Wells Fargo Reports Record Quarterly Net Income of $3.9 Billion

Increased Revenue and Loans, Lower Expenses from First Quarter

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

  • Strong financial results:
    • Record Wells Fargo net income of $3.9 billion, up 29 percent from prior year, up 5 percent from prior quarter
    • Record diluted earnings per common share of $0.70, up 27 percent from prior year, up 4 percent from prior quarter
    • Pre-tax pre-provision profit (PTPP)1 of $7.9 billion, up 4 percent from prior quarter
    • Return on average assets of 1.27 percent, highest in 3 years
    • Revenue of $20.4 billion, up from $20.3 billion in prior quarter
    • Noninterest expense down $258 million from prior quarter
    • Average checking and savings deposits up 9 percent from prior year; consumer checking accounts up a net 7.0 percent from June 30, 2010
    • Total loans of $751.9 billion at June 30, 2011, up $766 million from March 31, 2011; core loan portfolios up $5.8 billion from March 31, 20112
  • Improved capital position:
    • Capital ratios increased, with Tier 1 common equity ratio of 9.2 percent under Basel I at June 30, 2011; under current Basel III capital proposals, Tier 1 common equity ratio estimated at 7.4 percent3
    • Redeemed $3.4 billion of trust preferred securities
    • Re-started open market common stock repurchase program; purchased 35 million shares in second quarter 2011
  • Improved credit quality:
    • Net loan charge-offs declined to $2.8 billion, down $372 million from prior quarter; down $1.7 billion from prior year
    • Nonperforming assets declined to $27.9 billion, down $2.6 billion from prior quarter; down $4.9 billion from prior year
    • Reserve release4 of $1.0 billion (pre tax) reflected improved portfolio performance
  • Converted Wachovia banking stores in Pennsylvania and Florida; remaining Eastern banking markets scheduled to convert by year end; 83 percent of banking customers company-wide on a single system

1 See footnote (2) in SUMMARY FINANCIAL DATA table for more information on pre-tax, pre-provision profit.

2 See table in "Loans" section for more information on core and non-strategic/liquidating loan portfolios.

3 See TIER 1 COMMON EQUITY tables for more information on Tier 1 common equity.

4 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.

Selected Financial Information
     
Quarter ended
June 30, Mar. 31, June 30,
    2011     2011   2010
Earnings
Diluted earnings per common share $ 0.70 0.67 0.55
Wells Fargo net income (in billions) 3.95 3.76 3.06
 
Asset Quality
Net charge-offs as a % of avg. total loans (annualized) 1.52 % 1.73 2.33
Allowance as a % of total loans 2.83 2.98 3.27
Allowance as a % of annualized net charge-offs 187 172 139
 
Other
Revenue (in billions) $ 20.39 20.33 21.39
Average loans (in billions) 751.3 754.1 772.5
Average core deposits (in billions) 807.5 796.8 761.8
Net interest margin 4.01 % 4.05 4.38
                 

Wells Fargo & Company (NYSE:WFC) reported record net income of $3.9 billion, or $0.70 per diluted common share, for second quarter 2011, up from $3.1 billion, or $0.55 per share, for second quarter 2010 and up from $3.8 billion, or $0.67 per share, for first quarter 2011.

“Our business fundamentals were strong with increased revenues, loans and deposits, lower operating costs, improved credit quality and higher capital levels,” said Chairman and CEO John Stumpf. “While the economic recovery continues to be slower than expected, there are signs that businesses are investing for growth, and we’re here to help them. We’re enjoying strong loyalty and market share growth as we continue to focus on helping our customers emerge from the economic downturn. We’re right on track with our integration, having converted 2,215 Wachovia stores to date, including most recently one of our largest East Coast states, Florida. We continue to be focused on building and managing our diversified company for the long-term benefit of our team members, customers, shareholders and communities and feel we are very well positioned to capture future growth opportunities.”

Revenue

Revenue was $20.4 billion, compared with $20.3 billion in first quarter 2011. Businesses generating double-digit linked-quarter annualized revenue growth included corporate banking, commercial real estate, debit card, insurance, international, merchant services, retirement services and SBA lending. “We are pleased with the increased revenue in the quarter, reflecting the stability in loan balances and overall strength of our diversified sources of fee income,” said Chief Financial Officer Tim Sloan.

Net Interest Income

Net interest income was $10.7 billion, up $27 million from first quarter 2011. Average earning assets increased $10 billion from first quarter 2011, driven by growth in short-term investments and high-quality shorter-duration available for sale securities. Excluding the planned runoff of non-strategic/liquidating portfolios5, average loan balances increased from the prior quarter. Continued success in generating low-cost deposits enabled the Company to grow assets while reducing long-term debt, including the redemption of higher-yielding trust preferred securities. Lower cost funding was the primary driver of the increase in net interest income on a linked-quarter basis. Higher short-term investment balances contributed to the slight margin decline from 4.05 percent in first quarter 2011 to 4.01 percent in second quarter.

5 Non-strategic/liquidating portfolios include Pick-a-Pay, liquidating home equity, legacy Wells Fargo Financial indirect auto and debt consolidation, education finance government loans and other PCI loans.

Noninterest Income

Noninterest income was $9.7 billion, up $30 million from first quarter 2011. On a linked-quarter basis, deposit service charges increased 6 percent due to seasonal increases in customer spending and customer account growth. Card fees were up 5 percent from first quarter 2011 on higher debit and credit card spending volumes and new customer account growth. Insurance fees increased 13 percent linked quarter primarily due to seasonally higher crop insurance sales. Gains on trading assets were down due to softer equity and fixed income market conditions but were more than offset by higher gains from equity investments. “Second quarter performance was notable for the diversity of sources of growth and the resilience of non-mortgage banking fee income, up $427 million from first quarter to our highest level since the merger with Wachovia,” said Sloan.

Mortgage banking noninterest income was $1.6 billion, down $397 million from first quarter 2011 on $64 billion of originations compared with $84 billion of originations in first quarter. Mortgage banking noninterest income in second quarter included a $242 million provision for mortgage loan repurchase losses compared with $249 million in first quarter (included in net gains from mortgage loan origination/sales activities). Net mortgage servicing rights (MSRs) results were a $374 million gain compared with a $379 million gain in first quarter 2011. The ratio of MSRs to related loans serviced for others was 87 basis points and the average note rate on the servicing portfolio was 5.26 percent, compared with an average 4.51 percent published rate in the Freddie Mac Primary Mortgage Market Survey at quarter end. The unclosed pipeline at June 30, 2011, was $51 billion compared with $45 billion at March 31, 2011.

The Company had net unrealized securities gains of $9.3 billion at June 30, 2011, up $397 million from first quarter 2011. Period-end securities available for sale balances were up $18.4 billion, reflecting increased investment activity in second quarter.

Noninterest Expense

Noninterest expense was $12.5 billion, down $258 million from first quarter 2011. Second quarter expenses included $484 million of merger integration costs (up from $440 million in first quarter 2011 on increased integration activity in second quarter), and $428 million of operating losses (down from $472 million in first quarter 2011), substantially all for litigation accruals for mortgage foreclosure-related matters. “Merger costs remained within expectations and we are beginning to see positive results from our expense management initiatives,” said Sloan. “While we are still in the early stages of this effort, we expect meaningful cost savings over time, and are targeting $11 billion of noninterest expense for fourth quarter 20126.”

6 See 2Q11 quarterly supplement for additional information regarding noninterest expense and the Company’s targeted noninterest expense for 4Q12.

Loans

Total loans were $751.9 billion at June 30, 2011, up $766 million from $751.2 billion at March 31, 2011. Increased balances in many commercial loan portfolios more than offset the continued planned reduction in the non-strategic/liquidating portfolios, which declined $5.1 billion in the quarter compared with a $6.5 billion decline in first quarter 2011. Many portfolios had double-digit linked quarter annualized growth in average loan balances, including asset-backed finance, capital finance, commercial banking, commercial real estate, government banking, insurance, international, and real estate capital markets.

                           
  June 30, 2011   March 31, 2011  
(in millions)   Core   Liquidating (1)   Total   Core   Liquidating (1)   Total  
Commercial $ 323,673   7,016 330,689 315,715   7,507 323,222
Consumer     306,495   114,737   421,232   308,619   119,314   427,933  
Total loans   $ 630,168   121,753   751,921   624,334   126,821   751,155  
 
Change from prior quarter:   $ 5,834   (5,068 ) 766   371   (6,483 ) (6,112 )
 

(1) See NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS table for additional information on non-strategic/liquidating loan portfolios. Management believes that the above information provides useful disclosure regarding the Company’s ongoing loan portfolios.

 

Deposits

Average core deposits were $807.5 billion, up 6 percent from a year ago and up 5 percent (annualized) from first quarter 2011. Consumer checking accounts grew a net 7.0 percent from June 30, 2010. Average core checking and savings deposits were $735.4 billion, up 9 percent from a year ago and up 7 percent (annualized) from first quarter 2011. Average mortgage escrow deposits were $23.9 billion compared with $25.7 billion a year ago and $27.9 billion in first quarter 2011. Average checking and savings deposits were 91 percent of average core deposits, up from 88 percent a year ago. The average deposit cost for second quarter 2011 was 28 basis points compared with 30 basis points in first quarter 2011. Average core deposits were 107 percent of average loans.

Capital

Capital increased in the second quarter, with Tier 1 common equity reaching 9.2 percent. Under current Basel III proposals, the Tier 1 common equity ratio was an estimated 7.4 percent. The Company redeemed $3.4 billion of trust preferred securities, repurchased 35 million shares of its common stock and paid a quarterly common stock dividend of $0.12 per share.

                 
  June 30,   Mar. 31,     June 30,
(as a percent of total risk-weighted assets)   2011     2011     2010
Ratios under Basel I (1):
Tier 1 common equity (2) 9.2 % 8.9 7.6
Tier 1 capital 11.7 11.5 10.5
Tier 1 leverage 9.4 9.3 8.7
                 
 

(1) June 30, 2011, ratios are preliminary.

(2) See TIER 1 COMMON EQUITY tables for more information on Tier 1 common equity.

