View all news

Wells Fargo Reports $6.1 Billion in Quarterly Net Income; Diluted EPS of $1.21

01/15/2019
Share

Full Year 2018 Net Income of $22.4 Billion; Diluted EPS of $4.28

SAN FRANCISCO--(BUSINESS WIRE)--Wells Fargo & Company (NYSE:WFC):

  • Full year 2018 financial results:
    • Net income of $22.4 billion, compared with $22.2 billion in 2017
    • Diluted earnings per share (EPS) of $4.28, compared with $4.10
    • Return on assets (ROA) of 1.19 percent, return on equity (ROE) of 11.53 percent, and return on average tangible common equity (ROTCE) of 13.73 percent1
    • Revenue of $86.4 billion, down from $88.4 billion
    • Noninterest expense of $56.1 billion, down from $58.5 billion
    • Returned $25.8 billion to shareholders through common stock dividends and net share repurchases
      • Net share repurchases of $17.9 billion, which more than doubled from $6.8 billion in 2017
      • Common stock dividends of $1.64 per share, up 6 percent from $1.54 per share
      • Period-end common shares outstanding down 310.3 million shares, or 6 percent
  • Fourth quarter 2018 financial results:
    • Net income of $6.1 billion, compared with $6.2 billion in fourth quarter 2017
    • Diluted earnings per share (EPS) of $1.21, compared with $1.16
    • ROA of 1.28 percent, ROE of 12.89 percent, and ROTCE of 15.39 percent1
    • Revenue of $21.0 billion, down from $22.1 billion
      • Net interest income of $12.6 billion, up $331 million
      • Noninterest income of $8.3 billion, down $1.4 billion
    • Noninterest expense of $13.3 billion, down $3.5 billion
    • Income tax expense of $966 million, compared with an income tax benefit of $1.6 billion
    • Average deposits of $1.3 trillion, down $42.6 billion, or 3 percent
    • Average loans of $946.3 billion, down $5.5 billion, or 1 percent
    • Provision expense of $521 million, down $130 million, or 20 percent
      • Net charge-offs of 0.30 percent of average loans (annualized), down from 0.31 percent
      • Reserve release2 of $200 million, compared with $100 million release
    • Nonaccrual loans of $6.5 billion, down $1.2 billion, or 15 percent

Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Annual Report on Form 10-K for the year ended December 31, 2018, 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   Year ended Dec. 31,
   

Dec 31,
2018

  Sep 30,
2018
 

Dec 31,
2017

  2018   2017
Earnings        
Diluted earnings per common share $ 1.21 1.13 1.16 4.28 4.10
Wells Fargo net income (in billions) 6.06 6.01 6.15 22.39 22.18
Return on assets (ROA) 1.28 % 1.27 1.26 1.19 1.15
Return on equity (ROE) 12.89 12.04 12.47 11.53 11.35
Return on average tangible common equity (ROTCE) (a) 15.39 14.33 14.85 13.73 13.55
Asset Quality
Net charge-offs (annualized) as a % of average total loans 0.30 % 0.29 0.31 0.29 0.31
Allowance for credit losses as a % of total loans 1.12 1.16 1.25 1.12 1.25
Allowance for credit losses as a % of annualized net charge-offs 374 406 401 390 408
Other
Revenue (in billions) $ 21.0 21.9 22.1 86.4 88.4
Efficiency ratio (b) 63.6 % 62.7 76.2 65.0 66.2
Average loans (in billions) $ 946.3 939.5 951.8 945.2 956.1
Average deposits (in billions) 1,268.9 1,266.4 1,311.6 1,275.9 1,304.6
Net interest margin   2.94 %   2.94     2.84     2.91     2.87

(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 securities 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 36.

(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 $6.1 billion, or $1.21 per diluted common share, for fourth quarter 2018, compared with $6.2 billion, or $1.16 per share, for fourth quarter 2017, and $6.0 billion, or $1.13 per share, for third quarter 2018.

Chief Executive Officer Tim Sloan said, “I’m proud of the transformational changes we made at Wells Fargo during 2018 including significant progress on our six goals. We have made meaningful improvements to how we manage risk across the company, particularly operational and compliance risk. We improved customer service which resulted in both ‘Customer Loyalty’ and ‘Overall Satisfaction with Most Recent Visit’ branch survey scores reaching a 24-month high in December. Our voluntary team member attrition in 2018 improved to its lowest level in six years reflecting our efforts to make Wells Fargo a better place to work, and we continue to attract impressive leaders from outside the company. We launched many customer-focused innovations including our online mortgage application, Control TowerSM, Pay with Wells Fargo, and our new Propel® Card. Our commitment to building stronger communities was demonstrated by exceeding our target of donating $400 million to communities across the U.S., and a recent example was our Holiday Food Bank program which provided over 50 million meals during the holidays. Our focus on delivering long-term shareholder value included meeting our 2018 expense target and returning a record $25.8 billion to shareholders in 2018, up 78% from 2017. I want to thank our team members for their commitment to making Wells Fargo a better bank in 2018. I’m confident that we’ll continue to make Wells Fargo even better in 2019.”

Chief Financial Officer John Shrewsberry said, “Wells Fargo reported $6.1 billion of net income in the fourth quarter. Compared with the third quarter, we grew both loans and deposits and credit performance remained strong. In addition, our effective income tax rate was lower compared with the prior quarter, and we maintained solid capital levels even as we reduced our common shares outstanding. We continued to have positive business trends in the fourth quarter with primary consumer checking customers, consumer credit card active accounts, debit and credit card usage, commercial loan balances, and loan originations in auto, small business, home equity and student lending all growing compared with a year ago. Our focus on reducing expenses enabled us to meet our 2018 expense target, and we are on track to meet our 2019 expense target as well.”

Net Interest Income

Net interest income in the fourth quarter was $12.6 billion, up $72 million from third quarter 2018, driven primarily by the benefits of higher average interest rates and favorable hedge ineffectiveness accounting results, partially offset by the impacts from balance sheet mix and lower variable income. Net interest margin was 2.94 percent, flat compared with the prior quarter.

Noninterest Income

Noninterest income in the fourth quarter was $8.3 billion, down $1.0 billion from third quarter 2018. Fourth quarter noninterest income included lower market sensitive revenue3, mortgage banking fees and trust and investment fees, partially offset by higher other income.

  • Mortgage banking income was $467 million, down from $846 million in third quarter 2018. Net mortgage servicing income was $109 million, down from $390 million in the third quarter predominantly due to updated mortgage servicing rights valuation assumptions driven by recent market observations. The production margin on residential held-for-sale mortgage loan originations4 decreased to 0.89 percent, from 0.97 percent in the third quarter, primarily due to lower retail margins, partially offset by a lower percentage of correspondent volume. Residential mortgage loan originations in the fourth quarter were $38 billion, down from $46 billion in the third quarter primarily due to seasonality.
  • Market sensitive revenue3 was $40 million, down from $631 million in third quarter 2018, primarily due to lower net gains from equity securities as lower deferred compensation plan investment results were partially offset by higher equity investment gains. The decrease related to the deferred compensation plan was offset by lower employee benefits expense. Revenue from trading activities declined compared with the prior quarter as well, driven by wider spreads in credit and asset backed products.
  • Other income was $595 million, up from $466 million in the third quarter. The increase in the fourth quarter included a $117 million gain from the previously announced sale of 52 branches.

Noninterest Expense

Noninterest expense in the fourth quarter declined $424 million from the prior quarter to $13.3 billion, predominantly due to a $671 million decline in employee benefits driven by lower deferred compensation expense (largely offset in market sensitive revenue), lower FDIC expense due to the completion of their special assessment, and lower operating losses. These decreases were partially offset by higher other expense, operating lease expense on lease asset impairment, outside professional services and salary expense. The efficiency ratio was 63.6 percent in fourth quarter 2018, compared with 62.7 percent in the third quarter.

Fourth quarter 2018 operating losses were $432 million and included a $175 million accrual for an agreement reached in December 2018 with all 50 state Attorneys General and the District of Columbia regarding previously disclosed matters.

Income Taxes

The Company’s effective income tax rate was 13.7 percent for fourth quarter 2018, compared with 20.1 percent for third quarter 2018, which included net discrete income tax expense in the third quarter related to re-measurement of our initial estimates for the impacts of the Tax Cuts & Jobs Act (Tax Act) recognized in fourth quarter 2017. The fourth quarter 2018 income tax rate included $158 million of net discrete income tax benefits primarily related to the results of state income tax audits and incremental state tax credits. In addition, the fourth quarter income tax rate benefited from $137 million related to revisions to our full year 2018 effective income tax rate made during the quarter. The Company's full year 2018 effective income tax rate was 20.2 percent (18 percent before discrete items). We currently expect the effective income tax rate for full year 2019 to be approximately 18 percent, excluding the impact of any unanticipated discrete items.

