Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - WELLS FARGO & COMPANY/MN | d520380d8k.htm |
| EX-99.1 - EX-99.1 - WELLS FARGO & COMPANY/MN | d520380dex991.htm |
 1Q13 Quarterly Supplement
April 12, 2013
Exhibit 99.2 |
 Wells Fargo
1Q13 Supplement 1
Appendix
Pages 22-35
-
Non-strategic/liquidating loan portfolio risk reduction
23
-
Purchased credit-impaired (PCI) portfolios
24
-
PCI nonaccretable difference
25
-
PCI accretable yield
26
-
Pick-a-Pay credit highlights
27
-
Real estate 1-4 family first mortgage portfolio
28
-
Home equity portfolio
29
-
Credit card portfolio
30
-
Auto portfolios
31
-
Student lending portfolio
32
Tier 1 common equity under Basel I
33
Tier 1 common equity under Basel III
(Estimated)
34
Forward-looking statements and
additional information
35
Table of contents
1Q13 Results
-
1Q13 Results
Page 2
-
Year-over-year results
3
-
Strong revenue diversification
4
-
Balance Sheet and credit overview
5
-
Income Statement overview
6
-
Loans
7
-
Deposits
8
-
Net interest income
9
-
Noninterest income
10
-
Residential mortgage
11
-
Noninterest expense and efficiency ratio
12
-
Environmentally-elevated costs
13
-
Community Banking
14
-
Wholesale Banking
15
-
Wealth, Brokerage and Retirement
16
-
Credit quality
17-18
-
Capital
19
-
Demonstrated momentum across the franchise
20
-
Summary –
strong 1Q13
21 |
 Wells Fargo
1Q13 Supplement 2
Record earnings of $5.2 billion, up 22% year-
over-year (YoY) and 2% linked quarter (LQ)
Record diluted earnings per common share of
$0.92, up 23% YoY and 1% LQ
Efficiency ratio of 58.3%
(1)
, improved 180 bps
YoY and 50 bps LQ
Pre-tax pre-provision profit
(2)
of $8.9 billion, up
2% YoY and down $193 million LQ
Strong credit performance with net charge-offs
of 72 bps
ROA = 1.49%, up 18 bps YoY and up 3 bps LQ
ROE = 13.59%, up 145 bps YoY and up 24 bps LQ
Capital levels continued to grow
-
10.38% Tier 1 common equity ratio under Basel I
and estimated Tier 1 common equity ratio under
Basel III of 8.39%
(3)
1Q13 Results
Wells Fargo Net Income
($ in millions)
Diluted earnings per common share
4,248
4,622
4,937
5,090
5,171
1Q12
2Q12
3Q12
4Q12
1Q13
$0.75
$0.82
$0.88
$0.91
$0.92
(1) Efficiency ratio defined as noninterest expense divided by total revenue (net
interest income plus noninterest income).
(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest
expense. Management believes PTPP is a useful financial measure because it enables
investors and others to assess the Company’s ability to generate capital to cover credit
losses through a credit cycle. (3) Estimated Basel III calculation based on management’s current interpretation of
the Basel III capital rules proposed by federal banking agencies in notices of proposed
rulemaking announced in June 2012. The proposed rules and interpretations and assumptions used in estimating Basel III calculations are subject
to change depending on final promulgation of Basel III capital rules. See pages 33-34 for
additional information regarding Tier 1 common equity ratios.
|
 Wells Fargo
1Q13 Supplement 3
Year-over-year results
Pre-tax Pre-provision Profit
($ in billions)
Net Income
($ in billions, except EPS)
Diluted earnings per common share
Period-end Loans
($ in billions)
Return on Assets
Return on Equity
Period-end Core Deposits
($ in billions)
$8.6
$8.9
1Q12
1Q13
1.31%
1.49%
1Q12
1Q13
$888.7
$939.9
1Q12
1Q13
12.14%
13.59%
1Q12
1Q13
$4.2
$5.2
1Q12
1Q13
$0.75
$0.92
658.3
709.2
108.2
90.8
$766.5
$800.0
1Q12
1Q13
Core loans
Non-strategic/liquidating loans |
 Wells Fargo
1Q13 Supplement 4
Balanced Spread and
Fee Income
Diversified Fee Generation
Deposit Service Charges
11%
Card Fees
7%
Total Mortgage Banking
26%
Insurance
4%
Net Gains from Trading
5%
Strong revenue diversification
Total Trust & Investment Fees 30%
Total Other Fees
10%
Other Noninterest Income
(1)
7%
Net Interest
Income
Noninterest
Income
Brokerage advisory,
commissions and
other
Mortgage Orig./
Sales, net
Mortgage Servicing, net
Trust and investment
management
Investment banking
Charges and fees on loans
1%
Merchant processing
1%
Cash network
1%
CRE brokerage commissions
All other fees
1%
Letters of credit
Card fees
Deposit service charges
Other noninterest income
(1)
Net gains from trading
Insurance
All data is for 1Q13.
(1) Other noninterest income includes net gains (losses) on debt securities available
for sale, equity investments, lease income, life insurance investment income and all
other noninterest income. |
 Wells Fargo
1Q13 Supplement 5
Balance Sheet and credit overview
Loans
Total period-end loans up $392 million
-
Core loans increased $4.1 billion reflecting the retention of $3.4 billion of
1-4 family conforming first mortgage production as well as growth in foreign
and auto
-
Non-strategic/liquidating
portfolio
decreased
$3.7
billion
(1)
Short-term investments/
Fed funds sold
Up $6.5 billion on average deposit balance growth
Securities available for
sale (AFS)
Up $13.0 billion driven by new investments
-
$17.8 billion in gross agency MBS purchases during periods of higher rates in
the quarter
Deposits
Up $7.9 billion on strong retail deposit growth
Long-term debt
Down $1.2 billion as $7.6 billion in issuances were more than offset by maturities,
redemptions and other reductions
Common stock
repurchases
Purchased 16.6 million common shares in the quarter
2013 Capital Plan included an increase in common stock repurchase activity
compared with 2012
Credit
Provision expense of $1.2 billion down $612 million
-
Net charge-offs of $1.4 billion, or 72 bps, down $662 million on $165 million
lower losses in commercial and $497 million lower losses in consumer; 4Q12
losses included $321 million in consumer losses from the completion of
implementation
of
OCC
guidance
(2)
-
$200 million reserve release
(3)
vs. $250 million in 4Q12
Period-end balances. All result comparisons are 1Q13 compared with 4Q12.
