Wells Fargo 2007 Annual Report Download - page 93

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90
(in millions) Year ended December 31,
2007 2006 2005 2004 2003
Balance, beginning of year $ 3,964 $ 4,057 $ 3,950 $ 3,891 $ 3,819
Provision for credit losses 4,939 2,204 2,383 1,717 1,722
Loan charge-offs:
Commercial and commercial real estate:
Commercial (629) (414) (406) (424) (597)
Other real estate mortgage (6) (5) (7) (25) (33)
Real estate construction (14) (2) (6) (5) (11)
Lease financing (33) (30) (35) (62) (41)
Total commercial and commercial real estate (682) (451) (454) (516) (682)
Consumer:
Real estate 1-4 family first mortgage (109) (103) (111) (53) (47)
Real estate 1-4 family junior lien mortgage (648) (154) (136) (107) (77)
Credit card (832) (505) (553) (463) (476)
Other revolving credit and installment (1,913) (1,685) (1,480) (919) (827)
Total consumer (3,502) (2,447) (2,280) (1,542) (1,427)
Foreign (265) (281) (298) (143) (105)
Total loan charge-offs (4,449) (3,179) (3,032) (2,201) (2,214)
Loan recoveries:
Commercial and commercial real estate:
Commercial 119 111 133 150 177
Other real estate mortgage 819 16 17 11
Real estate construction 2313 611
Lease financing 17 21 21 26 8
Total commercial and commercial real estate 146 154 183 199 207
Consumer:
Real estate 1-4 family first mortgage 22 26 21 6 10
Real estate 1-4 family junior lien mortgage 53 36 31 24 13
Credit card 120 96 86 62 50
Other revolving credit and installment 504 537 365 220 196
Total consumer 699 695 503 312 269
Foreign 65 76 63 24 19
Total loan recoveries 910 925 749 535 495
Net loan charge-offs (3,539) (2,254) (2,283) (1,666) (1,719)
Allowances related to business combinations/other 154 (43) 7 8 69
Balance, end of year $ 5,518 $ 3,964 $ 4,057 $ 3,950 $ 3,891
Components:
Allowance for loan losses $ 5,307 $ 3,764 $ 3,871 $ 3,762 $ 3,891
Reserve for unfunded credit commitments (1) 211 200 186 188 —
Allowance for credit losses $ 5,518 $ 3,964 $ 4,057 $ 3,950 $ 3,891
Net loan charge-offs as a percentage of average total loans 1.03% 0.73% 0.77% 0.62% 0.81%
Allowance for loan losses as a percentage of total loans 1.39% 1.18% 1.25% 1.31% 1.54%
Allowance for credit losses as a percentage of total loans 1.44 1.24 1.31 1.37 1.54
(1) In 2004, we transferred the portion of the allowance for loan losses related to commercial lending commitments and letters of credit to other liabilities.
The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded credit commitments.
Changes in the allowance for credit losses were:
The recorded investment in impaired loans included
in nonaccrual loans and the methodology used to measure
impairment was:
The average recorded investment in these impaired loans
during 2007, 2006 and 2005 was $313 million, $173 million
and $260 million, respectively.
When the ultimate collectibility of the total principal of
an impaired loan is in doubt, all payments are applied to
principal, under the cost recovery method. When the ultimate
collectibility of the total principal of an impaired loan is not
in doubt, contractual interest is credited to interest income
when received, under the cash basis method. Total interest
income recognized for impaired loans in 2007, 2006 and
2005 under the cash basis method was not significant.
(in millions) December 31,
2007 2006
Impairment measurement based on:
Collateral value method $285 $122
Discounted cash flow method 184 108
Total (1) $469 $230
(1) Includes $369 million and $146 million of impaired loans with a related allowance
of $50 million and $29 million at December 31, 2007 and 2006, respectively.