Diluted EPS of $0.98 included net discrete
income tax expense of $0.10 per share
Wells Fargo & Company (NYSE:WFC):
- Financial results:
- Net income of $5.2 billion, compared
with $5.9 billion in second quarter 2017
- Second quarter 2018 included net
discrete income tax expense of $481 million mostly related to state
income taxes driven by the recent U.S. Supreme Court decision in
South Dakota v. Wayfair
- Diluted earnings per share (EPS) of
$0.98, compared with $1.08
- Revenue of $21.6 billion, down from
$22.2 billion
- Net interest income of $12.5 billion,
up $70 million, or 1 percent
- Noninterest income of $9.0 billion,
down $752 million, or 8 percent
- Noninterest expense of $14.0 billion,
up from $13.5 billion
- Second quarter 2018 included $619
million of operating losses primarily related to non-litigation
expense for previously disclosed matters
- Average deposits of $1.3 trillion, down
$29.9 billion, or 2 percent
- Average loans of $944.1 billion, down
$12.8 billion, or 1 percent
- Return on assets (ROA) of 1.10 percent,
return on equity (ROE) of 10.60 percent, and return on average
tangible common equity (ROTCE) of 12.62 percent1
- Returned $4.0 billion to shareholders
through common stock dividends and net share repurchases, up
17 percent from $3.4 billion in second quarter 2017
- Credit quality:
- Provision expense of $452 million, down
$103 million, or 19 percent, from second quarter 2017
- Net charge-offs declined $53 million to
$602 million, or 0.26 percent of average loans (annualized)
- Reserve release2 of $150 million,
compared with $100 million in second quarter 2017
- Nonaccrual loans of $7.5 billion, down
$1.6 billion, or 17 percent
- Received a non-objection to the
Company's 2018 Capital Plan submission from the Federal Reserve
- As part of this plan, the Company
expects to increase its third quarter 2018 common stock dividend to
$0.43 per share from $0.39 per share, subject to approval by the
Company's Board of Directors. The plan also includes up to $24.5
billion of gross common stock repurchases for the four-quarter
period from third quarter 2018 through second quarter 2019.1
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.
Financial results reported in this document are preliminary.
Final financial results and other disclosures will be reported in
our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2018, and may differ materially from the results and
disclosures in this document due to, among other things, the
completion of final review procedures, the occurrence of subsequent
events, or the discovery of additional information.
Selected Financial Information
Quarter ended
Jun 30,
Mar 31, Jun 30,
2018 2018 2017
Earnings
Diluted earnings per common share
$ 0.98 0.96 1.08
Wells Fargo net income (in billions)
5.19 5.14 5.86 Return
on assets (ROA)
1.10 % 1.09 1.22 Return on equity
(ROE)
10.60 10.58 12.06 Return on average tangible common
equity (ROTCE) (a)
12.62 12.62 14.41
Asset Quality
Net charge-offs (annualized) as a % of average total loans
0.26 % 0.32 0.27 Allowance for credit losses as a %
of total loans
1.18 1.19 1.27 Allowance for credit losses as
a % of annualized net charge-offs
460 376 462
Other
Revenue (in billions)
$ 21.6 21.9 22.2 Efficiency
ratio (b)
64.9 % 68.6 60.9 Average loans (in
billions)
$ 944.1 951.0 956.9 Average deposits (in
billions)
1,271.3 1,297.2 1,301.2 Net interest margin
2.93 % 2.84 2.90
(a) Tangible common equity is a non-GAAP
financial measure and represents total equity less preferred
equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible
assets associated with certain of our nonmarketable equity
securities but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible
common equity may differ among companies. Management believes that
return on average tangible common equity, which utilizes tangible
common equity, is a useful financial measure because it enables
investors and others to assess the Company's use of equity. For
additional information, including a corresponding reconciliation to
GAAP financial measures, see the “Tangible Common Equity” tables on
page 36.
(b) The efficiency ratio is noninterest
expense divided by total revenue (net interest income and
noninterest income).
Wells Fargo & Company (NYSE:WFC) reported net income of
$5.2 billion, or $0.98 per diluted common share, for second
quarter 2018, compared with $5.9 billion, or $1.08 per share,
for second quarter 2017, and $5.1 billion, or $0.96 per
share, for first quarter 2018.
Chief Executive Officer Tim Sloan said, “During the second
quarter we continued to transform Wells Fargo into a better,
stronger company for our customers, team members, communities and
shareholders. Our progress included making further improvements to
our compliance and operational risk management programs; hiring a
new Chief Risk Officer; announcing innovative new products
including a digital application for Merchant Services customers and
our enhanced Propel® Card, one of the richest no-annual-fee credit
cards in the industry; launching our ‘Re-established’ marketing
effort, the largest advertising campaign in our history; announcing
a new $200 billion commitment to financing sustainable businesses
and projects; and continuing to move forward on our expense savings
initiatives. I’m also pleased with our recent CCAR results, which
demonstrates the strength of our diversified business model, our
sound financial risk management practices, and our strong capital
position, and enables us to return more capital to our shareholders
in alignment with our goal of creating long-term shareholder
value.”
Chief Financial Officer John Shrewsberry said, “Wells Fargo
reported $5.2 billion of net income in the second quarter, which
included net discrete income tax expense of $481 million. Net
interest income grew both linked quarter and year-over-year in the
second quarter, credit performance and capital levels remained
strong, and we are on track to meet our expense reduction
expectations. In addition, we received a non-objection to our
2018 Capital Plan, which includes an increase in our quarterly
common stock dividend rate in third quarter 2018 to $0.43 per
share, subject to board approval, as well as up to $24.5 billion of
gross common stock repurchases during the four-quarter period
beginning in third quarter 2018. The shareholder returns
included in the capital plan are approximately 70% higher than our
previous four quarter capital actions, demonstrating our commitment
to returning more capital to shareholders. Our ability to return
this level of capital is a result of capital built in recent years
through continued stable earnings and a lower level of
risk-weighted assets.”
Net Interest Income
Net interest income in the second quarter was $12.5 billion, up
$303 million compared with first quarter 2018, driven predominantly
by a less negative impact from hedge ineffectiveness accounting,
the net benefit of rate and spread movements, and one additional
day in the quarter.
Net interest margin was 2.93 percent, up 9 basis points compared
with first quarter 2018. The increase was driven by a reduction in
the proportion of lower yielding assets, as well as a less negative
impact from hedge ineffectiveness accounting and the net benefit of
rate and spread movements.
Noninterest Income
Noninterest income in the second quarter was $9.0 billion, down
$684 million compared with first quarter 2018. Second quarter
noninterest income included lower market sensitive revenue3,
mortgage banking fees and other income, partially offset by higher
card fees on stronger credit card and debit card activity.
- Mortgage banking income was $770
million, down from $934 million in first quarter 2018.
Residential mortgage loan originations increased in the second
quarter to $50 billion, from $43 billion in the first quarter.
The production margin on residential held-for-sale mortgage loan
originations4 declined to 0.77 percent, compared with 0.94
percent in the first quarter, due to increased price competition.
Net mortgage servicing income was $406 million in the second
quarter, down from $468 million in the first quarter driven by
higher loan prepayments.
- Market sensitive revenue was $527
million, down from $1.0 billion in first quarter 2018, primarily
due to lower unrealized gains from equity securities. Additionally,
second quarter 2018 included $214 million of other-than-temporary
impairment (OTTI) from the announced sale of Wells Fargo Asset
Management's (WFAM) ownership stake in The Rock Creek Group, LP
(RockCreek).
- Other income was $323 million,
compared with $438 million in the first quarter. Second
quarter results included a $479 million gain from sales of $1.3
billion of purchased credit-impaired (PCI) Pick-a-Pay loans,
compared with a $643 million gain from sales of $1.6 billion of PCI
Pick-a-Pay loans in first quarter 2018.
Noninterest Expense
Noninterest expense in the second quarter declined $1.1 billion
from the prior quarter to $14.0 billion, primarily due to
lower operating losses, a decline in employee benefits and
incentive compensation expense, which were seasonally elevated in
the first quarter, and lower equipment expense. These decreases
were partially offset by higher charitable donations expense,
contract services, advertising and promotion, and outside
professional services expense. The efficiency ratio was
64.9 percent in second quarter 2018, compared with
68.6 percent in the first quarter.
Second quarter 2018 operating losses were $619 million,
which included typical operating losses, as well as non-litigation
expense for previously disclosed matters, including policies,
practices and procedures in our foreign exchange business; fee
calculations within certain fiduciary and custody accounts in our
wealth management business; practices in our automobile lending
business, including related insurance products; and mortgage
interest rate lock extensions. First quarter 2018 operating losses
were $1.5 billion due to elevated litigation accruals.
Income Taxes
The Company’s effective income tax rate was 25.9 percent for
second quarter 2018 and included net discrete income tax expense of
$481 million mostly related to state income taxes. Discrete income
tax expenses in the second quarter were driven by the Company’s
adjustment to its state income tax reserves following the recent
U.S. Supreme Court decision in South Dakota v. Wayfair and by the
true-up of certain state income tax accruals. The effective income
tax rate in first quarter 2018 was 21.1 percent and included net
discrete income tax expense of $137 million, predominantly
resulting from the non-deductible treatment of a discrete
litigation accrual. The Company currently expects the effective
income tax rate for the remainder of 2018 to be approximately 19
percent, excluding the impact of any future discrete items.
Loans
Total average loans were $944.1 billion in the second
quarter, down $6.9 billion from the first quarter. Period-end loan
balances were $944.3 billion at June 30, 2018, down
$3.0 billion from March 31, 2018. Commercial loans were
down $291 million compared with March 31, 2018, with a $2.5
billion decline in commercial real estate loans, partially offset
by $1.9 billion of growth in commercial and industrial loans and a
$321 million increase in lease financing loans. Consumer loans
decreased $2.8 billion from the prior quarter, driven by:
- a $1.9 billion decline in
automobile loans due to expected continued runoff
- a $1.4 billion decline in the
junior lien mortgage portfolio as payoffs continued to exceed new
originations
- a $376 million decline in other
revolving credit and installment loans
- these decreases were partially offset
by:
- a $581 million increase in credit card
balances
- a $343 million increase in 1-4 family
first mortgage loans, as nonconforming mortgage loan originations
were partially offset by payoffs and $1.3 billion of sales of PCI
Pick-a-Pay mortgage loans
Additionally, $507 million of nonconforming mortgage loan
originations that would have otherwise been included in 1-4 family
first mortgage loan outstandings were designated as held for sale
in anticipation of the future issuance of residential
mortgage-backed securities (RMBS), and $112 million of loans were
transferred to held for sale as a result of previously announced
branch divestitures.
Period-End Loan Balances
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30, (in millions)
2018 2018 2017
2017 2017 Commercial
$ 503,105 503,396
503,388 500,150
505,901 Consumer
441,160
443,912 453,382
451,723 451,522 Total loans
$ 944,265 947,308
956,770 951,873
957,423 Change from prior quarter
$ (3,043 ) (9,462 )
4,897 (5,550 ) (982 )
Debt and Equity Securities
Debt securities include available-for-sale and held-to-maturity
debt securities, as well as debt securities held for trading. Debt
securities were $475.5 billion at June 30, 2018, up $2.5
billion from the first quarter, driven by:
- a $5.7 billion increase in debt
securities held for trading
- a net decrease in available-for-sale
and held-to-maturity debt securities, as approximately $14.4
billion of purchases, primarily federal agency mortgage-backed
securities (MBS) in the available-for-sale portfolio, were more
than offset by runoff and sales
Net unrealized losses on available-for-sale debt securities were
$2.4 billion at June 30, 2018, compared with net unrealized
losses of $1.9 billion at March 31, 2018, primarily due
to higher interest rates.
Equity securities include marketable and non-marketable equity
securities, as well as equity securities held for trading. Equity
securities were $57.5 billion at June 30, 2018, down $1.4 billion
from the first quarter, predominantly due to a decline in equity
securities held for trading.
Deposits
Total average deposits for second quarter 2018 were $1.3
trillion, down $25.8 billion from the prior quarter. The decline
was driven by a decrease in commercial deposits, primarily from
financial institutions, including a $13.5 billion decline from
actions the Company has taken in response to 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 $754.0 billion for second
quarter 2018 were down $1.4 billion from the prior quarter, with
growth in Community Banking deposits more than offset by lower
Wealth and Investment Management deposits, as customers allocated
more cash to alternative higher-rate liquid investments. The
average deposit cost for second quarter 2018 was 40 basis points,
up 6 basis points from the prior quarter and 19 basis points from a
year ago, primarily driven by an increase in commercial and Wealth
and Investment Management deposit rates.
Capital
Capital in the second quarter continued to exceed our internal
target, with a Common Equity Tier 1 ratio (fully phased-in) of
12.0 percent5, flat compared with the prior quarter. In second
quarter 2018, the Company repurchased 35.8 million shares of
its common stock, which reduced period-end common shares
outstanding by 24.8 million. The Company paid a quarterly
common stock dividend of $0.39 per share. In addition, the Company
received a non-objection to its 2018 Capital Plan from the Federal
Reserve. As part of this plan, the Company expects to increase its
third quarter 2018 common stock dividend to $0.43 per share,
subject to approval by the Company's Board of Directors. The plan
also includes up to $24.5 billion of gross common stock
repurchases, subject to management discretion, for the four-quarter
period from third quarter 2018 through second quarter 2019.
Credit Quality
Net Loan Charge-offs
The quarterly loss rate in the second quarter was 0.26 percent
(annualized), compared with 0.32 percent in the prior quarter and
0.27 percent a year ago. Commercial and consumer losses were 0.05
percent and 0.49 percent, respectively. Total credit losses were
$602 million in second quarter 2018, down $139 million from
first quarter 2018. Commercial losses were down $11 million
due to improvement in commercial and industrial loans. Consumer
losses decreased $128 million driven by lower loss rates and
higher recovery rates, including seasonal impacts in automobile and
credit card.
Net Loan Charge-Offs
Quarter ended June 30,
2018 March 31, 2018 June
30, 2017 Net loan As a % of
Net loan As a % of
Net loan As a % of charge-
average charge- average charge-
average ($ in millions) offs
loans (a) offs
loans (a) offs
loans (a) Commercial: Commercial and industrial $ 58
0.07 % $ 85 0.10 % $ 78 0.10 % Real estate mortgage — — (15 ) (0.05
) (6 ) (0.02 ) Real estate construction (6 ) (0.09 ) (4 ) (0.07 )
(4 ) (0.05 ) Lease financing 15 0.32 12
0.25 7 0.15
Total commercial 67
0.05 78 0.06 75
0.06 Consumer: Real estate 1-4 family first mortgage
(23 ) (0.03 ) (18 ) (0.03 ) (16 ) (0.02 ) Real estate 1-4 family
junior lien mortgage (13 ) (0.13 ) (8 ) (0.09 ) (4 ) (0.03 ) Credit
card 323 3.61 332 3.69 320 3.67 Automobile 113 0.93 208 1.64 126
0.86 Other revolving credit and installment 135
1.44 149 1.60 154 1.58
Total consumer
535 0.49 663
0.60 580 0.51 Total
$ 602 0.26 % $
741 0.32 % $ 655
0.27 %
(a) Quarterly net charge-offs (recoveries)
as a percentage of average loans are annualized. See explanation on
page 33 of the accounting for purchased credit-impaired (PCI) loans
and the impact on selected financial ratios.
