EX-99.1 2 d520380dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

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

 

Friday, April 12, 2013

WELLS FARGO REPORTS RECORD QUARTERLY NET INCOME

Q1 Net Income of $5.2 Billion; EPS of $0.92, Up 23 Percent from Prior Year

 

 

Continued strong financial results:

 

  o Record Wells Fargo net income of $5.2 billion, up 22 percent from first quarter 2012

 

  o Record diluted earnings per share of $0.92, up 23 percent

 

  o Revenue of $21.3 billion, compared with $21.6 billion

 

  o Noninterest expense of $12.4 billion, down $593 million

 

  ¡ 58.3 percent efficiency ratio, improved from 60.1 percent

 

  o

Pre-tax pre-provision profit (PTPP)1 of $8.9 billion, up 2 percent

 

  o Return on average assets (ROA) of 1.49 percent, up 18 basis points

 

  o Return on equity (ROE) of 13.59 percent, up 145 basis points

 

 

Continued loan and deposit growth:

 

  o Total average loans of $798.1 billion, up $29.5 billion from first quarter 2012

 

  ¡ Quarter-end loans of $800.0 billion, up $33.4 billion

 

  ¡

Quarter-end core loans2 of $709.1 billion, up $50.8 billion

 

  o Total average core deposits of $925.9 billion, up $55.4 billion from first quarter 2012

 

  ¡ Quarter-end core deposits of $939.9 billion, up $51.2 billion

 

 

Continued improvement in credit quality:

 

  o Net charge-offs of $1.4 billion, a decline of $976 million from first quarter 2012

 

  ¡

Net charge-off rate of 0.72 percent (annualized), lowest since second quarter 20063

 

  o Non-performing assets of $22.9 billion, down $3.8 billion from first quarter 2012

 

  o

$200 million (pre-tax) reserve release4 due to continued strong credit performance

 

 

Strengthened capital levels; increased dividends and continued share repurchases:

 

  o

Tier 1 common equity5 under Basel I increased $14.1 billion from first quarter 2012 to $113.6 billion, with Tier 1 common equity ratio of 10.38 percent under Basel I at March 31, 2013

 

  o

Estimated Tier 1 common equity ratio of 8.39 percent under current Basel III capital proposals6

 

 

1 See footnote (2) on page 17 for more information on pre-tax pre-provision profit.

2 See table on page 5 for more information on core and non-strategic/liquidating loan portfolios.

3 As a result of the accounting for purchased credit-impaired (PCI) loans, substantially all related to the Wachovia merger, certain credit-related metrics may not be directly comparable with periods prior to the merger.

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

5 See tables on page 36 for more information on Tier 1 common equity.

6 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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  o Increased quarterly common stock dividend to $0.25 per share in first quarter 2013 and purchased approximately 17 million shares of common stock

 

  o Received a non-objection to 2013 Capital Plan under the Comprehensive Capital Analysis and Review (CCAR), which included a dividend rate of $0.30 per share for second quarter 2013, subject to Board approval. The 2013 plan also included an increase in common stock repurchase activity compared with actual repurchases in 2012.

Selected Financial Information

 

 

 
           Quarter ended    
  

 

 

 
     Mar. 31,       Dec. 31,        Mar. 31,    
     2013       2012        2012    

 

 

Earnings

       

Diluted earnings per common share

   $ 0.92          0.91           0.75     

Wells Fargo net income (in billions)

     5.17          5.09           4.25     

Return on assets (ROA)

     1.49       1.46           1.31     

Return on equity (ROE)

     13.59          13.35           12.14     

Asset Quality

       

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

     0.72          1.05           1.25     

Allowance as a % of total loans

     2.15          2.19           2.50     

Allowance as a % of annualized net charge-offs

     299          211           199     

Other

       

Revenue (in billions)

   $ 21.3          21.9           21.6     

Efficiency ratio

     58.3       58.8           60.1     

Average loans (in billions)

   $ 798.1          787.2           768.6     

Average core deposits (in billions)

     925.9          928.8           870.5     

Net interest margin

     3.48       3.56           3.91     

 

 

SAN FRANCISCO – Wells Fargo & Company (NYSE:WFC) reported record net income of $5.2 billion, or $0.92 per diluted common share, for first quarter 2013, up from $4.2 billion, or $0.75 per share, for first quarter 2012, and up from $5.1 billion, or $0.91 per share, for fourth quarter 2012.

“Wells Fargo delivered outstanding first quarter 2013 results for our shareholders,” said Chairman and CEO John Stumpf. “Quarterly earnings and EPS increased at double-digit rates compared with first quarter 2012, while loans and deposits demonstrated continued growth in a challenging economic environment. In addition, expenses continued to decline as we improved efficiency across the franchise, and returns on assets and equity increased and remained among the highest in our industry. Capital levels remained strong and we were very pleased to increase our dividend to $0.25 per common share in first quarter 2013 and to receive a non-objection to our 2013 Capital Plan which will allow us to return even more capital to shareholders in the year ahead. Our success in the quarter, as always, was driven by helping our customers succeed financially, and I am very proud of the dedication and hard work of our team members.”

“Our company earned $5.2 billion in first quarter 2013, the highest quarterly profit in our history—another milestone demonstrating how Wells Fargo’s diversified business model continued to produce outstanding results,” said Chief Financial Officer Tim Sloan. “This is our 13th consecutive quarter of EPS growth and


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8th consecutive quarter of record EPS. Average loans and deposits increased in the quarter, expenses were lower, and credit metrics improved with the net charge-off ratio down to the lowest level since second quarter 2006.”3

Revenue

Revenue was $21.3 billion in first quarter 2013, compared with $21.9 billion in fourth quarter 2012, and pre-tax pre-provision profit was $8.9 billion. “Revenue was down linked quarter largely due to the absence of the higher than average equity gains we recognized last quarter, the expected cyclicality in the mortgage business, and two fewer days in the quarter, which had a negative impact on both net interest income and noninterest income linked quarter trends,” said Sloan. “We continue to be pleased with the revenue growth in many of our core businesses, as evidenced by the strong year-over-year growth in brokerage advisory and commission fees, investment banking, card fees, and deposit service charges, all of which were up over 10 percent. That’s the benefit of our diversified business model and among the many drivers of our continued success.”

Net Interest Income

Net interest income in first quarter 2013 declined $144 million on a linked-quarter basis to $10.5 billion largely due to two fewer days compared with fourth quarter 2012. Apart from this impact, net interest income was essentially unchanged. Interest income from the available-for-sale (AFS) securities portfolio increased modestly as we opportunistically purchased $17.8 billion in federal agency mortgage-backed securities (MBS) during periods of higher interest rates in the first quarter. The benefit of these purchases outweighed the impact of continued runoff of higher yielding securities within the portfolio. In addition, organic growth in consumer and commercial loans and the retention of $3.4 billion in high-quality, conforming first real estate mortgages in the first quarter largely offset reduced income from portfolio repricing. The decline in interest income was partially offset by a $64 million decrease in deposit and long term funding interest expense.

