1Q12 Quarterly Supplement April 13, 2012 Exhibit 99.2 |
Wells Fargo 1Q12 Supplement 1 Appendix Pages 22-40 - Recent acquisitions and divestitures 23 - Non-strategic/liquidating loan portfolio risk reduction 24 - Purchased credit-impaired (PCI) portfolios 25 - PCI nonaccretable difference 26 - PCI accretable yield 27 - PCI accretable yield (Commercial & Pick-a-Pay) 28 - 1Q12 Credit quality highlights 29 - Commercial real estate (CRE) loan portfolio 30 - Pick-a-Pay mortgage portfolio 31 - Pick-a-Pay credit highlights 32 - Real estate 1-4 family first mortgage portfolio 33 - Home equity portfolio 34-35 - Credit card portfolio 36 - Auto portfolio 37 Forward-looking statements and additional information 38 Tier 1 common equity under Basel I 39 Tier 1 common equity under Basel III (Estimated) 40 Table of contents 1Q12 Results - 1Q12 Results Page 2 - Continued strong diversification 3 - Balance Sheet overview 4 - Income Statement overview 5 - Loans 6 - Deposits 7 - Net interest income 8 - Noninterest income 9 - Noninterest expense 10-11 - Noninterest expense target 12 - Community Banking 13 - Wholesale Banking 14 - Wealth, Brokerage and Retirement 15 - Credit quality 16-17 - Mortgage servicing 18-19 - Capital 20 - Summary 21 |
Wells Fargo 1Q12 Supplement 2 Record earnings of $4.2 billion, up 3% linked quarter (LQ) and 13% year-over-year (YoY) Record diluted earnings per share of $0.75, up 3% LQ and 12% YoY Total revenue of $21.6 billion, up $1.0 billion LQ on strong noninterest income Pre-tax pre-provision profit (1) of $8.6 billion, up $546 million LQ Positive operating leverage Improved credit quality including a 9% LQ decline in net charge-offs ROA = 1.31%, up 6 bps LQ and up 8 bps YoY ROE = 12.14%, up 17 bps LQ and up 16 bps YoY Capital levels continued to grow - 9.95% Tier 1 common equity ratio under Basel I and estimated Tier 1 common equity ratio under Basel III of 7.81% (2) Quarterly common stock dividend rate increased to $0.22 per share 1Q12 Results Wells Fargo Net Income ($ in millions) 3,759 3,948 4,055 4,107 4,248 1Q11 2Q11 3Q11 4Q11 1Q12 (1) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. interpretation of current Basel III capital proposals.This pro forma calculation is subject to change depending on final promulgation of Basel III capital rulemaking and interpretations by regulatory authorities. See pages 39-40 for additional information regarding Tier 1 common equity ratios. (2) 1Q12 capital ratios are preliminary estimates. Pro forma Basel III calculation based on Tier 1 common equity, as adjusted to reflect management’s |
Wells Fargo 1Q12 Supplement 3 50% 50% Balanced Spread and Fee Income Diversified Fee Generation 10% 10% 17% 6% 10% 2% 24% 5% 6% 10% Deposit Service Charges 10% Card Fees 6% Other Banking Fees 10% Mortgage Servicing, net 2% Insurance 5% Net Gains from Trading (1) 6% Noninterest Income 50% Net Interest Income 50% All data is for 1Q12. (1) Net gains from trading activities. (2) Other noninterest income includes net losses on debt securities available for sale, net gains from equity investments, operating leases and all other noninterest income. Diversified Loan Portfolio Commercial Loans 40% Consumer Loans 55% Continued strong diversification Foreign Loans 5% Mortgage Orig./Sales, net 24% Trust, Investment & IRA fees 10% Commissions & All Other Investment Fees 17% 55% 40% 5% Other Noninterest Income (2) 10% |
Wells Fargo 1Q12 Supplement 4 Balance Sheet overview Loans Total period-end loans down $3.1 billion; core loans grew $1.0 billion; non-strategic/liquidating portfolio decreased $4.1 billion (1) Acquired $858 million of asset-based commercial loans on February 1 Securities available for sale (AFS) Balances up $7.7 billion as we continued to deploy cash, and new investments were partially offset by runoff Trading assets Balances remained elevated as $12.1 billion of conforming agency production was held over quarter-end in security form to facilitate best execution VaR (2) stable with an average daily VaR of $32 million in the quarter Deposits Balances up $10.2 billion on strong consumer deposit growth Long-term debt Balances up $4.4 billion as $8.0 billion in issuances were partially offset by $4.2 billion in maturities Common stock repurchases Purchased 7.6 million common shares in the quarter st Period-end balances, unless otherwise noted. All result comparisons are 1Q12 compared to 4Q11. (1) See pages 6 and 24 for additional information regarding core loans and the non-strategic/liquidating portfolio, which comprises the Pick-a-Pay, liquidating home equity, legacy WFF indirect auto, legacy WFF debt consolidation, Education Finance-government guaranteed, and legacy Wachovia Commercial, Commercial Real Estate, foreign and other PCI loan portfolios. (2) Average one-day 99% Value-at-Risk (VaR). |
Wells Fargo 1Q12 Supplement 5 Income Statement overview Net interest income Stable as growth in securities and the mortgage warehouse, as well as disciplined deposit pricing, was offset by 1 less day in the quarter and continued balance sheet repricing Net interest margin (NIM) up 2 bps to 3.91% Noninterest income Mortgage banking up $506 million on higher origination volumes and strong margins Market sensitive revenues (1) up $458 million on strong equity investment and trading gains - Equity investment gains up $303 million on stronger business results and lower OTTI (2) - Trading up $210 million on higher deferred compensation plan investments (P&L neutral) and stronger customer-driven trading Trust & investment fees up $181 million on higher retail brokerage transaction activity and asset-based fees Other income down $128 million from 4Q11, which included a gain on the sale of H.D. Vest Noninterest expense Employee benefits expense up $596 million reflecting seasonally higher payroll taxes, 401(k) matching on annual incentive compensation and higher deferred compensation expense Commission and incentive compensation increased $166 million on annual equity awards to retirement-eligible employees as well as higher revenue-based compensation in mortgage, retail brokerage and insurance Operating losses up $314 million primarily reflecting litigation accruals on various legal matters Partially offset by previously implemented expense savings initiatives All result comparisons are 1Q12 compared with 4Q11. (1) Includes net gains from trading activities, net losses on debt securities available for sale and net gains from equity investments. (2) Other-than-temporary impairment. |
