Wells Fargo 2011 Annual Report Download - page 99

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
or interpreted;
mergers, acquisitions and divestitures;
changes in the Company’s credit ratings and changes in the
credit quality of the Company’s customers or counterparties;
reputational damage from negative publicity, protests, fines,
penalties and other negative consequences from regulatory
violations and legal actions;
a failure in or breach of our operational or security systems
or infrastructure, or those of our third party vendors and
other service providers, including as a result of cyber
attacks;
the loss of checking and savings account deposits to other
investments such as the stock market, and the resulting
increase in our funding costs and impact on our net interest
margin;
fiscal and monetary policies of the FRB; and
the other risk factors and uncertainties described under
“Risk Factors” in this Report.
In addition to the above factors, we also caution that there is
no assurance that our allowance for credit losses will be adequate
to cover future credit losses, especially if housing prices decline
and unemployment worsens. Increases in loan charge-offs or in
the allowance for credit losses and related provision expense
could materially adversely affect our financial results and
condition.
Any forward-looking statement made by us in this Report
speaks only as of the date on which it is made. Factors or events
that could cause our actual results to differ may emerge from
time to time, and it is not possible for us to predict all of them.
We undertake no obligation to publicly update any forward-
looking statement, whether as a result of new information, future
developments or otherwise, except as may be required by law.
Risk Factors
An investment in the Company involves risk, including the
possibility that the value of the investment could fall
substantially and that dividends or other distributions on the
investment could be reduced or eliminated. We discuss below
and elsewhere in this Report, including under “Forward-Looking
Statements” and in our 2011 Form 10-K, as well as in other
documents we file with the SEC, risk factors that could adversely
affect our financial results and condition and the value of, and
return on, an investment in the Company. There may be other
factors not discussed below or elsewhere in this Report or in our
2011 Form 10-K that could adversely affect our financial results
and condition.
RISKS RELATED TO THE ECONOMY, FINANCIAL MARKETS, INTEREST
RATES AND LIQUIDITY
As one of the largest lenders in the U.S. and a provider
of financial products and services to consumers and
businesses across the U.S. and internationally, our
financial results have been, and will continue to be,
materially affected by general economic conditions,
particularly unemployment levels and home prices in
the U.S., and a deterioration in economic conditions or
in the financial markets may materially adversely affect
our lending and other businesses and our financial
results and condition. We generate revenue from the interest
and fees we charge on the loans and other products and services
we sell, and a substantial amount of our revenue and earnings
comes from the net interest income and fee income that we earn
from our consumer and commercial lending and banking
businesses, including our mortgage banking business where we
currently are the largest mortgage originator in the U.S. These
businesses have been, and will continue to be, materially affected
by the state of the U.S. economy, particularly unemployment
levels and home prices. Although the U.S. economy has
continued to gradually improve from the levels of 2008 and early
2009, economic growth has been slow and uneven and the
housing market remains weak. In addition, the negative effects
and continued uncertainty stemming from the sovereign debt
crisis and economic difficulties in Europe and U. S. fiscal and
political matters, including concerns about deficit reduction and
U.S. debt ratings, have impacted and may continue to impact the
continuing global economic recovery. A prolonged period of slow
growth in the global economy, particularly in the U.S., or any
deterioration in general economic conditions and/or the
financial markets resulting from the above matters or any other
events or factors that may disrupt or dampen the global
economic recovery, could materially adversely affect our
financial results and condition.
The high unemployment rate in the U.S., together with high
levels of unsold housing inventory and distressed property sales
and the significant decline in home prices across the U.S.,
including in many of our large banking markets such as
California and Florida, has resulted in elevated credit costs and
nonperforming asset levels, which have adversely affected our
credit performance and our financial results and condition. If
unemployment levels worsen or if home prices continue to fall
we would expect to incur higher than normal charge-offs and
provision expense from increases in our allowance for credit
losses. These conditions may adversely affect not only consumer
loan performance but also commercial and CRE loans, especially
for those business borrowers that rely on the health of industries
that may experience deteriorating economic conditions. The
ability of these and other borrowers to repay their loans may be
hurt, causing us, as one of the largest commercial lenders and the
largest CRE lender in the U.S., to incur significantly higher credit
losses. In addition, weak or deteriorating economic conditions
make it more challenging for us to increase our consumer and
97