Wells Fargo (WFC) reported net income of $5.7 billion, or $1.03 per diluted common share, for second quarter 2015, compared with $5.7 billion, or $1.01 per share, for second quarter 2014, and $5.8 billion, or $1.04 per share, for first quarter 2015.
Net interest income increased $284 million from first quarter 2015 to $11.3 billion, primarily due to broad-based asset growth including investment securities, loans, trading assets and mortgages held-for-sale.
The quarter also included one additional day, accounting for approximately 25% of the increase in net interest income relative to the first quarter. Net interest income also benefited from increased income from variable sources, lower deposit costs, and higher income from interest rate swaps used to convert a portion of our floating rate commercial loans to fixed rate as we continued to add duration to our balance sheet.
"Wells Fargo’s second quarter results reflected continued strength in the fundamental drivers of long term growth," said Chairman and CEO John Stumpf. "Compared with a year ago, we grew loans, deposits and capital, and our balance sheet remained strong. Credit results also improved and we continued to adhere to our disciplined approach to risk management.
“As the economic and interest rate environments evolved, our diversified business model continued to generate strong results for shareholders, and we were pleased to increase our common stock dividend 7% in the second quarter, to $0.375 per share. Wells Fargo is well positioned for the future and I remain confident in the ability of our 266,000 team members to help our customers succeed financially and to serve our communities," Stumpf said.
Net interest margin was 2.97%, up 2 basis points from first quarter 2015. Many of the same factors that improved net interest income this quarter, including growth in investments and loans, and lower deposit costs, combined to improve the net interest margin by approximately 4 basis points linked-quarter, and income from variable sources contributed 1 basis point.
Mortgage originations came in at $62 billion, up from $49 billion in prior quarter. Applications were at $81 billion, down from $93 billion in prior quarter.
Wells had a residential mortgage servicing portfolio of $1.7 trillion.
“Wells Fargo’s second quarter results once again reflected the benefit of our balanced business model. Compared with the first quarter, revenue increased on net interest income growth and expenses declined,” said CFO John Shrewsberry said. “Our balance sheet remained strong, as evidenced by solid asset quality, liquidity and capital, and we were within our targeted ranges for ROA, ROE and efficiency.”
Noninterest income was $10.0 billion, compared with $10.3 billion in first quarter 2015, driven by higher mortgage banking revenue, equity investment gains, deposit service charges, card fees, trust and investment fees, and insurance fees. Offsetting this growth were lower gains from trading activities and debt securities, and lower other income, primarily due to variability from the accounting related to our debt hedges.
Mortgage banking noninterest income was $1.7 billion, up $158 million from first quarter. During the second quarter, residential mortgage originations were $62 billion, up $13 billion linked quarter, while the gain on sale ratio4 was 1.88 percent, compared with 2.06% in first quarter.
Net mortgage servicing rights (MSRs) results were $107 million, compared with $108 million in first quarter 2015.