Loans

Total average loans were $946.3 billion in the fourth quarter, up $6.9 billion from the third quarter. Period-end loan balances were $953.1 billion at December 31, 2018, up $10.8 billion from September 30, 2018. Commercial loans were up $11.5 billion compared with September 30, 2018, due to $12.2 billion of growth in commercial and industrial loans, partially offset by a $583 million decline in commercial real estate loans. Consumer loans decreased $709 million from the prior quarter, reflecting the following:

  • Real estate 1-4 family first mortgage loans increased $792 million, as $9.8 billion of held-for-investment nonconforming mortgage loan originations were predominantly offset by payoffs and $1.6 billion of sales of purchased credit-impaired (PCI) Pick-a-Pay mortgage loans. Additionally, $562 million of nonconforming mortgage loan originations that would have otherwise been included in 1-4 family first mortgage loan outstandings were designated as held-for-sale in fourth quarter 2018 in anticipation of the future issuance of residential mortgage-backed securities (RMBS).
  • Real estate 1-4 family junior lien mortgage loans decreased $932 million, as payoffs continued to exceed originations
  • Credit card loans increased $1.2 billion primarily due to seasonality
  • Automobile loans declined $1.0 billion due to expected continued runoff
 

Period-End Loan Balances

(in millions)   Dec 31,
2018
  Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
Commercial   $ 513,405   501,886   503,105   503,396   503,388
Consumer   439,705     440,414     441,160     443,912     453,382
Total loans   $ 953,110     942,300     944,265     947,308     956,770
Change from prior quarter   $ 10,810     (1,965 )   (3,043 )   (9,462 )   4,897
 

Debt and Equity Securities

Debt securities include available-for-sale and held-to-maturity debt securities, as well as debt securities held for trading. Debt securities were $484.7 billion at December 31, 2018, up $12.4 billion from the third quarter, predominantly due to a net increase in available-for-sale and held for trading debt securities. Debt securities purchases of approximately $16.9 billion, primarily U.S. Treasury and federal agency mortgage-backed securities (MBS) in the available-for-sale portfolio, more than offset runoff and sales.

Net unrealized losses on available-for-sale debt securities were $2.6 billion at December 31, 2018, compared with net unrealized losses of $3.8 billion at September 30, 2018, predominantly due to lower interest rates, partially offset by higher credit spreads.

Equity securities include marketable and non-marketable equity securities, as well as equity securities held for trading. Equity securities were $55.1 billion at December 31, 2018, down $6.6 billion from the third quarter, predominantly due to a decrease in equity securities held for trading.

Deposits

Total average deposits for fourth quarter 2018 were $1.3 trillion, up $2.6 billion from the prior quarter as growth in commercial deposits was partially offset by lower consumer and small business banking deposits, which included $1.8 billion of deposits associated with the previously announced sale of 52 branches that closed on November 30. The average deposit cost for fourth quarter 2018 was 55 basis points, up 8 basis points from the prior quarter and 27 basis points from a year ago.

Capital

Capital in the fourth quarter continued to exceed our internal target, with a Common Equity Tier 1 ratio (fully phased-in) of 11.7 percent5, down from 11.9 percent in the prior quarter. In fourth quarter 2018, the Company repurchased 142.7 million shares of its common stock, which net of issuances, reduced period-end common shares outstanding by 130.3 million. The Company paid a quarterly common stock dividend of $0.43 per share.

Credit Quality

Net Loan Charge-offs

The quarterly loss rate in the fourth quarter was 0.30 percent (annualized), compared with 0.29 percent in the prior quarter and 0.31 percent a year ago. Commercial and consumer losses were 0.10 percent and 0.53 percent, respectively. Total credit losses were $721 million in fourth quarter 2018, up $41 million from third quarter 2018. Commercial losses decreased $20 million driven by lower commercial and industrial loan net charge-offs and higher recoveries in commercial real estate, while consumer losses increased $61 million predominantly driven by seasonal increases in credit card and other revolving credit and installment loan charge-offs.

 

Net Loan Charge-Offs

  Quarter ended
    December 31, 2018   September 30, 2018   December 31, 2017
($ in millions)  

Net loan
charge-
offs

 

As a % of
average
loans (a)

 

Net loan
charge-
offs

 

As a % of
average
loans (a)

 

Net loan
charge-
offs

 

As a % of
average
loans (a)

Commercial:      
Commercial and industrial $ 132 0.15 % $ 148 0.18 % $ 118 0.14 %
Real estate mortgage (12 ) (0.04 ) (1 ) (10 ) (0.03 )
Real estate construction (1 ) (0.01 ) (2 ) (0.04 ) (3 ) (0.05 )
Lease financing   13   0.26 7   0.14 10   0.20
Total commercial   132   0.10 152   0.12 115   0.09
Consumer:
Real estate 1-4 family first mortgage (22 ) (0.03 ) (25 ) (0.04 ) (23 ) (0.03 )
Real estate 1-4 family junior lien mortgage (10 ) (0.11 ) (9 ) (0.10 ) (7 ) (0.06 )
Credit card 338 3.54 299 3.22 336 3.66
Automobile 133 1.16 130 1.10 188 1.38
Other revolving credit and installment   150   1.64 133   1.44 142   1.46
Total consumer   589   0.53 528   0.47 636   0.56
Total   $ 721   0.30 % $ 680   0.29 % $ 751   0.31 %
 

(a) Quarterly net charge-offs (recoveries) as a percentage of average loans are annualized. See explanation on page 33 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

 

Nonperforming Assets

Nonperforming assets decreased $289 million, or 4 percent, from third quarter 2018 to $6.9 billion. Nonaccrual loans decreased $218 million from third quarter 2018 to $6.5 billion reflecting both lower consumer and commercial nonaccruals.

 

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

    December 31, 2018   September 30, 2018   December 31, 2017
($ in millions)  

Total
balances

 

As a
% of
total
loans

 

Total
balances

 

As a
% of
total
loans

 

Total
balances

 

As a
% of
total
loans

Commercial:            
Commercial and industrial $ 1,486 0.42 % $ 1,555 0.46 % $ 1,899 0.57 %
Real estate mortgage 580 0.48 603 0.50 628 0.50
Real estate construction 32 0.14 44 0.19 37 0.15
Lease financing   90   0.46 96   0.49 76   0.39
Total commercial   2,188   0.43 2,298   0.46 2,640   0.52
Consumer:
Real estate 1-4 family first mortgage 3,183 1.12 3,267 1.15 3,732 1.31
Real estate 1-4 family junior lien mortgage 945 2.75 983 2.78 1,086 2.73
Automobile 130 0.29 118 0.26 130 0.24
Other revolving credit and installment   50   0.14 48   0.13 58   0.15
Total consumer   4,308   0.98 4,416   1.00 5,006   1.10
Total nonaccrual loans (a)   6,496   0.68 6,714   0.71 7,646   0.80
Foreclosed assets:
Government insured/guaranteed 88 87 120
Non-government insured/guaranteed   363   435   522  
Total foreclosed assets   451   522   642  
Total nonperforming assets   $ 6,947   0.73 % $ 7,236   0.77 % $ 8,288   0.87 %
Change from prior quarter:
Total nonaccrual loans (a) $ (218 ) $ (412 ) $ (572 )
Total nonperforming assets   (289 )       (389 )       (636 )    

(a) Financial information for periods prior to December 31, 2018, has been revised to exclude mortgage loans held for sale (MLHFS), loans held for sale (LHFS) and loans held at fair value. For additional information, see the "Five Quarter Nonperforming Assets" table on page 32.

 

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $10.7 billion at December 31, 2018, down $249 million from September 30, 2018. Fourth quarter 2018 included a $200 million reserve release2, which reflected continued improvement in the credit quality of the loan portfolio. The allowance coverage for total loans was 1.12 percent, compared with 1.16 percent in third quarter 2018. The allowance covered 3.7 times annualized fourth quarter net charge-offs, compared with 4.1 times in the prior quarter. The allowance coverage for nonaccrual loans was 165 percent at December 31, 2018, compared with 163 percent at September 30, 2018.

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
(in millions)   Dec 31,
2018
  Sep 30,
2018
  Dec 31,
2017
Community Banking $ 3,169   2,816   3,472
Wholesale Banking 2,671 2,851 2,373
Wealth and Investment Management   689     732     675
 

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 automobile, student, mortgage, home equity and small business lending, as well as referrals to Wholesale Banking and Wealth and Investment Management business partners. The Community Banking segment also includes the results of our Corporate Treasury activities net of allocations in support of the other operating segments and results of investments in our affiliated venture capital and private equity partnerships.

