Diluted EPS of $0.96 included net hedge
ineffectiveness accounting impact of $(0.07)
Wells Fargo & Company (NYSE:WFC):
- Full year 2016
- Net income of $21.9 billion, compared
with $22.9 billion in 2015
- Diluted earnings per share (EPS) of
$3.99, compared with $4.12
- Revenue of $88.3 billion, up 3
percent
- Return on assets (ROA) of 1.16 percent
and return on equity (ROE) of 11.49 percent
- Returned $12.5 billion to shareholders
through common stock dividends and net share repurchases
- Fourth quarter 2016
- Net income of $5.3 billion, compared
with $5.6 billion in fourth quarter 2015
- Included net hedge ineffectiveness
accounting impact of $(592) million
- Diluted EPS of $0.96, compared with
$1.00
- Included net hedge ineffectiveness
accounting impact of $(0.07)
- Revenue of $21.6 billion, consistent
with fourth quarter 2015
- Net interest income of $12.4 billion,
up 7 percent
- ROA of 1.08 percent and ROE of 10.94
percent
- Total average loans of $964.1 billion,
up $51.9 billion, or 6 percent
- Total average deposits of $1.3
trillion, up $67.3 billion, or 6 percent
- Provision expense of $805 million, down
$26 million, or 3%
- Nonaccrual loans of $10.4 billion,
down $998 million, or 9 percent
- Common Equity Tier 1 ratio (fully
phased-in) of 10.7 percent1
Selected Financial Information
Quarter ended Year ended Dec. 31,
Dec 31,
Sep 30,
Dec 31,
2016
2016
2015
2016 2015
Earnings Diluted earnings per
common share
$ 0.96 1.03 1.00
3.99 4.12 Wells
Fargo net income (in billions)
5.27 5.64 5.58
21.94
22.89 Return on assets (ROA)
1.08 % 1.17 1.24
1.16 1.31 Return on equity (ROE)
10.94 11.60 11.93
11.49 12.60 Return on average tangible common equity
(ROTCE)(a)
13.16 13.96 14.30
13.85 15.17
Asset
Quality Net charge-offs (annualized) as a % of average total
loans
0.37 % 0.33 0.36
0.37 0.33 Allowance for
credit losses as a % of total loans
1.30 1.32 1.37
1.30 1.37 Allowance for credit losses as a % of annualized
net charge-offs
348 396 380
356 433
Other
Revenue (in billions)
$ 21.6 22.3 21.6
88.3
86.1 Efficiency ratio (b)
61.2 % 59.4 58.4
59.3 58.1 Average loans (in billions)
$ 964.1
957.5 912.3
950.0 885.4 Average deposits (in billions)
1,284.2 1,261.5 1,216.8
1,250.6 1,194.1 Net interest
margin
2.87 % 2.82 2.92
2.86 2.95
(a) Tangible common equity is a non-GAAP
financial measure and represents total equity less preferred
equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible
assets associated with certain of our nonmarketable equity
investments but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible
common equity may differ among companies. Management believes that
return on average tangible common equity, which utilizes tangible
common equity, is a useful financial measure because it enables
investors and others to assess the Company's use of equity. For
additional information, including a corresponding reconciliation to
GAAP financial measures, see the "Tangible Common Equity" tables on
page 35.
(b) The efficiency ratio is noninterest
expense divided by total revenue (net interest income and
noninterest income).
Wells Fargo & Company (NYSE:WFC) reported diluted
earnings per common share of $3.99 for 2016, compared with $4.12
for 2015. Full year net income in 2016 was $21.9 billion, compared
with $22.9 billion in 2015. For fourth quarter 2016, net income was
$5.3 billion, or $0.96 per share, compared with
$5.6 billion, or $1.00 per share, for fourth quarter 2015, and
$5.6 billion, or $1.03 per share, for third quarter
2016.
Chief Executive Officer Tim Sloan said, "We continued to make
progress in the fourth quarter in rebuilding the trust of our
customers, team members and other key stakeholders. I am pleased
with the progress we have made in customer remediation, the ongoing
review of sales practices across the company and fulfilling our
regulatory requirements for sales practices matters. As planned, we
launched our new Retail Bank compensation program this month, which
is based on building lifelong relationships with our customers.
While we have more work to do, I am proud of the effort of our
entire team to make things right for our customers and team members
and to continue building a better Wells Fargo for the future.”
Chief Financial Officer John Shrewsberry said, “Wells Fargo had
solid underlying performance in the fourth quarter as we continued
to benefit from our diversified business model. Net interest income
increased from the prior quarter, largely driven by growth in loans
and investments, as well as higher interest rates. Noninterest
income declined from the prior quarter due to net hedge accounting
ineffectiveness associated with our hedging of long-term debt as
part of our asset/liability management program, as well as lower
market-sensitive revenue. Other sources of noninterest income were
diversified and stable with the prior quarter. Credit quality
remained solid in the quarter, and we returned $3.0 billion to
shareholders in the quarter, with a full year 2016 net payout
ratio2 of 61 percent."
Net Interest Income
Net interest income in fourth quarter 2016 increased $450
million from third quarter 2016 to $12.4 billion, primarily due to
growth in loans and investment securities, higher interest income
on trading assets, higher variable income including periodic
dividends and fees, and a modest benefit from higher interest rates
in the quarter.
Net interest margin was 2.87 percent, up 5 basis points from
third quarter 2016, driven by growth in loans, investment
securities and trading assets, and the impact from higher interest
rates. Income from variable sources contributed approximately two
basis points in the quarter. These benefits were partially offset
by growth in funding balances, primarily long-term debt and
deposits.
Noninterest Income
Noninterest income in the fourth quarter was $9.2 billion,
compared with $10.4 billion in third quarter 2016. Fee income in
many of the businesses in the quarter was stable compared with the
prior quarter; however, linked-quarter results included a $592
million loss due to the impact of higher interest rates and
currency movements on hedging results (net hedge ineffectiveness
accounting loss) reflected in Other income. The linked-quarter
decline also reflected decreases in trading income and mortgage
banking fees, partially offset by higher equity gains and stronger
investment banking fees.
Net loss from trading activities was $109 million in the
fourth quarter, compared with a net gain of $415 million in
the third quarter. Of the total linked-quarter decline of
$524 million, $223 million resulted from a decrease in
secondary trading, reflecting lower client volumes compared with a
strong third quarter, as well as seasonality and fewer trading days
in the quarter. Market-driven changes in credit spreads and higher
swap rates resulted in a $61 million decline from credit valuation
adjustments (CVA) in the quarter. Additionally, $204 million of the
decline was associated with items that were offset in other areas,
and were therefore neutral to net income:
- $98 million of losses resulted from
certain hedged trading positions in our equity and residential
mortgage-backed security books in which dividend and interest
payments were recognized in net interest income and corresponding
declines in the value of associated hedges were reflected in
trading losses.
- Deferred compensation trading gains,
which were largely offset in employee benefits expense, declined
$106 million from the third quarter.
Mortgage banking noninterest income was $1.4 billion, compared
with $1.7 billion in third quarter 2016. Residential mortgage loan
originations were $72 billion in the fourth quarter, up from
$70 billion in the third quarter. The production margin on
residential held-for-sale mortgage loan originations3 was
1.68 percent, down from 1.81 percent in the third
quarter. Mortgage servicing income declined to $196 million in the
fourth quarter from $359 million in the third quarter,
primarily due to higher unreimbursed servicing costs.
Other income was $(382) million, compared with $315 million in
third quarter, and included $592 million in hedge ineffectiveness
losses, net of related economic hedges, resulting from certain key
interest rate and foreign currency fluctuations. Full year 2016 net
hedge ineffectiveness losses were $15 million, as prior quarters
included net gains. Substantially all of the ineffectiveness
related to hedges of U.S. dollar and non-U.S. dollar long-term
debt.
Background on Hedge Ineffectiveness
As part of Wells Fargo's ongoing funding strategy, the Company
is a regular issuer of long-term debt, which typically is fixed
rate in order to meet the demands of debt investors. As part of the
Company’s asset/liability management program, however, this fixed
rate is typically swapped to floating rate in order to balance the
Company's deposit-oriented liability structure to better align with
the interest rate sensitivity characteristics of the Company's
assets. While the majority of long-term debt is issued in U.S.
dollars, non-U.S. dollar issuances are also used to diversify
funding sources. Any non-U.S. dollar issuance is either swapped to
U.S. dollars or is identified to be directly funding non-U.S.
dollar assets. While the Company believes this hedging strategy is
prudent from an asset/liability management perspective, it is
generally not possible to achieve a perfect accounting hedge due to
differences in the required valuation measurement of the hedging
instrument, such as an interest rate swap, and the hedged risk
component of the Company's long-term debt.
From an accounting standpoint, the measurement of the
“effectiveness” of the hedge occurs throughout the quarter up to
and including the last day of the quarter and results, therefore,
can be affected by that point-in time calculation. While
the hedge ineffectiveness recognized over the life of hedging
relationships is expected to be zero as long as hedge accounting is
maintained and the hedges are held to maturity, periodic
ineffectiveness is recognized in other noninterest income as
interest rate and foreign currency fluctuations occur. In
first quarter 2016, for example, a sharp decline in interest rates
and foreign currency fluctuations drove a net hedge accounting gain
of $379 million in the Company’s other noninterest income.
Conversely, the net hedge accounting losses in fourth quarter 2016
were driven by a sharp increase in certain interest rates and
foreign currency fluctuations. Reported results in any quarter can
also be affected by a related but separate economic hedging
strategy the Company employs, also utilizing interest rate swaps,
to partially offset the periodic volatility caused by the required
effectiveness measurement.
The Financial Accounting Standards Board issued an exposure
draft on hedge accounting guidelines and is expected to issue new
guidance in 2017. If issued in its current form, the interest
rate-related ineffectiveness associated with the Company's
long-term debt hedges would be significantly reduced.
Noninterest Expense
Noninterest expense in the fourth quarter declined $53 million
from the prior quarter to $13.2 billion, primarily due to lower
operating losses, charitable donations, which were elevated in the
third quarter due to a $107 million donation to the Wells
Fargo Foundation, and deferred compensation expense (included in
employee benefits expense and largely offset in revenue). Fourth
quarter expenses included typically higher outside professional
services, equipment, and advertising. Fourth quarter foreclosed
asset expense increased from the third quarter which included an
elevated level of commercial real estate recoveries. The efficiency
ratio increased to 61.2 percent in fourth quarter 2016, compared
with 59.4 percent in the prior quarter, primarily due to the
impact of hedge ineffectiveness losses on revenue. The efficiency
ratio for full year 2016 was 59.3 percent. The Company expects the
efficiency ratio to remain at an elevated level.
Loans
Total loans were $967.6 billion at December 31, 2016, up
$6.3 billion from September 30, 2016. Loan growth in the
quarter was affected by the deconsolidation of certain previously
sold reverse mortgage loans, which resulted from the sale of the
related servicing, and reduced real estate 1-4 family first
mortgages by $3.8 billion (offset in long-term
debt). Commercial and industrial, commercial real estate,
credit card and lease financing all grew in the quarter, while real
estate 1-4 family junior lien mortgage and automobile declined.
Total average loans were $964.1 billion in the fourth quarter,
up $6.7 billion from the prior quarter.
Period-End Loan Balances
Dec 31,
Sep 30,
Jun 30,
Mar 31,
Dec 31,
(in millions)
2016
2016
2016
2016
2015
Commercial
$ 506,536 496,454 494,538 488,205 456,583
Consumer
461,068 464,872 462,619
459,053 459,976 Total loans
$ 967,604
961,326 957,157 947,258 916,559 Change
from prior quarter
$ 6,278 4,169
9,899 30,699 13,326
Investment Securities
Investment securities were $407.9 billion at December 31,
2016, up $17.1 billion from third quarter, as approximately $44
billion of purchases, predominantly federal agency mortgage-backed
securities in the available-for-sale portfolio, were partially
offset by run-off.
Net unrealized losses on available-for-sale securities were $1.8
billion at December 31, 2016, compared with net unrealized
gains on available-for-sale securities of $4.5 billion at
September 30, 2016, as the impact from higher interest rates
was partially offset by tighter credit spreads.
Deposits
Total average deposits for fourth quarter 2016 were $1.3
trillion, up 2 percent from the prior quarter, driven by both
commercial and consumer growth. The average deposit cost for fourth
quarter 2016 was 12 basis points, up 1 basis point from the
prior quarter.
Capital
Capital levels remained strong in the fourth quarter, with a
Common Equity Tier 1 ratio (fully phased-in) of 10.7 percent1.
While flat from the prior quarter, Common Equity Tier 1 experienced
a decline due to changes in unrealized gains/losses recognized in
Other comprehensive income (OCI) resulting from higher interest
rates experienced in the fourth quarter, which were largely offset
by a decline in standardized risk-weighted assets, primarily due to
a decrease in the Company's exposure to counterparty risk. In
fourth quarter 2016, the Company repurchased 24.9 million
shares of its common stock and entered into a $750 million forward
repurchase transaction, which settled on January 12, 2017, for 14.7
million shares. The Company paid a quarterly common stock dividend
of $0.38 per share, up from $0.375 per share a year
ago.
Credit Quality
“Credit results were stable in the fourth quarter and overall
credit quality continued to be driven by strong performance in the
commercial and consumer real estate portfolios," said Chief Risk
Officer Mike Loughlin. "Continued improvement in residential real
estate and stabilization in oil and gas industry conditions drove a
$100 million reserve release4 in the fourth quarter."
Net Loan Charge-offs
The quarterly loss rate of 0.37 percent (annualized) reflected
commercial losses of 0.20 percent and consumer losses of 0.56
percent. Credit losses were $905 million in fourth quarter 2016, up
$100 million, from third quarter 2016. Consumer losses increased
$64 million, driven by losses in the credit card, automobile
and other revolving credit and installment portfolios. Commercial
losses were up $36 million, driven by $32 million in lower
recoveries.
Net Loan Charge-Offs
Quarter ended December 31,
2016 September 30, 2016
June 30, 2016
Net loan
As a % of
Net loan
As a % of
Net loan
As a % of
charge-
average
charge-
average
charge-
average
($ in millions)
offs
loans (a)
offs
loans (a)
offs
loans (a)
Commercial: Commercial and industrial $ 256 0.31 % $
259 0.32 % $ 368 0.46 % Real estate mortgage (12 ) (0.04 ) (28 )
(0.09 ) (20 ) (0.06 ) Real estate construction (8 ) (0.13 ) (18 )
(0.32 ) (3 ) (0.06 ) Lease financing 15 0.32 2
0.04 12 0.27
Total commercial 251
0.20 215 0.17 357
0.29 Consumer: Real estate 1-4 family first mortgage
(3 ) — 20 0.03 14
0.02
Real estate 1-4 family junior lien mortgage 44 0.38 49 0.40 62 0.49
Credit card 275 3.09 245 2.82 270 3.25 Automobile 166 1.05 137 0.87
90 0.59 Other revolving credit and installment 172
1.70 139 1.40 131 1.32
Total consumer
654 0.56 590 0.51
567 0.49 Total $
905 0.37 % $ 805
0.33 % $ 924 0.39
%
(a) Quarterly net charge-offs as a
percentage of average loans are annualized. See explanation on page
31 of the accounting for purchased credit-impaired (PCI) loans and
the impact on selected financial ratios.
Nonperforming Assets
Nonperforming assets decreased $644 million from third quarter
2016 to $11.4 billion. Nonaccrual loans decreased $602 million from
third quarter to $10.4 billion reflecting lower consumer real
estate, commercial and industrial, and commercial real estate
nonaccruals.
