Wells Fargo & Company (WFC) posted a record year-end net income of $12.3bn, or $1.75 per share, in 2009, capped off by a Q409 net income of $2.8bn, or $0.08 per share. Results in the quarter were impacted by a pre-tax $500m credit reserve build and $861m in merger-related and incremental expenses. The record profits come nearly a year after Wells Fargo acquired Wachovia, essentially doubling the bank’s size. Wells Fargo said mortgage originations and servicing revenue was $3.4bn in the quarter, and its total mortgage banking noninterest income accounted for 15% of the company’s consolidated Q409 revenue. The bank had $1.2bn in income from mortgage origination and sales activities on $94bn of residential mortgage originations and $144bn of applications. Wells originated $94bn in new mortgages in Q409, “essentially flat” from $96bn in Q309, the bank said. Total mortgage applications in the quarter totaled $144bn, up from $123bn in Q309. The bank’s mortgage application pipeline totaled $57bn in quarter’s end, down from $62bn at the end of Q309. Average mortgage escrow deposits were $27.5bn compared with $28.7bn in Q309. In 2008, Wells Fargo was the country’s highest volume mortgage originator with more than $237bn originations. The next closest producer in 2008 was Chase Home Finance, which originated $187.1bn in 2008. The bank’s owned residential mortgage servicing portfolio totaled $1.8trn at quarter’s end. Wells experienced $1.9bn in market-related valuation changes to mortgage servicing rights (MSRs) net of economic hedge results, reflecting the continuation of strong carry income and effective hedge performance, the bank said. The average servicing portfolio note rate was 5.66%, the lowest since Sept. 30, 2005, Wells said, adding the value of MSRs to loans serviced for others was 91bps. At the end of 2009, nearly 500,000 mortgage customers were in active trial or completed loan modifications started in prior 12 months, including 119,000 in the Making Home Affordable Modification Program (HAMP), 8,400 of which were completed modifications, and the rest were non-HAMP modifications. To handle the load of modification applications, Wells increased its home retention staff 17% in the quarter and now has a staff of more than 15,000 loss mitigation employees. The bank’s net interest income was $11.5bn, down from $11.7bn in Q309, due to the decline in core loans, the reduction in non-strategic assets and the Q309 sale of longer-duration mortgage-backed securities (MBS). During the quarter, MBS yields increased while capital market credit spreads generally narrowed, the bank said and it had a net unrealized securities gains of $5.6bn at year’s end, including $3.3bn in unrealized gains in its agency MBS portfolio. Write to Austin Kilgore.

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