Wells Fargo Reports Record Quarterly Net Income

Wells Fargo & Company (NYSE: WFC):

  • Continued strong financial results:
    • Record Wells Fargo net income of $4.9 billion, up 27 percent (annualized) from prior quarter
    • Record diluted earnings per common share of $0.88, up 29 percent (annualized) from prior quarter
    • Pre-tax pre-provision profit (PTPP)1 of $9.1 billion, up 9 percent (annualized) from prior quarter
    • Revenue of $21.2 billion, compared with $21.3 billion in prior quarter
    • Noninterest expense of $12.1 billion, down $285 million from prior quarter; 57.1 percent efficiency ratio
    • Return on average assets (ROA) of 1.45 percent, up 4 basis points from prior quarter
    • Return on equity (ROE) of 13.38 percent, up 52 basis points from prior quarter
  • Strong deposit and loan growth:
    • Total average core checking and savings deposits up $16.9 billion from prior quarter
    • Total loans of $782.6 billion, up $7.4 billion from prior quarter
    • Core loan portfolio up $11.9 billion from prior quarter2
  • Maintained strong capital position:
    • Tier 1 common equity3 under Basel I increased $4.1 billion to $105.8 billion, with Tier 1 common equity ratio of 10.06 percent under Basel I at September 30, 2012. Estimated Tier 1 common equity ratio of 8.02 percent under current Basel III capital proposals4
    • Purchased approximately 17 million shares of common stock in third quarter 2012 and an additional estimated 9 million shares through a forward repurchase transaction expected to settle in fourth quarter 2012
  • Solid underlying credit quality:
    • Net charge-offs of $2.4 billion, or 1.21 percent (annualized) of average loans, including $567 million of net charge-offs from the implementation of newly issued regulatory guidance5
    • Excluding the impact of the OCC guidance, net charge-offs of $1.8 billion or 0.92 percent (annualized) of average loans
    • Provision for credit losses was $767 million lower than net loan charge-offs due to two factors:
      • $567 million increase in net loan charge-offs from the implementation of the OCC guidance (fully covered by loan loss reserves)
      • $200 million (pre-tax) reserve release due to continued strong underlying credit performance, compared with $400 million in prior quarter

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

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

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

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

5 Office of the Comptroller of the Currency update to Bank Accounting Advisory Series issued third quarter 2012 (OCC guidance) which requires write-down of performing consumer loans restructured in bankruptcy to collateral value. See Credit Quality section including footnote 6, for additional information regarding the implementation of the OCC guidance and its effect on our third quarter credit metrics.

Selected Financial Information

Quarter ended

Sept. 30,

June 30,

Sept. 30,

2012 2012 2011
Earnings
Diluted earnings per common share $ 0.88 0.82 0.72
Wells Fargo net income (in billions) 4.94 4.62 4.06
Return on assets (ROA) 1.45% 1.41 1.26
Return on equity (ROE) 13.38 12.86 11.86
Asset Quality
Net charge-offs as a % of avg. total loans 1.21 1.15 1.37
Allowance as a % of total loans 2.27 2.41 2.68
Allowance as a % of annualized net charge-offs 190 211 197
Other
Revenue (in billions) $ 21.21 21.29 19.63
Efficiency ratio 57.1 58.2 59.5
Average loans (in billions) 776.7 768.2 754.5
Average core deposits (in billions) 895.4 880.6 836.8

Net interest margin

3.66% 3.91 3.84

Wells Fargo & Company (NYSE: WFC) reported record net income of $4.9 billion, or $0.88 per diluted common share, for third quarter 2012, up from $4.1 billion, or $0.72 per share, for third quarter 2011, and up from $4.6 billion, or $0.82 per share, for second quarter 2012. For the first nine months of 2012, net income was $13.8 billion, or $2.45 per share, compared with $11.8 billion, or $2.09 per share, a year ago.

“Through the efforts of our more than 265,000 team members, we've now achieved six consecutive quarters of record net income and EPS,” said Chairman and CEO John Stumpf. “By focusing on earning all of our customers' business and providing outstanding service, we continued to generate growth across our diversified set of businesses. In the third quarter, core loans grew by $11.9 billion and we saw continued strength in our mortgage and deposit businesses. We remained diligent in managing costs and continued to have strong underlying credit performance as our loss mitigation efforts and the low interest rate environment helped improve affordability for our customers.”

Chief Financial Officer Tim Sloan added, “Our third quarter results demonstrated that the Company’s business model continues to serve shareholders well. Our performance reflected an ongoing focus on measures that drive value over the long-term, including increased PTPP, positive operating leverage, and solid ROA and ROE. In addition, our efficiency ratio of 57.1 percent in the third quarter improved compared with second quarter and remained within our 55 to 59 percent targeted range. While the economic and interest rate environments continue to present challenges for us and our industry, our diversified model and focus on our customers continued to produce strong quarterly results.”

Revenue

Revenue was $21.2 billion in the third quarter, compared with $21.3 billion in second quarter 2012, as approximately $300 million of higher noninterest income was more than offset by lower net interest income. Businesses generating linked-quarter revenue growth included asset backed finance, asset management, brokerage services, commercial mortgage servicing, credit card, dealer services, debit card, equity funds, personal credit management, real estate capital markets, retail sales finance, retirement services, and small business administration loans.

Net Interest Income

Net interest income was $10.7 billion in third quarter, down from $11.0 billion in second quarter 2012. The decline in net interest income was largely driven by lower income from variable sources, such as fee income and purchased credit-impaired (PCI) loan resolutions which were elevated in the second quarter. In addition, income from the available-for-sale (AFS) securities portfolio declined as the pace of mortgage-backed securities (MBS) pay-downs increased in response to lower interest rates, and we replaced a large portion of the run-off with lower yielding, but shorter duration securities. The income impact of lower levels of long-term securities purchases was partially offset by our retention of $9.8 billion of high-quality, conforming first real estate mortgages.

On a linked-quarter basis, our net interest margin declined 25 basis points to 3.66 percent, driven by three primary items. First, the impact of lower income from variable sources described above caused a decline of approximately 10 basis points. Second, given our cautious stance on investment portfolio growth in the current low rate environment, deposit growth of $23 billion (10 percent annualized) caused cash and short term investments to increase, diluting the margin by approximately 7 basis points. Finally, the impact of lower rates, both in terms of run-off and new activity, reduced the margin by 8 basis points, with approximately 6 basis points of the decline from the AFS portfolio and approximately 2 basis points from the loan portfolios.

Noninterest Income

Noninterest income was $10.6 billion, up from $10.3 billion in second quarter 2012. The increase was driven by a $252 million increase in market sensitive revenue, primarily trading gains including deferred compensation plan investments offset in employee benefits expense. The Company also benefitted from increases in deposit service charges, trust and investment fees, and card fees. Insurance declined $108 million due to seasonally lower insurance revenue, with a related decline in insurance commission expense.

Mortgage banking noninterest income was $2.8 billion, down $86 million from second quarter 2012, on $139 billion of originations, compared with $131 billion of originations in second quarter. During the third quarter, the Company retained on balance sheet 1-4 family conforming first mortgage loans, forgoing approximately $200 million of fee revenue that could have been generated had the loans been originated for sale during the quarter along with other agency conforming loan production. The Company provided $462 million for mortgage loan repurchase losses, compared with $669 million in second quarter (included in net gains from mortgage loan origination/sales activities). Net mortgage servicing rights (MSRs) results were $142 million, compared with $377 million in second quarter due to MSR valuation adjustments made in the third quarter for increased servicing and foreclosure costs. The ratio of MSRs to related loans serviced for others was at a historical low of 63 basis points and the average note rate on the servicing portfolio was 4.87 percent. The unclosed pipeline at September 30, 2012 was $97 billion, compared with $102 billion at June 30, 2012.

The Company had net unrealized securities gains of $12.4 billion at September 30, 2012, compared with $9.5 billion at June 30, 2012. Period-end securities available for sale balances increased $2.5 billion.

Noninterest Expense

Noninterest expense declined $285 million in the quarter to $12.1 billion, compared with $12.4 billion in second quarter 2012. The decline in noninterest expense was due primarily to $243 million of lower operating losses, $112 million of seasonally lower insurance commissions, $104 million of lower severance expense, and our third consecutive quarterly reduction in foreclosed asset expense, down $42 million from prior quarter. The expense improvements were partially offset by higher deferred compensation expense of $152 million offset in noninterest income and by increases in occupancy and advertising costs. The Company’s efficiency ratio improved to 57.1 percent from 58.2 percent in second quarter 2012 and 59.5 percent in third quarter 2011, and the Company is well positioned to remain within its targeted range of 55 to 59 percent in the fourth quarter.

Loans

Total loans were $782.6 billion at September 30, 2012, up $7.4 billion from $775.2 billion at June 30, 2012. Included in this growth was $9.8 billion of 1-4 family conforming first mortgage production retained on the balance sheet. In addition, there was growth in auto, credit card, private student lending, and commercial and industrial (C&I) loan balances. The growth in core loan portfolios more than offset the reduction in the non-strategic/liquidating portfolios, which declined $4.5 billion in the quarter.

September 30, 2012 June 30, 2012
(in millions) CoreLiquidating (1)Total Core Liquidating (1) Total
Commercial $348,6963,836352,532 349,774 4,278 354,052
Consumer 335,27894,820430,098 322,297 98,850 421,147
Total loans $683,97498,656782,630 672,071 103,128 775,199
Change from prior quarter: $11,903(4,472)7,431 13,782 (5,104) 8,678

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

Deposits

Average core deposits were $895.4 billion, up 7 percent from a year ago and up 7 percent (annualized) from second quarter 2012. Average core checking and savings deposits were $837.2 billion, up 9 percent from a year ago and up 8 percent (annualized) from second quarter 2012. Average mortgage escrow deposits were $40.0 billion, compared with $28.3 billion a year ago and $35.4 billion in second quarter 2012. Average core checking and savings deposits were 94 percent of average core deposits, up from 93 percent in the prior quarter and 92 percent a year ago. The average deposit cost for third quarter 2012 was 18 basis points, compared with 19 basis points in second quarter 2012. Average core deposits were 115 percent of average loans, up slightly from second quarter 2012.

Capital

Capital increased in the third quarter, with Tier 1 common equity reaching $105.8 billion under Basel I, or 10.06 percent of risk-weighted assets. The third quarter ratio reflected refinements to the risk weighting of certain unused lending commitments that provide for the ability to issue standby letters of credit, which reduced the ratio by 32 basis points. This refinement did not affect our estimated Tier 1 common equity ratio under Basel III capital proposals, which rose to 8.02 percent at the end of the quarter.

In third quarter, the Company purchased approximately 17 million shares of its common stock and an additional estimated 9 million shares through a forward repurchase transaction expected to settle in fourth quarter 2012, and paid a quarterly common stock dividend of $0.22 per share.

Sept. 30, June 30, Sept. 30,
(as a percent of total risk-weighted assets) 2012 2012 2011
Ratios under Basel I (1):
Tier 1 common equity (2)

10.06

%

10.08 9.34
Tier 1 capital 11.66 11.69 11.26
Tier 1 leverage 9.45 9.25 8.97
(1) September 30, 2012, ratios are preliminary.
(2) See tables on TIER 1 COMMON EQUITY for more information on Tier 1 common equity.

Credit Quality

“Underlying credit quality continued to show improvement in the third quarter, as the overall financial condition of businesses and consumers strengthened, the housing market in many areas of the nation improved, and we continued to work to reduce problem assets and make new, high quality loans,” said Chief Risk Officer Mike Loughlin.

Reported credit metrics for the quarter were affected by the implementation in third quarter of the OCC guidance, which affected consumer loans where the borrower’s obligation to us has been discharged in bankruptcy and the borrower has not reaffirmed the debt. As of September 30, 2012, only 8 percent of loans within this category were 30 days or more past due. Implementation of the OCC guidance affected nonperforming loans and net charge-offs as follows:

  • $1.4 billion reclassification of performing consumer loans to nonaccrual status, consisting of $1.0 billion of first mortgages, $262 million of junior liens and $155 million of auto loans
  • $567 million increase in net loan charge-offs, fully covered by loan loss reserves

“Excluding the impact of the OCC guidance, we saw improvement in charge-offs, recoveries, and nonperforming assets. Early stage delinquencies remained relatively stable from prior quarter. Absent significant deterioration in the economy, we continue to expect future reserve releases,” said Loughlin.

Net Loan Charge-offs

Net loan charge-offs, summarized in the table below, were $2.4 billion in third quarter 2012 or 121 basis points of average loans. Excluding the $567 million in charge-offs resulting from implementation of the OCC guidance, net charge-offs were $1.8 billion or 92 basis points with commercial losses of $217 million, or 24 basis points, and consumer losses of $1.6 billion or 148 basis points6.

6 Management believes that the presentation in this news release of information excluding the impact of the OCC guidance provides useful disclosure regarding the underlying credit quality of the Company’s loan portfolios.

