Wells Fargo Reports Record Quarterly Net Income

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

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

  • Continued strong financial results:
    • Record Wells Fargo net income of $5.2 billion, up 22 percent from first quarter 2012
    • Record diluted earnings per share of $0.92, up 23 percent
    • Revenue of $21.3 billion, compared with $21.6 billion
    • Noninterest expense of $12.4 billion, down $593 million
      • 58.3 percent efficiency ratio, improved from 60.1 percent
    • Pre-tax pre-provision profit (PTPP)1 of $8.9 billion, up 2 percent
    • Return on average assets (ROA) of 1.49 percent, up 18 basis points
    • Return on equity (ROE) of 13.59 percent, up 145 basis points
  • Continued loan and deposit growth:
    • Total average loans of $798.1 billion, up $29.5 billion from first quarter 2012
      • Quarter-end loans of $800.0 billion, up $33.4 billion
      • Quarter-end core loans2 of $709.1 billion, up $50.8 billion
    • Total average core deposits of $925.9 billion, up $55.4 billion from first quarter 2012
      • Quarter-end core deposits of $939.9 billion, up $51.2 billion
  • Continued improvement in credit quality:
    • Net charge-offs of $1.4 billion, a decline of $976 million from first quarter 2012

      • Net charge-off rate of 0.72 percent (annualized), lowest since second quarter 20063
    • Non-performing assets of $22.9 billion, down $3.8 billion from first quarter 2012

    • $200 million (pre-tax) reserve release4 due to continued strong credit performance
  • Strengthened capital levels; increased dividends and continued share repurchases:
    • Tier 1 common equity5 under Basel I increased $14.1 billion from first quarter 2012 to $113.6 billion, with Tier 1 common equity ratio of 10.38 percent under Basel I at March 31, 2013
    • Estimated Tier 1 common equity ratio of 8.39 percent under current Basel III capital proposals6
    • Increased quarterly common stock dividend to $0.25 per share in first quarter 2013 and purchased approximately 17 million shares of common stock
    • Received a non-objection to 2013 Capital Plan under the Comprehensive Capital Analysis and Review (CCAR), which included a dividend rate of $0.30 per share for second quarter 2013, subject to Board approval. The 2013 plan also included an increase in common stock repurchase activity compared with actual repurchases in 2012.
 
1

See footnote (2) on table Summary Financial Data 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 As a result of the accounting for purchased credit-impaired (PCI) loans, substantially all related to the Wachovia merger, certain credit-related metrics may not be directly comparable with periods prior to the merger.
4 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
5

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

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

 

Quarter ended

Mar. 31, Dec. 31, Mar. 31,
          2013         2012     2012
Earnings
Diluted earnings per common share $ 0.92 0.91 0.75
Wells Fargo net income (in billions) 5.17 5.09 4.25
Return on assets (ROA) 1.49 % 1.46 1.31
Return on equity (ROE) 13.59 13.35 12.14
 
Asset Quality
Net charge-offs as a % of avg. total loans 0.72 1.05 1.25
Allowance as a % of total loans 2.15 2.19 2.50
Allowance as a % of annualized net charge-offs 299 211 199
 
Other
Revenue (in billions) $ 21.3 21.9 21.6
Efficiency ratio 58.3 % 58.8 60.1
Average loans (in billions) $ 798.1 787.2 768.6
Average core deposits (in billions) 925.9 928.8 870.5
Net interest margin 3.48 % 3.56 3.91
                         
 

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

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

“Our company earned $5.2 billion in first quarter 2013, the highest quarterly profit in our history—another milestone demonstrating how Wells Fargo’s diversified business model continued to produce outstanding results,” said Chief Financial Officer Tim Sloan. “This is our 13th consecutive quarter of EPS growth and 8th consecutive quarter of record EPS. Average loans and deposits increased in the quarter, expenses were lower, and credit metrics improved with the net charge-off ratio down to the lowest level since second quarter 2006.”3

Revenue

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

Net Interest Income

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

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

Noninterest Income

Noninterest income was $10.8 billion, compared with $11.3 billion in fourth quarter 2012. The decline was primarily driven by lower mortgage banking revenue as well as reduced gains on equity investments, which were elevated in the fourth quarter. These declines were partially offset by stronger retail brokerage transaction revenue and asset-based fees, and higher trading gains and insurance revenue.

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

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

Noninterest Expense

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

Income Taxes

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

Loans

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

 
      March 31, 2013     December 31, 2012
(in millions)       Core     Liquidating (1)     Total     Core     Liquidating (1)     Total
Commercial $ 358,944     2,770     361,714 358,028     3,170     361,198
Consumer         350,131     88,121       438,252     346,984     91,392       438,376
Total loans       $ 709,075     90,891       799,966     705,012     94,562       799,574
 
Change from prior quarter:       $ 4,063     (3,671 )     392     21,038     (4,094 )     16,944
 

(1) See 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

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

Capital

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

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

On March 14, 2013, the Company received a non-objection to its 2013 Capital Plan under the Comprehensive Capital Analysis and Review (CCAR), which included a dividend rate of $0.30 per share for second quarter 2013, subject to Board approval. The 2013 plan also included an increase in common stock repurchase activity compared with actual repurchases in 2012.

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

 
      Mar. 31,     Dec. 31,   Mar. 31,
(as a percent of total risk-weighted assets)       2013       2012   2012
Ratios under Basel I (1):
Tier 1 common equity (2) 10.38 % 10.12 9.98
Tier 1 capital 11.79 11.75 11.78
Tier 1 leverage 9.53 9.47 9.35
                     
 
(1) March 31, 2013, ratios are preliminary.

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

 

Credit Quality

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

Net Loan Charge-offs

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

8 Office of the Comptroller of the Currency update to Bank Accounting Advisory Series issued third quarter 2012 (OCC guidance), which requires consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status.

 
Net Loan Charge-Offs
 
      Quarter ended  
        Mar. 31, 2013         Dec. 31, 2012         Sept. 30, 2012  
    As a           As a           As a  
Net loan % of Net loan % of Net loan % of
charge-

 

 

average

charge-

 

average

charge-

 

average

($ in millions)       offs     loans (1)         offs     loans (1)         offs     loans (1)  
 
Commercial:
Commercial and industrial $ 93 0.20

%

 

$ 209 0.46

%

 

$ 131 0.29

%

Real estate mortgage 29 0.11 38 0.14 54 0.21
Real estate construction (34 ) (0.83 ) (18 ) (0.43 ) 1 0.03
Lease financing (1 ) (0.02 ) 2 0.04 1 0.03
Foreign         3   0.03   24   0.25   30 0.29
Total commercial         90   0.10   255   0.29   217 0.24
 
Consumer:
Real estate 1-4 family first mortgage 429 0.69 649 1.05 673 1.15
Real estate 1-4 family junior lien mortgage 449 2.46 690 3.57 1,036 5.17
Credit card 235 3.96 222 3.71 212 3.67
Automobile 76 0.66 112 0.97 75 0.66
Other revolving credit and installment         140   1.37   153   1.46   145 1.38
Total consumer         1,329   1.23   1,826   1.68   2,141 2.01
Total       $ 1,419   0.72

%

 

$ 2,081   1.05

%

 

$ 2,358 1.21

%

                                                 
 

(1) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation 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 decreased by $1.6 billion in the quarter to $22.9 billion, compared with $24.5 billion in fourth quarter 2012. Nonaccrual loans decreased to $19.5 billion from $20.5 billion in fourth quarter 2012. Foreclosed assets were $3.4 billion, down from $4.0 billion in fourth quarter 2012.

