Wells Fargo Reports Record Quarterly and Full Year Net Income

Q4 Net Income of $4.1 billion; Q4 Revenue of $20.6 billion

SAN FRANCISCO--()--Wells Fargo & Company (NYSE:WFC):

  • Continued strong financial results:
    • Record Wells Fargo net income of $4.1 billion
    • Record diluted earnings per common share of $0.73
    • Revenue of $20.6 billion, up 20 percent (annualized) from prior quarter
    • Pre-tax pre-provision profit (PTPP)1 of $8.1 billion, up 7 percent (annualized) from prior quarter
    • Return on equity of 11.97 percent, up 11 basis points from prior quarter
    • Return on average assets of 1.25 percent
    • Net interest margin of 3.89 percent, up 5 basis points from prior quarter
  • Continued solid loan and deposit growth:
    • Total loans of $769.6 billion at December 31, 2011, up $9.5 billion from September 30, 2011; core loan portfolios up $13.7 billion from September 30, 20112
    • Total average core checking and savings deposits up $30.8 billion from prior quarter
  • Improved capital position:
    • Tier 1 common equity increased $3.2 billion to $95.1 billion, with Tier 1 common equity ratio of 9.46 percent under Basel I at December 31, 2011. Under current Basel III capital proposals, Tier 1 common equity ratio estimated at 7.49 percent3
    • Purchased 27 million shares of common stock in fourth quarter 2011 and an additional estimated 6 million shares through a forward repurchase transaction that will settle in first quarter 2012
    • Redeemed $5.8 billion of trust preferred securities with an average coupon of 8.42 percent
  • Strong credit quality, stable net loan charge-offs:
    • Nonperforming assets declined to $26.0 billion, down $879 million from prior quarter; down $6.3 billion from prior year
    • Net charge-offs were $2.6 billion, or 1.36 percent (annualized) of average loans, in line with third quarter net charge-offs
    • Reserve release4 of $600 million (pre-tax) reflected continued strong portfolio performance
  • Wachovia banking conversions successfully completed:
    • Retail bank store conversions complete with North Carolina integration in mid-October 2011
    • 50 million accounts involved, 4,600 locations converted
    • On track for merger integration completion in first quarter 2012
  • Full Year 2011:
    • Record Wells Fargo net income of $15.9 billion, up 28 percent from 2010
    • Diluted earnings per common share of $2.82, up 28 percent from 2010
    • Revenue of $80.9 billion, down 5 percent from 2010
    • Net interest margin of 3.94 percent, return on assets of 1.25 percent, and return on equity of 11.93 percent
    • Returned more capital to shareholders through a higher common stock dividend, and resumed common stock repurchases; in addition, redeemed $9.2 billion of high cost trust preferred securities
  • Committed to helping homeowners remain in their homes:
    • As of November 30, 2011, 724,710 active trial or completed loan modifications had been initiated since the beginning of 2009; of this total, 84 percent were through Wells Fargo’s own modification programs and the remainder were through the federal government’s Home Affordable Modification Program (HAMP)
    • Since September 2009, Wells Fargo participated in more than 640 home preservation workshops and met individually with more than 29,000 customers.

1 See footnote (2) on SUMMARY FINANCIAL DATA table for more information on pre-tax pre-provision profit.

2 See table in Loans section for more information on core and non-strategic/liquidating loan portfolios.

3 See TIER 1 COMMON EQUITY tables for more information on Tier 1 common equity.

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

Selected Financial Information
         
Quarter ended
Dec. 31, Sept. 30, Dec. 31, Year ended Dec. 31,
      2011     2011   2010   2011   2010
Earnings
Diluted earnings per common share $ 0.73 0.72 0.61 2.82 2.21
Wells Fargo net income (in billions) 4.11 4.06 3.41 15.87 12.36
 
Asset Quality
Net charge-offs as a % of avg. total loans 1.36 % 1.37 2.02 1.49 2.30
Allowance as a % of total loans 2.56 2.68 3.10 2.56 3.10
Allowance as a % of annualized net charge-offs 188 197 154 174 132
 
Other
Revenue (in billions) $ 20.61 19.63 21.49 80.95 85.21
Average loans (in billions) 768.6 754.5 753.7 757.1 770.6
Average core deposits (in billions) 864.9 836.8 794.8 826.7 772.0
Net interest margin 3.89 % 3.84 4.16 3.94 4.26

Wells Fargo & Company (NYSE:WFC) reported record net income of $4.1 billion, or $0.73 per diluted common share, for fourth quarter 2011, compared with $3.4 billion, or $0.61 per share, for fourth quarter 2010, and $4.1 billion, or $0.72 per share, for third quarter 2011. Full year 2011 Wells Fargo net income was $15.9 billion, or $2.82 per share, up 28 percent from 2010.

“I’m extremely pleased with Wells Fargo’s performance in 2011 – including strong deposit and loan growth, record cross-sell and record earnings,” said Chairman and CEO John Stumpf. “We achieved these results while completing the conversion of Wachovia’s retail banking stores – the largest such conversion in banking history – and now all of our 6,239 retail banking stores are on a single platform serving customers coast to coast. At the time of the merger, we said the integration of Wachovia would take three years and we are right on track. I couldn’t be prouder of how our two companies have come together as one, thanks to the important and tireless work of our more than 260,000 team members.

“In 2012, we are focused on Wells Fargo’s many opportunities, including continuing to provide our customers with award winning service, welcoming new customers as we grow market share throughout our many businesses and geographies, achieving efficiency improvements across the company and returning even more capital to our shareholders.”

“The fourth quarter of 2011 was a very strong quarter for Wells Fargo, with record earnings, solid linked quarter growth in loans, deposits and capital, and continued strong credit quality,” said Chief Financial Officer Tim Sloan. “Revenue was up 5 percent from the third quarter despite a full quarter’s impact of the new debit interchange rules. As expected, expenses were higher in the quarter and we are maintaining our target of $11 billion in noninterest expense in the fourth quarter of 2012.”

Revenue

Revenue was $20.6 billion, up from $19.6 billion in third quarter 2011. “We are pleased with revenue performance in the quarter. Both net interest income, which benefited from the growth in earning assets and an increase in the net interest margin, and noninterest income, which was bolstered by strong mortgage banking and capital markets results, were up this quarter,” said Sloan. Businesses generating linked-quarter revenue growth included asset-backed finance, capital markets, commercial banking, commercial real estate, corporate banking, corporate trust, credit card, equipment finance, government and institutional banking, insurance, international, merchant services, mortgage, real estate capital markets and retail sales finance.

Net Interest Income

Net interest income was $10.9 billion, up from $10.5 billion in third quarter 2011. Average earning assets increased $24.3 billion from third quarter 2011, driven by growth in loans, securities and mortgages held for sale. Continued success in generating low-cost deposits enabled the Company to fund the asset growth while at the same time reducing long-term debt, including the redemption of $5.8 billion of higher-cost trust preferred securities. The net interest margin increased to 3.89 percent from 3.84 percent in third quarter 2011. Lower deposit costs, less long-term debt, and the redeployment of short-term investments into higher-yielding assets such as securities and loans contributed to the increase in the margin.

Noninterest Income

Noninterest income was $9.7 billion, compared with $9.1 billion in third quarter 2011. The $627 million increase was driven by increases of $531 million in mortgage banking and $337 million in trading, debt and equity gains. Card fees declined $333 million from third quarter due to a $365 million decline in debit interchange fees partially offset by improved credit card fee revenue. Other income included a $153 million gain on sale from H.D. Vest.

Mortgage banking noninterest income was $2.4 billion, up $531 million from third quarter 2011, on $120 billion of originations compared with $89 billion of originations in third quarter. Mortgage banking noninterest income in fourth quarter included a $404 million provision for mortgage loan repurchase losses compared with $390 million in third quarter (included in net gains from mortgage loan origination/sales activities). Net mortgage servicing rights (MSRs) results were a $201 million gain compared with a $607 million gain in third quarter 2011. The ratio of MSRs to related loans serviced for others was 76 basis points and the average note rate on the servicing portfolio was 5.14 percent. The unclosed pipeline at December 31, 2011, was $72 billion compared with $84 billion at September 30, 2011.

The Company had net unrealized securities gains of $7.0 billion at December 31, 2011, compared with a net unrealized gain of $6.8 billion at September 30, 2010. Period-end securities available for sale balances were up $15.4 billion, reflecting continued investment activity.

Noninterest Expense

Noninterest expense increased in the quarter, to $12.5 billion, compared with $11.7 billion in third quarter. Third quarter expense included a $210 million benefit due to lower deferred compensation expenses associated with an offsetting trading loss. In addition to this factor, the increase in fourth quarter expenses was primarily driven by the following:

  • higher personnel expense associated with stronger mortgage and capital markets revenue in the quarter (approximately $300 million);
  • seasonally higher costs for equipment and foreclosed assets expense (approximately $200 million); and
  • higher costs associated with the mortgage servicing regulatory consent orders (approximately $100 million).

The Company expects first quarter 2012 noninterest expense to remain elevated due to seasonally high personnel expenses offset by lower integration expenses and continued gains from efficiency and cost save initiatives. Starting in second quarter 2012, total expenses are expected to decline over the remainder of the year, driven by the benefit from ongoing efficiency initiatives and the conclusion of integration activities. The Company continues to target fourth quarter 2012 noninterest expense of $11 billion.

Loans

Total loans were $769.6 billion at December 31, 2011, up $9.5 billion from $760.1 billion at September 30, 2011. Increased balances in many loan portfolios more than offset the continued planned reduction in the non-strategic/liquidating portfolios, which declined $4.2 billion in the quarter. Period-end core loans grew $13.7 billion and included $2.1 billion of U.S.-based commercial real estate (CRE) loans purchased in the quarter, as well as an additional $5.6 billion of consumer real estate 1-4 family loans related to the consolidation of previously sold reverse mortgage loans. Organic loan growth of $6.0 billion linked quarter was driven by commercial and industrial growth from expanding relationships with existing customers and new customer loans. Additional growth came from a 4 percent increase in foreign loans and a 5 percent increase in credit card balances, reflecting higher purchase dollar volumes and transactions, as well as new account growth.