Net Loan Charge-Offs

Quarter ended

September 30, 2012June 30, 2012March 31, 2012
As aAs aAs a
Net loan% ofNet loan% ofNet loan% of
charge-averagecharge-averagecharge-average
($ in millions)offsloans (1) offsloans (1) offsloans (1)
Commercial:
Commercial and industrial $ 131 0.29 % $ 249 0.58 % $ 256 0.62

%

Real estate mortgage 54 0.21 81 0.31 46 0.17
Real estate construction 1 0.03 17 0.40 67 1.43
Lease financing 1 0.03 - - 2 0.06
Foreign 30 0.29 11 0.11 14 0.14
Total commercial2170.243580.423850.45
Consumer:
Real estate 1-4 family first mortgage 673 1.15 743 1.30 791 1.39
Real estate 1-4 family junior lien mortgage 1,036 5.17 689 3.38 763 3.62
Credit card 212 3.67 240 4.37 242 4.40
Other revolving credit and installment 220 1.00 170 0.79 214 0.99
Total consumer2,1412.011,8421.762,0101.91
Total$2,3581.21%$2,2001.15%$2,3951.25

%

(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 increased by $368 million in the quarter including a $1.4 billion increase in nonperforming loans resulting from implementation of the OCC guidance, ending the quarter at $25.3 billion, compared with $24.9 billion in second quarter 2012. Nonaccrual loans increased to $21.0 billion from $20.6 billion in second quarter; however, apart from implementing the OCC guidance, total commercial and consumer nonaccrual loans declined in the quarter by $975 million. Foreclosed assets were $4.2 billion, down from $4.3 billion in second quarter 2012.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

September 30, 2012June 30, 2012March 31, 2012
As aAs aAs a
% of% of% of
TotaltotalTotaltotalTotaltotal
($ in millions)balancesloansbalancesloansbalancesloans
Commercial:
Commercial and industrial $ 1,404 0.79 % $ 1,549 0.87 % $ 1,726 1.02 %
Real estate mortgage 3,599 3.44 3,832 3.63

4,081 3.85
Real estate construction 1,253 7.08 1,421 8.08 1,709 9.21
Lease financing 49 0.40 43 0.34 45 0.34
Foreign 66 0.17 79 0.20 38 0.10
Total commercial6,3711.816,9241.967,5992.20
Consumer:
Real estate 1-4 family first mortgage 11,195 4.65 10,368 4.50 10,683 4.67
Real estate 1-4 family junior lien mortgage 3,140 4.02 3,091 3.82 3,558 4.28
Other revolving credit and installment 338 0.39 195 0.22 186 0.21
Total consumer (1)14,6733.4113,6543.2414,4273.43
Total nonaccrual loans21,0442.6920,5782.6522,0262.87
Foreclosed assets:
GNMA 1,479 1,465 1,352
Non GNMA 2,730 2,842 3,265
Total foreclosed assets4,2094,3074,617
Total nonperforming assets$25,2533.23%$24,8853.21%$26,6433.48%
Change from prior quarter:
Total nonaccrual loans $ 466 $ (1,448 ) $ 722
Total nonperforming assets 368 (1,758 ) 678

(1)

Includes $1.4 billion at September 30, 2012, resulting from implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series. The updated guidance requires us to place on nonaccrual status those performing loans where the borrower’s obligation to us has been restructured in bankruptcy.

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 $1.5 billion at September 30, 2012, compared with $1.4 billion at June 30, 2012. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $21.4 billion at September 30, 2012, down slightly from $21.5 billion at June 30, 2012.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $17.8 billion at September 30, 2012, down from $18.6 billion at June 30, 2012. The reduction in the allowance included $567 million of net charge-offs resulting from implementation of the OCC guidance. While the impact of the OCC guidance accelerated charge-offs of performing consumer loans into the third quarter, the allowance for credit losses had full coverage for these charge-offs. The reduction also included a $200 million reserve release due to strong underlying credit, compared with a $400 million release in the prior quarter. The allowance coverage to total loans was 2.27 percent, compared with 2.41 percent in second quarter 2012. The allowance covered 1.9 times annualized third quarter net charge-offs, compared with 2.1 times in the prior quarter. The allowance coverage to nonaccrual loans was 85 percent at September 30, 2012, compared with 91 percent at June 30, 2012. “We believe the allowance was appropriate for losses inherent in the loan portfolio at September 30, 2012,” said Loughlin.

Business Segment Performance

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

Quarter ended
Sept. 30, June 30, Sept. 30,
(in millions) 2012 2012 2011
Community Banking $2,740 2,535 2,324
Wholesale Banking 1,993 1,881 1,803
Wealth, Brokerage and Retirement 338 343 290

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

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

Selected Financial Information

Quarter ended
Sept. 30, June 30, Sept. 30,
(in millions) 2012 2012 2011
Total revenue $13,110 13,092 12,510
Provision for credit losses 1,627 1,573 1,974
Noninterest expense 7,402 7,580 6,905
Segment net income 2,740 2,535 2,324
(in billions)
Average loans 485.3 483.9 489.7
Average assets 765.1 746.6 751.8
Average core deposits 594.5 586.1 556.4

Community Banking reported net income of $2.7 billion, up $205 million, or 8 percent, from second quarter 2012. Revenue increased $18 million from second quarter 2012, primarily due to continued growth in deposit service charges and higher gains on deferred compensation plan investments (offset in employee benefits expense), offset by lower investment income and mortgage banking revenue. Noninterest expense decreased $178 million, or 2 percent, from second quarter 2012, largely the result of lower operating losses and lower severance expense associated with our efficiency and cost save initiatives, partially offset by higher deferred compensation expense (offset in revenue).

Net income was up $416 million, or 18 percent, from third quarter 2011. Revenue increased $600 million, or 5 percent, primarily due to higher volume-related mortgage banking income and growth in deposit service charges, partially mitigated by higher equity gains in prior year, planned runoff of non-strategic loan balances and lower debit card revenue due to regulatory changes enacted in October 2011. Noninterest expense increased $497 million, or 7 percent, from third quarter 2011, largely the result of higher mortgage volume-related expenses and operating losses. The provision for credit losses was $347 million lower than a year ago due to improved portfolio performance.

Regional Banking

  • Retail banking
    • Retail Bank household cross-sell ratio of 6.04 products per household, up from 5.90 year-over-year; cross-sell in the West reached 6.40, compared with 5.56 in the East7
    • Consumer checking accounts essentially flat to prior year7
    • Consumer credit card, lines of credit and loan product solutions (sales) in the retail banking stores were nearly 1.5 times the prior year
    • Partner referrals that resulted in a sale, including products such as insurance, mortgage and student lending, up more than 30 percent from the prior year
    • Continued investments in the East; in third quarter, platform banker FTE (active, full-time equivalent) grew by more than 500 on a linked quarter basis
  • Small Business/Business Banking
    • Business checking accounts up a net 3.9 percent year-over-year7
    • Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) up more than 45 percent from the prior year
    • $11.4 billion in net new loan commitments to small business customers (primarily with annual revenues less than $20 million) in the first three quarters of 2012, up approximately 30 percent from prior year
    • America’s #1 small business lender (in both loans under $100,000 and under $1,000,000) and #1 lender to small businesses in low- and moderate-income areas (2011 CRA data, released August 2012)
    • For the second year in a row, Wells Fargo has approved more than $1 billion in SBA 7(a) loan dollars for small businesses
  • Online and Mobile Banking
    • 21.4 million active online customers7
    • 8.9 million active mobile customers7
    • “Best Consumer Internet Bank” in the U.S. for the 3rd consecutive year (Global Finance Magazine, July 2012)

Consumer Lending Group

  • Home Mortgage
    • Originations of $139 billion, up from $131 billion in prior quarter
    • Applications of $188 billion, compared with $208 billion in prior quarter
    • Application pipeline of $97 billion at quarter end, compared with $102 billion at June 30, 2012
    • Residential mortgage servicing portfolio of $1.9 trillion
  • Other Consumer Lending
    • Credit card penetration in retail banking households rose to 32.1 percent7, up from 31.0 percent in prior quarter and 28.1 percent in prior year
    • Auto originations of $6.3 billion, down 3 percent from prior quarter and up 20 percent from prior year

7 Data as of August 2012. Comparisons are August 2012 compared with August 2011.

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

Selected Financial Information

Quarter ended
Sept. 30, June 30, Sept. 30,
(in millions) 2012 2012 2011
Total revenue $5,949 6,117 5,135
Provision (reversal of provision) for credit losses (57) 188 (178 )
Noninterest expense 2,908 3,113 2,689
Segment net income 1,993 1,881 1,803
(in billions)
Average loans 277.1 270.2 253.4
Average assets 490.7 478.4 437.1
Average core deposits 225.4 220.9 209.3

Wholesale Banking reported record net income of $2.0 billion, up $112 million, or 6 percent, from second quarter 2012. Revenue of $5.9 billion decreased 3 percent from second quarter 2012 as strong growth across many businesses, including asset-backed finance, asset management, real estate capital markets, and sales and trading, was more than offset by seasonally lower crop insurance revenue and lower PCI resolution income. Noninterest expense decreased $205 million, or 7 percent, from second quarter 2012 on seasonally lower insurance commissions and lower foreclosed asset expense. The provision for credit losses reflected a net reversal of $57 million in third quarter, compared with a provision of $188 million in second quarter. This was due both to a lower level of net loan charge-offs and an increase in the reserve release.

Net income was up $190 million, or 11 percent, from third quarter 2011 led by higher pre-tax pre provision income and lower net charge-offs. Revenue increased $814 million, or 16 percent, from third quarter 2011 driven by broad-based business growth, including acquisitions and strong loan and deposit growth. Noninterest expense increased $219 million, or 8 percent, from third quarter 2011 due to higher personnel expenses related to revenue growth and higher non-personnel expenses related to growth initiatives and compliance and regulatory requirements. Despite an improvement of $119 million in net charge-offs, the provision for credit losses was $121 million higher than third quarter 2011 due to $240 million in lower reserve releases. The third quarter 2012 provision included a $110 million reserve release, compared with $350 million a year ago.

  • 9 percent year-over-year average loan and 12 percent average asset growth. The growth came from nearly all portfolios, including asset backed finance, capital finance, commercial banking, commercial real estate, and corporate banking
  • Nine consecutive quarters of average loan growth in Commercial Banking
  • Average core deposits up 8 percent from prior year
  • Investment banking year to date revenue from commercial and corporate customers increased 13 percent for the same period in 2011 due to attractive capital markets conditions and continued momentum in cross selling
  • Completed acquisition of Merlin Securities, LLC, a prime brokerage services and technology provider
  • Best U.S. Bank, 2012 Euromoney Awards for Excellence

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

Selected Financial Information

Quarter ended
Sept. 30, June 30, Sept. 30,
(in millions) 2012 2012 2011
Total revenue $3,033 2,971 2,888
Provision for credit losses 30 37 48
Noninterest expense 2,457 2,376 2,371
Segment net income 338 343 290
(in billions)
Average loans 42.5 42.5 43.1
Average assets 163.8 160.9 158.4
Average core deposits 136.7 134.2 133.3

Wealth, Brokerage and Retirement reported net income of $338 million, down $5 million from second quarter 2012. Revenue was $3.0 billion, up 2 percent from second quarter 2012, and benefited from $45 million in gains on deferred compensation plan investments (offset in expense, compared with $31 million in losses in second quarter 2012). Excluding deferred compensation, revenue was flat due to lower net interest income and reduced securities gains in the brokerage business, partially offset by higher asset-based fees and brokerage transaction revenue. Total provision for credit losses decreased $7 million from second quarter 2012. The provision in both periods included a $10 million credit reserve release. Noninterest expense increased 3 percent from second quarter 2012 related to higher deferred compensation plan expense. Third quarter 2012 results included $45 million in deferred compensation plan expense, compared with a $32 million benefit in second quarter. Apart from the $77 million change in deferred compensation plan expense, noninterest expense was flat.

Net income rose $48 million from third quarter 2011. Revenue increased 5 percent from third quarter 2011 due to $45 million in gains on deferred compensation plan investments (offset in expense, compared with $128 million in losses in third quarter 2011). Excluding deferred compensation, revenue was down 1 percent primarily due to lower net interest income and reduced securities gains in the brokerage business, partially offset by growth in managed account fee revenue. Total provision for credit losses decreased $18 million from third quarter 2011. Noninterest expense increased 4 percent from third quarter 2011 driven by higher deferred compensation plan expense. Third quarter 2012 results included $45 million in deferred compensation plan expense, compared with a $125 million benefit a year ago. Apart from the $170 million change in deferred compensation plan expense, noninterest expense decreased 3 percent.

Retail Brokerage

  • Client assets of $1.2 trillion, up 11 percent from prior year
  • Managed account assets increased $59 billion, or 25 percent, from prior year driven by strong net flows and market performance
  • Strong deposit growth, with average balances up 9 percent from prior year

Wealth Management

  • Client assets of $199 billion, up 4 percent from prior year
  • Recently named the 4th largest U.S. Wealth Manager according to Barron’s Annual Wealth Managers Survey

Retirement

  • Institutional Retirement plan assets of $260 billion, up 14 percent from prior year
  • IRA assets of $295 billion, up 13 percent from prior year

Conference Call

The Company will host a live conference call on Friday, October 12, at 7 a.m. PDT (10 a.m. EDT). To access the call, please dial 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings and http://us.meeting-stream.com/wellsfargocompany_101212.

A replay of the conference call will be available beginning at approximately noon PDT (3 p.m. EDT) on October 12 through Friday, October 19. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #18860134. The replay will also be available online at wellsfargo.com/invest_relations/earnings.