Nonperforming Assets
Nonperforming assets decreased $305 million, or 4 percent, from
first quarter 2018 to $8.0 billion. Nonaccrual loans decreased $233
million from first quarter 2018 to $7.5 billion predominantly
driven by lower consumer real estate nonaccruals.
Nonperforming Assets (Nonaccrual Loans
and Foreclosed Assets)
June 30, 2018 March
31, 2018 June 30, 2017
As a As a
As a % of % of
% of Total total Total total
Total total ($ in millions)
balances loans
balances loans
balances loans Commercial:
Commercial and industrial $ 1,559 0.46 % $ 1,516 0.45 % $ 2,632
0.79 % Real estate mortgage 765 0.62 755 0.60 630 0.48 Real estate
construction 51 0.22 45 0.19 34 0.13 Lease financing
80 0.41 93 0.48 89 0.46
Total
commercial 2,455 0.49
2,409 0.48 3,385 0.67
Consumer: Real estate 1-4 family first mortgage 3,829 1.35
4,053 1.43 4,413 1.60 Real estate 1-4 family junior lien mortgage
1,029 2.82 1,087 2.87 1,095 2.56 Automobile 119 0.25 117 0.24 104
0.18 Other revolving credit and installment 54
0.14 53 0.14 59 0.15
Total consumer
5,031 1.14 5,310
1.20 5,671 1.26 Total nonaccrual
loans 7,486 0.79
7,719 0.81 9,056 0.95
Foreclosed assets: Government insured/guaranteed 90 103 149
Non-government insured/guaranteed 409 468
632
Total foreclosed assets
499 571 781 Total
nonperforming assets $ 7,985
0.85 % $ 8,290 0.88
% $ 9,837 1.03 % Change
from prior quarter: Total nonaccrual loans $ (233 ) $ (317 ) $ (625
) Total nonperforming assets (305 )
(388 ) (827
)
Allowance for Credit Losses
The allowance for credit losses, including the allowance for
unfunded commitments, totaled $11.1 billion at June 30, 2018,
down $203 million from March 31, 2018. Second quarter 2018
included a $150 million reserve release2, which reflected strong
overall credit portfolio performance and lower loan balances. The
allowance coverage for total loans was 1.18 percent, compared
with 1.19 percent in first quarter 2018. The allowance covered 4.6
times annualized second quarter net charge-offs, compared with 3.8
times in the prior quarter. The allowance coverage for nonaccrual
loans was 148 percent at June 30, 2018, compared with
147 percent at March 31, 2018. The Company believes the
allowance was appropriate for losses inherent in the loan portfolio
at June 30, 2018.
Business Segment Performance
Wells Fargo defines its operating segments by product type and
customer segment. Segment net income for each of the three business
segments was:
Quarter ended
Jun 30, Mar
31, Jun 30, (in millions)
2018
2018 2017 Community Banking
$
2,496 1,913 2,765 Wholesale Banking
2,635 2,875 2,742
Wealth and Investment Management
445
714 711
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
Jun 30, Mar 31,
Jun 30, (in millions)
2018
2018 2017 Total revenue
$
11,806 11,830 11,955 Provision for credit losses
484
218 623 Noninterest expense
7,290 8,702 7,266 Segment net
income
2,496 1,913 2,765 (in billions) Average loans
463.8 470.5 475.1 Average assets
1,034.3 1,061.9
1,083.6 Average deposits
760.6
747.5 727.7
Community Banking reported net income of $2.5 billion, up
$583 million, or 30 percent, from first quarter 2018. Second
quarter 2018 results included net discrete income tax expense of
$481 million primarily related to state income taxes. Revenue in
the second quarter was $11.8 billion, flat compared with first
quarter 2018, as lower market sensitive revenue and mortgage
banking income were largely offset by higher net interest income
and card fees. Noninterest expense decreased $1.4 billion, or 16
percent, from first quarter 2018, driven mainly by lower operating
losses and lower personnel expense that was down from a seasonally
elevated first quarter. The provision for credit losses increased
$266 million from the prior quarter primarily due to a lower
reserve release.
Net income was down $269 million, or 10 percent, from second
quarter 2017, primarily due to lower revenue and net discrete
income tax expense of $481 million in second quarter 2018. Revenue
declined $149 million, or 1 percent, from a year ago due to
lower mortgage banking income and service charges on deposit
accounts, partially offset by higher net interest income and higher
gains on the sales of PCI Pick-a-Pay mortgage loans. Noninterest
expense of $7.3 billion was stable from a year ago. The provision
for credit losses decreased $139 million from a year ago due
to improvement in the consumer real estate and automobile
portfolios.
Retail Banking and Consumer Payments, Virtual Solutions and
Innovation
- More than 362,000 branch customer
experience surveys completed during second quarter 2018, with both
‘Loyalty’ and ‘Overall Satisfaction with Most Recent Visit’ scores
down due to several factors, including recent events and a
risk-based policy change affecting individuals making cash deposits
into an account on which they are not a signer
- 5,751 retail bank branches as of the
end of second quarter 2018, reflecting 56 branch consolidations in
the quarter and 114 in the first half of 2018; additionally, we
announced plans to divest 52 branches in 2018 in Indiana, Ohio,
Michigan and part of Wisconsin pending regulatory approval
- Primary consumer checking customers6,7
up 1.2 percent year-over-year
- Debit card point-of-sale purchase
volume8 of $87.5 billion in the second quarter, up 9 percent
year-over-year
- General purpose credit card
point-of-sale purchase volume of $19.2 billion in the second
quarter, up 7 percent year-over-year
- 28.9 million digital (online and
mobile) active customers, including over 22 million mobile active
users7,9
- Dynatrace's Small Business Banking
Scorecard named Wells Fargo #1 in overall performance for providing
a positive small business banking experience through digital
channels (July 2018)
- For the second year in a row, Wells
Fargo was number one in Nilson’s annual ranking of the top 50 U.S.
debit card issuers, receiving the top ranking by both purchase
volume and number of transactions (April 2018)
Consumer Lending
- Originations of $50 billion, up
from $43 billion in prior quarter, primarily due to
seasonality
- Applications of $67 billion, up
from $58 billion in prior quarter, primarily due to
seasonality
- Application pipeline of
$26 billion at quarter end, up from $24 billion at March 31,
2018
- Production margin on residential
held-for-sale mortgage loan originations4 of 0.77 percent,
down from 0.94 percent in the prior quarter, due to increased price
competition
- Automobile originations of $4.4 billion
in the second quarter were flat compared with the prior quarter;
and down 3 percent from the 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
Jun 30, Mar 31,
Jun 30, (in millions)
2018
2018 2017 Total revenue
$
7,197 7,279 7,479 Reversal of provision for credit losses
(36 ) (20 ) (65 ) Noninterest expense
4,219
3,978 4,036 Segment net income
2,635 2,875 2,742 (in
billions) Average loans
464.7 465.1 466.9 Average assets
826.4 829.2 818.8 Average deposits
414.0 446.0 462.4
Wholesale Banking reported net income of $2.6 billion, down
$240 million, or 8 percent, from first quarter 2018. Revenue
of $7.2 billion decreased $82 million, or 1 percent, from
the prior quarter, primarily due to the gain on the sale of Wells
Fargo Shareowner Services recognized in the first quarter and lower
market sensitive revenue in the second quarter, partially offset by
higher net interest income and investment banking fees. Noninterest
expense increased $241 million, or 6 percent, from the prior
quarter reflecting higher operating losses and higher regulatory,
risk and technology expense, partially offset by seasonally lower
personnel expense. Second quarter 2018 operating losses were $208
million and included $171 million of non-litigation expense related
to our foreign exchange business. The provision for credit losses
decreased $16 million from the prior quarter.
Net income decreased $107 million, or 4 percent, from second
quarter 2017. Second quarter 2018 results benefited from a lower
effective income tax rate, while second quarter 2017 included a
discrete income tax benefit related to the sale of Wells Fargo
Insurance Services USA (WFIS). Revenue decreased $282 million,
or 4 percent, from second quarter 2017, primarily due to the
impact of the sales of WFIS in fourth quarter 2017 and Wells Fargo
Shareowner Services in first quarter 2018, as well as lower net
interest income, operating lease income and mortgage banking fees,
partially offset by higher market sensitive revenue. Noninterest
expense increased $183 million, or 5 percent, from a year
ago as higher operating losses and higher regulatory, risk and
technology expense were partially offset by lower expense related
to the sales of WFIS and Wells Fargo Shareowner Services. The
provision for credit losses increased $29 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
clients’ brokerage needs, supply retirement and trust services to
institutional clients and provide investment management
capabilities delivered to global institutional clients through
separate accounts and the Wells Fargo Funds.
Selected Financial Information
Quarter ended
Jun 30, Mar 31,
Jun 30, (in millions)
2018
2018 2017 Total revenue
$
3,951 4,242 4,226 Provision (reversal of provision) for
credit losses
(2 ) (6 ) 7 Noninterest expense
3,361 3,290 3,071 Segment net income
445 714 711 (in
billions) Average loans
74.7 73.9 71.7 Average assets
84.0 84.2 82.4 Average deposits
167.1
177.9 190.1
Wealth and Investment Management reported net income of
$445 million, down $269 million, or 38 percent, from
first quarter 2018. Revenue of $4.0 billion decreased
$291 million, or 7 percent, from the prior quarter, primarily
due to the impairment from the announced sale of WFAM's ownership
stake in RockCreek, as well as lower transaction revenue and
asset-based fees. Noninterest expense increased $71 million,
or 2 percent, from the prior quarter, primarily driven by higher
operating losses and higher regulatory, risk and technology
expense, partially offset by lower personnel expense from a
seasonally higher first quarter and lower broker commissions.
Second quarter 2018 operating losses were $127 million and included
$114 million of non-litigation expense related to fee calculations
within certain fiduciary and custody accounts in our wealth
management business.
Net income was down $266 million, or 37 percent, from second
quarter 2017. Second quarter 2018 results benefited from a lower
effective income tax rate. Revenue decreased $275 million from
a year ago, primarily driven by the impairment of WFAM's ownership
stake in RockCreek, lower net interest income and transaction
revenue, partially offset by higher asset-based fees. Noninterest
expense increased $290 million, or 9 percent, from a year ago,
primarily due to higher regulatory, risk and technology expense,
higher operating losses, higher broker commissions and other
personnel expense.
- WIM total client assets of $1.9
trillion, up 3 percent from a year ago, driven by higher market
valuations
- Continued loan growth, with average
balances up 4 percent from a year ago largely due to growth in
non-conforming mortgage loans
- Second quarter 2018 average closed
referred investment assets (referrals resulting from the
WIM/Community Banking partnership) were flat compared with the
prior quarter and down 5 percent from a year ago
Retail Brokerage
- Client assets of $1.6 trillion, up 3
percent from prior year
- Advisory assets of $543 billion, up 8
percent from prior year, primarily driven by higher market
valuations
Wealth Management
- Client assets of $238 billion, up 1
percent from prior year
Asset Management
- Total assets under management of $494
billion, up 2 percent from prior year, driven by higher market
valuations and positive money market net inflows, partially offset
by equity and fixed income net outflows
Retirement
- IRA assets of $403 billion, up 3
percent from prior year
- Institutional Retirement plan assets of
$389 billion, up 4 percent from prior year
Conference Call
The Company will host a live conference call on Friday, July 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~9092328.
A replay of the conference call will be available beginning at
10:00 a.m. PT (1:00 p.m. ET) on Friday, July 13 through Friday,
July 27. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406
(International) and enter Conference ID #9092328. 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~9092328.
End Notes
1 Tangible common equity is a non-GAAP financial measure and
represents total equity less preferred equity, noncontrolling
interests, and goodwill and certain identifiable intangible assets
(including goodwill and intangible assets associated with certain
of our nonmarketable equity securities but excluding mortgage
servicing rights), net of applicable deferred taxes. The
methodology of determining tangible common equity may differ among
companies. Management believes that return on average tangible
common equity, which utilizes tangible common equity, is a useful
financial measure because it enables investors and others to assess
the Company's use of equity. For additional information, including
a corresponding reconciliation to GAAP financial measures, see the
“Tangible Common Equity” tables on page 36.
2 Reserve build represents the amount by which the provision for
credit losses exceeds net charge-offs, while reserve release
represents the amount by which net charge-offs exceed the provision
for credit losses.
3 Market sensitive revenue represents net gains from trading
activities, debt securities, and equity securities.
4 Production margin represents net gains on residential mortgage
loan origination/sales activities divided by total residential
held-for-sale mortgage originations. See the Selected Five Quarter
Residential Mortgage Production Data table on page 42 for more
information.
5 See table on page 37 for more information on Common Equity
Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary
estimate and is calculated assuming the full phase-in of the Basel
III capital rules.
6 Customers who actively use their checking account with
transactions such as debit card purchases, online bill payments,
and direct deposit.
7 Data as of May 2018, comparisons with May 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, return
on equity, and return on tangible common equity; (xii) the
outcome of contingencies, such as legal proceedings; and
(xiii) the Company’s plans, objectives and strategies.
Forward-looking statements are not based on historical facts but
instead represent our current expectations and assumptions
regarding our business, the economy and other future conditions.
Because forward-looking statements relate to the future, they are
subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict. Our actual results may
differ materially from those contemplated by the forward-looking
statements. We caution you, therefore, against relying on any of
these forward-looking statements. They are neither statements of
historical fact nor guarantees or assurances of future performance.
While there is no assurance that any list of risks and
uncertainties or risk factors is complete, important factors that
could cause actual results to differ materially from those in the
forward-looking statements include the following, without
limitation:
- current and future economic and market
conditions, including the effects of declines in housing prices,
high unemployment rates, U.S. fiscal debt, budget and tax matters
(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;
- 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;
- resolution of regulatory matters,
litigation, or other legal actions, which may result in, among
other things, additional costs, fines, penalties, restrictions on
our business activities, reputational harm, or other adverse
consequences;
- a failure in or breach of our
operational or security systems or infrastructure, or those of our
third party vendors or other service providers, including as a
result of cyber attacks;
- the effect of changes in the level of
checking or savings account deposits on our funding costs and net
interest margin;
- fiscal and monetary policies of the
Federal Reserve Board; and
- the other risk factors and
uncertainties described under “Risk Factors” in our Annual Report
on Form 10-K for the year ended December 31, 2017.
In addition to the above factors, we also caution that the
amount and timing of any future common stock dividends or
repurchases will depend on the earnings, cash requirements and
financial condition of the Company, market conditions, capital
requirements (including under Basel capital standards), common
stock issuance requirements, applicable law and regulations
(including federal securities laws and federal banking
regulations), and other factors deemed relevant by the Company’s
Board of Directors, and may be subject to regulatory approval or
conditions.
For more information about factors that could cause actual
results to differ materially from our expectations, refer to our
reports filed with the Securities and Exchange Commission,
including the discussion under “Risk Factors” in our Annual Report
on Form 10-K for the year ended December 31, 2017, as
filed with the Securities and Exchange Commission and available on
its website at www.sec.gov.
Any forward-looking statement made by us speaks only as of the
date on which it is made. Factors or events that could cause our
actual results to differ may emerge from time to time, and it is
not possible for us to predict all of them. We undertake no
obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or
otherwise, except as may be required by law.
Forward-looking Non-GAAP Financial
Measures. From time to time management may discuss
forward-looking non-GAAP financial measures, such as
forward-looking estimates or targets for return on average tangible
common equity. We are unable to provide a reconciliation of
forward-looking non-GAAP financial measures to their most directly
comparable GAAP financial measures because we are unable to
provide, without unreasonable effort, a meaningful or accurate
calculation or estimation of amounts that would be necessary for
the reconciliation due to the complexity and inherent difficulty in
forecasting and quantifying future amounts or when they may occur.
