WELLS FARGO (WFC) REPORTS RECORD FULL YEAR NET INCOME Q4 Record Revenue of $22.7 billion; Q4 Net Income of $2.8 billion
SAN FRANCISCO - Wells Fargo & Company (NYSE: WFC) reported record net income of $12.3 billion, or
$1.75 per common share, for 2009. Fourth quarter 2009 diluted earnings per share were $0.08,
compared with $0.56 for third quarter 2009 and a loss of $0.84 per share in fourth quarter 2008. Fourth
quarter and full year 2009 diluted earnings per share were reduced by $0.47 and $0.76, respectively, for
combined cash dividends and the deemed dividend upon redemption and full repayment of TARP
preferred stock. Results prior to January 1, 2009, do not include Wachovia.
"For the fourth quarter of 2009 and for the full year, we delivered significant value for our customers,
communities, shareholders and country," said Chairman and CEO John Stumpf. "We thank our team of
281,000 for their dedication and steadfast focus on customers in 2009 as we continued the important
integration of Wachovia into Wells Fargo. This merger, which essentially doubled the size of our company,
has already generated tremendous synergies as we expand the time-tested Wells Fargo model to more
customers and team members over a broader geography, including additional businesses that help
customers succeed financially. In particular, we are very pleased with the positive results we've seen in
attracting deposits from new and existing customers, and we are excited about the opportunity to deepen
current relationships, cross-sell to new customers and achieve even higher customer satisfaction, while
rewarding them for more of their business. Our mission and fundamental business model remains the
same and we believe our strategic and financial position is even stronger today than it was a year ago
when we completed our merger with Wachovia.
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"Wells Fargo continued to do its part in making credit available to help our nation's economic recovery.
Nearly half a million Wells Fargo loan customers were provided with mortgage payment relief through
active trial and completed loan modifications in 2009. We provided $711 billion in loans and lines of
credit to help get the economy going again.
"As this past year's financial performance has shown, the earnings capability of Wells Fargo's business
model has significant power to generate capital internally. Because of the value we created in 2009 for our
customers and communities, we were able to achieve record revenue and earnings for the year. As we
enter 2010, we believe our franchise has never been better positioned to meet the challenges and
opportunities ahead of it. The Wells Fargo model has been built to outperform our peers over time and
through cycles. Clearly we have done just that again in 2009 and believe that this very same model and
execution discipline will continue to outperform the industry in the years and cycles ahead."
Financial Performance
"Fourth quarter financial results reflected a continuation of the solid revenue, earnings and capital
generation we have produced all year," said Chief Financial Officer Howard Atkins. "Fourth quarter
earnings of $2.8 billion contributed to a record $12.3 billion in net income for the full year. Revenue
continued to build during the quarter across the majority of our businesses, reaching a new quarterly
record of $22.7 billion, leading to pre-tax pre-provision profit of nearly $10.0 billion despite $861 million
of merger-related and incremental expenses in the quarter. Risk in our asset portfolios has been reduced
throughout the year, including fourth quarter, by reducing higher-risk loan portfolios, shedding legacy
trading positions, and reducing longer duration investment securities at lower interest rates. We
continued to strengthen our balance sheet by building credit reserves to $25 billion at quarter end, up
$500 million in the quarter, up $3.5 billion during 2009 and more than six times the reserve (pre-merger)
we had at the start of the credit crisis in mid-2007.
The Wachovia integration is proceeding as expected. Credit losses are tracking better than originally
estimated at the time of the merger. Expense synergies are on track for $5 billion in annual run rate
savings upon completion of the integration in 2011 and cumulative integration costs are now expected to
be $3 billion less than the originally assumed $8 billion. Revenue synergies have already begun to be
realized with great potential for many more. We built capital significantly throughout the year.
Stockholders' equity and Tier 1 common at December 31, 2009, were above the strong levels we had prior
to the Wachovia acquisition, even after redeeming TARP and purchasing Prudential's minority interest."
Revenue
Revenue of $22.7 billion increased 4 percent (annualized) from third quarter 2009, largely the result of
continued growth in fee income in our trust and investment management, credit/debit card and mortgage
banking businesses. We also experienced broad-based growth across multiple businesses, including
double-digit (annualized) linked-quarter revenue growth in asset management, auto lending through
Wachovia Dealer Services, insurance, merchant card, mortgage banking, and wealth management. Legacy
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Wells Fargo had record retail bank household cross-sell of Wells Fargo products of 5.95 in the fourth
quarter, and core product solutions (sales) of 6.08 million, up 16 percent from prior year. While mortgage
originations and servicing revenue remained high, total mortgage banking noninterest income
contributed just 15 percent of the Company's consolidated revenue for the quarter.
Net Interest Income
Net interest income was $11.5 billion, compared with $11.7 billion in third quarter 2009. While earning
assets were up slightly, the decline in core loans, the reduction in non-strategic assets and the third
quarter sale of longer-duration mortgage-backed securities reduced net interest income growth and net
interest margin in the fourth quarter, offset by significant growth in noninterest-bearing checking and
savings deposits and wider new lending spreads, which are expected to benefit net interest income over
the long term.
Noninterest Income
Noninterest income was $11.2 billion, up 15 percent (annualized) from $10.8 billion in third quarter 2009,
and included:
- Mortgage banking income of $3.4 billion, including:
- $1.2 billion in income from mortgage loan originations/sales activities (net of $316 million
increase in repurchase reserves) on $94 billion of residential mortgage originations and
$144 billion of applications
- $1.9 billion market-related valuation changes to mortgage servicing rights (MSRs) net of
economic hedge results, largely reflecting the continuation of strong carry income and effective
hedge performance; average servicing portfolio note rate was only 5.66 percent, the lowest since
September 30, 2005, and the value of MSRs to loans serviced for others was 91 basis points.
- Trust and investment fees of $2.6 billion, up 16 percent (annualized) linked quarter, primarily
reflecting an increase in client assets and higher revenue from the retail securities brokerage business.
After purchasing Prudential's noncontrolling interest in the securities brokerage joint venture on
December 31, 2009, Wells Fargo has 100 percent of the future earnings of the business.
- Service charges on deposit accounts of $1.4 billion, down 15 percent (annualized) linked quarter due
to normal seasonality
- Credit/debit card fees of $961 million, up 6 percent (annualized) linked quarter reflecting seasonally
higher volumes and higher debit card penetration
- Insurance revenue of $482 million, up 12 percent (annualized) linked quarter
- Net gains on debt and equity securities of $383 million, largely reflecting private equity gains
- $272 million reduction in other noninterest income linked quarter, partly reflecting lower investment
income in employee benefit plan
The Company had net unrealized securities gains of $5.6 billion at December 31, 2009, consisting of
$3.3 billion in unrealized gains in the agency mortgage-backed securities portfolio and $2.3 billion on
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spread-related fixed-income securities and equity investments. During the quarter, mortgage-backed
securities yields increased while capital market credit spreads generally narrowed.
Noninterest Expense
"While our core cost discipline remained very much in place in the quarter, noninterest expense increased
to $12.8 billion from $11.7 billion in third quarter 2009, driven in large part by $450 million of Wachovia
merger integration and severance expense (up $251 million from third quarter), $261 million for the
previously announced ARS settlement and $150 million for employee benefit-related expense for 401(k)
profit sharing contribution to all eligible team members," said Atkins. "We also continued to invest for
both the short- and long-term benefit of our customers. We added sales and service team members in
regional banking as we align Wachovia's banking stores with the Wells Fargo model. As we've rolled out
our regional commercial banking office model into the Eastern states, we've increased sales and service
headcount by 8 percent from the third quarter. We also added resources to handle the higher volumes of
mortgage loan modifications, with home retention staff up 17 percent in the quarter to more than
15,000 team members dedicated to helping customers stay in their homes. The Company's efficiency ratio
was 56.5 percent, up from the third quarter's record level but roughly flat with the first and second
quarter.
Income Taxes
The Company's effective income tax rate was 25.2 percent in the fourth quarter, down from 29.5 percent
in the third quarter (adjusted for noncontrolling interest). The reduction in tax expense primarily related
to the resolution of certain federal and state income tax matters in the quarter and to a greater proportion
of tax-exempt income.
Loans
Average total loans were $792.4 billion in the fourth quarter compared with $810.2 billion in the third
quarter. In part, the decline was driven by the Company's objective to reduce identified higher-risk, nonstrategic
and liquidating consumer loan portfolios, down $4.7 billion in the fourth quarter. "While we
believe we've been an industry-leader in supplying credit to consumers and businesses - $711 billion in
commitments and originations in 2009 - loan demand remained relatively soft in the fourth quarter,
although the pace of decline in core loans moderated slightly in the quarter," said Atkins. "Wells Fargo
continued to gain market share in many lending segments including residential mortgage, auto, education
finance, SBA and middle market commercial. With commercial line utilization at cyclical lows and total
wholesale banking commitments of $258 billion, we are encouraged by the potential for increased loan
volume should a growing economy lead to increased commercial loan demand."
Deposits
"Deposit growth remained very strong as we continued to build consumer and business checking account
relationships," said Atkins. Average checking and savings deposits increased 20 percent (annualized) to
$661.4 billion from $629.6 billion in third quarter 2009. Average mortgage escrow deposits were
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$27.5 billion compared with $28.7 billion in third quarter 2009. Average consumer checking accounts
grew a net 5.8 percent from 2008 for Wells Fargo and Wachovia combined, and average business
checking accounts grew a net 3.9 percent for the same period. Average total core deposits were
$770.8 billion, up 6 percent (annualized) from $759.3 billion in third quarter 2009. During the quarter,
$14 billion of Wachovia's higher-rate certificates of deposit matured, with $6 billion of those balances
retained. For the full year 2009, $109 billion of Wachovia's high-rate certificates of deposit matured, with
$62 billion retained, largely in low-cost CDs, checking and savings accounts. Only $8 billion of Wachovia
high-rate CDs are expected to mature in 2010.
Capital
"We have built capital significantly in the last 15 months through industry-leading internal capital
generation and three successful common stock offerings totaling over $33 billion, including the
$12.2 billion offering in the fourth quarter that allowed us to repay TARP in full," said Atkins. "Despite
doubling the size of the Company and despite cyclically elevated credit costs this past year, our capital
ratios ended 2009 higher than they were upon completion of the Wachovia acquisition, even after
redeeming TARP in full and purchasing Prudential's noncontrolling interest in the retail securities
brokerage joint venture."
Dec. 31, Dec. 31,
(as a percent of total risk-weighted assets) 2009 (1) 2008
Tier 1 capital 9.3 % 7.8
Tier 1 common equity (2) 6.5 3.1
Total capital 13.3 11.8
(1) December 31, 2009, ratios are preliminary.
(2) See table on page 38 for more information on Tier 1 common equity.
On January 1, 2010, the Company adopted new accounting guidance contained in FASB ASC 810,
Consolidations
consolidation of certain off-balance sheet assets not currently included in its financial statements. The
adoption of the new guidance added approximately $10 billion in risk-weighted assets and had a small
positive impact on common equity upon adoption. The total impact was to increase Tier 1 common equity
as a percentage of risk-weighted assets by 1 basis point, to reduce the Tier 1 capital ratio by 1 basis point
and to reduce the total capital ratio by 4 basis points.
Credit Quality
"Fourth quarter credit results were in line with our expectations," said Chief Credit and Risk Officer Mike
Loughlin. "While losses remained elevated during the quarter as expected, a more favorable economic
outlook and improved credit statistics in several portfolios further increase our confidence that our credit
cycle is turning, provided economic conditions do not deteriorate. Credit actions taken early in 2008 have
so far produced high quality subsequent vintages in the consumer portfolios, and 30-day delinquency
levels in a number of retail and commercial segments improved or stabilized in the fourth quarter.
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Stabilization, or in some cases improvements, in residential real estate values in multiple markets have
resulted in lower expected loss severity in our consumer real estate secured portfolios, including better
than expected performance in the Pick-a-Pay portfolio. As expected, commercial real estate losses
increased during the quarter, but remained at manageable levels. Last quarter, we indicated that we
expected consumer losses to peak in the first half of 2010 and commercial losses to peak in the second
half absent further economic deterioration. Based on the portfolio performance data we saw in the fourth
quarter, and assuming the same economic outlook, we are tracking somewhat better than these
expectations. Nonperforming asset growth decelerated in the fourth quarter, and once again we increased
reserve levels commensurate with the estimated losses inherent in the portfolio. For the first time in four
quarters, the total provision in the fourth quarter declined on a linked-quarter basis. We are working
actively to find solutions for consumer and commercial customers who are not able to repay loans
according to original terms. We are also encouraging Wells Fargo bankers to stay close to their customers
and prospects to understand their future borrowing needs, so that when their credit needs arise, we will
be prepared to lend."
Credit Losses
Fourth quarter net charge-offs were $5.4 billion, or 2.71 percent of average loans (annualized), compared
with third quarter net charge-offs of $5.1 billion, or 2.50 percent of average loans. Total credit losses
included $1.7 billion of commercial and commercial real estate loans (2.15 percent of average loans) and
$3.7 billion of consumer loans (3.24 percent of average loans), as shown in the following table. Almost all
of the increase in charge-offs was in commercial and consumer real estate, with the other portfolios
showing flat to declining losses.
