EX-99.1 2 d423805dex991.htm THE PRESS RELEASE, DEEMED "FILED" UNDER THE SECURITIES EXCHANGE ACT OF 1934 <![CDATA[The Press Release, deemed "filed" under the Securities Exchange Act of 1934]]>

Exhibit 99.1

 

 

LOGO

 

  LOGO

 

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

 

Friday, October 12, 2012

WELLS FARGO REPORTS RECORD QUARTERLY NET INCOME

Q3 Net Income of $4.9 billion; EPS of $0.88, Up 22 Percent from Prior Year

 

 

Continued strong financial results:

 

  o Record Wells Fargo net income of $4.9 billion, up 27 percent (annualized) from prior quarter

 

  o Record diluted earnings per common share of $0.88, up 29 percent (annualized) from prior quarter

 

  o

Pre-tax pre-provision profit (PTPP)1 of $9.1 billion, up 9 percent (annualized) from prior quarter

 

  o Revenue of $21.2 billion, compared with $21.3 billion in prior quarter

 

  o Noninterest expense of $12.1 billion, down $285 million from prior quarter; 57.1 percent efficiency ratio

 

  o Return on average assets (ROA) of 1.45 percent, up 4 basis points from prior quarter

 

  o Return on equity (ROE) of 13.38 percent, up 52 basis points from prior quarter

 

 

Strong deposit and loan growth:

 

  o Total average core checking and savings deposits up $16.9 billion from prior quarter

 

  o Total loans of $782.6 billion, up $7.4 billion from prior quarter

 

  o

Core loan portfolio up $11.9 billion from prior quarter2

 

 

Maintained strong capital position:

 

  o

Tier 1 common equity3 under Basel I increased $4.1 billion to $105.8 billion, with Tier 1 common equity ratio of 10.06 percent under Basel I at September 30, 2012. Estimated Tier 1 common equity ratio of 8.02 percent under current Basel III capital proposals4

 

  o Purchased approximately 17 million shares of common stock in third quarter 2012 and an additional estimated 9 million shares through a forward repurchase transaction expected to settle in fourth quarter 2012

 

 

Solid underlying credit quality:

 

  o

Net charge-offs of $2.4 billion, or 1.21 percent (annualized) of average loans, including $567 million of net charge-offs from the implementation of newly issued regulatory guidance5

 

 

1 See footnote (2) on page 16 for more information on pre-tax pre-provision profit.

2 See table on page 4 for more information on core and non-strategic/liquidating loan portfolios.

3 See tables on page 38 for more information on Tier 1 common equity.

4 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.

5 Office of the Comptroller of the Currency update to Bank Accounting Advisory Series issued third quarter 2012 (OCC guidance) which requires write-down of performing consumer loans restructured in bankruptcy to collateral value. See pages 5-7, including footnote 6, for additional information regarding the implementation of the OCC guidance and its effect on our third quarter credit metrics.


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  o Excluding the impact of the OCC guidance, net charge-offs of $1.8 billion or 0.92 percent (annualized) of average loans

 

  o Provision for credit losses was $767 million lower than net loan charge-offs due to two factors:

 

  ¡ $567 million increase in net loan charge-offs from the implementation of the OCC guidance (fully covered by loan loss reserves)

 

  ¡ $200 million (pre-tax) reserve release due to continued strong underlying credit performance, compared with $400 million in prior quarter

Selected Financial Information

 

 

 
          

 

Quarter ended  

 
  

 

 

 
     Sept. 30,       June 30,        Sept. 30,    
     2012       2012        2011    

 

 

Earnings

       

Diluted earnings per common share

   $ 0.88          0.82           0.72     

Wells Fargo net income (in billions)

     4.94          4.62           4.06     

Return on assets (ROA)

     1.45       1.41           1.26     

Return on equity (ROE)

     13.38          12.86           11.86     

Asset Quality

       

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

     1.21          1.15           1.37     

Allowance as a % of total loans

     2.27          2.41           2.68     

Allowance as a % of annualized net charge-offs

     190          211           197     

Other

       

Revenue (in billions)

   $ 21.21          21.29           19.63     

Efficiency ratio

     57.1          58.2           59.5     

Average loans (in billions)

     776.7          768.2           754.5     

Average core deposits (in billions)

     895.4          880.6           836.8     

Net interest margin

     3.66       3.91           3.84     
       

 

 

SAN FRANCISCO – Wells Fargo & Company (NYSE: WFC) reported record net income of $4.9 billion, or $0.88 per diluted common share, for third quarter 2012, up from $4.1 billion, or $0.72 per share, for third quarter 2011, and up from $4.6 billion, or $0.82 per share, for second quarter 2012. For the first nine months of 2012, net income was $13.8 billion, or $2.45 per share, compared with $11.8 billion, or $2.09 per share, a year ago.

“Through the efforts of our more than 265,000 team members, we’ve now achieved six consecutive quarters of record net income and EPS,” said Chairman and CEO John Stumpf. “By focusing on earning all of our customers’ business and providing outstanding service, we continued to generate growth across our diversified set of businesses. In the third quarter, core loans grew by $11.9 billion and we saw continued strength in our mortgage and deposit businesses. We remained diligent in managing costs and continued to have strong underlying credit performance as our loss mitigation efforts and the low interest rate environment helped improve affordability for our customers.”

Chief Financial Officer Tim Sloan added, “Our third quarter results demonstrated that the Company’s business model continues to serve shareholders well. Our performance reflected an ongoing focus on measures that drive value over the long-term, including increased PTPP, positive operating leverage, and


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solid ROA and ROE. In addition, our efficiency ratio of 57.1 percent in the third quarter improved compared with second quarter and remained within our 55 to 59 percent targeted range. While the economic and interest rate environments continue to present challenges for us and our industry, our diversified model and focus on our customers continued to produce strong quarterly results.”

Revenue

Revenue was $21.2 billion in the third quarter, compared with $21.3 billion in second quarter 2012, as approximately $300 million of higher noninterest income was more than offset by lower net interest income. Businesses generating linked-quarter revenue growth included asset backed finance, asset management, brokerage services, commercial mortgage servicing, credit card, dealer services, debit card, equity funds, personal credit management, real estate capital markets, retail sales finance, retirement services, and small business administration loans.

Net Interest Income

Net interest income was $10.7 billion in third quarter, down from $11.0 billion in second quarter 2012. The decline in net interest income was largely driven by lower income from variable sources, such as fee income and purchased credit-impaired (PCI) loan resolutions which were elevated in the second quarter. In addition, income from the available-for-sale (AFS) securities portfolio declined as the pace of mortgage-backed securities (MBS) pay-downs increased in response to lower interest rates, and we replaced a large portion of the run-off with lower yielding, but shorter duration securities. The income impact of lower levels of long-term securities purchases was partially offset by our retention of $9.8 billion of high-quality, conforming first real estate mortgages.