Such unavailable information could be significant to future
results.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified,
community-based financial services company with $1.9 trillion
in assets. Wells Fargo’s vision is to satisfy our customers’
financial needs and help them succeed financially. Founded in 1852
and headquartered in San Francisco, Wells Fargo provides banking,
investments, mortgage, and consumer and commercial finance through
8,050 locations, 13,000 ATMs, the internet (wellsfargo.com) and
mobile banking, and has offices in 38 countries and territories to
support customers who conduct business in the global economy. With
approximately 265,000 team members, Wells Fargo serves one in three
households in the United States. Wells Fargo & Company was
ranked No. 26 on Fortune’s 2018 rankings of America’s largest
corporations.
Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA TABLE OF CONTENTS
Pages
Summary
Information
Summary Financial Data
17
Income
Consolidated Statement of Income 19 Consolidated Statement of
Comprehensive Income 21 Condensed Consolidated Statement of Changes
in Total Equity 21 Average Balances, Yields and Rates Paid
(Taxable-Equivalent Basis) 22 Five Quarter Average Balances, Yields
and Rates Paid (Taxable-Equivalent Basis) 24 Noninterest Income and
Noninterest Expense 25
Balance
Sheet
Consolidated Balance Sheet 27 Trading Activities 29 Debt Securities
29 Equity Securities 30
Loans
Loans 31 Nonperforming Assets 32 Loans 90 Days or More Past Due and
Still Accruing 32 Purchased Credit-Impaired Loans 33 Changes in
Allowance for Credit Losses 35
Equity
Tangible Common Equity 36 Common Equity Tier 1 Under Basel III 37
Operating
Segments
Operating Segment Results 38
Other
Mortgage Servicing and other related data 40
Wells Fargo & Company and
Subsidiaries
SUMMARY FINANCIAL DATA
% Change
Quarter ended
Jun 30, 2018 from
Six months ended ($ in millions, except per share
Jun 30,
Mar 31, Jun 30,
Mar 31,
Jun 30,
Jun 30, Jun 30, %
amounts)
2018 2018
2017 2018 2017
2018 2017 Change
For the
Period Wells Fargo net income
$ 5,186 5,136 5,856
1 % (11 )
$ 10,322 11,490 (10 )% Wells Fargo net
income applicable to common stock
4,792 4,733 5,450 1 (12 )
9,525 10,683 (11 ) Diluted earnings per common share
0.98 0.96 1.08 2 (9 )
1.94 2.11 (8 ) Profitability
ratios (annualized): Wells Fargo net income to average assets (ROA)
1.10 % 1.09 1.22 1 (10 )
1.10 % 1.20 (8
) Wells Fargo net income applicable to common stock to average
Wells Fargo common stockholders’ equity (ROE)
10.60 10.58
12.06 — (12 )
10.59 12.01 (12 ) Return on average tangible
common equity (ROTCE)(1)
12.62 12.62 14.41 — (12 )
12.62 14.38 (12 ) Efficiency ratio (2)
64.9 68.6 60.9
(5 ) 7
66.7 61.4 9 Total revenue
$ 21,553
21,934 22,235 (2 ) (3 )
$ 43,487 44,490 (2 ) Pre-tax
pre-provision profit (PTPP) (3)
7,571 6,892 8,694 10 (13 )
14,463 17,157 (16 ) Dividends declared per common share
0.39 0.39 0.38 — 3
0.78 0.760 3 Average common shares
outstanding
4,865.8 4,885.7 4,989.9 — (2 )
4,875.7
4,999.2 (2 ) Diluted average common shares outstanding
4,899.8 4,930.7 5,037.7 (1 ) (3 )
4,916.1 5,054.8 (3
) Average loans
$ 944,079 951,024 956,879 (1 ) (1 )
$ 947,532 960,243 (1 ) Average assets
1,884,884 1,915,896 1,927,021 (2 ) (2 )
1,900,304
1,929,020 (1 ) Average total deposits
1,271,339 1,297,178
1,301,195 (2 ) (2 )
1,284,187 1,300,198 (1 ) Average
consumer and small business banking deposits (4)
754,047
755,483 760,149 — (1 )
754,898 759,455 (1 ) Net interest
margin
2.93 % 2.84 2.90 3 1
2.89 % 2.89
—
At Period End Debt securities (5)
$ 475,495
472,968 462,890 1 3
$ 475,495 462,890 3 Loans
944,265 947,308 957,423 — (1 )
944,265 957,423 (1 )
Allowance for loan losses
10,193 10,373 11,073 (2 ) (8 )
10,193 11,073 (8 ) Goodwill
26,429 26,445 26,573 — (1
)
26,429 26,573 (1 ) Equity securities (5)
57,505
58,935 55,742 (2 ) 3
57,505 55,742 3 Assets
1,879,700
1,915,388 1,930,792 (2 ) (3 )
1,879,700 1,930,792 (3 )
Deposits
1,268,864 1,303,689 1,305,830 (3 ) (3 )
1,268,864 1,305,830 (3 ) Common stockholders' equity
181,386 181,150 181,233 — —
181,386 181,233 — Wells
Fargo stockholders’ equity
205,188 204,952 205,034 — —
205,188 205,034 — Total equity
206,069 205,910
205,949 — —
206,069 205,949 — Tangible common equity (1)
152,580 151,878 151,868 — —
152,580 151,868 — Common
shares outstanding
4,849.1 4,873.9 4,966.8 (1 ) (2 )
4,849.1 4,966.8 (2 ) Book value per common share (6)
$ 37.41 37.17 36.49 1 3
$ 37.41 36.49 3
Tangible book value per common share (1)(6)
31.47 31.16
30.58 1 3
31.47 30.58 3 Common stock price: High
57.12 66.31 56.60 (14 ) 1
66.31 59.99 11 Low
50.26 50.70 50.84 (1 ) (1 )
50.26 50.84 (1 ) Period
end
55.44 52.41 55.41 6 —
55.44 55.41 — Team members
(active, full-time equivalent)
264,500
265,700 270,600
— (2 )
264,500
270,600 (2 )
(1) Tangible common equity is a non-GAAP
financial measure and represents total equity less preferred
equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible
assets associated with certain of our nonmarketable equity
securities but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible
common equity may differ among companies. Management believes that
return on average tangible common equity and tangible book value
per common share, which utilize tangible common equity, are useful
financial measures because they enable investors and others to
assess the Company's use of equity. For additional information,
including a corresponding reconciliation to GAAP financial
measures, see the "Tangible Common Equity" tables on page 36.
(2) The efficiency ratio is noninterest
expense divided by total revenue (net interest income and
noninterest income).
(3) Pre-tax pre-provision profit (PTPP) is
total revenue less noninterest expense. Management believes that
PTPP is a useful financial measure because it enables investors and
others to assess the Company’s ability to generate capital to cover
credit losses through a credit cycle.
(4) Consumer and small business banking
deposits are total deposits excluding mortgage escrow and wholesale
deposits.
(5) Financial information for the prior
periods of 2017 has been revised to reflect the impact of the
adoption in first quarter 2018 of Accounting Standards Update (ASU)
2016-01 – Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities.
(6) Book value per common share is common
stockholders' equity divided by common shares outstanding. Tangible
book value per common share is tangible common equity divided by
common shares outstanding.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA Quarter
ended
Jun 30, Mar 31, Dec 31,
Sep 30, Jun 30, ($ in millions, except per
share amounts)
2018 2018
2017 2017 2017
For the Quarter
Wells Fargo net income
$ 5,186 5,136 6,151 4,542
5,856 Wells Fargo net income applicable to common stock
4,792 4,733 5,740 4,131 5,450 Diluted earnings per common
share
0.98 0.96 1.16 0.83 1.08 Profitability ratios
(annualized) : Wells Fargo net income to average assets (ROA)
1.10 % 1.09 1.26 0.93 1.22 Wells Fargo net income
applicable to common stock to average Wells Fargo common
stockholders’ equity (ROE)
10.60 10.58 12.47 8.96 12.06
Return on average tangible common equity (ROTCE)(1)
12.62
12.62 14.85 10.66 14.41 Efficiency ratio (2)
64.9 68.6 76.2
65.7 60.9 Total revenue
$ 21,553 21,934 22,050 21,849
22,235 Pre-tax pre-provision profit (PTPP) (3)
7,571 6,892
5,250 7,498 8,694 Dividends declared per common share
0.39
0.39 0.39 0.39 0.38 Average common shares outstanding
4,865.8 4,885.7 4,912.5 4,948.6 4,989.9 Diluted average
common shares outstanding
4,899.8 4,930.7 4,963.1 4,996.8
5,037.7 Average loans
$ 944,079 951,024 951,822
952,343 956,879 Average assets
1,884,884 1,915,896 1,935,318
1,938,461 1,927,021 Average total deposits
1,271,339
1,297,178 1,311,592 1,306,356 1,301,195 Average consumer and small
business banking deposits (4)
754,047 755,483 757,541
755,094 760,149 Net interest margin
2.93 % 2.84 2.84
2.86 2.90
At Quarter End Debt securities (5)
$
475,495 472,968 473,366 474,710 462,890 Loans
944,265
947,308 956,770 951,873 957,423 Allowance for loan losses
10,193 10,373 11,004 11,078 11,073 Goodwill
26,429
26,445 26,587 26,581 26,573 Equity securities (5)
57,505
58,935 62,497 54,981 55,742 Assets
1,879,700 1,915,388
1,951,757 1,934,880 1,930,792 Deposits
1,268,864 1,303,689
1,335,991 1,306,706 1,305,830 Common stockholders' equity
181,386 181,150 183,134 181,920 181,233 Wells Fargo
stockholders’ equity
205,188 204,952 206,936 205,722 205,034
Total equity
206,069 205,910 208,079 206,617 205,949
Tangible common equity (1)
152,580 151,878 153,730 152,694
151,868 Common shares outstanding
4,849.1 4,873.9 4,891.6
4,927.9 4,966.8 Book value per common share (6)
$
37.41 37.17 37.44 36.92 36.49 Tangible book value per common
share (1)(6)
31.47 31.16 31.43 30.99 30.58 Common stock
price: High
57.12 66.31 62.24 56.45 56.60 Low
50.26
50.70 52.84 49.28 50.84 Period end
55.44 52.41 60.67 55.15
55.41 Team members (active, full-time equivalent)
264,500 265,700
262,700 268,000 270,600
(1) Tangible common equity is a non-GAAP
financial measure and represents total equity less preferred
equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible
assets associated with certain of our nonmarketable equity
securities but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible
common equity may differ among companies. Management believes that
return on average tangible common equity and tangible book value
per common share, which utilize tangible common equity, are useful
financial measures because they enable investors and others to
assess the Company's use of equity. For additional information,
including a corresponding reconciliation to GAAP financial
measures, see the "Tangible Common Equity" tables on page 36.
(2) The efficiency ratio is noninterest
expense divided by total revenue (net interest income and
noninterest income).
(3) Pre-tax pre-provision profit (PTPP) is
total revenue less noninterest expense. Management believes that
PTPP is a useful financial measure because it enables investors and
others to assess the Company’s ability to generate capital to cover
credit losses through a credit cycle.
(4) Consumer and small business banking
deposits are total deposits excluding mortgage escrow and wholesale
deposits.
(5) Financial information for the prior
quarters of 2017 has been revised to reflect the impact of the
adoption in first quarter 2018 of ASU 2016-01 – Financial
Instruments – Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities.
(6) Book value per common share is common
stockholders' equity divided by common shares outstanding. Tangible
book value per common share is tangible common equity divided by
common shares outstanding.
Wells Fargo & Company and
Subsidiaries
CONSOLIDATED STATEMENT OF INCOME Quarter ended
June 30, % Six months ended June 30,
% (in millions, except per share amounts)
2018 2017 Change
2018 2017 Change
Interest income Debt securities
(1)
$ 3,594 3,226 11 %
$ 7,008 6,399 10
% Mortgages held for sale
198 191 4
377 373 1 Loans
held for sale (1)
48 13 269
72 23 213 Loans
10,912 10,358 5
21,491 20,499 5 Equity securities (1)
221 199 11
452 374 21 Other interest income (1)
1,042 707 47
1,962 1,239 58
Total interest income
16,015
14,694 9
31,362
28,907 8
Interest expense Deposits
1,268 677 87
2,358 1,213 94 Short-term borrowings
398 163 144
709 277 156 Long-term debt
1,658
1,275 30
3,234 2,422 34 Other interest expense
150 108 39
282 200 41 Total interest
expense
3,474 2,223
56
6,583 4,112
60
Net interest income 12,541 12,471 1
24,779 24,795 — Provision for credit losses
452 555 (19 )
643 1,160 (45 ) Net interest
income after provision for credit losses
12,089 11,916 1
24,136 23,635 2
Noninterest
income Service charges on deposit accounts
1,163 1,276
(9 )
2,336 2,589 (10 ) Trust and investment fees
3,675 3,629 1
7,358 7,199 2 Card fees
1,001
1,019 (2 )
1,909 1,964 (3 ) Other fees
846 902 (6 )
1,646 1,767 (7 ) Mortgage banking
770 1,148 (33 )
1,704 2,376 (28 ) Insurance
102 280 (64 )
216
557 (61 ) Net gains from trading activities (1)
191 151 26
434 423 3 Net gains on debt securities
41 120 (66 )
42 156 (73 ) Net gains from equity securities (1)
295
274 8
1,078 844 28 Lease income
443 493 (10 )
898 974 (8 ) Other
485
472 3
1,087
846 28 Total noninterest income
9,012
9,764 (8 )
18,708
19,695 (5 )
Noninterest expense
Salaries
4,465 4,343 3
8,828 8,604 3 Commission and
incentive compensation
2,642 2,499 6
5,410 5,224 4
Employee benefits
1,245 1,308 (5 )
2,843 2,994 (5 )
Equipment
550 529 4
1,167 1,106 6 Net occupancy
722 706 2
1,435 1,418 1 Core deposit and other
intangibles
265 287 (8 )
530 576 (8 ) FDIC and other
deposit assessments
297 328 (9 )
621 661 (6 ) Other
3,796 3,541 7
8,190 6,750 21
Total noninterest expense
13,982
13,541 3
29,024
27,333 6
Income before income tax expense
7,119 8,139 (13 )
13,820 15,997 (14 ) Income tax
expense
1,810 2,245
(19 )
3,184 4,378
(27 )
Net income before noncontrolling interests
5,309 5,894 (10 )
10,636 11,619 (8 ) Less: Net income
from noncontrolling interests
123
38 224
314
129 143
Wells Fargo net income
$ 5,186 5,856 (11 )
$ 10,322 11,490
(10 ) Less: Preferred stock dividends and other
394 406 (3 )
797 807 (1 )
Wells
Fargo net income applicable to common stock
$ 4,792 5,450 (12 )
$ 9,525 10,683
(11 )
Per share information Earnings per common share
$ 0.98 1.09 (10 )
$ 1.95 2.14 (9 )
Diluted earnings per common share
0.98 1.08 (9 )
1.94
2.11 (8 ) Dividends declared per common share
0.39 0.38 3
0.78 0.76 3
Average common shares outstanding
4,865.8 4,989.9 (2 )
4,875.7 4,999.2 (2 )
Diluted
average common shares outstanding 4,899.8
5,037.7 (3 )
4,916.1 5,054.8
(3 )
(1) Financial information for the prior
periods of 2017 has been revised to reflect the impact of the
adoption in first quarter 2018 of ASU 2016-01 – Financial
Instruments – Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter ended
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30, (in millions,
except per share amounts)
2018
2018 2017 2017 2017
Interest income Debt securities (1)
$ 3,594
3,414 3,294 3,253 3,226 Mortgages held for sale
198 179 196
217 191 Loans held for sale (1)
48 24 12 15 13 Loans
10,912 10,579 10,367 10,522 10,358 Equity securities (1)
221 231 239 186 199 Other interest income (1)
1,042 920 850
851 707 Total interest
income
16,015 15,347
14,958 15,044
14,694
Interest expense Deposits
1,268
1,090 931 869 677 Short-term borrowings
398 311 255 226 163
Long-term debt
1,658 1,576 1,344 1,391 1,275 Other interest
expense
150 132
115 109 108
Total interest expense
3,474
3,109 2,645 2,595
2,223
Net interest income 12,541
12,238 12,313 12,449 12,471 Provision for credit losses
452 191 651
717 555 Net interest
income after provision for credit losses
12,089 12,047
11,662 11,732 11,916
Noninterest income Service charges on deposit accounts
1,163 1,173 1,246 1,276 1,276 Trust and investment fees
3,675 3,683 3,687 3,609 3,629 Card fees
1,001 908 996
1,000 1,019 Other fees
846 800 913 877 902 Mortgage banking
770 934 928 1,046 1,148 Insurance
102 114 223 269 280
Net gains (losses) from trading activities (1)
191 243 (1 )
120 151 Net gains on debt securities
41 1 157 166 120 Net
gains from equity securities (1)
295 783 572 363 274 Lease
income
443 455 458 475 493 Other
485
602 558
199 472 Total noninterest income
9,012 9,696
9,737 9,400 9,764
Noninterest expense Salaries
4,465 4,363 4,403 4,356
4,343 Commission and incentive compensation
2,642 2,768
2,665 2,553 2,499 Employee benefits
1,245 1,598 1,293 1,279
1,308 Equipment
550 617 608 523 529 Net occupancy
722
713 715 716 706 Core deposit and other intangibles
265 265
288 288 287 FDIC and other deposit assessments
297 324 312
314 328 Other
3,796 4,394
6,516 4,322
3,541 Total noninterest expense
13,982
15,042 16,800
14,351 13,541
Income before
income tax expense 7,119 6,701 4,599 6,781 8,139 Income
tax expense (benefit)
1,810
1,374 (1,642 ) 2,181
2,245
Net income before noncontrolling
interests 5,309 5,327 6,241 4,600 5,894 Less: Net income
from noncontrolling interests
123
191 90 58
38
Wells Fargo net income
$ 5,186 5,136
6,151 4,542 5,856
Less: Preferred stock dividends and other
394
403 411
411 406
Wells Fargo net income
applicable to common stock $ 4,792
4,733 5,740
4,131 5,450
Per share
information Earnings per common share
$ 0.98 0.97
1.17 0.83 1.09 Diluted earnings per common share
0.98 0.96
1.16 0.83 1.08 Dividends declared per common share
0.39 0.39
0.39 0.39 0.38
Average common shares outstanding
4,865.8 4,885.7 4,912.5 4,948.6 4,989.9
Diluted average
common shares outstanding 4,899.8
4,930.7 4,963.1
4,996.8 5,037.7
(1) Financial information for the prior
quarters of 2017 has been revised to reflect the impact of the
adoption in first quarter 2018 of ASU 2016-01 – Financial
Instruments – Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities.
