Bank Stocks and the Secret of NIM (Update 2)

Meanwhile the company's mortgage banking revenue, which includes loan origination fees and gains on the quick sale of new loans to the government-sponsored enterprises, rose to $3.1 billion in the fourth quarter, from $2.8 billion the previous quarter.

CFO Tim Sloan said that "the important thing when you think about Wells Fargo is not to be overly focused on the net interest margin," and that the company "saw a diversified growth on the spread income side in terms of loans, the best that we've had in a long time."

Wells Fargo Tuesday's market close raised its quarterly dividend by three cents to 25 cents, for a dividend yield of 2.85%, based on a closing price of $35.04. The company said that this dividend increase had been approved as part of the Federal Reserve's 2012 stress test process. CEO John Stumpf said that the company had "requested an increase in capital distributions in our 2013 Capital Plan as compared to our 2012 plan," meaning that another dividend increase could be announced soon after the Fed completes the 2013 stress tests in March.

NIM Improves; Net Interest Income Improves More

Fourth-quarter earnings for Bank of America were nearly wiped-out by the company's large mortgage putback settlement with Fannie Mae (FNMA) and its portion of the $8.5 billion foreclosure settlement between federal regulators and the largest mortgage loan servicers.

Looking beyond the legacy mortgage mess, the company's fourth-quarter net interest margin was 2.35%, widening from 2.32% in the third quarter. The company reported fourth-quarter net interest income increased to $10.324 billion from $9.938 billion in the third quarter. That's a 4% increase in just one quarter, when the net interest margin was up only a little over 1%.