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EX-99.2 - THE QUARTERLY SUPPLEMENT, DEEMED "FURNISHED" UNDER THE SECURITIES EXCHANGE ACT - WELLS FARGO & COMPANY/MNd450286dex992.htm
8-K - FORM 8-K - WELLS FARGO & COMPANY/MNd450286d8k.htm

Exhibit 99.1

 

LOGO

 

 

LOGO

 

   Media    Investors   
   Mary Eshet    Jim Rowe   
   704-383-7777    415-396-8216   

 

Friday, January 11, 2013

WELLS FARGO REPORTS RECORD FULL YEAR AND QUARTERLY NET INCOME

2012 Net Income of $18.9 Billion, Up 19% from 2011; Record EPS of $3.36

Q4 Net Income of $5.1 Billion, Up 24% YoY; Record EPS of $0.91

 

 

Continued strong financial results:

 

  o Full year 2012:

 

  ¡ Record net income of $18.9 billion, up 19 percent from 2011

 

  ¡ Record diluted EPS of $3.36, up 19 percent from 2011

 

  ¡ Revenue of $86.1 billion, up 6 percent from 2011

 

  ¡ Positive operating leverage (revenue growth of 6 percent exceeded expense growth of 2 percent)

 

  ¡ Returned more capital to shareholders through a higher common stock dividend (up 83 percent), and common stock repurchases (approximately 120 million shares)

 

  o Fourth quarter 2012:

 

  ¡ Record net income of $5.1 billion, up 24 percent from fourth quarter 2011

 

  ¡ Record diluted EPS of $0.91, up 25 percent from fourth quarter 2011

 

  ¡ Revenue of $21.9 billion, up 7 percent from fourth quarter 2011

 

  ¡ Total average core checking and savings deposits up $72.0 billion from fourth quarter 2011

 

  ¡ Total loans of $799.6 billion, up $29.9 billion from fourth quarter 2011

 

  ¡

Core loan portfolio up $47.7 billion from fourth quarter 20111

 

 

Fourth quarter 2012 results2 included:

 

  o

$393 million, or $0.05 per share, in above-average quarterly equity gains3

 

  o $(644) million, or $(0.09) per share, in operating losses from an incremental accrual to fully reserve for the costs associated with the Independent Foreclosure Review (IFR) settlement and additional remediation-related costs

 

  o $(250) million, or $(0.03) per share, in noninterest expense for a contribution to the Wells Fargo Foundation

 

  o $332 million, or $0.06 per share, in lower tax expense due to a benefit associated with the realization for tax purposes of a previously written-down Wachovia life insurance investment

 

 

1 See table on page 6 for more information on core and non-strategic/liquidating loan portfolios.

2 Fourth quarter 2012 effective tax rate of 27.4 percent used in the calculation of per share amounts.

3 Fourth quarter 2012 net gains from equity investments of $715 million were $393 million higher than previous seven quarter average net gains of $322 million.


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Solid credit quality:

 

  o

Net charge-offs of $2.1 billion, or 1.05 percent (annualized) of average loans, including $321 million of net charge-offs (fully covered by loan loss reserves) from the completion of implementation of the OCC guidance4 issued in third quarter 2012

 

  o Excluding the impact of the OCC guidance, net charge-offs of $1.8 billion or 0.89 percent (annualized) of average loans

 

  o

$250 million (pre-tax) reserve release5 due to continued strong credit performance

 

 

Maintained strong capital position:

 

  o

Tier 1 common equity6 under Basel I increased $3.3 billion from prior quarter to $109.1 billion, with Tier 1 common equity ratio of 10.12 percent under Basel I at December 31, 2012. Estimated Tier 1 common equity ratio of 8.18 percent under current Basel III capital proposals7

 

  o Purchased approximately 42 million shares of common stock in fourth quarter 2012 and an additional estimated 6 million shares through a forward repurchase transaction expected to settle in first quarter 2013

Selected Financial Information

 

 

 
          

 

Quarter ended  

               
  

 

 

    
     Dec. 31,       Sept. 30,        Dec. 31,        Year ended Dec. 31,    
     2012       2012        2011        2012        2011    

 

 

Earnings

             

Diluted earnings per common share

   $ 0.91          0.88           0.73           3.36           2.82     

Wells Fargo net income (in billions)

     5.09          4.94           4.11           18.90           15.87     

Return on assets (ROA)

     1.46       1.45           1.25           1.41           1.25     

Return on equity (ROE)

     13.35          13.38           11.97           12.95           11.93     

Asset Quality

             

Net charge-offs as a % of avg. total loans

     1.05          1.21           1.36           1.17           1.49     

Allowance as a % of total loans

     2.19          2.27           2.56           2.19           2.56     

Allowance as a % of annualized net charge-offs

     211          190           188           193           174     

Other

             

Revenue (in billions)

   $ 21.9          21.2           20.6           86.1           80.9     

Efficiency ratio

     58.8       57.1           60.7           58.5           61.0     

Average loans (in billions)

   $  787.2          776.7           768.6           775.2           757.1     

Average core deposits (in billions)

     928.8          895.4           864.9           893.9           826.7     

Net interest margin

     3.56       3.66           3.89           3.76           3.94     

 

 

 

 

4 Office of the Comptroller of the Currency update to Bank Accounting Advisory Series issued third quarter 2012 (OCC guidance), which requires consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status. See pages 7-9, including footnote 9, for additional information regarding the implementation of the OCC guidance and its effect on our credit metrics.

5 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.

6 See tables on page 40 for more information on Tier 1 common equity.

7 Estimated based on management’s current interpretation of the Basel III capital rules proposed by federal banking agencies in notices of proposed rulemaking announced in June 2012. The proposed rules and interpretations and assumptions used in estimating Basel III calculations are subject to change depending on final promulgation of Basel III capital rules.


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SAN FRANCISCO – Wells Fargo & Company (NYSE:WFC) reported diluted earnings per common share of $3.36 for 2012, up 19 percent from $2.82 in 2011. Full year net income was $18.9 billion, compared with $15.9 billion in 2011. For fourth quarter 2012, net income was $5.1 billion, or $0.91 per share, compared with $4.1 billion, or $0.73 per share, for fourth quarter 2011.

“2012 was an outstanding year for Wells Fargo,” said Chairman and CEO John Stumpf. “We saw the continued benefits of our diversified business model and reported record full year and fourth quarter earnings, robust deposit and solid loan growth, and strong performance across our business units. The Company’s success is due to our more than 265,000 team members who remained focused on our customers and on our vision to satisfy all of our customers’ financial needs.

“This time last year, I said we would benefit from the many opportunities we saw for 2012 – and we did just that. From growing revenue, making strategic acquisitions and achieving efficiency improvements, I am extremely pleased with our 2012 performance. We also returned more capital to our shareholders through common stock dividends and common stock repurchases. We are very well positioned for and look forward to 2013, as Wells Fargo continues to work hard to contribute to a growing U.S. economy by doing what we do best: helping customers succeed financially.”

Chief Financial Officer Tim Sloan added, “The Company’s underlying results were driven by solid loan growth, improved credit quality, and continued success in improving efficiency. While our fourth quarter included some noteworthy items, we achieved strong returns on average assets and equity of 1.46 percent and 13.35 percent, respectively. We are very pleased with the Company’s outstanding performance despite the challenges our industry faced during this past year, including continued low interest rates and elevated unemployment. Our balanced business model helped us deliver strong results throughout these challenging times and should provide us the opportunity to continue to deliver value to our shareholders in the coming year.”

Revenue

Revenue for the year was $86.1 billion, up 6 percent from $80.9 billion in 2011. Revenue in the fourth quarter increased 7 percent to $21.9 billion, up $1.3 billion from a year ago. On a linked-quarter basis, revenue growth accelerated 14 percent (annualized), up $735 million. Growth in noninterest income was generated across our diversified businesses and net interest income was relatively flat linked quarter. Businesses generating linked-quarter, double-digit annualized revenue growth included capital finance, capital markets, commercial banking, commercial real estate, corporate banking, credit card, mortgage, and wealth management.

