WFC Wells Fargo and Company

Diluted EPS of $1.07; Revenue of $22.2 billion

Wells Fargo & Company (NYSE:WFC):

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

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

 

Selected Financial Information

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

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

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

 

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

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

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

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

Net Interest Income

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

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

Noninterest Income

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

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

Noninterest Expense

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

Income Taxes

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

Loans

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

Period-End Loan Balances

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

Investment Securities

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

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

Deposits

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

Capital

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

Credit Quality

Net Loan Charge-offs

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

Net Loan Charge-Offs

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

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

 

Nonperforming Assets

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

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

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

Allowance for Credit Losses

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

Business Segment Performance

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

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

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

Selected Financial Information

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

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

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

Retail Banking and Consumer Payments, Virtual Solutions and Innovation

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

Consumer Lending

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

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

Selected Financial Information

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

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

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

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

Selected Financial Information

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

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

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

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

Retail Brokerage

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

Wealth Management

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

Asset Management

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

Retirement

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

Conference Call

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

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

 

Endnotes

1   Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses. 2 See table on page 36 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules. 3 Net payout ratio means the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock. 4 Market sensitive revenue represents net gains from trading activities, debt securities and equity investments. 5 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 41 for more information. 6 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit. 7 Data as of May 2017, comparisons with May 2016. 8 Combined consumer and business debit card purchase volume dollars. 9 Credit card penetration defined as the percentage of Retail Banking households that have a credit card with Wells Fargo. Retail Banking households reflect only those households that maintain a retail checking account, which we believe provides the foundation for long-term retail banking relationships. Credit card household penetration rates have not been adjusted to reflect the impact of the potentially unauthorized accounts identified by an independent consulting firm late in 2016 because the maximum impact in any one quarter was not greater than 86 basis points, or approximately 2 percent. Data as of May 2017. 10 Primarily includes retail banking, consumer lending, small business and business banking customers.  

Forward-Looking Statements

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

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

• current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and the overall slowdown in global economic growth;
• our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
• financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
• the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;
• the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;
• negative effects relating to our mortgage servicing and foreclosure practices, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;
• our ability to realize our efficiency ratio target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;
• the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;
• significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our investment securities portfolio;
• the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
• negative effects from the retail banking sales practices matter, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, and our reputation;
• reputational damage from negative publicity, protests, fines, penalties and other negative consequences from regulatory violations and legal actions;
• a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
• the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
• fiscal and monetary policies of the Federal Reserve Board; and
• the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.

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

For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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

About Wells Fargo

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

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

   Pages   

 

Summary Information

Summary Financial Data

16

 

Income

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

Balance Sheet

Consolidated Balance Sheet 26 Investment Securities 28  

Loans

Loans 28 Nonperforming Assets 29 Loans 90 Days or More Past Due and Still Accruing 30 Purchased Credit-Impaired Loans 31 Pick-A-Pay Portfolio 32 Changes in Allowance for Credit Losses 34  

Equity

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

Operating Segments

Operating Segment Results 37  

Other

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

SUMMARY FINANCIAL DATA

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

($ in millions, except per

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

share amounts)

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

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

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

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

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

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

    Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA

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

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

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

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

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

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

    Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

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

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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

NM – Not meaningful

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

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

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

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

   

Wells Fargo & Company and Subsidiaries

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

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

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

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

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

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

(5) Includes taxable-equivalent adjustments of $330 million and $309 million for the quarters ended June 30, 2017 and 2016, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

    Wells Fargo & Company and Subsidiaries

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

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

(1) Our average prime rate was 3.92% and 3.50% for the first half of 2017 and 2016, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.14% and 0.63% for the same periods, respectively.