 
Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
 
        Mar. 31, 2013         Dec. 31, 2012         Sept. 30, 2012  
          As a           As a           As a  
% of % of % of
Total total Total total Total total
($ in millions)       balances     loans         balances     loans         balances     loans  
 
Commercial:
Commercial and industrial $ 1,193 0.64 % $ 1,422 0.76 % $ 1,404 0.79

%

Real estate mortgage 3,098

2.92

3,322 3.12 3,599 3.44
Real estate construction 870 5.23 1,003 5.93 1,253 7.08
Lease financing 25 0.20 27 0.22 49 0.40

Foreign

        56   0.14   50   0.13   66 0.17
Total commercial         5,242   1.45   5,824   1.61   6,371 1.81
 
Consumer:
Real estate 1-4 family first mortgage 11,320 4.49 11,455 4.58 11,195 4.65
Real estate 1-4 family junior lien mortgage 2,712 3.74 2,922 3.87 3,140 4.02
Automobile 220 0.47 245 0.53 295 0.64
Other revolving credit and installment         32   0.08   40   0.09   43 0.10
Total consumer (1)         14,284   3.26   14,662   3.34   14,673 3.41
Total nonaccrual loans         19,526   2.44   20,486   2.56   21,044 2.69
 
Foreclosed assets:
GNMA 969 1,509 1,479
Non GNMA         2,381     2,514     2,730
Total foreclosed assets         3,350     4,023     4,209
Total nonperforming assets       $ 22,876   2.86 % $ 24,509   3.07 % $ 25,253 3.23

%

 
Change from prior quarter:
Total nonaccrual loans $ (960 ) $ (558 ) $ 466
Total nonperforming assets (1,633 ) (744 ) 368
                                                 
 
(1) Includes $1.4 billion at September 30, 2012, resulting from implementation of OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status.
 

Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $1.4 billion at March 31, 2013, compared with $1.4 billion at December 31, 2012. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $21.7 billion at March 31, 2013, down slightly from $21.8 billion at December 31, 2012.

Allowance for Credit Losses

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

Business Segment Performance

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

 
      Quarter ended
Mar. 31,     Dec. 31,     Mar. 31,
(in millions)         2013     2012     2012
Community Banking $ 2,924 2,869 2,348
Wholesale Banking 2,045 2,032 1,868
Wealth, Brokerage and Retirement         337     351     296
 

More financial information about the business segments is in 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 Lending business units.

 

Selected Financial Information

      Quarter ended
Mar. 31,     Dec. 31,     Mar. 31,
(in millions)         2013     2012     2012
Total revenue $ 12,899 13,782 13,421
Provision for credit losses 1,262 1,757 1,878
Noninterest expense 7,377 8,033 7,825
Segment net income 2,924 2,869 2,348
 
(in billions)
Average loans 498.9 493.1 486.1
Average assets 799.6 794.2 738.3
Average core deposits         619.2     608.9     575.2
 

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

Net income was up $576 million, or 25 percent, from first quarter 2012. Revenue decreased $522 million, or 4 percent, from first quarter 2012, primarily due to lower net interest income, equity gains, and volume-related mortgage banking revenue. Noninterest expense declined $448 million, or 6 percent, from first quarter 2012, largely driven by lower operating losses. The provision for credit losses was $616 million lower than a year ago due to improved portfolio performance.

Regional Banking

  • Retail banking
    • Retail Bank household cross-sell ratio of 6.10 products per household, up from 5.98 year-over-year9
    • Primary consumer checking customers10 up a net 2.1 percent year-over-year9
    • Consumer credit card, lines of credit and loan product solutions (sales) in the retail banking stores in first quarter were up 20 percent from the prior year
    • Customers rated their experience with Wells Fargo stores and contact centers at an all-time high based on first quarter survey results
    • Platform banker FTE (active, full-time equivalent) grew by 1,528 from the prior year and 478 on a linked-quarter basis
  • Small Business/Business Banking
    • Business checking accounts up a net 2.9 percent year-over-year9
    • Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) in first quarter were up 42 percent from the prior year
    • $4.2 billion in net new loan commitments to small business customers (primarily with annual revenues less than $20 million) in first quarter, up 24 percent from the prior year
  • Online and Mobile Banking
    • 22.5 million active online customers, up 7 percent year-over-year9
    • 10.1 million active mobile customers, up 32 percent year-over-year9

Consumer Lending Group

  • Home Lending
    • Originations of $109 billion, compared with $125 billion in prior quarter
    • Applications of $140 billion, compared with $152 billion in prior quarter
    • Application pipeline of $74 billion at quarter end, compared with $81 billion at December 31, 2012
    • Residential mortgage servicing portfolio of $1.9 trillion; ratio of MSRs to related loans serviced for others was 70 basis points, compared with 67 basis points in prior quarter
    • Average note rate on the servicing portfolio was 4.69 percent, compared with 4.77 percent in prior quarter
  • Consumer Credit Solutions
    • Credit card penetration in retail banking households rose to 34.1 percent9, up from 29.9 percent in prior year
    • Record auto originations of $6.8 billion, up 27 percent from prior quarter and up 10 percent from prior year
 

9

Data as of February 2013, comparisons with February 2012.

10

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

 

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

 

Selected Financial Information

      Quarter ended
Mar. 31,     Dec. 31,     Mar. 31,
(in millions)         2013       2012     2012
Total revenue $ 6,086 5,993 6,033
Provision (reversal of provision) for credit losses (58 ) 60 95
Noninterest expense 3,091 3,007 3,054
Segment net income 2,045 2,032 1,868
 
(in billions)
Average loans 284.5 279.2 268.6
Average assets 496.1 489.7 467.8
Average core deposits         224.1       240.7     220.9

 

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

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

  • Six percent year-over-year average loan and 6 percent average asset growth—the growth came from nearly all portfolios, including asset-backed finance, capital finance, commercial banking, commercial real estate, corporate banking and government and institutional banking
  • Eleven consecutive quarters of average loan growth in Commercial Banking
  • Investment banking revenue from Wholesale customers increased 14 percent from first quarter 2012, including revenue from commercial and corporate customers which was up 2 percent
  • First quarter 2013 assets under management up 4 percent from first quarter 2012 from $18.9 billion in net inflows and higher market valuations
  • Cross-sell of 6.8 products per relationship as of December 2012, up from 6.6 as of December 2011

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

 

Selected Financial Information

      Quarter ended
Mar. 31,     Dec. 31,     Mar. 31,
(in millions)         2013     2012     2012
Total revenue $ 3,197 3,094 3,062
Provision for credit losses 14 15 43
Noninterest expense 2,639 2,513 2,547
Segment net income 337 351 296
 
(in billions)
Average loans 43.8 43.3 42.5
Average assets 180.3 171.7 161.9
Average core deposits         149.4     143.4     135.6
 

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

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

Retail Brokerage

  • Client assets of $1.3 trillion, up 7 percent from prior year
  • Managed account assets increased $46 billion, or 16 percent, from prior year driven by strong net flows and market performance
  • Strong deposit growth, with average balances up 13 percent from prior year

Wealth Management

  • Client assets of $208 billion, up 3 percent from prior year
  • Average deposit balances up 7 percent

Retirement

  • Institutional Retirement plan assets of $279 billion, up 9 percent from prior year
  • IRA assets of $314 billion, up 9 percent from prior year

Conference Call

The Company will host a live conference call on Friday, April 12, at 7 a.m. PDT (10 a.m. EDT). To access the call, please dial 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings and https://us.reg.meeting-stream.com/wellsfargo_041313.

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

Cautionary Statement about Forward-Looking Information

In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that this news release contains forward-looking statements about our future financial performance and business. We make forward-looking statements when we use words such as “believe,” “expect,” “anticipate,” “estimate,” “target,” “should,” “may,” “can,” “will,” “outlook,” “project,” “appears” or similar expressions. Forward-looking statements in this news release include, among others, statements about: (i) future credit quality and performance, and the appropriateness of the allowance for credit losses, including our current expectation of future reserve releases; (ii) our expectations regarding noninterest expense and our targeted efficiency ratio; (iii) our full year 2013 effective income tax rate; (iv) our estimate regarding our Tier 1 common equity ratio under proposed Basel III capital rules as of March 31, 2013; and (v) possible future common stock dividends and repurchases.

