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Wells Fargo Reports $5.8 Billion in Net Income

10/14/2015
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Diluted EPS of $1.05, Revenue of $21.9 Billion

Wells Fargo & Company (NYSE:WFC):

  • Continued strong financial results:
    • Net income of $5.8 billion, up 1 percent from third quarter 2014
    • Diluted earnings per share (EPS) of $1.05, up 3 percent
    • Revenue of $21.9 billion, up 3 percent
    • Pre-tax pre-provision profit1 of $9.5 billion, up 6 percent
    • Return on assets (ROA) of 1.32 percent and return on equity (ROE) of 12.62 percent
  • Strong growth in loans and deposits:
    • Total average loans of $895.1 billion, up $61.9 billion, or 7 percent, from third quarter 2014
      • Quarter-end loans of $903.2 billion, up $64.4 billion, or 8 percent
        • Quarter-end core loans2 of $849.2 billion, up $73.4 billion, or 9 percent
    • Total average deposits of $1.2 trillion, up $71.8 billion, or 6 percent
  • Continued strength in credit quality:
    • Net charge-offs of $703 million, up $35 million from third quarter 2014
      • Net charge-off rate of 0.31 percent (annualized), down from 0.32 percent
    • Nonaccrual loans down $1.8 billion, or 14 percent
    • No reserve release3, compared with a $300 million release in third quarter 2014
  • Maintained strong capital levels4 and continued share repurchases:
    • Common Equity Tier 1 ratio under Basel III (fully phased-in) of 10.7 percent
    • Period-end common shares outstanding down 36.8 million from second quarter 2015

Endnotes can be found at end of release text.

   

Selected Financial Information

    Quarter ended
    Sep 30,
2015
  Jun 30,
2015
  Sep 30,
2014
Earnings  
Diluted earnings per common share $ 1.05 1.03 1.02
Wells Fargo net income (in billions) 5.80 5.72 5.73
Return on assets (ROA) 1.32 % 1.33 1.40
Return on equity (ROE) 12.62 12.71 13.10
Asset Quality
Net charge-offs (annualized) as a % of average total loans 0.31 % 0.30 0.32
Allowance for credit losses as a % of total loans 1.39 1.42 1.61
Allowance for credit losses as a % of annualized net charge-offs 450 484 509
Other
Revenue (in billions) $ 21.9 21.3 21.2
Efficiency ratio 56.7 % 58.5 57.7
Average loans (in billions) $ 895.1 870.4 833.2
Average deposits (in billions) 1,198.9 1,185.3 1,127.0
Net interest margin   2.96 %   2.97     3.06
 

Wells Fargo & Company (NYSE:WFC) reported net income of $5.8 billion, or $1.05 per diluted common share, for third quarter 2015, compared with $5.7 billion, or $1.02 per share, for third quarter 2014, and $5.7 billion, or $1.03 per share, for second quarter 2015.

"Wells Fargo's strong third quarter results reflected the ability of our diversified business model to generate consistent financial performance in an uneven economic environment while continuing to meet our customers' financial needs," said Chairman and CEO John Stumpf. "Compared with a year ago, we grew loans, deposits and capital, and returned more capital to shareholders through dividends and share buybacks. Our balance sheet and credit results remained strong and our 265,000 team members continue to focus on helping our customers succeed financially."

Chief Financial Officer John Shrewsberry said, "Wells Fargo reported a solid $5.8 billion of net income for the third quarter. Revenue increased on both a linked quarter and year over year basis, on growth in both net interest income and noninterest income. We generated positive operating leverage in the quarter, as our expenses declined, and we remained within our targeted efficiency ratio range. Our return on equity and return on assets also remained within our targeted ranges, and we increased our net payout ratio5 to shareholders to 60 percent from 54 percent in second quarter."

Net Interest Income

Net interest income increased $187 million from second quarter 2015 to $11.5 billion, primarily driven by growth in investment securities and loans, including the full quarter benefit of the GE Capital loan purchase and related financing transaction that settled late in the second quarter. The third quarter also included one additional day, accounting for approximately one third of the increase in net interest income relative to the second quarter. These benefits were partially offset by reduced income from variable sources including purchased credit-impaired (PCI) loan recoveries, periodic dividends, and loan fees included in interest income.

Net interest margin was 2.96 percent, down 1 basis point from second quarter 2015. Balance sheet growth and repricing, driven by securities purchases and higher loan balances, improved the net interest margin by approximately 5 basis points linked-quarter. These benefits were offset by growth in customer deposits, which had a minimal impact to net interest income, but was dilutive to the net interest margin by 3 basis points, and by lower income from variable sources, which reduced the margin by 3 basis points.

Noninterest Income

Noninterest income was $10.4 billion, up from $10.0 billion in second quarter 2015, driven by higher equity investment gains, deposit service charges, lease income and card fees. Other noninterest income was also higher in the quarter, primarily due to the impact of lower interest rates on our debt hedging results. Offsetting this growth were lower gains from trading activities, driven by lower deferred compensation plan investment results (largely offset in employee benefits expense), debt securities gains, trust and investment fees, and seasonally lower crop insurance fees.

Mortgage banking noninterest income was $1.6 billion, down $116 million from second quarter. During the third quarter, residential mortgage originations were $55 billion, down $7 billion linked quarter. The production margin on residential held-for-sale mortgage originations6 was 1.88 percent, compared with 1.75 percent in second quarter. Net mortgage servicing rights (MSRs) results were $253 million, compared with $107 million in second quarter 2015.

Noninterest Expense

Noninterest expense declined $70 million from the prior quarter to $12.4 billion, primarily due to lower deferred compensation expense in employee benefits. This decline was partially offset by a $126 million contribution to the Wells Fargo Foundation, higher salaries expense, and increased project-related outside professional services expense. The efficiency ratio improved to 56.7 percent in third quarter 2015, compared with 58.5 percent in the prior quarter. The Company expects to operate at the higher end of its targeted efficiency ratio range of 55 to 59 percent for full year 2015.

Loans

Total loans were $903.2 billion at September 30, 2015, up $14.8 billion from June 30, 2015. Growth was broad-based and was driven by commercial and industrial, and 1-4 family first mortgage loans. Core loan growth was $17.1 billion, as non-strategic/liquidating portfolios declined $2.3 billion in the quarter. Total average loans were $895.1 billion in the third quarter, up $24.6 billion from the prior quarter, and included the benefit of the GE Capital loan purchase and related financing transaction that settled late in the second quarter.

         
  September 30, 2015   June 30, 2015
(in millions)   Core   Non-strategic

and liquidating (a)

  Total   Core   Non-strategic

and liquidating

  Total
Commercial $ 446,832   506   447,338 437,430   592   438,022
Consumer   402,363     53,532     455,895     394,670     55,767     450,437
Total loans   $ 849,195     54,038     903,233     832,100     56,359     888,459
Change from prior quarter:   $ 17,095     (2,321 )   14,774     29,423     (2,195 )   27,228

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

 

Investment Securities

Investment securities were $345.1 billion at September 30, 2015, up $4.3 billion from second quarter. Purchases of approximately $19 billion (primarily federal agency mortgage-backed securities and U.S. Treasury securities), were partially offset by maturities, amortization and sales.

Net unrealized available-for-sale securities gains of $4.9 billion at September 30, 2015, declined from $5.7 billion at June 30, 2015, as the benefit of lower interest rates was offset by reductions arising from realized gains (both debt and equity), and widening credit spreads.

Deposits

Total average deposits for third quarter 2015 were $1.2 trillion, up 6 percent from a year ago and up 5 percent (annualized) from second quarter 2015, driven by both commercial and consumer growth. The average deposit cost for third quarter 2015 was 8 basis points, which was down 2 basis points from a year ago and flat compared with the prior quarter.

Capital

Capital levels remained strong in the third quarter, with Common Equity Tier 1 under Basel III (fully phased-in) of $141.9 billion. The Common Equity Tier 1 ratio under Basel III (fully phased-in) was 10.7 percent4. In third quarter 2015, the Company purchased 51.7 million shares of its common stock. The Company also paid a quarterly common stock dividend of $0.375 per share, up from $0.35 per share a year ago.

Credit Quality

“Credit performance remained strong during the quarter," said Chief Risk Officer Mike Loughlin. "The quarterly loss rate (annualized) remained low at 0.31 percent and nonperforming assets declined by $1.1 billion, or 30 percent (annualized), from the prior quarter driven by lower nonaccrual loans. The allowance for credit losses in the third quarter remained flat (no reserve release) as continued credit quality improvements in the residential real estate portfolio were offset by higher commercial reserves reflecting deterioration in the energy sector. Future allowance levels may increase or decrease based on a variety of factors, including loan growth, portfolio performance and general economic conditions.”

Net Loan Charge-offs

The quarterly loss rate (annualized) of 0.31 percent included commercial losses of 0.08 percent and consumer losses of 0.53 percent. Credit losses were $703 million in third quarter 2015, compared with $650 million in the second quarter, an 8 percent increase, primarily driven by a seasonal increase in the auto portfolio.

 

Net Loan Charge-Offs

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

charge-

offs

  As a % of

average

loans (a)

  Net loan

charge-

offs

  As a % of

average

loans (a)

  Net loan

charge-

offs

  As a % of

average

loans (a)

Commercial:      
Commercial and industrial $ 122 0.17 % $ 81 0.12 % $ 64 0.10 %
Real estate mortgage (23 ) (0.08 ) (15 ) (0.05 ) (11 ) (0.04 )
Real estate construction (8 ) (0.15 ) (6 ) (0.11 ) (9 ) (0.19 )
Lease financing   3   0.11 2   0.06  
Total commercial   94   0.08 62   0.06 44   0.04
Consumer:
Real estate 1-4 family first mortgage 62 0.09 67 0.10 83 0.13
Real estate 1-4 family junior lien mortgage 89 0.64 94 0.66 123 0.85
Credit card 216 2.71 243 3.21 239 3.19
Automobile 113 0.76 68 0.48 101 0.73
Other revolving credit and installment   129   1.35 116   1.26 118   1.32
Total consumer   609   0.53 588   0.53 664   0.60
Total   $ 703   0.31 % $ 650   0.30 % $ 708   0.33 %
                                           

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

 

Nonperforming Assets

Nonperforming assets declined by $1.1 billion from second quarter 2015 to $13.3 billion. Nonaccrual loans decreased $906 million to $11.5 billion on improvements in several loan categories, including a $718 million decline in consumer real estate. Foreclosed assets were $1.8 billion, down from $2.0 billion in second quarter 2015.

     

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

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

balances

 

As a

% of

total

loans

 

Total
balances

  As a

% of

total

loans

  Total

balances

  As a

% of

total

loans

Commercial:      
Commercial and industrial $ 1,031 0.35 % $ 1,079 0.38 % $ 663 0.24 %
Real estate mortgage 1,125 0.93 1,250 1.04 1,324 1.18
Real estate construction 151 0.70 165 0.77 182 0.91
Lease financing   29   0.24 28   0.23 23   0.19
Total commercial   2,336   0.52 2,522   0.58 2,192   0.53
Consumer:
Real estate 1-4 family first mortgage 7,425 2.74 8,045 3.00 8,345 3.15
Real estate 1-4 family junior lien mortgage 1,612 2.95 1,710 3.04 1,798 3.11
Automobile 123 0.21 126 0.22 133 0.24
Other revolving credit and installment   41   0.11 40   0.11 42   0.12
Total consumer   9,201   2.02 9,921   2.20 10,318   2.31
Total nonaccrual loans   11,537   1.28 12,443   1.40 12,510   1.45
Foreclosed assets:
Government insured/guaranteed 502 588 772
Non-government insured/guaranteed   1,265   1,370   1,557  
Total foreclosed assets   1,767   1,958   2,329  
Total nonperforming assets   $ 13,304   1.47 % $ 14,401   1.62 % $ 14,839   1.72 %
Change from prior quarter:
Total nonaccrual loans $ (906 ) $ (67 ) $ (338 )
Total nonperforming assets   (1,097 )       (438 )       (618 )    
 

Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $872 million at September 30, 2015, up from $756 million at June 30, 2015. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $13.5 billion at September 30, 2015, down from $14.4 billion at June 30, 2015.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.6 billion at September 30, 2015, unchanged from June 30, 2015. The allowance coverage to total loans was 1.39 percent, compared with 1.42 percent in second quarter 2015. The allowance covered 4.5 times annualized third quarter net charge-offs, compared with 4.8 times in the prior quarter. The allowance coverage to nonaccrual loans was 109 percent at September 30, 2015, compared with 101 percent at June 30, 2015. “We believe the allowance was appropriate for losses inherent in the loan portfolio at September 30, 2015,” said Loughlin.