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

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

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

(5) Includes taxable-equivalent adjustments of $648 million and $599 million for the first half of 2017 and 2016, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

    Wells Fargo & Company and Subsidiaries

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

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

(1) Our average prime rate was 4.05% for the quarter ended June 30, 2017, 3.80% for the quarter ended March 31, 2017, 3.54% for the quarter ended December 31, 2016 and 3.50% for the quarters ended September 30 and June 30, 2016. The average three-month London Interbank Offered Rate (LIBOR) was 1.21%, 1.07%, 0.92%, 0.79% and 0.64% for the same quarters, respectively.

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

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

   

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME

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

NONINTEREST EXPENSE

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

FIVE QUARTER NONINTEREST INCOME

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

FIVE QUARTER NONINTEREST EXPENSE

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

Wells Fargo & Company and Subsidiaries

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

Total liabilities and equity

  $ 1,930,871     1,930,115     —              

Wells Fargo & Company and Subsidiaries

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

Wells Fargo & Company and Subsidiaries

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

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

 

FIVE QUARTER LOANS

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

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

 

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

                       

Jun 30,

Mar 31

Dec 31,

Sep 30,

Jun 30,

(in millions)

 

2017

 

2017

 

2016

 

2016

 

2016

Commercial foreign loans:

Commercial and industrial

$

57,825

56,987

55,396

51,515

50,515

Real estate mortgage

8,359

8,206

8,541

8,466

8,467

Real estate construction

585

471

375

310

246

Lease financing

   

1,092

 

986

 

972

 

958

 

987

Total commercial foreign loans

 

$

67,861

 

66,650

 

65,284

 

61,249

 

60,215

                 

Wells Fargo & Company and Subsidiaries

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

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

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

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

                   

Wells Fargo & Company and Subsidiaries

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

By segment and class, not government insured/guaranteed:

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

   

Wells Fargo & Company and Subsidiaries

PICK-A-PAY PORTFOLIO (1) June 30, 2017   PCI loans       All other loans                   Ratio of       Ratio of Adjusted carrying carrying unpaid Current value to value to principal LTV Carrying current Carrying current (in millions)   balance (2)       ratio (3)       value (4)       value (5)       value (4)       value (5)   California $ 12,263 63 % $ 9,511 48 % $ 7,077 45 % Florida 1,540 70 1,146 51 1,502 56 New Jersey 609 77 447 56 995 63 New York 458 70 360 51 497 60 Texas 141 49 108 37 598 38 Other states     3,057   70   2,308   52   4,147   57 Total Pick-a-Pay loans   $ 18,068   65 $ 13,880   49 $ 14,816   51                                                      

(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 2017.

(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 June 30,   Six months ended June 30,   (in millions)     2017     2016     2017     2016   Balance, beginning of period $ 12,287 12,668 12,540 12,512 Provision for credit losses 555 1,074 1,160 2,160 Interest income on certain impaired loans (1) (46 ) (51 ) (94 ) (99 ) Loan charge-offs: Commercial: Commercial and industrial (161 ) (437 ) (414 ) (786 ) Real estate mortgage (8 ) (3 ) (13 ) (6 ) Real estate construction — (1 ) — (1 ) Lease financing     (13 )   (17 )   (20 )   (21 ) Total commercial     (182 )   (458 )   (447 )   (814 ) Consumer: Real estate 1-4 family first mortgage (55 ) (123 ) (124 ) (260 ) Real estate 1-4 family junior lien mortgage (62 ) (133 ) (155 ) (266 ) Credit card (379 ) (320 ) (746 ) (634 ) Automobile (212 ) (176 ) (467 ) (387 ) Other revolving credit and installment     (185 )   (163 )   (374 )   (338 ) Total consumer     (893 )   (915 )   (1,866 )   (1,885 ) Total loan charge-offs     (1,075 )   (1,373 )   (2,313 )   (2,699 ) Loan recoveries: Commercial: Commercial and industrial 83 69 165 145 Real estate mortgage 14 23 44 55 Real estate construction 4 4 12 12 Lease financing     6     5     8     8   Total commercial     107     101     229     220   Consumer: Real estate 1-4 family first mortgage 71 109 133 198 Real estate 1-4 family junior lien mortgage 66 71 136 130 Credit card 59 50 117 102 Automobile 86 86 174 170 Other revolving credit and installment     31     32     64     69   Total consumer     313     348     624     669   Total loan recoveries     420     449     853     889   Net loan charge-offs     (655 )   (924 )   (1,460 )   (1,810 ) Other     5     (18 )   —     (14 ) Balance, end of period   $ 12,146     12,749     12,146     12,749   Components: Allowance for loan losses $ 11,073 11,664 11,073 11,664 Allowance for unfunded credit commitments     1,073     1,085     1,073     1,085   Allowance for credit losses   $ 12,146     12,749     12,146     12,749   Net loan charge-offs (annualized) as a percentage of average total loans 0.27 % 0.39 0.31 0.39 Allowance for loan losses as a percentage of total loans 1.16 1.22 1.16 1.22 Allowance for credit losses as a percentage of total loans     1.27     1.33     1.27     1.33  

