Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT ON FORM 8-K - WELLS FARGO & COMPANY/MN | d243657d8k.htm |
| EX-99.1 - THE PRESS RELEASE - WELLS FARGO & COMPANY/MN | d243657dex991.htm |
 3Q11 Quarterly Supplement
October 17, 2011
Exhibit 99.2 |
 Wells Fargo
3Q11 Supplement 1
Appendix
Pages 23-45
-
Non-strategic/liquidating loan portfolio risk reduction
24
-
Purchased credit-impaired (PCI) portfolios
25
-
PCI nonaccretable difference
26
-
PCI accretable yield
27
-
Commercial PCI accretable yield
28
-
Pick-a-Pay PCI accretable yield
29
-
3Q11 Credit quality highlights
30
-
Commercial nonaccrual loans
31
-
Consumer real estate nonaccrual loans
32
-
Commercial real estate (CRE) loan portfolio
33
-
Wholesale Banking CRE loan portfolio
34
-
Pick-a-Pay mortgage portfolio
35
-
Pick-a-Pay credit highlights
36
-
Pick-a-Pay nonaccrual loan composition
37
-
Real estate 1-4 family first mortgage portfolio
38
-
Home equity portfolio
39-40
-
Credit card portfolio
41
-
Auto portfolio
42
Forward-looking statements and
additional information
43
Tier 1 common equity under Basel I
44
Tier 1 common equity under Basel III
(Estimated)
45
Table of contents
3Q11 Results
-
3Q11 Results
Page 2
-
Continued strong diversification
3
-
Balance Sheet overview
4
-
Income Statement overview
5
-
Loans
6
-
Deposits
7
-
Net interest income
8
-
Drivers of net interest income
9
-
Noninterest income
10
-
Noninterest expense
11
-
Noninterest expense target
12
-
Community Banking
13
-
Wholesale Banking
14
-
Wealth, Brokerage and Retirement
15
-
Wachovia merger integration update
16
-
Credit quality
17-18
-
Mortgage servicing
19-20
-
Capital
21
-
Summary
22 |
 Wells Fargo
3Q11 Supplement 2
Record earnings of $4.1 billion, up 3% linked
quarter (LQ) and 21% year-over-year (YoY)
$0.72 earnings per share, up 3% LQ and
20% YoY
ROA = 1.26%, up 17 bps from 3Q10
ROE = 11.86%, up from 10.90% in 3Q10
Pre-tax pre-provision profit
(1)
of $8.0 billion, up
$40 million LQ
Total revenue down $758 million from 2Q11
Noninterest expense declined $798 million or 6%
Continued improvement in credit quality
Capital levels continued to grow
-
9.35% Tier 1 common equity ratio under
Basel I and estimated Tier 1 common equity
ratio under Basel III of 7.41%
(2)
3Q11 Results
Wells Fargo Net Income
($ in millions)
3,339
3,414
3,759
3,948
4,055
3Q10
4Q10
1Q11
2Q11
3Q11
(1) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest
expense. Management believes 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.
(2) Pro forma calculation based on Tier 1 common equity, as adjusted to reflect
management’s interpretation of current Basel III capital proposals. This pro forma
calculation is subject to change depending on final promulgation of Basel III capital rulemaking and interpretations by regulatory authorities. See
pages 44-45 for additional information regarding Tier 1 common equity ratios.
|
 Wells Fargo
3Q11 Supplement 3
46%
54%
Balanced Spread and
Fee Income
Diversified Fee
Generation
12%
11%
20%
11%
12%
11%
9%
5%
9%
Service Charges
12%
Card Fees
11%
Other Banking Fees
12%
Mortgage Servicing, net
11%
Insurance
5%
Other Noninterest
Income
(1)
9%
Noninterest Income
46%
Net Interest Income
54%
All data is for 3Q11.
(1)
Diversified Loan
Portfolio
Commercial Loans
40%
Consumer Loans
55%
Continued strong diversification
55%
40%
5%
Foreign Loans
5%
Mortgage Orig./Sales, net
9%
Trust, Investment & IRA fees 11%
Commissions & all other fees 20%
Other noninterest income includes net gains (losses) on debt securities available for sale,
net gains from equity investments, net gains (losses) from trading activities, operating
leases and all other noninterest income. |
 Wells Fargo
3Q11 Supplement 4
Balance Sheet overview
Period-end balances. All result change references are 3Q11 compared to 2Q11.
(1) See page 24 for additional information regarding the
non-strategic/liquidating portfolio, which comprises the Pick-a-Pay, liquidating home equity, legacy WFF
indirect auto, legacy WFF debt consolidation, Education Finance government guaranteed and
Commercial, legacy Wachovia Commercial Real Estate and other PCI loan portfolios.
Loans
Total period-end loans up $8.2 billion; core loans, which exclude
the $5.3 billion runoff of the non-strategic/liquidating portfolio,
grew $13.5 billion
(1)
Organic loan growth of $12.4 billion
Acquired $1.1 billion of commercial loans in 3Q11
Securities available for sale (AFS)
Balances up $20.9 billion on investment securities purchases
in 3Q11
Deposits
Balances up $41.8 billion on both flight to quality and new account
growth
Primary driver of net interest margin (NIM) compression: 12 bps
out of a 17 bps decline
Long-term debt
Balances down $9.7 billion due to continued maturities
$9.0 billion of maturities in 4Q11
Capital
Called for redemption $5.8 billion of trust preferred securities
in 3Q11
-
Tier 1 Capital reduced in 3Q11, but net interest income and NIM
benefit expected to start in 4Q11 |
 Wells Fargo
3Q11 Supplement 5
Income Statement overview
Net interest income
Down $136 million as balance sheet repricing and lower variable
income was partially offset by growth in loans, securities and the
mortgage warehouse as well as one extra day in the quarter
NIM down 17 bps driven primarily by strong deposit flows, 12 bps
impact
Noninterest income
Mortgage banking up $214 million on higher originations
Market-sensitive revenues
(1)
of $202 million
Linked quarter market-sensitive revenues
(1)
down $808 million
-
Equity gains down $380MM from strong 2Q11 equity investment
business results
-
Trading loss included $234MM lower deferred compensation plan
investments (offset in benefits expense, so P&L neutral)
-
Loss and gain on two legacy Wachovia positions partially offset one
another ($377MM trading loss and $271MM debt securities gain)
-
Customer accommodation trading results down $108 million on weaker
market conditions
Insurance revenues down $145 million primarily due to crop insurance
seasonality (partial offset in expense)
Noninterest expense
Deferred compensation down $235 million (offset in trading)
Merger expenses down $108 million
Operating losses down $230 million reflecting lower litigation accruals
All result change references are 3Q11 compared to 2Q11.
(1) Market-sensitive revenues include trading, debt and equity gains (losses).
|
 Wells Fargo
3Q11 Supplement 6
614.0
624.1
624.4
630.1
643.6
139.7
133.2
126.8
121.8
116.5
3Q10
4Q10
1Q11
2Q11
3Q11
Core loans
Non-strategic/liquidating loans
5.13%
5.11%
5.03%
5.00%
4.87%
Loans
Growth despite continued reduction in non-strategic/liquidating
portfolio Period-end loans up $8.2 billion from 2Q11
-
Commercial loans up $9.1 billion, or 3%, on
growth in both C&I and CRE driven by new
customer activity and new loans
•
Includes 3Q11 purchase of $1.1 billion in loans
from Bank of Ireland, all U.S.-based and largely
all commercial real estate
-
Consumer loans down $960 million as $4.5
billion in non-strategic loan portfolio runoff
more than offset growth in mortgage, core
auto, credit card and private student lending
Non-strategic/liquidating loans
(1)
down $5.3
billion from 2Q11
Core loans grew $13.5 billion, or 2%, from 2Q11
Total average loan yield of 4.87% down 13 bps
LQ and 26 bps YoY due to runoff of higher-
yielding loans including the non-strategic/
liquidating portfolio
-
Weighted average yield of the non-strategic
portfolio was 5.61% in 3Q11
Period–end Loans Outstanding
($ in billions)
(1)
753.7
757.3
751.2
751.9
Total average loan yield
760.1
Period-end balances.