On a linked-quarter basis, our net interest margin declined 25 basis points to 3.66 percent, driven by three primary items. First, the impact of lower income from variable sources described above caused a decline of approximately 10 basis points. Second, given our cautious stance on investment portfolio growth in the current low rate environment, deposit growth of $23 billion (10 percent annualized) caused cash and short term investments to increase, diluting the margin by approximately 7 basis points. Finally, the impact of lower rates, both in terms of run-off and new activity, reduced the margin by 8 basis points, with approximately 6 basis points of the decline from the AFS portfolio and approximately 2 basis points from the loan portfolios.

Noninterest Income

Noninterest income was $10.6 billion, up from $10.3 billion in second quarter 2012. The increase was driven by a $252 million increase in market sensitive revenue, primarily trading gains including deferred compensation plan investments offset in employee benefits expense. The Company also benefitted from increases in deposit service charges, trust and investment fees, and card fees. Insurance declined $108 million due to seasonally lower insurance revenue, with a related decline in insurance commission expense.


- 4 -

 

Mortgage banking noninterest income was $2.8 billion, down $86 million from second quarter 2012, on $139 billion of originations, compared with $131 billion of originations in second quarter. During the third quarter, the Company retained on balance sheet 1-4 family conforming first mortgage loans, forgoing approximately $200 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 $462 million for mortgage loan repurchase losses, compared with $669 million in second quarter (included in net gains from mortgage loan origination/sales activities). Net mortgage servicing rights (MSRs) results were $142 million, compared with $377 million in second quarter due to MSR valuation adjustments made in the third quarter for increased servicing and foreclosure costs. The ratio of MSRs to related loans serviced for others was at a historical low of 63 basis points and the average note rate on the servicing portfolio was 4.87 percent. The unclosed pipeline at September 30, 2012 was $97 billion, compared with $102 billion at June 30, 2012.

The Company had net unrealized securities gains of $12.4 billion at September 30, 2012, compared with $9.5 billion at June 30, 2012. Period-end securities available for sale balances increased $2.5 billion.

Noninterest Expense

Noninterest expense declined $285 million in the quarter to $12.1 billion, compared with $12.4 billion in second quarter 2012. The decline in noninterest expense was due primarily to $243 million of lower operating losses, $112 million of seasonally lower insurance commissions, $104 million of lower severance expense, and our third consecutive quarterly reduction in foreclosed asset expense, down $42 million from prior quarter. The expense improvements were partially offset by higher deferred compensation expense of $152 million offset in noninterest income and by increases in occupancy and advertising costs. The Company’s efficiency ratio improved to 57.1 percent from 58.2 percent in second quarter 2012 and 59.5 percent in third quarter 2011, and the Company is well positioned to remain within its targeted range of 55 to 59 percent in the fourth quarter.

Loans

Total loans were $782.6 billion at September 30, 2012, up $7.4 billion from $775.2 billion at June 30, 2012. Included in this growth was $9.8 billion of 1-4 family conforming first mortgage production retained on the balance sheet. In addition, there was growth in auto, credit card, private student lending, and commercial and industrial (C&I) loan balances. The growth in core loan portfolios more than offset the reduction in the non-strategic/liquidating portfolios, which declined $4.5 billion in the quarter.

 

 

 
    September 30, 2012      June 30, 2012    
 

 

 

   

 

 

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

 

 

 Commercial

    $   348,696           3,836           352,532         349,774           4,278           354,052     

 Consumer

    335,278           94,820           430,098         322,297           98,850           421,147     

 

 

 Total loans

    $ 683,974           98,656           782,630         672,071           103,128           775,199     

 

 

 Change from prior quarter:

    $ 11,903           (4,472        7,431         13,782           (5,104        8,678     

 

 

 

(1) See table on page 35 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.


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Deposits

Average core deposits were $895.4 billion, up 7 percent from a year ago and up 7 percent (annualized) from second quarter 2012. Average core checking and savings deposits were $837.2 billion, up 9 percent from a year ago and up 8 percent (annualized) from second quarter 2012. Average mortgage escrow deposits were $40.0 billion, compared with $28.3 billion a year ago and $35.4 billion in second quarter 2012. Average core checking and savings deposits were 94 percent of average core deposits, up from 93 percent in the prior quarter and 92 percent a year ago. The average deposit cost for third quarter 2012 was 18 basis points, compared with 19 basis points in second quarter 2012. Average core deposits were 115 percent of average loans, up slightly from second quarter 2012.

Capital

Capital increased in the third quarter, with Tier 1 common equity reaching $105.8 billion under Basel I, or 10.06 percent of risk-weighted assets. The third quarter ratio reflected refinements to the risk weighting of certain unused lending commitments that provide for the ability to issue standby letters of credit, which reduced the ratio by 32 basis points. This refinement did not affect our estimated Tier 1 common equity ratio under Basel III capital proposals, which rose to 8.02 percent at the end of the quarter.

In third quarter, the Company purchased approximately 17 million shares of its common stock and an additional estimated 9 million shares through a forward repurchase transaction expected to settle in fourth quarter 2012, and paid a quarterly common stock dividend of $0.22 per share.

 

 

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

 

 

Ratios under Basel I (1):

       

Tier 1 common equity (2)

     10.06        10.08         9.34     

Tier 1 capital

     11.66           11.69         11.26     

Tier 1 leverage

     9.45           9.25         8.97     

 

 

 

(1) September 30, 2012, ratios are preliminary.
(2) See table on page 38 for more information on Tier 1 common equity.

Credit Quality

“Underlying credit quality continued to show improvement in the third quarter, as the overall financial condition of businesses and consumers strengthened, the housing market in many areas of the nation improved, and we continued to work to reduce problem assets and make new, high quality loans,” said Chief Risk Officer Mike Loughlin.

Reported credit metrics for the quarter were affected by the implementation in third quarter of the OCC guidance, which affected consumer loans where the borrower’s obligation to us has been discharged in bankruptcy and the borrower has not reaffirmed the debt. As of September 30, 2012, only 8 percent of loans within this category were 30 days or more past due. Implementation of the OCC guidance affected nonperforming loans and net charge-offs as follows:

 

 

$1.4 billion reclassification of performing consumer loans to nonaccrual status, consisting of $1.0 billion of first mortgages, $262 million of junior liens and $155 million of auto loans

 

 

$567 million increase in net loan charge-offs, fully covered by loan loss reserves


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“Excluding the impact of the OCC guidance, we saw improvement in charge-offs, recoveries, and nonperforming assets. Early stage delinquencies remained relatively stable from prior quarter. Absent significant deterioration in the economy, we continue to expect future reserve releases,” said Loughlin.

Net Loan Charge-offs

Net loan charge-offs, summarized in the table below, were $2.4 billion in third quarter 2012 or 121 basis points of average loans. Excluding the $567 million in charge-offs resulting from implementation of the OCC guidance, net charge-offs were $1.8 billion or 92 basis points with commercial losses of $217 million, or 24 basis points, and consumer losses of $1.6 billion or 148 basis points6.