(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   Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, (in millions)   2017     2017     2016     2016     2016   Balance, beginning of quarter $ 12,287 12,540 12,694 12,749 12,668 Provision for credit losses 555 605 805 805 1,074 Interest income on certain impaired loans (1) (46 ) (48 ) (52 ) (54 ) (51 ) Loan charge-offs: Commercial: Commercial and industrial (161 ) (253 ) (309 ) (324 ) (437 ) Real estate mortgage (8 ) (5 ) (14 ) (7 ) (3 ) Real estate construction — — — — (1 ) Lease financing     (13 )   (7 )   (16 )   (4 )   (17 ) Total commercial     (182 )   (265 )   (339 )   (335 )   (458 ) Consumer: Real estate 1-4 family first mortgage (55 ) (69 ) (86 ) (106 ) (123 ) Real estate 1-4 family junior lien mortgage (62 ) (93 ) (110 ) (119 ) (133 ) Credit card (379 ) (367 ) (329 ) (296 ) (320 ) Automobile (212 ) (255 ) (243 ) (215 ) (176 ) Other revolving credit and installment     (185 )   (189 )   (200 )   (170 )   (163 ) Total consumer     (893 )   (973 )   (968 )   (906 )   (915 ) Total loan charge-offs     (1,075 )   (1,238 )   (1,307 )   (1,241 )   (1,373 ) Loan recoveries: Commercial: Commercial and industrial 83 82 53 65 69 Real estate mortgage 14 30 26 35 23 Real estate construction 4 8 8 18 4 Lease financing     6     2     1     2     5   Total commercial     107     122     88     120     101   Consumer: Real estate 1-4 family first mortgage 71 62 89 86 109 Real estate 1-4 family junior lien mortgage 66 70 66 70 71 Credit card 59 58 54 51 50 Automobile 86 88 77 78 86 Other revolving credit and installment     31     33     28     31     32   Total consumer     313     311     314     316     348   Total loan recoveries     420     433     402     436     449   Net loan charge-offs     (655 )   (805 )   (905 )   (805 )   (924 ) Other     5     (5 )   (2 )   (1 )   (18 ) Balance, end of quarter   $ 12,146     12,287     12,540     12,694     12,749   Components: Allowance for loan losses $ 11,073 11,168 11,419 11,583 11,664 Allowance for unfunded credit commitments     1,073     1,119     1,121     1,111     1,085   Allowance for credit losses   $ 12,146     12,287     12,540     12,694     12,749   Net loan charge-offs (annualized) as a percentage of average total loans 0.27 % 0.34 0.37 0.33 0.39 Allowance for loan losses as a percentage of: Total loans 1.16 1.17 1.18 1.20 1.22 Nonaccrual loans 122 114 110 105 98 Nonaccrual loans and other nonperforming assets 113 105 101 96 89 Allowance for credit losses as a percentage of: Total loans 1.27 1.28 1.30 1.32 1.33 Nonaccrual loans 134 126 121 116 107 Nonaccrual loans and other nonperforming assets     123     115     110     106     97  