 

Credit Quality

“Credit quality continued to improve in the second quarter, our sixth consecutive quarter of declining loan losses and the third consecutive quarter of lower nonperforming assets,” said Mike Loughlin, Chief Risk Officer. Second quarter net charge-offs were $2.8 billion, or 1.52 percent (annualized) of average loans, down $372 million from first quarter net charge-offs of $3.2 billion (1.73 percent). The decline in net charge-offs was driven by lower losses in virtually every loan category and delinquency trends continued to show improvement. Reflecting the improved overall portfolio performance, the provision for credit losses was $1.0 billion less than net charge-offs. “Absent significant deterioration in the economy, we expect future reserve releases,” said Loughlin.

Net Loan Charge-Offs
  Quarter ended
    June 30, 2011     March 31, 2011     December 31, 2010

($ in millions)

 

Net loan
charge-
offs

 

 

As a
% of

average

loans (1)

    Net loan
charge-
offs
 

 

 

As a
% of

average

loans (1)

    Net loan
charge-
offs
 

 

 

As a
% of

average

loans (1)

             
Commercial:
Commercial and industrial $ 254 0.66 % $ 354 0.96 % $ 500 1.34 %
Real estate mortgage 128 0.50 152 0.62 234 0.94
Real estate construction 72 1.32 83 1.38 171 2.51
Lease financing 1 0.01 6 0.18 21 0.61
Foreign     47 0.52   28 0.34   28 0.36
Total commercial     502 0.62   623 0.79   954 1.19
 
Consumer:
Real estate 1-4 family first mortgage 909 1.62 904 1.60 1,024 1.77
Real estate 1-4 family junior lien mortgage 909 3.97 994 4.25 1,005 4.08
Credit card 294 5.63 382 7.21 452 8.21
Other revolving credit and installment     224 1.03   307 1.42   404 1.84
Total consumer     2,336 2.21   2,587 2.42   2,885 2.63
Total   $ 2,838 1.52 % $ 3,210 1.73 % $ 3,839 2.02 %
                                         
 

(1) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation in PURCHASED CREDIT-IMPAIRED (PCI) LOANS table of the accounting for purchased credit-impaired (PCI) loans from Wachovia and the impact on selected financial ratios.

 

Nonperforming Assets

Nonperforming assets ended the quarter at $27.9 billion, down 8 percent from $30.5 billion in the first quarter. Nonaccrual loans declined to $23.0 billion from $25.0 billion in the first quarter, with reductions across all major loan portfolios. Foreclosed assets decreased 12 percent to $4.9 billion, the third consecutive quarterly decline despite extended foreclosure timelines in many states. A significant portion of the reduction in commercial nonperforming loans resulted from loans that returned to performing status, loan payoffs and loan sales, reflecting an improved credit landscape and market liquidity. Similarly, the reduction in consumer nonperforming loans was driven in part by an asset sale, increased success in home modifications and increased short sale activity.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
    June 30, 2011     March 31, 2011     December 31, 2010
($ in millions)   Total
balances
  As a
% of
total
loans
  Total
balances
  As a
% of
total
loans
  Total
balances
    As a
% of
total
loans
 
Commercial:
Commercial and industrial $ 2,393 1.52 % $ 2,653 1.76 % $ 3,213 2.12 %
Real estate mortgage 4,691 4.62 5,239 5.18 5,227 5.26
Real estate construction 2,043 9.56 2,239 9.79 2,676 10.56
Lease financing 79 0.61 95 0.73 108 0.82
Foreign     59   0.16   86   0.24   127   0.39
Total commercial     9,265   2.80   10,312   3.19   11,351   3.52
 
Consumer:
Real estate 1-4 family first mortgage 11,427 5.13 12,143 5.36 12,289 5.34
Real estate 1-4 family junior lien mortgage 2,098 2.33 2,235 2.40 2,302 2.39
Other revolving credit and installment     255   0.29   275   0.31   300   0.35
Total consumer     13,780   3.27   14,653   3.42   14,891   3.42
Total nonaccrual loans     23,045   3.06   24,965   3.32   26,242   3.47
 
Foreclosed assets:
GNMA 1,320 1,457 1,479
Non GNMA     3,541     4,055     4,530  
Total foreclosed assets     4,861     5,512     6,009  
Total nonperforming assets   $ 27,906   3.71 % $ 30,477   4.06 % $ 32,251   4.26 %
 
Change from prior quarter:
Total nonaccrual loans $ (1,920 ) $ (1,277 ) $ (2,063 )
Total nonperforming assets (2,571 ) (1,774 ) (2,181 )
                                             

Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing also improved in the quarter, totaling $17.3 billion at June 30, 2011, compared with $17.9 billion at March 31, 2011. Loans whose repayments are insured by the Federal Housing Administration or predominantly guaranteed by the Department of Veterans Affairs for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $15.5 billion at June 30, 2011, flat from first quarter. All other loans 90 days or more past due and still accruing balances declined 25 percent from the prior quarter.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $21.3 billion at June 30, 2011, down from $22.4 billion at March 31, 2011. The allowance coverage to total loans was 2.83 percent compared with 2.98 percent in the prior quarter. The allowance covered 1.87 times annualized second quarter net charge-offs compared with 1.72 times in the prior quarter. The allowance coverage to nonaccrual loans was 92 percent at June 30, 2011, compared with 90 percent at March 31, 2011. “We believe the allowance was adequate for losses inherent in the loan portfolio at June 30, 2011,” said Loughlin.

Additional detail on credit quality is included in the quarterly supplement, available on the Investor Relations page at www.wellsfargo.com/invest_relations/investor_relations/

Business Segment Performance

Wells Fargo defines its operating segments by product type and customer segment. Segment net income for each of the three business segments was:

                     
          Quarter ended
June 30,   Mar. 31,   June 30,
(in millions)   2011   2011   2010
Community Banking $ 2,087 2,175 1,716
Wholesale Banking 1,931 1,652 1,462
Wealth, Brokerage and Retirement     333   339   270
 

More financial information about the business segments is in the OPERATING SEGMENT RESULTS tables.

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. through its Regional Banking and Wells Fargo Home Mortgage business units.

Selected Financial Information

          Quarter ended
June 30,   Mar. 31,     June 30,
(in millions)   2011   2011     2010
Total revenue $ 12,567 12,637 13,606
Provision for credit losses 1,927 2,065 3,348
Noninterest expense 7,418 7,605 7,678
Segment net income 2,087 2,175 1,716
 
(in billions)
Average loans 498.2 509.8 534.3
Average assets 752.5 759.9 771.3
Average core deposits     552.0   548.1     532.6
 

Community Banking reported net income of $2.1 billion, down $88 million, or 4 percent, from prior quarter and up $371 million, or 22 percent, from second quarter 2010. Revenue decreased $70 million from first quarter 2011 driven primarily by a decline in mortgage banking income from lower originations and continued expected reductions in the home equity loan portfolio, offset by gains on equity investments and lower deposit costs. Revenue decreased $1.0 billion, or 8 percent, from second quarter 2010 largely due to lower mortgage banking income, lower deposit service charges as a result of Regulation E and the expected reduction in the liquidating loan portfolios, partially offset by the impact of a robust used car market on the indirect auto portfolio, strong debit card growth and equity gains. Noninterest expense decreased $187 million, or 2 percent, from first quarter 2011, reflecting improved credit costs, as well as lower software license and other equipment expense. Noninterest expense decreased $260 million, or 3 percent, from second quarter 2010 due to reduced personnel costs, a decrease in software license expense and lower operating losses. The provision for credit losses decreased $138 million from first quarter 2011 and $1.4 billion from second quarter 2010. The decline was due to a $288 million decrease in net loan charge-offs from first quarter 2011, a $1.1 billion decrease from second quarter 2010, as well as a $700 million reserve release in second quarter 2011, compared with a release of $850 million and $389 million in first quarter 2011 and second quarter 2010, respectively.

Regional Banking Highlights

  • Strong growth in checking accounts from June 30, 2010 (combined Regional Banking)
    • Consumer checking accounts up a net 7.0 percent
    • Business checking accounts up a net 4.5 percent
    • Consumer checking accounts up a net 7.9 percent in California, 9.2 percent in New Jersey, 9.5 percent in North Carolina and 11.1 percent in Florida
  • Strong solutions in second quarter 2011
    • West
      • Core product solutions (sales) of 8.33 million, up 16 percent from prior year
      • Sales of Wells Fargo Packages® (a checking account and three other products) up 19 percent from prior year, purchased by 85 percent of new checking account customers
    • East
      • Eastern core product solutions grew by double-digits from prior year
      • For eastern states on Wells Fargo systems the entire quarter, 81 percent of new checking account customers purchased Wells Fargo Packages
      • Platform banker full-time equivalents grew by nearly 1,500, or 16 percent, from prior year
  • Retail bank household cross-sell ratio for combined company of 5.84 products per household, up from 5.64 in second quarter 2010; cross-sell in the West of 6.25, compared with 5.29 in the East, represents the opportunity to earn more business from customers in the East
  • Small Business/Business Banking
    • Named U.S. Small Business Administration’s 2011 SBA 7(a) Large Lender of the Year
    • Record store-based business solutions up 8 percent from prior year (West)
    • Sales of Wells Fargo Business Services Packages (business checking account and at least three other business products) up 23 percent from prior year, purchased by 70 percent of new business checking account customers (West)
    • Business Banking household cross-sell of 4.17 products per household (West)
    • Wells Fargo, America’s #1 small business lender, made $7.5 billion in new loan commitments to its small business customers in the first half of 2011, a 13 percent increase in dollars lent from first half of 2010
  • Online and Mobile Banking
    • 19.3 million combined active online customers (as of May 31, 2011)
    • 6.0 million combined active mobile customers (as of May 31, 2011)

Wells Fargo Home Mortgage (Home Mortgage)

  • Home Mortgage applications of $109 billion, compared with $102 billion in prior quarter, driven in part by lower average rates in the quarter
  • Home Mortgage application pipeline of $51 billion at quarter end, compared with $45 billion at March 31, 2011
  • Home Mortgage originations of $64 billion, down from $84 billion in prior quarter
  • Residential mortgage servicing portfolio of $1.8 trillion
  • As of June 30, 2011, approximately 695,000 active trial or completed loan modifications had been initiated since the beginning of 2009; of this total, 85 percent were through Wells Fargo’s own modification programs and the rest were through the federal government’s Home Affordable Modification Program (HAMP)

Wholesale Banking provides financial solutions to businesses across the United States with annual sales generally in excess of $20 million and to financial institutions globally. Products & business units include Middle Market Commercial Banking, Government & Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Investment Banking & Capital Markets, Securities Investment Portfolio, Asset Backed Finance, and Asset Management.

