WFC Wells Fargo and Company

Full Year 2018 Net Income of $22.4 Billion; Diluted EPS of $4.28

Wells Fargo & Company (NYSE:WFC):

• Full year 2018 financial results:
  • Net income of $22.4 billion, compared with $22.2 billion in 2017
  • Diluted earnings per share (EPS) of $4.28, compared with $4.10
  • Return on assets (ROA) of 1.19 percent, return on equity (ROE) of 11.53 percent, and return on average tangible common equity (ROTCE) of 13.73 percent1
  • Revenue of $86.4 billion, down from $88.4 billion
  • Noninterest expense of $56.1 billion, down from $58.5 billion
  • Returned $25.8 billion to shareholders through common stock dividends and net share repurchases
    • Net share repurchases of $17.9 billion, which more than doubled from $6.8 billion in 2017
    • Common stock dividends of $1.64 per share, up 6 percent from $1.54 per share
    • Period-end common shares outstanding down 310.3 million shares, or 6 percent
• Fourth quarter 2018 financial results:
  • Net income of $6.1 billion, compared with $6.2 billion in fourth quarter 2017
  • Diluted earnings per share (EPS) of $1.21, compared with $1.16
  • ROA of 1.28 percent, ROE of 12.89 percent, and ROTCE of 15.39 percent1
  • Revenue of $21.0 billion, down from $22.1 billion
    • Net interest income of $12.6 billion, up $331 million
    • Noninterest income of $8.3 billion, down $1.4 billion
  • Noninterest expense of $13.3 billion, down $3.5 billion
  • Income tax expense of $966 million, compared with an income tax benefit of $1.6 billion
  • Average deposits of $1.3 trillion, down $42.6 billion, or 3 percent
  • Average loans of $946.3 billion, down $5.5 billion, or 1 percent
  • Provision expense of $521 million, down $130 million, or 20 percent
    • Net charge-offs of 0.30 percent of average loans (annualized), down from 0.31 percent
    • Reserve release2 of $200 million, compared with $100 million release
  • Nonaccrual loans of $6.5 billion, down $1.2 billion, or 15 percent

Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Annual Report on Form 10-K for the year ended December 31, 2018, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.

 

Selected Financial Information

  Quarter ended   Year ended Dec. 31,    

Dec 31, 2018

  Sep 30,2018  

Dec 31,2017

  2018   2017 Earnings         Diluted earnings per common share $ 1.21 1.13 1.16 4.28 4.10 Wells Fargo net income (in billions) 6.06 6.01 6.15 22.39 22.18 Return on assets (ROA) 1.28 % 1.27 1.26 1.19 1.15 Return on equity (ROE) 12.89 12.04 12.47 11.53 11.35 Return on average tangible common equity (ROTCE) (a) 15.39 14.33 14.85 13.73 13.55 Asset Quality Net charge-offs (annualized) as a % of average total loans 0.30 % 0.29 0.31 0.29 0.31 Allowance for credit losses as a % of total loans 1.12 1.16 1.25 1.12 1.25 Allowance for credit losses as a % of annualized net charge-offs 374 406 401 390 408 Other Revenue (in billions) $ 21.0 21.9 22.1 86.4 88.4 Efficiency ratio (b) 63.6 % 62.7 76.2 65.0 66.2 Average loans (in billions) $ 946.3 939.5 951.8 945.2 956.1 Average deposits (in billions) 1,268.9 1,266.4 1,311.6 1,275.9 1,304.6 Net interest margin   2.94 %   2.94     2.84     2.91     2.87

(a) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the “Tangible Common Equity” tables on page 36.

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

 

Wells Fargo & Company (NYSE:WFC) reported net income of $6.1 billion, or $1.21 per diluted common share, for fourth quarter 2018, compared with $6.2 billion, or $1.16 per share, for fourth quarter 2017, and $6.0 billion, or $1.13 per share, for third quarter 2018.

Chief Executive Officer Tim Sloan said, “I’m proud of the transformational changes we made at Wells Fargo during 2018 including significant progress on our six goals. We have made meaningful improvements to how we manage risk across the company, particularly operational and compliance risk. We improved customer service which resulted in both ‘Customer Loyalty’ and ‘Overall Satisfaction with Most Recent Visit’ branch survey scores reaching a 24-month high in December. Our voluntary team member attrition in 2018 improved to its lowest level in six years reflecting our efforts to make Wells Fargo a better place to work, and we continue to attract impressive leaders from outside the company. We launched many customer-focused innovations including our online mortgage application, Control TowerSM, Pay with Wells Fargo, and our new Propel® Card. Our commitment to building stronger communities was demonstrated by exceeding our target of donating $400 million to communities across the U.S., and a recent example was our Holiday Food Bank program which provided over 50 million meals during the holidays. Our focus on delivering long-term shareholder value included meeting our 2018 expense target and returning a record $25.8 billion to shareholders in 2018, up 78% from 2017. I want to thank our team members for their commitment to making Wells Fargo a better bank in 2018. I’m confident that we’ll continue to make Wells Fargo even better in 2019.”

Chief Financial Officer John Shrewsberry said, “Wells Fargo reported $6.1 billion of net income in the fourth quarter. Compared with the third quarter, we grew both loans and deposits and credit performance remained strong. In addition, our effective income tax rate was lower compared with the prior quarter, and we maintained solid capital levels even as we reduced our common shares outstanding. We continued to have positive business trends in the fourth quarter with primary consumer checking customers, consumer credit card active accounts, debit and credit card usage, commercial loan balances, and loan originations in auto, small business, home equity and student lending all growing compared with a year ago. Our focus on reducing expenses enabled us to meet our 2018 expense target, and we are on track to meet our 2019 expense target as well.”

Net Interest Income

Net interest income in the fourth quarter was $12.6 billion, up $72 million from third quarter 2018, driven primarily by the benefits of higher average interest rates and favorable hedge ineffectiveness accounting results, partially offset by the impacts from balance sheet mix and lower variable income. Net interest margin was 2.94 percent, flat compared with the prior quarter.

Noninterest Income

Noninterest income in the fourth quarter was $8.3 billion, down $1.0 billion from third quarter 2018. Fourth quarter noninterest income included lower market sensitive revenue3, mortgage banking fees and trust and investment fees, partially offset by higher other income.

• Mortgage banking income was $467 million, down from $846 million in third quarter 2018. Net mortgage servicing income was $109 million, down from $390 million in the third quarter predominantly due to updated mortgage servicing rights valuation assumptions driven by recent market observations. The production margin on residential held-for-sale mortgage loan originations4 decreased to 0.89 percent, from 0.97 percent in the third quarter, primarily due to lower retail margins, partially offset by a lower percentage of correspondent volume. Residential mortgage loan originations in the fourth quarter were $38 billion, down from $46 billion in the third quarter primarily due to seasonality.
• Market sensitive revenue3 was $40 million, down from $631 million in third quarter 2018, primarily due to lower net gains from equity securities as lower deferred compensation plan investment results were partially offset by higher equity investment gains. The decrease related to the deferred compensation plan was offset by lower employee benefits expense. Revenue from trading activities declined compared with the prior quarter as well, driven by wider spreads in credit and asset backed products.
• Other income was $595 million, up from $466 million in the third quarter. The increase in the fourth quarter included a $117 million gain from the previously announced sale of 52 branches.

Noninterest Expense

Noninterest expense in the fourth quarter declined $424 million from the prior quarter to $13.3 billion, predominantly due to a $671 million decline in employee benefits driven by lower deferred compensation expense (largely offset in market sensitive revenue), lower FDIC expense due to the completion of their special assessment, and lower operating losses. These decreases were partially offset by higher other expense, operating lease expense on lease asset impairment, outside professional services and salary expense. The efficiency ratio was 63.6 percent in fourth quarter 2018, compared with 62.7 percent in the third quarter.

Fourth quarter 2018 operating losses were $432 million and included a $175 million accrual for an agreement reached in December 2018 with all 50 state Attorneys General and the District of Columbia regarding previously disclosed matters.

