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Wells Fargo Reports $5.7 Billion in Quarterly Net Income; Diluted EPS of $1.03

01/15/2016
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2015 Net Income of $23.0 Billion; Diluted EPS of $4.15

Wells Fargo & Company (NYSE:WFC):

  • Full year 2015:
    • Net income of $23.0 billion, consistent with 2014
    • Diluted earnings per share (EPS) of $4.15, up 1 percent
    • Revenue of $86.1 billion, up 2 percent
    • Pre-tax pre-provision profit1 of $36.3 billion, up 3 percent
    • Return on assets (ROA) of 1.32 percent and return on equity (ROE) of 12.68 percent
    • Returned $12.6 billion to shareholders through dividends and net share repurchases
  • Fourth quarter 2015:
    • Net income of $5.7 billion, stable compared with fourth quarter 2014
    • Diluted EPS of $1.03, up 1 percent
    • Revenue of $21.6 billion, up 1 percent
    • Pre-tax pre-provision profit1 of $9.2 billion, up 4 percent
    • ROA of 1.27 percent and ROE of 12.23 percent
    • Total average loans of $912.3 billion, up $62.9 billion, or 7 percent
    • Total average deposits of $1.2 trillion, up $67.0 billion, or 6 percent
    • Net charge-off rate of 0.36 percent (annualized), up from 0.34 percent
    • Nonaccrual loans down $1.5 billion, or 11 percent
    • No reserve build or release2, compared with a $250 million release in fourth quarter 2014
    • Common Equity Tier 1 ratio (fully phased-in) of 10.7 percent3
    • Period-end common shares outstanding down 16.3 million from third quarter 2015

Endnotes can be found at end of release text.

Selected Financial Information

  Quarter ended     Year ended Dec. 31,
    Dec 31,
2015 		    Sep 30,
2015 		    Dec 31,
2014 		    2015     2014
Earnings            
Diluted earnings per common share $ 1.03 1.05 1.02 4.15 4.10
Wells Fargo net income (in billions) 5.71 5.80 5.71 23.03 23.06
Return on assets (ROA) 1.27 % 1.32 1.36 1.32 1.45
Return on equity (ROE) 12.23 12.62 12.84 12.68 13.41
Asset Quality
Net charge-offs (annualized) as a % of average total loans 0.36 % 0.31 0.34 0.33 0.35
Allowance for credit losses as a % of total loans 1.37 1.39 1.53 1.37 1.53
Allowance for credit losses as a % of annualized net charge-offs 380 450 452 433 447
Other
Revenue (in billions) $ 21.6 21.9 21.4 86.1 84.3
Efficiency ratio 57.4 % 56.7 59.0 57.8 58.1
Average loans (in billions) $ 912.3 895.1 849.4 885.4 834.4
Average deposits (in billions) 1,216.8 1,198.9 1,149.8 1,194.1 1,114.1
Net interest margin     2.92 %   2.96     3.04     2.95     3.11
 

Wells Fargo & Company (NYSE:WFC) reported diluted earnings per common share of $4.15 for 2015, compared with $4.10 in 2014. Full year net income was $23.0 billion, compared with $23.1 billion in 2014. For fourth quarter 2015, net income was $5.7 billion, or $1.03 per share, compared with $5.7 billion, or $1.02 per share, for fourth quarter 2014, and $5.8 billion, or $1.05 per share, for third quarter 2015.

Chairman and CEO John Stumpf said, “Full year and fourth quarter 2015 results demonstrated the benefit of our diversified business model as we again generated strong financial results, maintained our risk discipline and continued to invest across the company for future growth. We remained focused on the building blocks of long-term shareholder value, with continued growth in loans, deposits and capital. For the 5th consecutive year, we returned more capital to shareholders than the prior year. I am proud of the dedication of our team members and their focus on helping our customers succeed financially."

Chief Financial Officer John Shrewsberry added, “Our performance in the fourth quarter reflected a continuation of the solid results we generated all year and the ability of our diversified business model to perform consistently across cycles. Compared with the prior quarter, we increased deposits and grew both commercial and consumer loans, while maintaining our credit and pricing discipline. Net interest income increased as we benefited from broad-based earning asset growth, and fee income remained diversified. We continued to have strong liquidity and capital levels, and our net payout ratio4 was stable at 59 percent."

Net Interest Income

Net interest income in the fourth quarter increased $131 million from third quarter 2015 to $11.6 billion, largely driven by growth in earning assets. Income from variable sources, including periodic dividends, loan recoveries and fees included in interest income, also increased in the quarter. Net interest income also benefited modestly from the increase in short-term interest rates late in the quarter. These benefits to net interest income were partially offset by reduced income from seasonally lower balances of mortgages held-for-sale and increased interest expense from higher debt balances.

Net interest margin was 2.92 percent, down 4 basis points from third quarter 2015. Income from variable sources improved the net interest margin by approximately 2 basis points linked-quarter, but was more than offset by customer-driven deposit growth, which had a minimal impact to net interest income but was dilutive to the net interest margin by 3 basis points. All other growth, mix and repricing reduced the margin by 3 basis points, largely driven by increased debt balances, including funding raised in anticipation of closing the previously announced acquisitions of certain commercial lending businesses and assets from GE Capital.

Noninterest Income

Noninterest income in the fourth quarter was $10.0 billion, compared with $10.4 billion in third quarter 2015, down due to lower equity investment gains, which were elevated in the third quarter. Noninterest income benefited from higher debt securities gains, trading income (reflecting higher deferred compensation plan investment results which were largely offset in employee benefits expense), commercial real estate brokerage fees, mortgage banking, investment banking, card fees and insurance fees.

Mortgage banking noninterest income was $1.7 billion, up $71 million from third quarter, primarily driven by higher net servicing income. During the fourth quarter, residential mortgage loan originations were $47 billion, down $8 billion linked quarter on seasonality. The production margin on residential held-for-sale mortgage loan originations5 was 1.83 percent, compared with 1.88 percent in third quarter. Net mortgage servicing rights (MSRs) results were $417 million, compared with $253 million in third quarter 2015.

Noninterest Expense

Noninterest expense in the fourth quarter was $12.4 billion, stable compared with third quarter 2015. Fourth quarter expenses included typically higher equipment, outside professional services and advertising, as well as an increase in deferred compensation expense (included in employee benefits expense and largely offset in revenue). These higher expenses were offset by lower operating losses, commissions and incentive compensation, as well as lower charitable donations, which were elevated in the third quarter due to a $126 million contribution to the Wells Fargo Foundation. Foreclosed asset expense also declined in the quarter, driven primarily by commercial real estate recoveries. The efficiency ratio was 57.4 percent in fourth quarter 2015, compared with 56.7 percent in the prior quarter. The Company expects to operate at the higher end of its targeted efficiency ratio range of 55 to 59 percent for full year 2016.

Loans

Total loans were $916.6 billion at December 31, 2015, up $13.3 billion from September 30, 2015. Fourth quarter loan growth was broad-based across all portfolios (other than real estate 1-4 family junior lien mortgages) and did not include any loan portfolio acquisitions. Core loan growth was $15.4 billion, or 2 percent, as non-strategic/liquidating portfolios declined $2.1 billion in the quarter. Total average loans were $912.3 billion in the fourth quarter, up $17.2 billion from the prior quarter.

                   
  December 31, 2015     September 30, 2015
(in millions)   Core    

Non-strategic

and liquidating (a)

    Total     Core    

Non-strategic

and liquidating

    Total
Commercial $ 456,115     468   456,583   446,832     506   447,338
Consumer     408,489     51,487     459,976     402,363     53,532     455,895
Total loans   $ 864,604     51,955     916,559     849,195     54,038     903,233
Change from prior quarter:   $ 15,409     (2,083 )   13,326     17,095     (2,321 )   14,774

(a) See table on page 32 for additional information on non-strategic/liquidating loan portfolios. Management believes that the above information provides useful disclosure regarding the Company’s ongoing loan portfolios.