Business Segment Performance

Wells Fargo defines its operating segments by product type and customer segment. Effective third quarter 2015, we realigned our asset management business from Wholesale Banking to Wealth and Investment Management (WIM) (formerly Wealth, Brokerage and Retirement) and realigned our reinsurance business from WIM and our strategic auto investments from Community Banking to Wholesale Banking. Results for these operating segments were revised for prior periods to reflect the impact of these realignments. Segment net income for each of the three business segments was:

     
  Quarter ended
(in millions)   Sep 30,
2015
  Jun 30,
2015
  Sep 30,
2014
Community Banking $ 3,686   3,350   3,461
Wholesale Banking 1,772 2,035 1,929
Wealth and Investment Management   606     586     550
 

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

 

Selected Financial Information

Quarter ended
(in millions)   Sep 30,
2015
  Jun 30,
2015
  Sep 30,
2014
Total revenue $ 13,618   12,645   12,811
Provision for credit losses 658 363 465
Noninterest expense 7,219 7,161 7,049
Segment net income 3,686 3,350 3,461
(in billions)
Average loans 511.0 506.2 498.3
Average assets 977.1 987.8 944.8
Average core deposits   690.5     685.7     646.9
 

Community Banking reported net income of $3.7 billion, up $336 million, or 10 percent, from second quarter 2015. Revenue of $13.6 billion increased $973 million, or 8 percent, from second quarter 2015 due to gains from sale of equity investments, as well as higher net interest income, deposit service charges, and other income, partially offset by lower mortgage banking fees. Noninterest expense increased $58 million, or 1 percent, primarily due to a donation to the Wells Fargo Foundation, partially offset by lower advertising costs and operating losses. The provision for credit losses increased $295 million from the prior quarter primarily due to the absence of a reserve release in the quarter.

Net income was up $225 million, or 7 percent, from third quarter 2014. Revenue was up $807 million, or 6 percent, compared with a year ago due to higher net interest income, market sensitive revenue, primarily gains from sale of equity investments, debit and credit card fees, and trust and investment fees. Noninterest expense increased $170 million, or 2 percent, from a year ago driven by higher personnel costs and a donation to the Wells Fargo Foundation, partially offset by lower foreclosed assets and travel and entertainment expenses. The provision for credit losses increased $193 million from a year ago as the $74 million improvement in net charge-offs was more than offset by a $267 million lower reserve release.

Regional Banking

  • Retail banking
    • Primary consumer checking customers7 up 5.8 percent year-over-year8
    • Retail Bank household cross-sell ratio of 6.13 products per household, compared with 6.15 year-over-year8,9
  • Small Business/Business Banking
    • Primary business checking customers7 up 5.0 percent year-over-year8
    • Combined Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) were up 6 percent in the first nine months of 2015, compared with the same period in the prior year
    • For the 13th consecutive year, America’s #1 small business lender (in both loans under $100,000 and under $1 million) and #1 lender to small businesses in low- and moderate-income areas (2014 CRA data, released August 2015)
    • For seventh consecutive year, Wells Fargo was nation’s #1 SBA 7(a) small business lender in dollars, and #1 in units for the first time in the full-year results10
  • Online and Mobile Banking
    • 26.3 million active online customers, up 8 percent year-over-year8
    • 16.0 million active mobile customers, up 17 percent year-over-year8
    • #1 ranking in Keynote’s Small Business Banking Scorecard; best in “Functionality” (August 2015)

Consumer Lending Group

  • Home Lending
    • Originations of $55 billion, down from $62 billion in prior quarter
    • Applications of $73 billion, down from $81 billion in prior quarter
    • Application pipeline of $34 billion at quarter end, down from $38 billion at June 30, 2015
  • Consumer Credit
    • Credit card penetration in retail banking households rose to 42.9 percent8, up from 39.7 percent in prior year
    • Auto originations of $8.3 billion in third quarter, up 2 percent from prior quarter and 10 percent from prior year

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $20 million. Products and business segments include Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments, and Asset Backed Finance.

 

Selected Financial Information

Quarter ended
(in millions)   Sep 30,
2015
  Jun 30,
2015
  Sep 30,
2014
Total revenue $ 5,570   5,862   5,667
Provision (reversal of provision) for credit losses 45 (58 ) (85 )
Noninterest expense 3,036 3,035 2,997
Segment net income 1,772 2,035 1,929
(in billions)
Average loans 363.1 343.9 316.8
Average assets 652.6 627.7 562.0
Average core deposits   311.3     304.1     278.3  
 

Wholesale Banking reported net income of $1.8 billion, down $263 million, or 13 percent, from second quarter 2015. Revenue of $5.6 billion decreased $292 million, or 5 percent, from prior quarter. Net interest income increased $13 million, as the benefit of strong broad-based loan growth and higher other earning assets were largely offset by lower loan resolutions. Noninterest income decreased $305 million, or 11 percent, due to lower gains on equity fund investments and debt securities related to higher other-than-temporary impairment on energy sector investments, mortgage banking fees in real estate capital markets, investment banking fees, trading revenues and seasonally lower insurance fees. Noninterest expense increased $1 million as lower variable compensation expenses were more than offset by higher operating losses. The provision for credit losses increased $103 million from prior quarter due to the absence of a reserve release and increased net charge-offs.

Net income was down $157 million, or 8 percent, from third quarter 2014. Revenue decreased $97 million, or 2 percent, from third quarter 2014 as $67 million, or 2 percent, growth in net interest income related to strong loan and deposit growth was more than offset by lower noninterest income. Noninterest income declined $164 million, or 6 percent, on lower gains on equity investments and lower mortgage banking and commercial real estate brokerage fees. Noninterest expense increased $39 million, or 1 percent, from a year ago primarily due to higher personnel expenses related to growth initiatives, compliance, and regulatory requirements, as well as increased operating losses. The provision for credit losses increased $130 million from a year ago.

  • Average loans increased 15 percent in third quarter 2015, compared with third quarter 2014, on broad-based growth, including the benefit from loan acquisitions, with growth in asset-backed finance, capital finance, commercial banking, commercial real estate, corporate banking, equipment finance, government and institutional banking, and real estate capital markets
  • Cross-sell of 7.3 products per relationship, up 0.1 from third quarter 201411
  • Treasury management revenue up 9 percent from third quarter 2014

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

 

Selected Financial Information

Quarter ended
(in millions)   Sep 30,
2015
  Jun 30,
2015
  Sep 30,
2014
Total revenue $ 3,878   3,976   3,805
Reversal of provision for credit losses (6 ) (10 ) (25 )
Noninterest expense 2,909 3,038 2,945
Segment net income 606 586 550
(in billions)
Average loans 61.1 59.3 52.6
Average assets 192.6 189.1 185.2
Average core deposits   163.0     159.5     153.7  
 

Wealth and Investment Management (WIM) reported net income of $606 million, up $20 million, or 3 percent, from second quarter 2015. Revenue of $3.9 billion decreased $98 million, or 2 percent, from the prior quarter, primarily driven by lower gains on deferred compensation plan investments (offset in compensation expense), asset-based fees and transaction revenue, partially offset by higher net interest income. Noninterest expense decreased $129 million, or 4 percent, from the prior quarter, primarily due to lower personnel expenses driven by lower deferred compensation plan expense (offset in trading revenue), and lower operating losses reflecting decreased litigation accruals. The reversal of the provision for credit losses decreased $4 million from second quarter 2015.

Net income was up $56 million, or 10 percent, from third quarter 2014. Revenue increased $73 million, or 2 percent, from a year ago on growth in net interest income, partially offset by lower gains on deferred compensation plan investments (offset in compensation expense). Noninterest expense decreased $36 million, or 1 percent, from a year ago, primarily due to lower personnel expenses driven by lower deferred compensation plan expense (offset in trading revenue), partially offset by higher non-personnel expenses. The reversal of the provision for credit losses decreased $19 million from a year ago due to the absence of a reserve release in the quarter.

Retail Brokerage

  • Client assets of $1.4 trillion, down 4 percent from prior year
  • Managed account assets of $409 billion, flat compared with prior year
  • Strong loan growth, with average balances up 26 percent from prior year largely due to growth in non-conforming mortgage loans and security-based lending

Wealth Management

  • Client assets of $218 billion, down 1 percent from prior year
  • Average loan balances up 13 percent over prior year primarily driven by growth in non-conforming mortgage loans, commercial loans and security-based lending

Retirement

  • IRA assets of $344 billion, down 3 percent from prior year
  • Institutional Retirement plan assets of $330 billion, down 2 percent from prior year

Asset Management

  • Total assets under management of $480 billion, down $4 billion from third quarter 2014 as fixed income net client inflows were more than offset by equity and stable value outflows

Brokerage and Wealth cross-sell ratio of 10.52 products per household, up from 10.44 a year ago8

Conference Call

The Company will host a live conference call on Wednesday, October 14, at 7 a.m. PDT (10 a.m. EDT). You may participate by dialing 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~101415.

A replay of the conference call will be available beginning at 10 a.m. PDT (1 p.m. EDT) on Wednesday, October 14 through Sunday, October 25. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #6954691. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~101415.

Endnotes

1   Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
2 See table on page 4 for more information on core and non-strategic/liquidating loan portfolios.
3 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
4 See table on page 35 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules.
5 Net payout ratio means the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock.
6 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 40 for more information.
7 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
8 Data as of August 2015, comparisons with August 2014.
9 August 2015 Retail Bank household cross-sell ratio includes the impact of the sale of government guaranteed student loans in fourth quarter 2014.
10 U.S. SBA data, federal fiscal years 2009-2015 (year-ending September).
11 Cross-sell reported on a one-quarter lag.
 

Forward-Looking Statements

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

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

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

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

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

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

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.8 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through 8,700 locations, 12,800 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 30 on Fortune’s 2015 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially.

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

Summary Information

Summary Financial Data

16
 

Income

Consolidated Statement of Income 18
Consolidated Statement of Comprehensive Income 20
Condensed Consolidated Statement of Changes in Total Equity 20
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 21
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 23
Noninterest Income and Noninterest Expense 24
 

Balance Sheet

Consolidated Balance Sheet 26
Investment Securities 28
 

Loans

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

Equity

Common Equity Tier 1 Under Basel III 35
 

Operating Segments

Operating Segment Results 36
 

Other

Mortgage Servicing and other related data 38
 
 

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA

  Quarter ended   % Change
Sep 30, 2015 from
  Nine months ended  
($ in millions, except per share amounts)   Sep 30,
2015
  Jun 30,
2015
  Sep 30,
2014
  Jun 30,
2015
  Sep 30,
2014
  Sep 30,
2015
  Sep 30,
2014
  %
Change
For the Period        
Wells Fargo net income $ 5,796 5,719 5,729 1 % 1 $ 17,319 17,348 %
Wells Fargo net income applicable to common stock 5,443 5,363 5,408 1 1 16,267 16,439 (1 )
Diluted earnings per common share 1.05 1.03 1.02 2 3 3.12 3.08 1
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.32 % 1.33 1.40 (1 ) (6 ) 1.34 1.48 (9 )
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.62 12.71 13.10 (1 ) (4 ) 12.83 13.60 (6 )
Efficiency ratio (1) 56.7 58.5 57.7 (3 ) (2 ) 58.0 57.9
Total revenue $ 21,875 21,318 21,213 3 3 $ 64,471 62,904 2
Pre-tax pre-provision profit (PTPP) (2) 9,476 8,849 8,965 7 6 27,096 26,514 2
Dividends declared per common share 0.375 0.375 0.35 7 1.10 1.00 10
Average common shares outstanding 5,125.8 5,151.9 5,225.9 (1 ) (2 ) 5,145.9 5,252.2 (2 )
Diluted average common shares outstanding 5,193.8 5,220.5 5,310.4 (1 ) (2 ) 5,220.3 5,339.2 (2 )
Average loans $ 895,095 870,446 833,199 3 7 $ 876,384 829,378 6
Average assets 1,746,402 1,729,278 1,617,942 1 8 1,727,967 1,569,621 10
Average total deposits 1,198,874 1,185,304 1,127,049 1 6 1,186,412 1,102,129 8
Average core deposits (3) 1,093,608 1,079,160 1,012,219 1 8 1,078,778 992,723 9
Average retail core deposits (4) 749,838 741,500 703,062 1 7 740,984 697,535 6
Net interest margin 2.96 % 2.97 3.06 (3 ) 2.96 3.13 (5 )
At Period End
Investment securities $ 345,074 340,769 289,009 1 19 $ 345,074 289,009 19
Loans 903,233 888,459 838,883 2 8 903,233 838,883 8
Allowance for loan losses 11,659 11,754 12,681 (1 ) (8 ) 11,659 12,681 (8 )
Goodwill 25,684 25,705 25,705 25,684 25,705
Assets 1,751,265 1,720,617 1,636,855 2 7 1,751,265 1,636,855 7
Deposits 1,202,179 1,185,828 1,130,625 1 6 1,202,179 1,130,625 6
Core deposits (3) 1,094,083 1,082,634 1,016,478 1 8 1,094,083 1,016,478 8
Wells Fargo stockholders’ equity 193,051 189,558 182,481 2 6 193,051 182,481 6
Total equity 194,043 190,676 182,990 2 6 194,043 182,990 6
Common shares outstanding 5,108.5 5,145.2 5,215.0 (1 ) (2 ) 5,108.5 5,215.0 (2 )
Book value per common share $ 33.69 32.96 31.55 2 7 $ 33.69 31.55 7
Common stock price:
High 58.77 58.26 53.80 1 9 58.77 53.80 9
Low 47.75 53.56 49.47 (11 ) (3 ) 47.75 44.17 8
Period end 51.35 56.24 51.87 (9 ) (1 ) 51.35 51.87 (1 )
Team members (active, full-time equivalent)   265,200     265,800     263,900             265,200     263,900      
(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