Do not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. Several factors could cause actual results to differ materially from expectations including: current and future economic and market conditions, including the effects of further declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, and the sovereign debt crisis and economic difficulties in Europe; our capital requirements (including under regulatory capital standards as determined and interpreted by applicable regulatory authorities such as the proposed Basel III capital rules) and our ability to generate capital internally or raise capital on favorable terms; financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses (including the Dodd-Frank Wall Street Reform and Consumer Protection Act), as well as our ability to mitigate the loss of revenue and income from financial services reform and other regulation and legislation; the extent of success in our loan modification efforts, including the effects of regulatory requirements, or changes in regulatory requirements, relating to loan modifications; the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties; negative effects relating to mortgage servicing and foreclosures, as well as effects associated with our settlement with the Department of Justice and other federal and state government entities related to our mortgage servicing and foreclosure practices, including changes in our procedures or practices and/or industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures; our ability to realize our efficiency ratio target as part of our expense management initiatives when and in the range targeted, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters; a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers; recognition of other-than-temporary impairment on securities held in our available-for-sale portfolio; the effect of the current low interest rate environment or changes in interest rates on our net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; hedging gains or losses; disruptions in the capital markets and reduced investor demand for mortgage loans; our ability to sell more products to our customers; the effect of fluctuations in stock market prices on fee income from our brokerage, asset and wealth management businesses; our election to provide support to our money market funds; changes in the value of our venture capital investments; changes in our accounting policies or in accounting standards or in how accounting standards are to be applied; changes in our credit ratings and changes in the credit ratings of our customers or counterparties; mergers and acquisitions; federal and state regulations; reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations and legal actions; the loss of checking and saving account deposits to other investments such as the stock market; and fiscal and monetary policies of the Federal Reserve Board. There is no assurance that our allowance for credit losses will be adequate to cover future credit losses, especially if housing prices decline and unemployment worsens. Increases in loan charge-offs or in the allowance for credit losses and related provision expense could materially adversely affect our financial results and condition. The amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of the Company, market conditions, capital requirements (including under Basel capital standards), common stock issuance requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company’s Board of Directors, and may be subject to regulatory approval or conditions. For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC and available on the SEC’s website at www.sec.gov. Any factor described above or in our SEC reports could, by itself or together with one or more other factors, adversely affect our financial results and condition.

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.4 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, and the Internet (wellsfargo.com), and has offices in more than 35 countries to support the bank’s customers who conduct business in the global economy. With more than 275,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2012 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

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

Pages

 

Summary Information

Summary Financial Data 17-18
 

Income

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

Balance Sheet

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

Loans

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

Equity

Tier 1 Common Equity 36
 

Operating Segments

Operating Segment Results 37
 

Other

Mortgage Servicing and other related data 38-40
         
 
 
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
 
                    % Change
  Quarter ended Mar. 31, 2013 from
Mar. 31, Dec. 31, Mar. 31, Dec. 31,       Mar. 31,
($ in millions, except per share amounts)         2013         2012     2012     2012         2012
For the Period
Wells Fargo net income $ 5,171 5,090 4,248 2 % 22
Wells Fargo net income applicable to common stock 4,931 4,857 4,022 2 23
Diluted earnings per common share 0.92 0.91 0.75 1 23
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.49 % 1.46 1.31 2 14

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

13.59 13.35 12.14 2 12
Efficiency ratio (1) 58.3 58.8 60.1 (1) (3)
Total revenue $ 21,259 21,948 21,636 (3) (2)
Pre-tax pre-provision profit (PTPP) (2) 8,859 9,052 8,643 (2) 2
Dividends declared per common share 0.25 0.22 0.22 14 14
Average common shares outstanding 5,279.0 5,272.4 5,282.6 - -
Diluted average common shares outstanding 5,353.5 5,338.7 5,337.8 - -
Average loans $ 798,074 787,210 768,582 1 4
Average assets 1,404,334 1,387,056 1,302,921 1 8
Average core deposits (3) 925,866 928,824 870,516 - 6
Average retail core deposits (4) 662,913 646,145 616,569 3 8
Net interest margin 3.48 % 3.56 3.91 (2) (11)
At Period End
Securities available for sale $ 248,160 235,199 230,266 6 8
Loans 799,966 799,574 766,521 - 4
Allowance for loan losses 16,711 17,060 18,852 (2) (11)
Goodwill 25,637 25,637 25,140 - 2
Assets 1,436,634 1,422,968 1,333,799 1 8
Core deposits (3) 939,934 945,749 888,711 (1) 6
Wells Fargo stockholders' equity 162,086 157,554 145,516 3 11
Total equity 163,395 158,911 146,849 3 11
Capital ratios:
Total equity to assets 11.37 % 11.17 11.01 2 3
Risk-based capital (5):
Tier 1 capital 11.79 11.75 11.78 - -
Total capital 14.75 14.63 15.13 1 (3)
Tier 1 leverage (5) 9.53 9.47 9.35 1 2
Tier 1 common equity (5)(6) 10.38 10.12 9.98 3 4
Common shares outstanding 5,288.8 5,266.3 5,301.5 - -
Book value per common share $ 28.27 27.64 25.45 2 11
Common stock price:
High 38.20 36.34 34.59 5 10
Low 34.43 31.25 27.94 10 23
Period end 36.99 34.18 34.14 8 8
Team members (active, full-time equivalent) 274,300 269,200 264,900 2 4
 
 

(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.
(3) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5) The March 31, 2013, ratios are preliminary.
(6) See the "Five Quarter Tier 1 Common Equity Under Basel I" table for additional information.
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
 
        Quarter ended
Mar. 31,     Dec. 31,     Sept. 30,     June 30,     Mar. 31,
($ in millions, except per share amounts)         2013       2012     2012     2012     2012
For the Quarter
Wells Fargo net income $ 5,171 5,090 4,937 4,622 4,248
Wells Fargo net income applicable to common stock 4,931 4,857 4,717 4,403 4,022
Diluted earnings per common share 0.92 0.91 0.88 0.82 0.75
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.49 % 1.46 1.45 1.41 1.31

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

13.59 13.35 13.38 12.86 12.14
Efficiency ratio (1) 58.3 58.8 57.1 58.2 60.1
Total revenue $ 21,259 21,948 21,213 21,289 21,636
Pre-tax pre-provision profit (PTPP) (2) 8,859 9,052 9,101 8,892 8,643
Dividends declared per common share 0.25 0.22 0.22 0.22 0.22
Average common shares outstanding 5,279.0 5,272.4 5,288.1 5,306.9 5,282.6
Diluted average common shares outstanding 5,353.5 5,338.7 5,355.6 5,369.9 5,337.8
Average loans $ 798,074 787,210 776,734 768,223 768,582
Average assets 1,404,334 1,387,056 1,354,340 1,321,584 1,302,921
Average core deposits (3) 925,866 928,824 895,374 880,636 870,516
Average retail core deposits (4) 662,913 646,145 630,053 624,329 616,569
Net interest margin 3.48 % 3.56 3.66 3.91 3.91
At Quarter End
Securities available for sale $ 248,160 235,199 229,350 226,846 230,266
Loans 799,966 799,574 782,630 775,199 766,521
Allowance for loan losses 16,711 17,060 17,385 18,320 18,852
Goodwill 25,637 25,637 25,637 25,406 25,140
Assets 1,436,634 1,422,968 1,374,715 1,336,204 1,333,799
Core deposits (3) 939,934 945,749 901,075 882,137 888,711
Wells Fargo stockholders' equity 162,086 157,554 154,679 148,070 145,516
Total equity 163,395 158,911 156,059 149,437 146,849
Capital ratios:
Total equity to assets 11.37 % 11.17 11.35 11.18 11.01
Risk-based capital (5):
Tier 1 capital 11.79 11.75 11.50 11.69 11.78
Total capital 14.75 14.63 14.51 14.85 15.13
Tier 1 leverage (5) 9.53 9.47 9.40 9.25 9.35
Tier 1 common equity (5)(6) 10.38 10.12 9.92 10.08 9.98
Common shares outstanding 5,288.8 5,266.3 5,289.6 5,275.7 5,301.5
Book value per common share $ 28.27 27.64 27.10 26.06 25.45
Common stock price:
High 38.20 36.34 36.60 34.59 34.59
Low 34.43 31.25 32.62 29.80 27.94
Period end 36.99 34.18 34.53 33.44 34.14
Team members (active, full-time equivalent) 274,300 269,200 267,000 264,400 264,900
 
 
(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.
(3) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5) The March 31, 2013, ratios are preliminary.
(6) See the "Five Quarter Tier 1 Common Equity under Basel I" table for additional information.
 