 

Investment Securities

Investment securities were $347.6 billion at December 31, 2015, up $2.5 billion from third quarter. The Company purchased approximately $25 billion of securities (mostly federal agency mortgage-backed securities and U.S. Treasury securities), which were offset by maturities, amortization and sales.

Net unrealized available-for-sale securities gains of $3.0 billion at December 31, 2015, declined from $4.9 billion at September 30, 2015, primarily due to rising rates and realized gains on debt and equity securities.

Deposits

Total average deposits for fourth quarter 2015 were $1.2 trillion, up 6 percent from a year ago, driven by both commercial and consumer growth. The average deposit cost for fourth quarter 2015 was 8 basis points, which was down 1 basis point from a year ago and unchanged from the prior quarter. The increase in deposits reflected strong account growth as the number of primary consumer checking customers6 increased 5.6 percent year-over-year7 and primary small business and business banking checking customers6 increased 4.8 percent year-over-year7.

Capital

Capital levels remained strong in the fourth quarter, with Common Equity Tier 1 (fully phased-in) of $142.5 billion, or 10.7 percent3. In fourth quarter 2015, the Company purchased 27.0 million shares of its common stock and entered into a $500 million forward repurchase transaction for an additional 9.2 million shares which settled early in first quarter 2016. The Company paid a quarterly common stock dividend of $0.375 per share, up from $0.35 per share a year ago.

Credit Quality

“The trend of strong credit results continued in the fourth quarter," said Chief Risk Officer Mike Loughlin. "The quarterly loss rate (annualized) remained low at 0.36 percent and nonperforming assets declined by $497 million, or 15 percent (annualized), from the prior quarter. The allowance for credit losses in the fourth quarter was stable (no reserve build or release) as continued credit quality improvements in the residential real estate portfolio were offset by higher commercial reserves reflecting continued deterioration within the energy sector. Future allowance levels may increase or decrease based on a variety of factors, including loan growth, portfolio performance and general economic conditions.”

Net Loan Charge-offs

The quarterly loss rate (annualized) of 0.36 percent reflected commercial losses of 0.16 percent and consumer losses of 0.56 percent. Credit losses were $831 million in fourth quarter 2015, compared with $703 million in the third quarter, mainly due to $90 million in higher oil and gas portfolio losses, as well as seasonal increases in the non-real estate consumer portfolios.

Net Loan Charge-Offs

  Quarter ended  
    December 31, 2015     September 30, 2015     June 30, 2015  
($ in millions)   Net loan

charge-

offs

    As a % of

average

loans (a)

    Net loan

charge-

offs

    As a % of

average

loans (a)

    Net loan

charge-

offs

    As a % of

average

loans (a)

 
Commercial:      
Commercial and industrial $ 215 0.29 % $ 122 0.17 % $ 81 0.12 %
Real estate mortgage (19 ) (0.06 ) (23 ) (0.08 ) (15 ) (0.05 )
Real estate construction (10 ) (0.18 ) (8 ) (0.15 ) (6 ) (0.11 )
Lease financing     1   0.01   3   0.11   2   0.06
Total commercial     187   0.16   94   0.08   62   0.06
Consumer:
Real estate 1-4 family first mortgage 50 0.07 62 0.09 67 0.10
Real estate 1-4 family junior lien mortgage 70 0.52 89 0.64 94 0.66
Credit card 243 2.93 216 2.71 243 3.21
Automobile 135 0.90 113 0.76 68 0.48
Other revolving credit and installment     146   1.49   129   1.35   116   1.26
Total consumer     644   0.56   609   0.53   588   0.53
Total   $ 831   0.36 % $ 703   0.31 % $ 650   0.30 %
                                     

(a) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 31 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

 

Nonperforming Assets

Nonperforming assets declined by $497 million from third quarter 2015 to $12.8 billion. Nonaccrual loans decreased $155 million to $11.4 billion driven by improvements in commercial and consumer real estate portfolios, partially offset by an increase in commercial and industrial nonaccrual loans, primarily related to deterioration in the oil and gas portfolio. Foreclosed assets were $1.4 billion, down from $1.8 billion in third quarter 2015.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

                         
    December 31, 2015     September 30, 2015     June 30, 2015  
($ in millions)   Total

balances

   

As a

% of

total

loans

   

Total

balances

    As a

% of

total

loans

    Total

balances

    As a

% of

total

loans

 
Commercial:            
Commercial and industrial $ 1,363 0.45 % $ 1,031 0.35 % $ 1,079 0.38 %
Real estate mortgage 969 0.79 1,125 0.93 1,250 1.04
Real estate construction 66 0.30 151 0.70 165 0.77
Lease financing     26   0.21   29   0.24   28   0.23
Total commercial     2,424   0.53   2,336   0.52   2,522   0.58
Consumer:
Real estate 1-4 family first mortgage 7,293 2.66 7,425 2.74 8,045 3.00
Real estate 1-4 family junior lien mortgage 1,495 2.82 1,612 2.95 1,710 3.04
Automobile 121 0.20 123 0.21 126 0.22
Other revolving credit and installment     49   0.13   41   0.11   40   0.11
Total consumer     8,958   1.95   9,201   2.02   9,921   2.20
Total nonaccrual loans     11,382   1.24   11,537   1.28   12,443   1.40
Foreclosed assets:
Government insured/guaranteed 446 502 588
Non-government insured/guaranteed     979     1,265     1,370  
Total foreclosed assets     1,425     1,767     1,958  
Total nonperforming assets   $ 12,807   1.40 % $ 13,304   1.47 % $ 14,401   1.62 %
Change from prior quarter:
Total nonaccrual loans $ (155 ) $ (906 ) $ (67 )
Total nonperforming assets     (497 )           (1,097 )           (438 )      
 

Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $981 million at December 31, 2015, up from $872 million at September 30, 2015. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgage loans and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $13.4 billion at December 31, 2015, down from $13.5 billion at September 30, 2015.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.5 billion at December 31, 2015, compared with $12.6 billion at September 30, 2015. The allowance coverage for total loans was 1.37 percent, compared with 1.39 percent in third quarter 2015. The allowance covered 3.8 times annualized fourth quarter net charge-offs, compared with 4.5 times in the prior quarter. The allowance coverage for nonaccrual loans was 110 percent at December 31, 2015, compared with 109 percent at September 30, 2015. “We believe the allowance was appropriate for losses inherent in the loan portfolio at December 31, 2015,” said Loughlin.

Business Segment Performance

Wells Fargo defines its operating segments by product type and customer segment. Effective fourth quarter 2015, we realigned our business banking and merchant payment services businesses from Community Banking to Wholesale Banking. Results for these operating segments were revised for prior periods to reflect the impact of this realignment. Segment net income for each of the three business segments was:

         
  Quarter ended
(in millions)   Dec 31,
2015 		    Sep 30,
2015 		    Dec 31,
2014
Community Banking $ 3,303     3,560     3,333
Wholesale Banking 2,104 1,925 2,095
Wealth and Investment Management     595     606     519
 

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and auto, student, and small business lending. Community Banking also offers investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. through its Regional Banking and Wells Fargo Home Lending business units.

Selected Financial Information

  Quarter ended
(in millions)   Dec 31,
2015 		    Sep 30,
2015 		    Dec 31,
2014
Total revenue $ 12,330     12,933     12,158
Provision for credit losses 704 668 506
Noninterest expense 6,693 6,778 6,827
Segment net income 3,303 3,560 3,333
(in billions)
Average loans 482.2 477.0 469.6
Average assets 921.4 898.9 891.2
Average deposits     663.7     655.6     629.4
 

Community Banking reported net income of $3.3 billion, down $257 million, or 7 percent, from third quarter 2015. Revenue of $12.3 billion decreased $603 million, or 5 percent, from third quarter 2015 due to lower equity investment gains and lower other income, partially offset by gains on deferred compensation plan investments (offset in employee benefits expense) and higher gains on sales of debt securities. Noninterest expense decreased $85 million, or 1 percent, due to a donation to the Wells Fargo Foundation in the prior quarter, as well as lower operating losses, partially offset by higher deferred compensation plan expense (offset in trading revenue), project-related expense, and advertising costs. The provision for credit losses increased $36 million from the prior quarter primarily due to higher net charge-offs.

