Wells Fargo Reports Record Full Year and Quarterly Net Income

Wells Fargo & Company (NYSE:WFC):

  • Continued strong financial results:
    • Full year 2012:
      • Record net income of $18.9 billion, up 19 percent from 2011
      • Record diluted EPS of $3.36, up 19 percent from 2011
      • Revenue of $86.1 billion, up 6 percent from 2011
      • Positive operating leverage (revenue growth of 6 percent exceeded expense growth of 2 percent)
      • Returned more capital to shareholders through a higher common stock dividend (up 83 percent), and common stock repurchases (approximately 120 million shares)
    • Fourth quarter 2012:
      • Record net income of $5.1 billion, up 24 percent from fourth quarter 2011
      • Record diluted EPS of $0.91, up 25 percent from fourth quarter 2011
      • Revenue of $21.9 billion, up 7 percent from fourth quarter 2011
      • Total average core checking and savings deposits up $72.0 billion from fourth quarter 2011
      • Total loans of $799.6 billion, up $29.9 billion from fourth quarter 2011
      • Core loan portfolio up $47.7 billion from fourth quarter 20111
    • Fourth quarter 2012 results2 included:
      • $393 million, or $0.05 per share, in above-average quarterly equity gains3
      • $(644) million, or $(0.09) per share, in operating losses from an incremental accrual to fully reserve for the costs associated with the Independent Foreclosure Review (IFR) settlement and additional remediation-related costs
      • $(250) million, or $(0.03) per share, in noninterest expense for a contribution to the Wells Fargo Foundation
      • $332 million, or $0.06 per share, in lower tax expense due to a benefit associated with the realization for tax purposes of a previously written-down Wachovia life insurance investment
    • Solid credit quality:
      • Net charge-offs of $2.1 billion, or 1.05 percent (annualized) of average loans, including $321 million of net charge-offs (fully covered by loan loss reserves) from the completion of implementation of the OCC guidance4 issued in third quarter 2012
      • Excluding the impact of the OCC guidance, net charge-offs of $1.8 billion or 0.89 percent (annualized) of average loans
      • $250 million (pre-tax) reserve release5 due to continued strong credit performance
    • Maintained strong capital position:
      • Tier 1 common equity6 under Basel I increased $3.3 billion from prior quarter to $109.1 billion, with Tier 1 common equity ratio of 10.12 percent under Basel I at December 31, 2012. Estimated Tier 1 common equity ratio of 8.18 percent under current Basel III capital proposals7
      • Purchased approximately 42 million shares of common stock in fourth quarter 2012 and an additional estimated 6 million shares through a forward repurchase transaction expected to settle in first quarter 2013
1

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

2 Fourth quarter 2012 effective tax rate of 27.4 percent used in the calculation of per share amounts.
3 Fourth quarter 2012 net gains from equity investments of $715 million were $393 million higher than previous seven quarter average net gains of $322 million.
4

Office of the Comptroller of the Currency update to Bank Accounting Advisory Series issued third quarter 2012 (OCC guidance), which requires consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status. See section on Credit Quality, including footnote 9, for additional information regarding the implementation of the OCC guidance and its effect on our credit metrics.

5 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
6

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

7 Estimated based on management’s current interpretation of the Basel III capital rules proposed by federal banking agencies in notices of proposed rulemaking announced in June 2012. The proposed rules and interpretations and assumptions used in estimating Basel III calculations are subject to change depending on final promulgation of Basel III capital rules.
Selected Financial Information
Quarter ended
Dec. 31, Sept. 30, Dec. 31, Year ended Dec. 31,
2012 2012 2011 2012 2011
Earnings
Diluted earnings per common share $0.91 0.88 0.73 3.36 2.82
Wells Fargo net income (in billions) 5.09 4.94 4.11 18.90 15.87
Return on assets (ROA) 1.46

%

1.45 1.25 1.41 1.25
Return on equity (ROE) 13.35 13.38 11.97 12.95 11.93
Asset Quality
Net charge-offs as a % of avg. total loans 1.05 1.21 1.36 1.17 1.49
Allowance as a % of total loans 2.19 2.27 2.56 2.19 2.56
Allowance as a % of annualized net charge-offs 211 190 188 193 174
Other
Revenue (in billions) $21.9 21.2 20.6 86.1 80.9
Efficiency ratio 58.8% 57.1 60.7 58.5 61.0
Average loans (in billions) $787.2 776.7 768.6 775.2 757.1
Average core deposits (in billions) 928.8 895.4 864.9 893.9 826.7
Net interest margin 3.56% 3.66 3.89 3.76 3.94

Wells Fargo & Company (NYSE:WFC) reported diluted earnings per common share of $3.36 for 2012, up 19 percent from $2.82 in 2011. Full year net income was $18.9 billion, compared with $15.9 billion in 2011. For fourth quarter 2012, net income was $5.1 billion, or $0.91 per share, compared with $4.1 billion, or $0.73 per share, for fourth quarter 2011.

“2012 was an outstanding year for Wells Fargo,” said Chairman and CEO John Stumpf. “We saw the continued benefits of our diversified business model and reported record full year and fourth quarter earnings, robust deposit and solid loan growth, and strong performance across our business units. The Company’s success is due to our more than 265,000 team members who remained focused on our customers and on our vision to satisfy all of our customers’ financial needs.

“This time last year, I said we would benefit from the many opportunities we saw for 2012 – and we did just that. From growing revenue, making strategic acquisitions and achieving efficiency improvements, I am extremely pleased with our 2012 performance. We also returned more capital to our shareholders through common stock dividends and common stock repurchases. We are very well positioned for and look forward to 2013, as Wells Fargo continues to work hard to contribute to a growing U.S. economy by doing what we do best: helping customers succeed financially.”

Chief Financial Officer Tim Sloan added, “The Company’s underlying results were driven by solid loan growth, improved credit quality, and continued success in improving efficiency. While our fourth quarter included some noteworthy items, we achieved strong returns on average assets and equity of 1.46 percent and 13.35 percent, respectively. We are very pleased with the Company’s outstanding performance despite the challenges our industry faced during this past year, including continued low interest rates and elevated unemployment. Our balanced business model helped us deliver strong results throughout these challenging times and should provide us the opportunity to continue to deliver value to our shareholders in the coming year.”

Revenue

Revenue for the year was $86.1 billion, up 6 percent from $80.9 billion in 2011. Revenue in the fourth quarter increased 7 percent to $21.9 billion, up $1.3 billion from a year ago. On a linked-quarter basis, revenue growth accelerated 14 percent (annualized), up $735 million. Growth in noninterest income was generated across our diversified businesses and net interest income was relatively flat linked quarter. Businesses generating linked-quarter, double-digit annualized revenue growth included capital finance, capital markets, commercial banking, commercial real estate, corporate banking, credit card, mortgage, and wealth management.

Net Interest Income

Net interest income in the fourth quarter decreased $249 million, or 2 percent, from a year ago, and was down slightly on a linked-quarter basis to $10.6 billion in fourth quarter. Income from our loan portfolios rose slightly from prior quarter, reflecting both organic growth in consumer and commercial loans and the retention of $9.7 billion in high-quality, conforming first real estate mortgages in the fourth quarter. While the available-for-sale (AFS) securities portfolio balance was essentially flat linked-quarter, income continued to be impacted by runoff in federal agency mortgage-backed securities (MBS) and a decision to replace that runoff with shorter duration securities. Interest income from the AFS securities portfolio declined by $69 million. Interest income from the mortgage warehouse was down $63 million in the quarter as the size of the warehouse declined in line with lower origination volume.

The decline in interest income was partially offset by a $49 million decrease in interest expense, reflecting the benefit of continued reductions in deposit and long term funding costs.

On a linked-quarter basis, the Company’s net interest margin declined 10 basis points to 3.56 percent. The primary driver of the decline, approximately 8 basis points, was strong deposit growth of $30 billion in the quarter (12 percent annualized). This inflow of deposits caused cash and short term investments to increase, and while these inflows diluted net interest margin, they were essentially neutral to net interest income. The ongoing repricing of the balance sheet in the current low interest rate environment resulted in approximately 5 basis points of additional net interest margin compression. This was partially offset by the benefit of slightly higher income from variable sources, such as fee income and periodic dividends, which increased 3 basis points on a linked-quarter basis.

Noninterest Income

Noninterest income of $11.3 billion increased $1.6 billion, or 16 percent, from fourth quarter 2011 and increased 28 percent (annualized) from third quarter 2012. The linked-quarter increase reflects growth in service charges, trust and investment fees, and mortgage banking. Noninterest income was also bolstered by above-average equity gains, driven by gains in our private equity businesses.

Mortgage banking noninterest income was $3.1 billion, up $261 million from third quarter 2012, on $125 billion of originations, compared with $139 billion of originations in third quarter. During the fourth quarter, the Company retained on balance sheet 1-4 family conforming first mortgage loans, forgoing approximately $340 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 $379 million for mortgage loan repurchase losses, compared with $462 million in third quarter (included in net gains from mortgage loan origination/sales activities). Net mortgage servicing rights (MSRs) results were $220 million, up from $142 million in third quarter 2012, due primarily to MSRs valuation adjustments made in the third quarter for increased servicing and foreclosure costs. The ratio of MSRs to related loans serviced for others was 67 basis points and the average note rate on the servicing portfolio was 4.77 percent. The unclosed pipeline at December 31, 2012 was $81 billion, compared with $97 billion at September 30, 2012.

The Company had net unrealized securities gains of $11.9 billion at December 31, 2012, compared with $12.4 billion at September 30, 2012. Period-end AFS securities balances increased $5.8 billion.

Noninterest Expense

Noninterest expense increased $388 million, or 3 percent, from fourth quarter 2011 and increased $784 million from third quarter 2012. The increase in noninterest expense from the prior quarter was due primarily to $644 million in operating losses from an incremental accrual to fully reserve for the costs associated with the IFR settlement (discussed below) and additional remediation-related costs, and $250 million for a contribution to the Wells Fargo Foundation. The Company continued to operate within its targeted efficiency ratio range of 55 to 59 percent, with an efficiency ratio of 58.8 percent in fourth quarter 2012, compared with 57.1 percent in third quarter 2012 and 60.7 percent in fourth quarter 2011. The Company is well positioned to remain within this targeted range in 2013.

Independent Foreclosure Review Settlement

On January 7, 2013, the Company announced that, along with nine other mortgage servicers, it entered into settlement agreements with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board (FRB) that would end their IFR programs created by Article VII of an April 2011 Interagency Consent Order and replace it with an accelerated remediation process.

In aggregate, the servicers have agreed to make direct, cash payments of $3.3 billion and to provide $5.2 billion in additional assistance, such as loan modifications, to consumers. Wells Fargo’s portion of the cash settlement is $766 million, which is based on the proportionate share of Wells Fargo-serviced loans in the overall IFR population. Wells Fargo recorded a pre-tax charge of $644 million in fourth quarter 2012 to fully reserve for its cash payment portion of the settlement and additional remediation-related costs. The Company also committed an additional $1.2 billion to foreclosure prevention actions. This commitment did not result in any charge as the Company believes that this commitment is covered through the existing allowance for credit losses and the nonaccretable difference relating to the purchased credit-impaired loan portfolios. With this settlement, the Company will no longer incur costs associated with the independent foreclosure reviews, which had recently approximated $125 million per quarter for external consultants and additional staffing.

“In addition to the benefit to our customers, we are very pleased to have put this legacy issue behind us and to have removed the future costs associated with independent foreclosure reviews,” said Stumpf.

Taxes

Our effective tax rate was 27.4 percent for the fourth quarter 2012, compared with 31.3 percent for the fourth quarter 2011 and 32.5 percent for the year ended December 31, 2012, compared with 31.9 percent for the year ended December 31, 2011. The lower tax rate in the fourth quarter 2012 was primarily attributable to the realization, for tax purposes, of a discrete $332 million benefit resulting from the surrender of previously written-down Wachovia life insurance investment.

Loans

Total loans were $799.6 billion at December 31, 2012, up $16.9 billion from September 30, 2012, including double-digit annualized loan growth in commercial banking, credit card, mortgage, and retail brokerage. Included in the total loan growth was $9.7 billion of 1-4 family conforming first mortgage production retained on the balance sheet. The growth in core loan portfolios more than offset the reduction in the non-strategic/liquidating portfolios, which declined $4.1 billion in the quarter.

Average total loans of $787.2 billion in fourth quarter 2012 grew $18.6 billion, or 2 percent, from fourth quarter 2011. On a linked-quarter basis, average loans increased $10.5 billion, or 5 percent (annualized). Average commercial and commercial real estate loans increased $10.8 billion, or 3 percent, from fourth quarter 2011 and increased $1.6 billion, or 2 percent (annualized), on a linked-quarter basis. Average consumer loans increased $7.8 billion, or 2 percent, from a year ago and increased $8.9 billion, or 8 percent (annualized), on a linked-quarter basis.

