Wells Fargo 2010 Annual Report Download - page 222

The Company and each of its subsidiary banks are subject to
regulatory capital adequacy requirements promulgated by
federal regulatory agencies. The Federal Reserve establishes
capital requirements, including well capitalized standards, for
the consolidated financial holding company, and the OCC has
similar requirements for the Company’s national banks,
including Wells Fargo Bank, N.A. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 (FDICIA),
federal regulatory agencies were required to adopt regulations
defining five capital tiers for banks: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if
undertaken, could have a direct material effect on our financial
statements.
Note 25: Regulatory and Agency Capital Requirements
Quantitative measures, established by the regulators to
ensure capital adequacy, require that the Company and each of
its subsidiary banks maintain minimum ratios (set forth in the
following table) of capital to risk-weighted assets. Tier 1 capital is
considered core capital and generally includes common
stockholders’ equity, qualifying preferred stock, and trust
preferred securities, and noncontrolling interests in consolidated
subsidiaries, reduced by goodwill, net of related taxes, certain
intangible and other assets in excess of prescribed limitations,
and adjusted for the aggregate impact of certain items included
in other comprehensive income. Total capital includes Tier 1
capital, subordinated debt and other components that do not
qualify for Tier 1 capital, and the aggregate allowance for credit
losses up to a specified percentage of risk-weighted assets.
Risk-weighted assets reflect the perceived risk, expressed as a
percentage of the amount of each asset included on the balance
sheet, as well as certain off-balance sheet exposures, including
unfunded loan commitments, letters of credit and derivative
contracts. Additional information with respect to off-balance
sheet exposures is included in Notes 6 and 15.
We do not consolidate our wholly-owned trusts (the Trusts)
formed solely to issue trust preferred securities. Trust preferred
securities and perpetual preferred purchase securities issued by
the Trusts includable in Tier 1 capital were $19.2 billion at
December 31, 2010. The junior subordinated debentures held by
the Trusts were included in the Company's long-term debt. See
Note 13 for additional information on trust preferred securities.
Management believes that, as of December 31, 2010, the
Company and each of the covered subsidiary banks met all
capital adequacy requirements to which they are subject.
The most recent notification from the OCC categorized each of
the covered subsidiary banks as well capitalized, under the
FDICIA prompt corrective action provisions applicable to banks.
To be categorized as well capitalized, the institution must
maintain a total risk-based capital (RBC) ratio as set forth in the
table and not be subject to a capital directive order. There are no
conditions or events since that notification that management
believes have changed the RBC category of any of the covered
subsidiary banks.
Certain subsidiaries of the Company are approved
seller/servicers, and are therefore required to maintain
minimum levels of shareholders’ equity, as specified by various
agencies, including the United States Department of Housing
and Urban Development, GNMA, FHLMC and FNMA. At
December 31, 2010, each seller/servicer met these requirements.
Certain broker-dealer subsidiaries of the Company are subject to
SEC Rule 15c3-1 (the Net Capital Rule), which requires that we
maintain minimum levels of net capital, as defined. At
December 31, 2010, each of these subsidiaries met these
requirements.
The following table presents regulatory capital information
for Wells Fargo & Company and Wells Fargo Bank, N.A.
Wells Fargo & Company Wells Fargo Bank, N.A. Well- Minimum
December 31, capitalized capital
(in billions, except ratios) 2010 2009 2010 2009 ratios (1) ratios (1)
Regulatory capital:
Tier 1 $ 109.4 93.8 90.2 43.8
Total 147.1 134.4 117.1 58.4
Assets:
Risk-weighted $ 980.0 1,013.6 895.2 492.0
Adjusted average (2) 1,189.5 1,191.6 1,057.7 583.3
Capital ratios:
Tier 1 capital 11.16 % 9.25 10.07 8.90 6.00 4.00
Total capital 15.01 13.26 13.09 11.87 10.00 8.00
Tier 1 leverage (2) 9.19 7.87 8.52 7.50 5.00 4.00
(1) As defined by the regulations issued by the Federal Reserve, OCC and FDIC.
(2) The leverage ratio consists of Tier 1 capital divided by quarterly average total assets, excluding goodwill and certain other items. The minimum leverage ratio guideline is
3% for banking organizations that do not anticipate significant growth and that have well-diversified risk, excellent asset quality, high liquidity, good earnings, effective
management and monitoring of market risk and, in general, are considered top-rated, strong banking organizations.
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