Net Loan Charge-Offs

 

 

 
    

Quarter ended  

 
  

 

 

 
     September 30, 2012     June 30, 2012     March 31, 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

     $   131           0.29       $ 249           0.58       $ 256           0.62  

  Real estate mortgage

     54           0.21          81           0.31          46           0.17     

  Real estate construction

     1           0.03          17           0.40          67           1.43     

  Lease financing

     1           0.03          -           -          2           0.06     

  Foreign

     30           0.29          11           0.11          14           0.14     

 

      

 

 

      

 

 

    

  Total commercial

     217           0.24          358           0.42          385           0.45     

 

      

 

 

      

 

 

    

  Consumer:

               

  Real estate 1-4 family first mortgage

     673           1.15          743           1.30          791           1.39     

  Real estate 1-4 family junior lien mortgage

     1,036           5.17          689           3.38          763           3.62     

  Credit card

     212           3.67          240           4.37          242           4.40     

  Other revolving credit and installment

     220           1.00          170           0.79          214           0.99     

 

      

 

 

      

 

 

    

  Total consumer

     2,141           2.01          1,842           1.76          2,010           1.91     

 

      

 

 

      

 

 

    

  Total

     $ 2,358           1.21       $   2,200           1.15       $   2,395           1.25  

 

      

 

 

      

 

 

    
               

 

 

 

(1) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 31 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

Nonperforming Assets

Nonperforming assets increased by $368 million in the quarter including a $1.4 billion increase in nonperforming loans resulting from implementation of the OCC guidance, ending the quarter at $25.3 billion, compared with $24.9 billion in second quarter 2012. Nonaccrual loans increased to $21.0 billion from $20.6 billion in second quarter; however, apart from implementing the OCC guidance, total commercial and consumer nonaccrual loans declined in the quarter by $975 million. Foreclosed assets were $4.2 billion, down from $4.3 billion in second quarter 2012.

 

 

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


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Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

 

 

 
     September 30, 2012     June 30, 2012     March 31, 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

     $ 1,404           0.79       $   1,549           0.87      $   1,726           1.02  

 Real estate mortgage

     3,599           3.44          3,832           3.63         4,081           3.85     

 Real estate construction

     1,253           7.08          1,421           8.08         1,709           9.21     

 Lease financing

     49           0.40          43           0.34         45           0.34     

 Foreign

     66           0.17          79           0.20         38           0.10     

 

      

 

 

      

 

 

    

 Total commercial

     6,371           1.81          6,924           1.96         7,599           2.20     

 

      

 

 

      

 

 

    

 Consumer:

               

 Real estate 1-4 family first mortgage

     11,195           4.65          10,368           4.50          10,683           4.67     

 Real estate 1-4 family junior lien mortgage

     3,140           4.02          3,091           3.82          3,558           4.28     

 Other revolving credit and installment

     338           0.39          195           0.22          186           0.21     

 

      

 

 

      

 

 

    

 Total consumer (1)

     14,673           3.41          13,654           3.24          14,427           3.43     

 

      

 

 

      

 

 

    

 Total nonaccrual loans

     21,044           2.69          20,578           2.65          22,026           2.87     

 

      

 

 

      

 

 

    

 Foreclosed assets:

               

 GNMA

     1,479             1,465             1,352        

 Non GNMA

     2,730             2,842             3,265        

 

      

 

 

      

 

 

    

 Total foreclosed assets

     4,209             4,307             4,617        

 

      

 

 

      

 

 

    

 Total nonperforming assets

     $ 25,253           3.23       $   24,885           3.21       $   26,643           3.48  

 

      

 

 

      

 

 

    

 Change from prior quarter:

               

 Total nonaccrual loans

     $ 466             $ (1,448)             $ 722        

 Total nonperforming assets

     368             (1,758)             678        
               

 

 

 

(1) Includes $1.4 billion at September 30, 2012, resulting from implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series. The updated guidance requires us to place on nonaccrual status those performing loans where the borrower’s obligation to us has been restructured in bankruptcy.

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 $1.5 billion at September 30, 2012, compared with $1.4 billion at June 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 $21.4 billion at September 30, 2012, down slightly from $21.5 billion at June 30, 2012.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $17.8 billion at September 30, 2012, down from $18.6 billion at June 30, 2012. The reduction in the allowance included $567 million of net charge-offs resulting from implementation of the OCC guidance. While the impact of the OCC guidance accelerated charge-offs of performing consumer loans into the third quarter, the allowance for credit losses had full coverage for these charge-offs. The reduction also included a $200 million reserve release due to strong underlying credit, compared with a $400 million release in the prior quarter. The allowance coverage to total loans was 2.27 percent, compared with 2.41 percent in second quarter 2012. The allowance covered 1.9 times annualized third quarter net charge-offs, compared with 2.1 times in the prior quarter. The allowance coverage to nonaccrual loans was 85 percent at September 30, 2012, compared with 91 percent at June 30, 2012. “We believe the allowance was appropriate for losses inherent in the loan portfolio at September 30, 2012,” said Loughlin.


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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    
  

 

 

 
       Sept. 30,      June 30,      Sept. 30,    
 (in millions)    2012      2012      2011    

 

 

 Community Banking

    $   2,740         2,535         2,324     

 Wholesale Banking

     1,993         1,881         1,803     

 Wealth, Brokerage and Retirement

     338         343         290     

 

 

More financial information about the business segments is on pages 39 and 40.

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 Mortgage business units.

Selected Financial Information

 

 

 
                   Quarter ended    
  

 

 

 
       Sept. 30,      June 30,      Sept. 30,    
 (in millions)    2012      2012      2011    

 

 

 Total revenue

    $   13,110         13,092         12,510     

 Provision for credit losses

     1,627         1,573         1,974     

 Noninterest expense

     7,402         7,580         6,905     

 Segment net income

     2,740         2,535         2,324     
 (in billions)                     

 Average loans

     485.3         483.9         489.7     

 Average assets

     765.1         746.6         751.8     

 Average core deposits

     594.5         586.1         556.4     

 

 

Community Banking reported net income of $2.7 billion, up $205 million, or 8 percent, from second quarter 2012. Revenue increased $18 million from second quarter 2012, primarily due to continued growth in deposit service charges and higher gains on deferred compensation plan investments (offset in employee benefits expense), offset by lower investment income and mortgage banking revenue. Noninterest expense decreased $178 million, or 2 percent, from second quarter 2012, largely the result of lower operating losses and lower severance expense associated with our efficiency and cost save initiatives, partially offset by higher deferred compensation expense (offset in revenue).

Net income was up $416 million, or 18 percent, from third quarter 2011. Revenue increased $600 million, or 5 percent, primarily due to higher volume-related mortgage banking income and growth in deposit service charges, partially mitigated by higher equity gains in prior year, planned runoff of non-strategic loan balances and lower debit card revenue due to regulatory changes enacted in October 2011. Noninterest expense increased $497 million, or 7 percent, from third quarter 2011, largely the result of higher mortgage volume-related expenses and operating losses. The provision for credit losses was $347 million lower than a year ago due to improved portfolio performance.


