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Wells Fargo Reports $5.8 Billion in Quarterly Net Income

07/14/2017
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Diluted EPS of $1.07; Revenue of $22.2 billion

Wells Fargo & Company (NYSE:WFC):

  • Strong financial results:
    • Net income of $5.8 billion, up 5 percent from second quarter 2016
    • Diluted earnings per share (EPS) of $1.07, up 6 percent
    • Revenue of $22.2 billion
      • Net interest income of $12.5 billion, up $750 million, or 6 percent
    • Total average deposits of $1.3 trillion, up $64.5 billion, or 5 percent
    • Total average loans of $956.9 billion, up $6.1 billion, or 1 percent
    • Return on assets (ROA) of 1.21 percent and return on equity (ROE) of 11.95 percent
  • Continued improvement in credit quality:
    • Provision expense of $555 million, down $519 million, or 48 percent, from second quarter 2016
      • Net charge-offs of $655 million, down $269 million
        • Net charge-offs were 0.27 percent of average loans (annualized), down from 0.39 percent
      • Reserve release1 of $100 million
    • Nonaccrual loans of $9.1 billion, down $2.9 billion, or 24 percent
  • Strong capital position while returning more capital to shareholders:
    • Common Equity Tier 1 ratio (fully phased-in) of 11.6 percent2
    • Period-end common shares outstanding down 81.7 million from second quarter 2016
    • Returned $3.4 billion to shareholders in the second quarter through common stock dividends and net share repurchases
  • Received a non-objection to the Company's 2017 Capital Plan submission from the Federal Reserve
    • As part of this plan, the Company expects to increase its third quarter 2017 common stock dividend to $0.39 per share from $0.38 per share, subject to approval by the Company's Board of Directors. The plan also includes up to $11.5 billion of gross common stock repurchases, subject to management discretion, for the four-quarter period from third quarter 2017 through second quarter 2018.

Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.

 

Selected Financial Information

    Quarter ended
    Jun 30,     Mar 31,     Jun 30,
    2017     2017     2016
Earnings                
Diluted earnings per common share   $ 1.07     1.00     1.01
Wells Fargo net income (in billions)     5.81     5.46     5.56
Return on assets (ROA)     1.21 %   1.15     1.20
Return on equity (ROE)     11.95     11.54     11.70
Return on average tangible common equity (ROTCE)(a)     14.26     13.85     14.15
Asset Quality                
Net charge-offs (annualized) as a % of average total loans     0.27 %   0.34     0.39
Allowance for credit losses as a % of total loans     1.27     1.28     1.33
Allowance for credit losses as a % of annualized net charge-offs     462     376     343
Other                
Revenue (in billions)   $ 22.2     22.0     22.2
Efficiency ratio (b)     61.1 %   62.7     58.1
Average loans (in billions)   $ 956.9     963.6     950.8
Average deposits (in billions)     1,301.2     1,299.2     1,236.7
Net interest margin     2.90 %   2.87     2.86

(a) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.

(b) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

 

Wells Fargo & Company (NYSE:WFC) reported net income of $5.8 billion, or $1.07 per diluted common share, for second quarter 2017, compared with $5.6 billion, or $1.01 per share, for second quarter 2016, and $5.5 billion, or $1.00 per share, for first quarter 2017.

Chief Executive Officer Tim Sloan said, "Second quarter 2017 results demonstrated the benefit of our diversified business model as we continued to generate strong financial results, invest for the future, and adhere to our prudent risk discipline. We remain committed to reducing expenses and improving the efficiency of our company, and we are very focused on our recently announced goals. As we work to improve our efficiency, we will also continue to innovate for the future. We recently advanced a number of important customer-focused initiatives, such as the launch of the Zelle SM person-to-person payment platform to our 28 million digital customers. As always, our success starts with our customers, and I appreciate the effort of our 271,000 team members in helping our customers succeed financially. We continued to make progress this quarter in our efforts to rebuild trust and build a better Wells Fargo and, while there is still more work ahead of us, we are on the right track and I am confident about our future."

Chief Financial Officer John Shrewsberry said, “Wells Fargo reported $5.8 billion of net income in the second quarter, up on a linked-quarter and year-over-year basis. Overall results were solid in a period with continued modest economic growth and included growth in net interest income and continued improvement in credit results. Second quarter 2017 also included discrete tax benefits totaling $186 million, or approximately $0.04 per share, primarily as a result of our agreement to sell Wells Fargo Insurance Services.

Our liquidity and capital positions remained strong, and we returned $3.4 billion to shareholders through common stock dividends and net share repurchases for a net payout ratio3 of 63 percent in the quarter. In addition, during the quarter we received a non-objection from the Federal Reserve to our 2017 Capital Plan, which included an increase, subject to board approval, in our quarterly common stock dividend rate in third quarter 2017, to $0.39 per share from $0.38 per share, as well as increased share repurchases."

Net Interest Income

Net interest income in second quarter 2017 increased $183 million from first quarter 2017 to $12.5 billion, as the benefit of repricing earning assets in response to higher short-term interest rates exceeded the cost of repricing liabilities, due in part to continued deposit pricing discipline. Second quarter results also benefited from one additional business day. These benefits more than offset the impact of lower average loan and investment securities balances.

Net interest margin was 2.90 percent, up 3 basis points from first quarter 2017. The benefit of higher short-term interest rates, disciplined deposit pricing, and a reduction in long-term debt was partially offset by the impacts from lower loan and investment securities balances.

Noninterest Income

Noninterest income in the second quarter was $9.7 billion, in line with first quarter 2017. Second quarter noninterest income included higher other income on a $309 million gain on the sale of a Pick-a-Pay purchased credit-impaired (PCI) loan portfolio, higher card fees on stronger credit card and debit card purchase volumes, and higher trust and investment fees reflecting stronger investment banking fees from both higher equity and debt originations. These increases were offset by lower market sensitive revenue4 and lower mortgage banking income.

  • Mortgage banking noninterest income was $1.1 billion, compared with $1.2 billion in first quarter 2017. As expected, residential mortgage loan originations increased in the second quarter, up to $56 billion, from $44 billion in the first quarter. The production margin on residential held-for-sale mortgage loan originations5 was 1.24 percent, down from 1.68 percent in the first quarter due to increased price competition and a higher percentage of correspondent volume, which has lower production margins than retail originations. Mortgage servicing income was $400 million in the second quarter, down from $456 million in the first quarter, primarily due to lower net hedge results and higher prepayments.
  • Market sensitive revenue was $545 million, compared with $878 million in first quarter 2017, as lower net gains from equity investments and trading activities were partially offset by higher gains on debt securities. Net gains from equity investments were down $215 million from the first quarter on lower venture capital gains. Net gains from trading activities were down $202 million linked quarter and included lower deferred compensation plan investment results (largely offset in employee benefits expense), as well as lower secondary trading results on reduced client activity and lower valuation adjustments.

Noninterest Expense

Noninterest expense in the second quarter declined $251 million from the prior quarter to $13.5 billion, primarily due to lower employee benefits and commission and incentive compensation, which were seasonally elevated in the first quarter. These declines were partially offset by increases in outside professional services and salaries, as well as higher operating losses, reflecting higher litigation accruals. In addition, the second quarter included a $94 million donation to the Wells Fargo Foundation. The efficiency ratio improved to 61.1 percent in second quarter 2017, compared with 62.7 percent in the prior quarter.

Income Taxes

The Company’s effective income tax rate was 27.7 percent for second quarter 2017, and included discrete tax benefits totaling $186 million, primarily related to the deferred income tax effect of investment basis differences recognized as a result of our agreement to sell Wells Fargo Insurance Services USA and related businesses. This compares with an effective income tax rate of 27.4 percent in first quarter 2017, which included discrete tax benefits totaling $197 million, of which $183 million reflected tax benefits associated with stock compensation activity during the quarter which was subject to ASU 2016-09 accounting guidance adopted in the first quarter. The Company currently expects the full-year 2017 tax rate to be approximately 29 percent.

Loans

Total average loans were $956.9 billion in the second quarter, down $6.8 billion from the first quarter. Period-end loan balances were $957.4 billion at June 30, 2017, down $982 million from March 31, 2017, reflecting an expected decline in auto loans as our tighter underwriting standards resulted in lower origination volume. Additionally, legacy junior lien mortgage loans continued to decline as expected. These declines were partially offset by growth in commercial and industrial loans, real estate first mortgage loans, and credit card loans.

Period-End Loan Balances

      Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2017     2017     2016     2016     2016
Commercial     $ 505,901     505,004     506,536     496,454     494,538
Consumer       451,522     453,401     461,068     464,872     462,619
Total loans     $ 957,423     958,405     967,604     961,326     957,157
Change from prior quarter     $ (982 )   (9,199 )   6,278     4,169     9,899
                               

Investment Securities

Investment securities were $409.6 billion at June 30, 2017, up $2.0 billion from the first quarter, as approximately $37.1 billion of purchases, primarily federal agency mortgage-backed securities in the available-for-sale portfolio, were partially offset by sales and run-off.

Net unrealized gains on available-for-sale securities were $1.1 billion at June 30, 2017, compared with net unrealized losses on available-for-sale securities of $1.2 billion at March 31, 2017, primarily due to tighter credit spreads during the quarter and a modest benefit from lower long-term interest rates.

Deposits

Total average deposits for second quarter 2017 were $1.3 trillion, stable from the prior quarter, as growth in consumer and small business deposits was offset by lower commercial deposits. The average deposit cost for second quarter 2017 was 21 basis points, up 4 basis points from the prior quarter and 10 basis points from a year ago, primarily driven by an increase in commercial deposit rates.

Capital

Capital levels remained strong in the second quarter, with a Common Equity Tier 1 ratio (fully phased-in) of 11.6 percent2, compared with 11.2 percent in the prior quarter. In second quarter 2017, the Company repurchased 43.0 million shares of its common stock, which reduced period-end common shares outstanding by 30.0 million. The Company paid a quarterly common stock dividend of $0.38 per share. In addition, the Company received a non-objection to its 2017 Capital Plan from the Federal Reserve. As part of this plan, the Company expects to increase its third quarter 2017 common stock dividend to $0.39 per share, subject to approval by the Company's Board of Directors. The plan also includes up to $11.5 billion of gross common stock repurchases, subject to management discretion, for the four-quarter period from third quarter 2017 through second quarter 2018.

