EXHIBIT 13


<PAGE>

[** LOGO **]

WELLS
FINANCIAL
 CORP.

ANNUAL REPORT




<PAGE>
<TABLE>
<CAPTION>

WELLS FINANCIAL CORP.
ANNUAL REPORT

<S>                                                   <C>
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..................  5-16
Blue Earth
303 South Main Street                                      Independent Auditor's Report...........................  17
Blue Earth, Minnesota 56013                                Consolidated Statements of Financial Condition.........  18
                                                           Consolidated Statements of Income......................  19
Mankato - Madison East
Madison East Center                                        Consolidated Statements of Stockholders' Equity........  20-21
1400 Madison Avenue
Mankato, Minnesota 56001                                   Consolidated Statements of Cash Flows..................  22-24

North Mankato                                              Notes to Consolidated Financial Statements.............  25-47
1800 Commerce Drive
North Mankato, Minnesota  56003                            Office Location and Other Corporate Information........  48

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
523 South Third Street
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, 1999 - March 31, 1999           $16.25          $14.75
             April 1, 1999 - June 30, 1999              $16.06          $15.50
             July 1, 1999 - September 30, 1999          $15.94          $15.25
             October 1, 1999 - December 31, 1999        $15.63          $ 9.94
             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

         The number of  stockholders  of record of common stock as of the record
date of March 2, 2001, was  approximately  522. This does not reflect the number
of persons or  entities  who held stock in  nominee  or  "street"  name  through
various  brokerage  firms.  At  March  2,  2001,  there  were  1,188,121  shares
outstanding.

                                       1
<PAGE>


         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  declared  quarterly
cash  dividends  of $0.12 per share on January  21,  1998 and $0.15 per share on
April 15, 1998, July 15, 1998 and October 21, 1998.

         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 2000, 1999 and 1998 the Bank paid $965,000, $975,000
and $9.0 million 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,                                             1996        1997         1998         1999        2000
------------------------------------------------------ ----------- ------------ ------------ ----------- ------------
<S>                                                   <C>           <C>          <C>         <C>          <C>
Total assets                                            $ 201,326     $201,436     $191,876    $199,836     $221,848
Loans held for sale                                         1,791        2,012        6,097         521        1,955
Loans receivable, net                                     178,447      182,724      154,305     172,713      191,137
Mortgage-backed securities available for sale                 428           86            -           -            -
Securities available for sale                               7,100        2,640        2,968       2,551       16,225
Securities held to maturity                                 2,049        3,198        5,539      15,559            -
Certificates of deposit                                       200        1,850          500         400          200
Cash and cash equivalents                                   8,301        5,971       19,446       4,200        7,606
Deposits                                                  145,010      145,378      158,441     156,984      163,582
Borrowed funds                                             26,500       24,500        5,000      17,000       33,500
Equity                                                     28,202       29,641       25,892      23,457       22,341

Summary of Operations
------------------------------------------------------ ----------- ------------ ------------ ----------- ------------
Years Ended December 31,                                  1996        1997         1998         1999        2000
------------------------------------------------------ ----------- ------------ ------------ ----------- ------------

Interest income                                           $14,669      $15,325      $14,890     $14,214      $15,941
Interest expense                                            8,146        8,522        8,178       7,698        9,652
Net interest income                                         6,523        6,803        6,712       6,516        6,289
Provision for loan losses                                     180          180          120          27            -
Noninterest income                                          1,014        1,109        2,405       1,709        1,781
Noninterest expense (1)                                     5,245        3,987        4,769       5,054        5,055
Net income                                                  1,200        2,220        2,476       1,874        1,765

Other Selected Data
------------------------------------------------------ ----------- ------------ ------------ ----------- ------------
Years Ended December 31,                                  1996        1997         1998         1999        2000
------------------------------------------------------ ----------- ------------ ------------ ----------- ------------

Return on average assets                                     0.61%        1.10%        1.26%       0.97%        0.84%
Return on average equity                                     4.24%        7.71%        8.85%       7.57%        7.92%
Average equity to average assets                            14.40%       14.24%       14.25%      12.77%       10.57%
Equity to assets                                            14.01%       14.71%       13.49%      11.74%       10.07%
Net interest rate spread (2)                                 2.72%        2.75%        2.81%       2.89%        2.57%
Nonperforming assets to  total loans (3)                     0.29%        0.26%        0.23%       0.10%        0.35%
Allowance for loan losses to total loans                     0.34%        0.41%        0.53%       0.49%        0.43%
Allowance for loan losses to nonperforming loans (3)       138.20%      172.62%      236.94%     702.46%       134.1%
Basic earnings per share                                 $   0.61     $   1.18     $   1.42    $   1.26     $   1.41
Diluted earnings per share                               $   0.61     $   1.16     $   1.38    $   1.23     $   1.39
</TABLE>


----------------
(1)  For 1996, includes a special SAIF recapitalization assessment of $1,085.
(2)  Interest rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(3)  Nonperforming loans are loans over 90 days past due.  Nonperforming  assets
     include nonperforming loans and foreclosed real estate.

                                       3
<PAGE>




To Our Stockholders:

Welcome to Wells  Financial  Corp.'s  year 2000  annual  report.  The  Company's
results for 2000 were influenced by several factors. The most significant factor
that  affected the  Company's  operation  was the action by the Federal  Reserve
Board that  increased  short-term  interest  rates by a full 1% during the first
five months of 2000.  This  increased the Company's cost of funds as the Company
has a substantial  amount of deposits whose rates are indexed to the Prime Rate.
This trend has been reversed  during January and February of 2001 as the Federal
Reserve Board has decreased short-term interest rates by 1% that has resulted in
those deposits repricing downward during those periods.  Also affecting the 2000
results were the interest rates on the Company's adjustable rate loan portfolio.
The Company has  approximately  $50.5 million in adjustable  rate mortgage loans
that have interest  rates tied to lagging  indices.  These  interest rates began
repricing  upward  during  the last half of 2000 and are  continuing  to reprice
upward during 2001.

Management  is  pleased  with the  growth of the  Company  during  2000.  Assets
increased by $22.0  million at December  31, 2000 when  compared to December 31,
1999,  primarily  due to an  increase  of $18.4  million in the  Company's  loan
portfolio.

Enhancing  stockholder  value and  return  on your  investment  continues  to be
important to us. During 2000 the Company  repurchased  198,100 shares of its own
stock at prices below book value.  These  purchases not only  increased the book
value of your stock but also  enhanced  earnings  per  share.  The  Company  has
continued  to enhance  the value of your  stock by  repurchasing  an  additional
73,200  shares of its own stock during the first two months of 2001. We are also
pleased  with the ability to  continue  to pay  quarterly  cash  dividends.  The
Company began paying  quarterly  cash dividends in August of 1997 at the rate of
$0.12  per  share.  With the  quarterly  cash  dividend  paid in May of 1998 the
dividend was  increased  to $0.15 per share and the  dividend  was  increased to
$0.16 per share with the quarterly cash dividend paid in November 2000. To date,
the Company has paid in excess of $2.8 million in dividends to its shareholders.