Cautionary Statement about Forward-Looking Information

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

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

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.4 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet (wellsfargo.com), and has offices in more than 35 countries to support the bank’s customers who conduct business in the global economy. With approximately 265,000 full-time equivalent team members, Wells Fargo serves one in three households in United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2012 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

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

Pages

Summary Information

Summary Financial Data 16-17

Income

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

Balance Sheet

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

Loans

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

Equity

Tier 1 Common Equity 38

Operating Segments

Operating Segment Results 39-40

Other

Mortgage Servicing and other related data 41-43
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
Quarter ended September 30, % Nine months ended Sept. 30, %
($ in millions, except per share amounts) 2012 2011 Change 2012 2011 Change
For the Period
Wells Fargo net income $4,937 4,055 22 % $13,807 11,762 17 %
Wells Fargo net income applicable to common stock 4,717 3,839 23 13,142 11,137 18
Diluted earnings per common share 0.88 0.72 22 2.45 2.09 17
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.45% 1.26 15 1.39 1.25 11
Wells Fargo net income applicable to common
stock to average Wells Fargo common
stockholders' equity (ROE) 13.38 11.86 13 12.81 11.92 7
Efficiency ratio (1) 57.1 59.5 (4 ) 58.5 61.1 (4 )
Total revenue $21,213 19,628 8 $64,138 60,343 6
Pre-tax pre-provision profit (PTPP) (2) 9,101 7,951 14 26,636 23,458 14
Dividends declared per common share 0.22 0.12 83 0.66 0.36 83
Average common shares outstanding 5,288.1 5,275.5 - 5,292.7 5,280.2 -
Diluted average common shares outstanding 5,355.6 5,319.2 1 5,355.7 5,325.6 1
Average loans $776,734 754,544 3 $771,200 753,293 2
Average assets 1,354,340 1,281,369 6 1,326,384 1,257,977 5
Average core deposits (3) 895,374 836,845 7 882,224 813,865 8
Average retail core deposits (4) 630,053 599,227 5 623,671 592,156 5
Net interest margin 3.66% 3.84 (5 ) 3.82 3.96 (4 )
At Period End
Securities available for sale $229,350 207,176 11 $229,350 207,176 11
Loans 782,630 760,106 3 782,630 760,106 3
Allowance for loan losses 17,385 20,039 (13 ) 17,385 20,039 (13 )
Goodwill 25,637 25,038 2 25,637 25,038 2
Assets 1,374,715 1,304,945 5 1,374,715 1,304,945 5
Core deposits (3) 901,075 849,632 6 901,075 849,632 6
Wells Fargo stockholders' equity 154,679 137,768 12 154,679 137,768 12
Total equity 156,059 139,244 12 156,059 139,244 12
Capital ratios:
Total equity to assets 11.35% 10.67 6 11.35 10.67 6
Risk-based capital (5):
Tier 1 capital 11.66 11.26 4 11.66 11.26 4
Total capital 14.70 14.86 (1 ) 14.70 14.86 (1 )
Tier 1 leverage (5) 9.45 8.97 5 9.45 8.97 5
Tier 1 common equity (5)(6) 10.06 9.34 8 10.06 9.34 8
Common shares outstanding 5,289.6 5,272.2 - 5,289.6 5,272.2 -
Book value per common share $27.10 24.13 12 $27.10 24.13 12
Common stock price:
High 36.60 29.63 24 36.60 34.25 7
Low 32.62 22.58 44 27.94 22.58 24
Period end 34.53 24.12 43 34.53 24.12 43
Team members (active, full-time equivalent) 267,000 263,800 1 267,000 263,800 1

(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.
(3) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5) The September 30, 2012, ratios are preliminary.
(6) See the "Five Quarter Tier 1 Common Equity Under Basel I" table for additional information.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
Quarter ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
($ in millions, except per share amounts) 2012 2012 2012 2011 2011
For the Quarter
Wells Fargo net income $4,937 4,622 4,248 4,107 4,055
Wells Fargo net income applicable to common stock 4,717 4,403 4,022 3,888 3,839
Diluted earnings per common share 0.88 0.82 0.75 0.73 0.72
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.45% 1.41 1.31 1.25 1.26
Wells Fargo net income applicable to common stock to average
Wells Fargo common stockholders' equity (ROE) 13.38 12.86 12.14 11.97 11.86
Efficiency ratio (1) 57.1 58.2 60.1 60.7 59.5
Total revenue $21,213 21,289 21,636 20,605 19,628
Pre-tax pre-provision profit (PTPP) (2) 9,101 8,892 8,643 8,097 7,951
Dividends declared per common share 0.22 0.22 0.22 0.12 0.12
Average common shares outstanding 5,288.1 5,306.9 5,282.6 5,271.9 5,275.5
Diluted average common shares outstanding 5,355.6 5,369.9 5,337.8 5,317.6 5,319.2
Average loans $776,734 768,223 768,582 768,563 754,544
Average assets 1,354,340 1,321,584 1,302,921 1,306,728 1,281,369
Average core deposits (3) 895,374 880,636 870,516 864,928 836,845
Average retail core deposits (4) 630,053 624,329 616,569 606,810 599,227
Net interest margin 3.66% 3.91 3.91 3.89 3.84
At Quarter End
Securities available for sale $229,350 226,846 230,266 222,613 207,176
Loans 782,630 775,199 766,521 769,631 760,106
Allowance for loan losses 17,385 18,320 18,852 19,372 20,039
Goodwill 25,637 25,406 25,140 25,115 25,038
Assets 1,374,715 1,336,204 1,333,799 1,313,867 1,304,945
Core deposits (3) 901,075 882,137 888,711 872,629 849,632
Wells Fargo stockholders' equity 154,679 148,070 145,516 140,241 137,768
Total equity 156,059 149,437 146,849 141,687 139,244
Capital ratios:
Total equity to assets 11.35% 11.18 11.01 10.78 10.67
Risk-based capital (5):
Tier 1 capital 11.66 11.69 11.78 11.33 11.26
Total capital 14.70 14.85 15.13 14.76 14.86
Tier 1 leverage (5) 9.45 9.25 9.35 9.03 8.97
Tier 1 common equity (5)(6) 10.06 10.08 9.98 9.46 9.34
Common shares outstanding 5,289.6 5,275.7 5,301.5 5,262.6 5,272.2
Book value per common share $27.10 26.06 25.45 24.64 24.13
Common stock price:
High 36.60 34.59 34.59 27.97 29.63
Low 32.62 29.80 27.94 22.61 22.58
Period end 34.53 33.44 34.14 27.56 24.12
Team members (active, full-time equivalent) 267,000 264,400 264,900 264,200 263,800
(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 September 30, 2012, ratios are preliminary.
(6) See the "Five Quarter Tier 1 Common Equity under Basel I" table for additional information.
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
Nine months
Quarter ended Sept. 30,

%

ended Sept. 30, %
(in millions, except per share amounts) 2012 2011 Change 2012 2011 Change
Interest income
Trading assets $299 343 (13 ) % $1,019 1,040 (2 ) %
Securities available for sale 1,966 2,053 (4 ) 6,201 6,383 (3 )
Mortgages held for sale 476 389 22 1,412 1,188 19
Loans held for sale 17 13 31 38 42 (10 )
Loans 9,016 9,224 (2 ) 27,455 27,972 (2 )
Other interest income 151 156 (3 ) 409 409 -
Total interest income 11,925 12,178 (2 ) 36,534 37,034 (1 )
Interest expense
Deposits 428 559 (23 ) 1,328 1,768 (25 )
Short-term borrowings 19 20 (5 ) 55 66 (17 )
Long-term debt 756 980 (23 ) 2,375 3,093 (23 )
Other interest expense 60 77 (22 ) 189 236 (20 )
Total interest expense 1,263 1,636 (23 ) 3,947 5,163 (24 )
Net interest income10,662 10,542 1 32,587 31,871 2
Provision for credit losses 1,591 1,811 (12 ) 5,386 5,859 (8 )
Net interest income after provision for credit losses 9,071 8,731 4 27,201 26,012 5
Noninterest income
Service charges on deposit accounts 1,210 1,103 10 3,433 3,189 8
Trust and investment fees 2,954 2,786 6 8,691 8,646 1
Card fees 744 1,013 (27 ) 2,102 2,973 (29 )
Other fees 1,097 1,085 1 3,326 3,097 7
Mortgage banking 2,807 1,833 53 8,570 5,468 57
Insurance 414 423 (2 ) 1,455 1,494 (3 )
Net gains (losses) from trading activities 529 (442 ) NM 1,432 584 145
Net gains (losses) on debt securities available for sale 3 300 (99 ) (65) 6 NM
Net gains from equity investments 164 344 (52 ) 770 1,421 (46 )
Operating leases 218 284 (23 ) 397 464 (14 )
Other 411 357 15 1,440 1,130 27
Total noninterest income 10,551 9,086 16 31,551 28,472 11
Noninterest expense
Salaries 3,648 3,718 (2 ) 10,954 10,756 2
Commission and incentive compensation 2,368 2,088 13 7,139 6,606 8
Employee benefits 1,063 780 36 3,720 3,336 12
Equipment 510 516 (1 ) 1,526 1,676 (9 )
Net occupancy 727 751 (3 ) 2,129 2,252 (5 )
Core deposit and other intangibles 419 466 (10 ) 1,256 1,413 (11 )
FDIC and other deposit assessments 359 332 8 1,049 952 10
Other 3,018 3,026 - 9,729 9,894 (2 )
Total noninterest expense 12,112 11,677 4 37,502 36,885 2
Income before income tax expense7,510 6,140 22 21,250 17,599 21
Income tax expense 2,480 1,998 24 7,179 5,571 29
Net income before noncontrolling interests5,030 4,142 21 14,071 12,028 17
Less: Net income from noncontrolling interests 93 87 7 264 266 (1 )
Wells Fargo net income$4,937 4,055 22 $13,807 11,762 17
Less: Preferred stock dividends and other 220 216 2 665 625 6
Wells Fargo net income applicable to common stock$4,717 3,839 23 $13,142 11,137 18
Per share information
Earnings per common share $0.89 0.73 22 $2.48 2.11 18
Diluted earnings per common share 0.88 0.72 22 2.45 2.09 17
Dividends declared per common share 0.22 0.12 83 0.66 0.36 83
Average common shares outstanding 5,288.1 5,275.5 - 5,292.7 5,280.2 -
Diluted average common shares outstanding 5,355.6 5,319.2 1 5,355.7 5,325.6 1
NM - Not meaningful
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Nine months
Quarter ended Sept. 30, % ended Sept. 30, %
(in millions) 2012 2011 Change 2012 2011 Change
Wells Fargo net income $4,937 4,055 22 % $ 13,807 11,762 17 %
Other comprehensive income, before tax:
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period 45 (58 ) NM (1) (29 ) (97 )
Reclassification of net gains included in net income - - - (10) - -
Securities available for sale:
Net unrealized gains (losses) arising during the period 2,892 (2,007 ) NM 5,597 (878 ) NM
Reclassification of net gains included in net income (41) (431 ) (90 ) (290) (614 ) (53 )
Derivatives and hedging activities:
Net unrealized gains arising during the period 24 68 (65 ) 63 205 (69 )

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

(89) (141 ) (37 ) (295) (454 ) (35 )
Defined benefit plans adjustment:
Net actuarial gains (losses) arising during the period (1) 1 NM (18) (2 ) 800

