Wells Fargo Reports Record Q3 and Year-to-Date Net Income

SAN FRANCISCO--(BUSINESS WIRE)--Wells Fargo & Company (NYSE:WFC):

• 3rd consecutive quarter of record earnings
  • Record Wells Fargo net income of $3.2 billion, up 98 percent from last year; $9.5 billion year to date, up 75 percent from last year
  • Diluted earnings per common share of $0.56, up 14 percent from last year; $1.69 per share year to date
  • Results driven by record $10.8 billion pre-tax, pre-provision profit (PTPP); PTPP has been more than two times quarterly net charge-offs each quarter this year, despite cyclically elevated net charge-offs. (See footnote 4 on page 20 for information on PTPP)
• Continued strong revenue
  • Revenue of $22.5 billion, flat with record revenue in second quarter 2009
  • $169 billion of credit extended to customers in the quarter
  • Average checking and savings deposits up 11 percent (annualized) from prior quarter
  • Net interest margin of 4.36 percent, up 6 basis points from prior quarter
  • Cross-sell for legacy Wells Fargo a record 5.90 for retail bank households
  • Broad-based revenue contribution from diverse businesses, including double-digit linked-quarter growth in asset management, auto lending, consumer finance, debit cards, retirement services, SBA lending and wealth management, along with continued strong performance from regional banking and mortgage banking
• Significant increases in capital, reduction in risk
  • Wells Fargo stockholders' equity increased to $122 billion (10 percent of total assets), up $23 billion from year end
  • Generated $20 billion during the past six months toward the $13.7 billion Supervisory Capital Assessment Program (SCAP) buffer requirement; PTPP tracking above Company's internal SCAP estimates and 35 percent above supervisory adverse scenario estimate
  • Credit reserves built by $1.0 billion ($3.0 billion year to date), reaching $24.5 billion, or 3.07 percent of total loans and 118 percent of nonaccrual loans
  • Substantial increases in capital ratios driven by record retained earnings and other sources of internal capital generation

 
 
 
 
 
 
 
Sept. 30,
 
June 30,
 
Dec. 31,
 
 

(as a percent of total risk-weighted assets)
 
2009 (1
)
 
2009
 
2008
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

Tier 1 capital
 
 
 
10.6
 
%
9.8
 
7.8
 
 

Tier 1 common equity (2)
 
 
5.2
 
 
4.5
 
3.1
 
 

Tier 1 leverage
 
 
9.0
 
 
8.3
 
14.5
 
(3
)

Total capital
 
 
 
14.7
 
 
13.8
 
11.8
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) September 30, 2009, ratios are preliminary.

(2) See table on page 38 for more information on Tier 1 common equity.

(3) Based on average Q4 2008 Wells Fargo assets only, excludes Wachovia.

• Reduced non-strategic/liquidating loans by $5.7 billion in the quarter
• FAS 166/167 expected to add approximately $28 billion to risk-weighted assets upon adoption in 2010

• Current projections show credit losses peaking in 2010, with consumer losses potentially peaking in first half of the year and gradually declining, absent further economic deterioration
  • Growth in nonperforming loans and net charge-offs slowing as of third quarter, for consumer and commercial portfolios
  • Credit performance of recent vintage legacy Wells Fargo consumer portfolios improving, largely the result of proactive credit management over past two years
  • 90 days past due and still accruing levels flat with second quarter; consumer 90 days past due and still accruing declined from prior quarter
  • Significantly smaller credit card portfolio than large bank peers
  • Pick-a-Pay portfolio currently estimated to have lower life-of-loan losses than originally estimated, driven in part by extensive and successful loan modification efforts
  • Collateral values improving in auto market and housing prices stabilizing in many regions
  • Legacy Wells Fargo commercial and commercial real estate portfolio well underwritten and diversified; Wachovia commercial and commercial real estate portfolio marked down at merger close at end of last year
  • Legacy Wells Fargo loss rate of 3.37 percent, below large bank peers; overall loss rate of 2.50 percent reflected benefit of purchase accounting on Wachovia loan portfolio; combined losses less than half of Company's quarterly PTPP
• Wachovia integration on track and on schedule
  • Estimated cumulative merger expenses reduced to approximately $5.5 billion from $7.9 billion; on track to achieve $5.0 billion annual run-rate cost savings by completion of integration in 2011
  • Cross-sell revenues already being realized
  • Credit overall performing in line with original expectations
  • First state community bank conversion (Colorado) scheduled for November; conversion of remaining overlapping markets expected in 2010
• Increased loan modifications
  • Provided 62,989 trial and completed modifications through the Home Affordable Modification Program (HAMP) and 292,005 through Company's proprietary programs, bringing total this year through September 30, 2009, to 354,994
  • Refinanced 987,000 customers' mortgages using the Home Affordable Refinance Program (HARP) and other standard refinance programs
  • Over 20 percent of PCI Pick-a-Pay portfolio modified through September 30, 2009, with positive early performance

Selected Financial Information
 
 
 
 
 
 
 
Nine

 
 
 
 
 
 
 
 
 
 
 
 
months

 
 
 
 
 
 
 
Quarter ended
 
ended

 
 
 
 
 
 
 
Sept. 30,
 
 
June 30,
 
Sept. 30,

 
 
 
 
 
 
 
 
2009
 
 
2009
 
2009

Earnings
 
 
 
 
 
 
 
 
 

Diluted earnings per share
 
 
$
0.56
 
 
0.57
 
1.69

Wells Fargo net income (in billions)
 
 
3.24
 
 
3.17
 
9.45

 
 
 
 
 
 
 
 
 
 
 
 
 

Asset Quality
 
 
 
 
 
 
 
 

Net charge-offs as % of avg. total loans
 
 
2.50
 
%
2.11
 
2.05

Nonperforming loans as % of total loans
 
 
2.61
 
 
1.92
 
2.61

Allowance as a % of total loans
 
 
 
3.07
 
 
2.86
 
3.07

 
 
 
 
 
 
 
 
 
 
 
 
 

Other
 
 
 
 
 
 
 
 
 
 
 

Revenue (in billions)
 
 
$
22.47
 
 
22.51
 
65.99

Average loans (in billions)
 
 
 
810.2
 
 
833.9
 
833.1

Average core deposits (in billions)
 
 
759.3
 
 
765.7
 
759.7

Net interest margin
 
 
 
4.36
 
%
4.30
 
4.27

Wells Fargo & Company (NYSE:WFC) reported diluted earnings per common share of $0.56 for third quarter 2009 compared with $0.57 for second quarter 2009 and $0.49 for third quarter 2008. (Results prior to January 1, 2009, do not include Wachovia.) Wells Fargo net income was a record $3.24 billion for third quarter 2009, up 98 percent from last year, and a record $9.45 billion for the first nine months of 2009, up 75 percent from last year.

"Doing what's right for our customers again proved to be right for our stockholders as our talented team members earned even more of our customers' business, enabling us to achieve our third consecutive quarter of record earnings," said President and CEO John Stumpf. "The Wells Fargo-Wachovia merger, agreed to a year ago, is exceeding our expectations and already adding value for many of our 70 million customers across North America. Merger costs have been significantly less than originally expected. With our 80-plus businesses pulling the stagecoach, the diversity of our business model again showed significant power to generate capital internally. We had solid performance across our company - especially among counter-cyclical businesses such as deposits, residential mortgages, debit card and asset-based lending. We're also doing what's right for our mortgage customers having difficulty making their payments on time. We've offered home payment relief to 1.3 million customers so far this year, including 355,000 loan modifications. We now have 13,000 team members working on helping customers stay in their homes and our delinquency and foreclosure rates continue to be well below the industry average. As we've already announced, Dick Kovacevich will step down as chairman and a director at the end of 2009 and retire from the Company in early 2010. I am grateful to Dick and to Wells Fargo's leadership team and believe we have the strongest, most experienced team of senior leaders in all of financial services. They've led our businesses to a strong third quarter, following two consecutive quarters of record earnings, despite the economic recession. This is something that few, if any, financial services companies have achieved - and during the most challenging credit cycle in recent memory and while we continue to build reserves.

Wells Fargo has always been committed to providing clear, complete, and transparent communication about the Company's results to all of its stakeholders. As we enter the second year of the merger with Wachovia, we will be expanding our quarterly communications to include a live quarterly earnings conference call - starting in January for our fourth quarter and full year 2009 results - and we will also host an investor day in 2010."

Financial Performance

"Third quarter results again illustrated the Company's ability to profitably grow, even through the downward cycle despite elevated credit losses," said Chief Financial Officer Howard Atkins. "Since the merger with Wachovia at year-end 2008, we've earned a record $9.45 billion, even after building credit reserves by $3.0 billion and recording $1.4 billion of other-than-temporary impairment (OTTI) charges. Pre-tax pre-provision profit has grown every quarter this year, reaching a record $10.8 billion in the third quarter, more than double quarterly net charge-offs. While mortgage origination and hedging results contributed to our performance, collectively all of our other businesses have also grown PTPP each quarter this year reflecting the breadth of our diversified business model, record levels of sales and cross-sell, the realization of revenue synergies from the combination with Wachovia, and further improvements in our net interest margin to 4.36 percent and efficiency ratio to 52.0 percent. We continued to maintain what we believe is one of the strongest balance sheets in banking, building credit reserves by $1.0 billion in the quarter to $24.5 billion, or 3.07 percent of total loans, reducing previously identified non-strategic and liquidating loan portfolios to $152.7 billion, down over $14 billion from year end, and reducing the value of our debt and equity investment portfolios through $396 million of OTTI. Also, in line with lower mortgage rates, the ratio of mortgage servicing rights (MSRs) as a percentage of loans serviced for others was 83 basis points, the third lowest ratio in our Company's history and a level considerably lower than our mortgage peers.

"We have significantly built capital, increasing common stockholders' equity to $123 billion, up $23 billion so far in 2009 and increasing Tier 1 common to 5.2 percent, nearly two times our capital position at year-end 2008. Nonperforming loans and net charge-offs increased in the quarter, but the rate of growth of nonperforming loans has declined each quarter so far this year. While the level of nonperforming assets and losses is expected to remain elevated for a period of time, we currently expect total credit losses to peak in 2010, with consumer losses potentially peaking in the first half of the year and gradually declining as the year progresses, absent any further deterioration in the U.S. economy. Our credit reserves as of September 30, 2009, reflect an improvement in consumer loss emergence with almost all of the current quarter reserve build covering higher commercial loss emergence.

"Operationally and financially, the Wachovia merger is exceeding our expectations. Structurally, the merger leaves us with an even more diversified business than legacy Wells Fargo alone - less geographic concentration, an even wider array of products and services, better balance between consumer and commercial businesses, and an equal split between spread income and fee income. We are currently on track to realize our objective of $5.0 billion in annual run-rate savings when we complete the integration in 2011, with about 30-40 percent of those savings now beginning to be realized in our expense run-rate. We now expect to spend about $2.4 billion less in merger and integration costs than previously expected to achieve the run-rate savings, largely because proportionately more of the labor savings are being realized through attrition instead of severance and because we're spending less than planned on building disposition, as we fill unoccupied space with third party tenants. We are ahead of plan in shedding asset risk from businesses that do not meet our financial and strategic criteria and in retaining deposits and customers. We're already realizing meaningful revenue synergies, an important driver of our earnings this year. Because Wachovia's credit-impaired loan portfolios were written down at the close of the merger at the end of last year, Wachovia is now contributing to the Company's rapid internal capital growth."

Revenue

Revenue of $22.5 billion remained at near-record levels following strong first and second quarters. Relative to the pre-Wachovia third quarter a year ago, the Company's assets almost doubled, while total revenue has substantially more than doubled, despite the weak economy and despite the reduction in non-strategic/liquidating loan and asset portfolios. The high levels of revenue generated in the third quarter related to several factors:

• Continued strong core deposits reflecting 11 percent (annualized) growth in checking and savings, 25 percent (annualized) growth in wholesale banking core deposits and 10 percent (annualized) growth in wealth management core deposits. Wachovia's deposit pricing has been conformed to that of Wells Fargo, with continued better-than-planned retention of Wachovia's maturing higher-rate CDs (57 percent retained in third quarter). The average cost of all core deposits declined to 41 basis points in the quarter, the principal reason for the Company's 4.36 net interest margin, highest among large bank peers.
• The Company remained an industry leader in making credit available to U.S. consumers and businesses. Total credit supplied in the quarter through mortgage originations and new/increased credit facilities was $169 billion, one of the main drivers of continued strong loan fees, even though loan demand remained soft in the quarter.
• Record core product solutions (sales) and record cross-sell in regional banking for legacy Wells Fargo
• Broad-based revenue growth across multiple businesses, including double-digit (annualized) linked-quarter growth in asset management, auto lending, consumer finance, debit card, retirement services, SBA lending and wealth management. Linked-quarter growth in these businesses was partially offset by more modest mortgage revenue, lower investment banking revenue and seasonal decline in insurance revenue.
• While mortgage originations and servicing revenue remained high, total mortgage banking noninterest income represented less than 15 percent of consolidated company revenue, reflecting the breadth and depth of the Company's business model.

Net Interest Income

Net interest income was $11.7 billion, compared with $11.8 billion in second quarter 2009. While the net interest margin improved to 4.36 percent, average earning assets were down $23.7 billion linked quarter, reflecting soft loan demand and reductions in non-strategic/liquidating assets. While average investment securities were up $7.3 billion, this largely reflected the averaging effect in the quarter of mortgage-backed securities (MBS) purchased late in the second quarter at yields more than 1 percent above current market. During the third quarter, $23 billion of the lowest-yielding MBS were sold to reduce exposure to higher long-term interest rates.

Loans

Average total loans were $810.2 billion compared with $833.9 billion in second quarter 2009, as consumer and commercial demand for credit remained moderate and the Company continued to reduce certain higher-risk loan portfolios. The decline in average loans included a reduction of $5.7 billion linked quarter in the non-strategic and liquidating loan portfolios that the Company has been exiting, such as indirect home equity and indirect auto from legacy Wells Fargo, and Wachovia's Pick-a-Pay and commercial real estate portfolios.

Deposits

Average total core deposits were $759.3 billion compared with $765.7 billion in second quarter 2009. During the quarter, $38 billion of Wachovia's higher-rate certificates of deposit matured, with $22 billion of those balances retained. "We continued to gain new deposit customers and deepen our relationship with existing customers," said Atkins. Average checking and savings deposits increased 11 percent (annualized) to $629.6 billion from $613.3 billion in second quarter 2009. Average mortgage escrow deposits were $28.7 billion compared with $32.0 billion in second quarter 2009. Average consumer checking accounts at legacy Wells Fargo grew a net 6.4 percent from third quarter 2008 and, for Wells Fargo and Wachovia combined, grew a net 5.2 percent in California for the same period.

Noninterest Income

Noninterest income of $10.8 billion was flat compared with $10.7 billion in second quarter 2009 and included:

• Mortgage banking income of $3.1 billion, including:
  • $1.1 billion in revenue from mortgage loan originations/sales activities on $96 billion of residential mortgage originations
  • $1.5 billion combined market-related valuation changes to mortgage servicing rights (MSRs) and economic hedges (consisting of a $2.1 billion decrease in the fair value of the MSRs more than offset by a $3.6 billion economic hedge gain in the quarter), largely due to hedge-carry income reflecting the current low short-term interest rate environment, which is expected to continue into the fourth quarter; MSRs as a percentage of loans serviced for others reduced to 0.83 percent; average servicing portfolio note rate was only 5.72 percent.
• Trust and investment fees of $2.5 billion, up 15 percent (annualized) linked quarter primarily reflecting an increase in client assets, bond origination fees, and higher brokerage revenue as the Company further builds its retail securities brokerage business
• Service charges on deposit accounts of $1.5 billion, up 8 percent (annualized) linked quarter driven by continued strong checking account growth
• Card fees of $946 million, up 10 percent (annualized) linked quarter reflecting seasonally higher purchase volumes and higher customer penetration rates
• Net losses on debt and equity securities totaling $11 million, including $396 million of OTTI write-downs and $120 million of realized gains on the sale of MBS in the third quarter. After having purchased over $34 billion of agency MBS in the second quarter of 2009 at yields more than 1 percent above the current market, the Company sold $23 billion of its lowest-yielding MBS after long-term interest rates declined in the third quarter.

Due to the general decline in long-term yields and narrowing of credit spreads in the quarter, the Company's net unrealized securities gains, reflected in equity, increased to $6.6 billion at September 30, 2009, from net losses of $400 million at June 30, 2009.

Noninterest Expense

Noninterest expense declined to $11.7 billion from $12.7 billion in the second quarter, which included $565 million of FDIC deposit insurance assessments. The balance of the decline in third quarter expense was due to merger consolidation savings and ongoing expense management initiatives. "We currently expect cumulative merger integration costs of approximately $5.5 billion, down from our previous $7.9 billion estimate," said Atkins. "The revised estimate reflects lower owned real estate write-downs and lower estimated severance costs since a greater proportion of labor savings is being realized through attrition. Of this $5.5 billion, we've spent $1.0 billion merger to date, including $200 million in the third quarter. Of the amount spent thus far, $444 million has been recorded through the income statement and $559 million has been recorded through purchase accounting adjustments to goodwill. A portion of the remaining integration costs will be charged to goodwill in the fourth quarter under purchase accounting. The balance of the cumulative estimated integration costs are expected to be expensed over the next two years, and are likely to be offset by merger-related savings during this period. We remain on track to achieve $5.0 billion in annual run-rate savings upon completion of the integration in 2011. To date, we have achieved approximately 30-40 percent of these savings." Noninterest expense also included $100 million of additional insurance reserve at the Company's captive mortgage reinsurance operation and $49 million of non-Wachovia-related integration costs. "As we reduce expenses through consolidation and other expense initiatives, we continue to reinvest in our businesses for long-term revenue growth," said Atkins. "During 2009, we've opened 41 banking stores and converted 1,274 ATMs to Envelope-FreeSM webATM machines. We have also continued to increase the level and productivity of our sales force in community banking, commercial banking and wealth management. We continue to manage to a variable expense base in the mortgage company. Part-time staff was reduced in third quarter as application volume declined, and increased again in September and early in the fourth quarter as applications increased." The Company's efficiency ratio improved to 52.0 percent from 56.4 percent in second quarter and 56.2 percent in first quarter.

Capital

"We have rebuilt capital significantly this year," said Atkins, "with most of our capital ratios now higher - in some cases substantially so - than they were just before the Wachovia merger a year ago."