(1) See pages 7 and 23 for additional information regarding
core loans and the non-strategic/liquidating portfolio, which comprises the Pick-a-Pay, liquidating
home equity, legacy WFF indirect auto, legacy WFF debt consolidation, Education
Finance-government guaranteed, and legacy Wachovia commercial & industrial,
commercial real estate, foreign and other PCI loan portfolios. (2) Office of the Comptroller of the Currency update to the Bank Accounting
Advisory Series issued third quarter 2012 (OCC guidance). The OCC guidance requires
write-down of performing consumer loans discharged in bankruptcy to net realizable
collateral value. (3) Provision expense minus net charge-offs.
|
 Wells Fargo
1Q13 Supplement 6
Income Statement overview
Total revenue
Revenue of $21.3 billion, down $689 million, or 3%, from 4Q12 that included above-
average quarterly equity gains
Net interest income
NII down 1% primarily reflecting two fewer days in the quarter
Net interest margin (NIM) down 8 bps to 3.48% driven by continued growth in deposit
balances and lower variable income
Noninterest income
Mortgage banking down $274 million reflecting lower mortgage origination volumes
-
Net servicing income up $64 million
-
Gain on sale revenue down $338 million
Trust & investment fees stable as strong retail brokerage transaction revenue and
asset-based fees were offset by lower investment banking
Market sensitive revenues
(1)
down $199 million
-
Lower gains on equity investments from 4Q12 that included the gain on the sale
of Becker Underwood more than offset stronger trading
Noninterest expense
Personnel expense up $832 million, including $460 million in seasonally higher
employee benefits expense, annual equity awards for retirement-eligible employees
and higher deferred compensation expense
Operating losses down $796 million reflecting 4Q12 accrual for the Independent
Foreclosure Review (IFR) Settlement and additional remediation-related costs
All other expense down $265 million reflecting a 4Q12 contribution to the Foundation
Income tax rate
31.9% effective income tax rate includes the benefit associated with the realization
for tax purposes of a previously written-down investment
Full year effective tax rate expected to be higher than 1Q13 absent additional
discrete benefits
All result comparisons are 1Q13 compared with 4Q12.
(1) Includes net gains from trading activities, net gains (losses) on debt securities
available for sale and net gains from equity investments. |
 Wells Fargo
1Q13 Supplement 7
Loans
Solid core loan growth
Period-end loans up $33.5 billion YoY and $392
million from 4Q12
-
Commercial loans up $516 million LQ on growth
in foreign loans
-
Consumer loans down $124 million LQ as growth
in first mortgage and auto was more than offset
by a $2.9 billion decline in junior lien mortgage
and seasonally lower credit card
•
Includes retention of $3.4 billion of 1-4 family
conforming first mortgages
Non-strategic/liquidating loans
(1)
down $17.4
billion YoY and $3.7 billion from 4Q12
Core loans grew $50.9 billion YoY and $4.1 billion
LQ
Total average loans of $798.1 billion up $29.5
billion YoY and $10.9 billion LQ
Total average loan yield of 4.49%, down 9 bps LQ
-
Core loan yield excluding the non-strategic/
liquidating portfolio was down 8 bps
-
Non-strategic/liquidating portfolio yield
of 5.02%
(1) See page 23 for additional information regarding the non-strategic/liquidating
portfolio, which comprises the Pick-a-Pay, liquidating home equity, legacy WFF
indirect auto, legacy WFF debt consolidation, Education Finance-government guaranteed, and
legacy Wachovia commercial & industrial, commercial real estate, foreign and other
PCI loan portfolios. Period–end Loans Outstanding
($ in billions)
(1)
Total average loan yield
766.5
775.2
782.6
799.6
800.0
1Q12
2Q12
3Q12
4Q12
1Q13
Core loans
Non-strategic/liquidating loans |
 Wells Fargo
1Q13 Supplement 8
668.4
689.2
711.9
246.6
286.9
274.3
915.0
976.1
986.2
1Q12
4Q12
1Q13
Interest-bearing deposits
Noninterest-bearing deposits
Deposits
Continued growth and reduced average cost
Average deposits up $71.2 billion YoY and $10.1
billion LQ driven by late 4Q12 deposit growth as
well as retail deposit growth in the quarter
Average core deposits of $925.9 billion up $55.3
billion YoY and down $3.0 billion from 4Q12
-
116% of average loans
-
Average retail core deposits up 8% YoY and
11% annualized LQ
Average core checking and savings up $62.8
billion, or 8% YoY, and down $1.5 billion
from 4Q12
-
94% of average core deposits
Average deposit cost of 15 bps, down 1 bp
from 4Q12
Average Deposits and Rates
($ in billions)
Average deposit cost
Average Core Checking and Savings
($ in billions)
807.8
872.1
870.6
1Q12
4Q12
1Q13
0.20%
0.16%
0.15% |
 Wells Fargo
1Q13 Supplement 9
Tax-equivalent net interest income
(1)
down 2% LQ primarily due to two fewer days
in the quarter
Average earning assets up $21.6 billion or
2% LQ
-
Short-term investments/fed funds sold up
$3.9 billion
-
Loans up $10.9 billion
-
AFS securities up $10.6 billion
-
Mortgages held for sale declined $3.9 billion
NIM of 3.48%, down 8 bps, from 4Q12 on:
-
Deposit growth = (3) bps
-
Variable income = (3) bps
-
Continued balance sheet repricing, growth and
mix = (2) bps
Net interest income
Net Interest Income (TE)
(1)
($ in millions)
Net Interest Margin (NIM)
(1) Tax-equivalent net interest income is based on the federal statutory rate of 35%
for the periods presented. Net interest income was $10,888 million, $11,037 million,
$10,662 million, $10,643 million, $10,499 million for 1Q12, 2Q12, 3Q12, 4Q12 and 1Q13 respectively.
1Q12
2Q12
3Q12
4Q12
1Q13
11,058
11,213
10,820
10,841
10,675 |
 Wells Fargo
1Q13 Supplement 10
Noninterest income
Deposit service charges down 3% LQ reflecting
seasonality
Trust and investment fees essentially flat LQ as a 4%
increase in retail brokerage transaction revenue and
asset-based fees was offset by lower investment
banking
Other fees down $159 million, or 13% LQ, driven by
lower commercial real estate brokerage commissions
Mortgage banking down $274 million, or 9%, LQ
-
Net servicing income up $64 million as higher
servicing fees and lower MSR amortization
expense were partially offset by lower net
MSR/servicing hedge results
-
Gain on sale revenue down $338 million on
lower origination volumes
-
$112 million in forgone revenue from the
retention of conforming production
10,748
10,252
10,551
11,305
10,760
1Q12
2Q12
3Q12
4Q12
1Q13
vs
vs
($ in millions)
1Q13
4Q12
1Q12
Noninterest income
Service charges on deposit accounts
$
1,214
(3)
%
12
Trust and investment fees
Brokerage advisory, commissions
and other fees
2,050
4
12
Trust and investment management
799
-
6
Investment banking
353
(20)
37
Card fees
738
-
13
Other fees
1,034
(13)
(6)
Mortgage banking
2,794
(9)
(3)
Insurance
463
17
(11)
Net gains from trading activities
570
107
(11)
45
n.m.
n.m.
