Wells Fargo & Company (NYSE:WFC):
- Our preliminary financial results may
need to be revised to reflect additional accruals for the CFPB/OCC
matter, discussed on page 2, when we file our final financial
statements in our Quarterly Report on Form 10-Q.
- Preliminary financial results:
- Preliminary net income of $5.9 billion,
compared with $5.6 billion in first quarter 2017
- Diluted earnings per share (EPS) of
$1.12, compared with $1.03
- Revenue of $21.9 billion, down from
$22.3 billion
- Net interest income of $12.2 billion,
down $86 million, or 1 percent
- Noninterest income of $9.7 billion,
down $235 million, or 2 percent
- Average deposits of $1.3 trillion, down
$2.0 billion
- Average loans of $951.0 billion, down
$12.6 billion, or 1 percent
- Return on assets (ROA) of 1.26 percent,
return on equity (ROE) of 12.37 percent, and return on average
tangible common equity (ROTCE) of 14.75 percent1
- Credit quality:
- Provision expense of $191 million, down
$414 million, or 68 percent, from first quarter 2017
- Net charge-offs of $741 million, down
$64 million
- Net charge-offs were 0.32 percent of
average loans (annualized), down from 0.34 percent
- Reserve release2 of $550 million,
compared with a $200 million reserve release in first quarter
2017
- Nonaccrual loans of $7.7 billion, down
$2.0 billion, or 21 percent
- Capital position and return:
- Common Equity Tier 1 ratio (fully
phased-in) of 12.0 percent3
- Returned $4.0 billion to shareholders
through common stock dividends and net share repurchases, up
30 percent from $3.1 billion in first quarter 2017
- Net share repurchases of $2.1 billion,
up 78 percent
- Period-end common shares outstanding
down 122.9 million shares
Final financial results and other disclosures will be reported
in our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2018, and may differ materially from the results and
disclosures in this document due to, among other things, the
completion of final review procedures, the occurrence of subsequent
events, including developments with respect to the resolution of
regulatory matters, which could cause us to take additional
accruals in the first quarter, or the discovery of additional
information.
Selected Financial Information
Quarter ended
Mar 31, Dec 31, Mar 31,
2018 2017 2017
Earnings Diluted earnings per common share
$
1.12 1.16 1.03 Wells Fargo net income (in billions)
5.94 6.15 5.63 Return on assets (ROA)
1.26 %
1.26 1.18 Return on equity (ROE)
12.37 12.47 11.96 Return on
average tangible common equity (ROTCE) (a)
14.75 14.85 14.35
Asset Quality Net charge-offs (annualized) as a % of average
total loans
0.32 % 0.31 0.34 Allowance for credit
losses as a % of total loans
1.19 1.25 1.28 Allowance for
credit losses as a % of annualized net charge-offs
376 401
376
Other Revenue (in billions)
$ 21.9 22.1
22.3 Efficiency ratio (b)
64.9 % 76.2 62.0 Average
loans (in billions)
$ 951.0 951.8 963.6 Average
deposits (in billions)
1,297.2 1,311.6 1,299.2 Net interest
margin
2.84 % 2.84
2.87
(a) Tangible common equity is a non-GAAP
financial measure and represents total equity less preferred
equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible
assets associated with certain of our nonmarketable equity
securities but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible
common equity may differ among companies. Management believes that
return on average tangible common equity, which utilizes tangible
common equity, is a useful financial measure because it enables
investors and others to assess the Company's use of equity. For
additional information, including a corresponding reconciliation to
GAAP financial measures, see the "Tangible Common Equity" tables on
page 36.
(b) The efficiency ratio is noninterest
expense divided by total revenue (net interest income and
noninterest income).
Wells Fargo & Company (NYSE:WFC) reported preliminary
results, including net income of $5.9 billion, or $1.12 per
diluted common share, for first quarter 2018, compared with
$5.6 billion, or $1.03 per share, for first quarter 2017, and
$6.2 billion, or $1.16 per share, for fourth quarter
2017. These preliminary results are subject to change due to our
ongoing discussions with the Consumer Financial Protection Bureau
(CFPB) and Office of the Comptroller of the Currency (OCC) to
resolve matters regarding our compliance risk management program
and our past practices involving certain automobile collateral
protection insurance policies and certain mortgage interest rate
lock extensions (the “CFPB/OCC matter”), which the CFPB and OCC
have collectively offered to resolve for an aggregate of $1 billion
in civil money penalties. At this time, we are unable to predict
final resolution of the CFPB/OCC matter and cannot reasonably
estimate our related loss contingency. Accordingly, the preliminary
financial results we report today may need to be revised to reflect
additional accruals for the CFPB/OCC matter when we file our final
financial statements in our Quarterly Report on Form 10-Q with the
SEC.
Chief Executive Officer Tim Sloan said, “I’m confident that our
outstanding team will continue to transform Wells Fargo into a
better, stronger company; however, we recognize that it will take
time to put all of our challenges behind us. During the first
quarter our team members continued to focus on our vision of
satisfying our customers’ financial needs and helping them succeed
financially. We also made progress on our priority of rebuilding
trust with our customers, team members, communities, regulators,
and shareholders. The efforts to build a better Wells Fargo during
the quarter included continuing to improve our compliance and
operational risk management programs, investing in innovative
products and services that enhance the customer experience
including the roll-out of our digital mortgage application and
predictive banking service, and increasing the minimum hourly pay
rate for U.S.-based team members. We also began executing on our
goal to increase donations to nonprofit and community organizations
by approximately 40 percent in 2018, and we’re proud that Wells
Fargo was recently named number one in U.S. workplace giving for
the ninth consecutive year by United Way Worldwide. In addition, we
continued to make progress on our expense savings initiatives and
remain on track to achieve our target of $4 billion in expense
reductions by the end of 2019.”
Chief Financial Officer John Shrewsberry said, “Wells Fargo
preliminarily reported $5.9 billion of net income in the first
quarter, subject to the resolution of the CFPB/OCC matter noted in
today's earnings release. Our financial results included continued
strong credit performance, liquidity and capital levels. We
returned $4.0 billion to shareholders through common stock
dividends and net share repurchases in the first quarter, up
30 percent from a year ago. Our capital remained well above
our internal target, and returning more capital to shareholders
remains a priority. Our expenses in the first quarter included
typically higher personnel expense; however, our noninterest
expense dollar target range for full year 2018 remains
unchanged.”
Net Interest Income
Net interest income in first quarter 2018 was $12.2 billion,
down $75 million, compared with fourth quarter 2017, driven
primarily by two fewer days in the quarter, hedge ineffectiveness
accounting, and lower loan swap income related to the unwind of the
receive-fixed swap portfolio, partially offset by the net repricing
impact of higher interest rates.
Net interest margin was 2.84 percent, flat compared with fourth
quarter 2017. The negative impact to net interest margin from hedge
ineffectiveness accounting and lower loan swap income was offset by
the net repricing benefit of higher interest rates.
Noninterest Income
Noninterest income in first quarter was $9.7 billion, down $41
million, compared with fourth quarter 2017. First quarter
noninterest income reflected lower deposit service charges, card
fees, other fees and insurance income, partially offset by higher
market sensitive revenue4. First quarter results include the impact
of the adoption of new accounting standards for Recognition and
Measurement of Financial Assets and Financial Liabilities
(Financial Instruments) and Revenue from Contracts With Customers
(Revenue Recognition). See pages 17 and 18 in this Report for more
information.
- Deposit service charges of $1.2 billion
were down $73 million in the first quarter primarily driven by the
impact of customer-friendly changes including the first full
quarter impact of Overdraft RewindSM.
- Card fees were $908 million, down from
$996 million in fourth quarter 2017, and included the impact of the
new accounting standard for Revenue Recognition, which lowered card
fees and reduced noninterest expense by an equal amount due to the
netting of card payment network charges against related interchange
and network revenues in card fees. Additionally, interchange
revenue was seasonally lower in the first quarter.
- Other fees were $800 million, compared
with $913 million in fourth quarter 2017, as first quarter results
included lower commercial real estate brokerage commissions.
- Mortgage banking income was $934
million, up slightly from $928 million in fourth quarter 2017.
As expected, residential mortgage loan originations declined in the
first quarter, down to $43 billion, from $53 billion in the
fourth quarter. The production margin on residential held-for-sale
mortgage loan originations5 was 0.94 percent, compared with
1.25 percent in the fourth quarter, due to increased price
competition and a higher percentage of correspondent volume, which
has lower production margins than retail originations. Net mortgage
servicing income was $468 million in the first quarter, up
from $262 million in the fourth quarter, driven by higher net
mortgage servicing rights (MSR) valuation gains, lower unreimbursed
servicing costs and lower loan payoffs.
- Insurance income was $114 million, down
$109 million from fourth quarter 2017, due to the sale of Wells
Fargo Insurance Services USA, which closed in November 2017.
- Market sensitive revenue was $1.0
billion, compared with $728 million in fourth quarter 2017. Net
gains from equity securities included $250 million of gains from
the impact of the new accounting standard for Financial Instruments
which requires any gain or loss associated with the fair value
measurement of equity securities to be reflected in earnings. In
addition, net gains from trading activities were higher in first
quarter 2018 due to increased trading results in Wells Fargo
Securities. These increases were partially offset by lower net
gains from debt securities.
- Other income was $438 million,
compared with $405 million in the fourth quarter. First
quarter results included a $643 million gain from sales of $1.6
billion of purchased credit-impaired Pick-a-Pay loans and a $202
million gain from the sale of Wells Fargo Shareowner Services,
which closed in February 2018. These gains were partially offset by
a lower of cost or market (LOCOM) adjustment related to the
previously announced sale of certain automobile loans of Reliable
Financial Services Inc., as well as other mark-to-market
adjustments. Fourth quarter 2017 included an $848 million gain
on the sale of Wells Fargo Insurance Services USA, partially offset
by $414 million of impairments on low income housing and renewable
energy investments due to the Tax Cuts & Jobs Act (Tax
Act).
Noninterest Expense
Noninterest expense in the first quarter was $14.2 billion,
compared with $16.8 billion in the prior quarter. First
quarter expenses included operating losses of $668 million,
down from $3.5 billion in fourth quarter 2017, which were elevated
due to litigation accruals for a variety of matters, including
mortgage-related regulatory investigations, sales practices, and
other consumer-related matters. First quarter expenses also
included $781 million of seasonally higher employee benefits
and incentive compensation expense. Other expense was higher
primarily due to a reduction in other expense in fourth quarter
2017 as a result of a $117 million gain on the sale of a corporate
property. Outside professional services and advertising and
promotion expense, which typically decline in the first quarter,
were lower compared with fourth quarter 2017. The efficiency ratio
was 64.9 percent in first quarter 2018, down from
76.2 percent in the fourth quarter, driven primarily by lower
operating losses.
Loans
Total average loans were $951.0 billion in the first
quarter, down $798 million from the fourth quarter. Period-end loan
balances were $947.3 billion at March 31, 2018, down
$9.5 billion from December 31, 2017. Commercial loans
were flat compared with December 31, 2017 with growth in
commercial and industrial loans, largely offset by declines in
commercial real estate loans. Consumer loans decreased $9.5 billion
from the prior quarter, driven by:
- a $3.8 billion decline in
automobile loans due to the reclassification of $1.6 billion to
loans held for sale as a result of the previously announced sale of
certain assets of Reliable Financial Services Inc., as well as
expected continued runoff
- a $1.9 billion decline in credit
card balances primarily due to seasonality
- a $1.8 billion decline in the
junior lien mortgage portfolio as payoffs continued to exceed new
originations
- a $1.4 billion decline in 1-4 family
first mortgage loans, driven by $1.6 billion of sales of purchased
credit-impaired Pick-a-Pay loans
Period-End Loan Balances
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31, (in millions)
2018
2017 2017 2017
2017 Commercial
$ 503,396 503,388 500,150
505,901 505,004 Consumer
443,912
453,382 451,723
451,522 453,401 Total loans
$ 947,308 956,770
951,873 957,423
958,405 Change from prior quarter
$ (9,462 ) 4,897
(5,550 ) (982 ) (9,199 )
Debt and Equity Securities
As a result of the adoption of the new accounting standard for
Financial Instruments, the balance sheet now includes more detailed
disclosure of debt and equity securities.
Debt securities include debt securities available for sale and
held to maturity, as well as debt securities held for trading. Debt
securities were $473.0 billion at March 31, 2018, down $398
million from the fourth quarter, as approximately $13.1 billion of
purchases, primarily federal agency mortgage-backed securities
(MBS) in the available-for-sale portfolio, were more than offset by
run-off and sales.
Net unrealized losses on available-for-sale debt securities were
$(1.9) billion at March 31, 2018, compared with net unrealized
gains of $1.5 billion at December 31, 2017, primarily due
to higher interest rates and wider MBS spreads during the
quarter.
Equity securities include marketable and non-marketable equity
securities, as well as equity securities held for trading. Equity
securities were $58.9 billion at March 31, 2018, down $3.6
billion from the fourth quarter, predominantly due to a decline in
equity securities held for trading.
Deposits
Total average deposits for first quarter 2018 were $1.3
trillion, down $14.4 billion from the prior quarter. The decline
was driven by a decrease in commercial deposits primarily from
financial institutions, including a modest impact from actions the
Company took to comply with the asset cap included in the consent
order issued by the Board of Governors of the Federal Reserve
System on February 2, 2018. Average consumer and small business
banking deposits of $755.5 billion for first quarter 2018 were down
$2.1 billion from the prior quarter, as growth in Community Banking
deposits was more than offset by lower Wealth and Investment
Management deposits. The average deposit cost for first quarter
2018 was 34 basis points, up 6 basis points from the prior quarter
and 17 basis points from a year ago, primarily driven by an
increase in commercial and Wealth and Investment Management deposit
rates.
Capital
Capital in the first quarter continued to exceed our internal
target, with a Common Equity Tier 1 ratio (fully phased-in) of
12.0 percent3, flat compared with the prior quarter. In first
quarter 2018, the Company repurchased 50.6 million shares of
its common stock, which reduced period-end common shares
outstanding by 17.7 million.
Credit Quality
Net Loan Charge-offs
The quarterly loss rate was 0.32 percent (annualized), compared
with 0.31 percent in the prior quarter and 0.34 percent a year
ago. Commercial and consumer losses were 0.06 percent and 0.60
percent, respectively. Total credit losses were $741 million
in first quarter 2018, down $10 million from fourth quarter 2017.
Commercial losses were down $37 million driven by lower oil
and gas portfolio losses. Consumer losses increased
$27 million driven by higher automobile loan losses.
