Wells Fargo 2012 Annual Report Download - page 66

Risk Management – Credit Risk Management (continued)
NONPERFORMING ASSETS (NONACCRUAL LOANS AND
FORECLOSED ASSETS) Table 28 summarizes nonperforming
assets (NPAs) for each of the last five years. We generally place
loans on nonaccrual status when:
x the full and timely collection of interest or principal
becomes uncertain (generally based on an assessment of the
borrower’s financial condition and the adequacy of
collateral, if any);
x they are 90 days (120 days with respect to real estate 1-4
family first and junior lien mortgages) past due for interest
or principal, unless both well-secured and in the process of
collection;
x part of the principal balance has been charged off;
x effective first quarter 2012, for junior lien mortgages, we
have evidence that the related first lien mortgage may be
120 days past due or in the process of foreclosure regardless
of the junior lien delinquency status; or
x effective third quarter 2012, performing consumer loans are
discharged in bankruptcy, regardless of their delinquency
status.
In first quarter 2012, we implemented the Interagency
Guidance, which requires us to place junior liens on nonaccrual
status if the related first lien is nonaccruing. At
December 31, 2012, $960 million of such junior liens were
classified as nonaccrual.
In third quarter 2012, we implemented the OCC guidance
related to loans discharged in bankruptcy, which increased
nonperforming assets by $1.8 billion as of December 31, 2012,
and increased loan charge-offs by $888 million for 2012.
Note 1 (Summary of Significant Accounting Policies – Loans)
to Financial Statements in this Report describes our accounting
policy for nonaccrual and impaired loans.
Table 28: Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
December 31,
(in millions) 2012 2011 2010 2009 2008
Nonaccrual loans:
Commercial:
Commercial and industrial $ 1,422 2,142 3,213 4,397 1,253
Real estate mortgage 3,322 4,085 5,227 3,696 594
Real estate construction 1,003 1,890 2,676 3,313 989
Lease financing 27 53 108 171 92
Foreign 50 47 127 146 57
Total commercial (1) 5,824 8,217 11,351 11,723 2,985
Consumer:
Real estate 1-4 family first mortgage (2) 11,455 10,913 12,289 10,100 2,648
Real estate 1-4 family junior lien mortgage (3) 2,922 1,975 2,302 2,263 894
Other revolving credit and installment 285 199 300 332 273
Total consumer (4) 14,662 13,087 14,891 12,695 3,815
Total nonaccrual loans (5)(6)(7) 20,486 21,304 26,242 24,418 6,800
As a percentage of total loans 2.56 % 2.77 3.47 3.12 0.79
Foreclosed assets:
Government insured/guaranteed (8) $ 1,509 1,319 1,479 960 667
Non-government insured/guaranteed 2,514 3,342 4,530 2,199 1,526
Total foreclosed assets 4,023 4,661 6,009 3,159 2,193
Total nonperforming assets $ 24,509 25,965 32,251 27,577 8,993
As a percentage of total loans 3.07 % 3.37 4.26 3.52 1.04
(1) Includes LHFS of $16 million, $25 million, $3 million and $27 million at December 31, 2012, 2011, 2010, and 2009 respectively.
(2) Includes MHFS of $336 million, $301 million, $426 million, $339 million, and $193 million at December 31, 2012, 2011, 2010, 2009, and 2008 respectively.
(3) Includes $960 million at December 31, 2012, resulting from the Interagency Guidance issued in 2012 which requires performing junior liens to be classified as nonaccrual if
the related first mortgage is nonaccruing.
(4) Includes $1.8 billion at December 31, 2012 consisting of $1.4 billion of first mortgages, $205 million of junior liens and $140 million of auto and other loans, resulting from
the OCC guidance issued in third quarter 2012, which requires performing consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to
net realizable collateral value, regardless of their delinquency status.
(5) Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.
(6) Real estate 1-4 family mortgage loans predominantly insured by the FHA or guaranteed by the VA and student loans predominantly guaranteed by agencies on behalf of the
U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed.
(7) See Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report for further information on impaired loans.
(8) Consistent with regulatory reporting requirements, foreclosed real estate securing government insured/guaranteed loans are classified as nonperforming. Both principal and
interest for government insured/guaranteed loans secured by the foreclosed real estate are collectible because the loans are predominantly insured by the FHA or
guaranteed by the VA.
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