Wells Fargo Reports Record Quarterly Net Income

Q1 Net Income of $4.2 billion; Q1 Revenue of $21.6 billion

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

  • Continued strong financial results:
    • Record diluted earnings per common share of $0.75, up 11 percent (annualized) from prior quarter
    • Wells Fargo net income of $4.2 billion, up 14 percent (annualized) from prior quarter
    • Revenue of $21.6 billion, up 20 percent (annualized) from prior quarter
    • Pre-tax pre-provision profit (PTPP)1 of $8.6 billion, up 27 percent (annualized) from prior quarter
    • Positive operating leverage
    • Return on average assets of 1.31 percent, up 6 basis points from prior quarter
    • Return on equity of 12.14 percent, up 17 basis points from prior quarter
  • Solid deposit growth and higher core loans:
    • Total average core checking and savings deposits up $7.8 billion from prior quarter
    • Core loan portfolios up $984 million from December 31, 20112
    • Total loans of $766.5 billion at March 31, 2012, compared with $769.6 billion at December 31, 2011
    • Announced the acquisition of BNP Paribas’s North American energy lending business, which is expected to close in April 2012 and includes approximately $3.9 billion of loans outstanding
  • Improved capital position:
    • Tier 1 common equity3 under Basel I increased $4.4 billion to $99.5 billion, with Tier 1 common equity ratio of 9.95 percent under Basel I at March 31, 2012. Under current Basel III capital proposals, Tier 1 common equity ratio estimated at 7.81 percent, an increase of 31 basis points from prior quarter
    • Increased quarterly common stock dividend rate to $0.22 per share, starting in first quarter 2012
  • Improved credit quality:
    • Net charge-offs were $2.4 billion, a decline of $245 million from prior quarter
    • 1.25 percent (annualized) charge-off rate, the lowest level since 2007
    • Reserve release4 of $400 million (pre-tax) reflected improved portfolio performance

1 See footnote (2) on 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 FIVE QUARTER 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
Mar. 31, Dec. 31, Mar. 31,
            2012     2011   2011
Earnings
Diluted earnings per common share $ 0.75 0.73 0.67
Wells Fargo net income (in billions) 4.25 4.11 3.76
 
Asset Quality
Net charge-offs as a % of avg. total loans 1.25 % 1.36 1.73
Allowance as a % of total loans 2.50 2.56 2.98
Allowance as a % of annualized net charge-offs 199 188 172
 
Other
Revenue (in billions) $ 21.64 20.61 20.33
Average loans (in billions) 768.6 768.6 754.1
Average core deposits (in billions) 870.5 864.9 796.8
Net interest margin 3.91 % 3.89 4.05
                 
 

Wells Fargo & Company (NYSE:WFC) reported record net income of $4.2 billion, or $0.75 per diluted common share, for first quarter 2012, compared with $3.8 billion, or $0.67 per share, for first quarter 2011, and $4.1 billion, or $0.73 per share, for fourth quarter 2011.

“Wells Fargo delivered outstanding first quarter results driven by strong revenue growth. Quarterly revenue was the highest in nine quarters, and we achieved our ninth consecutive quarter of earnings per share growth,” said Chairman and CEO John Stumpf. “Our continued performance for shareholders through a variety of economic environments is a testament to our diversified business model. The performance of our franchise also allowed us to provide our shareholders with an increased common stock dividend for the second consecutive year. As Wells Fargo celebrates its 160th anniversary and successful completion of the Wachovia merger integration, I want to again thank all our team members for helping our customers succeed financially and satisfying all their financial needs—quarter after quarter, year after year.”

“This was a great quarter for Wells Fargo, as we increased revenue, PTPP, and net income; saw improvement in operating leverage and credit quality; and continued to grow capital,” said Chief Financial Officer Tim Sloan. “Revenue was up 20 percent (annualized) from the fourth quarter, led by continued strong mortgage banking results. Expenses increased in the quarter, but we currently expect a $500-$700 million overall reduction in noninterest expense during the second quarter. Our return on assets of 1.31 percent was the highest since first quarter 2008, while our return on equity of 12.14 percent was the highest since second quarter 2009.

“We increased our quarterly common stock dividend rate 83 percent to $0.22 per share and have the ability to repurchase more common shares as a result of the Federal Reserve’s non-objection to our 2012 Comprehensive Capital Analysis and Review capital plan. Our shareholders have been very patient, and we are pleased to reward them with an additional return on their investment.”

Revenue

Revenue increased $1 billion from fourth quarter 2011, to $21.6 billion. Total revenue increased due to growth in noninterest income, including strong mortgage banking and market sensitive revenues1, while net interest income remained stable. Businesses generating linked-quarter revenue growth included asset-backed finance, brokerage services, capital finance, capital markets, commercial banking, corporate banking, corporate trust, dealer services, equity funds, global remittance, insurance, international, mortgage banking, personal credit management, real estate capital markets, retail sales finance, private student lending, and wealth management.

1 Includes net gains (losses) from trading activities, net gains (losses) on debt securities available for sale and net gains from equity investments.

Net Interest Income

Net interest income was $10.9 billion, in line with fourth quarter 2011. Average earning assets were essentially unchanged from the prior quarter. The net interest margin increased to 3.91 percent from 3.89 percent in fourth quarter 2011 as the benefit of disciplined deposit pricing and redeployment of short-term investments into long-term securities offset the runoff of higher yielding loans and investments.

Noninterest Income

Noninterest income was $10.7 billion, up from $9.7 billion in fourth quarter 2011. The $1.0 billion increase was driven by increases of $506 million in mortgage banking, $458 million in market sensitive revenue, and $181 million in trust and investment fees.

Mortgage banking noninterest income was $2.9 billion, up $506 million from fourth quarter 2011, on $129 billion of originations, compared with $120 billion of originations in fourth quarter. The Company provided $430 million for mortgage loan repurchase losses, compared with $404 million in fourth quarter 2011 (included in net gains from mortgage loan origination/sales activities). Net mortgage servicing rights (MSRs) results were a $58 million loss compared with a $201 million gain in fourth quarter 2011. The change in net results was primarily due to a reduction in the value of the MSRs from incorporating a higher discount rate. The ratio of MSRs to related loans serviced for others was 77 basis points and the average note rate on the servicing portfolio was 5.05 percent. The unclosed pipeline at March 31, 2012, was $79 billion up from $72 billion at December 31, 2011.

The Company had net unrealized securities gains of $8.7 billion at March 31, 2012, compared with a net unrealized securities gain of $7.0 billion at December 31, 2011. Period-end securities available for sale balances were up $7.7 billion, reflecting continued investment activity.

Noninterest Expense

As expected, expenses remained elevated in the quarter. Noninterest expense increased to $13.0 billion from $12.5 billion in fourth quarter 2011 reflecting higher personnel costs and higher revenue. The increase was primarily due to:

  • employee benefits expense reflecting seasonally higher salary taxes and 401(k) matching, as well as higher deferred compensation expense ($596 million higher than fourth quarter),
  • higher commissions and incentive compensation reflecting higher revenue-related mortgage banking, retail brokerage, and insurance expenses ($166 million higher),
  • higher operating losses, primarily due to additional litigation accruals for various legal matters ($314 million higher),
  • partially offset by lower merger and severance costs ($262 million lower).

Total quarterly noninterest expenses are expected to decline $500-$700 million in second quarter 2012 driven primarily by the elimination of merger expenses and the absence of the first quarter seasonally higher personnel costs. Due to higher than expected revenues, primarily mortgage banking and acquisition-related revenues, the Company currently targets fourth quarter 2012 noninterest expense of approximately $11.25 billion. This amount is at the upper end of its previously disclosed range of $10.75-$11.25 billion.

Loans

Total period-end loans were $766.5 billion at March 31, 2012, compared with $769.6 billion at December 31, 2011. Excluding expected runoff in the non-strategic/liquidating portfolio of $4.1 billion, loans in the core portfolio grew $984 million in the quarter. Included in the core loan growth was $858 million of commercial asset-based loans purchased in the quarter. Linked quarter core loan growth was driven by commercial and industrial, consumer auto lending and private student lending. This growth was partially offset by seasonally lower credit card balances, a decline in commercial real estate, and continued runoff in the home equity portfolio. In the first quarter, the Company announced the acquisition of BNP Paribas’s North American energy lending business. The transaction is expected to close in April 2012 and includes approximately $3.9 billion of loans outstanding. Average loan balances were flat linked quarter, but many loan portfolios grew, including asset-backed finance, commercial banking, corporate banking, international, mortgage banking, and real estate capital markets.

                         
  March 31, 2012   December 31, 2011
(in millions)   Core   Liquidating (1)   Total   Core   Liquidating (1)   Total
Commercial $ 340,536   5,213   345,749 339,755   5,695   345,450
Consumer     317,753   103,019     420,772     317,550   106,631     424,181
Total loans   $ 658,289   108,232     766,521     657,305   112,326     769,631
 
Change from prior quarter:   $ 984   (4,094 )   (3,110 )   13,708   (4,183 )   9,525
 

(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 $870.5 billion, up 9 percent from a year ago and up 3 percent (annualized) from fourth quarter 2011. Average core checking and savings deposits were $807.8 billion, up 12 percent from a year ago and up 4 percent (annualized) from fourth quarter 2011. Average mortgage escrow deposits were $33.0 billion compared with $27.9 billion a year ago and $34.9 billion in fourth quarter 2011. Average core checking and savings deposits were 93 percent of average core deposits, up from 91 percent a year ago. Deposit costs for first quarter 2012 were 20 basis points compared with 22 basis points in fourth quarter 2011. Average core deposits were 113 percent of average loans, unchanged from fourth quarter 2011.