Net income was down $30 million, or 1 percent, from fourth quarter 2014. Revenue was up $172 million, or 1 percent, compared with a year ago due to higher net interest income, market sensitive revenue, primarily equity investment gains and gains on sale of debt securities, mortgage banking fees, deposit service charges, debit and credit card fees, and trust and investment fees, partially offset by a gain on sale of government guaranteed student loans in the prior year. Noninterest expense decreased $134 million, or 2 percent, from a year ago driven by lower foreclosed assets expense, partially offset by higher equipment expenses and operating losses. The provision for credit losses increased $198 million from a year ago as the $48 million improvement in net charge-offs was more than offset by the absence of a reserve release in fourth quarter 2015.

Regional Banking

  • Retail Banking
    • Primary consumer checking customers6 up 5.6 percent year-over-year7
    • Debit card purchase volume8 of $73 billion in fourth quarter, up 8 percent year-over-year
    • Retail Bank household cross-sell ratio9 of 6.11 products per household, compared with 6.17 year-over-year7
    • Customers rated their overall experience, satisfaction with visit, and loyalty with Wells Fargo stores at all-time highs based on fourth quarter 2015 survey results
  • Online and Mobile Banking
    • 26.4 million active online customers, up 7 percent year-over-year7
    • 16.2 million active mobile customers, up 14 percent year-over-year7

Consumer Lending Group

  • Home Lending
    • Originations of $47 billion, down from $55 billion in prior quarter
    • Applications of $64 billion, down from $73 billion in prior quarter
    • Application pipeline of $29 billion at quarter end, down from $34 billion at September 30, 2015
  • Consumer Credit
    • Credit card purchase volume of $19 billion in fourth quarter, up 12 percent year-over-year
    • Credit card penetration in retail banking households rose to 43.4 percent, up from 41.5 percent in prior year
    • Highest ranking (A- grade) in Corporate Insight assessment of credit card issuer rewards redemption options (December 2015)
    • Auto originations of $7.6 billion in fourth quarter, down 9 percent from prior quarter and up 13 percent from prior year

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include Business Banking, Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments and Asset Backed Finance.

Selected Financial Information

  Quarter ended  
(in millions)   Dec 31,
2015 		    Sep 30,
2015 		    Dec 31,
2014 		 
Total revenue $ 6,559     6,326     6,532
Provision (reversal of provision) for credit losses 126 36 (33 )
Noninterest expense 3,491 3,503 3,533
Segment net income 2,104 1,925 2,095
(in billions)
Average loans 417.0 405.6 369.0
Average assets 755.4 739.1 668.8
Average deposits     449.3     442.0     424.0  
 

Wholesale Banking reported net income of $2.1 billion, up $179 million, or 9 percent, from third quarter 2015. Revenue of $6.6 billion increased $233 million, or 4 percent, from prior quarter. Net interest income increased $100 million, or 3 percent, primarily from broad based loan growth. Noninterest income increased $133 million, or 5 percent, on strong results in commercial real estate related businesses with growth in commercial real estate brokerage, multi-family capital, structured real estate and community lending, as well as higher investment banking fees, equity fund investments gains and crop insurance underwriting gains, partially offset by lower customer accommodation trading revenue. Noninterest expense decreased $12 million as higher variable compensation expenses were more than offset by lower operating losses and foreclosed assets expense. The provision for credit losses increased $90 million from prior quarter due to increased loan losses primarily related to the oil and gas portfolio.

Net income was up $9 million from fourth quarter 2014. Revenue increased $27 million from fourth quarter 2014, on $78 million, or 2 percent, growth in net interest income related to strong loan and deposit growth, offset by a $51 million, or 2 percent, decline in noninterest income. Noninterest income declined as higher commercial real estate brokerage, structured real estate, and multi-family capital results as well as increased equity fund investment gains and higher crop insurance underwriting gains were offset by lower customer accommodation trading revenues, energy portfolio write-downs and lower investment banking fees. Noninterest expense increased $42 million, or 1 percent, from a year ago primarily due to higher personnel expenses related to growth initiatives, compliance, and regulatory requirements. The provision for credit losses increased $159 million from a year ago due to increased loan losses primarily related to the oil and gas portfolio.

  • Average loans increased 13 percent from fourth quarter 2014, on broad-based growth, including asset-backed finance, commercial banking, commercial real estate, corporate banking, equipment finance, and structured real estate
  • Cross-sell of 7.3 products per relationship, up 0.1 from fourth quarter 201410
  • Treasury management revenue up 7 percent from fourth quarter 2014
  • Wells Fargo Treasury Management Services' Wholesale Lockbox Network ranked as fastest in the United States11

Wealth and Investment Management (formerly Wealth, Brokerage and Retirement) provides a full range of personalized wealth management, investment and retirement products and services to clients across U.S. based businesses including Wells Fargo Advisors, The Private Bank, Abbot Downing, Wells Fargo Institutional Retirement and Trust, and Wells Fargo Asset Management. We deliver financial planning, private banking, credit, investment management and fiduciary services to high-net worth and ultra-high-net worth individuals and families. We also serve customers’ brokerage needs, supply retirement and trust services to institutional clients and provide investment management capabilities delivered to global institutional clients through separate accounts and the Wells Fargo Funds.

Selected Financial Information

  Quarter ended
(in millions)   Dec 31,
2015 		    Sep 30,
2015 		    Dec 31,
2014
Total revenue $ 3,947   3,878   3,913
Provision (reversal of provision) for credit losses (6 ) (6 ) 8
Noninterest expense 2,998 2,909 3,066
Segment net income 595 606 519
(in billions)
Average loans 63.0 61.1 54.8
Average assets 197.9 192.6 188.2
Average deposits     177.9     172.6     165.5
 

Wealth and Investment Management (WIM) reported net income of $595 million, down $11 million, or 2 percent, from third quarter 2015. Revenue of $3.9 billion increased $69 million, or 2 percent, from the prior quarter, primarily from higher gains on deferred compensation plan investments (offset in employee benefits expense) and higher net interest income, partially offset by lower asset-based fees. Noninterest expense increased $89 million, or 3 percent, from the prior quarter, primarily due to higher deferred compensation plan expense, partially offset by lower broker commissions. The provision for credit losses was flat from third quarter 2015.

Net income was up $76 million, or 15 percent, from fourth quarter 2014. Revenue increased $34 million, or 1 percent, from a year ago on growth in net interest income, partially offset by lower asset-based fees. Noninterest expense decreased $68 million, or 2 percent, from a year ago, due to lower broker commissions, as well as lower non-personnel expenses. The provision for credit losses decreased $14 million from a year ago.

Retail Brokerage

  • Client assets of $1.4 trillion, down 2 percent from prior year
  • Managed account assets of $420 billion, down 1 percent from prior year, as lower market valuations were partially offset by net flows
  • Strong loan growth, with average balances up 24 percent from prior year largely due to continued growth in non-conforming mortgage loans and security-based lending

Wealth Management

  • Client assets of $225 billion, flat from prior year
  • Average loan balances up 11 percent over prior year primarily driven by continued growth in non-conforming mortgage loans, commercial loans and security-based lending

Retirement

  • IRA assets of $354 billion, down 2 percent from prior year
  • Institutional Retirement plan assets of $334 billion, down 2 percent from prior year

Asset Management

  • Total assets under management of $490 billion, down $6 billion from fourth quarter 2014 as equity outflows and lower market valuations were partially offset by fixed income net client inflows

Brokerage and Wealth cross-sell ratio of 10.55 products per household, up from 10.49 a year ago7

Conference Call

The Company will host a live conference call on Friday, January 15, at 7 a.m. PT (10 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~011516.