Selected Financial Information

  Quarter ended
June 30,   Mar. 31,   June 30,
(in millions)   2011     2011   2010
Total revenue $ 5,631 5,460 5,774
Provision (reversal of provision) for credit losses (97 ) 134 635
Noninterest expense 2,766 2,800 2,873
Segment net income 1,931 1,652 1,462
 
(in billions)
Average loans 243.1 234.7 228.2
Average assets 415.7 399.6 369.5
Average core deposits     190.6     184.8   162.3

 

Wholesale Banking reported net income of $1.9 billion, up $279 million, or 17 percent, from first quarter 2011 and up $469 million, or 32 percent, from second quarter 2010. Revenue increased $171 million, or 3 percent, from the prior quarter as strong loan and revenue growth across most lending businesses, solid investment banking results, seasonally higher insurance fees and higher PCI-related resolutions more than offset weakness in sales and trading and lower equity fund gains. Revenue decreased $143 million, or 2 percent, from prior year as strong growth across core businesses, including loan and deposit growth, was more than offset by lower PCI-related resolutions and other gains. Noninterest expense decreased $34 million, or 1 percent, from prior quarter related to lower personnel expense and decreased $107 million, or 4 percent, from prior year related to lower litigation and foreclosed asset expenses. The provision for credit losses declined $732 million from second quarter 2010, and included a $300 million reserve release this quarter compared with a $111 million reserve release a year ago along with a $543 million improvement in net credit losses.

  • Linked quarter average loan growth in many portfolios, including asset-backed finance, commercial banking, commercial real estate, corporate banking, government banking, international, real estate capital markets, and capital finance, driven primarily by new customer activity
  • Continued improvement in nonperforming assets
  • Average core deposits up 17 percent from prior year, reflecting continued strong customer liquidity
  • U.S. investment banking market share year to date 2011 of 4.7 percent, up from 4.2 percent for full year 2010 (source: Dealogic fee-based league tables)
  • Wells Fargo named Best Trade Bank in the USA by Trade Finance

Wealth, Brokerage and Retirement provides a full range of financial advisory services to clients using a comprehensive planning approach to meet each client’s needs. Wealth Management provides affluent and high net worth clients with a complete range of wealth management solutions including financial planning, private banking, credit, investment management and trust. Family Wealth meets the unique needs of the ultra high net worth customers. Retail Brokerage’s financial advisors serve customers’ advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the U.S. Retirement provides retirement services for individual investors and is a national leader in 401(k) and pension record keeping.

Selected Financial Information

  Quarter ended
June 30,   Mar. 31,   June 30,
(in millions)   2011   2011   2010
Total revenue $ 3,086 3,150 2,867
Provision for credit losses 61 41 81
Noninterest expense 2,487 2,559 2,350
Segment net income 333 339 270
 
(in billions)
Average loans 43.5 42.7 42.6
Average assets 147.7 146.5 141.0
Average core deposits     126.0   125.4   121.5
 

Wealth, Brokerage and Retirement reported net income of $333 million, down $6 million from first quarter 2011 and up $63 million from second quarter 2010. Revenue was $3.1 billion, down 2 percent from first quarter 2011 due to lower brokerage transaction revenue and up 8 percent from second quarter 2010 driven by higher asset-based revenues and higher securities gains in the brokerage business. The provision for credit losses increased $20 million from first quarter 2011 and decreased $20 million from second quarter 2010. Noninterest expense declined 3 percent from first quarter on reduced personnel costs and increased 6 percent from second quarter 2010 due to growth in personnel costs, primarily broker commissions driven by higher production levels. Average core deposits increased $600 million from first quarter 2011 and $4.5 billion from second quarter 2010.

Retail Brokerage

  • Client assets of $1.2 trillion, up 12 percent from prior year
  • Managed account assets increased $62 billion, or 31 percent, from prior year driven by strong net flows and solid market gains
  • Strong deposit growth, with average balances up $5 billion, or 6 percent, from prior year
  • Announced sale of H.D. Vest Financial Services

Wealth Management

  • Client assets of $204 billion, up 8 percent from prior year
  • Investment management and trust asset-based revenue up 8 percent from prior year

Retirement

  • Institutional retirement plan assets of $247 billion, up $37 billion, or 18 percent, from prior year
  • IRA assets of $286 billion, up $39 billion, or 16 percent, from prior year

Conference Call

The Company will host a live conference call on Tuesday, July 19, at 6:30 a.m. PDT (9:30 a.m. EDT). To access the call, please dial 866-872-5161 (U.S. and Canada) or 706-643-1962 (international). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings and http://us.meeting-stream.com/wellsfargocompany_072011.

A replay of the conference call will be available beginning at approximately noon PDT (3 p.m. EDT) on July 19 through Tuesday, July 26. Please dial 800-642-1687 (U.S. and Canada) or 706-645-9291 (international) and enter Conference ID #76224090. The replay will also be available online at wellsfargo.com/invest_relations/earnings.

Cautionary Statement about Forward-Looking Information

In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that this news release contains forward-looking statements about our future financial performance and business. We make forward-looking statements when we use words such as “believe,” “expect,” “anticipate,” “estimate,” “target,” “should,” “may,” “can,” “will,” “outlook,” “project,” “appears” or similar expressions. Forward-looking statements in this news release include, among others, statements about: (i) future credit quality and expected or estimated future loan losses in our loan portfolios, and the adequacy of the allowance for loan losses, including our current expectation of future reductions in the allowance for loan losses; (ii) our targeted noninterest expense for fourth quarter 2012 as part of our expense management initiatives; (iii) our estimates regarding our Tier 1 common equity ratio under proposed Basel III capital regulations; and (iv) the timing of expected integration activities related to the Wachovia merger.

Do not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. Several factors could cause actual results to differ materially from expectations including: current and future economic and market conditions, including the effects of further declines in housing prices and high unemployment rates; our capital requirements (including under regulatory capital standards as determined and interpreted by applicable regulatory authorities such as the proposed Basel III capital regulations) and our ability to generate capital internally or raise capital on favorable terms; 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 Wall Street Reform and Consumer Protection Act); the extent of success in our loan modification efforts, including the effects of regulatory requirements, or changes in regulatory requirements, relating to loan modifications; the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties; negative effects relating to mortgage foreclosures, including changes in our procedures or practices and/or industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures; our ability to realize our noninterest expense target as part of our expense management initiatives when and in the amount targeted, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters; our ability to successfully and timely integrate the Wachovia merger and realize the expected cost savings and other benefits, including delays or disruptions in system conversions and higher severance costs; recognition of other-than-temporary impairment on securities held in our available-for-sale portfolio; the effect of changes in interest rates on our net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; hedging gains or losses; disruptions in the capital markets and reduced investor demand for mortgage loans; our ability to sell more products to our customers; the effect of the economic recession on the demand for our products and services; the effect of fluctuations in stock market prices on fee income from our brokerage, asset and wealth management businesses; our election to provide support to our mutual funds for structured credit products they may hold; changes in the value of our venture capital investments; changes in our accounting policies or in accounting standards or in how accounting standards are to be applied; changes in our credit ratings and changes in the credit ratings of our customers or counterparties; mergers and acquisitions; federal and state regulations; reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations; the loss of checking and saving account deposits to other investments such as the stock market; and fiscal and monetary policies of the Federal Reserve Board. There is no assurance that our allowance for credit losses will be adequate to cover future credit losses, especially if credit markets, housing prices, and unemployment do not improve. Increases in loan charge-offs or in the allowance for credit losses and related provision expense could materially adversely affect our financial results and condition. For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2010, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, including the discussion under “Risk Factors” in each of these reports, as filed with the SEC and available on the SEC’s website at www.sec.gov. Any factor described above or in our SEC reports could, by itself or together with one or more other factors, adversely affect our financial results and condition.

About Wells Fargo

Wells Fargo & Company (NYSE:WFC) is a nationwide, diversified, community-based financial services company with $1.3 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet (wellsfargo.com and wachovia.com), and other distribution channels across North America and internationally. With approximately 275,000 team members, Wells Fargo serves one in three households in America. Wells Fargo & Company was ranked No. 23 on Fortune’s 2011 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS
           

Pages

Summary Information

Summary Financial Data 15-16
 

Income

Consolidated Statement of Income 17-18
Average Balances, Yields and Rates Paid 19-20
Noninterest Income and Noninterest Expense 21-22
 

Balance Sheet

Consolidated Balance Sheet 23-24
Average Balances 25
 

Loans

Loans 26
Nonaccrual Loans and Foreclosed Assets 26
Loans 90 Days or More Past Due and Still Accruing 27
Purchased Credit-Impaired Loans 28-30
Pick-A-Pay Portfolio 31
Non-Strategic and Liquidating Loan Portfolios 32
Home Equity Portfolios 32
Allowance for Credit Losses 33-34
 

Equity

Condensed Consolidated Statement of Changes in Total Equity 35
Tier 1 Common Equity 36
 

Operating Segments

Operating Segment Results 37-38
 

Other

Mortgage Servicing and other related data   39-41
 
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
           
  Quarter ended June 30, %   Six months ended June 30, %
($ in millions, except per share amounts)     2011     2010   Change       2011   2010   Change
For the Period
Wells Fargo net income $ 3,948 3,062 29 % $ 7,707 5,609 37 %
Wells Fargo net income applicable to common stock 3,728 2,878 30 7,298 5,250 39
Diluted earnings per common share 0.70 0.55 27 1.37 1.00 37
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.27 % 1.00 27 1.25 0.92 36