Net Interest Income

Net interest income in the fourth quarter decreased $249 million, or 2 percent, from a year ago, and was down slightly on a linked-quarter basis to $10.6 billion in fourth quarter. Income from our loan portfolios


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rose slightly from prior quarter, reflecting both organic growth in consumer and commercial loans and the retention of $9.7 billion in high-quality, conforming first real estate mortgages in the fourth quarter. While the available-for-sale (AFS) securities portfolio balance was essentially flat linked-quarter, income continued to be impacted by runoff in federal agency mortgage-backed securities (MBS) and a decision to replace that runoff with shorter duration securities. Interest income from the AFS securities portfolio declined by $69 million. Interest income from the mortgage warehouse was down $63 million in the quarter as the size of the warehouse declined in line with lower origination volume.

The decline in interest income was partially offset by a $49 million decrease in interest expense, reflecting the benefit of continued reductions in deposit and long term funding costs.

On a linked-quarter basis, the Company’s net interest margin declined 10 basis points to 3.56 percent. The primary driver of the decline, approximately 8 basis points, was strong deposit growth of $30 billion in the quarter (12 percent annualized). This inflow of deposits caused cash and short term investments to increase, and while these inflows diluted net interest margin, they were essentially neutral to net interest income. The ongoing repricing of the balance sheet in the current low interest rate environment resulted in approximately 5 basis points of additional net interest margin compression. This was partially offset by the benefit of slightly higher income from variable sources, such as fee income and periodic dividends, which increased 3 basis points on a linked-quarter basis.

Noninterest Income

Noninterest income of $11.3 billion increased $1.6 billion, or 16 percent, from fourth quarter 2011 and increased 28 percent (annualized) from third quarter 2012. The linked-quarter increase reflects growth in service charges, trust and investment fees, and mortgage banking. Noninterest income was also bolstered by above-average equity gains, driven by gains in our private equity businesses.

Mortgage banking noninterest income was $3.1 billion, up $261 million from third quarter 2012, on $125 billion of originations, compared with $139 billion of originations in third quarter. During the fourth quarter, the Company retained on balance sheet 1-4 family conforming first mortgage loans, forgoing approximately $340 million of fee revenue that could have been generated had the loans been originated for sale during the quarter along with other agency conforming loan production. The Company provided $379 million for mortgage loan repurchase losses, compared with $462 million in third quarter (included in net gains from mortgage loan origination/sales activities). Net mortgage servicing rights (MSRs) results were $220 million, up from $142 million in third quarter 2012, due primarily to MSRs valuation adjustments made in the third quarter for increased servicing and foreclosure costs. The ratio of MSRs to related loans serviced for others was 67 basis points and the average note rate on the servicing portfolio was 4.77 percent. The unclosed pipeline at December 31, 2012 was $81 billion, compared with $97 billion at September 30, 2012.


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The Company had net unrealized securities gains of $11.9 billion at December 31, 2012, compared with $12.4 billion at September 30, 2012. Period-end AFS securities balances increased $5.8 billion.

Noninterest Expense

Noninterest expense increased $388 million, or 3 percent, from fourth quarter 2011 and increased $784 million from third quarter 2012. The increase in noninterest expense from the prior quarter was due primarily to $644 million in operating losses from an incremental accrual to fully reserve for the costs associated with the IFR settlement (discussed below) and additional remediation-related costs, and $250 million for a contribution to the Wells Fargo Foundation. The Company continued to operate within its targeted efficiency ratio range of 55 to 59 percent, with an efficiency ratio of 58.8 percent in fourth quarter 2012, compared with 57.1 percent in third quarter 2012 and 60.7 percent in fourth quarter 2011. The Company is well positioned to remain within this targeted range in 2013.

Independent Foreclosure Review Settlement

On January 7, 2013, the Company announced that, along with nine other mortgage servicers, it entered into settlement agreements with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board (FRB) that would end their IFR programs created by Article VII of an April 2011 Interagency Consent Order and replace it with an accelerated remediation process.

In aggregate, the servicers have agreed to make direct, cash payments of $3.3 billion and to provide $5.2 billion in additional assistance, such as loan modifications, to consumers. Wells Fargo’s portion of the cash settlement is $766 million, which is based on the proportionate share of Wells Fargo-serviced loans in the overall IFR population. Wells Fargo recorded a pre-tax charge of $644 million in fourth quarter 2012 to fully reserve for its cash payment portion of the settlement and additional remediation-related costs. The Company also committed an additional $1.2 billion to foreclosure prevention actions. This commitment did not result in any charge as the Company believes that this commitment is covered through the existing allowance for credit losses and the nonaccretable difference relating to the purchased credit-impaired loan portfolios. With this settlement, the Company will no longer incur costs associated with the independent foreclosure reviews, which had recently approximated $125 million per quarter for external consultants and additional staffing.

“In addition to the benefit to our customers, we are very pleased to have put this legacy issue behind us and to have removed the future costs associated with independent foreclosure reviews,” said Stumpf.

Taxes

Our effective tax rate was 27.4 percent for the fourth quarter 2012, compared with 31.3 percent for the fourth quarter 2011 and 32.5 percent for the year ended December 31, 2012, compared with 31.9 percent for the year ended December 31, 2011. The lower tax rate in the fourth quarter 2012 was primarily attributable


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to the realization, for tax purposes, of a discrete $332 million benefit resulting from the surrender of previously written-down Wachovia life insurance investment.

Loans

Total loans were $799.6 billion at December 31, 2012, up $16.9 billion from September 30, 2012, including double-digit annualized loan growth in commercial banking, credit card, mortgage, and retail brokerage. Included in the total loan growth was $9.7 billion of 1-4 family conforming first mortgage production retained on the balance sheet. The growth in core loan portfolios more than offset the reduction in the non-strategic/liquidating portfolios, which declined $4.1 billion in the quarter.

Average total loans of $787.2 billion in fourth quarter 2012 grew $18.6 billion, or 2 percent, from fourth quarter 2011. On a linked-quarter basis, average loans increased $10.5 billion, or 5 percent (annualized). Average commercial and commercial real estate loans increased $10.8 billion, or 3 percent, from fourth quarter 2011 and increased $1.6 billion, or 2 percent (annualized), on a linked-quarter basis. Average consumer loans increased $7.8 billion, or 2 percent, from a year ago and increased $8.9 billion, or 8 percent (annualized), on a linked-quarter basis.

 

 

 
    December 31, 2012      September 30, 2012    
 

 

 

   

 

 

 
(in millions)   Core        Liquidating (1)        Total      Core        Liquidating (1)        Total    

 

 

Commercial

    $   358,028           3,170           361,198         348,696           3,836           352,532     

Consumer

    346,984           91,392           438,376         335,278           94,820           430,098     

 

 

 Total loans

    $ 705,012           94,562           799,574         683,974           98,656           782,630     

 

 

Change from prior quarter:

    $ 21,038           (4,094        16,944         11,903           (4,472        7,431     

 

 

 

(1) See table on page 37 for additional information on non-strategic/liquidating loan portfolios. Management believes that the above information provides useful disclosure regarding the Company’s ongoing loan portfolios.

Deposits

Average core deposits of $928.8 billion for fourth quarter 2012 increased $63.9 billion, or 7 percent, from fourth quarter 2011. On a linked-quarter basis, average core deposits grew $33.5 billion, or 15 percent (annualized). Average mortgage escrow deposits were $42.2 billion for fourth quarter 2012, up $7.2 billion from fourth quarter 2011 and up $2.2 billion on a linked-quarter basis. Excluding mortgage escrow balances, total average core deposits grew 7 percent from fourth quarter 2011 and 15 percent (annualized) on a linked-quarter basis. Average core checking and savings deposits were 94 percent of average core deposits, up from 93 percent a year ago. The average deposit cost for fourth quarter 2012 was 16 basis points, compared with 18 basis points in third quarter 2012. Average core deposits were 118 percent of average loans, up slightly from third quarter 2012.

Capital

Capital increased in the fourth quarter, with Tier 1 common equity reaching $109.1 billion under Basel I, or 10.12 percent of risk-weighted assets, up from 9.46 percent in fourth quarter 2011 and 9.92 percent in third


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quarter 2012. Under current Basel III proposals, the Tier I common equity ratio was an estimated 8.18 percent8. In the fourth quarter, the Company purchased approximately 42 million shares of its common stock and an additional estimated 6 million shares through a forward repurchase transaction expected to settle in first quarter 2013, and paid a quarterly common stock dividend of $0.22 per share.