A replay of the conference call will be available beginning at 10 a.m. PT (1 p.m. ET) on Friday, January 15 through Sunday, January 24. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #29684900. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~011516.

 

Endnotes

1   Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
2 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
3 See table on page 35 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules.
4 Net payout ratio means the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock.
5 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 40 for more information.
6 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
7 Data as of November 2015, comparisons with November 2014.
8 Combined consumer and business debit card purchase volume dollars.
9 November 2015 Retail Bank household cross-sell ratio includes the impact of the sale of government guaranteed student loans in fourth quarter 2014.
10 Cross-sell reported on a one-quarter lag and does not reflect Business Banking relationships. Business Banking realigned from Community Banking to Wholesale Banking effective fourth quarter 2015.
11

Based on the 2015 Fall Phoenix-Hecht Mail Study. Phoenix-Hecht network rankings use all provider surveyed sites with an assumed locally disbursed check sample.

 

Forward-Looking Statements

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we may make forward-looking statements in our other documents filed or furnished with the SEC, and our management may make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “target,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar references to future periods. In particular, forward-looking statements include, but are not limited to, statements we make about: (i) the future operating or financial performance of the Company, including our outlook for future growth; (ii) our noninterest expense and efficiency ratio; (iii) future credit quality and performance, including our expectations regarding future loan losses and allowance levels; (iv) the appropriateness of the allowance for credit losses; (v) our expectations regarding net interest income and net interest margin; (vi) loan growth or the reduction or mitigation of risk in our loan portfolios; (vii) future capital levels or targets and our estimated Common Equity Tier 1 ratio under Basel III capital standards; (viii) the performance of our mortgage business and any related exposures; (ix) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (x) future common stock dividends, common share repurchases and other uses of capital; (xi) our targeted range for return on assets and return on equity; (xii) the outcome of contingencies, such as legal proceedings; and (xiii) the Company’s plans, objectives and strategies.

Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:

  • current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and the overall slowdown in global economic growth;
  • our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
  • financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
  • the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;
  • the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;
  • negative effects relating to our mortgage servicing and foreclosure practices, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;
  • our ability to realize our efficiency ratio target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;
  • the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;
  • significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our investment securities portfolio;
  • the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
  • reputational damage from negative publicity, protests, fines, penalties and other negative consequences from regulatory violations and legal actions;
  • a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
  • the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
  • fiscal and monetary policies of the Federal Reserve Board; and
  • the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014.

In addition to the above factors, we also caution that the amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of the Company, market conditions, capital requirements (including under Basel capital standards), common stock issuance requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company’s Board of Directors, and may be subject to regulatory approval or conditions.

For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

Any forward-looking statement made by us speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.8 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through 8,700 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 30 on Fortune’s 2015 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially.

 
Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS
     
Pages
 

Summary Information

Summary Financial Data

16
 

Income

Consolidated Statement of Income 18
Consolidated Statement of Comprehensive Income 20
Condensed Consolidated Statement of Changes in Total Equity 20
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 21
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 22
Noninterest Income and Noninterest Expense 24
 

Balance Sheet

Consolidated Balance Sheet 26
Investment Securities 28
 

Loans

Loans 28
Nonperforming Assets 29
Loans 90 Days or More Past Due and Still Accruing 30
Purchased Credit-Impaired Loans 31
Pick-A-Pay Portfolio 32
Non-Strategic and Liquidating Loan Portfolios 32
Changes in Allowance for Credit Losses 33
 

Equity

Common Equity Tier 1 Under Basel III 35
 

Operating Segments

Operating Segment Results 36
 

Other

Mortgage Servicing and other related data 38
 
                   

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA
Quarter ended  

% Change
Dec 31, 2015 from

  Year ended  
($ in millions, except per share amounts)     Dec 31,
2015 		      Sep 30,
2015 		      Dec 31,
2014 		      Sep 30,
2015 		      Dec 31,
2014 		      Dec 31,
2015 		      Dec 31,
2014 		      %
Change 		 
For the Period                    
Wells Fargo net income $ 5,709 5,796 5,709 (2 )% — $ 23,028 23,057 — %
Wells Fargo net income applicable to common stock 5,337 5,443 5,382 (2 ) (1 ) 21,604 21,821 (1 )
Diluted earnings per common share 1.03 1.05 1.02 (2 ) 1 4.15 4.10 1
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.27 % 1.32 1.36 (4 ) (7 ) 1.32 1.45 (9 )
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.23 12.62 12.84 (3 ) (5 ) 12.68 13.41 (5 )
Efficiency ratio (1) 57.4 56.7 59.0 1 (3 ) 57.8 58.1 (1 )
Total revenue $ 21,586 21,875 21,443 (1 ) 1 $ 86,057 84,347 2
Pre-tax pre-provision profit (PTPP) (2) 9,187 9,476 8,796 (3 ) 4 36,283 35,310 3
Dividends declared per common share 0.375 0.375 0.35 — 7 1.475 1.35 9
Average common shares outstanding 5,108.5 5,125.8 5,192.5 — (2 ) 5,136.5 5,237.2 (2 )
Diluted average common shares outstanding 5,177.9 5,193.8 5,279.2 — (2 ) 5,209.8 5,324.4 (2 )
Average loans $ 912,280 895,095 849,429 2 7 $ 885,432 834,432 6
Average assets 1,787,287 1,746,402 1,663,760 2 7 1,742,919 1,593,349 9
Average total deposits 1,216,809 1,198,874 1,149,796 1 6 1,194,073 1,114,144 7
Average consumer and small business banking deposits (3) 696,484 683,245 648,659 2 7 680,221 639,196 6
Net interest margin 2.92 % 2.96 3.04 (1 ) (4 ) 2.95 3.11 (5 )
At Period End
Investment securities $ 347,555 345,074 312,925 1 11 $ 347,555 312,925 11
Loans 916,559 903,233 862,551 1 6 916,559 862,551 6
Allowance for loan losses 11,545 11,659 12,319 (1 ) (6 ) 11,545 12,319 (6 )
Goodwill 25,529 25,684 25,705 (1 ) (1 ) 25,529 25,705 (1 )
Assets 1,787,632 1,751,265 1,687,155 2 6 1,787,632 1,687,155 6
Deposits 1,223,312 1,202,179 1,168,310 2 5 1,223,312 1,168,310 5
Common stockholders' equity 172,170 172,089 166,433 — 3 172,170 166,433 3
Wells Fargo stockholders’ equity 193,132 193,051 184,394 — 5 193,132 184,394 5
Total equity 194,025 194,043 185,262 — 5 194,025 185,262 5
Common shares outstanding 5,092.1 5,108.5 5,170.3 — (2 ) 5,092.1 5,170.3 (2 )
Book value per common share (4) $ 33.81 33.69 32.19 — 5 $ 33.81 32.19 5
Common stock price:
High 56.34 58.77 55.95 (4 ) 1 58.77 55.95 5
Low 49.51 47.75 46.44 4 7 47.75 44.17 8
Period end 54.36 51.35 54.82 6 (1 ) 54.36 54.82 (1 )
Team members (active, full-time equivalent)       264,700       265,200       264,500       —       —         264,700       264,500       —  
(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.

