Wells Fargo 2006 Annual Report Download - page 60

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remaining maturity of the debt securities within this portfolio
was 5.2 years at December 31, 2006. Of the $41.1 billion
(cost basis) of debt securities in this portfolio at December 31,
2006, $5.0 billion, or 12%, is expected to mature or be
prepaid in 2007 and an additional $7.3 billion, or 18%, in
2008. Asset liquidity is further enhanced by our ability to sell
or securitize loans in secondary markets through whole-loan
sales and securitizations. In 2006, we sold mortgage loans of
$271 billion, including home mortgage loans and commercial
mortgage loans of $51 billion that we securitized. The amount
of mortgage loans, home equity loans and other consumer
loans available to be sold or securitized was approximately
$160 billion at December 31, 2006.
Core customer deposits have historically provided a size-
able source of relatively stable and low-cost funds. Average
core deposits and stockholders’ equity funded 62.4% and
63.2% of average total assets in 2006 and 2005, respectively.
The remaining assets were funded by long-term debt
(including trust preferred securities), deposits in foreign
offices, and short-term borrowings (federal funds purchased,
securities sold under repurchase agreements, commercial
paper and other short-term borrowings). Short-term borrow-
ings averaged $21.5 billion in 2006 and $24.1 billion in
2005. Long-term debt averaged $84.0 billion in 2006 and
$79.1 billion in 2005.
We anticipate making capital expenditures of approxi-
mately $1.2 billion in 2007 for our stores, relocation and
remodeling of Company facilities, and routine replacement
of furniture, equipment and servers. We fund expenditures
from various sources, including cash flows from operations
and borrowings.
Liquidity is also available through our ability to raise
funds in a variety of domestic and international money and
capital markets. We access capital markets for long-term
funding by issuing registered debt, private placements and
asset-backed secured funding. Rating agencies base their ratings
on many quantitative and qualitative factors, including capital
adequacy, liquidity, asset quality, business mix and level and
quality of earnings. Material changes in these factors could
result in a different debt rating; however, a change in debt
rating would not cause us to violate any of our debt covenants.
In September 2003, Moody’s Investors Service rated Wells Fargo
Bank, N.A. as “Aaa,” its highest investment grade, and rated
the Company’s senior debt rating as “Aa1.” In July 2005,
Dominion Bond Rating Service raised the Company’s senior
debt rating to “AA” from “AA(low).” In February 2007,
Standard & Poor’s Ratings Services raised Wells Fargo Bank,
N.A.’s credit rating to “AAA” from “AA+,” and raised the
Company’s senior debt rating to “AA+” from “AA.” Our
bank is now the only U.S. bank to have the highest possible
credit rating from both Moody’s and S&P.
Table 18 provides the credit ratings of the Company and
Wells Fargo Bank, N.A. as of December 31, 2006.
PARENT. Under SEC rules effective December 1, 2005, the
Parent is classified as a “well-known seasoned issuer,” which
allows it to file a registration statement that does not have a
limit on issuance capacity. “Well-known seasoned issuers”
generally include those companies with a public float of
common equity of at least $700 million or those companies
that have issued at least $1 billion in aggregate principal
amount of non-convertible securities, other than common
equity, in the last three years. However, the Parent’s ability
to issue debt and other securities under a registration state-
ment filed with the SEC under these new rules is limited by
the debt issuance authority granted by the Board. The Parent
is currently authorized by the Board to issue $25 billion in
outstanding short-term debt and $95 billion in outstanding
long-term debt, subject to a total outstanding debt limit of
$110 billion. In June 2006, the Parent’s registration state-
ment with the SEC for issuance of senior and subordinated
notes, preferred stock and other securities became effective.
During 2006, the Parent issued a total of $12.1 billion of
registered senior notes, including $3.7 billion (denominated in
euros) sold primarily in Europe and $2.3 billion (denominated
in pounds sterling) sold primarily in the United Kingdom.
The Parent also issued $751 million in junior subordinated
debt (trust preferred securities). Also, in 2006, the Parent
issued $534 million in private placements (denominated
in Australian dollars) under the Parent’s Australian debt
issuance program. We used the proceeds from securities
issued in 2006 for general corporate purposes and expect
that the proceeds in the future will also be used for general
corporate purposes. In January 2007, the Parent issued a
total of $3.7 billion in senior notes, including approximately
$1.5 billion denominated in pounds sterling. The Parent also
issues commercial paper from time to time, subject to its
short-term debt limit.
WELLS FARGO BANK, N.A. Wells Fargo Bank, N.A. is authorized
by its board of directors to issue $20 billion in outstanding
short-term debt and $40 billion in outstanding long-term
debt. In March 2003, Wells Fargo Bank, N.A. established a
$50 billion bank note program under which, subject to any
other debt outstanding under the limits described above, it
may issue $20 billion in outstanding short-term senior notes
and $30 billion in long-term senior notes. Securities are issued
under this program as private placements in accordance with
Office of the Comptroller of the Currency (OCC) regulations.
During 2006, Wells Fargo Bank, N.A. issued $3.2 billion in
long-term senior and subordinated notes, which included
long-term senior notes under the bank note program.
Table 18: Credit Ratings
Wells Fargo & Company Wells Fargo Bank, N.A.
Senior Subordinated Commercial Long-term Short-term
debt debt paper deposits borrowings
Moody’s Aa1 Aa2 P-1 Aaa P-1
Standard &
Poor’s (1) AA+ AA A-1+ AAA A-1+
Fitch, Inc. AA AA- F1+ AA+ F1+
Dominion Bond
Rating Service AA AA(low) R-1(middle) AA(high) R-1(high)
(1) Reflects February 2007 upgrade of credit ratings.