Wells Fargo 1Q12 Supplement 6 624.4 630.1 643.6 657.3 658.3 126.8 121.8 116.5 112.3 108.2 751.2 751.9 760.1 769.6 766.5 1Q11 2Q11 3Q11 4Q11 1Q12 Core loans Non-strategic/liquidating loans Loans Decline reflects continued reduction in non-strategic/liquidating portfolio Period-end loans down $3.1 billion from 4Q11 - Commercial loans up $299 million as growth in C&I was partially offset by lower CRE and foreign • Included $858 million of asset-based loans acquired from Burdale Capital Finance in February ($445 million in U.S. and $413 million in U.K.) - Consumer loans down $3.4 billion as growth in auto and private student lending was more than offset by a decline in junior lien mortgage and seasonally lower credit card Non-strategic/liquidating loans (1) down $4.1 billion from 4Q11 Core loans grew $1.0 billion from 4Q11 Total average loan yield of 4.81% stable LQ; down 22 bps YoY due to runoff of higher-yielding loans including the non-strategic/liquidating portfolio - Weighted average yield of the non-strategic portfolio was 5.40% in 1Q12 Period-end balances. (1) See page 24 for additional information regarding the non-strategic/liquidating portfolio, which comprises the Pick-a-Pay, liquidating home equity, legacy WFF indirect auto, legacy WFF debt consolidation, Education Finance-government guaranteed, and legacy Wachovia Commercial, Commercial Real Estate, foreign and other PCI loan portfolios. Period–end Loans Outstanding ($ in billions) (1) Total average loan yield 5.03% 5.00% 4.87% 4.81% 4.81% |
Wells Fargo 1Q12 Supplement 7 647.8 665.4 668.4 193.1 246.7 246.6 840.9 912.1 915.0 1Q11 4Q11 1Q12 Interest-bearing deposits Noninterest-bearing deposits 722.5 800.1 807.8 1Q11 4Q11 1Q12 0.30% 0.22% 0.20% Deposits Strong growth and reduced average cost Average deposits up $2.9 billion LQ to $915.0 billion on growth in consumer deposits Average core deposits of $870.5 billion up $5.6 billion from 4Q11 and up $73.7 billion, or 9% YoY - 113% of average loans - Average retail core deposits up 6% annualized LQ Average core checking and savings up $7.7 billion, or 1% from 4Q11, and up $85.3 billion, or 12%, YoY - 93% of average core deposits Consumer checking accounts (1) up a net 2.5% YoY Average deposit cost of 20 bps down 2 bps from 4Q11 and 10 bps YoY Average Deposits and Rates ($ in billions) Average deposit cost Average Core Checking and Savings ($ in billions) (1) Checking account growth is 12-months ending February 2012. |
Wells Fargo 1Q12 Supplement 8 Net interest income Net Interest Income (TE) (1) ($ in millions) Tax-equivalent net interest income (1) stable from 4Q11; NIM up 2 bps Average earning assets flat on: - $11.6 billion increase in AFS securities and $2.1 billion increase in mortgages held for sale - Short-term investments/cash down $12.0 billion and trading assets down $1.7 billion NIM increased 2 bps as increased balance sheet efficiency and pricing discipline was largely offset by balance sheet repricing - Interest-bearing deposit costs down 3 bps in the quarter 10,812 10,851 10,714 11,083 11,058 1Q11 2Q11 3Q11 4Q11 1Q12 4.05% 4.01% 3.84% 3.89% 3.91% Net Interest Margin (NIM) (1) Tax equivalent net interest income is based on the federal statutory rate of 35% for the periods presented. Net interest income was $10,651 million, $10,678 million, $10,542 million, $10,892 million and $10,888 million for 1Q11, 2Q11, 3Q11, 4Q11 and 1Q12 respectively. |
Wells Fargo 1Q12 Supplement 9 Noninterest income Trust and investment fees up 7% LQ on higher retail brokerage transaction activity and asset-based fees Card fees down 4% LQ reflecting seasonally lower credit card fees Mortgage banking up $506 million, or 21%, LQ on an 8% increase in originations and higher margins Insurance up 11% LQ on seasonally higher crop insurance premiums Trading gains up $210 million on $109 million higher deferred compensation plan investment results (P&L neutral) and stronger core customer accommodation trading Equity gains up $303 million LQ reflecting strong business results and lower OTTI Other income down $128 million LQ reflecting 4Q11 gain on sale of H.D. Vest 9,678 9,708 9,086 9,713 10,748 1Q11 2Q11 3Q11 4Q11 1Q12 vs vs ($ in millions) 1Q12 4Q11 1Q11 Noninterest income Service charges on deposit accounts $ 1,084 (1) % 7 Trust and investment fees 2,839 7 (3) Card fees 654 (4) (32) Other fees 1,095 - 11 Mortgage banking 2,870 21 42 Insurance 519 11 3 Net gains from trading activities 640 49 5 (7) n.m. (96) Net gains from equity investments 364 n.m. 3 Operating leases 59 (2) (23) Other 631 (17) 54 Total nonterest income $ 10,748 11 % 11 Net losses on debt securities available for sale |
Wells Fargo 1Q12 Supplement 10 Noninterest expense Noninterest expense up $485 million from 4Q11 driven by higher personnel expense and operating losses; up $260 million from 1Q11 - Commission and incentive compensation increased $166 million, or 7%, on annual equity awards to retirement-eligible employees as well as higher revenue-based compensation in mortgage, retail brokerage and insurance - Employee benefits expense up $596 million reflecting seasonally higher payroll taxes and 401(k) matching on annual incentive compensation as well as $120 million higher deferred compensation expense (P&L neutral) - Other expenses up $62 million and included: • $314 million higher operating losses primarily reflecting litigation accruals on various legal matters 1Q12 expenses included: - $27 million in expense initiative severance expense vs. $133 million in 4Q11 - ~$100 million in mortgage servicing regulatory consent orders expense in line with 4Q11 - $218 million of merger integration costs vs. $374 million in 4Q11 vs vs ($ in millions) 1Q12 4Q11 1Q11 Noninterest expense Salaries $ 3,601 (3) % 4 Commission and incentive compensation 2,417 7 3 Employee benefits 1,608 59 16 Equipment 557 (8) (12) Net occupancy 704 (7) (6) Core deposit and other intangibles 419 (10) (13) FDIC and other deposit assessments 357 14 17 Other 3,330 (2) (1) Total noninterest expense $ 12,993 4 2 12,733 12,475 11,677 12,508 12,993 1Q11 2Q11 3Q11 4Q11 1Q12 |