The Board of Directors  and  management  of the Company  request your  continued
support of their  efforts to maximize the value of your  company.  Thank you for
your  investment in Wells  Financial Corp. and for the support you have shown us
over the years.


Best regards,


/s/Lawrence H. Kruse

Lawrence H. Kruse
President and Chief Executive Officer
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
1998,  the first half of 1999 and the last half of 2000 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
processing.

         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 in 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, 2000, 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            $14,941       $ (10,082)            (40)%       7.21%      -402 bp
           +200             18,630          (6,392)            (26)%       8.76%      -247 bp
           +100             22,104          (2,918)            (12)%      10.14%      -109 bp
             --             25,022                                        11.23%
           -100             26,829           1,807                7%      11.83%        60 bp
           -200             28,495           3,473               14%      12.36%       113 bp
           -300             31,134           6,112               24%      13.21%       198 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,
                                                                2000
                                                         -------------------

*** Risk Measures: 200 bp rate shock ***
Pre-Shock NPV Ratio: NPV as % of PV of Assets                    11.23%
Exposure Measure: Post-Shock NPV Ratio                            8.76%
Sensitivity Measure: Change in NPV Ratio                           247 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, 2000, 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>
                                                                           Years Ended December 31,
                                       ---------------------------------------------------------------------------------------------
                                                    1998                           1999                           2000
                                       ---------------------------------------------------------------------------------------------
                                       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)                $ 172,219  $ 13,888     8.06%  $ 161,444  $ 12,831      7.95%   $184,773   14,814     8.02%
   Mortgage-backed securities                 12         1     8.33%          -         -          -          -        -         -
   Investments (2)                        20,167     1,001     4.96%     27,442     1,383      5.04%     20,280    1,127     5.56%
                                       -------------------            --------------------            -------------------
      Total interest-earning assets      192,398    14,890     7.74%    188,886    14,214      7.53%    205,053   15,941     7.77%
                                                 ---------                      ----------                     ----------
Noninterest earning assets                 4,049                          4,994                           5,692
                                       ----------                     ----------                      ---------
      Total assets                     $ 196,447                      $ 193,880                        $210,745
                                       ==========                     ==========                      =========
Interest bearing liabilities:
   Savings, NOW and money
      Market accounts                     40,300     1,046     2.60%     45,352     1,153      2.54%     45,037    1,136     2.52%
   Certificates of deposit               110,836     6,293     5.68%    113,337     6,160      5.44%    114,980    6,963     6.06%
   Borrowed funds                         14,615       839     5.74%      7,462       385      5.16%     25,538    1,553     6.08%
                                       -------------------            --------------------            -------------------
      Total interest bearing
        liabilities                      165,751     8,178     4.93%    166,151     7,698      4.64%    185,555    9,652     5.20%
                                                 ---------                      ----------                     ----------
Noninterest bearing liabilities            2,706                          2,975                           2,910
                                       ----------                     ----------                      ---------
      Total liabilities                  168,457                        169,126                         188,465
Equity                                    27,990                         24,754                          22,280
                                       ---------                      ----------                      ---------
      Total liabilities and equity     $ 196,447                      $ 193,880                       $ 210,745
                                       ==========                     ==========                      =========
Net interest income                                  6,712                          6,516                          6,289
                                                 =========                      ==========                     ==========
Interest rate spread (3)                                       2.81%                           2.89%                         2.57%
Net yield on interest earning
   assets (4)                                                  3.49%                           3.45%                         3.07%
Ratio of average interest
   earning assets to average
   interest bearing liabilities            1.16X                          1.14X                                    1.11X
                                       ==========                     ==========                               ==========
</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>

Rate/Volume Analysis  (dollars in thousands)

         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,
                                     --------------------------------------- --- ----------------------------------------
                                                 1999 vs. 1998                                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                  $  (869)   $  (201)   $    13    $(1,057)   $ 1,854    $   113    $    16    $ 1,983
  Mortgage-backed securities             (1)         -          -         (1)         -          -          -          -
  Investments                           361         15          6        382       (362)       143        (37)      (256)
                                    -------    -------    -------    -------    -------    -------    -------    -------
    Total interest-earning assets      (509)      (186)        19       (676)     1,492        256        (21)     1,727
                                    -------    -------    -------    -------    -------    -------    -------    -------
Interest expense:
  Deposit accounts                      273       (290)        (9)       (26)        61        719          6        786
  Borrowed funds                       (411)       (85)        42       (454)       933         69        166      1,168
                                    -------    -------    -------    -------    -------    -------    -------    -------
     Total interest-bearing
       liabilities                     (138)      (375)        33       (480)       994        788        172      1,954
                                    -------    -------    -------    -------    -------    -------    -------    -------

Change in net interest income       $  (371)   $   189    $   (14)   $  (196)   $   498    $  (532)   $  (193)   $  (227)
                                    =======    =======    =======    =======    =======    =======    =======    =======
</TABLE>

                                       11
<PAGE>

(dollars in thousands)

Financial Condition

         Total assets increased by $22,012 from $199,836 at December 31, 1999 to
$221,848 at December  31,  2000  primarily  due to an increase of $18,424 in the
loan portfolio and a $3,406 increase in cash. The increase in the loan portfolio
was  primarily  due to an increase in real  estate  loans on farmland  and, to a
lesser degree, on management's  decision to retain residential real estate loans
that were  originated  during the first half of 2000.  Management's  decision to
retain  almost all of the  residential  real estate  loans that were  originated
during the first half of 2000  resulted  from an  increase in the rates on these
loans during that period of time.

         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, 2000
and  December  31, 1999,  the balance in the  allowance  for loan losses and the
allowance  for loan losses as a percentage of total loans were $833 and $857 and
0.43% and 0.49%, respectively.

         Loans on which the accrual of interest had been  discontinued  amounted
to $363 and $111 at  December  31,  2000 and 1999,  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,
2000 and 1999.

         Deposits  increased  by $6,598 from  $156,984  at December  31, 1999 to
$163,582 at December 31, 2000.  Borrowed funds  increased by $16,500 at year-end
2000 when compared to year-end 1999. The increase in deposits and borrowed funds
were used to fund the increase in the loan portfolio.

         Stockholders'  equity  decreased by $1,116 from $23,457 at December 31,
1999 to $22,341 at December 31, 2000.  The decrease in equity was  primarily the
result of net income for 2000 of $1,765  being  offset by the payment of $772 in
cash  dividends and by the  repurchase of 198,100  shares of treasury stock at a
cost of $2,410. Also affecting  stockholders'  equity was the allocation of $212
of employee stock  ownership plan shares,  the  amortization  of $39 of unearned
compensation and a $43 increase in accumulated other comprehensive income.

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.

                                       12
<PAGE>

(dollars in thousands)

         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.

Comparison of Operating Results for the Years Ended December 31, 1999 and 1998

         General.  Net income for the year ended  December 31, 1999 decreased by
$602, or 24.3%,  from $2,476 for the year ended  December 31, 1998 to $1,874 for
the year ended  December  31,  1999.  The  decrease  in net income for 1999 when
compared to 1998 was primarily due to a $696 decrease in noninterest income.