Income Taxes

The Company’s effective income tax rate was 13.7 percent for fourth quarter 2018, compared with 20.1 percent for third quarter 2018, which included net discrete income tax expense in the third quarter related to re-measurement of our initial estimates for the impacts of the Tax Cuts & Jobs Act (Tax Act) recognized in fourth quarter 2017. The fourth quarter 2018 income tax rate included $158 million of net discrete income tax benefits primarily related to the results of state income tax audits and incremental state tax credits. In addition, the fourth quarter income tax rate benefited from $137 million related to revisions to our full year 2018 effective income tax rate made during the quarter. The Company's full year 2018 effective income tax rate was 20.2 percent (18 percent before discrete items). We currently expect the effective income tax rate for full year 2019 to be approximately 18 percent, excluding the impact of any unanticipated discrete items.

Loans

Total average loans were $946.3 billion in the fourth quarter, up $6.9 billion from the third quarter. Period-end loan balances were $953.1 billion at December 31, 2018, up $10.8 billion from September 30, 2018. Commercial loans were up $11.5 billion compared with September 30, 2018, due to $12.2 billion of growth in commercial and industrial loans, partially offset by a $583 million decline in commercial real estate loans. Consumer loans decreased $709 million from the prior quarter, reflecting the following:

• Real estate 1-4 family first mortgage loans increased $792 million, as $9.8 billion of held-for-investment nonconforming mortgage loan originations were predominantly offset by payoffs and $1.6 billion of sales of purchased credit-impaired (PCI) Pick-a-Pay mortgage loans. Additionally, $562 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 fourth quarter 2018 in anticipation of the future issuance of residential mortgage-backed securities (RMBS).
• Real estate 1-4 family junior lien mortgage loans decreased $932 million, as payoffs continued to exceed originations
• Credit card loans increased $1.2 billion primarily due to seasonality
• Automobile loans declined $1.0 billion due to expected continued runoff

 

Period-End Loan Balances

(in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Commercial   $ 513,405   501,886   503,105   503,396   503,388 Consumer   439,705     440,414     441,160     443,912     453,382 Total loans   $ 953,110     942,300     944,265     947,308     956,770 Change from prior quarter   $ 10,810     (1,965 )   (3,043 )   (9,462 )   4,897  

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 $484.7 billion at December 31, 2018, up $12.4 billion from the third quarter, predominantly due to a net increase in available-for-sale and held for trading debt securities. Debt securities purchases of approximately $16.9 billion, primarily U.S. Treasury and federal agency mortgage-backed securities (MBS) in the available-for-sale portfolio, more than offset runoff and sales.

Net unrealized losses on available-for-sale debt securities were $2.6 billion at December 31, 2018, compared with net unrealized losses of $3.8 billion at September 30, 2018, predominantly due to lower interest rates, partially offset by higher credit spreads.

Equity securities include marketable and non-marketable equity securities, as well as equity securities held for trading. Equity securities were $55.1 billion at December 31, 2018, down $6.6 billion from the third quarter, predominantly due to a decrease in equity securities held for trading.

Deposits

Total average deposits for fourth quarter 2018 were $1.3 trillion, up $2.6 billion from the prior quarter as growth in commercial deposits was partially offset by lower consumer and small business banking deposits, which included $1.8 billion of deposits associated with the previously announced sale of 52 branches that closed on November 30. The average deposit cost for fourth quarter 2018 was 55 basis points, up 8 basis points from the prior quarter and 27 basis points from a year ago.

Capital

Capital in the fourth quarter continued to exceed our internal target, with a Common Equity Tier 1 ratio (fully phased-in) of 11.7 percent5, down from 11.9 percent in the prior quarter. In fourth quarter 2018, the Company repurchased 142.7 million shares of its common stock, which net of issuances, reduced period-end common shares outstanding by 130.3 million. The Company paid a quarterly common stock dividend of $0.43 per share.

Credit Quality

Net Loan Charge-offs

The quarterly loss rate in the fourth quarter was 0.30 percent (annualized), compared with 0.29 percent in the prior quarter and 0.31 percent a year ago. Commercial and consumer losses were 0.10 percent and 0.53 percent, respectively. Total credit losses were $721 million in fourth quarter 2018, up $41 million from third quarter 2018. Commercial losses decreased $20 million driven by lower commercial and industrial loan net charge-offs and higher recoveries in commercial real estate, while consumer losses increased $61 million predominantly driven by seasonal increases in credit card and other revolving credit and installment loan charge-offs.

 

Net Loan Charge-Offs

  Quarter ended     December 31, 2018   September 30, 2018   December 31, 2017 ($ in millions)  

Net loancharge-offs

 

As a % ofaverageloans (a)

 

Net loancharge-offs

 

As a % ofaverageloans (a)

 

Net loancharge-offs

 

As a % ofaverageloans (a)

Commercial:       Commercial and industrial $ 132 0.15 % $ 148 0.18 % $ 118 0.14 % Real estate mortgage (12 ) (0.04 ) (1 ) — (10 ) (0.03 ) Real estate construction (1 ) (0.01 ) (2 ) (0.04 ) (3 ) (0.05 ) Lease financing   13   0.26 7   0.14 10   0.20 Total commercial   132   0.10 152   0.12 115   0.09 Consumer: Real estate 1-4 family first mortgage (22 ) (0.03 ) (25 ) (0.04 ) (23 ) (0.03 ) Real estate 1-4 family junior lien mortgage (10 ) (0.11 ) (9 ) (0.10 ) (7 ) (0.06 ) Credit card 338 3.54 299 3.22 336 3.66 Automobile 133 1.16 130 1.10 188 1.38 Other revolving credit and installment   150   1.64 133   1.44 142   1.46 Total consumer   589   0.53 528   0.47 636   0.56 Total   $ 721   0.30 % $ 680   0.29 % $ 751   0.31 %  

(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 $289 million, or 4 percent, from third quarter 2018 to $6.9 billion. Nonaccrual loans decreased $218 million from third quarter 2018 to $6.5 billion reflecting both lower consumer and commercial nonaccruals.

 

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

    December 31, 2018   September 30, 2018   December 31, 2017 ($ in millions)  

Totalbalances

 

As a% oftotalloans

 

Totalbalances

 

As a% oftotalloans

 

Totalbalances

 

As a% oftotalloans

Commercial:             Commercial and industrial $ 1,486 0.42 % $ 1,555 0.46 % $ 1,899 0.57 % Real estate mortgage 580 0.48 603 0.50 628 0.50 Real estate construction 32 0.14 44 0.19 37 0.15 Lease financing   90   0.46 96   0.49 76   0.39 Total commercial   2,188   0.43 2,298   0.46 2,640   0.52 Consumer: Real estate 1-4 family first mortgage 3,183 1.12 3,267 1.15 3,732 1.31 Real estate 1-4 family junior lien mortgage 945 2.75 983 2.78 1,086 2.73 Automobile 130 0.29 118 0.26 130 0.24 Other revolving credit and installment   50   0.14 48   0.13 58   0.15 Total consumer   4,308   0.98 4,416   1.00 5,006   1.10 Total nonaccrual loans (a)   6,496   0.68 6,714   0.71 7,646   0.80 Foreclosed assets: Government insured/guaranteed 88 87 120 Non-government insured/guaranteed   363   435   522   Total foreclosed assets   451   522   642   Total nonperforming assets   $ 6,947   0.73 % $ 7,236   0.77 % $ 8,288   0.87 % Change from prior quarter: Total nonaccrual loans (a) $ (218 ) $ (412 ) $ (572 ) Total nonperforming assets   (289 )       (389 )       (636 )    

(a) Financial information for periods prior to December 31, 2018, has been revised to exclude mortgage loans held for sale (MLHFS), loans held for sale (LHFS) and loans held at fair value. For additional information, see the "Five Quarter Nonperforming Assets" table on page 32.

 

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $10.7 billion at December 31, 2018, down $249 million from September 30, 2018. Fourth quarter 2018 included a $200 million reserve release2, which reflected continued improvement in the credit quality of the loan portfolio. The allowance coverage for total loans was 1.12 percent, compared with 1.16 percent in third quarter 2018. The allowance covered 3.7 times annualized fourth quarter net charge-offs, compared with 4.1 times in the prior quarter. The allowance coverage for nonaccrual loans was 165 percent at December 31, 2018, compared with 163 percent at September 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 (in millions)   Dec 31, 2018   Sep 30,2018   Dec 31,2017 Community Banking $ 3,169   2,816   3,472 Wholesale Banking 2,671 2,851 2,373 Wealth and Investment Management   689     732     675  

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 and private equity partnerships.