(1) See page 24 for additional information regarding the
non-strategic/liquidating portfolio, which comprises the Pick-a-Pay, liquidating home equity,
legacy WFF indirect auto, legacy WFF debt consolidation, Education Finance government
guaranteed and Commercial, legacy Wachovia Commercial Real Estate and other PCI loan
portfolios. |
 Wells Fargo
3Q11 Supplement 7
631.2
651.5
661.4
184.8
199.3
221.2
3Q10
2Q11
3Q11
Interest-bearing deposits
Noninterest-bearing deposits
0.35%
0.28%
0.25%
Deposits
Strong growth and reduced average cost
Average core deposits of $836.8 billion up $29.4
billion from 2Q11 and up $64.9 billion, or 8%,
from 3Q10
-
111% of average loans
-
Average retail core deposits up 4% annualized
from 2Q11
Average core checking and savings up $33.8
billion, or 5% from 2Q11, and up $82.3 billion, or
12%, from 3Q10
-
92% of average core deposits
Consumer checking accounts up a net 5.6%
from 3Q10
-
7.1% growth in California
-
7.7% growth in Florida
-
8.3% growth in New Jersey
-
9.8% growth in North Carolina
Average deposit cost of 25 bps down 3 bps from
2Q11 and 10 bps from 3Q10
Average Deposits and Rates
($ in billions)
816.0
Average deposit cost
Average Core Checking and Savings
($ in billions)
850.8
686.9
735.4
769.2
3Q10
2Q11
3Q11
882.6 |
 Wells Fargo
3Q11 Supplement 8
Net interest income
Net Interest Income (TE)
(1)
($ in millions)
Net interest income (TE)
(1)
Tax-equivalent net interest income declined $137
million from 2Q11
-
Lower income from balance sheet repricing was
partially offset by growth in loans, securities and
the mortgage warehouse
-
Lower income from variable sources including
loan prepayments and resolutions
-
Benefit of one extra day in the quarter
Net interest margin
12 bps of the 17 bps decline in NIM due to $42
billion LQ increase in deposits
11,254
11,224
10,812
10,851
10,714
3Q10
4Q10
1Q11
2Q11
3Q11
4.25%
4.16%
4.05%
4.01%
3.84%
Net Interest Margin (NIM)
(1) Tax equivalent net interest income is based on the federal statutory rate of 35% for the
periods presented. Net interest income was $11,098 million, $11,063 million,
$10,651 million, $10,678 million and $10,542 million for 3Q10, 4Q10, 1Q11, 2Q11 and 3Q11, respectively. |
 Wells Fargo
3Q11 Supplement 9
Drivers of net interest income
Net interest income and net interest margin do
not necessarily move in sync
-
Increase in deposits in 3Q11 diluted NIM 12
bps but increased NII by approximately $13
million
Growth in earning assets has helped mitigate
the decline in NII due to repricing
-
AFS portfolio increased by over $39 billion in
the last two quarters
-
Loans outstanding have grown nearly $9
billion in the last two quarters despite the
continued runoff of the liquidating portfolio
•
Core loan portfolio has grown each quarter
this year, including $13.5 billion in 3Q11
-
Mortgage warehouse grew $11.5 billion in
3Q11 on increased refinancing activity
While earning asset growth is the primary
driver, NII is also influenced by our liability mix
-
NII benefit from redemption of $5.8 billion of
TRUPs expected to begin in 4Q11
-
Long-term debt balances down $9.7 billion in
3Q11, with an additional $9 billion maturing
in 4Q11
2011 Period End Balance Sheet Trends
($ in millions)
3Q11
2Q11
1Q11
AFS portfolio
$
207,176
186,298
167,906
change from prior quarter
20,878
18,392
(4,748)
Loans
760,106
751,921
751,155
change from prior quarter
8,185
766
(6,112)
Liquidating loan portfolio
116,509
121,753
126,821
change from prior quarter
(5,244)
(5,068)
(6,483)
Core loan portfolio
643,597
630,168
624,334
change from prior quarter
13,429
5,834
371
Core deposits
849,632
808,970
795,038
change from prior quarter
40,662
13,932
(3,154)
|
 Wells Fargo
3Q11 Supplement 10
Noninterest income
Service charges on deposit account fees up 3%
from 2Q11 primarily due to account and volume
growth
Trust and investment fees down 5% LQ on lower
investment banking originations and weaker retail
brokerage transaction activity
Mortgage banking up 13% LQ on higher
originations
-
Larger quarter-end pipeline and timing of revenue
recognition expected to lead to stronger 4Q11
mortgage revenue, but also increased expense
Insurance down 26% LQ substantially all due to
seasonality
Trading gains down $856 million driven by the
loss on resolving one legacy Wachovia position,
lower deferred compensation plan investment
results (P&L neutral) and lower core customer
accommodation trading
Debt securities gains up $428 million LQ, driven
by a $271 million gain on one legacy Wachovia
investment
Equity gains down $380 million LQ from strong
2Q11 equity investment results
Operating lease income up $181 million LQ on
higher lease settlement income
9,776
10,431
9,678
9,708
9,086
3Q10
4Q10
1Q11
2Q11
3Q11
vs
vs
($ in millions)
3Q11
2Q11
3Q10
Noninterest income
Service charges on deposit accounts
$
1,103
3
%
(3)
Trust and investment fees
2,786
(5)
9
Card fees
1,013
1
8
Other fees
1,085
6
8
Mortgage banking
1,833
13
(27)
Insurance
423
(26)
7
Net gains (losses) from trading activities
(442)
nm
nm
300
nm
nm
Net gains from equity investments
344
(52)
nm
Operating leases
284
nm
28
Other
357
(2)
(33)
Total nonterest income
$
9,086
(6)
%
(7)
Net gains (losses) on debt securities
available for sale |
 Wells Fargo
3Q11 Supplement 11
Noninterest expense
Noninterest expense down $798 million from
2Q11 driven by lower employee benefits
expense, operating losses and integration costs;
down $576 million from 3Q10
-
Salaries increased $134 million, or 4%, on
higher severance expense and one extra day in
the quarter
-
Employee benefits expense down $384 million
primarily driven by lower deferred compensation
expense
-
$376 million of integration costs in 3Q11, down
$108 million from 2Q11
•
68% of merger integration costs in the quarter
were from outside professional services,
contract services and advertising
-
Other expenses down $474 million and
included:
•
$230 million decline in operating losses on
lower litigation accruals
•
$107 million decline in insurance expense
Currently expect 4Q11 expenses to be higher than
3Q11 driven by costs associated with the strong
mortgage pipeline, higher integration expenses and
seasonally higher expenses at year-end
12,253
13,340
12,733
12,475
11,677
3Q10
4Q10
1Q11
2Q11
3Q11
vs
vs
($ in millions)
3Q11
2Q11
3Q10
Noninterest expense
Salaries
$
3,718
4
%
7
Commission and incentive compensation
2,088
(4)
(8)
Employee benefits
780
(33)
(27)
Equipment
516
(2)
(7)
Net occupancy
751
-
1
Core deposit and other intangibles
466
-
(15)
FDIC and other deposit assessments
332
5
11
Other
3,026
(14)
(8)
Total noninterest expense
$
11,677
(6)
%
(5) |
 Wells Fargo
3Q11 Supplement 12
Noninterest expense target
($ in millions)
Actual
2Q11
Actual
3Q11
Merger integration expense
$
484
$
376
$
-
Staff/technology functions
2,238
2,183
2,050-2,150
Loss mitigation and foreclosed asset expense
666
624
600-650
Business optimization
8,659
8,296
8,100-8,450
Operating
losses
(2)
428
198
not targeted
Total NIE
$
12,475
$
11,677
$
10,750-11,250
Targeted
4Q12
(1)
(2) Operating losses includes litigation accruals. (1)
Reflects management’s current targeted noninterest expense in 4Q12, which is subject to
change and may be affected by a variety of factors, including business and economic
cyclicality, seasonality, changes in our business composition and operating environment, growth in our business
and/or acquisitions, and unexpected expenses relating to, among other things, litigation and
regulatory matters. -
The target reflects expense savings initiatives to be executed over the next five quarters,
and reflects a 10-14% decline from 2Q11
-
We will continue to invest in our businesses and add team members and locations where
appropriate as we have done recently, for example, in banking stores in the East
-
Savings initiatives launched in 3Q11 included the consolidation of our consumer lending
businesses (Business optimization), and the consolidation of several business
technology groups and the streamlining of staff functions (Staff/technology
functions) Quarterly expense trends may vary
Noninterest
expense
is
targeted
to
decline
to
$11
billion
in
4Q12
through
Compass
initiatives
and
the
completion of merger integration activities |
 Wells Fargo
3Q11 Supplement 13
3Q11
2Q11
3Q10
Regional Banking
Consumer
checking
account
growth
(1)
5.6
%
7.0
7.3
Business
checking
account
growth
(1)
3.8
4.5
5.0
Retail Bank cross-sell
5.91
5.84
5.68
Business
Banking
cross-sell
(2)
4.21
4.17
3.97
Community Banking
Higher segment earnings reflects stronger
mortgage banking revenues
Average loans declined 1% on non-strategic loan
runoff with growth in consumer real estate first
mortgage, core auto, credit card, private student
lending and SBA lending
Regional Banking
Strong combined net checking gains
-
Consumer checking up a net 5.6% from 3Q10
-
Business checking up a net 3.8% from 3Q10
Combined retail bank cross-sell of 5.91 products
per household up from 5.68
in 3Q10
-
West cross-sell = 6.28
-
East cross-sell = 5.39
Core product solutions of 8.80 million in the West,
up 15% from 3Q10
Wells Fargo Home Mortgage
Mortgage originations up $25 billion from 2Q11
while application volumes were up 55%
Managed residential mortgage servicing flat from
3Q10 = $1.8 trillion
(1) Checking account growth is period-ending, 12-month rolling.