Many loan portfolios had linked-quarter growth in average balances, including asset-backed finance, capital finance, commercial banking, commercial real estate, corporate banking, credit card, government and institutional banking, international, mortgage, real estate capital markets, and retail sales finance.

 
  December 31, 2011   September 30, 2011
(in millions)   Core   Liquidating (1)   Total   Core   Liquidating (1)   Total
Commercial $ 339,755   5,695   345,450 333,513   6,321   339,834
Consumer     317,550   106,631     424,181   310,084   110,188     420,272
Total loans   $ 657,305   112,326     769,631   643,597   116,509     760,106
 
Change from prior quarter:   $ 13,708   (4,183 )   9,525   13,429   (5,244 )   8,185
 

(1) See NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS table for additional information on non-strategic/liquidating loan portfolios. Management believes that the above information provides useful disclosure regarding the Company’s ongoing loan portfolios.

Deposits

Average core deposits were $864.9 billion, up 9 percent from a year ago and up 13 percent (annualized) from third quarter 2011. Consumer checking accounts grew a net 3.2 percent from December 31, 2010. Average core checking and savings deposits were $800 billion, up 12 percent from a year ago and up 16 percent (annualized) from third quarter 2011. Average mortgage escrow deposits were $34.9 billion compared with $36.0 billion a year ago and $28.3 billion in third quarter 2011. Average core checking and savings deposits were 93 percent of average core deposits, up from 90 percent a year ago. Deposit costs for fourth quarter 2011 were 22 basis points compared with 25 basis points in third quarter 2011. Average core deposits were 113 percent of average loans, up from 111 percent in third quarter 2011.

Capital

Capital increased in the fourth quarter, with Tier 1 common equity reaching $95.1 billion under Basel I, or 9.46 percent of risk-weighted assets. Under current Basel III proposals, the Tier 1 common equity ratio was an estimated 7.49 percent. The Company redeemed $5.8 billion of trust preferred securities in the quarter, repurchased 27 million shares of its common stock, plus an additional estimated 6 million shares through a forward repurchase transaction that will settle in first quarter 2012, and paid a quarterly common stock dividend of $0.12 per share.

 
Dec. 31,   Sept. 30,   Dec. 31,
(as a percent of total risk-weighted assets) 2011     2011   2010
Ratios under Basel I (1):
Tier 1 common equity (2) 9.46 % 9.34 8.30
Tier 1 capital 11.33 11.26 11.16
Tier 1 leverage 9.03     8.97   9.19
(1) December 31, 2011, ratios are preliminary.

(2) See TIER 1 COMMON EQUITY table for more information on Tier 1 common equity.

Credit Quality

“Credit remained strong and within expectations in the fourth quarter. Consumer losses were essentially flat from third quarter while commercial losses increased slightly as we experienced normal period-to-period fluctuation. Based on our current forecasts, we expect continued improvement in credit in 2012,” said Chief Risk Officer Mike Loughlin.

Fourth quarter net charge-offs were $2.6 billion, or 1.36 percent (annualized) of average loans, essentially flat from third quarter net charge-offs of $2.6 billion (1.37 percent). The provision for credit losses was $600 million less than net charge-offs, compared with $800 million less than net charge-offs in the prior quarter, reflecting our expected continued improvement. “We have seen significant improvement in credit performance over the past eight quarters, and expect continued but slower improvement in 2012 as portfolio quality approaches a stable, more normal level,” said Loughlin. “Absent significant deterioration in the economy, we continue to expect future reserve releases in 2012.”

Net Loan Charge-Offs  
  Quarter ended  
    Dec. 31, 2011   Sept. 30, 2011   June 30, 2011  
($ 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 $ 310 0.74 % $ 261 0.65 % $ 254 0.66 %
Real estate mortgage 117 0.44 96 0.37 128 0.50
Real estate construction (5 ) (0.09 ) 55 1.06 72 1.32
Lease financing 4 0.13 3 0.11 1 0.01
Foreign     45   0.45   8 0.08   47 0.52
Total commercial     471   0.54   423 0.50   502 0.62
 
Consumer:
Real estate 1-4 family first mortgage 844 1.46 821 1.46 909 1.62
Real estate 1-4 family junior lien mortgage 800 3.64 842 3.75 909 3.97
Credit card 256 4.63 266 4.90 294 5.63
Other revolving credit and installment     269   1.24   259 1.19   224 1.03
Total consumer     2,169   2.02   2,188 2.06   2,336 2.21
Total   $ 2,640   1.36 % $ 2,611 1.37 % $ 2,838 1.52 %
 

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

Nonperforming Assets

Nonperforming assets ended the quarter at $26.0 billion, down 3 percent from $26.8 billion in the third quarter. Nonaccrual loans declined to $21.3 billion from $21.9 billion in the third quarter, with reductions across the majority of our larger loan portfolios, resulting from stable inflows. Foreclosed assets decreased to $4.7 billion from $4.9 billion in third quarter.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
    Dec. 31, 2011     Sept. 30, 2011     June 30, 2011
    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 $ 2,142 1.28 % $ 2,128 1.29 % $ 2,393 1.52 %
Real estate mortgage 4,085 3.85 4,429 4.24 4,691 4.62
Real estate construction 1,890 9.75 1,915 9.71 2,043 9.56
Lease financing 53 0.40 71 0.55 79 0.61
Foreign     47   0.12   68   0.18   59   0.16
Total commercial     8,217   2.38   8,611   2.53   9,265   2.80
 
Consumer:
Real estate 1-4 family first mortgage 10,913 4.77 11,024 4.93 11,427 5.13
Real estate 1-4 family junior lien mortgage 1,975 2.30 2,035 2.31 2,098 2.33
Other revolving credit and installment     199   0.23   230   0.27   255   0.29
Total consumer     13,087   3.09   13,289   3.16   13,780   3.27
Total nonaccrual loans     21,304   2.77   21,900   2.88   23,045   3.06
 
Foreclosed assets:
GNMA 1,319 1,336 1,320
Non GNMA     3,342     3,608     3,541  
Total foreclosed assets     4,661     4,944     4,861  
Total nonperforming assets   $ 25,965   3.37 % $ 26,844   3.53 % $ 27,906   3.71 %
 
Change from prior quarter:
Total nonaccrual loans $ (596 ) $ (1,145 ) $ (1,920 )
Total nonperforming assets     (879 )           (1,062 )           (2,571 )    

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 $2.0 billion at December 31, 2011, compared with $1.9 billion at September 30, 2011. Loans 90 days or more past due and still accruing whose repayments are 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 $20.5 billion at December 31, 2011, up from $17.7 billion at September 30, 2011, due primarily to growth in the FHA/VA portfolio over the past two years and the subsequent seasoning of those loans.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $19.7 billion at December 31, 2011, down from $20.4 billion at September 30, 2011. The allowance coverage to total loans was 2.56 percent compared with 2.68 percent in the prior quarter. The allowance covered 1.88 times annualized fourth quarter net charge-offs compared with 1.97 times in the prior quarter. The allowance coverage to nonaccrual loans was 92 percent at December 31, 2011, compared with 93 percent at September 30, 2011. “We believe the allowance was appropriate for losses inherent in the loan portfolio at December 31, 2011,” said Loughlin.

Additional detail on credit quality is included in the quarterly supplement, available on the Investor Relations page at www.wellsfargo.com/invest_relations/investor_relations/.

Business Segment Performance

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

  Quarter ended
Dec. 31,   Sept. 30,   Dec. 31,
(in millions)     2011   2011   2010
Community Banking $ 2,503 2,315 1,924
Wholesale Banking 1,641 1,813 1,690
Wealth, Brokerage and Retirement     325   291   197

More financial information about the business segments is in OPERATING SEGMENT RESULTS tables.

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including 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
(in millions)   Dec. 31,
2011
  Sept. 30,
2011
  Dec. 31,
2010
Total revenue $ 13,004   12,496   13,472
Provision for credit losses 2,031 1,978 2,785
Noninterest expense 7,310 6,901 7,855
Segment net income 2,503 2,315 1,924
 
(in billions)
Average loans 493.9 491.0 514.1
Average assets 756.0 754.4 771.6
Average core deposits     568.3   556.3   544.4

Community Banking reported net income of $2.5 billion, up $188 million, or 8 percent, from third quarter 2011 and up $579 million, or 30 percent, from fourth quarter 2010. Revenue increased $508 million, or 4 percent, from third quarter 2011 driven by higher volume-related mortgage banking income, noninterest bearing deposit growth and gains on deferred compensation plan investments (offset in employee benefits expense and therefore neutral to the income statement), mitigated by the impact of lower debit card revenues and smaller bond and equity sale gains. Noninterest expense increased $409 million, or 6 percent, from third quarter 2011, reflecting higher personnel costs (revenue-related incentive compensation in Home Mortgage and increased deferred compensation benefits expense), seasonal increase in foreclosed assets expense, an increase in Home Mortgage related to the mortgage servicing regulatory consent orders, and seasonally higher equipment purchases. Noninterest expense decreased $545 million, or 7 percent, from fourth quarter 2010, as last year’s fourth quarter included a two-year charitable donation commitment of $400 million. Contributing to lower expenses this year were reduced foreclosed asset expense and efficiency and cost save initiatives. The provision for credit losses increased $53 million from third quarter 2011 and decreased $754 million from fourth quarter 2010. Charge-offs increased $41 million from third quarter 2011 and decreased $966 million from fourth quarter 2010. The reserve release was $438 million in fourth quarter 2011, compared with releases of $450 million and $650 million in third quarter 2011 and fourth quarter 2010, respectively.