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

11.92 10.40 15 11.95 9.69 23
Efficiency ratio (1) 61.2 59.6 3 61.9 58.0 7
Total revenue $ 20,386 21,394 (5 ) $ 40,715 42,842 (5 )
Pre-tax pre-provision profit (PTPP) (2) 7,911 8,648 (9 ) 15,507 17,979 (14 )
Dividends declared per common share 0.12 0.05 140 0.24 0.10 140
Average common shares outstanding 5,286.5 5,219.7 1 5,282.7 5,205.1 1
Diluted average common shares outstanding 5,331.7 5,260.8 1 5,329.9 5,243.0 2
Average loans $ 751,253 772,460 (3 ) $ 752,657 784,856 (4 )
Average assets 1,250,945 1,224,180 2 1,246,088 1,225,145 2
Average core deposits (3) 807,483 761,767 6 802,184 760,475 5
Average retail core deposits (4) 592,974 574,436 3 588,561 574,059 3
Net interest margin 4.01 % 4.38 (8 ) 4.03 4.33 (7 )
At Period End
Securities available for sale $ 186,298 157,927 18 $ 186,298 157,927 18
Loans 751,921 766,265 (2 ) 751,921 766,265 (2 )
Allowance for loan losses 20,893 24,584 (15 ) 20,893 24,584 (15 )
Goodwill 24,776 24,820 - 24,776 24,820 -
Assets 1,259,734 1,225,862 3 1,259,734 1,225,862 3
Core deposits (3) 808,970 758,680 7 808,970 758,680 7
Wells Fargo stockholders' equity 136,401 119,772 14 136,401 119,772 14
Total equity 137,916 121,398 14 137,916 121,398 14
Capital ratios:
Total equity to assets 10.95 % 9.90 11 10.95 9.90 11
Risk-based capital (5):
Tier 1 capital 11.70 10.51 11 11.70 10.51 11
Total capital 15.42 14.53 6 15.42 14.53 6
Tier 1 leverage (5) 9.43 8.66 9 9.43 8.66 9
Tier 1 common equity (6) 9.16 7.61 20 9.16 7.61 20
Common shares outstanding 5,278.2 5,231.4 1 5,278.2 5,231.4 1
Book value per common share $ 23.84 21.35 12 $ 23.84 21.35 12
Common stock price:
High 32.63 34.25 (5 ) 34.25 34.25 -
Low 25.26 25.52 (1 ) 25.26 25.52 (1 )
Period end 28.06 25.60 10 28.06 25.60 10
Team members (active, full-time equivalent) 266,600 267,600 - 266,600 267,600 -
                                       

 

(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) The June 30, 2011, ratios are preliminary.

(6) See the "Five Quarter Tier 1 Common Equity" table for additional information.

 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
  Quarter ended
June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30,
($ in millions, except per share amounts)   2011     2011   2010   2010   2010
For the Quarter
Wells Fargo net income $ 3,948 3,759 3,414 3,339 3,062
Wells Fargo net income applicable to common stock 3,728 3,570 3,232 3,150 2,878
Diluted earnings per common share 0.70 0.67 0.61 0.60 0.55
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.27 % 1.23 1.09 1.09 1.00
Wells Fargo net income applicable to common stock to average
Wells Fargo common stockholders' equity (ROE) 11.92 11.98 10.95 10.90 10.40
Efficiency ratio (1) 61.2 62.6 62.1 58.7 59.6
Total revenue $ 20,386 20,329 21,494 20,874 21,394
Pre-tax pre-provision profit (PTPP) (2) 7,911 7,596 8,154 8,621 8,648
Dividends declared per common share 0.12 0.12 0.05 0.05 0.05
Average common shares outstanding 5,286.5 5,278.8 5,256.2 5,240.1 5,219.7
Diluted average common shares outstanding 5,331.7 5,333.1 5,293.8 5,273.2 5,260.8
Average loans $ 751,253 754,077 753,675 759,483 772,460
Average assets 1,250,945 1,241,176 1,237,037 1,220,368 1,224,180
Average core deposits (3) 807,483 796,826 794,799 771,957 761,767
Average retail core deposits (4) 592,974 584,100 573,843 571,062 574,436
Net interest margin 4.01 % 4.05 4.16 4.25 4.38
At Quarter End
Securities available for sale $ 186,298 167,906 172,654 176,875 157,927
Loans 751,921 751,155 757,267 753,664 766,265
Allowance for loan losses 20,893 21,983 23,022 23,939 24,584
Goodwill 24,776 24,777 24,770 24,831 24,820
Assets 1,259,734 1,244,666 1,258,128 1,220,784 1,225,862
Core deposits (3) 808,970 795,038 798,192 771,792 758,680
Wells Fargo stockholders' equity 136,401 133,471 126,408 123,658 119,772
Total equity 137,916 134,943 127,889 125,165 121,398
Capital ratios:
Total equity to assets 10.95 % 10.84 10.16 10.25 9.90
Risk-based capital (5):
Tier 1 capital 11.70 11.50 11.16 10.90 10.51
Total capital 15.42 15.30 15.01 14.88 14.53
Tier 1 leverage (5) 9.43 9.27 9.19 9.01 8.66
Tier 1 common equity (6) 9.16 8.93 8.30 8.01 7.61
Common shares outstanding 5,278.2 5,300.9 5,262.3 5,244.4 5,231.4
Book value per common share $ 23.84 23.18 22.49 22.04 21.35
Common stock price:
High 32.63 34.25 31.61 28.77 34.25
Low 25.26 29.82 23.37 23.02 25.52
Period end 28.06 31.71 30.99 25.12 25.60
Team members (active, full-time equivalent) 266,600 270,200 272,200 266,900 267,600
                         
 

(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) The June 30, 2011, ratios are preliminary.

(6) See the "Five Quarter Tier 1 Common Equity" table for additional information.

 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
                Six months  
Quarter ended June 30, % ended June 30, %
(in millions, except per share amounts)   2011     2010   Change     2011   2010   Change
Interest income  
Trading assets $ 347 266 30 % $ 697 533 31 %
Securities available for sale 2,166 2,385 (9 ) 4,330 4,800 (10 )
Mortgages held for sale 362 405 (11 ) 799 792 1
Loans held for sale 17 30 (43 ) 29 64 (55 )
Loans 9,361 10,277 (9 ) 18,748 20,315 (8 )
Other interest income     131     109 20   253     193 31
Total interest income     12,384     13,472 (8 )   24,856     26,697 (7 )
Interest expense
Deposits 594 714 (17 ) 1,209 1,449 (17 )
Short-term borrowings 20 21 (5 ) 46 39 18
Long-term debt 1,009 1,233 (18 ) 2,113 2,509 (16 )
Other interest expense     83     55 51   159     104 53
Total interest expense     1,706     2,023 (16 )   3,527     4,101 (14 )
Net interest income 10,678 11,449 (7 ) 21,329 22,596 (6 )
Provision for credit losses     1,838     3,989 (54 )   4,048     9,319 (57 )
Net interest income after provision for credit losses     8,840     7,460 18   17,281     13,277 30
Noninterest income
Service charges on deposit accounts 1,074 1,417 (24 ) 2,086 2,749 (24 )
Trust and investment fees 2,944 2,743 7 5,860 5,412 8
Card fees 1,003 911 10 1,960 1,776 10
Other fees 1,023 982 4 2,012 1,923 5
Mortgage banking 1,619 2,011 (19 ) 3,635 4,481 (19 )
Insurance 568 544 4 1,071 1,165 (8 )
Net gains from trading activities 414 109 280 1,026 646 59
Net gains (losses) on debt securities available for sale (128 ) 30 NM (294 ) 58 NM
Net gains from equity investments 724 288 151 1,077 331 225
Operating leases 103 329 (69 ) 180 514 (65 )
Other     364     581 (37 )   773     1,191 (35 )
Total noninterest income     9,708     9,945 (2 )   19,386     20,246 (4 )
Noninterest expense
Salaries 3,584 3,564 1 7,038 6,878 2
Commission and incentive compensation 2,171 2,225 (2 ) 4,518 4,217 7
Employee benefits 1,164 1,063 10 2,556 2,385 7
Equipment 528 588 (10 ) 1,160 1,266 (8 )
Net occupancy 749 742 1 1,501 1,538 (2 )
Core deposit and other intangibles 464 553 (16 ) 947 1,102 (14 )
FDIC and other deposit assessments 315 295 7 620 596 4
Other     3,500     3,716 (6 )   6,868     6,881 -
Total noninterest expense     12,475     12,746 (2 )   25,208     24,863 1
Income before income tax expense 6,073 4,659 30 11,459 8,660 32
Income tax expense     2,001    

1,514

32   3,573     2,915 23
Net income before noncontrolling interests 4,072 3,145 29 7,886 5,745 37
Less: Net income from noncontrolling interests     124     83 49   179     136 32
Wells Fargo net income   $ 3,948     3,062 29 $ 7,707     5,609 37
Less: Preferred stock dividends and other     220     184   409     359
Wells Fargo net income applicable to common stock   $ 3,728     2,878 30 $ 7,298     5,250 39
Per share information
Earnings per common share $ 0.70 0.55 27 $ 1.38 1.01 37
Diluted earnings per common share 0.70 0.55 27 1.37 1.00 37
Dividends declared per common share 0.12 0.05 140 0.24 0.10 140
Average common shares outstanding 5,286.5 5,219.7 1 5,282.7 5,205.1 1
Diluted average common shares outstanding 5,331.7 5,260.8 1 5,329.9 5,243.0 2
                   

