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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, 2009
(Exact name of registrant as specified in its charter)
Delaware | No. 41-0449260 | |
(State of incorporation) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
Yesþ | Noo |
Yeso | Noo |
Large accelerated filer | þ | Accelerated filero | ||
Non-accelerated filer | o(Do not check if a smaller reporting company) | Smaller reporting companyo |
Yeso | Noþ |
Shares Outstanding | ||||
April 30, 2009 | ||||
Common stock, $1-2/3 par value | 4,263,860,323 |
CROSS-REFERENCE INDEX
PART I | ||||||||
Item 1. | Financial Statements | Page | ||||||
54 | ||||||||
55 | ||||||||
56 | ||||||||
58 | ||||||||
59 | ||||||||
63 | ||||||||
64 | ||||||||
65 | ||||||||
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75 | ||||||||
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95 | ||||||||
103 | ||||||||
110 | ||||||||
112 | ||||||||
113 | ||||||||
114 | ||||||||
117 | ||||||||
123 | ||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Financial Review) | 2 | ||||||
2 | ||||||||
3 | ||||||||
12 | ||||||||
14 | ||||||||
21 | ||||||||
24 | ||||||||
28 | ||||||||
47 | ||||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 39 | ||||||
Item 4. | 53 | |||||||
PART II | ||||||||
Item 1. | 123 | |||||||
Item 1A. | 123 | |||||||
Item 2. | 124 | |||||||
Item 6. | 124 | |||||||
Signature | 124 | |||||||
Exhibit Index | 125 | |||||||
EX-10.(A) | ||||||||
EX-10.(B) | ||||||||
EX-12.(A) | ||||||||
EX-12.(B) | ||||||||
EX-31.(A) | ||||||||
EX-31.(B) | ||||||||
EX-32.(A) | ||||||||
EX-32.(B) |
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Quarter ended | ||||||||||||
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
($ in millions, except per share amounts) | 2009 | 2008 | 2008 | |||||||||
For the Quarter | ||||||||||||
Wells Fargo net income (loss) | $ | 3,045 | $ | (2,734 | ) | $ | 1,999 | |||||
Wells Fargo net income (loss) applicable to common stock | 2,384 | (3,020 | ) | 1,999 | ||||||||
Diluted earnings (loss) per common share | 0.56 | (0.84 | ) | 0.60 | ||||||||
Profitability ratios (annualized): | ||||||||||||
Wells Fargo net income (loss) to average assets (ROA) | 0.96 | % | (1.72 | )% | 1.40 | % | ||||||
Net income (loss) to average assets | 0.97 | (1.72 | ) | 1.41 | ||||||||
Wells Fargo net income (loss) applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) | 14.49 | (22.32 | ) | 16.86 | ||||||||
Net income (loss) to average total equity | 11.97 | (15.53 | ) | 16.93 | ||||||||
Efficiency ratio (3) | 56.2 | 61.3 | 51.5 | |||||||||
Total revenue | $ | 21,017 | $ | 9,477 | $ | 10,563 | ||||||
Pre-tax pre-provision profit (4) | 9,199 | 3,667 | 5,121 | |||||||||
Dividends declared per common share | 0.34 | 0.34 | 0.31 | |||||||||
Average common shares outstanding | 4,247.4 | 3,582.4 | 3,302.4 | |||||||||
Diluted average common shares outstanding | 4,249.3 | 3,593.6 | 3,317.9 | |||||||||
Average loans | $ | 855,591 | $ | 413,940 | $ | 383,919 | ||||||
Average assets | 1,289,716 | 633,223 | 574,994 | |||||||||
Average core deposits (5) | 753,928 | 344,957 | 317,278 | |||||||||
Average retail core deposits (6) | 590,502 | 243,464 | 228,448 | |||||||||
Net interest margin | 4.16 | % | 4.90 | % | 4.69 | % | ||||||
At Quarter End | ||||||||||||
Securities available for sale | $ | 178,468 | $ | 151,569 | $ | 81,787 | ||||||
Loans | 843,579 | 864,830 | 386,333 | |||||||||
Allowance for loan losses | 22,281 | 21,013 | 5,803 | |||||||||
Goodwill | 23,825 | 22,627 | 13,148 | |||||||||
Assets | 1,285,891 | 1,309,639 | 595,221 | |||||||||
Core deposits (5) | 756,183 | 745,432 | 327,360 | |||||||||
Wells Fargo stockholders’ equity | 100,295 | 99,084 | 48,159 | |||||||||
Total equity | 107,057 | 102,316 | 48,439 | |||||||||
Tier 1 capital (7) | 88,977 | 86,397 | 39,211 | |||||||||
Total capital (7) | 131,820 | 130,318 | 54,522 | |||||||||
Capital ratios: | ||||||||||||
Wells Fargo common stockholders’ equity to assets | 5.40 | % | 5.21 | % | 8.09 | % | ||||||
Total equity to assets | 8.33 | 7.81 | 8.14 | |||||||||
Average Wells Fargo common stockholders’ equity to average assets | 5.17 | 8.50 | 8.29 | |||||||||
Average total equity to average assets | 8.11 | 11.09 | 8.34 | |||||||||
Risk-based capital (7) | ||||||||||||
Tier 1 capital | 8.30 | 7.84 | 7.92 | |||||||||
Total capital | 12.30 | 11.83 | 11.01 | |||||||||
Tier 1 leverage (7) | 7.09 | 14.52 | 7.04 | |||||||||
Book value per common share | $ | 16.28 | $ | 16.15 | $ | 14.58 | ||||||
Team members (active, full-time equivalent) | 272,800 | 270,800 | 160,900 | |||||||||
Common stock price: | ||||||||||||
High | $ | 30.47 | $ | 38.95 | $ | 34.56 | ||||||
Low | 7.80 | 19.89 | 24.38 | |||||||||
Period end | 14.24 | 29.48 | 29.10 | |||||||||
(1) | Wells Fargo & Company (Wells Fargo) acquired Wachovia Corporation (Wachovia) on December 31, 2008. Because the acquisition was completed on December 31, 2008, Wachovia’s results are included in the income statement, average balances and related metrics beginning in 2009. Wachovia’s assets and liabilities are included in the consolidated balance sheet beginning on December 31, 2008. | |
(2) | On January 1, 2009, we adopted Statement of Financial Accounting Standards (FAS) No. 160,Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, on a retrospective basis for disclosure and, accordingly, prior period information reflects the adoption. FAS 160 requires that noncontrolling interests be reported as a component of total equity. | |
(3) | The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). | |
(4) | Total revenue less noninterest expense. | |
(5) | Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). | |
(6) | Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. | |
(7) | Because the Wachovia acquisition was completed on December 31, 2008, the Tier 1 leverage ratio at December 31, 2008, which considers period-end Tier 1 capital and quarterly average assets in the computation of the ratio, does not reflect average assets of Wachovia for 2008. See Note 19 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information. |
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• | Mortgage banking noninterest income of $2.5 billion: |
– | $1.6 billion in revenue from mortgage loan originations/sales activities on $101 billion in new originations, includes a reduction to revenue of $138 million to increase the mortgage repurchase reserve and a write-down of the mortgage warehouse for spread and other liquidity-related valuation adjustments | ||
– | Unclosed application pipeline of $100 billion, up 41% from prior quarter, indicates solid origination momentum heading into second quarter 2009 | ||
– | $875 million MSRs mark-to-market net of hedge results, reflecting a $2.8 billion reduction in the fair value of the MSRs offset by a $3.7 billion hedge gain, with the net difference largely due to hedge carry income due to low short-term interest rates |
• | Trust and investment fees of $2.2 billion reflected solid results in retail brokerage commissions, managed account fees and asset management fees | |
• | Service charges on deposit accounts of $1.4 billion reflected continued growth in checking accounts and the effect of higher average checking account balances | |
• | Trading revenue of $787 million; approximately two-thirds from customer business, including revenue earned on sales of foreign exchange and interest rate products and services | |
• | $516 million write-down through earnings for other-than-temporary impairment on debt and equity securities, with an additional $334 million (pre tax) of non-credit-related impairment on debt securities charged directly to equity through other comprehensive income |
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• | FAS 161,Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133; | |
• | FAS 160,Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51; | |
• | FAS 141R (revised 2007),Business Combinations; | |
• | FSP FAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly; | |
• | FSP FAS 115-2 and FAS 124-2,Recognition and Presentation of Other-Than-Temporary Impairments; and | |
• | FASB Emerging Issues Task Force (EITF) No. 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. |
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• | the allowance for credit losses; | |
• | acquired loans accounted for under SOP 03-3; | |
• | the valuation of residential mortgage servicing rights (MSRs); | |
• | the fair valuation of financial instruments; | |
• | pension accounting; and | |
• | income taxes. |
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Quarter ended March 31 | , | |||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
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 | $ | 24,074 | 0.84 | % | $ | 50 | $ | 3,888 | 3.30 | % | $ | 32 | ||||||||||||
Trading assets | 22,203 | 4.97 | 275 | 5,129 | 3.73 | 48 | ||||||||||||||||||
Debt securities available for sale (3): | ||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 2,899 | 0.93 | 7 | 975 | 3.86 | 9 | ||||||||||||||||||
Securities of U.S. states and political subdivisions | 12,213 | 6.43 | 213 | 6,290 | 7.43 | 120 | ||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Federal agencies | 76,545 | 5.71 | 1,068 | 36,097 | 6.10 | 535 | ||||||||||||||||||
Residential and commercial | 38,690 | 8.57 | 1,017 | 20,994 | 6.08 | 324 | ||||||||||||||||||
Total mortgage-backed securities | 115,235 | 6.82 | 2,085 | 57,091 | 6.09 | 859 | ||||||||||||||||||
Other debt securities (4) | 30,080 | 6.81 | 551 | 10,825 | 6.93 | 196 | ||||||||||||||||||
Total debt securities available for sale (4) | 160,427 | 6.69 | 2,856 | 75,181 | 6.30 | 1,184 | ||||||||||||||||||
Mortgages held for sale (5) | 31,058 | 5.34 | 415 | 26,273 | 6.00 | 394 | ||||||||||||||||||
Loans held for sale (5) | 7,949 | 3.40 | 67 | 647 | 7.54 | 12 | ||||||||||||||||||
Loans: | ||||||||||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||||||||||
Commercial | 196,923 | 3.87 | 1,884 | 91,085 | 6.92 | 1,569 | ||||||||||||||||||
Other real estate mortgage | 104,271 | 3.47 | 894 | 37,426 | 6.44 | 600 | ||||||||||||||||||
Real estate construction | 34,493 | 3.03 | 258 | 18,932 | 6.06 | 285 | ||||||||||||||||||
Lease financing | 15,810 | 8.77 | 347 | 6,825 | 5.77 | 98 | ||||||||||||||||||
Total commercial and commercial real estate | 351,497 | 3.89 | 3,383 | 154,268 | 6.65 | 2,552 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 245,494 | 5.64 | 3,444 | 72,308 | 6.90 | 1,246 | ||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 110,128 | 5.05 | 1,375 | 75,263 | 7.31 | 1,368 | ||||||||||||||||||
Credit card | 23,295 | 12.10 | 704 | 18,776 | 12.33 | 579 | ||||||||||||||||||
Other revolving credit and installment | 92,820 | 6.68 | 1,527 | 55,910 | 9.09 | 1,264 | ||||||||||||||||||
Total consumer | 471,737 | 6.03 | 7,050 | 222,257 | 8.05 | 4,457 | ||||||||||||||||||
Foreign | 32,357 | 4.36 | 349 | 7,394 | 11.27 | 207 | ||||||||||||||||||
Total loans (5) | 855,591 | 5.09 | 10,782 | 383,919 | 7.55 | 7,216 | ||||||||||||||||||
Other | 6,140 | 2.87 | 43 | 1,825 | 4.54 | 20 | ||||||||||||||||||
Total earning assets | $ | 1,107,442 | 5.22 | 14,488 | $ | 496,862 | 7.19 | 8,906 | ||||||||||||||||
FUNDING SOURCES | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Interest-bearing checking | $ | 80,393 | 0.15 | 30 | $ | 5,226 | 1.92 | 25 | ||||||||||||||||
Market rate and other savings | 313,445 | 0.54 | 419 | 159,865 | 1.97 | 784 | ||||||||||||||||||
Savings certificates | 170,122 | 0.92 | 387 | 41,915 | 3.96 | 413 | ||||||||||||||||||
Other time deposits | 25,555 | 1.97 | 124 | 4,763 | 3.53 | 42 | ||||||||||||||||||
Deposits in foreign offices | 45,896 | 0.35 | 39 | 46,641 | 2.84 | 330 | ||||||||||||||||||
Total interest-bearing deposits | 635,411 | 0.64 | 999 | 258,410 | 2.48 | 1,594 | ||||||||||||||||||
Short-term borrowings | 76,068 | 0.66 | 123 | 52,970 | 3.23 | 425 | ||||||||||||||||||
Long-term debt | 258,957 | 2.77 | 1,783 | 100,686 | 4.29 | 1,077 | ||||||||||||||||||
Other liabilities | 3,778 | 3.88 | 36 | -- | -- | -- | ||||||||||||||||||
Total interest-bearing liabilities | 974,214 | 1.22 | 2,941 | 412,066 | 3.02 | 3,096 | ||||||||||||||||||
Portion of noninterest-bearing funding sources | 133,228 | -- | -- | 84,796 | -- | -- | ||||||||||||||||||
Total funding sources | $ | 1,107,442 | 1.06 | 2,941 | $ | 496,862 | 2.50 | 3,096 | ||||||||||||||||
Net interest margin and net interest income on | 4.16 | % | $ | 11,547 | 4.69 | % | $ | 5,810 | ||||||||||||||||
NONINTEREST-EARNING ASSETS | ||||||||||||||||||||||||
Cash and due from banks | $ | 20,255 | $ | 11,648 | ||||||||||||||||||||
Goodwill | 23,183 | 13,161 | ||||||||||||||||||||||
Other | 138,836 | 53,323 | ||||||||||||||||||||||
Total noninterest-earning assets | $ | 182,274 | $ | 78,132 | ||||||||||||||||||||
NONINTEREST-BEARING FUNDING SOURCES | ||||||||||||||||||||||||
Deposits | $ | 160,308 | $ | 84,886 | ||||||||||||||||||||
Other liabilities | 50,566 | 30,062 | ||||||||||||||||||||||
Total equity | 104,628 | 47,980 | ||||||||||||||||||||||
Noninterest-bearing funding sources used to fund earning assets | (133,228 | ) | (84,796 | ) | ||||||||||||||||||||
Net noninterest-bearing funding sources | $ | 182,274 | $ | 78,132 | ||||||||||||||||||||
TOTAL ASSETS | $ | 1,289,716 | $ | 574,994 | ||||||||||||||||||||
(1) | Our average prime rate was 3.25% and 6.22% for the quarters ended March 31, 2009 and 2008, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.24% and 3.29% 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) | 2009 | 2008 | ||||||
Service charges on deposit accounts | $ | 1,394 | $ | 748 | ||||
Trust and investment fees: | ||||||||
Trust, investment and IRA fees | 722 | 559 | ||||||
Commissions and all other fees | 1,493 | 204 | ||||||
Total trust and investment fees | 2,215 | 763 | ||||||
Card fees | 853 | 558 | ||||||
Other fees: | ||||||||
Cash network fees | 58 | 48 | ||||||
Charges and fees on loans | 433 | 248 | ||||||
All other fees | 410 | 203 | ||||||
Total other fees | 901 | 499 | ||||||
Mortgage banking: | ||||||||
Servicing income, net | 843 | 273 | ||||||
Net gains on mortgage loan origination/sales activities | 1,582 | 267 | ||||||
All other | 79 | 91 | ||||||
Total mortgage banking | 2,504 | 631 | ||||||
Insurance | 581 | 504 | ||||||
Net gains from trading activities | 787 | 103 | ||||||
Net gains (losses) on debt securities available for sale | (119 | ) | 323 | |||||
Net gains (losses) from equity investments | (157 | ) | 313 | |||||
Operating leases | 130 | 143 | ||||||
All other | 552 | 218 | ||||||
Total | $ | 9,641 | $ | 4,803 | ||||
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Quarter | ||||||||
ended March 31 | , | |||||||
(in millions) | 2009 | 2008 | ||||||
Salaries | $ | 3,386 | $ | 1,984 | ||||
Commission and incentive compensation | 1,824 | 644 | ||||||
Employee benefits | 1,284 | 587 | ||||||
Equipment | 687 | 348 | ||||||
Net occupancy | 796 | 399 | ||||||
Core deposit and other intangibles | 647 | 46 | ||||||
FDIC and other deposit assessments | 338 | 8 | ||||||
Outside professional services | 410 | 171 | ||||||
Insurance | 267 | 161 | ||||||
Postage, stationery and supplies | 250 | 141 | ||||||
Outside data processing | 212 | 109 | ||||||
Travel and entertainment | 105 | 105 | ||||||
Foreclosed assets | 248 | 107 | ||||||
Contract services | 216 | 108 | ||||||
Operating leases | 70 | 116 | ||||||
Advertising and promotion | 125 | 85 | ||||||
Telecommunications | 158 | 78 | ||||||
Operating losses (reduction in losses) | 172 | (73 | ) | |||||
All other | 623 | 318 | ||||||
Total | $ | 11,818 | $ | 5,442 | ||||
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Fair | Net unrealized | Remaining | ||||||||||
(in billions) | value | gain (loss) | maturity | |||||||||
At March 31, 2009 | $ | 132.9 | $ | (2.4 | ) | 3.1 yrs. | ||||||
At March 31, 2009, assuming a 200 basis point: | ||||||||||||
Increase in interest rates | 121.5 | (13.8 | ) | 6.7 yrs. | ||||||||
Decrease in interest rates | 137.9 | 2.6 | 2.2 yrs. | |||||||||
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March 31, 2009 | December 31, 2008 | |||||||||||||||||||||||
All | All | |||||||||||||||||||||||
SOP 03-3 | other | SOP 03-3 | other | |||||||||||||||||||||
(in millions) | loans | loans | Total | loans | loans | Total | ||||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||||||||||
Commercial | $ | 3,088 | $ | 188,623 | $ | 191,711 | $ | 4,580 | $ | 197,889 | $ | 202,469 | ||||||||||||
Other real estate mortgage | 6,597 | 98,337 | 104,934 | 7,762 | 95,346 | 103,108 | ||||||||||||||||||
Real estate construction | 4,507 | 29,405 | 33,912 | 4,503 | 30,173 | 34,676 | ||||||||||||||||||
Lease financing | -- | 14,792 | 14,792 | -- | 15,829 | 15,829 | ||||||||||||||||||
Total commercial and commercial real estate | 14,192 | 331,157 | 345,349 | 16,845 | 339,237 | 356,082 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 41,520 | 201,427 | 242,947 | 39,214 | 208,680 | 247,894 | ||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 615 | 109,133 | 109,748 | 728 | 109,436 | 110,164 | ||||||||||||||||||
Credit card | -- | 22,815 | 22,815 | -- | 23,555 | 23,555 | ||||||||||||||||||
Other revolving credit and installment | 32 | 91,220 | 91,252 | 151 | 93,102 | 93,253 | ||||||||||||||||||
Total consumer | 42,167 | 424,595 | 466,762 | 40,093 | 434,773 | 474,866 | ||||||||||||||||||
Foreign | 1,849 | 29,619 | 31,468 | 1,859 | 32,023 | 33,882 | ||||||||||||||||||
Total loans | $ | 58,208 | $ | 785,371 | $ | 843,579 | $ | 58,797 | $ | 806,033 | $ | 864,830 | ||||||||||||
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Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2009 | 2008 | 2008 | |||||||||
Noninterest-bearing | $ | 166,497 | $ | 150,837 | $ | 90,793 | ||||||
Interest-bearing checking | 89,010 | 72,828 | 5,372 | |||||||||
Market rate and other savings | 315,209 | 306,255 | 163,230 | |||||||||
Savings certificates | 160,220 | 182,043 | 39,554 | |||||||||
Foreign deposits (1) | 25,247 | 33,469 | 28,411 | |||||||||
Core deposits | 756,183 | 745,432 | 327,360 | |||||||||
Other time deposits | 23,329 | 28,498 | 6,033 | |||||||||
Other foreign deposits | 17,757 | 7,472 | 24,751 | |||||||||
Total deposits | $ | 797,269 | $ | 781,402 | $ | 358,144 | ||||||
(1) | Reflects Eurodollar sweep balances included in core deposits. |
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• | underwriting securities issued by SPEs and subsequently making markets in those securities; | |
• | providing liquidity to support short-term obligations of SPEs issued to third party investors; | |
• | providing credit enhancement to securities issued by SPEs or market value guarantees of assets held by SPEs through the use of letters of credit, financial guarantees, credit default swaps and total return swaps; | |
• | entering into other derivative contracts with SPEs; | |
• | holding senior or subordinated interests in SPEs; | |
• | acting as servicer or investment manager for SPEs; and | |
• | providing administrative or trustee services to SPEs. |
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March 31, 2009 | December 31, 2008 | |||||||||||||||||||||||
Total | Maximum | Total | Maximum | |||||||||||||||||||||
entity | Carrying | exposure | entity | Carrying | exposure | |||||||||||||||||||
(in millions) | assets | value | to loss | assets | value | to loss | ||||||||||||||||||
QSPEs | ||||||||||||||||||||||||
Residential mortgage loan securitizations | $ | 1,229,211 | $ | 32,143 | $ | 34,525 | $ | 1,144,775 | $ | 29,939 | $ | 31,438 | ||||||||||||
Commercial mortgage securitizations | 391,114 | 2,979 | 6,013 | 355,267 | 3,060 | 6,376 | ||||||||||||||||||
Student loan securitizations | 2,776 | 220 | 220 | 2,765 | 133 | 133 | ||||||||||||||||||
Auto loan securitizations | 3,580 | 115 | 115 | 4,133 | 115 | 115 | ||||||||||||||||||
Other | 9,955 | 11 | 181 | 11,877 | 71 | 1,576 | ||||||||||||||||||
Total QSPEs | $ | 1,636,636 | $ | 35,468 | $ | 41,054 | $ | 1,518,817 | $ | 33,318 | $ | 39,638 | ||||||||||||
Unconsolidated VIEs | ||||||||||||||||||||||||
CDOs | $ | 53,439 | $ | 15,603 | $ | 20,101 | $ | 48,802 | $ | 15,133 | $ | 20,443 | ||||||||||||