Wells Fargo 1Q12 Supplement 11 1Q12 up from 4Q11 ($ in millions) 4Q11 Noninterest Expense 1Q12 Noninterest Expense Noninterest expense $12,508 $12,993 $476 $120 $166 $314 Seasonally higher payroll taxes and 401(k) matching Higher deferred compensation expense Higher commission and incentive compensation Higher operating losses (primarily litigation accruals) ~($200) ($262) ($129) Reduction from easonally higher 4Q11 equipment and foreclosed expense Lower merger expenses and Compass severance expense Lower all other expenses s asset Higher employee benefits expense of $596 |
Wells Fargo 1Q12 Supplement 12 $12,993 ~$11,250 1Q12 Noninterest Expense 4Q12 Targeted Noninterest Expense (1) Noninterest expense projected to decline through 2012 ($ in millions) Expected 2Q12 to 4Q12 decline to be driven by: (1) Reflects management’s current targeted noninterest expense in 4Q12. Future 2012 noninterest expense expectations are subject to change and may be affected by a variety of factors, including business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our business and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters. Expected 1Q12 to 2Q12 decline of $500-$700 million to be driven by: Lower personnel expense due to absence of 1Q12 seasonally higher compensation, benefits and payroll taxes Elimination of merger integration expenses Lower mortgage volume- related costs Lower severance-related expense Compass initiative savings Lower personnel expense Lower litigation-related costs |
Wells Fargo 1Q12 Supplement 13 Community Banking Earnings reflect strong mortgage banking results Average loans decreased 1% as lower home equity and credit card balances were partially offset by growth in core auto and private student lending Regional Banking Continued franchise and cross-sell growth (1) - Consumer checking (2) up a net 2.5% from 1Q11 - Business checking (2) up a net 3.8% from 1Q11 - Retail bank cross-sell of 5.98 products per household up from 5.76 in 1Q11 • West cross-sell = 6.35 • East cross-sell = 5.49 Consumer Lending Credit card penetration (1) (3) rose to 29.9%, up from 29.2% in 4Q11 and 27.2% in 1Q11 Record consumer auto originations of $6 billion, up 25% LQ and 10% YoY Mortgage originations up $9 billion from 4Q11 and application volumes up 20% - 15% of originations were from HARP (4) Quarter-end pipeline of $79 billion up 10% from 4Q11 Managed residential mortgage servicing of $1.8 trillion up 2% YoY vs vs ($ in millions) 1Q12 4Q11 1Q11 Net interest income $ 7,326 (1) % (3) Noninterest income 6,095 9 20 Provision for credit losses 1,878 (7) (9) Noninterest expense 7,825 7 3 Income tax expense 1,293 19 74 Segment earnings $ 2,348 (6) % 8 ($ in billions) Avg loans, net $ 486.1 (1) (4) Avg core deposits 575.2 1 5 1Q12 4Q11 1Q11 Regional Banking Consumer checking account growth (1)(2) 2.5 % 3.9 7.5 Business checking account growth (1)(2) 3.8 3.7 5.1 Retail Bank household cross-sell (1) 5.98 5.93 5.76 vs vs ($ in billions) 1Q12 4Q11 1Q11 Consumer Lending Credit card penetration (1) 29.9 % 71 bps 277 Home Mortgage Applications $ 188 20 % 84 Application pipeline 79 10 76 Originations 129 8 54 Managed residential mortgage servicing ($ in trillions) $ 1.8 1 2 (1) Metrics reported on a one-month lag from reported quarter-end; for example 1Q12 cross-sell is as of February 2012. Previously reported metrics have been restated to reflect the lagged reporting. (2) Checking account growth is 12-months ending February 2012. (3) Household penetration as of February 2012 and defined as the percentage of retail banking deposit households that have a credit card with Wells Fargo. Household penetration has been redefined to include legacy Wells Fargo Financial accounts. (4) Home Affordable Refinance Program. |
Wells Fargo 1Q12 Supplement 14 Wholesale Banking Record revenue and PTPP Net interest income up 4% - Average loans up $3.5 billion driven by new loans from existing customers, new customer growth and the Burdale acquisition Noninterest income up 22% LQ driven by strong capital markets, insurance and equity investment results Provision expense up $64 million LQ on $50 million lower reserve release Expenses up 4% LQ driven by higher personnel and crop insurance expenses while efficiency ratio improved to 50.6% (3) Treasury Management Commercial card spend volume of $3.68 billion up 7% LQ and 27% YoY Investment Banking U.S. investment banking market share (2) of 4.8% down from 5.1% in FY2011 Asset Management Total AUM down 2% LQ - Money market outflows were offset by higher equity assets reflecting both higher market valuations and positive net flows (1) Approved and initiated. (2) Source: Dealogic U.S. investment banking fee market share. (3) Efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). vs vs ($ in millions) 1Q12 4Q11 1Q11 Net interest income $ 3,181 4 % 17 Noninterest income 2,852 22 5 Provision for credit losses 95 n.m. (29) Noninterest expense 3,054 4 10 Income tax expense 1,016 25 18 Segment earnings $ 1,868 14 % 14 ($ in billions) Avg loans, net $ 268.6 1 14 Avg core deposits 220.9 (1) 20 vs vs ($ in billions) 1Q12 4Q11 1Q11 Key Metrics: Commercial card spend volume $ 3.68 7 % 27 CEO Mobile Wire volume (1) 3.3 49 156 U.S. investment banking market share % (2) 4.8 % Total AUM $ 444 (2) (10) Advantage Funds AUM 210 (2) (10) |
Wells Fargo 1Q12 Supplement 15 Wealth, Brokerage and Retirement Net interest income down 4% LQ primarily due to lower loan yields Noninterest income up 2% LQ despite 4Q11 gain on the sale of H.D. Vest Total revenue increased 1%; excluding the 4Q11 $153 million H.D. Vest gain, revenue was up 6% on higher retail brokerage asset-based fees, transaction revenues and securities gains - Brokerage managed account asset fees priced at beginning of quarter, reflecting 12/31/2011 market valuations Provision expense up on lower reserve release and recoveries Expenses up 1% LQ on higher personnel expense including higher revenue-based costs and deferred compensation expense Retail Brokerage Managed account assets up 10% LQ and 11% YoY driven by strong net flows and market performance Wealth Management Wealth Management client assets up 2% LQ Retirement IRA assets up 7% LQ Institutional Retirement plan assets up 9% LQ (1) Includes deposits. (2) Data as of February 2012. vs vs ($ in millions) 1Q12 4Q11 1Q11 Net interest income $ 701 (4) % - Noninterest income 2,361 2 (4) Provision for credit losses 43 n.m. 8 Noninterest expense 2,547 1 - Income tax expense 181 (5) (14) Segment earnings $ 296 (5) % (14) ($ in billions) Avg loans, net $ 42.5 (1) - Avg core deposits 135.6 - 8 vs vs ($ in billions, except where noted) 1Q12 4Q11 1Q11 Key Metrics: WBR Clients Assets (1) ($ in trillions)$ 1.4 5 % - Cross-sell (2) 10.16 9 bps 31 Retail Brokerage Financial Advisors 15,134 (1) % (1) Managed account assets $ 279 10 11 Client assets (1) ($ in trillions) 1.2 6 - Wealth Management Client assets (1) 202 2 (1) Retirement IRA Assets 287 7 1 Institutional Retirement Plan Assets 257 9 5 |
