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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2008
(Exact name of registrant as specified in its charter)
Delaware | No. 41-0449260 | |
(State of incorporation) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
Large accelerated filer þ | Accelerated filer o | |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Shares Outstanding | ||
April 30, 2008 | ||
Common stock, $1-2/3 par value | 3,302,624,899 |
CROSS-REFERENCE INDEX
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SUMMARY FINANCIAL DATA
% Change | ||||||||||||||||||||
Quarter ended | Mar. 31, 2008 from | |||||||||||||||||||
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | Dec. 31 | , | Mar. 31, | ||||||||||||
($ in millions, except per share amounts) | 2008 | 2007 | 2007 | 2007 | 2007 | |||||||||||||||
For the Quarter | ||||||||||||||||||||
Net income | $ | 1,999 | $ | 1,361 | $ | 2,244 | 47 | % | (11) | % | ||||||||||
Diluted earnings per common share | 0.60 | 0.41 | 0.66 | 46 | (9 | ) | ||||||||||||||
Profitability ratios (annualized): | ||||||||||||||||||||
Net income to average total assets (ROA) | 1.40 | % | 0.97 | % | 1.89 | % | 44 | (26 | ) | |||||||||||
Net income to average stockholders’ equity (ROE) | 16.86 | 11.25 | 19.68 | 50 | (14 | ) | ||||||||||||||
Efficiency ratio (1) | 51.7 | 57.8 | 58.5 | (11 | ) | (12 | ) | |||||||||||||
Total revenue | $ | 10,563 | $ | 10,205 | $ | 9,441 | 4 | 12 | ||||||||||||
Dividends declared per common share | 0.31 | 0.31 | 0.28 | — | 11 | |||||||||||||||
Average common shares outstanding | 3,302.4 | 3,327.6 | 3,376.0 | (1 | ) | (2 | ) | |||||||||||||
Diluted average common shares outstanding | 3,317.9 | 3,352.2 | 3,416.1 | (1 | ) | (3 | ) | |||||||||||||
Average loans | $ | 383,919 | $ | 374,372 | $ | 321,429 | 3 | 19 | ||||||||||||
Average assets | 574,994 | 555,647 | 482,105 | 3 | 19 | |||||||||||||||
Average core deposits (2) | 317,278 | 314,808 | 290,586 | 1 | 9 | |||||||||||||||
Average retail core deposits (3) | 228,448 | 226,180 | 216,944 | 1 | 5 | |||||||||||||||
Net interest margin | 4.69 | % | 4.62 | % | 4.95 | % | 2 | (5 | ) | |||||||||||
At Quarter End | ||||||||||||||||||||
Securities available for sale | $ | 81,787 | $ | 72,951 | $ | 45,443 | 12 | 80 | ||||||||||||
Loans | 386,333 | 382,195 | 325,487 | 1 | 19 | |||||||||||||||
Allowance for loan losses | 5,803 | 5,307 | 3,772 | 9 | 54 | |||||||||||||||
Goodwill | 13,148 | 13,106 | 11,275 | — | 17 | |||||||||||||||
Assets | 595,221 | 575,442 | 485,901 | 3 | 22 | |||||||||||||||
Core deposits (2) | 327,360 | 311,731 | 296,469 | 5 | 10 | |||||||||||||||
Stockholders’ equity | 48,159 | 47,628 | 46,073 | 1 | 5 | |||||||||||||||
Tier 1 capital (4) | 39,211 | 36,674 | 36,476 | 7 | 7 | |||||||||||||||
Total capital (4) | 54,522 | 51,638 | 50,733 | 6 | 7 | |||||||||||||||
Capital ratios: | ||||||||||||||||||||
Stockholders’ equity to assets | 8.09 | % | 8.28 | % | 9.48 | % | (2 | ) | (15 | ) | ||||||||||
Risk-based capital (4) | ||||||||||||||||||||
Tier 1 capital | 7.92 | 7.59 | 8.68 | 4 | (9 | ) | ||||||||||||||
Total capital | 11.01 | 10.68 | 12.09 | 3 | (9 | ) | ||||||||||||||
Tier 1 leverage (4) | 7.04 | 6.83 | 7.81 | 3 | (10 | ) | ||||||||||||||
Book value per common share | $ | 14.58 | $ | 14.45 | $ | 13.75 | 1 | 6 | ||||||||||||
Team members (active, full-time equivalent) | 160,900 | 159,800 | 159,600 | 1 | 1 | |||||||||||||||
Common Stock Price | ||||||||||||||||||||
High | $ | 34.56 | $ | 37.78 | $ | 36.64 | (9 | ) | (6 | ) | ||||||||||
Low | 24.38 | 29.29 | 33.01 | (17 | ) | (26 | ) | |||||||||||||
Period end | 29.10 | 30.19 | 34.43 | (4 | ) | (15 | ) | |||||||||||||
(1) | The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). | |
(2) | Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). | |
(3) | Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. To reflect the realignment of our corporate trust business from Community Banking into Wholesale Banking in first quarter 2008, balances for prior periods have been revised. | |
(4) | See Note 19 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information. |
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• | $(263) million | Write-down of the mortgage warehouse/pipeline, write-down of mortgage loans repurchased during the quarter, an increase in the repurchase reserve, and a decline in servicing value of loans held in the mortgage warehouse/pipeline. | ||
• | $94 million | Increase in mortgage servicing income reflecting a $1.8 billion reduction in the value of mortgage servicing rights (MSRs) due to a decline in mortgage rates during the quarter, offset by a $1.9 billion gain on the financial instruments hedging the MSRs. The ratio of MSRs to related loans serviced for others was 1.08%, the lowest capitalization ratio in 11 quarters and 12 basis points below fourth quarter 2007. | ||
• | $323 million | Net gain on the sale of mortgage-backed securities by Wells Fargo Home Mortgage (Home Mortgage) as part of its MSRs economic risk hedging activities. | ||
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• | $(63) million | Net write-down on commercial mortgages held for sale. | ||
• | $(21) million | Net equity losses (other than Visa IPO gain). | ||
• | $(39) million | Liability recorded for capital support agreement for one structured investment vehicle (SIV) held by our AAA-rated non-government money market mutual funds (included in noninterest expense). |
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• | FSP FIN 39-1 – Financial Accounting Standards Board (FASB) Staff Position on Interpretation No. 39,Amendment of FASB Interpretation No. 39; | |
• | EITF 06-4 – Emerging Issues Task Force (EITF) Issue No. 06-4,Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements; | |
• | EITF 06-10 – EITF Issue No. 06-10,Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements;and | |
• | SAB 109 – Staff Accounting Bulletin No. 109,Written Loan Commitments Recorded at Fair Value Through Earnings. |
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Quarter ended March 31 | , | |||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
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 | $ | 3,888 | 3.30 | % | $ | 32 | $ | 5,867 | 5.15 | % | $ | 75 | ||||||||||||
Trading assets | 5,129 | 3.73 | 48 | 4,305 | 5.53 | 59 | ||||||||||||||||||
Debt securities available for sale (3): | ||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 975 | 3.86 | 9 | 753 | 4.31 | 8 | ||||||||||||||||||
Securities of U.S. states and political subdivisions | 6,290 | 7.43 | 120 | 3,532 | 7.39 | 63 | ||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Federal agencies | 36,097 | 6.10 | 535 | 30,640 | 6.19 | 467 | ||||||||||||||||||
Private collateralized mortgage obligations | 20,994 | 6.08 | 324 | 3,993 | 6.33 | 62 | ||||||||||||||||||
Total mortgage-backed securities | 57,091 | 6.09 | 859 | 34,633 | 6.21 | 529 | ||||||||||||||||||
Other debt securities (4) | 10,825 | 6.93 | 196 | 5,778 | 7.44 | 106 | ||||||||||||||||||
Total debt securities available for sale (4) | 75,181 | 6.30 | 1,184 | 44,696 | 6.43 | 706 | ||||||||||||||||||
Mortgages held for sale (5) | 26,273 | 6.00 | 394 | 32,343 | 6.55 | 530 | ||||||||||||||||||
Loans held for sale (5) | 647 | 7.54 | 12 | 794 | 7.82 | 15 | ||||||||||||||||||
Loans: | ||||||||||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||||||||||
Commercial | 91,085 | 6.92 | 1,569 | 71,063 | 8.30 | 1,455 | ||||||||||||||||||
Other real estate mortgage | 37,426 | 6.44 | 600 | 30,590 | 7.41 | 560 | ||||||||||||||||||
Real estate construction | 18,932 | 6.06 | 285 | 15,892 | 8.01 | 314 | ||||||||||||||||||
Lease financing | 6,825 | 5.77 | 98 | 5,503 | 5.74 | 79 | ||||||||||||||||||
Total commercial and commercial real estate | 154,268 | 6.65 | 2,552 | 123,048 | 7.93 | 2,408 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 72,308 | 6.90 | 1,246 | 54,444 | 7.33 | 995 | ||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 75,263 | 7.31 | 1,368 | 69,079 | 8.17 | 1,393 | ||||||||||||||||||
Credit card | 18,776 | 12.33 | 579 | 14,557 | 13.55 | 493 | ||||||||||||||||||
Other revolving credit and installment | 55,910 | 9.09 | 1,264 | 53,539 | 9.75 | 1,287 | ||||||||||||||||||
Total consumer | 222,257 | 8.05 | 4,457 | 191,619 | 8.78 | 4,168 | ||||||||||||||||||
Foreign | 7,394 | 11.27 | 207 | 6,762 | 11.54 | 192 | ||||||||||||||||||
Total loans (5) | 383,919 | 7.55 | 7,216 | 321,429 | 8.51 | 6,768 | ||||||||||||||||||
Other | 1,825 | 4.54 | 20 | 1,327 | 5.12 | 16 | ||||||||||||||||||
Total earning assets | $ | 496,862 | 7.19 | 8,906 | $ | 410,761 | 8.04 | 8,169 | ||||||||||||||||
FUNDING SOURCES | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Interest-bearing checking | $ | 5,226 | 1.92 | 25 | $ | 4,615 | 3.25 | 37 | ||||||||||||||||
Market rate and other savings | 159,865 | 1.97 | 784 | 140,934 | 2.77 | 963 | ||||||||||||||||||
Savings certificates | 41,915 | 3.96 | 413 | 38,514 | 4.43 | 421 | ||||||||||||||||||
Other time deposits | 4,763 | 3.53 | 42 | 9,312 | 5.13 | 118 | ||||||||||||||||||
Deposits in foreign offices | 46,641 | 2.84 | 330 | 27,647 | 4.67 | 318 | ||||||||||||||||||
Total interest-bearing deposits | 258,410 | 2.48 | 1,594 | 221,022 | 3.41 | 1,857 | ||||||||||||||||||
Short-term borrowings | 52,970 | 3.23 | 425 | 11,498 | 4.78 | 136 | ||||||||||||||||||
Long-term debt | 100,686 | 4.29 | 1,077 | 89,027 | 5.15 | 1,138 | ||||||||||||||||||
Total interest-bearing liabilities | 412,066 | 3.02 | 3,096 | 321,547 | 3.94 | 3,131 | ||||||||||||||||||
Portion of noninterest-bearing funding sources | 84,796 | — | — | 89,214 | — | — | ||||||||||||||||||
Total funding sources | $ | 496,862 | 2.50 | 3,096 | $ | 410,761 | 3.09 | 3,131 | ||||||||||||||||
Net interest margin and net interest income on a taxable-equivalent basis (6) | 4.69 | % | $ | 5,810 | 4.95 | % | $ | 5,038 | ||||||||||||||||
NONINTEREST-EARNING ASSETS | ||||||||||||||||||||||||
Cash and due from banks | $ | 11,648 | $ | 11,862 | ||||||||||||||||||||
Goodwill | 13,161 | 11,274 | ||||||||||||||||||||||
Other | 53,323 | 48,208 | ||||||||||||||||||||||
Total noninterest-earning assets | $ | 78,132 | $ | 71,344 | ||||||||||||||||||||
NONINTEREST-BEARING FUNDING SOURCES | ||||||||||||||||||||||||
Deposits | $ | 84,886 | $ | 88,769 | ||||||||||||||||||||
Other liabilities | 30,348 | 25,536 | ||||||||||||||||||||||
Stockholders’ equity | 47,694 | 46,253 | ||||||||||||||||||||||
Noninterest-bearing funding sources used to fund earning assets | (84,796 | ) | (89,214 | ) | ||||||||||||||||||||
Net noninterest-bearing funding sources | $ | 78,132 | $ | 71,344 | ||||||||||||||||||||
TOTAL ASSETS | $ | 574,994 | $ | 482,105 | ||||||||||||||||||||
(1) | Our average prime rate was 6.22% and 8.25% for the quarters ended March 31, 2008 and 2007, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 3.29% and 5.36% for the same quarters, respectively. | |
(2) | Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories. | |
(3) | Yields are based on amortized cost balances computed on a settlement date basis. | |
(4) | Includes certain preferred securities. | |
(5) | Nonaccrual loans and related income are included in their respective loan categories. | |
(6) | Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented. |
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Quarter | ||||||||||||
ended March 31 | , | % | ||||||||||
