Wells Fargo Reports Record Quarterly Net Income

Q2 Net Income of $4.6 billion; EPS of $0.82, Up 17 Percent from Prior Year

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

  • Continued strong financial results:
    • Record diluted earnings per common share of $0.82, up 38 percent (annualized) from prior quarter
    • Record Wells Fargo net income of $4.6 billion, up 35 percent (annualized) from prior quarter
    • Pre-tax pre-provision profit (PTPP)1 of $8.9 billion, up 12 percent (annualized) from prior quarter
    • Revenue of $21.3 billion, compared with $21.6 billion in prior quarter
    • Positive operating leverage; continued expense control
    • Return on average assets (ROA) of 1.41 percent, up 10 basis points from prior quarter
    • Return on equity (ROE) of 12.86 percent, up 72 basis points from prior quarter
  • Strong loan and deposit growth:
    • Total loans of $775.2 billion at June 30, 2012, up from $766.5 billion at March 31, 2012
    • Core loan portfolio up $13.8 billion from March 31, 20122
    • Completed the acquisitions of BNP Paribas’s North American energy lending business and WestLB’s subscription finance loan portfolio
    • Total average core checking and savings deposits up $12.5 billion from prior quarter
  • Maintained strong capital position:
    • Tier 1 common equity3 under Basel I increased $2.2 billion to $101.7 billion, with Tier 1 common equity ratio of 10.08 percent under Basel I at June 30, 2012. Estimated Tier 1 common equity ratio of 7.78 percent under the latest Basel III capital proposals4
    • Purchased 53 million shares of common stock in second quarter 2012 and an additional estimated 11 million shares through a forward repurchase transaction expected to settle in third quarter 2012
    • Redeemed $1.8 billion of trust preferred securities, with an average coupon of 6.31 percent, on June 15, 2012
    • Paid quarterly common stock dividend of $0.22 per share
  • Solid credit improvement:
    • Net charge-offs were $2.2 billion, a decline of $195 million from prior quarter
    • 1.15 percent (annualized) net charge-off rate, lowest since third quarter 2007
    • Non-performing assets of $24.9 billion, down $1.8 billion from prior quarter
    • Reserve release5 of $400 million (pre-tax) reflected continued improved credit performance

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

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

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

 
Selected Financial Information
 
  Quarter ended
   

June 30,
2012

   

Mar. 31,
2012

 

June 30,
2011

Earnings    
Diluted earnings per common share $ 0.82 0.75 0.70
Wells Fargo net income (in billions) 4.62 4.25 3.95
Return on assets (ROA) 1.41 % 1.31 1.27
Return on equity (ROE) 12.86 12.14 11.92
 
Asset Quality
Net charge-offs as a % of avg. total loans 1.15 1.25 1.52
Allowance as a % of total loans 2.41 2.50 2.83
Allowance as a % of annualized net charge-offs 211 199 187
 
Other
Revenue (in billions) $ 21.29 21.64 20.39
Efficiency ratio 58.2 60.1 61.2
Average loans (in billions) 768.2 768.6 751.3
Average core deposits (in billions) 880.6 870.5 807.5
Net interest margin 3.91 % 3.91 4.01
                 
 

Wells Fargo & Company (NYSE:WFC) reported record net income of $4.6 billion, or $0.82 per diluted common share, for second quarter 2012, up from $3.9 billion, or $0.70 per share, for second quarter 2011, and up from $4.2 billion, or $0.75 per share, for first quarter 2012. For the first six months of 2012, net income was $8.9 billion, or $1.57 per share, compared with $7.7 billion, or $1.37 per share, a year ago.

“Wells Fargo’s strong financial results this quarter again reflect the benefit of our diversified business model,” said Chairman and CEO John Stumpf. “While the economic recovery remains uneven, we continued to meet our customers’ financial needs and benefited from signs of stabilization in the housing market. Our accomplishments reflect our continued focus on key Wells Fargo fundamentals: the way our team members work together to serve customers, and the way we manage risk. The foundation of our business is putting the customer at the center of all we do. Because of that focus, our customers entrusted more of their business with us—we had record quarterly mortgage applications, increases in lending to consumers and businesses, and continued growth in deposits and cross-sell.”

“Our performance was strong across the board,” said Chief Financial Officer Tim Sloan. “In the quarter, we had record net income and earnings per share; expense reduction of approximately $600 million; an improved efficiency ratio; higher PTPP, ROA and ROE; core loan growth of $13.8 billion; and continued improvement in credit metrics.”

Revenue

Revenue was $21.3 billion in the second quarter, compared with $21.6 billion in first quarter 2012. Net interest income increased 1.4 percent from first quarter, and noninterest income declined by $496 million from first quarter because of lower market sensitive revenue, including a decline in trading gains related to deferred compensation plan investments (offset in employee benefits expense). Businesses generating linked-quarter revenue growth included capital finance, capital markets, commercial banking, commercial mortgage servicing, commercial real estate, corporate banking, corporate trust, debit card, equipment finance, global remittance, government and institutional banking, home equity, international, merchant services, real estate capital markets, and wealth management.

Net Interest Income

Net interest income increased to $11.0 billion in the second quarter, up from $10.9 billion in first quarter 2012. Growth in commercial loan interest income and yields was driven by balance growth and higher levels of purchased credit-impaired (PCI) resolution income. The yield and interest income on the available-for-sale securities portfolio increased as short-term, low yielding agency securities were replaced with high quality municipal and agency mortgage-backed securities. Finally, interest expense declined as we redeemed higher cost trust preferred securities. The net interest margin was 3.91 percent, unchanged from first quarter 2012. On a linked quarter basis, the impact of higher variable income, including PCI loan resolution income, was approximately 7 basis points, helping offset pressure on the net interest margin from balance sheet repricing in the current low interest rate environment.

Noninterest Income

Noninterest income was $10.3 billion, compared with $10.7 billion in first quarter 2012. While the Company recorded higher deposit service charges, trust and investment fees, card fees and mortgage banking revenue, the decline from first quarter 2012 was attributable to lower market sensitive revenue, primarily trading gains related to deferred compensation plan investments ($218 million offset in employee benefits expense), as well as $122 million in lower equity gains.

Mortgage banking noninterest income was $2.9 billion, up $23 million from first quarter, on $131 billion of originations, compared with $129 billion of originations in first quarter. The Company provided $669 million for mortgage loan repurchase losses, compared with $430 million in first quarter (included in net gains from mortgage loan origination/sales activities). The increase in the repurchase provision was primarily attributable to an increase in projected demands from government-sponsored entities on loans sold between 2006 and 2008. Net mortgage servicing rights (MSRs) results were a $377 million gain compared with a $58 million loss in first quarter. The ratio of MSRs to related loans serviced for others was 69 basis points and the average note rate on the servicing portfolio was 4.97 percent. The unclosed pipeline at June 30, 2012, was $102 billion, up from $79 billion at March 31, 2012.

The Company had net unrealized securities gains of $9.5 billion at June 30, 2012, compared with a net unrealized gain of $8.7 billion at March 31, 2012. Period-end securities available for sale balances declined $3.4 billion, due primarily to lower-yielding securities being called.

Noninterest Expense

Noninterest expense declined $596 million in the quarter to $12.4 billion, compared with $13.0 billion in first quarter 2012. The decline in noninterest expense was primarily due to lower employee benefits expense, down $559 million from first quarter’s seasonally elevated levels, including $222 million of lower deferred compensation expense (offset in revenue), and reduced merger integration expenses. These reductions were partially offset by higher revenue-based incentive compensation and higher severance expense. Operating losses increased $47 million in the quarter to $524 million, compared with $477 million in first quarter, and included additional litigation accruals relating to the settlement with the Department of Justice announced yesterday.

The Company’s efficiency ratio improved to 58.2 percent from 60.1 percent in first quarter 2012 and 61.2 percent in second quarter 2011. “Our second quarter expense reduction was in-line with our prior estimates and is reflected in our improved efficiency ratio, which is now within the target range of 55 to 59 percent we cited at our 2012 Investor Day,” said Sloan. “Given the continued momentum in revenue opportunities this quarter, including a record number of mortgage applications, we currently expect fourth quarter 2012 expenses to be higher than our previous target of $11.25 billion. Reflecting these higher revenue opportunities, we believe our efficiency ratio is a better measure of our expense management than specific dollar estimates. For the remainder of 2012, we expect noninterest expense to decline from second quarter 2012 levels and that we will operate within our 55 to 59 percent efficiency ratio range.”

Loans

Total loans were $775.2 billion at June 30, 2012, up $8.7 billion from $766.5 billion at March 31, 2012. Excluding runoff in the non-strategic/liquidating portfolio of $5.1 billion, loans in the core portfolio grew $13.8 billion in the quarter. Included in the core loan growth was $6.9 billion of commercial loans acquired in the quarter from WestLB’s subscription finance loan portfolio and BNP Paribas’s North American energy lending business. In addition, core loan growth was driven by strength in key consumer lending businesses: 1-4 family first mortgages (up $1.6 billion from first quarter 2012), credit cards (up $708 million) due in part to stronger new account growth, and auto (up $1.5 billion).

Average loan balances were down slightly in the second quarter, as the acquisition of WestLB’s subscription finance loan portfolio closed toward the end of the quarter. Many loan portfolios had linked-quarter growth in average balances, including asset backed finance, brokerage services, capital finance, commercial banking, corporate banking, dealer services, equipment finance, mortgage, real estate capital markets and retail sales finance.