(2) Western footprint including Wells Fargo and Wachovia customers.
vs
vs
($ in millions)
3Q11
2Q11
3Q10
Net interest income
$
7,264
(1)
%
(7)
Noninterest income
5,232
-
(7)
Provision for credit losses
1,978
3
(37)
Noninterest expense
6,901
(7)
(6)
Income tax expense
1,217
18
28
Segment earnings
$
2,315
11
%
20
($ in billions)
Avg loans, net
491
(1)
(6)
Avg core deposits
$
556
1
4
vs
vs
($ in billions)
3Q11
2Q11
3Q10
Wells Fargo Home Mortgage
Applications
$
169
55
%
(13)
Application pipeline
84
65
(17)
Originations
89
39
(12)
Managed residential
mortgage servicing
($ in trillions)
$
1.81
-
-
% change |
 Wells Fargo
3Q11 Supplement 14
Wholesale Banking
Net interest income down 2% from 2Q11 on
lower PCI resolutions partially offset by strong
loan and deposit growth
-
Average loans up $10.3 billion, or 4%, driven by
both new and existing customer activity while
utilization rates were relatively stable
Noninterest income down 16% LQ as lower sales
and trading results, weaker investment banking
originations, seasonally lower insurance fees and
lower resolution income offset growth in Capital
Finance, International, Real Estate Capital
Markets and Asset Management
Net charge-offs were down $30
million
Expenses down 3% LQ driven by lower insurance
Treasury Management
Commercial card spend volume of $3.31 billion
up 4% LQ and 30% YoY
Investment Banking
U.S. investment banking market share YTD
(2)
of
4.8% up from 4.2% in FY2010
Asset Management
Total AUM down 5% and mutual funds AUM down
7% YoY
(1) Approved and initiated.
(2) Source: Dealogic U.S. investment banking fee market share.
vs
vs
($ in millions)
3Q11
2Q11
3Q10
Net interest income
$
2,910
(2)
%
(1)
Noninterest income
2,240
(16)
(9)
Provision for credit losses
(178)
84
nm
Noninterest expense
2,689
(3)
(1)
Income tax expense
826
(18)
(5)
Segment earnings
$
1,813
(6)
%
20
($ in billions)
Avg loans, net
253
4
11
Avg core deposits
$
209
10
23
vs
vs
($ in billions, except where noted)
3Q11
2Q11
3Q10
Key Metrics:
Commercial card spend
volume
$
3.31
4
%
30
CEO
Mobile
Wire
volume
(in millions)
2,511
89
nm
YTD U.S. investment banking
market
share
%
4.80
%
Total AUM
$
449
(6)
(5)
Advantage Funds AUM
211
(9)
(7)
(1)
(2) |
 Wells Fargo
3Q11 Supplement 15
Wealth, Brokerage and Retirement
Net interest income up 3% from 2Q11
-
Average loans down 1% LQ and up 1% YoY
-
Average core deposits up 6% LQ and up 11% YoY
Noninterest income down 9% from 2Q11 primarily
due to losses on deferred compensation plan
investments, as well as lower ARS recoveries and
retail brokerage transaction revenue
-
Brokerage managed account assets down 9% LQ
and up 9% YoY; fees priced at beginning of
quarter, reflecting 6/30/2011 market valuations
Expenses down 5% LQ primarily due to lower
deferred compensation expense and reduced
broker commissions on lower sales revenue
Retail Brokerage
Managed account assets up 9% YoY driven by
strong net flows
Wealth Management
Wealth
Management
client
assets
down
3%
YoY
Retirement
IRA assets down 2% YoY
Institutional Retirement plan assets up 3% YoY
(1) Includes deposits.
(2) Data as of August 2011.
vs
vs
($ in millions)
3Q11
2Q11
3Q10
Net interest income
$
714
3
%
5
Noninterest income
2,173
(9)
(3)
Provision for credit losses
48
(21)
(38)
Noninterest expense
2,368
(5)
(2)
Income tax expense
178
(13)
13
Segment earnings
$
291
(13)
%
14
($ in billions)
Avg loans, net
43
(1)
1
Avg core deposits
$
133
6
11
vs
vs
($ in billions, except where noted)
3Q11
2Q11
3Q10
Key Metrics:
WBR Clients Assets
(1)
($ in trillions)$
1.3
(8)
%
(3)
Cross-sell
(2)
10.0
8
bps
25
Retail Brokerage
Financial Advisors
15,188
-
%
1
Managed account assets
$
238
(9)
9
Client assets
(1)
($ in trillions)
1.1
(9)
(3)
Wealth Management
Client
assets
(1)
191
(6)
(3)
Retirement
IRA Assets
261
(9)
(2)
Institutional Retirement
Plan Assets
228
(8)
3 |
 Wells Fargo
3Q11 Supplement 16
Wachovia merger integration update
Merger integration on track
-
Regional banking store conversions complete following North Carolina conversion the weekend of
October 15-16, 2011; 3,083 store conversions completed
-
Over 45 million banking customers on a single platform
-
Over
38
million
accounts
converted
including
mortgage,
deposits,
trust,
brokerage
and
credit
cards
-
Remaining integration activities expected to be concluded by 1Q12 including deposit and
brokerage catch-up and additional Wholesale banking conversions
Growth opportunities already being realized due to merger revenue synergies:
Community Banking
-
Consumer
checking
account
sales
up
in
the
Eastern
retail
banking
stores
over
20%
from
a
year
ago
-
Credit
card
penetration
in
converted
East
markets
of
15.3%
(1)
,
up
from
13.2%
at
year
end
2010
-
Credit card new account growth in the East up 168% from 3Q10
Wholesale Banking
-
#1
Middle
market
lender
(2)
-
Investment Banking fees from Commercial and Corporate customers up 27% YTD vs. 2010
-
Foreign Exchange revenue from Wholesale customers up 25% YTD compared with 2010
Wealth, Brokerage and Retirement
-
Average deposit balances up 36% since merger
-
10
consecutive
quarter
of
positive
net
flows
into
brokerage
managed
accounts
-
Loans originated through brokers up 67% since merger
th
(1) Household penetration as of August, 2011 and defined as the percentage of retail
banking deposit households that have a credit card with Wells Fargo.
(2) Source: Greenwich Associates. Overall lead banking relationship penetration of
middle market companies (annual revenues of $25-$500 million).
