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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010
(Exact name of registrant as specified in its charter)
Delaware | No. 41-0449260 | |
(State of incorporation) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
Yesþ | Noo |
Yesþ | Noo |
Large accelerated filer | þ | Accelerated filer¨ | ||||
Non-accelerated filer | ¨(Do not check if a smaller reporting company) | Smaller reporting company¨ |
Yeso | Noþ |
Shares Outstanding | ||||
July 30, 2010 | ||||
Common stock, $1-2/3 par value | 5,233,424,661 |
CROSS-REFERENCE INDEX
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% Change | ||||||||||||||||||||||||||||||||
Quarter ended | June 30, 2010 from | Six months ended | ||||||||||||||||||||||||||||||
June 30 | , | Mar. 31 | , | June 30 | , | Mar. 31 | , | June 30 | , | June 30 | , | June 30 | , | % | ||||||||||||||||||
($ in millions, except per share amounts) | 2010 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | Change | ||||||||||||||||||||||||
For the Period | ||||||||||||||||||||||||||||||||
Wells Fargo net income | $ | 3,062 | 2,547 | 3,172 | 20 | % | (3 | ) | 5,609 | 6,217 | (10 | ) | ||||||||||||||||||||
Wells Fargo net income applicable to common stock | 2,878 | 2,372 | 2,575 | 21 | 12 | 5,250 | 4,959 | 6 | ||||||||||||||||||||||||
Diluted earnings per common share | 0.55 | 0.45 | 0.57 | 22 | (4 | ) | 1.00 | 1.13 | (12 | ) | ||||||||||||||||||||||
Profitability ratios (annualized): | ||||||||||||||||||||||||||||||||
Wells Fargo net income to average assets (ROA) | 1.00 | % | 0.84 | 1.00 | 19 | — | 0.92 | 0.98 | (6 | ) | ||||||||||||||||||||||
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) | 10.40 | 8.96 | 13.70 | 16 | (24 | ) | 9.69 | 14.07 | (31 | ) | ||||||||||||||||||||||
Efficiency ratio (1) | 59.6 | 56.5 | 56.4 | 5 | 6 | 58.0 | 56.3 | 3 | ||||||||||||||||||||||||
Total revenue | $ | 21,394 | 21,448 | 22,507 | — | (5 | ) | 42,842 | 43,524 | (2 | ) | |||||||||||||||||||||
Pre-tax pre-provision profit (PTPP) (2) | 8,648 | 9,331 | 9,810 | (7 | ) | (12 | ) | 17,979 | 19,009 | (5 | ) | |||||||||||||||||||||
Dividends declared per common share | 0.05 | 0.05 | 0.05 | �� | — | — | 0.10 | 0.39 | (74 | ) | ||||||||||||||||||||||
Average common shares outstanding | 5,219.7 | 5,190.4 | 4,483.1 | 1 | 16 | 5,205.1 | 4,365.9 | 19 | ||||||||||||||||||||||||
Diluted average common shares outstanding | 5,260.8 | 5,225.2 | 4,501.6 | 1 | 17 | 5,243.0 | 4,375.1 | 20 | ||||||||||||||||||||||||
Average loans | $ | 772,460 | 797,389 | 833,945 | (3 | ) | (7 | ) | 784,856 | 844,708 | (7 | ) | ||||||||||||||||||||
Average assets | 1,224,180 | 1,226,120 | 1,274,926 | — | (4 | ) | 1,225,145 | 1,282,280 | (4 | ) | ||||||||||||||||||||||
Average core deposits (3) | 761,767 | 759,169 | 765,697 | — | (1 | ) | 760,475 | 759,845 | — | |||||||||||||||||||||||
Average retail core deposits (4) | 574,436 | 573,653 | 596,648 | — | (4 | ) | 574,059 | 593,592 | (3 | ) | ||||||||||||||||||||||
Net interest margin | 4.38 | % | 4.27 | 4.30 | 3 | 2 | 4.33 | 4.23 | 2 | |||||||||||||||||||||||
At Period End | ||||||||||||||||||||||||||||||||
Securities available for sale | $ | 157,927 | 162,487 | 206,795 | (3 | ) | (24 | ) | 157,927 | 206,795 | (24 | ) | ||||||||||||||||||||
Loans | 766,265 | 781,430 | 821,614 | (2 | ) | (7 | ) | 766,265 | 821,614 | (7 | ) | |||||||||||||||||||||
Allowance for loan losses | 24,584 | 25,123 | 23,035 | (2 | ) | 7 | 24,584 | 23,035 | 7 | |||||||||||||||||||||||
Goodwill | 24,820 | 24,819 | 24,619 | — | 1 | 24,820 | 24,619 | 1 | ||||||||||||||||||||||||
Assets | 1,225,862 | 1,223,630 | 1,284,176 | — | (5 | ) | 1,225,862 | 1,284,176 | (5 | ) | ||||||||||||||||||||||
Core deposits (3) | 758,680 | 756,050 | 761,122 | — | — | 758,680 | 761,122 | — | ||||||||||||||||||||||||
Wells Fargo stockholders’ equity | 119,772 | 116,142 | 114,623 | 3 | 4 | 119,772 | 114,623 | 4 | ||||||||||||||||||||||||
Total equity | 121,398 | 118,154 | 121,382 | 3 | — | 121,398 | 121,382 | — | ||||||||||||||||||||||||
Tier 1 capital (5) | 101,992 | 98,329 | 102,721 | 4 | (1 | ) | 101,992 | 102,721 | (1 | ) | ||||||||||||||||||||||
Total capital (5) | 141,088 | 137,600 | 144,984 | 3 | (3 | ) | 141,088 | 144,984 | (3 | ) | ||||||||||||||||||||||
Capital ratios: | ||||||||||||||||||||||||||||||||
Total equity to assets | 9.90 | % | 9.66 | 9.45 | 2 | 5 | 9.90 | 9.45 | 5 | |||||||||||||||||||||||
Risk-based capital (5) | ||||||||||||||||||||||||||||||||
Tier 1 capital | 10.51 | 9.93 | 9.80 | 6 | 7 | 10.51 | 9.80 | 7 | ||||||||||||||||||||||||
Total capital | 14.53 | 13.90 | 13.84 | 5 | 5 | 14.53 | 13.84 | 5 | ||||||||||||||||||||||||
Tier 1 leverage (5) | 8.66 | 8.34 | 8.32 | 4 | 4 | 8.66 | 8.32 | 4 | ||||||||||||||||||||||||
Tier 1 common equity (6) | 7.61 | 7.09 | 4.49 | 7 | 69 | 7.61 | 4.49 | 69 | ||||||||||||||||||||||||
Book value per common share | $ | 21.35 | 20.76 | 17.91 | 3 | 19 | 21.35 | 17.91 | 19 | |||||||||||||||||||||||
Team members (active, full-time equivalent) | 267,600 | 267,400 | 269,900 | — | (1 | ) | 267,600 | 269,900 | (1 | ) | ||||||||||||||||||||||
Common stock price: | ||||||||||||||||||||||||||||||||
High | $ | 34.25 | 31.99 | 28.45 | 7 | 20 | 34.25 | 30.47 | 12 | |||||||||||||||||||||||
Low | 25.52 | 26.37 | 13.65 | (3 | ) | 87 | 25.52 | 7.80 | 227 | |||||||||||||||||||||||
Period end | 25.60 | 31.12 | 24.26 | (18 | ) | 6 | 25.60 | 24.26 | 6 | |||||||||||||||||||||||
(1) | The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). | |
(2) | Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. | |
(3) | Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). | |
(4) | Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. | |
(5) | See Note 18 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information. | |
(6) | See the “Capital Management” section in this Report for additional information. |
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• | $500 million release of loan loss reserves, reflecting improved loan portfolio performance; | |
• | $506 million of commercial purchased credit-impaired (PCI) loan resolutions, due to success in selling or settling commercial PCI loans; | |
• | $627 million of operating losses, up $468 million from a year ago, predominantly due to additional litigation accruals; | |
• | $498 million of merger integration expenses, up from $380 million in first quarter 2010; and | |
• | $137 million of severance costs for the Well Fargo Financial restructuring. |
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Quarter ended June 30 | , | |||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
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 | $ | 67,712 | 0.33 | % | $ | 56 | 20,889 | 0.66 | % | $ | 34 | |||||||||||||
Trading assets | 28,760 | 3.79 | 272 | 18,464 | 4.61 | 213 | ||||||||||||||||||
Debt securities available for sale (3): | ||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 2,094 | 3.50 | 18 | 2,102 | 3.45 | 17 | ||||||||||||||||||
Securities of U.S. states and political subdivisions | 16,192 | 6.48 | 255 | 12,189 | 6.47 | 206 | ||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Federal agencies | 72,876 | 5.39 | 930 | 92,550 | 5.36 | 1,203 | ||||||||||||||||||
Residential and commercial | 33,197 | 9.59 | 769 | 41,257 | 9.03 | 1,044 | ||||||||||||||||||
Total mortgage-backed securities | 106,073 | 6.72 | 1,699 | 133,807 | 6.60 | 2,247 | ||||||||||||||||||
Other debt securities (4) | 33,270 | 7.21 | 562 | 30,901 | 7.23 | 572 | ||||||||||||||||||
Total debt securities available for sale (4) | 157,629 | 6.75 | 2,534 | 178,999 | 6.67 | 3,042 | ||||||||||||||||||
Mortgages held for sale (5) | 32,196 | 5.04 | 405 | 43,177 | 5.05 | 545 | ||||||||||||||||||
Loans held for sale (5) | 4,386 | 2.73 | 30 | 7,188 | 2.83 | 50 | ||||||||||||||||||
Loans: | ||||||||||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||||||||||
Commercial | 147,965 | 5.44 | 2,009 | 187,501 | 4.11 | 1,922 | ||||||||||||||||||
Real estate mortgage | 97,731 | 3.89 | 949 | 96,131 | 3.52 | 843 | ||||||||||||||||||
Real estate construction | 33,060 | 3.44 | 284 | 42,023 | 2.71 | 284 | ||||||||||||||||||
Lease financing | 13,622 | 9.54 | 325 | 14,750 | 9.22 | 340 | ||||||||||||||||||
Total commercial and commercial real estate | 292,378 | 4.89 | 3,567 | 340,405 | 3.99 | 3,389 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 237,500 | 5.24 | 3,108 | 240,798 | 5.53 | 3,328 | ||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 102,678 | 4.53 | 1,162 | 108,422 | 4.77 | 1,290 | ||||||||||||||||||
Credit card | 22,239 | 13.24 | 736 | 22,963 | 12.74 | 731 | ||||||||||||||||||
Other revolving credit and installment | 88,617 | 6.57 | 1,452 | 90,729 | 6.64 | 1,502 | ||||||||||||||||||
Total consumer | 451,034 | 5.74 | 6,458 | 462,912 | 5.93 | 6,851 | ||||||||||||||||||
Foreign | 29,048 | 3.62 | 262 | 30,628 | 4.06 | 310 | ||||||||||||||||||
Total loans (5) | 772,460 | 5.34 | 10,287 | 833,945 | 5.07 | 10,550 | ||||||||||||||||||
Other | 6,082 | 3.44 | 53 | 6,079 | 2.91 | 45 | ||||||||||||||||||
Total earning assets | $ | 1,069,225 | 5.14 | % | $ | 13,637 | 1,108,741 | 5.21 | % | $ | 14,479 | |||||||||||||
Funding sources | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Interest-bearing checking | $ | 61,212 | 0.13 | % | $ | 19 | 79,955 | 0.13 | % | $ | 26 | |||||||||||||
Market rate and other savings | 412,062 | 0.26 | 267 | 334,067 | 0.40 | 336 | ||||||||||||||||||
Savings certificates | 89,773 | 1.44 | 323 | 152,444 | 1.19 | 451 | ||||||||||||||||||
Other time deposits | 14,936 | 1.90 | 72 | 21,660 | 2.00 | 108 | ||||||||||||||||||
Deposits in foreign offices | 57,461 | 0.23 | 33 | 49,885 | 0.29 | 36 | ||||||||||||||||||
Total interest-bearing deposits | 635,444 | 0.45 | 714 | 638,011 | 0.60 | 957 | ||||||||||||||||||
Short-term borrowings | 45,082 | 0.22 | 25 | 59,844 | 0.39 | 58 | ||||||||||||||||||
Long-term debt | 195,440 | 2.52 | 1,233 | 235,590 | 2.52 | 1,484 | ||||||||||||||||||
Other liabilities | 6,737 | 3.33 | 55 | 4,604 | 3.45 | 40 | ||||||||||||||||||
Total interest-bearing liabilities | 882,703 | 0.92 | 2,027 | 938,049 | 1.08 | 2,539 | ||||||||||||||||||
Portion of noninterest-bearing funding sources | 186,522 | — | — | 170,692 | — | — | ||||||||||||||||||
Total funding sources | $ | 1,069,225 | 0.76 | 2,027 | 1,108,741 | 0.91 | 2,539 | |||||||||||||||||
Net interest margin and net interest income on a taxable-equivalent basis (6) | 4.38 | % | $ | 11,610 | 4.30 | % | $ | 11,940 | ||||||||||||||||
Noninterest-earning assets | ||||||||||||||||||||||||
Cash and due from banks | $ | 17,415 | 19,340 | |||||||||||||||||||||
Goodwill | 24,820 | 24,261 | ||||||||||||||||||||||
Other | 112,720 | 122,584 | ||||||||||||||||||||||
Total noninterest-earning assets | $ | 154,955 | 166,185 | |||||||||||||||||||||
Noninterest-bearing funding sources | ||||||||||||||||||||||||
Deposits | $ | 176,908 | 174,529 | |||||||||||||||||||||
Other liabilities | 43,713 | 49,570 | ||||||||||||||||||||||
Total equity | 120,856 | 112,778 | ||||||||||||||||||||||
Noninterest-bearing funding sources used to fund earning assets | (186,522 | ) | (170,692 | ) | ||||||||||||||||||||
Net noninterest-bearing funding sources | $ | 154,955 | 166,185 | |||||||||||||||||||||
Total assets | $ | 1,224,180 | 1,274,926 | |||||||||||||||||||||
(1) | Our average prime rate was 3.25% for the quarters ended June 30, 2010 and 2009, and 3.25% for the first half of 2010 and 2009. The average three-month London Interbank Offered Rate (LIBOR) was 0.44% and 0.84% for the quarters ended June 30, 2010 and 2009, respectively, and 0.35% and 1.04% for the first half of 2010 and 2009, 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 and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts include the effects of any unrealized gain or loss marks but those marks carried in other comprehensive income are not included in yield determination of affected earning assets. Thus 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. |
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Six months ended June 30 | , | |||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
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 | $ | 54,347 | 0.33 | % | $ | 89 | 22,472 | 0.75 | % | $ | 84 | |||||||||||||
Trading assets | 28,338 | 3.85 | 544 | 20,323 | 4.81 | 488 | ||||||||||||||||||
Debt securities available for sale (3): | ||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 2,186 | 3.56 | 38 | 2,498 | 2.00 | 24 | ||||||||||||||||||
Securities of U.S. states and political subdivisions | 14,951 | 6.53 | 476 | 12,201 | 6.45 | 419 | ||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Federal agencies | 76,284 | 5.39 | 1,953 | 84,592 | 5.51 | 2,271 | ||||||||||||||||||
Residential and commercial | 32,984 | 9.63 | 1,559 | 39,980 | 8.80 | 2,061 | ||||||||||||||||||
Total mortgage-backed securities | 109,268 | 6.70 | 3,512 | 124,572 | 6.71 | 4,332 | ||||||||||||||||||
Other debt securities (4) | 32,810 | 6.86 | 1,054 | 30,493 | 7.02 | 1,123 | ||||||||||||||||||
Total debt securities available for sale (4) | 159,215 | 6.67 | 5,080 | 169,764 | 6.68 | 5,898 | ||||||||||||||||||
Mortgages held for sale (5) | 31,784 | 4.99 | 792 | 37,151 | 5.17 | 960 | ||||||||||||||||||
Loans held for sale (5) | 5,390 | 2.39 | 64 | 7,567 | 3.13 | 117 | ||||||||||||||||||
Loans: | ||||||||||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||||||||||
Commercial | 152,192 | 4.97 | 3,752 | 192,186 | 3.99 | 3,806 | ||||||||||||||||||
Real estate mortgage | 97,848 | 3.79 | 1,839 | 96,087 | 3.52 | 1,678 | ||||||||||||||||||
Real estate construction | 34,448 | 3.25 | 555 | 42,370 | 2.86 | 601 | ||||||||||||||||||
Lease financing | 13,814 | 9.38 | 648 | 15,277 | 8.99 | 687 | ||||||||||||||||||
Total commercial and commercial real estate | 298,302 | 4.59 | 6,794 | 345,920 | 3.94 | 6,772 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 241,241 | 5.25 | 6,318 | 243,133 | 5.59 | 6,772 | ||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 104,151 | 4.50 | 2,330 | 109,270 | 4.91 | 2,665 | ||||||||||||||||||
Credit card | 22,789 | 13.20 | 1,503 | 23,128 | 12.42 | 1,435 | ||||||||||||||||||
Other revolving credit and installment | 89,566 | 6.49 | 2,879 | 91,770 | 6.66 | 3,029 | ||||||||||||||||||
Total consumer | 457,747 | 5.72 | 13,030 | 467,301 | 5.98 | 13,901 | ||||||||||||||||||
Foreign | 28,807 | 3.62 | 518 | 31,487 | 4.22 | 659 | ||||||||||||||||||
Total loans (5) | 784,856 | 5.21 | 20,342 | 844,708 | 5.08 | 21,332 | ||||||||||||||||||
Other | 6,075 | 3.40 | 103 | 6,110 | 2.89 | 88 | ||||||||||||||||||
Total earning assets | $ | 1,070,005 | 5.10 | % | $ | 27,014 | 1,108,095 | 5.22 | % | $ | 28,967 | |||||||||||||
Funding sources | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Interest-bearing checking | $ | 61,614 | 0.14 | % | $ | 42 | 80,173 | 0.14 | % | $ | 56 | |||||||||||||
Market rate and other savings | 408,026 | 0.27 | 553 | 323,813 | 0.47 | 755 | ||||||||||||||||||
Savings certificates | 92,254 | 1.40 | 640 | 161,234 | 1.05 | 838 | ||||||||||||||||||
Other time deposits | 15,405 | 1.97 | 152 | 23,597 | 1.98 | 232 | ||||||||||||||||||
Deposits in foreign offices | 56,453 | 0.22 | 62 | 47,901 | 0.32 | 75 | ||||||||||||||||||
Total interest-bearing deposits | 633,752 | 0.46 | 1,449 | 636,718 | 0.62 | 1,956 | ||||||||||||||||||
Short-term borrowings | 45,082 | 0.20 | 44 | 67,911 | 0.54 | 181 | ||||||||||||||||||
Long-term debt | 202,186 | 2.48 | 2,509 | 247,209 | 2.65 | 3,267 | ||||||||||||||||||
Other liabilities | 6,203 | 3.38 | 104 | 4,194 | 3.64 | 76 | ||||||||||||||||||
Total interest-bearing liabilities | 887,223 | 0.93 | 4,106 | 956,032 | 1.15 | 5,480 | ||||||||||||||||||
Portion of noninterest-bearing funding sources | 182,782 | — | — | 152,063 | — | — | ||||||||||||||||||
Total funding sources | $ | 1,070,005 | 0.77 | 4,106 | 1,108,095 | 0.99 | 5,480 | |||||||||||||||||
Net interest margin and net interest income on a taxable-equivalent basis (6) | 4.33 | % | $ | 22,908 | 4.23 | % | $ | 23,487 | ||||||||||||||||
Noninterest-earning assets | ||||||||||||||||||||||||
Cash and due from banks | $ | 17,730 | 19,795 | |||||||||||||||||||||
Goodwill | 24,818 | 23,725 | ||||||||||||||||||||||
Other | 112,592 | 130,665 | ||||||||||||||||||||||
Total noninterest-earning assets | $ | 155,140 | 174,185 | |||||||||||||||||||||
Noninterest-bearing funding sources | ||||||||||||||||||||||||
Deposits | $ | 174,487 | 167,458 | |||||||||||||||||||||
Other liabilities | 44,224 | 50,064 | ||||||||||||||||||||||
Total equity | 119,211 | 108,726 | ||||||||||||||||||||||
Noninterest-bearing funding sources used to fund earning assets | (182,782 | ) | (152,063 | ) | ||||||||||||||||||||
Net noninterest-bearing funding sources | $ | 155,140 | 174,185 | |||||||||||||||||||||
Total assets | $ | 1,225,145 | 1,282,280 | |||||||||||||||||||||
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Quarter ended June 30 | , | % | Six months ended June 30 | , | % | |||||||||||||||||||
(in millions) | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
Service charges on deposit accounts | $ | 1,417 | 1,448 | (2 | )% | $ | 2,749 | 2,842 | (3 | )% | ||||||||||||||
Trust and investment fees: | ||||||||||||||||||||||||
Trust, investment and IRA fees | 1,035 | 839 | 23 | 2,084 | 1,561 | 34 | ||||||||||||||||||
Commissions and all other fees | 1,708 | 1,574 | 9 | 3,328 | 3,067 | 9 | ||||||||||||||||||
Total trust and investment fees | 2,743 | 2,413 | 14 | 5,412 | 4,628 | 17 | ||||||||||||||||||
Card fees | 911 | 923 | (1 | ) | 1,776 | 1,776 | — | |||||||||||||||||
Other fees: | ||||||||||||||||||||||||
Cash network fees | 58 | 58 | — | 113 | 116 | (3 | ) | |||||||||||||||||
Charges and fees on loans | 401 | 440 | (9 | ) | 820 | 873 | (6 | ) | ||||||||||||||||
Processing and all other fees | 523 | 465 | 12 | 990 | 875 | 13 | ||||||||||||||||||
Total other fees | 982 | 963 | 2 | 1,923 | 1,864 | 3 | ||||||||||||||||||
Mortgage banking (1): | ||||||||||||||||||||||||
Servicing income, net | 1,218 | 816 | 49 | 2,584 | 1,722 | 50 | ||||||||||||||||||
Net gains on mortgage loan origination/sales activities | 793 | 2,230 | (64 | ) | 1,897 | 3,828 | (50 | ) | ||||||||||||||||
Total mortgage banking | 2,011 | 3,046 | (34 | ) | 4,481 | 5,550 | (19 | ) | ||||||||||||||||
Insurance | 544 | 595 | (9 | ) | 1,165 | 1,176 | (1 | ) | ||||||||||||||||
Net gains from trading activities | 109 | 749 | (85 | ) | 646 | 1,536 | (58 | ) | ||||||||||||||||
Net gains (losses) on debt securities available for sale | 30 | (78 | ) | NM | 58 | (197 | ) | NM | ||||||||||||||||
Net gains (losses) from equity investments | 288 | 40 | 620 | 331 | (117 | ) | NM | |||||||||||||||||
Operating leases | 329 | 168 | 96 | 514 | 298 | 72 | ||||||||||||||||||
All other | 581 | 476 | 22 | 1,191 | 1,028 | 16 | ||||||||||||||||||
Total | $ | 9,945 | 10,743 | (7 | ) | $ | 20,246 | 20,384 | (1 | ) | ||||||||||||||
(1) | 2009 categories have been revised to conform to current presentation. |
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Quarter ended June 30 | , | % | Six months ended June 30 | , | % | |||||||||||||||||||
(in millions) | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
Salaries | $ | 3,564 | 3,438 | 4 | % | $ | 6,878 | 6,824 | 1 | % | ||||||||||||||
Commission and incentive compensation | 2,225 | 2,060 | 8 | 4,217 | 3,884 | 9 | ||||||||||||||||||
Employee benefits | 1,063 | 1,227 | (13 | ) | 2,385 | 2,511 | (5 | ) | ||||||||||||||||
Equipment | 588 | 575 | 2 | 1,266 | 1,262 | — | ||||||||||||||||||
Net occupancy | 742 | 783 | (5 | ) | 1,538 | 1,579 | (3 | ) | ||||||||||||||||
Core deposit and other intangibles | 553 | 646 | (14 | ) | 1,102 | 1,293 | (15 | ) | ||||||||||||||||
FDIC and other deposit assessments | 295 | 981 | (70 | ) | 596 | 1,319 | (55 | ) | ||||||||||||||||
Outside professional services | 572 | 451 | 27 | 1,056 | 861 | 23 | ||||||||||||||||||
Contract services | 384 | 256 | 50 | 731 | 472 | 55 | ||||||||||||||||||
Foreclosed assets | 333 | 187 | 78 | 719 | 435 | 65 | ||||||||||||||||||
Outside data processing | 276 | 282 | (2 | ) | 548 | 494 | 11 | |||||||||||||||||
Postage, stationery and supplies | 230 | 240 | (4 | ) | 472 | 490 | (4 | ) | ||||||||||||||||
Operating losses | 627 | 159 | 294 | 835 | 331 | 152 | ||||||||||||||||||
Insurance | 164 | 259 | (37 | ) | 312 | 526 | (41 | ) | ||||||||||||||||
Telecommunications | 156 | 164 | (5 | ) | 299 | 322 | (7 | ) | ||||||||||||||||
Travel and entertainment | 196 | 131 | 50 | 367 | 236 | 56 | ||||||||||||||||||
Advertising and promotion | 156 | 111 | 41 | 268 | 236 | 14 | ||||||||||||||||||
Operating leases | 27 | 61 | (56 | ) | 64 | 131 | (51 | ) | ||||||||||||||||
All other | 595 | 686 | (13 | ) | 1,210 | 1,309 | (8 | ) | ||||||||||||||||
Total | $ | 12,746 | 12,697 | — | $ | 24,863 | 24,515 | 1 | ||||||||||||||||
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Wealth, Brokerage | ||||||||||||||||||||||||
Community Banking | Wholesale Banking | and Retirement | ||||||||||||||||||||||
(in billions) | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Quarter ended June 30, | ||||||||||||||||||||||||
Revenue | $ | 13.7 | 15.2 | 5.7 | 5.2 | 2.9 | 2.8 | |||||||||||||||||
Net income | 1.8 | 2.1 | 1.4 | 1.1 | 0.3 | 0.3 | ||||||||||||||||||
Average loans | 539.1 | 565.8 | 223.4 | 258.4 | 42.6 | 46.0 | ||||||||||||||||||
Average core deposits | 533.4 | 565.6 | 161.5 | 137.4 | 121.5 | 113.5 | ||||||||||||||||||
Six months ended June 30, | ||||||||||||||||||||||||
Revenue | $ | 27.8 | 29.6 | 11.0 | 10.1 | 5.8 | 5.3 | |||||||||||||||||
Net income | 3.2 | 4.0 | 2.6 | 2.2 | 0.6 | 0.4 | ||||||||||||||||||
Average loans | 547.1 | 566.8 | 227.8 | 268.3 | 43.2 | 46.3 | ||||||||||||||||||
Average core deposits | 532.8 | 560.3 | 161.2 | 138.5 | 121.3 | 108.2 | ||||||||||||||||||
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June 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||
unrealized | Fair | unrealized | Fair | |||||||||||||||||||||
(in billions) | Cost | gain | value | Cost | gain | value | ||||||||||||||||||
Debt securities available for sale | $ | 144.8 | 8.0 | 152.8 | 162.3 | 4.8 | 167.1 | |||||||||||||||||
Marketable equity securities | 4.5 | 0.6 | 5.1 | 4.8 | 0.8 | 5.6 | ||||||||||||||||||
Total securities available for sale | $ | 149.3 | 8.6 | 157.9 | 167.1 | 5.6 | 172.7 | |||||||||||||||||
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Expected | ||||||||||||
remaining | ||||||||||||
Fair | Net unrealized | maturity | ||||||||||
(in billions) | value | gains (losses) | (in years) | |||||||||
At June 30, 2010 | $ | 105.1 | 6.2 | 3.7 | ||||||||
At June 30, 2010, assuming a 200 basis point: | ||||||||||||
Increase in interest rates | 97.3 | (1.6 | ) | 5.6 | ||||||||
Decrease in interest rates | 109.3 | 10.4 | 2.9 | |||||||||
June 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
All | All | |||||||||||||||||||||||
PCI | other | PCI | other | |||||||||||||||||||||
(in millions) | loans | loans | Total | loans | loans | Total | ||||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||||||||||
Commercial | $ | 1,113 | 144,971 | 146,084 | 1,911 | 156,441 | 158,352 | |||||||||||||||||
Real estate mortgage | 3,487 | 96,139 | 99,626 | 4,137 | 93,390 | 97,527 | ||||||||||||||||||
Real estate construction | 4,194 | 26,685 | 30,879 | 5,207 | 31,771 | 36,978 | ||||||||||||||||||
Lease financing | — | 13,492 | 13,492 | — | 14,210 | 14,210 | ||||||||||||||||||
Total commercial and commercial real estate | 8,794 | 281,287 | 290,081 | 11,255 | 295,812 | 307,067 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 35,972 | 197,840 | 233,812 | 38,386 | 191,150 | 229,536 | ||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 290 | 101,037 | 101,327 | 331 | 103,377 | 103,708 | ||||||||||||||||||
Credit card | — | 22,086 | 22,086 | — | 24,003 | 24,003 | ||||||||||||||||||
Other revolving credit and installment | — | 88,485 | 88,485 | — | 89,058 | 89,058 | ||||||||||||||||||
Total consumer | 36,262 | 409,448 | 445,710 | 38,717 | 407,588 | 446,305 | ||||||||||||||||||
Foreign | 1,457 | 29,017 | 30,474 | 1,733 | 27,665 | 29,398 | ||||||||||||||||||
Total loans | $ | 46,513 | 719,752 | 766,265 | 51,705 | 731,065 | 782,770 | |||||||||||||||||
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Commercial | , | |||||||||||||||
CRE and | Other | |||||||||||||||
(in millions) | foreign | Pick-a-Pay | consumer | Total | ||||||||||||
Balance, December 31, 2008 | $ | 10,410 | 26,485 | 4,069 | 40,964 | |||||||||||
Release of nonaccretable difference due to: | ||||||||||||||||
Loans resolved by settlement with borrower (1) | (330 | ) | — | — | (330 | ) | ||||||||||
Loans resolved by sales to third parties (2) | (86 | ) | — | (85 | ) | (171 | ) | |||||||||
Reclassification to accretable yield for loans with improving cash flows (3) | (138 | ) | (27 | ) | (276 | ) | (441 | ) | ||||||||
Use of nonaccretable difference due to: | ||||||||||||||||
Losses from loan resolutions and write-downs (4) | (4,853 | ) | (10,218 | ) | (2,086 | ) | (17,157 | ) | ||||||||
Balance, December 31, 2009 | 5,003 | 16,240 | 1,622 | 22,865 | ||||||||||||
Release of nonaccretable difference due to: | ||||||||||||||||
Loans resolved by settlement with borrower (1) | (586 | ) | — | — | (586 | ) | ||||||||||
Loans resolved by sales to third parties (2) | (102 | ) | — | — | (102 | ) | ||||||||||
Reclassification to accretable yield for loans with improving cash flows (3) | (169 | ) | (2,356 | ) | (70 | ) | (2,595 | ) | ||||||||
Use of nonaccretable difference due to: | ||||||||||||||||
Losses from loan resolutions and write-downs (4) | (1,223 | ) | (1,892 | ) | (263 | ) | (3,378 | ) | ||||||||
Balance, June 30, 2010 | $ | 2,923 | 11,992 | 1,289 | 16,204 | |||||||||||
Balance, March 31, 2010 | $ | 4,001 | 14,514 | 1,412 | 19,927 | |||||||||||
Release of nonaccretable difference due to: | ||||||||||||||||
Loans resolved by settlement with borrower (1) | (440 | ) | — | — | (440 | ) | ||||||||||
Loans resolved by sales to third parties (2) | (66 | ) | — | — | (66 | ) | ||||||||||
Reclassification to accretable yield for loans with improving cash flows (3) | (77 | ) | (1,807 | ) | (43 | ) | (1,927 | ) | ||||||||
Use of nonaccretable difference due to: | ||||||||||||||||
Losses from loan resolutions and write-downs (4) | (495 | ) | (715 | ) | (80 | ) | (1,290 | ) | ||||||||
Balance, June 30, 2010 | $ | 2,923 | 11,992 | 1,289 | 16,204 | |||||||||||
(1) | Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations. | |
(2) | Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale. | |
(3) | Reclassification of nonaccretable difference for increased cash flow estimates to the accretable yield will result in increasing income and thus the rate of return realized. Amounts reclassified to accretable yield are expected to be probable of realization over the estimated remaining life of the loan. | |
(4) | Write-downs to net realizable value of PCI loans are charged to the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan. |
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Commercial | , | |||||||||||||||
CRE and | Other | |||||||||||||||
(in millions) | foreign | Pick-a-Pay | consumer | Total | ||||||||||||
Release of unneeded nonaccretable difference due to: | ||||||||||||||||
Loans resolved by settlement with borrower (1) | $ | 916 | — | — | 916 | |||||||||||
Loans resolved by sales to third parties (2) | 188 | — | 85 | 273 | ||||||||||||
Reclassification to accretable yield for loans with improving cash flows (3) | 307 | 2,383 | 346 | 3,036 | ||||||||||||
Total releases of nonaccretable difference due to better than expected losses | 1,411 | 2,383 | 431 | 4,225 | ||||||||||||
Provision for worse than originally expected losses (4) | (1,226 | ) | — | (29 | ) | (1,255 | ) | |||||||||
Actual and projected losses on PCI loans better (worse) than originally expected | $ | 185 | 2,383 | 402 | 2,970 | |||||||||||
(1) | Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations. | |
(2) | Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale. | |
(3) | Reclassification of nonaccretable difference for increased cash flow estimates to the accretable yield will result in increasing income and thus the rate of return realized. Amounts reclassified to accretable yield are expected to be probable of realization over the estimated remaining life of the loan. | |
(4) | Provision for additional losses recorded as a charge to income, when it is estimated that the expected cash flows for a PCI loan or pool of loans have decreased subsequent to the acquisition. |
June 30 | , | Dec. 31 | , | |||||||||
(in millions) | 2010 | 2009 | % Change | |||||||||
Noninterest-bearing | $ | 175,013 | 181,356 | (3 | )% | |||||||
Interest-bearing checking | 61,195 | 63,225 | (3 | ) | ||||||||
Market rate and other savings | 405,412 | 402,448 | 1 | |||||||||
Savings certificates | 88,117 | 100,857 | (13 | ) | ||||||||
Foreign deposits (1) | 28,943 | 32,851 | (12 | ) | ||||||||
Core deposits | 758,680 | 780,737 | (3 | ) | ||||||||
Other time and savings deposits | 20,861 | 16,142 | 29 | |||||||||
Other foreign deposits | 36,082 | 27,139 | 33 | |||||||||
Total deposits | $ | 815,623 | 824,018 | (1 | ) | |||||||
(1) | Reflects Eurodollar sweep balances included in core deposits. |
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Incremental | ||||
assets as of | ||||
(in millions) | Jan. 1, 2010 | |||
Structure type: | ||||
Residential mortgage loans — nonconforming (1) | $ | 11,479 | ||
Commercial paper conduit | 5,088 | |||
Other | 2,002 | |||
Total | $ | 18,569 | ||
(1) | Represents certain of our residential mortgage loans that are not guaranteed by GSEs (“nonconforming”). |
