Few snippets from WFC's report. Note the impact of ARMs resets on customers, many who are obviously subprime. The drop of $17 billion is curious, did they get these toxics sold?:
the average yield on our 1-4 family first mortgage portfolio -- which includes ARMs -- increased from 5.19 percent on an average balance of $89.4 billion in second quarter 2004 to a yield of 6.60 percent on an average balance of $72.5 billion in third quarter 2005. With ARM yields in the 5.5 percent range at quarter-end, we held ARMs at yields that were more than 1 percent higher than the average yield on all the ARMs sold since second quarter 2004," said Atkins.
Charge offs increasing, although nonperforming is presented as flat:
Third quarter 2005 net charge-offs were $541 million (.73 percent of average loans outstanding, annualized) compared with $454 million (.62 percent) in second quarter 2005 and $407 million (.59 percent) a year ago. The increased losses during third quarter 2005 were driven by increased consumer bankruptcies in advance of the mid-October implementation of bankruptcy reform legislation, continued loan growth and seasoning at Wells Fargo Financial, which has performed consistently with our risk-based pricing model, and a return to modest commercial losses after a net recovery in Wholesale Banking in second quarter 2005.
During the third quarter of 2005, Hurricane Katrina damage affected the Company's loan portfolios. "The impact is expected to be primarily in the consumer lending area, including our residential real estate, credit card, automobile, and other revolving credit and installment loan portfolios," said Munio. "These portfolios total approximately $2 billion in loan outstandings in the FEMA-designated impacted areas. We believe the principal balance of loans subject to loss is less than $500 million based on our analysis to date of the existence of insurance coverage, type of loan, location and potential damage to collateral. Based on further analysis of the loss content of these loans, we believe it is prudent to provide an additional $100 million to the allowance for credit losses. Many of the loans are to borrowers where repayment prospects have not yet been determined to be diminished, or are in areas where the properties may have suffered little, if any, damage or may not yet have been inspected. We will continue to refine our estimates as more information becomes available. We currently do not estimate any significant exposure from Hurricane Katrina in our commercial and commercial real estate loan portfolios, totaling about $100 million in loan outstandings in the affected areas. We are still gathering information but, at this point we expect no material effect from Hurricane Rita."
Total nonperforming assets (NPAs) were $1.49 billion (.50 percent of total loans) at September 30, 2005, compared with $1.39 billion (.46 percent) at June 30, 2005, and $1.57 billion (.56 percent) at September 30, 2004. |