(in millions) | 2008 | 2007 | Change | |||||||||
Service charges on deposit accounts | $ | 748 | $ | 685 | 9 | % | ||||||
Trust and investment fees: | ||||||||||||
Trust, investment and IRA fees | 559 | 537 | 4 | |||||||||
Commissions and all other fees | 204 | 194 | 5 | |||||||||
Total trust and investment fees | 763 | 731 | 4 | |||||||||
Card fees | 558 | 470 | 19 | |||||||||
Other fees: | ||||||||||||
Cash network fees | 48 | 45 | 7 | |||||||||
Charges and fees on loans | 248 | 238 | 4 | |||||||||
All other fees | 203 | 228 | (11 | ) | ||||||||
Total other fees | 499 | 511 | (2 | ) | ||||||||
Mortgage banking: | ||||||||||||
Servicing income, net | 273 | 216 | 26 | |||||||||
Net gains on mortgage loan origination/sales activities | 267 | 495 | (46 | ) | ||||||||
All other | 91 | 79 | 15 | |||||||||
Total mortgage banking | 631 | 790 | (20 | ) | ||||||||
Operating leases | 143 | 192 | (26 | ) | ||||||||
Insurance | 504 | 399 | 26 | |||||||||
Net gains from trading activities | 103 | 265 | (61 | ) | ||||||||
Net gains on debt securities available for sale | 323 | 31 | 942 | |||||||||
Net gains from equity investments | 313 | 97 | 223 | |||||||||
All other | 218 | 260 | (16 | ) | ||||||||
Total | $ | 4,803 | $ | 4,431 | 8 | |||||||
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Quarter | ||||||||||||
ended March 31 | , | % | ||||||||||
(in millions) | 2008 | 2007 | Change | |||||||||
Salaries | $ | 1,984 | $ | 1,867 | 6 | % | ||||||
Incentive compensation | 644 | 742 | (13 | ) | ||||||||
Employee benefits | 587 | 665 | (12 | ) | ||||||||
Equipment | 348 | 337 | 3 | |||||||||
Net occupancy | 399 | 365 | 9 | |||||||||
Operating leases | 116 | 153 | (24 | ) | ||||||||
Outside professional services | 171 | 192 | (11 | ) | ||||||||
Outside data processing | 109 | 111 | (2 | ) | ||||||||
Travel and entertainment | 105 | 109 | (4 | ) | ||||||||
Contract services | 108 | 118 | (8 | ) | ||||||||
Operating losses (reduction in losses) | (73 | ) | 87 | NM | ||||||||
Insurance | 161 | 128 | 26 | |||||||||
Advertising and promotion | 85 | 91 | (7 | ) | ||||||||
Postage | 89 | 87 | 2 | |||||||||
Telecommunications | 78 | 81 | (4 | ) | ||||||||
Stationery and supplies | 52 | 53 | (2 | ) | ||||||||
Security | 44 | 43 | 2 | |||||||||
Core deposit intangibles | 31 | 26 | 19 | |||||||||
All other | 424 | 271 | 56 | |||||||||
Total | $ | 5,462 | $ | 5,526 | (1 | ) | ||||||
NM - Not meaningful |
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Fair | Net unrealized | Remaining | |||||||||||
(in billions) | value | gain (loss) | maturity | ||||||||||
At March 31, 2008 | $ | 61.2 | $ | 0.3 | 4.4 yrs. | ||||||||
At March 31, 2008, assuming a 200 basis point: | |||||||||||||
Increase in interest rates | 56.0 | (4.9 | ) | 6.6 yrs. | |||||||||
Decrease in interest rates | 63.6 | 2.7 | 1.9 yrs. | ||||||||||
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Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2008 | 2007 | 2007 | |||||||||
Noninterest-bearing | $ | 90,793 | $ | 84,348 | $ | 89,067 | ||||||
Interest-bearing checking | 5,372 | 5,277 | 3,652 | |||||||||
Market rate and other savings | 163,230 | 153,924 | 146,911 | |||||||||
Savings certificates | 39,554 | 42,708 | 38,753 | |||||||||
Foreign deposits (1) | 28,411 | 25,474 | 18,086 | |||||||||
Core deposits | 327,360 | 311,731 | 296,469 | |||||||||
Other time deposits | 6,033 | 3,654 | 4,503 | |||||||||
Other foreign deposits | 24,751 | 29,075 | 10,185 | |||||||||
Total deposits | $ | 358,144 | $ | 344,460 | $ | 311,157 | ||||||
(1) | Reflects Eurodollar sweep balances included in core deposits. |
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• | the full and timely collection of interest or principal becomes uncertain; | |
• | they are 90 days (120 days with respect to real estate 1-4 family first and junior lien mortgages and auto loans) past due for interest or principal (unless both well-secured and in the process of collection); or | |
• | part of the principal balance has been charged off. |
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2008 | 2007 | 2007 | |||||||||
Nonaccrual loans: | ||||||||||||
Commercial and commercial real estate: | ||||||||||||
Commercial | $ | 588 | $ | 432 | $ | 350 | ||||||
Other real estate mortgage | 152 | 128 | 114 | |||||||||
Real estate construction | 438 | 293 | 82 | |||||||||
Lease financing | 57 | 45 | 31 | |||||||||
Total commercial and commercial real estate | 1,235 | 898 | 577 | |||||||||
Consumer: | ||||||||||||
Real estate 1-4 family first mortgage (1) | 1,398 | 1,272 | 701 | |||||||||
Real estate 1-4 family junior lien mortgage | 381 | 280 | 233 | |||||||||
Other revolving credit and installment | 196 | 184 | 195 | |||||||||
Total consumer | 1,975 | 1,736 | 1,129 | |||||||||
Foreign | 49 | 45 | 46 | |||||||||
Total nonaccrual loans (2) | 3,259 | 2,679 | 1,752 | |||||||||
As a percentage of total loans | 0.84 | % | 0.70 | % | 0.54 | % | ||||||
Foreclosed assets: | ||||||||||||
GNMA loans (3) | 578 | 535 | 381 | |||||||||
Other | 637 | 649 | 528 | |||||||||
Real estate and other nonaccrual investments (4) | 21 | 5 | 5 | |||||||||
Total nonaccrual loans and other assets | $ | 4,495 | $ | 3,868 | $ | 2,666 | ||||||
As a percentage of total loans | 1.16 | % | 1.01 | % | 0.82 | % | ||||||
(1) | Includes nonaccrual mortgages held for sale. | |
(2) | Includes impaired loans of $859 million, $469 million and $251 million at March 31, 2008, December 31, 2007, and March 31, 2007, respectively. See Note 5 to Financial Statements in this Report and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in our 2007 Form 10-K for further information on impaired loans. | |
(3) | Consistent with regulatory reporting requirements, foreclosed real estate securing GNMA loans is classified as nonperforming. Both principal and interest for GNMA loans secured by the foreclosed real estate are collectible because the GNMA loans are insured by the FHA or guaranteed by the Department of Veterans Affairs. | |
(4) | Includes real estate investments (contingent interest loans accounted for as investments) that would be classified as nonaccrual if these assets were recorded as loans. |
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(EXCLUDING INSURED/GUARANTEED GNMA AND SIMILAR LOANS)
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2008 | 2007 | 2007 | |||||||||
Commercial and commercial real estate: | ||||||||||||
Commercial | $ | 29 | $ | 32 | $ | 29 | ||||||
Other real estate mortgage | �� | 24 | 10 | 4 | ||||||||
Real estate construction | 15 | 24 | 5 | |||||||||
Total commercial and commercial real estate | 68 | 66 | 38 | |||||||||
Consumer: | ||||||||||||
Real estate 1-4 family first mortgage (1) | 314 | 286 | 159 | |||||||||
Real estate 1-4 family junior lien mortgage | 228 | 201 | 64 | |||||||||
Credit card | 449 | 402 | 272 | |||||||||
Other revolving credit and installment | 532 | 552 | 560 | |||||||||
Total consumer | 1,523 | 1,441 | 1,055 | |||||||||
Foreign | 40 | 52 | 36 | |||||||||
Total | $ | 1,631 | $ | 1,559 | $ | 1,129 | ||||||
(1) | Includes mortgage loans held for sale 90 days or more past due and still accruing. |
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% of loans | ||||||||||||||||||||||||
two payments | Annualized | |||||||||||||||||||||||
Outstanding balances | or more past due | loss rate (1) | ||||||||||||||||||||||
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | Dec. 31 | , | |||||||||||||
(in millions) | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||||
Liquidating portfolio | ||||||||||||||||||||||||
California | $ | 4,417 | $ | 4,387 | 3.32 | % | 2.94 | % | 8.52 | % | 7.34 | % | ||||||||||||
Florida | 582 | 582 | 5.40 | 4.98 | 10.56 | 7.08 | ||||||||||||||||||
Arizona | 275 | 274 | 3.43 | 2.67 | 5.57 | 5.84 | ||||||||||||||||||
Texas | 219 | 221 | 0.65 | 0.83 | 1.93 | 0.78 | ||||||||||||||||||
Minnesota | 139 | 141 | 3.10 | 3.18 | 7.91 | 4.09 | ||||||||||||||||||
Other | 5,866 | 6,296 | 2.18 | 2.00 | 2.98 | 2.94 | ||||||||||||||||||
Total | 11,498 | 11,901 | 2.79 | 2.50 | 5.58 | 4.80 | ||||||||||||||||||
Core portfolio | ||||||||||||||||||||||||
California | 26,331 | 25,991 | 1.96 | 1.63 | 2.21 | 1.27 | ||||||||||||||||||
Florida | 2,595 | 2,614 | 3.80 | 2.92 | 4.35 | 2.57 | ||||||||||||||||||
Arizona | 3,785 | 3,821 | 1.91 | 1.54 | 1.89 | 0.90 | ||||||||||||||||||
Texas | 2,805 | 2,842 | 1.05 | 1.03 | 0.20 | 0.19 | ||||||||||||||||||
Minnesota | 4,546 | 4,668 | 1.16 | 1.08 | 1.07 | 0.88 | ||||||||||||||||||
Other | 31,994 | 32,393 | 1.44 | 1.43 | 0.95 | 0.44 | ||||||||||||||||||
Total | 72,056 | 72,329 | 1.71 | 1.52 | 1.56 | 0.86 | ||||||||||||||||||
Combined totals | $ | 83,554 | $ | 84,230 | 1.86 | 1.66 | 2.12 | 1.42 | ||||||||||||||||
(1) | Annualized loss rate for March 31, 2008, data is based on full quarter rate. Annualized loss rate for December 31, 2007, data is based on loss rate for month of December 2007. |
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• | assets and liabilities may mature or reprice at different times (for example, if assets reprice faster than liabilities and interest rates are generally falling, earnings will initially decline); | |
• | assets and liabilities may reprice at the same time but by different amounts (for example, when the general level of interest rates is falling, we may reduce rates paid on checking and savings deposit accounts by an amount that is less than the general decline in market interest rates); | |
• | short-term and long-term market interest rates may change by different amounts (for example, the shape of the yield curve may affect new loan yields and funding costs differently); or | |
• | the remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change (for example, if long-term mortgage interest rates decline sharply, mortgage-backed securities held in the securities available for sale portfolio may prepay significantly earlier than anticipated – which could reduce portfolio income). |
• | to convert a major portion of our long-term fixed-rate debt, which we issue to finance the Company, from fixed-rate payments to floating-rate payments by entering into receive-fixed swaps; | |
• | to convert the cash flows from selected asset and/or liability instruments/portfolios from fixed-rate payments to floating-rate payments or vice versa; and | |
• | to hedge our mortgage origination pipeline, funded mortgage loans and MSRs using interest rate swaps, swaptions, futures, forwards and options. |
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• | MSRs valuation changes associated with interest rate changes are recorded in earnings immediately within the accounting period in which those interest rate changes occur, whereas the impact of those same changes in interest rates on origination and servicing fees occur with a lag and over time. Thus, the mortgage business could be protected from adverse changes in interest rates over a period of time on a cumulative basis but still display large variations in income from one accounting period to the next. | |
• | The degree to which the “natural business hedge” offsets changes in MSRs valuations is imperfect, varies at different points in the interest rate cycle, and depends not just on the direction of interest rates but on the pattern of quarterly interest rate changes. | |