 

Selected Financial Information

  Quarter ended
(in millions)   Dec 31,
2018
  Sep 30,
2018
 

Dec 31,
2017

Total revenue $ 11,461   11,816   11,720
Provision for credit losses 534 547 636
Noninterest expense 7,032 7,467 10,216
Segment net income 3,169 2,816 3,472
(in billions)
Average loans 459.7 460.9 473.2
Average assets 1,015.9 1,024.9 1,073.2
Average deposits   759.4     760.9     738.3
 

Fourth Quarter 2018 vs. Third Quarter 2018

  • Net income of $3.2 billion, up $353 million, or 13 percent, primarily due to lower noninterest expense and income tax expense, partially offset by lower revenue
  • Revenue was $11.5 billion, down $355 million, or 3 percent, driven predominantly by lower mortgage banking income and lower market sensitive revenue reflecting lower deferred compensation plan investment results (offset in employee benefits expense), partially offset by a $117 million gain on the previously announced sale of 52 branches
  • Noninterest expense of $7.0 billion was down $435 million, or 6 percent, driven mainly by lower deferred compensation expense (offset in market sensitive revenue), operating losses, and FDIC expense, partially offset by higher other expense

Fourth Quarter 2018 vs. Fourth Quarter 2017

  • Net income was down $303 million, or 9 percent, predominantly due to higher income tax expense, as fourth quarter 2017 included an income tax benefit from the Tax Act, and lower revenue, partially offset by lower noninterest expense
  • Revenue declined $259 million, or 2 percent, predominantly due to lower market sensitive revenue and mortgage banking income, partially offset by gains from the sales of PCI Pick-a-Pay loans and the previously announced sale of 52 branches
  • Noninterest expense decreased $3.2 billion, or 31 percent, driven by lower operating losses
  • Provision for credit losses decreased $102 million, largely due to continued credit improvement in the automobile and consumer real estate portfolios

Business Metrics and Highlights

  • Primary consumer checking customers6,7 of 23.9 million, up 1.2 percent from a year ago. The previously announced sale of 52 branches and $1.8 billion of deposits which closed in fourth quarter 2018 reduced the growth rate by 0.5 percent
  • More than 318,000 branch customer experience surveys completed during fourth quarter 2018 (over 1.4 million in 2018), with both ‘Customer Loyalty’ and ‘Overall Satisfaction with Most Recent Visit’ scores up from the prior quarter and reaching a 24-month high in December
  • Debit card point-of-sale purchase volume8 of $89.8 billion in the fourth quarter, up 8 percent year-over-year
  • General purpose credit card point-of-sale purchase volume of $20.2 billion in the fourth quarter, up 5 percent year-over-year
  • 29.2 million digital (online and mobile) active customers, including 22.8 million mobile active users7,9
  • 5,518 retail bank branches as of the end of fourth quarter 2018, reflecting 93 branch consolidations in the quarter and 300 in 2018; in addition, completed the previously announced sale of 52 branches in Indiana, Ohio, Michigan and part of Wisconsin in fourth quarter 2018
  • Home Lending
    • Originations of $38 billion, down from $46 billion in the prior quarter, primarily due to seasonality; included home equity originations of $673 million, down 6 percent from the prior quarter and up 14 percent from the prior year
    • Applications of $48 billion, down from $57 billion in the prior quarter
    • Application pipeline of $18 billion at quarter end, down from $22 billion at September 30, 2018
    • Production margin on residential held-for-sale mortgage loan originations4 of 0.89 percent, down from 0.97 percent in the prior quarter, primarily due to lower retail margins
  • Automobile originations of $4.7 billion in the fourth quarter, up 9 percent from the prior year
  • Student loan originations of $258 million in fourth quarter 2018, up 16 percent from the prior year
  • Small Business Lending10 originations of $595 million, up 19 percent from the prior year

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include Commercial Banking, Commercial Real Estate, Corporate and Investment Banking, Principal Investments, Treasury Management, and Commercial Capital.

 

Selected Financial Information

  Quarter ended
(in millions)   Dec 31,
2018
  Sep 30,
2018
  Dec 31,
2017
Total revenue $ 6,926   7,304   7,440
Provision (reversal of provision) for credit losses (28 ) 26 20
Noninterest expense 4,025 3,935 4,187
Segment net income 2,671 2,851 2,373
(in billions)
Average loans 470.2 462.8 463.5
Average assets 839.1 827.2 837.2
Average deposits   421.6     413.6     465.7
 

Fourth Quarter 2018 vs. Third Quarter 2018

  • Net income of $2.7 billion, down $180 million, or 6 percent
  • Revenue of $6.9 billion decreased $378 million, or 5 percent, as higher net interest income, commercial real estate brokerage and other fees were more than offset by lower market sensitive revenue, investment banking fees and other income
  • Noninterest expense of $4.0 billion increased $90 million, or 2 percent, reflecting higher operating lease expense, partially offset by lower FDIC expense
  • Provision for credit losses decreased $54 million, driven primarily by higher recoveries

Fourth Quarter 2018 vs. Fourth Quarter 2017

  • Net income increased $298 million, or 13 percent, as fourth quarter 2018 results benefited from a lower effective income tax rate
  • Revenue decreased $514 million, or 7 percent, largely due to the impact of the sales of Wells Fargo Insurance Services USA (WFIS) in fourth quarter 2017 and Wells Fargo Shareowner Services in first quarter 2018, as well as lower market sensitive revenue, operating lease income and treasury management fees, partially offset by increases related to losses taken in fourth quarter 2017 from adjustments to leveraged leases and other tax advantaged businesses due to the Tax Act
  • Noninterest expense decreased $162 million, or 4 percent, on lower expense related to the sales of WFIS and Wells Fargo Shareowner Services, as well as lower project-related expense and FDIC expense, partially offset by higher regulatory, risk and technology expense

Business Metrics and Highlights

  • Commercial card spend volume11 of $8.6 billion, up 11 percent from the prior year on increased transaction volumes primarily reflecting customer growth, and up 5 percent compared with third quarter 2018
  • U.S. investment banking market share of 3.2 percent in 201812, compared with 3.6 percent in 201712

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 clients’ brokerage needs, supply retirement and trust services to institutional clients and provide investment management capabilities delivered to global institutional clients through separate accounts and the Wells Fargo Funds.

 

Selected Financial Information

  Quarter ended
(in millions)   Dec 31,
2018
  Sep 30,
2018
  Dec 31,
2017
Total revenue $ 3,957   4,226   4,333
Provision (reversal of provision) for credit losses (3 ) 6 (7 )
Noninterest expense 3,044 3,243 3,246
Segment net income 689 732 675
(in billions)
Average loans 75.2 74.6 72.9
Average assets 83.6 83.8 83.7
Average deposits   155.5     159.8     184.1  
 

Fourth Quarter 2018 vs. Third Quarter 2018

  • Net income of $689 million, down $43 million, or 6 percent
  • Revenue of $4.0 billion decreased $269 million, or 6 percent, mostly due to net losses from equity securities on lower deferred compensation plan investment results of $218 million (offset in employee benefits expense) and lower asset-based fees
  • Noninterest expense of $3.0 billion decreased $199 million, or 6 percent, primarily driven by lower employee benefits from deferred compensation plan expense of $216 million (offset in deferred compensation plan investments)

Fourth Quarter 2018 vs. Fourth Quarter 2017

  • Net income up $14 million, or 2 percent, as fourth quarter 2018 results benefited from a lower effective income tax rate
  • Revenue decreased $376 million, or 9 percent, primarily driven by lower deferred compensation plan investment results of $235 million (offset in employee benefits expense), asset-based fees, brokerage transaction revenue, and net interest income
  • Noninterest expense decreased $202 million, or 6 percent, primarily due to lower employee benefits from deferred compensation plan expense of $234 million (offset in deferred compensation plan investments) and lower FDIC expense, partially offset by higher regulatory, risk and technology expense

Business Metrics and Highlights

Total WIM Segment

  • WIM total client assets of $1.7 trillion, down 10 percent from a year ago, driven primarily by lower market valuations, as well as net outflows
  • Average loan balances up 3 percent from a year ago largely due to growth in nonconforming mortgage loans
  • Full year 2018 closed referred investment assets (referrals resulting from the WIM/Community Banking partnership) of $10.1 billion, down 2 percent compared with 2017

Retail Brokerage

  • Client assets of $1.5 trillion, down 10 percent from prior year, driven primarily by lower market valuations, as well as net outflows
  • Advisory assets of $501 billion, down 8 percent from prior year, driven primarily by lower market valuations, as well as net outflows

Wealth Management

  • Client assets of $224 billion, down 10 percent from prior year, driven primarily by lower market valuations, as well as lower deposit balances

Asset Management

  • Total assets under management (AUM) of $466 billion, down 8 percent from prior year, primarily due to equity and fixed income net outflows, the sale of Wells Fargo Asset Management's ownership stake in The Rock Creek Group, LP and removal of the associated AUM, and lower market valuations, partially offset by higher money market fund net inflows

Retirement

  • IRA assets of $373 billion, down 9 percent from prior year
  • Institutional Retirement plan assets of $364 billion, down 8 percent from prior year

Conference Call

The Company will host a live conference call on Tuesday, January 15, 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~7179357.

A replay of the conference call will be available beginning at 11:00 a.m. PT (2:00 p.m. ET) on Tuesday, January 15 through Tuesday, January 29. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #7179357. 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~7179357.

End Notes

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 securities 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 36.

2 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.

3 Market sensitive revenue represents net gains from trading activities, debt securities, and equity securities.

4 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 42 for more information.

5 See table on page 37 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.

6 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.

7 Data as of November 2018, comparisons with November 2017.

8 Combined consumer and business debit card purchase volume dollars.

9 Primarily includes retail banking, consumer lending, small business and business banking customers.

10 Small Business Lending includes credit card, lines of credit and loan products (primarily under $100,000 sold through our retail banking branches).

11 Includes commercial card volume for the entire company.

12 Source: Dealogic U.S. investment banking fee market share.

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, return on equity, and return on tangible common 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 any 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 any efficiency ratio or expense 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 interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgage loans 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 debt securities and equity securities portfolios;
  • 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 and from other instances where customers may have experienced financial harm, 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;
  • resolution of regulatory matters, litigation, or other legal actions, which may result in, among other things, additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other adverse consequences;
  • 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, 2017.

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, 2017, 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.

Forward-looking Non-GAAP Financial Measures. From time to time management may discuss forward-looking non-GAAP financial measures, such as forward-looking estimates or targets for return on average tangible common equity. We are unable to provide a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because we are unable to provide, without unreasonable effort, a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur. Such unavailable information could be significant to future results.