Wells Fargo & Company and
Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarter ended June 30, % Six months
ended June 30, % (in millions)
2018 2017 Change
2018 2017 Change Wells Fargo net
income
$ 5,186
5,856 (11)%
$ 10,322
11,490 (10)% Other comprehensive income (loss), before tax:
Debt securities (1): Net unrealized gains
(losses) arising during the period
(617 ) 1,565 NM
(4,060 ) 1,934 NM Reclassification of net (gains)
losses to net income
49 (177 ) NM
117 (322 ) NM
Derivatives and hedging activities: Net unrealized gains (losses)
arising during the period
(150 ) 276 NM
(392
) (86 ) 356 Reclassification of net (gains) losses to net
income
77 (153 ) NM
137 (355 ) 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
29 41 (29)
61 79 (23) Foreign currency
translation adjustments: Net unrealized gains (losses) arising
during the period
(83 )
31 NM
(85 ) 47 NM
Other comprehensive income (loss), before tax (695
) 1,583 NM
(4,216 ) 1,290 NM
Income tax benefit (expense) related to
other comprehensive income
154 (587 ) NM
1,016 (464 ) NM
Other comprehensive
income (loss), net of tax (541 ) 996 NM
(3,200 ) 826 NM Less: Other comprehensive income
(loss) from noncontrolling interests
(1
) (9 ) (89)
(1 ) 5
NM
Wells Fargo other comprehensive income (loss), net of
tax (540 ) 1,005
NM
(3,199 ) 821 NM
Wells Fargo comprehensive income 4,646 6,861 (32)
7,123 12,311 (42) Comprehensive income from noncontrolling
interests
122 29
321
313 134 134
Total
comprehensive income $ 4,768
6,890 (31)
$ 7,436 12,445
(40)
NM – Not meaningful
(1) The quarter and six months ended June
30, 2017, includes net unrealized gains (losses) arising during the
period from equity securities of $65 million and $126 million and
reclassification of net (gains) losses to net income related to
equity securities of $(101) million and $(217) million,
respectively. With the adoption in first quarter 2018 of ASU
2016-01, the quarter and six months ended June 30, 2018, reflects
net unrealized (gains) losses arising during the period and
reclassification of net (gains) losses to net income from only debt
securities.
FIVE QUARTER CONDENSED CONSOLIDATED
STATEMENT OF CHANGES IN TOTAL EQUITY
Quarter ended
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30,
(in millions)
2018 2018
2017 2017 2017
Balance,
beginning of period $ 205,910 208,079 206,617
205,949 202,310 Cumulative effect from change in accounting
policies (1)
— (24 ) — — — Wells Fargo net income
5,186 5,136 6,151 4,542 5,856 Wells Fargo other
comprehensive income (loss), net of tax
(540 ) (2,659
) (522 ) 526 1,005 Noncontrolling interests
(77 )
(178 ) 247 (20 ) (75 ) Common stock issued
73 1,208 436 254
252 Common stock repurchased (2)
(2,923 ) (3,029 )
(2,845 ) (2,601 ) (2,287 ) Preferred stock released by ESOP
490 231 218 209 406 Common stock warrants
repurchased/exercised
(1 ) (157 ) (46 ) (19 ) (24 )
Preferred stock issued
— — — — 677 Common stock dividends
(1,900 ) (1,911 ) (1,920 ) (1,936 ) (1,899 )
Preferred stock dividends
(394 ) (410 ) (411 ) (411 )
(406 ) Stock incentive compensation expense
258 437 206 135
145 Net change in deferred compensation and related plans
(13 ) (813 ) (52 )
(11 ) (11 )
Balance, end of
period $ 206,069
205,910 208,079
206,617 205,949
(1) The cumulative effect for the quarter
ended March 31, 2018, reflects the impact of the adoption in first
quarter 2018 of ASU 2016-04, ASU 2016-01 and ASU 2014-09.
(2) For the quarter ended June 30, 2018,
includes $1.0 billion related to a private forward repurchase
transaction expected to settle in third quarter 2018.
Wells Fargo & Company and
Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT
BASIS) (1)(2) Quarter ended June 30,
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)
$ 154,846 1.75 % $
676 204,541 1.03 % $ 523 Federal funds sold and securities
purchased under resale agreements (3)
80,020 1.73
344 77,078 0.91 175 Debt securities (4): Trading debt
securities (8)
80,661 3.45 695 70,411 3.24 570
Available-for-sale debt securities: Securities of U.S. Treasury and
federal agencies
6,425 1.66 27 18,099 1.53 69
Securities of U.S. states and political subdivisions (7)
47,388 3.91 464 53,492 3.89 521
Mortgage-backed securities: Federal agencies
154,929
2.75 1,065 132,032 2.63 868 Residential and
commercial
8,248 4.86 101
12,586 5.55 175 Total mortgage-backed securities
163,177 2.86 1,166 144,618 2.89 1,043 Other
debt securities (8)
47,009 4.33
506 48,466 3.77 457 Total available-for-sale
debt securities (7)(8)
263,999
3.28 2,163 264,675 3.16 2,090
Held-to-maturity debt securities: Securities of U.S. Treasury and
federal agencies
44,731 2.19 244 44,701 2.19
244 Securities of U.S. states and political subdivisions
6,255 4.34 68 6,270 5.29 83 Federal agency and
other mortgage-backed securities
94,964 2.33
552 83,116 2.44 507 Other debt securities
584 4.66 7 2,798 2.34 16
Total held-to-maturity debt securities
146,534
2.38 871 136,885 2.49 850 Total
debt securities (7)(8)
491,194 3.04 3,729
471,971 2.98 3,510 Mortgages held for sale (5)(7)
18,788
4.22 198 19,758 3.87 191 Loans held for sale (5)(8)
3,481 5.48 48 1,476 3.65 13 Commercial loans:
Commercial and industrial - U.S.
275,259 4.16
2,851 273,073 3.70 2,521 Commercial and industrial - Non
U.S.
59,716 3.51 524 56,426 2.86 402 Real
estate mortgage
123,982 4.27 1,319 131,293
3.68 1,206 Real estate construction
23,637 4.88
287 25,271 4.10 259 Lease financing
19,266 4.48 216 19,058
4.82 230 Total commercial loans
501,860
4.15 5,197 505,121 3.67 4,618 Consumer
loans: Real estate 1-4 family first mortgage
283,101
4.06 2,870 275,108 4.08 2,805 Real estate 1-4 family
junior lien mortgage
37,249 5.32 495 43,602
4.78 521 Credit card
35,883 12.66 1,133 34,868
12.18 1,059 Automobile
48,568 5.18 628 59,112
5.43 800 Other revolving credit and installment
37,418 6.62 617 39,068
6.13 596 Total consumer loans
442,219
5.20 5,743 451,758 5.13 5,781 Total
loans (5)
944,079 4.64 10,940 956,879 4.36
10,399 Equity securities (8)
37,330 2.38 222
36,604 2.24 205 Other (8)
5,518
1.48 21 4,400 0.70 8 Total earning
assets (7)(8)
$ 1,735,256
3.73 % $ 16,178 1,772,707
3.40 % $ 15,024
Funding sources Deposits: Interest-bearing
checking
$ 80,324 0.90 % $
181 48,465 0.41 % $ 50 Market rate and other savings
676,668 0.26 434 683,014 0.13 214 Savings
certificates
20,033 0.43 21 22,599 0.30 17
Other time deposits (7)
82,061 2.26 465 57,158
1.39 197 Deposits in foreign offices
51,474
1.30 167 123,684 0.65 199 Total
interest-bearing deposits (7)
910,560 0.56
1,268 934,920 0.29 677 Short-term borrowings
103,795
1.54 398 95,763 0.69 164 Long-term debt (7)
223,800 2.97 1,658 249,889 2.04 1,274 Other
liabilities
28,202 2.12
150 20,981 2.05 108 Total interest-bearing
liabilities (7)
1,266,357 1.10 3,474 1,301,553
0.68 2,223 Portion of noninterest-bearing funding sources (7)(8)
468,899 — —
471,154 — — Total funding sources (7)(8)
$ 1,735,256 0.80 3,474
1,772,707 0.50 2,223
Net interest margin
and net interest income on a taxable-equivalent basis (6)(7)
2.93 % $ 12,704
2.90 % $ 12,801
Noninterest-earning assets
Cash and due from banks
$ 18,609 18,171 Goodwill
26,444 26,664 Other (7)(8)
104,575
109,479 Total noninterest-earning assets (7)(8)
$ 149,628 154,314
Noninterest-bearing funding sources Deposits
$
360,779 366,275 Other liabilities (7)
51,681 53,438
Total equity (7)
206,067 205,755 Noninterest-bearing funding
sources used to fund earning assets (7)(8)
(468,899 ) (471,154 ) Net noninterest-bearing funding
sources (7)(8)
$ 149,628 154,314
Total assets (7) $
1,884,884 1,927,021
(1) Our average prime rate was 4.80% and
4.05% for the quarters ended June 30, 2018 and 2017, respectively.
The average three-month London Interbank Offered Rate (LIBOR) was
2.34% and 1.21% for the same quarters, respectively.
(2) Yields/rates and amounts include the
effects of hedge and risk management activities associated with the
respective asset and liability categories.
(3) Financial information for the prior
period has been revised to reflect the impact of the adoption in
first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic
230): Restricted Cash in which we changed the presentation of our
cash and cash equivalents to include both cash and due from banks
as well as interest-earning deposits with banks, which are
inclusive of any restricted cash.
(4) Yields and rates are based on interest
income/expense amounts for the period, annualized based on the
accrual basis for the respective accounts. The average balance
amounts represent amortized cost for the periods presented.
(5) Nonaccrual loans and related income
are included in their respective loan categories.
(6) Includes taxable-equivalent
adjustments of $163 million and $330 million for the quarters ended
June 30, 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 June 30,
2018 and 2017, respectively.
(7) Financial information for the prior
period 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
period has been revised to reflect the impact of the adoption in
first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall
(Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities.
Wells Fargo & Company and
Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT
BASIS) (1)(2) Six months ended June 30,
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)
$ 163,520 1.61
% $ 1,308 206,503 0.91 % $ 928 Federal funds
sold and securities purchased under resale agreements (3)
79,083 1.57 615 76,184 0.80 302 Debt
securities (4): Trading debt securities (8)
79,693
3.35 1,332 69,769 3.14 1,093 Available-for-sale debt
securities: Securities of U.S. Treasury and federal agencies
6,426 1.66 53 21,547 1.53 164 Securities of
U.S. states and political subdivisions (7)
48,665
3.64 885 52,873 3.91 1,034 Mortgage-backed
securities: Federal agencies
156,690 2.73
2,141 144,257 2.61 1,879 Residential and commercial (7)
8,558 4.48 192
13,514 5.44 368 Total mortgage-backed securities (7)
165,248 2.82 2,333 157,771 2.85 2,247 Other
debt securities (7)(8)
47,549
4.02 950 49,303 3.69 904 Total
available-for-sale debt securities (7)(8)
267,888 3.16 4,221 281,494
3.09 4,349 Held-to-maturity debt securities: Securities of
U.S. Treasury and federal agencies
44,727 2.20
487 44,697 2.20 487 Securities of U.S. states and political
subdivisions
6,257 4.34 136 6,271 5.30 166
Federal agency and other mortgage-backed securities
92,888
2.35 1,093 67,538 2.46 831 Other debt securities
639 3.89 12 3,062
2.34 35 Total held-to-maturity debt securities
144,511 2.40 1,728 121,568
2.51 1,519 Total debt securities (7)(8)
492,092
2.96 7,281 472,831 2.95 6,961 Mortgages held for sale
(5)(7)
18,598 4.06 377 19,825 3.77 373 Loans
held for sale (5)(8)
2,750 5.28 72 1,538 3.05
23 Commercial loans: Commercial and industrial - U.S.
273,658 4.00 5,435 273,905 3.65 4,957
Commercial and industrial - Non U.S.