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
 
      Quarter ended March 31,     %
(in millions, except per share amounts)         2013     2012       Change
Interest income    
Trading assets $ 327 377 (13 ) %
Securities available for sale 1,925 2,088 (8 )
Mortgages held for sale 371 459 (19 )
Loans held for sale 3 9 (67 )
Loans 8,861 9,197 (4 )
Other interest income         163     125   30
Total interest income         11,650     12,255   (5 )
Interest expense
Deposits 369 457 (19 )
Short-term borrowings 20 16 25
Long-term debt 697 830 (16 )
Other interest expense         65     64   2
Total interest expense         1,151     1,367   (16 )
Net interest income 10,499 10,888 (4 )

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

       

1,219

   

1,995

 

(39

)

Net interest income after provision for credit losses         9,280     8,893   4
Noninterest income
Service charges on deposit accounts 1,214 1,084 12
Trust and investment fees 3,202 2,839 13
Card fees 738 654 13
Other fees 1,034 1,095 (6 )
Mortgage banking 2,794 2,870 (3 )
Insurance 463 519 (11 )
Net gains from trading activities 570 640 (11 )
Net gains (losses) on debt securities available for sale 45 (7 ) NM
Net gains from equity investments 113 364 (69 )
Lease income 130 59 120
Other         457     631   (28 )
Total noninterest income         10,760     10,748   -
Noninterest expense
Salaries 3,663 3,601 2
Commission and incentive compensation 2,577 2,417 7
Employee benefits 1,583 1,608 (2 )
Equipment 528 557 (5 )
Net occupancy 719 704 2
Core deposit and other intangibles 377 419 (10 )
FDIC and other deposit assessments 292 357 (18 )
Other         2,661     3,330   (20 )
Total noninterest expense         12,400     12,993   (5 )
Income before income tax expense 7,640 6,648 15
Income tax expense         2,420     2,328   4
Net income before noncontrolling interests 5,220 4,320 21
Less: Net income from noncontrolling interests         49     72   (32 )
Wells Fargo net income       $ 5,171     4,248   22
Less: Preferred stock dividends and other         240     226   6
Wells Fargo net income applicable to common stock       $ 4,931     4,022   23
Per share information
Earnings per common share $ 0.93 0.76 22
Diluted earnings per common share 0.92 0.75 23
Dividends declared per common share 0.25 0.22 14
Average common shares outstanding 5,279.0 5,282.6 -
Diluted average common shares outstanding 5,353.5 5,337.8 -
                         
 
NM - Not meaningful
 
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
    Quarter ended March 31,     %  
(in millions)       2013     2012     Change
Wells Fargo net income     $ 5,171     4,248 22 %
Other comprehensive income, before tax:    
Foreign currency translation adjustments (1):
Net unrealized gains (losses) arising during the period (18) 10 NM
Securities available for sale:
Net unrealized gains (losses) arising during the period (634) 1,874 NM
Reclassification of net gains to net income (113) (226) (50)
Derivatives and hedging activities:
Net unrealized gains arising during the period 7 42 (83)
Reclassification of net gains on cash flow hedges to net income (87) (107) (19)
Defined benefit plans adjustments:
Net actuarial gains (losses) arising during the period 6 (5) NM
Amortization of net actuarial loss and other costs to net income       49     36 36
Other comprehensive income (loss), before tax (790) 1,624 NM
Income tax (expense) benefit related to other comprehensive income       288     (611) NM
Other comprehensive income (loss), net of tax (502) 1,013 NM
Less: Other comprehensive income from noncontrolling interests       3     4 (25)
Wells Fargo other comprehensive income (loss), net of tax       (505)     1,009 NM
 
Wells Fargo comprehensive income 4,666 5,257 (11)
Comprehensive income from noncontrolling interests       52     76 (32)
Total comprehensive income     $ 4,718     5,333     (12)
 
NM - Not meaningful
(1) There was no sale or liquidation of an investment in a foreign entity, and therefore no reclassification adjustment for the quarters ended March 31, 2013 and 2012, respectively.
 
 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
 
      Quarter ended March 31,
(in millions)         2013       2012  
Balance, beginning of period $ 158,911     141,687
Cumulative effect of fair value election for certain residential mortgage servicing rights         -       2  
Balance, beginning of period - adjusted 158,911 141,689
Wells Fargo net income 5,171 4,248
Wells Fargo other comprehensive income (loss), net of tax (505 ) 1,009
Common stock issued 878 879
Common stock repurchased (383 ) (64 )
Preferred stock released by ESOP 296 270
Preferred stock issued 610 -
Common stock dividends (1,319 ) (1,165 )
Preferred stock dividends and other (240 ) (226 )
Noncontrolling interests and other, net         (24 )     209  
Balance, end of period       $ 163,395       146,849  
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
 
        Quarter ended
Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31,
(in millions, except per share amounts)         2013   2012   2012   2012   2012
Interest income

Trading assets

$ 327 339 299 343 377
Securities available for sale 1,925 1,897 1,966 2,147 2,088
Mortgages held for sale 371 413 476 477 459
Loans held for sale 3 3 17 12 9
Loans 8,861 9,027 9,016 9,242 9,197
Other interest income         163   178   151   133   125
Total interest income         11,650   11,857   11,925   12,354   12,255
Interest expense
Deposits 369 399 428 443 457
Short-term borrowings 20 24 19 20 16

Long-term debt

697 735 756 789 830
Other interest expense         65   56   60   65   64
Total interest expense         1,151   1,214   1,263   1,317   1,367
Net interest income 10,499 10,643 10,662 11,037 10,888
Provision for credit losses         1,219   1,831   1,591   1,800   1,995
Net interest income after provision for credit losses         9,280   8,812   9,071   9,237   8,893
Noninterest income
Service charges on deposit accounts 1,214 1,250 1,210 1,139 1,084
Trust and investment fees 3,202 3,199 2,954 2,898 2,839
Card fees 738 736 744 704 654
Other fees 1,034 1,193 1,097 1,134 1,095
Mortgage banking 2,794 3,068 2,807 2,893 2,870
Insurance 463 395 414 522 519
Net gains from trading activities 570 275 529 263 640
Net gains (losses) on debt securities available for sale 45 (63) 3 (61) (7)
Net gains from equity investments 113 715 164 242 364
Lease income 130 170 218 120 59
Other         457   367   411   398   631
Total noninterest income         10,760   11,305   10,551   10,252   10,748
Noninterest expense
Salaries 3,663 3,735 3,648 3,705 3,601
Commission and incentive compensation 2,577 2,365 2,368 2,354 2,417
Employee benefits 1,583 891 1,063 1,049 1,608
Equipment 528 542 510 459 557
Net occupancy 719 728 727 698 704
Core deposit and other intangibles 377 418 419 418 419
FDIC and other deposit assessments 292 307 359 333 357
Other         2,661   3,910   3,018   3,381   3,330
Total noninterest expense         12,400   12,896   12,112   12,397   12,993
Income before income tax expense 7,640 7,221 7,510 7,092 6,648
Income tax expense         2,420   1,924   2,480   2,371   2,328
Net income before noncontrolling interests 5,220 5,297 5,030 4,721 4,320
Less: Net income from noncontrolling interests         49   207   93   99   72
Wells Fargo net income       $ 5,171   5,090   4,937   4,622   4,248
Less: Preferred stock dividends and other         240   233   220   219   226
Wells Fargo net income applicable to common stock       $ 4,931   4,857   4,717   4,403   4,022
Per share information
Earnings per common share $ 0.93 0.92 0.89 0.83 0.76
Diluted earnings per common share 0.92 0.91 0.88 0.82 0.75
Dividends declared per common share 0.25 0.22 0.22 0.22 0.22
Average common shares outstanding 5,279.0 5,272.4 5,288.1 5,306.9 5,282.6
Diluted average common shares outstanding 5,353.5 5,338.7 5,355.6 5,369.9 5,337.8
                           