Nonperforming Assets (Nonaccrual Loans
and Foreclosed Assets)
December 31, 2016 September
30, 2016 June 30, 2016
As a
As a
As a
% of
% of
% of
Total
total
Total
total
Total
total
($ in millions)
balances
loans
balances
loans
balances
loans
Commercial: Commercial and industrial $ 3,216 0.97 %
$ 3,331 1.03 % $ 3,464 1.07 % Real estate mortgage 685 0.52 780
0.60 872 0.68 Real estate construction 43 0.18 59 0.25 59 0.25
Lease financing 115 0.60 92 0.49 112
0.59
Total commercial 4,059 0.80
4,262 0.86 4,507 0.91
Consumer: Real estate 1-4 family first mortgage 4,962 1.80
5,310 1.91 5,970 2.15 Real estate 1-4 family junior lien mortgage
1,206 2.61 1,259 2.62 1,330 2.67 Automobile 106 0.17 108 0.17 111
0.18 Other revolving credit and installment 51 0.13
47 0.12 45 0.11
Total consumer
6,325 1.37 6,724 1.45
7,456 1.61 Total nonaccrual loans
10,384 1.07 10,986
1.14 11,963 1.25 Foreclosed
assets: Government insured/guaranteed 197 282 321
Non-government insured/guaranteed 781 738 796
Total foreclosed assets 978
1,020 1,117 Total nonperforming
assets $ 11,362 1.17
% $ 12,006 1.25 %
$ 13,080 1.37 % Change from
prior quarter: Total nonaccrual loans $ (602 ) $ (977 ) $ (271 )
Total nonperforming assets (644 )
(1,074 ) (433 )
Allowance for Credit Losses
The allowance for credit losses, including the allowance for
unfunded commitments, totaled $12.5 billion at December 31,
2016, which was down $154 million from September 30, 2016. The
allowance coverage for total loans was 1.30 percent, compared
with 1.32 percent in third quarter 2016. The allowance covered 3.5
times annualized fourth quarter net charge-offs, compared with 4.0
times in the prior quarter. The allowance coverage for nonaccrual
loans was 121 percent at December 31, 2016, compared with
116 percent at September 30, 2016. “We believe the
allowance was appropriate for losses inherent in the loan portfolio
at December 31, 2016,” said Loughlin.
Business Segment Performance
Wells Fargo defines its operating segments by product type and
customer segment. Effective fourth quarter 2016, we realigned some
personnel and business activities from Wholesale Banking to
Community Banking, as a result of the formation of the new
Payments, Virtual Solutions, and Innovation Group. Results for
these operating segments reflect the shift prospectively from
November 1, 2016. Segment net income for each of the three business
segments was:
Quarter ended
Dec 31,
Sep 30,
Dec 31,
(in millions)
2016
2016
2015
Community Banking
$ 2,733 3,227 3,169 Wholesale
Banking
2,194 2,047 2,104 Wealth and Investment Management
653 677 595
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
Dec 31,
Sep 30,
Dec 31,
(in millions)
2016
2016
2015
Total revenue
$ 11,661 12,387 12,330 Provision for
credit losses
631 651 704 Noninterest expense
6,985
6,953 6,893 Segment net income
2,733 3,227 3,169 (in
billions) Average loans
488.1 489.2 482.2 Average assets
1,000.7 993.6 921.4 Average deposits
709.8
708.0 663.7
Community Banking reported net income of $2.7 billion, down
$494 million, or 15 percent, from third quarter 2016. Revenue
of $11.7 billion decreased $726 million, or 6 percent, from
third quarter 2016 due to lower other income (hedge
ineffectiveness), mortgage banking revenue, and deposit service
charges, partially offset by higher net interest income, market
sensitive revenue, primarily higher gains on sales of debt
securities and equity investments, and other fees. Noninterest
expense increased $32 million, compared with third quarter
2016, due to higher equipment, project-related, and advertising
expense, which are typically elevated in the fourth quarter, as
well as higher legal expense. The increase in noninterest expense
was partially offset by lower operating losses and a donation to
the Wells Fargo Foundation in the prior quarter. The provision for
credit losses decreased $20 million from the prior
quarter.
Net income was down $436 million, or 14 percent, from fourth
quarter 2015. Revenue decreased $669 million, or 5 percent,
compared with a year ago due to lower other income (hedge
ineffectiveness), mortgage banking revenue, and gains on equity
investments, partially offset by higher net interest income and
other fees. Noninterest expense increased $92 million, or 1
percent, from a year ago driven by higher personnel, legal,
project-related, and FDIC expense, partially offset by lower
operating losses. The provision for credit losses decreased
$73 million from a year ago due to improvement in the consumer
real estate portfolios.
Retail Banking and Consumer Payments
- We recently launched a new compensation
plan in our Retail Bank focused on customer service, growth in
primary customers, household relationship growth and risk
management. These measures are consistent with other success
metrics we have introduced in the recent past and, as part of this
evolution, the cross-sell metric will not be included going
forward.
- Branch customer experience survey
scores continued to improve throughout the fourth quarter, with
many metrics reaching close to pre-settlement ranges by the end of
December; loyalty, which has also shown a strong improvement
trajectory, will require a longer period to recover previous
highs.
- Primary consumer checking customers5 up
3.5 percent year-over-year6
- Primary consumer checking customers5 in
December up 3.0 percent year-over-year
- Debit card purchase volume7 of $78.4
billion in fourth quarter, up 7 percent year-over-year
- Credit card purchase volume of $20.2
billion in fourth quarter, up 7 percent year-over-year
- Credit card penetration in retail
banking households rose to 45.5 percent, up from 45.4 percent in
prior year6,8
- 27.4 million digital (online and
mobile) active customers, including 19.6 million mobile active
users6,9
Consumer Lending
- Auto originations of $6.4 billion in
fourth quarter, down 21 percent from prior quarter and down
15 percent from prior year
- Home Lending
- Originations of $72 billion, up
from $70 billion in prior quarter
- Applications of $75 billion, down
from $100 billion in prior quarter
- Application pipeline of
$30 billion at quarter end, down from $50 billion at September
30, 2016
Wholesale Banking provides
financial solutions to businesses across the United States and
globally with annual sales generally in excess of $5 million.
Products and businesses include Business Banking, Middle Market
Commercial Banking, Government and Institutional Banking, Corporate
Banking, Commercial Real Estate, Treasury Management, Wells Fargo
Capital Finance, Insurance, International, Real Estate Capital
Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment
Finance, Wells Fargo Securities, Principal Investments and Asset
Backed Finance.
Selected Financial Information
Quarter ended
Dec 31,
Sep 30,
Dec 31,
(in millions)
2016
2016
2015
Total revenue
$ 7,153 7,147 6,559 Provision for
credit losses
168 157 126 Noninterest expense
4,002
4,120 3,491 Segment net income
2,194 2,047 2,104 (in
billions) Average loans
461.5 454.3 417.0 Average assets
811.9 794.2 755.4 Average deposits
459.2
441.2 449.3
Wholesale Banking reported net income of $2.2 billion, up
$147 million, or 7 percent, from third quarter 2016. Revenue
of $7.2 billion increased $6 million as higher net
interest income, investment banking fees, equity investment gains
and commercial real estate brokerage fees were partially offset by
lower sales and trading results, and lower mortgage banking fees in
multi-family capital and structured real estate. Noninterest
expense decreased $118 million, or 3 percent, from the prior
quarter primarily due to lower personnel expense and operating
losses. The provision for credit losses increased $11 million
from the prior quarter on lower recoveries.
Net income was up $90 million, or 4 percent, from fourth
quarter 2015. Revenue increased $594 million, or
9 percent, from fourth quarter 2015, on increased net interest
income driven by strong loan growth, including the GE Capital
portfolio acquisitions, and higher trading and other earning
assets. Noninterest income was down 1 percent from the prior
year due to lower insurance fees driven by the sale of our crop
insurance business in first quarter 2016, lower gains from trading
activities, and lower gains on debt securities, partially offset by
higher leasing income related to the GE Capital portfolio
acquisitions and strong investment banking fees. Noninterest
expense increased $511 million, or 15 percent, from a
year ago primarily due to the GE Capital portfolio acquisitions and
higher expenses related to growth initiatives, compliance, and
regulatory requirements. The provision for credit losses increased
$42 million from a year ago primarily due to higher oil and
gas net charge-offs.
- Average loans increased 11 percent from
fourth quarter 2015, on broad-based growth, including asset-backed
finance, commercial real estate, corporate banking, equipment
finance, government and institutional banking, international, and
structured real estate as well as the GE Capital portfolio
acquisitions
- Treasury management revenue up 4
percent from fourth quarter 2015
Wealth and Investment
Management (WIM) provides a full range of personalized
wealth management, investment and retirement products and services
to clients across U.S. based businesses including Wells Fargo
Advisors, The Private Bank, Abbot Downing, Wells Fargo
Institutional Retirement and Trust, and Wells Fargo Asset
Management. We deliver financial planning, private banking, credit,
investment management and fiduciary services to high-net worth and
ultra-high-net worth individuals and families. We also serve
customers’ brokerage needs, supply retirement and trust services to
institutional clients and provide investment management
capabilities delivered to global institutional clients through
separate accounts and the Wells Fargo Funds.
Selected Financial Information
Quarter ended
Dec 31,
Sep 30,
Dec 31,
(in millions)
2016
2016
2015
Total revenue
$ 4,074 4,099 3,947 Provision
(reversal of provision) for credit losses
3 4 (6 )
Noninterest expense
3,042 2,999 2,998 Segment net income
653 677 595 (in billions) Average loans
70.0 68.4
63.0 Average assets
220.4 212.1 197.9 Average deposits
194.9 189.2 177.9
Wealth and Investment Management reported net income of
$653 million, down $24 million, or 4 percent, from third
quarter 2016. Revenue of $4.1 billion decreased
$25 million, or 1 percent, from the prior quarter, primarily
due to lower deferred compensation plan investment results (offset
in employee benefits expense), transaction revenue and other fee
income, partially offset by higher net interest income and
asset-based fees. Noninterest expense increased $43 million,
or 1 percent, from the prior quarter, largely driven by higher
operating losses and other non-personnel expenses, partially offset
by lower deferred compensation plan expense (offset in trading
revenue). The provision for credit losses decreased $1 million
from third quarter 2016.
Net income was up $58 million, or 10 percent, from fourth
quarter 2015. Revenue increased $127 million, or
3 percent, from a year ago primarily driven by higher net
interest income and asset-based fees, partially offset by lower
transaction revenue and deferred compensation plan investment
results (offset in employee benefits expense). Noninterest expense
increased $44 million, or 1 percent, from a year ago,
primarily due to higher broker commissions and non-personnel
expenses, partially offset by lower deferred compensation plan
expense (offset in trading revenue). The provision for credit
losses increased $9 million from a year ago.
Retail Brokerage
- Client assets of $1.5 trillion, up 7
percent from prior year
- Advisory assets of $464 billion, up 10
percent from prior year, primarily driven by higher market
valuations and positive net flows
- Strong loan growth, with average
balances up 16 percent from prior year largely due to continued
growth in non-conforming mortgage loans and security-based
lending
Wealth Management
- Client assets of $231 billion, up 3
percent from prior year
- Average loan balances up 9 percent over
prior year primarily driven by continued growth in non-conforming
mortgage loans, security-based lending and commercial loans
Retirement
- IRA assets of $379 billion, up 7
percent from prior year
- Institutional Retirement plan assets of
$351 billion, up 5 percent from prior year
Asset Management
- Total assets under management of $482
billion, down 2 percent from prior year primarily due to equity and
money market net outflows, partially offset by higher market
valuations, fixed income inflows and assets acquired during the
quarter
Conference Call
The Company will host a live conference call on Friday, January
13, at 8:30 a.m. PT (11:30 a.m. ET). You may participate by dialing
866-872-5161 (U.S. and Canada) or 706-643-1962 (International). The
call will also be available online at
https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/
and at https://engage.vevent.com/rt/wells_fargo_ao~31502149.
A replay of the conference call will be available beginning at
11:30 a.m. PT (2:30 p.m. ET) on Friday, January 13 through Friday,
January 27. Please dial 855-859-2056 (U.S. and Canada) or
404-537-3406 (International) and enter Conference ID #31502149. 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~31502149.
Endnotes
1 See table on page 36 for more information on Common Equity Tier
1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate
and is calculated assuming the full phase-in of the Basel III
capital rules. 2 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. 3 Production margin represents net gains on
residential mortgage loan origination/sales activities divided by
total residential held-for-sale mortgage originations. See the
Selected Five Quarter Residential Mortgage Production Data table on
page 41 for more information. 4 Reserve build represents the amount
by which the provision for credit losses exceeds net charge-offs,
while reserve release represents the amount by which net
charge-offs exceed the provision for credit losses. 5 Customers who
actively use their checking account with transactions such as debit
card purchases, online bill payments, and direct deposit. 6 Data as
of November 2016, comparisons with November 2015. 7 Combined
consumer and business debit card purchase volume dollars. 8 Credit
card penetration defined as the percentage of Retail Banking
households that have a credit card with Wells Fargo. Effective
second quarter 2016, Retail Banking households reflect only those
households that maintain a retail checking account, which we
believe provides the foundation for long-term retail banking
relationships. Prior period metrics have been revised to conform
with the updated definition of Retail Banking households. Credit
card household penetration rates have not been adjusted to reflect
the impact of the approximately 565,000 potentially unauthorized
accounts identified by an independent consulting firm because the
maximum impact in any one quarter was not greater than 86 basis
points, or approximately 2 percent. 9 Primarily includes retail
banking, consumer lending, small business and business banking
customers.
Forward-Looking Statements
This document contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. In
addition, we may make forward-looking statements in our other
documents filed or furnished with the SEC, and our management may
make forward-looking statements orally to analysts, investors,
representatives of the media and others. Forward-looking statements
can be identified by words such as “anticipates,” “intends,”
“plans,” “seeks,” “believes,” “estimates,” “expects,” “target,”
“projects,” “outlook,” “forecast,” “will,” “may,” “could,”
“should,” “can” and similar references to future periods. In
particular, forward-looking statements include, but are not limited
to, statements we make about: (i) the future operating or
financial performance of the Company, including our outlook for
future growth; (ii) our noninterest expense and efficiency
ratio; (iii) future credit quality and performance, including
our expectations regarding future loan losses and allowance levels;
(iv) the appropriateness of the allowance for credit losses;
(v) our expectations regarding net interest income and net
interest margin; (vi) loan growth or the reduction or
mitigation of risk in our loan portfolios; (vii) future
capital levels or targets and our estimated Common Equity Tier 1
ratio under Basel III capital standards; (viii) the
performance of our mortgage business and any related exposures;
(ix) the expected outcome and impact of legal, regulatory and
legislative developments, as well as our expectations regarding
compliance therewith; (x) future common stock dividends,
common share repurchases and other uses of capital; (xi) our
targeted range for return on assets and return on equity;
(xii) the outcome of contingencies, such as legal proceedings;
and (xiii) the Company’s plans, objectives and strategies.
Forward-looking statements are not based on historical facts but
instead represent our current expectations and assumptions
regarding our business, the economy and other future conditions.
Because forward-looking statements relate to the future, they are
subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict. Our actual results may
differ materially from those contemplated by the forward-looking
statements. We caution you, therefore, against relying on any of
these forward-looking statements. They are neither statements of
historical fact nor guarantees or assurances of future performance.