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Net Loan Charge-Offs ( ) Quarter ended
Commercial $ 9 27 2.24 % $ 924 2.09 % $ 704 1.51 %
Real estate mortgage 349 1.32 209 0 .80 146 0.56
Real estate construction 375 4.82 249 3.01 232 2.76
Lease financing 49 1.37 82 2.26 61 1.68
Total commercial and commercial real estate 1,700 2 .15 1,464 1 .78 1,143 1 .35 Consumer:
Real estate 1-4 family
first mortgage 1,018 1.74 966 1.63 758 1.26
Real estate 1-4 family
junior lien mortgage 1,329 5.09 1 ,291 4.85 1,171 4.33
Credit card 634 1 0.61 648 10.96 664 11.59
Other revolving credit
and installment 686 3.06 682 3.00 6 04 2.66
Total consumer 3,667 3.24 3,587 3.13 3,197 2.77 Foreign 46 0 .62 6 0 0.79 46 0.61 Total $ 5,413 2.71
(1) See explanation on page 30 of the accounting for purchased credit-impaired (PCI) loans from Wachovia and the impact on selected financial ratios.
"While we expect commercial and commercial real estate losses will remain elevated for the near term, we
continue to believe our portfolio will perform relatively well," said Loughlin. "Our commercial real estate
portfolio is well diversified with respect to product type and geography. The Wells Fargo portion of the
portfolio reflected strong, consistent underwriting and a relationship approach, while the loss content in
the Wachovia portion was significantly reduced when we took $7 billion in purchase accounting
adjustments at the time of the merger on $18 billion of the highest risk commercial real estate loans. As a
result of improved residential real estate activity, stable employment and high quality recent vintages,
consumer losses were essentially flat in the fourth quarter.
"Overall the PCI portfolio has performed as expected, and we believe the remaining nonaccretable balance
is adequate to absorb estimated future life-of-loan losses on the portfolio. In fact, we expect the Pick-a-
Pay portfolio, where we have recognized $10.2 billion of the original $26.5 billion of PCI impairment
taken on the Pick-a-Pay portfolio, to perform better than our original estimates. As required, any further
deterioration we experience on the PCI loans will be reflected in credit costs while improvements in that
portfolio will be reflected in revenue as increased yield or gains on asset sales. To date, these have largely
offset one another."
Nonperforming assets
Total nonperforming assets (NPAs) were $27.6 billion (3.53 percent of total loans) at December 31, 2009,
and included $24.4 billion of nonaccrual loans and $3.2 billion of foreclosed assets (repossessed real
estate and vehicles).
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Nonaccrual Loans and Other Nonperforming Assets As a As a As a % of % of % of total total total ($ in millions) Balances loans Balances loans Balances loans Commercial and commercial real estate:
Commercial $ 4,397 2.78 % $ 4,540 2.68 % $ 2,910 1.60 %
Real estate mortgage 3,984 3.80 2,856 2.76 2,343 2.26
Real estate construction 3,025 10.18 2,711 8.55 2,210 6.65
Lease financing 171 1.20 157 1.11 130 0.89
Total commercial and commercial real estate 11,577 3.77 10,264 3.22 7,593 2 .28 Consumer:
Real estate 1-4 family
first mortgage 10,100 4.40 8 ,132 3.50 6,000 2.53
Real estate 1-4 family
junior lien mortgage 2,263 2 .18 1 ,985 1.90 1,652 1.54
Other revolving credit
and installment 332 0.37 3 44 0.38 327 0.36
Total consumer 12,695 2.84 10,461 2.32 7,979 1.74 Foreign 146 0.50 144 0.48 226 0.75 Total nonaccrual loans 24,418 3.12 20,869 2.61 1 5,798 1.92 Foreclosed assets:
GNMA loans 960 840 932
All other 2,199 1,687 1,592
Total foreclosed assets 3,159 2,527 2,524 Real estate and other nonaccrual investments 62 55 20 Total nonaccrual loans and other nonperforming assets $ 27,639 3 .53 % $ 23,451 2 .93 % $ 18,342 2 .23 %
Change from prior quarter $ 4,188 5,109 5,730
December 31, 2009 September 30, 2009 June 30, 2009
"While commercial and commercial real estate nonaccrual loans were up in the quarter, we continued to
see the rate of growth slowing considerably quarter to quarter," said Loughlin. "The $1.4 billion increase
in commercial real estate NPAs included impaired loans in the PCI portfolio placed in foreclosure and
therefore moved to NPAs (written down at the time of the Wachovia merger).
"We believe the loss exposure expected in the NPAs is significantly mitigated by three factors. First,
96 percent of our nonperforming loans (NPLs) are secured. Second, losses have already been recognized
on 36 percent of the total. Specifically, 31 percent of commercial loan NPLs have been written down by
52 percent or more, and all residential real estate NPLs greater than 180 days old have been written down
to net realizable value. Third, there are certain NPLs for which there are loan level reserves in the
allowance, while other NPLs are covered by general reserves."
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Loans 90 Days or More Past Due and Still Accruing ( ) (Excluding Insured/Guaranteed GNMA and Similar Loans) Dec. 31, (in millions) 2009 Commercial and commercial real estate:
Commercial $ 590 458
Real estate mortgage 1,183 693
Real estate construction 740 930
Total commercial and commercial real estate 2,513 Consumer:
Real estate 1-4 family first mortgage 1 ,623 1,552
Real estate 1-4 family junior lien mortgage 5 15 484
Credit card 795 683
Other revolving credit and installment 1 ,333 1,138
Total consumer 4,266 Foreign 7 3 Total loans $ 6,852
(1) The table above does not include PCI loans that were contractually 90 days past due and still accruing.
These loans have a related nonaccretable difference that will absorb future losses; therefore charge-offs
on these loans are not expected to reduce income in future periods to the extent that actual future loan
performance is consistent with original estimates.
Loans 90 days or more past due and still accruing totaled $22.2 billion at December 31, 2009, and
$18.9 billion at September 30, 2009. For the same period ends, the totals included $15.3 billion and
$12.9 billion, respectively, in advances pursuant to the Company's servicing agreement to Government
National Mortgage Association (GNMA) mortgage pools and similar loans whose repayments are insured
by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.
Allowance for Credit Losses
The allowance for credit losses, including the reserve for unfunded commitments, totaled $25.0 billion at
December 31, 2009, compared with $24.5 billion at September 30, 2009. The credit reserve reflects
management's estimate of inherent losses in the loan portfolio at December 31, 2009. Primary drivers of
the increased allowance this quarter included $100 million associated with additional life-of-loan losses
for several commercial PCI credits (as mentioned above, while this deterioration is reflected as credit
costs, related improvements in any PCI loans are reflected as increased revenues) and the remainder
associated with residential real estate loan modification programs.
The allowance coverage to total loans increased to 3.20 percent compared with 3.07 percent at September
30, 2009. The allowance coverage to NPLs was 103 percent at December 31, 2009, compared with
118 percent at September 30, 2009. "In 2009, we provided $3.5 billion of reserves in excess of chargeoffs,
bringing total loan loss reserves to more than $25 billion," said Loughlin. "In addition to the loan loss
reserve, we also began 2010 with $22.9 billion available specifically to absorb losses in the PCI portfolio;
i.e. to cover losses on the most severely distressed portion of the Wachovia loan portfolio. We believe the
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allowance was adequate for losses inherent in the loan portfolio at December 31, 2009, including both
performing and nonperforming loans."
For additional detail on credit quality and trends, please refer to the quarterly supplement.
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:
Dec. 31, Sept. 30,
(in millions) 2 009 2009
Community Banking $ 2,102 $ 2 ,667
Wholesale Banking 1,011 598
Wealth, Brokerage and Retirement 131 244
Quarter ended
More financial information about the business segments is on pages 39 and 40.
Community Banking offers a complete line of diversified financial products and services for
Selected Financial Information 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.
Dec. 31, Sept. 30,
(in millions) 2 009 2009
Total revenue $ 15,119 $ 15,143
Provision for credit losses 4,903 4,572
Noninterest expense 7,420 6,802
Segment net income 2,102 2,667
(in billions)
Average loans 5 24.3 534.7
Average assets 772.7 785.2
Average core deposits 519.9 530.3
Quarter ended
Community Banking reported net income of $2.1 billion in fourth quarter 2009, down $565 million from
third quarter. Revenue was flat compared with third quarter, driven by strong mortgage fee income offset
by a decrease in net interest margin. Noninterest income increased $285 million from prior quarter
driven by continued strength in mortgage banking. Noninterest expense increased $618 million, including
employee benefit-related expenses, volume-related mortgage expenses, project expenses and seasonal
software license and maintenance expenses, partially offset by Wachovia merger-related cost saves. The
provision for credit losses increased $331 million, and included a $385 million credit reserve build
compared with a $265 million credit reserve build in prior quarter.
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Regional Banking Highlights for Legacy Wells Fargo
- Record core product solutions (sales) of 26.0 million in 2009, up 14 percent from 2008 on a
comparable basis
- Core sales per platform banker FTE (active, full-time equivalent) of 5.75 per day, up from 5.29 in
2008 on a comparable basis
- Record retail bank household cross-sell of Wells Fargo products of 5.95 products per household;
26 percent of retail bank households had 8 or more products, the Company's long-term goal
- Sales of Wells Fargo Packages® (a checking account and at least three other products) up 21 percent
from 2008; purchased by 79 percent of new checking account customers
- Business Banking
- Store-based business solutions up 14 percent from 2008
- Business Banking household cross-sell of 3.77 products per household
- Sales of Wells Fargo Business Services Packages (business checking account and at least three
other business products) up 25 percent from 2008; purchased by 57 percent of new business
checking account customers
Regional Banking Highlights for Wachovia
- Retail bank household cross-sell of Wachovia products of 4.65 products per household
- Wachovia maintained its very high customer experience levels; scores continued to surpass prior year
Combined Regional Banking
- Consumer checking accounts up a net 5.8 percent from prior year
- Business checking accounts up a net 3.9 percent from prior year
- Opened 70 banking stores in 2009 for retail network total of 6,629; converted 19 Wachovia banking
stores in Colorado to Wells Fargo
- 12,363 ATMs across our network, including 3,839 Envelope-FreeSM webATM machines
Online Banking
- 16.7 million combined active online customers
- 4.0 million combined active Bill Pay customers
- Best Consumer Internet Bank in North America (Global Finance, November 2009)
- #1 Bank Technology Innovator of the Year, for leadership in person-to-person mobile payments,
advances in online and mobile banking, and research in next-generation customer experience (Bank, December 2009)
Technology News
- Wells Fargo Mobile Banking earned "Gold" grade (Javelin Strategy & Research, October 2009)
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Wells Fargo Home Mortgage (Home Mortgage)
- Home Mortgage applications of $144 billion, compared with $123 billion in prior quarter
- Home Mortgage application pipeline of $57 billion at quarter end, compared with $62 billion at
September 30, 2009
- Home Mortgage originations of $94 billion, essentially flat from $96 billion in prior quarter
- Owned residential mortgage servicing portfolio of $1.8 trillion
Wholesale Banking provides financial solutions to businesses across the United States with annual
Selected Financial Information sales generally in excess of $10 million and financial institutions globally. Products include middle market banking, corporate banking, commercial real estate, treasury management, asset-based lending, insurance brokerage, foreign exchange, correspondent banking, trade services, specialized lending, equipment finance, corporate trust, investment banking, capital markets and asset management.
Dec. 31, Sept. 30,
(in millions) 2 009 2009
Total revenue $ 5,276 $ 4,916
Provision for credit losses 950 1,361
Noninterest expense 2,720 2,630
Segment net income 1,011 598
(in billions)
Average loans 239.6 247.0
Average assets 368.9 369.3
Average core deposits 162.6 146.9
Quarter ended
Wholesale Banking reported net income of $1.0 billion compared with $598 million in third quarter
2009. Average core deposits were $163 billion, up 42 percent (annualized) from prior quarter, driven by
strong growth in government and institutional banking as well as deposits from international customers.
Loan loss provision in excess of net charge-offs decreased substantially to $115 million in fourth quarter
2009, from $627 million in third quarter, while net charge-offs increased to $835 million from
$733 million last quarter. Of those losses, $167 million related to PCI loans, down from $204 million last
quarter. Recoveries from the PCI portfolio that were recorded as revenue totaled $214 million, up from
$124 million last quarter.
Middle market banking ranks #1 in market share defined as overall lead relationship penetration. With
112 offices stretched across the country and expanded product and distribution capabilities, we saw
tremendous gains in 2009. According to Greenwich Associates, more middle market businesses borrowed
from Wells Fargo in 2009 than any other institution, and Wells Fargo established the most new
relationships. Commercial banking relationships in the West have achieved an average of 7.8 products per
relationship. The conversion of Wachovia regional commercial banking offices to the Wells Fargo
operating model is expected to be completed by the end of the first quarter 2010, providing significant
opportunities for cross-selling products within the middle market business.
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- Average deposits up 42 percent (annualized) from the prior quarter
- Government and institutional banking noninterest income up 11 percent driven by better pricing and
increased volume in letters of credit, bond issuances and re-marketing
- Debut of CEO MobileSM iPhone app, which provides alerts to corporate and business customers
regarding pending transactions and connects them to online commercial banking services
- Commercial Banking launched new cleantech banking group dedicated to supporting companies that
manufacture, market or develop clean technologies such as solar and wind power, energy and water
efficiency, electric and low-emission vehicles, and smart grid applications
- Integration of Wachovia wholesale businesses on track to meet or exceed expected cost saves and is
producing significant new growth opportunities from acquired businesses such as Government and
Institutional Banking, Global Finance and Institutional Trade, and Investment Banking and Capital
Markets
Wealth, Brokerage and Retirement provides a full range of financial advisory services to clients
Selected Financial Information using a comprehensive 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 meets the unique needs of the ultra high net worth customers. Retail Brokerage's financial advisors serve customers' advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the U.S. Retirement provides retirement services for individual investors and is a national leader in 401(k) and pension record keeping.