(3) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(4) Book value per common share is common stockholders' equity divided by common shares outstanding.
 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA
    Quarter ended
($ in millions, except per share amounts)     Dec 31,
2015 		      Sep 30,
2015 		      Jun 30,
2015 		      Mar 31,
2015 		      Dec 31,
2014
For the Quarter                      
Wells Fargo net income $ 5,709 5,796 5,719 5,804 5,709
Wells Fargo net income applicable to common stock 5,337 5,443 5,363 5,461 5,382
Diluted earnings per common share 1.03 1.05 1.03 1.04 1.02
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.27 % 1.32 1.33 1.38 1.36
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.23 12.62 12.71 13.17 12.84
Efficiency ratio (1) 57.4 56.7 58.5 58.8 59.0
Total revenue $ 21,586 21,875 21,318 21,278 21,443
Pre-tax pre-provision profit (PTPP) (2) 9,187 9,476 8,849 8,771 8,796
Dividends declared per common share 0.375 0.375 0.375 0.35 0.35
Average common shares outstanding 5,108.5 5,125.8 5,151.9 5,160.4 5,192.5
Diluted average common shares outstanding 5,177.9 5,193.8 5,220.5 5,243.6 5,279.2
Average loans $ 912,280 895,095 870,446 863,261 849,429
Average assets 1,787,287 1,746,402 1,729,278 1,707,798 1,663,760
Average total deposits 1,216,809 1,198,874 1,185,304 1,174,793 1,149,796
Average consumer and small business banking deposits (3) 696,484 683,245 674,889 665,896 648,659
Net interest margin 2.92 % 2.96 2.97 2.95 3.04
At Quarter End
Investment securities $ 347,555 345,074 340,769 324,736 312,925
Loans 916,559 903,233 888,459 861,231 862,551
Allowance for loan losses 11,545 11,659 11,754 12,176 12,319
Goodwill 25,529 25,684 25,705 25,705 25,705
Assets 1,787,632 1,751,265 1,720,617 1,737,737 1,687,155
Deposits 1,223,312 1,202,179 1,185,828 1,196,663 1,168,310
Common stockholders' equity 172,170 172,089 169,596 168,834 166,433
Wells Fargo stockholders’ equity 193,132 193,051 189,558 188,796 184,394
Total equity 194,025 194,043 190,676 189,964 185,262
Common shares outstanding 5,092.1 5,108.5 5,145.2 5,162.9 5,170.3
Book value per common share (4) $ 33.81 33.69 32.96 32.70 32.19
Common stock price:
High 56.34 58.77 58.26 56.29 55.95
Low 49.51 47.75 53.56 50.42 46.44
Period end 54.36 51.35 56.24 54.40 54.82
Team members (active, full-time equivalent)       264,700       265,200       265,800       266,000       264,500
(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

(2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.

(3) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(4) Book value per common share is common stockholders' equity divided by common shares outstanding.
 
 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME
    Quarter ended December 31,       %     Year ended December 31,       %
(in millions, except per share amounts)       2015       2014       Change         2015       2014       Change  
Interest income                
Trading assets $ 558 477 17 % $ 1,971 1,685 17 %
Investment securities 2,323 2,150 8 8,937 8,438 6
Mortgages held for sale 176 187 (6 ) 785 767 2
Loans held for sale 5 25 (80 ) 19 78 (76 )

Loans

9,323 9,091 3 36,575 35,652 3
Other interest income       258       253   2     990       932   6
Total interest income       12,643       12,183   4     49,277       47,552   4
Interest expense
Deposits 241 269 (10 ) 963 1,096 (12 )
Short-term borrowings 13 18 (28 ) 64 59 8
Long-term debt 713 620 15 2,592 2,488 4
Other interest expense       88       96   (8 )     357       382   (7 )
Total interest expense       1,055       1,003   5     3,976       4,025   (1 )
Net interest income 11,588 11,180 4 45,301 43,527 4
Provision for credit losses       831       485   71     2,442       1,395   75
Net interest income after provision for credit losses       10,757       10,695   1     42,859       42,132   2
Noninterest income
Service charges on deposit accounts 1,329 1,241 7 5,168 5,050 2
Trust and investment fees 3,511 3,705 (5 ) 14,468 14,280 1
Card fees 966 925 4 3,720 3,431 8
Other fees 1,040 1,124 (7 ) 4,324 4,349 (1 )
Mortgage banking 1,660 1,515 10 6,501 6,381 2
Insurance 427 382 12 1,694 1,655 2
Net gains from trading activities 99 179 (45 ) 614 1,161 (47 )
Net gains on debt securities 346 186 86 952 593 61
Net gains from equity investments 423 372 14 2,230 2,380 (6 )
Lease income 145 127 14 621 526 18
Other       52       507   (90 )     464       1,014   (54 )
Total noninterest income       9,998       10,263   (3 )     40,756       40,820   —
Noninterest expense
Salaries 4,061 3,938 3 15,883 15,375 3
Commission and incentive compensation 2,457 2,582 (5 ) 10,352 9,970 4
Employee benefits 1,042 1,124 (7 ) 4,446 4,597 (3 )
Equipment 640 581 10 2,063 1,973 5
Net occupancy 725 730 (1 ) 2,886 2,925 (1 )
Core deposit and other intangibles 311 338 (8 ) 1,246 1,370 (9 )
FDIC and other deposit assessments 258 231 12 973 928 5
Other       2,905       3,123   (7 )     11,925       11,899   —
Total noninterest expense       12,399       12,647   (2 )     49,774       49,037   2
Income before income tax expense 8,356 8,311 1 33,841 33,915 —
Income tax expense       2,599       2,519   3     10,431       10,307   1
Net income before noncontrolling interests 5,757 5,792 (1 ) 23,410 23,608 (1 )
Less: Net income from noncontrolling interests       48       83   (42 )     382       551   (31 )
Wells Fargo net income     $ 5,709       5,709   —   $ 23,028       23,057   —
Less: Preferred stock dividends and other       372       327   14     1,424       1,236   15
Wells Fargo net income applicable to common stock     $ 5,337       5,382   (1 )   $ 21,604       21,821   (1 )
Per share information
Earnings per common share $ 1.05 1.04 1 $ 4.21 4.17 1
Diluted earnings per common share 1.03 1.02 1 4.15 4.10 1
Dividends declared per common share 0.375 0.35 7 1.475 1.35 9
Average common shares outstanding 5,108.5 5,192.5 (2 ) 5,136.5 5,237.2 (2 )
Diluted average common shares outstanding       5,177.9       5,279.2       (2 )       5,209.8       5,324.4       (2 )
 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
    Quarter ended
(in millions, except per share amounts)     Dec 31,
2015 		    Sep 30,
2015 		    Jun 30,
2015 		    Mar 31,
2015 		    Dec 31,
2014
Interest income            
Trading assets $ 558 485 483 445 477
Investment securities 2,323 2,289 2,181 2,144 2,150
Mortgages held for sale 176 223 209 177 187
Loans held for sale 5 4 5 5 25
Loans 9,323 9,216 9,098 8,938 9,091
Other interest income       258     228     250     254     253
Total interest income       12,643     12,445     12,226     11,963     12,183
Interest expense
Deposits 241 232 232 258 269
Short-term borrowings 13 12 21 18 18
Long-term debt 713 655 620 604 620
Other interest expense       88     89     83     97     96
Total interest expense       1,055     988     956     977     1,003
Net interest income 11,588 11,457 11,270 10,986 11,180
Provision for credit losses       831     703     300     608     485
Net interest income after provision for credit losses       10,757     10,754     10,970     10,378     10,695
Noninterest income
Service charges on deposit accounts 1,329 1,335 1,289 1,215 1,241
Trust and investment fees 3,511 3,570 3,710 3,677 3,705
Card fees 966 953 930 871 925
Other fees 1,040 1,099 1,107 1,078 1,124
Mortgage banking 1,660 1,589 1,705 1,547 1,515
Insurance 427 376 461 430 382
Net gains (losses) from trading activities 99 (26 ) 133 408 179
Net gains on debt securities 346 147 181 278 186
Net gains from equity investments 423 920 517 370 372
Lease income 145 189 155 132 127
Other       52     266     (140 )   286     507
Total noninterest income       9,998     10,418     10,048     10,292     10,263
Noninterest expense
Salaries 4,061 4,035 3,936 3,851 3,938
Commission and incentive compensation 2,457 2,604 2,606 2,685 2,582
Employee benefits 1,042 821 1,106 1,477 1,124
Equipment 640 459 470 494 581
Net occupancy 725 728 710 723 730
Core deposit and other intangibles 311 311 312 312 338
FDIC and other deposit assessments 258 245 222 248 231
Other       2,905     3,196     3,107     2,717     3,123
Total noninterest expense       12,399     12,399     12,469     12,507     12,647
Income before income tax expense 8,356 8,773 8,549 8,163 8,311
Income tax expense       2,599     2,790     2,763     2,279     2,519
Net income before noncontrolling interests 5,757 5,983 5,786 5,884 5,792
Less: Net income from noncontrolling interests       48     187     67     80     83
Wells Fargo net income     $ 5,709     5,796     5,719     5,804     5,709
Less: Preferred stock dividends and other       372     353     356     343     327
Wells Fargo net income applicable to common stock     $ 5,337     5,443     5,363     5,461     5,382
Per share information
Earnings per common share $ 1.05 1.06 1.04 1.06 1.04
Diluted earnings per common share 1.03 1.05 1.03 1.04 1.02
Dividends declared per common share 0.375 0.375 0.375 0.35 0.35
Average common shares outstanding 5,108.5 5,125.8 5,151.9 5,160.4 5,192.5
Diluted average common shares outstanding       5,177.9     5,193.8     5,220.5     5,243.6     5,279.2
 