Net Loan Charge-Offs
Quarter ended March
31, 2018 December 31, 2017
March 31, 2017 Net loan As a %
of Net loan As a % of Net
loan As a % of charge-
average charge- average charge-
average ($ in millions) offs
loans (a) offs
loans (a) offs
loans (a) Commercial: Commercial and industrial $ 85
0.10 % $ 118 0.14 % $ 171 0.21 % Real estate mortgage (15 ) (0.05 )
(10 ) (0.03 ) (25 ) (0.08 ) Real estate construction (4 ) (0.07 )
(3 ) (0.05 ) (8 ) (0.15 ) Lease financing 12
0.25 10 0.20 5 0.11
Total commercial
78 0.06 115 0.09
143 0.11 Consumer: Real estate 1-4
family first mortgage (18 ) (0.03 ) (23 ) (0.03 ) 7 0.01 Real
estate 1-4 family junior lien mortgage (8 ) (0.09 ) (7 ) (0.06 ) 23
0.21 Credit card 332 3.69 336 3.66 309 3.54 Automobile 208 1.64 188
1.38 167 1.10 Other revolving credit and installment
149 1.60 142 1.46 156 1.60
Total
consumer 663 0.60 636
0.56 662 0.59 Total
$ 741 0.32 %
$ 751 0.31 % $ 805
0.34 %
(a) Quarterly net charge-offs (recoveries)
as a percentage of average loans are annualized. See explanation on
page 34 of the accounting for purchased credit-impaired (PCI) loans
and the impact on selected financial ratios.
Nonperforming Assets
Nonperforming assets decreased $388 million, or 4 percent, from
fourth quarter 2017 to $8.3 billion. Nonaccrual loans decreased
$317 million from fourth quarter 2017 to $7.7 billion primarily
driven by lower commercial and industrial nonaccruals reflecting
continued improvement in the oil and gas portfolio, as well as
continued declines in consumer real estate nonaccruals.
Nonperforming Assets (Nonaccrual Loans
and Foreclosed Assets)
March 31, 2018
December 31, 2017 March 31, 2017
As a %
As a As a of %
of % of Total total Total
total Total total ($ in millions)
balances loans
balances loans
balances loans Commercial:
Commercial and industrial $ 1,516 0.45 % $ 1,899 0.57 % $ 2,898
0.88 % Real estate mortgage 755 0.60 628 0.50 672 0.51 Real estate
construction 45 0.19 37 0.15 40 0.16 Lease financing
93 0.48 76 0.39 96 0.50
Total
commercial 2,409 0.48
2,640 0.52 3,706 0.73
Consumer: Real estate 1-4 family first mortgage 4,053 1.43
4,122 1.45 4,743 1.73 Real estate 1-4 family junior lien mortgage
1,087 2.87 1,086 2.73 1,153 2.60 Automobile 117 0.24 130 0.24 101
0.17 Other revolving credit and installment 53
0.14 58 0.15 56 0.14
Total consumer
5,310 1.20 5,396
1.19 6,053 1.34 Total nonaccrual
loans 7,719 0.81
8,036 0.84 9,759 1.02
Foreclosed assets: Government insured/guaranteed 103 120 179
Non-government insured/guaranteed 468 522
726
Total foreclosed assets
571 642 905 Total
nonperforming assets $ 8,290
0.88 % $ 8,678 0.91
% $ 10,664 1.11 % Change
from prior quarter: Total nonaccrual loans $ (317 ) $ (583 ) $ (625
) Total nonperforming assets (388 )
(647 ) (698
)
Allowance for Credit Losses
The allowance for credit losses, including the allowance for
unfunded commitments, totaled $11.3 billion at March 31, 2018,
down $647 million from December 31, 2017. “Credit performance
remained strong in the first quarter,” said Chief Risk Officer Mike
Loughlin. “We released $550 million from the allowance for
credit losses. Approximately $400 million of the release was driven
by a reduction in allowance previously held for hurricane-related
losses. The remainder of the release was due to continued
improvement in residential real estate, both in first and junior
lien mortgage loan portfolios, and lower loan balances.” The
allowance coverage for total loans was 1.19 percent, compared
with 1.25 percent in fourth quarter 2017. The allowance covered 3.8
times annualized first quarter net charge-offs, compared with 4.0
times in the prior quarter. The allowance coverage for nonaccrual
loans was 147 percent at March 31, 2018, compared with
149 percent at December 31, 2017. The Company believes
the allowance was appropriate for losses inherent in the loan
portfolio at March 31, 2018.
Business Segment Performance
Financial information for our operating segments reflect
revisions to our previously reported amounts to reflect a change,
adopted in first quarter 2018, in our methodology for assigning
funding charges and credits to our lines of business and for
reclassifications made in connection with the adoption of a new
accounting standard for Financial Instruments. See pages 17 and 18
in this Report for more information.
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
Mar
31, Dec 31, Mar 31, (in millions)
2018 2017 2017
Community Banking
$ 2,713 3,472 2,824 Wholesale
Banking
2,875 2,373 2,485 Wealth and Investment Management
714 675
665
Community Banking offers a
complete line of diversified financial products and services for
consumers and small businesses including checking and savings
accounts, credit and debit cards, and automobile, student,
mortgage, home equity and small business lending, as well as
referrals to Wholesale Banking and Wealth and Investment Management
business partners. The Community Banking segment also includes the
results of our Corporate Treasury activities net of allocations in
support of the other operating segments and results of investments
in our affiliated venture capital partnerships.
Selected Financial Information
Quarter ended
Mar 31,
Dec 31, Mar 31, (in millions)
2018 2017 2017 Total
revenue
$ 11,830 11,720 11,823 Provision for credit
losses
218 636 646 Noninterest expense
7,902 10,216
7,281 Segment net income
2,713 3,472 2,824 (in billions)
Average loans
470.5 473.2 480.7 Average assets
1,061.9 1,073.2 1,095.8 Average deposits
747.5 738.3 717.8
Community Banking reported net income of $2.7 billion, down
$759 million, or 22 percent, from fourth quarter 2017. The
decline in net income from fourth quarter 2017 was primarily driven
by the inclusion in the fourth quarter of the benefit of the
estimated impact of the Tax Act to the Company. Revenue in the
first quarter was $11.8 billion, up $110 million, or 1
percent, from fourth quarter 2017, and included a gain on sales of
Pick-a-Pay loans and higher market sensitive revenue, partially
offset by lower net interest income, card fees, and service charges
on deposit accounts. Noninterest expense decreased
$2.3 billion, or 23 percent, compared with fourth quarter
2017, driven primarily by a decline in litigation accruals,
partially offset by seasonally higher personnel expense. The
provision for credit losses decreased $418 million from the
prior quarter.
Net income was down $111 million, or 4 percent, from first
quarter 2017 due to higher expenses, partially offset by a lower
provision for credit losses and the lower income tax rate. Revenue
was flat compared with a year ago due to higher net interest
income, a gain on sales of Pick-a-Pay loans, higher market
sensitive revenue, and higher trust and investment fees, offset by
lower mortgage banking revenue and service charges on deposit
accounts. Noninterest expense increased $621 million, or 9
percent, from a year ago primarily driven by higher operating
losses and personnel expense. The provision for credit losses
decreased $428 million from a year ago.
Retail Banking and Consumer Payments, Virtual Solutions and
Innovation
- Nearly 387,000 branch customer
experience surveys completed during first quarter 2018, with
‘Loyalty’ scores reaching their highest levels since August 2016,
while ‘Overall Satisfaction with Most Recent Visit’ scores
continued to improve from the prior quarter
- 5,805 retail bank branches as of the
end of first quarter 2018, reflecting 58 branch consolidations in
the quarter
- Primary consumer checking customers6,7
up 0.9 percent year-over-year
- Debit card point-of-sale purchase
volume8 of $81.8 billion in first quarter, up 8 percent
year-over-year
- Credit card point-of-sale purchase
volume of $17.4 billion in first quarter, up 8 percent
year-over-year
- 28.8 million digital (online and
mobile) active customers, including 21.8 million mobile active
users7,9
- Dynatrace's Mobile Banking Scorecard
named Wells Fargo's mobile app #1 in Overall Performance,
Functionality, and Quality and Availability (March 2018)
- In March, Barlow Research awarded Wells
Fargo Gateway "Overall Most Innovative" in its 2018 Monarch
Innovation Awards
Consumer Lending
- Home Lending
- Originations of $43 billion, down
from $53 billion in prior quarter, primarily due to
seasonality
- Applications of $58 billion, down
from $63 billion in prior quarter, primarily due to
seasonality
- Application pipeline of
$24 billion at quarter end, up from $23 billion at
December 31, 2017
- Automobile originations of $4.4 billion
in first quarter, up 2 percent compared with prior quarter; and
down 20 percent from prior year, as proactive steps to tighten
underwriting standards resulted in lower origination volume
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, Commercial Real
Estate, Corporate Banking, Financial Institutions Group, Government
and Institutional Banking, Middle Market Banking, Principal
Investments, Treasury Management, Wells Fargo Commercial Capital,
and Wells Fargo Securities.
Selected Financial Information
Quarter ended
Mar 31,
Dec 31, Mar 31, (in millions)
2018 2017 2017 Total
revenue
$ 7,279 7,440 7,577 Provision (reversal of
provision) for credit losses
(20 ) 20 (43 )
Noninterest expense
3,978 4,187 4,167 Segment net income
2,875 2,373 2,485 (in billions) Average loans
465.1
463.5 468.3 Average assets
829.2 837.2 810.5 Average
deposits
446.0 465.7
465.3
Wholesale Banking reported net income of $2.9 billion, up
$502 million, or 21 percent, from fourth quarter 2017. First
quarter results benefited from the reduced income tax rate. Revenue
of $7.3 billion decreased $161 million, or 2 percent,
compared with the prior quarter, due to lower net interest income,
lower commercial real estate brokerage fees, lower insurance income
related to the sale of Wells Fargo Insurance Services USA (WFIS),
and the gain on the sale of WFIS recognized in fourth quarter 2017,
partially offset by the gain on the sale of Wells Fargo Shareowner
Services recognized in the first quarter and higher market
sensitive revenue. Fourth quarter 2017 also included impairments on
low income housing and tax-advantaged renewable energy investments
due to the Tax Act. Noninterest expense decreased
$209 million, or 5 percent, from the prior quarter reflecting
two less months of WFIS operating expenses and lower operating
losses, partially offset by seasonally higher personnel expenses.
The provision for credit losses decreased $40 million from the
prior quarter.
Net income increased $390 million, or 16 percent, from first
quarter 2017 and benefited from the lower income tax rate. Revenue
decreased $298 million, or 4 percent, from first quarter
2017, on lower net interest income, the impact of the sale of WFIS
in fourth quarter 2017, lower mortgage banking fees, and lower
operating lease income, partially offset by the gain related to the
sale of Wells Fargo Shareowner Services. Noninterest expense
decreased $189 million, or 5 percent, from a year ago
reflecting the sale of WFIS, partially offset by higher regulatory,
risk, cyber and technology expenses. The provision for credit
losses increased $23 million from a year ago.
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
Mar 31, Dec
31, Mar 31, (in millions)
2018
2017 2017 Total revenue
$
4,242 4,333 4,257 Reversal of provision for credit losses
(6 ) (7 ) (4 ) Noninterest expense
3,290 3,246
3,204 Segment net income
714 675 665 (in billions) Average
loans
73.9 72.9 70.7 Average assets
84.2 83.7 81.8
Average deposits
177.9
184.1 197.5
Wealth and Investment Management reported net income of
$714 million, up $39 million, or 6 percent, from fourth
quarter 2017. First quarter results benefited from the reduced
income tax rate. Revenue of $4.2 billion decreased
$91 million, or 2 percent, from the prior quarter, primarily
due to lower gains on deferred compensation plan investments
(offset in employee benefits expense), lower net interest income,
and lower transaction revenue, partially offset by higher
asset-based fees. Noninterest expense increased $44 million,
or 1 percent, from the prior quarter, primarily driven by
seasonally higher personnel expenses, partially offset by lower
non-personnel expense and lower deferred compensation plan expense
(offset in gains on equity securities).
Net income was up $49 million, or 7 percent, from first quarter
2017 and benefited from the lower income tax rate. Revenue
decreased $15 million from a year ago primarily driven by
lower gains on deferred compensation plan investments (offset in
employee benefits expense), lower transaction revenue, lower net
interest income, and lower other revenue, partially offset by
higher asset-based fees. Noninterest expense increased
$86 million, or 3 percent, from a year ago, primarily due to
higher broker commissions, higher regulatory, risk, cyber and
technology expenses, and higher other personnel expense, partially
offset by lower deferred compensation plan expense (offset in gains
on equity securities).
- WIM total client assets of $1.9
trillion, up 4 percent from a year ago, driven by higher market
valuations
- Continued loan growth, with average
balances up 5 percent from a year ago largely due to growth in
non-conforming mortgage loans
- First quarter 2018 average closed
referred investment assets (referrals resulting from the
WIM/Community Banking partnership) were up 5 percent compared with
the prior quarter and up 6 percent from a year ago
Retail Brokerage
- Client assets of $1.6 trillion, up 4
percent from prior year
- Advisory assets of $540 billion, up 10
percent from prior year, primarily driven by higher market
valuations and positive net flows
Wealth Management
- Client assets of $242 billion, up 2
percent from prior year
Asset Management
- Total assets under management of $497
billion, up 3 percent from prior year, driven by higher market
valuations, positive money market and fixed income net flows,
partially offset by equity net outflows
Retirement
- IRA assets of $403 billion, up 5
percent from prior year
- Institutional Retirement plan assets of
$386 billion, up 7 percent from prior year
Conference Call
The Company will host a live conference call on Friday, April
13, 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~1293006.
A replay of the conference call will be available beginning at
10:00 a.m. PT (1:00 p.m. ET) on Friday, April 13 through Friday,
April 27. Please dial 855-859-2056 (U.S. and Canada) or
404-537-3406 (International) and enter Conference ID #1293006. 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~1293006.
End Notes
1 Tangible common equity is a non-GAAP financial measure and
represents total equity less preferred equity, noncontrolling
interests, and goodwill and certain identifiable intangible assets
(including goodwill and intangible assets associated with certain
of our nonmarketable equity securities but excluding mortgage
servicing rights), net of applicable deferred taxes. The
methodology of determining tangible common equity may differ among
companies. Management believes that return on average tangible
common equity, which utilizes tangible common equity, is a useful
financial measure because it enables investors and others to assess
the Company's use of equity. For additional information, including
a corresponding reconciliation to GAAP financial measures, see the
"Tangible Common Equity" tables on page 36.
2 Reserve build represents the amount by which the provision for
credit losses exceeds net charge-offs, while reserve release
represents the amount by which net charge-offs exceed the provision
for credit losses.
3 See table on page 37 for more information on Common Equity
Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary
estimate and is calculated assuming the full phase-in of the Basel
III capital rules.
4 Market sensitive revenue represents net gains from trading
activities, debt securities, and equity securities.
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 42 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 February 2018, comparisons with February 2017.
8 Combined consumer and business debit card purchase volume
dollars.
9 Primarily includes retail banking, consumer lending, small
business and business banking customers.