 
 
 
 
 
 
 
Sept. 30,
 
Sept. 30,

(as a percent of total risk-weighted assets)
 
2009 (1
)
 
2008 (2
)

 
 
 
 
 
 
 
 
 
 

Tier 1 common equity
 
 
5.2
 
%
6.4
 

Tier 1 capital
 
 
 
10.6
 
 
8.6
 

Tier 1 leverage
 
 
9.0
 
 
7.5
 

Total capital
 
 
 
14.7
 
 
11.5
 

 
 
 
 
 
 
 
 
 
 

(1) September 30, 2009, ratios are preliminary

(2) Wells Fargo only, excludes Wachovia

Stockholders' equity now stands at $122 billion, up $50 billion from a year ago (excluding the U.S. Treasury's $25 billion Capital Purchase Program investment), up $23 billion from post-merger closing year-end equity and up $8 billion just in the third quarter of this year alone. "In the past year, we have more than doubled stockholders' equity while significantly reducing risk and increasing internal capital momentum," said Atkins. Tier 1 common equity grew from second quarter 2009 entirely from internally generated sources - record retained earnings, realization of deferred tax assets and stock issued to the Company's benefit plans. Through September 30, 2009, the Company generated $20 billion, including the $8.6 billion equity raise in the second quarter, toward the $13.7 billion regulatory capital buffer under SCAP, exceeding the requirement by $6 billion. "A major contributor to our strong results compared with the regulatory SCAP requirement has been our consistent outperformance on pre-tax pre-provision profit year to date, which confirmed the confidence we've had from the beginning of this process in the underlying revenue strength of our company and the consistency of our revenue generation even in adverse scenarios," said Atkins. See footnote (4) on page 20 and the table on page 38 for more information.

In January, the Company will adopt FAS 166/167, which will result in the consolidation of certain off-balance sheet assets not currently included in its financial statements. The Company's current estimate is that FAS 166/167 is expected to add approximately $28 billion in risk-weighted assets. This latest analysis is lower than originally projected primarily due to a reduction in the amount of securitized residential mortgages expected to be consolidated. In addition, the Company continues to explore the sale of certain interests held in securitized residential mortgage loans, which would be expected to reduce further the amount of incremental GAAP assets and incremental risk-weighted assets.

Credit Quality

"While the challenging credit cycle continues and losses remain elevated, we have begun to see early indications of consumer credit stability," said Chief Credit and Risk Officer Mike Loughlin. "In the third quarter, this stabilization was evident in several consumer loan portfolios, while the consumer real estate portfolio continued to vary across geography. Some real estate markets, such as California, have had increased home sales and home price stabilization and, as these conditions improve in more markets, we expect to see improvement in credit results. Third quarter commercial and commercial real estate losses remained at manageable levels, reflecting the high-quality of Wells Fargo's commercial loan portfolio and the fact that Wachovia's commercial and commercial real estate loan portfolios were already written down at the end of last year.

"Nonperforming assets and credit losses increased during the quarter, and once again we increased reserve levels to provide for the additional risk. We expect credit losses and nonperforming assets to continue to increase in the near term, but at a slower rate as we have seen the pace of deterioration slow. Based on our current economic outlook, we expect losses to peak in 2010, with consumer losses expected to peak in the first half of 2010 and commercial and commercial real estate losses expected to peak in the second half of 2010. The recovery may take some time to gain momentum and changes in the economic outlook could affect this time horizon."

Credit Losses

Third quarter net charge-offs were $5.1 billion, or 2.50 percent of average loans, compared with second quarter net charge-offs of $4.4 billion, or 2.11 percent of average loans. While losses were up in the quarter, the increase in terms of both dollars and percentages moderated from prior quarter growth. The overall quarterly loss rate in the third quarter, 2.50 percent, is substantially lower than reported large peer loss rates partly because Wells Fargo had already written down Wachovia's higher-risk loan portfolios at year end. Reflecting, in part, stabilizing credit performance, legacy Wells Fargo net charge-offs were $3.4 billion, or 3.37 percent of average loans. Wachovia's net charge-offs increased to $1.7 billion, or 1.66 percent of average loans, compared with $984 million in second quarter 2009, due to some deterioration in its portfolios and the lagging effect of purchase accounting.

Total credit losses of $5.1 billion included $1.5 billion of commercial and commercial real estate loans (1.78 percent of average loans) and $3.6 billion in consumer loans (3.13 percent of average loans), as shown in the following table.

Net Loan Charge-Offs (1)

 

Quarter ended

 
 

 
 
 
 
 
September 30, 2009
 
 
 
June 30, 2009
 
 
 
March 31, 2009
 
 

 
 
 
 
 
 
 
As a
 
 
 
 
 
As a
 
 
 
 
 
As a
 
 

 
 
 
 
 
 
 
% of
 
 
 
 
 
% of
 
 
 
 
 
% of
 
 

 
 
 
 
 
Net loan
 
average
 
 
 
Net loan
 
average
 
 
 
Net loan
 
average
 
 

 
 
 
 
 
charge-
 
loans
 
 
 
charge-
 
loans
 
 
 
charge-
 
loans
 
 

($ in millions)
 
offs
 
(annualized)
 
 
 
offs
 
(annualized)
 
 
 
offs
 
(annualized)
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Commercial and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Legacy Wells Fargo
 
$
862
 
1.96
 
%
 
$
897
 
2.01
 
%
 
$
667
 
1.48
 
%

 
Wachovia
 
 
602
 
1.57
 
 
 
 
246
 
0.61
 
 
 
 
30
 
0.07
 
 

Total commercial and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
commercial real estate
 
 
1,464
 
1.78
 
 
 
 
1,143
 
1.35
 
 
 
 
697
 
0.80
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Legacy Wells Fargo
 
 
2,480
 
4.50
 
 
 
 
2,462
 
4.44
 
 
 
 
2,175
 
3.90
 
 

 
Wachovia
 
 
1,107
 
1.87
 
 
 
 
735
 
1.22
 
 
 
 
341
 
0.56
 
 

Total consumer
 
 
3,587
 
3.13
 
 
 
 
3,197
 
2.77
 
 
 
 
2,516
 
2.16
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Foreign
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Legacy Wells Fargo
 
 
43
 
3.00
 
 
 
 
43
 
3.05
 
 
 
 
45
 
3.13
 
 

 
Wachovia
 
 
17
 
0.28
 
 
 
 
3
 
0.05
 
 
 
 
-
 
-
 
 

Total foreign
 
 
60
 
0.79
 
 
 
 
46
 
0.61
 
 
 
 
45
 
0.56
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total Legacy Wells Fargo
 
 
3,385
 
3.37
 
 
 
 
3,402
 
3.35
 
 
 
 
2,887
 
2.82
 
 

Total Wachovia
 
 
1,726
 
1.66
 
 
 
 
984
 
0.92
 
 
 
 
371
 
0.34
 
 

 
Total
 
$
5,111
 
2.50
 
%
 
$
4,386
 
2.11
 
%
 
$
3,258
 
1.54
 
%

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)See explanation on page 40 of the accounting for purchased credit-impaired (PCI) loans from Wachovia and the impact on selected financial ratios.

"Commercial and commercial real estate charge-offs remained manageable in the third quarter," said Loughlin. "In fact, legacy Wells Fargo's commercial and commercial real estate losses declined $35 million, or 4 percent, in the quarter. The increase in commercial and commercial real estate losses was entirely in the Wachovia non-impaired portfolio, in part reflecting the fact that charge-offs are just now coming through Wachovia's portfolio after having eliminated nonaccruals through purchase accounting at the end of last year. The overall loss rate in third quarter for Wachovia's commercial and commercial real estate portfolio was roughly comparable to Wells Fargo's higher-quality commercial portfolio. While the industry is likely to experience elevated commercial and commercial real estate losses, we continue to believe we have one of the best commercial and commercial real estate loan portfolios among large bank peers given our long-standing underwriting discipline and because we wrote down Wachovia's commercial and commercial real estate portfolio when we closed the acquisition at year end."

Consumer losses were up 12 percent in the third quarter, with virtually all of the increase in Wachovia's consumer portfolios. Over 40 percent of the increase in Wachovia consumer loan losses came from the non-impaired Pick-a-Pay portfolio, in large part reflecting the lagging effect of purchase accounting. "We are currently expecting lower life-of-loan losses on the non-impaired Pick-a-Pay portfolio than originally assumed at the time of the merger," said Loughlin. Overall losses on legacy Wells Fargo's consumer portfolio were essentially flat linked quarter. "Given the actions we've previously taken to reduce higher-risk portfolios, given the life-of-loan loss write-downs we have taken through purchase accounting and given the substantially smaller exposure to credit cards and sub-prime loans, we are expecting consumer losses to potentially peak in the first half of 2010 and gradually decline as the year progresses.

"We remain comfortable with our original loss estimates for the impaired portfolio from Wachovia, and currently expect life-of-loan losses on the purchased credit-impaired (PCI) Pick-a-Pay portfolio to be lower than original estimates. Also, while increasing this year, losses in the non-impaired Pick-a-Pay portion of the Wachovia portfolio are tracking below our original estimates at the time we acquired Wachovia. We continue to expect the non-impaired portfolios to perform significantly better than the impaired portfolios that have already been written down through purchase accounting, and the Pick-a-Pay portfolio to perform better than other companies' option adjustable-rate mortgage portfolios."

Nonperforming assets

Total nonperforming assets (NPAs) were $23.5 billion (2.93 percent of total loans) at September 30, 2009, and included $20.9 billion of nonaccrual loans and $2.5 billion of foreclosed assets (repossessed real estate and vehicles).

 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Nonaccrual Loans and Other Nonperforming Assets

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
September 30, 2009
 
 
 
June 30, 2009
 
 
 
March 31, 2009
 
 

 
 
 
 
 
 
 
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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Legacy Wells Fargo
$
6,037
 
3.53
 
%
 
$
5,260
 
3.02
 
%
 
$
3,860
 
2.13
 
%

 
Wachovia
 
4,227
 
2.86
 
 
 
 
2,333
 
1.46
 
 
 
 
645
 
0.39
 
 

Total commercial and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
commercial real estate
 
10,264
 
3.22
 
 
 
 
7,593
 
2.28
 
 
 
 
4,505
 
1.30
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Legacy Wells Fargo
 
6,293
 
2.90
 
 
 
 
5,687
 
2.59
 
 
 
 
4,970
 
2.22
 
 

 
Wachovia
 
4,168
 
1.78
 
 
 
 
2,292
 
0.96
 
 
 
 
966
 
0.40
 
 

Total consumer
 
10,461
 
2.32
 
 
 
 
7,979
 
1.74
 
 
 
 
5,936
 
1.27
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Foreign
 
 
 
144
 
0.48
 
 
 
 
226
 
0.75
 
 
 
 
75
 
0.24
 
 

 
 
Total nonaccrual loans
 
20,869
 
2.61
 
 
 
 
15,798
 
1.92
 
 
 
 
10,516
 
1.25
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Foreclosed assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Legacy Wells Fargo
 
1,756
 
 
 
 
 
 
1,741
 
 
 
 
 
 
1,421
 
 
 
 

 
Wachovia
 
771
 
 
 
 
 
 
783
 
 
 
 
 
 
641
 
 
 
 

Total foreclosed assets
 
2,527
 
 
 
 
 
 
2,524
 
 
 
 
 
 
2,062
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Real estate and other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
nonaccrual investments
 
55
 
 
 
 
 
 
20
 
 
 
 
 
 
34
 
 
 
 

 
 
 
Total nonaccrual loans and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
other nonperforming assets
$
23,451
 
2.93
 
%
 
$
18,342
 
2.23
 
%
 
$
12,612
 
1.50
 
%

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Change from prior quarter
$
5,109
 
 
 
 
 
$
5,730
 
 
 
 
 
$
3,603
 
 
 
 

While commercial and commercial real estate nonaccrual loans were up in the quarter, the dollar amount of the increase declined in the quarter and the rate of growth slowed considerably. Legacy Wells Fargo's commercial and commercial real estate nonaccrual loans increased $777 million. The rate of growth in Wachovia's commercial and commercial real estate nonaccrual loans reflected some deterioration but was in line with management's expectations. Similarly, the growth rate in consumer nonaccrual loans also slowed in the quarter. Legacy Wells Fargo's consumer nonaccrual loans increased $606 million, about 11 percent, reflecting the more moderate deterioration the Company has experienced in consumer loans. Wachovia's Pick-a-Pay portfolio represents the largest portion of consumer nonaccrual loans. While up $1.2 billion in the third quarter, the increase in nonaccrual loans in the non-impaired Pick-a-Pay portfolio reflected the inflows to nonaccruals expected in the first few quarters after purchase accounting write-downs. The Company continued to actively modify non-PCI Pick-a-Pay loans through the use of troubled debt restructurings (TDRs), which temporarily keeps NPA levels elevated until the modified loans can demonstrate performance. To the extent these nonperforming loans return to accrual status, NPA growth should moderate.

The loss exposure expected in the nonperforming assets 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. Residential real estate NPLs greater than 180 days old, or 41 percent of the total NPLs balance, have been written down to net realizable value. Third, there is a segment of NPLs for which there are specific reserves in the allowance, while other NPLs are covered by general reserves. "We believe that the allowance as of September 30, 2009, fully covers loss content embedded in the September 30, 2009 nonaccrual balances," said Loughlin.

 
 
 
 
 
 

Loans 90 Days or More Past Due and Still Accruing (1)

 
 
 
 

(Excluding Insured/Guaranteed GNMA and Similar Loans)
 
 
 
 

Includes Wells Fargo and Wachovia
 
 
 
 

 
 
 
Sept. 30,
 
June 30,

(in millions)
 
2009
 
2009

 
 
 
 
 
 

Commercial and commercial real estate:
 
 
 
 

Commercial
 
$
458
 
415

Real estate mortgage
 
 
693
 
702

Real estate construction
 
 
930
 
860

Total commercial and commercial real estate
 
 
2,081
 
1,977

 
 
 
 
 
 

Consumer:
 
 
 
 

Real estate 1-4 family first mortgage
 
 
1,552
 
1,497

Real estate 1-4 family junior lien mortgage
 
 
484
 
660

Credit card
 
 
683
 
680

Other revolving credit and installment
 
 
1,138
 
1,160

Total consumer
 
 
3,857
 
3,997

Foreign
 
 
 
76
 
32

Total loans

 
$
6,014
 
6,006

 

(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 $18.9 billion at September 30, 2009, and $16.7 billion at June 30, 2009. For the same periods, the totals included $12.9 billion and $10.7 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

(Includes Wells Fargo and, beginning December 31, 2008, Wachovia)

The allowance for credit losses, including the reserve for unfunded commitments, totaled $24.5 billion at September 30, 2009, compared with $23.5 billion at June 30, 2009. The credit reserve is driven by management's estimate of inherent losses in the loan portfolio at September 30, 2009. Of the $1.0 billion reserve increase in the third quarter, approximately $900 million reflected continued deterioration in the commercial portfolios. "We continued to see a decline in the quality of our performing commercial and commercial real estate portfolio as well as an increase in the amount of life-of-loan reserves taken on large commercial loans where we believe it is probable that we will not collect all amounts due," said Loughlin.

The remaining $100 million increase in the reserve relates mostly to the consumer loan portfolio and is principally due to the increasing level of residential real estate loan modifications classified as TDRs. The increased modifications this quarter resulted in an increase in the allowance of approximately $400 million compared with approximately $265 million last quarter. This increase was offset by approximately $345 million release in reserves related to performing consumer loans. "Based on our expectation that consumer related losses will peak in the first half of 2010 and then begin to gradually decline, the allowance required for performing consumer loans has decreased when compared to the allowance at the end of the second quarter 2009," said Loughlin.

The allowance coverage to total loans increased to 3.07 percent compared with 2.86 percent at June 30, 2009. The allowance coverage to NPLs was 118 percent as of September 30, 2009. "We believe the allowance was adequate for losses inherent in the loan portfolio at September 30, 2009, including both performing and nonperforming loans," said Loughlin.

Credit Summary

"We are two years into the most difficult credit cycle in recent memory," said Loughlin. "Economic challenges continue and we expect that credit costs will remain elevated in the fourth quarter. However, based on portfolio trends and our current economic outlook, and assuming no unexpected further deterioration in the economy, we believe consumer loan losses will peak in the first half of 2010 then gradually decline, while commercial and commercial real estate loan losses will peak in the second half of 2010 and then gradually decline. We expect nonperforming assets to continue to increase in the near term, but at a slower pace as credit deterioration slows. NPAs are expected to remain elevated through 2010. We are working closely with customers who are having difficulties to understand their challenges, identify possible solutions and minimize loss. We believe our experienced and stable management team is well equipped to navigate through the end of this cycle."

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:

 
 
 
 
 
 
Quarter ended

 
 
 
 
 
 
Sept. 30,
 
June 30,

(in millions)
 
 
2009
 
2009

Community Banking
 
$
2,667
 
2,008

Wholesale Banking
 
 
598
 
1,067

Wealth, Brokerage and Retirement
 
 
244
 
363

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 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.

Selected Financial Information

 
 
 
 
 
 
Quarter ended

 
 
 
 
 
 
Sept. 30,
 
June 30,

(in millions)
 
 
2009
 
2009

Total revenue
 
$
15,143
 
14,807

Provision for credit losses
 
 
4,572
 
4,264

Noninterest expense
 
 
6,802
 
7,665

Segment net income
 
 
2,667
 
2,008

 
 
 
 
 
 
 
 
 

(in billions)
 
 
 
 

Average loans
 
 
534.7
 
540.7

Average assets
 
 
785.2
 
799.2

Average core deposits
 
 
530.3
 
543.9

Community Banking reported net income of $2.7 billion, up $659 million, or 131 percent (annualized), from second quarter. Revenue increased $336 million, or 9 percent (annualized), driven by strong regional banking and mortgage fee income partially offset by a decrease in net interest margin. Noninterest income increased $420 million, or 28 percent (annualized), from prior quarter driven by continued strength in mortgage banking and strong growth in deposit service charges and card fees. Noninterest expense decreased $863 million, or 45 percent (annualized), driven by higher second quarter FDIC deposit insurance assessments as well as expense reductions due to Wachovia merger-related cost saves. The provision for credit losses increased $308 million, and included a $236 million credit reserve build compared with a $479 million credit reserve build in the prior quarter.