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

35 23 52 111 71 56
Other comprehensive income (loss), before tax2,865 (2,545 ) NM 5,157 (1,701 ) NM
Income tax (expense) benefit related to OCI (1,057) 945 NM (1,923) 781 NM
Other comprehensive income (loss), net of tax1,808 (1,600 ) NM 3,234 (920 ) NM
Less: Other comprehensive income (loss) from noncontrolling interests 2 (6 ) NM 6 (10 ) NM
Wells Fargo other comprehensive income (loss), net of tax1,806 (1,594 ) NM 3,228 (910 ) NM
Wells Fargo comprehensive income6,743 2,461 174 17,035 10,852 57
Comprehensive income from noncontrolling interests 95 81 17 270 256 5
Total comprehensive income$6,838 2,542 169 $ 17,305 11,108 56
NM - Not meaningful
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
Nine months ended Sept. 30,
(in millions) 2012 2011
Balance, beginning of period$141,687 127,889
Cumulative effect of fair value election for certain residential mortgage servicing rights 2 -
Balance, beginning of period - adjusted141,689 127,889
Wells Fargo net income 13,807 11,762
Wells Fargo other comprehensive income (loss), net of tax 3,228 (910 )
Common stock issued 2,000 1,014
Common stock repurchased (1) (2,597) (1,762 )
Preferred stock released by ESOP 838 824
Preferred stock issued 742 2,501
Common stock warrants repurchased - (1 )
Common stock dividends (3,500) (1,905 )
Preferred stock dividends and other (665) (625 )
Noncontrolling interests and other, net 517 457
Balance, end of period$156,059 139,244
(1) For the nine months ended September 30, 2012, includes $300 million related to a private forward repurchase transaction entered into in third quarter 2012 that is expected to settle in fourth quarter 2012 for an estimated 9 million shares of common stock.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions, except per share amounts) 2012 2012 2012 2011 2011
Interest income
Trading assets $299 343 377 400 343
Securities available for sale 1,966 2,147 2,088 2,092 2,053
Mortgages held for sale 476 477 459 456 389
Loans held for sale 17 12 9 16 13
Loans 9,016 9,242 9,197 9,275 9,224
Other interest income 151 133 125 139 156
Total interest income 11,925 12,354 12,255 12,378 12,178
Interest expense
Deposits 428 443 457 507 559
Short-term borrowings 19 20 16 14 20
Long-term debt 756 789 830 885 980
Other interest expense 60 65 64 80 77
Total interest expense 1,263 1,317 1,367 1,486 1,636
Net interest income10,662 11,037 10,888 10,892 10,542
Provision for credit losses 1,591 1,800 1,995 2,040 1,811
Net interest income after provision for credit losses 9,071 9,237 8,893 8,852 8,731
Noninterest income
Service charges on deposit accounts 1,210 1,139 1,084 1,091 1,103
Trust and investment fees 2,954 2,898 2,839 2,658 2,786
Card fees 744 704 654 680 1,013
Other fees 1,097 1,134 1,095 1,096 1,085
Mortgage banking 2,807 2,893 2,870 2,364 1,833
Insurance 414 522 519 466 423
Net gains (losses) from trading activities 529 263 640 430 (442 )
Net gains (losses) on debt securities available for sale 3 (61 ) (7 ) 48 300
Net gains from equity investments 164 242 364 61 344
Operating leases 218 120 59 60 284
Other 411 398 631 759 357
Total noninterest income 10,551 10,252 10,748 9,713 9,086
Noninterest expense
Salaries 3,648 3,705 3,601 3,706 3,718
Commission and incentive compensation 2,368 2,354 2,417 2,251 2,088
Employee benefits 1,063 1,049 1,608 1,012 780
Equipment 510 459 557 607 516
Net occupancy 727 698 704 759 751
Core deposit and other intangibles 419 418 419 467 466
FDIC and other deposit assessments 359 333 357 314 332
Other 3,018 3,381 3,330 3,392 3,026
Total noninterest expense 12,112 12,397 12,993 12,508 11,677
Income before income tax expense7,510 7,092 6,648 6,057 6,140
Income tax expense 2,480 2,371 2,328 1,874 1,998
Net income before noncontrolling interests5,030 4,721 4,320 4,183 4,142
Less: Net income from noncontrolling interests 93 99 72 76 87
Wells Fargo net income$4,937 4,622 4,248 4,107 4,055
Less: Preferred stock dividends and other 220 219 226 219 216
Wells Fargo net income applicable to common stock$4,717 4,403 4,022 3,888 3,839
Per share information
Earnings per common share $0.89 0.83 0.76 0.74 0.73
Diluted earnings per common share 0.88 0.82 0.75 0.73 0.72
Dividends declared per common share 0.22 0.22 0.22 0.12 0.12
Average common shares outstanding 5,288.1 5,306.9 5,282.6 5,271.9 5,275.5
Diluted average common shares outstanding 5,355.6 5,369.9 5,337.8 5,317.6 5,319.2
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended September 30,
2012 2011
Interest Interest
AverageYields/income/ Average Yields/ income/
(in millions) balanceratesexpense balance rates expense
Earning assets

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

$91,5610.44%$101 98,909 0.42 % $ 105
Trading assets 39,4413.08304 37,939 3.67 348
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 1,3901.054 9,578 1.02 24
Securities of U.S. states and political subdivisions 35,9254.36392 25,593 4.93 315
Mortgage-backed securities:
Federal agencies 94,3242.88679 72,887 4.41 804
Residential and commercial 33,1246.67553 32,625 7.46 609
Total mortgage-backed securities 127,4483.871,232 105,512 5.36 1,413
Other debt and equity securities 47,6474.07486 38,888 4.69 457

Total securities available for sale

212,4103.982,114 179,571 4.92 2,209
Mortgages held for sale (4) 52,1283.65476 34,634 4.49 389
Loans held for sale (4) 9327.3817 968 5.21 13
Loans:
Commercial:
Commercial and industrial 177,5003.841,711 159,625 4.22 1,697
Real estate mortgage 105,1484.051,070 102,428 3.93 1,015
Real estate construction 17,6875.21232 20,537 6.12 317
Lease financing 12,6086.60208 12,964 7.21 234
Foreign 39,6632.46245 38,175 2.42 233
Total commercial 352,6063.913,466 333,729 4.16 3,496
Consumer:
Real estate 1-4 family first mortgage 234,0204.512,638 223,765 4.83 2,704
Real estate 1-4 family junior lien mortgage 79,7184.26854 89,065 4.37 980
Credit card 23,04012.64732 21,452 12.96 695
Other revolving credit and installment 87,3506.081,334 86,533 6.25 1,364
Total consumer 424,1285.235,558 420,815 5.44 5,743
Total loans (4) 776,7344.639,024 754,544 4.87 9,239
Other 4,3864.6250 4,831 4.18 50
Total earning assets $1,177,5924.09%$12,086 1,111,396 4.43 % $ 12,353
Funding sources
Deposits:
Interest-bearing checking $28,8150.06%$4 43,986 0.07 % $ 8
Market rate and other savings 506,1380.12152 473,409 0.17 198
Savings certificates 58,2061.29188 67,633 1.47 251
Other time deposits 14,3731.4954 12,809 2.02 65
Deposits in foreign offices 71,7910.1630 63,548 0.23 37
Total interest-bearing deposits 679,3230.25428 661,385 0.34 559
Short-term borrowings 51,8570.1722 50,373 0.18 23
Long-term debt 127,4862.37756 139,542 2.81 980
Other liabilities 9,9452.4060 11,170 2.75 77
Total interest-bearing liabilities 868,6110.581,266 862,470 0.76 1,639
Portion of noninterest-bearing funding sources 308,981-- 248,926 - -
Total funding sources $1,177,5920.431,266 1,111,396 0.59 1,639

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

3.66%$10,820 3.84 % $ 10,714
Noninterest-earning assets
Cash and due from banks $15,682 17,101
Goodwill 25,566 25,008
Other 135,500 127,864
Total noninterest-earning assets $176,748 169,973
Noninterest-bearing funding sources
Deposits $267,184 221,182
Other liabilities 66,116 57,464
Total equity 152,429 140,253
Noninterest-bearing funding sources used to fund earning assets (308,981) (248,926 )
Net noninterest-bearing funding sources $176,748 169,973
Total assets$1,354,340 1,281,369
(1) Our average prime rate was 3.25% for the quarters ended September 30, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.43% and 0.30% for the same quarters, respectively.
(2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) Includes taxable-equivalent adjustments of $158 million and $172 million for the quarters ended September 30, 2012 and 2011, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Nine months ended September 30,
2012 2011
Interest Interest
AverageYields/income/ Average Yields/ income/
(in millions) balanceratesexpense balance rates expense
Earning assets

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

$73,0110.47%$257 93,661 0.37 % $ 257
Trading assets 41,9313.291,035 37,788 3.73 1,056
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 3,0411.1225 4,423 1.43 47
Securities of U.S. states and political subdivisions 34,3664.421,139 22,694 5.21 887
Mortgage-backed securities:
Federal agencies 93,5553.242,277 71,408 4.63 2,480
Residential and commercial 33,8396.821,731 30,954 8.64 2,005
Total mortgage-backed securities 127,3944.194,008 102,362 5.84 4,485
Other debt and equity securities 48,9834.091,501 35,709 5.32 1,423
Total securities available for sale 213,7844.166,673 165,188 5.52 6,842
Mortgages held for sale (4) 49,5313.801,412 34,668 4.57 1,188
Loans held for sale (4) 8386.0738 1,100 5.05 42
Loans:
Commercial:
Commercial and industrial 172,0394.075,245 154,469 4.48 5,181
Real estate mortgage 105,5484.243,350 101,230 4.00 3,033
Real estate construction 18,1184.98676 22,255 4.96 826
Lease financing 12,8757.47721 12,961 7.59 737
Foreign 39,9152.52753 36,103 2.62 708
Total commercial 348,4954.1210,745 327,018 4.28 10,485
Consumer:
Real estate 1-4 family first mortgage 231,2564.607,984 226,048 4.93 8,363
Real estate 1-4 family junior lien mortgage 82,1614.282,631 91,881 4.32 2,973
Credit card 22,41412.752,140 21,305 13.04 2,084
Other revolving credit and installment 86,8746.123,980 87,041 6.31 4,107
Total consumer 422,7055.2816,735 426,275 5.49 17,527
Total loans (4) 771,2004.7627,480 753,293 4.97 28,012
Other 4,4924.53153 5,017 4.06 153
Total earning assets $1,154,7874.28%$37,048 1,090,715 4.59 % $ 37,550
Funding sources
Deposits:
Interest-bearing checking $30,4650.06%$14 51,891 0.09 % $ 34
Market rate and other savings 500,8500.12457 457,483 0.19 661
Savings certificates 60,4041.33601 71,343 1.43 762
Other time deposits 13,2801.74173 13,212 2.10 208
Deposits in foreign offices 67,4240.1683 59,662 0.23 103
Total interest-bearing deposits 672,4230.261,328 653,591 0.36 1,768
Short-term borrowings 50,6500.1765 52,805 0.19 77
Long-term debt 127,5612.482,375 145,000 2.85 3,093
Other liabilities 10,0522.50189 10,547 2.99 236
Total interest-bearing liabilities 860,6860.613,957 861,943 0.80 5,174
Portion of noninterest-bearing funding sources 294,101-- 228,772 - -
Total funding sources $1,154,7870.463,957 1,090,715 0.63 5,174

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

3.82%$33,091 3.96 % $ 32,376
Noninterest-earning assets
Cash and due from banks $16,283 17,277
Goodwill 25,343 24,853
Other 129,971 125,132
Total noninterest-earning assets $171,597 167,262
Noninterest-bearing funding sources
Deposits $256,120 204,643
Other liabilities 60,606 55,324
Total equity 148,972 136,067
Noninterest-bearing funding sources used to fund earning assets (294,101) (228,772 )
Net noninterest-bearing funding sources $171,597 167,262