 

 

 
     Dec. 31,        Sept. 30,         Dec. 31,     
(as a percent of total risk-weighted assets)    2012        2012         2011     

 

 

Ratios under Basel I (1):

       

Tier 1 common equity (2)

     10.12        9.92         9.46      

Tier 1 capital

     11.75           11.50         11.33      

Tier 1 leverage

     9.47           9.40         9.03      

 

 

 

(1) December 31, 2012, ratios are preliminary.
(2) See table on page 40 for more information on Tier 1 common equity.

Credit Quality

“Wells Fargo’s risk profile continued to improve in 2012,” said Chief Risk Officer Mike Loughlin. “Credit losses were $9.0 billion in 2012, compared with $11.3 billion in 2011—an improvement of $2.3 billion or 20 percent. In addition, year-over-year, our nonperforming assets declined by $1.5 billion or 6 percent, our consumer 30 – 89 days past due was down $1.8 billion or 22 percent, our liquidating portfolios declined by $17.8 billion or 16 percent, and the Pick-a-Pay PCI portfolio continued to perform better than we estimated at the time we acquired Wachovia. Reflecting continued, improved credit performance, we released $250 million in loan loss reserves in the fourth quarter. Absent significant deterioration in the economy, we continue to expect future reserve releases in 2013, though at a lower level than in 2012,” said Loughlin.

Reported credit metrics for the quarter were affected by the completion of implementation of the OCC guidance issued in third quarter 2012. In the fourth quarter, we applied the updated OCC guidance to previously modified loans to consumers who have been discharged in bankruptcy. Fourth quarter adjustments associated with the OCC guidance affected nonperforming loans and net charge-offs as follows9:

 

 

$394 million reclassification of performing consumer loans to nonaccrual status

 

 

$321 million increase in net loan charge-offs, fully covered by loan loss reserves

Net Loan Charge-offs

Net loan charge-offs improved to $2.1 billion in fourth quarter 2012, or 105 basis points of average loans, compared with $2.6 billion in fourth quarter 2011, or 136 basis points of average loans. On a linked-quarter basis, net loan charge-offs improved by $277 million, or 16 basis points of average loans.

 

 

8 Estimated based on management’s current interpretation of the Basel III capital rules proposed by federal banking agencies in notices of proposed rulemaking announced in June 2012. The proposed rules and interpretations and assumptions used in estimating Basel III calculations are subject to change depending on final promulgation of Basel III capital rules.

9 Reclassification to nonaccrual loans includes $264 million and the increase in net loan charge offs include $271 million from the completion of implementation of OCC guidance.


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Excluding the $321 million in charge-offs resulting from the adjustments associated with the OCC guidance, net charge-offs in fourth quarter 2012 were $1.8 billion or 89 basis points with commercial losses of $255 million, or 29 basis points, and consumer losses of $1.5 billion or 138 basis points10. Full year 2012 credit losses (excluding losses from the OCC guidance implementation) declined $3.2 billion or 28 percent from 2011.

Net Loan Charge-Offs

 

 

 
    

Quarter ended  

 
  

 

 

 
     Dec. 31, 2012     Sept. 30, 2012     June 30, 2012    

 

 
  ($ in millions)      Net loan  
charge-  
offs  
    

As a  

% of  
average  
loans (1)  

      Net loan  
charge-  
offs  
    

As a  

% of  
average  
loans (1)  

      Net loan  
charge-  
offs  
    

As a  

% of  
average  
loans (1)  

 

 

 

  Commercial:

               

  Commercial and industrial

     $   209           0.46       $ 131           0.29       $ 249           0.58  

  Real estate mortgage

     38           0.14          54           0.21          81           0.31     

  Real estate construction

     (18)           (0.43)          1           0.03          17           0.40     

  Lease financing

     2           0.04          1           0.03          -           -     

  Foreign

     24           0.25          30           0.29          11           0.11     

 

      

 

 

      

 

 

    

  Total commercial

     255           0.29          217           0.24          358           0.42     

 

      

 

 

      

 

 

    

  Consumer:

               

  Real estate 1-4 family first mortgage

     649           1.05          673           1.15          743           1.30     

  Real estate 1-4 family junior lien mortgage

     690           3.57          1,036           5.17          689           3.38     

  Credit card

     222           3.71          212           3.67          240           4.37     

  Other revolving credit and installment

     265           1.21          220           1.00          170           0.79     

 

      

 

 

      

 

 

    

  Total consumer

 

     1,826           1.68          2,141           2.01          1,842           1.76     

 

      

 

 

      

 

 

    

  Total

     $   2,081           1.05       $   2,358           1.21       $   2,200           1.15  

 

      

 

 

      

 

 

    
               

 

 

 

(1) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 33 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

Nonperforming Assets

Nonperforming assets decreased by $744 million in the quarter, which included a $394 million increase in nonperforming loans due to the impact of the OCC guidance, ending the quarter at $24.5 billion, compared with $25.3 billion in third quarter 2012. Nonaccrual loans decreased to $20.5 billion from $21.0 billion in third quarter. Foreclosed assets were $4.0 billion, down from $4.2 billion in third quarter 2012.

 

 

10 Management believes that the presentation in this news release of information excluding the impact of the OCC guidance provides useful disclosure regarding the credit quality of the Company’s loan portfolios.


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Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

 

 

 
     Dec. 31, 2012     Sept. 30, 2012     June 30, 2012  

 

 
            As a             As a             As a   
            % of             % of             % of   
     Total        total      Total        total      Total        total   
 ($ in millions)    balances        loans      balances        loans      balances        loans   

 

 

 Commercial:

               

 Commercial and industrial

     $   1,422           0.76       $   1,404           0.79      $   1,549           0.87  

 Real estate mortgage

     3,322           3.12          3,599           3.44         3,832           3.63     

 Real estate construction

     1,003           5.93          1,253           7.08         1,421           8.08     

 Lease financing

     27           0.22          49           0.40         43           0.34     

 Foreign

     50           0.13          66           0.17         79           0.20     

 

      

 

 

      

 

 

    

 Total commercial

     5,824           1.61          6,371           1.81         6,924           1.96     

 

      

 

 

      

 

 

    

 Consumer:

               

 Real estate 1-4 family first mortgage

     11,455           4.58          11,195           4.65          10,368           4.50     

 Real estate 1-4 family junior lien mortgage

     2,922           3.87          3,140           4.02          3,091           3.82     

 Other revolving credit and installment

     285           0.32          338           0.39          195           0.22     

 

      

 

 

      

 

 

    

 Total consumer (1)

     14,662           3.34          14,673           3.41          13,654           3.24     

 

      

 

 

      

 

 

    

 Total nonaccrual loans

     20,486           2.56          21,044           2.69          20,578           2.65     

 

      

 

 

      

 

 

    

 Foreclosed assets:

               

 GNMA

     1,509             1,479             1,465        

 Non GNMA

     2,514             2,730             2,842        

 

      

 

 

      

 

 

    

 Total foreclosed assets

     4,023             4,209             4,307        

 

      

 

 

      

 

 

    

 Total nonperforming assets

     $   24,509           3.07       $   25,253           3.23       $   24,885           3.21  

 

      

 

 

      

 

 

    

 Change from prior quarter:

               

 Total nonaccrual loans

     $ (558)             $ 466           $ (1,448)        

 Total nonperforming assets

     (744)             368             (1,758)        
               

 

 

 

(1) Includes $1.4 billion at September 30, 2012, resulting from implementation of OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status.

Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $1.4 billion at December 31, 2012, compared with $1.5 billion at September 30, 2012. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $21.8 billion at December 31, 2012, up slightly from $21.4 billion at September 30, 2012.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $17.5 billion at December 31, 2012, down from $17.8 billion at September 30, 2012. The allowance reflected estimated loan losses attributable to Hurricane Sandy. The allowance coverage to total loans was 2.19 percent, compared with 2.27 percent in third quarter 2012. The allowance covered 2.1 times annualized fourth quarter net charge-offs, compared with 1.9 times in the prior quarter. The allowance coverage to nonaccrual loans was 85 percent at December 31, 2012, compared with 85 percent at September 30, 2012. “We believe the allowance was appropriate for losses inherent in the loan portfolio at December 31, 2012,” said Loughlin.


- 10 -

 

Business Segment Performance

Wells Fargo defines its operating segments by product type and customer segment. Segment net income for each of the three business segments was:

 

 

 
                   Quarter ended    
  

 

 

 
       Dec. 31,      Sept. 30,      Dec. 31,    
(in millions)    2012      2012      2011    

 

 

Community Banking

    $   2,869         2,740         2,509     

Wholesale Banking

     2,032         1,993         1,636     

Wealth, Brokerage and Retirement

     351         338         311     

 

 

More financial information about the business segments is on pages 41 and 42.

