Wells Fargo & Company (NYSE:WFC):

  • Continued strong financial results:
    • Full year 2013:
      • Net income of $21.9 billion, up 16 percent from 2012
      • Diluted earnings per share (EPS) of $3.89, up 16 percent
      • Revenue of $83.8 billion, compared with $86.1 billion
      • Return on average assets (ROA) of 1.51 percent, up 10 basis points
      • Return on equity (ROE) of 13.87 percent, up 92 basis points
      • Returned $11.4 billion to shareholders through dividends and share repurchases
    • Fourth quarter 2013:
      • Net income of $5.6 billion, up 10 percent from fourth quarter 2012
      • Diluted earnings per share of $1.00, up 10 percent
      • Revenue of $20.7 billion, compared with $21.9 billion
      • Noninterest expense of $12.1 billion, down $811 million
      • Efficiency ratio of 58.5 percent, improved by 30 basis points
      • ROA of 1.47 percent, up 1 basis point
      • ROE of 13.81 percent, up 46 basis points
  • Fourth quarter 2013 results included:
    • Strong loan and deposit growth:
      • Total loans of $825.8 billion, up $26.2 billion from fourth quarter 2012
      • Core loan portfolio up $39.9 billion1
      • Total average core checking and savings deposits up $50.7 billion
    • Continued improvement in credit quality:
      • Net charge-offs of $963 million, down $1.1 billion from fourth quarter 2012
        • Net charge-off rate of 0.47 percent (annualized), compared with 1.05 percent
      • Nonperforming assets down $4.9 billion
      • $600 million reserve release2 due to continued strong credit performance and improved economic conditions
    • Strengthened capital levels:
      • Tier 1 common equity3 ratio under Basel I of 10.82 percent at December 31, 2013
      • Common Equity Tier 1 ratio under Basel III, using the advanced approach, of 9.78 percent4
      • Period end common stock share count declined 16.6 million from third quarter 2013 reflecting 30.0 million of purchases in the quarter
      • Purchased an additional estimated 11.3 million shares through a forward repurchase transaction expected to settle in first quarter 2014
1  

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

2 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
3

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

4 Estimated based on management's interpretation of final rules adopted July 2, 2013, by the Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act.
         
Selected Financial Information
                       
 
Quarter ended
Dec. 31, Sept. 30, Dec. 31, Year ended Dec. 31,
      2013     2013   2012   2013   2012
Earnings
Diluted earnings per common share $ 1.00 0.99 0.91 3.89 3.36
Wells Fargo net income (in billions) 5.61 5.58 5.09 21.88 18.90
Return on assets (ROA) 1.47 % 1.53 1.46 1.51 1.41
Return on equity (ROE) 13.81 14.07 13.35 13.87 12.95
 
Asset Quality
Net charge-offs (annualized) as a % of avg. total loans 0.47 0.48 1.05 0.56 1.17
Allowance for credit losses as a % of total loans 1.81 1.93 2.19 1.81 2.19
Allowance for credit losses as a % of annualized net charge-offs 392 405 211 332 193
 
Other
Revenue (in billions) $ 20.7 20.5 21.9 83.8 86.1
Efficiency ratio 58.5 % 59.1 58.8 58.3 58.5
Average loans (in billions) $ 816.7 804.8 787.2 805.0 775.2
Average core deposits (in billions) 965.8 940.3 928.8 942.1 893.9
Net interest margin 3.26 % 3.38 3.56 3.39 3.76
                       
 

Wells Fargo & Company (NYSE:WFC) reported diluted earnings per common share of $3.89 for 2013, up 16 percent from $3.36 in 2012. Full year net income was $21.9 billion, compared with $18.9 billion in 2012. For fourth quarter 2013, net income was $5.6 billion, or $1.00 per share, compared with $5.1 billion, or $0.91 per share, for fourth quarter 2012.

"Wells Fargo had another outstanding year in 2013, including strong growth in loans and deposits, and double-digit growth in earnings," said Chairman and CEO John Stumpf. "In the five years since our merger with Wachovia, we have grown our businesses, invested in our franchise's future and contributed to the U.S. economy's recovery. Our 264,000 team members made it possible through their strong commitment to our consumer, small business and commercial customers, and the communities they serve around the world. Strong earnings power and capital levels, and an improving economic outlook are major reasons why we look ahead to 2014 with optimism."

Chief Financial Officer Tim Sloan said, "The fourth quarter of 2013 was very strong for Wells Fargo, with record earnings, solid growth in loans, deposits and capital, and strong credit quality. We also grew both net interest income and noninterest income during the quarter, despite a challenging rate environment and the expected decline in mortgage originations. Wells Fargo's diversified model was again able to produce solid results for our shareholders."

Revenue

Revenue in the fourth quarter was $20.7 billion, compared with $21.9 billion from a year ago. On a linked-quarter basis, revenue grew $187 million driven by increases in both net interest income and noninterest income. Revenue growth from the prior quarter was broad-based, with several businesses generating year-over-year double-digit growth, including retail brokerage, commercial real estate, credit card, insurance and asset-backed finance.

Net Interest Income

Net interest income in fourth quarter 2013 increased $55 million from the third quarter to $10.8 billion due to a larger securities portfolio, higher interest income on trading assets, lower deposit costs, and organic growth in commercial and consumer loans. These benefits were partially offset by lower interest income from mortgages held for sale. Income from variable sources, such as purchased credit-impaired (PCI) loan resolutions and loan fees included in interest income, was essentially flat on a linked quarter basis.

The Company's net interest margin declined 12 basis points from the prior quarter to 3.26 percent resulting from two primary factors. First, actions taken in response to increased regulatory liquidity expectations--raising long-term debt and term deposits--increased cash and short-term investments. Although these actions had little impact on net interest income, they were dilutive to net interest margin, resulting in approximately 6 basis points of decline in the fourth quarter. Second, customer-driven deposit growth was very strong, which contributed to further growth in cash and short-term investments. While customer deposit growth was modestly accretive to net interest income, it diluted net interest margin an additional 6 basis points.

The net impact of balance sheet repricing and growth in the fourth quarter was neutral compared with third quarter as the benefits of securities purchases, lower deposit costs, and reduced debt yields offset the decline in mortgages held for sale income.

Noninterest Income

Noninterest income in the fourth quarter was $9.9 billion, down from $11.3 billion from a year ago, primarily due to lower mortgage banking revenue. On a linked-quarter basis, noninterest income grew $132 million driven by increases of $182 million in trust and investment fees and $72 million in market sensitive revenue.5 These increases were partially offset by a decline of $38 million in mortgage banking revenue as $205 million in higher servicing income was more than offset by lower production revenue.

The increase in trust and investment fees was broad-based, reflecting higher assets under management in the Asset Management Group and in our Retail Brokerage business, in each case driven by strong market performance and higher net flows. In addition, increased investment banking revenues from our Wholesale Banking customers contributed to the higher level of trust and investment fees.

Mortgage banking noninterest income was $1.6 billion, down $38 million from third quarter 2013. During the fourth quarter, residential mortgage originations were $50 billion, down from $80 billion in third quarter 2013 while the gain on sale margin strengthened to 1.77 percent in the fourth quarter, compared with 1.42 percent in the third quarter. The Company provided $26 million for mortgage loan repurchase losses, compared with $28 million in third quarter 2013. As previously announced on December 30, 2013, the Company reached an agreement with the Federal National Mortgage Association (Fannie Mae), which was fully covered through previously established mortgage repurchase accruals, that resolved substantially all repurchase liabilities related to loans sold to Fannie Mae that were originated prior to January 1, 2009. Net mortgage servicing rights (MSRs) results were $266 million, compared with $26 million in third quarter 2013.

The Company had net unrealized securities gains of $3.9 billion at December 31, 2013, down from $5.8 billion at September 30, 2013, primarily driven by an increase in interest rates in the quarter.

5   Consists of net gains from trading activities, net gains (losses) on debt securities and net gains from equity investments.
 

Noninterest Expense

Noninterest expense of $12.1 billion decreased $811 million, or 6 percent, from fourth quarter 2012. On a linked-quarter basis, noninterest expense declined $17 million, as seasonally-higher costs for equipment (including software licenses) and outside professional services (including project spend on business investments and compliance and regulatory-related initiatives) were more than offset by lower salaries and mortgage-related incentive compensation. The efficiency ratio was 58.5 percent in fourth quarter 2013, compared with 59.1 percent in third quarter 2013. The Company expects to operate within its targeted efficiency ratio range of 55 to 59 percent in first quarter 2014.

Loans

Total loans were $825.8 billion at December 31, 2013, up $13.5 billion from September 30, 2013, driven by growth in all categories except for junior lien mortgages--a portfolio the Company has intentionally been reducing. Core loan growth was $16.7 billion, as non-strategic/liquidating portfolios declined $3.3 billion in the quarter. Total average loans were $816.7 billion, up $11.9 billion from the prior quarter, driven by commercial and industrial, 1-4 family first mortgages and the full quarter benefit of portfolio acquisitions in the third quarter (CRE and foreign).

                         
  December 31, 2013   September 30, 2013
(in millions)   Core   Liquidating (1)   Total   Core   Liquidating (1)   Total
Commercial $ 378,743   2,013   380,756 369,703   2,342   372,045
Consumer     366,190   78,853     445,043   358,484   81,796     440,280
Total loans   $ 744,933   80,866     825,799   728,187   84,138     812,325
 
Change from prior quarter:   $ 16,746   (3,272 )   13,474   13,777   (3,426 )   10,351
 

(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 for fourth quarter 2013 were $1.1 trillion, up 9 percent from a year ago and up 13 percent (annualized) from third quarter 2013, driven by strong commercial and consumer growth. The average deposit cost for fourth quarter 2013 improved to 11 basis points, compared with 12 basis points in the prior quarter and 16 basis points a year ago. Average core deposits were $965.8 billion, up 4 percent from a year ago and up 11 percent (annualized) from third quarter 2013. Average core checking and savings deposits were $922.8 billion, up 6 percent from a year ago and up 13 percent (annualized) from third quarter 2013. Average mortgage escrow deposits decreased to $28.2 billion, compared with $42.2 billion a year ago and $34.7 billion in third quarter 2013.

Capital

Capital continued to strengthen in the fourth quarter, with Tier 1 common equity of $123.5 billion under Basel I, or 10.82 percent of risk-weighted assets, compared with 10.12 percent in fourth quarter 2012 and 10.60 percent in third quarter 2013. The Common Equity Tier 1 ratio under Basel III, using the advanced approach, was 9.78 percent.6 In fourth quarter 2013, the Company purchased 30.0 million shares of its common stock and an additional estimated 11.3 million shares through a forward repurchase transaction expected to settle in first quarter 2014. The Company also paid a quarterly common stock dividend of $0.30 per share, up from $0.22 a year ago.

6   Estimated based on management's interpretation of final rules adopted July 2, 2013, by the Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act.
 
  Dec. 31,   Sept. 30,   Dec. 31,
(as a percent of total risk-weighted assets)   2013     2013   2012
Ratios under Basel I (1):
Tier 1 common equity (2) 10.82 % 10.60 10.12
Tier 1 capital 12.33 12.11 11.75
Tier 1 leverage 9.60 9.76 9.47
               
 
(1) December 31, 2013, ratios are preliminary.

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

 

Credit Quality

"Credit performance continued to be strong in the fourth quarter and we were pleased with the quality of the loans we originated. Losses remained at historical lows and non-performing assets decreased significantly," said Chief Risk Officer Mike Loughlin. "Credit losses were $963 million in fourth quarter 2013, compared with $2.1 billion in fourth quarter 2012, a 54 percent year-over-year improvement. The quarterly loss rate was 0.47 percent with commercial losses of only 0.06 percent and consumer losses of 0.82 percent. The consumer loss levels continued to benefit from the improvement in the residential real estate market and the economy. Nonperforming assets declined by $1.1 billion, or 21 percent (annualized) from last quarter. We released $600 million from the allowance for credit losses in the fourth quarter, reflecting improvements in credit performance. Given these favorable conditions, we continue to expect future reserve releases absent a significant deterioration in the economic environment."

Net Loan Charge-offs

Net loan charge-offs improved to $963 million in fourth quarter 2013, or 0.47 percent of average loans, compared with $975 million in third quarter 2013, or 0.48 percent of average loans.