Capital

Capital increased in the first quarter, with Tier 1 common equity reaching $99.5 billion under Basel I, or 9.95 percent of risk-weighted assets. Under current Basel III proposals, the Tier 1 common equity ratio was an estimated 7.81 percent. In the first quarter, the Company called for the redemption of $875 million of trust preferred securities with a coupon of 6.38 percent, repurchased approximately 8 million shares of its common stock (primarily related to settlement of a forward repurchase contract entered into in fourth quarter 2011), and paid quarterly common stock dividends of $0.22 per share.

               
  Mar. 31,   Dec. 31,   Mar. 31,
(as a percent of total risk-weighted assets)   2012     2011   2011
Ratios under Basel I (1):
Tier 1 common equity (2) 9.95 % 9.46 8.93
Tier 1 capital 11.74 11.33 11.50
Tier 1 leverage 9.35 9.03 9.27
               
 

(1) March 31, 2012, ratios are preliminary.

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

Credit Quality

“Credit quality continued to improve in the first quarter,” said Chief Risk Officer Mike Loughlin. First quarter 2012 net charge-offs were $2.4 billion, or 1.25 percent (annualized) of average loans, down from fourth quarter 2011 net charge-offs of $2.6 billion (1.36 percent). The loan loss reserve release was $400 million compared with $600 million in the prior quarter. “We have seen significant improvement in credit performance over the past two years, and expect continued but slower improvement this year as losses approach a stable, more normalized level,” said Loughlin. “Absent significant deterioration in the economy, we continue to expect future reserve releases in 2012.”

             
Net Loan Charge-Offs
Quarter ended
    Mar. 31, 2012   Dec. 31, 2011   Sept. 30, 2011
($ 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 $ 256 0.62 % $ 310 0.74

%

$ 261 0.65

%

Real estate mortgage 46 0.17 117 0.44 96 0.37
Real estate construction 67 1.43 (5 ) (0.09 ) 55 1.06
Lease financing 2 0.06 4 0.13 3 0.11
Foreign     14 0.14   45   0.45   8 0.08
Total commercial     385 0.45   471   0.54   423 0.50
 
Consumer:
Real estate 1-4 family first mortgage 791 1.39 844 1.46 821 1.46
Real estate 1-4 family junior lien mortgage 763 3.62 800 3.64 842 3.75
Credit card 242 4.40 256 4.63 266 4.90
Other revolving credit and installment     214 0.99   269   1.24   259 1.19
Total consumer     2,010 1.91   2,169   2.02   2,188 2.06
Total   $ 2,395 1.25

%

$ 2,640   1.36

%

$ 2,611 1.37

%

                               
 

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

Nonperforming Assets

Nonperforming assets ended the quarter at $26.6 billion, compared with $26.0 billion in fourth quarter 2011. Nonaccrual loans increased to $22.0 billion from $21.3 billion in the fourth quarter, with the increase exclusively tied to industry-wide supervisory guidance pertaining to the junior lien portfolio described below. Excluding the impact of the supervisory guidance, nonaccrual loans declined in all portfolios and were down $948 million linked quarter, continuing a trend of improvement that started in the fourth quarter 2010. Foreclosed assets were down slightly to $4.6 billion from $4.7 billion in fourth quarter 2011.

In accordance with industry guidance1, related to real estate 1-4 family junior lien mortgages, issued by bank regulators in the first quarter, $1.7 billion of performing junior liens with associated delinquent first liens were reclassified to nonaccrual status in the first quarter. This action had minimal financial impact as the expected loss content of these loans was already considered in the loan loss allowance. “As of March 31, 2012, only 12 percent of these loans was 30 days or more past due,” said Loughlin.

1 Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties, January 31, 2012.

 
Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
    Mar. 31, 2012     Dec. 31, 2011     Sept. 30, 2011
    As a     As a     As a
% of % of % of
Total total Total total Total total
($ in millions)   balances   loans     balances   loans     balances   loans
 
Commercial:
Commercial and industrial $ 1,726 1.02 % $ 2,142 1.28 % $ 2,128 1.29 %
Real estate mortgage 4,081 3.85 4,085 3.85 4,429 4.24
Real estate construction 1,709 9.21 1,890 9.75 1,915 9.71
Lease financing 45 0.34 53 0.40 71 0.55
Foreign     38 0.10   47   0.12   68   0.18
Total commercial     7,599 2.20   8,217   2.38   8,611   2.53
 
Consumer:
Real estate 1-4 family first mortgage 10,683 4.67 10,913 4.77 11,024 4.93
Real estate 1-4 family junior lien mortgage 3,558 4.28 1,975 2.30 2,035 2.31
Other revolving credit and installment     186 0.21   199   0.23   230   0.27
Total consumer     14,427 3.43   13,087   3.09   13,289   3.16
Total nonaccrual loans     22,026 2.87   21,304   2.77   21,900   2.88
 
Foreclosed assets:
GNMA 1,352 1,319 1,336
Non GNMA     3,265   3,342     3,608  
Total foreclosed assets     4,617   4,661     4,944  
Total nonperforming assets   $ 26,643 3.48 % $ 25,965   3.37 % $ 26,844   3.53 %
 
Change from prior quarter:
Total nonaccrual loans $ 722 $ (596 ) $ (1,145 )
Total nonperforming assets 678 (879 ) (1,062 )
                             
 

Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $1.6 billion at March 31, 2012, compared with $2.0 billion at December 31, 2011. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $20.9 billion at March 31, 2012, up from $20.5 billion at December 31, 2011, due to growth in the FHA/VA portfolio over the past two years and the subsequent seasoning of those loans.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $19.1 billion at March 31, 2012, down from $19.7 billion at December 31, 2011. The allowance coverage to total loans was 2.50 percent compared with 2.56 percent in the prior quarter. The allowance covered 1.99 times annualized first quarter net charge-offs compared with 1.88 times in the prior quarter. The allowance coverage to nonaccrual loans was 87 percent at March 31, 2012, compared with 92 percent at December 31, 2011. “We believe the allowance was appropriate for losses inherent in the loan portfolio at March 31, 2012,” 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
Mar. 31,   Dec. 31,   Mar. 31,
(in millions)   2012   2011   2011
Community Banking $ 2,348 2,509 2,180
Wholesale Banking 1,868 1,636 1,635
Wealth, Brokerage and Retirement     296   311   343
 

More financial information about the business segments is in FIVE QUARTER OPERATING SEGMENT RESULTS table.

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses. These products include 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
Mar. 31, Dec. 31, Mar. 31,
(in millions)   2012   2011   2011
Total revenue $ 13,421 13,009 12,657
Provision for credit losses 1,878 2,025 2,061
Noninterest expense 7,825 7,313 7,622
Segment net income 2,348 2,509 2,180
 
(in billions)
Average loans 486.1 490.6 508.4
Average assets 738.3 753.3 756.7
Average core deposits     575.2   568.4   548.1
 

Community Banking reported net income of $2.3 billion, down $161 million, or 6 percent, from fourth quarter 2011 and up $168 million, or 8 percent, from first quarter 2011. Revenue increased $412 million, or 3 percent, from fourth quarter 2011, driven by higher volume-related mortgage banking income and deposit growth, mitigated by the planned runoff of non-strategic loan portfolios. Revenue increased $764 million, or 6 percent, from first quarter 2011 as a result of higher volume-related mortgage banking income, deposit growth, and higher equity sale gains, partially offset by runoff of non-strategic loan balances and lower debit card revenue due to regulatory changes enacted in October. Noninterest expense increased $512 million, or 7 percent, from fourth quarter 2011, reflecting seasonally higher personnel costs. Noninterest expense increased $203 million, or 3 percent, from first quarter 2011, largely the result of higher mortgage volume-related expenses. The provision for credit losses decreased $147 million from fourth quarter 2011 and decreased $183 million from first quarter 2011. Charge-offs decreased $285 million from fourth quarter 2011 and decreased $733 million from first quarter 2011. The reserve release was $300 million in first quarter 2012, compared with releases of $438 million and $850 million in fourth quarter 2011 and first quarter 2011, respectively.