(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)     Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30, (in millions, except ratios)       2017     2017     2016     2016     2016   Tangible book value per common share (1): Total equity $ 206,145 202,489 200,497 203,958 202,661 Adjustments: Preferred stock (25,785 ) (25,501 ) (24,551 ) (24,594 ) (24,830 ) Additional paid-in capital on ESOP

preferred stock

(136 ) (157 ) (126 ) (130 ) (150 ) Unearned ESOP shares 2,119 2,546 1,565 1,612 1,868 Noncontrolling interests         (915 )   (989 )   (916 )   (930 )   (916 ) Total common stockholders' equity (A) 181,428 178,388 176,469 179,916 178,633 Adjustments: Goodwill (26,573 ) (26,666 ) (26,693 ) (26,688 ) (26,963 )

Certain identifiable intangible assets

(other than MSRs)

(2,147 ) (2,449 ) (2,723 ) (3,001 ) (3,356 ) Other assets (2) (2,159 ) (2,121 ) (2,088 ) (2,230 ) (2,110 ) Applicable deferred taxes (3)         1,624     1,698     1,772     1,832     1,906   Tangible common equity   (B)   $ 152,173     148,850     146,737     149,829     148,110   Common shares outstanding (C) 4,966.8 4,996.7 5,016.1 5,023.9 5,048.5 Book value per common share (A)/(C) $ 36.53 35.70 35.18 35.81 35.38 Tangible book value per common share   (B)/(C)     30.64     29.79     29.25     29.82     29.34                                     Quarter ended     Six months ended   Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30, Jun 30,   Jun 30, (in millions, except ratios)       2017     2017     2016     2016     2016     2017     2016   Return on average tangible common equity (1): Net income applicable to common stock (A) $ 5,404 5,056 4,872 5,243 5,173 10,460 10,258 Average total equity 205,968 201,767 201,247 203,883 201,003 203,879 198,795 Adjustments: Preferred stock (25,849 ) (25,163 ) (24,579 ) (24,813 ) (24,091 ) (25,508 ) (24,027 ) Additional paid-in capital on ESOP preferred stock (144 ) (146 ) (128 ) (148 ) (168 ) (145 ) (184 ) Unearned ESOP shares 2,366 2,198 1,596 1,850 2,094 2,282 2,302 Noncontrolling interests         (910 )   (957 )   (928 )   (927 )   (984 )   (934 )   (944 ) Average common stockholders’ equity (B) 181,431 177,699 177,208 179,845 177,854 179,574 175,942 Adjustments: Goodwill (26,664 ) (26,673 ) (26,713 ) (26,979 ) (27,037 ) (26,668 ) (26,553 ) Certain identifiable intangible assets (other than MSRs) (2,303 ) (2,588 ) (2,871 ) (3,145 ) (3,600 ) (2,445 ) (3,503 ) Other assets (2) (2,160 ) (2,095 ) (2,175 ) (2,131 ) (2,096 ) (2,128 ) (2,081 ) Applicable deferred taxes (3)         1,648     1,722     1,785     1,855     1,934     1,685     1,974   Average tangible common equity   (C)   $ 151,952     148,065     147,234     149,445     147,055     150,018     145,779   Return on average common stockholders' equity (ROE) (A)/(B) 11.95 % 11.54 10.94 11.60 11.70 11.75 11.72 Return on average tangible common equity (ROTCE)   (A)/(C)     14.26     13.85     13.16     13.96     14.15     14.06     14.15  

