(Update 1: noted that WFC's results did not include Wachovia) The controversial acquisition of Wachovia Corp. wasn't needed to help push Wells Fargo & Co. (WFC) into the red for the first time in seven years, with the San Francisco-based bank saying Wednesday morning that it lost $2.55 billion, or (.79/share), during the fourth quarter of 2008. Wachovia itself -- which wasn't included in the bank's bottom-line results -- recorded a fourth quarter loss of $11.2 billion, including $2.8 billion deferred tax asset write-down, $4.2 billion credit reserve build and $4.3 billion of market disruption losses, Wells Fargo said in a press statement. Wells itself wasn't immune to the credit crisis, outside of Wachovia, either; the bank said it built credit reserves by $5.6 billion for future expected losses, while absorbing $473 million in other-than-temporary-impairment charges in its securities portfolio and another $413 million in write-downs on mortgages in warehouse facilities. Of the major four U.S. banks left standing, only JP Morgan Chase & Co. (JPM) managed to post a quarterly profit; Citigroup Inc. (C) posted the widest loss of $8.29 billion for Q4, and has been forced to break itself up, while Bank of America Corp. (BAC) lost $1.79 billion. Wells stressed that despite the loss, it has no plans to request additional capital from the U.S. Treasury via the Troubled Asset Relief Program. Mortgage applications soared at WFC during the quarter, bank officials said -- apps reached $116 billion, up 158 percent annualized on a linked-quarter basis. December represent the 4th-highest month of application activity recorded in the bank's history, the company said, although it did not specify how many of those applications successfully transformed into a loan. The bank reported a mortgage application pipeline of $71 billion at year end to go with $50 billion in closed loans during Q4, and estimated that its share of the mortgage market grew to 12 percent, up from 10 percent one year earlier. Chief credit officer Mike Loughlin cited continued home price declines and increased bankruptcies as key drivers for deteriorating credit performance -- which makes us wonder if cram-down legislation, recently passed by a key House of Representatives committee earlier this week, could portend further portfolio losses for Wells, should it become law. Net charge-offs in the real estate 1-4 family first mortgage portfolio increased $54 million between Q3 and Q4, while charge-offs in junior liens increased $61 million in the same time frame. “As previously stated, loss levels in this portfolio directly correlate to property values,” said Loughlin. “Until residential real estate values stabilize, our home equity portfolios will produce higher than normal loss levels.” Wells Fargo itself held $78.2 billion in residential 1-4 family first mortgages and $75.8 billion in second liens on its books at the end of the fourth quarter; now combined with Wachovia, Wells holds $247.8 billion in first liens, and $110.1 billion in seconds. $122 billion of that increased total comes in the form of Wachovia's now-discontinued Pick-a-Pay Option ARM product; it remains to be seen how the bank pushes through managing such a toxic loan book, in addition to its own substantial second lien exposure. Write to Paul Jackson at paul.jackson@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.