While there is no assurance that any list of risks and
uncertainties or risk factors is complete, important factors that
could cause actual results to differ materially from those in the
forward-looking statements include the following, without
limitation:
- current and future economic and market
conditions, including the effects of declines in housing prices,
high unemployment rates, U.S. fiscal debt, budget and tax matters,
geopolitical matters, and the overall slowdown in global economic
growth;
- our capital and liquidity requirements
(including under regulatory capital standards, such as the Basel
III capital standards) and our ability to generate capital
internally or raise capital on favorable terms;
- financial services reform and other
current, pending or future legislation or regulation that could
have a negative effect on our revenue and businesses, including the
Dodd-Frank Act and other legislation and regulation relating to
bank products and services;
- the extent of our success in our loan
modification efforts, as well as the effects of regulatory
requirements or guidance regarding loan modifications;
- the amount of mortgage loan repurchase
demands that we receive and our ability to satisfy any such demands
without having to repurchase loans related thereto or otherwise
indemnify or reimburse third parties, and the credit quality of or
losses on such repurchased mortgage loans;
- negative effects relating to our
mortgage servicing and foreclosure practices, as well as changes in
industry standards or practices, regulatory or judicial
requirements, penalties or fines, increased servicing and other
costs or obligations, including loan modification requirements, or
delays or moratoriums on foreclosures;
- our ability to realize our efficiency
ratio target as part of our expense management initiatives,
including as a result of business and economic cyclicality,
seasonality, changes in our business composition and operating
environment, growth in our businesses and/or acquisitions, and
unexpected expenses relating to, among other things, litigation and
regulatory matters;
- the effect of the current low interest
rate environment or changes in interest rates on our net interest
income, net interest margin and our mortgage originations, mortgage
servicing rights and mortgages held for sale;
- significant turbulence or a disruption
in the capital or financial markets, which could result in, among
other things, reduced investor demand for mortgage loans, a
reduction in the availability of funding or increased funding
costs, and declines in asset values and/or recognition of
other-than-temporary impairment on securities held in our
investment securities portfolio;
- the effect of a fall in stock market
prices on our investment banking business and our fee income from
our brokerage, asset and wealth management businesses;
- negative effects from the retail
banking sales practices matter, including on our legal, operational
and compliance costs, our ability to engage in certain business
activities or offer certain products or services, our ability to
keep and attract customers, our ability to attract and retain
qualified team members, and our reputation;
- reputational damage from negative
publicity, protests, fines, penalties and other negative
consequences from regulatory violations and legal actions;
- a failure in or breach of our
operational or security systems or infrastructure, or those of our
third party vendors or other service providers, including as a
result of cyber attacks;
- the effect of changes in the level of
checking or savings account deposits on our funding costs and net
interest margin;
- fiscal and monetary policies of the
Federal Reserve Board; and
- the other risk factors and
uncertainties described under “Risk Factors” in our Annual Report
on Form 10-K for the year ended December 31, 2015 and in our
Quarterly Report on Form 10-Q for the quarter ended September 30,
2016.
In addition to the above factors, we also caution that the
amount and timing of any future common stock dividends or
repurchases will depend on the earnings, cash requirements and
financial condition of the Company, market conditions, capital
requirements (including under Basel capital standards), common
stock issuance requirements, applicable law and regulations
(including federal securities laws and federal banking
regulations), and other factors deemed relevant by the Company’s
Board of Directors, and may be subject to regulatory approval or
conditions.
For more information about factors that could cause actual
results to differ materially from our expectations, refer to our
reports filed with the Securities and Exchange Commission,
including the discussion under “Risk Factors” in our Annual Report
on Form 10-K for the year ended December 31, 2015 and in
our Quarterly Report on Form 10-Q for the quarter ended September
30, 2016, as filed with the Securities and Exchange Commission and
available on its website at www.sec.gov.
Any forward-looking statement made by us speaks only as of the
date on which it is made. Factors or events that could cause our
actual results to differ may emerge from time to time, and it is
not possible for us to predict all of them. We undertake no
obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or
otherwise, except as may be required by law.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified,
community-based financial services company with $1.9 trillion
in assets. Founded in 1852 and headquartered in San Francisco,
Wells Fargo provides banking, insurance, investments, mortgage, and
consumer and commercial finance through more than 8,600 locations,
13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and
has offices in 42 countries and territories to support customers
who conduct business in the global economy. With approximately
269,000 team members, Wells Fargo serves one in three households in
the United States. Wells Fargo & Company was ranked No. 27 on
Fortune’s 2016 rankings of America’s largest corporations. Wells
Fargo’s vision is to satisfy our customers’ financial needs and
help them succeed financially.
Wells Fargo & Company and
SubsidiariesQUARTERLY FINANCIAL DATATABLE OF
CONTENTS
Pages
Summary
Information
Summary Financial Data
16
Income
Consolidated Statement of Income 18 Consolidated Statement of
Comprehensive Income 20 Condensed Consolidated Statement of Changes
in Total Equity 20 Average Balances, Yields and Rates Paid
(Taxable-Equivalent Basis) 21 Five Quarter Average Balances, Yields
and Rates Paid (Taxable-Equivalent Basis) 23 Noninterest Income and
Noninterest Expense 24
Balance
Sheet
Consolidated Balance Sheet 26 Investment Securities 28
Loans
Loans 28 Nonperforming Assets 29 Loans 90 Days or More Past Due and
Still Accruing 30 Purchased Credit-Impaired Loans 31 Pick-A-Pay
Portfolio 32 Changes in Allowance for Credit Losses 34
Equity
Tangible Common Equity 35 Common Equity Tier 1 Under Basel III 36
Operating
Segments
Operating Segment Results 37
Other
Mortgage Servicing and other related data 39
Wells Fargo & Company and
SubsidiariesSUMMARY FINANCIAL DATA
% Change
Quarter ended
Dec 31, 2016 from
Year ended
Dec 31,
Sep 30,
Dec 31,
Sep 30,
Dec 31,
Dec 31,
Dec 31,
%
($ in millions, except per share amounts)
2016
2016
2015
2016
2015
2016
2015
Change
For the Period Wells Fargo net income
$
5,274 5,644 5,575 (7 )% (5 )
$ 21,938 22,894
(4 )% Wells Fargo net income applicable to common stock
4,872 5,243 5,203 (7 ) (6 )
20,373 21,470 (5 )
Diluted earnings per common share
0.96 1.03 1.00 (7 ) (4 )
3.99 4.12 (3 ) Profitability ratios (annualized): Wells
Fargo net income to average assets (ROA)
1.08 % 1.17
1.24 (8 ) (13 )
1.16 % 1.31 (11 ) Wells Fargo net
income applicable to common stock to average Wells Fargo common
stockholders’ equity (ROE)
10.94 11.60 11.93 (6 ) (8 )
11.49 12.60 (9 ) Return on average tangible common equity
(ROTCE)(1)
13.16 13.96 14.30 (6 ) (8 )
13.85 15.17 (9
) Efficiency ratio (2)
61.2 59.4 58.4 3 5
59.3 58.1 2
Total revenue
$ 21,582 22,328 21,586 (3 ) —
$
88,267 86,057 3 Pre-tax pre-provision profit (PTPP) (3)
8,367 9,060 8,987 (8 ) (7 )
35,890 36,083 (1 )
Dividends declared per common share
0.380 0.380 0.375 — 1
1.515 1.475 3 Average common shares outstanding
5,025.6 5,043.4 5,108.5 — (2 )
5,052.8 5,136.5 (2 )
Diluted average common shares outstanding
5,078.2 5,094.6
5,177.9 — (2 )
5,108.3 5,209.8 (2 ) Average loans
$
964,147 957,484 912,280 1 6
$ 949,960 885,432
7 Average assets
1,944,250 1,914,586 1,787,287 2 9
1,885,441 1,742,919 8 Average total deposits
1,284,158 1,261,527 1,216,809 2 6
1,250,566 1,194,073
5 Average consumer and small business banking deposits (4)
749,946 739,066 696,484 1 8
732,620 680,221 8 Net
interest margin
2.87 % 2.82 2.92 2 (2 )
2.86
% 2.95 (3 )
At Period End Investment securities
$ 407,947 390,832 347,555 4 17
$
407,947 347,555 17 Loans
967,604 961,326 916,559 1 6
967,604 916,559 6 Allowance for loan losses
11,419
11,583 11,545 (1 ) (1 )
11,419 11,545 (1 ) Goodwill
26,693 26,688 25,529 — 5
26,693 25,529 5 Assets
1,930,115 1,942,124 1,787,632 (1 ) 8
1,930,115
1,787,632 8 Deposits
1,306,079 1,275,894 1,223,312 2 7
1,306,079 1,223,312 7 Common stockholders' equity
176,469 179,916 172,036 (2 ) 3
176,469 172,036 3
Wells Fargo stockholders’ equity
199,581 203,028 192,998 (2
) 3
199,581 192,998 3 Total equity
200,497 203,958
193,891 (2 ) 3
200,497 193,891 3 Tangible common equity (1)
146,737 149,829 143,337 (2 ) 2
146,737 143,337 2
Common shares outstanding
5,016.1 5,023.9 5,092.1 — (1 )
5,016.1 5,092.1 (1 ) Book value per common share (5)
$ 35.18 35.81 33.78 (2 ) 4
$ 35.18
33.78 4 Tangible book value per common share (1)(5)
29.25
29.82 28.15 (2 ) 4
29.25 28.15 4 Common stock price: High
58.02 51.00 56.34 14 3
58.02 58.77 (1 ) Low
43.55 44.10 49.51 (1 ) (12 )
43.55 47.75 (9 ) Period
end
55.11 44.28 54.36 24 1
55.11 54.36 1 Team members
(active, full-time equivalent)
269,100
268,800 264,700 — 2
269,100 264,700 2
(1) Tangible common equity is a non-GAAP
financial measure and represents total equity less preferred
equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible
assets associated with certain of our nonmarketable equity
investments but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible
common equity may differ among companies. Management believes that
return on average tangible common equity and tangible book value
per common share, which utilize tangible common equity, are useful
financial measures because they enable investors and others to
assess the Company's use of equity. For additional information,
including a corresponding reconciliation to GAAP financial
measures, see the "Tangible Common Equity" tables on page 35.
(2) The efficiency ratio is noninterest
expense divided by total revenue (net interest income and
noninterest income).
(3) Pre-tax pre-provision profit (PTPP) is
total revenue less noninterest expense. Management believes that
PTPP is a useful financial measure because it enables investors and
others to assess the Company’s ability to generate capital to cover
credit losses through a credit cycle.
(4) Consumer and small business banking
deposits are total deposits excluding mortgage escrow and wholesale
deposits.
(5) Book value per common share is common
stockholders' equity divided by common shares outstanding. Tangible
book value per common share is tangible common equity divided by
common shares outstanding.
Wells Fargo & Company and
SubsidiariesFIVE QUARTER SUMMARY FINANCIAL DATA
Quarter ended
Dec 31,
Sep 30,
Jun 30,
Mar 31,
Dec 31,
($ in millions, except per share amounts)
2016
2016
2016
2016
2015
For the Quarter Wells Fargo net income
$ 5,274
5,644 5,558 5,462 5,575 Wells Fargo net income applicable to common
stock
4,872 5,243 5,173 5,085 5,203 Diluted earnings per
common share
0.96 1.03 1.01 0.99 1.00 Profitability ratios
(annualized): Wells Fargo net income to average assets (ROA)
1.08 % 1.17 1.20 1.21 1.24 Wells Fargo net income
applicable to common stock to average Wells Fargo common
stockholders’ equity (ROE)
10.94 11.60 11.70 11.75 11.93
Return on average tangible common equity (ROTCE)(1)
13.16
13.96 14.15 14.15 14.30 Efficiency ratio (2)
61.2 59.4 58.1
58.7 58.4 Total revenue
$ 21,582 22,328 22,162 22,195
21,586 Pre-tax pre-provision profit (PTPP) (3)
8,367 9,060
9,296 9,167 8,987 Dividends declared per common share
0.380
0.380 0.380 0.375 0.375 Average common shares outstanding
5,025.6 5,043.4 5,066.9 5,075.7 5,108.5 Diluted average
common shares outstanding
5,078.2 5,094.6 5,118.1 5,139.4
5,177.9 Average loans
$ 964,147 957,484 950,751
927,220 912,280 Average assets
1,944,250 1,914,586 1,862,084
1,819,875 1,787,287 Average total deposits
1,284,158
1,261,527 1,236,658 1,219,430 1,216,809 Average consumer and small
business banking deposits (4)
749,946 739,066 726,359
714,837 696,484 Net interest margin
2.87 % 2.82 2.86
2.90 2.92
At Quarter End Investment securities
$
407,947 390,832 353,426 334,899 347,555 Loans
967,604
961,326 957,157 947,258 916,559 Allowance for loan losses
11,419 11,583 11,664 11,621 11,545 Goodwill
26,693
26,688 26,963 27,003 25,529 Assets
1,930,115 1,942,124
1,889,235 1,849,182 1,787,632 Deposits
1,306,079 1,275,894
1,245,473 1,241,490 1,223,312 Common stockholders' equity
176,469 179,916 178,633 175,534 172,036 Wells Fargo
stockholders’ equity
199,581 203,028 201,745 197,496 192,998
Total equity
200,497 203,958 202,661 198,504 193,891
Tangible common equity (1)
146,737 149,829 148,110 144,679
143,337 Common shares outstanding
5,016.1 5,023.9 5,048.5
5,075.9 5,092.1 Book value per common share (5)
$
35.18 35.81 35.38 34.58 33.78 Tangible book value per common
share (1)(5)
29.25 29.82 29.34 28.50 28.15 Common stock
price: High
58.02 51.00 51.41 53.27 56.34 Low
43.55
44.10 44.50 44.50 49.51 Period end
55.11 44.28 47.33 48.36
54.36 Team members (active, full-time equivalent)
269,100 268,800 267,900 268,600
264,700
(1) Tangible common equity is a non-GAAP
financial measure and represents total equity less preferred
equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible
assets associated with certain of our nonmarketable equity
investments but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible
common equity may differ among companies. Management believes that
return on average tangible common equity and tangible book value
per common share, which utilize tangible common equity, are useful
financial measures because they enable investors and others to
assess the Company's use of equity. For additional information,
including a corresponding reconciliation to GAAP financial
measures, see the "Tangible Common Equity" tables on page 35.
(2) The efficiency ratio is noninterest
expense divided by total revenue (net interest income and
noninterest income).
(3) Pre-tax pre-provision profit (PTPP) is
total revenue less noninterest expense. Management believes that
PTPP is a useful financial measure because it enables investors and
others to assess the Company’s ability to generate capital to cover
credit losses through a credit cycle.
(4) Consumer and small business banking
deposits are total deposits excluding mortgage escrow and wholesale
deposits.
(5) Book value per common share is common
stockholders' equity divided by common shares outstanding. Tangible
book value per common share is tangible common equity divided by
common shares outstanding.
