Wells Fargo 2013 Annual Report Download - page 99

to various regulatory, tax, legal and other restrictions that can
limit the transferability of their funds. Accordingly, we believe
we maintain adequate liquidity at these entities in consideration
of such funds transfer restrictions.
Table 53 provides the primary sources of liquidity as of
December 31, 2013.
Table 53: Primary Sources of Liquidity
December 31, 2013
(in millions) Total Encumbered Unencumbered
Cash on deposit $ 186,249 - 186,249
Securities of U.S. Treasury and federal agencies 6,280 571 5,709
Mortgage-backed securities of federal agencies (1) 123,796 60,605 63,191
Total $ 316,325 61,176 255,149
(1) Included in encumbered securities are securities with a fair value of $653 million which were purchased in December 2013 but settled in January 2014.
Other than our primary sources of liquidity shown in Table
53, liquidity is also available through the sale or financing of
other securities including trading and/or available-for-sale
securities, as well as through the sale, securitization or financing
of loans, to the extent such securities and loans are not
encumbered. In addition, other held-to-maturity securities, to
the extent not encumbered, may be used in repurchase
agreements to obtain financing.
Core customer deposits have historically provided a sizeable
source of relatively stable and low-cost funds. At
December 31, 2013, core deposits were 119% of total loans
compared with 118% a year ago. Additional funding is provided
by long-term debt, other foreign deposits, and short-term
borrowings. Long-term debt averaged $134.9 billion in 2013 and
$127.5 billion in 2012. Short-term borrowings averaged
$54.7 billion in 2013 and $51.2 billion in 2012.
We access domestic and international capital markets for
long-term funding (generally greater than one year) through
issuances of registered debt securities, private placements and
asset-backed secured funding. Investors in the long-term capital
markets, as well as other market participants, generally will
consider, among other factors, a company’s debt rating in
making investment decisions. Rating agencies base their ratings
on many quantitative and qualitative factors, including capital
adequacy, liquidity, asset quality, business mix, the level and
quality of earnings, and rating agency assumptions regarding the
probability and extent of federal financial assistance or support
for certain large financial institutions. Adverse changes in these
factors could result in a reduction of our credit rating; however,
our debt securities do not contain credit rating covenants.
Generally, rating agencies review a firm’s ratings at least
annually. There were no changes to our credit ratings in 2013,
and both the Parent and Wells Fargo Bank, N.A. remain among
the top-rated financial firms in the U.S. On October 8, 2013,
Fitch Ratings affirmed all the ratings of the Parent and its rated
subsidiaries; on October 25, 2013, Standard & Poor’s Ratings
Services (S&P) affirmed all the ratings of the Parent and its rated
subsidiaries; and on November 14, 2013, Moody’s Investors
Service (Moody’s) confirmed all the ratings of the Parent and its
rated subsidiaries. This ratings confirmation by Moody’s
followed completion of their review regarding whether to
continue incorporating the possibility of federal support in
ratings applicable to certain bank holding companies in light of
recent regulatory developments related to the Title II Orderly
Liquidation Authority of the Dodd-Frank Act. Moody’s decided
to eliminate any assumption of federal support for the impacted
holding companies, including the Parent. However, Moody’s also
concluded that the same regulatory developments were likely to
reduce the severity of losses for bank holding company creditors
in the event of default, reflecting the potential benefits of a more
orderly resolution of bank holding companies and their related
banks. The net result of these offsetting conclusions was the
confirmation of our ratings. S&P is likewise reviewing their
support assumptions for certain bank holding companies in light
of the same regulatory developments. That review is ongoing and
S&P has not specified a timeframe for completion of their
review.
See the “Risk Management – Asset/Liability Management”
and “Risk Factors” sections in this Report for additional
information regarding our credit ratings as of
December 31, 2013, and the potential impact a credit rating
downgrade would have on our liquidity and operations, as well
as Note 16 (Derivatives) to Financial Statements in this Report
for information regarding additional collateral and funding
obligations required for certain derivative instruments in the
event our credit ratings were to fall below investment grade.
The credit ratings of the Parent and Wells Fargo Bank, N.A.
as of December 31, 2013, are presented in Table 54.
Table 54: Credit Ratings
Wells Fargo & Company Wells Fargo Bank, N.A.
Senior debt
Short-term
borrowings
Long-term
deposits
Short-term
borrowings
Moody's A2 P-1 Aa3 P-1
S&P A+ A-1 AA- A-1+
Fitch Ratings AA- F1+ AA F1+
DBRS AA R-1* AA** R-1**
* middle **high
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