On a linked-quarter basis, the Company’s net interest margin declined 8 basis points to 3.48 percent. Approximately 3 basis points of the decline was due to lower income from variable sources, including purchased credit-impaired (PCI) loan resolutions and periodic dividends. Linked-quarter deposit growth caused cash and short term investments to remain elevated. Although these short-term balances have little impact on net interest income, they are dilutive to net interest margin and accounted for 3 basis points of compression. Net of growth in loans and AFS securities, ongoing repricing of the balance sheet in the current low interest rate environment reduced net interest margin approximately 2 basis points compared with the fourth quarter.

Noninterest Income

Noninterest income was $10.8 billion, compared with $11.3 billion in fourth quarter 2012. The decline was primarily driven by lower mortgage banking revenue as well as reduced gains on equity investments, which


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were elevated in the fourth quarter. These declines were partially offset by stronger retail brokerage transaction revenue and asset-based fees, and higher trading gains and insurance revenue.

Mortgage banking noninterest income was $2.8 billion, down $274 million from fourth quarter 2012. During the first quarter, the Company retained on balance sheet 1-4 family conforming first mortgage loans of $3.4 billion, forgoing approximately $112 million of 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 $309 million for mortgage loan repurchase losses, compared with $379 million in fourth quarter 2012 (included in net gains from mortgage loan origination/sales activities). Net mortgage servicing rights (MSRs) results were $129 million, down from $220 million in fourth quarter 2012, due primarily to MSR valuation adjustments made in the first quarter for the impact of improving housing prices on estimated prepayment speeds.

The Company had net unrealized securities gains of $11.2 billion at March 31, 2013, compared with $11.9 billion at December 31, 2012. Period-end AFS securities balances increased $13.0 billion.

Noninterest Expense

Noninterest expense declined $496 million from the prior quarter primarily due to lower operating losses associated with the Independent Foreclosure Review settlement and a $250 million charitable contribution to the Wells Fargo Foundation in the fourth quarter. This quarter’s expenses included approximately $460 million of seasonally higher personnel expenses and approximately $103 million of higher deferred compensation, which was offset in trading revenue. The Company continued to operate within its targeted efficiency ratio range of 55 to 59 percent, with a ratio of 58.3 percent in first quarter 2013, compared with 58.8 percent in fourth quarter 2012. The Company expects second quarter 2013 expenses to decline from first quarter 2013 and to remain within the target efficiency range.

Income Taxes

The Company’s effective income tax rate was 31.9 percent for first quarter 2013. The rate included the benefit associated with the realization for tax purposes of a previously written-down investment. Absent additional discrete benefits in 2013, the Company expects the effective income tax rate for the full year 2013 to be higher than the effective income tax rate for first quarter 2013.

Loans

Total loans were $800.0 billion at March 31, 2013, up $392 million from December 31, 2012. Included in this growth was $3.4 billion of 1-4 family conforming first mortgage production retained on the balance sheet, and a decrease of $3.7 billion due to the continued runoff in the liquidating/non-strategic portfolio. Total average loans were $798.1 billion, up $10.9 billion from prior quarter. The asset-backed finance, commercial banking, corporate banking, credit card, government and institutional banking, mortgage, retail


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brokerage, real estate capital markets, and retail sales finance portfolios all experienced year-over-year, double-digit growth.

 

 

 
    March 31, 2013      December 31, 2012   
 

 

 

   

 

 

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

 

 

Commercial

    $   358,944           2,770           361,714         358,028           3,170           361,198     

Consumer

    350,131           88,121           438,252         346,984           91,392           438,376     

 

 

 Total loans

    $ 709,075           90,891           799,966         705,012           94,562           799,574     

 

 

Change from prior quarter:

    $ 4,063           (3,671        392         21,038           (4,094        16,944     

 

 

 

(1) See table on page 34 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

Total average deposits were $986.2 billion, up 8 percent from a year ago and up 4 percent (annualized) from fourth quarter 2012. Average core deposits were $925.9 billion, up 6 percent from a year ago and down slightly from fourth quarter 2012. Average core checking and savings deposits were $870.6 billion, up 8 percent from a year ago and down 1 percent (annualized) from fourth quarter 2012. Average mortgage escrow deposits were $38.8 billion, compared with $33.0 billion a year ago and $42.2 billion in fourth quarter 2012. Average core checking and savings deposits were 94 percent of average core deposits, compared with 94 percent in the prior quarter and 93 percent a year ago. The average deposit cost for first quarter 2013 was 15 basis points, compared with 16 basis points in fourth quarter 2012. Average core deposits were 116 percent of average loans, down slightly from fourth quarter 2012.

Capital

Capital increased in the first quarter, with Tier 1 common equity of $113.6 billion under Basel I, or 10.38 percent of risk-weighted assets, compared with 9.98 percent in first quarter 2012 and 10.12 percent in fourth quarter 2012. The Tier I common equity ratio under Basel I was negatively impacted by approximately 25 basis points in the first quarter by the implementation of the Federal Reserve’s Market Risk Final Rule, commonly known as “Basel 2.5,” which became effective on January 1, 2013. Under current Basel III proposals, the Tier I common equity ratio was an estimated 8.39 percent.7 Our estimate of Basel III ratios is not impacted by the Market Risk Final Rule, as its impact has historically been included in our calculations.

In the first quarter, the Company purchased approximately 17 million shares of its common stock and paid a quarterly common stock dividend of $0.25 per share.

On March 14, 2013, the Company received a non-objection to its 2013 Capital Plan under the Comprehensive Capital Analysis and Review (CCAR), which included a dividend rate of $0.30 per share for

 

 

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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second quarter 2013, subject to Board approval. The 2013 plan also included an increase in common stock repurchase activity compared with actual repurchases in 2012.

 

 

 
     Mar. 31,        Dec. 31,         Mar. 31,     
(as a percent of total risk-weighted assets)    2013        2012         2012     

 

 

Ratios under Basel I (1):

       

Tier 1 common equity (2)

     10.38        10.12         9.98   

Tier 1 capital

     11.79           11.75         11.78   

Tier 1 leverage

     9.53           9.47         9.35   

 

 

 

(1) March 31, 2013, ratios are preliminary.
(2) See table on page 36 for more information on Tier 1 common equity.

Credit Quality

“Credit quality continued to improve in the quarter, and in several of our portfolios the performance was particularly strong,” said Chief Risk Officer Mike Loughlin. “Credit losses were $1.4 billion in first quarter 2013, compared with $2.1 billion in fourth quarter 2012, an improvement of 32 percent. Additionally, the loss rate of 0.72 percent was the lowest level since second quarter 2006.3 Nonperforming assets declined by $1.6 billion, or 7 percent, from fourth quarter 2012. As a result of the continued positive improvement to credit performance, we released $200 million from the allowance for credit losses in the first quarter. We continue to expect future reserve releases in 2013 absent a significant deterioration in the economic environment,” said Loughlin.

Net Loan Charge-offs

Net loan charge-offs improved to $1.4 billion in first quarter 2013, or 72 basis points of average loans, compared with $2.1 billion in fourth quarter 2012, or 105 basis points of average loans. On a linked-quarter basis, net loan charge-offs improved by $662 million, or 33 basis points of average loans. Net charge-offs in fourth quarter 2012 included $321 million in charge-offs, or 16 basis points, resulting from adjustments associated with the OCC guidance8 on loans discharged in bankruptcy.