 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
      Quarter ended March 31,
              2013                 2012
   

 

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

$ 121,024 0.36 % $ 107 56,020 0.52 % $ 73
Trading assets 42,130 3.17 334 43,766 3.50 383
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 7,079 1.56 28 5,797 0.97 14
Securities of U.S. states and political subdivisions 37,584 4.38 410 32,595 4.52 368
Mortgage-backed securities:
Federal agencies 95,368 2.74 654 91,300 3.49 797
Residential and commercial         32,141 6.46   519 34,531 6.80   587
Total mortgage-backed securities 127,509 3.68 1,173 125,831 4.40 1,384
Other debt and equity securities         53,724 3.58   476 50,402 3.82   480
Total securities available for sale 225,896 3.70 2,087 214,625 4.19 2,246
Mortgages held for sale (4) 43,312 3.42 371 46,908 3.91 459
Loans held for sale (4) 141 8.83 3 748 5.09 9
Loans:
Commercial:
Commercial and industrial 184,515 3.73 1,700 166,782 4.18 1,733
Real estate mortgage 106,221 3.84 1,006 105,990 4.07 1,072
Real estate construction 16,559 4.84 197 18,730 4.79 223
Lease financing 12,424 6.78 210 13,129 8.89 292
Foreign         39,900 2.16 213 41,167 2.52   258
Total commercial         359,619 3.74 3,326 345,798 4.16   3,578

Consumer:

Real estate 1-4 family first mortgage 252,049 4.29 2,702 229,653 4.69 2,688
Real estate 1-4 family junior lien mortgage 74,068 4.28 785 84,718 4.27 900
Credit card 24,097 12.62 750 22,129 12.93 711
Automobile 46,566 7.20 826 43,686 7.79 846
Other revolving credit and installment         41,675 4.70   483 42,598 4.57   483
Total consumer         438,455 5.10   5,546 422,784 5.34   5,628
Total loans (4) 798,074 4.49 8,872 768,582 4.81 9,206
Other         4,255 5.19   55 4,604 4.42   51
Total earning assets       $ 1,234,832 3.86 % $ 11,829 1,135,253 4.39 % $ 12,427
Funding sources
Deposits:
Interest-bearing checking $ 32,165 0.06 % $ 5 32,158 0.05 % $ 4
Market rate and other savings 537,549 0.09 122 496,027 0.12 153
Savings certificates 55,238 1.22 167 62,689 1.36 213
Other time deposits 15,905 1.25 50 12,651 1.93 61
Deposits in foreign offices         71,077 0.14   25 64,847 0.16   26
Total interest-bearing deposits 711,934 0.21 369 668,372 0.27 457
Short-term borrowings 55,410 0.17 24 48,382 0.15 18
Long-term debt 127,112 2.20 696 127,537 2.60 830
Other liabilities         11,608 2.24   65 9,803 2.63   64
Total interest-bearing liabilities 906,064 0.51 1,154 854,094 0.64 1,369
Portion of noninterest-bearing funding sources         328,768 -   - 281,159 -   -
Total funding sources       $ 1,234,832   0.38   1,154 1,135,253   0.48   1,369

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

3.48 %   $ 10,675 3.91 %   $ 11,058
Noninterest-earning assets
Cash and due from banks $ 16,529 16,974
Goodwill 25,637 25,128
Other         127,336 125,566

 

Total noninterest-earning assets       $ 169,502 167,668
Noninterest-bearing funding sources
Deposits $ 274,221 246,614
Other liabilities 63,634 57,201
Total equity 160,415 145,012
Noninterest-bearing funding sources used to fund earning assets         (328,768) (281,159)
Net noninterest-bearing funding sources       $ 169,502 167,668

Total assets

   

 

$ 1,404,334 1,302,921
                                         
 

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

(2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.

(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.

(4) Nonaccrual loans and related income are included in their respective loan categories.

(5) Includes taxable-equivalent adjustments of $176 million and $170 million for the quarters ended March 31, 2013 and 2012, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

 
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
 
      Quarter ended March 31,     %
(in millions)         2013     2012       Change
Service charges on deposit accounts $ 1,214     1,084 12 %
Trust and investment fees:
Brokerage advisory, commissions and other fees (1) 2,050 1,830 12
Trust and investment management (1) 799 752 6
Investment banking         353     257   37
Total trust and investment fees         3,202     2,839   13
Card fees 738 654 13
Other fees:
Charges and fees on loans 384 445 (14 )
Merchant processing fees 154 125 23
Cash network fees 117 118 (1 )
Commercial real estate brokerage commissions 45 50 (10 )
Letters of credit fees 109 112 (3 )
All other fees         225     245   (8 )
Total other fees         1,034     1,095   (6 )
Mortgage banking:
Servicing income, net 314 252 25
Net gains on mortgage loan origination/sales activities         2,480     2,618   (5 )
Total mortgage banking         2,794     2,870   (3 )
Insurance 463 519 (11 )
Net gains from trading activities 570 640 (11 )
Net gains (losses) on debt securities available for sale 45 (7 ) NM
Net gains from equity investments 113 364 (69 )
Lease income 130 59 120
Life insurance investment income 145 168 (14 )
All other         312     463   (33 )
Total       $ 10,760     10,748       -  
 
NM - Not meaningful

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

 
NONINTEREST EXPENSE    
 
  Quarter ended March 31, %
(in millions)         2013     2012       Change
Salaries $ 3,663 3,601 2 %
Commission and incentive compensation 2,577 2,417 7
Employee benefits 1,583 1,608 (2 )
Equipment 528 557 (5 )
Net occupancy 719 704 2
Core deposit and other intangibles 377 419 (10 )
FDIC and other deposit assessments 292 357 (18 )
Outside professional services 535 594 (10 )
Operating losses 157 477 (67 )
Foreclosed assets 195 304 (36 )
Contract services 207 303 (32 )
Outside data processing 233 216 8
Travel and entertainment 213 202 5
Postage, stationery and supplies 199 216 (8 )
Advertising and promotion 105 122 (14 )
Telecommunications 123 124 (1 )
Insurance 137 157 (13 )
Operating leases 48 28 71
All other         509     587   (13 )
Total       $ 12,400     12,993       (5 )
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME  
 
        Quarter ended  
Mar. 31,     Dec. 31,   Sept. 30,     June 30,   Mar. 31,
(in millions)         2013     2012     2012     2012     2012  
Service charges on deposit accounts $ 1,214 1,250 1,210 1,139 1,084
Trust and investment fees:
Brokerage advisory, commissions and other fees (1) 2,050 1,962 1,887 1,845 1,830
Trust and investment management (1) 799 797 769 762 752
Investment banking         353     440     298     291     257  
Total trust and investment fees         3,202     3,199     2,954     2,898     2,839  
Card fees 738 736 744 704 654
Other fees:
Charges and fees on loans 384 448 426 427 445
Merchant processing fees 154 151 150 157 125
Cash network fees 117 112 120 120 118
Commercial real estate brokerage commissions 45 119 56 82 50
Letters of credit fees 109 107 114 108 112
All other fees         225     256     231     240     245  
Total other fees         1,034     1,193     1,097     1,134     1,095  
Mortgage banking:
Servicing income, net 314 250 197 679 252
Net gains on mortgage loan origination/sales activities         2,480     2,818     2,610     2,214     2,618  
Total mortgage banking         2,794     3,068     2,807     2,893     2,870  
Insurance 463 395 414 522 519
Net gains from trading activities 570 275 529 263 640
Net gains (losses) on debt securities available for sale 45 (63 ) 3 (61 ) (7 )
Net gains from equity investments 113 715 164 242 364
Lease income 130 170 218 120 59
Life insurance investment income 145 276 159 154 168
All other         312     91     252     244     463  
Total       $ 10,760     11,305     10,551     10,252     10,748  
 