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Regional Banking

 

 

Retail banking

 

  o Retail Bank household cross-sell ratio of 6.04 products per household, up from 5.90 year-over-year; cross-sell in the West reached 6.40, compared with 5.56 in the East7

 

  o

Consumer checking accounts essentially flat to prior year7

 

  o Consumer credit card, lines of credit and loan product solutions (sales) in the retail banking stores were nearly 1.5 times the prior year

 

  o Partner referrals that resulted in a sale, including products such as insurance, mortgage and student lending, up more than 30 percent from the prior year

 

  o Continued investments in the East; in third quarter, platform banker FTE (active, full-time equivalent) grew by more than 500 on a linked quarter basis

 

 

Small Business/Business Banking

 

  o

Business checking accounts up a net 3.9 percent year-over-year7

 

  o Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) up more than 45 percent from the prior year

 

  o $11.4 billion in net new loan commitments to small business customers (primarily with annual revenues less than $20 million) in the first three quarters of 2012, up approximately 30 percent from prior year

 

  o America’s #1 small business lender (in both loans under $100,000 and under $1,000,000) and #1 lender to small businesses in low- and moderate-income areas (2011 CRA data, released August 2012)

 

  o For the second year in a row, Wells Fargo has approved more than $1 billion in SBA 7(a) loan dollars for small businesses

 

 

Online and Mobile Banking

 

  o

21.4 million active online customers7

 

  o

8.9 million active mobile customers7

 

  o “Best Consumer Internet Bank” in the U.S. for the 3rd consecutive year (Global Finance Magazine, July 2012)

Consumer Lending Group

 

 

Home Mortgage

 

  o Originations of $139 billion, up from $131 billion in prior quarter

 

  o Applications of $188 billion, compared with $208 billion in prior quarter

 

  o Application pipeline of $97 billion at quarter end, compared with $102 billion at June 30, 2012

 

  o Residential mortgage servicing portfolio of $1.9 trillion

 

7 Data as of August 2012. Comparisons are August 2012 compared with August 2011.


- 10 -

 

 

Other Consumer Lending

 

  o

Credit card penetration in retail banking households rose to 32.1 percent7, up from 31.0 percent in prior quarter and 28.1 percent in prior year

 

  o Auto originations of $6.3 billion, down 3 percent from prior quarter and up 20 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)      Sept. 30,
2012
    June 30,
2012
     Sept. 30,  
2011  
 

 

 

 Total revenue

     $ 5,949        6,117         5,135   

 Provision (reversal of provision) for credit losses

     (57     188         (178

 Noninterest expense

     2,908        3,113         2,689   

 Segment net income

     1,993        1,881         1,803   

 (in billions)

       

 Average loans

     277.1        270.2         253.4   

 Average assets

     490.7        478.4         437.1   

 Average core deposits

     225.4        220.9         209.3   

 

 

Wholesale Banking reported record net income of $2.0 billion, up $112 million, or 6 percent, from second quarter 2012. Revenue of $5.9 billion decreased 3 percent from second quarter 2012 as strong growth across many businesses, including asset-backed finance, asset management, real estate capital markets, and sales and trading, was more than offset by seasonally lower crop insurance revenue and lower PCI resolution income. Noninterest expense decreased $205 million, or 7 percent, from second quarter 2012 on seasonally lower insurance commissions and lower foreclosed asset expense. The provision for credit losses reflected a net reversal of $57 million in third quarter, compared with a provision of $188 million in second quarter. This was due both to a lower level of net loan charge-offs and an increase in the reserve release.

Net income was up $190 million, or 11 percent, from third quarter 2011 led by higher pre-tax pre provision income and lower net charge-offs. Revenue increased $814 million, or 16 percent, from third quarter 2011 driven by broad-based business growth, including acquisitions and strong loan and deposit growth. Noninterest expense increased $219 million, or 8 percent, from third 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 $119 million in net charge-offs, the provision for credit losses was $121 million higher than third quarter 2011 due to $240 million in lower reserve releases. The third quarter 2012 provision included a $110 million reserve release, compared with $350 million a year ago.


- 11 -

 

 

9 percent year-over-year average loan and 12 percent average asset growth. The growth came from nearly all portfolios, including asset backed finance, capital finance, commercial banking, commercial real estate, and corporate banking

 

 

Nine consecutive quarters of average loan growth in Commercial Banking

 

 

Average core deposits up 8 percent from prior year

 

 

Investment banking year to date revenue from commercial and corporate customers increased 13 percent for the same period in 2011 due to attractive capital markets conditions and continued momentum in cross selling

 

 

Completed acquisition of Merlin Securities, LLC, a prime brokerage services and technology provider

 

 

Best U.S. Bank, 2012 Euromoney Awards for Excellence

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 meets the unique needs of ultra high net worth clients. 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)    Sept. 30,
2012
     June 30,
2012
     Sept. 30,  
2011  
 

 

 

 Total revenue

   $ 3,033         2,971         2,888     

 Provision for credit losses

     30         37         48     

 Noninterest expense

     2,457         2,376         2,371     

 Segment net income

     338         343         290     
  (in billions)                     

 Average loans

     42.5         42.5         43.1     

 Average assets

     163.8         160.9         158.4     

 Average core deposits

     136.7         134.2         133.3     

 

 

Wealth, Brokerage and Retirement reported net income of $338 million, down $5 million from second quarter 2012. Revenue was $3.0 billion, up 2 percent from second quarter 2012, and benefited from $45 million in gains on deferred compensation plan investments (offset in expense, compared with $31 million in losses in second quarter 2012). Excluding deferred compensation, revenue was flat due to lower net interest income and reduced securities gains in the brokerage business, partially offset by higher asset-based fees and brokerage transaction revenue. Total provision for credit losses decreased $7 million from second quarter 2012. The provision in both periods included a $10 million credit reserve release. Noninterest expense increased 3 percent from second quarter 2012 related to higher deferred compensation plan expense. Third quarter 2012 results included $45 million in deferred compensation plan expense, compared with a $32 million benefit in second quarter. Apart from the $77 million change in deferred compensation plan expense, noninterest expense was flat.


- 12 -

 

Net income rose $48 million from third quarter 2011. Revenue increased 5 percent from third quarter 2011 due to $45 million in gains on deferred compensation plan investments (offset in expense, compared with $128 million in losses in third quarter 2011). Excluding deferred compensation, revenue was down 1 percent primarily due to lower net interest income and reduced securities gains in the brokerage business, partially offset by growth in managed account fee revenue. Total provision for credit losses decreased $18 million from third quarter 2011. Noninterest expense increased 4 percent from third quarter 2011 driven by higher deferred compensation plan expense. Third quarter 2012 results included $45 million in deferred compensation plan expense, compared with a $125 million benefit a year ago. Apart from the $170 million change in deferred compensation plan expense, noninterest expense decreased 3 percent.