 

 

8 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.


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Net Loan Charge-Offs

 

 

 
    

Quarter ended  

 
  

 

 

 
     Mar. 31, 2013     Dec. 31, 2012     Sept. 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

     $   93           0.20       $ 209           0.46     $ 131           0.29  

  Real estate mortgage

     29           0.11          38           0.14          54           0.21     

  Real estate construction

     (34)           (0.83)          (18)           (0.43)          1           0.03     

  Lease financing

     (1)           (0.02)          2           0.04          1           0.03     

  Foreign

     3           0.03          24           0.25          30           0.29     

 

      

 

 

      

 

 

    

  Total commercial

     90           0.10          255           0.29          217           0.24     

 

      

 

 

      

 

 

    

  Consumer:

               

  Real estate 1-4 family first mortgage

     429           0.69          649           1.05          673           1.15     

  Real estate 1-4 family junior lien mortgage

     449           2.46          690           3.57          1,036           5.17     

  Credit card

     235           3.96          222           3.71          212           3.67     

  Automobile

     76           0.66          112           0.97          75           0.66     

  Other revolving credit and installment

     140           1.37          153           1.46          145           1.38     

 

      

 

 

      

 

 

    

  Total consumer

     1,329           1.23          1,826           1.68          2,141           2.01     

 

      

 

 

      

 

 

    

  Total

     $   1,419           0.72       $   2,081           1.05       $   2,358           1.21  

 

      

 

 

      

 

 

    
               

 

 

 

(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 decreased by $1.6 billion in the quarter to $22.9 billion, compared with $24.5 billion in fourth quarter 2012. Nonaccrual loans decreased to $19.5 billion from $20.5 billion in fourth quarter 2012. Foreclosed assets were $3.4 billion, down from $4.0 billion in fourth quarter 2012.


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Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

 

 

 
     Mar. 31, 2013     Dec. 31, 2012     Sept. 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

   $ 1,193           0.64       $   1,422           0.76       $   1,404           0.79  

 Real estate mortgage

     3,098           2.92          3,322           3.12          3,599           3.44     

 Real estate construction

     870           5.23          1,003           5.93          1,253           7.08     

 Lease financing

     25           0.20          27           0.22          49           0.40     

 Foreign

     56           0.14          50           0.13          66           0.17     

 

      

 

 

      

 

 

    

 Total commercial

     5,242           1.45          5,824           1.61          6,371           1.81     

 

      

 

 

      

 

 

    

 Consumer:

               

 Real estate 1-4 family first mortgage

     11,320           4.49          11,455           4.58          11,195           4.65     

 Real estate 1-4 family junior lien mortgage

     2,712           3.74          2,922           3.87          3,140           4.02     

 Automobile

     220           0.47          245           0.53          295           0.64     

 Other revolving credit and installment

     32           0.08          40           0.09          43           0.10     

 

      

 

 

      

 

 

    

 Total consumer (1)

     14,284           3.26          14,662           3.34          14,673           3.41     

 

      

 

 

      

 

 

    

 Total nonaccrual loans

     19,526           2.44          20,486           2.56          21,044           2.69     

 

      

 

 

      

 

 

    

 Foreclosed assets:

               

 GNMA

     969             1,509             1,479        

 Non GNMA

     2,381             2,514             2,730        

 

      

 

 

      

 

 

    

 Total foreclosed assets

     3,350             4,023             4,209        

 

      

 

 

      

 

 

    

 Total nonperforming assets

     $   22,876           2.86       $   24,509           3.07       $   25,253           3.23  

 

      

 

 

      

 

 

    

 Change from prior quarter:

               

 Total nonaccrual loans

     $ (960)             $ (558)             $ 466        

 Total nonperforming assets

     (1,633)             (744)             368        
               

 

 

 

(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 March 31, 2013, compared with $1.4 billion at December 31, 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 $21.7 billion at March 31, 2013, down slightly from $21.8 billion at December 31, 2012.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $17.2 billion at March 31, 2012, down from $17.5 billion at December 31, 2012. The allowance coverage to total loans was 2.15 percent, compared with 2.19 percent in fourth quarter 2012. The allowance covered 3.0 times annualized first quarter net charge-offs, compared with 2.1 times in the prior quarter. The allowance coverage to nonaccrual loans was 88 percent at March 31, 2013, compared with 85 percent at December 31, 2012. “We believe the allowance was appropriate for losses inherent in the loan portfolio at March 31, 2013,” 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    
  

 

 

 
       Mar. 31,      Dec. 31,      Mar. 31,    
(in millions)    2013      2012      2012    

 

 

Community Banking

     $   2,924         2,869         2,348     

Wholesale Banking

     2,045         2,032         1,868     

Wealth, Brokerage and Retirement

     337         351         296     

 

 

More financial information about the business segments is on page 37.

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    
  

 

 

 
       Mar. 31,      Dec. 31,      Mar. 31,    
(in millions)    2013      2012      2012    

 

 

Total revenue

       $  12,899         13,782         13,421     

Provision for credit losses

     1,262         1,757         1,878     

Noninterest expense

     7,377         8,033         7,825     

Segment net income

     2,924         2,869         2,348     
(in billions)                     

Average loans

     498.9         493.1         486.1     

Average assets

     799.6         794.2         738.3     

Average core deposits

     619.2         608.9         575.2     

 

 

Community Banking reported net income of $2.9 billion, up $55 million, or 2 percent, from fourth quarter 2012. Revenue decreased $883 million, or 6 percent, from fourth quarter 2012, primarily due to lower volume-related mortgage banking revenue and above-average quarterly equity gains in fourth quarter 2012. Noninterest expense declined $656 million, or 8 percent, from fourth quarter 2012, largely due to elevated costs in fourth quarter 2012 including the Independent Foreclosure Review (IFR) settlement and the contribution to the Wells Fargo Foundation, partially offset by seasonally higher personnel costs in first quarter 2013. The provision for credit losses was $495 million lower than fourth quarter 2012 due to improved portfolio performance.

