Financial Visions And Values: Wells Fargo

Overview

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reating, establishing, and maintaining customer trust are the key factors in Wells Fargo’s Visions and Values. Wells Fargo in 2015 continues to maintain a conservative financial position by cultivating a strong risk culture, maintaining a risk management governance structure escalating risk to the appropriate levels of management, and providing effective and efficient communication between the Board Oversight of Risk’s Committees.

The Board Oversight of Risk contains 7 governance committees and sub Committees each designed to mitigate certain risks among the Company. The duties of the Governance Committees are to increase to attention of risks of Wells Fargo as well as mitigate those risks assigned to them shown in Figure 1.

The

Purchased Credit Impaired Loans (PCI)

Purchased Credit Impaired Loans are loans that will most likely not be paid fully back due to a reduction in cash flows. Most if not all of Wells Fargo’s PCI Loans are from 2008 when Wells Fargo merged with Wachovia.

According to Wells Fargo:

Such loans are considered to be accruing due to the existence of the accretable yield and not based on consideration given to contractual interest payments. (64)

A nonaccretable difference is established for PCI Loans and made to identify losses expected on contractual amounts in excess to the fair value of the 2008 merge. The nonaccretable difference is calculated by:

$9.7 billion (previous difference to the accretable yield) + $2.0 billion (released to income through loan resolutions) = 11.7 billion (nonaccretable difference)

From the nonaccretable difference we can calculate the reduction from Dec. 2008 through Dec 2015

There was no data in order to calculate this projected loss which questions where that number came from.

Real Estate 1-4 Family First, Junior Mortgage Loans, and the Pick-a-Pay Mortgage Portfolio

The Pick-a-Pay Mortgage Portfolio lies hand and hand with the Real Estate 1-4 Family First and Junior Mortgage Loans.

The Family First and Junior Lien Loans includes loans who have different payment options and fixed-rate loans. The Loans with option payments can choose between fixed or adjustable rates that have a minimum payment or an interest only payment compared to the Pick-a-Pay Loans which include a full amortized option payment as well.

With adjustable payments

Wells Fargo believes they have manageable adjustable-rate mortgage (ARM) reset risk across their owned mortgage loan portfolios. They do not offer option ARM products, nor do they offer variable-rate mortgage products with fixed payment amounts, commonly referred to within the financial services industry as negative amortizing mortgage loans. The option ARMs they do have are included in the Pick-a- Pay portfolio which was acquired from Wachovia and are part of our liquidating loan