10-QPeriod: Q3 FY2002

WELLS FARGO & COMPANY/MN Quarterly Report for Q3 Ended Sep 30, 2002

Filed November 7, 2002For Securities:WFCWFC-PDWFC-PCWFC-PYWFC-PAWFC-PLWFCNPWFC-PZ

Summary

Wells Fargo & Company reported strong financial performance for the nine months ending September 30, 2002, with net income of $3.97 billion, a significant increase from $2.24 billion in the same period of 2001. This growth was driven by a substantial rise in net interest income, which benefited from increased loan volumes and improved net interest margins, coupled with robust noninterest income, particularly from service charges on deposit accounts, credit card fees, and insurance. The company's balance sheet expanded considerably, with total assets growing to $334.25 billion. This growth was primarily fueled by increases in loans and mortgages held for sale, reflecting increased originations and refinancing activity. Deposits also saw significant growth, indicating strong customer confidence and funding stability. Capital ratios remain strong, well above regulatory requirements, demonstrating the company's solid financial position.

Key Highlights

  • 1Net income for the nine months ended September 30, 2002, reached $3.97 billion, a substantial increase from $2.24 billion in the prior year period.
  • 2Diluted earnings per common share for the nine months were $2.30, up from $1.29 in the prior year.
  • 3Total assets grew to $334.25 billion as of September 30, 2002, up from $298.10 billion at the end of 2001.
  • 4Total deposits increased to $205.76 billion from $176.76 billion in the prior year period.
  • 5Net interest income increased significantly, driven by higher loan volumes and an improved net interest margin.
  • 6Noninterest income saw a robust increase, particularly from service charges on deposit accounts and credit card fees.

Frequently Asked Questions

The primary driver of the increase in net income was the significant growth in net interest income, which benefited from higher average loan balances and an improved net interest margin. Noninterest income also contributed positively, with notable increases in service charges on deposit accounts and credit card fees.

The loan portfolio expanded significantly, with total loans reaching $186.31 billion, an increase driven by higher originations in home equity and home mortgage products. Deposits also grew substantially, reaching $205.76 billion, indicating a strong base of customer funding and confidence.

Effective January 1, 2002, Wells Fargo adopted FAS 142, which eliminated the amortization of goodwill. The company recorded a transitional goodwill impairment charge of $276 million (after tax) in the first quarter of 2002 as a cumulative effect of a change in accounting principle. This change allows for a more comparable presentation of earnings by excluding goodwill amortization from reported figures in certain disclosures.

Wells Fargo manages interest rate risk through a combination of balance sheet strategies and derivative instruments. For mortgage servicing rights (MSRs), the company utilizes derivative contracts to hedge potential value declines. Additionally, a portion of potential reductions in MSR value is offset by expected increases in origination and servicing fees over time, driven by new mortgage activity.