Wells Fargo's ( WFC) earnings report was a tale of two cities -- the one management portrays and the one investors and analysts see. Wells' stock took a nose-dive after the results, falling as much as 7.6% at one point on Wednesday, and closed down another 19 cents at $24.26 on Thursday, despite a broad market rally. Investors seemed to be focused on Wells' troubling credit trends and relatively weak capital coverage, rather than its booming bottom line and revenue, which topped even the most bullish forecast. CFO Howard Atkins explained away a sharp increase in non-performing assets largely as a technicality related to their categorization after the Wachovia acquisition. Both Atkins and Chief Credit Officer Mike Loughlin said that Wells' efforts to modify loans and write down bad debt have reduced risk, leading to moderation in loan-loss growth and early-stage delinquencies. "Not all NPAs result in a loss," Atkins said. However, many of them certainly do -- and have -- throughout the economic crisis, making such assurances ring hollow. And because Wells has raised relatively little capital, it seems the company is less prepared to handle potential losses than competitors. For instance, while Wells noted that its capital ratios increased "significantly" last quarter, at least one key metric is still far below peers. Its ratio of Tier 1 common equity to risk-weighted assets stood at 4.49% at June 30, compared with Bank of America's ( BAC) 6.9%, and JPMorgan Chase's ( JPM) 7.7%. Citigroup ( C) only reported its Tier 1 ratio, which was 12.7%, also far above Wells Fargo's 9.8%.