Wells Fargo Income Sets Record in 2012; Q4 Originations Income Down 10%

WellsrnFargo reported today that its fourth quarter and full 2012 net income set newrnrecord highs.  Fiscal Year 2012 earningsrnwere $18.9 billion; an increase of 19 percent from 2011 and fourth quarterrnearnings were up 24 percent compared to the fourth quarter of 2011 at $5.1rnbillion. </p

Revenuernfor the year was $86.1 billion, up 6 percent from $80.9 billion in 2011.  Fourth quarter income increased by 7 percentrnyear-over-year to 21.9 billion.  Net InterestrnIncome decreased $249 million or 2 percent from 2011 and was down slightly on arnlinked quarter basis to $10.6 billion. rnIncome from Wells Fargo’s loan portfolio rose slightly from the thirdrnquarter both because of growth in consumer and commercial loans and thernretention of $9.7 billion in high-quality, conforming first mortgages.  The available for sale (AFS) securitiesrnportfolio balance was essentially flat linked-quarter; income continued to bernimpacted by runoff in federal agency mortgage-backed securities (MBS) and arndecision to replace the run-off with shorter term securities.  Interest income from the AFS securitiesrnportfolio declined by $69 million and interest income from the mortgagernwarehouse was down $63 million as the warehouse size declined with lowerrnorigination volume.</p

Therncompany will take a $644 million or $0.09 per share operating loss from anrnincremental accrual to fully reserve for the costs associated with thernIndependent Foreclosure Review (IFR) settlement announced the first week inrnJanuary and other remediation costs.</p

Mortgage bankingrnnoninterest income was $3.1 billion, up $261 million from the third quarter onrn$125 million in originations compared with $139 million of originations in thernthird quarter.  During the fourth quarterrnthe company retained on its balance sheets approximately $340 million in 1-4rnfamily conforming first mortgage loans, forgoing that amount that might havernbeen generated had they been originated for sale during the quarter.  </p

ThernCompany provided $379 million for mortgage loan repurchase losses, comparedrnwith $462 million in the third quarter (included in net gains from mortgagernloan origination/sales activities). Net mortgage servicing rights (MSRs)rnresults were $220 million, up from $142 million in third quarter of 2012, duernprimarily to MSRs valuation adjustments made in the third quarter for increasedrnservicing and foreclosure costs. The ratio of MSRs to related loans servicedrnfor others was 67 basis points and the average note rate on the servicing portfoliornwas 4.77 percent. The unclosed pipeline at December 31, 2012 was $81 billion,rncompared with $97 billion at September 30, 2012.</p

Atrnthe end of the fourth quarter the company had $11.5 in non-accruing orrnforeclosed 1 to 4 family residential loans, a rate of 4.58 percent, up slightlyrnfrom 11.2 billion or 4.65 percent at the end of Quarter 2.  There were 2.92 billion in non-accruing orrnforeclosed junior residential liens (3.87 percent) compared to $3.14 billion orrn4.02 percent the previous quarter.  </p

Netrncharge offs of real estate loans have steadily decreased over the lastrnyear.  Net charge-offs of 1 to 4 familyrnmortgages totaled $649 million in the fourth quarter or 1.05 percent of averagernloans compared to $673 million in the third quarter (1.15 percent) and $743rnmillion or 1.30 percent in the second quarter. rnJunior liens charge offs totaled $690 million in Q4, $1.04 billion inrnQ3, and Q2.</p

As noted above,rnoriginations declined from $139 billion in the third quarter to $125 billion inrnthe fourth; application volume was also down, from $188 billion in the priorrnquarter to $152 billion and the application pipeline stood at $81 billion atrnthe end of the fourth quarter compared to $97 billion at the end of thernthird.  The residential servicingrnportfolio at year end was valued at $1.9 trillion.

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