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• | Quarterly credit losses declined 16% to $4.5 billion in second quarter 2010 from $5.3 billion in first quarter 2010. This improvement in losses was broad based across the consumer portfolios, with reduced losses in the home equity, Wells Fargo Financial, Pick-a-Pay, consumer lines and loans, auto dealer services and credit card portfolios. | |
• | Losses in the commercial portfolio continued to improve from the higher levels experienced last year, including a 10% linked-quarter reduction in commercial real estate losses. | |
• | We also saw improvement in early indicators of credit quality, with improved 30 day delinquencies in many portfolios, including Business Direct, credit card, home equity, student lending and Wells Fargo Home Mortgage. | |
• | Based on declining losses and improved credit quality trends, the provision for credit losses of $4.0 billion was $500 million less than net charge-offs in second quarter 2010. Absent significant deterioration in the economy, we currently expect future reductions in the allowance for loan losses. |
Outstanding balances | ||||||||
June 30 | , | Dec. 31 | , | |||||
(in billions) | 2010 | 2009 | ||||||
Commercial and commercial real estate PCI loans (1) | $ | 8.8 | 11.3 | |||||
Pick-a-Pay mortgage (1) | 80.2 | 85.2 | ||||||
Liquidating home equity | 7.6 | 8.4 | ||||||
Legacy Wells Fargo Financial indirect auto | 8.3 | 11.3 | ||||||
Legacy Wells Fargo Financial debt consolidation (2) | 20.4 | 22.4 | ||||||
Total non-strategic and liquidating loan portfolios | $ | 125.3 | 138.6 | |||||
(1) | Net of purchase accounting adjustments related to PCI loans. | |
(2) | In July 2010, we announced the restructuring of our Wells Fargo Financial division and exiting the origination of non-prime portfolio mortgage loans. |
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June 30, 2010 | ||||||||||||||||||||||||||||
Real estate mortgage | Real estate construction | Total | % of | |||||||||||||||||||||||||
Nonaccrual | Outstanding | Nonaccrual | Outstanding | Nonaccrual | Outstanding | total | ||||||||||||||||||||||
(in millions) | loans | balance (1) | loans | balance (1) | loans | balance (1) | loans | |||||||||||||||||||||
By state: | ||||||||||||||||||||||||||||
PCI loans: | ||||||||||||||||||||||||||||
Florida | $ | — | 561 | — | 886 | — | 1,447 | * | % | |||||||||||||||||||
California | — | 731 | — | 258 | — | 989 | * | |||||||||||||||||||||
North Carolina | — | 199 | — | 481 | — | 680 | * | |||||||||||||||||||||
Georgia | — | 260 | — | 382 | — | 642 | * | |||||||||||||||||||||
Virginia | — | 227 | — | 391 | — | 618 | * | |||||||||||||||||||||
Other | — | 1,509 | — | 1,796 | — | 3,305 | (2) | * | ||||||||||||||||||||
Total PCI loans | — | 3,487 | — | 4,194 | — | 7,681 | 1 | |||||||||||||||||||||
All other loans: | ||||||||||||||||||||||||||||
California | 1,109 | 22,987 | 593 | 4,311 | 1,702 | 27,298 | 4 | |||||||||||||||||||||
Florida | 853 | 9,667 | 475 | 2,754 | 1,328 | 12,421 | 2 | |||||||||||||||||||||
Texas | 284 | 6,549 | 311 | 2,650 | 595 | 9,199 | 1 | |||||||||||||||||||||
North Carolina | 226 | 4,891 | 255 | 1,669 | 481 | 6,560 | * | |||||||||||||||||||||
Georgia | 303 | 3,850 | 111 | 1,149 | 414 | 4,999 | * | |||||||||||||||||||||
Virginia | 57 | 3,075 | 184 | 1,791 | 241 | 4,866 | * | |||||||||||||||||||||
Arizona | 195 | 3,744 | 342 | 937 | 537 | 4,681 | * | |||||||||||||||||||||
New York | 52 | 3,940 | 40 | 1,221 | 92 | 5,161 | * | |||||||||||||||||||||
New Jersey | 87 | 2,814 | 57 | 702 | 144 | 3,516 | * | |||||||||||||||||||||
Colorado | 95 | 3,031 | 86 | 777 | 181 | 3,808 | * | |||||||||||||||||||||
Other | 1,428 | 31,591 | 975 | 8,724 | 2,403 | 40,315 | (3) | 5 | ||||||||||||||||||||
Total all other loans | 4,689 | 96,139 | 3,429 | 26,685 | 8,118 | 122,824 | 16 | |||||||||||||||||||||
Total | $ | 4,689 | 99,626 | 3,429 | 30,879 | 8,118 | 130,505 | 17 | % | |||||||||||||||||||
By property: | ||||||||||||||||||||||||||||
PCI loans: | ||||||||||||||||||||||||||||
Apartments | $ | — | 709 | — | 1,004 | — | 1,713 | * | % | |||||||||||||||||||
Office buildings | — | 1,148 | — | 376 | — | 1,524 | * | |||||||||||||||||||||
1-4 family land | — | 242 | — | 852 | — | 1,094 | * | |||||||||||||||||||||
Retail (excluding shopping center) | — | 437 | — | 167 | — | 604 | * | |||||||||||||||||||||
Land (excluding 1-4 family) | — | 21 | — | 576 | — | 597 | * | |||||||||||||||||||||
Other | — | 930 | — | 1,219 | — | 2,149 | * | |||||||||||||||||||||
Total PCI loans | — | 3,487 | — | 4,194 | — | 7,681 | 1 | |||||||||||||||||||||
All other loans: | ||||||||||||||||||||||||||||
Office buildings | 1,179 | 24,545 | 309 | 3,357 | 1,488 | 27,902 | 4 | |||||||||||||||||||||
Industrial/warehouse | 674 | 13,519 | 93 | 1,129 | 767 | 14,648 | 2 | |||||||||||||||||||||
Real estate — other | 601 | 13,215 | 114 | 904 | 715 | 14,119 | 2 | |||||||||||||||||||||
Apartments | 283 | 7,770 | 330 | 4,482 | 613 | 12,252 | 2 | |||||||||||||||||||||
Retail (excluding shopping center) | 599 | 10,210 | 158 | 1,192 | 757 | 11,402 | 1 | |||||||||||||||||||||
Land (excluding 1-4 family) | 21 | 343 | 778 | 7,931 | 799 | 8,274 | 1 | |||||||||||||||||||||
Shopping center | 308 | 6,312 | 241 | 1,959 | 549 | 8,271 | 1 | |||||||||||||||||||||
Hotel/motel | 375 | 5,553 | 105 | 904 | 480 | 6,457 | * | |||||||||||||||||||||
1-4 family land | 114 | 314 | 685 | 2,695 | 799 | 3,009 | * | |||||||||||||||||||||
Institutional | 85 | 2,721 | 39 | 229 | 124 | 2,950 | * | |||||||||||||||||||||
Other | 450 | 11,637 | 577 | 1,903 | 1,027 | 13,540 | 2 | |||||||||||||||||||||
Total all other loans | 4,689 | 96,139 | 3,429 | 26,685 | 8,118 | 122,824 | 16 | |||||||||||||||||||||
Total | $ | 4,689 | 99,626 | (4) | 3,429 | 30,879 | 8,118 | 130,505 | 17 | % | ||||||||||||||||||
* | Less than 1% | |
(1) | For PCI loans amounts represent carrying value. | |
(2) | Includes 37 states; no state had loans in excess of $570 million. | |
(3) | Includes 40 states; no state had loans in excess of $3.1 billion. | |
(4) | Includes $41.8 billion of loans to owner-occupants where 51% or more of the property is used in the conduct of their business. |
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December 31, 2009 | ||||||||||||||||||||||||||||
Real estate mortgage | Real estate construction | Total | % of | |||||||||||||||||||||||||
Nonaccrual | Outstanding | Nonaccrual | Outstanding | Nonaccrual | Outstanding | total | ||||||||||||||||||||||
(in millions) | loans | balance (1) | loans | balance (1) | loans | balance (1) | loans | |||||||||||||||||||||
By state: | ||||||||||||||||||||||||||||
PCI loans: | ||||||||||||||||||||||||||||
Florida | $ | — | 629 | — | 1,115 | — | 1,744 | * | % | |||||||||||||||||||
California | — | 995 | — | 271 | — | 1,266 | * | |||||||||||||||||||||
North Carolina | — | 150 | — | 618 | — | 768 | * | |||||||||||||||||||||
Georgia | — | 226 | — | 523 | — | 749 | * | |||||||||||||||||||||
Virginia | — | 219 | — | 480 | — | 699 | * | |||||||||||||||||||||
Other | — | 1,918 | — | 2,200 | — | 4,118 | (5) | * | ||||||||||||||||||||
Total PCI loans | — | 4,137 | — | 5,207 | — | 9,344 | 1 | |||||||||||||||||||||
All other loans: | ||||||||||||||||||||||||||||
California | 1,132 | 22,739 | 874 | 5,024 | 2,006 | 27,763 | 4 | |||||||||||||||||||||
Florida | 563 | 9,899 | 374 | 3,227 | 937 | 13,126 | 2 | |||||||||||||||||||||
Texas | 225 | 6,098 | 256 | 3,054 | 481 | 9,152 | 1 | |||||||||||||||||||||
North Carolina | 179 | 4,983 | 161 | 2,079 | 340 | 7,062 | * | |||||||||||||||||||||
Georgia | 207 | 3,809 | 127 | 1,507 | 334 | 5,316 | * | |||||||||||||||||||||
Virginia | 53 | 3,080 | 117 | 1,974 | 170 | 5,054 | * | |||||||||||||||||||||
New York | 53 | 3,591 | 49 | 1,456 | 102 | 5,047 | * | |||||||||||||||||||||
Arizona | 158 | 3,810 | 200 | 1,193 | 358 | 5,003 | * | |||||||||||||||||||||
New Jersey | 66 | 2,904 | 23 | 768 | 89 | 3,672 | * | |||||||||||||||||||||
Colorado | 78 | 2,252 | 110 | 875 | 188 | 3,127 | * | |||||||||||||||||||||
Other | 982 | 30,225 | 1,022 | 10,614 | 2,004 | 40,839 | (6) | 5 | ||||||||||||||||||||
Total all other loans | 3,696 | 93,390 | 3,313 | 31,771 | 7,009 | 125,161 | 16 | |||||||||||||||||||||
Total | $ | 3,696 | 97,527 | 3,313 | 36,978 | 7,009 | 134,505 | 17 | % | |||||||||||||||||||
By property: | ||||||||||||||||||||||||||||
PCI loans: | ||||||||||||||||||||||||||||
Apartments | $ | — | 810 | — | 1,300 | — | 2,110 | * | % | |||||||||||||||||||
Office buildings | — | 1,443 | — | 399 | — | 1,842 | * | |||||||||||||||||||||
1-4 family land | — | 270 | — | 1,076 | — | 1,346 | * | |||||||||||||||||||||
1-4 family structure | — | 96 | — | 693 | — | 789 | * | |||||||||||||||||||||
Land (excluding 1-4 family) | — | — | — | 759 | — | 759 | * | |||||||||||||||||||||
Other | — | 1,518 | — | 980 | — | 2,498 | * | |||||||||||||||||||||
Total PCI loans | — | 4,137 | — | 5,207 | — | 9,344 | 1 | |||||||||||||||||||||
All other loans: | ||||||||||||||||||||||||||||
Office buildings | 887 | 24,688 | 188 | 4,005 | 1,075 | 28,693 | 4 | |||||||||||||||||||||
Industrial/warehouse | 508 | 13,643 | 36 | 1,281 | 544 | 14,924 | 2 | |||||||||||||||||||||
Real estate — other | 550 | 13,563 | 102 | 1,105 | 652 | 14,668 | 2 | |||||||||||||||||||||
Apartments | 267 | 7,102 | 254 | 5,138 | 521 | 12,240 | 2 | |||||||||||||||||||||
Retail (excluding shopping center) | 597 | 10,457 | 108 | 1,327 | 705 | 11,784 | 2 | |||||||||||||||||||||
Land (excluding 1-4 family) | 9 | 262 | 778 | 8,943 | 787 | 9,205 | 1 | |||||||||||||||||||||
Shopping center | 204 | 5,912 | 210 | 2,398 | 414 | 8,310 | 1 | |||||||||||||||||||||
Hotel/motel | 208 | 5,216 | 123 | 1,160 | 331 | 6,376 | * | |||||||||||||||||||||
1-4 family land | 77 | 232 | 764 | 3,156 | 841 | 3,388 | * | |||||||||||||||||||||
1-4 family structure | 60 | 1,065 | 689 | 2,199 | 749 | 3,264 | * | |||||||||||||||||||||
Other | 329 | 11,250 | 61 | 1,059 | 390 | 12,309 | 2 | |||||||||||||||||||||
Total all other loans | 3,696 | 93,390 | 3,313 | 31,771 | 7,009 | 125,161 | 16 | |||||||||||||||||||||
Total | $ | 3,696 | 97,527 | (7) | 3,313 | 36,978 | 7,009 | 134,505 | 17 | % | ||||||||||||||||||
(5) | Includes 38 states; no state had loans in excess of $605 million. | |
(6) | Includes 40 states; no state had loans in excess of $3.0 billion. | |
(7) | Includes $42.1 billion of loans to owner-occupants where 51% or more of the property is used in the conduct of their business. |
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June 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||
Nonaccrual | Outstanding | total | Nonaccrual | Outstanding | total | |||||||||||||||||||
(in millions) | loans | balance (1) | loans | loans | balance (1) | loans | ||||||||||||||||||
PCI loans: | ||||||||||||||||||||||||
Media | $ | — | 159 | * | % | $ | — | 314 | * | % | ||||||||||||||
Real estate investment trust | — | 92 | * | — | 351 | * | ||||||||||||||||||
Insurance | — | 108 | * | — | 118 | * | ||||||||||||||||||
Investors | — | 113 | * | — | 140 | * | ||||||||||||||||||
Airlines | — | 73 | * | — | 87 | * | ||||||||||||||||||
Technology | — | 69 | * | — | 72 | * | ||||||||||||||||||
Other | — | 499 | (2) | * | — | 829 | (2) | * | ||||||||||||||||
Total PCI loans | — | 1,113 | * | — | 1,911 | * | ||||||||||||||||||
All other loans: | ||||||||||||||||||||||||
Financial institutions | 141 | 11,529 | 2 | 496 | 11,111 | 1 | ||||||||||||||||||
Cyclical retailers | 82 | 8,374 | 1 | 71 | 8,188 | 1 | ||||||||||||||||||
Healthcare | 112 | 8,125 | 1 | 88 | 8,397 | 1 | ||||||||||||||||||
Food and beverage | 78 | 7,859 | 1 | 77 | 8,316 | 1 | ||||||||||||||||||
Oil and gas | 219 | 7,863 | 1 | 202 | 8,464 | 1 | ||||||||||||||||||
Industrial equipment | 96 | 6,503 | * | 119 | 7,524 | * | ||||||||||||||||||
Business services | 138 | 5,341 | * | 99 | 6,722 | * | ||||||||||||||||||
Transportation | 61 | 6,177 | * | 31 | 6,469 | * | ||||||||||||||||||
Utilities | 10 | 5,216 | * | 15 | 5,752 | * | ||||||||||||||||||
Real estate other | 141 | 5,767 | * | 167 | 6,570 | * | ||||||||||||||||||
Technology | 42 | 5,486 | * | 72 | 5,489 | * | ||||||||||||||||||
Hotel/restaurant | 224 | 4,693 | * | 195 | 5,050 | * | ||||||||||||||||||
Other | 2,662 | 75,530 | (3) | 10 | 2,936 | 82,599 | (3) | 11 | ||||||||||||||||
Total all other loans | 4,006 | 158,463 | 21 | 4,568 | 170,651 | 22 | ||||||||||||||||||
Total | $ | 4,006 | 159,576 | 21 | % | $ | 4,568 | 172,562 | 22 | % | ||||||||||||||
* | Less than 1% | |
(1) | For PCI loans amounts represent carrying value. | |
(2) | No other single category had loans in excess of $66 million at June 30, 2010, or $110 million (leisure) at December 31, 2009. | |
(3) | No other single category had loans in excess of $4.7 billion at June 30, 2010, or $5.8 billion (public administration) at December 31, 2009. The next largest categories included public administration, investors, media, non-residential construction and leisure. |
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June 30, 2010 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||||||
(in millions) | Outstandings | % of total | Outstandings | % of total | Outstandings | % of total | ||||||||||||||||||
Option payment loans | $ | 63,974 | 66 | % | $ | 73,060 | 70 | % | $ | 101,297 | 86 | % | ||||||||||||
Non-option payment ARMs and fixed-rate loans | 13,286 | 14 | 14,178 | 14 | 15,978 | 14 | ||||||||||||||||||
Loan modifications — Pick-a-Pay | 19,851 | 20 | 16,420 | 16 | — | — | ||||||||||||||||||
Total unpaid principal balance | $ | 97,111 | 100 | % | $ | 103,658 | 100 | % | $ | 117,275 | 100 | % | ||||||||||||
Total carrying value | $ | 80,208 | $ | 85,238 | $ | 95,315 | ||||||||||||||||||
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PCI loans | All other loans | |||||||||||||||||||||||||||
Ratio of | ||||||||||||||||||||||||||||
carrying | ||||||||||||||||||||||||||||
Unpaid | Current | value to | Unpaid | Current | ||||||||||||||||||||||||
principal | LTV | Carrying | current | principal | LTV | Carrying | ||||||||||||||||||||||
(in millions) | balance | ratio (2) | value (3) | value | balance | ratio (2) | value (3) | |||||||||||||||||||||
June 30, 2010 | ||||||||||||||||||||||||||||
California | $ | 34,458 | 137 | % | $ | 23,505 | 93 | % | $ | 22,653 | 90 | % | $ | 22,283 | ||||||||||||||
Florida | 5,375 | 146 | 3,098 | 84 | 4,817 | 109 | 4,621 | |||||||||||||||||||||
New Jersey | 1,590 | 100 | 1,241 | 77 | 2,747 | 81 | 2,729 | |||||||||||||||||||||
Texas | 412 | 80 | 366 | 71 | 1,842 | 65 | 1,846 | |||||||||||||||||||||
Washington | 601 | 101 | 519 | 86 | 1,380 | 84 | 1,366 | |||||||||||||||||||||
Other states | 8,582 | 117 | 6,170 | 83 | 12,654 | 88 | 12,464 | |||||||||||||||||||||
Total Pick-a-Pay loans | $ | 51,018 | $ | 34,899 | $ | 46,093 | $ | 45,309 | ||||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||||||
California | $ | 37,341 | 141 | % | $ | 25,022 | 94 | % | $ | 23,795 | 93 | % | $ | 23,626 | ||||||||||||||
Florida | 5,751 | 139 | 3,199 | 77 | 5,046 | 104 | 4,942 | |||||||||||||||||||||
New Jersey | 1,646 | 101 | 1,269 | 77 | 2,914 | 82 | 2,912 | |||||||||||||||||||||
Texas | 442 | 82 | 399 | 74 | 1,967 | 66 | 1,973 | |||||||||||||||||||||
Washington | 633 | 103 | 543 | 88 | 1,439 | 84 | 1,435 | |||||||||||||||||||||
Other states | 9,283 | 116 | 6,597 | 82 | 13,401 | 87 | 13,321 | |||||||||||||||||||||
Total Pick-a-Pay loans | $ | 55,096 | $ | 37,029 | $ | 48,562 | $ | 48,209 | ||||||||||||||||||||
(1) | The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2010. The December 31, 2009 table has been revised to conform to the 2010 presentation of top five states. | |
(2) | 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. | |
(3) | 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. |
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% of loans | Loss rate | |||||||||||||||||||||||
two payments | (annualized) | |||||||||||||||||||||||
Outstanding balances | or more past due | Quarter ended | ||||||||||||||||||||||
June 30 | , | Dec. 31 | , | June 30 | , | Dec. 31 | , | June 30 | , | Dec. 31 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Core portfolio | ||||||||||||||||||||||||
California | $ | 28,819 | 30,264 | 3.67 | % | 4.12 | 4.70 | 6.12 | ||||||||||||||||
Florida | 12,616 | 12,038 | 4.95 | 5.48 | 6.02 | 6.98 | ||||||||||||||||||
New Jersey | 8,416 | 8,379 | 2.45 | 2.50 | 1.84 | 1.51 | ||||||||||||||||||
Virginia | 5,802 | 5,855 | 1.86 | 1.91 | 2.00 | 1.13 | ||||||||||||||||||
Pennsylvania | 5,240 | 5,051 | 1.86 | 2.03 | 1.22 | 1.81 | ||||||||||||||||||
Other | 54,439 | 53,811 | 2.73 | 2.85 | 2.96 | 3.04 | ||||||||||||||||||
Total (2) | 115,332 | 115,398 | 3.11 | 3.35 | 3.54 | 3.90 | ||||||||||||||||||
Liquidating portfolio | ||||||||||||||||||||||||
California | 2,860 | 3,205 | 7.50 | 8.78 | 15.36 | 17.94 | ||||||||||||||||||
Florida | 366 | 408 | 8.40 | 9.45 | 14.84 | 19.53 | ||||||||||||||||||
Arizona | 169 | 193 | 8.78 | 10.46 | 22.31 | 19.29 | ||||||||||||||||||
Texas | 141 | 154 | 2.24 | 1.94 | 2.57 | 2.40 | ||||||||||||||||||
Minnesota | 100 | 108 | 5.70 | 4.15 | 7.59 | 7.53 | ||||||||||||||||||
Other | 4,003 | 4,361 | 4.35 | 5.06 | 7.22 | 7.33 | ||||||||||||||||||
Total | 7,639 | 8,429 | 5.80 | 6.74 | 10.90 | 12.16 | ||||||||||||||||||
Total core and liquidating portfolios | $ | 122,971 | 123,827 | 3.28 | 3.58 | 4.00 | 4.48 | |||||||||||||||||
(1) | Consists of real estate 1-4 family junior lien mortgages and lines of credit secured by real estate, excluding PCI loans. | |
(2) | Includes equity lines of credit and closed-end second liens associated with the Pick-a-Pay portfolio totaling $1.7 billion at June 30, 2010, and $1.8 billion at December 31, 2009. |
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• | the full and timely collection of interest or principal becomes uncertain; | |
• | they are 90 days (120 days with respect to real estate 1-4 family first and junior lien mortgages and auto loans) past due for interest or principal (unless both well-secured and in the process of collection); or | |
• | part of the principal balance has been charged off and no restructuring has occurred. |
June 30 | , | Mar. 31 | , | Dec. 31 | , | |||||||
(in millions) | 2010 | 2010 | 2009 | |||||||||
Nonaccrual loans: | ||||||||||||
Commercial and commercial real estate: | ||||||||||||
Commercial (includes LHFS of $12, $0 and $19) | $ | 3,843 | 4,273 | 4,397 | ||||||||
Real estate mortgage | 4,689 | 4,345 | 3,696 | |||||||||
Real estate construction (includes LHFS of $7, $7 and $8) | 3,429 | 3,327 | 3,313 | |||||||||
Lease financing | 163 | 185 | 171 | |||||||||
Total commercial and commercial real estate | 12,124 | 12,130 | 11,577 | |||||||||
Consumer: | ||||||||||||
Real estate 1-4 family first mortgage (includes MHFS of $450, $412 and $339) | 12,865 | 12,347 | 10,100 | |||||||||
Real estate 1-4 family junior lien mortgage | 2,391 | 2,355 | 2,263 | |||||||||
Other revolving credit and installment | 316 | 334 | 332 | |||||||||
Total consumer | 15,572 | 15,036 | 12,695 | |||||||||
Foreign | 115 | 135 | 146 | |||||||||
Total nonaccrual loans (1)(2) | 27,811 | 27,301 | 24,418 | |||||||||
As a percentage of total loans | 3.63 | % | 3.49 | 3.12 | ||||||||
Foreclosed assets: | ||||||||||||
GNMA loans (3) | $ | 1,344 | 1,111 | 960 | ||||||||
Other | 3,650 | 2,970 | 2,199 | |||||||||
Real estate and other nonaccrual investments (4) | 131 | 118 | 62 | |||||||||
Total nonaccrual loans and other nonperforming assets | $ | 32,936 | 31,500 | 27,639 | ||||||||
As a percentage of total loans | 4.30 | % | 4.03 | 3.53 | ||||||||
(1) | Excludes loans acquired from Wachovia that are accounted for as PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms. | |
(2) | See Note 5 to Financial Statements in this Report and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in our 2009 Form 10-K for further information on impaired loans. | |
(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 (FHA) or guaranteed by the Department of Veterans Affairs (VA). | |
(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. |
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• | 99% are secured, substantially all by real estate; and | |
• | 21% have a combined LTV ratio of 80% or below. |
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June 30 | , | Mar. 31 | , | Dec. 31 | , | |||||||
(in millions) | 2010 | 2010 | 2009 | |||||||||
Consumer TDRs: | ||||||||||||
Real estate 1-4 family first mortgage | $ | 9,525 | 7,972 | 6,685 | ||||||||
Real estate 1-4 family junior lien mortgage | 1,469 | 1,563 | 1,566 | |||||||||
Other revolving credit and installment | 502 | 310 | 17 | |||||||||
Total consumer TDRs | 11,496 | 9,845 | 8,268 | |||||||||
Commercial and commercial real estate TDRs | 656 | 386 | 265 | |||||||||
Total TDRs | $ | 12,152 | 10,231 | 8,533 | ||||||||
TDRs on nonaccrual status | $ | 3,877 | 2,738 | 2,289 | ||||||||
TDRs on accrual status | 8,275 | 7,493 | 6,244 | |||||||||
Total TDRs | $ | 12,152 | 10,231 | 8,533 | ||||||||
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June 30 | , | Dec. 31 | , | |||||
(in millions) | 2010 | 2009 | ||||||
Commercial and commercial real estate: | ||||||||
Commercial | $ | 540 | 590 | |||||
Real estate mortgage | 654 | 1,014 | ||||||
Real estate construction | 471 | 909 | ||||||
Total commercial and commercial real estate | 1,665 | 2,513 | ||||||
Consumer: | ||||||||
Real estate 1-4 family first mortgage (2) | 1,049 | 1,623 | ||||||
Real estate 1-4 family junior lien mortgage (2) | 352 | 515 | ||||||
Credit card | 610 | 795 | ||||||
Other revolving credit and installment | 1,300 | 1,333 | ||||||
Total consumer | 3,311 | 4,266 | ||||||
Foreign | 21 | 73 | ||||||
Total | $ | 4,997 | 6,852 | |||||
(1) | The carrying value of PCI loans contractually 90 days or more past due was $15.1 billion at June 30, 2010, and $16.1 billion at December 31, 2009. These amounts are excluded from the above table as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status. See table on page 17 for detail of PCI loans. | |
(2) | Includes mortgage loans held for sale 90 days or more past due and still accruing. |
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Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||
As a | As a | As a | As a | |||||||||||||||||||||||||||||
Net loan | % of | Net loan | % of | Net loan | % of | Net loan | % of | |||||||||||||||||||||||||
charge- | average | charge- | average | charge- | average | charge- | average | |||||||||||||||||||||||||
($ in millions) | offs | loans (1) | offs | loans (1) | offs | loans (1) | offs | loans (1) | ||||||||||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||||||||||||||||||
Commercial | $ | 689 | 1.87 | % | $ | 704 | 1.51 | % | $ | 1,339 | 1.77 | % | $ | 1,260 | 1.32 | % | ||||||||||||||||
Real estate mortgage | 360 | 1.47 | 119 | 0.49 | 631 | 1.30 | 138 | 0.29 | ||||||||||||||||||||||||
Real estate construction | 238 | 2.90 | 259 | 2.48 | 632 | 3.70 | 364 | 1.73 | ||||||||||||||||||||||||
Lease financing | 27 | 0.78 | 61 | 1.68 | 56 | 0.82 | 78 | 1.04 | ||||||||||||||||||||||||
Total commercial and commercial real estate | 1,314 | 1.80 | 1,143 | 1.35 | 2,658 | 1.80 | 1,840 | 1.07 | ||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 1,009 | 1.70 | 758 | 1.26 | 2,320 | 1.94 | 1,149 | 0.95 | ||||||||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 1,184 | 4.62 | 1,171 | 4.33 | 2,633 | 5.10 | 2,018 | 3.72 | ||||||||||||||||||||||||
Credit card | 579 | 10.45 | 664 | 11.59 | 1,222 | 10.82 | 1,246 | 10.86 | ||||||||||||||||||||||||
Other revolving credit and installment | 361 | 1.64 | 604 | 2.66 | 908 | 2.05 | 1,300 | 2.86 | ||||||||||||||||||||||||
Total consumer | 3,133 | 2.79 | 3,197 | 2.77 | 7,083 | 3.12 | 5,713 | 2.47 | ||||||||||||||||||||||||
Foreign | 42 | 0.57 | 46 | 0.61 | 78 | 0.54 | 91 | 0.58 | ||||||||||||||||||||||||
Total | $ | 4,489 | 2.33 | % | $ | 4,386 | 2.11 | % | $ | 9,819 | 2.52 | % | $ | 7,644 | 1.82 | % | ||||||||||||||||
(1) | Net charge-offs as a percentage of average loans are annualized. |
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June 30, 2010 | Dec. 31, 2009 | |||||||||||||||
Original | Original | |||||||||||||||
Number of | loan | Number of | loan | |||||||||||||
($ in millions) | loans | balance (1) | loans | balance (1) | ||||||||||||
Government sponsored entities (2) | 12,536 | $ | 2,840 | 8,354 | $ | 1,911 | ||||||||||
Private | 3,160 | 707 | 2,929 | 886 | ||||||||||||
Mortgage insurance rescissions (3) | 2,979 | 760 | 2,965 | 859 | ||||||||||||
Total | 18,675 | $ | 4,307 | 14,248 | $ | 3,656 | ||||||||||
(1) | While original loan balance related to these demands is presented above, the establishment of the repurchase reserve is based on a combination of factors, such as our appeals success rates, reimbursement by correspondent and other third party originators, and projected loss severity, which is driven by the difference between the current loan balance and the estimated collateral value less costs to sell the property. | |
(2) | Includes repurchase demands of 2,141 and $417 million and 1,536 and $322 million for June 30, 2010, and December 31, 2009, respectively, received from investors on mortgage servicing rights acquired from other originators. We have the right of recourse against the seller for these repurchase demands and would only incur a loss on these demands for counterparty risk associated with the seller. | |
(3) | As part of our representations and warranties in our loan sales contracts, we represent that certain loans have mortgage insurance. To the extent the mortgage insurance is rescinded by the mortgage insurer, the lack of insurance may result in a repurchase demand from an investor. |
Six months | ||||||||||||||||
Quarter ended | ended | Year ended | ||||||||||||||
June 30 | , | March 31 | , | June 30 | , | Dec. 31 | , | |||||||||
(in millions) | 2010 | 2010 | 2010 | 2009 | ||||||||||||
Balance, beginning of period | $ | 1,263 | 1,033 | 1,033 | 620 | |||||||||||
Provision for repurchase losses: | ||||||||||||||||
Loan sales | 36 | 44 | 80 | 302 | ||||||||||||
Change in estimate — primarily due to credit deterioration | 346 | 358 | 704 | 625 | ||||||||||||
Total additions | 382 | 402 | 784 | 927 | ||||||||||||
Losses | (270 | ) | (172 | ) | (442 | ) | (514 | ) | ||||||||
Balance, end of period | $ | 1,375 | 1,263 | 1,375 | 1,033 | |||||||||||
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June 30 | , | Dec. 31 | , | |||||
(in millions) | 2010 | 2009 | ||||||
Nonmarketable equity investments: | ||||||||
Private equity investments: | ||||||||
Cost method | $ | 3,769 | 3,808 | |||||
Equity method | 6,144 | 5,138 | ||||||
Federal bank stock | 6,024 | 5,985 | ||||||
Principal investments | 360 | 1,423 | ||||||
Total nonmarketable equity investments (1) | $ | 16,297 | 16,354 | |||||
Marketable equity securities: | ||||||||
Cost | $ | 4,571 | 4,749 | |||||
Net unrealized gains | 592 | 843 | ||||||
Total marketable equity securities (2) | $ | 5,163 | 5,592 | |||||
(1) | Included in other assets on the balance sheet. See Note 6 (Other Assets) to Financial Statements in this Report for additional information. | |
(2) | Included in securities available for sale. See Note 4 (Securities Available for Sale) to Financial Statements in this Report for additional information. |
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June 30 | , | Dec. 31 | , | |||||||||
(in billions) | 2010 | 2009 | ||||||||||
Total equity | $ | 121.4 | 114.4 | |||||||||
Less: | Noncontrolling interests | (1.6 | ) | (2.6 | ) | |||||||
Total Wells Fargo stockholders’ equity | 119.8 | 111.8 | ||||||||||
Less: | Preferred equity | (8.1 | ) | (8.1 | ) | |||||||
Goodwill and intangible assets (other than MSRs) | (36.7 | ) | (37.7 | ) | ||||||||
Applicable deferred taxes | 5.0 | 5.3 | ||||||||||
Deferred tax asset limitation | — | (1.0 | ) | |||||||||
MSRs over specified limitations | (1.0 | ) | (1.6 | ) | ||||||||
Cumulative other comprehensive income | (4.8 | ) | (3.0 | ) | ||||||||
Other | (0.3 | ) | (0.2 | ) | ||||||||
Tier 1 common equity | (A) | $ | 73.9 | 65.5 | ||||||||
Total risk-weighted assets (2) | (B) | $ | 970.8 | 1,013.6 | ||||||||
Tier 1 common equity to total risk-weighted assets | (A)/(B) | 7.61 | % | 6.46 | ||||||||
(1) | Tier 1 common equity is a non-generally accepted accounting principle (GAAP) financial measure that is used by investors, analysts and bank regulatory agencies, to assess the capital position of financial services companies. 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. |
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• | the allowance for credit losses; | |
• | purchased credit-impaired (PCI) loans; | |
• | the valuation of residential mortgage servicing rights (MSRs); | |
• | the fair valuation of financial instruments; | |
• | pension accounting; and | |
• | income taxes. |
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June 30, 2010 | December 31, 2009 | |||||||||||||||
Total | Total | |||||||||||||||
($ in billions) | balance | Level 3 (1) | balance | Level 3 (1) | ||||||||||||
Assets carried at fair value | $ | 260.4 | 47.2 | 277.4 | 52.0 | |||||||||||
As a percentage of total assets | 21 | % | 4 | 22 | 4 | |||||||||||
Liabilities carried at fair value | $ | 21.8 | 8.2 | 22.8 | 7.9 | |||||||||||
As a percentage of total liabilities | 2 | % | 1 | 2 | 1 | |||||||||||
(1) | Before derivative netting adjustments. |
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• | Accounting Standards Update (ASU or Update) 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses; | |
• | ASU 2010-18, Effect of a Loan Modification When the Loan is Part of a Pool That is Accounted for as a Single Asset; and | |
• | ASU 2010-11, Scope Exception Related to Embedded Credit Derivatives. |