December 31, 2012 September 30, 2012
(in millions) CoreLiquidating (1)Total Core Liquidating (1) Total
Commercial $358,0283,170361,198 348,696 3,836 352,532
Consumer 346,98491,392438,376 335,278 94,820 430,098
Total loans $705,01294,562799,574 683,974 98,656 782,630
Change from prior quarter: $21,038(4,094)16,944 11,903 (4,472) 7,431

(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 of $928.8 billion for fourth quarter 2012 increased $63.9 billion, or 7 percent, from fourth quarter 2011. On a linked-quarter basis, average core deposits grew $33.5 billion, or 15 percent (annualized). Average mortgage escrow deposits were $42.2 billion for fourth quarter 2012, up $7.2 billion from fourth quarter 2011 and up $2.2 billion on a linked-quarter basis. Excluding mortgage escrow balances, total average core deposits grew 7 percent from fourth quarter 2011 and 15 percent (annualized) on a linked-quarter basis. Average core checking and savings deposits were 94 percent of average core deposits, up from 93 percent a year ago. The average deposit cost for fourth quarter 2012 was 16 basis points, compared with 18 basis points in third quarter 2012. Average core deposits were 118 percent of average loans, up slightly from third quarter 2012.

Capital

Capital increased in the fourth quarter, with Tier 1 common equity reaching $109.1 billion under Basel I, or 10.12 percent of risk-weighted assets, up from 9.46 percent in fourth quarter 2011 and 9.92 percent in third quarter 2012. Under current Basel III proposals, the Tier I common equity ratio was an estimated 8.18 percent8. In the fourth quarter, the Company purchased approximately 42 million shares of its common stock and an additional estimated 6 million shares through a forward repurchase transaction expected to settle in first quarter 2013, and paid a quarterly common stock dividend of $0.22 per share.

8 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.
Dec. 31, Sept. 30, Dec. 31,
(as a percent of total risk-weighted assets) 2012 2012 2011
Ratios under Basel I (1):

Tier 1 common equity (2)

10.12

%

9.92 9.46
Tier 1 capital 11.75 11.50 11.33
Tier 1 leverage 9.47 9.40 9.03
(1)December 31, 2012, ratios are preliminary.

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

Credit Quality

“Wells Fargo's risk profile continued to improve in 2012,” said Chief Risk Officer Mike Loughlin. “Credit losses were $9.0 billion in 2012, compared with $11.3 billion in 2011—an improvement of $2.3 billion or 20 percent. In addition, year-over-year, our nonperforming assets declined by $1.5 billion or 6 percent, our consumer 30 – 89 days past due was down $1.8 billion or 22 percent, our liquidating portfolios declined by $17.8 billion or 16 percent, and the Pick-a-Pay PCI portfolio continued to perform better than we estimated at the time we acquired Wachovia. Reflecting continued, improved credit performance, we released $250 million in loan loss reserves in the fourth quarter. Absent significant deterioration in the economy, we continue to expect future reserve releases in 2013, though at a lower level than in 2012,” said Loughlin.

Reported credit metrics for the quarter were affected by the completion of implementation of the OCC guidance issued in third quarter 2012. In the fourth quarter, we applied the updated OCC guidance to previously modified loans to consumers who have been discharged in bankruptcy. Fourth quarter adjustments associated with the OCC guidance affected nonperforming loans and net charge-offs as follows9:

  • $394 million reclassification of performing consumer loans to nonaccrual status
  • $321 million increase in net loan charge-offs, fully covered by loan loss reserves
9 Reclassification to nonaccrual loans includes $264 million and the increase in net loan charge offs include $271 million from the completion of implementation of OCC guidance.

Net Loan Charge-offs

Net loan charge-offs improved to $2.1 billion in fourth quarter 2012, or 105 basis points of average loans, compared with $2.6 billion in fourth quarter 2011, or 136 basis points of average loans. On a linked-quarter basis, net loan charge-offs improved by $277 million, or 16 basis points of average loans.

Excluding the $321 million in charge-offs resulting from the adjustments associated with the OCC guidance, net charge-offs in fourth quarter 2012 were $1.8 billion or 89 basis points with commercial losses of $255 million, or 29 basis points, and consumer losses of $1.5 billion or 138 basis points10. Full year 2012 credit losses (excluding losses from the OCC guidance implementation) declined $3.2 billion or 28 percent from 2011.

10 Management believes that the presentation in this news release of information excluding the impact of the OCC guidance provides useful disclosure regarding the credit quality of the Company’s loan portfolios.
Net Loan Charge-Offs
Quarter ended
Dec. 31, 2012Sept. 30, 2012June 30, 2012
As aAs aAs a
Net loan% ofNet loan% ofNet loan% of
charge-

average

charge-

average

charge-

average

($ in millions)offsloans (1) offsloans (1) offsloans (1)
Commercial:
Commercial and industrial $ 209 0.46 % $ 131 0.29 % $ 249 0.58 %
Real estate mortgage 38 0.14 54 0.21 81 0.31
Real estate construction (18 ) (0.43 ) 1 0.03 17 0.40
Lease financing 2 0.04 1 0.03 - -
Foreign 24 0.25 30 0.29 11 0.11
Total commercial2550.292170.243580.42
Consumer:
Real estate 1-4 family first mortgage 649 1.05 673 1.15 743 1.30
Real estate 1-4 family junior lien mortgage 690 3.57 1,036 5.17 689 3.38
Credit card 222 3.71 212 3.67 240 4.37
Other revolving credit and installment 265 1.21 220 1.00 170 0.79
Total consumer1,8261.682,1412.011,8421.76
Total$2,0811.05%$2,3581.21%$2,2001.15%

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

Nonperforming Assets

Nonperforming assets decreased by $744 million in the quarter, which included a $394 million increase in nonperforming loans due to the impact of the OCC guidance, ending the quarter at $24.5 billion, compared with $25.3 billion in third quarter 2012. Nonaccrual loans decreased to $20.5 billion from $21.0 billion in third quarter. Foreclosed assets were $4.0 billion, down from $4.2 billion in third quarter 2012.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
Dec. 31, 2012Sept. 30, 2012June 30, 2012
As aAs aAs a
% of% of% of
TotaltotalTotaltotalTotaltotal
($ in millions)balancesloansbalancesloansbalancesloans
Commercial:
Commercial and industrial $ 1,422 0.76 % $ 1,404 0.79 % $ 1,549 0.87 %
Real estate mortgage 3,322 3.12 3,599 3.44 3,832 3.63
Real estate construction 1,003 5.93 1,253 7.08 1,421 8.08
Lease financing 27 0.22 49 0.40 43 0.34
Foreign 50 0.13 66 0.17 79 0.20
Total commercial5,8241.616,3711.816,9241.96
Consumer:
Real estate 1-4 family first mortgage 11,455 4.58 11,195 4.65 10,368 4.50
Real estate 1-4 family junior lien mortgage 2,922 3.87 3,140 4.02 3,091 3.82
Other revolving credit and installment 285 0.32 338 0.39 195 0.22
Total consumer (1)14,6623.3414,6733.4113,6543.24
Total nonaccrual loans20,4862.5621,0442.6920,5782.65
Foreclosed assets:
GNMA 1,509 1,479 1,465
Non GNMA 2,514 2,730 2,842
Total foreclosed assets4,0234,2094,307
Total nonperforming assets$24,5093.07%$25,2533.23%$24,8853.21%
Change from prior quarter:
Total nonaccrual loans $ (558) $ 466 $ (1,448)
Total nonperforming assets (744) 368 (1,758)
(1)Includes $1.4 billion at September 30, 2012, resulting from implementation of OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status.

Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $1.4 billion at December 31, 2012, compared with $1.5 billion at September 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 $21.8 billion at December 31, 2012, up slightly from $21.4 billion at September 30, 2012.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $17.5 billion at December 31, 2012, down from $17.8 billion at September 30, 2012. The allowance reflected estimated loan losses attributable to Hurricane Sandy. The allowance coverage to total loans was 2.19 percent, compared with 2.27 percent in third quarter 2012. The allowance covered 2.1 times annualized fourth quarter net charge-offs, compared with 1.9 times in the prior quarter. The allowance coverage to nonaccrual loans was 85 percent at December 31, 2012, compared with 85 percent at September 30, 2012. “We believe the allowance was appropriate for losses inherent in the loan portfolio at December 31, 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
Dec. 31, Sept. 30, Dec. 31,
(in millions) 2012 2012 2011
Community Banking $2,869 2,740 2,509
Wholesale Banking 2,032 1,993 1,636
Wealth, Brokerage and Retirement 351 338 311

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 Lending business units.

Selected Financial Information

Quarter ended
Dec. 31, Sept. 30, Dec. 31,
(in millions) 2012 2012 2011
Total revenue $13,782 13,110 13,009
Provision for credit losses 1,757 1,627 2,025
Noninterest expense 8,033 7,402 7,313
Segment net income 2,869 2,740 2,509
(in billions)
Average loans 493.1 485.3 490.6
Average assets 794.2 765.1 753.3
Average core deposits 608.9 594.5 568.4

Community Banking reported net income of $2.9 billion, up $360 million, or 14 percent, from fourth quarter 2011. Revenue increased $773 million, or 6 percent, primarily due to higher mortgage banking revenue and above-average quarterly equity gains, partially offset by lower net interest income. Noninterest expense increased $720 million, or 10 percent, from fourth quarter 2011, largely the result of costs associated with the IFR settlement and a $250 million contribution to the Wells Fargo Foundation, partially mitigated by lower employee benefits costs. The provision for credit losses was $268 million lower than a year ago due to improved portfolio performance. Net income included a benefit of $332 million associated with the realization for tax purposes of a previously written-down Wachovia life insurance investment.

Net income was up $129 million, or 5 percent, from third quarter 2012. Revenue increased $672 million, or 5 percent, from third quarter 2012, primarily due to above-average quarterly equity gains and higher mortgage banking revenue. Noninterest expense increased $631 million, or 9 percent, from third quarter, largely due to costs associated with the IFR settlement and a $250 million contribution to the Wells Fargo Foundation, partially offset by lower employee benefit costs. The provision for credit losses increased $130 million from third quarter, as credit improvement was more than offset by additional charge-offs from the completion of implementation of the OCC guidance issued in third quarter 2012. Net income also included a benefit of $332 million associated with the realization for tax purposes of a previously written-down Wachovia life insurance investment.

Regional Banking

  • Retail banking
    • Retail Bank household cross-sell ratio of 6.05 products per household, up from 5.93 year-over-year11
    • Consumer checking accounts essentially flat year-over-year11
    • Consumer credit card, lines of credit and loan product solutions (sales) in the retail banking stores in 2012 were up more than 50 percent from 2011
    • Partner referrals that resulted in a sale in 2012 were up more than 40 percent from 2011
    • Customers rated their experience with Wells Fargo stores and contact centers at an all-time high, based on fourth quarter survey results
  • Small Business/Business Banking
    • Business checking accounts up a net 3.7 percent year-over-year11
    • Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) in 2012 were up more than 50 percent from 2011
    • $16.0 billion in net new loan commitments to small business customers (primarily with annual revenues less than $20 million) in 2012, up over 30 percent from 2011
    • Wells Fargo approved a record $1.24 billion in SBA 7(a) loans in 2012 and, for the fourth consecutive year, is the No. 1 SBA 7(a) lender in dollar volume in the U.S. (U.S. SBA data, federal fiscal years 2009–2012)
  • Online and Mobile Banking
    • 21.4 million active online customers, up 5 percent year-over-year11
    • 9.4 million active mobile customers, up 33 percent year-over-year11
    • Wells Fargo announced the nationwide expansion of Wells Fargo Mobile® Deposit
    • New Wells Fargo for iPad app which includes access to Wells Fargo accounts, transfers, payments, Wells Fargo Mobile® Deposit and brokerage access and trading
    • Expansion of our Send & Receive Money service which now makes it possible to send money to anyone with an eligible U.S. deposit account using an email address or mobile number

Consumer Lending Group

  • Home Lending
    • Originations of $125 billion, compared with $139 billion in prior quarter
    • Applications of $152 billion, compared with $188 billion in prior quarter
    • Application pipeline of $81 billion at quarter end, compared with $97 billion at September 30, 2012
    • Residential mortgage servicing portfolio of $1.9 trillion
  • Other Consumer Lending
    • Credit card penetration in retail banking households rose to 33.1 percent11, up from 32.1 percent in prior quarter and 29.2 percent in prior year
    • Auto originations of $5.4 billion, down 15 percent from prior quarter and up 8 percent from prior year

11 Data as of November 2012. Comparisons are November 2012 compared with November 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
Dec. 31, Sept. 30, Dec. 31,
(in millions) 2012 2012 2011
Total revenue $5,993 5,949 5,416
Provision (reversal of provision) for credit losses 60 (57) 31
Noninterest expense 3,007 2,908 2,938
Segment net income 2,032 1,993 1,636
(in billions)
Average loans 279.2 277.1 265.1
Average assets 489.7 490.7 458.3
Average core deposits 240.7 225.4 223.2

Wholesale Banking reported net income of $2.0 billion, up $396 million, or 24 percent, from fourth quarter 2011 led by higher pre-tax pre-provision profit (PTPP)12 and lower net charge-offs. Revenue increased $577 million, or 11 percent, from fourth quarter 2011 driven by broad-based business growth, including acquisitions and solid loan and deposit growth. Noninterest expense increased $69 million, or 2 percent, from fourth 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 $71 million in net charge-offs, the provision for credit losses increased $29 million from fourth quarter 2011, due to a lower level of reserve release. The fourth quarter 2012 provision included a $50 million reserve release, compared with a $150 million reserve release a year ago.