 
Net Loan Charge-Offs
         
  Quarter ended
    Dec. 31, 2013   Sept. 30, 2013   June 30, 2013
  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 $ 107 0.22 % $ 58 0.12

%

$ 77 0.17

%

Real estate mortgage (41 ) (0.15 ) (20 ) (0.08 ) (5 ) (0.02 )
Real estate construction (13 ) (0.32 ) (17 ) (0.41 ) (45 ) (1.10 )
Lease financing - - - - 18 0.57
Foreign     -   -   (2 ) (0.02 )   (1 ) (0.01 )
Total commercial     53   0.06   19   0.02   44   0.05
 
Consumer:
Real estate 1-4 family first mortgage 195 0.30 242 0.38 328 0.52
Real estate 1-4 family junior lien mortgage 226 1.34 275 1.58 359 2.02
Credit card 220 3.38 207 3.28 234 3.90
Automobile 108 0.85 78 0.63 42 0.35
Other revolving credit and installment     161   1.50   154   1.46   145   1.38
Total consumer     910   0.82   956   0.86   1,108   1.01
Total   $ 963   0.47 % $ 975   0.48 % $ 1,152   0.58

%

                             
 

(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 $1.1 billion from the prior quarter to $19.6 billion. Nonaccrual loans decreased $1.2 billion from the prior quarter to $15.7 billion. Foreclosed assets were $3.9 billion, up from $3.8 billion in third quarter 2013, reflecting an increase in foreclosed assets insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA). This increase was primarily driven by enhancements to loan modification programs, slowing foreclosures in prior quarters.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
                             
    Dec. 31, 2013     Sept. 30, 2013     June 30, 2013
    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 $ 738 0.37 % $ 809 0.42 % $ 1,022 0.54 %
Real estate mortgage 2,252 2.10 2,496 2.36 2,708 2.59
Real estate construction 416 2.48 517 3.15 665 4.04
Lease financing 29 0.24 17 0.15 20 0.17
Foreign     40   0.08   47   0.10   40   0.10
Total commercial     3,475   0.91   3,886   1.04   4,455   1.23
 
Consumer:
Real estate 1-4 family first mortgage 9,799 3.79 10,450 4.10 10,705 4.23
Real estate 1-4 family junior lien mortgage 2,188 3.32 2,333 3.45 2,522 3.60
Automobile 173 0.34 188 0.38 200 0.41
Other revolving credit and installment     33   0.08   36   0.08   33   0.08
Total consumer     12,193   2.74   13,007   2.95   13,460   3.07
Total nonaccrual loans     15,668   1.90   16,893   2.08   17,915   2.23
 
Foreclosed assets:
Government insured/guaranteed 2,093 1,781 1,026
Non-government insured/guaranteed     1,844     2,021     2,114  
Total foreclosed assets     3,937     3,802     3,140  
Total nonperforming assets   $ 19,605   2.37 % $ 20,695   2.55 % $ 21,055   2.63 %
 
Change from prior quarter:
Total nonaccrual loans $ (1,225 ) $ (1,022 ) $ (1,611 )
Total nonperforming assets (1,090 ) (360 ) (1,821 )
                               
 

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 $1.0 billion at December 31, 2013, compared with $1.1 billion at September 30, 2013. 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 $22.2 billion at December 31, 2013, up from $21.1 billion at September 30, 2013.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $15.0 billion at December 31, 2013, down from $15.6 billion at September 30, 2013. The allowance coverage to total loans was 1.81 percent, compared with 1.93 percent in third quarter 2013. The allowance covered 3.9 times annualized fourth quarter net charge-offs, compared with 4.0 times in the prior quarter. The allowance coverage to nonaccrual loans was 96 percent at December 31, 2013 compared with 93 percent at September 30, 2013. "We believe the allowance was appropriate for losses inherent in the loan portfolio at December 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
Dec. 31,   Sept. 30,   Dec. 31,
(in millions)     2013   2013   2012
Community Banking $ 3,222 3,341 2,869
Wholesale Banking 2,111 1,973 2,032
Wealth, Brokerage and Retirement     491   450   351
 

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

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and auto, student, and small business lending. Community Banking also offers 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
  Dec. 31,   Sept. 30,   Dec. 31,
(in millions)     2013   2013   2012
Total revenue $ 12,254 12,244 13,782
Provision for credit losses 490 240 1,757
Noninterest expense 7,073 7,060 8,033
Segment net income 3,222 3,341 2,869
 
(in billions)
Average loans 502.5 497.7 493.1
Average assets 883.6 836.6 794.2
Average core deposits     620.2   618.2   608.9
 

Community Banking reported net income of $3.2 billion, down $119 million, or 4 percent, from third quarter 2013. Revenue of $12.3 billion increased $10 million, or 0.1 percent, from the prior quarter primarily due to higher gains on equity investments. The provision for credit losses increased $250 million from the prior quarter as the $26 million improvement in net charge-offs was more than offset by a lower reserve release.

Net income was up $353 million, or 12 percent, from fourth quarter 2012. Revenue decreased $1.5 billion, or 11 percent, from a year ago due to lower mortgage banking revenue, partially offset by higher net interest income, trust and investment fees, and revenue from debit and credit card volumes. Noninterest expense declined $960 million, or 12 percent, from a year ago largely due to costs in 2012 associated with the OCC's Independent Foreclosure Review settlement, and a $250 million contribution to the Wells Fargo Foundation. The provision for credit losses decreased $1.3 billion from a year ago driven by a $953 million decline in net charge-offs and a $314 million increase in the reserve release.

Regional Banking

  • Retail banking
    • Retail Bank household cross-sell ratio of 6.16 products per household, up from 6.05 year-over-year7
    • Primary consumer checking customers8 up a net 4.7 percent year-over-year7
    • Customers rated their experience with Wells Fargo stores at an all-time high based on fourth quarter survey results
  • Small Business/Business Banking
    • Primary business checking customers8 up a net 4.7 percent year-over-year7
    • $18.9 billion in new loan commitments to small business customers (primarily with annual revenues less than $20 million) in 2013, up 18 percent from 2012
    • For fifth consecutive year, Wells Fargo was nation's #1 SBA 7(a) small business lender in dollars, and for first three months of new federal fiscal year was #1 lender in dollars and units9
  • Online and Mobile Banking
    • 22.9 million active online customers, up 7 percent year-over-year7
    • 11.9 million active mobile customers, up 27 percent year-over-year7

Consumer Lending Group

  • Home Lending
    • Originations of $50 billion, compared with $80 billion in prior quarter
    • Applications of $65 billion, compared with $87 billion in prior quarter
    • Application pipeline of $25 billion at quarter end, compared with $35 billion at September 30, 2013
    • Residential mortgage servicing portfolio of $1.8 trillion; ratio of MSRs to related loans serviced for others was 88 basis points, compared with 82 basis points in prior quarter
    • Average note rate on the servicing portfolio was 4.52 percent, compared with 4.54 percent in prior quarter
  • Consumer Credit
    • Credit card penetration in retail banking households rose to 37.0 percent7, up from 33.1 percent in prior year
    • Auto originations of $6.8 billion, down 2 percent from prior quarter and up 26 percent from prior year
7   Data as of November 2013, comparisons with November 2012.
8 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
9 U.S. SBA data, federal fiscal year 2009-2013 (year ending September) and partial fiscal year 2014.
 

Wholesale Bankingprovides 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
Dec. 31,   Sept. 30,   Dec. 31,
(in millions)     2013     2013     2012
Total revenue $ 5,972 5,871 5,993
Provision (reversal of provision) for credit losses (125 ) (144 ) 60
Noninterest expense 3,020 3,084 3,007
Segment net income 2,111 1,973 2,032
 
(in billions)
Average loans 298.0 290.4 279.2
Average assets 512.3 500.7 489.7
Average core deposits     258.5     235.3     240.7

 

Wholesale Banking reported net income of $2.1 billion, up $138 million, or 7 percent, from third quarter 2013. Revenue of $6.0 billion increased $101 million, or 2 percent, from the prior quarter on strong growth across many areas including asset management, commercial real estate, corporate banking and investment banking as well as seasonally higher crop insurance revenue. Noninterest expense decreased $64 million, or 2 percent, from third quarter 2013, benefiting from lower FDIC expense, partially offset by higher variable personnel expense.

Net income was up $79 million, or 4 percent, from fourth quarter 2012. Revenue decreased $21 million, or 0.4 percent, from fourth quarter 2012 as business growth and strong loan and deposit growth was more than offset by lower sales and trading, equity funds gains and other income. Noninterest expense increased $13 million from a year ago due to higher personnel expenses and support costs. The provision for credit losses decreased $185 million from a year ago due to a $152 million reduction in credit losses and $33 million of additional reserve release. The fourth quarter 2013 provision included an $83 million reserve release, compared with a $50 million release a year ago.

  • Seven percent average loan growth in fourth quarter 2013 compared with fourth quarter 2012. The growth came from nearly all portfolios, including asset-backed finance, commercial real estate, and international
  • Investment banking full year 2013 revenue from Wholesale Banking customers increased 22 percent from full year 2012
  • Investment banking full year 2013 market share of 5.6 percent up from 5.0 percent for full year 2012
  • Cross-sell of 7.1 products per relationship up from 7.0 in prior quarter
  • Full year 2013 treasury management revenue up 8 percent from full year 2012
  • Fourth quarter assets under management up $12 billion from prior quarter to $487 billion, reflecting net client inflows and increased market valuation

Wealth, Brokerage and Retirementprovides 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 fiduciary services. Abbot Downing, a Wells Fargo business, provides comprehensive wealth management services to ultra high net worth families and individuals as well as 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
  Dec. 31,   Sept. 30,   Dec. 31,
(in millions)     2013     2013     2012
Total revenue $ 3,438 3,307 3,094
Provision (reversal of provision) for credit losses (11 ) (38 ) 15
Noninterest expense 2,655 2,619 2,513
Segment net income 491 450 351
 
(in billions)
Average loans 48.4 46.7 43.3
Average assets 185.3 180.8 171.7
Average core deposits     153.9     150.6     143.4
 

Wealth, Brokerage and Retirement reported net income of $491 million, up $41 million, or 9 percent, from third quarter 2013. Revenue of $3.4 billion increased $131 million, or 4 percent, from the prior quarter primarily driven by higher asset-based fees, as well as increases in net interest income and brokerage transaction revenue. Noninterest expense was up 1 percent over the prior quarter as increased broker commissions and other incentives, as well as higher non-personnel expenses, were mostly offset by lower FDIC expense. The provision for credit losses increased $27 million from third quarter 2013 due to reduced reserve releases. The provision in fourth and third quarters 2013 included $11 million and $38 million of reserve releases, respectively.

Net income was up $140 million, or 40 percent, from fourth quarter 2012. Revenue increased $344 million, or 11 percent, from a year ago primarily driven by strong growth in asset-based fees, as well as higher net interest income and higher gains on deferred compensation plan investments (offset in compensation expense). Noninterest expense increased $142 million, or 6 percent, from a year ago due to higher broker commissions, increased non-personnel expenses and an increase in deferred compensation plan expense (offset in trading income), partially offset by lower FDIC expense. The provision for credit losses decreased $26 million from a year ago; the provision in fourth quarter 2012 included an $8 million reserve release.

Retail Brokerage

  • Client assets of $1.4 trillion, up 12 percent from prior year
  • Managed account assets increased $71 billion, or 23 percent, from prior year driven by strong market performance and net flows
  • Strong deposit growth, with average balances up 9 percent from prior year
  • Average loan balances increased 24 percent from prior year

Wealth Management

  • Client assets of $218 billion, up 7 percent from prior year
  • Average loan balances up 9 percent from prior year

Retirement

  • IRA assets of $341 billion, up 15 percent from prior year
  • Institutional Retirement plan assets of $298 billion, up 12 percent from prior year

WBR cross-sell ratio of 10.42 products per household, up from 10.27 a year ago

Conference Call

The Company will host a live conference call on Tuesday, January 14, at 7 a.m. PST (10 a.m. EST). To access the call, please dial 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings and http://us.meeting-stream.com/wellsfargobankna_011414.

A replay of the conference call will be available beginning at approximately noon PST (3 p.m. EST) on January 14 through Tuesday, January 21. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #99204348. The replay will also be available online at wellsfargo.com/invest_relations/earnings.

Forward-Looking Statements

This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we may make forward-looking statements in our other documents filed or furnished with the SEC, and our management may make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "target," "projects," "outlook," "forecast," "will," "may," "could," "should," "can" and similar references to future periods. In particular, forward-looking statements include, but are not limited to, statements we make about: (i) the future operating or financial performance of the Company, including our outlook for future growth; (ii) our noninterest expense and efficiency ratio; (iii) future credit quality and performance, including our expectations regarding future loan losses and allowance releases; (iv) the appropriateness of the allowance for credit losses; (v) our expectations regarding net interest income and net interest margin; (vi) loan growth or the reduction or mitigation of risk in our loan portfolios; (vii) future capital levels and our estimated common equity tier 1 ratio under Basel III capital standards; (viii) the performance of our mortgage business and any related exposures; (ix) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (x) future common stock dividends, common share repurchases and other uses of capital; (xi) our targeted range for return on assets and return on equity; (xii) the outcome of contingencies, such as legal proceedings; and (xiii) the Company's plans, objectives and strategies.

Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:

  • current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, the sovereign debt crisis and economic difficulties in Europe, and the overall slowdown in global economic growth;
  • our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) 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 Act and other legislation and regulation relating to bank products and services;
  • the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding 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, and the credit quality of or losses on such repurchased mortgage loans;
  • negative effects relating to our mortgage servicing and foreclosure practices, including our obligations under the settlement with the Department of Justice and other federal and state government entities, as well as changes in 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, 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;
  • the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;
  • a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our available-for-sale portfolio;
  • the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
  • reputational damage from negative publicity, protests, fines, penalties and other negative consequences from regulatory violations and legal actions;
  • a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
  • the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
  • fiscal and monetary policies of the Federal Reserve Board; and
  • the other risk factors and uncertainties described under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2012.

In addition to the above factors, we also caution that 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 Securities and Exchange Commission and available on its website at www.sec.gov.