Net income was up $576 million, or 25 percent, from first quarter 2012. Revenue decreased $522 million, or 4 percent, from first quarter 2012, primarily due to lower net interest income, equity gains, and volume-related mortgage banking revenue. Noninterest expense declined $448 million, or 6 percent, from first quarter 2012, largely driven by lower operating losses. The provision for credit losses was $616 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 6.10 products per household, up from 5.98 year-over-year9

 

  o Primary consumer checking customers10 up a net 2.1 percent year-over-year9

 

  o Consumer credit card, lines of credit and loan product solutions (sales) in the retail banking stores in first quarter were up 20 percent from the prior year

 

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

 

  o Platform banker FTE (active, full-time equivalent) grew by 1,528 from the prior year and 478 on a linked-quarter basis

 

  Small Business/Business Banking

 

  o Business checking accounts up a net 2.9 percent year-over-year9

 

  o Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) in first quarter were up 42 percent from the prior year

 

  o $4.2 billion in net new loan commitments to small business customers (primarily with annual revenues less than $20 million) in first quarter, up 24 percent from the prior year

 

  Online and Mobile Banking

 

  o 22.5 million active online customers, up 7 percent year-over-year9

 

  o 10.1 million active mobile customers, up 32 percent year-over-year9

Consumer Lending Group

 

  Home Lending

 

  o Originations of $109 billion, compared with $125 billion in prior quarter

 

  o Applications of $140 billion, compared with $152 billion in prior quarter

 

  o Application pipeline of $74 billion at quarter end, compared with $81 billion at December 31, 2012
  o Residential mortgage servicing portfolio of $1.9 trillion; ratio of MSRs to related loans serviced for others was 70 basis points, compared with 67 basis points in prior quarter

 

  o Average note rate on the servicing portfolio was 4.69 percent, compared with 4.77 percent in prior quarter

 

  Consumer Credit Solutions

 

  o Credit card penetration in retail banking households rose to 34.1 percent9, up from 29.9 percent in prior year

 

  o Record auto originations of $6.8 billion, up 27 percent from prior quarter and up 10 percent from prior year

 

 

9 Data as of February 2013, comparisons with February 2012.

10 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.


- 11 -

 

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $20 million. Products and 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)      Mar. 31,
2013
    Dec. 31,
2012
     Mar. 31,  
2012  
 

 

 

Total revenue

   $ 6,086        5,993         6,033   

Provision (reversal of provision) for credit losses

     (58     60         95   

Noninterest expense

     3,091        3,007         3,054   

Segment net income

     2,045        2,032         1,868   

(in billions)

       

Average loans

     284.5        279.2         268.6   

Average assets

     496.1        489.7         467.8   

Average core deposits

     224.1        240.7         220.9   

 

 

Wholesale Banking reported net income of $2.0 billion, up $13 million, or 1 percent, from fourth quarter 2012. Revenue of $6.1 billion increased $93 million, or 2 percent, from fourth quarter 2012 as strong growth across many businesses, including asset-backed finance, equity funds and sales and trading were partially offset by lower investment banking and PCI resolutions. Wholesale Banking average loan balances increased 2 percent to $285 billion in the first quarter. Noninterest expense increased $84 million, or 3 percent, from fourth quarter 2012 on seasonally higher personnel benefits expense and insurance commissions. The provision for credit losses was a net recovery of $58 million in the first quarter, compared with a provision of $60 million in the fourth quarter, primarily due to historically low net charge-offs.

Net income was up $177 million, or 9 percent, from first quarter 2012. Revenue increased $53 million, or 1 percent, from first quarter 2012 driven by broad-based business growth and strong loan and deposit growth. Partially offsetting this growth was a decline in PCI resolutions. Noninterest expense increased $37 million, or 1 percent, from first quarter 2012 due to higher personnel expenses related to revenue growth and higher non-personnel expenses related to growth initiatives and compliance and regulatory requirements. The provision for credit losses decreased $153 million from first quarter 2012 due to a $203 million reduction in credit losses which was partially offset by a lower level of reserve release. The first quarter 2013 provision included a $50 million reserve release, compared with a $100 million reserve release a year ago.

 

 

Six percent year-over-year average loan and 6 percent average asset growth—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

 

 

Eleven consecutive quarters of average loan growth in Commercial Banking

 

 

Investment banking revenue from Wholesale customers increased 14 percent from first quarter 2012, including revenue from commercial and corporate customers which was up 2 percent


- 12 -

 

 

First quarter 2013 assets under management up 4 percent from first quarter 2012 from $18.9 billion in net inflows and higher market valuations

 

 

Cross-sell of 6.8 products per relationship as of December 2012, up from 6.6 as of December 2011

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)    Mar. 31,
2013
     Dec. 31,
2012
     Mar. 31,  
2012  
 

 

 

Total revenue

   $ 3,197         3,094         3,062     

Provision for credit losses

     14         15         43     

Noninterest expense

     2,639         2,513         2,547     

Segment net income

     337         351         296     

(in billions)

        

Average loans

     43.8         43.3         42.5     

Average assets

     180.3         171.7         161.9     

Average core deposits

     149.4         143.4         135.6     

 

 

Wealth, Brokerage and Retirement reported net income of $337 million, down 4 percent from fourth quarter 2012. Total revenue of $3.2 billion was up 3 percent from fourth quarter 2012. Excluding $42 million in higher gains on deferred compensation plan investments (offset in compensation expense), revenue was up 2 percent largely due to higher brokerage transaction revenue and asset-based fees, partially offset by lower net interest income. Noninterest expense increased 5 percent from fourth quarter 2012 primarily due to the seasonal impact on personnel expenses, higher deferred compensation expense (offset in trading income), and increased broker commissions. Apart from the $41 million increase in deferred compensation, noninterest expense increased 3 percent.

Net income was up 14 percent from first quarter 2012. Total revenue was up 4 percent from first quarter 2012. Excluding $36 million in lower gains on deferred compensation plan investments, revenue was up 6 percent predominantly due to strong growth in asset-based fees and higher brokerage transaction revenue, partially offset by lower net interest income and reduced securities gains in the brokerage business. Total provision for credit losses decreased $29 million from first quarter 2012, including a $6 million credit reserve release in first quarter 2013. Noninterest expense increased 4 percent from first quarter 2012 driven by higher personnel expenses, primarily broker commissions, partially offset by lower deferred compensation expense. Apart from the $33 million decrease in deferred compensation, noninterest expense increased 5 percent.


- 13 -

 

Retail Brokerage

 

 

Client assets of $1.3 trillion, up 7 percent from prior year

 

 

Managed account assets increased $46 billion, or 16 percent, from prior year driven by strong net flows and market performance

 

 

Strong deposit growth, with average balances up 13 percent from prior year

Wealth Management

 

 

Client assets of $208 billion, up 3 percent from prior year

 

 

Average deposit balances up 7 percent

Retirement

 

 

Institutional Retirement plan assets of $279 billion, up 9 percent from prior year

 

 

IRA assets of $314 billion, up 9 percent from prior year

Conference Call

The Company will host a live conference call on Friday, April 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 https://us.reg.meeting-stream.com/wellsfargo_041313.

A replay of the conference call will be available beginning at approximately noon PDT (3 p.m. EDT) on April 12 through Friday, April 19. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #12552824. The replay will also be available online at wellsfargo.com/invest_relations/earnings.


- 14 -

 

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 credit losses, including our current expectation of future reserve releases; (ii) our expectations regarding noninterest expense and our targeted efficiency ratio; (iii) our full year 2013 effective income tax rate; (iv) our estimate regarding our Tier 1 common equity ratio under proposed Basel III capital rules as of March 31, 2013; and (v) possible future common stock dividends and repurchases.