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

Net income was up $39 million, or 2 percent, from third quarter 2012. Revenue of $6.0 billion increased $44 million, or 1 percent, from third quarter 2012 as strong growth across many businesses, including capital finance, commercial banking, commercial real estate, corporate banking and investment banking was partially offset by lower sales and trading, equity funds gains and lower PCI resolutions. The Wholesale Banking businesses continued to drive higher loan growth and meet customer demand with average loan balances rising to $279 billion in the fourth quarter. Noninterest expense increased $99 million, or 3 percent, from third quarter 2012 on higher personnel expense and operating losses. The provision for credit losses was $60 million in fourth quarter, compared with a net reversal of $57 million in the third quarter. This was due to both increased net loan charge-offs and a decrease in reserve release.

  • Five percent average loan and 7 percent average asset growth in fourth quarter 2012 compared to fourth quarter 2011. The growth came from nearly all portfolios, including asset backed finance, capital finance, commercial banking, commercial real estate, corporate banking and government and institutional banking
  • Ten consecutive quarters of average loan growth in Commercial Banking
  • Fourth quarter 2012 average core deposits, up 8 percent from fourth quarter 2011
  • Investment Banking full year revenue from commercial and corporate customers increased 30 percent from 2011 full year due to attractive capital markets conditions and continued momentum in cross selling
  • Wholesale businesses established a branch presence in Toronto, Canada in the quarter, expanding capabilities
  • Wells Fargo Asset Management announced that it had acquired a minority ownership stake in privately held The Rock Creek Group, a Washington, D.C.-based fund of hedge funds firm with approximately $7 billion in assets under management
  • Cross-sell of 6.8 products per relationship, up from 6.7 in prior quarter13

13 As of September 2012.

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

Selected Financial Information

Quarter ended
Dec. 31, Sept. 30, Dec. 31,
(in millions) 2012 2012 2011
Total revenue $3,094 3,033 3,042
Provision for credit losses 15 30 20
Noninterest expense 2,513 2,457 2,520
Segment net income 351 338 311
(in billions)
Average loans 43.3 42.5 42.8
Average assets 171.7 163.8 160.6
Average core deposits 143.4 136.7 135.2

Wealth, Brokerage and Retirement reported net income of $351 million, up 13 percent from fourth quarter 2011. Revenue was $3.1 billion, up 2 percent from fourth quarter 2011. Fourth quarter 2011 results included a $153 million gain on the sale of the H.D. Vest business. Excluding the gain on the sale of H.D. Vest and $46 million in lower gains on deferred compensation plan investments (offset in compensation expense), revenue was up 9 percent, predominantly due to higher asset-based fees and brokerage transaction revenue, partially offset by lower net interest income. Total provision for credit losses decreased $5 million from fourth quarter 2011. The provision in the fourth quarter 2012 and fourth quarter 2011 included an $8 million and a $12 million credit reserve release, respectively. Noninterest expense was flat compared with the fourth quarter 2011. Apart from a $41 million decrease in deferred compensation plan expense (offset in trading income), noninterest expense increased 1 percent, primarily due to higher broker commissions.

Net income was up 4 percent from third quarter 2012. Revenue was up 2 percent from third quarter 2012. Excluding $32 million in lower gains on deferred compensation plan investments, revenue was up 3 percent largely due to higher asset-based fees. Total provision for credit losses decreased $15 million from third quarter 2012; the provision in the third quarter 2012 included a $10 million credit reserve release. Noninterest expense increased 2 percent from the third quarter 2012 driven by higher personnel expense, primarily increased incentives, partially offset by lower deferred compensation expense and reduced non-personnel costs. Apart from a $34 million decrease in deferred compensation, noninterest expense increased 4 percent.

Retail Brokerage

  • Client assets of $1.2 trillion, up 8 percent from prior year
  • Managed account assets increased $50 billion, or 20 percent, from prior year driven by strong net flows and market performance
  • Strong deposit growth, with average balances up 9 percent from prior year
  • Wells Fargo launched an iPad app in December 2012, which, among other features, enables Wells Fargo Advisors clients to monitor accounts, get real-time quotes and execute trades; trading capability was also added for mobile brokerage clients via the Wells Fargo Mobile App and wf.com

Wealth Management

  • Client assets of $204 billion, up 3 percent from prior year

Retirement

  • Institutional Retirement plan assets of $266 billion, up 13 percent from prior year
  • IRA assets of $297 billion, up 11 percent from prior year

Conference Call

The Company will host a live conference call on Friday, January 11, at 7 a.m. PST (10 a.m. EST). To access the call, please dial 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings and http://us.meeting-stream.com/wellsfargocompany_011113.

A replay of the conference call will be available beginning at approximately noon PST (3 p.m. EST) on January 11 through Friday, January 18. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #69450441. 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; and (iii) our estimate regarding our Tier 1 common equity ratio under proposed Basel III capital rules as of December 31, 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 more than 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2012 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

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

Summary Information

Summary Financial Data 18-19

Income

Consolidated Statement of Income 20
Consolidated Statement of Comprehensive Income 21
Condensed Consolidated Statement of Changes in Total Equity 21
Five Quarter Consolidated Statement of Income 22
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 23-24
Noninterest Income and Noninterest Expense 25-26

Balance Sheet

Consolidated Balance Sheet 27-28
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 29
Securities Available for Sale 30

Loans

Loans 30
Nonperforming Assets 31
Loans 90 Days or More Past Due and Still Accruing 32
Purchased Credit-Impaired Loans 33-35
Pick-A-Pay Portfolio 36
Non-Strategic and Liquidating Loan Portfolios 37
Home Equity Portfolios 37
Changes in Allowance for Credit Losses 38-39

Equity

Tier 1 Common Equity 40

Operating Segments

Operating Segment Results 41-42

Other

Mortgage Servicing and other related data 43-45
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
Quarter ended December 31, % Year ended Dec. 31, %
($ in millions, except per share amounts) 2012 2011 Change 2012 2011 Change
For the Period
Wells Fargo net income $5,090 4,107 24 % $18,897 15,869 19 %
Wells Fargo net income applicable to common stock 4,857 3,888 25 17,999 15,025 20
Diluted earnings per common share 0.91 0.73 25 3.36 2.82 19
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.46% 1.25 17 1.41 1.25 13

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

13.35 11.97 12 12.95 11.93 9
Efficiency ratio (1) 58.8 60.7 (3 ) 58.5 61.0 (4 )
Total revenue $21,948 20,605 7 $86,086 80,948 6
Pre-tax pre-provision profit (PTPP) (2) 9,052 8,097 12 35,688 31,555 13
Dividends declared per common share 0.22 0.12 83 0.88 0.48 83
Average common shares outstanding 5,272.4 5,271.9 - 5,287.6 5,278.1 -
Diluted average common shares outstanding 5,338.7 5,317.6 - 5,351.5 5,323.4 1
Average loans $787,210 768,563 2 $775,224 757,144 2
Average assets 1,387,056 1,306,728 6 1,341,635 1,270,265 6
Average core deposits (3) 928,824 864,928 7 893,937 826,735 8
Average retail core deposits (4) 646,145 606,810 6 629,320 595,851 6
Net interest margin 3.56% 3.89 (8 ) 3.76 3.94 (5 )
At Period End
Securities available for sale $235,199 222,613 6 $235,199 222,613 6
Loans 799,574 769,631 4 799,574 769,631 4
Allowance for loan losses 17,060 19,372 (12 ) 17,060 19,372 (12 )
Goodwill 25,637 25,115 2 25,637 25,115 2
Assets 1,422,968 1,313,867 8 1,422,968 1,313,867 8
Core deposits (3) 945,749 872,629 8 945,749 872,629 8
Wells Fargo stockholders' equity 157,554 140,241 12 157,554 140,241 12
Total equity 158,911 141,687 12 158,911 141,687 12
Capital ratios:
Total equity to assets 11.17% 10.78 4 11.17 10.78 4
Risk-based capital (5):
Tier 1 capital 11.75 11.33 4 11.75 11.33 4
Total capital 14.63 14.76 (1 ) 14.63 14.76 (1 )
Tier 1 leverage (5) 9.47 9.03 5 9.47 9.03 5
Tier 1 common equity (5)(6) 10.12 9.46 7 10.12 9.46 7
Common shares outstanding 5,266.3 5,262.6 - 5,266.3 5,262.6 -
Book value per common share $27.64 24.64 12 $27.64 24.64 12
Common stock price:
High 36.34 27.97 30 36.60 34.25 7
Low 31.25 22.61 38 27.94 22.58 24
Period end 34.18 27.56 24 34.18 27.56 24
Team members (active, full-time equivalent) 269,200 264,200 2 269,200 264,200 2
(1)The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2)Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.
(3)Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4)Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5)The December 31, 2012, ratios are preliminary.
(6)See the "Five Quarter Tier 1 Common Equity Under Basel I" table for additional information.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
($ in millions, except per share amounts) 2012 2012 2012 2012 2011
For the Quarter
Wells Fargo net income $5,090 4,937 4,622 4,248 4,107
Wells Fargo net income applicable to common stock 4,857 4,717 4,403 4,022 3,888
Diluted earnings per common share 0.91 0.88 0.82 0.75 0.73
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.46% 1.45 1.41 1.31 1.25

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

13.35 13.38 12.86 12.14 11.97
Efficiency ratio (1) 58.8 57.1 58.2 60.1 60.7
Total revenue $21,948 21,213 21,289 21,636 20,605
Pre-tax pre-provision profit (PTPP) (2) 9,052 9,101 8,892 8,643 8,097
Dividends declared per common share 0.22 0.22 0.22 0.22 0.12
Average common shares outstanding 5,272.4 5,288.1 5,306.9 5,282.6 5,271.9
Diluted average common shares outstanding 5,338.7 5,355.6 5,369.9 5,337.8 5,317.6
Average loans $787,210 776,734 768,223 768,582 768,563
Average assets 1,387,056 1,354,340 1,321,584 1,302,921 1,306,728
Average core deposits (3) 928,824 895,374 880,636 870,516 864,928
Average retail core deposits (4) 646,145 630,053 624,329 616,569 606,810
Net interest margin 3.56% 3.66 3.91 3.91 3.89
At Quarter End
Securities available for sale $235,199 229,350 226,846 230,266 222,613
Loans 799,574 782,630 775,199 766,521 769,631
Allowance for loan losses 17,060 17,385 18,320 18,852 19,372
Goodwill 25,637 25,637 25,406 25,140 25,115
Assets 1,422,968 1,374,715 1,336,204 1,333,799 1,313,867
Core deposits (3) 945,749 901,075 882,137 888,711 872,629
Wells Fargo stockholders' equity 157,554 154,679 148,070 145,516 140,241
Total equity 158,911 156,059 149,437 146,849 141,687
Capital ratios:
Total equity to assets 11.17% 11.35 11.18 11.01 10.78
Risk-based capital (5):
Tier 1 capital 11.75 11.50 11.69 11.78 11.33
Total capital 14.63 14.51 14.85 15.13 14.76
Tier 1 leverage (5) 9.47 9.40 9.25 9.35 9.03
Tier 1 common equity (5)(6) 10.12 9.92 10.08 9.98 9.46
Common shares outstanding 5,266.3 5,289.6 5,275.7 5,301.5 5,262.6
Book value per common share $27.64 27.10 26.06 25.45 24.64
Common stock price:
High 36.34 36.60 34.59 34.59 27.97
Low 31.25 32.62 29.80 27.94 22.61
Period end 34.18 34.53 33.44 34.14 27.56
Team members (active, full-time equivalent) 269,200 267,000 264,400 264,900 264,200
(1)The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2)Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.
(3)Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4)Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5)The December 31, 2012, ratios are preliminary.
(6)See the "Five Quarter Tier 1 Common Equity under Basel I" table for additional information.
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
Quarter ended Dec. 31, % Year ended Dec. 31, %
(in millions, except per share amounts) 2012 2011 Change 2012 2011 Change
Interest income
Trading assets $339 400 (15 ) % $1,358 1,440 (6 ) %
Securities available for sale 1,897 2,092 (9 ) 8,098 8,475 (4 )
Mortgages held for sale 413 456 (9 ) 1,825 1,644 11
Loans held for sale 3 16 (81 ) 41 58 (29 )
Loans 9,027 9,275 (3 ) 36,482 37,247 (2 )
Other interest income 178 139 28 587 548 7
Total interest income 11,857 12,378 (4 ) 48,391 49,412 (2 )
Interest expense
Deposits 399 507 (21 ) 1,727 2,275 (24 )
Short-term borrowings 24 14 71 79 80 (1 )
Long-term debt 735 885 (17 ) 3,110 3,978 (22 )
Other interest expense 56 80 (30 ) 245 316 (22 )
Total interest expense 1,214 1,486 (18 ) 5,161 6,649 (22 )
Net interest income10,643 10,892 (2 ) 43,230 42,763 1