Regional Banking Highlights

  • Continued franchise growth in 2011 from December 31, 2010 (combined Regional Banking)
    • Consumer checking accounts up a net 3.2 percent
    • Business checking accounts up a net 3.7 percent
    • Consumer credit card, lines of credit and loan product solutions (sales) in the retail banking stores were up by double digits from 2010
    • Insurance referrals in the retail banking stores were more than two-and-a-half times those done in 2010
  • Record solutions in 2011
    • West
      • Record core product solutions (sales) of 33.7 million, up 14 percent from 2010
      • Core sales per platform banker FTE (active, full-time equivalent) of 6.69 per day, up from 5.95 in 2010
      • Sales of Wells Fargo Packages® (a checking account and three other products) up 16 percent from 2010, purchased by 86 percent of new checking account customers
    • East
      • Eastern core product solutions grew by double digits from 2010
      • For eastern stores converted to the Wells Fargo systems, 82 percent of new checking account customers purchased Wells Fargo Packages® in 2011
      • Platform banker FTE grew by over 670, or 6 percent, from 2010
  • Retail Bank household cross-sell ratio for combined company of 5.92 products per household, up from 5.70 in fourth quarter 2010; cross-sell in the West of 6.29, compared with 5.43 in the East, represents the opportunity to earn more business from customers in the East
  • Wells Fargo’s retail bank ranked No. 1 again in customer satisfaction according to the American Customer Satisfaction Index (ACSI) for customers of large banks (tied with Citigroup, third quarter 2011 results released in December)
  • Small Business/Business Banking
    • Store-based business solutions up 15 percent from 2010 (West)
    • Sales of Wells Fargo Business Services Packages (a business checking account and at least three other business products) up 37 percent from 2010, purchased by 75 percent of new business checking account customers (West)
    • Wells Fargo, America’s #1 small business lender, made $13.9 billion in new loan commitments to its small business customers in 2011, an 8 percent increase in new dollars lent from 2010
  • Online and Mobile Banking
    • 19.8 million combined active online customers
    • 7.3 million combined active mobile customers
    • Wells Fargo AssistSM, an online financial assistance center, launched and provides information for customers who are facing payment challenges

Wells Fargo Home Mortgage (Home Mortgage)

  • Home Mortgage applications of $157 billion, compared with $169 billion in prior quarter
  • Home Mortgage application pipeline of $72 billion at quarter end, compared with $84 billion at September 30, 2011
  • Home Mortgage originations of $120 billion, up from $89 billion in prior quarter
  • Residential mortgage servicing portfolio of $1.8 trillion

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 & 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, Investment Banking & Capital Markets, Securities Investment Portfolio, Asset Backed Finance, and Asset Management.

Selected Financial Information

  Quarter ended
(in millions)   Dec. 31,
2011
  Sept. 30,
2011
  Dec. 31,
2010
Total revenue $ 5,425   5,150   5,840
Provision (reversal of provision) for credit losses 32 (178 ) 195
Noninterest expense 2,939 2,689 2,992
Segment net income 1,641 1,813 1,690
 
(in billions)
Average loans 264.8 253.4 229.6
Average assets 458.3 438.0 384.4
Average core deposits     223.2   209.3     185.1

Wholesale Banking reported net income of $1.6 billion, down $172 million or 9 percent from the third quarter and $49 million or 3 percent from fourth quarter 2010. Revenue increased $275 million or 5 percent from the third quarter primarily due to strong loan and deposit growth across most businesses, including commercial banking, commercial real estate, corporate banking, government banking and international. Revenue also benefited from capital markets and investment banking results which rebounded from prior quarter depressed levels. Revenue decreased $415 million, or 7 percent from fourth quarter 2010 as broad based growth among many businesses, including strong loan and deposit growth, was offset by lower PCI resolutions and other gains. Noninterest expense increased $250 million, or 9 percent, from the third quarter due to higher variable compensation related to higher revenue and increased operating losses and foreclosed asset expenses. Expenses decreased $53 million, or 2 percent, from fourth quarter 2010 related to lower operating losses. The provision for credit losses was $32 million and increased $210 million from the third quarter primarily due to lower reserve release. Provision declined $163 million from fourth quarter 2010. The decrease included a $150 million reserve release in fourth quarter 2011 compared with a $200 million reserve release in the fourth quarter a year ago along with a $213 million improvement in net charge-offs.

  • 15 percent year-over-year and 4 percent linked quarter average loan growth in almost all portfolios including asset backed finance, capital finance, commercial banking, commercial real estate, corporate banking, government banking and international from both new and existing customer activity
  • Stable level of net charge-offs and lower nonperforming assets
  • Average core deposits up 21 percent from prior year
  • U.S. investment banking 2011 market share of 5.1 percent, up from 4.2 percent for full year 2010 (source: Dealogic fee-based league tables)
  • Ending loans include $2.1 billion of U.S.-based CRE loans purchased in the quarter

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. Family Wealth (to be rebranded as Abbot Downing, A Wells Fargo Business, in April 2012) meets the unique needs of the ultra high net worth customers. Brokerage serves customers' advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the United States. Retirement is a national leader in providing institutional retirement and trust services (including 401(k) and pension plan record keeping) for businesses, retail retirement solutions for individuals, and reinsurance services for the life insurance industry.

Selected Financial Information

  Quarter ended

(in millions)

  Dec. 31,
2011
  Sept. 30,
2011
  Dec. 31,
2010
Total revenue $ 3,065   2,887   3,041
Provision for credit losses 20 48 113
Noninterest expense 2,521 2,368 2,608
Segment net income 325 291 197
 
(in billions)
Average loans 42.7 43.1 43.0
Average assets 159.3 155.1 140.2
Average core deposits     136.6   133.4   121.5

Wealth, Brokerage and Retirement reported net income of $325 million, up $34 million from third quarter 2011 and up $128 million from fourth quarter 2010. Revenue was $3.1 billion, up 6 percent from third quarter 2011 driven by $59 million in gains on deferred compensation plan investments (offset in expense compared with $128 million in losses in third quarter 2011) and a $153 million gain on the sale of the H.D. Vest business. Excluding deferred compensation and H.D. Vest gains, revenue was down 5 percent due to lower asset-based fees, reduced brokerage transaction revenue and lower securities gains in the brokerage business. Total provision for credit losses decreased $28 million for the quarter, including a reserve release of $12 million in fourth quarter 2011. Noninterest expense increased 6 percent from third quarter 2011 primarily due to higher deferred compensation expense, $52 million in fourth quarter 2011 compared to a $125 million benefit in third quarter 2011. Excluding the $177 million increase in deferred compensation expense, noninterest expense decreased 1 percent primarily due to reduced broker commissions on lower production levels. Revenue was up 1 percent from fourth quarter 2010; excluding the impact of the H.D. Vest gain, revenue was down 4 percent due to lower brokerage transaction revenue. Total provision for credit losses decreased $93 million from fourth quarter 2010. Noninterest expense was down 3 percent from fourth quarter 2010 driven by a decline in personnel costs largely due to decreased broker commissions, driven by lower production levels, and decreased non-personnel costs. Average core deposits increased $3.2 billion from third quarter 2011 and $15.1 billion from fourth quarter 2010.

Retail Brokerage

  • Strong deposit growth, with average balances up $14 billion, or 17 percent, from prior year
  • Client assets of $1.1 trillion, down 3 percent from prior year
  • Managed account assets increased $19 billion, or 8 percent, from prior year driven by strong net flows

Wealth Management

  • Average deposit balances up 3 percent from prior year
  • Client assets of $198 billion, down 2 percent from prior year

Retirement

  • Institutional Retirement plan assets of $236 billion, up $5 billion, or 2 percent, from prior year
  • IRA assets of $268 billion, down $10 billion, or 4 percent, from prior year

Conference Call

The Company will host a live conference call on Tuesday, January 17, at 6:30 a.m. PST (9:30 a.m. EST). To access the call, please dial 866-872-5161 (U.S. and Canada) or 706-643-1962 (international). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings and http://us.reg.meeting-stream.com/wellsfargocompany_011712/.

A replay of the conference call will be available beginning at approximately noon PST (3 p.m. EST) on January 17 through Tuesday, January 24. Please dial 800-642-1687 (U.S. and Canada) or 706-645-9291 (international) and enter Conference ID #29256540. The replay will also be available online at wellsfargo.com/invest_relations/earnings.

Cautionary Statement about Forward-Looking Information

In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that this news release contains forward-looking statements about our future financial performance and business. We make forward-looking statements when we use words such as “believe,” “expect,” “anticipate,” “estimate,” “target,” “should,” “may,” “can,” “will,” “outlook,” “project,” “appears” or similar expressions. Forward-looking statements in this news release include, among others, statements about: (i) future credit quality and performance, and the adequacy of the allowance for loan losses, including our current expectation of future reductions in the allowance for loan losses; (ii) our expectations regarding elevated first quarter 2012 noninterest expense and declines in noninterest expense beginning in second quarter 2012, as well as our targeted noninterest expense for fourth quarter 2012 as part of our expense management initiatives; (iii) our estimates regarding our Tier 1 common equity ratio under proposed Basel III capital regulations and our expectations regarding returning more capital to our shareholders; and (iv) the timing of remaining integration activities related to the Wachovia merger.

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 and budget matters and the sovereign debt crisis 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 regulations) 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); 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 foreclosures, 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 noninterest expense target as part of our expense management initiatives when and in the amount 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; our ability to successfully complete the remaining Wachovia integration activities, as well as realize the expected benefits of the Wachovia merger; 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 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 the economic recession on the demand for our products and services; 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 mutual funds for structured credit products they may hold; 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; 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 and unemployment do not improve. 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 Quarterly Reports on Form 10-Q for the quarters ended June 30, 2011, and September 30, 2011, as filed with the SEC and available on the SEC’s website at www.sec.gov. Any factor described above or in our SEC reports could, by itself or together with one or more other factors, adversely affect our financial results and condition.