       
 
  June 30, 2012   March 31, 2012  
(in millions)   Core   Liquidating (1)     Total   Core   Liquidating (1)     Total  
Commercial $ 349,774   4,278   354,052 340,536   5,213   345,749
Consumer     322,297   98,850     421,147   317,753   103,019     420,772  
Total loans   $ 672,071   103,128     775,199   658,289   108,232     766,521  
 
Change from prior quarter:   $ 13,782   (5,104 )   8,678   984   (4,094 )   (3,110 )
 

(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 $880.6 billion, up 9 percent from a year ago and up 5 percent (annualized) from first quarter 2012. Average core checking and savings deposits were $820.3 billion, up 12 percent from a year ago and up 6 percent (annualized) from first quarter 2012. Average mortgage escrow deposits were $35.4 billion, compared with $23.9 billion a year ago and $33.0 billion in first quarter 2012. Average core checking and savings deposits were 93 percent of average core deposits, up from 91 percent a year ago. The average deposit cost for second quarter 2012 was 19 basis points, compared with 20 basis points in first quarter 2012. Average core deposits were 115 percent of average loans, up slightly from first quarter 2012.

Capital

Capital increased in the second quarter, with Tier 1 common equity reaching $101.7 billion under Basel I, or 10.08 percent of risk-weighted assets. Based on our interpretation of the latest Basel III capital proposals, including the notices of proposed rulemaking issued by the federal banking agencies in June 2012, the Tier 1 common equity ratio was an estimated 7.78 percent. In the second quarter, the Company purchased approximately 53 million shares of its common stock and an additional estimated 11 million shares through a forward repurchase transaction expected to settle in third quarter 2012, paid quarterly common stock dividends of $0.22 per share, and redeemed $1.8 billion of trust preferred securities, with an average coupon of 6.31 percent, on June 15, 2012.

 
 
 
(as a percent of total risk-weighted assets)  

June 30,
2012

   

Mar. 31,
2012

 

June 30,
2011

Ratios under Basel I (1):      
Tier 1 common equity (2) 10.08 % 9.98 9.15
Tier 1 capital 11.68 11.78 11.69
Tier 1 leverage 9.25 9.35 9.43
               
 

(1) June 30, 2012, ratios are preliminary.

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

 

Credit Quality

“Credit quality trends continued to show improvement in the second quarter, with reductions in net losses, nonperforming assets, nonaccrual loans, and loans 90 days or more past due and still accruing,” said Chief Risk Officer Mike Loughlin. Second quarter 2012 net charge-offs were $2.2 billion, or 1.15 percent (annualized) of average loans, down from first quarter 2012 net charge-offs of $2.4 billion (1.25 percent). The loan loss reserve release was $400 million, equal to the release in the first quarter. “Credit performance over the past two years has steadily improved and the second quarter results continued that trend. Absent significant deterioration in the economy, we expect continued but more modest improvement for the remainder of the year, and we continue to expect future reserve releases in 2012,” said Loughlin.

 

Net Loan Charge-Offs

 
 

Quarter ended

 
        June 30, 2012     March 31, 2012     December 31, 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 $ 249 0.58 % $ 256 0.62 % $ 310 0.74 %
Real estate mortgage 81 0.31 46 0.17 117 0.44
Real estate construction 17 0.40 67 1.43 (5 ) (0.09 )
Lease financing - - 2 0.06 4 0.13
Foreign     11 0.11   14 0.14   45   0.45
Total commercial     358 0.42   385 0.45   471   0.54
 
Consumer:
Real estate 1-4 family first mortgage 743 1.30 791 1.39 844 1.46
Real estate 1-4 family junior lien mortgage 689 3.38 763 3.62 800 3.64
Credit card 240 4.37 242 4.40 256 4.63
Other revolving credit and installment     170 0.79   214 0.99   269   1.24
Total consumer     1,842 1.76   2,010 1.91   2,169   2.02
Total   $ 2,200 1.15 % $ 2,395 1.25 % $ 2,640   1.36 %
                                           
 

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

 

Nonperforming Assets

Nonperforming assets declined by $1.8 billion, ending the quarter at $24.9 billion, compared with $26.6 billion in first quarter 2012. Nonaccrual loans decreased to $20.6 billion from $22.0 billion in the first quarter, with declines in both commercial and consumer categories. Foreclosed assets were down to $4.3 billion from $4.6 billion in first quarter 2012.

 
Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
         

June 30, 2012

   

March 31, 2012

   

December 31, 2011

($ in millions)  

 

Total
balances

   

As a
% of
total
loans

   

 

Total
balances

 

As a
% of
total
loans

   

 

Total
balances

    As a
% of
total
loans
                 
Commercial:
Commercial and industrial $ 1,549 0.87 % $ 1,726 1.02 % $ 2,142 1.28 %
Real estate mortgage 3,832 3.63 4,081 3.85 4,085 3.85
Real estate construction 1,421 8.08 1,709 9.21 1,890 9.75
Lease financing 43 0.34 45 0.34 53 0.40
Foreign     79   0.20   38 0.10   47   0.12
Total commercial     6,924   1.96   7,599 2.20   8,217   2.38
 
Consumer:
Real estate 1-4 family first mortgage 10,368 4.50 10,683 4.67 10,913 4.77
Real estate 1-4 family junior lien mortgage 3,091 3.82 3,558 4.28 1,975 2.30
Other revolving credit and installment     195   0.22   186 0.21   199   0.23
Total consumer     13,654   3.24   14,427 3.43   13,087   3.09
Total nonaccrual loans     20,578   2.65   22,026 2.87   21,304   2.77
 
Foreclosed assets:
GNMA 1,465 1,352 1,319
Non GNMA     2,842     3,265   3,342  
Total foreclosed assets     4,307     4,617   4,661  
Total nonperforming assets   $ 24,885   3.21 % $ 26,643 3.48 % $ 25,965   3.37 %
 
Change from prior quarter:
Total nonaccrual loans $ (1,448 ) $ 722 $ (596 )
Total nonperforming assets (1,758 ) 678 (879 )
                                             
 

Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $1.4 billion at June 30, 2012, compared with $1.6 billion at March 31, 2012. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $21.5 billion at June 30, 2012, up from $20.9 billion at March 31, 2012, due 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 $18.6 billion at June 30, 2012, down from $19.1 billion at March 31, 2012. The allowance coverage to total loans was 2.41 percent, compared with 2.50 percent in first quarter 2012. The allowance covered 2.11 times annualized second quarter net charge-offs, compared with 1.99 times in the prior quarter. The allowance coverage to nonaccrual loans was 91 percent at June 30, 2012, compared with 87 percent at March 31, 2012. “We believe the allowance was appropriate for losses inherent in the loan portfolio at June 30, 2012,” said Loughlin.

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
(in millions)  

June 30,
2012

 

Mar. 31,
2012

 

June 30,
2011

Community Banking $ 2,535 2,348 2,120
Wholesale Banking 1,881 1,868 1,913
Wealth, Brokerage and Retirement 343 296 337
               
 

More financial information about the business segments is in OPERATING SEGMENT RESULTS table and FIVE QUARTER OPERATING SEGMENT RESULTS table.

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

Selected Financial Information

     
Quarter ended
(in millions)  

June 30,
2012

  Mar. 31,
2012
  June 30,
2011
Total revenue $ 13,092 13,421 12,605
Provision for credit losses 1,573 1,878 1,916
Noninterest expense 7,580 7,825 7,412
Segment net income 2,535 2,348 2,120
 
(in billions)
Average loans 483.9 486.1 497.0
Average assets 746.6 738.3 747.6
Average core deposits 586.1 575.2 552.0
               
 

Community Banking reported net income of $2.5 billion, up $187 million, or 8 percent, from first quarter 2012. Revenue decreased $329 million, or 2 percent, from first quarter 2012, primarily due to lower gains on deferred compensation plan investments (offset in employee benefits expense) and planned runoff of non-strategic loan portfolios, partially offset by growth in deposit service charges, trust and investment fees and debit, credit and merchant card transaction volumes. Noninterest expense decreased $245 million, or 3 percent, from first quarter 2012, due to seasonally higher benefits expense in first quarter and lower deferred compensation expense (offset in revenue), partially offset by higher operating losses and higher severance expense associated with our efficiency and cost save initiatives. The provision for credit losses decreased $305 million from first quarter 2012 as net charge-offs declined $180 million and improved credit performance resulted in a $125 million higher reserve release.

Net income was up $415 million, or 20 percent, from second quarter 2011. Revenue increased $487 million, or 4 percent, from second quarter 2011 as a result of higher volume-related mortgage banking income and deposit growth, partially mitigated by higher equity gains in the prior year, planned runoff of non-strategic loan balances and lower debit card revenue due to regulatory changes enacted in October 2011. Noninterest expense increased $168 million, or 2 percent, from second quarter 2011, largely the result of higher mortgage volume-related expenses, operating losses and increased severance expense associated with efficiency and cost save initiatives. The provision for credit losses decreased $343 million from second quarter 2011 due to a $618 million improvement in net charge-offs, offset in part by a lower reserve release.