NM - Not meaningful

 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
  Quarter ended
June 30, Mar. 31,   Dec. 31,   Sept. 30, June 30,
(in millions, except per share amounts)     2011   2011     2010     2010   2010
Interest income
Trading assets $ 347 350 295 270 266
Securities available for sale 2,166 2,164 2,374 2,492 2,385
Mortgages held for sale 362 437 495 449 405
Loans held for sale 17 12 15 22 30
Loans 9,361 9,387 9,666 9,779 10,277
Other interest income     131   122     124     118   109
Total interest income     12,384   12,472     12,969     13,130   13,472
Interest expense
Deposits 594 615 662 721 714
Short-term borrowings 20 26 26 27 21
Long-term debt 1,009 1,104 1,153 1,226 1,233
Other interest expense     83   76     65     58   55
Total interest expense     1,706   1,821     1,906     2,032   2,023
Net interest income 10,678 10,651 11,063 11,098 11,449
Provision for credit losses     1,838   2,210     2,989     3,445   3,989
Net interest income after provision for credit losses     8,840   8,441     8,074     7,653   7,460
Noninterest income
Service charges on deposit accounts 1,074 1,012 1,035 1,132 1,417
Trust and investment fees 2,944 2,916 2,958 2,564 2,743
Card fees 1,003 957 941 935 911
Other fees 1,023 989 1,063 1,004 982
Mortgage banking 1,619 2,016 2,757 2,499 2,011
Insurance 568 503 564 397 544
Net gains from trading activities 414 612 532 470 109
Net gains (losses) on debt securities available for sale (128 ) (166 ) (268 ) (114 ) 30
Net gains from equity investments 724 353 317 131 288
Operating leases 103 77 79 222 329
Other     364   409     453     536   581
Total noninterest income     9,708   9,678     10,431     9,776   9,945
Noninterest expense
Salaries 3,584 3,454 3,513 3,478 3,564
Commission and incentive compensation 2,171 2,347 2,195 2,280 2,225
Employee benefits 1,164 1,392 1,192 1,074 1,063
Equipment 528 632 813 557 588
Net occupancy 749 752 750 742 742
Core deposit and other intangibles 464 483 549 548 553
FDIC and other deposit assessments 315 305 301 300 295
Other     3,500   3,368     4,027     3,274   3,716
Total noninterest expense     12,475   12,733     13,340     12,253   12,746
Income before income tax expense 6,073 5,386 5,165 5,176 4,659
Income tax expense     2,001   1,572     1,672     1,751   1,514
Net income before noncontrolling interests 4,072 3,814 3,493 3,425 3,145
Less: Net income from noncontrolling interests     124   55     79     86   83
Wells Fargo net income   $ 3,948   3,759     3,414     3,339   3,062
Less: Preferred stock dividends and other     220   189     182     189   184
Wells Fargo net income applicable to common stock   $ 3,728   3,570     3,232     3,150   2,878
Per share information
Earnings per common share $ 0.70 0.68 0.62 0.60 0.55
Diluted earnings per common share 0.70 0.67 0.61 0.60 0.55
Dividends declared per common share 0.12 0.12 0.05 0.05 0.05
Average common shares outstanding 5,286.5 5,278.8 5,256.2 5,240.1 5,219.7
Diluted average common shares outstanding 5,331.7 5,333.1 5,293.8 5,273.2 5,260.8
                           
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
  Quarter ended June 30,
2011   2010

(in millions)

    Average
balance
    Yields/
rates
      Interest
income/
expense
  Average
balance
    Yields/
rates
    Interest
income/
expense
Earning assets      

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

$ 98,519 0.32 % $ 80 67,712 0.33 % $ 56
Trading assets 38,015 3.71 352 28,760 3.79 272
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 2,091 2.33 12 2,094 3.50 18
Securities of U.S. states and political subdivisions 22,610 5.35 302 16,192 6.48 255
Mortgage-backed securities:
Federal agencies 74,402 4.76 844 72,876 5.39 930
Residential and commercial     32,536   8.86   664 33,197   9.59   769
Total mortgage-backed securities 106,938 5.98 1,508 106,073 6.72 1,699
Other debt and equity securities     37,037   5.81   502 33,270   7.21   562
Total securities available for sale 168,676 5.81 2,324 157,629 6.75 2,534
Mortgages held for sale (4) 30,674 4.73 362 32,196 5.04 405
Loans held for sale (4) 1,356 5.05 17 4,386 2.73 30
Loans:
Commercial:
Commercial and industrial 153,630 4.60 1,761 147,965 5.44 2,009
Real estate mortgage 101,437 4.16 1,051 97,731 3.89 949
Real estate construction 21,987 4.64 254 33,060 3.44 284
Lease financing 12,899 7.72 249 13,622 9.54 325
Foreign     36,445   2.65 241 29,048   3.62   262
Total commercial     326,398   4.37 3,556 321,426   4.78   3,829
Consumer:
Real estate 1-4 family first mortgage 224,873 4.97 2,792 237,500 5.24 3,108
Real estate 1-4 family junior lien mortgage 91,934 4.25 975 102,678 4.53 1,162
Credit card 20,954 12.97 679 22,239 13.24 736
Other revolving credit and installment     87,094   6.32   1,372 88,617   6.57   1,452
Total consumer     424,855   5.48   5,818 451,034   5.74   6,458
Total loans (4) 751,253 5.00 9,374 772,460 5.34 10,287
Other     4,997   4.10   52 6,082   3.44   53
Total earning assets   $ 1,093,490   4.64 % $ 12,561 1,069,225   5.14 % $ 13,637
Funding sources
Deposits:
Interest-bearing checking $ 53,344 0.09 % $ 12 61,212 0.13 % $ 19
Market rate and other savings 455,126 0.20 226 412,062 0.26 267
Savings certificates 72,100 1.42 256 89,773 1.44 323
Other time deposits 12,988 2.03 67 14,936 1.90 72
Deposits in foreign offices     57,899   0.23   33 57,461   0.23   33
Total interest-bearing deposits 651,457 0.37 594 635,444 0.45 714
Short-term borrowings 53,340 0.18 24 45,082 0.22 25
Long-term debt 145,431 2.78 1,009 195,440 2.52 1,233
Other liabilities     10,978   3.03   83 6,737   3.33   55
Total interest-bearing liabilities 861,206 0.80 1,710 882,703 0.92 2,027
Portion of noninterest-bearing funding sources     232,284   -   - 186,522   -   -
Total funding sources   $ 1,093,490     0.63   1,710 1,069,225   0.76   2,027

Net interest margin and net interest income on a taxable-equivalent basis (5)

4.01 %   $ 10,851 4.38 % $ 11,610
Noninterest-earning assets
Cash and due from banks $ 17,373 17,415
Goodwill 24,773 24,820
Other     115,309   112,720  
Total noninterest-earning assets   $ 157,455   154,955  
Noninterest-bearing funding sources
Deposits $ 199,339 176,908
Other liabilities 53,169 43,713
Total equity 137,231 120,856
Noninterest-bearing funding sources used to fund earning assets     (232,284 ) (186,522 )
Net noninterest-bearing funding sources   $ 157,455   154,955  
Total assets   $ 1,250,945   1,224,180  
                                     

(1) Our average prime rate was 3.25% for the quarters ended June 30, 2011 and 2010. The average three-month London Interbank Offered Rate (LIBOR) was 0.26% and 0.44% for the same quarters, respectively.

(2) Yield/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) Nonaccrual loans and related income are included in their respective loan categories.

(5) Includes taxable-equivalent adjustments of $173 million and $161 million for June 30, 2011 and 2010, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate utilized was 35% for the periods presented.

 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
  Six months ended June 30,
2011   2010

(in millions)

    Average
balance
  Yields/
rates
      Interest
income/
expense
  Average
balance
  Yields/
rates
      Interest
income/
expense
Earning assets        

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

$ 90,994 0.34 % $ 152 54,347 0.33 % $ 89
Trading assets 37,711 3.76 708 28,338 3.85 544
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 1,834 2.56 23 2,186 3.56 38
Securities of U.S. states and political subdivisions 21,098 5.39 572 14,951 6.53 476
Mortgage-backed securities:
Federal agencies 73,937 4.74 1,676 76,284 5.39 1,953
Residential and commercial     32,734   9.28   1,396 32,984   9.63   1,559
Total mortgage-backed securities 106,671 6.10 3,072 109,268 6.70 3,512
Other debt and equity securities     36,482   5.68   967 32,810   6.86   1,054
Total securities available for sale 166,085 5.87 4,634 159,215 6.67 5,080
Mortgages held for sale (4) 34,686 4.61 799 31,784 4.99 792
Loans held for sale (4) 1,167 4.98 29 5,390 2.39 64
Loans:
Commercial:
Commercial and industrial 151,849 4.62 3,484 152,192 4.97 3,752
Real estate mortgage 100,621 4.04 2,018 97,848 3.79 1,839
Real estate construction 23,128 4.44 509 34,448 3.25 555
Lease financing 12,959 7.78 504 13,814 9.38 648
Foreign     35,050   2.73   476 28,807   3.62   518
Total commercial     323,607   4.35   6,991 327,109   4.50   7,312
Consumer:
Real estate 1-4 family first mortgage 227,208 4.99 5,659 241,241 5.25 6,318
Real estate 1-4 family junior lien mortgage 93,313 4.30 1,993 104,151 4.50 2,330
Credit card 21,230 13.08 1,388 22,789 13.20 1,503
Other revolving credit and installment     87,299   6.34   2,743 89,566   6.49   2,879
Total consumer     429,050   5.51   11,783 457,747   5.72   13,030
Total loans (4) 752,657 5.01 18,774 784,856 5.21 20,342
Other     5,111   4.00   102 6,075   3.40   103
Total earning assets   $ 1,088,411   4.69 % $ 25,198 1,070,005   5.10 % $ 27,014
Funding sources
Deposits:
Interest-bearing checking $ 55,909 0.09 % $ 26 61,614 0.14 % $ 42
Market rate and other savings 449,388 0.21 463 408,026 0.27 553
Savings certificates 73,229 1.41 511 92,254 1.40 640
Other time deposits 13,417 2.14 143 15,405 1.97 152
Deposits in foreign offices     57,687   0.23   66 56,453   0.22   62
Total interest-bearing deposits 649,630 0.38 1,209 633,752 0.46 1,449
Short-term borrowings 54,041 0.20 54 45,082 0.20 44
Long-term debt 147,774 2.86 2,113 202,186 2.48 2,509
Other liabilities     10,230   3.13   159 6,203   3.38   104
Total interest-bearing liabilities 861,675 0.82 3,535 887,223 0.93 4,106
Portion of noninterest-bearing funding sources     226,736   -   - 182,782   -   -
Total funding sources   $ 1,088,411     0.66   3,535 1,070,005   0.77   4,106

Net interest margin and net interest income on a taxable-equivalent basis (5)

4.03 %   $ 21,663 4.33 %   $ 22,908
Noninterest-earning assets
Cash and due from banks $ 17,367 17,730
Goodwill 24,774 24,818
Other     115,536   112,592  
Total noninterest-earning assets   $ 157,677  

 

155,140  
Noninterest-bearing funding sources
Deposits $ 196,237 174,487
Other liabilities 54,237 44,224
Total equity 133,939 119,211
Noninterest-bearing funding sources used to fund earning assets     (226,736 ) (182,782 )
Net noninterest-bearing funding sources   $ 157,677   155,140  
Total assets   $ 1,246,088   1,225,145  
 

(1) Our average prime rate was 3.25% for the six months ended June 30, 2011 and 2010. The average three-month London Interbank Offered Rate (LIBOR) was 0.29% and 0.35% for the same periods, respectively.

