EX-99.1 2 d280076dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

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   Media      Investors   
   Mary Eshet      Jim Rowe   
   704-383-7777      415-396-8216   

 

Tuesday, January 17, 2012

WELLS FARGO REPORTS RECORD QUARTERLY AND FULL YEAR NET INCOME

Q4 Net Income of $4.1 billion; Q4 Revenue of $20.6 billion

 

 

Continued strong financial results:

 

  o Record Wells Fargo net income of $4.1 billion

 

  o Record diluted earnings per common share of $0.73

 

  o Revenue of $20.6 billion, up 20 percent (annualized) from prior quarter

 

  o

Pre-tax pre-provision profit (PTPP)1 of $8.1 billion, up 7 percent (annualized) from prior quarter

 

  o Return on equity of 11.97 percent, up 11 basis points from prior quarter

 

  o Return on average assets of 1.25 percent

 

  o Net interest margin of 3.89 percent, up 5 basis points from prior quarter

 

 

Continued solid loan and deposit growth:

 

  o

Total loans of $769.6 billion at December 31, 2011, up $9.5 billion from September 30, 2011; core loan portfolios up $13.7 billion from September 30, 20112

 

  o Total average core checking and savings deposits up $30.8 billion from prior quarter

 

 

Improved capital position:

 

  o

Tier 1 common equity increased $3.2 billion to $95.1 billion, with Tier 1 common equity ratio of 9.46 percent under Basel I at December 31, 2011. Under current Basel III capital proposals, Tier 1 common equity ratio estimated at 7.49 percent3

 

  o Purchased 27 million shares of common stock in fourth quarter 2011 and an additional estimated 6 million shares through a forward repurchase transaction that will settle in first quarter 2012

 

  o Redeemed $5.8 billion of trust preferred securities with an average coupon of 8.42 percent

 

 

Strong credit quality, stable net loan charge-offs:

 

  o Nonperforming assets declined to $26.0 billion, down $879 million from prior quarter; down $6.3 billion from prior year

 

  o Net charge-offs were $2.6 billion, or 1.36 percent (annualized) of average loans, in line with third quarter net charge-offs

 

 

1 See footnote (2) on page 17 for more information on pre-tax pre-provision profit.

2 See table on page 5 for more information on core and non-strategic/liquidating loan portfolios.

3 See tables on page 39 for more information on Tier 1 common equity.


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  o

Reserve release1 of $600 million (pre-tax) reflected continued strong portfolio performance

 

 

Wachovia banking conversions successfully completed:

 

  o Retail bank store conversions complete with North Carolina integration in mid-October 2011

 

  o 50 million accounts involved, 4,600 locations converted

 

  o On track for merger integration completion in first quarter 2012

 

 

Full Year 2011:

 

  o Record Wells Fargo net income of $15.9 billion, up 28 percent from 2010

 

  o Diluted earnings per common share of $2.82, up 28 percent from 2010

 

  o Revenue of $80.9 billion, down 5 percent from 2010

 

  o Net interest margin of 3.94 percent, return on assets of 1.25 percent, and return on equity of 11.93 percent

 

  o Returned more capital to shareholders through a higher common stock dividend, and resumed common stock repurchases; in addition, redeemed $9.2 billion of high cost trust preferred securities

 

 

Committed to helping homeowners remain in their homes:

 

  o As of November 30, 2011, 724,710 active trial or completed loan modifications had been initiated since the beginning of 2009; of this total, 84 percent were through Wells Fargo’s own modification programs and the remainder were through the federal government’s Home Affordable Modification Program (HAMP)

 

  o Since September 2009, Wells Fargo participated in more than 640 home preservation workshops and met individually with more than 29,000 customers

Selected Financial Information

 

 

 
          

 

Quarter ended

               
  

 

 

       
     Dec. 31,     Sept. 30,      Dec. 31,      Year ended Dec. 31,    
          

 

 

 
     2011     2011      2010      2011      2010    

 

 

Earnings

             

Diluted earnings per common share

   $ 0.73        0.72         0.61         2.82         2.21     

Wells Fargo net income (in billions)

     4.11        4.06         3.41         15.87         12.36     

Asset Quality

             

Net charge-offs as a % of avg. total loans

     1.36   %      1.37         2.02         1.49         2.30     

Allowance as a % of total loans

     2.56        2.68         3.10         2.56         3.10     

Allowance as a % of annualized net charge-offs

     188        197         154         174         132     

Other

             

Revenue (in billions)

   $ 20.61        19.63         21.49         80.95         85.21     

Average loans (in billions)

     768.6        754.5         753.7         757.1         770.6     

Average core deposits (in billions)

     864.9        836.8         794.8         826.7         772.0     

Net interest margin

     3.89   %      3.84         4.16         3.94         4.26     
             

 

 

 

 

1 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.


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SAN FRANCISCO – Wells Fargo & Company (NYSE: WFC) reported record net income of $4.1 billion, or $0.73 per diluted common share, for fourth quarter 2011, compared with $3.4 billion, or $0.61 per share, for fourth quarter 2010, and $4.1 billion, or $0.72 per share, for third quarter 2011. Full year 2011 Wells Fargo net income was $15.9 billion, or $2.82 per share, up 28 percent from 2010.

“I’m extremely pleased with Wells Fargo’s performance in 2011 – including strong deposit and loan growth, record cross-sell and record earnings,” said Chairman and CEO John Stumpf. “We achieved these results while completing the conversion of Wachovia’s retail banking stores – the largest such conversion in banking history – and now all of our 6,239 retail banking stores are on a single platform serving customers coast to coast. At the time of the merger, we said the integration of Wachovia would take three years and we are right on track. I couldn’t be prouder of how our two companies have come together as one, thanks to the important and tireless work of our more than 260,000 team members.

“In 2012, we are focused on Wells Fargo’s many opportunities, including continuing to provide our customers with award winning service, welcoming new customers as we grow market share throughout our many businesses and geographies, achieving efficiency improvements across the company and returning even more capital to our shareholders.”

“The fourth quarter of 2011 was a very strong quarter for Wells Fargo, with record earnings, solid linked quarter growth in loans, deposits and capital, and continued strong credit quality,” said Chief Financial Officer Tim Sloan. “Revenue was up 5 percent from the third quarter despite a full quarter’s impact of the new debit interchange rules. As expected, expenses were higher in the quarter and we are maintaining our target of $11 billion in noninterest expense in the fourth quarter of 2012.”

Revenue

Revenue was $20.6 billion, up from $19.6 billion in third quarter 2011. “We are pleased with revenue performance in the quarter. Both net interest income, which benefited from the growth in earning assets and an increase in the net interest margin, and noninterest income, which was bolstered by strong mortgage banking and capital markets results, were up this quarter,” said Sloan. Businesses generating linked-quarter revenue growth included asset-backed finance, capital markets, commercial banking, commercial real estate, corporate banking, corporate trust, credit card, equipment finance, government and institutional banking, insurance, international, merchant services, mortgage, real estate capital markets and retail sales finance.

Net Interest Income

Net interest income was $10.9 billion, up from $10.5 billion in third quarter 2011. Average earning assets increased $24.3 billion from third quarter 2011, driven by growth in loans, securities and mortgages held for sale. Continued success in generating low-cost deposits enabled the Company to fund the asset growth while at the same time reducing long-term debt, including the redemption of $5.8 billion of higher-cost trust preferred securities. The net interest margin increased to 3.89 percent from 3.84 percent in third quarter


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2011. Lower deposit costs, less long-term debt, and the redeployment of short-term investments into higher-yielding assets such as securities and loans contributed to the increase in the margin.

Noninterest Income

Noninterest income was $9.7 billion, compared with $9.1 billion in third quarter 2011. The $627 million increase was driven by increases of $531 million in mortgage banking and $337 million in trading, debt and equity gains. Card fees declined $333 million from third quarter due to a $365 million decline in debit interchange fees partially offset by improved credit card fee revenue. Other income included a $153 million gain on sale from H.D. Vest.

Mortgage banking noninterest income was $2.4 billion, up $531 million from third quarter 2011, on $120 billion of originations compared with $89 billion of originations in third quarter. Mortgage banking noninterest income in fourth quarter included a $404 million provision for mortgage loan repurchase losses compared with $390 million in third quarter (included in net gains from mortgage loan origination/sales activities). Net mortgage servicing rights (MSRs) results were a $201 million gain compared with a $607 million gain in third quarter 2011. The ratio of MSRs to related loans serviced for others was 76 basis points and the average note rate on the servicing portfolio was 5.14 percent. The unclosed pipeline at December 31, 2011, was $72 billion compared with $84 billion at September 30, 2011.

The Company had net unrealized securities gains of $7.0 billion at December 31, 2011, compared with a net unrealized gain of $6.8 billion at September 30, 2010. Period-end securities available for sale balances were up $15.4 billion, reflecting continued investment activity.

Noninterest Expense

Noninterest expense increased in the quarter, to $12.5 billion, compared with $11.7 billion in third quarter. Third quarter expense included a $210 million benefit due to lower deferred compensation expenses associated with an offsetting trading loss. In addition to this factor, the increase in fourth quarter expenses was primarily driven by the following:

 

 

higher personnel expense associated with stronger mortgage and capital markets revenue in the quarter (approximately $300 million);

 

 

seasonally higher costs for equipment and foreclosed assets expense (approximately $200 million); and

 

 

higher costs associated with the mortgage servicing regulatory consent orders (approximately $100 million).

The Company expects first quarter 2012 noninterest expense to remain elevated due to seasonally high personnel expenses offset by lower integration expenses and continued gains from efficiency and cost save initiatives. Starting in second quarter 2012, total expenses are expected to decline over the remainder of the


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year, driven by the benefit from ongoing efficiency initiatives and the conclusion of integration activities. The Company continues to target fourth quarter 2012 noninterest expense of $11 billion.

Loans

Total loans were $769.6 billion at December 31, 2011, up $9.5 billion from $760.1 billion at September 30, 2011. Increased balances in many loan portfolios more than offset the continued planned reduction in the non-strategic/liquidating portfolios, which declined $4.2 billion in the quarter. Period-end core loans grew $13.7 billion and included $2.1 billion of U.S.-based commercial real estate (CRE) loans purchased in the quarter, as well as an additional $5.6 billion of consumer real estate 1-4 family loans related to the consolidation of previously sold reverse mortgage loans. Organic loan growth of $6.0 billion linked quarter was driven by commercial and industrial growth from expanding relationships with existing customers and new customer loans. Additional growth came from a 4 percent increase in foreign loans and a 5 percent increase in credit card balances, reflecting higher purchase dollar volumes and transactions, as well as new account growth.

Many loan portfolios had linked-quarter growth in average balances, including asset-backed finance, capital finance, commercial banking, commercial real estate, corporate banking, credit card, government and institutional banking, international, mortgage, real estate capital markets, and retail sales finance.

 

 

 
    December 31, 2011       September 30, 2011    
 

 

 

   

 

 

 
 (in millions)   Core        Liquidating (1)        Total       Core        Liquidating (1)        Total    

 

 

 Commercial

    $   339,755           5,695           345,450          333,513           6,321           339,834     

 Consumer

    317,550           106,631           424,181          310,084           110,188           420,272     

 

 

 Total loans

    $   657,305           112,326           769,631          643,597           116,509           760,106     

 

 

 Change from prior quarter:

    $   13,708           (4,183        9,525          13,429           (5,244        8,185     

 

 

 

(1) See table on page 35 for additional information on non-strategic/liquidating loan portfolios. Management believes that the above information provides useful disclosure regarding the Company’s ongoing loan portfolios.

Deposits

Average core deposits were $864.9 billion, up 9 percent from a year ago and up 13 percent (annualized) from third quarter 2011. Consumer checking accounts grew a net 3.2 percent from December 31, 2010. Average core checking and savings deposits were $800 billion, up 12 percent from a year ago and up 16 percent (annualized) from third quarter 2011. Average mortgage escrow deposits were $34.9 billion compared with $36.0 billion a year ago and $28.3 billion in third quarter 2011. Average core checking and savings deposits were 93 percent of average core deposits, up from 90 percent a year ago. Deposit costs for fourth quarter 2011 were 22 basis points compared with 25 basis points in third quarter 2011. Average core deposits were 113 percent of average loans, up from 111 percent in third quarter 2011.


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Capital

Capital increased in the fourth quarter, with Tier 1 common equity reaching $95.1 billion under Basel I, or 9.46 percent of risk-weighted assets. Under current Basel III proposals, the Tier 1 common equity ratio was an estimated 7.49 percent. The Company redeemed $5.8 billion of trust preferred securities in the quarter, repurchased 27 million shares of its common stock, plus an additional estimated 6 million shares through a forward repurchase transaction that will settle in first quarter 2012, and paid a quarterly common stock dividend of $0.12 per share.

 

 

 
     Dec. 31,        Sept. 30,      Dec. 31,    
 (as a percent of total risk-weighted assets)    2011        2011      2010    

 

 

 Ratios under Basel I (1):

       

 Tier 1 common equity (2)

     9.46        9.34         8.30     

 Tier 1 capital

     11.33           11.26         11.16     

 Tier 1 leverage

     9.03           8.97         9.19      
       

 

 

 

(1) December 31, 2011, ratios are preliminary.
(2) See table on page 39 for more information on Tier 1 common equity.

Credit Quality

“Credit remained strong and within expectations in the fourth quarter. Consumer losses were essentially flat from third quarter while commercial losses increased slightly as we experienced normal period-to-period fluctuation. Based on our current forecasts, we expect continued improvement in credit in 2012,” said Chief Risk Officer Mike Loughlin.

Fourth quarter net charge-offs were $2.6 billion, or 1.36 percent (annualized) of average loans, essentially flat from third quarter net charge-offs of $2.6 billion (1.37 percent). The provision for credit losses was $600 million less than net charge-offs, compared with $800 million less than net charge-offs in the prior quarter, reflecting our expected continued improvement. “We have seen significant improvement in credit performance over the past eight quarters, and expect continued but slower improvement in 2012 as portfolio quality approaches a stable, more normal level,” said Loughlin. “Absent significant deterioration in the economy, we continue to expect future reserve releases in 2012.”