Any forward-looking statement made by us speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

About Wells Fargo

Wells Fargo & Company (NYSE:WFC) is a nationwide, diversified, community-based financial services company with $1.5 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 270,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune's 2013 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) 22-23
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 24
Noninterest Income and Noninterest Expense 25-26
 

Balance Sheet

Consolidated Balance Sheet 27-28
Investment Securities 29
 

Loans

Loans 29
Nonperforming Assets 30
Loans 90 Days or More Past Due and Still Accruing 31
Purchased Credit-Impaired Loans 32-34
Pick-A-Pay Portfolio 35
Non-Strategic and Liquidating Loan Portfolios 35
Changes in Allowance for Credit Losses 36-37
 

Equity

Tier 1 Common Equity 38
 

Operating Segments

Operating Segment Results 39-40
 

Other

Mortgage Servicing and other related data 41-43
     
 
         
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA                              
       
% Change
  Quarter ended Dec. 31, 2013 from   Year ended
Dec. 31, Sept. 30, Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, %
($ in millions, except per share amounts)   2013   2013   2012   2013   2012     2013   2012   Change
For the Period
Wells Fargo net income $ 5,610 5,578 5,090 1 % 10 $ 21,878 18,897 16 %
Wells Fargo net income
applicable to common stock 5,369 5,317 4,857 1 11 20,889 17,999 16
Diluted earnings per common share 1.00 0.99 0.91 1 10 3.89 3.36 16
Profitability ratios (annualized):
Wells Fargo net income
to average assets (ROA) 1.47 % 1.53 1.46 (4) 1 1.51 1.41 7
Wells Fargo net income applicable to
common stock to average Wells Fargo
common stockholders' equity (ROE) 13.81 14.07 13.35 (2) 3 13.87 12.95 7
Efficiency ratio (1) 58.5 59.1 58.8 (1) (1) 58.3 58.5 -
Total revenue $ 20,665 20,478 21,948 1 (6) $ 83,780 86,086 (3)
Pre-tax pre-provision profit (PTPP) (2) 8,580 8,376 9,052 2 (5) 34,938 35,688 (2)
Dividends declared per common share 0.30 0.30 0.22 - 36 1.15 0.88 31
Average common shares outstanding 5,270.3 5,295.3 5,272.4 - - 5,287.3 5,287.6 -
Diluted average common shares outstanding 5,358.6 5,381.7 5,338.7 - - 5,371.2 5,351.5 -
Average loans $ 816,669 804,779 787,210 1 4 $ 804,992 775,224 4
Average assets 1,509,117 1,449,610 1,387,056 4 9 1,448,305 1,341,635 8
Average core deposits (3) 965,828 940,279 928,824 3 4 942,120 893,937 5
Average retail core deposits (4) 679,355 670,335 646,145 1 5 669,657 629,320 6
Net interest margin 3.26 % 3.38 3.56 (4) (8) 3.39 3.76 (10)
At Period End
Investment securities $ 264,353 259,399 235,199 2 12 $ 264,353 235,199 12
Loans 825,799 812,325 799,574 2 3 825,799 799,574 3
Allowance for loan losses 14,502 15,159 17,060 (4) (15) 14,502 17,060 (15)
Goodwill 25,637 25,637 25,637 - - 25,637 25,637 -
Assets 1,527,015 1,488,055 1,422,968 3 7 1,527,015 1,422,968 7
Core deposits (3) 980,063 947,805 945,749 3 4 980,063 945,749 4
Wells Fargo stockholders' equity 170,142 167,165 157,554 2 8 170,142 157,554 8
Total equity 171,008 168,813 158,911 1 8 171,008 158,911 8
Capital ratios:
Total equity to assets 11.20 % 11.34 11.17 (1) - 11.20 11.17 -
Risk-based capital (5):
Tier 1 capital 12.33 12.11 11.75 2 5 12.33 11.75 5
Total capital 15.44 15.09 14.63 2 6 15.44 14.63 6
Tier 1 leverage (5) 9.60 9.76 9.47 (2) 1 9.60 9.47 1
Tier 1 common equity (5)(6) 10.82 10.60 10.12 2 7 10.82 10.12 7
Common shares outstanding 5,257.2 5,273.7 5,266.3 - - 5,257.2 5,266.3 -
Book value per common share $ 29.48 28.98 27.64 2 7 $ 29.48 27.64 7
Common stock price:
High 45.64 44.79 36.34 2 26 45.64 36.60 25
Low 40.07 40.79 31.25 (2) 28 34.43 27.94 23
Period end 45.40 41.32 34.18 10 33 45.40 34.18 33
Team members (active, full-time equivalent) 264,900 270,600 269,200 (2) (2) 264,900 269,200 (2)
                                             
 
(1)

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

(2)

 Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.

(3)

 Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

(4)

 Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.

(5)

 The December 31, 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
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
($ in millions, except per share amounts)   2013   2013 2013 2013 2012
For the Quarter
Wells Fargo net income $ 5,610 5,578 5,519 5,171 5,090
Wells Fargo net income applicable to common stock 5,369 5,317 5,272 4,931 4,857
Diluted earnings per common share 1.00 0.99 0.98 0.92 0.91
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.47 % 1.53 1.55 1.49 1.46
Wells Fargo net income applicable to common stock to average
Wells Fargo common stockholders' equity (ROE) 13.81 14.07 14.02 13.59 13.35
Efficiency ratio (1) 58.5 59.1 57.3 58.3 58.8
Total revenue $ 20,665 20,478 21,378 21,259 21,948
Pre-tax pre-provision profit (PTPP) (2) 8,580 8,376 9,123 8,859 9,052
Dividends declared per common share 0.30 0.30 0.30 0.25 0.22
Average common shares outstanding 5,270.3 5,295.3 5,304.7 5,279.0 5,272.4
Diluted average common shares outstanding 5,358.6 5,381.7 5,384.6 5,353.5 5,338.7
Average loans $ 816,669 804,779 800,241 798,074 787,210
Average assets 1,509,117 1,449,610 1,429,005 1,404,334 1,387,056
Average core deposits (3) 965,828 940,279 936,090 925,866 928,824
Average retail core deposits (4) 679,355 670,335 666,043 662,913 646,145
Net interest margin 3.26 % 3.38 3.46 3.48 3.56
At Quarter End
Investment securities $ 264,353 259,399 249,439 248,160 235,199
Loans 825,799 812,325 801,974 799,966 799,574
Allowance for loan losses 14,502 15,159 16,144 16,711 17,060
Goodwill 25,637 25,637 25,637 25,637 25,637
Assets 1,527,015 1,488,055 1,440,563 1,436,634 1,422,968
Core deposits (3) 980,063 947,805 941,158 939,934 945,749
Wells Fargo stockholders' equity 170,142 167,165 162,421 162,086 157,554
Total equity 171,008 168,813 163,777 163,395 158,911
Capital ratios:
Total equity to assets 11.20 % 11.34 11.37 11.37 11.17
Risk-based capital (5):
Tier 1 capital 12.33 12.11 12.12 11.80 11.75
Total capital 15.44 15.09 15.03 14.76 14.63
Tier 1 leverage (5) 9.60 9.76 9.63 9.53 9.47
Tier 1 common equity (5)(6) 10.82 10.60 10.71 10.39 10.12
Common shares outstanding 5,257.2 5,273.7 5,302.2 5,288.8 5,266.3
Book value per common share $ 29.48 28.98 28.26 28.27 27.64
Common stock price:
High 45.64 44.79 41.74 38.20 36.34
Low 40.07 40.79 36.19 34.43 31.25
Period end 45.40 41.32 41.27 36.99 34.18
Team members (active, full-time equivalent) 264,900 270,600 274,300 274,300 269,200
                         
 
(1)

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

(2)

 Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.

(3)

 Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

(4)

 Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.

(5)

 The December 31, 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 Dec. 31, % Year ended Dec. 31, %
(in millions, except per share amounts)     2013   2012   Change         2013   2012   Change
Interest income
Trading assets $ 378 339 12 % $ 1,376 1,358 1 %
Investment securities 2,119 1,897 12 8,116 8,098 -
Mortgages held for sale 221 413 (46) 1,290 1,825 (29)
Loans held for sale 3 3 - 13 41 (68)
Loans 8,907 9,027 (1) 35,571 36,482 (2)
Other interest income     208   178 17   723   587 23
  Total interest income     11,836   11,857 -   47,089   48,391 (3)
Interest expense
Deposits 297 399 (26) 1,337 1,727 (23)
Short-term borrowings 14 24 (42) 60 79 (24)
Long-term debt 635 735 (14) 2,585 3,110 (17)
Other interest expense     87   56 55   307   245 25
  Total interest expense     1,033   1,214 (15)   4,289   5,161 (17)
Net interest income 10,803 10,643 2 42,800 43,230 (1)
Provision for credit losses     363   1,831 (80)   2,309   7,217 (68)
Net interest income after provision for credit losses 10,440   8,812 18   40,491   36,013 12
Noninterest income
Service charges on deposit accounts 1,283 1,250 3 5,023 4,683 7
Trust and investment fees 3,458 3,199 8 13,430 11,890 13
Card fees 827 736 12 3,191 2,838 12
Other fees 1,119 1,193 (6) 4,340 4,519 (4)
Mortgage banking 1,570 3,068 (49) 8,774 11,638 (25)
Insurance 453 395 15 1,814 1,850 (2)
Net gains from trading activities 325 275 18 1,623 1,707 (5)
Net losses on debt securities (14) (63) (78) (29) (128) (77)
Net gains from equity investments 654 715 (9) 1,472 1,485 (1)
Lease income 148 170 (13) 663 567 17
Other     39   367 (89)   679   1,807 (62)
  Total noninterest income     9,862   11,305 (13)   40,980   42,856 (4)
Noninterest expense
Salaries 3,811 3,735 2 15,152 14,689 3
Commission and incentive compensation 2,347 2,365 (1) 9,951 9,504 5
Employee benefits 1,160 891 30 5,033 4,611 9
Equipment 567 542 5 1,984 2,068 (4)
Net occupancy 732 728 1 2,895 2,857 1
Core deposit and other intangibles 375 418 (10) 1,504 1,674 (10)
FDIC and other deposit assessments 196 307 (36) 961 1,356 (29)
Other     2,897   3,910 (26)   11,362   13,639 (17)
  Total noninterest expense     12,085   12,896 (6)   48,842   50,398 (3)
Income before income tax expense 8,217 7,221 14 32,629 28,471 15
Income tax expense     2,504   1,924 30   10,405   9,103 14
Net income before noncontrolling interests 5,713 5,297 8 22,224 19,368 15
Less: Net income from noncontrolling interests     103   207 (50)   346   471 (27)
Wells Fargo net income   $ 5,610   5,090 10 $ 21,878   18,897 16
Less: Preferred stock dividends and other     241   233 3   989   898 10
Wells Fargo net income applicable to common stock   $ 5,369   4,857 11 $ 20,889   17,999 16
Per share information
Earnings per common share $ 1.02 0.92 11 $ 3.95 3.40 16
Diluted earnings per common share 1.00 0.91 10 3.89 3.36 16
Dividends declared per common share 0.30 0.22 36 1.15 0.88 31
Average common shares outstanding 5,270.3 5,272.4 - 5,287.3 5,287.6 -
Diluted average common shares outstanding 5,358.6 5,338.7 - 5,371.2 5,351.5 -
 
                                   
Wells Fargo & Company and Subsidiaries    
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME        
             
Quarter ended Dec. 31, % Year ended Dec. 31, %
(in millions)   2013   2012   Change       2013   2012   Change
Wells Fargo net income $ 5,610   5,090 10 % $ 21,878   18,897 16 %
Other comprehensive income (loss), before tax:
Investment securities:
Net unrealized gains (losses) arising during the period (1,739) (454) 283 (7,661) 5,143 NM
Reclassification of net (gains) losses to net income (88) 19 NM (285) (271) 5
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period (22) (11) 100 (32) 52 NM
Reclassification of net gains on cash flow hedges to net income (71) (93) (24) (296) (388) (24)
Defined benefit plans adjustments:
Net actuarial gains (losses) arising during the period 458 (757) NM 1,533 (775) NM
Amortization of net actuarial loss, settlements and
other costs to net income 55 33 67 276 144 92
Foreign currency translation adjustments:
Net unrealized losses arising during the period (17) (5) 240 (44) (6) 633
    Reclassification of net gains to net income   -   - -   (12)   (10) 20
Other comprehensive income (loss), before tax (1,424) (1,268) 12 (6,521) 3,889 NM
Income tax (expense) benefit related to other comprehensive income   522   481 9   2,524   (1,442) NM
Other comprehensive income (loss), net of tax (902) (787) 15 (3,997) 2,447 NM
Less: Other comprehensive income (loss) from noncontrolling interests 1   (2) NM   267   4 NM
Wells Fargo other comprehensive income (loss), net of tax   (903)   (785) 15   (4,264)   2,443 NM
 
Wells Fargo comprehensive income 4,707 4,305 9 17,614 21,340 (17)
Comprehensive income from noncontrolling interests   104   205 (49)   613   475 29
Total comprehensive income $ 4,811   4,510   7     $ 18,227   21,815   (16)
 
NM - Not meaningful
 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY      
 
Year ended Dec. 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 21,878 18,897
Wells Fargo other comprehensive income (loss), net of tax (4,264) 2,443
Common stock issued 2,733 2,488
Common stock repurchased (1) (5,356) (3,918)
Preferred stock released by ESOP 1,006 888
Preferred stock issued 3,145 1,377
Common stock warrants repurchased - (1)
Common stock dividends (6,086) (4,658)
Preferred stock dividends and other (989) (898)
Noncontrolling interests and other, net   30 604
Balance, end of period $ 171,008 158,911
 
(1)

 For the year ended December 31, 2013, includes $500 million related to a private forward repurchase transaction entered into in fourth quarter 2013 that is expected to settle in first quarter 2014 for an estimated 11.3 million shares of common stock. For the year ended December 31, 2012, includes $200 million related to a private forward repurchase transaction entered into in fourth quarter 2012 that settled in first quarter 2013 for 6 million shares of common stock.

