Wells Fargo 2013 Annual Report Download - page 153

monitoring procedures, executing master netting arrangements
and obtaining collateral, where appropriate. To the extent
derivatives subject to master netting arrangements meet the
applicable requirements, including determining the legal
enforceability of the arrangement, it is our policy to present
derivatives balances and related cash collateral amounts net on
the balance sheet. Counterparty credit risk related to derivatives
is considered in determining fair value and our assessment of
hedge effectiveness.
Private Share Repurchases
During 2013 and 2012, we repurchased approximately
40 million shares and 36 million shares, respectively, under
private forward repurchase contracts. We enter into these
transactions with unrelated third parties to complement our
open-market common stock repurchase strategies, to allow us to
manage our share repurchases in a manner consistent with our
capital plans, currently submitted under the 2013
Comprehensive Capital Analysis and Review (CCAR), and to
provide an economic benefit to the Company.
Our payments to the counterparties for these private share
repurchase contracts are recorded in permanent equity in the
quarter paid and are not subject to re-measurement. The
classification of the up-front payments as permanent equity
assures that we have appropriate repurchase timing consistent
with our 2013 capital plan, which contemplated a fixed dollar
amount available per quarter for share repurchases pursuant to
Federal Reserve Board (FRB) supervisory guidance. In return,
the counterparty agrees to deliver a variable number of shares
based on a per share discount to the volume-weighted average
stock price over the contract period. There are no scenarios
where the contracts would not either physically settle in shares
or allow us to choose the settlement method.
In December 2013, we entered into a private forward
repurchase contract and paid $500 million to an unrelated third
party. This contract is expected to settle in first quarter 2014. At
December 31, 2012, we had a $200 million private forward
repurchase contract outstanding that settled in first quarter 2013
for 6 million shares of common stock. Our total number of
outstanding shares of common stock is not reduced until
settlement of the private share repurchase contract.
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