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Net Loan Charge-Offs

 

 

 
     Quarter ended    
  

 

 

 
     Dec. 31, 2011     Sept. 30, 2011     June 30, 2011    

 

 
            As a            As a            As a    
       Net loan        % of       Net loan        % of       Net loan        % of    
     charge-        average     charge-        average     charge-        average    
  ($ in millions)    offs        loans (1)     offs        loans (1)     offs        loans (1)    

 

 

  Commercial:

               

  Commercial and industrial

     $   310           0.74     %      $   261           0.65     %      $   254           0.66     % 

  Real estate mortgage

     117           0.44        96           0.37        128           0.50     

  Real estate construction

     (5)          (0.09 )       55           1.06        72           1.32     

  Lease financing

     4           0.13        3           0.11        1           0.01     

  Foreign

     45           0.45        8           0.08        47           0.52     

 

      

 

 

      

 

 

    

  Total commercial

     471           0.54        423           0.50        502           0.62     

 

      

 

 

      

 

 

    

  Consumer:

               

  Real estate 1-4 family first mortgage

     844           1.46        821           1.46        909           1.62     

  Real estate 1-4 family junior lien mortgage

     800           3.64        842           3.75        909           3.97     

  Credit card

     256           4.63        266           4.90        294           5.63     

  Other revolving credit and installment

     269           1.24        259           1.19        224           1.03     

 

      

 

 

      

 

 

    

  Total consumer

     2,169           2.02        2,188           2.06        2,336           2.21     

 

      

 

 

      

 

 

    

  Total

     $   2,640           1.36     %      $   2,611           1.37     %      $   2,838           1.52     % 

 

      

 

 

      

 

 

    
               

 

 

 

(1) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 31 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

Nonperforming Assets

Nonperforming assets ended the quarter at $26.0 billion, down 3 percent from $26.8 billion in the third quarter. Nonaccrual loans declined to $21.3 billion from $21.9 billion in the third quarter, with reductions across the majority of our larger loan portfolios, resulting from stable inflows. Foreclosed assets decreased to $4.7 billion from $4.9 billion in third quarter.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

 

 

 
     Dec. 31, 2011     Sept. 30, 2011     June 30, 2011  

 

 
            As a             As a             As a   
            % of             % of             % of   
     Total        total      Total        total      Total        total   
 ($ in millions)    balances        loans        balances        loans        balances        loans   

 

 

 Commercial:

               

 Commercial and industrial

   $ 2,142           1.28    %      $   2,128           1.29    %      $   2,393           1.52    % 

 Real estate mortgage

     4,085           3.85         4,429           4.24         4,691           4.62    

 Real estate construction

     1,890           9.75         1,915           9.71         2,043           9.56    

 Lease financing

     53           0.40         71           0.55         79           0.61    

 Foreign

     47           0.12         68           0.18         59           0.16    

 

      

 

 

      

 

 

    

 Total commercial

     8,217           2.38         8,611           2.53         9,265           2.80    

 

      

 

 

      

 

 

    

 Consumer:

               

 Real estate 1-4 family first mortgage

     10,913           4.77         11,024           4.93         11,427           5.13    

 Real estate 1-4 family junior lien mortgage

     1,975           2.30         2,035           2.31         2,098           2.33    

 Other revolving credit and installment

     199           0.23         230           0.27         255           0.29    

 

      

 

 

      

 

 

    

 Total consumer

     13,087           3.09         13,289           3.16         13,780           3.27    

 

      

 

 

      

 

 

    

 Total nonaccrual loans

     21,304           2.77         21,900           2.88         23,045           3.06    

 

      

 

 

      

 

 

    

 Foreclosed assets:

               

 GNMA

     1,319             1,336             1,320        

 Non GNMA

     3,342             3,608             3,541        

 

      

 

 

      

 

 

    

 Total foreclosed assets

     4,661             4,944             4,861        

 

      

 

 

      

 

 

    

 Total nonperforming assets

   $ 25,965           3.37    %      $   26,844           3.53    %      $   27,906           3.71    % 

 

      

 

 

      

 

 

    

 Change from prior quarter:

               

 Total nonaccrual loans

   $ (596)            $ (1,145)            $ (1,920)       

 Total nonperforming assets

     (879)            (1,062)            (2,571)       
               

 

 


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Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $2.0 billion at December 31, 2011, compared with $1.9 billion at September 30, 2011. Loans 90 days or more past due and still accruing whose repayments are insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $20.5 billion at December 31, 2011, up from $17.7 billion at September 30, 2011, due primarily to growth in the FHA/VA portfolio over the past two years and the subsequent seasoning of those loans.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $19.7 billion at December 31, 2011, down from $20.4 billion at September 30, 2011. The allowance coverage to total loans was 2.56 percent compared with 2.68 percent in the prior quarter. The allowance covered 1.88 times annualized fourth quarter net charge-offs compared with 1.97 times in the prior quarter. The allowance coverage to nonaccrual loans was 92 percent at December 31, 2011, compared with 93 percent at September 30, 2011. “We believe the allowance was appropriate for losses inherent in the loan portfolio at December 31, 2011,” said Loughlin.

Additional detail on credit quality is included in the quarterly supplement, available on the Investor Relations page at www.wellsfargo.com/invest_relations/investor_relations/.

Business Segment Performance

Wells Fargo defines its operating segments by product type and customer segment. Segment net income for each of the three business segments was:

 

 

 
                   Quarter ended    
  

 

 

 
       Dec. 31,      Sept. 30,      Dec. 31,    
 (in millions)    2011      2011      2010    

 

 

 Community Banking

    $   2,503         2,315         1,924     

 Wholesale Banking

     1,641         1,813         1,690     

 Wealth, Brokerage and Retirement

     325         291         197     

 

 

More financial information about the business segments is on pages 40 and 41.


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Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. through its Regional Banking and Wells Fargo Home Mortgage business units.

Selected Financial Information

 

 

 
                   Quarter ended    
  

 

 

 
       Dec. 31,      Sept. 30,      Dec. 31,    
 (in millions)    2011      2011      2010    

 

 

 Total revenue

    $   13,004         12,496         13,472     

 Provision for credit losses

     2,031         1,978         2,785     

 Noninterest expense

     7,310         6,901         7,855     

 Segment net income

     2,503         2,315         1,924     
 (in billions)                     

 Average loans

     493.9         491.0         514.1     

 Average assets

     756.0         754.4         771.6     

 Average core deposits

     568.3         556.3         544.4     

 

 

Community Banking reported net income of $2.5 billion, up $188 million, or 8 percent, from third quarter 2011 and up $579 million, or 30 percent, from fourth quarter 2010. Revenue increased $508 million, or 4 percent, from third quarter 2011 driven by higher volume-related mortgage banking income, noninterest bearing deposit growth and gains on deferred compensation plan investments (offset in employee benefits expense and therefore neutral to the income statement), mitigated by the impact of lower debit card revenues and smaller bond and equity sale gains. Noninterest expense increased $409 million, or 6 percent, from third quarter 2011, reflecting higher personnel costs (revenue-related incentive compensation in Home Mortgage and increased deferred compensation benefits expense), seasonal increase in foreclosed assets expense, an increase in Home Mortgage related to the mortgage servicing regulatory consent orders, and seasonally higher equipment purchases. Noninterest expense decreased $545 million, or 7 percent, from fourth quarter 2010, as last year’s fourth quarter included a two-year charitable donation commitment of $400 million. Contributing to lower expenses this year were reduced foreclosed asset expense and efficiency and cost save initiatives. The provision for credit losses increased $53 million from third quarter 2011 and decreased $754 million from fourth quarter 2010. Charge-offs increased $41 million from third quarter 2011 and decreased $966 million from fourth quarter 2010. The reserve release was $438 million in fourth quarter 2011, compared with releases of $450 million and $650 million in third quarter 2011 and fourth quarter 2010, respectively.

Regional Banking Highlights

 

 

Continued franchise growth in 2011 from December 31, 2010 (combined Regional Banking)

 

  o Consumer checking accounts up a net 3.2 percent

 

  o Business checking accounts up a net 3.7 percent

 

  o Consumer credit card, lines of credit and loan product solutions (sales) in the retail banking stores were up by double digits from 2010

 

  o Insurance referrals in the retail banking stores were more than two-and-a-half times those done in 2010


- 10 -

 

 

Record solutions in 2011

 

  o West

 

  Record core product solutions (sales) of 33.7 million, up 14 percent from 2010

 

  Core sales per platform banker FTE (active, full-time equivalent) of 6.69 per day, up from 5.95 in 2010

 

 

Sales of Wells Fargo Packages® (a checking account and three other products) up 16 percent from 2010, purchased by 86 percent of new checking account customers

 

  o East

 

  Eastern core product solutions grew by double digits from 2010

 

 

For eastern stores converted to the Wells Fargo systems, 82 percent of new checking account customers purchased Wells Fargo Packages® in 2011

 

  Platform banker FTE grew by over 670, or 6 percent, from 2010

 

 

Retail Bank household cross-sell ratio for combined company of 5.92 products per household, up from 5.70 in fourth quarter 2010; cross-sell in the West of 6.29, compared with 5.43 in the East, represents the opportunity to earn more business from customers in the East

 

 

Wells Fargo’s retail bank ranked No. 1 again in customer satisfaction according to the American Customer Satisfaction Index (ACSI) for customers of large banks (tied with Citigroup, third quarter 2011 results released in December)

 

 

Small Business/Business Banking

 

  o Store-based business solutions up 15 percent from 2010 (West)

 

  o Sales of Wells Fargo Business Services Packages (a business checking account and at least three other business products) up 37 percent from 2010, purchased by 75 percent of new business checking account customers (West)

 

  o Wells Fargo, America’s #1 small business lender, made $13.9 billion in new loan commitments to its small business customers in 2011, an 8 percent increase in new dollars lent from 2010

 

 

Online and Mobile Banking

 

  o 19.8 million combined active online customers

 

  o 7.3 million combined active mobile customers

 

  o

Wells Fargo AssistSM, an online financial assistance center, launched and provides information for customers who are facing payment challenges

Wells Fargo Home Mortgage (Home Mortgage)

 

 

Home Mortgage applications of $157 billion, compared with $169 billion in prior quarter

 

 

Home Mortgage application pipeline of $72 billion at quarter end, compared with $84 billion at September 30, 2011

 

 

Home Mortgage originations of $120 billion, up from $89 billion in prior quarter

 

 

Residential mortgage servicing portfolio of $1.8 trillion


- 11 -

 

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $20 million. Products & business segments include Middle Market Commercial Banking, Government & Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Investment Banking & Capital Markets, Securities Investment Portfolio, Asset Backed Finance, and Asset Management.

Selected Financial Information

 

 
     Quarter ended    
  

 

 

 
(in millions)      Dec. 31,
2011
     Sept. 30,
2011
    Dec. 31,  
2010  
 

 

 

 Total revenue

     $ 5,425         5,150        5,840     

 Provision (reversal of provision) for credit losses

     32         (178     195     

 Noninterest expense

     2,939         2,689        2,992     

 Segment net income

     1,641         1,813        1,690     
 (in billions)                    

 Average loans

     264.8         253.4        229.6     

 Average assets

     458.3         438.0        384.4     

 Average core deposits

     223.2         209.3        185.1     

 

 

Wholesale Banking reported net income of $1.6 billion, down $172 million or 9 percent from the third quarter and $49 million or 3 percent from fourth quarter 2010. Revenue increased $275 million or 5 percent from the third quarter primarily due to strong loan and deposit growth across most businesses, including commercial banking, commercial real estate, corporate banking, government banking and international. Revenue also benefited from capital markets and investment banking results which rebounded from prior quarter depressed levels. Revenue decreased $415 million, or 7 percent from fourth quarter 2010 as broad based growth among many businesses, including strong loan and deposit growth, was offset by lower PCI resolutions and other gains. Noninterest expense increased $250 million, or 9 percent, from the third quarter due to higher variable compensation related to higher revenue and increased operating losses and foreclosed asset expenses. Expenses decreased $53 million, or 2 percent, from fourth quarter 2010 related to lower operating losses. The provision for credit losses was $32 million and increased $210 million from the third quarter primarily due to lower reserve release. Provision declined $163 million from fourth quarter 2010. The decrease included a $150 million reserve release in fourth quarter 2011 compared with a $200 million reserve release in the fourth quarter a year ago along with a $213 million improvement in net charge-offs.

 

 

15 percent year-over-year and 4 percent linked quarter average loan growth in almost all portfolios including asset backed finance, capital finance, commercial banking, commercial real estate, corporate banking, government banking and international from both new and existing customer activity

 

 

Stable level of net charge-offs and lower nonperforming assets

 

 

Average core deposits up 21 percent from prior year

 

 

U.S. investment banking 2011 market share of 5.1 percent, up from 4.2 percent for full year 2010 (source: Dealogic fee-based league tables)

 

 

Ending loans include $2.1 billion of U.S.-based CRE loans purchased in the quarter


- 12 -

 

Wealth, Brokerage and Retirement provides a full range of financial advisory services to clients using a planning approach to meet each client’s needs. Wealth Management provides affluent and high net worth clients with a complete range of wealth management solutions, including financial planning, private banking, credit, investment management and trust. Family Wealth (to be rebranded as Abbot Downing, A Wells Fargo Business, in April 2012) meets the unique needs of the ultra high net worth customers. Brokerage serves customers’ advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the United States. Retirement is a national leader in providing institutional retirement and trust services (including 401(k) and pension plan record keeping) for businesses, retail retirement solutions for individuals, and reinsurance services for the life insurance industry.

Selected Financial Information

 

 

 
     Quarter ended    
  

 

 

 
 (in millions)      Dec. 31,
2011
     Sept. 30,
2011
     Dec. 31,  
2010  
 

 

 

 Total revenue

     $ 3,065         2,887         3,041     

 Provision for credit losses

     20         48         113     

 Noninterest expense

     2,521         2,368         2,608     

 Segment net income

     325         291         197     
 (in billions)                     

 Average loans

     42.7         43.1         43.0     

 Average assets

     159.3         155.1         140.2     

 Average core deposits

     136.6         133.4         121.5     

 

 

Wealth, Brokerage and Retirement reported net income of $325 million, up $34 million from third quarter 2011 and up $128 million from fourth quarter 2010. Revenue was $3.1 billion, up 6 percent from third quarter 2011 driven by $59 million in gains on deferred compensation plan investments (offset in expense compared with $128 million in losses in third quarter 2011) and a $153 million gain on the sale of the H.D. Vest business. Excluding deferred compensation and H.D. Vest gains, revenue was down 5 percent due to lower asset-based fees, reduced brokerage transaction revenue and lower securities gains in the brokerage business. Total provision for credit losses decreased $28 million for the quarter, including a reserve release of $12 million in fourth quarter 2011. Noninterest expense increased 6 percent from third quarter 2011 primarily due to higher deferred compensation expense, $52 million in fourth quarter 2011 compared to a $125 million benefit in third quarter 2011. Excluding the $177 million increase in deferred compensation expense, noninterest expense decreased 1 percent primarily due to reduced broker commissions on lower production levels. Revenue was up 1 percent from fourth quarter 2010; excluding the impact of the H.D. Vest gain, revenue was down 4 percent due to lower brokerage transaction revenue. Total provision for credit losses decreased $93 million from fourth quarter 2010. Noninterest expense was down 3 percent from fourth quarter 2010 driven by a decline in personnel costs largely due to decreased broker commissions, driven by lower production levels, and decreased non-personnel costs. Average core deposits increased $3.2 billion from third quarter 2011 and $15.1 billion from fourth quarter 2010.

Retail Brokerage

 

 

  Strong deposit growth, with average balances up $14 billion, or 17 percent, from prior year

 

 

  Client assets of $1.1 trillion, down 3 percent from prior year

 

 

  Managed account assets increased $19 billion, or 8 percent, from prior year driven by strong net flows


- 13 -

 

Wealth Management

 

 

  Average deposit balances up 3 percent from prior year

 

 

  Client assets of $198 billion, down 2 percent from prior year

Retirement

 

 

  Institutional Retirement plan assets of $236 billion, up $5 billion, or 2 percent, from prior year

 

 

  IRA assets of $268 billion, down $10 billion, or 4 percent, from prior year

 

Conference Call

The Company will host a live conference call on Tuesday, January 17, at 6:30 a.m. PST (9:30 a.m. EST). To access the call, please dial 866-872-5161 (U.S. and Canada) or 706-643-1962 (international). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings and http://us.reg.meeting-stream.com/wellsfargocompany_011712/.

A replay of the conference call will be available beginning at approximately noon PST (3 p.m. EST) on January 17 through Tuesday, January 24. Please dial 800-642-1687 (U.S. and Canada) or 706-645-9291 (international) and enter Conference ID #29256540. The replay will also be available online at wellsfargo.com/invest_relations/earnings.


- 14 -

 

Cautionary Statement about Forward-Looking Information

In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that this news release contains forward-looking statements about our future financial performance and business. We make forward-looking statements when we use words such as “believe,” “expect,” “anticipate,” “estimate,” “target,” “should,” “may,” “can,” “will,” “outlook,” “project,” “appears” or similar expressions. Forward-looking statements in this news release include, among others, statements about: (i) future credit quality and performance, and the adequacy of the allowance for loan losses, including our current expectation of future reductions in the allowance for loan losses; (ii) our expectations regarding elevated first quarter 2012 noninterest expense and declines in noninterest expense beginning in second quarter 2012, as well as our targeted noninterest expense for fourth quarter 2012 as part of our expense management initiatives; (iii) our estimates regarding our Tier 1 common equity ratio under proposed Basel III capital regulations and our expectations regarding returning more capital to our shareholders; and (iv) the timing of remaining integration activities related to the Wachovia merger.