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

 
FIVE QUARTER NONINTEREST EXPENSE  
 
  Quarter ended  
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)         2013     2012     2012     2012     2012  
Salaries $ 3,663 3,735 3,648 3,705 3,601
Commission and incentive compensation 2,577 2,365 2,368 2,354 2,417
Employee benefits 1,583 891 1,063 1,049 1,608
Equipment 528 542 510 459 557
Net occupancy 719 728 727 698 704
Core deposit and other intangibles 377 418 419 418 419
FDIC and other deposit assessments 292 307 359 333 357
Outside professional services 535 744 733 658 594
Operating losses 157 953 281 524 477
Foreclosed assets 195 221 247 289 304
Contract services 207 235 237 236 303
Outside data processing 233 227 234 233 216
Travel and entertainment 213 211 208 218 202
Postage, stationery and supplies 199 192 196 195 216
Advertising and promotion 105 142 170 144 122
Telecommunications 123 122 127 127 124
Insurance 137 62 51 183 157
Operating leases 48 27 27 27 28
All other         509     774     507     547     587  
Total       $ 12,400     12,896     12,112     12,397     12,993  
 
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
             
Mar. 31,

Dec. 31,

%
(in millions, except shares)         2013     2012     Change
Assets
Cash and due from banks $ 16,217 21,860 (26 ) %
Federal funds sold, securities purchased under resale agreements and other short-term investments 143,804 137,313 5
Trading assets 62,274 57,482 8
Securities available for sale 248,160 235,199 6
Mortgages held for sale (includes $42,624 and $42,305 carried at fair value) 46,702 47,149 (1 )
Loans held for sale (includes $0 and $6 carried at fair value) 194 110 76
 
Loans (includes $6,183 and $$6,206 carried at fair value) 799,966 799,574 -
Allowance for loan losses         (16,711 )     (17,060 ) (2 )
Net loans         783,255       782,514   -
Mortgage servicing rights:
Measured at fair value 12,061 11,538 5
Amortized 1,181 1,160 2
Premises and equipment, net 9,263 9,428 (2 )
Goodwill 25,637 25,637 -
Other assets (includes $197 and $0 carried at fair value)         87,886       93,578   (6 )
Total assets       $ 1,436,634       1,422,968   1
Liabilities
Noninterest-bearing deposits $ 278,909 288,207 (3 )
Interest-bearing deposits         731,824       714,628   2
Total deposits 1,010,733 1,002,835 1
Short-term borrowings 60,693 57,175 6
Accrued expenses and other liabilities 75,622 76,668 (1 )
Long-term debt (includes $0 and $1 carried at fair value)         126,191       127,379   (1 )
Total liabilities         1,273,239       1,264,057   1
Equity
Wells Fargo stockholders' equity:
Preferred stock 14,412 12,883 12

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

9,136 9,136 -
Additional paid-in capital 60,136 59,802 1
Retained earnings 81,264 77,679 5
Cumulative other comprehensive income 5,145 5,650 (9 )
Treasury stock – 193,038,624 shares and 215,497,298 shares (6,036 ) (6,610 ) (9 )
Unearned ESOP shares         (1,971 )     (986 ) 100
Total Wells Fargo stockholders' equity 162,086 157,554 3
Noncontrolling interests         1,309       1,357   (4 )
Total equity         163,395       158,911   3
Total liabilities and equity       $ 1,436,634       1,422,968       1  
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
 
      Mar. 31,     Dec. 31,     Sept. 30,     June 30,     Mar. 31,
(in millions)         2013     2012     2012     2012     2012
Assets
Cash and due from banks $ 16,217 21,860 16,986 16,811 17,000

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

143,804 137,313 100,442 74,635 74,143
Trading assets 62,274 57,482 60,592 64,419 75,696
Securities available for sale 248,160 235,199 229,350 226,846 230,266
Mortgages held for sale 46,702 47,149 50,337 50,462 43,449
Loans held for sale 194 110 298 853 958
 
Loans 799,966 799,574 782,630 775,199 766,521
Allowance for loan losses         (16,711 )     (17,060 )     (17,385 )     (18,320 )     (18,852 )
Net loans         783,255       782,514       765,245       756,879       747,669  
Mortgage servicing rights:
Measured at fair value 12,061 11,538 10,956 12,081 13,578
Amortized 1,181 1,160 1,144 1,130 1,074
Premises and equipment, net 9,263 9,428 9,165 9,317 9,291
Goodwill 25,637 25,637 25,637 25,406 25,140
Other assets         87,886       93,578       104,563       97,365       95,535  
Total assets       $ 1,436,634       1,422,968       1,374,715       1,336,204       1,333,799  
Liabilities
Noninterest-bearing deposits $ 278,909 288,207 268,991 253,999 255,013
Interest-bearing deposits         731,824       714,628       683,248       674,934       675,254  
Total deposits 1,010,733 1,002,835 952,239 928,933 930,267
Short-term borrowings 60,693 57,175 51,957 56,023 50,964
Accrued expenses and other liabilities 75,622 76,668 83,659 76,827 75,967
Long-term debt         126,191       127,379       130,801       124,984       129,752  
Total liabilities         1,273,239       1,264,057       1,218,656       1,186,767       1,186,950  
Equity
Wells Fargo stockholders' equity:
Preferred stock 14,412 12,883 12,283 11,694 12,101
Common stock 9,136 9,136 9,105 9,054 9,008
Additional paid-in capital 60,136 59,802 59,089 58,091 57,569
Retained earnings 81,264 77,679 73,994 70,456 67,239
Cumulative other comprehensive income 5,145 5,650 6,435 4,629 4,216
Treasury stock (6,036 ) (6,610 ) (5,186 ) (4,638 ) (2,958 )
Unearned ESOP shares         (1,971 )     (986 )     (1,041 )     (1,216 )     (1,659 )
Total Wells Fargo stockholders' equity 162,086 157,554 154,679 148,070 145,516
Noncontrolling interests         1,309       1,357       1,380       1,367       1,333  
Total equity         163,395       158,911       156,059       149,437       146,849  
Total liabilities and equity       $ 1,436,634       1,422,968       1,374,715       1,336,204       1,333,799  
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
 
      Quarter ended
  Mar. 31, 2013       Dec. 31, 2012       Sept. 30, 2012       June 30, 2012       Mar. 31, 2012
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