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses. These products include investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. through its Regional Banking and Wells Fargo Home Lending business units.

Selected Financial Information

 

 
                   Quarter ended    
  

 

 

 
       Dec. 31,      Sept. 30,      Dec. 31,    
 (in millions)    2012      2012      2011    

 

 

Total revenue

      $  13,782         13,110         13,009     

Provision for credit losses

     1,757         1,627         2,025     

Noninterest expense

     8,033         7,402         7,313     

Segment net income

     2,869         2,740         2,509     
(in billions)                     

Average loans

     493.1         485.3         490.6     

Average assets

     794.2         765.1         753.3     

Average core deposits

     608.9         594.5         568.4     

 

 

Community Banking reported net income of $2.9 billion, up $360 million, or 14 percent, from fourth quarter 2011. Revenue increased $773 million, or 6 percent, primarily due to higher mortgage banking revenue and above-average quarterly equity gains, partially offset by lower net interest income. Noninterest expense increased $720 million, or 10 percent, from fourth quarter 2011, largely the result of costs associated with the IFR settlement and a $250 million contribution to the Wells Fargo Foundation, partially mitigated by lower employee benefits costs. The provision for credit losses was $268 million lower than a year ago due to improved portfolio performance. Net income included a benefit of $332 million associated with the realization for tax purposes of a previously written-down Wachovia life insurance investment.

Net income was up $129 million, or 5 percent, from third quarter 2012. Revenue increased $672 million, or 5 percent, from third quarter 2012, primarily due to above-average quarterly equity gains and higher mortgage banking revenue. Noninterest expense increased $631 million, or 9 percent, from third quarter, largely due to costs associated with the IFR settlement and a $250 million contribution to the Wells Fargo Foundation, partially offset by lower employee benefit costs. The provision for credit losses increased $130 million from third quarter, as credit improvement was more than offset by additional charge-offs from the completion of implementation of the OCC guidance issued in third quarter 2012. Net income also


- 11 -

 

included a benefit of $332 million associated with the realization for tax purposes of a previously written-down Wachovia life insurance investment.

Regional Banking

 

 

Retail banking

 

  o

Retail Bank household cross-sell ratio of 6.05 products per household, up from 5.93 year-over-year11

 

  o

Consumer checking accounts essentially flat year-over-year11

 

  o Consumer credit card, lines of credit and loan product solutions (sales) in the retail banking stores in 2012 were up more than 50 percent from 2011

 

  o Partner referrals that resulted in a sale in 2012 were up more than 40 percent from 2011

 

  o Customers rated their experience with Wells Fargo stores and contact centers at an all-time high, based on fourth quarter survey results

 

 

Small Business/Business Banking

 

  o

Business checking accounts up a net 3.7 percent year-over-year11

 

  o Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) in 2012 were up more than 50 percent from 2011

 

  o $16.0 billion in net new loan commitments to small business customers (primarily with annual revenues less than $20 million) in 2012, up over 30 percent from 2011

 

  o Wells Fargo approved a record $1.24 billion in SBA 7(a) loans in 2012 and, for the fourth consecutive year, is the No. 1 SBA 7(a) lender in dollar volume in the U.S. (U.S. SBA data, federal fiscal years 2009–2012)

 

 

Online and Mobile Banking

 

  o

21.4 million active online customers, up 5 percent year-over-year11

 

  o

9.4 million active mobile customers, up 33 percent year-over-year11

 

  o

Wells Fargo announced the nationwide expansion of Wells Fargo Mobile® Deposit

 

  o

New Wells Fargo for iPad app which includes access to Wells Fargo accounts, transfers, payments, Wells Fargo Mobile® Deposit and brokerage access and trading

 

  o Expansion of our Send & Receive Money service which now makes it possible to send money to anyone with an eligible U.S. deposit account using an email address or mobile number

Consumer Lending Group

 

 

Home Lending

 

  o Originations of $125 billion, compared with $139 billion in prior quarter

 

  o Applications of $152 billion, compared with $188 billion in prior quarter

 

  o Application pipeline of $81 billion at quarter end, compared with $97 billion at September 30, 2012

 

  o Residential mortgage servicing portfolio of $1.9 trillion


- 12 -

 

 

Other Consumer Lending

 

  o

Credit card penetration in retail banking households rose to 33.1 percent11, up from 32.1 percent in prior quarter and 29.2 percent in prior year

 

  o Auto originations of $5.4 billion, down 15 percent from prior quarter and up 8 percent from prior year

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $20 million. Products & business segments include Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments, Asset Backed Finance, and Asset Management.

Selected Financial Information

 

 

 
     Quarter ended    
  

 

 

 
(in millions)   

  Dec. 31,

2012

    

Sept. 30,

2012

   

Dec. 31,  

2011  

 

 

 

Total revenue

     $ 5,993         5,949        5,416   

Provision (reversal of provision) for credit losses

     60         (57     31   

Noninterest expense

     3,007         2,908        2,938   

Segment net income

     2,032         1,993        1,636   
(in billions)                    

Average loans

     279.2         277.1        265.1   

Average assets

     489.7         490.7        458.3   

Average core deposits

     240.7         225.4        223.2   

 

 

Wholesale Banking reported net income of $2.0 billion, up $396 million, or 24 percent, from fourth quarter 2011 led by higher pre-tax pre-provision profit (PTPP)12 and lower net charge-offs. Revenue increased $577 million, or 11 percent, from fourth quarter 2011 driven by broad-based business growth, including acquisitions and solid loan and deposit growth. Noninterest expense increased $69 million, or 2 percent, from fourth quarter 2011 due to higher personnel expenses related to revenue growth and higher non-personnel expenses related to growth initiatives and compliance and regulatory requirements. Despite an improvement of $71 million in net charge-offs, the provision for credit losses increased $29 million from fourth quarter 2011, due to a lower level of reserve release. The fourth quarter 2012 provision included a $50 million reserve release, compared with a $150 million reserve release a year ago.

Net income was up $39 million, or 2 percent, from third quarter 2012. Revenue of $6.0 billion increased $44 million, or 1 percent, from third quarter 2012 as strong growth across many businesses, including capital finance, commercial banking, commercial real estate, corporate banking and investment banking was partially offset by lower sales and trading, equity funds gains and lower PCI resolutions. The Wholesale Banking businesses continued to drive higher loan growth and meet customer demand with average loan balances rising to $279 billion in the fourth quarter. Noninterest expense increased $99 million, or 3 percent, from third quarter 2012 on higher personnel expense and operating losses. The provision for

 

 

11 Data as of November 2012. Comparisons are November 2012 compared with November 2011.

12 See footnote (2) on page 18 for more information on pre-tax pre-provision profit.


- 13 -

 

credit losses was $60 million in fourth quarter, compared with a net reversal of $57 million in the third quarter. This was due to both increased net loan charge-offs and a decrease in reserve release.

 

 

Five percent average loan and 7 percent average asset growth in fourth quarter 2012 compared to fourth quarter 2011. The growth came from nearly all portfolios, including asset backed finance, capital finance, commercial banking, commercial real estate, corporate banking and government and institutional banking

 

 

Ten consecutive quarters of average loan growth in Commercial Banking

 

 

Fourth quarter 2012 average core deposits, up 8 percent from fourth quarter 2011

 

 

Investment Banking full year revenue from commercial and corporate customers increased 30 percent from 2011 full year due to attractive capital markets conditions and continued momentum in cross selling

 

 

Wholesale businesses established a branch presence in Toronto, Canada in the quarter, expanding capabilities

 

 

Wells Fargo Asset Management announced that it had acquired a minority ownership stake in privately held The Rock Creek Group, a Washington, D.C.-based fund of hedge funds firm with approximately $7 billion in assets under management

 

 

Cross-sell of 6.8 products per relationship, up from 6.7 in prior quarter13

Wealth, Brokerage and Retirement provides a full range of financial advisory services to clients using a planning approach to meet each client’s needs. Wealth Management provides affluent and high net worth clients with a complete range of wealth management solutions, including financial planning, private banking, credit, investment management and trust. Abbot Downing, a Wells Fargo business, provides comprehensive wealth management services to ultra high net worth families and individuals as well as their endowments and foundations. Brokerage serves customers’ advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the United States. Retirement is a national leader in providing institutional retirement and trust services (including 401(k) and pension plan record keeping) for businesses, retail retirement solutions for individuals, and reinsurance services for the life insurance industry.