Do not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. Several factors could cause actual results to differ materially from expectations including: current and future economic and market conditions, including the effects of further declines in housing prices, high unemployment rates, U.S. fiscal debt and budget matters and the sovereign debt crisis in Europe; our capital requirements (including under regulatory capital standards as determined and interpreted by applicable regulatory authorities such as the proposed Basel III capital regulations) and our ability to generate capital internally or raise capital on favorable terms; financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses (including the Dodd-Frank Wall Street Reform and Consumer Protection Act); the extent of success in our loan modification efforts, including the effects of regulatory requirements, or changes in regulatory requirements, relating to loan modifications; the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties; negative effects relating to mortgage foreclosures, including changes in our procedures or practices and/or industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures; our ability to realize our noninterest expense target as part of our expense management initiatives when and in the amount targeted, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters; our ability to successfully complete the remaining Wachovia integration activities, as well as realize the expected benefits of the Wachovia merger; a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers; recognition of other-than-temporary impairment on securities held in our available-for-sale portfolio; the effect of changes in interest rates on our net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; hedging gains or losses; disruptions in the capital markets and reduced investor demand for mortgage loans; our ability to sell more products to our customers; the effect of the economic recession on the demand for our products and services; the effect of fluctuations in stock market prices on fee income from our brokerage, asset and wealth management businesses; our election to provide support to our mutual funds for structured credit products they may hold; changes in the value of our venture capital investments; changes in our accounting policies or in accounting standards or in how accounting standards are to be applied; changes in our credit ratings and changes in the credit ratings of our customers or counterparties; mergers and acquisitions; federal and state regulations; reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations; the loss of checking and saving account deposits to other investments such as the stock market; and fiscal and monetary policies of the Federal Reserve Board. There is no assurance that our allowance for credit losses will be adequate to cover future credit losses, especially if housing prices and unemployment do not improve. Increases in loan charge-offs or in the allowance for credit losses and related provision expense could materially adversely affect our financial results and condition. For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2011, and September 30, 2011, as filed with the SEC and available on the SEC’s website at www.sec.gov. Any factor described above or in our SEC reports could, by itself or together with one or more other factors, adversely affect our financial results and condition.


- 15 -

 

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.3 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet (wellsfargo.com), and other distribution channels across North America and internationally. With more than 272,000 team members, Wells Fargo serves one in three households in America. Wells Fargo & Company was ranked No. 23 on Fortune’s 2011 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

# # #


Wells Fargo & Company and Subsidiaries

QUARTERLY FINANCIAL DATA

TABLE OF CONTENTS

 

 

    

 

      Pages

 

Summary Information

  

Summary Financial Data

     17-18   

Income

  

Consolidated Statement of Income

     19-20   

Average Balances, Yields and Rates Paid

     21-22   

Noninterest Income and Noninterest Expense

     23-24   

Balance Sheet

  

Consolidated Balance Sheet

     25-26   

Average Balances

     27   

Loans

  

Securities Available for Sale

     28   

Loans

     28   

Nonaccrual Loans and Foreclosed Assets

     29   

Loans 90 Days or More Past Due and Still Accruing

     30   

Purchased Credit-Impaired Loans

     31-33   

Pick-A-Pay Portfolio

     34   

Non-Strategic and Liquidating Loan Portfolios

     35   

Home Equity Portfolios

     35   

Allowance for Credit Losses

     36-37   

Equity

  

Condensed Consolidated Statement of Changes in Total Equity

     38   

Tier 1 Common Equity

     39   

Operating Segments

  

Operating Segment Results

     40-41   

Other

  

Mortgage Servicing and other related data

     42-44   

 

 


17

 

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA

 

 
    

 

Quarter ended Dec. 31,

     %    

 

Year ended Dec. 31,

     %  
  

 

 

      

 

 

    
($ in millions, except per share amounts)    2011      2010       Change     2011       2010       Change  

 

 

For the Period

               

Wells Fargo net income

   $ 4,107        3,414         20   %   $ 15,869         12,362         28   %

Wells Fargo net income applicable to common stock

     3,888        3,232         20        15,025         11,632         29   

Diluted earnings per common share

     0.73        0.61         20        2.82         2.21         28   

Profitability ratios (annualized):

               

Wells Fargo net income to average assets (ROA)

     1.25   %      1.09         15        1.25         1.01         24   

Wells Fargo net income applicable to common stock to average Wells Fargo common stockolders’ equity (ROE)

     11.97        10.95               11.93         10.33         15   

Efficiency ratio (1)

     60.7        62.1         (2)        61.0         59.2          

Total revenue

   $ 20,605        21,494         (4)      $ 80,948         85,210         (5)   

Pre-tax pre-provision profit (PTPP) (2)

     8,097        8,154         (1)        31,555         34,754         (9)   

Dividends declared per common share

     0.12        0.05         140        0.48         0.20         140   

Average common shares outstanding

     5,271.9        5,256.2                5,278.1         5,226.8          

Diluted average common shares outstanding

     5,317.6        5,293.8                5,323.4         5,263.1          

Average loans

   $ 768,563        753,675             $ 757,144         770,601         (2)   

Average assets

     1,306,728        1,237,037               1,270,265         1,226,938          

Average core deposits (3)

     864,928        794,799               826,735         772,021          

Average retail core deposits (4)

     606,810        573,843               595,851         572,881          

Net interest margin

     3.89   %      4.16         (6)        3.94         4.26         (8)   

At Period End

               

Securities available for sale

   $ 222,613        172,654         29      $ 222,613         172,654         29   

Loans

     769,631        757,267               769,631         757,267          

Allowance for loan losses

     19,372        23,022         (16)        19,372         23,022         (16)   

Goodwill

     25,115        24,770               25,115         24,770          

Assets

         1,313,867        1,258,128                   1,313,867         1,258,128          

Core deposits (3)

     872,629        798,192               872,629         798,192          

Wells Fargo stockholders’ equity

     140,241        126,408         11        140,241         126,408         11   

Total equity

     141,687        127,889         11        141,687         127,889         11   

Capital ratios:

               

Total equity to assets

     10.78   %      10.16               10.78         10.16          

Risk-based capital (5):

               

Tier 1 capital

     11.33        11.16               11.33         11.16          

Total capital

     14.77        15.01         (2)        14.77         15.01         (2)   

Tier 1 leverage (5)

     9.03        9.19         (2)        9.03         9.19         (2)   

Tier 1 common equity (6)

     9.46        8.30         14        9.46         8.30         14   

Common shares outstanding

     5,262.6        5,262.3                5,262.6         5,262.3           

Book value per common share

   $ 24.64        22.49         10      $ 24.64         22.49         10   

Common stock price:

               

High

     27.97        31.61         (12)        34.25         34.25           

Low

     22.61        23.37         (3)        22.58         23.02         (2)   

Period end

     27.56        30.99         (11)        27.56         30.99         (11)   

Team members (active, full-time equivalent)

     264,200        272,200         (3)        264,200         272,200         (3)   
               

 

 

 

(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(3) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5) The December 31, 2011, ratios are preliminary.
(6) See the “Five Quarter Tier 1 Common Equity Under Basel I” table for additional information.


18

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA

 

 
    

 

Quarter ended

 
  

 

 

 
($ in millions, except per share amounts)    Dec. 31,
2011 
    Sept. 30,
2011 
     June 30,
2011 
     Mar. 31,
2011 
     Dec. 31,
2010 
 

 

 

For the Quarter

             

Wells Fargo net income

   $ 4,107        4,055         3,948         3,759         3,414   

Wells Fargo net income applicable to common stock

     3,888        3,839         3,728         3,570         3,232   

Diluted earnings per common share

     0.73        0.72         0.70         0.67         0.61   

Profitability ratios (annualized):

             

Wells Fargo net income to average assets (ROA)

     1.25   %      1.26         1.27         1.23         1.09   

Wells Fargo net income applicable to common stock to average

             

Wells Fargo common stockholders’ equity (ROE)

     11.97        11.86         11.92         11.98         10.95   

Efficiency ratio (1)

     60.7        59.5         61.2         62.6         62.1   

Total revenue

   $ 20,605        19,628         20,386         20,329         21,494   

Pre-tax pre-provision profit (PTPP) (2)

     8,097        7,951         7,911         7,596         8,154   

Dividends declared per common share

     0.12        0.12         0.12         0.12         0.05   

Average common shares outstanding

     5,271.9        5,275.5         5,286.5         5,278.8         5,256.2   

Diluted average common shares outstanding

     5,317.6        5,319.2         5,331.7         5,333.1         5,293.8   

Average loans

   $ 768,563        754,544         751,253         754,077         753,675   

Average assets

         1,306,728        1,281,369         1,250,945         1,241,176         1,237,037   

Average core deposits (3)

     864,928        836,845         807,483         796,826         794,799   

Average retail core deposits (4)

     606,810        599,227         592,974         584,100         573,843   

Net interest margin

     3.89   %      3.84         4.01         4.05         4.16   

At Quarter End

             

Securities available for sale

   $ 222,613        207,176         186,298         167,906         172,654   

Loans

     769,631        760,106         751,921         751,155         757,267   

Allowance for loan losses

     19,372        20,039         20,893         21,983         23,022   

Goodwill

     25,115        25,038         24,776         24,777         24,770   

Assets

     1,313,867        1,304,945         1,259,734         1,244,666         1,258,128   

Core deposits (3)

     872,629        849,632         808,970         795,038         798,192   

Wells Fargo stockholders’ equity

     140,241        137,768         136,401         133,471         126,408   

Total equity

     141,687        139,244         137,916         134,943         127,889   

Capital ratios:

             

Total equity to assets

     10.78   %      10.67         10.95         10.84         10.16   

Risk-based capital (5):

             

Tier 1 capital

     11.33        11.26         11.69         11.50         11.16   

Total capital

     14.77        14.86         15.41         15.30         15.01   

Tier 1 leverage (5)

     9.03        8.97         9.43         9.27         9.19   

Tier 1 common equity (6)

     9.46        9.34         9.15         8.93         8.30   

Common shares outstanding

     5,262.6        5,272.2         5,278.2         5,300.9         5,262.3   

Book value per common share

   $ 24.64        24.13         23.84         23.18         22.49   

Common stock price:

             

High

     27.97        29.63         32.63         34.25         31.61   

Low

     22.61        22.58         25.26         29.82         23.37   

Period end

     27.56        24.12         28.06         31.71         30.99   

Team members (active, full-time equivalent)

     264,200        263,800         266,600         270,200         272,200   
             

 

 

 

(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(3) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5) The December 31, 2011, ratios are preliminary.
(6) See the “Five Quarter Tier 1 Common Equity Under Basel I” table for additional information.


19

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

 

 
    

 

Quarter ended Dec. 31,

     %     Year ended Dec. 31,      %  
  

 

 

      

 

 

    
(in millions, except per share amounts)    2011       2010       Change     2011       2010       Change  

 

 

Interest income

                

Trading assets

   $ 400         295         36   %    $ 1,440         1,098         31   % 

Securities available for sale

     2,092         2,374         (12)        8,475         9,666         (12)   

Mortgages held for sale

     456         495         (8)        1,644         1,736         (5)   

Loans held for sale

     16         15               58         101         (43)   

Loans

     9,275         9,666         (4)        37,247         39,760         (6)   

Other interest income

     139         124         12        548         435         26   

 

      

 

 

    

Total interest income

     12,378         12,969         (5)        49,412         52,796         (6)   

 

      

 

 

    

Interest expense

                

Deposits

     507         662         (23)        2,275         2,832         (20)   

Short-term borrowings

     14         26         (46)        80         92         (13)   

Long-term debt

     885         1,153         (23)        3,978         4,888         (19)   

Other interest expense

     80         65         23        316         227         39   

 

      

 

 

    

Total interest expense

     1,486         1,906         (22)        6,649         8,039         (17)   

 

      

 

 

    

Net interest income

     10,892         11,063         (2)        42,763         44,757         (4)   

Provision for credit losses

     2,040         2,989         (32)        7,899         15,753         (50)   

 

      

 

 

    

Net interest income after provision for credit losses

     8,852         8,074         10        34,864         29,004         20   

 

      

 

 

    

Noninterest income

                

Service charges on deposit accounts

     1,091         1,035               4,280         4,916         (13)   

Trust and investment fees

     2,658         2,958         (10)        11,304         10,934          

Card fees

     680         941         (28)        3,653         3,652           

Other fees

     1,096         1,063               4,193         3,990          

Mortgage banking

     2,364         2,757         (14)        7,832         9,737         (20)   

Insurance

     466         564         (17)        1,960         2,126         (8)   

Net gains from trading activities

     430         532         (19)        1,014         1,648         (38)   

Net gains (losses) on debt securities available for sale

     48         (268)         NM        54         (324)         NM   

Net gains from equity investments

     61         317         (81)        1,482         779         90   

Operating leases

     60         79         (24)        524         815         (36)   

Other

     759         453         68        1,889         2,180         (13)   

 

      

 

 

    

Total noninterest income

     9,713         10,431         (7)        38,185         40,453         (6)   

 

      

 

 

    

Noninterest expense

                

Salaries

     3,706         3,513               14,462         13,869          

Commission and incentive compensation

     2,251         2,195               8,857         8,692          

Employee benefits

     1,012         1,192         (15)        4,348         4,651         (7)   

Equipment

     607         813         (25)        2,283         2,636         (13)   

Net occupancy

     759         750               3,011         3,030         (1)   

Core deposit and other intangibles

     467         549         (15)        1,880         2,199         (15)   

FDIC and other deposit assessments

     314         301               1,266         1,197          

Other

     3,392         4,027         (16)        13,286         14,182         (6)   

 

      

 

 

    

Total noninterest expense

     12,508         13,340         (6)        49,393         50,456         (2)   

 

      

 

 

    

Income before income tax expense

     6,057         5,165         17        23,656         19,001         24   

Income tax expense

     1,874         1,672         12        7,445         6,338         17   

 

      

 

 

    

Net income before noncontrolling interests

     4,183         3,493         20        16,211         12,663         28   

Less: Net income from noncontrolling interests

     76         79         (4)        342         301         14   

 

      

 

 

    

Wells Fargo net income

   $ 4,107         3,414         20      $ 15,869         12,362         28   

 

      

 

 

    

Less: Preferred stock dividends and other

     219         182         20        844         730         16   

 

      

 

 

    

Wells Fargo net income applicable to common stock

   $ 3,888         3,232         20      $ 15,025         11,632         29   

 

      

 

 

    

Per share information

                

Earnings per common share

   $ 0.74         0.62         19      $ 2.85         2.23         28   

Diluted earnings per common share

     0.73         0.61         20        2.82         2.21         28   

Dividends declared per common share

     0.12         0.05         140        0.48         0.20         140   

Average common shares outstanding

             5,271.9         5,256.2                      5,278.1         5,226.8          

Diluted average common shares outstanding

     5,317.6         5,293.8                5,323.4         5,263.1          
                

 

 

NM - Not meaningful


20

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

 

 
  

 

 

 

Quarter ended

 

  

     Dec. 31,      Sept. 30,      June 30,      Mar. 31,      Dec. 31,  
(in millions, except per share amounts)    2011       2011       2011       2011       2010   

 

 

Interest income

              

Trading assets

   $ 400         343         347         350         295   

Securities available for sale

     2,092         2,053         2,166         2,164         2,374   

Mortgages held for sale

     456         389         362         437         495   

Loans held for sale

     16         13         17         12         15   

Loans

     9,275         9,224         9,361         9,387         9,666   

Other interest income

     139         156         131         122         124   

 

 

Total interest income

     12,378         12,178         12,384         12,472         12,969   

 

 

Interest expense

              

Deposits

     507         559         594         615         662   

Short-term borrowings

     14         20         20         26         26   

Long-term debt

     885         980         1,009         1,104         1,153   

Other interest expense

     80         77         83         76         65   

 

 

Total interest expense

     1,486         1,636         1,706         1,821         1,906   

 

 

Net interest income

     10,892         10,542         10,678         10,651         11,063   

Provision for credit losses

     2,040         1,811         1,838         2,210         2,989   

 

 

Net interest income after provision for credit losses

     8,852         8,731         8,840         8,441         8,074   

 

 

Noninterest income

              

Service charges on deposit accounts

     1,091         1,103         1,074         1,012         1,035   

Trust and investment fees

     2,658         2,786         2,944         2,916         2,958   

Card fees

     680         1,013         1,003         957         941   

Other fees

     1,096         1,085         1,023         989         1,063   

Mortgage banking

     2,364         1,833         1,619         2,016         2,757   

Insurance

     466         423         568         503         564   

Net gains (losses) from trading activities

     430         (442)         414         612         532   

Net gains (losses) on debt securities available for sale

     48         300         (128)         (166)         (268)   

Net gains from equity investments

     61         344         724         353         317   

Operating leases

     60         284         103         77         79   

Other

     759         357         364         409         453   

 

 

Total noninterest income

     9,713         9,086         9,708         9,678         10,431   

 

 

Noninterest expense

              