Regional Banking

  • Retail banking
    • Achieved new Retail Bank cross-sell milestone of 6.00 products per household for the combined company, up from 5.82; cross-sell in the West reached 6.37, compared with 5.52 in the East6
    • Consumer checking accounts up a net 1.0 percent6
    • Consumer credit card, lines of credit and loan product solutions (sales) in the retail banking stores were up by double digits from the prior year
    • Partner referrals that resulted in a sale, including products such as insurance, mortgage and student lending, were more than 1.5 times the prior year
    • Customer experience ratings exceeded last quarter’s record, as customers rated their experience in our retail banking stores at an all-time high, based on survey results
  • Small Business/Business Banking
    • Business checking accounts up a net 3.8 percent6
    • Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) were more than 1.5 times the prior year
    • $7.4 billion in net new loan commitments to small business customers (primarily with annual revenues less than $20 million) in the first half of 2012, up approximately 32 percent from prior year
  • Online and Mobile Banking
    • 21.1 million active online customers6
    • 8.3 million active mobile customers6

Consumer Lending Group

  • Home Mortgage
    • Originations of $131 billion, up from $129 billion in prior quarter
    • Applications of $208 billion, compared with $188 billion in prior quarter
    • Application pipeline of $102 billion at quarter end, compared with $79 billion at March 31, 2012
    • Residential mortgage servicing portfolio of $1.9 trillion
  • Other Consumer Lending
    • Credit card penetration in retail banking households rose to 31.0 percent6, up from 29.9 percent in the prior year
    • Record auto originations of $6.6 billion, up 6 percent from prior quarter and up 18 percent from prior year

6 Data as of May 2012. Comparisons are May 2012 compared with May 2011.

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

Selected Financial Information

 
     
Quarter ended  
(in millions)   June 30,
2012
  Mar. 31,
2012
  June 30,
2011
 
Total revenue $ 6,117 6,033 5,595
Provision (reversal of provision) for credit losses 188 95 (97 )
Noninterest expense 3,113 3,054 2,761
Segment net income 1,881 1,868 1,913
 
(in billions)
Average loans 270.2 268.6 242.9
Average assets 478.4 467.8 417.3
Average core deposits 220.9 220.9 190.6
                 
 

Wholesale Banking reported net income of $1.9 billion, up $13 million from first quarter 2012. Record revenue of $6.1 billion increased 1 percent from first quarter 2012 as strong growth across many businesses, including capital finance, commercial banking, commercial real estate, corporate banking, capital markets, international and real estate capital markets as well as increased PCI resolutions offset lower trading portfolio and equity gains. Noninterest expense increased $59 million, or 2 percent, from first quarter 2012 due to higher non-personnel expenses related to growth initiatives and compliance and regulatory requirements. The provision for credit losses was $188 million and increased $93 million from first quarter 2012 despite a net charge-off improvement of $32 million. The provision also included a $25 million credit reserve build, compared with a $100 million reserve release in first quarter 2012.

Net income was down $32 million, or 2 percent, from second quarter 2011 as higher revenue was offset by an increase in noninterest expense and the provision for credit losses. Revenue increased $522 million, or 9 percent, from second quarter 2011 driven by broad-based business growth, including from acquisitions, and strong loan and deposit growth. Noninterest expense increased $352 million, or 13 percent, from second quarter 2011 due to higher personnel expenses related to revenue growth and higher operating losses. Despite an improvement of $40 million in net charge-offs, the provision for credit losses rose $285 million from second quarter 2011. The provision included a $25 million credit reserve build, compared with a $300 million reserve release a year ago.

  • 11 percent year-over-year average loan and 15 percent average asset growth. The growth came from nearly all portfolios, including asset backed finance, capital finance, commercial banking, commercial real estate, corporate banking and international
  • Eight straight quarters of average loan growth in Commercial Banking
  • Average core deposits up 16 percent from prior year
  • Investment Banking year to date revenue from commercial customers increased 22 percent from 2011 year to date due to attractive capital markets conditions and continued momentum in cross selling
  • Acquired BNP Paribas’s North American energy lending business in April with nearly $9.4 billion of loan commitments and $3.7 billion in loans outstanding
  • Acquired WestLB’s subscription finance portfolio in June with nearly $6 billion of loan commitments and $3.2 billion in loans outstanding
  • Agreement to acquire Merlin Securities LLC, a prime brokerage services and technology provider. Transaction is expected to close in third quarter 2012
  • Wells Fargo & Company named “Best Trade Bank in USA” for second year in a row by Trade Finance magazine’s online readers poll
  • Wells Fargo Capital Finance named Best Bank for Supply Chain Finance by Trade & Forfaiting Review, a leading international trade finance publication

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

Selected Financial Information

     
Quarter ended
(in millions)  

June 30,
2012

  Mar. 31,
2012
  June 30,
2011
Total revenue $ 2,971 3,062 3,093
Provision for credit losses 37 43 62
Noninterest expense 2,376 2,547 2,486
Segment net income 343 296 337
 
(in billions)
Average loans 42.5 42.5 43.5
Average assets 160.9 161.9 150.7
Average core deposits 134.2 135.6 125.9
               
 

Wealth, Brokerage and Retirement reported net income of $343 million, up $47 million from first quarter 2012. Revenue was $3.0 billion, down 3 percent from first quarter 2012 due to the impact of the equity market decline on deferred compensation plan investment results (offset in noninterest expense). Apart from the $122 million lower deferred compensation plan investment results, all other revenue was up 1 percent driven by higher asset-based fees, partially offset by lower brokerage transaction revenue. Total provision for credit losses decreased $6 million from first quarter 2012, including a reserve release of $10 million in second quarter 2012. Noninterest expense decreased 7 percent from first quarter 2012 driven by lower deferred compensation plan expense. Excluding $118 million lower deferred compensation plan expense, noninterest expense was down 2 percent primarily due to the first quarter 2012 seasonal impact on personnel expenses, partially offset by increased broker commissions on higher production levels.

Net income was up $6 million from second quarter 2011. Revenue was down 4 percent from second quarter 2011 due to lower brokerage transaction revenue, reduced securities gains in the brokerage business and market impact on deferred compensation plan investments, partially offset by growth in managed account fee revenue. Apart from $33 million lower deferred compensation plan results, all other revenue was down 3 percent. Total provision for credit losses decreased $25 million from second quarter 2011. Noninterest expense was down 4 percent from second quarter 2011 driven by a decline in personnel costs largely due to decreased broker commissions, driven by lower production levels, and lower deferred compensation plan expense. Apart from $34 million lower deferred compensation expense, all other noninterest expenses were down 3 percent.

Retail Brokerage

  • Strong deposit growth, with average balances up $12 billion, or 14 percent, from prior year
  • Client assets of $1.2 trillion, down 2 percent with prior year
  • Managed account assets increased $18 billion, or 7 percent, from prior year driven by strong net flows

Wealth Management

  • Client assets of $197 billion, down $8 billion, or 4 percent, from prior year

Retirement

  • Institutional Retirement plan assets of $250 billion, up $3 billion, or 1 percent, from prior year
  • IRA assets of $282 billion, down $4 billion, or 1 percent, from prior year

Conference Call

The Company will host a live conference call on Friday, July 13, at 7 a.m. PDT (10 a.m. EDT). To access the call, please dial 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings and http://us.meeting-stream.com/wellsfargocompany_041312.

A replay of the conference call will be available beginning at approximately noon PDT (3 p.m. EDT) on July 13 through Friday, July 20. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #87775616. The replay will also be available online at wellsfargo.com/invest_relations/earnings.

Cautionary Statement about Forward-Looking Information

In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that this news release contains forward-looking statements about our future financial performance and business. We make forward-looking statements when we use words such as “believe,” “expect,” “anticipate,” “estimate,” “target,” “should,” “may,” “can,” “will,” “outlook,” “project,” “appears” or similar expressions. Forward-looking statements in this news release include, among others, statements about: (i) future credit quality and performance, and the appropriateness of the allowance for loan losses, including our current expectation of future reserve releases in 2012; (ii) our expectations regarding noninterest expense and our targeted efficiency ratio for the remainder of 2012 as part of our expense management initiatives; and (iii) our estimate regarding our Tier 1 common equity ratio under proposed Basel III capital rules as of June 30, 2012.

Do not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. Several factors could cause actual results to differ materially from expectations including: current and future economic and market conditions, including the effects of further declines in housing prices, high unemployment rates, U.S. fiscal debt and budget matters and the sovereign debt crisis and economic difficulties in Europe; our capital requirements (including under regulatory capital standards as determined and interpreted by applicable regulatory authorities such as the proposed Basel III capital rules) and our ability to generate capital internally or raise capital on favorable terms; financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses (including the Dodd-Frank Wall Street Reform and Consumer Protection Act), as well as our ability to mitigate the loss of revenue and income from financial services reform and other regulation and legislation; the extent of success in our loan modification efforts, including the effects of regulatory requirements, or changes in regulatory requirements, relating to loan modifications; the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties; negative effects relating to mortgage servicing and foreclosures, as well as effects associated with our settlement with the Department of Justice and other federal and state government entities related to our mortgage servicing and foreclosure practices, including changes in our procedures or practices and/or industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures; our ability to realize our efficiency ratio target as part of our expense management initiatives when and in the range targeted, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters; a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers; recognition of other-than-temporary impairment on securities held in our available-for-sale portfolio; the effect of the current low interest rate environment or changes in interest rates on our net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; hedging gains or losses; disruptions in the capital markets and reduced investor demand for mortgage loans; our ability to sell more products to our customers; the effect of fluctuations in stock market prices on fee income from our brokerage, asset and wealth management businesses; our election to provide support to our money market funds; changes in the value of our venture capital investments; changes in our accounting policies or in accounting standards or in how accounting standards are to be applied; changes in our credit ratings and changes in the credit ratings of our customers or counterparties; mergers and acquisitions; federal and state regulations; reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations and legal actions; the loss of checking and saving account deposits to other investments such as the stock market; and fiscal and monetary policies of the Federal Reserve Board. There is no assurance that our allowance for credit losses will be adequate to cover future credit losses, especially if housing prices decline and unemployment worsens. Increases in loan charge-offs or in the allowance for credit losses and related provision expense could materially adversely affect our financial results and condition. For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the SEC and available on the SEC’s website at www.sec.gov. Any factor described above or in our SEC reports could, by itself or together with one or more other factors, adversely affect our financial results and condition.