Wachovia administered ABCP (1) conduit | 9,894 | -- | 10,092 | 10,767 | -- | 15,824 | ||||||||||||||||||
Asset-based lending structures | 15,158 | 8,939 | 10,256 | 11,614 | 9,096 | 9,482 | ||||||||||||||||||
Tax credit structures | 27,197 | 4,162 | 5,040 | 22,882 | 3,850 | 4,926 | ||||||||||||||||||
CLOs | 24,691 | 3,666 | 4,195 | 23,339 | 3,326 | 3,881 | ||||||||||||||||||
Investment funds | 96,497 | 1,918 | 2,541 | 105,808 | 3,543 | 3,690 | ||||||||||||||||||
Credit-linked note structures | 1,578 | 1,462 | 2,241 | 12,993 | 1,522 | 2,303 | ||||||||||||||||||
Money market funds | 33,552 | (9 | ) | 51 | 31,843 | 60 | 101 | |||||||||||||||||
Other | 3,989 | 4,242 | 5,031 | 1,832 | 3,806 | 4,699 | ||||||||||||||||||
Total unconsolidated VIEs | $ | 265,995 | $ | 39,983 | $ | 59,548 | $ | 269,880 | $ | 40,336 | $ | 65,349 | ||||||||||||
(1) | Asset-backed commercial paper. |
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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) | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||
Core portfolio(2)(3) | ||||||||||||||||||||||||
California | $ | 31,784 | $ | 31,544 | 3.56 | % | 2.95 | % | 3.97 | % | 3.94 | % | ||||||||||||
Florida | 12,067 | 11,781 | 3.73 | 3.36 | 2.03 | 4.39 | ||||||||||||||||||
New Jersey | 8,086 | 7,888 | 1.58 | 1.41 | 0.45 | 0.78 | ||||||||||||||||||
Virginia | 5,653 | 5,688 | 1.45 | 1.50 | 0.76 | 1.56 | ||||||||||||||||||
Pennsylvania | 5,129 | 5,043 | 1.04 | 1.10 | 0.29 | 0.52 | ||||||||||||||||||
Other | 56,342 | 56,415 | 2.06 | 1.97 | 1.59 | 1.59 | ||||||||||||||||||
Total | 119,061 | 118,359 | 2.53 | 2.27 | 2.09 | 2.39 | ||||||||||||||||||
Liquidating portfolio | ||||||||||||||||||||||||
California | 3,835 | 4,008 | 8.49 | 6.69 | 13.98 | 12.32 | ||||||||||||||||||
Florida | 492 | 513 | 10.35 | 8.41 | 13.33 | 13.60 | ||||||||||||||||||
Arizona | 233 | 244 | 8.37 | 7.40 | 15.04 | 13.19 | ||||||||||||||||||
Texas | 179 | 191 | 1.40 | 1.27 | 2.66 | 1.67 | ||||||||||||||||||
Minnesota | 122 | 127 | 3.88 | 3.79 | 6.92 | 5.25 | ||||||||||||||||||
Other | 5,001 | 5,226 | 3.96 | 3.28 | 5.29 | 4.73 | ||||||||||||||||||
Total | 9,862 | 10,309 | 6.10 | 4.93 | 9.27 | 8.27 | ||||||||||||||||||
Total core and liquidating portfolios | $ | 128,923 | $ | 128,668 | 2.80 | 2.48 | 2.65 | 2.87 | ||||||||||||||||
(1) | Consists of real estate 1-4 family junior lien mortgages and lines of credit secured by real estate from all groups, excluding SOP 03-3 loans. | |
(2) | Loss rates for 2008 for the core portfolio in the table above reflect results for Wachovia (not included in the Wells Fargo reported results) and Wells Fargo. For fourth quarter 2008, the Wells Fargo core portfolio on a stand-alone basis, outstanding balances and related annualized loss rates were $29,399 million (3.81%) for California, $2,677 million (6.87%) for Florida, $1,925 million (1.29%) for New Jersey, $1,827 million (1.26%) for Virginia, $1,073 million (1.17%) for Pennsylvania, $38,934 million (1.77%) for all other states, and $75,835 million (2.71%) in total. | |
(3) | Includes equity lines of credit and closed end second liens associated with the Pick-a-Pay portfolio totaling $2.1 billion at March 31, 2009, and December 31, 2008. Related credit losses are reported separately with the Pick-a-Pay portfolio. |
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SOP 03-3 loans | All other loans | |||||||||||||||||||||||||||
Ratio of | ||||||||||||||||||||||||||||
carrying | ||||||||||||||||||||||||||||
Unpaid | Current | value to | Unpaid | Current | ||||||||||||||||||||||||
principal | LTV | Carrying | current | principal | LTV | Carrying | ||||||||||||||||||||||
(in millions) | balance | ratio | (1) | value | (2) | value | balance | ratio | (1) | value | ||||||||||||||||||
March 31, 2009 | ||||||||||||||||||||||||||||
California | $ | 42,216 | 152 | % | $ | 26,907 | 98 | % | $ | 25,875 | 90 | % | $ | 25,979 | ||||||||||||||
Florida | 6,260 | 129 | 3,779 | 79 | 5,412 | 92 | 5,433 | |||||||||||||||||||||
New Jersey | 1,750 | 101 | 1,271 | 74 | 3,358 | 76 | 3,372 | |||||||||||||||||||||
Texas | 475 | 76 | 336 | 54 | 2,204 | 60 | 2,213 | |||||||||||||||||||||
Arizona | 1,642 | 161 | 987 | 99 | 1,239 | 104 | 1,244 | |||||||||||||||||||||
Other states | 9,306 | 110 | 6,397 | 77 | 15,282 | 79 | 15,324 | |||||||||||||||||||||
Total Pick-a-Pay loans | $ | 61,649 | $ | 39,677 | $ | 53,370 | $ | 53,565 | ||||||||||||||||||||
(1) | Current LTV ratio is based on collateral values and is updated quarterly by an independent vendor. LTV ratio includes unpaid principal balance on equity lines of credit (included in the Home Equity Portfolio table on page 29 in this Report) that share common collateral and are junior to the above Pick-a-Pay loans. | |
(2) | Carrying value, which does not reflect the allowance for loan losses, includes purchase accounting adjustments, which, for SOP 03-3 loans, are a deduction of $25.9 billion nonaccretable difference and an addition of $3.9 billion accretable yield at March 31, 2009, and for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs. |
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• | 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) | 2009 | (1) | 2008 | (1) | 2008 | |||||||
Nonaccrual loans: | ||||||||||||
Commercial and commercial real estate: | ||||||||||||
Commercial | $ | 1,696 | $ | 1,253 | $ | 588 | ||||||
Other real estate mortgage | 1,324 | 594 | 152 | |||||||||
Real estate construction | 1,371 | 989 | 438 | |||||||||
Lease financing | 114 | 92 | 57 | |||||||||
Total commercial and commercial real estate | 4,505 | 2,928 | 1,235 | |||||||||
Consumer: | ||||||||||||
Real estate 1-4 family first mortgage (2) | 4,218 | 2,648 | 1,398 | |||||||||
Real estate 1-4 family junior lien mortgage | 1,418 | 894 | 381 | |||||||||
Other revolving credit and installment | 300 | 273 | 196 | |||||||||
Total consumer | 5,936 | 3,815 | 1,975 | |||||||||
Foreign | 75 | 57 | 49 | |||||||||
Total nonaccrual loans (3) | 10,516 | 6,800 | 3,259 | |||||||||
As a percentage of total loans | 1.25 | % | 0.79 | % | 0.84 | % | ||||||
Foreclosed assets: | ||||||||||||
GNMA loans (4) | 768 | 667 | 578 | |||||||||
Other | 1,294 | 1,526 | 637 | |||||||||
Real estate and other nonaccrual investments (5) | 34 | 16 | 21 | |||||||||
Total nonaccrual loans and other nonperforming assets | $ | 12,612 | $ | 9,009 | $ | 4,495 | ||||||
As a percentage of total loans | 1.50 | % | 1.04 | % | 1.16 | % | ||||||
(1) | At March 31, 2009, and December 31, 2008, nonaccrual loans exclude loans acquired from Wachovia that are accounted for under SOP 03-3. | |
(2) | Includes nonaccrual mortgages held for sale. | |
(3) | Includes impaired loans of $4,126 million, $3,640 million and $859 million at March 31, 2009, December 31, 2008, and March 31, 2008, respectively. See Note 5 to Financial Statements in this Report and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in our 2008 Form 10-K for further information on impaired loans. | |
(4) | Consistent with regulatory reporting requirements, foreclosed real estate securing Government National Mortgage Association (GNMA) loans is classified as nonperforming. Both principal and interest for GNMA loans secured by the foreclosed real estate are collectible because the GNMA loans are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs. | |
(5) | 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) | 2009 | 2008 | (2) | 2008 | ||||||||
Commercial and commercial real estate: | ||||||||||||
Commercial | $ | 417 | $ | 218 | $ | 29 | ||||||
Other real estate mortgage | 355 | 88 | 24 | |||||||||
Real estate construction | 624 | 232 | 15 | |||||||||
Total commercial and commercial real estate | 1,396 | 538 | 68 | |||||||||
Consumer: | ||||||||||||
Real estate 1-4 family first mortgage (1) | 1,361 | 883 | 314 | |||||||||
Real estate 1-4 family junior lien mortgage | 598 | 457 | 228 | |||||||||
Credit card | 738 | 687 | 449 | |||||||||
Other revolving credit and installment | 1,105 | 1,047 | 532 | |||||||||
Total consumer | 3,802 | 3,074 | 1,523 | |||||||||
Foreign | 29 | 34 | 40 | |||||||||
Total | $ | 5,227 | $ | 3,646 | $ | 1,631 | ||||||
(1) | Includes mortgage loans held for sale 90 days or more past due and still accruing. | |
(2) | The amount of real estate 1-4 family first and junior lien mortgage loan delinquencies as originally reported at December 31, 2008, included certain SOP 03-3 loans previously classified as nonaccrual by Wachovia. The December 31, 2008, amounts have been revised to exclude those loans. |
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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). |
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• | 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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issue guaranteed debt as of March 31, 2009. Eligible entities are assessed fees payable to the FDIC for coverage under the program. This assessment is in addition to risk-based deposit insurance assessments currently imposed under FDIC rules and regulations.
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Quarter ended | ||||||||||||||||||
Mar. 31 | , | Dec. 31 | , | |||||||||||||||
(in billions) | 2009 | 2008 | ||||||||||||||||
Total equity | $ | 107.1 | $ | 102.3 | ||||||||||||||
Less: Preferred equity | (30.9 | ) | (30.8 | ) | ||||||||||||||
Goodwill and intangible assets (other than MSRs) | $ | (38.5 | ) | $ | (38.1 | ) | ||||||||||||
Applicable deferred taxes | 5.7 | 5.6 | ||||||||||||||||
Goodwill and intangible assets, net of deferred taxes | (32.8 | ) | (32.5 | ) | ||||||||||||||
Noncontrolling interests | (2.3 | ) | (2.4 | ) | ||||||||||||||
Tangible common equity (1) | (A) | $ | 41.1 | $ | 36.6 | |||||||||||||
Total assets | $ | 1,285.9 | $ | 1,309.6 | ||||||||||||||
Less: Goodwill and intangible assets, net of deferred taxes | (32.8 | ) | (32.5 | ) | ||||||||||||||
Tangible assets | (B) | $ | 1,253.1 | $ | 1,277.1 | |||||||||||||
Tangible common equity ratio | (A)/(B) | 3.28 | % | 2.86 | % | |||||||||||||
Total risk-weighted assets (2) | (C) | $ | 1,071.5 | $ | 1,101.3 | |||||||||||||
Tangible common equity to total risk-weighted assets | (A)/(C) | 3.84 | % | 3.32 | % | |||||||||||||
(1) | Tangible common equity, a non-GAAP financial measure, includes total equity, less preferred equity, goodwill and intangible assets (excluding MSRs), net of related deferred taxes, and the portion of noncontrolling interests accounted for under FAS 160 that does not have risk sharing attributes similar to common equity. Management reviews tangible common equity along with other measures of capital as part of its financial analyses and has included this information because of current interest on the part of market participants in tangible common equity as a measure of capital. The methodology of determining tangible common equity may differ among companies. | |
(2) | Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets. |
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• | we believe our allowance for credit losses at March 31, 2009, was adequate to cover expected consumer losses for at least the next 12 months and to provide approximately 24 months of anticipated loss coverage for the commercial and commercial real estate portfolios; |
• | we expect to generate $5 billion of annual merger-related expense savings, which will begin to emerge in the second quarter and are expected to be fully realized upon completion of the integration; |
• | we expect total integration expense to be substantially less than our original estimate of $7.9 billion and to be spread over the integration period rather than all by year-end 2009; |
• | we expect additional efficiency initiatives to lower expenses over the remainder of 2009; |
• | we expect to satisfy the remaining capital requirement relating to the recently completed stress test through profits and other internally generated sources; |
• | losses on the combined Wells Fargo and Wachovia loan portfolios will increase as long as the U.S. economy remains weak; |
• | we believe actions described in this Report that we have taken to reduce credit risk better position us for continued deterioration and economic headwinds; |
• | to the extent the market does not recover, the residential mortgage business could continue to have increased loss severity on repurchases, causing future increases in the repurchase reserve; |
• | we could have significant losses on unsaleable loans until the housing market recovers; |
• | we will continue to hold more nonperforming assets on our balance sheet until conditions improve in the residential real estate and liquidity markets; |
• | we expect nonperforming asset balances to continue to grow; |
• | charge-offs on Wachovia loans accounted for under SOP 03-3 are not expected to reduce income in future periods to the extent the original estimates used to determine the purchase accounting adjustments continue to be accurate; |
• | we expect changes in the fair value of derivative financial instruments used to hedge outstanding derivative loan commitments will fully or partially offset the changes in fair value of the commitments; |
• | we expect that $34 million of deferred net loss on derivatives in other comprehensive income at March 31, 2009, will be reclassified as earnings during the next twelve months; |
• | we do not expect that we will be required to make a minimum contribution in 2009 for the Cash Balance Plan; and |
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• | we expect actions taken with respect to the Wells Fargo qualified and supplemental Cash Balance Plans and the Wachovia Pension Plan will reduce pension cost by approximately $330 million in 2009. |
• | current economic and market conditions; |
• | our capital requirements and ability to raise capital on favorable terms; |
• | the terms of capital investments or other financial assistance provided by the U.S. government; |
• | legislative proposals to allow mortgage cram-downs in bankruptcy or require other loan modifications; |
• | our ability to successfully integrate the Wachovia merger and realize the expected cost savings and other benefits; |
• | our ability to realize the recently announced efficiency initiatives to lower expenses when and in the amount expected; |
• | the adequacy of our allowance for credit losses; |
• | recognition of other-than-temporary impairment on securities held in our available-for-sale portfolio; |
• | the effect of changes in interest rates on our net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; |
• | hedging gains or losses; disruptions in the capital markets and reduced investor demand for mortgages loans; |
• | our ability to sell more products to our customers; |
• | the effect of the economic recession on the demand for our products and services; |
• | the effect of the fall in stock market prices on fee income from our brokerage, asset and wealth management businesses; |
• | our election to provide support to our mutual funds for structured credit products they may hold; |
• | changes in the value of our venture capital investments; |
• | changes in our accounting policies or in accounting standards or in how accounting standards are to be applied; |
• | mergers and acquisitions; |
• | federal and state regulations; |
• | reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations; |
• | the loss of checking and saving account deposits to other investments such as the stock market; and |
• | fiscal and monetary policies of the Federal Reserve Board. |
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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) | 2009 | 2008 | ||||||
INTEREST INCOME | ||||||||
Trading assets | $ | 266 | $ | 47 | ||||
Securities available for sale | 2,709 | 1,132 | ||||||
Mortgages held for sale | 415 | 394 | ||||||
Loans held for sale | 67 | 12 | ||||||
Loans | 10,765 | 7,212 | ||||||
Other interest income | 91 | 52 | ||||||
Total interest income | 14,313 | 8,849 | ||||||
INTEREST EXPENSE | ||||||||
Deposits | 999 | 1,594 | ||||||
Short-term borrowings | 123 | 425 | ||||||
Long-term debt | 1,779 | 1,070 | ||||||
Other interest expense | 36 | -- | ||||||
Total interest expense | 2,937 | 3,089 | ||||||
NET INTEREST INCOME | 11,376 | 5,760 | ||||||
Provision for credit losses | 4,558 | 2,028 | ||||||
Net interest income after provision for credit losses | 6,818 | 3,732 | ||||||
NONINTEREST INCOME | ||||||||
Service charges on deposit accounts | 1,394 | 748 | ||||||
Trust and investment fees | 2,215 | 763 | ||||||
Card fees | 853 | 558 | ||||||
Other fees | 901 | 499 | ||||||
Mortgage banking | 2,504 | 631 | ||||||
Insurance | 581 | 504 | ||||||
Net gains (losses) on debt securities available for sale (includes impairment losses of $269, consisting of $603 of total other-than-temporary impairment losses, net of $334 recognized in other comprehensive income, for the quarter ended March 31, 2009) | (119 | ) | 323 | |||||
Net gains (losses) from equity investments | (157 | ) | 313 | |||||
Other | 1,469 | 464 | ||||||
Total noninterest income | 9,641 | 4,803 | ||||||
NONINTEREST EXPENSE | ||||||||
Salaries | 3,386 | 1,984 | ||||||
Commission and incentive compensation | 1,824 | 644 | ||||||
Employee benefits | 1,284 | 587 | ||||||
Equipment | 687 | 348 | ||||||
Net occupancy | 796 | 399 | ||||||
Core deposit and other intangibles | 647 | 46 | ||||||
FDIC and other deposit assessments | 338 | 8 | ||||||
Other | 2,856 | 1,426 | ||||||
Total noninterest expense | 11,818 | 5,442 | ||||||
INCOME BEFORE INCOME TAX EXPENSE | 4,641 | 3,093 | ||||||
Income tax expense | 1,552 | 1,074 | ||||||
NET INCOME BEFORE NONCONTROLLING INTERESTS | 3,089 | 2,019 | ||||||
Less: Net income from noncontrolling interests | 44 | 20 | ||||||
WELLS FARGO NET INCOME | $ | 3,045 | $ | 1,999 | ||||
WELLS FARGO NET INCOME APPLICABLE TO COMMON STOCK | $ | 2,384 | $ | 1,999 | ||||
EARNINGS PER COMMON SHARE | $ | 0.56 | $ | 0.61 | ||||
DILUTED EARNINGS PER COMMON SHARE | $ | 0.56 | $ | 0.60 | ||||
DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.34 | $ | 0.31 | ||||
Average common shares outstanding | 4,247.4 | 3,302.4 | ||||||
Diluted average common shares outstanding | 4,249.3 | 3,317.9 | ||||||
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CONSOLIDATED BALANCE SHEET
March 31 | , | December 31 | , | March 31 | , | |||||||
(in millions, except shares) | 2009 | 2008 | 2008 | |||||||||
ASSETS | ||||||||||||
Cash and due from banks | $ | 22,186 | $ | 23,763 | $ | 13,146 | ||||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | 18,625 | 49,433 | 4,171 | |||||||||
Trading assets | 46,497 | 54,884 | 8,893 | |||||||||
Securities available for sale | 178,468 | 151,569 | 81,787 | |||||||||
Mortgages held for sale (includes $35,205, $18,754 and $27,927 carried at fair value) | 36,807 | 20,088 | 29,708 | |||||||||
Loans held for sale (includes $114 and $398 carried at fair value at March 31, 2009, and December 31, 2008) | 8,306 | 6,228 | 813 | |||||||||
Loans | 843,579 | 864,830 | 386,333 | |||||||||
Allowance for loan losses | (22,281 | ) | (21,013 | ) | (5,803 | ) | ||||||
Net loans | 821,298 | 843,817 | 380,530 | |||||||||
Mortgage servicing rights: | ||||||||||||
Measured at fair value (residential MSRs) | 12,391 | 14,714 | 14,956 | |||||||||
Amortized | 1,257 | 1,446 | 455 | |||||||||
Premises and equipment, net | 11,215 | 11,269 | 5,056 | |||||||||
Goodwill | 23,825 | 22,627 | 13,148 | |||||||||
Other assets | 105,016 | 109,801 | 42,558 | |||||||||
Total assets | $ | 1,285,891 | $ | 1,309,639 | $ | 595,221 | ||||||
LIABILITIES | ||||||||||||
Noninterest-bearing deposits | $ | 166,497 | $ | 150,837 | $ | 90,793 | ||||||
Interest-bearing deposits | 630,772 | 630,565 | 267,351 | |||||||||
Total deposits | 797,269 | 781,402 | 358,144 | |||||||||
Short-term borrowings | 72,084 | 108,074 | 53,983 | |||||||||
Accrued expenses and other liabilities | 58,831 | 50,689 | 31,480 | |||||||||
Long-term debt | 250,650 | 267,158 | 103,175 | |||||||||
Total liabilities | 1,178,834 | 1,207,323 | 546,782 | |||||||||
EQUITY | ||||||||||||
Wells Fargo stockholders’ equity: | ||||||||||||
Preferred stock | 31,411 | 31,332 | 837 | |||||||||
Common stock – $1-2/3 par value, authorized 6,000,000,000 shares; issued 4,363,921,429 shares, 4,363,921,429 shares and 3,472,762,050 shares | 7,273 | 7,273 | 5,788 | |||||||||