Salaries

     3,706         3,718         3,584         3,454         3,513   

Commission and incentive compensation

     2,251         2,088         2,171         2,347         2,195   

Employee benefits

     1,012         780         1,164         1,392         1,192   

Equipment

     607         516         528         632         813   

Net occupancy

     759         751         749         752         750   

Core deposit and other intangibles

     467         466         464         483         549   

FDIC and other deposit assessments

     314         332         315         305         301   

Other

     3,392         3,026         3,500         3,368         4,027   

 

 

Total noninterest expense

     12,508         11,677         12,475         12,733         13,340   

 

 

Income before income tax expense

     6,057         6,140         6,073         5,386         5,165   

Income tax expense

     1,874         1,998         2,001         1,572         1,672   

 

 

Net income before noncontrolling interests

     4,183         4,142         4,072         3,814         3,493   

Less: Net income from noncontrolling interests

     76         87         124         55         79   

 

 

Wells Fargo net income

   $ 4,107         4,055         3,948         3,759         3,414   

 

 

Less: Preferred stock dividends and other

     219         216         220         189         182   

 

 

Wells Fargo net income applicable to common stock

   $ 3,888         3,839         3,728         3,570         3,232   

 

 

Per share information

              

Earnings per common share

   $ 0.74         0.73         0.70         0.68         0.62   

Diluted earnings per common share

     0.73         0.72         0.70         0.67         0.61   

Dividends declared per common share

     0.12         0.12         0.12         0.12         0.05   

Average common shares outstanding

     5,271.9         5,275.5         5,286.5         5,278.8         5,256.2   

Diluted average common shares outstanding

             5,317.6         5,319.2         5,331.7         5,333.1         5,293.8   

 

 


21

 

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)

 

 

     Quarter ended December 31,  
    

2011

        

2010

 
(in millions)    Average
balance
    Yields/
rates
           Interest
income/
expense
          Average
balance
    Yields/
rates
           Interest
income/
expense
 

Earning assets

                       

Federal funds sold, securities purchased under resale agreements and other short-term investments

   $ 67,968       0.52      %      $ 89          72,029       0.40      %      $ 74  

Trading assets

     45,521       3.57           407          33,871       3.56           302  

Securities available for sale (3):

                       

Securities of U.S. Treasury and federal agencies

     8,708       0.99           22          1,597       2.80           12  

Securities of U.S. states and political subdivisions

     28,015       4.80           336          18,245       5.58           255  

Mortgage-backed securities:

                       

Federal agencies

     84,332       3.68           776          76,674       4.48           859  

Residential and commercial

     34,717       7.05           612          31,060       10.95           850  

Total mortgage-backed securities

     119,049       4.66           1,388          107,734       6.35           1,709  

Other debt and equity securities

     47,278       4.38           518          35,492       6.15           545  

Total securities available for sale

     203,050       4.46           2,264          163,068       6.18           2,521  

Mortgages held for sale (4)

     44,842       4.07           456          45,063       4.39           495  

Loans held for sale (4)

     1,118       5.84           16          1,140       5.15           15  

Loans:

                       

Commercial:

                       

Commercial and industrial

     166,920       4.08           1,713          147,866       4.71           1,755  

Real estate mortgage

     105,219       4.26           1,130          99,188       3.85           961  

Real estate construction

     19,624       4.61           228          26,882       3.68           250  

Lease financing

     12,893       7.41           239          13,033       9.00           293  

Foreign

     38,740       2.39           233          30,986       3.57           279  

Total commercial

     343,396       4.10           3,543          317,955       4.42           3,538  

Consumer:

                       

Real estate 1-4 family first mortgage

     229,746       4.74           2,727          228,802       5.06           2,901  

Real estate 1-4 family junior lien mortgage

     87,212       4.34           953          97,673       4.37           1,075  

Credit card

     21,933       12.96           711          21,888       13.44           736  

Other revolving credit and installment

     86,276       6.23           1,356          87,357       6.48           1,427  

Total consumer

     425,167       5.39           5,747          435,720       5.61           6,139  

Total loans (4)

     768,563       4.81           9,290          753,675       5.11           9,677  

Other

     4,671       4.32           50          5,338       3.93           51  

Total earning assets

   $     1,135,733       4.41      %      $     12,572          1,074,184       4.87      %      $     13,135  

Funding sources

                       

Deposits:

                       

Interest-bearing checking

   $ 35,285       0.06      %      $ 6          60,879       0.09      %      $ 15  

Market rate and other savings

     485,127       0.14           175          431,171       0.25           266  

Savings certificates

     64,868       1.43           233          79,146       1.43           285  

Other time deposits

     12,868       1.85           60          13,438       2.00           67  

Deposits in foreign offices

     67,213       0.20           33          55,463       0.21           29  

Total interest-bearing deposits

     665,361       0.30           507          640,097       0.41           662  

Short-term borrowings

     48,742       0.14           17          50,609       0.24           31  

Long-term debt

     129,445       2.73           885          160,801       2.86           1,153  

Other liabilities

     12,166       2.60           80          8,258       3.13           65  

Total interest-bearing liabilities

     855,714       0.69           1,489          859,765       0.89           1,911  

Portion of noninterest-bearing funding sources

     280,019       -            -           214,419       -            -   

Total funding sources

   $ 1,135,733       0.52           1,489          1,074,184       0.71           1,911  

Net interest margin and net interest income
on a taxable-equivalent basis (5)

       3.89      %      $ 11,083            4.16      %      $ 11,224  

Noninterest-earning assets

                       

Cash and due from banks

   $ 17,718                  18,016          

Goodwill

     25,057                  24,832          

Other

     128,220                  120,005          

Total noninterest-earning assets

   $ 170,995                  162,853          

Noninterest-bearing funding sources

                       

Deposits

   $ 246,692                  197,943          

Other liabilities

     63,556                  52,930          

Total equity

     140,766                  126,399          

Noninterest-bearing funding sources used to fund earning assets

     (280,019                (214,419        

Net noninterest-bearing funding sources

   $ 170,995                  162,853          

Total assets

   $ 1,306,728                  1,237,037          

 

 

 

(1) Our average prime rate was 3.25% for the quarters ended December 31, 2011 and 2010. The average three-month London Interbank Offered Rate (LIBOR) was 0.48% and 0.29% for the same quarters, respectively.
(2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost and the previously reported amounts for all periods prior to 2011 have been changed to amortized cost, the basis used to determine yield for those periods.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) Includes taxable-equivalent adjustments of $191 million and $161 million for December 31, 2011 and 2010, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate utilized was 35% for the periods presented.


22

 

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)

 

 

    Year ended December 31,  
    2011         2010  
(in millions)   Average
balance
    Yields/
rates
         Interest
income/
expense
         Average
balance
    Yields/
rates
         Interest
income/
expense
 

Earning assets

                 

Federal funds sold, securities purchased under resale agreements and other short-term investments

  $ 87,186       0.40      %     $ 345         62,961       0.36     %     $ 230  

Trading assets

    39,737       3.68         1,463         29,920       3.75         1,121  

Securities available for sale (3):

                 

Securities of U.S. Treasury and federal agencies

    5,503       1.25         69         1,870       3.24         61  

Securities of U.S. states and political subdivisions

    24,035       5.09         1,223         16,089       6.09         980  

Mortgage-backed securities:

                 

Federal agencies

    74,665       4.36         3,257         71,953       5.14         3,697  

Residential and commercial

    31,902       8.20         2,617         31,815       10.67         3,396  

Total mortgage-backed securities

    106,567       5.51         5,874         103,768       6.84         7,093  

Other debt and equity securities

    38,625       5.03         1,941         32,611       6.45         2,102  

Total securities available for sale

    174,730       5.21         9,107         154,338       6.63         10,236  

Mortgages held for sale (4)

    37,232       4.42         1,644         36,716       4.73         1,736  

Loans held for sale (4)

    1,104       5.25         58         3,773       2.67         101  

Loans:

                 

Commercial:

                 

Commercial and industrial

    157,608       4.37         6,894         149,576       4.80         7,186  

Real estate mortgage

    102,236       4.07         4,163         98,497       3.89         3,836  

Real estate construction

    21,592       4.88         1,055         31,286       3.36         1,051  

Lease financing

    12,944       7.54         976         13,451       9.21         1,239  

Foreign

    36,768       2.56         941         29,726       3.49         1,037  

Total commercial

    331,148       4.24         14,029         322,536       4.45         14,349  

Consumer:

                 

Real estate 1-4 family first mortgage

    226,980       4.89         11,090         235,568       5.18         12,206  

Real estate 1-4 family junior lien mortgage

    90,705       4.33         3,926         101,537       4.45         4,519  

Credit card

    21,463       13.02         2,794         22,375       13.35         2,987  

Other revolving credit and installment

    86,848       6.29         5,463         88,585       6.49         5,747  

Total consumer

    425,996       5.46         23,273         448,065       5.68         25,459  

Total loans (4)

    757,144       4.93         37,302         770,601       5.17         39,808  

Other

    4,929       4.12         203         5,849       3.56         207  

Total earning assets

  $     1,102,062       4.55     %     $     50,122         1,064,158       5.02     %     $     53,439  

Funding sources

                 

Deposits:

                 

Interest-bearing checking

  $ 47,705       0.08     %     $ 40         60,941       0.12     %     $ 72  

Market rate and other savings

    464,450       0.18         836         416,877       0.26         1,088  

Savings certificates

    69,711       1.43         995         87,133       1.43         1,247  

Other time deposits

    13,126       2.04         268         14,654       2.07         302  

Deposits in foreign offices

    61,566       0.22         136         55,097       0.22         123  

Total interest-bearing deposits

    656,558       0.35         2,275         634,702       0.45         2,832  

Short-term borrowings

    51,781       0.18         94         46,824       0.22         106  

Long-term debt

    141,079       2.82         3,978         185,426       2.64         4,888  

Other liabilities

    10,955       2.88         316         6,863       3.31         227  

Total interest-bearing liabilities

    860,373       0.77         6,663         873,815       0.92         8,053  

Portion of noninterest-bearing funding sources

    241,689       -          -          190,343       -          -   

Total funding sources

  $ 1,102,062       0.61         6,663         1,064,158       0.76         8,053  

Net interest margin and net interest income
on a taxable-equivalent basis (5)

      3.94     %     $ 43,459           4.26     %     $ 45,386  

Noninterest-earning assets

                 

Cash and due from banks

  $ 17,388               17,618        

Goodwill

    24,904               24,824        

Other

    125,911               120,338        

Total noninterest-earning assets

  $ 168,203               162,780        

Noninterest-bearing funding sources

                 

Deposits

  $ 215,242               183,008        

Other liabilities

    57,399               47,877        

Total equity

    137,251               122,238        

Noninterest-bearing funding sources used to fund earning assets

    (241,689             (190,343      

Net noninterest-bearing funding sources

  $ 168,203               162,780        

Total assets

  $ 1,270,265               1,226,938        

 

 

 

(1) Our average prime rate was 3.25% for the years ended December 31, 2011 and 2010. The average three-month London Interbank Offered Rate (LIBOR) was 0.34% for the same periods.
(2) Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost and the previously reported amounts for all periods prior to 2011 have been changed to amortized cost, the basis used to determine yield for those periods.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) Includes taxable-equivalent adjustments of $696 million and $629 million for December 31, 2011 and 2010, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.


23

 

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME

 

 
     Quarter ended Dec. 31,      %     Year ended Dec. 31,      %  
  

 

 

      

 

 

    
(in millions)    2011       2010       Change     2011       2010       Change  

 

 

Service charges on deposit accounts

    $ 1,091         1,035           5  %     $ 4,280         4,916         (13)  % 

Trust and investment fees:

                

Trust, investment and IRA fees

     1,000         1,030         (3)        4,099         4,038          

Commissions and all other fees

     1,658         1,928         (14)        7,205         6,896          

 

      

 

 

    

Total trust and investment fees

     2,658         2,958         (10     11,304         10,934          

 

      

 

 

    

Card fees

     680         941         (28)        3,653         3,652           

Other fees:

                

Cash network fees

     109         74         47        389         260         50   

Charges and fees on loans

     402         446         (10)        1,641         1,690         (3)   

Processing and all other fees

     585         543               2,163         2,040          

 

      

 

 

    

Total other fees

     1,096         1,063               4,193         3,990          

 

      

 

 

    

Mortgage banking:

                

Servicing income, net

     493         240         105        3,266         3,340         (2)   

Net gains on mortgage loan origination/sales activities

     1,871         2,517         (26)        4,566         6,397         (29)   

 

      

 

 

    

Total mortgage banking

     2,364         2,757         (14)        7,832         9,737         (20)   

 

      

 

 

    

Insurance

     466         564         (17)        1,960         2,126         (8)   

Net gains (losses) from trading activities

     430         532         (19)        1,014         1,648         (38)   

Net gains (losses) on debt securities available for sale

     48         (268)         NM        54         (324)         NM   

Net gains from equity investments

     61         317         (81)        1,482         779         90   

Operating leases

     60         79         (24)        524         815         (36)   

All other

     759         453         68        1,889         2,180         (13)   

 

      

 

 

    

Total

   $ 9,713         10,431         (7)      $ 38,185         40,453         (6)   

 

 

 

NM - Not meaningful

 

NONINTEREST EXPENSE

  

  

 

 
    

Quarter ended Dec. 31,

     %     Year ended Dec. 31,      %  
  

 

 

      

 

 

    
(in millions)    2011       2010       Change     2011       2010       Change  

 

 

Salaries

    $ 3,706         3,513             5     $ 14,462         13,869        

Commission and incentive compensation

     2,251         2,195               8,857         8,692          

Employee benefits

     1,012         1,192         (15)        4,348         4,651         (7)   

Equipment

     607         813         (25)        2,283         2,636         (13)   

Net occupancy

     759         750               3,011         3,030         (1)   

Core deposit and other intangibles

     467         549         (15)        1,880         2,199         (15)   

FDIC and other deposit assessments

     314         301               1,266         1,197          

Outside professional services

     813         781               2,692         2,370         14   

Contract services

     356         481         (26)        1,407         1,642         (14)   

Foreclosed assets

     370         452         (18)        1,354         1,537         (12)   

Operating losses

     163         193         (16)        1,261         1,258           

Postage, stationery and supplies

     231         239         (3)        942         944           

Outside data processing

     257         235               935         1,046         (11)   

Travel and entertainment

     212         221         (4)        821         783          

Advertising and promotion

     166         192         (14)        607         630         (4)   

Telecommunications

     129         151         (15)        523         596         (12)   

Insurance

     87         90         (3)        515         464         11   

Operating leases

     28         24         17        112         109          

All other

     580         968         (40)        2,117         2,803         (24)   

 

      

 

 

    

Total

    $       12,508         13,340         (6)       $       49,393         50,456         (2)   

 

 


24

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

 

 
     Quarter ended  
  

 

 

 
(in millions)    Dec. 31,
2011 
     Sept. 30,
2011 
     June 30,
2011 
     Mar. 31,
2011 
     Dec. 31,
2010 
 

 

 

Service charges on deposit accounts

    $ 1,091         1,103         1,074         1,012         1,035   

Trust and investment fees:

              

Trust, investment and IRA fees

     1,000         1,019         1,020         1,060         1,030   

Commissions and all other fees

     1,658         1,767         1,924         1,856         1,928   

 

 

Total trust and investment fees

     2,658         2,786         2,944         2,916         2,958   

 

 

Card fees

     680         1,013         1,003         957         941   

Other fees:

              

Cash network fees

     109         105         94         81         74   

Charges and fees on loans

     402         438         404         397         446   

Processing and all other fees

     585         542         525         511         543   

 

 

Total other fees

     1,096         1,085         1,023         989         1,063   

 

 

Mortgage banking:

              

Servicing income, net

     493         1,030         877         866         240   

Net gains on mortgage loan origination/sales activities

     1,871         803         742         1,150         2,517   

 

 

Total mortgage banking

     2,364         1,833         1,619         2,016         2,757   

 

 

Insurance

     466         423         568         503         564   

Net gains (losses) from trading activities

     430         (442)         414         612         532   

Net gains (losses) on debt securities available for sale

     48         300         (128)         (166)         (268)   

Net gains from equity investments

     61         344         724         353         317   

Operating leases

     60         284         103         77         79   

All other

     759         357         364         409         453   

 

 

Total

   $ 9,713         9,086         9,708         9,678         10,431   

 

 
FIVE QUARTER NONINTEREST EXPENSE   

 

 
     Quarter ended  
  

 

 

 
(in millions)    Dec. 31,
2011 
     Sept. 30,
2011 
     June 30,
2011 
     Mar. 31,
2011 
     Dec. 31,
2010 
 