         
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME                
       
  Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions, except per share amounts)     2013     2013     2013     2013   2012  
Interest income
Trading assets $ 378 331 340 327 339
Investment securities 2,119 2,038 2,034 1,925 1,897
Mortgages held for sale 221 320 378 371 413
Loans held for sale 3 3 4 3 3
Loans 8,907 8,901 8,902 8,861 9,027
Other interest income     208     183     169     163   178  
  Total interest income     11,836     11,776     11,827     11,650   11,857  
Interest expense
Deposits 297 318 353 369 399
Short-term borrowings 14 9 17 20 24
Long-term debt 635 621 632 697 735
Other interest expense     87     80     75     65   56  
  Total interest expense     1,033     1,028     1,077     1,151   1,214  
Net interest income 10,803 10,748 10,750 10,499 10,643
Provision for credit losses     363     75     652     1,219   1,831  
Net interest income after provision for credit losses     10,440     10,673     10,098     9,280   8,812  
Noninterest income
Service charges on deposit accounts 1,283 1,278 1,248 1,214 1,250
Trust and investment fees 3,458 3,276 3,494 3,202 3,199
Card fees 827 813 813 738 736
Other fees 1,119 1,098 1,089 1,034 1,193
Mortgage banking 1,570 1,608 2,802 2,794 3,068
Insurance 453 413 485 463 395
Net gains from trading activities 325 397 331 570 275
Net gains (losses) on debt securities (14 ) (6 ) (54 ) 45 (63 )
Net gains from equity investments 654 502 203 113 715
Lease income 148 160 225 130 170
Other     39     191     (8 )   457   367  
  Total noninterest income     9,862     9,730     10,628     10,760   11,305  
Noninterest expense
Salaries 3,811 3,910 3,768 3,663 3,735
Commission and incentive compensation 2,347 2,401 2,626 2,577 2,365
Employee benefits 1,160 1,172 1,118 1,583 891
Equipment 567 471 418 528 542
Net occupancy 732 728 716 719 728
Core deposit and other intangibles 375 375 377 377 418
FDIC and other deposit assessments 196 214 259 292 307
Other     2,897     2,831     2,973     2,661   3,910  
  Total noninterest expense     12,085     12,102     12,255     12,400   12,896  
Income before income tax expense 8,217 8,301 8,471 7,640 7,221
Income tax expense     2,504     2,618     2,863     2,420   1,924  
Net income before noncontrolling interests 5,713 5,683 5,608 5,220 5,297
Less: Net income from noncontrolling interests     103     105     89     49   207  
Wells Fargo net income   $ 5,610     5,578     5,519     5,171   5,090  
Less: Preferred stock dividends and other     241     261     247     240   233  
Wells Fargo net income applicable to common stock   $ 5,369     5,317     5,272     4,931   4,857  
Per share information
Earnings per common share $ 1.02 1.00 1.00 0.93 0.92
Diluted earnings per common share 1.00 0.99 0.98 0.92 0.91
Dividends declared per common share 0.30 0.30 0.30 0.25 0.22
Average common shares outstanding 5,270.3 5,295.3 5,304.7 5,279.0 5,272.4
Diluted average common shares outstanding 5,358.6 5,381.7 5,384.6 5,353.5 5,338.7
                       
 
 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
                 
Quarter ended December 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 $ 205,276 0.28 % $ 148 117,047 0.41 % $ 121
Trading assets 45,379 3.40 386 42,005 3.28 345
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 6,611 1.67 27 5,281 1.64 22
Securities of U.S. states and political subdivisions 42,025 4.38 460 36,391 4.64 422
Mortgage-backed securities:
Federal agencies 117,910 2.94 866 90,898 2.71 617
      Residential and commercial   29,233 6.35   464 32,669 6.53   533
Total mortgage-backed securities 147,143 3.62 1,330 123,567 3.72 1,150
    Other debt and equity securities   55,325 3.43   478 50,025 3.91   490
Total available-for-sale securities 251,104 3.65 2,295 215,264 3.87 2,084
Held-to-maturity securities (4) 2,845 3.09 22 - - -
Mortgages held for sale (5) 21,396 4.13 221 47,241 3.50 413
Loans held for sale (5) 138 8.21 3 135 9.03 3
Loans:
Commercial:
Commercial and industrial 193,211 3.48 1,696 179,493 3.85 1,736
Real estate mortgage 105,795 3.85 1,026 105,107 4.02 1,061
Real estate construction 16,579 4.79 200 17,502 4.97 218
Lease financing 11,744 5.70 167 12,461 6.43 201
    Foreign   46,682 2.23 262 39,665 2.32   231
      Total commercial   374,011 3.56 3,351 354,228 3.87   3,447
Consumer:
Real estate 1-4 family first mortgage 257,253 4.15 2,673 244,634 4.39 2,686
Real estate 1-4 family junior lien mortgage 66,774 4.29 721 76,908 4.28 826
Credit card 25,854 12.23 797 23,839 12.43 745
Automobile 50,213 6.70 849 45,957 7.34 848
    Other revolving credit and installment   42,564 4.94   529 41,644 4.63   485
      Total consumer   442,658 5.01   5,569 432,982 5.15   5,590
Total loans (5) 816,669 4.35 8,920 787,210 4.58 9,037
Other   4,728 5.22   61 4,280 5.21   56
          Total earning assets $ 1,347,535 3.56 % $ 12,056 1,213,182 3.96 % $ 12,059
Funding sources
Deposits:
Interest-bearing checking $ 35,171 0.07 % $ 6 30,858 0.06 % $ 5
Market rate and other savings 568,750 0.08 110 518,593 0.10 135
Savings certificates 43,067 0.94 102 56,743 1.27 181
Other time deposits 39,700 0.48 47 13,612 1.51 51
  Deposits in foreign offices   86,333 0.15   32 69,398 0.15   27
Total interest-bearing deposits 773,021 0.15 297 689,204 0.23 399
Short-term borrowings 52,286 0.12 15 52,820 0.21 28
Long-term debt 153,470 1.65 635 127,505 2.30 735
Other liabilities   12,822 2.70   87 9,975 2.27   56
Total interest-bearing liabilities 991,599 0.42 1,034 879,504 0.55 1,218
Portion of noninterest-bearing funding sources   355,936 -   - 333,678 -   -
          Total funding sources $ 1,347,535   0.30   1,034 1,213,182   0.40   1,218
Net interest margin and net interest income on a taxable-equivalent basis (6)
3.26 %   $ 11,022 3.56 %   $ 10,841
Noninterest-earning assets
Cash and due from banks $ 15,998 16,361
Goodwill 25,637 25,637
Other   119,947 131,876
          Total noninterest-earning assets $ 161,582 173,874
Noninterest-bearing funding sources
Deposits $ 287,379 286,924
Other liabilities 60,489 63,025
Total equity 169,650 157,603
Noninterest-bearing funding sources used to fund earning assets   (355,936) (333,678)
          Net noninterest-bearing funding sources $ 161,582 173,874
            Total assets $ 1,509,117 1,387,056
                                             
 
(1)

 Our average prime rate was 3.25% for the quarters ended December 31, 2013 and 2012. The average three-month London Interbank Offered Rate (LIBOR) was 0.24% and 0.32% 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)

 Includes $6.3 billion of federal agency mortgage-backed securities purchased during the fourth quarter of 2013 and $6.0 billion of auto asset-backed securities that were transferred near the end of 2013 from the available-for-sale portfolio.

(5)

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

(6)

 Includes taxable-equivalent adjustments of $219 million and $198 million for the quarters ended December 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
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
                   
Year ended December 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 $ 154,902 0.32 % $ 489 84,081 0.45 % $ 378
Trading assets 44,745 3.14 1,406 41,950 3.29 1,380
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 6,750 1.66 112 3,604 1.31 47
Securities of U.S. states and political subdivisions 39,922 4.38 1,748 34,875 4.48 1,561
Mortgage-backed securities:
Federal agencies 107,148 2.83 3,031 92,887 3.12 2,893
      Residential and commercial   30,717 6.47   1,988 33,545 6.75   2,264
Total mortgage-backed securities 137,865 3.64 5,019 126,432 4.08 5,157
    Other debt and equity securities   55,002 3.53   1,940 49,245 4.04   1,992
Total available-for-sale securities 239,539 3.68 8,819 214,156 4.09 8,757
Held-to-maturity securities (4) 717 3.06 22 - - -
Mortgages held for sale (5) 35,273 3.66 1,290 48,955 3.73 1,825
Loans held for sale (5) 163 7.95 13 661 6.22 41
Loans:
Commercial:
Commercial and industrial 188,092 3.62 6,807 173,913 4.01 6,981
Real estate mortgage 105,475 3.93 4,147 105,437 4.18 4,411
Real estate construction 16,445 4.77 784 17,963 4.98 894
Lease financing 12,048 6.13 738 12,771 7.22 921
    Foreign   43,447 2.18   946 39,852 2.47   984
      Total commercial   365,507 3.67   13,422 349,936 4.06   14,191
Consumer:
Real estate 1-4 family first mortgage 254,000 4.22 10,716 234,619 4.55 10,671
Real estate 1-4 family junior lien mortgage 70,227 4.29 3,013 80,840 4.28 3,457
Credit card 24,747 12.46 3,083 22,772 12.67 2,885
Automobile 48,476 6.94 3,365 44,986 7.54 3,390
    Other revolving credit and installment   42,035 4.80   2,019 42,071 4.57   1,923
      Total consumer   439,485 5.05   22,196 425,288 5.25   22,326
Total loans (5) 804,992 4.42 35,618 775,224 4.71 36,517
Other   4,354 5.39   235 4,438 4.70   209
          Total earning assets $ 1,284,685 3.73 % $ 47,892 1,169,465 4.20 % $ 49,107
Funding sources
Deposits:
Interest-bearing checking $ 35,570 0.06 % $ 22 30,564 0.06 % $ 19
Market rate and other savings 550,394 0.08 450 505,310 0.12 592
Savings certificates 49,510 1.13 559 59,484 1.31 782
Other time deposits 28,090 0.69 194 13,363 1.68 225
  Deposits in foreign offices   76,894 0.15   112 67,920 0.16   109
Total interest-bearing deposits 740,458 0.18 1,337 676,641 0.26 1,727
Short-term borrowings 54,716 0.13 71 51,196 0.18 94
Long-term debt 134,937 1.92 2,585 127,547 2.44 3,110
Other liabilities   12,471 2.46   307 10,032 2.44   245
Total interest-bearing liabilities 942,582 0.46 4,300 865,416 0.60 5,176
Portion of noninterest-bearing funding sources   342,103 -   - 304,049 -   -
          Total funding sources $ 1,284,685   0.34   4,300 1,169,465   0.44   5,176
Net interest margin and net interest income
on a taxable-equivalent basis (6) 3.39   %   $ 43,592 3.76 %   $ 43,931
Noninterest-earning assets
Cash and due from banks $ 16,272 16,303
Goodwill 25,637 25,417
Other   121,711 130,450
          Total noninterest-earning assets $ 163,620 172,170
Noninterest-bearing funding sources
Deposits $ 280,229 263,863
Other liabilities 60,500 61,214
Total equity 164,994 151,142
Noninterest-bearing funding sources used to fund earning assets   (342,103) (304,049)
          Net noninterest-bearing funding sources $ 163,620 172,170
            Total assets $ 1,448,305 1,341,635
                                               
 
(1) Our average prime rate was 3.25% for the year ended December 31, 2013 and 2012. The average three-month London Interbank Offered Rate (LIBOR) was 0.27% and 0.43% for the same periods, respectively.
(2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) The average balance amounts represent amortized cost for the periods presented.
(4) Includes $6.3 billion of federal agency mortgage-backed securities purchased during the fourth quarter of 2013 and $6.0 billion of auto asset-backed securities that were transferred near the end of 2013 from the available-for-sale portfolio.
(5) Nonaccrual loans and related income are included in their respective loan categories.
(6) Includes taxable-equivalent adjustments of $792 million and $701 million for the year ended December 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
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)    
                     
  Quarter ended
  Dec. 31, 2013         Sept. 30, 2013         June 30, 2013         Mar. 31, 2013         Dec. 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