(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         Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, (in billions, except ratio)       2017     2017     2016     2016     2016   Total equity $ 206.1 202.5 200.5 204.0 202.7 Adjustments: Preferred stock (25.8 ) (25.5 ) (24.6 ) (24.6 ) (24.8 ) Additional paid-in capital on ESOP

preferred stock

(0.1 ) (0.2 ) (0.1 ) (0.1 ) (0.2 ) Unearned ESOP shares 2.1 2.5 1.6 1.6 1.9 Noncontrolling interests         (0.9 )   (1.0 )   (0.9 )   (1.0 )   (1.0 ) Total common stockholders' equity 181.4 178.3 176.5 179.9 178.6 Adjustments: Goodwill (26.6 ) (26.7 ) (26.7 ) (26.7 ) (27.0 ) Certain identifiable intangible assets (other than MSRs) (2.1 ) (2.4 ) (2.7 ) (3.0 ) (3.4 ) Other assets (2) (2.2 ) (2.1 ) (2.1 ) (2.2 ) (2.0 ) Applicable deferred taxes (3) 1.6 1.7 1.8 1.8 1.9 Investment in certain subsidiaries and other         (0.2 )   (0.1 )   (0.4 )   (2.0 )   (2.5 ) Common Equity Tier 1 (Fully Phased-In) under Basel III   (A)     151.9     148.7     146.4     147.8     145.6   Total risk-weighted assets (RWAs) anticipated under Basel III (4)(5)   (B)   $ 1,312.6     1,324.5     1,358.9     1,380.0     1,372.9   Common Equity Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In) (5)   (A)/(B)     11.6 %   11.2     10.8     10.7     10.6  

(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 June 30, 2017, 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 March 31, 2017, and December 31, September 30 and June 30, 2016, was calculated under the Basel III Standardized Approach RWAs.

(5) The Company’s June 30, 2017, 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

  2017     2016     2017     2016     2017     2016     2017     2016     2017     2016 Quarter ended Jun 30, Net interest income (3) $ 7,548 7,379 4,278 3,919 1,127 932 (470 ) (497 ) 12,483 11,733 Provision (reversal of provision) for credit losses 623 689 (65 ) 385 7 2 (10 ) (2 ) 555 1,074 Noninterest income 4,741 4,825 2,673 3,365 3,055 2,987 (783 ) (748 ) 9,686 10,429 Noninterest expense       7,223     6,648     4,078     4,036     3,075     2,976     (835 )   (794 )   13,541     12,866 Income (loss) before income tax expense (benefit) 4,443 4,867 2,938 2,863 1,100 941 (408 ) (449 ) 8,073 8,222 Income tax expense (benefit)       1,404     1,667     559     795     417     358     (155 )   (171 )   2,225     2,649 Net income (loss) before noncontrolling interests 3,039 3,200 2,379 2,068 683 583 (253 ) (278 ) 5,848 5,573 Less: Net income (loss) from noncontrolling interests       46     21     (9 )   (5 )   1     (1 )   —     —     38     15 Net income (loss)     $ 2,993     3,179     2,388     2,073     682     584     (253 )   (278 )   5,810     5,558   Average loans $ 477.2 485.7 464.9 451.4 71.7 66.7 (56.9 ) (53.0 ) 956.9 950.8 Average assets 983.5 967.6 817.3 772.6 213.1 205.3 (86.8 ) (83.4 ) 1,927.1 1,862.1 Average deposits 727.2 703.7 463.0 425.8 188.2 182.5 (77.2 ) (75.3 ) 1,301.2 1,236.7                                                                 Six months ended June 30, Net interest income (3) $ 15,175 14,847 8,426 7,667 2,201 1,875 (1,019 ) (989 ) 24,783 23,400 Provision (reversal of provision) for credit losses 1,269 1,409 (108 ) 748 3 (12 ) (4 ) 15 1,160 2,160 Noninterest income 9,207 9,971 5,563 6,575 6,174 5,898 (1,556 ) (1,487 ) 19,388 20,957 Noninterest expense       14,444     13,484     8,303     8,004     6,281     6,018     (1,695 )   (1,612 )   27,333     25,894 Income (loss) before income tax expense (benefit) 8,669 9,925 5,794 5,490 2,091 1,767 (876 ) (879 ) 15,678 16,303 Income tax expense (benefit)       2,531     3,364     1,305     1,514     779     672     (333 )   (334 )   4,282     5,216 Net income (loss) before noncontrolling interests 6,138 6,561 4,489 3,976 1,312 1,095 (543 ) (545 ) 11,396 11,087 Less: Net income (loss) from noncontrolling interests       136     86     (14 )   (18 )   7     (1 )   —     —     129     67 Net income (loss)     $ 6,002     6,475     4,503     3,994     1,305     1,096     (543 )   (545 )   11,267     11,020   Average loans $ 479.9 485.0 465.6 440.6 71.2 65.4 (56.5 ) (52.0 ) 960.2 939.0 Average assets 987.0 957.5 812.6 760.6 217.5 206.7 (88.1 ) (83.8 ) 1,929.0 1,841.0 Average deposits       722.2     693.3     464.5     426.9     191.9     183.5     (78.4 )   (75.7 )   1,300.2     1,228.0