 

Selected Financial Information

  Quarter ended (in millions)   Dec 31, 2018   Sep 30,2018  

Dec 31,2017

Total revenue $ 11,461   11,816   11,720 Provision for credit losses 534 547 636 Noninterest expense 7,032 7,467 10,216 Segment net income 3,169 2,816 3,472 (in billions) Average loans 459.7 460.9 473.2 Average assets 1,015.9 1,024.9 1,073.2 Average deposits   759.4     760.9     738.3  

Fourth Quarter 2018 vs. Third Quarter 2018

• Net income of $3.2 billion, up $353 million, or 13 percent, primarily due to lower noninterest expense and income tax expense, partially offset by lower revenue
• Revenue was $11.5 billion, down $355 million, or 3 percent, driven predominantly by lower mortgage banking income and lower market sensitive revenue reflecting lower deferred compensation plan investment results (offset in employee benefits expense), partially offset by a $117 million gain on the previously announced sale of 52 branches
• Noninterest expense of $7.0 billion was down $435 million, or 6 percent, driven mainly by lower deferred compensation expense (offset in market sensitive revenue), operating losses, and FDIC expense, partially offset by higher other expense

Fourth Quarter 2018 vs. Fourth Quarter 2017

• Net income was down $303 million, or 9 percent, predominantly due to higher income tax expense, as fourth quarter 2017 included an income tax benefit from the Tax Act, and lower revenue, partially offset by lower noninterest expense
• Revenue declined $259 million, or 2 percent, predominantly due to lower market sensitive revenue and mortgage banking income, partially offset by gains from the sales of PCI Pick-a-Pay loans and the previously announced sale of 52 branches
• Noninterest expense decreased $3.2 billion, or 31 percent, driven by lower operating losses
• Provision for credit losses decreased $102 million, largely due to continued credit improvement in the automobile and consumer real estate portfolios

Business Metrics and Highlights

• Primary consumer checking customers6,7 of 23.9 million, up 1.2 percent from a year ago. The previously announced sale of 52 branches and $1.8 billion of deposits which closed in fourth quarter 2018 reduced the growth rate by 0.5 percent
• More than 318,000 branch customer experience surveys completed during fourth quarter 2018 (over 1.4 million in 2018), with both ‘Customer Loyalty’ and ‘Overall Satisfaction with Most Recent Visit’ scores up from the prior quarter and reaching a 24-month high in December
• Debit card point-of-sale purchase volume8 of $89.8 billion in the fourth quarter, up 8 percent year-over-year
• General purpose credit card point-of-sale purchase volume of $20.2 billion in the fourth quarter, up 5 percent year-over-year
• 29.2 million digital (online and mobile) active customers, including 22.8 million mobile active users7,9
• 5,518 retail bank branches as of the end of fourth quarter 2018, reflecting 93 branch consolidations in the quarter and 300 in 2018; in addition, completed the previously announced sale of 52 branches in Indiana, Ohio, Michigan and part of Wisconsin in fourth quarter 2018
• Home Lending
  • Originations of $38 billion, down from $46 billion in the prior quarter, primarily due to seasonality; included home equity originations of $673 million, down 6 percent from the prior quarter and up 14 percent from the prior year
  • Applications of $48 billion, down from $57 billion in the prior quarter
  • Application pipeline of $18 billion at quarter end, down from $22 billion at September 30, 2018
  • Production margin on residential held-for-sale mortgage loan originations4 of 0.89 percent, down from 0.97 percent in the prior quarter, primarily due to lower retail margins
• Automobile originations of $4.7 billion in the fourth quarter, up 9 percent from the prior year
• Student loan originations of $258 million in fourth quarter 2018, up 16 percent from the prior year
• Small Business Lending10 originations of $595 million, up 19 percent from the prior year

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 Commercial Banking, Commercial Real Estate, Corporate and Investment Banking, Principal Investments, Treasury Management, and Commercial Capital.

 

Selected Financial Information

  Quarter ended (in millions)   Dec 31, 2018   Sep 30,2018   Dec 31,2017 Total revenue $ 6,926   7,304   7,440 Provision (reversal of provision) for credit losses (28 ) 26 20 Noninterest expense 4,025 3,935 4,187 Segment net income 2,671 2,851 2,373 (in billions) Average loans 470.2 462.8 463.5 Average assets 839.1 827.2 837.2 Average deposits   421.6     413.6     465.7  

Fourth Quarter 2018 vs. Third Quarter 2018

• Net income of $2.7 billion, down $180 million, or 6 percent
• Revenue of $6.9 billion decreased $378 million, or 5 percent, as higher net interest income, commercial real estate brokerage and other fees were more than offset by lower market sensitive revenue, investment banking fees and other income
• Noninterest expense of $4.0 billion increased $90 million, or 2 percent, reflecting higher operating lease expense, partially offset by lower FDIC expense
• Provision for credit losses decreased $54 million, driven primarily by higher recoveries

Fourth Quarter 2018 vs. Fourth Quarter 2017

• Net income increased $298 million, or 13 percent, as fourth quarter 2018 results benefited from a lower effective income tax rate
• Revenue decreased $514 million, or 7 percent, largely due to the impact of the sales of Wells Fargo Insurance Services USA (WFIS) in fourth quarter 2017 and Wells Fargo Shareowner Services in first quarter 2018, as well as lower market sensitive revenue, operating lease income and treasury management fees, partially offset by increases related to losses taken in fourth quarter 2017 from adjustments to leveraged leases and other tax advantaged businesses due to the Tax Act
• Noninterest expense decreased $162 million, or 4 percent, on lower expense related to the sales of WFIS and Wells Fargo Shareowner Services, as well as lower project-related expense and FDIC expense, partially offset by higher regulatory, risk and technology expense

Business Metrics and Highlights

• Commercial card spend volume11 of $8.6 billion, up 11 percent from the prior year on increased transaction volumes primarily reflecting customer growth, and up 5 percent compared with third quarter 2018
• U.S. investment banking market share of 3.2 percent in 201812, compared with 3.6 percent in 201712

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 (in millions)   Dec 31, 2018   Sep 30,2018   Dec 31,2017 Total revenue $ 3,957   4,226   4,333 Provision (reversal of provision) for credit losses (3 ) 6 (7 ) Noninterest expense 3,044 3,243 3,246 Segment net income 689 732 675 (in billions) Average loans 75.2 74.6 72.9 Average assets 83.6 83.8 83.7 Average deposits   155.5     159.8     184.1    

Fourth Quarter 2018 vs. Third Quarter 2018

• Net income of $689 million, down $43 million, or 6 percent
• Revenue of $4.0 billion decreased $269 million, or 6 percent, mostly due to net losses from equity securities on lower deferred compensation plan investment results of $218 million (offset in employee benefits expense) and lower asset-based fees
• Noninterest expense of $3.0 billion decreased $199 million, or 6 percent, primarily driven by lower employee benefits from deferred compensation plan expense of $216 million (offset in deferred compensation plan investments)

Fourth Quarter 2018 vs. Fourth Quarter 2017

• Net income up $14 million, or 2 percent, as fourth quarter 2018 results benefited from a lower effective income tax rate
• Revenue decreased $376 million, or 9 percent, primarily driven by lower deferred compensation plan investment results of $235 million (offset in employee benefits expense), asset-based fees, brokerage transaction revenue, and net interest income
• Noninterest expense decreased $202 million, or 6 percent, primarily due to lower employee benefits from deferred compensation plan expense of $234 million (offset in deferred compensation plan investments) and lower FDIC expense, partially offset by higher regulatory, risk and technology expense

Business Metrics and Highlights

Total WIM Segment

• WIM total client assets of $1.7 trillion, down 10 percent from a year ago, driven primarily by lower market valuations, as well as net outflows
• Average loan balances up 3 percent from a year ago largely due to growth in nonconforming mortgage loans
• Full year 2018 closed referred investment assets (referrals resulting from the WIM/Community Banking partnership) of $10.1 billion, down 2 percent compared with 2017

Retail Brokerage

• Client assets of $1.5 trillion, down 10 percent from prior year, driven primarily by lower market valuations, as well as net outflows
• Advisory assets of $501 billion, down 8 percent from prior year, driven primarily by lower market valuations, as well as net outflows

Wealth Management

• Client assets of $224 billion, down 10 percent from prior year, driven primarily by lower market valuations, as well as lower deposit balances

Asset Management

• Total assets under management (AUM) of $466 billion, down 8 percent from prior year, primarily due to equity and fixed income net outflows, the sale of Wells Fargo Asset Management's ownership stake in The Rock Creek Group, LP and removal of the associated AUM, and lower market valuations, partially offset by higher money market fund net inflows

Retirement

• IRA assets of $373 billion, down 9 percent from prior year
• Institutional Retirement plan assets of $364 billion, down 8 percent from prior year

Conference Call

The Company will host a live conference call on Tuesday, January 15, 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~7179357.