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. The amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of the Company, market conditions, capital requirements (including under Basel capital standards), common stock issuance requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company’s Board of Directors, and may be subject to regulatory approval or conditions. For more


- 15 -

 

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, 2012, 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, and 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 275,000 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

     17-18   

Income

  

Consolidated Statement of Income

     19   

Consolidated Statement of Comprehensive Income

     20   

Condensed Consolidated Statement of Changes in Total Equity

     20   

Five Quarter Consolidated Statement of Income

     21   

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

     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   

Loans

  

Securities Available for Sale

     28   

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

     34   

Changes in Allowance for Credit Losses

     35   

Equity

  

Tier 1 Common Equity

     36   

Operating Segments

  

Operating Segment Results

     37   

Other

  

Mortgage Servicing and other related data

     38-40   

 

 


17

 

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA

 

     Quarter ended      % Change
Mar. 31, 2013 from
 
  

 

 

    

 

 

 
($ in millions, except per share amounts)    Mar. 31,
2013
    Dec. 31,
2012
     Mar. 31,
2012
     Dec. 31,
2012
    Mar. 31,
2012
 

 

 

For the Period

            

Wells Fargo net income

   $ 5,171         5,090          4,248              22    

Wells Fargo net income applicable to common stock

     4,931         4,857          4,022                 23    

Diluted earnings per common share

     0.92         0.91          0.75                 23    

Profitability ratios (annualized):

            

Wells Fargo net income to average assets (ROA)

     1.49      1.46          1.31                 14    

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

     13.59         13.35          12.14                 12    

Efficiency ratio (1)

     58.3         58.8          60.1          (1)        (3)   

Total revenue

   $ 21,259         21,948          21,636          (3)        (2)   

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

     8,859         9,052          8,643          (2)          

Dividends declared per common share

     0.25         0.22          0.22          14         14    

Average common shares outstanding

     5,279.0         5,272.4          5,282.6                   

Diluted average common shares outstanding

     5,353.5         5,338.7          5,337.8                   

Average loans

   $ 798,074         787,210          768,582                   

Average assets

     1,404,334         1,387,056          1,302,921                   

Average core deposits (3)

     925,866         928,824          870,516                   

Average retail core deposits (4)

     662,913         646,145          616,569                   

Net interest margin

     3.48      3.56          3.91          (2)        (11)   

At Period End

            

Securities available for sale

   $ 248,160         235,199          230,266                   

Loans

     799,966         799,574          766,521                   

Allowance for loan losses

     16,711         17,060          18,852          (2)        (11)   

Goodwill

     25,637         25,637          25,140                   

Assets

     1,436,634         1,422,968          1,333,799                   

Core deposits (3)

     939,934         945,749          888,711          (1)          

Wells Fargo stockholders’ equity

     162,086         157,554          145,516                 11    

Total equity

     163,395         158,911          146,849                11    

Capital ratios:

            

Total equity to assets

     11.37      11.17          11.01                   

Risk-based capital (5):

            

Tier 1 capital

     11.79         11.75          11.78                   

Total capital

     14.75         14.63          15.13                 (3)   

Tier 1 leverage (5)

     9.53         9.47          9.35                   

Tier 1 common equity (5)(6)

     10.38         10.12          9.98                   

Common shares outstanding

     5,288.8         5,266.3          5,301.5                   

Book value per common share

   $ 28.27         27.64          25.45                 11    

Common stock price:

            

High

     38.20         36.34          34.59                 10    

Low

     34.43         31.25          27.94          10         23    

Period end

     36.99         34.18          34.14                   

Team members (active, full-time equivalent)

     274,300         269,200          264,900                   

 

 

 

(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 March 31, 2013, 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

FIVE QUARTER SUMMARY FINANCIAL DATA

 

 
    

 

Quarter ended

 
  

 

 

 
($ in millions, except per share amounts)   

Mar. 31,

2013

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

For the Quarter

             

Wells Fargo net income

   $ 5,171         5,090          4,937          4,622          4,248    

Wells Fargo net income applicable to common stock

     4,931         4,857          4,717          4,403          4,022    

Diluted earnings per common share

     0.92         0.91          0.88          0.82          0.75    

Profitability ratios (annualized):

             

Wells Fargo net income to average assets (ROA)

     1.49       1.46          1.45          1.41          1.31    

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

     13.59         13.35          13.38          12.86          12.14    

Efficiency ratio (1)

     58.3         58.8          57.1          58.2          60.1    

Total revenue

   $ 21,259         21,948          21,213          21,289          21,636    

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

     8,859         9,052          9,101          8,892          8,643    

Dividends declared per common share

     0.25         0.22          0.22          0.22          0.22    

Average common shares outstanding

     5,279.0         5,272.4          5,288.1          5,306.9          5,282.6    

Diluted average common shares outstanding

     5,353.5         5,338.7          5,355.6          5,369.9          5,337.8    

Average loans

   $ 798,074         787,210          776,734          768,223          768,582    

Average assets

     1,404,334         1,387,056          1,354,340          1,321,584          1,302,921    

Average core deposits (3)

     925,866         928,824          895,374          880,636          870,516    

Average retail core deposits (4)

     662,913         646,145          630,053          624,329          616,569    

Net interest margin

     3.48       3.56          3.66          3.91          3.91    

At Quarter End

             

Securities available for sale

   $ 248,160         235,199          229,350          226,846          230,266    

Loans

     799,966         799,574          782,630          775,199          766,521    

Allowance for loan losses

     16,711         17,060          17,385          18,320          18,852    

Goodwill

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

Assets

     1,436,634         1,422,968          1,374,715          1,336,204          1,333,799    

Core deposits (3)

     939,934         945,749          901,075          882,137          888,711    

Wells Fargo stockholders’ equity

     162,086         157,554          154,679          148,070          145,516    

Total equity

     163,395         158,911          156,059          149,437          146,849    

Capital ratios:

             

Total equity to assets

     11.37       11.17          11.35          11.18          11.01    

Risk-based capital (5):

             

Tier 1 capital

     11.79         11.75          11.50          11.69          11.78    

Total capital

     14.75         14.63          14.51          14.85          15.13    

Tier 1 leverage (5)

     9.53         9.47          9.40          9.25          9.35    

Tier 1 common equity (5)(6)

     10.38         10.12          9.92          10.08          9.98    

Common shares outstanding

     5,288.8         5,266.3          5,289.6          5,275.7          5,301.5    

Book value per common share

   $ 28.27         27.64          27.10          26.06          25.45    

Common stock price:

             

High

     38.20         36.34          36.60          34.59          34.59    

Low

     34.43         31.25          32.62          29.80          27.94    

Period end

     36.99         34.18          34.53          33.44          34.14    

Team members (active, full-time equivalent)

     274,300         269,200          267,000          264,400          264,900    

 

 

 

(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 March 31, 2013, 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

CONSOLIDATED STATEMENT OF INCOME

      Quarter ended March 31,      %  
  

 

 

    
(in millions, except per share amounts)    2013      2012      Change  

 

 

Interest income

        

Trading assets

   $ 327         377          (13)  % 

Securities available for sale

     1,925         2,088          (8)   

Mortgages held for sale

     371         459          (19)   

Loans held for sale

     3                 (67)   

Loans

     8,861         9,197          (4)   

Other interest income

     163         125          30    

 

    

Total interest income

     11,650         12,255          (5)   

 

    

Interest expense

        

Deposits

     369         457          (19)   