Wells Fargo 1Q12 Supplement 16 2.21 1.84 1.81 2.04 2.00 1Q11 2Q11 3Q11 4Q11 1Q12 3.21 2.84 2.61 2.64 2.40 1Q11 2Q11 3Q11 4Q11 1Q12 Credit quality Improved performance with lower net charge-offs $2.4 billion net charge-offs, down $245 million LQ and down 56% from 4Q09 peak - 1.25% net charge-off rate, down 11 bps LQ Provision expense of $2.0 billion, down $45 million from 4Q11, includes a $400 million reserve release (1) in 1Q12 vs. $600 million in 4Q11 Allowance for credit losses = $19.1 billion Remaining PCI nonaccretable = 25.8% of remaining UPB (2) Credit metrics: - $678 million LQ increase in NPAs reflects $1.7 billion in additional junior lien nonaccruals resulting from January 2012 interagency guidance (3) ; excluding the $1.7 billion in junior lien nonaccruals, NPLs fell $948 million on declines in all categories - Early stage consumer delinquency balances declined 18% and rates improved 40 bps LQ driven by seasonality (1) Reserve release represents the amount by which net charge-offs exceed the provision for credit losses. (2) Unpaid principal balance for PCI loans that have not had a UPB charge-off. (3) Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties issued January 31, 2012. Net Charge-offs ($ in billions) 1.73% 1.52% 1.37% 1.36% 1.25% Net charge-off rate Provision Expense ($ in billions) |
Wells Fargo 1Q12 Supplement 17 1.7 1.5 1.5 1.5 1.2 0.7 0.3 0.4 0.5 0.4 2.4 1.8 1.9 2.0 1.6 1Q11 2Q11 3Q11 4Q11 1Q12 Consumer Commercial Credit quality Nonperforming Assets ($ in billions) Consumer Loans 30-89 DPD & Still Accruing (Balances and rates) Loans 90+ DPD and Still Accruing ($ in billions) (1) Includes $1.7 billion at March 31, 2012, resulting from implementation of Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties issued January 31, 2012. (2) Excludes mortgage loans insured/guaranteed by the FHA or VA, reverse mortgages, margin loans and student loans whose repayments are predominantly guaranteed by guarantee agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program. Also excludes the carrying value of PCI loans contractually delinquent. (3) Consumer includes mortgage loans held for sale 30-89 days and 90 days or more past due and still accruing. (1) 25.0 23.0 21.9 21.3 22.0 5.5 4.9 4.9 4.7 4.6 30.5 27.9 26.8 26.0 26.6 1Q11 2Q11 3Q11 4Q11 1Q12 Nonaccrual loans Foreclosed assets 2.36% 2.32% 2.37% 2.40% 2.00% 8.3 8.1 8.2 8.3 6.8 $0 $5 $10 1Q11 2Q11 3Q11 4Q11 1Q12 (2) (3) (2) (3) |
Wells Fargo 1Q12 Supplement 18 71% 19% 5% 5% Mortgage servicing Wells Fargo has a high quality servicing portfolio Residential Mortgage Servicing Portfolio $1.8 Trillion (as of March 31, 2012) Agency Retained and acquired portfolio Non-agency securitizations of WFC originated loans Non-agency acquired servicing and private whole loan sales 71% of the portfolio is with the Agencies (FNMA, FHLMC and GNMA) 19% are loans that we retained or acquired - Loss exposure handled through loan loss reserves and PCI nonaccretable 5% are private securitizations where Wells Fargo originated the loan and therefore has some repurchase risk - 79% prime at origination - 58% from pre-2006 vintages - Insignificant amount of home equity and no option ARMs - ~50% do not have traditional reps and warranties 5% are non-agency acquired servicing and private whole loan sales - 4% is acquired servicing where Wells Fargo did not underwrite and securitize and has repurchase recourse with the originator - 1% are private whole loan sales • Less than 2% subprime at origination • Loans sold to others and subsequently securitized are included in private securitizations above |
Wells Fargo 1Q12 Supplement 19 Mortgage servicing Delinquency ratios lower than peers and total repurchase demands stable As of 4Q11, the delinquency and foreclosure ratio of Wells Fargo’s servicing portfolio continued to be lower than peers, per industry data Wells Fargo’s total delinquency and foreclosure ratio for 1Q12 was 6.89%, down from a peak of 8.96% in 4Q09 Total repurchase demands down modestly LQ and down approximately 25% YoY Agency - Agency repurchase demands outstanding down from 4Q11 • Agency new demands for 2006-2008 vintages are down slightly in 1Q12 • Demand on newer vintage originations continue to emerge consistent with our estimates - Demands and losses continued to be concentrated in the 2006 - early 2008 vintages Non-Agency - Non-agency repurchase demands outstanding, which includes non-agency securities, whole loans sold and acquired servicing, up from 4Q11, but continued to be a small percentage of total demands outstanding (1) Inside Mortgage Finance, data as of December 31, 2011. Industry excluding WFC performance calculated based on IMF data. (2) Industry is all large servicers ($6.8 trillion) including WFC, C, JPM and BAC. (3) Includes mortgage insurance rescissions. Total Outstanding Repurchase Demands (3) and Agency New Demands for 2006-2008 Vintages 4Q11 Servicing Portfolio Delinquency Performance (1) $3.76 $4.31 $3.84 $2.95 $2.49 $2.24 $2.02 $2.01 $1.86 (1,000) 1,000 3,000 5,000 7,000 9,000 11,000 13,000 15,000 17,000 19,000 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Number of Outstanding Demands Agency New Demands for 2006 -2008 Vintages Original Loan Balance of Outstanding Demands ($ in B) 5.63% 5.99% 6.56% 9.83% 7.21% 7.79% 2.33% 2.51% 5.01% 3.89% 3.67% 4.15% Wells Fargo Citi JPM Chase Bank of America Industry Industry ex WFC Foreclosure Rate Delinquency Rate 7.96% 8.50% 11.57% 13.72% 10.88% 11.94% (2) |
Wells Fargo 1Q12 Supplement 20 Capital Capital remained strong and continued to grow internally 8.93% 9.15% 9.34% 9.46% 9.95% 1Q11 2Q11 3Q11 4Q11 1Q12 Tier 1 common equity ratio increased 49 bps in 1Q12 Tier 1 common equity ratio under Basel III is estimated to be 7.81% at 3/31/12 (1) Increased common stock quarterly dividend rate to $0.22 per share in 1Q12 Purchased 7.6 million common shares in 1Q12 Called $875 million of 6.38% trust preferred securities; to be redeemed on 4/13/12 See Appendix page 39 for additional information on Tier 1 common equity. 1Q12 capital ratios are preliminary estimates. (1) Pro forma Basel III calculation based on Tier 1 common equity, as adjusted to reflect management’s interpretation of current Basel III capital proposals. This pro forma calculation is subject to change depending on final promulgation of Basel III capital rulemaking and interpretations thereof by regulatory authorities. See page 40 for additional information. Tier 1 Common Equity Ratio |