(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.

(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  

 

Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,

(income/expense in millions, average balances in billions)

  2017     2017     2016     2016     2016   COMMUNITY BANKING Net interest income (2) $ 7,548 7,627 7,556 7,430 7,379 Provision for credit losses 623 646 631 651 689 Noninterest income 4,741 4,466 4,105 4,957 4,825 Noninterest expense     7,223     7,221     6,985     6,953     6,648   Income before income tax expense 4,443 4,226 4,045 4,783 4,867 Income tax expense     1,404     1,127     1,272     1,546     1,667   Net income before noncontrolling interests 3,039 3,099 2,773 3,237 3,200 Less: Net income from noncontrolling interests     46     90     40     10     21   Segment net income   $ 2,993     3,009     2,733     3,227     3,179   Average loans $ 477.2 482.7 488.1 489.2 485.7 Average assets 983.5 990.7 1,000.7 993.6 967.6 Average deposits     727.2     717.2     709.8     708.0     703.7   WHOLESALE BANKING Net interest income (2) $ 4,278 4,148 4,323 4,062 3,919 Provision (reversal of provision) for credit losses (65 ) (43 ) 168 157 385 Noninterest income 2,673 2,890 2,830 3,085 3,365 Noninterest expense     4,078     4,225     4,002     4,120     4,036   Income before income tax expense 2,938 2,856 2,983 2,870 2,863 Income tax expense     559     746     795     827     795   Net income before noncontrolling interests 2,379 2,110 2,188 2,043 2,068 Less: Net loss from noncontrolling interests     (9 )   (5 )   (6 )   (4 )   (5 ) Segment net income   $ 2,388     2,115     2,194     2,047     2,073   Average loans $ 464.9 466.3 461.5 454.3 451.4 Average assets 817.3 807.8 811.9 794.2 772.6 Average deposits     463.0     466.0     459.2     441.2     425.8   WEALTH AND INVESTMENT MANAGEMENT Net interest income (2) $ 1,127 1,074 1,061 977 932 Provision (reversal of provision) for credit losses 7 (4 ) 3 4 2 Noninterest income 3,055 3,119 3,013 3,122 2,987 Noninterest expense     3,075     3,206     3,042     2,999     2,976   Income before income tax expense 1,100 991 1,029 1,096 941 Income tax expense     417     362     380     415     358   Net income before noncontrolling interests 683 629 649 681 583 Less: Net income (loss) from noncontrolling interests     1     6     (4 )   4     (1 ) Segment net income   $ 682     623     653     677     584   Average loans $ 71.7 70.7 70.0 68.4 66.7 Average assets 213.1 221.9 220.4 212.1 205.3 Average deposits     188.2     195.6     194.9     189.2     182.5   OTHER (3) Net interest income (2) $ (470 ) (549 ) (538 ) (517 ) (497 ) Provision (reversal of provision) for credit losses (10 ) 6 3 (7 ) (2 ) Noninterest income (783 ) (773 ) (768 ) (788 ) (748 ) Noninterest expense     (835 )   (860 )   (814 )   (804 )   (794 ) Loss before income tax benefit (408 ) (468 ) (495 ) (494 ) (449 ) Income tax benefit     (155 )   (178 )   (189 )   (187 )   (171 ) Net loss before noncontrolling interests (253 ) (290 ) (306 ) (307 ) (278 ) Less: Net income from noncontrolling interests     —     —     —     —     —   Other net loss   $ (253 )   (290 )   (306 )   (307 )   (278 ) Average loans $ (56.9 ) (56.1 ) (55.5 ) (54.4 ) (53.0 ) Average assets (86.8 ) (89.4 ) (88.7 ) (85.3 ) (83.4 ) Average deposits     (77.2 )   (79.6 )   (79.7 )   (76.9 )   (75.3 ) CONSOLIDATED COMPANY Net interest income (2) $ 12,483 12,300 12,402 11,952 11,733 Provision for credit losses 555 605 805 805 1,074 Noninterest income 9,686 9,702 9,180 10,376 10,429 Noninterest expense     13,541     13,792     13,215     13,268     12,866   Income before income tax expense 8,073 7,605 7,562 8,255 8,222 Income tax expense     2,225     2,057     2,258     2,601     2,649   Net income before noncontrolling interests 5,848 5,548 5,304 5,654 5,573 Less: Net income from noncontrolling interests     38     91     30     10     15   Wells Fargo net income   $ 5,810     5,457     5,274     5,644     5,558   Average loans $ 956.9 963.6 964.1 957.5 950.8 Average assets 1,927.1 1,931.0 1,944.3 1,914.6 1,862.1 Average deposits     1,301.2     1,299.2     1,284.2     1,261.5     1,236.7  