 

 

Salaries

   $ 3,706         3,718         3,584         3,454         3,513   

Commission and incentive compensation

     2,251         2,088         2,171         2,347         2,195   

Employee benefits

     1,012         780         1,164         1,392         1,192   

Equipment

     607         516         528         632         813   

Net occupancy

     759         751         749         752         750   

Core deposit and other intangibles

     467         466         464         483         549   

FDIC and other deposit assessments

     314         332         315         305         301   

Outside professional services

     813         640         659         580         781   

Contract services

     356         341         341         369         481   

Foreclosed assets

     370         271         305         408         452   

Operating losses

     163         198         428         472         193   

Postage, stationery and supplies

     231         240         236         235         239   

Outside data processing

     257         226         232         220         235   

Travel and entertainment

     212         198         205         206         221   

Advertising and promotion

     166         159         166         116         192   

Telecommunications

     129         128         132         134         151   

Insurance

     87         94         201         133         90   

Operating leases

     28         29         31         24         24   

All other

     580         502         564         471         968   

 

 

Total

   $         12,508         11,677         12,475         12,733         13,340   

 

 


25

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

 

     December 31,      %  
  

 

 

    
(in millions, except shares)    2011       2010       Change  

 

 

Assets

        

Cash and due from banks

   $ 19,440         16,044         21 

Federal funds sold, securities purchased under resale agreements and other short-term investments

     44,367         80,637         (45)   

Trading assets

     77,814         51,414         51   

Securities available for sale

     222,613         172,654         29   

Mortgages held for sale (includes $44,791 and $47,531 carried at fair value)

     48,357         51,763         (7)   

Loans held for sale (includes $1,176 and $873 carried at fair value)

     1,338         1,290          

Loans (includes $5,916 and $309 carried at fair value)

     769,631         757,267          

Allowance for loan losses

     (19,372)         (23,022)         (16)   

 

    

Net loans

     750,259         734,245          

 

    

Mortgage servicing rights:

        

Measured at fair value

     12,603         14,467         (13)   

Amortized

     1,408         1,419         (1)   

Premises and equipment, net

     9,531         9,644         (1)   

Goodwill

     25,115         24,770          

Other assets

     101,022         99,781          

 

    

Total assets

   $     1,313,867         1,258,128          

 

    

Liabilities

        

Noninterest-bearing deposits

   $ 244,003         191,256         28   

Interest-bearing deposits

     676,067         656,686          

 

    

Total deposits

     920,070         847,942          

Short-term borrowings

     49,091         55,401         (11)   

Accrued expenses and other liabilities

     77,665         69,913         11   

Long-term debt (includes $0 and $306 carried at fair value)

     125,354         156,983         (20)   

 

    

Total liabilities

     1,172,180         1,130,239          

 

    

Equity

        

Wells Fargo stockholders’ equity:

        

Preferred stock

     11,431         8,689         32   

Common stock – $1-2/3 par value, authorized 9,000,000,000 shares;
issued 5,358,522,061 and 5,272,414,622 shares

     8,931         8,787          

Additional paid-in capital

     55,957         53,426          

Retained earnings

     64,385         51,918         24   

Cumulative other comprehensive income

     3,207         4,738         (32)   

Treasury stock – 95,910,425 shares and 10,131,394 shares

     (2,744)         (487)         463   

Unearned ESOP shares

     (926)         (663)         40   

 

    

Total Wells Fargo stockholders’ equity

     140,241         126,408         11   

Noncontrolling interests

     1,446         1,481         (2)   

 

    

Total equity

     141,687         127,889         11   

 

    

Total liabilities and equity

   $ 1,313,867         1,258,128          

 

 


26

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET

 

(in millions)   Dec. 31,
2011 
    Sept. 30,
2011 
    June 30,
2011 
    Mar. 31,
2011 
    Dec. 31,
2010 
 

 

 

Assets

         

Cash and due from banks

  $ 19,440        18,314        24,059        16,978        16,044   

Federal funds sold, securities purchased under
resale agreements and other short-term investments

    44,367        89,804        88,406        93,041        80,637   

Trading assets

    77,814        57,786        54,770        57,890        51,414   

Securities available for sale

    222,613        207,176        186,298        167,906        172,654   

Mortgages held for sale

    48,357        42,704        31,254        33,121        51,763   

Loans held for sale

    1,338        743        1,512        1,428        1,290   

Loans

    769,631        760,106        751,921        751,155        757,267   

Allowance for loan losses

    (19,372)        (20,039)        (20,893)        (21,983)        (23,022)   

 

 

Net loans

    750,259        740,067        731,028        729,172        734,245   

 

 

Mortgage servicing rights:

         

Measured at fair value

    12,603        12,372        14,778        15,648        14,467   

Amortized

    1,408        1,397        1,422        1,423        1,419   

Premises and equipment, net

    9,531        9,607        9,613        9,545        9,644   

Goodwill

    25,115        25,038        24,776        24,777        24,770   

Other assets

    101,022        99,937        91,818        93,737        99,781   

 

 

Total assets

  $     1,313,867        1,304,945        1,259,734        1,244,666        1,258,128   

 

 

Liabilities

         

Noninterest-bearing deposits

  $ 244,003        229,863        202,143        190,959        191,256   

Interest-bearing deposits

    676,067        665,565        651,492        646,703        656,686   

 

 

Total deposits

    920,070        895,428        853,635        837,662        847,942   

Short-term borrowings

    49,091        50,775        53,881        54,737        55,401   

Accrued expenses and other liabilities

    77,665        86,284        71,430        68,721        69,913   

Long-term debt

    125,354        133,214        142,872        148,603        156,983   

 

 

Total liabilities

    1,172,180        1,165,701        1,121,818        1,109,723        1,130,239   

 

 

Equity

         

Wells Fargo stockholders’ equity:

         

Preferred stock

    11,431        11,566        11,730        11,897        8,689   

Common stock

    8,931        8,902        8,876        8,854        8,787   

Additional paid-in capital

    55,957        55,495        55,226        54,815        53,426   

Retained earnings

    64,385        61,135        57,942        54,855        51,918   

Cumulative other comprehensive income

    3,207        3,828        5,422        5,021        4,738   

Treasury stock

    (2,744)        (2,087)        (1,546)        (541)        (487)   

Unearned ESOP shares

    (926)        (1,071)        (1,249)        (1,430)        (663)   

 

 

Total Wells Fargo stockholders’ equity

    140,241        137,768        136,401        133,471        126,408   

Noncontrolling interests

    1,446        1,476        1,515        1,472        1,481   

 

 

Total equity

    141,687        139,244        137,916        134,943        127,889   

 

 

Total liabilities and equity

  $ 1,313,867        1,304,945        1,259,734        1,244,666        1,258,128   

 

 


27

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1) 

    

 

Quarter ended

       
    Dec. 31, 2011          Sept. 30, 2011            June 30, 2011            Mar. 31, 2011            Dec. 31, 2010        
($ in billions)   Average
balance
    Yields/
rates
         Average
balance
    Yields/
rates
           Average
balance
    Yields/
rates
           Average
balance
    Yields/
rates
           Average
balance
    Yields/
rates
       

Earning assets

                             

Federal funds sold, securities purchased
under resale agreements and
other short-term investments

  $ 68.0        0.52     %     $ 98.9       0.42       %        $ 98.5       0.32       %        $ 83.4       0.35       %        $ 72.0       0.40       %   

Trading assets

    45.5        3.57         37.9       3.67         38.0       3.71         37.4       3.81         33.9       3.56    

Securities available for sale (2):

                             

Securities of U.S. Treasury and federal agencies

    8.7        0.99         9.6       1.02         2.0       2.33         1.6       2.87         1.6       2.80    

Securities of U.S. states and political subdivisions

    28.0        4.80         25.6       4.93         22.5       5.35         19.9       5.45         18.3       5.58    

Mortgage-backed securities:

                             

Federal agencies

    84.3        3.68         72.8       4.41         70.9       4.76         70.4       4.72         76.7       4.48    

Residential and commercial

    34.7        7.05         32.6       7.46         30.0       8.86         30.2       9.68         31.0       10.95    

Total mortgage-backed securities

    119.0        4.66         105.4       5.36         100.9       5.98         100.6       6.21         107.7       6.35    

Other debt and equity securities

    47.3        4.38         38.9       4.69         34.5       5.81         33.6       5.55         35.5       6.15    

Total securities available for sale

    203.0        4.46         179.5       4.92         159.9       5.81         155.7       5.94         163.1       6.18    

Mortgages held for sale

    44.8        4.07         34.6       4.49         30.7       4.73         38.7       4.51         45.1       4.39    

Loans held for sale

    1.1        5.84         1.0       5.21         1.4       5.05         1.0       4.88         1.1       5.15    

Loans:

                             

Commercial:

                             

Commercial and industrial

    166.9        4.08         159.6       4.22         153.6       4.60         150.0       4.65         147.9       4.71    

Real estate mortgage

    105.2        4.26         102.4       3.93         101.5       4.16         99.9       3.92         99.2       3.85    

Real estate construction

    19.6        4.61         20.5       6.12         22.0       4.64         24.3       4.26         26.9       3.68    

Lease financing

    12.9        7.41         13.0       7.21         12.9       7.72         13.0       7.83         13.0       9.00    

Foreign

    38.8        2.39         38.2       2.42         36.4       2.65         33.6       2.83         31.0       3.57    

Total commercial

    343.4        4.10         333.7       4.16         326.4       4.37         320.8       4.33         318.0       4.42    

Consumer:

                             

Real estate 1-4 family first mortgage

    229.8        4.74         223.8       4.83         224.9       4.97         229.6       5.01         228.8       5.06    

Real estate 1-4 family junior lien mortgage

    87.2        4.34         89.1       4.37         91.9       4.25         94.7       4.35         97.7       4.37    

Credit card

    21.9        12.96         21.5       12.96         21.0       12.97         21.5       13.18         21.9       13.44    

Other revolving credit and installment

    86.3        6.23         86.5       6.25         87.1       6.32         87.5       6.36         87.3       6.48    

Total consumer

    425.2        5.39         420.9       5.44         424.9       5.48         433.3       5.54         435.7       5.61    

Total loans

    768.6        4.81         754.6       4.87         751.3       5.00         754.1       5.03         753.7       5.11    

Other

    4.7        4.32         4.9       4.18         5.0       4.10         5.2       3.90         5.3       3.93    

Total earning assets

  $     1,135.7        4.41     %     $     1,111.4       4.43       %        $     1,084.8       4.64       %        $     1,075.5       4.73       %        $     1,074.2       4.87       %   

Funding sources

                             

Deposits:

                             

Interest-bearing checking

  $ 35.3        0.06     %     $ 44.0       0.07       %        $ 53.3       0.09       %        $ 58.5       0.10       %        $ 60.9       0.09       %   

Market rate and other savings

    485.1        0.14         473.4       0.17         455.1       0.20         443.6       0.22         431.2       0.25    

Savings certificates

    64.9        1.43         67.6       1.47         72.1       1.42         74.4       1.39         79.1       1.43    

Other time deposits

    12.9        1.85         12.8       2.02         13.0       2.03         13.8       2.24         13.4       2.00    

Deposits in foreign offices

    67.2        0.20         63.5       0.23         57.9       0.23         57.5       0.23         55.5       0.21    

Total interest-bearing deposits

    665.4        0.30         661.3       0.34         651.4       0.37         647.8       0.38         640.1       0.41    

Short-term borrowings

    48.7        0.14         50.4       0.18         53.3       0.18         54.8       0.22         50.6       0.24    

Long-term debt

    129.4        2.73         139.5       2.81         145.5       2.78         150.1       2.95         160.8       2.86    

Other liabilities

    12.2        2.60         11.2       2.75         11.0       3.03         9.5       3.24         8.3       3.13    

Total interest-bearing liabilities

    855.7        0.69         862.4       0.76         861.2       0.80         862.2       0.85         859.8       0.89    

Portion of noninterest-bearing funding sources

    280.0        -          249.0       -          223.6       -          213.3       -          214.4       -     

Total funding sources

  $ 1,135.7        0.52       $ 1,111.4       0.59       $ 1,084.8       0.63       $ 1,075.5       0.68       $ 1,074.2       0.71    

Net interest margin on a
taxable-equivalent basis

      3.89     %         3.84       %            4.01       %            4.05       %            4.16       %   

Noninterest-earning assets

                             

Cash and due from banks

  $ 17.7            17.1           17.4           17.4           18.0      

Goodwill

    25.1            25.0           24.8           24.8           24.8      

Other

    128.2            127.9           123.9           123.5           120.0      

Total noninterest-earnings assets

  $ 171.0            170.0           166.1           165.7           162.8      

Noninterest-bearing funding sources

                             

Deposits

  $ 246.7            221.2           199.3           193.1           197.9      

Other liabilities

    63.5            57.5           53.2           55.3           52.9      

Total equity

    140.8            140.3           137.2           130.6           126.4      

Noninterest-bearing funding sources used to fund earning assets

    (280.0         (249.0         (223.6         (213.3         (214.4    

Net noninterest-bearing funding sources

  $ 171.0            170.0           166.1           165.7           162.8      

Total assets

  $ 1,306.7            1,281.4           1,250.9           1,241.2           1,237.0      
     

 

(1) Our average prime rate was 3.25% for quarters ended December 31, September 30, June 30 and March 31, 2011, and December 31 2010. The average three-month London Interbank Offered Rate (LIBOR) was 0.48%, 0.30%, 0.26%, 0.31% and 0.29% for the same quarters, respectively.
(2) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost and the previously reported amounts for all periods prior to December 31, 2011, have been changed to amortized cost, the basis used to determine yield for those periods.


28

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SECURITIES AVAILABLE FOR SALE

 

 
(in millions)    Dec. 31,
2011 
     Sept. 30,
2011 
     June 30,
2011 
     Mar. 31,
2011 
     Dec. 31,
2010 
 

 

 

Securities of U.S. Treasury and federal agencies

   $ 6,968         13,813         10,523         1,507         1,604   

Securities of U.S. states and political subdivisions

     32,593         26,970         24,412         21,159         18,654   

Mortgage-backed securities:

              

Federal agencies

     96,754         84,716         78,338         75,552         82,037   

Residential and commercial

     35,986         35,159         33,088         32,728         33,757   

 

 

Total mortgage-backed securities

     132,740         119,875         111,426         108,280         115,794   

Other debt securities

     46,895         42,925         35,582         31,952         31,413   

 

 

Total debt securities available for sale

     219,196         203,583         181,943         162,898         167,465   

Marketable equity securities

     3,417         3,593         4,355         5,008         5,189   

 

 

Total securities available for sale

   $         222,613         207,176         186,298         167,906         172,654   

 

 

FIVE QUARTER LOANS

 

 
(in millions)    Dec. 31,
2011 
     Sept. 30,
2011 
     June 30,
2011 
     Mar. 31,
2011 
     Dec. 31,
2010 
 

 

 

Commercial:

              

Commercial and industrial

   $         167,216         164,510         157,095         150,857         151,284   

Real estate mortgage

     105,975         104,363         101,458         101,084         99,435   

Real estate construction

     19,382         19,719         21,374         22,868         25,333   

Lease financing

     13,117         12,852         12,907         12,937         13,094   

Foreign (1)

     39,760         38,390         37,855         35,476         32,912   

 

 

Total commercial

     345,450         339,834         330,689         323,222         322,058   

 

 

Consumer:

              

Real estate 1-4 family first mortgage

     228,894         223,758         222,874         226,509         230,235   

Real estate 1-4 family junior lien mortgage

     85,991         88,264         89,947         93,041         96,149   

Credit card

     22,836         21,650         21,191         20,996         22,260   

Other revolving credit and installment

     86,460         86,600         87,220         87,387         86,565   

 

 

Total consumer

     424,181         420,272         421,232         427,933         435,209   

 

 

Total loans (net of unearned income) (2)

   $ 769,631         760,106         751,921         751,155         757,267   

 

 

 

(1) Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign if the borrower’s primary address is outside of the United States.
(2) Includes $36.7 billion, $37.2 billion, $38.7 billion, $40.0 billion and $41.4 billion of purchased credit-impaired (PCI) loans at December 31, September 30, June 30 and March 31, 2011, and December 31, 2010, respectively. See table on page 31 for detail of PCI loans.