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, investment and mortgage products and services, as well as consumer and commercial finance, through 7,800 locations, more than 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 37 countries and territories to support customers who conduct business in the global economy. With approximately 259,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2018 rankings of America’s largest corporations.

 

Wells Fargo & Company and Subsidiaries

QUARTERLY FINANCIAL DATA

TABLE OF CONTENTS

 
  Pages
 

Summary Information

Summary Financial Data

17

 

Income

Consolidated Statement of Income 19
Consolidated Statement of Comprehensive Income 21
Condensed Consolidated Statement of Changes in Total Equity 21
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 22
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 24
Noninterest Income and Noninterest Expense 25
 

Balance Sheet

Consolidated Balance Sheet 27
Trading Activities 29
Debt Securities 29
Equity Securities 30
 

Loans

Loans 31
Nonperforming Assets 32
Loans 90 Days or More Past Due and Still Accruing 32
Purchased Credit-Impaired Loans 33
Changes in Allowance for Credit Losses 35
 

Equity

Tangible Common Equity 36
Common Equity Tier 1 Under Basel III 37
 

Operating Segments

Operating Segment Results 38
 

Other

Mortgage Servicing and other related data 40
 
 

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA

  Quarter ended   % Change
Dec 31, 2018 from
  Year ended  
($ in millions, except per share amounts)   Dec 31,
2018
  Sep 30,
2018
  Dec 31,
2017
  Sep 30,
2018
  Dec 31,
2017
  Dec 31,
2018
  Dec 31,
2017
  %
Change
For the Period        
Wells Fargo net income $ 6,064 6,007 6,151 1 % (1 ) $ 22,393 22,183 1 %
Wells Fargo net income applicable to common stock 5,711 5,453 5,740 5 (1 ) 20,689 20,554 1
Diluted earnings per common share 1.21 1.13 1.16 7 4 4.28 4.10 4
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.28 % 1.27 1.26 1 2 1.19 % 1.15 3
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.89 12.04 12.47 7 3 11.53 11.35 2
Return on average tangible common equity (ROTCE)(1) 15.39 14.33 14.85 7 4 13.73 13.55 1
Efficiency ratio (2) 63.6 62.7 76.2 1 (17 ) 65.0 66.2 (2 )
Total revenue $ 20,980 21,941 22,050 (4 ) (5 ) $ 86,408 88,389 (2 )
Pre-tax pre-provision profit (PTPP) (3) 7,641 8,178 5,250 (7 ) 46 30,282 29,905 1
Dividends declared per common share 0.43 0.43 0.39 10 1.64 1.54 6
Average common shares outstanding 4,665.8 4,784.0 4,912.5 (2 ) (5 ) 4,799.7 4,964.6 (3 )
Diluted average common shares outstanding 4,700.8 4,823.2 4,963.1 (3 ) (5 ) 4,838.4 5,017.3 (4 )
Average loans $ 946,336 939,462 951,822 1 (1 ) $ 945,197 956,129 (1 )
Average assets 1,879,047 1,876,283 1,935,318 (3 ) 1,888,892 1,933,005 (2 )
Average total deposits 1,268,948 1,266,378 1,311,592 (3 ) 1,275,857 1,304,622 (2 )
Average consumer and small business banking deposits (4) 736,295 743,503 757,541 (1 ) (3 ) 747,183 758,271 (1 )
Net interest margin 2.94 % 2.94 2.84 4 2.91

%

2.87 1
At Period End
Debt securities (5) $ 484,689 472,283 473,366 3 2 $ 484,689 473,366 2
Loans 953,110 942,300 956,770 1 953,110 956,770
Allowance for loan losses 9,775 10,021 11,004 (2 ) (11 ) 9,775 11,004 (11 )
Goodwill 26,418 26,425 26,587 (1 ) 26,418 26,587 (1 )
Equity securities (5) 55,148 61,755 62,497 (11 ) (12 ) 55,148 62,497 (12 )
Assets 1,895,883 1,872,981 1,951,757 1 (3 ) 1,895,883 1,951,757 (3 )
Deposits 1,286,170 1,266,594 1,335,991 2 (4 ) 1,286,170 1,335,991 (4 )
Common stockholders' equity 174,359 176,934 183,134 (1 ) (5 ) 174,359 183,134 (5 )
Wells Fargo stockholders’ equity 196,166 198,741 206,936 (1 ) (5 ) 196,166 206,936 (5 )
Total equity 197,066 199,679 208,079 (1 ) (5 ) 197,066 208,079 (5 )
Tangible common equity (1) 145,980 148,391 153,730 (2 ) (5 ) 145,980 153,730 (5 )
Common shares outstanding 4,581.3 4,711.6 4,891.6 (3 ) (6 ) 4,581.3 4,891.6 (6 )
Book value per common share (6) $ 38.06 37.55 37.44 1 2 $ 38.06 37.44 2
Tangible book value per common share (1)(6) 31.86 31.49 31.43 1 1 31.86 31.43 1
Team members (active, full-time equivalent)   258,700     261,700     262,700     (1 )   (2 )   258,700     262,700     (2 )

(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 securities 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 36.

(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) Financial information for the prior periods of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of Accounting Standards Update (ASU) 2016-01Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

(6) 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
($ in millions, except per share amounts)   Dec 31,
2018
  Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
For the Quarter        
Wells Fargo net income $ 6,064 6,007 5,186 5,136 6,151
Wells Fargo net income applicable to common stock 5,711 5,453 4,792 4,733 5,740
Diluted earnings per common share 1.21 1.13 0.98 0.96 1.16
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.28 % 1.27 1.10 1.09 1.26
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.89 12.04 10.60 10.58 12.47
Return on average tangible common equity (ROTCE)(1) 15.39 14.33 12.62 12.62 14.85
Efficiency ratio (2) 63.6 62.7 64.9 68.6 76.2
Total revenue $ 20,980 21,941 21,553 21,934 22,050
Pre-tax pre-provision profit (PTPP) (3) 7,641 8,178 7,571 6,892 5,250
Dividends declared per common share 0.43 0.43 0.39 0.39 0.39
Average common shares outstanding 4,665.8 4,784.0 4,865.8 4,885.7 4,912.5
Diluted average common shares outstanding 4,700.8 4,823.2 4,899.8 4,930.7 4,963.1
Average loans $ 946,336 939,462 944,079 951,024 951,822
Average assets 1,879,047 1,876,283 1,884,884 1,915,896 1,935,318
Average total deposits 1,268,948 1,266,378 1,271,339 1,297,178 1,311,592
Average consumer and small business banking deposits (4) 736,295 743,503 754,047 755,483 757,541
Net interest margin 2.94 % 2.94 2.93 2.84 2.84
At Quarter End
Debt securities (5) $ 484,689 472,283 475,495 472,968 473,366
Loans 953,110 942,300 944,265 947,308 956,770
Allowance for loan losses 9,775 10,021 10,193 10,373 11,004
Goodwill 26,418 26,425 26,429 26,445 26,587
Equity securities (5) 55,148 61,755 57,505 58,935 62,497
Assets 1,895,883 1,872,981 1,879,700 1,915,388 1,951,757
Deposits 1,286,170 1,266,594 1,268,864 1,303,689 1,335,991
Common stockholders' equity 174,359 176,934 181,386 181,150 183,134
Wells Fargo stockholders’ equity 196,166 198,741 205,188 204,952 206,936
Total equity 197,066 199,679 206,069 205,910 208,079
Tangible common equity (1) 145,980 148,391 152,580 151,878 153,730
Common shares outstanding 4,581.3 4,711.6 4,849.1 4,873.9 4,891.6
Book value per common share (6) $ 38.06 37.55 37.41 37.17 37.44
Tangible book value per common share (1)(6) 31.86 31.49 31.47 31.16 31.43
Team members (active, full-time equivalent)   258,700     261,700     264,500     265,700     262,700

(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 securities 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 36.

(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) Financial information for the quarter ended December 31, 2017, has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