Net gains from equity investments
113
(84)
(69)
Lease income
130
(24)
120
Other
457
25
(28)
Total noninterest income
$
10,760
(5)
%
-
Net gains on debt securities available
for sale
Insurance up 17% LQ driven by seasonally
higher crop insurance premiums
Trading gains up $295 million LQ and included
$120 million higher deferred compensation plan
investment income (P&L neutral)
Equity gains down $602 million from 4Q12
which included the gain on sale of Becker
Underwood |
 Wells Fargo
1Q13 Supplement 11
4.90
5.89
7.11
9.03
6.88
7.77
2.14
2.70
3.06
2.73
2.61
2.82
7.04%
8.59%
10.17%
11.76%
9.48%
10.59%
Wells Fargo
Citi
JPM Chase
Bank of
America
Industry
Industry ex
WFC
Deliquency Rate
Foreclosure Rate
Residential mortgage
Production, servicing and repurchase trends
Sixth consecutive quarter of over $100 billion of
originations
-
Margins remained elevated and are expected
to decline
Wells Fargo total delinquency and foreclosure
ratio for 1Q13 was 6.54%, down 50 bps LQ and
down from 6.89% in 1Q12
-
4Q12 Wells Fargo delinquency and foreclosure
ratio continued to be lower than peers
Number and balance of total outstanding
repurchase demands were down slightly
LQ and YoY
Repurchase reserves of $2.3 billion increased
$111 million LQ
(1) Net gains on mortgage loan origination/or sales activities less repurchase
reserve build divided by total originations.
(2) Includes mortgage insurance rescissions.
(3) Inside Mortgage Finance, data as of December 31, 2012. Industry excluding
WFC performance calculated based on IMF data.
(4) Industry is all large servicers ($5.9 trillion) including WFC, C, JPM and BAC.
(4)
Total
Outstanding
Repurchase
Demands
(2)
and
Agency New Demands for 2006-2008 Vintages
4Q12 Servicing Portfolio Delinquency
Performance
(3)
Residential mortgage production trends
($ in billions)
1Q13
4Q12
3Q12
2Q12
1Q12
Applications
140
152
188
208
188
Pipeline
74
81
97
102
79
Originations
109
125
139
131
129
Gain on Sale
(1)
2.56
%
2.56
2.21
2.20
2.36
Number of Outstanding Demands
Agency New Demands for 2006-2008 Vintages
Original Loan Balance of Outstanding Demands ($ in B) |
 Wells Fargo
1Q13 Supplement 12
Noninterest expense and efficiency ratio
(1)
Noninterest expense down $496 million
from 4Q12
-
Personnel expense up $832 million, or 12%
•
Employee benefits included $460 million of
seasonally higher payroll taxes and 401(K)
matching expenses and $103 million higher
deferred compensation expense
•
Commissions and incentive compensation
included $199 million in annual equity awards
for retirement-eligible employees
-
Other expense down $1.2 billion
•
4Q12 results included $644 million
incremental accrual to fully reserve for
settlement costs associated with the IFR
Settlement and additional remediation-related
costs as well as a $250 million contribution to
the Foundation
•
Outside professional services down $209
million on lower legal costs and ~$60 million
lower OCC Consent Order costs
Efficiency ratio of 58.3% in 1Q13
Continue to target an efficiency ratio of 55%-
59%
Expect 2Q13 expenses to decline from 1Q13
12,993
12,397
12,112
12,896
12,400
1Q12
2Q12
3Q12
4Q12
1Q13
Efficiency Ratio
894
(2)
12,002
60.1%
58.2%
57.1%
58.8%
58.3%
(1)
Efficiency ratio defined as noninterest expense divided by total revenue (net
interest income plus noninterest income). Noninterest expense and our
efficiency ratio may be affected by a variety of factors, including business and
economic cyclicality, seasonality, changes in our business composition and
operating environment, growth in our business and/or acquisitions, and
unexpected expenses relating to, among other things, litigation and regulatory
matters.
(2)
Includes $644 million for IFR Settlement and additional remediation-related
costs and $250 million Foundation contribution.
vs
vs
($ in millions)
1Q13
4Q12
1Q12
Noninterest expense
Salaries
$
3,663
(2)
%
2
Commission and incentive compensation
2,577
9
7
Employee benefits
1,583
78
(2)
Equipment
528
(3)
(5)
Net occupancy
719
(1)
2
Core deposit and other intangibles
377
(10)
(10)
FDIC and other deposit assessments
292
(5)
(18)
Other
2,661
(32)
(20)
Total noninterest expense
$
12,400
(4)
%
(5) |
 Wells Fargo
1Q13 Supplement 13
Environmentally-elevated costs
(1)
Contra revenue item. Change in estimate.
(2) Contra revenue item. MSR valuation adjustments include costs to service and
unreimbursed foreclosure costs. ($ in millions)
Expense description
1Q13
4Q12
FY 2012
OCC
Consent
Order
-
Foreclosure
Review
costs:
Independent consultant expense
$
~40
~100
~400
Internal costs
~10
~25
~100
Foreclosed asset expense
195
221
1,061
Mortgage repurchase reserve build
(1)
250
313
1,665
MSR servicing and foreclosure costs
(2)
58
127
677 |
 Wells Fargo
1Q13 Supplement 14
Community Banking
Net income of $2.9 billion, up 25% YoY
and 2% LQ
Regional Banking
Continued franchise and cross-sell growth
(1)
-
Primary consumer checking customers
(2) (3)
up
a net 2.1% YoY
-
Business checking accounts
(2)
up a net
2.9% YoY
-
Retail bank cross-sell of 6.10 products per
household up from 5.98 in 1Q12
Consumer Lending
Credit card penetration
(1) (4)
rose to 34.1%, up
from 33.1% in 4Q12 and 29.9% in 1Q12
Record consumer auto originations of $6.8 billion,
up 27% LQ and up 10% YoY
Mortgage originations of $109 billion down
13% LQ and 16% YoY
-
10% of originations were from HARP
(5)
vs.
12% in 4Q12 and 15% in 1Q12
vs
vs
($ in millions)
1Q13
4Q12
1Q12
Net interest income
$
7,119
(1)
%
(3)
Noninterest income
5,780
(13)
(5)
Provision for credit losses
1,262
(28)
(33)
Noninterest expense
7,377
(8)
(6)
Income tax expense
1,288
40
-
Segment earnings
$
2,924
2
%
25
($ in billions)
Avg loans, net
$
498.9
1
3
Avg core deposits
619.2
2
8
(1)
Metrics reported on a one-month lag from reported quarter-end; for example 1Q13
cross-sell is as of February 2013. (2)
Checking customer and account growth is 12-months ending for each respective period.
(3)
Customers who actively use their checking account with transactions such as debit card
purchases, online bill payments, and direct deposit. (4)
Household penetration as of February 2013 and defined as the percentage of retail banking
deposit households that have a credit card with Wells Fargo. Household penetration has
been redefined to include legacy Wells Fargo Financial accounts.
(5)
Home Affordable Refinance Program.
1Q13
4Q12
1Q12
Regional Banking
Primary consumer checking customers
(1)(2)(3)
2.1
%
n.a.
n.a.