Wells Fargo & Company and
Subsidiaries
CONSOLIDATED STATEMENT OF
INCOME
Quarter ended December 31, % Year ended December 31, % (in
millions, except per share amounts)
2016
2015 Change
2016 2015
Change
Interest income Trading
assets
$ 745 558 34 %
$ 2,506 1,971 27
% Investment securities
2,512 2,323 8
9,248 8,937 3
Mortgages held for sale
235 176 34
784 785 — Loans
held for sale
2 5 (60 )
9 19 (53 ) Loans
10,128 9,323 9
39,505 36,575 8 Other interest income
436 258 69
1,611
990 63 Total interest income
14,058
12,643 11
53,663 49,277 9
Interest
expense Deposits
400 241 66
1,395 963 45
Short-term borrowings
101 13 677
330 64 416 Long-term
debt
1,061 713 49
3,830 2,592 48 Other interest
expense
94 88 7
354
357 (1 ) Total interest expense
1,656
1,055 57
5,909 3,976 49
Net interest
income 12,402 11,588 7
47,754 45,301 5 Provision
for credit losses
805 831 (3 )
3,770 2,442 54 Net interest income after provision
for credit losses
11,597 10,757 8
43,984 42,859 3
Noninterest income
Service charges on deposit accounts
1,357 1,329 2
5,372 5,168 4 Trust and investment fees
3,698 3,511 5
14,243 14,468 (2 ) Card fees
1,001 966 4
3,936
3,720 6 Other fees
962 1,040 (8 )
3,727 4,324 (14 )
Mortgage banking
1,417 1,660 (15 )
6,096 6,501 (6 )
Insurance
262 427 (39 )
1,268 1,694 (25 ) Net gains
(losses) from trading activities
(109 ) 99 NM
834 614 36 Net gains on debt securities
145 346 (58 )
942 952 (1 ) Net gains from equity investments
306
423 (28 )
879 2,230 (61 ) Lease income
523 145 261
1,927 621 210 Other
(382 ) 52 NM
1,289 464 178 Total noninterest income
9,180 9,998 (8 )
40,513
40,756 (1 )
Noninterest expense Salaries
4,193 4,061
3
16,552 15,883 4 Commission and incentive compensation
2,478 2,457 1
10,247 10,352 (1 ) Employee benefits
1,101 1,042 6
5,094 4,446 15 Equipment
642 640
—
2,154 2,063 4 Net occupancy
710 725 (2 )
2,855 2,886 (1 ) Core deposit and other intangibles
301 311 (3 )
1,192 1,246 (4 ) FDIC and other deposit
assessments
353 258 37
1,168 973 20 Other
3,437 3,105 11
13,115
12,125 8 Total noninterest expense
13,215
12,599 5
52,377 49,974 5
Income
before income tax expense 7,562 8,156 (7 )
32,120
33,641 (5 ) Income tax expense
2,258
2,533 (11 )
10,075 10,365 (3 )
Net income
before noncontrolling interests 5,304 5,623 (6 )
22,045 23,276 (5 ) Less: Net income from noncontrolling
interests
30 48 (38 )
107
382 (72 )
Wells Fargo net income $
5,274 5,575 (5 )
$ 21,938
22,894 (4 ) Less: Preferred stock dividends and other
402 372 8
1,565 1,424 10
Wells Fargo net income applicable to common stock
$ 4,872 5,203 (6 )
$
20,373 21,470 (5 )
Per share information
Earnings per common share
$ 0.97 1.02 (5 )
$
4.03 4.18 (4 ) Diluted earnings per common share
0.96
1.00 (4 )
3.99 4.12 (3 ) Dividends declared per common share
0.380 0.375 1
1.515 1.475 3
Average common shares
outstanding 5,025.6 5,108.5 (2 )
5,052.8 5,136.5
(2 )
Diluted average common shares outstanding
5,078.2 5,177.9 (2 )
5,108.3 5,209.8 (2 )
NM – Not meaningful
Wells Fargo & Company and
SubsidiariesFIVE QUARTER CONSOLIDATED STATEMENT OF
INCOME
Quarter ended
Dec 31,
Sep 30,
Jun 30,
Mar 31,
Dec 31,
(in millions, except per share amounts)
2016
2016
2016
2016
2015
Interest income Trading assets
$ 745 593 572
596 558 Investment securities
2,512 2,298 2,176 2,262 2,323
Mortgages held for sale
235 207 181 161 176 Loans held for
sale
2 2 3 2 5 Loans
10,128 9,978 9,822 9,577 9,323
Other interest income
436 409
392 374 258 Total interest income
14,058 13,487 13,146 12,972
12,643
Interest expense Deposits
400 356 332
307 241 Short-term borrowings
101 85 77 67 13 Long-term debt
1,061 1,006 921 842 713 Other interest expense
94 88 83 89 88 Total
interest expense
1,656 1,535
1,413 1,305 1,055
Net interest income
12,402 11,952 11,733 11,667 11,588 Provision for credit
losses
805 805 1,074
1,086 831 Net interest income after provision for credit
losses
11,597 11,147 10,659
10,581 10,757
Noninterest income Service
charges on deposit accounts
1,357 1,370 1,336 1,309 1,329
Trust and investment fees
3,698 3,613 3,547 3,385 3,511 Card
fees
1,001 997 997 941 966 Other fees
962 926 906 933
1,040 Mortgage banking
1,417 1,667 1,414 1,598 1,660
Insurance
262 293 286 427 427 Net gains (losses) from
trading activities
(109 ) 415 328 200 99 Net gains on
debt securities
145 106 447 244 346 Net gains from equity
investments
306 140 189 244 423 Lease income
523 534
497 373 145 Other
(382 ) 315 482
874 52 Total noninterest income
9,180
10,376 10,429 10,528 9,998
Noninterest expense Salaries
4,193 4,224 4,099 4,036
4,061 Commission and incentive compensation
2,478 2,520
2,604 2,645 2,457 Employee benefits
1,101 1,223 1,244 1,526
1,042 Equipment
642 491 493 528 640 Net occupancy
710
718 716 711 725 Core deposit and other intangibles
301 299
299 293 311 FDIC and other deposit assessments
353 310 255
250 258 Other
3,437 3,483 3,156
3,039 3,105 Total noninterest expense
13,215 13,268 12,866 13,028
12,599
Income before income tax expense 7,562
8,255 8,222 8,081 8,156 Income tax expense
2,258
2,601 2,649 2,567 2,533
Net
income before noncontrolling interests 5,304 5,654 5,573
5,514 5,623 Less: Net income from noncontrolling interests
30 10 15 52 48
Wells
Fargo net income $ 5,274
5,644 5,558 5,462 5,575 Less: Preferred stock
dividends and other
402 401 385
377 372
Wells Fargo net income applicable to
common stock $ 4,872 5,243
5,173 5,085 5,203
Per share information
Earnings per common share
$ 0.97 1.04 1.02 1.00 1.02
Diluted earnings per common share
0.96 1.03 1.01 0.99 1.00
Dividends declared per common share
0.380 0.380 0.380 0.375
0.375
Average common shares outstanding 5,025.6
5,043.4 5,066.9 5,075.7 5,108.5
Diluted average common shares
outstanding 5,078.2 5,094.6
5,118.1 5,139.4 5,177.9 Wells Fargo
& Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
Quarter ended Dec 31, %
Year ended Dec 31, % (in millions)
2016 2015
Change
2016 2015
Change Wells Fargo net income
$ 5,274 5,575 (5
)%
$ 21,938 22,894 (4 )%
Other comprehensive income (loss), before tax:
Investment securities: Net unrealized losses arising during
the period
(5,936 ) (1,301 ) 356
(3,458
) (3,318 ) 4 Reclassification of net gains to net income
(239 ) (573 ) (58 )
(1,240 ) (1,530 )
(19 ) Derivatives and hedging activities: Net unrealized gains
(losses) arising during the period
(2,434 ) (684 )
256
177 1,549 (89 ) Reclassification of net gains on cash
flow hedges to net income
(246 ) (294 ) (16 )
(1,029 ) (1,089 ) (6 ) Defined benefit plans
adjustments: Net actuarial and prior service gains (losses) arising
during the period
422 (501 ) NM
(52 ) (512 )
(90 ) Amortization of net actuarial loss, settlements and other to
net income
43 11 291
158 114 39 Foreign currency
translation adjustments: Net unrealized losses arising during the
period
(30 ) (33 ) (9 )
(3 ) (137 ) (98
) Reclassification of net gains to net income
— (5 ) —
—
(5 ) —
Other comprehensive loss, before tax
(8,420 ) (3,380 ) 149
(5,447 ) (4,928 )
11 Income tax benefit related to other comprehensive income
3,106 1,230 153
1,996 1,774 13
Other
comprehensive loss, net of tax (5,314 ) (2,150 )
147
(3,451 ) (3,154 ) 9 Less: Other comprehensive
income (loss) from noncontrolling interests
7 (58 ) NM
(17 )
67 NM
Wells Fargo other comprehensive loss,
net of tax (5,321 )
(2,092 ) 154
(3,434 )
(3,221 ) 7
Wells Fargo comprehensive income (loss)
(47 ) 3,483 NM
18,504 19,673 (6 )
Comprehensive income (loss) from noncontrolling interests
37 (10 ) NM
90 449 (80 )
Total
comprehensive income (loss) $ (10
) 3,473 NM
$ 18,594 20,122
(8 )
NM – Not meaningful
FIVE QUARTER CONDENSED CONSOLIDATED
STATEMENT OF CHANGES IN TOTAL EQUITY
Quarter ended
Dec 31, Sep 30,
Jun 30, Mar 31, Dec 31, (in millions)
2016 2016 2016
2016 2015
Balance, beginning of period
$ 203,958 202,661 198,504 193,891 194,043 Cumulative
effect from change in consolidation accounting (1)
— — — 121
— Wells Fargo net income
5,274 5,644 5,558 5,462 5,575 Wells
Fargo other comprehensive income (loss), net of tax
(5,321
) (764 ) 1,174 1,477 (2,092 ) Noncontrolling interests
(13 ) 14 (92 ) (5 ) (100 ) Common stock issued
610 300 397 1,079 310 Common stock repurchased (2)
(2,034 ) (1,839 ) (2,214 ) (2,029 ) (1,974 )
Preferred stock released by ESOP
43 236 371 313 210 Common
stock warrants repurchased/exercised
— (17 ) — — — Preferred
stock issued
— — 1,126 975 — Common stock dividends
(1,909 ) (1,918 ) (1,930 ) (1,904 ) (1,917 )
Preferred stock dividends
(401 ) (401 ) (386 ) (378 )
(371 ) Tax benefit from stock incentive compensation
74 31
23 149 22 Stock incentive compensation expense
232 39 139
369 204 Net change in deferred compensation and related plans
(16 ) (28 ) (9 )
(1,016 ) (19 )
Balance, end of period $
200,497 203,958 202,661
198,504 193,891
(1) Effective January 1, 2016, we adopted
changes in consolidation accounting pursuant to Accounting
Standards Update 2015-02 (Amendments to the Consolidation
Analysis). Accordingly, we recorded a $121 million net increase to
beginning noncontrolling interests as a cumulative-effect
adjustment.
(2) For the quarter ended December 31,
2016, includes $750 million related to a private forward repurchase
transaction that settled in first quarter 2017 for 14.7 million
shares of common stock. For the quarter ended December 31, 2015,
includes $500 million related to a private forward repurchase
transaction that settled in first quarter 2016 for 9.2 million
shares of common stock.
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID
(TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended December 31,
2016 2015
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
$ 273,073 0.56 % $ 381
274,589 0.28 % $ 195 Trading assets
102,757 2.96
761 68,833 3.33 573 Investment securities (3):
Available-for-sale securities: Securities of U.S. Treasury and
federal agencies
25,935 1.53 99 34,617 1.58
137 Securities of U.S. states and political subdivisions
53,917 4.06 547 49,300 4.37 539
Mortgage-backed securities: Federal agencies
147,980
2.37 875 102,281 2.79 712 Residential and commercial
16,456 5.87 242
21,502 5.51 297 Total mortgage-backed securities
164,436 2.72 1,117 123,783 3.26 1,009 Other
debt and equity securities
52,692
3.71 492 52,701 3.35 444 Total
available-for-sale securities
296,980
3.03 2,255 260,401 3.27 2,129
Held-to-maturity securities: Securities of U.S. Treasury and
federal agencies
44,686 2.20 246 44,656 2.18
246 Securities of U.S. states and political subdivisions
4,738 5.31 63 2,158 6.07 33 Federal agency and
other mortgage-backed securities
46,009 1.81
209 28,185 2.42 170 Other debt securities
3,597 2.26 20 4,876 1.77
22 Total held-to-maturity securities
99,030 2.17 538 79,875
2.35 471 Total investment securities
396,010
2.82 2,793 340,276 3.05 2,600 Mortgages held for sale
(4)
27,503 3.43 235 19,189 3.66 176 Loans held
for sale (4)
155 5.42 2 363 4.96 5 Loans:
Commercial: Commercial and industrial - U.S.
272,828
3.46 2,369 250,445 3.25 2,048 Commercial and
industrial - Non U.S.
54,410 2.58 352 47,972
1.97 239 Real estate mortgage
131,195 3.44
1,135 121,844 3.30 1,012 Real estate construction
23,850 3.61 216 21,993 3.27 182 Lease
financing
18,904 5.78
273 12,241 4.48 136 Total commercial
501,187 3.45 4,345
454,495 3.16 3,617 Consumer: Real estate 1-4 family
first mortgage
277,732 4.01 2,785 272,871 4.04
2,759 Real estate 1-4 family junior lien mortgage
47,203
4.42 524 53,788 4.28 579 Credit card
35,383
11.73 1,043 32,795 11.61 960 Automobile
62,521
5.54 870 59,505 5.74 862 Other revolving credit and
installment
40,121 5.91
595 38,826 5.83 571 Total consumer
462,960 5.01 5,817
457,785 4.99 5,731 Total loans (4)
964,147
4.20 10,162 912,280 4.08 9,348 Other
6,729 3.27 56 5,166 4.82
61 Total earning assets
$ 1,770,374
3.24 % $ 14,390 1,620,696
3.18 % $ 12,958
Funding sources Deposits: Interest-bearing
checking
$ 46,907 0.17 % $
19 39,082 0.05 % $ 5 Market rate and other savings
676,365 0.07 122 640,503 0.06 93 Savings
certificates
24,362 0.30 18 29,654 0.54 41
Other time deposits
49,170 1.16 144 49,806
0.52 64 Deposits in foreign offices
110,425
0.35 97 107,094 0.14 38
Total interest-bearing deposits
907,229 0.18
400 866,139 0.11 241 Short-term borrowings
124,698
0.33 102 102,915 0.05 12 Long-term debt
252,162 1.68 1,061 190,861 1.49 713 Other
liabilities
17,210 2.15
94 16,453 2.14 88 Total interest-bearing
liabilities
1,301,299 0.51 1,657 1,176,368
0.36 1,054 Portion of noninterest-bearing funding sources
469,075 — — 444,328
— — Total funding sources
$
1,770,374 0.37 1,657
1,620,696 0.26 1,054
Net interest margin
and net interest income on a taxable-equivalent basis (5)
2.87 % $ 12,733 2.92 % $
11,904
Noninterest-earning assets Cash and due from banks
$ 18,967 17,804 Goodwill
26,713 25,580 Other
128,196 123,207 Total
noninterest-earning assets
$ 173,876
166,591
Noninterest-bearing funding sources Deposits
$ 376,929 350,670 Other liabilities
64,775
65,224 Total equity
201,247 195,025 Noninterest-bearing
funding sources used to fund earning assets
(469,075 ) (444,328 ) Net noninterest-bearing funding
sources
$ 173,876 166,591
Total assets $ 1,944,250
1,787,287
(1) Our average prime rate was 3.54% and
3.29% for the quarters ended December 31, 2016 and 2015,
respectively. The average three-month London Interbank Offered Rate
(LIBOR) was 0.92% and 0.41% 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 $331 million and $316 million for the quarters ended
December 31, 2016 and 2015, respectively, predominantly related to
tax-exempt income on certain loans and securities. The federal
statutory tax rate was 35% for the periods presented.