Total assets

$1,326,384 1,257,977
(1) Our average prime rate was 3.25% for the nine months ended September 30, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.47% and 0.29% for the same periods, respectively.
(2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) Includes taxable-equivalent adjustments of $504 million and $505 million for the nine months ended September 30, 2012 and 2011, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
Nine months
Quarter ended Sept. 30, % ended Sept. 30, %
(in millions) 2012 2011 Change 2012 2011 Change
Service charges on deposit accounts $1,210 1,103 10 % $3,433 3,189 8 %
Trust and investment fees:
Trust, investment and IRA fees 1,062 1,019 4 3,127 3,099 1
Commissions and all other fees 1,892 1,767 7 5,564 5,547 -
Total trust and investment fees 2,954 2,786 6 8,691 8,646 1
Card fees 744 1,013 (27 ) 2,102 2,973 (29 )
Other fees:
Cash network fees 121 105 15 359 280 28
Charges and fees on loans 426 438 (3 ) 1,298 1,239 5
Processing and all other fees 550 542 1 1,669 1,578 6
Total other fees 1,097 1,085 1 3,326 3,097 7
Mortgage banking:
Servicing income, net 197 1,030 (81 ) 1,128 2,773 (59 )
Net gains on mortgage loan origination/sales activities 2,610 803 225 7,442 2,695 176
Total mortgage banking 2,807 1,833 53 8,570 5,468 57
Insurance 414 423 (2 ) 1,455 1,494 (3 )
Net gains (losses) from trading activities 529 (442 ) NM 1,432 584 145
Net gains (losses) on debt securities available for sale 3 300 (99 ) (65) 6 NM
Net gains from equity investments 164 344 (52 ) 770 1,421 (46 )
Operating leases 218 284 (23 ) 397 464 (14 )
All other 411 357 15 1,440 1,130 27
Total $10,551 9,086 16 $31,551 28,472 11
NM - Not meaningful
NONINTEREST EXPENSE
Nine months
Quarter ended Sept. 30, % ended Sept. 30, %
(in millions) 2012 2011 Change 2012 2011 Change
Salaries $3,648 3,718 (2 ) % $10,954 10,756 2 %
Commission and incentive compensation 2,368 2,088 13 7,139 6,606 8
Employee benefits 1,063 780 36 3,720 3,336 12
Equipment 510 516 (1 ) 1,526 1,676 (9 )
Net occupancy 727 751 (3 ) 2,129 2,252 (5 )
Core deposit and other intangibles 419 466 (10 ) 1,256 1,413 (11 )
FDIC and other deposit assessments 359 332 8 1,049 952 10
Outside professional services 733 640 15 1,985 1,879 6
Contract services 237 341 (30 ) 776 1,051 (26 )
Foreclosed assets 247 271 (9 ) 840 984 (15 )
Operating losses 281 198 42 1,282 1,098 17
Postage, stationery and supplies 196 240 (18 ) 607 711 (15 )
Outside data processing 234 226 4 683 678 1
Travel and entertainment 208 198 5 628 609 3
Advertising and promotion 170 159 7 436 441 (1 )
Telecommunications 127 128 (1 ) 378 394 (4 )
Insurance 51 94 (46 ) 391 428 (9 )
Operating leases 27 29 (7 ) 82 84 (2 )
All other 507 502 1 1,641 1,537 7
Total $12,112 11,677 4 $37,502 36,885 2
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
Quarter ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
Service charges on deposit accounts $1,210 1,139 1,084 1,091 1,103
Trust and investment fees:
Trust, investment and IRA fees 1,062 1,041 1,024 1,000 1,019
Commissions and all other fees 1,892 1,857 1,815 1,658 1,767
Total trust and investment fees 2,954 2,898 2,839 2,658 2,786
Card fees 744 704 654 680 1,013
Other fees:
Cash network fees 121 120 118 109 105
Charges and fees on loans 426 427 445 402 438
Processing and all other fees 550 587 532 585 542
Total other fees 1,097 1,134 1,095 1,096 1,085
Mortgage banking:
Servicing income, net 197 679 252 493 1,030
Net gains on mortgage loan origination/sales activities 2,610 2,214 2,618 1,871 803
Total mortgage banking 2,807 2,893 2,870 2,364 1,833
Insurance 414 522 519 466 423
Net gains (losses) from trading activities 529 263 640 430 (442 )
Net gains (losses) on debt securities available for sale 3 (61 ) (7 ) 48 300
Net gains from equity investments 164 242 364 61 344
Operating leases 218 120 59 60 284
All other 411 398 631 759 357
Total $10,551 10,252 10,748 9,713 9,086
FIVE QUARTER NONINTEREST EXPENSE
Quarter ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
Salaries $3,648 3,705 3,601 3,706 3,718
Commission and incentive compensation 2,368 2,354 2,417 2,251 2,088
Employee benefits 1,063 1,049 1,608 1,012 780
Equipment 510 459 557 607 516
Net occupancy 727 698 704 759 751
Core deposit and other intangibles 419 418 419 467 466
FDIC and other deposit assessments 359 333 357 314 332
Outside professional services 733 658 594 813 640
Contract services 237 236 303 356 341
Foreclosed assets 247 289 304 370 271
Operating losses 281 524 477 163 198
Postage, stationery and supplies 196 195 216 231 240
Outside data processing 234 233 216 257 226
Travel and entertainment 208 218 202 212 198
Advertising and promotion 170 144 122 166 159
Telecommunications 127 127 124 129 128
Insurance 51 183 157 87 94
Operating leases 27 27 28 28 29
All other 507 547 587 580 502
Total $12,112 12,397 12,993 12,508 11,677
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
Sept. 30, Dec. 31, %
(in millions, except shares) 2012 2011 Change
Assets
Cash and due from banks $16,986 19,440 (13 ) %
Federal funds sold, securities purchased under resale agreements and other short-term investments 100,442 44,367 126
Trading assets 60,592 77,814 (22 )
Securities available for sale 229,350 222,613 3
Mortgages held for sale (includes $46,575 and $44,791 carried at fair value) 50,337 48,357 4
Loans held for sale (includes $172 and $1,176 carried at fair value) 298 1,338 (78 )
Loans (includes $6,188 and $5,916 carried at fair value) 782,630 769,631 2
Allowance for loan losses (17,385) (19,372 ) (10 )
Net loans 765,245 750,259 2
Mortgage servicing rights:
Measured at fair value 10,956 12,603 (13 )
Amortized 1,144 1,408 (19 )
Premises and equipment, net 9,165 9,531 (4 )
Goodwill 25,637 25,115 2
Other assets 104,563 101,022 4
Total assets $1,374,715 1,313,867 5
Liabilities
Noninterest-bearing deposits $268,991 244,003 10
Interest-bearing deposits 683,248 676,067 1
Total deposits 952,239 920,070 3
Short-term borrowings 51,957 49,091 6
Accrued expenses and other liabilities 83,659 77,665 8
Long-term debt (includes $218 and $0 carried at fair value) 130,801 125,354 4
Total liabilities 1,218,656 1,172,180 4
Equity
Wells Fargo stockholders' equity:
Preferred stock 12,283 11,431 7

Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,463,056,853 and 5,358,522,061 shares

9,105 8,931 2
Additional paid-in capital 59,089 55,957 6
Retained earnings 73,994 64,385 15
Cumulative other comprehensive income 6,435 3,207 101
Treasury stock – 173,431,978 shares and 95,910,425 shares (5,186) (2,744 ) 89
Unearned ESOP shares (1,041) (926 ) 12
Total Wells Fargo stockholders' equity 154,679 140,241 10
Noncontrolling interests 1,380 1,446 (5 )
Total equity 156,059 141,687 10
Total liabilities and equity $1,374,715 1,313,867 5
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
Assets
Cash and due from banks $16,986 16,811 17,000 19,440 18,314

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

100,442 74,635 74,143 44,367 89,804
Trading assets 60,592 64,419 75,696 77,814 57,786
Securities available for sale 229,350 226,846 230,266 222,613 207,176
Mortgages held for sale 50,337 50,462 43,449 48,357 42,704
Loans held for sale 298 853 958 1,338 743
Loans 782,630 775,199 766,521 769,631 760,106
Allowance for loan losses (17,385) (18,320 ) (18,852 ) (19,372 ) (20,039 )
Net loans 765,245 756,879 747,669 750,259 740,067
Mortgage servicing rights:
Measured at fair value 10,956 12,081 13,578 12,603 12,372
Amortized 1,144 1,130 1,074 1,408 1,397
Premises and equipment, net 9,165 9,317 9,291 9,531 9,607
Goodwill 25,637 25,406 25,140 25,115 25,038
Other assets 104,563 97,365 95,535 101,022 99,937
Total assets $1,374,715 1,336,204 1,333,799 1,313,867 1,304,945
Liabilities
Noninterest-bearing deposits $268,991 253,999 255,013 244,003 229,863
Interest-bearing deposits 683,248 674,934 675,254 676,067 665,565
Total deposits 952,239 928,933 930,267 920,070 895,428
Short-term borrowings 51,957 56,023 50,964 49,091 50,775
Accrued expenses and other liabilities 83,659 76,827 75,967 77,665 86,284
Long-term debt 130,801 124,984 129,752 125,354 133,214
Total liabilities 1,218,656 1,186,767 1,186,950 1,172,180 1,165,701
Equity
Wells Fargo stockholders' equity:
Preferred stock 12,283 11,694 12,101 11,431 11,566
Common stock 9,105 9,054 9,008 8,931 8,902
Additional paid-in capital 59,089 58,091 57,569 55,957 55,495
Retained earnings 73,994 70,456 67,239 64,385 61,135
Cumulative other comprehensive income 6,435 4,629 4,216 3,207 3,828
Treasury stock (5,186) (4,638 ) (2,958 ) (2,744 ) (2,087 )
Unearned ESOP shares (1,041) (1,216 ) (1,659 ) (926 ) (1,071 )
Total Wells Fargo stockholders' equity 154,679 148,070 145,516 140,241 137,768
Noncontrolling interests 1,380 1,367 1,333 1,446 1,476
Total equity 156,059 149,437 146,849 141,687 139,244
Total liabilities and equity $1,374,715 1,336,204 1,333,799 1,313,867 1,304,945
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
Quarter ended
Sept. 30, 2012 June 30, 2012 Mar. 31, 2012 Dec. 31, 2011 Sept. 30, 2011

Average

Yields/

Average

Yields/

Average

Yields/

Average

Yields/

Average

Yields/
($ in billions)

balance

rates

balance

rates

balance

rates

balance

rates

balance

rates
Earning assets

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

$91.60.44% $ 71.3 0.47 % $ 56.0 0.52 % $ 68.0 0.52 % $ 98.9 0.42 %
Trading assets 39.53.08 42.6 3.27 43.8 3.50 45.5 3.57 37.9 3.67
Securities available for sale (2):
Securities of U.S. Treasury and federal agencies 1.41.05 2.0 1.60 5.8 0.97 8.7 0.99 9.6 1.02
Securities of U.S. states and political subdivisions 35.94.36 34.5 4.39 32.6 4.52 28.0 4.80 25.6 4.93
Mortgage-backed securities:
Federal agencies 94.32.88 95.0 3.37 91.3 3.49 84.3 3.68 72.8 4.41
Residential and commercial 33.16.67 33.9 6.97 34.5 6.80 34.7 7.05 32.6 7.46
Total mortgage-backed securities 127.43.87 128.9 4.32 125.8 4.40 119.0 4.66 105.4 5.36
Other debt and equity securities 47.74.07 48.9 4.39 50.4 3.82 47.3 4.38 38.9 4.69
Total securities available for sale 212.43.98 214.3 4.32 214.6 4.19 203.0 4.46 179.5 4.92
Mortgages held for sale 52.13.65 49.5 3.86 46.9 3.91 44.8 4.07 34.6 4.49
Loans held for sale 0.97.38 0.9 5.48 0.8 5.09 1.1 5.84 1.0 5.21
Loans:
Commercial:
Commercial and industrial 177.53.84 171.8 4.21 166.8 4.18 166.9 4.08 159.6 4.22
Real estate mortgage 105.14.05 105.5 4.60 106.0 4.07 105.2 4.26 102.4 3.93
Real estate construction 17.75.21 17.9 4.96 18.7 4.79 19.6 4.61 20.5 6.12
Lease financing 12.66.60 12.9 6.86 13.1 8.89 12.9 7.41 13.0 7.21
Foreign 39.72.46 38.9 2.57 41.2 2.52 38.8 2.39 38.2 2.42
Total commercial 352.63.91 347.0 4.28 345.8 4.16 343.4 4.10 333.7 4.16
Consumer:
Real estate 1-4 family first mortgage 234.04.51 230.0 4.62 229.7 4.69 229.8 4.74 223.8 4.83
Real estate 1-4 family junior lien mortgage 79.74.26 82.1 4.30 84.7 4.27 87.2 4.34 89.1 4.37
Credit card 23.012.64 22.1 12.70 22.1 12.93 21.9 12.96 21.5 12.96
Other revolving credit and installment 87.46.08 87.0 6.09 86.3 6.19 86.3 6.23 86.5 6.25
Total consumer 424.15.23 421.2 5.29 422.8 5.34 425.2 5.39 420.9 5.44
Total loans 776.74.63 768.2 4.83 768.6 4.81 768.6 4.81 754.6 4.87
Other 4.44.62 4.5 4.56 4.6 4.42 4.7 4.32 4.9 4.18
Total earning assets $1,177.64.09% $ 1,151.3 4.37 % $ 1,135.3 4.39 % $ 1,135.7 4.41 % $ 1,111.4 4.43 %
Funding sources
Deposits:
Interest-bearing checking $28.80.06% $ 30.4 0.07 % $ 32.2 0.05 % $ 35.3 0.06 % $ 44.0 0.07 %
Market rate and other savings 506.10.12 500.3 0.12 496.0 0.12 485.1 0.14 473.4 0.17
Savings certificates 58.21.29 60.4 1.34 62.7 1.36 64.9 1.43 67.6 1.47
Other time deposits 14.41.49 12.8 1.83 12.7 1.93 12.9 1.85 12.8 2.02
Deposits in foreign offices 71.80.16 65.6 0.17 64.8 0.16 67.2 0.20 63.5 0.23
Total interest-bearing deposits 679.30.25 669.5 0.27 668.4 0.27 665.4 0.30 661.3 0.34
Short-term borrowings 51.90.17 51.7 0.19 48.4 0.15 48.7 0.14 50.4 0.18
Long-term debt 127.52.37 127.7 2.48 127.5 2.60 129.4 2.73 139.5 2.81
Other liabilities 9.92.40 10.4 2.48 9.8 2.63 12.2 2.60 11.2 2.75
Total interest-bearing liabilities 868.60.58 859.3 0.62 854.1 0.64 855.7 0.69 862.4 0.76
Portion of noninterest-bearing funding sources 309.0- 292.0 - 281.2 - 280.0 - 249.0 -
Total funding sources $1,177.60.43 $ 1,151.3 0.46 $ 1,135.3 0.48 $ 1,135.7 0.52 $ 1,111.4 0.59

Net interest margin on a taxable-equivalent basis

3.66% 3.91 % 3.91 % 3.89 % 3.84 %
Noninterest-earning assets
Cash and due from banks $15.7 16.2 17.0 17.7 17.1
Goodwill 25.5 25.3 25.1 25.1 25.0
Other 135.5 128.8 125.5 128.2 127.9
Total noninterest-earnings assets $176.7 170.3 167.6 171.0 170.0
Noninterest-bearing funding sources
Deposits $267.2 254.5 246.6 246.7 221.2
Other liabilities 66.1 58.4 57.2 63.5 57.5
Total equity 152.4 149.4 145.0 140.8 140.3

Noninterest-bearing funding sources used to fund earning assets

(309.0) (292.0 ) (281.2 ) (280.0 ) (249.0 )

Net noninterest-bearing funding sources

$176.7 170.3 167.6 171.0 170.0
Total assets$1,354.3 1,321.6 1,302.9 1,306.7 1,281.4
(1) Our average prime rate was 3.25% for quarters ended September 30, June 30 and March 31, 2012, and December 31 and September 30, 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.43%, 0.47%, 0.51%, 0.48% and 0.30% for the same quarters, respectively.
(2) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SECURITIES AVAILABLE FOR SALE
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
Securities of U.S. Treasury and federal agencies $1,869 1,493 4,678 6,968 13,813
Securities of U.S. states and political subdivisions 37,925 37,251 34,237 32,593 26,970
Mortgage-backed securities:
Federal agencies 102,713 101,863 102,665 96,754 84,716
Residential and commercial 36,098 35,646 36,486 35,986 35,159
Total mortgage-backed securities 138,811 137,509 139,151 132,740 119,875
Other debt securities 47,993 47,746 49,047 46,895 42,925
Total debt securities available for sale 226,598 223,999 227,113 219,196 203,583
Marketable equity securities 2,752 2,847 3,153 3,417 3,593
Total securities available for sale $229,350 226,846 230,266 222,613 207,176