59,964 3.37
1,003 55,890 2.80 775 Real estate mortgage
125,085
4.16 2,581 131,868 3.62 2,370 Real estate
construction
24,041 4.70 561 24,933 3.91 484
Lease financing
19,266 4.89
471 19,064 4.88 465 Total commercial loans
502,014 4.03 10,051
505,660 3.61 9,051 Consumer loans: Real estate 1-4
family first mortgage
283,651 4.04 5,722
275,293 4.05 5,571 Real estate 1-4 family junior lien mortgage
38,042 5.23 988 44,439 4.69 1,036 Credit card
36,174 12.71 2,280 35,151 12.07 2,105
Automobile
50,010 5.17 1,283 60,304 5.45 1,628
Other revolving credit and installment
37,641
6.54 1,221 39,396 6.07 1,186
Total consumer loans
445,518
5.18 11,494 454,583 5.09 11,526 Total
loans (5)
947,532 4.57 21,545 960,243 4.31
20,577 Equity securities (8)
38,536 2.37 455
35,272 2.18 384 Other (8)
5,765
1.34 40 2,213 0.70 8 Total earning
assets (7)(8)
$ 1,747,876
3.64 % $ 31,693 1,774,609
3.36 % $ 29,556
Funding sources Deposits: Interest-bearing
checking
$ 74,084 0.84 % $
310 49,569 0.35 % $ 87 Market rate and other savings
677,861 0.24 802 683,591 0.11 371 Savings
certificates
20,025 0.38 38 23,030 0.29 34
Other time deposits (7)
79,340 2.06 812 56,043
1.34 374 Deposits in foreign offices
73,023
1.09 396 122,946 0.57 347
Total interest-bearing deposits (7)
924,333 0.51 2,358 935,179 0.26 1,213
Short-term borrowings
102,793 1.39 710 97,149
0.58 279 Long-term debt (7)
224,924 2.88 3,234
254,981 1.90 2,421 Other liabilities
28,065
2.02 282 18,905 2.12 200 Total
interest-bearing liabilities (7)
1,280,115 1.03
6,584 1,306,214 0.63 4,113 Portion of noninterest-bearing
funding sources (7)(8)
467,761 —
— 468,395 — — Total funding sources (7)(8)
$ 1,747,876 0.75
6,584 1,774,609 0.47 4,113
Net
interest margin and net interest income on a taxable-equivalent
basis (6)(7) 2.89 % $
25,109 2.89 % $ 25,443
Noninterest-earning assets Cash and due from banks
$
18,730 18,437 Goodwill
26,480 26,668 Other (7)(8)
107,218 109,306 Total
noninterest-earning assets (7)(8)
$
152,428 154,411
Noninterest-bearing funding
sources Deposits
$ 359,854 365,019 Other
liabilities (7)
54,212 54,119 Total equity (7)
206,123 203,668 Noninterest-bearing funding sources used to
fund earning assets (7)(8)
(467,761 )
(468,395 ) Net noninterest-bearing funding sources (7)(8)
$ 152,428 154,411
Total
assets (7) $ 1,900,304
1,929,020
(1) Our average prime rate was 4.66% and
3.92% for the first half of 2018 and 2017, respectively. The
average three-month London Interbank Offered Rate (LIBOR) was 2.13%
and 1.14% for the same periods, respectively.
(2) Yields/rates and amounts include the
effects of hedge and risk management activities associated with the
respective asset and liability categories.
(3) Financial information for the prior
period has been revised to reflect the impact of the adoption in
first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic
230): Restricted Cash in which we changed the presentation of our
cash and cash equivalents to include both cash and due from banks
as well as interest-earning deposits with banks, which are
inclusive of any restricted cash.
(4) Yields and rates are based on interest
income/expense amounts for the period, 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 $330 million and $648 million for the first half of
2018 and 2017, respectively, predominantly related to tax-exempt
income on certain loans and securities. The federal statutory tax
rate was 21% and 35% for the first half of 2018 and 2017,
respectively.
(7) Financial information for the prior
period has been revised to reflect the impact of the adoption in
fourth quarter 2017 of ASU 2017-12 – Derivatives and Hedging (Topic
815): Targeted Improvements to Accounting for Hedging
Activities.
(8) Financial information for the prior
period has been revised to reflect the impact of the adoption in
first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall
(Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID
(TAXABLE-EQUIVALENT BASIS) (1)(2) Quarter ended
Jun 30, 2018 Mar 31, 2018
Dec 31, 2017 Sep 30, 2017
Jun 30, 2017
Average Yields/
Average Yields/ Average
Yields/ Average Yields/
Average Yields/ ($ in billions)
balance rates balance
rates balance rates
balance rates balance
rates
Earning assets Interest-earning deposits
with banks (3)
$ 154.8 1.75 % $ 172.3
1.49 % $ 189.1 1.27 % $ 205.5 1.21 % $ 204.5 1.03 % Federal funds
sold and securities purchased under resale agreements (3)
80.0 1.73 78.1 1.40 75.8 1.20 70.6 1.14 77.1 0.91
Debt securities (4): Trading debt securities (5)
80.7
3.45 78.7 3.24 81.6 3.17 76.6 3.21 70.4 3.24
Available-for-sale debt securities: Securities of U.S. Treasury and
federal agencies
6.4 1.66 6.4 1.66 6.4 1.66 14.5 1.31
18.1 1.53 Securities of U.S. states and political subdivisions
47.4 3.91 50.0 3.37 52.4 3.91 52.5 4.08 53.5 3.89
Mortgage-backed securities: Federal agencies
154.9
2.75 158.4 2.72 152.9 2.62 139.8 2.58 132.0 2.63 Residential
and commercial
8.2 4.86 8.9
4.12 9.4 4.85 11.0 5.44 12.6 5.55 Total
mortgage-backed securities
163.1 2.86 167.3 2.79
162.3 2.75 150.8 2.79 144.6 2.89 Other debt securities (5)
47.1 4.33 48.1 3.73 48.6
3.62 47.7 3.73 48.5 3.77 Total available-for-sale
debt securities (5)
264.0 3.28
271.8 3.04 269.7 3.10 265.5 3.13 264.7
3.16 Held-to-maturity debt securities: Securities of U.S. Treasury
and federal agencies
44.7 2.19 44.7 2.20 44.7 2.19
44.7 2.18 44.7 2.19 Securities of U.S. states and political
subdivisions
6.3 4.34 6.3 4.34 6.3 5.26 6.3 5.44 6.3
5.29 Federal agency and other mortgage-backed securities
94.9 2.33 90.8 2.38 89.6 2.25 88.3 2.26 83.1 2.44
Other debt securities
0.6 4.66
0.7 3.23 1.2 2.64 1.4 3.05 2.8 2.34
Total held-to-maturity debt securities
146.5
2.38 142.5 2.42 141.8 2.36 140.7
2.38 136.9 2.49 Total debt securities (5)
491.2
3.04 493.0 2.89 493.1 2.90 482.8 2.93 472.0 2.98 Mortgages
held for sale
18.8 4.22 18.4 3.89 20.5 3.82 22.9 3.79
19.8 3.87 Loans held for sale (5)
3.5 5.48 2.0 4.92
1.5 3.19 1.4 4.39 1.5 3.65 Commercial loans: Commercial and
industrial - U.S.
275.3 4.16 272.0 3.85 270.3 3.89
270.1 3.81 273.1 3.70 Commercial and industrial - Non U.S.
59.7 3.51 60.2 3.23 59.2 2.96 57.7 2.89 56.4 2.86
Real estate mortgage
124.0 4.27 126.2 4.05 127.2 3.88
129.1 3.83 131.3 3.68 Real estate construction
23.6
4.88 24.4 4.54 24.4 4.38 25.0 4.18 25.3 4.10 Lease financing
19.3 4.48 19.4 5.30 19.3
0.62 19.2 4.59 19.0 4.82 Total commercial
loans
501.9 4.15 502.2
3.91 500.4 3.68 501.1 3.76 505.1 3.67 Consumer
loans: Real estate 1-4 family first mortgage
283.1
4.06 284.2 4.02 282.0 4.01 278.4 4.03 275.1 4.08 Real estate
1-4 family junior lien mortgage
37.2 5.32 38.8 5.13
40.4 4.96 41.9 4.95 43.6 4.78 Credit card
35.9 12.66
36.4 12.75 36.4 12.37 35.6 12.41 34.9 12.18 Automobile
48.6
5.18 51.5 5.16 54.3 5.13 56.7 5.34 59.1 5.43 Other revolving
credit and installment
37.4 6.62
37.9 6.46 38.3 6.28 38.6 6.31 39.1 6.13
Total consumer loans
442.2 5.20
448.8 5.16 451.4 5.10 451.2 5.14 451.8
5.13 Total loans
944.1 4.64 951.0 4.50 951.8 4.35
952.3 4.41 956.9 4.36 Equity securities (5)
37.3 2.38
39.8 2.35 38.0 2.60 35.9 2.12 36.6 2.24 Other (5)
5.6 1.48 6.0 1.21 7.2 0.88 8.7
0.90 4.3 0.70 Total earning assets (5)
$ 1,735.3 3.73 % $ 1,760.6
3.55 % $ 1,777.0 3.43 % $ 1,780.1 3.44 % $
1,772.7 3.40 %
Funding sources Deposits:
Interest-bearing checking
$ 80.3 0.90 %
$ 67.8 0.77 % $ 50.5 0.68 % $ 48.3 0.57 % $ 48.5 0.41 % Market rate
and other savings
676.7 0.26 679.1 0.22 679.9 0.19
681.2 0.17 683.0 0.13 Savings certificates
20.0 0.43
20.0 0.34 20.9 0.31 21.8 0.31 22.6 0.30 Other time deposits
82.1 2.26 76.6 1.84 68.2 1.49 66.1 1.51 57.1 1.39
Deposits in foreign offices
51.5
1.30 94.8 0.98 124.6 0.81 124.7 0.76
123.7 0.65 Total interest-bearing deposits
910.6
0.56 938.3 0.47 944.1 0.39 942.1 0.37 934.9 0.29 Short-term
borrowings
103.8 1.54 101.8 1.24 102.1 0.99 99.2 0.91
95.8 0.69 Long-term debt
223.8 2.97 226.0 2.80 231.6
2.32 243.5 2.28 249.9 2.04 Other liabilities
28.2 2.12 27.9 1.92 24.7 1.86
24.8 1.74 21.0 2.05 Total interest-bearing
liabilities
1,266.4 1.10 1,294.0 0.97 1,302.5 0.81
1,309.6 0.79 1,301.6 0.68 Portion of noninterest-bearing funding
sources (5)
468.9 — 466.6
— 474.5 — 470.5 — 471.1 — Total funding
sources (5)
$ 1,735.3
0.80 $ 1,760.6 0.71 $ 1,777.0
0.59 $ 1,780.1 0.58 $ 1,772.7 0.50
Net interest margin on a taxable-equivalent basis
2.93 % 2.84 % 2.84 % 2.86 % 2.90 %
Noninterest-earning assets Cash and due from banks
$
18.6 18.9 19.2 18.5 18.2 Goodwill
26.4 26.5 26.6 26.6
26.7 Other (5)
104.6 109.9 112.5
113.3 109.4 Total noninterest-earnings assets
(5)
$ 149.6 155.3 158.3
158.4 154.3
Noninterest-bearing funding
sources Deposits
$ 360.7 358.9 367.5 364.3 366.3
Other liabilities (5)
51.7 56.8 57.9 56.9 53.3 Total equity
206.1 206.2 207.4 207.7 205.8 Noninterest-bearing funding
sources used to fund earning assets (5)
(468.9
) (466.6 ) (474.5 ) (470.5 ) (471.1 ) Net
noninterest-bearing funding sources (5)
$
149.6 155.3 158.3 158.4 154.3
Total assets $ 1,884.9
1,915.9 1,935.3 1,938.5 1,927.0
(1) Our average prime rate was 4.80% for
the quarter ended June 30, 2018, 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 and 4.05% for the quarter
ended June 30, 2017. The average three-month London Interbank
Offered Rate (LIBOR) was 2.34%, 1.93%, 1.46%, 1.31% and 1.21% for
the same quarters, respectively.
(2) Yields/rates include the effects of
hedge and risk management activities associated with the respective
asset and liability categories.
(3) Financial information for the prior
quarters of 2017 has been revised to reflect the impact of the
adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash
Flows (Topic 230): Restricted Cash in which we changed the
presentation of our cash and cash equivalents to include both cash
and due from banks as well as interest-earning deposits with banks,
which are inclusive of any restricted cash.
(4) Yields and rates are based on interest
income/expense amounts for the period, annualized based on the
accrual basis for the respective accounts. The average balance
amounts represent amortized cost for the periods presented.
(5) Financial information for the prior
quarters of 2017 has been revised to reflect the impact of the
adoption in first quarter 2018 of ASU 2016-01 – Financial
Instruments – Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities.
Wells Fargo & Company and
Subsidiaries
NONINTEREST INCOME Quarter ended June 30,
% Six months ended June 30,
% (in millions)
2018 2017
Change
2018 2017
Change Service charges on deposit accounts
$
1,163 1,276 (9 )%
$ 2,336
2,589 (10 )% Trust and investment fees: Brokerage advisory,
commissions and other fees
2,354 2,329 1
4,757 4,653
2 Trust and investment management
835 837 —
1,685
1,666 1 Investment banking
486
463 5
916 880 4 Total
trust and investment fees
3,675
3,629 1
7,358 7,199 2
Card fees
1,001 1,019 (2 )
1,909 1,964 (3 ) Other
fees: Charges and fees on loans
304 325 (6 )
605 632
(4 ) Cash network fees
120 134 (10 )
246 260 (5 )
Commercial real estate brokerage commissions
109 102 7
194 183 6 Letters of credit fees
72 76 (5 )
151 150 1 Wire transfer and other remittance fees
121
112 8
237 219 8 All other fees
120
153 (22 )
213 323
(34 ) Total other fees
846
902 (6 )
1,646 1,767
(7 ) Mortgage banking: Servicing income, net
406 400
2
874 856 2 Net gains on mortgage loan origination/sales
activities
364 748
(51 )
830 1,520 (45 ) Total mortgage
banking
770 1,148
(33 )
1,704 2,376 (28 ) Insurance
102 280 (64 )
216 557 (61 ) Net gains from trading
activities (1)
191 151 26
434 423 3 Net gains on debt
securities
41 120 (66 )
42 156 (73 ) Net gains from
equity securities (1)
295 274 8
1,078 844 28 Lease
income
443 493 (10 )
898 974 (8 ) Life insurance
investment income
162 145 12
326 289 13 All other
323 327 (1 )
761 557 37 Total
$
9,012 9,764 (8 )
$ 18,708 19,695
(5 )
(1) Financial information for the prior
periods has been revised to reflect the impact of the adoption in
first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall
(Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities.