Additional paid-in capital | 32,414 | 36,026 | 8,259 | |||||||||
Retained earnings | 36,949 | 36,543 | 39,896 | |||||||||
Cumulative other comprehensive income (loss) | (3,624 | ) | (6,869 | ) | 120 | |||||||
Treasury stock – 102,524,177 shares, 135,290,540 shares and 170,411,704 shares | (3,593 | ) | (4,666 | ) | (5,850 | ) | ||||||
Unearned ESOP shares | (535 | ) | (555 | ) | (891 | ) | ||||||
Total Wells Fargo stockholders’ equity | 100,295 | 99,084 | 48,159 | |||||||||
Noncontrolling interests | 6,762 | 3,232 | 280 | |||||||||
Total equity | 107,057 | 102,316 | 48,439 | |||||||||
Total liabilities and equity | $ | 1,285,891 | $ | 1,309,639 | $ | 595,221 | ||||||
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
AND COMPREHENSIVE INCOME
Preferred stock | Common stock | |||||||||||||||
(in millions, except shares) | Shares | Amount | Shares | Amount | ||||||||||||
BALANCE DECEMBER 31, 2007 | 449,804 | $ | 450 | 3,297,102,208 | $ | 5,788 | ||||||||||
Cumulative effect of adoption of EITF 06-4 and EITF 06-10 | ||||||||||||||||
FAS 158 change of measurement date | ||||||||||||||||
BALANCE JANUARY 1, 2008 | 449,804 | 450 | 3,297,102,208 | 5,788 | ||||||||||||
Comprehensive income: | ||||||||||||||||
Net income | ||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||
Translation adjustments | ||||||||||||||||
Net unrealized gains (losses) on securities available for sale, net of reclassification of $180 million of net gains included in net income | ||||||||||||||||
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 | ||||||||||||||||
Unamortized gains under defined benefit plans, net of amortization | ||||||||||||||||
Total comprehensive income | ||||||||||||||||
Noncontrolling interests | ||||||||||||||||
Common stock issued | 12,053,786 | |||||||||||||||
Common stock repurchased | (11,404,468 | ) | ||||||||||||||
Preferred stock issued to ESOP | 520,500 | 521 | ||||||||||||||
Preferred stock released to ESOP | ||||||||||||||||
Preferred stock converted to common shares | (133,756 | ) | (134 | ) | 4,598,820 | |||||||||||
Common stock dividends | ||||||||||||||||
Tax benefit upon exercise of stock options | ||||||||||||||||
Stock option compensation expense | ||||||||||||||||
Net change in deferred compensation and related plans | ||||||||||||||||
Net change | 386,744 | 387 | 5,248,138 | -- | ||||||||||||
BALANCE MARCH 31, 2008 | 836,548 | $ | 837 | 3,302,350,346 | $ | 5,788 | ||||||||||
BALANCE DECEMBER 31, 2008 | 10,111,821 | $ | 31,332 | 4,228,630,889 | $ | 7,273 | ||||||||||
Cumulative effect of adoption of FSP FAS 115-2 and FAS 124-2 | ||||||||||||||||
Effect of adoption of FAS 160, as amended and interpreted | ||||||||||||||||
BALANCE JANUARY 1, 2009 | 10,111,821 | 31,332 | 4,228,630,889 | 7,273 | ||||||||||||
Comprehensive income: | ||||||||||||||||
Net income | ||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||
Translation adjustments | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Unrealized losses related to factors other than credit | ||||||||||||||||
All other net unrealized gains, net of reclassification of $48 million of net losses included in net income | ||||||||||||||||
Net unrealized losses on derivatives and hedging activities, net of reclassification of $84 million of net gains on cash flow hedges included in net income | ||||||||||||||||
Unamortized gains under defined benefit plans, net of amortization | ||||||||||||||||
Total comprehensive income | ||||||||||||||||
Noncontrolling interests | ||||||||||||||||
Common stock issued | 33,346,822 | |||||||||||||||
Common stock repurchased | (2,294,746 | ) | ||||||||||||||
Preferred stock discount accretion | 98 | |||||||||||||||
Preferred stock released to ESOP | ||||||||||||||||
Preferred stock converted to common shares | (18,830 | ) | (19 | ) | 1,714,287 | |||||||||||
Common stock dividends | ||||||||||||||||
Preferred stock dividends and accretion | ||||||||||||||||
Stock option compensation expense | ||||||||||||||||
Net change in deferred compensation and related plans | ||||||||||||||||
Net change | (18,830 | ) | 79 | 32,766,363 | -- | |||||||||||
BALANCE MARCH 31, 2009 | 10,092,991 | $ | 31,411 | 4,261,397,252 | $ | 7,273 | ||||||||||
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
AND COMPREHENSIVE INCOME
Wells Fargo stockholders' equity | |||||||||||||||||||||||||||||||||
Cumulative | Total | ||||||||||||||||||||||||||||||||
Additional | other | Unearned | Wells Fargo | ||||||||||||||||||||||||||||||
paid-in | Retained | comprehensive | Treasury | ESOP | stockholders’ | Noncontrolling | Total | ||||||||||||||||||||||||||
capital | earnings | income | stock | shares | equity | interests | equity | ||||||||||||||||||||||||||
| $ | 8,212 | $ | 38,970 | $ | 725 | $ | (6,035 | ) | $ | (482 | ) | $ | 47,628 | $ | 286 | $ | 47,914 | |||||||||||||||
(20 | ) | (20 | ) | (20 | ) | ||||||||||||||||||||||||||||
(8 | ) | (8 | ) | (8 | ) | ||||||||||||||||||||||||||||
8,212 | 38,942 | 725 | (6,035 | ) | (482 | ) | 47,600 | 286 | 47,886 | ||||||||||||||||||||||||
1,999 | 1,999 | 20 | 2,019 | ||||||||||||||||||||||||||||||
(7 | ) | (7 | ) | (7 | ) | ||||||||||||||||||||||||||||
| (783 | ) | (783 | ) | (783 | ) | |||||||||||||||||||||||||||
| 184 | 184 | 184 | ||||||||||||||||||||||||||||||
1 | 1 | 1 | |||||||||||||||||||||||||||||||
1,394 | 20 | 1,414 | |||||||||||||||||||||||||||||||
-- | (26 | ) | (26 | ) | |||||||||||||||||||||||||||||
(58 | ) | (21 | ) | 396 | 317 | 317 | |||||||||||||||||||||||||||
(351 | ) | (351 | ) | (351 | ) | ||||||||||||||||||||||||||||
30 | (551 | ) | -- | -- | |||||||||||||||||||||||||||||
(8 | ) | 142 | 134 | 134 | |||||||||||||||||||||||||||||
(16 | ) | 150 | -- | -- | |||||||||||||||||||||||||||||
(1,024 | ) | (1,024 | ) | (1,024 | ) | ||||||||||||||||||||||||||||
15 | 15 | 15 | |||||||||||||||||||||||||||||||
71 | 71 | 71 | |||||||||||||||||||||||||||||||
13 | (10 | ) | 3 | 3 | |||||||||||||||||||||||||||||
47 | 954 | (605 | ) | 185 | (409 | ) | 559 | (6 | ) | 553 | |||||||||||||||||||||||
| $ | 8,259 | $ | 39,896 | $ | 120 | $ | (5,850 | ) | $ | (891 | ) | $ | 48,159 | $ | 280 | $ | 48,439 | |||||||||||||||
| $ | 36,026 | $ | 36,543 | $ | (6,869 | ) | $ | (4,666 | ) | $ | (555 | ) | $ | 99,084 | $ | 3,232 | $ | 102,316 | ||||||||||||||
53 | (53 | ) | -- | -- | |||||||||||||||||||||||||||||
(3,716 | ) | -- | -- | (3,716 | ) | 3,716 | -- | ||||||||||||||||||||||||||
32,310 | 36,596 | (6,922 | ) | (4,666 | ) | (555 | ) | 95,368 | 6,948 | 102,316 | |||||||||||||||||||||||
3,045 | 3,045 | 44 | 3,089 | ||||||||||||||||||||||||||||||
(18 | ) | (18 | ) | (5 | ) | (23 | ) | ||||||||||||||||||||||||||
(210 | ) | (210 | ) | (210 | ) | ||||||||||||||||||||||||||||
| 3,473 | 3,473 | 12 | 3,485 | |||||||||||||||||||||||||||||
| (16 | ) | (16 | ) | (16 | ) | |||||||||||||||||||||||||||
69 | 69 | 69 | |||||||||||||||||||||||||||||||
6,343 | 51 | 6,394 | |||||||||||||||||||||||||||||||
-- | (237 | ) | (237 | ) | |||||||||||||||||||||||||||||
35 | (588 | ) | 1,077 | 524 | 524 | ||||||||||||||||||||||||||||
(54 | ) | (54 | ) | (54 | ) | ||||||||||||||||||||||||||||
98 | 98 | ||||||||||||||||||||||||||||||||
(1 | ) | 20 | 19 | 19 | |||||||||||||||||||||||||||||
(36 | ) | 55 | -- | -- | |||||||||||||||||||||||||||||
(1,443 | ) | (1,443 | ) | (1,443 | ) | ||||||||||||||||||||||||||||
(661 | ) | (661 | ) | (661 | ) | ||||||||||||||||||||||||||||
95 | 95 | 95 | |||||||||||||||||||||||||||||||
11 | (5 | ) | 6 | 6 | |||||||||||||||||||||||||||||
104 | 353 | 3,298 | 1,073 | 20 | 4,927 | (186 | ) | 4,741 | |||||||||||||||||||||||||
| $ | 32,414 | $ | 36,949 | $ | (3,624 | ) | $ | (3,593 | ) | $ | (535 | ) | $ | 100,295 | $ | 6,762 | $ | 107,057 | ||||||||||||||
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CONSOLIDATED STATEMENT OF CASH FLOWS
Quarter ended March 31 | , | |||||||
(in millions) | 2009 | 2008 | ||||||
Cash flows from operating activities: | ||||||||
Wells Fargo net income | $ | 3,045 | $ | 1,999 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for credit losses | 4,558 | 2,028 | ||||||
Changes in fair value of MSRs (residential) and MHFS carried at fair value | 2,141 | 1,812 | ||||||
Depreciation and amortization | 981 | 368 | ||||||
Other net gains | (383 | ) | (158 | ) | ||||
Preferred shares released to ESOP | 19 | 134 | ||||||
Stock option compensation expense | 95 | 71 | ||||||
Excess tax benefits related to stock option payments | -- | (15 | ) | |||||
Originations of MHFS | (98,613 | ) | (59,146 | ) | ||||
Proceeds from sales of and principal collected on mortgages originated for sale | 83,262 | 56,737 | ||||||
Originations of LHFS | (1,494 | ) | -- | |||||
Proceeds from sales of LHFS | 26,100 | -- | ||||||
Purchases of LHFS | (26,167 | ) | -- | |||||
Net change in: | ||||||||
Trading assets | 7,821 | (1,166 | ) | |||||
Deferred income taxes | 2,373 | (200 | ) | |||||
Accrued interest receivable | 674 | 142 | ||||||
Accrued interest payable | (767 | ) | (63 | ) | ||||
Other assets, net | 6,372 | (4,356 | ) | |||||
Other accrued expenses and liabilities, net | 5,818 | 1,423 | ||||||
Net cash provided (used) by operating activities | 15,835 | (390 | ) | |||||
Cash flows from investing activities: | ||||||||
Net change in: | ||||||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | 30,808 | (1,417 | ) | |||||
Securities available for sale: | ||||||||
Sales proceeds | 10,760 | 16,213 | ||||||
Prepayments and maturities | 7,343 | 5,466 | ||||||
Purchases | (39,173 | ) | (30,947 | ) | ||||
Loans: | ||||||||
Decrease (increase) in banking subsidiaries’ loan originations, net of collections | 10,908 | (3,519 | ) | |||||
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries | 419 | 325 | ||||||
Purchases (including participations) of loans by banking subsidiaries | (301 | ) | (2,656 | ) | ||||
Principal collected on nonbank entities’ loans | 3,175 | 5,015 | ||||||
Loans originated by nonbank entities | (1,995 | ) | (5,273 | ) | ||||
Net cash paid for acquisitions | (123 | ) | (46 | ) | ||||
Proceeds from sales of foreclosed assets | 1,001 | 438 | ||||||
Changes in MSRs from purchases and sales | (4 | ) | 37 | |||||
Net change in noncontrolling interests | (186 | ) | 6 | |||||
Other, net | (4,117 | ) | (2,062 | ) | ||||
Net cash provided (used) by investing activities | 18,515 | (18,420 | ) | |||||
Cash flows from financing activities: | ||||||||
Net change in: | ||||||||
Deposits | 15,725 | 13,684 | ||||||
Short-term borrowings | (35,990 | ) | 728 | |||||
Long-term debt: | ||||||||
Proceeds from issuance | 3,811 | 8,137 | ||||||
Repayment | (17,877 | ) | (7,569 | ) | ||||
Preferred stock: | ||||||||
Cash dividends paid and accretion | (623 | ) | -- | |||||
Common stock: | ||||||||
Proceeds from issuance | 524 | 317 | ||||||
Repurchased | (54 | ) | (351 | ) | ||||
Cash dividends paid | (1,443 | ) | (1,024 | ) | ||||
Excess tax benefits related to stock option payments | -- | 15 | ||||||
Other, net | -- | 3,262 | ||||||
Net cash provided (used) by financing activities | (35,927 | ) | 17,199 | |||||
Net change in cash and due from banks | (1,577 | ) | (1,611 | ) | ||||
Cash and due from banks at beginning of quarter | 23,763 | 14,757 | ||||||
Cash and due from banks at end of quarter | $ | 22,186 | $ | 13,146 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the quarter for: | ||||||||
Interest | $ | 3,704 | $ | 3,152 | ||||
Income taxes | 249 | 259 | ||||||
Noncash investing and financing activities: | ||||||||
Transfers from trading assets to securities available for sale | $ | 786 | $ | -- | ||||
Transfers from MHFS to trading assets | 220 | -- | ||||||
Transfers from MHFS to securities available for sale | -- | 268 | ||||||
Transfers from MHFS to loans | 32 | 55 | ||||||
Transfers from MHFS to MSRs | 1,451 | 802 | ||||||
Transfers from MHFS to foreclosed assets | 33 | -- | ||||||
Net transfers from LHFS to loans | -- | 176 | ||||||
Transfers from loans to foreclosed assets | 1,479 | 775 | ||||||
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59
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• | FAS 161,Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133; | |
• | FAS 160,Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51; | |
• | FAS 141R (revised 2007),Business Combinations; | |
• | FSP FAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly; | |
• | FSP FAS 115-2 and FAS 124-2,Recognition and Presentation of Other-Than-Temporary Impairments; and | |
• | FASB Emerging Issues Task Force (EITF) No. 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. |
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61
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(in millions) | ||||
Mortgage-backed securities: | ||||
Residential | $ | 2,311 | ||
Commercial | 1,329 | |||
Collateralized debt obligations | 492 | |||
Other (1) | 394 | |||
Total | $ | 4,526 | ||
(1) | Primarily consists of home equity asset-backed securities and credit card-backed securities. |
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Dec. 31 | , | |||||||||||
2008 | Dec. 31 | , | ||||||||||
(in millions) | (refined) | Refinements | 2008 | |||||||||
Purchase price: | ||||||||||||
Value of common shares | $ | 14,621 | $ | -- | $ | 14,621 | ||||||
Value of preferred shares | 8,409 | -- | 8,409 | |||||||||
Other (value of share-based awards and direct acquisition costs) | 62 | -- | 62 | |||||||||
Total purchase price | 23,092 | -- | 23,092 | |||||||||
Allocation of the purchase price: | ||||||||||||
Wachovia tangible stockholders’ equity, less prior purchase accounting adjustments and other basis adjustments eliminated in purchase accounting | 19,319 | (75 | ) | 19,394 | ||||||||
Adjustments to reflect assets acquired and liabilities assumed at fair value: | ||||||||||||
Loans and leases, net | (17,139 | ) | (742 | ) | (16,397 | ) | ||||||
Premises and equipment, net | (656 | ) | (200 | ) | (456 | ) | ||||||
Intangible assets | 14,590 | (150 | ) | 14,740 | ||||||||
Other assets | (3,675 | ) | (231 | ) | (3,444 | ) | ||||||
Deposits | (4,576 | ) | (142 | ) | (4,434 | ) | ||||||
Accrued expenses and other liabilities (exit, termination and other liabilities) | (2,153 | ) | (554 | ) | (1,599 | ) | ||||||
Long-term debt | (199 | ) | (9 | ) | (190 | ) | ||||||
Deferred taxes | 7,635 | 959 | 6,676 | |||||||||
Fair value of net assets acquired | 13,146 | (1,144 | ) | 14,290 | ||||||||
Goodwill resulting from the merger | $ | 9,946 | $ | 1,144 | $ | 8,802 | ||||||
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Employee | Contract | Facilities | ||||||||||||||
(in millions) | termination | termination | related | Total | ||||||||||||
Balance, December 31, 2008 | $ | 57 | $ | 13 | $ | 129 | $ | 199 | ||||||||
Purchase accounting adjustments | 100 | 200 | 60 | 360 | ||||||||||||
Cash payments | (50 | ) | -- | (8 | ) | (58 | ) | |||||||||
Balance, March 31, 2009 | $ | 107 | $ | 213 | $ | 181 | $ | 501 | ||||||||
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2009 | 2008 | 2008 | |||||||||
Federal funds sold and securities purchased under resale agreements | $ | 4,114 | $ | 8,439 | $ | 2,209 | ||||||
Interest-earning deposits | 13,359 | 39,890 | 994 | |||||||||
Other short-term investments | 1,152 | 1,104 | 968 | |||||||||
Total | $ | 18,625 | $ | 49,433 | $ | 4,171 | ||||||
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Gross | Gross | |||||||||||||||
unrealized | unrealized | Fair | ||||||||||||||
(in millions) | Cost | gains | losses | value | ||||||||||||
March 31, 2008 | ||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 983 | $ | 33 | $ | -- | $ | 1,016 | ||||||||
Securities of U.S. states and political subdivisions | 7,453 | 109 | (382 | ) | 7,180 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
Federal agencies | 37,468 | 1,145 | (36 | ) | 38,577 | |||||||||||
Residential | 15,625 | 55 | (217 | ) | 15,463 | |||||||||||
Commercial | 7,755 | 85 | (718 | ) | 7,122 | |||||||||||
Total mortgage-backed securities | 60,848 | 1,285 | (971 | ) | 61,162 | |||||||||||
Corporate debt securities | 2,045 | 24 | (162 | ) | 1,907 | |||||||||||
Collateralized debt obligations | 1,086 | 4 | (273 | ) | 817 | |||||||||||
Other (1) | 6,711 | 57 | (28 | ) | 6,740 | |||||||||||
Total debt securities | 79,126 | 1,512 | (1,816 | ) | 78,822 | |||||||||||
Marketable equity securities: | ||||||||||||||||
Perpetual preferred securities | 2,533 | 3 | (386 | ) | 2,150 | |||||||||||
Other marketable equity securities | 726 | 115 | (26 | ) | 815 | |||||||||||
Total marketable equity securities | 3,259 | 118 | (412 | ) | 2,965 | |||||||||||
Total | $ | 82,385 | $ | 1,630 | $ | (2,228 | ) | $ | 81,787 | |||||||
December 31, 2008 | ||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 3,187 | $ | 62 | $ | -- | $ | 3,249 | ||||||||
Securities of U.S. states and political subdivisions | 14,062 | 116 | (1,520 | ) | 12,658 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
Federal agencies | 64,726 | 1,711 | (3 | ) | 66,434 | |||||||||||
Residential | 29,536 | 11 | (4,717 | ) | 24,830 | |||||||||||
Commercial | 12,305 | 51 | (3,878 | ) | 8,478 | |||||||||||
Total mortgage-backed securities | 106,567 | 1,773 | (8,598 | ) | 99,742 | |||||||||||
Corporate debt securities | 7,382 | 81 | (539 | ) | 6,924 | |||||||||||
Collateralized debt obligations | 2,634 | 21 | (570 | ) | 2,085 | |||||||||||
Other (1) (2) | 21,363 | 14 | (602 | ) | 20,775 | |||||||||||
Total debt securities | 155,195 | 2,067 | (11,829 | ) | 145,433 | |||||||||||
Marketable equity securities: | ||||||||||||||||
Perpetual preferred securities | 5,040 | 13 | (327 | ) | 4,726 | |||||||||||
Other marketable equity securities | 1,256 | 181 | (27 | ) | 1,410 | |||||||||||
Total marketable equity securities | 6,296 | 194 | (354 | ) | 6,136 | |||||||||||
Total | $ | 161,491 | $ | 2,261 | $ | (12,183 | ) | $ | 151,569 | |||||||
March 31, 2009 | ||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 2,837 | $ | 68 | $ | (2 | ) | $ | 2,903 | |||||||
Securities of U.S. states and political subdivisions | 12,738 | 281 | (1,173 | ) | 11,846 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
Federal agencies | 87,721 | 2,931 | (4 | ) | 90,648 | |||||||||||
Residential (2) | 34,853 | 1,287 | (3,658 | ) | 32,482 | |||||||||||
Commercial | 12,762 | 280 | (3,267 | ) | 9,775 | |||||||||||
Total mortgage-backed securities | 135,336 | 4,498 | (6,929 | ) | 132,905 | |||||||||||
Corporate debt securities | 7,531 | 157 | (702 | ) | 6,986 | |||||||||||
Collateralized debt obligations | 2,761 | 221 | (596 | ) | 2,386 | |||||||||||
Other (1) | 16,159 | 660 | (556 | ) | 16,263 | |||||||||||
Total debt securities | 177,362 | 5,885 | (9,958 | ) | 173,289 | |||||||||||
Marketable equity securities: | ||||||||||||||||
Perpetual preferred securities | 4,483 | 41 | (754 | ) | 3,770 | |||||||||||
Other marketable equity securities | 1,342 | 190 | (123 | ) | 1,409 | |||||||||||
Total marketable equity securities | 5,825 | 231 | (877 | ) | 5,179 | |||||||||||
Total | $ | 183,187 | $ | 6,116 | $ | (10,835 | ) | $ | 178,468 | |||||||
(1) | The “Other” category includes certain asset-backed securities collateralized by auto leases with a cost basis and fair value of $8,407 million and $8,309 million, respectively, at March 31, 2009, $8,310 million and $7,852 million at December 31, 2008, and $5,909 million and $5,941 million at March 31, 2008. | |
(2) | Foreign residential mortgage-backed securities with a fair value of $6.0 billion are included in residential mortgage-backed securities at March 31, 2009. These instruments were included in other debt securities at December 31, 2008, and had a fair value of $6.3 billion. |
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The following table shows the gross unrealized losses and fair value of securities in the securities available-for-sale portfolio by length of time that individual securities in each category had been in a continuous loss position. Debt securities on which we have taken only credit-related OTTI write-downs are categorized as being “less than 12 months” or “12 months or more” in a continuous loss position based on the point in time that the fair value declined to below the cost basis and not the period of time since the OTTI write-down.