Provision for credit losses

1,831 2,040 (10 ) 7,217 7,899 (9 )
Net interest income after provision for credit losses 8,812 8,852 - 36,013 34,864 3
Noninterest income

Service charges on deposit accounts

1,250 1,091 15 4,683 4,280 9
Trust and investment fees 3,199 2,658 20 11,890 11,304 5
Card fees 736 680 8 2,838 3,653 (22 )
Other fees 1,193 1,096 9 4,519 4,193 8
Mortgage banking 3,068 2,364 30 11,638 7,832 49
Insurance 395 466 (15 ) 1,850 1,960 (6 )
Net gains from trading activities 275 430 (36 ) 1,707 1,014 68
Net gains (losses) on debt securities available for sale (63) 48 NM (128) 54 NM
Net gains from equity investments 715 61 NM 1,485 1,482 -
Operating leases 170 60 183 567 524 8
Other 367 759 (52 ) 1,807 1,889 (4 )
Total noninterest income 11,305 9,713 16 42,856 38,185 12
Noninterest expense
Salaries 3,735 3,706 1 14,689 14,462 2
Commission and incentive compensation 2,365 2,251 5 9,504 8,857 7
Employee benefits 891 1,012 (12 ) 4,611 4,348 6
Equipment 542 607 (11 ) 2,068 2,283 (9 )
Net occupancy 728 759 (4 ) 2,857 3,011 (5 )
Core deposit and other intangibles 418 467 (10 ) 1,674 1,880 (11 )
FDIC and other deposit assessments 307 314 (2 ) 1,356 1,266 7
Other 3,910 3,392 15 13,639 13,286 3
Total noninterest expense 12,896 12,508 3 50,398 49,393 2
Income before income tax expense7,221 6,057 19 28,471 23,656 20
Income tax expense 1,924 1,874 3 9,103 7,445 22
Net income before noncontrolling interests5,297 4,183 27 19,368 16,211 19
Less: Net income from noncontrolling interests 207 76 172 471 342 38
Wells Fargo net income$5,090 4,107 24 $18,897 15,869 19
Less: Preferred stock dividends and other 233 219 6 898 844 6
Wells Fargo net income applicable to common stock$4,857 3,888 25 $17,999 15,025 20
Per share information
Earnings per common share $0.92 0.74 24 $3.40 2.85 19
Diluted earnings per common share 0.91 0.73 25 3.36 2.82 19
Dividends declared per common share 0.22 0.12 83 0.88 0.48 83
Average common shares outstanding 5,272.4 5,271.9 - 5,287.6 5,278.1 -
Diluted average common shares outstanding 5,338.7 5,317.6 - 5,351.5 5,323.4 1
NM - Not meaningful
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarter ended Dec. 31, % Year ended Dec. 31, %
(in millions) 2012 2011 Change 2012 2011 Change
Wells Fargo net income $5,090 4,107 24 % $ 18,897 15,869 19 %
Other comprehensive income, before tax:
Foreign currency translation adjustments:
Net unrealized losses arising during the period (5) (8 ) (38 ) (6) (37 ) (84 )
Reclassification of net gains included in net income - - - (10) - -
Securities available for sale:
Net unrealized gains (losses) arising during the period (454) 290 NM 5,143 (588 ) NM
Reclassification of net losses (gains) included in net income 19 (82 ) NM (271) (696 ) (61 )
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period (11) (15 ) (27 ) 52 190 (73 )

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

(93) (117 ) (21 ) (388) (571 ) (32 )
Defined benefit plans adjustment:
Net actuarial losses arising during the period (757) (1,077 ) (30 ) (775) (1,079 ) (28 )

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

33 28 18 144 99 45
Other comprehensive income (loss), before tax(1,268) (981 ) 29 3,889 (2,682 ) NM
Income tax (expense) benefit related to OCI 481 358 34 (1,442) 1,139 NM
Other comprehensive income (loss), net of tax(787) (623 ) 26 2,447 (1,543 ) NM
Less: Other comprehensive income (loss) from noncontrolling interests (2) (2 ) - 4 (12 ) NM
Wells Fargo other comprehensive income (loss), net of tax(785) (621 ) 26 2,443 (1,531 ) NM
Wells Fargo comprehensive income4,305 3,486 23 21,340 14,338 49
Comprehensive income from noncontrolling interests 205 74 177 475 330 44
Total comprehensive income$4,510 3,560 27 $ 21,815 14,668 49
NM - Not meaningful
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
Year ended December 31,
(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 18,897 15,869
Wells Fargo other comprehensive income (loss), net of tax 2,443 (1,531 )
Common stock issued 2,488 1,296
Common stock repurchased (1) (3,918) (2,416 )
Preferred stock released by ESOP 888 959
Preferred stock issued 1,377 2,501
Common stock warrants repurchased (1) (2 )
Common stock dividends (4,658) (2,537 )
Preferred stock dividends and other (898) (844 )
Noncontrolling interests and other, net 604 503
Balance, end of period$158,911 141,687
(1)For the year ended December 31, 2012, includes $200 million related to a private forward repurchase transaction entered into in fourth quarter 2012 that is expected to settle in first quarter 2013 for an estimated 6 million shares of common stock.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions, except per share amounts) 2012 2012 2012 2012 2011
Interest income
Trading assets $339 299 343 377 400
Securities available for sale 1,897 1,966 2,147 2,088 2,092
Mortgages held for sale 413 476 477 459 456
Loans held for sale 3 17 12 9 16
Loans 9,027 9,016 9,242 9,197 9,275
Other interest income 178 151 133 125 139
Total interest income 11,857 11,925 12,354 12,255 12,378
Interest expense
Deposits 399 428 443 457 507
Short-term borrowings 24 19 20 16 14
Long-term debt 735 756 789 830 885
Other interest expense 56 60 65 64 80
Total interest expense 1,214 1,263 1,317 1,367 1,486
Net interest income10,643 10,662 11,037 10,888 10,892
Provision for credit losses 1,831 1,591 1,800 1,995 2,040
Net interest income after provision for credit losses 8,812 9,071 9,237 8,893 8,852
Noninterest income
Service charges on deposit accounts 1,250 1,210 1,139 1,084 1,091
Trust and investment fees 3,199 2,954 2,898 2,839 2,658
Card fees 736 744 704 654 680
Other fees 1,193 1,097 1,134 1,095 1,096
Mortgage banking 3,068 2,807 2,893 2,870 2,364
Insurance 395 414 522 519 466
Net gains from trading activities 275 529 263 640 430
Net gains (losses) on debt securities available for sale (63) 3 (61 ) (7 ) 48
Net gains from equity investments 715 164 242 364 61
Operating leases 170 218 120 59 60
Other 367 411 398 631 759
Total noninterest income 11,305 10,551 10,252 10,748 9,713
Noninterest expense
Salaries 3,735 3,648 3,705 3,601 3,706
Commission and incentive compensation 2,365 2,368 2,354 2,417 2,251
Employee benefits 891 1,063 1,049 1,608 1,012
Equipment 542 510 459 557 607
Net occupancy 728 727 698 704 759
Core deposit and other intangibles 418 419 418 419 467
FDIC and other deposit assessments 307 359 333 357 314
Other 3,910 3,018 3,381 3,330 3,392
Total noninterest expense 12,896 12,112 12,397 12,993 12,508
Income before income tax expense7,221 7,510 7,092 6,648 6,057
Income tax expense 1,924 2,480 2,371 2,328 1,874
Net income before noncontrolling interests5,297 5,030 4,721 4,320 4,183
Less: Net income from noncontrolling interests 207 93 99 72 76
Wells Fargo net income$5,090 4,937 4,622 4,248 4,107
Less: Preferred stock dividends and other 233 220 219 226 219
Wells Fargo net income applicable to common stock$4,857 4,717 4,403 4,022 3,888
Per share information
Earnings per common share $0.92 0.89 0.83 0.76 0.74
Diluted earnings per common share 0.91 0.88 0.82 0.75 0.73
Dividends declared per common share 0.22 0.22 0.22 0.22 0.12
Average common shares outstanding 5,272.4 5,288.1 5,306.9 5,282.6 5,271.9
Diluted average common shares outstanding 5,338.7 5,355.6 5,369.9 5,337.8 5,317.6
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended December 31,
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

$117,0470.41%$121 67,968 0.52 % $ 89
Trading assets 42,0053.28345 45,521 3.57 407
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 5,2811.6422 8,708 0.99 22
Securities of U.S. states and political subdivisions 36,3914.64422 28,015 4.80 336
Mortgage-backed securities:
Federal agencies 90,8982.71617 84,332 3.68 776
Residential and commercial 32,6696.53533 34,717 7.05 612
Total mortgage-backed securities 123,5673.721,150 119,049 4.66 1,388
Other debt and equity securities 50,0253.91490 47,278 4.38 518
Total securities available for sale 215,2643.872,084 203,050 4.46 2,264
Mortgages held for sale (4) 47,2413.50413 44,842 4.07 456
Loans held for sale (4) 1359.033 1,118 5.84 16
Loans:
Commercial:
Commercial and industrial 179,4933.851,736 166,920 4.08 1,713
Real estate mortgage 105,1074.021,061 105,219 4.26 1,130
Real estate construction 17,5024.97218 19,624 4.61 228
Lease financing 12,4616.43201 12,893 7.41 239
Foreign 39,6652.32231 38,740 2.39 233
Total commercial 354,2283.873,447 343,396 4.10 3,543
Consumer:
Real estate 1-4 family first mortgage 244,6344.392,686 229,746 4.74 2,727
Real estate 1-4 family junior lien mortgage 76,9084.28826 87,212 4.34 953
Credit card 23,83912.43745 21,933 12.96 711
Other revolving credit and installment 87,6016.051,333 86,276 6.23 1,356
Total consumer 432,9825.155,590 425,167 5.39 5,747
Total loans (4) 787,2104.589,037 768,563 4.81 9,290
Other 4,2805.2156 4,671 4.32 50
Total earning assets $1,213,1823.96%$12,059 1,135,733 4.41 % $ 12,572
Funding sources
Deposits:
Interest-bearing checking $30,8580.06%$5 35,285 0.06 % $ 6
Market rate and other savings 518,5930.10135 485,127 0.14 175
Savings certificates 56,7431.27181 64,868 1.43 233
Other time deposits 13,6121.5151 12,868 1.85 60
Deposits in foreign offices 69,3980.1527 67,213 0.20 33
Total interest-bearing deposits 689,2040.23399 665,361 0.30 507
Short-term borrowings 52,8200.2128 48,742 0.14 17
Long-term debt 127,5052.30735 129,445 2.73 885
Other liabilities 9,9752.2756 12,166 2.60 80
Total interest-bearing liabilities 879,5040.551,218 855,714 0.69 1,489
Portion of noninterest-bearing funding sources 333,678-- 280,019 - -
Total funding sources $1,213,1820.401,218 1,135,733 0.52 1,489

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

3.56%$10,841 3.89 % $ 11,083
Noninterest-earning assets
Cash and due from banks $16,361 17,718
Goodwill 25,637 25,057
Other 131,876 128,220
Total noninterest-earning assets $173,874 170,995
Noninterest-bearing funding sources
Deposits $286,924 246,692
Other liabilities 63,025 63,556
Total equity 157,603 140,766
Noninterest-bearing funding sources used to fund earning assets (333,678) (280,019 )
Net noninterest-bearing funding sources $173,874 170,995
Total assets$1,387,056 1,306,728
(1)Our average prime rate was 3.25% for the quarters ended December 31, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.32% and 0.48% 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 $198 million and $191 million for the quarters ended December 31, 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)
Year ended December 31,
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