NONINTEREST EXPENSE
Quarter ended June 30, %
Six months ended June 30, % (in millions)
2018 2017 Change
2018 2017 Change Salaries
$ 4,465 4,343 3 %
$ 8,828
8,604 3 % Commission and incentive compensation
2,642 2,499 6
5,410 5,224 4 Employee benefits
1,245 1,308 (5 )
2,843 2,994 (5 ) Equipment
550 529 4
1,167 1,106 6 Net occupancy
722 706
2
1,435 1,418 1 Core deposit and other intangibles
265 287 (8 )
530 576 (8 ) FDIC and other deposit
assessments
297 328 (9 )
621 661 (6 ) Operating
losses
619 350 77
2,087 632 230 Outside professional
services
881 1,029 (14 )
1,702 1,833 (7 ) Contract
services (1)
536 416 29
983 813 21 Operating leases
311 334 (7 )
631 679 (7 ) Outside data processing
164 236 (31 )
326 456 (29 ) Travel and entertainment
157 171 (8 )
309 350 (12 ) Advertising and promotion
227 150 51
380 277 37 Postage, stationery and
supplies
121 134 (10 )
263 279 (6 )
Telecommunications
88 91 (3 )
180 182 (1 ) Foreclosed
assets
44 52 (15 )
82 138 (41 ) Insurance
24
24 —
50 48 4 All other (1)
624
554 13
1,197 1,063 13
Total
$ 13,982
13,541 3
$
29,024 27,333 6
(1) The prior periods have been revised to
conform with the current period presentation whereby temporary help
is included in contract services rather than in all other
noninterest expense.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER NONINTEREST INCOME Quarter ended
Jun 30, Mar 31, Dec 31,
Sep 30, Jun 30, (in millions)
2018 2018 2017
2017 2017 Service charges on deposit accounts
$ 1,163 1,173 1,246 1,276 1,276 Trust and investment
fees: Brokerage advisory, commissions and other fees
2,354
2,403 2,401 2,304 2,329 Trust and investment management
835
850 866 840 837 Investment banking
486
430 420 465
463 Total trust and investment fees
3,675 3,683
3,687 3,609 3,629 Card
fees
1,001 908 996 1,000 1,019 Other fees: Charges and fees
on loans
304 301 313 318 325 Cash network fees
120
126 120 126 134 Commercial real estate brokerage commissions
109 85 159 120 102 Letters of credit fees
72 79 78 77
76 Wire transfer and other remittance fees
121 116 115 114
112 All other fees
120 93
128 122
153 Total other fees
846
800 913 877
902 Mortgage banking: Servicing income, net
406 468 262 309 400 Net gains on mortgage loan
origination/sales activities
364
466 666 737
748 Total mortgage banking
770
934 928
1,046 1,148 Insurance
102 114
223 269 280 Net gains (losses) from trading activities (1)
191 243 (1 ) 120 151 Net gains on debt securities
41
1 157 166 120 Net gains from equity securities (1)
295 783
572 363 274 Lease income
443 455 458 475 493 Life insurance
investment income
162 164 153 152 145 All other
323 438 405
47 327 Total
$ 9,012 9,696
9,737 9,400
9,764
(1) Financial information for the prior
quarters of 2017 has been revised to reflect the impact of the
adoption in first quarter 2018 of ASU 2016-01 – Financial
Instruments – Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities.
FIVE QUARTER NONINTEREST
EXPENSE
Quarter ended
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30,
(in millions)
2018 2018
2017 2017 2017 Salaries
$
4,465 4,363 4,403 4,356 4,343 Commission and incentive
compensation
2,642 2,768 2,665 2,553 2,499 Employee benefits
1,245 1,598 1,293 1,279 1,308 Equipment
550 617 608
523 529 Net occupancy
722 713 715 716 706 Core deposit and
other intangibles
265 265 288 288 287 FDIC and other deposit
assessments
297 324 312 314 328 Operating losses
619
1,468 3,531 1,329 350 Outside professional services
881 821
1,025 955 1,029 Contract services (1)
536 447 410 415 416
Operating leases
311 320 325 347 334 Outside data processing
164 162 208 227 236 Travel and entertainment
157 152
183 154 171 Advertising and promotion
227 153 200 137 150
Postage, stationery and supplies
121 142 137 128 134
Telecommunications
88 92 92 90 91 Foreclosed assets
44 38 47 66 52 Insurance
24 26 28 24 24 All other (1)
624 573 330
450 554 Total
$
13,982 15,042 16,800
14,351 13,541
(1) The prior quarters of 2017 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 Jun 30,
Dec 31, % (in millions, except shares)
2018 2017 Change
Assets Cash and due from banks
$ 20,450 23,367
(12 )% Interest-earning deposits with banks (1)
142,999 192,580 (26 ) Total
cash, cash equivalents, and restricted cash (1)
163,449 215,947 (24 ) Federal
funds sold and securities purchased under resale agreements (1)
80,184 80,025 — Debt securities: Trading, at fair value (2)
65,602 57,624 14 Available-for-sale, at fair value (2)
265,687 276,407 (4 ) Held-to-maturity, at cost
144,206 139,335 3 Mortgages held for sale
21,509
20,070 7 Loans held for sale (2)
3,408 1,131 201 Loans
944,265 956,770 (1 ) Allowance for loan losses
(10,193 ) (11,004 ) (7 ) Net loans
934,072 945,766 (1
) Mortgage servicing rights: Measured at fair value
15,411
13,625 13 Amortized
1,407 1,424 (1 ) Premises and equipment,
net
8,882 8,847 — Goodwill
26,429 26,587 (1 )
Derivative assets
11,099 12,228 (9 ) Equity securities (2)
57,505 62,497 (8 ) Other assets (2)
80,850 90,244 (10 ) Total assets
$ 1,879,700
1,951,757 (4 )
Liabilities Noninterest-bearing
deposits
$ 365,021 373,722 (2 ) Interest-bearing
deposits
903,843 962,269
(6 ) Total deposits
1,268,864 1,335,991 (5 )
Short-term borrowings
104,496 103,256 1 Derivative
liabilities
8,507 8,796 (3 ) Accrued expenses and other
liabilities
72,480 70,615 3 Long-term debt
219,284 225,020 (3 ) Total
liabilities
1,673,631
1,743,678 (4 )
Equity Wells Fargo stockholders’
equity: Preferred stock
25,737 25,358 1 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
59,644 60,893 (2 ) Retained earnings
150,803
145,263 4 Cumulative other comprehensive income (loss)
(5,461 ) (2,144 ) 155 Treasury stock – 632,743,620
shares and 590,194,846 shares
(32,620 ) (29,892 ) 9
Unearned ESOP shares
(2,051 )
(1,678 ) 22 Total Wells Fargo stockholders’ equity
205,188 206,936 (1 )
Noncontrolling interests
881 1,143 (23 ) Total equity
206,069 208,079 (1 )
Total liabilities and equity
$
1,879,700 1,951,757
(4 )
(1) Financial information has been revised
to reflect the impact of the adoption in first quarter 2018 of ASU
2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in
which we changed the presentation of our cash and cash equivalents
to include both cash and due from banks as well as interest-earning
deposits with banks, which are inclusive of any restricted
cash.
(2) Financial information for the prior
quarter has been revised to reflect the impact of the adoption in
first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall
(Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET Jun
30, Mar 31, Dec 31,
Sep 30, Jun 30, (in millions)
2018 2018 2017
2017 2017
Assets Cash and due from banks
$ 20,450 18,145 23,367 19,206 20,248 Interest-earning
deposits with banks (1)
142,999
184,250 192,580
205,648 195,700 Total cash, cash
equivalents, and restricted cash (1)
163,449
202,395 215,947
224,854 215,948 Federal
funds sold and securities purchased under resale agreements (1)
80,184 73,550 80,025 67,457 69,006 Debt securities: Trading,
at fair value (2)
65,602 59,866 57,624 60,970 54,324
Available-for-sale, at fair value (2)
265,687 271,656
276,407 271,317 268,174 Held-to-maturity, at cost
144,206
141,446 139,335 142,423 140,392 Mortgages held for sale
21,509 17,944 20,070 20,009 24,807 Loans held for sale (2)
3,408 3,581 1,131 1,339 1,898 Loans
944,265 947,308
956,770 951,873 957,423 Allowance for loan losses
(10,193 ) (10,373 )
(11,004 ) (11,078 ) (11,073 ) Net loans
934,072 936,935
945,766 940,795
946,350 Mortgage servicing rights: Measured at fair
value
15,411 15,041 13,625 13,338 12,789 Amortized
1,407 1,411 1,424 1,406 1,399 Premises and equipment, net
8,882 8,828 8,847 8,449 8,403 Goodwill
26,429 26,445
26,587 26,581 26,573 Derivative assets
11,099 11,467 12,228
12,580 13,273 Equity securities (2)
57,505 58,935 62,497
54,981 55,742 Other assets (2)
80,850
85,888 90,244
88,381 91,714 Total assets
$ 1,879,700
1,915,388 1,951,757
1,934,880 1,930,792
Liabilities
Noninterest-bearing deposits
$ 365,021 370,085
373,722 366,528 372,766 Interest-bearing deposits
903,843 933,604
962,269 940,178 933,064
Total deposits
1,268,864 1,303,689 1,335,991
1,306,706 1,305,830 Short-term borrowings
104,496 97,207
103,256 93,811 95,356 Derivative liabilities
8,507 7,883
8,796 9,497 11,636 Accrued expenses and other liabilities
72,480 73,397 70,615 78,993 72,799 Long-term debt
219,284 227,302
225,020 239,256
239,222 Total liabilities
1,673,631
1,709,478 1,743,678
1,728,263 1,724,843
Equity Wells Fargo stockholders’ equity: Preferred
stock
25,737 26,227 25,358 25,576 25,785 Common stock
9,136 9,136 9,136 9,136 9,136 Additional paid-in capital
59,644 60,399 60,893 60,759 60,689 Retained earnings
150,803 147,928 145,263 141,549 139,366 Cumulative other
comprehensive income (loss)
(5,461 ) (4,921 ) (2,144
) (1,622 ) (2,148 ) Treasury stock
(32,620 ) (31,246
) (29,892 ) (27,772 ) (25,675 ) Unearned ESOP shares
(2,051 ) (2,571 ) (1,678
) (1,904 ) (2,119 ) Total Wells Fargo
stockholders’ equity
205,188 204,952 206,936 205,722 205,034
Noncontrolling interests
881
958 1,143 895
915 Total equity
206,069 205,910
208,079 206,617 205,949
Total liabilities and equity
$
1,879,700 1,915,388
1,951,757 1,934,880
1,930,792
(1) Financial information has been revised
to reflect the impact of the adoption in first quarter 2018 of ASU
2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in
which we changed the presentation of our cash and cash equivalents
to include both cash and due from banks as well as interest-earning
deposits with banks, which are inclusive of any restricted
cash.
(2) Financial information for prior
quarters has been revised to reflect the impact of the adoption in
first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall
(Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER TRADING ASSETS AND
LIABILITIES
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30, (in millions)
2018 2018 2017
2017 2017
Trading assets Debt
securities
$ 65,602 59,866 57,624 60,970 54,324
Equity securities (1)
22,978 25,327 30,004 22,797 24,229
Loans held for sale
1,350 1,695 1,023 1,182 1,742 Gross
trading derivative assets
30,758 30,644 31,340 31,052 31,451
Netting (2)
(20,687 )
(20,112 ) (19,629 ) (18,881 )
(19,289 ) Total trading derivative assets
10,071 10,532
11,711 12,171 12,162
Total trading assets
100,001
97,420 100,362
97,120 92,457
Trading
liabilities Short sales
21,765 23,303 18,472 19,096
16,845 Gross trading derivative liabilities
29,847 29,717
31,386 30,365 31,172 Netting (2)
(22,311
) (22,569 ) (23,062 )
(21,662 ) (20,544 ) Total trading derivative
liabilities
7,536 7,148
8,324 8,703
10,628 Total trading liabilities
$ 29,301 30,451
26,796 27,799
27,473
(1) Financial information for the prior
quarters of 2017 has been revised to reflect the impact of the
adoption in first quarter 2018 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
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30, (in millions)
2018 2018 2017
2017 2017 Trading debt securities
$ 65,602 59,866
57,624 60,970 54,324
Available-for-sale debt securities: Securities of U.S. Treasury and
federal agencies
6,271 6,279 6,319 6,350 17,896 Securities
of U.S. states and political subdivisions
47,559 49,643
51,326 52,774 52,013 Mortgage-backed securities: Federal agencies
154,556 156,814 160,219 150,181 135,938 Residential and
commercial
8,286 9,264
9,173 11,046 12,772
Total mortgage-backed securities
162,842 166,078 169,392 161,227 148,710 Other debt
securities
49,015 49,656
49,370 50,966 49,555 Total
available-for-sale debt securities
265,687
271,656 276,407 271,317
268,174 Held-to-maturity debt securities: Securities
of U.S. Treasury and federal agencies
44,735 44,727 44,720
44,712 44,704 Securities of U.S. states and political subdivisions
6,300 6,307 6,313 6,321 6,325 Federal agency and other
mortgage-backed securities (1)
93,016 89,748 87,527 90,071
87,525 Other debt securities
155
664 775 1,319 1,838 Total
held-to-maturity debt securities
144,206
141,446 139,335 142,423
140,392 Total debt securities
$
475,495 472,968 473,366
474,710 462,890
(1) Predominantly consists of federal
agency mortgage-backed securities.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER EQUITY SECURITIES Jun 30,
Mar 31, Dec 31, Sep 30,
Jun 30, (in millions)
2018
2018 2017 2017
2017
Held for trading at fair value
Marketable equity securities
$ 22,978 25,327
30,004 22,797 24,229
Not held for
trading: Fair value: Marketable equity securities (1)
5,273 4,931 4,356 4,348 4,340 Nonmarketable equity
securities (2)
5,876 5,303
4,867 4,523 3,986 Total
equity securities at fair value
11,149
10,234 9,223 8,871
8,326 Equity method: LIHTC (3)
10,361 10,318 10,269 9,884
9,828 Private equity
3,732 3,840 3,839 3,757 3,740
Tax-advantaged renewable energy
1,950 1,822 1,950 1,954
1,960 New market tax credit and other
262
268 294 292
295 Total equity method
16,305
16,248 16,352 15,887
15,823 Other: Federal bank stock and other at cost (4)
5,673
5,780 5,828 6,251 6,247 Private equity (5)
1,400 1,346 1,090
1,175 1,117 Total equity securities not held for
trading
34,527 33,608
32,493 32,184 31,513
Total
equity securities $ 57,505
58,935 62,497 54,981
55,742
(1) Includes $3.5 billion, $3.5 billion,
$3.7 billion, $3.5 billion and $3.3 billion at June 30 and March
31, 2018, and December 31, September 30, and June 30, 2017,
respectively, related to securities held as economic hedges of our
deferred compensation plan obligations.
(2) Includes $5.5 billion, $5.0 billion,
$4.9 billion, $4.5 billion and $4.0 billion at June 30 and March
31, 2018, and December 31, September 30, and June 30, 2017,
respectively, related to investments in which we elected the fair
value option.
(3) Represents low-income housing tax
credit investments.
(4) Includes $5.6 billion, $5.7 billion,
$5.4 billion, $5.8 billion and $5.8 billion at June 30 and March
31, 2018, and December 31, September 30, and June 30, 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 security
under the measurement alternative.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER LOANS Jun 30,
Mar 31, Dec 31, Sep 30,
Jun 30, (in millions)
2018
2018 2017 2017
2017 Commercial: Commercial and industrial
$ 336,590
334,678 333,125 327,944 331,113 Real estate mortgage
123,964
125,543 126,599 128,475 130,277 Real estate construction
22,937 23,882 24,279 24,520 25,337 Lease financing
19,614 19,293 19,385
19,211 19,174 Total commercial
503,105 503,396 503,388
500,150 505,901 Consumer: Real estate
1-4 family first mortgage
283,001 282,658 284,054 280,173
276,566 Real estate 1-4 family junior lien mortgage
36,542
37,920 39,713 41,152 42,747 Credit card
36,684 36,103 37,976
36,249 35,305 Automobile
47,632 49,554 53,371 55,455 57,958
Other revolving credit and installment
37,301
37,677 38,268 38,694
38,946 Total consumer
441,160
443,912 453,382 451,723
451,522 Total loans (1)
$
944,265 947,308 956,770
951,873 957,423
(1) Includes $9.0 billion, $10.7 billion,
$12.8 billion, $13.6 billion, and $14.3 billion of purchased
credit-impaired (PCI) loans at June 30 and March 31, 2018, and
December 31, September 30 and June 30, 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.