• | Origination volumes, the valuation of MSRs and hedging results and associated costs are also impacted by many factors. Such factors include the mix of new business between ARMs and fixed-rated mortgages, the relationship between short-term and long-term interest rates, the degree of volatility in interest rates, the relationship between mortgage interest rates and other interest rate markets, and other interest rate factors. Many of these factors are hard to predict and we may not be able to directly or perfectly hedge their effect. | |
• | While our hedging activities are designed to balance our mortgage banking interest rate risks, the financial instruments we use may not perfectly correlate with the values and income being hedged. For example, the change in the value of ARMs production held for sale from changes in mortgage interest rates may or may not be fully offset by Treasury and LIBOR index-based financial instruments used as economic hedges for such ARMs. |
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• | the amount of nonaccrual loans will change due to portfolio growth, portfolio seasoning, routine problem loan recognition and resolution through collections, sales or charge-offs; | |
• | the April 1, 2008, change in our Home Equity charge-off policy will add to the balance of nonaccrual loans; | |
• | the election to measure new prime MHFS and other interests held at fair value will reduce certain timing differences and better match changes in the value of these assets with changes in the value of derivatives used to hedge these assets; | |
• | changes in the fair value of derivative financial instruments used to hedge derivative loan commitments will fully or partially offset changes in the fair value of such commitments; | |
• | proceeds of securities issued in the future will be used for general corporate purposes; | |
• | our one pending business combination transaction will close in 2008; | |
• | our investments in entities formed to invest in affordable housing and sustainable energy projects will be recovered over time through realization of federal tax credits; | |
• | the amount of any additional consideration that may be payable in connection with previous acquisitions will not be significant to our financial statements; | |
• | $70 million of deferred net gains on derivatives in other comprehensive income at March 31, 2008, will be reclassified as earnings in the next 12 months; and | |
• | a contribution to the Cash Balance Plan will not be required in 2008. |
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• | lower or negative revenue growth because of our inability to cross-sell more products to our existing customers; | |
• | decreased demand for our products and services and lower revenue and earnings because of an economic recession; | |
• | reduced fee income from our brokerage and asset management businesses because of a fall in stock market prices; | |
• | lower net interest margin, decreased mortgage loan originations and reductions in the value of our MSRs and MHFS because of changes in interest rates; | |
• | increased funding costs due to market illiquidity and increased competition for funding; | |
• | the election to provide capital support to our mutual funds relating to investments in credit products; | |
• | reduced earnings due to higher credit losses generally and specifically because: |
¡ | losses in our residential real estate loan portfolio (including home equity) are greater than expected due to economic factors, including declining home values, increasing interest rates, increasing unemployment, or changes in payment behavior, or other factors; and/or | ||
¡ | our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral; |
• | higher credit losses because of federal or state legislation or regulatory action that reduces the amount that our borrowers are required to pay us; | |
• | higher credit losses because of federal or state legislation or regulatory action that limits our ability to foreclose on properties or other collateral or makes foreclosure less economically feasible; | |
• | negative effect on our servicing and investment portfolios because of financial difficulties or credit downgrades of mortgage and bond issuers; | |
• | reduced earnings because of changes in the value of our venture capital investments; | |
• | changes in our accounting policies or in accounting standards; | |
• | reduced earnings from not realizing the expected benefits of acquisitions or from unexpected difficulties integrating acquisitions; | |
• | reduced earnings because of the inability or unwillingness of counterparties to perform their obligations with respect to derivative financial instruments; | |
• | federal and state regulations; | |
• | reputational damage from negative publicity; | |
• | fines, penalties and other negative consequences from regulatory violations, even inadvertent or unintentional violations; | |
• | the loss of checking and saving account deposits to alternative investments such as the stock market and higher-yielding fixed income investments; and | |
• | fiscal and monetary policies of the Federal Reserve Board. |
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• | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the company; | |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and | |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
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CONSOLIDATED STATEMENT OF INCOME
Quarter ended March 31 | , | ||||||||
(in millions, except per share amounts) | 2008 | 2007 | |||||||
INTEREST INCOME | |||||||||
Trading assets | $ | 47 | $ | 53 | |||||
Securities available for sale | 1,132 | 686 | |||||||
Mortgages held for sale | 394 | 530 | |||||||
Loans held for sale | 12 | 15 | |||||||
Loans | 7,212 | 6,764 | |||||||
Other interest income | 52 | 91 | |||||||
Total interest income | 8,849 | 8,139 | |||||||
INTEREST EXPENSE | |||||||||
Deposits | 1,594 | 1,857 | |||||||
Short-term borrowings | 425 | 136 | |||||||
Long-term debt | 1,070 | 1,136 | |||||||
Total interest expense | 3,089 | 3,129 | |||||||
NET INTEREST INCOME | 5,760 | 5,010 | |||||||
Provision for credit losses | 2,028 | 715 | |||||||
Net interest income after provision for credit losses | 3,732 | 4,295 | |||||||
NONINTEREST INCOME | |||||||||
Service charges on deposit accounts | 748 | 685 | |||||||
Trust and investment fees | 763 | 731 | |||||||
Card fees | 558 | 470 | |||||||
Other fees | 499 | 511 | |||||||
Mortgage banking | 631 | 790 | |||||||
Operating leases | 143 | 192 | |||||||
Insurance | 504 | 399 | |||||||
Net gains on debt securities available for sale | 323 | 31 | |||||||
Net gains from equity investments | 313 | 97 | |||||||
Other | 321 | 525 | |||||||
Total noninterest income | 4,803 | 4,431 | |||||||
NONINTEREST EXPENSE | |||||||||
Salaries | 1,984 | 1,867 | |||||||
Incentive compensation | 644 | 742 | |||||||
Employee benefits | 587 | 665 | |||||||
Equipment | 348 | 337 | |||||||
Net occupancy | 399 | 365 | |||||||
Operating leases | 116 | 153 | |||||||
Other | 1,384 | 1,397 | |||||||
Total noninterest expense | 5,462 | 5,526 | |||||||
INCOME BEFORE INCOME TAX EXPENSE | 3,073 | 3,200 | |||||||
Income tax expense | 1,074 | 956 | |||||||
NET INCOME | $ | 1,999 | $ | 2,244 | |||||
EARNINGS PER COMMON SHARE | $ | 0.61 | $ | 0.66 | |||||
DILUTED EARNINGS PER COMMON SHARE | $ | 0.60 | $ | 0.66 | |||||
DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.31 | $ | 0.28 | |||||
Average common shares outstanding | 3,302.4 | 3,376.0 | |||||||
Diluted average common shares outstanding | 3,317.9 | 3,416.1 | |||||||
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CONSOLIDATED BALANCE SHEET
March 31 | , | December 31 | , | March 31 | , | ||||||||
(in millions, except shares) | 2008 | 2007 | 2007 | ||||||||||
ASSETS | |||||||||||||
Cash and due from banks | $ | 13,146 | $ | 14,757 | $ | 12,485 | |||||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | 4,171 | 2,754 | 4,668 | ||||||||||
Trading assets | 8,893 | 7,727 | 6,525 | ||||||||||
Securities available for sale | 81,787 | 72,951 | 45,443 | ||||||||||
Mortgages held for sale (includes $27,927, $24,998 and $25,692 carried at fair value) | 29,708 | 26,815 | 32,286 | ||||||||||
Loans held for sale | 813 | 948 | 829 | ||||||||||
Loans | 386,333 | 382,195 | 325,487 | ||||||||||
Allowance for loan losses | (5,803 | ) | (5,307 | ) | (3,772 | ) | |||||||
Net loans | 380,530 | 376,888 | 321,715 | ||||||||||
Mortgage servicing rights: | |||||||||||||
Measured at fair value (residential MSRs) | 14,956 | 16,763 | 17,779 | ||||||||||
Amortized | 455 | 466 | 400 | ||||||||||
Premises and equipment, net | 5,056 | 5,122 | 4,864 | ||||||||||
Goodwill | 13,148 | 13,106 | 11,275 | ||||||||||
Other assets | 42,558 | 37,145 | 27,632 | ||||||||||
Total assets | $ | 595,221 | $ | 575,442 | $ | 485,901 | |||||||
LIABILITIES | |||||||||||||
Noninterest-bearing deposits | $ | 90,793 | $ | 84,348 | $ | 89,067 | |||||||
Interest-bearing deposits | 267,351 | 260,112 | 222,090 | ||||||||||
Total deposits | 358,144 | 344,460 | 311,157 | ||||||||||
Short-term borrowings | 53,983 | 53,255 | 13,181 | ||||||||||
Accrued expenses and other liabilities | 31,760 | 30,706 | 25,163 | ||||||||||
Long-term debt | 103,175 | 99,393 | 90,327 | ||||||||||
Total liabilities | 547,062 | 527,814 | 439,828 | ||||||||||
STOCKHOLDERS’ EQUITY | |||||||||||||
Preferred stock | 837 | 450 | 740 | ||||||||||
Common stock – $1-2/3 par value, authorized 6,000,000,000 shares; issued 3,472,762,050 shares | 5,788 | 5,788 | 5,788 | ||||||||||
Additional paid-in capital | 8,259 | 8,212 | 7,875 | ||||||||||
Retained earnings | 39,896 | 38,970 | 36,377 | ||||||||||
Cumulative other comprehensive income | 120 | 725 | 289 | ||||||||||
Treasury stock – 170,411,704 shares, 175,659,842 shares and 122,242,186 shares | (5,850 | ) | (6,035 | ) | (4,204 | ) | |||||||
Unearned ESOP shares | (891 | ) | (482 | ) | (792 | ) | |||||||
Total stockholders’ equity | 48,159 | 47,628 | 46,073 | ||||||||||
Total liabilities and stockholders’ equity | $ | 595,221 | $ | 575,442 | $ | 485,901 | |||||||
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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
Cumulative | |||||||||||||||||||||||||||||||||||||
Additional | other | Unearned | Total | ||||||||||||||||||||||||||||||||||
Number of | Preferred | Common | paid-in | Retained | comprehensive | Treasury | ESOP | stockholders’ | |||||||||||||||||||||||||||||
(in millions, except shares) | common shares | stock | stock | capital | earnings | income | stock | shares | equity | ||||||||||||||||||||||||||||
BALANCE DECEMBER 31, 2006 | 3,377,149,861 | $ | 384 | $ | 5,788 | $ | 7,739 | $ | 35,215 | $ | 302 | $ | (3,203 | ) | $ | (411 | ) | $ | 45,814 | ||||||||||||||||||
Cumulative effect of adoption of FSP13-2 | (71 | ) | (71 | ) | |||||||||||||||||||||||||||||||||
BALANCE JANUARY 1, 2007 | 3,377,149,861 | 384 | 5,788 | 7,739 | 35,144 | 302 | (3,203 | ) | (411 | ) | 45,743 | ||||||||||||||||||||||||||
Comprehensive income | |||||||||||||||||||||||||||||||||||||
Net income | 2,244 | 2,244 | |||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||||||||||||||||||
Translation adjustments | 1 | 1 | |||||||||||||||||||||||||||||||||||
Net unrealized gains on securities available for sale and other interests held, net of reclassification of $32 million of net gains included in net income | 18 | 18 | |||||||||||||||||||||||||||||||||||