FIVE QUARTER LOANS

Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
Commercial:
Commercial and industrial $178,191 177,646 168,546 167,216 164,510
Real estate mortgage 104,611 105,666 105,874 105,975 104,363
Real estate construction 17,710 17,594 18,549 19,382 19,719
Lease financing 12,279 12,729 13,143 13,117 12,852
Foreign (1) 39,741 40,417 39,637 39,760 38,390
Total commercial 352,532 354,052 345,749 345,450 339,834
Consumer:
Real estate 1-4 family first mortgage 240,554 230,263 228,885 228,894 223,758
Real estate 1-4 family junior lien mortgage 78,091 80,881 83,173 85,991 88,264
Credit card 23,692 22,706 21,998 22,836 21,650
Other revolving credit and installment 87,761 87,297 86,716 86,460 86,600
Total consumer 430,098 421,147 420,772 424,181 420,272
Total loans (2) $782,630 775,199 766,521 769,631 760,106
(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 $32.5 billion, $33.8 billion, $35.5 billion, $36.7 billion and $37.2 billion of purchased credit-impaired (PCI) loans at September 30, June 30 and March 31, 2012, and December 31 and September 30, 2011, respectively. See the PCI loans table for detail of PCI loans.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
Nonaccrual loans:
Commercial:
Commercial and industrial $1,404 1,549 1,726 2,142 2,128
Real estate mortgage 3,599 3,832 4,081 4,085 4,429
Real estate construction 1,253 1,421 1,709 1,890 1,915
Lease financing 49 43 45 53 71
Foreign 66 79 38 47 68
Total commercial 6,371 6,924 7,599 8,217 8,611
Consumer:
Real estate 1-4 family first mortgage 11,195 10,368 10,683 10,913 11,024
Real estate 1-4 family junior lien mortgage (1) 3,140 3,091 3,558 1,975 2,035
Other revolving credit and installment 338 195 186 199 230
Total consumer (2) 14,673 13,654 14,427 13,087 13,289
Total nonaccrual loans (3)(4)(5) 21,044 20,578 22,026 21,304 21,900
As a percentage of total loans 2.69% 2.65 2.87 2.77 2.88
Foreclosed assets:
Government insured/guaranteed (6) $1,479 1,465 1,352 1,319 1,336
Non-government insured/guaranteed 2,730 2,842 3,265 3,342 3,608
Total foreclosed assets 4,209 4,307 4,617 4,661 4,944
Total nonperforming assets $25,253 24,885 26,643 25,965 26,844
As a percentage of total loans 3.23% 3.21 3.48 3.37 3.53
(1) Includes $1.7 billion at March 31, 2012, resulting from implementation of the Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties issued on January 31, 2012. This guidance accelerated the timing of placing these loans on nonaccrual to coincide with the timing of placing the related real estate 1-4 family first mortgage loans on nonaccrual.
(2) Includes $1.4 billion at September 30, 2012, resulting from implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series. The updated guidance requires us to place on nonaccrual status those performing loans where the borrower’s obligation to us has been restructured in bankruptcy.
(3) Also includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
(4) Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.
(5) Real estate 1-4 family mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed.
(6) Consistent with regulatory reporting requirements, foreclosed real estate securing government insured/guaranteed loans is classified as nonperforming. Both principal and interest for government insured/guaranteed loans secured by the foreclosed real estate are collectible because the loans are insured by the FHA or guaranteed by the VA.
Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

Sept. 30,

June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
Loans 90 days or more past due and still accruing:
Total (excluding PCI)(1): $22,894 22,872 22,555 22,569 19,639
Less: FHA insured/VA guaranteed (2) 20,320 20,368 19,681 19,240 16,498
Less: Student loans guaranteed under the FFELP (3) 1,082 1,144 1,238 1,281 1,212
Total, not government insured/guaranteed$1,492 1,360 1,636 2,048 1,929
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $49 44 104 153 108
Real estate mortgage 206 184 289 256 207
Real estate construction 41 25 25 89 57
Foreign 2 3 7 6 11
Total commercial 298 256 425 504 383
Consumer:
Real estate 1-4 family first mortgage (4) 627 561 616 781 819
Real estate 1-4 family junior lien mortgage (4)(5) 151 159 156 279 255
Credit card 288 274 319 346 328
Other revolving credit and installment 128 110 120 138 144
Total consumer 1,194 1,104 1,211 1,544 1,546
Total, not government insured/guaranteed$1,492 1,360 1,636 2,048 1,929
(1) The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $6.2 billion, $6.6 billion, $7.1 billion, $8.7 billion and $8.9 billion, at September 30, June 30 and March 31, 2012 and December 31 and September 30, 2011, respectively. These amounts are excluded from the above table as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status.
(2) Represents loans whose repayments are insured by the FHA or guaranteed by the VA.
(3) Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program (FFELP).
(4) Includes mortgages held for sale 90 days or more past due and still accruing.
(5) During first quarter 2012, $43 million of 1-4 family junior lien mortgages were transferred to nonaccrual upon implementation of the Interagency Guidance issued on January 31, 2012.
Wells Fargo & Company and Subsidiaries
PURCHASED CREDIT-IMPAIRED (PCI) LOANS
Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans predominately represent loans acquired from Wachovia that were deemed to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent LTV percentages. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date.
Under the accounting guidance for PCI loans, the excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan, or pool of loans, in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.
Subsequent to acquisition, we regularly evaluate our estimates of cash flows expected to be collected. These evaluations, performed quarterly, require the continued usage of key assumptions and estimates, similar to the initial estimate of fair value. If we have probable decreases in the expected cash flows (other than due to a decrease in rate indices), we charge the provision for credit losses, resulting in an increase to the allowance for loan losses. If we have probable and significant increases in the expected cash flows subsequent to establishing an additional allowance, we first reverse any previously established allowance and then increase interest income over the remaining life of the loan, or pool of loans.
As a result of PCI loan accounting, certain credit-related ratios cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.
Sept. 30, December 31,
(in millions) 2012 2011 2010 2009 2008
Commercial:
Commercial and industrial $246 399 718 1,911 4,580
Real estate mortgage 2,350 3,270 2,855 4,137 5,803
Real estate construction 1,164 1,745 2,949 5,207 6,462
Foreign 1,037 1,353 1,413 1,733 1,859
Total commercial 4,797 6,767 7,935 12,988 18,704
Consumer:
Real estate 1-4 family first mortgage 27,535 29,746 33,245 38,386 39,214
Real estate 1-4 family junior lien mortgage 181 206 250 331 728
Other revolving credit and installment - - - - 151
Total consumer 27,716 29,952 33,495 38,717 40,093
Total PCI loans (carrying value) $32,513 36,719 41,430 51,705 58,797
Wells Fargo & Company and Subsidiaries

CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS

The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference. A nonaccretable difference is established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Substantially all our commercial and industrial, CRE and foreign PCI loans are accounted for as individual loans. Conversely, Pick-a-Pay and other consumer PCI loans have been aggregated into several pools based on common risk characteristics. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Resolutions of loans may include sales to third parties, receipt of payments in settlement with the borrower, or foreclosure of the collateral. Our policy is to remove an individual loan from a pool based on comparing the amount received from its resolution with its contractual amount. Any difference between these amounts is absorbed by the nonaccretable difference. This removal method assumes that the amount received from resolution approximates pool performance expectations. The accretable yield percentage is unaffected by the resolution and any changes in the effective yield for the remaining loans in the pool are addressed by our quarterly cash flow evaluation process for each pool. For loans that are resolved by payment in full, there is no release of the nonaccretable difference for the pool because there is no difference between the amount received at resolution and the contractual amount of the loan. Modified PCI loans are not removed from a pool even if those loans would otherwise be deemed troubled debt restructurings (TDRs). Modified PCI loans that are accounted for individually are considered TDRs, and removed from PCI accounting, if there has been a concession granted in excess of the original nonaccretable difference. The following table provides an analysis of changes in the nonaccretable difference.
Other
(in millions)

Commercial

Pick-a-Pay consumer Total
Balance, December 31, 2008 $ 10,410 26,485 4,069 40,964
Addition of nonaccretable difference due to acquisitions 188 - - 188
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (1,345 ) - - (1,345 )
Loans resolved by sales to third parties (2) (299 ) - (85 ) (384 )
Reclassification to accretable yield for loans with improving credit-related cash flows (3) (1,216 ) (2,383 ) (614 ) (4,213 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4) (6,809 ) (14,976 ) (2,718 ) (24,503 )
Balance, December 31, 20119299,12665210,707
Addition of nonaccretable difference due to acquisitions--- -
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1)(76)--(76)
Loans resolved by sales to third parties (2)(4)--(4)
Reclassification to accretable yield for loans with improving credit-related cash flows (3)(188)(648)(170)(1,006)
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)(104)(1,799)(112)(2,015)
Balance, September 30, 2012$5576,6793707,606
Balance, June 30, 2012$6588,1284409,226
Addition of nonaccretable difference due to acquisitions--- -
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1)(24)--(24)
Loans resolved by sales to third parties (2)(4)--(4)
Reclassification to accretable yield for loans with improving credit-related cash flows (3)(41)(603)(43)(687)
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)(32)(846)(27)(905)
Balance, September 30, 2012$5576,6793707,606

(1) Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases for settlements with borrowers due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations.

(2) Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.
(3) Reclassification of nonaccretable difference to accretable yield for loans with increased cash flow estimates will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans.

(4) Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.

Wells Fargo & Company and Subsidiaries

CHANGES IN ACCRETABLE YIELD RELATED TO PCI LOANS

The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:

Changes in interest rate indices for variable rate PCI loans – Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows;

Changes in prepayment assumptions – Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and

Changes in the expected principal and interest payments over the estimated life – Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.

The change in the accretable yield related to PCI loans is presented in the following table.
(in millions)
Balance, December 31, 2008 $ 10,447
Addition of accretable yield due to acquisitions 128
Accretion into interest income (1) (7,199 )
Accretion into noninterest income due to sales (2) (237 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 4,213
Changes in expected cash flows that do not affect nonaccretable difference (3) 8,609
Balance, December 31, 2011$15,961
Addition of accretable yield due to acquisitions-
Accretion into interest income (1)(1,639)
Accretion into noninterest income due to sales (2)(5)
Reclassification from nonaccretable difference for loans with improving credit-related cash flows1,006
Changes in expected cash flows that do not affect nonaccretable difference (3)3,589
Balance, September 30, 2012$18,912
Balance, June 30, 2012$15,153
Addition of accretable yield due to acquisitions-
Accretion into interest income (1)(495)
Accretion into noninterest income due to sales (2)-
Reclassification from nonaccretable difference for loans with improving credit-related cash flows687
Changes in expected cash flows that do not affect nonaccretable difference (3)3,567
Balance, September 30, 2012$18,912
(1) Includes accretable yield released as a result of settlements with borrowers, which is included in interest income.
(2) Includes accretable yield released as a result of sales to third parties, which is included in noninterest income.
(3) Represents changes in cash flows expected to be collected due to changes in interest rates on variable rate PCI loans, changes in prepayment assumptions and the impact of modifications.

CHANGES IN ALLOWANCE FOR PCI LOAN LOSSES

When it is estimated that the 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

1,668

- 116 1,784
Charge-offs

(1,503

)

- (50 ) (1,553 )
Balance, December 31, 2011165-66231
Provision for losses due to credit deterioration

11

-920
Charge-offs

(78

)

-(13)(91)
Balance, September 30, 2012$98-62160
Balance, June 30, 2012$145-67212
Reversal of provision for losses

(7

)

--(7)
Charge-offs

(40

)

-(5)(45)
Balance, September 30, 2012$98-62160
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)
September 30, 2012
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 $ 22,401 116 % $ 17,833 92 % $ 16,162 84 %
Florida 2,941 114 2,322 86 3,376 95
New Jersey 1,243 91 1,205 86 2,118 79
New York 710 91 679 84 941 80
Texas 310 79 288 73 1,336 64
Other states 5,502 105 4,657 87 9,163 85
Total Pick-a-Pay loans $ 33,107 $ 26,984 $ 33,096
(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 2012.
(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.
Wells Fargo & Company and Subsidiaries
NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS

Sept. 30,

June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
Commercial:

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

$3,836 4,278 5,213 5,695 6,321
Total commercial 3,836 4,278 5,213 5,695 6,321
Consumer:
Pick-a-Pay mortgage (1) 60,080 62,045 63,983 65,652 67,361
Liquidating home equity 4,951 5,199 5,456 5,710 5,982
Legacy Wells Fargo Financial indirect auto 1,104 1,454 1,907 2,455 3,101
Legacy Wells Fargo Financial debt consolidation 15,002 15,511 16,013 16,542 17,186
Education Finance - government guaranteed 12,951 13,823 14,800 15,376 15,611
Legacy Wachovia other PCI loans (1) 732 818 860 896 947
Total consumer 94,820 98,850 103,019 106,631 110,188
Total non-strategic and liquidating loan portfolios $98,656 103,128 108,232 112,326 116,509
(1) Net of purchase accounting adjustments related to PCI loans.
HOME EQUITY PORTFOLIOS (1)
% of loans
two payments Loss rate (annualized)
Outstanding balance or more past due Quarter ended
Sept. 30, Dec. 31, Sept. 30, Dec. 31, Sept. 30, Dec. 31,
(in millions) 2012 2011 2012 2011