Selected Financial Information

 

 

 
     Quarter ended    
  

 

 

 
 (in millions)   

Dec. 31,

2012

    

Sept. 30,

2012

    

Dec. 31,  

2011  

 

 

 

 Total revenue

   $ 3,094         3,033         3,042     

 Provision for credit losses

     15         30         20     

 Noninterest expense

     2,513         2,457         2,520     

 Segment net income

     351         338         311     
 (in billions)                     

 Average loans

     43.3         42.5         42.8     

 Average assets

     171.7         163.8         160.6     

 Average core deposits

     143.4         136.7         135.2     

 

 

Wealth, Brokerage and Retirement reported net income of $351 million, up 13 percent from fourth quarter 2011. Revenue was $3.1 billion, up 2 percent from fourth quarter 2011. Fourth quarter 2011 results included a $153 million gain on the sale of the H.D. Vest business. Excluding the gain on the sale of H.D. Vest and

 

 

13 As of September 2012.


- 14 -

 

$46 million in lower gains on deferred compensation plan investments (offset in compensation expense), revenue was up 9 percent, predominantly due to higher asset-based fees and brokerage transaction revenue, partially offset by lower net interest income. Total provision for credit losses decreased $5 million from fourth quarter 2011. The provision in the fourth quarter 2012 and fourth quarter 2011 included an $8 million and a $12 million credit reserve release, respectively. Noninterest expense was flat compared with the fourth quarter 2011. Apart from a $41 million decrease in deferred compensation plan expense (offset in trading income), noninterest expense increased 1 percent, primarily due to higher broker commissions.

Net income was up 4 percent from third quarter 2012. Revenue was up 2 percent from third quarter 2012. Excluding $32 million in lower gains on deferred compensation plan investments, revenue was up 3 percent largely due to higher asset-based fees. Total provision for credit losses decreased $15 million from third quarter 2012; the provision in the third quarter 2012 included a $10 million credit reserve release. Noninterest expense increased 2 percent from the third quarter 2012 driven by higher personnel expense, primarily increased incentives, partially offset by lower deferred compensation expense and reduced non-personnel costs. Apart from a $34 million decrease in deferred compensation, noninterest expense increased 4 percent.

Retail Brokerage

 

 

Client assets of $1.2 trillion, up 8 percent from prior year

 

 

Managed account assets increased $50 billion, or 20 percent, from prior year driven by strong net flows and market performance

 

 

Strong deposit growth, with average balances up 9 percent from prior year

 

 

Wells Fargo launched an iPad app in December 2012, which, among other features, enables Wells Fargo Advisors clients to monitor accounts, get real-time quotes and execute trades; trading capability was also added for mobile brokerage clients via the Wells Fargo Mobile App and wf.com

Wealth Management

 

 

Client assets of $204 billion, up 3 percent from prior year

Retirement

 

 

Institutional Retirement plan assets of $266 billion, up 13 percent from prior year

 

 

IRA assets of $297 billion, up 11 percent from prior year

Conference Call

The Company will host a live conference call on Friday, January 11, at 7 a.m. PST (10 a.m. EST). To access the call, please dial 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings and http://us.meeting-stream.com/wellsfargocompany_011113.


- 15 -

 

A replay of the conference call will be available beginning at approximately noon PST (3 p.m. EST) on January 11 through Friday, January 18. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #69450441. The replay will also be available online at wellsfargo.com/invest_relations/earnings.

Cautionary Statement about Forward-Looking Information

In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that this news release contains forward-looking statements about our future financial performance and business. We make forward-looking statements when we use words such as “believe,” “expect,” “anticipate,” “estimate,” “target,” “should,” “may,” “can,” “will,” “outlook,” “project,” “appears” or similar expressions. Forward-looking statements in this news release include, among others, statements about: (i) future credit quality and performance, and the appropriateness of the allowance for loan losses, including our current expectation of future reserve releases; (ii) our expectations regarding noninterest expense and our targeted efficiency ratio; and (iii) our estimate regarding our Tier 1 common equity ratio under proposed Basel III capital rules as of December 31, 2012.

Do not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. Several factors could cause actual results to differ materially from expectations including: current and future economic and market conditions, including the effects of further declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, and the sovereign debt crisis and economic difficulties in Europe; our capital requirements (including under regulatory capital standards as determined and interpreted by applicable regulatory authorities such as the proposed Basel III capital rules) and our ability to generate capital internally or raise capital on favorable terms; financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses (including the Dodd-Frank Wall Street Reform and Consumer Protection Act), as well as our ability to mitigate the loss of revenue and income from financial services reform and other regulation and legislation; the extent of success in our loan modification efforts, including the effects of regulatory requirements, or changes in regulatory requirements, relating to loan modifications; the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties; negative effects relating to mortgage servicing and foreclosures, as well as effects associated with our settlement with the Department of Justice and other federal and state government entities related to our mortgage servicing and foreclosure practices, including changes in our procedures or practices and/or industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures; our ability to realize our efficiency ratio target as part of our expense management initiatives when and in the range targeted, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters; a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers; recognition of other-than-temporary impairment on securities held in our available-for-sale portfolio; the effect of the current low interest rate environment or changes in interest rates on our net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; hedging gains or losses; disruptions in the capital markets and reduced investor demand for mortgage loans; our ability to sell more products to our customers; the effect of fluctuations in stock market prices on fee income from our brokerage, asset and wealth management businesses; our election to provide support to our money market funds; changes in the value of our venture capital investments; changes in our accounting policies or in accounting standards or in how accounting standards are to be applied; changes in our credit ratings and changes in the credit ratings of our customers or counterparties; mergers and acquisitions; federal and state regulations; reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations and legal actions; the loss of checking and saving account deposits to other investments such as the stock market; and fiscal and monetary policies of the Federal Reserve Board. There is no assurance that our allowance for credit losses will be adequate to cover future credit losses, especially if housing prices decline


- 16 -

 

and unemployment worsens. Increases in loan charge-offs or in the allowance for credit losses and related provision expense could materially adversely affect our financial results and condition. For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the SEC and available on the SEC’s website at www.sec.gov. Any factor described above or in our SEC reports could, by itself or together with one or more other factors, adversely affect our financial results and condition.

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.4 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet (wellsfargo.com), and has offices in more than 35 countries to support the bank’s customers who conduct business in the global economy. With more than 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2012 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

# # #


Wells Fargo & Company and Subsidiaries

QUARTERLY FINANCIAL DATA

TABLE OF CONTENTS

 

 

    

 

      Pages

 

Summary Information

  

Summary Financial Data

     18-19   

Income

  

Consolidated Statement of Income

     20   

Consolidated Statement of Comprehensive Income

     21   

Condensed Consolidated Statement of Changes in Total Equity

     21   

Five Quarter Consolidated Statement of Income

     22   

Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis)

     23-24   

Noninterest Income and Noninterest Expense

     25-26   

Balance Sheet

  

Consolidated Balance Sheet

     27-28   

Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis)

     29   

Securities Available for Sale

     30   

Loans

  

Loans

     30   

Nonperforming Assets

     31   

Loans 90 Days or More Past Due and Still Accruing

     32   

Purchased Credit-Impaired Loans

     33-35   

Pick-A-Pay Portfolio

     36   

Non-Strategic and Liquidating Loan Portfolios

     37   

Home Equity Portfolios

     37   

Changes in Allowance for Credit Losses

     38-39   

Equity

  

Tier 1 Common Equity

     40   

Operating Segments

  

Operating Segment Results

     41-42   

Other

  

Mortgage Servicing and other related data

     43-45   

 

 


18

 

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA

 

 
     Quarter ended December 31,      %     Year ended Dec. 31,      %  
  

 

 

      

 

 

    
($ in millions, except per share amounts)    2012     2011      Change     2012      2011      Change  

 

 

For the Period

               

Wells Fargo net income

   $ 5,090        4,107         24    $ 18,897         15,869         19 

Wells Fargo net income applicable to common stock

     4,857        3,888         25        17,999         15,025         20   

Diluted earnings per common share

     0.91        0.73         25        3.36         2.82         19   

Profitability ratios (annualized):

               

Wells Fargo net income to average assets (ROA)

     1.46   %      1.25         17        1.41         1.25         13   

Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)

     13.35        11.97         12        12.95         11.93          

Efficiency ratio (1)