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID
(TAXABLE-EQUIVALENT BASIS) (1)(2)
Year ended December 31,
2016 2015
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
$ 287,718 0.51 % $ 1,457
266,832 0.28 % $ 738 Trading assets
88,400 2.89
2,553 66,679 3.01 2,010 Investment securities (3):
Available-for-sale securities: Securities of U.S. Treasury and
federal agencies
29,418 1.56 457 32,093 1.58
505 Securities of U.S. states and political subdivisions
52,959 4.20 2,225 47,404 4.23 2,007
Mortgage-backed securities: Federal agencies
110,637
2.50 2,764 100,218 2.73 2,733 Residential and
commercial
18,725 5.49
1,029 22,490 5.73 1,289 Total mortgage-backed
securities
129,362 2.93 3,793 122,708 3.28
4,022 Other debt and equity securities
53,433
3.44 1,841 49,752 3.42
1,701 Total available-for-sale securities
265,172 3.14 8,316 251,957
3.27 8,235 Held-to-maturity securities: Securities of
U.S. Treasury and federal agencies
44,675 2.19
979 44,173 2.19 968 Securities of U.S. states and political
subdivisions
2,893 5.32 154 2,087 5.40 113
Federal agency and other mortgage-backed securities
39,330
2.00 786 21,967 2.23 489 Other debt securities
4,043 2.01 81 5,821
1.73 101 Total held-to-maturity securities
90,941 2.20 2,000 74,048
2.26 1,671 Total investment securities
356,113
2.90 10,316 326,005 3.04 9,906 Mortgages held for
sale (4)
22,412 3.50 784 21,603 3.63 785 Loans
held for sale (4)
218 4.01 9 573 3.25 19
Loans: Commercial: Commercial and industrial - U.S.
268,182
3.45 9,243 237,844 3.29 7,836 Commercial and
industrial - Non U.S.
51,601 2.36 1,219 46,028
1.90 877 Real estate mortgage
127,232 3.44
4,371 116,893 3.41 3,984 Real estate construction
23,197 3.55 824 20,979 3.57 749 Lease
financing
17,950 5.10
916 12,301 4.70 577 Total commercial
488,162 3.39 16,573
434,045 3.23 14,023 Consumer: Real estate 1-4 family
first mortgage
276,712 4.01 11,096 268,560
4.10 11,002 Real estate 1-4 family junior lien mortgage
49,735 4.39 2,183 56,242 4.25 2,391 Credit
card
34,178 11.62 3,970 31,307 11.70 3,664
Automobile
61,566 5.62 3,458 57,766 5.84 3,374
Other revolving credit and installment
39,607
5.93 2,350 37,512 5.89
2,209 Total consumer
461,798
4.99 23,057 451,387 5.02 22,640
Total loans (4)
949,960 4.17 39,630 885,432
4.14 36,663 Other
6,262 2.51
157 4,947 5.11 252
Total earning assets
$ 1,711,083 3.21 %
$ 54,906 1,572,071 3.20 % $ 50,373
Funding
sources Deposits: Interest-bearing checking
$
42,379 0.14 % $ 60 38,640 0.05 %
$ 20 Market rate and other savings
663,557 0.07
449 625,549 0.06 367 Savings certificates
25,912
0.35 91 31,887 0.63 201 Other time deposits
55,846 0.91 508 51,790 0.45 232 Deposits in
foreign offices
103,206 0.28
287 107,138 0.13 143 Total
interest-bearing deposits
890,900 0.16 1,395
855,004 0.11 963 Short-term borrowings
115,187 0.29
333 87,465 0.07 64 Long-term debt
239,471 1.60
3,830 185,078 1.40 2,592 Other liabilities
16,702 2.12 354 16,545
2.15 357 Total interest-bearing liabilities
1,262,260
0.47 5,912 1,144,092 0.35 3,976 Portion of
noninterest-bearing funding sources
448,823
— — 427,979 — — Total
funding sources
$ 1,711,083 0.35
5,912 1,572,071 0.25
3,976
Net interest margin and net interest income on a
taxable-equivalent basis (5) 2.86 %
$ 48,994 2.95 % $ 46,397
Noninterest-earning assets Cash and due from banks
$
18,617 17,327 Goodwill
26,700 25,673 Other
129,041 127,848 Total
noninterest-earning assets
$ 174,358
170,848
Noninterest-bearing funding sources Deposits
$ 359,666 339,069 Other liabilities
62,825
68,174 Total equity
200,690 191,584 Noninterest-bearing
funding sources used to fund earning assets
(448,823 ) (427,979 ) Net noninterest-bearing funding
sources
$ 174,358 170,848
Total assets $ 1,885,441
1,742,919
(1) Our average prime rate was 3.51% and
3.26% for the years ended December 31, 2016 and 2015, respectively.
The average three-month London Interbank Offered Rate (LIBOR) was
0.74% and 0.32% for the same periods, respectively.
(2) Yields/rates and amounts include the
effects of hedge and risk management activities associated with the
respective asset and liability categories.
(3) The average balance amounts represent amortized cost for the
periods presented. (4) Nonaccrual loans and related income are
included in their respective loan categories.
(5) Includes taxable-equivalent
adjustments of $1.2 billion and $1.1 billion for the years ended
December 31, 2016 and 2015, respectively, predominantly related to
tax-exempt income on certain loans and securities. The federal
statutory tax rate was 35% for the periods presented.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS
AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended
Dec 31,
2016 Sep 30, 2016 Jun 30, 2016
Mar 31, 2016 Dec 31, 2015
Average Yields/ Average Yields/
Average Yields/ Average Yields/
Average Yields/ ($ 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
$ 273.1 0.56 % $ 299.4 0.50 % $ 293.8
0.49 % $ 284.7 0.49 % $ 274.6 0.28 % Trading assets
102.8
2.96 88.8 2.72 81.4 2.86 80.5 3.01 68.8 3.33 Investment
securities (3): Available-for-sale securities: Securities of U.S.
Treasury and federal agencies
25.9 1.53 25.8 1.52
31.5 1.56 34.4 1.59 34.6 1.58 Securities of U.S. states and
political subdivisions
53.9 4.06 55.2 4.28 52.2 4.24
50.5 4.24 49.3 4.37 Mortgage-backed securities: Federal agencies
148.0 2.37 105.8 2.39 92.0 2.53 96.5 2.80 102.3 2.79
Residential and commercial
16.5
5.87 18.1 5.54 19.6 5.44
20.8 5.20 21.5 5.51 Total mortgage-backed
securities
164.5 2.72 123.9 2.85 111.6 3.04 117.3
3.23 123.8 3.26 Other debt and equity securities
52.7 3.71 54.2 3.37 53.3
3.48 53.6 3.21 52.7 3.35 Total
available-for-sale securities
297.0
3.03 259.1 3.13 248.6 3.20
255.8 3.20 260.4 3.27 Held-to-maturity
securities: Securities of U.S. Treasury and federal agencies
44.7 2.20 44.6 2.19 44.6 2.19 44.7 2.20 44.7 2.18
Securities of U.S. states and political subdivisions
4.7
5.31 2.5 5.24 2.2 5.41 2.1 5.41 2.1 6.07 Federal agency and
other mortgage-backed securities
46.0 1.81 48.0 1.97
35.1 1.90 28.1 2.49 28.2 2.42 Other debt securities
3.6 2.26 3.9 1.98 4.1
1.92 4.6 1.92 4.9 1.77 Total
held-to-maturity securities
99.0
2.17 99.0 2.15 86.0 2.14
79.5 2.37 79.9 2.35 Total investment
securities
396.0 2.82 358.1 2.86 334.6 2.93 335.3
3.01 340.3 3.05 Mortgages held for sale
27.5 3.43
24.1 3.44 20.1 3.60 17.9 3.59 19.2 3.66 Loans held for sale
0.2 5.42 0.2 3.04 0.2 4.83 0.3 3.23 0.4 4.96 Loans:
Commercial: Commercial and industrial - U.S.
272.8
3.46 271.2 3.48 270.9 3.45 257.7 3.39 250.5 3.25 Commercial
and industrial - Non U.S.
54.4 2.58 51.3 2.40 51.2
2.35 49.5 2.10 48.0 1.97 Real estate mortgage
131.2
3.44 128.8 3.48 126.1 3.41 122.7 3.41 121.8 3.30 Real estate
construction
23.9 3.61 23.2 3.50 23.1 3.49 22.6 3.61
22.0 3.27 Lease financing
18.9
5.78 18.9 4.70 19.0 5.12
15.1 4.74 12.2 4.48 Total commercial
501.2 3.45 493.4 3.42
490.3 3.39 467.6 3.31 454.5
3.16 Consumer: Real estate 1-4 family first mortgage
277.7 4.01 278.5 3.97 275.9 4.01 274.7 4.05 272.9
4.04 Real estate 1-4 family junior lien mortgage
47.2
4.42 48.9 4.37 50.6 4.37 52.2 4.39 53.8 4.28 Credit card
35.4 11.73 34.6 11.60 33.4 11.52 33.4 11.61 32.8
11.61 Automobile
62.5 5.54 62.5 5.60 61.1 5.66 60.1
5.67 59.5 5.74 Other revolving credit and installment
40.1 5.91 39.6 5.92 39.5
5.91 39.2 5.99 38.8 5.83 Total
consumer
462.9 5.01 464.1
4.97 460.5 4.98 459.6 5.02
457.8 4.99 Total loans
964.1 4.20 957.5
4.17 950.8 4.16 927.2 4.16 912.3 4.08 Other
6.7 3.27 6.4 2.30 6.0
2.30 5.8 2.06 5.1 4.82 Total
earning assets
$ 1,770.4 3.24
% $ 1,734.5 3.17 % $ 1,686.9 3.20 % $ 1,651.7
3.22 % $ 1,620.7 3.18 %
Funding sources
Deposits: Interest-bearing checking
$ 46.9
0.17 % $ 44.0 0.15 % $ 39.8 0.13 % $ 38.7 0.12 % $
39.1 0.05 % Market rate and other savings
676.4 0.07
667.2 0.07 659.0 0.07 651.5 0.07 640.5 0.06 Savings certificates
24.4 0.30 25.2 0.30 26.2 0.35 27.9 0.45 29.6 0.54
Other time deposits
49.2 1.16 54.9 0.93 61.2 0.85
58.2 0.74 49.8 0.52 Deposits in foreign offices
110.4 0.35 107.1 0.30
97.5 0.23 97.7 0.21 107.1 0.14
Total interest-bearing deposits
907.3 0.18 898.4 0.16
883.7 0.15 874.0 0.14 866.1 0.11 Short-term borrowings
124.7
0.33 116.2 0.29 111.8 0.28 107.9 0.25 102.9 0.05 Long-term
debt
252.2 1.68 252.4 1.59 236.2 1.56 216.9 1.56
190.9 1.49 Other liabilities
17.1
2.15 16.8 2.11 16.3 2.06
16.5 2.14 16.5 2.14 Total interest-bearing
liabilities
1,301.3 0.51 1,283.8 0.48 1,248.0 0.45
1,215.3 0.43 1,176.4 0.36 Portion of noninterest-bearing funding
sources
469.1 — 450.7
— 438.9 — 436.4 — 444.3
— Total funding sources
$ 1,770.4
0.37 $ 1,734.5 0.35 $ 1,686.9
0.34 $ 1,651.7 0.32 $ 1,620.7
0.26
Net interest margin on a taxable-equivalent
basis 2.87 % 2.82 % 2.86 % 2.90 % 2.92 %
Noninterest-earning assets Cash and due from banks
$
19.0 18.7 18.8 18.0 17.8 Goodwill
26.7 27.0 27.0 26.1
25.6 Other
128.2 134.4
129.4 124.1 123.2 Total
noninterest-earnings assets
$ 173.9
180.1 175.2 168.2
166.6
Noninterest-bearing funding sources Deposits
$ 376.9 363.1 353.0 345.4 350.7 Other liabilities
64.9 63.8 60.1 62.6 65.2 Total equity
201.2 203.9
201.0 196.6 195.0 Noninterest-bearing funding sources used to fund
earning assets
(469.1 ) (450.7 )
(438.9 ) (436.4 ) (444.3 ) Net
noninterest-bearing funding sources
$ 173.9
180.1 175.2 168.2
166.6
Total assets $
1,944.3 1,914.6 1,862.1
1,819.9 1,787.3
(1) Our average prime rate was 3.54% for
the quarter ended December 31, 2016, 3.50% for the quarters ended
September 30, June 30 and March 31, 2016, and 3.29% for the quarter
ended December 31, 2015. The average three-month London Interbank
Offered Rate (LIBOR) was 0.92%, 0.79%, 0.64%, 0.62% and 0.41% 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 December 31, % Year ended
December 31, % (in millions)
2016
2015 Change
2016
2015 Change Service charges on deposit
accounts
$ 1,357 1,329 2 %
$
5,372 5,168 4 % Trust and investment fees: Brokerage
advisory, commissions and other fees
2,342 2,288 2
9,216 9,435 (2 ) Trust and investment management
837
838 —
3,336 3,394 (2 ) Investment banking
519 385 35
1,691
1,639 3 Total trust and investment fees
3,698 3,511 5
14,243
14,468 (2 ) Card fees
1,001 966 4
3,936
3,720 6 Other fees: Charges and fees on loans
305 308 (1 )
1,241 1,228 1 Cash network fees
130 129 1
537
522 3 Commercial real estate brokerage commissions
172 224
(23 )
494 618 (20 ) Letters of credit fees
79 86 (8 )
321 353 (9 ) Wire transfer and other remittance fees
105 95 11
401 370 8 All other fees (1)(2)(3)
171 198 (14 )
733
1,233 (41 ) Total other fees
962
1,040 (8 )
3,727 4,324
(14 ) Mortgage banking: Servicing income, net
196 730
(73 )
1,765 2,441 (28 ) Net gains on mortgage loan
origination/sales activities
1,221
930 31
4,331 4,060 7
Total mortgage banking
1,417
1,660 (15 )
6,096 6,501 (6 )
Insurance
262 427 (39 )
1,268 1,694 (25 ) Net gains
(losses) from trading activities
(109 ) 99 NM
834 614 36 Net gains on debt securities
145 346 (58 )
942 952 (1 ) Net gains from equity investments
306
423 (28 )
879 2,230 (61 ) Lease income
523 145 261
1,927 621 210 Life insurance investment income
132
139 (5 )
587 579 1 All other (3)
(514
) (87 ) 491
702 (115 ) NM Total
$ 9,180 9,998 (8 )
$ 40,513 40,756 (1 ) NM –
Not meaningful (1) Wire transfer and other remittance fees,
reflected in all other fees prior to 2016, have been separately
disclosed. (2) All other fees have been revised to include merchant
processing fees for all periods presented. (3) Effective fourth
quarter 2015, the Company's proportionate share of its merchant
services joint venture earnings is included in All other income.