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• | current and future economic and market conditions, including the effects of further declines in housing prices and high unemployment rates; | |
• | the terms of capital investments or other financial assistance provided by the U.S. government; | |
• | our capital requirements and the ability to raise capital on favorable terms, including regulatory capital standards as determined by applicable regulatory authorities; | |
• | financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and legislation and regulation relating to overdraft fees (and changes to our overdraft practices as a result thereof), credit cards, and other bank services; | |
• | legislative proposals to allow mortgage cram-downs in bankruptcy or require other loan modifications; | |
• | the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications or changes in such requirements or guidance; | |
• | our ability to successfully integrate the Wachovia merger and realize the expected cost savings and other benefits and the effects of any delays or disruptions in systems conversions relating to the Wachovia integration; | |
• | our ability to realize the efficiency initiatives to lower expenses when and in the amount expected; | |
• | recognition of OTTI 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; |
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• | 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 the fall in stock market prices on our investment banking business and our 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 or interpreted; | |
• | mergers, acquisitions and divestitures; | |
• | changes in the Company’s credit ratings and changes in the credit quality of the Company’s customers or counterparties; | |
• | reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations and legal actions; | |
• | the loss of checking and saving account deposits to other investments such as the stock market, and the resulting increase in our funding costs and impact on our net interest margin; | |
• | fiscal and monetary policies of the Federal Reserve Board; and | |
• | the other risk factors and uncertainties described under “Risk Factors” in our 2009 Form 10-K and First Quarter Form 10-Q, and under “Risk Factors” in this Report. |
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• | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Company; | |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and | |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
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CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions, except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Interest income | ||||||||||||||||
Trading assets | $ | 266 | 206 | 533 | 472 | |||||||||||
Securities available for sale | 2,385 | 2,887 | 4,800 | 5,596 | ||||||||||||
Mortgages held for sale | 405 | 545 | 792 | 960 | ||||||||||||
Loans held for sale | 30 | 50 | 64 | 117 | ||||||||||||
Loans | 10,277 | 10,532 | 20,315 | 21,297 | ||||||||||||
Other interest income | 109 | 81 | 193 | 172 | ||||||||||||
Total interest income | 13,472 | 14,301 | 26,697 | 28,614 | ||||||||||||
Interest expense | ||||||||||||||||
Deposits | 714 | 957 | 1,449 | 1,956 | ||||||||||||
Short-term borrowings | 21 | 55 | 39 | 178 | ||||||||||||
Long-term debt | 1,233 | 1,485 | 2,509 | 3,264 | ||||||||||||
Other interest expense | 55 | 40 | 104 | 76 | ||||||||||||
Total interest expense | 2,023 | 2,537 | 4,101 | 5,474 | ||||||||||||
Net interest income | 11,449 | 11,764 | 22,596 | 23,140 | ||||||||||||
Provision for credit losses | 3,989 | 5,086 | 9,319 | 9,644 | ||||||||||||
Net interest income after provision for credit losses | 7,460 | 6,678 | 13,277 | 13,496 | ||||||||||||
Noninterest income | ||||||||||||||||
Service charges on deposit accounts | 1,417 | 1,448 | 2,749 | 2,842 | ||||||||||||
Trust and investment fees | 2,743 | 2,413 | 5,412 | 4,628 | ||||||||||||
Card fees | 911 | 923 | 1,776 | 1,776 | ||||||||||||
Other fees | 982 | 963 | 1,923 | 1,864 | ||||||||||||
Mortgage banking | 2,011 | 3,046 | 4,481 | 5,550 | ||||||||||||
Insurance | 544 | 595 | 1,165 | 1,176 | ||||||||||||
Net gains from trading activities | 109 | 749 | 646 | 1,536 | ||||||||||||
Net gains (losses) on debt securities available for sale (1) | 30 | (78 | ) | 58 | (197 | ) | ||||||||||
Net gains (losses) from equity investments (2) | 288 | 40 | 331 | (117 | ) | |||||||||||
Operating leases | 329 | 168 | 514 | 298 | ||||||||||||
Other | 581 | 476 | 1,191 | 1,028 | ||||||||||||
Total noninterest income | 9,945 | 10,743 | 20,246 | 20,384 | ||||||||||||
Noninterest expense | ||||||||||||||||
Salaries | 3,564 | 3,438 | 6,878 | 6,824 | ||||||||||||
Commission and incentive compensation | 2,225 | 2,060 | 4,217 | 3,884 | ||||||||||||
Employee benefits | 1,063 | 1,227 | 2,385 | 2,511 | ||||||||||||
Equipment | 588 | 575 | 1,266 | 1,262 | ||||||||||||
Net occupancy | 742 | 783 | 1,538 | 1,579 | ||||||||||||
Core deposit and other intangibles | 553 | 646 | 1,102 | 1,293 | ||||||||||||
FDIC and other deposit assessments | 295 | 981 | 596 | 1,319 | ||||||||||||
Other | 3,716 | 2,987 | 6,881 | 5,843 | ||||||||||||
Total noninterest expense | 12,746 | 12,697 | 24,863 | 24,515 | ||||||||||||
Income before income tax expense | 4,659 | 4,724 | 8,660 | 9,365 | ||||||||||||
Income tax expense | 1,514 | 1,475 | 2,915 | 3,027 | ||||||||||||
Net income before noncontrolling interests | 3,145 | 3,249 | 5,745 | 6,338 | ||||||||||||
Less: Net income from noncontrolling interests | 83 | 77 | 136 | 121 | ||||||||||||
Wells Fargo net income | $ | 3,062 | 3,172 | 5,609 | 6,217 | |||||||||||
Wells Fargo net income applicable to common stock | $ | 2,878 | 2,575 | 5,250 | 4,959 | |||||||||||
Per share information | ||||||||||||||||
Earnings per common share | $ | 0.55 | 0.58 | 1.01 | 1.14 | |||||||||||
Diluted earnings per common share | 0.55 | 0.57 | 1.00 | 1.13 | ||||||||||||
Dividends declared per common share | 0.05 | 0.05 | 0.10 | 0.39 | ||||||||||||
Average common shares outstanding | 5,219.7 | 4,483.1 | 5,205.1 | 4,365.9 | ||||||||||||
Diluted average common shares outstanding | 5,260.8 | 4,501.6 | 5,243.0 | 4,375.1 | ||||||||||||
(1) | Includes other-than-temporary impairment losses of $106 million and $308 million recognized in earnings, consisting of $49 million and $972 million of total other-than-temporary impairment losses, net of $(57) million and $664 million recognized in other comprehensive income, for the quarters ended June 30, 2010 and 2009, respectively, and other-than-temporary impairment losses of $198 million and $577 million recognized in earnings, consisting of $203 million and $1,575 million of total other-than-temporary impairment losses, net of $5 million and $998 million recognized in other comprehensive income, for the six months ended June 30, 2010 and 2009, respectively. | |
(2) | Includes other-than-temporary impairment losses of $62 million and $155 million for the quarters ended June 30, 2010 and 2009, respectively, and $167 million and $402 million for the six months ended June 30, 2010 and 2009, respectively. |
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CONSOLIDATED BALANCE SHEET (UNAUDITED)
June 30 | , | Dec. 31 | , | |||||
(in millions, except shares) | 2010 | 2009 | ||||||
Assets | ||||||||
Cash and due from banks | $ | 17,571 | 27,080 | |||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | 73,898 | 40,885 | ||||||
Trading assets | 47,132 | 43,039 | ||||||
Securities available for sale | 157,927 | 172,710 | ||||||
Mortgages held for sale (includes $34,877 and $36,962 carried at fair value) | 38,581 | 39,094 | ||||||
Loans held for sale (includes $238 and $149 carried at fair value) | 3,999 | 5,733 | ||||||
Loans (includes $367 carried at fair value at June 30, 2010) | 766,265 | 782,770 | ||||||
Allowance for loan losses | (24,584 | ) | (24,516 | ) | ||||
Net loans | 741,681 | 758,254 | ||||||
Mortgage servicing rights: | ||||||||
Measured at fair value (residential MSRs) | 13,251 | 16,004 | ||||||
Amortized | 1,037 | 1,119 | ||||||
Premises and equipment, net | 10,508 | 10,736 | ||||||
Goodwill | 24,820 | 24,812 | ||||||
Other assets | 95,457 | 104,180 | ||||||
Total assets (1) | $ | 1,225,862 | 1,243,646 | |||||
Liabilities | ||||||||
Noninterest-bearing deposits | $ | 175,015 | 181,356 | |||||
Interest-bearing deposits | 640,608 | 642,662 | ||||||
Total deposits | 815,623 | 824,018 | ||||||
Short-term borrowings | 45,187 | 38,966 | ||||||
Accrued expenses and other liabilities | 58,582 | 62,442 | ||||||
Long-term debt (includes $361 carried at fair value at June 30, 2010) | 185,072 | 203,861 | ||||||
Total liabilities (2) | 1,104,464 | 1,129,287 | ||||||
Equity | ||||||||
Wells Fargo stockholders’ equity: | ||||||||
Preferred stock | 8,980 | 8,485 | ||||||
Common stock — $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,245,971,422 shares and 5,245,971,422 shares | 8,743 | 8,743 | ||||||
Additional paid-in capital | 52,687 | 52,878 | ||||||
Retained earnings | 46,126 | 41,563 | ||||||
Cumulative other comprehensive income | 4,844 | 3,009 | ||||||
Treasury stock — 14,575,741 shares and 67,346,829 shares | (631 | ) | (2,450 | ) | ||||
Unearned ESOP shares | (977 | ) | (442 | ) | ||||
Total Wells Fargo stockholders’ equity | 119,772 | 111,786 | ||||||
Noncontrolling interests | 1,626 | 2,573 | ||||||
Total equity | 121,398 | 114,359 | ||||||
Total liabilities and equity | $ | 1,225,862 | 1,243,646 | |||||
(1) | Our consolidated assets at June 30, 2010, include the following assets of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs: Cash and due from banks, $379 million; Trading assets, $93 million; Securities available for sale, $2.6 billion; Net loans, $20.5 billion; Other assets, $2.4 billion, and Total assets, $26.0 billion. | |
(2) | Our consolidated liabilities at June 30, 2010, include the following VIE liabilities for which the VIE creditors do not have recourse to Wells Fargo: Short-term borrowings, $346 million; Accrued expenses and other liabilities, $771 million; Long-term debt, $10.3 billion; and Total liabilities, $11.4 billion. |
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
AND COMPREHENSIVE INCOME (UNAUDITED)
Preferred stock | Common stock | |||||||||||||||
(in millions, except shares) | Shares | Amount | Shares | Amount | ||||||||||||
Balance, December 31, 2008 | 10,111,821 | $ | 31,332 | 4,228,630,889 | $ | 7,273 | ||||||||||
Cumulative effect from change in accounting for other-than-temporary impairment on debt securities | ||||||||||||||||
Effect of change in accounting for noncontrolling interests | ||||||||||||||||
Balance, January 1, 2009 | 10,111,821 | 31,332 | 4,228,630,889 | 7,273 | ||||||||||||
Comprehensive income: | ||||||||||||||||
Net income | ||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||
Translation adjustments | ||||||||||||||||
Net unrealized gains on securities available for sale, net of reclassification of $5 million of net losses included in net income | ||||||||||||||||
Net unrealized losses on derivatives and hedging activities, net of reclassification of $175 million of net gains on cash flow hedges included in net income | ||||||||||||||||
Unamortized gains under defined benefit plans, net of amortization | ||||||||||||||||
Total comprehensive income | ||||||||||||||||
Noncontrolling interests | ||||||||||||||||
Common stock issued | 439,968,781 | 654 | ||||||||||||||
Common stock repurchased | (2,731,755 | ) | ||||||||||||||
Preferred stock released to ESOP | ||||||||||||||||
Preferred stock converted to common shares | (32,703 | ) | (33 | ) | 2,280,480 | |||||||||||
Common stock dividends | ||||||||||||||||
Preferred stock dividends and accretion | 198 | |||||||||||||||
Tax benefit upon exercise of stock options | ||||||||||||||||
Stock option compensation expense | ||||||||||||||||
Net change in deferred compensation and related plans | ||||||||||||||||
Net change | (32,703 | ) | 165 | 439,517,506 | 654 | |||||||||||
Balance, June 30, 2009 | 10,079,118 | $ | 31,497 | 4,668,148,395 | $ | 7,927 | ||||||||||
Balance, January 1, 2010 | 9,980,940 | $ | 8,485 | 5,178,624,593 | $ | 8,743 | ||||||||||
Cumulative effect from change in accounting for VIEs | ||||||||||||||||
Comprehensive income: | ||||||||||||||||
Net income | ||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||
Translation adjustments | ||||||||||||||||
Net unrealized gains on securities available for sale, net of reclassification of $134 million of net gains included in net income | ||||||||||||||||
Net unrealized gains on derivatives and hedging activities, net of reclassification of $204 million of net gains on cash flow hedges included in net income | ||||||||||||||||
Unamortized gains under defined benefit plans, net of amortization | ||||||||||||||||
Total comprehensive income | ||||||||||||||||
Noncontrolling interests | ||||||||||||||||
Common stock issued | 37,142,817 | |||||||||||||||
Common stock repurchased | (2,206,165 | ) | ||||||||||||||
Preferred stock issued to ESOP | 1,000,000 | 1,000 | ||||||||||||||
Preferred stock released to ESOP | ||||||||||||||||
Preferred stock converted to common shares | (504,847 | ) | (505 | ) | 17,834,436 | |||||||||||
Common stock warrants repurchased | ||||||||||||||||
Common stock dividends | ||||||||||||||||
Preferred stock dividends | ||||||||||||||||
Tax benefit upon exercise of stock options | ||||||||||||||||
Stock option compensation expense | ||||||||||||||||
Net change in deferred compensation and related plans | ||||||||||||||||
Net change | 495,153 | 495 | 52,771,088 | — | ||||||||||||
Balance, June 30, 2010 | 10,476,093 | $ | 8,980 | 5,231,395,681 | $ | 8,743 | ||||||||||
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AND COMPREHENSIVE INCOME
Wells Fargo stockholders’ equity | ||||||||||||||||||||||||||||||||
Cumulative | Total | |||||||||||||||||||||||||||||||
Additional | other | Unearned | Wells Fargo | |||||||||||||||||||||||||||||
paid-in | Retained | comprehensive | Treasury | ESOP | stockholders’ | Noncontrolling | Total | |||||||||||||||||||||||||
capital | earnings | income | stock | shares | equity | interests | equity | |||||||||||||||||||||||||
36,026 | 36,543 | (6,869 | ) | (4,666 | ) | (555 | ) | 99,084 | 3,232 | $ | 102,316 | |||||||||||||||||||||
53 | (53 | ) | — | — | ||||||||||||||||||||||||||||
(3,716 | ) | (3,716 | ) | 3,716 | — | |||||||||||||||||||||||||||
32,310 | 36,596 | (6,922 | ) | (4,666 | ) | (555 | ) | 95,368 | 6,948 | 102,316 | ||||||||||||||||||||||
6,217 | 6,217 | 121 | 6,338 | |||||||||||||||||||||||||||||
35 | 35 | (4 | ) | 31 | ||||||||||||||||||||||||||||
6,039 | 6,039 | 34 | 6,073 | |||||||||||||||||||||||||||||
(300 | ) | (300 | ) | (300 | ) | |||||||||||||||||||||||||||
558 | 558 | 558 | ||||||||||||||||||||||||||||||
12,549 | 151 | 12,700 | ||||||||||||||||||||||||||||||
(5 | ) | (5 | ) | (340 | ) | (345 | ) | |||||||||||||||||||||||||
7,845 | (733 | ) | 1,542 | 9,308 | 9,308 | |||||||||||||||||||||||||||
(63 | ) | (63 | ) | (63 | ) | |||||||||||||||||||||||||||
(2 | ) | 35 | 33 | 33 | ||||||||||||||||||||||||||||
(40 | ) | 73 | — | — | ||||||||||||||||||||||||||||
(1,657 | ) | (1,657 | ) | (1,657 | ) | |||||||||||||||||||||||||||
(1,258 | ) | (1,060 | ) | (1,060 | ) | |||||||||||||||||||||||||||
3 | 3 | 3 | ||||||||||||||||||||||||||||||
138 | 138 | 138 | ||||||||||||||||||||||||||||||
21 | (12 | ) | 9 | 9 | ||||||||||||||||||||||||||||
7,960 | 2,569 | 6,332 | 1,540 | 35 | 19,255 | (189 | ) | 19,066 | ||||||||||||||||||||||||
40,270 | 39,165 | (590 | ) | (3,126 | ) | (520 | ) | 114,623 | 6,759 | $ | 121,382 | |||||||||||||||||||||
52,878 | 41,563 | 3,009 | (2,450 | ) | (442 | ) | 111,786 | 2,573 | $ | 114,359 | ||||||||||||||||||||||
183 | 183 | 183 | ||||||||||||||||||||||||||||||
5,609 | 5,609 | 136 | 5,745 | |||||||||||||||||||||||||||||
(13 | ) | (13 | ) | (1 | ) | (14 | ) | |||||||||||||||||||||||||
1,672 | 1,672 | 11 | 1,683 | |||||||||||||||||||||||||||||
| 144 | 144 | 144 | |||||||||||||||||||||||||||||
32 | 32 | 32 | ||||||||||||||||||||||||||||||
7,444 | 146 | 7,590 | ||||||||||||||||||||||||||||||
17 | 17 | (1,093 | ) | (1,076 | ) | |||||||||||||||||||||||||||
21 | (338 | ) | 1,182 | 865 | 865 | |||||||||||||||||||||||||||
(68 | ) | (68 | ) | (68 | ) | |||||||||||||||||||||||||||
80 | (1,080 | ) | — | — | ||||||||||||||||||||||||||||
(40 | ) | 545 | 505 | 505 | ||||||||||||||||||||||||||||
(62 | ) | 567 | — | — | ||||||||||||||||||||||||||||
(540 | ) | (540 | ) | (540 | ) | |||||||||||||||||||||||||||
2 | (522 | ) | (520 | ) | (520 | ) | ||||||||||||||||||||||||||
(369 | ) | (369 | ) | (369 | ) | |||||||||||||||||||||||||||
76 | 76 | 76 | ||||||||||||||||||||||||||||||
67 | 67 | 67 | ||||||||||||||||||||||||||||||
188 | 138 | 326 | 326 | |||||||||||||||||||||||||||||
(191 | ) | 4,563 | 1,835 | 1,819 | (535 | ) | 7,986 | (947 | ) | 7,039 | ||||||||||||||||||||||
52,687 | 46,126 | 4,844 | (631 | ) | (977 | ) | 119,772 | 1,626 | $ | 121,398 | ||||||||||||||||||||||
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CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Six months ended June 30 | , | |||||||
(in millions) | 2010 | 2009 | ||||||
Cash flows from operating activities: | ||||||||
Net income before noncontrolling interests | $ | 5,745 | 6,338 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for credit losses | 9,319 | 9,644 | ||||||
Changes in fair value of MSRs (residential), MHFS and LHFS carried at fair value | 1,384 | 201 | ||||||
Changes in fair value related to adoption of consolidation accounting guidance | 424 | — | ||||||
Depreciation and amortization | 1,335 | 1,540 | ||||||
Other net losses (gains) | 1,927 | (4,028 | ) | |||||
Preferred shares released to ESOP | 505 | 33 | ||||||
Stock option compensation expense | 67 | 138 | ||||||
Excess tax benefits related to stock option payments | (75 | ) | (3 | ) | ||||
Originations of MHFS | (153,453 | ) | (226,452 | ) | ||||
Proceeds from sales of and principal collected on mortgages originated for sale | 161,908 | 207,006 | ||||||
Originations of LHFS | (4,206 | ) | (5,403 | ) | ||||
Proceeds from sales of and principal collected on LHFS | 10,555 | 10,723 | ||||||
Purchases of LHFS | (4,673 | ) | (3,947 | ) | ||||
Net change in: | ||||||||
Trading assets | (3,938 | ) | 14,592 | |||||
Deferred income taxes | 2,416 | 3,289 | ||||||
Accrued interest receivable | 727 | 284 | ||||||
Accrued interest payable | (56 | ) | (631 | ) | ||||
Other assets, net | (4,595 | ) | (326 | ) | ||||
Other accrued expenses and liabilities, net | (8,462 | ) | 4,851 | |||||
Net cash provided by operating activities | 16,854 | 17,849 | ||||||
Cash flows from investing activities: | ||||||||
Net change in: | ||||||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | (33,013 | ) | 33,457 | |||||
Securities available for sale: | ||||||||
Sales proceeds | 3,981 | 18,871 | ||||||
Prepayments and maturities | 22,741 | 18,484 | ||||||
Purchases | (11,095 | ) | (80,923 | ) | ||||
Loans: | ||||||||
Decrease in banking subsidiaries’ loan originations, net of collections | 20,904 | 28,470 | ||||||
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries | 3,556 | 3,179 | ||||||
Purchases (including participations) of loans by banking subsidiaries | (1,201 | ) | (1,563 | ) | ||||
Principal collected on nonbank entities’ loans | �� | 8,006 | 6,471 | |||||
Loans originated by nonbank entities | (5,309 | ) | (4,319 | ) | ||||
Net cash paid for acquisitions | (11 | ) | (132 | ) | ||||
Proceeds from sales of foreclosed assets | 2,346 | 1,813 | ||||||
Changes in MSRs from purchases and sales | (15 | ) | (9 | ) | ||||
Other, net | 830 | 683 | ||||||
Net cash provided by investing activities | 11,720 | 24,482 | ||||||
Cash flows from financing activities: | ||||||||
Net change in: | ||||||||
Deposits | (8,395 | ) | 32,192 | |||||
Short-term borrowings | 1,094 | (52,591 | ) | |||||
Long-term debt: | ||||||||
Proceeds from issuance | 2,165 | 3,876 | ||||||
Repayment | (31,925 | ) | (35,162 | ) | ||||
Preferred stock: | ||||||||
Cash dividends paid | (369 | ) | (1,053 | ) | ||||
Common stock: | ||||||||
Proceeds from issuance | 865 | 9,308 | ||||||
Repurchased | (68 | ) | (63 | ) | ||||
Cash dividends paid | (520 | ) | (1,657 | ) | ||||
Common stock warrants repurchased | (540 | ) | — | |||||
Excess tax benefits related to stock option payments | 75 | 3 | ||||||
Net change in noncontrolling interests | (465 | ) | (315 | ) | ||||
Net cash used by financing activities | (38,083 | ) | (45,462 | ) | ||||
Net change in cash and due from banks | (9,509 | ) | (3,131 | ) | ||||
Cash and due from banks at beginning of period | 27,080 | 23,763 | ||||||
Cash and due from banks at end of period | $ | 17,571 | 20,632 | |||||
Supplemental cash flow disclosures: | ||||||||
Cash paid for interest | $ | 4,157 | 6,105 | |||||
Cash paid for income taxes | 625 | 1,062 | ||||||
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• | Accounting Standards Update (ASU or Update) 2010-6,Improving Disclosures about Fair Value Measurements; | |
• | ASU 2009-16,Accounting for Transfers of Financial Assets(Statement of Financial Accounting Standards (FAS) 166,Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140); | |
• | ASU 2009-17,Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (FAS 167, Amendments to FASB Interpretation No. 46(R)); and | |
• | ASU 2010-10,Amendments for Certain Investment Funds. |
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Six months ended June 30 | , | |||||||
(in millions) | 2010 | 2009 | ||||||
Transfers from trading assets to securities available for sale | $ | — | 845 | |||||
Transfers from loans to securities available for sale | 3,468 | — | ||||||
Transfers from MHFS to trading assets | — | 663 | ||||||
Transfers from MHFS to MSRs | 2,025 | 3,550 | ||||||
Transfers from MHFS to foreclosed assets | 102 | 87 | ||||||
Transfers from (to) loans to (from) MHFS | 99 | 45 | ||||||
Transfers from (to) loans to (from) LHFS | (77 | ) | 16 | |||||
Transfers from loans to foreclosed assets | 5,481 | 3,307 | ||||||
Adoption of consolidation accounting guidance: | ||||||||
Trading assets | 155 | — | ||||||
Securities available for sale | (7,590 | ) | — | |||||
Loans | 25,657 | — | ||||||
Other assets | 193 | — | ||||||
Short-term borrowings | 5,127 | — | ||||||
Long-term debt | 13,134 | — | ||||||
Accrued expenses and other liabilities | (32 | ) | — | |||||
Decrease in noncontrolling interests due to deconsolidation of subsidiaries | 240 | — | ||||||
Transfer from noncontrolling interests to long-term debt | 345 | — | ||||||
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Employee | Contract | Facilities | ||||||||||||||
(in millions) | termination | termination | related | Total | ||||||||||||
Balance, December 31, 2009 | $ | 355 | 58 | 344 | 757 | |||||||||||
Cash payments / utilization | (121 | ) | (16 | ) | (92 | ) | (229 | ) | ||||||||
Balance, June 30, 2010 | $ | 234 | 42 | 252 | 528 | |||||||||||
June 30 | , | Dec. 31 | , | |||||
(in millions) | 2010 | 2009 | ||||||
Federal funds sold and securities purchased under resale agreements | $ | 16,302 | 8,042 | |||||
Interest-earning deposits | 55,550 | 31,668 | ||||||
Other short-term investments | 2,046 | 1,175 | ||||||
Total | $ | 73,898 | 40,885 | |||||
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Gross | Gross | |||||||||||||||
unrealized | unrealized | Fair | ||||||||||||||
(in millions) | Cost | gains | losses | value | ||||||||||||
June 30, 2010 | ||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 1,621 | 64 | — | 1,685 | |||||||||||
Securities of U.S. states and political subdivisions | 16,205 | 764 | (545 | ) | 16,424 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
Federal agencies | 66,915 | 4,489 | (9 | ) | 71,395 | |||||||||||
Residential | 19,425 | 2,501 | (780 | ) | 21,146 | |||||||||||
Commercial | 12,513 | 1,293 | (1,276 | ) | 12,530 | |||||||||||
Total mortgage-backed securities | 98,853 | 8,283 | (2,065 | ) | 105,071 | |||||||||||
Corporate debt securities | 8,848 | 1,159 | (64 | ) | 9,943 | |||||||||||
Collateralized debt obligations | 4,020 | 340 | (329 | ) | 4,031 | |||||||||||
Other(1) | 15,219 | 754 | (363 | ) | 15,610 | |||||||||||
Total debt securities | 144,766 | 11,364 | (3,366 | ) | 152,764 | |||||||||||
Marketable equity securities: | ||||||||||||||||
Perpetual preferred securities | 3,999 | 237 | (150 | ) | 4,086 | |||||||||||
Other marketable equity securities | 572 | 509 | (4 | ) | 1,077 | |||||||||||
Total marketable equity securities | 4,571 | 746 | (154 | ) | 5,163 | |||||||||||
Total | $ | 149,337 | 12,110 | (3,520 | ) | 157,927 | ||||||||||
December 31, 2009 | ||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 2,256 | 38 | (14 | ) | 2,280 | ||||||||||
Securities of U.S. states and political subdivisions | 13,212 | 683 | (365 | ) | 13,530 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
Federal agencies | 79,542 | 3,285 | (9 | ) | 82,818 | |||||||||||
Residential | 28,153 | 2,480 | (2,043 | ) | 28,590 | |||||||||||
Commercial | 12,221 | 602 | (1,862 | ) | 10,961 | |||||||||||
Total mortgage-backed securities | 119,916 | 6,367 | (3,914 | ) | 122,369 | |||||||||||
Corporate debt securities | 8,245 | 1,167 | (77 | ) | 9,335 | |||||||||||
Collateralized debt obligations | 3,660 | 432 | (367 | ) | 3,725 | |||||||||||
Other (1) | 15,025 | 1,099 | (245 | ) | 15,879 | |||||||||||
Total debt securities | 162,314 | 9,786 | (4,982 | ) | 167,118 | |||||||||||
Marketable equity securities: | ||||||||||||||||
Perpetual preferred securities | 3,677 | 263 | (65 | ) | 3,875 | |||||||||||
Other marketable equity securities | 1,072 | 654 | (9 | ) | 1,717 | |||||||||||
Total marketable equity securities | 4,749 | 917 | (74 | ) | 5,592 | |||||||||||
Total | $ | 167,063 | 10,703 | (5,056 | ) | 172,710 | ||||||||||
(1) | Included in the “Other” category are asset-backed securities collateralized by auto leases or loans and cash reserves with a cost basis and fair value of $6.7 billion and $6.9 billion, respectively, at June 30, 2010, and $8.2 billion and $8.5 billion, respectively, at December 31, 2009. Also included in the “Other” category are asset-backed securities collateralized by home equity loans with a cost basis and fair value of $1.0 billion and $1.2 billion, respectively, at June 30, 2010, and $2.3 billion and $2.5 billion, respectively, at December 31, 2009. The remaining balances primarily include asset-backed securities collateralized by credit cards and student loans. |
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Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
unrealized | Fair | unrealized | Fair | unrealized | Fair | |||||||||||||||||||
(in millions) | losses | value | losses | value | losses | value | ||||||||||||||||||
June 30, 2010 | ||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | $ | (93 | ) | 2,653 | (452 | ) | 2,715 | (545 | ) | 5,368 | ||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Federal agencies | (9 | ) | 1,010 | — | — | (9 | ) | 1,010 | ||||||||||||||||
Residential | (19 | ) | 788 | (761 | ) | 5,316 | (780 | ) | 6,104 | |||||||||||||||
Commercial | (10 | ) | 366 | (1,266 | ) | 5,589 | (1,276 | ) | 5,955 | |||||||||||||||
Total mortgage-backed securities | (38 | ) | 2,164 | (2,027 | ) | 10,905 | (2,065 | ) | 13,069 | |||||||||||||||
Corporate debt securities | (18 | ) | 731 | (46 | ) | 290 | (64 | ) | 1,021 | |||||||||||||||
Collateralized debt obligations | (18 | ) | 687 | (311 | ) | 519 | (329 | ) | 1,206 | |||||||||||||||
Other | (70 | ) | 1,432 | (293 | ) | 812 | (363 | ) | 2,244 | |||||||||||||||
Total debt securities | (237 | ) | 7,667 | (3,129 | ) | 15,241 | (3,366 | ) | 22,908 | |||||||||||||||
Marketable equity securities: | ||||||||||||||||||||||||
Perpetual preferred securities | (139 | ) | 1,349 | (11 | ) | 74 | (150 | ) | 1,423 | |||||||||||||||
Other marketable equity securities | (4 | ) | 65 | — | — | (4 | ) | 65 | ||||||||||||||||
Total marketable equity securities | (143 | ) | 1,414 | (11 | ) | 74 | (154 | ) | 1,488 | |||||||||||||||
Total | $ | (380 | ) | 9,081 | (3,140 | ) | 15,315 | (3,520 | ) | 24,396 | ||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | (14 | ) | 530 | — | — | (14 | ) | 530 | |||||||||||||||
Securities of U.S. states and political subdivisions | (55 | ) | 1,120 | (310 | ) | 2,826 | (365 | ) | 3,946 | |||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Federal agencies | (9 | ) | 767 | — | — | (9 | ) | 767 | ||||||||||||||||
Residential | (243 | ) | 2,991 | (1,800 | ) | 9,697 | (2,043 | ) | 12,688 | |||||||||||||||
Commercial | (37 | ) | 816 | (1,825 | ) | 6,370 | (1,862 | ) | 7,186 | |||||||||||||||
Total mortgage-backed securities | (289 | ) | 4,574 | (3,625 | ) | 16,067 | (3,914 | ) | 20,641 | |||||||||||||||
Corporate debt securities | (7 | ) | 281 | (70 | ) | 442 | (77 | ) | 723 | |||||||||||||||
Collateralized debt obligations | (55 | ) | 398 | (312 | ) | 512 | (367 | ) | 910 | |||||||||||||||
Other | (73 | ) | 746 | (172 | ) | 286 | (245 | ) | 1,032 | |||||||||||||||
Total debt securities | (493 | ) | 7,649 | (4,489 | ) | 20,133 | (4,982 | ) | 27,782 | |||||||||||||||
Marketable equity securities: | ||||||||||||||||||||||||
Perpetual preferred securities | (1 | ) | 93 | (64 | ) | 527 | (65 | ) | 620 | |||||||||||||||
Other marketable equity securities | (9 | ) | 175 | — | — | (9 | ) | 175 | ||||||||||||||||
Total marketable equity securities | (10 | ) | 268 | (64 | ) | 527 | (74 | ) | 795 | |||||||||||||||
Total | $ | (503 | ) | 7,917 | (4,553 | ) | 20,660 | (5,056 | ) | 28,577 | ||||||||||||||
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The unrealized losses associated with U.S. Treasury and federal agency securities do not have any credit losses due to the guarantees provided by the United States government.