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

(3) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

(4) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA

  Quarter ended
($ in millions, except per share amounts)   Sep 30,
2015
  Jun 30,
2015
  Mar 31,
2015
  Dec 31,
2014
  Sep 30,
2014
For the Quarter        
Wells Fargo net income $ 5,796 5,719 5,804 5,709 5,729
Wells Fargo net income applicable to common stock 5,443 5,363 5,461 5,382 5,408
Diluted earnings per common share 1.05 1.03 1.04 1.02 1.02
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.32 % 1.33 1.38 1.36 1.40
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.62 12.71 13.17 12.84 13.10
Efficiency ratio (1) 56.7 58.5 58.8 59.0 57.7
Total revenue $ 21,875 21,318 21,278 21,443 21,213
Pre-tax pre-provision profit (PTPP) (2) 9,476 8,849 8,771 8,796 8,965
Dividends declared per common share 0.375 0.375 0.35 0.35 0.35
Average common shares outstanding 5,125.8 5,151.9 5,160.4 5,192.5 5,225.9
Diluted average common shares outstanding 5,193.8 5,220.5 5,243.6 5,279.2 5,310.4
Average loans $ 895,095 870,446 863,261 849,429 833,199
Average assets 1,746,402 1,729,278 1,707,798 1,663,760 1,617,942
Average total deposits 1,198,874 1,185,304 1,174,793 1,149,796 1,127,049
Average core deposits (3) 1,093,608 1,079,160 1,063,234 1,035,999 1,012,219
Average retail core deposits (4) 749,838 741,500 731,413 714,572 703,062
Net interest margin 2.96 % 2.97 2.95 3.04 3.06
At Quarter End
Investment securities $ 345,074 340,769 324,736 312,925 289,009
Loans 903,233 888,459 861,231 862,551 838,883
Allowance for loan losses 11,659 11,754 12,176 12,319 12,681
Goodwill 25,684 25,705 25,705 25,705 25,705
Assets 1,751,265 1,720,617 1,737,737 1,687,155 1,636,855
Deposits 1,202,179 1,185,828 1,196,663 1,168,310 1,130,625
Core deposits (3) 1,094,083 1,082,634 1,086,993 1,054,348 1,016,478
Wells Fargo stockholders’ equity 193,051 189,558 188,796 184,394 182,481
Total equity 194,043 190,676 189,964 185,262 182,990
Common shares outstanding 5,108.5 5,145.2 5,162.9 5,170.3 5,215.0
Book value per common share $ 33.69 32.96 32.70 32.19 31.55
Common stock price:
High 58.77 58.26 56.29 55.95 53.80
Low 47.75 53.56 50.42 46.44 49.47
Period end 51.35 56.24 54.40 54.82 51.87
Team members (active, full-time equivalent)   265,200     265,800     266,000     264,500     263,900
(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

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

(3) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

(4) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

  Quarter ended September 30,   %   Nine Months Ended September 30,   %
(in millions, except per share amounts)   2015   2014   Change   2015   2014   Change
Interest income    
Trading assets $ 485 427 14 % $ 1,413 1,208 17 %
Investment securities 2,289 2,066 11 6,614 6,288 5
Mortgages held for sale 223 215 4 609 580 5
Loans held for sale 4 50 (92 ) 14 53 (74 )
Loans 9,216 8,963 3 27,252 26,561 3
Other interest income   228     243   (6 )   732     679   8
Total interest income   12,445     11,964   4   36,634     35,369   4
Interest expense
Deposits 232 273 (15 ) 722 827 (13 )
Short-term borrowings 12 15 (20 ) 51 41 24
Long-term debt 655 629 4 1,879 1,868 1
Other interest expense   89     106   (16 )   269     286   (6 )
Total interest expense   988     1,023   (3 )   2,921     3,022   (3 )
Net interest income 11,457 10,941 5 33,713 32,347 4
Provision for credit losses   703     368   91   1,611     910   77
Net interest income after provision for credit losses   10,754     10,573   2   32,102     31,437   2
Noninterest income
Service charges on deposit accounts 1,335 1,311 2 3,839 3,809 1
Trust and investment fees 3,570 3,554 10,957 10,575 4
Card fees 953 875 9 2,754 2,506 10
Other fees 1,099 1,090 1 3,284 3,225 2
Mortgage banking 1,589 1,633 (3 ) 4,841 4,866 (1 )
Insurance 376 388 (3 ) 1,267 1,273
Net gains from trading activities (26 ) 168 NM 515 982 (48 )
Net gains on debt securities 147 253 (42 ) 606 407 49
Net gains from equity investments 920 712 29 1,807 2,008 (10 )
Lease income 189 137 38 476 399 19
Other   266     151   76   412     507   (19 )
Total noninterest income   10,418     10,272   1   30,758     30,557   1
Noninterest expense
Salaries 4,035 3,914 3 11,822 11,437 3
Commission and incentive compensation 2,604 2,527 3 7,895 7,388 7
Employee benefits 821 931 (12 ) 3,404 3,473 (2 )
Equipment 459 457 1,423 1,392 2
Net occupancy 728 731 2,161 2,195 (2 )
Core deposit and other intangibles 311 342 (9 ) 935 1,032 (9 )
FDIC and other deposit assessments 245 229 7 715 697 3
Other   3,196     3,117   3   9,020     8,776   3
Total noninterest expense   12,399     12,248   1   37,375     36,390   3
Income before income tax expense 8,773 8,597 2 25,485 25,604
Income tax expense   2,790     2,642   6   7,832     7,788   1
Net income before noncontrolling interests 5,983 5,955 17,653 17,816 (1 )
Less: Net income from noncontrolling interests   187     226   (17 )   334     468   (29 )
Wells Fargo net income   $ 5,796     5,729   1   $ 17,319     17,348  
Less: Preferred stock dividends and other   353     321   10   1,052     909   16
Wells Fargo net income applicable to common stock   $ 5,443     5,408   1   $ 16,267     16,439   (1 )
Per share information
Earnings per common share $ 1.06 1.04 2 $ 3.16 3.13 1
Diluted earnings per common share 1.05 1.02 3 3.12 3.08 1
Dividends declared per common share 0.375 0.35 7 1.10 1.00 10
Average common shares outstanding 5,125.8 5,225.9 (2 ) 5,145.9 5,252.2 (2 )
Diluted average common shares outstanding   5,193.8     5,310.4     (2 )   5,220.3     5,339.2     (2 )
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

 
    Quarter ended  
Sep 30,   Jun 30,   Mar 31,     Dec 31,     Sep 30,
(in millions, except per share amounts)     2015     2015     2015     2014     2014  
Interest income
Trading assets $ 485 483 445 477 427
Investment securities 2,289 2,181 2,144 2,150 2,066
Mortgages held for sale 223 209 177 187 215
Loans held for sale 4 5 5 25 50
Loans 9,216 9,098 8,938 9,091 8,963
Other interest income       228     250     254     253     243  
Total interest income       12,445     12,226     11,963     12,183     11,964  
Interest expense
Deposits 232 232 258 269 273
Short-term borrowings 12 21 18 18 15
Long-term debt 655 620 604 620 629
Other interest expense       89     83     97     96     106  
Total interest expense       988     956     977     1,003     1,023  
Net interest income 11,457 11,270 10,986 11,180 10,941
Provision for credit losses       703     300     608     485     368  
Net interest income after provision for credit losses       10,754     10,970     10,378     10,695     10,573  
Noninterest income
Service charges on deposit accounts 1,335 1,289 1,215 1,241 1,311
Trust and investment fees 3,570 3,710 3,677 3,705 3,554
Card fees 953 930 871 925 875
Other fees 1,099 1,107 1,078 1,124 1,090
Mortgage banking 1,589 1,705 1,547 1,515 1,633
Insurance 376 461 430 382 388
Net gains from trading activities (26 ) 133 408 179 168
Net gains on debt securities 147 181 278 186 253
Net gains from equity investments 920 517 370 372 712
Lease income 189 155 132 127 137
Other       266     (140 )   286     507     151  
Total noninterest income       10,418     10,048     10,292     10,263     10,272  
Noninterest expense
Salaries 4,035 3,936 3,851 3,938 3,914
Commission and incentive compensation 2,604 2,606 2,685 2,582 2,527
Employee benefits 821 1,106 1,477 1,124 931
Equipment 459 470 494 581 457
Net occupancy 728 710 723 730 731
Core deposit and other intangibles 311 312 312 338 342
FDIC and other deposit assessments 245 222 248 231 229
Other       3,196     3,107     2,717     3,123     3,117  
Total noninterest expense       12,399     12,469     12,507     12,647     12,248  
Income before income tax expense 8,773 8,549 8,163 8,311 8,597
Income tax expense       2,790     2,763     2,279     2,519     2,642  
Net income before noncontrolling interests 5,983 5,786 5,884 5,792 5,955
Less: Net income from noncontrolling interests       187     67     80     83     226  
Wells Fargo net income     $ 5,796     5,719     5,804     5,709     5,729  
Less: Preferred stock dividends and other       353     356     343     327     321  
Wells Fargo net income applicable to common stock     $ 5,443     5,363     5,461     5,382     5,408  
Per share information
Earnings per common share $ 1.06 1.04 1.06 1.04 1.04
Diluted earnings per common share 1.05 1.03 1.04 1.02 1.02
Dividends declared per common share 0.375 0.375 0.35 0.35 0.35
Average common shares outstanding 5,125.8 5,151.9 5,160.4 5,192.5 5,225.9
Diluted average common shares outstanding       5,193.8     5,220.5     5,243.6     5,279.2     5,310.4  
 
Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

    Quarter ended Sep 30,     %   Nine months ended Sep 30,     %
(in millions)     2015   2014     Change     2015     2014     Change
Wells Fargo net income     $ 5,796     5,729   1 % $ 17,319     17,348   %
Other comprehensive income (loss), before tax:    
Investment securities:
Net unrealized gains (losses) arising during the period (441 ) (944 ) (53 ) (2,017 ) 3,866 NM
Reclassification of net gains to net income (439 ) (661 ) (34 ) (957 ) (1,205 ) (21 )
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period 1,769 (34 ) NM 2,233 222 906
Reclassification of net gains on cash flow hedges to net income (293 ) (127 ) 131 (795 ) (348 ) 128
Defined benefit plans adjustments:
Net actuarial losses arising during the period (11 ) (12 ) (8 )
Amortization of net actuarial loss, settlements and other to net income 30 18 67 103 56 84
Foreign currency translation adjustments:
Net unrealized losses arising during the period (59 ) (32 ) 84 (104 ) (32 ) 225
Reclassification of net losses to net income                   6   (100 )
Other comprehensive income (loss), before tax 567 (1,780 ) NM (1,548 ) 2,553 NM
Income tax (expense) benefit related to other comprehensive income       (268 )   560   NM   544     (1,087 ) NM
Other comprehensive income (loss), net of tax 299 (1,220 ) NM (1,004 ) 1,466 NM
Less: Other comprehensive income (loss) from noncontrolling interests       (22 )   (221 ) (90 )   125     (266 ) NM
Wells Fargo other comprehensive income (loss), net of tax       321     (999 ) NM   (1,129 )   1,732   NM
Wells Fargo comprehensive income 6,117 4,730 29 16,190 19,080 (15 )
Comprehensive income from noncontrolling interests       165     5   NM   459     202   127
Total comprehensive income     $ 6,282     4,735     33     $ 16,649     19,282     (14 )

NM - Not meaningful

 

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

 
  Quarter ended  
Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2015     2015     2015     2014     2014  
Balance, beginning of period $ 190,676 189,964 185,262 182,990 181,549
Wells Fargo net income 5,796 5,719 5,804 5,709 5,729
Wells Fargo other comprehensive income (loss), net of tax 321 (1,709 ) 259 400 (999 )
Noncontrolling interests (123 ) (51 ) 301 353 (181 )
Common stock issued 505 502 1,327 508 402
Common stock repurchased (1) (2,137 ) (1,994 ) (2,592 ) (2,945 ) (2,490 )
Preferred stock released by ESOP 225 349 41 166 170
Common stock warrants repurchased/exercised (17 ) (24 ) (8 ) (9 )
Preferred stock issued 975 1,997 780
Common stock dividends (1,926 ) (1,932 ) (1,805 ) (1,816 ) (1,828 )
Preferred stock dividends (356 ) (355 ) (344 ) (327 ) (321 )
Tax benefit from stock incentive compensation 22 55 354 75 48
Stock incentive compensation expense 98 166 376 176 144
Net change in deferred compensation and related plans     (16 )   (14 )   (1,008 )   (18 )   (13 )
Balance, end of period   $ 194,043     190,676     189,964     185,262     182,990  

(1) For the quarters ended June 30 and March 31, 2015, and December 31 and September 30, 2014, includes $750 million, $750 million, $750 million, and $1.0 billion, respectively, related to private forward repurchase transactions that settled in subsequent quarters for 13.6 million, 14.0 million, 14.3 million, and 19.8 million shares of common stock, respectively.