Business checking account growth
(1)(2)
2.9
3.7
3.8
Retail Bank household cross-sell
(1)
6.10
6.05
5.98
vs
vs
($ in billions)
1Q13
4Q12
1Q12
Consumer Lending
Credit card payment volumes (POS)
$
11.7
(8)
%
14
Credit card penetration
(1)(4)
34.1
%
100
bps
420
Home Mortgage
Applications
$
140
(8)
%
(26)
Application pipeline
74
(9)
(6)
Originations
109
(13)
(16) |
 Wells Fargo
1Q13 Supplement 15
Wholesale Banking
Net income of $2.0 billion, up 9% YoY and 1% LQ
Net interest income down 3% LQ; average loans
up 2%
Noninterest income up 6% LQ on broad-based
growth
Provision reflects lower gross losses and higher
recoveries
Expenses up 3% LQ driven by seasonally higher
personnel and insurance expense
Key Metrics
Cross-sell of 6.8 products per relationship
(1)
up
20 bps YoY
Treasury Management
Commercial card spend volume of $4.4 billion up
2% LQ and 19% YoY
Investment Banking
1Q13 Investment Banking fees from Wholesale
customers up 14% YoY
U.S. investment banking market share
(2)
of 4.6%
Asset Management
Total AUM up $11.4 billion LQ and included $4.1
billion in net flows into both short-term and long-
term strategies
(1) Cross-sell reported on a one-quarter lag.
(2) Source: Dealogic U.S. investment banking fee market share.
vs
vs
($ in millions)
1Q13
4Q12
1Q12
Net interest income
$
3,005
(3)
%
(6)
Noninterest income
3,081
6
8
Provision for credit losses
(58)
n.m.
n.m.
Noninterest expense
3,091
3
1
Income tax expense
1,007
13
(1)
Segment earnings
$
2,045
1
%
9
($ in billions)
Avg loans, net
$
284.5
2
6
Avg core deposits
224.1
(7)
1
vs
vs
($ in billions)
1Q13
4Q12
1Q12
Key Metrics:
Cross-sell
(1)
6.8
-
%
3
Commercial card spend
volume
$
4.4
2
19
YTD U.S. investment banking
market share %
(2)
4.6
%
(50)
bps
(20)
Total AUM
$
463.2
3
%
4
Advantage Funds AUM
223.6
3
7 |
 Wealth, Brokerage and Retirement
Net income up 14% YoY and down 4% LQ
Net interest income down 3% LQ; average core
deposits up 4%
Noninterest income up 5% LQ; excluding $47
million higher deferred compensation plan
investment results, noninterest income was up
3% due to higher retail brokerage transaction
revenue and asset-based fees
Noninterest expense was up 5% LQ; excluding
$41 million in higher deferred compensation
expense, expenses increased 3% due to
seasonality in personnel expenses and increased
broker commissions
Retail Brokerage
Managed account assets of $325 billion, up 7%
LQ and 16% YoY driven by strong net flows and
market performance
Wealth Management
Wealth
Management
client
assets
up
2%
LQ
and
3% YoY
Retirement
IRA assets up 6% LQ and 9% YoY
Institutional Retirement plan assets up 5% LQ
and 9% YoY
(1) Includes deposits.
(2) Data as of February 2013.
vs
vs
($ in millions)
1Q13
4Q12
1Q12
Net interest income
$
669
(3)
%
(5)
Noninterest income
2,528
5
7
Provision for credit losses
14
(7)
(67)
Noninterest expense
2,639
5
4
Income tax expense
207
(4)
14
Segment earnings
$
337
(4)
%
14
($ in billions)
Avg loans, net
$
43.8
1
3
Avg core deposits
149.4
4
10
vs
vs
($ in billions, except where noted)
1Q13
4Q12
1Q12
Key Metrics:
WBR Clients Assets
(1)
($ in trillions)
$
1.5
5
%
7
Cross-sell
(2)
10.33
1
2
Retail Brokerage
Financial Advisors
15,354
-
1
Managed account assets
$
325
7
16
Client assets
(1)
($ in trillions)
1.3
5
7
Wealth Management
Client assets
(1)
208
2
3
Retirement
IRA Assets
314
6
9
Institutional Retirement
Plan Assets
279
5
9
Wells Fargo 1Q13 Supplement
16 |
 2.4
2.2
2.4
2.1
1.4
1Q12
2Q12
3Q12
4Q12
1Q13
1.25%
1.15%
1.21%
1.05%
0.72%
2.0
1.8
1.6
1.8
1.2
1Q12
2Q12
3Q12
4Q12
1Q13
Credit quality
Trends showed continued improvement
Provision expense of $1.2 billion, down $612
million from 4Q12
Net charge-offs of $1.4 billion were down $662
million LQ, or 32%; 4Q12 consumer losses
included $321 million from OCC guidance
(1)
0.72% net charge-off rate
-
Commercial losses of 0.10%, down 19 bps LQ
-
Consumer losses of 1.23%, down 45 bps LQ,
reflecting both lower severities and frequency
NPAs declined $1.6 billion LQ on a $960 million
decline in nonaccrual loans and a $673 million
decline in foreclosed assets
Early stage consumer delinquency balances
decreased 14% and rates declined 26 bps LQ
Reserve release
(2)
of $200 million vs. $250
million in 4Q12
-
Absent significant deterioration in the economy
we continue to expect future reserve releases
in 2013
Allowance for credit losses = $17.2 billion
Remaining PCI nonaccretable = 22.9% of
remaining UPB
(3)
(1) OCC guidance, see page 5 for additional information. 4Q12 losses included $271
million from the completion of implementation and $50 million from 4Q12 activity.
(2) Provision expense minus net charge-offs.
(3) Unpaid principal balance for PCI loans that have not had a UPB charge-off.
Net Charge-offs
($ in billions)
Provision Expense
($ in billions)
1.8
0.6
(1)
0.89%
Net charge-off rate (as reported)
Net charge-off rate (as adjusted)
0.3
(1)
0.92%
1.8
Wells Fargo 1Q13 Supplement
17 |
 22.0
20.6
19.7
20.5
19.5
4.6
4.3
4.2
4.0
3.4
26.6
24.9
25.3
24.5
22.9
1Q12
2Q12
3Q12
4Q12
1Q13
Nonaccrual loans
Foreclosed assets
1.2
1.1
1.2
1.1
1.1
0.4
0.3
0.3
0.3
0.3
1.6
1.4
1.5
1.4
1.4
1Q12
2Q12
3Q12
4Q12
1Q13
Consumer
Commercial
6.8
6.6
6.9
6.5
5.5
$0
$5
$10
1Q12
2Q12
3Q12
4Q12
1Q13
2.00%
1.94%
1.97%
1.79%
1.53%
Credit quality
Trends showed continued improvement
Nonperforming Assets
(1)
($ in billions)
Consumer Loans 30-89 DPD &
Still
Accruing
(1)(4)
(Balances and rates)
Loans
90+
DPD
and
Still
Accruing
(1)(4)
($ in billions)
(2)
1.4
(3)
(1)
30-89 days and 90 days or more past due and still accruing, and nonperforming loans,
include held for sale loans reported on Balance Sheet. (2)
Includes $1.7 billion at March 31, 2012, resulting from implementation of Interagency
Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for
Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties issued January 31, 2012.
(3)
OCC guidance.
(4)
Excludes mortgage loans insured/guaranteed by the FHA or VA, reverse mortgages, margin loans
and student loans whose repayments are predominantly guaranteed by guarantee agencies
on behalf of the U.S. Department of Education under the Federal Family Education Loan Program. Also excludes the
carrying value of PCI loans contractually delinquent.
