Wells Fargo 2012 Annual Report Download - page 155

Allowance for Credit Losses
The allowance for credit losses consists of the allowance for loan losses and the allowance for unfunded credit commitments. Changes in
the allowance for credit losses were:
Year ended December 31,
(in millions) 2012 2011 2010 2009 2008
Balance, beginning of year $ 19,668 23,463 25,031 21,711 5,518
Provision for credit losses 7,217 7,899 15,753 21,668 15,979
Interest income on certain impaired loans (1) (315) (332) (266) - -
Loan charge-offs:
Commercial:
Commercial and industrial (1,306) (1,598) (2,775) (3,365) (1,653)
Real estate mortgage (382) (636) (1,151) (670) (29)
Real estate construction (191) (351) (1,189) (1,063) (178)
Lease financing (24) (38) (120) (229) (65)
Foreign (111) (173) (198) (237) (245)
Total commercial (2,014) (2,796) (5,433) (5,564) (2,170)
Consumer:
Real estate 1-4 family first mortgage (3,013) (3,883) (4,900) (3,318) (540)
Real estate 1-4 family junior lien mortgage (3,437) (3,763) (4,934) (4,812) (2,204)
Credit card (1,101) (1,449) (2,396) (2,708) (1,563)
Other revolving credit and installment (1,408) (1,724) (2,437) (3,423) (2,300)
Total consumer (2) (8,959) (10,819) (14,667) (14,261) (6,607)
Total loan charge-offs (10,973) (13,615) (20,100) (19,825) (8,777)
Loan recoveries:
Commercial:
Commercial and industrial 461 419 427 254 114
Real estate mortgage 163 143 68 33 5
Real estate construction 124 146 110 16 3
Lease financing 19 24 20 20 13
Foreign 32 45 53 40 49
Total commercial 799 777 678 363 184
Consumer:
Real estate 1-4 family first mortgage 157 405 522 185 37
Real estate 1-4 family junior lien mortgage 259 218 211 174 89
Credit card 185 251 218 180 147
Other revolving credit and installment 539 665 718 755 481
Total consumer 1,140 1,539 1,669 1,294 754
Total loan recoveries 1,939 2,316 2,347 1,657 938
Net loan charge-offs (3) (9,034) (11,299) (17,753) (18,168) (7,839)
Allowances related to business combinations/other (4) (59) (63) 698 (180) 8,053
Balance, end of year $ 17,477 19,668 23,463 25,031 21,711
Components:
Allowance for loan losses $ 17,060 19,372 23,022 24,516 21,013
Allowance for unfunded credit commitments 417 296 441 515 698
Allowance for credit losses (5) $ 17,477 19,668 23,463 25,031 21,711
Net loan charge-offs as a percentage of average total loans (3) 1.17 % 1.49 2.30 2.21 1.97
Allowance for loan losses as a percentage of total loans (5) 2.13 2.52 3.04 3.13 2.43
Allowance for credit losses as a percentage of total loans (5) 2.19 2.56 3.10 3.20 2.51
(1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize
reductions in the allowance as interest income.
(2) The year ended December 31, 2012, includes $888 million resulting from the OCC guidance issued in third quarter 2012, which requires consumer loans discharged in
bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status.
(3) For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting estimates.
(4) Includes $693 million for the year ended December 31, 2010, related to the adoption of consolidation accounting guidance on January 1, 2010.
(5) The allowance for credit losses includes $117 million, $231 million, $298 million and $333 million at December 31, 2012, 2011, 2010 and 2009, respectively, related to PCI
loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs.
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