 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
      Quarter ended Dec 31,       %     Year ended Dec 31,       %
(in millions)       2015       2014       Change       2015       2014       Change
Wells Fargo net income       $ 5,709       5,709   —% $ 23,028       23,057   —%
Other comprehensive income (loss), before tax:        
Investment securities:
Net unrealized gains (losses) arising during the period (1,301 ) 1,560 NM (3,318 ) 5,426 NM
Reclassification of net gains to net income (573 ) (327 ) 75 (1,530 ) (1,532 ) —
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period (684 ) 730 NM 1,549 952 63
Reclassification of net gains on cash flow hedges to net income (294 ) (197 ) 49 (1,089 ) (545 ) 100
Defined benefit plans adjustments:
Net actuarial losses arising during the period (501 ) (1,104 )

(55

)

(512 ) (1,116 ) (54)
Amortization of net actuarial loss, settlements and other to net income 11 18

(39

)

114 74 54
Foreign currency translation adjustments:
Net unrealized losses arising during the period (33 ) (28 ) 18 (137 ) (60 ) 128
Reclassification of net (gains) losses to net income       (5 )     —   NM (5 )     6   NM
Other comprehensive income (loss), before tax (3,380 ) 652 NM (4,928 ) 3,205 NM
Income tax (expense) benefit related to other comprehensive income       1,230       (213 ) NM 1,774       (1,300 ) NM
Other comprehensive income (loss), net of tax (2,150 ) 439 NM (3,154 ) 1,905 NM
Less: Other comprehensive income (loss) from noncontrolling interests       (58 )     39   NM 67       (227 ) NM
Wells Fargo other comprehensive income (loss), net of tax       (2,092 )     400   NM (3,221 )     2,132   NM
Wells Fargo comprehensive income 3,617 6,109

(41

)

19,807 25,189 (21)
Comprehensive income (loss) from noncontrolling interests       (10 )     122   NM 449       324   39
Total comprehensive income       $ 3,607       6,231      

(42

)

    $ 20,256       25,513       (21)

NM - Not meaningful

 
 

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

      Quarter ended  
Dec 31,     Sep 30,     Jun 30,     Mar 31,     Dec 31,
(in millions)       2015       2015       2015       2015       2014  
Balance, beginning of period $ 194,043 190,676 189,964 185,262 182,990
Wells Fargo net income 5,709 5,796 5,719 5,804 5,709
Wells Fargo other comprehensive income (loss), net of tax (2,092 ) 321 (1,709 ) 259 400
Noncontrolling interests (100 ) (123 ) (51 ) 301 353
Common stock issued 310 505 502 1,327 508
Common stock repurchased (1) (1,974 ) (2,137 ) (1,994 ) (2,592 ) (2,945 )
Preferred stock released by ESOP 210 225 349 41 166
Common stock warrants repurchased/exercised — (17 ) (24 ) (8 ) (9 )
Preferred stock issued — 975 — 1,997 —
Common stock dividends (1,917 ) (1,926 ) (1,932 ) (1,805 ) (1,816 )
Preferred stock dividends (371 ) (356 ) (355 ) (344 ) (327 )
Tax benefit from stock incentive compensation 22 22 55 354 75
Stock incentive compensation expense 204 98 166 376 176
Net change in deferred compensation and related plans       (19 )     (16 )     (14 )     (1,008 )     (18 )
Balance, end of period       $ 194,025       194,043       190,676       189,964       185,262  

(1) For the quarter ended December 31, 2015, includes $500 million related to a private forward repurchase transaction that settled in first quarter 2016 for 9.2 million shares of common stock. For the quarters ended June 30 and March 31, 2015, and December 31, 2014, includes $750 million each quarter related to private forward repurchase transactions that settled in subsequent quarters for 13.6 million, 14.0 million, and 14.3 million shares of common stock, respectively.

 
 

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
      Quarter ended December 31,
2015       2014
        Interest           Interest
Average Yields/ income/ Average Yields/ income/
(in millions)       balance       rates       expense       balance       rates       expense
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 274,589 0.28 % $ 195 268,109 0.28 % $ 188
Trading assets 68,833 3.33 573 60,383 3.21 485
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 34,617 1.58 137 19,506 1.55 76
Securities of U.S. states and political subdivisions 49,300 4.37 539 43,891 4.30 472
Mortgage-backed securities:
Federal agencies 102,281 2.79 712 109,270 2.78 760
Residential and commercial       21,502   5.51 297   24,711   5.89 364
Total mortgage-backed securities 123,783 3.26 1,009 133,981 3.36 1,124
Other debt and equity securities       52,701   3.35 444   44,980   3.87 438
Total available-for-sale securities       260,401   3.27 2,129   242,358   3.48 2,110
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,656 2.18 246 32,930 2.25 187
Securities of U.S. states and political subdivisions 2,158 6.07 33 902 4.92 11
Federal agency mortgage-backed securities 28,185 2.42 170 5,586 2.07 29
Other debt securities       4,876   1.77 22   6,118   1.81 27
Total held-to-maturity securities       79,875   2.35 471   45,536   2.22 254
Total investment securities 340,276 3.05 2,600 287,894 3.28 2,364
Mortgages held for sale (4) 19,189 3.66 176 19,191 3.90 187
Loans held for sale (4) 363 4.96 5 6,968 1.43 25
Loans:
Commercial:
Commercial and industrial - U.S. 250,445 3.25 2,048 218,297 3.32 1,825
Commercial and industrial - Non U.S. 47,972 1.97 239 43,049 2.03 221
Real estate mortgage 121,844 3.30 1,012 112,277 3.69 1,044
Real estate construction 21,993 3.27 182 18,336 4.33 200
Lease financing       12,241   4.48 136   12,268   5.35 164
Total commercial       454,495   3.16 3,617   404,227   3.39 3,454
Consumer:
Real estate 1-4 family first mortgage 272,871 4.04 2,759 264,799 4.16 2,754
Real estate 1-4 family junior lien mortgage 53,788 4.28 579 60,177 4.28 648
Credit card 32,795 11.61 960 29,477 11.71 870
Automobile 59,505 5.74 862 55,457 6.08 849
Other revolving credit and installment       38,826   5.83 571   35,292   6.01 534
Total consumer       457,785   4.99 5,731   445,202   5.06 5,655
Total loans (4) 912,280 4.08 9,348 849,429 4.27 9,109
Other       5,166   4.82 61   4,829   5.30 64
Total earning assets       $ 1,620,696   3.18 % $ 12,958   1,496,803   3.31 % $ 12,422
Funding sources
Deposits:
Interest-bearing checking $ 39,082 0.05 % $ 5 40,498 0.06 % $ 6
Market rate and other savings 640,503 0.06 93 593,940 0.07 99
Savings certificates 29,654 0.54 41 35,870 0.80 72
Other time deposits 49,806 0.52 64 56,119 0.39 55
Deposits in foreign offices       107,094   0.14 38   99,289   0.15 37
Total interest-bearing deposits 866,139 0.11 241 825,716 0.13 269
Short-term borrowings 102,915 0.05 12 64,676 0.12 19
Long-term debt 190,861 1.49 713 183,286 1.35 620
Other liabilities       16,453   2.14 88   15,580   2.44 96
Total interest-bearing liabilities 1,176,368 0.36 1,054 1,089,258 0.37 1,004
Portion of noninterest-bearing funding sources       444,328       407,545   — —
Total funding sources       $ 1,620,696   0.26   1,054   1,496,803   0.27   1,004
Net interest margin and net interest income on a taxable-equivalent basis (5) 2.92 %     $ 11,904   3.04 %     $ 11,418
Noninterest-earning assets
Cash and due from banks $ 17,804 16,932
Goodwill 25,580 25,705
Other       123,207   124,320  
Total noninterest-earning assets       $ 166,591   166,957  
Noninterest-bearing funding sources
Deposits $ 350,670 324,080
Other liabilities 65,223 65,672
Total equity 195,026 184,750
Noninterest-bearing funding sources used to fund earning assets       (444,328 ) (407,545 )
Net noninterest-bearing funding sources       $ 166,591   166,957  
Total assets       $ 1,787,287   1,663,760  
           
