Half a loaf from Wells Fargo (WFC) Friday morning. The bank reported first quarter earnings of 75 cents a share. That was 3 cents a share above Wall Street estimates and a 12% increase from the 67 cents a share that the company earned in the first quarter of 2011. (Earnings were bolstered by $400 million release from reserves against bad loans in the quarter.) Revenue climbed—a novelty in the banking industry lately—by 5% from the first quarter of 2011 to $21.64. Wall Street analysts were expecting $20.5 billion in revenue.

But the strength of the story this quarter really depends on what part of Wells Fargo you looked at.

The mortgage business went great guns in the first quarter with the bank originating  $129 billion in mortgages. That was an increase of 7.5% from the $120 billion originated in the fourth quarter and a 54% increase from the $84 billion originated in the first quarter of 2011. This is the kind of performance from the bank’s mortgage unit that investors who have bid up the shares 24% for 2012 through the April 12 close were expecting. Wells Fargo’s mortgage business should be taking advantage of a retreat in the mortgage market from competitors such as Bank of America (BAC)—and it is.

The bank’s lending business wasn’t anywhere near that strong a story. Read more

Bad mortgages get worse at Wells Fargo stretching out schedule for paying back $25 billion bailout

Fear of the future trumps current earnings, as far as investors are concerned, when it comes to Wells Fargo (WFC).

On July 22, before the opening bell, the company reported second quarter earnings of 57 cents a share–far above the 34 cents a share Wall Street had projected, and revenue of $22.5 billion, again above Wall Street expections of $20.5 billion. As the company said in its conference call, “Wells Fargo earned another record profit this quarter: $3.17 bln. While many banks are struggling to earn consistent operating profits, we’ve had back-to-back quarterly record profits”

And once the stock market opened for trading, the stock sunk like a stone. By 11 a.m. ET shares had dropped by 6%.

Why? Because investors looked past current earnings and revenue to the bank’s huge portfolio of some of the riskiest types of mortgage loans in some of the nation’s worst real estate markets, and didn’t see much that they liked. Read more