 
Wells Fargo & Company and Subsidiaries

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

 
  Quarter ended September 30,  
2015     2014  
    Interest       Interest
Average Yields/ income/ Average Yields/ income/
(in millions)   balance     rates     expense   balance     rates     expense  
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 250,104 0.26 % $ 167 253,231 0.28 % $ 180
Trading assets 67,223 2.93 492 57,439 3.00 432
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 35,709 1.59 143 8,816 1.69 38
Securities of U.S. states and political subdivisions 48,238 4.22 510 43,324 4.24 459
Mortgage-backed securities:
Federal agencies 98,459 2.70 665 113,022 2.76 780
Residential and commercial     21,876   5.84   319   25,946   5.98   388  
Total mortgage-backed securities 120,335 3.27 984 138,968 3.36 1,168
Other debt and equity securities     50,371   3.40   430   47,131   3.45   408  
Total available-for-sale securities     254,653   3.24   2,067   238,239   3.48   2,073  
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,649 2.18 245 23,672 2.22 133
Securities of U.S. states and political subdivisions 2,151 5.17 28 66 5.51 1
Federal agency mortgage-backed securities 27,079 2.38 161 5,854 2.23 32
Other debt securities     5,371   1.75   24   5,918   1.83   28  
Total held-to-maturity securities     79,250   2.30   458   35,510   2.17   194  
Total investment securities 333,903 3.02 2,525 273,749 3.31 2,267
Mortgages held for sale (4) 24,159 3.69 223 21,444 4.01 215
Loans held for sale (4) 568 2.57 4 9,533 2.10 50
Loans:
Commercial:
Commercial and industrial - U.S. 241,409 3.30 2,005 207,570 3.29 1,716
Commercial and industrial - Non U.S. 45,923 1.83 212 42,362 2.11 225
Real estate mortgage 120,983 3.31 1,009 112,946 3.69 1,050
Real estate construction 21,626 3.39 184 17,824 3.94 178
Lease financing     12,282   4.18   129   12,348   5.38   166  
Total commercial     442,223   3.18   3,539   393,050   3.37   3,335  
Consumer:
Real estate 1-4 family first mortgage 269,437 4.10 2,762 262,144 4.23 2,773
Real estate 1-4 family junior lien mortgage 55,298 4.22 588 61,606 4.30 666
Credit card 31,649 11.73 936 27,724 11.96 836
Automobile 58,534 5.80 855 54,638 6.19 852
Other revolving credit and installment     37,954   5.84   559   34,037   6.03   517  
Total consumer     452,872   5.01   5,700   440,149   5.11   5,644  
Total loans (4) 895,095 4.11 9,239 833,199 4.29 8,979
Other     5,028   5.11   64   4,674   5.41   64  
Total earning assets   $ 1,576,080   3.21 % $ 12,714   1,453,269   3.34 % $ 12,187  
Funding sources
Deposits:
Interest-bearing checking $ 37,783 0.05 % $ 5 41,368 0.07 % $ 7
Market rate and other savings 628,119 0.06 90 586,353 0.07 98
Savings certificates 30,897 0.58 44 37,347 0.84 80
Other time deposits 48,676 0.46 57 55,128 0.39 54
Deposits in foreign offices     111,521   0.13   36   98,862   0.14   34  
Total interest-bearing deposits 856,996 0.11 232 819,058 0.13 273
Short-term borrowings 90,357 0.06 13 62,285 0.10 16
Long-term debt 180,569 1.45 655 172,982 1.46 629
Other liabilities     16,435   2.13   89   15,536   2.73   106  
Total interest-bearing liabilities 1,144,357 0.34 989 1,069,861 0.38 1,024
Portion of noninterest-bearing funding sources     431,723       383,408      
Total funding sources   $ 1,576,080   0.25     989   1,453,269   0.28     1,024  
Net interest margin and net interest income on a taxable-equivalent basis (5) 2.96 %   $ 11,725   3.06 %   $ 11,163  
Noninterest-earning assets
Cash and due from banks $ 16,979 16,189
Goodwill 25,703 25,705
Other     127,640   122,779  
Total noninterest-earning assets   $ 170,322   164,673  
Noninterest-bearing funding sources
Deposits $ 341,878 307,991
Other liabilities 67,964 57,979
Total equity 192,203 182,111
Noninterest-bearing funding sources used to fund earning assets     (431,723 ) (383,408 )
Net noninterest-bearing funding sources   $ 170,322   164,673  
Total assets   $ 1,746,402   1,617,942  
 

(1) Our average prime rate was 3.25% for the quarters ended September 30, 2015 and 2014. The average three-month London Interbank Offered Rate (LIBOR) was 0.31% and 0.23% for the same quarters, respectively.

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

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

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

(5) Includes taxable-equivalent adjustments of $268 million and $222 million for the quarters ended September 30, 2015 and 2014, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

 
Wells Fargo & Company and Subsidiaries

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

 
  Nine months ended September 30,  
2015     2014  
    Interest     Interest
Average Yields/ income/ Average Yields/ income/
(in millions)   balance     rates     expense     balance     rates     expense  
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 264,218 0.27 % $ 543 232,241 0.28 % $ 485
Trading assets 65,954 2.91 1,437 53,373 3.07 1,227
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 31,242 1.57 368 7,331 1.72 95
Securities of U.S. states and political subdivisions 46,765 4.18 1,468 42,884 4.29 1,380
Mortgage-backed securities:
Federal agencies 99,523 2.71 2,021 115,696 2.85 2,475
Residential and commercial     22,823   5.80   992   27,070   6.07   1,233  
Total mortgage-backed securities 122,346 3.28 3,013 142,766 3.46 3,708
Other debt and equity securities     48,758   3.44   1,257   48,333   3.60   1,303  
Total available-for-sale securities     249,111   3.27   6,106   241,314   3.58   6,486  
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,010 2.19 722 11,951 2.22 198
Securities of U.S. states and political subdivisions 2,064 5.16 80 25 5.51 1
Federal agency mortgage-backed securities 19,871 2.14 319 6,034 2.70 122
Other debt securities     6,139   1.72   79   5,844   1.86   82  
Total held-to-maturity securities     72,084   2.22   1,200   23,854   2.26   403  
Total investment securities 321,195 3.03 7,306 265,168 3.47 6,889
Mortgages held for sale (4) 22,416 3.62 609 18,959 4.08 580
Loans held for sale (4) 644 2.93 14 3,302 2.15 53
Loans:
Commercial:
Commercial and industrial - U.S. 233,598 3.31 5,788 200,277 3.37 5,044
Commercial and industrial - Non U.S. 45,373 1.88 638 42,530 2.03 646
Real estate mortgage 115,224 3.45 2,972 112,855 3.62 3,056
Real estate construction 20,637 3.68 567 17,454 4.16 544
Lease financing     12,322   4.77   441   12,254   5.73   526  
Total commercial     427,154   3.26   10,406   385,370   3.40   9,816  
Consumer:
Real estate 1-4 family first mortgage 267,107 4.12 8,243 260,549 4.20 8,207
Real estate 1-4 family junior lien mortgage 57,068 4.24 1,812 63,296 4.30 2,038
Credit card 30,806 11.74 2,704 26,822 12.08 2,424
Automobile 57,180 5.87 2,512 53,314 6.34 2,528
Other revolving credit and installment     37,069   5.91   1,638   40,027   5.32   1,593  
Total consumer     449,230   5.03   16,909   444,008   5.05   16,790  
Total loans (4) 876,384 4.16 27,315 829,378 4.28 26,606
Other     4,874   5.21   191   4,622   5.62   195  
Total earning assets   $ 1,555,685   3.21 % $ 37,415   1,407,043   3.42 % $ 36,035  
Funding sources
Deposits:
Interest-bearing checking $ 38,491 0.05 % $ 15 39,470 0.07 % $ 20
Market rate and other savings 620,510 0.06 274 583,128 0.07 304
Savings certificates 32,639 0.66 160 38,867 0.86 251
Other time deposits 52,459 0.43 168 49,855 0.41 152
Deposits in foreign offices     107,153   0.13   105   94,743   0.14   100  

Total interest-bearing deposits

851,252 0.11 722 806,063 0.14 827
Short-term borrowings 82,258 0.09 52 58,573 0.10 43
Long-term debt 183,130 1.37 1,879 162,073 1.54 1,868
Other liabilities     16,576   2.16   269   14,005   2.73   286  
Total interest-bearing liabilities 1,133,216 0.34 2,922 1,040,714 0.39 3,024
Portion of noninterest-bearing funding sources     422,469       366,329      
Total funding sources   $ 1,555,685   0.25     2,922   1,407,043   0.29     3,024  
Net interest margin and net interest income on a taxable-equivalent basis (5)(6) 2.96 %   $ 34,493   3.13 %   $ 33,011  
Noninterest-earning assets
Cash and due from banks $ 17,167 16,169
Goodwill 25,703 25,681
Other     129,412   120,728  
Total noninterest-earning assets   $ 172,282   162,578  
Noninterest-bearing funding sources
Deposits $ 335,160 296,066
Other liabilities 69,167 54,057
Total equity 190,424 178,784
Noninterest-bearing funding sources used to fund earning assets     (422,469 ) (366,329 )
Net noninterest-bearing funding sources   $ 172,282   162,578  
Total assets   $ 1,727,967   1,569,621  
 

(1) Our average prime rate was 3.25% for the nine months ended September 30, 2015 and 2014. The average three-month London Interbank Offered Rate (LIBOR) was 0.28% and 0.23% for the same periods, respectively.

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

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

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

(5) Includes taxable-equivalent adjustments of $780 million and $664 million for the nine months ended September 30, 2015 and 2014, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

 

Wells Fargo & Company and Subsidiaries

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

 