     58.8        60.7         (3)        58.5         61.0         (4)   

Total revenue

   $ 21,948        20,605             $ 86,086         80,948          

Pre-tax pre-provision profit (PTPP) (2)

     9,052        8,097         12         35,688         31,555         13   

Dividends declared per common share

     0.22        0.12         83        0.88         0.48         83   

Average common shares outstanding

     5,272.4        5,271.9                5,287.6         5,278.1           

Diluted average common shares outstanding

     5,338.7        5,317.6                5,351.5         5,323.4          

Average loans

   $ 787,210        768,563             $ 775,224         757,144          

Average assets

         1,387,056        1,306,728                   1,341,635         1,270,265          

Average core deposits (3)

     928,824        864,928               893,937         826,735          

Average retail core deposits (4)

     646,145        606,810               629,320         595,851          

Net interest margin

     3.56   %      3.89         (8)        3.76         3.94         (5)   

At Period End

               

Securities available for sale

   $ 235,199        222,613             $ 235,199         222,613          

Loans

     799,574        769,631               799,574         769,631          

Allowance for loan losses

     17,060        19,372         (12)        17,060         19,372         (12)   

Goodwill

     25,637        25,115               25,637         25,115          

Assets

     1,422,968        1,313,867               1,422,968         1,313,867          

Core deposits (3)

     945,749        872,629               945,749         872,629          

Wells Fargo stockholders’ equity

     157,554        140,241         12        157,554         140,241         12   

Total equity

     158,911        141,687         12        158,911         141,687         12   

Capital ratios:

               

Total equity to assets

     11.17   %      10.78               11.17         10.78          

Risk-based capital (5):

               

Tier 1 capital

     11.75        11.33               11.75         11.33          

Total capital

     14.63        14.76         (1)        14.63         14.76         (1)   

Tier 1 leverage (5)

     9.47        9.03               9.47         9.03          

Tier 1 common equity (5)(6)

     10.12        9.46               10.12         9.46          

Common shares outstanding

     5,266.3        5,262.6                5,266.3         5,262.6           

Book value per common share

   $ 27.64        24.64         12      $ 27.64         24.64         12   

Common stock price:

               

High

     36.34        27.97         30        36.60         34.25          

Low

     31.25        22.61         38        27.94         22.58         24   

Period end

     34.18        27.56         24        34.18         27.56         24   

Team members (active, full-time equivalent)

     269,200        264,200               269,200         264,200          
               

 

 

 

(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(3) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5) The December 31, 2012, ratios are preliminary.
(6) See the “Five Quarter Tier 1 Common Equity Under Basel I” table for additional information.


19

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA

   
           

 

Quarter ended

 
  

 

 

 
($ in millions, except per share amounts)    Dec. 31,
2012
    Sept. 30,
2012
     June 30,
2012
     Mar. 31,
2012
     Dec. 31,
2011
 

For the Quarter

             

Wells Fargo net income

   $ 5,090        4,937         4,622         4,248         4,107   

Wells Fargo net income applicable to common stock

     4,857        4,717         4,403         4,022         3,888   

Diluted earnings per common share

     0.91        0.88         0.82         0.75         0.73   

Profitability ratios (annualized):

             

Wells Fargo net income to average assets (ROA)

     1.46    %      1.45         1.41         1.31         1.25   

Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)

     13.35        13.38         12.86         12.14         11.97   

Efficiency ratio (1)

     58.8        57.1         58.2         60.1         60.7   

Total revenue

   $ 21,948        21,213         21,289         21,636         20,605   

Pre-tax pre-provision profit (PTPP) (2)

     9,052        9,101         8,892         8,643         8,097   

Dividends declared per common share

     0.22        0.22         0.22         0.22         0.12   

Average common shares outstanding

     5,272.4        5,288.1         5,306.9         5,282.6         5,271.9   

Diluted average common shares outstanding

     5,338.7        5,355.6         5,369.9         5,337.8         5,317.6   

Average loans

   $ 787,210        776,734         768,223         768,582         768,563   

Average assets

         1,387,056        1,354,340         1,321,584         1,302,921         1,306,728   

Average core deposits (3)

     928,824        895,374         880,636         870,516         864,928   

Average retail core deposits (4)

     646,145        630,053         624,329         616,569         606,810   

Net interest margin

     3.56    %      3.66         3.91         3.91         3.89   

At Quarter End

             

Securities available for sale

   $ 235,199        229,350         226,846         230,266         222,613   

Loans

     799,574        782,630         775,199         766,521         769,631   

Allowance for loan losses

     17,060        17,385         18,320         18,852         19,372   

Goodwill

     25,637        25,637         25,406         25,140         25,115   

Assets

     1,422,968        1,374,715         1,336,204         1,333,799         1,313,867   

Core deposits (3)

     945,749        901,075         882,137         888,711         872,629   

Wells Fargo stockholders’ equity

     157,554        154,679         148,070         145,516         140,241   

Total equity

     158,911        156,059         149,437         146,849         141,687   

Capital ratios:

             

Total equity to assets

     11.17    %      11.35         11.18         11.01         10.78   

Risk-based capital (5):

             

Tier 1 capital

     11.75        11.50         11.69         11.78         11.33   

Total capital

     14.63        14.51         14.85         15.13         14.76   

Tier 1 leverage (5)

     9.47        9.40         9.25         9.35         9.03   

Tier 1 common equity (5)(6)

     10.12        9.92         10.08         9.98         9.46   

Common shares outstanding

     5,266.3        5,289.6         5,275.7         5,301.5         5,262.6   

Book value per common share

   $ 27.64        27.10         26.06         25.45         24.64   

Common stock price:

             

High

     36.34        36.60         34.59         34.59         27.97   

Low

     31.25        32.62         29.80         27.94         22.61   

Period end

     34.18        34.53         33.44         34.14         27.56   

Team members (active, full-time equivalent)

     269,200        267,000         264,400         264,900         264,200   
             

 

 

 

(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(3) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5) The December 31, 2012, ratios are preliminary.
(6) See the “Five Quarter Tier 1 Common Equity under Basel I” table for additional information.


20

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

 

 
     Quarter ended Dec. 31,      %     Year ended Dec. 31,      %  
  

 

 

      

 

 

    
(in millions, except per share amounts)    2012     2011      Change     2012      2011      Change  

 

 

Interest income

               

Trading assets

   $ 339       400         (15)     $ 1,358         1,440        (6)  % 

Securities available for sale

     1,897       2,092         (9)          8,098         8,475        (4)   

Mortgages held for sale

     413       456         (9)          1,825         1,644        11   

Loans held for sale

     3       16         (81)          41         58        (29)   

Loans

     9,027       9,275         (3)          36,482         37,247        (2)   

Other interest income

     178       139         28          587         548         

 

      

 

 

    

Total interest income

     11,857       12,378         (4)          48,391         49,412        (2)   

 

      

 

 

    

Interest expense

               

Deposits

     399       507         (21)          1,727         2,275        (24)   

Short-term borrowings

     24       14         71          79         80        (1)   

Long-term debt

     735       885         (17)          3,110         3,978        (22)   

Other interest expense

     56       80         (30)          245         316        (22)   

 

      

 

 

    

Total interest expense

     1,214       1,486         (18)          5,161         6,649        (22)   

 

      

 

 

    

Net interest income

     10,643       10,892         (2)          43,230         42,763         

Provision for credit losses

     1,831       2,040         (10)          7,217         7,899        (9)   

 

      

 

 

    

Net interest income after provision for credit losses

     8,812       8,852          -           36,013         34,864         

 

      

 

 

    

Noninterest income

               

Service charges on deposit accounts

     1,250       1,091         15          4,683         4,280         

Trust and investment fees

     3,199       2,658         20          11,890         11,304         

Card fees

     736       680         8          2,838         3,653        (22)   

Other fees

     1,193       1,096         9          4,519         4,193         

Mortgage banking

     3,068       2,364         30          11,638         7,832        49   

Insurance

     395       466         (15)          1,850         1,960        (6)   

Net gains from trading activities

     275       430         (36)          1,707         1,014        68   

Net gains (losses) on debt securities available for sale

     (63     48          NM           (128)         54        NM    

Net gains from equity investments

     715       61         NM           1,485         1,482          

Operating leases

     170       60         183          567         524         

Other

     367       759         (52)          1,807         1,889        (4)   

 

      

 

 

    