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
unrealized | Fair | unrealized | Fair | unrealized | Fair | |||||||||||||||||||
(in millions) | losses | value | losses | value | losses | value | ||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | ||||||||||||
Securities of U.S. states and political subdivisions | (745 | ) | 3,483 | (775 | ) | 1,702 | (1,520 | ) | 5,185 | |||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Federal agencies | (3 | ) | 83 | -- | -- | (3 | ) | 83 | ||||||||||||||||
Residential | (4,471 | ) | 9,960 | (246 | ) | 238 | (4,717 | ) | 10,198 | |||||||||||||||
Commercial | (1,726 | ) | 4,152 | (2,152 | ) | 2,302 | (3,878 | ) | 6,454 | |||||||||||||||
Total mortgage-backed securities | (6,200 | ) | 14,195 | (2,398 | ) | 2,540 | (8,598 | ) | 16,735 | |||||||||||||||
Corporate debt securities | (285 | ) | 1,056 | (254 | ) | 469 | (539 | ) | 1,525 | |||||||||||||||
Collateralized debt obligations | (113 | ) | 215 | (457 | ) | 180 | (570 | ) | 395 | |||||||||||||||
Other | (554 | ) | 8,638 | (48 | ) | 38 | (602 | ) | 8,676 | |||||||||||||||
Total debt securities | (7,897 | ) | 27,587 | (3,932 | ) | 4,929 | (11,829 | ) | 32,516 | |||||||||||||||
Marketable equity securities: | ||||||||||||||||||||||||
Perpetual preferred securities | (75 | ) | 265 | (252 | ) | 360 | (327 | ) | 625 | |||||||||||||||
Other marketable equity securities | (23 | ) | 72 | (4 | ) | 9 | (27 | ) | 81 | |||||||||||||||
Total marketable equity securities | (98 | ) | 337 | (256 | ) | 369 | (354 | ) | 706 | |||||||||||||||
Total | $ | (7,995 | ) | $ | 27,924 | $ | (4,188 | ) | $ | 5,298 | $ | (12,183 | ) | $ | 33,222 | |||||||||
March 31, 2009 | ||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | (2 | ) | $ | 1,300 | $ | -- | $ | -- | $ | (2 | ) | $ | 1,300 | ||||||||||
Securities of U.S. states and political subdivisions | (504 | ) | 3,821 | (669 | ) | 2,222 | (1,173 | ) | 6,043 | |||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Federal agencies | (4 | ) | 279 | -- | 20 | (4 | ) | 299 | ||||||||||||||||
Residential | (1,723 | ) | 12,707 | (1,935 | ) | 4,823 | (3,658 | ) | 17,530 | |||||||||||||||
Commercial | (1,077 | ) | 4,228 | (2,190 | ) | 3,037 | (3,267 | ) | 7,265 | |||||||||||||||
Total mortgage-backed securities | (2,804 | ) | 17,214 | (4,125 | ) | 7,880 | (6,929 | ) | 25,094 | |||||||||||||||
Corporate debt securities | (442 | ) | 2,863 | (260 | ) | 531 | (702 | ) | 3,394 | |||||||||||||||
Collateralized debt obligations | (195 | ) | 853 | (401 | ) | 285 | (596 | ) | 1,138 | |||||||||||||||
Other | (384 | ) | 6,982 | (172 | ) | 1,430 | (556 | ) | 8,412 | |||||||||||||||
Total debt securities | (4,331 | ) | 33,033 | (5,627 | ) | 12,348 | (9,958 | ) | 45,381 | |||||||||||||||
Marketable equity securities: | ||||||||||||||||||||||||
Perpetual preferred securities | (405 | ) | 807 | (349 | ) | 366 | (754 | ) | 1,173 | |||||||||||||||
Other marketable equity securities | (123 | ) | 387 | -- | -- | (123 | ) | 387 | ||||||||||||||||
Total marketable equity securities | (528 | ) | 1,194 | (349 | ) | 366 | (877 | ) | 1,560 | |||||||||||||||
Total | $ | (4,859 | ) | $ | 34,227 | $ | (5,976 | ) | $ | 12,714 | $ | (10,835 | ) | $ | 46,941 | |||||||||
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We recognize OTTI for debt securities classified as available for sale in accordance with FSP FAS 115-2 and FAS 124-2. As required by this FSP, we assess whether we intend to sell or it is more likely than not that we will be required to sell a security before recovery of its amortized cost basis less any current-period credit losses. For debt securities that are considered other-than-temporarily impaired and that we do not intend to sell and will not be required to sell prior to recovery of our amortized cost basis, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows. The remaining difference
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Quarter ended | ||||
(in millions) | March 31, 2009 | |||
Balance, beginning of period | $ | 471 | ||
Additions (1): | ||||
Initial credit impairments | 197 | |||
Subsequent credit impairments | 66 | |||
Reductions: | ||||
For securities sold | (7 | ) | ||
Balance, end of period | $ | 727 | ||
(1) | Excludes $6 million of OTTI on debt securities we intend to sell. |
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Residential MBS | ||||
Expected remaining life of loan losses (1): | ||||
Range (2) | 0.28 to 34.32% | |||
Weighted average (3) | 11.69% | |||
Current subordination levels (4): | ||||
Range (2) | 0 to 19.68% | |||
Weighted average (3) | 6.93% | |||
Prepayment speed (annual CPR (5)): | ||||
Range (2) | 7.27 to 24.64% | |||
Weighted average (3) | 15.76% | |||
(1) | Represents future expected credit losses on underlying pool of loans expressed as a percentage of total current outstanding loan balance. | |
(2) | Represents the range of inputs/assumptions based upon the individual securities within each category. | |
(3) | Calculated by weighting the relevant input/assumption for each individual security by current outstanding amortized cost basis of the security. | |
(4) | Represents current level of credit protection (subordination) for the securities, expressed as a percentage of total current underlying loan balance. | |
(5) | Constant prepayment rate. |
The following table shows the gross realized gains and losses on the sales of securities from the securities available-for-sale portfolio, including marketable equity securities. Of the first quarter 2009 OTTI write-downs of $516 million, $269 million related to debt securities and $247 million to equity securities. Under FSP FAS 115-2 and FAS 124-2, which we adopted this quarter, total OTTI on debt securities amounted to $603 million, which included $263 million of credit-related OTTI and $6 million related to securities we intend to sell, both of which were recorded as part of gross realized losses, and $334 million recorded directly to other comprehensive income for non-credit related impairment on securities. We believe that we will fully collect the carrying value of securities on which we have recorded a non-credit-related impairment in other comprehensive income.
Quarter ended March 31 | , | |||||||
(in millions) | 2009 | 2008 | ||||||
Gross realized gains | $ | 294 | $ | 378 | ||||
Gross realized losses | (370 | ) | (88 | ) | ||||
Net realized gains (losses) | $ | (76 | ) | $ | 290 | |||
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The following table shows the remaining contractual principal maturities and contractual yields of debt securities available for sale. The remaining contractual principal maturities for mortgage-backed securities were allocated assuming no prepayments. Remaining expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature.
Remaining contractual principal maturity | ||||||||||||||||||||||||||||||||||||||||
Weighted- | After one year | After five years | ||||||||||||||||||||||||||||||||||||||
Total | average | Within one year | through five years | through ten years | After ten years | |||||||||||||||||||||||||||||||||||
(in millions) | Amount | yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | ||||||||||||||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 3,249 | 1.54 | % | $ | 1,719 | 0.02 | % | $ | 1,127 | 3.15 | % | $ | 388 | 3.40 | % | $ | 15 | 4.79 | % | ||||||||||||||||||||
Securities of U.S. states and political subdivisions | 12,658 | 7.54 | 210 | 5.54 | 784 | 7.36 | 1,163 | 7.39 | 10,501 | 7.61 | ||||||||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||||
Federal agencies | 66,434 | 5.73 | 42 | 4.23 | 122 | 4.98 | 353 | 6.02 | 65,917 | 5.73 | ||||||||||||||||||||||||||||||
Residential | 24,830 | 6.73 | -- | -- | -- | -- | 34 | 8.15 | 24,796 | 6.73 | ||||||||||||||||||||||||||||||
Commercial | 8,478 | 7.95 | -- | -- | 5 | 1.57 | 135 | 8.64 | 8,338 | 7.94 | ||||||||||||||||||||||||||||||
Total mortgage-backed securities | 99,742 | 6.17 | 42 | 4.23 | 127 | 4.87 | 522 | 6.83 | 99,051 | 6.17 | ||||||||||||||||||||||||||||||
Corporate debt securities | 6,924 | 5.81 | 432 | 5.49 | 3,697 | 4.76 | 2,212 | 7.48 | 583 | 6.31 | ||||||||||||||||||||||||||||||
Collateralized debt obligations | 2,085 | 4.52 | -- | -- | 120 | 7.83 | 809 | 3.65 | 1,156 | 4.77 | ||||||||||||||||||||||||||||||
Other | 20,775 | 5.17 | 43 | 3.82 | 8,057 | 7.41 | 1,346 | 4.86 | 11,329 | 3.61 | ||||||||||||||||||||||||||||||
Total debt securities at fair value (1) | $ | 145,433 | 6.00 | % | $ | 2,446 | 1.60 | % | $ | 13,912 | 6.34 | % | $ | 6,440 | 6.14 | % | $ | 122,635 | 6.04 | % | ||||||||||||||||||||
March 31, 2009 | ||||||||||||||||||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 2,903 | 1.72 | % | $ | 1,380 | 0.11 | % | $ | 918 | 3.01 | % | $ | 586 | 3.41 | % | $ | 19 | 5.36 | % | ||||||||||||||||||||
Securities of U.S. states and political subdivisions | 11,846 | 6.48 | 117 | 6.19 | 621 | 7.43 | 976 | 6.90 | 10,132 | 6.38 | ||||||||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||||
Federal agencies | 90,648 | 5.62 | 6 | 4.80 | 97 | 5.50 | 329 | 5.57 | 90,216 | 5.62 | ||||||||||||||||||||||||||||||
Residential | 32,482 | 5.41 | 8 | 4.42 | 131 | 0.80 | 91 | 6.31 | 32,252 | 5.43 | ||||||||||||||||||||||||||||||
Commercial | 9,775 | 5.20 | 79 | 1.46 | 72 | 5.31 | 158 | 7.67 | 9,466 | 5.19 | ||||||||||||||||||||||||||||||
Total mortgage-backed securities | 132,905 | 5.54 | 93 | 1.94 | 300 | 3.40 | 578 | 6.26 | 131,934 | 5.54 | ||||||||||||||||||||||||||||||
Corporate debt securities | 6,986 | 5.85 | 715 | 5.48 | 3,092 | 4.95 | 2,643 | 7.03 | 536 | 5.42 | ||||||||||||||||||||||||||||||
Collateralized debt obligations | 2,386 | 2.53 | -- | -- | 168 | 5.87 | 1,025 | 2.94 | 1,193 | 1.69 | ||||||||||||||||||||||||||||||
Other | 16,263 | 4.59 | 35 | 3.47 | 9,414 | 6.65 | 766 | 1.62 | 6,048 | 1.76 | ||||||||||||||||||||||||||||||
Total debt securities at fair value (1) | $ | 173,289 | 5.42 | % | $ | 2,340 | 2.18 | % | $ | 14,513 | 6.01 | % | $ | 6,574 | 5.35 | % | $ | 149,862 | 5.41 | % | ||||||||||||||||||||
(1) | The weighted-average yield is computed using the contractual life amortization method. |
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March 31, 2009 | December 31, 2008 | |||||||||||||||||||||||||||
All | All | |||||||||||||||||||||||||||
SOP 03-3 | other | SOP 03-3 | other | Mar. 31 | , | |||||||||||||||||||||||
(in millions) | loans | loans | Total | loans | loans | Total | 2008 | |||||||||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||||||||||||||
Commercial | $ | 3,088 | $ | 188,623 | $ | 191,711 | $ | 4,580 | $ | 197,889 | $ | 202,469 | $ | 92,589 | ||||||||||||||
Other real estate mortgage | 6,597 | 98,337 | 104,934 | 7,762 | 95,346 | 103,108 | 38,415 | |||||||||||||||||||||
Real estate construction | 4,507 | 29,405 | 33,912 | 4,503 | 30,173 | 34,676 | 18,885 | |||||||||||||||||||||
Lease financing | -- | 14,792 | 14,792 | -- | 15,829 | 15,829 | 6,885 | |||||||||||||||||||||
Total commercial and commercial real estate | 14,192 | 331,157 | 345,349 | 16,845 | 339,237 | 356,082 | 156,774 | |||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 41,520 | 201,427 | 242,947 | 39,214 | 208,680 | 247,894 | 73,321 | |||||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 615 | 109,133 | 109,748 | 728 | 109,436 | 110,164 | 74,840 | |||||||||||||||||||||
Credit card | -- | 22,815 | 22,815 | -- | 23,555 | 23,555 | 18,677 | |||||||||||||||||||||
Other revolving credit and installment | 32 | 91,220 | 91,252 | 151 | 93,102 | 93,253 | 55,505 | |||||||||||||||||||||
Total consumer | 42,167 | 424,595 | 466,762 | 40,093 | 434,773 | 474,866 | 222,343 | |||||||||||||||||||||
Foreign | 1,849 | 29,619 | 31,468 | 1,859 | 32,023 | 33,882 | 7,216 | |||||||||||||||||||||
Total loans | $ | 58,208 | $ | 785,371 | $ | 843,579 | $ | 58,797 | $ | 806,033 | $ | 864,830 | $ | 386,333 | ||||||||||||||
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2009 | 2008 | 2008 | |||||||||
Impairment measurement based on: | ||||||||||||
Collateral value method | $ | 345 | $ 88 | $ 14 | ||||||||
Discounted cash flow method (1) | 6,445 | 3,552 | 909 | |||||||||
Total (2) | $ | 6,790 | $3,640 | $ 923 | ||||||||
(1) | The March 31, 2009, balance includes $474 million of Government National Mortgage Association (GNMA) loans that are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs. Although both principal and interest are insured, the insured interest rate may be different than the original contractual interest rate prior to modification, resulting in interest impairment under a discounted cash flow methodology. | |
(2) | Includes $6,206 million, $3,468 million and $828 million of impaired loans with a related allowance of $1,571 million, $816 million and $111 million at March 31, 2009, December 31, 2008, and March 31, 2008, respectively. |
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Quarter ended March 31 | , | |||||||
(in millions) | 2009 | 2008 | ||||||
Balance, beginning of period | $ | 21,711 | $ | 5,518 | ||||
Provision for credit losses | 4,558 | 2,028 | ||||||
Loan charge-offs: | ||||||||
Commercial and commercial real estate: | ||||||||
Commercial | (596 | ) | (259 | ) | ||||
Other real estate mortgage | (31 | ) | (4 | ) | ||||
Real estate construction | (105 | ) | (29 | ) | ||||
Lease financing | (20 | ) | (12 | ) | ||||
Total commercial and commercial real estate | (752 | ) | (304 | ) | ||||
Consumer: | ||||||||
Real estate 1-4 family first mortgage | (424 | ) | (81 | ) | ||||
Real estate 1-4 family junior lien mortgage | (873 | ) | (455 | ) | ||||
Credit card | (622 | ) | (313 | ) | ||||
Other revolving credit and installment | (900 | ) | (543 | ) | ||||
Total consumer | (2,819 | ) | (1,392 | ) | ||||
Foreign | (54 | ) | (68 | ) | ||||
Total loan charge-offs | (3,625 | ) | (1,764 | ) | ||||
Loan recoveries: | ||||||||
Commercial and commercial real estate: | ||||||||
Commercial | 40 | 31 | ||||||
Other real estate mortgage | 10 | 1 | ||||||
Real estate construction | 2 | 1 | ||||||
Lease financing | 3 | 3 | ||||||
Total commercial and commercial real estate | 55 | 36 | ||||||
Consumer: | ||||||||
Real estate 1-4 family first mortgage | 33 | 6 | ||||||
Real estate 1-4 family junior lien mortgage | 26 | 17 | ||||||
Credit card | 40 | 38 | ||||||
Other revolving credit and installment | 204 | 125 | ||||||
Total consumer | 303 | 186 | ||||||
Foreign | 9 | 14 | ||||||
Total loan recoveries | 367 | 236 | ||||||
Net loan charge-offs (1) | (3,258 | ) | (1,528 | ) | ||||
Allowances related to business combinations/other | (165 | ) | (5 | ) | ||||
Balance, end of period | $ | 22,846 | $ | 6,013 | ||||
Components: | ||||||||
Allowance for loan losses | $ | 22,281 | $ | 5,803 | ||||
Reserve for unfunded credit commitments | 565 | 210 | ||||||
Allowance for credit losses | $ | 22,846 | $ | 6,013 | ||||
Net loan charge-offs (annualized) as a percentage of average total loans | 1.54 | % | 1.60 | % | ||||
Allowance for loan losses as a percentage of total loans (2) | 2.64 | % | 1.50 | % | ||||
Allowance for credit losses as a percentage of total loans (2) | 2.71 | 1.56 | ||||||
(1) | Loans accounted for under SOP 03-3 were recorded in purchase accounting at fair value and, accordingly, charge-offs do not include losses on such loans. | |
(2) | The allowance for loan losses and the allowance for credit losses do not include any amounts related to loans acquired from Wachovia that are accounted for under SOP 03-3. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs. |
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December 31, 2008 | ||||
(in millions) | (refined) | |||
Contractually required payments including interest | $114,565 | |||
Nonaccretable difference (1) | (44,274 | ) | ||
Cash flows expected to be collected (2) | 70,291 | |||
Accretable yield | (10,547 | ) | ||
Fair value of loans acquired | $ 59,744 | |||
(1) | Includes $40.0 billion in principal cash flows (purchase accounting adjustments) not expected to be collected, $2.0 billion of pre-acquisition charge-offs and $2.3 billion of future interest not expected to be collected. | |
(2) | Represents undiscounted expected principal and interest cash flows. |
(in millions) | Quarter ended March 31, 2009 | |||
Balance, beginning of quarter (refined) | $ (10,547 | ) | ||
Disposals | 4 | |||
Accretion | 561 | |||
Balance, end of quarter | $ (9,982 | ) | ||
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Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in millions) | 2009 | 2008 | 2008 | |||||||||
Nonmarketable equity investments: | ||||||||||||
Cost method: | ||||||||||||
Private equity investments | $ | 2,588 | $ | 2,706 | $ | 2,078 | ||||||
Federal bank stock | 6,080 | 6,106 | 2,110 | |||||||||
Other | 2,306 | 2,292 | 1,939 | |||||||||
Total cost method | 10,974 | 11,104 | 6,127 | |||||||||
Equity method | 4,151 | 4,400 | 1,107 | |||||||||
Principal investments (1) | 1,270 | 1,278 | -- | |||||||||
Total nonmarketable equity investments | 16,395 | 16,782 | 7,234 | |||||||||
Operating lease assets | 2,866 | 2,251 | 1,955 | |||||||||
Accounts receivable | 16,471 | 22,493 | 14,547 | |||||||||
Interest receivable | 5,009 | 5,746 | 2,835 | |||||||||
Core deposit intangibles | 12,026 | 11,999 | 403 | |||||||||
Customer relationship and other intangibles | 2,700 | 3,516 | 306 | |||||||||
Foreclosed assets: | ||||||||||||
GNMA loans (2) | 768 | 667 | 578 | |||||||||
Other | 1,294 | 1,526 | 637 | |||||||||
Due from customers on acceptances | 188 | 615 | 66 | |||||||||
Other | 47,299 | 44,206 | 13,997 | |||||||||
Total other assets | $ | 105,016 | $ | 109,801 | $ | 42,558 | ||||||
(1) | Principal investments are recorded at fair value with realized and unrealized gains (losses) included in net gains (losses) from equity investments in the income statement. | |
(2) | Consistent with regulatory reporting requirements, foreclosed assets include foreclosed real estate securing GNMA loans. Both principal and interest for GNMA loans secured by the foreclosed real estate are collectible because the GNMA loans are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. |
Quarter ended March 31 | , | |||||||
(in millions) | 2009 | 2008 | ||||||
Net gains (losses) from private equity investments (1) | $ | (220 | ) | $ | 346 | |||
Net losses from principal investments | (8 | ) | -- | |||||
Net losses from all other nonmarketable equity investments | (49 | ) | (39 | ) | ||||
Net gains (losses) from nonmarketable equity investments | $ | (277 | ) | $ | 307 | |||
(1) | Net gains from first quarter 2008 include $334 million gain from our ownership in Visa, which completed its initial public offering in March 2008. |
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We enter into various types of on- and off-balance sheet transactions with special purpose entities (SPEs) in the normal course of business. SPEs are corporations, trusts or partnerships that are established for a limited purpose. We use SPEs to create sources of financing, liquidity and regulatory capital capacity for the Company, as well as sources of financing and liquidity, and investment products for our clients. Our use of SPEs generally consists of various securitization activities with SPEs whereby financial assets are transferred to an SPE and repackaged as securities or similar interests that are sold to investors. In connection with our securitization activities, we have various forms of ongoing involvement with SPEs, which may include:
• | underwriting securities issued by SPEs and subsequently making markets in those securities; | |
• | providing liquidity facilities to support short-term obligations of SPEs issued to third party investors; | |
• | providing credit enhancement on securities issued by SPEs or market value guarantees of assets held by SPEs through the use of letters of credit, financial guarantees, credit default swaps and total return swaps; | |
• | entering into other derivative contracts with SPEs; | |
• | holding senior or subordinated interests in SPEs; | |
• | acting as servicer or investment manager for SPEs; and | |
• | providing administrative or trustee services to SPEs. |
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Transfers that | ||||||||||||||||||||
VIEs that we | we account | |||||||||||||||||||
do not | VIEs that we | for as secured | ||||||||||||||||||
(in millions) | QSPEs | consolidate | consolidate | borrowings | Total | |||||||||||||||
December 31, 2008 | ||||||||||||||||||||
Cash | $ | -- | $ | -- | $ | 117 | $ | 287 | $ | 404 | ||||||||||
Trading account assets | 1,261 | 5,241 | 71 | 141 | 6,714 | |||||||||||||||
Securities (1) | 18,078 | 15,168 | 922 | 6,094 | 40,262 | |||||||||||||||
Mortgages held for sale | 56 | -- | -- | -- | 56 | |||||||||||||||
Loans (2) | -- | 16,882 | 217 | 4,126 | 21,225 | |||||||||||||||
MSRs | 14,106 | -- | -- | -- | 14,106 | |||||||||||||||
Other assets | 345 | 5,022 | 2,416 | 55 | 7,838 | |||||||||||||||
Total assets | 33,846 | 42,313 | 3,743 | 10,703 | 90,605 | |||||||||||||||
Short-term borrowings | -- | -- | 307 | 1,440 | 1,747 | |||||||||||||||
Accrued expenses and other liabilities | 528 | 1,976 | 330 | 26 | 2,860 | |||||||||||||||
Long term debt | -- | -- | 1,773 | 7,125 | 8,898 | |||||||||||||||
Noncontrolling interests | -- | -- | 121 | -- | 121 | |||||||||||||||
Total liabilities and noncontrolling interests | 528 | 1,976 | 2,531 | 8,591 | 13,626 | |||||||||||||||
Net assets | $ | 33,318 | $ | 40,337 | $ | 1,212 | $ | 2,112 | $ | 76,979 | ||||||||||
March 31, 2009 | ||||||||||||||||||||
Cash | $ | -- | $ | -- | $ | 166 | $ | 288 | $ | 454 | ||||||||||
Trading account assets | 2,097 | 5,183 | 55 | 135 | 7,470 | |||||||||||||||
Securities (1) | 21,766 | 14,633 | 1,627 | 5,849 | 43,875 | |||||||||||||||
Loans (2) | -- | 16,852 | 312 | 3,284 | 20,448 | |||||||||||||||