 
  Quarter ended  
    Sep 30, 2015     Jun 30, 2015     Mar 31, 2015     Dec 31, 2014     Sep 30, 2014  
Average   Yields/   Average   Yields/   Average   Yields/   Average   Yields/   Average   Yields/
($ in billions)   balance     rates     balance     rates     balance     rates     balance     rates     balance     rates  
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 250.1 0.26 % $ 267.1 0.28 % $ 275.7 0.28 % $ 268.1 0.28 % $ 253.2 0.28 %
Trading assets 67.2 2.93 67.6 2.91 63.0 2.88 60.4 3.21 57.5 3.00
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 35.7 1.59 31.7 1.58 26.2 1.55 19.5 1.55 8.8 1.69
Securities of U.S. states and political subdivisions 48.2 4.22 47.1 4.13 44.9 4.20 43.9 4.30 43.3 4.24
Mortgage-backed securities:
Federal agencies 98.4 2.70 98.0 2.65 102.2 2.76 109.3 2.78 113.0 2.76
Residential and commercial     21.9   5.84   22.7   5.84   23.9   5.71   24.7   5.89   26.0   5.98
Total mortgage-backed securities 120.3 3.27 120.7 3.25 126.1 3.32 134.0 3.36 139.0 3.36
Other debt and equity securities     50.4   3.40   48.8   3.51   47.1   3.43   45.0   3.87   47.1   3.45
Total available-for-sale securities     254.6   3.24   248.3   3.25   244.3   3.32   242.4   3.48   238.2   3.48
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44.6 2.18 44.5 2.19 42.9 2.21 32.9 2.25 23.7 2.22
Securities of U.S. states and political subdivisions 2.2 5.17 2.1 5.17 1.9 5.16 0.9 4.92
Federal agency mortgage-backed securities 27.1 2.38 21.0 2.00 11.3 1.87 5.6 2.07 5.9 2.23
Other debt securities     5.4   1.75   6.3   1.70   6.8   1.72   6.1   1.81   5.9   1.83
Total held-to-maturity securities     79.3   2.30   73.9   2.18   62.9   2.19   45.5   2.22   35.5   2.17
Total investment securities 333.9 3.02 322.2 3.01 307.2 3.08 287.9 3.28 273.7 3.31
Mortgages held for sale 24.2 3.69 23.5 3.57 19.6 3.61 19.2 3.90 21.5 4.01
Loans held for sale 0.6 2.57 0.7 3.51 0.7 2.67 7.0 1.43 9.5 2.10
Loans:
Commercial:
Commercial and industrial - U.S. 241.4 3.30 231.5 3.36 227.7 3.28 218.3 3.32 207.6 3.29
Commercial and industrial - Non U.S. 45.9 1.83 45.1 1.93 45.1 1.88 43.0 2.03 42.4 2.11
Real estate mortgage 121.0 3.31 113.1 3.48 111.5 3.57 112.3 3.69 113.0 3.69
Real estate construction 21.6 3.39 20.8 4.12 19.5 3.52 18.3 4.33 17.8 3.94
Lease financing     12.3   4.18   12.4   5.16   12.3   4.95   12.3   5.35   12.3   5.38
Total commercial     442.2   3.18   422.9   3.33   416.1   3.26   404.2   3.39   393.1   3.37
Consumer:
Real estate 1-4 family first mortgage 269.4 4.10 266.0 4.12 265.8 4.13 264.8 4.16 262.2 4.23
Real estate 1-4 family junior lien mortgage 55.3 4.22 57.0 4.23 58.9 4.27 60.2 4.28 61.6 4.30
Credit card 31.7 11.73 30.4 11.69 30.4 11.78 29.5 11.71 27.7 11.96
Automobile 58.5 5.80 57.0 5.88 56.0 5.95 55.4 6.08 54.6 6.19
Other revolving credit and installment     38.0   5.84   37.1   5.88   36.1   6.01   35.3   6.01   34.0   6.03
Total consumer     452.9   5.01   447.5   5.02   447.2   5.05   445.2   5.06   440.1   5.11
Total loans 895.1 4.11 870.4 4.20 863.3 4.19 849.4 4.27 833.2 4.29
Other     5.0   5.11   4.8   5.14   4.7   5.41   4.8   5.30   4.7   5.41
Total earning assets   $ 1,576.1   3.21 % $ 1,556.3   3.22 % $ 1,534.2   3.21 % $ 1,496.8   3.31 % $ 1,453.3   3.34 %
Funding sources
Deposits:
Interest-bearing checking $ 37.8 0.05 % $ 38.6 0.05 % $ 39.2 0.05 % $ 40.5 0.06 % $ 41.4 0.07 %
Market rate and other savings 628.1 0.06 619.8 0.06 613.4 0.06 593.9 0.07 586.4 0.07
Savings certificates 30.9 0.58 32.5 0.63 34.6 0.75 35.9 0.80 37.3 0.84
Other time deposits 48.7 0.46 52.2 0.42 56.5 0.39 56.1 0.39 55.1 0.39
Deposits in foreign offices     111.5   0.13   104.3   0.13   105.5   0.14   99.3   0.15   98.9   0.14
Total interest-bearing deposits 857.0 0.11 847.4 0.11 849.2 0.12 825.7 0.13 819.1 0.13
Short-term borrowings 90.4 0.06 84.5 0.09 71.7 0.11 64.7 0.12 62.3 0.10
Long-term debt 180.6 1.45 185.1 1.34 183.8 1.32 183.3 1.35 173.0 1.46
Other liabilities     16.4   2.13   16.4   2.03   16.9   2.30   15.6   2.44   15.5   2.73
Total interest-bearing liabilities 1,144.4 0.34 1,133.4 0.34 1,121.6 0.35 1,089.3 0.37 1,069.9 0.38
Portion of noninterest-bearing funding sources     431.7     422.9     412.6     407.5     383.4  
Total funding sources   $ 1,576.1   0.25   $ 1,556.3   0.25   $ 1,534.2   0.26   $ 1,496.8   0.27   $ 1,453.3   0.28  
Net interest margin on a taxable-equivalent basis 2.96 % 2.97 % 2.95 % 3.04 % 3.06 %
Noninterest-earning assets
Cash and due from banks $ 17.0 17.5 17.1 16.9 16.2
Goodwill 25.7 25.7 25.7 25.7 25.7
Other     127.6     129.8     130.8     124.4     122.7  
Total noninterest-earnings assets   $ 170.3     173.0     173.6     167.0     164.6  
Noninterest-bearing funding sources
Deposits $ 341.9 337.9 325.6 324.1 308.0
Other liabilities 67.9 67.6 72.0 65.7 57.9
Total equity 192.2 190.4 188.6 184.7 182.1
Noninterest-bearing funding sources used to fund earning assets     (431.7 )   (422.9 )   (412.6 )   (407.5 )   (383.4 )
Net noninterest-bearing funding sources   $ 170.3     173.0     173.6     167.0     164.6  
Total assets   $ 1,746.4     1,729.3     1,707.8     1,663.8     1,617.9  
                     

(1) Our average prime rate was 3.25% for quarters ended September 30, June 30 and March 31, 2015, and December 31 and September 30, 2014. The average three-month London Interbank Offered Rate (LIBOR) was 0.31%, 0.28%, 0.26%, 0.24% and 0.23% for the same quarters, respectively.

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

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

 
Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME

 
    Quarter ended Sep 30,     %  

Nine months ended Sep 30,

    %
(in millions)     2015     2014     Change   2015     2014     Change
Service charges on deposit accounts $ 1,335   1,311   2 % $ 3,839   3,809   1 %
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,368 2,327 2 7,147 6,848 4
Trust and investment management 843 856 (2 ) 2,556 2,538 1
Investment banking       359     371   (3 )   1,254     1,189   5
Total trust and investment fees       3,570     3,554     10,957     10,575   4
Card fees 953 875 9 2,754 2,506 10
Other fees:
Charges and fees on loans 307 296 4 920 1,005 (8 )
Merchant processing fees 200 184 9 589 539 9
Cash network fees 136 134 1 393 382 3
Commercial real estate brokerage commissions 124 143 (13 ) 394 314 25
Letters of credit fees 89 100 (11 ) 267 288 (7 )
All other fees       243     233   4   721     697   3
Total other fees       1,099     1,090   1   3,284     3,225   2
Mortgage banking:
Servicing income, net 674 679 (1 ) 1,711 2,652 (35 )
Net gains on mortgage loan origination/sales activities       915     954   (4 )   3,130     2,214   41
Total mortgage banking       1,589     1,633   (3 )   4,841     4,866   (1 )
Insurance 376 388 (3 ) 1,267 1,273
Net gains (losses) from trading activities (26 ) 168 NM 515 982 (48 )
Net gains on debt securities 147 253 (42 ) 606 407 49
Net gains from equity investments 920 712 29 1,807 2,008 (10 )
Lease income 189 137 38 476 399 19
Life insurance investment income 150 143 5 440 413 7
All other       116     8   NM   (28 )   94   NM
Total     $ 10,418     10,272     1   $ 30,758     30,557     1  
NM - Not meaningful
 
NONINTEREST EXPENSE                                    
Quarter ended Sep 30,   %

Nine months ended Sep 30,

  %
(in millions)     2015     2014     Change   2015     2014     Change
Salaries $ 4,035 3,914 3 % $ 11,822 11,437 3 %
Commission and incentive compensation 2,604 2,527 3 7,895 7,388 7
Employee benefits 821 931 (12 ) 3,404 3,473 (2 )
Equipment 459 457 1,423 1,392 2
Net occupancy 728 731 2,161 2,195 (2 )
Core deposit and other intangibles 311 342 (9 ) 935 1,032 (9 )
FDIC and other deposit assessments 245 229 7 715 697 3
Outside professional services 663 684 (3 ) 1,838 1,889 (3 )
Operating losses 523 417 25 1,339 940 42
Outside data processing 258 264 (2 ) 780 764 2
Contract services 249 247 1 712 730 (2 )
Travel and entertainment 166 226 (27 ) 496 688 (28 )
Postage, stationery and supplies 174 182 (4 ) 525 543 (3 )
Advertising and promotion 135 153 (12 ) 422 458 (8 )
Foreclosed assets 109 157 (31 ) 361 419 (14 )
Telecommunications 109 122 (11 ) 333 347 (4 )
Insurance 95 97 (2 ) 391 362 8
Operating leases 79 58 36 205 162 27
All other       636     510   25   1,618     1,474   10
Total     $ 12,399     12,248     1   $ 37,375     36,390     3  
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

 
    Quarter ended  
Sep 30,   Jun 30,   Mar 31,     Dec 31,     Sep 30,
(in millions)     2015     2015     2015     2014     2014  
Service charges on deposit accounts $ 1,335 1,289 1,215 1,241 1,311
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,368 2,399 2,380 2,335 2,327
Trust and investment management 843 861 852 849 856
Investment banking       359     450     445     521     371  
Total trust and investment fees       3,570     3,710     3,677     3,705     3,554  
Card fees 953 930 871 925 875
Other fees:
Charges and fees on loans 307 304 309 311 296
Merchant processing fees 200 202 187 187 184
Cash network fees 136 132 125 125 134
Commercial real estate brokerage commissions 124 141 129 155 143
Letters of credit fees 89 90 88 102 100
All other fees       243     238     240     244     233  
Total other fees       1,099     1,107     1,078     1,124     1,090  
Mortgage banking:
Servicing income, net 674 514 523 685 679
Net gains on mortgage loan origination/sales activities       915     1,191     1,024     830     954  
Total mortgage banking       1,589     1,705     1,547     1,515     1,633  
Insurance 376 461 430 382 388
Net gains (losses) from trading activities (26 ) 133 408 179 168
Net gains on debt securities 147 181 278 186 253
Net gains from equity investments 920 517 370 372 712
Lease income 189 155 132 127 137
Life insurance investment income 150 145 145 145 143
All other       116     (285 )   141     362     8  
Total     $ 10,418     10,048     10,292     10,263     10,272  
 
 
FIVE QUARTER NONINTEREST EXPENSE  
  Quarter ended  
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(in millions)     2015     2015     2015     2014     2014  
Salaries $ 4,035 3,936 3,851 3,938 3,914
Commission and incentive compensation 2,604 2,606 2,685 2,582 2,527
Employee benefits 821 1,106 1,477 1,124 931
Equipment 459 470 494 581 457
Net occupancy 728 710 723 730 731
Core deposit and other intangibles 311 312 312 338 342
FDIC and other deposit assessments 245 222 248 231 229
Outside professional services 663 627 548 800 684
Operating losses 523 521 295 309 417
Outside data processing 258 269 253 270 264
Contract services 249 238 225 245 247
Travel and entertainment 166 172 158 216 226
Postage, stationery and supplies 174 180 171 190 182
Advertising and promotion 135 169 118 195 153
Foreclosed assets 109 117 135 164 157
Telecommunications 109 113 111 106 122
Insurance 95 156 140 60 97
Operating leases 79 64 62 58 58
All other       636     481     501     510     510  
Total     $ 12,399     12,469     12,507     12,647     12,248  
 
Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

 
    Sep 30,   Dec 31,   %
(in millions, except shares)     2015     2014     Change
Assets
Cash and due from banks $ 17,395 19,571 (11 )%
Federal funds sold, securities purchased under resale agreements and other short-term investments 254,811 258,429 (1 )
Trading assets 73,894 78,255 (6 )
Investment securities:
Available-for-sale, at fair value 266,406 257,442 3
Held-to-maturity, at cost 78,668 55,483 42
Mortgages held for sale 21,840 19,536 12
Loans held for sale 430 722 (40 )
Loans 903,233 862,551 5
Allowance for loan losses       (11,659 )   (12,319 ) (5 )
Net loans       891,574     850,232   5
Mortgage servicing rights:
Measured at fair value 11,778 12,738 (8 )
Amortized 1,277 1,242 3
Premises and equipment, net 8,800 8,743 1
Goodwill 25,684 25,705
Other assets       98,708     99,057  
Total assets     $ 1,751,265     $ 1,687,155   4
Liabilities
Noninterest-bearing deposits $ 339,761 321,963 6
Interest-bearing deposits       862,418     846,347   2
Total deposits 1,202,179 1,168,310 3
Short-term borrowings 88,069 63,518 39
Accrued expenses and other liabilities 81,700 86,122 (5 )
Long-term debt       185,274     183,943     1
Total liabilities       1,557,222     1,501,893     4
Equity
Wells Fargo stockholders’ equity:
Preferred stock 22,424 19,213 17
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 60,998 60,537 1
Retained earnings 117,593 107,040 10
Cumulative other comprehensive income 2,389 3,518 (32 )
Treasury stock – 373,337,506 shares and 311,462,276 shares (17,899 ) (13,690 ) 31
Unearned ESOP shares       (1,590 )   (1,360 ) 17
Total Wells Fargo stockholders’ equity 193,051 184,394 5
Noncontrolling interests       992     868   14
Total equity       194,043     185,262   5
Total liabilities and equity     $ 1,751,265     $ 1,687,155     4  
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET

 
    Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)     2015     2015     2015     2014     2014  
Assets
Cash and due from banks $ 17,395 19,687 19,793 19,571 18,032
Federal funds sold, securities purchased under resale agreements and other short-term investments 254,811 232,247 291,317 258,429 261,932
Trading assets 73,894 80,236 79,278 78,255 67,755
Investment securities:
Available-for-sale, at fair value 266,406 260,667 257,603 257,442 248,251
Held-to-maturity, at cost 78,668 80,102 67,133 55,483 40,758
Mortgages held for sale 21,840 25,447 23,606 19,536 20,178
Loans held for sale 430 621 681 722 9,292
Loans 903,233 888,459 861,231 862,551 838,883
Allowance for loan losses       (11,659 )   (11,754 )   (12,176 )   (12,319 )   (12,681 )
Net loans       891,574     876,705     849,055     850,232     826,202  
Mortgage servicing rights:
Measured at fair value 11,778 12,661 11,739 12,738 14,031
Amortized 1,277 1,262 1,252 1,242 1,224
Premises and equipment, net 8,800 8,692 8,696 8,743 8,768
Goodwill 25,684 25,705 25,705 25,705 25,705
Other assets       98,708     96,585     101,879     99,057     94,727  
Total assets     $ 1,751,265     1,720,617     1,737,737     1,687,155     1,636,855  
Liabilities
Noninterest-bearing deposits $ 339,761 343,582 335,858 321,963 313,791
Interest-bearing deposits       862,418     842,246     860,805     846,347     816,834  
Total deposits 1,202,179 1,185,828 1,196,663 1,168,310 1,130,625
Short-term borrowings 88,069 82,963 77,697 63,518 62,927
Accrued expenses and other liabilities 81,700 81,399 90,121 86,122 75,727
Long-term debt       185,274     179,751     183,292     183,943     184,586  
Total liabilities       1,557,222     1,529,941     1,547,773     1,501,893     1,453,865  
Equity
Wells Fargo stockholders’ equity:
Preferred stock 22,424 21,649 21,998 19,213 19,379
Common stock 9,136 9,136 9,136 9,136 9,136
Additional paid-in capital 60,998 60,154 59,980 60,537 60,100
Retained earnings 117,593 114,093 110,676 107,040 103,494
Cumulative other comprehensive income 2,389 2,068 3,777 3,518 3,118
Treasury stock (17,899 ) (15,707 ) (14,556 ) (13,690 ) (11,206 )
Unearned ESOP shares       (1,590 )   (1,835 )   (2,215 )   (1,360 )   (1,540 )
Total Wells Fargo stockholders’ equity 193,051 189,558 188,796 184,394 182,481
Noncontrolling interests       992     1,118     1,168     868     509  
Total equity       194,043     190,676     189,964     185,262     182,990  
Total liabilities and equity     $ 1,751,265     1,720,617     1,737,737     1,687,155     1,636,855  
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER INVESTMENT SECURITIES

  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2015   2015   2015   2014   2014
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ 35,423 35,944 30,031 25,804 14,794
Securities of U.S. states and political subdivisions 49,423 48,298 47,380 44,944 45,805
Mortgage-backed securities:
Federal agencies 105,023 100,078 103,217 110,089 112,613
Residential and commercial     22,836   23,770   24,712   26,263   27,491
Total mortgage-backed securities 127,859 123,848 127,929 136,352 140,104
Other debt securities     51,760   50,090   48,759   46,666   45,013
Total available-for-sale debt securities 264,465 258,180 254,099 253,766 245,716
Marketable equity securities     1,941   2,487   3,504   3,676   2,535
Total available-for-sale securities     266,406   260,667   257,603   257,442   248,251
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,653 44,645 44,244 40,886 28,887
Securities of U.S. states and political subdivisions 2,187 2,174 2,092 1,962 123
Federal agency mortgage-backed securities 26,828 27,577 14,311 5,476 5,770
Other debt securities     5,000   5,706   6,486   7,159   5,978
Total held-to-maturity debt securities     78,668   80,102   67,133   55,483   40,758
Total investment securities   $ 345,074   340,769   324,736   312,925   289,009
 
 

FIVE QUARTER LOANS

Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(in millions)   2015   2015   2015   2014   2014
Commercial:
Commercial and industrial $ 292,234 284,817 271,088 271,795 254,199
Real estate mortgage 121,252 119,695 111,848 111,996 112,064
Real estate construction 21,710 21,309 19,981 18,728 18,090
Lease financing     12,142   12,201   12,382   12,307   12,006
Total commercial     447,338   438,022   415,299   414,826   396,359
Consumer:
Real estate 1-4 family first mortgage 271,311 267,868 265,213 265,386 263,337
Real estate 1-4 family junior lien mortgage 54,592 56,164 57,839 59,717 60,875
Credit card 32,286 31,135 30,078 31,119 28,280
Automobile 59,164 57,801 56,339 55,740 55,242
Other revolving credit and installment     38,542   37,469   36,463   35,763   34,790
Total consumer     455,895   450,437   445,932   447,725   442,524
Total loans (1)   $ 903,233   888,459   861,231   862,551   838,883

(1) Includes $20.7 billion, $21.6 billion, $22.4 billion, $23.3 billion, and $24.2 billion of purchased credit-impaired (PCI) loans at September 30, June 30 and March 31, 2015, and December 31 and September 30, 2014, respectively.

 

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

 
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(in millions)   2015   2015   2015   2014   2014
Commercial foreign loans:
Commercial and industrial $ 46,380 44,838 45,325 44,707 41,829
Real estate mortgage 8,662 9,125 5,171 4,776 4,856
Real estate construction 396 389 241 218 209
Lease financing     279   301   307   336   332
Total commercial foreign loans   $ 55,717   54,653   51,044   50,037   47,226
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)

 
  Sep 30,   Jun 30,     Mar 31,     Dec 31,     Sep 30,
(in millions)   2015     2015     2015     2014     2014  
Nonaccrual loans:
Commercial:
Commercial and industrial $ 1,031 1,079 663 538 614
Real estate mortgage 1,125 1,250 1,324 1,490 1,636
Real estate construction 151 165 182 187 217
Lease financing     29     28     23     24     27  
Total commercial     2,336     2,522     2,192     2,239     2,494  
Consumer:
Real estate 1-4 family first mortgage 7,425 8,045 8,345 8,583 8,785
Real estate 1-4 family junior lien mortgage 1,612 1,710 1,798 1,848 1,903
Automobile 123 126 133 137 143
Other revolving credit and installment     41     40     42     41     40  
Total consumer     9,201     9,921     10,318     10,609     10,871  
Total nonaccrual loans (1)(2)(3)   $ 11,537     12,443     12,510     12,848     13,365  
As a percentage of total loans 1.28 % 1.40 1.45 1.49 1.59
Foreclosed assets:
Government insured/guaranteed (4) $ 502 588 772 982 1,140
Non-government insured/guaranteed     1,265     1,370     1,557     1,627     1,691  
Total foreclosed assets     1,767     1,958     2,329     2,609     2,831  
Total nonperforming assets   $ 13,304     14,401     14,839     15,457     16,196  
As a percentage of total loans     1.47 %   1.62     1.72     1.79     1.93  

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

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

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

(4) Consistent with regulatory reporting requirements, foreclosed real estate resulting from government insured/guaranteed loans are classified as nonperforming. Both principal and interest related to these foreclosed real estate assets are collectible because the loans were predominantly insured by the FHA or guaranteed by the VA. Foreclosure of certain government guaranteed residential real estate mortgage loans that meet criteria specified by Accounting Standards Update (ASU) 2014-14, Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure, effective as of January 1, 2014, are excluded from this table and included in Accounts Receivable in Other Assets. For more information on ASU 2014-14 and the classification of certain government-guaranteed mortgage loans upon foreclosure, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2014 Form 10-K.

 
Wells Fargo & Company and Subsidiaries

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2015   2015   2015   2014   2014
Loans 90 days or more past due and still accruing:
Total (excluding PCI)(1): $ 14,405 15,161 16,344 17,810 18,295
Less: FHA insured/guaranteed by the VA (2)(3) 13,500 14,359 15,453 16,827 16,628
Less: Student loans guaranteed under the FFELP (4)     33   46   50   63   721
Total, not government insured/guaranteed   $ 872   756   841   920   946
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 53 17 31 31 35
Real estate mortgage 24 10 43 16 37
Real estate construction             18
Total commercial     77   27   74   47   90
Consumer:
Real estate 1-4 family first mortgage (3) 216 220 221 260 327
Real estate 1-4 family junior lien mortgage (3) 61 65 55 83 78
Credit card 353 304 352 364 302
Automobile 66 51 47 73 64
Other revolving credit and installment     99   89   92   93   85
Total consumer     795   729   767   873   856
Total, not government insured/guaranteed   $ 872   756   841   920   946

(1) PCI loans totaled $3.2 billion, $3.4 billion, $3.6 billion, $3.7 billion and $4.0 billion, at September 30, June 30 and March 31, 2015, and December 31 and September 30, 2014, respectively.

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

(4) Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP. In fourth quarter 2014, substantially all government guaranteed loans were sold.

 
Wells Fargo & Company and Subsidiaries

CHANGES IN ACCRETABLE YIELD RELATED TO PURCHASED CREDIT-IMPAIRED (PCI) LOANS

 
Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans predominantly represent loans acquired from Wachovia that were deemed to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent LTV percentages. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date.
 
As a result of PCI loan accounting, certain credit-related ratios cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.
 
The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:

•  Changes in interest rate indices for variable rate PCI loans - Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows;

•  Changes in prepayment assumptions - Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and

•  Changes in the expected principal and interest payments over the estimated life - Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.

 
The change in the accretable yield related to PCI loans is presented in the following table.
 
(in millions)    
Balance, December 31, 2008   $ 10,447
Addition of accretable yield due to acquisitions 132
Accretion into interest income (1) (12,783 )
Accretion into noninterest income due to sales (2) (430 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 8,568
Changes in expected cash flows that do not affect nonaccretable difference (3)     11,856  
Balance, December 31, 2014 17,790
Addition of accretable yield due to acquisitions
Accretion into interest income (1) (1,102 )
Accretion into noninterest income due to sales (2) (28 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (4) 31
Changes in expected cash flows that do not affect nonaccretable difference (3)     (34 )
Balance, September 30, 2015   $ 16,657  
         
Balance, June 30, 2015 $ 16,970
Addition of accretable yield due to acquisitions
Accretion into interest income (1) (338 )
Accretion into noninterest income due to sales (2)
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (4) 1
Changes in expected cash flows that do not affect nonaccretable difference (3)     24  
Balance, September 30, 2015   $ 16,657  

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

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

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

(4) At September 30, 2015, our carrying value for PCI loans totaled $20.7 billion and the remainder of nonaccretable difference established in purchase accounting totaled $3.0 billion. The nonaccretable difference absorbs losses of contractual amounts that exceed our carrying value for PCI loans.

 
Wells Fargo & Company and Subsidiaries

PICK-A-PAY PORTFOLIO (1)

 
  September 30, 2015  
PCI loans     All other loans  

 

          Ratio of     Ratio of

Adjusted

carrying carrying

unpaid

Current value to value to

principal

LTV Carrying current Carrying current
(in millions)  

balance (2)

    ratio (3)     value (4)     value (5)     value (4)     value (5)  
California $ 17,030 74 % $ 13,860 60 % $ 10,117 54 %
Florida 1,932 83 1,372 57 2,093 67
New Jersey 803 81

641

61 1,364 69
New York 539 75 477 61 658 65
Texas 210 58 191 51 813 45
Other states     3,952   79   3,179   62   5,813   66
Total Pick-a-Pay loans   $ 24,466   76 $ 19,720   60 $ 20,858   59
             

(1) The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2015.

(2) Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.

(3) The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.

(4) Carrying value, which does not reflect the allowance for loan losses, includes remaining purchase accounting adjustments, which, for PCI loans may include the nonaccretable difference and the accretable yield and, for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs.

(5) The ratio of carrying value to current value is calculated as the carrying value divided by the collateral value.

 

NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS

  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2015   2015   2015   2014   2014
Commercial:
Legacy Wachovia commercial and industrial and commercial real estate PCI loans (1)   $ 506   592   699   1,125   1,465
Total commercial     506   592   699   1,125   1,465
Consumer:
Pick-a-Pay mortgage (1)(2) 40,578 42,222 43,745 45,002 46,389
Legacy Wells Fargo Financial debt consolidation (3) 10,315 10,702 11,067 11,417 11,781
Liquidating home equity 2,388 2,566 2,744 2,910 3,083
Legacy Wachovia other PCI loans (1) 240 262 276 300 320
Legacy Wells Fargo Financial indirect auto (3)     11   15   23   34   54
Total consumer     53,532   55,767   57,855   59,663   61,627
Total non-strategic and liquidating loan portfolios   $ 54,038   56,359   58,554   60,788   63,092

(1) Net of purchase accounting adjustments related to PCI loans.

(2) Includes PCI loans of $19.7 billion, $20.4 billion, $21.0 billion, $21.5 billion and $22.1 billion at September 30, June 30 and March 31, 2015, and December 31 and September 30, 2014, respectively.

(3) When we refer to "Legacy Wells Fargo", we mean Wells Fargo excluding Wachovia Corporation (Wachovia).