A replay of the conference call will be available beginning at 11:00 a.m. PT (2:00 p.m. ET) on Tuesday, January 15 through Tuesday, January 29. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #7179357. 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~7179357.

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 November 2018, comparisons with November 2017.

8 Combined consumer and business debit card purchase volume dollars.

9 Primarily includes retail banking, consumer lending, small business and business banking customers.

10 Small Business Lending includes credit card, lines of credit and loan products (primarily under $100,000 sold through our retail banking branches).

11 Includes commercial card volume for the entire company.

12 Source: Dealogic U.S. investment banking fee market share.

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, geopolitical matters, and any 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 any efficiency ratio or expense 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 interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgage loans 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, investment and mortgage products and services, as well as consumer and commercial finance, through 7,800 locations, more than 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 37 countries and territories to support customers who conduct business in the global economy. With approximately 259,000 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

  Quarter ended   % ChangeDec 31, 2018 from   Year ended   ($ in millions, except per share amounts)   Dec 31, 2018   Sep 30,2018   Dec 31,2017   Sep 30,2018   Dec 31,2017   Dec 31, 2018   Dec 31,2017   %Change For the Period         Wells Fargo net income $ 6,064 6,007 6,151 1 % (1 ) $ 22,393 22,183 1 % Wells Fargo net income applicable to common stock 5,711 5,453 5,740 5 (1 ) 20,689 20,554 1 Diluted earnings per common share 1.21 1.13 1.16 7 4 4.28 4.10 4 Profitability ratios (annualized): Wells Fargo net income to average assets (ROA) 1.28 % 1.27 1.26 1 2 1.19 % 1.15 3 Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.89 12.04 12.47 7 3 11.53 11.35 2 Return on average tangible common equity (ROTCE)(1) 15.39 14.33 14.85 7 4 13.73 13.55 1 Efficiency ratio (2) 63.6 62.7 76.2 1 (17 ) 65.0 66.2 (2 ) Total revenue $ 20,980 21,941 22,050 (4 ) (5 ) $ 86,408 88,389 (2 ) Pre-tax pre-provision profit (PTPP) (3) 7,641 8,178 5,250 (7 ) 46 30,282 29,905 1 Dividends declared per common share 0.43 0.43 0.39 — 10 1.64 1.54 6 Average common shares outstanding 4,665.8 4,784.0 4,912.5 (2 ) (5 ) 4,799.7 4,964.6 (3 ) Diluted average common shares outstanding 4,700.8 4,823.2 4,963.1 (3 ) (5 ) 4,838.4 5,017.3 (4 ) Average loans $ 946,336 939,462 951,822 1 (1 ) $ 945,197 956,129 (1 ) Average assets 1,879,047 1,876,283 1,935,318 — (3 ) 1,888,892 1,933,005 (2 ) Average total deposits 1,268,948 1,266,378 1,311,592 — (3 ) 1,275,857 1,304,622 (2 ) Average consumer and small business banking deposits (4) 736,295 743,503 757,541 (1 ) (3 ) 747,183 758,271 (1 ) Net interest margin 2.94 % 2.94 2.84 — 4 2.91

%

2.87 1 At Period End Debt securities (5) $ 484,689 472,283 473,366 3 2 $ 484,689 473,366 2 Loans 953,110 942,300 956,770 1 — 953,110 956,770 — Allowance for loan losses 9,775 10,021 11,004 (2 ) (11 ) 9,775 11,004 (11 ) Goodwill 26,418 26,425 26,587 — (1 ) 26,418 26,587 (1 ) Equity securities (5) 55,148 61,755 62,497 (11 ) (12 ) 55,148 62,497 (12 ) Assets 1,895,883 1,872,981 1,951,757 1 (3 ) 1,895,883 1,951,757 (3 ) Deposits 1,286,170 1,266,594 1,335,991 2 (4 ) 1,286,170 1,335,991 (4 ) Common stockholders' equity 174,359 176,934 183,134 (1 ) (5 ) 174,359 183,134 (5 ) Wells Fargo stockholders’ equity 196,166 198,741 206,936 (1 ) (5 ) 196,166 206,936 (5 ) Total equity 197,066 199,679 208,079 (1 ) (5 ) 197,066 208,079 (5 ) Tangible common equity (1) 145,980 148,391 153,730 (2 ) (5 ) 145,980 153,730 (5 ) Common shares outstanding 4,581.3 4,711.6 4,891.6 (3 ) (6 ) 4,581.3 4,891.6 (6 ) Book value per common share (6) $ 38.06 37.55 37.44 1 2 $ 38.06 37.44 2 Tangible book value per common share (1)(6) 31.86 31.49 31.43 1 1 31.86 31.43 1 Team members (active, full-time equivalent)   258,700     261,700     262,700     (1 )   (2 )   258,700     262,700     (2 )

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity 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 ($ in millions, except per share amounts)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 For the Quarter         Wells Fargo net income $ 6,064 6,007 5,186 5,136 6,151 Wells Fargo net income applicable to common stock 5,711 5,453 4,792 4,733 5,740 Diluted earnings per common share 1.21 1.13 0.98 0.96 1.16 Profitability ratios (annualized): Wells Fargo net income to average assets (ROA) 1.28 % 1.27 1.10 1.09 1.26 Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.89 12.04 10.60 10.58 12.47 Return on average tangible common equity (ROTCE)(1) 15.39 14.33 12.62 12.62 14.85 Efficiency ratio (2) 63.6 62.7 64.9 68.6 76.2 Total revenue $ 20,980 21,941 21,553 21,934 22,050 Pre-tax pre-provision profit (PTPP) (3) 7,641 8,178 7,571 6,892 5,250 Dividends declared per common share 0.43 0.43 0.39 0.39 0.39 Average common shares outstanding 4,665.8 4,784.0 4,865.8 4,885.7 4,912.5 Diluted average common shares outstanding 4,700.8 4,823.2 4,899.8 4,930.7 4,963.1 Average loans $ 946,336 939,462 944,079 951,024 951,822 Average assets 1,879,047 1,876,283 1,884,884 1,915,896 1,935,318 Average total deposits 1,268,948 1,266,378 1,271,339 1,297,178 1,311,592 Average consumer and small business banking deposits (4) 736,295 743,503 754,047 755,483 757,541 Net interest margin 2.94 % 2.94 2.93 2.84 2.84 At Quarter End Debt securities (5) $ 484,689 472,283 475,495 472,968 473,366 Loans 953,110 942,300 944,265 947,308 956,770 Allowance for loan losses 9,775 10,021 10,193 10,373 11,004 Goodwill 26,418 26,425 26,429 26,445 26,587 Equity securities (5) 55,148 61,755 57,505 58,935 62,497 Assets 1,895,883 1,872,981 1,879,700 1,915,388 1,951,757 Deposits 1,286,170 1,266,594 1,268,864 1,303,689 1,335,991 Common stockholders' equity 174,359 176,934 181,386 181,150 183,134 Wells Fargo stockholders’ equity 196,166 198,741 205,188 204,952 206,936 Total equity 197,066 199,679 206,069 205,910 208,079 Tangible common equity (1) 145,980 148,391 152,580 151,878 153,730 Common shares outstanding 4,581.3 4,711.6 4,849.1 4,873.9 4,891.6 Book value per common share (6) $ 38.06 37.55 37.41 37.17 37.44 Tangible book value per common share (1)(6) 31.86 31.49 31.47 31.16 31.43 Team members (active, full-time equivalent)   258,700     261,700     264,500     265,700     262,700