(2) Yields/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) Nonaccrual loans and related income are included in their respective loan categories.

(5) Includes taxable-equivalent adjustments of $334 million and $312 million for June 30, 2011 and 2010, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

 
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
      Six months  
Quarter ended June 30, % ended June 30, %
(in millions)   2011   2010   Change     2011     2010   Change  
Service charges on deposit accounts $ 1,074 1,417 (24 ) % $ 2,086   2,749 (24 ) %
Trust and investment fees:
Trust, investment and IRA fees 1,020 1,035 (1 ) 2,080 2,084 -
Commissions and all other fees     1,924   1,708 13   3,780     3,328 14
Total trust and investment fees     2,944   2,743 7   5,860     5,412 8
Card fees 1,003 911 10 1,960 1,776 10
Other fees:
Cash network fees 94 58 62 175 113 55
Charges and fees on loans 404 401 1 801 820 (2 )
Processing and all other fees     525   523 -   1,036     990 5
Total other fees     1,023   982 4   2,012     1,923 5
Mortgage banking:
Servicing income, net 877 1,218 (28 ) 1,743 2,584 (33 )
Net gains on mortgage loan origination/sales activities     742   793 (6 )   1,892     1,897 -
Total mortgage banking     1,619   2,011 (19 )   3,635     4,481 (19 )
Insurance 568 544 4 1,071 1,165 (8 )
Net gains from trading activities 414 109 280 1,026 646 59
Net gains (losses) on debt securities available for sale (128 ) 30 NM (294 ) 58 NM
Net gains from equity investments 724 288 151 1,077 331 225
Operating leases 103 329 (69 ) 180 514 (65 )
All other  

 

364   581 (37 )   773     1,191 (35 )
Total   $ 9,708   9,945   (2 )     $ 19,386     20,246   (4 )
NM - Not meaningful

 

 

NONINTEREST EXPENSE

Six months
Quarter ended June 30, % ended June 30, %
(in millions)   2011   2010   Change     2011   2010   Change  
Salaries $ 3,584 3,564 1 % $ 7,038 6,878 2 %
Commission and incentive compensation 2,171 2,225 (2 ) 4,518 4,217 7
Employee benefits 1,164 1,063 10 2,556 2,385 7
Equipment 528 588 (10 ) 1,160 1,266 (8 )
Net occupancy 749 742 1 1,501 1,538 (2 )
Core deposit and other intangibles 464 553 (16 ) 947 1,102 (14 )
FDIC and other deposit assessments 315 295 7 620 596 4
Outside professional services 659 572 15 1,239 1,056 17
Contract services 341 384 (11 ) 710 731 (3 )
Foreclosed assets 305 333 (8 ) 713 719 (1 )
Operating losses 428 627 (32 ) 900 835 8
Outside data processing 232 276 (16 ) 452 548 (18 )
Postage, stationery and supplies 236 230 3 471 472 -
Travel and entertainment 205 196 5 411 367 12
Advertising and promotion 166 156 6 282 268 5
Telecommunications 132 156 (15 ) 266 299 (11 )
Insurance 201 164 23 334 312 7
Operating leases 31 27 15 55 64 (14 )
All other     564   595 (5 )   1,035     1,210 (14 )
Total   $ 12,475   12,746   (2 )     $ 25,208     24,863   1    
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
         
Quarter ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)   2011     2011     2010     2010     2010
Service charges on deposit accounts $ 1,074 1,012 1,035 1,132 1,417
Trust and investment fees:
Trust, investment and IRA fees 1,020 1,060 1,030 924 1,035
Commissions and all other fees     1,924     1,856     1,928     1,640     1,708
Total trust and investment fees     2,944     2,916     2,958     2,564     2,743
Card fees 1,003 957 941 935 911
Other fees:
Cash network fees 94 81 74 73 58
Charges and fees on loans 404 397 446 424 401
Processing and all other fees     525     511     543     507     523
Total other fees     1,023     989     1,063     1,004     982
Mortgage banking:
Servicing income, net 877 866 240 516 1,218
Net gains on mortgage loan origination/sales activities     742     1,150     2,517     1,983     793
Total mortgage banking     1,619     2,016     2,757     2,499     2,011
Insurance 568 503 564 397 544
Net gains from trading activities 414 612 532 470 109
Net gains (losses) on debt securities available for sale (128 ) (166 ) (268 ) (114 ) 30
Net gains from equity investments 724 353 317 131 288
Operating leases 103 77 79 222 329
All other     364     409     453     536     581
Total   $ 9,708     9,678     10,431     9,776     9,945
 
FIVE QUARTER NONINTEREST EXPENSE                              
 
Quarter ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)   2011     2011     2010     2010     2010
Salaries $ 3,584 3,454 3,513 3,478 3,564
Commission and incentive compensation 2,171 2,347 2,195 2,280 2,225
Employee benefits 1,164 1,392 1,192 1,074 1,063
Equipment 528 632 813 557 588
Net occupancy 749 752 750 742 742
Core deposit and other intangibles 464 483 549 548 553
FDIC and other deposit assessments 315 305 301 300 295
Outside professional services 659 580 781 533 572
Contract services 341 369 481 430 384
Foreclosed assets 305 408 452 366 333
Operating losses 428 472 193 230 627
Outside data processing 232 220 235 263 276
Postage, stationery and supplies 236 235 239 233 230
Travel and entertainment 205 206 221 195 196
Advertising and promotion 166 116 192 170 156
Telecommunications 132 134 151 146 156
Insurance 201 133 90 62 164
Operating leases 31 24 24 21 27
All other     564     471     968     625     595
Total   $ 12,475     12,733     13,340     12,253     12,746
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
 
(in millions, except shares)     June 30,
2011
    Dec. 31,
2010
    %
Change
 
Assets      
Cash and due from banks $ 24,059 16,044 50 %
Federal funds sold, securities purchased under resale agreements and other short-term investments 88,406 80,637 10
Trading assets 54,770 51,414 7
Securities available for sale 186,298 172,654 8
Mortgages held for sale (includes $25,175 and $47,531 carried at fair value) 31,254 51,763 (40 )
Loans held for sale (includes $1,102 and $873 carried at fair value) 1,512 1,290 17
 
Loans (includes $0 and $309 carried at fair value) 751,921 757,267 (1 )
Allowance for loan losses     (20,893 )   (23,022 ) (9 )
Net loans     731,028     734,245   -
Mortgage servicing rights:
Measured at fair value 14,778 14,467 2
Amortized 1,422 1,419 -
Premises and equipment, net 9,613 9,644 -
Goodwill 24,776 24,770 -
Other assets     91,818     99,781   (8 )
Total assets   $ 1,259,734     1,258,128   -
Liabilities
Noninterest-bearing deposits $ 202,143 191,256 6
Interest-bearing deposits     651,492     656,686   (1 )
Total deposits 853,635 847,942 1
Short-term borrowings 53,881 55,401 (3 )
Accrued expenses and other liabilities 71,430 69,913 2
Long-term debt (includes $0 and $306 carried at fair value)     142,872     156,983   (9 )
Total liabilities     1,121,818     1,130,239   (1 )
Equity
Wells Fargo stockholders' equity:
Preferred stock 11,730 8,689 35

Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,325,393,921 and 5,272,414,622 shares

8,876 8,787 1
Additional paid-in capital 55,226 53,426 3
Retained earnings 57,942 51,918 12
Cumulative other comprehensive income 5,422 4,738 14
Treasury stock – 47,222,127 shares and 10,131,394 shares (1,546 ) (487 ) 217
Unearned ESOP shares     (1,249 )   (663 ) 88
Total Wells Fargo stockholders' equity 136,401 126,408 8
Noncontrolling interests     1,515     1,481   2
Total equity     137,916     127,889   8
Total liabilities and equity   $ 1,259,734     1,258,128     -  
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
 
(in millions)     June 30,
2011
    Mar. 31,
2011
    Dec. 31,
2010
    Sept. 30,
2010
    June 30,
2010
 
Assets          
Cash and due from banks $ 24,059 16,978 16,044 16,001 17,571

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

88,406 93,041 80,637 56,549 73,898
Trading assets 54,770 57,890 51,414 49,271 47,132
Securities available for sale 186,298 167,906 172,654 176,875 157,927
Mortgages held for sale 31,254 33,121 51,763 46,001 38,581
Loans held for sale 1,512 1,428 1,290 1,188 3,999
 