(6) 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 December 31,   %   Year ended December 31,   %
(in millions, except per share amounts)   2018   2017   Change   2018   2017   Change
Interest income    
Debt securities (1) $ 3,803 3,294 15 % $ 14,406 12,946 11 %
Mortgage loans held for sale 190 196 (3 ) 777 786 (1 )
Loans held for sale (1) 33 12 175 140 50 180
Loans 11,367 10,367 10 43,974 41,388 6
Equity securities (1) 260 239 9 992 799 24
Other interest income (1)   1,268     850   49   4,358     2,940   48
Total interest income   16,921     14,958   13   64,647     58,909   10
Interest expense
Deposits 1,765 931 90 5,622 3,013 87
Short-term borrowings 546 255 114 1,717 758 127
Long-term debt 1,802 1,344 34 6,703 5,157 30
Other interest expense   164     115   43   610     424   44
Total interest expense   4,277     2,645   62   14,652     9,352   57
Net interest income 12,644 12,313 3 49,995 49,557 1
Provision for credit losses   521     651   (20 )   1,744     2,528   (31 )
Net interest income after provision for credit losses   12,123     11,662   4   48,251     47,029   3
Noninterest income
Service charges on deposit accounts 1,176 1,246 (6 ) 4,716 5,111 (8 )
Trust and investment fees 3,520 3,687 (5 ) 14,509 14,495
Card fees 981 996 (2 ) 3,907 3,960 (1 )
Other fees 888 913 (3 ) 3,384 3,557 (5 )
Mortgage banking 467 928 (50 ) 3,017 4,350 (31 )
Insurance 109 223 (51 ) 429 1,049 (59 )
Net gains (losses) from trading activities (1) 10 (1 ) NM 602 542 11
Net gains on debt securities 9 157 (94 ) 108 479 (77 )
Net gains from equity securities (1) 21 572 (96 ) 1,515 1,779 (15 )
Lease income 402 458 (12 ) 1,753 1,907 (8 )
Other   753     558   35   2,473     1,603   54
Total noninterest income   8,336     9,737   (14 )   36,413     38,832   (6 )
Noninterest expense
Salaries 4,545 4,403 3 17,834 17,363 3
Commission and incentive compensation 2,427 2,665 (9 ) 10,264 10,442 (2 )
Employee benefits 706 1,293 (45 ) 4,926 5,566 (11 )
Equipment 643 608 6 2,444 2,237 9
Net occupancy 735 715 3 2,888 2,849 1
Core deposit and other intangibles 264 288 (8 ) 1,058 1,152 (8 )
FDIC and other deposit assessments 153 312 (51 ) 1,110 1,287 (14 )
Other   3,866     6,516   (41 )   15,602     17,588   (11 )
Total noninterest expense   13,339     16,800   (21 )   56,126     58,484   (4 )
Income before income tax expense 7,120 4,599 55 28,538 27,377 4
Income tax expense (benefit)   966     (1,642 ) NM   5,662     4,917   15
Net income before noncontrolling interests 6,154 6,241 (1 ) 22,876 22,460 2
Less: Net income from noncontrolling interests   90     90     483     277   74
Wells Fargo net income   $ 6,064     6,151   (1 )   $ 22,393     22,183   1
Less: Preferred stock dividends and other   353     411   (14 )   1,704     1,629   5
Wells Fargo net income applicable to common stock   $ 5,711     5,740   (1 )   $ 20,689     20,554   1
Per share information
Earnings per common share $ 1.22 1.17 4 $ 4.31 4.14 4
Diluted earnings per common share 1.21 1.16 4 4.28 4.10 4
Average common shares outstanding 4,665.8 4,912.5 (5 ) 4,799.7 4,964.6 (3 )
Diluted average common shares outstanding   4,700.8     4,963.1     (5 )   4,838.4     5,017.3     (4 )

NM - Not meaningful

(1) Financial information for the prior periods of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

  Quarter ended
(in millions, except per share amounts)   Dec 31,
2018
  Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
Interest income        
Debt securities (1) $ 3,803 3,595 3,594 3,414 3,294
Mortgage loans held for sale 190 210 198 179 196
Loans held for sale (1) 33 35 48 24 12
Loans 11,367 11,116 10,912 10,579 10,367
Equity securities (1) 260 280 221 231 239
Other interest income (1)   1,268     1,128     1,042     920     850  
Total interest income   16,921     16,364     16,015     15,347     14,958  
Interest expense
Deposits 1,765 1,499 1,268 1,090 931
Short-term borrowings 546 462 398 311 255
Long-term debt 1,802 1,667 1,658 1,576 1,344
Other interest expense   164     164     150     132     115  
Total interest expense   4,277     3,792     3,474     3,109     2,645  
Net interest income 12,644 12,572 12,541 12,238 12,313
Provision for credit losses   521     580     452     191     651  
Net interest income after provision for credit losses   12,123     11,992     12,089     12,047     11,662  
Noninterest income
Service charges on deposit accounts 1,176 1,204 1,163 1,173 1,246
Trust and investment fees 3,520 3,631 3,675 3,683 3,687
Card fees 981 1,017 1,001 908 996
Other fees 888 850 846 800 913
Mortgage banking 467 846 770 934 928
Insurance 109 104 102 114 223
Net gains (losses) from trading activities (1) 10 158 191 243 (1 )
Net gains on debt securities 9 57 41 1 157
Net gains from equity securities (1) 21 416 295 783 572
Lease income 402 453 443 455 458
Other   753     633     485     602     558  
Total noninterest income   8,336     9,369     9,012     9,696     9,737  
Noninterest expense
Salaries 4,545 4,461 4,465 4,363 4,403
Commission and incentive compensation 2,427 2,427 2,642 2,768 2,665
Employee benefits 706 1,377 1,245 1,598 1,293
Equipment 643 634 550 617 608
Net occupancy 735 718 722 713 715
Core deposit and other intangibles 264 264 265 265 288
FDIC and other deposit assessments 153 336 297 324 312
Other   3,866     3,546     3,796     4,394     6,516  
Total noninterest expense   13,339     13,763     13,982     15,042     16,800  
Income before income tax expense 7,120 7,598 7,119 6,701 4,599
Income tax expense (benefit)   966     1,512     1,810     1,374     (1,642 )
Net income before noncontrolling interests 6,154 6,086 5,309 5,327 6,241
Less: Net income from noncontrolling interests   90     79     123     191     90  
Wells Fargo net income   $ 6,064     6,007     5,186     5,136     6,151  
Less: Preferred stock dividends and other   353     554     394     403     411  
Wells Fargo net income applicable to common stock   $ 5,711     5,453     4,792     4,733     5,740  
Per share information
Earnings per common share $ 1.22 1.14 0.98 0.97 1.17
Diluted earnings per common share 1.21 1.13 0.98 0.96 1.16
Average common shares outstanding 4,665.8 4,784.0 4,865.8 4,885.7 4,912.5
Diluted average common shares outstanding   4,700.8     4,823.2     4,899.8     4,930.7     4,963.1  

(1) Financial information for the quarter ended December 31, 2017, has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

  Quarter ended December 31,   %   Year ended December 31,   %
(in millions)   2018   2017   Change   2018   2017   Change
Wells Fargo net income   $ 6,064     6,151   (1)% $ 22,393     22,183   1%
Other comprehensive income (loss), before tax:    
Debt securities (1):
Net unrealized gains (losses) arising during the period 1,035 (106 ) NM (4,493 ) 2,719 NM
Reclassification of net (gains) losses to net income 80 (215 ) NM 248 (737 ) NM
Derivatives and hedging activities:
Net unrealized losses arising during the period (116 ) (558 ) (79) (532 ) (540 ) (1)
Reclassification of net (gains) losses to net income 78 (83 ) NM 294 (543 ) NM
Defined benefit plans adjustments:
Net actuarial and prior service gains (losses) arising during the period (440 ) 45 NM (434 ) 49 NM
Amortization of net actuarial loss, settlements and other to net income 163 33 394 253 153 65
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period   (62 )   10   NM (156 )   96   NM
Other comprehensive income (loss), before tax 738 (874 ) NM (4,820 ) 1,197 NM
Income tax benefit (expense) related to other comprehensive income   (202 )   319   NM 1,144     (434 ) NM
Other comprehensive income (loss), net of tax 536 (555 ) NM (3,676 ) 763 NM
Less: Other comprehensive loss from noncontrolling interests   (1 )   (33 ) (97) (2 )   (62 ) (97)
Wells Fargo other comprehensive income (loss), net of tax   537     (522 ) NM (3,674 )   825   NM
Wells Fargo comprehensive income 6,601 5,629 17 18,719 23,008 (19)
Comprehensive income from noncontrolling interests   89     57   56 481     215   124
Total comprehensive income   $ 6,690     5,686     18   $ 19,200     23,223     (17)

NM – Not meaningful

(1) The quarter and year ended December 31, 2017, includes net unrealized gains (losses) arising during the period from equity securities of ($31) million and $81 million and reclassification of net (gains) losses to net income related to equity securities of ($133) million and ($456) million, respectively. With the adoption in first quarter 2018 of ASU 2016-01, the quarter and year ended December 31, 2018, reflects net unrealized gains (losses) arising during the period and reclassification of net (gains) losses to net income from only debt securities.

 
 

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

  Quarter ended
(in millions)   Dec 31,
2018
  Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
Balance, beginning of period $ 199,679   206,069   205,910   208,079   206,617
Cumulative effect from change in accounting policies (1) (24 )
Wells Fargo net income 6,064 6,007 5,186 5,136 6,151
Wells Fargo other comprehensive income (loss), net of tax 537 (1,012 ) (540 ) (2,659 ) (522 )
Noncontrolling interests (38 ) 57 (77 ) (178 ) 247
Common stock issued 239 156 73 1,208 436
Common stock repurchased (2) (7,299 ) (7,382 ) (2,923 ) (3,029 ) (2,845 )
Preferred stock redeemed (3) (2,150 )
Preferred stock released by ESOP 268 260 490 231 218
Common stock warrants repurchased/exercised (131 ) (36 ) (1 ) (157 ) (46 )
Common stock dividends (2,016 ) (2,062 ) (1,900 ) (1,911 ) (1,920 )
Preferred stock dividends (353 ) (399 ) (394 ) (410 ) (411 )
Stock incentive compensation expense 144 202 258 437 206
Net change in deferred compensation and related plans   (28 )   (31 )   (13 )   (813 )   (52 )
Balance, end of period   $ 197,066     199,679     206,069     205,910     208,079  

(1) The cumulative effect for the quarter ended March 31, 2018, reflects the impact of the adoption in first quarter 2018 of ASU 2016-04, ASU 2016-01 and ASU 2014-09.

(2) For the quarter ended June 30, 2018, includes $1.0 billion related to a private forward repurchase transaction that settled in third quarter 2018 for 18.8 million shares of common stock.