Regional Banking Highlights for Legacy Wells Fargo

• Record core product solutions (sales) of 6.84 million, up 10 percent from prior year on a comparable basis
• Core sales per platform banker FTE (active, full-time equivalent) of 5.88 per day, up from 5.65 in prior year on a comparable basis
• Record retail bank household cross-sell of Wells Fargo products of 5.90 products per household; 25 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 14 percent from prior year, purchased by 78 percent of new checking account customers
• Customer loyalty scores up 3 percent, and welcoming and wait time scores improved 7 percent from prior year (based on customers conducting transactions with tellers)
• Business Banking
  • Store-based business solutions up 11 percent from prior year
  • Business Banking household cross-sell of 3.72 products per household
  • Sales of Wells Fargo Business Services Packages (business checking account and at least three other business products) up 18 percent from prior year, purchased by 55 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 5.2 percent from prior year
• Business checking accounts up a net 4.1 percent from prior year
• Opened 15 banking stores for retail network total of 6,653 stores
• 12,352 ATMs across our network, including 3,260 Envelope-FreeSM webATM machines
• America's #1 small business lender for 7th consecutive year (in loans under $100,000), according to 2008 Community Reinvestment Act (CRA) data

Online Banking

• 16.2 million combined active online customers
• 3.9 million combined active Bill Pay customers
• Global Finance Magazine ranked Wells Fargo the Best Consumer Internet Bank in the U.S. (July 2009)
• Wells Fargo launched customer-to-customer mobile banking money transfers, a simple and secure way to send funds to family and friends

Wells Fargo Home Mortgage (Home Mortgage)

• Home Mortgage applications of $123 billion, compared with $194 billion in prior quarter
• Home Mortgage application pipeline of $62 billion at quarter end, compared with $90 billion at June 30, 2009
• Home Mortgage originations of $96 billion, down from $129 billion in prior quarter
• Owned residential mortgage servicing portfolio of $1.7 trillion

Wholesale Banking provides financial solutions to businesses across the United States with annual 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.

Selected Financial Information

 
 
 
 
 
 
Quarter ended

 
 
 
 
 
 
Sept. 30,
 
June 30,

(in millions)
 
 
2009
 
2009

Total revenue
 
$
4,916
 
5,238

Provision for credit losses
 
 
1,361
 
738

Noninterest expense
 
 
2,630
 
2,807

Segment net income
 
 
598
 
1,067

 
 
 
 
 
 
 
 
 

(in billions)
 
 
 
 

Average loans
 
 
247.0
 
263.5

Average assets
 
 
369.3
 
381.7

Average core deposits
 
 
146.9
 
138.1

Wholesale Banking reported net income of $598 million compared with $1.07 billion in second quarter 2009. Revenue decreased $322 million, primarily due to strength in investment banking and capital markets revenue in the prior quarter, as well as insurance revenue seasonality. Average core deposits were $147 billion up 25 percent (annualized) from the prior quarter. Noninterest expense decreased $177 million, primarily due to lower FDIC deposit insurance assessments. The provision for credit losses was $1.36 billion, an increase of $623 million from the prior quarter, and included $627 million of additional provision recorded to build reserves for the wholesale portfolio, compared with a credit reserve build of $162 million in the prior quarter.

• Government and Institutional Banking core deposits up 3 percent and noninterest income up 9 percent, driven by creation of integrated national platform of Wachovia and Wells Fargo capabilities, continued support of client credit needs and expansion in Public Finance
• Total core deposits up 13 percent and noninterest income up 2 percent in Global Financial Institutions and Trade Services, as international bank liquidity continued to improve and trade and payment volumes increased
• For 7th time in 8 years, Wells Fargo Shareowner ServicesSM received the TALON award as transfer agent ranked highest in Overall Satisfaction
• Treasury Management introduced enhanced version of CEO Workstation®, an easy-to-use online cash management tool
• Merger 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 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.

Selected Financial Information

 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
Quarter ended

 
 
 
 
 
 
Sept. 30,
 
June 30,

(in millions)
 
 
2009
 
2009

Total revenue
 
$
2,966
 
2,986

Provision for credit losses
 
 
234
 
115

Noninterest expense
 
 
2,314
 
2,289

Segment net income
 
 
244
 
363

 
 
 
 
 
 
 
 
 

(in billions)
 
 
 
 

Average loans
 
 
45.4
 
45.9

Average assets
 
 
108.6
 
110.2

Average core deposits
 
 
116.4
 
113.5

Wealth, Brokerage and Retirement reported net income of $244 million, compared with $363 million in the prior quarter. Revenue was $3.0 billion consistent with the prior quarter's levels as the strong equity market recovery led to increases in client assets across the brokerage, wealth and retirement businesses, driving solid revenue growth, partially offset by lower realized gains on sales of securities available for sale in the brokerage business. Total provision for credit losses increased $119 million from the prior quarter, largely reflecting a credit reserve build of $137 million in third quarter due to higher loss rates. Average core deposits increased $2.9 billion, or 10 percent (annualized), from second quarter, reflecting continued success in attracting client assets, including deposits.

Retail Brokerage

• Client assets increased 8 percent to $1.1 trillion from prior quarter
• Managed account assets increased $23 billion, or 14 percent, from prior quarter, including net inflows of $8 billion
• Brokerage transactional revenue increased 2 percent from prior quarter

Wealth Management

• Continued strong deposit growth, with average balances up 8 percent from prior quarter
• Trust assets of $119 billion, up 7 percent from prior quarter

Retirement

• Retirement plan assets of $271 billion increased $22 billion, or 9 percent, from prior quarter
• IRA assets of $231 billion increased $20 billion, or 9 percent, from prior quarter
• Integrated sales approach, firm stability and scale in the business, drove key new business wins in institutional retirement

Recorded Message

A recorded message reviewing Wells Fargo's results is available at 5:30 a.m. Pacific Time through October 24, 2009. Dial 866-416-0522 (domestic) or 706-902-3479 (international). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings.

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 that we currently expect that credit losses will peak in 2010, absent further deterioration in the economy, with consumer loan losses expected to peak in the first half of 2010 and commercial and commercial real estate loan losses expected to peak later in 2010, and that the pick-a-pay portfolios, both purchased credit-impaired and non-impaired, 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 approximately $5.5 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; (iv) the status of our capital requirements under the Supervisory Capital Assessment Program; and (v) our preliminary estimates to add assets to our consolidated financial statements upon the implementation of FAS 166 and FAS 167.

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; legislative proposals to allow mortgage cram-downs in bankruptcy or force other loan modifications; 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; 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 stabilize or improve. Increases in loan charge-offs or in the allowance for credit losses and related provision expense could materially adversely affect our financial results and condition. There is no assurance that we will meet the SCAP capital requirement on the November 9, 2009, deadline established by the Federal Reserve Board. Although we exceeded the requirement at September 30, 2009, our common equity capital could fall between now and the deadline, causing us not to meet the requirement. Failure to meet the requirement could result in the issuance of equity securities or the conversion of preferred securities into common stock, resulting in substantial dilution to existing stockholders. There is no assurance as to when or how we will repay the government's investment or that we will be able to repay the investment in a manner that does not require the issuance of equity securities resulting in substantial dilution to existing stockholders. 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, and June 30, 2009, and our Annual Report on Form 10-K for the year ended December 31, 2008, 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, over 12,000 ATMs and the internet (wellsfargo.com) across North America and internationally.

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA (1) (2)

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
Quarter ended Sept. 30,
 
Nine months ended Sept. 30,

($ in millions, except per share amounts)
 
 
2009
 
 
2008
 
2009
 
2008

For the Period
 
 
 
 
 
 
 
 
 

Wells Fargo net income
 
$
3,235
 
 
1,637
 
9,452
 
5,389

Wells Fargo net income applicable to common stock
 
 
2,637
 
 
1,637
 
7,596
 
5,389

Diluted earnings per common share
 
 
0.56
 
 
0.49
 
1.69
 
1.62

Profitability ratios (annualized):
 
 
 
 
 
 
 
 
 

 
Wells Fargo net income to average assets (ROA)
 
 
1.03
%
 
1.06
 
1.00
 
1.21

 
Net income to average assets
 
 
1.06
 
 
1.07
 
1.02
 
1.22

 

Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders' equity (ROE)

 
 
12.04
 
 
13.63
 
13.29
 
15.02

 
Net income to average total equity
 
 
10.57
 
 
13.66
 
11.32
 
15.06

Efficiency ratio (3)
 
 
52.0
 
 
53.0
 
54.9
 
51.8

Total revenue
 
$
22,466
 
 
10,377
 
65,990
 
32,400

Pre-tax pre-provision profit (PTPP) (4)
 
 
10,782
 
 
4,876
 
29,791
 
15,612

Dividends declared per common share
 
 
0.05
 
 
0.34
 
0.44
 
0.96

Average common shares outstanding
 
 
4,678.3
 
 
3,316.4
 
4,471.2
 
3,309.6

Diluted average common shares outstanding
 
 
4,706.4
 
 
3,331.0
 
4,485.3
 
3,323.4

Average loans
 
$
810,191
 
 
404,203
 
833,076
 
393,262

Average assets
 
 
1,246,051
 
 
614,194
 
1,270,071
 
594,717

Average core deposits (5)
 
 
759,319
 
 
320,074
 
759,668
 
318,582

Average retail core deposits (6)
 
 
584,414
 
 
234,140
 
590,499
 
230,935

Net interest margin
 
 
4.36
%
 
4.79
 
4.27
 
4.80

At Period End
 
 
 
 
 
 
 
 
 

Securities available for sale
 
$
183,814
 
 
86,882
 
183,814
 
86,882

Loans
 
 
799,952
 
 
411,049
 
799,952
 
411,049

Allowance for loan losses
 
 
24,028
 
 
7,865
 
24,028
 
7,865

Goodwill
 
 
24,052
 
 
13,520
 
24,052
 
13,520

Assets
 
 
1,228,625
 
 
622,361
 
1,228,625
 
622,361

Core deposits (5)
 
 
747,913
 
 
334,076
 
747,913
 
334,076

Wells Fargo stockholders' equity
 
 
122,150
 
 
46,957
 
122,150
 
46,957

Total equity
 
 
128,924
 
 
47,259
 
128,924
 
47,259

Capital ratios:
 
 
 
 
 
 
 
 
 

 
Wells Fargo common stockholders' equity to assets
 
 
7.41
%
 
7.54
 
7.41
 
7.54

 
Total equity to assets
 
 
10.49
 
 
7.59
 
10.49
 
7.59

 
Average Wells Fargo common stockholders' equity to average assets
 
 
6.98
 
 
7.78
 
6.02
 
8.06

 
Average total equity to average assets
 
 
9.99
 
 
7.83
 
8.98
 
8.11

 
Risk-based capital (7)
 
 
 
 
 
 
 
 
 

 
 
Tier 1 capital
 
 
10.63
 
 
8.59
 
10.63
 
8.59

 
 
Total capital
 
 
14.66
 
 
11.51
 
14.66
 
11.51

 
Tier 1 leverage (7)
 
 
9.03
 
 
7.54
 
9.03
 
7.54

Book value per common share
 
$
19.46
 
 
14.14
 
19.46
 
14.14

Team members (active, full-time equivalent)
 
 
265,100
 
 
159,000
 
265,100
 
159,000

Common stock price:
 
 
 
 
 
 
 
 
 

 
High
 
$
29.56
 
 
44.68
 
30.47
 
44.68

 
Low
 
 
22.08
 
 
20.46
 
7.80
 
20.46

 
Period end
 
 
28.18
 
 
37.53
 
28.18
 
37.53

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 

(1)
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.

(2)
On January 1, 2009, we adopted new accounting guidance on noncontrolling interests contained in FASB ASC 810-10, Consolidation (Statement of Financial Accounting Standards (FAS) No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51), 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.

(3)
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

(4)
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.

(5)
Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

(6)
Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.

(7)
The September 30, 2009, ratios are preliminary.

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA (1) (2)

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
Quarter ended

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

($ in millions, except per share amounts)
 
 
2009
 
2009
 
2009
 
2008
 
 
2008

For the Quarter
 
 
 
 
 
 
 
 
 
 

Wells Fargo net income (loss)
 
$
3,235
 
3,172
 
3,045
 
(2,734
)
 
1,637

Wells Fargo net income (loss) applicable to common stock
 
 
2,637
 
2,575
 
2,384
 
(3,020
)
 
1,637

Diluted earnings (loss) per common share
 
 
0.56
 
0.57
 
0.56
 
(0.84
)
 
0.49

Profitability ratios (annualized):
 
 
 
 
 
 
 
 
 
 

 
Wells Fargo net income (loss) to average assets (ROA)
 
 
1.03
%
1.00
 
0.96
 
(1.72
)
 
1.06

 
Net income (loss) to average assets
 
 
1.06
 
1.02
 
0.97
 
(1.72
)
 
1.07

 

Wells Fargo net income (loss) applicable to common stock to average Wells Fargo common stockholders' equity (ROE)

 
 
12.04
 
13.70
 
14.49
 
(22.32
)
 
13.63

 
Net income (loss) to average total equity
 
 
10.57
 
11.56
 
11.97
 
(15.53
)
 
13.66

Efficiency ratio (3)
 
 
52.0
 
56.4
 
56.2
 
61.3
 
 
53.0

Total revenue
 
$
22,466
 
22,507
 
21,017
 
9,477
 
 
10,377

Pre-tax pre-provision profit (PTPP) (4)
 
 
10,782
 
9,810
 
9,199
 
3,667
 
 
4,876

Dividends declared per common share
 
 
0.05
 
0.05
 
0.34
 
0.34
 
 
0.34

Average common shares outstanding
 
 
4,678.3
 
4,483.1
 
4,247.4
 
3,582.4
 
 
3,316.4

Diluted average common shares outstanding
 
 
4,706.4
 
4,501.6
 
4,249.3
 
3,593.6
 
 
3,331.0

Average loans
 
$
810,191
 
833,945
 
855,591
 
413,940
 
 
404,203

Average assets
 
 
1,246,051
 
1,274,926
 
1,289,716
 
633,223
 
 
614,194

Average core deposits (5)
 
 
759,319
 
765,697
 
753,928
 
344,957
 
 
320,074

Average retail core deposits (6)
 
 
584,414
 
596,648
 
590,502
 
243,464
 
 
234,140

Net interest margin
 
 
4.36
%
4.30
 
4.16
 
4.90
 
 
4.79

At Quarter End
 
 
 
 
 
 
 
 
 
 

Securities available for sale
 
$
183,814
 
206,795
 
178,468
 
151,569
 
 
86,882

Loans
 
 
799,952
 
821,614
 
843,579
 
864,830
 
 
411,049

Allowance for loan losses
 
 
24,028
 
23,035
 
22,281
 
21,013
 
 
7,865

Goodwill
 
 
24,052
 
24,619
 
23,825
 
22,627
 
 
13,520

Assets
 
 
1,228,625
 
1,284,176
 
1,285,891
 
1,309,639
 
 
622,361

Core deposits (5)
 
 
747,913
 
761,122
 
756,183
 
745,432
 
 
334,076

Wells Fargo stockholders' equity
 
 
122,150
 
114,623
 
100,295
 
99,084
 
 
46,957

Total equity
 
 
128,924
 
121,382
 
107,057
 
102,316
 
 
47,259

Capital ratios:
 
 
 
 
 
 
 
 
 
 

 
Wells Fargo common stockholders' equity to assets
 
 
7.41
%
6.51
 
5.40
 
5.21
 
 
7.54

 
Total equity to assets
 
 
10.49
 
9.45
 
8.33
 
7.81
 
 
7.59

 
Average Wells Fargo common stockholders' equity to average assets
 
 
6.98
 
5.92
 
5.17
 
8.50
 
 
7.78

 
Average total equity to average assets
 
 
9.99
 
8.85
 
8.11
 
11.09
 
 
7.83

 
Risk-based capital (7)
 
 
 
 
 
 
 
 
 
 

 
 
Tier 1 capital
 
 
10.63
 
9.80
 
8.30
 
7.84
 
 
8.59

 
 
Total capital
 
 
14.66
 
13.84
 
12.30
 
11.83
 
 
11.51

 
Tier 1 leverage (7)
 
 
9.03
 
8.32
 
7.09
 
14.52
 
 
7.54

Book value per common share
 
$
19.46
 
17.91
 
16.28
 
16.15
 
 
14.14

Team members (active, full-time equivalent)
 
 
265,100
 
269,900
 
272,800
 
270,800
 
 
159,000

Common stock price:
 
 
 
 
 
 
 
 
 
 

 
High
 
$
29.56
 
28.45
 
30.47
 
38.95
 
 
44.68

 
Low
 
 
22.08
 
13.65
 
7.80
 
19.89
 
 
20.46

 
Period end
 
 
28.18
 
24.26
 
14.24
 
29.48
 
 
37.53

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
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.

(2)
On January 1, 2009, we adopted new accounting guidance on noncontrolling interests contained in FASB ASC 810-10, Consolidation (Statement of Financial Accounting Standards (FAS) No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51), 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.

(3)
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

(4)
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.

(5)
Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

(6)
Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.