Credit Quality

Net Loan Charge-offs

The quarterly loss rate improved to 0.27 percent (annualized) from 0.34 percent in the prior quarter. Commercial and consumer losses improved to 0.06 percent and 0.51 percent, respectively. Credit losses were $655 million in second quarter 2017, down $150 million from first quarter 2017. Consumer losses decreased $82 million, driven by lower losses across all asset classes with the exception of credit card. Commercial losses were down $68 million, predominantly driven by lower losses in our oil and gas portfolio.

Net Loan Charge-Offs

 
    Quarter ended  
    June 30, 2017     March 31, 2017     December 31, 2016  
    Net loan     As a % of     Net loan     As a % of     Net loan     As a % of  
    charge-     average     charge-     average     charge-     average  
($ in millions)   offs     loans (a)     offs     loans (a)     offs     loans (a)  
Commercial:                                    
Commercial and industrial   $ 78     0.10 %   $ 171     0.21 %   $ 256     0.31 %
Real estate mortgage     (6 )   (0.02 )     (25 )   (0.08 )     (12 )   (0.04 )
Real estate construction     (4 )   (0.05 )     (8 )   (0.15 )     (8 )   (0.13 )
Lease financing     7     0.15       5     0.11       15     0.32  
Total commercial     75     0.06       143     0.11       251     0.20  
Consumer:                                    
Real estate 1-4 family first mortgage     (16 )   (0.02 )     7     0.01       (3 )    
Real estate 1-4 family junior lien mortgage     (4 )   (0.03 )     23     0.21       44     0.38  
Credit card     320     3.67       309     3.54       275     3.09  
Automobile     126     0.86       167     1.10       166     1.05  
Other revolving credit and installment     154     1.58       156     1.60       172     1.70  
Total consumer     580     0.51       662     0.59       654     0.56  
Total   $ 655     0.27 %   $ 805     0.34 %   $ 905     0.37 %
                                     

(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 decreased $827 million from first quarter 2017 to $9.8 billion. Nonaccrual loans decreased $703 million from first quarter 2017 to $9.1 billion reflecting declines across all commercial asset classes, as well as continued lower consumer real estate nonaccruals.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

 
      June 30, 2017     March 31, 2017     December 31, 2016  
            As a           As a           As a  
            % of           % of           % of  
      Total     total     Total     total     Total     total  
($ in millions)     balances     loans     balances     loans     balances     loans  
Commercial:                                      
Commercial and industrial     $ 2,632     0.79 %   $ 2,898     0.88 %   $ 3,216     0.97 %
Real estate mortgage       630     0.48       672     0.51       685     0.52  
Real estate construction       34     0.13       40     0.16       43     0.18  
Lease financing       89     0.46       96     0.50       115     0.60  
Total commercial       3,385     0.67       3,706     0.73       4,059     0.80  
Consumer:                                      
Real estate 1-4 family first mortgage       4,413     1.60       4,743     1.73       4,962     1.80  
Real estate 1-4 family junior lien mortgage       1,095     2.56       1,153     2.60       1,206     2.61  
Automobile       104     0.18       101     0.17       106     0.17  
Other revolving credit and installment       59     0.15       56     0.14       51     0.13  
Total consumer       5,671     1.26       6,053     1.34       6,325     1.37  
Total nonaccrual loans       9,056     0.95       9,759     1.02       10,384     1.07  
Foreclosed assets:                                      
Government insured/guaranteed       149             179             197        
Non-government insured/guaranteed       632             726             781        
Total foreclosed assets       781             905             978        
Total nonperforming assets     $ 9,837     1.03 %   $ 10,664     1.11 %   $ 11,362     1.17 %
Change from prior quarter:                                      
Total nonaccrual loans     $ (703 )         $ (625 )         $ (602 )      
Total nonperforming assets       (827 )           (698 )           (644 )      
                                             

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.1 billion at June 30, 2017, which was down $141 million from March 31, 2017. Second quarter 2017 included a $100 million reserve release1, reflecting continued strong credit performance. The allowance coverage for total loans was 1.27 percent, compared with 1.28 percent in first quarter 2017. The allowance covered 4.6 times annualized second quarter net charge-offs, compared with 3.8 times in the prior quarter. The allowance coverage for nonaccrual loans was 134 percent at June 30, 2017, compared with 126 percent at March 31, 2017. The Company believes the allowance was appropriate for losses inherent in the loan portfolio at June 30, 2017.

Business Segment Performance

Wells Fargo defines its operating segments by product type and customer segment. Segment net income for each of the three business segments was:

 
      Quarter ended
      Jun 30,     Mar 31,     Jun 30,
(in millions)     2017     2017     2016
Community Banking     $ 2,993     3,009     3,179
Wholesale Banking       2,388     2,115     2,073
Wealth and Investment Management       682     623     584
                   

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
      Jun 30,     Mar 31,     Jun 30,
(in millions)     2017     2017     2016
Total revenue     $ 12,289     12,093     12,204
Provision for credit losses       623     646     689
Noninterest expense       7,223     7,221     6,648
Segment net income       2,993     3,009     3,179
(in billions)                  
Average loans       477.2     482.7     485.7
Average assets       983.5     990.7     967.6
Average deposits       727.2     717.2     703.7
                     

Community Banking reported net income of $3.0 billion, down $16 million, or 1 percent, from first quarter 2017. Revenue of $12.3 billion increased $196 million, or 2 percent, from first quarter 2017, driven by the gain on the sale of a Pick-a-Pay PCI loan portfolio, higher other income (reflecting the accounting impact of net hedge ineffectiveness), higher gains on sales of debt securities and higher card fees, partially offset by lower gains on equity investments, lower net interest income and lower mortgage banking revenue. Noninterest expense was flat, compared with first quarter 2017, as lower personnel expense offset higher professional services. The provision for credit losses decreased $23 million linked quarter.

Net income decreased $186 million, or 6 percent, from second quarter 2016. Revenue increased $85 million, or 1 percent, compared with a year ago due to the gain on the sale of a Pick-a-Pay PCI loan portfolio, higher net interest income, higher gains from deferred compensation plan investments (offset in benefits expense) and higher card fees, partially offset by lower mortgage banking revenue and gains on sales of debt securities. Noninterest expense increased $575 million, or 9 percent, from a year ago driven by higher personnel and professional services expense. The provision for credit losses decreased $66 million from a year ago primarily due to improvement in the consumer real estate portfolios.

Retail Banking and Consumer Payments, Virtual Solutions and Innovation

  • With over 400,000 branch customer experience surveys completed during the second quarter, ‘Overall Satisfaction with Most Recent Visit’ and ‘Loyalty’ scores in June reached their highest levels since August 2016
  • 5,977 retail bank branches as of the end of second quarter 2017, reflecting 54 branch consolidations in the quarter
  • Primary consumer checking customers6,7 up 0.7 percent year-over-year
  • Debit card point-of-sale purchase volume8 of $80.6 billion in second quarter, up 6 percent year-over-year
  • Credit card point-of-sale purchase volume of $20.0 billion in second quarter, up 3 percent year-over-year
  • Credit card penetration in retail banking households of 45.5 percent9
  • 27.9 million digital (online and mobile) active customers in June, including 20.4 million mobile active users10
  • Keynote's Banker Scorecard named Wells Fargo as tied for #1 in online performance (May 2017)
  • Launched Zelle SM peer-to-peer payments experience to allow digital customers to send, receive, and request money with mobile banking customers across the U.S.

Consumer Lending

  • Auto originations of $4.5 billion in second quarter, down 17 percent from prior quarter and down 45 percent from prior year, as proactive steps to tighten underwriting standards resulted in lower origination volume
  • Home Lending
    • Originations of $56 billion, up from $44 billion in prior quarter
    • Applications of $83 billion, up from $59 billion in prior quarter
    • Application pipeline of $34 billion at quarter end, up from $28 billion at March 31, 2017

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
      Jun 30,     Mar 31,     Jun 30,
(in millions)     2017     2017     2016
Total revenue     $ 6,951     7,038     7,284
Provision (reversal of provision) for credit losses       (65 )   (43 )   385
Noninterest expense       4,078     4,225     4,036
Segment net income       2,388     2,115     2,073
(in billions)                  
Average loans       464.9     466.3     451.4
Average assets       817.3     807.8     772.6
Average deposits       463.0     466.0     425.8
                     

Wholesale Banking reported net income of $2.4 billion, up $273 million, or 13 percent, from first quarter 2017, primarily due to the tax benefit resulting from our agreement to sell Wells Fargo Insurance Services USA and related businesses and lower noninterest expense. Revenue of $7.0 billion decreased $87 million, or 1 percent, from the prior quarter. Net interest income increased $130 million, or 3 percent, on higher trading related income, increased loan yields and one additional business day in the quarter. Noninterest income decreased $217 million, or 8 percent, as lower customer accommodation trading and lower principal investing results were partially offset by higher investment banking and commercial real estate brokerage fees. Noninterest expense decreased $147 million, or 3 percent, from the prior quarter due to seasonally higher personnel expenses in the first quarter. The provision for credit losses decreased $22 million from the prior quarter, primarily due to improvements in the oil and gas portfolio.

Net income increased $315 million, or 15 percent, from second quarter 2016, primarily due to the tax benefit in second quarter 2017 and lower loan loss provision. Revenue decreased $333 million, or 5 percent, from second quarter 2016, which included the gain on sale of our health benefit services business. Net interest income increased $359 million, or 9 percent, from second quarter 2016 on deposit and loan growth, including the GE Capital portfolio acquisitions in the second half of 2016, as well as the impact of rising interest rates. Noninterest income decreased $692 million, or 21 percent, from a year ago primarily due to the second quarter 2016 gain on the sale of our health benefit services business, lower customer accommodation trading results, and lower principal investing gains. Noninterest expense increased $42 million, or 1 percent, from a year ago primarily due to higher expenses related to growth initiatives, compliance, and regulatory requirements. The provision for credit losses decreased $450 million from a year ago primarily due to improvements in the oil and gas portfolio.