$84,0810.45%$378 87,186 0.40 % $ 345
Trading assets 41,9503.291,380 39,737 3.68 1,463
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 3,6041.3147 5,503 1.25 69
Securities of U.S. states and political subdivisions 34,8754.481,561 24,035 5.09 1,223
Mortgage-backed securities:
Federal agencies 92,8873.122,893 74,665 4.36 3,257
Residential and commercial 33,5456.752,264 31,902 8.20 2,617
Total mortgage-backed securities 126,4324.085,157 106,567 5.51 5,874
Other debt and equity securities 49,2454.041,992 38,625 5.03 1,941
Total securities available for sale 214,1564.098,757 174,730 5.21 9,107
Mortgages held for sale (4) 48,9553.731,825 37,232 4.42 1,644
Loans held for sale (4) 6616.2241 1,104 5.25 58
Loans:
Commercial:
Commercial and industrial 173,9134.016,981 157,608 4.37 6,894
Real estate mortgage 105,4374.184,411 102,236 4.07 4,163
Real estate construction 17,9634.98894 21,592 4.88 1,055
Lease financing 12,7717.22921 12,944 7.54 976
Foreign 39,8522.47984 36,768 2.56 941
Total commercial 349,9364.0614,191 331,148 4.24 14,029
Consumer:
Real estate 1-4 family first mortgage 234,6194.5510,671 226,980 4.89 11,090
Real estate 1-4 family junior lien mortgage 80,8404.283,457 90,705 4.33 3,926
Credit card 22,77212.672,885 21,463 13.02 2,794
Other revolving credit and installment 87,0576.105,313 86,848 6.29 5,463
Total consumer 425,2885.2522,326 425,996 5.46 23,273
Total loans (4) 775,2244.7136,517 757,144 4.93 37,302
Other 4,4384.70209 4,929 4.12 203
Total earning assets $1,169,4654.20%$49,107 1,102,062 4.55 % $ 50,122
Funding sources
Deposits:
Interest-bearing checking $30,5640.06%$19 47,705 0.08 % $ 40
Market rate and other savings 505,3100.12592 464,450 0.18 836
Savings certificates 59,4841.31782 69,711 1.43 995
Other time deposits 13,3631.68225 13,126 2.04 268
Deposits in foreign offices 67,9200.16109 61,566 0.22 136
Total interest-bearing deposits 676,6410.261,727 656,558 0.35 2,275
Short-term borrowings 51,1960.1894 51,781 0.18 94
Long-term debt 127,5472.443,110 141,079 2.82 3,978
Other liabilities 10,0322.44245 10,955 2.88 316
Total interest-bearing liabilities 865,4160.605,176 860,373 0.77 6,663
Portion of noninterest-bearing funding sources 304,049-- 241,689 - -
Total funding sources $1,169,4650.445,176 1,102,062 0.61 6,663

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

3.76%$43,931 3.94 % $ 43,459
Noninterest-earning assets
Cash and due from banks $16,303 17,388
Goodwill 25,417 24,904
Other 130,450 125,911
Total noninterest-earning assets $172,170 168,203
Noninterest-bearing funding sources
Deposits $263,863 215,242
Other liabilities 61,214 57,399
Total equity 151,142 137,251
Noninterest-bearing funding sources used to fund earning assets (304,049) (241,689 )
Net noninterest-bearing funding sources $172,170 168,203
Total assets$1,341,635 1,270,265
(1)Our average prime rate was 3.25% for the years ended December 31, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.43% and 0.34% 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 $701 million and $696 million for the year ended December 31, 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
Quarter ended Dec. 31, % Year ended Dec. 31, %
(in millions) 2012 2011 Change 2012 2011 Change
Service charges on deposit accounts $1,250 1,091 15 % $4,683 4,280 9 %
Trust and investment fees:
Trust, investment and IRA fees 1,091 1,000 9 4,218 4,099 3
Commissions and all other fees 2,108 1,658 27 7,672 7,205 6
Total trust and investment fees 3,199 2,658 20 11,890 11,304 5
Card fees 736 680 8 2,838 3,653 (22 )
Other fees:
Cash network fees 111 109 2 470 389 21
Charges and fees on loans 448 402 11 1,746 1,641 6
Processing and all other fees 634 585 8 2,303 2,163 6
Total other fees 1,193 1,096 9 4,519 4,193 8
Mortgage banking:
Servicing income, net 250 493 (49 ) 1,378 3,266 (58 )
Net gains on mortgage loan origination/sales activities 2,818 1,871 51 10,260 4,566 125
Total mortgage banking 3,068 2,364 30 11,638 7,832 49
Insurance 395 466 (15 ) 1,850 1,960 (6 )
Net gains from trading activities 275 430 (36 ) 1,707 1,014 68
Net gains (losses) on debt securities available for sale (63) 48 NM (128) 54 NM
Net gains from equity investments 715 61 NM 1,485 1,482 -
Operating leases 170 60 183 567 524 8
All other 367 759 (52 ) 1,807 1,889 (4 )
Total $11,305 9,713 16 $42,856 38,185 12
NM - Not meaningful
NONINTEREST EXPENSE
Quarter ended Dec. 31, % Year ended Dec. 31, %
(in millions) 2012 2011 Change 2012 2011 Change
Salaries $3,735 3,706 1 % $14,689 14,462 2 %
Commission and incentive compensation 2,365 2,251 5 9,504 8,857 7
Employee benefits 891 1,012 (12 ) 4,611 4,348 6
Equipment 542 607 (11 ) 2,068 2,283 (9 )
Net occupancy 728 759 (4 ) 2,857 3,011 (5 )
Core deposit and other intangibles 418 467 (10 ) 1,674 1,880 (11 )
FDIC and other deposit assessments 307 314 (2 ) 1,356 1,266 7
Outside professional services 744 813 (8 ) 2,729 2,692 1
Operating losses 953 163 485 2,235 1,261 77
Foreclosed assets 221 370 (40 ) 1,061 1,354 (22 )
Contract services 235 356 (34 ) 1,011 1,407 (28 )
Outside data processing 227 257 (12 ) 910 935 (3 )
Travel and entertainment 211 212 - 839 821 2
Postage, stationery and supplies 192 231 (17 ) 799 942 (15 )
Advertising and promotion 142 166 (14 ) 578 607 (5 )
Telecommunications 122 129 (5 ) 500 523 (4 )
Insurance 62 87 (29 ) 453 515 (12 )
Operating leases 27 28 (4 ) 109 112 (3 )
All other 774 580 33 2,415 2,117 14
Total $12,896 12,508 3 $50,398 49,393 2
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2012 2012 2012 2012 2011
Service charges on deposit accounts $1,250 1,210 1,139 1,084 1,091
Trust and investment fees:
Trust, investment and IRA fees 1,091 1,062 1,041 1,024 1,000
Commissions and all other fees 2,108 1,892 1,857 1,815 1,658
Total trust and investment fees 3,199 2,954 2,898 2,839 2,658
Card fees 736 744 704 654 680
Other fees:
Cash network fees 111 121 120 118 109
Charges and fees on loans 448 426 427 445 402
Processing and all other fees 634 550 587 532 585
Total other fees 1,193 1,097 1,134 1,095 1,096
Mortgage banking:
Servicing income, net 250 197 679 252 493
Net gains on mortgage loan origination/sales activities 2,818 2,610 2,214 2,618 1,871
Total mortgage banking 3,068 2,807 2,893 2,870 2,364
Insurance 395 414 522 519 466
Net gains from trading activities 275 529 263 640 430
Net gains (losses) on debt securities available for sale (63) 3 (61 ) (7 ) 48
Net gains from equity investments 715 164 242 364 61
Operating leases 170 218 120 59 60
All other 367 411 398 631 759
Total $11,305 10,551 10,252 10,748 9,713
FIVE QUARTER NONINTEREST EXPENSE
Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2012 2012 2012 2012 2011
Salaries $3,735 3,648 3,705 3,601 3,706
Commission and incentive compensation 2,365 2,368 2,354 2,417 2,251
Employee benefits 891 1,063 1,049 1,608 1,012
Equipment 542 510 459 557 607
Net occupancy 728 727 698 704 759
Core deposit and other intangibles 418 419 418 419 467
FDIC and other deposit assessments 307 359 333 357 314
Outside professional services 744 733 658 594 813
Operating losses 953 281 524 477 163
Foreclosed assets 221 247 289 304 370
Contract services 235 237 236 303 356
Outside data processing 227 234 233 216 257
Travel and entertainment 211 208 218 202 212
Postage, stationery and supplies 192 196 195 216 231
Advertising and promotion 142 170 144 122 166
Telecommunications 122 127 127 124 129
Insurance 62 51 183 157 87
Operating leases 27 27 27 28 28
All other 774 507 547 587 580
Total $12,896 12,112 12,397 12,993 12,508
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET

December 31,

%
(in millions, except shares) 2012 2011 Change
Assets
Cash and due from banks $21,860 19,440 12 %
Federal funds sold, securities purchased under resale agreements and other short-term investments 137,313 44,367 209
Trading assets 57,482 77,814 (26 )
Securities available for sale 235,199 222,613 6
Mortgages held for sale (includes $42,305 and $44,791 carried at fair value) 47,149 48,357 (2 )
Loans held for sale (includes $6 and $1,176 carried at fair value) 110 1,338 (92 )
Loans (includes $6,206 and $5,916 carried at fair value) 799,574 769,631 4
Allowance for loan losses (17,060) (19,372 ) (12 )
Net loans 782,514 750,259 4
Mortgage servicing rights:
Measured at fair value 11,538 12,603 (8 )
Amortized 1,160 1,408 (18 )
Premises and equipment, net 9,428 9,531 (1 )
Goodwill 25,637 25,115 2
Other assets 93,578 101,022 (7 )
Total assets $1,422,968 1,313,867 8
Liabilities
Noninterest-bearing deposits $288,207 244,003 18
Interest-bearing deposits 714,628 676,067 6
Total deposits 1,002,835 920,070 9
Short-term borrowings 57,175 49,091 16
Accrued expenses and other liabilities 76,668 77,665 (1 )
Long-term debt (includes $1 and $0 carried at fair value) 127,379 125,354 2
Total liabilities 1,264,057 1,172,180 8
Equity
Wells Fargo stockholders' equity:
Preferred stock 12,883 11,431 13

Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 and 5,358,522,061 shares

9,136 8,931 2
Additional paid-in capital 59,802 55,957 7
Retained earnings 77,679 64,385 21
Cumulative other comprehensive income 5,650 3,207 76
Treasury stock – 215,497,298 shares and 95,910,425 shares (6,610) (2,744 ) 141
Unearned ESOP shares (986) (926 ) 6
Total Wells Fargo stockholders' equity 157,554 140,241 12
Noncontrolling interests 1,357 1,446 (6 )
Total equity 158,911 141,687 12
Total liabilities and equity $1,422,968 1,313,867 8
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2012 2012 2012 2012 2011
Assets
Cash and due from banks $21,860 16,986 16,811 17,000 19,440

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

137,313 100,442 74,635 74,143 44,367
Trading assets 57,482 60,592 64,419 75,696 77,814
Securities available for sale 235,199 229,350 226,846 230,266 222,613
Mortgages held for sale 47,149 50,337 50,462 43,449 48,357
Loans held for sale 110 298 853 958 1,338
Loans 799,574 782,630 775,199 766,521 769,631
Allowance for loan losses (17,060) (17,385 ) (18,320 ) (18,852 ) (19,372 )
Net loans 782,514 765,245 756,879 747,669 750,259
Mortgage servicing rights:
Measured at fair value 11,538 10,956 12,081 13,578 12,603
Amortized 1,160 1,144 1,130 1,074 1,408
Premises and equipment, net 9,428 9,165 9,317 9,291 9,531
Goodwill 25,637 25,637 25,406 25,140 25,115
Other assets 93,578 104,563 97,365 95,535 101,022
Total assets $1,422,968 1,374,715 1,336,204 1,333,799 1,313,867
Liabilities
Noninterest-bearing deposits $288,207 268,991 253,999 255,013 244,003
Interest-bearing deposits 714,628 683,248 674,934 675,254 676,067
Total deposits 1,002,835 952,239 928,933 930,267 920,070
Short-term borrowings 57,175 51,957 56,023 50,964 49,091
Accrued expenses and other liabilities 76,668 83,659 76,827 75,967 77,665
Long-term debt 127,379 130,801 124,984 129,752 125,354
Total liabilities 1,264,057 1,218,656 1,186,767 1,186,950 1,172,180
Equity
Wells Fargo stockholders' equity:
Preferred stock 12,883 12,283 11,694 12,101 11,431
Common stock 9,136 9,105 9,054 9,008 8,931
Additional paid-in capital 59,802 59,089 58,091 57,569 55,957
Retained earnings 77,679 73,994 70,456 67,239 64,385
Cumulative other comprehensive income 5,650 6,435 4,629 4,216 3,207
Treasury stock (6,610) (5,186 ) (4,638 ) (2,958 ) (2,744 )
Unearned ESOP shares (986) (1,041 ) (1,216 ) (1,659 ) (926 )
Total Wells Fargo stockholders' equity 157,554 154,679 148,070 145,516 140,241
Noncontrolling interests 1,357 1,380 1,367 1,333 1,446
Total equity 158,911 156,059 149,437 146,849 141,687
Total liabilities and equity $1,422,968 1,374,715 1,336,204 1,333,799 1,313,867
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
Quarter ended
Dec. 31, 2012 Sept. 30, 2012 June 30, 2012 Mar. 31, 2012 Dec. 31, 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