Regional Banking

  • Retail banking
    • Consumer checking accounts up a net 2.5 percent1
    • Core product solutions (sales) of 13.3 million, up 9 percent from prior year
    • Retail Bank household cross-sell ratio of 5.98 products per household in February 2012, up from 5.76 in February 2011; cross-sell in the West of 6.35, compared with 5.49 in the East
  • Customer experience
    • Customers rated their experience in our retail banking stores at an all-time high, a major accomplishment given the many integration activities of the past year
  • Small Business/Business Banking
    • Business checking accounts up a net 3.8 percent1
    • Store-based business solutions up 17 percent from prior year
  • Online and Mobile Banking
    • 21.0 million active online customers1
    • 7.7 million active mobile customers1

Consumer Lending Group

  • Home Mortgage
    • Home Mortgage originations of $129 billion, up from $120 billion in prior quarter
    • Home Mortgage applications of $188 billion, compared with $157 billion in prior quarter
    • Home Mortgage application pipeline of $79 billion at quarter end, compared with $72 billion at December 31, 2011
    • Residential mortgage servicing portfolio of $1.8 trillion
  • Other Consumer Lending
    • Credit card penetration in retail banking households rose to 29.9 percent1, up from 27.2 percent in the prior year
    • Record auto originations of $6.2 billion, up 25 percent from prior quarter and up 10 percent from prior year

1 Data as of February 2012. Comparisons are February 2012 compared with February 2011.

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

             

Selected Financial Information

       
Quarter ended
Mar. 31, Dec. 31, Mar. 31,
(in millions)   2012   2011   2011
Total revenue $ 6,033 5,416 5,422
Provision for credit losses 95 31 134
Noninterest expense 3,054 2,938 2,789
Segment net income 1,868 1,636 1,635
 
(in billions)
Average loans 268.6 265.1 234.7
Average assets 467.8 458.3 398.8
Average core deposits     220.9   223.2   184.8

 

Wholesale Banking reported net income of $1.9 billion, up $232 million, or 14 percent, from fourth quarter 2011, and $233 million, or 14 percent, from first quarter 2011. Driven by broad-based growth across many businesses, as well as seasonally higher insurance fees, Wholesale Banking generated record quarterly revenue of $6.0 billion, an increase of $617 million, or 11 percent, from fourth quarter 2011. Revenue increased $611 million, or 11 percent, from first quarter 2011 driven by broad-based business growth as well as strong loan and deposit growth. Noninterest expense increased $116 million, or 4 percent, from fourth quarter 2011 due to seasonally higher insurance expense and personnel costs. The efficiency ratio improved to 50.6 percent in first quarter 2012 compared with 54.2 percent in fourth quarter 2011. The provision for credit losses was $95 million and increased $64 million from fourth quarter 2011 primarily due to lower reserve release. The provision decreased $39 million from first quarter 2011 due to an $89 million improvement in credit losses partially offset by $50 million of lower reserve release.

  • Record quarterly revenue of $6.0 billion achieved while completing the Wachovia merger integration
  • 14 percent year-over-year average loan and 17 percent average asset growth. The growth came from nearly all portfolios, including asset-backed finance, capital finance, commercial banking, commercial real estate, corporate banking, government and institutional banking, international and Wells Fargo Securities
  • Seven straight quarters of loan growth in Commercial Banking
  • Strong support to government, education, healthcare, and nonprofit organizations leading to nine straight quarters of asset growth in Government and Institutional Banking
  • Average core deposits up 20 percent from prior year
  • Investment Banking revenue from commercial customers increased 20 percent from first quarter 2011 due to attractive capital markets conditions and continued momentum in cross selling to wholesale customer base
  • Agreement to acquire North American energy lending business of BNP Paribas with nearly $9.5 billion of loan commitments and approximately $3.9 billion in loans outstanding; acquisition expected to close in April 2012
  • Completed acquisition of Burdale Capital Finance Inc. from the Bank of Ireland on February 1 with $858 million in loan balances
  • The number of companies using CEO (Commercial Electronic Office) Mobile® banking grew 144 percent year over year to more than 7,000

Wealth, Brokerage and Retirement provides a full range of financial advisory services to clients using a 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. Abbot Downing (formerly branded as Lowry Hill and Wells Fargo Family Wealth) meets the unique needs of ultra high net worth clients. Brokerage serves customers' advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the United States. Retirement is a national leader in providing institutional retirement and trust services (including 401(k) and pension plan record keeping) for businesses, retail retirement solutions for individuals, and reinsurance services for the life insurance industry.

     

Selected Financial Information

Quarter ended
Mar. 31, Dec. 31, Mar. 31,
(in millions)   2012   2011   2011
Total revenue $ 3,062 3,042 3,154
Provision for credit losses 43 20 40
Noninterest expense 2,547 2,520 2,557
Segment net income 296 311 343
 
(in billions)
Average loans 42.5 42.8 42.7
Average assets 161.9 160.6 150.7
Average core deposits     135.6   135.2   125.4
 

Wealth, Brokerage and Retirement reported net income of $296 million, down $15 million from fourth quarter 2011 and down $47 million from first quarter 2011. Revenue was $3.1 billion, up 1 percent from fourth quarter 2011 driven by increased asset-based fees, higher brokerage transaction revenue and gains on deferred compensation plan investments (offset in expense), partially offset by the impact of the fourth quarter 2011 gain on the sale of the H.D. Vest business. Excluding the H.D. Vest gain, revenue was up 6 percent. Total provision for credit losses increased $23 million for the quarter. Noninterest expense increased 1 percent from fourth quarter 2011 primarily due to the seasonal impact on personnel costs, increased broker commissions on higher production levels and higher deferred compensation expense, partially offset by reduced non-personnel costs. Revenue was down 3 percent from first quarter 2011 due to lower brokerage transaction revenue and reduced securities gains in the brokerage business, partially offset by higher gains on deferred compensation investments and growth in managed account fee revenue. Total provision for credit losses increased $3 million from first quarter 2011. Noninterest expense was flat with first quarter 2011 driven by a decline in personnel costs largely due to decreased broker commissions, driven by lower production levels, offset by higher deferred compensation expense. Average core deposits increased $0.4 billion from fourth quarter 2011 and $10.2 billion from first quarter 2011.

Retail Brokerage

  • Strong deposit growth, with average balances up $13 billion, or 16 percent, from prior year
  • Client assets of $1.2 trillion, flat with prior year
  • Managed account assets increased $27 billion, or 11 percent, from prior year driven by strong net flows and market performance

Wealth Management

  • Client assets of $202 billion, down $2 billion, or 1 percent, from prior year

Retirement

  • Institutional Retirement plan assets of $257 billion, up $13 billion, or 5 percent, from prior year
  • IRA assets of $287 billion, up $3 billion, or 1 percent, from prior year

Conference Call

The Company will host a live conference call on Friday, April 13, at 7 a.m. PDT (10 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_041312.

A replay of the conference call will be available beginning at approximately noon PDT (3 p.m. EDT) on April 13 through Friday, April 20. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #60549965. 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 performance, and the adequacy of the allowance for loan losses, including our current expectation of future reserve releases in 2012; (ii) our expectations regarding declines in noninterest expense beginning in second quarter 2012, as well as our targeted noninterest expense for fourth quarter 2012 as part of our expense management initiatives; and (iii) our estimates regarding our Tier 1 common equity ratio under proposed Basel III capital regulations as of March 31, 2012.

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, high unemployment rates, U.S. fiscal debt and budget matters and the sovereign debt crisis and economic difficulties in Europe; 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, as well as effects associated with our settlement with the Department of Justice and other federal and state government entities related to our mortgage servicing and foreclosure practices, 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; a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers; 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 money market funds; 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 housing prices decline and unemployment worsens. 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 the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, 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 other distribution channels across North America and internationally. With more than 270,000 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 16-17
 

Income

Consolidated Statement of Income 18
Consolidated Statement of Comprehensive Income 19
Condensed Consolidated Statement of Changes in Total Equity 19
Five Quarter Consolidated Statement of Income 20
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 21
Noninterest Income and Noninterest Expense 22-23
 

Balance Sheet

Consolidated Balance Sheet 24-25
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 26
 

Loans

Securities Available for Sale 27
Loans 27
Nonperforming Assets 28
Loans 90 Days or More Past Due and Still Accruing 29
Purchased Credit-Impaired Loans 30-32
Pick-A-Pay Portfolio 33
Non-Strategic and Liquidating Loan Portfolios 34
Home Equity Portfolios 34
Changes in Allowance for Credit Losses 35
 

Equity

Tier 1 Common Equity 36
 

Operating Segments

Operating Segment Results 37
 

Other

Mortgage Servicing and other related data 38-40
     
 
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
         
% Change
  Quarter ended Mar. 31, 2012 from
($ in millions, except per share amounts)    

Mar. 31,
2012

   

Dec. 31,
2011

 

Mar. 31,
2011

 

Dec. 31,
2011

   

Mar. 31,
2011

For the Period
Wells Fargo net income $ 4,248 4,107 3,759 3 % 13
Wells Fargo net income applicable to common stock 4,022 3,888 3,570 3 13
Diluted earnings per common share 0.75 0.73 0.67 3 12
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.31 % 1.25 1.23 5 7

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

12.14 11.97 11.98 1 1
Efficiency ratio (1) 60.1 60.7 62.6 (1 ) (4 )
Total revenue $ 21,636 20,605 20,329 5 6
Pre-tax pre-provision profit (PTPP) (2) 8,643 8,097 7,596 7 14
Dividends declared per common share 0.22 0.12 0.12 83 83
Average common shares outstanding 5,282.6 5,271.9 5,278.8 - -
Diluted average common shares outstanding 5,337.8 5,317.6 5,333.1 - -
Average loans $ 768,582 768,563 754,077 - 2
Average assets 1,302,921 1,306,728 1,241,176 - 5
Average core deposits (3) 870,516 864,928 796,826 1 9
Average retail core deposits (4) 616,569 606,810 584,100 2 6
Net interest margin 3.91 % 3.89 4.05 1 (3 )
 
At Period End
Securities available for sale $ 230,266 222,613 167,906 3 37
Loans 766,521 769,631 751,155 - 2
Allowance for loan losses 18,852 19,372 21,983 (3 ) (14 )
Goodwill 25,140 25,115 24,777 - 1
Assets 1,333,799 1,313,867 1,244,666 2 7
Core deposits (3) 888,711 872,629 795,038 2 12
Wells Fargo stockholders' equity 145,516 140,241 133,471 4 9
Total equity 146,849 141,687 134,943 4 9
Capital ratios:
Total equity to assets 11.01 % 10.78 10.84 2 2
Risk-based capital (5):
Tier 1 capital 11.74 11.33 11.50 4 2
Total capital 15.08 14.76 15.30 2 (1 )
Tier 1 leverage (5) 9.35 9.03 9.27 4 1
Tier 1 common equity (5)(6) 9.95 9.46 8.93 5 11
Common shares outstanding 5,301.5 5,262.6 5,300.9 1 -
Book value per common share $ 25.45 24.64 23.18 3 10
Common stock price:
High 34.59 27.97 34.25 24 1
Low 27.94 22.61 29.82 24 (6 )
Period end 34.14 27.56 31.71 24 8
Team members (active, full-time equivalent) 264,900 264,200 270,200 - (2 )
                           
 

(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 March 31, 2012, ratios are preliminary.