MSRs | 11,969 | 18 | -- | -- | 11,987 | |||||||||||||||
Other assets | 258 | 5,648 | 2,616 | 167 | 8,689 | |||||||||||||||
Total assets | 36,090 | 42,334 | 4,776 | 9,723 | 92,923 | |||||||||||||||
Short-term borrowings | -- | -- | 306 | 2,307 | 2,613 | |||||||||||||||
Accrued expenses and other liabilities | 622 | 2,351 | 517 | 90 | 3,580 | |||||||||||||||
Long term debt | -- | -- | 1,807 | 6,529 | 8,336 | |||||||||||||||
Noncontrolling interests | -- | -- | 138 | -- | 138 | |||||||||||||||
Total liabilities and noncontrolling interests | 622 | 2,351 | 2,768 | 8,926 | 14,667 | |||||||||||||||
Net assets | $ | 35,468 | $ | 39,983 | $ | 2,008 | $ | 797 | $ | 78,256 | ||||||||||
(1) | Excludes certain debt securities related to loans serviced for the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Government National Mortgage Association (GNMA). | |
(2) | Excludes related allowance for loan losses. |
We use QSPEs to securitize consumer and commercial real estate loans and other types of financial assets, including student loans, auto loans and municipal bonds. We typically retain the servicing rights from these sales and may continue to hold other beneficial interests in QSPEs. We may also provide liquidity to investors in the beneficial interests and credit enhancements in
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Other | ||||||||||||||||||||||||
Total | Debt and | commitments | ||||||||||||||||||||||
QSPE | equity | Servicing | and | Net | ||||||||||||||||||||
(in millions) | assets (1) | interests (2) | assets | Derivatives | guarantees | assets | ||||||||||||||||||
December 31, 2008 | Carrying value – asset (liability) | |||||||||||||||||||||||
Residential mortgage loan securitizations | $ | 1,144,775 | $ | 17,469 | $ | 12,951 | $ | 30 | $ | (511 | ) | $ | 29,939 | |||||||||||
Commercial mortgage securitizations | 355,267 | 1,452 | 1,098 | 524 | (14 | ) | 3,060 | |||||||||||||||||
Auto loan securitizations | 4,133 | 72 | -- | 43 | -- | 115 | ||||||||||||||||||
Student loan securitizations | 2,765 | 76 | 57 | -- | -- | 133 | ||||||||||||||||||
Other | 11,877 | 74 | -- | (3 | ) | -- | 71 | |||||||||||||||||
Total | $ | 1,518,817 | $ | 19,143 | $ | 14,106 | $ | 594 | $ | (525 | ) | $ | 33,318 | |||||||||||
Maximum exposure to loss | ||||||||||||||||||||||||
Residential mortgage loan securitizations | $ | 17,469 | $ | 12,951 | $ | 300 | $ | 718 | $ | 31,438 | ||||||||||||||
Commercial mortgage securitizations | 1,452 | 1,098 | 524 | 3,302 | 6,376 | |||||||||||||||||||
Auto loan securitizations | 72 | -- | 43 | -- | 115 | |||||||||||||||||||
Student loan securitizations | 76 | 57 | -- | -- | 133 | |||||||||||||||||||
Other | 74 | -- | 1,465 | 37 | 1,576 | |||||||||||||||||||
Total | $ | 19,143 | $ | 14,106 | $ | 2,332 | $ | 4,057 | $ | 39,638 | ||||||||||||||
March 31, 2009 | Carrying value – asset (liability) | |||||||||||||||||||||||
Residential mortgage loan securitizations | $ | 1,229,211 | $ | 21,763 | $ | 10,961 | $ | 24 | $ | (605 | ) | $ | 32,143 | |||||||||||
Commercial mortgage securitizations | 391,114 | 1,561 | 953 | 482 | (17 | ) | 2,979 | |||||||||||||||||
Auto loan securitizations | 3,580 | 76 | -- | 39 | -- | 115 | ||||||||||||||||||
Student loan securitizations | 2,776 | 165 | 55 | -- | -- | 220 | ||||||||||||||||||
Other | 9,955 | 11 | -- | -- | -- | 11 | ||||||||||||||||||
Total | $ | 1,636,636 | $ | 23,576 | $ | 11,969 | $ | 545 | $ | (622 | ) | $ | 35,468 | |||||||||||
Maximum exposure to loss | ||||||||||||||||||||||||
Residential mortgage loan securitizations | $ | 21,763 | $ | 10,961 | $ | 276 | $ | 1,525 | $ | 34,525 | ||||||||||||||
Commercial mortgage securitizations | 1,561 | 953 | 482 | 3,017 | 6,013 | |||||||||||||||||||
Auto loan securitizations | 76 | -- | 39 | -- | 115 | |||||||||||||||||||
Student loan securitizations | 165 | 55 | -- | -- | 220 | |||||||||||||||||||
Other | 11 | -- | 133 | 37 | 181 | |||||||||||||||||||
Total | $ | 23,576 | $ | 11,969 | $ | 930 | $ | 4,579 | $ | 41,054 | ||||||||||||||
(1) | Represents the remaining principal balance of assets held by QSPEs using the most current information available. | |
(2) | Excludes certain debt securities held related to loans serviced for FNMA, FHLMC and GNMA. |
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Quarter ended March 31, 2009 | , | |||||||
Other | ||||||||
Mortgage | financial | |||||||
(in millions) | loans | assets | ||||||
Sales proceeds from securitizations (1) | $81,178 | $ -- | ||||||
Servicing fees | 1,000 | 18 | ||||||
Other interests held | 495 | 79 | ||||||
Purchases of delinquent assets | 13 | -- | ||||||
Net servicing advances | 62 | -- | ||||||
(1) | Represents cash flow data for all loans securitized in first quarter 2009. |
March 31, 2009 | ||||
Mortgage | ||||
servicing rights | ||||
Prepayment speed (annual CPR (1)) | 12.6 | % | ||
Life (in years) | 5.9 | |||
Discount rate | 9.1 | % | ||
(1) | Constant prepayment rate. |
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Mortgage | Other | Other interests held – | ||||||||||
($ in millions) | servicing rights | interests held | subordinate bonds | |||||||||
Fair value of interests held | $ | 12,932 | $ | 265 | $ | 176 | ||||||
Expected weighted-average life (in years) | 3.6 | 4.2 | 5.4 | |||||||||
Prepayment speed assumption (annual CPR) | 19.6 | % | 17.6 | % | 14.0 | % | ||||||
Decrease in fair value from: | ||||||||||||
10% increase | $ | 650 | $ | 17 | $ | - -- | ||||||
25% increase | 1,482 | 38 | - -- | |||||||||
Discount rate assumption | 10.0 | % | 12.6 | % | 13.6 | % | ||||||
MSRs and other interests held | ||||||||||||
Decrease in fair value from: | ||||||||||||
100 basis point increase | $ | 448 | $ | 8 | ||||||||
200 basis point increase | 861 | 15 | ||||||||||
Other interests held – subordinate bonds | ||||||||||||
Decrease in fair value from: | ||||||||||||
50 basis point increase | $ | 4 | ||||||||||
100 basis point increase | 9 | |||||||||||
Credit loss assumption | 3.4 | % | ||||||||||
Decrease in fair value from: | ||||||||||||
10% higher losses | $ | 16 | ||||||||||
25% higher losses | 36 | |||||||||||
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Delinquent | Net charge-offs | |||||||||||||||||||
Total loans (1) | loans (2)(3) | (recoveries) (3) | ||||||||||||||||||
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | Dec. 31 | , | Quarter ended | ||||||||||||
(in millions) | 2009 | 2008 | 2009 | 2008 | March 31, 2009 | |||||||||||||||
Commercial and commercial real estate: | ||||||||||||||||||||
Commercial | $ | 193,236 | $ | 204,113 | $ | 2,113 | $ | 1,471 | $ | 556 | ||||||||||
Other real estate mortgage | 312,211 | 310,480 | 2,912 | 1,058 | 25 | |||||||||||||||
Real estate construction | 33,912 | 34,676 | 1,995 | 1,221 | 103 | |||||||||||||||
Lease financing | 14,792 | 15,829 | 114 | 92 | 17 | |||||||||||||||
Total commercial and commercial real estate | 554,151 | 565,098 | 7,134 | 3,842 | 701 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Real estate 1-4 family first mortgage | 1,211,050 | 1,165,456 | 10,213 | 6,849 | 593 | |||||||||||||||
Real estate 1-4 family junior lien mortgage | 114,845 | 115,308 | 2,096 | 1,421 | 880 | |||||||||||||||
Credit card | 22,815 | 23,555 | 738 | 687 | 582 | |||||||||||||||
Other revolving credit and installment | 104,469 | 104,886 | 1,504 | 1,427 | 737 | |||||||||||||||
Total consumer | 1,453,179 | 1,409,205 | 14,551 | 10,384 | 2,792 | |||||||||||||||
Foreign | 31,468 | 33,882 | 104 | 91 | 45 | |||||||||||||||
Total loans owned and securitized | 2,038,798 | 2,008,185 | $ | 21,789 | $ | 14,317 | $ | 3,538 | ||||||||||||
Less: | ||||||||||||||||||||
Securitized loans | 1,150,106 | 1,117,039 | ||||||||||||||||||
Mortgages held for sale | 36,807 | 20,088 | ||||||||||||||||||
Loans held for sale | 8,306 | 6,228 | ||||||||||||||||||
Total loans held | $ | 843,579 | $ | 864,830 | ||||||||||||||||
(1) | Represents loans in the balance sheet or that have been securitized and includes residential mortgages sold to FNMA and FHLMC and securitizations where servicing is our only form of continuing involvement. | |
(2) | Delinquent loans are 90 days or more past due and still accruing interest as well as nonaccrual loans. | |
(3) | Delinquent loans and net charge-offs exclude loans sold to FNMA and FHLMC. We continue to service the loans and would only experience a loss if required to repurchase a delinquent loan due to a breach in original representations and warranties associated with our underwriting standards. |
Our transactions with VIEs include securitization, investment and financing activities involving collateralized debt obligations (CDOs) backed by asset-backed and commercial real estate securities, collateralized loan obligations (CLOs) backed by corporate loans or bonds, and other types of structured financing. We have various forms of involvement with VIEs, including holding senior or subordinated interests, entering into liquidity arrangements, credit default swaps and other derivative contracts.
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Other | ||||||||||||||||||||
Total | Debt and | commitments | ||||||||||||||||||
VIE | equity | and | Net | |||||||||||||||||
(in millions) | assets (1) | interests | Derivatives | guarantees | assets | |||||||||||||||
December 31, 2008 | Carrying value – asset (liability) | |||||||||||||||||||
CDOs | $ | 48,802 | $ | 14,080 | $ | 1,053 | $ | - -- | $ | 15,133 | ||||||||||
Wachovia administered ABCP conduit | 10,767 | - -- | - -- | - -- | - -- | |||||||||||||||
Asset-based lending structures | 11,614 | 9,232 | (136 | ) | - -- | 9,096 | ||||||||||||||
Tax credit structures | 22,882 | 4,366 | - -- | (516 | ) | 3,850 | ||||||||||||||
CLOs | 23,339 | 3,217 | 109 | - -- | 3,326 | |||||||||||||||
Investment funds | 105,808 | 3,543 | - -- | - -- | 3,543 | |||||||||||||||
Credit-linked note structures | 12,993 | 50 | 1,472 | - -- | 1,522 | |||||||||||||||
Money market funds | 31,843 | 50 | 10 | - -- | 60 | |||||||||||||||
Other (2) | 1,832 | 3,983 | (36 | ) | (141 | ) | 3,806 | |||||||||||||
Total | $ | 269,880 | $ | 38,521 | $ | 2,472 | $ | (657 | ) | $ | 40,336 | |||||||||
Maximum exposure to loss | ||||||||||||||||||||
CDOs | $ | 14,080 | $ | 4,849 | $ | 1,514 | $ | 20,443 | ||||||||||||
Wachovia administered ABCP conduit | - -- | 15,824 | - -- | 15,824 | ||||||||||||||||
Asset-based lending structures | 9,346 | 136 | - -- | 9,482 | ||||||||||||||||
Tax credit structures | 4,366 | - -- | 560 | 4,926 | ||||||||||||||||
CLOs | 3,217 | 109 | 555 | 3,881 | ||||||||||||||||
Investment funds | 3,550 | - -- | 140 | 3,690 | ||||||||||||||||
Credit-linked note structures | 50 | 2,253 | - -- | 2,303 | ||||||||||||||||
Money market funds | 50 | 51 | - -- | 101 | ||||||||||||||||
Other (2) | 3,991 | 130 | 578 | 4,699 | ||||||||||||||||
Total | $ | 38,650 | $ | 23,352 | $ | 3,347 | $ | 65,349 | ||||||||||||
March 31, 2009 | Carrying value – asset (liability) | |||||||||||||||||||
CDOs | $ | 53,439 | $ | 14,595 | $ | 1,008 | $ | - -- | $ | 15,603 | ||||||||||
Wachovia administered ABCP conduit | 9,894 | - -- | - -- | - -- | -- | |||||||||||||||
Asset-based lending structures | 15,158 | 9,061 | (122 | ) | - -- | 8,939 | ||||||||||||||
Tax credit structures | 27,197 | 5,025 | - -- | (863 | ) | 4,162 | ||||||||||||||
CLOs | 24,691 | 3,547 | 119 | - -- | 3,666 | |||||||||||||||
Investment funds | 96,497 | 1,918 | - -- | - -- | 1,918 | |||||||||||||||
Credit-linked note structures | 1,578 | 52 | 1,410 | - -- | 1,462 | |||||||||||||||
Money market funds | 33,552 | - -- | (9 | ) | - -- | (9 | ) | |||||||||||||
Other (2) | 3,989 | 4,336 | (8 | ) | (86 | ) | 4,242 | |||||||||||||
Total | $ | 265,995 | $ | 38,534 | $ | 2,398 | $ | (949 | ) | $ | 39,983 | |||||||||
Maximum exposure to loss | ||||||||||||||||||||
CDOs | $ | 14,595 | $ | 4,414 | $ | 1,092 | $ | 20,101 | ||||||||||||
Wachovia administered ABCP conduit | - -- | 10,092 | - -- | 10,092 | ||||||||||||||||
Asset-based lending structures | 9,061 | 122 | 1,073 | 10,256 | ||||||||||||||||
Tax credit structures | 5,025 | - -- | 15 | 5,040 | ||||||||||||||||
CLOs | 3,547 | 119 | 529 | 4,195 | ||||||||||||||||
Investment funds | 1,918 | 500 | 123 | 2,541 | ||||||||||||||||
Credit-linked note structures | 52 | 2,189 | - -- | 2,241 | ||||||||||||||||
Money market funds | - -- | 39 | 12 | 51 | ||||||||||||||||
Other (2) | 4,336 | 160 | 535 | 5,031 | ||||||||||||||||
Total | $ | 38,534 | $ | 17,635 | $ | 3,379 | $ | 59,548 | ||||||||||||
(1) | Represents the remaining principal balance of assets held by unconsolidated VIEs using the most current information available. For VIEs that obtain exposure to assets synthetically through derivative instruments, the remaining notional amount of the derivative is included in the asset balance. | |
(2) | Contains investments in auction rate securities issued by VIEs that we do not sponsor and, accordingly, are unable to obtain the total assets of the entity. |
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A CDO or CLO is a securitization where an SPE purchases a pool of assets consisting of asset-backed securities or loans and issues multiple tranches of equity or notes to investors. In some transactions a portion of the assets are obtained synthetically through the use of derivatives such as credit default swaps or total return swaps. Generally, CDOs and CLOs are structured on behalf of a third party asset manager that typically selects and manages the assets for the term of the CDO or CLO. Typically, the asset manager has some discretion to manage the sale of assets of, or derivatives used by the CDOs and CLOs.
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We administer a multi-seller asset-backed commercial paper (ABCP) conduit that arranges financing for certain client transactions. We acquired the relationship with this conduit in the Wachovia merger. This conduit is a bankruptcy remote entity that makes loans to, or purchases certificated interests from SPEs established by our clients (sellers) and which are secured by pools of financial assets. The conduit funds itself through the issuance of highly rated commercial paper to third party investors. The primary source of repayment of the commercial paper is the cash flows from the conduit’s assets or the re-issuance of commercial paper upon maturity. The conduit’s assets are structured with deal-specific credit enhancements generally in the form of overcollateralization provided by the seller, but also may include subordinated interests, cash reserve accounts, third party credit support facilities and excess spread capture. The weighted average life of the conduit’s assets was 2.8 years and 3.0 years at March 31, 2009, and December 31, 2008, respectively.
March 31, 2009 | December 31, 2008 | |||||||||||||||
Funded | Total | Funded | Total | |||||||||||||
asset | committed | asset | committed | |||||||||||||
composition | exposure | composition | exposure | |||||||||||||
Auto loans | 34.1 | % | 27.8 | % | 34.1 | % | 26.7 | % | ||||||||
Commercial and middle market loans | 28.9 | 31.1 | 27.6 | 32.6 | ||||||||||||
Equipment loans | 14.8 | 11.8 | 14.4 | 11.4 | ||||||||||||
Trade receivables | 5.8 | 10.3 | 8.8 | 10.9 | ||||||||||||
Credit cards | 7.2 | 8.8 | 7.0 | 7.9 | ||||||||||||
Leases | 7.0 | 6.2 | 6.1 | 7.0 | ||||||||||||
Other | 2.2 | 4.0 | 2.0 | 3.5 | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
March 31, 2009 | December 31, 2008 | |||||||||||||||
Funded | Total | Funded | Total | |||||||||||||
asset | committed | asset | committed | |||||||||||||
composition | exposure | composition | exposure | |||||||||||||
AAA | 7.0 | % | 8.9 | % | 9.4 | % | 10.4 | % | ||||||||
AA | 8.5 | 9.4 | 8.3 | 11.7 | ||||||||||||
A | 47.9 | 50.7 | 52.2 | 51.5 | ||||||||||||
BBB/BB | 36.6 | 31.0 | 30.1 | 26.4 | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
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We engage in various forms of structured lending arrangements with VIEs that are collateralized by various asset classes including energy contracts, auto and other transportation leases, intellectual property, equipment and general corporate credit. We typically provide senior financing, and may act as an interest rate swap or commodity derivative counterparty when necessary. In most cases, we are not the primary beneficiary of these structures because we do not retain a majority of the variability in these transactions.
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We make passive investments in affordable housing and sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits. In some instances, our investments in these structures may require that we fund future capital commitments at the discretion of the project sponsors. While the size of our investment in a single entity may at times exceed 50% of the outstanding equity interests, we do not consolidate these structures due to performance guarantees provided by the project sponsors giving them a majority of the variability.
At March 31, 2009, we had investments of $1.2 billion and lending arrangements of $88 million with certain funds managed by one of our majority owned subsidiaries, compared with investments of $2.1 billion and lending arrangements of $349 million at December 31, 2008. In addition, we also provide a default protection agreement to a third party lender to one of these funds. Our involvements in these funds are either senior or of equal priority to third party investors. We do not consolidate the investment funds because we do not absorb the majority of the expected future variability associated with the funds’ assets, including variability associated with credit, interest rate and liquidity risks.
We entered into a capital support agreement in first quarter 2008 for up to $130 million related to an investment in a structured investment vehicle (SIV) held by our AAA-rated non-government money market funds. In third quarter 2008, we fulfilled our obligation under this agreement by purchasing the SIV investment from the funds. At December 31, 2008, the SIV investment was recorded as a debt security in our securities available-for-sale portfolio. In addition, at March 31, 2009, we had remaining outstanding support agreements of $51 million to certain other funds to support the value of certain investments held by those funds. We recorded a loss of $50 million and a liability of $9 million in first quarter 2009 in connection with these support agreements. We do not consolidate these funds because we are generally not responsible for investment losses incurred by our funds, and we do not have a contractual or implicit obligation to indemnify such losses or provide additional support to the funds. While we elected to enter into the capital support agreements for the funds, we are not obligated and may elect not to provide additional support to these funds or other funds in the future.
We structure transactions for clients designed to provide investors with specified returns based on the returns of an underlying security, loan or index. To generate regulatory capital for the Company, we also structure similar transactions that are indexed to the returns of a pool of underlying securities or loans that we own. These transactions result in the issuance of credit-linked notes. These transactions typically involve a bankruptcy remote SPE that synthetically obtains exposure to the underlying through a derivative instrument such as a written credit default swap or total return swap. The SPE issues notes to investors based on the referenced
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In August 2008, Wachovia reached an agreement to purchase at par auction rate securities (ARS) that were sold to third party investors by two of its subsidiaries. ARS are debt instruments with long-term maturities, but which reprice more frequently. Certain of these securities were issued by VIEs. At March 31, 2009, and December 31, 2008, we held in our securities available-for-sale portfolio $3.7 billion of ARS issued by VIEs that we redeemed pursuant to this agreement. At March 31, 2009, and December 31, 2008, we had a liability in our balance sheet of $42 million and $91 million, respectively, for additional losses on anticipated future redemptions of ARS issued by VIEs. Were we to redeem all remaining ARS issued by VIEs that are subject to the agreement, our estimated maximum exposure to loss would have been $468 million and $620 million at March 31, 2009, and December 31, 2008, respectively; however, certain of these securities may be repaid in full by the issuer prior to redemption. We do not consolidate the VIEs that issued the ARS because we do not expect to absorb the majority of the expected future variability associated with the VIEs’ assets.
In addition to the involvements disclosed in the following table, we had $19.0 billion of debt financing through the issuance of trust preferred securities at March 31, 2009. In these transactions, VIEs that we wholly own issue preferred equity or debt securities to third party investors. All of the proceeds of the issuance are invested in debt securities that we issue to the VIEs. In certain instances, we may provide liquidity to third party investors that purchase long-term securities that reprice frequently issued by VIEs. The VIEs’ operations and cash flows relate only to the issuance, administration and repayment of the securities held by third parties. We do not consolidate these VIEs because the VIEs’ sole assets are receivables from us. This is the case even though we own all of the VIEs’ voting equity shares, have fully guaranteed the VIEs’ obligations and may have the right to redeem the third party securities under certain circumstances. We report the debt securities that we issue to the VIEs as long-term debt in our consolidated balance sheet.