Forward-Looking Statements
This document contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. In
addition, we may make forward-looking statements in our other
documents filed or furnished with the SEC, and our management may
make forward-looking statements orally to analysts, investors,
representatives of the media and others. Forward-looking statements
can be identified by words such as “anticipates,” “intends,”
“plans,” “seeks,” “believes,” “estimates,” “expects,” “target,”
“projects,” “outlook,” “forecast,” “will,” “may,” “could,”
“should,” “can” and similar references to future periods. In
particular, forward-looking statements include, but are not limited
to, statements we make about: (i) the future operating or
financial performance of the Company, including our outlook for
future growth; (ii) our noninterest expense and efficiency
ratio; (iii) future credit quality and performance, including
our expectations regarding future loan losses and allowance levels;
(iv) the appropriateness of the allowance for credit losses;
(v) our expectations regarding net interest income and net
interest margin; (vi) loan growth or the reduction or
mitigation of risk in our loan portfolios; (vii) future
capital 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
(including the impact of the Tax Cuts & Jobs Act), 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;
- resolution of regulatory matters,
including the claims pending against us from the Consumer Financial
Protection Bureau and Office of the Comptroller of the Currency
regarding our compliance risk management program and our past
practices involving certain automobile collateral protection
insurance policies and certain mortgage interest rate lock
extensions;
- 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 debt
securities and equity securities portfolios;
- the effect of a fall in stock market
prices on our investment banking business and our fee income from
our brokerage, asset and wealth management businesses;
- negative effects from the retail
banking sales practices matter and from other instances where
customers may have experienced financial harm, including on our
legal, operational and compliance costs, our ability to engage in
certain business activities or offer certain products or services,
our ability to keep and attract customers, our ability to attract
and retain qualified team members, and our reputation;
- 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, 2017.
In addition to the above factors, we also caution that the
amount and timing of any future common stock dividends or
repurchases will depend on the earnings, cash requirements and
financial condition of the Company, market conditions, capital
requirements (including under Basel capital standards), common
stock issuance requirements, applicable law and regulations
(including federal securities laws and federal banking
regulations), and other factors deemed relevant by the Company’s
Board of Directors, and may be subject to regulatory approval or
conditions.
For more information about factors that could cause actual
results to differ materially from our expectations, refer to our
reports filed with the Securities and Exchange Commission,
including the discussion under “Risk Factors” in our Annual Report
on Form 10-K for the year ended December 31, 2017, as
filed with the Securities and Exchange Commission and available on
its website at www.sec.gov.
Any forward-looking statement made by us speaks only as of the
date on which it is made. Factors or events that could cause our
actual results to differ may emerge from time to time, and it is
not possible for us to predict all of them. We undertake no
obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or
otherwise, except as may be required by law.
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,
investments, mortgage, and consumer and commercial finance through
8,200 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 265,000 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
Significant Accounting and Presentation Changes
17
Summary Financial Data 19
Income
Consolidated Statement of Income 21 Consolidated Statement of
Comprehensive Income 23 Condensed Consolidated Statement of Changes
in Total Equity 23 Average Balances, Yields and Rates Paid
(Taxable-Equivalent Basis) 24 Five Quarter Average Balances, Yields
and Rates Paid (Taxable-Equivalent Basis) 25 Noninterest Income and
Noninterest Expense 26
Balance
Sheet
Consolidated Balance Sheet 28 Trading Activities 30 Debt Securities
30 Equity Securities 31
Loans
Loans 32 Nonperforming Assets 33 Loans 90 Days or More Past Due and
Still Accruing 33 Purchased Credit-Impaired Loans 34 Changes in
Allowance for Credit Losses 35
Equity
Tangible Common Equity 36 Common Equity Tier 1 Under Basel III 37
Operating
Segments
Operating Segment Results 38
Other
Mortgage Servicing and other related data 40
SIGNIFICANT ACCOUNTING AND PRESENTATION CHANGES
Following is a discussion of key accounting and presentation
changes in first quarter 2018 that resulted from adoption of new
accounting standards and a change in our methodology for measuring
operating segment results. Prior periods have been revised as
appropriate for these changes to maintain comparability.
Accounting Standards Adopted in 2018
In first quarter 2018, we adopted the following new accounting
guidance:
- Accounting Standards Update (ASU or
Update) 2016-18 - Statement of Cash Flows (Topic 230): Restricted
Cash
- ASU 2016-04 - Liabilities -
Extinguishments of Liabilities (Subtopic 405-20): Recognition of
Breakage for Certain Prepaid Stored-Value Products;
- ASU 2016-01 - Financial Instruments -
Overall (Subtopic 825-10): Recognition and Measurement of Financial
Assets and Financial Liabilities; and
- ASU 2014-09 - Revenue from Contracts
With Customers (Topic 606) and subsequent related Updates.
In connection with the adoption of ASU 2016-18 we have
changed the presentation of our cash and cash equivalents to
include both cash and due from banks as well as interest-earning
deposits with banks, which are inclusive of any restricted
cash.
ASU 2016-04 modifies the accounting for certain prepaid
card products to require the recognition of breakage. Breakage
represents the estimated amount that will not be redeemed by the
cardholder for goods or services. Upon adoption, we recorded a
cumulative-effect adjustment that increased retained earnings,
given estimated breakage, by $26 million.
ASU 2016-01 changes the accounting for certain equity
investments to record at fair value with unrealized gains or losses
reflected in earnings, as well as improve the disclosures of equity
investments and the fair value of financial instruments.
We adopted the Update in first quarter 2018 and recorded a
cumulative-effect adjustment as of January 1, 2018, that increased
retained earnings by $106 million as a result of a transition
adjustment to reclassify $118 million in net unrealized gains from
other comprehensive income to retained earnings, partially offset
by a transition adjustment to decrease retained earnings by $12
million to adjust the carrying value of our auction rate securities
from cost to fair value. No transition adjustment was recorded for
investments changed to the measurement alternative (described
below), which was applied prospectively.
As a result of adopting this ASU, our investments in marketable
equity securities, including those previously classified as
available-for-sale, are now accounted for at fair value with
unrealized gains or losses reflected in earnings. Additionally, our
share of unrealized gains or losses of marketable equity securities
held by investees in our nonmarketable equity securities accounted
for using the equity method are now reflected in earnings. Prior to
adoption, such unrealized gains and losses were reflected in other
comprehensive income. Our investments in nonmarketable equity
securities previously accounted for under the cost method of
accounting, except for federal bank stock, are now accounted for
either at fair value with unrealized gains and losses reflected in
earnings or using the measurement alternative. The measurement
alternative is similar to the cost method of accounting, except the
carrying value is adjusted through earnings for impairment, if any,
and changes in observable and orderly transactions in the same or
similar investment. We now account for substantially all of our
private equity investments using the measurement alternative,
except for those accounted for using the equity method of
accounting. Our auction rate securities portfolio is now accounted
for at fair value with unrealized gains or losses reflected in
earnings.
In connection with our adoption of this Update, we have modified
our balance sheet and income statement presentation to report
marketable and nonmarketable equity securities and their results
separately from debt securities by now reporting all equity
securities in a new line labeled “Equity securities” in both the
balance sheet and income statement. Additionally we now report
loans held for trading purposes in loans held for sale and have
reclassified net gains and losses on marketable equity securities
used as economic hedges of deferred compensation obligations from
“Net gains for trading activities” to “Net gains from equity
securities”. All prior periods have been revised to conform to
these changes in reporting.
The following table provides a summary of our reporting changes
implemented in connection with our adoption of ASU 2016-01.
Financial
instrument or transaction
type As previously reported
Revised reporting Balance Sheet Marketable equity
securities Trading assets and available for sale investment
securities Equity securities (new caption) Nonmarketable equity
securities Other assets Equity securities (new caption) Loans held
for trading Trading assets Loans held for sale Debt securities held
for trading Trading assets Debt securities (formerly “Investment
securities”)
Income Statement Interest income:
Marketable equity securities Trading assets and investment
securities Equity securities (new caption) Nonmarketable equity
securities Other Equity securities (new caption) Loans held for
trading Trading assets Loans held for sale Debt securities held for
trading Trading assets Debt securities (formerly “Investment
securities”) Noninterest income: Deferred compensation gains (1)
Net gains from trading activities Net
gains from equity securities
(1) Reclassification of net gains and
losses on marketable equity securities economically hedging our
deferred compensation obligations.
The following table illustrates the changes to the balance sheet
as of December 31, 2017, and related consolidated statement of
income for the year ended December 31, 2017, in connection with our
adoption of ASU 2016-01.
Reclassification adjustments
Marketable
As previously
Debt equity
Nonmarketable
Loans held for
Revised Change in (in millions) reported
securities securities
equity securities
trading reporting balance
Balance sheet as of December 31, 2017: Trading assets $
92,329 (57,624 ) (33,682 ) — (1,023 ) — (92,329 ) Debt securities:
Trading — 57,624 — — — 57,624 57,624 Available for sale 277,085 —
(678 ) — — 276,407 (678 ) Loans held for sale 108 — — — 1,023 1,131
1,023 Equity securities — — 34,360 28,137 — 62,497 62,497 Other
assets 118,381 — —
(28,137 ) — 90,244 (28,137 ) Total impact to
assets — —
— —
—
Income statement for the
year ended December 31, 2017: Interest income: Trading assets
2,928 (2,313 ) (577 ) — (38 ) — (2,928 ) Debt securities 10,664
2,313 (31 ) — — 12,946 2,282 Loans held for sale 12 — — — 38 50 38
Equity securities — — 608 191 — 799 799 Other 3,131 —
— (191 ) — 2,940
(191 ) Total impact to interest income — — — — — Noninterest
income: Net gains from trading activities 1,053 — (511 ) — — 542
(511 ) Net gains from equity securities 1,268 —
511 — —
1,779 511 Total impact to noninterest income
— —
— —
—
ASU 2014-09 modifies the guidance used to recognize
revenue from contracts with customers for transfers of goods or
services and transfers of non-financial assets, unless those
contracts are within the scope of other guidance. Upon adoption, we
recorded a cumulative-effect adjustment that decreased retained
earnings by $44 million, due to changes in the timing of revenue
for corporate trust services that are provided over the life of the
associated trust. In addition, we changed the presentation of some
costs such that underwriting expenses of our broker-dealer business
that were previously netted against revenue are now included in
noninterest expense, and card payment network charges that were
previously included in noninterest expense are now netted against
card fee revenue.
Operating Segment Financial Information Changes
Financial information for our operating segments presented in
this Report reflect revisions to our previously reported amounts to
reflect a change, adopted in first quarter 2018, in our methodology
for assigning funding charges and credits to our lines of business
and for the reclassifications made in connection with the adoption
of ASU 2016-01. Effective first quarter 2018, assets and
liabilities will receive a funding charge or credit that considers
interest rate risk, liquidity risk, and other product
characteristics on a more granular level. This methodology change
affects results across all three of our reportable operating
segments. Our previously reported consolidated financial results
were not impacted by the methodology change; however, in connection
with the adoption of ASU 2016-01, certain reclassifications will
occur within noninterest income.
Wells Fargo & Company and
Subsidiaries
SUMMARY FINANCIAL DATA
% Change Quarter ended Mar 31, 2018
from
Mar 31, Dec 31, Mar 31, Dec
31, Mar 31, ($ in millions, except per share amounts)
2018 2017 2017
2017 2017
For the Period Wells
Fargo net income
$ 5,936 6,151 5,634 (3 )% 5 Wells
Fargo net income applicable to common stock
5,533 5,740
5,233 (4 ) 6 Diluted earnings per common share
1.12 1.16
1.03 (3 ) 9 Profitability ratios (annualized): Wells Fargo net
income to average assets (ROA)
1.26 % 1.26 1.18 — 7
Wells Fargo net income applicable to common stock to average Wells
Fargo common stockholders’ equity (ROE)
12.37 12.47 11.96 (1
) 3 Return on average tangible common equity (ROTCE)(1)
14.75 14.85 14.35 (1 ) 3 Efficiency ratio (2)
64.9
76.2 62.0 (15 ) 5 Total revenue
$ 21,934 22,050
22,255 (1 ) (1 ) Pre-tax pre-provision profit (PTPP) (3)
7,692 5,250 8,463 47 (9 ) Dividends declared per common
share
0.39 0.39 0.38 — 3 Average common shares outstanding
4,885.7 4,912.5 5,008.6 (1 ) (2 ) Diluted average common
shares outstanding
4,930.7 4,963.1 5,070.4 (1 ) (3 ) Average
loans
$ 951,024 951,822 963,645 — (1 ) Average assets
1,915,896 1,935,318 1,931,040 (1 ) (1 ) Average total
deposits
1,297,178 1,311,592 1,299,191 (1 ) — Average
consumer and small business banking deposits (4)
755,483
757,541 758,754 — — Net interest margin
2.84 % 2.84
2.87 — (1 )
At Period End Debt securities (5)
$
472,968 473,366 456,969 — 4 Loans
947,308 956,770
958,405 (1 ) (1 ) Allowance for loan losses
10,373 11,004
11,168 (6 ) (7 ) Goodwill
26,445 26,587 26,666 (1 ) (1 )
Equity securities (5)
58,935 62,497 56,991 (6 ) 3 Assets
1,915,388 1,951,757 1,951,501 (2 ) (2 ) Deposits
1,303,689 1,335,991 1,325,444 (2 ) (2 ) Common stockholders'
equity
181,950 183,134 178,209 (1 ) 2 Wells Fargo
stockholders’ equity
205,752 206,936 201,321 (1 ) 2 Total
equity
206,710 208,079 202,310 (1 ) 2 Tangible common equity
(1)
152,678 153,730 148,671 (1 ) 3 Common shares outstanding
4,873.9 4,891.6 4,996.7 — (2 ) Book value per common share
(6)
$ 37.33 37.44 35.67 — 5 Tangible book value per
common share (1)(6)
31.33 31.43 29.75 — 5 Common stock
price: High
66.31 62.24 59.99 7 11 Low
50.70 52.84
53.35 (4 ) (5 ) Period end
52.41 60.67 55.66 (14 ) (6 ) Team
members (active, full-time equivalent)
265,700
262,700 272,800
1 (3 )
(1) Tangible common equity is a non-GAAP
financial measure and represents total equity less preferred
equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible
assets associated with certain of our nonmarketable equity
securities but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible
common equity may differ among companies. Management believes that
return on average tangible common equity and tangible book value
per common share, which utilize tangible common equity, are useful
financial measures because they enable investors and others to
assess the Company's use of equity. For additional information,
including a corresponding reconciliation to GAAP financial
measures, see the "Tangible Common Equity" tables on page 36.
(2) The efficiency ratio is noninterest
expense divided by total revenue (net interest income and
noninterest income).
(3) Pre-tax pre-provision profit (PTPP) is
total revenue less noninterest expense. Management believes that
PTPP is a useful financial measure because it enables investors and
others to assess the Company’s ability to generate capital to cover
credit losses through a credit cycle.
(4) Consumer and small business banking
deposits are total deposits excluding mortgage escrow and wholesale
deposits.
(5) Financial information for prior
quarters has been revised to reflect the impact of the adoption of
Accounting Standards Update (ASU) 2016-01 – Financial Instruments –
Overall (Subtopic 825-10): Recognition and Measurement of Financial
Assets and Financial Liabilities. See pages 17 and 18 for more
information.