The unrealized losses associated with securities of U.S. states and political subdivisions are primarily driven by changes in interest rates and not due to the credit quality of the securities. Substantially all of these investments are investment grade. The securities were generally underwritten in accordance with our own investment standards prior to the decision to purchase, without relying on a bond insurer’s guarantee in making the investment decision. These investments will continue to be monitored as part of our ongoing impairment analysis, but are expected to perform, even if the rating agencies reduce the credit rating of the bond insurers. As a result, we expect to recover the entire amortized cost basis of these securities.
The unrealized losses associated with federal agency MBS are primarily driven by changes in interest rates and not due to credit losses. These securities are issued by U.S. government or GSEs and do not have any credit losses given the explicit or implicit government guarantee.
The unrealized losses associated with private residential MBS are primarily driven by higher projected collateral losses, wider credit spreads and changes in interest rates. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. We estimate losses to a security by forecasting the underlying mortgage loans in each transaction. The forecasted loan performance is used to project cash flows to the various tranches in the structure. Cash flow forecasts also considered, as applicable, independent industry analyst reports and forecasts, sector credit ratings, and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.
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The unrealized losses associated with commercial MBS are primarily driven by higher projected collateral losses and wider credit spreads. These investments are predominantly investment grade. We assess for credit impairment using a cash flow model. The key assumptions include default rates and severities. We estimate losses to a security by forecasting the underlying loans in each transaction. The forecasted loan performance is used to project cash flows to the various tranches in the structure. Cash flow forecasts are also considered, as applicable, and independent industry analyst reports and forecasts, sector credit ratings, and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.
The unrealized losses associated with corporate debt securities are primarily related to securities backed by commercial loans and individual issuer companies. For securities with commercial loans as the underlying collateral, we have evaluated the expected credit losses in the security and concluded that we have sufficient credit enhancement when compared with our estimate of credit losses for the individual security. For individual issuers, we evaluate the financial performance of the issuer on a quarterly basis to determine that the issuer can make all contractual principal and interest payments. Based upon this assessment, we expect to recover the entire cost basis of these securities.
The unrealized losses associated with CDOs relate to securities primarily backed by commercial, residential or other consumer collateral. The losses are primarily driven by higher projected collateral losses and wider credit spreads. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.
The unrealized losses associated with other debt securities primarily relate to other asset-backed securities, which are primarily backed by auto, home equity and student loans. The losses are primarily driven by higher projected collateral losses, wider credit spreads and changes in interest rates. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.
Our marketable equity securities include investments in perpetual preferred securities, which provide very attractive tax-equivalent yields. We evaluated these hybrid financial instruments with investment-grade ratings for impairment using an evaluation methodology similar to that used for debt securities. Perpetual preferred securities were not other-than-temporarily impaired at June 30, 2010, if there was no evidence of credit deterioration or investment rating downgrades of any issuers to below investment grade, and we expected to continue to receive full contractual payments. We will continue to evaluate the prospects for these securities for recovery in their market value in accordance with our policy for estimating OTTI. We have recorded impairment write-downs on perpetual preferred securities where there was evidence of credit deterioration.
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Investment grade | Non-investment grade | |||||||||||||||
Gross | Gross | |||||||||||||||
unrealized | Fair | unrealized | Fair | |||||||||||||
(in millions) | losses | value | losses | value | ||||||||||||
June 30, 2010 | ||||||||||||||||
Securities of U.S. states and political subdivisions | $ | (453 | ) | 4,991 | (92 | ) | 377 | |||||||||
Mortgage-backed securities: | ||||||||||||||||
Federal agencies | (9 | ) | 1,010 | — | — | |||||||||||
Residential | (19 | ) | 773 | (761 | ) | 5,331 | ||||||||||
Commercial | (736 | ) | 5,227 | (540 | ) | 728 | ||||||||||
Total mortgage-backed securities | (764 | ) | 7,010 | (1,301 | ) | 6,059 | ||||||||||
Corporate debt securities | (31 | ) | 129 | (33 | ) | 892 | ||||||||||
Collateralized debt obligations | (89 | ) | 731 | (240 | ) | 475 | ||||||||||
Other | (210 | ) | 1,842 | (153 | ) | 402 | ||||||||||
Total debt securities | (1,547 | ) | 14,703 | (1,819 | ) | 8,205 | ||||||||||
Perpetual preferred securities | (131 | ) | 1,314 | (19 | ) | 109 | ||||||||||
Total | $ | (1,678 | ) | 16,017 | (1,838 | ) | 8,314 | |||||||||
December 31, 2009 | ||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | (14 | ) | 530 | — | — | ||||||||||
Securities of U.S. states and political subdivisions | (275 | ) | 3,621 | (90 | ) | 325 | ||||||||||
Mortgage-backed securities: | ||||||||||||||||
Federal agencies | (9 | ) | 767 | — | — | |||||||||||
Residential | (480 | ) | 5,661 | (1,563 | ) | 7,027 | ||||||||||
Commercial | (1,247 | ) | 6,543 | (615 | ) | 643 | ||||||||||
Total mortgage-backed securities | (1,736 | ) | 12,971 | (2,178 | ) | 7,670 | ||||||||||
Corporate debt securities | (31 | ) | 260 | (46 | ) | 463 | ||||||||||
Collateralized debt obligations | (104 | ) | 471 | (263 | ) | 439 | ||||||||||
Other | (85 | ) | 644 | (160 | ) | 388 | ||||||||||
Total debt securities | (2,245 | ) | 18,497 | (2,737 | ) | 9,285 | ||||||||||
Perpetual preferred securities | (65 | ) | 620 | — | — | |||||||||||
Total | $ | (2,310 | ) | 19,117 | (2,737 | ) | 9,285 | |||||||||
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Remaining contractual principal maturity | ||||||||||||||||||||||||||||||||||||||||
Weighted- | After one year | After five years | ||||||||||||||||||||||||||||||||||||||
Total | average | Within one year | through five years | through ten years | After ten years | |||||||||||||||||||||||||||||||||||
(in millions) | amount | yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | ||||||||||||||||||||||||||||||
June 30, 2010 | ||||||||||||||||||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 1,685 | 3.17 | % | $ | 12 | 3.49 | % | $ | 748 | 3.14 | % | $ | 919 | 3.19 | % | $ | 6 | 4.05 | % | ||||||||||||||||||||
Securities of U.S. states and political subdivisions | 16,424 | 6.37 | 402 | 2.81 | 1,371 | 4.59 | 1,509 | 6.19 | 13,142 | 6.68 | ||||||||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||||
Federal agencies | 71,395 | 5.47 | 2 | 5.89 | 43 | 6.28 | 548 | 5.23 | 70,802 | 5.47 | ||||||||||||||||||||||||||||||
Residential | 21,146 | 5.27 | — | — | 113 | 0.54 | 302 | 5.53 | 20,731 | 5.29 | ||||||||||||||||||||||||||||||
Commercial | 12,530 | 5.35 | — | — | 84 | 5.62 | 603 | 3.59 | 11,843 | 5.43 | ||||||||||||||||||||||||||||||
Total mortgage-backed securities | 105,071 | 5.41 | 2 | 5.89 | 240 | 3.35 | 1,453 | 4.61 | 103,376 | 5.43 | ||||||||||||||||||||||||||||||
Corporate debt securities | 9,943 | 5.53 | 612 | 4.94 | 3,846 | 5.89 | 4,507 | 5.36 | 978 | 5.33 | ||||||||||||||||||||||||||||||
Collateralized debt obligations | 4,031 | 1.29 | 2 | 5.20 | 456 | 1.71 | 1,868 | 1.36 | 1,705 | 1.09 | ||||||||||||||||||||||||||||||
Other | 15,610 | 3.57 | 3,719 | 4.96 | 6,217 | 4.09 | 1,372 | 1.74 | 4,302 | 2.21 | ||||||||||||||||||||||||||||||
Total debt securities at fair value(1) | $ | 152,764 | 5.20 | % | $ | 4,749 | 4.77 | % | $ | 12,878 | 4.53 | % | $ | 11,628 | 4.13 | % | $ | 123,509 | 5.39 | % | ||||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 2,280 | 2.80 | % | $ | 413 | 0.79 | % | $ | 669 | 2.14 | % | $ | 1,192 | 3.87 | % | $ | 6 | 4.03 | % | ||||||||||||||||||||
Securities of U.S. states and political subdivisions | 13,530 | 6.75 | 77 | 7.48 | 703 | 6.88 | 1,055 | 6.56 | 11,695 | 6.76 | ||||||||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||||
Federal agencies | 82,818 | 5.50 | 12 | 4.68 | 50 | 5.91 | 271 | 5.56 | 82,485 | 5.50 | ||||||||||||||||||||||||||||||
Residential | 28,590 | 5.40 | 51 | 4.80 | 115 | 0.45 | 283 | 5.69 | 28,141 | 5.41 | ||||||||||||||||||||||||||||||
Commercial | 10,961 | 5.29 | 85 | 0.68 | 71 | 5.55 | 169 | 5.66 | 10,636 | 5.32 | ||||||||||||||||||||||||||||||
Total mortgage-backed securities | 122,369 | 5.46 | 148 | 2.44 | 236 | 3.14 | 723 | 5.63 | 121,262 | 5.46 | ||||||||||||||||||||||||||||||
Corporate debt securities | 9,335 | 5.53 | 684 | 4.00 | 3,937 | 5.68 | 3,959 | 5.68 | 755 | 5.32 | ||||||||||||||||||||||||||||||
Collateralized debt obligations | 3,725 | 1.70 | 2 | 5.53 | 492 | 4.48 | 1,837 | 1.56 | 1,394 | 0.90 | ||||||||||||||||||||||||||||||
Other | 15,879 | 4.22 | 2,128 | 5.62 | 7,762 | 5.96 | 697 | 2.46 | 5,292 | 1.33 | ||||||||||||||||||||||||||||||
Total debt securities at fair value (1) | $ | 167,118 | 5.33 | % | $ | 3,452 | 4.63 | % | $ | 13,799 | 5.64 | % | $ | 9,463 | 4.51 | % | $ | 140,404 | 5.37 | % | ||||||||||||||||||||
(1) | The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security. |
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Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Gross realized gains | $ | 260 | 416 | 444 | 710 | |||||||||||
Gross realized losses | (109 | ) | (348 | ) | (230 | ) | (718 | ) | ||||||||
Net realized gains (losses) | $ | 151 | 68 | 214 | (8 | ) | ||||||||||
Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
OTTI write-downs included in earnings | ||||||||||||||||
Debt securities: | ||||||||||||||||
U.S. states and political subdivisions | $ | 3 | 5 | 8 | 5 | |||||||||||
Residential mortgage-backed securities | 37 | 214 | 76 | 392 | ||||||||||||
Commercial mortgage-backed securities | 42 | 1 | 55 | 11 | ||||||||||||
Corporate debt securities | 4 | 22 | 5 | 53 | ||||||||||||
Collateralized debt obligations | 5 | 46 | 11 | 96 | ||||||||||||
Other debt securities | 15 | 20 | 43 | 20 | ||||||||||||
Total debt securities | 106 | 308 | 198 | 577 | ||||||||||||
Equity securities: | ||||||||||||||||
Marketable equity securities: | ||||||||||||||||
Perpetual preferred securities | — | 18 | 14 | 45 | ||||||||||||
Other marketable equity securities | — | 9 | — | 25 | ||||||||||||
Total marketable equity securities | — | 27 | 14 | 70 | ||||||||||||
Nonmarketable equity securities | 62 | 128 | 153 | 332 | ||||||||||||
Total equity securities | 62 | 155 | 167 | 402 | ||||||||||||
Total OTTI write-downs included in earnings | $ | 168 | 463 | 365 | 979 | |||||||||||
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Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
OTTI on debt securities | ||||||||||||||||
Recorded as part of gross realized losses: | ||||||||||||||||
Credit-related OTTI | $ | 106 | 307 | 195 | 570 | |||||||||||
Securities we intend to sell | — | 1 | 3 | 7 | ||||||||||||
Total recorded as part of gross realized losses | 106 | 308 | 198 | 577 | ||||||||||||
Recorded directly to OCI for non-credit-related impairment: | ||||||||||||||||
U.S. states and political subdivisions | (1 | ) | 4 | (5 | ) | 4 | ||||||||||
Residential mortgage-backed securities | (124 | ) | 608 | (98 | ) | 922 | ||||||||||
Commercial mortgage-backed securities | 84 | 14 | 82 | 21 | ||||||||||||
Corporate debt securities | — | (2 | ) | — | (2 | ) | ||||||||||
Collateralized debt obligations | (3 | ) | 17 | 56 | 30 | |||||||||||
Other debt securities | (13 | ) | 23 | (30 | ) | 23 | ||||||||||
Total recorded directly to OCI for non-credit-related impairment (1) | (57 | ) | 664 | 5 | 998 | |||||||||||
Total OTTI on debt securities | $ | 49 | 972 | 203 | 1,575 | |||||||||||
(1) | Represents amounts recorded to OCI on debt securities in periods OTTI write-downs have occurred. Changes in fair value in subsequent periods on such securities are not reflected in this total unless the securities also had a credit impairment charge to income recorded for the subsequent period. |
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Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Credit loss component, beginning of period | $ | 1,002 | 727 | 1,187 | 471 | |||||||||||
Additions (1): | ||||||||||||||||
Initial credit impairments | 39 | 216 | 59 | 413 | ||||||||||||
Subsequent credit impairments | 67 | 91 | 136 | 157 | ||||||||||||
Reductions: | ||||||||||||||||
For securities sold | (51 | ) | (16 | ) | (76 | ) | (23 | ) | ||||||||
For securities derecognized resulting from adoption of consolidation accounting guidance | — | — | (242 | ) | — | |||||||||||
Due to change in intent to sell or requirement to sell | (2 | ) | (1 | ) | (2 | ) | (1 | ) | ||||||||
For increases in expected cash flows | (6 | ) | (5 | ) | (13 | ) | (5 | ) | ||||||||
Credit loss component, end of period | $ | 1,049 | 1,012 | 1,049 | 1,012 | |||||||||||
(1) | Excludes OTTI on debt securities we intend to sell of $1 million for the quarter ended June 30, 2009, and $3 million and $7 million for the six months ended June 30, 2010 and 2009, respectively. |
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Non-agency residential MBS – non-investment grade | ||||||||||||||||
Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Expected remaining life of loan losses (1): | ||||||||||||||||
Range (2) | 1 - 40 | % | 0 - 58 | 1 - 40 | 0 - 58 | |||||||||||
Credit impairment distribution (3): | ||||||||||||||||
0 - 10% range | 54 | 40 | 53 | 55 | ||||||||||||
10 - 20% range | 8 | 42 | 14 | 35 | ||||||||||||
20 - 30% range | 34 | 17 | 29 | 9 | ||||||||||||
Greater than 30% | 4 | 1 | 4 | 1 | ||||||||||||
Weighted average (4) | 8 | 10 | 9 | 10 | ||||||||||||
Current subordination levels (5): | ||||||||||||||||
Range (2) | 0 - 25 | 0 - 19 | 0 - 25 | 0 - 20 | ||||||||||||
Weighted average (4) | 7 | 8 | 7 | 7 | ||||||||||||
Prepayment speed (annual CPR (6)): | ||||||||||||||||
Range (2) | 3 - 17 | 5 - 18 | 3 - 17 | 5 - 25 | ||||||||||||
Weighted average (4) | 9 | 10 | 9 | 11 | ||||||||||||
(1) | Represents future expected credit losses on underlying pool of loans expressed as a percentage of total current outstanding loan balance. | |
(2) | Represents the range of inputs/assumptions based upon the individual securities within each category. | |
(3) | Represents distribution of credit impairment losses recognized in earnings categorized based on range of expected remaining life of loan losses. For example 54% of credit impairment losses recognized in earnings for the quarter ended June 30, 2010, had expected remaining life of loan loss assumptions of 0 to 10%. | |
(4) | Calculated by weighting the relevant input/assumption for each individual security by current outstanding amortized cost basis of the security. | |
(5) | Represents current level of credit protection (subordination) for the securities, expressed as a percentage of total current underlying loan balance. | |
(6) | Constant prepayment rate. |
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June 30, 2010 | Dec. 31, 2009 | |||||||||||||||||||||||
All | All | |||||||||||||||||||||||
PCI | other | PCI | other | |||||||||||||||||||||
(in millions) | loans | loans | Total | loans | loans | Total | ||||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||||||||||
Commercial | $ | 1,113 | 144,971 | 146,084 | 1,911 | 156,441 | 158,352 | |||||||||||||||||
Real estate mortgage | 3,487 | 96,139 | 99,626 | 4,137 | 93,390 | 97,527 | ||||||||||||||||||
Real estate construction | 4,194 | 26,685 | 30,879 | 5,207 | 31,771 | 36,978 | ||||||||||||||||||
Lease financing | — | 13,492 | 13,492 | — | 14,210 | 14,210 | ||||||||||||||||||
Total commercial and commercial real estate | 8,794 | 281,287 | 290,081 | 11,255 | 295,812 | 307,067 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 35,972 | 197,840 | 233,812 | 38,386 | 191,150 | 229,536 | ||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 290 | 101,037 | 101,327 | 331 | 103,377 | 103,708 | ||||||||||||||||||
Credit card | — | 22,086 | 22,086 | — | 24,003 | 24,003 | ||||||||||||||||||
Other revolving credit and installment | — | 88,485 | 88,485 | — | 89,058 | 89,058 | ||||||||||||||||||
Total consumer | 36,262 | 409,448 | 445,710 | 38,717 | 407,588 | 446,305 | ||||||||||||||||||
Foreign | 1,457 | 29,017 | 30,474 | 1,733 | 27,665 | 29,398 | ||||||||||||||||||
Total loans | $ | 46,513 | 719,752 | 766,265 | 51,705 | 731,065 | 782,770 | |||||||||||||||||
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Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Balance, beginning of period | $ | 25,656 | 22,846 | 25,031 | 21,711 | |||||||||||
Provision for credit losses | 3,989 | 5,086 | 9,319 | 9,644 | ||||||||||||
Adjustment for passage of time on certain impaired loans (1) | (62 | ) | — | (136 | ) | — | ||||||||||
Loan charge-offs: | ||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||
Commercial | (810 | ) | (755 | ) | (1,577 | ) | (1,351 | ) | ||||||||
Real estate mortgage | (364 | ) | (125 | ) | (645 | ) | (154 | ) | ||||||||
Real estate construction | (289 | ) | (263 | ) | (694 | ) | (370 | ) | ||||||||
Lease financing | (31 | ) | (65 | ) | (65 | ) | (85 | ) | ||||||||
Total commercial and commercial real estate | (1,494 | ) | (1,208 | ) | (2,981 | ) | (1,960 | ) | ||||||||
Consumer: | ||||||||||||||||
Real estate 1-4 family first mortgage | (1,140 | ) | (790 | ) | (2,537 | ) | (1,214 | ) | ||||||||
Real estate 1-4 family junior lien mortgage | (1,239 | ) | (1,215 | ) | (2,735 | ) | (2,088 | ) | ||||||||
Credit card | (639 | ) | (712 | ) | (1,335 | ) | (1,334 | ) | ||||||||
Other revolving credit and installment | (542 | ) | (802 | ) | (1,292 | ) | (1,702 | ) | ||||||||
Total consumer | (3,560 | ) | (3,519 | ) | (7,899 | ) | (6,338 | ) | ||||||||
Foreign | (52 | ) | (56 | ) | (99 | ) | (110 | ) | ||||||||
Total loan charge-offs | (5,106 | ) | (4,783 | ) | (10,979 | ) | (8,408 | ) | ||||||||
Loan recoveries: | ||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||
Commercial | 121 | 51 | 238 | 91 | ||||||||||||
Real estate mortgage | 4 | 6 | 14 | 16 | ||||||||||||
Real estate construction | 51 | 4 | 62 | 6 | ||||||||||||
Lease financing | 4 | 4 | 9 | 7 | ||||||||||||
Total commercial and commercial real estate | 180 | 65 | 323 | 120 | ||||||||||||
Consumer: | ||||||||||||||||
Real estate 1-4 family first mortgage | 131 | 32 | 217 | 65 | ||||||||||||
Real estate 1-4 family junior lien mortgage | 55 | 44 | 102 | 70 | ||||||||||||
Credit card | 60 | 48 | 113 | 88 | ||||||||||||
Other revolving credit and installment | 181 | 198 | 384 | 402 | ||||||||||||
Total consumer | 427 | 322 | 816 | 625 | ||||||||||||
Foreign | 10 | 10 | 21 | 19 | ||||||||||||
Total loan recoveries | 617 | 397 | 1,160 | 764 | ||||||||||||
Net loan charge-offs (2) | (4,489 | ) | (4,386 | ) | (9,819 | ) | (7,644 | ) | ||||||||
Allowances related to business combinations/other (3) | (9 | ) | (16 | ) | 690 | (181 | ) | |||||||||
Balance, end of period | $ | 25,085 | 23,530 | 25,085 | 23,530 | |||||||||||
Components: | ||||||||||||||||
Allowance for loan losses | $ | 24,584 | 23,035 | 24,584 | 23,035 | |||||||||||
Reserve for unfunded credit commitments | 501 | 495 | 501 | 495 | ||||||||||||
Allowance for credit losses | $ | 25,085 | 23,530 | 25,085 | 23,530 | |||||||||||
Net loan charge-offs (annualized) as a percentage of average total loans (2) | 2.33 | % | 2.11 | 2.52 | 1.82 | |||||||||||
Allowance for loan losses as a percentage of total loans (4) | 3.21 | 2.80 | 3.21 | 2.80 | ||||||||||||
Allowance for credit losses as a percentage of total loans (4) | 3.27 | 2.86 | 3.27 | 2.86 | ||||||||||||
(1) | Certain impaired loans have a valuation allowance determined by discounting expected cash flows at the respective loan’s effective interest rate. Accordingly, the valuation allowance for these impaired loans reduces with the passage of time and that reduction is recognized as interest income. | |
(2) | For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting estimates. | |
(3) | Includes $693 million related to the adoption of consolidation accounting guidance on January 1, 2010. | |
(4) | The allowance for credit losses includes $225 million and $49 million at June 30, 2010 and 2009, respectively, related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs. |
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Recorded investment | ||||||||||||||||||||||||
Impaired loans with | ||||||||||||||||||||||||
related allowance for | Related allowance | |||||||||||||||||||||||
Impaired loans | credit losses (1) | for credit losses | ||||||||||||||||||||||
June 30, | Dec. 31, | June 30 | , | Dec. 31 | , | June 30 | , | Dec. 31 | , | |||||||||||||||
(in millions) | 2010 | 2009(2) | 2010 | 2009(2) | 2010 | 2009(2) | ||||||||||||||||||
Commercial and commercial real estate | $ | 11,011 | 10,562 | 10,029 | 9,666 | 1,367 | 1,502 | |||||||||||||||||
Consumer (TDRs) | 11,496 | 8,268 | 11,496 | 8,268 | 2,806 | 1,765 | ||||||||||||||||||
Total | $ | 22,507 | 18,830 | 21,525 | 17,934 | 4,173 | 3,267 | |||||||||||||||||
(1) | Loans will not have a related allowance if the collateral value or the present value of expected cash flows (discounted at the pre-modification rate) exceed the recorded investment. | |
(2) | Balances have been revised to conform with current period presentation. |
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• | Changes in interest rate indices for variable rate PCI loans — Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows; | |
• | Changes in prepayment assumptions — Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and | |
• | Changes in the expected principal and interest payments over the estimated life — These changes in expected cash flows are driven by updates to the credit outlook and actions taken with our borrowers. Expected benefits from loan modifications are included in the quarterly assessment of expected future cash flows. |
(in millions) | ||||
Total, December 31, 2008 (refined) | $ | 10,447 | ||
Accretion | (2,606 | ) | ||
Reclassification from nonaccretable difference for loans with improving cash flows | 441 | |||
Changes in expected cash flows that do not affect nonaccretable difference (1) | 6,277 | |||
Total, December 31, 2009 | 14,559 | |||
Accretion | (1,329 | ) | ||
Reclassification from nonaccretable difference for loans with improving cash flows | 2,595 | |||
Changes in expected cash flows that do not affect nonaccretable difference (1) | (740 | ) | ||
Total, June 30, 2010 | $ | 15,085 | ||
Total, March 31, 2010 | $ | 15,803 | ||
Accretion | (643 | ) | ||
Reclassification from nonaccretable difference for loans with improving cash flows | 1,927 | |||
Changes in expected cash flows that do not affect nonaccretable difference (1) | (2,002 | ) | ||
Total, June 30, 2010 | $ | 15,085 | ||
(1) | Represents changes in interest cash flows due to the impact of modifications incorporated into the quarterly assessment of expected future cash flows and/or changes in interest rates on variable rate PCI loans. |
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Commercial | , | |||||||||||||||
CRE and | Other | |||||||||||||||
(in millions) | foreign | Pick-a-Pay | consumer | Total | ||||||||||||
Balance, December 31, 2008 | $ | — | — | — | — | |||||||||||
Provision for losses due to credit deterioration | 850 | — | 3 | 853 | ||||||||||||
Charge-offs | (520 | ) | — | — | (520 | ) | ||||||||||
Balance, December 31, 2009 | 330 | — | 3 | 333 | ||||||||||||
Provision for losses due to credit deterioration | 376 | — | 26 | 402 | ||||||||||||
Charge-offs | (500 | ) | — | (10 | ) | (510 | ) | |||||||||
Balance, June 30, 2010 | $ | 206 | — | 19 | 225 | |||||||||||
Balance at March 31, 2010 | $ | 231 | — | 16 | 247 | |||||||||||
Provision for losses due to credit deterioration | 224 | — | 13 | 237 | ||||||||||||
Charge-offs | (249 | ) | — | (10 | ) | (259 | ) | |||||||||
Balance at June 30, 2010 | $ | 206 | — | 19 | 225 | |||||||||||
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June 30 | , | Dec. 31 | , | |||||
(in millions) | 2010 | 2009 | ||||||
Nonmarketable equity investments: | ||||||||
Cost method: | ||||||||
Private equity investments | $ | 3,769 | 3,808 | |||||
Federal bank stock | 6,024 | 5,985 | ||||||
Total cost method | 9,793 | 9,793 | ||||||
Equity method | 6,144 | 5,138 | ||||||
Principal investments (1) | 360 | 1,423 | ||||||
Total nonmarketable equity investments | 16,297 | 16,354 | ||||||
Corporate/bank-owned life insurance | 19,653 | 19,515 | ||||||
Accounts receivable | 18,190 | 20,565 | ||||||
Interest receivable | 5,219 | 5,946 | ||||||
Core deposit intangibles | 9,839 | 10,774 | ||||||
Customer relationship and other amortized intangibles | 2,014 | 2,154 | ||||||
Net deferred tax assets | 306 | 3,212 | ||||||
Foreclosed assets: | ||||||||
GNMA loans (2) | 1,344 | 960 | ||||||
Other | 3,650 | 2,199 | ||||||
Operating lease assets | 1,870 | 2,395 | ||||||
Due from customers on acceptances | 481 | 810 | ||||||
Other | 16,594 | 19,296 | ||||||
Total other assets | $ | 95,457 | 104,180 | |||||
(1) | Principal investments are recorded at fair value with realized and unrealized gains (losses) included in net gains (losses) from equity investments in the income statement. | |
(2) | Consistent with regulatory reporting requirements, foreclosed assets include foreclosed real estate securing GNMA loans. Both principal and interest for GNMA loans secured by the foreclosed real estate are collectible because the GNMA loans are insured by the FHA or guaranteed by the VA. |
Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Net gains (losses) from: | ||||||||||||||||
Private equity investments | $ | 155 | (71 | ) | 154 | (291 | ) | |||||||||
Principal investments | 12 | (7 | ) | 21 | (15 | ) | ||||||||||
All other nonmarketable equity investments | (21 | ) | (94 | ) | (38 | ) | (143 | ) | ||||||||
Net gains (losses) from nonmarketable equity investments | $ | 146 | (172 | ) | 137 | (449 | ) | |||||||||
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• | underwriting securities issued by SPEs and subsequently making markets in those securities; | |
• | providing liquidity facilities to support short-term obligations of SPEs issued to third party investors; | |
• | providing credit enhancement on securities issued by SPEs or market value guarantees of assets held by SPEs through the use of letters of credit, financial guarantees, credit default swaps and total return swaps; | |
• | entering into other derivative contracts with SPEs; | |
• | holding senior or subordinated interests in SPEs; | |
• | acting as servicer or investment manager for SPEs; and | |
• | providing administrative or trustee services to SPEs. |
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Transfers that | ||||||||||||||||
VIEs that we | VIEs | we account | ||||||||||||||
do not | that we | for as secured | ||||||||||||||
(in millions) | consolidate | consolidate | borrowings | Total | ||||||||||||
June 30, 2010 | ||||||||||||||||
Cash | $ | — | 379 | 444 | 823 | |||||||||||
Trading assets | 5,351 | 93 | 33 | 5,477 | ||||||||||||
Securities available for sale(1) | 25,728 | 2,596 | 7,191 | 35,515 | ||||||||||||
Loans | 12,274 | 20,560 | 1,703 | 34,537 | ||||||||||||
Mortgage servicing rights | 12,009 | — | — | 12,009 | ||||||||||||
Other assets | 3,418 | 2,368 | 91 | 5,877 | ||||||||||||
Total assets | 58,780 | 25,996 | 9,462 | 94,238 | ||||||||||||
Short-term borrowings(2) | — | 4,743 | 6,755 | 11,498 | ||||||||||||
Accrued expenses and other liabilities(2) | 3,037 | 752 | 19 | 3,808 | ||||||||||||
Long-term debt(2) | — | 10,432 | 1,800 | 12,232 | ||||||||||||
Total liabilities | 3,037 | 15,927 | 8,574 | 27,538 | ||||||||||||
Noncontrolling interests | — | 56 | — | 56 | ||||||||||||
Net assets | $ | 55,743 | 10,013 | 888 | 66,644 | |||||||||||
December 31, 2009 | ||||||||||||||||
Cash | $ | — | 273 | 328 | 601 | |||||||||||
Trading assets | 6,097 | 77 | 35 | 6,209 | ||||||||||||
Securities available for sale (1) | 35,186 | 1,794 | 7,126 | 44,106 | ||||||||||||
Loans | 15,698 | 561 | 2,007 | 18,266 | ||||||||||||
Mortgage servicing rights | 16,233 | — | — | 16,233 | ||||||||||||
Other assets | 5,604 | 2,595 | 68 | 8,267 | ||||||||||||
Total assets | 78,818 | 5,300 | 9,564 | 93,682 | ||||||||||||
Short-term borrowings | — | 351 | 1,996 | 2,347 | ||||||||||||
Accrued expenses and other liabilities | 3,352 | 708 | 4,864 | 8,924 | ||||||||||||
Long-term debt | — | 1,448 | 1,938 | 3,386 | ||||||||||||
Total liabilities | 3,352 | 2,507 | 8,798 | 14,657 | ||||||||||||
Noncontrolling interests | — | 68 | — | 68 | ||||||||||||
Net assets | $ | 75,466 | 2,725 | 766 | 78,957 | |||||||||||
(1) | Excludes certain debt securities related to loans serviced for the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and GNMA. | |
(2) | Includes the following VIE liabilities at June 30, 2010, with recourse to the general credit of Wells Fargo: Short-term borrowings, $4.4 billion; Accrued expenses and other liabilities, $92 million; and Long-term debt, $163 million. |
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Other | ||||||||||||||||||||||||
Total | Debt and | commitments | ||||||||||||||||||||||
VIE | equity | Servicing | and | Net | ||||||||||||||||||||
(in millions) | assets (1) | interests (2) | assets | Derivatives | guarantees | assets | ||||||||||||||||||
June 30, 2010 | ||||||||||||||||||||||||
Carrying value - asset (liability) | ||||||||||||||||||||||||
Residential mortgage loan securitizations (3): | ||||||||||||||||||||||||
Conforming | $ | 1,080,550 | 5,317 | 10,823 | — | (999 | ) | 15,141 | ||||||||||||||||
Other/nonconforming | 90,599 | 3,753 | 511 | 10 | (11 | ) | 4,263 | |||||||||||||||||
Commercial mortgage securitizations | 204,793 | 5,182 | 629 | 320 | — | 6,131 | ||||||||||||||||||
Collateralized debt obligations: | ||||||||||||||||||||||||
Debt securities | 20,088 | 1,508 | — | 941 | — | 2,449 | ||||||||||||||||||
Loans(4) | 9,882 | 9,639 | — | — | — | 9,639 | ||||||||||||||||||
Asset-based finance structures | 13,146 | 7,488 | — | (99 | ) | — | 7,389 | |||||||||||||||||
Tax credit structures | 20,026 | 3,198 | — | — | (587 | ) | 2,611 | |||||||||||||||||
Collateralized loan obligations | 13,996 | 2,751 | — | 48 | — | 2,799 | ||||||||||||||||||
Investment funds | 14,027 | 1,335 | — | — | — | 1,335 | ||||||||||||||||||
Other(5) | 18,905 | 3,356 | 46 | 588 | (4 | ) | 3,986 | |||||||||||||||||
Total | $ | 1,486,012 | 43,527 | 12,009 | 1,808 | (1,601 | ) | 55,743 | ||||||||||||||||
Maximum exposure to loss | ||||||||||||||||||||||||
Residential mortgage loan securitizations (3): | ||||||||||||||||||||||||
Conforming | $ | 5,317 | 10,823 | — | 4,233 | 20,373 | ||||||||||||||||||
Other/nonconforming | 3,753 | 511 | 10 | 27 | 4,301 | |||||||||||||||||||
Commercial mortgage securitizations | 5,182 | 629 | 575 | — | 6,386 | |||||||||||||||||||
Collateralized debt obligation: | ||||||||||||||||||||||||
Debt securities | 1,508 | — | 3,060 | 12 | 4,580 | |||||||||||||||||||
Loans(4) | 9,639 | — | — | — | 9,639 | |||||||||||||||||||
Asset-based finance structures | 7,488 | — | 99 | 1,476 | 9,063 | |||||||||||||||||||
Tax credit structures | 3,198 | — | — | 1 | 3,199 | |||||||||||||||||||
Collateralized loan obligations | 2,751 | — | 48 | 492 | 3,291 | |||||||||||||||||||
Investment funds | 1,335 | — | — | 176 | 1,511 | |||||||||||||||||||
Other(5) | 3,356 | 46 | 1,384 | 852 | 5,638 | |||||||||||||||||||
Total | $ | 43,527 | 12,009 | 5,176 | 7,269 | 67,981 | ||||||||||||||||||
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Other | ||||||||||||||||||||||||
Total | Debt and | commitments | ||||||||||||||||||||||
VIE | equity | Servicing | and | Net | ||||||||||||||||||||
(in millions) | assets (1) | interests (2) | assets | Derivatives | guarantees | assets | ||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||
Carrying value - asset (liability) | ||||||||||||||||||||||||
Residential mortgage loan securitizations (3): | ||||||||||||||||||||||||
Conforming | $ | 1,150,515 | 5,846 | 13,949 | — | (869 | ) | 18,926 | ||||||||||||||||
Other/nonconforming | 251,850 | 11,683 | 1,538 | 16 | (15 | ) | 13,222 | |||||||||||||||||
Commercial mortgage securitizations | 345,561 | 3,760 | 696 | 489 | — | 4,945 | ||||||||||||||||||
Collateralized debt obligations: | ||||||||||||||||||||||||
Debt securities | 45,684 | 3,024 | — | 1,746 | — | 4,770 | ||||||||||||||||||
Loans (4) | 10,215 | 9,964 | — | — | — | 9,964 | ||||||||||||||||||
Multi-seller commercial paper conduit | 5,160 | — | — | — | — | — | ||||||||||||||||||
Asset-based finance structures | 17,467 | 10,187 | — | (72 | ) | (248 | ) | 9,867 | ||||||||||||||||
Tax credit structures | 27,537 | 4,659 | — | — | (653 | ) | 4,006 | |||||||||||||||||
Collateralized loan obligations | 23,830 | 3,602 | — | 64 | — | 3,666 | ||||||||||||||||||
Investment funds | 84,642 | 1,831 | — | — | (129 | ) | 1,702 | |||||||||||||||||
Other (5) | 23,538 | 3,626 | 50 | 1,015 | (293 | ) | 4,398 | |||||||||||||||||
Total | $ | 1,985,999 | 58,182 | 16,233 | 3,258 | (2,207 | ) | 75,466 | ||||||||||||||||
Maximum exposure to loss | ||||||||||||||||||||||||
Residential mortgage loan securitizations (3): | ||||||||||||||||||||||||
Conforming | $ | 5,846 | 13,949 | — | 4,567 | 24,362 | ||||||||||||||||||
Other/nonconforming | 11,683 | 1,538 | 30 | 218 | 13,469 | |||||||||||||||||||
Commercial mortgage securitizations | 3,760 | 696 | 766 | — | 5,222 | |||||||||||||||||||
Collateralized debt obligations: | ||||||||||||||||||||||||
Debt securities | 3,024 | — | 3,586 | 33 | 6,643 | |||||||||||||||||||
Loans (4) | 9,964 | — | — | — | 9,964 | |||||||||||||||||||
Multi-seller commercial paper conduit | — | — | 5,263 | — | 5,263 | |||||||||||||||||||
Asset-based finance structures | 10,187 | — | 72 | 968 | 11,227 | |||||||||||||||||||
Tax credit structures | 4,659 | — | — | 4 | 4,663 | |||||||||||||||||||
Collateralized loan obligations | 3,702 | — | 64 | 473 | 4,239 | |||||||||||||||||||
Investment funds | 2,331 | — | 500 | 89 | 2,920 | |||||||||||||||||||
Other (5) | 3,626 | 50 | 1,818 | 1,774 | 7,268 | |||||||||||||||||||
Total | $ | 58,782 | 16,233 | 12,099 | 8,126 | 95,240 | ||||||||||||||||||
(1) | Represents the remaining principal balance of assets held by unconsolidated VIEs using the most current information available. For VIEs that obtain exposure to assets synthetically through derivative instruments, the remaining notional amount of the derivative is included in the asset balance. The multi-seller commercial paper conduit was consolidated in first quarter 2010. | |
(2) | Excludes certain debt securities held related to loans serviced for FNMA, FHLMC and GNMA. | |
(3) | Conforming residential mortgage loan securitizations are those that are guaranteed by GSEs. Other commitments and guarantees include amounts related to loans sold that we may be required to repurchase, or otherwise indemnify or reimburse the investor or insurer for losses incurred, due to material breach of contractual representations and warranties. The maximum exposure to loss for material breach of contractual representations and warranties represents a stressed case estimate we utilize for determining stressed case regulatory capital needs. Total VIE assets at December 31, 2009, includes $20.9 billion of nonconforming residential mortgage securitizations that were consolidated in first quarter 2010. | |
(4) | Represents senior loans to trusts that are collateralized by asset-backed securities. The trusts invest in senior tranches from a diversified pool of primarily U.S. asset securitizations, of which all are current, and over 95% were rated as investment grade by the primary rating agencies at June 30, 2010. These senior loans were acquired in the Wachovia business combination and are accounted for at amortized cost as initially determined under purchase accounting and are subject to the Company’s allowance and credit charge-off policies. | |
(5) | Includes student loan securitizations, auto loan securitizations and credit-linked note structures. Also contains investments in auction rate securities (ARS) issued by VIEs that we do not sponsor and, accordingly, are unable to obtain the total assets of the entity. |
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Residential mortgage loan securitizations are financed through the issuance of fixed- or floating-rate-asset-backed-securities, which are collateralized by the loans transferred to a VIE. We typically transfer loans we originated to these VIEs, account for the transfers as sales, retain the right to service the loans and may hold other beneficial interests issued by the VIEs. We also may be exposed to limited liability related to recourse agreements and repurchase agreements we make to our issuers and purchasers, which are included in other commitments and guarantees. In certain instances, we may service residential mortgage loan securitizations structured by third parties whose loans we did not originate or transfer. Our residential mortgage loan securitizations consist of conforming and nonconforming securitizations. Conforming residential mortgage loan securitizations are those that are guaranteed by GSEs, including GNMA. We do not consolidate our conforming residential mortgage loan securitizations because we do not have power over the VIEs. The loans sold to the VIEs in nonconforming residential mortgage loan securitizations are those that do not qualify for a GSE guarantee. We do not consolidate the nonconforming residential mortgage loan securitizations included in the table because we do not have a variable interest that could potentially be significant or we do not have power to direct the activities that most significantly impact the performance of the VIE.