 
Wells Fargo & Company and Subsidiaries

CHANGES IN ALLOWANCE FOR CREDIT LOSSES

 
  Quarter ended September 30,     Nine months ended September 30,  
(in millions)   2015     2014     2015     2014  
Balance, beginning of period $ 12,614   13,834 13,169   14,971
Provision for credit losses 703 368 1,611 910
Interest income on certain impaired loans (1) (48 ) (52 ) (150 ) (163 )
Loan charge-offs:
Commercial:
Commercial and industrial (172 ) (157 ) (459 ) (466 )
Real estate mortgage (9 ) (11 ) (48 ) (47 )
Real estate construction (3 ) (2 ) (7 )
Lease financing     (5 )   (5 )   (11 )   (12 )
Total commercial     (186 )   (176 )   (520 )   (532 )
Consumer:
Real estate 1-4 family first mortgage (145 ) (167 ) (394 ) (583 )
Real estate 1-4 family junior lien mortgage (159 ) (202 ) (501 ) (671 )
Credit card (259 ) (236 ) (821 ) (769 )
Automobile (186 ) (192 ) (531 ) (515 )
Other revolving credit and installment     (160 )   (160 )   (465 )   (508 )
Total consumer     (909 )   (957 )   (2,712 )   (3,046 )
Total loan charge-offs     (1,095 )   (1,133 )   (3,232 )   (3,578 )
Loan recoveries:
Commercial:
Commercial and industrial 50 90 192 290
Real estate mortgage 32 48 97 116
Real estate construction 8 61 25 108
Lease financing     2     1     6     6  
Total commercial     92     200     320     520  
Consumer:
Real estate 1-4 family first mortgage 83 53 182 162
Real estate 1-4 family junior lien mortgage 70 62 195 179
Credit card 43 35 123 126
Automobile 73 80 249 267
Other revolving credit and installment     31     35     102     114  
Total consumer     300     265     851     848  
Total loan recoveries     392     465     1,171     1,368  
Net loan charge-offs (2)     (703 )   (668 )   (2,061 )   (2,210 )
Allowances related to business combinations/other     (4 )   (1 )   (7 )   (27 )
Balance, end of period   $ 12,562     13,481     12,562     13,481  
Components:
Allowance for loan losses $ 11,659 12,681 11,659 12,681
Allowance for unfunded credit commitments     903     800     903     800  
Allowance for credit losses (3)   $ 12,562     13,481     12,562     13,481  
Net loan charge-offs (annualized) as a percentage of average total loans (2) 0.31 % 0.32 0.31 0.36
Allowance for loan losses as a percentage of total loans (3) 1.29 1.51 1.29 1.51
Allowance for credit losses as a percentage of total loans (3)     1.39     1.61     1.39     1.61  

(1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income.

(2) For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting estimates.

(3) The allowance for credit losses includes $5 million and $11 million at September 30, 2015 and 2014, respectively, related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs.

 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES

 
  Quarter ended  
Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2015     2015     2015     2014     2014  
Balance, beginning of quarter $ 12,614 13,013 13,169 13,481 13,834
Provision for credit losses 703 300 608 485 368
Interest income on certain impaired loans (1) (48 ) (50 ) (52 ) (48 ) (52 )
Loan charge-offs:
Commercial:
Commercial and industrial (172 ) (154 ) (133 ) (161 ) (157 )
Real estate mortgage (9 ) (16 ) (23 ) (19 ) (11 )
Real estate construction (1 ) (1 ) (2 ) (3 )
Lease financing     (5 )   (3 )   (3 )   (3 )   (5 )
Total commercial     (186 )   (174 )   (160 )   (185 )   (176 )
Consumer:
Real estate 1-4 family first mortgage (145 ) (119 ) (130 ) (138 ) (167 )
Real estate 1-4 family junior lien mortgage (159 ) (163 ) (179 ) (193 ) (202 )
Credit card (259 ) (284 ) (278 ) (256 ) (236 )
Automobile (186 ) (150 ) (195 ) (214 ) (192 )
Other revolving credit and installment     (160 )   (151 )   (154 )   (160 )   (160 )
Total consumer     (909 )   (867 )   (936 )   (961 )   (957 )
Total loan charge-offs     (1,095 )   (1,041 )   (1,096 )   (1,146 )   (1,133 )
Loan recoveries:
Commercial:
Commercial and industrial 50 73 69 79 90
Real estate mortgage 32 31 34 44 48
Real estate construction 8 7 10 28 61
Lease financing     2     1     3     2     1  
Total commercial     92     112     116     153     200  
Consumer:
Real estate 1-4 family first mortgage 83 52 47 50 53
Real estate 1-4 family junior lien mortgage 70 69 56 59 62
Credit card 43 41 39 35 35
Automobile 73 82 94 82 80
Other revolving credit and installment     31     35     36     32     35  
Total consumer     300     279     272     258     265  
Total loan recoveries     392     391     388     411     465  
Net loan charge-offs     (703 )   (650 )   (708 )   (735 )   (668 )
Allowances related to business combinations/other     (4 )   1     (4 )   (14 )   (1 )
Balance, end of quarter   $ 12,562     12,614     13,013     13,169     13,481  
Components:
Allowance for loan losses $ 11,659 11,754 12,176 12,319 12,681
Allowance for unfunded credit commitments     903     860     837     850     800  
Allowance for credit losses   $ 12,562     12,614     13,013     13,169     13,481  
Net loan charge-offs (annualized) as a percentage of average total loans 0.31 % 0.30 0.33 0.34 0.32
Allowance for loan losses as a percentage of:
Total loans 1.29 1.32 1.41 1.43 1.51
Nonaccrual loans 101 94 97 96 95
Nonaccrual loans and other nonperforming assets 88 82 82 80 78
Allowance for credit losses as a percentage of:
Total loans 1.39 1.42 1.51 1.53 1.61
Nonaccrual loans 109 101 104 103 101
Nonaccrual loans and other nonperforming assets     94     88     88     85     83  

(1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income.

 
Wells Fargo & Company and Subsidiaries

COMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1)

 
    Estimated      
Sep 30, Jun 30, Mar 31, Dec 31,
(in billions)       2015     2015     2015     2014  
Total equity $ 194.0 190.7 190.0 185.3
Noncontrolling interests         (0.9 )   (1.1 )   (1.2 )   (0.9 )
Total Wells Fargo stockholders’ equity         193.1     189.6     188.8     184.4  
Adjustments:
Preferred stock (21.0 ) (20.0 ) (20.0 ) (18.0 )
Goodwill and other intangible assets (2) (28.7 ) (29.1 ) (28.9 ) (29.0 )
Investment in certain subsidiaries and other         (1.5 )   (0.6 )   (0.9 )   (0.7 )
Common Equity Tier 1 (Fully Phased-In) under Basel III (1)   (A)     141.9     139.9     139.0     136.7  
Total risk-weighted assets (RWAs) anticipated under Basel III (3)(4)   (B)   $ 1,329.5     1,325.6     1,326.3     1,310.5  
Common Equity Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In) (4)   (A)/(B)     10.7 %   10.6     10.5     10.4  

(1) Basel III capital rules, adopted by the Federal Reserve Board on July 2, 2013, revised the definition of capital, increased minimum capital ratios, and introduced a minimum Common Equity Tier 1 (CET1) ratio. These rules established a new comprehensive capital framework for U.S. banking organizations that implements the Basel III capital framework and certain provisions of the Dodd-Frank Act. The rules are being phased in through the end of 2021. Fully phased-in capital amounts, ratios and RWAs are calculated assuming the full phase-in of the Basel III capital rules. Fully phased-in regulatory capital amounts, ratios and RWAs are considered non-GAAP financial measures that are used by management, bank regulatory agencies, investors and analysts to assess and monitor the Company’s capital position. We have included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants.

(2) Goodwill and other intangible assets are net of any associated deferred tax liabilities.

(3) The final Basel III capital rules provide for two capital frameworks: the Standardized Approach, which replaced Basel I, and the Advanced Approach applicable to certain institutions. Under the final rules, we are subject to the lower of our CET1 ratio calculated under the Standardized Approach and under the Advanced Approach in the assessment of our capital adequacy. Because the final determination of our CET1 ratio and which approach will produce the lower CET1 ratio as of September 30, 2015, is subject to detailed analysis of considerable data, our CET1 ratio at that date has been estimated using the Basel III definition of capital under the Basel III Standardized Approach RWAs. The capital ratio for June 30, 2015, was calculated under the Basel III Standardized Approach RWAs, and the capital ratio for March 31, 2015, and December 31, 2014, was calculated under the Basel III Advanced Approach RWAs.

(4) The Company’s September 30, 2015, RWAs and capital ratio are preliminary estimates.

 
Wells Fargo & Company and Subsidiaries

OPERATING SEGMENT RESULTS (1)

 
(income/expense in millions,

average balances in billions)

 

Community
Banking

   

Wholesale
Banking

   

Wealth and
Investment
Management

   

Other (2)

   

Consolidated
Company

 
  2015     2014     2015     2014     2015     2014     2015     2014     2015     2014  
Quarter ended Sep 30,                
Net interest income (3) $ 7,822 7,455 3,128 3,061 887 753 (380 ) (328 ) 11,457 10,941
Provision (reversal of provision) for credit losses 658 465 45 (85 ) (6 ) (25 ) 6 13 703 368
Noninterest income 5,796 5,356 2,442 2,606 2,991 3,052 (811 ) (742 ) 10,418 10,272
Noninterest expense     7,219     7,049     3,036     2,997     2,909     2,945     (765 )   (743 )   12,399     12,248  
Income (loss) before income tax expense (benefit) 5,741 5,297 2,489 2,755 975 885 (432 ) (340 ) 8,773 8,597
Income tax expense (benefit)     1,861     1,603     722     830     371     338     (164 )   (129 )   2,790     2,642  
Net income (loss) before noncontrolling interests 3,880 3,694 1,767 1,925 604 547 (268 ) (211 ) 5,983 5,955
Less: Net income (loss) from noncontrolling interests     194     233     (5 )   (4 )   (2 )   (3 )           187     226  
Net income (loss)   $ 3,686     3,461     1,772     1,929     606     550     (268 )   (211 )   5,796     5,729  
 
Average loans $ 511.0 498.3 363.1 316.8 61.1 52.6 (40.1 ) (34.5 ) 895.1 833.2
Average assets 977.1 944.8 652.6 562.0 192.6 185.2 (75.9 ) (74.1 ) 1,746.4 1,617.9
Average core deposits 690.5 646.9 311.3 278.3 163.0 153.7 (71.2 ) (66.7 ) 1,093.6 1,012.2
                     
Nine months ended Sep 30,
Net interest income (3) $ 23,051 22,075 9,215 9,021 2,545 2,221 (1,098 ) (970 ) 33,713 32,347
Provision (reversal of provision) for credit losses 1,638 1,163 (19 ) (227 ) (19 ) (58 ) 11 32 1,611 910
Noninterest income 15,980 15,883 7,902 7,691 9,285 9,135 (2,409 ) (2,152 ) 30,758 30,557
Noninterest expense     21,442     20,839     9,191     8,843     9,069     8,927     (2,327 )   (2,219 )   37,375     36,390  
Income (loss) before income tax expense (benefit) 15,951 15,956 7,945 8,096 2,780 2,487 (1,191 ) (935 ) 25,485 25,604
Income tax expense (benefit)     4,921     4,781     2,309     2,418     1,054     944     (452 )   (355 )   7,832     7,788  
Net income (loss) before noncontrolling interests 11,030 11,175 5,636 5,678 1,726 1,543 (739 ) (580 ) 17,653 17,816
Less: Net income (loss) from noncontrolling interests     337     469     (8 )   (3 )   5     2             334     468  
Net income (loss)   $ 10,693     10,706     5,644     5,681     1,721     1,541     (739 )   (580 )   17,319     17,348  
 
Average loans $ 507.8 502.7 348.4 309.2 59.1 51.2 (38.9 ) (33.7 ) 876.4 829.4
Average assets 984.0 914.5 628.6 544.0 191.1 185.4 (75.7 ) (74.3 ) 1,728.0 1,569.6
Average core deposits 681.8 637.8 306.2 267.7 161.4 154.3 (70.6 ) (67.1 ) 1,078.8 992.7
                                                               

(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. Effective third quarter 2015, we realigned our asset management business from Wholesale Banking to Wealth and Investment Management (WIM) (formerly Wealth, Brokerage and Retirement), and realigned our reinsurance business from WIM and our strategic auto investments from Community Banking to Wholesale Banking. Results for these operating segments were revised for prior periods to reflect the impact of these realignments.

(2) Includes items not specific to a business segment and elimination of certain items that are included in more than one business segment, substantially all of which represents services for wealth management customers provided in Community Banking stores.

(3) Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.