Net unrealized losses on derivatives and hedging activities, net of reclassification of $39 million of net gains on cash flow hedges included in net income | (38 | ) | (38 | ) | |||||||||||||||||||||||||||||||||
Defined benefit pension plans: | |||||||||||||||||||||||||||||||||||||
Amortization of actuarial loss and prior service cost included in net income | 6 | 6 | |||||||||||||||||||||||||||||||||||
Total comprehensive income | 2,231 | ||||||||||||||||||||||||||||||||||||
Common stock issued | 16,732,843 | (17 | ) | (63 | ) | 528 | 448 | ||||||||||||||||||||||||||||||
Common stock repurchased | (47,068,819 | ) | (1,631 | ) | (1,631 | ) | |||||||||||||||||||||||||||||||
Preferred stock (484,000) issued to ESOP | 484 | 34 | (518 | ) | — | ||||||||||||||||||||||||||||||||
Preferred stock released to ESOP | (9 | ) | 137 | 128 | |||||||||||||||||||||||||||||||||
Preferred stock (127,646) converted to common shares | 3,705,979 | (128 | ) | 8 | 120 | — | |||||||||||||||||||||||||||||||
Common stock dividends | (948 | ) | (948 | ) | |||||||||||||||||||||||||||||||||
Tax benefit upon exercise of stock options | 51 | 51 | |||||||||||||||||||||||||||||||||||
Stock option compensation expense | 50 | 50 | |||||||||||||||||||||||||||||||||||
Net change in deferred compensation and related plans | 19 | (18 | ) | 1 | |||||||||||||||||||||||||||||||||
Net change | (26,629,997 | ) | 356 | — | 136 | 1,233 | (13 | ) | (1,001 | ) | (381 | ) | 330 | ||||||||||||||||||||||||
BALANCE MARCH 31, 2007 | 3,350,519,864 | $ | 740 | $ | 5,788 | $ | 7,875 | $ | 36,377 | $ | 289 | $ | (4,204 | ) | $ | (792 | ) | $ | 46,073 | ||||||||||||||||||
BALANCE DECEMBER 31, 2007 | 3,297,102,208 | $ | 450 | $ | 5,788 | $ | 8,212 | $ | 38,970 | $ | 725 | $ | (6,035 | ) | $ | (482 | ) | $ | 47,628 | ||||||||||||||||||
Cumulative effect of adoption of EITF 06-4 and EITF 06-10 | (20 | ) | (20 | ) | |||||||||||||||||||||||||||||||||
FAS 158 change of measurement date | (8 | ) | (8 | ) | |||||||||||||||||||||||||||||||||
BALANCE JANUARY 1, 2008 | 3,297,102,208 | 450 | 5,788 | 8,212 | 38,942 | 725 | (6,035 | ) | (482 | ) | 47,600 | ||||||||||||||||||||||||||
Comprehensive income | |||||||||||||||||||||||||||||||||||||
Net income | 1,999 | 1,999 | |||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||||||||||||||||||
Translation adjustments | (7 | ) | (7 | ) | |||||||||||||||||||||||||||||||||
Net unrealized losses on securities available for sale and other interests held, net of reclassification of $180 million of net gains included in net income | (783 | ) | (783 | ) | |||||||||||||||||||||||||||||||||
Net unrealized gains on derivatives and hedging activities, net of reclassification of $30 million of net gains on cash flow hedges included in net income | 184 | 184 | |||||||||||||||||||||||||||||||||||
Defined benefit pension plans: | |||||||||||||||||||||||||||||||||||||
Amortization of net actuarial loss and prior service cost included in net income | 1 | 1 | |||||||||||||||||||||||||||||||||||
Total comprehensive income | 1,394 | ||||||||||||||||||||||||||||||||||||
Common stock issued | 12,053,786 | (58 | ) | (21 | ) | 396 | 317 | ||||||||||||||||||||||||||||||
Common stock repurchased | (11,404,468 | ) | (351 | ) | (351 | ) | |||||||||||||||||||||||||||||||
Preferred stock (520,500) issued to ESOP | 521 | 30 | (551 | ) | — | ||||||||||||||||||||||||||||||||
Preferred stock released to ESOP | (8 | ) | 142 | 134 | |||||||||||||||||||||||||||||||||
Preferred stock (133,756) converted to common shares | 4,598,820 | (134 | ) | (16 | ) | 150 | — | ||||||||||||||||||||||||||||||
Common stock dividends | (1,024 | ) | (1,024 | ) | |||||||||||||||||||||||||||||||||
Tax benefit upon exercise of stock options | 15 | 15 | |||||||||||||||||||||||||||||||||||
Stock option compensation expense | 71 | 71 | |||||||||||||||||||||||||||||||||||
Net change in deferred compensation and related plans | 13 | (10 | ) | 3 | |||||||||||||||||||||||||||||||||
Net change | 5,248,138 | 387 | — | 47 | 954 | (605 | ) | 185 | (409 | ) | 559 | ||||||||||||||||||||||||||
BALANCE MARCH 31, 2008 | 3,302,350,346 | $ | 837 | $ | 5,788 | $ | 8,259 | $ | 39,896 | $ | 120 | $ | (5,850 | ) | $ | (891 | ) | $ | 48,159 | ||||||||||||||||||
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CONSOLIDATED STATEMENT OF CASH FLOWS
Quarter ended March 31 | , | ||||||||
(in millions) | 2008 | 2007 | |||||||
Cash flows from operating activities: | |||||||||
Net income | $ | 1,999 | $ | 2,244 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Provision for credit losses | 2,028 | 715 | |||||||
Changes in fair value of MSRs (residential) and MHFS carried at fair value | 1,812 | 570 | |||||||
Depreciation and amortization | 368 | 382 | |||||||
Other net gains | (158 | ) | (513 | ) | |||||
Preferred shares released to ESOP | 134 | 128 | |||||||
Stock option compensation expense | 71 | 50 | |||||||
Excess tax benefits related to stock option payments | (15 | ) | (46 | ) | |||||
Originations of MHFS | (59,146 | ) | (54,688 | ) | |||||
Proceeds from sales of and principal collected on mortgages originated for sale | 56,737 | 54,452 | |||||||
Net change in: | |||||||||
Trading assets | (1,166 | ) | (936 | ) | |||||
Loans originated for sale | (41 | ) | (108 | ) | |||||
Deferred income taxes | (200 | ) | 184 | ||||||
Accrued interest receivable | 142 | (11 | ) | ||||||
Accrued interest payable | (63 | ) | (179 | ) | |||||
Other assets, net | (4,315 | ) | 3,262 | ||||||
Other accrued expenses and liabilities, net | 1,423 | (673 | ) | ||||||
Net cash provided (used) by operating activities | (390 | ) | 4,833 | ||||||
Cash flows from investing activities: | |||||||||
Net change in: | |||||||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | (1,417 | ) | 1,410 | ||||||
Securities available for sale: | |||||||||
Sales proceeds | 16,213 | 4,545 | |||||||
Prepayments and maturities | 5,466 | 2,244 | |||||||
Purchases | (30,947 | ) | (9,513 | ) | |||||
Loans: | |||||||||
Increase in banking subsidiaries’ loan originations, net of collections | (3,519 | ) | (7,367 | ) | |||||
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries | 325 | 983 | |||||||
Purchases (including participations) of loans by banking subsidiaries | (2,656 | ) | (1,068 | ) | |||||
Principal collected on nonbank entities’ loans | 5,015 | 5,574 | |||||||
Loans originated by nonbank entities | (5,273 | ) | (5,943 | ) | |||||
Net cash paid for acquisitions | (46 | ) | — | ||||||
Proceeds from sales of foreclosed assets | 438 | 291 | |||||||
Changes in MSRs from purchases and sales | 37 | (188 | ) | ||||||
Other, net | (2,056 | ) | (620 | ) | |||||
Net cash used by investing activities | (18,420 | ) | (9,652 | ) | |||||
Cash flows from financing activities: | |||||||||
Net change in: | |||||||||
Deposits | 13,684 | 914 | |||||||
Short-term borrowings | 728 | 352 | |||||||
Long-term debt: | |||||||||
Proceeds from issuance | 8,137 | 9,536 | |||||||
Repayment | (7,569 | ) | (6,356 | ) | |||||
Common stock: | |||||||||
Proceeds from issuance | 317 | 448 | |||||||
Repurchased | (351 | ) | (1,631 | ) | |||||
Cash dividends paid | (1,024 | ) | (948 | ) | |||||
Excess tax benefits related to stock option payments | 15 | 46 | |||||||
Other, net | 3,262 | (85 | ) | ||||||
Net cash provided by financing activities | 17,199 | 2,276 | |||||||
Net change in cash and due from banks | (1,611 | ) | (2,543 | ) | |||||
Cash and due from banks at beginning of quarter | 14,757 | 15,028 | |||||||
Cash and due from banks at end of quarter | $ | 13,146 | $ | 12,485 | |||||
Supplemental disclosures of cash flow information: | |||||||||
Cash paid during the quarter for: | |||||||||
Interest | $ | 3,152 | $ | 3,308 | |||||
Income taxes | 259 | 106 | |||||||
Noncash investing and financing activities: | |||||||||
Net transfers from loans held for sale to loans | $ | 176 | $ | — | |||||
Transfers from MHFS to securities available for sale | 268 | — | |||||||
Transfers from MHFS to loans | 55 | — | |||||||
Transfers from MHFS to MSRs | 802 | 838 | |||||||
Transfers from loans to foreclosed assets | 775 | 1,087 | |||||||
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• | FSP FIN 39-1 – Financial Accounting Standards Board (FASB) Staff Position on Interpretation No. 39,Amendment of FASB Interpretation No. 39; | |
• | EITF 06-4 – Emerging Issues Task Force (EITF) Issue No. 06-4,Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements; | |
• | EITF 06-10 – EITF Issue No. 06-10,Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements;and | |
• | SAB 109 – Staff Accounting Bulletin No. 109,Written Loan Commitments Recorded at Fair Value Through Earnings. |
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3. | FEDERAL FUNDS SOLD, SECURITIES PURCHASED UNDER RESALE AGREEMENTS AND OTHER SHORT-TERM INVESTMENTS |
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2008 | 2007 | 2007 | |||||||||
Federal funds sold and securities purchased under resale agreements | $ | 2,209 | $ | 1,700 | $ | 3,730 | ||||||
Interest-earning deposits | 994 | 460 | 361 | |||||||||
Other short-term investments | 968 | 594 | 577 | |||||||||
Total | $ | 4,171 | $ | 2,754 | $ | 4,668 | ||||||
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Mar. 31, 2008 | Dec. 31, 2007 | Mar. 31, 2007 | ||||||||||||||||||||||
Fair | Fair | Fair | ||||||||||||||||||||||
(in millions) | Cost | value | Cost | value | Cost | value | ||||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 983 | $ | 1,016 | $ | 962 | $ | 982 | $ | 827 | $ | 822 | ||||||||||||
Securities of U.S. states and political subdivisions | 7,453 | 7,180 | 6,128 | 6,152 | 3,528 | 3,665 | ||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Federal agencies | 37,468 | 38,577 | 34,092 | 34,987 | 30,336 | 30,874 | ||||||||||||||||||
Private collateralized mortgage obligations (1) | 23,380 | 22,585 | 20,026 | 19,982 | 3,865 | 3,921 | ||||||||||||||||||
Total mortgage-backed securities | 60,848 | 61,162 | 54,118 | 54,969 | 34,201 | 34,795 | ||||||||||||||||||
Other | 9,842 | 9,464 | 8,185 | 8,065 | 5,348 | 5,396 | ||||||||||||||||||
Total debt securities | 79,126 | 78,822 | 69,393 | 70,168 | 43,904 | 44,678 | ||||||||||||||||||
Marketable equity securities | 3,259 | 2,965 | 2,878 | 2,783 | 591 | 765 | ||||||||||||||||||
Total | $ | 82,385 | $ | 81,787 | $ | 72,271 | $ | 72,951 | $ | 44,495 | $ | 45,443 | ||||||||||||
(1) | A majority of the private collateralized mortgage obligations are AAA-rated bonds collateralized by 1-4 family residential first mortgages. |
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2008 | 2007 | 2007 | |||||||||
Gross unrealized gains | $ | 1,630 | $ | 1,352 | $ | 996 | ||||||
Gross unrealized losses | (2,228 | ) | (672 | ) | (48 | ) | ||||||
Net unrealized gains (losses) | $ | (598 | ) | $ | 680 | $ | 948 | |||||
Quarter ended March 31 | , | |||||||
(in millions) | 2008 | 2007 | ||||||
Gross realized gains | $ | 378 | $ | 59 | ||||
Gross realized losses (1) | (88 | ) | (7 | ) | ||||
Net realized gains | $ | 290 | $ | 52 | ||||
(1) | Includes other-than-temporary impairment of $73 million and $4 million for first quarter 2008 and 2007, respectively. |
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Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2008 | 2007 | 2007 | |||||||||
Commercial and commercial real estate: | ||||||||||||
Commercial | $ | 92,589 | $ | 90,468 | $ | 72,268 | ||||||
Other real estate mortgage | 38,415 | 36,747 | 31,542 | |||||||||