(7)
The September 30, 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 and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
Quarter ended Sept. 30,
 
Nine months ended Sept. 30,

(in millions, except per share amounts)
 
2009
 
2008
 
2009
 
2008

Interest income
 
 
 
 
 
 
 
 

Trading assets
 
$
216
 
 
41
 
 
688
 
 
126
 

Securities available for sale
 
 
2,947
 
 
1,397
 
 
8,543
 
 
3,753
 

Mortgages held for sale
 
 
524
 
 
394
 
 
1,484
 
 
1,211
 

Loans held for sale
 
 
34
 
 
12
 
 
151
 
 
34
 

Loans
 
 
10,170
 
 
6,888
 
 
31,467
 
 
20,906
 

Other interest income
 
 
77
 
 
42
 
 
249
 
 
140
 

 
Total interest income
 
 
13,968
 
 
8,774
 
 
42,582
 
 
26,170
 

Interest expense
 
 
 
 
 
 
 
 

Deposits
 
 
905
 
 
1,019
 
 
2,861
 
 
3,676
 

Short-term borrowings
 
 
32
 
 
492
 
 
210
 
 
1,274
 

Long-term debt
 
 
1,301
 
 
882
 
 
4,565
 
 
2,801
 

Other interest expense
 
 
46
 
 
-
 
 
122
 
 
-
 

 
Total interest expense
 
 
2,284
 
 
2,393
 
 
7,758
 
 
7,751
 

Net interest income
 
 
11,684
 
 
6,381
 
 
34,824
 
 
18,419
 

Provision for credit losses
 
 
6,111
 
 
2,495
 
 
15,755
 
 
7,535
 

Net interest income after provision for credit losses
 
 
5,573
 
 
3,886
 
 
19,069
 
 
10,884
 

Noninterest income
 
 
 
 
 
 
 
 

Service charges on deposit accounts
 
 
1,478
 
 
839
 
 
4,320
 
 
2,387
 

Trust and investment fees
 
 
2,502
 
 
738
 
 
7,130
 
 
2,263
 

Card fees
 
 
946
 
 
601
 
 
2,722
 
 
1,747
 

Other fees
 
 
950
 
 
552
 
 
2,814
 
 
1,562
 

Mortgage banking
 
 
3,067
 
 
892
 
 
8,617
 
 
2,720
 

Insurance
 
 
468
 
 
439
 
 
1,644
 
 
1,493
 

Net gains (losses) on debt securities available for sale (includes impairment losses of $273 and $850, consisting of $314 and $1,889 of total other-than-temporary impairment losses, net of $41 and $1,039 recognized in other comprehensive income, for the quarter and nine months ended September 30, 2009, respectively)

 
 
(40
)
 
84
 
 
(237
)
 
316
 

Net gains (losses) from equity investments
 
 
29
 
 
(509
)
 
(88
)
 
(149
)

Other
 
 
1,382
 
 
360
 
 
4,244
 
 
1,642
 

 
Total noninterest income
 
 
10,782
 
 
3,996
 
 
31,166
 
 
13,981
 

Noninterest expense
 
 
 
 
 
 
 
 

Salaries
 
 
3,428
 
 
2,078
 
 
10,252
 
 
6,092
 

Commission and incentive compensation
 
 
2,051
 
 
555
 
 
5,935
 
 
2,005
 

Employee benefits
 
 
1,034
 
 
486
 
 
3,545
 
 
1,666
 

Equipment
 
 
563
 
 
302
 
 
1,825
 
 
955
 

Net occupancy
 
 
778
 
 
402
 
 
2,357
 
 
1,201
 

Core deposit and other intangibles
 
 
642
 
 
47
 
 
1,935
 
 
139
 

FDIC and other deposit assessments
 
 
228
 
 
37
 
 
1,547
 
 
63
 

Other
 
 
2,960
 
 
1,594
 
 
8,803
 
 
4,667
 

 
Total noninterest expense
 
 
11,684
 
 
5,501
 
 
36,199
 
 
16,788
 

Income before income tax expense
 
 
4,671
 
 
2,381
 
 
14,036
 
 
8,077
 

Income tax expense
 
 
1,355
 
 
730
 
 
4,382
 
 
2,638
 

Net income before noncontrolling interests
 
 
3,316
 
 
1,651
 
 
9,654
 
 
5,439
 

Less: Net income from noncontrolling interests
 
 
81
 
 
14
 
 
202
 
 
50
 

Wells Fargo net income
 
$
3,235
 
 
1,637
 
 
9,452
 
 
5,389
 

Wells Fargo net income applicable to common stock
 
$
2,637
 
 
1,637
 
 
7,596
 
 
5,389
 

Per share information
 
 
 
 
 
 
 
 

Earnings per common share
 
$
0.56
 
 
0.49
 
 
1.70
 
 
1.63
 

Diluted earnings per common share
 
 
0.56
 
 
0.49
 
 
1.69
 
 
1.62
 

Dividends declared per common share
 
 
0.05
 
 
0.34
 
 
0.44
 
 
0.96
 

Average common shares outstanding
 
 
4,678.3
 
 
3,316.4
 
 
4,471.2
 
 
3,309.6
 

Diluted average common shares outstanding
 
 
4,706.4
 
 
3,331.0
 
 
4,485.3
 
 
3,323.4
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
Quarter ended

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

(in millions, except per share amounts)
 
2009
 
2009
 
2009
 
2008
 
2008

Interest income
 
 
 
 
 
 
 
 
 
 

Trading assets
 
$
216
 
 
206
 
 
266
 
 
51
 
 
41
 

Securities available for sale
 
 
2,947
 
 
2,887
 
 
2,709
 
 
1,534
 
 
1,397
 

Mortgages held for sale
 
 
524
 
 
545
 
 
415
 
 
362
 
 
394
 

Loans held for sale
 
 
34
 
 
50
 
 
67
 
 
14
 
 
12
 

Loans
 
 
10,170
 
 
10,532
 
 
10,765
 
 
6,726
 
 
6,888
 

Other interest income
 
 
77
 
 
81
 
 
91
 
 
41
 
 
42
 

 
Total interest income
 
 
13,968
 
 
14,301
 
 
14,313
 
 
8,728
 
 
8,774
 

Interest expense
 
 
 
 
 
 
 
 
 
 

Deposits
 
 
905
 
 
957
 
 
999
 
 
845
 
 
1,019
 

Short-term borrowings
 
 
32
 
 
55
 
 
123
 
 
204
 
 
492
 

Long-term debt
 
 
1,301
 
 
1,485
 
 
1,779
 
 
955
 
 
882
 

Other interest expense
 
 
46
 
 
40
 
 
36
 
 
-
 
 
-
 

 
Total interest expense
 
 
2,284
 
 
2,537
 
 
2,937
 
 
2,004
 
 
2,393
 

Net interest income
 
 
11,684
 
 
11,764
 
 
11,376
 
 
6,724
 
 
6,381
 

Provision for credit losses
 
 
6,111
 
 
5,086
 
 
4,558
 
 
8,444
 
 
2,495
 

Net interest income after provision for credit losses
 
 
5,573
 
 
6,678
 
 
6,818
 
 
(1,720
)
 
3,886
 

Noninterest income
 
 
 
 
 
 
 
 
 
 

Service charges on deposit accounts
 
 
1,478
 
 
1,448
 
 
1,394
 
 
803
 
 
839
 

Trust and investment fees
 
 
2,502
 
 
2,413
 
 
2,215
 
 
661
 
 
738
 

Card fees
 
 
946
 
 
923
 
 
853
 
 
589
 
 
601
 

Other fees
 
 
950
 
 
963
 
 
901
 
 
535
 
 
552
 

Mortgage banking
 
 
3,067
 
 
3,046
 
 
2,504
 
 
(195
)
 
892
 

Insurance
 
 
468
 
 
595
 
 
581
 
 
337
 
 
439
 

Net gains (losses) on debt securities available for sale
 
 
(40
)
 
(78
)
 
(119
)
 
721
 
 
84
 

Net gains (losses) from equity investments
 
 
29
 
 
40
 
 
(157
)
 
(608
)
 
(509
)

Other
 
 
1,382
 
 
1,393
 
 
1,469
 
 
(90
)
 
360
 

 
Total noninterest income
 
 
10,782
 
 
10,743
 
 
9,641
 
 
2,753
 
 
3,996
 

Noninterest expense
 
 
 
 
 
 
 
 
 
 

Salaries
 
 
3,428
 
 
3,438
 
 
3,386
 
 
2,168
 
 
2,078
 

Commission and incentive compensation
 
 
2,051
 
 
2,060
 
 
1,824
 
 
671
 
 
555
 

Employee benefits
 
 
1,034
 
 
1,227
 
 
1,284
 
 
338
 
 
486
 

Equipment
 
 
563
 
 
575
 
 
687
 
 
402
 
 
302
 

Net occupancy
 
 
778
 
 
783
 
 
796
 
 
418
 
 
402
 

Core deposit and other intangibles
 
 
642
 
 
646
 
 
647
 
 
47
 
 
47
 

FDIC and other deposit assessments
 
 
228
 
 
981
 
 
338
 
 
57
 
 
37
 

Other
 
 
2,960
 
 
2,987
 
 
2,856
 
 
1,709
 
 
1,594
 

 
Total noninterest expense
 
 
11,684
 
 
12,697
 
 
11,818
 
 
5,810
 
 
5,501
 

Income (loss) before income tax expense (benefit)
 
 
4,671
 
 
4,724
 
 
4,641
 
 
(4,777
)
 
2,381
 

Income tax expense (benefit)
 
 
1,355
 
 
1,475
 
 
1,552
 
 
(2,036
)
 
730
 

Net income (loss) before noncontrolling interests
 
 
3,316
 
 
3,249
 
 
3,089
 
 
(2,741
)
 
1,651
 

Less: Net income (loss) from noncontrolling interests
 
 
81
 
 
77
 
 
44
 
 
(7
)
 
14
 

Wells Fargo net income (loss)
 
$
3,235
 
 
3,172
 
 
3,045
 
 
(2,734
)
 
1,637
 

Wells Fargo net income (loss) applicable to common stock
 
$
2,637
 
 
2,575
 
 
2,384
 
 
(3,020
)
 
1,637
 

Per share information
 
 
 
 
 
 
 
 
 
 

Earnings (loss) per common share
 
$
0.56
 
 
0.58
 
 
0.56
 
 
(0.84
)
 
0.49
 

Diluted earnings (loss) per common share
 
 
0.56
 
 
0.57
 
 
0.56
 
 
(0.84
)
 
0.49
 

Dividends declared per common share
 
 
0.05
 
 
0.05
 
 
0.34
 
 
0.34
 
 
0.34
 

Average common shares outstanding
 
 
4,678.3
 
 
4,483.1
 
 
4,247.4
 
 
3,582.4
 
 
3,316.4
 

Diluted average common shares outstanding
 
 
4,706.4
 
 
4,501.6
 
 
4,249.3
 
 
3,593.6
 
 
3,331.0
 

Wells Fargo & Company and Subsidiaries

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
Quarter ended September 30,

 
 
 
 
 
 
 
 
 
2009
 
2008

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest
 
 
 
 
 
 
Interest

 
 
 
 
 
 
 
 
 
Average
 
Yields/
 
 
income/
 
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

 
$
16,356
 
 
0.66
%
 
$
27
 
3,463
 
 
2.09
%
 
$
18

Trading assets
 
 
 
20,518
 
 
4.29
 
 
 
221
 
4,838
 
 
3.72
 
 
 
46

Debt securities available for sale (3):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Securities of U.S. Treasury and federal agencies
 
 
2,545
 
 
3.79
 
 
 
24
 
1,141
 
 
3.99
 
 
 
11

 
Securities of U.S. states and political subdivisions
 
 
12,818
 
 
6.28
 
 
 
204
 
7,211
 
 
6.65
 
 
 
124

 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Federal agencies
 
 
94,457
 
 
5.34
 
 
 
1,221
 
50,528
 
 
5.83
 
 
 
731

 
 
Residential and commercial
 
 
43,214
 
 
9.56
 
 
 
1,089
 
21,358
 
 
5.82
 
 
 
346

 
 
 
Total mortgage-backed securities
 
 
137,671
 
 
6.75
 
 
 
2,310
 
71,886
 
 
5.83
 
 
 
1,077

 
Other debt securities (4)
 
 
33,294
 
 
7.00
 
 
 
568
 
12,622
 
 
7.17
 
 
 
248

 
 
 
 
Total debt securities available for sale (4)
 
 
186,328
 
 
6.72
 
 
 
3,106
 
92,860
 
 
6.06
 
 
 
1,460

Mortgages held for sale (5)
 
 
40,604
 
 
5.16
 
 
 
524
 
24,990
 
 
6.31
 
 
 
394

Loans held for sale (5)
 
 
4,975
 
 
2.67
 
 
 
34
 
677
 
 
6.95
 
 
 
12

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Commercial
 
 
175,642
 
 
4.34
 
 
 
1,919
 
100,688
 
 
5.92
 
 
 
1,496

 
 
Real estate mortgage
 
 
103,450
 
 
3.39
 
 
 
883
 
43,616
 
 
5.60
 
 
 
615

 
 
Real estate construction
 
 
32,649
 
 
3.02
 
 
 
249
 
19,715
 
 
4.82
 
 
 
238

 
 
Lease financing
 
 
14,360
 
 
9.14
 
 
 
328
 
7,250
 
 
5.48
 
 
 
100

 
 
 
Total commercial and commercial real estate
 
 
326,101
 
 
4.12
 
 
 
3,379
 
171,269
 
 
5.69
 
 
 
2,449

 
Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Real estate 1-4 family first mortgage
 
 
235,051
 
 
5.35
 
 
 
3,154
 
76,197
 
 
6.64
 
 
 
1,265

 
 
Real estate 1-4 family junior lien mortgage
 
 
105,779
 
 
4.62
 
 
 
1,229
 
75,379
 
 
6.36
 
 
 
1,206

 
 
Credit card
 
 
23,448
 
 
11.65
 
 
 
683
 
19,948
 
 
12.19
 
 
 
609

 
 
Other revolving credit and installment
 
 
90,199
 
 
6.48
 
 
 
1,473
 
54,104
 
 
8.64
 
 
 
1,175

 
 
 
Total consumer
 
 
454,477
 
 
5.73
 
 
 
6,539
 
225,628
 
 
7.52
 
 
 
4,255

 
Foreign
 
 
29,613
 
 
3.61
 
 
 
270
 
7,306
 
 
10.28
 
 
 
188

 
 
 
 
Total loans (5)
 
 
810,191
 
 
5.00
 
 
 
10,188
 
404,203
 
 
6.79
 
 
 
6,892

Other
 
 
6,088
 
 
3.29
 
 
 
49
 
2,126
 
 
4.64
 
 
 
24

 
 
 
 
 
Total earning assets
 
$
1,085,060
 
 
5.20
%
 
$
14,149
 
533,157
 
 
6.57
%
 
$
8,846

Funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Interest-bearing checking
 
$
59,467
 
 
0.15
%
 
$
21
 
5,483
 
 
0.87
%
 
$
12

 
Market rate and other savings
 
 
369,120
 
 
0.34
 
 
 
317
 
166,710
 
 
1.18
 
 
 
495

 
Savings certificates
 
 
129,698
 
 
1.35
 
 
 
442
 
37,192
 
 
2.57
 
 
 
240

 
Other time deposits
 
 
18,248
 
 
1.93
 
 
 
89
 
7,930
 
 
2.59
 
 
 
53

 
Deposits in foreign offices
 
 
56,820
 
 
0.25
 
 
 
36
 
49,054
 
 
1.78
 
 
 
219

 
 
 
Total interest-bearing deposits
 
 
633,353
 
 
0.57
 
 
 
905
 
266,369
 
 
1.52
 
 
 
1,019

Short-term borrowings
 
 
39,828
 
 
0.35
 
 
 
36
 
83,458
 
 
2.35
 
 
 
492

Long-term debt
 
 
222,580
 
 
2.33
 
 
 
1,301
 
103,745
 
 
3.43
 
 
 
892

Other liabilities
 
 
5,620
 
 
3.30
 
 
 
46
 
-
 
 
-
 
 
 
-

 
 
 
Total interest-bearing liabilities
 
 
901,381
 
 
1.01
 
 
 
2,288
 
453,572
 
 
2.11
 
 
 
2,403

Portion of noninterest-bearing funding sources
 
 
183,679
 
 
-
 
 
 
-
 
79,585
 
 
-
 
 
 
-

 
 
 
 
 
Total funding sources
 
$
1,085,060
 
 
0.84
 
 
 
2,288
 
533,157
 
 
1.78
 
 
 
2,403

Net interest margin and net interest income on a taxable-equivalent basis (6)

 
 
 
4.36
%
 
$
11,861
 
 
 
4.79
%
 
$
6,443

Noninterest-earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Cash and due from banks
 
$
18,084
 
 
 
 
 
 
 
11,024
 
 
 
 
 
 

Goodwill
 
 
24,435
 
 
 
 
 
 
 
13,531
 
 
 
 
 
 

Other
 
 
118,472
 
 
 
 
 
 
 
56,482
 
 
 
 
 
 

 
 
 
 
 
Total noninterest-earning assets
 
$
160,991
 
 
 
 
 
 
 
81,037
 
 
 
 
 
 

Noninterest-bearing funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Deposits
 
$
172,588
 
 
 
 
 
 
 
87,095
 
 
 
 
 
 

Other liabilities
 
 
47,646
 
 
 
 
 
 
 
25,452
 
 
 
 
 
 

Total equity
 
 
124,436
 
 
 
 
 
 
 
48,075
 
 
 
 
 
 

Noninterest-bearing funding sources used to fund earning assets

 
 
(183,679
)
 
 
 
 
 
 
(79,585
)
 
 
 
 
 

 
 
 
 
 
Net noninterest-bearing funding sources
 
$
160,991
 
 
 
 
 
 
 
81,037
 
 
 
 
 
 

 
 
 
 
 
 
Total assets
 
$
1,246,051
 
 
 
 
 
 
 
614,194
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Our average prime rate was 3.25% and 5.00% for the quarters ended September 30, 2009 and 2008, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.41% and 2.91% for the same quarters, respectively.

(2)
Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.

(3)
Yields are based on amortized cost balances computed on a settlement date basis.

(4)
Includes certain preferred securities.

(5)
Nonaccrual loans and related income are included in their respective loan categories.

(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.