About Wells Fargo

Wells Fargo & Company (NYSE:WFC) is a nationwide, diversified, community-based financial services company with $1.3 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 other distribution channels across North America and internationally. With more than 272,000 team members, Wells Fargo serves one in three households in America. Wells Fargo & Company was ranked No. 23 on Fortune’s 2011 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 19-20
Average Balances, Yields and Rates Paid 21-22
Noninterest Income and Noninterest Expense 23-24
 

Balance Sheet

Consolidated Balance Sheet 25-26
Average Balances 27
 

Loans

Securities Available for Sale 28
Loans 28
Nonaccrual Loans and Foreclosed 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
Allowance for Credit Losses 36-37
 

Equity

Condensed Consolidated Statement of Changes in Total Equity 38
Tier 1 Common Equity 39
 

Operating Segments

Operating Segment Results 40-41
 

Other

Mortgage Servicing and other related data   42-44
 
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
           
Quarter ended Dec. 31, % Year ended Dec. 31, %
($ in millions, except per share amounts)     2011     2010   Change       2011   2010   Change
For the Period
Wells Fargo net income $ 4,107 3,414 20 % $ 15,869 12,362 28 %
Wells Fargo net income applicable to common stock 3,888 3,232 20 15,025 11,632 29
Diluted earnings per common share 0.73 0.61 20 2.82 2.21 28
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.25 % 1.09 15 1.25 1.01 24

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

11.97 10.95 9 11.93 10.33 15
Efficiency ratio (1) 60.7 62.1 (2 ) 61.0 59.2 3
Total revenue $ 20,605 21,494 (4 ) $ 80,948 85,210 (5 )
Pre-tax pre-provision profit (PTPP) (2) 8,097 8,154 (1 ) 31,555 34,754 (9 )
Dividends declared per common share 0.12 0.05 140 0.48 0.20 140
Average common shares outstanding 5,271.9 5,256.2 - 5,278.1 5,226.8 1
Diluted average common shares outstanding 5,317.6 5,293.8 - 5,323.4 5,263.1 1
Average loans $ 768,563 753,675 2 $ 757,144 770,601 (2 )
Average assets 1,306,728 1,237,037 6 1,270,265 1,226,938 4
Average core deposits (3) 864,928 794,799 9 826,735 772,021 7
Average retail core deposits (4) 606,810 573,843 6 595,851 572,881 4
Net interest margin 3.89 % 4.16 (6 ) 3.94 4.26 (8 )
 
At Period End
Securities available for sale $ 222,613 172,654 29 $ 222,613 172,654 29
Loans 769,631 757,267 2 769,631 757,267 2
Allowance for loan losses 19,372 23,022 (16 ) 19,372 23,022 (16 )
Goodwill 25,115 24,770 1 25,115 24,770 1
Assets 1,313,867 1,258,128 4 1,313,867 1,258,128 4
Core deposits (3) 872,629 798,192 9 872,629 798,192 9
Wells Fargo stockholders' equity 140,241 126,408 11 140,241 126,408 11
Total equity 141,687 127,889 11 141,687 127,889 11
Capital ratios:
Total equity to assets 10.78 % 10.16 6 10.78 10.16 6
Risk-based capital (5):
Tier 1 capital 11.33 11.16 2 11.33 11.16 2
Total capital 14.77 15.01 (2 ) 14.77 15.01 (2 )
Tier 1 leverage (5) 9.03 9.19 (2 ) 9.03 9.19 (2 )
Tier 1 common equity (6) 9.46 8.30 14 9.46 8.30 14
Common shares outstanding 5,262.6 5,262.3 - 5,262.6 5,262.3 -
Book value per common share $ 24.64 22.49 10 $ 24.64 22.49 10
Common stock price:
High 27.97 31.61 (12 ) 34.25 34.25 -
Low 22.61 23.37 (3 ) 22.58 23.02 (2 )
Period end 27.56 30.99 (11 ) 27.56 30.99 (11 )
Team members (active, full-time equivalent) 264,200 272,200 (3 ) 264,200 272,200 (3 )
   
 
(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.
(3) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5) The December 31, 2011, ratios are preliminary.
(6) See the "Five Quarter Tier 1 Common Equity Under Basel I" table for additional information.
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
         
  Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
($ in millions, except per share amounts)     2011     2011   2011   2011   2010
For the Quarter
Wells Fargo net income $ 4,107 4,055 3,948 3,759 3,414
Wells Fargo net income applicable to common stock 3,888 3,839 3,728 3,570 3,232
Diluted earnings per common share 0.73 0.72 0.70 0.67 0.61
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.25 % 1.26 1.27 1.23 1.09

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

11.97 11.86 11.92 11.98 10.95
Efficiency ratio (1) 60.7 59.5 61.2 62.6 62.1
Total revenue $ 20,605 19,628 20,386 20,329 21,494
Pre-tax pre-provision profit (PTPP) (2) 8,097 7,951 7,911 7,596 8,154
Dividends declared per common share 0.12 0.12 0.12 0.12 0.05
Average common shares outstanding 5,271.9 5,275.5 5,286.5 5,278.8 5,256.2
Diluted average common shares outstanding 5,317.6 5,319.2 5,331.7 5,333.1 5,293.8
Average loans $ 768,563 754,544 751,253 754,077 753,675
Average assets 1,306,728 1,281,369 1,250,945 1,241,176 1,237,037
Average core deposits (3) 864,928 836,845 807,483 796,826 794,799
Average retail core deposits (4) 606,810 599,227 592,974 584,100 573,843
Net interest margin 3.89 % 3.84 4.01 4.05 4.16
 
At Quarter End
Securities available for sale $ 222,613 207,176 186,298 167,906 172,654
Loans 769,631 760,106 751,921 751,155 757,267
Allowance for loan losses 19,372 20,039 20,893 21,983 23,022
Goodwill 25,115 25,038 24,776 24,777 24,770
Assets 1,313,867 1,304,945 1,259,734 1,244,666 1,258,128
Core deposits (3) 872,629 849,632 808,970 795,038 798,192
Wells Fargo stockholders' equity 140,241 137,768 136,401 133,471 126,408
Total equity 141,687 139,244 137,916 134,943 127,889
Capital ratios:
Total equity to assets 10.78 % 10.67 10.95 10.84 10.16
Risk-based capital (5):
Tier 1 capital 11.33 11.26 11.69 11.50 11.16
Total capital 14.77 14.86 15.41 15.30 15.01
Tier 1 leverage (5) 9.03 8.97 9.43 9.27 9.19
Tier 1 common equity (6) 9.46 9.34 9.15 8.93 8.30
Common shares outstanding 5,262.6 5,272.2 5,278.2 5,300.9 5,262.3
Book value per common share $ 24.64 24.13 23.84 23.18 22.49
Common stock price:
High 27.97 29.63 32.63 34.25 31.61
Low 22.61 22.58 25.26 29.82 23.37
Period end 27.56 24.12 28.06 31.71 30.99
Team members (active, full-time equivalent) 264,200 263,800 266,600 270,200 272,200
 
 
(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.
(3) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5) The December 31, 2011, ratios are preliminary.
(6) See the "Five Quarter Tier 1 Common Equity Under Basel I" table for additional information.
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
         
Quarter ended Dec. 31, % Year ended Dec. 31, %
(in millions, except per share amounts)   2011   2010   Change     2011   2010   Change
Interest income  
Trading assets $ 400 295 36 % $ 1,440 1,098 31 %
Securities available for sale 2,092 2,374 (12 ) 8,475 9,666 (12 )
Mortgages held for sale 456 495 (8 ) 1,644 1,736 (5 )
Loans held for sale 16 15 7 58 101 (43 )
Loans 9,275 9,666 (4 ) 37,247 39,760 (6 )
Other interest income     139   124   12   548   435   26
Total interest income     12,378   12,969   (5 )   49,412   52,796   (6 )
Interest expense
Deposits 507 662 (23 ) 2,275 2,832 (20 )
Short-term borrowings 14 26 (46 ) 80 92 (13 )
Long-term debt 885 1,153 (23 ) 3,978 4,888 (19 )
Other interest expense     80   65   23   316   227   39
Total interest expense     1,486   1,906   (22 )   6,649   8,039   (17 )
Net interest income 10,892 11,063 (2 ) 42,763 44,757 (4 )
Provision for credit losses     2,040   2,989   (32 )   7,899   15,753   (50 )
Net interest income after provision for credit losses   8,852   8,074   10   34,864   29,004   20
Noninterest income
Service charges on deposit accounts 1,091 1,035 5 4,280 4,916 (13 )
Trust and investment fees 2,658 2,958 (10 ) 11,304 10,934 3
Card fees 680 941 (28 ) 3,653 3,652 -
Other fees 1,096 1,063 3 4,193 3,990 5
Mortgage banking 2,364 2,757 (14 ) 7,832 9,737 (20 )
Insurance 466 564 (17 ) 1,960 2,126 (8 )
Net gains from trading activities 430 532 (19 ) 1,014 1,648 (38 )
Net gains (losses) on debt securities available for sale 48 (268 ) NM 54 (324 ) NM
Net gains from equity investments 61 317 (81 ) 1,482 779 90
Operating leases 60 79 (24 ) 524 815 (36 )
Other     759   453   68   1,889   2,180   (13 )
Total noninterest income     9,713   10,431   (7 )   38,185   40,453   (6 )
Noninterest expense
Salaries 3,706 3,513 5 14,462 13,869 4
Commission and incentive compensation 2,251 2,195 3 8,857 8,692 2
Employee benefits 1,012 1,192 (15 ) 4,348 4,651 (7 )
Equipment 607 813 (25 ) 2,283 2,636 (13 )
Net occupancy 759 750 1 3,011 3,030 (1 )
Core deposit and other intangibles 467 549 (15 ) 1,880 2,199 (15 )
FDIC and other deposit assessments 314 301 4 1,266 1,197 6
Other     3,392   4,027   (16 )   13,286   14,182   (6 )
Total noninterest expense     12,508   13,340   (6 )   49,393   50,456   (2 )
Income before income tax expense 6,057 5,165 17 23,656 19,001 24
Income tax expense     1,874   1,672   12   7,445   6,338   17
Net income before noncontrolling interests 4,183 3,493 20 16,211 12,663 28
Less: Net income from noncontrolling interests     76   79   (4 )   342   301   14
Wells Fargo net income   $ 4,107   3,414   20 $ 15,869   12,362   28
Less: Preferred stock dividends and other     219   182   20   844   730   16
Wells Fargo net income applicable to common stock   $ 3,888   3,232   20 $ 15,025   11,632   29
Per share information
Earnings per common share $ 0.74 0.62 19 $ 2.85 2.23 28
Diluted earnings per common share 0.73 0.61 20 2.82 2.21 28
Dividends declared per common share 0.12 0.05 140 0.48 0.20 140
Average common shares outstanding 5,271.9 5,256.2 - 5,278.1 5,226.8 1
Diluted average common shares outstanding 5,317.6 5,293.8 - 5,323.4 5,263.1 1
   