Dec. 31, Sept. 30,
(in millions) 2 009 2009
Total revenue $ 2,875 $ 2,966
Provision for credit losses 93 234
Noninterest expense 2 ,542 2,314
Segment net income 131 244
(in billions)
Average loans 4 4.8 45.4
Average assets 114.7 1 08.6
Average core deposits 124.4 116.4
Quarter ended
Wealth, Brokerage and Retirement reported net income of $131 million, compared with $244 million in
prior quarter. The earnings decline was driven by the reserve incurred in connection with the ARS
settlement as previously disclosed. Revenue was $2.9 billion, down slightly from prior quarter, as higher
asset-based revenues were offset by lower securities gains in the brokerage business. Total provision for
credit losses decreased $141 million from prior quarter, largely reflecting a credit reserve build in the third
quarter. Noninterest expense was up 10 percent from prior quarter largely due to the ARS reserve.
Average core deposits increased $8.0 billion, or 27 percent (annualized), from third quarter, reflecting
continued success in attracting client assets, including deposits.
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Retail Brokerage
- Managed account assets up $11 billion, or 6 percent, from prior quarter, including net inflows of
$8 billion
- Solid financial advisor recruiting during the quarter, as brokers who have joined the firm are over two
times more productive than those who have left the firm
- Average sweep deposits up 3 percent from prior quarter
Wealth Management
- Continued strong deposit growth, with average balances up 11 percent from prior quarter
- Private banking revenue up 7 percent from prior quarter on continued strong deposit growth
Retirement
- Retirement plan assets of $285 billion increased $16 billion, or 6 percent, from prior quarter
- IRA assets of $240 billion up $5 billion, or 2 percent, from prior quarter
Conference Call
The Company will host a live conference call on Wednesday, January 20, at 7:30 a.m. PST (10:30 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://event.meetingstream.com/r.htm?e=186436&s=1&k=1D289141D2BE92DD111DC7C959592BB8.
A replay of the conference call will be available beginning at approximately noon PST
(3 p.m. EST) on January 20 through Wednesday, January 27. Please dial 800-642-1687 (U.S. and
Canada) or 706-645-9291 (international) and enter Conference ID #48998396. The replay will also be
available online at wellsfargo.com/invest_relations/earnings and
http://event.meetingstream.com/r.htm?e=186436&s=1&k=1D289141D2BE92DD111DC7C959592BB8.
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,"
"should," "may," "can," "will," "outlook," "project" or similar expressions. Forward-looking statements in
this news release include, among others, statements about: (i) future credit quality, the adequacy of the
allowance for loan losses, the level of nonperforming assets and nonaccrual loans, expected or estimated
future losses in our loan portfolios and life-of-loan loss estimates, including our expectations regarding
consumer and commercial loan losses in 2010 and that the Pick-a-Pay portfolio will perform better than
management's expectations at the time of the Wachovia merger; (ii) reduction or mitigation of risk in our
loan portfolios and the effects of loan modification programs; (iii) the amount and timing of expected
integration activities, expenses and cost savings relating to the Wachovia merger, as well as the expected
synergies and benefits of the merger, including that we currently estimate merger expenses of less than
$5.0 billion and that we currently are on track to achieve $5.0 billion annual run rate cost savings by the
expected completion of the integration in 2011; and (iv) the impact on our balance sheet and capital of the
consolidation of certain off-balance sheet assets under FAS 166 and FAS 167.
- 17 -
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 and high unemployment rates; our
capital requirements and our ability to generate capital internally or raise capital on favorable terms; the
terms of capital investments or other financial assistance provided by the U.S. government; financial
services reform; the extent of success in our loan modification efforts; our ability to successfully and
timely integrate the Wachovia merger and realize the expected cost savings and other benefits, including
delays or disruptions in system conversions and higher severance costs; our ability to realize efficiency
initiatives to lower expenses when and in the amount expected; 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, including the implementation of FAS 166 and FAS 167 and its effects on the
consolidation of additional assets on our balance sheet and capital; 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 credit markets, housing prices, and unemployment do not improve. Increases in loan chargeoffs
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 our Quarterly Reports on Form 10-Q for the periods ended March 31, 2009,
June 30, 2009, and September 30, 2009, and our Annual Report on Form 10-K for the year ended
December 31, 2008, as amended by our Current Report on Form 8-K filed May 11, 2009, including the
discussions under "Risk Factors" in each of those reports, 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.
About Wells Fargo
Wells Fargo & Company is a diversified financial services company with $1.2 trillion in assets, providing
banking, insurance, investments, mortgage and consumer finance through more than 10,000 stores and
12,000 ATMs and the internet (wellsfargo.com) across North America and internationally.
# # #
- 18 -
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
($ in millions, except per share amounts) 2009 2008 2009 2008
For the Period
Wells Fargo net income (loss) $ 2,823 (2,734) 12,275 2,655
Wells Fargo net income (loss) applicable to common stock 394 (3,020) 7,990 2,369
Diluted earnings (loss) per common share 0.08 (0.84) 1.75 0.70
Profitability ratios (annualized):
Wells Fargo net income (loss) to average assets (ROA) 0.90 % (1.72) 0.97 0.44
Net income (loss) to average assets 0.96 (1.72) 1.00 0.45
Wells Fargo net income (loss) applicable to common stock to
average Wells Fargo common stockholders' equity (ROE) 1.66 (22.32) 9.88 4.79
Net income (loss) to average total equity 9.24 (15.53) 10.75 5.02
Efficiency ratio (3) 56.5 61.3 55.3 54.0
Total revenue $ 22,696 9,477 88,686 41,877
Pre-tax pre-provision profit (PTPP) (4) 9,875 3,667 39,666 19,279
Dividends declared per common share 0.05 0.34 0.49 1.30
Average common shares outstanding 4,764.8 3,582.4 4,545.2 3,378.1
Diluted average common shares outstanding 4,796.1 3,593.6 4,562.7 3,391.3
Average loans $ 792,440 413,940 822,833 398,460
Average assets 1,239,456 633,223 1,262,354 604,396
Average core deposits (5) 770,750 344,957 762,461 325,212
Average retail core deposits (6) 580,873 243,464 588,072 234,130
Net interest margin 4.31 % 4.90 4.28 4.83
At Period End
Securities available for sale $ 172,710 151,569 172,710 151,569
Loans 782,770 864,830 782,770 864,830
Allowance for loan losses 24,516 21,013 24,516 21,013
Goodwill 24,812 22,627 24,812 22,627
Assets 1,243,646 1,309,639 1,243,646 1,309,639
Core deposits (5) 780,737 745,432 780,737 745,432
Wells Fargo stockholders' equity 111,786 99,084 111,786 99,084
Total equity 114,359 102,316 114,359 102,316
Capital ratios:
Wells Fargo common stockholders' equity to assets 8.34 % 5.21 8.34 5.21
Total equity to assets 9.20 7.81 9.20 7.81
Average Wells Fargo common stockholders' equity to average assets 7.58 8.50 6.41 8.18
Average total equity to average assets 10.43 11.09 9.34 8.89
Risk-based capital (7):
Tier 1 capital 9.26 7.84 9.26 7.84
Total capital 13.27 11.83 13.27 11.83
Tier 1 leverage (7) 7.87 14.52 7.87 14.52
Book value per common share $ 20.03 16.15 20.03 16.15
Team members (active, full-time equivalent) 267,300 270,800 267,300 270,800
Common stock price:
High $ 31.53 38.95 31.53 44.68
Low 25.00 19.89 7.80 19.89
Period end 26.99 29.48 26.99 29.48
(1)
(2)
(3)
(4)
(5)
(6)
(7) The December 31, 2009, ratios are preliminary. Because the Wachovia acquisition was completed on December 31, 2008, the Tier 1 leverage ratio at December 31, 2008, which
considers period-end Tier 1 capital and quarterly average assets in the computation of the ratio, does not reflect average assets of Wachovia for 2008.
Wells Fargo & Company (Wells Fargo) acquired Wachovia Corporation (Wachovia) on December 31, 2008. Because the acquisition was completed on December 31, 2008,
Wachovia's results are included in the income statement, average balances and related metrics beginning in 2009. Wachovia's assets and liabilities are included in the consolidated
balance sheet beginning on December 31, 2008.
On January 1, 2009, we adopted new accounting guidance on noncontrolling interests on a retrospective basis for disclosure and, accordingly, prior period information reflects the
adoption. The guidance requires that noncontrolling interests be reported as a component of total equity.
Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
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.
Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep
balances).
Quarter ended Dec. 31, Year ended Dec. 31,
- 19 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA Dec. 31,
($ in millions, except per share amounts) 2009 2009 2009 2009 2008
For the Quarter
Wells Fargo net income (loss) $ 2,823 3,235 3,172 3,045 (2,734)
Wells Fargo net income (loss) applicable to common stock 394 2,637 2,575 2,384 (3,020)
Diluted earnings (loss) per common share 0.08 0.56 0.57 0.56 (0.84)
Profitability ratios (annualized):
Wells Fargo net income (loss) to average assets (ROA) 0.90 % 1.03 1.00 0.96 (1.72)
Net income (loss) to average assets 0.96 1.06 1.02 0.97 (1.72)
Wells Fargo net income (loss) applicable to common stock to
average Wells Fargo common stockholders' equity (ROE) 1.66 12.04 13.70 14.49 (22.32)
Net income (loss) to average total equity 9.24 10.57 11.56 11.97 (15.53)
Efficiency ratio (3) 56.5 52.0 56.4 56.2 61.3
Total revenue $ 22,696 22,466 22,507 21,017 9,477
Pre-tax pre-provision profit (PTPP) (4) 9,875 10,782 9,810 9,199 3,667
Dividends declared per common share 0.05 0.05 0.05 0.34 0.34
Average common shares outstanding 4,764.8 4,678.3 4,483.1 4,247.4 3,582.4
Diluted average common shares outstanding 4,796.1 4,706.4 4,501.6 4,249.3 3,593.6
Average loans $ 792,440 810,191 833,945 855,591 413,940
Average assets 1,239,456 1,246,051 1,274,926 1,289,716 633,223
Average core deposits (5) 770,750 759,319 765,697 753,928 344,957
Average retail core deposits (6) 580,873 584,414 596,648 590,502 243,464
Net interest margin 4.31 % 4.36 4.30 4.16 4.90
At Quarter End
Securities available for sale $ 172,710 183,814 206,795 178,468 151,569
Loans 782,770 799,952 821,614 843,579 864,830
Allowance for loan losses 24,516 24,028 23,035 22,281 21,013
Goodwill 24,812 24,052 24,619 23,825 22,627
Assets 1,243,646 1,228,625 1,284,176 1,285,891 1,309,639
Core deposits (5) 780,737 747,913 761,122 756,183 745,432
Wells Fargo stockholders' equity 111,786 122,150 114,623 100,295 99,084
Total equity 114,359 128,924 121,382 107,057 102,316
Capital ratios:
Wells Fargo common stockholders' equity to assets 8.34 % 7.41 6.51 5.40 5.21
Total equity to assets 9.20 10.49 9.45 8.33 7.81
Average Wells Fargo common stockholders' equity to average assets 7.58 6.98 5.92 5.17 8.50
Average total equity to average assets 10.43 9.99 8.85 8.11 11.09
Risk-based capital (7):
Tier 1 capital 9.26 10.63 9.80 8.30 7.84
Total capital 13.27 14.66 13.84 12.30 11.83
Tier 1 leverage (7) 7.87 9.03 8.32 7.09 14.52
Book value per common share $ 20.03 19.46 17.91 16.28 16.15
Team members (active, full-time equivalent) 267,300 265,100 269,900 272,800 270,800
Common stock price:
High $ 31.53 29.56 28.45 30.47 38.95
Low 25.00 22.08 13.65 7.80 19.89
Period end 26.99 28.18 24.26 14.24 29.48
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
The December 31, 2009, ratios are preliminary. Because the Wachovia acquisition was completed on December 31, 2008, the Tier 1 leverage ratio at December 31, 2008, which considers periodend
Tier 1 capital and quarterly average assets in the computation of the ratio, does not reflect average assets of Wachovia for 2008.
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 & Company (Wells Fargo) acquired Wachovia Corporation (Wachovia) on December 31, 2008. Because the acquisition was completed on December 31, 2008, Wachovia's results
are included in the income statement, average balances and related metrics beginning in 2009. Wachovia's assets and liabilities are included in the consolidated balance sheet beginning on
December 31, 2008.
Quarter ended
Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
On January 1, 2009, we adopted new accounting guidance on noncontrolling interests on a retrospective basis for disclosure and, accordingly, prior period information reflects the adoption. The
guidance requires that noncontrolling interests be reported as a component of total equity.