Wells Fargo & Company and Subsidiaries
 

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
Nine months ended September 30,

 
 
 
 
 
 
 
 
2009
 
2008

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest
 
 
 
 
 
 
Interest

 
 
 
 
 
 
 
 
Average
 
Yields/
 
 
income/
 
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

 
$
20,411
 
 
0.73
%
 
$
111
 
3,734
 
 
2.59
%
 
$
72

Trading assets
 
 
20,389
 
 
4.64
 
 
 
709
 
4,960
 
 
3.57
 
 
 
133

Debt securities available for sale (3):
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Securities of U.S. Treasury and federal agencies
 
 
2,514
 
 
2.61
 
 
 
48
 
1,055
 
 
3.88
 
 
 
30

 
Securities of U.S. states and political subdivisions
 
 
12,409
 
 
6.39
 
 
 
623
 
6,848
 
 
6.88
 
 
 
362

 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Federal agencies
 
 
87,916
 
 
5.45
 
 
 
3,492
 
42,448
 
 
5.93
 
 
 
1,854

 
 
Residential and commercial
 
 
41,070
 
 
9.05
 
 
 
3,150
 
21,589
 
 
5.92
 
 
 
1,010

 
 
 
Total mortgage-backed securities
 
 
128,986
 
 
6.72
 
 
 
6,642
 
64,037
 
 
5.92
 
 
 
2,864

 
Other debt securities (4)
 
 
31,437
 
 
7.01
 
 
 
1,691
 
12,351
 
 
6.78
 
 
 
670

 
 
 
 
Total debt securities available for sale (4)
 
 
175,346
 
 
6.69
 
 
 
9,004
 
84,291
 
 
6.11
 
 
 
3,926

Mortgages held for sale (5)
 
 
38,315
 
 
5.16
 
 
 
1,484
 
26,417
 
 
6.11
 
 
 
1,211

Loans held for sale (5)
 
 
6,693
 
 
3.01
 
 
 
151
 
686
 
 
6.66
 
 
 
34

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Commercial
 
 
186,610
 
 
4.10
 
 
 
5,725
 
95,697
 
 
6.29
 
 
 
4,509

 
 
Real estate mortgage
 
 
104,003
 
 
3.44
 
 
 
2,677
 
40,351
 
 
5.91
 
 
 
1,788

 
 
Real estate construction
 
 
33,660
 
 
2.92
 
 
 
734
 
19,288
 
 
5.29
 
 
 
763

 
 
Lease financing
 
 
14,968
 
 
9.04
 
 
 
1,015
 
7,055
 
 
5.63
 
 
 
298

 
 
 
Total commercial and commercial real estate
 
 
339,241
 
 
4.00
 
 
 
10,151
 
162,391
 
 
6.05
 
 
 
7,358

 
Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Real estate 1-4 family first mortgage
 
 
240,409
 
 
5.51
 
 
 
9,926
 
74,064
 
 
6.77
 
 
 
3,761

 
 
Real estate 1-4 family junior lien mortgage
 
 
108,094
 
 
4.81
 
 
 
3,894
 
75,220
 
 
6.78
 
 
 
3,820

 
 
Credit card
 
 
23,236
 
 
12.16
 
 
 
2,118
 
19,256
 
 
12.11
 
 
 
1,749

 
 
Other revolving credit and installment
 
 
91,240
 
 
6.60
 
 
 
4,502
 
54,949
 
 
8.84
 
 
 
3,637

 
 
 
Total consumer
 
 
462,979
 
 
5.90
 
 
 
20,440
 
223,489
 
 
7.74
 
 
 
12,967

 
Foreign
 
 
30,856
 
 
4.02
 
 
 
929
 
7,382
 
 
10.72
 
 
 
592

 
 
 
 
Total loans (5)
 
 
833,076
 
 
5.05
 
 
 
31,520
 
393,262
 
 
7.10
 
 
 
20,917

Other
 
 
6,102
 
 
3.02
 
 
 
137
 
1,995
 
 
4.55
 
 
 
68

 
 
 
 
 
Total earning assets
 
$
1,100,332
 
 
5.21
%
 
$
43,116
 
515,345
 
 
6.81
%
 
$
26,361

Funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Interest-bearing checking
 
$
73,195
 
 
0.14
%
 
$
77
 
5,399
 
 
1.31
%
 
$
53

 
Market rate and other savings
 
 
339,081
 
 
0.42
 
 
 
1,072
 
162,792
 
 
1.45
 
 
 
1,765

 
Savings certificates
 
 
150,607
 
 
1.14
 
 
 
1,280
 
38,907
 
 
3.23
 
 
 
940

 
Other time deposits
 
 
21,794
 
 
1.97
 
 
 
321
 
6,163
 
 
2.87
 
 
 
133

 
Deposits in foreign offices
 
 
50,907
 
 
0.29
 
 
 
111
 
49,192
 
 
2.13
 
 
 
785

 
 
 
Total interest-bearing deposits
 
 
635,584
 
 
0.60
 
 
 
2,861
 
262,453
 
 
1.87
 
 
 
3,676

Short-term borrowings
 
 
58,447
 
 
0.50
 
 
 
217
 
67,714
 
 
2.51
 
 
 
1,274

Long-term debt
 
 
238,909
 
 
2.55
 
 
 
4,568
 
101,668
 
 
3.71
 
 
 
2,825

Other liabilities
 
 
4,675
 
 
3.50
 
 
 
122
 
-
 
 
-
 
 
 
-

 
 
 
Total interest-bearing liabilities
 
 
937,615
 
 
1.11
 
 
 
7,768
 
431,835
 
 
2.40
 
 
 
7,775

Portion of noninterest-bearing funding sources
 
 
162,717
 
 
-
 
 
 
-
 
83,510
 
 
-
 
 
 
-

 
 
 
 
 
Total funding sources
 
$
1,100,332
 
 
0.94
 
 
 
7,768
 
515,345
 
 
2.01
 
 
 
7,775

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net interest margin and net interest income on a taxable-equivalent basis (6)

 
 
 
4.27
%
 
$
35,348
 
 
 
4.80
%
 
$
18,586

Noninterest-earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Cash and due from banks
 
$
19,218
 
 
 
 
 
 
 
11,182
 
 
 
 
 
 

Goodwill
 
 
23,964
 
 
 
 
 
 
 
13,289
 
 
 
 
 
 

Other
 
 
126,557
 
 
 
 
 
 
 
54,901
 
 
 
 
 
 

 
 
 
 
 
Total noninterest-earning assets
 
$
169,739
 
 
 
 
 
 
 
79,372
 
 
 
 
 
 

Noninterest-bearing funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Deposits
 
$
169,187
 
 
 
 
 
 
 
86,676
 
 
 
 
 
 

Other liabilities
 
 
49,249
 
 
 
 
 
 
 
27,973
 
 
 
 
 
 

Total equity
 
 
114,020
 
 
 
 
 
 
 
48,233
 
 
 
 
 
 

Noninterest-bearing funding sources used to fund earning assets

 
 
(162,717
)
 
 
 
 
 
 
(83,510
)
 
 
 
 
 

 
 
 
 
 
Net noninterest-bearing funding sources
 
$
169,739
 
 
 
 
 
 
 
79,372
 
 
 
 
 
 

 
 
 
 
 
 
Total assets
 
$
1,270,071
 
 
 
 
 
 
 
594,717
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Our average prime rate was 3.25% and 5.43% for the nine months ended September 30, 2009 and 2008, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.83% and 2.98% for the same periods, respectively.

(2)
Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.

(3)
Yields are based on amortized cost balances computed on a settlement date basis.

(4)
Includes certain preferred securities.

(5)
Nonaccrual loans and related income are included in their respective loan categories.

(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.

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
Quarter ended Sept. 30,
 
Nine months ended Sept. 30,

(in millions)
 
 
2009
 
 
2008
 
 
2009
 
 
2008
 

Service charges on deposit accounts
 
$
1,478
 
 
839
 
 
4,320
 
 
2,387
 

Trust and investment fees:
 
 
 
 
 
 
 
 

 
Trust, investment and IRA fees
 
 
989
 
 
549
 
 
2,550
 
 
1,674
 

 
Commissions and all other fees
 
 
1,513
 
 
189
 
 
4,580
 
 
589
 

 
 
Total trust and investment fees
 
 
2,502
 
 
738
 
 
7,130
 
 
2,263
 

Card fees
 
 
946
 
 
601
 
 
2,722
 
 
1,747
 

Other fees:
 
 
 
 
 
 
 
 

 
Cash network fees
 
 
60
 
 
48
 
 
176
 
 
143
 

 
Charges and fees on loans
 
 
453
 
 
266
 
 
1,326
 
 
765
 

 
All other fees
 
 
437
 
 
238
 
 
1,312
 
 
654
 

 
 
Total other fees
 
 
950
 
 
552
 
 
2,814
 
 
1,562
 

Mortgage banking:
 
 
 
 
 
 
 
 

 
Servicing income, net
 
 
1,873
 
 
525
 
 
3,469
 
 
1,019
 

 
Net gains on mortgage loan origination/sales activities
 
 
1,125
 
 
276
 
 
4,910
 
 
1,419
 

 
All other
 
 
69
 
 
91
 
 
238
 
 
282
 

 
 
Total mortgage banking
 
 
3,067
 
 
892
 
 
8,617
 
 
2,720
 

Insurance
 
 
468
 
 
439
 
 
1,644
 
 
1,493
 

Net gains from trading activities
 
 
622
 
 
65
 
 
2,158
 
 
684
 

Net gains (losses) on debt securities available for sale
 
 
(40
)
 
84
 
 
(237
)
 
316
 

Net gains (losses) from equity investments
 
 
29
 
 
(509
)
 
(88
)
 
(149
)

Operating leases
 
 
224
 
 
102
 
 
522
 
 
365
 

All other
 
 
536
 
 
193
 
 
1,564
 
 
593
 

 
 
 
Total
 
$
10,782
 
 
3,996
 
 
31,166
 
 
13,981
 

 
 
 
 
 
 
 
 
 
 
 
 

NONINTEREST EXPENSE
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
Quarter ended Sept. 30,
 
Nine months ended Sept. 30,

(in millions)
 
 
2009
 
 
2008
 
 
2009
 
 
2008
 

Salaries
 
$
3,428
 
 
2,078
 
 
10,252
 
 
6,092
 

Commission and incentive compensation
 
 
2,051
 
 
555
 
 
5,935
 
 
2,005
 

Employee benefits
 
 
1,034
 
 
486
 
 
3,545
 
 
1,666
 

Equipment
 
 
563
 
 
302
 
 
1,825
 
 
955
 

Net occupancy
 
 
778
 
 
402
 
 
2,357
 
 
1,201
 

Core deposit and other intangibles
 
 
642
 
 
47
 
 
1,935
 
 
139
 

FDIC and other deposit assessments
 
 
228
 
 
37
 
 
1,547
 
 
63
 

Outside professional services
 
 
489
 
 
206
 
 
1,350
 
 
589
 

Insurance
 
 
208
 
 
144
 
 
734
 
 
511
 

Postage, stationery and supplies
 
 
211
 
 
136
 
 
701
 
 
415
 

Outside data processing
 
 
251
 
 
122
 
 
745
 
 
353
 

Travel and entertainment
 
 
151
 
 
113
 
 
387
 
 
330
 

Foreclosed assets
 
 
243
 
 
99
 
 
678
 
 
298
 

Contract services
 
 
254
 
 
88
 
 
726
 
 
300
 

Operating leases
 
 
52
 
 
90
 
 
183
 
 
308
 

Advertising and promotion
 
 
160
 
 
96
 
 
396
 
 
285
 

Telecommunications
 
 
142
 
 
78
 
 
464
 
 
238
 

Operating losses
 
 
117
 
 
63
 
 
448
 
 
46
 

All other
 
 
682
 
 
359
 
 
1,991
 
 
994
 

 
Total
 
$
11,684
 
 
5,501
 
 
36,199
 
 
16,788
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
Quarter ended

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

(in millions)
 
2009
 
2009
 
2009
 
2008
 
2008

Service charges on deposit accounts
 
$
1,478
 
 
1,448
 
 
1,394
 
 
803
 
 
839
 

Trust and investment fees:
 
 
 
 
 
 
 
 
 
 

 
Trust, investment and IRA fees
 
 
989
 
 
839
 
 
722
 
 
487
 
 
549
 

 
Commissions and all other fees
 
 
1,513
 
 
1,574
 
 
1,493
 
 
174
 
 
189
 

 
 
Total trust and investment fees
 
 
2,502
 
 
2,413
 
 
2,215
 
 
661
 
 
738
 

Card fees
 
 
946
 
 
923
 
 
853
 
 
589
 
 
601
 

Other fees:
 
 
 
 
 
 
 
 
 
 

 
Cash network fees
 
 
60
 
 
58
 
 
58
 
 
45
 
 
48
 

 
Charges and fees on loans
 
 
453
 
 
440
 
 
433
 
 
272
 
 
266
 

 
All other fees
 
 
437
 
 
465
 
 
410
 
 
218
 
 
238
 

 
 
Total other fees
 
 
950
 
 
963
 
 
901
 
 
535
 
 
552
 

Mortgage banking:
 
 
 
 
 
 
 
 
 
 

 
Servicing income, net
 
 
1,873
 
 
753
 
 
843
 
 
(40
)
 
525
 

 

Net gains (losses) on mortgage loan origination/sales activities

 
 
1,125
 
 
2,203
 
 
1,582
 
 
(236
)
 
276
 

 
All other
 
 
69
 
 
90
 
 
79
 
 
81
 
 
91
 

 
 
Total mortgage banking
 
 
3,067
 
 
3,046
 
 
2,504
 
 
(195
)
 
892
 

Insurance
 
 
468
 
 
595
 
 
581
 
 
337
 
 
439
 

Net gains (losses) from trading activities
 
 
622
 
 
749
 
 
787
 
 
(409
)
 
65
 

Net gains (losses) on debt securities available for sale
 
 
(40
)
 
(78
)
 
(119
)
 
721
 
 
84
 

Net gains (losses) from equity investments
 
 
29
 
 
40
 
 
(157
)
 
(608
)
 
(509
)

Operating leases
 
 
224
 
 
168
 
 
130
 
 
62
 
 
102
 

All other
 
 
536
 
 
476
 
 
552
 
 
257
 
 
193
 

 
 
 
Total
 
$
10,782
 
 
10,743
 
 
9,641
 
 
2,753
 
 
3,996
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

FIVE QUARTER NONINTEREST EXPENSE
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
Quarter ended

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

(in millions)
 
2009
 
2009
 
2009
 
2008
 
2008

Salaries
 
$
3,428
 
 
3,438
 
 
3,386
 
 
2,168
 
 
2,078
 

Commission and incentive compensation
 
 
2,051
 
 
2,060
 
 
1,824
 
 
671
 
 
555
 

Employee benefits
 
 
1,034
 
 
1,227
 
 
1,284
 
 
338
 
 
486
 

Equipment
 
 
563
 
 
575
 
 
687
 
 
402
 
 
302
 

Net occupancy
 
 
778
 
 
783
 
 
796
 
 
418
 
 
402
 

Core deposit and other intangibles
 
 
642
 
 
646
 
 
647
 
 
47
 
 
47
 

FDIC and other deposit assessments
 
 
228
 
 
981
 
 
338
 
 
57
 
 
37
 

Outside professional services
 
 
489
 
 
451
 
 
410
 
 
258
 
 
206
 

Insurance
 
 
208
 
 
259
 
 
267
 
 
214
 
 
144
 

Postage, stationery and supplies
 
 
211
 
 
240
 
 
250
 
 
141
 
 
136
 

Outside data processing
 
 
251
 
 
282
 
 
212
 
 
127
 
 
122
 

Travel and entertainment
 
 
151
 
 
131
 
 
105
 
 
117
 
 
113
 

Foreclosed assets
 
 
243
 
 
187
 
 
248
 
 
116
 
 
99
 

Contract services
 
 
254
 
 
256
 
 
216
 
 
107
 
 
88
 

Operating leases
 
 
52
 
 
61
 
 
70
 
 
81
 
 
90
 

Advertising and promotion
 
 
160
 
 
111
 
 
125
 
 
93
 
 
96
 

Telecommunications
 
 
142
 
 
164
 
 
158
 
 
83
 
 
78
 

Operating losses
 
 
117
 
 
159
 
 
172
 
 
96
 
 
63
 

All other
 
 
682
 
 
686
 
 
623
 
 
276
 
 
359
 

 
Total
 
$
11,684
 
 
12,697
 
 
11,818
 
 
5,810
 
 
5,501
 

Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
 

(in millions, except shares)
 
Sept. 30,
2009
 
 
Dec. 31,
2008
 

Assets
 
 
 
 
 
 

Cash and due from banks
 
$
17,233
 
 
23,763
 

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

 
 
17,491
 
 
49,433
 

Trading assets
 
 
43,198
 
 
54,884
 

Securities available for sale
 
 
183,814
 
 
151,569
 

Mortgages held for sale (includes $33,435 and $18,754 carried at fair value)
 
 
35,538
 
 
20,088
 

Loans held for sale (includes $201 and $398 carried at fair value)
 
 
5,846
 
 
6,228
 

 
 
 
 
 
 
 

Loans
 
 
799,952
 
 
864,830
 

Allowance for loan losses
 
 
(24,028
)
 
(21,013
)

Net loans
 
 
775,924
 
 
843,817
 

Mortgage servicing rights:
 
 
 
 
 
 

Measured at fair value (residential MSRs)
 
 
14,500
 
 
14,714
 

Amortized
 
 
1,162
 
 
1,446
 

Premises and equipment, net
 
 
11,040
 
 
11,269
 

Goodwill
 
 
24,052
 
 
22,627
 

Other assets
 
 
98,827
 
 
109,801
 

Total assets
 
$
1,228,625
 
 
1,309,639
 

Liabilities
 
 
 
 
 
 

Noninterest-bearing deposits
 
$
165,260
 
 
150,837
 

Interest-bearing deposits
 
 
631,488
 
 
630,565
 

Total deposits
 
 
796,748
 
 
781,402
 

Short-term borrowings
 
 
30,800
 
 
108,074
 

Accrued expenses and other liabilities
 
 
57,861
 
 
50,689
 

Long-term debt
 
 
214,292
 
 
267,158
 

Total liabilities
 
 
1,099,701
 
 
1,207,323
 

Equity
 
 
 
 
 
 

Wells Fargo stockholders' equity:
 
 
 
 
 
 

Preferred stock
 
 
31,589
 
 
31,332
 

Common stock - $1-2/3 par value, authorized 6,000,000,000 shares; issued 4,756,071,429 shares and 4,363,921,429 shares

 
 
7,927
 
 
7,273
 

Additional paid-in capital
 
 
40,343
 
 
36,026
 

Retained earnings
 
 
41,485
 
 
36,543
 

Cumulative other comprehensive income (loss)
 
 
4,088
 
 
(6,869
)

Treasury stock - 76,876,271 shares and 135,290,540 shares
 
 
(2,771
)
 
(4,666
)

Unearned ESOP shares
 
 
(511
)
 
(555
)

Total Wells Fargo stockholders' equity
 
 
122,150
 
 
99,084
 

Noncontrolling interests
 
 
6,774
 
 
3,232
 

Total equity
 
 
128,924
 
 
102,316
 

Total liabilities and equity
 
$
1,228,625
 
 
1,309,639
 

 
 
 
 
 
 
 

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
 

(in millions)
 
Sept. 30,
2009
 
 
June 30,
2009
 
 
Mar. 31,
2009
 
 
Dec. 31,
2008
 
 
Sept. 30,
2008
 

Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Cash and due from banks
 
$
17,233
 
 
20,632
 
 
22,186
 
 
23,763
 
 
12,861
 

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

 
 
17,491
 
 
15,976
 
 
18,625
 
 
49,433
 
 
8,093
 

Trading assets
 
 
43,198
 
 
40,110
 
 
46,497
 
 
54,884
 
 
9,097
 

Securities available for sale
 
 
183,814
 
 
206,795
 
 
178,468
 
 
151,569
 
 
86,882
 

Mortgages held for sale
 
 
35,538
 
 
41,991
 
 
36,807
 
 
20,088
 
 
18,739
 

Loans held for sale
 
 
5,846
 
 
5,413
 
 
8,306
 
 
6,228
 
 
635
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Loans
 
 
799,952
 
 
821,614
 
 
843,579
 
 
864,830
 
 
411,049
 

Allowance for loan losses
 
 
(24,028
)
 
(23,035
)
 
(22,281
)
 
(21,013
)
 
(7,865
)

Net loans
 
 
775,924
 
 
798,579
 
 
821,298
 
 
843,817
 
 
403,184
 

Mortgage servicing rights:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Measured at fair value (residential MSRs)
 