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity 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 quarter ended December 31, 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 December 31,   %   Year ended December 31,   % (in millions, except per share amounts)   2018   2017   Change   2018   2017   Change Interest income     Debt securities (1) $ 3,803 3,294 15 % $ 14,406 12,946 11 % Mortgage loans held for sale 190 196 (3 ) 777 786 (1 ) Loans held for sale (1) 33 12 175 140 50 180 Loans 11,367 10,367 10 43,974 41,388 6 Equity securities (1) 260 239 9 992 799 24 Other interest income (1)   1,268     850   49   4,358     2,940   48 Total interest income   16,921     14,958   13   64,647     58,909   10 Interest expense Deposits 1,765 931 90 5,622 3,013 87 Short-term borrowings 546 255 114 1,717 758 127 Long-term debt 1,802 1,344 34 6,703 5,157 30 Other interest expense   164     115   43   610     424   44 Total interest expense   4,277     2,645   62   14,652     9,352   57 Net interest income 12,644 12,313 3 49,995 49,557 1 Provision for credit losses   521     651   (20 )   1,744     2,528   (31 ) Net interest income after provision for credit losses   12,123     11,662   4   48,251     47,029   3 Noninterest income Service charges on deposit accounts 1,176 1,246 (6 ) 4,716 5,111 (8 ) Trust and investment fees 3,520 3,687 (5 ) 14,509 14,495 — Card fees 981 996 (2 ) 3,907 3,960 (1 ) Other fees 888 913 (3 ) 3,384 3,557 (5 ) Mortgage banking 467 928 (50 ) 3,017 4,350 (31 ) Insurance 109 223 (51 ) 429 1,049 (59 ) Net gains (losses) from trading activities (1) 10 (1 ) NM 602 542 11 Net gains on debt securities 9 157 (94 ) 108 479 (77 ) Net gains from equity securities (1) 21 572 (96 ) 1,515 1,779 (15 ) Lease income 402 458 (12 ) 1,753 1,907 (8 ) Other   753     558   35   2,473     1,603   54 Total noninterest income   8,336     9,737   (14 )   36,413     38,832   (6 ) Noninterest expense Salaries 4,545 4,403 3 17,834 17,363 3 Commission and incentive compensation 2,427 2,665 (9 ) 10,264 10,442 (2 ) Employee benefits 706 1,293 (45 ) 4,926 5,566 (11 ) Equipment 643 608 6 2,444 2,237 9 Net occupancy 735 715 3 2,888 2,849 1 Core deposit and other intangibles 264 288 (8 ) 1,058 1,152 (8 ) FDIC and other deposit assessments 153 312 (51 ) 1,110 1,287 (14 ) Other   3,866     6,516   (41 )   15,602     17,588   (11 ) Total noninterest expense   13,339     16,800   (21 )   56,126     58,484   (4 ) Income before income tax expense 7,120 4,599 55 28,538 27,377 4 Income tax expense (benefit)   966     (1,642 ) NM   5,662     4,917   15 Net income before noncontrolling interests 6,154 6,241 (1 ) 22,876 22,460 2 Less: Net income from noncontrolling interests   90     90   —   483     277   74 Wells Fargo net income   $ 6,064     6,151   (1 )   $ 22,393     22,183   1 Less: Preferred stock dividends and other   353     411   (14 )   1,704     1,629   5 Wells Fargo net income applicable to common stock   $ 5,711     5,740   (1 )   $ 20,689     20,554   1 Per share information Earnings per common share $ 1.22 1.17 4 $ 4.31 4.14 4 Diluted earnings per common share 1.21 1.16 4 4.28 4.10 4 Average common shares outstanding 4,665.8 4,912.5 (5 ) 4,799.7 4,964.6 (3 ) Diluted average common shares outstanding   4,700.8     4,963.1     (5 )   4,838.4     5,017.3     (4 )

NM - Not meaningful

(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 (in millions, except per share amounts)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Interest income         Debt securities (1) $ 3,803 3,595 3,594 3,414 3,294 Mortgage loans held for sale 190 210 198 179 196 Loans held for sale (1) 33 35 48 24 12 Loans 11,367 11,116 10,912 10,579 10,367 Equity securities (1) 260 280 221 231 239 Other interest income (1)   1,268     1,128     1,042     920     850   Total interest income   16,921     16,364     16,015     15,347     14,958   Interest expense Deposits 1,765 1,499 1,268 1,090 931 Short-term borrowings 546 462 398 311 255 Long-term debt 1,802 1,667 1,658 1,576 1,344 Other interest expense   164     164     150     132     115   Total interest expense   4,277     3,792     3,474     3,109     2,645   Net interest income 12,644 12,572 12,541 12,238 12,313 Provision for credit losses   521     580     452     191     651   Net interest income after provision for credit losses   12,123     11,992     12,089     12,047     11,662   Noninterest income Service charges on deposit accounts 1,176 1,204 1,163 1,173 1,246 Trust and investment fees 3,520 3,631 3,675 3,683 3,687 Card fees 981 1,017 1,001 908 996 Other fees 888 850 846 800 913 Mortgage banking 467 846 770 934 928 Insurance 109 104 102 114 223 Net gains (losses) from trading activities (1) 10 158 191 243 (1 ) Net gains on debt securities 9 57 41 1 157 Net gains from equity securities (1) 21 416 295 783 572 Lease income 402 453 443 455 458 Other   753     633     485     602     558   Total noninterest income   8,336     9,369     9,012     9,696     9,737   Noninterest expense Salaries 4,545 4,461 4,465 4,363 4,403 Commission and incentive compensation 2,427 2,427 2,642 2,768 2,665 Employee benefits 706 1,377 1,245 1,598 1,293 Equipment 643 634 550 617 608 Net occupancy 735 718 722 713 715 Core deposit and other intangibles 264 264 265 265 288 FDIC and other deposit assessments 153 336 297 324 312 Other   3,866     3,546     3,796     4,394     6,516   Total noninterest expense   13,339     13,763     13,982     15,042     16,800   Income before income tax expense 7,120 7,598 7,119 6,701 4,599 Income tax expense (benefit)   966     1,512     1,810     1,374     (1,642 ) Net income before noncontrolling interests 6,154 6,086 5,309 5,327 6,241 Less: Net income from noncontrolling interests   90     79     123     191     90   Wells Fargo net income   $ 6,064     6,007     5,186     5,136     6,151   Less: Preferred stock dividends and other   353     554     394     403     411   Wells Fargo net income applicable to common stock   $ 5,711     5,453     4,792     4,733     5,740   Per share information Earnings per common share $ 1.22 1.14 0.98 0.97 1.17 Diluted earnings per common share 1.21 1.13 0.98 0.96 1.16 Average common shares outstanding 4,665.8 4,784.0 4,865.8 4,885.7 4,912.5 Diluted average common shares outstanding   4,700.8     4,823.2     4,899.8     4,930.7     4,963.1  

(1) Financial information for the quarter ended December 31, 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 December 31,   %   Year ended December 31,   % (in millions)   2018   2017   Change   2018   2017   Change Wells Fargo net income   $ 6,064     6,151   (1)% $ 22,393     22,183   1% Other comprehensive income (loss), before tax:     Debt securities (1): Net unrealized gains (losses) arising during the period 1,035 (106 ) NM (4,493 ) 2,719 NM Reclassification of net (gains) losses to net income 80 (215 ) NM 248 (737 ) NM Derivatives and hedging activities: Net unrealized losses arising during the period (116 ) (558 ) (79) (532 ) (540 ) (1) Reclassification of net (gains) losses to net income 78 (83 ) NM 294 (543 ) NM Defined benefit plans adjustments: Net actuarial and prior service gains (losses) arising during the period (440 ) 45 NM (434 ) 49 NM Amortization of net actuarial loss, settlements and other to net income 163 33 394 253 153 65 Foreign currency translation adjustments: Net unrealized gains (losses) arising during the period   (62 )   10   NM (156 )   96   NM Other comprehensive income (loss), before tax 738 (874 ) NM (4,820 ) 1,197 NM Income tax benefit (expense) related to other comprehensive income   (202 )   319   NM 1,144     (434 ) NM Other comprehensive income (loss), net of tax 536 (555 ) NM (3,676 ) 763 NM Less: Other comprehensive loss from noncontrolling interests   (1 )   (33 ) (97) (2 )   (62 ) (97) Wells Fargo other comprehensive income (loss), net of tax   537     (522 ) NM (3,674 )   825   NM Wells Fargo comprehensive income 6,601 5,629 17 18,719 23,008 (19) Comprehensive income from noncontrolling interests   89     57   56 481     215   124 Total comprehensive income   $ 6,690     5,686     18   $ 19,200     23,223     (17)