Wells Fargo 1Q12 Supplement 21 Summary Record earnings of $4.2 billion Robust revenue growth on strong noninterest income Expenses up on higher revenues and seasonality - 2Q12 expense currently expected to decline $500 - $700 million - Noninterest expense expected to decline to ~$11,250 million in 4Q12 (1) Higher pre-tax pre-provision profit (2) of $8.6 billion Positive operating leverage Improved credit quality Solid returns - ROA = 1.31% - ROE = 12.14% Capital levels continued to grow Rewarded shareholders with additional returns on their investment - Increased common stock quarterly dividend rate to $0.22 per share in 1Q12 (1) Reflects management’s current targeted noninterest expense in 4Q12. Future 2012 noninterest expense expectations are subject to change and may be affected by a variety of factors, including business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our business and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters. (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. |
Wells Fargo 1Q12 Supplement 22 Appendix |
Wells Fargo 1Q12 Supplement 23 Recent acquisitions and divestitures Acquired from / Divestiture of Date 2012 Pending BNP Paribas North American Energy Lending Estimated April 2012 Complete Burdale Financial Holdings Limited 1Q12 EverKey Global Partners 1Q12 2011 Loan portfolio purchases Irish Bank Resolution Corp. 4Q11 Bank of Ireland 3Q11 Allied Irish 2Q11 Acquisitions LaCrosse Holdings, LLC 4Q11 CP Equity, LLC (remaining equity interest) 3Q11 Foreign Currency Exchange Corp. (certain assets) 3Q11 Insurance brokerage firms 7 transactions 2Q11-3Q11 Divestitures H.D. Vest Financial Services 4Q11 Wells Fargo Third Party Administrator, Inc. 4Q11 WFF Canadian, Guam and Saipan receivables 4Q11 American E&S 2Q11 |
Wells Fargo 1Q12 Supplement 24 (1) Net of purchase accounting adjustments. -$64.0 Non-strategic/liquidating loan portfolio risk reduction -$5.0 -$82.6 -$5.3 -$4.2 -$4.1 ($ in billions) 1Q12 4Q11 3Q11 2Q11 1Q11 4Q08 Pick-a-Pay mortgage (1) $ 64.0 65.7 67.4 69.6 71.5 95.3 Liquidating home equity 5.5 5.7 6.0 6.3 6.6 10.3 Legacy WFF indirect auto 1.9 2.5 3.1 3.9 4.9 18.2 Legacy WFF debt consolidation 16.0 16.5 17.2 17.7 18.4 25.3 Education Finance - gov't guaranteed 14.8 15.4 15.6 16.3 16.9 20.5 Legacy WB C&I, CRE and foreign PCI loans (1) 5.2 5.7 6.3 7.0 7.5 18.7 Legacy WB other PCI loans (1) 0.8 0.8 0.9 1.0 1.0 2.5 Total $ 108.2 112.3 116.5 121.8 126.8 190.8 |
Wells Fargo 1Q12 Supplement 25 Purchased credit-impaired (PCI) portfolios Legacy Wachovia PCI loans continued to perform better than originally expected (1) there will be a loss of contractually due amounts upon final resolution of the loan. (2) Reflects releases of $1.8 billion for loan resolutions and $4.4 billion from the reclassification of nonaccretable difference to the accretable yield, which will result in increasing income over the remaining life of the loan or pool of loans. ($ in billions) Adjusted unpaid principal balance (1) December 31, 2008 $ 29.2 62.5 6.5 98.2 December 31, 2011 8.5 36.9 1.8 47.2 March 31, 2012 7.8 35.8 1.8 45.4 Nonaccretable difference rollforward 12/31/08 Nonaccretable difference $ 10.4 26.5 4.0 40.9 Addition of nonaccretable difference due to acquisitions 0.2 - - 0.2 Losses from loan resolutions and write-downs (6.9) (15.5) (2.6) (25.0) Release of nonaccretable difference since merger (3.0) (2.4) (0.8) (6.2) (2) 3/31/12 Remaining nonaccretable difference 0.7 8.6 0.6 9.9 Life-to-date net performance Additional provision since 2008 merger $ (1.7) - (0.1) (1.8) Release of nonaccretable difference since 2008 merger 3.0 2.4 0.8 6.2 (2) Net performance 1.3 2.4 0.7 4.4 Commercial Pick-a-Pay Other consumer Total Includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate |
Wells Fargo 1Q12 Supplement 26 (1) settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases for settlements with borrowers due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations. (2) Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale. (3) Reclassification of nonaccretable difference to accretable yield for loans with increased cash flow estimates will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans. (4) Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan. (5) Unpaid principal balance of loans without write-downs. $9.9 billion in nonaccretable difference remains to absorb losses on PCI loans - Remaining nonaccretable = 25.8% of unpaid principal balance (UPB) (5) • Remaining Pick-a-Pay nonaccretable = 28.3% of Pick-a-Pay UPB (5) PCI nonaccretable difference Analysis of nonaccretable difference for PCI loans ($ in millions) Pick-a-Pay Total Balance at December 31, 2011 $ 929 9,126 Addition of nonaccretable difference due to acquisitions - - - Release of nonaccretable difference due to: Loans resolved by settlement with borrower (1) (28) - - Loans resolved by sales to third parties (2) - - - Reclassification to accretable yield for loans with improving credit-related cash flows (3) (108) - Use of nonaccretable difference due to: Losses from loan resolutions and write-downs (4) (45) (505) Balance at March 31, 2012 $ 748 8,621 - (127) (19) (28) - (235) (569) Commercial 652 10,707 Other consumer 506 9,875 Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of |
Wells Fargo 1Q12 Supplement 27 1Q12 results included accretion of $514 million, down modestly from 4Q11 as balances and yields declined Balance of $15.8 billion expected to accrete to income over the remaining life of the underlying loans PCI accretable yield (1) Includes accretable yield released as a result of settlements with borrowers, which is included in interest income. (2) Includes accretable yield released as a result of sales to third parties, which is included in noninterest income. (3) Represents changes in cash flows expected to be collected due to changes in interest rates on variable rate PCI loans, changes in prepayment assumptions and the impact of modifications. Cumulative Accretable yield rollforward since ($ in millions) 1Q12 4Q11 merger Total, beginning of period $ 15,961 16,896 10,447 Addition of accretable yield due to acquisitions - 124 128 Accretion into interest income (1) (514) (551) (7,713) Accretion into noninterest income due to sales (2) - (1) (237) Reclassification from nonaccretable difference for loans with improving cash flows 235 55 4,448 Changes in expected cash flows that do not affect nonaccretable difference (3) 81 (562) 8,690 Total, end of period $ 15,763 15,961 15,763 |