NONINTEREST EXPENSE
Quarter ended Dec 31, %
Year ended Dec 31, % (in millions)
2016 2015 Change
2016 2015 Change
Salaries
$ 4,193 4,061 3 %
$ 16,552 15,883 4 % Commission and
incentive compensation
2,478 2,457 1
10,247 10,352 (1
) Employee benefits
1,101 1,042 6
5,094 4,446 15
Equipment
642 640 —
2,154 2,063 4 Net occupancy
710 725 (2 )
2,855 2,886 (1 ) Core deposit and other
intangibles
301 311 (3 )
1,192 1,246 (4 ) FDIC and
other deposit assessments
353 258 37
1,168 973 20
Outside professional services
984 827 19
3,138 2,665
18 Operating losses
243 532 (54 )
1,608 1,871 (14 )
Operating leases
379 73 419
1,329 278 378 Contract
services
325 266 22
1,203 978 23 Outside data
processing
222 205 8
888 985 (10 ) Travel and
entertainment
195 196 (1 )
704 692 2 Postage,
stationery and supplies
156 177 (12 )
622 702 (11 )
Advertising and promotion
178 184 (3 )
595 606 (2 )
Telecommunications
96 106 (9 )
383 439 (13 )
Foreclosed assets
75 20 275
202 381 (47 ) Insurance
23 57 (60 )
179 448 (60 ) All other
561 462 21
2,264
2,080 9 Total
$ 13,215
12,599 5
$
52,377 49,974 5
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
Quarter ended
Dec 31, Sep 30,
Jun 30, Mar 31, Dec 31, (in millions)
2016 2016 2016 2016
2015 Service charges on deposit accounts
$
1,357 1,370 1,336 1,309 1,329 Trust and investment fees:
Brokerage advisory, commissions and other fees
2,342 2,344
2,291 2,239 2,288 Trust and investment management
837 849
835 815 838 Investment banking
519
420 421 331 385 Total
trust and investment fees
3,698
3,613 3,547 3,385 3,511 Card
fees
1,001 997 997 941 966 Other fees: Charges and fees on
loans
305 306 317 313 308 Cash network fees
130 138
138 131 129 Commercial real estate brokerage commissions
172
119 86 117 224 Letters of credit fees
79 81 83 78 86 Wire
transfer and other remittance fees
105 103 101 92 95 All
other fees (1)(2)(3)
171 179
181 202 198 Total other fees
962 926 906
933 1,040 Mortgage banking: Servicing income, net
196 359 360 850 730 Net gains on mortgage loan
origination/sales activities
1,221
1,308 1,054 748 930 Total
mortgage banking
1,417 1,667
1,414 1,598 1,660 Insurance
262 293 286 427 427 Net gains (losses) from trading
activities
(109 ) 415 328 200 99 Net gains on debt
securities
145 106 447 244 346 Net gains from equity
investments
306 140 189 244 423 Lease income
523 534
497 373 145 Life insurance investment income
132 152 149 154
139 All other (3)
(514 ) 163
333 720 (87 ) Total
$
9,180 10,376 10,429
10,528 9,998
(1) Wire transfer and other remittance
fees, reflected in all other fees prior to 2016, have been
separately disclosed.
(2) All other fees have been revised to include merchant processing
fees for all periods presented.
(3) Effective fourth quarter 2015, the
Company's proportionate share of its merchant services joint
venture earnings is included in All other income.
FIVE QUARTER NONINTEREST
EXPENSE
Quarter ended
Dec 31, Sep 30,
Jun 30, Mar 31, Dec 31, (in millions)
2016
2016 2016 2016 2015
Salaries
$ 4,193 4,224 4,099 4,036 4,061 Commission
and incentive compensation
2,478 2,520 2,604 2,645 2,457
Employee benefits
1,101 1,223 1,244 1,526 1,042 Equipment
642 491 493 528 640 Net occupancy
710 718 716 711 725
Core deposit and other intangibles
301 299 299 293 311 FDIC
and other deposit assessments
353 310 255 250 258 Outside
professional services
984 802 769 583 827 Operating losses
243 577 334 454 532 Operating leases
379 363 352 235
73 Contract services
325 313 283 282 266 Outside data
processing
222 233 225 208 205 Travel and entertainment
195 144 193 172 196 Postage, stationery and supplies
156 150 153 163 177 Advertising and promotion
178 117
166 134 184 Telecommunications
96 101 94 92 106 Foreclosed
assets
75 (17 ) 66 78 20 Insurance
23 23 22 111 57
All other
561 677
499 527 462 Total
$
13,215 13,268 12,866
13,028 12,599 Wells Fargo & Company
and Subsidiaries
CONSOLIDATED BALANCE SHEET
Dec 31, Dec 31, % (in millions,
except shares)
2016 2015 Change
Assets Cash and due from banks
$ 20,729 19,111
8 % Federal funds sold, securities purchased under resale
agreements and other short-term investments
266,038 270,130
(2 ) Trading assets (1)
74,397 64,815 15 Investment
securities: Available-for-sale, at fair value
308,364
267,358 15 Held-to-maturity, at cost
99,583 80,197 24
Mortgages held for sale
26,309 19,603 34 Loans held for sale
80 279 (71 ) Loans
967,604 916,559 6 Allowance for
loan losses
(11,419 ) (11,545 )
(1 ) Net loans
956,185 905,014
6 Mortgage servicing rights: Measured at fair value
12,959 12,415 4 Amortized
1,406 1,308 7 Premises and
equipment, net
8,333 8,704 (4 ) Goodwill
26,693
25,529 5 Derivative assets
14,498 17,656 (18 ) Other assets
(1)
114,541 95,513 20
Total assets
$ 1,930,115
1,787,632 8
Liabilities Noninterest-bearing deposits
$ 375,967 351,579 7 Interest-bearing deposits
930,112 871,733 7 Total deposits
1,306,079 1,223,312 7 Short-term borrowings
96,781
97,528 (1 ) Derivative liabilities
14,492 13,920 4 Accrued
expenses and other liabilities (1)
57,189 59,445 (4 )
Long-term debt
255,077 199,536
28 Total liabilities
1,729,618
1,593,741 9
Equity Wells Fargo stockholders’
equity: Preferred stock
24,551 22,214 11 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
60,234 60,714 (1 ) Retained earnings
133,075
120,866 10 Cumulative other comprehensive income (loss)
(3,137 ) 297 NM Treasury stock – 465,702,148 shares
and 389,682,664 shares
(22,713 ) (18,867 ) 20
Unearned ESOP shares
(1,565 )
(1,362 ) 15 Total Wells Fargo stockholders’ equity
199,581
192,998 3 Noncontrolling interests
916
893 3 Total equity
200,497
193,891 3 Total liabilities and equity
$ 1,930,115 1,787,632 8
NM – Not meaningful
(1) Prior period has been revised to
conform to the current period presentation of reporting derivative
assets and liabilities separately.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE
SHEET
Dec 31, Sep 30, Jun 30,
Mar 31, Dec 31, (in millions)
2016
2016 2016 2016
2015
Assets Cash and due from banks
$
20,729 19,287 20,407 19,084 19,111 Federal funds sold,
securities purchased under resale agreements and other short-term
investments
266,038 298,325 295,521 300,547 270,130 Trading
assets (1)
74,397 81,094 71,556 62,657 64,815 Investment
securities: Available-for-sale, at fair value
308,364
291,591 253,006 255,551 267,358 Held-to-maturity, at cost
99,583 99,241 100,420 79,348 80,197 Mortgages held for sale
26,309 27,423 23,930 18,041 19,603 Loans held for sale
80 183 220 280 279 Loans
967,604 961,326 957,157
947,258 916,559 Allowance for loan losses
(11,419 ) (11,583 ) (11,664 )
(11,621 ) (11,545 ) Net loans
956,185
949,743 945,493 935,637
905,014 Mortgage servicing rights: Measured at
fair value
12,959 10,415 10,396 11,333 12,415 Amortized
1,406 1,373 1,353 1,359 1,308 Premises and equipment, net
8,333 8,322 8,289 8,349 8,704 Goodwill
26,693 26,688
26,963 27,003 25,529 Derivative assets
14,498 18,736 20,999
20,043 17,656 Other assets (1)
114,541
109,703 110,682 109,950
95,513 Total assets
$ 1,930,115
1,942,124 1,889,235
1,849,182 1,787,632
Liabilities
Noninterest-bearing deposits
$ 375,967 376,136
361,934 348,888 351,579 Interest-bearing deposits
930,112 899,758 883,539
892,602 871,733 Total deposits
1,306,079 1,275,894 1,245,473 1,241,490 1,223,312 Short-term
borrowings
96,781 124,668 120,258 107,703 97,528 Derivative
liabilities
14,492 13,603 15,483 15,184 13,920 Accrued
expenses and other liabilities (1)
57,189 69,166 61,433
58,413 59,445 Long-term debt
255,077
254,835 243,927 227,888
199,536 Total liabilities
1,729,618 1,738,166 1,686,574
1,650,678 1,593,741
Equity Wells Fargo stockholders’ equity: Preferred stock
24,551 24,594 24,830 24,051 22,214 Common stock
9,136
9,136 9,136 9,136 9,136 Additional paid-in capital
60,234
60,685 60,691 60,602 60,714 Retained earnings
133,075
130,288 127,076 123,891 120,866 Cumulative other comprehensive
income (loss)
(3,137 ) 2,184 2,948 1,774 297 Treasury
stock
(22,713 ) (22,247 ) (21,068 ) (19,687 ) (18,867
) Unearned ESOP shares
(1,565 )
(1,612 ) (1,868 ) (2,271 ) (1,362 ) Total
Wells Fargo stockholders’ equity
199,581 203,028 201,745
197,496 192,998 Noncontrolling interests
916
930 916 1,008
893 Total equity
200,497
203,958 202,661 198,504
193,891 Total liabilities and equity
$
1,930,115 1,942,124 1,889,235
1,849,182 1,787,632
(1) Prior periods have been revised to
conform to the current period presentation of reporting derivative
assets and liabilities separately.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER INVESTMENT
SECURITIES
Dec 31, Sep 30,
Jun 30, Mar 31, Dec 31, (in millions)
2016 2016 2016
2016 2015 Available-for-sale
securities: Securities of U.S. Treasury and federal agencies
$ 25,819 26,376 27,939 33,813 36,250 Securities of
U.S. states and political subdivisions
51,101 55,366 54,024
51,574 49,990 Mortgage-backed securities: Federal agencies
161,230 135,692 95,868 95,463 104,546 Residential and
commercial
16,318 18,387
19,938 21,246 22,646
Total mortgage-backed securities
177,548 154,079 115,806
116,709 127,192 Other debt securities
52,685 54,537 53,935
51,956 52,289 Total available-for-sale debt
securities
307,153 290,358 251,704 254,052 265,721
Marketable equity securities
1,211
1,233 1,302 1,499
1,637 Total available-for-sale securities
308,364 291,591 253,006
255,551 267,358 Held-to-maturity
securities: Securities of U.S. Treasury and federal agencies
44,690 44,682 44,675 44,667 44,660 Securities of U.S. states
and political subdivisions
6,336 2,994 2,181 2,183 2,185
Federal agency and other mortgage-backed securities (1)
45,161 47,721 49,594 28,016 28,604 Other debt securities
3,396 3,844
3,970 4,482 4,748 Total
held-to-maturity debt securities
99,583
99,241 100,420 79,348
80,197 Total investment securities
$ 407,947 390,832 353,426
334,899 347,555
(1) Predominantly consists of federal
agency mortgage-backed securities.
FIVE QUARTER LOANS
Dec 31, Sep 30, Jun 30, Mar 31,
Dec 31, (in millions)
2016 2016
2016 2016 2015 Commercial: Commercial and industrial
$ 330,840 324,020 323,858 321,547 299,892 Real estate
mortgage
132,491 130,223 128,320 124,711 122,160 Real estate
construction
23,916 23,340 23,387 22,944 22,164 Lease
financing
19,289 18,871 18,973
19,003 12,367 Total commercial
506,536 496,454 494,538 488,205
456,583 Consumer: Real estate 1-4 family first mortgage
275,579 278,689 277,162 274,734 273,869 Real estate 1-4
family junior lien mortgage
46,237 48,105 49,772 51,324
53,004 Credit card
36,700 34,992 34,137 33,139 34,039
Automobile
62,286 62,873 61,939 60,658 59,966 Other
revolving credit and installment
40,266
40,213 39,609 39,198 39,098 Total consumer
461,068 464,872 462,619
459,053 459,976 Total loans (1)
$
967,604 961,326 957,157 947,258
916,559
(1) Includes $16.7 billion, $17.7 billion,
$19.3 billion, $20.3 billion, and $20.0 billion of purchased
credit-impaired (PCI) loans at December 31, September 30, June 30,
and March 31, 2016, and December 31, 2015, 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.
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions)
2016 2016 2016 2016 2015
Commercial foreign loans: Commercial and industrial
$
55,396 51,515 50,515 51,884 49,049 Real estate mortgage
8,541 8,466 8,467 8,367 8,350 Real estate construction
375 310 246 311 444 Lease financing
972
958 987 983 274 Total commercial
foreign loans
$ 65,284 61,249
60,215 61,545 58,117 Wells Fargo &
Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS
(NONACCRUAL LOANS AND FORECLOSED ASSETS)
Dec 31, Sep 30, Jun 30, Mar 31,
Dec 31, (in millions)
2016 2016
2016 2016 2015 Nonaccrual loans: Commercial:
Commercial and industrial
$ 3,216 3,331 3,464 2,911
1,363 Real estate mortgage
685 780 872 896 969 Real estate
construction
43 59 59 63 66 Lease financing
115 92 112 99 26 Total
commercial
4,059 4,262
4,507 3,969 2,424 Consumer: Real estate 1-4 family
first mortgage
4,962 5,310 5,970 6,683 7,293 Real estate 1-4
family junior lien mortgage
1,206 1,259 1,330 1,421 1,495
Automobile
106 108 111 114 121 Other revolving credit and
installment
51 47 45
47 49 Total consumer
6,325
6,724 7,456 8,265 8,958 Total
nonaccrual loans (1)(2)(3)
$ 10,384
10,986 11,963 12,234 11,382 As a
percentage of total loans
1.07 % 1.14 1.25 1.29 1.24
Foreclosed assets: Government insured/guaranteed
$
197 282 321 386 446 Non-government insured/guaranteed
781 738 796 893
979 Total foreclosed assets
978
1,020 1,117 1,279 1,425 Total nonperforming
assets
$ 11,362 12,006
13,080 13,513 12,807 As a percentage of total loans
1.17 % 1.25 1.37
1.43 1.40 (1) Includes nonaccrual mortgages held for sale
and loans held for sale in their respective loan categories.
(2) Excludes PCI loans because they
continue to earn interest income from accretable yield, independent
of performance in accordance with their contractual terms.
(3) Real estate 1-4 family mortgage loans
predominantly insured by the Federal Housing Administration (FHA)
or guaranteed by the Department of Veterans Affairs (VA) and
student loans largely guaranteed by agencies on behalf of the U.S.
Department of Education under the Federal Family Education Loan
Program are not placed on nonaccrual status because they are
insured or guaranteed.
Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND
STILL ACCRUING
Dec 31, Sep 30, Jun 30, Mar 31,
Dec 31, (in millions)
2016 2016
2016 2016 2015 Total (excluding PCI)(1):
$
11,858 12,068 12,385 13,060 14,380 Less: FHA
insured/guaranteed by the VA (2)(3)
10,883 11,198 11,577
12,233 13,373 Less: Student loans guaranteed under the FFELP (4)
3 17 20 24 26
Total, not government insured/guaranteed $
972 853 788 803 981 By segment
and class, not government insured/guaranteed: Commercial:
Commercial and industrial
$ 28 47 36 24 97 Real
estate mortgage
36 4 22 8 13 Real estate construction
— — — 2 4 Total
commercial
64 51 58 34
114 Consumer: Real estate 1-4 family first mortgage (3)
175 171 169 167 224 Real estate 1-4 family junior lien
mortgage (3)
56 54 52 55 65 Credit card
452 392 348
389 397 Automobile
112 81 64 55 79 Other revolving credit
and installment
113 104 97
103 102 Total consumer
908
802 730 769 867
Total, not
government insured/guaranteed $ 972
853 788 803 981
(1) PCI loans totaled $2.0 billion, $2.2
billion, $2.4 billion, $2.7 billion and $2.9 billion, at December
31, September 30, June 30, and March 31, 2016, and December 31,
2015, respectively.
(2) Represents loans whose repayments are predominantly insured by
the FHA or guaranteed by the VA. (3) Includes mortgages held for
sale 90 days or more past due and still accruing. (4) Represents
loans whose repayments are largely guaranteed by agencies on behalf
of the U.S. Department of Education under the FFELP.