- 20 -
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts) 2009 2008 2009 2008
Interest income
Trading assets $ 230 51 918 177
Securities available for sale 2,776 1,534 11,319 5,287
Mortgages held for sale 446 362 1,930 1,573
Loans held for sale 32 14 183 48
Loans 10,122 6,726 41,589 27,632
Other interest income 86 41 335 181
Total interest income 13,692 8,728 56,274 34,898
Interest expense
Deposits 913 845 3,774 4,521
Short-term borrowings 12 204 222 1,478
Long-term debt 1,217 955 5,782 3,756
Other interest expense 50 - 172 -
Total interest expense 2,192 2,004 9,950 9,755
Net interest income 11,500
Provision for credit losses 5,913 8,444 21,668 15,979
Net interest income after provision for credit losses 5,587 ( 1,720) 24,656 9,164
Noninterest income
Service charges on deposit accounts 1,421 803 5,741 3,190
Trust and investment fees 2,605 661 9,735 2,924
Card fees 961 589 3,683 2,336
Other fees 990 535 3,804 2,097
Mortgage banking 3,411 (195) 12,028 2,525
Insurance 482 337 2,126 1,830
Net gains (losses) from trading activities 516 (409) 2,674 275
Net gains (losses) on debt securities available for sale
(includes impairment losses of $162 and $1,012, consisting of $463 and $2,352
of total other-than-temporary impairment losses, net of $301 and $1,340
recognized in other comprehensive income, for the quarter and year ended
December 31, 2009, respectively) 110 721 ( 127) 1,037
Net gains (losses) from equity investments 273 (608) 185 (757)
Operating leases 163 62 685 427
Other 264 257 1,828 850
Total noninterest income 11,196 2,753 42,362 16,734
Noninterest expense
Salaries 3,505 2,168 13,757 8,260
Commission and incentive compensation 2,086 671 8,021 2,676
Employee benefits 1,144 338 4,689 2,004
Equipment 681 402 2,506 1,357
Net occupancy 770 418 3,127 1,619
Core deposit and other intangibles 642 47 2,577 186
FDIC and other deposit assessments 302 57 1,849 120
Other 3,691 1,709 12,494 6,376
Total noninterest expense 12,821 5,810 49,020 22,598
Income (loss) before income tax expense (benefit) 3,962
Income tax expense (benefit) 949 (2,036) 5,331 602
Net income (loss) before noncontrolling interests 3,013
Less: Net income (loss) from noncontrolling interests 190 (7) 392 43
Wells Fargo net income (loss) $ 2,823 Wells Fargo net income (loss) applicable to common stock $ 394 Per share information
Earnings (loss) per common share $ 0.08 (0.84) 1.76 0.70
Diluted earnings (loss) per common share 0.08 (0.84) 1.75 0.70
Dividends declared per common share 0.05 0.34 0.49 1.30
Average common shares outstanding 4,764.8 3,582.4 4,545.2 3,378.1
Diluted average common shares outstanding 4,796.1 3,593.6 4,562.7 3,391.3
Quarter ended Dec. 31, Year ended Dec. 31,
- 21 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME Dec. 31,
(in millions, except per share amounts) 2009 2009 2009 2009 2008
Interest income
Trading assets $ 230 216 206 266 51
Securities available for sale 2,776 2,947 2,887 2,709 1,534
Mortgages held for sale 446 524 545 415 362
Loans held for sale 32 34 50 67 14
Loans 10,122 10,170 10,532 10,765 6,726
Other interest income 86 77 81 91 41
Total interest income 13,692 13,968 14,301 14,313 8,728
Interest expense
Deposits 913 905 957 999 845
Short-term borrowings 12 32 55 123 204
Long-term debt 1,217 1,301 1,485 1,779 955
Other interest expense 50 46 40 36 -
Total interest expense 2,192 2,284 2,537 2,937 2,004
Net interest income 11,500
Provision for credit losses 5,913 6,111 5,086 4,558 8,444
Net interest income after provision for credit losses 5,587 5,573 6,678 6,818 ( 1,720)
Noninterest income
Service charges on deposit accounts 1,421 1,478 1,448 1,394 803
Trust and investment fees 2,605 2,502 2,413 2,215 661
Card fees 961 946 923 853 589
Other fees 990 950 963 901 535
Mortgage banking 3,411 3,067 3,046 2,504 (195)
Insurance 482 468 595 581 337
Net gains (losses) from trading activities 516 622 749 787 (409)
Net gains (losses) on debt securities available for sale 110 (40) (78) ( 119) 721
Net gains (losses) from equity investments 273 29 40 ( 157) (608)
Operating leases 163 224 168 130 62
Other 264 536 476 552 257
Total noninterest income 11,196 10,782 10,743 9,641 2,753
Noninterest expense
Salaries 3,505 3,428 3,438 3,386 2,168
Commission and incentive compensation 2,086 2,051 2,060 1,824 671
Employee benefits 1,144 1,034 1,227 1,284 338
Equipment 681 563 575 687 402
Net occupancy 770 778 783 796 418
Core deposit and other intangibles 642 642 646 647 47
FDIC and other deposit assessments 302 228 981 338 57
Other 3,691 2,960 2,987 2,856 1,709
Total noninterest expense 12,821 11,684 12,697 11,818 5,810
Income (loss) before income tax expense (benefit) 3,962
Income tax expense (benefit) 949 1,355 1,475 1,552 (2,036)
Net income (loss) before noncontrolling interests 3,013
Less: Net income (loss) from noncontrolling interests 190 81 77 44 (7)
Wells Fargo net income (loss) $ 2,823 Wells Fargo net income (loss) applicable to common stock $ 394 Per share information
Earnings (loss) per common share $ 0.08 0.56 0.58 0.56 (0.84)
Diluted earnings (loss) per common share 0.08 0.56 0.57 0.56 (0.84)
Dividends declared per common share 0.05 0.05 0.05 0.34 0.34
Average common shares outstanding 4,764.8 4,678.3 4,483.1 4,247.4 3,582.4
Diluted average common shares outstanding 4,796.1 4,706.4 4,501.6 4,249.3 3,593.6
Quarter ended
- 22 -
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS)
Quarter ended December 31,
2009 Interest Average Yields/ income/
(in millions) balance rates expense balance rates expense
Earning assets
Federal funds sold, securities purchased under
resale agreements and other short-term investments $ 46,031 0.33%$ 39 9,938 0.73 % $ 18
Trading assets 23,179 4.05 235 5,004 4.50 56
Debt securities available for sale (3):
Securities of U.S. Treasury and federal agencies 2,381 3.54 21 1,165 3.75 11
Securities of U.S. states and political subdivisions 13,574 6.48 217 7,124 6.73 139
Mortgage-backed securities:
Federal agencies 85,063 5.43 1,099 51,714 6.07 769
Residential and commercial 43,243 9.20 1,000 18,245 6.40 402
Total mortgage-backed securities 128,306 6.74 2,099 69,959 6.18 1,171
Other debt securities (4) 33,710 7.60 600 14,217 8.10 330
Total debt securities available for sale (4) 177,971 6.84 2,937 92,465 6.50 1,651
Mortgages held for sale (5) 34,750 5.13 446 23,390 6.19 362
Loans held for sale (5) 5,104 2.48 32 1,287 4.14 14
Loans:
Commercial and commercial real estate:
Commercial 164,050 4.65 1,918 107,325 5.66 1,525
Real estate mortgage 104,773 3.44 908 45,555 5.49 628
Real estate construction 30,887 3.03 236 19,943 4.49 225
Lease financing 14,107 10.20 360 7,397 5.58 103
Total commercial and commercial real estate 313,817 4.33 3,422 180,220 5.48 2,481
Consumer:
Real estate 1-4 family first mortgage 232,273 5.26 3,066 78,251 6.37 1,247
Real estate 1-4 family junior lien mortgage 103,584 4.58 1,195 75,838 5.85 1,114
Credit card 23,717 12.18 723 20,626 1 2.21 629
Other revolving credit and installment 88,963 6.46 1,450 52,638 8.35 1,107
Total consumer 448,537 5.71 6,434 227,353 7.19 4,097
Foreign 30,086 3.74 2 83 6,367 9.73 1 56
Total loans (5) 792,440 5.09 10,139 413,940 6.48 6,734
Other 6,147 3.13 49 1,690 5.37 23
Total earning assets $ 1,085,622 5.12 % $ 13,877 547,714 6.34 % $ 8,858
Funding sources
Deposits:
Interest-bearing checking $ 61,229 0.15%$ 23 6,396 0.65 % $ 11
Market rate and other savings 389,905 0.31 303 178,301 0.96 430
Savings certificates 109,306 1.66 458 41,189 2.66 275
Other time deposits 16,501 2.28 94 8,128 2.74 54
Deposits in foreign offices 59,870 0.23 35 42,771 0.69 75
Total interest-bearing deposits 636,811 0.57 9 13 276,785 1.22 8 45
Short-term borrowings 32,757 0.18 14 60,210 1.35 204
Long-term debt 210,707 2.31 1,218 104,112 3.69 964
Other liabilities 5,587 3.49 50 - - -
Total interest-bearing liabilities 885,862 0.99 2,195 441,107 1.82 2,013
Portion of noninterest-bearing funding sources 199,760 - - 106,607 - -
Total funding sources $ 1,085,622 0.81 2,195 547,714 1.44 2,013
Net interest margin and net interest income on a taxable-equivalent basis ( Noninterest-earning assets
Cash and due from banks $ 19,216 11,155
Goodwill 24,093 13,544
Other 110,525 60,810
Total noninterest-earning assets $ 153,834 85,509
Noninterest-bearing funding sources
Deposits $ 179,204 91,229
Other liabilities 45,058 30,651
Total equity 129,332 70,236
Noninterest-bearing funding sources used to
fund earning assets (199,760) ( 106,607)
Net noninterest-bearing funding sources $ 153,834 85,509
Total assets $ 1,239,456
(1)
(2)
(3)
(4)
(5)
(6)
Nonaccrual loans and related income are included in their respective loan categories.
Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
Our average prime rate was 3.25% and 4.06% for the quarters ended December 31, 2009 and 2008, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.27% and 2.77% for the same quarters,
respectively.
Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
Yields are based on amortized cost balances computed on a settlement date basis.
Includes certain preferred securities.
- 23 -
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS)
Year ended December 31,
2009 Interest Average Yields/ income/
(in millions) balance rates expense balance rates expense
Earning assets
Federal funds sold, securities purchased under
resale agreements and other short-term investments $ 26,869 0.56 % $ 150 5,293 1.71 % $ 90
Trading assets 21,092 4.48 944 4,971 3.80 189
Debt securities available for sale (3):
Securities of U.S. Treasury and federal agencies 2,480 2.83 69 1,083 3.84 41
Securities of U.S. states and political subdivisions 12,702 6.42 840 6,918 6.83 501
Mortgage-backed securities:
Federal agencies 87,197 5.45 4,591 44,777 5.97 2,623
Residential and commercial 41,618 9.09 4,150 20,749 6.04 1,412
Total mortgage-backed securities 128,815 6.73 8,741 65,526 5.99 4,035
Other debt securities (4) 32,011 7.16 2,291 12,818 7.17 1,000
Total debt securities available for sale (4) 176,008 6.73 11,941 86,345 6.22 5,577
Mortgages held for sale (5) 37,416 5.16 1,930 25,656 6.13 1,573
Loans held for sale (5) 6,293 2.90 183 8 37 5.69 48
Loans:
Commercial and commercial real estate:
Commercial 180,924 4.22 7,643 98,620 6.12 6,034
Real estate mortgage 104,197 3.44 3,585 41,659 5.80 2,416
Real estate construction 32,961 2.94 970 19,453 5.08 988
Lease financing 14,751 9.32 1,375 7,141 5.62 401
Total commercial and commercial real estate 332,833 4.08 13,573 166,873 5.90 9,839
Consumer:
Real estate 1-4 family first mortgage 238,359 5.45 12,992 75,116 6.67 5,008
Real estate 1-4 family junior lien mortgage 106,957 4.76 5,089 75,375 6.55 4,934
Credit card 23,357 12.16 2,841 19,601 1 2.13 2,378
Other revolving credit and installment 90,666 6.56 5,952 54,368 8.72 4,744
Total consumer 459,339 5.85 26,874 224,460 7.60 17,064
Foreign 30,661 3.95 1,212 7,127 1 0.50 7 48
Total loans (5) 822,833 5.06 41,659 398,460 6.94 27,651
Other 6,113 3.05 186 1,920 4.73 91
Total earning assets $ 1,096,624 5.19 % $ 56,993 523,482 6.69 % $ 35,219
Funding sources
Deposits:
Interest-bearing checking $ 70,179 0.14 % $ 100 5,650 1.12 % $ 64
Market rate and other savings 351,892 0.39 1,375 166,691 1.32 2,195
Savings certificates 140,197 1.24 1,738 39,481 3.08 1,215
Other time deposits 20,459 2.03 415 6,656 2.83 187
Deposits in foreign offices 53,166 0.27 146 47,578 1.81 860
Total interest-bearing deposits 635,893 0.59 3,774 266,056 1.70 4,521
Short-term borrowings 51,972 0.44 231 65,826 2.25 1,478
Long-term debt 231,801 2.50 5,786 102,283 3.70 3,789
Other liabilities 4,904 3.50 172 - - -
Total interest-bearing liabilities 924,570 1.08 9,963 434,165 2.25 9,788
Portion of noninterest-bearing funding sources 172,054 - - 89,317 - -
Total funding sources $ 1,096,624 0.91 9,963 523,482 1.86 9,788
Net interest margin and net interest income on a taxable-equivalent basis ( Noninterest-earning assets
Cash and due from banks $ 19,218 11,175
Goodwill 23,997 13,353
Other 122,515 56,386
Total noninterest-earning assets $ 165,730 80,914
Noninterest-bearing funding sources
Deposits $ 171,712 87,820
Other liabilities 48,193 28,658
Total equity 117,879 53,753
Noninterest-bearing funding sources used to
fund earning assets (172,054) ( 89,317)
Net noninterest-bearing funding sources $ 165,730 80,914
Total assets $ 1,262,354
(1)
(2)
(3)
(4)
(5)
(6) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
Our average prime rate was 3.25% and 5.09% for the year ended December 31, 2009 and 2008, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.69% and 2.93% for the same periods,
respectively.
Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
Yields are based on amortized cost balances computed on a settlement date basis.
Includes certain preferred securities.
Nonaccrual loans and related income are included in their respective loan categories.
- 24 -
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
(in millions) 2009 2008 2009 2008
Service charges on deposit accounts $ 1,421 803 5,741 3,190
Trust and investment fees:
Trust, investment and IRA fees 1,038 487 3,588 2,161
Commissions and all other fees 1,567 174 6,147 763
Total trust and investment fees 2,605 661 9,735 2,924
Card fees 961 589 3,683 2,336
Other fees:
Cash network fees 55 45 231 188
Charges and fees on loans 475 272 1,801 1,037
All other fees 460 218 1,772 872
Total other fees 990 535 3,804 2,097
Mortgage banking:
Servicing income, net 2,088 (40) 5,557 979
Net gains (losses) on mortgage loan
origination/sales activities 1,242 (236) 6,152 1,183
All other 81 81 319 363
Total mortgage banking 3,411 ( 195) 12,028 2,525
Insurance 482 337 2,126 1,830
Net gains (losses) from trading activities 516 (409) 2,674 275
Net gains (losses) on debt securities available for sale 110 721 ( 127) 1,037
Net gains (losses) from equity investments 273 (608) 185 (757)
Operating leases 163 62 685 427
All other 264 257 1,828 850
Total $ 11,196 2,753 42,362 16,734
NONINTEREST EXPENSE
(in millions) 2009 2008 2009 2008
Salaries $ 3,505 2,168 13,757 8,260
Commission and incentive compensation 2,086 671 8,021 2,676
Employee benefits 1,144 338 4,689 2,004
Equipment 681 402 2,506 1,357
Net occupancy 770 418 3,127 1,619
Core deposit and other intangibles 642 47 2,577 186
FDIC and other deposit assessments 302 57 1,849 120
Outside professional services 632 258 1,982 847
Contract services 362 107 1,088 407
Foreclosed assets 393 116 1,071 414
Outside data processing 282 127 1,027 480
Postage, stationery and supplies 232 141 933 556
Operating losses 427 96 875 142
Insurance 111 214 8 45 725
Telecommunications 146 83 610 321
Travel and entertainment 188 117 575 447
Advertising and promotion 176 93 572 378
Operating leases 44 81 227 389
All other 698 276 2,689 1,270
Total $ 12,821 5,810 49,020 22,598
Quarter ended Dec. 31, Year ended Dec. 31,
Quarter ended Dec. 31, Year ended Dec. 31,
- 25 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME Dec. 31,
(in millions) 2009 2009 2009 2009 2008
Service charges on deposit accounts $ 1 ,421 1 ,478 1 ,448 1 ,394 8 03
Trust and investment fees:
Trust, investment and IRA fees 1,038 989 839 7 22 487
Commissions and all other fees 1,567 1,513 1,574 1 ,493 174
Total trust and investment fees 2 ,605 2 ,502 2 ,413 2 ,215 6 61
Card fees 9 61 9 46 9 23 8 53 5 89
Other fees:
Cash network fees 55 60 58 5 8 45
Charges and fees on loans 475 453 440 4 33 272
All other fees 460 437 465 4 10 218
Total other fees 9 90 9 50 9 63 9 01 5 35
Mortgage banking:
Servicing income, net 2,088 1,873 753 8 43 (40)
Net gains (losses) on mortgage loan
origination/sales activities 1,242 1,125 2,203 1 ,582 (236)
All other 81 69 90 7 9 81
Total mortgage banking 3 ,411 3 ,067 3 ,046 2 ,504 (195)
Insurance 4 82 4 68 5 95 5 81 3 37
Net gains (losses) from trading activities 516 622 749 7 87 (409)
Net gains (losses) on debt securities available for sale 110 (40) (78) (119) 721
Net gains (losses) from equity investments 273 29 40 (157) (608)
Operating leases 163 224 168 1 30 62
All other 264 536 476 5 52 257
Total $ 1 1,196 1 0,782 1 0,743 9 ,641 2 ,753
FIVE QUARTER NONINTEREST EXPENSE Dec. 31,
(in millions) 2009 2009 2009 2009 2008
Salaries $ 3 ,505 3 ,428 3 ,438 3 ,386 2 ,168
Commission and incentive compensation 2,086 2,051 2,060 1 ,824 671
Employee benefits 1,144 1,034 1,227 1 ,284 338
Equipment 681 563 575 6 87 402
Net occupancy 770 778 783 7 96 418
Core deposit and other intangibles 642 642 646 6 47 47
FDIC and other deposit assessments 302 228 981 3 38 57
Outside professional services 632 489 451 4 10 258
Contract services 362 254 256 2 16 107
Foreclosed assets 393 243 187 2 48 116
Outside data processing 282 251 282 2 12 127
Postage, stationery and supplies 232 211 240 2 50 141
Operating losses 427 117 159 1 72 96
Insurance 111 208 259 2 67 214
Telecommunications 146 142 164 1 58 83
Travel and entertainment 188 151 131 1 05 117
Advertising and promotion 176 160 111 1 25 93
Operating leases 44 52 61 7 0 81
All other 698 682 686 6 23 276
Total $ 1 2,821 1 1,684 1 2,697 1 1,818 5 ,810
Quarter ended
Quarter ended
- 26 -
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions, except shares) 2009 2008
Assets
Cash and due from banks $ 2 7,080 23,763
Federal funds sold, securities purchased under
resale agreements and other short-term investments 4 0,885 49,433
Trading assets 4 3,039 54,884
Securities available for sale 1 72,710 151,569
Mortgages held for sale (includes $36,962 and $18,754 carried at fair value) 3 9,094 20,088
Loans held for sale (includes $149 and $398 carried at fair value) 5 ,733 6,228
Loans 7 82,770 864,830
Allowance for loan losses (24,516) (21,013)
Net loans 7 58,254 8 43,817
Mortgage servicing rights:
Measured at fair value (residential MSRs) 1 6,004 14,714
Amortized 1 ,119 1,446
Premises and equipment, net 1 0,736 11,269
Goodwill 2 4,812 22,627
Other assets 1 04,180 109,801
Total assets $ 1,243,646 1 ,309,639
Liabilities
Noninterest-bearing deposits $ 1 81,356 150,837
Interest-bearing deposits 6 42,662 630,565
Total deposits 8 24,018 7 81,402
Short-term borrowings 3 8,966 108,074
Accrued expenses and other liabilities 6 2,442 50,689
Long-term debt 2 03,861 267,158
Total liabilities 1 ,129,287 1,207,323
Equity
Wells Fargo stockholders' equity:
Preferred stock 8 ,485 31,332
Common stock - $1-2/3 par value, authorized 6,000,000,000 shares;
issued 5,245,971,422 shares and 4,363,921,429 shares 8 ,743 7,273
Additional paid-in capital 5 2,878 36,026
Retained earnings 4 1,563 36,543
Cumulative other comprehensive income (loss) 3 ,009 (6,869)
Treasury stock - 67,346,829 shares and 135,290,540 shares (2,450) (4,666)
Unearned ESOP shares (442) (555)
Total Wells Fargo stockholders' equity 1 11,786 99,084
Noncontrolling interests 2 ,573 3,232
Total equity 1 14,359 102,316
Total liabilities and equity $ 1,243,646 1 ,309,639
December 31,
- 27 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET Dec. 31,
(in millions) 2009 2009 2009 2009 2008
Assets
Cash and due from banks $ 27,080 17,233 20,632 22,186 23,763
Federal funds sold, securities purchased under
resale agreements and other short-term investments 40,885 17,491 15,976 18,625 49,433
Trading assets 43,039 43,198 40,110 46,497 54,884
Securities available for sale 172,710 183,814 206,795 178,468 151,569
Mortgages held for sale 39,094 35,538 41,991 36,807 20,088
Loans held for sale 5,733 5,846 5,413 8,306 6,228
Loans 782,770 799,952 821,614 843,579 864,830
Allowance for loan losses (24,516) (24,028) (23,035) (22,281) (21,013)
Net loans 758,254 775,924 798,579 821,298 843,817
Mortgage servicing rights:
Measured at fair value (residential MSRs) 16,004 14,500 15,690 12,391 14,714
Amortized 1,119 1,162 1,205 1,257 1,446
Premises and equipment, net 10,736 11,040 11,151 11,215 11,269
Goodwill 24,812 24,052 24,619 23,825 22,627
Other assets 104,180 98,827 102,015 105,016 109,801
Total assets $ 1,243,646 1,228,625 1,284,176 1,285,891 1,309,639
Liabilities
Noninterest-bearing deposits $ 181,356 165,260 173,149 166,497 150,837
Interest-bearing deposits 642,662 631,488 640,586 630,772 630,565
Total deposits 824,018 796,748 813,735 797,269 781,402
Short-term borrowings 38,966 30,800 55,483 72,084 108,074
Accrued expenses and other liabilities 62,442 57,861 64,160 58,831 50,689
Long-term debt 203,861 214,292 229,416 250,650 267,158
Total liabilities 1,129,287 1,099,701 1,162,794 1,178,834 1,207,323
Equity
Wells Fargo stockholders' equity:
Preferred stock 8,485 31,589 31,497 31,411 31,332
Common stock 8,743 7,927 7,927 7,273 7,273
Additional paid-in capital 52,878 40,343 40,270 32,414 36,026
Retained earnings 41,563 41,485 39,165 36,949 36,543
Cumulative other comprehensive income (loss) 3,009 4,088 (590) (3,624) (6,869)
Treasury stock (2,450) (2,771) (3,126) (3,593) (4,666)
Unearned ESOP shares (442) (511) (520) (535) (555)
Total Wells Fargo stockholders' equity 111,786 122,150 114,623 100,295 99,084
Noncontrolling interests 2,573 6,774 6,759 6,762 3,232
Total equity 114,359 128,924 121,382 107,057 102,316
Total liabilities and equity $ 1,243,646 1,228,625 1,284,176 1,285,891 1,309,639
- 28 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES Dec. 31,
(in millions) 2009 2009 2009 2009 2008
Earning assets
Federal funds sold, securities purchased under
resale agreements and other short-term investments $ 46,031 16,356 20,889 24,074 9,938
Trading assets 23,179 20,518 18,464 22,203 5,004
Debt securities available for sale:
Securities of U.S. Treasury and federal agencies 2,381 2,545 2,102 2,899 1,165
Securities of U.S. states and political subdivisions 13,574 12,818 12,189 12,213 7,124
Mortgage-backed securities:
Federal agencies 85,063 94,457 92,550 76,545 51,714
Residential and commercial 43,243 43,214 41,257 38,690 18,245
Total mortgage-backed securities 128,306 137,671 133,807 115,235 69,959
Other debt securities (1) 33,710 33,294 30,901 30,080 14,217
Total debt securities available for sale (1) 177,971 186,328 178,999 160,427 92,465
Mortgages held for sale (2) 34,750 40,604 43,177 31,058 23,390
Loans held for sale (2) 5,104 4,975 7,188 7,949 1,287
Loans:
Commercial and commercial real estate:
Commercial 164,050 175,642 187,501 196,923 107,325
Real estate mortgage 104,773 103,450 104,297 104,271 45,555
Real estate construction 30,887 32,649 33,857 34,493 19,943
Lease financing 14,107 14,360 14,750 15,810 7,397
Total commercial and commercial real estate 313,817 326,101 340,405 351,497 180,220
Consumer:
Real estate 1-4 family first mortgage 232,273 235,051 240,798 245,494 78,251
Real estate 1-4 family junior lien mortgage 103,584 105,779 108,422 110,128 75,838
Credit card 23,717 23,448 22,963 23,295 20,626
Other revolving credit and installment 88,963 90,199 90,729 92,820 52,638
Total consumer 448,537 454,477 462,912 471,737 227,353
Foreign 30,086 29,613 3 0,628 3 2,357 6,367
Total loans (2) 792,440 810,191 833,945 855,591 413,940
Other 6,147 6,088 6,079 6,140 1,690
Total earning assets $ 1,085,622 1,085,060 1 ,108,741 1 ,107,442 547,714
Funding sources
Deposits:
Interest-bearing checking $ 61,229 59,467 79,955 80,393 6,396
Market rate and other savings 389,905 369,120 334,067 313,445 178,301
Savings certificates 109,306 129,698 152,444 170,122 41,189
Other time deposits 16,501 18,248 21,660 25,555 8,128
Deposits in foreign offices 59,870 56,820 49,885 45,896 42,771
Total interest-bearing deposits 636,811 633,353 6 38,011 6 35,411 276,785
Short-term borrowings 32,757 39,828 59,844 76,068 60,210
Long-term debt 210,707 222,580 235,590 258,957 104,112
Other liabilities 5,587 5,620 4 ,604 3 ,778 -
Total interest-bearing liabilities 885,862 901,381 938,049 974,214 441,107
Portion of noninterest-bearing funding sources 199,760 183,679 170,692 1 33,228 106,607
Total funding sources $ 1,085,622 1,085,060 1,108,741 1,107,442 547,714
Noninterest-earning assets
Cash and due from banks $ 19,216 18,084 19,340 20,255 11,155
Goodwill 24,093 24,435 24,261 23,183 13,544
Other 110,525 118,472 122,584 1 38,836 60,810
Total noninterest-earning assets $ 1 53,834 160,991 166,185 182,274 85,509
Noninterest-bearing funding sources
Deposits $ 179,204 172,588 174,529 160,308 91,229
Other liabilities 45,058 47,646 49,570 50,566 30,651
Total equity 129,332 124,436 112,778 104,628 70,236
Noninterest-bearing funding sources used to
fund earning assets (199,760) (183,679) (170,692) ( 133,228) (106,607)
Net noninterest-bearing funding sources $ 1 53,834 160,991 166,185 182,274 85,509
Total assets $ 1 ,239,456
(1) Includes certain preferred securities.
