Seasonality in Deposit Flows
Erika Penala – Bank of America Merrill Lynch: My first question was on the margin. Is there a seasonality in terms of deposit flows because you have $92 billion average cash this quarter and it was $98 billion last quarter – sorry, last year same quarter. I’m just wondering we had sort of a similar step down and more stability in other quarters. I’m just wondering if there is a seasonality in deposit flows that we hadn’t been take into account.
Timothy J. Sloan – SEVP and CFO: Erika, that’s a good question. I think throughout the year you can see some seasonality in our deposit flows. I wouldn’t necessarily conclude that every third quarter we are going to have deposit growth like we had in the third quarter of last year and this year, but there is no question that part of the and a big reason for the net interest margin decline was because of the strong deposit flows, particularly what we saw in September.
Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.
Erika Penala – Bank of America Merrill Lynch: It’s clear that the momentum in core loan growth should absorb some of that excess cash on a go-forward basis, but could you give us a sense of how you plan to deploy and how much of the excess cash that you plan to deploy on a go-forward basis your reinvestment strategy that’s not soaked by core loan growth?
Timothy J. Sloan – SEVP and CFO: Well, the first call on any of our liquidity is for our customers and it’s really going to be focused on core loan growth. As you saw this quarter, we decided to hold $9.8 billion of our conforming first mortgage portfolio primarily because we view it as a very good investment opportunity for us given the risk-reward of holding those mortgages, which were very high quality versus buying similar duration MBS at a big premium. We were very cautious this quarter in terms of how we thought about our investment alternatives and we are doing that, because we are thinking about the investment portfolio for the long-term.
John G. Stumpf – Chairman, President and CEO: And Erika, I think Tim is absolutely right on that. We had to be very careful at this point in time not to just go out there and stretch for yield and take on a lot of interest rate risk. But the first call is always for our customers.
Erika Penala – Bank of America Merrill Lynch: Just one last question on the margin and I’ll step off. On Slide 15, you mentioned that there was a $4.3 billion increase in the accretable yield. I guess the way I am thinking about this is as that housing market in the U.S. recovers, you can continue to reclassify more of the non-accretable into accretable and so that’s clearly going to be margin support on a go-forward basis and the negative impact that you mentioned on the margin this quarter that has to do with the lower cash resolutions from the Wachovia legacy book than last quarter? Am I thinking about this component in right way?
Timothy J. Sloan – SEVP and CFO: That’s correct, the 10 basis points that we called out in the supplement was primarily because of lower resolutions and as we mentioned in second quarter, we had higher resolutions. Those are going to be volatile on our quarter-to-quarter basis, but you are absolutely correct when you think about the impact on the non-accretable yield to accretable yield and then the expectation of cash flows from that portfolio that as the housing market continues to improve that we’ll get benefit there.
New Agency Demands
Moshe Orenbuch – Credit Suisse: Tim, could you perhaps maybe just drill down little more into what you’re seeing from the agencies in terms of the put-backs. You talked about a little bit, can you kind of just– some of your competitors have already kind of had their reserves to the point where they’re beginning the draw them down to talk about that a little bit.
Timothy J. Sloan – SEVP and CFO: Sure. As we mentioned we added $462 million into their purchase reserve this quarter which was down from the second quarter which was $669 million and there is a little bit of noise in the puts and takes here because the new agency demand levels were actually down. So these are new agency demands that were down this quarter, which is a good sign. I don’t necessarily think that it means we should declare a victory and they are always going to be down, but that’s a good sign that we haven’t seen for a while. The outstanding demands from the GSEs were actually up a little bit and this reflects a couple of things. One, remember, our expectations from last quarter as well as the fact that it’s taken a little bit longer to work through our file request, but the non-agency demands were actually up this quarter. So, there is a lot going on there and we continue to have a lot of discussion with the agencies, but there is nothing that we’ve seen yet that would indicate that the decline that we saw this quarter is certainly a trend. I hope it is, but I can’t guarantee that that’s going to be the case.
John G. Stumpf – Chairman, President and CEO: There are a couple of big – if step back a little bit, a couple issues that are encouraging. First of all, real estate is getting better. We saw it in housing a year ago and every quarter, we have more confidence that this — we’re not back to where we needed to be and it’s not as robust as we all wanted to be, but that’s good on the repurchase side as values go up, and secondly, we continue to get further and further away or it’s within a rearview mirror, the 2006 and 2008 portfolio. So, every quarter we go, we’re getting through them. So, those are things that that are encouraging.
Timothy J. Sloan – SEVP and CFO: Just on the mortgage banking front, a couple of just interesting trends. It looks like you took the pedal off on the correspondent business a touch and at the same time took the valuation of your MSR down whereas that JPMorgan had taken it up a little bit. Could you just talk a little bit about how we should think about the interplay of both origination volumes into the fourth quarter in 2013 and maybe perhaps the valuation of the MSR?
John G. Stumpf – Chairman, President and CEO: Sure. I’ll start with origination volume. We ended the quarter with a pipeline that was a little bit less than the second quarter but at almost $100 billion it’s still very strong. And as we mentioned, volume has been strong so far this quarter being the fourth quarter, so we expect to have a pretty strong mortgage quarter in the fourth quarter. How long that lasts? Don’t know for sure, but it feels like it’s going to last at least a few quarters and obviously we hope it does. In terms of the MSR valuation, the change that we made this quarter was just to continue to take into consideration the higher servicing and the foreclosure costs that we’re seeing and to include that into valuation of our MSR, and that yielded a $350 million write-down.
A Closer Look: Wells Fargo Earnings Cheat Sheet>>