Wells Fargo 2014 Annual Report Download - page 77

Table 33 provides an analysis of the changes in nonaccrual
loans.
Table 33: Analysis of Changes in Nonaccrual Loans
Quarter ended
Dec 31, Sep 30, Jun 30, Mar 31, Year ended Dec 31,
(in millions) 2014 2014 2014 2014 2014 2013
Commercial nonaccrual loans
Balance, beginning of period $ 2,494 2,798 3,027 3,475 3,475 5,824
Inflows 410 342 433 367 1,552 2,178
Outflows:
Returned to accruing (64) (37) (81) (98) (280) (497)
Foreclosures (45) (18) (32) (79) (174) (321)
Charge-offs (141) (124) (120) (116) (501) (723)
Payments, sales and other (1) (415) (467) (429) (522) (1,833) (2,986)
Total outflows (665) (646) (662) (815) (2,788) (4,527)
Balance, end of period 2,239 2,494 2,798 3,027 2,239 3,475
Consumer nonaccrual loans
Balance, beginning of period 10,871 11,174 11,623 12,193 12,193 14,662
Inflows 1,454 1,529 1,673 1,650 6,306 8,117
Outflows:
Returned to accruing (678) (817) (1,107) (1,104) (3,706) (4,137)
Foreclosures (114) (148) (132) (146) (540) (597)
Charge-offs (278) (289) (348) (400) (1,315) (2,343)
Payments, sales and other (1) (646) (578) (535) (570) (2,329) (3,509)
Total outflows (1,716) (1,832) (2,122) (2,220) (7,890) (10,586)
Balance, end of period 10,609 10,871 11,174 11,623 10,609 12,193
Total nonaccrual loans $ 12,848 13,365 13,972 14,650 12,848 15,668
(1) Other outflows include the effects of VIE deconsolidations and adjustments for loans carried at fair value.
Typically, changes to nonaccrual loans period-over-period
represent inflows for loans that are placed on nonaccrual status
in accordance with our policy, offset by reductions for loans that
are paid down, charged off, sold, foreclosed, or are no longer
classified as nonaccrual as a result of continued performance
and an improvement in the borrower’s financial condition and
loan repayment capabilities. Also, reductions can come from
borrower repayments even if the loan remains on nonaccrual.
While nonaccrual loans are not free of loss content, we
believe exposure to loss is significantly mitigated by the
following factors at December 31, 2014:
• 98% of total commercial nonaccrual loans and 99% of total
consumer nonaccrual loans are secured. Of the consumer
nonaccrual loans, 98% are secured by real estate and 72%
have a combined LTV (CLTV) ratio of 80% or less.
• losses of $495 million and $3.5 billion have already been
recognized on 29% of commercial nonaccrual loans and 53%
of consumer nonaccrual loans, respectively. Generally, when
a consumer real estate loan is 120 days past due (except
when required earlier by guidance issued by bank regulatory
agencies), we transfer it to nonaccrual status. When the loan
reaches 180 days past due, or is discharged in bankruptcy, it
is our policy to write these loans down to net realizable
value (fair value of collateral less estimated costs to sell),
except for modifications in their trial period that are not
written down as long as trial payments are made on time.
Thereafter, we reevaluate each loan regularly and record
additional write-downs if needed.
• 71% of commercial nonaccrual loans were current on
interest.
• the risk of loss of all nonaccrual loans has been considered
and we believe is adequately covered by the allowance for
loan losses.
• $2.0 billion of consumer loans discharged in bankruptcy
and classified as nonaccrual were 60 days or less past due,
of which $1.9 billion were current.
We continue to work with our customers experiencing
financial difficulty to determine if they can qualify for a loan
modification so that they can stay in their homes. Under both
our proprietary modification programs and the MHA programs,
customers may be required to provide updated documentation,
and some programs require completion of payment during trial
periods to demonstrate sustained performance before the loan
can be removed from nonaccrual status. In addition, for loans in
foreclosure in certain states, including New York and New
Jersey, the foreclosure timeline has significantly increased due
to backlogs in an already complex process. Therefore, some
loans may remain on nonaccrual status for a long period.
If interest due on all nonaccrual loans (including loans that
were, but are no longer on nonaccrual at year end) had been
accrued under the original terms, approximately $741 million of
interest would have been recorded as income on these loans,
compared with $598 million actually recorded as interest
income in 2014, versus $764 million and $575 million,
respectively, in 2013.
Table 34 provides a summary of foreclosed assets and an
analysis of changes in foreclosed assets.
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