(6) Book value per common share is common
stockholders' equity divided by common shares outstanding. Tangible
book value per common share is tangible common equity divided by
common shares outstanding.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA Quarter
ended
Mar 31, Dec 31, Sep 30,
Jun 30, Mar 31, ($ in millions, except
per share amounts)
2018 2017
2017 2017 2017
For the
Quarter Wells Fargo net income
$ 5,936 6,151
4,542 5,856 5,634 Wells Fargo net income applicable to common stock
5,533 5,740 4,131 5,450 5,233 Diluted earnings per common
share
1.12 1.16 0.83 1.08 1.03 Profitability ratios
(annualized) : Wells Fargo net income to average assets (ROA)
1.26 % 1.26 0.93 1.22 1.18 Wells Fargo net income
applicable to common stock to average Wells Fargo common
stockholders’ equity (ROE)
12.37 12.47 8.96 12.06 11.96
Return on average tangible common equity (ROTCE)(1)
14.75
14.85 10.66 14.41 14.35 Efficiency ratio (2)
64.9 76.2 65.7
60.9 62.0 Total revenue
$ 21,934 22,050 21,849 22,235
22,255 Pre-tax pre-provision profit (PTPP) (3)
7,692 5,250
7,498 8,694 8,463 Dividends declared per common share
0.39
0.39 0.39 0.38 0.38 Average common shares outstanding
4,885.7 4,912.5 4,948.6 4,989.9 5,008.6 Diluted average
common shares outstanding
4,930.7 4,963.1 4,996.8 5,037.7
5,070.4 Average loans
$ 951,024 951,822 952,343
956,879 963,645 Average assets
1,915,896 1,935,318 1,938,461
1,927,021 1,931,040 Average total deposits
1,297,178
1,311,592 1,306,356 1,301,195 1,299,191 Average consumer and small
business banking deposits (4)
755,483 757,541 755,094
760,149 758,754 Net interest margin
2.84 % 2.84 2.86
2.90 2.87
At Quarter End Debt securities (5)
$
472,968 473,366 474,710 462,890 456,969 Loans
947,308
956,770 951,873 957,423 958,405 Allowance for loan losses
10,373 11,004 11,078 11,073 11,168 Goodwill
26,445
26,587 26,581 26,573 26,666 Equity securities (5)
58,935
62,497 54,981 55,742 56,991 Assets
1,915,388 1,951,757
1,934,880 1,930,792 1,951,501 Deposits
1,303,689 1,335,991
1,306,706 1,305,830 1,325,444 Common stockholders' equity
181,950 183,134 181,920 181,233 178,209 Wells Fargo
stockholders’ equity
205,752 206,936 205,722 205,034 201,321
Total equity
206,710 208,079 206,617 205,949 202,310
Tangible common equity (1)
152,678 153,730 152,694 151,868
148,671 Common shares outstanding
4,873.9 4,891.6 4,927.9
4,966.8 4,996.7 Book value per common share (6)
$
37.33 37.44 36.92 36.49 35.67 Tangible book value per common
share (1)(6)
31.33 31.43 30.99 30.58 29.75 Common stock
price: High
66.31 62.24 56.45 56.60 59.99 Low
50.70
52.84 49.28 50.84 53.35 Period end
52.41 60.67 55.15 55.41
55.66 Team members (active, full-time equivalent)
265,700 262,700
268,000 270,600 272,800
(1) Tangible common equity is a non-GAAP
financial measure and represents total equity less preferred
equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible
assets associated with certain of our nonmarketable equity
securities but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible
common equity may differ among companies. Management believes that
return on average tangible common equity and tangible book value
per common share, which utilize tangible common equity, are useful
financial measures because they enable investors and others to
assess the Company's use of equity. For additional information,
including a corresponding reconciliation to GAAP financial
measures, see the "Tangible Common Equity" tables on page 36.
(2) The efficiency ratio is noninterest
expense divided by total revenue (net interest income and
noninterest income).
(3) Pre-tax pre-provision profit (PTPP) is
total revenue less noninterest expense. Management believes that
PTPP is a useful financial measure because it enables investors and
others to assess the Company’s ability to generate capital to cover
credit losses through a credit cycle.
(4) Consumer and small business banking
deposits are total deposits excluding mortgage escrow and wholesale
deposits.
(5) Financial information for prior
quarters has been revised to reflect the impact of the adoption of
ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities. See pages 17 and 18 for more information.
(6) Book value per common share is common
stockholders' equity divided by common shares outstanding. Tangible
book value per common share is tangible common equity divided by
common shares outstanding.
Wells Fargo & Company and
Subsidiaries
CONSOLIDATED STATEMENT OF INCOME Quarter ended
March 31, % (in millions, except per share amounts)
2018 2017 Change
Interest income Debt securities (1)
$
3,414 3,173 8 % Mortgages held for sale
179 182 (2 )
Loans held for sale (1)
24 10 140 Loans
10,579 10,141
4 Equity securities (1)
231 175 32 Other interest income
920 532 73 Total
interest income
15,347
14,213 8
Interest expense Deposits
1,090 536
103 Short-term borrowings
311 114 173 Long-term debt
1,576 1,147 37 Other interest expense
132 92 43 Total interest expense
3,109 1,889 65
Net interest income 12,238 12,324 (1 ) Provision for
credit losses
191 605
(68 ) Net interest income after provision for credit losses
12,047 11,719 3
Noninterest income Service charges on deposit accounts
1,173 1,313 (11 ) Trust and investment fees
3,683
3,570 3 Card fees
908 945 (4 ) Other fees
800 865 (8
) Mortgage banking
934 1,228 (24 ) Insurance
114 277
(59 ) Net gains from trading activities (1)
243 272 (11 )
Net gains on debt securities
1 36 (97 ) Net gains from
equity securities (1)
783 570 37 Lease income
455 481
(5 ) Other
602 374
61 Total noninterest income
9,696
9,931 (2 )
Noninterest expense Salaries
4,363 4,261 2 Commission and incentive compensation
2,768 2,725 2 Employee benefits
1,598 1,686 (5 )
Equipment
617 577 7 Net occupancy
713 712 — Core
deposit and other intangibles
265 289 (8 ) FDIC and other
deposit assessments
324 333 (3 ) Other
3,594 3,209 12 Total noninterest
expense
14,242 13,792
3
Income before income tax expense 7,501 7,858
(5 ) Income tax expense
1,374
2,133 (36 )
Net income before noncontrolling
interests 6,127 5,725 7 Less: Net income from
noncontrolling interests
191
91 110
Wells Fargo net income
$ 5,936 5,634 5 Less:
Preferred stock dividends and other
403
401 —
Wells Fargo net income applicable to
common stock $ 5,533
5,233 6
Per share information Earnings per
common share
$ 1.13 1.05 8 Diluted earnings per
common share
1.12 1.03 9 Dividends declared per common share
0.390 0.380 3
Average common shares outstanding
4,885.7 5,008.6 (2 )
Diluted average common shares
outstanding 4,930.7
5,070.4 (3 )
(1) Financial information for the prior
quarter has been revised to reflect the impact of the adoption of
ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities. See pages 17 and 18 for more information.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter ended
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31, (in millions,
except per share amounts)
2018
2017 2017 2017 2017
Interest income Debt securities (1)
$ 3,414
3,294 3,253 3,226 3,173 Mortgages held for sale
179 196 217
191 182 Loans held for sale (1)
24 12 15 13 10 Loans
10,579 10,367 10,522 10,358 10,141 Equity securities (1)
231 239 186 199 175 Other interest income
920 850 851
707 532 Total interest income
15,347 14,958
15,044 14,694
14,213
Interest expense Deposits
1,090 931 869
677 536 Short-term borrowings
311 255 226 163 114 Long-term
debt
1,576 1,344 1,391 1,275 1,147 Other interest expense
132 115
109 108 92 Total
interest expense
3,109
2,645 2,595 2,223
1,889
Net interest income 12,238 12,313
12,449 12,471 12,324 Provision for credit losses
191 651 717
555 605 Net interest income
after provision for credit losses
12,047
11,662 11,732
11,916 11,719
Noninterest
income Service charges on deposit accounts
1,173 1,246
1,276 1,276 1,313 Trust and investment fees
3,683 3,687
3,609 3,629 3,570 Card fees
908 996 1,000 1,019 945 Other
fees
800 913 877 902 865 Mortgage banking
934 928
1,046 1,148 1,228 Insurance
114 223 269 280 277 Net gains
(losses) from trading activities (1)
243 (1 ) 120 151 272
Net gains on debt securities
1 157 166 120 36 Net gains from
equity securities (1)
783 572 363 274 570 Lease income
455 458 475 493 481 Other
602
558 199 472
374 Total noninterest income
9,696 9,737 9,400
9,764 9,931
Noninterest expense Salaries
4,363 4,403 4,356 4,343
4,261 Commission and incentive compensation
2,768 2,665
2,553 2,499 2,725 Employee benefits
1,598 1,293 1,279 1,308
1,686 Equipment
617 608 523 529 577 Net occupancy
713
715 716 706 712 Core deposit and other intangibles
265 288
288 287 289 FDIC and other deposit assessments
324 312 314
328 333 Other
3,594 6,516
4,322 3,541
3,209 Total noninterest expense
14,242
16,800 14,351
13,541 13,792
Income before
income tax expense 7,501 4,599 6,781 8,139 7,858 Income
tax expense (benefit)
1,374
(1,642 ) 2,181 2,245
2,133
Net income before noncontrolling
interests 6,127 6,241 4,600 5,894 5,725 Less: Net income
from noncontrolling interests
191
90 58 38
91
Wells Fargo net income
$ 5,936 6,151
4,542 5,856 5,634
Less: Preferred stock dividends and other
403
411 411
406 401
Wells Fargo net income
applicable to common stock $ 5,533
5,740 4,131
5,450 5,233
Per share
information Earnings per common share
$ 1.13 1.17
0.83 1.09 1.05 Diluted earnings per common share
1.12 1.16
0.83 1.08 1.03 Dividends declared per common share
0.390
0.390 0.390 0.380 0.380
Average common shares outstanding
4,885.7 4,912.5 4,948.6 4,989.9 5,008.6
Diluted average
common shares outstanding 4,930.7
4,963.1 4,996.8
5,037.7 5,070.4
(1) Financial information for prior
quarters has been revised to reflect the impact of the adoption of
ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities. See pages 17 and 18 for more information.
Wells Fargo & Company and
Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarter ended Mar 31, % (in millions)
2018 2017 Change
Wells Fargo net income
$ 5,936
5,634 5 % Other comprehensive income (loss),
before tax: Debt securities (1): Net unrealized gains
(losses) arising during the period
(3,443 ) 369 NM
Reclassification of net (gains) losses to net income
68 (145
) NM Derivatives and hedging activities: Net unrealized losses
arising during the period
(242 ) (362 ) (33 )
Reclassification of net (gains) losses to net income
60 (202
) NM Defined benefit plans adjustments: Net actuarial and prior
service gains (losses) arising during the period
6 (7 ) NM
Amortization of net actuarial loss, settlements and other to net
income
32 38 (16 ) Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period
(2 ) 16 NM
Other
comprehensive loss, before tax (3,521 ) (293 ) NM
Income tax benefit related to other comprehensive income
862 123 601
Other
comprehensive loss, net of tax (2,659 ) (170 ) NM
Less: Other comprehensive income from noncontrolling interests
— 14 (100 )
Wells Fargo other comprehensive loss, net of tax
(2,659 ) (184 ) NM
Wells
Fargo comprehensive income 3,277 5,450 (40 )
Comprehensive income from noncontrolling interests
191 105 82
Total
comprehensive income $ 3,468
5,555 (38 )
NM – Not meaningful
(1) The quarter ended March 31, 2017,
includes net unrealized gains from equity securities of $61 million
and reclassification of gains to net income related to equity
securities of ($116) million. Per the adoption of ASU 2016-01, the
quarter ended March 31, 2018, reflects only net unrealized gains
and reclassification of net gains to net income from debt
securities.
FIVE QUARTER CONDENSED CONSOLIDATED
STATEMENT OF CHANGES IN TOTAL EQUITY
Quarter ended
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31,
(in millions)
2018 2017
2017 2017 2017
Balance,
beginning of period $ 208,079 206,617 205,949
202,310 200,497 Cumulative effect from change in accounting policy
(1)
(24 ) — — — (213 ) Wells Fargo net income
5,936 6,151 4,542 5,856 5,634 Wells Fargo other
comprehensive income (loss), net of tax
(2,659 ) (522
) 526 1,005 (184 ) Noncontrolling interests
(178 )
247 (20 ) (75 ) 75 Common stock issued
1,208 436 254 252
1,406 Common stock repurchased
(3,029 ) (2,845 )
(2,601 ) (2,287 ) (2,175 ) Preferred stock released by ESOP
231 218 209 406 — Common stock warrants
repurchased/exercised
(157 ) (46 ) (19 ) (24 ) (44 )
Preferred stock issued
— — — 677 — Common stock dividends
(1,911 ) (1,920 ) (1,936 ) (1,899 ) (1,903 )
Preferred stock dividends
(410 ) (411 ) (411 ) (406 )
(401 ) Stock incentive compensation expense
437 206 135 145
389 Net change in deferred compensation and related plans
(813 ) (52 ) (11 )
(11 ) (771 )
Balance, end of
period $ 206,710
208,079 206,617
205,949 202,310
(1) The cumulative effect for the quarter
ended March 31, 2018, reflects the impact of the adoption in first
quarter 2018 of ASU 2016-04, ASU 2016-01 and ASU 2014-09. See pages
17 and 18 for more information. The cumulative effect for the
quarter ended March 31, 2017, reflects the impact of the adoption
in fourth quarter 2017 of ASU 2017-12 – Derivatives and Hedging
(Topic 815): Targeted Improvements to Accounting for Hedging
Activities.
Wells Fargo & Company and
Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT
BASIS) (1)(2) Quarter ended March 31,
2018
2017
Interest
Interest
Average Yields/
income/ Average Yields/ income/ (in millions)
balance rates
expense balance rates
expense
Earning assets Interest-earning deposits with
banks (3)
$ 172,291 1.49 % $
632 208,486 0.79 % $ 405 Federal funds sold, securities
purchased under resale agreements and other short-term investments
(3)
78,135 1.40 271 75,281 0.68 127 Debt
securities (4): Trading debt securities (7)
78,715
3.24 637 69,120 3.03 523 Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies
6,426
1.66 26 25,034 1.54 95 Securities of U.S. states and
political subdivisions (7)
49,956 3.37 421
52,248 3.93 513 Mortgage-backed securities: Federal agencies
158,472 2.72 1,076 156,617 2.58 1,011
Residential and commercial (7)
8,871
4.12 91 14,452 5.34 193 Total
mortgage-backed securities (7)
167,343 2.79
1,167 171,069 2.81 1,204 Other debt securities (7)(8)
48,094 3.73 444 50,149
3.61 447 Total available-for-sale debt securities (7)(8)
271,819 3.04 2,058
298,500 3.04 2,259 Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies
44,723
2.20 243 44,693 2.20 243 Securities of U.S. states
and political subdivisions
6,259 4.34 68 6,273
5.30 83 Federal agency and other mortgage-backed securities
90,789 2.38 541 51,786 2.51 324 Other debt
securities
695 3.23 5
3,329 2.34 19 Total held-to-maturity debt securities
142,466 2.42 857
106,081 2.54 669 Total debt securities (7)(8)
493,000
2.89 3,552 473,701 2.92 3,451 Mortgages held for sale
(5)(7)
18,406 3.89 179 19,893 3.67 182 Loans
held for sale (5)(8)
2,011 4.92 24 1,600 2.50
10 Commercial loans: Commercial and industrial - U.S.
272,040 3.85 2,584 274,749 3.59 2,436
Commercial and industrial - Non U.S.