2012 (2)

2011
Core portfolio (3)
California $23,665 25,555 2.62% 3.03 4.77 3.42
Florida 9,946 10,870 4.49 4.99 4.75 4.30
New Jersey 7,474 7,973 3.58 3.73 3.22 2.22
Virginia 4,839 5,248 2.06 2.15 2.54 1.31
Pennsylvania 4,738 5,071 2.73 2.82 2.15 1.41
Other 42,317 46,165 2.67 2.79 3.75 2.50
Total 92,979 100,882 2.90 3.13 3.93 2.79
Liquidating portfolio
California 1,747 2,024 4.56 5.50 14.57 11.93
Florida 234 265 5.66 7.02 8.25 9.71
Arizona 101 116 4.12 6.64 13.07 17.54
Texas 83 97 1.31 0.93 4.95 1.57
Minnesota 68 75 2.96 2.83 12.24 8.13
Other 2,718 3,133 3.66 4.13 10.10 7.12
Total 4,951 5,710 4.03 4.73 11.60 9.09
Total core and liquidating portfolios $97,930 106,592 2.95 3.22 4.32 3.13
(1) Consists predominantly of real estate 1-4 family junior lien mortgages and first and junior lines of credit secured by real estate, but excludes PCI loans because their losses are generally covered by PCI accounting adjustment at the date of acquisition, and excludes real estate 1-4 family first lien open-ended line reverse mortgages because they do not have scheduled payments. These reverse mortgage loans are insured by the FHA.
(2) Reflects the implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series, which requires write-down of performing consumer loans restructured in bankruptcy to collateral value.
(3) Includes $1.4 billion at September 30, 2012, and $1.5 billion at December 31, 2011, associated with the Pick-a-Pay portfolio.
Wells Fargo & Company and Subsidiaries
CHANGES IN ALLOWANCE FOR CREDIT LOSSES
Nine months
Quarter ended Sept. 30, ended Sept. 30,
(in millions) 2012 2011 2012 2011
Balance, beginning of period$18,646 21,262 19,668 23,463
Provision for credit losses 1,591 1,811 5,386 5,859
Interest income on certain impaired loans (1) (76) (84 ) (245) (246 )
Loan charge-offs:
Commercial:
Commercial and industrial (285) (349 ) (1,004) (1,182 )
Real estate mortgage (100) (119 ) (296) (483 )
Real estate construction (41) (98 ) (181) (316 )
Lease financing (5) (10 ) (18) (30 )
Foreign (35) (25 ) (81) (121 )
Total commercial (466) (601 ) (1,580) (2,132 )
Consumer:
Real estate 1-4 family first mortgage (719) (900 ) (2,319) (2,979 )
Real estate 1-4 family junior lien mortgage (1,095) (893 ) (2,672) (2,907 )
Credit card (255) (320 ) (842) (1,146 )
Other revolving credit and installment (336) (421 ) (1,027) (1,312 )
Total consumer (2) (2,405) (2,534 ) (6,860) (8,344 )

Total loan charge-offs

(2,871) (3,135 ) (8,440) (10,476 )
Loan recoveries:
Commercial:
Commercial and industrial 154 88 368 313
Real estate mortgage 46 23 115 107
Real estate construction 40 43 96 106
Lease financing 4 7 15 20
Foreign 5 17 26 38
Total commercial 249 178 620 584
Consumer:
Real estate 1-4 family first mortgage 46 79 112 345
Real estate 1-4 family junior lien mortgage 59 51 184 162
Credit card 43 54 148 204
Other revolving credit and installment 116 162 423 522
Total consumer 264 346 867 1,233
Total loan recoveries 513 524 1,487 1,817
Net loan charge-offs (3) (2,358) (2,611 ) (6,953) (8,659 )
Allowances related to business combinations/other - (6 ) (53) (45 )
Balance, end of period$17,803 20,372 17,803 20,372
Components:
Allowance for loan losses $17,385 20,039 17,385 20,039
Allowance for unfunded credit commitments 418 333 418 333
Allowance for credit losses (4) $17,803 20,372 17,803 20,372
Net loan charge-offs (annualized) as a percentage of average total loans (3) 1.21% 1.37 1.20 1.54
Allowance for loan losses as a percentage of total loans (4) 2.22 2.64 2.22 2.64
Allowance for credit losses as a percentage of total loans (4) 2.27 2.68 2.27 2.68

(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 $567 million at September 30, 2012, resulting from implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series, which requires write-down of performing consumer loans restructured in bankruptcy to collateral value.

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

(4) The allowance for credit losses includes $160 million and $302 million at September 30, 2012 and 2011, 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
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
Balance, beginning of quarter$18,646 19,129 19,668 20,372 21,262
Provision for credit losses 1,591 1,800 1,995 2,040 1,811
Interest income on certain impaired loans (1) (76) (82 ) (87 ) (86 ) (84 )
Loan charge-offs:
Commercial:
Commercial and industrial (285) (360 ) (359 ) (416 ) (349 )
Real estate mortgage (100) (114 ) (82 ) (153 ) (119 )
Real estate construction (41) (60 ) (80 ) (35 ) (98 )
Lease financing (5) (5 ) (8 ) (8 ) (10 )
Foreign (35) (17 ) (29 ) (52 ) (25 )
Total commercial (466) (556 ) (558 ) (664 ) (601 )
Consumer:
Real estate 1-4 family first mortgage (719) (772 ) (828 ) (904 ) (900 )
Real estate 1-4 family junior lien mortgage (1,095) (757 ) (820 ) (856 ) (893 )
Credit card (255) (286 ) (301 ) (303 ) (320 )
Other revolving credit and installment (336) (318 ) (373 ) (412 ) (421 )
Total consumer (2) (2,405) (2,133 ) (2,322 ) (2,475 ) (2,534 )
Total loan charge-offs (2,871) (2,689 ) (2,880 ) (3,139 ) (3,135 )
Loan recoveries:
Commercial:
Commercial and industrial 154 111 103 106 88
Real estate mortgage 46 33 36 36 23
Real estate construction 40 43 13 40 43
Lease financing 4 5 6 4 7
Foreign 5 6 15 7 17
Total commercial 249 198 173 193 178
Consumer:
Real estate 1-4 family first mortgage 46 29 37 60 79
Real estate 1-4 family junior lien mortgage 59 68 57 56 51
Credit card 43 46 59 47 54
Other revolving credit and installment 116 148 159 143 162
Total consumer 264 291 312 306 346
Total loan recoveries 513 489 485 499 524
Net loan charge-offs (2,358) (2,200 ) (2,395 ) (2,640 ) (2,611 )
Allowances related to business combinations/other - (1 ) (52 ) (18 ) (6 )
Balance, end of quarter$17,803 18,646 19,129 19,668 20,372
Components:
Allowance for loan losses $17,385 18,320 18,852 19,372 20,039
Allowance for unfunded credit commitments 418 326 277 296 333
Allowance for credit losses $17,803 18,646 19,129 19,668 20,372
Net loan charge-offs (annualized) as a percentage of average total loans 1.21% 1.15 1.25 1.36 1.37
Allowance for loan losses as a percentage of:
Total loans 2.22 2.36 2.46 2.52 2.64
Nonaccrual loans 83 89 86 91 92
Nonaccrual loans and other nonperforming assets 69 74 71 75 75
Allowance for credit losses as a percentage of:
Total loans 2.27 2.41 2.50 2.56 2.68
Nonaccrual loans 85 91 87 92 93
Nonaccrual loans and other nonperforming assets 70 75 72 76 76

(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 $567 million at September 30, 2012, resulting from implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series, which requires write-down of performing consumer loans restructured in bankruptcy to collateral value.

Wells Fargo & Company and Subsidiaries
FIVE QUARTER TIER 1 COMMON EQUITY UNDER BASEL I (1)
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in billions) 2012 2012 2012 2011 2011
Total equity $156.1 149.4 146.8 141.7 139.2
Noncontrolling interests (1.4) (1.3 ) (1.3 ) (1.5 ) (1.5 )
Total Wells Fargo stockholders' equity $154.7 148.1 145.5 140.2 137.7
Adjustments:
Preferred equity (11.3) (10.6 ) (10.6 ) (10.6 ) (10.6 )
Goodwill and intangible assets (other than MSRs) (33.4) (33.5 ) (33.7 ) (34.0 ) (34.4 )
Applicable deferred taxes 3.3 3.5 3.7 3.8 4.0
MSRs over specified limitations (0.7) (0.7 ) (0.9 ) (0.8 ) (0.7 )
Cumulative other comprehensive income (6.4) (4.6 ) (4.1 ) (3.1 ) (3.7 )
Other (0.4) (0.5 ) (0.4 ) (0.4 ) (0.4 )
Tier 1 common equity (A) $105.8 101.7 99.5 95.1 91.9
Total risk-weighted assets (2) (B) $1,052.4 1,008.6 996.8 1,005.6 983.2
Tier 1 common equity to total risk-weighted assets (A)/(B) 10.06% 10.08 9.98 9.46 9.34
(1) Tier 1 common equity is a non-generally accepted accounting principle (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.
(2) 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. The Company’s September 30, 2012, risk-weighted assets are preliminary and reflect the Company’s refinement to its determination of risk weighting of certain unused lending commitments that provide for the ability to issue standby letters of credit. Total estimated on-balance sheet, and total estimated derivative and off-balance sheet risk-weighted assets were $846.5 billion and $205.9 billion at September 30, 2012, respectively.

TIER 1 COMMON EQUITY UNDER BASEL III (ESTIMATED) (1) (2)
Sept. 30,
(in billions) 2012
Tier 1 common equity under Basel I

$

105.8
Adjustments from Basel I to Basel III (3) (5):

Cumulative other comprehensive income related to AFS securities and defined benefit pension plans

6.0
Other 0.3
Total adjustments from Basel I to Basel III 6.3
Threshold deductions, as defined under Basel III (4) (5)

(0.7 )
Tier 1 common equity anticipated under Basel III (C)

$

111.4
Total risk-weighted assets anticipated under Basel III (6) (D)

$

1,390.1

Tier 1 common equity to total risk-weighted assets anticipated under Basel III

(C)/(D) 8.02 %
(1) Tier 1 common equity is a non-generally accepted accounting principle (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.
(2) The Basel III Tier 1 common equity and risk-weighted assets are calculated based on management’s current interpretation of the Basel III capital rules proposed by federal banking agencies in notices of proposed rulemaking announced in June 2012. The proposed rules and interpretations and assumptions used in estimating Basel III calculations are subject to change depending on final promulgations of Basel III capital rules.
(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 Tier 1 common equity under Basel III.
(4) Threshold deductions, as defined under Basel III, include individual and aggregate limitations, as a percentage of Tier 1 common equity, with respect to MSRs, 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) Under current Basel proposals, risk-weighted assets incorporate different classifications of assets, with certain risk weights based on a borrower's credit rating or Wells Fargo's own risk models, along with adjustments to address a combination of credit/counterparty, operational and market risks, and other Basel III elements. The amount of risk-weighted assets anticipated under Basel III is preliminary and subject to change depending on final promulgation of Basel III capital rulemaking and interpretations thereof by regulatory authorities.
Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
Community Wholesale Wealth, Brokerage Consolidated
(income/expense in millions, Banking Banking and Retirement Other (2) Company
average balances in billions) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Quarter ended Sept. 30,
Net interest income (3) $7,247 7,272 3,028 2,897 680 716 (293) (343 ) 10,662 10,542

Provision (reversal of provision) for credit losses

1,627 1,974 (57) (178 ) 30 48 (9) (33 ) 1,591 1,811
Noninterest income 5,863 5,238 2,921 2,238 2,353 2,172 (586) (562 ) 10,551 9,086
Noninterest expense 7,402 6,905 2,908 2,689 2,457 2,371 (655) (288 ) 12,112 11,677

Income (loss) before income tax expense (benefit)

4,081 3,631 3,098 2,624 546 469 (215) (584 ) 7,510 6,140
Income tax expense (benefit) 1,250 1,220 1,103 822 208 178 (81) (222 ) 2,480 1,998

Net income (loss) before noncontrolling interests

2,831 2,411 1,995 1,802 338 291 (134) (362 ) 5,030 4,142

Less: Net income (loss) from noncontrolling interests

91 87 2 (1 ) - 1 - - 93 87
Net income (loss) (4) $2,740 2,324 1,993 1,803 338 290 (134) (362 ) 4,937 4,055
Average loans $485.3 489.7 277.1 253.4 42.5 43.1 (28.2) (31.7 ) 776.7 754.5
Average assets 765.1 751.8 490.7 437.1 163.8 158.4 (65.3) (65.9 ) 1,354.3 1,281.4
Average core deposits 594.5 556.4 225.4 209.3 136.7 133.3 (61.2) (62.2 ) 895.4 836.8
Nine months ended Sept. 30,
Net interest income (3) $21,879 22,237 9,556 8,545 2,079 2,113 (927) (1,024 ) 32,587 31,871