$117.10.41% $ 91.6 0.44 % $ 71.3 0.47 % $ 56.0 0.52 % $ 68.0 0.52 %
Trading assets 42.03.28 39.5 3.08 42.6 3.27 43.8 3.50 45.5 3.57
Securities available for sale (2):
Securities of U.S. Treasury and federal agencies 5.31.64 1.4 1.05 2.0 1.60 5.8 0.97 8.7 0.99
Securities of U.S. states and political subdivisions 36.44.64 35.9 4.36 34.5 4.39 32.6 4.52 28.0 4.80
Mortgage-backed securities:
Federal agencies 90.92.71 94.3 2.88 95.0 3.37 91.3 3.49 84.3 3.68
Residential and commercial 32.76.53 33.1 6.67 33.9 6.97 34.5 6.80 34.7 7.05
Total mortgage-backed securities 123.63.72 127.4 3.87 128.9 4.32 125.8 4.40 119.0 4.66
Other debt and equity securities 50.03.91 47.7 4.07 48.9 4.39 50.4 3.82 47.3 4.38
Total securities available for sale 215.33.87 212.4 3.98 214.3 4.32 214.6 4.19 203.0 4.46
Mortgages held for sale 47.23.50 52.1 3.65 49.5 3.86 46.9 3.91 44.8 4.07
Loans held for sale 0.19.03 0.9 7.38 0.9 5.48 0.8 5.09 1.1 5.84
Loans:
Commercial:
Commercial and industrial 179.53.85 177.5 3.84 171.8 4.21 166.8 4.18 166.9 4.08
Real estate mortgage 105.14.02 105.1 4.05 105.5 4.60 106.0 4.07 105.2 4.26
Real estate construction 17.54.97 17.7 5.21 17.9 4.96 18.7 4.79 19.6 4.61
Lease financing 12.46.43 12.6 6.60 12.9 6.86 13.1 8.89 12.9 7.41
Foreign 39.72.32 39.7 2.46 38.9 2.57 41.2 2.52 38.8 2.39
Total commercial 354.23.87 352.6 3.91 347.0 4.28 345.8 4.16 343.4 4.10
Consumer:
Real estate 1-4 family first mortgage 244.64.39 234.0 4.51 230.0 4.62 229.7 4.69 229.8 4.74
Real estate 1-4 family junior lien mortgage 76.94.28 79.7 4.26 82.1 4.30 84.7 4.27 87.2 4.34
Credit card 23.912.43 23.0 12.64 22.1 12.70 22.1 12.93 21.9 12.96
Other revolving credit and installment 87.66.05 87.4 6.08 87.0 6.09 86.3 6.19 86.3 6.23
Total consumer 433.05.15 424.1 5.23 421.2 5.29 422.8 5.34 425.2 5.39
Total loans 787.24.58 776.7 4.63 768.2 4.83 768.6 4.81 768.6 4.81
Other 4.35.21 4.4 4.62 4.5 4.56 4.6 4.42 4.7 4.32
Total earning assets $1,213.23.96% $ 1,177.6 4.09 % $ 1,151.3 4.37 % $ 1,135.3 4.39 % $ 1,135.7 4.41 %
Funding sources
Deposits:
Interest-bearing checking $30.90.06% $ 28.8 0.06 % $ 30.4 0.07 % $ 32.2 0.05 % $ 35.3 0.06 %
Market rate and other savings 518.60.10 506.1 0.12 500.3 0.12 496.0 0.12 485.1 0.14
Savings certificates 56.71.27 58.2 1.29 60.4 1.34 62.7 1.36 64.9 1.43
Other time deposits 13.61.51 14.4 1.49 12.8 1.83 12.7 1.93 12.9 1.85
Deposits in foreign offices 69.40.15 71.8 0.16 65.6 0.17 64.8 0.16 67.2 0.20
Total interest-bearing deposits 689.20.23 679.3 0.25 669.5 0.27 668.4 0.27 665.4 0.30
Short-term borrowings 52.80.21 51.9 0.17 51.7 0.19 48.4 0.15 48.7 0.14
Long-term debt 127.52.30 127.5 2.37 127.7 2.48 127.5 2.60 129.4 2.73
Other liabilities 10.02.27 9.9 2.40 10.4 2.48 9.8 2.63 12.2 2.60
Total interest-bearing liabilities 879.50.55 868.6 0.58 859.3 0.62 854.1 0.64 855.7 0.69
Portion of noninterest-bearing funding sources 333.7- 309.0 - 292.0 - 281.2 - 280.0 -
Total funding sources $1,213.20.40 $ 1,177.6 0.43 $ 1,151.3 0.46 $ 1,135.3 0.48 $ 1,135.7 0.52

Net interest margin on a taxable-equivalent basis

3.56% 3.66 % 3.91 % 3.91 % 3.89 %
Noninterest-earning assets
Cash and due from banks $16.4 15.7 16.2 17.0 17.7
Goodwill 25.6 25.5 25.3 25.1 25.1
Other 131.9 135.5 128.8 125.5 128.2
Total noninterest-earnings assets $173.9 176.7 170.3 167.6 171.0
Noninterest-bearing funding sources
Deposits $286.9 267.2 254.5 246.6 246.7
Other liabilities 63.1 66.1 58.4 57.2 63.5
Total equity 157.6 152.4 149.4 145.0 140.8

Noninterest-bearing funding sources used to fund earning assets

(333.7) (309.0 ) (292.0 ) (281.2 ) (280.0 )

Net noninterest-bearing funding sources

$173.9 176.7 170.3 167.6 171.0
Total assets$1,387.1 1,354.3 1,321.6 1,302.9 1,306.7
(1) Our average prime rate was 3.25% for quarters ended December 31, September 30, June 30 and March 31, 2012, and December 31, 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.32%, 0.43%, 0.47%, 0.51% and 0.48% 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
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2012 2012 2012 2012 2011
Securities of U.S. Treasury and federal agencies $7,146 1,869 1,493 4,678 6,968
Securities of U.S. states and political subdivisions 38,676 37,925 37,251 34,237 32,593
Mortgage-backed securities:
Federal agencies 97,285 102,713 101,863 102,665 96,754
Residential and commercial 35,899 36,098 35,646 36,486 35,986
Total mortgage-backed securities 133,184 138,811 137,509 139,151 132,740
Other debt securities 53,408 47,993 47,746 49,047 46,895
Total debt securities available for sale 232,414 226,598 223,999 227,113 219,196
Marketable equity securities 2,785 2,752 2,847 3,153 3,417
Total securities available for sale $235,199 229,350 226,846 230,266 222,613
FIVE QUARTER LOANS
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2012 2012 2012 2012 2011
Commercial:
Commercial and industrial $187,759 178,191 177,646 168,546 167,216
Real estate mortgage 106,340 104,611 105,666 105,874 105,975
Real estate construction 16,904 17,710 17,594 18,549 19,382
Lease financing 12,424 12,279 12,729 13,143 13,117
Foreign (1) 37,771 39,741 40,417 39,637 39,760
Total commercial 361,198 352,532 354,052 345,749 345,450
Consumer:
Real estate 1-4 family first mortgage 249,900 240,554 230,263 228,885 228,894
Real estate 1-4 family junior lien mortgage 75,465 78,091 80,881 83,173 85,991
Credit card 24,640 23,692 22,706 21,998 22,836
Other revolving credit and installment 88,371 87,761 87,297 86,716 86,460
Total consumer 438,376 430,098 421,147 420,772 424,181
Total loans (2) $799,574 782,630 775,199 766,521 769,631
(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 $31.0 billion, $32.5 billion, $33.8 billion, $35.5 billion and $36.7 billion of purchased credit-impaired (PCI) loans at December 31, September 30, June 30, and March 31, 2012, and December 31, 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)
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2012 2012 2012 2012 2011
Nonaccrual loans:
Commercial:
Commercial and industrial $1,422 1,404 1,549 1,726 2,142
Real estate mortgage 3,322 3,599 3,832 4,081 4,085
Real estate construction 1,003 1,253 1,421 1,709 1,890
Lease financing 27 49 43 45 53
Foreign 50 66 79 38 47
Total commercial 5,824 6,371 6,924 7,599 8,217
Consumer:
Real estate 1-4 family first mortgage 11,455 11,195 10,368 10,683 10,913
Real estate 1-4 family junior lien mortgage (1) 2,922 3,140 3,091 3,558 1,975
Other revolving credit and installment 285 338 195 186 199
Total consumer (2) 14,662 14,673 13,654 14,427 13,087
Total nonaccrual loans (3)(4)(5) 20,486 21,044 20,578 22,026 21,304
As a percentage of total loans 2.56% 2.69 2.65 2.87 2.77
Foreclosed assets:
Government insured/guaranteed (6) $1,509 1,479 1,465 1,352 1,319
Non-government insured/guaranteed 2,514 2,730 2,842 3,265 3,342
Total foreclosed assets 4,023 4,209 4,307 4,617 4,661
Total nonperforming assets $24,509 25,253 24,885 26,643 25,965
As a percentage of total loans 3.07% 3.23 3.21 3.48 3.37
(1) Includes $1.7 billion at March 31, 2012, resulting from implementation of the Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties issued on January 31, 2012. This guidance accelerated the timing of placing these loans on nonaccrual to coincide with the timing of placing the related real estate 1-4 family first mortgage loans on nonaccrual.
(2) Includes $1.4 billion at September 30, 2012, resulting from implementation of OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status.
(3) Also includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
(4) Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.
(5) Real estate 1-4 family mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed.
(6) Consistent with regulatory reporting requirements, foreclosed real estate securing government insured/guaranteed loans is classified as nonperforming. Both principal and interest for government insured/guaranteed loans secured by the foreclosed real estate are collectible because the loans are insured by the FHA or guaranteed by the VA.
Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

Dec. 31,

Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2012 2012 2012 2012 2011
Loans 90 days or more past due and still accruing:
Total (excluding PCI)(1): $23,245 22,894 22,872 22,555 22,569
Less: FHA insured/VA guaranteed (2) 20,745 20,320 20,368 19,681 19,240
Less: Student loans guaranteed under the FFELP (3) 1,065 1,082 1,144 1,238 1,281
Total, not government insured/guaranteed$1,435 1,492 1,360 1,636 2,048
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $47 49 44 104 153
Real estate mortgage 228 206 184 289 256
Real estate construction 27 41 25 25 89
Foreign 1 2 3 7 6
Total commercial 303 298 256 425 504
Consumer:
Real estate 1-4 family first mortgage (4) 564 627 561 616 781
Real estate 1-4 family junior lien mortgage (4)(5) 133 151 159 156 279
Credit card 310 288 274 319 346
Other revolving credit and installment 125 128 110 120 138
Total consumer 1,132 1,194 1,104 1,211 1,544
Total, not government insured/guaranteed$1,435 1,492 1,360 1,636 2,048
(1) The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $6.0 billion, $6.2 billion, $6.6 billion, $7.1 billion and $8.7 billion, at December 31, September 30, June 30 and March 31, 2012 and December 31, 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.