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Carrying value (1) | ||||||||||||||||
Total | Third | |||||||||||||||
VIE | Consolidated | party | Noncontrolling | |||||||||||||
(in millions) | assets | assets | liabilities | interests | ||||||||||||
December 31, 2008 | ||||||||||||||||
Secured borrowings: | ||||||||||||||||
Municipal tender option bond securitizations | $ | 6,358 | $ | 6,280 | $ | 4,765 | $ | - -- | ||||||||
Auto loan securitizations | 2,134 | 2,134 | 1,869 | - -- | ||||||||||||
Commercial real estate loans | 1,294 | 1,294 | 1,258 | - -- | ||||||||||||
Residential mortgage securitizations | 1,124 | 995 | 699 | - -- | ||||||||||||
Total secured borrowings | 10,910 | 10,703 | 8,591 | - -- | ||||||||||||
Consolidated VIEs: | ||||||||||||||||
Structured asset finance | 3,491 | 1,666 | 1,481 | 13 | ||||||||||||
Investment funds | 1,119 | 1,070 | 155 | 97 | ||||||||||||
Other | 1,007 | 1,007 | 774 | 11 | ||||||||||||
Total consolidated VIEs | 5,617 | 3,743 | 2,410 | 121 | ||||||||||||
Total secured borrowings and consolidated VIEs | $ | 16,527 | $ | 14,446 | $ | 11,001 | $ | 121 | ||||||||
March 31, 2009 | ||||||||||||||||
Secured borrowings: | ||||||||||||||||
Municipal tender option bond securitizations | $ | 6,081 | $ | 6,010 | $ | 5,822 | $ | -- | ||||||||
Auto loan securitizations | 1,702 | 1,702 | 1,441 | -- | ||||||||||||
Commercial real estate loans | 1,112 | 1,112 | 1,049 | -- | ||||||||||||
Residential mortgage securitizations | 1,025 | 899 | 614 | -- | ||||||||||||
Total secured borrowings | 9,920 | 9,723 | 8,926 | -- | ||||||||||||
Consolidated VIEs: | ||||||||||||||||
Structured asset finance | 3,476 | 1,723 | 1,556 | 16 | ||||||||||||
Investment funds | 1,946 | 1,946 | 242 | 105 | ||||||||||||
Other | 1,108 | 1,107 | 832 | 17 | ||||||||||||
Total consolidated VIEs | 6,530 | 4,776 | 2,630 | 138 | ||||||||||||
Total secured borrowings and consolidated VIEs | $ | 16,450 | $ | 14,499 | $ | 11,556 | $ | 138 | ||||||||
(1) | Amounts exclude loan loss reserves, and total assets may differ from consolidated assets due to the different measurement methods used depending on the assets’ classifications. |
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Quarter ended March 31 | , | |||||||
(in millions) | 2009 | 2008 | ||||||
Fair value, beginning of quarter | $ | 14,714 | $ | 16,763 | ||||
Purchases | - -- | 52 | ||||||
Acquired from Wachovia (1) | 34 | - -- | ||||||
Servicing from securitizations or asset transfers | 1,447 | 797 | ||||||
Sales | - -- | (92 | ) | |||||
Net additions | 1,481 | 757 | ||||||
Changes in fair value: | ||||||||
Due to changes in valuation model inputs or assumptions (2) | (2,824 | ) | (1,798 | ) | ||||
Other changes in fair value (3) | (980 | ) | (766 | ) | ||||
Total changes in fair value | (3,804 | ) | (2,564 | ) | ||||
Fair value, end of quarter | $ | 12,391 | $ | 14,956 | ||||
(1) | First quarter 2009 reflects refinements to initial purchase accounting adjustments. | |
(2) | Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates. | |
(3) | Represents changes due to collection/realization of expected cash flows over time. |
Quarter ended March 31 | , | |||||||
(in millions) | 2009 | 2008 | ||||||
Balance, beginning of quarter | $ | 1,446 | $ | 466 | ||||
Purchases (1) | 4 | 3 | ||||||
Acquired from Wachovia (2) | (127 | ) | - -- | |||||
Servicing from securitizations or asset transfers (1) | 4 | 5 | ||||||
Amortization | (70 | ) | (19 | ) | ||||
Balance, end of quarter (3) | $ | 1,257 | $ | 455 | ||||
Fair value of amortized MSRs: | ||||||||
Beginning of quarter | $ | 1,555 | $ | 573 | ||||
End of quarter | 1,392 | 601 | ||||||
(1) | Based on March 31, 2009, assumptions, the weighted-average amortization period for MSRs added during the quarter was approximately 16.7 years. | |
(2) | First quarter 2009 reflects refinements to initial purchase accounting adjustments. | |
(3) | There was no valuation allowance recorded for the periods presented. |
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Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | |||||||
(in billions) | 2009 | 2008 | 2008 | |||||||||
Residential mortgage loans serviced for others (1) | $ | 1,379 | $ | 1,388 | $ | 1,288 | ||||||
Owned loans serviced (2) | 267 | 268 | 102 | |||||||||
Total owned residential mortgage loans serviced | 1,646 | 1,656 | 1,390 | |||||||||
Commercial mortgage loans serviced for others | 474 | 472 | 144 | |||||||||
Total owned loans serviced | 2,120 | 2,128 | 1,534 | |||||||||
Sub-servicing | 23 | 26 | 21 | |||||||||
Total managed servicing portfolio | $ | 2,143 | $ | 2,154 | $ | 1,555 | ||||||
Ratio of MSRs to related loans serviced for others | 0.74 | % | 0.87 | % | 1.08 | % | ||||||
(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) | 2009 | 2008 | ||||||
Servicing income, net: | ||||||||
Servicing fees (1) | $ | 1,018 | $ | 964 | ||||
Changes in fair value of residential MSRs: | ||||||||
Due to changes in valuation model inputs or assumptions (2) | (2,824 | ) | (1,798 | ) | ||||
Other changes in fair value (3) | (980 | ) | (766 | ) | ||||
Total changes in fair value of residential MSRs | (3,804 | ) | (2,564 | ) | ||||
Amortization | (70 | ) | (19 | ) | ||||
Net derivative gains from economic hedges (4) | 3,699 | 1,892 | ||||||
Total servicing income, net | 843 | 273 | ||||||
Net gains on mortgage loan origination/sales activities | 1,582 | 267 | ||||||
All other | 79 | 91 | ||||||
Total mortgage banking noninterest income | $ | 2,504 | $ | 631 | ||||
Market-related valuation changes to MSRs, net of hedge results (2) + (4) | $ | 875 | $ | 94 | ||||
(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 | , | December 31 | , | March 31 | , | |||||||||||||||||||
2009 | 2008 | 2008 | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
carrying | Accumulated | carrying | Accumulated | carrying | Accumulated | |||||||||||||||||||
(in millions) | value | amortization | value | amortization | value | amortization | ||||||||||||||||||
Amortized intangible assets: | ||||||||||||||||||||||||
MSRs (1) | $ | 1,553 | $ | 296 | $ | 1,672 | $ | 226 | $ | 625 | $ | 170 | ||||||||||||
Core deposit intangibles | 14,746 | 2,720 | 14,188 | 2,189 | 2,503 | 2,100 | ||||||||||||||||||
Customer relationship and other intangibles | 3,287 | 601 | 3,988 | 486 | 733 | 441 | ||||||||||||||||||
Total amortized intangible assets | $ | 19,586 | $ | 3,617 | $ | 19,848 | $ | 2,901 | $ | 3,861 | $ | 2,711 | ||||||||||||
MSRs (fair value) (1) | $ | 12,391 | $ | 14,714 | $ | 14,956 | ||||||||||||||||||
Trademark | 14 | 14 | 14 | |||||||||||||||||||||
(1) | See Note 8 in this Report for additional information on MSRs. |
Customer | ||||||||||||||||
Core | relationship | Amortized | ||||||||||||||
deposit | and other | commercial | ||||||||||||||
(in millions) | intangibles | intangibles | MSRs | Total | ||||||||||||
Three months ended March 31, 2009 (actual) | $ | 532 | $ | 115 | $ | 70 | $ | 717 | ||||||||
Estimate for year ended December 31, 2009 | $ | 2,121 | $ | 466 | $ | 259 | $ | 2,846 | ||||||||
2010 | 1,813 | 370 | 213 | 2,396 | ||||||||||||
2011 | 1,544 | 309 | 188 | 2,041 | ||||||||||||
2012 | 1,352 | 290 | 151 | 1,793 | ||||||||||||
2013 | 1,202 | 271 | 118 | 1,591 | ||||||||||||
2014 | 1,078 | 253 | 103 | 1,434 | ||||||||||||
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Wealth, | ||||||||||||||||
Brokerage and | ||||||||||||||||
Community | Wholesale | Retirement | Consolidated | |||||||||||||
(in millions) | Banking | Banking | Services | Company | ||||||||||||
December 31, 2007 | $ | 10,591 | $ | 2,136 | $ | 379 | $ | 13,106 | ||||||||
Goodwill from business combinations | - -- | 44 | - -- | 44 | ||||||||||||
Foreign currency translation adjustments | (2 | ) | - -- | - -- | (2 | ) | ||||||||||
March 31, 2008 | $ | 10,589 | $ | 2,180 | $ | 379 | $ | 13,148 | ||||||||
December 31, 2008 | $ | 16,810 | $ | 5,438 | $ | 379 | $ | 22,627 | ||||||||
Goodwill from business combinations | 732 | 467 | -- | 1,199 | ||||||||||||
Foreign currency translation adjustments | (1 | ) | - -- | - -- | (1 | ) | ||||||||||
March 31, 2009 | $ | 17,541 | $ | 5,905 | $ | 379 | $ | 23,825 | ||||||||
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Guarantees are contracts that contingently require us to make payments to a guaranteed party based on an event or a change in an underlying asset, liability, rate or index. Guarantees are generally in the form of securities lending indemnifications, standby letters of credit, liquidity agreements, written put options, recourse obligations, residual value guarantees, and contingent consideration. The following table shows carrying value, maximum exposure to loss on our guarantees and the amount with a higher risk of performance.
March 31 | , | December 31 | , | |||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Maximum | Higher | Maximum | Higher | |||||||||||||||||||||
Carrying | exposure | performance | Carrying | exposure | performance | |||||||||||||||||||
(in millions) | value | to loss | risk | value | to loss | risk | ||||||||||||||||||
Standby letters of credit | $ | 318 | $ | 50,325 | $ | 10,157 | $ | 130 | $ | 47,191 | $ | 17,293 | ||||||||||||
Securities and other lending indemnifications | 51 | 28,611 | 3,859 | - -- | 30,120 | 1,907 | ||||||||||||||||||
Liquidity agreements (1) | 41 | 14,514 | - -- | 30 | 17,602 | - -- | ||||||||||||||||||
Written put options (1) | 1,558 | 7,423 | 3,109 | 1,376 | 10,182 | 5,314 | ||||||||||||||||||
Loans sold with recourse | 192 | 6,288 | 2,169 | 53 | 6,126 | 2,038 | ||||||||||||||||||
Residual value guarantees | - -- | 197 | - -- | - -- | 1,121 | - -- | ||||||||||||||||||
Contingent consideration | - -- | 134 | - -- | 11 | 187 | - -- | ||||||||||||||||||
Other guarantees | - -- | 73 | - -- | - -- | 38 | - -- | ||||||||||||||||||
Total guarantees | $ | 2,160 | $ | 107,565 | $ | 19,294 | $ | 1,600 | $ | 112,567 | $ | 26,552 | ||||||||||||
(1) | Liquidity agreements and written put options that are in the form of derivatives are excluded from this disclosure and included in the derivative disclosures in Note 12. Certain of these agreements included in this table are related to off-balance sheet entities and, accordingly, are also disclosed in Note 7. |
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The following supplements and amends our discussion of certain matters previously reported in Item 3 (Legal Proceedings) of our 2008 Form 10-K for events occurring in the most recent quarter.
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March 31, 2009 | December 31, 2008 | |||||||||||||||||||||||
Notional or | Fair value | Notional or | Fair value | |||||||||||||||||||||
contractual | Asset | Liability | contractual | Asset | Liability | |||||||||||||||||||
(in millions) | amount | derivatives | derivatives | amount | derivatives | derivatives | ||||||||||||||||||
Qualifying hedge contracts accounted for under FAS 133 (1) | ||||||||||||||||||||||||
Interest rate contracts | $ | 176,593 | $ | 10,269 | $ | 2,847 | $ | 191,972 | $ | 11,511 | $ | 3,287 | ||||||||||||
Foreign exchange contracts | 42,308 | 1,119 | 1,344 | 38,386 | 1,138 | 1,198 | ||||||||||||||||||
Total derivatives designated as hedging instruments under FAS 133 | 11,388 | 4,191 | 12,649 | 4,485 | ||||||||||||||||||||
Derivatives not designated as hedging instruments under FAS 133 | ||||||||||||||||||||||||
Free-standing derivatives (economic hedges) (1): | ||||||||||||||||||||||||
Interest rate contracts (2) | 946,991 | 11,014 | 8,933 | 750,728 | 12,635 | 9,708 | ||||||||||||||||||
Equity contracts | 39 | -- | 9 | - -- | - -- | - -- | ||||||||||||||||||
Foreign exchange contracts | 4,435 | 370 | 131 | 4,208 | 150 | 325 | ||||||||||||||||||
Credit contracts | 2,644 | 473 | -- | 644 | 528 | -- | ||||||||||||||||||
Other derivatives | 951 | 3 | 139 | 4,458 | 108 | 71 | ||||||||||||||||||
Subtotal | 11,860 | 9,212 | 13,421 | 10,104 | ||||||||||||||||||||
Customer accommodation, trading and other free-standing derivatives (3): | ||||||||||||||||||||||||
Interest rate contracts | 3,399,331 | 115,111 | 113,609 | 3,752,656 | 142,739 | 141,508 | ||||||||||||||||||
Commodity contracts | 58,421 | 6,035 | 6,203 | 86,360 | 6,117 | 6,068 | ||||||||||||||||||
Equity contracts | 35,511 | 2,276 | 2,664 | 37,136 | 3,088 | 2,678 | ||||||||||||||||||
Foreign exchange contracts | 267,361 | 4,791 | 4,595 | 273,437 | 7,562 | 7,419 | ||||||||||||||||||
Credit contracts | 278,620 | 24,986 | 24,493 | 272,722 | 21,953 | 21,787 | ||||||||||||||||||
Other derivatives | 4,323 | 882 | 133 | 6,322 | 524 | 524 | ||||||||||||||||||
Subtotal | 154,081 | 151,697 | 181,983 | 179,984 | ||||||||||||||||||||
Total derivatives not designated as hedging instruments under FAS 133 | 165,941 | 160,909 | 195,404 | 190,088 | ||||||||||||||||||||
Subtotal | 177,329 | 165,100 | 208,053 | 194,573 | ||||||||||||||||||||
Netting (4) | (140,124 | ) | (152,208 | ) | (168,690 | ) | (182,435 | ) | ||||||||||||||||
Total | $ | 37,205 | $ | 12,892 | $ | 39,363 | $ | 12,138 | ||||||||||||||||
(1) | Represents asset/liability management hedges, which are included in other assets or other liabilities. | |
(2) | 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. | |
(3) | Customer accommodation, trading and other free-standing derivatives are included in trading assets or other liabilities. | |
(4) | Represents netting of derivative asset and liability balances, and related cash collateral, with the same counterparty subject to master netting arrangements under FIN 39. The amount of cash collateral netted against derivative assets and liabilities was $19.5 billion and $6.8 billion, respectively, at March 31, 2009, and $17.7 billion and $22.2 billion, respectively, at December 31, 2008. |
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Quarter ended March 31, 2009 | ||||||||||||||||
Gains (losses) | ||||||||||||||||
recorded in net | ||||||||||||||||
interest income | Gains (losses) recorded in noninterest income | |||||||||||||||
Recognized on | ||||||||||||||||
fair value | ||||||||||||||||
hedges | ||||||||||||||||
Recognized | Recognized | Recognized | (ineffective | |||||||||||||
(in millions) | on derivatives | on derivatives | on hedged item | portion) | ||||||||||||
(A) | (B) | (A) + (B) | ||||||||||||||
Interest rate contracts | ||||||||||||||||
Hedging: | ||||||||||||||||
Securities available for sale | $ | (41 | ) | $ | 82 | $ | (93 | ) | $ | (11 | ) | |||||
Long-term debt | 264 | (789 | ) | 798 | 9 | |||||||||||
Foreign exchange contracts | ||||||||||||||||
Hedging: | ||||||||||||||||
Securities available for sale | (28 | ) | 2 | (2 | ) | - -- | ||||||||||
Short-term borrowings | 16 | (1 | ) | 1 | - -- | |||||||||||
Long-term debt | 76 | (262 | ) | 330 | 68 | |||||||||||
Total | $ | 287 | $ | (968 | ) | $ | 1,034 | $ | 66 | (1) | ||||||
(1) | None of the change in value of the derivatives was excluded from the assessment of hedge effectiveness. |
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(in millions) | Quarter ended March 31, 2009 | |||||||||||
Gains (pre tax) | ||||||||||||
Gains (pre tax) | recognized in | |||||||||||
Gains (after tax) | reclassified from | noninterest | ||||||||||
recognized in | cumulative OCI | income on | ||||||||||
OCI on | into net | derivatives | ||||||||||
derivatives | interest income | (ineffective | ||||||||||
(effective portion) | (effective portion) | portion) | ||||||||||
Interest rate contracts | $ | 68 | $ | 135 | $ | 6 | (1) | |||||
(1) | None of the change in value of the derivatives was excluded from the assessment of hedge effectiveness. |
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Quarter ended March 31, 2009 | ||||
Gains (losses) recognized | ||||
in noninterest income | ||||
(in millions) | on derivatives | |||
Free-standing derivatives (economic hedges) | ||||
Interest rate contracts (1) | ||||
Recognized in noninterest income: | ||||
Mortgage banking | $ | 2,364 | ||
Other | (5 | ) | ||
Foreign exchange contracts | 80 | |||
Equity contracts | 2 | |||
Credit contracts | (58 | ) | ||
Subtotal | 2,383 | |||
Customer accommodation, trading and other free-standing derivatives | ||||
Interest rate contracts (2) | ||||
Recognized in noninterest income: | ||||
Mortgage banking | 1,013 | |||
Other | 313 | |||
Commodity contracts | (12 | ) | ||
Equity contracts | (123 | ) | ||
Foreign exchange contracts | 113 | |||
Credit contracts | 254 | |||
Other | (163 | ) | ||
Subtotal | 1,395 | |||
Total | $ | 3,778 | ||
(1) | Predominantly mortgage banking noninterest income including gains (losses) on the derivatives used as economic hedges of MSRs, interest rate lock commitments, loans held for sale and mortgages held for sale. | |
(2) | Predominantly mortgage banking noninterest income including gains (losses) on interest rate lock commitments. |
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Maximum | Higher | |||||||||||||||
Fair value | exposure | performance | Range of | |||||||||||||
(in millions) | liability | to loss | risk | maturities | ||||||||||||
December 31, 2008 | ||||||||||||||||
Credit default swaps on corporate bonds | $ | 9,643 | $ | 83,446 | $ | 39,987 | 2009-2018 | |||||||||
Credit default swaps on structured products | 4,940 | 7,451 | 5,824 | 2009-2056 | ||||||||||||
Credit protection on credit default swap index | 2,611 | 35,943 | 6,364 | 2009-2017 | ||||||||||||
Credit protection on commercial mortgage-backed securities index | 2,231 | 7,291 | 2,938 | 2009-2052 | ||||||||||||
Credit protection on asset-backed securities index | 1,331 | 1,526 | 1,116 | 2037-2046 | ||||||||||||
Loan deliverable credit default swaps | 106 | 611 | 592 | 2009-2014 | ||||||||||||
Other | 18 | 845 | 150 | 2009-2020 | ||||||||||||
Total credit derivatives | $ | 20,880 | $ | 137,113 | $ | 56,971 | ||||||||||
March 31, 2009 | ||||||||||||||||
Credit default swaps on corporate bonds | $ | 10,168 | $ | 82,468 | $ | 41,124 | 2009-2018 | |||||||||
Credit default swaps on structured products | 5,300 | 7,005 | 5,558 | 2009-2056 | ||||||||||||
Credit protection on credit default swap index | 3,803 | 39,166 | 6,240 | 2009-2017 | ||||||||||||
Credit protection on commercial mortgage-backed securities index | 2,631 | 4,888 | 313 | 2009-2052 | ||||||||||||
Credit protection on asset-backed securities index | 1,112 | 1,197 | 814 | 2037-2046 | ||||||||||||
Loan deliverable credit default swaps | 114 | 536 | 515 | 2009-2014 | ||||||||||||
Other | 18 | 1,629 | 940 | 2009-2020 | ||||||||||||
Total credit derivatives | $ | 23,146 | $ | 136,889 | $ | 55,504 | ||||||||||
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• | Level 1 — Valuation is based upon quoted prices for identical instruments traded in active markets. | |
• | Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. | |
• | Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
(in millions) | Level 1 | Level 2 | Level 3 | Netting (1) | Total | |||||||||||||||
Balance at March 31, 2008 | ||||||||||||||||||||
Trading assets (excluding derivatives) | $ | 1,047 | $ | 3,266 | $ | 362 | $ | - -- | $ | 4,675 | ||||||||||
Derivatives (trading assets) | 77 | 10,186 | - -- | (6,045 | ) | 4,218 | ||||||||||||||
Securities of U.S. Treasury and federal agencies | 1,016 | - -- | - -- | - -- | 1,016 | |||||||||||||||
Securities of U.S. states and political subdivisions | - -- | 7,014 | 166 | - -- | 7,180 | |||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Federal agencies | 38,577 | - -- | - -- | - -- | 38,577 | |||||||||||||||
Residential | - -- | 14,907 | 556 | - -- | 15,463 | |||||||||||||||
Commercial | - -- | 7,122 | - -- | - -- | 7,122 | |||||||||||||||
Total mortgage-backed securities | 38,577 | 22,029 | 556 | - -- | 61,162 | |||||||||||||||
Corporate debt securities | - -- | 1,907 | - -- | - -- | 1,907 | |||||||||||||||
Collateralized debt obligations | - -- | 817 | - -- | - -- | 817 | |||||||||||||||
Other | - -- | 779 | 5,961 | - -- | 6,740 | |||||||||||||||
Total debt securities | 39,593 | 32,546 | 6,683 | - -- | 78,822 | |||||||||||||||
