Wells Fargo 2014 Annual Report Download - page 177
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ACCRETABLE YIELD The excess of cash flows expected to be • changes in the expected principal and interest payments
collected over the carrying value of PCI loans is referred to as over the estimated life – updates to expected cash flows are
the accretable yield and is recognized in interest income using an driven by the credit outlook and actions taken with
effective yield method over the remaining life of the loan, or borrowers. Changes in expected future cash flows from loan
pools of loans. The accretable yield is affected by: modifications are included in the regular evaluations of cash
• changes in interest rate indices for variable rate PCI loans – flows expected to be collected.
expected future cash flows are based on the variable rates in
effect at the time of the regular evaluations of cash flows The change in the accretable yield related to PCI loans since
expected to be collected; the merger with Wachovia is presented in the following table.
• changes in prepayment assumptions – prepayments affect
the estimated life of PCI loans which may change the
amount of interest income, and possibly principal, expected
to be collected; and
(in millions) 2014 2013 2012 2009-2011
Total, beginning of period $ 17,392 18,548 15,961 10,447
Addition of accretable yield due to acquisitions — 1 3 128
Accretion into interest income (1) (1,599) (1,833) (2,152) (7,199)
Accretion into noninterest income due to sales (2) (37) (151) (5) (237)
Reclassification from nonaccretable difference for loans with improving credit-related
cash flows 2,243 971 1,141 4,213
Changes in expected cash flows that do not affect nonaccretable difference (3) (209) (144) 3,600 8,609
Total, end of period $ 17,790 17,392 18,548 15,961
(1) Includes accretable yield released as a result of settlements with borrowers, which is included in interest income.
(2) Includes accretable yield released as a result of sales to third parties, which is included in noninterest income.
(3) Represents changes in cash flows expected to be collected due to the impact of modifications, changes in prepayment assumptions, changes in interest rates on variable
rate PCI loans and sales to third parties.
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