Short-term borrowings

     20         16          25    

Long-term debt

     697         830          (16)   

Other interest expense

     65         64            

 

    

Total interest expense

     1,151         1,367          (16)   

 

    

Net interest income

     10,499         10,888          (4)   

Provision for credit losses

     1,219         1,995          (39)   

 

    

Net interest income after provision for credit losses

     9,280         8,893            

 

    

Noninterest income

        

Service charges on deposit accounts

     1,214         1,084          12    

Trust and investment fees

     3,202         2,839          13    

Card fees

     738         654          13    

Other fees

     1,034         1,095          (6)   

Mortgage banking

     2,794         2,870          (3)   

Insurance

     463         519          (11)   

Net gains from trading activities

     570         640          (11)   

Net gains (losses) on debt securities available for sale

     45         (7)         NM    

Net gains from equity investments

     113         364          (69)   

Lease income

     130         59          120    

Other

     457         631          (28)   

 

    

Total noninterest income

     10,760         10,748            

 

    

Noninterest expense

        

Salaries

     3,663         3,601            

Commission and incentive compensation

     2,577         2,417            

Employee benefits

     1,583         1,608          (2)   

Equipment

     528         557          (5)   

Net occupancy

     719         704            

Core deposit and other intangibles

     377         419          (10)   

FDIC and other deposit assessments

     292         357          (18)   

Other

     2,661         3,330          (20)   

 

    

Total noninterest expense

     12,400         12,993          (5)   

 

    

Income before income tax expense

     7,640         6,648          15    

Income tax expense

     2,420         2,328            

 

    

Net income before noncontrolling interests

     5,220         4,320          21    

Less: Net income from noncontrolling interests

     49         72          (32)   

 

    

Wells Fargo net income

   $ 5,171         4,248          22    

 

    

Less: Preferred stock dividends and other

     240         226            

 

    

Wells Fargo net income applicable to common stock

   $ 4,931         4,022          23    

 

    

Per share information

        

Earnings per common share

   $ 0.93         0.76          22    

Diluted earnings per common share

     0.92         0.75          23    

Dividends declared per common share

     0.25         0.22          14    

Average common shares outstanding

     5,279.0         5,282.6            

Diluted average common shares outstanding

     5,353.5         5,337.8            
              

 

NM - Not meaningful


20

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 
     Quarter ended March 31,      %  
  

 

 

    
(in millions)    2013       2012       Change  

 

 

Wells Fargo net income

   $ 5,171          4,248          22 

 

    

Other comprehensive income, before tax:

        

Foreign currency translation adjustments (1):

        

Net unrealized gains (losses) arising during the period

     (18)         10          NM    

Securities available for sale:

        

Net unrealized gains (losses) arising during the period

     (634)         1,874          NM    

Reclassification of net gains to net income

     (113)         (226)         (50)   

Derivatives and hedging activities:

        

Net unrealized gains arising during the period

     7         42          (83)   

Reclassification of net gains on cash flow hedges to net income

     (87)         (107)         (19)   

Defined benefit plans adjustments:

        

Net actuarial gains (losses) arising during the period

     6         (5)         NM    

Amortization of net actuarial loss and other costs to net income

     49         36          36    

 

    

Other comprehensive income (loss), before tax

     (790)         1,624          NM    

Income tax (expense) benefit related to other comprehensive income

     288         (611)         NM    

 

    

Other comprehensive income (loss), net of tax

     (502)         1,013          NM    

Less: Other comprehensive income from noncontrolling interests

     3                 (25)   

 

    

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

     (505)         1,009          NM    

 

    

Wells Fargo comprehensive income

     4,666         5,257          (11)   

Comprehensive income from noncontrolling interests

     52         76          (32)   

 

    

Total comprehensive income

   $ 4,718         5,333          (12)   

 

 

NM - Not meaningful

(1) There was no sale or liquidation of an investment in a foreign entity, and therefore no reclassification adjustment for the quarters ended March 31, 2013 and 2012, respectively.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

 

 
     Quarter ended March 31,  
  

 

 

 
(in millions)    2013       2012   

 

 

Balance, beginning of period

   $ 158,911          141,687    

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

               

 

 

Balance, beginning of period - adjusted

     158,911          141,689    

Wells Fargo net income

     5,171          4,248    

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

     (505)          1,009    

Common stock issued

     878          879    

Common stock repurchased

     (383)          (64)    

Preferred stock released by ESOP

     296          270    

Preferred stock issued

     610            

Common stock dividends

     (1,319)          (1,165)    

Preferred stock dividends and other

     (240)          (226)    

Noncontrolling interests and other, net

     (24)          209    

 

 

Balance, end of period

   $ 163,395          146,849    

 

 


21

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

 

 
     Quarter ended  
  

 

 

 
     Mar. 31,      Dec. 31,      Sept 30,      June. 30,      Mar. 31,  
(in millions, except per share amounts)    2013       2012       2012       2012       2012   

 

 

Interest income

              

Trading assets

   $ 327          339          299          343          377    

Securities available for sale

     1,925          1,897          1,966          2,147          2,088    

Mortgages held for sale

     371          413          476          477          459    

Loans held for sale

                     17          12            

Loans

     8,861          9,027          9,016          9,242          9,197    

Other interest income

     163          178          151          133          125    

 

 

Total interest income

     11,650          11,857          11,925          12,354          12,255    

 

 

Interest expense

              

Deposits

     369          399          428          443          457    

Short-term borrowings

     20          24          19          20          16    

Long-term debt

     697          735          756          789          830    

Other interest expense

     65          56          60          65          64    

 

 

Total interest expense

     1,151          1,214          1,263          1,317          1,367    

 

 

Net interest income

     10,499          10,643          10,662          11,037          10,888    

Provision for credit losses

     1,219          1,831          1,591          1,800          1,995    

 

 

Net interest income after provision for credit losses

     9,280          8,812          9,071          9,237          8,893    

 

 

Noninterest income

              

Service charges on deposit accounts

     1,214          1,250          1,210          1,139          1,084    

Trust and investment fees

     3,202          3,199          2,954          2,898          2,839    

Card fees

     738          736          744          704          654    

Other fees

     1,034          1,193          1,097          1,134          1,095    

Mortgage banking

     2,794          3,068          2,807          2,893          2,870    

Insurance

     463          395          414          522          519    

Net gains from trading activities

     570          275          529          263          640    

Net gains (losses) on debt securities available for sale

     45          (63)                  (61)          (7)    

Net gains from equity investments

     113          715          164          242          364    

Lease income

     130          170          218          120          59    

Other

     457          367          411          398          631    

 

 

Total noninterest income

     10,760          11,305          10,551          10,252          10,748    

 

 

Noninterest expense

              

Salaries

     3,663          3,735          3,648          3,705          3,601    

Commission and incentive compensation

     2,577          2,365          2,368          2,354          2,417    

Employee benefits

     1,583          891          1,063          1,049          1,608    

Equipment

     528          542          510          459          557    

Net occupancy

     719          728          727          698          704    

Core deposit and other intangibles

     377          418          419          418          419    

FDIC and other deposit assessments

     292          307          359          333          357    

Other

     2,661          3,910          3,018          3,381          3,330    

 