(2) Nonaccrual loans are included in their respective loan categories.
Quarter ended
- 29 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER LOANS Dec. 31,
(in millions) 2009 2009 2009 2009 2008
Commercial and commercial real estate:
Commercial $ 158,352 169,610 182,037 191,711 202,469
Real estate mortgage 104,798 103,442 103,654 104,934 103,108
Real estate construction 29,707 31,719 33,238 33,912 34,676
Lease financing 14,210 14,115 14,555 14,792 15,829
Total commercial and commercial real estate 307,067 318,886 333,484 345,349 356,082
Consumer:
Real estate 1-4 family first mortgage 229,536 232,622 237,289 242,947 247,894
Real estate 1-4 family junior lien mortgage 103,708 104,538 107,024 109,748 110,164
Credit card 24,003 23,597 23,069 22,815 23,555
Other revolving credit and installment 89,058 90,027 90,654 91,252 93,253
Total consumer 446,305 450,784 458,036 466,762 474,866
Foreign 29,398 30,282 30,094 31,468 33,882
Total loans (net of unearned income) (1) $ 782,770 799,952 821,614 843,579 864,830
(1)
FIVE QUARTER NONACCRUAL LOANS AND OTHER NONPERFORMING ASSETS Dec. 31,
(in millions) 2009 2009 2009 2009 2008
Nonaccrual loans:
Commercial and commercial real estate:
Commercial $ 4,397 4,540 2,910 1,696 1,253
Real estate mortgage 3,984 2,856 2,343 1,324 594
Real estate construction 3,025 2,711 2,210 1,371 989
Lease financing 171 157 130 114 92
Total commercial and commercial real estate 11,577 10,264 7,593 4,505 2,928
Consumer:
Real estate 1-4 family first mortgage 10,100 8,132 6,000 4,218 2,648
Real estate 1-4 family junior lien mortgage 2,263 1,985 1,652 1,418 894
Other revolving credit and installment 332 344 327 300 273
Total consumer 12,695 10,461 7,979 5,936 3,815
Foreign 146 144 226 75 57
Total nonaccrual loans (1) (2) 24,418 20,869 15,798 10,516 6,800
As a percentage of total loans 3.12 % 2.61 1.92 1.25 0.79
Foreclosed assets:
GNMA loans (3) $ 960 840 932 768 667
Other 2,199 1,687 1,592 1,294 1,526
Real estate and other nonaccrual investments (4) 62 55 20 34 16
Total nonaccrual loans and other
nonperforming assets $ 27,639 23,451 18,342 12,612 9,009
As a percentage of total loans 3.53 % 2.93 2.23 1.50 1.04
(1)
(2)
(3)
(4) Includes real estate investments (contingent interest loans accounted for as investments) that would be classified as nonaccrual if these assets were recorded as loans, and nonaccrual debt securities.
Consistent with regulatory reporting requirements, foreclosed real estate securing Government National Mortgage Association (GNMA) loans is classified as nonperforming. Both principal and
interest for GNMA loans secured by the foreclosed real estate are collectible because the GNMA loans are insured by the Federal Housing Administration or guaranteed by the Department of
Veterans Affairs.
Includes $51.7 billion, $54.3 billion, $55.2 billion, $58.2 billion and $58.8 billion of purchased credit-impaired (PCI) loans at December 31, September 30, June 30 and March 31, 2009, and
December 31, 2008, respectively. See table on page 30 for detail of PCI loans.
Excludes PCI loans from Wachovia.
Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
- 30 -
Wells Fargo & Company and Subsidiaries
PURCHASED CREDIT-IMPAIRED (PCI) LOANS All PCI other
(in millions) loans loans Total loans loans Total
Commercial and commercial real estate:
Commercial $ 1,911 156,441 158,352 4 ,580 1 97,889 202,469
Real estate mortgage 5,631 99,167 104,798 7 ,762 9 5,346 103,108
Real estate construction 3,713 25,994 29,707 4 ,503 3 0,173 34,676
Lease financing - 14,210 14,210 - 1 5,829 15,829
Total commercial and
commercial real estate (CRE) 11,255 295,812 307,067 1 6,845 3 39,237 356,082
Consumer:
Real estate 1-4 family first mortgage 38,386 191,150 229,536 3 9,214 2 08,680 247,894
Real estate 1-4 family junior lien mortgage 331 103,377 103,708 7 28 1 09,436 110,164
Credit card - 24,003 24,003 - 2 3,555 23,555
Other revolving credit and installment - 89,058 89,058 1 51 9 3,102 93,253
Total consumer 3 8,717 4 07,588 4 46,305 4 0,093 4 34,773 4 74,866
Foreign 1 ,733 2 7,665 2 9,398 1 ,859 3 2,023 3 3,882
Total loans $ 5 1,705 7 31,065 7 82,770 5 8,797 8 06,033 8 64,830
(1)
FAIR VALUE OF PCI LOANS ACQUIRED
December 31, 2008
(in millions) (refined)
Contractually required payments including interest $1 15,008
Nonaccretable difference (1) (45,398)
Cash flows expected to be collected (2) 69,610
Accretable yield (10,447)
Fair value of loans acquired $ 59,163
(1)
(2) Represents undiscounted expected principal and interest cash flows.
Includes $41.0 billion in principal cash flows not expected to be collected, $2.0 billion of pre-acquisition charge-offs and $2.5 billion of future interest not expected to be collected.
Certain loans acquired from Wachovia have evidence of credit deterioration since origination and it is probable that we will not collect all contractually required
principal and interest payments (referred to as "purchased credit-impaired"(PCI) loans). Such loans are accounted for under ASC 310-30, Receivables (American
Institute of Certified Public Accountants Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer ). These accounting
provisions require that acquired loans be recorded at fair value at the acquisition date and prohibits carryover of the related allowance for loan losses. The difference
between contractually required payments and cash flows expected to be collected is referred to as the nonaccretable difference. The difference between the cash flows
expected to be collected and the fair value is referred to as the accretable yield.
Because PCI loans have been written down in purchase accounting to an amount estimated to be collectible, such loans are not classified as nonaccrual even though
they may be contractually past due. Also, losses on such loans are charged against the nonaccretable difference established in purchase accounting and, as such, are
not reported as charge-offs.
December 31, 2009
As a result of the application of ASC 310-30 to credit-impaired Wachovia loans, certain ratios of the combined company 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.
In 2009, we refined certain of our preliminary purchase accounting adjustments based on additional information as of December 31, 2008. These refinements resulted in increasing the PCI loans carrying
value at December 31, 2008, to $59,163.
PCI loans had an unpaid principal balance of $83.6 billion at December 31, 2009, and $98.2 billion at December 31, 2008 (refined), and a carrying value, before the
deduction of the allowance for PCI loan losses, of $51.7 billion and $59.2 billion, respectively. The following table provides details on the PCI loans acquired from
Wachovia.
- 31 -
Wells Fargo & Company and Subsidiaries
CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS
Year ended December 31, 2009
Commercial,
CRE and Other
(in millions) foreign Pick-a-Pay consumer Total
Balance at December 31, 2008, with refinements $ (10,410) (26,485) (4,069) (40,964)
Release of nonaccretable difference due to:
Loans resolved by payment in full (1) 330 - - 330
Loans resolved by sales to third parties (2) 86 - 85 171
Reclassification to accretable yield for loans with improving cash flow (3) 138 27 2 76 441
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4) 4,853 10,218 2 ,086 17,157
Balance at December 31, 2009 $ (5,003) (16,240) (1,622) (22,865)
Quarter ended December 31, 2009
Commercial,
CRE and Other
(in millions) foreign Pick-a-Pay consumer Total
Balance at September 30, 2009, with refinements $ (6,583) (18,165) (2,201) (26,949)
Release of nonaccretable difference due to:
Loans resolved by payment in full (1) 136 - - 136
Loans resolved by sales to third parties (2) 58 - - 58
Reclassification to accretable yield for loans with improving cash flow (3) 117 27 2 76 420
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4) 1,269 1,898 3 03 3,470
Balance at December 31, 2009 $ (5,003) (16,240) (1,622) (22,865)
(1)
(2) Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.
(3)
(4)
The nonaccretable difference was 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. The following table provides an analysis of changes in the
nonaccretable difference related to principal that is not expected to be collected.
Release of the nonaccretable difference for payments in full increases interest income in the period of payment. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases
due to pool accounting for those loans.
Write-downs to net realizable value of PCI loans are charged to 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 upon final resolution of the loan.
Reclassification of nonaccretable difference for increased cash flow estimates to the accretable yield will result in increasing income and thus the rate of return over the remaining life of the PCI loan or
pool. Amounts reclassified to accretable yield are expected to be probable of realization.
- 32 -
Wells Fargo & Company and Subsidiaries
CHANGES IN ACCRETABLE YIELD RELATED TO PCI LOANS
1)
2)
3)
Quarter ended Year ended
(in millions) Dec. 31, 2009 Dec. 31, 2009
Total, beginning of period (refined) $ (14,223) (10,447)
Accretion 610 2,606
Reclassification from nonaccretable difference for loans with improving cash flows (420) (441)
Changes in expected cash flows that do not affect nonaccretable difference (1) (526) (6,277)
Total, end of period $ (14,559) (14,559)
(1)
CHANGES IN ALLOWANCE FOR PCI LOAN LOSSES
Year ended December 31, 2009
Commercial,
CRE and Other
(in millions) foreign Pick-a-Pay consumer Total
Balance at December 31, 2008 $ - - - -
Provision for losses due to credit deterioration 850 - 3 8 53
Charge-offs (520) - - (520)
Balance at December 31, 2009 $ 3 30 - 3 3 33
Quarter ended December 31, 2009
Commercial,
CRE and Other
(in millions) foreign Pick-a-Pay consumer Total
Balance at September 30, 2009 $ 2 33 - - 2 33
Provision for losses due to credit deterioration 270 - 3 2 73
Charge-offs (173) - - (173)
Balance at December 31, 2009 $ 3 30 - 3 3 33
When it is estimated that the nonaccretable difference is not sufficient to absorb losses on a PCI loan or pool an allowance is established and a provision for
additional loss is recorded as a charge to income. The following tables summarize the changes in allowance for PCI loan losses.
Represents changes in interest cash flows due to the impact of modifications incorporated into the quarterly assessment of expected future cash flows and/or changes in interest rates on variable rate loans.
For PCI loans, the impact of loan modifications is included in the quarterly evaluation of expected cash flows for subsequent decreases or increases of cash flows.
For variable rate PCI loans, expected future cash flows will be recalculated as the rates adjust over the lives of the loans. At acquisition, the expected future cash
flows were based on the variable rates that were in effect at that time. The change in the accretable yield related to PCI loans is presented in the following tables.
The excess of cash flows expected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated
remaining life of the PCI loans. The accretable yield will otherwise change due to:
changes in estimate as to the remaining life of PCI loans which will change the amount of future interest income, and possibly principle, expected to be
collected;
changes in the amount of contractually required principle and interest payments over the estimated life that will not be collected (the nonaccretable
difference); and
changes in indices for PCI loans with adjustable rates.
- 33 -
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO
Ratio of
carrying
Unpaid Current value to Unpaid Current
principal LTV Carrying current principal LTV Carrying
(in millions) balance ratio (1) value (2) value balance ratio (1) value (2)
December 31, 2009 California $ 37,341 141 % $ 25,022 94 % $ 23,795 9 3 % $ 23,626 Florida 5,751 139 3,199 77 5,046 1 04 4,942 New Jersey 1,646 101 1,269 77 2,914 8 2 2,912 Texas 442 82 399 74 1,967 6 6 1,973 Arizona 1,410 143 712 72 1,124 1 01 1,106 Other states 8,506 110 6,428 82 13,716 8 6 13,650 Total Pick-a-Pay loans $ 55,096 $ 37,029 $ 48,562 $ 48,209
September 30, 2009
California $ 39,034 150 % $ 25,492 98 % $ 24,447 9 5 % $ 24,395
Florida 5,929 144 3,532 85 5,166 1 08 5,117
New Jersey 1,676 101 1,309 78 3,017 8 2 3,021
Texas 452 81 395 71 2,031 6 6 2,039
Arizona 1,481 155 742 78 1,160 1 05 1,152
Other states 8,738 110 6,520 82 14,128 8 5 14,120
Total Pick-a-Pay loans $ 57,310 $ 37,990 $ 49,949 $ 49,844
(1)
(2)
PCI loans All other loans
The current LTV ratio is calculated as the unpaid prinicpal balance plus the unpaid prinicpal balance of any equity lines of credit that share common collateral 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.
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.