Wealth and Investment Management (WIM) 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
      Jun 30,     Mar 31,     Jun 30,
(in millions)     2017     2017     2016
Total revenue     $ 4,182     4,193     3,919
Provision (reversal of provision) for credit losses       7     (4 )   2
Noninterest expense       3,075     3,206     2,976
Segment net income       682     623     584
(in billions)                  
Average loans       71.7     70.7     66.7
Average assets       213.1     221.9     205.3
Average deposits       188.2     195.6     182.5
                     

Wealth and Investment Management reported net income of $682 million, up $59 million, or 9 percent, from first quarter 2017. Revenue of $4.2 billion decreased $11 million from the prior quarter, primarily due to lower gains on deferred compensation plan investments (offset in employee benefits expense) and lower other fee income, partially offset by higher net interest income and higher asset-based fees. Noninterest expense decreased $131 million, or 4 percent, from the prior quarter, primarily driven by lower personnel expenses from seasonally-higher first quarter expense, lower other non-personnel expenses, and lower deferred compensation plan expense (offset in trading revenue), partially offset by higher operating losses.

Net income was up $98 million, or 17 percent, from second quarter 2016. Revenue increased $263 million, or 7 percent, from a year ago primarily driven by higher net interest income and asset-based fees, partially offset by lower transaction revenue. Noninterest expense increased $99 million, or 3 percent, from a year ago, primarily due to higher operating losses, broker commissions, and other personnel expenses.

  • WIM total client assets reached a record-high of $1.8 trillion, up 8 percent from a year ago, driven by higher market valuations and continued positive net flows
  • Second quarter 2017 average closed referred investment assets (referrals resulting from the WIM/Community Banking partnership) were up 12 percent from first quarter 2017

Retail Brokerage

  • Client assets of $1.6 trillion, up 8 percent from prior year
  • Advisory assets of $503 billion, up 13 percent from prior year, primarily driven by higher market valuations and positive net flows
  • Strong loan growth, with average balances up 11 percent from prior year largely due to continued growth in non-conforming mortgage loans

Wealth Management

  • Client assets of $236 billion, up 5 percent from prior year
  • Average loan balances up 5 percent from prior year primarily driven by continued growth in non-conforming mortgage loans

Asset Management

  • Total assets under management of $487 billion, up 1 percent from prior year, primarily due to higher market valuations, positive fixed income net flows and assets acquired during the prior year, partially offset by equity and money market net outflows
  • Strong performance in active equity with 70 percent of active equity mutual funds outperforming their respective benchmarks year-to-date through the end of June

Retirement

  • IRA assets of $390 billion, up 6 percent from prior year
  • Institutional Retirement plan assets of $375 billion, up 11 percent from prior year

Conference Call

The Company will host a live conference call on Friday, July 14, at 7:00 a.m. PT (10:00 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 440-424-4922 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~34999396.

A replay of the conference call will be available beginning at 10:00 a.m. PT (1:00 p.m. ET) on Friday, July 14 through Friday, July 28. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #34999396. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~34999396.

 

Endnotes

1   Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
2   See table on page 36 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.
3   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.
4   Market sensitive revenue represents net gains from trading activities, debt securities and equity investments.
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 41 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 May 2017, comparisons with May 2016.
8   Combined consumer and business debit card purchase volume dollars.
9   Credit card penetration defined as the percentage of Retail Banking households that have a credit card with Wells Fargo. Retail Banking households reflect only those households that maintain a retail checking account, which we believe provides the foundation for long-term retail banking relationships. Credit card household penetration rates have not been adjusted to reflect the impact of the potentially unauthorized accounts identified by an independent consulting firm late in 2016 because the maximum impact in any one quarter was not greater than 86 basis points, or approximately 2 percent. Data as of May 2017.
10   Primarily includes retail banking, consumer lending, small business and business banking customers.
     

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 or liquidity 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;
  • negative effects from the retail banking sales practices matter, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, and our reputation;
  • 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, 2016.

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, 2016, 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 $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,500 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 42 countries and territories to support customers who conduct business in the global economy. With approximately 271,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2017 rankings of America’s largest corporations.

 
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)     23
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
Changes in Allowance for Credit Losses     34
       

Equity

     
Tangible Common Equity     35
Common Equity Tier 1 Under Basel III     36
       

Operating Segments

     
Operating Segment Results     37
       

Other

     
Mortgage Servicing and other related data     39
       
   
Wells Fargo & Company and Subsidiaries  

SUMMARY FINANCIAL DATA

 
          % Change              
    Quarter ended     Jun 30, 2017 from     Six months ended        

($ in millions, except per

  Jun 30,     Mar 31,     Jun 30,     Mar 31,     Jun 30,     Jun 30,     Jun 30,     %  

share amounts)

  2017     2017     2016     2017     2016     2017     2016     Change  
For the Period                                                
Wells Fargo net income   $ 5,810     5,457     5,558     6 %   5     $ 11,267     11,020     2 %
Wells Fargo net income applicable to common stock     5,404     5,056     5,173     7     4       10,460     10,258     2  
Diluted earnings per common share     1.07     1.00     1.01     7     6       2.07     2.00     4  
Profitability ratios (annualized):                                                
Wells Fargo net income to average assets (ROA)     1.21 %   1.15     1.20     5     1       1.18 %   1.20     (2 )
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)     11.95     11.54     11.70     4     2       11.75     11.72      
Return on average tangible common equity (ROTCE)(1)     14.26     13.85     14.15     3     1       14.06     14.15     (1 )
Efficiency ratio (2)     61.1     62.7     58.1     (3 )   5       61.9     58.4     6  
Total revenue   $ 22,169     22,002     22,162     1         $ 44,171     44,357      
Pre-tax pre-provision profit (PTPP) (3)     8,628     8,210     9,296     5     (7 )     16,838     18,463     (9 )
Dividends declared per common share     0.380     0.380     0.380               0.760     0.755     1  
Average common shares outstanding     4,989.9     5,008.6     5,066.9         (2 )     4,999.2     5,071.3     (1 )
Diluted average common shares outstanding     5,037.7     5,070.4     5,118.1     (1 )   (2 )     5,054.8     5,129.8     (1 )
Average loans   $ 956,879     963,645     950,751     (1 )   1     $ 960,243     938,986     2  
Average assets     1,927,079     1,931,041     1,862,084         3       1,929,049     1,840,980     5  
Average total deposits     1,301,195     1,299,191     1,236,658         5       1,300,198     1,228,044     6  
Average consumer and small business banking deposits (4)     760,149     758,754     726,359         5       759,455     720,598     5  
Net interest margin     2.90 %   2.87     2.86     1     1       2.89 %   2.88      
At Period End                                                
Investment securities   $ 409,594     407,560     353,426         16     $ 409,594     353,426     16  
Loans     957,423     958,405     957,157               957,423     957,157      
Allowance for loan losses     11,073     11,168     11,664     (1 )   (5 )     11,073     11,664     (5 )
Goodwill     26,573     26,666     26,963         (1 )     26,573     26,963     (1 )
Assets     1,930,871     1,951,564     1,889,235     (1 )   2       1,930,871     1,889,235     2  
Deposits     1,305,830     1,325,444     1,245,473     (1 )   5       1,305,830     1,245,473     5  
Common stockholders' equity     181,428     178,388     178,633     2     2       181,428     178,633     2  
Wells Fargo stockholders’ equity     205,230     201,500     201,745     2     2       205,230     201,745     2  
Total equity     206,145     202,489     202,661     2     2       206,145     202,661     2  
Tangible common equity (1)     152,173     148,850     148,110     2     3       152,173     148,110     3  
Common shares outstanding     4,966.8     4,996.7     5,048.5     (1 )   (2 )     4,966.8     5,048.5     (2 )
Book value per common share (5)   $ 36.53     35.70     35.38     2     3     $ 36.53     35.38     3  
Tangible book value per common share (1)(5)     30.64     29.79     29.34     3     4       30.64     29.34     4  
Common stock price:                                                
High     56.60     59.99     51.41     (6 )   10       59.99     53.27     13  
Low     50.84     53.35     44.50     (5 )   14       50.84     44.50     14  
Period end     55.41     55.66     47.33         17       55.41     47.33     17  
Team members (active, full-time equivalent)     270,600     272,800     267,900     (1 )   1       270,600     267,900     1  

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.

 

(2) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

 

(3) 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.

 

(4) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.