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

 
 
Wells Fargo & Company and Subsidiaries        
FIVE QUARTER SUMMARY FINANCIAL DATA
 
  Quarter ended
($ in millions, except per share amounts)     Mar. 31,
2012
    Dec. 31,
2011
  Sept. 30,
2011
  June 30,
2011
  Mar. 31,
2011
For the Quarter
Wells Fargo net income $ 4,248 4,107 4,055 3,948 3,759
Wells Fargo net income applicable to common stock 4,022 3,888 3,839 3,728 3,570
Diluted earnings per common share 0.75 0.73 0.72 0.70 0.67
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.31 % 1.25 1.26 1.27 1.23

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

12.14 11.97 11.86 11.92 11.98
Efficiency ratio (1) 60.1 60.7 59.5 61.2 62.6
Total revenue $ 21,636 20,605 19,628 20,386 20,329
Pre-tax pre-provision profit (PTPP) (2) 8,643 8,097 7,951 7,911 7,596
Dividends declared per common share 0.22 0.12 0.12 0.12 0.12
Average common shares outstanding 5,282.6 5,271.9 5,275.5 5,286.5 5,278.8
Diluted average common shares outstanding 5,337.8 5,317.6 5,319.2 5,331.7 5,333.1
Average loans $ 768,582 768,563 754,544 751,253 754,077
Average assets 1,302,921 1,306,728 1,281,369 1,250,945 1,241,176
Average core deposits (3) 870,516 864,928 836,845 807,483 796,826
Average retail core deposits (4) 616,569 606,810 599,227 592,974 584,100
Net interest margin 3.91 % 3.89 3.84 4.01 4.05
 
At Quarter End
Securities available for sale $ 230,266 222,613 207,176 186,298 167,906
Loans 766,521 769,631 760,106 751,921 751,155
Allowance for loan losses 18,852 19,372 20,039 20,893 21,983
Goodwill 25,140 25,115 25,038 24,776 24,777
Assets 1,333,799 1,313,867 1,304,945 1,259,734 1,244,666
Core deposits (3) 888,711 872,629 849,632 808,970 795,038
Wells Fargo stockholders' equity 145,516 140,241 137,768 136,401 133,471
Total equity 146,849 141,687 139,244 137,916 134,943
Capital ratios:
Total equity to assets 11.01 % 10.78 10.67 10.95 10.84
Risk-based capital (5):
Tier 1 capital 11.74 11.33 11.26 11.69 11.50
Total capital 15.08 14.76 14.86 15.41 15.30
Tier 1 leverage (5) 9.35 9.03 8.97 9.43 9.27
Tier 1 common equity (5)(6) 9.95 9.46 9.34 9.15 8.93
Common shares outstanding 5,301.5 5,262.6 5,272.2 5,278.2 5,300.9
Book value per common share $ 25.45 24.64 24.13 23.84 23.18
Common stock price:
High 34.59 27.97 29.63 32.63 34.25
Low 27.94 22.61 22.58 25.26 29.82
Period end 34.14 27.56 24.12 28.06 31.71
Team members (active, full-time equivalent) 264,900 264,200 263,800 266,600 270,200
                         
 
(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 March 31, 2012, ratios are preliminary.
(6) See the "Five Quarter Tier 1 Common Equity under Basel I" table for additional information.
 
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
     
Quarter ended March 31, %
(in millions, except per share amounts)     2012   2011   Change
Interest income
Trading assets $ 377 350 8 %
Securities available for sale 2,088 2,164 (4 )
Mortgages held for sale 459 437 5
Loans held for sale 9 12 (25 )
Loans 9,197 9,387 (2 )
Other interest income     125     122   2
Total interest income     12,255     12,472   (2 )
Interest expense
Deposits 457 615 (26 )
Short-term borrowings 16 26 (38 )
Long-term debt 830 1,104 (25 )
Other interest expense     64     76   (16 )
Total interest expense     1,367     1,821   (25 )
Net interest income 10,888 10,651 2
Provision for credit losses     1,995     2,210   (10 )
Net interest income after provision for credit losses     8,893     8,441   5
Noninterest income
Service charges on deposit accounts 1,084 1,012 7
Trust and investment fees 2,839 2,916 (3 )
Card fees 654 957 (32 )
Other fees 1,095 989 11
Mortgage banking 2,870 2,016 42
Insurance 519 503 3
Net gains from trading activities 640 612 5
Net losses on debt securities available for sale (7 ) (166 ) (96 )
Net gains from equity investments 364 353 3
Operating leases 59 77 (23 )
Other     631     409   54
Total noninterest income     10,748     9,678   11
Noninterest expense
Salaries 3,601 3,454 4
Commission and incentive compensation 2,417 2,347 3
Employee benefits 1,608 1,392 16
Equipment 557 632 (12 )
Net occupancy 704 752 (6 )
Core deposit and other intangibles 419 483 (13 )
FDIC and other deposit assessments 357 305 17
Other     3,330     3,368   (1 )
Total noninterest expense     12,993     12,733   2
Income before income tax expense 6,648 5,386 23
Income tax expense     2,328     1,572   48
Net income before noncontrolling interests 4,320 3,814 13
Less: Net income from noncontrolling interests     72     55   31
Wells Fargo net income   $ 4,248     3,759   13
Less: Preferred stock dividends and other     226     189   20
Wells Fargo net income applicable to common stock   $ 4,022     3,570   13
Per share information
Earnings per common share $ 0.76 0.68 12
Diluted earnings per common share 0.75 0.67 12
Dividends declared per common share 0.22 0.12 83
Average common shares outstanding 5,282.6 5,278.8 -
Diluted average common shares outstanding 5,337.8 5,333.1 -
                 
 
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
     
Quarter ended March 31, %
(in millions)     2012   2011   Change
Wells Fargo net income $ 4,248 3,759 13

%

 

Other comprehensive income, before tax:
Foreign currency translation adjustments (1)

Net unrealized gains (losses) arising during the period

10 24 (58 )
Securities available for sale:
Net unrealized gains (losses) arising during the period 1,874 498 276
Reclassification of (gains) losses included in net income (226 ) 51 NM
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period 42 (4 ) NM
Reclassification of net (gains) losses on cash flow hedges included in net income (107 ) (156 ) (31 )
Defined benefit plans adjustment
Net actuarial gains (losses) arising during the period (5 ) (1 ) 400
Amortization of net actuarial (gain) loss and prior service cost included in net income     36     24   50
Other comprehensive income, before tax 1,624 436 272
Income tax expense related to OCI     (611 )   (157 ) 289
Other comprehensive income, net of tax 1,013 279 263
Less: Other comprehensive income from noncontrolling interests     4     (4 ) NM
Wells Fargo other comprehensive income, net of tax     1,009     283   257
 
Wells Fargo comprehensive income 5,257 4,042 30
Comprehensive income from noncontrolling interests     76     51   49
Total comprehensive income   $ 5,333     4,093     30  
 
NM - Not meaningful

(1) There was no sale or liquidation of an investment in a foreign entity, and therefore no reclassification adjustment for the quarters ended March 31, 2012 and 2011, respectively.