60,216 3.23
479 55,347 2.73 373 Real estate mortgage
126,200
4.05 1,262 132,449 3.56 1,164 Real estate
construction
24,449 4.54 274 24,591 3.72 225
Lease financing
19,265 5.30
255 19,070 4.94 235 Total commercial loans
502,170 3.91 4,854
506,206 3.54 4,433 Consumer loans: Real estate 1-4 family
first mortgage
284,207 4.02 2,852 275,480 4.02
2,766 Real estate 1-4 family junior lien mortgage
38,844
5.13 493 45,285 4.60 515 Credit card
36,468
12.75 1,147 35,437 11.97 1,046 Automobile
51,469 5.16 655 61,510 5.46 828 Other
revolving credit and installment
37,866
6.46 604 39,727 6.02 590 Total consumer
loans
448,854 5.16 5,751
457,439 5.06 5,745 Total loans (5)
951,024
4.50 10,605 963,645 4.26 10,178 Equity securities (8)
39,754 2.35 233 33,926 2.11 179 Other (8)
6,015 1.21 19 —
— — Total earning assets (7)(8)
$
1,760,636 3.55 % $ 15,515
1,776,532 3.30 % $ 14,532
Funding sources
Deposits: Interest-bearing checking
$ 67,774
0.77 % $ 129 50,686 0.29 % $ 37 Market
rate and other savings
679,068 0.22 368
684,175 0.09 157 Savings certificates
20,018 0.34
17 23,466 0.29 17 Other time deposits (7)
76,589
1.84 347 54,915 1.30 177 Deposits in foreign offices
94,810 0.98 229
122,200 0.49 148 Total interest-bearing deposits (7)
938,259 0.47 1,090 935,442 0.23 536 Short-term
borrowings
101,779 1.24 312 98,549 0.47 115
Long-term debt (7)
226,062 2.80 1,576 260,130
1.77 1,147 Other liabilities
27,927
1.92 132 16,806 2.22 92 Total
interest-bearing liabilities (7)
1,294,027 0.97
3,110 1,310,927 0.58 1,890 Portion of noninterest-bearing
funding sources (7)(8)
466,609 —
— 465,605 — — Total funding sources (7)(8)
$ 1,760,636 0.71
3,110 1,776,532 0.43 1,890
Net
interest margin and net interest income on a taxable-equivalent
basis (6)(7) 2.84 % $ 12,405
2.87 % $ 12,642
Noninterest-earning assets
Cash and due from banks
$ 18,853 18,706 Goodwill
26,516 26,673 Other (7)(8)
109,891
109,129 Total noninterest-earning assets (7)(8)
$ 155,260 154,508
Noninterest-bearing funding sources Deposits
$
358,919 363,749 Other liabilities (7)
56,761 54,805
Total equity (7)
206,189 201,559 Noninterest-bearing funding
sources used to fund earning assets (7)(8)
(466,609 ) (465,605 ) Net noninterest-bearing funding
sources (7)(8)
$ 155,260 154,508
Total assets (7) $
1,915,896 1,931,040
(1) Our average prime rate was 4.52% and
3.80% for the quarters ended March 31, 2018 and 2017, respectively.
The average three-month London Interbank Offered Rate (LIBOR) was
1.93% and 1.07% for the same quarters, respectively.
(2) Yields/rates and amounts include the
effects of hedge and risk management activities associated with the
respective asset and liability categories.
(3) Financial information has been revised
to reflect the impact of the adoption of ASU 2016-18 – Statement of
Cash Flows (Topic 230): Restricted Cash in which we changed the
presentation of our cash and cash equivalents to include both cash
and due from banks as well as interest-earning deposits with banks,
which are inclusive of any restricted cash.
(4) Yields and rates are based on interest
income/expense amounts for the period, annualized based on the
accrual basis for the respective accounts. The average balance
amounts represent amortized cost for the periods presented.
(5) Nonaccrual loans and related income
are included in their respective loan categories.
(6) Includes taxable-equivalent
adjustments of $167 million and $318 million for the quarters ended
March 31, 2018 and 2017, respectively, predominantly related to
tax-exempt income on certain loans and securities. The federal
statutory tax rate was 21% and 35% for the quarters ended March 31,
2018 and 2017, respectively.
(7) Financial information for prior
quarters in 2017 has been revised to reflect the impact of the
adoption in fourth quarter 2017 of ASU 2017-12 – Derivatives and
Hedging (Topic 815): Targeted Improvements to Accounting for
Hedging Activities.
(8) Financial information for the prior
quarter has been revised to reflect the impact of the adoption of
ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities. See pages 17 and 18 for more information.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID
(TAXABLE-EQUIVALENT BASIS) (1)(2) Quarter ended
Mar 31, 2018 Dec 31, 2017
Sep 30, 2017 Jun 30, 2017
Mar 31, 2017
Average Yields/
Average Yields/ Average
Yields/ Average Yields/
Average Yields/ ($ in billions)
balance rates balance
rates balance rates
balance rates balance
rates
Earning assets Interest-earning deposits
with banks (3)
$ 172.3 1.49 % $ 189.1
1.27 % $ 205.5 1.21 % $ 204.5 1.03 % $ 208.5 0.79 % Federal funds
sold, securities purchased under resale agreements and other
short-term investments (3)
78.1 1.40 75.8 1.20 70.6
1.14 77.1 0.91 75.3 0.68 Debt securities (4): Trading debt
securities (5)
78.7 3.24 81.6 3.17 76.6 3.21 70.4
3.24 69.1 3.03 Available-for-sale debt securities: Securities of
U.S. Treasury and federal agencies
6.4 1.66 6.4 1.66
14.5 1.31 18.1 1.53 25.0 1.54 Securities of U.S. states and
political subdivisions
50.0 3.37 52.4 3.91 52.5 4.08
53.5 3.89 52.2 3.93 Mortgage-backed securities: Federal agencies
158.4 2.72 152.9 2.62 139.8 2.58 132.0 2.63 156.6
2.58 Residential and commercial
8.9
4.12 9.4 4.85 11.0 5.44 12.6 5.55 14.5
5.34 Total mortgage-backed securities
167.3
2.79 162.3 2.75 150.8 2.79 144.6 2.89 171.1 2.81 Other debt
securities (5)
48.1 3.73 48.6
3.62 47.7 3.73 48.5 3.77 50.2 3.61
Total available-for-sale debt securities (5)
271.8 3.04 269.7 3.10 265.5 3.13
264.7 3.16 298.5 3.04 Held-to-maturity debt
securities: Securities of U.S. Treasury and federal agencies
44.7 2.20 44.7 2.19 44.7 2.18 44.7 2.19 44.7 2.20
Securities of U.S. states and political subdivisions
6.3
4.34 6.3 5.26 6.3 5.44 6.3 5.29 6.3 5.30 Federal agency and
other mortgage-backed securities
90.8 2.38 89.6 2.25
88.3 2.26 83.1 2.44 51.8 2.51 Other debt securities
0.7 3.23 1.2 2.64 1.4 3.05 2.8
2.34 3.3 2.34 Total held-to-maturity debt securities
142.5 2.42 141.8 2.36
140.7 2.38 136.9 2.49 106.1 2.54 Total debt
securities (5)
493.0 2.89 493.1 2.90 482.8 2.93 472.0
2.98 473.7 2.92 Mortgages held for sale
18.4 3.89
20.5 3.82 22.9 3.79 19.8 3.87 19.9 3.67 Loans held for sale (5)
2.0 4.92 1.5 3.19 1.4 4.39 1.5 3.65 1.6 2.50
Commercial loans: Commercial and industrial - U.S.
272.0
3.85 270.3 3.89 270.1 3.81 273.1 3.70 274.8 3.59 Commercial
and industrial - Non U.S.
60.2 3.23 59.2 2.96 57.7
2.89 56.4 2.86 55.3 2.73 Real estate mortgage
126.2
4.05 127.2 3.88 129.1 3.83 131.3 3.68 132.4 3.56 Real estate
construction
24.4 4.54 24.4 4.38 25.0 4.18 25.3 4.10
24.6 3.72 Lease financing
19.4
5.30 19.3 0.62 19.2 4.59 19.0 4.82 19.1
4.94 Total commercial loans
502.2
3.91 500.4 3.68 501.1 3.76 505.1
3.67 506.2 3.54 Consumer loans: Real estate 1-4 family first
mortgage
284.2 4.02 282.0 4.01 278.4 4.03 275.1 4.08
275.5 4.02 Real estate 1-4 family junior lien mortgage
38.8
5.13 40.4 4.96 41.9 4.95 43.6 4.78 45.3 4.60 Credit card
36.4 12.75 36.4 12.37 35.6 12.41 34.9 12.18 35.4
11.97 Automobile
51.5 5.16 54.3 5.13 56.7 5.34 59.1
5.43 61.5 5.46 Other revolving credit and installment
37.9 6.46 38.3 6.28 38.6 6.31
39.1 6.13 39.7 6.02 Total consumer loans
448.8 5.16 451.4 5.10 451.2
5.14 451.8 5.13 457.4 5.06 Total loans
951.0 4.50 951.8 4.35 952.3 4.41 956.9 4.36 963.6
4.26 Equity securities (5)
39.8 2.35 38.0 2.60 35.9
2.12 36.6 2.24 33.9 2.11 Other (5)
6.0
1.21 7.2 0.88 8.7 0.90 4.3 0.70 —
— Total earning assets (5)
$
1,760.6 3.55 % $ 1,777.0 3.43 %
$ 1,780.1 3.44 % $ 1,772.7 3.40 % $ 1,776.5
3.30 %
Funding sources Deposits: Interest-bearing checking
$ 67.8 0.77 % $ 50.5 0.68 % $ 48.3 0.57
% $ 48.5 0.41 % $ 50.7 0.29 % Market rate and other savings
679.1 0.22 679.9 0.19 681.2 0.17 683.0 0.13 684.2
0.09 Savings certificates
20.0 0.34 20.9 0.31 21.8
0.31 22.6 0.30 23.5 0.29 Other time deposits
76.6
1.84 68.2 1.49 66.1 1.51 57.1 1.39 54.9 1.30 Deposits in
foreign offices
94.8 0.98 124.6
0.81 124.7 0.76 123.7 0.65 122.2 0.49
Total interest-bearing deposits
938.3 0.47 944.1 0.39
942.1 0.37 934.9 0.29 935.5 0.23 Short-term borrowings
101.8
1.24 102.1 0.99 99.2 0.91 95.8 0.69 98.5 0.47 Long-term debt
226.0 2.80 231.6 2.32 243.5 2.28 249.9 2.04 260.1
1.77 Other liabilities
27.9 1.92
24.7 1.86 24.8 1.74 21.0 2.05 16.8 2.22
Total interest-bearing liabilities
1,294.0 0.97
1,302.5 0.81 1,309.6 0.79 1,301.6 0.68 1,310.9 0.58 Portion of
noninterest-bearing funding sources (5)
466.6
— 474.5 — 470.5 — 471.1 — 465.6
— Total funding sources (5)
$
1,760.6 0.71 $ 1,777.0 0.59
$ 1,780.1 0.58 $ 1,772.7 0.50 $
1,776.5 0.43
Net interest margin on a
taxable-equivalent basis 2.84 % 2.84 % 2.86 %
2.90 % 2.87 %
Noninterest-earning assets Cash and due from
banks
$ 18.9 19.2 18.5 18.2 18.7 Goodwill
26.5
26.6 26.6 26.7 26.7 Other (5)
109.9
112.5 113.3 109.4 109.1 Total
noninterest-earnings assets (5)
$ 155.3
158.3 158.4 154.3 154.5
Noninterest-bearing funding sources Deposits
$
358.9 367.5 364.3 366.3 363.7 Other liabilities (5)
56.8 57.9 56.9 53.3 54.8 Total equity
206.2 207.4
207.7 205.8 201.6 Noninterest-bearing funding sources used to fund
earning assets (5)
(466.6 ) (474.5 )
(470.5 ) (471.1 ) (465.6 ) Net noninterest-bearing funding sources
(5)
$ 155.3 158.3 158.4
154.3 154.5
Total assets
$ 1,915.9 1,935.3 1,938.5
1,927.0 1,931.0
(1) Our average prime rate was 4.52% for
the quarter ended March 31, 2018, 4.30% for the quarter ended
December 31,2017, 4.25% for the quarter ended September 30, 2017,
4.05% for the quarter ended June 30, 2017 and 3.80% for the quarter
ended March 31, 2017. The average three-month London Interbank
Offered Rate (LIBOR) was 1.93%, 1.46%, 1.31%, 1.21% and 1.07% for
the same quarters, respectively.
(2) Yields/rates include the effects of
hedge and risk management activities associated with the respective
asset and liability categories.
(3) Financial information has been revised
to reflect the impact of the adoption of ASU 2016-18 – Statement of
Cash Flows (Topic 230): Restricted Cash in which we changed the
presentation of our cash and cash equivalents to include both cash
and due from banks as well as interest-earning deposits with banks,
which are inclusive of any restricted cash.
(4) Yields and rates are based on interest
income/expense amounts for the period, annualized based on the
accrual basis for the respective accounts. The average balance
amounts represent amortized cost for the periods presented.
(5) Financial information for prior
quarters has been revised to reflect the impact of the adoption of
ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities. See pages 17 and 18 for more information.
(1) Our average prime rate was 4.52% for the
quarter ended March 31, 2018, 4.30% for the quarter ended December
31,2017, 4.25% for the quarter ended September 30, 2017, 4.05% for
the quarter ended June 30, 2017 and 3.80% for the quarter ended
March 31, 2017. The average three-month London Interbank Offered
Rate (LIBOR) was 1.93%, 1.46%, 1.31%, 1.21% and 1.07% for the same
quarters, respectively. (2) Yields/rates include the effects of
hedge and risk management activities associated with the respective
asset and liability categories. (3) Financial information has been
revised to reflect the impact of the adoption of ASU 2016-18 –
Statement of Cash Flows (Topic 230): Restricted Cash in which we
changed the presentation of our cash and cash equivalents to
include both cash and due from banks as well as interest-earning
deposits with banks, which are inclusive of any restricted cash.
(4) Yields and rates are based on interest income/expense amounts
for the period, annualized based on the accrual basis for the
respective accounts. The average balance amounts represent
amortized cost for the periods presented. (5) Financial information
for prior quarters has been revised to reflect the impact of the
adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities. See pages 17 and 18 for more information.
Wells Fargo & Company and
Subsidiaries
NONINTEREST INCOME
Quarter ended March 31, % (in millions)
2018 2017 Change
Service charges on deposit accounts
$ 1,173
1,313 (11 )% Trust and investment fees: Brokerage advisory,
commissions and other fees
2,403 2,324 3 Trust and
investment management
850 829 3 Investment banking
430 417 3 Total trust and investment
fees
3,683 3,570 3 Card fees
908 945 (4 ) Other fees: Charges and fees on loans
301 307 (2 ) Cash network fees
126 126 — Commercial
real estate brokerage commissions
85 81 5 Letters of credit
fees
79 74 7 Wire transfer and other remittance fees
116 107 8 All other fees
93
170 (45 ) Total other fees
800
865 (8 ) Mortgage banking: Servicing income, net
468
456 3 Net gains on mortgage loan origination/sales activities
466 772 (40 ) Total mortgage
banking
934 1,228 (24 )
Insurance
114 277 (59 ) Net gains from trading activities
(1)
243 272 (11 ) Net gains on debt securities
1 36
(97 ) Net gains from equity securities (1)
783 570 37 Lease
income
455 481 (5 ) Life insurance investment income
164 144 14 All other
438
230 90 Total
$ 9,696
9,931 (2 )
(1) Financial information for the prior
quarter has been revised to reflect the impact of the adoption of
ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities. See pages 17 and 18 for more information.