Robust deposit growth during the merger integration; deposits up $114.0 billion since
12/31/08, while average deposit costs have declined 26 bps since 1Q09 |
 Wells Fargo
3Q11 Supplement 17
Credit quality
Continued decline in provision expense
$2.6 billion net charge-offs, down $227 million
from 2Q11 and 52% from 4Q09 peak
Provision expense of $1.81 billion, down $27
million from 2Q11, includes an $800 million
reserve release in 3Q11
Allowance for credit losses = $20.4 billion
Remaining PCI nonaccretable = 28.3% of
remaining UPB
(1)
Credit metrics showed continued improvement
-
$1.1 billion LQ decline in NPAs reflects $1.1
billion decline in nonaccrual loans on lower
commercial inflows and an $83 million
increase in foreclosed assets
-
Early stage delinquency balances down
modestly while rates were stable
5.11
5.41
5.33
4.49
4.10
3.84
3.21
2.84
2.61
1.00
0.50
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
Net Charge-offs
Credit Reserve Build
(0.50)
(0.65)
(0.85)
Reserve Release
3.99
3.45
2.99
5.33
5.91
6.11
(1) Unpaid principal balance for PCI loans that have not had a UPB charge-off.
Provision Expense
($ in billions)
2.21
(1.0)
1.84
(1.0)
1.81
(0.8) |
 Wells Fargo
3Q11 Supplement 18
($ in billions)
3Q10
4Q10
1Q11
2Q11
3Q11
Commercial
Inflows
2.8
2.3
1.9
1.6
1.2
Outflows
(2.4)
(3.6)
(2.9)
(2.7)
(1.8)
Ending balance
12.6
11.3
10.3
9.2
8.6
Consumer
Inflows
4.9
4.3
4.0
3.4
3.5
Outflows
(4.8)
(5.1)
(4.2)
(4.3)
(4.0)
Ending balance
15.7
14.9
14.7
13.8
13.3
Total
$
28.3
26.2
25.0
23.0
21.9
2.1
2.0
1.7
1.5
1.5
1.1
0.6
0.7
0.3
0.4
3Q10
4Q10
1Q11
2Q11
3Q11
Consumer
Commercial
28.3
26.2
25.0
23.0
21.9
6.1
6.1
5.5
4.9
4.9
3Q10
4Q10
1Q11
2Q11
3Q11
Nonaccrual loans
Foreclosed assets
Credit quality
Credit metrics showed improvement/stabilization
Nonperforming Assets
($ in billions)
2.6
3.2
$10
$15
$20
$25
$30
3Q10
4Q10
1Q11
2Q11
3Q11
Nonaccrual Loan Flows
32.3
34.4
30.5
2.4
Loans
90+
DPD
and
Still
Accruing
($ in billions)
27.9
1.8
26.8
1.9
7.54%
7.14%
6.21%
6.13%
6.13%
(1)
Early
Stage
Delinquencies
–
Retail
Businesses
(30+ days past due -
balances and rates)
(1)
Excludes mortgage loans insured/guaranteed by the FHA or VA and student loans whose repayments
are predominantly guaranteed by guarantee agencies on behalf of the U.S. Department of
Education under the Federal Family Education Loan Program. Also excludes the carrying value of PCI
loans contractually 90 days or more past due of $8.9 billion in 3Q11, $9.8 billion in 2Q11,
$10.8 billion in 1Q11, $11.6 billion in 4Q10 and $13.0 billion in 3Q10. Consumer
includes mortgage loans held for sale 90 days or more past due and still accruing. |
 Wells Fargo
3Q11 Supplement 19
69%
19%
6%
6%
Mortgage servicing
Wells Fargo has a high quality servicing portfolio
Residential Mortgage Servicing Portfolio
$1.8 Trillion
(as of September 30, 2011)
Agency
Retained and acquired portfolio
Non-agency securitizations of
WFC originated loans
Non-agency acquired servicing
and private whole loan sales
69% of the portfolio is with the Agencies (FNMA,
FHLMC, and GNMA)
19% are loans that we retained or acquired
-
Loss exposure handled through loan loss
reserves and PCI nonaccretable
6% are private securitizations where Wells Fargo
originated the loan and therefore has some
repurchase risk
-
80% prime at origination
-
58% from pre-2006 vintages
-
Insignificant amount of home equity and no
option ARMs
-
~50% do not have traditional reps and
warranties
6% are non-agency acquired servicing and
private whole loan sales
-
4% is acquired servicing where Wells Fargo
did not underwrite and securitize and has
repurchase recourse with the originator
-
2% are private whole loan sales
•
Less than 2% subprime at origination
•
Loans sold to others and subsequently
securitized are included in private
securitizations above |
 Wells Fargo
3Q11 Supplement 20
Mortgage servicing
Delinquency
ratios
lower
than
peers
and
total
repurchase
demands
down
2Q11 delinquency and foreclosure ratio of Wells
Fargo’s servicing portfolio substantially lower
than peers
Wells Fargo’s total delinquency and foreclosure
ratio for 3Q11 was 7.63%, down from a peak of
8.96% in 4Q09
-
Increase from 2Q11 primarily driven by
seasonality
Total repurchase demands down (both number
and balances) for fifth consecutive quarter;
losses of $384 million up from $261 million on
higher loss-content mortgage insurance
rescission repurchase activity
Agency
-
Total agency repurchase demands outstanding
down from 2Q11 on higher repurchase activity
•
Agency new demands for 2006-2008 vintages
up due to an increase in demands from FNMA;
this increase in demands was the primary driver
of the reserve build
•
FHLMC demands as well as newer vintage
demands continued to emerge consistent with
our estimates
-
Demands and losses continued to be concentrated
in the 2006 -
early 2008 vintages
Non-Agency
-
Non-agency repurchase demands outstanding,
which includes non-agency securities, whole loans
sold and acquired servicing, down for the fourth
consecutive quarter
(1) Inside
Mortgage
Finance,
data
as
of
June
30,
2011.
Industry
excluding
WFC
performance calculated based on IMF data.
(2) Industry is all large servicers ($7.1 trillion) including WFC, C, JPM and BAC.
(3) Includes mortgage insurance rescissions.
Total
Outstanding
Repurchase
Demands
(3)
and
Agency New Demands for 2006-2008 Vintages
2Q11 Servicing Portfolio Delinquency
Performance
(1) |
 Wells Fargo
3Q11 Supplement 21
Capital
Capital remained strong and continued to grow internally
8.01%
8.30%
8.93%
9.15%
9.35%
3Q10
4Q10
1Q11
2Q11
3Q11
Tier 1 common equity ratio +20 bps in 3Q11
Tier 1 common equity ratio under Basel III is
estimated to be 7.41% at 9/30/11
(1)
$5.8 billion of high-cost trust preferred securities
redeemed October 3, 2011
-
Weighted average coupon of 8.45%
-
Redemptions funded with cash on hand
-
Tier 1 capital reduced in 3Q11 with NII and
NIM benefit expected to start in 4Q11
Purchased 22 million common shares in
the quarter and an additional estimated 6 million
shares through a forward repurchase transaction
that will settle in 4Q11
Tier 1 Common Equity Ratio
See Appendix page 44 for additional information on Tier 1 common equity. 3Q11 capital
ratios are preliminary estimates.
(1) Pro forma calculation based on Tier 1 common equity, as adjusted to reflect
management’s interpretation of current Basel III capital proposals. This pro forma
calculation is subject to change depending on final promulgation of Basel III capital
rulemaking and interpretations thereof by regulatory authorities. See page 45 for
additional information. |
 Wells Fargo
3Q11 Supplement 22
Summary
Record earnings of $4.1 billion
-
Robust deposit growth
Robust earning asset growth on strong core loan growth and investment securities purchases
Disciplined expense management
Higher pre-tax pre-provision profit
(1)
of $8.0 billion
Continued improvement in credit quality
Strong returns
-
ROA = 1.26%
-
ROE = 11.86%
Capital levels continued to grow
(1) 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. |
 Wells Fargo
3Q11 Supplement 23
Appendix |
 Wells Fargo
3Q11 Supplement 24
(1) Net of purchase accounting adjustments.