(3) Represents the impact of the redemption of preferred stock, Series J, in third quarter 2018.

 
 

Wells Fargo & Company and Subsidiaries

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

Quarter ended December 31,
2018   2017
(in millions)  

Average
balance

 

Yields/
rates

 

Interest
income/
expense

 

Average
balance

 

Yields/
rates

 

Interest
income/
expense

Earning assets        
Interest-earning deposits with banks (3) $ 150,091 2.18 % $ 825 189,114 1.27 % $ 605
Federal funds sold and securities purchased under resale agreements (3) 76,108 2.22 426 75,826 1.20 230
Debt securities (4):
Trading debt securities (5) 90,110 3.52 794 81,580 3.17 647
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 7,195 1.80 32 6,423 1.66 27
Securities of U.S. states and political subdivisions 47,618 4.05 483 52,390 3.91 513
Mortgage-backed securities:
Federal agencies 155,322 2.91 1,128 152,910 2.62 1,000
Residential and commercial   6,666   4.87 81   9,371   4.85 114
Total mortgage-backed securities 161,988 2.99 1,209 162,281 2.75 1,114
Other debt securities (5)   46,072   4.46 518   48,679   3.62 443
Total available-for-sale debt securities (5)   262,873   3.41 2,242   269,773   3.10 2,097

Held-to-maturity debt securities:

Securities of U.S. Treasury and federal agencies 44,747 2.19 247 44,716 2.19 246
Securities of U.S. states and political subdivisions 6,247 4.34 67 6,263 5.26 83
Federal agency and other mortgage-backed securities 95,748 2.46 589 89,622 2.25 503
Other debt securities   68   3.65 1   1,194   2.64 8
Total held-to-maturity debt securities   146,810   2.46 904   141,795   2.36 840
Total debt securities (5) 499,793 3.15 3,940 493,148 2.90 3,584
Mortgage loans held for sale (6) 17,044 4.46 190 20,517 3.82 196
Loans held for sale (5)(6) 1,992 6.69 33 1,490 3.19 12
Commercial loans:
Commercial and industrial - U.S. 281,431 4.40 3,115 270,294 3.89 2,649
Commercial and industrial - Non U.S. 62,035 3.73 584 59,233 2.96 442
Real estate mortgage 120,404 4.51 1,369 127,199 3.88 1,244
Real estate construction 23,090 5.32 310 24,408 4.38 270
Lease financing   19,519   4.48 219   19,226   0.62 31
Total commercial loans   506,479   4.39 5,597   500,360   3.68 4,636
Consumer loans:
Real estate 1-4 family first mortgage 285,260 4.02 2,868 281,966 4.01 2,826
Real estate 1-4 family junior lien mortgage 34,844 5.60 491 40,379 4.96 505
Credit card 37,858 12.69 1,211 36,428 12.37 1,136
Automobile 45,536 5.16 592 54,323 5.13 702
Other revolving credit and installment   36,359   6.95 637   38,366   6.28 607
Total consumer loans   439,857   5.25 5,799   451,462   5.10 5,776
Total loans (6) 946,336 4.79 11,396 951,822 4.35 10,412
Equity securities (5) 37,412 2.79 261 38,001 2.60 246
Other (5)   4,074   1.78 18   7,103   0.88 16
Total earning assets (5)   $ 1,732,850   3.93 % $ 17,089   1,777,021   3.43 % $ 15,301
Funding sources
Deposits:
Interest-bearing checking $ 53,983 1.21 % $ 165 50,483 0.68 % $ 86
Market rate and other savings 689,639 0.43 741 679,893 0.19 319
Savings certificates 21,955 0.87 48 20,920 0.31 17
Other time deposits 92,676 2.46 575 68,187 1.49 255
Deposits in foreign offices   56,098   1.66 236   124,597   0.81 254
Total interest-bearing deposits 914,351 0.77 1,765 944,080 0.39 931
Short-term borrowings 105,962 2.04 546 102,142 0.99 256
Long-term debt 226,591 3.17 1,802 231,598 2.32 1,344
Other liabilities   27,365   2.41 164   24,728   1.86 115
Total interest-bearing liabilities 1,274,269 1.34 4,277 1,302,548 0.81 2,646
Portion of noninterest-bearing funding sources (5)   458,581     474,473  
Total funding sources (5)   $ 1,732,850   0.99   4,277   1,777,021   0.59   2,646
Net interest margin and net interest income on a taxable-equivalent basis (7) 2.94 %   $ 12,812   2.84 %   $ 12,655
Noninterest-earning assets
Cash and due from banks $ 19,288 19,152
Goodwill 26,423 26,579
Other (5)   100,486   112,566  
Total noninterest-earning assets (5)   $ 146,197   158,297  
Noninterest-bearing funding sources
Deposits $ 354,597 367,512
Other liabilities 51,739 57,845
Total equity 198,442 207,413
Noninterest-bearing funding sources used to fund earning assets (5)   (458,581 ) (474,473 )
Net noninterest-bearing funding sources (5)   $ 146,197   158,297  
Total assets   $ 1,879,047   1,935,318  
 

(1) Our average prime rate was 5.28% and 4.30% for the quarters ended December 31, 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 2.62% and 1.46% 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) Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

(4) 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.

(5) Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

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

(7) Includes taxable-equivalent adjustments of $168 million and $342 million for the quarters ended December 31, 2018 and 2017, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 21% and 35% for the quarters ended December 31, 2018 and 2017, respectively.

 
 

Wells Fargo & Company and Subsidiaries

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

Year ended December 31,
2018   2017
(in millions)  

Average
balance

 

Yields/
rates

 

Interest
income/
expense

 

Average
balance

 

Yields/
rates

 

Interest
income/
expense

Earning assets        
Interest-earning deposits with banks (3) $ 156,366 1.82 % $ 2,854 201,864 1.07 % $ 2,162
Federal funds sold and securities purchased under resale agreements (3) 78,547 1.82 1,431 74,697 0.98 735
Debt securities (4):
Trading debt securities (5) 83,526 3.42 2,856 74,475 3.16 2,356
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6,618 1.70 112 15,966 1.49 239
Securities of U.S. states and political subdivisions 47,884 3.77 1,806 52,658 3.95 2,082
Mortgage-backed securities:
Federal agencies 156,052 2.79 4,348 145,310 2.60 3,782
Residential and commercial   7,769   4.62 358   11,839   5.33 631
Total mortgage-backed securities 163,821 2.87 4,706 157,149 2.81 4,413
Other debt securities (5)   46,875   4.22 1,980   48,714   3.68 1,794
Total available-for-sale debt securities (5)   265,198   3.24 8,604   274,487   3.11 8,528
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44,735 2.19 980 44,705 2.19 979
Securities of U.S. states and political subdivisions 6,253 4.34 271 6,268 5.32 334
Federal agency and other mortgage-backed securities 94,216 2.36 2,221 78,330 2.34 1,832
Other debt securities   361   4.00 15   2,194   2.50 55
Total held-to-maturity debt securities   145,565   2.40 3,487   131,497   2.43 3,200
Total debt securities (5) 494,289 3.02 14,947 480,459 2.93 14,084
Mortgage loans held for sale (6) 18,394 4.22 777 20,780 3.78 786
Loans held for sale (5)(6) 2,526 5.56 140 1,487 3.40 50
Commercial loans:
Commercial and industrial - U.S. 275,656 4.16 11,465 272,034 3.75 10,196
Commercial and industrial - Non U.S. 60,718 3.53 2,143 57,198 2.86 1,639
Real estate mortgage 122,947 4.29 5,279 129,990 3.74 4,859
Real estate construction 23,609 4.94 1,167 24,813 4.10 1,017
Lease financing   19,392   4.74 919   19,128   3.74 715
Total commercial loans   502,322   4.18 20,973   503,163   3.66 18,426
Consumer loans:
Real estate 1-4 family first mortgage 284,178 4.04 11,481 277,751 4.03 11,206
Real estate 1-4 family junior lien mortgage 36,687 5.38 1,975 42,780 4.82 2,062
Credit card 36,780 12.72 4,678 35,600 12.23 4,355
Automobile 48,115 5.18 2,491 57,900 5.34 3,094
Other revolving credit and installment   37,115   6.70 2,488   38,935   6.18 2,408
Total consumer loans   442,875   5.22 23,113   452,966   5.11 23,125
Total loans (6) 945,197 4.66 44,086 956,129 4.35 41,551
Equity securities (5) 38,092 2.62 999 36,105 2.27 821
Other (5)   5,071   1.46 74   5,069   0.85 44
Total earning assets (5)   $ 1,738,482   3.76 % $ 65,308   1,776,590   3.40 % $ 60,233
Funding sources
Deposits:
Interest-bearing checking $ 63,243 0.96 % $ 606 49,474 0.49 % $ 242
Market rate and other savings 684,882 0.31 2,157 682,053 0.14 983
Savings certificates 20,653 0.57 118 22,190 0.30 67
Other time deposits 84,822 2.25 1,906 61,625 1.43 880
Deposits in foreign offices   63,945   1.30 835   123,816   0.68 841
Total interest-bearing deposits 917,545 0.61 5,622 939,158 0.32 3,013
Short-term borrowings 104,267 1.65 1,719 98,922 0.77 761
Long-term debt 224,268 2.99 6,703 246,195 2.09 5,157
Other liabilities   27,648   2.21 610   21,872   1.94 424
Total interest-bearing liabilities 1,273,728 1.15 14,654 1,306,147 0.72 9,355
Portion of noninterest-bearing funding sources (5)   464,754     470,443  
Total funding sources (5)   $ 1,738,482   0.85   14,654   1,776,590   0.53   9,355
Net interest margin and net interest income on a taxable-equivalent basis (7) 2.91 %   $ 50,654   2.87 %   $ 50,878
Noninterest-earning assets
Cash and due from banks $ 18,777 18,622
Goodwill 26,453 26,629
Other (5)   105,180   111,164  
Total noninterest-earning assets (5)   $ 150,410   156,415  
Noninterest-bearing funding sources
Deposits $ 358,312 365,464
Other liabilities 53,496 55,740
Total equity 203,356 205,654
Noninterest-bearing funding sources used to fund earning assets (5)   (464,754 ) (470,443 )
Net noninterest-bearing funding sources (5)   $ 150,410   156,415  
Total assets   $ 1,888,892   1,933,005  
 

(1) Our average prime rate was 4.91% and 4.10% for 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 2.31% and 1.26% 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) Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

(4) Yields and rates are based on interest income/expense amounts for the period. The average balance amounts represent amortized cost for the periods presented.