Wells Fargo 1Q13 Supplement
18 |
 Capital
9.98%
10.08%
9.92%
10.12%
10.38%
1Q12
2Q12
3Q12
4Q12
1Q13
Capital remained strong
Tier 1 common equity ratio under Basel I
of 10.38% increased 26 bps LQ
-
Ratio reduced by 25 bps by implementation of
Basel 2.5
(1)
Tier 1 common equity ratio under Basel III is
estimated to be 8.39% at 3/31/13
(2)
Purchased
16.6 million common shares in 1Q13
Redeemed $2.8 billion of trust preferred
securities
2013 Capital Plan includes an increase in capital
returns
to
shareholders
from
2012
and
includes:
-
Dividend rate of $0.30 per share for 2Q13
subject to Board approval
-
Increase in common stock repurchase
activity
Tier 1 Common Equity Ratio
Under Basel I
Wells Fargo 1Q13 Supplement
19
See Appendix page 33-34 for additional information regarding Tier 1 common equity ratios.
1Q13 capital ratios are preliminary estimates.
(1)
Federal Reserve’s Market Risk Final Rule became effective on January 1, 2013.
(2)
Estimated Basel III calculation based on management’s current interpretation of the Basel
III capital rules proposed by federal banking agencies in notices of proposed
rulemaking announced in June 2012. The proposed rules and interpretations and assumptions used in estimating Basel III calculations are subject to
change depending on final promulgation of Basel III capital rules. See pages 33-34 for
additional information regarding Tier 1 common equity ratios. |
 Demonstrated momentum across the franchise
Retail
bank
cross-sell
of
6.10
products
per
household
up
from
5.98
in
1Q12
(1)
$4.2 billion in net new loan commitments to small business customers, up 24% YoY
Primary consumer checking customers up a net 2.1% YoY
(2)
Record auto originations of $6.8 billion, up 27% LQ and 10% YoY
Consumer
credit
card
new
accounts
in
1Q13
increased
31%
LQ
and
18%
YoY
with
household
penetration
increasing 420 bps YoY to 34.1%
(3)
Cross-sell
of
6.8
products
per
relationship
(4)
up
from
6.6
in
1Q12
driven
by
increased
penetration
with
eastern commercial banking customers across multiple products
Eleven consecutive quarters of average loan growth in Commercial Banking
Investment banking revenue from Wholesale customers increased 14% YoY, including revenue from
commercial and corporate customers which was up 2%
AUM up 4% YoY from $19 billion in net flows as well as higher market valuations
Record managed account assets of $325 billion increased 7% LQ and 16% YoY
Cross-sell
of
10.33
products
per
household
up
from
10.16
in
1Q12
(1)
Wells Fargo 1Q13 Supplement
20
(1)
Metrics reported on a one-month lag from reported quarter-end; for example 1Q13
cross-sell is as of February 2013.
(2)
Checking customer growth is 12-months ending February 2013.
Customers who actively use their checking account with transactions such as debit card
purchases, online bill payments, and direct deposit. (3)
Household penetration as of February 2013 and defined as the percentage of retail banking
deposit households that have a credit card with Wells Fargo.
(4)
Wholesale Banking cross-sell is reported on a one-quarter lag and is as of December
2012 and December 2011, respectively. Regional Banking
Consumer Lending Group
Wholesale Banking
Wealth, Brokerage and Retirement |
 Summary
-
strong
1Q13
Record earnings of $5.2 billion, up $923 million, or 22% from 1Q12
Record diluted earnings per share of $0.92, up 23%
1Q13 efficiency ratio of 58.3%, improved 180 bps
PTPP of $8.9 billion up $216 million, or 2%
Strong credit performance
Solid returns
-
ROA = 1.49%, up 18 bps
-
ROE = 13.59%, up 145 bps
Strong capital generation
All comparisons are 1Q13 vs. 1Q12.
Wells Fargo 1Q13 Supplement
21 |
 Appendix
Wells Fargo 1Q13 Supplement
22 |
 (1) Net
of purchase accounting adjustments. -$82.6
Non-strategic/liquidating loan portfolio risk reduction
-$5.1
-$100.0
-$4.5
-$4.1
-$3.7
($ in billions)
1Q13
4Q12
3Q12
2Q12
1Q12
4Q08
Pick-a-Pay mortgage
(1)
$
56.6
58.3
60.1
62.0
64.0
95.3
Liquidating home equity
4.4
4.6
5.0
5.2
5.5
10.3
Legacy WFF indirect auto
0.6
0.8
1.1
1.5
1.9
18.2
Legacy WFF debt consolidation
14.1
14.5
15.0
15.5
16.0
25.3
Education Finance - gov't guaranteed
11.9
12.5
13.0
13.8
14.8
20.5
Legacy WB C&I, CRE and foreign PCI loans
(1)
2.8
3.2
3.8
4.3
5.2
18.7
Legacy WB other PCI loans
(1)
0.4
0.6
0.6
0.8
0.8
2.5
Total
$
90.8
94.5
98.6
103.1
108.2
190.8
Wells Fargo 1Q13 Supplement
23 |
 Purchased credit-impaired (PCI) portfolios
Legacy Wachovia PCI loans continued to perform better than originally expected
($ in billions)
Adjusted unpaid principal balance
(1)
December 31, 2008
$
29.2
62.5
6.5
98.2
December 31, 2012
5.0
32.0
1.4
38.4
March 31, 2013
4.4
31.1
0.9
36.4
Nonaccretable difference rollforward
12/31/08 Nonaccretable difference
$
10.4
26.5
4.0
40.9
Addition of nonaccretable difference due to acquisitions
0.2
-
-
0.2
Losses from loan resolutions and write-downs
(6.9)
(17.6)
(2.9)
(27.4)
Release of nonaccretable difference since merger
(3.4)
(3.0)
(0.8)
(7.2)
(2)
3/31/13 Remaining nonaccretable difference
0.3
5.9
0.3
6.5
Life-to-date net performance
Additional provision since 2008 merger
$
(1.7)
-
(0.1)
(1.8)
Release of nonaccretable difference since 2008 merger
3.4
3.0
0.8
7.2
(2)
Net performance
1.7
3.0
0.7
5.4
Commercial
Pick-a-Pay
Other
consumer
Total
Wells Fargo 1Q13 Supplement
24
(1)
Includes write-downs taken on loans where severe delinquency (normally 180 days) or other
indications of severe borrower financial stress exist that indicate there will be a
loss of contractually due amounts upon final resolution of the loan.
(2)
Reflects releases of $1.8 billion for loan resolutions and $5.4 billion from the
reclassification of nonaccretable difference to the accretable yield, which will result
in increasing income over the remaining life of the loan or pool of loans.
|
 $31 million
in nonaccretable difference reclassified to accretable yield this quarter $412 million
in losses from loan resolutions and write-downs in the quarter $6.5 billion in
nonaccretable difference remains to absorb losses on PCI loans -
Remaining
nonaccretable
=
22.9%
of
unpaid
principal
balance
(UPB)
(5)
•
Remaining
Pick-a-Pay
nonaccretable
=
24.2%
of
Pick-a-Pay
UPB
(5)
PCI nonaccretable difference
Analysis of nonaccretable difference for PCI loans
($ in millions)
Pick-a-Pay
Total
Balance, December 31, 2012
$
422
6,232
Addition of nonaccretable difference due to acquisitions
-
-
-
Release of nonaccretable difference due to:
Loans
resolved
by
settlement
with
borrower
(1)
(30)
-
-
Loans
resolved
by
sales
to
third
parties
(2)
(5)
-
-
Reclassification
to
accretable
yield
for
loans
with
improving
credit-related
cash
flows
(3)
(31)
-
Use of nonaccretable difference due to:
Losses
from
loan
resolutions
and
write-downs
(4)
(20)
(345)
Balance, March 31, 2013
$
336
5,887
Other
consumer
Commercial
310
6,964
-
(30)
-
(31)
(5)
(47)
(412)
263
6,486
(1)
Release of the nonaccretable difference for settlement with borrower, on individually
accounted PCI loans, increases interest income in the period of settlement.
Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference
releases for settlements with borrowers due to pool accounting for those loans, which
assumes that the amount received approximates the pool performance expectations.
(2)
Release of the nonaccretable difference as a result of sales to third parties increases
noninterest income in the period of the sale. (3)
Reclassification of nonaccretable difference to accretable yield for loans with increased cash
flow estimates will result in increased interest income as a prospective yield
adjustment over the remaining life of the loan or pool of loans.
(4)
Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable
difference when severe delinquency (normally 180 days) or other indications of severe
borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.
(5)
Unpaid principal balance of loans without write-downs.
Wells Fargo 1Q13 Supplement
25 |
 Accretable
yield balance decreased $583 million LQ and included: -
Accretion into interest income of $447 million
-
Accretion into noninterest income of $151 million reflecting loan sales of other consumer PCI
loans Balance of $18.0 billion expected to accrete to income over the remaining life of
the underlying loans -
Commercial accretable yield balance of $1.0 billion; weighted average life of portfolio is 2.9
years •
Accretable yield percentage of 16.60% relatively stable LQ
-
Pick-a-Pay accretable yield balance of $16.6 billion; weighted average life of 12.3
years •
Accretable yield percentage of 4.7% flat LQ
PCI accretable yield
(1) Includes accretable yield released as a result of settlements with borrowers, which
is included in interest income. (2) Includes accretable yield released as a
result of sales to third parties, which is included in noninterest income. (3)
Represents changes in cash flows expected to be collected due to the impact of modifications, changes in prepayment assumptions, changes in interest rates on
variable rate PCI loans and sales to third parties.
Cumulative
Accretable yield rollforward
since
($ in millions)
1Q13
4Q12
merger
Total, beginning of period
$
18,548
18,912
10,447
Addition of accretable yield due to acquisitions
-
3
131
Accretion
into
interest
income
(1)
(447)
(513)
(9,798)
Accretion
into
noninterest
income
due
to
sales
(2)
(151)
-
(393)
Reclassification from nonaccretable difference for loans with improving credit-related
cash flows 31
135
5,385
Changes
in
expected
cash
flows
that
do
not
affect
nonaccretable
difference
(3)
(16)
11
12,193
Total, end of period
$
17,965
18,548
17,965
Wells Fargo 1Q13 Supplement
26 |
 Pick-a-Pay credit highlights
Non-PCI portfolio
Loans down 3% LQ driven by loans paid-in-full
85% of portfolio current
Nonaccrual loans flat LQ
-
$129 million of nonaccrual TDRs reclassified to
accruing TDR status based on borrower payment
performance
$4.2 billion in nonaccruals includes $2.1 billion
of nonaccruing TDRs
Net charge-offs of $104 million down $34 million
LQ on improved portfolio performance and lower
severities
48% of portfolio with LTV
(2)
80%
PCI portfolio
Carrying value down 2%
68% of portfolio current, consistent with 4Q12
Life-of-loan losses continued to be lower than
originally projected at time of merger
Wells Fargo 1Q13 Supplement
27
($ in millions)
1Q13
4Q12
Non-PCI loans
Carrying value
(1)
$
30,843
31,940
Nonaccrual loans
4,204
4,200
as a % of loans
13.63
%
13.15
Net charge-offs
$
104
138
as % of avg loans
1.34
%
1.68
90+ days past due
as % of loans
10.23
10.30
Current
average
LTV
(2)
81
%
83
($ in millions)
1Q13
4Q12
PCI loans
Adjusted
unpaid
principal
balance
(3)
$
31,078
32,003
Carrying value
(1)
25,765
26,334
Current
average
LTV
(2)
86
%
88
(1)
The carrying value, which does not reflect the allowance for loan losses, includes purchase
accounting adjustments, which, for PCI loans, are the nonaccretable difference and the
accretable yield, and for all other loans, an adjustment to mark the loans to a market yield at date of merger less any
subsequent
charge-offs.
(2)
The current loan-to-value (LTV) ratio is calculated as the net carrying value (defined
in (1) above) divided by the collateral value.
(3)
The adjusted unpaid principal balance includes write-downs taken on loans where severe
delinquency (normally 180 days) or other indications of severe borrower financial
stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.
|
 Real estate 1-4 family first mortgage portfolio
First lien mortgage loans up 1% as growth in core
first lien mortgage was partially offset by
continued run-off in the liquidating portfolio
-
Pick-a-Pay non-PCI portfolio down 3%
-
PCI portfolio down 3%
-
Debt consolidation first lien down 3%
-
Core first lien up $4.6 billion, or 3%, reflecting the
retention of $3.4 billion of conforming production
and continued strong origination volumes
Core net charge-offs down $123 million from
4Q12 losses that included OCC guidance impact;
1Q13 reflected improved severities and frequency
(1)
Ratios
on
Legacy
WFF
debt
consolidation
first
mortgage
loan
portfolio
only.
(2) Ratios on non run-off first lien mortgage loan portfolio only.
Wells Fargo 1Q13 Supplement
28
($ in millions)
1Q13
4Q12
Total real estate 1-4 family first mortgage
$
252,307
249,900
Less consumer non-strategic/liquidating portfolios:
Pick-a-Pay non-PCI first lien mortgage
30,843
31,940
PCI first lien mortgage
26,086
26,838
Debt consolidation first mortgage portfolio
13,794
14,178
Core first lien mortgage
181,584
176,944
Nonaccrual loans
$
2,323
2,363
as % of loans
16.84 %
16.67
Net charge-offs
$
119
182
as % of average loans
3.45 %
5.03
Nonaccrual loans
$
4,793
4,892
as % of loans
2.64 %
2.76
Net charge-offs
$
206
329
as % of loans
0.46 %
0.74
Legacy
WFF
debt
consolidation
first
mortgage
loan
performance
(1)
Core
first
lien
mortgage
loan
performance
(2) |
 Home equity portfolio
Core Portfolio
(1)
Outstandings
down 3%
-
High quality new originations with weighted
average CLTV of 62%, 777 FICO, and 32% total
debt service ratio
1Q13 losses decreased $208 million
2+ delinquencies decreased $226 million
Delinquency rate for loans with a CLTV >100%
improved 33 bps
Liquidating Portfolio
Outstandings down 5%
1Q13 losses decreased $35 million
2+ delinquencies declined $17 million
Delinquency rate for loans with a CLTV >100%
improved 45 bps
Total
home
equity
portfolio
=
$92
billion
21% in 1
lien position
40% in junior lien position behind WFC owned or
serviced 1
lien
-
Current
1
lien,
Current
junior
lien
=
96.1%
-
Current
1
lien,
Delinquent
junior
lien
=
1.0%
-
Delinquent
1
lien,
Current
junior
lien
=
1.4%
-
Delinquent
1
lien,
Delinquent
junior
lien
=
1.5%
39%
in
junior
lien
position
behind
third
party
1
lien
Excludes purchased credit-impaired loans.