 
 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY          
   
  Quarter ended March 31,
(in millions)     2012   2011
Balance, beginning of period $ 141,687 127,889
Cumulative effect of fair value election for certain residential mortgage servicing rights     2     -  
Balance, beginning of period - adjusted 141,689 127,889
Wells Fargo net income 4,248 3,759
Wells Fargo other comprehensive income, net of tax 1,009 283
Common stock issued 879 634
Common stock repurchased (64 ) (55 )
Preferred stock released by ESOP 270 493
Preferred stock issued - 2,501
Common stock dividends (1,165 ) (634 )
Preferred stock dividends and other (226 ) (189 )
Noncontrolling interests and other, net     209     262  
Balance, end of period   $ 146,849     134,943  
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
         
  Quarter ended
(in millions, except per share amounts)    

Mar. 31,
2012

  Dec. 31,
2011
  Sept. 30,
2011
  June 30,
2011
  Mar. 31,
2011
Interest income
Trading assets $ 377 400 343 347 350
Securities available for sale 2,088 2,092 2,053 2,166 2,164
Mortgages held for sale 459 456 389 362 437
Loans held for sale 9 16 13 17 12
Loans 9,197 9,275 9,224 9,361 9,387
Other interest income     125     139   156     131     122  
Total interest income     12,255     12,378   12,178     12,384     12,472  
Interest expense
Deposits 457 507 559 594 615
Short-term borrowings 16 14 20 20 26
Long-term debt 830 885 980 1,009 1,104
Other interest expense     64     80   77     83     76  
Total interest expense     1,367     1,486   1,636     1,706     1,821  
Net interest income 10,888 10,892 10,542 10,678 10,651
Provision for credit losses     1,995     2,040   1,811     1,838     2,210  
Net interest income after provision for credit losses     8,893     8,852   8,731     8,840     8,441  
Noninterest income
Service charges on deposit accounts 1,084 1,091 1,103 1,074 1,012
Trust and investment fees 2,839 2,658 2,786 2,944 2,916
Card fees 654 680 1,013 1,003 957
Other fees 1,095 1,096 1,085 1,023 989
Mortgage banking 2,870 2,364 1,833 1,619 2,016
Insurance 519 466 423 568 503
Net gains (losses) from trading activities 640 430 (442 ) 414 612
Net gains (losses) on debt securities available for sale (7 ) 48 300 (128 ) (166 )
Net gains from equity investments 364 61 344 724 353
Operating leases 59 60 284 103 77
Other     631     759   357     364     409  
Total noninterest income     10,748     9,713   9,086     9,708     9,678  
Noninterest expense
Salaries 3,601 3,706 3,718 3,584 3,454
Commission and incentive compensation 2,417 2,251 2,088 2,171 2,347
Employee benefits 1,608 1,012 780 1,164 1,392
Equipment 557 607 516 528 632
Net occupancy 704 759 751 749 752
Core deposit and other intangibles 419 467 466 464 483
FDIC and other deposit assessments 357 314 332 315 305
Other     3,330     3,392   3,026     3,500     3,368  
Total noninterest expense     12,993     12,508   11,677     12,475     12,733  
Income before income tax expense 6,648 6,057 6,140 6,073 5,386
Income tax expense     2,328     1,874   1,998     2,001     1,572  
Net income before noncontrolling interests 4,320 4,183 4,142 4,072 3,814
Less: Net income from noncontrolling interests     72     76   87     124     55  
Wells Fargo net income   $ 4,248     4,107   4,055     3,948     3,759  
Less: Preferred stock dividends and other     226     219   216     220     189  
Wells Fargo net income applicable to common stock   $ 4,022     3,888   3,839     3,728     3,570  
Per share information
Earnings per common share $ 0.76 0.74 0.73 0.70 0.68
Diluted earnings per common share 0.75 0.73 0.72 0.70 0.67
Dividends declared per common share 0.22 0.12 0.12 0.12 0.12
Average common shares outstanding 5,282.6 5,271.9 5,275.5 5,286.5 5,278.8
Diluted average common shares outstanding 5,337.8 5,317.6 5,319.2 5,331.7 5,333.1
                       
 
 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
           
Quarter ended March 31,
              2012             2011
Interest Interest
Average Yields/ income/ Average Yields/ income/
(in millions)     balance   rates     expense   balance   rates     expense
Earning assets

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

$ 56,020 0.52 % $ 73 83,386 0.35 % $ 72
Trading assets 43,766 3.50 383 37,403 3.81 356
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 5,797 0.97 14 1,545 2.87 11
Securities of U.S. states and political subdivisions 32,595 4.52 368 19,890 5.45 270
Mortgage-backed securities:
Federal agencies 91,300 3.49 797 70,418 4.72 832
Residential and commercial     34,531   6.80   587 30,229   9.68   732
Total mortgage-backed securities 125,831 4.40 1,384 100,647 6.21 1,564
Other debt and equity securities     50,402   3.82   480 33,601   5.55   465
Total securities available for sale 214,625 4.19 2,246 155,683 5.94 2,310
Mortgages held for sale (4) 46,908 3.91 459 38,742 4.51 437
Loans held for sale (4) 748 5.09 9 975 4.88 12
Loans:
Commercial:
Commercial and industrial 166,782 4.18 1,733 150,047 4.65 1,723
Real estate mortgage 105,990 4.07 1,072 99,797 3.92 967
Real estate construction 18,730 4.79 223 24,281 4.26 255
Lease financing 13,129 8.89 292 13,020 7.83 255
Foreign     41,167   2.52 258 33,638   2.83   235
Total commercial     345,798   4.16 3,578 320,783   4.33   3,435
Consumer:
Real estate 1-4 family first mortgage 229,653 4.69 2,688 229,570 5.01 2,867
Real estate 1-4 family junior lien mortgage 84,718 4.27 900 94,708 4.35 1,018
Credit card 22,129 12.93 711 21,509 13.18 709
Other revolving credit and installment     86,284   6.19   1,329 87,507   6.36   1,371
Total consumer     422,784   5.34   5,628 433,294   5.54   5,965
Total loans (4) 768,582 4.81 9,206 754,077 5.03 9,400
Other     4,604   4.42   51 5,228   3.90   50
Total earning assets   $ 1,135,253   4.39 % $ 12,427 1,075,494   4.73 % $ 12,637
Funding sources
Deposits:
Interest-bearing checking $ 32,158 0.05 % $ 4 58,503 0.10 % $ 14
Market rate and other savings 496,027 0.12 153 443,586 0.22 237
Savings certificates 62,689 1.36 213 74,371 1.39 255
Other time deposits 12,651 1.93 61 13,850 2.24 76
Deposits in foreign offices     64,847   0.16   26 57,473   0.23   33
Total interest-bearing deposits 668,372 0.27 457 647,783 0.38 615
Short-term borrowings 48,382 0.15 18 54,751 0.22 30
Long-term debt 127,537 2.60 830 150,144 2.95 1,104
Other liabilities     9,803   2.63   64 9,472   3.24   76
Total interest-bearing liabilities 854,094 0.64 1,369 862,150 0.85 1,825
Portion of noninterest-bearing funding sources     281,159   -   - 213,344   -   -
Total funding sources   $ 1,135,253     0.48   1,369 1,075,494     0.68   1,825

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

3.91

%

  $ 11,058 4.05 %   $ 10,812
Noninterest-earning assets
Cash and due from banks $ 16,974 17,360
Goodwill 25,128 24,775
Other     125,566   123,547  
Total noninterest-earning assets   $ 167,668   165,682  
Noninterest-bearing funding sources
Deposits $ 246,614 193,100
Other liabilities 57,201 55,316
Total equity 145,012 130,610
Noninterest-bearing funding sources used to fund earning assets     (281,159 ) (213,344 )
Net noninterest-bearing funding sources   $ 167,668   165,682  
Total assets   $ 1,302,921   1,241,176  
 
 
(1) Our average prime rate was 3.25% for the quarters ended March 31, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.51% and 0.31% 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 represent amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) Includes taxable-equivalent adjustments of $170 million and $161 million for the quarters ended March 31, 2012 and 2011, 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
   
Quarter ended March 31, %
(in millions)   2012     2011     Change
Service charges on deposit accounts $ 1,084 1,012 7

%

Trust and investment fees:
Trust, investment and IRA fees 1,024 1,060 (3 )
Commissions and all other fees   1,815     1,856   (2 )
Total trust and investment fees   2,839     2,916   (3 )
Card fees 654 957 (32 )
Other fees:
Cash network fees 118 81 46
Charges and fees on loans 445 397 12
Processing and all other fees   532     511   4
Total other fees   1,095     989   11
Mortgage banking:
Servicing income, net 252 866 (71 )
Net gains on mortgage loan origination/sales activities   2,618     1,150   128
Total mortgage banking   2,870     2,016   42
Insurance 519 503 3
Net gains from trading activities 640 612 5
Net losses on debt securities available for sale (7 ) (166 ) (96 )
Net gains from equity investments 364 353 3
Operating leases 59 77 (23 )
All other   631     409   54
Total $ 10,748     9,678     11  
 
 
NONINTEREST EXPENSE
               
  Quarter ended March 31, %
(in millions)     2012   2011   Change
Salaries $ 3,601 3,454 4 %
Commission and incentive compensation 2,417 2,347 3
Employee benefits 1,608 1,392 16
Equipment 557 632 (12 )
Net occupancy 704 752 (6 )
Core deposit and other intangibles 419 483 (13 )
FDIC and other deposit assessments 357 305 17
Outside professional services 594 580 2
Contract services 303 369 (18 )
Foreclosed assets 304 408 (25 )
Operating losses 477 472 1
Postage, stationery and supplies 216 235 (8 )
Outside data processing 216 220 (2 )
Travel and entertainment 202 206 (2 )
Advertising and promotion 122 116 5
Telecommunications 124 134 (7 )
Insurance 157 133 18
Operating leases 28 24 17
All other     587   471 25
Total   $ 12,993   12,733   2  
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
         
  Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)     2012   2011   2011   2011   2011
Service charges on deposit accounts $ 1,084 1,091 1,103 1,074 1,012
Trust and investment fees:
Trust, investment and IRA fees 1,024 1,000 1,019 1,020 1,060
Commissions and all other fees     1,815     1,658   1,767     1,924     1,856  
Total trust and investment fees     2,839     2,658   2,786     2,944     2,916  
Card fees 654 680 1,013 1,003 957
Other fees:
Cash network fees 118 109 105 94 81
Charges and fees on loans 445 402 438 404 397
Processing and all other fees     532     585   542     525     511  
Total other fees     1,095     1,096   1,085     1,023     989  
Mortgage banking:
Servicing income, net 252 493 1,030 877 866
Net gains on mortgage loan origination/sales activities     2,618     1,871   803     742     1,150  
Total mortgage banking     2,870     2,364   1,833     1,619     2,016  
Insurance 519 466 423 568 503
Net gains (losses) from trading activities 640 430 (442 ) 414 612
Net gains (losses) on debt securities available for sale (7 ) 48 300 (128 ) (166 )
Net gains from equity investments 364 61 344 724 353
Operating leases 59 60 284 103 77
All other     631     759   357     364     409  
Total   $ 10,748     9,713   9,086     9,708     9,678  
 