(5) Financial information for the year ended December 31, 2017, has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

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

(7) Includes taxable-equivalent adjustments of $659 million and $1.3 billion for 2018 and 2017, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 21% and 35% for the years ended 2018 and 2017, respectively.

 
 

Wells Fargo & Company and Subsidiaries

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

Quarter ended
    Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Mar 31, 2018   Dec 31, 2017
($ in billions)  

Average
balance

 

Yields/
rates

 

Average
balance

 

Yields/
rates

 

Average
balance

 

Yields/
rates

 

Average
balance

 

Yields/
rates

 

Average
balance

 

Yields/
rates

Earning assets              
Interest-earning deposits with banks (3) $ 150.1 2.18 % $ 148.6 1.93 % $ 154.8 1.75 % $ 172.3 1.49 % $ 189.1 1.27 %
Federal funds sold and securities purchased under resale agreements (3) 76.1 2.22 79.9 1.93 80.0 1.73 78.1 1.40 75.8 1.20
Debt securities (4):
Trading debt securities (5) 90.1 3.52 84.5 3.45 80.7 3.45 78.7 3.24 81.6 3.17
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 7.2 1.80 6.4 1.65 6.4 1.66 6.4 1.66 6.4 1.66
Securities of U.S. states and political subdivisions 47.6 4.05 46.6 3.76 47.4 3.91 50.0 3.37 52.4 3.91
Mortgage-backed securities:
Federal agencies 155.3 2.91 155.5 2.77 154.9 2.75 158.4 2.72 152.9 2.62
Residential and commercial   6.7   4.87 7.3   4.68 8.2   4.86 8.9   4.12 9.4   4.85
Total mortgage-backed securities 162.0 2.99 162.8 2.86 163.1 2.86 167.3 2.79 162.3 2.75
Other debt securities (5)   46.1   4.46 46.4   4.39 47.1   4.33 48.1   3.73 48.6   3.62
Total available-for-sale debt securities (5)   262.9   3.41 262.2   3.26 264.0   3.28 271.8   3.04 269.7   3.10
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44.7 2.19 44.7 2.18 44.7 2.19 44.7 2.20 44.7 2.19
Securities of U.S. states and political subdivisions 6.2 4.34 6.3 4.33 6.3 4.34 6.3 4.34 6.3 5.26
Federal agency and other mortgage-backed securities 95.8 2.46 95.3 2.27 94.9 2.33 90.8 2.38 89.6 2.25
Other debt securities   0.1   3.65 0.1   5.61 0.6   4.66 0.7   3.23 1.2   2.64
Total held-to-maturity debt securities   146.8   2.46 146.4   2.33 146.5   2.38 142.5   2.42 141.8   2.36
Total debt securities (5) 499.8 3.15 493.1 3.02 491.2 3.04 493.0 2.89 493.1 2.90
Mortgage loans held for sale 17.0 4.46 19.3 4.33 18.8 4.22 18.4 3.89 20.5 3.82
Loans held for sale (5) 2.0 6.69 2.6 5.28 3.5 5.48 2.0 4.92 1.5 3.19
Commercial loans:
Commercial and industrial - U.S. 281.4 4.40 273.8 4.22 275.3 4.16 272.0 3.85 270.3 3.89
Commercial and industrial - Non U.S. 62.0 3.73 60.9 3.63 59.7 3.51 60.2 3.23 59.2 2.96
Real estate mortgage 120.4 4.51 121.3 4.35 124.0 4.27 126.2 4.05 127.2 3.88
Real estate construction 23.1 5.32 23.3 5.05 23.6 4.88 24.4 4.54 24.4 4.38
Lease financing   19.5   4.48 19.5   4.69 19.3   4.48 19.4   5.30 19.3   0.62
Total commercial loans   506.4   4.39 498.8   4.24 501.9   4.15 502.2   3.91 500.4   3.68
Consumer loans:
Real estate 1-4 family first mortgage 285.3 4.02 284.1 4.07 283.1 4.06 284.2 4.02 282.0 4.01
Real estate 1-4 family junior lien mortgage 34.8 5.60 35.9 5.50 37.2 5.32 38.8 5.13 40.4 4.96
Credit card 37.9 12.69 36.9 12.77 35.9 12.66 36.4 12.75 36.4 12.37
Automobile 45.5 5.16 47.0 5.20 48.6 5.18 51.5 5.16 54.3 5.13
Other revolving credit and installment   36.4   6.95 36.8   6.78 37.4   6.62 37.9   6.46 38.3   6.28
Total consumer loans   439.9   5.25 440.7   5.26 442.2   5.20 448.8   5.16 451.4   5.10
Total loans 946.3 4.79 939.5 4.72 944.1 4.64 951.0 4.50 951.8 4.35
Equity securities (5) 37.4 2.79 37.9 2.98 37.3 2.38 39.8 2.35 38.0 2.60
Other (5)   4.2   1.78 4.7   1.47 5.6   1.48 6.0   1.21 7.2   0.88
Total earning assets (5)   $ 1,732.9   3.93 % $ 1,725.6   3.81 % $ 1,735.3   3.73 % $ 1,760.6   3.55 % $ 1,777.0   3.43 %
Funding sources
Deposits:
Interest-bearing checking $ 54.0 1.21 % $ 51.2 1.01 % $ 80.3 0.90 % $ 67.8 0.77 % $ 50.5 0.68 %
Market rate and other savings 689.6 0.43 693.9 0.35 676.7 0.26 679.1 0.22 679.9 0.19
Savings certificates 22.0 0.87 20.6 0.62 20.0 0.43 20.0 0.34 20.9 0.31
Other time deposits 92.6 2.46 87.8 2.35 82.1 2.26 76.6 1.84 68.2 1.49
Deposits in foreign offices   56.1   1.66 53.9   1.50 51.5   1.30 94.8   0.98 124.6   0.81
Total interest-bearing deposits 914.3 0.77 907.4 0.66 910.6 0.56 938.3 0.47 944.1 0.39
Short-term borrowings 106.0 2.04 105.5 1.74 103.8 1.54 101.8 1.24 102.1 0.99
Long-term debt 226.6 3.17 220.7 3.02 223.8 2.97 226.0 2.80 231.6 2.32
Other liabilities   27.4   2.41 27.0   2.40 28.2   2.12 27.9   1.92 24.7   1.86
Total interest-bearing liabilities 1,274.3 1.34 1,260.6 1.20 1,266.4 1.10 1,294.0 0.97 1,302.5 0.81
Portion of noninterest-bearing funding sources (5)   458.6   465.0   468.9   466.6   474.5  
Total funding sources (5)   $ 1,732.9   0.99   $ 1,725.6   0.87   $ 1,735.3   0.80   $ 1,760.6   0.71   $ 1,777.0   0.59  
Net interest margin on a taxable-equivalent basis 2.94 % 2.94 % 2.93 % 2.84 % 2.84 %
Noninterest-earning assets
Cash and due from banks $ 19.3 18.4 18.6 18.9 19.2
Goodwill 26.4 26.4 26.4 26.5 26.6
Other (5)   100.4   105.9   104.6   109.9   112.5  
Total noninterest-earnings assets (5)   $ 146.1   150.7   149.6   155.3   158.3  
Noninterest-bearing funding sources
Deposits $ 354.6 359.0 360.7 358.9 367.5
Other liabilities (5) 51.7 53.9 51.7 56.8 57.9
Total equity 198.4 202.8 206.1 206.2 207.4
Noninterest-bearing funding sources used to fund earning assets (5)   (458.6 ) (465.0 ) (468.9 ) (466.6 ) (474.5 )
Net noninterest-bearing funding sources (5)   $ 146.1   150.7   149.6   155.3   158.3  
Total assets   $ 1,879.0   1,876.3   1,884.9   1,915.9   1,935.3  
                                                     

(1) Our average prime rate was 5.28% for the quarter ended December 31, 2018, 5.01% for the quarter ended September 30,2018, 4.80% for the quarter ended June 30, 2018, 4.52% for the quarter ended March 31, 2018 and 4.30% for the quarter ended December 31, 2017. The average three-month London Interbank Offered Rate (LIBOR) was 2.62%, 2.34%, 2.34%, 1.93% and 1.46% 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) Financial information for the quarter ended December 31, 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

(4) 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.