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 has offices in more than 35 countries to support the bank’s customers who conduct business in the global economy. With approximately 265,000 full-time equivalent team members, Wells Fargo serves one in three households in United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2012 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

 
Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS
 
Pages
 

Summary Information

Summary Financial Data 16-17
 

Income

Consolidated Statement of Income 18
Consolidated Statement of Comprehensive Income 19
Condensed Consolidated Statement of Changes in Total Equity 19
Five Quarter Consolidated Statement of Income 20
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 21-22
Noninterest Income and Noninterest Expense 23-24
 

Balance Sheet

Consolidated Balance Sheet 25-26
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 27
Securities Available for Sale 28
 

Loans

Loans 28
Nonperforming Assets 29
Loans 90 Days or More Past Due and Still Accruing 30
Purchased Credit-Impaired Loans 31-33
Pick-A-Pay Portfolio 34
Non-Strategic and Liquidating Loan Portfolios 35
Home Equity Portfolios 35
Changes in Allowance for Credit Losses 36-37
 

Equity

Tier 1 Common Equity 38
 

Operating Segments

Operating Segment Results 39-40
 

Other

Mortgage Servicing and other related data 41-43
     
 
 
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
             
Quarter ended June 30, % Six months ended June 30, %
($ in millions, except per share amounts)     2012     2011   Change         2012   2011   Change  
 
For the Period
Wells Fargo net income $ 4,622 3,948 17 % $ 8,870 7,707 15 %
Wells Fargo net income applicable to common stock 4,403 3,728 18 8,425 7,298 15
Diluted earnings per common share 0.82 0.70 17 1.57 1.37 15
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.41 % 1.27 11 1.36 1.25 9

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

12.86 11.92 8 12.51 11.95 5
Efficiency ratio (1) 58.2 61.2 (5 ) 59.1 61.9 (5 )
Total revenue $ 21,289 20,386 4 $ 42,925 40,715 5
Pre-tax pre-provision profit (PTPP) (2) 8,892 7,911 12 17,535 15,507 13
Dividends declared per common share 0.22 0.12 83 0.44 0.24 83
Average common shares outstanding 5,306.9 5,286.5 - 5,294.9 5,282.7 -
Diluted average common shares outstanding 5,369.9 5,331.7 1 5,354.3 5,329.9 -
Average loans $ 768,223 751,253 2 $ 768,403 752,657 2
Average assets 1,321,584 1,250,945 6 1,312,252 1,246,088 5
Average core deposits (3) 880,636 807,483 9 875,576 802,184 9
Average retail core deposits (4) 624,329 592,974 5 620,445 588,561 5
Net interest margin 3.91 % 4.01 (2 ) 3.91 4.03 (3 )
 
At Period End
Securities available for sale $ 226,846 186,298 22 $ 226,846 186,298 22
Loans 775,199 751,921 3 775,199 751,921 3
Allowance for loan losses 18,320 20,893 (12 ) 18,320 20,893 (12 )
Goodwill 25,406 24,776 3 25,406 24,776 3
Assets 1,336,204 1,259,734 6 1,336,204 1,259,734 6
Core deposits (3) 882,137 808,970 9 882,137 808,970 9
Wells Fargo stockholders' equity 148,070 136,401 9 148,070 136,401 9
Total equity 149,437 137,916 8 149,437 137,916 8
Capital ratios:
Total equity to assets 11.18 % 10.95 2 11.18 10.95 2
Risk-based capital (5):
Tier 1 capital 11.68 11.69 - 11.68 11.69 -
Total capital 14.85 15.41 (4 ) 14.85 15.41 (4 )
Tier 1 leverage (5) 9.25 9.43 (2 ) 9.25 9.43 (2 )
Tier 1 common equity (5)(6) 10.08 9.15 10 10.08 9.15 10
Common shares outstanding 5,275.7 5,278.2 - 5,275.7 5,278.2 -
Book value per common share $ 26.06 23.84 9 $ 26.06 23.84 9
Common stock price:
High 34.59 32.63 6 34.59 34.25 1
Low 29.80 25.26 18 27.94 25.26 11
Period end 33.44 28.06 19 33.44 28.06 19
Team members (active, full-time equivalent) 264,400 266,600 (1 ) 264,400 266,600 (1 )
                                       
 

(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 June 30, 2012, 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
($ in millions, except per share amounts)  

June 30,
2012

   

Mar. 31,
2012

 

Dec. 31,
2011

 

Sept. 30,
2011

 

June 30,
2011

 
For the Quarter
Wells Fargo net income $ 4,622 4,248 4,107 4,055 3,948
Wells Fargo net income applicable to common stock 4,403 4,022 3,888 3,839 3,728
Diluted earnings per common share 0.82 0.75 0.73 0.72 0.70
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.41 % 1.31 1.25 1.26 1.27

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

12.86 12.14 11.97 11.86 11.92
Efficiency ratio (1) 58.2 60.1 60.7 59.5 61.2
Total revenue $ 21,289 21,636 20,605 19,628 20,386
Pre-tax pre-provision profit (PTPP) (2) 8,892 8,643 8,097 7,951 7,911
Dividends declared per common share 0.22 0.22 0.12 0.12 0.12
Average common shares outstanding 5,306.9 5,282.6 5,271.9 5,275.5 5,286.5
Diluted average common shares outstanding 5,369.9 5,337.8 5,317.6 5,319.2 5,331.7
Average loans $ 768,223 768,582 768,563 754,544 751,253
Average assets 1,321,584 1,302,921 1,306,728 1,281,369 1,250,945
Average core deposits (3) 880,636 870,516 864,928 836,845 807,483
Average retail core deposits (4) 624,329 616,569 606,810 599,227 592,974
Net interest margin 3.91 % 3.91 3.89 3.84 4.01
 
At Quarter End
Securities available for sale $ 226,846 230,266 222,613 207,176 186,298
Loans 775,199 766,521 769,631 760,106 751,921
Allowance for loan losses 18,320 18,852 19,372 20,039 20,893
Goodwill 25,406 25,140 25,115 25,038 24,776
Assets 1,336,204 1,333,799 1,313,867 1,304,945 1,259,734
Core deposits (3) 882,137 888,711 872,629 849,632 808,970
Wells Fargo stockholders' equity 148,070 145,516 140,241 137,768 136,401
Total equity 149,437 146,849 141,687 139,244 137,916
Capital ratios:
Total equity to assets 11.18 % 11.01 10.78 10.67 10.95
Risk-based capital (5):
Tier 1 capital 11.68 11.78 11.33 11.26 11.69
Total capital 14.85 15.13 14.76 14.86 15.41
Tier 1 leverage (5) 9.25 9.35 9.03 8.97 9.43
Tier 1 common equity (5)(6) 10.08 9.98 9.46 9.34 9.15
Common shares outstanding 5,275.7 5,301.5 5,262.6 5,272.2 5,278.2
Book value per common share $ 26.06 25.45 24.64 24.13 23.84
Common stock price:
High 34.59 34.59 27.97 29.63 32.63
Low 29.80 27.94 22.61 22.58 25.26
Period end 33.44 34.14 27.56 24.12 28.06
Team members (active, full-time equivalent) 264,400 264,900 264,200 263,800 266,600
                           
 

(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 June 30, 2012, 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 June 30, %