- 34 -
Wells Fargo & Company and Subsidiaries
HOME EQUITY PORTFOLIOS
% of loans
two payments Annualized
or more past due loss rate
Dec. 31,
(in millions) 2009 2009 2009 2009 2009 2009
Core portfolio
California $ 30,264 30,841 4.12 % 3 .97 6 .12 6.52
Florida 12,038 11,496 5.48 5 .08 6 .98 4.82
New Jersey 8,379 8,119 2.50 2 .22 1 .51 1.41
Virginia 5,855 5,736 1.91 1 .60 1 .13 1.22
Pennsylvania 5,051 4,971 2.03 1 .95 1 .81 1.51
Other 53,811 54,152 2.85 2 .64 3 .04 2.65
Total 115,398 115,315 3 .35 3 .13 3 .90 3 .69
Liquidating portfolio
California 3,205 3,406 8.78 8 .75 1 7.94 18.22
Florida 408 435 9.45 9 .83 1 9.53 16.97
Arizona 193 206 10.46 8 .25 1 9.29 22.33
Texas 154 161 1.94 1 .68 2 .40 2.15
Minnesota 108 112 4.15 3 .39 7 .53 8.52
Other 4,361 4,546 5.06 4 .68 7 .33 7.14
Total 8,429 8,866 6 .74 6 .51 1 2.16 1 2.17
Total core and liquidating portfolios $ 123,827 124,181 3 .58 3 .37 4 .48 4 .31
(1)
(2)
Consists of real estate 1-4 family junior lien mortgages and lines of credit secured by real estate from all groups, excluding PCI loans.
Includes equity lines of credit and closed-end second liens associated with the Pick-a-Pay portfolio totaling $1.8 billion and $1.9 billion at December 31 and September 30, 2009
respectively.
Outstanding balances
- 35 -
Wells Fargo & Company and Subsidiaries
CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES ( )
(in millions) 2009 2008 2009 2008
Balance, beginning of period $ 24,528
Provision for credit losses 5,913 8,444 21,668 15,979
Loan charge-offs:
Commercial and commercial real estate:
Commercial (1,028) (756) ( 3,365) (1,653)
Real estate mortgage (360) (10) ( 758) (29)
Real estate construction (380) (85) ( 975) (178)
Lease financing (56) (21) ( 229) (65)
Total commercial and commercial real estate ( 1,824) ( 872) ( 5,327) ( 1,925)
Consumer:
Real estate 1-4 family first mortgage (1,089) (210) ( 3,318) (540)
Real estate 1-4 family junior lien mortgage (1,384) (728) ( 4,812) (2,204)
Credit card (683) (485) ( 2,708) (1,563)
Other revolving credit and installment (861) (683) ( 3,423) (2,300)
Total consumer ( 4,017) ( 2,106) ( 14,261) ( 6,607)
Foreign ( 56) ( 60) ( 237) ( 245)
Total loan charge-offs ( 5,897) ( 3,038) ( 19,825) ( 8,777)
Loan recoveries:
Commercial and commercial real estate:
Commercial 101 24 254 114
Real estate mortgage 11 1 33 5
Real estate construction 5 1 16 3
Lease financing 7 4 20 13
Total commercial and commercial real estate 124 30 323 135
Consumer:
Real estate 1-4 family first mortgage 71 17 185 37
Real estate 1-4 family junior lien mortgage 55 26 174 89
Credit card 49 34 180 147
Other revolving credit and installment 175 118 755 481
Total consumer 350 195 1,294 754
Foreign 10 9 40 49
Total loan recoveries 484 234 1,657 938
Net loan charge-offs ( 5,413) ( 2,804) ( 18,168) ( 7,839)
Allowances related to business combinations/other 3 8,044 ( 180) 8,053
Balance, end of period $ 25,031
Components:
Allowance for loan losses $ 24,516 21,013 24,516 21,013
Reserve for unfunded credit commitments 515 698 515 698
Allowance for credit losses $ 25,031 21,711 25,031 21,711
Net loan charge-offs (annualized) as a
percentage of average total loans 2.71 % 2.69 2.21 1.97
(1)
Quarter ended Dec. 31, Year ended Dec. 31,
Because the Wachovia acquisition was completed on December 31, 2008, charge-offs and recoveries for 2008 include only those of Wells Fargo, and exclude those of
Wachovia for that period. Purchased credit-impaired loans (PCI) loans from Wachovia are included in total loans net of related purchase accounting adjustments. For PCI
loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting adjustments. The Wachovia merger and the accounting for PCI loans both
affect the comparability of certain ratios as described on page 30.
- 36 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES ( ) Dec. 31,
(in millions) 2009 2009 2009 2009 2008
Balance, beginning of quarter $ 24,528
Provision for credit losses (2) 5,913 6,111 5,086 4,558 8,444
Loan charge-offs:
Commercial and commercial real estate
Commercial (1,028) (986) (755) ( 596) (756)
Real estate mortgage (360) (215) (152) ( 31) (10)
Real estate construction (380) (254) (236) ( 105) (85)
Lease financing (56) (88) (65) ( 20) (21)
Total commercial and commercial real estate ( 1,824) ( 1,543) ( 1,208) ( 752) ( 872)
Consumer:
Real estate 1-4 family first mortgage (1,089) (1,015) (790) ( 424) (210)
Real estate 1-4 family junior lien mortgage (1,384) (1,340) (1,215) ( 873) (728)
Credit card (683) (691) (712) ( 622) (485)
Other revolving credit and installment (861) (860) (802) ( 900) (683)
Total consumer ( 4,017) ( 3,906) ( 3,519) ( 2,819) ( 2,106)
Foreign ( 56) ( 71) ( 56) ( 54) ( 60)
Total loan charge-offs ( 5,897) ( 5,520) ( 4,783) ( 3,625) ( 3,038)
Loan recoveries:
Commercial and commercial real estate
Commercial 101 62 51 40 24
Real estate mortgage 11 6 6 10 1
Real estate construction 5 5 4 2 1
Lease financing 7 6 4 3 4
Total commercial and commercial real estate 124 79 65 55 30
Consumer:
Real estate 1-4 family first mortgage 71 49 32 33 17
Real estate 1-4 family junior lien mortgage 55 49 44 26 26
Credit card 49 43 48 40 34
Other revolving credit and installment 175 178 198 204 118
Total consumer 350 319 322 303 195
Foreign 10 11 10 9 9
Total loan recoveries 484 409 397 367 234
Net loan charge-offs ( 5,413) ( 5,111) ( 4,386) ( 3,258) ( 2,804)
Allowances related to business combinations/other 3 ( 2) ( 16) ( 165) 8,044
Balance, end of quarter $ 25,031
Components:
Allowance for loan losses $ 24,516 24,028 23,035 22,281 21,013
Reserve for unfunded credit commitments 515 500 495 565 698
Allowance for credit losses $ 25,031 24,528 23,530 22,846 21,711
Net loan charge-offs (annualized) as a percentage of average
total loans 2.71 % 2.50 2.11 1.54 2.69
Allowance for loan losses as a percentage of
Total loans 3.13 3.00 2.80 2.64 2.43
Nonaccrual loans 100 115 146 212 309
Nonaccrual loans and other nonperforming assets 89 102 126 177 233
Allowance for credit losses as a percentage of
Total loans 3.20 3.07 2.86 2.71 2.51
Nonaccrual loans 103 118 149 217 319
Nonaccrual loans and other nonperforming assets 91 105 128 181 241
(1)
(2)
Quarter ended
Provision for credit losses for the quarter ended December 31, 2008, included $3.9 billion to conform reserve practices of Wells Fargo and Wachovia.
Because the Wachovia acquisition was completed on December 31, 2008, charge-offs and recoveries for 2008 include only those of Wells Fargo, and exclude those of
Wachovia for that period. Purchased credit-impaired loans (PCI) loans from Wachovia are included in total loans net of related purchase accounting adjustments. For
PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting adjustments. The Wachovia merger and the accounting for PCI loans
both affect the comparability of certain ratios as described on page 30.
- 37 -
Wells Fargo & Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
(in millions) 2009 2008
Balance, beginning of period
Cumulative effect from change in accounting for postretirement benefits (3) - (20)
Adjustment for change of measurement date related to pension and other postretirement benefits (4 - (8)
Wells Fargo net income 12,275 2,655
Wells Fargo other comprehensive income (loss), net of tax, related to
Translation adjustments 73 (58)
Investment securities (5):
Unrealized losses related to factors other than credit (2) (843) -
All other 10,649 (6,610)
Derivative instruments and hedging activities (221) 436
Defined benefit pension plans 273 (1,362)
Common stock issued 21,976 14,171
Common stock issued for acquisitions - 14,601
Common stock repurchased (220) (1,623)
Preferred stock issued - 22,674
Preferred stock redeemed (25,000) -
Preferred stock discount accretion 2,259 67
Preferred stock issued for acquisitions - 8,071
Preferred stock released to ESOP 106 451
Stock warrants issued - 2,326
Common stock dividends (2,125) (4,312)
Preferred stock dividends and accretion (4,285) (286)
Noncontrolling interests and other, net (2,874) 3,229
Balance, end of period $ 114,359
(1)
(2)
(3)
(4)
(5)
We adjusted the 2008 beginning balance of retained earnings to reflect the change in the measurement date for our pension and postretirement plan assets and benefit obligations
as required by ASC 715, Compensation - Retirement Benefits (FAS 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment).
of FASB Statements No. 87, 88, 106, and 132(R)
On March 31, 2009, we early adopted new fair value measurement provisions contained in ASC 820-10, Fair Value Measurements and Disclosures (FSP FAS 157-4,
Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly
This guidance addresses determining fair values for securities in circumstances where the market for such securities is illiquid and transactions involve distressed sales. In such
circumstances, ASC 820-10 permits use of other inputs in estimating fair value that may include pricing models.
Year ended December 31,
On January 1, 2008, we adopted new accounting guidance for postretirement benefits in accordance with ASC 715,C ompensation - Retirement Benefits (Emerging Issues Task
Force (EITF) Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements, and Issue
No. 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements ).
On January 1, 2009, we adopted new accounting guidance on noncontrolling interests contained in Financial Accounting Standards Board (FASB) Accounting Standards
Codification 810-10 (ASC 810-10), Consolidation (Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements - an), on a retrospective basis for disclosure and, accordingly, prior period information reflects the adoption. ASC 810-10 requires that noncontrolling
amendment of ARB No. 51
interests be reported as a component of total equity.
The impact on prior periods of adopting new accounting provisions for recording other-than-temporary impairment on debt securities as prescribed in ASC 320-10I,n vestments(FASB Staff Position (FSP) FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments ), was to increase
- Debt and Equity Securities
the beginning balance of retained earnings and reduce the beginning balance of other comprehensive income by $85 million ($53 million after tax). The change in unrealized
losses included in Wells Fargo other comprehensive income that related to the non-credit portion for those securities determined to be other-than-temporarily impaired amounted
to $1.34 billion ($843 million after tax). The credit-related portion for those securities determined to be other-than-temporarily impaired was recorded to earnings.
- 38 -
Wells Fargo & Company and Subsidiaries
TIER 1 COMMON EQUITY
Quarter ended
Dec. 31,
(in billions) 2009 2009 2008
Total equity $ 1 14.4 1 28.9 1 02.3
Less: Noncontrolling interests (2.6) (6.8) (3.2)
Total Wells Fargo stockholders' equity 1 11.8 1 22.1 9 9.1
Less: Preferred equity (8.1) (31.1) (30.8)
Goodwill and intangible assets (other than MSRs) (37.7) (37.5) (38.1)
Applicable deferred tax assets 5.3 5 .3 5.6
Deferred tax asset limitation (1.0) - (6.0)
MSRs over specified limitations (1.6) (1.5) (1.5)
Cumulative other comprehensive income (3.0) (4.0) 6.9
Other (0.2) (0.3) (0.8)
Tier 1 common equity (A) $ 6 5.5 5 3.0 3 4.4
Total risk-weighted assets (2) (B) $ 1 ,012.6 1 ,023.8 1 ,101.3
Tier 1 common equity to total risk-weighted assets (A)/(B) 6 .47 % 5 .18 3 .13
(1)
(2)
Tier 1 common equity is a non-GAAP financial measure that is used by investors, analysts and bank regulatory agencies, including the Federal Reserve in
the Supervisory Capital Assessment Program, to assess the capital position of financial services companies. Tier 1 common equity includes total Wells
Fargo stockholders' equity, less preferred equity, goodwill and intangible assets (excluding MSRs), net of related deferred taxes, adjusted for specified
Tier 1 regulatory capital limitations covering deferred taxes, MSRs, and cumulative other comprehensive income. 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.
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, 2009, preliminary risk-weighted assets reflect
estimated on-balance sheet risk-weighted assets of $837.4 billion and derivative and off-balance sheet risk-weighted assets of $175.2 billion.