Retail Brokerage

 

 

  Client assets of $1.2 trillion, up 11 percent from prior year

 

 

  Managed account assets increased $59 billion, or 25 percent, from prior year driven by strong net flows and market performance

 

 

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

Wealth Management

 

 

  Client assets of $199 billion, up 4 percent from prior year

 

 

  Recently named the 4th largest U.S. Wealth Manager according to Barron’s Annual Wealth Managers Survey

Retirement

 

 

  Institutional Retirement plan assets of $260 billion, up 14 percent from prior year

 

 

  IRA assets of $295 billion, up 13 percent from prior year

Conference Call

The Company will host a live conference call on Friday, October 12, at 7 a.m. PDT (10 a.m. EDT). 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_101212.

A replay of the conference call will be available beginning at approximately noon PDT (3 p.m. EDT) on October 12 through Friday, October 19. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #18860134. The replay will also be available online at wellsfargo.com/invest_relations/earnings.


- 13 -

 

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 for the remainder of 2012 as part of our expense management initiatives; and (iii) our estimate regarding our Tier 1 common equity ratio under proposed Basel III capital rules as of September 30, 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 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.


- 14 -

 

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 approximately 265,000 full-time equivalent team members, Wells Fargo serves one in three households in 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

     16-17   

Income

  

Consolidated Statement of Income

     18   

Consolidated Statement of Comprehensive Income

     19   

Condensed Consolidated Statement of Changes in Total Equity

     19   

Five Quarter Consolidated Statement of Income

     20   

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

     21-22   

Noninterest Income and Noninterest Expense

     23-24   

Balance Sheet

  

Consolidated Balance Sheet

     25-26   

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

     27   

Securities Available for Sale

     28   

Loans

  

Loans

     28   

Nonperforming Assets

     29   

Loans 90 Days or More Past Due and Still Accruing

     30   

Purchased Credit-Impaired Loans

     31-33   

Pick-A-Pay Portfolio

     34   

Non-Strategic and Liquidating Loan Portfolios

     35   

Home Equity Portfolios

     35   

Changes in Allowance for Credit Losses

     36-37   

Equity

  

Tier 1 Common Equity

     38   

Operating Segments

  

Operating Segment Results

     39-40   

Other

  

Mortgage Servicing and other related data

     41-43   

 

 


16

 

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA

 

 
     Quarter ended September 30,      %     Nine months ended Sept. 30,      %  
  

 

 

      

 

 

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

 

 

For the Period

               

Wells Fargo net income

   $ 4,937        4,055         22    $ 13,807         11,762         17 

Wells Fargo net income applicable to common stock

     4,717        3,839         23        13,142         11,137         18   

Diluted earnings per common share

     0.88        0.72         22        2.45         2.09         17   

Profitability ratios (annualized):

               

Wells Fargo net income to average assets (ROA)

     1.45   %      1.26         15        1.39         1.25         11   

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

     13.38        11.86         13        12.81         11.92          

Efficiency ratio (1)

     57.1        59.5         (4)        58.5         61.1         (4)   

Total revenue

   $ 21,213        19,628             $ 64,138         60,343          

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

     9,101        7,951         14        26,636         23,458         14   

Dividends declared per common share

     0.22        0.12         83        0.66         0.36         83   

Average common shares outstanding

     5,288.1        5,275.5                5,292.7         5,280.2           

Diluted average common shares outstanding

     5,355.6        5,319.2               5,355.7         5,325.6          

Average loans

   $ 776,734        754,544             $ 771,200         753,293          

Average assets

         1,354,340        1,281,369                   1,326,384         1,257,977          

Average core deposits (3)

     895,374        836,845               882,224         813,865          

Average retail core deposits (4)

     630,053        599,227               623,671         592,156          

Net interest margin

     3.66   %      3.84         (5)        3.82         3.96         (4)   

At Period End

               

Securities available for sale

   $ 229,350        207,176         11      $ 229,350         207,176         11   

Loans

     782,630        760,106               782,630         760,106          

Allowance for loan losses

     17,385        20,039         (13)        17,385         20,039         (13)   

Goodwill

     25,637        25,038               25,637         25,038          

Assets

         1,374,715        1,304,945               1,374,715         1,304,945          

Core deposits (3)

     901,075        849,632               901,075         849,632          

Wells Fargo stockholders’ equity

     154,679        137,768         12        154,679         137,768         12   

Total equity

     156,059        139,244         12        156,059         139,244         12   

Capital ratios:

               

Total equity to assets

     11.35   %      10.67               11.35         10.67          

Risk-based capital (5):

               

Tier 1 capital

     11.66        11.26               11.66         11.26          

Total capital

     14.70        14.86         (1)        14.70         14.86         (1)   

Tier 1 leverage (5)

     9.45        8.97               9.45         8.97          

Tier 1 common equity (5)(6)

     10.06        9.34               10.06         9.34          

Common shares outstanding

     5,289.6        5,272.2                5,289.6         5,272.2           

Book value per common share

   $ 27.10        24.13         12      $ 27.10         24.13         12   

Common stock price:

               

High

     36.60        29.63         24        36.60         34.25          

Low

     32.62        22.58         44        27.94         22.58         24   

Period end

     34.53        24.12         43        34.53         24.12         43   

Team members (active, full-time equivalent)

     267,000        263,800               267,000         263,800          
               

 

 

 

(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 September 30, 2012, ratios are preliminary.
(6) See the “Five Quarter Tier 1 Common Equity Under Basel I” table for additional information.


17

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA

   
           

 

Quarter ended

 
  

 

 

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

For the Quarter

             

Wells Fargo net income

   $ 4,937        4,622         4,248         4,107         4,055  

Wells Fargo net income applicable to common stock

     4,717        4,403         4,022         3,888         3,839  

Diluted earnings per common share

     0.88        0.82         0.75         0.73         0.72  

Profitability ratios (annualized):

             

Wells Fargo net income to average assets (ROA)

     1.45    %      1.41         1.31         1.25         1.26   

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

     13.38        12.86         12.14         11.97         11.86   

Efficiency ratio (1)

     57.1        58.2         60.1         60.7         59.5   

Total revenue

   $ 21,213        21,289         21,636         20,605         19,628   

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

     9,101        8,892         8,643         8,097         7,951   

Dividends declared per common share

     0.22        0.22         0.22         0.12         0.12   

Average common shares outstanding

     5,288.1        5,306.9         5,282.6         5,271.9         5,275.5   

Diluted average common shares outstanding

     5,355.6        5,369.9         5,337.8         5,317.6         5,319.2   

Average loans

   $ 776,734        768,223         768,582         768,563         754,544   

Average assets

         1,354,340        1,321,584         1,302,921         1,306,728         1,281,369   

Average core deposits (3)

     895,374        880,636         870,516         864,928         836,845   

Average retail core deposits (4)

     630,053        624,329         616,569         606,810         599,227   

Net interest margin

     3.66    %      3.91         3.91         3.89         3.84   

At Quarter End

             

Securities available for sale

   $ 229,350        226,846         230,266         222,613         207,176   

Loans

     782,630        775,199         766,521         769,631         760,106   

Allowance for loan losses

     17,385        18,320         18,852         19,372         20,039   

Goodwill

     25,637        25,406         25,140         25,115         25,038   

Assets

     1,374,715        1,336,204         1,333,799         1,313,867         1,304,945   

Core deposits (3)