Provision (reversal of provision) for credit losses

5,078 5,951 226 (141 ) 110 150 (28) (101 ) 5,386 5,859
Noninterest income 17,744 15,535 8,543 7,607 6,987 7,022 (1,723) (1,692 ) 31,551 28,472
Noninterest expense 22,807 21,939 9,075 8,239 7,380 7,414 (1,760) (707 ) 37,502 36,885

Income (loss) before income tax expense (benefit)

11,738 9,882 8,798 8,054 1,576 1,571 (862) (1,908 ) 21,250 17,599
Income tax expense (benefit) 3,856 3,020 3,051 2,682 599 594 (327) (725 ) 7,179 5,571

Net income (loss) before noncontrolling interests

7,882 6,862 5,747 5,372 977 977 (535) (1,183 ) 14,071 12,028

Less: Net income from noncontrolling interests

259 238 5 21 - 7 - - 264 266
Net income (loss) (4) $7,623 6,624 5,742 5,351 977 970 (535) (1,183 ) 13,807 11,762
Average loans $485.1 498.3 272.0 243.7 42.5 43.1 (28.4) (31.8 ) 771.2 753.3
Average assets 750.1 752.0 479.0 417.9 162.2 153.3 (64.9) (65.2 ) 1,326.4 1,258.0
Average core deposits 585.3 552.3 222.4 195.0 135.5 128.2 (61.0) (61.6 ) 882.2 813.9
(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. In first quarter 2012, we modified internal funds transfer rates and the allocation of funding. The prior periods have been revised to reflect these changes.
(2) Includes Wachovia integration expenses and the elimination of items that are included in both Community Banking and Wealth, Brokerage and Retirement, largely representing wealth management customers serviced and products sold in the 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
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(income/expense in millions, average balances in billions) 2012 2012 2012 2011 2011
COMMUNITY BANKING
Net interest income (2) $7,247 7,306 7,326 7,420 7,272
Provision for credit losses 1,627 1,573 1,878 2,025 1,974
Noninterest income 5,863 5,786 6,095 5,589 5,238
Noninterest expense 7,402 7,580 7,825 7,313 6,905
Income before income tax expense 4,081 3,939 3,718 3,671 3,631
Income tax expense 1,250 1,313 1,293 1,084 1,220
Net income before noncontrolling interests 2,831 2,626 2,425 2,587 2,411
Less: Net income from noncontrolling interests 91 91 77 78 87
Segment net income $2,740 2,535 2,348 2,509 2,324
Average loans $485.3 483.9 486.1 490.6 489.7
Average assets 765.1 746.6 738.3 753.3 751.8
Average core deposits 594.5 586.1 575.2 568.4 556.4
WHOLESALE BANKING
Net interest income (2) $3,028 3,347 3,181 3,071 2,897
Provision (reversal of provision) for credit losses (57) 188 95 31 (178 )
Noninterest income 2,921 2,770 2,852 2,345 2,238
Noninterest expense 2,908 3,113 3,054 2,938 2,689
Income before income tax expense 3,098 2,816 2,884 2,447 2,624
Income tax expense 1,103 932 1,016 813 822
Net income before noncontrolling interests 1,995 1,884 1,868 1,634 1,802
Less: Net income (loss) from noncontrolling interests 2 3 - (2 ) (1 )
Segment net income $1,993 1,881 1,868 1,636 1,803
Average loans $277.1 270.2 268.6 265.1 253.4
Average assets 490.7 478.4 467.8 458.3 437.1
Average core deposits 225.4 220.9 220.9 223.2 209.3
WEALTH, BROKERAGE AND RETIREMENT
Net interest income (2) $680 698 701 731 716
Provision for credit losses 30 37 43 20 48
Noninterest income 2,353 2,273 2,361 2,311 2,172
Noninterest expense 2,457 2,376 2,547 2,520 2,371
Income before income tax expense 546 558 472 502 469
Income tax expense 208 210 181 191 178
Net income before noncontrolling interests 338 348 291 311 291
Less: Net income (loss) from noncontrolling interests - 5 (5 ) - 1
Segment net income $338 343 296 311 290
Average loans $42.5 42.5 42.5 42.8 43.1
Average assets 163.8 160.9 161.9 160.6 158.4
Average core deposits 136.7 134.2 135.6 135.2 133.3
OTHER (3)
Net interest income (2) $(293) (314 ) (320 ) (330 ) (343 )
Provision (reversal of provision) for credit losses (9) 2 (21 ) (36 ) (33 )
Noninterest income (586) (577 ) (560 ) (532 ) (562 )
Noninterest expense (655) (672 ) (433 ) (263 ) (288 )
Loss before income tax benefit (215) (221 ) (426 ) (563 ) (584 )
Income tax benefit (81) (84 ) (162 ) (214 ) (222 )
Net loss before noncontrolling interests (134) (137 ) (264 ) (349 ) (362 )
Less: Net income from noncontrolling interests - - - - -
Other net loss $(134) (137 ) (264 ) (349 ) (362 )
Average loans $(28.2) (28.4 ) (28.6 ) (29.9 ) (31.7 )
Average assets (65.3) (64.3 ) (65.1 ) (65.5 ) (65.9 )
Average core deposits (61.2) (60.6 ) (61.2 ) (61.9 ) (62.2 )
CONSOLIDATED COMPANY
Net interest income (2) $10,662 11,037 10,888 10,892 10,542
Provision for credit losses 1,591 1,800 1,995 2,040 1,811
Noninterest income 10,551 10,252 10,748 9,713 9,086
Noninterest expense 12,112 12,397 12,993 12,508 11,677
Income before income tax expense 7,510 7,092 6,648 6,057 6,140
Income tax expense 2,480 2,371 2,328 1,874 1,998
Net income before noncontrolling interests 5,030 4,721 4,320 4,183 4,142
Less: Net income from noncontrolling interests 93 99 72 76 87
Wells Fargo net income $4,937 4,622 4,248 4,107 4,055
Average loans $776.7 768.2 768.6 768.6 754.5
Average assets 1,354.3 1,321.6 1,302.9 1,306.7 1,281.4
Average core deposits 895.4 880.6 870.5 864.9 836.8

(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. In first quarter 2012, we modified internal funds transfer rates and the allocation of funding. Prior periods have been revised to reflect these changes.

(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 Wachovia integration expenses and the elimination of items that are included in both Community Banking and Wealth, Brokerage and Retirement, largely representing wealth management customers serviced and products sold in the stores.

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
Quarter ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
MSRs measured using the fair value method:
Fair value, beginning of quarter $12,081 13,578 12,603 12,372 14,778
Servicing from securitizations or asset transfers (1) 1,173 1,139 1,776 1,211 744
Sales - (293 ) - - -
Net additions 1,173 846 1,776 1,211 744
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (2) (1,131) (1,496 ) 147 (483 ) (2,867 )
Servicing and foreclosure costs (3) (350) (146 ) (54 ) (2 ) (33 )
Discount rates (4) - - (344 ) - -
Prepayment estimates and other (5) 54 11 93 21 260
Net changes in valuation model inputs or assumptions (1,427) (1,631 ) (158 ) (464 ) (2,640 )
Other changes in fair value (6) (871) (712 ) (643 ) (516 ) (510 )
Total changes in fair value (2,298) (2,343 ) (801 ) (980 ) (3,150 )
Fair value, end of quarter $10,956 12,081 13,578 12,603 12,372
(1) Quarter ended March 31, 2012, includes $315 million residential MSRs transferred from amortized MSRs that we elected to carry at fair value effective January 1, 2012.
(2) 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).
(3) Includes costs to service and unreimbursed foreclosure costs.
(4) Reflects discount rate assumption change, excluding portion attributable to changes in mortgage interest rates; the first quarter 2012 change reflects increased capital return requirements from market participants.
(5) 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.
(6) Represents changes due to collection/realization of expected cash flows over time.
Quarter ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
Amortized MSRs:
Balance, beginning of quarter $1,130 1,074 1,445 1,437 1,432
Purchases 42 78 14 53 21
Servicing from securitizations or asset transfers (1) 30 34 (327 ) 26 50
Amortization (58) (56 ) (58 ) (71 ) (66 )
Balance, end of quarter 1,144 1,130 1,074 1,445 1,437
Valuation Allowance:
Balance, beginning of quarter - - (37 ) (40 ) (10 )
Reversal of provision (provision) for MSRs in excess of fair value (1) - - 37 3 (30 )
Balance, end of quarter - - - (37 ) (40 )
Amortized MSRs, net $1,144 1,130 1,074 1,408 1,397
Fair value of amortized MSRs:
Beginning of quarter $1,450 1,263 1,756 1,759 1,805
End of quarter 1,399 1,450 1,263 1,756 1,759
(1) Quarter ended March 31, 2012, is net of $350 million ($313 million after valuation allowance) of residential MSRs that we elected to carry at fair value effective January 1, 2012. A cumulative adjustment of $2 million to fair value was recorded in retained earnings at January 1, 2012.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
Quarter ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in millions) 2012 2012 2012 2011 2011
Servicing income, net:
Servicing fees (1) $984 1,070 1,011 876 1,029
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2) (1,427) (1,631 ) (158 ) (464 ) (2,640 )
Other changes in fair value (3) (871) (712 ) (643 ) (516 ) (510 )
Total changes in fair value of MSRs carried at fair value (2,298) (2,343 ) (801 ) (980 ) (3,150 )
Amortization (58) (56 ) (58 ) (71 ) (66 )
Reversal of provision (provision) for MSRs in excess of fair value - - - 3 (30 )
Net derivative gains from economic hedges (4) 1,569 2,008 100 665 3,247
Total servicing income, net $197 679 252 493 1,030
Market-related valuation changes to MSRs, net of hedge results (2)+(4) $142 377 (58 ) 201 607
(1) Includes contractually specified servicing fees, late charges and other ancillary revenues.

(2) Refer to the changes in fair value MSRs table in the FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING table 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.
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in billions) 2012 2012 2012 2011 2011
Managed servicing portfolio (1):
Residential mortgage servicing:
Serviced for others $1,508 1,499 1,483 1,456 1,457
Owned loans serviced 364 357 350 358 349
Subservicing 7 7 7 8 8
Total residential servicing 1,879 1,863 1,840 1,822 1,814
Commercial mortgage servicing:
Serviced for others 405 406 407 398 401
Owned loans serviced 105 106 106 106 104
Subservicing 13 13 13 14 14
Total commercial servicing 523 525 526 518 519
Total managed servicing portfolio $2,402 2,388 2,366 2,340 2,333
Total serviced for others $1,913 1,905 1,890 1,854 1,858
Ratio of MSRs to related loans serviced for others 0.63% 0.69 0.77 0.76 0.74
Weighted-average note rate (mortgage loans serviced for others) 4.87 4.97 5.05 5.14 5.21

(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
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(in billions) 2012 2012 2012 2011 2011
Application data:
Wells Fargo first mortgage quarterly applications $188 208 188 157 169
Refinances as a percentage of applications 72% 69 76 78 74
Wells Fargo first mortgage unclosed pipeline, at quarter end $97 102 79 72 84
Residential Real Estate Originations:
Wells Fargo first mortgage loans:
Retail $61 62 61 58 43
Correspondent/Wholesale 77 68 68 61 45
Other (1) 1 1 - 1 1
Total quarter-to-date $139 131 129 120 89
Total year-to-date $399 260 129 357 237

(1) Consists of home equity loans and lines.

Wells Fargo & Company and Subsidiaries
CHANGES IN MORTGAGE REPURCHASE LIABILITY
Quarter ended Nine months ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
(in millions) 2012 2012 2011 2012 2011
Balance, beginning of period $1,764 1,444 1,188 1,326 1,289
Provision for repurchase losses:
Loan sales 75 72 19 209 74
Change in estimate (1) 387 597 371 1,352 807
Total additions 462 669 390 1,561 881
Losses (193) (349 ) (384 ) (854) (976 )
Balance, end of period $2,033 1,764 1,194 2,033 1,194
(1) Results from such factors as changes in investor demand and mortgage insurer practices, credit deterioration and changes in the financial stability of correspondent lenders.
UNRESOLVED REPURCHASE DEMANDS AND MORTGAGE INSURANCE RESCISSIONS
Government Mortgage
sponsored insurance
($ in millions) entities (1) Private rescissions (2) Total
September 30, 2012
Number of loans6,5251,5138178,855
Original loan balance (3)$1,4893311832,003
June 30, 2012
Number of loans 5,687 913 840 7,440
Original loan balance (3) $ 1,265 213 188 1,666
March 31, 2012
Number of loans 6,333 857 970 8,160
Original loan balance (3) $ 1,398 241 217 1,856
December 31, 2011
Number of loans 7,066 470 1,178 8,714
Original loan balance (3) $ 1,575 167 268 2,010
September 30, 2011
Number of loans 6,577 582 1,508 8,667
Original loan balance (3) $ 1,500 208 314 2,022
(1) Includes repurchase demands of 534 and $111 million, 526 and $103 million, 694 and $131 million, 861 and $161 million, and 878 and $173 million, for September 30, June 30 and March 31, 2012, and December 31 and September 30, 2011, 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. The number of repurchase demands from GSEs that are from mortgage loans originated in 2006 through 2008 totaled 80% at September 30, 2012.
(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 20% of our repurchase demands from GSEs had mortgage insurance rescission as one of the reasons for the repurchase demand. Of all the mortgage insurance rescissions notices received in 2011, approximately 80% have resulted in repurchase demands through September 2012. Not all mortgage insurance rescissions received in 2011 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.

Contacts:

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