 

(5) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

 
   
         
Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA

    Quarter ended
    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
($ in millions, except per share amounts)   2017     2017     2016     2016     2016
For the Quarter                            
Wells Fargo net income   $ 5,810     5,457     5,274     5,644     5,558
Wells Fargo net income applicable to common stock     5,404     5,056     4,872     5,243     5,173
Diluted earnings per common share     1.07     1.00     0.96     1.03     1.01
Profitability ratios (annualized):                            
Wells Fargo net income to average assets (ROA)     1.21 %   1.15     1.08     1.17     1.20
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)     11.95     11.54     10.94     11.60     11.70
Return on average tangible common equity (ROTCE)(1)     14.26     13.85     13.16     13.96     14.15
Efficiency ratio (2)     61.1     62.7     61.2     59.4     58.1
Total revenue   $ 22,169     22,002     21,582     22,328     22,162
Pre-tax pre-provision profit (PTPP) (3)     8,628     8,210     8,367     9,060     9,296
Dividends declared per common share     0.380     0.380     0.380     0.380     0.380
Average common shares outstanding     4,989.9     5,008.6     5,025.6     5,043.4     5,066.9
Diluted average common shares outstanding     5,037.7     5,070.4     5,078.2     5,094.6     5,118.1
Average loans   $ 956,879     963,645     964,147     957,484     950,751
Average assets     1,927,079     1,931,041     1,944,250     1,914,586     1,862,084
Average total deposits     1,301,195     1,299,191     1,284,158     1,261,527     1,236,658
Average consumer and small business banking deposits (4)     760,149     758,754     749,946     739,066     726,359
Net interest margin     2.90 %   2.87     2.87     2.82     2.86
At Quarter End                            
Investment securities   $ 409,594     407,560     407,947     390,832     353,426
Loans     957,423     958,405     967,604     961,326     957,157
Allowance for loan losses     11,073     11,168     11,419     11,583     11,664
Goodwill     26,573     26,666     26,693     26,688     26,963
Assets     1,930,871     1,951,564     1,930,115     1,942,124     1,889,235
Deposits     1,305,830     1,325,444     1,306,079     1,275,894     1,245,473
Common stockholders' equity     181,428     178,388     176,469     179,916     178,633
Wells Fargo stockholders’ equity     205,230     201,500     199,581     203,028     201,745
Total equity     206,145     202,489     200,497     203,958     202,661
Tangible common equity (1)     152,173     148,850     146,737     149,829     148,110
Common shares outstanding     4,966.8     4,996.7     5,016.1     5,023.9     5,048.5
Book value per common share (5)   $ 36.53     35.70     35.18     35.81     35.38
Tangible book value per common share (1)(5)     30.64     29.79     29.25     29.82     29.34
Common stock price:                            
High     56.60     59.99     58.02     51.00     51.41
Low     50.84     53.35     43.55     44.10     44.50
Period end     55.41     55.66     55.11     44.28     47.33
Team members (active, full-time equivalent)     270,600     272,800     269,100     268,800     267,900

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.

(2) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

(3) 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.

(4) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.

(5) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

 
             
Wells Fargo & Company and Subsidiaries  

CONSOLIDATED STATEMENT OF INCOME

 
      Quarter ended June 30,     %     Six months ended June 30,     %  
(in millions, except per share amounts)     2017     2016     Change     2017     2016     Change  
Interest income                                      
Trading assets     $ 710     572     24 %   $ 1,353     1,168     16 %
Investment securities       2,698     2,176     24       5,373     4,438     21  
Mortgages held for sale       195     181     8       379     342     11  
Loans held for sale       4     3     33       5     5      
Loans       10,358     9,822     5       20,499     19,399     6  
Other interest income       750     392     91       1,332     766     74  
Total interest income       14,715     13,146     12       28,941     26,118     11  
Interest expense                                      
Deposits       683     332     106       1,220     639     91  
Short-term borrowings       163     77     112       277     144     92  
Long-term debt       1,278     921     39       2,461     1,763     40  
Other interest expense       108     83     30       200     172     16  
Total interest expense       2,232     1,413     58       4,158     2,718     53  
Net interest income       12,483     11,733     6       24,783     23,400     6  
Provision for credit losses       555     1,074     (48 )     1,160     2,160     (46 )
Net interest income after provision for credit losses       11,928     10,659     12       23,623     21,240     11  
Noninterest income                                      
Service charges on deposit accounts       1,276     1,336     (4 )     2,589     2,645     (2 )
Trust and investment fees       3,629     3,547     2       7,199     6,932     4  
Card fees       1,019     997     2       1,964     1,938     1  
Other fees       902     906           1,767     1,839     (4 )
Mortgage banking       1,148     1,414     (19 )     2,376     3,012     (21 )
Insurance       280     286     (2 )     557     713     (22 )
Net gains from trading activities       237     328     (28 )     676     528     28  
Net gains on debt securities       120     447     (73 )     156     691     (77 )
Net gains from equity investments       188     189     (1 )     591     433     36  
Lease income       493     497     (1 )     974     870     12  
Other       394     482     (18 )     539     1,356     (60 )
Total noninterest income       9,686     10,429     (7 )     19,388     20,957     (7 )
Noninterest expense                                      
Salaries       4,343     4,099     6       8,604     8,135     6  
Commission and incentive compensation       2,499     2,604     (4 )     5,224     5,249      
Employee benefits       1,308     1,244     5       2,994     2,770     8  
Equipment       529     493     7       1,106     1,021     8  
Net occupancy       706     716     (1 )     1,418     1,427     (1 )
Core deposit and other intangibles       287     299     (4 )     576     592     (3 )
FDIC and other deposit assessments       328     255     29       661     505     31  
Other       3,541     3,156     12       6,750     6,195     9  
Total noninterest expense       13,541     12,866     5       27,333     25,894     6  
Income before income tax expense       8,073     8,222     (2 )     15,678     16,303     (4 )
Income tax expense       2,225     2,649     (16 )     4,282     5,216     (18 )
Net income before noncontrolling interests       5,848     5,573     5       11,396     11,087     3  
Less: Net income from noncontrolling interests       38     15     153       129     67     93  
Wells Fargo net income     $ 5,810     5,558     5     $ 11,267     11,020     2  
Less: Preferred stock dividends and other       406     385     5       807     762     6  
Wells Fargo net income applicable to common stock     $ 5,404     5,173     4     $ 10,460     10,258     2  
Per share information                                      
Earnings per common share     $ 1.08     1.02     6     $ 2.09     2.02     3  
Diluted earnings per common share       1.07     1.01     6       2.07     2.00     4  
Dividends declared per common share       0.380     0.380           0.760     0.755     1  
Average common shares outstanding       4,989.9     5,066.9     (2 )     4,999.2     5,071.3     (1 )
Diluted average common shares outstanding       5,037.7     5,118.1     (2 )     5,054.8     5,129.8     (1 )
                                           
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

      Quarter ended
      Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions, except per share amounts)     2017     2017     2016     2016     2016
Interest income                              
Trading assets     $ 710     643     745     593     572
Investment securities       2,698     2,675     2,512     2,298     2,176
Mortgages held for sale       195     184     235     207     181
Loans held for sale       4     1     2     2     3
Loans       10,358     10,141     10,128     9,978     9,822
Other interest income       750     582     436     409     392
Total interest income       14,715     14,226     14,058     13,487     13,146
Interest expense                              
Deposits       683     537     400     356     332
Short-term borrowings       163     114     101     85     77
Long-term debt       1,278     1,183     1,061     1,006     921
Other interest expense       108     92     94     88     83
Total interest expense       2,232     1,926     1,656     1,535     1,413
Net interest income       12,483     12,300     12,402     11,952     11,733
Provision for credit losses       555     605     805     805     1,074
Net interest income after provision for credit losses       11,928     11,695     11,597     11,147     10,659
Noninterest income                              
Service charges on deposit accounts       1,276     1,313     1,357     1,370     1,336
Trust and investment fees       3,629     3,570     3,698     3,613     3,547
Card fees       1,019     945     1,001     997     997
Other fees       902     865     962     926     906
Mortgage banking       1,148     1,228     1,417     1,667     1,414
Insurance       280     277     262     293     286
Net gains (losses) from trading activities       237     439     (109 )   415     328
Net gains on debt securities       120     36     145     106     447
Net gains from equity investments       188     403     306     140     189
Lease income       493     481     523     534     497
Other       394     145     (382 )   315     482
Total noninterest income       9,686     9,702     9,180     10,376     10,429
Noninterest expense                              
Salaries       4,343     4,261     4,193     4,224     4,099
Commission and incentive compensation       2,499     2,725     2,478     2,520     2,604
Employee benefits       1,308     1,686     1,101     1,223     1,244
Equipment       529     577     642     491     493
Net occupancy       706     712     710     718     716
Core deposit and other intangibles       287     289     301     299     299
FDIC and other deposit assessments       328     333     353     310     255
Other       3,541     3,209     3,437     3,483     3,156
Total noninterest expense       13,541     13,792     13,215     13,268     12,866
Income before income tax expense       8,073     7,605     7,562     8,255     8,222
Income tax expense       2,225     2,057     2,258     2,601     2,649
Net income before noncontrolling interests       5,848     5,548     5,304     5,654     5,573
Less: Net income from noncontrolling interests       38     91     30     10     15
Wells Fargo net income     $ 5,810     5,457     5,274     5,644     5,558
Less: Preferred stock dividends and other       406     401     402     401     385
Wells Fargo net income applicable to common stock     $ 5,404     5,056     4,872     5,243     5,173
Per share information                              
Earnings per common share     $ 1.08     1.01     0.97     1.04     1.02
Diluted earnings per common share       1.07     1.00     0.96     1.03     1.01
Dividends declared per common share       0.380     0.380     0.380     0.380     0.380
Average common shares outstanding       4,989.9     5,008.6     5,025.6     5,043.4     5,066.9
Diluted average common shares outstanding       5,037.7     5,070.4     5,078.2     5,094.6     5,118.1
                                 
   
Wells Fargo & Company and Subsidiaries  

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 
      Quarter ended June 30,     %     Six months ended June 30,     %  
(in millions)     2017     2016     Change     2017     2016     Change  
Wells Fargo net income     $ 5,810     5,558     5 %   $ 11,267     11,020     2 %
Other comprehensive income (loss), before tax:                                      
Investment securities:                                      
Net unrealized gains arising during the period       1,565     1,571           1,934     2,366     (18 )
Reclassification of net gains to net income       (177 )   (504 )   (65 )     (322 )   (808 )   (60 )
Derivatives and hedging activities:                                      
Net unrealized gains arising during the period       376     1,057     (64 )     243     3,056     (92 )
Reclassification of net gains on cash flow hedges to net income       (153 )   (265 )   (42 )     (355 )   (521 )   (32 )
Defined benefit plans adjustments:                                      
Net actuarial and prior service losses arising during the period           (19 )   (100 )     (7 )   (27 )   (74 )
Amortization of net actuarial loss, settlements and other to net income       41     39     5       79     76     4  
Foreign currency translation adjustments:                                      
Net unrealized gains (losses) arising during the period       31     (6 )   NM       47     37     27  
Other comprehensive income, before tax       1,683     1,873     (10 )     1,619     4,179     (61 )
Income tax expense related to other comprehensive income       (624 )   (714 )   (13 )     (587 )   (1,571 )   (63 )
Other comprehensive income, net of tax       1,059     1,159     (9 )     1,032     2,608     (60 )
Less: Other comprehensive income (loss) from noncontrolling interests       (9 )   (15 )   (40 )     5     (43 )   NM  
Wells Fargo other comprehensive income, net of tax       1,068     1,174     (9 )     1,027     2,651     (61 )
Wells Fargo comprehensive income       6,878     6,732     2       12,294     13,671     (10 )
Comprehensive income from noncontrolling interests       29               134     24     458  
Total comprehensive income     $ 6,907     6,732     3     $ 12,428     13,695     (9 )