NM – Not meaningful

(1) The quarter and year ended December 31, 2017, includes net unrealized gains (losses) arising during the period from equity securities of ($31) million and $81 million and reclassification of net (gains) losses to net income related to equity securities of ($133) million and ($456) million, respectively. With the adoption in first quarter 2018 of ASU 2016-01, the quarter and year ended December 31, 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 (in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Balance, beginning of period $ 199,679   206,069   205,910   208,079   206,617 Cumulative effect from change in accounting policies (1) — — — (24 ) — Wells Fargo net income 6,064 6,007 5,186 5,136 6,151 Wells Fargo other comprehensive income (loss), net of tax 537 (1,012 ) (540 ) (2,659 ) (522 ) Noncontrolling interests (38 ) 57 (77 ) (178 ) 247 Common stock issued 239 156 73 1,208 436 Common stock repurchased (2) (7,299 ) (7,382 ) (2,923 ) (3,029 ) (2,845 ) Preferred stock redeemed (3) — (2,150 ) — — — Preferred stock released by ESOP 268 260 490 231 218 Common stock warrants repurchased/exercised (131 ) (36 ) (1 ) (157 ) (46 ) Common stock dividends (2,016 ) (2,062 ) (1,900 ) (1,911 ) (1,920 ) Preferred stock dividends (353 ) (399 ) (394 ) (410 ) (411 ) Stock incentive compensation expense 144 202 258 437 206 Net change in deferred compensation and related plans   (28 )   (31 )   (13 )   (813 )   (52 ) Balance, end of period   $ 197,066     199,679     206,069     205,910     208,079  

(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 that settled in third quarter 2018 for 18.8 million shares of common stock.

(3) Represents the impact of the redemption of preferred stock, Series J, in third quarter 2018.

   

Wells Fargo & Company and Subsidiaries

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

Quarter ended December 31, 2018   2017 (in millions)  

Averagebalance

 

Yields/rates

 

Interestincome/expense

 

Averagebalance

 

Yields/rates

 

Interestincome/expense

Earning assets         Interest-earning deposits with banks (3) $ 150,091 2.18 % $ 825 189,114 1.27 % $ 605 Federal funds sold and securities purchased under resale agreements (3) 76,108 2.22 426 75,826 1.20 230 Debt securities (4): Trading debt securities (5) 90,110 3.52 794 81,580 3.17 647 Available-for-sale debt securities: Securities of U.S. Treasury and federal agencies 7,195 1.80 32 6,423 1.66 27 Securities of U.S. states and political subdivisions 47,618 4.05 483 52,390 3.91 513 Mortgage-backed securities: Federal agencies 155,322 2.91 1,128 152,910 2.62 1,000 Residential and commercial   6,666   4.87 81   9,371   4.85 114 Total mortgage-backed securities 161,988 2.99 1,209 162,281 2.75 1,114 Other debt securities (5)   46,072   4.46 518   48,679   3.62 443 Total available-for-sale debt securities (5)   262,873   3.41 2,242   269,773   3.10 2,097

Held-to-maturity debt securities:

Securities of U.S. Treasury and federal agencies 44,747 2.19 247 44,716 2.19 246 Securities of U.S. states and political subdivisions 6,247 4.34 67 6,263 5.26 83 Federal agency and other mortgage-backed securities 95,748 2.46 589 89,622 2.25 503 Other debt securities   68   3.65 1   1,194   2.64 8 Total held-to-maturity debt securities   146,810   2.46 904   141,795   2.36 840 Total debt securities (5) 499,793 3.15 3,940 493,148 2.90 3,584 Mortgage loans held for sale (6) 17,044 4.46 190 20,517 3.82 196 Loans held for sale (5)(6) 1,992 6.69 33 1,490 3.19 12 Commercial loans: Commercial and industrial - U.S. 281,431 4.40 3,115 270,294 3.89 2,649 Commercial and industrial - Non U.S. 62,035 3.73 584 59,233 2.96 442 Real estate mortgage 120,404 4.51 1,369 127,199 3.88 1,244 Real estate construction 23,090 5.32 310 24,408 4.38 270 Lease financing   19,519   4.48 219   19,226   0.62 31 Total commercial loans   506,479   4.39 5,597   500,360   3.68 4,636 Consumer loans: Real estate 1-4 family first mortgage 285,260 4.02 2,868 281,966 4.01 2,826 Real estate 1-4 family junior lien mortgage 34,844 5.60 491 40,379 4.96 505 Credit card 37,858 12.69 1,211 36,428 12.37 1,136 Automobile 45,536 5.16 592 54,323 5.13 702 Other revolving credit and installment   36,359   6.95 637   38,366   6.28 607 Total consumer loans   439,857   5.25 5,799   451,462   5.10 5,776 Total loans (6) 946,336 4.79 11,396 951,822 4.35 10,412 Equity securities (5) 37,412 2.79 261 38,001 2.60 246 Other (5)   4,074   1.78 18   7,103   0.88 16 Total earning assets (5)   $ 1,732,850   3.93 % $ 17,089   1,777,021   3.43 % $ 15,301 Funding sources Deposits: Interest-bearing checking $ 53,983 1.21 % $ 165 50,483 0.68 % $ 86 Market rate and other savings 689,639 0.43 741 679,893 0.19 319 Savings certificates 21,955 0.87 48 20,920 0.31 17 Other time deposits 92,676 2.46 575 68,187 1.49 255 Deposits in foreign offices   56,098   1.66 236   124,597   0.81 254 Total interest-bearing deposits 914,351 0.77 1,765 944,080 0.39 931 Short-term borrowings 105,962 2.04 546 102,142 0.99 256 Long-term debt 226,591 3.17 1,802 231,598 2.32 1,344 Other liabilities   27,365   2.41 164   24,728   1.86 115 Total interest-bearing liabilities 1,274,269 1.34 4,277 1,302,548 0.81 2,646 Portion of noninterest-bearing funding sources (5)   458,581   — —   474,473   — — Total funding sources (5)   $ 1,732,850   0.99   4,277   1,777,021   0.59   2,646 Net interest margin and net interest income on a taxable-equivalent basis (7) 2.94 %   $ 12,812   2.84 %   $ 12,655 Noninterest-earning assets Cash and due from banks $ 19,288 19,152 Goodwill 26,423 26,579 Other (5)   100,486   112,566   Total noninterest-earning assets (5)   $ 146,197   158,297   Noninterest-bearing funding sources Deposits $ 354,597 367,512 Other liabilities 51,739 57,845 Total equity 198,442 207,413 Noninterest-bearing funding sources used to fund earning assets (5)   (458,581 ) (474,473 ) Net noninterest-bearing funding sources (5)   $ 146,197   158,297   Total assets   $ 1,879,047   1,935,318    

(1) Our average prime rate was 5.28% and 4.30% for the quarters ended December 31, 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 2.62% and 1.46% 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) 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.

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

(7) Includes taxable-equivalent adjustments of $168 million and $342 million for the quarters ended December 31, 2018 and 2017, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 21% and 35% for the quarters ended December 31, 2018 and 2017, respectively.