$ 121.0 0.36 % $ 117.1 0.41 % $ 91.6 0.44 % $ 71.3 0.47 % $ 56.0 0.52 %
Trading assets 42.1 3.17 42.0 3.28 39.5 3.08 42.6 3.27 43.8 3.50
Securities available for sale (2):
Securities of U.S. Treasury and federal agencies 7.1 1.56 5.3 1.64 1.4 1.05 2.0 1.60 5.8 0.97
Securities of U.S. states and political subdivisions 37.6 4.38 36.4 4.64 35.9 4.36 34.5 4.39 32.6 4.52
Mortgage-backed securities:
Federal agencies 95.4 2.74 90.9 2.71 94.3 2.88 95.0 3.37 91.3 3.49
Residential and commercial       32.1   6.46   32.7   6.53   33.1   6.67   33.9   6.97   34.5   6.80
Total mortgage-backed securities 127.5 3.68 123.6 3.72 127.4 3.87 128.9 4.32 125.8 4.40
Other debt and equity securities       53.7   3.58   50.0   3.91   47.7   4.07   48.9   4.39   50.4   3.82
Total securities available for sale 225.9 3.70 215.3 3.87 212.4 3.98 214.3 4.32 214.6 4.19
Mortgages held for sale 43.3 3.42 47.2 3.50 52.1 3.65 49.5 3.86 46.9 3.91
Loans held for sale 0.1 8.83 0.1 9.03 0.9 7.38 0.9 5.48 0.8 5.09
Loans:
Commercial:
Commercial and industrial 184.5 3.73 179.5 3.85 177.5 3.84 171.8 4.21 166.8 4.18
Real estate mortgage 106.2 3.84 105.1 4.02 105.1 4.05 105.5 4.60 106.0 4.07
Real estate construction 16.6 4.84 17.5 4.97 17.7 5.21 17.9 4.96 18.7 4.79
Lease financing 12.4 6.78 12.4 6.43 12.6 6.60 12.9 6.86 13.1 8.89
Foreign       39.9   2.16   39.7   2.32   39.7   2.46   38.9   2.57   41.2   2.52
Total commercial       359.6   3.74   354.2   3.87   352.6   3.91   347.0   4.28   345.8   4.16
Consumer:
Real estate 1-4 family first mortgage 252.0 4.29 244.6 4.39 234.0 4.51 230.0 4.62 229.7 4.69
Real estate 1-4 family junior lien mortgage 74.1 4.28 76.9 4.28 79.7 4.26 82.1 4.30 84.7 4.27
Credit card 24.1 12.62 23.9 12.43 23.0 12.64 22.1 12.70 22.1 12.93
Automobile 46.6 7.20 46.0 7.34 45.7 7.44 44.6 7.59 43.7 7.79
Other revolving credit and installment       41.7   4.70   41.6   4.63   41.7   4.58   42.4   4.51   42.6   4.57
Total consumer       438.5   5.10   433.0   5.15   424.1   5.23   421.2   5.29   422.8   5.34
Total loans 798.1 4.49 787.2 4.58 776.7 4.63 768.2 4.83 768.6 4.81
Other       4.3   5.19   4.3   5.21   4.4   4.62   4.5   4.56   4.6   4.42
Total earning assets     $ 1,234.8   3.86 % $ 1,213.2   3.96 % $ 1,177.6   4.09 % $ 1,151.3   4.37 % $ 1,135.3   4.39 %
Funding sources
Deposits:
Interest-bearing checking $ 32.2 0.06 % $ 30.9 0.06 % $ 28.8 0.06 % $ 30.4 0.07 % $ 32.2 0.05 %
Market rate and other savings 537.5 0.09 518.6 0.10 506.1 0.12 500.3 0.12 496.0 0.12
Savings certificates 55.2 1.22 56.7 1.27 58.2 1.29 60.4 1.34 62.7 1.36
Other time deposits 15.9 1.25 13.6 1.51 14.4 1.49 12.8 1.83 12.7 1.93
Deposits in foreign offices       71.1   0.14   69.4   0.15   71.8   0.16   65.6   0.17   64.8   0.16
Total interest-bearing deposits 711.9 0.21 689.2 0.23 679.3 0.25 669.5 0.27 668.4 0.27
Short-term borrowings 55.4 0.17 52.8 0.21 51.9 0.17 51.7 0.19 48.4 0.15
Long-term debt 127.1 2.20 127.5 2.30 127.5 2.37 127.7 2.48 127.5 2.60
Other liabilities       11.6   2.24   10.0   2.27   9.9   2.40   10.4   2.48   9.8   2.63
Total interest-bearing liabilities 906.0 0.51 879.5 0.55 868.6 0.58 859.3 0.62 854.1 0.64
Portion of noninterest-bearing funding sources       328.8   -   333.7   -   309.0   -   292.0   -   281.2   -
Total funding sources     $ 1,234.8     0.38 $ 1,213.2     0.40 $ 1,177.6     0.43 $ 1,151.3     0.46 $ 1,135.3     0.48

Net interest margin on a taxable-equivalent basis

3.48 % 3.56 % 3.66 % 3.91 % 3.91 %
Noninterest-earning assets
Cash and due from banks $ 16.5 16.4 15.7 16.2 17.0
Goodwill 25.6 25.6 25.5 25.3 25.1
Other       127.4     131.9     135.5     128.8     125.5  
Total noninterest-earnings assets     $ 169.5     173.9     176.7     170.3     167.6  
Noninterest-bearing funding sources
Deposits $ 274.2 286.9 267.2 254.5 246.6
Other liabilities 63.7 63.1 66.1 58.4 57.2
Total equity 160.4 157.6 152.4 149.4 145.0

Noninterest-bearing funding sources used to fund earning assets

      (328.8 )   (333.7 )   (309.0 )   (292.0 )   (281.2 )

Net noninterest-bearing funding sources

    $ 169.5     173.9     176.7     170.3     167.6  
Total assets     $ 1,404.3     1,387.1     1,354.3     1,321.6     1,302.9  
                                                             
 

(1) Our average prime rate was 3.25% for quarters ended March 31, 2013, and December 31, September 30, June 30 and March 31, 2012. The average three-month London Interbank Offered Rate (LIBOR) was 0.29%, 0.32%, 0.43%, 0.47% and 0.51% 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
 
      Mar. 31,     Dec. 31,     Sept. 30,     June 30,     Mar. 31,
(in millions)         2013     2012     2012     2012     2012
Securities of U.S. Treasury and federal agencies $ 6,884 7,146 1,869 1,493 4,678
Securities of U.S. states and political subdivisions 40,456 38,676 37,925 37,251 34,237
Mortgage-backed securities:
Federal agencies 105,472 97,285 102,713 101,863 102,665
Residential and commercial         35,179     35,899     36,098     35,646     36,486
Total mortgage-backed securities 140,651 133,184 138,811 137,509 139,151
Other debt securities         57,390     53,408     47,993     47,746     49,047
Total debt securities available for sale 245,381 232,414 226,598 223,999 227,113
Marketable equity securities         2,779     2,785     2,752     2,847     3,153
Total securities available for sale       $ 248,160     235,199     229,350     226,846     230,266
 
FIVE QUARTER LOANS
                     
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)         2013     2012     2012     2012     2012
Commercial:
Commercial and industrial $ 185,623 187,759 178,191 177,646 168,546
Real estate mortgage 106,119 106,340 104,611 105,666 105,874
Real estate construction 16,650 16,904 17,710 17,594 18,549
Lease financing 12,402 12,424 12,279 12,729 13,143
Foreign (1)         40,920     37,771     39,741     40,417     39,637
Total commercial         361,714     361,198     352,532     354,052     345,749
Consumer:
Real estate 1-4 family first mortgage 252,307 249,900 240,554 230,263 228,885
Real estate 1-4 family junior lien mortgage 72,543 75,465 78,091 80,881 83,173
Credit card 24,120 24,640 23,692 22,706 21,998
Automobile 47,259 45,998 46,044 45,180 44,167
Other revolving credit and installment         42,023     42,373     41,717     42,117     42,549
Total consumer         438,252     438,376     430,098     421,147     420,772
Total loans (2)       $ 799,966     799,574     782,630     775,199     766,521
 

(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 $29.7 billion, $31.0 billion, $32.5 billion, $33.8 billion and $35.5 billion of purchased credit-impaired (PCI) loans at March 31, 2013 and December 31, September 30, June 30, and March 31, 2012, 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)
                     
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)         2013       2012     2012     2012     2012
Nonaccrual loans:
Commercial:
Commercial and industrial $ 1,193 1,422 1,404 1,549 1,726
Real estate mortgage 3,098 3,322 3,599 3,832 4,081
Real estate construction 870 1,003 1,253 1,421 1,709
Lease financing 25 27 49 43 45
Foreign         56       50     66     79     38
Total commercial         5,242       5,824     6,371     6,924     7,599
Consumer:
Real estate 1-4 family first mortgage 11,320 11,455 11,195 10,368 10,683
Real estate 1-4 family junior lien mortgage (1) 2,712 2,922 3,140 3,091 3,558
Automobile 220 245 295 164 130
Other revolving credit and installment         32       40     43     31     56
Total consumer (2)         14,284       14,662     14,673     13,654     14,427
Total nonaccrual loans (3)(4)(5)         19,526       20,486     21,044     20,578     22,026
As a percentage of total loans 2.44 % 2.56 2.69 2.65 2.87
Foreclosed assets:
Government insured/guaranteed (6) $ 969 1,509 1,479 1,465 1,352
Non-government insured/guaranteed         2,381       2,514     2,730     2,842     3,265
Total foreclosed assets         3,350       4,023     4,209     4,307     4,617
Total nonperforming assets       $ 22,876       24,509     25,253     24,885     26,643
As a percentage of total loans         2.86 %     3.07     3.23     3.21     3.48
 

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

(3) Also includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.

(4) Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.

(5) 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.