(1) Our average prime rate was 3.29% and 3.25% for the quarters ended December 31, 2015 and 2014, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.41% and 0.24% for the same quarters, respectively.
(2) Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) Includes taxable-equivalent adjustments of $316 million and $238 million for the quarters ended December 31, 2015 and 2014, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
 
 

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
      Year ended December 31,

2015

      2014
        Interest           Interest
Average Yields/ income/ Average Yields/ income/
(in millions)       balance       rates       expense       balance       rates       expense
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 266,832 0.28 % $ 738 241,282 0.28 % $ 673
Trading assets 66,679 3.01 2,010 55,140 3.10 1,712
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 32,093 1.58 505 10,400 1.64 171
Securities of U.S. states and political subdivisions 47,404 4.23 2,007 43,138 4.29 1,852
Mortgage-backed securities:
Federal agencies 100,218 2.73 2,733 114,076 2.84 3,235
Residential and commercial       22,490   5.73 1,289   26,475   6.03 1,597
Total mortgage-backed securities 122,708 3.28 4,022 140,551 3.44 4,832
Other debt and equity securities       49,752   3.42 1,701   47,488   3.66 1,741
Total available-for-sale securities       251,957   3.27 8,235   241,577   3.56 8,596
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,173 2.19 968 17,239 2.23 385
Securities of U.S. states and political subdivisions 2,087 5.40 113 246 4.93 12
Federal agency mortgage-backed securities 21,967 2.23 489 5,921 2.55 151
Other debt securities       5,821   1.73 101   5,913   1.85 109
Total held-to-maturity securities       74,048   2.26 1,671   29,319   2.24 657
Total investment securities 326,005 3.04 9,906 270,896 3.42 9,253
Mortgages held for sale (4) 21,603 3.63 785 19,018 4.03 767
Loans held for sale (4) 573 3.25 19 4,226 1.85 78
Loans:
Commercial:
Commercial and industrial - U.S. 237,844 3.29 7,836 204,819 3.35 6,869
Commercial and industrial - Non U.S. 46,028 1.90 877 42,661 2.03 867
Real estate mortgage 116,893 3.41 3,984 112,710 3.64 4,100
Real estate construction 20,979 3.57 749 17,676 4.21 744
Lease financing       12,301   4.70 577   12,257   5.63 690
Total commercial       434,045   3.23 14,023   390,123   3.40 13,270
Consumer:
Real estate 1-4 family first mortgage 268,560 4.10 11,002 261,620 4.19 10,961
Real estate 1-4 family junior lien mortgage 56,242 4.25 2,391 62,510 4.30 2,686
Credit card 31,307 11.70 3,664 27,491 11.98 3,294
Automobile 57,766 5.84 3,374 53,854 6.27 3,377
Other revolving credit and installment       37,512   5.89 2,209   38,834   5.48 2,127
Total consumer       451,387   5.02 22,640   444,309   5.05 22,445
Total loans (4) 885,432 4.14 36,663 834,432 4.28 35,715
Other       4,947   5.11 252   4,673   5.54 259
Total earning assets       $ 1,572,071   3.20 % $ 50,373   1,429,667   3.39 % $ 48,457
Funding sources
Deposits:
Interest-bearing checking $ 38,640 0.05 % $ 20 39,729 0.07 % $ 26
Market rate and other savings 625,549 0.06 367 585,854 0.07 403
Savings certificates 31,887 0.63 201 38,111 0.85 323
Other time deposits 51,790 0.45 232 51,434 0.40 207
Deposits in foreign offices       107,138   0.13 143   95,889   0.14 137
Total interest-bearing deposits 855,004 0.11 963 811,017 0.14 1,096
Short-term borrowings 87,465 0.07 64 60,111 0.10 62
Long-term debt 185,078 1.40 2,592 167,420 1.49 2,488
Other liabilities       16,545   2.15 357   14,401   2.65 382
Total interest-bearing liabilities 1,144,092 0.35 3,976 1,052,949 0.38 4,028
Portion of noninterest-bearing funding sources       427,979   — —   376,718   — —
Total funding sources       $ 1,572,071   0.25   3,976   1,429,667   0.28   4,028

Net interest margin and net interest income on a taxable-equivalent basis (5)

2.95 %     $ 46,397   3.11 %     $ 44,429
Noninterest-earning assets
Cash and due from banks $ 17,327 16,361
Goodwill 25,673 25,687
Other       127,848   121,634  
Total noninterest-earning assets       $ 170,848   163,682  
Noninterest-bearing funding sources
Deposits $ 339,069 303,127
Other liabilities 68,174 56,985
Total equity 191,584 180,288
Noninterest-bearing funding sources used to fund earning assets       (427,979 ) (376,718 )
Net noninterest-bearing funding sources       $ 170,848   163,682  
Total assets       $ 1,742,919   1,593,349  
                                                   

(1) Our average prime rate was 3.26% and 3.25% for the year ended December 31, 2015 and 2014, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.32% and 0.23% for the same periods, respectively.

(2) Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.

(3) The average balance amounts represent amortized cost for the periods presented.

(4) Nonaccrual loans and related income are included in their respective loan categories.