29

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)

 

 
(in millions)    Dec. 31,
2011 
    Sept. 30,
2011 
     June 30,
2011 
     Mar. 31,
2011 
     Dec. 31,
2010 
 

 

 

Nonaccrual loans:

             

Commercial:

             

Commercial and industrial

   $ 2,142        2,128         2,393         2,653         3,213   

Real estate mortgage

     4,085        4,429         4,691         5,239         5,227   

Real estate construction

     1,890        1,915         2,043         2,239         2,676   

Lease financing

     53        71         79         95         108   

Foreign

     47        68         59         86         127   

 

 

Total commercial

     8,217        8,611         9,265         10,312         11,351   

 

 

Consumer:

             

Real estate 1-4 family first mortgage

     10,913        11,024         11,427         12,143         12,289   

Real estate 1-4 family junior lien mortgage

     1,975        2,035         2,098         2,235         2,302   

Other revolving credit and installment

     199        230         255         275         300   

 

 

Total consumer

     13,087        13,289         13,780         14,653         14,891   

 

 

Total nonaccrual loans (1)(2)(3)

     21,304        21,900         23,045         24,965         26,242   

 

 

As a percentage of total loans

     2.77  %      2.88         3.06         3.32         3.47   

Foreclosed assets:

             

GNMA (4)

   $ 1,319        1,336         1,320         1,457         1,479   

Non-GNMA

     3,342        3,608         3,541         4,055         4,530   

 

 

Total foreclosed assets

     4,661        4,944         4,861         5,512         6,009   

 

 

Total nonperforming assets

   $           25,965          26,844           27,906           30,477           32,251   

 

 

As a percentage of total loans

     3.37      3.53         3.71         4.06         4.26   

 

 

 

(1) Also includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
(2) Excludes loans that are accounted for as PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.
(3) Real estate 1-4 family mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status since they are insured or guaranteed.
(4) Consistent with regulatory reporting requirements, foreclosed real estate securing government insured/guaranteed loans is classified as nonperforming. Both principal and interest for government insured/guaranteed loans secured by the foreclosed real estate are collectible because the loans are insured by the FHA or guaranteed by the VA.


30

 

Wells Fargo & Company and Subsidiaries

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

 

 
(in millions)    Dec. 31,
2011 
     Sept. 30, 
2011 
     June 30,
2011 
     Mar. 31,
2011 
     Dec. 31,
2010 
 

 

 

Total (excluding PCI)(1):

   $         22,569         19,639         17,318         17,901         18,488   

Less: FHA insured / VA guaranteed (2)

     19,240         16,498         14,474         14,353         14,733   

Less: Student loans guaranteed under the FFELP (3)

     1,281         1,212         1,014         1,120         1,106   

 

 

Total, not government insured/guaranteed

   $ 2,048         1,929         1,830         2,428         2,649   

 

 

By segment and class, not government insured/guaranteed:

              

Commercial:

              

Commercial and industrial

   $ 153         108         110         338         308   

Real estate mortgage

     256         207         137         177         104   

Real estate construction

     89         57         86         156         193   

Foreign

            11         12         16         22   

 

 

Total commercial

     504         383         345         687         627   

 

 

Consumer:

              

Real estate 1-4 family first mortgage (4)

     781         819         728         858         941   

Real estate 1-4 family junior lien mortgage (4)

     279         255         286         325         366   

Credit card

     346         328         334         413         516   

Other revolving credit and installment

     138         144         137         145         199   

 

 

Total consumer

     1,544         1,546         1,485         1,741         2,022   

 

 

Total, not government insured/guaranteed

   $ 2,048         1,929         1,830         2,428         2,649   

 

 

 

(1) The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $8.7 billion, $8.9 billion, $9.8 billion, $10.8 billion and $11.6 billion at December 31, September 30, June 30 and March 31, 2011, and December 31, 2010, respectively. These amounts are excluded from the above table as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status.
(2) Represents loans whose repayments are insured by the FHA or guaranteed by the VA.
(3) Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program (FFELP).
(4) Includes mortgages held for sale 90 days or more past due and still accruing.


31

 

Wells Fargo & Company and Subsidiaries

PURCHASED CREDIT-IMPAIRED (PCI) LOANS

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans predominately represent loans acquired from Wachovia that were deemed to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent LTV percentages. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date.

Under the accounting guidance for PCI loans, the excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan, or pool of loans, in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.

Subsequent to acquisition, we regularly evaluate our estimates of cash flows expected to be collected. These evaluations, performed quarterly, require the continued usage of key assumptions and estimates, similar to the initial estimate of fair value. If we have probable decreases in the expected cash flows (other than due to a decrease in rate indices), we charge the provision for credit losses, resulting in an increase to the allowance for loan losses. If we have probable and significant increases in the expected cash flows subsequent to establishing an additional allowance, we first reverse any previously established allowance and then increase interest income over the remaining life of the loan, or pool of loans.

As a result of PCI loan accounting, certain credit-related ratios cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.

 

 

 
            December 31,  
  

 

 

 
(in millions)    2011       2010      2009      2008   

 

 

Commercial:

           

Commercial and industrial

   $ 399         718        1,911        4,580   

Real estate mortgage

     3,270         2,855        4,137        5,803   

Real estate construction

     1,745         2,949        5,207        6,462   

Foreign

     1,353         1,413        1,733        1,859   

 

 

Total commercial

     6,767         7,935        12,988        18,704   

 

 

Consumer:

           

Real estate 1-4 family first mortgage

     29,746         33,245        38,386        39,214   

Real estate 1-4 family junior lien mortgage

     206         250        331        728   

Other revolving credit and installment

             -         -         151   

 

 

Total consumer

     29,952         33,495        38,717        40,093   

 

 

Total PCI loans (carrying value)

   $         36,719                 41,430                51,705                58,797   

 

 


32

 

Wells Fargo & Company and Subsidiaries

CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS

The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference. A nonaccretable difference is established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Substantially all our commercial and industrial, CRE and foreign PCI loans are accounted for as individual loans. Conversely, Pick-a-Pay and other consumer PCI loans have been aggregated into several pools based on common risk characteristics. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Resolutions of loans may include sales to third parties, receipt of payments in settlement with the borrower, or foreclosure of the collateral. Our policy is to remove an individual loan from a pool based on comparing the amount received from its resolution with its contractual amount. Any difference between these amounts is absorbed by the nonaccretable difference. This removal method assumes that the amount received from resolution approximates pool performance expectations. The accretable yield percentage is unaffected by the resolution and any changes in the effective yield for the remaining loans in the pool are addressed by our quarterly cash flow evaluation process for each pool. For loans that are resolved by payment in full, there is no release of the nonaccretable difference for the pool because there is no difference between the amount received at resolution and the contractual amount of the loan. Modified PCI loans are not removed from a pool even if those loans would otherwise be deemed troubled debt restructurings (TDRs). Modified PCI loans that are accounted for individually are considered TDRs, and removed from PCI accounting, if there has been a concession granted in excess of the original nonaccretable difference. The following table provides an analysis of changes in the nonaccretable difference.

 

 

 
(in millions)    Commercial      Pick-a-Pay      Other
consumer
     Total  

 

 

Balance, December 31, 2008

   $         10,410         26,485         4,069         40,964   

Release of nonaccretable difference due to:

           

Loans resolved by settlement with borrower (1)

     (330)                         (330)   

Loans resolved by sales to third parties (2)

     (86)                 (85)         (171)   

Reclassification to accretable yield for loans
with improving credit-related cash flows (3)

     (138)         (27)         (276)         (441)   

Use of nonaccretable difference due to:

           

Losses from loan resolutions and write-downs (4)

     (4,853)         (10,218)         (2,086)         (17,157)   

 

 

Balance, December 31, 2009

     5,003         16,240         1,622         22,865   

Release of nonaccretable difference due to:

           

Loans resolved by settlement with borrower (1)

     (817)                         (817)   

Loans resolved by sales to third parties (2)

     (172)                         (172)   

Reclassification to accretable yield for loans
with improving credit-related cash flows (3)

     (726)         (2,356)         (317)         (3,399)   

Use of nonaccretable difference due to:

           

Losses from loan resolutions and write-downs (4)

     (1,698)         (2,959)         (391)         (5,048)   

 

 

Balance, December 31, 2010

     1,590         10,925         914         13,429   

Addition of nonaccretable difference due to acquisitions

     188                         188   

Release of nonaccretable difference due to:

           

Loans resolved by settlement with borrower (1)

     (198)                         (198)   

Loans resolved by sales to third parties (2)

     (41)                         (41)   

Reclassification to accretable yield for loans
with improving credit-related cash flows (3)

     (352)                 (21)         (373)   

Use of nonaccretable difference due to:

           

Losses from loan resolutions and write-downs (4)

     (258)         (1,799)         (241)         (2,298)   

 

 

Balance, December 31, 2011

   $ 929         9,126         652         10,707   

 

 

 

 

Balance, September 30, 2011

   $ 958         9,643         686         11,287   

Addition of nonaccretable difference due to acquisitions

     171                         171   

Release of nonaccretable difference due to:

           

Loans resolved by settlement with borrower (1)

     (44)                         (44)   

Loans resolved by sales to third parties (2)

     (11)                         (11)   

Reclassification to accretable yield for loans
with improving credit-related cash flows (3)

     (55)                         (55)   

Use of nonaccretable difference due to:

           

Losses from loan resolutions and write-downs (4)

     (90)         (517)         (34)         (641)   

 

 

Balance, December 31, 2011

   $ 929         9,126         652         10,707   

 

 

 

(1) Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations.
(2) Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.
(3) Reclassification of nonaccretable difference to accretable yield for loans with increased cash flow estimates will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans.
(4) Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.


33

 

Wells Fargo & Company and Subsidiaries

CHANGES IN ACCRETABLE YIELD RELATED TO PCI LOANS

The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the loan, or pool of loans. The accretable yield is affected by:

 

   

Changes in interest rate indices for variable rate PCI loans – Expected future cash flows are based on the variable rates in effect at the time of the regular evaluations of cash flows expected to be collected;

 

   

Changes in prepayment assumptions – Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and

 

   

Changes in the expected principal and interest payments over the estimated life – Updates to expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.

The change in the accretable yield related to PCI loans is presented in the following table.

 

 

 
         Quarter
ended
    Dec. 31,
    

            Year ended Dec. 31,

 
    

 

 

    

 

 

 
(in millions)        2011       2011       2010       2009   

 

 

Total, beginning of period

   $     16,896         16,714         14,559         10,447   

Addition of accretable yield due to acquisitions

       124         128                   

Accretion into interest income (1)

       (551)         (2,206)         (2,392)         (2,601)   

Accretion into noninterest income due to sales (2)

       (1)         (189)         (43)         (5)   

Reclassification from nonaccretable difference for loans
with improving credit-related cash flows

       55         373         3,399         441   

Changes in expected cash flows that do not affect nonaccretable difference (3)

       (562)         1,141         1,191         6,277   

 

 

Total, end of period

   $     15,961         15,961         16,714         14,559   

 

 

 

(1) Includes accretable yield released as a result of settlements with borrowers, which is included in interest income.
(2) Includes accretable yield released as a result of sales to third parties, which is included in noninterest income
(3) Represents changes in cash flows expected to be collected due to changes in interest rates on variable rate PCI loans, changes in prepayment assumptions and the impact of modifications.

CHANGES IN ALLOWANCE FOR PCI LOAN LOSSES

When it is estimated that the cash flows expected to be collected have decreased subsequent to acquisition for a PCI loan or pool of loans, an allowance is established and a provision for additional loss is recorded as a charge to income. The following table summarizes the changes in allowance for PCI loan losses.

 

 

 
(in millions)        Commercial      Pick-a-Pay      Other
consumer
     Total  

 

 

Balance, December 31, 2008

   $                           

Provision for losses due to credit deterioration

     850                        853   

Charge-offs

     (520)                         (520)   

 

 

Balance, December 31, 2009

     330                        333   

Provision for losses due to credit deterioration

     712                 59         771   

Charge-offs

     (776)                 (30)         (806)   

 

 

Balance, December 31, 2010

     266                 32         298   

Provision for losses due to credit deterioration

     106                 54         160   

Charge-offs

     (207)                 (20)         (227)   

 

 

Balance, December 31, 2011

   $ 165                 66         231   

 

 

 

 

Balance, September 30, 2011

   $ 242                 60         302   

Provision for losses due to credit deterioration

     (26)                 10         (16)   

Charge-offs

     (51)                 (4)         (55)   

 

 

Balance, December 31, 2011

   $ 165                 66         231   

 

 


34

 

Wells Fargo & Company and Subsidiaries

PICK-A-PAY PORTFOLIO (1)

 

 
    

 

December 31, 2011

 
  

 

 

 
    

 

PCI loans

    All other loans  
  

 

 

 
(in millions)    Adjusted
unpaid
principal
balance (2)
     Current
LTV
ratio (3)
    Carrying
value (4)
    

 

Ratio of
carrying
value to
current
value (5)

    Carrying
value (4)
     Ratio of
carrying
value to
current
value (5)
 

 

 

California

   $         25,036         121   %     $         19,269         93    %     $         17,870         86   % 

Florida

     3,325         122        2,562         89        3,760         100   

New Jersey

     1,336         92        1,224         84        2,321         79   

New York

     757         95        685         84        1,013         82   

Texas

     340         78        312         72        1,487         64   

Other states

     6,111         110        5,004         89        10,145         87   

 

      

 

 

      

 

 

    

Total Pick-a-Pay loans

   $ 36,905         $ 29,056         $ 36,596     

 

      

 

 

      

 

 

    

 

 

 

(1) The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2011.
(2) Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.

 

(3) The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.

 

(4) Carrying value, which does not reflect the allowance for loan losses, includes remaining purchase accounting adjustments, which, for PCI loans may include the nonaccretable difference and the accretable yield and, for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs.

 

(5) The ratio of carrying value to current value is calculated as the carrying value divided by the collateral value.


35

 

Wells Fargo & Company and Subsidiaries

NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS

 

 
(in millions)    Dec.31,
2011 
     Sept.30,
2011 
     June 30,
2011 
     Mar.31,
2011 
     Dec.31,
2010 
 

 

 

Commercial:

              

Legacy Wachovia commercial and industrial, commercial real estate and foreign PCI loans (1)

   $ 5,695         6,321         7,016         7,507         7,935   

 

 

Total commercial

     5,695         6,321         7,016         7,507         7,935   

 

 

Consumer:

              

Pick-a-Pay mortgage (1)

     65,652         67,361         69,587         71,506         74,815   

Liquidating home equity

     5,710         5,982         6,266         6,568         6,904   

Legacy Wells Fargo Financial indirect auto

     2,455         3,101         3,881         4,941         6,002   

Legacy Wells Fargo Financial debt consolidation

     16,542         17,186         17,730         18,344         19,020   

Education Finance - government guaranteed (2)

     15,376         15,611         16,295         16,907         17,510   

Legacy Wachovia other PCI loans (1)

     896         947         978         1,048         1,118   

 

 

Total consumer

     106,631         110,188         114,737         119,314         125,369   

 

 

Total non-strategic and liquidating loan portfolios

   $         112,326         116,509         121,753         126,821         133,304   

 

 

 

(1) Net of purchase accounting adjustments related to PCI loans.
(2) Effective first quarter 2011, we included our education finance government guaranteed loan portfolio as there is no longer a U.S. Government guaranteed student loan program available to private financial institutions, pursuant to legislation in 2010. Prior periods have been adjusted to reflect this change.

