Wells Fargo Pick-A-Pay Portfolio: Presented without Comment*

Some of you have may have noticed the ongoing debate regarding the Pick-a-Pay portfolio of Warren Buffett's beloved Wells Fargo WFC. In order to put this horse to pasture, I present the following with no pejorative words and only a few minor comments.

First, the before (for the entire document you can go here):

Next, the after (full document here):

As promised, the limited commentary:

(1) On the latest conference call, management noted that the PCI portfolio was performing BETTER than expected;

(2) Notice the LTV for ALL PCI loans is higher than originally recorded (based on carrying values);

(3) Notice unpaid principal has dropped from $61.9 billion to $41.9 billion or 32%, yet the carrying value has only dropped 14% to $32.4 billion;

(4) See note (2) from the 2010 Form 10K – “unpaid principal balance includes write-downs taken on loans…”

(5) Finally, from the 2008 Form 10K, the following disclosure was made (emphasis mine):

In accordance with SOP 03-3, loans that were classified as nonperforming loans by Wachovia are no longer classified as nonperforming because, at acquisition, we believe we will fully collect the new carrying value of these loans. It is important to note that judgment is required in reclassifying loans subject to SOP 03-3 to performing status, and is dependent on having a reasonable expectation about the timing and amount of cash flows expected to be collected, even if the loan is contractually past due.

You the reader can now determine whether or not you consider the loan book better, worse or no different (please vote).

*Ok, minimal comments.