(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment.

(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   Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, (in millions)   2017     2017     2016     2016     2016   MSRs measured using the fair value method: Fair value, beginning of quarter $ 13,208 12,959 10,415 10,396 11,333 Servicing from securitizations or asset transfers (1) 436 583 752 609 477 Sales and other (2)     (8 )   (47 )   (47 )   4     (22 ) Net additions     428     536     705     613     455   Changes in fair value: Due to changes in valuation model inputs or assumptions: Mortgage interest rates (3) (305 ) 152 2,367 39 (779 ) Servicing and foreclosure costs (4) (14 ) 27 93 (10 ) (4 ) Prepayment estimates and other (5)     (41 )   (5 )   (106 )   (37 )   (41 ) Net changes in valuation model inputs or assumptions     (360 )   174     2,354     (8 )   (824 ) Changes due to collection/realization of expected cash flows over time     (487 )   (461 )   (515 )   (586 )   (568 ) Total changes in fair value     (847 )   (287 )   1,839     (594 )   (1,392 ) Fair value, end of quarter   $ 12,789     13,208     12,959     10,415     10,396  

(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.

                                    Quarter ended   Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, (in millions)   2017     2017     2016     2016     2016   Amortized MSRs: Balance, beginning of quarter $ 1,402 1,406 1,373 1,353 1,359 Purchases 26 18 34 18 24 Servicing from securitizations or asset transfers 37 45 66 69 38 Amortization     (66 )   (67 )   (67 )   (67 )   (68 ) Balance, end of quarter   $ 1,399     1,402     1,406     1,373     1,353   Fair value of amortized MSRs: Beginning of quarter $ 2,051 1,956 1,627 1,620 1,725 End of quarter     1,989     2,051     1,956     1,627     1,620                  

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)