(1) Includes equity lines of credit and closed-end junior liens associated with the
Pick-a-Pay portfolio totaling $1.3 billion at March 31, 2013 and at December
31, 2012.
(2)
CLTV
is
calculated
based
on
outstanding
balance
plus
unused
lines
of
credit
divided by estimated home value. Estimated home values are determined
predominantly based on automated valuation models updated through March
2013.
(3) Unsecured balances, representing the percentage of outstanding balances
above the most recent home value.
($ in millions)
1Q13
4Q12
Core Portfolio
(1)
Outstandings
87,298
90,427
Net charge-offs
414
622
as % of avg loans
1.89
%
2.69
2+ payments past due
2,271
2,497
as % loans
2.61
%
2.77
% CLTV > 100%
(2)
33
34
2+ payments past due
3.19
3.52
% Unsecured balances
(3)
15
15
% 1st lien position
22
22
Liquidating Portfolio
Outstandings
4,421
4,647
Net charge-offs
66
101
as % of avg loans
5.87
%
8.33
2+ payments past due
161
178
as % loans
3.64
%
3.82
% CLTV > 100%
(2)
70
71
2+ payments past due
3.28
3.73
% 1st lien position
4
4
Wells Fargo 1Q13 Supplement
29
st
st
st
st
st
st
st |
 Credit card portfolio
Credit card outstandings of $24.1 billion, down
2% LQ on seasonally lower balances and up 10%
YoY on strong account growth
-
Record 577,000 new accounts in 1Q13, up 31%
LQ and 18% YoY
-
Credit Card household penetration rate rose to
34.1%
(1)
, up from 33.1% in 4Q12
-
Purchase dollar volume and transactions are
down 8% and 7% from 4Q12, respectively
reflecting seasonality
Net charge-offs up $13 million, or 25 bps, LQ and
down $7 million, or 44 bps, YoY
(1) Household penetration as of February 2013 and defined as the percentage of retail
banking deposit households that have a credit card with Wells Fargo. ($ in millions)
1Q13
4Q12
Credit card outstandings
$
24,120
24,640
Net charge-offs
235
222
as % of avg loans
3.96
%
3.71
Key Metrics:
Purchase volume
$
11,658
12,609
Penetration
(1)
34.1
%
33.1
Wells Fargo 1Q13 Supplement
30 |
 Auto portfolios
(1)
Consumer Portfolio
Auto outstandings of $47.3 billion up 3% LQ and
7% YoY
-
1Q13 originations of $6.8 billion up 27% LQ
reflecting seasonal car sales and up 10% YoY
Nonaccrual loans stable LQ
Net charge-offs were down $36 million LQ
-
March Manheim index of 120.4, down 3% LQ and
5% from March 2012
30+ days past due decreased $338 million LQ
reflecting seasonality
Commercial Portfolio
Loans of $7.6 billion up 2% LQ and 21% YoY as
dealer floorplan utilization rates hit highest levels
since the merger
Continued strong credit performance
(1)
The auto portfolio has been refined to exclude Specialized Lending recreational vehicle and
marine loan balances and includes the liquidating legacy Wells Fargo Financial indirect
portfolio of $593 million. ($ in millions)
1Q13
4Q12
Auto outstandings
$
44,939
43,647
Nonaccrual loans
192
210
as % of loans
0.43
%
0.48
Net charge-offs
$
71
103
as % of avg loans
0.65
%
0.94
30+ days past due
$
614
937
as % of loans
1.37
%
2.15
Auto outstandings
$
2,320
2,351
Nonaccrual loans
28
35
as % of loans
1.20
%
1.50
Net charge-offs
$
5
9
as % of avg loans
0.85
%
1.41
30+ days past due
$
19
34
as % of loans
0.83
%
1.43
Commercial Portfolio
Auto outstandings
$
7,570
7,396
Nonaccrual loans
-
-
as % of loans
-
%
-
Net charge-offs (recoveries)
$
-
-
as % of avg loans
n.m.
%
n.m.
Indirect Consumer Portfolio
Direct Consumer Portfolio
Wells Fargo 1Q13 Supplement
31 |
 Student lending portfolio
$22.9 billion student lending outstandings down
1% LQ
Private Portfolio
$11.0 billion private loans outstandings up 3% LQ
and up 7% YoY
-
Applications decreased 10% LQ due to spring
term applications
-
Dollar originations increased 140% LQ due
to spring term disbursements in the quarter
-
Continued to originate high quality loans with
an average FICO of 764 and 78% of new loans
co-signed
Net charge-offs down $8 million LQ due to
seasonality of repayments on loans
Government Portfolio
$11.9 billion liquidating government guaranteed
outstandings declined 4% LQ and 19% YoY
($ in millions)
1Q13
4Q12
Education Finance
Total outstandings
$
22,897
23,119
Private Portfolio
Private outstandings
$
10,975
10,654
Net charge-offs
30
38
as % of avg loans
1.10
%
1.41
30 days past due
$
226
233
as % of loans
2.06
%
2.19
Government Guaranteed Portfolio
Government outstandings
$
11,922
12,465
Wells Fargo 1Q13 Supplement
32 |
 Tier 1 common equity under Basel I
(1)
Wells Fargo 1Q13 Supplement
33
Wells Fargo & Company and Subsidiaries
FIVE
QUARTER
TIER
1
COMMON
EQUITY
UNDER
BASEL
I
(1)
Mar. 31,
Dec. 31,
Sept. 30
June 30,
Mar. 31,
($ in billions)
2013
2012
2012
2012
2012
Total equity
163.4
$
158.9
156.1
149.4
146.8
Noncontrolling interests
(1.3)
(1.3)
(1.4)
(1.3)
(1.3)
Total Wells Fargo stockholders' equity
162.1
157.6
154.7
148.1
145.5
Adjustments:
Preferred equity
(12.6)
(12.0)
(11.3)
(10.6)
(10.6)
Goodwill and intangible assets (other than MSRs)
(32.5)
(32.9)
(33.4)
(33.5)
(33.7)
Applicable deferred assets
3.1
3.2
3.3
3.5
3.7
Deferred tax asset limitation
-
-
-
-
-
MSRs over specified limitations
(0.8)
(0.7)
(0.7)
(0.7)
(0.9)
Cumulative other comprehensive income
(5.1)
(5.6)
(6.4)
(4.6)
(4.1)
Other
(0.6)
(0.6)
(0.4)
(0.5)
(0.4)
Tier 1 common equity
(A)
113.6
$
109.0
105.8
101.7
99.5
Total risk-weighted assets
(2)
(B)
1,095.1
$
1,077.1
1,067.10
1,008.6
996.8
Tier 1 common equity to total risk-weighted assets
(2)
(A)/(B)
10.38
%
10.12
9.92
10.08
9.98
(1)
(2)
Tier 1 common equity is a non-generally accepted accounting
principle (GAAP) financial measure that is used by investors,
analysts and bank regulatory agencies to assess the capital
position of financial services companies. Management reviews Tier 1 common equity along with other measures of capital
as part of its financial analyses and has included this non-GAAP
financial information, and the corresponding reconciliation to
total equity, because of current interest in such information on
the part of market participants. 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 Company’s March 31, 2013, risk-weighted
assets and resulting Tier 1 common equity to total risk-weighted
assets are preliminary and reflect total estimated on-balance sheet and total estimated
derivative and off-balance sheet risk-weighted assets of $882.7
billion and $212.4 billion, respectively. Effective September 30, 2012, the Company refined
its determination of the risk weighting of certain unused lending
commitments that provide for the ability to issue standby letters of credit and
commitments to issue standby letters of credit under syndication
arrangements where the Company has an obligation to issue in a lead
agent or similar capacity beyond its contractual participation
level. |
 Tier 1 common equity under Basel III (Estimated)
(1)
Wells Fargo 1Q13 Supplement
34
Wells Fargo & Company and Subsidiaries
TIER
1
COMMON