NM - Not meaningful
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
         
  Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions, except per share amounts)     2011   2011   2011   2011   2010
Interest income
Trading assets $ 400 343 347 350 295
Securities available for sale 2,092 2,053 2,166 2,164 2,374
Mortgages held for sale 456 389 362 437 495
Loans held for sale 16 13 17 12 15
Loans 9,275 9,224 9,361 9,387 9,666
Other interest income     139   156     131     122     124  
Total interest income     12,378   12,178     12,384     12,472     12,969  
Interest expense
Deposits 507 559 594 615 662
Short-term borrowings 14 20 20 26 26
Long-term debt 885 980 1,009 1,104 1,153
Other interest expense     80   77     83     76     65  
Total interest expense     1,486   1,636     1,706     1,821     1,906  
Net interest income 10,892 10,542 10,678 10,651 11,063
Provision for credit losses     2,040   1,811     1,838     2,210     2,989  
Net interest income after provision for credit losses     8,852   8,731     8,840     8,441     8,074  
Noninterest income
Service charges on deposit accounts 1,091 1,103 1,074 1,012 1,035
Trust and investment fees 2,658 2,786 2,944 2,916 2,958
Card fees 680 1,013 1,003 957 941
Other fees 1,096 1,085 1,023 989 1,063
Mortgage banking 2,364 1,833 1,619 2,016 2,757
Insurance 466 423 568 503 564
Net gains (losses) from trading activities 430 (442 ) 414 612 532
Net gains (losses) on debt securities available for sale 48 300 (128 ) (166 ) (268 )
Net gains from equity investments 61 344 724 353 317
Operating leases 60 284 103 77 79
Other     759   357     364     409     453  
Total noninterest income     9,713   9,086     9,708     9,678     10,431  
Noninterest expense
Salaries 3,706 3,718 3,584 3,454 3,513
Commission and incentive compensation 2,251 2,088 2,171 2,347 2,195
Employee benefits 1,012 780 1,164 1,392 1,192
Equipment 607 516 528 632 813
Net occupancy 759 751 749 752 750
Core deposit and other intangibles 467 466 464 483 549
FDIC and other deposit assessments 314 332 315 305 301
Other     3,392   3,026     3,500     3,368     4,027  
Total noninterest expense     12,508   11,677     12,475     12,733     13,340  
Income before income tax expense 6,057 6,140 6,073 5,386 5,165
Income tax expense     1,874   1,998     2,001     1,572     1,672  
Net income before noncontrolling interests 4,183 4,142 4,072 3,814 3,493
Less: Net income from noncontrolling interests     76   87     124     55     79  
Wells Fargo net income   $ 4,107   4,055     3,948     3,759     3,414  
Less: Preferred stock dividends and other     219   216     220     189     182  
Wells Fargo net income applicable to common stock   $ 3,888   3,839     3,728     3,570     3,232  
Per share information
Earnings per common share $ 0.74 0.73 0.70 0.68 0.62
Diluted earnings per common share 0.73 0.72 0.70 0.67 0.61
Dividends declared per common share 0.12 0.12 0.12 0.12 0.05
Average common shares outstanding 5,271.9 5,275.5 5,286.5 5,278.8 5,256.2
Diluted average common shares outstanding 5,317.6 5,319.2 5,331.7 5,333.1 5,293.8
                               
 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
           
Quarter ended December 31,
2011 2010
Interest Interest
Average Yields/ income/ Average Yields/ income/
(in millions)     balance   rates       expense   balance   rates       expense
Earning assets

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

$ 67,968 0.52 % $ 89 72,029 0.40 % $ 74
Trading assets 45,521 3.57 407 33,871 3.56 302
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 8,708 0.99 22 1,597 2.80 12
Securities of U.S. states and political subdivisions 28,015 4.80 336 18,245 5.58 255
Mortgage-backed securities:
Federal agencies 84,332 3.68 776 76,674 4.48 859
Residential and commercial     34,717   7.05   612 31,060   10.95   850
Total mortgage-backed securities 119,049 4.66 1,388 107,734 6.35 1,709
Other debt and equity securities     47,278   4.38   518 35,492   6.15   545
Total securities available for sale 203,050 4.46 2,264 163,068 6.18 2,521
Mortgages held for sale (4) 44,842 4.07 456 45,063 4.39 495
Loans held for sale (4) 1,118 5.84 16 1,140 5.15 15
Loans:
Commercial:
Commercial and industrial 166,920 4.08 1,713 147,866 4.71 1,755
Real estate mortgage 105,219 4.26 1,130 99,188 3.85 961
Real estate construction 19,624 4.61 228 26,882 3.68 250
Lease financing 12,893 7.41 239 13,033 9.00 293
Foreign     38,740   2.39 233 30,986   3.57   279
Total commercial     343,396   4.10 3,543 317,955   4.42   3,538
Consumer:
Real estate 1-4 family first mortgage 229,746 4.74 2,727 228,802 5.06 2,901
Real estate 1-4 family junior lien mortgage 87,212 4.34 953 97,673 4.37 1,075
Credit card 21,933 12.96 711 21,888 13.44 736
Other revolving credit and installment     86,276   6.23   1,356 87,357   6.48   1,427
Total consumer     425,167   5.39   5,747 435,720   5.61   6,139
Total loans (4) 768,563 4.81 9,290 753,675 5.11 9,677
Other     4,671   4.32   50 5,338   3.93   51
Total earning assets   $ 1,135,733   4.41 % $ 12,572 1,074,184   4.87 % $ 13,135
Funding sources
Deposits:
Interest-bearing checking $ 35,285 0.06 % $ 6 60,879 0.09 % $ 15
Market rate and other savings 485,127 0.14 175 431,171 0.25 266
Savings certificates 64,868 1.43 233 79,146 1.43 285
Other time deposits 12,868 1.85 60 13,438 2.00 67
Deposits in foreign offices     67,213   0.20   33 55,463   0.21   29
Total interest-bearing deposits 665,361 0.30 507 640,097 0.41 662
Short-term borrowings 48,742 0.14 17 50,609 0.24 31
Long-term debt 129,445 2.73 885 160,801 2.86 1,153
Other liabilities     12,166   2.60   80 8,258   3.13   65
Total interest-bearing liabilities 855,714 0.69 1,489 859,765 0.89 1,911
Portion of noninterest-bearing funding sources     280,019   -   - 214,419   -   -
Total funding sources   $ 1,135,733     0.52   1,489 1,074,184     0.71   1,911

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

3.89 %   $ 11,083 4.16 %   $ 11,224
Noninterest-earning assets
Cash and due from banks $ 17,718 18,016
Goodwill 25,057 24,832
Other     128,220   120,005  
Total noninterest-earning assets   $ 170,995   162,853  
Noninterest-bearing funding sources
Deposits $ 246,692 197,943
Other liabilities 63,556 52,930
Total equity 140,766 126,399
Noninterest-bearing funding sources used to fund earning assets     (280,019 ) (214,419 )
Net noninterest-bearing funding sources   $ 170,995   162,853  
Total assets   $ 1,306,728   1,237,037  
 
(1) Our average prime rate was 3.25% for the quarters ended December 31, 2011 and 2010. The average three-month London Interbank Offered Rate (LIBOR) was 0.48% and 0.29% 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 and the previously reported amounts for all periods prior to 2011 have been changed to amortized cost, the basis used to determine yield for those periods.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) Includes taxable-equivalent adjustments of $191 million and $161 million for December 31, 2011 and 2010, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate utilized was 35% for the periods presented.
 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
           
Year ended December 31,
  2011 2010
Interest Interest
Average Yields/ income/ Average Yields/ income/
(in millions)     balance   rates       expense   balance   rates       expense
Earning assets

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

$ 87,186 0.40 % $ 345 62,961 0.36 % $ 230
Trading assets 39,737 3.68 1,463 29,920 3.75 1,121
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 5,503 1.25 69 1,870 3.24 61
Securities of U.S. states and political subdivisions 24,035 5.09 1,223 16,089 6.09 980
Mortgage-backed securities:
Federal agencies 74,665 4.36 3,257 71,953 5.14 3,697
Residential and commercial     31,902   8.20   2,617 31,815   10.67   3,396
Total mortgage-backed securities 106,567 5.51 5,874 103,768 6.84 7,093
Other debt and equity securities     38,625   5.03   1,941 32,611   6.45   2,102
Total securities available for sale 174,730 5.21 9,107 154,338 6.63 10,236
Mortgages held for sale (4) 37,232 4.42 1,644 36,716 4.73 1,736
Loans held for sale (4) 1,104 5.25 58 3,773 2.67 101
Loans:
Commercial:
Commercial and industrial 157,608 4.37 6,894 149,576 4.80 7,186
Real estate mortgage 102,236 4.07 4,163 98,497 3.89 3,836
Real estate construction 21,592 4.88 1,055 31,286 3.36 1,051
Lease financing 12,944 7.54 976 13,451 9.21 1,239
Foreign     36,768   2.56   941 29,726   3.49   1,037
Total commercial     331,148   4.24   14,029 322,536   4.45   14,349
Consumer:
Real estate 1-4 family first mortgage 226,980 4.89 11,090 235,568 5.18 12,206
Real estate 1-4 family junior lien mortgage 90,705 4.33 3,926 101,537 4.45 4,519
Credit card 21,463 13.02 2,794 22,375 13.35 2,987
Other revolving credit and installment     86,848   6.29   5,463 88,585   6.49   5,747
Total consumer     425,996   5.46   23,273 448,065   5.68   25,459
Total loans (4) 757,144 4.93 37,302 770,601 5.17 39,808
Other     4,929   4.12   203 5,849   3.56   207
Total earning assets   $ 1,102,062   4.55 % $ 50,122 1,064,158   5.02 % $ 53,439
Funding sources
Deposits:
Interest-bearing checking $ 47,705 0.08 % $ 40 60,941 0.12 % $ 72
Market rate and other savings 464,450 0.18 836 416,877 0.26 1,088
Savings certificates 69,711 1.43 995 87,133 1.43 1,247
Other time deposits 13,126 2.04 268 14,654 2.07 302
Deposits in foreign offices     61,566   0.22   136 55,097   0.22   123
Total interest-bearing deposits 656,558 0.35 2,275 634,702 0.45 2,832
Short-term borrowings 51,781 0.18 94 46,824 0.22 106
Long-term debt 141,079 2.82 3,978 185,426 2.64 4,888
Other liabilities     10,955   2.88   316 6,863   3.31   227
Total interest-bearing liabilities 860,373 0.77 6,663 873,815 0.92 8,053
Portion of noninterest-bearing funding sources     241,689   -   - 190,343   -   -
Total funding sources   $ 1,102,062     0.61   6,663 1,064,158     0.76   8,053