NM – Not meaningful

 

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

 
    Quarter ended  
    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,  
(in millions)   2017     2017     2016     2016     2016  
Balance, beginning of period   $ 202,489     200,497     203,958     202,661     198,504  
Wells Fargo net income     5,810     5,457     5,274     5,644     5,558  
Wells Fargo other comprehensive income (loss), net of tax     1,068     (41 )   (5,321 )   (764 )   1,174  
Noncontrolling interests     (75 )   75     (13 )   14     (92 )
Common stock issued     252     1,406     610     300     397  
Common stock repurchased (1)     (2,287 )   (2,175 )   (2,034 )   (1,839 )   (2,214 )
Preferred stock released by ESOP     406         43     236     371  
Common stock warrants repurchased/exercised     (24 )   (44 )       (17 )    
Preferred stock issued     677                 1,126  
Common stock dividends     (1,899 )   (1,903 )   (1,909 )   (1,918 )   (1,930 )
Preferred stock dividends     (406 )   (401 )   (401 )   (401 )   (386 )
Tax benefit from stock incentive compensation (2)             74     31     23  
Stock incentive compensation expense     145     389     232     39     139  
Net change in deferred compensation and related plans     (11 )   (771 )   (16 )   (28 )   (9 )
Balance, end of period   $ 206,145     202,489     200,497     203,958     202,661  

(1) For the quarter ended December 31, 2016, includes $750 million related to a private forward repurchase transaction that settled in first quarter 2017 for 14.7 million shares of common stock.

 

(2) Effective January 1, 2017, we adopted Accounting Standards Update 2016-09 (Improvements to Employee Share-Based Payment Accounting). Accordingly, tax benefit from stock incentive compensation is reported in income tax expense in the consolidated statement of income.

 
   
             

Wells Fargo & Company and Subsidiaries

 

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)

 
    Quarter ended June 30,  
    2017     2016  
                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   $ 281,619     0.99 %   $ 698     293,783     0.49 %   $ 359  
Trading assets     98,086     2.95       722     81,380     2.86       582  
Investment securities (3):                                    
Available-for-sale securities:                                    
Securities of U.S. Treasury and federal agencies     18,099     1.53       69     31,525     1.56       123  
Securities of U.S. states and political subdivisions     53,492     4.03       540     52,201     4.24       553  
Mortgage-backed securities:                                    
Federal agencies     132,032     2.63       868     92,010     2.53       583  
Residential and commercial     12,586     5.55       175     19,571     5.44       266  
Total mortgage-backed securities     144,618     2.89       1,043     111,581     3.04       849  
Other debt and equity securities     48,962     3.87       472     53,301     3.48       461  
Total available-for-sale securities     265,171     3.21       2,124     248,608     3.20       1,986  
Held-to-maturity securities:                                    
Securities of U.S. Treasury and federal agencies     44,701     2.19       244     44,671     2.19       243  
Securities of U.S. states and political subdivisions     6,270     5.29       83     2,155     5.41       29  
Federal agency and other mortgage-backed securities     83,116     2.44       507     35,057     1.90       166  
Other debt securities     2,798     2.34       16     4,077     1.92       20  
Total held-to-maturity securities     136,885     2.49       850     85,960     2.14       458  
Total investment securities     402,056     2.96       2,974     334,568     2.93       2,444  
Mortgages held for sale (4)     19,758     3.94       195     20,140     3.60       181  
Loans held for sale (4)     210     6.95       4     239     4.83       3  
Loans:                                    
Commercial:                                    
Commercial and industrial - U.S.     273,073     3.70       2,521     270,862     3.45       2,328  
Commercial and industrial - Non U.S.     56,426     2.86       402     51,201     2.35       300  
Real estate mortgage     131,293     3.68       1,206     126,126     3.41       1,069  
Real estate construction     25,271     4.10       259     23,115     3.49       200  
Lease financing     19,058     4.82       230     18,930     5.12       242  
Total commercial     505,121     3.67       4,618     490,234     3.39       4,139  
Consumer:                                    
Real estate 1-4 family first mortgage     275,108     4.08       2,805     275,854     4.01       2,765  
Real estate 1-4 family junior lien mortgage     43,602     4.78       521     50,609     4.37       551  
Credit card     34,868     12.18       1,059     33,368     11.52       956  
Automobile     59,112     5.43       800     61,149     5.66       860  
Other revolving credit and installment     39,068     6.13       596     39,537     5.91       581  
Total consumer     451,758     5.13       5,781     460,517     4.98       5,713  
Total loans (4)     956,879     4.36       10,399     950,751     4.16       9,852  
Other     10,713     2.00       54     6,014     2.30       35  
Total earning assets   $ 1,769,321     3.41 %   $ 15,046     1,686,875     3.20 %   $ 13,456  
Funding sources                                    
Deposits:                                    
Interest-bearing checking   $ 48,465     0.41 %   $ 50     39,772     0.13 %   $ 13  
Market rate and other savings     683,014     0.13       214     658,944     0.07       110  
Savings certificates     22,599     0.30       17     26,246     0.35       23  
Other time deposits     57,158     1.43       203     61,170     0.85       129  
Deposits in foreign offices     123,684     0.65       199     97,525     0.23       57  
Total interest-bearing deposits     934,920     0.29       683     883,657     0.15       332  
Short-term borrowings     95,763     0.69       164     111,848     0.28       78  
Long-term debt     249,518     2.05       1,278     236,156     1.56       921  
Other liabilities     20,981     2.05       108     16,336     2.06       83  
Total interest-bearing liabilities     1,301,182     0.69       2,233     1,247,997     0.45       1,414  
Portion of noninterest-bearing funding sources     468,139               438,878              
Total funding sources   $ 1,769,321     0.51       2,233     1,686,875     0.34       1,414  
Net interest margin and net interest income on a taxable-equivalent basis (5)         2.90 %   $ 12,813           2.86 %   $ 12,042  
Noninterest-earning assets                                    
Cash and due from banks   $ 18,171                 18,818              
Goodwill     26,664                 27,037              
Other     112,923                 129,354              
Total noninterest-earning assets   $ 157,758                 175,209              
Noninterest-bearing funding sources                                    
Deposits   $ 366,275                 353,001              
Other liabilities     53,654                 60,083              
Total equity     205,968                 201,003              
Noninterest-bearing funding sources used to fund earning assets     (468,139 )               (438,878 )            
Net noninterest-bearing funding sources   $ 157,758                 175,209              
Total assets   $ 1,927,079                 1,862,084              
                                       

(1) Our average prime rate was 4.05% and 3.50% for the quarters ended June 30, 2017 and 2016, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.21% and 0.64% 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 $330 million and $309 million for the quarters ended June 30, 2017 and 2016, respectively, predominantly 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)

 
    Six months ended June 30,  
    2017     2016  
                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   $ 282,687     0.88 %   $ 1,230     289,240     0.49 %   $ 703  
Trading assets     95,937     2.87       1,377     80,922     2.94       1,187  
Investment securities (3):                                    
Available-for-sale securities:                                    
Securities of U.S. Treasury and federal agencies     21,547     1.53       164     33,000     1.58       259  
Securities of U.S. states and political subdivisions     52,873     4.03       1,066     51,357     4.24       1,088  
Mortgage-backed securities:                                    
Federal agencies     144,257     2.61       1,879     94,216     2.67       1,258  
Residential and commercial     13,514     5.43       367     20,199     5.32       537  
Total mortgage-backed securities     157,771     2.85       2,246     114,415     3.14       1,795  
Other debt and equity securities     49,787     3.73       924     53,430     3.34       890  
Total available-for-sale securities     281,978     3.13       4,400     252,202     3.20       4,032  
Held-to-maturity securities:                                    
Securities of U.S. Treasury and federal agencies     44,697     2.20       487     44,667     2.19       487  
Securities of U.S. states and political subdivisions     6,271     5.30       166     2,155     5.41       58  
Federal agency and other mortgage-backed securities     67,538     2.46       831     31,586     2.16       341  
Other debt securities     3,062     2.34       35     4,338     1.92       42  
Total held-to-maturity securities     121,568     2.51       1,519     82,746     2.25       928  
Total investment securities     403,546     2.94       5,919     334,948     2.97       4,960  
Mortgages held for sale (4)     19,825     3.82       379     19,005     3.60       342  
Loans held for sale (4)     161     6.08       5     260     3.97       5  
Loans:                                    
Commercial:                                    
Commercial and industrial - U.S.     273,905     3.65       4,957     264,295     3.42       4,505  
Commercial and industrial - Non U.S.     55,890     2.80       775     50,354     2.23       558  
Real estate mortgage     131,868     3.62       2,370     124,432     3.41       2,109  
Real estate construction     24,933     3.91       484     22,859     3.55       403  
Lease financing     19,064     4.88       465     16,989     4.95       420  
Total commercial     505,660     3.61       9,051     478,929     3.35       7,995  
Consumer:                                    
Real estate 1-4 family first mortgage     275,293     4.05       5,571     275,288     4.03       5,547  
Real estate 1-4 family junior lien mortgage     44,439     4.69       1,036     51,423     4.38       1,122  
Credit card     35,151     12.07       2,105     33,367     11.56       1,919  
Automobile     60,304     5.45       1,628     60,631     5.66       1,708  
Other revolving credit and installment     39,396     6.07       1,186     39,348     5.95       1,165  
Total consumer     454,583     5.09       11,526     460,057     5.00       11,461  
Total loans (4)     960,243     4.31       20,577     938,986     4.16       19,456  
Other     8,801     2.37       104     5,910     2.18       65  
Total earning assets   $ 1,771,200     3.36 %   $ 29,591     1,669,271     3.21 %   $ 26,718  
Funding sources                                    
Deposits:                                    
Interest-bearing checking   $ 49,569     0.35 %   $ 87     39,242     0.12 %   $ 24  
Market rate and other savings     683,591     0.11       371     655,247     0.07       217  
Savings certificates     23,030     0.29       34     27,063     0.40       54  
Other time deposits     56,043     1.37       381     59,688     0.80       236  
Deposits in foreign offices     122,946     0.57       347     97,604     0.22       108  
Total interest-bearing deposits     935,179     0.26       1,220     878,844     0.15       639  
Short-term borrowings     97,149     0.58       279     109,853     0.27       145  
Long-term debt     254,627     1.94       2,461     226,519     1.56       1,763  
Other liabilities     18,905     2.12       200     16,414     2.10       172  
Total interest-bearing liabilities     1,305,860     0.64       4,160     1,231,630     0.44       2,719  
Portion of noninterest-bearing funding sources     465,340               437,641            
Total funding sources   $ 1,771,200     0.47       4,160     1,669,271     0.33       2,719  
Net interest margin and net interest income on a taxable-equivalent basis (5)         2.89 %   $ 25,431           2.88 %   $ 23,999  
Noninterest-earning assets                                    
Cash and due from banks   $ 18,437                 18,407              
Goodwill     26,668                 26,553              
Other     112,744                 126,749              
Total noninterest-earning assets   $ 157,849                 171,709              
Noninterest-bearing funding sources                                    
Deposits   $ 365,019                 349,200              
Other liabilities     54,291                 61,355              
Total equity     203,879                 198,795              
Noninterest-bearing funding sources used to fund earning assets     (465,340 )               (437,641 )            
Net noninterest-bearing funding sources   $ 157,849                 171,709              
Total assets   $ 1,929,049                 1,840,980              
                                       