(6) 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
                     
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)         2013     2012     2012     2012     2012
Loans 90 days or more past due and still accruing:
Total (excluding PCI)(1): $ 23,082 23,245 22,894 22,872 22,555
Less: FHA insured/VA guaranteed (2) 20,745 20,745 20,320 20,368 19,681
Less: Student loans guaranteed under the FFELP (3)         977     1,065     1,082     1,144     1,238
Total, not government insured/guaranteed       $ 1,360     1,435     1,492     1,360     1,636
 
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 47 47 49 44 104
Real estate mortgage 164 228 206 184 289
Real estate construction 47 27 41 25 25
Foreign         7     1     2     3     7
Total commercial         265     303     298     256     425
Consumer:
Real estate 1-4 family first mortgage (4) 563 564 627 561 616
Real estate 1-4 family junior lien mortgage (4)(5) 112 133 151 159 156
Credit card 306 310 288 274 319
Automobile 33 40 43 36 37
Other revolving credit and installment         81     85     85     74     83
Total consumer         1,095     1,132     1,194     1,104     1,211
Total, not government insured/guaranteed       $ 1,360     1,435     1,492     1,360     1,636
 

(1) The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $5.8 billion, $6.0 billion, $6.2 billion, $6.6 billion and $7.1 billion, at March 31, 2013 and December 31, September 30, June 30 and March 31, 2012, 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 predominantly 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 decreases in interest rate indices and changes in prepayment assumptions), 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.

 
 
        March 31,       December 31,
(in millions)           2013       2012     2008
Commercial:    
Commercial and industrial $ 191 259 4,580
Real estate mortgage 1,839 1,970 5,803
Real estate construction 767 877 6,462
Foreign           705       871     1,859
Total commercial           3,502       3,977     18,704
Consumer:
Real estate 1-4 family first mortgage 26,086 26,839 39,214
Real estate 1-4 family junior lien mortgage 141 152 728
Automobile           -       -     151
Total consumer           26,227       26,991     40,093
Total PCI loans (carrying value)         $ 29,729       30,968     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
Addition of nonaccretable difference due to acquisitions 195 - - 195
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (1,426 ) - - (1,426 )
Loans resolved by sales to third parties (2) (303 ) - (85 ) (388 )
Reclassification to accretable yield for loans with improving credit-related cash flows (3) (1,531 ) (3,031 ) (792 ) (5,354 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)       (6,923 )     (17,222 )     (2,882 )     (27,027 )
Balance, December 31, 2012 422 6,232 310 6,964
Addition of nonaccretable difference due to acquisitions - - - -
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (30 ) - - (30 )
Loans resolved by sales to third parties (2) (5 ) - - (5 )
Reclassification to accretable yield for loans with improving credit-related cash flows (3) (31 ) - - (31 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)       (20 )     (345 )     (47 )     (412 )
Balance, March 31, 2013     $ 336       5,887       263       6,486  
 

(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 for settlements with borrowers 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 accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:
 
Changes in interest rate indices for variable rate PCI loans – Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows;
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 changes in 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.
(in millions)          
Balance, December 31, 2008       $ 10,447
Addition of accretable yield due to acquisitions 131
Accretion into interest income (1) (9,351 )
Accretion into noninterest income due to sales (2) (242 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 5,354
Changes in expected cash flows that do not affect nonaccretable difference (3)         12,209  
Balance, December 31, 2012 18,548
Addition of accretable yield due to acquisitions -
Accretion into interest income (1) (447 )
Accretion into noninterest income due to sales (2) (151 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 31
Changes in expected cash flows that do not affect nonaccretable difference (3)         (16 )
Balance, March 31, 2013       $ 17,965  
 

(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 the impact of modifications, changes in prepayment assumptions, changes in interest rates on variable rate PCI loans and sales to third parties.

 
 
CHANGES IN ALLOWANCE FOR PCI LOAN LOSSES
 
When it is estimated that the expected cash flows 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     consumer       Total  
Balance, December 31, 2008 $ - - - -
Provision for losses due to credit deterioration 1,693 - 123 1,816
Charge-offs         (1,605 )     -     (94 )     (1,699 )
Balance, December 31, 2012 88 - 29 117
Provision for losses due to credit deterioration (32 ) - - (32 )
Charge-offs         (3 )     -     (2 )     (5 )
Balance, March 31, 2013       $ 53       -     27       80  
 
 
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)
 
      March 31, 2013
  PCI loans   All other loans
          Ratio of     Ratio of
Adjusted carrying carrying
unpaid Current value to value to
principal LTV Carrying current Carrying current
(in millions)       balance (2)     ratio (3)     value (4)     value (5)     value (4)     value (5)
California $ 21,043 109 % $ 16,971 87 % $ 15,036 79 %
Florida 2,720 109 2,178 83 3,154 90
New Jersey 1,179 91 1,195 88 1,994 79
New York 684 89 676 84 893 78
Texas 293 78 277 72 1,237 63
Other states         5,159 100   4,468 85   8,529 83
Total Pick-a-Pay loans       $ 31,078 $ 25,765 $ 30,843
                                             
 

(1) The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2013.

(2) Adjusted unpaid principal balance includes write-downs taken on loans where 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.

(3) The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.

(4) Carrying value, which does not reflect the allowance for loan losses, includes remaining purchase accounting adjustments, which, for PCI loans may include the nonaccretable difference and the accretable yield and, for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs.

(5) The ratio of carrying value to current value is calculated as the carrying value divided by the collateral value.

 
 
NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS
                     
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)         2013     2012     2012     2012     2012
Commercial:

Legacy Wachovia commercial and industrial, commercial real estate and foreign PCI loans (1)

      $ 2,770     3,170     3,836     4,278     5,213
Total commercial         2,770     3,170     3,836     4,278     5,213
Consumer:
Pick-a-Pay mortgage (1) 56,608 58,274 60,080 62,045 63,983
Liquidating home equity 4,421 4,647 4,951 5,199 5,456
Legacy Wells Fargo Financial indirect auto 593 830 1,104 1,454 1,907
Legacy Wells Fargo Financial debt consolidation 14,115 14,519 15,002 15,511 16,013
Education Finance - government guaranteed 11,922 12,465 12,951 13,823 14,800
Legacy Wachovia other PCI loans (1)         462     657     732     818     860
Total consumer         88,121     91,392     94,820     98,850     103,019
Total non-strategic and liquidating loan portfolios       $ 90,891     94,562     98,656     103,128     108,232
 

(1) Net of purchase accounting adjustments related to PCI loans.

 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
 
        Quarter ended
Mar. 31,   Dec. 31,     Sept. 30,     June 30,     Mar. 31,
(in millions)         2013     2012     2012     2012     2012
Balance, beginning of quarter $ 17,477 17,803 18,646 19,129 19,668
Provision for credit losses 1,219 1,831 1,591 1,800 1,995
Interest income on certain impaired loans (1) (73 ) (70 ) (76 ) (82 ) (87 )
Loan charge-offs:
Commercial:
Commercial and industrial (181 ) (302 ) (285 ) (360 ) (359 )
Real estate mortgage (60 ) (86 ) (100 ) (114 ) (82 )
Real estate construction (5 ) (10 ) (41 ) (60 ) (80 )
Lease financing (3 ) (6 ) (5 ) (5 ) (8 )
Foreign         (11 )     (30 )     (35 )     (17 )     (29 )
Total commercial         (260 )     (434 )     (466 )     (556 )     (558 )
Consumer:
Real estate 1-4 family first mortgage (475 ) (694 ) (719 ) (772 ) (828 )
Real estate 1-4 family junior lien mortgage (514 ) (765 ) (1,095 ) (757 ) (820 )
Credit card (266 ) (259 ) (255 ) (286 ) (301 )
Automobile (164 ) (189 ) (152 ) (131 ) (179 )
Other revolving credit and installment         (182 )     (192 )     (184 )     (187 )     (194 )
Total consumer (2)         (1,601 )     (2,099 )     (2,405 )     (2,133 )     (2,322 )
Total loan charge-offs         (1,861 )     (2,533 )     (2,871 )     (2,689 )     (2,880 )
Loan recoveries:
Commercial:
Commercial and industrial 88 93 154 111 103
Real estate mortgage 31 48 46 33 36
Real estate construction 39 28 40 43 13
Lease financing 4 4 4 5 6
Foreign         <