NONINTEREST EXPENSE
Quarter ended March 31, % (in millions)
2018 2017 Change
Salaries
$ 4,363 4,261 2 % Commission
and incentive compensation
2,768 2,725 2 Employee benefits
1,598 1,686 (5 ) Equipment
617 577 7 Net occupancy
713 712 — Core deposit and other intangibles
265 289
(8 ) FDIC and other deposit assessments
324 333 (3 )
Operating losses
668 282 137 Outside professional services
821 804 2 Contract services (1)
447 397 13 Operating
leases
320 345 (7 ) Outside data processing
162 220
(26 ) Travel and entertainment
152 179 (15 ) Advertising and
promotion
153 127 20 Postage, stationery and supplies
142 145 (2 ) Telecommunications
92 91 1 Foreclosed
assets
38 86 (56 ) Insurance
26 24 8 All other (1)
573 509 13 Total
$ 14,242 13,792 3
(1) The prior period has been revised to
conform with the current period presentation whereby temporary help
is included in contract services rather than in all other
noninterest expense.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER NONINTEREST INCOME Quarter ended
Mar 31, Dec 31, Sep 30,
Jun 30, Mar 31, (in millions)
2018 2017 2017
2017 2017 Service charges on deposit accounts
$ 1,173 1,246 1,276 1,276 1,313 Trust and investment
fees: Brokerage advisory, commissions and other fees
2,403
2,401 2,304 2,329 2,324 Trust and investment management
850
866 840 837 829 Investment banking
430
420 465 463
417 Total trust and investment fees
3,683
3,687 3,609 3,629
3,570 Card fees
908 996 1,000 1,019 945 Other
fees: Charges and fees on loans
301 313 318 325 307 Cash
network fees
126 120 126 134 126 Commercial real estate
brokerage commissions
85 159 120 102 81 Letters of credit
fees
79 78 77 76 74 Wire transfer and other remittance fees
116 115 114 112 107 All other fees
93
128 122 153
170 Total other fees
800
913 877 902 865
Mortgage banking: Servicing income, net
468 262 309 400 456
Net gains on mortgage loan origination/sales activities
466 666 737
748 772 Total mortgage banking
934 928 1,046
1,148 1,228 Insurance
114 223 269 280
277 Net gains (losses) from trading activities (1)
243 (1 )
120 151 272 Net gains on debt securities
1 157 166 120 36
Net gains from equity securities (1)
783 572 363 274 570
Lease income
455 458 475 493 481 Life insurance investment
income
164 153 152 145 144 All other
438 405 47
327 230 Total
$ 9,696
9,737 9,400 9,764
9,931
(1) Financial information for prior
quarters has been revised to reflect the impact of the adoption of
ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities. See pages 17 and 18 for more information.
FIVE QUARTER NONINTEREST
EXPENSE
Quarter ended
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31,
(in millions)
2018 2017
2017 2017 2017 Salaries
$
4,363 4,403 4,356 4,343 4,261 Commission and incentive
compensation
2,768 2,665 2,553 2,499 2,725 Employee benefits
1,598 1,293 1,279 1,308 1,686 Equipment
617 608 523
529 577 Net occupancy
713 715 716 706 712 Core deposit and
other intangibles
265 288 288 287 289 FDIC and other deposit
assessments
324 312 314 328 333 Operating losses
668
3,531 1,329 350 282 Outside professional services
821 1,025
955 1,029 804 Contract services (1)
447 410 415 416 397
Operating leases
320 325 347 334 345 Outside data processing
162 208 227 236 220 Travel and entertainment
152 183
154 171 179 Advertising and promotion
153 200 137 150 127
Postage, stationery and supplies
142 137 128 134 145
Telecommunications
92 92 90 91 91 Foreclosed assets
38 47 66 52 86 Insurance
26 28 24 24 24 All other (1)
573 330 450
554 509 Total
$
14,242 16,800 14,351
13,541 13,792
(1) Prior periods have been revised to
conform with the current period presentation whereby temporary help
is included in contract services rather than in all other
noninterest expense.
Wells Fargo & Company and
Subsidiaries
CONSOLIDATED BALANCE SHEET Mar 31,
Dec 31, % (in millions, except shares)
2018 2017 Change
Assets Cash and due from banks
$ 18,145 23,367
(22 )% Interest-earning deposits with banks (1)
184,250 192,580 (4 ) Total cash,
cash equivalents, and restricted cash (1)
202,395 215,947 (6 ) Federal
funds sold, securities purchased under resale agreements and other
short-term investments (1)
73,550 80,025 (8 ) Debt
securities: Trading, at fair value (2)
59,866 57,624 4
Available-for-sale, at fair value (2)
271,656 276,407 (2 )
Held-to-maturity, at cost
141,446 139,335 2 Mortgages held
for sale
17,944 20,070 (11 ) Loans held for sale (2)
3,581 1,131 217 Loans
947,308 956,770 (1 ) Allowance
for loan losses
(10,373 )
(11,004 ) (6 ) Net loans
936,935
945,766 (1 ) Mortgage servicing rights: Measured at
fair value
15,041 13,625 10 Amortized
1,411 1,424 (1
) Premises and equipment, net
8,828 8,847 — Goodwill
26,445 26,587 (1 ) Derivative assets
11,467 12,228 (6
) Equity securities (2)
58,935 62,497 (6 ) Other assets (2)
85,888 90,244 (5 )
Total assets
$ 1,915,388
1,951,757 (2 )
Liabilities Noninterest-bearing
deposits
$ 370,085 373,722 (1 ) Interest-bearing
deposits
933,604 962,269
(3 ) Total deposits
1,303,689 1,335,991 (2 )
Short-term borrowings
97,207 103,256 (6 ) Derivative
liabilities
7,883 8,796 (10 ) Accrued expenses and other
liabilities
72,597 70,615 3 Long-term debt
227,302 225,020 1 Total
liabilities
1,708,678
1,743,678 (2 )
Equity Wells Fargo stockholders’
equity: Preferred stock
26,227 25,358 3 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
60,399 60,893 (1 ) Retained earnings
148,728
145,263 2 Cumulative other comprehensive income (loss)
(4,921 ) (2,144 ) 130 Treasury stock – 607,928,993
shares and 590,194,846 shares
(31,246 ) (29,892 ) 5
Unearned ESOP shares
(2,571 )
(1,678 ) 53 Total Wells Fargo stockholders’ equity
205,752 206,936 (1 ) Noncontrolling interests
958 1,143 (16 ) Total equity
206,710 208,079 (1
)
Total liabilities and equity
$ 1,915,388
1,951,757 (2 )
(1) Financial information has been revised
to reflect the impact of the adoption of ASU 2016-18 – Statement of
Cash Flows (Topic 230): Restricted Cash in which we changed the
presentation of our cash and cash equivalents to include both cash
and due from banks as well as interest-earning deposits with banks,
which are inclusive of any restricted cash.
(2) Financial information for the prior
quarter has been revised to reflect the impact of the adoption of
ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities. See pages 17 and 18 for more information.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET Mar
31, Dec 31, Sep 30,
Jun 30, Mar 31, (in millions)
2018 2017 2017
2017 2017
Assets Cash and due from banks
$ 18,145 23,367 19,206 20,248 19,698 Interest-earning
deposits with banks (1)
184,250
192,580 205,648
195,700 227,635 Total cash, cash
equivalents, and restricted cash (1)
202,395
215,947 224,854
215,948 247,333 Federal
funds sold, securities purchased under resale agreements and other
short-term investments (1)
73,550 80,025 67,457 69,006
81,112 Debt securities: Trading, at fair value (2)
59,866
57,624 60,970 54,324 50,534 Available-for-sale, at fair value (2)
271,656 276,407 271,317 268,174 298,405 Held-to-maturity, at
cost
141,446 139,335 142,423 140,392 108,030 Mortgages held
for sale
17,944 20,070 20,009 24,807 17,822 Loans held for
sale (2)
3,581 1,131 1,339 1,898 1,373 Loans
947,308
956,770 951,873 957,423 958,405 Allowance for loan losses
(10,373 ) (11,004 )
(11,078 ) (11,073 ) (11,168 )
Net loans
936,935 945,766
940,795 946,350
947,237 Mortgage servicing rights: Measured at
fair value
15,041 13,625 13,338 12,789 13,208 Amortized
1,411 1,424 1,406 1,399 1,402 Premises and equipment, net
8,828 8,847 8,449 8,403 8,320 Goodwill
26,445 26,587
26,581 26,573 26,666 Derivative assets
11,467 12,228 12,580
13,273 12,564 Equity securities (2)
58,935 62,497 54,981
55,742 56,991 Other assets (2)
85,888
90,244 88,381
91,714 80,504 Total assets
$ 1,915,388
1,951,757 1,934,880
1,930,792 1,951,501
Liabilities
Noninterest-bearing deposits
$ 370,085 373,722
366,528 372,766 365,780 Interest-bearing deposits
933,604 962,269
940,178 933,064 959,664
Total deposits
1,303,689 1,335,991 1,306,706 1,305,830 1,325,444 Short-term
borrowings
97,207 103,256 93,811 95,356 94,871 Derivative
liabilities
7,883 8,796 9,497 11,636 12,461 Accrued expenses
and other liabilities
72,597 70,615 78,993 72,799 59,629
Long-term debt
227,302
225,020 239,256 239,222
256,786 Total liabilities
1,708,678 1,743,678
1,728,263 1,724,843
1,749,191
Equity Wells Fargo stockholders’
equity: Preferred stock
26,227 25,358 25,576 25,785 25,501
Common stock
9,136 9,136 9,136 9,136 9,136 Additional
paid-in capital
60,399 60,893 60,759 60,689 60,585 Retained
earnings
148,728 145,263 141,549 139,366 135,828 Cumulative
other comprehensive income (loss)
(4,921 ) (2,144 )
(1,622 ) (2,148 ) (3,153 ) Treasury stock
(31,246 )
(29,892 ) (27,772 ) (25,675 ) (24,030 ) Unearned ESOP shares
(2,571 ) (1,678 )
(1,904 ) (2,119 ) (2,546 ) Total Wells
Fargo stockholders’ equity
205,752 206,936 205,722 205,034
201,321 Noncontrolling interests
958
1,143 895
915 989 Total equity
206,710 208,079
206,617 205,949 202,310
Total liabilities and equity
$
1,915,388 1,951,757
1,934,880 1,930,792
1,951,501
(1) Financial information has been revised
to reflect the impact of the adoption of ASU 2016-18 – Statement of
Cash Flows (Topic 230): Restricted Cash in which we changed the
presentation of our cash and cash equivalents to include both cash
and due from banks as well as interest-earning deposits with banks,
which are inclusive of any restricted cash.
(2) Financial information for prior
quarters has been revised to reflect the impact of the adoption of
ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities. See pages 17 and 18 for more information.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER TRADING ASSETS AND LIABILITIES
Mar 31, Dec 31, Sep 30,
Jun 30, Mar 31, (in millions)
2018 2017 2017
2017 2017
Trading assets Debt securities
$ 59,866 57,624 60,970 54,324 50,534 Equity
securities (1)
25,327 30,004 22,797 24,229 25,358 Loans held
for sale
1,695 1,023 1,182 1,742 1,120 Gross trading
derivative assets
30,644 31,340 31,052 31,451 71,793 Netting
(2)
(20,112 ) (19,629 )
(18,881 ) (19,289 )
(60,483 ) Total trading derivative assets
10,532 11,711
12,171 12,162 11,310
Total trading assets
97,420
100,362 97,120
92,457 88,322
Trading
liabilities Short sales
23,303 18,472 19,096 16,845
19,982 Gross trading derivative liabilities
29,717 31,386
30,365 31,172 75,441 Netting (2)
(22,569
) (23,062 ) (21,662 )
(20,544 ) (64,138 ) Total trading derivative
liabilities
7,148 8,324
8,703 10,628
11,303 Total trading liabilities
$ 30,451 26,796
27,799 27,473
31,285
(1) Financial information for prior
quarters has been revised to reflect the impact of the adoption of
ASU 2016-01 and assets held as economic hedges for our deferred
compensation plan obligations have been reclassified as marketable
equity securities not held for trading.
(2) Represents balance sheet netting for
trading derivative assets and liability balances, and trading
portfolio level counterparty valuation adjustments.
FIVE QUARTER DEBT SECURITIES
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31, (in millions)
2018 2017 2017
2017 2017 Trading debt securities
$ 59,866 57,624
60,970 54,324 50,534
Available-for-sale debt securities: Securities of U.S. Treasury and
federal agencies
6,279 6,319 6,350 17,896 24,625 Securities
of U.S. states and political subdivisions
49,643 51,326
52,774 52,013 52,061 Mortgage-backed securities: Federal agencies
156,814 160,219 150,181 135,938 156,966 Residential and
commercial
9,264 9,173
11,046 12,772 14,233 Total
mortgage-backed securities
166,078 169,392 161,227 148,710
171,199 Other debt securities
49,656
49,370 50,966 49,555
50,520 Total available-for-sale debt securities
271,656 276,407 271,317
268,174 298,405 Held-to-maturity debt
securities: Securities of U.S. Treasury and federal agencies
44,727 44,720 44,712 44,704 44,697 Securities of U.S. states
and political subdivisions
6,307 6,313 6,321 6,325 6,331
Federal agency and other mortgage-backed securities (1)
89,748 87,527 90,071 87,525 53,778 Other debt securities
664 775 1,319
1,838 3,224 Total held-to-maturity debt
securities
141,446 139,335
142,423 140,392 108,030
Total debt securities
$ 472,968
473,366 474,710 462,890
456,969
(1) Predominantly consists of federal
agency mortgage-backed securities.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER EQUITY SECURITIES Mar 31,
Dec 31, Sep 30, Jun 30,
Mar 31, (in millions)
2018
2017 2017 2017
2017
Held for trading at fair value
Marketable equity securities
$ 25,327 30,004
22,797 24,229 25,358
Not held for
trading: Fair value: Marketable equity securities (1)
4,931 4,356 4,348 4,340 4,439 Nonmarketable equity
securities (2)
5,303 4,867
4,523 3,986 3,780 Total
equity securities at fair value
10,234
9,223 8,871 8,326
8,219 Equity method: LIHTC (3)
10,318 10,269 9,884 9,828
9,624 Private equity
3,840 3,839 3,757 3,740 3,620
Tax-advantaged renewable energy
1,822 1,950 1,954 1,960
2,013 New market tax credit and other
268
294 292 295
277 Total equity method
16,248
16,352 15,887 15,823
15,534 Other: Federal bank stock and other at cost (4)
5,780
5,828 6,251 6,247 6,645 Private equity (5)
1,346 1,090 1,175
1,117 1,235 Total equity securities not held for
trading
33,608 32,493
32,184 31,513 31,633
Total
equity securities 58,935
62,497 54,981 55,742
56,991
(1) Includes $3.5 billion, $3.7 billion,
$3.5 billion, $3.3 billion and $3.3 billion at March 31, 2018, and
December 31, September 30, June 30, and March 31, 2017,
respectively, related to investments held as economic hedges of our
deferred compensation plan obligations.