Real estate construction | 18,885 | 18,854 | 15,869 | |||||||||
Lease financing | 6,885 | 6,772 | 5,494 | |||||||||
Total commercial and commercial real estate | 156,774 | 152,841 | 125,173 | |||||||||
Consumer: | ||||||||||||
Real estate 1-4 family first mortgage | 73,321 | 71,415 | 55,982 | |||||||||
Real estate 1-4 family junior lien mortgage | 74,840 | 75,565 | 69,489 | |||||||||
Credit card | 18,677 | 18,762 | 14,594 | |||||||||
Other revolving credit and installment | 55,505 | 56,171 | 53,445 | |||||||||
Total consumer | 222,343 | 221,913 | 193,510 | |||||||||
Foreign | 7,216 | 7,441 | 6,804 | |||||||||
Total loans | $ | 386,333 | $ | 382,195 | $ | 325,487 | ||||||
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2008 | 2007 | 2007 | |||||||||
Impairment measurement based on: | ||||||||||||
Collateral value method | $ | 14 | $ | 285 | $ | 163 | ||||||
Discounted cash flow method | 909 | 184 | 88 | |||||||||
Total (1) | $ | 923 | $ | 469 | $ | 251 | ||||||
(1) | Includes $828 million, $369 million and $133 million of impaired loans with a related allowance of $111 million, $50 million and $21 million at March 31, 2008, December 31, 2007, and March 31, 2007, respectively. |
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Quarter ended March 31 | , | |||||||
(in millions) | 2008 | 2007 | ||||||
Balance, beginning of period | $ | 5,518 | $ | 3,964 | ||||
Provision for credit losses | 2,028 | 715 | ||||||
Loan charge-offs: | ||||||||
Commercial and commercial real estate: | ||||||||
Commercial | (259 | ) | (126 | ) | ||||
Other real estate mortgage | (4 | ) | (1 | ) | ||||
Real estate construction | (29 | ) | — | |||||
Lease financing | (12 | ) | (7 | ) | ||||
Total commercial and commercial real estate | (304 | ) | (134 | ) | ||||
Consumer: | ||||||||
Real estate 1-4 family first mortgage | (81 | ) | (24 | ) | ||||
Real estate 1-4 family junior lien mortgage | (455 | ) | (83 | ) | ||||
Credit card | (313 | ) | (183 | ) | ||||
Other revolving credit and installment | (543 | ) | (474 | ) | ||||
Total consumer | (1,392 | ) | (764 | ) | ||||
Foreign | (68 | ) | (62 | ) | ||||
Total loan charge-offs | (1,764 | ) | (960 | ) | ||||
Loan recoveries: | ||||||||
Commercial and commercial real estate: | ||||||||
Commercial | 31 | 24 | ||||||
Other real estate mortgage | 1 | 2 | ||||||
Real estate construction | 1 | 1 | ||||||
Lease financing | 3 | 5 | ||||||
Total commercial and commercial real estate | 36 | 32 | ||||||
Consumer: | ||||||||
Real estate 1-4 family first mortgage | 6 | 6 | ||||||
Real estate 1-4 family junior lien mortgage | 17 | 9 | ||||||
Credit card | 38 | 31 | ||||||
Other revolving credit and installment | 125 | 149 | ||||||
Total consumer | 186 | 195 | ||||||
Foreign | 14 | 18 | ||||||
Total loan recoveries | 236 | 245 | ||||||
Net loan charge-offs | (1,528 | ) | (715 | ) | ||||
Other | (5 | ) | 1 | |||||
Balance, end of period | $ | 6,013 | $ | 3,965 | ||||
Components: | ||||||||
Allowance for loan losses | $ | 5,803 | $ | 3,772 | ||||
Reserve for unfunded credit commitments | 210 | 193 | ||||||
Allowance for credit losses | $ | 6,013 | $ | 3,965 | ||||
Net loan charge-offs (annualized) as a percentage of average total loans | 1.60 | % | 0.90 | % | ||||
Allowance for loan losses as a percentage of total loans | 1.50 | % | 1.16 | % | ||||
Allowance for credit losses as a percentage of total loans | 1.56 | 1.22 | ||||||
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Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2008 | 2007 | 2007 | |||||||||
Nonmarketable equity investments: | ||||||||||||
Private equity investments | $ | 2,078 | $ | 2,024 | $ | 1,750 | ||||||
Federal bank stock | 2,110 | 1,925 | 1,325 | |||||||||
All other | 3,046 | 2,981 | 2,199 | |||||||||
Total nonmarketable equity investments (1) | 7,234 | 6,930 | 5,274 | |||||||||
Operating lease assets | 1,955 | 2,218 | 3,084 | |||||||||
Accounts receivable | 14,547 | 10,913 | 4,781 | |||||||||
Interest receivable | 2,835 | 2,977 | 2,581 | |||||||||
Core deposit intangibles | 403 | 435 | 356 | |||||||||
Credit card and other intangibles | 306 | 319 | 209 | |||||||||
Foreclosed assets: | ||||||||||||
GNMA loans (2) | 578 | 535 | 381 | |||||||||
Other | 637 | 649 | 528 | |||||||||
Due from customers on acceptances | 66 | 62 | 61 | |||||||||
Other | 13,997 | 12,107 | 10,377 | |||||||||
Total other assets | $ | 42,558 | $ | 37,145 | $ | 27,632 | ||||||
(1) | At March 31, 2008, December 31, 2007, and March 31, 2007, $6.1 billion, $5.9 billion and $4.5 billion, respectively, of nonmarketable equity investments, including all federal bank stock, were accounted for at cost. | |
(2) | Consistent with regulatory reporting requirements, foreclosed assets include foreclosed real estate securing GNMA loans. Both principal and interest for GNMA loans secured by the foreclosed real estate are collectible because the GNMA loans are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. |
Quarter ended March 31 | , | |||||||
(in millions) | 2008 | 2007 | ||||||
Net gains from private equity investments (1) | $ | 346 | $ | 76 | ||||
Net losses from all other nonmarketable equity investments | (39 | ) | (13 | ) | ||||
Net gains from nonmarketable equity investments | $ | 307 | $ | 63 | ||||
(1) | Includes $334 million gain from our ownership in Visa, which completed its initial public offering in March 2008. See Note 11 in this Report for additional information. |
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Quarter ended March 31 | , | |||||||
(in millions) | 2008 | 2007 | ||||||
Fair value, beginning of quarter | $ | 16,763 | $ | 17,591 | ||||
Purchases | 52 | 159 | ||||||
Servicing from securitizations or asset transfers | 797 | 828 | ||||||
Sales | (92 | ) | — | |||||
Net additions | 757 | 987 | ||||||
Changes in fair value: | ||||||||
Due to changes in valuation model inputs or assumptions (1) | (1,798 | ) | �� | (11 | ) | |||
Other changes in fair value (2) | (766 | ) | (788 | ) | ||||
Total changes in fair value | (2,564 | ) | (799 | ) | ||||
Fair value, end of quarter | $ | 14,956 | $ | 17,779 | ||||
(1) | Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates. | |
(2) | Represents changes due to collection/realization of expected cash flows over time. |
Quarter ended March 31 | , | |||||||
(in millions) | 2008 | 2007 | ||||||
Balance, beginning of quarter | $ | 466 | $ | 377 | ||||
Purchases (1) | 3 | 29 | ||||||
Servicing from securitizations or asset transfers (1) | 5 | 10 | ||||||
Amortization | (19 | ) | (16 | ) | ||||
Balance, end of quarter (2) | $ | 455 | $ | 400 | ||||
Fair value of amortized MSRs: | ||||||||
Beginning of quarter | $ | 573 | $ | 457 | ||||
End of quarter | 601 | 484 | ||||||
(1) | Based on March 31, 2008, assumptions, the weighted-average amortization period for MSRs added during the quarter was approximately 16.1 years. | |
(2) | There was no valuation allowance recorded for the periods presented. |
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March 31 | , | |||||||
(in billions) | 2008 | 2007 | ||||||
Loans serviced for others (1) | $ | 1,431 | $ | 1,309 | ||||
Owned loans serviced (2) | 103 | 88 | ||||||
Total owned servicing | 1,534 | 1,397 | ||||||
Sub-servicing | 21 | 26 | ||||||
Total managed servicing portfolio | $ | 1,555 | $ | 1,423 | ||||
Ratio of MSRs to related loans serviced for others | 1.08 | % | 1.39 | % | ||||
(1) | Consists of 1-4 family first mortgage and commercial mortgage loans. | |
(2) | Consists of mortgages held for sale and 1-4 family first mortgage loans. |
Quarter ended March 31 | , | |||||||
(in millions) | 2008 | 2007 | ||||||
Servicing income, net: | ||||||||
Servicing fees (1) | $ | 964 | $ | 1,054 | ||||
Changes in fair value of residential MSRs: | ||||||||
Due to changes in valuation model inputs or assumptions (2) | (1,798 | ) | (11 | ) | ||||
Other changes in fair value (3) | (766 | ) | (788 | ) | ||||
Total changes in fair value of residential MSRs | (2,564 | ) | (799 | ) | ||||
Amortization | (19 | ) | (16 | ) | ||||
Net derivative gains (losses) from economic hedges (4) | 1,892 | (23 | ) | |||||
Total servicing income, net | 273 | 216 | ||||||
Net gains on mortgage loan origination/sales activities | 267 | 495 | ||||||
All other | 91 | 79 | ||||||
Total mortgage banking noninterest income | $ | 631 | $ | 790 | ||||
Market-related valuation changes to MSRs, net of hedge results (2) + (4) | $ | 94 | $ | (34 | ) | |||
(1) | Includes contractually specified servicing fees, late charges and other ancillary revenues. | |
(2) | Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates. | |
(3) | Represents changes due to collection/realization of expected cash flows over time. | |
(4) | Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs. See Note 12 – Free-Standing Derivatives in this Report for additional discussion and detail. |
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March 31 | , | |||||||||||||||
2008 | 2007 | |||||||||||||||
Gross | Accumulated | Gross | Accumulated | |||||||||||||
(in millions) | carrying amount | amortization | carrying amount | amortization | ||||||||||||
Amortized intangible assets: | ||||||||||||||||
MSRs (commercial) (1) | $ | 625 | $ | 170 | $ | 496 | $ | 96 | ||||||||
Core deposit intangibles | 2,503 | 2,100 | 2,374 | 2,018 | ||||||||||||
Credit card and other intangibles | 733 | 441 | 583 | 388 | ||||||||||||
Total intangible assets | $ | 3,861 | $ | 2,711 | $ | 3,453 | $ | 2,502 | ||||||||
MSRs (fair value) (1) | $ | 14,956 | $ | 17,779 | ||||||||||||
Trademark | 14 | 14 | ||||||||||||||
(1) | See Note 8 in this Report for additional information on MSRs. |
Core | ||||||||||||
deposit | ||||||||||||
(in millions) | intangibles | Other (1) | Total | |||||||||
Three months ended March 31, 2008 (actual) | $ | 31 | $ | 34 | $ | 65 | ||||||
Estimate for year ended December 31, | ||||||||||||
2008 | $ | 121 | $ | 143 | $ | 264 | ||||||
2009 | 110 | 115 | 225 | |||||||||
2010 | 97 | 103 | 200 | |||||||||
2011 | 37 | 91 | 128 | |||||||||
2012 | 17 | 79 | 96 | |||||||||
2013 | 14 | 70 | 84 | |||||||||
(1) | Includes amortized commercial MSRs and credit card and other intangibles. |
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Community | Wholesale | Wells Fargo | Consolidated | |||||||||||||
(in millions) | Banking (1) | Banking (1) | Financial | Company | ||||||||||||
December 31, 2006 and | $ | 7,357 | $ | 3,552 | $ | 366 | $ | 11,275 | ||||||||
December 31, 2007 | $ | 8,581 | $ | 4,102 | $ | 423 | $ | 13,106 | ||||||||
Goodwill from business combinations | — | 44 | — | 44 | ||||||||||||
Foreign currency translation adjustments | — | — | (2 | ) | (2 | ) | ||||||||||
March 31, 2008 | $ | 8,581 | $ | 4,146 | $ | 421 | $ | 13,148 | ||||||||
Community | Wholesale | Wells Fargo | Consolidated | |||||||||||||||||
(in millions) | Banking (1) | Banking (1) | Financial | Enterprise | Company | |||||||||||||||
March 31, 2007 | $ | 3,510 | $ | 1,602 | $ | 366 | $ | 5,797 | $ | 11,275 | ||||||||||
March 31, 2008 | $ | 4,734 | $ | 2,196 | $ | 421 | $ | 5,797 | $ | 13,148 | ||||||||||
(1) | To reflect the realignment of our corporate trust business from Community Banking into Wholesale Banking in first quarter 2008, balances for prior periods have been revised. |
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Quarter ended March 31 | , | |||||||
(in millions) | 2008 | 2007 | ||||||
Net gains from fair value hedges from: | ||||||||