   

Wells Fargo & Company and Subsidiaries

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

Year ended December 31, 2018   2017 (in millions)  

Averagebalance

 

Yields/rates

 

Interestincome/expense

 

Averagebalance

 

Yields/rates

 

Interestincome/expense

Earning assets         Interest-earning deposits with banks (3) $ 156,366 1.82 % $ 2,854 201,864 1.07 % $ 2,162 Federal funds sold and securities purchased under resale agreements (3) 78,547 1.82 1,431 74,697 0.98 735 Debt securities (4): Trading debt securities (5) 83,526 3.42 2,856 74,475 3.16 2,356 Available-for-sale debt securities: Securities of U.S. Treasury and federal agencies 6,618 1.70 112 15,966 1.49 239 Securities of U.S. states and political subdivisions 47,884 3.77 1,806 52,658 3.95 2,082 Mortgage-backed securities: Federal agencies 156,052 2.79 4,348 145,310 2.60 3,782 Residential and commercial   7,769   4.62 358   11,839   5.33 631 Total mortgage-backed securities 163,821 2.87 4,706 157,149 2.81 4,413 Other debt securities (5)   46,875   4.22 1,980   48,714   3.68 1,794 Total available-for-sale debt securities (5)   265,198   3.24 8,604   274,487   3.11 8,528 Held-to-maturity debt securities: Securities of U.S. Treasury and federal agencies 44,735 2.19 980 44,705 2.19 979 Securities of U.S. states and political subdivisions 6,253 4.34 271 6,268 5.32 334 Federal agency and other mortgage-backed securities 94,216 2.36 2,221 78,330 2.34 1,832 Other debt securities   361   4.00 15   2,194   2.50 55 Total held-to-maturity debt securities   145,565   2.40 3,487   131,497   2.43 3,200 Total debt securities (5) 494,289 3.02 14,947 480,459 2.93 14,084 Mortgage loans held for sale (6) 18,394 4.22 777 20,780 3.78 786 Loans held for sale (5)(6) 2,526 5.56 140 1,487 3.40 50 Commercial loans: Commercial and industrial - U.S. 275,656 4.16 11,465 272,034 3.75 10,196 Commercial and industrial - Non U.S. 60,718 3.53 2,143 57,198 2.86 1,639 Real estate mortgage 122,947 4.29 5,279 129,990 3.74 4,859 Real estate construction 23,609 4.94 1,167 24,813 4.10 1,017 Lease financing   19,392   4.74 919   19,128   3.74 715 Total commercial loans   502,322   4.18 20,973   503,163   3.66 18,426 Consumer loans: Real estate 1-4 family first mortgage 284,178 4.04 11,481 277,751 4.03 11,206 Real estate 1-4 family junior lien mortgage 36,687 5.38 1,975 42,780 4.82 2,062 Credit card 36,780 12.72 4,678 35,600 12.23 4,355 Automobile 48,115 5.18 2,491 57,900 5.34 3,094 Other revolving credit and installment   37,115   6.70 2,488   38,935   6.18 2,408 Total consumer loans   442,875   5.22 23,113   452,966   5.11 23,125 Total loans (6) 945,197 4.66 44,086 956,129 4.35 41,551 Equity securities (5) 38,092 2.62 999 36,105 2.27 821 Other (5)   5,071   1.46 74   5,069   0.85 44 Total earning assets (5)   $ 1,738,482   3.76 % $ 65,308   1,776,590   3.40 % $ 60,233 Funding sources Deposits: Interest-bearing checking $ 63,243 0.96 % $ 606 49,474 0.49 % $ 242 Market rate and other savings 684,882 0.31 2,157 682,053 0.14 983 Savings certificates 20,653 0.57 118 22,190 0.30 67 Other time deposits 84,822 2.25 1,906 61,625 1.43 880 Deposits in foreign offices   63,945   1.30 835   123,816   0.68 841 Total interest-bearing deposits 917,545 0.61 5,622 939,158 0.32 3,013 Short-term borrowings 104,267 1.65 1,719 98,922 0.77 761 Long-term debt 224,268 2.99 6,703 246,195 2.09 5,157 Other liabilities   27,648   2.21 610   21,872   1.94 424 Total interest-bearing liabilities 1,273,728 1.15 14,654 1,306,147 0.72 9,355 Portion of noninterest-bearing funding sources (5)   464,754   — —   470,443   — — Total funding sources (5)   $ 1,738,482   0.85   14,654   1,776,590   0.53   9,355 Net interest margin and net interest income on a taxable-equivalent basis (7) 2.91 %   $ 50,654   2.87 %   $ 50,878 Noninterest-earning assets Cash and due from banks $ 18,777 18,622 Goodwill 26,453 26,629 Other (5)   105,180   111,164   Total noninterest-earning assets (5)   $ 150,410   156,415   Noninterest-bearing funding sources Deposits $ 358,312 365,464 Other liabilities 53,496 55,740 Total equity 203,356 205,654 Noninterest-bearing funding sources used to fund earning assets (5)   (464,754 ) (470,443 ) Net noninterest-bearing funding sources (5)   $ 150,410   156,415   Total assets   $ 1,888,892   1,933,005    

(1) Our average prime rate was 4.91% and 4.10% for 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 2.31% and 1.26% 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. The average balance amounts represent amortized cost for the periods presented.

(5) Financial information for the year ended December 31, 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) Nonaccrual loans and related income are included in their respective loan categories.

(7) Includes taxable-equivalent adjustments of $659 million and $1.3 billion for 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 years ended 2018 and 2017, respectively.

   

Wells Fargo & Company and Subsidiaries

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

Quarter ended     Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Mar 31, 2018   Dec 31, 2017 ($ in billions)  

Averagebalance

 

Yields/rates

 

Averagebalance

 

Yields/rates

 

Averagebalance

 

Yields/rates

 

Averagebalance

 

Yields/rates

 

Averagebalance

 