         Interest  Income.  Interest income  decreased by $676, or 4.5%, for the
year ended  December 31, 1999 when compared to the year ended December 31, 1998.
A $1,057  decrease in interest on loans was partially  offset by a $381 increase
in interest income from investments.  The decrease in interest income from loans
was the result of a decrease in the average amount of the loan portfolio  during
1999  when  compared  to  1998.  Due to  lower  interest  rates  on  residential
mortgages,  management  elected to sell the  majority of the  residential  loans
originated  during  1998 and the first  three  months  of 1999 to the  secondary
market. Included in the loans originated and sold during those time periods were
loans from the Company's  mortgage loan portfolio that were refinanced.  This is
the primary reason for the decrease in the average amount of the loan portfolio.
The increase in interest  income from  investments was the result of an increase
in the average amount of investments during 1999 when compared to 1998.

                                       13
<PAGE>

(dollars in thousands)

         Interest  Expense.  Interest  expense on deposits  remained  relatively
constant  for 1999 when  compared to 1998.  Interest  expense on borrowed  funds
decreased by $454 for the year ended December 31, 1999 when compared to the year
ended  December 31, 1998  primarily  due to a decrease in the average  amount of
borrowed funds during 1999 when compared to 1998.

         Net Interest Income. Net interest income decreased by $196, or 2.9% for
the year ended  December 31, 1999 when  compared to the year ended  December 31,
1998 due to the changes in interest income and interest expense described above.

         Provision for Loan Losses. The provision for loan loss decreased by $93
for the year ended  December 31, 1999 when  compared to the year ended  December
31, 1998.  Management  monitors the  allowance  for loan loss in relation to the
size and quality of the loan portfolio and adjusts the provision for loan losses
to  adequately  provide for loan  losses.  Based on the  decrease in the average
amount of the loan portfolio  during 1999 when compared to 1998 and management's
evaluation  of the  quality  of  the  loan  portfolio,  management  felt  that a
reduction  in the  provision  for loan losses was  warranted.  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 decreased by $696, or 28.9%, for
1999 when compared to 1998. The decrease in noninterest income was primarily due
to a decrease  of $670 for 1999 when  compared to 1998 in loan  origination  and
commitment  fees. The decrease in loan  origination  and commitment fees was the
result of fewer loan originations during 1999 when compared to 1998.

         Noninterest  Expense.  Noninterest  expense increased by $285, or 6.0%,
for the year ended  December 31, 1999 when  compared to the year ended  December
31, 1998 due to increases in data processing and in other  noninterest  expense.
Other  noninterest  expense  increased  by $173 for 1999 when  compared  to 1998
primarily  due to a $87  increase  in the  amortization  of  mortgage  servicing
rights.

         Income Tax Expense.  Income tax expense  decreased by $482 for the year
ended December 31, 1999 when compared to the year ended December 31, 1998.  This
decrease  was the result of a decrease in income  before  income  taxes for 1999
when compared to 1998.

Liquidity and Capital Resources

         The Bank is required under applicable  federal  regulations to maintain
specified levels of "liquid" investments in qualifying types of U.S. Government,
federal agency and other  investments  having  maturities of five years or less.
Current OTS  regulations  require  that a savings  association  maintain  liquid
assets of not less than 5% of its  average  daily  balance  of net  withdrawable
deposit accounts and borrowings payable in one year or less, of which short-term
liquid assets must consist of not less than 1%. At December 31, 2000, the Bank's
liquidity,  as measured  for  regulatory  purposes,  was 8.0%.  The Bank adjusts
liquidity as appropriate to meet its asset/liability objectives.

                                       14
<PAGE>

(dollars in thousands)

         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, 2000 and 1999, the
Bank's noninterest bearing cash was $1,053 and $1,880, respectively.

         Also  available  to  the  Bank  to  meet  liquidity   requirements  are
borrowings  from the Federal Home Loan Bank. At December 31, 2000,  the Bank had
$33,500 in  outstanding  advances  from the FHLB of Des Moines,  which have been
used to fund loan  originations.  At December 31, 2000, the Bank had the ability
to borrow approximately 2.53 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  January 2001 the Company  bought 24,700 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, 2000, the Bank's tangible
capital  totaled  $17,812,  or 8.17% of adjusted total assets,  and core capital
totaled $17,812, or 8.17% of adjusted total assets, which substantially exceeded
the respective 1.5% tangible capital and 4.0% core capital  requirements at that
date by $14,544 and $9,097,  respectively,  or 6.67% and 4.17% of adjusted total
assets, respectively.  The Bank's risk-based capital totaled $18,645 at December
31,  2000  or  12.89%  of  risk-weighted  assets,  which  exceeded  the  current
requirements of 8.0% of risk-weighted assets by $7,073 or 4.89% 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  generally  accepted  accounting
principles,  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 and 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 June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities (Statement
No.  133) which was  required  to be adopted in years  beginning  after June 15,
1999.  The Statement  requires the Company to recognize all  derivatives  on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the nature
of the hedge,  changes in the fair value of  derivatives  will  either be offset
against  the  change in fair value of the hedged  assets,  liabilities,  or firm
commitments through earnings or recognized in other  comprehensive  income until
the  hedged  item is  recognized  in  earnings.  The  ineffective  portion  of a
derivative's change in fair value will be immediately recognized in earnings. In
June 1999, the Financial  Accounting  Standards Board issued  Statement No. 137,
Accounting for Derivative  Instruments and Hedging  Activities - Deferral of the
Effective  Date of FASB  Statement No. 133 (Statement No. 137) which delayed the
implementation  of Statement  No. 133 until  quarters  beginning  after June 15,
2000.  Because  the  Company  does  not use  derivatives,  management  does  not
anticipate that the adoption of the new Statement will have a significant effect
on the Company's earnings or financial position.

                                       16

<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, 2000 and 1999, and
the related  consolidated  statements of income,  stockholders'  equity and cash
flows for each of the three years in the period ended  December 31, 2000.  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  generally   accepted  auditing
standards.  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, 2000 and 1999, and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with generally accepted accounting principles.


                                        /s/McGladrey & Pullen, LLP

Rochester, Minnesota
February 12, 2001

                                       17
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>

ASSETS                                                                 2000         1999
------------------------------------------------------------------------------------------
<S>                                                               <C>          <C>
Cash, including interest-bearing accounts
  2000 $6,553; 1999 $2,320                                          $   7,606    $   4,200
Certificates of deposit (Note 2)                                          200          400
Securities available for sale (Notes 3 and 10)                         16,225        2,551
Securities held to maturity (Note 4)                                        -       15,559
Loans held for sale (Note 5)                                            1,955          521
Loans receivable, net (Notes 5, 10, 16 and 17)                        191,137      172,713
Accrued interest receivable                                             1,910        1,350
Income taxes receivable                                                     -           16
Premises and equipment (Note 8)                                         1,833        1,558
Foreclosed real estate (Note 7)                                            54           55
Other assets (Note 6)                                                     928          913
                                                                    ----------------------
     Total assets                                                   $ 221,848    $ 199,836
                                                                    ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------
Liabilities
  Deposits (Note 9)                                                 $ 163,582    $ 156,984
  Borrowed funds (Note 10)                                             33,500       17,000
  Advances from borrowers for taxes and insurance (Note 6)              1,228        1,262
  Income taxes (Note 11):
    Current                                                                52            -
    Deferred                                                              855          763
  Accrued interest payable                                                129          116
  Accrued expenses and other liabilities                                  161          254
                                                                    ----------------------
     Total liabilities                                                199,507      176,379
                                                                    ----------------------
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                                           17,011       16,939
  Retained earnings, substantially restricted                          19,182       18,189
  Accumulated other comprehensive income                                  698          655
  Unearned Employee Stock Ownership Plan shares                          (290)        (435)
  Unearned compensation-restricted stock awards                          (237)         (27)
  Less cost of treasury stock, 2000 933,168 shares;
    1999 758,343 shares                                               (14,242)     (12,083)
                                                                    ----------------------
     Total stockholders' equity                                        22,341       23,457
                                                                    ----------------------
     Total liabilities and stockholders' equity                     $ 221,848    $ 199,836
                                                                    ======================
</TABLE>


See Notes to Consolidated Financial Statements.