December 31,
(in millions) 2012 2011 2010 2009 2008
Commercial:
Commercial and industrial $259 399 718 1,911 4,580
Real estate mortgage 1,970 3,270 2,855 4,137 5,803
Real estate construction 877 1,745 2,949 5,207 6,462
Foreign 871 1,353 1,413 1,733 1,859
Total commercial 3,977 6,767 7,935 12,988 18,704
Consumer:
Real estate 1-4 family first mortgage 26,839 29,746 33,245 38,386 39,214
Real estate 1-4 family junior lien mortgage 152 206 250 331 728
Other revolving credit and installment - - - - 151
Total consumer 26,991 29,952 33,495 38,717 40,093
Total PCI loans (carrying value) $30,968 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 acquisitions7--7
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1)(81)--(81)
Loans resolved by sales to third parties (2)(4)--(4)
Reclassification to accretable yield for loans with improving credit-related cash flows (3)(315)(648)(178)(1,141)
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)(5)(114)(2,246)(164)(2,524)
Balance, December 31, 2012$4226,2323106,964
Balance, September 30, 2012$5576,6793707,606
Addition of nonaccretable difference due to acquisitions7--7
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1)(5)--(5)
Loans resolved by sales to third parties (2)----
Reclassification to accretable yield for loans with improving credit-related cash flows (3)(127)-(8)(135)
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)(5)(10)(447)(52)(509)
Balance, December 31, 2012$4226,2323106,964
(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.
(5) Quarter and year ended December 31, 2012, include $86 million and $462 million, respectively, resulting from the implementation of OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be written down to net realizable collateral value, regardless of their delinquency status.
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, 201115,961
Addition of accretable yield due to acquisitions3
Accretion into interest income (1)(2,152)
Accretion into noninterest income due to sales (2)(5)
Reclassification from nonaccretable difference for loans with improving credit-related cash flows1,141
Changes in expected cash flows that do not affect nonaccretable difference (3)3,600
Balance, December 31, 2012$18,548
Balance, September 30, 201218,912
Addition of accretable yield due to acquisitions3
Accretion into interest income (1)(513)
Accretion into noninterest income due to sales (2)-
Reclassification from nonaccretable difference for loans with improving credit-related cash flows135
Changes in expected cash flows that do not affect nonaccretable difference (3)11
Balance, December 31, 2012$18,548
(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 deterioration25-732
Charge-offs(102)-(44)(146)
Balance, December 31, 2012$88-29117
Balance, September 30, 2012$98-62160
Provision for losses due to credit deterioration / (reversal of provision)14-(2)12
Charge-offs(24)-(31)(55)
Balance, December 31, 2012$88-29117
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)

December 31, 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 $ 21,642 113 % $ 17,337 90 % $ 15,586 82 %
Florida 2,824 112 2,262 85 3,265 93
New Jersey 1,213 92 1,204 88 2,056 79
New York 697 90 680 85 916 79
Texas 303 79 284 73 1,290 64
Other states 5,324 102 4,567 86 8,827 84
Total Pick-a-Pay loans $ 32,003 $ 26,334 $ 31,940
(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

Dec. 31,

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

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

$3,170 3,836 4,278 5,213 5,695
Total commercial 3,170 3,836 4,278 5,213 5,695
Consumer:
Pick-a-Pay mortgage (1) 58,274 60,080 62,045 63,983 65,652
Liquidating home equity 4,647 4,951 5,199 5,456 5,710
Legacy Wells Fargo Financial indirect auto 830 1,104 1,454 1,907 2,455
Legacy Wells Fargo Financial debt consolidation 14,519 15,002 15,511 16,013 16,542
Education Finance - government guaranteed 12,465 12,951 13,823 14,800 15,376
Legacy Wachovia other PCI loans (1) 657 732 818 860 896
Total consumer 91,392 94,820 98,850 103,019 106,631
Total non-strategic and liquidating loan portfolios $94,562 98,656 103,128 108,232 112,326
(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

December 31,

December 31, December 31,
(in millions) 2012 2011 2012 2011 2012 (2 ) 2011
Core portfolio (3)
California $22,900 25,555 2.46% 3.03 2.89 3.42
Florida 9,763 10,870 4.15 4.99 3.09 4.30
New Jersey 7,338 7,973 3.43 3.73 2.30 2.22
Virginia 4,758 5,248 2.04 2.15 1.78 1.31
Pennsylvania 4,683 5,071 2.67 2.82 1.72 1.41
Other 40,985 46,165 2.59 2.79 2.77 2.50
Total 90,427 100,882 2.77 3.13 2.69 2.79
Liquidating portfolio
California 1,633 2,024 3.99 5.50 11.21 11.93
Florida 223 265 5.79 7.02 6.29 9.71
Arizona 95 116 3.85 6.64 10.65 17.54
Texas 77 97 1.47 0.93 2.96 1.57
Minnesota 64 75 3.62 2.83 8.09 8.13
Other 2,555 3,133 3.62 4.13 6.75 7.12
Total 4,647 5,710 3.82 4.73 8.33 9.09
Total core and liquidating portfolios $95,074 106,592 2.82 3.22 2.97 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 OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be written down to net realizable collateral value, regardless of their delinquency status.
(3) Includes $1.3 billion at December 31, 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
Quarter ended Dec. 31, Year ended Dec. 31,
(in millions) 2012 2011 2012 2011
Balance, beginning of period$17,803 20,372 19,668 23,463
Provision for credit losses 1,831 2,040 7,217 7,899
Interest income on certain impaired loans (1) (70) (86 ) (315) (332 )
Loan charge-offs:
Commercial:
Commercial and industrial (302) (416 ) (1,306) (1,598 )
Real estate mortgage (86) (153 ) (382) (636 )
Real estate construction (10) (35 ) (191) (351 )
Lease financing (6) (8 ) (24) (38 )
Foreign (30) (52 ) (111) (173 )
Total commercial (434) (664 ) (2,014) (2,796 )
Consumer:
Real estate 1-4 family first mortgage (694) (904 ) (3,013) (3,883 )
Real estate 1-4 family junior lien mortgage (765) (856 ) (3,437) (3,763 )
Credit card (259) (303 ) (1,101) (1,449 )
Other revolving credit and installment (381) (412 ) (1,408) (1,724 )
Total consumer (2) (2,099) (2,475 ) (8,959) (10,819 )
Total loan charge-offs (2,533) (3,139 ) (10,973) (13,615 )
Loan recoveries:
Commercial:
Commercial and industrial 93 106 461 419
Real estate mortgage 48 36 163 143
Real estate construction 28 40 124 146
Lease financing 4 4 19 24
Foreign 6 7 32 45
Total commercial 179 193 799 777
Consumer:
Real estate 1-4 family first mortgage 45 60 157 405
Real estate 1-4 family junior lien mortgage 75 56 259 218
Credit card 37 47 185 251
Other revolving credit and installment 116 143 539 665
Total consumer 273 306 1,140 1,539
Total loan recoveries 452 499 1,939 2,316
Net loan charge-offs (3) (2,081) (2,640 ) (9,034) (11,299 )
Allowances related to business combinations/other (6) (18 ) (59) (63 )
Balance, end of period$17,477 19,668 17,477 19,668
Components:
Allowance for loan losses $17,060 19,372 17,060 19,372
Allowance for unfunded credit commitments 417 296 417 296
Allowance for credit losses (4) $17,477 19,668 17,477 19,668
Net loan charge-offs (annualized) as a percentage of average total loans (3) 1.05% 1.36 1.17 1.49
Allowance for loan losses as a percentage of total loans (4) 2.13 2.52 2.13 2.52
Allowance for credit losses as a percentage of total loans (4) 2.19 2.56 2.19 2.56
(1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan's effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income.
(2) Includes $321 million and $888 million for the quarter and year ended December 31, 2012, respectively, resulting from the implementation of OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status.
(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 $117 million and $231 million at December 31, 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
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2012 2012 2012 2012 2011
Balance, beginning of quarter$17,803 18,646 19,129 19,668 20,372
Provision for credit losses 1,831 1,591 1,800 1,995 2,040
Interest income on certain impaired loans (1) (70) (76 ) (82 ) (87 ) (86 )
Loan charge-offs:
Commercial:
Commercial and industrial (302) (285 ) (360 ) (359 ) (416 )
Real estate mortgage (86) (100 ) (114 ) (82 ) (153 )
Real estate construction (10) (41 ) (60 ) (80 ) (35 )
Lease financing (6) (5 ) (5 ) (8 ) (8 )
Foreign (30) (35 ) (17 ) (29 ) (52 )
Total commercial (434) (466 ) (556 ) (558 ) (664 )
Consumer:
Real estate 1-4 family first mortgage (694) (719 ) (772 ) (828 ) (904 )
Real estate 1-4 family junior lien mortgage (765) (1,095 ) (757 ) (820 ) (856 )
Credit card (259) (255 ) (286 ) (301 ) (303 )
Other revolving credit and installment (381) (336 ) (318 ) (373 ) (412 )
Total consumer (2) (2,099) (2,405 ) (2,133 ) (2,322 ) (2,475 )
Total loan charge-offs (2,533) (2,871 ) (2,689 ) (2,880 ) (3,139 )
Loan recoveries:
Commercial:
Commercial and industrial 93 154 111 103 106
Real estate mortgage 48 46 33 36 36
Real estate construction 28 40 43 13 40
Lease financing 4 4 5 6 4
Foreign 6 5 6 15 7
Total commercial 179 249 198 173 193
Consumer:
Real estate 1-4 family first mortgage 45 46 29 37 60
Real estate 1-4 family junior lien mortgage 75 59 68 57 56
Credit card 37 43 46 59 47
Other revolving credit and installment 116 116 148 159 143
Total consumer 273 264 291 312 306
Total loan recoveries 452 513 489 485 499
Net loan charge-offs (2,081) (2,358 ) (2,200 ) (2,395 ) (2,640 )
Allowances related to business combinations/other (6) - (1 ) (52 ) (18 )
Balance, end of quarter$17,477 17,803 18,646 19,129 19,668
Components:
Allowance for loan losses $17,060 17,385 18,320 18,852 19,372
Allowance for unfunded credit commitments 417 418 326 277 296
Allowance for credit losses $17,477 17,803 18,646 19,129 19,668
Net loan charge-offs (annualized) as a percentage of average total loans 1.05% 1.21 1.15 1.25 1.36
Allowance for loan losses as a percentage of:
Total loans 2.13 2.22 2.36 2.46 2.52
Nonaccrual loans 83 83 89 86 91
Nonaccrual loans and other nonperforming assets 70 69 74 71 75
Allowance for credit losses as a percentage of:
Total loans 2.19 2.27 2.41 2.50 2.56
Nonaccrual loans 85 85 91 87 92
Nonaccrual loans and other nonperforming assets 71 70 75 72 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 $321 million and $567 million for the quarters ended December 31 and September 30, 2012, respectively, resulting from the implementation of OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER TIER 1 COMMON EQUITY UNDER BASEL I (1)
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in billions) 2012 2012 2012 2012 2011
Total equity $158.9 156.1 149.4 146.8 141.7
Noncontrolling interests (1.3) (1.4 ) (1.3 ) (1.3 ) (1.5 )
Total Wells Fargo stockholders' equity $157.6 154.7 148.1 145.5 140.2
Adjustments:
Preferred equity (12.0) (11.3 ) (10.6 ) (10.6 ) (10.6 )
Goodwill and intangible assets (other than MSRs) (32.9) (33.4 ) (33.5 ) (33.7 ) (34.0 )
Applicable deferred taxes 3.2 3.3 3.5 3.7 3.8
Deferred tax asset limitation - - - - -
MSRs over specified limitations (0.7) (0.7 ) (0.7 ) (0.9 ) (0.8 )
Cumulative other comprehensive income (5.6) (6.4 ) (4.6 ) (4.1 ) (3.1 )
Other (0.5) (0.4 ) (0.5 ) (0.4 ) (0.4 )
Tier 1 common equity (A) $109.1 105.8 101.7 99.5 95.1
Total risk-weighted assets (2) (B) $1,077.9 1,067.1 1,008.6 996.8 1,005.6
Tier 1 common equity to total risk-weighted assets (2) (A)/(B) 10.12% 9.92 10.08 9.98 9.46
(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 Company’s December 31, 2012, risk-weighted assets and resulting Tier 1 common equity to total risk-weighted assets are preliminary and reflect total estimated on-balance sheet and total estimated derivative and off-balance sheet risk-weighted assets of $861.6 billion and $216.3 billion, respectively. Effective September 30, 2012, the Company refined its determination of the risk weighting of certain unused lending commitments that provide for the ability to issue standby letters of credit and commitments to issue standby letters of credit under syndication arrangements where the Company has an obligation to issue in a lead agent or similar capacity beyond its contractual participation level.
TIER 1 COMMON EQUITY UNDER BASEL III (ESTIMATED) (1) (2)
Dec. 31,
(in billions) 2012
Tier 1 common equity under Basel I $ 109.1
Adjustments from Basel I to Basel III (3) (5):

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

5.3
Other 0.2
Total adjustments from Basel I to Basel III 5.5
Threshold deductions, as defined under Basel III (4) (5) (0.7 )
Tier 1 common equity anticipated under Basel III (C) $ 113.9
Total risk-weighted assets anticipated under Basel III (6) (D) $ 1,393.1

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

(C)/(D) 8.18 %
(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 Dec. 31,
Net interest income (3) $7,166 7,420 3,092 3,071 689 731 (304) (330 ) 10,643 10,892
Provision for credit losses 1,757 2,025 60 31 15 20 (1) (36 ) 1,831 2,040
Noninterest income 6,616 5,589 2,901 2,345 2,405 2,311 (617) (532 ) 11,305 9,713
Noninterest expense 8,033 7,313 3,007 2,938 2,513 2,520 (657) (263 ) 12,896 12,508