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30, (in
millions)
2018 2018
2017 2017 2017 Commercial
foreign loans: Commercial and industrial
$ 61,732
59,696 60,106 58,570 57,825 Real estate mortgage
7,617 8,082
8,033 8,032 8,359 Real estate construction
542 668 655 647
585 Lease financing
1,097 1,077
1,126 1,141 1,092 Total
commercial foreign loans
$ 70,988
69,523 69,920 68,390
67,861
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND
FORECLOSED ASSETS) Jun 30,
Mar 31, Dec 31, Sep 30,
Jun 30, (in millions)
2018 2018
2017 2017 2017 Nonaccrual
loans: Commercial: Commercial and industrial
$ 1,559
1,516 1,899 2,397 2,632 Real estate mortgage
765 755 628 593
630 Real estate construction
51 45 37 38 34 Lease financing
80 93
76 81 89 Total
commercial
2,455 2,409
2,640 3,109
3,385 Consumer: Real estate 1-4 family first mortgage
3,829 4,053 4,122 4,213 4,413 Real estate 1-4 family junior
lien mortgage
1,029 1,087 1,086 1,101 1,095 Automobile
119 117 130 137 104 Other revolving credit and installment
54 53
58 59 59 Total
consumer
5,031 5,310
5,396 5,510
5,671 Total nonaccrual loans (1)(2)(3)
$ 7,486 7,719
8,036 8,619 9,056
As a percentage of total loans
0.79 % 0.81 0.84 0.91
0.95 Foreclosed assets: Government insured/guaranteed
$
90 103 120 137 149 Non-government insured/guaranteed
409 468 522
569 632 Total foreclosed
assets
499 571
642 706 781
Total nonperforming assets
$ 7,985
8,290 8,678
9,325 9,837 As a percentage of total
loans
0.85 % 0.88
0.91 0.98
1.03
(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
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30, (in millions)
2018 2018 2017
2017 2017 Total (excluding PCI)(1):
$ 9,464 10,753 11,997 10,227 9,716 Less: FHA
insured/guaranteed by the VA (2)(3)
8,622
9,786 10,934 9,266
8,873
Total, not government insured/guaranteed
$ 842 967 1,063
961 843 By segment and class, not
government insured/guaranteed: Commercial: Commercial and
industrial
$ 23 40 26 27 42 Real estate mortgage
26 23 23 11 2 Real estate construction
— 1 — —
10 Total commercial
49 64
49 38 54 Consumer: Real
estate 1-4 family first mortgage (3)
133 164 219 190 145
Real estate 1-4 family junior lien mortgage (3)
33 48 60 49
44 Credit card
429 473 492 475 411 Automobile
105 113
143 111 91 Other revolving credit and installment
93 105 100 98
98 Total consumer
793
903 1,014 923 789
Total, not government insured/guaranteed
$ 842 967 1,063
961 843
(1) PCI loans totaled $811 million, $1.0
billion, $1.4 billion, $1.4 billion and $1.5 billion, at June 30
and March 31, 2018, and December 31, September 30 and June 30,
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 Six months
ended ended June 30, June
30, (in millions)
2018
2018 2009-2017 Balance, beginning of
period $ 6,864 8,887 10,447
Change in accretable yield due to acquisitions —
— 161 Accretion into interest income (1)
(299 ) (613 ) (16,983 )
Accretion into noninterest income due to sales (2)
(479 ) (1,122 ) (801 )
Reclassification from nonaccretable difference for loans with
improving credit-related cash flows (3) 59 399
11,597 Changes in expected cash flows that do not affect
nonaccretable difference (4) (412 )
(1,818 ) 4,466
Balance, end of period $
5,733 5,733
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 June 30, 2018, our carrying
value for PCI loans totaled $9.0 billion and the remainder of
nonaccretable difference established in purchase accounting totaled
$313 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
CHANGES IN ALLOWANCE FOR CREDIT LOSSES Quarter
ended June 30, Six months ended June 30, (in
millions)
2018 2017
2018 2017
Balance, beginning of
period $ 11,313 12,287
11,960 12,540 Provision for credit losses
452 555
643 1,160 Interest income on certain impaired
loans (1)
(43 ) (46 )
(86 ) (94 ) Loan
charge-offs: Commercial: Commercial and industrial
(134
) (161 )
(298 ) (414 ) Real estate mortgage
(19 ) (8 )
(21 ) (13 ) Real estate
construction
— —
— — Lease financing
(20 ) (13 )
(37
) (20 ) Total commercial
(173 ) (182 )
(356
) (447 ) Consumer: Real estate 1-4 family
first mortgage
(55 ) (55 )
(96 ) (124 )
Real estate 1-4 family junior lien mortgage
(47 ) (62
)
(94 ) (155 ) Credit card
(404 ) (379
)
(809 ) (746 ) Automobile
(216 ) (212
)
(516 ) (467 ) Other revolving credit and
installment
(164 ) (185 )
(344 ) (374 ) Total
consumer
(886 ) (893 )
(1,859 ) (1,866 ) Total
loan charge-offs
(1,059 )
(1,075 )
(2,215 ) (2,313
) Loan recoveries: Commercial: Commercial and industrial
76
83
155 165 Real estate mortgage
19 14
36 44
Real estate construction
6 4
10 12 Lease financing
5 6
10 8 Total commercial
106 107
211 229 Consumer: Real estate
1-4 family first mortgage
78 71
137 133 Real estate
1-4 family junior lien mortgage
60 66
115 136 Credit
card
81 59
154 117 Automobile
103 86
195 174 Other revolving credit and installment
29 31
60
64 Total consumer
351 313
661
624 Total loan recoveries
457 420
872
853 Net loan charge-offs
(602 ) (655 )
(1,343 ) (1,460 ) Other
(10 ) 5
(64
) —
Balance, end of period
$ 11,110 12,146
11,110 12,146
Components: Allowance for loan losses
$ 10,193
11,073
10,193 11,073 Allowance for unfunded credit
commitments
917 1,073
917 1,073
Allowance for credit losses
$ 11,110
12,146
11,110
12,146 Net loan charge-offs
(annualized) as a percentage of average total loans
0.26
% 0.27
0.29 0.31 Allowance for loan losses as a
percentage of total loans
1.08 1.16
1.08 1.16
Allowance for credit losses as a percentage of total loans
1.18 1.27
1.18 1.27
(1) Certain impaired loans with an
allowance calculated by discounting expected cash flows using the
loan’s effective interest rate over the remaining life of the loan
recognize changes in allowance attributable to the passage of time
as interest income.
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
Quarter ended
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30, (in
millions)
2018 2018
2017 2017 2017
Balance,
beginning of quarter $ 11,313 11,960 12,109
12,146 12,287 Provision for credit losses
452 191 651 717
555 Interest income on certain impaired loans (1)
(43
) (43 ) (49 ) (43 ) (46 ) Loan charge-offs: Commercial:
Commercial and industrial
(134 ) (164 ) (181 ) (194 )
(161 ) Real estate mortgage
(19 ) (2 ) (4 ) (21 ) (8
) Real estate construction
— — — — — Lease financing
(20 ) (17 ) (14 )
(11 ) (13 ) Total commercial
(173 ) (183 ) (199
) (226 ) (182 ) Consumer: Real estate
1-4 family first mortgage
(55 ) (41 ) (49 ) (67 ) (55
) Real estate 1-4 family junior lien mortgage
(47 )
(47 ) (54 ) (70 ) (62 ) Credit card
(404 ) (405 )
(398 ) (337 ) (379 ) Automobile
(216 ) (300 ) (261 )
(274 ) (212 ) Other revolving credit and installment
(164 ) (180 ) (169 )
(170 ) (185 ) Total consumer
(886 ) (973 ) (931
) (918 ) (893 ) Total loan charge-offs
(1,059 ) (1,156 )
(1,130 ) (1,144 ) (1,075 ) Loan
recoveries: Commercial: Commercial and industrial
76 79 63
69 83 Real estate mortgage
19 17 14 24 14 Real estate
construction
6 4 3 15 4 Lease financing
5 5 4
5 6 Total commercial
106 105
84 113 107
Consumer: Real estate 1-4 family first mortgage
78 59 72 83
71 Real estate 1-4 family junior lien mortgage
60 55 61 69
66 Credit card
81 73 62 60 59 Automobile
103 92 73 72
86 Other revolving credit and installment
29
31 27
30 31 Total consumer
351 310 295
314 313 Total loan
recoveries
457 415
379 427 420
Net loan charge-offs
(602 )
(741 ) (751 ) (717 )
(655 ) Other
(10 )
(54 ) — 6
5
Balance, end of quarter
$ 11,110 11,313
11,960 12,109
12,146 Components: Allowance for loan losses
$
10,193 10,373 11,004 11,078 11,073 Allowance for unfunded
credit commitments
917
940 956 1,031
1,073 Allowance for credit losses
$ 11,110 11,313
11,960 12,109
12,146 Net loan charge-offs (annualized) as a
percentage of average total loans
0.26 % 0.32 0.31
0.30 0.27 Allowance for loan losses as a percentage of: Total loans
1.08 1.10 1.15 1.16 1.16 Nonaccrual loans
136 134 137
129 122 Nonaccrual loans and other nonperforming assets
128
125 127 119 113 Allowance for credit losses as a percentage of:
Total loans
1.18 1.19 1.25 1.27 1.27 Nonaccrual loans
148 147 149 141 134 Nonaccrual loans and other nonperforming
assets
139 136
138 130 123
(1) Certain impaired loans with an
allowance calculated by discounting expected cash flows using the
loan’s effective interest rate over the remaining life of the loan
recognize changes in allowance attributable to the passage of time
as interest income.
Wells Fargo & Company and
Subsidiaries
TANGIBLE COMMON EQUITY (1)
Jun 30, Mar 31, Dec 31,
Sep 30, Jun 30, (in millions, except ratios)
2018 2018
2017 2017 2017 Tangible
book value per common share (1): Total equity
$
206,069 205,910 208,079 206,617 205,949 Adjustments:
Preferred stock
(25,737 ) (26,227 ) (25,358 ) (25,576
) (25,785 ) Additional paid-in capital on ESOP
preferred stock
(116 ) (146 ) (122 ) (130 ) (136 ) Unearned ESOP
shares
2,051 2,571 1,678 1,904 2,119 Noncontrolling
interests
(881 )
(958 ) (1,143 ) (895 )
(915 ) Total common stockholders' equity (A)
181,386 181,150 183,134 181,920 181,232 Adjustments:
Goodwill
(26,429 ) (26,445 ) (26,587 ) (26,581 )
(26,573 ) Certain identifiable intangible assets
(other than MSRs)
(1,091 ) (1,357 ) (1,624 ) (1,913 ) (2,147 ) Other
assets (2)
(2,160 ) (2,388 ) (2,155 ) (2,282 ) (2,268
) Applicable deferred taxes (3)
874 918 962
1,550 1,624 Tangible
common equity (B)
$
152,580 151,878
153,730 152,694 151,868
Common shares outstanding (C)
4,849.1 4,873.9 4,891.6
4,927.9 4,966.8 Book value per common share (A)/(C)
$
37.41 37.17 37.44 36.92 36.49 Tangible book value per common
share (B)/(C)
31.47
31.16 31.43
30.99 30.58
Quarter ended Six months ended
Jun 30, Mar 31, Dec 31,
Sep 30, Jun 30,
Jun 30,
Jun 30, (in millions, except ratios)
2018 2018 2017
2017 2017
2018
2017 Return on average tangible common equity (1):
Net income applicable to common stock (A)
$ 4,792
4,733 5,740 4,131 5,450
9,525 10,683 Average total equity
206,067 206,180 207,413 207,723 205,755
206,123
203,668 Adjustments: Preferred stock
(26,021 )
(26,157 ) (25,569 ) (25,780 ) (25,849 )
(26,089 )
(25,508 ) Additional paid-in capital on ESOP preferred stock
(129 ) (153 ) (129 ) (136 ) (144 )
(141
) (145 ) Unearned ESOP shares
2,348 2,508 1,896 2,114
2,366
2,428 2,282 Noncontrolling interests
(919 ) (997 )
(998 ) (926 ) (910 )
(958 ) (934 )
Average common stockholders’ equity (B)
181,346 181,381
182,613 182,995 181,218
181,363 179,363 Adjustments:
Goodwill
(26,444 ) (26,516 ) (26,579 ) (26,600 )
(26,664 )
(26,480 ) (26,668 ) Certain identifiable
intangible assets (other than MSRs)
(1,223 ) (1,489 )
(1,767 ) (2,056 ) (2,303 )
(1,355 ) (2,445 ) Other
assets (2)
(2,271 ) (2,233 ) (2,245 ) (2,231 ) (2,160
)
(2,252 ) (2,128 ) Applicable deferred taxes (3)
889
933 1,332 1,579
1,648
911
1,685 Average tangible common equity
(C)
$ 152,297
152,076 153,354
153,687 151,739
152,187 149,807 Return on
average common stockholders' equity (ROE) (annualized) (A)/(B)
10.60 % 10.58 12.47 8.96 12.06
10.59 12.01
Return on average tangible common equity (ROTCE) (annualized)
(A)/(C)
12.62
12.62 14.85 10.66
14.41
12.62
14.38
(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, which are included
in other assets.
(3) Applicable deferred taxes relate to
goodwill and other intangible assets. They were determined by
applying the combined federal statutory rate and composite state
income tax rates to the difference between book and tax basis of
the respective goodwill and intangible assets at period end.
Wells Fargo & Company and
Subsidiaries
COMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1)
Estimated
Jun 30, Mar 31, Dec 31,
Sep 30, Jun 30, (in billions, except ratio)
2018 2018 2017
2017 2017 Total equity
$
206.1 205.9 208.1 206.6 205.9 Adjustments: Preferred stock
(25.7 ) (26.2 ) (25.4 ) (25.6 ) (25.8 )
Additional paid-in capital on ESOP
preferred stock
(0.1 ) (0.1 ) (0.1 ) (0.1 ) (0.1 ) Unearned ESOP
shares
2.0 2.6 1.7 1.9 2.1 Noncontrolling interests
(0.9 ) (1.0
) (1.1 ) (0.9 ) (0.9 )
Total common stockholders' equity
181.4 181.2 183.2 181.9
181.2 Adjustments: Goodwill
(26.4 ) (26.4 ) (26.6 )
(26.6 ) (26.6 ) Certain identifiable intangible assets (other than
MSRs)
(1.1 ) (1.4 ) (1.6 ) (1.9 ) (2.1 ) Other assets
(2)
(2.2 ) (2.4 ) (2.2 ) (2.3 ) (2.2 ) Applicable
deferred taxes (3)
0.9 0.9 1.0 1.6 1.6 Investment in certain
subsidiaries and other
0.4 0.4 0.2
(0.1 ) (0.2 ) Common Equity Tier 1
(Fully Phased-In) under Basel III (A)
153.0 152.3 154.0
152.6 151.7
Total risk-weighted assets (RWAs)
anticipated under Basel III (4)(5)
(B)
$ 1,279.7
1,278.1 1,285.6
1,292.8 1,310.5
Common Equity Tier 1 to total RWAs
anticipated under Basel III (Fully Phased-In) (5)
(A)/(B)
12.0 %
11.9 12.0 11.8
11.6
(1) Basel III capital rules, adopted by
the Federal Reserve Board on July 2, 2013, revised the definition
of capital, increased minimum capital ratios, and introduced a
minimum Common Equity Tier 1 (CET1) ratio. 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. Beginning January 1, 2018, the
requirements for calculating CET1 and tier 1 capital, along with
RWAs, became fully phased-in.