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

3.94 %   $ 43,459 4.26 %   $ 45,386
Noninterest-earning assets
Cash and due from banks $ 17,388 17,618
Goodwill 24,904 24,824
Other     125,911   120,338  
Total noninterest-earning assets   $ 168,203   162,780  
Noninterest-bearing funding sources
Deposits $ 215,242 183,008
Other liabilities 57,399 47,877
Total equity 137,251 122,238
Noninterest-bearing funding sources used to fund earning assets     (241,689 ) (190,343 )
Net noninterest-bearing funding sources   $ 168,203   162,780  
Total assets   $ 1,270,265   1,226,938  
 
(1) Our average prime rate was 3.25% for the years ended December 31, 2011 and 2010. The average three-month London Interbank Offered Rate (LIBOR) was 0.34% for the same periods.
(2) Yields/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 and the previously reported amounts for all periods prior to 2011 have been changed to amortized cost, the basis used to determine yield for those periods.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) Includes taxable-equivalent adjustments of $696 million and $629 million for December 31, 2011 and 2010, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
 
Wells Fargo & Company and Subsidiaries        
NONINTEREST INCOME
   
Quarter ended Dec. 31, % Year ended Dec. 31, %
(in millions)     2011   2010     Change       2011   2010     Change
Service charges on deposit accounts $ 1,091 1,035 5 % $ 4,280 4,916 (13 ) %
Trust and investment fees:
Trust, investment and IRA fees 1,000 1,030 (3 ) 4,099 4,038 2
Commissions and all other fees     1,658   1,928   (14 )   7,205   6,896   4
Total trust and investment fees     2,658   2,958   (10 )   11,304   10,934   3
Card fees 680 941 (28 ) 3,653 3,652 -
Other fees:
Cash network fees 109 74 47 389 260 50
Charges and fees on loans 402 446 (10 ) 1,641 1,690 (3 )
Processing and all other fees     585   543   8   2,163   2,040   6
Total other fees     1,096   1,063   3   4,193   3,990   5
Mortgage banking:
Servicing income, net 493 240 105 3,266 3,340 (2 )
Net gains on mortgage loan origination/sales activities     1,871   2,517   (26 )   4,566   6,397   (29 )
Total mortgage banking     2,364   2,757   (14 )   7,832   9,737   (20 )
Insurance 466 564 (17 ) 1,960 2,126 (8 )
Net gains (losses) from trading activities 430 532 (19 ) 1,014 1,648 (38 )
Net gains (losses) on debt securities available for sale 48 (268 ) NM 54 (324 ) NM
Net gains from equity investments 61 317 (81 ) 1,482 779 90
Operating leases 60 79 (24 ) 524 815 (36 )
All other     759   453   68   1,889   2,180   (13 )
Total   $ 9,713   10,431     (7 )     $ 38,185   40,453     (6 )
NM - Not meaningful
 
NONINTEREST EXPENSE
 
Quarter ended Dec. 31, % Year ended Dec. 31, %
(in millions)     2011   2010     Change       2011   2010     Change
Salaries $ 3,706 3,513 5 % $ 14,462 13,869 4 %
Commission and incentive compensation 2,251 2,195 3 8,857 8,692 2
Employee benefits 1,012 1,192 (15 ) 4,348 4,651 (7 )
Equipment 607 813 (25 ) 2,283 2,636 (13 )
Net occupancy 759 750 1 3,011 3,030 (1 )
Core deposit and other intangibles 467 549 (15 ) 1,880 2,199 (15 )
FDIC and other deposit assessments 314 301 4 1,266 1,197 6
Outside professional services 813 781 4 2,692 2,370 14
Contract services 356 481 (26 ) 1,407 1,642 (14 )
Foreclosed assets 370 452 (18 ) 1,354 1,537 (12 )
Operating losses 163 193 (16 ) 1,261 1,258 -
Postage, stationery and supplies 231 239 (3 ) 942 944 -
Outside data processing 257 235 9 935 1,046 (11 )
Travel and entertainment 212 221 (4 ) 821 783 5
Advertising and promotion 166 192 (14 ) 607 630 (4 )
Telecommunications 129 151 (15 ) 523 596 (12 )
Insurance 87 90 (3 ) 515 464 11
Operating leases 28 24 17 112 109 3
All other     580   968   (40 )   2,117   2,803   (24 )
Total   $ 12,508   13,340     (6 )     $ 49,393   50,456     (2 )
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
         
  Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)     2011   2011   2011   2011   2010
Service charges on deposit accounts $ 1,091 1,103 1,074 1,012 1,035
Trust and investment fees:
Trust, investment and IRA fees 1,000 1,019 1,020 1,060 1,030
Commissions and all other fees     1,658   1,767     1,924     1,856     1,928  
Total trust and investment fees     2,658   2,786     2,944     2,916     2,958  
Card fees 680 1,013 1,003 957 941
Other fees:
Cash network fees 109 105 94 81 74
Charges and fees on loans 402 438 404 397 446
Processing and all other fees     585   542     525     511     543  
Total other fees     1,096   1,085     1,023     989     1,063  
Mortgage banking:
Servicing income, net 493 1,030 877 866 240
Net gains on mortgage loan origination/sales activities     1,871   803     742     1,150     2,517  
Total mortgage banking     2,364   1,833     1,619     2,016     2,757  
Insurance 466 423 568 503 564
Net gains (losses) from trading activities 430 (442 ) 414 612 532
Net gains (losses) on debt securities available for sale 48 300 (128 ) (166 ) (268 )
Net gains from equity investments 61 344 724 353 317
Operating leases 60 284 103 77 79
All other     759   357     364     409     453  
Total   $ 9,713   9,086     9,708     9,678     10,431  
 
FIVE QUARTER NONINTEREST EXPENSE
 
  Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)     2011   2011   2011   2011   2010
Salaries $ 3,706 3,718 3,584 3,454 3,513
Commission and incentive compensation 2,251 2,088 2,171 2,347 2,195
Employee benefits 1,012 780 1,164 1,392 1,192
Equipment 607 516 528 632 813
Net occupancy 759 751 749 752 750
Core deposit and other intangibles 467 466 464 483 549
FDIC and other deposit assessments 314 332 315 305 301
Outside professional services 813 640 659 580 781
Contract services 356 341 341 369 481
Foreclosed assets 370 271 305 408 452
Operating losses 163 198 428 472 193
Postage, stationery and supplies 231 240 236 235 239
Outside data processing 257 226 232 220 235
Travel and entertainment 212 198 205 206 221
Advertising and promotion 166 159 166 116 192
Telecommunications 129 128 132 134 151
Insurance 87 94 201 133 90
Operating leases 28 29 31 24 24
All other     580   502     564     471     968  
Total   $ 12,508   11,677     12,475     12,733     13,340  
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
     
  December 31, %
(in millions, except shares)     2011   2010   Change
Assets
Cash and due from banks $ 19,440 16,044 21 %
Federal funds sold, securities purchased under resale agreements and other short-term investments 44,367 80,637 (45 )
Trading assets 77,814 51,414 51
Securities available for sale 222,613 172,654 29
Mortgages held for sale (includes $44,791 and $47,531 carried at fair value) 48,357 51,763 (7 )
Loans held for sale (includes $1,176 and $873 carried at fair value) 1,338 1,290 4
 
Loans (includes $5,916 and $309 carried at fair value) 769,631 757,267 2
Allowance for loan losses     (19,372 )   (23,022 ) (16 )
Net loans     750,259     734,245   2
Mortgage servicing rights:
Measured at fair value 12,603 14,467 (13 )
Amortized 1,408 1,419 (1 )
Premises and equipment, net 9,531 9,644 (1 )
Goodwill 25,115 24,770 1
Other assets     101,022     99,781   1
Total assets   $ 1,313,867     1,258,128   4
Liabilities
Noninterest-bearing deposits $ 244,003 191,256 28
Interest-bearing deposits     676,067     656,686   3
Total deposits 920,070 847,942 9
Short-term borrowings 49,091 55,401 (11 )
Accrued expenses and other liabilities 77,665 69,913 11
Long-term debt (includes $0 and $306 carried at fair value)     125,354     156,983   (20 )
Total liabilities     1,172,180     1,130,239   4
Equity
Wells Fargo stockholders' equity:
Preferred stock 11,431 8,689 32

Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,358,522,061 and 5,272,414,622 shares

8,931 8,787 2
Additional paid-in capital 55,957 53,426 5
Retained earnings 64,385 51,918 24
Cumulative other comprehensive income 3,207 4,738 (32 )
Treasury stock – 95,910,425 shares and 10,131,394 shares (2,744 ) (487 ) 463
Unearned ESOP shares     (926 )   (663 ) 40
Total Wells Fargo stockholders' equity 140,241 126,408 11
Noncontrolling interests     1,446     1,481   (2 )
Total equity     141,687     127,889   11
Total liabilities and equity   $ 1,313,867     1,258,128     4  
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
         
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)     2011   2011   2011   2011   2010
Assets
Cash and due from banks $ 19,440 18,314 24,059 16,978 16,044

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

44,367 89,804 88,406 93,041 80,637
Trading assets 77,814 57,786 54,770 57,890 51,414
Securities available for sale 222,613 207,176 186,298 167,906 172,654
Mortgages held for sale 48,357 42,704 31,254 33,121 51,763
Loans held for sale 1,338 743 1,512 1,428 1,290
 