Change in value of derivatives excluded from the assessment of hedge effectiveness | $ | — | $ | 2 | ||||
Ineffective portion of change in value of derivatives | 49 | 3 | ||||||
Net gains (losses) from ineffective portion of change in the value of cash flow hedges | (1 | ) | 25 | |||||
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March 31, 2008 | December 31, 2007 | |||||||||||||||
Credit | Estimated | Credit | Estimated | |||||||||||||
risk | net fair | risk | net fair | |||||||||||||
(in millions) | amount (2) | value | amount (2) | value | ||||||||||||
ASSET/LIABILITY MANAGEMENT HEDGES | ||||||||||||||||
Qualifying hedge contracts accounted for under FAS 133 | ||||||||||||||||
Interest rate contracts | $ | 2,838 | $ | 2,330 | $ | 1,419 | $ | 1,147 | ||||||||
Equity contracts | — | (2 | ) | — | (3 | ) | ||||||||||
Foreign exchange contracts | 2,002 | 2,002 | 1,399 | 1,376 | ||||||||||||
Free-standing derivatives (economic hedges) | ||||||||||||||||
Interest rate contracts (1) | 5,082 | 1,953 | 2,183 | 1,455 | ||||||||||||
Foreign exchange contracts | 177 | 177 | 202 | 202 | ||||||||||||
CUSTOMER ACCOMMODATION, TRADING AND OTHER FREE-STANDING DERIVATIVES | ||||||||||||||||
Interest rate contracts | 7,569 | 622 | 3,893 | 444 | ||||||||||||
Commodity contracts | 1,199 | 285 | 731 | 116 | ||||||||||||
Equity contracts | 623 | 56 | 571 | 86 | ||||||||||||
Foreign exchange contracts | 828 | 31 | 726 | 72 | ||||||||||||
Credit contracts | 122 | 79 | 75 | 51 | ||||||||||||
(1) | Includes free-standing derivatives (economic hedges) used to hedge the risk of changes in the fair value of residential MSRs, MHFS, interest rate lock commitments and other interests held. | |
(2) | Credit risk amounts reflect the replacement cost for those contracts in a gain position in the event of nonperformance by all counterparties. The credit risk amount does not reflect the effects of netting on a counterparty basis under FSP FIN 39-1. At March 31, 2008, our derivative assets and liabilities on the balance sheet were netted for cash collateral by approximately $5.6 billion. |
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• | Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. |
• | Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. |
• | Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
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(in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Balance at March 31, 2008 | ||||||||||||||||
Trading assets | $ | 8,893 | $ | 1,124 | $ | 7,407 | $ | 362 | ||||||||
Securities available for sale | 81,787 | 41,912 | 33,191 | 6,684 | (2) | |||||||||||
Mortgages held for sale | 27,927 | — | 26,667 | 1,260 | ||||||||||||
Mortgage servicing rights (residential) | 14,956 | — | — | 14,956 | ||||||||||||
Other assets (1) | 3,167 | 2,226 | 893 | 48 | ||||||||||||
Total | $ | 136,730 | $ | 45,262 | $ | 68,158 | $ | 23,310 | ||||||||
Other liabilities (1) | $ | (6,235 | ) | $ | (3,597 | ) | $ | (2,230 | ) | $ | (408 | ) | ||||
Balance at March 31, 2007 | ||||||||||||||||
Trading assets | $ | 6,525 | $ | 1,572 | $ | 4,599 | $ | 354 | ||||||||
Securities available for sale | 45,443 | 32,412 | 10,223 | 2,808 | (2) | |||||||||||
Mortgages held for sale | 25,692 | — | 25,692 | — | ||||||||||||
Mortgage servicing rights (residential) | 17,779 | — | — | 17,779 | ||||||||||||
Other assets | 538 | 470 | 58 | 10 | ||||||||||||
Total | $ | 95,977 | $ | 34,454 | $ | 40,572 | $ | 20,951 | ||||||||
Other liabilities (1) | $ | (3,056 | ) | $ | (1,285 | ) | $ | (1,460 | ) | $ | (311 | ) | ||||
(1) | Derivatives are included in this category. | |
(2) | Non-rated asset-backed securities collateralized by auto leases represent substantially all of this balance. |
Trading | Mortgage | Net | Other | |||||||||||||||||||||
assets | Securities | Mortgages | servicing | derivative | liabilities | |||||||||||||||||||
(excluding | available | held for | rights | assets and | (excluding | |||||||||||||||||||
(in millions) | derivatives) | for sale | sale | (residential) | liabilities | derivatives) | ||||||||||||||||||
Quarter ended March 31, 2008 | ||||||||||||||||||||||||
Balance, beginning of quarter | $ | 418 | $ | 5,381 | $ | 146 | $ | 16,763 | $ | 6 | $ | (280 | ) | |||||||||||
Total net gains (losses) for the quarter included in: | ||||||||||||||||||||||||
Net income | (68 | ) | (8 | ) | (5 | ) | (2,564 | ) | (179 | ) | (66 | ) | ||||||||||||
Other comprehensive income | — | 42 | — | — | — | -- | ||||||||||||||||||
Purchases, sales, issuances and settlements, net | 12 | 1,269 | 27 | 757 | 142 | 17 | ||||||||||||||||||
Net transfers into/out of Level 3 | — | — | 1,092 | (3) | — | — | -- | |||||||||||||||||
Balance, end of quarter | $ | 362 | $ | 6,684 | $ | 1,260 | $ | 14,956 | $ | (31 | ) | $ | (329 | ) | ||||||||||
Net unrealized losses included in net income for the quarter relating to assets and liabilities held at March 31, 2008 (1) | $ | (40 | )(2) | $ | (4 | ) | $ | (5 | )(4) | $ | (1,794 | )(4)(5) | $ | (27 | )(4) | $ | (66 | )(4) | ||||||
Quarter ended March 31, 2007 | ||||||||||||||||||||||||
Balance, beginning of quarter | $ | 360 | $ | 3,447 | $ | — | $ | 17,591 | $ | (68 | ) | $ | (282 | ) | ||||||||||
Total net gains (losses) for the quarter included in: | ||||||||||||||||||||||||
Net income | (41 | ) | — | — | (799 | ) | 17 | (6 | ) | |||||||||||||||
Purchases, sales, issuances and settlements, net | 34 | (639 | ) | — | 987 | — | 39 | |||||||||||||||||
Balance, end of quarter | $ | 353 | $ | 2,808 | $ | — | $ | 17,779 | $ | (51 | ) | $ | (249 | ) | ||||||||||
Net unrealized losses included in net income for the quarter relating to assets and liabilities held at March 31, 2007 (1) | $ | (25 | )(2) | $ | — | $ | — | $ | (10 | )(4)(5) | $ | (43 | )(4) | $ | (6 | )(4) | ||||||||
(1) | Represents only net losses that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/realization of cash flows over time. | |
(2) | Included in other noninterest income in the income statement. | |
(3) | Represents mortgages held for sale that were transferred from Level 2 to Level 3 due to reduced levels of market liquidity for certain residential mortgage loans. | |
(4) | Included in mortgage banking in the income statement. | |
(5) | Represents total unrealized losses of $1,798 million and $11 million, net of losses of $4 million and $1 million related to sales, for first quarter 2008 and 2007, respectively. |
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Carrying value at quarter end | Total losses for | |||||||||||||||||||
(in millions) | Total | Level 1 | Level 2 | Level 3 | quarter ended | |||||||||||||||
March 31, 2008 | ||||||||||||||||||||
Mortgages held for sale | $ | 1,781 | $ | — | $ | 1,678 | $ | 103 | $ | (78 | ) | |||||||||
Loans held for sale | 360 | — | 360 | — | (11 | ) | ||||||||||||||
Loans (1) | 546 | — | 540 | 6 | (1,297 | ) | ||||||||||||||
Private equity investments | 19 | 16 | — | 3 | (14 | ) | ||||||||||||||
Foreclosed assets (2) | 384 | — | 384 | — | (104 | ) | ||||||||||||||
Operating lease assets | 19 | — | 19 | — | -- | |||||||||||||||
$ | (1,504 | ) | ||||||||||||||||||
March 31, 2007 | ||||||||||||||||||||
Mortgages held for sale | $ | 5,023 | $ | — | $ | 5,023 | $ | — | $ | (66 | ) | |||||||||
Loans (1) | 592 | — | 592 | — | (575 | ) | ||||||||||||||
Private equity investments | 3 | — | — | 3 | (5 | ) | ||||||||||||||
Foreclosed assets (2) | 225 | — | 225 | — | (89 | ) | ||||||||||||||
$ | (735 | ) | ||||||||||||||||||
(1) | Represents carrying value and related write-downs of loans for which adjustments are predominantly based on the appraised value of the collateral. The carrying value of loans fully charged-off, which includes unsecured lines and loans, is zero. | |
(2) | Represents the fair value and related losses of foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets. |
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March 31, 2008 | March 31, 2007 | |||||||||||||||||||||||
Fair value | Fair value | |||||||||||||||||||||||
Fair value | Aggregate | carrying amount | Fair value | Aggregate | carrying amount | |||||||||||||||||||
carrying | unpaid | less aggregate | carrying | unpaid | less aggregate | |||||||||||||||||||
(in millions) | amount | principal | unpaid principal | amount | principal | unpaid principal | ||||||||||||||||||
Mortgages held for sale reported at fair value: | ||||||||||||||||||||||||
Total loans | $ | 27,927 | $ | 27,705 | $ | 222 | (1) | $ | 25,692 | $ | 25,417 | $ | 275 | (1) | ||||||||||
Nonaccrual loans | 48 | 86 | (38 | ) | 30 | 35 | (5 | ) | ||||||||||||||||
Loans 90 days or more past due and still accruing | 30 | 31 | (1 | ) | 5 | 5 | — | |||||||||||||||||
(1) | The difference between fair value carrying amount and aggregate unpaid principal includes changes in fair value recorded at and subsequent to funding, gains and losses on the related loan commitment prior to funding, and premiums on acquired loans. |
Quarter ended March 31 | , | |||||||||||||||
2008 | 2007 | |||||||||||||||
Other | Other | |||||||||||||||
Mortgages | interests | Mortgages | interests | |||||||||||||
(in millions) | held for sale | held | held for sale | held | ||||||||||||
Changes in fair value included in net income: | ||||||||||||||||
Mortgage banking noninterest income: | ||||||||||||||||
Net gains on mortgage loan origination/sales activities (1) | $ | 752 | $ | — | $ | 229 | $ | — | ||||||||
Other noninterest income | — | (67 | ) | — | (41 | ) | ||||||||||
(1) | Includes changes in fair value of servicing associated with MHFS. |
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Shares issued and outstanding | Carrying amount (in millions) | Adjustable | ||||||||||||||||||||||||||||||
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | dividends rate | ||||||||||||||||||||
2008 | 2007 | 2007 | 2008 | 2007 | 2007 | Minimum | Maximum | |||||||||||||||||||||||||
ESOP Preferred Stock (1): | ||||||||||||||||||||||||||||||||
2008 | 395,494 | — | — | $ | 396 | $ | — | $ | — | 10.50 | % | 11.50 | % | |||||||||||||||||||
2007 | 126,374 | 135,124 | 363,754 | 126 | 135 | 364 | 10.75 | 11.75 | ||||||||||||||||||||||||
2006 | 95,866 | 95,866 | 108,121 | 96 | 96 | 108 | 10.75 | 11.75 | ||||||||||||||||||||||||
2005 | 73,434 | 73,434 | 84,284 | 73 | 73 | 84 | 9.75 | 10.75 | ||||||||||||||||||||||||
2004 | 55,610 | 55,610 | 65,180 | 56 | 56 | 65 | 8.50 | 9.50 | ||||||||||||||||||||||||
2003 | 37,043 | 37,043 | 44,843 | 37 | 37 | 45 | 8.50 | 9.50 | ||||||||||||||||||||||||
2002 | 25,779 | 25,779 | 32,874 | 26 | 26 | 33 | 10.50 | 11.50 | ||||||||||||||||||||||||
2001 | 16,593 | 16,593 | 22,303 | 17 | 17 | 22 | 10.50 | 11.50 | ||||||||||||||||||||||||
2000 | 9,094 | 9,094 | 14,142 | 9 | 9 | 14 | 11.50 | 12.50 | ||||||||||||||||||||||||
1999 | 1,261 | 1,261 | 4,094 | 1 | 1 | 4 | 10.30 | 11.30 | ||||||||||||||||||||||||
1998 | — | — | 563 | — | — | 1 | 10.75 | 11.75 | ||||||||||||||||||||||||
Total ESOP Preferred Stock | 836,548 | 449,804 | 740,158 | $ | 837 | $ | 450 | $ | 740 | |||||||||||||||||||||||
Unearned ESOP shares (2) | $ | (891 | ) | $ | (482 | ) | $ | (792 | ) | |||||||||||||||||||||||
(1) | Liquidation preference $1,000. At March 31, 2008, December 31, 2007, and March 31, 2007, additional paid-in capital included $54 million, $32 million and $52 million, respectively, related to preferred stock. | |