Loans 751,921 751,155 757,267 753,664 766,265
Allowance for loan losses     (20,893 )   (21,983 )   (23,022 )   (23,939 )   (24,584 )
Net loans     731,028     729,172     734,245     729,725     741,681  
Mortgage servicing rights:
Measured at fair value 14,778 15,648 14,467 12,486 13,251
Amortized 1,422 1,423 1,419 1,013 1,037
Premises and equipment, net 9,613 9,545 9,644 9,636 10,508
Goodwill 24,776 24,777 24,770 24,831 24,820
Other assets     91,818     93,737     99,781     97,208     95,457  
Total assets   $ 1,259,734     1,244,666     1,258,128     1,220,784     1,225,862  
Liabilities
Noninterest-bearing deposits $ 202,143 190,959 191,256 184,451 175,015
Interest-bearing deposits     651,492     646,703     656,686     630,061     640,608  
Total deposits 853,635 837,662 847,942 814,512 815,623
Short-term borrowings 53,881 54,737 55,401 50,715 45,187
Accrued expenses and other liabilities 71,430 68,721 69,913 67,249 58,582
Long-term debt     142,872     148,603     156,983     163,143     185,072  
Total liabilities     1,121,818     1,109,723     1,130,239     1,095,619     1,104,464  
Equity
Wells Fargo stockholders' equity:
Preferred stock 11,730 11,897 8,689 8,840 8,980
Common stock 8,876 8,854 8,787 8,756 8,743
Additional paid-in capital 55,226 54,815 53,426 52,899 52,687
Retained earnings 57,942 54,855 51,918 48,953 46,126
Cumulative other comprehensive income 5,422 5,021 4,738 5,502 4,844
Treasury stock (1,546 ) (541 ) (487 ) (466 ) (631 )
Unearned ESOP shares     (1,249 )   (1,430 )   (663 )   (826 )   (977 )
Total Wells Fargo stockholders' equity 136,401 133,471 126,408 123,658 119,772
Noncontrolling interests     1,515     1,472     1,481     1,507     1,626  
Total equity     137,916     134,943     127,889     125,165     121,398  
Total liabilities and equity   $ 1,259,734     1,244,666     1,258,128     1,220,784     1,225,862  
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
  Quarter ended
  June 30, 2011       Mar. 31, 2011       Dec. 31, 2010       Sept. 30, 2010       June 30, 2010
($ in billions)  

 

Average

balance

  Yields/
rates
   

 

Average

balance

  Yields/
rates
   

 

Average

balance

  Yields/
rates
   

 

Average

balance

  Yields/
rates
   

 

Average

balance

  Yields/
rates
Earning assets                  

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

$ 98.5 0.32 % $ 83.4 0.35 % $ 72.0 0.40 % $ 70.8 0.38 % $ 67.7 0.33 %
Trading assets 38.0 3.71 37.4 3.81 33.9 3.56 29.0 3.77 28.8 3.79
Securities available for sale:
Securities of U.S. Treasury and federal agencies 2.1 2.33 1.6 2.87 1.7 2.80 1.7 2.79 2.0 3.50
Securities of U.S. states and political subdivisions 22.6 5.35 19.6 5.45 18.4 5.58 17.2 5.89 16.2 6.48
Mortgage-backed securities:
Federal agencies 74.4 4.76 73.5 4.72 80.4 4.48 70.5 5.35 72.9 5.39
Residential and commercial     32.5 8.86   32.9 9.68   33.4 10.95   33.4 12.53   33.2 9.59
Total mortgage-backed securities 106.9 5.98 106.4 6.21 113.8 6.35 103.9 7.67 106.1 6.72
Other debt and equity securities     37.0 5.81   35.9 5.55   37.8 6.15   35.5 6.02   33.3 7.21
Total securities available for sale 168.6 5.81 163.5 5.94 171.7 6.18 158.3 7.05 157.6 6.75
Mortgages held for sale 30.7 4.73 38.7 4.51 45.1 4.39 38.1 4.72 32.2 5.04
Loans held for sale 1.4 5.05 1.0 4.88 1.1 5.15 3.2 2.71 4.4 2.73
Loans:
Commercial:
Commercial and industrial 153.6 4.60 150.0 4.65 147.9 4.71 146.1 4.57 148.0 5.44
Real estate mortgage 101.5 4.16 99.9 3.92 99.2 3.85 99.0 4.15 97.7 3.89
Real estate construction 22.0 4.64 24.3 4.26 26.9 3.68 29.5 3.31 33.1 3.44
Lease financing 12.9 7.72 13.0 7.83 13.0 9.00 13.2 9.07 13.6 9.54
Foreign     36.4 2.65   33.6 2.83   31.0 3.57   30.3 3.15   29.0 3.62
Total commercial     326.4 4.37   320.8 4.33   318.0 4.42   318.1 4.37   321.4 4.78
Consumer:
Real estate 1-4 family first mortgage 224.9 4.97 229.6 5.01 228.8 5.06 231.2 5.16 237.5 5.24
Real estate 1-4 family junior lien mortgage 91.9 4.25 94.7 4.35 97.7 4.37 100.3 4.41 102.7 4.53
Credit card 21.0 12.97 21.5 13.18 21.9 13.44 22.0 13.57 22.2 13.24
Other revolving credit and installment     87.1 6.32   87.5 6.36   87.3 6.48   87.9 6.50   88.6 6.57
Total consumer     424.9 5.48   433.3 5.54   435.7 5.61   441.4 5.68   451.0 5.74
Total loans 751.3 5.00 754.1 5.03 753.7 5.11 759.5 5.13 772.4 5.34
Other     5.0 4.10   5.2 3.90   5.3 3.93   6.0 3.53   6.1 3.44
Total earning assets   $ 1,093.5 4.64 % $ 1,083.3 4.73 % $ 1,082.8 4.87 % $ 1,064.9 5.01 % $ 1,069.2 5.14 %
Funding sources
Deposits:
Interest-bearing checking $ 53.3 0.09 % $ 58.5 0.10 % $ 60.9 0.09 % $ 59.7 0.10 % $ 61.2 0.13 %
Market rate and other savings 455.1 0.20 443.6 0.22 431.2 0.25 420.0 0.25 412.1 0.26
Savings certificates 72.1 1.42 74.4 1.39 79.1 1.43 85.0 1.50 89.8 1.44
Other time deposits 13.0 2.03 13.8 2.24 13.4 2.00 14.4 2.33 14.8 1.90
Deposits in foreign offices     57.9 0.23   57.5 0.23   55.5 0.21   52.1 0.24   57.5 0.23
Total interest-bearing deposits 651.4 0.37 647.8 0.38 640.1 0.41 631.2 0.45 635.4 0.45
Short-term borrowings 53.3 0.18 54.8 0.22 50.6 0.24 46.5 0.26 45.1 0.22
Long-term debt 145.5 2.78 150.1 2.95 160.8 2.86 177.1 2.76 195.4 2.52
Other liabilities     11.0 3.03   9.5 3.24   8.3 3.13   6.7 3.39   6.8 3.33
Total interest-bearing liabilities 861.2 0.80 862.2 0.85 859.8 0.89 861.5 0.94 882.7 0.92
Portion of noninterest-bearing funding sources     232.3 -   221.1 -   223.0 -   203.4 -   186.5 -
Total funding sources   $ 1,093.5   0.63 $ 1,083.3   0.68 $ 1,082.8   0.71 $ 1,064.9   0.76 $ 1,069.2   0.76

Net interest margin on a taxable-equivalent basis

4.01 % 4.05 % 4.16 % 4.25 % 4.38 %
Noninterest-earning assets
Cash and due from banks $ 17.4 17.4 18.0 17.0 17.4
Goodwill 24.8 24.8 24.8 24.8 24.8
Other     115.2   115.7   111.4   113.7   112.8
Total noninterest-earnings assets   $ 157.4   157.9   154.2   155.5   155.0
Noninterest-bearing funding sources
Deposits $ 199.3 193.1 197.9 184.8 176.9
Other liabilities 53.2 55.3 52.9 50.1 43.7
Total equity 137.2 130.6 126.4 124.0 120.9

Noninterest-bearing funding sources used to fund earning assets

    (232.3)   (221.1)   (223.0)   (203.4)   (186.5)

Net noninterest-bearing funding sources

  $ 157.4   157.9   154.2   155.5   155.0
Total assets   $ 1,250.9   1,241.2   1,237.0   1,220.4   1,224.2
                                                           
 
(1) Our average prime rate was 3.25% for quarters ended June 30 and March 31, 2011, and December 31, September 30 and June 30, 2010. The average three-month London Interbank Offered Rate (LIBOR) was 0.26%, 0.31%, 0.29%, 0.39% and 0.44% for the same quarters, respectively.

 

 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER LOANS
(in millions)     June 30,
2011
  Mar. 31,
2011
  Dec. 31,
2010
  Sept. 30,
2010
  June 30,
2010
Commercial:          
Commercial and industrial $ 157,095 150,857 151,284 147,321 146,084
Real estate mortgage 101,458 101,084 99,435 98,755 99,626
Real estate construction 21,374 22,868 25,333 27,911 30,879
Lease financing 12,907 12,937 13,094 12,993 13,492
Foreign (1)     37,855   35,476   32,912   29,691   30,474
Total commercial     330,689   323,222   322,058   316,671   320,555
Consumer:
Real estate 1-4 family first mortgage 222,874 226,509 230,235 228,081 233,812
Real estate 1-4 family junior lien mortgage 89,947 93,041 96,149 99,060 101,327
Credit card 21,191 20,996 22,260 21,890 22,086
Other revolving credit and installment     87,220   87,387   86,565   87,962   88,485
Total consumer     421,232   427,933   435,209   436,993   445,710
Total loans (net of unearned income) (2)   $ 751,921   751,155   757,267   753,664   766,265
 
(1) Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign if the borrower's primary address is outside of the United States.

(2) Includes $38.7 billion, $40.0 billion, $41.4 billion, $43.8 billion and $46.5 billion of purchased credit-impaired (PCI) loans at June 30 and March 31, 2011, and December 31, September 30 and June 30, 2010, respectively. See PURCHASED CREDIT-IMPAIRED (PCI) LOANS table for detail of PCI loans.