 

Total noninterest expense

     12,400          12,896          12,112          12,397          12,993    

 

 

Income before income tax expense

     7,640          7,221          7,510          7,092          6,648    

Income tax expense

     2,420          1,924          2,480          2,371          2,328    

 

 

Net income before noncontrolling interests

     5,220          5,297          5,030          4,721          4,320    

Less: Net income from noncontrolling interests

     49          207          93          99          72    

 

 

Wells Fargo net income

   $ 5,171          5,090          4,937          4,622          4,248    

 

 

Less: Preferred stock dividends and other

     240          233          220          219          226    

 

 

Wells Fargo net income applicable to common stock

   $ 4,931          4,857          4,717          4,403          4,022    

 

 

Per share information

              

Earnings per common share

   $ 0.93          0.92          0.89          0.83          0.76    

Diluted earnings per common share

     0.92          0.91          0.88          0.82          0.75    

Dividends declared per common share

     0.25          0.22          0.22          0.22          0.22    

Average common shares outstanding

     5,279.0          5,272.4          5,288.1          5,306.9          5,282.6    

Diluted average common shares outstanding

             5,353.5          5,338.7          5,355.6          5,369.9          5,337.8    
              

 

 


22

 

Wells Fargo & Company and Subsidiaries

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

 

 

     Quarter ended March 31,  
                          
     2013               2012  
(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

   $ 121,024        0.36         %         $ 107              56,020        0.52         %         $ 73   

Trading assets

     42,130        3.17            334              43,766        3.50            383   

Securities available for sale (3):

                          

Securities of U.S. Treasury and federal agencies

     7,079        1.56            28              5,797        0.97            14   

Securities of U.S. states and political subdivisions

     37,584        4.38            410              32,595        4.52            368   

Mortgage-backed securities:

                          

Federal agencies

     95,368        2.74            654              91,300        3.49            797   

Residential and commercial

     32,141        6.46            519              34,531        6.80            587   

Total mortgage-backed securities

     127,509        3.68            1,173              125,831        4.40            1,384   

Other debt and equity securities

     53,724        3.58            476              50,402        3.82            480   

Total securities available for sale

     225,896        3.70            2,087              214,625        4.19            2,246   

Mortgages held for sale (4)

     43,312        3.42            371              46,908        3.91            459   

Loans held for sale (4)

     141        8.83            3              748        5.09            9   

Loans:

                          

Commercial:

                          

Commercial and industrial

     184,515        3.73            1,700              166,782        4.18            1,733   

Real estate mortgage

     106,221        3.84            1,006              105,990        4.07            1,072   

Real estate construction

     16,559        4.84            197              18,730        4.79            223   

Lease financing

     12,424        6.78            210              13,129        8.89            292   

Foreign

     39,900        2.16            213              41,167        2.52            258   

Total commercial

     359,619        3.74            3,326              345,798        4.16            3,578   

Consumer:

                          

Real estate 1-4 family first mortgage

     252,049        4.29            2,702              229,653        4.69            2,688   

Real estate 1-4 family junior lien mortgage

     74,068        4.28            785              84,718        4.27            900   

Credit card

     24,097        12.62            750              22,129        12.93            711   

Automobile

     46,566        7.20            826              43,686        7.79            846   

Other revolving credit and installment

     41,675        4.70            483              42,598        4.57            483   

Total consumer

     438,455        5.10            5,546              422,784        5.34            5,628   

Total loans (4)

     798,074        4.49            8,872              768,582        4.81            9,206   

Other

     4,255        5.19            55              4,604        4.42            51   

Total earning assets

   $ 1,234,832        3.86         %         $ 11,829              1,135,253        4.39         %         $ 12,427   

Funding sources

                          

Deposits:

                          

Interest-bearing checking

   $ 32,165        0.06         %         $ 5              32,158        0.05         %         $ 4   

Market rate and other savings

     537,549        0.09            122              496,027        0.12            153   

Savings certificates

     55,238        1.22            167              62,689        1.36            213   

Other time deposits

     15,905        1.25            50              12,651        1.93            61   

Deposits in foreign offices

     71,077        0.14            25              64,847        0.16            26   

Total interest-bearing deposits

     711,934        0.21            369              668,372        0.27            457   

Short-term borrowings

     55,410        0.17            24              48,382        0.15            18   

Long-term debt

     127,112        2.20            696              127,537        2.60            830   

Other liabilities

     11,608        2.24            65              9,803        2.63            64   

Total interest-bearing liabilities

     906,064        0.51            1,154              854,094        0.64            1,369   

Portion of noninterest-bearing funding sources

     328,768        -              -                281,159        -              -     

Total funding sources

   $ 1,234,832        0.38            1,154              1,135,253        0.48            1,369   

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

       3.48         %         $ 10,675                3.91         %         $ 11,058   

Noninterest-earning assets

                          

Cash and due from banks

   $ 16,529                      16,974           

Goodwill

     25,637                      25,128           

Other

     127,336                      125,566           

Total noninterest-earning assets

   $ 169,502                      167,668           

Noninterest-bearing funding sources

                          

Deposits

   $ 274,221                      246,614           

Other liabilities

     63,634                      57,201           

Total equity

     160,415                      145,012           

Noninterest-bearing funding sources used to fund earning assets

     (328,768                   (281,159        

Net noninterest-bearing funding sources

   $ 169,502                      167,668           

Total assets

   $ 1,404,334                      1,302,921           

 

 

 

(1) Our average prime rate was 3.25% for the quarters ended March 31, 2013 and 2012. The average three-month London Interbank Offered Rate (LIBOR) was 0.29% and 0.51% 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 $176 million and $170 million for the quarters ended March 31, 2013 and 2012, 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
March 31,
     %  
  

 

 

    
(in millions)    2013       2012       Change   

 

 

Service charges on deposit accounts

   $ 1,214          1,084          12 

Trust and investment fees:

        

Brokerage advisory, commissions and other fees (1)

     2,050          1,830          12    

Trust and investment management (1)

     799          752            

Investment banking

     353          257          37    

 

    

Total trust and investment fees

     3,202          2,839          13    

 

    

Card fees

     738          654          13    

Other fees:

        

Charges and fees on loans

     384          445          (14)   

Merchant processing fees

     154          125          23    

Cash network fees

     117          118          (1)   

Commercial real estate brokerage commissions

     45          50          (10)   

Letters of credit fees

     109          112          (3)   

All other fees

     225          245          (8)   

 

    

Total other fees

     1,034          1,095          (6)   

 

    

Mortgage banking:

        

Servicing income, net

     314          252          25    

Net gains on mortgage loan origination/sales activities

     2,480          2,618          (5)   

 

    

Total mortgage banking

     2,794          2,870          (3)   

 

    

Insurance

     463          519          (11)   

Net gains from trading activities

     570          640          (11)   

Net gains (losses) on debt securities available for sale

     45          (7)          NM    

Net gains from equity investments

     113          364          (69)   

Lease income

     130          59          120    

Life insurance investment income

     145          168          (14)   

All other

     312          463          (33)   

 

    

Total

   $     10,760          10,748            

 

 

 

NM - Not meaningful

        

(1) The prior period has been revised to reflect all fund distribution fees as brokerage related income.