Quarter ended   Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, (in millions)       2017       2017     2016     2016     2016   Servicing income, net: Servicing fees (1) $ 882 882 738 878 842 Changes in fair value of MSRs carried at fair value: Due to changes in valuation model inputs or assumptions (2) (A) (360

)

 

174 2,354 (8 ) (824 ) Changes due to collection/realization of expected cash flows over time       (487

)

 

  (461 )   (515 )   (586 )   (568 ) Total changes in fair value of MSRs carried at fair value (847

)

 

(287 ) 1,839 (594 ) (1,392 ) Amortization (66

)

 

(67 ) (67 ) (67 ) (68 ) Net derivative gains (losses) from economic hedges (3)   (B)   431       (72 )   (2,314 )   142     978   Total servicing income, net       $ 400       456     196     359     360   Market-related valuation changes to MSRs, net of hedge results (2)(3)   (A)+(B)   $ 71       102     40     134     154  

(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 results from economic hedges used to hedge the risk of changes in fair value of MSRs.

                                          Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, (in billions)       2017       2017     2016     2016     2016   Managed servicing portfolio (1): Residential mortgage servicing: Serviced for others $ 1,189 1,204 1,205 1,226 1,250 Owned loans serviced 343 335 347 352 349 Subserviced for others       4       4     8     4     4   Total residential servicing       1,536       1,543     1,560     1,582     1,603   Commercial mortgage servicing: Serviced for others 475 474 479 477 478 Owned loans serviced 130 132 132 130 128 Subserviced for others       8       7     8     8     8   Total commercial servicing       613       613     619     615     614   Total managed servicing portfolio       $ 2,149       2,156     2,179     2,197     2,217   Total serviced for others $ 1,664 1,678 1,684 1,703 1,728 Ratio of MSRs to related loans serviced for others 0.85 % 0.87 0.85 0.69 0.68 Weighted-average note rate (mortgage loans serviced for others)       4.23       4.23     4.26     4.28     4.32  

(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   Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,         2017     2017     2016     2016     2016   Net gains on mortgage loan origination/sales activities (in millions): Residential (A) $ 521 569 939 953 744 Commercial 81 101 90 167 72 Residential pipeline and unsold/repurchased loan management (1)       146     102     192     188     238   Total       $ 748     772     1,221     1,308     1,054   Application data (in billions): Wells Fargo first mortgage quarterly applications $ 83 59 75 100 95 Refinances as a percentage of applications 32 % 36 48 55 46 Wells Fargo first mortgage unclosed pipeline, at quarter end       $ 34     28     30     50     47   Residential real estate originations: Purchases as a percentage of originations 75 % 61 50 58 60 Refinances as a percentage of originations       25     39     50     42     40   Total       100 %   100     100     100     100   Wells Fargo first mortgage loans (in billions): Retail $ 25 21 35 37 34 Correspondent 31 22 36 32 28 Other (2)       —     1     1     1     1   Total quarter-to-date       $ 56     44     72     70     63   Held-for-sale (B) $ 42 34 56 53 46 Held-for-investment       14     10     16     17     17   Total quarter-to-date       $ 56     44     72     70     63   Total year-to-date       $ 100     44     249     177     107   Production margin on residential held-for-sale mortgage originations   (A)/(B)   1.24 %   1.68     1.68     1.81     1.66  

(1) Largely 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   Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, (in millions)       2017     2017     2016     2016     2016   Balance, beginning of period $ 222 229 239 255 355 Provision for repurchase losses: Loan sales 6 8 10 11 8 Change in estimate (1)       (45

)

 

  (8 )   (7 )   (24 )   (89 ) Net additions (reductions) (39

)

 

— 3 (13 ) (81 ) Losses       (5

)

 

  (7 )   (13 )   (3 )   (19 ) Balance, end of period       $ 178       222     229     239     255  

(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/20170714005111/en/

MediaAncel Martinez, 415-222-3858orInvestorsJim Rowe, 415-396-8216