-$27.6
-$8.2
-$8.2
Non-strategic/liquidating loan portfolio risk reduction
-$7.1
-$6.5
-$6.4
-$5.0
-$74.3
-$5.3
($ in billions)
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
4Q08
Pick-a-Pay mortgage
(1)
$
67.4
69.6
71.5
74.8
77.3
80.2
82.9
85.2
95.3
Liquidating home equity
6.0
6.3
6.6
6.9
7.3
7.6
8.0
8.4
10.3
Legacy WFF indirect auto
3.1
3.9
4.9
6.0
7.1
8.3
9.7
11.3
18.2
Legacy WFF debt consolidation
17.2
17.7
18.4
19.0
19.7
20.4
21.4
22.4
25.3
Education
Finance
-
gov't
guaranteed
15.6
16.3
16.9
17.5
18.0
18.7
19.7
21.2
20.5
Legacy
WB
C&I,
CRE
and
foreign
PCI
loans
(1)
6.3
7.0
7.5
7.9
9.2
10.3
11.8
13.0
18.7
Legacy
WB
other
PCI
loans
(1)
0.9
1.0
1.0
1.1
1.1
1.3
1.5
1.7
2.5
Total
$
116.5
121.8
126.8
133.2
139.7
146.8
155.0
163.2
190.8
4Q09
1Q10 |
 Wells Fargo
3Q11 Supplement 25
Purchased credit-impaired (PCI) portfolios
Continued to perform better than originally expected
($ in billions)
Adjusted unpaid principal balance
(1)
December 31, 2008
$
29.2
62.5
6.5
98.2
June 30, 2011
9.1
39.5
2.0
50.6
September 30, 2011
8.3
38.1
1.9
48.3
Nonaccretable difference rollforward
12/31/08 Nonaccretable difference
$
10.4
26.5
4.0
40.9
Losses from loan resolutions and write-downs
(6.7)
(14.5)
(2.6)
(23.8)
Release of nonaccretable difference since merger
(2.7)
(2.4)
(0.7)
(5.8)
(2)
9/30/11 Remaining nonaccretable difference
1.0
9.6
0.7
11.3
Life-to-date net performance
Additional provision since 2008 merger
$
(1.7)
-
(0.1)
(1.8)
Release of nonaccretable difference since 2008 merger
2.7
2.4
0.7
5.8
(2)
Net performance
1.0
2.4
0.6
4.0
Commercial
Pick-a-Pay
Other
consumer
Total
(1) 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.
(2) Reflects releases of $1.7 billion for loan resolutions and $4.1 billion from the
reclassification of nonaccretable difference to the accretable yield, which will result
in increasing income over the remaining life of the loan or pool of loans.
|
 Wells Fargo
3Q11 Supplement 26
$70
million
nonaccretable
difference
released
in
3Q11
into
income
due
to
loan
resolutions
-
$65 million in net interest income; $5 million in noninterest income
$108
million
reclassified
to
accretable
yield
in
3Q11
$11.3
billion
in
nonaccretable
difference
remains
to
absorb
losses
on
PCI
loans
-
Remaining
nonaccretable
=
28.3%
of
unpaid
principal
balance
(UPB)
(5)
•
Remaining
Pick-a-Pay
nonaccretable
=
29.5%
of
Pick-a-Pay
UPB
(5)
Nonaccretable difference established in purchase accounting for PCI loans absorbs losses
otherwise recorded as charge-offs
PCI nonaccretable difference
Analysis
of
nonaccretable
difference
for
PCI
loans
($ in millions)
Pick-a-Pay
Total
Balance at June 30, 2011
$
1,192
10,136
Release of nonaccretable difference due to:
Loans
resolved
by
settlement
with
borrower
(1)
(65)
-
-
Loans
resolved
by
sales
to
third
parties
(2)
(5)
-
-
Reclassification
to
accretable
yield
for
loans
with
improving
credit-related
cash
flows
(3)
(108)
-
Use of nonaccretable difference due to:
Losses
from
loan
resolutions
and
write-downs
(4)
(56)
(493)
Balance at September 30, 2011
$
958
9,643
-
(47)
(65)
(5)
(108)
(596)
Commercial
733
12,061
Other
consumer
686
11,287
(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.
(5) Unpaid principal balance of loans without write-downs.
|
 Wells Fargo
3Q11 Supplement 27
Cumulative
Accretable yield rollforward
since
($ in millions)
3Q11
2Q11
merger
Total, beginning of period
$
14,871
15,881
10,447
Accretion
into
interest
income
(1)
(553)
(556)
(6,648)
Accretion
into
noninterest
income
due
to
sales
(2)
(3)
(31)
(237)
Reclassification from nonaccretable difference for loans with improving cash flows
108
95
4,158
Changes
in
expected
cash
flows
that
do
not
affect
nonaccretable
difference
(3)
2,473
(518)
9,176
Total, end of period
$
16,896
14,871
16,896
PCI accretable yield
Expected cash flows on all PCI portfolios are recalculated quarterly including the adequacy of
life-of-loan loss marks (nonaccretable difference)
3Q11 increase in expected cash flows of $2.5 billion primarily due to the Pick-a-Pay
portfolio •
Lifetime expected cash flows are updated quarterly and will fluctuate based on estimates and
assumptions •
Cash flow estimates are affected by changes in interest rates, liquidation timing, the pace
of the economic and housing recovery and projected lifetime performance of loan
modification activity •
(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.
The PCI cash flows remained significantly better than estimated at acquisition
–
3Q11 results included accretion of $556 million compared with $587 million in 2Q11
Balance of $16.9 billion expected to accrete to income over the remaining life of the
underlying loans |
 Wells Fargo
3Q11 Supplement 28
$1.3 billion remains to be accreted into income over the remaining life of the portfolio
Most of portfolio tied to LIBOR
Weighted
average
life
of
the
portfolio
of
2.7
years
has
extended
over
the
past
couple
of
quarters
as
shorter
duration portfolios have rolled off and period of future cash flow assumptions have been
extended Commercial PCI accretable yield
(1) Increase in accretion and accretable yield percentage is primarily due to
improvements in the expected cash flows. ($ in millions)
3Q11
2Q11
1Q11
PCI interest income
Accretion
(1)
$
220
186
153
Resolution income
65
36
53
Average carrying value
6,672
7,171
7,694
Accretable yield percentage
Accretion
(1)
13.20
%
10.36
7.95
Accretable yield balance
$
1,303
1,357
1,175
Weighted average life (years)
2.7
2.4
2.0
|
 Wells Fargo
3Q11 Supplement 29
$15.0 billion remains to be accreted into income over 11 years (estimated remaining life of
portfolio) -
Based on updated cash flow valuations, there was no reclassification of nonaccretable to
accretable in 3Q11 -
Reduction in accretable yield percentage reflects continued industry expectations of extended
foreclosure timelines
and
lengthening
of
portfolio
weighted
average
life
due
to
modification
performance
-
Weighted average life of loans has increased due to loan modification activity and slower
liquidation timing -
Lifetime expected cash flows are updated quarterly and will fluctuate based on estimates and
assumptions •
Cash flow estimates are affected by changes in interest rates, liquidation timing, the pace
of the economic and housing recovery and projected lifetime performance of loan
modification activity Pick-a-Pay PCI accretable yield
($ in millions)
3Q11
2Q11
1Q11
PCI interest income
Accretion
$
310
352
361
Average carrying value
30,168
31,008
31,849
Accretable yield percentage
4.11
%
4.54
4.54
Accretable yield balance
$
14,989
12,884
14,027
Weighted average life (years)
11.0
10.0
9.3
|
 Wells Fargo
3Q11 Supplement 30
3Q11 Credit quality highlights
Net charge-offs of $2.6 billion down $227 million
from 2Q11 with declines across all loan categories
except for lease financing and other revolving
credit and installment
-
Commercial
losses
declined
$79
million
-
Consumer
losses
down
$148
million
Total NPAs of $26.8 billion down $1.1 billion
-
Nonaccrual
loans
down
$1.1
billion
-
Foreclosed
assets
up
$83
million
•
60% of the balance are government guaranteed
loans and loans written down through purchase
accounting
$1.3 billion, or 27%, are government
guaranteed
$1.6 billion, or 33%, reflects shift from
PCI loans to REO ($530 million consumer
and $1.1 billion C&I and CRE)
Currently expect future reserve releases absent
significant deterioration in the economy
Total
($ in millions)
Wells Fargo
Commercial loans
6,551
333,283
339,834
Consumer loans
30,662
389,610
420,272
Total period-end loans
37,213
722,893
760,106
Total nonaccrual loans
$
21,900
Total foreclosed assets
4,944
Total NPAs
$
26,844
as % of loans
3.53
%
Provision for credit losses
$
1,810
Net charge-offs
2,611
as % of avg loans
1.37
%
Commercial
0.50
Consumer
2.06
%
Allowance for credit losses
20,039 $
20,372
as % of loans
2.77
2.68
%
as % of nonaccrual loans
93
%
3Q11
PCI loans
Non PCI
loans |
 Wells Fargo
3Q11 Supplement 31
Commercial nonaccrual loans
3Q11 Total Commercial nonaccrual loans = $8,611 million
($ change in millions)
Commercial and Industrial & Lease
Financing:
CRE Construction:
CRE Mortgage:
Foreign
Inflows decreased 47%; fourth
consecutive quarterly decrease
92% secured
47% guaranteed
76% current on interest
27% have already been written down
Inflows decreased 31%
58% guaranteed
40% current on interest
38% of NPLs have been written down
Inflows decreased 7%; fourth
consecutive quarterly decline
67% guaranteed
55% current on interest
34% of NPLs have been written
down
-
1,000
2,000
3,000
4,000
5,000
3Q10
4Q10
1Q11
2Q11
3Q11
Commercial and Industrial Loans & Lease
Financing
Total Inflow
Total Outflow
NPL Balances
-
1,000
2,000
3,000
4,000
3Q10
4Q10
1Q11
2Q11
3Q11
CRE Construction
Total Inflow
Total Outflow
NPL Balances
-
1,000
2,000
3,000
4,000
5,000
6,000
3Q10
4Q10
1Q11
2Q11
3Q11
CRE Mortgage
Total Inflow
Total Outflow
NPL Balances
All comparisons are to 2Q11.