$ 205.3 0.28 % $ 155.9 0.31 % $ 136.5 0.33 % $ 121.0 0.36 % $ 117.1 0.41 %
Trading assets 45.4 3.40 44.8 3.02 46.6 2.98 42.1 3.17 42.0 3.28
Investment securities (2):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 6.6 1.67 6.6 1.69 6.7 1.73 7.1 1.56 5.3 1.64
Securities of U.S. states and political subdivisions 42.0 4.38 40.8 4.35 39.3 4.42 37.6 4.38 36.4 4.64
Mortgage-backed securities:
Federal agencies 117.9 2.94 113.0 2.83 102.0 2.79 95.4 2.74 90.9 2.71
      Residential and commercial   29.2 6.35   30.2 6.56   31.3 6.50   32.1 6.46   32.7 6.53
Total mortgage-backed securities 147.1 3.62 143.2 3.62 133.3 3.66 127.5 3.68 123.6 3.72
    Other debt and equity securities 55.4 3.43   55.4 3.27   55.5 3.84   53.7 3.58   50.0 3.91
Total available-for-sale securities 251.1 3.65 246.0 3.61 234.8 3.77 225.9 3.70 215.3 3.87
Held-to-maturity securities 2.8 3.09 - - - - - - - -
Mortgages held for sale 21.4 4.13 33.2 3.86 43.4 3.48 43.3 3.42 47.2 3.50
Loans held for sale 0.1 8.21 0.2 7.25 0.2 7.85 0.1 8.83 0.1 9.03
Loans:
Commercial:
Commercial and industrial 193.2 3.48 188.4 3.58 186.1 3.69 184.5 3.73 179.5 3.85
Real estate mortgage 105.8 3.85 104.6 4.12 105.3 3.92 106.2 3.84 105.1 4.02
Real estate construction 16.6 4.79 16.2 4.43 16.4 5.02 16.6 4.84 17.5 4.97
Lease financing 11.7 5.70 11.7 5.29 12.3 6.66 12.4 6.78 12.4 6.43
    Foreign   46.7 2.23   44.9 2.09   42.3 2.23   39.9 2.16   39.7 2.32
      Total commercial   374.0 3.56   365.8 3.64   362.4 3.75   359.6 3.74   354.2 3.87
Consumer:
Real estate 1-4 family first mortgage 257.2 4.15 254.1 4.20 252.6 4.23 252.0 4.29 244.6 4.39
Real estate 1-4 family junior lien mortgage 66.8 4.29 68.8 4.30 71.4 4.29 74.1 4.28 76.9 4.28
Credit card 25.9 12.23 25.0 12.45 24.0 12.55 24.1 12.62 23.9 12.43
Automobile 50.2 6.70 49.1 6.85 47.9 7.05 46.6 7.20 46.0 7.34
    Other revolving credit and installment   42.6 4.94   42.0 4.83   41.9 4.74   41.7 4.70   41.6 4.63
      Total consumer   442.7 5.01   439.0 5.04   437.8 5.05   438.5 5.10   433.0 5.15
Total loans 816.7 4.35 804.8 4.41 800.2 4.46 798.1 4.49 787.2 4.58
Other   4.7 5.22   4.3 5.62   4.2 5.55   4.3 5.19   4.3 5.21
          Total earning assets $ 1,347.5 3.56 % $ 1,289.2 3.70 % $ 1,265.9 3.80 % $ 1,234.8 3.86 % $ 1,213.2 3.96 %
Funding sources
Deposits:
Interest-bearing checking $ 35.2 0.07 % $ 34.5 0.06 % $ 40.4 0.06 % $ 32.2 0.06 % $ 30.9 0.06 %
Market rate and other savings 568.7 0.08 553.1 0.08 541.8 0.08 537.5 0.09 518.6 0.10
Savings certificates 43.1 0.94 47.3 1.08 52.6 1.23 55.2 1.22 56.7 1.27
Other time deposits 39.7 0.48 30.4 0.62 26.0 0.76 15.9 1.25 13.6 1.51
  Deposits in foreign offices   86.3 0.15   81.1 0.15   68.9 0.15   71.1 0.14   69.4 0.15
Total interest-bearing deposits 773.0 0.15 746.4 0.17 729.7 0.19 711.9 0.21 689.2 0.23
Short-term borrowings 52.3 0.12 53.4 0.08 57.8 0.14 55.4 0.17 52.8 0.21
Long-term debt 153.5 1.65 133.4 1.86 125.5 2.02 127.1 2.20 127.5 2.30
Other liabilities   12.8 2.70   12.1 2.64   13.3 2.25   11.6 2.24   10.0 2.27
Total interest-bearing liabilities 991.6 0.42 945.3 0.43 926.3 0.47 906.0 0.51 879.5 0.55
Portion of noninterest-bearing funding sources   355.9 -   343.9 -   339.6 -   328.8 -   333.7 -
          Total funding sources $ 1,347.5   0.30 $ 1,289.2   0.32 $ 1,265.9   0.34 $ 1,234.8   0.38 $ 1,213.2   0.40
Net interest margin on a
taxable-equivalent basis 3.26 % 3.38 % 3.46 % 3.48 % 3.56 %
Noninterest-earning assets
Cash and due from banks $ 16.0 16.4 16.2 16.5 16.4
Goodwill 25.6 25.6 25.6 25.6 25.6
Other   120.0   118.4   121.3   127.4   131.9
          Total noninterest-earnings assets $ 161.6   160.4   163.1   169.5   173.9
Noninterest-bearing funding sources
Deposits $ 287.4 279.2 280.0 274.2 286.9
Other liabilities 60.5 60.0 58.0 63.7 63.1
Total equity 169.6 165.1 164.7 160.4 157.6

Noninterest-bearing funding sources used to fund earning assets

  (355.9)   (343.9)   (339.6)   (328.8)   (333.7)
Net noninterest-bearing
            funding sources $ 161.6   160.4   163.1   169.5   173.9
            Total assets $ 1,509.1   1,449.6   1,429.0   1,404.3   1,387.1
                                                                             
 
(1)

 Our average prime rate was 3.25% for quarters ended December 31, September 30, June 30 and March 31, 2013, and December 31, 2012. The average three-month London Interbank Offered Rate (LIBOR) was 0.24%, 0.26%, 0.28%, 0.29% and 0.32% 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
NONINTEREST INCOME                      
         
Quarter ended Dec. 31 % Year ended Dec. 31, %
(in millions)   2013   2012   Change         2013   2012   Change
Service charges on deposit accounts $ 1,283 1,250 3 % $ 5,023 4,683 7 %
Trust and investment fees:
Brokerage advisory, commissions and other fees (1) 2,150 1,962 10 8,395 6,386 31
Trust and investment management (1) 850 797 7 3,289 4,218 (22)
  Investment banking   458   440 4   1,746   1,286 36
    Total trust and investment fees   3,458   3,199 8   13,430   11,890 13
Card fees 827 736 12 3,191 2,838 12
Other fees:
Charges and fees on loans 379 448 (15) 1,540 1,746 (12)
Merchant processing fees 172 151 14 669 583 15
Cash network fees 122 112 9 493 470 5
Commercial real estate brokerage commissions 129 119 8 338 307 10
Letters of credit fees 99 107 (7) 410 441 (7)
  All other fees   218   256 (15)   890   972 (8)
    Total other fees   1,119   1,193 (6)   4,340   4,519 (4)
Mortgage banking:
Servicing income, net 709 250 184 1,920 1,378 39
  Net gains on mortgage loan origination/sales activities   861   2,818 (69)   6,854   10,260 (33)
    Total mortgage banking   1,570   3,068 (49)   8,774   11,638 (25)
Insurance 453 395 15 1,814 1,850 (2)
Net gains from trading activities 325 275 18 1,623 1,707 (5)
Net losses on debt securities (14) (63) (78) (29) (128) (77)
Net gains from equity investments 654 715 (9) 1,472 1,485 (1)
Lease income 148 170 (13) 663 567 17
Life insurance investment income 125 276 (55) 566 757 (25)
All other   (86)   91 NM   113   1,050 (89)
      Total $ 9,862   11,305   (13)       $ 40,980   42,856   (4)
 
NM - Not meaningful

 

(1)

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

 
NONINTEREST EXPENSE                              
 
Quarter ended Dec. 31, %   Year ended Dec. 31, %
(in millions)   2013   2012   Change         2013   2012   Change
Salaries $ 3,811 3,735 2 % $ 15,152 14,689 3 %
Commission and incentive compensation 2,347 2,365 (1) 9,951 9,504 5
Employee benefits 1,160 891 30 5,033 4,611 9
Equipment 567 542 5 1,984 2,068 (4)
Net occupancy 732 728 1 2,895 2,857 1
Core deposit and other intangibles 375 418 (10) 1,504 1,674 (10)
FDIC and other deposit assessments 196 307 (36) 961 1,356 (29)
Outside professional services 754 744 1 2,519 2,729 (8)
Outside data processing 264 227 16 983 910 8
Contract services 261 235 11 935 1,011 (8)
Travel and entertainment 234 211 11 885 839 5
Operating losses 181 953 (81) 821 2,235 (63)
Postage, stationery and supplies 189 192 (2) 756 799 (5)
Advertising and promotion 165 142 16 610 578 6
Foreclosed assets 103 221 (53) 605 1,061 (43)
Telecommunications 118 122 (3) 482 500 (4)
Insurance 59 62 (5) 437 453 (4)
Operating leases 51 27 89 204 109 87
All other   518   774 (33)   2,125   2,415 (12)
  Total $ 12,085   12,896   (6)       $ 48,842   50,398   (3)
 
       
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME                    
       
  Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)   2013   2013   2013   2013   2012
Service charges on deposit accounts $ 1,283 1,278 1,248 1,214 1,250
Trust and investment fees:
Brokerage advisory, commissions and other fees (1) 2,150 2,068 2,127 2,050 1,962
Trust and investment management (1) 850 811 829 799 797
  Investment banking   458   397   538   353   440
    Total trust and investment fees   3,458   3,276   3,494   3,202   3,199
Card fees 827 813 813 738 736
Other fees:
Charges and fees on loans 379 390 387 384 448
Merchant processing fees 172 169 174 154 151
Cash network fees 122 129 125 117 112
Commercial real estate brokerage commissions 129 91 73 45 119
Letters of credit fees 99 100 102 109 107
  All other fees   218   219   228   225   256
    Total other fees   1,119   1,098   1,089   1,034   1,193
Mortgage banking:
Servicing income, net 709 504 393 314 250
  Net gains on mortgage loan origination/sales activities   861   1,104   2,409   2,480   2,818
    Total mortgage banking   1,570   1,608   2,802   2,794   3,068
Insurance 453 413 485 463 395
Net gains from trading activities 325 397 331 570 275
Net gains (losses) on debt securities (14) (6) (54) 45 (63)
Net gains from equity investments 654 502 203 113 715
Lease income 148 160 225 130 170
Life insurance investment income 125 154 142 145 276
All other   (86)   37   (150)   312   91
      Total $ 9,862   9,730   10,628   10,760   11,305
 
(1)

 Quarter ended December 31, 2012, has been revised to reflect all fund distribution fees as brokerage related income.

 
FIVE QUARTER NONINTEREST EXPENSE                    
 
  Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)   2013   2013   2013   2013   2012
Salaries $ 3,811 3,910 3,768 3,663 3,735
Commission and incentive compensation 2,347 2,401 2,626 2,577 2,365
Employee benefits 1,160 1,172 1,118 1,583 891
Equipment 567 471 418 528 542
Net occupancy 732 728 716 719 728
Core deposit and other intangibles 375 375 377 377 418
FDIC and other deposit assessments 196 214 259 292 307
Outside professional services 754 623 607 535 744
Outside data processing 264 251 235 233 227
Contract services 261 241 226 207 235
Travel and entertainment 234 209 229 213 211
Operating losses 181 195 288 157 953
Postage, stationery and supplies 189 184 184 199 192
Advertising and promotion 165 157 183 105 142
Foreclosed assets 103 161 146 195 221
Telecommunications 118 116 125 123 122
Insurance 59 98 143 137 62
Operating leases 51 56 49 48 27
All other   518   540   558   509   774
  Total $ 12,085   12,102   12,255   12,400   12,896
 
   
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET            
         
December 31, %
(in millions, except shares)   2013   2012   Change
Assets
Cash and due from banks $ 19,919 21,860 (9) %
Federal funds sold, securities purchased under resale agreements and other short-term investments 213,793 137,313 56
Trading assets 62,813 57,482 9
Investment securities:
Available-for-sale, at fair value 252,007 235,199 7
Held-to-maturity, at cost (fair value $12,247 and $0) 12,346 - -
Mortgages held for sale (includes $13,879 and $42,305 carried at fair value) (1) 16,763 47,149 (64)
Loans held for sale (includes $1 and $6 carried at fair value) (1) 133 110 21
 
Loans (includes $5,995 and $6,206 carried at fair value) (1) 825,799 799,574 3
Allowance for loan losses   (14,502)   (17,060) (15)
  Net loans   811,297   782,514 4
Mortgage servicing rights:
Measured at fair value 15,580 11,538 35
Amortized 1,229 1,160 6
Premises and equipment, net 9,156 9,428 (3)
Goodwill 25,637 25,637 -
Other assets (includes $1,386 and $0 carried at fair value) (1)   86,342   93,578 (8)
        Total assets $ 1,527,015   1,422,968 7
Liabilities
Noninterest-bearing deposits $ 288,117 288,207 -
Interest-bearing deposits   791,060   714,628 11
Total deposits 1,079,177 1,002,835 8
Short-term borrowings 53,883 57,175 (6)
Accrued expenses and other liabilities 69,949 76,668 (9)
Long-term debt (includes $0 and $1 carried at fair value) (1)   152,998   127,379 20
      Total liabilities   1,356,007   1,264,057 7
Equity
Wells Fargo stockholders' equity:
Preferred stock 16,267 12,883 26
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 60,296 59,802 1
Retained earnings 92,361 77,679 19
Cumulative other comprehensive income 1,386 5,650 (75)
Treasury stock - 224,648,769 shares and 215,497,298 shares (8,104) (6,610) 23
  Unearned ESOP shares   (1,200)   (986) 22
Total Wells Fargo stockholders' equity 170,142 157,554 8
Noncontrolling interests   866   1,357 (36)
      Total equity   171,008   158,911 8
        Total liabilities and equity $ 1,527,015   1,422,968   7
 

(1) Parenthetical amounts represent assets and liabilities for which we have elected the fair value option.