(2) Includes $5.0 billion, $4.9 billion,
$4.5 billion, $4.0 billion and $3.8 billion at March 31, 2018, and
December 31, September 30, June 30, and March 31, 2017,
respectively, related to investments in which we elected the fair
value option.
(3) Represents low-income housing tax
credit investments.
(4) Includes $5.7 billion, $5.4 billion,
$5.8 billion, $5.8 billion and $6.2 billion at March 31, 2018, and
December 31, September 30, June 30, and March 31, 2017,
respectively, related to investments in Federal Reserve Bank and
Federal Home Loan Bank stock.
(5) Represents nonmarketable equity
securities for which we have elected to account for the investment
under the measurement alternative.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER LOANS Mar 31,
Dec 31, Sep 30, Jun 30,
Mar 31, (in millions)
2018
2017 2017 2017
2017 Commercial: Commercial and industrial
$ 334,678
333,125 327,944 331,113 329,252 Real estate mortgage
125,543
126,599 128,475 130,277 131,532 Real estate construction
23,882 24,279 24,520 25,337 25,064 Lease financing
19,293 19,385 19,211
19,174 19,156 Total commercial
503,396 503,388 500,150
505,901 505,004 Consumer: Real estate
1-4 family first mortgage
282,658 284,054 280,173 276,566
274,633 Real estate 1-4 family junior lien mortgage
37,920
39,713 41,152 42,747 44,333 Credit card
36,103 37,976 36,249
35,305 34,742 Automobile
49,554 53,371 55,455 57,958 60,408
Other revolving credit and installment
37,677
38,268 38,694 38,946
39,285 Total consumer
443,912
453,382 451,723 451,522
453,401 Total loans (1)
$
947,308 956,770 951,873
957,423 958,405
(1) Includes $10.7 billion, $12.8 billion,
$13.6 billion, $14.3 billion, and $15.7 billion of purchased
credit-impaired (PCI) loans at March 31, 2018 and December
31, September 30, June 30, and March 31, 2017,
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.
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31, (in
millions)
2018 2017
2017 2017 2017 Commercial
foreign loans: Commercial and industrial
$ 59,696
60,106 58,570 57,825 56,987 Real estate mortgage
8,082 8,033
8,032 8,359 8,206 Real estate construction
668 655 647 585
471 Lease financing
1,077 1,126
1,141 1,092 986 Total
commercial foreign loans
$ 69,523
69,920 68,390 67,861
66,650
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND
FORECLOSED ASSETS) Mar 31,
Dec 31, Sep 30, Jun 30, Mar 31,
(in millions)
2018 2017
2017 2017 2017 Nonaccrual loans:
Commercial: Commercial and industrial
$ 1,516 1,899
2,397 2,632 2,898 Real estate mortgage
755 628 593 630 672
Real estate construction
45 37 38 34 40 Lease financing
93 76 81
89 96 Total commercial
2,409 2,640 3,109
3,385 3,706 Consumer: Real estate 1-4 family
first mortgage
4,053 4,122 4,213 4,413 4,743 Real estate 1-4
family junior lien mortgage
1,087 1,086 1,101 1,095 1,153
Automobile
117 130 137 104 101 Other revolving credit and
installment
53 58
59 59 56 Total consumer
5,310 5,396 5,510
5,671 6,053 Total nonaccrual loans
(1)(2)(3)
$ 7,719
8,036 8,619 9,056 9,759
As a percentage of total loans
0.81 % 0.84 0.91 0.95
1.02 Foreclosed assets: Government insured/guaranteed
$
103 120 137 149 179 Non-government insured/guaranteed
468 522 569
632 726 Total foreclosed assets
571 642 706
781 905 Total nonperforming assets
$ 8,290 8,678
9,325 9,837 10,664 As a percentage of
total loans
0.88 % 0.91
0.98 1.03 1.11
(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) are not
placed on nonaccrual status because they are insured or
guaranteed.
LOANS 90 DAYS OR MORE PAST DUE AND
STILL ACCRUING
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31, (in millions)
2018 2017 2017
2017 2017 Total (excluding PCI)(1):
$ 10,753 11,997 10,227 9,716 10,525 Less: FHA
insured/guaranteed by the VA (2)(3)
9,786
10,934 9,266 8,873
9,585
Total, not government insured/guaranteed
$ 967 1,063 961
843 940 By segment and class, not
government insured/guaranteed: Commercial: Commercial and
industrial
$ 40 26 27 42 88 Real estate mortgage
23 23 11 2 11 Real estate construction
1 — — 10
3 Total commercial
64 49
38 54 102 Consumer: Real
estate 1-4 family first mortgage (3)
164 219 190 145 149
Real estate 1-4 family junior lien mortgage (3)
48 60 49 44
42 Credit card
473 492 475 411 453 Automobile
113 143
111 91 79 Other revolving credit and installment
105 100 98 98
115 Total consumer
903
1,014 923 789 838
Total, not government insured/guaranteed
$ 967 1,063 961
843 940
(1) PCI loans totaled $1.0 billion, $1.4
billion, $1.4 billion, $1.5 billion and $1.8 billion, at
March 31, 2018 and December 31, September 30, June 30, and
March 31, 2017, 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.
Wells Fargo & Company and Subsidiaries
CHANGES IN ACCRETABLE YIELD RELATED TO PURCHASED
CREDIT-IMPAIRED (PCI) LOANS
Loans purchased with evidence of credit deterioration since
origination and for which it is probable that all contractually
required payments will not be collected are considered to be credit
impaired. PCI loans predominantly represent loans acquired from
Wachovia that were deemed to be credit impaired. Evidence of credit
quality deterioration as of the purchase date may include
statistics such as past due and nonaccrual status, recent borrower
credit scores and recent LTV percentages. PCI loans are initially
measured at fair value, which includes estimated future credit
losses expected to be incurred over the life of the loan.
Accordingly, the associated allowance for credit losses related to
these loans is not carried over at the acquisition date.
As a result of PCI loan accounting, certain credit-related
ratios cannot be used to compare a portfolio that includes PCI
loans against one that does not, or to compare ratios across
quarters or years. The ratios particularly affected include the
allowance for loan losses and allowance for credit losses as
percentages of loans, of nonaccrual loans and of nonperforming
assets; nonaccrual loans and nonperforming assets as a percentage
of total loans; and net charge-offs as a percentage of loans.
The excess of cash flows expected to be collected over the
carrying value of PCI loans is referred to as the accretable yield
and is accreted into interest income over the estimated lives of
the PCI loans using the effective yield method. The accretable
yield is affected by:
- Changes in interest rate indices for
variable rate PCI loans - Expected future cash flows are based on
the variable rates in effect at the time of the quarterly
assessment of expected cash flows;
- Changes in prepayment assumptions -
Prepayments affect the estimated life of PCI loans which may change
the amount of interest income, and possibly principal, expected to
be collected; and
- Changes in the expected principal and
interest payments over the estimated life - Updates to changes in
expected cash flows are driven by the credit outlook and actions
taken with borrowers. Changes in expected future cash flows from
loan modifications are included in the regular evaluations of cash
flows expected to be collected.
The change in the accretable yield related to PCI loans since
the merger with Wachovia is presented in the following table.
Quarter ended March 31, (in
millions)
2018 2009-2017
Balance, beginning of period $ 8,887
10,447 Change in accretable yield due to acquisitions
— 161 Accretion into interest income (1)
(314 ) (16,983 ) Accretion into
noninterest income due to sales (2) (643 )
(801 ) Reclassification from nonaccretable
difference for loans with improving credit-related cash flows
(3) 340 11,597 Changes in expected cash flows
that do not affect nonaccretable difference (4)
(1,406 ) 4,466
Balance, end of period $ 6,864
8,887
(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 March 31, 2018, our carrying
value for PCI loans totaled $10.7 billion and the remainder of
nonaccretable difference established in purchase accounting totaled
$293 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
FIVE QUARTER CHANGES IN ALLOWANCE FOR
CREDIT LOSSES
Quarter ended
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31,
(in millions)
2018 2017
2017 2017 2017
Balance,
beginning of quarter $ 11,960 12,109 12,146
12,287 12,540 Provision for credit losses
191 651 717 555
605 Interest income on certain impaired loans (1)
(43
) (49 ) (43 ) (46 ) (48 ) Loan charge-offs: Commercial:
Commercial and industrial
(164 ) (181 ) (194 ) (161 )
(253 ) Real estate mortgage
(2 ) (4 ) (21 ) (8 ) (5 )
Real estate construction
— — — — — Lease financing
(17 ) (14 ) (11 )
(13 ) (7 ) Total commercial
(183 ) (199 ) (226
) (182 ) (265 ) Consumer: Real estate
1-4 family first mortgage
(41 ) (49 ) (67 ) (55 ) (69
) Real estate 1-4 family junior lien mortgage
(47 )
(54 ) (70 ) (62 ) (93 ) Credit card
(405 ) (398 )
(337 ) (379 ) (367 ) Automobile
(300 ) (261 ) (274 )
(212 ) (255 ) Other revolving credit and installment
(180 ) (169 ) (170 )
(185 ) (189 ) Total consumer
(973 ) (931 ) (918
) (893 ) (973 ) Total loan charge-offs
(1,156 ) (1,130 )
(1,144 ) (1,075 ) (1,238 ) Loan
recoveries: Commercial: Commercial and industrial
79 63 69
83 82 Real estate mortgage
17 14 24 14 30 Real estate
construction
4 3 15 4 8 Lease financing
5 4 5
6 2 Total commercial
105 84
113 107 122
Consumer: Real estate 1-4 family first mortgage
59 72 83 71
62 Real estate 1-4 family junior lien mortgage
55 61 69 66
70 Credit card
73 62 60 59 58 Automobile
92 73 72 86
88 Other revolving credit and installment
31
27 30
31 33 Total consumer
310 295 314
313 311 Total loan
recoveries
415 379
427 420 433
Net loan charge-offs
(741 )
(751 ) (717 ) (655 )
(805 ) Other
(54 )
— 6 5
(5 )
Balance, end of quarter
$ 11,313 11,960
12,109 12,146
12,287 Components: Allowance for loan losses
$
10,373 11,004 11,078 11,073 11,168 Allowance for unfunded
credit commitments
940
956 1,031 1,073
1,119 Allowance for credit losses
$ 11,313 11,960
12,109 12,146
12,287 Net loan charge-offs (annualized) as a
percentage of average total loans
0.32 % 0.31 0.30
0.27 0.34 Allowance for loan losses as a percentage of: Total loans
1.10 1.15 1.16 1.16 1.17 Nonaccrual loans
134 137 129
122 114 Nonaccrual loans and other nonperforming assets
125
127 119 113 105 Allowance for credit losses as a percentage of:
Total loans
1.19 1.25 1.27 1.27 1.28 Nonaccrual loans
147 149 141 134 126 Nonaccrual loans and other nonperforming
assets
136 138
130 123 115
(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)
Mar 31, Dec 31, Sep 30,
Jun 30, Mar 31, (in millions, except ratios)
2018 2017
2017 2017 2017 Tangible
book value per common share (1): Total equity
$
206,710 208,079 206,617 205,949 202,310 Adjustments:
Preferred stock
(26,227 ) (25,358 ) (25,576 ) (25,785
) (25,501 )
Additional paid-in capital on ESOP
preferred stock
(146 ) (122 ) (130 ) (136 ) (157 ) Unearned ESOP
shares
2,571 1,678 1,904 2,119 2,546 Noncontrolling
interests
(958 )
(1,143 ) (895 ) (915 )
(989 ) Total common stockholders' equity (A)
181,950 183,134 181,920 181,232 178,209 Adjustments:
Goodwill
(26,445 ) (26,587 ) (26,581 ) (26,573 )
(26,666 )
Certain identifiable intangible assets
(other than MSRs)
(1,357 ) (1,624 ) (1,913 ) (2,147 ) (2,449 ) Other
assets (2)
(2,388 ) (2,155 ) (2,282 ) (2,268 ) (2,121
) Applicable deferred taxes (3)
918 962 1,550
1,624 1,698
Tangible common equity (B)
$
152,678 153,730
152,694 151,868 148,671
Common shares outstanding (C)
4,873.9 4,891.6 4,927.9
4,966.8 4,996.7 Book value per common share (A)/(C)
$
37.33 37.44 36.92 36.49 35.67 Tangible book value per common
share (B)/(C)
31.33
31.43 30.99
30.58 29.75
Quarter ended
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31, (in
millions, except ratios)
2018 2017 2017
2017 2017 Return on average tangible common equity
(1): Net income applicable to common stock (A)
$
5,533 5,740 4,131 5,450 5,233 Average total equity
206,189 207,413 207,723 205,755 201,559 Adjustments:
Preferred stock
(26,157 ) (25,569 ) (25,780 ) (25,849
) (25,163 ) Additional paid-in capital on ESOP preferred stock
(153 ) (129 ) (136 ) (144 ) (146 ) Unearned ESOP
shares
2,508 1,896 2,114 2,366 2,198 Noncontrolling
interests
(997 )
(998 ) (926 ) (910 )
(957 ) Average common stockholders’ equity (B)
181,390 182,613 182,995 181,218 177,491 Adjustments:
Goodwill
(26,516 ) (26,579 ) (26,600 ) (26,664 )
(26,673 ) Certain identifiable intangible assets (other than MSRs)
(1,489 ) (1,767 ) (2,056 ) (2,303 ) (2,588 ) Other
assets (2)
(2,233 ) (2,245 ) (2,231 ) (2,160 ) (2,095
) Applicable deferred taxes (3)
933 1,332 1,579
1,648 1,722
Average tangible common equity (C)
$ 152,085 153,354
153,687 151,739
147,857 Return on average common stockholders' equity (ROE)
(annualized) (A)/(B)
12.37 % 12.47 8.96 12.06 11.96
Return on average tangible common equity (ROTCE) (annualized)
(A)/(C)
14.75
14.85 10.66 14.41
14.35
(1) Tangible common equity is a non-GAAP
financial measure and represents total equity less preferred
equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible
assets associated with certain of our nonmarketable equity
securities but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible
common equity may differ among companies. Management believes that
return on average tangible common equity and tangible book value
per common share, which utilize tangible common equity, are useful
financial measures because they enable investors and others to
assess the Company's use of equity.
(2) Represents goodwill and other
intangibles on nonmarketable equity securities.
(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
Mar 31, Dec 31, Sep 30,
Jun 30, Mar 31, (in billions, except ratio)
2018 2017 2017
2017 2017 Total equity
$
206.7 208.1 206.6 205.9 202.3 Adjustments: Preferred stock
(26.2 ) (25.4 ) (25.6 ) (25.8 ) (25.5 )
Additional paid-in capital on ESOP
preferred stock
(0.1 ) (0.1 ) (0.1 ) (0.1 ) (0.2 ) Unearned ESOP
shares
2.6 1.7 1.9 2.1 2.5 Noncontrolling interests
(1.0 ) (1.1
) (0.9 ) (0.9 ) (1.0 )
Total common stockholders' equity
182.0 183.2 181.9 181.2
178.1 Adjustments: Goodwill
(26.4 ) (26.6 ) (26.6 )
(26.6 ) (26.7 ) Certain identifiable intangible assets (other than
MSRs)
(1.4 ) (1.6 ) (1.9 ) (2.1 ) (2.4 ) Other assets
(2)
(2.4 ) (2.2 ) (2.3 ) (2.2 ) (2.1 ) Applicable
deferred taxes (3)
0.9 1.0 1.6 1.6 1.7 Investment in certain
subsidiaries and other
0.4 0.2 (0.1 )
(0.2 ) (0.1 ) Common Equity Tier 1
(Fully Phased-In) under Basel III (A)
153.1 154.0 152.6
151.7 148.5 Total
risk-weighted assets (RWAs) anticipated under Basel III (4)(5)
(B)
$ 1,280.9
1,285.6 1,292.8
1,310.5 1,324.5 Common Equity
Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In)
(5) (A)/(B)
12.0 %
12.0 11.8 11.6
11.2
(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 securities.