(2) | In accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position 93-6,Employers’ Accounting for Employee Stock Ownership Plans, we recorded a corresponding charge to unearned ESOP shares in connection with the issuance of the ESOP Preferred Stock. The unearned ESOP shares are reduced as shares of the ESOP Preferred Stock are committed to be released. |
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Quarter ended March 31 | , | |||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
Pension benefits | Pension benefits | |||||||||||||||||||||||
Non- | Other | Non- | Other | |||||||||||||||||||||
(in millions) | Qualified | qualified | benefits | Qualified | qualified | benefits | ||||||||||||||||||
Service cost | $ | 73 | $ | 4 | $ | 3 | $ | 70 | $ | 4 | $ | 4 | ||||||||||||
Interest cost | 69 | 5 | 10 | 61 | 4 | 10 | ||||||||||||||||||
Expected return on plan assets | (120 | ) | — | (10 | ) | (113 | ) | — | (9 | ) | ||||||||||||||
Amortization of net actuarial loss (1) | — | 3 | — | 8 | 3 | 1 | ||||||||||||||||||
Amortization of prior service cost | — | (1 | ) | (1 | ) | — | — | (1 | ) | |||||||||||||||
Net periodic benefit cost | $ | 22 | $ | 11 | $ | 2 | $ | 26 | $ | 11 | $ | 5 | ||||||||||||
(1) | Net actuarial loss is generally amortized over five years. |
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Quarter ended March 31 | , | |||||||
(in millions, except per share amounts) | 2008 | 2007 | ||||||
Net income (numerator) | $ | 1,999 | $ | 2,244 | ||||
EARNINGS PER COMMON SHARE | ||||||||
Average common shares outstanding (denominator) | 3,302.4 | 3,376.0 | ||||||
Per share | $ | 0.61 | $ | 0.66 | ||||
DILUTED EARNINGS PER COMMON SHARE | ||||||||
Average common shares outstanding | 3,302.4 | 3,376.0 | ||||||
Add: Stock options | 15.4 | 40.0 | ||||||
Restricted share rights | 0.1 | 0.1 | ||||||
Diluted average common shares outstanding (denominator) | 3,317.9 | 3,416.1 | ||||||
Per share | $ | 0.60 | $ | 0.66 | ||||
63
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64
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(income/expense in millions, | Community | Wholesale | Wells Fargo | Consolidated | ||||||||||||||||||||||||||||
average balances in billions) | Banking | Banking | Financial | Company | ||||||||||||||||||||||||||||
Quarter ended March 31, | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||||||||||
Net interest income (1) | $ | 3,636 | $ | 3,150 | $ | 1,032 | $ | 855 | $ | 1,092 | $ | 1,005 | $ | 5,760 | $ | 5,010 | ||||||||||||||||
Provision for credit losses | 1,313 | 306 | 161 | 13 | 554 | 396 | 2,028 | 715 | ||||||||||||||||||||||||
Noninterest income | 3,223 | 2,765 | 1,250 | 1,347 | 330 | 319 | 4,803 | 4,431 | ||||||||||||||||||||||||
Noninterest expense | 3,336 | 3,570 | 1,415 | 1,207 | 711 | 749 | 5,462 | 5,526 | ||||||||||||||||||||||||
Income before income tax expense | 2,210 | 2,039 | 706 | 982 | 157 | 179 | 3,073 | 3,200 | ||||||||||||||||||||||||
Income tax expense | 783 | 540 | 231 | 349 | 60 | 67 | 1,074 | 956 | ||||||||||||||||||||||||
Net income | $ | 1,427 | $ | 1,499 | $ | 475 | $ | 633 | $ | 97 | $ | 112 | $ | 1,999 | $ | 2,244 | ||||||||||||||||
Average loans | $ | 214.9 | $ | 180.8 | $ | 100.6 | $ | 77.9 | $ | 68.4 | $ | 62.7 | $ | 383.9 | $ | 321.4 | ||||||||||||||||
Average assets (2) | 356.7 | 306.8 | 138.5 | 101.2 | 74.0 | 68.3 | 575.0 | 482.1 | ||||||||||||||||||||||||
Average core deposits | 248.4 | 237.1 | 68.9 | 53.5 | — | — | 317.3 | 290.6 | ||||||||||||||||||||||||
(1) | Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment. In general, Community Banking has excess liabilities and receives interest credits for the funding it provides to other segments. | |
(2) | The Consolidated Company balance includes unallocated goodwill held at the enterprise level of $5.8 billion for both periods presented. |
65
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Quarter ended March 31, 2008 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
Dividends from subsidiaries: | ||||||||||||||||||||
Bank | $ | 797 | $ | — | $ | — | $ | (797 | ) | $ | — | |||||||||
Nonbank | 11 | — | — | (11 | ) | — | ||||||||||||||
Interest income from loans | 1 | 1,407 | 5,824 | (20 | ) | 7,212 | ||||||||||||||
Interest income from subsidiaries | 859 | — | — | (859 | ) | — | ||||||||||||||
Other interest income | 54 | 29 | 1,556 | (2 | ) | 1,637 | ||||||||||||||
Total interest income | 1,722 | 1,436 | 7,380 | (1,689 | ) | 8,849 | ||||||||||||||
Deposits | — | — | 1,759 | (165 | ) | 1,594 | ||||||||||||||
Short-term borrowings | 144 | 83 | 421 | (223 | ) | 425 | ||||||||||||||
Long-term debt | 858 | 495 | 210 | (493 | ) | 1,070 | ||||||||||||||
Total interest expense | 1,002 | 578 | 2,390 | (881 | ) | 3,089 | ||||||||||||||
NET INTEREST INCOME | 720 | 858 | 4,990 | (808 | ) | 5,760 | ||||||||||||||
Provision for credit losses | — | 342 | 1,686 | — | 2,028 | |||||||||||||||
Net interest income after provision for credit losses | 720 | 516 | 3,304 | (808 | ) | 3,732 | ||||||||||||||
NONINTEREST INCOME | ||||||||||||||||||||
Fee income – nonaffiliates | — | 116 | 2,452 | — | 2,568 | |||||||||||||||
Other | 293 | 48 | 2,310 | (416 | ) | 2,235 | ||||||||||||||
Total noninterest income | 293 | 164 | 4,762 | (416 | ) | 4,803 | ||||||||||||||
NONINTEREST EXPENSE | ||||||||||||||||||||
Salaries and benefits | (103 | ) | 266 | 3,052 | — | 3,215 | ||||||||||||||
Other | (105 | ) | 277 | 2,491 | (416 | ) | 2,247 | |||||||||||||
Total noninterest expense | (208 | ) | 543 | 5,543 | (416 | ) | 5,462 | |||||||||||||
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES | 1,221 | 137 | 2,523 | (808 | ) | 3,073 | ||||||||||||||
Income tax expense | 145 | 55 | 874 | — | 1,074 | |||||||||||||||
Equity in undistributed income of subsidiaries | 923 | — | — | (923 | ) | — | ||||||||||||||
NET INCOME | $ | 1,999 | $ | 82 | $ | 1,649 | $ | (1,731 | ) | $ | 1,999 | |||||||||
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Quarter ended March 31, 2007 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
Dividends from subsidiaries: | ||||||||||||||||||||
Bank | $ | 1,558 | $ | — | $ | — | $ | (1,558 | ) | $ | — | |||||||||
Nonbank | 4 | — | — | (4 | ) | — | ||||||||||||||
Interest income from loans | — | 1,354 | 5,421 | (11 | ) | 6,764 | ||||||||||||||
Interest income from subsidiaries | 852 | — | — | (852 | ) | — | ||||||||||||||
Other interest income | 34 | 26 | 1,317 | (2 | ) | 1,375 | ||||||||||||||
Total interest income | 2,448 | 1,380 | 6,738 | (2,427 | ) | 8,139 | ||||||||||||||
Deposits | — | — | 2,060 | (203 | ) | 1,857 | ||||||||||||||
Short-term borrowings | 59 | 110 | 218 | (251 | ) | 136 | ||||||||||||||
Long-term debt | 897 | 453 | 197 | (411 | ) | 1,136 | ||||||||||||||
Total interest expense | 956 | 563 | 2,475 | (865 | ) | 3,129 | ||||||||||||||
NET INTEREST INCOME | 1,492 | 817 | 4,263 | (1,562 | ) | 5,010 | ||||||||||||||
Provision for credit losses | — | 282 | 433 | — | 715 | |||||||||||||||
Net interest income after provision for credit losses | 1,492 | 535 | 3,830 | (1,562 | ) | 4,295 | ||||||||||||||
NONINTEREST INCOME | ||||||||||||||||||||
Fee income — nonaffiliates | — | 80 | 2,317 | — | 2,397 | |||||||||||||||
Other | 31 | 77 | 1,938 | (12 | ) | 2,034 | ||||||||||||||
Total noninterest income | 31 | 157 | 4,255 | (12 | ) | 4,431 | ||||||||||||||
NONINTEREST EXPENSE | ||||||||||||||||||||
Salaries and benefits | 4 | 307 | 2,963 | — | 3,274 | |||||||||||||||
Other | 20 | 312 | 1,932 | (12 | ) | 2,252 | ||||||||||||||
Total noninterest expense | 24 | 619 | 4,895 | (12 | ) | 5,526 | ||||||||||||||
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES | 1,499 | 73 | 3,190 | (1,562 | ) | 3,200 | ||||||||||||||
Income tax expense (benefit) | (11 | ) | 34 | 933 | — | 956 | ||||||||||||||
Equity in undistributed income of subsidiaries | 734 | — | — | (734 | ) | — | ||||||||||||||
NET INCOME | $ | 2,244 | $ | 39 | $ | 2,257 | $ | (2,296 | ) | $ | 2,244 | |||||||||
67
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�� | ||||||||||||||||||||
March 31, 2008 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and cash equivalents due from: | ||||||||||||||||||||
Subsidiary banks | $ | 15,105 | $ | 306 | $ | — | $ | (15,411 | ) | $ | — | |||||||||
Nonaffiliates | — | 214 | 17,103 | — | 17,317 | |||||||||||||||
Securities available for sale | 2,270 | 2,023 | 77,499 | (5 | ) | 81,787 | ||||||||||||||
Mortgages and loans held for sale | — | — | 30,521 | — | 30,521 | |||||||||||||||
Loans | 10 | 51,060 | 344,624 | (9,361 | ) | 386,333 | ||||||||||||||
Loans to subsidiaries: | ||||||||||||||||||||
Bank | 11,400 | — | — | (11,400 | ) | — | ||||||||||||||
Nonbank | 54,260 | — | — | (54,260 | ) | — | ||||||||||||||
Allowance for loan losses | — | (1,025 | ) | (4,778 | ) | — | (5,803 | ) | ||||||||||||
Net loans | 65,670 | 50,035 | 339,846 | (75,021 | ) | 380,530 | ||||||||||||||
Investments in subsidiaries: | ||||||||||||||||||||
Bank | 49,371 | — | — | (49,371 | ) | — | ||||||||||||||
Nonbank | 5,568 | — | — | (5,568 | ) | — | ||||||||||||||
Other assets | 11,417 | 1,574 | 78,323 | (6,248 | ) | 85,066 | ||||||||||||||
Total assets | $ | 149,401 | $ | 54,152 | $ | 543,292 | $ | (151,624 | ) | $ | 595,221 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Deposits | $ | — | $ | — | $ | 373,555 | $ | (15,411 | ) | $ | 358,144 | |||||||||
Short-term borrowings | 5,023 | 10,804 | 69,075 | (30,919 | ) | 53,983 | ||||||||||||||
Accrued expenses and other liabilities | 4,921 | 1,497 | 29,334 | (3,992 | ) | 31,760 | ||||||||||||||
Long-term debt | 80,991 | 38,579 | 19,821 | (36,216 | ) | 103,175 | ||||||||||||||
Indebtedness to subsidiaries | 10,307 | — | — | (10,307 | ) | — | ||||||||||||||
Total liabilities | 101,242 | 50,880 | 491,785 | (96,845 | ) | 547,062 | ||||||||||||||
Stockholders’ equity | 48,159 | 3,272 | 51,507 | (54,779 | ) | 48,159 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 149,401 | $ | 54,152 | $ | 543,292 | $ | (151,624 | ) | $ | 595,221 | |||||||||
68
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March 31, 2007 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and cash equivalents due from: | ||||||||||||||||||||
Subsidiary banks | $ | 15,900 | $ | 308 | $ | — | $ | (16,208 | ) | $ | — | |||||||||
Nonaffiliates | 79 | 116 | 16,958 | — | 17,153 | |||||||||||||||
Securities available for sale | 866 | 1,821 | 42,762 | (6 | ) | 45,443 | ||||||||||||||
Mortgages and loans held for sale | — | — | 33,115 | — | 33,115 | |||||||||||||||
Loans | — | 47,473 | 278,372 | (358 | ) | 325,487 | ||||||||||||||
Loans to subsidiaries: | ||||||||||||||||||||
Bank | 3,400 | — | — | (3,400 | ) | — | ||||||||||||||
Nonbank | 48,565 | 543 | — | (49,108 | ) | — | ||||||||||||||
Allowance for loan losses | — | (1,204 | ) | (2,568 | ) | — | (3,772 | ) | ||||||||||||
Net loans | 51,965 | 46,812 | 275,804 | (52,866 | ) | 321,715 | ||||||||||||||
Investments in subsidiaries: | ||||||||||||||||||||
Bank | 43,591 | — | — | (43,591 | ) | — | ||||||||||||||
Nonbank | 4,847 | — | — | (4,847 | ) | — | ||||||||||||||
Other assets | 6,959 | 1,694 | 61,497 | (1,675 | ) | 68,475 | ||||||||||||||
Total assets | $ | 124,207 | $ | 50,751 | $ | 430,136 | $ | (119,193 | ) | $ | 485,901 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Deposits | $ | — | $ | — | $ | 327,365 | $ | (16,208 | ) | $ | 311,157 | |||||||||
Short-term borrowings | 20 | 8,314 | 18,725 | (13,878 | ) | 13,181 | ||||||||||||||
Accrued expenses and other liabilities | 4,088 | 1,507 | 21,634 | (2,066 | ) | 25,163 | ||||||||||||||