    

  
NONINTEREST EXPENSE   

 

 
     Quarter ended
March 31,
     %  
  

 

 

    
(in millions)    2013       2012       Change   

 

 

Salaries

   $ 3,663          3,601         

Commission and incentive compensation

     2,577          2,417            

Employee benefits

     1,583          1,608          (2)   

Equipment

     528          557          (5)   

Net occupancy

     719          704            

Core deposit and other intangibles

     377          419          (10)   

FDIC and other deposit assessments

     292          357          (18)   

Outside professional services

     535          594          (10)   

Operating losses

     157          477          (67)   

Foreclosed assets

     195          304          (36)   

Contract services

     207          303          (32)   

Outside data processing

     233          216            

Travel and entertainment

     213          202            

Postage, stationery and supplies

     199          216          (8)   

Advertising and promotion

     105          122          (14)   

Telecommunications

     123          124          (1)   

Insurance

     137          157          (13)   

Operating leases

     48          28          71   

All other

     509          587          (13)   

 

    

Total

   $ 12,400          12,993          (5)   

 

 


24

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

 

 
     Quarter ended  
  

 

 

 
(in millions)    Mar. 31,
2013 
     Dec. 31,
2012 
     Sept. 30,
2012 
     June 30,
2012 
     Mar. 31,
2012 
 

 

 

Service charges on deposit accounts

   $ 1,214          1,250          1,210          1,139          1,084    

Trust and investment fees:

              

Brokerage advisory, commissions and other fees (1)

     2,050          1,962          1,887          1,845          1,830    

Trust and investment management (1)

     799          797          769          762          752    

Investment banking

     353          440          298          291          257    

 

 

Total trust and investment fees

     3,202          3,199          2,954          2,898          2,839    

 

 

Card fees

     738          736          744          704          654    

Other fees:

              

Charges and fees on loans

     384          448          426          427          445    

Merchant processing fees

     154          151          150          157          125    

Cash network fees

     117          112          120          120          118    

Commercial real estate brokerage commissions

     45          119          56          82          50    

Letters of credit fees

     109          107          114          108          112    

All other fees

     225          256          231          240          245    

 

 

Total other fees

     1,034          1,193          1,097          1,134          1,095    

 

 

Mortgage banking:

              

Servicing income, net

     314          250          197          679          252    

Net gains on mortgage loan origination/sales activities

     2,480          2,818          2,610          2,214          2,618    

 

 

Total mortgage banking

     2,794          3,068          2,807          2,893          2,870    

 

 

Insurance

     463          395          414          522          519    

Net gains from trading activities

     570          275          529          263          640    

Net gains (losses) on debt securities available for sale

     45          (63)                 (61)         (7)    

Net gains from equity investments

     113          715          164          242          364    

Lease income

     130          170          218          120          59    

Life insurance investment income

     145          276          159          154          168    

All other

     312          91          252          244          463    

 

 

Total

   $         10,760          11,305          10,551          10,252          10,748    

 

 

 

(1) Prior periods have been revised to reflect all fund distribution fees as brokerage related income.
FIVE QUARTER NONINTEREST EXPENSE   

 

 
    

 

Quarter ended

 
  

 

 

 
     Mar. 31,
2013 
     Dec. 31,
2012 
     Sept. 30,
2012 
     June 30,
2012 
     Mar. 31,
2012 
 

 

 

Salaries

   $         3,663          3,735          3,648          3,705          3,601    

Commission and incentive compensation

     2,577          2,365          2,368          2,354          2,417    

Employee benefits

     1,583          891          1,063          1,049          1,608    

Equipment

     528          542          510          459          557    

Net occupancy

     719          728          727          698          704    

Core deposit and other intangibles

     377          418          419          418          419    

FDIC and other deposit assessments

     292          307          359          333          357    

Outside professional services

     535          744          733          658          594    

Operating losses

     157          953          281          524          477    

Foreclosed assets

     195          221          247          289          304    

Contract services

     207          235          237          236          303    

Outside data processing

     233          227          234          233          216    

Travel and entertainment

     213          211          208          218          202    

Postage, stationery and supplies

     199          192          196          195          216    

Advertising and promotion

     105          142          170          144          122    

Telecommunications

     123          122          127          127          124    

Insurance

     137          62          51          183          157    

Operating leases

     48          27          27          27          28    

All other

     509          774          507          547          587    

 

 

Total

   $ 12,400          12,896          12,112          12,397          12,993    

 

 


25

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

 

 
     Mar. 31,      Dec. 31,      %  
(in millions, except shares)    2013       2012       Change  

 

 

Assets

        

Cash and due from banks

   $ 16,217          21,860          (26)

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

     143,804          137,313            

Trading assets

     62,274          57,482            

Securities available for sale

     248,160          235,199            

Mortgages held for sale (includes $42,624 and $42,305 carried at fair value)

     46,702          47,149          (1)   

Loans held for sale (includes $0 and $6 carried at fair value)

     194          110          76    

Loans (includes $6,183 and $$6,206 carried at fair value)

     799,966          799,574          -     

Allowance for loan losses

     (16,711)         (17,060)         (2)   

 

    

Net loans

     783,255          782,514          -     

 

    

Mortgage servicing rights:

        

Measured at fair value

     12,061          11,538            

Amortized

     1,181          1,160            

Premises and equipment, net

     9,263          9,428          (2)   

Goodwill

     25,637          25,637          -     

Other assets (includes $197 and $0 carried at fair value)

     87,886          93,578          (6)   

 

    

Total assets

   $ 1,436,634          1,422,968            

 

    

Liabilities

        

Noninterest-bearing deposits

   $ 278,909          288,207          (3)   

Interest-bearing deposits

     731,824          714,628            

 

    

Total deposits

     1,010,733          1,002,835            

Short-term borrowings

     60,693          57,175            

Accrued expenses and other liabilities

     75,622          76,668          (1)   

Long-term debt (includes $0 and $1 carried at fair value)

     126,191          127,379          (1)   

 

    

Total liabilities

     1,273,239          1,264,057            

 

    

Equity

        

Wells Fargo stockholders’ equity:

        

Preferred stock

     14,412          12,883          12    

Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares and 5,481,811,474 shares

     9,136          9,136          -     

Additional paid-in capital

     60,136          59,802            

Retained earnings

     81,264          77,679            

Cumulative other comprehensive income

     5,145          5,650          (9)   

Treasury stock – 193,038,624 shares and 215,497,298 shares

     (6,036)         (6,610)         (9)   

Unearned ESOP shares

     (1,971)         (986)         100    

 

    

Total Wells Fargo stockholders’ equity

     162,086          157,554            

Noncontrolling interests

     1,309          1,357          (4)   

 

    

Total equity

     163,395          158,911            

 

    

Total liabilities and equity

   $ 1,436,634          1,422,968            

 

 


26

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET

 

 
(in millions)   

Mar. 31,

2013 

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

 

 

Assets