 
14,500
 
 
15,690
 
 
12,391
 
 
14,714
 
 
19,184
 

Amortized
 
 
1,162
 
 
1,205
 
 
1,257
 
 
1,446
 
 
433
 

Premises and equipment, net
 
 
11,040
 
 
11,151
 
 
11,215
 
 
11,269
 
 
5,054
 

Goodwill
 
 
24,052
 
 
24,619
 
 
23,825
 
 
22,627
 
 
13,520
 

Other assets
 
 
98,827
 
 
102,015
 
 
105,016
 
 
109,801
 
 
44,679
 

Total assets
 
$
1,228,625
 
 
1,284,176
 
 
1,285,891
 
 
1,309,639
 
 
622,361
 

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Noninterest-bearing deposits
 
$
165,260
 
 
173,149
 
 
166,497
 
 
150,837
 
 
89,446
 

Interest-bearing deposits
 
 
631,488
 
 
640,586
 
 
630,772
 
 
630,565
 
 
264,128
 

Total deposits
 
 
796,748
 
 
813,735
 
 
797,269
 
 
781,402
 
 
353,574
 

Short-term borrowings
 
 
30,800
 
 
55,483
 
 
72,084
 
 
108,074
 
 
85,187
 

Accrued expenses and other liabilities
 
 
57,861
 
 
64,160
 
 
58,831
 
 
50,689
 
 
28,991
 

Long-term debt
 
 
214,292
 
 
229,416
 
 
250,650
 
 
267,158
 
 
107,350
 

Total liabilities
 
 
1,099,701
 
 
1,162,794
 
 
1,178,834
 
 
1,207,323
 
 
575,102
 

Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Wells Fargo stockholders' equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Preferred stock
 
 
31,589
 
 
31,497
 
 
31,411
 
 
31,332
 
 
625
 

Common stock
 
 
7,927
 
 
7,927
 
 
7,273
 
 
7,273
 
 
5,788
 

Additional paid-in capital
 
 
40,343
 
 
40,270
 
 
32,414
 
 
36,026
 
 
8,348
 

Retained earnings
 
 
41,485
 
 
39,165
 
 
36,949
 
 
36,543
 
 
40,853
 

Cumulative other comprehensive income (loss)
 
 
4,088
 
 
(590
)
 
(3,624
)
 
(6,869
)
 
(2,783
)

Treasury stock
 
 
(2,771
)
 
(3,126
)
 
(3,593
)
 
(4,666
)
 
(5,207
)

Unearned ESOP shares
 
 
(511
)
 
(520
)
 
(535
)
 
(555
)
 
(667
)

Total Wells Fargo stockholders' equity
 
 
122,150
 
 
114,623
 
 
100,295
 
 
99,084
 
 
46,957
 

Noncontrolling interests
 
 
6,774
 
 
6,759
 
 
6,762
 
 
3,232
 
 
302
 

Total equity
 
 
128,924
 
 
121,382
 
 
107,057
 
 
102,316
 
 
47,259
 

Total liabilities and equity
 
$
1,228,625
 
 
1,284,176
 
 
1,285,891
 
 
1,309,639
 
 
622,361
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES
 

 
 
Quarter ended
 

(in millions)
 
Sept. 30,
2009
 
 
June 30,
2009
 
 
Mar. 31,
2009
 
 
Dec. 31,
2008
 
 
Sept. 30,
2008
 

Earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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

 
$
16,356
 
 
20,889
 
 
24,074
 
 
9,938
 
 
3,463
 

Trading assets
 
 
20,518
 
 
18,464
 
 
22,203
 
 
5,004
 
 
4,838
 

Debt securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Securities of U.S. Treasury and federal agencies
 
 
2,545
 
 
2,102
 
 
2,899
 
 
1,165
 
 
1,141
 

Securities of U.S. states and political subdivisions
 
 
12,818
 
 
12,189
 
 
12,213
 
 
7,124
 
 
7,211
 

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Federal agencies
 
 
94,457
 
 
92,550
 
 
76,545
 
 
51,714
 
 
50,528
 

Residential and commercial
 
 
43,214
 
 
41,257
 
 
38,690
 
 
18,245
 
 
21,358
 

Total mortgage-backed securities
 
 
137,671
 
 
133,807
 
 
115,235
 
 
69,959
 
 
71,886
 

Other debt securities (1)
 
 
33,294
 
 
30,901
 
 
30,080
 
 
14,217
 
 
12,622
 

Total debt securities available for sale (1)
 
 
186,328
 
 
178,999
 
 
160,427
 
 
92,465
 
 
92,860
 

Mortgages held for sale (2)
 
 
40,604
 
 
43,177
 
 
31,058
 
 
23,390
 
 
24,990
 

Loans held for sale (2)
 
 
4,975
 
 
7,188
 
 
7,949
 
 
1,287
 
 
677
 

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Commercial
 
 
175,642
 
 
187,501
 
 
196,923
 
 
107,325
 
 
100,688
 

Real estate mortgage
 
 
103,450
 
 
104,297
 
 
104,271
 
 
45,555
 
 
43,616
 

Real estate construction
 
 
32,649
 
 
33,857
 
 
34,493
 
 
19,943
 
 
19,715
 

Lease financing
 
 
14,360
 
 
14,750
 
 
15,810
 
 
7,397
 
 
7,250
 

Total commercial and commercial real estate
 
 
326,101
 
 
340,405
 
 
351,497
 
 
180,220
 
 
171,269
 

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Real estate 1-4 family first mortgage
 
 
235,051
 
 
240,798
 
 
245,494
 
 
78,251
 
 
76,197
 

Real estate 1-4 family junior lien mortgage
 
 
105,779
 
 
108,422
 
 
110,128
 
 
75,838
 
 
75,379
 

Credit card
 
 
23,448
 
 
22,963
 
 
23,295
 
 
20,626
 
 
19,948
 

Other revolving credit and installment
 
 
90,199
 
 
90,729
 
 
92,820
 
 
52,638
 
 
54,104
 

Total consumer
 
 
454,477
 
 
462,912
 
 
471,737
 
 
227,353
 
 
225,628
 

Foreign
 
 
29,613
 
 
30,628
 
 
32,357
 
 
6,367
 
 
7,306
 

Total loans (2)
 
 
810,191
 
 
833,945
 
 
855,591
 
 
413,940
 
 
404,203
 

Other
 
 
6,088
 
 
6,079
 
 
6,140
 
 
1,690
 
 
2,126
 

Total earning assets
 
$
1,085,060
 
 
1,108,741
 
 
1,107,442
 
 
547,714
 
 
533,157
 

Funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Interest-bearing checking
 
$
59,467
 
 
79,955
 
 
80,393
 
 
6,396
 
 
5,483
 

Market rate and other savings
 
 
369,120
 
 
334,067
 
 
313,445
 
 
178,301
 
 
166,710
 

Savings certificates
 
 
129,698
 
 
152,444
 
 
170,122
 
 
41,189
 
 
37,192
 

Other time deposits
 
 
18,248
 
 
21,660
 
 
25,555
 
 
8,128
 
 
7,930
 

Deposits in foreign offices
 
 
56,820
 
 
49,885
 
 
45,896
 
 
42,771
 
 
49,054
 

Total interest-bearing deposits
 
 
633,353
 
 
638,011
 
 
635,411
 
 
276,785
 
 
266,369
 

Short-term borrowings
 
 
39,828
 
 
59,844
 
 
76,068
 
 
60,210
 
 
83,458
 

Long-term debt
 
 
222,580
 
 
235,590
 
 
258,957
 
 
104,112
 
 
103,745
 

Other liabilities
 
 
5,620
 
 
4,604
 
 
3,778
 
 
-
 
 
-
 

Total interest-bearing liabilities
 
 
901,381
 
 
938,049
 
 
974,214
 
 
441,107
 
 
453,572
 

Portion of noninterest-bearing funding sources
 
 
183,679
 
 
170,692
 
 
133,228
 
 
106,607
 
 
79,585
 

Total funding sources
 
$
1,085,060
 
 
1,108,741
 
 
1,107,442
 
 
547,714
 
 
533,157
 

Noninterest-earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Cash and due from banks
 
$
18,084
 
 
19,340
 
 
20,255
 
 
11,155
 
 
11,024
 

Goodwill
 
 
24,435
 
 
24,261
 
 
23,183
 
 
13,544
 
 
13,531
 

Other
 
 
118,472
 
 
122,584
 
 
138,836
 
 
60,810
 
 
56,482
 

Total noninterest-earning assets
 
$
160,991
 
 
166,185
 
 
182,274
 
 
85,509
 
 
81,037
 

Noninterest-bearing funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Deposits
 
$
172,588
 
 
174,529
 
 
160,308
 
 
91,229
 
 
87,095
 

Other liabilities
 
 
47,646
 
 
49,570
 
 
50,566
 
 
30,651
 
 
25,452
 

Total equity
 
 
124,436
 
 
112,778
 
 
104,628
 
 
70,236
 
 
48,075
 

Noninterest-bearing funding sources used to fund earning assets

 
 
(183,679
)
 
(170,692
)
 
(133,228
)
 
(106,607
)
 
(79,585
)

Net noninterest-bearing funding sources
 
$
160,991
 
 
166,185
 
 
182,274
 
 
85,509
 
 
81,037
 

Total assets
 
$
1,246,051
 
 
1,274,926
 
 
1,289,716
 
 
633,223
 
 
614,194
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) Includes certain preferred securities.
 

(2) Nonaccrual loans are included in their respective loan categories.
 

 
 

Wells Fargo & Company and Subsidiaries
FIVE QUARTER LOANS

(in millions)
 
Sept. 30,
2009
 
June 30,
2009
 
Mar. 31,
2009
 
Dec. 31,
2008
 
Sept. 30,
2008

Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 

Commercial
 
$
169,610
 
182,037
 
191,711
 
202,469
 
104,281

Real estate mortgage
 
 
103,442
 
103,654
 
104,934
 
103,108
 
44,741

Real estate construction
 
 
31,719
 
33,238
 
33,912
 
34,676
 
19,681

Lease financing
 
 
14,115
 
14,555
 
14,792
 
15,829
 
7,271

Total commercial and commercial real estate
 
 
318,886
 
333,484
 
345,349
 
356,082
 
175,974

Consumer:
 
 
 
 
 
 
 
 
 
 

Real estate 1-4 family first mortgage
 
 
232,622
 
237,289
 
242,947
 
247,894
 
77,870

Real estate 1-4 family junior lien mortgage
 
 
104,538
 
107,024
 
109,748
 
110,164
 
75,617

Credit card
 
 
23,597
 
23,069
 
22,815
 
23,555
 
20,358

Other revolving credit and installment
 
 
90,027
 
90,654
 
91,252
 
93,253
 
54,327

Total consumer
 
 
450,784
 
458,036
 
466,762
 
474,866
 
228,172

Foreign
 
 
30,282
 
30,094
 
31,468
 
33,882
 
6,903

Total loans (net of unearned income) (1)
 
$
799,952
 
821,614
 
843,579
 
864,830
 
411,049

 
 
 
 
 
 
 
 
 
 
 

(1) Includes $54.3 billion, $55.2 billion, $58.2 billion and $58.8 billion of purchased credit-impaired (PCI) loans at September 30, June 30 and March 31, 2009, and December 31, 2008, respectively. See table on page 32 for detail of PCI loans.

 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 

FIVE QUARTER NONACCRUAL LOANS AND OTHER NONPERFORMING ASSETS

(in millions)
 
Sept. 30,
2009
 
June 30,
2009
 
Mar. 31,
2009
 
Dec. 31,
2008
 
Sept. 30,
2008

Nonaccrual loans:
 
 
 
 
 
 
 
 
 
 

Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 

Commercial
 
$
4,540
 
2,910
 
1,696
 
1,253
 
846

Real estate mortgage
 
 
2,856
 
2,343
 
1,324
 
594
 
296

Real estate construction
 
 
2,711
 
2,210
 
1,371
 
989
 
736

Lease financing
 
 
157
 
130
 
114
 
92
 
69

Total commercial and commercial real estate
 
 
10,264
 
7,593
 
4,505
 
2,928
 
1,947

Consumer:
 
 
 
 
 
 
 
 
 
 

Real estate 1-4 family first mortgage
 
 
8,132
 
6,000
 
4,218
 
2,648
 
1,975

Real estate 1-4 family junior lien mortgage
 
 
1,985
 
1,652
 
1,418
 
894
 
780

Other revolving credit and installment
 
 
344
 
327
 
300
 
273
 
232

Total consumer
 
 
10,461
 
7,979
 
5,936
 
3,815
 
2,987

Foreign
 
 
144
 
226
 
75
 
57
 
61

Total nonaccrual loans (1) (2)
 
 
20,869
 
15,798
 
10,516
 
6,800
 
4,995

As a percentage of total loans
 
 
2.61

 % 

1.92
 
1.25
 
0.79
 
1.22

Foreclosed assets:
 
 
 
 
 
 
 
 
 
 

GNMA loans (3)
 
$
840
 
932
 
768
 
667
 
596

Other
 
 
1,687
 
1,592
 
1,294
 
1,526
 
644

Real estate and other nonaccrual investments (4)
 
 
55
 
20
 
34
 
16
 
56

Total nonaccrual loans and other nonperforming assets

 
$
23,451
 
18,342
 
12,612
 
9,009
 
6,291

As a percentage of total loans
 
 
2.93

 % 

2.23
 
1.50
 
1.04
 
1.53

 
 
 
 
 
 
 
 
 
 
 

(1) Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.

(2) Excludes PCI loans from Wachovia.

(3) 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.

(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.

 

Wells Fargo & Company and Subsidiaries
PURCHASED CREDIT-IMPAIRED (PCI) LOANS
 

 
 

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). The accounting provisions contained in ASC 310-30 require 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.
 

 
 

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 by the accounting under ASC 310-30 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.
 

 
 

 
 
September 30, 2009 (1)
 
 
December 31, 2008
 

(in millions)
 
PCI
loans
 
 
All
other
loans
 
Total
 
 
PCI
loans
 
 
All
other
loans
 
Total
 

Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Commercial
 
$
2,407
 
 
167,203
 
169,610
 
 
4,580
 
 
197,889
 
202,469
 

Real estate mortgage
 
 
5,950
 
 
97,492
 
103,442
 
 
7,762
 
 
95,346
 
103,108
 

Real estate construction
 
 
4,250
 
 
27,469
 
31,719
 
 
4,503
 
 
30,173
 
34,676
 

Lease financing
 
 
-
 
 
14,115
 
14,115
 
 
-
 
 
15,829
 
15,829
 

Total commercial and commercial real estate (CRE)

 
 
12,607
 
 
306,279
 
318,886
 
 
16,845
 
 
339,237
 
356,082
 

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Real estate 1-4 family first mortgage
 
 
39,538
 
 
193,084
 
232,622
 
 
39,214
 
 
208,680
 
247,894
 

Real estate 1-4 family junior lien mortgage
 
 
425
 
 
104,113
 
104,538
 
 
728
 
 
109,436
 
110,164
 

Credit card
 
 
-
 
 
23,597
 
23,597
 
 
-
 
 
23,555
 
23,555
 

Other revolving credit and installment
 
 
-
 
 
90,027
 
90,027
 
 
151
 
 
93,102
 
93,253
 

Total consumer
 
 
39,963
 
 
410,821
 
450,784
 
 
40,093
 
 
434,773
 
474,866
 

Foreign
 
 
1,768
 
 
28,514
 
30,282
 
 
1,859
 
 
32,023
 
33,882
 

Total loans
 
$
54,338
 
 
745,614
 
799,952
 
 
58,797
 
 
806,033
 
864,830
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) In the first three quarters of 2009, we refined certain of our preliminary purchase accounting adjustments based on additional information as of December 31, 2008. These refinements include a net increase to the nonaccretable difference of $3.8 billion ($2.2 billion of which related to Pick-a-Pay loans), and a net increase to the accretable yield of $1.9 billion ($2.0 billion of which related to Pick-a-Pay loans and reflects changes in the amount and timing of cash flows). The effect on goodwill of these adjustments amounted to a net increase to goodwill of $1.9 billion.
 

 
 

CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS
 

 
 

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.
 

 
 

 
 

(in millions)
 
Pick-a-Pay
 
 
 
 
Other
consumer
 
 
Commercial,
CRE and
foreign
 
 
 
 
Total
 

Balance at December 31, 2008, with refinements
 
$
(26,485
)
 
 
 
(4,082
)
 
(10,378
)
 
 
 
(40,945
)

Release of nonaccretable difference due to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Loans resolved by payment in full
 
 
-
 
 
 
 
-
 
 
194
 
 
 
 
194
 

Loans resolved by sales to third parties
 
 
-
 
 
 
 
85
 
 
28
 
 
 
 
113
 

Loans with improving cash flows reclassified to accretable yield
 
 
-
 
 
 
 
-
 
 
21
 
 
 
 
21
 

Use of nonaccretable difference due to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Losses from loan resolutions and write-downs (1)
 
 
8,320
 
 
 
 
1,796
 
 
3,552
 
 
 
 
13,668
 

Balance at September 30, 2009
 
$
(18,165
)
 
 
 
(2,201
)
 
(6,583
)
 
 
 
(26,949
)

 
 

(1) Use of nonaccretable difference through June 30, 2009, was $8.5 billion (including $5.1 billion for Pick-a-Pay loans); revised from second quarter to include all losses due to resolution of loans and write-downs.
 

 
 

CHANGES IN ALLOWANCE FOR LOAN LOSSES FOR PCI LOANS
 

 
 

Deterioration in expected credit losses for PCI loans subsequent to the acquisition on December 31, 2008, results the establishment of an allowance, provided for through a charge to income. Losses and improvements in expected losses will reduce the allowance.
 