(1) Our average prime rate was 3.92% and 3.50% for the first half of 2017 and 2016, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.14% and 0.63% 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) 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 $648 million and $599 million for the first half of 2017 and 2016, respectively, predominantly 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  
    Jun 30, 2017     Mar 31, 2017     Dec 31, 2016     Sep 30, 2016     Jun 30, 2016  
    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   $ 281.6     0.99 %   $ 283.8     0.76 %   $ 273.1     0.56 %   $ 299.4     0.50 %   $ 293.8     0.49 %
Trading assets     98.1     2.95       93.8     2.80       102.8     2.96       88.8     2.72       81.4     2.86  
Investment securities (3):                                                            
Available-for-sale securities:                                                            
Securities of U.S. Treasury and federal agencies     18.1     1.53       25.0     1.54       25.9     1.53       25.8     1.52       31.5     1.56  
Securities of U.S. states and political subdivisions     53.5     4.03       52.2     4.03       53.9     4.06       55.2     4.28       52.2     4.24  
Mortgage-backed securities:                                                            
Federal agencies     132.0     2.63       156.6     2.58       148.0     2.37       105.8     2.39       92.0     2.53  
Residential and commercial     12.6     5.55       14.5     5.32       16.5     5.87       18.1     5.54       19.6     5.44  
Total mortgage-backed securities     144.6     2.89       171.1     2.81       164.5     2.72       123.9     2.85       111.6     3.04  
Other debt and equity securities     49.0     3.87       50.7     3.60       52.7     3.71       54.2     3.37       53.3     3.48  
Total available-for-sale securities     265.2     3.21       299.0     3.05       297.0     3.03       259.1     3.13       248.6     3.20  
Held-to-maturity securities:                                                            
Securities of U.S. Treasury and federal agencies     44.7     2.19       44.7     2.20       44.7     2.20       44.6     2.19       44.6     2.19  
Securities of U.S. states and political subdivisions     6.3     5.29       6.3     5.30       4.7     5.31       2.5     5.24       2.2     5.41  
Federal agency and other mortgage-backed securities     83.1     2.44       51.8     2.51       46.0     1.81       48.0     1.97       35.1     1.90  
Other debt securities     2.8     2.34       3.3     2.34       3.6     2.26       3.9     1.98       4.1     1.92  
Total held-to-maturity securities     136.9     2.49       106.1     2.54       99.0     2.17       99.0     2.15       86.0     2.14  
Total investment securities     402.1     2.96       405.1     2.92       396.0     2.82       358.1     2.86       334.6     2.93  
Mortgages held for sale     19.8     3.94       19.9     3.70       27.5     3.43       24.1     3.44       20.1     3.60  
Loans held for sale     0.2     6.95       0.1     4.44       0.2     5.42       0.2     3.04       0.2     4.83  
Loans:                                                            
Commercial:                                                            
Commercial and industrial - U.S.     273.1     3.70       274.8     3.59       272.8     3.46       271.2     3.48       270.9     3.45  
Commercial and industrial - Non U.S.     56.4     2.86       55.3     2.73       54.4     2.58       51.3     2.40       51.2     2.35  
Real estate mortgage     131.3     3.68       132.4     3.56       131.2     3.44       128.8     3.48       126.1     3.41  
Real estate construction     25.3     4.10       24.6     3.72       23.9     3.61       23.2     3.50       23.1     3.49  
Lease financing     19.0     4.82       19.1     4.94       18.9     5.78       18.9     4.70       19.0     5.12  
Total commercial     505.1     3.67       506.2     3.54       501.2     3.45       493.4     3.42       490.3     3.39  
Consumer:                                                            
Real estate 1-4 family first mortgage     275.1     4.08       275.5     4.02       277.7     4.01       278.5     3.97       275.9     4.01  
Real estate 1-4 family junior lien mortgage     43.6     4.78       45.3     4.60       47.2     4.42       48.9     4.37       50.6     4.37  
Credit card     34.9     12.18       35.4     11.97       35.4     11.73       34.6     11.60       33.4     11.52  
Automobile     59.1     5.43       61.5     5.46       62.5     5.54       62.5     5.60       61.1     5.66  
Other revolving credit and installment     39.1     6.13       39.7     6.02       40.1     5.91       39.6     5.92       39.5     5.91  
Total consumer     451.8     5.13       457.4     5.06       462.9     5.01       464.1     4.97       460.5     4.98  
Total loans     956.9     4.36       963.6     4.26       964.1     4.20       957.5     4.17       950.8     4.16  
Other     10.6     2.00       6.8     2.96       6.7     3.27       6.4     2.30       6.0     2.30  
Total earning assets   $ 1,769.3     3.41 %   $ 1,773.1     3.31 %   $ 1,770.4     3.24 %   $ 1,734.5     3.17 %   $ 1,686.9     3.20 %
Funding sources                                                            
Deposits:                                                            
Interest-bearing checking   $ 48.5     0.41 %   $ 50.7     0.29 %   $ 46.9     0.17 %   $ 44.0     0.15 %   $ 39.8     0.13 %
Market rate and other savings     683.0     0.13       684.2     0.09       676.4     0.07       667.2     0.07       659.0     0.07  
Savings certificates     22.6     0.30       23.5     0.29       24.4     0.30       25.2     0.30       26.2     0.35  
Other time deposits     57.1     1.43       54.9     1.31       49.2     1.16       54.9     0.93       61.2     0.85  
Deposits in foreign offices     123.7     0.65       122.2     0.49       110.4     0.35       107.1     0.30       97.5     0.23  
Total interest-bearing deposits     934.9     0.29       935.5     0.23       907.3     0.18       898.4     0.16       883.7     0.15  
Short-term borrowings     95.8     0.69       98.5     0.47       124.7     0.33       116.2     0.29       111.8     0.28  
Long-term debt     249.5     2.05       259.8     1.83       252.2     1.68       252.4     1.59       236.2     1.56  
Other liabilities     21.0     2.05       16.8     2.22       17.1     2.15       16.8     2.11       16.3     2.06  
Total interest-bearing liabilities     1,301.2     0.69       1,310.6     0.59       1,301.3     0.51       1,283.8     0.48       1,248.0     0.45  
Portion of noninterest-bearing funding sources     468.1           462.5           469.1           450.7           438.9      
Total funding sources   $ 1,769.3     0.51     $ 1,773.1     0.44     $ 1,770.4     0.37     $ 1,734.5     0.35     $ 1,686.9     0.34  
Net interest margin on a taxable-equivalent basis         2.90 %         2.87 %         2.87 %         2.82 %         2.86 %
Noninterest-earning assets                                                            
Cash and due from banks   $ 18.2             18.7             19.0             18.7             18.8        
Goodwill     26.7             26.7             26.7             27.0             27.0        
Other     112.9             112.5             128.2             134.4             129.4        
Total noninterest-earnings assets   $ 157.8             157.9             173.9             180.1             175.2        
Noninterest-bearing funding sources                                                            
Deposits   $ 366.3             363.7             376.9             363.1             353.0        
Other liabilities     53.6             54.9             64.9             63.8             60.1        
Total equity     206.0             201.8             201.2             203.9             201.0        
Noninterest-bearing funding sources used to fund earning assets     (468.1 )           (462.5 )           (469.1 )           (450.7 )           (438.9 )      
Net noninterest-bearing funding sources   $ 157.8             157.9             173.9             180.1             175.2        
Total assets   $ 1,927.1             1,931.0             1,944.3             1,914.6             1,862.1        
                                                                       