HOME EQUITY PORTFOLIOS (1)

 

 
     Outstanding balance           % of loans
two payments
or more past due
     Loss rate (annualized)
Quarter ended
 
  

 

 

       

 

 

    

 

 

 
     December 31,            December 31,         December 31,   
  

 

 

       

 

 

    

 

 

 
(in millions)    2011      2010           2011     2010      2011      2010  

 

 

Core portfolio (2)

                   

California

   $ 25,555        27,850           3.03   %      3.30        3.42        3.95   

Florida

     10,870        12,036           4.99       5.46        4.30        5.84   

New Jersey

     7,973        8,629           3.73       3.44        2.22        1.83   

Virginia

     5,248        5,667           2.15       2.33        1.31        1.70   

Pennsylvania

     5,071        5,432           2.82       2.48        1.41        1.11   

Other

     46,165        50,976           2.79       2.83        2.50        2.86   

 

          

Total

     100,882        110,590           3.13       3.24        2.79        3.24   

 

          

Liquidating portfolio

                   

California

     2,024        2,555           5.50       6.66        11.93        13.48   

Florida

     265        330           7.02       8.85        9.71        10.59   

Arizona

     116        149           6.64       6.91        17.54        18.45   

Texas

     97        125           0.93       2.02        1.57        2.95   

Minnesota

     75        91           2.83       5.39        8.13        8.73   

Other

     3,133        3,654           4.13       4.53        7.12        6.46   

 

          

Total

     5,710        6,904           4.73       5.54        9.09        9.49   

 

          

Total core and liquidating portfolios

   $ 106,592        117,494           3.22       3.37        3.13        3.61   

 

          

 

 

 

(1) Consists predominantly of real estate 1-4 family junior lien mortgages and first and junior lines of credit secured by real estate, excluding PCI loans.
(2) Includes $1.5 billion at December 31, 2011, and $1.7 billion at December 31, 2010, associated with the Pick-a-Pay portfolio.


36

 

Wells Fargo & Company and Subsidiaries

CHANGES IN ALLOWANCE FOR CREDIT LOSSES

 

 
    

 

        Quarter ended Dec. 31,

    

 

        Year ended Dec. 31,

 
  

 

 

    

 

 

 
(in millions)    2011      2010       2011       2010   

 

 

Balance, beginning of period

   $ 20,372        24,372         23,463         25,031   

Provision for credit losses

     2,040        2,989         7,899         15,753   

Interest income on certain impaired loans (1)

     (86)        (63)         (332)         (266)   

Loan charge-offs:

          

Commercial:

          

Commercial and industrial

     (416)        (610)         (1,598)         (2,775)   

Real estate mortgage

     (153)        (270)         (636)         (1,151)   

Real estate construction

     (35)        (199)         (351)         (1,189)   

Lease financing

     (8)        (26)         (38)         (120)   

Foreign

     (52)        (50)         (173)         (198)   

 

 

Total commercial

     (664)        (1,155)         (2,796)         (5,433)   

 

 

Consumer:

          

Real estate 1-4 family first mortgage

     (904)        (1,199)         (3,883)         (4,900)   

Real estate 1-4 family junior lien mortgage

     (856)        (1,059)         (3,763)         (4,934)   

Credit card

     (303)        (505)         (1,449)         (2,396)   

Other revolving credit and installment

     (412)        (573)         (1,724)         (2,437)   

 

 

Total consumer

     (2,475)        (3,336)         (10,819)         (14,667)   

 

 

Total loan charge-offs

     (3,139)        (4,491)         (13,615)         (20,100)   

 

 

Loan recoveries:

          

Commercial:

          

Commercial and industrial

     106        110         419         427   

Real estate mortgage

     36        36         143         68   

Real estate construction

     40        28         146         110   

Lease financing

                  24         20   

Foreign

           22         45         53   

 

 

Total commercial

     193        201         777         678   

 

 

Consumer:

          

Real estate 1-4 family first mortgage

     60        175         405         522   

Real estate 1-4 family junior lien mortgage

     56        54         218         211   

Credit card

     47        53         251         218   

Other revolving credit and installment

     143        169         665         718   

 

 

Total consumer

     306        451         1,539         1,669   

 

 

Total loan recoveries

     499        652         2,316         2,347   

 

 

Net loan charge-offs (2)

     (2,640)        (3,839)         (11,299)         (17,753)   

 

 

Allowances related to business combinations/other (3)

     (18)               (63)         698   

 

 

Balance, end of period

   $ 19,668        23,463         19,668         23,463   

 

 

Components:

          

Allowance for loan losses

   $ 19,372        23,022         19,372         23,022   

Allowance for unfunded credit commitments

     296        441         296         441   

 

 

Allowance for credit losses (4)

   $ 19,668        23,463         19,668         23,463   

 

 

Net loan charge-offs (annualized) as a percentage of average total loans (2)

     1.36   %      2.02         1.49         2.30   

Allowance for loan losses as a percentage of total loans (4)

     2.52        3.04         2.52         3.04   

Allowance for credit losses as a percentage of total loans (4)

     2.56        3.10         2.56         3.10   

 

 

 

(1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income.
(2) For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting estimates.
(3) Includes $693 million for the year ended December 31, 2010, related to the adoption of consolidation accounting guidance on January 1, 2010.
(4) The allowance for credit losses includes $231 million and $298 million at December 31, 2011 and 2010, respectively, related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs.


37

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES

 

 
    

 

Quarter ended

 
  

 

 

 
(in millions)    Dec.31,
2011
    Sept.30,
2011
     June30,
2011
     Mar.31,
2011
     Dec.31,
2010
 

 

 

Balance, beginning of quarter

    $           20,372         21,262         22,383         23,463         24,372   

Provision for credit losses

     2,040         1,811         1,838         2,210         2,989   

Interest income on certain impaired loans (1)

     (86)        (84)         (79)         (83)         (63)   

Loan charge-offs:

             

Commercial:

             

Commercial and industrial

     (416)        (349)         (365)         (468)         (610)   

Real estate mortgage

     (153)        (119)         (185)         (179)         (270)   

Real estate construction

     (35)        (98)         (99)         (119)         (199)   

Lease financing

     (8)        (10)         (7)         (13)         (26)   

Foreign

     (52)        (25)         (57)         (39)         (50)   

 

 

Total commercial

     (664)        (601)         (713)         (818)         (1,155)   

 

 

Consumer:

             

Real estate 1-4 family first mortgage

     (904)        (900)         (1,064)         (1,015)         (1,199)   

Real estate 1-4 family junior lien mortgage

     (856)        (893)         (968)         (1,046)         (1,059)   

Credit card

     (303)        (320)         (378)         (448)         (505)   

Other revolving credit and installment

     (412)        (421)         (391)         (500)         (573)   

 

 

Total consumer

     (2,475)        (2,534)         (2,801)         (3,009)         (3,336)   

 

 

Total loan charge-offs

     (3,139)        (3,135)         (3,514)         (3,827)         (4,491)   

 

 

Loan recoveries:

             

Commercial:

             

Commercial and industrial

     106         88         111         114         110   

Real estate mortgage

     36         23         57         27         36   

Real estate construction

     40         43         27         36         28   

Lease financing

                                  

Foreign

            17         10         11         22   

 

 

Total commercial

     193         178         211         195         201   

 

 

Consumer:

             

Real estate 1-4 family first mortgage

     60         79         155         111         175   

Real estate 1-4 family junior lien mortgage

     56         51         59         52         54   

Credit card

     47         54         84         66         53   

Other revolving credit and installment

     143         162         167         193         169   

 

 

Total consumer

     306         346         465         422         451   

 

 

Total loan recoveries

     499         524         676         617         652   

 

 

Net loan charge-offs

     (2,640)        (2,611)         (2,838)         (3,210)         (3,839)   

 

 

Allowances related to business combinations/other

     (18)        (6)         (42)                 

 

 

Balance, end of quarter

    $ 19,668         20,372         21,262         22,383         23,463   

 

 

Components:

             

Allowance for loan losses

    $ 19,372         20,039         20,893         21,983         23,022   

Allowance for unfunded credit commitments

     296         333         369         400         441   

 

 

Allowance for credit losses

    $ 19,668         20,372         21,262         22,383         23,463   

 

 

Net loan charge-offs (annualized) as a percentage of average total loans

     1.36      1.37         1.52         1.73         2.02   

Allowance for loan losses as a percentage of:

             

Total loans

     2.52         2.64         2.78         2.93         3.04   

Nonaccrual loans

     91         92         91         88         88   

Nonaccrual loans and other nonperforming assets

     75         75         75         72         71   

Allowance for credit losses as a percentage of:

             

Total loans

     2.56         2.68         2.83         2.98         3.10   

Nonaccrual loans

     92         93         92         90         89   

Nonaccrual loans and other nonperforming assets

     76         76         76         73         72   

 

 

 

(1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income.


38

 

Wells Fargo & Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

 

 
    

 

  Year ended December 31,

 
  

 

 

 
(in millions)    2011       2010   

 

 

Balance, beginning of period

      $  127,889         114,359   

Cumulative effect from change in accounting for VIEs (1)

             183   

Cumulative effect from change in accounting for embedded credit derivatives (2)

             (28)   

Wells Fargo net income

     15,869         12,362   

Wells Fargo other comprehensive income (loss), net of tax, related to:

     

Translation adjustments

     (22)         45   

Investment securities

     (653)         1,525   

Derivative instruments and hedging activities

     (249)         89   

Defined benefit pension plans

     (607)         70   

Common stock issued

     1,296         1,375   

Common stock repurchased (3)

     (2,416)         (91)   

Preferred stock released by ESOP

     959         796   

Preferred stock issued

     2,501          

Common stock warrants repurchased

     (2)         (545)   

Common stock dividends

     (2,537)         (1,045)   

Preferred stock dividends and other

     (844)         (730)   

Noncontrolling interests and other, net

     503         (476)   

 

 

Balance, end of period

      $  141,687        127,889  

 

 

 

(1) Effective January 1, 2010, we adopted changes in consolidation accounting pursuant to amendments by ASU 2009-17 to ASC 810 (FAS 167) and, accordingly, consolidated certain VIEs that were not included in our consolidated financial statements at December 31, 2009. We recorded a $183 million increase to beginning retained earnings as a cumulative effect adjustment.
(2) Effective July 1, 2010, we adopted changes in accounting for embedded credit derivatives pursuant to ASU 2010-11, which provides guidance clarifying the accounting for embedded credit derivative features in certain financial instruments. We recorded a $28 million decrease to beginning retained earnings as a cumulative effect adjustment.
(3) For the year ended December 31, 2011, includes $150 million related to a private forward repurchase transaction entered into in fourth quarter 2011 that will settle in first quarter 2012 for an estimated 6 million shares of common stock.


39

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER TIER 1 COMMON EQUITY UNDER BASEL I (1)

 

 
(in billions)      

 

Dec. 31,
2011 

    Sept. 30,
2011 
     June 30,
2011 
     Mar. 31,
2011 
     Dec. 31,
2010 
 

 

 

Total equity

    $         141.7        139.2         137.9         134.9         127.9   

Noncontrolling interests

      (1.5)        (1.5)         (1.5)         (1.5)         (1.5)   

 

 

Total Wells Fargo stockholders’ equity

      140.2        137.7         136.4         133.4         126.4   

 

 

Adjustments:

              

Preferred equity

      (10.6)        (10.6)         (10.6)         (10.6)         (8.1)   

Goodwill and intangible assets (other than MSRs)

      (34.0)        (34.4)         (34.6)         (35.1)         (35.5)   

Applicable deferred taxes

      3.8        4.0         4.1         4.2         4.3   

MSRs over specified limitations

      (0.8)        (0.7)         (0.9)         (0.9)         (0.9)   

Cumulative other comprehensive income

      (3.1)        (3.7)         (5.3)         (4.9)         (4.6)   

Other

      (0.4)        (0.4)         (0.3)         (0.1)         (0.3)   

 

 

Tier 1 common equity

  (A)   $ 95.1        91.9         88.8         86.0         81.3   

 

 

Total risk-weighted assets (2)

  (B)   $ 1,005.3        983.2         970.2         962.9         980.0   

 

 

Tier 1 common equity to total risk-weighted assets

  (A)/(B)           9.46   %      9.34         9.15         8.93         8.30   

 

 

 

(1) Tier 1 common equity is a non-generally accepted accounting principle (GAAP) financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews Tier 1 common equity along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants.
(2) Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets. The Company’s December 31, 2011, preliminary risk-weighted assets reflect estimated on-balance sheet risk-weighted assets of $838.7 billion and derivative and off-balance sheet risk-weighted assets of $166.6 billion.

Wells Fargo & Company and Subsidiaries

TIER 1 COMMON EQUITY UNDER BASEL III (ESTIMATED) (1)

 

 
(in billions)                       

 

Dec. 31,
2011 

 

 

 

Tier 1 common equity under Basel I

               $ 95.1   

 

 

Adjustments from Basel I to Basel III:

              

Cumulative other comprehensive income (2)

                 3.1   

Other

                 0.3   

 

 

Tier 1 common equity anticipated under Basel III

                (C)      98.5   

 

 

Total risk-weighted assets anticipated under Basel III (3)

                (D)    $     1,314.6   

 

 

Tier 1 common equity to total risk-weighted assets anticipated under Basel III

                (C)/(D)      7.49 

 

 

 

(1) Tier 1 common equity is a non-generally accepted accounting principle (GAAP) financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews Tier 1 common equity along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants.
(2) Volatility in interest rates can have a significant impact on the valuation of cumulative other comprehensive income and MSRs and therefore, impact adjustments under Basel III in future reporting periods.
(3) Under current Basel proposals, risk-weighted assets incorporate different classifications of assets, with certain risk weights based on a borrower’s credit rating or Wells Fargo’s own risk models, along with adjustments to address a combination of credit/counterparty, operational and market risks, and other Basel III elements. The amount of risk-weighted assets anticipated under Basel III is preliminary and subject to change depending on final promulgation of Basel III capital rulemaking and interpretations thereof by regulatory authorities.


40

 

Wells Fargo & Company and Subsidiaries

OPERATING SEGMENT RESULTS (1)

 

 
    

Community

     Wholesale      Wealth, Brokerage                   

 

Consolidated

 
     Banking      Banking      and Retirement      Other (2)      Company  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
(income/expense in millions,
average balances in billions)
   2011      2010       2011       2010       2011       2010       2011       2010       2011       2010   

 

 

Quarter ended Dec. 31,

                             

Net interest income (3)

    $ 7,414         7,751         3,081         2,965         754         676         (357)         (329)         10,892         11,063   

Provision for credit losses

     2,031         2,785         32         195         20         113         (43)         (104)         2,040         2,989   

Noninterest income

     5,590         5,721         2,344         2,875         2,311         2,365         (532)         (530)         9,713         10,431   

Noninterest expense

     7,310         7,855         2,939         2,992         2,521         2,608         (262)         (115)         12,508         13,340   

 

 

Income (loss) before income tax expense (benefit)

     3,663         2,832         2,454         2,653         524         320         (584)         (640)         6,057         5,165   

Income tax expense (benefit)

     1,082         836         815         958         199         121         (222)         (243)         1,874         1,672   

 

 

Net income (loss) before noncontrolling interests

     2,581         1,996         1,639         1,695         325         199         (362)         (397)         4,183         3,493   

Less: Net income (loss) from noncontrolling interests

     78         72         (2)                                               76         79   

 

 

Net income (loss) (4)

    $ 2,503         1,924         1,641         1,690         325         197         (362)         (397)         4,107         3,414   

 

 

Average loans

    $ 493.9         514.1         264.8         229.6         42.7         43.0         (32.8)         (33.0)         768.6         753.7   

Average assets

     756.0         771.6         458.3         384.4         159.3         140.2         (66.9)         (59.2)         1,306.7         1,237.0   

Average core deposits

     568.3         544.4         223.2         185.1         136.6         121.5         (63.2)         (56.2)         864.9         794.8   

 

 

Year ended Dec. 31,

                             

Net interest income (3)

    $     29,580         31,885         11,714         11,474         2,855         2,707         (1,386)         (1,309)         42,763         44,757   

Provision (reversal of provision) for credit losses

     8,001         13,807         (109)         1,920         170         334         (163)         (308)         7,899         15,753   

Noninterest income

     21,124         22,604         9,952         10,951         9,333         9,023         (2,224)         (2,125)         38,185         40,453   

Noninterest expense

     29,234         30,071         11,194         11,269         9,935         9,768         (970)         (652)         49,393         50,456   

 

 

Income (loss) before income tax expense (benefit)

     13,469         10,611         10,581         9,236         2,083         1,628         (2,477)         (2,474)         23,656         19,001   

Income tax expense (benefit)

     4,072         3,347         3,525         3,315         789         616         (941)         (940)         7,445         6,338   

 

 

Net income (loss) before noncontrolling interests

     9,397         7,264         7,056         5,921         1,294         1,012         (1,536)         (1,534)         16,211         12,663   

Less: Net income from noncontrolling interests

     317         274         19         20                                       342         301   

 

 

Net income (loss) (4)

    $ 9,080         6,990         7,037         5,901         1,288         1,005         (1,536)         (1,534)         15,869         12,362   

 

 

Average loans

    $ 498.1         530.1         249.1         230.5         43.0         43.0         (33.1)         (33.0)         757.1         770.6   

Average assets

     755.7         772.4         428.1         373.8         152.2         139.3         (65.7)         (58.6)         1,270.3         1,226.9   

Average core deposits

     556.2         536.4         202.1         170.0         130.4         121.2         (62.0)         (55.6)         826.7         772.0   

 

 

 

(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. In first quarter 2010, we conformed certain funding and allocation methodologies of legacy Wachovia to those of Wells Fargo; in addition, amounts remaining in “Other” related to integration expense were revised to reflect only integration expense related to the Wachovia merger. In fourth quarter 2010, we realigned certain lending businesses into Wholesale Banking from Community Banking to reflect our previously announced restructuring of Wells Fargo Financial. In first quarter 2011, we realigned a private equity business into Wholesale Banking from Community Banking. Prior periods have been revised to reflect these changes.
(2) Includes Wachovia integration expenses and the elimination of items that are included in both Community Banking and Wealth, Brokerage and Retirement, largely representing wealth management customers serviced and products sold in the stores.
(3) Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.
(4) Represents segment net income (loss) for Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement segments and Wells Fargo net income for the consolidated company.