 
 

 
 

(in millions)
 
Pick-a-Pay
 
 
 
 
Other
consumer
 
 
Commercial,
CRE and
foreign
 
 
 
 
Total
 

Balance at December 31, 2008
 
$
-
 
 
 
 
-
 
 
-
 
 
 
 
-
 

Provision for losses due to credit deterioration
 
 
-
 
 
 
 
-
 
 
458
 
 
 
 
458
 

Charge-offs
 
 
-
 
 
 
 
-
 
 
(225
)
 
 
 
(225
)

Balance at September 30, 2009
 
$
-
 
 
 
 
-
 
 
233
 
 
 
 
233
 

 
 

Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO

 
 
PCI loans
 
All other loans

(in millions)
 
Unpaid
principal
balance
 
Current
LTV
ratio (1)
 
Carrying
value (2)
 
Ratio of
carrying
value to
current
value
 
Unpaid
principal
balance
 
Current
LTV
ratio (1)
 
Carrying
value

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Sept. 30, 2009
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

California
 
$
39,034
 
150

 % 

$
25,492
 
98

 % 

$
24,447
 
95

 % 

$
24,395

Florida
 
 
5,929
 
144
 
 
3,532
 
85
 
 
5,166
 
108
 
 
5,117

New Jersey
 
 
1,676
 
101
 
 
1,309
 
78
 
 
3,017
 
82
 
 
3,021

Texas
 
 
452
 
81
 
 
395
 
71
 
 
2,031
 
66
 
 
2,039

Arizona
 
 
1,481
 
155
 
 
742
 
78
 
 
1,160
 
105
 
 
1,152

Other states
 
 
8,738
 
110
 
 
6,520
 
82
 
 
14,128
 
85
 
 
14,120

Total Pick-a-Pay loans
 
$
57,310
 
 
 
$
37,990
 
 
 
$
49,949
 
 
 
$
49,844

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

June 30, 2009
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

California
 
$
40,657
 
146

 % 

$
26,177
 
95

 % 

$
25,117
 
90

 % 

$
25,170

Florida
 
 
6,117
 
130
 
 
3,903
 
84
 
 
5,276
 
96
 
 
5,287

New Jersey
 
 
1,717
 
99
 
 
1,226
 
71
 
 
3,162
 
80
 
 
3,169

Texas
 
 
466
 
80
 
 
341
 
59
 
 
2,108
 
66
 
 
2,112

Arizona
 
 
1,553
 
148
 
 
1,001
 
96
 
 
1,195
 
99
 
 
1,197

Other states
 
 
9,041
 
108
 
 
6,227
 
75
 
 
14,607
 
83
 
 
14,640

Total Pick-a-Pay loans
 
$
59,551
 
 
 
$
38,875
 
 
 
$
51,465
 
 
 
$
51,575

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) The current LTV ratio is calculated as the unpaid principal balance plus the unpaid principal 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.          

(2) 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.

 

Wells Fargo & Company and Subsidiaries
HOME EQUITY PORTFOLIOS (1)

 
 
Outstanding balances
 
% of loans
two payments
or more past due
 
Annualized
loss rate

(in millions)
 
Sept. 30,
2009
 
June 30,
2009
 
Sept. 30,
2009
 
June 30,
2009
 
Sept. 30,
2009
 
June 30,
2009

Core portfolio (2)
 
 
 
 
 
 
 
 
 
 
 
 

California
 
$
30,841
 
31,479
 
3.97
%
3.63
 
6.52
 
5.36

Florida
 
 
11,496
 
11,697
 
5.08
 
3.91
 
4.82
 
4.55

New Jersey
 
 
8,119
 
8,224
 
2.22
 
1.70
 
1.41
 
1.37

Virginia
 
 
5,736
 
5,805
 
1.60
 
1.26
 
1.22
 
0.99

Pennsylvania
 
 
4,971
 
5,048
 
1.95
 
1.46
 
1.51
 
1.29

Other
 
 
54,152
 
55,248
 
2.64
 
2.22
 
2.65
 
2.46

Total
 
 
115,315
 
117,501
 
3.13
 
2.65
 
3.69
 
3.25

Liquidating portfolio
 
 
 
 
 
 
 
 
 
 
 
 

California
 
 
3,406
 
3,616
 
8.75
 
8.16
 
18.22
 
17.13

Florida
 
 
435
 
460
 
9.83
 
9.14
 
16.97
 
18.11

Arizona
 
 
206
 
219
 
8.25
 
8.16
 
22.33
 
18.13

Texas
 
 
161
 
169
 
1.68
 
1.13
 
2.15
 
2.96

Minnesota
 
 
112
 
117
 
3.39
 
3.88
 
8.52
 
7.41

Other
 
 
4,546
 
4,764
 
4.68
 
4.00
 
7.14
 
6.25

Total
 
 
8,866
 
9,345
 
6.51
 
5.91
 
12.17
 
11.29

Total core and liquidating portfolios
 
$
124,181
 
126,846
 
3.37
 
2.89
 
4.31
 
3.85

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

(1) Consists of real estate 1-4 family junior lien mortgages and lines of credit secured by real estate from all groups, excluding PCI loans.

(2) Includes equity lines of credit and closed-end second liens associated with the Pick-a-Pay portfolio totaling $1.9 billion and $2.0 billion at September 30 and June 30, 2009, respectively.

 

Wells Fargo & Company and Subsidiaries
CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES (1)
 

 
 
 
Quarter ended Sept. 30,
 
 
Nine months ended Sept. 30,
 

(in millions)
 
 
 
2009
 
 
2008
 
 
2009
 
 
2008
 

Balance, beginning of period
 
 
$
23,530
 
 
7,517
 
 
21,711
 
 
5,518
 

Provision for credit losses
 
 
 
6,111
 
 
2,495
 
 
15,755
 
 
7,535
 

Loan charge-offs:
 
 
 
 
 
 
 
 
 
 
 

Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 
 

Commercial
 
 
 
(986
)
 
(305
)
 
(2,337
)
 
(897
)

Real estate mortgage
 
 
 
(215
)
 
(9
)
 
(398
)
 
(19
)

Real estate construction
 
 
 
(254
)
 
(36
)
 
(595
)
 
(93
)

Lease financing
 
 
 
(88
)
 
(19
)
 
(173
)
 
(44
)

Total commercial and commercial real estate
 
 
 
(1,543
)
 
(369
)
 
(3,503
)
 
(1,053
)

Consumer:
 
 
 
 
 
 
 
 
 
 
 

Real estate 1-4 family first mortgage
 
 
 
(1,015
)
 
(146
)
 
(2,229
)
 
(330
)

Real estate 1-4 family junior lien mortgage
 
 
 
(1,340
)
 
(669
)
 
(3,428
)
 
(1,476
)

Credit card
 
 
 
(691
)
 
(396
)
 
(2,025
)
 
(1,078
)

Other revolving credit and installment
 
 
 
(860
)
 
(586
)
 
(2,562
)
 
(1,617
)

Total consumer
 
 
 
(3,906
)
 
(1,797
)
 
(10,244
)
 
(4,501
)

Foreign
 
 
 
(71
)
 
(59
)
 
(181
)
 
(185
)

Total loan charge-offs
 
 
 
(5,520
)
 
(2,225
)
 
(13,928
)
 
(5,739
)

Loan recoveries:
 
 
 
 
 
 
 
 
 
 
 

Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 
 

Commercial
 
 
 
62
 
 
27
 
 
153
 
 
90
 

Real estate mortgage
 
 
 
6
 
 
1
 
 
22
 
 
4
 

Real estate construction
 
 
 
5
 
 
-
 
 
11
 
 
2
 

Lease financing
 
 
 
6
 
 
3
 
 
13
 
 
9
 

Total commercial and commercial real estate
 
 
 
79
 
 
31
 
 
199
 
 
105
 

Consumer:
 
 
 
 
 
 
 
 
 
 
 

Real estate 1-4 family first mortgage
 
 
 
49
 
 
7
 
 
114
 
 
20
 

Real estate 1-4 family junior lien mortgage
 
 
 
49
 
 
28
 
 
119
 
 
63
 

Credit card
 
 
 
43
 
 
35
 
 
131
 
 
113
 

Other revolving credit and installment
 
 
 
178
 
 
117
 
 
580
 
 
363
 

Total consumer
 
 
 
319
 
 
187
 
 
944
 
 
559
 

Foreign
 
 
 
11
 
 
12
 
 
30
 
 
40
 

Total loan recoveries
 
 
 
409
 
 
230
 
 
1,173
 
 
704
 

Net loan charge-offs
 
 
 
(5,111
)
 
(1,995
)
 
(12,755
)
 
(5,035
)

Allowances related to business combinations/other
 
 
 
(2
)
 
10
 
 
(183
)
 
9
 

Balance, end of period
 
 
$
24,528
 
 
8,027
 
 
24,528
 
 
8,027
 

Components:
 
 
 
 
 
 
 
 
 
 
 

Allowance for loan losses
 
 
$
24,028
 
 
7,865
 
 
24,028
 
 
7,865
 

Reserve for unfunded credit commitments
 
 
 
500
 
 
162
 
 
500
 
 
162
 

Allowance for credit losses
 
 
$
24,528
 
 
8,027
 
 
24,528
 
 
8,027
 

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

 
 
 
2.50
 
%
1.96
 
 
2.05
 
 
1.71
 

 
 
 
 
 
 
 
 
 
 
 
 

(1) 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 32.
 

 
 

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES (1)
 

 
 
Quarter ended
 

(in millions)
 
Sept. 30,
2009
 
 
June 30,
2009
 
 
Mar. 31,
2009
 
 
Dec. 31,
2008
 
 
Sept. 30,
2008
 

Balance, beginning of quarter
 
$
23,530
 
 
22,846
 
 
21,711
 
 
8,027
 
 
7,517
 

Provision for credit losses (2)
 
 
6,111
 
 
5,086
 
 
4,558
 
 
8,444
 
 
2,495
 

Loan charge-offs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Commercial
 
 
(986
)
 
(755
)
 
(596
)
 
(756
)
 
(305
)

Real estate mortgage
 
 
(215
)
 
(152
)
 
(31
)
 
(10
)
 
(9
)

Real estate construction
 
 
(254
)
 
(236
)
 
(105
)
 
(85
)
 
(36
)

Lease financing
 
 
(88
)
 
(65
)
 
(20
)
 
(21
)
 
(19
)

Total commercial and commercial real estate
 
 
(1,543
)
 
(1,208
)
 
(752
)
 
(872
)
 
(369
)

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Real estate 1-4 family first mortgage
 
 
(1,015
)
 
(790
)
 
(424
)
 
(210
)
 
(146
)

Real estate 1-4 family junior lien mortgage
 
 
(1,340
)
 
(1,215
)
 
(873
)
 
(728
)
 
(669
)

Credit card
 
 
(691
)
 
(712
)
 
(622
)
 
(485
)
 
(396
)

Other revolving credit and installment
 
 
(860
)
 
(802
)
 
(900
)
 
(683
)
 
(586
)

Total consumer
 
 
(3,906
)
 
(3,519
)
 
(2,819
)
 
(2,106
)
 
(1,797
)

Foreign
 
 
(71
)
 
(56
)
 
(54
)
 
(60
)
 
(59
)

Total loan charge-offs
 
 
(5,520
)
 
(4,783
)
 
(3,625
)
 
(3,038
)
 
(2,225
)

Loan recoveries:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Commercial
 
 
62
 
 
51
 
 
40
 
 
24
 
 
27
 

Real estate mortgage
 
 
6
 
 
6
 
 
10
 
 
1
 
 
1
 

Real estate construction
 
 
5
 
 
4
 
 
2
 
 
1
 
 
-
 

Lease financing
 
 
6
 
 
4
 
 
3
 
 
4
 
 
3
 

Total commercial and commercial real estate
 
 
79
 
 
65
 
 
55
 
 
30
 
 
31
 

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Real estate 1-4 family first mortgage
 
 
49
 
 
32
 
 
33
 
 
17
 
 
7
 

Real estate 1-4 family junior lien mortgage
 
 
49
 
 
44
 
 
26
 
 
26
 
 
28
 

Credit card
 
 
43
 
 
48
 
 
40
 
 
34
 
 
35
 

Other revolving credit and installment
 
 
178
 
 
198
 
 
204
 
 
118
 
 
117
 

Total consumer
 
 
319
 
 
322
 
 
303
 
 
195
 
 
187
 

Foreign
 
 
11
 
 
10
 
 
9
 
 
9
 
 
12
 

Total loan recoveries
 
 
409
 
 
397
 
 
367
 
 
234
 
 
230
 

Net loan charge-offs
 
 
(5,111
)
 
(4,386
)
 
(3,258
)
 
(2,804
)
 
(1,995
)

Allowances related to business combinations/other
 
 
(2
)
 
(16
)
 
(165
)
 
8,044
 
 
10
 

Balance, end of quarter
 
$
24,528
 
 
23,530
 
 
22,846
 
 
21,711
 
 
8,027
 

Components:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Allowance for loan losses
 
$
24,028
 
 
23,035
 
 
22,281
 
 
21,013
 
 
7,865
 

Reserve for unfunded credit commitments
 
 
500
 
 
495
 
 
565
 
 
698
 
 
162
 

Allowance for credit losses
 
$
24,528
 
 
23,530
 
 
22,846
 
 
21,711
 
 
8,027
 

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

 
 
2.50

  %  

 

2.11
 
 
1.54
 
 
2.69
 
 
1.96
 

Allowance for loan losses as a percentage of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total loans
 
 
3.00
 
 
2.80
 
 
2.64
 
 
2.43
 
 
1.91
 

Nonaccrual loans
 
 
115
 
 
146
 
 
212
 
 
309
 
 
157
 

Nonaccrual loans and other nonperforming assets
 
 
102
 
 
126
 
 
177
 
 
233
 
 
125
 

Allowance for credit losses as a percentage of:
 
 
 
 
 
 
 
 
 
 
 
 
 

Total loans
 
 
3.07
 
 
2.86
 
 
2.71
 
 
2.51
 
 
1.95
 

Nonaccrual loans
 
 
118
 
 
149
 
 
217
 
 
319
 
 
161
 

Nonaccrual loans and other nonperforming assets
 
 
105
 
 
128
 
 
181
 
 
241
 
 
128
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) 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 32.
 

(2) Provision for credit losses for the quarter ended December 31, 2008, included $3.9 billion to conform reserve practices of Wells Fargo and Wachovia.
 

 
 

Wells Fargo & Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY (1)
 

 
 
Nine months ended September 30,
 

(in millions)
 
 
2009
 
 
2008
 

Balance, beginning of period (2)
 
$
102,316
 
 
47,914
 

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
)

Net income before noncontrolling interests
 
 
9,654
 
 
5,439
 

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

Translation adjustments
 
 
63
 
 
(20
)

Investment securities (5):
 
 
 
 
 

Unrealized losses related to factors other than credit (2)
 
 
(654
)
 
-
 

All other
 
 
11,220
 
 
(3,485
)

Derivative instruments and hedging activities
 
 
(189
)
 
(6
)

Defined benefit pension plans
 
 
570
 
 
3
 

Common stock issued
 
 
9,590
 
 
1,269
 

Common stock repurchased
 
 
(80
)
 
(1,162
)

Preferred stock released to ESOP
 
 
41
 
 
346
 

Common stock dividends
 
 
(1,891
)
 
(3,178
)

Preferred stock dividends
 
 
(1,558
)
 
-
 

Other, net
 
 
(158
)
 
167
 

Balance, end of period
 
$
128,924
 
 
47,259
 

 
 
 
 
 
 

(1) 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 amendment of ARB No. 51), on a retrospective basis for disclosure and, accordingly, prior period information reflects the adoption. ASC 810-10 requires that noncontrolling interests be reported as a component of total equity.
 

(2) The impact on prior periods of adopting new accounting provisions for recording other-than-temporary impairment on debt securities as prescribed in ASC 320-10, Investments - Debt and Equity Securities (FASB Staff Position (FSP) FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments), was to increase the beginning balance of retained earnings and reduce the beginning balance of other comprehensive income by $85 million ($53 million after tax). The unrealized losses in Wells Fargo other comprehensive income in the first nine months of 2009 that related to factors other than credit, where the credit portion was recorded as other-than-temporary impairment in earnings, amounted to $1.04 billion ($654 million after tax).
 

(3) On January 1, 2008, we adopted new accounting guidance for postretirement benefits in accordance with ASC 715, Compensation - 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).
 

(4) 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)).
 

(5) 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.
 

 
 

Wells Fargo & Company and Subsidiaries
TIER 1 COMMON EQUITY (1)
 
 
 

 
 
 
Quarter ended
 

(in billions)
 
Sept. 30,
2009
 
 
June 30,
2009
 
 
Dec. 31,
2008
 

Total equity
 
$
128.9
 
 
121.4
 
 
102.3
 

Less:  

Noncontrolling interests
 
 
(6.8
)
 
(6.8
)
 
(3.2
)

Total Wells Fargo stockholders' equity
 
 
122.1
 
 
114.6
 
 
99.1
 

Less:  

Preferred equity
 
 
(31.1
)
 
(31.0
)
 
(30.8
)

 
Goodwill and intangible assets (other than MSRs)
 
 
(37.5
)
 
(38.7
)
 
(38.1
)

 
Applicable deferred assets
 
 
5.3
 
 
5.5
 
 
5.6
 

 
Deferred tax asset limitation
 
 
-
 
 
(2.0
)
 
(6.0
)

 
MSRs over specified limitations
 
 
(1.5
)
 
(1.6
)
 
(1.5
)

 
Cumulative other comprehensive income
 
 
(4.0
)
 
0.6
 
 
6.9
 

 
Other
 
 
(0.3
)
 
(0.3
)
 
(0.8
)

 
Tier 1 common equity

 (A)

$
53.0
 
 
47.1
 
 
34.4
 

Total risk-weighted assets (2)

 (B)

$
1,022.9
 
 
1,047.7
 
 
1,101.3
 

Tier 1 common equity to total risk-weighted assets

 (A)/(B)

 
5.18
 

% 

4.49
 
 
3.13
 

 
 
 
 
 
 
 
 
 
 
 

(1) 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.
 

(2) Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets. The Company's September 30, 2009, preliminary risk-weighted assets reflect estimated on-balance sheet risk-weighted assets of $848.5 billion and derivative and off-balance sheet risk-weighted assets of $174.4 billion.
 