Long-term debt | 68,591 | 37,940 | 17,115 | (33,319 | ) | 90,327 | ||||||||||||||
Indebtedness to subsidiaries | 5,435 | — | — | (5,435 | ) | — | ||||||||||||||
Total liabilities | 78,134 | 47,761 | 384,839 | (70,906 | ) | 439,828 | ||||||||||||||
Stockholders’ equity | 46,073 | 2,990 | 45,297 | (48,287 | ) | 46,073 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 124,207 | $ | 50,751 | $ | 430,136 | $ | (119,193 | ) | $ | 485,901 | |||||||||
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Quarter ended March 31, 2008 | ||||||||||||||||
Other | ||||||||||||||||
consolidating | ||||||||||||||||
subsidiaries/ | Consolidated | |||||||||||||||
(in millions) | Parent | WFFI | eliminations | Company | ||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net cash provided (used) by operating activities | $ | 499 | $ | 668 | $ | (1,557 | ) | $ | (390 | ) | ||||||
Cash flows from investing activities: | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Sales proceeds | 882 | 359 | 14,972 | 16,213 | ||||||||||||
Prepayments and maturities | — | 78 | 5,388 | 5,466 | ||||||||||||
Purchases | (792 | ) | (357 | ) | (29,798 | ) | (30,947 | ) | ||||||||
Loans: | ||||||||||||||||
Increase in banking subsidiaries’ loan originations, net of collections | — | (171 | ) | (3,348 | ) | (3,519 | ) | |||||||||
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries | — | — | 325 | 325 | ||||||||||||
Purchases (including participations) of loans by banking subsidiaries | — | — | (2,656 | ) | (2,656 | ) | ||||||||||
Principal collected on nonbank entities’ loans | — | 4,194 | 821 | 5,015 | ||||||||||||
Loans originated by nonbank entities | — | (4,439 | ) | (834 | ) | (5,273 | ) | |||||||||
Net repayments from (advances to) subsidiaries | (2,858 | ) | — | 2,858 | — | |||||||||||
Capital notes and term loans made to subsidiaries | (630 | ) | — | 630 | — | |||||||||||
Principal collected on notes/loans made to subsidiaries | 2,500 | — | (2,500 | ) | — | |||||||||||
Net decrease (increase) in investment in subsidiaries | (48 | ) | — | 48 | — | |||||||||||
Net cash paid for acquisitions | — | — | (46 | ) | (46 | ) | ||||||||||
Other, net | 439 | (52 | ) | (3,385 | ) | (2,998 | ) | |||||||||
Net cash used by investing activities | (507 | ) | (388 | ) | (17,525 | ) | (18,420 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||||||
Net change in: | ||||||||||||||||
Deposits | — | — | 13,684 | 13,684 | ||||||||||||
Short-term borrowings | 1,506 | 1,687 | (2,465 | ) | 728 | |||||||||||
Long-term debt: | ||||||||||||||||
Proceeds from issuance | 7,075 | 1,105 | (43 | ) | 8,137 | |||||||||||
Repayment | (7,414 | ) | (3,037 | ) | 2,882 | (7,569 | ) | |||||||||
Common stock: | ||||||||||||||||
Proceeds from issuance | 317 | — | — | 317 | ||||||||||||
Repurchased | (351 | ) | — | — | (351 | ) | ||||||||||
Cash dividends paid | (1,024 | ) | — | — | (1,024 | ) | ||||||||||
Excess tax benefits related to stock option payments | 15 | — | — | 15 | ||||||||||||
Other, net | — | 2 | 3,260 | 3,262 | ||||||||||||
Net cash provided (used) by financing activities | 124 | (243 | ) | 17,318 | 17,199 | |||||||||||
Net change in cash and due from banks | 116 | 37 | (1,764 | ) | (1,611 | ) | ||||||||||
Cash and due from banks at beginning of quarter | 14,989 | 483 | (715 | ) | 14,757 | |||||||||||
Cash and due from banks at end of quarter | $ | 15,105 | $ | 520 | $ | (2,479 | ) | $ | 13,146 | |||||||
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Quarter ended March 31, 2007 | ||||||||||||||||
Other | ||||||||||||||||
consolidating | ||||||||||||||||
subsidiaries/ | Consolidated | |||||||||||||||
(in millions) | Parent | WFFI | eliminations | Company | ||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net cash provided by operating activities | $ | 754 | $ | 511 | $ | 3,568 | $ | 4,833 | ||||||||
Cash flows from investing activities: | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Sales proceeds | 115 | 107 | 4,323 | 4,545 | ||||||||||||
Prepayments and maturities | — | 77 | 2,167 | 2,244 | ||||||||||||
Purchases | (52 | ) | (276 | ) | (9,185 | ) | (9,513 | ) | ||||||||
Loans: | ||||||||||||||||
Increase in banking subsidiaries’ loan originations, net of collections | — | (414 | ) | (6,953 | ) | (7,367 | ) | |||||||||
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries | — | — | 983 | 983 | ||||||||||||
Purchases (including participations) of loans by banking subsidiaries | — | — | (1,068 | ) | (1,068 | ) | ||||||||||
Principal collected on nonbank entities’ loans | — | 4,570 | 1,004 | 5,574 | ||||||||||||
Loans originated by nonbank entities | — | (4,734 | ) | (1,209 | ) | (5,943 | ) | |||||||||
Net repayments from (advances to) subsidiaries | (518 | ) | — | 518 | — | |||||||||||
Capital notes and term loans made to subsidiaries | (1,933 | ) | — | 1,933 | — | |||||||||||
Principal collected on notes/loans made to subsidiaries | 1,900 | — | (1,900 | ) | — | |||||||||||
Net decrease (increase) in investment in subsidiaries | (71 | ) | — | 71 | — | |||||||||||
Other, net | — | (11 | ) | 904 | 893 | |||||||||||
Net cash used by investing activities | (559 | ) | (681 | ) | (8,412 | ) | (9,652 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||||||
Net change in: | ||||||||||||||||
Deposits | — | — | 914 | 914 | ||||||||||||
Short-term borrowings | 446 | 606 | (700 | ) | 352 | |||||||||||
Long-term debt: | ||||||||||||||||
Proceeds from issuance | 9,235 | 1,500 | (1,199 | ) | 9,536 | |||||||||||
Repayment | (6,019 | ) | (2,049 | ) | 1,712 | (6,356 | ) | |||||||||
Common stock: | ||||||||||||||||
Proceeds from issuance | 448 | — | — | 448 | ||||||||||||
Repurchased | (1,631 | ) | — | — | (1,631 | ) | ||||||||||
Cash dividends paid | (948 | ) | — | — | (948 | ) | ||||||||||
Excess tax benefits related to stock option payments | 46 | — | — | 46 | ||||||||||||
Other, net | (2 | ) | 67 | (150 | ) | (85 | ) | |||||||||
Net cash provided by financing activities | 1,575 | 124 | 577 | 2,276 | ||||||||||||
Net change in cash and due from banks | 1,770 | (46 | ) | (4,267 | ) | (2,543 | ) | |||||||||
Cash and due from banks at beginning of quarter | 14,209 | 470 | 349 | 15,028 | ||||||||||||
Cash and due from banks at end of quarter | $ | 15,979 | $ | 424 | $ | (3,918 | ) | $ | 12,485 | |||||||
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To be well capitalized | ||||||||||||||||||||||||||||||||||||||||||||||||
under the FDICIA | ||||||||||||||||||||||||||||||||||||||||||||||||
For capital | prompt corrective | |||||||||||||||||||||||||||||||||||||||||||||||
Actual | adequacy purposes | action provisions | ||||||||||||||||||||||||||||||||||||||||||||||
(in billions) | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2008: | ||||||||||||||||||||||||||||||||||||||||||||||||
Total capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||
Wells Fargo & Company | $ | 54.5 | 11.01 | % | ³ | $ | 39.6 | ³ | 8.00 | % | ||||||||||||||||||||||||||||||||||||||
Wells Fargo Bank, N.A. | 44.1 | 11.03 | ³ | 32.0 | ³ | 8.00 | ³ | $ | 40.0 | ³ | 10.00 | % | ||||||||||||||||||||||||||||||||||||
Tier 1 capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||
Wells Fargo & Company | $ | 39.2 | 7.92 | % | ³ | $ | 19.8 | ³ | 4.00 | % | ||||||||||||||||||||||||||||||||||||||
Wells Fargo Bank, N.A. | 30.7 | 7.68 | ³ | 16.0 | ³ | 4.00 | ³ | $ | 24.0 | ³ | 6.00 | % | ||||||||||||||||||||||||||||||||||||
Tier 1 capital (to average assets) | ||||||||||||||||||||||||||||||||||||||||||||||||
(Leverage ratio) | ||||||||||||||||||||||||||||||||||||||||||||||||
Wells Fargo & Company | $ | 39.2 | 7.04 | % | ³ | $ | 22.3 | ³ | 4.00 | %(1) | ||||||||||||||||||||||||||||||||||||||
Wells Fargo Bank, N.A. | 30.7 | 6.71 | ³ | 18.3 | ³ | 4.00 | (1) | ³ | $ | 22.9 | ³ | 5.00 | % | |||||||||||||||||||||||||||||||||||
(1) | The leverage ratio consists of Tier 1 capital divided by quarterly average total assets, excluding goodwill and certain other items. The minimum leverage ratio guideline is 3% for banking organizations that do not anticipate significant growth and that have well-diversified risk, excellent asset quality, high liquidity, good earnings, effective management and monitoring of market risk and, in general, are considered top-rated, strong banking organizations. |
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Maximum number of | ||||||||||||
Total number | shares that may yet | |||||||||||
Calendar | of shares | Weighted-average | be repurchased under | |||||||||
month | repurchased (1) | price paid per share | the authorizations | |||||||||
January | 3,709,624 | $ | 29.88 | 37,801,609 | ||||||||
February | 3,465,746 | 31.06 | 34,335,863 | |||||||||
March | 4,229,098 | 31.26 | 30,106,765 | |||||||||
Total | 11,404,468 | |||||||||||
(1) | All shares were repurchased under the authorization covering up to 75 million shares of common stock approved by the Board of Directors and publicly announced by the Company on November 7, 2007. Unless modified or revoked by the Board, this authorization does not expire. |
Dated: May 9, 2008 | WELLS FARGO & COMPANY | |||
By: | /s/ RICHARD D. LEVY | |||
Richard D. Levy | ||||
Executive Vice President and Controller (Principal Accounting Officer) | ||||
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Exhibit | ||||||||||||
Number | Description | Location | ||||||||||
3(a) | Restated Certificate of Incorporation. | Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed September 28, 2006. | ||||||||||
3(b) | Certificate of Designations for the Company’s 2007 ESOP Cumulative Convertible Preferred Stock. | Incorporated by reference to Exhibit 3(a) to the Company’s Current Report on Form 8-K filed March 19, 2007. | ||||||||||
3(c) | Certificate Eliminating the Certificate of Designations for the Company’s 1997 ESOP Cumulative Convertible Preferred Stock. | Incorporated by reference to Exhibit 3(b) to the Company’s Current Report on Form 8-K filed March 19, 2007. | ||||||||||
3(d) | Certificate of Designations for the Company’s 2008 ESOP Cumulative Convertible Preferred Stock. | Incorporated by reference to Exhibit 3(a) to the Company’s Current Report on Form 8-K filed March 18, 2008. | ||||||||||
3(e) | Certificate Eliminating the Certificate of Designations for the Company’s 1998 ESOP Cumulative Convertible Preferred Stock. | Incorporated by reference to Exhibit 3(b) to the Company’s Current Report on Form 8-K filed March 18, 2008. | ||||||||||
3(f) | By-Laws. | Incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed December 4, 2006. | ||||||||||
4(a) | See Exhibits 3(a) through 3(f). | |||||||||||
4(b) | The Company agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of the Company. | |||||||||||
12 | Computation of Ratios of Earnings to Fixed Charges: | Filed herewith. | ||||||||||
Quarter ended March 31, | ||||||||||||
2008 | 2007 | |||||||||||
Including interest on deposits | 1.98 | 2.01 | ||||||||||
Excluding interest on deposits | 2.98 | 3.41 | ||||||||||
31(a) | Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith. | ||||||||||
31(b) | Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith. | ||||||||||
32(a) | Certification of Periodic Financial Report by Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350. | Furnished herewith. | ||||||||||
32(b) | Certification of Periodic Financial Report by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350. | Furnished herewith. |
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