                                        18
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2000, 1999 and 1998
(dollars in thousands, except per share data)

                                          2000      1999      1998
--------------------------------------------------------------------
Interest and Dividend Income
  Loans receivable:
    First mortgage loans                 $11,532   $10,112   $11,257
    Consumer and other loans               3,282     2,719     2,631
  Investment securities and interest-
    bearing deposits                       1,127     1,383     1,002
                                         ---------------------------
     Total interest income                15,941    14,214    14,890
                                         ---------------------------
Interest Expense
  Deposits                                 8,099     7,313     7,339
  Borrowed funds                           1,553       385       839
                                         ---------------------------
     Total interest expense                9,652     7,698     8,178
                                         ---------------------------
     Net interest income                   6,289     6,516     6,712
Provision for loan losses (Note 5)            --        27       120
                                         ---------------------------
     Net interest income after
       provision for loan losses           6,289     6,489     6,592
                                         ---------------------------
Noninterest Income
  Gain on sale of loans                      166       188       434
  Gain on sale of securities, net            122        --        --
  Loan origination and commitment fees       211       295       965
  Loan servicing fees                        401       397       267
  Insurance commissions                      387       346       334
  Fees and service charges                   442       450       381
  Other                                       52        33        24
                                         ---------------------------
     Total noninterest income              1,781     1,709     2,405
                                         ---------------------------
Noninterest Expenses
  Compensation and benefits (Note 14)      2,619     2,493     2,521
  Occupancy and equipment (Note 15)          819       788       735
  Data processing                            357       340       281
  Advertising                                224       214       190
  Other                                    1,036     1,219     1,042
                                         ---------------------------
     Total noninterest expenses            5,055     5,054     4,769
                                         ---------------------------
     Income before income taxes            3,015     3,144     4,228
Income tax expense (Note 11)               1,250     1,270     1,752
                                         ---------------------------
     Net income                          $ 1,765   $ 1,874   $ 2,476
                                         ===========================
Earnings per share (Note 13):
  Basic                                  $  1.41   $  1.26   $  1.42
                                         ===========================
  Diluted                                $  1.39   $  1.23   $  1.38
                                         ===========================


See Notes to Consolidated Financial Statements.

                                       19
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2000, 1999 and 1998
(dollars in thousands)

<TABLE>
<CAPTION>
                                                                      Unearned
                                                             Accumu-  Employee  Unearned
                                                             lated     Stock    Compen-
                                                             Other     Owner-    sation
                       Compre-          Additional           Compre-   ship    Restricted                 Total
                       hensive   Common  Paid-In   Retained  hensive   Plan      Stock     Treasury    Stockholders'
                       Income    Stock   Capital   Earnings  Income    Shares    Awards     Stock         Equity
-----------------------------------------------------------------------------------------------------------------------
<S>                             <C>     <C>        <C>       <C>     <C>      <C>        <C>              <C>
Balances,
  December 31, 1997              $  219  $16,694    $15,736   $ 584   $ (757)  $   (151)  $ (2,684)        $ 29,641
Comprehensive Income:
Net income             $ 2,476        -        -      2,476       -        -          -          -            2,476
Other comprehensive
income, net of tax:
Unrealized gains on
  securities, net
  of related taxes         317        -        -          -     317        -          -          -              317
                       -------
Comprehensive income   $ 2,793
                       =======
Treasury stock
  purchases, 307,200
  shares (Note 12)                    -        -          -       -        -          -     (5,937)          (5,937)
Cash dividends
  declared
  ($.57 per share)                    -        -     (1,001)      -        -          -          -           (1,001)
Amortization of
  unearned
  compensation                        -        -          -       -        -         84          -               84
Allocated ESOP
  shares                              -      146          -       -      166          -          -              312
                                 ----------------------------------------------------------------------------------
Balances,
  December 31, 1998                 219   16,840     17,211     901     (591)       (67)    (8,621)          25,892
Comprehensive Income:
Net income              $1,874        -        -      1,874       -        -          -          -            1,874
Other comprehensive
income, net of tax:
Unrealized losses
  on securities, net
  of related taxes        (246)       -        -          -    (246)       -          -          -             (246)
                        ------
Comprehensive income    $1,628
                        ======
Treasury stock
  purchases, 223,003
  shares (Note 12)                    -        -          -       -        -          -     (3,462)          (3,462)
Cash dividends
  declared
  ($.60 per share)                    -        -       (896)      -        -          -          -             (896)
Amortization of
  unearned
  compensation                        -        -          -       -        -         40          -               40
Allocated ESOP
  shares                              -       99          -       -      156          -          -              255
                                 ----------------------------------------------------------------------------------
Balances,
  December 31, 1999                 219   16,939     18,189     655     (435)       (27)   (12,083)          23,457
Comprehensive Income:
Net income              $1,765        -        -      1,765       -        -          -          -            1,765
Other comprehensive
income, net of tax:
Unrealized gains on
  securities, net
  of related taxes          43        -        -          -      43        -          -          -               43
                        ------
Comprehensive income    $1,808
                        ======
Treasury stock
  purchases, 198,100
  shares (Note 12)                    -        -          -       -        -          -     (2,410)          (2,410)
Cash dividends
  declared
  ($.61 per share)                    -        -       (772)      -        -          -          -             (772)
Amortization of
  unearned
  compensation                        -        -          -       -        -         39          -               39
Options exercised,
  700 options,
  (Note 14)                           -       (3)         -       -        -          -         10                7
Award of management
  stock bonus plan
  shares, 24,335
  shares, (Note 14)                   -        8          -       -        -       (249)       241                -
Allocated ESOP
  shares                              -       67          -       -      145          -          -              212
                                 ----------------------------------------------------------------------------------
Balances,
  December 31, 2000              $  219  $17,011    $19,182   $ 698   $ (290)  $   (237)  $(14,242)        $ 22,341
                                 ==================================================================================

See Notes to Consolidated Financial Statements.