 
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
(in millions)     June 30,
2011
    Mar. 31,
2011
  Dec. 31,
2010
  Sept. 30,
2010
  June 30,
2010
Nonaccrual loans:          
Commercial:
Commercial and industrial $ 2,393 2,653 3,213 4,103 3,843
Real estate mortgage 4,691 5,239 5,227 5,079 4,689
Real estate construction 2,043 2,239 2,676 3,198 3,429
Lease financing 79 95 108 138 163
Foreign     59     86   127   126   115
Total commercial     9,265     10,312   11,351   12,644   12,239
Consumer:
Real estate 1-4 family first mortgage 11,427 12,143 12,289 12,969 12,865
Real estate 1-4 family junior lien mortgage 2,098 2,235 2,302 2,380 2,391
Other revolving credit and installment     255     275   300   312   316
Total consumer     13,780     14,653   14,891   15,661   15,572
Total nonaccrual loans (1)(2)(3)     23,045     24,965   26,242   28,305   27,811
As a percentage of total loans 3.06 % 3.32 3.47 3.76 3.63
Foreclosed assets:
GNMA (4) $ 1,320 1,457 1,479 1,492 1,344
Non-GNMA     3,541     4,055   4,530   4,635   3,650
Total foreclosed assets     4,861     5,512   6,009   6,127   4,994
Total nonperforming assets   $ 27,906     30,477   32,251   34,432   32,805
As a percentage of total loans 3.71 % 4.06 4.26 4.57 4.28
                         
 
(1) Also includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
(2) 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.
(3) Real estate 1-4 family mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status since they are insured or guaranteed.
(4) 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 FHA or guaranteed by the VA.
 
Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
(in millions)  

 

June 30,

2011

  Mar. 31,
2011
  Dec. 31,
2010
  Sept. 30,
2010
  June 30,
2010
         
Total (excluding PCI)(1): $ 17,318 17,901 18,488 18,815 19,384
Less: FHA insured/guaranteed by the VA (2) 14,474 14,353 14,733 14,529 14,387
Less: Student loans guaranteed under the FFELP (3)     1,014   1,120   1,106   1,113   1,122
Total, not government insured/guaranteed   $ 1,830   2,428   2,649   3,173   3,875
 
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 110 338 308 222 540
Real estate mortgage 137 177 104 463 654
Real estate construction 86 156 193 332 471
Foreign     12   16   22   27   21
Total commercial     345   687   627   1,044   1,686
Consumer:
Real estate 1-4 family first mortgage (4) 728 858 941 1,016 1,049
Real estate 1-4 family junior lien mortgage (4) 286 325 366 361 352
Credit card 334 413 516 560 610
Other revolving credit and installment     137   145   199   192   178
Total consumer     1,485   1,741   2,022   2,129   2,189
Total, not government insured/guaranteed   $ 1,830   2,428   2,649   3,173   3,875
 
(1) The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $9.8 billion, $10.8 billion, $11.6 billion, $13.0 billion, and $15.1 billion, at June 30 and March 31, 2011, and December 31, September 30 and June 30, 2010, respectively. These amounts are excluded from the above table as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status.
(2) Represents loans whose repayments are insured by the FHA or guaranteed by the VA.
(3) Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program (FFELP).
(4) Includes mortgages held for sale 90 days or more past due and still accruing.
 
Wells Fargo & Company and Subsidiaries
PURCHASED CREDIT-IMPAIRED (PCI) LOANS
       
Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans represent loans acquired from Wachovia that were deemed to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent LTV percentages. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date.

 

Under the accounting guidance for PCI loans, the excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan, or pool of loans, in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.

 

Subsequent to acquisition, we regularly evaluate our estimates of cash flows expected to be collected. These evaluations, performed quarterly, require the continued usage of key assumptions and estimates, similar to the initial estimate of fair value. If we have probable decreases in the expected cash flows (other than due to a decrease in rate indices), we charge the provision for credit losses, resulting in an increase to the allowance for loan losses. If we have probable and significant increases in the expected cash flows subsequent to establishing an additional allowance, we first reverse any previously established allowance and then increase interest income over the remaining life of the loan, or pool of loans.

 

As a result of PCI loan accounting, certain credit-related ratios cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.

                   
June 30, December 31,
(in millions)     2011   2010   2009   2008
Commercial:
Commercial and industrial $ 527 718 1,911 4,580
Real estate mortgage 2,800 2,855 4,137 5,803
Real estate construction 2,188 2,949 5,207 6,462
Foreign     1,501   1,413   1,733   1,859
Total commercial     7,016   7,935   12,988   18,704
Consumer:
Real estate 1-4 family first mortgage 31,448 33,245 38,386 39,214
Real estate 1-4 family junior lien mortgage 229 250 331 728
Other revolving credit and installment     -   -   -   151
Total consumer     31,677   33,495   38,717   40,093
Total PCI loans (carrying value)   $ 38,693   41,430   51,705   58,797
 
Wells Fargo & Company and Subsidiaries
CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS
       
The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference. A nonaccretable difference was established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Substantially all our commercial and industrial, CRE and foreign PCI loans are accounted for as individual loans. Conversely, Pick-a-Pay and other consumer PCI loans have been aggregated into several pools based on common risk characteristics. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Resolutions of loans may include sales to third parties, receipt of payments in settlement with the borrower, or foreclosure of the collateral. Our policy is to remove an individual loan from a pool based on comparing the amount received from its resolution with its contractual amount. Any difference between these amounts is absorbed by the nonaccretable difference. This removal method assumes that the amount received from resolution approximates pool performance expectations. The accretable yield percentage is unaffected by the resolution and any changes in the effective yield for the remaining loans in the pool are addressed by our quarterly cash flow evaluation process for each pool. For loans that are resolved by payment in full, there is no release of the nonaccretable difference for the pool because there is no difference between the amount received at resolution and the contractual amount of the loan. Modified PCI loans are not removed from a pool even if those loans would otherwise be deemed troubled debt restructurings (TDRs). Modified PCI loans that are accounted for individually are considered TDRs, and removed from PCI accounting, if there has been a concession granted in excess of the original nonaccretable difference. The following table provides an analysis of changes in the nonaccretable difference.
                           
(in millions)     Commercial     Pick-a-Pay     Other
consumer
    Total  
Balance at 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 credit-related 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 at December 31, 2009 5,003 16,240 1,622 22,865
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (817 ) - - (817 )
Loans resolved by sales to third parties (2) (172 ) - - (172 )

Reclassification to accretable yield for loans with improving credit-related cash flows (3)

(726 ) (2,356 ) (317 ) (3,399 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)     (1,698 )   (2,959 )   (391 )   (5,048 )
Balance at December 31, 2010 1,590 10,925 914 13,429
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (89 ) - - (89 )
Loans resolved by sales to third parties (2) (25 ) - - (25 )

Reclassification to accretable yield for loans with improving credit-related cash flows (3)

(189 ) - (21 ) (210 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)     (95 )   (789 )   (160 )   (1,044 )
Balance at June 30, 2011   $ 1,192     10,136     733     12,061  
                           
Balance at March 31,2011 $ 1,395 10,626 829 12,850
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (36 ) - - (36 )
Loans resolved by sales to third parties (2) (7 ) - - (7 )

Reclassification to accretable yield for loans with improving credit-related cash flows (3)

(95 ) - - (95 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)     (65 )   (490 )   (96 )   (651 )
Balance at June 30, 2011   $ 1,192     10,136     733     12,061  
 
(1) Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations.
(2) Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.
(3) Reclassification of nonaccretable difference to accretable yield for loans with increased cash flow estimates will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans.
(4) Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.
 
Wells Fargo & Company and Subsidiaries
CHANGES IN ACCRETABLE YIELD RELATED TO PCI LOANS
           
The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the loan, or pool of loans. The accretable yield is affected by:

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 regular evaluations cash flows expected to be collected;

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 – Updates to expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.
The change in the accretable yield related to PCI loans is presented in the following table.
 

Quarter
ended
June 30,

 

Six
months
ended
June 30,

 

Year ended Dec. 31,

 
(in millions)   2011     2011     2010     2009  
Total, beginning of period $ 15,881 16,714 14,559 10,447
Accretion into interest income (1) (556 ) (1,102 ) (2,392 ) (2,601 )
Accretion into noninterest income due to sales (2) (31 ) (186 ) (43 ) (5 )

Reclassification from nonaccretable difference for loans with improving credit-related cash flows

95 210 3,399 441
Changes in expected cash flows that do not affect nonaccretable difference (3)   (518 )   (765 )   1,191     6,277  
Total, end of period $ 14,871     14,871     16,714     14,559  
 
(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.
 
CHANGES IN ALLOWANCE FOR PCI LOAN LOSSES
     
When it is estimated that the cash flows expected to be collected have decreased subsequent to acquisition for a PCI loan or pool of loans, an allowance is established and a provision for additional loss is recorded as a charge to income. The following table summarizes the changes in allowance for PCI loan losses.
 

(in millions)

 

Commercial

   

Pick-a-Pay

 

Other
consumer

   

Total

 
Balance at December 31, 2008 $ - - - -
Provision for losses due to credit deterioration 850 - 3 853
Charge-offs   (520 )   -   -     (520 )
Balance at December 31, 2009 330 - 3 333
Provision for losses due to credit deterioration 712 - 59 771
Charge-offs   (776 )   -   (30 )   (806 )
Balance at December 31, 2010 266 - 32 298
Provision for losses due to credit deterioration 55 - 38 93
Charge-offs   (106 )   -   (12 )   (118 )
Balance at June 30, 2011 $ 215     -   58     273  
                 
Balance at March 31, 2011 $ 234 - 23 257
Provision for losses due to credit deterioration 44 - 39 83
Charge-offs   (63 )   -   (4 )   (67 )
Balance at June 30, 2011 $ 215     -   58     273  
 
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)
  June 30, 2011
  PCI loans   All other loans
(in millions)  

 

Adjusted
unpaid
principal
balance (2)

  Current
LTV
ratio (3)
    Carrying
value (4)
  Ratio of
carrying
value to
current
value (5)
    Carrying
value (4)
  Ratio of
carrying
value to
current
value (5)
California $ 26,851   119 %   $ 20,464   90 % $ 19,011   84 %
Florida 3,621 124 2,759 89 4,002 103
New Jersey 1,384 93 1,231 82 2,450 79
Texas 356 79 325 72 1,589 65
New York 772 92 681 80 1,062 81
Other states     6,499 110   5,239 88   10,774 87
Total Pick-a-Pay loans   $