(5) Includes taxable-equivalent adjustments of $1.1 billion and $902 million for the year ended December 31, 2015 and 2014, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

 
     

Wells Fargo & Company and Subsidiaries

FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended
        Dec 31, 2015       Sep 30, 2015       Jun 30, 2015       Mar 31, 2015       Dec 31, 2014  
Average     Yields/     Average     Yields/     Average     Yields/     Average     Yields/     Average     Yields/
($ in billions)       balance       rates       balance       rates       balance       rates       balance       rates       balance       rates  
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 274.6 0.28 % $ 250.1 0.26 % $ 267.1 0.28 % $ 275.7 0.28 % $ 268.1 0.28 %
Trading assets 68.8 3.33 67.2 2.93 67.6 2.91 63.0 2.88 60.4 3.21
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 34.6 1.58 35.7 1.59 31.7 1.58 26.2 1.55 19.5 1.55
Securities of U.S. states and political subdivisions 49.3 4.37 48.2 4.22 47.1 4.13 44.9 4.20 43.9 4.30
Mortgage-backed securities:
Federal agencies 102.3 2.79 98.4 2.70 98.0 2.65 102.2 2.76 109.3 2.78
Residential and commercial       21.5   5.51 21.9   5.84 22.7   5.84 23.9   5.71 24.7   5.89
Total mortgage-backed securities 123.8 3.26 120.3 3.27 120.7 3.25 126.1 3.32 134.0 3.36
Other debt and equity securities       52.7   3.35 50.4   3.40 48.8   3.51 47.1   3.43 45.0   3.87
Total available-for-sale securities       260.4   3.27 254.6   3.24 248.3   3.25 244.3   3.32 242.4   3.48
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44.7 2.18 44.6 2.18 44.5 2.19 42.9 2.21 32.9 2.25
Securities of U.S. states and political subdivisions 2.1 6.07 2.2 5.17 2.1 5.17 1.9 5.16 0.9 4.92
Federal agency mortgage-backed securities 28.2 2.42 27.1 2.38 21.0 2.00 11.3 1.87 5.6 2.07
Other debt securities       4.9   1.77 5.4   1.75 6.3   1.70 6.8   1.72 6.1   1.81
Total held-to-maturity securities       79.9   2.35 79.3   2.30 73.9   2.18 62.9   2.19 45.5   2.22
Total investment securities 340.3 3.05 333.9 3.02 322.2 3.01 307.2 3.08 287.9 3.28
Mortgages held for sale 19.2 3.66 24.2 3.69 23.5 3.57 19.6 3.61 19.2 3.90
Loans held for sale 0.4 4.96 0.6 2.57 0.7 3.51 0.7 2.67 7.0 1.43
Loans:
Commercial:
Commercial and industrial - U.S. 250.5 3.25 241.4 3.30 231.5 3.36 227.7 3.28 218.3 3.32
Commercial and industrial - Non U.S. 48.0 1.97 45.9 1.83 45.1 1.93 45.1 1.88 43.0 2.03
Real estate mortgage 121.8 3.30 121.0 3.31 113.1 3.48 111.5 3.57 112.3 3.69
Real estate construction 22.0 3.27 21.6 3.39 20.8 4.12 19.5 3.52 18.3 4.33
Lease financing       12.2   4.48 12.3   4.18 12.4   5.16 12.3   4.95 12.3   5.35
Total commercial       454.5   3.16 442.2   3.18 422.9   3.33 416.1   3.26 404.2   3.39
Consumer:
Real estate 1-4 family first mortgage 272.9 4.04 269.4 4.10 266.0 4.12 265.8 4.13 264.8 4.16
Real estate 1-4 family junior lien mortgage 53.8 4.28 55.3 4.22 57.0 4.23 58.9 4.27 60.2 4.28
Credit card 32.8 11.61 31.7 11.73 30.4 11.69 30.4 11.78 29.5 11.71
Automobile 59.5 5.74 58.5 5.80 57.0 5.88 56.0 5.95 55.4 6.08
Other revolving credit and installment       38.8   5.83 38.0   5.84 37.1   5.88 36.1   6.01 35.3   6.01
Total consumer       457.8   4.99 452.9   5.01 447.5   5.02 447.2   5.05 445.2   5.06
Total loans 912.3 4.08 895.1 4.11 870.4 4.20 863.3 4.19 849.4 4.27
Other       5.1   4.82 5.0   5.11 4.8   5.14 4.7   5.41 4.8   5.30
Total earning assets       $ 1,620.7   3.18 % $ 1,576.1   3.21 % $ 1,556.3   3.22 % $ 1,534.2   3.21 % $ 1,496.8   3.31 %
Funding sources
Deposits:
Interest-bearing checking $ 39.1 0.05 % $ 37.8 0.05 % $ 38.6 0.05 % $ 39.2 0.05 % $ 40.5 0.06 %
Market rate and other savings 640.5 0.06 628.1 0.06 619.8 0.06 613.4 0.06 593.9 0.07
Savings certificates 29.6 0.54 30.9 0.58 32.5 0.63 34.6 0.75 35.9 0.80
Other time deposits 49.8 0.52 48.7 0.46 52.2 0.42 56.5 0.39 56.1 0.39
Deposits in foreign offices       107.1   0.14 111.5   0.13 104.3   0.13 105.5   0.14 99.3   0.15
Total interest-bearing deposits 866.1 0.11 857.0 0.11 847.4 0.11 849.2 0.12 825.7 0.13
Short-term borrowings 102.9 0.05 90.4 0.06 84.5 0.09 71.7 0.11 64.7 0.12
Long-term debt 190.9 1.49 180.6 1.45 185.1 1.34 183.8 1.32 183.3 1.35
Other liabilities       16.5   2.14 16.4   2.13 16.4   2.03 16.9   2.30 15.6   2.44
Total interest-bearing liabilities 1,176.4 0.36 1,144.4 0.34 1,133.4 0.34 1,121.6 0.35 1,089.3 0.37
Portion of noninterest-bearing funding sources       444.3   — 431.7   — 422.9   — 412.6   — 407.5   —
Total funding sources       $ 1,620.7   0.26   $ 1,576.1   0.25   $ 1,556.3   0.25   $ 1,534.2   0.26   $ 1,496.8   0.27  
Net interest margin on a taxable-equivalent basis 2.92 % 2.96 % 2.97 % 2.95 % 3.04 %
Noninterest-earning assets
Cash and due from banks $ 17.8 17.0 17.5 17.1 16.9
Goodwill 25.6 25.7 25.7 25.7 25.7
Other       123.2   127.6   129.8   130.8   124.4  
Total noninterest-earnings assets       $ 166.6   170.3   173.0   173.6   167.0  
Noninterest-bearing funding sources
Deposits $ 350.7 341.9 337.9 325.6 324.1
Other liabilities 65.2 67.9 67.6 72.0 65.7
Total equity 195.0 192.2 190.4 188.6 184.7
Noninterest-bearing funding sources used to fund earning assets       (444.3 ) (431.7 ) (422.9 ) (412.6 ) (407.5 )
Net noninterest-bearing funding sources       $ 166.6   170.3   173.0   173.6   167.0  
Total assets       $ 1,787.3   1,746.4   1,729.3   1,707.8   1,663.8  
                                                                                     

(1) Our average prime rate was 3.29% for the quarter ended December 31, 2015, and 3.25% for the quarters ended September 30, June 30 and March 31, 2015, and December 31, 2014. The average three-month London Interbank Offered Rate (LIBOR) was 0.41%, 0.31%, 0.28%, 0.26% and 0.24% for the same quarters, respectively.

(2) Yields/rates include the effects of hedge and risk management activities associated with the respective asset and liability categories.

(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.

 
                     

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME
Quarter ended Dec 31, % Year ended Dec 31, %
(in millions)       2015       2014       Change     2015       2014       Change
Service charges on deposit accounts $ 1,329     1,241 7 % $ 5,168     5,050 2 %
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,288 2,335 (2 ) 9,435 9,183 3
Trust and investment management 838 849 (1 ) 3,394 3,387 —
Investment banking         385       521   (26 )   1,639       1,710   (4 )
Total trust and investment fees         3,511       3,705   (5 )   14,468       14,280   1
Card fees 966 925 4 3,720 3,431 8
Other fees:
Charges and fees on loans 308 311 (1 ) 1,228 1,316 (7 )
Merchant processing fees (1) 18 187 (90 ) 607 726 (16 )
Cash network fees 129 125 3 522 507 3
Commercial real estate brokerage commissions 224 155 45 618 469 32
Letters of credit fees 86 102