(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
March 31, 2018, 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 December 31,
September 30, June 30 and March 31, 2017, was calculated under the
Basel III Standardized Approach RWAs.
(5) The Company’s March 31, 2018,
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
2018 2017
2018 2017
2018
2017
2018 2017
2018 2017
Quarter ended March
31,
Net interest income (3)
$ 7,195 7,132
4,532 4,681
1,112 1,141
(601 ) (630 )
12,238 12,324 Provision (reversal of provision) for credit
losses
218 646
(20 ) (43 )
(6 )
(4 )
(1 ) 6
191 605 Noninterest income
4,635 4,691
2,747 2,896
3,130 3,116
(816 ) (772 )
9,696 9,931 Noninterest expense
7,902 7,281
3,978 4,167
3,290 3,204
(928 ) (860 )
14,242 13,792 Income (loss) before income tax
expense (benefit)
3,710 3,896
3,321 3,453
958
1,057
(488 ) (548 )
7,501 7,858 Income tax
expense (benefit)
809 982
448 973
239 386
(122 ) (208 )
1,374 2,133 Net income (loss) before
noncontrolling interests
2,901 2,914
2,873 2,480
719 671
(366 ) (340 )
6,127 5,725 Less:
Net income (loss) from noncontrolling interests
188 90
(2 )
(5 )
5 6
— —
191 91 Net income (loss)
$ 2,713 2,824
2,875 2,485
714 665
(366 ) (340 )
5,936 5,634 Average loans
$
470.5 480.7
465.1 468.3
73.9 70.7
(58.5
) (56.1 )
951.0 963.6 Average assets
1,061.9
1,095.8
829.2 810.5
84.2 81.8
(59.4 )
(57.1 )
1,915.9 1,931.0 Average deposits
747.5 717.8
446.0 465.3
177.9 197.5
(74.2 ) (81.4 )
1,297.2 1,299.2
(1) The management accounting process
measures the performance of the operating segments based on our
management structure and is not necessarily comparable with other
similar information for other financial services companies. We
define our operating segments by product type and customer segment.
Effective first quarter 2018, assets and liabilities receive a
funding charge or credit that considers interest rate risk,
liquidity risk, and other product characteristics on a more
granular level. This methodology change affects results across all
three of our reportable operating segments and prior period
operating segment results have been revised to reflect this
methodology change. Our previously reported consolidated financial
results were not impacted by the methodology change; however, in
connection with the adoption of ASU 2016-01 in first quarter 2018,
certain reclassifications will occur within noninterest income.
(2) Includes the elimination of certain
items that are included in more than one business segment, most 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 as well as interest credits for any funding of a
segment available to be provided to other segments. The cost of
liabilities includes actual interest expense on segment liabilities
as well as funding charges for any funding provided from other
segments.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)
Quarter ended
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31, (income/expense
in millions, average balances in billions)
2018 2017 2017
2017 2017
COMMUNITY BANKING Net interest
income (2)
$ 7,195 7,239 7,154 7,133 7,132 Provision
for credit losses
218 636 650 623 646 Noninterest income
4,635 4,481 4,366 4,822 4,691 Noninterest expense
7,902 10,216
7,852 7,266 7,281
Income before income tax expense
3,710 868 3,018
4,066 3,896 Income tax expense (benefit)
809
(2,682 ) 1,079
1,255 982 Net income before
noncontrolling interests
2,901 3,550 1,939 2,811 2,914 Less:
Net income from noncontrolling interests
188
78 62
46 90 Segment net income
$ 2,713 3,472
1,877 2,765
2,824 Average loans
$ 470.5 473.2 473.7 475.1
480.7 Average assets
1,061.9 1,073.2 1,089.6 1,083.6 1,095.8
Average deposits
747.5
738.3 734.6 727.7
717.8
WHOLESALE BANKING Net interest
income (2)
$ 4,532 4,557 4,763 4,809 4,681 Provision
(reversal of provision) for credit losses
(20 ) 20 69
(65 ) (43 ) Noninterest income
2,747 2,883 2,741 2,670 2,896
Noninterest expense
3,978
4,187 4,234 4,036
4,167 Income before income tax expense
3,321 3,233 3,201 3,508 3,453 Income tax expense
448 854 894
775 973 Net income
before noncontrolling interests
2,873 2,379 2,307 2,733
2,480 Less: Net income (loss) from noncontrolling interests
(2 ) 6 (7 )
(9 ) (5 ) Segment net income
$ 2,875 2,373
2,314 2,742
2,485 Average loans
$ 465.1 463.5 463.7 466.9
468.3 Average assets
829.2 837.2 824.2 818.8 810.5 Average
deposits
446.0 465.7
463.4 462.4
465.3
WEALTH AND INVESTMENT MANAGEMENT Net
interest income (2)
$ 1,112 1,152 1,177 1,171 1,141
Provision (reversal of provision) for credit losses
(6
) (7 ) (1 ) 7 (4 ) Noninterest income
3,130 3,181
3,079 3,055 3,116 Noninterest expense
3,290
3,246 3,102
3,071 3,204 Income before income
tax expense
958 1,094 1,155 1,148 1,057 Income tax expense
239 413
433 436 386
Net income before noncontrolling interests
719 681 722 712
671 Less: Net income from noncontrolling interests
5 6 3
1 6 Segment net income
$ 714 675
719 711 665
Average loans
$ 73.9 72.9 72.4 71.7 70.7
Average assets
84.2 83.7 83.2 82.4 81.8 Average deposits
177.9 184.1
184.4 190.1 197.5
OTHER (3
) Net interest income (2)
$
(601 ) (635 ) (645 ) (642 ) (630 ) Provision
(reversal of provision) for credit losses
(1 ) 2 (1 )
(10 ) 6 Noninterest income
(816 ) (808 ) (786 ) (783
) (772 ) Noninterest expense
(928 )
(849 ) (837 ) (832 )
(860 ) Loss before income tax benefit
(488
) (596 ) (593 ) (583 ) (548 ) Income tax benefit
(122 ) (227 ) (225
) (221 ) (208 ) Net loss before
noncontrolling interests
(366 ) (369 ) (368 ) (362 )
(340 ) Less: Net income from noncontrolling interests
— — —
— — Other net loss
$ (366 ) (369 )
(368 ) (362 ) (340 ) Average
loans
$ (58.5 ) (57.8 ) (57.5 ) (56.8 ) (56.1
) Average assets
(59.4 ) (58.8 ) (58.5 ) (57.8 )
(57.1 ) Average deposits
(74.2 )
(76.5 ) (76.0 ) (79.0 )
(81.4 )
CONSOLIDATED COMPANY Net interest income (2)
$ 12,238 12,313 12,449 12,471 12,324 Provision for
credit losses
191 651 717 555 605 Noninterest income
9,696 9,737 9,400 9,764 9,931 Noninterest expense
14,242 16,800
14,351 13,541
13,792 Income before income tax expense
7,501 4,599
6,781 8,139 7,858 Income tax expense (benefit)
1,374 (1,642 ) 2,181
2,245 2,133 Net
income before noncontrolling interests
6,127 6,241 4,600
5,894 5,725 Less: Net income from noncontrolling interests
191 90 58
38 91 Wells Fargo
net income
$ 5,936
6,151 4,542 5,856
5,634 Average loans
$ 951.0
951.8 952.3 956.9 963.6 Average assets
1,915.9 1,935.3
1,938.5 1,927.0 1,931.0 Average deposits
1,297.2 1,311.6
1,306.4 1,301.2 1,299.2
(1) The management accounting process
measures the performance of the operating segments based on our
management structure and is not necessarily comparable with other
similar information for other financial services companies. We
define our operating segments by product type and customer segment.
Effective first quarter 2018, assets and liabilities receive a
funding charge or credit that considers interest rate risk,
liquidity risk, and other product characteristics on a more
granular level. This methodology change affects results across all
three of our reportable operating segments and prior period
operating segment results have been revised to reflect this
methodology change. Our previously reported consolidated financial
results were not impacted by the methodology change; however, in
connection with the adoption of ASU 2016-01 in first quarter 2018,
certain reclassifications will occur within noninterest income.
(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 as well as interest credits for any funding of a
segment available to be provided to other segments. The cost of
liabilities includes actual interest expense on segment liabilities
as well as funding charges for any funding provided from other
segments.
(3) Includes the elimination of certain
items that are included in more than one business segment, most 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
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31, (in millions)
2018 2017 2017
2017 2017
MSRs measured using the
fair value method: Fair value, beginning of quarter
$
13,625 13,338 12,789 13,208 12,959 Purchases
— — 541
— — Servicing from securitizations or asset transfers (1)
573 639 605 436 583 Sales and other (2)
(4 ) (32 ) 64
(8 ) (47 ) Net additions
569 607 1,210
428 536 Changes in
fair value: Due to changes in valuation model inputs or
assumptions: Mortgage interest rates (3)
1,253 221 (171 )
(305 ) 152 Servicing and foreclosure costs (4)
34 23 60 (14
) 27 Discount rates (5)
— 13 — — — Prepayment estimates and
other (6)
43 (55 )
(31 ) (41 ) (5 ) Net changes in
valuation model inputs or assumptions
1,330
202 (142 )
(360 ) 174 Changes due to
collection/realization of expected cash flows over time
(483 ) (522 ) (519
) (487 ) (461 ) Total changes in fair
value
847 (320 )
(661 ) (847 ) (287 ) Fair value,
end of quarter
$ 15,041
13,625 13,338
12,789 13,208
(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 or
portfolios with servicing liabilities.
(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) Reflects discount rate assumption
change, excluding portion attributable to changes in mortgage
interest rates.
(6) 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
Mar 31,
Dec 31, Sep 30, Jun 30,
Mar 31, (in millions)
2018
2017 2017 2017
2017
Amortized MSRs: Balance, beginning of quarter
$
1,424 1,406 1,399 1,402 1,406 Purchases
18 40 31 26
18 Servicing from securitizations or asset transfers
34 43
41 37 45 Amortization
(65 )
(65 ) (65 ) (66 )
(67 ) Balance, end of quarter
$ 1,411
1,424 1,406
1,399 1,402
Fair value of
amortized MSRs: Beginning of quarter
$ 2,025
1,990 1,989 2,051 1,956 End of quarter
2,307
2,025 1,990
1,989 2,051
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
Quarter ended
Mar 31,
Dec 31, Sep 30, Jun 30,
Mar 31, (in millions)
2018 2017 2017
2017 2017
Servicing income, net: Servicing
fees (1)
$ 906 833 795 882 882 Changes in fair value
of MSRs carried at fair value: Due to changes in valuation model
inputs or assumptions (2) (A)
1,330 202 (142 ) (360 ) 174
Changes due to collection/realization of expected cash flows over
time
(483 )
(522 ) (519 ) (487 )
(461 ) Total changes in fair value of MSRs carried at fair
value
847 (320 ) (661 ) (847 ) (287 ) Amortization
(65 ) (65 ) (65 ) (66 ) (67 ) Net derivative gains
(losses) from economic hedges (3) (B)
(1,220 ) (186 ) 240
431 (72 ) Total servicing
income, net
$ 468
262 309
400 456 Market-related valuation
changes to MSRs, net of hedge results (2)(3) (A)+(B)
$ 110 16
98 71 102
(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.
Mar 31, Dec 31, Sep 30,
Jun 30, Mar 31, (in billions)
2018 2017
2017 2017 2017
Managed servicing portfolio
(1
): Residential mortgage servicing: Serviced for others
$ 1,201 1,209 1,223 1,189 1,204 Owned loans serviced
337 342 340 343 335 Subserviced for others
5
3 3 4 4 Total
residential servicing
1,543 1,554
1,566 1,536 1,543 Commercial
mortgage servicing: Serviced for others
510 495 480 475 474
Owned loans serviced
125 127 128 130 132 Subserviced for
others
10 9 8 8
7 Total commercial servicing
645
631 616 613 613 Total
managed servicing portfolio
$ 2,188
2,185 2,182 2,149 2,156
Total serviced for others
$ 1,711 1,704 1,703 1,664
1,678 Ratio of MSRs to related loans serviced for others
0.96 % 0.88 0.87 0.85 0.87 Weighted-average note rate
(mortgage loans serviced for others)
4.24 4.23
4.23 4.23 4.23
(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
Mar 31,
Dec 31, Sep 30, Jun 30,
Mar 31,
2018 2017 2017
2017 2017
Net gains on mortgage loan
origination/sales activities (in millions): Residential (A)
$ 324 504 546 521 569 Commercial
76 95 81 81
101 Residential pipeline and unsold/repurchased loan management (1)
66
67 110 146
102 Total
$
466 666 737
748 772
Application data (in
billions): Wells Fargo first mortgage quarterly applications
$ 58 63 73 83 59 Refinances as a percentage of
applications
35 % 38 37 32 36 Wells Fargo first
mortgage unclosed pipeline, at quarter end
$ 24 23
29 34 28
Residential real estate originations: Purchases as a
percentage of originations
65 % 64 72 75 61
Refinances as a percentage of originations
35 36
28 25 39 Total
100 %
100 100 100
100 Wells Fargo first mortgage loans (in billions):
Retail
$ 16 23 26 25 21 Correspondent
27 30 32
31 22 Other (2)
—
— 1 —
1 Total quarter-to-date
$ 43 53
59 56 44
Held-for-sale (B)
$ 34 40 44 42 34
Held-for-investment
9
13 15
14 10 Total quarter-to-date
$ 43
53 59 56
44 Total year-to-date
$ 43 212
159 100 44
Production
margin on residential held-for-sale mortgage originations
(A)/(B)
0.94 %
1.25 1.24 1.24
1.68
(1) Predominantly includes the results of
sales of modified Government National Mortgage Association (GNMA)
loans, 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
Mar 31, Dec 31,
Sep 30, Jun 30, Mar 31,
(in millions)
2018 2017
2017 2017 2017 Balance,
beginning of period
$ 181 179 178 222 229 Assumed
with MSR purchases (1)
— — 10 — — Provision for repurchase
losses: Loan sales
3 4 6 6 8 Change in estimate (2)
1 2 (12 )
(45 ) (8 )
Net additions (reductions) to
provision
4 6 (6 ) (39 ) — Losses
(4 )
(4 ) (3 ) (5 )
(7 ) Balance, end of period
$
181 181 179
178 222
(1) Represents repurchase liability
associated with portfolio of loans underlying mortgage servicing
rights acquired during the period.
(2) 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: https://www.businesswire.com/news/home/20180413005190/en/
MediaAncel Martinez,415-222-3858orInvestorsJohn M.
Campbell, 415-396-0523
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