41

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER OPERATING SEGMENT RESULTS (1)

 

 
    

 

Quarter ended

 
  

 

 

 
(income/expense in millions, average balances in billions)    Dec. 31,
2011 
     Sept. 30,
2011 
     June 30,
2011 
     Mar. 31,
2011 
     Dec. 31,
2010 
 

 

 

COMMUNITY BANKING

              

Net interest income (2)

    $ 7,414         7,264         7,359         7,543         7,751   

Provision for credit losses

     2,031         1,978         1,927         2,065         2,785   

Noninterest income

     5,590         5,232         5,208         5,094         5,721   

Noninterest expense

     7,310         6,901         7,418         7,605         7,855   

 

 

Income before income tax expense

     3,663         3,617         3,222         2,967         2,832   

Income tax expense

     1,082         1,217         1,031         742         836   

 

 

Net income before noncontrolling interests

     2,581         2,400         2,191         2,225         1,996   

Less: Net income from noncontrolling interests

     78         85         104         50         72   

 

 

Segment net income

    $ 2,503         2,315         2,087         2,175         1,924   

 

 

Average loans

    $ 493.9         491.0         498.2         509.8         514.1   

Average assets

     756.0         754.4         752.5         759.9         771.6   

Average core deposits

     568.3         556.3         552.0         548.1         544.4   

 

 

WHOLESALE BANKING

              

Net interest income (2)

    $ 3,081         2,910         2,968         2,755         2,965   

Provision (reversal of provision) for credit losses

     32         (178)         (97)         134         195   

Noninterest income

     2,344         2,240         2,663         2,705         2,875   

Noninterest expense

     2,939         2,689         2,766         2,800         2,992   

 

 

Income before income tax expense

     2,454         2,639         2,962         2,526         2,653   

Income tax expense

     815         826         1,012         872         958   

 

 

Net income before noncontrolling interests

     1,639         1,813         1,950         1,654         1,695   

Less: Net income (loss) from noncontrolling interests

     (2)                 19                 

 

 

Segment net income

    $ 1,641         1,813         1,931         1,652         1,690   

 

 

Average loans

    $ 264.8         253.4         243.1         234.7         229.6   

Average assets

     458.3         438.0         415.7         399.6         384.4   

Average core deposits

     223.2         209.3         190.6         184.8         185.1   

 

 

WEALTH, BROKERAGE AND RETIREMENT

              

Net interest income (2)

    $ 754         714         691         696         676   

Provision for credit losses

     20         48         61         41         113   

Noninterest income

     2,311         2,173         2,395         2,454         2,365   

Noninterest expense

     2,521         2,368         2,487         2,559         2,608   

 

 

Income before income tax expense

     524         471         538         550         320   

Income tax expense

     199         178         204         208         121   

 

 

Net income before noncontrolling interests

     325         293         334         342         199   

Less: Net income from noncontrolling interests

                                   

 

 

Segment net income

    $ 325         291         333         339         197   

 

 

Average loans

    $ 42.7         43.1         43.5         42.7         43.0   

Average assets

     159.3         155.1         147.7         146.5         140.2   

Average core deposits

     136.6         133.4         126.0         125.4         121.5   

 

 

OTHER (3)

              

Net interest income (2)

    $ (357)         (346)         (340)         (343)         (329)   

Provision for credit losses

     (43)         (37)         (53)         (30)         (104)   

Noninterest income

     (532)         (559)         (558)         (575)         (530)   

Noninterest expense

     (262)         (281)         (196)         (231)         (115)   

 

 

Loss before income tax benefit

     (584)         (587)         (649)         (657)         (640)   

Income tax benefit

     (222)         (223)         (246)         (250)         (243)   

 

 

Net loss before noncontrolling interests

     (362)         (364)         (403)         (407)         (397)   

Less: Net income from noncontrolling interests

                                       

 

 

Other net loss

    $ (362)         (364)         (403)         (407)         (397)   

 

 

Average loans

    $ (32.8)         (33.0)         (33.5)         (33.1)         (33.0)   

Average assets

     (66.9)         (66.1)         (65.0)         (64.8)         (59.2)   

Average core deposits

     (63.2)         (62.2)         (61.1)         (61.5)         (56.2)   

 

 

CONSOLIDATED COMPANY

              

Net interest income (2)

    $ 10,892         10,542         10,678         10,651         11,063   

Provision for credit losses

     2,040         1,811         1,838         2,210         2,989   

Noninterest income

     9,713         9,086         9,708         9,678         10,431   

Noninterest expense

     12,508         11,677         12,475         12,733         13,340   

 

 

Income before income tax expense

     6,057         6,140         6,073         5,386         5,165   

Income tax expense

     1,874         1,998         2,001         1,572         1,672   

 

 

Net income before noncontrolling interests

     4,183         4,142         4,072         3,814         3,493   

Less: Net income from noncontrolling interests

     76         87         124         55         79   

 

 

Wells Fargo net income

    $ 4,107         4,055         3,948         3,759         3,414   

 

 

Average loans

    $ 768.6         754.5         751.3         754.1         753.7   

Average assets

             1,306.7         1,281.4         1,250.9         1,241.2         1,237.0   

Average core deposits

     864.9         836.8         807.5         796.8         794.8   

 

 
(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. In fourth quarter 2010, we realigned certain lending businesses into Wholesale Banking from Community Banking to reflect our previously announced restructuring of Wells Fargo Financial. In first quarter 2011, we realigned a private equity business into Wholesale Banking from Community Banking. Prior periods have been revised to reflect these changes.

 

(2) Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.

 

(3) Includes Wachovia integration expenses and the elimination of items that are included in both Community Banking and Wealth, Brokerage and Retirement, largely representing wealth management customers serviced and products sold in the stores.


42

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING

 

 
    

 

Quarter ended

 
  

 

 

 
     Dec. 31,      Sept. 30,      June 30,      Mar. 31,      Dec. 31,  
(in millions)    2011       2011       2011       2011       2010   

 

 

MSRs measured using the fair value method:

              

Fair value, beginning of quarter

    $           12,372         14,778         15,648         14,467         12,486   

Servicing from securitizations or asset transfers

     1,211         744         740         1,262         1,052   

Changes in fair value:

              

Due to changes in valuation model inputs or assumptions (1)

     (464)         (2,640)         (1,075)         499         1,613   

Other changes in fair value (2)

     (516)         (510)         (535)         (580)         (684)   

 

 

Total changes in fair value

     (980)         (3,150)         (1,610)         (81)         929   

 

 

Fair value, end of quarter

    $ 12,603         12,372         14,778         15,648         14,467   

 

 

 

(1) Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates and costs to service, including delinquency and foreclosure costs.
(2) Represents changes due to collection/realization of expected cash flows over time.

 

 

 
    

 

Quarter ended

 
  

 

 

 
     Dec. 31,      Sept. 30,      June 30,      Mar. 31,      Dec. 31,  
(in millions)    2011       2011       2011       2011       2010   

 

 

Amortized MSRs:

              

Balance, beginning of quarter

    $           1,437         1,432         1,432         1,422         1,013   

Purchases

     53         21         36         45         36   

Servicing from securitizations or asset transfers

     26         50         27         29         432   

Amortization

     (71)         (66)         (63)         (64)         (59)   

 

 

Balance, end of quarter

     1,445         1,437         1,432         1,432         1,422   

 

 

Valuation Allowance:

              

Balance, beginning of quarter

     (40)         (10)         (9)         (3)           

Reversal of provision (provision) for MSRs in excess of fair value

            (30)         (1)         (6)         (3)   

 

 

Balance, end of quarter

     (37)         (40)         (10)         (9)         (3)   

 

 

Amortized MSRs, net

    $ 1,408         1,397         1,422         1,423         1,419   

 

 

Fair value of amortized MSRs:

              

Beginning of quarter

    $ 1,759         1,805         1,898         1,812         1,349   

End of quarter

     1,756         1,759         1,805         1,898         1,812   

 

 


43

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)

 

 
    

 

Quarter ended

 
  

 

 

 
(in millions)    Dec. 31,
2011 
    Sept. 30,
2011 
    June 30,
2011 
    Mar. 31,
2011 
    Dec. 31,
2010 
 

 

 

Servicing income, net:

          

Servicing fees (1)

    $ 876        1,029        1,102        1,137        1,129   

Changes in fair value of MSRs carried at fair value:

          

Due to changes in valuation model inputs or assumptions (2)

     (464     (2,640     (1,075     499        1,613   

Other changes in fair value (3)

     (516     (510     (535     (580     (684

 

 

Total changes in fair value of MSRs carried at fair value

     (980     (3,150     (1,610     (81     929  

Amortization

     (71     (66     (63     (64     (59

Reversal of provision (provision) for MSRs in excess of fair value

           (30     (1     (6     (3

Net derivative gains (losses) from economic hedges (4)

     665        3,247        1,449       (120     (1,756

 

 

Total servicing income, net

    $ 493        1,030        877        866        240   

 

 

Market-related valuation changes to MSRs, net of hedge results (2)+(4)

    $ 201        607        374        379        (143

 

 

(1) Includes contractually specified servicing fees, late charges and other ancillary revenues.

(2) Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates and costs to service,

      including delinquency and foreclosure costs.

(3) Represents changes due to collection/realization of expected cash flows over time.

(4) Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs.

 

    

     

  

    

    

 

 
(in billions)   

 

Dec. 31,
2011 

    Sept. 30,
2011 
    June 30,
2011 
    Mar. 31,
2011 
    Dec. 31,
2010 
 

 

 

Managed servicing portfolio (1):

          

Residential mortgage servicing:

          

Serviced for others

    $         1,456        1,457        1,464        1,453        1,429   

Owned loans serviced

     358        349        338        346        371   

Subservicing

                              

 

 

Total residential servicing

     1,822        1,814        1,810        1,808        1,809   

 

 

Commercial mortgage servicing:

          

Serviced for others

     398        401        402        406        408   

Owned loans serviced

     106        104        101        101        99   

Subservicing

     14        14        14        14        13   

 

 

Total commercial servicing

     518        519        517        521        520   

 

 

Total managed servicing portfolio

    $ 2,340        2,333        2,327        2,329        2,329   

 

 

Total serviced for others

    $ 1,854        1,858        1,866        1,859        1,837   

Ratio of MSRs to related loans serviced for others

     0.76      0.74        0.87        0.92        0.86   

Weighted-average note rate (mortgage loans serviced for others)

     5.14        5.21        5.26        5.31        5.39   

 

 

 

(1) The components of our managed servicing portfolio are presented at unpaid principal balance for loans serviced and subserviced for others and at book

      value for owned loans serviced.

     

  

 

SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA

  

 

 
    

 

Quarter ended

 
  

 

 

 
(in billions)    Dec. 31,
2011 
    Sept. 30,
2011 
    June 30,
2011 
    Mar. 31,
2011 
    Dec. 31,
2010 
 

 

 

Application data:

          

Wells Fargo first mortgage quarterly applications

    $ 157         169        109        102        158   

Refinances as a percentage of applications

     78      74        55        61        73   

Wells Fargo first mortgage unclosed pipeline, at quarter end

    $ 72         84        51        45        73   

 

 

 

 

Residential Real Estate Originations:

          

Wells Fargo first mortgage loans:

          

Retail

    $ 58         43        34        49        70   

Correspondent/Wholesale

     61         45        29        34        57   

Other (1)

                               

 

 

Total quarter-to-date

    $ 120         89        64        84        128   

 

 

Total year-to-date

    $         357         237        148        84        386   

 

 

 

(1) Consists of home equity loans and lines and legacy Wells Fargo Financial.


44

 

Wells Fargo & Company and Subsidiaries

CHANGES IN LIABILITY FOR MORTGAGE LOAN REPURCHASE LOSSES

 

 
    

 

Quarter ended

     Year ended  
  

 

 

    

 

 

 
(in millions)   

 

Dec.31,
2011 

     Sept.30,
2011 
     Dec.31,
2010 
             Dec.31,
2011 
     Dec.31,
2010 
 

 

 

Balance, beginning of period

    $         1,194          1,188         1,331         1,289         1,033   

Provision for repurchase losses:

              

Loan sales

     27          19         35         101         144   

Change in estimate – primarily due to credit deterioration

     377          371         429         1,184         1,474   

 

 

Total additions

     404          390         464         1,285         1,618   

Losses

     (272)         (384)         (506)         (1,248)         (1,362)   

 

 

Balance, end of period

    $ 1,326          1,194         1,289         1,326         1,289   

 

 

 

UNRESOLVED REPURCHASE DEMANDS AND MORTGAGE INSURANCE RESCISSIONS

  

 

 
($ in millions)          

 

Government
sponsored
entities (1) 

     Private      Mortgage
insurance
rescissions (2) 
     Total  

 

 

December 31, 2011

              

Number of loans

        7,066         470         1,178         8,714   

Original loan balance (3)

      $         1,575         167         268         2,010   

September 30, 2011

              

Number of loans

        6,577         582         1,508         8,667   

Original loan balance (3)

      $ 1,500         208         314         2,022   

June 30, 2011

              

Number of loans

        6,876         695         2,019         9,590   

Original loan balance (3)

      $ 1,565         230         444         2,239   

March 31, 2011

              

Number of loans

        6,210         1,973         2,885         11,068   

Original loan balance (3)

      $ 1,395         424         674         2,493   

December 31, 2010

              

Number of loans

        6,501         2,899         3,248         12,648   

Original loan balance (3)

      $ 1,467         680         801         2,948   

 

 

 

(1) Includes repurchase demands of 861 and $161 million, 878 and $173 million, 892 and $179 million, 685 and $132 million, and 1,495 and $291 million, for December 31, September 30, June 30 and March 31, 2011, and December 31, 2010, respectively, received from investors on mortgage servicing rights acquired from other originators. We generally have the right of recourse against the seller and may be able to recover losses related to such repurchase demands subject to counterparty risk associated with the seller.
(2) As part of our representations and warranties in our loan sales contracts, we typically represent to GSEs and private investors that certain loans have mortgage insurance to the extent there are loans that have loan to value ratios in excess of 80% that require mortgage insurance. To the extent the mortgage insurance is rescinded by the mortgage insurer due to a claim of breach of a contractual representation or warranty, the lack of insurance may result in a repurchase demand from an investor. Similar to repurchase demands, we evaluate mortgage insurance rescission notices for validity and appeal for reinstatement if the rescission was not based on a contractual breach. When investor demands are received due to lack of mortgage insurance, they are reported as unresolved repurchase demands based on the applicable investor category for the loan (GSE or private). Over the last year, approximately 20% of our repurchase demands from GSEs had mortgage insurance rescission as one of the reasons for the repurchase demand. Of all the mortgage insurance rescissions notices received in 2010, approximately 70% have resulted in repurchase demands through December 2011. Not all mortgage insurance rescissions received in 2010 have been completed through the appeals process with the mortgage insurer and upon successful appeal, we work with the investor to rescind the repurchase demand.

 

(3) While original loan balance related to these demands is presented above, the establishment of the repurchase liability is based on a combination of factors, such as our appeals success rates, reimbursement by correspondent and other third party originators, and projected loss severity, which is driven by the difference between the current loan balance and the estimated collateral value less costs to sell the property.