Wells Fargo 1Q12 Supplement 28 PCI accretable yield (Commercial and Pick-a-Pay) Includes both legacy Wachovia PCI loans as well as recently purchased PCI loans. Commercial PCI Accretable Yield ($ in millions) 1Q12 4Q11 3Q11 PCI interest income Accretion $ 182 198 220 Resolution income 28 44 65 Average carrying value 6,638 6,812 6,672 Accretable yield percentage Accretion 10.94 % 11.62 13.20 Accretable yield balance $ 1,347 1,363 1,303 Weighted average life (years) 2.8 3.2 2.7 Pick-a-Pay PCI Accretable Yield ($ in millions) 1Q12 4Q11 3Q11 PCI interest income Accretion $ 311 326 310 Average carrying value 28,734 29,331 30,168 Accretable yield percentage 4.32 % 4.45 4.11 Accretable yield balance $ 13,709 14,018 14,989 Weighted average life (years) 11.0 11.0 11.0 |
Wells Fargo 1Q12 Supplement 29 1Q12 Credit quality highlights Net charge-offs of $2.4 billion down $245 million LQ – Commercial losses down $86 million as higher CRE construction losses were more than offset by declines in all other categories – Consumer losses down $159 million on declines across all asset classes Total NPAs of $26.6 billion up $678 million – Nonaccrual loans up $722 million on: • $1.7 billion in junior lien nonaccruals (1) on implementation of interagency guidance 12% were 30+ DPD • Partially offset by declines in all other categories – Foreclosed assets down $44 million • 57% of the balance are government guaranteed loans and loans written down through purchase accounting $1.4 billion, or 29%, are government guaranteed $1.3 billion, or 28%, reflects shift from PCI loans to REO ($432 million consumer and $875 million C&I and CRE) Currently expect future reserve releases absent significant deterioration in the economy (1) Resulting from implementation of Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties issued January 31, 2012. Total ($ in millions) Wells Fargo Commercial loans $ 6,254 339,495 345,749 Consumer loans 29,280 391,492 420,772 Total period-end loans $ 35,534 730,987 766,521 Total nonaccrual loans $ 22,026 Total foreclosed assets 4,617 Total NPAs $ 26,643 as % of loans 3.48 % Provision for credit losses $ 1,995 Net charge-offs 2,395 as % of avg loans 1.25 % Commercial 0.45 Consumer 1.91 % Allowance for credit losses 19,129 as % of loans 2.50 % as % of nonaccrual loans 87 % 1Q12 PCI loans Non PCI loans $ |
Wells Fargo 1Q12 Supplement 30 Commercial real estate (CRE) loan portfolio Outstandings down modestly from 4Q11 Nonaccruals down $185 million, or 12 bps, on lower real estate construction NPLs Net charge-offs stable LQ ($ in millions) 1Q12 4Q11 CRE outstandings Real estate mortgage $ 105,874 105,975 Real estate construction 18,549 19,382 Total CRE outstandings 124,423 125,357 Nonaccrual loans Real estate mortgage $ 4,081 4,085 Real estate construction 1,709 1,890 Total nonaccrual loans 5,790 5,975 as % of loans 4.65 % 4.77 Net charge-offs (recoveries) Real estate mortgage $ 46 117 Real estate construction 67 (5) Total net charge-offs 113 112 as % of avg loans 0.36 % 0.36 |
Wells Fargo 1Q12 Supplement 31 Pick-a-Pay mortgage portfolio Carrying value of $64.0 billion in first lien loans outstanding, down $1.7 billion from 4Q11 and down $31.3 billion from 4Q08 on paid-in-full loans and loss mitigation efforts – Adjusted unpaid principal balance of $71.2 billion, down $2.1 billion from 4Q11 and down $44.5 billion from 4Q08 – $4.0 billion in modification principal forgiveness since acquisition reflects over 103,000 completed full-term modifications; additional $616 million of conditional forgiveness that can be earned by borrowers through performance over the next 3 years – Modification redefault rate has been consistently better than the industry average (as measured by 60+ DPD after six months) ($ in millions) Product type Adjusted unpaid principal balance % of total Adjusted unpaid principal balance % of total Adjusted unpaid principal balance % of total Option payment loans (1) $ 37,251 52 % $ 39,164 53 % $ 99,937 86 % Non-option payment adjustable-rate and fixed-rate loans (1) 9,673 14 9,986 14 15,763 14 Full-term loan modifications (1) 24,284 34 24,207 33 - - Total adjusted unpaid principal balance (1) $ 71,208 100 % $ 73,357 100 % $ 115,700 100 % Total carrying value 63,983 65,652 95,315 At 12/31/2011 At 3/31/2012 At 12/31/2008 (1) Adjusted unpaid principal includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan. |
Wells Fargo 1Q12 Supplement 32 Pick-a-Pay credit highlights Non-PCI portfolio Loans down 3% driven by loans paid-in-full 85% of portfolio current Nonaccrual loans consistent with 4Q11 levels – $130 million of nonaccrual TDRs reclassified to accruing TDR status based on borrower payment performance $3.9 billion in nonaccruals includes $1.0 billion of nonaccruing TDRs and an annualized loss rate of 2.21% Net charge-offs of $200 million in 1Q12, consistent with expectations 41% of portfolio with LTV (2) 80% PCI portfolio Carrying value down 2% 69% of portfolio current vs. 67% in 4Q11 Life-of-loan losses continued to be lower than originally projected at time of merger (1) The carrying value, which does not reflect the allowance for loan losses, includes purchase accounting adjustments, which, for PCI loans, are the nonaccretable difference and the accretable yield, and for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs. (2) The current loan-to-value (LTV) ratio is calculated as the net carrying value (defined in (1) above) divided by the collateral value. (3) The adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan. ($ in millions) 1Q12 4Q11 Non-PCI loans Carrying value (1) $ 35,563 36,596 Nonaccrual loans 3,918 3,909 as a % of loans 11.02 % 10.68 Net charge-offs $ 200 196 as % of avg loans 2.21 % 2.11 90+ days past due as % of loans 10.27 10.07 Current average LTV (2) 86 % 86 Current average FICO 681 681 Contractual average loan size $ 208,000 210,000 Contractual average age of loans 8.04 years 7.79 % of loans in California 49 % 49 ($ in millions) PCI loans Adjusted unpaid principal balance (3) $ 35,785 36,905 Carrying value (1) 28,420 29,056 Current average LTV (2) 90 % 91 Current average FICO 612 610 Contractual average loan size $ 310,000 311,000 Contractual average age of loans 6.00 years 5.75 % of loans in California 68 % 68 |