 
FIVE QUARTER NONINTEREST EXPENSE
         
  Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)     2012   2011   2011   2011   2011
Salaries $ 3,601 3,706 3,718 3,584 3,454
Commission and incentive compensation 2,417 2,251 2,088 2,171 2,347
Employee benefits 1,608 1,012 780 1,164 1,392
Equipment 557 607 516 528 632
Net occupancy 704 759 751 749 752
Core deposit and other intangibles 419 467 466 464 483
FDIC and other deposit assessments 357 314 332 315 305
Outside professional services 594 813 640 659 580
Contract services 303 356 341 341 369
Foreclosed assets 304 370 271 305 408
Operating losses 477 163 198 428 472
Postage, stationery and supplies 216 231 240 236 235
Outside data processing 216 257 226 232 220
Travel and entertainment 202 212 198 205 206
Advertising and promotion 122 166 159 166 116
Telecommunications 124 129 128 132 134
Insurance 157 87 94 201 133
Operating leases 28 28 29 31 24
All other     587   580   502   564   471
Total   $ 12,993   12,508   11,677   12,475   12,733
 
 
Wells Fargo & Company and Subsidiaries      
CONSOLIDATED BALANCE SHEET              
 
Mar. 31, Dec. 31, %
(in millions, except shares)     2012   2011   Change
Assets
Cash and due from banks $ 17,000 19,440 (13 ) %
Federal funds sold, securities purchased under resale agreements and other short-term investments 74,143 44,367 67
Trading assets 75,696 77,814 (3 )
Securities available for sale 230,266 222,613 3
Mortgages held for sale (includes $39,183 and $44,791 carried at fair value) 43,449 48,357 (10 )
Loans held for sale (includes $796 and $1,176 carried at fair value) 958 1,338 (28 )
 
Loans (includes $6,037 and $5,916 carried at fair value) 766,521 769,631 -
Allowance for loan losses     (18,852 )   (19,372 ) (3 )
Net loans     747,669     750,259   -
Mortgage servicing rights:
Measured at fair value 13,578 12,603 8
Amortized 1,074 1,408 (24 )
Premises and equipment, net 9,291 9,531 (3 )
Goodwill 25,140 25,115 -
Other assets     95,535     101,022   (5 )
Total assets   $ 1,333,799     1,313,867   2
Liabilities
Noninterest-bearing deposits $ 255,013 244,003 5
Interest-bearing deposits     675,254     676,067   -
Total deposits 930,267 920,070 1
Short-term borrowings 50,964 49,091 4
Accrued expenses and other liabilities 75,967 77,665 (2 )
Long-term debt     129,752     125,354   4
Total liabilities     1,186,950     1,172,180   1
Equity
Wells Fargo stockholders' equity:
Preferred stock 12,101 11,431 6

Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,405,043,212 and 5,358,522,061 shares

9,008 8,931 1
Additional paid-in capital 57,569 55,957 3
Retained earnings 67,239 64,385 4
Cumulative other comprehensive income 4,216 3,207 31
Treasury stock – 103,542,034 shares and 95,910,425 shares (2,958 ) (2,744 ) 8
Unearned ESOP shares     (1,659 )   (926 ) 79
Total Wells Fargo stockholders' equity 145,516 140,241 4
Noncontrolling interests     1,333     1,446   (8 )
Total equity     146,849     141,687   4
Total liabilities and equity   $ 1,333,799     1,313,867     2  
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
                   
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)     2012   2011   2011   2011   2011
Assets
Cash and due from banks $ 17,000 19,440 18,314 24,059 16,978

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

74,143 44,367 89,804 88,406 93,041
Trading assets 75,696 77,814 57,786 54,770 57,890
Securities available for sale 230,266 222,613 207,176 186,298 167,906
Mortgages held for sale 43,449 48,357 42,704 31,254 33,121
Loans held for sale 958 1,338 743 1,512 1,428
 
Loans 766,521 769,631 760,106 751,921 751,155
Allowance for loan losses     (18,852 )   (19,372 )   (20,039 )   (20,893 )   (21,983 )
Net loans     747,669     750,259     740,067     731,028     729,172  
Mortgage servicing rights:

Measured at fair value

13,578 12,603 12,372 14,778 15,648
Amortized 1,074 1,408 1,397 1,422 1,423
Premises and equipment, net 9,291 9,531 9,607 9,613 9,545
Goodwill 25,140 25,115 25,038 24,776 24,777
Other assets     95,535     101,022     99,937     91,818     93,737  
Total assets   $ 1,333,799     1,313,867     1,304,945     1,259,734     1,244,666  
Liabilities
Noninterest-bearing deposits $ 255,013 244,003 229,863 202,143 190,959
Interest-bearing deposits     675,254     676,067     665,565     651,492     646,703  
Total deposits 930,267 920,070 895,428 853,635 837,662
Short-term borrowings 50,964 49,091 50,775 53,881 54,737
Accrued expenses and other liabilities 75,967 77,665 86,284 71,430 68,721
Long-term debt     129,752     125,354     133,214     142,872     148,603  
Total liabilities     1,186,950     1,172,180     1,165,701     1,121,818     1,109,723  
Equity
Wells Fargo stockholders' equity:
Preferred stock 12,101 11,431 11,566 11,730 11,897
Common stock 9,008 8,931 8,902 8,876 8,854
Additional paid-in capital 57,569 55,957 55,495 55,226 54,815
Retained earnings 67,239 64,385 61,135 57,942 54,855
Cumulative other comprehensive income 4,216 3,207 3,828 5,422 5,021
Treasury stock (2,958 ) (2,744 ) (2,087 ) (1,546 ) (541 )
Unearned ESOP shares     (1,659 )   (926 )   (1,071 )   (1,249 )   (1,430 )
Total Wells Fargo stockholders' equity 145,516 140,241 137,768 136,401 133,471
Noncontrolling interests     1,333     1,446     1,476     1,515     1,472  
Total equity     146,849     141,687     139,244     137,916     134,943  
Total liabilities and equity   $ 1,333,799     1,313,867     1,304,945     1,259,734     1,244,666  
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
                   
  Quarter ended
  Mar. 31, 2012       Dec. 31, 2011       Sept. 30, 2011       June 30, 2011       Mar. 31, 2011
Average Yields/ Average Yields/ Average Yields/ Average Yields/ Average Yields/
($ in billions)   balance   rates     balance   rates     balance   rates     balance   rates     balance   rates
Earning assets