 
       
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET                
         
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)   2013   2013   2013   2013   2012
Assets
Cash and due from banks $ 19,919 18,928 17,939 16,217 21,860
Federal funds sold, securities purchased under
resale agreements and other short-term investments 213,793 182,036 148,665 143,804 137,313
Trading assets 62,813 60,203 58,619 62,274 57,482
Investment securities:
Available-for-sale, at fair value 252,007 259,399 249,439 248,160 235,199
Held-to-maturity, at cost 12,346 - - - -
Mortgages held for sale 16,763 25,395 38,785 46,702 47,149
Loans held for sale 133 204 190 194 110
 
Loans 825,799 812,325 801,974 799,966 799,574
Allowance for loan losses   (14,502)   (15,159)   (16,144)   (16,711)   (17,060)
  Net loans   811,297   797,166   785,830   783,255   782,514
Mortgage servicing rights:
Measured at fair value 15,580 14,501 14,185 12,061 11,538
Amortized 1,229 1,204 1,176 1,181 1,160
Premises and equipment, net 9,156 9,120 9,190 9,263 9,428
Goodwill 25,637 25,637 25,637 25,637 25,637
Other assets   86,342   94,262   90,908   87,886   93,578
        Total assets $ 1,527,015   1,488,055   1,440,563   1,436,634   1,422,968
Liabilities
Noninterest-bearing deposits $ 288,117 279,911 277,648 278,909 288,207
Interest-bearing deposits   791,060   761,960   743,937   731,824   714,628
Total deposits 1,079,177 1,041,871 1,021,585 1,010,733 1,002,835
Short-term borrowings 53,883 53,851 56,983 60,693 57,175
Accrued expenses and other liabilities 69,949 72,308 74,843 75,622 76,668
Long-term debt   152,998   151,212   123,375   126,191   127,379
      Total liabilities   1,356,007   1,319,242   1,276,786   1,273,239   1,264,057
Equity
Wells Fargo stockholders' equity:
Preferred stock 16,267 15,549 13,988 14,412 12,883
Common stock 9,136 9,136 9,136 9,136 9,136
Additional paid-in capital 60,296 60,188 59,945 60,136 59,802
Retained earnings 92,361 88,625 84,923 81,264 77,679
Cumulative other comprehensive income 1,386 2,289 1,797 5,145 5,650
Treasury stock (8,104) (7,290) (5,858) (6,036) (6,610)
  Unearned ESOP shares   (1,200)   (1,332)   (1,510)   (1,971)   (986)
Total Wells Fargo stockholders' equity 170,142 167,165 162,421 162,086 157,554
Noncontrolling interests   866   1,648   1,356   1,309   1,357
      Total equity   171,008   168,813   163,777   163,395   158,911
        Total liabilities and equity $ 1,527,015   1,488,055   1,440,563   1,436,634   1,422,968
 
       
Wells Fargo & Company and Subsidiaries
FIVE QUARTER INVESTMENT SECURITIES                    
           
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)   2013   2013   2013   2013   2012
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ 6,280 6,406 6,383 6,884 7,146
Securities of U.S. states and political subdivisions 42,536 42,293 40,890 40,456 38,676
Mortgage-backed securities:
Federal agencies 117,591 118,963 110,561 105,472 97,285
      Residential and commercial   31,200   32,329   33,423   35,179   35,899
Total mortgage-backed securities 148,791 151,292 143,984 140,651 133,184
    Other debt securities   51,015   55,828   55,425   57,390   53,408
Total available-for-sale debt securities 248,622 255,819 246,682 245,381 232,414
    Marketable equity securities   3,385   3,580   2,757   2,779   2,785
            Total available-for-sale securities   252,007   259,399   249,439   248,160   235,199
Held-to-maturity securities:
Federal agency mortgage-backed securities 6,304 - - - -
    Other debt securities   6,042   -   -   -   -
            Total held-to-maturity debt securities   12,346   -   -   -   -
              Total investment securities $ 264,353   259,399   249,439   248,160   235,199
 
FIVE QUARTER LOANS                    
 
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)   2013   2013   2013   2013   2012
Commercial:
Commercial and industrial $ 197,210 191,738 188,758 185,623 187,759
Real estate mortgage 107,100 105,540 104,673 106,119 106,340
Real estate construction 16,747 16,413 16,442 16,650 16,904
Lease financing 12,034 11,688 11,766 12,402 12,424
    Foreign (1)   47,665   46,666   41,833   40,920   37,771
      Total commercial   380,756   372,045   363,472   361,714   361,198
Consumer:
Real estate 1-4 family first mortgage 258,497 254,924 252,841 252,307 249,900
Real estate 1-4 family junior lien mortgage 65,914 67,675 70,059 72,543 75,465
Credit card 26,870 25,448 24,815 24,120 24,640
Automobile 50,808 49,693 48,648 47,259 45,998
    Other revolving credit and installment   42,954   42,540   42,139   42,023   42,373
      Total consumer   445,043   440,280   438,502   438,252   438,376
        Total loans (2) $ 825,799   812,325   801,974   799,966   799,574
 
(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 $26.7 billion, $27.8 billion, $28.8 billion, $29.7 billion and $31.0 billion of purchased credit-impaired (PCI) loans at December 31, September 30, June 30 and March 31, 2013, and December 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)
         
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)     2013     2013   2013   2013   2012
Nonaccrual loans:
Commercial:
Commercial and industrial $ 738 809 1,022 1,193 1,422
Real estate mortgage 2,252 2,496 2,708 3,098 3,322
Real estate construction 416 517 665 870 1,003
Lease financing 29 17 20 25 27
Foreign     40     47   40   56   50
Total commercial     3,475     3,886   4,455   5,242   5,824
Consumer:
Real estate 1-4 family first mortgage 9,799 10,450 10,705 11,320 11,455
Real estate 1-4 family junior lien mortgage 2,188 2,333 2,522 2,712 2,922
Automobile 173 188 200 220 245
Other revolving credit and installment     33     36   33   32   40
Total consumer     12,193     13,007   13,460   14,284   14,662
Total nonaccrual loans (1)(2)(3)     15,668     16,893   17,915   19,526   20,486
As a percentage of total loans 1.90 % 2.08 2.23 2.44 2.56
Foreclosed assets:
Government insured/guaranteed (4) $ 2,093 1,781 1,026 969 1,509
Non-government insured/guaranteed     1,844     2,021   2,114   2,381   2,514
Total foreclosed assets     3,937     3,802   3,140   3,350   4,023
Total nonperforming assets   $ 19,605     20,695   21,055   22,876   24,509
As a percentage of total loans     2.37 %   2.55   2.63   2.86   3.07
 

(1) Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.

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

(3) Real estate 1-4 family mortgage loans predominantly 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.

(4) Consistent with regulatory reporting requirements, foreclosed real estate resulting from government insured/guaranteed loans are classified as nonperforming. Both principal and interest related to these foreclosed real estate assets are collectible because the loans were predominantly insured by the FHA or guaranteed by the VA. Increase in balances at December 31 and September 30, 2013, reflects the impact of changes to loan modification programs, slowing foreclosures in prior quarters.

 
         
Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
 

 

Dec. 31,

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

2013

   2013   2013   2013   2012
Loans 90 days or more past due and still accruing:
Total (excluding PCI)(1): $ 23,219 22,181 22,197 23,082 23,245
Less: FHA insured/VA guaranteed (2)(4) 21,274 20,214 20,112 20,745 20,745
Less: Student loans guaranteed under the FFELP (3)     900   917   931   977   1,065
Total, not government insured/guaranteed   $ 1,045   1,050   1,154   1,360   1,435
 
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 11 125 37 47 47
Real estate mortgage 35 40 175 164 228
Real estate construction 97 1 4 47 27
Foreign     -   1   -   7   1
Total commercial     143   167   216   265   303
Consumer:
Real estate 1-4 family first mortgage (4) 354 383 476 563 564
Real estate 1-4 family junior lien mortgage (4) 86 89 92 112 133
Credit card 321 285 263 306 310
Automobile 55 48 32 33 40
Other revolving credit and installment     86   78   75   81  

85

Total consumer     902   883   938   1,095   1,132
Total, not government insured/guaranteed   $ 1,045   1,050   1,154   1,360   1,435
 

(1) The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $4.5 billion, $4.9 billion, $5.4 billion, $5.8 billion and $6.0 billion, at December 31, September 30, June 30 and March 31, 2013 and December 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 predominantly insured by the FHA or guaranteed by the VA.

(3) Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program (FFELP).

(4) Includes mortgages held for sale 90 days or more past due and still accruing.

 
     
Wells Fargo & Company and Subsidiaries
PURCHASED CREDIT-IMPAIRED (PCI) LOANS
 

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans 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.

               
 
  December 31,
(in millions)     2013   2012   2008
Commercial:
Commercial and industrial $ 215 259 4,580
Real estate mortgage 1,136 1,970 5,803
Real estate construction 433 877 6,462
Foreign     720   871   1,859
Total commercial     2,504   3,977   18,704
Consumer:
Real estate 1-4 family first mortgage 24,100 26,839 39,214
Real estate 1-4 family junior lien mortgage 123 152 728
Automobile     -   -   151
Total consumer     24,223   26,991   40,093
Total PCI loans (carrying value)   $ 26,727   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 18 - - 18
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (86 ) - - (86 )
Loans resolved by sales to third parties (2) (5 ) - - (5 )
Reclassification to accretable yield for loans with improving credit-related cash flows (3) (74 ) (866 ) (31 ) (971 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)     (10 )   (662 )   (79 )   (751 )
Balance, December 31, 2013   $ 265     4,704     200     5,169  
                           
Balance, September 30, 2013 $ 300 4,725 243 5,268
Addition of nonaccretable difference due to acquisitions 11 - - 11
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (24 ) - - (24 )
Loans resolved by sales to third parties (2) - - - -
Reclassification to accretable yield for loans with improving credit-related cash flows (3) (24 ) - (31 ) (55 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)     2     (21 )   (12 )   (31 )
Balance, December 31, 2013   $ 265     4,704     200     5,169  
 

(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. Also includes foreign exchange adjustments related to underlying principal for which the nonaccretable difference was established.

 
 
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 1
Accretion into interest income (1) (1,833 )
Accretion into noninterest income due to sales (2) (151 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 971
Changes in expected cash flows that do not affect nonaccretable difference (3)     1,586  
Balance, December 31, 2013   $ 19,122  
       
Balance, September 30, 2013 $ 19,516
Addition of accretable yield due to acquisitions -
Accretion into interest income (1) (447 )
Accretion into noninterest income due to sales (2) -
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 55
Changes in expected cash flows that do not affect nonaccretable difference (3)     (2 )
Balance, December 31, 2013   $ 19,122  
 

(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
Reversal of provision for losses (52 ) - (16 ) (68 )
Charge-offs   (10 )   -   (9 )   (19 )
Balance, December 31, 2013 $ 26     -   4     30  
                       
Balance, September 30, 2013 $ 17 - 5 22
Provision for loan losses due to credit deterioration / (reversal of provision) 13 - (1 ) 12
Charge-offs   (4 )   -   -     (4 )
Balance, December 31, 2013 $ 26     -   4     30  
 
     
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)    
   

 

December 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 $ 19,797 89 % $ 16,213 72 % $ 13,219 65 %
Florida 2,395 98 1,827 69 2,764 80
New Jersey 1,029 87 974 74 1,770 74
New York 609 84 592 73 797 73
Texas 266 70 241 62 1,081 56
Other states     4,704 89   4,001 74   7,492 75
Total Pick-a-Pay loans   $ 28,800 $ 23,848 $ 27,123
                                 
 

(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  
 

 

Dec. 31,

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

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

  $ 2,013   2,342   2,532   2,770   3,170

Total commercial

    2,013   2,342   2,532   2,770   3,170
Consumer:
Pick-a-Pay mortgage (1) 50,971 52,805 54,755 56,608 58,274
Liquidating home equity 3,695 3,911 4,173 4,421 4,647
Legacy Wells Fargo Financial indirect auto 207 299 428 593 830
Legacy Wells Fargo Financial debt consolidation 12,893 13,281 13,707 14,115 14,519
Education Finance - government guaranteed 10,712 11,094 11,534 11,922 12,465
Legacy Wachovia other PCI loans (1)     375   406   435   462   657
Total consumer     78,853   81,796   85,032   88,121   91,392
Total non-strategic and liquidating loan portfolios   $ 80,866   84,138   87,564   90,891   94,562
 

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

 
       
Wells Fargo & Company and Subsidiaries
CHANGES IN ALLOWANCE FOR CREDIT LOSSES  
 
  Quarter ended Dec. 31,   Year ended Dec. 31,  
(in millions)     2013     2012     2013     2012  
Balance, beginning of period $ 15,647 17,803 17,477 19,668
Provision for credit losses 363 1,831 2,309 7,217
Interest income on certain impaired loans (1) (55 ) (70 ) (264 ) (315 )
Loan charge-offs:
Commercial:
Commercial and industrial (199 ) (302 ) (715 ) (1,306 )
Real estate mortgage (37 ) (86 ) (190 ) (382 )
Real estate construction (10 ) (10 ) (28 ) (191 )
Lease financing (3 ) (6 ) (33 ) (24 )
Foreign     (4 )   (30 )   (27 )   (111 )
Total commercial     (253 )   (434 )   (993 )   (2,014 )
Consumer:
Real estate 1-4 family first mortgage (269 ) (694 ) (1,439 ) (3,013 )
Real estate 1-4 family junior lien mortgage (291 ) (765 ) (1,578 ) (3,437 )
Credit card (251 ) (259 ) (1,022 ) (1,101 )
Automobile (182 ) (189 ) (625 ) (651 )
Other revolving credit and installment     (195 )   (192 )   (753 )   (757 )
Total consumer     (1,188 )   (2,099 )   (5,417 )   (8,959 )
Total loan charge-offs     (1,441 )   (2,533 )   (6,410 )   (10,973 )
Loan recoveries:
Commercial:
Commercial and industrial 92 93 380 461
Real estate mortgage 78 48 227 163
Real estate construction 23 28 137 124
Lease financing 3 4 16 19
Foreign     4     6     27     32  
Total commercial     200     179     787     799  
Consumer:
Real estate 1-4 family first mortgage 74 45 245 157
Real estate 1-4 family junior lien mortgage 65 75 269 259
Credit card 31 37 126 185
Automobile 74 77 321 362
Other revolving credit and installment     34     39     153     177  
Total consumer     278     273     1,114     1,140  
Total loan recoveries     478     452     1,901     1,939  
Net loan charge-offs (2)     (963 )   (2,081 )   (4,509 )   (9,034 )
Allowances related to business combinations/other     (21 )   (6 )   (42 )   (59 )
Balance, end of period   $ 14,971     17,477     14,971     17,477  
Components:
Allowance for loan losses $ 14,502 17,060 14,502 17,060
Allowance for unfunded credit commitments     469     417     469     417  
Allowance for credit losses (3)   $ 14,971     17,477     14,971     17,477  
Net loan charge-offs (annualized) as a percentage of average total loans (2) 0.47

%

 

1.05 0.56 1.17
Allowance for loan losses as a percentage of total loans (3) 1.76 2.13 1.76 2.13
Allowance for credit losses as a percentage of total loans (3)     1.81     2.19     1.81     2.19  
 

(1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan's effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income.