(1) Our average prime rate was 4.05% for the quarter ended June 30, 2017, 3.80% for the quarter ended March 31, 2017, 3.54% for the quarter ended December 31, 2016 and 3.50% for the quarters ended September 30 and June 30, 2016. The average three-month London Interbank Offered Rate (LIBOR) was 1.21%, 1.07%, 0.92%, 0.79% and 0.64% 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 June 30,     %     Six months ended June 30,     %  
(in millions)     2017     2016     Change     2017     2016     Change  
Service charges on deposit accounts     $ 1,276     1,336     (4 )%   $ 2,589     2,645     (2 )%
Trust and investment fees:                                      
Brokerage advisory, commissions and other fees       2,329     2,291     2       4,653     4,530     3  
Trust and investment management       837     835           1,666     1,650     1  
Investment banking       463     421     10       880     752     17  
Total trust and investment fees       3,629     3,547     2       7,199     6,932     4  
Card fees       1,019     997     2       1,964     1,938     1  
Other fees:                                      
Charges and fees on loans       325     317     3       632     630      
Cash network fees       134     138     (3 )     260     269     (3 )
Commercial real estate brokerage commissions       102     86     19       183     203     (10 )
Letters of credit fees       76     83     (8 )     150     161     (7 )
Wire transfer and other remittance fees       112     101     11       219     193     13  
All other fees       153     181     (15 )     323     383     (16 )
Total other fees       902     906           1,767     1,839     (4 )
Mortgage banking:                                      
Servicing income, net       400     360     11       856     1,210     (29 )
Net gains on mortgage loan origination/sales activities       748     1,054     (29 )     1,520     1,802     (16 )
Total mortgage banking       1,148     1,414     (19 )     2,376     3,012     (21 )
Insurance       280     286     (2 )     557     713     (22 )
Net gains from trading activities       237     328     (28 )     676     528     28  
Net gains on debt securities       120     447     (73 )     156     691     (77 )
Net gains from equity investments       188     189     (1 )     591     433     36  
Lease income       493     497     (1 )     974     870     12  
Life insurance investment income       145     149     (3 )     289     303     (5 )
All other       249     333     (25 )     250     1,053     (76 )
Total     $ 9,686     10,429     (7 )   $ 19,388     20,957     (7 )
                                           
                                           

NONINTEREST EXPENSE

 
      Quarter ended June 30,     %     Six months ended June 30,     %  
(in millions)     2017     2016     Change     2017     2016     Change  
Salaries     $ 4,343     4,099     6 %   $ 8,604     8,135     6 %
Commission and incentive compensation       2,499     2,604     (4 )     5,224     5,249      
Employee benefits       1,308     1,244     5       2,994     2,770     8  
Equipment       529     493     7       1,106     1,021     8  
Net occupancy       706     716     (1 )     1,418     1,427     (1 )
Core deposit and other intangibles       287     299     (4 )     576     592     (3 )
FDIC and other deposit assessments       328     255     29       661     505     31  
Outside professional services       1,029     769     34       1,833     1,352     36  
Operating losses       350     334     5       632     788     (20 )
Operating leases       334     352     (5 )     679     587     16  
Contract services       349     283     23       674     565     19  
Outside data processing       236     225     5       456     433     5  
Travel and entertainment       171     193     (11 )     350     365     (4 )
Postage, stationery and supplies       134     153     (12 )     279     316     (12 )
Advertising and promotion       150     166     (10 )     277     300     (8 )
Telecommunications       91     94     (3 )     182     186     (2 )
Foreclosed assets       52     66     (21 )     138     144     (4 )
Insurance       24     22     9       48     133     (64 )
All other       621     499     24       1,202     1,026     17  
Total     $ 13,541     12,866     5     $ 27,333     25,894     6  
                                           
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

      Quarter ended
      Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2017     2017     2016     2016     2016
Service charges on deposit accounts     $ 1,276     1,313     1,357     1,370     1,336
Trust and investment fees:                              
Brokerage advisory, commissions and other fees       2,329     2,324     2,342     2,344     2,291
Trust and investment management       837     829     837     849     835
Investment banking       463     417     519     420     421
Total trust and investment fees       3,629     3,570     3,698     3,613     3,547
Card fees       1,019     945     1,001     997     997
Other fees:                              
Charges and fees on loans       325     307     305     306     317
Cash network fees       134     126     130     138     138
Commercial real estate brokerage commissions       102     81     172     119     86
Letters of credit fees       76     74     79     81     83
Wire transfer and other remittance fees       112     107     105     103     101
All other fees       153     170     171     179     181
Total other fees       902     865     962     926     906
Mortgage banking:                              
Servicing income, net       400     456     196     359     360
Net gains on mortgage loan origination/sales activities       748     772     1,221     1,308     1,054
Total mortgage banking       1,148     1,228     1,417     1,667     1,414
Insurance       280     277     262     293     286
Net gains (losses) from trading activities       237     439     (109 )   415     328
Net gains on debt securities       120     36     145     106     447
Net gains from equity investments       188     403     306     140     189
Lease income       493     481     523     534     497
Life insurance investment income       145     144     132     152     149
All other       249     1     (514 )   163     333
Total     $ 9,686     9,702     9,180     10,376     10,429
       
       

FIVE QUARTER NONINTEREST EXPENSE

      Quarter ended
      Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2017     2017     2016     2016     2016
Salaries     $ 4,343     4,261     4,193     4,224     4,099
Commission and incentive compensation       2,499     2,725     2,478     2,520     2,604
Employee benefits       1,308     1,686     1,101     1,223     1,244
Equipment       529     577     642     491     493
Net occupancy       706     712     710     718     716
Core deposit and other intangibles       287     289     301     299     299
FDIC and other deposit assessments       328     333     353     310     255
Outside professional services       1,029     804     984     802     769
Operating losses       350     282     243     577     334
Operating leases       334     345     379     363     352
Contract services       349     325     325     313     283
Outside data processing       236     220     222     233     225
Travel and entertainment       171     179     195     144     193
Postage, stationery and supplies       134     145     156     150     153
Advertising and promotion       150     127     178     117     166
Telecommunications       91     91     96     101     94
Foreclosed assets       52     86     75     (17 )   66
Insurance       24     24     23     23     22
All other       621     581     561     677     499
Total     $ 13,541     13,792     13,215     13,268     12,866
                                 
                 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET
    Jun 30,     Dec 31,     %
(in millions, except shares)   2017     2016     Change
Assets                
Cash and due from banks   $ 20,248     20,729     (2 )%
Federal funds sold, securities purchased under resale agreements and other short-term investments     264,706     266,038     (1 )
Trading assets     83,607     74,397     12  
Investment securities:                
Available-for-sale, at fair value     269,202     308,364     (13 )
Held-to-maturity, at cost     140,392     99,583     41  
Mortgages held for sale     24,807     26,309     (6 )
Loans held for sale     156     80     95  
Loans     957,423     967,604     (1 )
Allowance for loan losses     (11,073 )   (11,419 )   (3 )
Net loans     946,350     956,185     (1 )
Mortgage servicing rights:                
Measured at fair value     12,789     12,959     (1 )
Amortized     1,399     1,406      
Premises and equipment, net     8,403     8,333     1  
Goodwill     26,573     26,693      
Derivative assets     13,273     14,498     (8 )
Other assets     118,966     114,541     4  
Total assets   $ 1,930,871     1,930,115      
Liabilities                
Noninterest-bearing deposits   $ 372,766     375,967     (1 )
Interest-bearing deposits     933,064     930,112      
Total deposits     1,305,830     1,306,079      
Short-term borrowings     95,356     96,781     (1 )
Derivative liabilities     11,636     14,492     (20 )
Accrued expenses and other liabilities     73,035     57,189     28  
Long-term debt     238,869     255,077     (6 )
Total liabilities     1,724,726     1,729,618      
Equity                
Wells Fargo stockholders’ equity:                
Preferred stock     25,785     24,551     5  
Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares     9,136     9,136      
Additional paid-in capital     60,689     60,234     1  
Retained earnings     139,524     133,075     5  
Cumulative other comprehensive income (loss)     (2,110 )   (3,137 )   (33 )
Treasury stock – 515,041,424 shares and 465,702,148 shares     (25,675 )   (22,713 )   13  
Unearned ESOP shares     (2,119 )   (1,565 )   35  
Total Wells Fargo stockholders’ equity     205,230     199,581     3  
Noncontrolling interests     915     916      
Total equity     206,145     200,497     3  

Total liabilities and equity

  $ 1,930,871     1,930,115      
                   
                               

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET
    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,  
(in millions)   2017     2017     2016     2016     2016  
Assets                              
Cash and due from banks   $ 20,248     19,698     20,729     19,287     20,407  
Federal funds sold, securities purchased under resale agreements and other short-term investments     264,706     308,747     266,038     298,325     295,521  
Trading assets     83,607     80,326     74,397     81,094     71,556  
Investment securities:                              
Available-for-sale, at fair value     269,202     299,530     308,364     291,591     253,006  
Held-to-maturity, at cost     140,392     108,030     99,583     99,241     100,420  
Mortgages held for sale     24,807     17,822     26,309     27,423     23,930  
Loans held for sale     156     253     80     183     220  
Loans     957,423     958,405     967,604     961,326     957,157  
Allowance for loan losses     (11,073 )   (11,168 )   (11,419 )   (11,583 )   (11,664 )
Net loans     946,350     947,237     956,185     949,743     945,493  
Mortgage servicing rights:                              
Measured at fair value     12,789     13,208     12,959     10,415     10,396  
Amortized     1,399     1,402     1,406     1,373     1,353  
Premises and equipment, net     8,403     8,320     8,333     8,322     8,289  
Goodwill     26,573     26,666     26,693     26,688     26,963  
Derivative assets     13,273     12,564     14,498     18,736     20,999  
Other assets     118,966     107,761     114,541     109,703     110,682  
Total assets   $ 1,930,871     1,951,564     1,930,115     1,942,124     1,889,235  
Liabilities                              
Noninterest-bearing deposits   $ 372,766     365,780     375,967     376,136     361,934  
Interest-bearing deposits     933,064     959,664     930,112     899,758     883,539  
Total deposits     1,305,830     1,325,444     1,306,079     1,275,894     1,245,473  
Short-term borrowings     95,356     94,871     96,781     124,668     120,258  
Derivative liabilities     11,636     12,461     14,492     13,603     15,483  
Accrued expenses and other liabilities     73,035     59,831     57,189     69,166     61,433  
Long-term debt     238,869     256,468     255,077     254,835     243,927  
Total liabilities     1,724,726     1,749,075     1,729,618     1,738,166     1,686,574  
Equity                              
Wells Fargo stockholders’ equity:                              
Preferred stock     25,785     25,501     24,551     24,594     24,830  
Common stock     9,136     9,136     9,136     9,136     9,136  
Additional paid-in capital     60,689     60,585     60,234     60,685     60,691  
Retained earnings     139,524     136,032     133,075     130,288     127,076  
Cumulative other comprehensive income (loss)     (2,110 )   (3,178 )   (3,137 )   2,184     2,948  
Treasury stock     (25,675 )   (24,030 )   (22,713 )   (22,247 )   (21,068 )
Unearned ESOP shares     (2,119 )   (2,546 )   (1,565 )   (1,612 )   (1,868 )
Total Wells Fargo stockholders’ equity     205,230     201,500     199,581     203,028     201,745  
Noncontrolling interests     915     989     916     930     916  
Total equity     206,145     202,489     200,497     203,958     202,661  
Total liabilities and equity   $ 1,930,871     1,951,564     1,930,115     1,942,124     1,889,235  
                                 