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

$ 56.0 0.52 % $ 68.0 0.52 % $ 98.9 0.42 % $ 98.5 0.32 % $ 83.4 0.35 %
Trading assets 43.8 3.50 45.5 3.57 37.9 3.67 38.0 3.71 37.4 3.81
Securities available for sale (2):
Securities of U.S. Treasury and federal agencies 5.8 0.97 8.7 0.99 9.6 1.02 2.0 2.33 1.6 2.87
Securities of U.S. states and political subdivisions 32.6 4.52 28.0 4.80 25.6 4.93 22.5 5.35 19.9 5.45
Mortgage-backed securities:
Federal agencies 91.3 3.49 84.3 3.68 72.8 4.41 70.9 4.76 70.4 4.72
Residential and commercial     34.5   6.80   34.7   7.05   32.6   7.46   30.0   8.86   30.2   9.68
Total mortgage-backed securities 125.8 4.40 119.0 4.66 105.4 5.36 100.9 5.98 100.6 6.21
Other debt and equity securities     50.4   3.82   47.3   4.38   38.9   4.69   34.5   5.81   33.6   5.55
Total securities available for sale 214.6 4.19 203.0 4.46 179.5 4.92 159.9 5.81 155.7 5.94
Mortgages held for sale 46.9 3.91 44.8 4.07 34.6 4.49 30.7 4.73 38.7 4.51
Loans held for sale 0.8 5.09 1.1 5.84 1.0 5.21 1.4 5.05 1.0 4.88
Loans:
Commercial:
Commercial and industrial 166.8 4.18 166.9 4.08 159.6 4.22 153.6 4.60 150.0 4.65
Real estate mortgage 106.0 4.07 105.2 4.26 102.4 3.93 101.5 4.16 99.9 3.92
Real estate construction 18.7 4.79 19.6 4.61 20.5 6.12 22.0 4.64 24.3 4.26
Lease financing 13.1 8.89 12.9 7.41 13.0 7.21 12.9 7.72 13.0 7.83
Foreign     41.2   2.52   38.8   2.39   38.2   2.42   36.4   2.65   33.6   2.83
Total commercial     345.8   4.16   343.4   4.10   333.7   4.16   326.4   4.37   320.8   4.33
Consumer:
Real estate 1-4 family first mortgage 229.7 4.69 229.8 4.74 223.8 4.83 224.9 4.97 229.6 5.01
Real estate 1-4 family junior lien mortgage 84.7 4.27 87.2 4.34 89.1 4.37 91.9 4.25 94.7 4.35
Credit card 22.1 12.93 21.9 12.96 21.5 12.96 21.0 12.97 21.5 13.18
Other revolving credit and installment     86.3   6.19   86.3   6.23   86.5   6.25   87.1   6.32   87.5   6.36
Total consumer     422.8   5.34   425.2   5.39   420.9   5.44   424.9   5.48   433.3   5.54
Total loans 768.6 4.81 768.6 4.81 754.6 4.87 751.3 5.00 754.1 5.03
Other     4.6   4.42   4.7   4.32   4.9   4.18   5.0   4.10   5.2   3.90
Total earning assets   $ 1,135.3   4.39 % $ 1,135.7   4.41 % $ 1,111.4   4.43 % $ 1,084.8   4.64 % $ 1,075.5   4.73 %
Funding sources
Deposits:
Interest-bearing checking $ 32.2 0.05 % $ 35.3 0.06 % $ 44.0 0.07 % $ 53.3 0.09 % $ 58.5 0.10 %
Market rate and other savings 496.0 0.12 485.1 0.14 473.4 0.17 455.1 0.20 443.6 0.22
Savings certificates 62.7 1.36 64.9 1.43 67.6 1.47 72.1 1.42 74.4 1.39
Other time deposits 12.7 1.93 12.9 1.85 12.8 2.02 13.0 2.03 13.8 2.24
Deposits in foreign offices     64.8   0.16   67.2   0.20   63.5   0.23   57.9   0.23   57.5   0.23
Total interest-bearing deposits 668.4 0.27 665.4 0.30 661.3 0.34 651.4 0.37 647.8 0.38
Short-term borrowings 48.4 0.15 48.7 0.14 50.4 0.18 53.3 0.18 54.8 0.22
Long-term debt 127.5 2.60 129.4 2.73 139.5 2.81 145.5 2.78 150.1 2.95
Other liabilities     9.8   2.63   12.2   2.60   11.2   2.75   11.0   3.03   9.5   3.24
Total interest-bearing liabilities 854.1 0.64 855.7 0.69 862.4 0.76 861.2 0.80 862.2 0.85
Portion of noninterest-bearing funding sources     281.2   -   280.0   -   249.0   -   223.6   -   213.3   -
Total funding sources   $ 1,135.3     0.48 $ 1,135.7     0.52 $ 1,111.4     0.59 $ 1,084.8     0.63 $ 1,075.5     0.68

Net interest margin on a taxable-equivalent basis

3.91 % 3.89 % 3.84 % 4.01 % 4.05 %
Noninterest-earning assets
Cash and due from banks $ 17.0 17.7 17.1 17.4 17.4
Goodwill 25.1 25.1 25.0 24.8 24.8
Other     125.5     128.2     127.9     123.9     123.5  
Total noninterest-earnings assets   $ 167.6     171.0     170.0     166.1     165.7  
Noninterest-bearing funding sources
Deposits $ 246.6 246.7 221.2 199.3 193.1
Other liabilities 57.2 63.5 57.5 53.2 55.3
Total equity 145.0 140.8 140.3 137.2 130.6

Noninterest-bearing funding sources used to fund earning assets

    (281.2 )   (280.0 )   (249.0 )   (223.6 )   (213.3 )

Net noninterest-bearing funding sources

  $ 167.6     171.0    

170.0

    166.1     165.7  
Total assets   $ 1,302.9     1,306.7     1,281.4     1,250.9     1,241.2  
                                                           
(1) Our average prime rate was 3.25% for quarters ended March 31, 2012, and December 31, September 30, June 30 and March 31, 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.51%, 0.48%, 0.30%, 0.26% and 0.31% for the same quarters, respectively.
(2) 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 represent amortized cost for the periods presented.
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SECURITIES AVAILABLE FOR SALE
         
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)     2012   2011   2011   2011   2011
Securities of U.S. Treasury and federal agencies $ 4,678 6,968 13,813 10,523 1,507
Securities of U.S. states and political subdivisions 34,237 32,593 26,970 24,412 21,159
Mortgage-backed securities:
Federal agencies 102,665 96,754 84,716 78,338 75,552
Residential and commercial     36,486   35,986   35,159   33,088   32,728
Total mortgage-backed securities 139,151 132,740 119,875 111,426 108,280
Other debt securities     49,047   46,895   42,925   35,582   31,952
Total debt securities available for sale 227,113 219,196 203,583 181,943 162,898
Marketable equity securities     3,153   3,417   3,593   4,355   5,008
Total securities available for sale   $ 230,266   222,613   207,176   186,298   167,906
 
 
FIVE QUARTER LOANS
         
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)     2012   2011   2011   2011   2011
Commercial:
Commercial and industrial $ 168,546 167,216 164,510 157,095 150,857
Real estate mortgage 105,874 105,975 104,363 101,458 101,084
Real estate construction 18,549 19,382 19,719 21,374 22,868
Lease financing 13,143 13,117 12,852 12,907 12,937
Foreign (1)     39,637   39,760   38,390   37,855   35,476
Total commercial     345,749   345,450   339,834   330,689   323,222
Consumer:
Real estate 1-4 family first mortgage 228,885 228,894 223,758 222,874 226,509
Real estate 1-4 family junior lien mortgage 83,173 85,991 88,264 89,947 93,041
Credit card 21,998 22,836 21,650 21,191 20,996
Other revolving credit and installment     86,716   86,460   86,600   87,220   87,387
Total consumer     420,772   424,181   420,272   421,232   427,933
Total loans (2)   $ 766,521   769,631   760,106   751,921   751,155
 
(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 $35.5 billion, $36.7 billion, $37.2 billion, $38.7 billion, and $40.0 billion of purchased credit-impaired (PCI) loans at March 31, 2012, and December 31, September 30, June 30, and March 31, 2011, respectively. See the PCI loans table for detail of PCI loans.
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
       
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)     2012   2011   2011   2011   2011
Nonaccrual loans:
Commercial:
Commercial and industrial $ 1,726 2,142 2,128 2,393 2,653
Real estate mortgage 4,081 4,085 4,429 4,691 5,239
Real estate construction 1,709 1,890 1,915 2,043 2,239
Lease financing 45 53 71 79 95
Foreign     38   47   68   59   86
Total commercial     7,599   8,217   8,611   9,265   10,312
Consumer:
Real estate 1-4 family first mortgage 10,683 10,913 11,024 11,427 12,143
Real estate 1-4 family junior lien mortgage (1) 3,558 1,975 2,035 2,098 2,235
Other revolving credit and installment     186   199   230   255   275
Total consumer     14,427   13,087   13,289   13,780   14,653
Total nonaccrual loans (2)(3)(4)     22,026   21,304   21,900   23,045   24,965
As a percentage of total loans 2.87 % 2.77 2.88 3.06 3.32
Foreclosed assets:
Government insured/guaranteed (5) $ 1,352 1,319 1,336 1,320 1,457
Non-government insured/guaranteed     3,265   3,342   3,608   3,541   4,055
Total foreclosed assets     4,617   4,661   4,944   4,861   5,512
Total nonperforming assets   $ 26,643   25,965   26,844   27,906   30,477
As a percentage of total loans 3.48 % 3.37 3.53 3.71 4.06
                       
 
(1) Includes $1.7 billion at March 31, 2012, resulting from implementation of the Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties issued on January 31, 2012. This guidance accelerated the timing of placing these loans on nonaccrual to coincide with the timing of placing the related real estate 1-4 family first mortgage loans on nonaccrual.
(2) Also includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
(3) Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.
(4) 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 because they are insured or guaranteed.
(5) Consistent with regulatory reporting requirements, foreclosed real estate securing government insured/guaranteed loans is classified as nonperforming. Both principal and interest for government insured/guaranteed loans secured by the foreclosed real estate are collectible because the 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
         
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)     2012   2011   2011   2011   2011
Loans 90 days or more past due and still accruing:
Total (excluding PCI)(1): $ 22,555 22,569 19,639 17,318 17,901
Less: FHA insured/VA guaranteed (2) 19,681 19,240 16,498 14,474 14,353
Less: Student loans guaranteed under the FFELP (3)     1,238   1,281   1,212   1,014   1,120
Total, not government insured/guaranteed   $ 1,636   2,048   1,929   1,830   2,428
 
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 104 153 108 110 338
Real estate mortgage 289 256 207 137 177
Real estate construction 25 89 57 86 156
Foreign     7   6   11   12   16
Total commercial     425   504   383   345   687
Consumer:
Real estate 1-4 family first mortgage (4) 616 781 819 728 858
Real estate 1-4 family junior lien mortgage (4) 156 279 255 286 325
Credit card 319 346 328 334 413
Other revolving credit and installment     120   138   144   137   145
Total consumer     1,211   1,544   1,546   1,485   1,741
Total, not government insured/guaranteed   $ 1,636   2,048   1,929   1,830   2,428
 
(1) The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $7.1 billion, $8.7 billion, $8.9 billion, $9.8 billion and $10.8 billion at March 31, 2012, and December 31, September 30, June 30 and March 31, 2011, 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 predominately 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.

