Wells Fargo 2014 Annual Report Download - page 44

Earnings Performance (continued)
compared with 0.88% at December 31, 2013 and 0.67% at
December 31, 2012. See the “Risk Management – Asset/Liability
Management – Mortgage Banking Interest Rate and Market
Risk” section in this Report for additional information regarding
our MSRs risks and hedging approach.
Net gains on mortgage loan origination/sale activities were
$3.0 billion in 2014, compared with $6.9 billion in 2013 and
$10.3 billion in 2012. The decrease from 2013 and 2012 was
primarily driven by lower origination volume and margins.
Mortgage loan originations were $175 billion in 2014, of which
68% were for home purchases, compared with $351 billion and
47%, respectively, for 2013 and $524 billion and 35%,
respectively, for 2012. Mortgage applications were $262 billion
in 2014, compared with $438 billion in 2013 and $736 billion in
2012. The 1-4 family first mortgage unclosed pipeline was
$26 billion at December 31, 2014, compared with $25 billion at
December 31, 2013 and $81 billion at December 31, 2012. For
additional information about our mortgage banking activities
and results, see the “Risk Management – Asset/Liability
Management – Mortgage Banking Interest Rate and Market
Risk” section and Note 9 (Mortgage Banking Activities) and
Note 17 (Fair Values of Assets and Liabilities) to Financial
Statements in this Report.
Net gains on mortgage loan origination/sales activities
include adjustments to the mortgage repurchase liability.
Mortgage loans are repurchased from third parties based on
standard representations and warranties, and early payment
default clauses in mortgage sale contracts. For 2014, we released
a net $140 million from the repurchase liability, compared with
a provision of $428 million for 2013 and $1.9 billion for 2012.
For additional information about mortgage loan repurchases, see
the “Risk Management – Credit Risk Management – Liability for
Mortgage Loan Repurchase Losses” section and Note 9
(Mortgage Banking Activities) to Financial Statements in this
Report.
We engage in trading activities primarily to accommodate
the investment activities of our customers, execute economic
hedging to manage certain of our balance sheet risks and for a
very limited amount of proprietary trading for our own account.
Net gains (losses) from trading activities, which reflect
unrealized changes in fair value of our trading positions and
realized gains and losses, were $1.2 billion in 2014, $1.6 billion
in 2013 and $1.7 billion in 2012. The year-over-year decrease in
2014 was driven by lower trading from customer
accommodation activity within our capital markets business and
lower deferred compensation gains (offset in employee benefits
expense), and the decrease in 2013 from 2012 was largely driven
by lower results in customer accommodation activity. Net gains
from trading activities do not include interest and dividend
income and expense on trading securities. Those amounts are
reported within interest income from trading assets and other
interest expense from trading liabilities. Interest and fees related
to proprietary trading are reported in their corresponding
income statement line items. Proprietary trading activities are
not significant to our client-focused business model. For
additional information about proprietary and other trading, see
the “Risk Management – Asset/Liability Management – Market
Risk – Trading Activities” section in this Report.
Net gains on debt and equity securities totaled $3.0 billion
for 2014 and $1.4 billion for both 2013 and 2012, after other-
than-temporary impairment (OTTI) write-downs of
$322 million, $344 million and $416 million, respectively, for
the same periods. The increase in net gains on debt and equity
securities reflected the benefit of strong public and private equity
markets.
All other income was $456 million for 2014 compared with
$113 million in 2013 and $1.1 billion in 2012. All other income
includes ineffectiveness recognized on derivatives that qualify
for hedge accounting, losses on low-income housing tax credit
investments, foreign currency adjustments and income from
investments accounted for under the equity method, any of
which can cause decreases and net losses in other income.
Higher other income for 2014 compared with a year ago
primarily reflected larger ineffectiveness gains on derivatives
that qualify for hedge accounting, a gain on sale of government-
guaranteed student loans in fourth quarter 2014, and a gain on
sale of 40 insurance offices in second quarter 2014. These were
partially offset by lower income from equity method
investments.
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