4 Must-Read Quotes From Wells Fargo & Co.'s Fourth-Quarter Earnings Call

On Wednesday morning, Wells Fargo reported results for the company's fourth quarter ended Dec. 31. The bank reported increases in revenue and profits, driven by growth in lending, deposits, and non-lending businesses. Earnings per share came in at $1.02 per share, meeting analyst expectations.

The release was followed by the company's investor call to discuss the quarter's results, featuring CEO John Stumpf and CFO John Shrewsberry.

These executives didn't just rehash the obvious headline metrics in the call. They really got under the hood and talked about what really matters. Here are what I think are the three important quotes from the latest call, followed by my interpretation of why they matter to shareholders.

1. The bank's diversified income streamsAccording to CFO Shrewsberry:

Wells' core business is lending money and accepting deposits, an old-school and very profitable business when done right. However, in today's era of low interest rates, that business can be pretty tough. Wells Fargo has, over time, built highly successful and complementary income streams designed to compliment the lending business and buoy profits through the ups and downs of interest rate cycles.

The best part, though, is that these businesses have low volatility and risk. It's not about hedge funds or private equity or trading. It's about providing simple and needed solutions to clients. In my opinion, you couldn't draw up a bank business model any better than that.

2. Shrewsberryon efficiency

I've written at length before on the importance of efficiency at banks over time. Wells Fargo has a decent efficiency ratio, primarily because of the bank's expansive branch network. What's remarkable about the bank, and why this quote resonates with me so much, is how consistent the bank is able to maintain an efficiency within its target range.

On an annualized basis, Wells has met its stated target range every single year except once since 2004 (and that was a 61% mark in 2011). That's a remarkable achievement, especially considering the near collapse of the entire financial system during the financial crisis and Great Recession.

3. Understanding both the ups and the downs ofthe credit cycleShrewsberry offered this opinion on the topic:

And Stumpf had these big picture thoughts to add:

I love the dichotomy of these two quotes, and while they at first may seem contradictory, I would argue that this is exactly the kind of approach you need to see in a bank management team. Let's break it down.

First, Shrewsberry's comment says that the bank is beginning preparations to increase its loan loss reserves in the event that there is an increase in problem loans. The loan loss reserves are basically a rainy day fund to protect the bank from future losses if loans go bad. In that light, one may think that the bank sees troubled times ahead. Since the end of the recession, banks have by and large been reducing reserves, not increasing them. Increasing reserves would be a marked change.

On the other hand, though, Stumpf paints a pretty optimistic (his word) picture for the future. Throughout the call, both executives talk again and again about the investments the bank is making for the future, for growth, and for the next 20 years of Wells' evolution. So what is it? Doom and gloom and loan losses, or sunshine and growth and profits?

The key, and what makes these last two quotes so significant to me, is that the bank sees a positive future for itself and for the U.S. economy, but it also recognizes the reality of the credit cycle. The U.S. economy does not grow in a straight line. It grows for a while, then there's a recession, and then it resumes growth.

The best banks, like Wells Fargo, plan for the downs and invest for the ups. It's a balancing act based on a long-term strategy. And for investors, it's a strategy that works.

The article 4 Must-Read Quotes From Wells Fargo & Co.'s Fourth-Quarter Earnings Call originally appeared on Fool.com.

Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.