     901,075        882,137         888,711         872,629         849,632   

Wells Fargo stockholders’ equity

     154,679        148,070         145,516         140,241         137,768   

Total equity

     156,059        149,437         146,849         141,687         139,244   

Capital ratios:

             

Total equity to assets

     11.35    %      11.18         11.01         10.78         10.67   

Risk-based capital (5):

             

Tier 1 capital

     11.66        11.69         11.78         11.33         11.26   

Total capital

     14.70        14.85         15.13         14.76         14.86   

Tier 1 leverage (5)

     9.45        9.25         9.35         9.03         8.97   

Tier 1 common equity (5)(6)

     10.06        10.08         9.98         9.46         9.34   

Common shares outstanding

     5,289.6        5,275.7         5,301.5         5,262.6         5,272.2   

Book value per common share

   $ 27.10        26.06         25.45         24.64         24.13   

Common stock price:

             

High

     36.60        34.59         34.59         27.97         29.63   

Low

     32.62        29.80         27.94         22.61         22.58   

Period end

     34.53        33.44         34.14         27.56         24.12   

Team members (active, full-time equivalent)

     267,000        264,400         264,900         264,200         263,800   
             

 

 

 

(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 September 30, 2012, ratios are preliminary.
(6) See the “Five Quarter Tier 1 Common Equity under Basel I” table for additional information.


18

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

 

 
     Quarter ended Sept. 30,      %     Nine months
ended Sept. 30,
     %  
  

 

 

      

 

 

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

 

 

Interest income

                

Trading assets

   $ 299        343         (13)  %    $ 1,019         1,040        (2)  % 

Securities available for sale

     1,966        2,053         (4)        6,201         6,383        (3)   

Mortgages held for sale

     476        389         22        1,412         1,188        19   

Loans held for sale

     17        13         31        38         42        (10)   

Loans

     9,016        9,224         (2)        27,455         27,972        (2)   

Other interest income

     151        156         (3)        409         409          

 

      

 

 

    

Total interest income

     11,925        12,178         (2)        36,534         37,034        (1)   

 

      

 

 

    

Interest expense

                

Deposits

     428        559         (23)        1,328         1,768        (25)   

Short-term borrowings

     19        20         (5)        55         66        (17)   

Long-term debt

     756        980         (23)        2,375         3,093        (23)   

Other interest expense

     60        77         (22)        189         236        (20)   

 

      

 

 

    

Total interest expense

     1,263        1,636         (23)        3,947         5,163        (24)   

 

      

 

 

    

Net interest income

     10,662        10,542               32,587         31,871         

Provision for credit losses

     1,591        1,811         (12)        5,386         5,859        (8)   

 

      

 

 

    

Net interest income after provision for credit losses

     9,071        8,731               27,201         26,012         

 

      

 

 

    

Noninterest income

                

Service charges on deposit accounts

     1,210        1,103         10        3,433         3,189         

Trust and investment fees

     2,954        2,786               8,691         8,646         

Card fees

     744        1,013         (27)        2,102         2,973        (29)   

Other fees

     1,097        1,085               3,326         3,097         

Mortgage banking

     2,807        1,833         53        8,570         5,468        57   

Insurance

     414        423         (2)        1,455         1,494        (3)   

Net gains (losses) from trading activities

     529        (442)         NM         1,432         584        145   

Net gains (losses) on debt securities available for sale

     3        300         (99)        (65)         6        NM    

Net gains from equity investments

     164        344         (52)        770         1,421        (46)   

Operating leases

     218        284         (23)        397         464        (14)   

Other

     411        357         15        1,440         1,130        27   

 

      

 

 

    

Total noninterest income

     10,551        9,086         16        31,551         28,472        11   

 

      

 

 

    

Noninterest expense

                

Salaries

     3,648        3,718         (2)        10,954         10,756         

Commission and incentive compensation

     2,368        2,088         13        7,139         6,606         

Employee benefits

     1,063        780         36        3,720         3,336        12   

Equipment

     510        516         (1)        1,526         1,676        (9)   

Net occupancy

     727        751         (3)        2,129         2,252        (5)   

Core deposit and other intangibles

     419        466         (10)        1,256         1,413        (11)   

FDIC and other deposit assessments

     359        332               1,049         952        10   

Other

     3,018        3,026                9,729         9,894        (2)   

 

      

 

 

    

Total noninterest expense

     12,112        11,677               37,502         36,885         

 

      

 

 

    

Income before income tax expense

     7,510        6,140         22        21,250         17,599        21   

Income tax expense

     2,480        1,998         24        7,179         5,571        29   

 

      

 

 

    

Net income before noncontrolling interests

     5,030        4,142         21        14,071         12,028        17   

Less: Net income from noncontrolling interests

     93        87               264         266        (1)   

 

      

 

 

    

Wells Fargo net income

   $ 4,937        4,055         22      $ 13,807         11,762        17   

 

      

 

 

    

Less: Preferred stock dividends and other

     220        216               665         625         

 

      

 

 

    

Wells Fargo net income applicable to common stock

   $ 4,717        3,839         23      $ 13,142         11,137        18   

 

      

 

 

    

Per share information

                

Earnings per common share

   $ 0.89        0.73         22      $ 2.48         2.11        18   

Diluted earnings per common share

     0.88        0.72         22        2.45         2.09        17   

Dividends declared per common share

     0.22        0.12         83        0.66         0.36        83   

Average common shares outstanding

     5,288.1        5,275.5                5,292.7         5,280.2          

Diluted average common shares outstanding

             5,355.6        5,319.2                       5,355.7         5,325.6         
     

 

 

NM - Not meaningful


19

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 
           Nine months         
     Quarter ended Sept. 30,      %     ended Sept. 30,      %  
  

 

 

      

 

 

    

(in millions)

   2012       2011       Change     2012       2011       Change  

 

 

Wells Fargo net income

   $ 4,937         4,055         22    $ 13,807         11,762         17 

 

      

 

 

    

Other comprehensive income, before tax:

                

Foreign currency translation adjustments:

                

Net unrealized gains (losses) arising during the period

     45         (58)         NM         (1)         (29)         (97

Reclassification of net gains included in net income

                            (10)                 -   

Securities available for sale:

                

Net unrealized gains (losses) arising during the period

     2,892         (2,007)         NM         5,597         (878)         NM   

Reclassification of net gains included in net income

     (41)         (431)         (90)        (290)         (614)         (53

Derivatives and hedging activities:

                

Net unrealized gains arising during the period

     24         68         (65)        63         205         (69

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

     (89)         (141)         (37)        (295)         (454)         (35

Defined benefit plans adjustment:

                

Net actuarial gains (losses) arising during the period

     (1)                NM         (18)         (2)         800   

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

     35         23         52        111         71         56   

 

      

 

 

    

Other comprehensive income (loss), before tax

     2,865         (2,545)         NM         5,157         (1,701)         NM    

Income tax (expense) benefit related to OCI

     (1,057)         945         NM         (1,923)         781         NM    

 