$1,915
$4,429
$68
$2,199 |
 Wells Fargo
3Q11 Supplement 32
3,000
3,250
3,500
3,750
4,000
1,000
1,500
2,000
2,500
3,000
3Q10
4Q10
1Q11
2Q11
3Q11
Home Equity
Total Inflow
(Left)
Total Outflow
(Left)
RE NPL Balances
(Right)
Consumer real estate nonaccrual loans
Inflows decreased 5%
Outflows decreased 2%
48% are 1-4 family first mortgage
76% is legacy WFF debt consolidation
-
Inflows increased 33%
-
Outflows decreased 14%
-
44% written down; losses taken stable
from prior quarter
12% is WBR
Nonaccrual balances stable
41% written down; losses taken
stable from prior quarter
58% are > 180 DPD
Inflows decreased 5%
Outflows increased 6%
84% of NPLs held at current estimated
recoverable value
23% are TDRs for which impairment
has been recognized
See page 37 for additional information
3Q11 Total residential real estate nonaccrual loans = $13,059 million
Inflows stabilized while outflows slowed reflecting environment and seasonality
All comparisons are to 2Q11.
(1) Includes National Home Equity first and junior lines and loans.
(2) Total
inflows
and
outflows
tracked
on
left
scale
and
RE
NPL
balances
tracked
on
right
scale.
National Home Equity
(1)
:
Home Mortgage:
Pick-a-Pay:
Other Businesses:
($ change in millions)
(2)
-
1,000
2,000
3,000
4,000
5,000
-
1,000
2,000
3,000
4,000
3Q10
4Q10
1Q11
2Q11
3Q11
Home
Mortgage
Total Inflow
(Left)
Total Outflow
(Left)
RE NPL Balances
(Right)
2,000
3,000
4,000
5,000
500
1,000
1,500
2,000
2,500
3Q10
4Q10
1Q11
2Q11
3Q11
Pick-a-Pay
Total Inflow
(Left)
Total Outflow
(Left)
RE NPL Balances
(Right)
$3,103
$2,527
$3,900
$3,529 |
 Wells Fargo
3Q11 Supplement 33
Commercial real estate (CRE) loan portfolio
Growth in outstandings includes the $948 million
in CRE loans purchased in the quarter partially
offset by real estate construction paydowns
Nonaccruals down $390 million, or 37 bps
Net charge-offs down $49 million, or 16 bps
31% of the portfolio is owner-occupied
($ in millions)
3Q11
2Q11
CRE outstandings
Real estate mortgage
$
104,363
101,458
Real estate construction
19,719
21,374
Total CRE outstandings
124,082
122,832
Nonaccrual loans
Real estate mortgage
4,429
4,691
Real estate construction
1,915
2,043
Total nonaccrual loans
6,344
6,734
as % of loans
5.11
%
5.48
Net charge-offs
Real estate mortgage
$
96
128
Real estate construction
55
72
Total net charge-offs
151
200
as % of avg loans
0.49
%
0.65 |
  Wells Fargo 3Q11
Supplement 34
Wholesale Banking CRE loan portfolio
(1)
(1)
Includes $7.1 billion in C&I loans managed by commercial real estate business including
unsecured loans to real estate developers not secured by real estate and loans to
REITs, as well as foreign and consumer loans. Other Wholesale
Total Wholesale
($ in millions)
CRE Division
PCI CRE
Banking CRE
CRE Loans
Loan outstandings
$
65,055
5,295
14,977
85,327
Nonaccrual loans
3,167
-
168
3,335
Foreclosed assets/REO/Other
813
1,022
44
1,879
Total NPAs
3,980
1,022
212
5,214
as a % of loans
6.12
%
19.30
1.42
6.11
Net charge-offs
$
72
35
4
111
as a % of loans
0.44
%
2.62
0.11
0.52
Wholesale Banking Commercial Real Estate
(1)
Growth
reflects
strong
originations
and
the
$1.1
billion
purchase
of
loans
which
was
partially
offset
by
a
decline
in
C&I
loans
managed
by
Wholesale
Banking
CRE
NPAs
decreased
$330
million
from
2Q11
while
losses
declined
$12
million,
or
9
bps,
from
2Q11
3Q11
revenue
included
release
of
nonaccretable
difference
for
commercial
PCI
resolutions
(payoffs/sales)
of
$41
million
vs.
$39
million
in
2Q11
Foreclosed
assets/REO/Other
increased
$57
million
from
2Q11
CRE
loans
originated
through
other
Wholesale
Banking
channels
(both
legacy
Wells
Fargo
and
Wachovia)
=
$15.0
billion
CRE Division portfolio = $65.1 billion, up $758 million from 2Q11 PCI CRE portfolio = $5.3 billion, carrying value
down $911 million, or 15%, from 2Q11
Wholesale
CRE
outstandings
of
$85.3
billion
(1)
up
$974
million
from
2Q11 |
 Wells Fargo
3Q11 Supplement 35
Pick-a-Pay mortgage portfolio
Carrying
value
of
$67.4
billion
in
first
lien
loans
outstanding,
down
$2.2
billion
from
2Q11
and
down
$28.0
billion from 4Q08 on paid-in-full loans and loss mitigation efforts
–
Adjusted unpaid principal balance of $75.6 billion, down $2.7 billion from 2Q11 and down $40.1
billion from 4Q08
–
$4.0 billion in modification principal forgiveness since acquisition reflects over 96,000
completed full-term modifications; additional $367 million of conditional
forgiveness that can be earned by borrowers through performance over the next 3 years
–
Pick-a-Pay loans with negative amortization potential decreased $2.8 billion from 2Q11
to 55% of loans Total portfolio deferred interest of $2.1 billion down $161 million from
2Q11 and down $2.2 billion from 4Q08; down for tenth consecutive quarter
Modification redefault rate has been consistently better than the industry average (as
measured by 60+ DPD after 6 months) as we have strived to give customers an affordable,
sustainable payment (1)
Adjusted unpaid principal includes write-downs taken on loans where severe delinquency
(normally 180 days) or other indications of severe borrower financial ($ in millions)
Product type
Adjusted
unpaid
principal
% of total
Adjusted
unpaid
principal
% of total
Adjusted
unpaid
principal
% of total
Option payment loans
(1)
$
41,335
55
%
$
49,958
59
%
$
99,937
86
%
Non-option payment adjustable-rate and
fixed-rate loans
(1)
10,231
13
11,070
13
15,763
14
Full-term loan modifications
(1)
23,990
32
23,132
28
-
-
Total adjusted unpaid principal balance
(1)
$
75,556
100
%
$
84,160
100
%
$
115,700
100
%
Total carrying value
67,361
74,815
95,315
At 12/31/2008
At 12/31/2010
At 9/30/2011
stress exist that indicate there will be a loss of contractually due amounts upon final
resolution of the loan. |
 Wells Fargo
3Q11 Supplement 36
Pick-a-Pay credit highlights
Non-PCI portfolio
Loans down 3% driven by loans paid-in-full
85% of portfolio current
Nonaccrual loans down $147 million in 3Q11
-
84% of loans written down to current net
realizable value (See page 37)
-
New inflows of $0.7 billion, down 5% from 2Q11
on stabilizing delinquencies and decline in the
number of TDRs moving to nonaccrual; decreased
for seventh consecutive quarter
-
$223 million of nonaccrual TDRs
reclassified to
accruing TDR status based on borrower payment
performance
$3.9 billion in nonaccruals includes $916 million of
nonaccruing TDRs
Net charge-offs of $220 million in 3Q11,
consistent with expectations and an annualized
loss rate of 2.30%
43% of portfolio with LTV
(2)
80%
PCI portfolio
Carrying value down 3%
68% of portfolio current, consistent with 2Q11
Life-of-loan losses continued to be lower than
originally projected at time of merger
(1)
The carrying value, which does not reflect the allowance for loan losses, includes purchase
accounting adjustments, which, for PCI loans, are the nonaccretable difference
and
the
accretable
yield,
and
for
all
other
loans,
an
adjustment
to
mark
the
loans
to
a
market
yield
at
date
of
merger
less
any
subsequent
charge-offs.