Commercial mortgage loan securitizations are financed through the issuance of fixed- or floating-rate-asset-backed-securities, which are collateralized by the loans transferred to the VIE. In a typical securitization, we may transfer loans we originate to these VIEs, account for the transfers as sales, retain the right to service the loans and may hold other beneficial interests issued by the VIEs. In certain instances, we may service commercial mortgage loan securitizations structured by third parties whose loans we did not originate or transfer. We typically serve as primary or master servicer of these VIEs. The primary or master servicer in a commercial mortgage loan securitization typically cannot make the most significant decisions impacting the performance of the VIE and therefore does not have power over the VIE. We do not consolidate the commercial mortgage loan securitizations included in the disclosure because we either do not have power or do not have a significant variable interest.
A CDO is a securitization where an SPE purchases a pool of assets consisting of asset-backed securities and issues multiple tranches of equity or notes to investors. In some transactions, a portion of the assets are obtained synthetically through the use of derivatives such as credit default swaps or total return swaps.
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A CLO is a securitization where an SPE purchases a pool of assets consisting of loans and issues multiple tranches of equity or notes to investors. Generally, CLOs are structured on behalf of a third party asset manager that typically selects and manages the assets for the term of the CLO. Typically, the asset manager has the power over the significant decisions of the VIE through its discretion to manage the assets of the CLO. We assess whether we are the primary beneficiary of CLOs based on our role in the transaction and the variable interests we hold. In most cases, we are not the primary beneficiary of these transactions because we do not have the power to manage the collateral in the VIE.
We engage in various forms of structured finance arrangements with VIEs that are collateralized by various asset classes including energy contracts, auto and other transportation leases, intellectual property, equipment and general corporate credit. We typically provide senior financing, and may act as an interest rate swap or commodity derivative counterparty when necessary. In most cases, we are not the primary beneficiary of these structures because we do not have power over the significant activities of the VIEs involved in these transactions.
We co-sponsor and make investments in affordable housing and sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits. In some instances, our investments in these structures may require that we fund future capital commitments at the discretion of the project sponsors. While the size of our investment in a single entity may at times exceed 50% of the outstanding equity interests, we do not consolidate these structures due to the project sponsor’s ability to manage the projects, which is indicative of power in these transactions.
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At June 30, 2010, we had investments of $1.3 billion and lending arrangements of $18 million with certain funds managed by one of our majority owned subsidiaries compared with investments of $1.3 billion and lending arrangements of $20 million at December 31, 2009. In addition, we also provide a default protection agreement to a third party lender to one of these funds. Our involvement in these funds is either senior or of equal priority to third party investors. We do not consolidate the investment funds because we do not absorb the majority of the expected future variability associated with the funds’ assets, including variability associated with credit, interest rate and liquidity risks.
In August 2008, Wachovia reached an agreement to purchase at par auction rate securities (ARS) that were sold to third-party investors by certain of its subsidiaries. ARS are debt instruments with long-term maturities, but which re-price more frequently. All remaining ARS issued by VIEs subject to the agreement were redeemed. At June 30, 2010, we held in our securities available-for-sale portfolio $1.9 billion of ARS issued by VIEs redeemed pursuant to this agreement, compared with $3.2 billion at December 31, 2009.
In addition to the involvements disclosed in the following table, we had $19.0 billion of debt financing through the issuance of trust preferred securities at June 30, 2010. In these transactions, VIEs that we wholly own issue preferred equity or debt securities to third party investors. All of the proceeds of the issuance are invested in debt securities that we issue to the VIEs. In certain instances, we may provide liquidity to third party investors that purchase long-term securities that re-price frequently issued by VIEs. The VIEs’ operations and cash flows relate only to the issuance, administration and repayment of the securities held by third parties. We do not consolidate these VIEs because the sole assets of the VIEs are receivables from us. This is the case even though we own all of the voting equity shares of the VIEs, have fully guaranteed the obligations of the VIEs and may have the right to redeem the third party securities under certain circumstances. We report the debt securities that we issue to the VIEs as long-term debt in our consolidated balance sheet.
We use VIEs to securitize consumer and CRE loans and other types of financial assets, including student loans, auto loans and municipal bonds. We typically retain the servicing rights from these sales and may continue to hold other beneficial interests in the VIEs. We may also provide liquidity to investors in the beneficial interests and credit enhancements in the form of standby letters of credit. Through these securitizations we may be exposed to liability under limited amounts of recourse as well as standard representations and warranties we make to purchasers and issuers.
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2010 | 2009 | |||||||||||||||
Other | Other | |||||||||||||||
Mortgage | financial | Mortgage | financial | |||||||||||||
(in millions) | loans | assets | loans | assets | ||||||||||||
Quarter ended June 30, | ||||||||||||||||
Sales proceeds from securitizations (1) | $ | 81,435 | — | 120,167 | — | |||||||||||
Servicing fees | 1,057 | 9 | 1,084 | 5 | ||||||||||||
Other interests held | 445 | 132 | 646 | 20 | ||||||||||||
Purchases of delinquent assets | 10 | — | 11 | — | ||||||||||||
Net servicing advances | 10 | — | 67 | — | ||||||||||||
Six months ended June 30, | ||||||||||||||||
Sales proceeds from securitizations (1) | $ | 163,757 | — | 201,345 | — | |||||||||||
Servicing fees | 2,097 | 18 | 2,084 | 23 | ||||||||||||
Other interests held | 852 | 244 | 1,163 | 35 | ||||||||||||
Purchases of delinquent assets | 10 | — | 24 | — | ||||||||||||
Net servicing advances | 29 | — | 129 | — | ||||||||||||
(1) | Represents cash flow data for all loans securitized in the periods presented. |
Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Prepayment speed assumption (annual CPR(1)) | 13.6 | % | 10.4 | 13.0 | 11.3 | |||||||||||
Expected weighted-average life (in years) | 5.4 | 6.8 | 5.6 | 6.5 | ||||||||||||
Discount rate assumption | 8.0 | % | 8.8 | 8.2 | 8.9 | |||||||||||
(1) | Constant prepayment rate. |
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Other interests held (1) | ||||||||||||||||
Mortgage | Interest- | |||||||||||||||
servicing | only | Subordinated | Senior | |||||||||||||
(in millions) | rights | strips | bonds (2) | bonds (3) | ||||||||||||
Fair value of interests held at June 30, 2010 | $ | 14,556 | 208 | 49 | 480 | |||||||||||
Expected weighted-average life (in years) | 4.8 | 4.4 | 8.9 | 6.8 | ||||||||||||
Prepayment speed assumption (annual CPR) | 15.2 | % | 15.0 | 4.1 | 9.4 | |||||||||||
Decrease in fair value from: | ||||||||||||||||
10% adverse change | $ | 781 | 10 | 7 | 2 | |||||||||||
25% adverse change | 1,830 | 20 | 7 | 6 | ||||||||||||
Discount rate assumption | 8.6 | % | 16.1 | 7.2 | 7.5 | |||||||||||
Decrease in fair value from: | ||||||||||||||||
100 basis point increase | $ | 633 | 8 | 10 | 21 | |||||||||||
200 basis point increase | 1,214 | 13 | 12 | 41 | ||||||||||||
Credit loss assumption | 0.5 | % | 3.2 | |||||||||||||
Decrease in fair value from: | ||||||||||||||||
10% higher losses | $ | 7 | 1 | |||||||||||||
25% higher losses | 7 | 2 | ||||||||||||||
(1) | Excludes securities retained in securitizations issued through GSEs such as FNMA, FHLMC and GNMA because we do not believe the value of these securities would be materially affected by the adverse changes in assumptions noted in the table. These GSE securities and other interests held presented in this table are included in debt and equity interests in our disclosure of our involvements with VIEs shown in the first two tables in this Note. | |
(2) | Subordinated interests include only those bonds whose credit rating was below AAA by a major rating agency at issuance. | |
(3) | Senior interests include only those bonds whose credit rating was AAA by a major rating agency at issuance. |
Mortgage | ||||
repurchase | ||||
(in millions) | reserve | |||
Reserve for mortgage loan repurchase losses held at June 30, 2010 | $ | 1,375 | ||
Credit loss assumption | 42.0 | % | ||
Decrease in reserve from: | ||||
10% higher losses | $ | 139 | ||
25% higher losses | 347 | |||
Repurchase rate assumption | 0.5 | % | ||
Decrease in reserve from: | ||||
10% higher losses | $ | 120 | ||
25% higher losses | 299 | |||
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Net charge-offs | ||||||||||||||||||||||||
(recoveries) (3) | ||||||||||||||||||||||||
Total loans (1) | Delinquent loans (2) (3) | Six months ended | ||||||||||||||||||||||
June 30 | , | Dec. 31 | , | June 30 | , | Dec. 31 | , | June 30 | , | |||||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||||||||||
Commercial | $ | 4 | 78 | — | 65 | — | — | |||||||||||||||||
Real estate mortgage | 218,494 | 221,516 | 15,314 | 7,208 | 143 | 108 | ||||||||||||||||||
Total commercial and commercial real estate | 218,498 | 221,594 | 15,314 | 7,273 | 143 | 108 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 1,111,507 | 1,062,938 | 6,034 | 7,501 | 696 | 1,287 | ||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 2 | 3,292 | — | 76 | — | 54 | ||||||||||||||||||
Other revolving credit and installment | 82 | 5,104 | 6 | 100 | — | 107 | ||||||||||||||||||
Total consumer | 1,111,591 | 1,071,334 | 6,040 | 7,677 | 696 | 1,448 | ||||||||||||||||||
Total off-balance sheet securitized loans | $ | 1,330,089 | 1,292,928 | $ | 21,354 | 14,950 | 839 | 1,556 | ||||||||||||||||
(1) | Represents off-balance sheet loans that have been securitized and includes residential mortgages sold to FNMA, FHLMC and GNMA and securitizations where servicing is our only form of continuing involvement. | |
(2) | Delinquent loans are 90 days or more past due and still accruing interest as well as nonaccrual loans. | |
(3) | Delinquent loans and net charge-offs exclude loans sold to FNMA, FHLMC and GNMA. We continue to service the loans and would only experience a loss if required to repurchase a delinquent loan due to a breach in original representations and warranties associated with our underwriting standards. |
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Carrying value (1) | ||||||||||||||||||||
Total | Third | |||||||||||||||||||
VIE | Consolidated | party | Noncontrolling | Net | ||||||||||||||||
(in millions) | assets | assets (2) | liabilities | interests | assets | |||||||||||||||
June 30, 2010 | ||||||||||||||||||||
Secured borrowings: | ||||||||||||||||||||
Municipal tender option bond securitizations | $ | 9,540 | 7,243 | (6,763 | ) | — | 480 | |||||||||||||
Auto loan securitizations | 211 | 210 | (56 | ) | — | 154 | ||||||||||||||
Commercial real estate loans | 1,316 | 1,316 | (1,275 | ) | — | 41 | ||||||||||||||
Residential mortgage securitizations | 791 | 693 | (480 | ) | — | 213 | ||||||||||||||
Total secured borrowings | 11,858 | 9,462 | (8,574 | ) | — | 888 | ||||||||||||||
Consolidated VIEs: | ||||||||||||||||||||
Nonconforming residential mortgage loan securitizations | 17,211 | 16,400 | (8,229 | ) | — | 8,171 | ||||||||||||||
Multi-seller commercial paper conduit | 4,383 | 4,233 | (4,328 | ) | — | (95 | ) | |||||||||||||
Auto loan securitizations | 1,575 | 1,574 | (1,558 | ) | — | 16 | ||||||||||||||
Structured asset finance | 153 | 153 | (31 | ) | (11 | ) | 111 | |||||||||||||
Investment funds | 2,239 | 2,056 | (609 | ) | (30 | ) | 1,417 | |||||||||||||
Other | 1,583 | 1,580 | (1,172 | ) | (15 | ) | 393 | |||||||||||||
Total consolidated VIEs | 27,144 | 25,996 | (15,927 | ) | (56 | ) | 10,013 | |||||||||||||
Total secured borrowings and consolidated VIEs | $ | 39,002 | 35,458 | (24,501 | ) | (56 | ) | 10,901 | ||||||||||||
December 31, 2009 | ||||||||||||||||||||
Secured borrowings: | ||||||||||||||||||||
Municipal tender option bond securitizations (3) | $ | 9,649 | 7,189 | (6,856 | ) | — | 333 | |||||||||||||
Auto loan securitizations | 274 | 274 | (121 | ) | — | 153 | ||||||||||||||
Commercial real estate loans | 1,309 | 1,309 | (1,269 | ) | — | 40 | ||||||||||||||
Residential mortgage securitizations | 901 | 792 | (552 | ) | — | 240 | ||||||||||||||
Total secured borrowings | 12,133 | 9,564 | (8,798 | ) | — | 766 | ||||||||||||||
Consolidated VIEs: | ||||||||||||||||||||
Structured asset finance | 2,791 | 1,074 | (1,088 | ) | (10 | ) | (24 | ) | ||||||||||||
Investment funds | 2,257 | 2,245 | (271 | ) | (33 | ) | 1,941 | |||||||||||||
Other | 2,697 | 1,981 | (1,148 | ) | (25 | ) | 808 | |||||||||||||
Total consolidated VIEs | 7,745 | 5,300 | (2,507 | ) | (68 | ) | 2,725 | |||||||||||||
Total secured borrowings and consolidated VIEs | $ | 19,878 | 14,864 | (11,305 | ) | (68 | ) | 3,491 | ||||||||||||
(1) | Total assets may differ from consolidated assets due to the different measurement methods used depending on the assets’ classifications. | |
(2) | Amounts disclosed in the consolidated balance sheet presentation are limited to VIE assets that can only be used to settle the liabilities of those VIEs. | |
(3) | Balances have been revised to conform with current period presentation. |
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We have consolidated certain of our nonconforming residential mortgage loan securitizations in accordance with consolidation accounting guidance. We have determined we are the primary beneficiary of these securitizations because we have the power to direct the most significant activities of the entity through our role as primary servicer and also hold variable interests that we have determined to be significant. The nature of our variable interests in these entities may include beneficial interests issued by the VIE, mortgage servicing rights and recourse or repurchase reserve liabilities.
We administer a multi-seller asset-based commercial paper (ABCP) conduit that finances certain client transactions. This conduit is a bankruptcy remote entity that makes loans to, or purchases certificated interests, generally from SPEs, established by our clients (sellers) and which are secured by pools of financial assets. The conduit funds itself through the issuance of highly rated commercial paper to third party investors. The primary source of repayment of the commercial paper is the cash flows from the conduit’s assets or the re-issuance of commercial paper upon maturity. The conduit’s assets are structured with deal-specific credit enhancements generally in the form of overcollateralization provided by the seller, but may also include subordinated interests, cash reserve accounts, third party credit support facilities and excess spread capture. The timely repayment of the commercial paper is further supported by asset-specific liquidity facilities in the form of liquidity asset purchase agreements that we provide. Each facility is equal to 102% of the conduit’s funding commitment to a client. The aggregate amount of liquidity must be equal to or greater than all the commercial paper issued by the conduit. At the discretion of the administrator, we may be required to purchase assets from the conduit at par value plus accrued interest or discount on the related commercial paper, including situations where the conduit is unable to issue commercial paper. Par value may be different from fair value.
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Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Fair value, beginning of period | $ | 15,544 | 12,391 | 16,004 | 14,714 | |||||||||||
Adjustments from adoption of consolidation accounting guidance | — | — | (118 | ) | — | |||||||||||
Acquired from Wachovia (1) | — | — | — | 34 | ||||||||||||
Servicing from securitizations or asset transfers | 943 | 2,081 | 1,997 | 3,528 | ||||||||||||
Net additions | 943 | 2,081 | 1,879 | 3,562 | ||||||||||||
Changes in fair value: | ||||||||||||||||
Due to changes in valuation model inputs or assumptions (2) | (2,661 | ) | 2,316 | (3,438 | ) | (508 | ) | |||||||||
Other changes in fair value (3) | (575 | ) | (1,098 | ) | (1,194 | ) | (2,078 | ) | ||||||||
Total changes in fair value | (3,236 | ) | 1,218 | (4,632 | ) | (2,586 | ) | |||||||||
Fair value, end of period | $ | 13,251 | 15,690 | 13,251 | 15,690 | |||||||||||
(1) | Reflects 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 June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Balance, beginning of period | $ | 1,069 | 1,257 | 1,119 | 1,446 | |||||||||||
Adjustments from adoption of consolidation accounting guidance | — | — | (5 | ) | — | |||||||||||
Purchases (1) | 7 | 6 | 8 | 10 | ||||||||||||
Acquired from Wachovia (2) | — | (8 | ) | — | (135 | ) | ||||||||||
Servicing from securitizations or asset transfers (1) | 17 | 18 | 28 | 22 | ||||||||||||
Amortization | (56 | ) | (68 | ) | (113 | ) | (138 | ) | ||||||||
Balance, end of period (3) | $ | 1,037 | 1,205 | 1,037 | 1,205 | |||||||||||
Fair value of amortized MSRs: | ||||||||||||||||
Beginning of period | $ | 1,283 | 1,392 | 1,261 | 1,555 | |||||||||||
End of period | 1,307 | 1,311 | 1,307 | 1,311 | ||||||||||||
(1) | Based on June 30, 2010, assumptions, the weighted-average amortization period for MSRs added during the second quarter and six months ended June 30, 2010, was approximately 16.5 and 17.4 years, respectively. | |
(2) | Reflects refinements to initial purchase accounting adjustments. | |
(3) | There was no valuation allowance recorded for the periods presented. Commercial MSRs are evaluated for impairment purposes by the following asset classes: agency and non-agency commercial mortgage-backed securities (MBS), and loans. |
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June 30 | , | Dec. 31 | , | |||||
(in billions) | 2010 | 2009 | ||||||
Residential mortgage servicing: | ||||||||
Serviced for others | $ | 1,437 | 1,422 | |||||
Owned loans serviced | 365 | 364 | ||||||
Subservicing | 10 | 10 | ||||||
Total residential servicing | 1,812 | 1,796 | ||||||
Commercial mortgage servicing: | ||||||||
Serviced for others | 441 | 454 | ||||||
Owned loans serviced | 100 | 105 | ||||||
Subservicing | 10 | 10 | ||||||
Total commercial servicing | 551 | 569 | ||||||
Total managed servicing portfolio | $ | 2,363 | 2,365 | |||||
Total serviced for others | $ | 1,878 | 1,876 | |||||
Ratio of MSRs to related loans serviced for others | 0.76 | % | 0.91 | |||||
Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Servicing income, net: | ||||||||||||||||
Servicing fees | $ | 1,223 | 951 | 2,276 | 2,032 | |||||||||||
Changes in fair value of residential MSRs: | ||||||||||||||||
Due to changes in valuation model inputs or assumptions (1) | (2,661 | ) | 2,316 | (3,438 | ) | (508 | ) | |||||||||
Other changes in fair value (2) | (575 | ) | (1,098 | ) | (1,194 | ) | (2,078 | ) | ||||||||
Total changes in fair value of residential MSRs | (3,236 | ) | 1,218 | (4,632 | ) | (2,586 | ) | |||||||||
Amortization | (56 | ) | (68 | ) | (113 | ) | (138 | ) | ||||||||
Net derivative gains (losses) from economic hedges (3) | 3,287 | (1,285 | ) | 5,053 | 2,414 | |||||||||||
Total servicing income, net | 1,218 | 816 | 2,584 | 1,722 | ||||||||||||
Net gains on mortgage loan origination/sales activities | 793 | 2,230 | 1,897 | 3,828 | ||||||||||||
Total mortgage banking noninterest income | $ | 2,011 | 3,046 | 4,481 | 5,550 | |||||||||||
Market-related valuation changes to MSRs, net of hedge results (1)+(3) | $ | 626 | 1,031 | 1,615 | 1,906 | |||||||||||
(1) | Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates. | |
(2) | Represents changes due to collection/realization of expected cash flows over time. | |
(3) | Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs. See Note 11 — Free-Standing Derivatives in this Report for additional discussion and detail. |
Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Contractually specified servicing fees | $ | 1,154 | 1,109 | 2,261 | 2,192 | |||||||||||
Late charges | 88 | 79 | 178 | 166 | ||||||||||||
Ancillary fees | 111 | 75 | 217 | 148 | ||||||||||||
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June 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||||||||
carrying | Accumulated | carrying | carrying | Accumulated | carrying | |||||||||||||||||||
(in millions) | value | amortization | value | value | amortization | value | ||||||||||||||||||
Amortized intangible assets: | ||||||||||||||||||||||||
MSRs (1) | $ | 1,633 | 596 | 1,037 | 1,606 | 487 | 1,119 | |||||||||||||||||
Core deposit intangibles | 15,135 | 5,296 | 9,839 | 15,140 | 4,366 | 10,774 | ||||||||||||||||||
Customer relationship and other intangibles | 3,077 | 1,063 | 2,014 | 3,050 | 896 | 2,154 | ||||||||||||||||||
Total amortized intangible assets | $ | 19,845 | 6,955 | 12,890 | 19,796 | 5,749 | 14,047 | |||||||||||||||||
MSRs (carried at fair value) (1) | $ | 13,251 | — | 13,251 | 16,004 | — | 16,004 | |||||||||||||||||
Goodwill | 24,820 | — | 24,820 | 24,812 | — | 24,812 | ||||||||||||||||||
Trademark | 14 | — | 14 | 14 | — | 14 | ||||||||||||||||||
(1) | See Note 8 in this Report for additional information on MSRs. |
Customer | ||||||||||||||||
Amortized | Core | relationship | ||||||||||||||
commercial | deposit | and other | ||||||||||||||
(in millions) | MSRs | intangibles | intangibles (1) | Total | ||||||||||||
Six months ended June 30, 2010 (actual) | $ | 113 | 937 | 163 | 1,213 | |||||||||||
Estimate for year ending December 31, | ||||||||||||||||
2010 | $ | 223 | 1,869 | 330 | 2,422 | |||||||||||
2011 | 205 | 1,593 | 287 | 2,085 | ||||||||||||
2012 | 167 | 1,396 | 270 | 1,833 | ||||||||||||
2013 | 130 | 1,241 | 254 | 1,625 | ||||||||||||
2014 | 113 | 1,113 | 234 | 1,460 | ||||||||||||
2015 | 105 | 1,022 | 212 | 1,339 | ||||||||||||
(1) | Includes amortization of lease intangibles reported in occupancy expense of $5 million for the first six months of 2010, and estimated amortization of $9 million, $9 million, $8 million, $8 million, $5 million, and $4 million for 2010, 2011, 2012, 2013, 2014 and 2015, respectively. |
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Wealth, | ||||||||||||||||
Community | Wholesale | Brokerage and | Consolidated | |||||||||||||
(in millions) | Banking | Banking | Retirement | Company | ||||||||||||
Balance, December 31, 2008 | $ | 16,810 | 5,449 | 368 | 22,627 | |||||||||||
Goodwill from business combinations | 1,240 | 750 | — | 1,990 | ||||||||||||
Foreign currency translation adjustments | 2 | — | — | 2 | ||||||||||||
Balance, June 30, 2009 | $ | 18,052 | 6,199 | 368 | 24,619 | |||||||||||
Balance, December 31, 2009 | $ | 18,160 | 6,279 | 373 | 24,812 | |||||||||||
Goodwill from business combinations | — | 8 | — | 8 | ||||||||||||
Balance, June 30, 2010 | $ | 18,160 | 6,287 | 373 | 24,820 | |||||||||||
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June 30, 2010 | Dec. 31, 2009 | |||||||||||||||||||||||
Maximum | Non- | Maximum | Non- | |||||||||||||||||||||
Carrying | exposure | investment | Carrying | exposure | investment | |||||||||||||||||||
(in millions) | value | to loss | grade | value | to loss | grade | ||||||||||||||||||
Standby letters of credit | $ | 148 | 46,701 | 20,251 | 148 | 49,997 | 21,112 | |||||||||||||||||
Securities lending and other indemnifications | 49 | 11,398 | 798 | 51 | 20,002 | 2,512 | ||||||||||||||||||
Liquidity agreements (1) | — | 62 | — | 66 | 7,744 | — | ||||||||||||||||||
Written put options (1)(2) | 1,205 | 8,353 | 4,095 | 803 | 8,392 | 3,674 | ||||||||||||||||||
Loans sold with recourse | 116 | 5,202 | 3,357 | 96 | 5,049 | 2,400 | ||||||||||||||||||
Residual value guarantees | 8 | 197 | — | 8 | 197 | — | ||||||||||||||||||
Contingent consideration | 15 | 101 | 98 | 11 | 145 | 102 | ||||||||||||||||||
Other guarantees | — | 99 | 2 | — | 55 | 2 | ||||||||||||||||||
Total guarantees | $ | 1,541 | 72,113 | 28,601 | 1,183 | 91,581 | 29,802 | |||||||||||||||||
(1) | Certain of these agreements are related to off-balance sheet entities and, accordingly, are also disclosed in Note 7 in this Report. | |
(2) | Written put options, which are in the form of derivatives, are also included in the derivative disclosures in Note 11 in this Report. |
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June 30, 2010 | Dec. 31, 2009 | |||||||||||||||||||||||
Notional or | Fair value | Notional or | Fair value | |||||||||||||||||||||
contractual | Asset | Liability | contractual | Asset | Liability | |||||||||||||||||||
(in millions) | amount | derivatives | derivatives | amount | derivatives | derivatives | ||||||||||||||||||
Qualifying hedge contracts(1) | ||||||||||||||||||||||||
Interest rate contracts (2) | $ | 111,021 | 8,401 | 1,967 | 119,966 | 6,425 | 1,302 | |||||||||||||||||
Foreign exchange contracts | 28,173 | 813 | 1,290 | 30,212 | 1,553 | 811 | ||||||||||||||||||
Total derivatives designated as qualifying hedging instruments | 9,214 | 3,257 | 7,978 | 2,113 | ||||||||||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||||||||||
Free-standing derivatives (economic hedges) (1): | ||||||||||||||||||||||||
Interest rate contracts (3) | 497,218 | 6,153 | 5,400 | 633,734 | 4,441 | 4,873 | ||||||||||||||||||
Equity contracts | — | — | — | 300 | — | 2 | ||||||||||||||||||
Foreign exchange contracts | 3,788 | 23 | 23 | 7,019 | 233 | 29 | ||||||||||||||||||
Credit contracts — protection purchased | 490 | 133 | — | 577 | 261 | — | ||||||||||||||||||
Other derivatives | 4,516 | — | 104 | 4,583 | — | 40 | ||||||||||||||||||
Subtotal | 6,309 | 5,527 | 4,935 | 4,944 | ||||||||||||||||||||
Customer accommodation, trading and other free-standing derivatives (4): | ||||||||||||||||||||||||
Interest rate contracts | 2,649,776 | 66,789 | 66,951 | 2,741,119 | 54,873 | 54,033 | ||||||||||||||||||
Commodity contracts | 84,307 | 3,669 | 3,563 | 92,182 | 5,400 | 5,182 | ||||||||||||||||||
Equity contracts | 70,340 | 2,906 | 2,891 | 71,572 | 2,459 | 3,067 | ||||||||||||||||||
Foreign exchange contracts | 140,803 | 3,802 | 3,363 | 142,012 | 3,084 | 2,737 | ||||||||||||||||||
Credit contracts — protection sold | 59,743 | 524 | 7,838 | 76,693 | 979 | 9,577 | ||||||||||||||||||
Credit contracts — protection purchased | 61,700 | 6,764 | 530 | 81,357 | 9,349 | 1,089 | ||||||||||||||||||
Other derivatives | 279 | 9 | 22 | 2,314 | 427 | 171 | ||||||||||||||||||
Subtotal | 84,463 | 85,158 | 76,571 | 75,856 | ||||||||||||||||||||
Total derivatives not designated as hedging instruments | 90,772 | 90,685 | 81,506 | 80,800 | ||||||||||||||||||||
Total derivatives before netting | 99,986 | 93,942 | 89,484 | 82,913 | ||||||||||||||||||||
Netting (5) | (74,396 | ) | (82,310 | ) | (65,926 | ) | (73,303 | ) | ||||||||||||||||
Total | $ | 25,590 | 11,632 | 23,558 | 9,610 | |||||||||||||||||||
(1) | Represents asset/liability management hedges, which are included in other assets or other liabilities. | |
(2) | Notional amounts presented exclude $21.0 billion at June 30, 2010, and $20.9 billion at December 31, 2009, of basis swaps that are combined with receive fixed-rate / pay floating-rate swaps and designated as one hedging instrument. | |
(3) | Includes free-standing derivatives (economic hedges) used to hedge the risk of changes in the fair value of residential MSRs, MHFS, interest rate lock commitments and other interests held. | |
(4) | Customer accommodation, trading and other free-standing derivatives are included in trading assets or other liabilities. | |