      

 

 

    

Other comprehensive income (loss), net of tax

     1,808         (1,600)         NM         3,234         (920)         NM    

Less: Other comprehensive income (loss) from noncontrolling interests

            (6)         NM                (10)         NM    

 

      

 

 

    

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

     1,806         (1,594)         NM         3,228         (910)         NM    

 

      

 

 

    

Wells Fargo comprehensive income

     6,743         2,461         174        17,035         10,852         57   

Comprehensive income from noncontrolling interests

     95         81         17        270         256          

 

      

 

 

    

Total comprehensive income

   $ 6,838         2,542         169      $ 17,305         11,108         56   

 

 

NM - Not meaningful

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

 

 
     Nine months ended Sept. 30,  
  

 

 

 
(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

     13,807         11,762   

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

     3,228         (910)    

Common stock issued

     2,000         1,014   

Common stock repurchased (1)

     (2,597)          (1,762)    

Preferred stock released by ESOP

     838         824   

Preferred stock issued

     742         2,501   

Common stock warrants repurchased

             (1)    

Common stock dividends

     (3,500)          (1,905)    

Preferred stock dividends and other

     (665)          (625)    

Noncontrolling interests and other, net

     517         457   

 

 

Balance, end of period

    $ 156,059         139,244   

 

 

 

(1) For the nine months ended September 30, 2012, includes $300 million related to a private forward repurchase transaction entered into in third quarter 2012 that is expected to settle in fourth quarter 2012 for an estimated 9 million shares of common stock.


20

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

 

 
    

 

Quarter ended

 
  

 

 

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

 

 

Interest income

              

Trading assets

   $ 299         343         377         400         343   

Securities available for sale

     1,966         2,147         2,088         2,092         2,053   

Mortgages held for sale

     476         477         459         456         389   

Loans held for sale

     17         12                16         13   

Loans

     9,016         9,242         9,197         9,275         9,224   

Other interest income

     151         133         125         139         156   

 

 

Total interest income

     11,925         12,354         12,255         12,378         12,178   

 

 

Interest expense

              

Deposits

     428         443         457         507         559   

Short-term borrowings

     19         20         16         14         20   

Long-term debt

     756         789         830         885         980   

Other interest expense

     60         65         64         80         77   

 

 

Total interest expense

     1,263         1,317         1,367         1,486         1,636   

 

 

Net interest income

     10,662         11,037         10,888         10,892         10,542   

Provision for credit losses

     1,591         1,800         1,995         2,040         1,811   

 

 

Net interest income after provision for credit losses

     9,071         9,237         8,893         8,852         8,731   

 

 

Noninterest income

              

Service charges on deposit accounts

     1,210         1,139         1,084         1,091         1,103   

Trust and investment fees

     2,954         2,898         2,839         2,658         2,786   

Card fees

     744         704         654         680         1,013   

Other fees

     1,097         1,134         1,095         1,096         1,085   

Mortgage banking

     2,807         2,893         2,870         2,364         1,833   

Insurance

     414         522         519         466         423   

Net gains (losses) from trading activities

     529         263         640         430         (442)   

Net gains (losses) on debt securities available for sale

            (61)         (7)         48         300   

Net gains from equity investments

     164         242         364         61         344   

Operating leases

     218         120         59         60         284   

Other

     411         398         631         759         357   

 

 

Total noninterest income

     10,551         10,252         10,748         9,713         9,086   

 

 

Noninterest expense

              

Salaries

     3,648         3,705         3,601         3,706         3,718   

Commission and incentive compensation

     2,368         2,354         2,417         2,251         2,088   

Employee benefits

     1,063         1,049         1,608         1,012         780   

Equipment

     510         459         557         607         516   

Net occupancy

     727         698         704         759         751   

Core deposit and other intangibles

     419         418         419         467         466   

FDIC and other deposit assessments

     359         333         357         314         332   

Other

     3,018         3,381         3,330         3,392         3,026   

 

 

Total noninterest expense

     12,112         12,397         12,993         12,508         11,677   

 

 

Income before income tax expense

     7,510         7,092         6,648         6,057         6,140   

Income tax expense

     2,480         2,371         2,328         1,874         1,998   

 

 

Net income before noncontrolling interests

     5,030         4,721         4,320         4,183         4,142   

Less: Net income from noncontrolling interests

     93         99         72         76         87   

 

 

Wells Fargo net income

   $ 4,937         4,622         4,248         4,107         4,055   

 

 

Less: Preferred stock dividends and other

     220         219         226         219         216   

 

 

Wells Fargo net income applicable to common stock

   $ 4,717         4,403         4,022         3,888         3,839   

 

 

Per share information

              

Earnings per common share

   $ 0.89         0.83         0.76         0.74         0.73   

Diluted earnings per common share

     0.88         0.82         0.75         0.73         0.72   

Dividends declared per common share

     0.22         0.22         0.22         0.12         0.12   

Average common shares outstanding

     5,288.1         5,306.9         5,282.6         5,271.9         5,275.5   

Diluted average common shares outstanding

             5,355.6         5,369.9         5,337.8         5,317.6         5,319.2   
              

 

 


21

 

Wells Fargo & Company and Subsidiaries

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

 

 

 

     Quarter ended September 30,  
                       
     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

   $ 91,561       0.44         %         $ 101          98,909       0.42         %         $ 105  

Trading assets

     39,441       3.08           304          37,939       3.67           348  

Securities available for sale (3):

                       

Securities of U.S. Treasury and federal agencies

     1,390       1.05           4          9,578       1.02           24  

Securities of U.S. states and political subdivisions

     35,925       4.36           392          25,593       4.93           315  

Mortgage-backed securities:

                       

Federal agencies

     94,324       2.88           679          72,887       4.41           804  

Residential and commercial

     33,124       6.67           553          32,625       7.46           609  

Total mortgage-backed securities

     127,448       3.87           1,232          105,512       5.36           1,413  

Other debt and equity securities

     47,647       4.07           486          38,888       4.69           457  

Total securities available for sale

     212,410       3.98           2,114          179,571       4.92           2,209  

Mortgages held for sale (4)

     52,128       3.65           476          34,634       4.49           389  

Loans held for sale (4)

     932       7.38           17          968       5.21           13  

Loans:

                       

Commercial:

                       

Commercial and industrial

     177,500       3.84           1,711          159,625       4.22           1,697  

Real estate mortgage

     105,148       4.05           1,070          102,428       3.93           1,015  

Real estate construction

     17,687       5.21           232          20,537       6.12           317  

Lease financing

     12,608       6.60           208          12,964       7.21           234  

Foreign

     39,663       2.46           245          38,175       2.42           233  

Total commercial

     352,606       3.91           3,466          333,729       4.16           3,496  

Consumer:

                       

Real estate 1-4 family first mortgage

     234,020       4.51           2,638          223,765       4.83           2,704  

Real estate 1-4 family junior lien mortgage

     79,718       4.26           854          89,065       4.37           980  

Credit card

     23,040       12.64           732          21,452       12.96           695  

Other revolving credit and installment

     87,350       6.08           1,334          86,533       6.25           1,364  

Total consumer

     424,128       5.23           5,558          420,815       5.44           5,743  

Total loans (4)