                                                              20 - 21
</TABLE>

<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000, 1999 and 1998
(dollars in thousands)
<TABLE>
<CAPTION>

                                                           2000        1999        1998
-----------------------------------------------------------------------------------------
<S>                                                   <C>         <C>         <C>
Cash Flows From Operating Activities
  Net income                                            $  1,765    $  1,874    $  2,476
  Adjustments to reconcile net income to net
    cash provided by (used in) operating activities:
    Provision for loan losses                                  -          27         120
    Gain on sale of loans                                   (166)       (188)       (434)
    (Gain) on sale of securities                            (122)          -           -
    Amortization of mortgage servicing rights                152         212         125
    Compensation on allocation of ESOP shares                212         255         312
    Amortization of unearned compensation                     39          40          84
    (Gain) loss on sale of foreclosed real estate              1         (11)          2
    Unrealized gain on loans held for sale                     -           -         (14)
    Gain on premises and equipment                           (12)          -         (28)
    Deferred income taxes                                     62          49         188
    Depreciation and amortization on premises
      and equipment                                          278         247         279
    Amortization of deferred loan origination fees          (116)       (154)       (245)
    Amortization of excess servicing fees                     10          12          13
    Amortization of securities premiums and discounts          -           -           9
    Loans originated for sale                            (21,067)    (30,485)    (89,160)
    Proceeds from the sale of loans held for sale         19,573      36,061      85,089
    Changes in assets and liabilities:
      Accrued interest receivable                           (560)       (507)        263
      Other assets                                          (177)       (208)       (678)
      Income taxes payable, current                           68        (144)         17
      Accrued expenses and other liabilities                 (80)         60          58
                                                        --------------------------------
  Net cash provided by (used in)
        operating activities                                (140)      7,140      (1,524)
                                                        --------------------------------
</TABLE>
                                   (Continued)

                                       22
<PAGE>

WELLS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 2000, 1999 and 1998
(dollars in thousands)
<TABLE>
<CAPTION>
                                                              2000        1999        1998
--------------------------------------------------------------------------------------------
<S>                                                     <C>         <C>         <C>
Cash Flows From Investing Activities
  Net (increase) decrease in loans                        $(18,175)   $(18,238)   $ 28,945
  Certificates of deposit:
    Maturities                                                 400         500       6,650
    Purchases                                                 (200)       (400)     (5,300)
  Purchase of securities available for sale                 (7,177)          -           -
  Proceeds from sales of securities available for sale       8,118           -         212
  Securities held to maturity:
  Maturities and calls                                       1,139       1,210       4,491
  Purchases                                                      -     (11,230)     (6,841)
  Proceeds from principal repayments of
    mortgage-backed securities available for sale                -           -          86
  Proceeds from the disposal of leasehold improvements           -           -          75
  Purchase of premises and equipment                          (553)       (556)       (150)
  Proceeds from the disposal of premises and equipment          12           -           -
  Proceeds from the sale and redemption of
    foreclosed real estate                                      93         108          69
  Investment in foreclosed real estate                           -         (7)          (3)
                                                          --------------------------------
    Net cash provided by (used in) investing activities    (16,343)    (28,613)     28,234
                                                          --------------------------------
Cash Flows From Financing Activities
  Net increase (decrease) in deposits                        6,598      (1,457)     13,063
  Net increase from advances from
    borrowers for taxes and insurance                          (34)         42         140
  Options exercised                                              7           -           -
  Proceeds from borrowed funds                              46,600      15,000       5,000
  Repayments on borrowed funds                             (30,100)     (3,000)    (24,500)
  Purchase of treasury stock                                (2,410)     (3,462)     (5,937)
  Dividends paid                                              (772)       (896)     (1,001)
                                                          --------------------------------
    Net cash provided by (used in)
      financing activities                                  19,889       6,227     (13,235)
                                                          --------------------------------
    Net increase (decrease) in cash                          3,406     (15,246)     13,475

Cash
  Beginning                                                  4,200      19,446       5,971
                                                          --------------------------------
  Ending                                                  $  7,606    $  4,200    $ 19,446
                                                          ================================
</TABLE>
                                   (Continued)

                                       23
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 2000, 1999 and 1998
(dollars in thousands)

<TABLE>
<CAPTION>
                                                            2000      1999       1998
--------------------------------------------------------------------------------------
<S>                                                     <C>       <C>        <C>
Supplemental Disclosures of Cash Flow Information
  Cash payments for:
    Interest on deposits                                  $ 8,101   $ 7,313    $ 7,348
    Interest on borrowed funds                              1,538       369        869
    Income taxes                                            1,119     1,365      1,547
                                                          ============================
Supplemental Schedule of Noncash Investing and
  Financing Activities:
  Other real estate acquired in settlement of loans       $    93   $   145    $    33
  Transfer of securities classified as held to maturity
    to available for sale                                  12,601         -          -
  Allocation of ESOP shares to participants                   145       156        166
  Net change in unrealized gains (losses) on securities
    available for sale                                         43      (246)       317
                                                          ============================
</TABLE>
See Notes to Consolidated Financial Statements.

                                       24
<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: The consolidated financial statements
have been prepared in conformity with generally accepted accounting  principles.
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.  A material estimate that is particularly  susceptible to significant
change in the near term relates to the  determination  of the allowance for loan
losses.

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.

Comprehensive  income:  Comprehensive income is the total of reported net income
and all other revenues, expenses, gains and losses that under generally accepted
accounting   principles  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.

                                       25
<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 held to maturity:  Debt securities for which the Company has both the
positive  intent  and  ability to hold to  maturity  are  classified  as held to
maturity and reported at amortized cost.  Amortization of premiums and accretion
of discounts,  computed by the interest method over their contractual  lives, is
included in interest income.

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 classified as either held to
maturity or available for sale 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.

                                       26
<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.

                                       27
<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 of demand  deposits  and
     savings accounts equal 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.

                                       28
<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 and $400 at December 31,
2000 and 1999,  respectively,  had weighted  average  yields of 6.83% and 5.19%,
respectively, and contractual maturities of less than one year.

Note 3.  Securities Available for Sale

<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>

<TABLE>
<CAPTION>
                                                                        December 31, 1999
                                                 ------------------------------------------------------------------
                                                                       Gross           Gross
                                                    Amortized       Unrealized       Unrealized
                                                       Cost            Gains           Losses        Fair Value
-------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>               <C>              <C>           <C>
Stock in Federal Home Loan Bank                          $  1,421          $    -           $    -        $  1,421
FHLMC stock                                                    24           1,106                -           1,130
                                                 ------------------------------------------------------------------
                                                         $  1,445        $  1,106           $    -        $  2,551
                                                 ==================================================================
</TABLE>


                                       29
<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, 2000 were as follows:

                                              Amortized Cost         Fair Value
--------------------------------------------------------------------------------
Due in one year or less                             $    593           $    589
Due in one to five years                              12,563             12,659
                                            ------------------------------------
                                                      13,156             13,248
Equity securities                                      1,891              2,977
                                            ------------------------------------
                                                   $  15,047          $  16,225
                                            ====================================

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:  Gross  realized  gains and losses from the sale of
securities  available for sale for the year ended  December 31, 2000 amounted to
$262 of realized losses and $384 of realized gains. There were no realized gains
or losses from the sale of securities  during the years ended  December 31, 1999
and 1998.