(2) The current loan-to-value (LTV) ratio is calculated as the net carrying
value (defined in (1) above) divided by the collateral value. (3) The adjusted
unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower
financial stress exist that indicate there will be a loss of contractually due amounts upon
final resolution of the loan. ($ in millions)
3Q11
2Q11
Non-PCI loans
Carrying value
(1)
$
37,646
38,888
Nonaccrual loans
3,900
4,047
as a % of loans
10.36
%
10.41
Net charge-offs
$
220
224
as % of avg loans
2.30
%
2.27
90+ days past due
as % of loans
9.53
9.41
Current average LTV
(2)
85
%
86
Current average FICO
682
682
Contractual average loan size
$
211,000
213,000
Contractual average age of loans
7.54
years
7.28
% of loans in California
49
%
49
($ in millions)
3Q11
2Q11
PCI loans
Adjusted unpaid principal balance
(3)
$
38,060
39,483
Carrying value
(1)
29,715
30,699
Current average LTV
(2)
89
%
89
Current average FICO
608
606
Contractual average loan size
$
311,000
313,000
Contractual average age of loans
5.50
years
5.25
% of loans in California
67
%
67 |
 Wells Fargo
3Q11 Supplement 37
Pick-a-Pay nonaccrual loan composition
84% of Pick-a-Pay nonaccruals held at estimated recoverable value vs. 85% at 2Q11,
reflecting write-downs
and/or
LTV
100%
Allowance
available
for
the
remaining
16%
that
have
not
yet
been
written
down
7% of the nonaccruals are performing modifications
-
Performing modifications move to accruing status after six consecutive payments are made
9/30/11 Total $3,900 million
Charge-offs to date of $670 million
(29% of original balance)
66% of loans have LTV<80%
33%
of
loans
have
LTV
80%
but
<100%
1%
of
loans
have
LTV
100%
(1)
Initial charge-offs usually not taken
until 180 DPD ($39 million taken to
date)
Expected losses included in allowance
Charge-offs/principal forgiveness to
date of $220 million (20% of
original balance)
Additionally, we hold expected life-
of-loan loss reserves in allowance
LTV is considered to be over 100% if the loan balance exceeds current estimated appraised
value based on automated valuation methodology or updated appraisal where available.
Calculation excludes unpaid principal balance of related equity lines of credit that share common collateral. Does not include PCI Pick-a-Pay since they
are considered to be accruing under PCI loan accounting for accretable yield and accrual
status is not based on contractual interest payments. (1) Loans with LTV>100%
are currently in modification trial periods. 180 DPD written down to estimated
recoverable value
0-179 DPD
Loan modifications (TDRs)
180
DPD
updated
LTV
100%
19%
16%
23%
42% |
 Wells Fargo
3Q11 Supplement 38
Real estate 1-4 family first mortgage portfolio
First lien mortgage loans up $884 million despite
$2.8 billion decline in runoff portfolios
Pick-a-Pay non-PCI portfolio down 3%
PCI portfolio down 3%
Debt consolidation down 3%
Non runoff first lien up 3%
Core first lien mortgage nonaccruals down $294
million, or 31 bps
Non runoff net charge-offs down $58 million, or
22 bps
(1) Ratios on WFF debt consolidation loan portfolio only.
(2) Ratios on non runoff first lien mortgage loan portfolio only.
($ in millions)
3Q11
2Q11
Total real estate 1-4 family first mortgage
$
223,758
222,874
Less consumer non-strategic/liquidating portfolios:
Pick-a-Pay non-PCI first lien mortgage
37,646
38,888
PCI first lien mortgage
30,446
31,448
WFF debt consolidation portfolio
17,186
17,730
Core first lien mortgage
138,480
134,808
Nonaccrual loans
$
2,334
2,296
as % of loans
13.58 %
12.95
Net charge-offs
$
191
217
as % of average loans
4.37 %
4.81
Nonaccrual loans
$
4,790
5,084
as % of loans
3.46 %
3.77
Net charge-offs
$
410
468
as % of loans
1.17 %
1.39
WFF
debt
consolidation
mortgage
loan
performance
(1)
Core
first
lien
mortgage
loan
performance
(2) |
 Wells Fargo
3Q11 Supplement 39
Home equity portfolio
Core Portfolio
(1)
Outstandings
down 1%
-
High quality new originations with weighted
average CLTV of 60%, 777 FICO, and 32% total
debt service ratio
3Q11 losses down $57 million, or 20 bps
2+ delinquencies increased $43 million, or 8 bps
Delinquency rate for loans with a CLTV >100%
increased 8 bps
Liquidating
Portfolio
Outstandings down 5%
3Q11 losses down $9 million, or 25 bps
2+ delinquencies declined $18 million, or 8 bps
Continued decline in delinquency rate for loans
with a CLTV >100%, 22 bps improvement QoQ
Excludes purchased credit-impaired loans.
(1) Includes equity lines of credit and closed-end junior liens associated with the
Pick-a-Pay portfolio totaling $1.5 billion at September 30, 2011 and $1.6 billion at
June 30, 2011.
(2)
CLTV is calculated based on outstanding balance plus unused lines of credit divided by
estimated home value. Unsecured balances, representing the percentage of
outstanding balances above the most recent home value, is a smaller percentage of the portfolio. Estimated home values are determined predominately
based on automated valuation models updated through September 2011.
($ in millions)
3Q11
2Q11
Core Portfolio
(1)
Outstandings
$
103,100
104,417
Net charge-offs
753
810
as % of avg loans
2.88
%
3.08
2+ payments past due
$
3,153
3,110
as % loans
3.07
%
2.99
% CLTV > 100%
(2)
35
36
2+ payments past due
4.40
%
4.32
% 1st lien position
20
20
Liquidating Portfolio
Outstandings
$
5,982
6,266
Net charge-offs
139
148
as % of avg loans
8.97
%
9.22
2+ payments past due
$
281
299
as % loans
4.69
%
4.77
% CLTV > 100%
(2)
73
73
2+ payments past due
5.06
%
5.28
% 1st lien position
4
4 |
 Wells Fargo
3Q11 Supplement 40
$109.1 billion home equity portfolio
-
19% in 1
st
lien position
-
41% in junior lien position behind WFC owned or serviced 1
st
lien
-
40% in junior lien position behind third party 1
st
lien
Excludes purchased credit-impaired loans.
(1) Delinquency represents two or more payments past due as of August 2011.