(5) | Represents netting of derivative asset and liability balances, and related cash collateral, with the same counterparty subject to master netting arrangements under the accounting guidance covering the offsetting of amounts related to certain contracts. The amount of cash collateral netted against derivative assets and liabilities was $5.6 billion and $13.6 billion, respectively, at June 30, 2010, and $5.3 billion and $14.1 billion, respectively, at December 31, 2009. |
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Interest rate | ||||||||||||||||||||||||
contracts hedging: | Foreign exchange contracts hedging: | Total net | ||||||||||||||||||||||
Securities | Securities | gains (losses) | ||||||||||||||||||||||
available | Long-term | available | Short-term | Long-term | on fair value | |||||||||||||||||||
(in millions) | for sale | debt | for sale | borrowings | debt | hedges | ||||||||||||||||||
Quarter ended June 30, 2010 | ||||||||||||||||||||||||
Gains (losses) recorded in net interest income | $ | (94 | ) | 527 | (1 | ) | — | 87 | 519 | |||||||||||||||
Gains (losses) recorded in noninterest income | ||||||||||||||||||||||||
Recognized on derivatives | $ | (642 | ) | 1,744 | 70 | — | (1,769 | ) | (597 | ) | ||||||||||||||
Recognized on hedged item | 650 | (1,626 | ) | (70 | ) | — | 1,778 | 732 | ||||||||||||||||
Recognized on fair value hedges (ineffective portion) (1) | $ | 8 | 118 | — | — | 9 | 135 | |||||||||||||||||
Quarter ended June 30, 2009 | ||||||||||||||||||||||||
Gains (losses) recorded in net interest income | $ | (71 | ) | 383 | (18 | ) | 12 | 78 | 384 | |||||||||||||||
Gains (losses) recorded in noninterest income | ||||||||||||||||||||||||
Recognized on derivatives | $ | 712 | (2,680 | ) | (2 | ) | 1 | 1,204 | (765 | ) | ||||||||||||||
Recognized on hedged item | (703 | ) | 2,585 | 2 | (1 | ) | (1,281 | ) | 602 | |||||||||||||||
Recognized on fair value hedges (ineffective portion) (1) | $ | 9 | (95 | ) | — | — | (77 | ) | (163 | ) | ||||||||||||||
Six months ended June 30, 2010 | ||||||||||||||||||||||||
Gains (losses) recorded in net interest income | $ | (188 | ) | 1,058 | (2 | ) | — | 184 | 1,052 | |||||||||||||||
Gains (losses) recorded in noninterest income | ||||||||||||||||||||||||
Recognized on derivatives | $ | (768 | ) | 2,276 | 189 | — | (2,905 | ) | (1,208 | ) | ||||||||||||||
Recognized on hedged item | 785 | (2,143 | ) | (189 | ) | — | 2,932 | 1,385 | ||||||||||||||||
Recognized on fair value hedges (ineffective portion) (1) | $ | 17 | 133 | — | — | 27 | 177 | |||||||||||||||||
Six months ended June 30, 2009 | ||||||||||||||||||||||||
Gains (losses) recorded in net interest income | $ | (112 | ) | 647 | (46 | ) | 28 | 154 | 671 | |||||||||||||||
Gains (losses) recorded in noninterest income | ||||||||||||||||||||||||
Recognized on derivatives | $ | 794 | (3,469 | ) | — | — | 942 | (1,733 | ) | |||||||||||||||
Recognized on hedged item | (796 | ) | 3,383 | — | — | (951 | ) | 1,636 | ||||||||||||||||
Recognized on fair value hedges (ineffective portion) (1) | $ | (2 | ) | (86 | ) | — | — | (9 | ) | (97 | ) | |||||||||||||
(1) | Second quarter and six months ended June 30, 2010, included nil and $1 million, respectively, and second quarter and six months ended June 30, 2009, included $(7) million for both periods, of gains (losses) on forward derivatives hedging foreign currency securities available for sale, short-term borrowings and long-term debt, representing the portion of derivatives gains (losses) excluded from the assessment of hedge effectiveness (time value). |
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Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
Gains (losses) (after tax) recognized in OCI on derivatives (effective portion) | $ | 190 | (196 | ) | 349 | (128 | ) | |||||||||||||
Gains (pre tax) reclassified from cumulative | ||||||||||||||||||||
OCI into net interest income (effective portion) | 186 | 144 | 328 | 279 | ||||||||||||||||
Gains (losses) (pre tax) recognized in noninterest income on derivatives (ineffective portion) (1) | (1 | ) | 5 | 6 | 11 | |||||||||||||||
(1) | None of the change in value of the derivatives was excluded from the assessment of hedge effectiveness. |
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Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Gains (losses) recognized on free-standing derivatives (economic hedges): | ||||||||||||||||
Interest rate contracts (1) | ||||||||||||||||
Recognized in noninterest income: | ||||||||||||||||
Mortgage banking | $ | 757 | 692 | 1,425 | 3,056 | |||||||||||
Other | (30 | ) | 4 | (36 | ) | (1 | ) | |||||||||
Foreign exchange contracts | 69 | (98 | ) | 145 | (18 | ) | ||||||||||
Equity contracts | — | — | — | 2 | ||||||||||||
Credit contracts | (36 | ) | (56 | ) | (125 | ) | (114 | ) | ||||||||
Subtotal | 760 | 542 | 1,409 | 2,925 | ||||||||||||
Gains (losses) recognized on customer accommodation, trading and other free-standing derivatives: | ||||||||||||||||
Interest rate contracts (2) | ||||||||||||||||
Recognized in noninterest income: | ||||||||||||||||
Mortgage banking | 1,644 | (616 | ) | 2,547 | 397 | |||||||||||
Other | (154 | ) | 499 | 165 | 812 | |||||||||||
Commodity contracts | 13 | (27 | ) | 33 | (39 | ) | ||||||||||
Equity contracts | 495 | (58 | ) | 449 | (181 | ) | ||||||||||
Foreign exchange contracts | 148 | 145 | 266 | 258 | ||||||||||||
Credit contracts | (58 | ) | (352 | ) | (488 | ) | (98 | ) | ||||||||
Other | (12 | ) | (13 | ) | (19 | ) | (176 | ) | ||||||||
Subtotal | 2,076 | (422 | ) | 2,953 | 973 | |||||||||||
Net gains recognized related to derivatives not designated as hedging instruments | $ | 2,836 | 120 | 4,362 | 3,898 | |||||||||||
(1) | Predominantly mortgage banking noninterest income including gains (losses) on the derivatives used as economic hedges of MSRs, interest rate lock commitments, loans held for sale and mortgages held for sale. | |
(2) | Predominantly mortgage banking noninterest income including gains (losses) on interest rate lock commitments. |
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Notional amount | ||||||||||||||||||||||||||||
Protection | Protection | |||||||||||||||||||||||||||
sold— | purchased | Net | ||||||||||||||||||||||||||
non- | with | protection | Other | |||||||||||||||||||||||||
Fair value | Protection | investment | identical | sold | protection | Range of | ||||||||||||||||||||||
(in millions) | liability | sold (A) | grade | underlyings (B) | (A) - (B) | purchased | maturities | |||||||||||||||||||||
June 30, 2010 | ||||||||||||||||||||||||||||
Credit default swaps on: | ||||||||||||||||||||||||||||
Corporate bonds | $ | 1,759 | 40,279 | 20,552 | 32,465 | 7,814 | 8,414 | 2010-2020 | ||||||||||||||||||||
Structured products | 4,556 | 6,238 | 5,478 | 4,932 | 1,306 | 3,012 | 2016-2056 | |||||||||||||||||||||
Credit protection on: | ||||||||||||||||||||||||||||
Default swap index | 39 | 2,655 | 1,234 | 2,655 | — | 486 | 2010-2017 | |||||||||||||||||||||
Commercial mortgage- backed securities index | 1,190 | 2,789 | 749 | 2,348 | 441 | 128 | 2049-2052 | |||||||||||||||||||||
Asset-backed securities index | 275 | 361 | 296 | 315 | 46 | 95 | 2037-2046 | |||||||||||||||||||||
Loan deliverable credit default swaps | 7 | 489 | 479 | 396 | 93 | 253 | 2010-2014 | |||||||||||||||||||||
Other | 12 | 6,932 | 6,389 | 39 | 6,893 | 4,967 | 2010-2056 | |||||||||||||||||||||
Total credit derivatives | $ | 7,838 | 59,743 | 35,177 | 43,150 | 16,593 | 17,355 | |||||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||||||
Credit default swaps on: | ||||||||||||||||||||||||||||
Corporate bonds | $ | 2,419 | 55,511 | 23,815 | 44,159 | 11,352 | 12,634 | 2010-2018 | ||||||||||||||||||||
Structured products | 4,498 | 6,627 | 5,084 | 4,999 | 1,628 | 3,018 | 2014-2056 | |||||||||||||||||||||
Credit protection on: | ||||||||||||||||||||||||||||
Default swap index | 23 | 6,611 | 2,765 | 4,202 | 2,409 | 2,510 | 2010-2017 | |||||||||||||||||||||
Commercial mortgage- backed securities index | 1,987 | 5,188 | 453 | 4,749 | 439 | 189 | 2049-2052 | |||||||||||||||||||||
Asset-backed securities index | 637 | 830 | 660 | 696 | 134 | 189 | 2037-2046 | |||||||||||||||||||||
Loan deliverable credit default swaps | 12 | 510 | 494 | 423 | 87 | 287 | 2010-2014 | |||||||||||||||||||||
Other | 1 | 1,416 | 809 | 32 | 1,384 | 100 | 2010-2020 | |||||||||||||||||||||
Total credit derivatives | $ | 9,577 | 76,693 | 34,080 | 59,260 | 17,433 | 18,927 | |||||||||||||||||||||
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• | Level 1 — Valuation is based upon quoted prices for identical instruments traded in active markets. | |
• | Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. | |
• | Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
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Independent brokers | Third party pricing services | |||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
June 30, 2010 | ||||||||||||||||||||||||
Trading assets (excluding derivatives) | $ | — | 1,909 | — | 17 | 1,985 | — | |||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||
Securities of U.S. treasury and federal agencies | — | — | — | 808 | 875 | — | ||||||||||||||||||
Securities of U.S. states and political subdivisions | — | 14 | — | — | 13,658 | — | ||||||||||||||||||
Mortgage-backed securities | — | 3 | 37 | — | 84,916 | 57 | ||||||||||||||||||
Other debt securities | — | 194 | 3,249 | — | 11,910 | 142 | ||||||||||||||||||
Total debt securities | — | 211 | 3,286 | 808 | 111,359 | 199 | ||||||||||||||||||
Total marketable equity securities | 173 | 21 | — | 1,045 | 728 | — | ||||||||||||||||||
Total securities available for sale | 173 | 232 | 3,286 | 1,853 | 112,087 | 199 | ||||||||||||||||||
Derivatives (trading and other assets) | — | 18 | 44 | — | 1,423 | 10 | ||||||||||||||||||
Loans held for sale | — | — | — | — | 1 | — | ||||||||||||||||||
Derivatives (liabilities) | — | 13 | 54 | — | 1,552 | 1 | ||||||||||||||||||
Other liabilities | — | 10 | — | — | 348 | — | ||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||
Trading assets (excluding derivatives) | $ | — | 4,208 | — | 30 | 1,712 | 81 | |||||||||||||||||
Securities available for sale | 85 | 1,870 | 548 | 1,467 | 120,688 | 1,864 | ||||||||||||||||||
Loans held for sale | — | — | — | — | 2 | — | ||||||||||||||||||
Derivatives (trading and other assets) | — | 8 | 42 | — | 2,926 | 9 | ||||||||||||||||||
Derivatives (liabilities) | — | — | 70 | — | 2,949 | 4 | ||||||||||||||||||
Other liabilities | — | — | — | 10 | 3,916 | 26 | ||||||||||||||||||
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The table below presents the balances of assets and liabilities measured at fair value on a recurring basis at June 30, 2010.
(in millions) | Level 1 | Level 2 | Level 3 | Netting | (1) | Total | ||||||||||||||
June 30, 2010 | ||||||||||||||||||||
Trading assets (excluding derivatives) | ||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 2,221 | 3,551 | — | — | 5,772 | ||||||||||||||
Securities of U.S. states and political subdivisions | — | 1,338 | 12 | — | 1,350 | |||||||||||||||
Collateralized debt obligations | — | 32 | 1,767 | — | 1,799 | |||||||||||||||
Corporate debt securities | — | 8,896 | 165 | — | 9,061 | |||||||||||||||
Equity securities | 1,430 | 677 | 52 | — | 2,159 | |||||||||||||||
Other trading securities | — | 5,228 | 330 | — | 5,558 | |||||||||||||||
Total trading securities | 3,651 | 19,722 | 2,326 | — | 25,699 | |||||||||||||||
Other trading assets | 728 | 108 | 149 | — | 985 | |||||||||||||||
Total trading assets (excluding derivatives) | 4,379 | 19,830 | 2,475 | — | 26,684 | |||||||||||||||
Securities of U.S. Treasury and federal agencies | 808 | 877 | — | — | 1,685 | |||||||||||||||
Securities of U.S. states and political subdivisions | — | 13,688 | 2,736 | — | 16,424 | |||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Federal agencies | — | 71,395 | — | — | 71,395 | |||||||||||||||
Residential | — | 20,793 | 353 | — | 21,146 | |||||||||||||||
Commercial | — | 11,633 | 897 | — | 12,530 | |||||||||||||||
Total mortgage-backed securities | — | 103,821 | 1,250 | — | 105,071 | |||||||||||||||
Corporate debt securities | — | 9,563 | 380 | — | 9,943 | |||||||||||||||
Collateralized debt obligations | — | — | 4,031 | — | 4,031 | |||||||||||||||
Asset-backed securities: | ||||||||||||||||||||
Auto loans and leases | — | 293 | 7,104 | — | 7,397 | |||||||||||||||
Home equity loans | — | 941 | 194 | — | 1,135 | |||||||||||||||
Other asset-backed securities | — | 3,050 | 3,341 | — | 6,391 | |||||||||||||||
Total asset-backed securities | — | 4,284 | 10,639 | — | 14,923 | |||||||||||||||
Other debt securities | — | 599 | 88 | — | 687 | |||||||||||||||
Total debt securities | 808 | 132,832 | 19,124 | — | 152,764 | |||||||||||||||
Marketable equity securities: | ||||||||||||||||||||
Perpetual preferred securities(2) | 666 | 791 | 2,629 | — | 4,086 | |||||||||||||||
Other marketable equity securities | 957 | 104 | 16 | — | 1,077 | |||||||||||||||
Total marketable equity securities | 1,623 | 895 | 2,645 | — | 5,163 | |||||||||||||||
Total securities available for sale | 2,431 | 133,727 | 21,769 | — | 157,927 | |||||||||||||||
Mortgages held for sale | — | 31,617 | 3,260 | — | 34,877 | |||||||||||||||
Loans held for sale | — | 238 | — | — | 238 | |||||||||||||||
Loans | — | — | 367 | — | 367 | |||||||||||||||
Mortgage servicing rights (residential) | — | — | 13,251 | — | 13,251 | |||||||||||||||
Derivative assets: | ||||||||||||||||||||
Interest rate contracts | 1,490 | 78,745 | 1,108 | — | 81,343 | |||||||||||||||
Commodity contracts | — | 3,669 | — | — | 3,669 | |||||||||||||||
Equity contracts | 252 | 1,996 | 658 | — | 2,906 | |||||||||||||||
Foreign exchange contracts | 110 | 4,523 | 5 | — | 4,638 | |||||||||||||||
Credit contracts | — | 3,498 | 3,923 | — | 7,421 | |||||||||||||||
Other derivative contracts | — | 8 | 1 | — | 9 | |||||||||||||||
Netting | — | — | — | (74,396 | ) | (74,396 | ) | |||||||||||||
Total derivative assets(3) | 1,852 | 92,439 | 5,695 | (74,396 | ) | 25,590 | ||||||||||||||
Other assets | 432 | 690 | 360 | — | 1,482 | |||||||||||||||
Total assets recorded at fair value | $ | 9,094 | 278,541 | 47,177 | (74,396 | ) | 260,416 | |||||||||||||
Derivative liabilities: | ||||||||||||||||||||
Interest rate contracts | $ | (1,717 | ) | (72,136 | ) | (465 | ) | — | (74,318 | ) | ||||||||||
Commodity contracts | — | (3,563 | ) | — | — | (3,563 | ) | |||||||||||||
Equity contracts | (174 | ) | (1,827 | ) | (890 | ) | — | (2,891 | ) | |||||||||||
Foreign exchange contracts | (109 | ) | (4,560 | ) | (7 | ) | — | (4,676 | ) | |||||||||||
Credit contracts | — | (3,452 | ) | (4,916 | ) | — | (8,368 | ) | ||||||||||||
Other derivative contracts | — | (22 | ) | (104 | ) | — | (126 | ) | ||||||||||||
Netting | — | — | — | 82,310 | 82,310 | |||||||||||||||
Total derivative liabilities(4) | (2,000 | ) | (85,560 | ) | (6,382 | ) | 82,310 | (11,632 | ) | |||||||||||
Short sale liabilities | ||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | (1,957 | ) | (784 | ) | — | — | (2,741 | ) | ||||||||||||
Corporate debt securities | — | (3,477 | ) | (1 | ) | — | (3,478 | ) | ||||||||||||
Equity securities | (1,888 | ) | (116 | ) | — | — | (2,004 | ) | ||||||||||||
Other securities | — | (82 | ) | (3 | ) | — | (85 | ) | ||||||||||||
Total short sale liabilities | (3,845 | ) | (4,459 | ) | (4 | ) | — | (8,308 | ) | |||||||||||
Other liabilities | — | (39 | ) | (1,806 | ) | — | (1,845 | ) | ||||||||||||
Total liabilities recorded at fair value | $ | (5,845 | ) | (90,058 | ) | (8,192 | ) | 82,310 | (21,785 | ) | ||||||||||
(1) | Derivatives are reported net of cash collateral received and paid and, to the extent that the criteria of the accounting guidance covering the offsetting of amounts related to certain contracts are met, positions with the same counterparty are netted as part of a legally enforceable master netting agreement. | |
(2) | Perpetual preferred securities are primarily ARS. See Note 7 for additional information. | |
(3) | Derivative assets include contracts qualifying for hedge accounting, economic hedges, and derivatives included in trading assets. | |
(4) | Derivative liabilities include contracts qualifying for hedge accounting, economic hedges, and derivatives included in trading liabilities. |
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(in millions) | Level 1 | Level 2 | Level 3 | Netting | (1) | Total | ||||||||||||||
December 31, 2009 | ||||||||||||||||||||
Trading assets (excluding derivatives) (2) | $ | 2,386 | 20,497 | 2,311 | — | 25,194 | ||||||||||||||
Derivatives (trading assets) | 340 | 70,938 | 5,682 | (59,115 | ) | 17,845 | ||||||||||||||
Securities of U.S. Treasury and federal agencies | 1,094 | 1,186 | — | — | 2,280 | |||||||||||||||
Securities of U.S. states and political subdivisions | 4 | 12,708 | 818 | — | 13,530 | |||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Federal agencies | — | 82,818 | — | — | 82,818 | |||||||||||||||
Residential | — | 27,506 | 1,084 | — | 28,590 | |||||||||||||||
Commercial | — | 9,162 | 1,799 | — | 10,961 | |||||||||||||||
Total mortgage-backed securities | — | 119,486 | 2,883 | — | 122,369 | |||||||||||||||
Corporate debt securities | — | 8,968 | 367 | — | 9,335 | |||||||||||||||
Collateralized debt obligations | — | — | 3,725 | — | 3,725 | |||||||||||||||
Other | — | 3,292 | 12,587 | — | 15,879 | |||||||||||||||
Total debt securities | 1,098 | 145,640 | 20,380 | — | 167,118 | |||||||||||||||
Marketable equity securities: | ||||||||||||||||||||
Perpetual preferred securities | 736 | 834 | 2,305 | — | 3,875 | |||||||||||||||
Other marketable equity securities | 1,279 | 350 | 88 | — | 1,717 | |||||||||||||||
Total marketable equity securities | 2,015 | 1,184 | 2,393 | — | 5,592 | |||||||||||||||
Total securities available for sale | 3,113 | 146,824 | 22,773 | — | 172,710 | |||||||||||||||
Mortgages held for sale | — | 33,439 | 3,523 | — | 36,962 | |||||||||||||||
Loans held for sale | — | 149 | — | — | 149 | |||||||||||||||
Mortgage servicing rights (residential) | — | — | 16,004 | — | 16,004 | |||||||||||||||
Other assets (3) | 1,932 | 11,720 | 1,690 | (6,812 | ) | 8,530 | ||||||||||||||
Total assets recorded at fair value | $ | 7,771 | 283,567 | 51,983 | (65,927 | ) | 277,394 | |||||||||||||
Other liabilities (4) | $ | (6,527 | ) | (81,613 | ) | (7,942 | ) | 73,299 | (22,783 | ) | ||||||||||
(1) | Derivatives are reported net of cash collateral received and paid and, to the extent that the criteria of the accounting guidance covering the offsetting of amounts related to certain contracts are met, positions with the same counterparty are netted as part of a legally enforceable master netting agreement. | |
(2) | Includes trading securities of $24.0 billion. | |
(3) | Derivative assets other than trading and principal investments are included in this category. | |
(4) | Derivative liabilities are included in this category. |
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Net unrealized | ||||||||||||||||||||||||||||||||
Total net gains | Purchases | , | gains (losses) | |||||||||||||||||||||||||||||
(losses) included in | sales | , | included in net | |||||||||||||||||||||||||||||
Other | issuances | income related | ||||||||||||||||||||||||||||||
Balance | , | compre- | and | Transfers | Transfers | Balance | , | to assets and | ||||||||||||||||||||||||
beginning | Net | hensive | settlements | , | into | out of | end | liabilities held | ||||||||||||||||||||||||
(in millions) | of period | income | income | net | Level 3 | (1) | Level 3 | (1) | of period | at period end | (2) | |||||||||||||||||||||
Quarter ended June 30, 2010 | ||||||||||||||||||||||||||||||||
Trading assets (excluding derivatives): | ||||||||||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | $ | 12 | 5 | — | (5 | ) | — | — | 12 | 6 | ||||||||||||||||||||||
Collateralized debt obligations | 1,889 | 31 | — | (153 | ) | — | — | 1,767 | 2 | |||||||||||||||||||||||
Corporate bonds | 276 | 6 | — | 22 | — | (139 | ) | 165 | 22 | |||||||||||||||||||||||
Equity securities | 67 | 1 | — | (16 | ) | — | — | 52 | — | |||||||||||||||||||||||
Other trading securities | 390 | 20 | — | (80 | ) | — | — | 330 | 4 | |||||||||||||||||||||||
Total trading securities | 2,634 | 63 | — | (232 | ) | — | (139 | ) | 2,326 | 34 | ||||||||||||||||||||||
Other trading assets | 174 | (21 | ) | — | (4 | ) | — | — | 149 | 6 | ||||||||||||||||||||||
Total trading assets (excluding derivatives) | 2,808 | 42 | — | (236 | ) | — | (139 | ) | 2,475 | 40 | (3) | |||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | 2,871 | 3 | 32 | (170 | ) | — | — | 2,736 | 4 | |||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||
Residential | 406 | — | (22 | ) | 26 | 82 | (139 | ) | 353 | — | ||||||||||||||||||||||
Commercial | 503 | (17 | ) | 368 | (8 | ) | 128 | (77 | ) | 897 | — | |||||||||||||||||||||
Total mortgage-backed securities | 909 | (17 | ) | 346 | 18 | 210 | (216 | ) | 1,250 | — | ||||||||||||||||||||||
Corporate debt securities | 503 | 3 | (2 | ) | (44 | ) | 28 | (108 | ) | 380 | — | |||||||||||||||||||||
Collateralized debt obligations | 3,851 | 40 | (114 | ) | 254 | — | — | 4,031 | (5 | ) | ||||||||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||||||||||
Auto loans and leases | 7,587 | — | (56 | ) | (428 | ) | 1 | — | 7,104 | — | ||||||||||||||||||||||
Home equity loans | 107 | 1 | 5 | (1 | ) | 98 | (16 | ) | 194 | (2 | ) | |||||||||||||||||||||
Other asset-backed securities | 2,190 | (6 | ) | (39 | ) | 1,540 | — | (344 | ) | 3,341 | (1 | ) | ||||||||||||||||||||
Total asset-backed securities | 9,884 | (5 | ) | (90 | ) | 1,111 | 99 | (360 | ) | 10,639 | (3 | ) | ||||||||||||||||||||
Other debt securities | 79 | — | 2 | 7 | — | — | 88 | — | ||||||||||||||||||||||||
Total debt securities | 18,097 | 24 | 174 | 1,176 | 337 | (684 | ) | 19,124 | (4 | ) | ||||||||||||||||||||||
Marketable equity securities: | ||||||||||||||||||||||||||||||||
Perpetual preferred securities | 2,967 | 58 | (14 | ) | (381 | ) | — | (1 | ) | 2,629 | — | |||||||||||||||||||||
Other marketable equity securities | 12 | — | — | 15 | — | (11 | ) | 16 | — | |||||||||||||||||||||||
Total marketable equity securities | 2,979 | 58 | (14 | ) | (366 | ) | — | (12 | ) | 2,645 | — | |||||||||||||||||||||
Total securities available for sale | 21,076 | 82 | 160 | 810 | 337 | (696 | ) | 21,769 | (4 | ) | ||||||||||||||||||||||
Mortgages held for sale | 3,338 | (17 | ) | — | (89 | ) | 104 | (76 | ) | 3,260 | (16) | (4) | ||||||||||||||||||||
Loans | 371 | 8 | — | (12 | ) | — | — | 367 | 7 | (4) | ||||||||||||||||||||||
Mortgage servicing rights (residential) | 15,544 | (3,237 | ) | — | 944 | — | — | 13,251 | (2,661) | (4) | ||||||||||||||||||||||
Net derivative assets and liabilities: | ||||||||||||||||||||||||||||||||
Interest rate contracts | 257 | 1,685 | — | (1,299 | ) | — | — | 643 | 407 | |||||||||||||||||||||||
Equity contracts | (281 | ) | (87 | ) | — | 122 | 30 | (16 | ) | (232 | ) | — | ||||||||||||||||||||
Foreign exchange contracts | 4 | (8 | ) | — | 2 | — | — | (2 | ) | — | ||||||||||||||||||||||
Credit contracts | (758 | ) | (202 | ) | — | (33 | ) | — | — | (993 | ) | (178 | ) | |||||||||||||||||||
Other derivative contracts | (30 | ) | (78 | ) | — | 5 | — | — | (103 | ) | — | |||||||||||||||||||||
Total derivative contracts | (808 | ) | 1,310 | — | (1,203 | ) | 30 | (16 | ) | (687 | ) | 229 | (5) | |||||||||||||||||||
Other assets | 377 | 2 | — | (19 | ) | — | — | 360 | (6) | (4) | ||||||||||||||||||||||
Short sale liabilities (corporate debt securities) | (65 | ) | 1 | — | (5 | ) | — | 65 | (4 | ) | — | |||||||||||||||||||||
Other liabilities (excluding derivatives) | (1,672 | ) | (368 | ) | — | 234 | — | — | (1,806 | ) | (368 | ) | ||||||||||||||||||||
(1) | The amounts presented as transfers into and out of Level 3 represent fair value as of the beginning of the quarter in which each transfer occurred. | |
(2) | Represents only net gains (losses) that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/realization of cash flows over time. | |
(3) | Included in other noninterest income in the income statement. | |
(4) | Included in mortgage banking in the income statement. | |
(5) | Included in mortgage banking, trading activities and other noninterest income in the income statement. |
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Net unrealized | ||||||||||||||||||||||||||||
Total net gains | Purchases | , | gains (losses) | |||||||||||||||||||||||||
(losses) included in | sales | , | Net | included in net | ||||||||||||||||||||||||
Other | issuances | transfers | income related | |||||||||||||||||||||||||
Balance | , | compre- | and | into and/or | Balance | , | to assets and | |||||||||||||||||||||
beginning | Net | hensive | settlements | , | out of | end | liabilities held | |||||||||||||||||||||
(in millions) | of period | income | income | net | Level 3 | (1) | of period | at period end | (2) | |||||||||||||||||||
Quarter ended June 30, 2009 | ||||||||||||||||||||||||||||
Trading assets (excluding derivatives) | $ | 3,258 | 80 | — | (875 | ) | 12 | 2,475 | 99 | (3) | ||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | 821 | 20 | 11 | 53 | — | 905 | 5 | |||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||
Federal agencies | — | — | — | — | — | — | — | |||||||||||||||||||||
Residential | 7,657 | (1 | ) | 173 | (418 | ) | (1,498 | ) | 5,913 | (56 | ) | |||||||||||||||||
Commercial | 2,497 | (110 | ) | 246 | (2 | ) | (16 | ) | 2,615 | (1 | ) | |||||||||||||||||
Total mortgage-backed securities | 10,154 | (111 | ) | 419 | (420 | ) | (1,514 | ) | 8,528 | (57 | ) | |||||||||||||||||
Corporate debt securities | 261 | 4 | 46 | (6 | ) | (19 | ) | 286 | — | |||||||||||||||||||
Collateralized debt obligations | 2,329 | (15 | ) | 17 | 102 | 315 | 2,748 | (46 | ) | |||||||||||||||||||
Other | 15,267 | 49 | 427 | 186 | (211 | ) | 15,718 | (21 | ) | |||||||||||||||||||
Total debt securities | 28,832 | (53 | ) | 920 | (85 | ) | (1,429 | ) | 28,185 | (119 | ) | |||||||||||||||||
Marketable equity securities: | ||||||||||||||||||||||||||||
Perpetual preferred securities | 2,557 | 16 | 89 | 77 | (23 | ) | 2,716 | (1 | ) | |||||||||||||||||||
Other marketable equity securities | 44 | — | 17 | 2 | 64 | 127 | — | |||||||||||||||||||||
Total marketable equity securities | 2,601 | 16 | 106 | 79 | 41 | 2,843 | (1 | ) | ||||||||||||||||||||
Total securities available for sale | 31,433 | (37 | ) | 1,026 | (6 | ) | (1,388 | ) | 31,028 | (120 | ) | |||||||||||||||||
Mortgages held for sale | 4,516 | (4 | ) | — | (361 | ) | (52 | ) | 4,099 | (8 | )(4) | |||||||||||||||||
Mortgage servicing rights (residential) | 12,391 | 1,217 | — | 2,082 | — | 15,690 | 2,316 | (4) | ||||||||||||||||||||
Net derivative assets and liabilities | 1,036 | (854 | ) | — | (413 | ) | 25 | (206 | ) | (483 | )(5) | |||||||||||||||||
Other assets (excluding derivatives) | 1,221 | (24 | ) | — | 29 | — | 1,226 | (14 | )(4) | |||||||||||||||||||
Other liabilities (excluding derivatives) | (729 | ) | (102 | ) | — | (19 | ) | (2 | ) | (852 | ) | (102 | ) | |||||||||||||||
(1) | The amounts presented as transfers into and out of Level 3 represent fair value as of the beginning of the quarter in which each transfer occurred. | |
(2) | Represents only net gains (losses) that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/realization of cash flows over time. | |
(3) | Included in other noninterest income in the income statement. | |
(4) | Included in mortgage banking in the income statement. | |
(5) | Included in mortgage banking, trading activities and other noninterest income in the income statement. |
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Net unrealized | ||||||||||||||||||||||||||||||||
Total net gains | Purchases | , | gains (losses) | |||||||||||||||||||||||||||||
(losses) included in | sales | , | included in net | |||||||||||||||||||||||||||||
Other | issuances | income related | ||||||||||||||||||||||||||||||
Balance | , | compre- | and | Transfers | Transfers | Balance | , | to assets and | ||||||||||||||||||||||||
beginning | Net | hensive | settlements | , | into | out of | end | liabilities held | ||||||||||||||||||||||||
(in millions) | of period | income | income | net | Level 3 | (1) | Level 3 | (1) | of period | at period end | (2) | |||||||||||||||||||||
Six months ended June 30, 2010 | ||||||||||||||||||||||||||||||||
Trading assets (excluding derivatives): | ||||||||||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | $ | 5 | 7 | — | (9 | ) | 9 | — | 12 | 7 | ||||||||||||||||||||||
Collateralized debt obligations | 1,133 | 382 | — | 252 | — | — | 1,767 | 16 | ||||||||||||||||||||||||