     776,734       4.63           9,024          754,544       4.87           9,239  

Other

     4,386       4.62           50          4,831       4.18           50  

Total earning assets

   $ 1,177,592       4.09         %         $ 12,086          1,111,396       4.43         %         $ 12,353  

Funding sources

                       

Deposits:

                       

Interest-bearing checking

   $ 28,815       0.06         %         $ 4          43,986       0.07         %         $ 8  

Market rate and other savings

     506,138       0.12           152          473,409       0.17           198  

Savings certificates

     58,206       1.29           188          67,633       1.47           251  

Other time deposits

     14,373       1.49           54          12,809       2.02           65  

Deposits in foreign offices

     71,791       0.16           30          63,548       0.23           37  

Total interest-bearing deposits

     679,323       0.25           428          661,385       0.34           559  

Short-term borrowings

     51,857       0.17           22          50,373       0.18           23  

Long-term debt

     127,486       2.37           756          139,542       2.81           980  

Other liabilities

     9,945       2.40           60          11,170       2.75           77  

Total interest-bearing liabilities

     868,611       0.58           1,266          862,470       0.76           1,639  

Portion of noninterest-bearing funding sources

     308,981                            248,926                    

Total funding sources

   $     1,177,592       0.43           1,266          1,111,396       0.59           1,639  

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

       3.66         %         $ 10,820            3.84         %         $ 10,714  

Noninterest-earning assets

                       

Cash and due from banks

   $ 15,682                  17,101          

Goodwill

     25,566                  25,008          

Other

     135,500                  127,864          

Total noninterest-earning assets

   $ 176,748                  169,973          

Noninterest-bearing funding sources

                       

Deposits

   $ 267,184                  221,182          

Other liabilities

     66,116                  57,464          

Total equity

     152,429                  140,253          

Noninterest-bearing funding sources used to fund earning assets

     (308,981                (248,926        

Net noninterest-bearing funding sources

   $ 176,748                  169,973          

Total assets

   $ 1,354,340                  1,281,369          

 

 

 

(1) Our average prime rate was 3.25% for the quarters ended September 30, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.43% and 0.30% 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 $158 million and $172 million for the quarters ended September 30, 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.


22

 

Wells Fargo & Company and Subsidiaries

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

 

 
                Nine months ended September 30,  
  

 

 

 
     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

   $ 73,011       0.47         %         $ 257          93,661       0.37         %         $ 257  

Trading assets

     41,931       3.29           1,035          37,788       3.73           1,056  

Securities available for sale (3):

                       

Securities of U.S. Treasury and federal agencies

     3,041       1.12           25          4,423       1.43           47  

Securities of U.S. states and political subdivisions

     34,366       4.42           1,139          22,694       5.21           887  

Mortgage-backed securities:

                       

Federal agencies

     93,555       3.24           2,277          71,408       4.63           2,480  

Residential and commercial

     33,839       6.82           1,731          30,954       8.64           2,005  

Total mortgage-backed securities

     127,394       4.19           4,008          102,362       5.84           4,485  

Other debt and equity securities

     48,983       4.09           1,501          35,709       5.32           1,423  

Total securities available for sale

     213,784       4.16           6,673          165,188       5.52           6,842  

Mortgages held for sale (4)

     49,531       3.80           1,412          34,668       4.57           1,188  

Loans held for sale (4)

     838       6.07           38          1,100       5.05           42  

Loans:

                       

Commercial:

                       

Commercial and industrial

     172,039       4.07           5,245          154,469       4.48           5,181  

Real estate mortgage

     105,548       4.24           3,350          101,230       4.00           3,033  

Real estate construction

     18,118       4.98           676          22,255       4.96           826  

Lease financing

     12,875       7.47           721          12,961       7.59           737  

Foreign

     39,915       2.52           753          36,103       2.62           708  

Total commercial

     348,495       4.12           10,745          327,018       4.28           10,485  

Consumer:

                       

Real estate 1-4 family first mortgage

     231,256       4.60           7,984          226,048       4.93           8,363  

Real estate 1-4 family junior lien mortgage

     82,161       4.28           2,631          91,881       4.32           2,973  

Credit card

     22,414       12.75           2,140          21,305       13.04           2,084  

Other revolving credit and installment

     86,874       6.12           3,980          87,041       6.31           4,107  

Total consumer

     422,705       5.28           16,735          426,275       5.49           17,527  

Total loans (4)

     771,200       4.76           27,480          753,293       4.97           28,012  

Other

     4,492       4.53           153          5,017       4.06           153  

Total earning assets

   $ 1,154,787       4.28         %         $ 37,048          1,090,715       4.59         %         $ 37,550  

Funding sources

                       

Deposits:

                       

Interest-bearing checking

   $ 30,465       0.06         %         $ 14          51,891       0.09         %         $ 34  

Market rate and other savings

     500,850       0.12           457          457,483       0.19           661  

Savings certificates

     60,404       1.33           601          71,343       1.43           762  

Other time deposits

     13,280       1.74           173          13,212       2.10           208  

Deposits in foreign offices

     67,424       0.16           83          59,662       0.23           103  

Total interest-bearing deposits

     672,423       0.26           1,328          653,591       0.36           1,768  

Short-term borrowings

     50,650       0.17           65          52,805       0.19           77  

Long-term debt

     127,561       2.48           2,375          145,000       2.85           3,093  

Other liabilities

     10,052       2.50           189          10,547       2.99           236  

Total interest-bearing liabilities

     860,686       0.61           3,957          861,943       0.80           5,174  

Portion of noninterest-bearing funding sources

     294,101                            228,772                    

Total funding sources

   $ 1,154,787       0.46           3,957          1,090,715       0.63           5,174  

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

       3.82         %         $ 33,091            3.96         %         $ 32,376  

Noninterest-earning assets

                       

Cash and due from banks

   $ 16,283                  17,277          

Goodwill

     25,343                  24,853          

Other

     129,971                  125,132          

Total noninterest-earning assets

   $ 171,597                  167,262          

Noninterest-bearing funding sources

                       

Deposits

   $ 256,120                  204,643          

Other liabilities

     60,606                  55,324          

Total equity

     148,972                  136,067          

Noninterest-bearing funding sources used to fund earning assets

     (294,101                (228,772        

Net noninterest-bearing funding sources

   $ 171,597                  167,262          

Total assets

   $     1,326,384                  1,257,977          

 

 

 

(1) Our average prime rate was 3.25% for the nine months ended September 30, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.47% and 0.29% for the same periods, 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 $504 million and $505 million for the nine months ended September 30, 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.


23

 

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME

 

 
    

Quarter ended

Sept. 30,

     %     Nine months ended
Sept. 30,
     %  
  

 

 

      

 

 

    
(in millions)    2012       2011       Change      2012       2011       Change   

 

 

Service charges on deposit accounts