Wells Fargo & Company and Subsidiaries
CHANGES IN ACCRETABLE YIELD RELATED TO
PURCHASED CREDIT-IMPAIRED (PCI) LOANS
Loans purchased with evidence of credit
deterioration since origination and for which it is probable that
all contractually required payments will not be collected are
considered to be credit impaired. PCI loans predominantly represent
loans acquired from Wachovia that were deemed to be credit
impaired. Evidence of credit quality deterioration as of the
purchase date may include statistics such as past due and
nonaccrual status, recent borrower credit scores and recent LTV
percentages. PCI loans are initially measured at fair value, which
includes estimated future credit losses expected to be incurred
over the life of the loan. Accordingly, the associated allowance
for credit losses related to these loans is not carried over at the
acquisition date.
As a result of PCI loan accounting,
certain credit-related ratios cannot be used to compare a portfolio
that includes PCI loans against one that does not, or to compare
ratios across quarters or years. The ratios particularly affected
include the allowance for loan losses and allowance for credit
losses as percentages of loans, of nonaccrual loans and of
nonperforming assets; nonaccrual loans and nonperforming assets as
a percentage of total loans; and net charge-offs as a percentage of
loans.
The excess of cash flows expected to be
collected over the carrying value of PCI loans is referred to as
the accretable yield and is accreted into interest income over the
estimated lives of the PCI loans using the effective yield method.
The accretable yield is affected by:
•
Changes in interest rate indices for
variable rate PCI loans - Expected future cash flows are based on
the variable rates in effect at the time of the quarterly
assessment of expected cash flows;
•
Changes in prepayment assumptions -
Prepayments affect the estimated life of PCI loans which may change
the amount of interest income, and possibly principal, expected to
be collected; and
•
Changes in the expected principal and
interest payments over the estimated life - Updates to changes in
expected cash flows are driven by the credit outlook and actions
taken with borrowers. Changes in expected future cash flows from
loan modifications are included in the regular evaluations of cash
flows expected to be collected.
The change in the accretable yield related
to PCI loans since the merger with Wachovia is presented in the
following table.
Quarter Year ended
ended Dec 31, Dec 31, (in millions)
2016 2016
2009-2015 Balance, beginning of period
$ 11,619 16,301 10,447 Change in
accretable yield due to acquisitions (31 )
27 132 Accretion into interest income (1)
(373 ) (1,365 ) (14,212 )
Accretion into noninterest income due to sales (2) —
(9 ) (458 )
Reclassification from nonaccretable
difference for loans with improving credit-related cash flows
(3)
— 1,221 9,734
Changes in expected cash flows that do
not affect nonaccretable difference (4)
1 (4,959 )
10,658 Balance, end of period $
11,216 11,216
16,301 (1) Includes accretable yield released as a
result of settlements with borrowers, which is included in interest
income. (2) Includes accretable yield released as a result of sales
to third parties, which is included in noninterest income.
(3) At December 31, 2016, our carrying
value for PCI loans totaled $16.7 billion and the remainder of
nonaccretable difference established in purchase accounting totaled
$954 million. The nonaccretable difference absorbs losses of
contractual amounts that exceed our carrying value for PCI
loans.
(4) Represents changes in cash flows
expected to be collected due to the impact of modifications,
changes in prepayment assumptions, changes in interest rates on
variable rate PCI loans and sales to third parties.
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)
December 31, 2016 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 $ 14,219 65 % $ 11,070 50 % $ 7,871 47
% Florida 1,648 72 1,216 52 1,651 58 New Jersey 663 77 470 54 1,090
65 New York 483 72 408 56 542 61 Texas 175 50 154 44 654 39 Other
states 3,323 72 2,585 55 4,581
59 Total Pick-a-Pay loans $ 20,511 67 $ 15,903
51 $ 16,389 53
(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 2016.
(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.
Wells Fargo & Company and Subsidiaries
CHANGES IN ALLOWANCE FOR CREDIT
LOSSES
Quarter ended December 31, Year ended
December 31, (in millions)
2016
2015
2016 2015
Balance, beginning of period $ 12,694
12,562
12,512 13,169 Provision for credit losses
805 831
3,770 2,442 Interest income on certain
impaired loans (1)
(52 ) (48 )
(205 )
(198 ) Loan charge-offs: Commercial: Commercial and industrial
(309 ) (275 )
(1,419 ) (734 ) Real
estate mortgage
(14 ) (11 )
(27 ) (59 )
Real estate construction
— (2 )
(1 ) (4 )
Lease financing
(16 ) (3 )
(41 ) (14 ) Total commercial
(339 ) (291 )
(1,488
) (811 ) Consumer: Real estate 1-4 family first
mortgage
(86 ) (113 )
(452 ) (507 )
Real estate 1-4 family junior lien mortgage
(110 )
(134 )
(495 ) (635 ) Credit card
(329 )
(295 )
(1,259 ) (1,116 ) Automobile
(243
) (211 )
(845 ) (742 ) Other revolving credit
and installment
(200 ) (178 )
(708 ) (643 ) Total consumer
(968 ) (931 )
(3,759
) (3,643 ) Total loan charge-offs
(1,307 ) (1,222 )
(5,247
) (4,454 ) Loan recoveries: Commercial: Commercial
and industrial
53 60
263 252 Real estate mortgage
26 30
116 127 Real estate construction
8 12
38 37 Lease financing
1 2
11 8 Total commercial
88 104
428
424 Consumer: Real estate 1-4 family first
mortgage
89 63
373 245 Real estate 1-4 family junior
lien mortgage
66 64
266 259 Credit card
54 52
207 175 Automobile
77 76
325 325 Other
revolving credit and installment
28
32
128 134 Total
consumer
314 287
1,299 1,138 Total loan recoveries
402 391
1,727 1,562 Net loan charge-offs
(905 ) (831 )
(3,520
) (2,892 ) Other
(2 )
(2 )
(17 ) (9 )
Balance, end
of period $ 12,540 12,512
12,540 12,512 Components:
Allowance for loan losses
$ 11,419 11,545
11,419 11,545 Allowance for unfunded credit commitments
1,121 967
1,121 967 Allowance for credit losses
$ 12,540 12,512
12,540 12,512 Net loan charge-offs
(annualized) as a percentage of average total loans
0.37
% 0.36
0.37 0.33 Allowance for loan losses as a
percentage of total loans
1.18 1.26
1.18 1.26
Allowance for credit losses as a percentage of total loans
1.30 1.37
1.30
1.37
(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 changes in allowance attributable to the passage of time
as interest income.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR
CREDIT LOSSES
Quarter ended
Dec 31, Sep 30,
Jun 30, Mar 31, Dec 31, (in millions)
2016 2016 2016
2016 2015
Balance, beginning of quarter
$ 12,694 12,749 12,668 12,512 12,562 Provision for
credit losses
805 805 1,074 1,086 831 Interest income on
certain impaired loans (1)
(52 ) (54 ) (51 ) (48 )
(48 ) Loan charge-offs: Commercial: Commercial and industrial
(309 ) (324 ) (437 ) (349 ) (275 ) Real estate
mortgage
(14 ) (7 ) (3 ) (3 ) (11 ) Real estate
construction
— — (1 ) — (2 ) Lease financing
(16 ) (4 ) (17 ) (4 ) (3
) Total commercial
(339 ) (335 )
(458 ) (356 ) (291 ) Consumer: Real estate 1-4
family first mortgage
(86 ) (106 ) (123 ) (137 ) (113
) Real estate 1-4 family junior lien mortgage
(110 )
(119 ) (133 ) (133 ) (134 ) Credit card
(329 ) (296 )
(320 ) (314 ) (295 ) Automobile
(243 ) (215 ) (176 )
(211 ) (211 ) Other revolving credit and installment
(200 ) (170 ) (163 ) (175 )
(178 ) Total consumer
(968 )
(906 ) (915 ) (970 ) (931 ) Total loan
charge-offs
(1,307 ) (1,241 )
(1,373 ) (1,326 ) (1,222 ) Loan recoveries:
Commercial: Commercial and industrial
53 65 69 76 60 Real
estate mortgage
26 35 23 32 30 Real estate construction
8 18 4 8 12 Lease financing
1
2 5 3 2
Total commercial
88 120
101 119 104 Consumer:
Real estate 1-4 family first mortgage
89 86 109 89 63 Real
estate 1-4 family junior lien mortgage
66 70 71 59 64 Credit
card
54 51 50 52 52 Automobile
77 78 86 84 76 Other
revolving credit and installment
28
31 32 37 32
Total consumer
314 316
348 321 287 Total loan
recoveries
402 436
449 440 391 Net loan charge-offs
(905 ) (805 ) (924 )
(886 ) (831 ) Other
(2 )
(1 ) (18 ) 4 (2 )
Balance,
end of quarter $ 12,540
12,694 12,749 12,668
12,512 Components: Allowance for loan losses
$
11,419 11,583 11,664 11,621 11,545 Allowance for unfunded
credit commitments
1,121 1,111
1,085 1,047 967
Allowance for credit losses
$ 12,540
12,694 12,749 12,668
12,512 Net loan charge-offs (annualized) as a
percentage of average total loans
0.37 % 0.33 0.39
0.38 0.36 Allowance for loan losses as a percentage of: Total loans
1.18 1.20 1.22 1.23 1.26 Nonaccrual loans
110 105 98
95 101 Nonaccrual loans and other nonperforming assets
101
96 89 86 90 Allowance for credit losses as a percentage of: Total
loans
1.30 1.32 1.33 1.34 1.37 Nonaccrual loans
121
116 107 104 110 Nonaccrual loans and other nonperforming assets
110 106 97
94 98
(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 changes in allowance attributable to the passage of time
as interest income.
Wells Fargo & Company and Subsidiaries
TANGIBLE COMMON EQUITY (1)
Dec 31, Sep 30, Jun 30,
Mar 31, Dec 31, (in millions, except ratios)
2016 2016 2016
2016 2015 Tangible book value
per common share (1): Total equity
$ 200,497 203,958
202,661 198,504 193,891 Adjustments: Preferred stock
(24,551
) (24,594 ) (24,830 ) (24,051 ) (22,214 )
Additional paid-in capital on ESOP
preferred stock
(126 ) (130 ) (150 ) (182 ) (110 ) Unearned ESOP
shares
1,565 1,612 1,868 2,271 1,362 Noncontrolling
interests
(916 )
(930 ) (916 ) (1,008 ) (893 ) Total common
stockholders' equity (A)
176,469 179,916 178,633 175,534
172,036 Adjustments: Goodwill
(26,693 ) (26,688 )
(26,963 ) (27,003 ) (25,529 )
Certain identifiable intangible assets
(other than MSRs)
(2,723
) (3,001 ) (3,356 ) (3,814 ) (3,167 ) Other assets (2)
(2,088 ) (2,230 ) (2,110 ) (2,023 ) (2,074 )
Applicable deferred taxes (3)
1,772 1,832 1,906
1,985 2,071 Tangible common equity (B)
$ 146,737 149,829
148,110 144,679 143,337 Common
shares outstanding (C)
5,016.1 5,023.9 5,048.5 5,075.9
5,092.1 Book value per common share (A)/(C)
$ 35.18
35.81 35.38 34.58 33.78 Tangible book value per common share
(B)/(C)
29.25 29.82
29.34 28.50 28.15
Quarter ended Year ended
Dec 31,
Sep 30, Jun 30, Mar 31, Dec 31,
Dec
31, Dec 31, (in millions, except ratios)
2016 2016 2016
2016 2015
2016
2015
Return on average tangible common equity
(1):
Net income applicable to common stock (A)
$ 4,872
5,243 5,173 5,085 5,203
20,373 21,470 Average total equity
201,247 203,883 201,003 196,586 195,025
200,690
191,584 Adjustments: Preferred stock
(24,579 )
(24,813 ) (24,091 ) (23,963 ) (22,407 )
(24,363 )
(21,715 )
Additional paid-in capital on ESOP
preferred stock
(128 ) (148 ) (168 ) (201 ) (127 )
(161
) (138 ) Unearned ESOP shares
1,596 1,850 2,094 2,509
1,572
2,011 1,716 Noncontrolling interests
(928 ) (927 )
(984
) (904 ) (979 )
(936 )
(1,048 ) Average common stockholders’ equity (B)
177,208
179,845 177,854 174,027 173,084
177,241 170,399 Adjustments:
Goodwill
(26,713 ) (26,979 ) (27,037 ) (26,069 )
(25,580 )
(26,700 ) (25,673 ) Certain identifiable
intangible assets
(other than MSRs)
(2,871 ) (3,145 ) (3,600 ) (3,407 ) (3,317 )
(3,254 ) (3,793 ) Other assets (2)
(2,175
) (2,131 ) (2,096 ) (2,065 ) (1,987 )
(2,117 )
(1,654 ) Applicable deferred taxes (3)
1,785 1,855 1,934
2,014 2,103
1,897
2,248 Average tangible common equity (C)
$ 147,234 149,445 147,055
144,500 144,303
147,067 141,527 Return on average
common stockholders' equity (ROE) (A)/(B)
10.94 %
11.60 11.70 11.75 11.93
11.49 12.60 Return on average
tangible common equity (ROTCE) (A)/(C)
13.16 13.96 14.15
14.15 14.30
13.85
15.17
(1) Tangible common equity is a non-GAAP
financial measure and represents total equity less preferred
equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible
assets associated with certain of our nonmarketable equity
investments but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible
common equity may differ among companies. Management believes that
return on average tangible common equity and tangible book value
per common share, which utilize tangible common equity, are useful
financial measures because they enable investors and others to
assess the Company's use of equity.
(2) Represents goodwill and other intangibles on nonmarketable
equity investments, which are included in other assets.
(3) Applicable deferred taxes relate to
goodwill and other intangible assets. They were determined by
applying the combined federal statutory rate and composite state
income tax rates to the difference between book and tax basis of
the respective goodwill and intangible assets at period end.
Wells Fargo & Company and Subsidiaries
COMMON EQUITY TIER 1 UNDER BASEL III
(FULLY PHASED-IN) (1)
Estimated
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in billions, except
ratio)
2016 2016
2016 2016 2015 Total
equity
$ 200.5 204.0 202.7 198.5 193.9 Adjustments:
Preferred stock
(24.6 ) (24.6 ) (24.8 ) (24.1 ) (22.2
)
Additional paid-in capital on ESOP
preferred stock
(0.1 ) (0.1 ) (0.2 ) (0.2 ) (0.1 ) Unearned ESOP
shares
1.6 1.6 1.9 2.3 1.3 Noncontrolling interests
(0.9 ) (1.0 ) (1.0
) (1.0 ) (0.9 ) Total common stockholders' equity
176.5 179.9 178.6 175.5 172.0 Adjustments: Goodwill
(26.7 ) (26.7 ) (27.0 ) (27.0 ) (25.5 ) Certain
identifiable intangible assets (other than MSRs)
(2.7
) (3.0 ) (3.4 ) (3.8 ) (3.2 ) Other assets (2)
(2.1
) (2.2 ) (2.0 ) (2.1 ) (2.1 ) Applicable deferred taxes (3)
1.8 1.8 1.9 2.0 2.1 Investment in certain subsidiaries and
other
(0.4 ) (2.0
) (2.5 ) (1.9 ) (0.9 ) Common Equity Tier 1
(Fully Phased-In) under Basel III (A)
146.4 147.8 145.6
142.7 142.4 Total risk-weighted assets (RWAs)
anticipated under Basel III (4)(5) (B)
$
1,369.8 1,380.0 1,372.9
1,345.1 1,321.7 Common Equity Tier 1 to
total RWAs anticipated under Basel III (Fully Phased-In) (5)
(A)/(B)
10.7 % 10.7
10.6 10.6 10.8
(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.
(2) Represents goodwill and other intangibles on nonmarketable
equity investments, which are included in other assets.
(3) Applicable deferred taxes relate to
goodwill and other intangible assets. They were determined by
applying the combined federal statutory rate and composite state
income tax rates to the difference between book and tax basis of
the respective goodwill and intangible assets at period end.