Corporate bonds | 223 | 13 | — | 62 | 9 | (142 | ) | 165 | 23 | |||||||||||||||||||||||
Equity securities | 36 | 2 | — | 12 | 2 | — | 52 | — | ||||||||||||||||||||||||
Other trading securities | 643 | 34 | — | (154 | ) | 1 | (194 | ) | 330 | 12 | ||||||||||||||||||||||
Total trading securities | 2,040 | 438 | — | 163 | 21 | (336 | ) | 2,326 | 58 | |||||||||||||||||||||||
Other trading assets | 271 | (36 | ) | — | (4 | ) | — | (82 | ) | 149 | (11 | ) | ||||||||||||||||||||
Total trading assets (excluding derivatives) | 2,311 | 402 | — | 159 | 21 | (418 | ) | 2,475 | 47 | (3) | ||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | 818 | 4 | 94 | 1,798 | 28 | (6 | ) | 2,736 | 4 | |||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||
Residential | 1,084 | (7 | ) | (15 | ) | (14 | ) | 266 | (961 | ) | 353 | (4 | ) | |||||||||||||||||||
Commercial | 1,799 | (17 | ) | 373 | (7 | ) | 187 | (1,438 | ) | 897 | (4 | ) | ||||||||||||||||||||
Total mortgage-backed securities | 2,883 | (24 | ) | 358 | (21 | ) | 453 | (2,399 | ) | 1,250 | (8 | ) | ||||||||||||||||||||
Corporate debt securities | 367 | 4 | 42 | (50 | ) | 166 | (149 | ) | 380 | — | ||||||||||||||||||||||
Collateralized debt obligations | 3,725 | 79 | (38 | ) | 477 | — | (212 | ) | 4,031 | (10 | ) | |||||||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||||||||||
Auto loans and leases | 8,525 | — | (123 | ) | (1,477 | ) | 179 | — | 7,104 | — | ||||||||||||||||||||||
Home equity loans | 1,677 | — | 12 | (2 | ) | 113 | (1,606 | ) | 194 | (5 | ) | |||||||||||||||||||||
Other asset-backed securities | 2,308 | 48 | (82 | ) | 1,403 | 679 | (1,015 | ) | 3,341 | (2 | ) | |||||||||||||||||||||
Total asset-backed securities | 12,510 | 48 | (193 | ) | (76 | ) | 971 | (2,621 | ) | 10,639 | (7 | ) | ||||||||||||||||||||
Other debt securities | 77 | — | (1 | ) | 12 | — | — | 88 | — | |||||||||||||||||||||||
Total debt securities | 20,380 | 111 | 262 | 2,140 | 1,618 | (5,387 | ) | 19,124 | (21 | ) | ||||||||||||||||||||||
Marketable equity securities: | ||||||||||||||||||||||||||||||||
Perpetual preferred securities | 2,305 | 66 | (26 | ) | 297 | — | (13 | ) | 2,629 | — | ||||||||||||||||||||||
Other marketable equity securities | 88 | — | — | (38 | ) | — | (34 | ) | 16 | — | ||||||||||||||||||||||
Total marketable equity securities | 2,393 | 66 | (26 | ) | 259 | — | (47 | ) | 2,645 | — | ||||||||||||||||||||||
Total securities available for sale | 22,773 | 177 | 236 | 2,399 | 1,618 | (5,434 | ) | 21,769 | (21 | ) | ||||||||||||||||||||||
Mortgages held for sale | 3,523 | (15 | ) | — | (251 | ) | 203 | (200 | ) | 3,260 | (17) | (4) | ||||||||||||||||||||
Loans | — | 52 | — | (51 | ) | 366 | — | 367 | 52 | (4) | ||||||||||||||||||||||
Mortgage servicing rights (residential) | 16,004 | (4,633 | ) | — | 1,998 | — | (118 | ) | 13,251 | (3,438) | (4) | |||||||||||||||||||||
Net derivative assets and liabilities: | ||||||||||||||||||||||||||||||||
Interest rate contracts | (114 | ) | 2,673 | — | (1,916 | ) | — | — | 643 | 426 | ||||||||||||||||||||||
Equity contracts | (344 | ) | (7 | ) | — | 142 | 2 | (25 | ) | (232 | ) | 29 | ||||||||||||||||||||
Foreign exchange contracts | (1 | ) | (3 | ) | — | 2 | — | — | (2 | ) | — | |||||||||||||||||||||
Credit contracts | (330 | ) | (692 | ) | — | 23 | 6 | — | (993 | ) | (671 | ) | ||||||||||||||||||||
Other derivative contracts | (43 | ) | (65 | ) | — | 5 | — | — | (103 | ) | — | |||||||||||||||||||||
Total derivative contracts | (832 | ) | 1,906 | — | (1,744 | ) | 8 | (25 | ) | (687 | ) | (216) | (5) | |||||||||||||||||||
Other assets | 1,373 | 25 | — | (49 | ) | — | (989 | ) | 360 | (12) | (4) | |||||||||||||||||||||
Short sale liabilities (corporate debt securities) | (26 | ) | (1 | ) | — | (42 | ) | — | 65 | (4 | ) | — | ||||||||||||||||||||
Other liabilities (excluding derivatives) | (1,085 | ) | (778 | ) | — | 416 | (359 | ) | — | (1,806 | ) | (779 | ) | |||||||||||||||||||
(1) | The amounts presented as transfers into and out of Level 3 represent fair value as of the beginning of the period in which each transfer occurred. | |
(2) | Represents only net gains (losses) that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/realization of cash flows over time. | |
(3) | Included in other noninterest income in the income statement. | |
(4) | Included in mortgage banking in the income statement. | |
(5) | Included in mortgage banking, trading activities and other noninterest income in the income statement. |
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Net unrealized | ||||||||||||||||||||||||||||
Total net gains | Purchases | , | gains (losses) | |||||||||||||||||||||||||
(losses) included in | sales | , | Net | included in net | ||||||||||||||||||||||||
Other | issuances | transfers | income related | |||||||||||||||||||||||||
Balance | , | compre- | and | into and/ | Balance | , | to assets and | |||||||||||||||||||||
beginning | Net | hensive | settlements | , | or out of | end | liabilities held | |||||||||||||||||||||
(in millions) | of period | income | income | net | Level 3 | (1) | of period | at period end | (2) | |||||||||||||||||||
Six months ended June 30, 2009 | ||||||||||||||||||||||||||||
Trading assets (excluding derivatives) | $ | 3,495 | 42 | — | (1,398 | ) | 336 | 2,475 | 82 | (3) | ||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | 903 | 18 | 13 | 46 | (75 | ) | 905 | (6 | ) | |||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||
Federal agencies | 4 | — | — | — | (4 | ) | — | — | ||||||||||||||||||||
Residential | 3,510 | (30 | ) | 884 | (588 | ) | 2,137 | 5,913 | (151 | ) | ||||||||||||||||||
Commercial | 286 | (118 | ) | 747 | 49 | 1,651 | 2,615 | (11 | ) | |||||||||||||||||||
Total mortgage-backed securities | 3,800 | (148 | ) | 1,631 | (539 | ) | 3,784 | 8,528 | (162 | ) | ||||||||||||||||||
Corporate debt securities | 282 | 2 | 56 | (23 | ) | (31 | ) | 286 | — | |||||||||||||||||||
Collateralized debt obligations | 2,083 | 55 | 189 | 104 | 317 | 2,748 | (56 | ) | ||||||||||||||||||||
Other | 12,799 | 29 | 1,064 | 1,657 | 169 | 15,718 | (53 | ) | ||||||||||||||||||||
Total debt securities | 19,867 | (44 | ) | 2,953 | 1,245 | 4,164 | 28,185 | (277 | ) | |||||||||||||||||||
Marketable equity securities: | ||||||||||||||||||||||||||||
Perpetual preferred securities | 2,775 | 86 | 115 | (234 | ) | (26 | ) | 2,716 | (1 | ) | ||||||||||||||||||
Other marketable equity securities | 50 | — | (1 | ) | 62 | 16 | 127 | — | ||||||||||||||||||||
Total marketable equity securities | 2,825 | 86 | 114 | (172 | ) | (10 | ) | 2,843 | (1 | ) | ||||||||||||||||||
Total securities available for sale | $ | 22,692 | 42 | 3,067 | 1,073 | 4,154 | 31,028 | (278 | ) | |||||||||||||||||||
Mortgages held for sale | $ | 4,718 | (2 | ) | — | (471 | ) | (146 | ) | 4,099 | (9) | (4) | ||||||||||||||||
Mortgage servicing rights (residential) | 14,714 | (2,587 | ) | — | 3,563 | — | 15,690 | (508) | (4) | |||||||||||||||||||
Net derivative assets and liabilities | 37 | (6 | ) | — | (502 | ) | 265 | (206 | ) | (422) | (5) | |||||||||||||||||
Other assets (excluding derivatives) | 1,231 | (33 | ) | — | 28 | — | 1,226 | (3) | (4) | |||||||||||||||||||
Other liabilities (excluding derivatives) | (638 | ) | (178 | ) | — | (34 | ) | (2 | ) | (852 | ) | (179 | ) | |||||||||||||||
(1) | The amounts presented as transfers into and out of Level 3 represent fair value as of the beginning of the period in which each transfer occurred. | |
(2) | Represents only net gains (losses) that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/realization of cash flows over time. | |
(3) | Included in other noninterest income in the income statement. | |
(4) | Included in mortgage banking in the income statement. | |
(5) | Included in mortgage banking, trading activities and other noninterest income in the income statement. |
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• | Our adoption of new consolidation accounting guidance on January 1, 2010, impacted Level 3 balances for certain financial instruments. Reductions in Level 3 balances, which represent derecognition of existing investments in newly consolidated VIEs, are reflected as transfers out for the following categories: trading assets, $276 million; securities available for sale, $1.9 billion; and mortgage servicing rights, $118 million. Increases in Level 3 balances, which represent newly consolidated VIE assets, are reflected as transfers in for the following categories: securities available for sale, $829 million; loans, $366 million; and long-term debt, $359 million. |
• | We transferred $3.5 billion of debt securities available for sale from Level 3 to Level 2 due to an increase in the volume of trading activity for certain securities, which resulted in increased occurrences of observable market prices. |
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Carrying value at period end | ||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
June 30, 2010 | ||||||||||||||||
Mortgages held for sale(1) | $ | — | 2,470 | 724 | 3,194 | |||||||||||
Loans held for sale | — | 407 | — | 407 | ||||||||||||
Loans(2): | ||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||
Commercial | — | 432 | 90 | 522 | ||||||||||||
Real estate mortgage | — | 603 | 2 | 605 | ||||||||||||
Real estate construction | — | 642 | — | 642 | ||||||||||||
Total commercial and commercial real estate | — | 1,677 | 92 | 1,769 | ||||||||||||
Consumer: | ||||||||||||||||
Real estate 1 - 4 family first mortgage | — | 5,196 | — | 5,196 | ||||||||||||
Real estate 1 - 4 family junior liens | — | 410 | — | 410 | ||||||||||||
Other | — | 83 | 17 | 100 | ||||||||||||
Total consumer | — | 5,689 | 17 | 5,706 | ||||||||||||
Foreign | — | 10 | — | 10 | ||||||||||||
Total loans | — | 7,376 | 109 | 7,485 | ||||||||||||
Other assets: | ||||||||||||||||
Private equity investments | — | — | 26 | 26 | ||||||||||||
Foreclosed assets(3) | — | 356 | 23 | 379 | ||||||||||||
Operating lease assets | — | 22 | — | 22 | ||||||||||||
December 31, 2009 | ||||||||||||||||
Mortgages held for sale (1) | $ | — | 1,105 | 711 | 1,816 | |||||||||||
Loans held for sale | — | 444 | — | 444 | ||||||||||||
Loans (2) | — | 6,177 | 134 | 6,311 | ||||||||||||
Private equity investments | — | — | 52 | 52 | ||||||||||||
Foreclosed assets (3) | — | 199 | 38 | 237 | ||||||||||||
Operating lease assets | — | 90 | 29 | 119 | ||||||||||||
(1) | Predominantly real estate 1-4 family first mortgage loans. | |
(2) | Represents carrying value of loans for which adjustments are based on the appraised value of the collateral. The carrying value of loans fully charged-off, which includes unsecured lines and loans, is zero. | |
(3) | Represents the fair value of foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets. |
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(in millions) | ||||
Six months ended June 30, 2010 | ||||
Mortgages held for sale | $ | 23 | ||
Loans held for sale | 9 | |||
Loans (1): | ||||
Commercial and commercial real estate: | ||||
Commercial | (1,110 | ) | ||
Real estate mortgage | (250 | ) | ||
Real estate construction | (255 | ) | ||
Total commercial and commercial real estate | (1,615 | ) | ||
Consumer: | ||||
Real estate 1 - 4 family first mortgage | (1,807 | ) | ||
Real estate 1 - 4 family junior liens | (2,236 | ) | ||
Other | (1,843 | ) | ||
Total consumer | (5,886 | ) | ||
Foreign | — | |||
Total loans | (7,501 | ) | ||
Other assets: | ||||
Private equity investments | (28 | ) | ||
Foreclosed assets (2) | (115 | ) | ||
Operating lease assets | (1 | ) | ||
Total | $ | (7,613 | ) | |
Six months ended June 30, 2009 | ||||
Mortgages held for sale | $ | 1 | ||
Loans held for sale | 119 | |||
Loans (1) | (6,100 | ) | ||
Private equity investments | (61 | ) | ||
Foreclosed assets (2) | (225 | ) | ||
Operating lease assets | (16 | ) | ||
Total | $ | (6,282 | ) | |
(1) | Represents write-downs of loans based on the appraised value of the collateral and write-downs of loans fully charged-off to zero. | |
(2) | Represents the losses on foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets. |
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Redemption | ||||||||||||||||
Fair | Unfunded | Redemption | notice | |||||||||||||
(in millions) | value | commitments | frequency | period | ||||||||||||
June 30, 2010 | ||||||||||||||||
Offshore funds (1) | $ | 1,492 | — | Daily - Annually | 1 - 120 days | |||||||||||
Funds of funds | 67 | — | Monthly - Annually | 10 - 120 days | ||||||||||||
Hedge funds | 18 | — | Monthly - Annually | 30 - 120 days | ||||||||||||
Private equity funds (2) | 1,774 | 760 | N/A | N/A | ||||||||||||
Venture capital funds (3) | 92 | 43 | N/A | N/A | ||||||||||||
Total | $ | 3,443 | 803 | |||||||||||||
December 31, 2009 | ||||||||||||||||
Offshore funds (1) | $ | 1,270 | — | Daily - Quarterly | 1 - 90 days | |||||||||||
Funds of funds | 69 | — | Monthly - Annually | 10 - 120 days | ||||||||||||
Hedge funds | 35 | — | Monthly - Annually | 30 - 180 days | ||||||||||||
Private equity funds (2) | 901 | 340 | N/A | N/A | ||||||||||||
Venture capital funds (3) | 93 | 47 | N/A | N/A | ||||||||||||
Total | $ | 2,368 | 387 | |||||||||||||
N/A — Not applicable | ||
(1) | Includes investments in funds that invest primarily in investment grade European fixed income securities. Redemption restrictions are in place for investments with a fair value of $67 million at June 30, 2010, and $76 million at December 31, 2009, due to lock-up provisions that will remain in effect until November 2012. | |
(2) | Includes private equity funds that invest in equity and debt securities issued by private and publicly-held companies in connection with leveraged buy-outs, recapitalizations, and expansion opportunities. Substantially all of these investments do not allow redemptions. Alternatively, we receive distributions as the underlying assets of the funds liquidate, which we expect to occur over the next 10 years. | |
(3) | Represents investments in funds that invest in domestic and foreign companies in a variety of industries, including information technology, financial services, and healthcare. These investments can never be redeemed with the funds. Instead, we receive distributions as the underlying assets of the fund liquidate, which we expect to occur over the next seven years. |
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June 30, 2010 | Dec. 31, 2009 | |||||||||||||||||||||||
Fair value | Fair value | |||||||||||||||||||||||
carrying | carrying | |||||||||||||||||||||||
amount | amount | |||||||||||||||||||||||
less | less | |||||||||||||||||||||||
Fair value | Aggregate | aggregate | Fair value | Aggregate | aggregate | |||||||||||||||||||
carrying | unpaid | unpaid | carrying | unpaid | unpaid | |||||||||||||||||||
(in millions) | amount | principal | principal | amount | principal | principal | ||||||||||||||||||
Mortgages held for sale: | ||||||||||||||||||||||||
Total loans | $ | 34,877 | 34,084 | 793 | (1) | 36,962 | 37,072 | (110 | )(1) | |||||||||||||||
Nonaccrual loans | 317 | 640 | (323 | ) | 268 | 560 | (292 | ) | ||||||||||||||||
Loans 90 days or more past due and still accruing | 47 | 56 | (9 | ) | 49 | 63 | (14 | ) | ||||||||||||||||
Loans held for sale: | ||||||||||||||||||||||||
Total loans | 238 | 264 | (26 | ) | 149 | 159 | (10 | ) | ||||||||||||||||
Nonaccrual loans | 8 | 12 | (4 | ) | 5 | 2 | 3 | |||||||||||||||||
Loans: | ||||||||||||||||||||||||
Total loans | 367 | 410 | (43 | ) | — | — | — | |||||||||||||||||
Nonaccrual loans | 13 | 15 | (2 | ) | — | — | — | |||||||||||||||||
Loans 90 days or more past due and still accruing | 2 | 2 | — | — | — | — | ||||||||||||||||||
Long-term debt | (361 | ) | (413 | ) | 52 | — | — | — | ||||||||||||||||
(1) | The difference between fair value carrying amount and aggregate unpaid principal includes changes in fair value recorded at and subsequent to funding, gains and losses on the related loan commitment prior to funding, and premiums on acquired loans. |
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2010 | 2009 | |||||||||||||||
Mortgage banking | Mortgage banking | |||||||||||||||
noninterest income | noninterest income | |||||||||||||||
Net gains | Net gains | |||||||||||||||
on mortgage | Other | on mortgage | Other | |||||||||||||
loan origination/sales | noninterest | loan origination/sales | noninterest | |||||||||||||
(in millions) | activities (1) | income | activities (1) | income | ||||||||||||
Quarter ended June 30, | ||||||||||||||||
Mortgages held for sale | $ | 1,769 | — | 630 | — | |||||||||||
Loans held for sale | — | 3 | — | 48 | ||||||||||||
Loans | 8 | — | — | — | ||||||||||||
Long-term debt | (8 | ) | — | — | — | |||||||||||
Other interests held | — | (6 | ) | — | 96 | |||||||||||
Six months ended June 30, | ||||||||||||||||
Mortgages held for sale | $ | 3,231 | — | 2,293 | — | |||||||||||
Loans held for sale | — | 17 | — | 92 | ||||||||||||
Loans | 52 | — | — | — | ||||||||||||
Long-term debt | (45 | ) | — | — | — | |||||||||||
Other interests held | — | (46 | ) | — | 79 | |||||||||||
(1) | Includes changes in fair value of servicing associated with MHFS. |
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June 30, 2010 | Dec. 31, 2009 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
(in millions) | amount | fair value | amount | fair value | ||||||||||||
Financial assets | ||||||||||||||||
Mortgages held for sale (1) | $ | 3,704 | 3,739 | 2,132 | 2,132 | |||||||||||
Loans held for sale (2) | 3,761 | 3,842 | 5,584 | 5,719 | ||||||||||||
Loans, net (3) | 728,016 | 708,667 | 744,225 | 717,798 | ||||||||||||
Nonmarketable equity investments (cost method) | 9,793 | 10,041 | 9,793 | 9,889 | ||||||||||||
Financial liabilities | ||||||||||||||||
Deposits | 815,623 | 816,655 | 824,018 | 824,678 | ||||||||||||
Long-term debt (3)(4) | 184,659 | 189,525 | 203,784 | 205,752 | ||||||||||||
(1) | Balance excludes mortgages held for sale for which the fair value option was elected, and therefore includes nonprime and other residential and commercial mortgages held for sale. | |
(2) | Balance excludes loans held for sale for which the fair value option was elected. | |
(3) | At June 30, 2010, loans and long-term debt exclude balances for which the fair value option was elected. Loans exclude lease financing with a carrying amount of $13.5 billion at June 30, 2010, and $14.2 billion at December 31, 2009. | |
(4) | The carrying amount and fair value exclude obligations under capital leases of $52 million at June 30, 2010, and $77 million at December 31, 2009. |
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Shares | ||||||||||||||||
issued and | Carrying | |||||||||||||||
(in millions, except shares) | outstanding | Par value | value | Discount | ||||||||||||
DEP Shares | ||||||||||||||||
Dividend Equalization Preferred Shares, $10 liquidation preference per share, 97,000 shares authorized | 96,546 | $ | — | — | — | |||||||||||
Series J(1) | ||||||||||||||||
8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J, $1,000 liquidation preference per share, 2,300,000 shares authorized | 2,150,375 | 2,150 | 1,995 | 155 | ||||||||||||
Series K(1) | ||||||||||||||||
7.98% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock, Series K, $1,000 liquidation preference per share, 3,500,000 shares authorized | 3,352,000 | 3,352 | 2,876 | 476 | ||||||||||||
Series L(1) | ||||||||||||||||
7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L, $1,000 liquidation preference per share, 4,025,000 shares authorized | 3,968,000 | 3,968 | 3,200 | 768 | ||||||||||||
Total | 9,566,921 | $ | 9,470 | 8,071 | 1,399 | |||||||||||
(1) | Preferred shares qualify as Tier 1 capital. |
• | Series A – Non-Cumulative Perpetual Preferred Stock, Series A, $100,000 liquidation preference per share, 25,001 shares authorized | |
• | Series B – Non-Cumulative Perpetual Preferred Stock, Series B, $100,000 liquidation preference per share, 17,501 shares authorized | |
• | Series G – 7.25% Class A Preferred Stock, Series G, $15,000 liquidation preference per share, 50,000 shares authorized | |
• | Series H – Floating Class A Preferred Stock, Series H, $20,000 liquidation preference per share, 50,000 shares authorized | |
• | Series I – 5.80% Fixed to Floating Class A Preferred Stock, Series I, $100,000 liquidation preference per share, 25,010 shares authorized |
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Shares issued and outstanding | Carrying value | Adjustable | ||||||||||||||||||||||
June 30 | , | Dec. 31 | , | June 30 | , | Dec. 31 | , | dividend rate | ||||||||||||||||
(in millions, except shares) | 2010 | 2009 | 2010 | 2009 | Minimum | Maximum | ||||||||||||||||||
ESOP Preferred Stock(1) | ||||||||||||||||||||||||
2010 | 509,814 | — | $ | 510 | — | 9.50 | % | 10.50 | ||||||||||||||||
2008 | 112,029 | 120,289 | 112 | 120 | 10.50 | 11.50 | ||||||||||||||||||
2007 | 95,524 | 97,624 | 95 | 98 | 10.75 | 11.75 | ||||||||||||||||||
2006 | 69,782 | 71,322 | 70 | 71 | 10.75 | 11.75 | ||||||||||||||||||
2005 | 50,552 | 51,687 | 50 | 52 | 9.75 | 10.75 | ||||||||||||||||||
2004 | 35,615 | 36,425 | 36 | 37 | 8.50 | 9.50 | ||||||||||||||||||
2003 | 20,974 | 21,450 | 21 | 21 | 8.50 | 9.50 | ||||||||||||||||||
2002 | 11,677 | 11,949 | 12 | 12 | 10.50 | 11.50 | ||||||||||||||||||
2001 | 3,205 | 3,273 | 3 | 3 | 10.50 | 11.50 | ||||||||||||||||||
Total ESOP Preferred Stock | 909,172 | 414,019 | $ | 909 | 414 | |||||||||||||||||||
Unearned ESOP shares (2) | $ | (977 | ) | (442 | ) | |||||||||||||||||||
(1) | Liquidation preference $1,000. At June 30, 2010, and December 31, 2009, additional paid-in capital included $68 million and $28 million, respectively, related to preferred stock. | |
(2) | We recorded a corresponding charge to unearned ESOP shares in connection with the issuance of the ESOP Preferred Stock. The unearned ESOP shares are reduced as shares of the ESOP Preferred Stock are committed to be released. |
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2010 | 2009 | |||||||||||||||||||||||
Pension benefits | Pension benefits | |||||||||||||||||||||||
Non- | Other | Non- | Other | |||||||||||||||||||||
(in millions) | Qualified | qualified | benefits | Qualified | qualified | benefits | ||||||||||||||||||
Quarter ended June 30, | ||||||||||||||||||||||||
Service cost | $ | 2 | — | 3 | 100 | 4 | 3 | |||||||||||||||||
Interest cost | 138 | 9 | 19 | 149 | 11 | 21 | ||||||||||||||||||
Expected return on plan assets | (179 | ) | — | (7 | ) | (160 | ) | — | (7 | ) | ||||||||||||||
Amortization of net actuarial loss | 26 | 1 | — | 48 | 1 | 1 | ||||||||||||||||||
Amortization of prior service cost | — | — | (1 | ) | — | (1 | ) | (1 | ) | |||||||||||||||
Curtailment gain | — | — | — | (32 | ) | (35 | ) | — | ||||||||||||||||
Net periodic benefit cost | $ | (13 | ) | 10 | 14 | 105 | (20 | ) | 17 | |||||||||||||||
Six months ended June 30, | ||||||||||||||||||||||||
Service cost | $ | 3 | — | 6 | 207 | 8 | 6 | |||||||||||||||||
Interest cost | 277 | 18 | 39 | 294 | 21 | 42 | ||||||||||||||||||
Expected return on plan assets | (358 | ) | — | (14 | ) | (323 | ) | — | (14 | ) | ||||||||||||||
Amortization of net actuarial loss | 52 | 2 | — | 154 | 3 | 2 | ||||||||||||||||||
Amortization of prior service cost | — | — | (2 | ) | — | (2 | ) | (2 | ) | |||||||||||||||
Curtailment gain | — | — | — | (32 | ) | (35 | ) | — | ||||||||||||||||
Net periodic benefit cost | $ | (26 | ) | 20 | 29 | 300 | (5 | ) | 34 | |||||||||||||||
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Quarter ended June 30 | , | Six months ended June 30 | , | |||||||||||||
(in millions, except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Wells Fargo net income | $ | 3,062 | 3,172 | 5,609 | 6,217 | |||||||||||
Less: Preferred stock dividends, accretion and other (1) | 184 | 597 | 359 | 1,258 | ||||||||||||
Wells Fargo net income applicable to common stock (numerator) | $ | 2,878 | 2,575 | 5,250 | 4,959 | |||||||||||
Earnings per common share | ||||||||||||||||
Average common shares outstanding (denominator) | 5,219.7 | 4,483.1 | 5,205.1 | 4,365.9 | ||||||||||||
Per share | $ | 0.55 | 0.58 | 1.01 | 1.14 | |||||||||||
Diluted earnings per common share | ||||||||||||||||
Average common shares outstanding | 5,219.7 | 4,483.1 | 5,205.1 | 4,365.9 | ||||||||||||
Add: Stock options | 32.9 | 18.2 | 32.1 | 9.0 | ||||||||||||
Restricted share rights | 8.2 | 0.3 | 5.8 | 0.2 | ||||||||||||
Diluted average common shares outstanding (denominator) | 5,260.8 | 4,501.6 | 5,243.0 | 4,375.1 | ||||||||||||
Per share | $ | 0.55 | 0.57 | 1.00 | 1.13 | |||||||||||
(1) | For the quarter and six months ended June 30, 2010, includes $185 million and $369 million, respectively, of preferred stock dividends. |
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Community | Wholesale | Wealth, Brokerage | Consolidated | |||||||||||||||||||||||||||||||||||||
(income/expense in millions, | Banking | Banking | and Retirement | Other (3) | Company | |||||||||||||||||||||||||||||||||||
average balances in billions) | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||||||||
Quarter ended June 30, | ||||||||||||||||||||||||||||||||||||||||
Net interest income (1) | $ | 8,113 | 8,953 | 2,978 | 2,460 | 684 | 637 | (326 | ) | (286 | ) | 11,449 | 11,764 | |||||||||||||||||||||||||||
Provision for credit losses | 3,357 | 4,303 | 626 | 738 | 81 | 111 | (75 | ) | (66 | ) | 3,989 | 5,086 | ||||||||||||||||||||||||||||
Noninterest income | 5,614 | 6,285 | 2,675 | 2,775 | 2,183 | 2,187 | (527 | ) | (504 | ) | 9,945 | 10,743 | ||||||||||||||||||||||||||||
Noninterest expense | 7,711 | 7,922 | 2,840 | 2,802 | 2,350 | 2,300 | (155 | ) | (327 | ) | 12,746 | 12,697 | ||||||||||||||||||||||||||||
Income (loss) before income tax expense (benefit) | 2,659 | 3,013 | 2,187 | 1,695 | 436 | 413 | (623 | ) | (397 | ) | 4,659 | 4,724 | ||||||||||||||||||||||||||||
Income tax expense (benefit) | 811 | 849 | 775 | 619 | 165 | 158 | (237 | ) | (151 | ) | 1,514 | 1,475 | ||||||||||||||||||||||||||||
Net income (loss) before noncontrolling interests | 1,848 | 2,164 | 1,412 | 1,076 | 271 | 255 | (386 | ) | (246 | ) | 3,145 | 3,249 | ||||||||||||||||||||||||||||
Less: Net income from noncontrolling interests | 82 | 73 | — | 7 | 1 | (3 | ) | — | — | 83 | 77 | |||||||||||||||||||||||||||||
Net income (loss) (2) | $ | 1,766 | 2,091 | 1,412 | 1,069 | 270 | 258 | (386 | ) | (246 | ) | 3,062 | 3,172 | |||||||||||||||||||||||||||
Average loans | $ | 539.1 | 565.8 | 223.4 | 258.4 | 42.6 | 46.0 | (32.6 | ) | (36.3 | ) | 772.5 | 833.9 | |||||||||||||||||||||||||||
Average assets | 778.4 | 824.0 | 362.4 | 377.7 | 141.0 | 127.0 | (57.6 | ) | (53.8 | ) | 1,224.2 | 1,274.9 | ||||||||||||||||||||||||||||
Average core deposits | 533.4 | 565.6 | 161.5 | 137.4 | 121.5 | 113.5 | (54.6 | ) | (50.8 | ) | 761.8 | 765.7 | ||||||||||||||||||||||||||||
Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||
Net interest income (1) | $ | 16,420 | 17,620 | 5,478 | 4,803 | 1,348 | 1,278 | (650 | ) | (561 | ) | 22,596 | 23,140 | |||||||||||||||||||||||||||
Provision for credit losses | 7,887 | 8,323 | 1,425 | 1,281 | 144 | 134 | (137 | ) | (94 | ) | 9,319 | 9,644 | ||||||||||||||||||||||||||||
Noninterest income | 11,369 | 12,012 | 5,500 | 5,325 | 4,429 | 4,065 | (1,052 | ) | (1,018 | ) | 20,246 | 20,384 | ||||||||||||||||||||||||||||
Noninterest expense | 14,941 | 15,332 | 5,500 | 5,335 | 4,740 | 4,535 | (318 | ) | (687 | ) | 24,863 | 24,515 | ||||||||||||||||||||||||||||
Income (loss) before income tax expense (benefit) | 4,961 | 5,977 | 4,053 | 3,512 | 893 | 674 | (1,247 | ) | (798 | ) | 8,660 | 9,365 | ||||||||||||||||||||||||||||
Income tax expense (benefit) | 1,610 | 1,806 | 1,441 | 1,260 | 338 | 265 | (474 | ) | (304 | ) | 2,915 | 3,027 | ||||||||||||||||||||||||||||
Net income (loss) before noncontrolling interests | 3,351 | 4,171 | 2,612 | 2,252 | 555 | 409 | (773 | ) | (494 | ) | 5,745 | 6,338 | ||||||||||||||||||||||||||||
Less: Net income (loss) from noncontrolling interests | 130 | 134 | 3 | 12 | 3 | (25 | ) | — | — | 136 | 121 | |||||||||||||||||||||||||||||
Net income (loss) (2) | $ | 3,221 | 4,037 | 2,609 | 2,240 | 552 | 434 | (773 | ) | (494 | ) | 5,609 | 6,217 | |||||||||||||||||||||||||||
Average loans | $ | 547.1 | 566.8 | 227.8 | 268.3 | 43.2 | 46.3 | (33.2 | ) | (36.7 | ) | 784.9 | 844.7 | |||||||||||||||||||||||||||
Average assets | 781.6 | 817.4 | 361.9 | 393.1 | 139.4 | 122.1 | (57.8 | ) | (50.3 | ) | 1,225.1 | 1,282.3 | ||||||||||||||||||||||||||||
Average core deposits | 532.8 | 560.3 | 161.2 | 138.5 | 121.3 | 108.2 | (54.8 | ) | (47.2 | ) | 760.5 | 759.8 | ||||||||||||||||||||||||||||
(1) | 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. | |
