12:20AM New York – Wells Fargo reported revenue increase of 16% and net income decline of 25%. Mortgage portfolio increased 7% to $1.6 trillion.

Wells Fargo & Company, California based bank today reported revenue increased 16% to $11.5 billion. Net income declined to $1.75 billion or 53 cent diluted earnings per share compared with $2.28 billion or 67 cent diluted earnings per share for the same quarter of a year ago. The company increased quarterly dividend 10% to 34 cents per share.

The company set aside $3 billion to cover loan losses that included $1.5 billion in credit reserve fund. The company increased its Tier 1 capital in the quarter by 32 basis points to 8.24% and generated return on equity of 14.6%.

The company increased earnings asset by 20%, net revenue by 16% and non-interest income by 10%.

The company issued upbeat asset of its future and said, “In broad terms, the credit crisis has created incremental earnings opportunities for Wells Fargo largely offsetting our incremental charge-offs from the crisis.” The board of directors increased dividend payout 10%.

The company issued $31 billion in mortgages, flat from a year ago but mortgage applications were down 12% to $100 billion and pipeline of applications declined 16% from a year ago to $47 billion. The company owned mortgage portfolio rose 7% from a year ago to $1.55 trillion.

Loans Portfolio Rises 18%

Average loans increased $59.6 billion or 18% to $391.5 billion from a year ago. Average commercial and commercial real estate loans increased 27% to $33.9 billion from second quarter of 2007. Average consumer loans up 13% to $25.5 billion from second quarter 2007.

Deposit Base Rises 6%

On average core deposits increased 6% or $17.8 billion from a year ago to $318.4 billion. Mortgage escrow deposits were down $680 million to $22.7 billion from second quarter 2007. Retail core deposits rose 5% to $10.3 billion compared to quarter of 2007. Average consumer checking accounts increased net 5.5% from second quarter 2007 and wholesale deposits increased 14% from a year ago.

Net Interest Income Surge 21%

Net interest income increased $1.1 billion or 21% from last year and $518 million on 20% increase in interest earnings asset and increase of net interest margin of 23 basis points to 4.92%.

Non-interest Income Increase 10%

Non-interest income grew 10% to $5.2 billion from second quarter 2007. Trust and investment fees declined 9%. Card fees increased 14% from a year ago and insurance fees increased 27% due to customer growth and higher crop insurance revenue on the recent acquisition of ABD Insurance.

Equity investment gains declined to $46 million from $196 million from a year ago quarter. Unrealized net losses on securities available for sale were $2.1 billion at June 30, 2008, compared with unrealized net losses of $598 million at March 31, 2008.

Credit Quality

Second quarter 2008 net charge-offs were $1.5 billion 1.55% of average loans annualized compared with $1.5 billion or 1.60% in first quarter 2008 and $720 million in second quarter 2007 or 0.87%. The second quarter 2008 provision was $3.0 billion which included second quarter 2008 net charge-offs of $1.5 billion and an additional $1.5 billion credit reserve build, primarily for expected higher losses in home equity loans and the unsecured retail loan portfolios.

Net loan charge-offs in total commercial and commercial real estate were $342 million and consumer loans were $1,512 million.

Nonperforming Assets Continue to Rise