(4) 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 December 31,
2016, 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 September 30, June 30 and March 31,
2016, and December 31, 2015, was calculated under the Basel III
Standardized Approach RWAs.
(5) The Company’s December 31, 2016, RWAs and capital ratio are
preliminary estimates. Wells Fargo & Company and
Subsidiaries
OPERATING SEGMENT RESULTS (1)
(income/expense in millions,
average balances in billions)
CommunityBanking
WholesaleBanking
Wealth andInvestmentManagement
Other (2)
ConsolidatedCompany
2016 2015
2016
2015
2016 2015
2016 2015
2016
2015
Quarter ended Dec 31,
Net interest income (3)
$ 7,556 7,409
4,323 3,711
1,061 933
(538 ) (465 )
12,402 11,588 Provision (reversal of provision) for credit
losses
631 704
168 126
3 (6 )
3 7
805 831 Noninterest income
4,105 4,921
2,830
2,848
3,013 3,014
(768 ) (785 )
9,180
9,998 Noninterest expense
6,985 6,893
4,002 3,491
3,042
2,998
(814 ) (783
)
13,215 12,599 Income (loss) before income
tax expense (benefit)
4,045 4,733
2,983 2,942
1,029 955
(495 ) (474 )
7,562 8,156
Income tax expense (benefit)
1,272
1,507
795 841
380
366
(189 ) (181 )
2,258 2,533 Net income (loss) before
noncontrolling interests
2,773 3,226
2,188 2,101
649 589
(306 ) (293 )
5,304 5,623 Less:
Net income (loss) from noncontrolling interests
40 57
(6 ) (3 )
(4 ) (6 )
— —
30 48 Net income (loss)
$
2,733 3,169
2,194 2,104
653 595
(306 ) (293 )
5,274 5,575
Average loans
$ 488.1 482.2
461.5 417.0
70.0 63.0
(55.5 ) (49.9 )
964.1 912.3
Average assets
1,000.7 921.4
811.9 755.4
220.4
197.9
(88.7 ) (87.4 )
1,944.3 1,787.3 Average
deposits
709.8 663.7
459.2 449.3
194.9 177.9
(79.7 ) (74.1 )
1,284.2 1,216.8
Year ended Dec 31, Net
interest income (3)
$ 29,833 29,242
16,052
14,350
3,913 3,478
(2,044 ) (1,769 )
47,754 45,301 Provision (reversal of provision) for credit
losses
2,691 2,427
1,073 27
(5 ) (25 )
11 13
3,770 2,442 Noninterest income
19,033
20,099
12,490 11,554
12,033 12,299
(3,043
) (3,196 )
40,513 40,756 Noninterest expense
27,422 26,981
16,126
14,116
12,059 12,067
(3,230 ) (3,190 )
52,377 49,974 Income (loss) before income tax expense
(benefit)
18,753 19,933
11,343 11,761
3,892
3,735
(1,868 ) (1,788 )
32,120 33,641 Income
tax expense (benefit)
6,182 6,202
3,136 3,424
1,467
1,420
(710 ) (681
)
10,075 10,365 Net income (loss) before
noncontrolling interests
12,571 13,731
8,207 8,337
2,425 2,315
(1,158 ) (1,107 )
22,045
23,276 Less: Net income (loss) from noncontrolling interests
136 240
(28 ) 143
(1 ) (1 )
—
—
107 382 Net income (loss)
$ 12,435 13,491
8,235
8,194
2,426 2,316
(1,158 ) (1,107 )
21,938 22,894 Average loans
$
486.9 475.9
449.3 397.3
67.3 60.1
(53.5
) (47.9 )
950.0 885.4 Average assets
977.3
910.0
782.0 724.9
211.5 192.8
(85.4 )
(84.8 )
1,885.4 1,742.9 Average deposits
701.2 654.4
438.6 438.9
187.8 172.3
(77.0 ) (71.5 )
1,250.6 1,194.1
(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 fourth quarter 2016, we realigned some personnel and
business activities from Wholesale Banking to Community Banking, as
a result of the formation of the new Payments, Virtual Solutions,
and Innovation Group. Results for these operating segments reflect
the shift prospectively from November 1, 2016.
(2) Includes the elimination of certain
items that are included in more than one business segment,
substantially all of which represents products and services for
Wealth and Investment Management customers served through Community
Banking distribution channels.
(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
Dec 31, Sep 30,
Jun 30, Mar 31, Dec 31, (income/expense in
millions, average balances in billions)
2016
2016 2016 2016
2015
COMMUNITY BANKING Net interest income (2)
$ 7,556 7,430 7,379 7,468 7,409 Provision for credit
losses
631 651 689 720 704 Noninterest income
4,105
4,957 4,825 5,146 4,921 Noninterest expense
6,985 6,953 6,648
6,836 6,893 Income before income tax expense
4,045 4,783 4,867 5,058 4,733 Income tax expense
1,272 1,546 1,667
1,697 1,507 Net income before
noncontrolling interests
2,773 3,237 3,200 3,361 3,226 Less:
Net income from noncontrolling interests
40
10 21 65 57
Segment net income
$ 2,733
3,227 3,179 3,296
3,169 Average loans
$ 488.1 489.2 485.7 484.3
482.2 Average assets
1,000.7 993.6 967.6 947.4 921.4 Average
deposits
709.8 708.0
703.7 683.0 663.7
WHOLESALE BANKING Net interest income (2)
$
4,323 4,062 3,919 3,748 3,711 Provision for credit losses
168 157 385 363 126 Noninterest income
2,830 3,085
3,365 3,210 2,848 Noninterest expense
4,002
4,120 4,036 3,968
3,491 Income before income tax expense
2,983
2,870 2,863 2,627 2,942 Income tax expense
795
827 795 719
841 Net income before noncontrolling interests
2,188
2,043 2,068 1,908 2,101 Less: Net loss from noncontrolling
interests
(6 ) (4 ) (5 )
(13 ) (3 ) Segment net income
$
2,194 2,047 2,073
1,921 2,104 Average loans
$
461.5 454.3 451.4 429.8 417.0 Average assets
811.9
794.2 772.6 748.6 755.4 Average deposits
459.2
441.2 425.8 428.0
449.3
WEALTH AND INVESTMENT MANAGEMENT Net
interest income (2)
$ 1,061 977 932 943 933 Provision
(reversal of provision) for credit losses
3 4 2 (14 ) (6 )
Noninterest income
3,013 3,122 2,987 2,911 3,014 Noninterest
expense
3,042 2,999
2,976 3,042 2,998 Income
before income tax expense
1,029 1,096 941 826 955 Income tax
expense
380 415
358 314 366 Net income before
noncontrolling interests
649 681 583 512 589 Less: Net
income (loss) from noncontrolling interests
(4
) 4 (1 ) — (6 )
Segment net income
$ 653 677
584 512 595
Average loans
$ 70.0 68.4 66.7 64.1 63.0 Average
assets
220.4 212.1 205.3 208.1 197.9 Average deposits
194.9 189.2 182.5
184.5 177.9
OTHER (3
) Net
interest income (2)
$ (538 ) (517 ) (497 )
(492 ) (465 ) Provision (reversal of provision) for credit losses
3 (7 ) (2 ) 17 7 Noninterest income
(768 )
(788 ) (748 ) (739 ) (785 ) Noninterest expense
(814 ) (804 ) (794 ) (818 )
(783 ) Loss before income tax benefit
(495 )
(494 ) (449 ) (430 ) (474 ) Income tax benefit
(189 ) (187 ) (171 ) (163 )
(181 ) Net loss before noncontrolling interests
(306
) (307 ) (278 ) (267 ) (293 ) Less: Net income from
noncontrolling interests
— —
— — — Other net
loss
$ (306 ) (307 ) (278
) (267 ) (293 ) Average loans
$ (55.5
) (54.4 ) (53.0 ) (51.0 ) (49.9 ) Average assets
(88.7 ) (85.3 ) (83.4 ) (84.2 ) (87.4 ) Average
deposits
(79.7 ) (76.9 )
(75.3 ) (76.1 ) (74.1 )
CONSOLIDATED COMPANY
Net interest income (2)
$ 12,402 11,952 11,733 11,667
11,588 Provision for credit losses
805 805 1,074 1,086 831
Noninterest income
9,180 10,376 10,429 10,528 9,998
Noninterest expense
13,215
13,268 12,866 13,028
12,599 Income before income tax expense
7,562 8,255
8,222 8,081 8,156 Income tax expense
2,258
2,601 2,649 2,567
2,533 Net income before noncontrolling interests
5,304 5,654 5,573 5,514 5,623 Less: Net income from
noncontrolling interests
30 10
15 52 48 Wells
Fargo net income
$ 5,274 5,644
5,558 5,462 5,575
Average loans
$ 964.1 957.5 950.8 927.2 912.3 Average
assets
1,944.3 1,914.6 1,862.1 1,819.9 1,787.3 Average
deposits
1,284.2 1,261.5
1,236.7 1,219.4 1,216.8
(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 fourth quarter 2016, we realigned some personnel and
business activities from Wholesale Banking to Community Banking, as
a result of the formation of the new Payments, Virtual Solutions,
and Innovation Group. Results for these operating segments reflect
the shift prospectively from November 1, 2016.
(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 the elimination of certain
items that are included in more than one business segment,
substantially all of which represents products and services for
Wealth and Investment Management customers served through Community
Banking distribution channels.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE
SERVICING
Quarter ended
Dec 31, Sep 30,
Jun 30, Mar 31, Dec 31, (in millions)
2016 2016 2016
2016 2015
MSRs measured using the fair
value method: Fair value, beginning of quarter
$
10,415 10,396 11,333 12,415 11,778 Servicing from
securitizations or asset transfers (1)
752 609 477 366 372
Sales and other (2)
(47 ) 4
(22 ) — (9 ) Net additions
705 613 455
366 363 Changes in fair value: Due to
changes in valuation model inputs or assumptions: Mortgage interest
rates (3)
2,367 39 (779 ) (1,084 ) 560 Servicing and
foreclosure costs (4)
93 (10 ) (4 ) 27 (37 ) Prepayment
estimates and other (5)
(106 )
(37 ) (41 ) 100 244 Net changes
in valuation model inputs or assumptions
2,354
(8 ) (824 ) (957 ) 767
Other changes in fair value (6)
(515 )
(586 ) (568 ) (491 ) (493 ) Total
changes in fair value
1,839 (594 ) (1,392 ) (1,448 ) 274
Fair value, end of quarter
$ 12,959
10,415 10,396 11,333
12,415 (1) Includes impacts associated with
exercising our right to repurchase delinquent loans from GNMA loan
securitization pools. (2) 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.
(3) 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)
(4) Includes costs to service and unreimbursed foreclosure costs.
(5) 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.
(6) Represents changes due to collection/realization of expected
cash flows over time. Quarter ended
Dec 31, Sep 30, Jun 30, Mar 31,
Dec 31, (in millions)
2016 2016
2016 2016 2015
Amortized MSRs: Balance, beginning of quarter
$
1,373 1,353 1,359 1,308 1,277 Purchases
34 18 24 21
48 Servicing from securitizations or asset transfers
66 69
38 97 49 Amortization
(67 ) (67
) (68 ) (67 ) (66 ) Balance, end of quarter
$ 1,406 1,373
1,353 1,359 1,308
Fair value
of amortized MSRs: Beginning of quarter
$ 1,627
1,620 1,725 1,680 1,643 End of quarter
1,956
1,627 1,620 1,725
1,680 Wells Fargo & Company and
Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE
SERVICING (CONTINUED)
Quarter ended
Dec 31, Sep
30, Jun 30, Mar 31, Dec 31, (in millions)
2016 2016
2016 2016 2015
Servicing
income, net: Servicing fees (1)
$ 738 878 842 910
872 Changes in fair value of MSRs carried at fair value: Due to
changes in valuation model inputs or assumptions (2) (A)
2,354 (8 ) (824 ) (957 ) 767 Other changes in fair value (3)
(515 ) (586 )
(568 ) (491 ) (493 ) Total changes in fair
value of MSRs carried at fair value
1,839 (594 ) (1,392 )
(1,448 ) 274 Amortization
(67 ) (67 ) (68 ) (67 ) (66
) Net derivative gains (losses) from economic hedges (4) (B)
(2,314 ) 142 978
1,455 (350 ) Total servicing income,
net
$ 196 359
360 850 730
Market-related valuation changes to MSRs, net of hedge results
(2)(4) (A)+(B)
$ 40 134
154 498 417
(1) Includes contractually specified
servicing fees, late charges and other ancillary revenues, net of
unreimbursed direct servicing costs.
(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.
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(in billions)
2016 2016
2016 2016 2015
Managed
servicing portfolio (1
): Residential mortgage servicing:
Serviced for others
$ 1,205 1,226 1,250 1,280 1,300
Owned loans serviced
347 352 349 342 345 Subserviced for
others
8 4 4
4 4 Total residential servicing
1,560 1,582 1,603
1,626 1,649 Commercial mortgage
servicing: Serviced for others
479 477 478 485 478 Owned
loans serviced
132 130 128 125 122 Subserviced for others
8 8 8
8 7 Total commercial servicing
619 615 614
618 607 Total managed servicing portfolio
$ 2,179 2,197
2,217 2,244 2,256 Total serviced
for others
$ 1,684 1,703 1,728 1,765 1,778 Ratio of
MSRs to related loans serviced for others
0.85 % 0.69
0.68 0.72 0.77 Weighted-average note rate (mortgage loans serviced
for others)
4.26 4.28
4.32 4.34 4.37
(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
Dec 31, Sep
30, Jun 30, Mar 31, Dec 31,
2016 2016 2016
2016 2015
Net gains on
mortgage loan origination/sales activities (in millions):
Residential (A)
$ 939 953 744 532 600 Commercial
90 167 72 71 108 Residential pipeline and unsold/repurchased
loan management (1)
192
188 238 145 222
Total
$ 1,221
1,308 1,054 748
930
Application data (in billions): Wells Fargo first
mortgage quarterly applications
$ 75 100 95 77 64
Refinances as a percentage of applications
48 % 55 46
52 48 Wells Fargo first mortgage unclosed pipeline, at quarter end
$ 30 50
47 39 29
Residential
real estate originations: Purchases as a percentage of
originations
50 % 58 60 55 59 Refinances as a
percentage of originations
50
42 40 45 41
Total
100 %
100 100 100 100
Wells Fargo first mortgage loans (in billions): Retail
$
35 37 34 24 27 Correspondent
36 32 28 19 19 Other (2)
1 1
1 1 1 Total quarter-to-date
$ 72 70
63 44 47 Held-for-sale
(B)
$ 56 53 46 31 33 Held-for-investment
16 17 17
13 14 Total quarter-to-date
$ 72 70
63 44 47 Total
year-to-date
$ 249
177 107 44 213
Production margin on residential held-for-sale mortgage
originations (A)/(B)
1.68 %
1.81 1.66 1.68
1.83
(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.
CHANGES IN MORTGAGE REPURCHASE
LIABILITY
Quarter ended
Dec
31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions)
2016 2016 2016
2016 2015 Balance, beginning of period
$ 239 255 355 378 538 Provision for repurchase
losses: Loan sales
10 11 8 7 9 Change in estimate (1)
(7 ) (24 ) (89 ) (19 )
(128 ) Net additions (reductions)
3 (13 ) (81 ) (12 )
(119 ) Losses
(13 ) (3 )
(19 ) (11 ) (41 ) Balance, end of period
$ 229 239 255
355 378
(1) Results from changes in investor
demand and mortgage insurer practices, credit deterioration and
changes in the financial stability of correspondent lenders.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170113005120/en/
Wells Fargo & CompanyMediaAncel Martinez,
415-222-3858orInvestorsJim Rowe, 415-396-8216
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