Loans 769,631 760,106 751,921 751,155 757,267
Allowance for loan losses     (19,372)   (20,039)   (20,893)   (21,983)   (23,022)
Net loans     750,259   740,067   731,028   729,172   734,245
Mortgage servicing rights:
Measured at fair value 12,603 12,372 14,778 15,648 14,467
Amortized 1,408 1,397 1,422 1,423 1,419
Premises and equipment, net 9,531 9,607 9,613 9,545 9,644
Goodwill 25,115 25,038 24,776 24,777 24,770
Other assets     101,022   99,937   91,818   93,737   99,781
Total assets   $ 1,313,867   1,304,945   1,259,734   1,244,666   1,258,128
Liabilities
Noninterest-bearing deposits $ 244,003 229,863 202,143 190,959 191,256
Interest-bearing deposits     676,067   665,565   651,492   646,703   656,686
Total deposits 920,070 895,428 853,635 837,662 847,942
Short-term borrowings 49,091 50,775 53,881 54,737 55,401
Accrued expenses and other liabilities 77,665 86,284 71,430 68,721 69,913
Long-term debt     125,354   133,214   142,872   148,603   156,983
Total liabilities     1,172,180   1,165,701   1,121,818   1,109,723   1,130,239
Equity
Wells Fargo stockholders' equity:
Preferred stock 11,431 11,566 11,730 11,897 8,689
Common stock 8,931 8,902 8,876 8,854 8,787
Additional paid-in capital 55,957 55,495 55,226 54,815 53,426
Retained earnings 64,385 61,135 57,942 54,855 51,918
Cumulative other comprehensive income 3,207 3,828 5,422 5,021 4,738
Treasury stock (2,744) (2,087) (1,546) (541) (487)
Unearned ESOP shares     (926)   (1,071)   (1,249)   (1,430)   (663)
Total Wells Fargo stockholders' equity 140,241 137,768 136,401 133,471 126,408
Noncontrolling interests     1,446   1,476   1,515   1,472   1,481
Total equity     141,687   139,244   137,916   134,943   127,889
Total liabilities and equity   $ 1,313,867   1,304,945   1,259,734   1,244,666   1,258,128
 
Wells Fargo & Company and Subsidiaries          
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)    
         
  Quarter ended
  Dec. 31, 2011   Sept. 30, 2011   June 30, 2011   Mar. 31, 2011   Dec. 31, 2010
Average Yields/ Average Yields/ Average Yields/ Average Yields/ Average Yields/
($ in billions)   balance   rates     balance   rates     balance   rates     balance   rates     balance   rates
Earning assets

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

$ 68.0 0.52 % $ 98.9 0.42 % $ 98.5 0.32 % $ 83.4 0.35 % $ 72.0 0.40 %
Trading assets 45.5 3.57 37.9 3.67 38.0 3.71 37.4 3.81 33.9 3.56
Securities available for sale (2):
Securities of U.S. Treasury and federal agencies 8.7 0.99 9.6 1.02 2.0 2.33 1.6 2.87 1.6 2.80
Securities of U.S. states and political subdivisions 28.0 4.80 25.6 4.93 22.5 5.35 19.9 5.45 18.3 5.58
Mortgage-backed securities:
Federal agencies 84.3 3.68 72.8 4.41 70.9 4.76 70.4 4.72 76.7 4.48
Residential and commercial     34.7   7.05   32.6   7.46   30.0   8.86   30.2   9.68   31.0   10.95
Total mortgage-backed securities 119.0 4.66 105.4 5.36 100.9 5.98 100.6 6.21 107.7 6.35
Other debt and equity securities     47.3   4.38   38.9   4.69   34.5   5.81   33.6   5.55   35.5   6.15
Total securities available for sale 203.0 4.46 179.5 4.92 159.9 5.81 155.7 5.94 163.1 6.18
Mortgages held for sale 44.8 4.07 34.6 4.49 30.7 4.73 38.7 4.51 45.1 4.39
Loans held for sale 1.1 5.84 1.0 5.21 1.4 5.05 1.0 4.88 1.1 5.15
Loans:
Commercial:
Commercial and industrial 166.9 4.08 159.6 4.22 153.6 4.60 150.0 4.65 147.9 4.71
Real estate mortgage 105.2 4.26 102.4 3.93 101.5 4.16 99.9 3.92 99.2 3.85
Real estate construction 19.6 4.61 20.5 6.12 22.0 4.64 24.3 4.26 26.9 3.68
Lease financing 12.9 7.41 13.0 7.21 12.9 7.72 13.0 7.83 13.0 9.00
Foreign     38.8   2.39   38.2   2.42   36.4   2.65   33.6   2.83   31.0   3.57
Total commercial     343.4   4.10   333.7   4.16   326.4   4.37   320.8   4.33   318.0   4.42
Consumer:
Real estate 1-4 family first mortgage 229.8 4.74 223.8 4.83 224.9 4.97 229.6 5.01 228.8 5.06
Real estate 1-4 family junior lien mortgage 87.2 4.34 89.1 4.37 91.9 4.25 94.7 4.35 97.7 4.37
Credit card 21.9 12.96 21.5 12.96 21.0 12.97 21.5 13.18 21.9 13.44
Other revolving credit and installment     86.3   6.23   86.5   6.25   87.1   6.32   87.5   6.36   87.3   6.48
Total consumer     425.2   5.39   420.9   5.44   424.9   5.48   433.3   5.54   435.7   5.61
Total loans 768.6 4.81 754.6 4.87 751.3 5.00 754.1 5.03 753.7 5.11
Other     4.7   4.32   4.9   4.18   5.0   4.10   5.2   3.90   5.3   3.93
Total earning assets   $ 1,135.7   4.41 % $ 1,111.4   4.43 % $ 1,084.8   4.64 % $ 1,075.5   4.73 % $ 1,074.2   4.87 %
Funding sources
Deposits:
Interest-bearing checking $ 35.3 0.06 % $ 44.0 0.07 % $ 53.3 0.09 % $ 58.5 0.10 % $ 60.9 0.09 %
Market rate and other savings 485.1 0.14 473.4 0.17 455.1 0.20 443.6 0.22 431.2 0.25
Savings certificates 64.9 1.43 67.6 1.47 72.1 1.42 74.4 1.39 79.1 1.43
Other time deposits 12.9 1.85 12.8 2.02 13.0 2.03 13.8 2.24 13.4 2.00
Deposits in foreign offices     67.2   0.20   63.5   0.23   57.9   0.23   57.5   0.23   55.5   0.21
Total interest-bearing deposits 665.4 0.30 661.3 0.34 651.4 0.37 647.8 0.38 640.1 0.41
Short-term borrowings 48.7 0.14 50.4 0.18 53.3 0.18 54.8 0.22 50.6 0.24
Long-term debt 129.4 2.73 139.5 2.81 145.5 2.78 150.1 2.95 160.8 2.86
Other liabilities     12.2   2.60   11.2   2.75   11.0   3.03   9.5   3.24   8.3   3.13
Total interest-bearing liabilities 855.7 0.69 862.4 0.76 861.2 0.80 862.2 0.85 859.8 0.89
Portion of noninterest-bearing funding sources     280.0   -   249.0   -   223.6   -   213.3   -   214.4   -
Total funding sources   $ 1,135.7     0.52 $ 1,111.4     0.59 $ 1,084.8     0.63 $ 1,075.5     0.68 $ 1,074.2     0.71

Net interest margin on a taxable-equivalent basis

3.89 % 3.84 % 4.01 % 4.05 % 4.16 %
Noninterest-earning assets
Cash and due from banks $ 17.7 17.1 17.4 17.4 18.0
Goodwill 25.1 25.0 24.8 24.8 24.8
Other     128.2     127.9     123.9     123.5     120.0  
Total noninterest-earnings assets   $ 171.0     170.0     166.1     165.7     162.8  
Noninterest-bearing funding sources
Deposits $ 246.7 221.2 199.3 193.1 197.9
Other liabilities 63.5 57.5 53.2 55.3 52.9
Total equity 140.8 140.3 137.2 130.6 126.4

Noninterest-bearing funding sources used to fund earning assets

    (280.0 )   (249.0 )   (223.6 )   (213.3 )   (214.4 )

 

Net noninterest-bearing funding sources

  $ 171.0     170.0     166.1     165.7     162.8  
Total assets   $ 1,306.7     1,281.4     1,250.9     1,241.2     1,237.0  
 

(1) Our average prime rate was 3.25% for quarters ended December 31, September 30, June 30 and March 31, 2011, and December 31, 2010. The average three-month London Interbank Offered Rate (LIBOR) was 0.48%, 0.30%, 0.26%, 0.31% and 0.29% for the same quarters, respectively.

(2) 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 and the previously reported amounts for all periods prior to December 31, 2011, have been changed to amortized cost, the basis used to determine yield for those periods.
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SECURITIES AVAILABLE FOR SALE
         
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)     2011   2011   2011   2011   2010
Securities of U.S. Treasury and federal agencies $ 6,968 13,813 10,523 1,507 1,604
Securities of U.S. states and political subdivisions 32,593 26,970 24,412 21,159 18,654
Mortgage-backed securities:
Federal agencies 96,754 84,716 78,338 75,552 82,037
Residential and commercial     35,986   35,159   33,088   32,728   33,757
Total mortgage-backed securities 132,740 119,875 111,426 108,280 115,794
Other debt securities     46,895   42,925   35,582   31,952   31,413
Total debt securities available for sale 219,196 203,583 181,943 162,898 167,465
Marketable equity securities     3,417   3,593   4,355   5,008   5,189
Total securities available for sale   $ 222,613   207,176   186,298   167,906   172,654
 
FIVE QUARTER LOANS
         
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)     2011   2011   2011   2011   2010
Commercial:
Commercial and industrial $ 167,216 164,510 157,095 150,857 151,284
Real estate mortgage 105,975 104,363 101,458 101,084 99,435
Real estate construction 19,382 19,719 21,374 22,868 25,333
Lease financing 13,117 12,852 12,907 12,937 13,094
Foreign (1)     39,760   38,390   37,855   35,476   32,912
Total commercial     345,450   339,834   330,689   323,222   322,058
Consumer:
Real estate 1-4 family first mortgage 228,894 223,758 222,874 226,509 230,235
Real estate 1-4 family junior lien mortgage 85,991 88,264 89,947 93,041 96,149
Credit card 22,836 21,650 21,191 20,996 22,260
Other revolving credit and installment     86,460   86,600   87,220   87,387   86,565
Total consumer     424,181   420,272   421,232   427,933   435,209
Total loans (net of unearned income) (2)   $ 769,631   760,106   751,921   751,155   757,267
 
(1) Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign if the borrower's primary address is outside of the United States.