Home equity portfolio
Delinquency Status
(1)
of Junior Liens Behind a Wells Fargo 1
st
Lien
Delinquency Status
Current 1
st
lien, Current junior lien
95.6
%
Current 1
st
lien, Delinquent junior lien
0.9
Delinquent 1
st
lien, Current junior lien
1.6
Delinquent 1
st
lien, Delinquent junior lien
1.9
Outstanding Balance % |
 Wells Fargo
3Q11 Supplement 41
Credit card portfolio
$21.7 billion credit card outstandings up 2% from
2Q11 on new customer growth and higher
consumer spending from existing customers
–
New accounts increased 20% in the quarter
with household penetration increasing to
25.8%
(1)
•
East penetration of 14.9%
(1)
–
Purchase dollar volumes increased 4% and
transactions grew 5% from 2Q11
–
Purchase dollar volume increased 12% and
transactions grew 13% from 3Q10
Net charge-offs down $28 million, or 73 bps,
reflecting continued delinquency improvement
driven by previous risk mitigation efforts
($ in millions)
3Q11
2Q11
Credit card outstandings
$
21,650
21,191
Net charge-offs
266
294
as % of avg loans
4.90
%
5.63
(1) Household penetration as of August, 2011 and defined as the percentage of retail
banking deposit households that have a credit card with Wells Fargo. |
 Wells Fargo
3Q11 Supplement 42
Auto portfolio
Core Portfolio
Total outstandings up 1% QoQ and up 9% YoY
reflecting market share gains
-
Originations were down 5% from 2Q11 reflecting
increased competition in the marketplace
Net charge-offs increased $35 million, or 32 bps,
on seasonality and modestly weaker used car
values
-
September Manheim index of 122.9, down 4%
from June 2011 and up 3% from September 2010
30+ days past due increased $32 million, or 6
bps, reflecting seasonality
Liquidating
Portfolio
(1)
Legacy Wells Fargo Financial indirect auto
outstandings down 20%, or $780 million, QoQ
driven by paydowns
(1) Legacy Wells Fargo Indirect portfolio.
($ in millions)
3Q11
2Q11
Core
Portfolios
Direct
Auto outstandings
$
2,636
2,762
Nonaccrual loans
75
82
as % of loans
2.84
%
2.97
Net charge-offs
$
11
8
as % of avg loans
1.57
%
1.13
30+ days past due
$
66
87
as % of loans
2.49
%
3.15
Indirect
Auto outstandings
$
39,139
38,420
Nonaccrual loans
12
15
as % of loans
0.03
%
0.04
Net charge-offs
$
69
37
as % of avg loans
0.71
%
0.39
30+ days past due
$
521
468
as % of loans
1.33
%
1.22
Auto outstandings
$
3,101
3,881
Nonaccrual loans
97
113
as % of loans
3.14
%
2.90
Net charge-offs
$
25
16
as % of avg loans
2.85
%
1.43
30+ days past due
$
208
287
as % of loans
6.72
%
7.38
Liquidating
portfolio
(1) |
 Wells Fargo
3Q11 Supplement 43
Forward-looking statements and additional information
Forward-looking statements:
This Quarterly Supplement and management’s related presentation contain
forward-looking statements about our future financial performance.
These
forward-looking
statements
include
statements
using
words
such
as
“believe,”
“expect,”
“anticipate,”
“estimate,”
“target”, “should,”
“may,”
“can,”
“will,”
“outlook,”
“appears”
or similar expressions. These forward-looking statements may include,
among others, statements about: expected or estimated future losses in our loan portfolios,
including our belief that the allowance for loan losses is expected to decline; fourth
quarter 2011 net interest income, noninterest expense, mortgage-related revenues, and
benefits
to
net
interest
income
and
net
interest
margin
from
the
redemption
of
trust
preferred
securities;
expected
or
estimated
loan
loss reserve releases; mortgage repurchase exposure; exposure related to mortgage practices,
including foreclosures and servicing; our
targeted
noninterest
expense
for
fourth
quarter
2012
as
part
of
our
expense
management
initiatives;
the
future
economic
environment; reduction or mitigation of risk in our loan portfolios; future effects of loan
modification programs; life-of-loan loss estimates; the estimated impact of
regulatory reform on our financial results and business and expectations regarding our efforts to
mitigate such impact; and our estimated Tier 1 common equity ratio as of September 30, 2011,
under proposed Basel capital rules. Investors are urged to 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. For more information about factors that could cause actual results
to differ materially from expectations, refer to page 13 of Wells Fargo’s press
release announcing our third quarter 2011 results, as well as Wells Fargo’s reports filed with
the
Securities
and
Exchange
Commission,
including
the
discussion
under
“Risk
Factors”
in
our
Quarterly
Report
on
Form
10-Q
for
the
period ended June 30, 2011.
Purchased credit-impaired loan portfolio:
Loans that were acquired from Wachovia that were considered credit impaired were written down
at acquisition date in purchase accounting to an amount estimated to be collectible and
the related allowance for loan losses was not carried over to Wells Fargo’s
allowance. In addition, such purchased credit-impaired loans are not classified as
nonaccrual or nonperforming, and are not included in loans that were contractually 90+
days past due and still accruing. Any losses on such loans are charged against the nonaccretable
difference established in purchase accounting and are not reported as charge-offs (until
such difference is fully utilized). As a result of accounting for purchased loans with
evidence of credit deterioration, certain ratios of the combined company are not comparable to a
portfolio that does not include purchased credit-impaired loans.
In certain cases, the purchased credit-impaired loans may affect portfolio credit ratios
and trends. Management believes that the presentation of information adjusted to
exclude the purchased credit-impaired loans provides useful disclosure regarding the credit
quality of the non-impaired loan portfolio. Accordingly, certain of the loan balances and
credit ratios in this Quarterly Supplement have been adjusted to exclude the purchased
credit-impaired loans. References in this Quarterly Supplement to impaired loans mean
the
purchased
credit-impaired
loans.
Please
see
pages
29-31
of
the
press
release
for
additional
information
regarding
the
purchased
credit-impaired loans. |
 Wells Fargo
3Q11 Supplement 44
Tier 1 common equity under Basel I
(1)
Quarter ended
Sept. 30,
June 30,
Mar. 31,
Dec. 31,
Sept. 30,
2011
2011
2011
2010
2010
$
139.2
137.9
134.9
127.9
125.2
(1.5)
(1.5)
(1.5)
(1.5)
(1.5)
137.7
136.4
133.4
126.4
123.7
(10.6)
(10.6)
(10.6)
(8.1)
(8.1)
(34.4)
(34.6)
(35.1)
(35.5)
(36.1)
4.0
4.1
4.2
4.3
4.7
(0.7)
(0.9)
(0.9)
(0.9)
(0.9)
(3.7)
(5.3)
(4.9)
(4.6)
(5.4)
(0.4)
(0.3)
(0.1)
(0.3)
(0.3)
(A)
$
91.9
88.8
86.0
81.3
77.6
(B)
$
982.0
970.2
962.9
980.0
968.4
(A)/(B)
9.35
%
9.15
8.93
8.30
8.01
Total risk-weighted assets
(2)
Tier 1 common equity to total risk-weighted assets
Cumulative other comprehensive income
Other
Tier 1 common equity
MSRs over specified limitations
Wells Fargo & Company and Subsidiaries
($ in billions)
Total equity
Noncontrolling interests
Total Wells Fargo stockholders' equity
Adjustments:
FIVE
QUARTER
TIER
1
COMMON
EQUITY
UNDER
BASEL
I
(1)
Preferred equity
Goodwill and intangible assets (other than MSRs)
Applicable deferred taxes
(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 September 30, 2011, preliminary risk-weighted assets reflect estimated on-balance sheet risk-weighted assets of $818.4 billion and
derivative and off-balance sheet risk-weighted assets of $163.6 billion.
|
 Wells Fargo
3Q11 Supplement 45
Tier 1 common equity under Basel III (Estimated)
(1)
Quarter ended
Sept. 30,
2011
$
91.9
3.7
(1.5)
Other
0.2
(C)
94.3
(D)
$
1,272.2
(C)/(D)
7.41
%
Wells Fargo & Company and Subsidiaries
TIER
1
COMMON
EQUITY
UNDER
BASEL
III
(ESTIMATED)
(1)
($ in billions)
Tier 1 common equity under Basel I
Adjustments from Basel I to Basel III:
Cumulative
other
comprehensive
income
(2)
Threshold
deductions
defined
under
Basel
III
(2) (3)
Tier 1 common equity anticipated under Basel III
Total
risk-weighted
assets
anticipated
under
Basel
III
(4)
Tier 1 common equity to total risk-weighted assets
anticipated under Basel III
(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)
Threshold deductions under Basel III include individual and aggregate
limitations, as a percentage of Tier 1 common equity (as defined under Basel III), with
respect to MSRs, deferred tax assets and investments in unconsolidated
financial companies. (4)
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. |