Wells Fargo 1Q12 Supplement 33 Real estate 1-4 family first mortgage portfolio First lien mortgage loans stable as growth in core first lien mortgage was offset by continued run-off in the liquidating portfolio - Pick-a-Pay non-PCI portfolio down 3% - PCI portfolio down 2% - Debt consolidation first lien down 3% - Core first lien up $2.2 billion, or 1%, reflecting strong origination volumes Core first lien mortgage nonaccruals down $260 million, or 23 bps Core net charge-offs down $19 million (1) Ratios on WFF debt consolidation first mortgage loan portfolio only. (2) Ratios on non runoff first lien mortgage loan portfolio only. ($ in millions) 1Q12 4Q11 Total real estate 1-4 family first mortgage $ 228,885 228,894 Less consumer non-strategic/liquidating portfolios: Pick-a-Pay non-PCI first lien mortgage 35,563 36,596 PCI first lien mortgage 29,082 29,746 WFF debt consolidation first mortgage portfolio 15,610 16,117 Core first lien mortgage 148,630 146,435 Nonaccrual loans $ 2,284 2,263 as % of loans 14.63 % 14.04 Net charge-offs $ 195 233 as % of average loans 4.91 % 5.67 Nonaccrual loans $ 4,481 4,741 as % of loans 3.01 % 3.24 Net charge-offs $ 396 415 as % of loans 1.07 % 1.12 WFF debt consolidation first mortgage loan performance (1) Core first lien mortgage loan performance (2) |
Wells Fargo 1Q12 Supplement 34 Home equity portfolio Core Portfolio (1) Outstandings down 3% - High quality new originations with weighted average CLTV of 62%, 778 FICO, and 31% total debt service ratio 1Q12 losses increased $3 million, or 12 bps 2+ delinquencies decreased $292 million Delinquency rate for loans with a CLTV >100% declined 43 bps Liquidating Portfolio Outstandings down 4% 1Q12 losses down $21 million, or 98 bps 2+ delinquencies declined $29 million Continued decline in delinquency rate for loans with a CLTV >100%, 33 bps improvement Excludes purchased credit-impaired loans. (1) Includes equity lines of credit and closed-end junior liens associated with the Pick-a-Pay portfolio totaling $1.5 billion at March 31, 2012, and December 31, 2011. (2) CLTV is calculated based on outstanding balance plus unused lines of credit divided by estimated home value. Estimated home values are determined predominantly based on automated valuation models updated through March 2012. (3) Unsecured balances, representing the percentage of outstanding balances above the most recent home value. ($ in millions) 1Q12 4Q11 Core Portfolio (1) Outstandings 98,009 100,882 Net charge-offs 721 718 as % of avg loans 2.91 % 2.79 2+ payments past due 2,854 3,146 as % loans 2.92 % 3.13 % CLTV > 100% (2) 37 36 2+ payments past due 3.99 4.42 % Unsecured balances (3) 18 17 % 1st lien position 21 20 Liquidating Portfolio Outstandings 5,456 5,710 Net charge-offs 113 134 as % of avg loans 8.11 % 9.09 2+ payments past due 241 270 as % loans 4.41 % 4.73 % CLTV > 100% (2) 74 74 2+ payments past due 4.69 5.02 % 1st lien position 4 4 |
Wells Fargo 1Q12 Supplement 35 $103.5 billion home equity portfolio - 20% in 1 lien position - 40% in junior lien position behind WFC owned or serviced 1 lien - Excludes purchased credit-impaired loans. (1) Delinquency represents two or more payments past due as of February 2012. Home equity portfolio Delinquency Status Current 1 st lien, Current junior lien 95.7 % Current 1 st lien, Delinquent junior lien 1.1 Delinquent 1 st lien, Current junior lien 1.5 Delinquent 1 st lien, Delinquent junior lien 1.7 st st 40% in junior lien position behind third party 1 lien st Delinquency Status (1) of Junior Liens Behind a Wells Fargo 1 st Lien Outstanding Balance % |
Wells Fargo 1Q12 Supplement 36 Credit card portfolio $22.0 billion credit card outstandings down 4% from 4Q11 as seasonally lower balances offset new customer growth – New accounts increased 23% in the quarter with household penetration increasing to 29.9% (1) • East penetration of 20.4% (1) vs. 19.2% in November 2011 – Purchase dollar volume decreased 7% and transactions fell 7% from 4Q11 Net charge-offs down $14 million LQ, or 23 bps, reflecting continued steady improvement (1) Household penetration as of February 2012 and defined as the percentage of retail banking deposit households that have a credit card with Wells Fargo. Household penetration has been redefined to include Wells Fargo Financial accounts. ($ in millions) 1Q12 4Q11 Credit card outstandings $ 21,998 22,836 Net charge-offs 242 256 as % of avg loans 4.40 % 4.63 |
Wells Fargo 1Q12 Supplement 37 ($ in millions) 1Q12 4Q11 Direct Auto outstandings $ 2,380 2,529 Nonaccrual loans 56 67 as % of loans 2.35 % 2.66 Net charge-offs $ 7 16 as % of avg loans 1.09 % 2.43 30+ days past due $ 31 75 as % of loans 1.31 % 2.98 Indirect Auto outstandings $ 40,908 39,647 Nonaccrual loans 9 9 as % of loans 0.02 % 0.02 Net charge-offs $ 54 68 as % of avg loans 0.57 % 0.69 30+ days past due $ 447 571 as % of loans 1.09 % 1.44 Auto outstandings $ 6,043 5,660 Nonaccrual loans - 6 as % of loans - % 0.11 Net charge-offs (recoveries) $ (3) (1) as % of avg loans n.m. % n.m. Commercial Portfolio Core Consumer Portfolios Auto portfolios (1) Core Consumer Portfolio Core auto outstandings of $43.2 billion up 3% LQ and up 8% YoY Originations were up 25% LQ and 10% YoY reflecting growth across the credit spectrum Net charge-offs were down $23 million, or 27%, LQ on low delinquencies and continued strong used car values March Manheim index of 126.2, up 1% LQ and up 2% from March 2011 30+ days past due decreased $168 million LQ, or 43 bps, reflecting continued improvement in portfolio quality as well as seasonal improvement Commercial Portfolio Loans of $6.0 billion increased 7% LQ reflecting improved demand in floor plan lending Nonaccrual loans down $6 million on continued strong performance of the portfolio (1) Legacy Wells Fargo Financial indirect portfolio balance as of March 31, 2012, was $1,907 million. |