Marketable equity securities: | ||||||||||||||||||||
Perpetual preferred securities | 1,539 | 611 | - -- | - -- | 2,150 | |||||||||||||||
Other marketable equity securities | 780 | 34 | 1 | - -- | 815 | |||||||||||||||
Total marketable equity securities | 2,319 | 645 | 1 | - -- | 2,965 | |||||||||||||||
Total | 41,912 | 33,191 | 6,684 | - -- | 81,787 | |||||||||||||||
Mortgages held for sale | - -- | 26,667 | 1,260 | - -- | 27,927 | |||||||||||||||
Mortgage servicing rights (residential) | - -- | - -- | 14,956 | - -- | 14,956 | |||||||||||||||
Other assets (2) | 2,226 | 7,888 | 48 | (6,995 | ) | 3,167 | ||||||||||||||
Total | $ | 45,262 | $ | 81,198 | $ | 23,310 | $ | (13,040 | ) | $ | 136,730 | |||||||||
Other liabilities (3) | $ | (3,597 | ) | $ | (11,597 | ) | $ | (408 | ) | $ | 9,367 | $ | (6,235 | ) | ||||||
(continued on following page)
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(continued from previous page)
(in millions) | Level 1 | Level 2 | Level 3 | Netting (1) | Total | |||||||||||||||
Balance at December 31, 2008 | ||||||||||||||||||||
Trading assets (excluding derivatives) | $ | 911 | $ | 16,045 | $ | 3,495 | $ | - -- | $ | 20,451 | ||||||||||
Derivatives (trading assets) | 331 | 174,355 | 7,897 | (148,150 | ) | 34,433 | ||||||||||||||
Securities of U.S. Treasury and federal agencies | 3,177 | 72 | - -- | - -- | 3,249 | |||||||||||||||
Securities of U.S. states and political subdivisions | 1 | 11,754 | 903 | - -- | 12,658 | |||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Federal agencies | - -- | 66,430 | 4 | - -- | 66,434 | |||||||||||||||
Residential | - -- | 21,320 | 3,510 | - -- | 24,830 | |||||||||||||||
Commercial | - -- | 8,192 | 286 | - -- | 8,478 | |||||||||||||||
Total mortgage-backed securities | - -- | 95,942 | 3,800 | - -- | 99,742 | |||||||||||||||
Corporate debt securities | - -- | 6,642 | 282 | - -- | 6,924 | |||||||||||||||
Collateralized debt obligations | - -- | 2 | 2,083 | - -- | 2,085 | |||||||||||||||
Other | - -- | 7,976 | 12,799 | - -- | 20,775 | |||||||||||||||
Total debt securities | 3,178 | 122,388 | 19,867 | - -- | 145,433 | |||||||||||||||
Marketable equity securities: | ||||||||||||||||||||
Perpetual preferred securities | 886 | 1,065 | 2,775 | - -- | 4,726 | |||||||||||||||
Other marketable equity securities | 1,099 | 261 | 50 | - -- | 1,410 | |||||||||||||||
Total marketable equity securities | 1,985 | 1,326 | 2,825 | - -- | 6,136 | |||||||||||||||
Total | 5,163 | 123,714 | 22,692 | - -- | 151,569 | |||||||||||||||
Mortgages held for sale | - -- | 14,036 | 4,718 | - -- | 18,754 | |||||||||||||||
Loans held for sale | - -- | 398 | - -- | - -- | 398 | |||||||||||||||
Mortgage servicing rights (residential) | - -- | - -- | 14,714 | - -- | 14,714 | |||||||||||||||
Other assets (2) | 3,975 | 21,751 | 2,041 | (20,540 | ) | 7,227 | ||||||||||||||
Total | $ | 10,380 | $ | 350,299 | $ | 55,557 | $ | (168,690 | ) | $ | 247,546 | |||||||||
Other liabilities (3) | $ | (4,815 | ) | $ | (187,098 | ) | $ | (9,308 | ) | $ | 182,435 | $ | (18,786 | ) | ||||||
Balance at March 31, 2009 | ||||||||||||||||||||
Trading assets (excluding derivatives) | $ | 2,396 | $ | 13,637 | $ | 3,258 | $ | - -- | $ | 19,291 | ||||||||||
Derivatives (trading assets) | 1,420 | 145,193 | 7,810 | (127,217 | ) | 27,206 | ||||||||||||||
Securities of U.S. Treasury and federal agencies | 2,800 | 103 | - -- | - -- | 2,903 | |||||||||||||||
Securities of U.S. states and political subdivisions | 1 | 11,024 | 821 | - -- | 11,846 | |||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Federal agencies | - -- | 90,648 | - -- | - -- | 90,648 | |||||||||||||||
Residential | - -- | 24,825 | 7,657 | - -- | 32,482 | |||||||||||||||
Commercial | - -- | 7,278 | 2,497 | - -- | 9,775 | |||||||||||||||
Total mortgage-backed securities | - -- | 122,751 | 10,154 | - -- | 132,905 | |||||||||||||||
Corporate debt securities | - -- | 6,725 | 261 | - -- | 6,986 | |||||||||||||||
Collateralized debt obligations | - -- | 57 | 2,329 | - -- | 2,386 | |||||||||||||||
Other | - -- | 996 | 15,267 | - -- | 16,263 | |||||||||||||||
Total debt securities | 2,801 | 141,656 | 28,832 | - -- | 173,289 | |||||||||||||||
Marketable equity securities: | ||||||||||||||||||||
Perpetual preferred securities | 574 | 639 | 2,557 | - -- | 3,770 | |||||||||||||||
Other marketable equity securities | 1,072 | 293 | 44 | - -- | 1,409 | |||||||||||||||
Total marketable equity securities | 1,646 | 932 | 2,601 | - -- | 5,179 | |||||||||||||||
Total | 4,447 | 142,588 | 31,433 | - -- | 178,468 | |||||||||||||||
Mortgages held for sale | - -- | 30,689 | 4,516 | - -- | 35,205 | |||||||||||||||
Loans held for sale | - -- | 114 | - -- | - -- | 114 | |||||||||||||||
Mortgage servicing rights (residential) | - -- | - -- | 12,391 | - -- | 12,391 | |||||||||||||||
Other assets (2) | 4,070 | 19,129 | 2,285 | (12,907 | ) | 12,577 | ||||||||||||||
Total | $ | 12,333 | $ | 351,350 | $ | 61,693 | $ | (140,124 | ) | $ | 285,252 | |||||||||
Other liabilities (3) | $ | (6,313 | ) | $ | (157,898 | ) | $ | (8,567 | ) | $ | 152,208 | $ | (20,570 | ) | ||||||
(1) | Derivatives are reported net of cash collateral received and paid and, to the extent that the criteria of FIN 39 are met, positions with the same counterparty are netted as part of a legally enforceable master netting agreement. | |
(2) | Derivative assets other than trading and principal investments are included in this category. | |
(3) | Derivative liabilities other than trading are included in this category. |
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Total net gains | Net unrealized | |||||||||||||||||||||||||||
(losses) included in | Purchases, | gains (losses) | ||||||||||||||||||||||||||
sales, | Net | included in net | ||||||||||||||||||||||||||
Other | issuances | transfers | income relating | |||||||||||||||||||||||||
Balance, | compre- | and | into and/ | Balance, | to assets and | |||||||||||||||||||||||
beginning | Net | hensive | settlements, | or out of | end of | liabilities held | ||||||||||||||||||||||
(in millions) | of period | income | income | net | Level 3 | (1) | period | at period end | (2) | |||||||||||||||||||
Quarter ended March 31, 2008 | ||||||||||||||||||||||||||||
Trading assets (excluding derivatives) | $ | 418 | $ | (68 | ) | $ | - -- | $ | 12 | $ | - -- | $ | 362 | $ | (40 | )(3) | ||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | 168 | - -- | (8 | ) | 6 | - -- | 166 | - -- | ||||||||||||||||||||
Mortgage-backed securities - residential | 486 | (8 | ) | 18 | 60 | - -- | 556 | (4 | ) | |||||||||||||||||||
Other | 4,726 | -- | 32 | 1,203 | -- | 5,961 | -- | |||||||||||||||||||||
Total debt securities | 5,380 | (8 | ) | 42 | 1,269 | - -- | 6,683 | (4 | ) | |||||||||||||||||||
Marketable equity securities - other | 1 | - -- | - -- | - -- | - -- | 1 | - -- | |||||||||||||||||||||
Total securities available for sale | $ | 5,381 | $ | (8 | ) | $ | 42 | $ | 1,269 | $ | - -- | $ | 6,684 | $ | (4 | ) | ||||||||||||
Mortgages held for sale | $ | 146 | $ | (5 | ) | $ | - -- | $ | 27 | $ | 1,092 | $ | 1,260 | $ | (5 | )(4) | ||||||||||||
Mortgage servicing rights (residential) | 16,763 | (2,564 | ) | - -- | 757 | - -- | 14,956 | (1,794 | )(4)(5) | |||||||||||||||||||
Net derivative assets and liabilities | 6 | (179 | ) | - -- | 142 | - -- | (31 | ) | (27 | )(4) | ||||||||||||||||||
Other liabilities (excluding derivatives) | (280 | ) | (66 | ) | - -- | 17 | - -- | (329 | ) | (66 | )(4) | |||||||||||||||||
Quarter ended March 31, 2009 | ||||||||||||||||||||||||||||
Trading assets (excluding derivatives) | $ | 3,495 | $ | (38 | ) | $ | - -- | $ | (523 | ) | $ | 324 | $ | 3,258 | $ | 2 | (3) | |||||||||||
Securities available for sale: | ||||||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | 903 | (2 | ) | 2 | (7 | ) | (75 | ) | 821 | -- | ||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||
Federal agencies | 4 | - -- | - -- | - -- | (4 | ) | - -- | -- | ||||||||||||||||||||
Residential | 3,510 | (29 | ) | 711 | (170 | ) | 3,635 | 7,657 | (95 | ) | ||||||||||||||||||
Commercial | 286 | (8 | ) | 501 | 51 | 1,667 | 2,497 | (9 | ) | |||||||||||||||||||
Total mortgage-backed securities | 3,800 | (37 | ) | 1,212 | (119 | ) | 5,298 | 10,154 | (104 | ) | ||||||||||||||||||
Corporate debt securities | 282 | (2 | ) | 10 | (17 | ) | (12 | ) | 261 | -- | ||||||||||||||||||
Collateralized debt obligations | 2,083 | 70 | 172 | 2 | 2 | 2,329 | -- | |||||||||||||||||||||
Other | 12,799 | (20 | ) | 637 | 1,471 | 380 | 15,267 | (31 | ) | |||||||||||||||||||
Total debt securities | 19,867 | 9 | 2,033 | 1,330 | 5,593 | 28,832 | (135 | ) | ||||||||||||||||||||
Marketable equity securities | ||||||||||||||||||||||||||||
Perpetual preferred securities | 2,775 | 70 | 26 | (311 | ) | (3 | ) | 2,557 | -- | |||||||||||||||||||
Other marketable equity securities | 50 | - -- | (18 | ) | 60 | (48 | ) | 44 | -- | |||||||||||||||||||
Total marketable equity securities | 2,825 | 70 | 8 | (251 | ) | (51 | ) | 2,601 | -- | |||||||||||||||||||
Total securities available for sale | $ | 22,692 | $ | 79 | $ | 2,041 | $ | 1,079 | $ | 5,542 | $ | 31,433 | $ | (135 | ) | |||||||||||||
Mortgages held for sale | $ | 4,718 | $ | 2 | $ | - -- | $ | (110 | ) | $ | (94 | ) | $ | 4,516 | $ | (1 | )(4) | |||||||||||
Mortgage servicing rights (residential) | 14,714 | (3,804 | ) | - -- | 1,481 | - -- | 12,391 | (2,824 | )(4)(5) | |||||||||||||||||||
Net derivative assets and liabilities | 37 | 848 | - -- | (89 | ) | 240 | 1,036 | 616 | (4) | |||||||||||||||||||
Other assets (excluding derivatives) | 1,231 | (9 | ) | - -- | (1 | ) | - -- | 1,221 | (12 | )(4) | ||||||||||||||||||
Other liabilities (excluding derivatives) | (638 | ) | (76 | ) | - -- | (15 | ) | - -- | (729 | ) | (76 | ) | ||||||||||||||||
(1) | The amounts presented as transfers into and out of Level 3 represent fair value as of the beginning of the period presented. | |
(2) | 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. | |
(3) | Included in other noninterest income in the income statement. | |
(4) | Included in mortgage banking in the income statement. | |
(5) | Represents total unrealized losses of $2,824 million and $1,798 million, net of losses of nil and $4 million related to sales, in first quarter 2009 and 2008, respectively. |
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Independent brokers | Third party pricing services | |||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||
Trading assets (excluding derivatives) | $ | 190 | $ | 3,272 | $ | 12 | $ | 917 | $ | 1,944 | $ | 110 | ||||||||||||
Derivatives (trading and other assets) | 3,419 | 106 | 106 | 605 | 4,635 | - -- | ||||||||||||||||||
Securities available for sale | 181 | 8,916 | 1,681 | 3,944 | 109,170 | 8 | ||||||||||||||||||
Loans held for sale | - -- | 1 | - -- | - -- | 353 | - -- | ||||||||||||||||||
Other liabilities | 1,105 | 175 | 128 | 2,208 | 5,171 | 1 | ||||||||||||||||||
March 31, 2009 | ||||||||||||||||||||||||
Trading assets (excluding derivatives) | $ | 422 | $ | 3,600 | $ | 20 | $ | 22 | $ | 1,551 | $ | 2 | ||||||||||||
Derivatives (trading and other assets) | 3,527 | 2,215 | 52 | - -- | 4,268 | 8 | ||||||||||||||||||
Securities available for sale | 400 | 1,956 | 256 | 3,297 | 113,274 | 11 | ||||||||||||||||||
Loans held for sale | - -- | - -- | - -- | - -- | 78 | -- | ||||||||||||||||||
Derivatives (liabilities) | 699 | 1,976 | 71 | - -- | 4,133 | 2 | ||||||||||||||||||
Other liabilities | 74 | 175 | - -- | 6 | 518 | -- | ||||||||||||||||||
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Total gains | |||||||||||||||||||||
Carrying value at quarter end | (losses) for | ||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | quarter ended | ||||||||||||||||
March 31, 2008 | |||||||||||||||||||||
Mortgages held for sale | $ | - -- | $ | 1,678 | $ | 103 | $ | 1,781 | $ | (78 | ) | ||||||||||
Loans held for sale | - -- | 360 | - -- | 360 | (11 | ) | |||||||||||||||
Loans (1) | - -- | 540 | 6 | 546 | (1,297 | ) | |||||||||||||||
Private equity investments | 16 | - -- | 3 | 19 | (14 | ) | |||||||||||||||
Foreclosed assets (2) | - -- | 384 | - -- | 384 | (104 | ) | |||||||||||||||
Operating lease assets | - -- | 19 | - -- | 19 | - -- | ||||||||||||||||
$ | (1,504 | ) | |||||||||||||||||||
March 31, 2009 | |||||||||||||||||||||
Mortgages held for sale | $ | - -- | $ | 668 | $ | 676 | $ | 1,344 | $ | 4 | |||||||||||
Loans held for sale | - -- | 1,002 | - -- | 1,002 | 48 | ||||||||||||||||
Loans (1) | - -- | 1,459 | 111 | 1,570 | (2,604 | ) | |||||||||||||||
Private equity investments | - -- | - -- | 31 | 31 | (50 | ) | |||||||||||||||
Foreclosed assets (2) | - -- | 387 | 40 | 427 | (112 | ) | |||||||||||||||
Operating lease assets | - -- | 181 | - -- | 181 | (11 | ) | |||||||||||||||
$ | (2,725 | ) | |||||||||||||||||||
(1) | Represents carrying value and related write-downs of loans for which adjustments are based on the appraised value of the collateral. The carrying value of loans fully charged-off, which includes unsecured lines and loans, is zero. | |
(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, 2009 | December 31, 2008 | March 31, 2008 | ||||||||||||||||||||||||||||||||||
Fair value | Fair value | Fair value | ||||||||||||||||||||||||||||||||||
carrying | carrying | carrying | ||||||||||||||||||||||||||||||||||
amount | amount | amount | ||||||||||||||||||||||||||||||||||
less | less | less | ||||||||||||||||||||||||||||||||||
Fair value | Aggregate | aggregate | Fair value | Aggregate | aggregate | Fair value | Aggregate | aggregate | ||||||||||||||||||||||||||||
carrying | unpaid | unpaid | carrying | unpaid | unpaid | carrying | unpaid | unpaid | ||||||||||||||||||||||||||||
(in millions) | amount | principal | principal | amount | principal | principal | amount | principal | principal | |||||||||||||||||||||||||||
Mortgages held for sale reported at fair value: | ||||||||||||||||||||||||||||||||||||
Total loans | $ | 35,205 | $ | 34,955 | $ | 250 | (1) | $ | 18,754 | $ | 18,862 | $ | (108 | )(1) | $ | 27,927 | $ | 27,705 | $ | 222 | (1) | |||||||||||||||
Nonaccrual loans | 211 | 491 | (280 | ) | 152 | 344 | (192 | ) | 48 | 86 | (38 | ) | ||||||||||||||||||||||||
Loans 90 days or more past due and still accruing | 71 | 79 | (8 | ) | 58 | 63 | (5 | ) | 30 | 31 | (1 | ) | ||||||||||||||||||||||||
Loans held for sale reported at fair value: | ||||||||||||||||||||||||||||||||||||
Total loans | 114 | 197 | (83 | ) | 398 | 760 | (362 | ) | - -- | - -- | - -- | |||||||||||||||||||||||||
Loans 90 days or more past due and still accruing | (4 | ) | 3 | (7 | ) | 1 | 17 | (16 | ) | - -- | - -- | - -- | ||||||||||||||||||||||||
(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 | , | |||||||||||||||||||
2009 | 2008 | |||||||||||||||||||
Loans | Mortgages | Other | Mortgages | Other | ||||||||||||||||
held | held | interests | held | interests | ||||||||||||||||
(in millions) | for sale | for sale | 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) | $ | - -- | $ | 1,663 | $ | - -- | $ | 752 | $ | - -- | ||||||||||
Other noninterest income | 44 | - -- | (17 | ) | - -- | (67 | ) | |||||||||||||
(1) | Includes changes in fair value of servicing associated with MHFS. |
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March 31, 2009 | December 31, 2008 | |||||||||||||||||||||||
Shares | ||||||||||||||||||||||||
issued and | Carrying | Carrying | ||||||||||||||||||||||
(in millions, except shares) | outstanding | Par value | value | Discount | value | Discount | ||||||||||||||||||
Series D(1) | ||||||||||||||||||||||||
Fixed Rate Cumulative Perpetual Preferred Stock, Series D, $1,000,000 liquidation preference per share, 25,000 shares authorized | 25,000 | $ | 25,000 | $ | 22,839 | $ | 2,161 | $ | 22,741 | $ | 2,259 | |||||||||||||
DEP Shares | ||||||||||||||||||||||||
Dividend Equalization Preferred Shares, $10 liquidation preference per share, 97,000 shares authorized | 96,546 | - -- | - -- | - -- | - -- | - -- | ||||||||||||||||||
Series J(1)(2) | ||||||||||||||||||||||||
8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J, $1,000 liquidation preference per share, 2,300,000 shares authorized | 2,150,375 | 2,150 | 1,995 | 155 | 1,995 | 155 | ||||||||||||||||||
Series K(1)(2) | ||||||||||||||||||||||||
7.98% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock, Series K, $1,000 liquidation preference per share, 3,500,000 shares authorized | 3,352,000 | 3,352 | 2,876 | 476 | 2,876 | 476 | ||||||||||||||||||
Series L(1)(2) | ||||||||||||||||||||||||
7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L, $1,000 liquidation preference per share, 4,025,000 shares authorized | 3,968,000 | 3,968 | 3,200 | 768 | 3,200 | 768 | ||||||||||||||||||
TOTAL | 9,591,921 | $ | 34,470 | $ | 30,910 | $ | 3,560 | $ | 30,812 | $ | 3,658 | |||||||||||||
(1) | Series D, J, K and L preferred shares qualify as Tier 1 capital. | |
(2) | In conjunction with the acquisition of Wachovia, at December 31, 2008, shares of Series J, K and L perpetual preferred stock were converted into shares of a corresponding series of Wells Fargo preferred stock having substantially the same rights and preferences. The carrying value is par value adjusted to fair value in purchase accounting. |
• | Series A – Non-Cumulative Perpetual Preferred Stock, Series A, $100,000 liquidation preference per share, 25,001 shares authorized | |
• | Series B – Non-Cumulative Perpetual Preferred Stock, Series B, $100,000 liquidation preference per share, 17,501 shares authorized | |
• | Series G – 7.25% Class A Preferred Stock, Series G, $15,000 liquidation preference per share, 50,000 shares authorized | |
• | Series H – Floating Class A Preferred Stock, Series H, $20,000 liquidation preference per share, 50,000 shares authorized |
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• | Series I – 5.80% Fixed to Floating Class A Preferred Stock, Series I, $100,000 liquidation preference per share, 25,010 shares authorized |
Shares issued and outstanding | Carrying value (in millions) | |||||||||||||||||||||||||||||||
Adjustable | ||||||||||||||||||||||||||||||||
Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | Mar. 31 | , | Dec. 31 | , | Mar. 31 | , | dividends rate | ||||||||||||||||||||
2009 | 2008 | 2008 | 2009 | 2008 | 2008 | Minimum | Maximum | |||||||||||||||||||||||||
ESOP Preferred Stock (1): | ||||||||||||||||||||||||||||||||
2008 | 138,108 | 156,914 | 395,494 | $ | 138 | $ | 157 | $ | 396 | 10.50 | % | 11.50 | % | |||||||||||||||||||
2007 | 110,159 | 110,159 | 126,374 | 110 | 110 | 126 | 10.75 | 11.75 | ||||||||||||||||||||||||
2006 | 83,249 | 83,249 | 95,866 | 83 | 83 | 96 | 10.75 | 11.75 | ||||||||||||||||||||||||
2005 | 62,484 | 62,484 | 73,434 | 63 | 63 | 73 | 9.75 | 10.75 | ||||||||||||||||||||||||
2004 | 45,950 | 45,950 | 55,610 | 46 | 46 | 56 | 8.50 | 9.50 | ||||||||||||||||||||||||
2003 | 29,218 | 29,218 | 37,043 | 29 | 29 | 37 | 8.50 | 9.50 | ||||||||||||||||||||||||
2002 | 18,889 | 18,889 | 25,779 | 19 | 19 | 26 | 10.50 | 11.50 | ||||||||||||||||||||||||
2001 | 10,393 | 10,393 | 16,593 | 10 | 10 | 17 | 10.50 | 11.50 | ||||||||||||||||||||||||
2000 | 2,620 | 2,644 | 9,094 | 3 | 3 | 9 | 11.50 | 12.50 | ||||||||||||||||||||||||
1999 | - -- | - -- | 1,261 | - -- | - -- | 1 | 10.30 | 11.30 | ||||||||||||||||||||||||
Total ESOP Preferred Stock | 501,070 | 519,900 | 836,548 | $ | 501 | $ | 520 | $ | 837 | |||||||||||||||||||||||
Unearned ESOP shares (2) | $ | (535 | ) | $ | (555 | ) | $ | (891 | ) | |||||||||||||||||||||||
(1) | Liquidation preference $1,000. At March 31, 2009, December 31, 2008, and March 31, 2008, additional paid-in capital included $34 million, $35 million and $54 million, respectively, related to preferred stock. | |
(2) | In accordance with the 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 | , | |||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Pension benefits | Pension benefits | |||||||||||||||||||||||
Non- | Other | Non- | Other | |||||||||||||||||||||