Six months
ended June 30,

%
(in millions, except per share amounts)     2012     2011     Change       2012     2011     Change  
Interest income
Trading assets $ 343 347 (1 ) % $ 720 697 3 %
Securities available for sale 2,147 2,166 (1 ) 4,235 4,330 (2 )
Mortgages held for sale 477 362 32 936 799 17
Loans held for sale 12 17 (29 ) 21 29 (28 )
Loans 9,242 9,361 (1 ) 18,439 18,748 (2 )
Other interest income     133     131   2   258     253   2
Total interest income     12,354     12,384   -   24,609     24,856   (1 )
Interest expense
Deposits 443 594 (25 ) 900 1,209 (26 )
Short-term borrowings 20 20 - 36 46 (22 )
Long-term debt 789 1,009 (22 ) 1,619 2,113 (23 )
Other interest expense     65     83   (22 )   129     159   (19 )
Total interest expense     1,317     1,706   (23 )   2,684     3,527   (24 )
Net interest income 11,037 10,678 3 21,925 21,329 3
Provision for credit losses     1,800     1,838   (2 )   3,795     4,048   (6 )
Net interest income after provision for credit losses     9,237     8,840   4   18,130     17,281   5
Noninterest income
Service charges on deposit accounts 1,139 1,074 6 2,223 2,086 7
Trust and investment fees 2,898 2,944 (2 ) 5,737 5,860 (2 )
Card fees 704 1,003 (30 ) 1,358 1,960 (31 )
Other fees 1,134 1,023 11 2,229 2,012 11
Mortgage banking 2,893 1,619 79 5,763 3,635 59
Insurance 522 568 (8 ) 1,041 1,071 (3 )
Net gains from trading activities 263 414 (36 ) 903 1,026 (12 )
Net losses on debt securities available for sale (61 ) (128 ) (52 ) (68 ) (294 ) (77 )
Net gains from equity investments 242 724 (67 ) 606 1,077 (44 )
Operating leases 120 103 17 179 180 (1 )
Other     398     364   9   1,029     773   33
Total noninterest income     10,252     9,708   6   21,000     19,386   8
Noninterest expense
Salaries 3,705 3,584 3 7,306 7,038 4
Commission and incentive compensation 2,354 2,171 8 4,771 4,518 6
Employee benefits 1,049 1,164 (10 ) 2,657 2,556 4
Equipment 459 528 (13 ) 1,016 1,160 (12 )
Net occupancy 698 749 (7 ) 1,402 1,501 (7 )
Core deposit and other intangibles 418 464 (10 ) 837 947 (12 )
FDIC and other deposit assessments 333 315 6 690 620 11
Other     3,381     3,500   (3 )   6,711     6,868   (2 )
Total noninterest expense     12,397     12,475   (1 )   25,390     25,208   1
Income before income tax expense 7,092 6,073 17 13,740 11,459 20
Income tax expense     2,371     2,001   18   4,699     3,573   32
Net income before noncontrolling interests 4,721 4,072 16 9,041 7,886 15
Less: Net income from noncontrolling interests     99     124   (20 )   171     179   (4 )
Wells Fargo net income   $ 4,622     3,948   17 $ 8,870     7,707   15
Less: Preferred stock dividends and other     219     220   -   445     409   9
Wells Fargo net income applicable to common stock   $ 4,403     3,728   18 $ 8,425     7,298   15
Per share information
Earnings per common share $ 0.83 0.70 19 $ 1.59 1.38 15
Diluted earnings per common share 0.82 0.70 17 1.57 1.37 15
Dividends declared per common share 0.22 0.12 83 0.44 0.24 83
Average common shares outstanding 5,306.9 5,286.5 - 5,294.9 5,282.7 -
Diluted average common shares outstanding 5,369.9 5,331.7 1 5,354.3 5,329.9 -
                                           
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
           
Six months
Quarter ended June 30, % ended June 30, %
(in millions)     2012     2011     Change       2012     2011     Change
Wells Fargo net income   $ 4,622     3,948     17   %   $ 8,870     7,707   15 %
Other comprehensive income, before tax:
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period (56 ) 5 NM (46 ) 29 NM
Reclassification of net gains included in net income (10 ) - - (10 ) - -
Securities available for sale:
Net unrealized gains arising during the period 831 631 32 2,705 1,129 140
Reclassification of net gains included in net income (23 ) (234 ) (90 ) (249 ) (183 ) 36
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period (3 ) 141 NM 39 137 (72 )

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

(99 ) (157 ) (37 ) (206 ) (313 ) (34 )
Defined benefit plans adjustment:
Net actuarial losses arising during the period (12 ) (2 ) 500 (17 ) (3 ) 467

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

    40     24   67   76     48   58
Other comprehensive income, before tax 668 408 64 2,292 844 172
Income tax expense related to OCI     (255 )   (7 ) NM   (866 )   (164 ) 428
Other comprehensive income, net of tax 413 401 3 1,426 680 110
Less: Other comprehensive income from noncontrolling interests     -     -   -   4     (4 ) NM
Wells Fargo other comprehensive income, net of tax     413     401   3   1,422     684   108
 
Wells Fargo comprehensive income 5,035 4,349 16 10,292 8,391 23
Comprehensive income from noncontrolling interests     99     124   (20 )   175     175   -
Total comprehensive income   $ 5,134     4,473     15       $ 10,467     8,566     22  
 
NM - Not meaningful
 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
   
Six months ended June 30,
(in millions)     2012     2011  
Balance, beginning of period $ 141,687 127,889
Cumulative effect of fair value election for certain residential mortgage servicing rights     2     -  
Balance, beginning of period - adjusted 141,689 127,889
Wells Fargo net income 8,870 7,707
Wells Fargo other comprehensive income, net of tax 1,422 684
Common stock issued 1,311 801
Common stock repurchased (1) (2,101 ) (1,072 )
Preferred stock released by ESOP 677 660
Preferred stock issued - 2,501
Common stock dividends (2,336 ) (1,269 )
Preferred stock dividends and other (445 ) (409 )
Noncontrolling interests and other, net     350     424  
Balance, end of period   $ 149,437     137,916  
 

(1) For the six months ended June 30, 2012, includes $350 million related to a private forward repurchase transaction entered into in second quarter 2012 that is expected to settle in third quarter 2012 for an estimated 11 million shares of common stock.

 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
           
  Quarter ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions, except per share amounts)     2012   2012   2011   2011   2011
Interest income
Trading assets $ 343 377 400 343 347
Securities available for sale 2,147 2,088 2,092 2,053 2,166
Mortgages held for sale 477 459 456 389 362
Loans held for sale 12 9 16 13 17
Loans 9,242 9,197 9,275 9,224 9,361
Other interest income     133     125     139   156     131  
Total interest income     12,354     12,255     12,378   12,178     12,384  
Interest expense
Deposits 443 457 507 559 594
Short-term borrowings 20 16 14 20 20
Long-term debt 789 830 885 980 1,009
Other interest expense     65     64     80   77     83  
Total interest expense     1,317     1,367     1,486   1,636     1,706  
Net interest income 11,037 10,888 10,892 10,542 10,678
Provision for credit losses     1,800     1,995     2,040   1,811     1,838  
Net interest income after provision for credit losses     9,237     8,893     8,852   8,731     8,840  
Noninterest income
Service charges on deposit accounts 1,139 1,084 1,091 1,103 1,074
Trust and investment fees 2,898 2,839 2,658 2,786 2,944
Card fees 704 654 680 1,013 1,003
Other fees 1,134 1,095 1,096 1,085 1,023
Mortgage banking 2,893 2,870 2,364 1,833 1,619
Insurance 522 519 466 423 568
Net gains (losses) from trading activities 263 640 430 (442 ) 414
Net gains (losses) on debt securities available for sale (61 ) (7 ) 48 300 (128 )
Net gains from equity investments 242 364 61 344 724
Operating leases 120 59 60 284 103
Other     398     631     759   357     364  
Total noninterest income     10,252     10,748     9,713   9,086     9,708  
Noninterest expense
Salaries 3,705 3,601 3,706 3,718 3,584
Commission and incentive compensation 2,354 2,417 2,251 2,088 2,171
Employee benefits 1,049 1,608 1,012 780 1,164
Equipment 459 557 607 516 528
Net occupancy 698 704 759 751 749
Core deposit and other intangibles 418 419 467 466 464
FDIC and other deposit assessments 333 357 314 332 315
Other     3,381     3,330     3,392   3,026     3,500  
Total noninterest expense     12,397     12,993     12,508   11,677     12,475  
Income before income tax expense 7,092 6,648 6,057 6,140 6,073
Income tax expense     2,371     2,328     1,874   1,998     2,001  
Net income before noncontrolling interests 4,721 4,320 4,183 4,142 4,072
Less: Net income from noncontrolling interests     99     72     76   87     124  
Wells Fargo net income   $ 4,622     4,248     4,107   4,055     3,948  
Less: Preferred stock dividends and other     219     226     219   216     220  
Wells Fargo net income applicable to common stock   $ 4,403     4,022     3,888   3,839     3,728  
Per share information
Earnings per common share $ 0.83 0.76 0.74 0.73 0.70
Diluted earnings per common share 0.82 0.75 0.73 0.72 0.70
Dividends declared per common share 0.22 0.22 0.12 0.12 0.12
Average common shares outstanding 5,306.9 5,282.6 5,271.9 5,275.5 5,286.5
Diluted average common shares outstanding 5,369.9 5,337.8 5,317.6 5,319.2 5,331.7
 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
           
Quarter ended June 30,
              2012             2011
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

$ 71,250 0.47 % $ 83 98,519 0.32 % $ 80
Trading assets 42,614 3.27 348 38,015 3.71 352
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 1,954 1.60 8 2,058 2.33 12
Securities of U.S. states and political subdivisions 34,560 4.39 379 22,536 5.35 302
Mortgage-backed securities:
Federal agencies 95,031 3.37 800 70,891 4.76 844
Residential and commercial     33,870 6.97   591 29,981 8.86   664
Total mortgage-backed securities 128,901 4.32 1,391 100,872 5.98 1,508
Other debt and equity securities     48,915 4.39   535 34,580 5.81   502
Total securities available for sale 214,330 4.32 2,313 160,046 5.81 2,324
Mortgages held for sale (4) 49,528 3.86 477 30,674 4.73 362
Loans held for sale (4) 833 5.48 12 1,356 5.05 17
Loans:
Commercial:
Commercial and industrial 171,776 4.21 1,801 153,630 4.60 1,761
Real estate mortgage 105,509 4.60 1,208 101,437 4.16 1,051
Real estate construction 17,943 4.96 221 21,987 4.64 254
Lease financing 12,890 6.86 221 12,899 7.72 249
Foreign     38,917 2.57 249 36,445 2.65   241
Total commercial     347,035 4.28 3,700 326,398 4.37   3,556
Consumer:
Real estate 1-4 family first mortgage 230,065 4.62 2,658 224,873 4.97 2,792
Real estate 1-4 family junior lien mortgage 82,076 4.30 878 91,934 4.25 975
Credit card 22,065 12.70 697 20,954 12.97 679
Other revolving credit and installment     86,982 6.09   1,317 87,094 6.32   1,372
Total consumer     421,188 5.29   5,550 424,855 5.48   5,818
Total loans (4) 768,223 4.83 9,250 751,253 5.00 9,374
Other     4,486 4.56   51 4,997 4.10   52
Total earning assets   $ 1,151,264 4.37 % $ 12,534 1,084,860 4.64 % $ 12,561
Funding sources
Deposits:
Interest-bearing checking $ 30,440 0.07 % $ 5 53,344 0.09 % $ 12
Market rate and other savings 500,327 0.12 152 455,126 0.20 226
Savings certificates 60,341 1.34 200 72,100 1.42 256
Other time deposits 12,803 1.83 59 12,988 2.03 67
Deposits in foreign offices     65,587 0.17   27 57,899 0.23   33
Total interest-bearing deposits 669,498 0.27 443 651,457 0.37 594
Short-term borrowings 51,698 0.19 24 53,340 0.18 24
Long-term debt 127,660 2.48 789 145,431 2.78 1,009
Other liabilities     10,408 2.48   65 10,978 3.03   83
Total interest-bearing liabilities 859,264 0.62 1,321 861,206 0.80 1,710
Portion of noninterest-bearing funding sources     292,000 -   - 223,654 -   -
Total funding sources   $ 1,151,264   0.46   1,321 1,084,860   0.63   1,710