(2) Represents goodwill and other
intangibles on nonmarketable equity securities, which are included
in other assets.
(3) Applicable deferred taxes relate to
goodwill and other intangible assets. They were determined by
applying the combined federal statutory rate and composite state
income tax rates to the difference between book and tax basis of
the respective goodwill and intangible assets at period end.
(4) The final Basel III capital rules
provide for two capital frameworks: the Standardized Approach,
which replaced Basel I, and the Advanced Approach applicable to
certain institutions. Under the final rules, we are subject to the
lower of our CET1 ratio calculated under the Standardized Approach
and under the Advanced Approach in the assessment of our capital
adequacy. Because the final determination of our CET1 ratio and
which approach will produce the lower CET1 ratio as of
June 30, 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 March 31, 2018, and December
31, September 30 and June 30, 2017, was calculated under the Basel
III Standardized Approach RWAs.
(5) The Company’s June 30, 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 June 30,
Net interest income (3)
$ 7,346 7,133
4,693 4,809
1,111 1,171
(609 ) (642 )
12,541 12,471 Provision (reversal of provision) for credit
losses
484 623
(36 ) (65 )
(2 )
7
6 (10 )
452 555 Noninterest income
4,460
4,822
2,504 2,670
2,840 3,055
(792 )
(783 )
9,012 9,764 Noninterest expense
7,290 7,266
4,219 4,036
3,361 3,071
(888 ) (832 )
13,982 13,541 Income (loss) before
income tax expense (benefit)
4,032 4,066
3,014 3,508
592 1,148
(519 ) (583 )
7,119 8,139
Income tax expense (benefit)
1,413
1,255
379
775
147 436
(129 ) (221 )
1,810 2,245 Net income
(loss) before noncontrolling interests
2,619 2,811
2,635 2,733
445 712
(390 ) (362 )
5,309 5,894 Less: Net income (loss) from noncontrolling
interests
123 46
— (9 )
— 1
—
—
123
38 Net income (loss)
$
2,496 2,765
2,635 2,742
445 711
(390 ) (362 )
5,186 5,856 Average loans
$ 463.8 475.1
464.7 466.9
74.7 71.7
(59.1 ) (56.8 )
944.1 956.9 Average assets
1,034.3 1,083.6
826.4 818.8
84.0 82.4
(59.8 ) (57.8 )
1,884.9 1,927.0 Average
deposits
760.6 727.7
414.0 462.4
167.1 190.1
(70.4 ) (79.0 )
1,271.3 1,301.2
Six
months ended June 30, Net interest income (3)
$
14,541 14,265
9,225 9,490
2,223 2,312
(1,210 ) (1,272 )
24,779 24,795 Provision
(reversal of provision) for credit losses
702 1,269
(56 ) (108 )
(8 ) 3
5 (4 )
643 1,160 Noninterest income
9,095 9,513
5,251
5,566
5,970 6,171
(1,608 ) (1,555 )
18,708 19,695 Noninterest expense
15,992 14,547
8,197 8,203
6,651 6,275
(1,816 ) (1,692 )
29,024 27,333 Income (loss) before
income tax expense (benefit)
6,942 7,962
6,335 6,961
1,550 2,205
(1,007 ) (1,131 )
13,820
15,997 Income tax expense (benefit)
2,222
2,237
827
1,748
386
822
(251 )
(429 )
3,184 4,378 Net
income (loss) before noncontrolling interests
4,720 5,725
5,508 5,213
1,164 1,383
(756 ) (702 )
10,636 11,619 Less: Net income (loss) from noncontrolling
interests
311 136
(2 ) (14 )
5 7
—
—
314
129 Net income (loss)
$
4,409 5,589
5,510 5,227
1,159 1,376
(756 ) (702 )
10,322 11,490 Average loans
$ 467.1 477.9
464.9 467.6
74.3 71.2
(58.8 ) (56.5 )
947.5 960.2 Average assets
1,048.0 1,089.7
827.8 814.7
84.1 82.1
(59.6 ) (57.5 )
1,900.3 1,929.0 Average
deposits
754.1 722.8
429.9 463.8
172.5 193.8
(72.3 ) (80.2 )
1,284.2 1,300.2
(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 results for all
periods prior to 2018 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 occurred 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
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30, (income/expense
in millions, average balances in billions)
2018 2018 2017
2017 2017
COMMUNITY BANKING Net interest
income (2)
$ 7,346 7,195 7,239 7,154 7,133 Provision
for credit losses
484 218 636 650 623 Noninterest income
4,460 4,635 4,481 4,366 4,822 Noninterest expense
7,290 8,702
10,216 7,852 7,266
Income before income tax expense
4,032 2,910 868 3,018 4,066
Income tax expense (benefit)
1,413
809 (2,682 ) 1,079
1,255 Net income before noncontrolling
interests
2,619 2,101 3,550 1,939 2,811 Less: Net income
from noncontrolling interests
123
188 78 62
46 Segment net income
$ 2,496 1,913
3,472 1,877 2,765
Average loans
$ 463.8 470.5 473.2 473.7 475.1
Average assets
1,034.3 1,061.9 1,073.2 1,089.6 1,083.6
Average deposits
760.6
747.5 738.3 734.6
727.7
WHOLESALE BANKING Net interest
income (2)
$ 4,693 4,532 4,557 4,763 4,809 Provision
(reversal of provision) for credit losses
(36 ) (20 )
20 69 (65 ) Noninterest income
2,504 2,747 2,883 2,741 2,670
Noninterest expense
4,219
3,978 4,187 4,234
4,036 Income before income tax expense
3,014 3,321 3,233 3,201 3,508 Income tax expense
379 448 854
894 775 Net income
before noncontrolling interests
2,635 2,873 2,379 2,307
2,733 Less: Net income (loss) from noncontrolling interests
— (2 ) 6
(7 ) (9 ) Segment net income
$ 2,635 2,875
2,373 2,314
2,742 Average loans
$ 464.7 465.1 463.5 463.7
466.9 Average assets
826.4 829.2 837.2 824.2 818.8 Average
deposits
414.0 446.0
465.7 463.4
462.4
WEALTH AND INVESTMENT MANAGEMENT Net
interest income (2)
$ 1,111 1,112 1,152 1,177 1,171
Provision (reversal of provision) for credit losses
(2
) (6 ) (7 ) (1 ) 7 Noninterest income
2,840 3,130
3,181 3,079 3,055 Noninterest expense
3,361
3,290 3,246
3,102 3,071 Income before income
tax expense
592 958 1,094 1,155 1,148 Income tax expense
147 239
413 433 436
Net income before noncontrolling interests
445 719 681 722
712 Less: Net income from noncontrolling interests
— 5 6
3 1 Segment net income
$ 445 714
675 719 711
Average loans
$ 74.7 73.9 72.9 72.4 71.7
Average assets
84.0 84.2 83.7 83.2 82.4 Average deposits
167.1 177.9
184.1 184.4 190.1
OTHER (3
) Net interest income (2)
$
(609 ) (601 ) (635 ) (645 ) (642 ) Provision
(reversal of provision) for credit losses
6 (1 ) 2 (1 ) (10
) Noninterest income
(792 ) (816 ) (808 ) (786 ) (783
) Noninterest expense
(888 )
(928 ) (849 ) (837 )
(832 ) Loss before income tax benefit
(519 )
(488 ) (596 ) (593 ) (583 ) Income tax benefit
(129 ) (122 ) (227 )
(225 ) (221 ) Net loss before
noncontrolling interests
(390 ) (366 ) (369 ) (368 )
(362 ) Less: Net income from noncontrolling interests
— — —
— — Other net loss
$ (390 ) (366 )
(369 ) (368 ) (362 ) Average
loans
$ (59.1 ) (58.5 ) (57.8 ) (57.5 ) (56.8
) Average assets
(59.8 ) (59.4 ) (58.8 ) (58.5 )
(57.8 ) Average deposits
(70.4 )
(74.2 ) (76.5 ) (76.0 )
(79.0 )
CONSOLIDATED COMPANY Net interest income (2)
$ 12,541 12,238 12,313 12,449 12,471 Provision for
credit losses
452 191 651 717 555 Noninterest income
9,012 9,696 9,737 9,400 9,764 Noninterest expense
13,982 15,042
16,800 14,351
13,541 Income before income tax expense
7,119 6,701
4,599 6,781 8,139 Income tax expense (benefit)
1,810 1,374 (1,642
) 2,181 2,245 Net income
before noncontrolling interests
5,309 5,327 6,241 4,600
5,894 Less: Net income from noncontrolling interests
123 191 90
58 38 Wells Fargo net
income
$ 5,186
5,136 6,151 4,542
5,856 Average loans
$ 944.1
951.0 951.8 952.3 956.9 Average assets
1,884.9 1,915.9
1,935.3 1,938.5 1,927.0 Average deposits
1,271.3 1,297.2
1,311.6 1,306.4 1,301.2
(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 results for all
periods prior to 2018 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 occurred 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
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30,
(in millions)
2018 2018
2017 2017 2017
MSRs measured
using the fair value method: Fair value, beginning of quarter
$ 15,041 13,625 13,338 12,789 13,208 Purchases
— — — 541 — Servicing from securitizations or asset
transfers (1)
486 573 639 605 436 Sales and other (2)
(1 ) (4 ) (32 )
64 (8 ) Net additions
485 569 607
1,210 428 Changes
in fair value: Due to changes in valuation model inputs or
assumptions: Mortgage interest rates (3)
376 1,253 221 (171
) (305 ) Servicing and foreclosure costs (4)
30 34 23 60 (14
) Discount rates (5)
— — 13 — — Prepayment estimates and
other (6)
(61 ) 43
(55 ) (31 ) (41 ) Net
changes in valuation model inputs or assumptions
345 1,330 202
(142 ) (360 ) Changes due to
collection/realization of expected cash flows over time
(460 ) (483 ) (522
) (519 ) (487 ) Total changes in fair
value
(115 ) 847
(320 ) (661 ) (847 ) Fair
value, end of quarter
$ 15,411
15,041 13,625
13,338 12,789
(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
Jun 30,
Mar 31, Dec 31, Sep 30,
Jun 30, (in millions)
2018
2018 2017 2017
2017
Amortized MSRs: Balance, beginning of quarter
$
1,411 1,424 1,406 1,399 1,402 Purchases
22 18 40 31
26 Servicing from securitizations or asset transfers
39 34
43 41 37 Amortization
(65 )
(65 ) (65 ) (65 )
(66 ) Balance, end of quarter
$ 1,407
1,411 1,424
1,406 1,399
Fair value of
amortized MSRs: Beginning of quarter
$ 2,307
2,025 1,990 1,989 2,051 End of quarter
2,309
2,307 2,025
1,990 1,989
Wells Fargo & Company and
Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
Quarter ended
Jun 30,
Mar 31, Dec 31, Sep 30,
Jun 30, (in millions)
2018 2018 2017
2017 2017
Servicing income, net: Servicing
fees (1)
$ 905 906 833 795 882 Changes in fair value
of MSRs carried at fair value: Due to changes in valuation model
inputs or assumptions (2) (A)
345 1,330 202 (142 ) (360 )
Changes due to collection/realization of expected cash flows over
time
(460 )
(483 ) (522 ) (519 )
(487 ) Total changes in fair value of MSRs carried at fair
value
(115 ) 847 (320 ) (661 ) (847 ) Amortization
(65 ) (65 ) (65 ) (65 ) (66 ) Net derivative gains
(losses) from economic hedges (3) (B)
(319 ) (1,220 ) (186 )
240 431 Total servicing
income, net
$ 406
468 262
309 400 Market-related valuation
changes to MSRs, net of hedge results (2)(3) (A)+(B)
$ 26 110
16 98 71
(1) Includes contractually specified
servicing fees, late charges and other ancillary revenues, net of
unreimbursed direct servicing costs.
(2) Refer to the changes in fair value
MSRs table on the previous page for more detail.
(3) Represents results from economic
hedges used to hedge the risk of changes in fair value of MSRs.
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30,
(in billions)
2018 2018
2017 2017 2017
Managed
servicing portfolio (1
): Residential mortgage servicing:
Serviced for others
$ 1,190 1,201 1,209 1,223 1,189
Owned loans serviced
340 337 342 340 343 Subserviced for
others
4 5
3 3 4 Total
residential servicing
1,534
1,543 1,554 1,566
1,536 Commercial mortgage servicing: Serviced
for others
518 510 495 480 475 Owned loans serviced
124 125 127 128 130 Subserviced for others
10 10 9
8 8 Total commercial servicing
652 645
631 616 613 Total
managed servicing portfolio
$ 2,186
2,188 2,185
2,182 2,149 Total serviced for others
$ 1,708 1,711 1,704 1,703 1,664 Ratio of MSRs to
related loans serviced for others
0.98 % 0.96 0.88
0.87 0.85 Weighted-average note rate (mortgage loans serviced for
others)
4.27 4.24
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
Jun 30,
Mar 31, Dec 31, Sep 30,
Jun 30,
2018 2018 2017
2017 2017
Net gains on mortgage loan
origination/sales activities (in millions): Residential (A)
$ 281 324 504 546 521 Commercial
49 76 95 81
81 Residential pipeline and unsold/repurchased loan management (1)
34
66 67 110
146 Total
$
364 466 666
737 748
Application data (in
billions): Wells Fargo first mortgage quarterly applications
$ 67 58 63 73 83 Refinances as a percentage of
applications
25 % 35 38 37 32 Wells Fargo first
mortgage unclosed pipeline, at quarter end
$ 26 24
23 29 34
Residential real estate originations: Purchases as a
percentage of originations
78 % 65 64 72 75
Refinances as a percentage of originations
22 35
36 28 25 Total
100 %
100 100 100
100 Wells Fargo first mortgage loans (in billions):
Retail
$ 21 16 23 26 25 Correspondent
28 27 30
32 31 Other (2)
1
— — 1
— Total quarter-to-date
$ 50 43
53 59 56
Held-for-sale (B)
$ 37 34 40 44 42
Held-for-investment
13
9 13
15 14 Total quarter-to-date
$ 50 43
53 59
56 Total year-to-date
$ 93 43 212
159 100
Production
margin on residential held-for-sale mortgage originations
(A)/(B)
0.77 %
0.94 1.25 1.24
1.24
(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
Jun 30, Mar 31,
Dec 31, Sep 30, Jun 30,
(in millions)
2018 2018
2017 2017 2017 Balance,
beginning of period
$ 181 181 179 178 222 Assumed
with MSR purchases (1)
— — — 10 — Provision for repurchase
losses: Loan sales
4 3 4 6 6 Change in estimate (2)
(2 ) 1 2
(12 ) (45 ) Net additions
(reductions) to provision
2 4 6 (6 ) (39 ) Losses
(4 ) (4 ) (4 )
(3 ) (5 ) Balance, end of period
$ 179 181
181 179 178
(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/20180713005043/en/
MediaAncel Martinez,
415-222-3858orInvestorsJohn M. Campbell,
415-396-0523
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