Wells Fargo 2011 Annual Report Download - page 40

Earnings Performance (continued)
Net gains on mortgage loan origination/sales activities
include the cost of any additions to the mortgage repurchase
liability. Mortgage loans are repurchased from third parties
based on standard representations and warranties, and early
payment default clauses in mortgage sale contracts. Additions to
the mortgage repurchase liability that were charged against net
gains on mortgage loan origination/sales activities during 2011
totaled $1.3 billion (compared with $1.6 billion for 2010), of
which $1.2 billion ($1.5 billion for 2010) was for subsequent
increases in estimated losses on prior year’s loan sales. For
additional information about mortgage loan repurchases, see the
“Risk Management – Credit Risk Management – Liability for
Mortgage Loan Repurchase Losses” section and Note 9
(Mortgage Banking Activities) to Financial Statements in this
Report.
Net gains from trading activities, which reflect unrealized
changes in fair value of our trading positions and realized gains
and losses, were $1.0 billion in 2011 and $1.6 billion in 2010.
The year-over-year decrease was driven by challenging market
conditions, including sovereign debt concerns, which pressured
credit spreads, reduced prices on financial assets and limited
new issue origination and trading opportunities. The decline also
reflects a loss of $377 million in 2011 relating to our resolution of
a legacy Wachovia position. Net gains from trading activities do
not include interest income and other fees earned from related
activities. Those amounts are reported within interest income
from trading assets and other noninterest income, respectively,
in the income statement. Net gains from trading activities are
primarily from trading conducted on behalf of or driven by the
needs of our customers (customer accommodation trading) and
also include the results of certain economic hedging and
proprietary trading activity. Net gains (losses) from proprietary
trading were a $14 million net loss in 2011 and a $22 million net
gain in 2010. Proprietary trading results also included interest
and fees reported in their corresponding income statement line
items. Proprietary trading activities are not significant to our
client-focused business model. Our trading activities, customer
accommodation, economic hedging and proprietary trading are
further discussed in the “Asset/Liability Management – Market
Risk – Trading Activities” section in this Report.
Net gains on debt and equity securities totaled $1.5 billion for
2011 and $455 million for 2010, after other-than-temporary
impairment (OTTI) write downs of $711 million for 2011 and
$940 million for 2010. Included in net gains on debt and equity
securities for 2011 was a $271 million gain related to a legacy
Wachovia position, due to redemption of our interest in an
investment fund. Other income in 2011 also included a
$153 million gain on the sale of our H.D. Vest Financial Services
business.
38