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


<TABLE>
<CAPTION>
                                                                                Years Ended December 31,
                                                                 --------------------------------------------------
                                                                        2000               1999               1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>                <C>
Balance, beginning                                                   $   655           $    901           $    584
Unrealized gains (losses) during the year                                194               (417)               540
Reclassification adjustment for net (gain)
  realized in net income                                                (122)                 -                  -
Deferred tax effect relating to unrealized
  appreciation                                                           (29)               171               (223)
                                                          ---------------------------------------------------------
Balance, ending                                                      $   698           $    655           $    901
                                                          =========================================================
</TABLE>

Securities  with a carrying  value of $1,600 and $1,100 at December 31, 2000 and
1999,  respectively,  were  pledged  to  secure  public  deposits  and for other
purposes as required or permitted by law.

                                       30
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------
Note 4.  Securities Held to Maturity

<TABLE>
<CAPTION>
                                                                         December 31, 1999
                                                 ------------------------------------------------------------------
                                                                       Gross           Gross
                                                    Amortized       Unrealized       Unrealized
                                                       Cost            Gains           Losses        Fair Value
-------------------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>             <C>             <C>
Debt securities:
U.S. Government corporations and
  agencies                                          $ 15,559          $    -          $   469         $ 15,090
                                                 ==================================================================
</TABLE>

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,
                                                                             --------------------------------------
                                                                                         2000               1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>               <C>
First mortgage loans (principally conventional):
  Secured primarily by one-to-four family residences                                    $ 111,922         $  105,570
  Secured by other properties, primarily agricultural real estate                          39,037             32,582
  Construction                                                                              2,043              2,957
                                                                             ---------------------------------------
     Total first mortgage loans                                                           153,002            141,109
                                                                             ---------------------------------------
Consumer and other loans:
  Home equity, home improvement and second mortgages                                       26,155             21,315
  Agricultural operating loans                                                              2,967              2,988
  Vehicle loans                                                                             5,333              4,914
  Other                                                                                     5,007              3,722
                                                                             ---------------------------------------
     Total consumer and other loans                                                        39,462             32,939
                                                                             ---------------------------------------
     Total loans                                                                          192,464            174,048
Less:
  Net deferred loan origination fees                                                         (494)              (478)
  Allowance for loan losses                                                                  (833)              (857)
                                                                             ---------------------------------------
     Loan receivable, net                                                               $ 191,137         $  172,713
                                                                             =======================================
</TABLE>


                                       31
<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,
                                                          ---------------------------------------------------------
                                                                       2000               1999               1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>                <C>
Balance, beginning                                                   $   857           $    853           $    763
Provision for loan losses                                                  -                 27                120
Loans charged off                                                        (49)               (43)               (46)
Recoveries                                                                25                 20                 16
                                                          ---------------------------------------------------------
Balance, ending                                                      $   833           $    857           $    853
                                                          =========================================================
</TABLE>

Nonaccrual  loans:  Loans on which the accrual of interest has been discontinued
totaled $363, $111 and $260 at December 31, 2000,  1999 and 1998,  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 at December 31, 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, 2000 and 1999 were $349 and $321,  respectively.  During 2000,  new
loans to such related parties were $65 and repayments were $37.

Loans held for sale: As of December 31, 2000 and 1999, the Company's  loans held
for sale were $1,955 and $521, respectively, and consisted of one-to-four family
residential real estate loans. Outstanding commitments to sell loans at December
31, 2000 were $1,955.

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,  2000 and 1999  were  $157,762  and  $155,157,
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
$697 and $708 at December 31, 2000 and 1999, respectively.

Mortgage  servicing  rights in the  amounts  of $226 and $281  were  capitalized
during the years ended December 31, 2000 and 1999, respectively. The fair values
of capitalized mortgage servicing rights were $888 and $815 at December 31, 2000
and 1999,  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 12%.  The  Company  recognized  amortization  of the  cost of
mortgage  servicing  rights in the amounts of $152,  $212 and $125 for the years
ended December 31, 2000, 1999 and 1998, respectively.

                                       32
<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, 2000 and 1999.

Note 7.  Foreclosed Real Estate


The Company had investment in real estate acquired through foreclosure or deeded
to the Company in lieu of foreclosure of $54 and $55 as of December 31, 2000 and
1999,  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,
                                                                                      ----------------------------
                                                                                         2000               1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                <C>
Cost:
  Land                                                                                 $     79          $      79
  Buildings and improvements                                                              1,864              1,461
  Leasehold improvements                                                                     98                365
  Furniture, fixtures and equipment                                                       1,301              2,132
                                                                                      ----------------------------
                                                                                          3,342              4,037
  Less accumulated depreciation and amortization                                          1,509              2,479
                                                                                      ----------------------------
                                                                                       $  1,833          $   1,558
                                                                                      ============================
</TABLE>

Note 9.  Deposits

Composition of deposits:

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                     ------------------------------
                                                                                          2000               1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>               <C>
Demand deposits, noninterest bearing                                                  $   2,433         $    3,587
NOW and money market accounts                                                            23,083             21,858
Savings accounts                                                                         18,979             19,050
Certificates of deposit                                                                 119,087            112,489
                                                                                     ------------------------------
                                                                                      $ 163,582         $  156,984
                                                                                     ==============================
</TABLE>

The aggregate amount of certificates of deposit over $100 was $10,841 and $8,326
at December 31, 2000 and 1999, respectively.

                                       33
<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 deposits is as follows:

Years Ending December 31,
-------------------------------------------------------------------------------
2001                                                                 $  73,465
2002                                                                    27,966
2003                                                                    16,792
2004                                                                       836
2005                                                                        28
                                                                  -------------
                                                                    $  119,087
                                                                  =============

Note 10. Borrowed Funds


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

<TABLE>
<CAPTION>
                                                                                  2000              1999
----------------------------------------------------------------------------------------------------------
<S>                                                                           <C>               <C>
Fixed-rate advances (with rates ranging from 4.77% to 5.93%)
  Due in one year or less                                                       $     -           $ 3,000
  Due from one through five years                                                     -                 -
  Due from five to ten years                                                     23,000            10,000
                                                                      ------------------------------------
     Total fixed-rate advances                                                   23,000            13,000
                                                                      ------------------------------------

Variable-rate advances (with rates ranging from 5.02% to 6.79%)
  Due in one year or less                                                        10,500             4,000
  Due from one through five years                                                     -                 -
  Due from five to ten years                                                          -                 -
                                                                      ------------------------------------
     Total variable-rate advances                                                10,500             4,000
                                                                      ------------------------------------
                                                                                $33,500           $17,000
                                                                      ====================================
</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 130% of the amount of the advances.