 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER OPERATING SEGMENT RESULTS (1)

 
  Quarter ended  
Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(income/expense in millions, average balances in billions)   2015     2015     2015     2014     2014  
COMMUNITY BANKING
Net interest income (2) $ 7,822 7,684 7,545 7,560 7,455
Provision for credit losses 658 363 617 518 465
Noninterest income 5,796 4,961 5,223 5,259 5,356
Noninterest expense     7,219     7,161     7,062     7,279     7,049  
Income before income tax expense 5,741 5,121 5,089 5,022 5,297
Income tax expense     1,861     1,702     1,358     1,540     1,603  
Net income before noncontrolling interests 3,880 3,419 3,731 3,482 3,694
Less: Net income from noncontrolling interests     194     69     74     56     233  
Segment net income   $ 3,686     3,350     3,657     3,426     3,461  
Average loans $ 511.0 506.2 506.1 503.5 498.3
Average assets 977.1 987.8 987.1 969.6 944.8
Average core deposits     690.5     685.7     668.9     655.6     646.9  
WHOLESALE BANKING
Net interest income (2) $ 3,128 3,115 2,972 3,155 3,061
Reversal of provision for credit losses 45 (58 ) (6 ) (39 ) (85 )
Noninterest income 2,442 2,747 2,713 2,649 2,606
Noninterest expense     3,036     3,035     3,120     3,054     2,997  
Income before income tax expense 2,489 2,885 2,571 2,789 2,755
Income tax expense     722     855     732     790     830  
Net income before noncontrolling interests 1,767 2,030 1,839 1,999 1,925
Less: Net income (loss) from noncontrolling interests     (5 )   (5 )   2     25     (4 )
Segment net income   $ 1,772     2,035     1,837     1,974     1,929  
Average loans $ 363.1 343.9 337.9 327.1 316.8
Average assets 652.6 627.7 605.0 582.6 562.0
Average core deposits     311.3     304.1     303.2     292.3     278.3  
WEALTH AND INVESTMENT MANAGEMENT
Net interest income (2) $ 887 832 826 811 753
Provision (reversal of provision) for credit losses (6 ) (10 ) (3 ) 8 (25 )
Noninterest income 2,991 3,144 3,150 3,102 3,052
Noninterest expense     2,909     3,038     3,122     3,066     2,945  
Income before income tax expense 975 948 857 839 885
Income tax expense     371     359     324     318     338  
Net income before noncontrolling interests 604 589 533 521 547
Less: Net income from noncontrolling interests     (2 )   3     4     2     (3 )
Segment net income   $ 606     586     529     519     550  
Average loans $ 61.1 59.3 56.9 54.8 52.6
Average assets 192.6 189.1 191.6 188.2 185.2
Average core deposits     163.0     159.5     161.6     157.1     153.7  
OTHER (3)
Net interest income (2) $ (380 ) (361 ) (357 ) (346 ) (328 )
Provision (reversal of provision) for credit losses 6 5 (2 ) 13
Noninterest income (811 ) (804 ) (794 ) (747 ) (742 )
Noninterest expense     (765 )   (765 )   (797 )   (752 )   (743 )
Loss before income tax benefit (432 ) (405 ) (354 ) (339 ) (340 )
Income tax benefit     (164 )   (153 )   (135 )   (129 )   (129 )
Net loss before noncontrolling interests (268 ) (252 ) (219 ) (210 ) (211 )
Less: Net income from noncontrolling interests                      
Other net loss   $ (268 )   (252 )   (219 )   (210 )   (211 )
Average loans $ (40.1 ) (39.0 ) (37.6 ) (36.0 ) (34.5 )
Average assets (75.9 ) (75.3 ) (75.9 ) (76.6 ) (74.1 )
Average core deposits     (71.2 )   (70.1 )   (70.5 )   (69.0 )   (66.7 )
CONSOLIDATED COMPANY
Net interest income (2) $ 11,457 11,270 10,986 11,180 10,941
Provision for credit losses 703 300 608 485 368
Noninterest income 10,418 10,048 10,292 10,263 10,272
Noninterest expense     12,399     12,469     12,507     12,647     12,248  
Income before income tax expense 8,773 8,549 8,163 8,311 8,597
Income tax expense     2,790     2,763     2,279     2,519     2,642  
Net income before noncontrolling interests 5,983 5,786 5,884 5,792 5,955
Less: Net income from noncontrolling interests     187     67     80     83     226  
Wells Fargo net income   $ 5,796     5,719     5,804     5,709     5,729  
Average loans $ 895.1 870.4 863.3 849.4 833.2
Average assets 1,746.4 1,729.3 1,707.8 1,663.8 1,617.9
Average core deposits     1,093.6     1,079.2     1,063.2     1,036.0     1,012.2  

(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. Effective third quarter 2015, we realigned our asset management business from Wholesale Banking to Wealth and Investment Management (WIM) (formerly Wealth, Brokerage and Retirement), and realigned our reinsurance business from WIM and our strategic auto investments from Community Banking to Wholesale Banking. Results for these operating segments were revised for prior periods to reflect the impact of these realignments.

(2) Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.

(3) Includes items not specific to a business segment and elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for wealth management customers provided in Community Banking stores.

 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING

 
  Quarter ended  
Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)

 

2015     2015     2015     2014     2014  
MSRs measured using the fair value method:
Fair value, beginning of quarter $ 12,661 11,739 12,738 14,031 13,900
Servicing from securitizations or asset transfers 448 428 308 296 340
Sales and other (1)     6     (5 )   (1 )   (7 )    
Net additions     454     423     307     289     340  
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (2) (858 ) 1,117 (572 ) (1,016 ) 251
Servicing and foreclosure costs (3) (18 ) (10 ) (18 ) (5 ) (4 )
Prepayment estimates and other (4)     43     (54 )   (183 )   (78 )   6  
Net changes in valuation model inputs or assumptions     (833 )   1,053     (773 )   (1,099 )   253  
Other changes in fair value (5)     (504 )   (554 )   (533 )   (483 )   (462 )
Total changes in fair value     (1,337 )   499     (1,306 )   (1,582 )   (209 )
Fair value, end of quarter   $ 11,778     12,661     11,739     12,738     14,031  

(1) Includes sales and transfers of MSRs, which can result in an increase of total reported MSRs if the sales or transfers are related to nonperforming loan portfolios.

(2) Includes prepayment speed changes as well as other valuation changes due to changes in mortgage interest rates (such as changes in estimated interest earned on custodial deposit balances).

(3) Includes costs to service and unreimbursed foreclosure costs.

(4) Represents changes driven by other valuation model inputs or assumptions including prepayment speed estimation changes and other assumption updates. Prepayment speed estimation changes are influenced by observed changes in borrower behavior and other external factors that occur independent of interest rate changes.

(5) Represents changes due to collection/realization of expected cash flows over time.

 
Quarter ended  
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(in millions)   2015     2015     2015     2014     2014  
Amortized MSRs:
Balance, beginning of quarter $ 1,262 1,252 1,242 1,224 1,196
Purchases 45 29 22 38 47
Servicing from securitizations or asset transfers 35 46 50 43 29
Amortization     (65 )   (65 )   (62 )   (63 )   (48 )
Balance, end of quarter   $ 1,277     1,262     1,252     1,242     1,224  
Fair value of amortized MSRs:
Beginning of quarter $ 1,692 1,522 1,637 1,647 1,577
End of quarter     1,643     1,692     1,522     1,637     1,647  
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)

      Quarter ended  
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)       2015     2015     2015     2014     2014  
Servicing income, net:
Servicing fees (1) $ 990 1,026 1,010 996 919
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2) (A) (833 ) 1,053 (773 ) (1,099 ) 253
Other changes in fair value (3)         (504 )   (554 )   (533 )   (483 )   (462 )
Total changes in fair value of MSRs carried at fair value (1,337 ) 499 (1,306 ) (1,582 ) (209 )
Amortization (65 ) (65 ) (62 ) (63 ) (48 )
Net derivative gains (losses) from economic hedges (4)   (B)     1,086     (946 )   881     1,334     17  
Total servicing income, net       $ 674     514     523     685     679  
Market-related valuation changes to MSRs, net of hedge results (2)(4)   (A)+(B)   $ 253     107     108     235     270  
(1) Includes contractually specified servicing fees, late charges and other ancillary revenues.
(2) Refer to the changes in fair value MSRs table on the previous page for more detail.
(3) Represents changes due to collection/realization of expected cash flows over time.
(4) Represents results from economic hedges used to hedge the risk of changes in fair value of MSRs.
 
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(in billions)   2015     2015     2015     2014     2014  
Managed servicing portfolio (1):
Residential mortgage servicing:
Serviced for others $ 1,323 1,344 1,374 1,405 1,430
Owned loans serviced 346 347 344 342 342
Subserviced for others     4     5     5     5     5  
Total residential servicing     1,673     1,696     1,723     1,752     1,777  
Commercial mortgage servicing:
Serviced for others 470 465 461 456 440
Owned loans serviced 121 120 112 112 107
Subserviced for others     7     7     7     7     7  
Total commercial servicing     598     592     580     575     554  
Total managed servicing portfolio   $ 2,271     2,288     2,303     2,327     2,331  
Total serviced for others $ 1,793 1,809 1,835 1,861 1,870
Ratio of MSRs to related loans serviced for others 0.73 % 0.77 0.71 0.75 0.82
Weighted-average note rate (mortgage loans serviced for others)     4.39     4.41     4.43     4.45     4.47  

(1) The components of our managed servicing portfolio are presented at unpaid principal balance for loans serviced and subserviced for others and at book value for owned loans serviced.

 
Wells Fargo & Company and Subsidiaries

SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA

      Quarter ended
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
        2015   2015   2015   2014   2014
Net gains on mortgage loan origination/sales activities (in millions):
Residential (A) $ 736 814 711 605 603
Commercial 55 108 91 66 103
Residential pipeline and unsold/repurchased loan management (1)         124     269   222   159   248
Total       $ 915     1,191   1,024   830   954
Application data (in billions):
Wells Fargo first mortgage quarterly applications $ 73 81 93 66 64
Refinances as a percentage of applications 44 % 45 61 52 40
Wells Fargo first mortgage unclosed pipeline, at quarter end       $ 34     38   44   26   25
Residential real estate originations:
Purchases as a percentage of originations 66 % 54 45 60 70
Refinances as a percentage of originations         34     46   55   40   30
Total         100 %   100   100   100   100
Wells Fargo first mortgage loans (in billions):
Retail $ 32 36 28 27 27
Correspondent 22 25 20 16 20
Other (2)         1     1   1   1   1
Total quarter-to-date       $ 55     62   49   44   48
Held-for-sale (B) $ 39 46 37 31 36
Held-for-investment         16     16   12   13   12
Total quarter-to-date       $ 55     62   49   44   48
Total year-to-date       $ 166     111   49   175   131
Production margin on residential held-for-sale mortgage originations   (A)/(B)     1.88 %   1.75   1.93   1.94   1.70

(1) Primarily includes the results of GNMA loss mitigation activities, interest rate management activities and changes in estimate to the liability for mortgage loan repurchase losses.

(2) Consists of home equity loans and lines.

 
Wells Fargo & Company and Subsidiaries

CHANGES IN MORTGAGE REPURCHASE LIABILITY

 
  Quarter ended  
Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2015     2015     2015     2014     2014  
Balance, beginning of period $ 557 586 615 669 766
Provision for repurchase losses:
Loan sales 11 13 10 10 12
Change in estimate (1)     (17 )   (31 )   (26 )   (49 )   (93 )
Total reductions (6 ) (18 ) (16 ) (39 ) (81 )
Losses     (13 )   (11 )   (13 )   (15 )   (16 )
Balance, end of period   $ 538     557     586     615     669  

(1) Results from changes in investor demand, mortgage insurer practices, credit and the financial stability of correspondent lenders.

 

UNRESOLVED REPURCHASE DEMANDS AND MORTGAGE INSURANCE RESCISSIONS

      Mortgage  
insurance
Government rescissions
sponsored with no
($ in millions)   entities   Private   demand (1)   Total
September 30, 2015
Number of loans 210 59 103 372
Original loan balance (2) $ 46 12 26 84
June 30, 2015
Number of loans 385 148 107 640
Original loan balance (2) $ 83 24 27 134
March 31, 2015
Number of loans 526 161 108 795
Original loan balance (2) $ 118 29 28 175
December 31, 2014
Number of loans 546 173 120 839
Original loan balance (2) $ 118 34 31 183
September 30, 2014
Number of loans 426 322 233 981
Original loan balance (2)   $ 93   75   52   220

(1) As part of our representations and warranties in our loan sales contracts, we typically represent to GSEs and private investors that certain loans have mortgage insurance to the extent there are loans that have loan to value ratios in excess of 80% that require mortgage insurance. To the extent the mortgage insurance is rescinded by the mortgage insurer due to a claim of breach of a contractual representation or warranty, the lack of insurance may result in a repurchase demand from an investor. Similar to repurchase demands, we evaluate mortgage insurance rescission notices for validity and appeal for reinstatement if the rescission was not based on a contractual breach. When investor demands are received due to lack of mortgage insurance, they are reported as unresolved repurchase demands based on the applicable investor category for the loan (GSE or private).

(2) While the original loan balances related to these demands are presented above, the establishment of the repurchase liability is based on a combination of factors, such as our appeals success rates, reimbursement by correspondent and other third party originators, and projected loss severity, which is driven by the difference between the current loan balance and the estimated collateral value less costs to sell the property.

Wells Fargo & Company
Media
Ancel Martinez, 415-222-3858
Investors
Jim Rowe, 415-396-8216

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