(2) For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting estimates.

(3) The allowance for credit losses includes $30 million and $117 million at December 31, 2013 and 2012, respectively, related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs.

 
     
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES  
   
  Quarter ended  
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)     2013     2013     2013     2013     2012  
Balance, beginning of quarter $ 15,647 16,618 17,193 17,477 17,803
Provision for credit losses 363 75 652 1,219 1,831
Interest income on certain impaired loans (1) (55 ) (63 ) (73 ) (73 ) (70 )
Loan charge-offs:
Commercial:
Commercial and industrial (199 ) (151 ) (184 ) (181 ) (302 )
Real estate mortgage (37 ) (44 ) (49 ) (60 ) (86 )
Real estate construction (10 ) (6 ) (7 ) (5 ) (10 )
Lease financing (3 ) (3 ) (24 ) (3 ) (6 )
Foreign     (4 )   (4 )   (8 )   (11 )   (30 )
Total commercial     (253 )   (208 )   (272 )   (260 )   (434 )
Consumer:
Real estate 1-4 family first mortgage (269 ) (303 ) (392 ) (475 ) (694 )
Real estate 1-4 family junior lien mortgage (291 ) (345 ) (428 ) (514 ) (765 )
Credit card (251 ) (239 ) (266 ) (266 ) (259 )
Automobile (182 ) (153 ) (126 ) (164 ) (189 )
Other revolving credit and installment     (195 )   (191 )   (185 )   (182 )   (192 )
Total consumer (2)     (1,188 )   (1,231 )   (1,397 )   (1,601 )   (2,099 )
Total loan charge-offs     (1,441 )   (1,439 )   (1,669 )   (1,861 )   (2,533 )
Loan recoveries:
Commercial:
Commercial and industrial 92 93 107 88 93
Real estate mortgage 78 64 54 31 48
Real estate construction 23 23 52 39 28
Lease financing 3 3 6 4 4
Foreign     4     6     9     8     6  
Total commercial     200     189     228     170     179  
Consumer:
Real estate 1-4 family first mortgage 74 61 64 46 45
Real estate 1-4 family junior lien mortgage 65 70 69 65 75
Credit card 31 32 32 31 37
Automobile 74 75 84 88 77
Other revolving credit and installment     34     37     40     42     39  
Total consumer     278     275     289     272     273  
Total loan recoveries     478     464     517     442     452  
Net loan charge-offs     (963 )   (975 )   (1,152 )   (1,419 )   (2,081 )
Allowances related to business combinations/other     (21 )   (8 )   (2 )   (11 )   (6 )
Balance, end of quarter   $ 14,971     15,647     16,618     17,193     17,477  
Components:
Allowance for loan losses $ 14,502 15,159 16,144 16,711 17,060
Allowance for unfunded credit commitments     469     488     474     482     417  
Allowance for credit losses   $ 14,971     15,647     16,618     17,193     17,477  
Net loan charge-offs (annualized) as a percentage of average total loans

0.47

%

 

0.48 0.58 0.72 1.05
Allowance for loan losses as a percentage of:
Total loans 1.76 1.87 2.01 2.09 2.13
Nonaccrual loans 93 90 90 86 83
Nonaccrual loans and other nonperforming assets 74 73 77 73 70
Allowance for credit losses as a percentage of:
Total loans 1.81 1.93 2.07 2.15 2.19
Nonaccrual loans 96 93 93 88 85
Nonaccrual loans and other nonperforming assets 76 76 79 75 71
                                 
 

(1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan's effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income.

(2) Includes $321 million for the quarter ended December 31, 2012, resulting from the 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.

 
       
Wells Fargo & Company and Subsidiaries
FIVE QUARTER RISK-BASED CAPITAL COMPONENTS UNDER BASEL I
 
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in billions)       2013   2013   2013   2013   2012
Total equity $ 171.0 168.8 163.8 163.4 158.9
Noncontrolling interests       (0.9)   (1.6)   (1.4)   (1.3)   (1.3)
Total Wells Fargo stockholders' equity       170.1   167.2   162.4   162.1   157.6
Adjustments:
Preferred stock (15.2) (14.3) (12.6) (12.6) (12.0)
Cumulative other comprehensive income (1.4) (2.2) (1.8) (5.1) (5.6)
Goodwill and other intangible assets (1) (29.6) (29.8) (30.0) (30.2) (30.4)
Investment in certain subsidiaries and other       (0.4)   (0.6)   (0.5)   (0.6)   (0.6)

Tier 1 common equity (2)

(A)

    123.5   120.3   117.5   113.6   109.0
Preferred stock 15.2 14.3 12.6 12.6 12.0
Qualifying hybrid securities and noncontrolling interests       2.0   2.9   2.9   2.9   5.6
Total Tier 1 capital       140.7   137.5   133.0   129.1   126.6
Long-term debt and other instruments qualifying as Tier 2 20.5 18.9 18.0 18.4 17.2
Qualifying allowance for credit losses 14.3 14.3 13.8 13.8 13.6
Other       0.7   0.6   0.2   0.3   0.2
Total Tier 2 capital       35.5   33.8   32.0   32.5   31.0

Total capital

(B)

  $ 176.2   171.3   165.0   161.6   157.6
Risk-weighted assets (3) (4):
Credit risk $ 1,103.7 1,099.2 1,061.1 1,056.5 1,066.2
Market risk       37.3   35.9   36.3   37.8   10.9

Total risk-weighted assets

(C)

  $ 1,141.0   1,135.1   1,097.4   1,094.3   1,077.1
 
Capital Ratios (4):

Tier 1 common equity to total risk-weighted assets

(A)/(C)

10.82 % 10.60 10.71 10.39 10.12

Total capital to total risk-weighted assets

(B)/(C)

    15.44   15.09   15.03   14.76   14.63
 

(1) Goodwill and other intangible assets are net of any associated deferred tax liabilities.

(2) Tier 1 common equity is a non-GAAP financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews Tier 1 common equity along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants.

(3) Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets.

(4) The Company's December 31, 2013, risk-weighted assets (RWA) and capital ratios are preliminary.

 
COMMON EQUITY TIER 1 UNDER BASEL III (1) (2)
 
(in billions)                   Dec. 31, 2013
Tier 1 common equity under Basel I                   $   123.5
Adjustments from Basel I to Basel III (3) (5):
Cumulative other comprehensive income related to AFS securities and defined benefit pension plans 1.3
Other                       1.2
Total adjustments from Basel I to Basel III 2.5
Threshold deductions, as defined under Basel III (4) (5)                       -
Common Equity Tier 1 anticipated under Basel III               (C)   $   126.0
Total risk-weighted assets anticipated under Basel III (6)               (D)   $   1,288.7
Common Equity Tier 1 to total risk-weighted assets anticipated under Basel III              

(C)/(D)

      9.78 %
 

(1) Common Equity Tier 1 is a non-GAAP financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews Common Equity Tier 1 along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants.

(2) The Basel III Common Equity Tier 1 and RWA are estimated based on management's interpretation of the Basel III capital rules adopted July 2, 2013, by the FRB. The rules establish a new comprehensive capital framework for U.S. banking organizations that implement the Basel III capital framework and certain provisions of the Dodd-Frank Act.

(3) Adjustments from Basel I to Basel III represent reconciling adjustments, primarily certain components of cumulative other comprehensive income deducted for Basel I purposes, to derive Common Equity Tier 1 under Basel III.

(4) Threshold deductions, as defined under Basel III, include individual and aggregate limitations, as a percentage of Common Equity Tier 1, with respect to MSRs (net of related deferred tax liability, which approximates the MSR book value times the applicable statutory tax rates), deferred tax assets and investments in unconsolidated financial companies.

(5) Volatility in interest rates can have a significant impact on the valuation of cumulative other comprehensive income and MSRs and therefore, may impact adjustments from Basel I to Basel III, and MSRs subject to threshold deductions, as defined under Basel III, in future reporting periods.

(6) The final Basel III capital rules provide for two capital frameworks: the "standardized" approach intended to replace Basel I, and the "advanced" approach applicable to certain institutions as originally defined under Basel II. Under the final rules, we will be subject to the lower of our Common Equity Tier 1 ratio calculated under the standardized approach and under the advanced approach in the assessment of our capital adequacy. Accordingly, the estimate of RWA reflects management's interpretation of RWA determined under the advanced approach because management expects RWA to be higher using the advanced approach compared with the standardized approach. Basel III capital rules adopted by the Federal Reserve Board incorporate different classification of assets, with certain risk weights based on a borrower's credit rating or Wells Fargo's own models, along with adjustments to address a combination of credit/counterparty, operational and market risks, and other Basel III elements.

 
             
Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
     
Community Wholesale

 

Wealth, Brokerage

Consolidated

 

  Banking Banking and Retirement Other (2)   Company

(income/expense in millions, average balances in billions)

    2013   2012   2013     2012   2013     2012   2013     2012     2013   2012
Quarter ended Dec. 31,
Net interest income (3) $ 7,225 7,166 3,133 3,092 770 689 (325 ) (304 ) 10,803 10,643

Provision (reversal of provision) for credit losses

490 1,757 (125 ) 60 (11 ) 15 9 (1 ) 363 1,831
Noninterest income 5,029 6,616 2,839 2,901 2,668 2,405 (674 ) (617 ) 9,862 11,305
Noninterest expense     7,073   8,033   3,020     3,007   2,655     2,513   (663 )   (657 )   12,085   12,896

Income (loss) before income tax expense (benefit)

4,691 3,992 3,077 2,926 794 566 (345 ) (263 ) 8,217 7,221
Income tax expense (benefit)     1,373   918   960     892   302     215   (131 )   (101 )   2,504   1,924

Net income (loss) before noncontrolling interests

3,318 3,074 2,117 2,034 492 351 (214 ) (162 ) 5,713 5,297

Less: Net income from noncontrolling interests

    96   205   6     2   1     -   -     -     103   207
Net income (loss) (4)   $ 3,222   2,869   2,111     2,032   491     351   (214 )   (162 )   5,610   5,090
Average loans $ 502.5 493.1 298.0 279.2 48.4 43.3 (32.2 ) (28.4 ) 816.7 787.2
Average assets 883.6 794.2 512.3 489.7 185.3 171.7 (72.1 ) (68.5 ) 1,509.1 1,387.1
Average core deposits 620.2 608.9 258.5 240.7 153.9 143.4 (66.8 ) (64.2 ) 965.8 928.8
                                                 
 
Year ended Dec. 31,
Net interest income (3) $ 28,839 29,045 12,298 12,648 2,888 2,768 (1,225 ) (1,231 ) 42,800 43,230

Provision (reversal of provision) for credit losses

2,755 6,835 (445 ) 286 (16 ) 125 15 (29 ) 2,309 7,217
Noninterest income 21,500 24,360 11,766 11,444 10,315 9,392 (2,601 ) (2,340 ) 40,980 42,856
Noninterest expense     28,723   30,840   12,378     12,082   10,455     9,893   (2,714 )   (2,417 )   48,842   50,398

Income (loss) before income tax expense (benefit)

18,861 15,730 12,131 11,724 2,764 2,142 (1,127 ) (1,125 ) 32,629 28,471
Income tax expense (benefit)    

5,799

   4,774   3,984     3,943   1,050     814   (428 )   (428 )   10,405   9,103

Net income (loss) before noncontrolling interests

13,062 10,956 8,147 7,781 1,714 1,328 (699 ) (697 ) 22,224 19,368

Less: Net income from noncontrolling interests

    330   464   14     7   2     -   -     -     346   471
Net income (loss) (4)   $ 12,732   10,492   8,133     7,774   1,712     1,328   (699 )   (697 )   21,878   18,897
Average loans $ 499.3 487.1 290.0 273.8 46.1 42.7 (30.4 ) (28.4 ) 805.0 775.2
Average assets 835.4 761.1 502.3 481.7 180.9 164.6 (70.3 ) (65.8 ) 1,448.3 1,341.6
Average core deposits 620.1 591.2 237.2 227.0 150.1 137.5 (65.3 ) (61.8 ) 942.1 893.9
                                                 
 

(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment.

(2) Includes corporate items not specific to a business segment and the elimination of certain items that are included in more than one business segment, substantially all of which represents services for wealth management customers provided in Community Banking stores.

(3) Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.

(4) Represents segment net income (loss) for Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement segments and Wells Fargo net income for the consolidated company.