                                       34

<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,
                                                          ---------------------------------------------------------
                                                                        2000               1999               1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>               <C>
Federal:
  Current                                                            $   886           $    940          $   1,181
  Deferred                                                                47                 37                143
                                                          ---------------------------------------------------------
                                                                         933                977              1,324
                                                          ---------------------------------------------------------
State:
  Current                                                                302                281                383
  Deferred                                                                15                 12                 45
                                                          ---------------------------------------------------------
                                                                         317                293                428
                                                          ---------------------------------------------------------
     Total                                                          $  1,250          $   1,270          $   1,752
                                                          =========================================================
</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,
                                                          ---------------------------------------------------------
                                                                        2000               1999               1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>                <C>
Computed "expected" tax expense                                     $  1,055          $   1,100          $   1,480
State income taxes, net of federal benefit                               195                203                273
Effect of graduated rates                                                (30)               (31)               (42)
Other                                                                     30                 (2)                41
                                                          ---------------------------------------------------------
     Income tax expense                                             $  1,250          $   1,270          $   1,752
                                                          =========================================================
</TABLE>


                                       35
<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:


                                                          December 31,
                                        --------------------------------------
                                                      2000               1999
------------------------------------------------------------------------------
Deferred tax assets:
  Allowance for loan losses                        $   325           $    323
  Management stock bonus plan                           12                 36
  Accrued vacation                                      11                 16
  Other                                                 34                 28
                                        --------------------------------------
                                                       382                403
  Less valuation allowance                               -                  -
                                        --------------------------------------
                                                       382                403
                                        --------------------------------------
Deferred tax liabilities:
  Premises and equipment                               128                141
  Securities available for sale                        480                450
  FHLB stock dividends                                 189                189
  Mortgage servicing rights                            332                313
  Deferred loan origination fees                       101                 64
  Other                                                  7                  9
                                        --------------------------------------
                                                     1,237              1,166
                                        --------------------------------------
                                                 $    (855)         $    (763)
                                        ======================================

Retained  earnings at December  31, 2000 and 1999 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, 2000 and 1999.

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


The Company has  initiated  several  stock buy back  programs.  Shares  totaling
198,100,  223,003 and 307,200 were purchased during the years ended December 31,
2000,  1999 and 1998,  respectively.  From January 1, 2001 through  February 12,
2001, the Company purchased 24,700 additional shares under this program.

On January 16,  2001,  the Company  declared a dividend of $.16 per common share
payable on February 12, 2001 to  stockholders  of record as of January 31, 2001.
The scheduled dividend is approximately $198.

                                       36
<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, 2000, 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 September
27,  1999,  categorized  the Bank as "well  capitalized"  under  the  regulatory
framework  for  Prompt  Corrective  Action.  To  be  categorized  as  adequately
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.

                                       37
<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>
                                                                                                To Be Well Capitalized
                                                                            For Capital         Under Prompt Corrective
                                                    Actual               Adequacy Purposes         Action Provisions
                                            ---------------------------------------------------------------------------
As of December 31, 2000:                      Amount      Percent        Amount     Percent         Amount      Percent
                                            ---------------------------------------------------------------------------
<S>                                        <C>           <C>           <C>         <C>            <C>          <C>
  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

As of December 31, 1999:
  Tier 1 (core) capital (to
    adjusted total assets)                   $16,865        8.70%        $7,754       4.00%         $ 9,693       5.00%
  Risk-based capital (to risk-
    weighted assets)                          17,722       13.96         10,154       8.00           12,693      10.00
  Tangible capital (to
    tangible assets)                          16,865        8.70          2,907       1.50              N/A        N/A
  Tier 1 (core) capital (to
    risk-weighted assets)                     16,865       13.29            N/A        N/A            7,616       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 $965 and $975 to the Company
during the years ended December 31, 2000 and 1999, respectively.

                                       38
<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, 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>
<TABLE>
<CAPTION>
                                                                        For the Year Ended December 31, 1998
                                                          ----------------------------------------------------------
                                                                                                           Per Share
                                                                        Income           Shares             Amount
--------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>               <C>                 <C>
Basic EPS
  Net income                                                         $   2,476          1,747,325           $   1.42
                                                                                                 ===================
Effect of Dilutive Securities
  Stock options                                                              -             49,966
                                                           --------------------------------------
Diluted EPS
  Net income plus assumed conversions                                $   2,476          1,797,291           $   1.38
                                                           =========================================================
</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  contributions of up to 4 percent of each
participant's contribution. No contributions were made by the Bank for the years
ended December 31, 2000, 1999 and 1998.

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.

                                       39
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------
Note 14. Employee Benefit Plans (Continued)


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 $212,  $255 and $312 for the years ended
December 31, 2000, 1999 and 1998, respectively.

Shares of the  Company  held by the ESOP at  December  31,  2000 and 1999 are as
follows:

                                                     2000               1999
-------------------------------------------------------------------------------
Shares released for allocation                       99,823             81,833
Unreleased (unearned) shares                         36,210             54,355
                                               --------------------------------
                                                    136,033            136,188
                                               ================================
Fair value of unreleased (unearned) shares          $   575           $    629
                                               ================================

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, 2000,  1999 and 1998 as the option price is the
quoted market price of the shares at the date of the award.

                                       40
<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 $38,
$34, $61 for the years ended  December 31,  2000,  1999 and 1998,  respectively.
Reported net income and earnings per common share would have been reduced to the
pro forma amounts shown below:

                                             Years Ended December 31,
                              -----------------------------------------------
                                   2000               1999               1998
-----------------------------------------------------------------------------
Net income:
  As reported                   $  1,765          $   1,874          $   2,476
  Pro forma                        1,742              1,854              2,440

Basic earnings per share:
  As reported                   $   1.41           $   1.26           $   1.42
  Pro forma                         1.39               1.25               1.40

Diluted earnings per share:
  As reported                   $   1.39           $   1.23           $   1.38
  Pro forma                         1.38               1.22               1.36



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.

                                       41
<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, 2000 and
1999, and changes during the years ended on those dates are presented below:

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                 --------------------------------------------------------------------
                                                                  2000                           1999
                                                 --------------------------------------------------------------------
                                                                          Weighted                      Weighted
Fixed Options                                              Shares      Exercise Price       Shares   Exercise Price
---------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>             <C>              <C>            <C>
Outstanding at beginning of year                          125,405         $ 11.00          125,405        $  11.00
Granted                                                    45,585           13.02                -               -
Exercised                                                    (700)          11.00                -               -
                                                 --------------------------------------------------------------------
Outstanding at end of year                                170,290         $ 11.54          125,405        $  11.00
                                                 ====================================================================
</TABLE>

The status of the 170,290 options  outstanding at December 31, 2000 is presented
below:

                                                     Contractural     Number
Date of award                  Shares       Price       Life        Exercisable
--------------------------------------------------------------------------------
November 15, 1995             125,405   $    11.00     4.9 years      123,705
September 7, 2000              32,805        12.88     9.7 years            -
September 19, 2000             12,780        13.38     9.7 years            -

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, 2000 and 1999 and the changes  during the
years ended on those dates is presented below:

                                                    Years Ended December 31,
                                                -------------------------------
                                                      2000               1999
-------------------------------------------------------------------------------
Outstanding at beginning of year                      8,720             17,440
Granted                                              24,335                  -
Vested                                               (8,720)            (8,720)
Forfeited                                               (23)                 -
                                                -------------------------------
Outstanding at end of year                           24,312              8,720
                                                ===============================

The Bank  recorded  expense of $39,  $40 and $84  relating  to this Plan for the
years ended December 31, 2000, 1999 and 1998, respectively.

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 are 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.