                       

Wells Fargo & Company and Subsidiaries

FIVE QUARTER INVESTMENT SECURITIES
    Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,
(in millions)   2017   2017   2016   2016   2016
Available-for-sale securities:                      
Securities of U.S. Treasury and federal agencies   $ 17,896   24,625   25,819   26,376   27,939
Securities of U.S. states and political subdivisions     52,013   52,061   51,101   55,366   54,024
Mortgage-backed securities:                      
Federal agencies     135,938   156,966   161,230   135,692   95,868
Residential and commercial     12,772   14,233   16,318   18,387   19,938
Total mortgage-backed securities     148,710   171,199   177,548   154,079   115,806
Other debt securities     49,555   50,520   52,685   54,537   53,935
Total available-for-sale debt securities     268,174   298,405   307,153   290,358   251,704
Marketable equity securities     1,028   1,125   1,211   1,233   1,302
Total available-for-sale securities     269,202   299,530   308,364   291,591   253,006
Held-to-maturity securities:                      
Securities of U.S. Treasury and federal agencies     44,704   44,697   44,690   44,682   44,675
Securities of U.S. states and political subdivisions     6,325   6,331   6,336   2,994   2,181
Federal agency and other mortgage-backed securities (1)     87,525   53,778   45,161   47,721   49,594
Other debt securities     1,838   3,224   3,396   3,844   3,970
Total held-to-maturity debt securities     140,392   108,030   99,583   99,241   100,420
Total investment securities   $ 409,594   407,560   407,947   390,832   353,426

(1) Predominantly consists of federal agency mortgage-backed securities.

                       

FIVE QUARTER LOANS

                     
    Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,
(in millions)   2017   2017   2016   2016   2016
Commercial:                      
Commercial and industrial   $ 331,113   329,252   330,840   324,020   323,858
Real estate mortgage     130,277   131,532   132,491   130,223   128,320
Real estate construction     25,337   25,064   23,916   23,340   23,387
Lease financing     19,174   19,156   19,289   18,871   18,973
Total commercial     505,901   505,004   506,536   496,454   494,538
Consumer:                      
Real estate 1-4 family first mortgage     276,566   274,633   275,579   278,689   277,162
Real estate 1-4 family junior lien mortgage     42,747   44,333   46,237   48,105   49,772
Credit card     35,305   34,742   36,700   34,992   34,137
Automobile     57,958   60,408   62,286   62,873   61,939
Other revolving credit and installment     38,946   39,285   40,266   40,213   39,609
Total consumer     451,522   453,401   461,068   464,872   462,619
Total loans (1)   $ 957,423   958,405   967,604   961,326   957,157

(1) Includes $14.3 billion, $15.7 billion, $16.7 billion, $17.7 billion, and $19.3 billion of purchased credit-impaired (PCI) loans at June 30, and March 31, 2017, and December 31, September 30, and June 30, 2016, respectively.

                       

Our foreign loans are reported by respective class of financing receivable in the table above. Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign primarily based on whether the borrower's primary address is outside of the United States. The following table presents total commercial foreign loans outstanding by class of financing receivable.

                       
   

Jun 30,

 

Mar 31

 

Dec 31,

 

Sep 30,

 

Jun 30,

(in millions)

 

2017

 

2017

 

2016

 

2016

 

2016

Commercial foreign loans:

                     

Commercial and industrial

 

$

57,825

 

56,987

 

55,396

 

51,515

 

50,515

Real estate mortgage

   

8,359

 

8,206

 

8,541

 

8,466

 

8,467

Real estate construction

   

585

 

471

 

375

 

310

 

246

Lease financing

   

1,092

 

986

 

972

 

958

 

987

Total commercial foreign loans

 

$

67,861

 

66,650

 

65,284

 

61,249

 

60,215

                       
                             

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)   2017     2017     2016     2016     2016
Nonaccrual loans:                            
Commercial:                            
Commercial and industrial   $ 2,632     2,898     3,216     3,331     3,464
Real estate mortgage     630     672     685     780     872
Real estate construction     34     40     43     59     59
Lease financing     89     96     115     92     112
Total commercial     3,385     3,706     4,059     4,262     4,507
Consumer:                            
Real estate 1-4 family first mortgage     4,413     4,743     4,962     5,310     5,970
Real estate 1-4 family junior lien mortgage     1,095     1,153     1,206     1,259     1,330
Automobile     104     101     106     108     111
Other revolving credit and installment     59     56     51     47     45
Total consumer     5,671     6,053     6,325     6,724     7,456
Total nonaccrual loans (1)(2)(3)   $ 9,056     9,759     10,384     10,986     11,963
As a percentage of total loans     0.95 %   1.02     1.07     1.14     1.25
Foreclosed assets:                            
Government insured/guaranteed   $ 149     179     197     282     321
Non-government insured/guaranteed     632     726     781     738     796
Total foreclosed assets     781     905     978     1,020     1,117
Total nonperforming assets   $ 9,837     10,664     11,362     12,006     13,080
As a percentage of total loans     1.03 %   1.11     1.17     1.25     1.37

(1) Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.

(2) Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.

(3) Real estate 1-4 family mortgage loans predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans largely guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed. All remaining student loans guaranteed under the FFELP were sold as of March 31, 2017.

 
                             

Wells Fargo & Company and Subsidiaries

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)   2017     2017     2016     2016     2016
Total (excluding PCI)(1):   $ 9,716     10,525     11,858     12,068     12,385
Less: FHA insured/guaranteed by the VA (2)(3)     8,873     9,585     10,883     11,198     11,577
Less: Student loans guaranteed under the FFELP (4)             3     17     20
Total, not government insured/guaranteed   $ 843     940     972     853     788

By segment and class, not government insured/guaranteed:

                             
Commercial:                              
Commercial and industrial   $ 42     88     28     47     36
Real estate mortgage     2     11     36     4     22
Real estate construction     10     3            
Total commercial     54     102     64     51     58
Consumer:                              
Real estate 1-4 family first mortgage (3)     145     149     175     171     169
Real estate 1-4 family junior lien mortgage (3)     44     42     56     54     52
Credit card     411     453     452     392     348
Automobile     91     79     112     81     64
Other revolving credit and installment     98     115     113     104     97
Total consumer     789     838     908     802     730
Total, not government insured/guaranteed   $ 843     940     972     853     788

(1) PCI loans totaled $1.5 billion, $1.8 billion, $2.0 billion, $2.2 billion and $2.4 billion, at June 30 and March 31, 2017 and December 31, September 30, and June 30, 2016, respectively.

(2) Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
(3) Includes mortgages held for sale 90 days or more past due and still accruing.

(4) Represents loans whose repayments are largely guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP. All remaining student loans guaranteed under the FFELP were sold as of March 31, 2017.

 

Wells Fargo & Company and Subsidiaries
CHANGES IN ACCRETABLE YIELD RELATED TO PURCHASED CREDIT-IMPAIRED (PCI) LOANS

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans predominantly represent loans acquired from Wachovia that were deemed to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent LTV percentages. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date.

As a result of PCI loan accounting, certain credit-related ratios cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.

The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:

  • Changes in interest rate indices for variable rate PCI loans - Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows;
  • Changes in prepayment assumptions - Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and
  • Changes in the expected principal and interest payments over the estimated life - Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.

The change in the accretable yield related to PCI loans since the merger with Wachovia is presented in the following table.

                       
    Quarter       Six months          
    ended       ended          
    June 30,       June 30,          
(in millions)   2017       2017       2009-2016  
Balance, beginning of period   $ 10,315       11,216       10,447  
Change in accretable yield due to acquisitions           2       159  
Accretion into interest income (1)     (374 )     (731 )     (15,577 )
Accretion into noninterest income due to sales (2)     (309 )     (334 )     (467 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (3)           406       10,955  
Changes in expected cash flows that do not affect nonaccretable difference (4)     (263 )     (1,190 )     5,699  
Balance, end of period   $ 9,369       9,369       11,216  

(1) Includes accretable yield released as a result of settlements with borrowers, which is included in interest income.

(2) Includes accretable yield released as a result of sales to third parties, which is included in noninterest income.

(3) At June 30, 2017, our carrying value for PCI loans totaled $14.3 billion and the remainder of nonaccretable difference established in purchase accounting totaled $649 million. The nonaccretable difference absorbs losses of contractual amounts that exceed our carrying value for PCI loans.

(4) Represents changes in cash flows expected to be collected due to the impact of modifications, changes in prepayment assumptions, changes in interest rates on variable rate PCI loans and sales to third parties.

                       
                 

Wells Fargo & Company and Subsidiaries

PICK-A-PAY PORTFOLIO (1)
    June 30, 2017  
    PCI loans       All other loans  
                            Ratio of               Ratio of  
    Adjusted                       carrying               carrying  
    unpaid       Current               value to               value to  
    principal       LTV       Carrying       current       Carrying       current  
(in millions)   balance (2)       ratio (3)       value (4)       value (5)       value (4)       value (5)  
California   $ 12,263       63 %     $ 9,511       48 %     $ 7,077       45 %
Florida     1,540       70         1,146       51         1,502       56  
New Jersey     609       77         447       56         995       63  
New York     458       70         360       51         497       60  
Texas     141       49         108       37         598       38  
Other states   &nbs