 
 

Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
 
 
 

 

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

 
Community
Banking
 
Wholesale
Banking
 
 
Wealth, Brokerage
and Retirement
 
Other (2)
 
 
Consolidated
Company

 
2009
 
2008
 
2009
 
2008
 
 
2009
 
 
2008
 
2009
 
 
2008
 
 
2009
 
2008

Quarter ended Sept. 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net interest income (3)
 
$
8,700
 
5,293
 
2,535
 
1,065
 
 
743
 
 
223
 
(294
)
 
(200
)
 
11,684
 
6,381

Provision for credit losses
 
 
4,572
 
2,202
 
1,361
 
294
 
 
234
 
 
3
 
(56
)
 
(4
)
 
6,111
 
2,495

Noninterest income
 
 
6,443
 
3,209
 
2,381
 
631
 
 
2,223
 
 
458
 
(265
)
 
(302
)
 
10,782
 
3,996

Noninterest expense
 
 
6,802
 
3,982
 
2,630
 
1,329
 
 
2,314
 
 
498
 
(62
)
 
(308
)
 
11,684
 
5,501

Income (loss) before income tax expense (benefit)

 

 
3,769
 
2,318
 
925
 
73
 
 
418
 
 
180
 
(441
)
 
(190
)
 
4,671
 
2,381

Income tax expense (benefit)
 
 
1,046
 
764
 
325
 
(30
)
 
151
 
 
68
 
(167
)
 
(72
)
 
1,355
 
730

Net income (loss) before noncontrolling interests

 
 
2,723
 
1,554
 
600
 
103
 
 
267
 
 
112
 
(274
)
 
(118
)
 
3,316
 
1,651

Less: Net income from noncontrolling interests

 
 
56
 
14
 
2
 
-
 
 
23
 
 
-
 
-
 
 
-
 
 
81
 
14

Net income (loss) (4)
 
$
2,667
 
1,540
 
598
 
103
 
 
244
 
 
112
 
(274
)
 
(118
)
 
3,235
 
1,637

Average loans
 
$
534.7
 
287.1
 
247.0
 
116.3
 
 
45.4
 
 
15.9
 
(16.9
)
 
(15.1
)
 
810.2
 
404.2

Average assets
 
 
785.2
 
452.3
 
369.3
 
158.1
 
 
108.6
 
 
19.1
 
(17.0
)
 
(15.3
)
 
1,246.1
 
614.2

Average core deposits
 
 
530.3
 
252.8
 
146.9
 
64.4
 
 
116.4
 
 
23.5
 
(34.3
)
 
(20.6
)
 
759.3
 
320.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Nine months ended Sept. 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net interest income (3)
 
$
25,981
 
15,246
 
7,381
 
3,116
 
 
2,244
 
 
576
 
(782
)
 
(519
)
 
34,824
 
18,419

Provision for credit losses
 
 
12,840
 
6,833
 
2,644
 
701
 
 
374
 
 
9
 
(103
)
 
(8
)
 
15,755
 
7,535

Noninterest income
 
 
17,922
 
10,328
 
7,680
 
3,170
 
 
6,347
 
 
1,422
 
(783
)
 
(939
)
 
31,166
 
13,981

Noninterest expense
 
 
21,625
 
12,187
 
7,968
 
4,031
 
 
6,822
 
 
1,480
 
(216
)
 
(910
)
 
36,199
 
16,788

Income (loss) before income tax expense (benefit)

 

 
9,438
 
6,554
 
4,449
 
1,554
 
 
1,395
 
 
509
 
(1,246
)
 
(540
)
 
14,036
 
8,077

Income tax expense (benefit)
 
 
2,734
 
2,265
 
1,590
 
385
 
 
531
 
 
193
 
(473
)
 
(205
)
 
4,382
 
2,638

Net income (loss) before noncontrolling interests

 
 
6,704
 
4,289
 
2,859
 
1,169
 
 
864
 
 
316
 
(773
)
 
(335
)
 
9,654
 
5,439

Less: Net income (loss) from noncontrolling interests

 
 
190
 
43
 
14
 
7
 
 
(2
)
 
-
 
-
 
 
-
 
 
202
 
50

Net income (loss) (4)
 
$
6,514
 
4,246
 
2,845
 
1,162
 
 
866
 
 
316
 
(773
)
 
(335
)
 
9,452
 
5,389

Average loans
 
$
542.7
 
284.4
 
260.7
 
108.3
 
 
46.0
 
 
14.8
 
(16.3
)
 
(14.2
)
 
833.1
 
393.3

Average assets
 
 
794.1
 
441.3
 
384.8
 
149.9
 
 
107.6
 
 
17.9
 
(16.4
)
 
(14.4
)
 
1,270.1
 
594.7

Average core deposits
 
 
537.4
 
250.2
 
141.2
 
65.8
 
 
110.9
 
 
22.3
 
(29.8
)
 
(19.7
)
 
759.7
 
318.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. 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.

(2) "Other" 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.

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

(4) Represents segment net income (loss) for Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement segments and Wells Fargo net income for the Consolidated Company.

 
 
 
 

Wells Fargo & Company and Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)
 

 
 
Quarter ended
 

(income/expense in millions, average balances in billions)
 
Sept. 30,
2009
 
 
June 30,
2009
 
 
Mar. 31,
2009
 
 
Dec. 31,
2008
 
 
Sept. 30,
2008
 

COMMUNITY BANKING
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net interest income (2)
 
$
8,700
 
 
8,784
 
 
8,497
 
 
5,296
 
 
5,293
 

Provision for credit losses
 
 
4,572
 
 
4,264
 
 
4,004
 
 
6,789
 
 
2,202
 

Noninterest income
 
 
6,443
 
 
6,023
 
 
5,456
 
 
2,096
 
 
3,209
 

Noninterest expense
 
 
6,802
 
 
7,665
 
 
7,158
 
 
4,320
 
 
3,982
 

Income (loss) before income tax expense (benefit)
 
 
3,769
 
 
2,878
 
 
2,791
 
 
(3,717
)
 
2,318
 

Income tax expense (benefit)
 
 
1,046
 
 
798
 
 
890
 
 
(1,606
)
 
764
 

Net income (loss) before noncontrolling interests
 
 
2,723
 
 
2,080
 
 
1,901
 
 
(2,111
)
 
1,554
 

Less: Net income (loss) from noncontrolling interests
 
 
56
 
 
72
 
 
62
 
 
(11
)
 
14
 

Segment net income (loss)
 
$
2,667
 
 
2,008
 
 
1,839
 
 
(2,100
)
 
1,540
 

Average loans
 
 
534.7
 
 
540.7
 
 
552.8
 
 
288.9
 
 
287.1
 

Average assets
 
 
785.2
 
 
799.2
 
 
797.9
 
 
466.0
 
 
452.3
 

Average core deposits
 
 
530.3
 
 
543.9
 
 
538.0
 
 
260.6
 
 
252.8
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

WHOLESALE BANKING
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net interest income (2)
 
$
2,535
 
 
2,479
 
 
2,367
 
 
1,400
 
 
1,065
 

Provision for credit losses
 
 
1,361
 
 
738
 
 
545
 
 
414
 
 
294
 

Noninterest income
 
 
2,381
 
 
2,759
 
 
2,540
 
 
515
 
 
631
 

Noninterest expense
 
 
2,630
 
 
2,807
 
 
2,531
 
 
1,251
 
 
1,329
 

Income before income tax expense (benefit)
 
 
925
 
 
1,693
 
 
1,831
 
 
250
 
 
73
 

Income tax expense (benefit)
 
 
325
 
 
618
 
 
647
 
 
31
 
 
(30
)

Net income before noncontrolling interests
 
 
600
 
 
1,075
 
 
1,184
 
 
219
 
 
103
 

Less: Net income from noncontrolling interests
 
 
2
 
 
8
 
 
4
 
 
4
 
 
-
 

Segment net income
 
$
598
 
 
1,067
 
 
1,180
 
 
215
 
 
103
 

Average loans
 
 
247.0
 
 
263.5
 
 
271.9
 
 
124.2
 
 
116.3
 

Average assets
 
 
369.3
 
 
381.7
 
 
403.8
 
 
163.2
 
 
158.1
 

Average core deposits
 
 
146.9
 
 
138.1
 
 
138.5
 
 
81.0
 
 
64.4
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

WEALTH, BROKERAGE AND RETIREMENT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net interest income (2)
 
$
743
 
 
764
 
 
737
 
 
251
 
 
223
 

Provision for credit losses
 
 
234
 
 
115
 
 
25
 
 
293
 
 
3
 

Noninterest income
 
 
2,223
 
 
2,222
 
 
1,902
 
 
417
 
 
458
 

Noninterest expense
 
 
2,314
 
 
2,289
 
 
2,219
 
 
512
 
 
498
 

Income (loss) before income tax expense (benefit)
 
 
418
 
 
582
 
 
395
 
 
(137
)
 
180
 

Income tax expense (benefit)
 
 
151
 
 
222
 
 
158
 
 
(52
)
 
68
 

Net income (loss) before noncontrolling interests
 
 
267
 
 
360
 
 
237
 
 
(85
)
 
112
 

Less: Net income (loss) from noncontrolling interests
 
 
23
 
 
(3
)
 
(22
)
 
-
 
 
-
 

Segment net income (loss)
 
$
244
 
 
363
 
 
259
 
 
(85
)
 
112
 

Average loans
 
 
45.4
 
 
45.9
 
 
46.7
 
 
16.5
 
 
15.9
 

Average assets
 
 
108.6
 
 
110.2
 
 
104.0
 
 
20.0
 
 
19.1
 

Average core deposits
 
 
116.4
 
 
113.5
 
 
102.6
 
 
25.6
 
 
23.5
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OTHER (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net interest income (2)
 
$
(294
)
 
(263
)
 
(225
)
 
(223
)
 
(200
)

Provision for credit losses
 
 
(56
)
 
(31
)
 
(16
)
 
948
 
 
(4
)

Noninterest income
 
 
(265
)
 
(261
)
 
(257
)
 
(275
)
 
(302
)

Noninterest expense
 
 
(62
)
 
(64
)
 
(90
)
 
(273
)
 
(308
)

Loss before income tax benefit
 
 
(441
)
 
(429
)
 
(376
)
 
(1,173
)
 
(190
)

Income tax benefit
 
 
(167
)
 
(163
)
 
(143
)
 
(409
)
 
(72
)

Net loss before noncontrolling interests
 
 
(274
)
 
(266
)
 
(233
)
 
(764
)
 
(118
)

Less: Net income from noncontrolling interests
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 

Other net loss
 
$
(274
)
 
(266
)
 
(233
)
 
(764
)
 
(118
)

Average loans
 
 
(16.9
)
 
(16.2
)
 
(15.8
)
 
(15.7
)
 
(15.1
)

Average assets
 
 
(17.0
)
 
(16.2
)
 
(16.0
)
 
(16.0
)
 
(15.3
)

Average core deposits
 
 
(34.3
)
 
(29.8
)
 
(25.2
)
 
(22.2
)
 
(20.6
)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

CONSOLIDATED COMPANY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net interest income (2)
 
$
11,684
 
 
11,764
 
 
11,376
 
 
6,724
 
 
6,381
 

Provision for credit losses
 
 
6,111
 
 
5,086
 
 
4,558
 
 
8,444
 
 
2,495
 

Noninterest income
 
 
10,782
 
 
10,743
 
 
9,641
 
 
2,753
 
 
3,996
 

Noninterest expense
 
 
11,684
 
 
12,697
 
 
11,818
 
 
5,810
 
 
5,501
 

Income (loss) before income tax expense (benefit)
 
 
4,671
 
 
4,724
 
 
4,641
 
 
(4,777
)
 
2,381
 

Income tax expense (benefit)
 
 
1,355
 
 
1,475
 
 
1,552
 
 
(2,036
)
 
730
 

Net income (loss) before noncontrolling interests
 
 
3,316
 
 
3,249
 
 
3,089
 
 
(2,741
)
 
1,651
 

Less: Net income (loss) from noncontrolling interests
 
 
81
 
 
77
 
 
44
 
 
(7
)
 
14
 

Wells Fargo net income (loss)
 
$
3,235
 
 
3,172
 
 
3,045
 
 
(2,734
)
 
1,637
 

Average loans
 
 
810.2
 
 
833.9
 
 
855.6
 
 
413.9
 
 
404.2
 

Average assets
 
 
1,246.1
 
 
1,274.9
 
 
1,289.7
 
 
633.2
 
 
614.2
 

Average core deposits
 
 
759.3
 
 
765.7
 
 
753.9
 
 
345.0
 
 
320.1
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. 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.
 

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

(3) "Other" 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
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
 

 
 
Quarter ended
 

(in millions)
 
Sept. 30,
2009
 
 
June 30,
2009
 
 
Mar. 31,
2009
 
 
Dec. 31,
2008
 
 
Sept. 30,
2008
 

Residential MSRs measured using the fair value method:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Fair value, beginning of quarter
 
$
15,690
 
 
12,391
 
 
14,714
 
 
19,184
 
 
19,333
 

Purchases
 
 
-
 
 
-
 
 
-
 
 
-
 
 
57
 

Acquired from Wachovia (1)
 
 
-
 
 
-
 
 
34
 
 
479
 
 
-
 

Servicing from securitizations or asset transfers
 
 
1,517
 
 
2,081
 
 
1,447
 
 
808
 
 
851
 

Net additions
 
 
1,517
 
 
2,081
 
 
1,481
 
 
1,287
 
 
908
 

Changes in fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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

 
 
(2,078
)
 
2,316
 
 
(2,824
)
 
(5,129
)
 
(546
)

Other changes in fair value (3)
 
 
(629
)
 
(1,098
)
 
(980
)
 
(628
)
 
(511
)

Total changes in fair value
 
 
(2,707
)
 
1,218
 
 
(3,804
)
 
(5,757
)
 
(1,057
)

Fair value, end of quarter
 
$
14,500
 
 
15,690
 
 
12,391
 
 
14,714
 
 
19,184
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) First quarter 2009 results reflect refinements to initial purchase accounting adjustments.

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

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Quarter ended
 

(in millions)
 
Sept. 30,
2009
 
 
June 30,
2009
 
 
Mar. 31,
2009
 
 
Dec. 31,
2008
 
 
Sept. 30,
2008
 

Amortized MSRs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Balance, beginning of quarter
 
$
1,205
 
 
1,257
 
 
1,446
 
 
433
 
 
442
 

Purchases
 
 
-
 
 
6
 
 
4
 
 
3
 
 
2
 

Acquired from Wachovia (1)
 
 
-
 
 
(8
)
 
(127
)
 
1,021
 
 
-
 

Servicing from securitizations or asset transfers
 
 
21
 
 
18
 
 
4
 
 
7
 
 
8
 

Amortization
 
 
(64
)
 
(68
)
 
(70
)
 
(18
)
 
(19
)

Balance, end of quarter (2)
 
$
1,162
 
 
1,205
 
 
1,257
 
 
1,446
 
 
433
 

Fair value of amortized MSRs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Beginning of quarter
 
$
1,311
 
 
1,392
 
 
1,555
 
 
622
 
 
595
 

End of quarter
 
 
1,277
 
 
1,311
 
 
1,392
 
 
1,555
 
 
622
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) 2009 periods reflect refinements to initial purchase accounting adjustments.

(2) There was no valuation allowance recorded for the periods presented.

 
 
 
 
 
 

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
 

 
 
Quarter ended
 

(in millions)

 
Sept. 30,
2009
 
 
June 30,
2009
 
 
Mar. 31,
2009
 
 
Dec. 31,
2008
 
 
Sept. 30,
2008
 

Servicing income, net:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Servicing fees (1)
 
$
1,039
 
 
888
 
 
1,018
 
 
952
 
 
980
 

Changes in fair value of residential MSRs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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

 
 
(2,078
)
 
2,316
 
 
(2,824
)
 
(5,129
)
 
(546
)

Other changes in fair value (3)
 
 
(629
)
 
(1,098
)
 
(980
)
 
(628
)
 
(511
)

Total changes in fair value of residential MSRs
 
 
(2,707
)
 
1,218
 
 
(3,804
)
 
(5,757
)
 
(1,057
)

Amortization
 
 
(64
)
 
(68
)
 
(70
)
 
(18
)
 
(19
)

Net derivative gains (losses) from economic hedges (4)
 
 
3,605
 
 
(1,285
)
 
3,699
 
 
4,783
 
 
621
 

Total servicing income, net
 
$
1,873
 
 
753
 
 
843
 
 
(40
)
 
525
 

Market-related valuation changes to MSRs and economic hedges (2)+(4)

 
$
1,527
 
 
1,031
 
 
875
 
 
(346
)
 
75
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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

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

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

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(in billions)
 
Sept. 30,
2009
 
 
June 30,
2009
 
 
Mar. 31,
2009
 
 
Dec. 31,
2008
 
 
Sept. 30,
2008
 

Managed servicing portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Residential mortgage loans serviced for others (1)
 
$
1,419
 
 
1,394
 
 
1,379
 
 
1,388
 
 
1,323
 

Owned loans serviced (2)
 
 
260
 
 
270
 
 
267
 
 
268
 
 
96
 

Total owned servicing of residential mortgage loans
 
 
1,679
 
 
1,664
 
 
1,646
 
 
1,656
 
 
1,419
 

Commercial mortgage loans serviced for others
 
 
458
 
 
470
 
 
474
 
 
472
 
 
142
 

Total owned servicing of loans
 
 
2,137
 
 
2,134
 
 
2,120
 
 
2,128
 
 
1,561
 

Sub-servicing
 
 
21
 
 
22
 
 
23
 
 
26
 
 
19
 

Total managed servicing portfolio
 
$
2,158
 
 
2,156
 
 
2,143
 
 
2,154
 
 
1,580
 

Ratio of MSRs to related loans serviced for others
 
 
0.83
 

 % 

0.91
 
 
0.74
 
 
0.87
 
 
1.34
 

Weighted-average note rate (mortgage loans serviced for others)
 
 
5.72
 
 
5.74
 
 
5.83
 
 
5.92
 
 
5.98
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) Consists of 1-4 family first mortgage loans.
 

(2) Consists of residential mortgages held for sale and 1-4 family first mortgage loans.
 

 
 
 
 
 
 

Wells Fargo & Company and Subsidiaries
SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA

 
 
Quarter ended

(in billions)
 
Sept. 30,
2009
 
June 30,
2009
 
Mar. 31,
2009
 
Dec. 31,
2008
 
Sept. 30,
2008

Application data:
 
 
 
 
 
 
 
 
 
 

Wells Fargo Home Mortgage first mortgage quarterly applications

 
$
123
 
194
 
190
 
116
 
83

Refinances as a percentage of applications
 
 
62

 % 

73
 
82
 
68
 
39

Wells Fargo Home Mortgage first mortgage unclosed pipeline, at quarter end

 
$
62
 
90
 
100
 
71
 
41

 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 

 
 
Quarter ended

(in billions)
 
Sept. 30,
2009
 
June 30,
2009
 
Mar. 31,
2009
 
Dec. 31,
2008
 
Sept. 30,
2008

Residential Real Estate Originations: (1)
 
 
 
 
 
 
 
 
 
 

Wells Fargo Home Mortgage first mortgage loans:
 
 
 
 
 
 
 
 
 
 

Retail
 
$
50
 
71
 
51
 
20
 
23

Correspondent/Wholesale
 
 
45
 
57
 
49
 
28
 
25

Home equity loans and lines
 
 
1
 
1
 
1
 
1
 
2

Wells Fargo Financial
 
 
-
 
-
 
-
 
1
 
1

Total quarter-to-date
 
$
96
 
129
 
101
 
50
 
51

Total year-to-date
 
$
326
 
230
 
101
 
230
 
180

 
 
 
 
 
 
 
 
 
 
 

(1) Consists of residential real estate originations from all Wells Fargo channels.