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

3.91 %   $ 11,213 4.01 %   $ 10,851
Noninterest-earning assets
Cash and due from banks $ 16,200 17,373
Goodwill 25,332 24,773
Other     128,788 123,939
Total noninterest-earning assets   $ 170,320 166,085
Noninterest-bearing funding sources
Deposits $ 254,442 199,339
Other liabilities 58,441 53,169
Total equity 149,437 137,231
Noninterest-bearing funding sources used to fund earning assets     (292,000) (223,654)
Net noninterest-bearing funding sources   $ 170,320 166,085
Total assets   $ 1,321,584 1,250,945
                                   
 

(1) Our average prime rate was 3.25% for the quarters ended June 30, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.47% and 0.26% for the same quarters, respectively.

(2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) Includes taxable-equivalent adjustments of $176 million and $173 million for the quarters ended June 30, 2012 and 2011, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
           
Six months ended June 30,
              2012             2011
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

$ 63,635 0.49 % $ 156 90,994 0.34 % $ 152
Trading assets 43,190 3.39 731 37,711 3.76 708
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 3,875 1.13 22 1,804 2.56 23
Securities of U.S. states and political subdivisions 33,578 4.45 747 21,220 5.39 572
Mortgage-backed securities:
Federal agencies 93,165 3.43 1,597 70,656 4.74 1,676
Residential and commercial     34,201   6.89   1,178 30,104   9.28   1,396
Total mortgage-backed securities 127,366 4.36 2,775 100,760 6.10 3,072
Other debt and equity securities     49,658   4.10   1,015 34,093   5.68   967
Total securities available for sale 214,477 4.26 4,559 157,877 5.87 4,634
Mortgages held for sale (4) 48,218 3.88 936 34,686 4.61 799
Loans held for sale (4) 790 5.29 21 1,167 4.98 29
Loans:
Commercial:
Commercial and industrial 169,279 4.20 3,534 151,849 4.62 3,484
Real estate mortgage 105,750 4.33 2,280 100,621 4.04 2,018
Real estate construction 18,337 4.87 444 23,128 4.44 509
Lease financing 13,009 7.89 513 12,959 7.78 504
Foreign     40,042   2.54   507 35,050   2.73   476
Total commercial     346,417   4.22   7,278 323,607   4.35   6,991
Consumer:
Real estate 1-4 family first mortgage 229,859 4.66 5,346 227,208 4.99 5,659
Real estate 1-4 family junior lien mortgage 83,397 4.28 1,778 93,313 4.30 1,993
Credit card 22,097 12.81 1,408 21,230 13.08 1,388
Other revolving credit and installment     86,633   6.14   2,646 87,299   6.34   2,743
Total consumer     421,986   5.31   11,178 429,050   5.51   11,783
Total loans (4) 768,403 4.82 18,456 752,657 5.01 18,774
Other     4,545   4.49   103 5,111   4.00   102
Total earning assets   $ 1,143,258   4.38 % $ 24,962 1,080,203   4.69 % $ 25,198
Funding sources
Deposits:
Interest-bearing checking $ 31,299 0.06 % $ 10 55,909 0.09 % $ 26
Market rate and other savings 498,177 0.12 305 449,388 0.21 463
Savings certificates 61,515 1.35 413 73,229 1.41 511
Other time deposits 12,727 1.88 119 13,417 2.14 143
Deposits in foreign offices     65,217   0.16   53 57,687   0.23   66

Total interest-bearing deposits

668,935 0.27 900 649,630 0.38 1,209
Short-term borrowings 50,040 0.17 43 54,041 0.20 54
Long-term debt 127,599 2.54 1,619 147,774 2.86 2,113
Other liabilities     10,105   2.55   129 10,230   3.13   159
Total interest-bearing liabilities 856,679 0.63 2,691 861,675 0.82 3,535
Portion of noninterest-bearing funding sources     286,579   -   - 218,528   -   -
Total funding sources   $ 1,143,258     0.47   2,691 1,080,203     0.66   3,535

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

3.91 %   $ 22,271 4.03 %   $ 21,663
Noninterest-earning assets
Cash and due from banks $ 16,587 17,367
Goodwill 25,230 24,774
Other     127,177   123,744  
Total noninterest-earning assets   $ 168,994   165,885  
Noninterest-bearing funding sources
Deposits $ 250,528 196,237
Other liabilities 57,821 54,237
Total equity 147,224 133,939
Noninterest-bearing funding sources used to fund earning assets     (286,579 ) (218,528 )
Net noninterest-bearing funding sources   $ 168,994   165,885  
Total assets   $ 1,312,252   1,246,088  
                                   
 
(1) Our average prime rate was 3.25% for the six months ended June 30, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.49% and 0.29% for the same periods, respectively.
(2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) Includes taxable-equivalent adjustments of $346 million and $334 million for the six months ended June 30, 2012 and 2011, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
 
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
           
Six months
Quarter ended June 30, %   ended June 30, %
(in millions)     2012     2011     Change       2012     2011     Change
Service charges on deposit accounts $ 1,139 1,074 6 % $ 2,223 2,086 7 %
Trust and investment fees:
Trust, investment and IRA fees 1,041 1,020 2 2,065 2,080 (1 )
Commissions and all other fees     1,857     1,924   (3 )   3,672     3,780   (3 )
Total trust and investment fees     2,898     2,944   (2 )   5,737     5,860   (2 )
Card fees 704 1,003 (30 ) 1,358 1,960 (31 )
Other fees:
Cash network fees 120 94 28 238 175 36
Charges and fees on loans 427 404 6 872 801 9
Processing and all other fees     587     525   12   1,119     1,036   8
Total other fees     1,134     1,023   11   2,229     2,012   11
Mortgage banking:
Servicing income, net 679 877 (23 ) 931 1,743 (47 )
Net gains on mortgage loan origination/sales activities     2,214     742   198   4,832     1,892   155
Total mortgage banking     2,893     1,619   79   5,763     3,635   59
Insurance 522 568 (8 ) 1,041 1,071 (3 )
Net gains from trading activities 263 414 (36 ) 903 1,026 (12 )
Net losses on debt securities available for sale (61 ) (128 ) (52 ) (68 ) (294 ) (77 )
Net gains from equity investments 242 724 (67 ) 606 1,077 (44 )
Operating leases 120 103 17 179 180 (1 )
All other     398     364   9   1,029     773   33
Total   $ 10,252     9,708     6       $ 21,000     19,386     8  
 
NONINTEREST EXPENSE
           
Six months
  Quarter ended June 30, %   ended June 30, %
(in millions)     2012   2011   Change       2012   2011   Change
Salaries $ 3,705 3,584 3 % $ 7,306 7,038 4 %
Commission and incentive compensation 2,354 2,171 8 4,771 4,518 6
Employee benefits 1,049 1,164 (10 ) 2,657 2,556 4
Equipment 459 528 (13 ) 1,016 1,160 (12 )
Net occupancy 698 749 (7 ) 1,402 1,501 (7 )
Core deposit and other intangibles 418 464 (10 ) 837 947 (12 )
FDIC and other deposit assessments 333 315 6 690 620 11
Outside professional services 658 659 - 1,252 1,239 1
Contract services 236 341 (31 ) 539 710 (24 )
Foreclosed assets 289 305 (5 ) 593 713 (17 )
Operating losses 524 428 22 1,001 900 11
Postage, stationery and supplies 195 236 (17 ) 411 471 (13 )
Outside data processing 233 232 - 449 452 (1 )
Travel and entertainment 218 205 6 420 411 2
Advertising and promotion 144 166 (13 ) 266 282 (6 )
Telecommunications 127 132 (4 ) 251 266 (6 )
Insurance 183 201 (9 ) 340 334 2
Operating leases 27 31 (13 ) 55 55 -
All other     547   564 (3 )   1,134   1,035 10
Total   $ 12,397   12,475   (1 )     $ 25,390   25,208   1  
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME  
         