(2) | 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. | |
(3) | Includes Wachovia integration expenses and the elimination of items that are included in both Community Banking and Wealth, Brokerage and Retirement, largely representing wealth management customers serviced and products sold in the stores. |
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Quarter ended June 30, 2010 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
Dividends from subsidiaries: | ||||||||||||||||||||
Bank | $ | 5,975 | — | — | (5,975 | ) | — | |||||||||||||
Nonbank | 15 | — | — | (15 | ) | — | ||||||||||||||
Interest income from loans | — | 693 | 9,622 | (38 | ) | 10,277 | ||||||||||||||
Interest income from subsidiaries | 302 | — | 9 | (311 | ) | — | ||||||||||||||
Other interest income | 86 | 30 | 3,079 | — | 3,195 | |||||||||||||||
Total interest income | 6,378 | 723 | 12,710 | (6,339 | ) | 13,472 | ||||||||||||||
Deposits | — | — | 714 | — | 714 | |||||||||||||||
Short-term borrowings | 21 | 11 | 93 | (104 | ) | 21 | ||||||||||||||
Long-term debt | 729 | 260 | 489 | (245 | ) | 1,233 | ||||||||||||||
Other interest expense | 1 | — | 54 | — | 55 | |||||||||||||||
Total interest expense | 751 | 271 | 1,350 | (349 | ) | 2,023 | ||||||||||||||
Net interest income | 5,627 | 452 | 11,360 | (5,990 | ) | 11,449 | ||||||||||||||
Provision for credit losses | — | 198 | 3,791 | — | 3,989 | |||||||||||||||
Net interest income after provision for credit losses | 5,627 | 254 | 7,569 | (5,990 | ) | 7,460 | ||||||||||||||
Noninterest income | ||||||||||||||||||||
Fee income — nonaffiliates | — | 26 | 6,027 | — | 6,053 | |||||||||||||||
Other | 171 | 29 | 3,880 | (188 | ) | 3,892 | ||||||||||||||
Total noninterest income | 171 | 55 | 9,907 | (188 | ) | 9,945 | ||||||||||||||
Noninterest expense | ||||||||||||||||||||
Salaries and benefits | (17 | ) | 26 | 6,843 | — | 6,852 | ||||||||||||||
Other | 207 | 210 | 5,665 | (188 | ) | 5,894 | ||||||||||||||
Total noninterest expense | 190 | 236 | 12,508 | (188 | ) | 12,746 | ||||||||||||||
Income (loss) before income tax expense (benefit) and equity in undistributed income of subsidiaries | 5,608 | 73 | 4,968 | (5,990 | ) | 4,659 | ||||||||||||||
Income tax expense (benefit) | (118 | ) | 26 | 1,606 | — | 1,514 | ||||||||||||||
Equity in undistributed income of subsidiaries | (2,664 | ) | — | — | 2,664 | — | ||||||||||||||
Net income (loss) before noncontrolling interests | 3,062 | 47 | 3,362 | (3,326 | ) | 3,145 | ||||||||||||||
Less: Net income from noncontrolling interests | — | — | 83 | — | 83 | |||||||||||||||
Parent, WFFI, Other and Wells Fargo net income (loss) | $ | 3,062 | 47 | 3,279 | (3,326 | ) | 3,062 | |||||||||||||
131
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Quarter ended June 30, 2009 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
Dividends from subsidiaries: | ||||||||||||||||||||
Bank | $ | 1 | — | — | (1 | ) | — | |||||||||||||
Nonbank | 209 | — | — | (209 | ) | — | ||||||||||||||
Interest income from loans | — | 867 | 9,669 | (4 | ) | 10,532 | ||||||||||||||
Interest income from subsidiaries | 580 | — | — | (580 | ) | — | ||||||||||||||
Other interest income | 114 | 27 | 3,630 | (2 | ) | 3,769 | ||||||||||||||
Total interest income | 904 | 894 | 13,299 | (796 | ) | 14,301 | ||||||||||||||
Deposits | — | — | 970 | (13 | ) | 957 | ||||||||||||||
Short-term borrowings | 50 | 8 | 238 | (241 | ) | 55 | ||||||||||||||
Long-term debt | 860 | 338 | 699 | (412 | ) | 1,485 | ||||||||||||||
Other interest expense | — | — | 40 | — | 40 | |||||||||||||||
Total interest expense | 910 | 346 | 1,947 | (666 | ) | 2,537 | ||||||||||||||
Net interest income | (6 | ) | 548 | 11,352 | (130 | ) | 11,764 | |||||||||||||
Provision for credit losses | — | 348 | 4,738 | — | 5,086 | |||||||||||||||
Net interest income after provision for credit losses | (6 | ) | 200 | 6,614 | (130 | ) | 6,678 | |||||||||||||
Noninterest income | ||||||||||||||||||||
Fee income — nonaffiliates | — | 30 | 5,717 | — | 5,747 | |||||||||||||||
Other | 141 | 38 | 5,328 | (511 | ) | 4,996 | ||||||||||||||
Total noninterest income | 141 | 68 | 11,045 | (511 | ) | 10,743 | ||||||||||||||
Noninterest expense | ||||||||||||||||||||
Salaries and benefits | 144 | 31 | 6,550 | — | 6,725 | |||||||||||||||
Other | 153 | 177 | 6,151 | (509 | ) | 5,972 | ||||||||||||||
Total noninterest expense | 297 | 208 | 12,701 | (509 | ) | 12,697 | ||||||||||||||
Income (loss) before income tax expense (benefit) and equity in undistributed income of subsidiaries | (162 | ) | 60 | 4,958 | (132 | ) | 4,724 | |||||||||||||
Income tax expense (benefit) | (76 | ) | 22 | 1,529 | — | 1,475 | ||||||||||||||
Equity in undistributed income of subsidiaries | 3,258 | — | — | (3,258 | ) | — | ||||||||||||||
Net income (loss) before noncontrolling interests | 3,172 | 38 | 3,429 | (3,390 | ) | 3,249 | ||||||||||||||
Less: Net income from noncontrolling interests | — | — | 77 | — | 77 | |||||||||||||||
Parent, WFFI, Other and Wells Fargo net income (loss) | $ | 3,172 | 38 | 3,352 | (3,390 | ) | 3,172 | |||||||||||||
132
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Six months ended June 30, 2010 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
Dividends from subsidiaries: | ||||||||||||||||||||
Bank | $ | 5,975 | — | — | (5,975 | ) | — | |||||||||||||
Nonbank | 21 | — | — | (21 | ) | — | ||||||||||||||
Interest income from loans | — | 1,419 | 18,972 | (76 | ) | 20,315 | ||||||||||||||
Interest income from subsidiaries | 650 | — | 9 | (659 | ) | — | ||||||||||||||
Other interest income | 164 | 60 | 6,158 | — | 6,382 | |||||||||||||||
Total interest income | 6,810 | 1,479 | 25,139 | (6,731 | ) | 26,697 | ||||||||||||||
Deposits | — | — | 1,449 | — | 1,449 | |||||||||||||||
Short-term borrowings | 44 | 20 | 187 | (212 | ) | 39 | ||||||||||||||
Long-term debt | 1,447 | 547 | 1,038 | (523 | ) | 2,509 | ||||||||||||||
Other interest expense | 1 | — | 103 | — | 104 | |||||||||||||||
Total interest expense | 1,492 | 567 | 2,777 | (735 | ) | 4,101 | ||||||||||||||
Net interest income | 5,318 | 912 | 22,362 | (5,996 | ) | 22,596 | ||||||||||||||
Provision for credit losses | — | 519 | 8,800 | — | 9,319 | |||||||||||||||
Net interest income after provision for credit losses | 5,318 | 393 | 13,562 | (5,996 | ) | 13,277 | ||||||||||||||
Noninterest income | ||||||||||||||||||||
Fee income — nonaffiliates | — | 54 | 11,806 | — | 11,860 | |||||||||||||||
Other | 382 | 76 | 8,267 | (339 | ) | 8,386 | ||||||||||||||
Total noninterest income | 382 | 130 | 20,073 | (339 | ) | 20,246 | ||||||||||||||
Noninterest expense | ||||||||||||||||||||
Salaries and benefits | (50 | ) | 96 | 13,434 | — | 13,480 | ||||||||||||||
Other | 465 | 357 | 10,900 | (339 | ) | 11,383 | ||||||||||||||
Total noninterest expense | 415 | 453 | 24,334 | (339 | ) | 24,863 | ||||||||||||||
Income (loss) before income tax expense (benefit) and equity in undistributed income of subsidiaries | 5,285 | 70 | 9,301 | (5,996 | ) | 8,660 | ||||||||||||||
Income tax expense (benefit) | (208 | ) | 25 | 3,098 | — | 2,915 | ||||||||||||||
Equity in undistributed income of subsidiaries | 116 | — | — | (116 | ) | — | ||||||||||||||
Net income (loss) before noncontrolling interests | 5,609 | 45 | 6,203 | (6,112 | ) | 5,745 | ||||||||||||||
Less: Net income from noncontrolling interests | — | — | 136 | — | 136 | |||||||||||||||
Parent, WFFI, Other and Wells Fargo net income (loss) | $ | 5,609 | 45 | 6,067 | (6,112 | ) | 5,609 | |||||||||||||
133
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Six months ended June 30, 2009 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
Dividends from subsidiaries: | ||||||||||||||||||||
Bank | $ | 717 | — | — | (717 | ) | — | |||||||||||||
Nonbank | 209 | — | — | (209 | ) | — | ||||||||||||||
Interest income from loans | — | 1,852 | 19,454 | (9 | ) | 21,297 | ||||||||||||||
Interest income from subsidiaries | 1,231 | — | — | (1,231 | ) | — | ||||||||||||||
Other interest income | 227 | 53 | 7,042 | (5 | ) | 7,317 | ||||||||||||||
Total interest income | 2,384 | 1,905 | 26,496 | (2,171 | ) | 28,614 | ||||||||||||||
Deposits | — | — | 1,977 | (21 | ) | 1,956 | ||||||||||||||
Short-term borrowings | 114 | 17 | 574 | (527 | ) | 178 | ||||||||||||||
Long-term debt | 1,889 | 706 | 1,482 | (813 | ) | 3,264 | ||||||||||||||
Other interest expense | — | — | 76 | — | 76 | |||||||||||||||
Total interest expense | 2,003 | 723 | 4,109 | (1,361 | ) | 5,474 | ||||||||||||||
Net interest income | 381 | 1,182 | 22,387 | (810 | ) | 23,140 | ||||||||||||||
Provision for credit losses | — | 1,023 | 8,621 | — | 9,644 | |||||||||||||||
Net interest income after provision for credit losses | 381 | 159 | 13,766 | (810 | ) | 13,496 | ||||||||||||||
Noninterest income | ||||||||||||||||||||
Fee income — nonaffiliates | — | 83 | 11,027 | — | 11,110 | |||||||||||||||
Other | 314 | 71 | 10,025 | (1,136 | ) | 9,274 | ||||||||||||||
Total noninterest income | 314 | 154 | 21,052 | (1,136 | ) | 20,384 | ||||||||||||||
Noninterest expense | ||||||||||||||||||||
Salaries and benefits | 282 | 50 | 12,887 | — | 13,219 | |||||||||||||||
Other | 263 | 371 | 11,796 | (1,134 | ) | 11,296 | ||||||||||||||
Total noninterest expense | 545 | 421 | 24,683 | (1,134 | ) | 24,515 | ||||||||||||||
Income (loss) before income tax expense (benefit) and equity in undistributed income of subsidiaries | 150 | (108 | ) | 10,135 | (812 | ) | 9,365 | |||||||||||||
Income tax expense (benefit) | (234 | ) | (35 | ) | 3,296 | — | 3,027 | |||||||||||||
Equity in undistributed income of subsidiaries | 5,833 | — | — | (5,833 | ) | — | ||||||||||||||
Net income (loss) before noncontrolling interests | 6,217 | (73 | ) | 6,839 | (6,645 | ) | 6,338 | |||||||||||||
Less: Net income from noncontrolling interests | — | — | 121 | — | 121 | |||||||||||||||
Parent, WFFI, Other and Wells Fargo net income (loss) | $ | 6,217 | (73 | ) | 6,718 | (6,645 | ) | 6,217 | ||||||||||||
134
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June 30, 2010 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and cash equivalents due from: | ||||||||||||||||||||
Subsidiary banks | $ | 29,609 | 195 | — | (29,804 | ) | — | |||||||||||||
Nonaffiliates | 17 | 219 | 91,233 | — | 91,469 | |||||||||||||||
Securities available for sale | 4,360 | 2,734 | 150,833 | — | 157,927 | |||||||||||||||
Mortgages and loans held for sale | — | — | 42,580 | — | 42,580 | |||||||||||||||
Loans | 7 | 32,498 | 747,311 | (13,551 | ) | 766,265 | ||||||||||||||
Loans to subsidiaries: | ||||||||||||||||||||
Bank | 3,885 | — | 3,500 | (7,385 | ) | — | ||||||||||||||
Nonbank | 54,137 | — | — | (54,137 | ) | — | ||||||||||||||
Allowance for loan losses | — | (1,728 | ) | (22,856 | ) | — | (24,584 | ) | ||||||||||||
Net loans | 58,029 | 30,770 | 727,955 | (75,073 | ) | 741,681 | ||||||||||||||
Investments in subsidiaries: | ||||||||||||||||||||
Bank | 134,097 | — | — | (134,097 | ) | — | ||||||||||||||
Nonbank | 13,675 | — | — | (13,675 | ) | — | ||||||||||||||
Other assets | 8,490 | 1,291 | 184,520 | (2,096 | ) | 192,205 | ||||||||||||||
Total assets | $ | 248,277 | 35,209 | 1,197,121 | (254,745 | ) | 1,225,862 | |||||||||||||
Liabilities and equity | ||||||||||||||||||||
Deposits | $ | — | — | 845,427 | (29,804 | ) | 815,623 | |||||||||||||
Short-term borrowings | 1,609 | 12,712 | 75,873 | (45,007 | ) | 45,187 | ||||||||||||||
Accrued expenses and other liabilities | 7,762 | 1,668 | 51,248 | (2,096 | ) | 58,582 | ||||||||||||||
Long-term debt | 108,661 | 19,268 | 76,736 | (19,593 | ) | 185,072 | ||||||||||||||
Indebtedness to subsidiaries | 10,473 | — | — | (10,473 | ) | — | ||||||||||||||
Total liabilities | 128,505 | 33,648 | 1,049,284 | (106,973 | ) | 1,104,464 | ||||||||||||||
Parent, WFFI, other and Wells Fargo stockholders’ equity | 119,772 | 1,551 | 146,221 | (147,772 | ) | 119,772 | ||||||||||||||
Noncontrolling interests | — | 10 | 1,616 | — | 1,626 | |||||||||||||||
Total equity | 119,772 | 1,561 | 147,837 | (147,772 | ) | 121,398 | ||||||||||||||
Total liabilities and equity | $ | 248,277 | 35,209 | 1,197,121 | (254,745 | ) | 1,225,862 | |||||||||||||
135
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December 31, 2009 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and cash equivalents due from: | ||||||||||||||||||||
Subsidiary banks | $ | 27,303 | 205 | — | (27,508 | ) | — | |||||||||||||
Nonaffiliates | 11 | 249 | 67,705 | — | 67,965 | |||||||||||||||
Securities available for sale | 4,666 | 2,665 | 165,379 | — | 172,710 | |||||||||||||||
Mortgages and loans held for sale | — | — | 44,827 | — | 44,827 | |||||||||||||||
Loans | 7 | 35,199 | 750,045 | (2,481 | ) | 782,770 | ||||||||||||||
Loans to subsidiaries: | ||||||||||||||||||||
Bank | 6,760 | — | — | (6,760 | ) | — | ||||||||||||||
Nonbank | 56,316 | — | — | (56,316 | ) | — | ||||||||||||||
Allowance for loan losses | — | (1,877 | ) | (22,639 | ) | — | (24,516 | ) | ||||||||||||
Net loans | 63,083 | 33,322 | 727,406 | (65,557 | ) | 758,254 | ||||||||||||||
Investments in subsidiaries: | ||||||||||||||||||||
Bank | 134,063 | — | — | (134,063 | ) | — | ||||||||||||||
Nonbank | 12,816 | — | — | (12,816 | ) | — | ||||||||||||||
Other assets | 10,758 | 1,500 | 189,049 | (1,417 | ) | 199,890 | ||||||||||||||
Total assets | $ | 252,700 | 37,941 | 1,194,366 | (241,361 | ) | 1,243,646 | |||||||||||||
Liabilities and equity | ||||||||||||||||||||
Deposits | $ | — | — | 851,526 | (27,508 | ) | 824,018 | |||||||||||||
Short-term borrowings | 1,546 | 10,599 | 59,813 | (32,992 | ) | 38,966 | ||||||||||||||
Accrued expenses and other liabilities | 7,878 | 1,439 | 54,542 | (1,417 | ) | 62,442 | ||||||||||||||
Long-term debt | 119,353 | 24,437 | 80,499 | (20,428 | ) | 203,861 | ||||||||||||||
Indebtedness to subsidiaries | 12,137 | — | — | (12,137 | ) | — | ||||||||||||||
Total liabilities | 140,914 | 36,475 | 1,046,380 | (94,482 | ) | 1,129,287 | ||||||||||||||
Parent, WFFI, other and Wells Fargo stockholders’ equity | 111,786 | 1,456 | 145,423 | (146,879 | ) | 111,786 | ||||||||||||||
Noncontrolling interests | — | 10 | 2,563 | — | 2,573 | |||||||||||||||
Total equity | 111,786 | 1,466 | 147,986 | (146,879 | ) | 114,359 | ||||||||||||||
Total liabilities and equity | $ | 252,700 | 37,941 | 1,194,366 | (241,361 | ) | 1,243,646 | |||||||||||||
136
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Six months ended June 30, 2010 | ||||||||||||||||
Other | ||||||||||||||||
consolidating | ||||||||||||||||
subsidiaries/ | Consolidated | |||||||||||||||
(in millions) | Parent | WFFI | eliminations | Company | ||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net cash provided by operating activities | $ | 7,924 | 1,001 | 7,929 | 16,854 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Sales proceeds | 370 | 462 | 3,149 | 3,981 | ||||||||||||
Prepayments and maturities | — | 108 | 22,633 | 22,741 | ||||||||||||
Purchases | (113 | ) | (564 | ) | (10,418 | ) | (11,095 | ) | ||||||||
Loans: | ||||||||||||||||
Decrease in banking subsidiaries’ loan originations, net of collections | — | 95 | 20,809 | 20,904 | ||||||||||||
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries | — | — | 3,556 | 3,556 | ||||||||||||
Purchases (including participations) of loans by banking subsidiaries | — | — | (1,201 | ) | (1,201 | ) | ||||||||||
Principal collected on nonbank entities’ loans | — | 5,574 | 2,432 | 8,006 | ||||||||||||
Loans originated by nonbank entities | — | (3,071 | ) | (2,238 | ) | (5,309 | ) | |||||||||
Net repayments from (advances to) subsidiaries | (2,004 | ) | (621 | ) | 2,625 | — | ||||||||||
Principal collected on notes/loans made to subsidiaries | 7,046 | — | (7,046 | ) | — | |||||||||||
Net decrease (increase) in investment in subsidiaries | 1,359 | — | (1,359 | ) | — | |||||||||||
Net cash paid for acquisitions | — | — | (11 | ) | (11 | ) | ||||||||||
Other, net | 2 | (12 | ) | (29,842 | ) | (29,852 | ) | |||||||||
Net cash provided by investing activities | 6,660 | 1,971 | 3,089 | 11,720 | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||
Net change in: | ||||||||||||||||
Deposits | — | — | (8,395 | ) | (8,395 | ) | ||||||||||
Short-term borrowings | (10 | ) | 2,114 | (1,010 | ) | 1,094 | ||||||||||
Long-term debt: | ||||||||||||||||
Proceeds from issuance | 1,577 | — | 588 | 2,165 | ||||||||||||
Repayment | (13,282 | ) | (5,126 | ) | (13,517 | ) | (31,925 | ) | ||||||||
Preferred stock: | ||||||||||||||||
Cash dividends paid | (369 | ) | — | — | (369 | ) | ||||||||||
Common stock: | ||||||||||||||||
Proceeds from issuance | 865 | — | — | 865 | ||||||||||||
Repurchased | (68 | ) | — | — | (68 | ) | ||||||||||
Cash dividends paid | (520 | ) | — | — | (520 | ) | ||||||||||
Common stock warrants repurchased | (540 | ) | — | — | (540 | ) | ||||||||||
Excess tax benefits related to stock option payments | 75 | — | — | 75 | ||||||||||||
Net change in noncontrolling interests | — | — | (465 | ) | (465 | ) | ||||||||||
Net cash used by financing activities | (12,272 | ) | (3,012 | ) | (22,799 | ) | (38,083 | ) | ||||||||
Net change in cash and due from banks | 2,312 | (40 | ) | (11,781 | ) | (9,509 | ) | |||||||||
Cash and due from banks at beginning of period | 27,314 | 454 | (688 | ) | 27,080 | |||||||||||
Cash and due from banks at end of period | $ | 29,626 | 414 | (12,469 | ) | 17,571 | ||||||||||
137
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Six months ended June 30, 2009 | ||||||||||||||||
Other | ||||||||||||||||
consolidating | ||||||||||||||||
subsidiaries/ | Consolidated | |||||||||||||||
(in millions) | Parent | WFFI | eliminations | Company | ||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net cash provided by operating activities | $ | 721 | 801 | 16,327 | 17,849 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Sales proceeds | 562 | 363 | 17,946 | 18,871 | ||||||||||||
Prepayments and maturities | — | 84 | 18,400 | 18,484 | ||||||||||||
Purchases | (308 | ) | (597 | ) | (80,018 | ) | (80,923 | ) | ||||||||
Loans: | ||||||||||||||||
Decrease (increase) in banking subsidiaries’ loan originations, net of collections | — | (217 | ) | 28,687 | 28,470 | |||||||||||
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries | — | — | 3,179 | 3,179 | ||||||||||||
Purchases (including participations) of loans by banking subsidiaries | — | — | (1,563 | ) | (1,563 | ) | ||||||||||
Principal collected on nonbank entities’ loans | — | 4,853 | 1,618 | 6,471 | ||||||||||||
Loans originated by nonbank entities | — | (2,307 | ) | (2,012 | ) | (4,319 | ) | |||||||||
Net repayments from (advances to) subsidiaries | 10,246 | — | (10,246 | ) | — | |||||||||||
Capital notes and term loans made to subsidiaries | (64 | ) | — | 64 | — | |||||||||||
Principal collected on notes/loans made to subsidiaries | 5,202 | — | (5,202 | ) | — | |||||||||||
Net decrease (increase) in investment in subsidiaries | (5,011 | ) | — | 5,011 | — | |||||||||||
Net cash paid for acquisitions | — | — | (132 | ) | (132 | ) | ||||||||||
Other, net | 22,460 | 151 | 13,333 | 35,944 | ||||||||||||
Net cash provided (used) by investing activities | 33,087 | 2,330 | (10,935 | ) | 24,482 | |||||||||||
Cash flows from financing activities: | ||||||||||||||||
Net change in: | ||||||||||||||||
Deposits | — | — | 32,192 | 32,192 | ||||||||||||
Short-term borrowings | (14,426 | ) | 1,781 | (39,946 | ) | (52,591 | ) | |||||||||
Long-term debt: | ||||||||||||||||
Proceeds from issuance | 3,538 | — | 338 | 3,876 | ||||||||||||
Repayment | (11,500 | ) | (5,000 | ) | (18,662 | ) | (35,162 | ) | ||||||||
Preferred stock: | ||||||||||||||||
Cash dividends paid | (1,053 | ) | — | — | (1,053 | ) | ||||||||||
Common stock: | ||||||||||||||||
Proceeds from issuance | 9,308 | — | — | 9,308 | ||||||||||||
Repurchased | (63 | ) | — | — | (63 | ) | ||||||||||
Cash dividends paid | (1,657 | ) | — | — | (1,657 | ) | ||||||||||
Excess tax benefits related to stock option payments | 3 | — | — | 3 | ||||||||||||
Net change in noncontrolling interests | — | — | (315 | ) | (315 | ) | ||||||||||
Other, net | (34 | ) | — | 34 | — | |||||||||||
Net cash used by financing activities | (15,884 | ) | (3,219 | ) | (26,359 | ) | (45,462 | ) | ||||||||
Net change in cash and due from banks | 17,924 | (88 | ) | (20,967 | ) | (3,131 | ) | |||||||||
Cash and due from banks at beginning of period | 15,658 | 426 | 7,679 | 23,763 | ||||||||||||
Cash and due from banks at end of period | $ | 33,582 | 338 | (13,288 | ) | 20,632 | ||||||||||
138
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To be well capitalized | ||||||||||||||||||||||||
under the FDICIA | ||||||||||||||||||||||||
For capital | prompt corrective | |||||||||||||||||||||||
Actual | adequacy purposes | action provisions | ||||||||||||||||||||||
(in billions) | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
As of June 30, 2010: | ||||||||||||||||||||||||
Total capital (to risk-weighted assets) | ||||||||||||||||||||||||
Wells Fargo & Company | $ | 141.1 | 14.53 | % | ³ | $77.7 | ³ | 8.00 | % | |||||||||||||||
Wells Fargo Bank, N.A. | 119.1 | 13.42 | ³ | 71.0 | ³ | 8.00 | ³ | $88.7 | ³ | 10.00 | % | |||||||||||||
Tier 1 capital (to risk-weighted assets) | ||||||||||||||||||||||||
Wells Fargo & Company | 102.0 | 10.51 | ³ | 38.8 | ³ | 4.00 | ||||||||||||||||||
Wells Fargo Bank, N.A. | 90.9 | 10.24 | ³ | 35.5 | ³ | 4.00 | ³ | 53.2 | ³ | 6.00 | ||||||||||||||
Tier 1 capital (to average assets) | ||||||||||||||||||||||||
(Leverage ratio) | ||||||||||||||||||||||||
Wells Fargo & Company | 102.0 | 8.66 | ³ | 47.1 | ³ | 4.00 | (1) | |||||||||||||||||
Wells Fargo Bank, N.A. | 90.9 | 8.81 | ³ | 41.2 | ³ | 4.00 | (1) | ³ | 51.6 | ³ | 5.00 | |||||||||||||
(1) | The leverage ratio consists of Tier 1 capital divided by quarterly average total assets, excluding goodwill and certain other items. The minimum leverage ratio guideline is 3% for banking organizations that do not anticipate significant growth and that have well-diversified risk, excellent asset quality, high liquidity, good earnings, effective management and monitoring of market risk and, in general, are considered top-rated, strong banking organizations. |
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ABCP | Asset-based commercial paper | |
ALCO | Asset/Liability Management Committee | |
AMTN | Australian medium-term note program | |
ARS | Auction rate security | |
ASC | Accounting Standards Codification | |
ASU | Accounting Standards Update | |
ARM | Adjustable-rate mortgage | |
AVM | Automated valuation model | |
CDs | Certificates of deposit | |
CDO | Collateralized debt obligation | |
CLO | Collateralized loan obligation | |
CPR | Constant prepayment rate | |
CRE | Commercial real estate | |
EMTN | European medium-term note program | |
ESOP | Employee Stock Ownership Plan | |
FAS | Statement of Financial Accounting Standards | |
FASB | Financial Accounting Standards Board | |
FDIC | Federal Deposit Insurance Corporation | |
FHA | Federal Housing Administration | |
FHLB | Federal Home Loan Bank | |
FHLMC | Federal Home Loan Mortgage Company | |
FICO | Fair Isaac Corporation (credit rating) | |
FNMA | Federal National Mortgage Association | |
FRB | Federal Reserve Board | |
GAAP | Generally Accepted Accounting Principles | |
GNMA | Government National Mortgage Association | |
GSE | Government-sponsored entity | |
HAMP | Home Affordability Modification Program | |
IRA | Individual Retirement Account | |
LHFS | Loans held for sale | |
LIBOR | London Interbank Offered Rate | |
LTV | Loan-to-value | |
MBS | Mortgage-backed security | |
MHFS | Mortgages held for sale | |
MSR | Mortgage servicing right | |
MTN | Medium-term note program | |
NAV | Net asset value | |
NPA | Nonperforming asset | |
OCC | Office of the Comptroller of the Currency | |
OCI | Other comprehensive income | |
OTC | Over-the-counter | |
OTTI | Other-than-temporary impairment | |
PCI Loans | Purchased credit-impaired loans are acquired loans with evidence of credit deterioration accounted for under FASB ASC 310-30 (AICPA Statement of Position 03-3) | |
PTPP | Pre-tax pre-provision profit | |
QSPE | Qualifying special purpose entity | |
RBC | Risk-based capital | |
ROA | Wells Fargo net income to average total assets |
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ROE | Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity | |
SEC | Securities and Exchange Commission | |
S&P | Standard & Poors | |
SPE | Special purpose entity | |
TDR | Troubled debt restructuring | |
VA | Department of Veterans Affairs | |
VaR | Value-at-risk | |
VIE | Variable interest entity | |
WFFCC | Wells Fargo Financial Canada Corporation |
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Maximum number of | ||||||||||||
Total number | shares that may yet | |||||||||||
of shares | Weighted-average | be repurchased under | ||||||||||
Calendar month | repurchased | (1) | price paid per share | the authorizations | ||||||||
April | 776,794 | $32.66 | 3,992,919 | |||||||||
May | 88,602 | 32.36 | 3,904,317 | |||||||||
June | 27,777 | 27.93 | 3,876,540 | |||||||||
Total | 893,173 | |||||||||||
(1) | All shares were repurchased under the authorization covering up to 25 million shares of common stock approved by the Board of Directors and publicly announced by the Company on September 23, 2008. Unless modified or revoked by the Board, this authorization does not expire. |
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Dated: August 6, 2010 | WELLS FARGO & COMPANY | |||
By: | /s/ RICHARD D. LEVY | |||
Richard D. Levy | ||||
Executive Vice President and Controller (Principal Accounting Officer) | ||||
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Exhibit | ||||||||||||||||||||
Number | Description | Location | ||||||||||||||||||
3(a) | Restated Certificate of Incorporation, as amended and in effect on the date hereof. | Incorporated by reference to Exhibit 3(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010. | ||||||||||||||||||
3(b) | By-Laws. | Incorporated by reference to Exhibit 3(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010. | ||||||||||||||||||
4(a) | See Exhibits 3(a) and 3(b). | |||||||||||||||||||
4(b) | The Company agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of the Company. | |||||||||||||||||||
10(a) | Form of Performance Share Award Agreement for grants to John G. Stumpf, Howard I. Atkins, David M. Carroll, David A. Hoyt and Mark C. Oman on June 22, 2010. | Incorporated by reference to Exhibit 10(a) to the Company’s Current Report on Form 8-K filed June 25, 2010. | ||||||||||||||||||
10(b) | Wells Fargo Bonus Plan, as amended effective January 1, 2010. | Filed herewith. | ||||||||||||||||||
12(a) | Computation of Ratios of Earnings to Fixed Charges: | Filed herewith. | ||||||||||||||||||
Quarter ended | Six months | |||||||||||||||||||
June 30, | ended June 30, | |||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||
Including interest on deposits | 3.15 | 2.74 | 2.97 | 2.61 | ||||||||||||||||
Excluding interest on deposits | 4.23 | 3.72 | 3.96 | 3.45 | ||||||||||||||||
12(b) | Computation of Ratios of Earnings to Fixed Charges and Preferred Dividends: | Filed herewith. | ||||||||||||||||||
Quarter ended | Six months | |||||||||||||||||||
June 30, | ended June 30, | |||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||
Including interest on deposits | 2.79 | 2.06 | 2.64 | 1.97 | ||||||||||||||||
Excluding interest on deposits | 3.54 | 2.46 | 3.33 | 2.30 | ||||||||||||||||
31(a) | Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith. | ||||||||||||||||||
31(b) | Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith. | ||||||||||||||||||
32(a) | Certification of Periodic Financial Report by Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350. | Furnished herewith. | ||||||||||||||||||
32(b) | Certification of Periodic Financial Report by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350. | Furnished herewith. | ||||||||||||||||||
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Exhibit | ||||||||||||||||||||
Number | Description | Location | ||||||||||||||||||
101* | Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2010, is formatted in XBRL interactive data files: (i) Consolidated Statement of Income for the three and six months ended June 30, 2010 and 2009; (ii) Consolidated Balance Sheet at June 30, 2010, and December 31, 2009; (iii) Consolidated Statement of Changes in Equity and Comprehensive Income for the six months ended June 30, 2010 and 2009; (iv) Consolidated Statement of Cash Flows for the six months ended June 30, 2010 and 2009; and (v) Notes to Financial Statements. | Furnished herewith. |
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