(in millions) | Qualified | qualified | benefits | Qualified | qualified | benefits | ||||||||||||||||||
Service cost | $ | 107 | $ | 4 | $ | 3 | $ | 73 | $ | 4 | $ | 3 | ||||||||||||
Interest cost | 145 | 19 | 21 | 69 | 5 | 10 | ||||||||||||||||||
Expected return on plan assets | (163 | ) | - -- | (7 | ) | (120 | ) | - -- | (10 | ) | ||||||||||||||
Amortization of net actuarial loss (1) | 106 | 2 | 1 | - -- | 3 | - -- | ||||||||||||||||||
Amortization of prior service cost | - -- | (1 | ) | (1 | ) | - -- | (1 | ) | (1 | ) | ||||||||||||||
Net periodic benefit cost | $ | 195 | $ | 24 | $ | 17 | $ | 22 | $ | 11 | $ | 2 | ||||||||||||
(1) | Net actuarial loss is generally amortized over five years. |
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Quarter ended March 31 | , | |||||||
(in millions, except per share amounts) | 2009 | 2008 | ||||||
Wells Fargo net income (numerator) | $ | 3,045 | $ | 1,999 | ||||
Less: Preferred stock dividends and accretion | 661 | - -- | ||||||
Wells Fargo net income applicable to common stock (numerator) | $ | 2,384 | $ | 1,999 | ||||
EARNINGS PER COMMON SHARE | ||||||||
Average common shares outstanding (denominator) | 4,247.4 | 3,302.4 | ||||||
Per share | $ | 0.56 | $ | 0.61 | ||||
DILUTED EARNINGS PER COMMON SHARE | ||||||||
Average common shares outstanding | 4,247.4 | 3,302.4 | ||||||
Add: Stock options | 1.8 | 15.4 | ||||||
Restricted share rights | 0.1 | 0.1 | ||||||
Diluted average common shares outstanding (denominator) | 4,249.3 | 3,317.9 | ||||||
Per share | $ | 0.56 | $ | 0.60 | ||||
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Wealth, | ||||||||||||||||||||||||||||||||||||||||
Brokerage | ||||||||||||||||||||||||||||||||||||||||
(income/expense in millions, | Community | Wholesale | and Retirement | Consolidated | ||||||||||||||||||||||||||||||||||||
average balances in billions) | Banking | Banking | Services | Other | Company | |||||||||||||||||||||||||||||||||||
Quarter ended March 31, | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||||||||||||
Net interest income (1) | $ | 8,497 | $ | 4,718 | $ | 2,367 | $ | 1,026 | $ | 737 | $ | 154 | $ | (225 | ) | $ | (138 | ) | $ | 11,376 | $ | 5,760 | ||||||||||||||||||
Provision for credit losses | 4,004 | 1,865 | 545 | 161 | 25 | 2 | (16 | ) | - -- | 4,558 | 2,028 | |||||||||||||||||||||||||||||
Noninterest income | 5,456 | 3,482 | 2,540 | 1,151 | 1,902 | 483 | (257 | ) | (313 | ) | 9,641 | 4,803 | ||||||||||||||||||||||||||||
Noninterest expense | 7,158 | 3,905 | 2,531 | 1,344 | 2,219 | 485 | (90 | ) | (292 | ) | 11,818 | 5,442 | ||||||||||||||||||||||||||||
Income (loss) before income tax expense (benefit) | 2,791 | 2,430 | 1,831 | 672 | 395 | 150 | (376 | ) | (159 | ) | 4,641 | 3,093 | ||||||||||||||||||||||||||||
Income tax expense (benefit) | 890 | 897 | 647 | 180 | 158 | 57 | (143 | ) | (60 | ) | 1,552 | 1,074 | ||||||||||||||||||||||||||||
Net income (loss) before noncontrolling interests | 1,901 | 1,533 | 1,184 | 492 | 237 | 93 | (233 | ) | (99 | ) | 3,089 | 2,019 | ||||||||||||||||||||||||||||
Less: Net income (loss) from noncontrolling interests | 62 | 11 | 4 | 9 | (22 | ) | - -- | - -- | - -- | 44 | 20 | |||||||||||||||||||||||||||||
Segment net income (loss) | $ | 1,839 | $ | 1,522 | $ | 1,180 | $ | 483 | $ | 259 | $ | 93 | $ | (233 | ) | $ | (99 | ) | $ | 3,045 | $ | 1,999 | ||||||||||||||||||
Average loans | $ | 552.8 | $ | 282.7 | $ | 271.9 | $ | 100.8 | $ | 46.7 | $ | 13.7 | $ | (15.8 | ) | $ | (13.3 | ) | $ | 855.6 | $ | 383.9 | ||||||||||||||||||
Average assets | 797.9 | 431.8 | 403.8 | 140.0 | 104.0 | 16.7 | (16.0 | ) | (13.5 | ) | 1,289.7 | 575.0 | ||||||||||||||||||||||||||||
Average core deposits | 538.0 | 246.6 | 138.5 | 68.2 | 102.6 | 21.0 | (25.2 | ) | (18.5 | ) | 753.9 | 317.3 | ||||||||||||||||||||||||||||
(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. |
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Quarter ended March 31, 2009 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
Dividends from subsidiaries: | ||||||||||||||||||||
Bank | $ | 716 | $ | - -- | $ | - -- | $ | (716 | ) | $ | - -- | |||||||||
Nonbank | - -- | - -- | - -- | - -- | - -- | |||||||||||||||
Interest income from loans | - -- | 985 | 9,785 | (5 | ) | 10,765 | ||||||||||||||
Interest income from subsidiaries | 651 | - -- | - -- | (651 | ) | - -- | ||||||||||||||
Other interest income | 113 | 26 | 3,412 | (3 | ) | 3,548 | ||||||||||||||
Total interest income | 1,480 | 1,011 | 13,197 | (1,375 | ) | 14,313 | ||||||||||||||
Deposits | - -- | - -- | 1,007 | (8 | ) | 999 | ||||||||||||||
Short-term borrowings | 64 | 9 | 336 | (286 | ) | 123 | ||||||||||||||
Long-term debt | 1,029 | 368 | 783 | (401 | ) | 1,779 | ||||||||||||||
Other interest-expense | - -- | - -- | 36 | - -- | 36 | |||||||||||||||
Total interest expense | 1,093 | 377 | 2,162 | (695 | ) | 2,937 | ||||||||||||||
NET INTEREST INCOME | 387 | 634 | 11,035 | (680 | ) | 11,376 | ||||||||||||||
Provision for credit losses | - -- | 675 | 3,883 | - -- | 4,558 | |||||||||||||||
Net interest income after provision for credit losses | 387 | (41 | ) | 7,152 | (680 | ) | 6,818 | |||||||||||||
NONINTEREST INCOME | ||||||||||||||||||||
Fee income – nonaffiliates | - -- | 53 | 5,310 | - -- | 5,363 | |||||||||||||||
Other | 173 | 33 | 4,697 | (625 | ) | 4,278 | ||||||||||||||
Total noninterest income | 173 | 86 | 10,007 | (625 | ) | 9,641 | ||||||||||||||
NONINTEREST EXPENSE | ||||||||||||||||||||
Salaries and benefits | 138 | 19 | 6,337 | - -- | 6,494 | |||||||||||||||
Other | 110 | 194 | 5,645 | (625 | ) | 5,324 | ||||||||||||||
Total noninterest expense | 248 | 213 | 11,982 | (625 | ) | 11,818 | ||||||||||||||
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES | 312 | (168 | ) | 5,177 | (680 | ) | 4,641 | |||||||||||||
Income tax expense (benefit) | (158 | ) | (57 | ) | 1,767 | - -- | 1,552 | |||||||||||||
Equity in undistributed income of subsidiaries | 2,575 | - -- | - -- | (2,575 | ) | - -- | ||||||||||||||
NET INCOME (LOSS) BEFORE NONCONTROLLING INTERESTS | 3,045 | (111 | ) | 3,410 | (3,255 | ) | 3,089 | |||||||||||||
Less: Net income from noncontrolling interests | - -- | - -- | 44 | - -- | 44 | |||||||||||||||
PARENT, WFFI, OTHER AND WELLS FARGO NET INCOME (LOSS) | $ | 3,045 | $ | (111 | ) | $ | 3,366 | $ | (3,255 | ) | $ | 3,045 | ||||||||
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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 | ||||||||||||||
Other interest-expense | - -- | - -- | - -- | - -- | - -- | |||||||||||||||
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 | 2,471 | (416 | ) | 2,227 | |||||||||||||
Total noninterest expense | (208 | ) | 543 | 5,523 | (416 | ) | 5,442 | |||||||||||||
INCOME BEFORE INCOME TAX EXPENSE AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES | 1,221 | 137 | 2,543 | (808 | ) | 3,093 | ||||||||||||||
Income tax expense | 145 | 55 | 874 | - -- | 1,074 | |||||||||||||||
Equity in undistributed income of subsidiaries | 923 | - -- | - -- | (923 | ) | - -- | ||||||||||||||
NET INCOME BEFORE NONCONTROLLING INTERESTS | 1,999 | 82 | 1,669 | (1,731 | ) | 2,019 | ||||||||||||||
Less: Net income from noncontrolling interests | - -- | - -- | 20 | - -- | 20 | |||||||||||||||
PARENT, WFFI, OTHER AND WELLS FARGO NET INCOME | $ | 1,999 | $ | 82 | $ | 1,649 | $ | (1,731 | ) | $ | 1,999 | |||||||||
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March 31, 2009 | ||||||||||||||||||||
Other | ||||||||||||||||||||
consolidating | Consolidated | |||||||||||||||||||
(in millions) | Parent | WFFI | subsidiaries | Eliminations | Company | |||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and cash equivalents due from: | ||||||||||||||||||||
Subsidiary banks | $ | 28,550 | $ | 211 | $ | -- | $ | (28,761 | ) | $ | -- | |||||||||
Nonaffiliates | -- | 268 | 40,543 | -- | 40,811 | |||||||||||||||
Securities available for sale | 4,731 | 2,221 | 171,519 | (3 | ) | 178,468 | ||||||||||||||
Mortgages and loans held for sale | -- | -- | 45,113 | -- | 45,113 | |||||||||||||||
Loans | 9 | 37,598 | 819,483 | (13,511 | ) | 843,579 | ||||||||||||||
Loans to subsidiaries: | ||||||||||||||||||||
Bank | 14,597 | -- | -- | (14,597 | ) | -- | ||||||||||||||
Nonbank | 64,161 | -- | -- | (64,161 | ) | -- | ||||||||||||||
Allowance for loan losses | -- | (1,723 | ) | (20,558 | ) | -- | (22,281 | ) | ||||||||||||
Net loans | 78,767 | 35,875 | 798,925 | (92,269 | ) | 821,298 | ||||||||||||||
Investments in subsidiaries: | ||||||||||||||||||||
Bank | 113,435 | -- | -- | (113,435 | ) | -- | ||||||||||||||
Nonbank | 19,663 | -- | -- | (19,663 | ) | -- | ||||||||||||||
Other assets | 12,316 | 1,376 | 200,163 | (13,654 | ) | 200,201 | ||||||||||||||
Total assets | $ | 257,462 | $ | 39,951 | $ | 1,256,263 | $ | (267,785 | ) | $ | 1,285,891 | |||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Deposits | $ | -- | $ | -- | $ | 823,550 | $ | (26,281 | ) | $ | 797,269 | |||||||||
Short-term borrowings | 5,294 | 8,237 | 105,010 | (46,457 | ) | 72,084 | ||||||||||||||
Accrued expenses and other liabilities | 6,984 | 1,182 | 65,219 | (14,554 | ) | 58,831 | ||||||||||||||
Long-term debt | 133,679 | 29,110 | 124,221 | (36,360 | ) | 250,650 | ||||||||||||||
Indebtedness to subsidiaries | 11,210 | -- | -- | (11,210 | ) | -- | ||||||||||||||
Total liabilities | 157,167 | 38,529 | 1,118,000 | (134,862 | ) | 1,178,834 | ||||||||||||||
Parent, WFFI, Other and Wells Fargo stockholders’ equity | 100,295 | 1,407 | 131,516 | (132,923 | ) | 100,295 | ||||||||||||||
Noncontrolling interests | -- | 15 | 6,747 | -- | 6,762 | |||||||||||||||
Total equity | 100,295 | 1,422 | 138,263 | (132,923 | ) | 107,057 | ||||||||||||||
Total liabilities and equity | $ | 257,462 | $ | 39,951 | $ | 1,256,263 | $ | (267,785 | ) | $ | 1,285,891 | |||||||||
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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 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 | 29,054 | (3,992 | ) | 31,480 | ||||||||||||||
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 | 491,505 | (96,845 | ) | 546,782 | ||||||||||||||
Parent, WFFI, Other and Wells Fargo stockholders’ equity | 48,159 | 3,258 | 51,521 | (54,779 | ) | 48,159 | ||||||||||||||
Noncontrolling interests | -- | 14 | 266 | -- | 280 | |||||||||||||||
Total equity | 48,159 | 3,272 | 51,787 | (54,779 | ) | 48,439 | ||||||||||||||
Total liabilities and equity | $ | 149,401 | $ | 54,152 | $ | 543,292 | $ | (151,624 | ) | $ | 595,221 | |||||||||
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Quarter ended March 31, 2009 | ||||||||||||||||
Other | ||||||||||||||||
consolidating | ||||||||||||||||
subsidiaries/ | Consolidated | |||||||||||||||
(in millions) | Parent | WFFI | eliminations | Company | ||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net cash provided (used) by operating activities | $ | (828 | ) | $ | 612 | $ | 16,051 | $ | 15,835 | |||||||
Cash flows from investing activities: | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Sales proceeds | 97 | 193 | 10,470 | 10,760 | ||||||||||||
Prepayments and maturities | -- | 39 | 7,304 | 7,343 | ||||||||||||
Purchases | (283 | ) | (317 | ) | (38,573 | ) | (39,173 | ) | ||||||||
Loans: | ||||||||||||||||
Decrease in banking subsidiaries’ loan originations, net of collections | -- | 17 | 10,891 | 10,908 | ||||||||||||
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries | -- | -- | 419 | 419 | ||||||||||||
Purchases (including participations) of loans by banking subsidiaries | -- | -- | (301 | ) | (301 | ) | ||||||||||
Principal collected on nonbank entities’ loans | -- | 2,310 | 865 | 3,175 | ||||||||||||
Loans originated by nonbank entities | -- | (991 | ) | (1,004 | ) | (1,995 | ) | |||||||||
Net repayments from (advances to) subsidiaries | 9,976 | -- | (9,976 | ) | -- | |||||||||||
Capital notes and term loans made to subsidiaries | (22 | ) | -- | 22 | -- | |||||||||||
Principal collected on notes/loans made to subsidiaries | 1,560 | -- | (1,560 | ) | -- | |||||||||||
Net decrease (increase) in investment in subsidiaries | (436 | ) | -- | 436 | -- | |||||||||||
Net cash paid for acquisitions | -- | -- | (123 | ) | (123 | ) | ||||||||||
Net change in noncontrolling interests | -- | -- | (186 | ) | (186 | ) | ||||||||||
Other, net | 22,264 | 140 | 5,284 | 27,688 | ||||||||||||
Net cash provided (used) by investing activities | 33,156 | 1,391 | (16,032 | ) | 18,515 | |||||||||||
Cash flows from financing activities: | ||||||||||||||||
Net change in: | ||||||||||||||||
Deposits | -- | -- | 15,725 | 15,725 | ||||||||||||
Short-term borrowings | (16,187 | ) | (426 | ) | (19,377 | ) | (35,990 | ) | ||||||||
Long-term debt: | ||||||||||||||||
Proceeds from issuance | 3,522 | -- | 289 | 3,811 | ||||||||||||
Repayment | (5,175 | ) | (1,524 | ) | (11,178 | ) | (17,877 | ) | ||||||||
Preferred stock: | ||||||||||||||||
Cash dividends paid and accretion | (623 | ) | -- | -- | (623 | ) | ||||||||||
Common stock: | ||||||||||||||||
Proceeds from issuance | 524 | -- | -- | 524 | ||||||||||||
Repurchased | (54 | ) | -- | -- | (54 | ) | ||||||||||
Cash dividends paid | (1,443 | ) | -- | -- | (1,443 | ) | ||||||||||
Net cash used by financing activities | (19,436 | ) | (1,950 | ) | (14,541 | ) | (35,927 | ) | ||||||||
Net change in cash and due from banks | 12,892 | 53 | (14,522 | ) | (1,577 | ) | ||||||||||
Cash and due from banks at beginning of quarter | 15,658 | 426 | 7,679 | 23,763 | ||||||||||||
Cash and due from banks at end of quarter | $ | 28,550 | $ | 479 | $ | (6,843 | ) | $ | 22,186 | |||||||
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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 | ) | ||||||||||
Net change in noncontrolling interests | -- | -- | 6 | 6 | ||||||||||||
Other, net | 439 | (52 | ) | (3,391 | ) | (3,004 | ) | |||||||||
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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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, 2009: | ||||||||||||||||||||||||||||||||||||||||||||||||
Total capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||
Wells Fargo & Company | $ | 131.8 | 12.30 | % | ³ | $ | 85.7 | ³ | 8.00 | % | ||||||||||||||||||||||||||||||||||||||
Wells Fargo Bank, N.A. | 53.7 | 11.87 | ³ | 36.2 | ³ | 8.00 | ³ | $ | 45.3 | ³ | 10.00 | % | ||||||||||||||||||||||||||||||||||||
Wachovia Bank, N.A. | 57.5 | 12.02 | ³ | 38.2 | ³ | 8.00 | ³ | 47.8 | ³ | 10.00 | ||||||||||||||||||||||||||||||||||||||
Tier 1 capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||
Wells Fargo & Company | $ | 89.0 | 8.30 | % | ³ | $ | 42.9 | ³ | 4.00 | % | ||||||||||||||||||||||||||||||||||||||
Wells Fargo Bank, N.A. | 34.8 | 7.70 | ³ | 18.1 | ³ | 4.00 | ³ | $ | 27.2 | ³ | 6.00 | % | ||||||||||||||||||||||||||||||||||||
Wachovia Bank, N.A. | 35.4 | 7.41 | ³ | 19.1 | ³ | 4.00 | ³ | 28.7 | ³ | 6.00 | ||||||||||||||||||||||||||||||||||||||
Tier 1 capital (to average assets) (Leverage ratio) | ||||||||||||||||||||||||||||||||||||||||||||||||
Wells Fargo & Company | $ | 89.0 | 7.09 | % | ³ | $ | 50.2 | ³ | 4.00 | %(1) | ||||||||||||||||||||||||||||||||||||||
Wells Fargo Bank, N.A. | 34.8 | 6.53 | ³ | 21.3 | ³ | 4.00 | (1) | ³ | $ | 26.7 | ³ | 5.00 | % | |||||||||||||||||||||||||||||||||||
Wachovia Bank, N.A. | 35.4 | 6.20 | ³ | 22.9 | ³ | 4.00 | (1) | ³ | 28.6 | ³ | 5.00 | |||||||||||||||||||||||||||||||||||||
(1) | The leverage ratio consists of Tier 1 capital divided by quarterly average total assets, excluding goodwill and certain other items. The minimum leverage ratio guideline is 3% for banking organizations that do not anticipate significant growth and that have well-diversified risk, excellent asset quality, high liquidity, good earnings, effective management and monitoring of market risk and, in general, are considered top-rated, strong banking organizations. |
Item 1. | Legal Proceedings | ||
Information in response to this item can be found in Note 11 (Guarantees and Legal Actions) to Financial Statements in this Report which information is incorporated by reference into this item. | |||
Item 1A. | Risk Factors |
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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 | 2,228,293 | $ | 24.00 | 12,128,427 | ||||||||
February | 10,458 | 14.77 | 12,117,969 | |||||||||
March | 55,995 | 10.31 | 12,061,974 | |||||||||
Total | 2,294,746 | |||||||||||
(1) | All shares were repurchased under the authorization covering up to 25 million shares of common stock approved by the Board of Directors and publicly announced by the Company on September 23, 2008. Unless modified or revoked by the Board, this authorization does not expire. |
Dated: May 11, 2009 | 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) | Certificate of Designations for the Company’s Non-Cumulative Perpetual Preferred Stock, Series A. | Incorporated by reference to Exhibit 4.8 to the Company’s Current Report on Form 8-K filed May 19, 2008. | ||||||||||
3(g) | Certificate of Designations for the Company’s Non-Cumulative Perpetual Preferred Stock, Series B. | Incorporated by reference to Exhibit 4.8 to the Company’s Current Report on Form 8-K filed September 10, 2008. | ||||||||||
3(h) | Certificate of Designations for the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series D. | Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed October 30, 2008. | ||||||||||
3(i) | Certificate of Designations for the Company’s Dividend Equalization Preferred Shares. | Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed December 30, 2008. | ||||||||||
3(j) | Certificate of Designations for the Company’s Class A Preferred Stock, Series G. | Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed December 30, 2008. | ||||||||||
3(k) | Certificate of Designations for the Company’s Class A Preferred Stock, Series H. | Incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed December 30, 2008. | ||||||||||
3(l) | Certificate of Designations for the Company’s Class A Preferred Stock, Series I. | Incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed December 30, 2008. | ||||||||||
3(m) | Certificate of Designations for the Company’s 8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J. | Incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed December 30, 2008. | ||||||||||
3(n) | Certificate of Designations for the Company’s Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series K. | Incorporated by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed December 30, 2008. | ||||||||||
3(o) | Certificate of Designations for the Company’s 7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L. | Incorporated by reference to Exhibit 4.7 to the Company’s Current Report on Form 8-K filed December 30, 2008. |
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Exhibit | ||||||||||||
Number | Description | Location | ||||||||||
3(p) | 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(p). | |||||||||||
4(b) | The Company agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of the Company. | |||||||||||
10(a) | Amendment to Directors Stock Compensation and Deferral Plan. | Filed herewith. | ||||||||||
10(b) | Amendments to Amended and Restated Wachovia Corporation 2003 Stock Incentive Plan. | Filed herewith. | ||||||||||
12(a) | Computation of Ratios of Earnings to Fixed Charges: | Filed herewith. | ||||||||||
Quarter ended March 31 | , | |||||||||||
2009 | 2008 | |||||||||||
Including interest on deposits | 2.50 | 1.98 | ||||||||||
Excluding interest on deposits | 3.22 | 2.98 | ||||||||||
(Computation is based on Wells Fargo net income.) | ||||||||||||
12(b) | Computation of Ratios of Earnings to Fixed Charges and Preferred Dividends: | Filed herewith. | ||||||||||
Quarter ended March 31 | , | |||||||||||
2009 | 2008 | |||||||||||
Including interest on deposits | 1.89 | 1.98 | ||||||||||
Excluding interest on deposits | 2.17 | 2.98 | ||||||||||
(Computation is based on Wells Fargo net income.) | ||||||||||||
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. |
126