  Quarter ended  
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)     2012     2012     2011   2011     2011  
Service charges on deposit accounts $ 1,139 1,084 1,091 1,103 1,074
Trust and investment fees:
Trust, investment and IRA fees 1,041 1,024 1,000 1,019 1,020
Commissions and all other fees     1,857     1,815     1,658   1,767     1,924  
Total trust and investment fees     2,898     2,839     2,658   2,786     2,944  
Card fees 704 654 680 1,013 1,003
Other fees:
Cash network fees 120 118 109 105 94
Charges and fees on loans 427 445 402 438 404
Processing and all other fees     587     532     585   542     525  
Total other fees     1,134     1,095     1,096   1,085     1,023  
Mortgage banking:
Servicing income, net 679 252 493 1,030 877
Net gains on mortgage loan origination/sales activities     2,214     2,618     1,871   803     742  
Total mortgage banking     2,893     2,870     2,364   1,833     1,619  
Insurance 522 519 466 423 568
Net gains (losses) from trading activities 263 640 430 (442 ) 414
Net gains (losses) on debt securities available for sale (61 ) (7 ) 48 300 (128 )
Net gains from equity investments 242 364 61 344 724
Operating leases 120 59 60 284 103
All other     398     631     759   357     364  
Total   $ 10,252     10,748     9,713   9,086     9,708  
 
FIVE QUARTER NONINTEREST EXPENSE                              
 
  Quarter ended  
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)     2012     2012     2011   2011     2011  
Salaries $ 3,705 3,601 3,706 3,718 3,584
Commission and incentive compensation 2,354 2,417 2,251 2,088 2,171
Employee benefits 1,049 1,608 1,012 780 1,164
Equipment 459 557 607 516 528
Net occupancy 698 704 759 751 749
Core deposit and other intangibles 418 419 467 466 464
FDIC and other deposit assessments 333 357 314 332 315
Outside professional services 658 594 813 640 659
Contract services 236 303 356 341 341
Foreclosed assets 289 304 370 271 305
Operating losses 524 477 163 198 428
Postage, stationery and supplies 195 216 231 240 236
Outside data processing 233 216 257 226 232
Travel and entertainment 218 202 212 198 205
Advertising and promotion 144 122 166 159 166
Telecommunications 127 124 129 128 132
Insurance 183 157 87 94 201
Operating leases 27 28 28 29 31
All other     547     587     580   502     564  
Total   $ 12,397     12,993     12,508   11,677     12,475  
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
     
June 30, Dec. 31, %
(in millions, except shares)     2012     2011     Change  
Assets
Cash and due from banks $ 16,811 19,440 (14 ) %
Federal funds sold, securities purchased under resale agreements and other short-term investments 74,635 44,367 68
Trading assets 64,419 77,814 (17 )
Securities available for sale 226,846 222,613 2
Mortgages held for sale (includes $46,621 and $44,791 carried at fair value) 50,462 48,357 4
Loans held for sale (includes $730 and $1,176 carried at fair value) 853 1,338 (36 )
 
Loans (includes $6,083 and $5,916 carried at fair value) 775,199 769,631 1
Allowance for loan losses     (18,320 )   (19,372 ) (5 )
Net loans     756,879     750,259   1
Mortgage servicing rights:
Measured at fair value 12,081 12,603 (4 )
Amortized 1,130 1,408 (20 )
Premises and equipment, net 9,317 9,531 (2 )
Goodwill 25,406 25,115 1
Other assets     97,365     101,022   (4 )
Total assets   $ 1,336,204     1,313,867   2
Liabilities
Noninterest-bearing deposits $ 253,999 244,003 4
Interest-bearing deposits     674,934     676,067   -
Total deposits 928,933 920,070 1
Short-term borrowings 56,023 49,091 14
Accrued expenses and other liabilities 76,827 77,665 (1 )
Long-term debt (includes $208 and $0 carried at fair value)     124,984     125,354   -
Total liabilities     1,186,767     1,172,180   1
Equity
Wells Fargo stockholders' equity:
Preferred stock 11,694 11,431 2

Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,432,624,738 and 5,358,522,061 shares

9,054 8,931 1
Additional paid-in capital 58,091 55,957 4
Retained earnings 70,456 64,385 9
Cumulative other comprehensive income 4,629 3,207 44
Treasury stock – 156,892,121 shares and 95,910,425 shares (4,638 ) (2,744 ) 69
Unearned ESOP shares     (1,216 )   (926 ) 31
Total Wells Fargo stockholders' equity 148,070 140,241 6
Noncontrolling interests     1,367     1,446   (5 )
Total equity     149,437     141,687   5
Total liabilities and equity   $ 1,336,204     1,313,867     2  
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET  
         
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)     2012     2012     2011     2011     2011  
Assets
Cash and due from banks $ 16,811 17,000 19,440 18,314 24,059

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

74,635 74,143 44,367 89,804 88,406
Trading assets 64,419 75,696 77,814 57,786 54,770
Securities available for sale 226,846 230,266 222,613 207,176 186,298
Mortgages held for sale 50,462 43,449 48,357 42,704 31,254
Loans held for sale 853 958 1,338 743 1,512
 
Loans 775,199 766,521 769,631 760,106 751,921
Allowance for loan losses     (18,320 )   (18,852 )   (19,372 )   (20,039 )   (20,893 )
Net loans     756,879     747,669     750,259     740,067     731,028  
Mortgage servicing rights:
Measured at fair value 12,081 13,578 12,603 12,372 14,778
Amortized 1,130 1,074 1,408 1,397 1,422
Premises and equipment, net 9,317 9,291 9,531 9,607 9,613
Goodwill 25,406 25,140 25,115 25,038 24,776
Other assets     97,365     95,535     101,022     99,937     91,818  
Total assets   $ 1,336,204     1,333,799     1,313,867     1,304,945     1,259,734  
Liabilities
Noninterest-bearing deposits $ 253,999 255,013 244,003 229,863 202,143
Interest-bearing deposits     674,934     675,254     676,067     665,565     651,492  
Total deposits 928,933 930,267 920,070 895,428 853,635
Short-term borrowings 56,023 50,964 49,091 50,775 53,881
Accrued expenses and other liabilities 76,827 75,967 77,665 86,284 71,430
Long-term debt     124,984     129,752     125,354     133,214     142,872  
Total liabilities     1,186,767     1,186,950     1,172,180     1,165,701     1,121,818  
Equity
Wells Fargo stockholders' equity:
Preferred stock 11,694 12,101 11,431 11,566 11,730
Common stock 9,054 9,008 8,931 8,902 8,876
Additional paid-in capital 58,091 57,569 55,957 55,495 55,226
Retained earnings 70,456 67,239 64,385 61,135 57,942
Cumulative other comprehensive income 4,629 4,216 3,207 3,828 5,422
Treasury stock (4,638 ) (2,958 ) (2,744 ) (2,087 ) (1,546 )
Unearned ESOP shares     (1,216 )   (1,659 )   (926 )   (1,071 )   (1,249 )
Total Wells Fargo stockholders' equity 148,070 145,516 140,241 137,768 136,401
Noncontrolling interests     1,367     1,333     1,446     1,476     1,515  
Total equity     149,437     146,849     141,687     139,244     137,916  
Total liabilities and equity   $ 1,336,204     1,333,799     1,313,867     1,304,945     1,259,734  
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
 
  Quarter ended
  June 30, 2012     Mar. 31, 2012     Dec. 31, 2011     Sept. 30, 2011     June 30, 2011

 

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

$ 71.3 0.47

%

$ 56.0 0.52 % $ 68.0 0.52 % $ 98.9 0.42 % $ 98.5 0.32 %
Trading assets 42.6 3.27 43.8 3.50 45.5 3.57 37.9 3.67 38.0 3.71
Securities available for sale (2):
Securities of U.S. Treasury and federal agencies 2.0 1.60 5.8 0.97 8.7 0.99 9.6 1.02 2.0 2.33
Securities of U.S. states and political subdivisions 34.5 4.39 32.6 4.52 28.0 4.80 25.6 4.93 22.5 5.35
Mortgage-backed securities:

Federal agencies

95.0 3.37 91.3 3.49 84.3 3.68 72.8 4.41 70.9 4.76
Residential and commercial   33.9   6.97   34.5   6.80   34.7   7.05   32.6   7.46   30.0   8.86
Total mortgage-backed securities 128.9 4.32 125.8 4.40 119.0 4.66 105.4 5.36 100.9 5.98
Other debt and equity securities   48.9   4.39   50.4   3.82   47.3   4.38   38.9   4.69   34.6   5.81
Total securities available for sale 214.3 4.32 214.6 4.19 203.0 4.46 179.5 4.92 160.0 5.81
Mortgages held for sale 49.5 3.86 46.9 3.91 44.8 4.07 34.6 4.49 30.7 4.73
Loans held for sale 0.9 5.48 0.8 5.09 1.1 5.84 1.0 5.21 1.3 5.05
Loans:
Commercial:
Commercial and industrial 171.8 4.21 166.8 4.18 166.9 4.08 159.6 4.22 153.6 4.60
Real estate mortgage 105.5 4.60 106.0 4.07 105.2 4.26 102.4 3.93 101.5 4.16
Real estate construction 17.9 4.96 18.7 4.79 19.6 4.61 20.5 6.12 22.0 4.64
Lease financing 12.9 6.86 13.1 8.89 12.9 7.41 13.0 7.21 12.9 7.72
Foreign   38.9   2.57   41.2   2.52   38.8   2.39   38.2   2.42   36.4   2.65
Total commercial   347.0   4.28   345.8   4.16   343.4   4.10   333.7   4.16   326.4   4.37
Consumer:
Real estate 1-4 family first mortgage 230.0 4.62 229.7 4.69 229.8 4.74 223.8 4.83 224.9 4.97
Real estate 1-4 family junior lien mortgage 82.1 4.30 84.7 4.27 87.2 4.34 89.1 4.37 91.9 4.25
Credit card 22.1 12.70 22.1 12.93 21.9 12.96 21.5 12.96 21.0 12.97
Other revolving credit and installment   87.0   6.09   86.3   6.19   86.3   6.23   86.5   6.25   87.1   6.32
Total consumer   421.2   5.29   422.8   5.34   425.2   5.39   420.9   5.44   424.9   5.48
Total loans 768.2 4.83 768.6 4.81 768.6 4.81 754.6 4.87 751.3 5.00
Other   4.5   4.56   4.6   4.42   4.7   4.32   4.9   4.18   5.0   4.10
Total earning assets $ 1,151.3   4.37 % $ 1,135.3   4.39 % $ 1,135.7   4.41 % $ 1,111.4   4.43 % $ 1,084.8   4.64 %
Funding sources
Deposits:
Interest-bearing checking $ 30.4 0.07 % $ 32.2 0.05 % $ 35.3 0.06 % $ 44.0 0.07 % $ 53.3 0.09 %
Market rate and other savings 500.3 0.12 496.0 0.12 485.1 0.14 473.4 0.17 455.1 0.20
Savings certificates 60.4 1.34 62.7 1.36 64.9 1.43 67.6 1.47 72.1 1.42
Other time deposits 12.8 1.83 12.7 1.93 12.9 1.85 12.8 2.02 13.0 2.03
Deposits in foreign offices   65.6   0.17   64.8   0.16   67.2   0.20   63.5   0.23   57.9   0.23
Total interest-bearing deposits 669.5 0.27 668.4 0.27 665.4 0.30 661.3 0.34 651.4 0.37
Short-term borrowings 51.7 0.19 48.4 0.15 48.7 0.14 50.4 0.18 53.3 0.18
Long-term debt 127.7 2.48 127.5 2.60 129.4 2.73 139.5 2.81 145.5 2.78
Other liabilities   10.4   2.48   9.8   2.63   12.2   2.60   11.2   2.75   11.0   3.03
Total interest-bearing liabilities 859.3 0.62 854.1 0.64 855.7 0.69 862.4 0.76 861.2 0.80
Portion of noninterest-bearing funding sources   292.0   -   281.2   -   280.0   -   249.0   -   223.6   -
Total funding sources $ 1,151.3   0.46 $ 1,135.3   0.48 $ 1,135.7   0.52 $ 1,111.4   0.59 $ 1,084.8   0.63

Net interest margin on a taxable-equivalent basis

3.91 % 3.91 % 3.89 % 3.84 % 4.01 %
Noninterest-earning assets
Cash and due from banks $ 16.2 17.0 17.7 17.1 17.4
Goodwill 25.3 25.1 25.1 25.0 24.8
Other   128.8     125.5     128.2     127.9     123.9  
Total noninterest-earnings assets $ 170.3     167.6     171.0     170.0     166.1  
Noninterest-bearing funding sources
Deposits $ 254.5 246.6 246.7 221.2 199.3
Other liabilities 58.4 57.2 63.5 57.5 53.2
Total equity 149.4 145.0 140.8 140.3 137.2

Noninterest-bearing funding sources used to fund earning assets

  (292.0 )   (281.2 )   (280.0 )   (249.0 )   (223.6 )

Net noninterest-bearing funding sources

$ 170.3     167.6     171.0     170.0     166.1  
Total assets $ 1,321.6     1,302.9     1,306.7     1,281.4     1,250.9  
                                                 
 
(1) Our average prime rate was 3.25% for quarters ended June 30 and March 31, 2012, and December 31, September 30, and June 30, 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.47%, 0.51%, 0.48%, 0.30% and 0.26% 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 for the periods presented.
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SECURITIES AVAILABLE FOR SALE
         
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)     2012   2012   2011   2011   2011
Securities of U.S. Treasury and federal agencies $ 1,493 4,678 6,968 13,813 10,523
Securities of U.S. states and political subdivisions 37,251 34,237 32,593 26,970 24,412
Mortgage-backed securities:
Federal agencies 101,863 102,665 96,754 84,716 78,338
Residential and commercial     35,646   36,486   35,986   35,159   33,088
Total mortgage-backed securities 137,509 139,151 132,740 119,875 111,426
Other debt securities     47,746   49,047   46,895   42,925   35,582
Total debt securities available for sale 223,999 227,113 219,196 203,583 181,943
Marketable equity securities     2,847   3,153   3,417   3,593   4,355
Total securities available for sale   $ 226,846   230,266   222,613   207,176   186,298
 
FIVE QUARTER LOANS
       
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)   2012   2012   2011   2011   2011
Commercial:
Commercial and industrial $ 177,646 168,546 167,216 164,510 157,095
Real estate mortgage 105,666 105,874 105,975 104,363 101,458
Real estate construction 17,594 18,549 19,382 19,719 21,374
Lease financing 12,729 13,143 13,117 12,852 12,907
Foreign (1)   40,417   39,637   39,760   38,390   37,855
Total commercial   354,052   345,749   345,450   339,834   330,689
Consumer:
Real estate 1-4 family first mortgage 230,263 228,885 228,894 223,758 222,874
Real estate 1-4 family junior lien mortgage 80,881 83,173 85,991 88,264 89,947
Credit card 22,706 21,998 22,836 21,650 21,191
Other revolving credit and installment   87,297   86,716   86,460   86,600   87,220
Total consumer   421,147   420,772   424,181   420,272   421,232
Total loans (2) $ 775,199   766,521   769,631   760,106   751,921
 
(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 $33.8 billion, $35.5 billion, $36.7 billion, $37.2 billion and $38.7 billion of purchased credit-impaired (PCI) loans at June 30 and March 31, 2012, and December 31, September 30 and June 30, 2011, respectively. See the PCI loans table for detail of PCI loans.
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
       
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)     2012   2012   2011   2011   2011
Nonaccrual loans:
Commercial:
Commercial and industrial $ 1,549 1,726 2,142 2,128 2,393
Real estate mortgage 3,832 4,081 4,085 4,429 4,691
Real estate construction 1,421 1,709 1,890 1,915 2,043
Lease financing 43 45 53 71 79
Foreign     79   38   47   68   59
Total commercial     6,924   7,599   8,217   8,611   9,265
Consumer:
Real estate 1-4 family first mortgage 10,368 10,683 10,913 11,024 11,427
Real estate 1-4 family junior lien mortgage (1) 3,091 3,558 1,975 2,035 2,098
Other revolving credit and installment     195   186   199   230   255
Total consumer     13,654   14,427   13,087   13,289   13,780
Total nonaccrual loans (2)(3)(4)     20,578   22,026   21,304   21,900   23,045
As a percentage of total loans 2.65 % 2.87 2.77 2.88 3.06
Foreclosed assets:
Government insured/guaranteed (5) $ 1,465 1,352 1,319 1,336 1,320
Non-government insured/guaranteed     2,842   3,265   3,342   3,608   3,541
Total foreclosed assets     4,307   4,617   4,661   4,944   4,861
Total nonperforming assets   $ 24,885   26,643   25,965   26,844   27,906
As a percentage of total loans 3.21 % 3.48 3.37 3.53 3.71
                       
 
(1) Includes $1.7 billion at March 31, 2012, resulting from implementation of the Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties issued on January 31, 2012. This guidance accelerated the timing of placing these loans on nonaccrual to coincide with the timing of placing the related real estate 1-4 family first mortgage loans on nonaccrual.
(2) Also includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
(3) Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.
(4) 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 because they are insured or guaranteed.
(5) 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
       

 

June 30,

Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)   2012   2012   2011   2011   2011
Loans 90 days or more past due and still accruing:
Total (excluding PCI)(1): $ 22,872 22,555 22,569 19,639 17,318
Less: FHA insured/VA guaranteed (2) 20,368 19,681 19,240 16,498 14,474
Less: Student loans guaranteed under the FFELP (3)   1,144   1,238   1,281   1,212   1,014
Total, not government insured/guaranteed $ 1,360   1,636   2,048   1,929   1,830
 
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 44 104 153 108 110
Real estate mortgage 184 289 256 207 137
Real estate construction 25 25 89 57 86
Foreign   3   7   6   11   12
Total commercial   256   425   504   383   345
Consumer:
Real estate 1-4 family first mortgage (4) 561 616 781 819 728
Real estate 1-4 family junior lien mortgage (4)(5) 159 156 279 255 286
Credit card 274 319 346 328 334
Other revolving credit and installment   110   120   138   144   137
Total consumer   1,104   1,211   1,544   1,546   1,485
Total, not government insured/guaranteed $ 1,360   1,636   2,048   1,929   1,830
 
(1) The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $6.6 billion, $7.1 billion, $8.7 billion, $8.9 billion and $9.8 billion at June 30 and March 31, 2012, and December 31, September 30 and June 30, 2011, 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.
(5) During first quarter 2012, $43 million of 1-4 family junior lien mortgages were transferred to nonaccrual upon implementation of the Interagency Guidance issued on January 31, 2012.
 
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.

               
 
June 30, December 31,
(in millions)   2012   2011 2010 2009 2008
Commercial:
Commercial and industrial $ 244 399 718 1,911 4,580
Real estate mortgage 2,622