                       
 
Mar. 31, Dec. 31,
(in millions)     2012   2011   2010   2009   2008
Commercial:
Commercial and industrial $ 385 399 718 1,911 4,580
Real estate mortgage 3,107 3,270 2,855 4,137 5,803
Real estate construction 1,564 1,745 2,949 5,207 6,462
Foreign     1,198   1,353   1,413   1,733   1,859
Total commercial     6,254   6,767   7,935   12,988   18,704
Consumer:
Real estate 1-4 family first mortgage 29,082 29,746 33,245 38,386 39,214
Real estate 1-4 family junior lien mortgage 198 206 250 331 728
Other revolving credit and installment     -   -   -   -   151
Total consumer     29,280   29,952   33,495   38,717   40,093
Total PCI loans (carrying value)   $ 35,534   36,719   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 is 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.
                         
 
 
Other
(in millions) Commercial     Pick-a-Pay     consumer     Total  
Balance, December 31, 2008 $ 10,410 26,485 4,069 40,964
Addition of nonaccretable difference due to acquisitions 188 - - 188
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (1,345 ) - - (1,345 )
Loans resolved by sales to third parties (2) (299 ) - (85 ) (384 )
Reclassification to accretable yield for loans with improving credit-related cash flows (3) (1,216 ) (2,383 ) (614 ) (4,213 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)   (6,809 )   (14,976 )   (2,718 )   (24,503 )
Balance, December 31, 2011 929 9,126 652 10,707
Addition of nonaccretable difference due to acquisitions - - - -
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (28 ) - - (28 )
Loans resolved by sales to third parties (2) - - - -
Reclassification to accretable yield for loans with improving credit-related cash flows (3) (108 ) - (127 ) (235 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)   (45 )   (505 )   (19 )   (569 )
Balance, March 31, 2012 $ 748     8,621     506     9,875  
 
(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 for settlements with borrowers due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations.
(2) Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.
(3) Reclassification of nonaccretable difference to accretable yield for loans with increased cash flow estimates will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans.
(4) Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.
 
 
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 of 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.
     
 
 
(in millions)    
Balance, December 31, 2008 $ 10,447
Addition of accretable yield due to acquisitions 128
Accretion into interest income (1) (7,199 )
Accretion into noninterest income due to sales (2) (237 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 4,213
Changes in expected cash flows that do not affect nonaccretable difference (3)   8,609  
Balance, December 31, 2011 15,961
Addition of accretable yield due to acquisitions -
Accretion into interest income (1) (514 )
Accretion into noninterest income due to sales (2) -
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 235
Changes in expected cash flows that do not affect nonaccretable difference (3)   81  
Balance, March 31, 2012 $ 15,763  
 
(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.
                         
 
Other
(in millions)     Commercial     Pick-a-Pay   consumer     Total  
Balance, December 31, 2008 $ - - - -
Provision for losses due to credit deterioration 1,668 - 116 1,784
Charge-offs     (1,503 )   -   (50 )   (1,553 )
Balance, December 31, 2011 165 - 66 231
Provision for losses due to credit deterioration 39 - 5 44
Charge-offs     (27 )   -   (3 )   (30 )
Balance, March 31, 2012   $ 177     -   68     245  
 
 
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)  
           
March 31, 2012  
  PCI loans All other loans  
Ratio of Ratio of
Adjusted carrying carrying
unpaid Current value to value to
principal LTV Carrying current Carrying current
(in millions)   balance (2)   ratio (3)     value (4)   value (5)     value (4)   value (5)  
California $ 24,292 119 % $ 18,852 92 % $ 17,371 85 %
Florida 3,187 120 2,471 88 3,640 99
New Jersey 1,310 91 1,217 83 2,261 78
New York 743 92 683 83 993 80
Texas 330 79 304 72 1,442 64
Other states     5,923   109   4,893   89   9,856   87
Total Pick-a-Pay loans   $ 35,785   $ 28,420   $ 35,563  
                                     
 
(1) The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2012.
(2) Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.
(3) The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.
(4) Carrying value, which does not reflect the allowance for loan losses, includes remaining purchase accounting adjustments, which, for PCI loans may include the nonaccretable difference and the accretable yield and, for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs.
(5) The ratio of carrying value to current value is calculated as the carrying value divided by the collateral value.
 
 
Wells Fargo & Company and Subsidiaries
NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS
         
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)     2012   2011   2011   2011   2011
Commercial:

Legacy Wachovia commercial and industrial, commercial real estate and foreign PCI loans (1)

  $ 5,213   5,695   6,321   7,016   7,507
Total commercial     5,213   5,695   6,321   7,016   7,507
Consumer:
Pick-a-Pay mortgage (1) 63,983 65,652 67,361 69,587 71,506
Liquidating home equity 5,456 5,710 5,982 6,266 6,568
Legacy Wells Fargo Financial indirect auto 1,907 2,455 3,101 3,881 4,941
Legacy Wells Fargo Financial debt consolidation 16,013 16,542 17,186 17,730 18,344
Education Finance - government guaranteed 14,800 15,376 15,611 16,295 16,907
Legacy Wachovia other PCI loans (1)     860   896   947   978   1,048
Total consumer     103,019   106,631   110,188   114,737   119,314
Total non-strategic and liquidating loan portfolios   $ 108,232   112,326   116,509   121,753   126,821
 

(1) Net of purchase accounting adjustments related to PCI loans.

 
HOME EQUITY PORTFOLIOS (1)
       
% of loans
two payments

 

Loss rate (annualized)

Outstanding balance or more past due Quarter ended
Mar. 31, Dec. 31, Mar. 31, Dec. 31, Mar. 31, Dec. 31,
(in millions)     2012   2011   2012     2011     2012   2011
Core portfolio (2)
California $ 24,855 25,555 2.84 % 3.03 3.56 3.42
Florida 10,547 10,870 4.57 4.99 4.79 4.30
New Jersey 7,774 7,973 3.56 3.73 2.46 2.22
Virginia 5,115 5,248 2.10 2.15 1.42 1.31
Pennsylvania 4,958 5,071 2.50 2.82 1.49 1.41
Other     44,760   46,165   2.61 2.79 2.50 2.50
Total     98,009   100,882   2.92 3.13 2.91 2.79
Liquidating portfolio
California 1,926 2,024 5.27 5.50 10.80 11.93
Florida 253 265 6.40 7.02 9.84 9.71
Arizona 109 116 4.76 6.64 15.08 17.54
Texas 93 97 1.06 0.93 2.43 1.57
Minnesota 73 75 3.89 2.83 5.07 8.13
Other     3,002   3,133   3.80 4.13 6.23 7.12
Total     5,456   5,710   4.41 4.73 8.11 9.09
Total core and liquidating portfolios   $ 103,465   106,592   3.00 3.22 3.18 3.13
                               
 

(1) Consists predominantly of real estate 1-4 family junior lien mortgages and first and junior lines of credit secured by real estate, but excludes PCI loans because their losses are generally covered by PCI accounting adjustment at the date of acquisition, and excludes real estate 1-4 family first lien open-ended line reverse mortgages because they do not have scheduled payments. These reverse mortgage loans are insured by the FHA.

(2) Includes $1.5 billion at March 31, 2012, and December 31, 2011, associated with the Pick-a-Pay portfolio.

 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES  
         
  Quarter ended  
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)     2012       2011     2011     2011     2011  
Balance, beginning of quarter $ 19,668 20,372 21,262 22,383 23,463
Provision for credit losses 1,995 2,040 1,811 1,838 2,210
Interest income on certain impaired loans (1) (87 ) (86 ) (84 ) (79 ) (83 )
Loan charge-offs:
Commercial:
Commercial and industrial (359 ) (416 ) (349 ) (365 ) (468 )
Real estate mortgage (82 ) (153 ) (119 ) (185 ) (179 )
Real estate construction (80 ) (35 ) (98 ) (99 ) (119 )
Lease financing (8 ) (8 ) (10 ) (7 ) (13 )
Foreign     (29 )     (52 )   (25 )   (57 )   (39 )
Total commercial     (558 )     (664 )   (601 )   (713 )   (818 )
Consumer:
Real estate 1-4 family first mortgage (828 ) (904 ) (900 ) (1,064 ) (1,015 )
Real estate 1-4 family junior lien mortgage (820 ) (856 ) (893 ) (968 ) (1,046 )
Credit card (301 ) (303 ) (320 ) (378 ) (448 )
Other revolving credit and installment     (373 )     (412 )   (421 )   (391 )   (500 )
Total consumer     (2,322 )     (2,475 )   (2,534 )   (2,801 )   (3,009 )
Total loan charge-offs     (2,880 )     (3,139 )   (3,135 )   (3,514 )   (3,827 )
Loan recoveries:
Commercial:
Commercial and industrial 103 106 88 111 114
Real estate mortgage 36 36 23 57 27
Real estate construction 13 40 43 27 36
Lease financing 6 4 7 6 7
Foreign     15       7     17     10     11  
Total commercial     173       193     178     211     195  
Consumer:
Real estate 1-4 family first mortgage 37 60 79 155 111
Real estate 1-4 family junior lien mortgage 57 56 51 59 52
Credit card 59 47 54 84 66
Other revolving credit and installment     159       143     162     167     193  
Total consumer     312       306     346     465     422  
Total loan recoveries     485       499     524     676     617  
Net loan charge-offs     (2,395 )     (2,640 )   (2,611 )   (2,838 )   (3,210 )
Allowances related to business combinations/other     (52 )     (18 )   (6 )   (42 )   3  
Balance, end of quarter   $ 19,129       19,668     20,372     21,262     22,383