 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)  
         
  Quarter ended  
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(income/expense in millions, average balances in billions)     2013     2013     2013     2013     2012  
COMMUNITY BANKING
Net interest income (2) $ 7,225 7,244 7,251 7,119 7,166
Provision for credit losses 490 240 763 1,262 1,757
Noninterest income 5,029 5,000 5,691 5,780 6,616
Noninterest expense     7,073     7,060     7,213     7,377     8,033  
Income before income tax expense 4,691 4,944 4,966 4,260 3,992
Income tax expense     1,373     1,505     1,633     1,288     918  
Net income before noncontrolling interests 3,318 3,439 3,333 2,972 3,074
Less: Net income from noncontrolling interests     96     98     88     48     205  
Segment net income   $ 3,222     3,341     3,245     2,924     2,869  
Average loans $ 502.5 497.7 498.2 498.9 493.1
Average assets 883.6 836.6 820.9 799.6 794.2
Average core deposits 620.2 618.2 623.0 619.2 608.9
                                 
WHOLESALE BANKING
Net interest income (2) $ 3,133 3,059 3,101 3,005 3,092
Provision (reversal of provision) for credit losses (125 ) (144 ) (118 ) (58 ) 60
Noninterest income 2,839 2,812 3,034 3,081 2,901
Noninterest expense     3,020     3,084     3,183     3,091     3,007  
Income before income tax expense 3,077 2,931 3,070 3,053 2,926
Income tax expense     960     952     1,065     1,007     892  
Net income before noncontrolling interests 2,117 1,979 2,005 2,046 2,034
Less: Net income from noncontrolling interests     6     6     1     1     2  
Segment net income   $ 2,111     1,973     2,004     2,045     2,032  
Average loans $ 298.0 290.4 286.9 284.5 279.2
Average assets 512.3 500.7 499.9 496.1 489.7
Average core deposits 258.5 235.3 230.5 224.1 240.7
                                 
WEALTH, BROKERAGE AND RETIREMENT
Net interest income (2) $ 770 749 700 669 689
Provision (reversal of provision) for credit losses (11 ) (38 ) 19 14 15
Noninterest income 2,668 2,558 2,561 2,528 2,405
Noninterest expense     2,655     2,619     2,542     2,639     2,513  
Income before income tax expense 794 726 700 544 566
Income tax expense     302     275     266     207     215  
Net income before noncontrolling interests 492 451 434 337 351
Less: Net income from noncontrolling interests     1     1     -     -     -  
Segment net income   $ 491     450     434     337     351  
Average loans $ 48.4 46.7 45.4 43.8 43.3
Average assets 185.3 180.8 177.1 180.3 171.7
Average core deposits 153.9 150.6 146.4 149.4 143.4
                                 
OTHER (3)
Net interest income (2) $ (325 ) (304 ) (302 ) (294 ) (304 )
Provision (reversal of provision) for credit losses 9 17 (12 ) 1 (1 )
Noninterest income (674 ) (640 ) (658 ) (629 ) (617 )
Noninterest expense     (663 )   (661 )   (683 )   (707 )   (657 )
Loss before income tax benefit (345 ) (300 ) (265 ) (217 ) (263 )
Income tax benefit     (131 )   (114 )   (101 )   (82 )   (101 )
Net loss before noncontrolling interests (214 ) (186 ) (164 ) (135 ) (162 )
Less: Net income from noncontrolling interests     -     -     -     -     -  
Other net loss   $ (214 )   (186 )   (164 )   (135 )   (162 )
Average loans $ (32.2 ) (30.0 ) (30.3 ) (29.1 ) (28.4 )
Average assets (72.1 ) (68.5 ) (68.9 ) (71.7 ) (68.5 )
Average core deposits (66.8 ) (63.8 ) (63.8 ) (66.8 ) (64.2 )
                                 
CONSOLIDATED COMPANY
Net interest income (2) $ 10,803 10,748 10,750 10,499 10,643
Provision for credit losses 363 75 652 1,219 1,831
Noninterest income 9,862 9,730 10,628 10,760 11,305
Noninterest expense     12,085     12,102     12,255     12,400     12,896  
Income before income tax expense 8,217 8,301 8,471 7,640 7,221
Income tax expense     2,504     2,618     2,863     2,420     1,924  
Net income before noncontrolling interests 5,713 5,683 5,608 5,220 5,297
Less: Net income from noncontrolling interests     103     105     89     49     207  
Wells Fargo net income   $ 5,610     5,578     5,519     5,171     5,090  
Average loans $ 816.7 804.8 800.2 798.1 787.2
Average assets 1,509.1 1,449.6 1,429.0 1,404.3 1,387.1
Average core deposits 965.8 940.3 936.1 925.9 928.8
                                 
 

(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment.

(2) Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.

(3) Includes corporate items not specific to a business segment and the elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for wealth management customers provided in Community Banking stores.

 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING  
       
  Quarter ended  
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)     2013     2013     2013     2013     2012  
MSRs measured using the fair value method:
Fair value, beginning of quarter $ 14,501 14,185 12,061 11,538 10,956
Servicing from securitizations or asset transfers 520 954 1,060 935 1,094
Sales     -     -     (160 )   (423 )   -  
Net additions     520     954     900     512     1,094  
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (1) 1,048 61 2,223 1,030 388
Servicing and foreclosure costs (2) (54 ) (34 ) (82 ) (58 ) (127 )
Discount rates (3) - - - - (53 )
Prepayment estimates and other (4)     (11 )   (240 )   (274 )   (211 )   115  
Net changes in valuation model inputs or assumptions     983     (213 )   1,867     761     323  
Other changes in fair value (5)     (424 )   (425 )   (643 )   (750 )   (835 )
Total changes in fair value     559     (638 )   1,224     11     (512 )
Fair value, end of quarter   $ 15,580     14,501     14,185     12,061     11,538  
 

(1) Primarily represents prepayment speed changes due to changes in mortgage interest rates, but also includes other valuation changes due to changes in mortgage interest rates (such as changes in estimated interest earned on custodial deposit balances).

(2) Includes costs to service and unreimbursed foreclosure costs.

(3) Reflects discount rate assumption change, excluding portion attributable to changes in mortgage interest rates; the fourth quarter 2012 change reflects updated broker input on market values for servicing fees in excess of the minimum that can be retained on loans sold to Freddie Mac and Fannie Mae.

(4) Represents changes driven by other valuation model inputs or assumptions including prepayment speed estimation changes and other assumption updates. Prepayment speed estimation changes are influenced by observed changes in borrower behavior that occur independent of interest rate changes.

(5) Represents changes due to collection/realization of expected cash flows over time.

                                 
 
  Quarter ended  
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)     2013     2013     2013     2013     2012  
Amortized MSRs:
Balance, beginning of quarter $ 1,204 1,176 1,181 1,160 1,144
Purchases 64 59 26 27 43
Servicing from securitizations or asset transfers 28 32 31 56 34
Amortization     (67 )   (63 )   (62 )   (62 )   (61 )
Balance, end of quarter     1,229     1,204     1,176     1,181     1,160  
                                 
 
Fair value of amortized MSRs:
Beginning of quarter $ 1,525 1,533 1,404 1,400 1,399
End of quarter     1,575     1,525     1,533     1,404     1,400  
 
         
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)  
 
  Quarter ended  
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions)     2013     2013     2013     2013     2012  
Servicing income, net:
Servicing fees (1) $ 934 966 1,030 997 926
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2) 983 (213 ) 1,867 761 323
Other changes in fair value (3)     (424 )   (425 )   (643 )   (750 )   (835 )
Total changes in fair value of MSRs carried at fair value 559 (638 ) 1,224 11 (512 )
Amortization (67 ) (63 ) (62 ) (62 ) (61 )
Net derivative gains (losses) from economic hedges (4)     (717 )   239     (1,799 )   (632 )   (103 )
Total servicing income, net   $ 709     504     393     314     250  
Market-related valuation changes to MSRs, net of hedge results (2)+(4) $ 266 26 68 129 220
                                 
 

(1) Includes contractually specified servicing fees, late charges and other ancillary revenues.

(2) Refer to the changes in fair value MSRs table on the previous page for more detail.

(3) Represents changes due to collection/realization of expected cash flows over time.

(4) Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs.

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

Managed servicing portfolio (1):

Residential mortgage servicing:
Serviced for others $ 1,485 1,494 1,487 1,486 1,498
Owned loans serviced 338 344 358 367 368
Subservicing     6     6     6     7     7  
Total residential servicing     1,829     1,844     1,851     1,860     1,873  
Commercial mortgage servicing:
Serviced for others 419 416 409 404 408
Owned loans serviced 107 106 105 106 106
Subservicing     7     11     11     14     13  
Total commercial servicing     533     533     525     524     527  
Total managed servicing portfolio   $ 2,362     2,377     2,376     2,384     2,400  
Total serviced for others $ 1,904 1,910 1,896 1,890 1,906
Ratio of MSRs to related loans serviced for others 0.88

%

 

0.82 0.81 0.70 0.67
Weighted-average note rate (mortgage loans serviced for others) 4.52 4.54 4.59 4.69 4.77
                                 
 

(1) The components of our managed servicing portfolio are presented at unpaid principal balance for loans serviced and subserviced for others and at book value for owned loans serviced.

 
SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA  
 
  Quarter ended  
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in billions)     2013     2013     2013     2013     2012  
Application data:
Wells Fargo first mortgage quarterly applications $ 65 87 146 140 152
Refinances as a percentage of applications 42

%

 

36 54 65 72
Wells Fargo first mortgage unclosed pipeline, at quarter end $ 25 35 63 74 81
                                 
                                 
Residential real estate originations:
Wells Fargo first mortgage loans:
Retail $ 26 44 62 59 63
Correspondent/Wholesale 23 35 50 49 61
Other (1)     1     1     -     1     1  
Total quarter-to-date   $ 50     80     112     109     125  
Total year-to-date   $ 351     301     221     109     524  
 

(1) Consists of home equity loans and lines.

 
 
Wells Fargo & Company and Subsidiaries
CHANGES IN MORTGAGE REPURCHASE LIABILITY
         
  Quarter ended   Year ended  
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
(in millions)     2013     2013     2012     2013     2012  
Balance, beginning of period $ 1,421 2,222 2,033 2,206 1,326
Provision for repurchase losses:
Loan sales 16 28 66 143 275
Change in estimate (1)     10     -     313     285     1,665  
Total additions 26 28 379 428 1,940
Losses (2)     (548 )   (829 )   (206 )   (1,735 )   (1,060 )
Balance, end of period   $ 899     1,421     2,206     899     2,206  
 

(1) Results from changes in investor demand and mortgage insurer practices, credit deterioration and changes in the financial stability of correspondent lenders.

(2) Quarter and year ended September 30 and December 31, 2013, respectively, reflect $746 million as a result of the agreement with Freddie Mac that substantially resolves all repurchase liabilities related to loans sold to Freddie Mac prior to January 1, 2009. Quarter and year ended December 31, 2013, reflect $508 million as a result of the agreement with Fannie Mae that substantially resolves all repurchase liabilities related to loans sold to Fannie Mae that were originated prior to January 1, 2009.

 
UNRESOLVED REPURCHASE DEMANDS AND MORTGAGE INSURANCE RESCISSIONS            
 
Mortgage
insurance
Government rescissions
sponsored with no
($ in millions)           entities (1)     Private     demand (2)     Total  
December 31, 2013
Number of loans 674 2,260 394 3,328
Original loan balance (3) $ 124 497 87 708
 
September 30, 2013
Number of loans 4,422 1,240 385 6,047
Original loan balance (3) $ 958 264 87 1,309
 
June 30, 2013
Number of loans 6,313 1,206 561 8,080
Original loan balance (3) $ 1,413 258 127 1,798
 
March 31, 2013
Number of loans 5,910 1,278 652 7,840
Original loan balance (3) $ 1,371 278 145 1,794
 
December 31, 2012
Number of loans 6,621 1,306 753 8,680
Original loan balance (3) $ 1,503 281 160 1,944
                                 
 

(1) Includes repurchase demands of 42 and $6 million, 1,247 and $225 million, 942 and $190 million, 674 and $147 million, and 661 and $132 million at December 31, September 30, June 30 and March 31, 2013, and December 31, 2012, respectively, received from investors on mortgage servicing rights acquired from other originators. We generally have the right of recourse against the seller and may be able to recover losses related to such repurchase demands subject to counterparty risk associated with the seller.

(2) As part of our representations and warranties in our loan sales contracts, we typically represent to GSEs and private investors that certain loans have mortgage insurance to the extent there are loans that have loan to value ratios in excess of 80% that require mortgage insurance. To the extent the mortgage insurance is rescinded by the mortgage insurer due to a claim of breach of a contractual representation or warranty, the lack of insurance may result in a repurchase demand from an investor. Similar to repurchase demands, we evaluate mortgage insurance rescission notices for validity and appeal for reinstatement if the rescission was not based on a contractual breach. When investor demands are received due to lack of mortgage insurance, they are reported as unresolved repurchase demands based on the applicable investor category for the loan (GSE or private). Over the last year, approximately 7% of our repurchase demands from GSEs had mortgage insurance rescission as one of the reasons for the repurchase demand. Of all the mortgage insurance rescission notices received in 2012, approximately 78% have resulted in repurchase demands through December 2013. Not all mortgage insurance rescissions received in 2012 have been completed through the appeals process with the mortgage insurer and, upon successful appeal, we work with the investor to rescind the repurchase demand.

(3) While the original loan balances related to these demands are presented above, the establishment of the repurchase liability is based on a combination of factors, such as our appeals success rates, reimbursement by correspondent and other third party originators, and projected loss severity, which is driven by the difference between the current loan balance and the estimated collateral value less costs to sell the property.

Wells Fargo & Company
Media
Mary Eshet, 704-383-7777
or
Investors
Jim Rowe, 415-396-8216