Wells Fargo 1Q12 Supplement 38 Forward-looking statements and additional information Forward-looking statements: This Quarterly Supplement and management’s related presentation contain forward-looking statements about our future financial performance. These forward-looking statements include statements using words such as “believe,” “expect,” “anticipate,” “estimate,” “target”, “should,” “may,” “can,” “will,” “outlook,” “appears” or similar expressions. These forward-looking statements may include, among others, statements about: expected or estimated future losses in our loan portfolios, including our belief that the allowance for loan losses is expected to decline; expected or estimated loan loss reserve releases; mortgage repurchase exposure; exposure related to mortgage practices, including foreclosures and servicing; our noninterest expense, including our targeted noninterest expense for second quarter 2012 and fourth quarter 2012 as part of our expense management initiatives; the future economic environment; loan growth; our net interest margin; reduction or mitigation of risk in our loan portfolios; future effects of loan modification programs; life-of-loan loss estimates; the estimated impact of regulatory reform on our financial results and business and expectations regarding our efforts to mitigate such impact; and our estimated Tier 1 common equity ratio as of March 31, 2012, under proposed Basel capital rules. Investors are urged to not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. For more information about factors that could cause actual results to differ materially from expectations, refer to page 13 of Wells Fargo’s press release announcing our first quarter 2012 results, as well as Wells Fargo’s reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011. Purchased credit-impaired loan portfolio: Loans that were acquired from Wachovia that were considered credit impaired were written down at acquisition date in purchase accounting to an amount estimated to be collectible and the related allowance for loan losses was not carried over to Wells Fargo’s allowance. In addition, such purchased credit-impaired loans are not classified as nonaccrual or nonperforming, and are not included in loans that were contractually 90+ days past due and still accruing. Any losses on such loans are charged against the nonaccretable difference established in purchase accounting and are not reported as charge-offs (until such difference is fully utilized). As a result of accounting for purchased loans with evidence of credit deterioration, certain ratios of the combined company are not comparable to a portfolio that does not include purchased credit-impaired loans. In certain cases, the purchased credit-impaired loans may affect portfolio credit ratios and trends. Management believes that the presentation of information adjusted to exclude the purchased credit-impaired loans provides useful disclosure regarding the credit quality of the non-impaired loan portfolio. Accordingly, certain of the loan balances and credit ratios in this Quarterly Supplement have been adjusted to exclude the purchased credit-impaired loans. References in this Quarterly Supplement to impaired loans mean the purchased credit-impaired loans. Please see pages 30-32 of the press release for additional information regarding the purchased credit-impaired loans. |
Wells Fargo 1Q12 Supplement 39 Tier 1 common equity under Basel I (1) Quarter ended Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2012 2011 2011 2011 2011 $ 146.8 141.7 139.2 137.9 134.9 (1.3) (1.5) (1.5) (1.5) (1.5) 145.5 140.2 137.7 136.4 133.4 (10.6) (10.6) (10.6) (10.6) (10.6) (33.7) (34.0) (34.4) (34.6) (35.1) 3.7 3.8 4.0 4.1 4.2 (0.9) (0.8) (0.7) (0.9) (0.9) (4.1) (3.1) (3.7) (5.3) (4.9) (0.4) (0.4) (0.4) (0.3) (0.1) (A) $ 99.5 95.1 91.9 88.8 86.0 (B) $ 1,000.1 1,005.6 983.2 970.2 962.9 (A)/(B) 9.95 % 9.46 9.34 9.15 8.93 (1) (2) MSRs over specified limitations Wells Fargo & Company and Subsidiaries ($ in billions) Total equity Noncontrolling interests Total Wells Fargo stockholders' equity Adjustments: FIVE QUARTER TIER 1 COMMON EQUITY UNDER BASEL I (1) Preferred equity Goodwill and intangible assets (other than MSRs) Applicable deferred taxes Total risk-weighted assets (2) Tier 1 common equity to total risk-weighted assets Cumulative other comprehensive income Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets. The Company's March 31, 2012, preliminary risk-weighted assets reflect estimated on-balance sheet risk-weighted assets of $831.2 billion and derivative and off-balance sheet risk-weighted assets of $169.0 billion. Tier 1 common equity is a non-generally accepted accounting principle (GAAP) financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews Tier 1 common equity along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants. Other Tier 1 common equity |
Wells Fargo 1Q12 Supplement 40 Tier 1 common equity under Basel III (Estimated) (1) Quarter ended Mar. 31, 2012 $ 99.5 4.1 0.9 Other 0.6 (C) 105.1 (D) $ 1,346.0 (C)/(D) 7.81 % Wells Fargo & Company and Subsidiaries ($ in billions) Tier 1 common equity under Basel I Adjustments from Basel I to Basel III: Impact of threshold deductions defined under Basel III (2) (3) Tier 1 common equity anticipated under Basel III Total risk-weighted assets anticipated under Basel III (4) Tier 1 common equity to total risk-weighted assets anticipated under Basel III (1 ) Tier 1 common equity is a non-generally accepted accounting principle (GAAP) financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews Tier 1 common equity along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants. (2) Volatility in interest rates can have a significant impact on the valuation of cumulative other comprehensive income and MSRs and therefore, impact adjustments under Basel III in future reporting periods. (3) Threshold deductions under Basel III include individual and aggregate limitations, as a percentage of Tier 1 common equity (as defined under Basel III), with respect to MSRs, deferred tax assets and investments in unconsolidated financial companies. (4) Under current Basel proposals, risk-weighted assets incorporate different classifications of assets, with certain risk weights based on a borrower's credit rating or Wells Fargo's own risk models, along with adjustments to address a combination of credit/counterparty, operational and market risks, and other Basel III elements. The amount of risk-weighted assets anticipated under Basel III is preliminary and subject to change depending on final promulgation of Basel III capital rulemaking and interpretations thereof by regulatory authorities. Cumulative other comprehensive income (2) (1) TIER 1 COMMON EQUITY UNDER BASEL III (ESTIMATED) |