(2) Includes $36.7 billion, $37.2 billion, $38.7 billion, $40.0 billion and $41.4 billion of purchased credit-impaired (PCI) loans at December 31, September 30, June 30 and March 31, 2011, and December 31, 2010, respectively. See PURCHASED CREDIT-IMPAIRED LOANS table for detail of PCI loans.

 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
  Dec. 31,   Sept. 30,   June 30,   Mar. 31,   Dec. 31,
(in millions)     2011     2011   2011   2011   2010
Nonaccrual loans:
Commercial:

Commercial and industrial

$ 2,142 2,128 2,393 2,653 3,213
Real estate mortgage 4,085 4,429 4,691 5,239 5,227
Real estate construction 1,890 1,915 2,043 2,239 2,676
Lease financing 53 71 79 95 108
Foreign     47     68   59   86   127
Total commercial     8,217     8,611   9,265   10,312   11,351
Consumer:
Real estate 1-4 family first mortgage 10,913 11,024 11,427 12,143 12,289
Real estate 1-4 family junior lien mortgage 1,975 2,035 2,098 2,235 2,302
Other revolving credit and installment     199     230   255   275   300
Total consumer     13,087     13,289   13,780   14,653   14,891
Total nonaccrual loans (1)(2)(3)     21,304     21,900   23,045   24,965   26,242
As a percentage of total loans 2.77 % 2.88 3.06 3.32 3.47
Foreclosed assets:
GNMA (4) $ 1,319 1,336 1,320 1,457 1,479
Non-GNMA     3,342     3,608   3,541   4,055   4,530
Total foreclosed assets     4,661     4,944   4,861   5,512   6,009
Total nonperforming assets   $ 25,965     26,844   27,906   30,477   32,251
As a percentage of total loans 3.37 % 3.53 3.71 4.06 4.26
 
(1) Also includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
(2) Excludes loans that are accounted for as PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.
(3) Real estate 1-4 family mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status since they are insured or guaranteed.
(4) Consistent with regulatory reporting requirements, foreclosed real estate securing government insured/guaranteed loans is classified as nonperforming. Both principal and interest for government insured/guaranteed loans secured by the foreclosed real estate are collectible because the loans are insured by the FHA or guaranteed by the VA.
 
Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
         
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)     2011   2011   2011   2011   2010
 
Total (excluding PCI)(1): $ 22,569 19,639 17,318 17,901 18,488
Less: FHA insured / VA guaranteed (2) 19,240 16,498 14,474 14,353 14,733
Less: Student loans guaranteed under the FFELP (3)     1,281   1,212   1,014   1,120   1,106
Total, not government insured/guaranteed   $ 2,048   1,929   1,830   2,428   2,649
 
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 153 108 110 338 308
Real estate mortgage 256 207 137 177 104
Real estate construction 89 57 86 156 193
Foreign     6   11   12   16   22
Total commercial     504   383   345   687   627
Consumer:
Real estate 1-4 family first mortgage (4) 781 819 728 858 941
Real estate 1-4 family junior lien mortgage (4) 279 255 286 325 366
Credit card 346 328 334 413 516
Other revolving credit and installment     138   144   137   145   199
Total consumer     1,544   1,546   1,485   1,741   2,022
Total, not government insured/guaranteed   $ 2,048   1,929   1,830   2,428   2,649
 
(1) The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $8.7 billion, $8.9 billion, $9.8 billion, $10.8 billion and $11.6 billion at December 31, September 30, June 30 and March 31, 2011, and December 31, 2010, respectively. These amounts are excluded from the above table as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status.
(2) Represents loans whose repayments are insured by the FHA or guaranteed by the VA.
(3) Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program (FFELP).
(4) Includes mortgages held for sale 90 days or more past due and still accruing.
 
Wells Fargo & Company and Subsidiaries
PURCHASED CREDIT-IMPAIRED (PCI) LOANS
       
Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans predominately represent loans acquired from Wachovia that were deemed to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent LTV percentages. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date.

 

Under the accounting guidance for PCI loans, the excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan, or pool of loans, in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.

 

Subsequent to acquisition, we regularly evaluate our estimates of cash flows expected to be collected. These evaluations, performed quarterly, require the continued usage of key assumptions and estimates, similar to the initial estimate of fair value. If we have probable decreases in the expected cash flows (other than due to a decrease in rate indices), we charge the provision for credit losses, resulting in an increase to the allowance for loan losses. If we have probable and significant increases in the expected cash flows subsequent to establishing an additional allowance, we first reverse any previously established allowance and then increase interest income over the remaining life of the loan, or pool of loans.

 

As a result of PCI loan accounting, certain credit-related ratios cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.

 
  December 31,
(in millions)     2011   2010   2009   2008
Commercial:
Commercial and industrial $ 399 718 1,911 4,580
Real estate mortgage 3,270 2,855 4,137 5,803
Real estate construction 1,745 2,949 5,207 6,462
Foreign     1,353   1,413   1,733   1,859
Total commercial     6,767   7,935   12,988   18,704
Consumer:
Real estate 1-4 family first mortgage 29,746 33,245 38,386 39,214
Real estate 1-4 family junior lien mortgage 206 250 331 728
Other revolving credit and installment     -   -   -   151
Total consumer     29,952   33,495   38,717   40,093
Total PCI loans (carrying value)   $ 36,719   41,430   51,705   58,797
 
Wells Fargo & Company and Subsidiaries
CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS
       
The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference. A nonaccretable difference is established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Substantially all our commercial and industrial, CRE and foreign PCI loans are accounted for as individual loans. Conversely, Pick-a-Pay and other consumer PCI loans have been aggregated into several pools based on common risk characteristics. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Resolutions of loans may include sales to third parties, receipt of payments in settlement with the borrower, or foreclosure of the collateral. Our policy is to remove an individual loan from a pool based on comparing the amount received from its resolution with its contractual amount. Any difference between these amounts is absorbed by the nonaccretable difference. This removal method assumes that the amount received from resolution approximates pool performance expectations. The accretable yield percentage is unaffected by the resolution and any changes in the effective yield for the remaining loans in the pool are addressed by our quarterly cash flow evaluation process for each pool. For loans that are resolved by payment in full, there is no release of the nonaccretable difference for the pool because there is no difference between the amount received at resolution and the contractual amount of the loan. Modified PCI loans are not removed from a pool even if those loans would otherwise be deemed troubled debt restructurings (TDRs). Modified PCI loans that are accounted for individually are considered TDRs, and removed from PCI accounting, if there has been a concession granted in excess of the original nonaccretable difference. The following table provides an analysis of changes in the nonaccretable difference.
 
Other
(in millions)     Commercial   Pick-a-Pay   consumer   Total
Balance, December 31, 2008 $ 10,410 26,485 4,069 40,964
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (330 ) - - (330 )
Loans resolved by sales to third parties (2) (86 ) - (85 ) (171 )

Reclassification to accretable yield for loans with improving credit-related cash flows (3)

(138 ) (27 ) (276 ) (441 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)     (4,853 )   (10,218 )   (2,086 )   (17,157 )
Balance, December 31, 2009 5,003 16,240 1,622 22,865
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (817 ) - - (817 )
Loans resolved by sales to third parties (2) (172 ) - - (172 )

Reclassification to accretable yield for loans with improving credit-related cash flows (3)

(726 ) (2,356 ) (317 ) (3,399 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)     (1,698 )   (2,959 )   (391 )   (5,048 )
Balance, December 31, 2010 1,590 10,925 914 13,429
Addition of nonaccretable difference due to acquisitions 188 - - 188
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (198 ) - - (198 )
Loans resolved by sales to third parties (2) (41 ) - - (41 )

Reclassification to accretable yield for loans with improving credit-related cash flows (3)

(352 ) - (21 ) (373 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)     (258 )   (1,799 )   (241 )   (2,298 )
Balance, December 31, 2011   $ 929     9,126     652     10,707  
                   
Balance, September 30,2011 $ 958 9,643 686 11,287
Addition of nonaccretable difference due to acquisitions 171 - - 171
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (44 ) - - (44 )
Loans resolved by sales to third parties (2) (11 ) - - (11 )

Reclassification to accretable yield for loans with improving credit-related cash flows (3)

(55 ) - - (55 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)     (90 )   (517 )   (34 )   (641 )
Balance, December 31, 2011   $ 929     9,126     652     10,707  
 
(1) Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations.
(2) Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.
(3) Reclassification of nonaccretable difference to accretable yield for loans with increased cash flow estimates will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans.
(4) Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.
 
Wells Fargo & Company and Subsidiaries
CHANGES IN ACCRETABLE YIELD RELATED TO PCI LOANS
       
The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the loan, or pool of loans. The accretable yield is affected by:
 
  • Changes in interest rate indices for variable rate PCI loans – Expected future cash flows are based on variable rates in effect at the time of the regular evaluations of cash flows expected to be collected;
  • Changes in prepayment assumptions – Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and
  • Changes in the expected principal and interest payments over the estimated life – Updates to expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.
 
The change in the accretable yield related to PCI loans is presented in the following table.
Quarter
ended
Dec. 31, Year ended Dec. 31,
(in millions)     2011   2011   2010   2009
Total, beginning of period $ 16,896 16,714 14,559 10,447
Addition of accretable yield due to acquisitions 124 128 - -
Accretion into interest income (1) (551) (2,206) (2,392) (2,601)
Accretion into noninterest income due to sales (2) (1) (189) (43) (5)

Reclassification from nonaccretable difference for loans with improving credit-related cash flows

55 373 3,399 441
  Changes in expected cash flows that do not affect nonaccretable difference (3)     (562)   1,141   1,191   6,277
Total, end of period   $ 15,961   15,961   16,714   14,559
 
(1) Includes accretable yield released as a result of settlements with borrowers, which is included in interest income.
(2) Includes accretable yield released as a result of sales to third parties, which is included in noninterest income
(3) Represents changes in cash flows expected to be collected due to changes in interest rates on variable rate PCI loans, changes in prepayment assumptions and the impact of modifications.
 
CHANGES IN ALLOWANCE FOR PCI LOAN LOSSES
       
When it is estimated that the cash flows expected to be collected have decreased subsequent to acquisition for a PCI loan or pool of loans, an allowance is established and a provision for additional loss is recorded as a charge to income. The following table summarizes the changes in allowance for PCI loan losses.
 
Other
(in millions)     Commercial   Pick-a-Pay