Income (loss) before income tax expense (benefit)

3,992 3,671 2,926 2,447 566 502 (263) (563 ) 7,221 6,057
Income tax expense (benefit) 918 1,084 892 813 215 191 (101) (214 ) 1,924 1,874

Net income (loss) before noncontrolling interests

3,074 2,587 2,034 1,634 351 311 (162) (349 ) 5,297 4,183

Less: Net income (loss) from noncontrolling interests

205 78 2 (2 ) - - - - 207 76
Net income (loss) (4) $2,869 2,509 2,032 1,636 351 311 (162) (349 ) 5,090 4,107
Average loans $493.1 490.6 279.2 265.1 43.3 42.8 (28.4) (29.9 ) 787.2 768.6
Average assets 794.2 753.3 489.7 458.3 171.7 160.6 (68.5) (65.5 ) 1,387.1 1,306.7
Average core deposits 608.9 568.4 240.7 223.2 143.4 135.2 (64.2) (61.9 ) 928.8 864.9
Year ended Dec. 31,
Net interest income (3) $29,045 29,657 12,648 11,616 2,768 2,844 (1,231) (1,354 ) 43,230 42,763

Provision (reversal of provision) for credit losses

6,835 7,976 286 (110 ) 125 170 (29) (137 ) 7,217 7,899
Noninterest income 24,360 21,124 11,444 9,952 9,392 9,333 (2,340) (2,224 ) 42,856 38,185
Noninterest expense 30,840 29,252 12,082 11,177 9,893 9,934 (2,417) (970 ) 50,398 49,393

Income (loss) before income tax expense (benefit)

15,730 13,553 11,724 10,501 2,142 2,073 (1,125) (2,471 ) 28,471 23,656
Income tax expense (benefit) 4,774 4,104 3,943 3,495 814 785 (428) (939 ) 9,103 7,445

Net income (loss) before noncontrolling interests

10,956 9,449 7,781 7,006 1,328 1,288 (697) (1,532 ) 19,368 16,211

Less: Net income from noncontrolling interests

464 316 7 19 - 7 - - 471 342
Net income (loss) (4) $10,492 9,133 7,774 6,987 1,328 1,281 (697) (1,532 ) 18,897 15,869
Average loans $487.1 496.3 273.8 249.1 42.7 43.0 (28.4) (31.3 ) 775.2 757.1
Average assets 761.1 752.3 481.7 428.1 164.6 155.2 (65.8) (65.3 ) 1,341.6 1,270.3
Average core deposits 591.2 556.3 227.0 202.1 137.5 130.0 (61.8) (61.7 ) 893.9 826.7
(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
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(income/expense in millions, average balances in billions) 2012 2012 2012 2012 2011
COMMUNITY BANKING
Net interest income (2) $7,166 7,247 7,306 7,326 7,420
Provision for credit losses 1,757 1,627 1,573 1,878 2,025
Noninterest income 6,616 5,863 5,786 6,095 5,589
Noninterest expense 8,033 7,402 7,580 7,825 7,313
Income before income tax expense 3,992 4,081 3,939 3,718 3,671
Income tax expense 918 1,250 1,313 1,293 1,084
Net income before noncontrolling interests 3,074 2,831 2,626 2,425 2,587
Less: Net income from noncontrolling interests 205 91 91 77 78
Segment net income $2,869 2,740 2,535 2,348 2,509
Average loans $493.1 485.3 483.9 486.1 490.6
Average assets 794.2 765.1 746.6 738.3 753.3
Average core deposits 608.9 594.5 586.1 575.2 568.4
WHOLESALE BANKING
Net interest income (2) $3,092 3,028 3,347 3,181 3,071
Provision (reversal of provision) for credit losses 60 (57 ) 188 95 31
Noninterest income 2,901 2,921 2,770 2,852 2,345
Noninterest expense 3,007 2,908 3,113 3,054 2,938
Income before income tax expense 2,926 3,098 2,816 2,884 2,447
Income tax expense 892 1,103 932 1,016 813
Net income before noncontrolling interests 2,034 1,995 1,884 1,868 1,634
Less: Net income (loss) from noncontrolling interests 2 2 3 - (2 )
Segment net income $2,032 1,993 1,881 1,868 1,636
Average loans $279.2 277.1 270.2 268.6 265.1
Average assets 489.7 490.7 478.4 467.8 458.3
Average core deposits 240.7 225.4 220.9 220.9 223.2
WEALTH, BROKERAGE AND RETIREMENT
Net interest income (2) $689 680 698 701 731
Provision for credit losses 15 30 37 43 20
Noninterest income 2,405 2,353 2,273 2,361 2,311
Noninterest expense 2,513 2,457 2,376 2,547 2,520
Income before income tax expense 566 546 558 472 502
Income tax expense 215 208 210 181 191
Net income before noncontrolling interests 351 338 348 291 311
Less: Net income (loss) from noncontrolling interests - - 5 (5 ) -
Segment net income $351 338 343 296 311
Average loans $43.3 42.5 42.5 42.5 42.8
Average assets 171.7 163.8 160.9 161.9 160.6
Average core deposits 143.4 136.7 134.2 135.6 135.2
OTHER (3)
Net interest income (2) $(304) (293 ) (314 ) (320 ) (330 )
Provision (reversal of provision) for credit losses (1) (9 ) 2 (21 ) (36 )
Noninterest income (617) (586 ) (577 ) (560 ) (532 )
Noninterest expense (657) (655 ) (672 ) (433 ) (263 )
Loss before income tax benefit (263) (215 ) (221 ) (426 ) (563 )
Income tax benefit (101) (81 ) (84 ) (162 ) (214 )
Net loss before noncontrolling interests (162) (134 ) (137 ) (264 ) (349 )
Less: Net income from noncontrolling interests - - - - -
Other net loss $(162) (134 ) (137 ) (264 ) (349 )
Average loans $(28.4) (28.2 ) (28.4 ) (28.6 ) (29.9 )
Average assets (68.5) (65.3 ) (64.3 ) (65.1 ) (65.5 )
Average core deposits (64.2) (61.2 ) (60.6 ) (61.2 ) (61.9 )
CONSOLIDATED COMPANY
Net interest income (2) $10,643 10,662 11,037 10,888 10,892
Provision for credit losses 1,831 1,591 1,800 1,995 2,040
Noninterest income 11,305 10,551 10,252 10,748 9,713
Noninterest expense 12,896 12,112 12,397 12,993 12,508
Income before income tax expense 7,221 7,510 7,092 6,648 6,057
Income tax expense 1,924 2,480 2,371 2,328 1,874
Net income before noncontrolling interests 5,297 5,030 4,721 4,320 4,183
Less: Net income from noncontrolling interests 207 93 99 72 76
Wells Fargo net income $5,090 4,937 4,622 4,248 4,107
Average loans $787.2 776.7 768.2 768.6 768.6
Average assets 1,387.1 1,354.3 1,321.6 1,302.9 1,306.7
Average core deposits 928.8 895.4 880.6 870.5 864.9
(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. 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

Dec. 31,

Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2012 2012 2012 2012 2011
MSRs measured using the fair value method:
Fair value, beginning of quarter $10,956 12,081 13,578 12,603 12,372
Servicing from securitizations or asset transfers (1) 1,094 1,173 1,139 1,776 1,211
Sales - - (293 ) - -
Net additions 1,094 1,173 846 1,776 1,211
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (2) 388 (1,131 ) (1,496 ) 147 (483 )
Servicing and foreclosure costs (3) (127) (350 ) (146 ) (54 ) (2 )
Discount rates (4) (53) - - (344 ) -
Prepayment estimates and other (5) 115 54 11 93 21
Net changes in valuation model inputs or assumptions 323 (1,427 ) (1,631 ) (158 ) (464 )
Other changes in fair value (6) (835) (871 ) (712 ) (643 ) (516 )
Total changes in fair value (512) (2,298 ) (2,343 ) (801 ) (980 )
Fair value, end of quarter $11,538 10,956 12,081 13,578 12,603
(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 fourth quarter 2012 change reflects updated broker input on market values for servicing fees in excess of the minimum that can be retained on loans sold to Freddie Mac and Fannie Mae and 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
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2012 2012 2012 2012 2011
Amortized MSRs:
Balance, beginning of quarter $1,144 1,130 1,074 1,445 1,437
Purchases 43 42 78 14 53
Servicing from securitizations or asset transfers (1) 34 30 34 (327 ) 26
Amortization (61) (58 ) (56 ) (58 ) (71 )
Balance, end of quarter 1,160 1,144 1,130 1,074 1,445
Valuation Allowance:
Balance, beginning of quarter - - - (37 ) (40 )
Reversal of provision for MSRs in excess of fair value (1) - - - 37 3
Balance, end of quarter - - - - (37 )
Amortized MSRs, net $1,160 1,144 1,130 1,074 1,408
Fair value of amortized MSRs:
Beginning of quarter $1,399 1,450 1,263 1,756 1,759
End of quarter 1,400 1,399 1,450 1,263 1,756

(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
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2012 2012 2012 2012 2011
Servicing income, net:
Servicing fees (1) $926 984 1,070 1,011 876
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2) 323 (1,427 ) (1,631 ) (158 ) (464 )
Other changes in fair value (3) (835) (871 ) (712 ) (643 ) (516 )
Total changes in fair value of MSRs carried at fair value (512) (2,298 ) (2,343 ) (801 ) (980 )
Amortization (61) (58 ) (56 ) (58 ) (71 )
Reversal of provision for MSRs in excess of fair value - - - - 3
Net derivative gains (losses) from economic hedges (4) (103) 1,569 2,008 100 665
Total servicing income, net $250 197 679 252 493
Market-related valuation changes to MSRs, net of hedge results (2)+(4) $220 142 377 (58 ) 201
(1) Includes contractually specified servicing fees, late charges and other ancillary revenues.
(2) Refer to the changes in fair value MSRs table on the previous page for more detail.
(3) Represents changes due to collection/realization of expected cash flows over time.
(4) Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs.
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in billions) 2012 2012 2012 2012 2011
Managed servicing portfolio (1):
Residential mortgage servicing:
Serviced for others $1,498 1,508 1,499 1,483 1,456
Owned loans serviced 368 364 357 350 358
Subservicing 7 7 7 7 8
Total residential servicing 1,873 1,879 1,863 1,840 1,822
Commercial mortgage servicing:
Serviced for others 408 405 406 407 398
Owned loans serviced 106 105 106 106 106
Subservicing 13 13 13 13 14
Total commercial servicing 527 523 525 526 518
Total managed servicing portfolio $2,400 2,402 2,388 2,366 2,340
Total serviced for others $1,906 1,913 1,905 1,890 1,854
Ratio of MSRs to related loans serviced for others 0.67% 0.63 0.69 0.77 0.76
Weighted-average note rate (mortgage loans serviced for others) 4.77 4.87 4.97 5.05 5.14

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

SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA
Quarter ended
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in billions) 2012 2012 2012 2012 2011
Application data:
Wells Fargo first mortgage quarterly applications $152 188 208 188 157
Refinances as a percentage of applications 72% 72 69 76 78
Wells Fargo first mortgage unclosed pipeline, at quarter end $81 97 102 79 72
Residential real estate originations:
Wells Fargo first mortgage loans:
Retail $63 61 62 61 58
Correspondent/Wholesale 61 77 68 68 61
Other (1) 1 1 1 - 1
Total quarter-to-date $125 139 131 129 120
Total year-to-date $524 399 260 129 357

(1) Consists of home equity loans and lines.

Wells Fargo & Company and Subsidiaries
CHANGES IN MORTGAGE REPURCHASE LIABILITY
Quarter ended Year ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31,
(in millions) 2012 2012 2011 2012 2011
Balance, beginning of period $2,033 1,764 1,194 1,326 1,289
Provision for repurchase losses:
Loan sales 66 75 27 275 101
Change in estimate (1) 313 387 377 1,665 1,184
Total additions 379 462 404 1,940 1,285
Losses (206) (193 ) (272 ) (1,060) (1,248 )
Balance, end of period $2,206 2,033 1,326 2,206 1,326

(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

December 31, 2012

Number of loans6,6211,3067538,680
Original loan balance (3)$1,5032811601,944
September 30, 2012
Number of loans 6,525 1,513 817 8,855
Original loan balance (3) $ 1,489 331 183 2,003
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

(1) Includes repurchase demands of 661 and $132 million, 534 and $111 million, 526 and $103 million, 694 and $131 million and 861 and $161 million, for December 31, September 30, June 30 and March 31, 2012, and December 31, 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 81% at December 31, 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 December 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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