(5) Financial information for the quarter ended December 31, 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 
       

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME

Quarter ended December 31, % Year ended December 31, %
(in millions)   2018   2017   Change   2018   2017   Change
Service charges on deposit accounts $ 1,176   1,246 (6 )% $ 4,716   5,111 (8 )%
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,345 2,401 (2 ) 9,436 9,358 1
Trust and investment management 796 866 (8 ) 3,316 3,372 (2 )
Investment banking   379     420   (10 ) 1,757     1,765  
Total trust and investment fees   3,520     3,687   (5 ) 14,509     14,495  
Card fees 981 996 (2 ) 3,907 3,960 (1 )
Other fees:
Lending related charges and fees (1) 400 391 2 1,526 1,568 (3 )
Cash network fees 114 120 (5 ) 481 506 (5 )
Commercial real estate brokerage commissions 145 159 (9 ) 468 462 1
Wire transfer and other remittance fees 120 115 4 477 448 6
All other fees   109     128   (15 ) 432     573   (25 )
Total other fees   888     913   (3 ) 3,384     3,557   (5 )
Mortgage banking:
Servicing income, net 109 262 (58 ) 1,373 1,427 (4 )
Net gains on mortgage loan origination/sales activities   358     666   (46 ) 1,644     2,923   (44 )
Total mortgage banking   467     928   (50 ) 3,017     4,350   (31 )
Insurance 109 223 (51 ) 429 1,049 (59 )
Net gains (losses) from trading activities (2) 10 (1 ) NM 602 542 11
Net gains on debt securities 9 157 (94 ) 108 479 (77 )
Net gains from equity securities (2) 21 572 (96 ) 1,515 1,779 (15 )
Lease income 402 458 (12 ) 1,753 1,907 (8 )
Life insurance investment income 158 153 3 651 594 10
All other   595     405   47 1,822     1,009   81
Total   $ 8,336     9,737     (14 )   $ 36,413     38,832     (6 )

NM - Not meaningful

(1) Represents combined amount of previously reported "Charges and fees on loans" and "Letters of credit fees".

(2) Financial information for the prior periods has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 
       

NONINTEREST EXPENSE

Quarter ended December 31, % Year ended December 31, %
(in millions)   2018   2017   Change   2018   2017   Change
Salaries $ 4,545   4,403 3 % $ 17,834   17,363 3 %
Commission and incentive compensation 2,427 2,665 (9 ) 10,264 10,442 (2 )
Employee benefits 706 1,293 (45 ) 4,926 5,566 (11 )
Equipment 643 608 6 2,444 2,237 9
Net occupancy 735 715 3 2,888 2,849 1
Core deposit and other intangibles 264 288 (8 ) 1,058 1,152 (8 )
FDIC and other deposit assessments 153 312 (51 ) 1,110 1,287 (14 )
Outside professional services 843 1,025 (18 ) 3,306 3,813 (13 )
Operating losses 432 3,531 (88 ) 3,124 5,492 (43 )
Contract services (1) 616 410 50 2,192 1,638 34
Operating leases 392 325 21 1,334 1,351 (1 )
Advertising and promotion 254 200 27 857 614 40
Outside data processing 168 208 (19 ) 660 891 (26 )
Travel and entertainment 168 183 (8 ) 618 687 (10 )
Postage, stationery and supplies 132 137 (4 ) 515 544 (5 )
Telecommunications 91 92 (1 ) 361 364 (1 )
Foreclosed assets 47 47 188 251 (25 )
Insurance 25 28 (11 ) 101 100 1
All other (1)   698     330   112   2,346     1,843   27
Total   $ 13,339     16,800     (21 )   $ 56,126     58,484     (4 )

(1) The prior periods have been revised to conform with the current period presentation whereby temporary help is included in contract services rather than in all other noninterest expense.

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

Quarter ended
(in millions)   Dec 31,
2018
  Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
Service charges on deposit accounts $ 1,176   1,204   1,163   1,173   1,246
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,345 2,334 2,354 2,403 2,401
Trust and investment management 796 835 835 850 866
Investment banking   379     462     486     430     420  
Total trust and investment fees   3,520     3,631     3,675     3,683     3,687  
Card fees 981 1,017 1,001 908 996
Other fees:
Lending related charges and fees (1) 400 370 376 380 391
Cash network fees 114 121 120 126 120
Commercial real estate brokerage commissions 145 129 109 85 159
Wire transfer and other remittance fees 120 120 121 116 115
All other fees   109     110     120     93     128  
Total other fees   888     850     846     800     913  
Mortgage banking:
Servicing income, net 109 390 406 468 262
Net gains on mortgage loan origination/sales activities   358     456     364     466     666  
Total mortgage banking   467     846     770     934     928  
Insurance 109 104 102 114 223
Net gains (losses) from trading activities (2) 10 158 191 243 (1 )
Net gains on debt securities 9 57 41 1 157
Net gains from equity securities (2) 21 416 295 783 572
Lease income 402 453 443 455 458
Life insurance investment income 158 167 162 164 153
All other   595     466     323     438     405  
Total   $ 8,336     9,369     9,012     9,696     9,737  

(1) Represents combined amount of previously reported "Charges and fees on loans" and "Letters of credit fees".

(2) Financial information for the quarter ended December 31, 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 
 

FIVE QUARTER NONINTEREST EXPENSE

Quarter ended
(in millions)   Dec 31,
2018
  Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
Salaries $ 4,545   4,461   4,465   4,363   4,403
Commission and incentive compensation 2,427 2,427 2,642 2,768 2,665
Employee benefits 706 1,377 1,245 1,598 1,293
Equipment 643 634 550 617 608
Net occupancy 735 718 722 713 715
Core deposit and other intangibles 264 264 265 265 288
FDIC and other deposit assessments 153 336 297 324 312
Outside professional services 843 761 881 821 1,025
Operating losses 432 605 619 1,468 3,531
Contract services (1) 616 593 536 447 410
Operating leases 392 311 311 320 325
Advertising and promotion 254 223 227 153 200
Outside data processing 168 166 164 162 208
Travel and entertainment 168 141 157 152 183
Postage, stationery and supplies 132 120 121 142 137
Telecommunications 91 90 88 92 92
Foreclosed assets 47 59 44 38 47
Insurance 25 26 24 26 28
All other (1)   698     451     624     573     330
Total   $ 13,339     13,763     13,982     15,042     16,800

(1) The quarter ended December 31, 2017, has been revised to conform with the current period presentation whereby temporary help is included in contract services rather than in all other noninterest expense.

 
     

Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

(in millions, except shares)   Dec 31,
2018
  Dec 31,
2017
 

%
Change

Assets
Cash and due from banks $ 23,551 23,367 1

%

Interest-earning deposits with banks (1)   149,736     192,580   (22 )
Total cash, cash equivalents, and restricted cash (1)   173,287     215,947   (20 )
Federal funds sold and securities purchased under resale agreements (1) 80,207 80,025
Debt securities:
Trading, at fair value (2) 69,989 57,624 21
Available-for-sale, at fair value (2) 269,912 276,407 (2 )
Held-to-maturity, at cost 144,788 139,335 4
Mortgage loans held for sale 15,126 20,070 (25 )
Loans held for sale (2) 2,041 1,131 80
Loans 953,110 956,770
Allowance for loan losses   (9,775 )   (11,004 ) (11 )
Net loans   943,335     945,766  
Mortgage servicing rights:
Measured at fair value 14,649 13,625 8
Amortized 1,443 1,424 1
Premises and equipment, net 8,920 8,847 1
Goodwill 26,418 26,587 (1 )
Derivative assets 10,770 12,228 (12 )
Equity securities (2) 55,148 62,497 (12 )
Other assets (2)   79,850     90,244   (12 )
Total assets   $ 1,895,883     1,951,757   (3 )
Liabilities
Noninterest-bearing deposits $ 349,534 373,722 (6 )
Interest-bearing deposits   936,636     962,269   (3 )
Total deposits 1,286,170 1,335,991 (4 )
Short-term borrowings 105,787 103,256 2
Derivative liabilities 8,499 8,796 (3 )
Accrued expenses and other liabilities 69,317 70,615 (2 )
Long-term debt   229,044     225,020   2
Total liabilities   1,698,817     1,743,678   (3 )
Equity
Wells Fargo stockholders’ equity:
Preferred stock 23,214 25,358 (8 )
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 60,685 60,893
Retained earnings 158,163 145,263 9
Cumulative other comprehensive income (loss) (6,336 ) (2,144 ) 196
Treasury stock – 900,557,866 shares and 590,194,846 shares (47,194 ) (29,892 ) 58
Unearned ESOP shares   (1,502 )   (1,678 ) (10 )
Total Wells Fargo stockholders’ equity 196,166 206,936 (5 )
Noncontrolling interests   900     1,143   (21 )
Total equity   197,066     208,079   (5 )
Total liabilities and equity   $ 1,895,883     1,951,757     (3 )

(1) Financial information has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

(2) Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 
         

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET

(in millions)   Dec 31,
2018
  Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
Assets
Cash and due from banks $ 23,551 18,791 20,450 18,145 23,367
Interest-earning deposits with banks (1)   149,736     140,732     142,999     184,250     192,580  
Total cash, cash equivalents, and restricted cash (1)   173,287     159,523