Total noninterest income

     11,305       9,713         16          42,856         38,185        12   

 

      

 

 

    

Noninterest expense

               

Salaries

     3,735       3,706         1          14,689         14,462         

Commission and incentive compensation

     2,365       2,251         5          9,504         8,857         

Employee benefits

     891       1,012         (12)          4,611         4,348         

Equipment

     542       607         (11)          2,068         2,283        (9)   

Net occupancy

     728       759         (4)          2,857         3,011        (5)   

Core deposit and other intangibles

     418       467         (10)          1,674         1,880        (11)   

FDIC and other deposit assessments

     307       314         (2)          1,356         1,266         

Other

     3,910       3,392         15          13,639         13,286         

 

      

 

 

    

Total noninterest expense

     12,896       12,508         3          50,398         49,393         

 

      

 

 

    

Income before income tax expense

     7,221       6,057         19          28,471         23,656        20   

Income tax expense

     1,924       1,874         3          9,103         7,445        22   

 

      

 

 

    

Net income before noncontrolling interests

     5,297       4,183         27          19,368         16,211        19   

Less: Net income from noncontrolling interests

     207       76         172          471         342        38   

 

      

 

 

    

Wells Fargo net income

   $ 5,090       4,107         24        $ 18,897         15,869        19   

 

      

 

 

    

Less: Preferred stock dividends and other

     233       219         6          898         844         

 

      

 

 

    

Wells Fargo net income applicable to common stock

   $ 4,857       3,888         25        $ 17,999         15,025        20   

 

      

 

 

    

Per share information

               

Earnings per common share

   $ 0.92       0.74         24        $ 3.40         2.85        19   

Diluted earnings per common share

     0.91       0.73         25          3.36         2.82        19   

Dividends declared per common share

     0.22       0.12         83          0.88         0.48        83   

Average common shares outstanding

     5,272.4       5,271.9         -           5,287.6         5,278.1          

Diluted average common shares outstanding

             5,338.7       5,317.6         -                   5,351.5         5,323.4         
    

 

 

NM - Not meaningful


21

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 
     Quarter ended Dec. 31,      %     Year ended Dec. 31,      %  
  

 

 

      

 

 

    
(in millions)    2012       2011       Change     2012       2011       Change  

 

 

Wells Fargo net income

   $ 5,090         4,107         24    $ 18,897         15,869         19 

 

      

 

 

    

Other comprehensive income, before tax:

                

Foreign currency translation adjustments:

                

Net unrealized losses arising during the period

     (5)         (8)         (38)        (6)         (37)         (84

Reclassification of net gains included in net income

                            (10)                   

Securities available for sale:

                

Net unrealized gains (losses) arising during the period

     (454)         290         NM         5,143         (588)         NM   

Reclassification of net losses (gains) included in net income

     19         (82)         NM         (271)         (696)         (61

Derivatives and hedging activities:

                

Net unrealized gains (losses) arising during the period

     (11)         (15)         (27)        52         190         (73

Reclassification of net gains on cash flow hedges included in net income

     (93)         (117)         (21)        (388)         (571)         (32

Defined benefit plans adjustment:

                

Net actuarial losses arising during the period

     (757)         (1,077)         (30)        (775)         (1,079)         (28

Amortization of net actuarial loss and prior service cost included in net income

     33         28         18        144         99         45   

 

      

 

 

    

Other comprehensive income (loss), before tax

     (1,268)         (981)         29        3,889         (2,682)         NM    

Income tax (expense) benefit related to OCI

     481         358         34        (1,442)         1,139         NM    

 

      

 

 

    

Other comprehensive income (loss), net of tax

     (787)         (623)         26        2,447         (1,543)         NM    

Less: Other comprehensive income (loss) from noncontrolling interests

     (2)         (2)                       (12)         NM    

 

      

 

 

    

Wells Fargo other comprehensive income (loss), net of tax

     (785)         (621)         26        2,443         (1,531)         NM    

 

      

 

 

    

Wells Fargo comprehensive income

     4,305         3,486         23        21,340         14,338         49   

Comprehensive income from noncontrolling interests

     205         74         177        475         330         44   

 

      

 

 

    

Total comprehensive income

   $ 4,510         3,560         27      $ 21,815         14,668         49   

 

 

NM - Not meaningful

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

 

 
     Year ended December 31,  
  

 

 

 
(in millions)    2012       2011   

 

 

Balance, beginning of period

   $ 141,687         127,889   

Cumulative effect of fair value election for certain residential mortgage servicing rights

              

 

 

Balance, beginning of period - adjusted

     141,689         127,889   

Wells Fargo net income

     18,897         15,869   

Wells Fargo other comprehensive income (loss), net of tax

     2,443         (1,531)    

Common stock issued

     2,488         1,296   

Common stock repurchased (1)

     (3,918)          (2,416)    

Preferred stock released by ESOP

     888         959   

Preferred stock issued

     1,377         2,501   

Common stock warrants repurchased

     (1)          (2)    

Common stock dividends

     (4,658)          (2,537)    

Preferred stock dividends and other

     (898)          (844)    

Noncontrolling interests and other, net

     604         503   

 

 

Balance, end of period

    $ 158,911         141,687   

 

 

 

(1) For the year ended December 31, 2012, includes $200 million related to a private forward repurchase transaction entered into in fourth quarter 2012 that is expected to settle in first quarter 2013 for an estimated 6 million shares of common stock.


22

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

 

 
     Quarter ended  
  

 

 

 
     Dec. 31,      Sept. 30,      June 30,      Mar. 31,      Dec. 31,  
(in millions, except per share amounts)    2012       2012       2012       2012       2011   

 

 

Interest income

              

Trading assets

   $ 339         299         343         377         400   

Securities available for sale

     1,897         1,966         2,147         2,088         2,092   

Mortgages held for sale

     413         476         477         459         456   

Loans held for sale

            17         12                16   

Loans

     9,027         9,016         9,242         9,197         9,275   

Other interest income

     178         151         133         125         139   

 

 

Total interest income

     11,857         11,925         12,354         12,255         12,378   

 

 

Interest expense

              

Deposits

     399         428         443         457         507   

Short-term borrowings

     24         19         20         16         14   

Long-term debt

     735         756         789         830         885   

Other interest expense

     56         60         65         64         80   

 

 

Total interest expense

     1,214         1,263         1,317         1,367         1,486   

 

 

Net interest income

     10,643         10,662         11,037         10,888         10,892   

Provision for credit losses

     1,831         1,591         1,800         1,995         2,040   

 

 

Net interest income after provision for credit losses

     8,812         9,071         9,237         8,893         8,852   

 

 

Noninterest income

              

Service charges on deposit accounts

     1,250         1,210         1,139         1,084         1,091   

Trust and investment fees

     3,199         2,954         2,898         2,839         2,658   

Card fees

     736         744         704         654         680   

Other fees

     1,193         1,097         1,134         1,095         1,096   

Mortgage banking

     3,068         2,807         2,893         2,870         2,364   

Insurance

     395         414         522         519         466   

Net gains from trading activities

     275         529         263         640         430   

Net gains (losses) on debt securities available for sale

     (63)                (61)         (7)         48   

Net gains from equity investments

     715         164         242         364         61   

Operating leases

     170         218         120         59         60   

Other

     367         411         398         631         759   

 

 

Total noninterest income

     11,305         10,551         10,252         10,748         9,713   

 

 

Noninterest expense

              

Salaries

     3,735         3,648         3,705         3,601         3,706   

Commission and incentive compensation

     2,365         2,368         2,354         2,417         2,251   

Employee benefits

     891         1,063         1,049         1,608         1,012   

Equipment

     542         510         459         557         607   

Net occupancy

     728         727         698         704         759   

Core deposit and other intangibles

     418         419         418         419         467   

FDIC and other deposit assessments

     307         359         333         357         314   

Other

     3,910         3,018         3,381         3,330         3,392   

 

 

Total noninterest expense

     12,896         12,112         12,397         12,993         12,508   

 

 

Income before income tax expense

     7,221         7,510         7,092         6,648         6,057   

Income tax expense

     1,924         2,480         2,371         2,328         1,874   

 

 

Net income before noncontrolling interests

     5,297         5,030         4,721         4,320         4,183   

Less: Net income from noncontrolling interests

     207         93         99         72         76   

 

 

Wells Fargo net income

   $ 5,090         4,937         4,622         4,248         4,107   

 

 

