The country’s biggest U.S. residential lender and servicer, Wells Fargo & Co., pushed up annual home-loan production to a three-year high.
During the final-three months of 2016, income before income tax expense was $7.6 billion, falling from $8.3 billion in the third-quarter 2016.
Those were among some of the performance measures revealed in the San Francisco-based financial institution’s fourth-quarter earnings report.
Earnings also declined from $8.2 billion in the fourth-quarter 2015.
Quarterly earnings were impacted by net hedge ineffectiveness — which swung to a $592 million loss from a $142 million profit in the third quarter. The bank said hedge ineffectiveness happens when interest rates shift higher or the U.S. dollar appreciates or both.
Mortgage banking income fell to $1.4 billion in the fourth-quarter 2016 from $1.7 billion three months earlier and a year earlier.
The latest period included $0.2 billion in net servicing income and $1.2 billion in net gains on mortgage loan origination and sales activity.
Repurchase liability has been cut to $229 million as of the end of last year from $378 million twelve months earlier.
From Oct. 1, 2016, through year-end 2016, mortgage originations totaled $72 billion.
Business picked up from $70 billion in the third quarter and skyrocketed from $47 billion in the fourth-quarter 2015.
Retail originators generated $35 billion of fourth-quarter 2016 production, while $36 billion came from correspondent acquisitions.
Refinance share was 50 percent, fattening from 42 percent in the third quarter.
The report noted “nonconforming mortgage growth.”
For all of 2016, Wells Fargo closed $249 billion in home loans — including $130 billion in retail originations, $115 billion in correspondent business and $4 billion in home-equity loans and lines of credit. Annual activity increased compared to $213 billion during 2015 and was strongest since $351 billion was funded in 2013.
First-quarter 2017 originations are likely slowing considerably based on Wells Fargo’s applications, which fell to $75 billion
in the final quarter of this year from $100 billion in the third quarter. Refinance share of applications tumbled to 48 percent from 55 percent in the third quarter.
Making the origination outlook even darker was the application pipeline, which sank to $30 billion from $50 billion three months earlier.
Wells Fargo serviced
$1.552 trillion in residential loans when last month concluded. The mortgage servicing portfolio grew from $1.578 trillion at the end of September. But a decline in the portfolio has taken place versus year-end 2015, when it stood at $1.645 trillion.
The month-end December 2016 total was made up of $1.205 trillion in loans serviced for third parties and $0.347 trillion that Wells Fargo serviced for itself.
An additional $0.008 trillion was subserviced for others as of the latest closing date.
The real estate portfolio of one-to-four-family mortgages closed out last year at $321.816 billion. Residential assets were trimmed from $326.794 billion as of Sept. 30, 2016, and $326.873 billion at year-end 2015.
First-lien mortgages accounted for $275.579 billion of the Dec. 31, 2016, total, and junior-lien mortgages made up $46.237 billion.
Wells Fargo serviced $611 billion in commercial real estate loans as of the expiration of 2016. The commercial mortgage servicing portfolio was expanded from $607 billion at the end of the prior quarter and $600 billion a year prior. Last month’s portfolio included $479 billion in loans serviced for others and $132 billion in owned-loans serviced. An additional $8 billion in CRE loans were subserviced.
CRE loan investments
grew to $156.407 billion at the end of last month from $153.563 billion as of Sept. 30 and $144.324 billion as of Dec. 31, 2015. The fourth-quarter 2015 CRE total was comprised of $132.491 billion in commercial mortgages and $23.916 billion in construction loans.
Headcount closed out 2016 at 269,100 active, full-time equivalent team members. Staffing grew from 268,800 at the end of the third quarter and 264,700 as of Dec. 31, 2015.
As of Jan. 8, 2017, the financial services firm raised its minimum hourly pay to between $13.50 and $17.00 depending on experience and geography.
Wells Fargo said it reached out to 40 million retail and 3 million small business customers, and as of year-end 2016 had called more than 168,000
potentially unauthorized credit card customers.
“We continued to make progress in the fourth quarter in rebuilding the trust of our customers, team members and other key stakeholders,” Wells Fargo Chief Executive Officer Tim Sloan said in the report. “I am pleased with the progress we have made in customer remediation, the ongoing review of sales practices across the company and fulfilling our regulatory requirements for sales practices matters.”