                                       42
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

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

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, 2000 are as follows:

Years Ending
------------------------------------------------------------------------------
2001                                                                 $    171
2002                                                                      118
2003                                                                       80
2004                                                                       76
2005                                                                       76
                                                           -------------------
                                                                     $    521
                                                           ===================

Total rental expense related to operating  leases was  approximately  $222, $213
and $206 for the years ended December 31, 2000, 1999 and 1998, respectively.

As of  December  31,  2000,  the  Company had signed a letter of intent to lease
property for a new branch facility in St. Peter,  Minnesota beginning on or near
June 1, 2001.

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.

Commitments to extend credit on loans totaled  approximately $24,163 and $20,200
at December  31, 2000 and 1999,  respectively.  The  portion of  commitments  to
extend  credit  that  related  to fixed  rate  loans is $2,454  and $2,661 as of
December 31, 2000 and 1999, 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.

                                       43
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

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

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, 2000 the Company had $6,553 on
deposit with the FHLB of Des Moines.

Note 18. Fair Values of Financial Instruments


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

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                 ------------------------------------------------------------------
                                                                      2000                             1999
--------------------------------------------------------------------------------------------------------------------
                                                            Carrying          Fair           Carrying          Fair
                                                             Amount           Value           Amount           Value
                                                 -------------------------------------------------------------------
<S>                                                       <C>             <C>             <C>             <C>
Financial assets
  Cash                                                      $ 7,606         $ 7,606         $  4,200        $  4,200
  Certificates of deposit                                       200             200              400             400
  Securities available for sale                              16,225          16,225            2,551           2,551
  Securities held to maturity                                     -               -           15,559          15,090
  Loans held for sale                                         1,955           1,955              521             521
  Loans receivable, net                                     191,137         190,788          172,713         172,198
  Accrued interest receivable                                 1,910           1,910            1,350           1,350
  Mortgage servicing rights                                     821             888              772             815

Financial liabilities
  Deposits                                                  163,582         163,457          156,984         157,039
  Borrowed funds                                             33,500          33,930           17,000          16,292
  Advances from borrowers for
    taxes and insurance                                       1,228           1,228            1,262           1,262
  Accrued interest payable                                      129             129              116             116
                                                 ===================================================================
</TABLE>
                                       44
<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,
2000 and 1999 and related condensed statements of income and cash flows for each
of the years in the three year period ended December 31, 2000 are as follows:

<TABLE>
<CAPTION>
Condensed Statements of Financial Condition                                                  2000               1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                <C>
Assets
  Cash, including deposits with Wells Federal
    Bank, fsb 2000 $263; 1999 $131                                                      $     771          $     623
  Certificates of deposit                                                                       -                200
  Securities held to maturity                                                                   -              3,747
  Securities available for sale                                                             1,887                  -
  Investment in Wells Federal Bank, fsb                                                    19,629             18,733
  Accrued interest receivable and other assets                                                 54                154
                                                                             ---------------------------------------
     Total assets                                                                       $  22,341          $  23,457
                                                                             =======================================
Liabilities and Stockholders' Equity
  Liabilities                                                                           $       -          $       -
  Stockholders' equity                                                                     22,341             23,457
                                                                             ---------------------------------------
     Total liabilities and stockholders' equity                                         $  22,341          $  23,457
                                                                             =======================================
</TABLE>

<TABLE>
<CAPTION>

Condensed Statements of Income                                         2000               1999               1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>                 <C>
Interest income                                                     $    202          $     392          $     261
Other expenses                                                           100                142                125
                                                          ---------------------------------------------------------
     Income before income taxes                                          102                250                136
Income tax expense                                                        41                101                 55
                                                          ---------------------------------------------------------
     Net income before equity in net
       income of subsidiary                                               61                149                 81
Equity in net income of subsidiary                                     1,704              1,725              2,395
                                                          ---------------------------------------------------------
     Net income                                                     $  1,765          $   1,874          $   2,476
                                                          =========================================================
</TABLE>

                                       45
<PAGE>
WELLS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
--------------------------------------------------------------------------------
Note 19.   Financial   Information  of  Wells  Financial  Corp.   (Parent  Only)
           (Continued)
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows                            2000        1999        1998
-------------------------------------------------------------------------------------------
<S>                                                     <C>         <C>         <C>
Cash Flows From Operating Activities
  Net income                                              $  1,765    $  1,874    $  2,476
  Adjustment to reconcile net income to net cash
    provided by operating activities:
  Equity in undistributed net income
    of subsidiary                                           (1,704)     (1,725)     (2,395)
  (Increase) decrease in accrued interest receivable           104        (132)        (10)
  Decrease in other liabilities                                  -           -          (6)
                                                          ---------------------------------
  Net cash provided by operating activities                    165          17          65
                                                          ---------------------------------
Cash Flows From Investing Activities
  Purchase of certificates of deposit                            -        (200)       (100)
  Purchase of securities held to maturity                        -      (3,747)     (2,499)
  Proceeds from the maturities of
    certificates of deposit                                    200         200         250
  Proceeds from maturity of securities
    held to maturity                                             -       2,499         750
  Proceeds from sale of securities
    available for sale                                       1,848           -           -
  Dividends from subsidiaries                                  965         975       9,000
  Decrease in loan to Wells Federal Bank, fsb                    -           -       4,000
                                                          ---------------------------------
    Net cash provided by (used in)
      investing activities                                   3,013        (273)     11,401
                                                          ---------------------------------
Cash Flows From Financing Activities
  Payments relating to ESOP stock                              145         156         166
  Exercised stock options                                        7           -           -
  Purchase of treasury stock                                (2,410)     (3,462)     (5,937)
  Dividends paid                                              (772)       (896)     (1,001)
                                                          ---------------------------------
    Net cash (used in) financing activities                 (3,030)     (4,202)     (6,772)
                                                          ---------------------------------
    Net (decrease) increase in cash                            148      (4,458)      4,694
Cash:
  Beginning of year                                            623       5,081         387
                                                          ---------------------------------
  End of year                                             $    771    $    623    $  5,081
                                                          =================================
Supplemental Schedule of Noncash Investing
  Activities:
  Transfer of securities classified as held to maturity
    maturity to available for sale classification         $  1,900    $      -    $      -
  Net change in unrealized loss in securities
    available for sale                                          43        (246)        317
                                                          =================================
</TABLE>

                                       46
<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, 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>


<TABLE>
<CAPTION>
                                                                         Year Ended December 31, 1999
---------------------------------------------------------------------------------------------------------------------
                                                              First         Second             Third         Fourth
                                                 --------------------------------------------------------------------
<S>                                                        <C>             <C>              <C>             <C>
Interest income                                            $  3,509        $  3,489         $  3,556        $  3,660
Net interest income                                           1,611           1,604            1,650           1,651
Provision for loan losses                                        23               4                -               -
Net income                                                      541             473              444             416
Earnings per share
  Basic                                                        0.34            0.31             0.31            0.30
  Diluted                                                      0.34            0.30             0.30            0.29
</TABLE>

                                       47
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>
                 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.

 Lawrence H. Kruse                                    David Buesing
 President, Wells Federal Bank                        President, Wells Concrete Products, Inc.

 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.

 Lawrence H. Kruse                                    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, 2000, 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 18, 2001 at 4:00 p.m. at the Wells Community
Building, 189 Second Street S.E., Wells, Minnesota.