Less: Preferred stock dividends and other

     233         220         219         226         219   

 

 

Wells Fargo net income applicable to common stock

   $ 4,857         4,717         4,403         4,022         3,888   

 

 

Per share information

              

Earnings per common share

   $ 0.92         0.89         0.83         0.76         0.74   

Diluted earnings per common share

     0.91         0.88         0.82         0.75         0.73   

Dividends declared per common share

     0.22         0.22         0.22         0.22         0.12   

Average common shares outstanding

     5,272.4         5,288.1         5,306.9         5,282.6         5,271.9   

Diluted average common shares outstanding

             5,338.7         5,355.6         5,369.9         5,337.8         5,317.6   
              

 

 


23

 

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)

 

 

     Quarter ended December 31,  
                          
     2012                2011  
(in millions)    Average
balance
    Yields/
rates
            Interest
income/
expense
              Average
balance
    Yields/
rates
            Interest
income/
expense
 

 

 

Earning assets

                          

Federal funds sold, securities purchased under resale agreements and other short-term investments

   $ 117,047       0.41         %         $ 121             67,968       0.52         %         $ 89  

Trading assets

     42,005       3.28           345             45,521       3.57           407  

Securities available for sale (3):

                          

Securities of U.S. Treasury and federal agencies

     5,281       1.64           22             8,708       0.99           22  

Securities of U.S. states and political subdivisions

     36,391       4.64           422             28,015       4.80           336  

Mortgage-backed securities:

                          

Federal agencies

     90,898       2.71           617             84,332       3.68           776  

Residential and commercial

     32,669       6.53           533               34,717       7.05           612  

Total mortgage-backed securities

     123,567       3.72           1,150             119,049       4.66           1,388  

Other debt and equity securities

     50,025       3.91           490               47,278       4.38           518  

Total securities available for sale

     215,264       3.87           2,084             203,050       4.46           2,264  

Mortgages held for sale (4)

     47,241       3.50           413             44,842       4.07           456  

Loans held for sale (4)

     135       9.03           3             1,118       5.84           16  

Loans:

                          

Commercial:

                          

Commercial and industrial

     179,493       3.85           1,736             166,920       4.08           1,713  

Real estate mortgage

     105,107       4.02           1,061             105,219       4.26           1,130  

Real estate construction

     17,502       4.97           218             19,624       4.61           228  

Lease financing

     12,461       6.43           201             12,893       7.41           239  

Foreign

     39,665       2.32           231               38,740       2.39           233  

Total commercial

     354,228       3.87           3,447               343,396       4.10           3,543  

Consumer:

                          

Real estate 1-4 family first mortgage

     244,634       4.39           2,686             229,746       4.74           2,727  

Real estate 1-4 family junior lien mortgage

     76,908       4.28           826             87,212       4.34           953  

Credit card

     23,839       12.43           745             21,933       12.96           711  

Other revolving credit and installment

     87,601       6.05           1,333               86,276       6.23           1,356  

Total consumer

     432,982       5.15           5,590               425,167       5.39           5,747  

Total loans (4)

     787,210       4.58           9,037             768,563       4.81           9,290  

Other

     4,280       5.21           56               4,671       4.32           50  

Total earning assets

   $ 1,213,182       3.96         %         $ 12,059               1,135,733       4.41         %         $ 12,572  

Funding sources

                          

Deposits:

                          

Interest-bearing checking

   $ 30,858       0.06         %         $ 5             35,285       0.06         %         $ 6  

Market rate and other savings

     518,593       0.10           135             485,127       0.14           175  

Savings certificates

     56,743       1.27           181             64,868       1.43           233  

Other time deposits

     13,612       1.51           51             12,868       1.85           60  

Deposits in foreign offices

     69,398       0.15           27               67,213       0.20           33  

Total interest-bearing deposits

     689,204       0.23           399             665,361       0.30           507  

Short-term borrowings

     52,820       0.21           28             48,742       0.14           17  

Long-term debt

     127,505       2.30           735             129,445       2.73           885  

Other liabilities

     9,975       2.27           56               12,166       2.60           80  

Total interest-bearing liabilities

     879,504       0.55           1,218             855,714       0.69           1,489  

Portion of noninterest-bearing funding sources

     333,678                                 280,019                    

Total funding sources

   $     1,213,182       0.40           1,218               1,135,733       0.52           1,489  

Net interest margin and net interest income on a taxable-equivalent basis (5)

       3.56         %         $ 10,841                 3.89         %         $ 11,083  

Noninterest-earning assets

                          

Cash and due from banks

   $ 16,361                     17,718          

Goodwill

     25,637                     25,057          

Other

     131,876                     128,220          

Total noninterest-earning assets

   $ 173,874                     170,995          

Noninterest-bearing funding sources

                          

Deposits

   $ 286,924                     246,692          

Other liabilities

     63,025                     63,556          

Total equity

     157,603                     140,766          

Noninterest-bearing funding sources used to fund earning assets

     (333,678                   (280,019        

Net noninterest-bearing funding sources

   $ 173,874                     170,995          

Total assets

   $ 1,387,056                     1,306,728          

 

 

 

(1) Our average prime rate was 3.25% for the quarters ended December 31, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.32% and 0.48% for the same quarters, respectively.
(2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) Includes taxable-equivalent adjustments of $198 million and $191 million for the quarters ended December 31, 2012 and 2011, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.


24

 

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)

 

 
     Year ended December 31,  
  

 

 

 
     2012          2011  
(in millions)    Average
balance
    Yields/
rates
            Interest
income/
expense
         Average
balance
    Yields/
rates
            Interest
income/
expense
 

 

 

Earning assets

                       

Federal funds sold, securities purchased under resale agreements and other short-term investments

     $84,081       0.45         %         $ 378          87,186       0.40        %         $ 345  

Trading assets

     41,950       3.29           1,380          39,737       3.68           1,463  

Securities available for sale (3):

                       

Securities of U.S. Treasury and federal agencies

     3,604       1.31           47          5,503       1.25           69  

Securities of U.S. states and political subdivisions

     34,875       4.48           1,561          24,035       5.09           1,223  

Mortgage-backed securities:

                       

Federal agencies

     92,887       3.12           2,893          74,665       4.36           3,257  

Residential and commercial

     33,545       6.75           2,264          31,902       8.20           2,617  

Total mortgage-backed securities

     126,432       4.08           5,157          106,567       5.51           5,874  

Other debt and equity securities

     49,245       4.04           1,992          38,625       5.03           1,941  

Total securities available for sale

     214,156       4.09           8,757          174,730       5.21           9,107  

Mortgages held for sale (4)

     48,955       3.73           1,825          37,232       4.42           1,644  

Loans held for sale (4)

     661       6.22           41          1,104       5.25           58  

Loans:

                       

Commercial:

                       

Commercial and industrial

     173,913       4.01           6,981          157,608       4.37           6,894  

Real estate mortgage

     105,437       4.18           4,411          102,236       4.07           4,163  

Real estate construction

     17,963       4.98           894          21,592       4.88           1,055  

Lease financing

     12,771       7.22           921          12,944       7.54           976  

Foreign

     39,852       2.47           984          36,768       2.56           941  

Total commercial

     349,936       4.06           14,191          331,148       4.24           14,029  

Consumer:

                       

Real estate 1-4 family first mortgage

     234,619       4.55           10,671          226,980       4.89           11,090  

Real estate 1-4 family junior lien mortgage

     80,840       4.28           3,457          90,705       4.33           3,926  

Credit card

     22,772       12.67           2,885          21,463       13.02           2,794  

Other revolving credit and installment

     87,057       6.10           5,313          86,848       6.29           5,463  

Total consumer

     425,288       5.25           22,326          425,996       5.46           23,273  

Total loans (4)

     775,224       4.71           36,517          757,144       4.93           37,302  

Other

     4,438       4.70           209          4,929       4.12           203  

Total earning assets

   $       1,169,465       4.20         %         $ 49,107          1,102,062       4.55        %         $ 50,122  

Funding sources

                       

Deposits:

                       

Interest-bearing checking

   $ 30,564       0.06         %         $ 19          47,705       0.08         %         $ 40  

Market rate and other savings

     505,310       0.12           592          464,450       0.18           836  

Savings certificates

     59,484       1.31           782          69,711       1.43           995  

Other time deposits

     13,363       1.68           225          13,126       2.04           268  

Deposits in foreign offices

     67,920       0.16           109          61,566       0.22           136  
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