2. Wells Fargo Shares of Wells Fargo closed at $34.50 Monday, returning 27% year-to-date, following 10% decline during 2011. The shares trade for 1.5 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.5 times the consensus 2013 EPS estimate of $3.63. Based on a quarterly payout of 22 cents, the shares have a dividend yield of 2.55%. Wells Fargo reported third-quarter earnings applicable to common stock of $4.7 billion, or 88 cents a share, increasing from $4.4 billion, or 82 cents a share, in the second quarter, and $3.8 billion, or 72 cents a share, during the third quarter of 2011. The company's third-quarter net interest margin declined by 25 basis points sequentially to 3.66%, its third-quarter net interest income totaled $10.7 billion, declining sharply from $11.0 billion the previous quarter, while increasing from $10.5 billion a year earlier. Wells Fargo CFO said during the company's earnings conference call that "we expect continued pressure on the net interest margin given this low rate environment... however, we don't believe the net interest margin decline we had this quarter is representative of what we will see in the future." Wells Fargo's noninterest income increased to $10.6 billion in the third quarter, from $10.3 billion in the second quarter, and $9.1 billion in the third quarter of 2011. Mortgage banking revenue totaled $2.8 billion, declining from $2.9 billion the previous quarter, but increasing from $1.8 billion a year earlier. During the third quarter, the company reported $529 million in net gains from trading activities, increasing from $263 million the previous quarter, and from losses of $442 million in September of last year. Ramsden said that Wells Fargo's mortgage production volume was up 6% sequentially and 56% year-over-year, and that "volume during the first few weeks of October has accelerated as rates reached new lows." The analyst expects the high refinance volume "to continue on for a few quarters." Another bright spot for Wells Fargo in the third quarter was trust and investment fees, which grew to $3.0 billion, from $2.9 billion the previous quarter, and $2.8 billion a year earlier. Like most of the large banks, Wells Fargo has been focused on reducing expenses. Total noninterest expense declined to $12.1 billion in the third quarter from $12.4 billion in the second quarter, although expenses were up from $11.7 billion in the third quarter of 2011, with rising costs for employee compensation and benefits. With so many moving parts, the efficiency ratio is a useful measure of the company's expense control efforts. The efficiency ratio is, essentially, the number of pennies of overhead expenses for each dollar of revenue. Wells Fargo's efficiency ratio improved to 57.1 in the third quarter, from 58.2 the previous quarter, and 59.5 a year earlier. The company has had the strongest and most consistent earnings performance among the big four, with a return on average assets (ROA) of 1.34% over the past 12 months ended Sept. 30, and a return on average tangible common equity (ROE) of 15.86%, according to Thomson Reuters Bank Insight. Ramsden's price target for Wells Fargo is $40, and he estimates the company will earn $3.65 a share in 2013, followed by EPS of $3.95 in 2014. Interested in more on Wells Fargo? See TheStreet Ratings' report card for this stock.