- 39 -
Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS
Community Wholesale Wealth, Brokerage Consolidated
Banking Banking and Retirement Other (2) Company
2009 Quarter ended Dec. 31,
Net interest income (3) $ 8,391 5,296 2,682 1,400 7 30 2 51 (303) (223) 11,500 6,724
Provision for credit losses 4 ,903 6,789 950 414 93 293 (33) 9 48 5,913 8,444
Noninterest income 6,728 2,096 2,594 515 2,145 417 (271) (275) 11,196 2,753
Noninterest expense 7,420 4,320 2,720 1,251 2,542 512 139 (273) 12,821 5,810
Income (loss) before income
tax expense (benefit) 2 ,796 (3,717) 1,606 250 240 (137) (680) (1,173) 3,962 (4,777)
Income tax expense (benefit) 545 (1,606) 583 31 80 (52) (259) (409) 949 (2,036)
Net income (loss) before
noncontrolling interests 2,251 (2,111) 1,023 219 160 (85) (421) (764) 3,013 (2,741)
Less: Net income (loss) from
noncontrolling interests 149 (11) 12 4 29 - - - 190 (7)
Net income (loss) (4) $ 2,102 (2,100) 1 ,011 2 15 1 31 (85) (421) (764) 2 ,823 (2,734)
Average loans $ 524.3 2 88.9 2 39.6 1 24.2 4 4.8 1 6.5 (16.3) (15.7) 7 92.4 4 13.9
Average assets 772.7 4 66.0 368.9 163.2 114.7 20.0 (16.8) (16.0) 1 ,239.5 633.2
Average core deposits 519.9 2 60.6 162.6 81.0 124.4 25.6 (36.1) (22.2) 770.8 345.0
Year ended Dec. 31,
Net interest income (3) $ 34,372 20,542 10,063 4,516 2,974 8 27 (1,085) (742) 46,324 2 5,143
Provision for credit losses 17,743 13,622 3,594 1,115 467 302 (136) 940 21,668 15,979
Noninterest income 24,650 12,424 10,274 3,685 8,492 1,839 (1,054) (1,214) 42,362 16,734
Noninterest expense 29,045 16,507 10,688 5,282 9,364 1,992 (77) (1,183) 49,020 22,598
Income (loss) before income
tax expense (benefit) 12,234 2,837 6,055 1,804 1,635 372 (1,926) (1,713) 17,998 3,300
Income tax expense (benefit) 3,279 659 2,173 416 611 141 (732) (614) 5,331 602
Net income (loss) before
noncontrolling interests 8 ,955 2,178 3,882 1,388 1,024 231 (1,194) (1,099) 12,667 2,698
Less: Net income from
noncontrolling interests 339 32 26 11 27 - - - 392 43
Net income (loss) (4) $ 8,616 2 ,146 3 ,856 1 ,377 9 97 2 31 (1,194) (1,099) 1 2,275 2 ,655
Average loans $ 538.0 2 85.6 2 55.4 1 12.3 4 5.7 1 5.2 (16.3) (14.6) 8 22.8 3 98.5
Average assets 788.7 4 47.6 380.8 153.2 109.4 18.4 (16.5) (14.8) 1 ,262.4 604.4
Average core deposits 533.0 2 52.8 146.6 69.6 114.3 23.1 (31.4) (20.3) 762.5 325.2
(1)
(2)
(3)
(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.
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.
(income/expense in millions,
average balances in billions)
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. As a result of the combination of Wells Fargo and Wachovia, management
realigned its segments into the following three lines of business: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement. We revised prior period information to reflect
this realignment; however, segment information for periods prior to first quarter 2009 does not include Wachovia information.
Includes 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. "Other" also includes the $1.2 billion provision for credit losses recorded at the enterprise level in fourth quarter 2008 to conform Wachovia
estimated loss emergence coverage periods to Wells Fargo policies.
Wells Fargo & Company and Subsidiaries - 40 -
FIVE QUARTER OPERATING SEGMENT RESULTS Dec. 31,
(income/expense in millions, average balances in billions) 2009 2009 2009 2009 2008
COMMUNITY BANKING
Net interest income (2) $ 8,391 8,700 8,784 8 ,497 5 ,296
Provision for credit losses 4,903 4,572 4,264 4 ,004 6 ,789
Noninterest income 6,728 6,443 6,023 5 ,456 2 ,096
Noninterest expense 7,420 6,802 7,665 7 ,158 4 ,320
Income (loss) before income tax expense (benefit) 2 ,796 3 ,769 2 ,878 2 ,791 (3,717)
Income tax expense (benefit) 545 1,046 798 890 (1,606)
Net income (loss) before noncontrolling interests 2 ,251 2 ,723 2 ,080 1 ,901 (2,111)
Less: Net income (loss) from noncontrolling interests 149 56 72 62 (11)
Segment net income (loss) $ 2 ,102 2 ,667 2 ,008 1 ,839 (2,100)
Average loans $ 5 24.3 5 34.7 5 40.7 5 52.8 2 88.9
Average assets 772.7 785.2 799.2 7 97.9 4 66.0
Average core deposits 519.9 530.3 543.9 5 38.0 2 60.6
WHOLESALE BANKING
Net interest income (2) $ 2,682 2,535 2,479 2 ,367 1 ,400
Provision for credit losses 950 1,361 738 545 414
Noninterest income 2,594 2,381 2,759 2 ,540 515
Noninterest expense 2,720 2,630 2,807 2 ,531 1 ,251
Income before income tax expense 1 ,606 925 1 ,693 1 ,831 250
Income tax expense 583 325 618 647 31
Net income before noncontrolling interests 1 ,023 600 1 ,075 1 ,184 219
Less: Net income from noncontrolling interests 12 2 8 4 4
Segment net income $ 1 ,011 598 1 ,067 1 ,180 215
Average loans $ 2 39.6 2 47.0 2 63.5 2 71.9 1 24.2
Average assets 368.9 369.3 381.7 4 03.8 1 63.2
Average core deposits 162.6 146.9 138.1 1 38.5 81.0
WEALTH, BROKERAGE AND RETIREMENT
Net interest income (2) $ 730 743 764 737 251
Provision for credit losses 93 234 115 25 293
Noninterest income 2,145 2,223 2,222 1 ,902 417
Noninterest expense 2,542 2,314 2,289 2 ,219 512
Income (loss) before income tax expense (benefit) 240 418 582 3 95 (137)
Income tax expense (benefit) 80 151 222 158 (52)
Net income (loss) before noncontrolling interests 160 267 360 2 37 ( 85)
Less: Net income (loss) from noncontrolling interests 29 23 (3) ( 22) -
Segment net income (loss) $ 1 31 244 363 2 59 ( 85)
Average loans $ 4 4.8 45.4 45.9 46.7 1 6.5
Average assets 114.7 108.6 110.2 1 04.0 20.0
Average core deposits 124.4 116.4 113.5 1 02.6 25.6
OTHER
Net interest income (2) $ (303) (294) (263) (225) (223)
Provision for credit losses (33) (56) (31) ( 16) 948
Noninterest income (271) (265) (261) (257) (275)
Noninterest expense 139 (62) (64) ( 90) (273)
Loss before income tax benefit (680) (441) (429) (376) (1,173)
Income tax benefit (259) (167) (163) (143) (409)
Net loss before noncontrolling interests (421) (274) (266) (233) (764)
Less: Net income from noncontrolling interests - - - - -
Other net loss $ (421) (274) (266) (233) (764)
Average loans $ (16.3) (16.9) (16.2) (15.8) (15.7)
Average assets (16.8) (17.0) (16.2) (16.0) (16.0)
Average core deposits (36.1) (34.3) (29.8) (25.2) (22.2)
CONSOLIDATED COMPANY
Net interest income (2) $ 11,500 11,684 11,764 1 1,376 6 ,724
Provision for credit losses 5,913 6,111 5,086 4 ,558 8 ,444
Noninterest income 11,196 10,782 10,743 9 ,641 2 ,753
Noninterest expense 12,821 11,684 12,697 1 1,818 5 ,810
Income (loss) before income tax expense (benefit) 3 ,962 4 ,671 4 ,724 4 ,641 (4,777)
Income tax expense (benefit) 949 1,355 1,475 1 ,552 (2,036)
Net income (loss) before noncontrolling interests 3 ,013 3 ,316 3 ,249 3 ,089 (2,741)
Less: Net income (loss) from noncontrolling interests 190 81 77 44 (7)
Wells Fargo net income (loss) $ 2 ,823 3 ,235 3 ,172 3 ,045 (2,734)
Average loans $ 7 92.4 8 10.2 8 33.9 8 55.6 4 13.9
Average assets 1,239.5 1,246.1 1,274.9 1 ,289.7 6 33.2
Average core deposits 770.8 759.3 765.7 7 53.9 3 45.0
(1)
(2)
(3)
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. As a result of the combination of Wells Fargo and Wachovia, management realigned its segments into the following three
lines of business: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement. We revised prior period information to reflect this realignment; however, segment information for periods prior to
first quarter 2009 does not include Wachovia information.
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.
Quarter ended
Includes 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. "Other" also includes the $1.2 billion provision for credit losses recorded at the enterprise level in fourth quarter 2008 to conform Wachovia estimated loss emergence coverage periods to
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING Dec. 31,
(in millions) 2009 2009 2009 2009 2008
Residential MSRs measured using the fair value method:
Fair value, beginning of quarter $ 14,500 15,690 12,391 14,714 19,184
Acquired from Wachovia (1) - - - 34 479
Servicing from securitizations or asset transfers 1,181 1,517 2,081 1,447 808
Net additions 1,181 1,517 2,081 1,481 1,287
Changes in fair value:
Due to changes in valuation model inputs
or assumptions (2) 1,052 (2,078) 2,316 ( 2,824) (5,129)
Other changes in fair value (3) (729) (629) ( 1,098) ( 980) (628)
Total changes in fair value 323 ( 2,707) 1,218 ( 3,804) ( 5,757)
Fair value, end of quarter $ 16,004 14,500 15,690 12,391 14,714
(1)
(2)
(3)
Dec. 31,
(in millions) 2009 2009 2009 2009 2008
Amortized MSRs:
Balance, beginning of quarter $ 1,162 1,205 1,257 1,446 433
Purchases 1 - 6 4 3
Acquired from Wachovia (1) - - ( 8) ( 127) 1,021
Servicing from securitizations or asset transfers 18 21 18 4 7
Amortization (62) (64) ( 68) ( 70) (18)
Balance, end of quarter (2) $ 1,119 1,162 1,205 1,257 1,446
Fair value of amortized MSRs:
Beginning of quarter $ 1,277 1,311 1,392 1,555 622
End of quarter 1,261 1,277 1,311 1,392 1,555
(1)
(2)
Quarter ended
Quarter ended
First quarter 2009 results reflect refinements to initial purchase accounting adjustments.
There was no valuation allowance recorded for the periods presented.
2009 periods reflect refinements to initial purchase accounting adjustments.
Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates.
Represents changes due to collection/realization of expected cash flows over time.
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED) Dec. 31,
(in millions) 2009 2009 2009 2009 2008
Servicing income, net:
Servicing fees (1) $ 997 1,039 888 1,018 952
Changes in fair value of residential MSRs:
Due to changes in valuation model inputs
or assumptions (2) 1,052 (2,078) 2,316 ( 2,824) (5,129)
Other changes in fair value (3) (729) (629) (1,098) (980) (628)
Total changes in fair value of residential MSRs 323 ( 2,707) 1,218 ( 3,804) ( 5,757)
Amortization (62) (64) (68) ( 70) (18)
Net derivative gains (losses) from economic hedges (4) 830 3,605 (1,285) 3,699 4,783
Total servicing income, net $ 2,088 1,873 753 843 (40)
Market-related valuation changes to MSRs
and economic hedges (2)+(4) $ 1,882 1,527 1,031 875 (346)
(1)
(2)
(3)
(4)
Dec. 31,
(in billions) 2009 2009 2009 2009 2008
Managed servicing portfolio:
Residential mortgage servicing:
Serviced for others (1) $ 1,422 1,419 1,394 1,379 1,388
Owned loans serviced (2) 364 365 377 377 378
Sub-servicing 10 11 12 13 15
Total residential servicing 1,796 1,795 1,783 1,769 1,781
Commercial mortgage servicing:
Serviced for others 454 458 470 474 472
Owned loans serviced 105 103 104 105 103
Sub-servicing 10 10 10 10 11
Total commercial servicing 569 571 584 589 586
Total managed servicing portfolio $ 2,365 2,366 2,367 2,358 2,367
Total serviced for others $ 1,876 1,877 1,864 1,853 1,860
Ratio of MSRs to related loans serviced for others 0.91 % 0.83 0.91 0.74 0.87
Weighted-average note rate (mortgage loans serviced for others) 5.66 5.72 5.74 5.83 5.92
(1)
(2)
Quarter ended
Includes contractually specified servicing fees, late charges and other ancillary revenues.
Consists of 1-4 family first mortgage loans.
Consists of residential mortgages held for sale and 1-4 family first and junior lien mortgage loans at carrying value.
Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates.
Represents changes due to collection/realization of expected cash flows over time.
Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs.
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Wells Fargo & Company and Subsidiaries
SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA Dec. 31,
(in billions) 2009 2009 2009 2009 2008
Application data:
Wells Fargo Home Mortgage first mortgage
quarterly applications $ 144 123 194 190 116
Refinances as a percentage of applications 72 % 62 73 82 68
Wells Fargo Home Mortgage first mortgage
unclosed pipeline, at quarter end $ 57 62 90 100 71
Dec. 31,
(in billions) 2009 2009 2009 2009 2008
Residential Real Estate Originations:
Wells Fargo Home Mortgage first mortgage loans
Retail $ 51 50 71 51 20
Correspondent/Wholesale 42 45 57 49 28
Other (1) 1 1 1 1 2
Total quarter-to-date $ 94 96 129 101 50
Total year-to-date $ 420 326 230 101 230
(1) Consists of home equity loans and lines and Wells Fargo Financial.
Quarter ended
Quarter ended