EQUITY
UNDER
BASEL
III
(ESTIMATED)
(1)
(2)
Mar. 31,
($ in billions)
2013
Tier 1 common equity under Basel I
113.6
$
Adjustments from Basel I to Basel III
(3)(5)
:
Cumulative other comprehensive income related to AFS securities and
defined benefit pension plans
4.8
$
0.5
5.3
Threshold deductions, as defined under Basel III
(4) (5)
(0.9)
Tier 1 common equity anticipated under Basel III
(C)
118.0
$
Total risk-weighted assets anticipated under Basel III
(6)
(D)
1,406.1
$
Tier 1 common equity to total risk-weighted assets anticipated
under Basel III (C)/(D)
8.39
%
(1)
(2)
(3)
(4)
(5)
(6)
Volatility in interest rates can have a significant impact on the
valuation of cumulative other comprehensive income and MSRs and therefore, may impact
adjustments from Basel I to Basel III, and MSRs subject to threshold
deductions, as defined under Basel III, in future reporting
periods.
Under current Basel proposals, risk-weighted assets incorporate
different classifications of assets, with certain risk weights
based on a borrower's credit rating or Wells Fargo's own risk
models, along with adjustments to address a combination of credit/counterparty, operational and
market risks, and other
Basel III elements. The amount of risk-weighted assets anticipated
under Basel III is preliminary and subject to change depending on final promulgation
of Basel III capital rulemaking and interpretations thereof by
regulatory authorities. Other
Total adjustments from Basel I to Basel III
Tier 1 common equity is a non-generally accepted accounting
principle (GAAP) financial measure that is used by investors,
analysts and bank regulatory agencies to assess the capital
position of financial services companies. Management reviews Tier 1 common equity along with other measures of capital
as part of its financial analyses and has included this non-GAAP
financial information, and the corresponding reconciliation to
total equity, because of current interest in such information on
the part of market participants. The Basel III Tier 1 common
equity and risk-weighted assets are calculated based on management’s current interpretation of the Basel III capital rules
proposed by federal banking agencies in notices of proposed rulemaking
announced in June 2012. The proposed rules and interpretations and
assumptions used in estimating Basel III calculations are subject to
change depending on final promulgations of Basel III capital rules.
Adjustments from Basel I to Basel III represent reconciling
adjustments, primarily certain components of cumulative other comprehensive income
deducted for Basel I purposes, to derive Tier 1 common equity under
Basel III. Threshold
deductions,
as
defined
under
Basel
III,
include
individual
and
aggregate
limitations,
as
a
percentage
of
Tier
1
common
equity,
with
respect
to
MSRs, deferred tax assets and investments in unconsolidated financial
companies. |
 Forward-looking statements and additional information
Forward-looking statements:
This Quarterly Supplement and management’s related presentation contain
forward-looking statements about our future financial performance.
These
forward-looking
statements
include
statements
using
words
such
as
“believe,”
“expect,”
“anticipate,”
“estimate,”
“target”, “should,”
“may,”
“can,”
“will,”
“outlook,”
“appears”
or similar expressions. These forward-looking statements may include,
among others, statements about: future credit quality and performance, including our current
expectation of future loan loss reserve releases; our outlook for future growth;
mortgage repurchase exposure; exposure related to mortgage practices, including
foreclosures and servicing; our noninterest expense and efficiency ratio, including our
targeted efficiency ratio range as part of our expense
management
initiatives;
the
future
economic
environment,
including
the
housing
market;
loan
growth;
our
expectations
regarding
net
interest
income
and
net
interest
margin;
reduction
or
mitigation
of
risk
in
our
loan
portfolios;
our
mortgage
originations, including mortgage volume, sale or retention of our mortgage production, and
gain on sale margins; the estimated impact of regulatory reform on our financial
results and business and expectations regarding our efforts to mitigate such impact; our
estimated
Tier
1
common
equity
ratio
as
of
March
31,
2013,
under
proposed
Basel
III
capital
rules;
our
full
year
2013
effective
income
tax
rate;
and
future
common
stock
dividends,
common
share
repurchases
and
other
uses
of
capital.
Investors
are
urged
to
not unduly rely on forward-looking statements as actual results could differ materially
from expectations. Forward-looking statements speak only as of the date made, and
we do not undertake to update them to reflect changes or events that occur after that
date. For more information about factors that could cause actual results to differ materially from expectations, refer to page 14
of Wells Fargo’s press release announcing our first quarter 2013 results, as well as
Wells Fargo’s reports filed with the Securities and Exchange
Commission,
including
the
discussion
under
“Risk
Factors”
in
our
Annual
Report
on
Form
10-K
for
the
year
ended
December 31, 2012.
Purchased credit-impaired loan portfolio:
Loans that were acquired from Wachovia that were considered credit impaired were written down
at acquisition date in purchase accounting to an amount estimated to be collectible and
the related allowance for loan losses was not carried over to Wells Fargo’s
allowance. In addition, such purchased credit-impaired loans are not classified as
nonaccrual or nonperforming, and are not included in loans that were contractually 90+
days past due and still accruing. Any losses on such loans are charged against the
nonaccretable difference established in purchase accounting and are not reported as
charge-offs (until such difference is fully utilized). As a result of accounting
for purchased loans with evidence of credit deterioration, certain ratios of the combined company
are not comparable to a portfolio that does not include purchased credit-impaired
loans. In certain cases, the purchased credit-impaired loans may affect portfolio
credit ratios and trends. Management believes that the presentation of information
adjusted to exclude the purchased credit-impaired loans provides useful disclosure regarding the credit
quality of the non-impaired loan portfolio. Accordingly, certain of the loan balances and
credit ratios in this Quarterly Supplement have been adjusted to exclude the purchased
credit-impaired loans. References in this Quarterly Supplement to impaired loans mean
the
purchased
credit-impaired
loans.
Please
see
pages
31-33
of
the
press
release
for
additional
information
regarding
the
purchased
credit-impaired loans.
Wells Fargo 1Q13 Supplement
35 |