Yields/rates

Earning assets               Interest-earning deposits with banks (3) $ 150.1 2.18 % $ 148.6 1.93 % $ 154.8 1.75 % $ 172.3 1.49 % $ 189.1 1.27 % Federal funds sold and securities purchased under resale agreements (3) 76.1 2.22 79.9 1.93 80.0 1.73 78.1 1.40 75.8 1.20 Debt securities (4): Trading debt securities (5) 90.1 3.52 84.5 3.45 80.7 3.45 78.7 3.24 81.6 3.17 Available-for-sale debt securities: Securities of U.S. Treasury and federal agencies 7.2 1.80 6.4 1.65 6.4 1.66 6.4 1.66 6.4 1.66 Securities of U.S. states and political subdivisions 47.6 4.05 46.6 3.76 47.4 3.91 50.0 3.37 52.4 3.91 Mortgage-backed securities: Federal agencies 155.3 2.91 155.5 2.77 154.9 2.75 158.4 2.72 152.9 2.62 Residential and commercial   6.7   4.87 7.3   4.68 8.2   4.86 8.9   4.12 9.4   4.85 Total mortgage-backed securities 162.0 2.99 162.8 2.86 163.1 2.86 167.3 2.79 162.3 2.75 Other debt securities (5)   46.1   4.46 46.4   4.39 47.1   4.33 48.1   3.73 48.6   3.62 Total available-for-sale debt securities (5)   262.9   3.41 262.2   3.26 264.0   3.28 271.8   3.04 269.7   3.10 Held-to-maturity debt securities: Securities of U.S. Treasury and federal agencies 44.7 2.19 44.7 2.18 44.7 2.19 44.7 2.20 44.7 2.19 Securities of U.S. states and political subdivisions 6.2 4.34 6.3 4.33 6.3 4.34 6.3 4.34 6.3 5.26 Federal agency and other mortgage-backed securities 95.8 2.46 95.3 2.27 94.9 2.33 90.8 2.38 89.6 2.25 Other debt securities   0.1   3.65 0.1   5.61 0.6   4.66 0.7   3.23 1.2   2.64 Total held-to-maturity debt securities   146.8   2.46 146.4   2.33 146.5   2.38 142.5   2.42 141.8   2.36 Total debt securities (5) 499.8 3.15 493.1 3.02 491.2 3.04 493.0 2.89 493.1 2.90 Mortgage loans held for sale 17.0 4.46 19.3 4.33 18.8 4.22 18.4 3.89 20.5 3.82 Loans held for sale (5) 2.0 6.69 2.6 5.28 3.5 5.48 2.0 4.92 1.5 3.19 Commercial loans: Commercial and industrial - U.S. 281.4 4.40 273.8 4.22 275.3 4.16 272.0 3.85 270.3 3.89 Commercial and industrial - Non U.S. 62.0 3.73 60.9 3.63 59.7 3.51 60.2 3.23 59.2 2.96 Real estate mortgage 120.4 4.51 121.3 4.35 124.0 4.27 126.2 4.05 127.2 3.88 Real estate construction 23.1 5.32 23.3 5.05 23.6 4.88 24.4 4.54 24.4 4.38 Lease financing   19.5   4.48 19.5   4.69 19.3   4.48 19.4   5.30 19.3   0.62 Total commercial loans   506.4   4.39 498.8   4.24 501.9   4.15 502.2   3.91 500.4   3.68 Consumer loans: Real estate 1-4 family first mortgage 285.3 4.02 284.1 4.07 283.1 4.06 284.2 4.02 282.0 4.01 Real estate 1-4 family junior lien mortgage 34.8 5.60 35.9 5.50 37.2 5.32 38.8 5.13 40.4 4.96 Credit card 37.9 12.69 36.9 12.77 35.9 12.66 36.4 12.75 36.4 12.37 Automobile 45.5 5.16 47.0 5.20 48.6 5.18 51.5 5.16 54.3 5.13 Other revolving credit and installment   36.4   6.95 36.8   6.78 37.4   6.62 37.9   6.46 38.3   6.28 Total consumer loans   439.9   5.25 440.7   5.26 442.2   5.20 448.8   5.16 451.4   5.10 Total loans 946.3 4.79 939.5 4.72 944.1 4.64 951.0 4.50 951.8 4.35 Equity securities (5) 37.4 2.79 37.9 2.98 37.3 2.38 39.8 2.35 38.0 2.60 Other (5)   4.2   1.78 4.7   1.47 5.6   1.48 6.0   1.21 7.2   0.88 Total earning assets (5)   $ 1,732.9   3.93 % $ 1,725.6   3.81 % $ 1,735.3   3.73 % $ 1,760.6   3.55 % $ 1,777.0   3.43 % Funding sources Deposits: Interest-bearing checking $ 54.0 1.21 % $ 51.2 1.01 % $ 80.3 0.90 % $ 67.8 0.77 % $ 50.5 0.68 % Market rate and other savings 689.6 0.43 693.9 0.35 676.7 0.26 679.1 0.22 679.9 0.19 Savings certificates 22.0 0.87 20.6 0.62 20.0 0.43 20.0 0.34 20.9 0.31 Other time deposits 92.6 2.46 87.8 2.35 82.1 2.26 76.6 1.84 68.2 1.49 Deposits in foreign offices   56.1   1.66 53.9   1.50 51.5   1.30 94.8   0.98 124.6   0.81 Total interest-bearing deposits 914.3 0.77 907.4 0.66 910.6 0.56 938.3 0.47 944.1 0.39 Short-term borrowings 106.0 2.04 105.5 1.74 103.8 1.54 101.8 1.24 102.1 0.99 Long-term debt 226.6 3.17 220.7 3.02 223.8 2.97 226.0 2.80 231.6 2.32 Other liabilities   27.4   2.41 27.0   2.40 28.2   2.12 27.9   1.92 24.7   1.86 Total interest-bearing liabilities 1,274.3 1.34 1,260.6 1.20 1,266.4 1.10 1,294.0 0.97 1,302.5 0.81 Portion of noninterest-bearing funding sources (5)   458.6   — 465.0   — 468.9   — 466.6   — 474.5   — Total funding sources (5)   $ 1,732.9   0.99   $ 1,725.6   0.87   $ 1,735.3   0.80   $ 1,760.6   0.71   $ 1,777.0   0.59   Net interest margin on a taxable-equivalent basis 2.94 % 2.94 % 2.93 % 2.84 % 2.84 % Noninterest-earning assets Cash and due from banks $ 19.3 18.4 18.6 18.9 19.2 Goodwill 26.4 26.4 26.4 26.5 26.6 Other (5)   100.4   105.9   104.6   109.9   112.5   Total noninterest-earnings assets (5)   $ 146.1   150.7   149.6   155.3   158.3   Noninterest-bearing funding sources Deposits $ 354.6 359.0 360.7 358.9 367.5 Other liabilities (5) 51.7 53.9 51.7 56.8 57.9 Total equity 198.4 202.8 206.1 206.2 207.4 Noninterest-bearing funding sources used to fund earning assets (5)   (458.6 ) (465.0 ) (468.9 ) (466.6 ) (474.5 ) Net noninterest-bearing funding sources (5)   $ 146.1   150.7   149.6   155.3   158.3   Total assets   $ 1,879.0   1,876.3   1,884.9   1,915.9   1,935.3                                                        

(1) Our average prime rate was 5.28% for the quarter ended December 31, 2018, 5.01% for the quarter ended September 30,2018, 4.80% for the quarter ended June 30, 2018, 4.52% for the quarter ended March 31, 2018 and 4.30% for the quarter ended December 31, 2017. The average three-month London Interbank Offered Rate (LIBOR) was 2.62%, 2.34%, 2.34%, 1.93% and 1.46% 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 quarter ended December 31, 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 quarter ended December 31, 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 December 31, % Year ended December 31, % (in millions)   2018   2017   Change   2018   2017   Change Service charges on deposit accounts $ 1,176   1,246 (6 )% $ 4,716   5,111 (8 )% Trust and investment fees: Brokerage advisory, commissions and other fees 2,345 2,401 (2 ) 9,436 9,358 1 Trust and investment management 796 866 (8 ) 3,316 3,372 (2 ) Investment banking   379     420   (10 ) 1,757     1,765   — Total trust and investment fees   3,520     3,687   (5 ) 14,509     14,495   — Card fees 981 996 (2 ) 3,907 3,960 (1 ) Other fees: Lending related charges and fees (1) 400 391 2 1,526 1,568 (3 ) Cash network fees 114 120 (5 ) 481 506 (5 ) Commercial real estate brokerage commissions 145 159 (9 ) 468 462 1 Wire transfer and other remittance fees 120 115 4 477 448 6 All other fees   109     128   (15 ) 432     573   (25 ) Total other fees   888     913   (3 ) 3,384     3,557   (5 ) Mortgage banking: Servicing income, net 109 262 (58 ) 1,373 1,427 (4 ) Net gains on mortgage loan origination/sales activities   358     666   (46 ) 1,644     2,923   (44 ) Total mortgage banking   467     928   (50 ) 3,017     4,350   (31 ) Insurance 109 223 (51 ) 429 1,049 (59 ) Net gains (losses) from trading activities (2) 10 (1 ) NM 602 542 11 Net gains on debt securities 9 157 (94 ) 108 479 (77 ) Net gains from equity securities (2) 21 572 (96 ) 1,515 1,779 (15 ) Lease income 402 458 (12 ) 1,753 1,907 (8 ) Life insurance investment income 158 153 3 651 594 10 All other   595     405   47 1,822     1,009   81 Total   $ 8,336     9,737     (14 )   $ 36,413     38,832     (6 )

NM - Not meaningful

(1) Represents combined amount of previously reported "Charges and fees on loans" and "Letters of credit fees".

(2) 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 December 31, % Year ended December 31, % (in millions)   2018   2017   Change   2018   2017   Change Salaries $ 4,545   4,403 3 % $ 17,834   17,363 3 % Commission and incentive compensation 2,427 2,665 (9 ) 10,264 10,442 (2 ) Employee benefits 706 1,293 (45 ) 4,926 5,566 (11 ) Equipment 643 608 6 2,444 2,237 9 Net occupancy 735 715 3 2,888 2,849 1 Core deposit and other intangibles 264 288 (8 ) 1,058 1,152 (8 ) FDIC and other deposit assessments 153 312 (51 ) 1,110 1,287 (14 ) Outside professional services 843 1,025 (18 ) 3,306 3,813 (13 ) Operating losses 432 3,531 (88 ) 3,124 5,492 (43 ) Contract services (1) 616 410 50 2,192 1,638 34 Operating leases 392 325 21 1,334 1,351 (1 ) Advertising and promotion 254 200 27 857 614 40 Outside data processing 168 208 (19 ) 660 891 (26 ) Travel and entertainment 168 183 (8 ) 618 687 (10 ) Postage, stationery and supplies 132 137 (4 ) 515 544 (5 ) Telecommunications 91 92 (1 ) 361 364 (1 ) Foreclosed assets 47 47 — 188 251 (25 ) Insurance 25 28 (11 ) 101 100 1 All other (1)   698     330   112   2,346     1,843   27 Total   $ 13,339     16,800     (21 )   $ 56,126     58,484     (4 )

(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 (in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Service charges on deposit accounts $ 1,176   1,204   1,163   1,173   1,246 Trust and investment fees: Brokerage advisory, commissions and other fees 2,345 2,334 2,354 2,403 2,401 Trust and investment management 796 835 835 850 866 Investment banking   379     462     486     430     420   Total trust and investment fees   3,520     3,631     3,675     3,683     3,687   Card fees 981 1,017 1,001 908 996 Other fees: Lending related charges and fees (1) 400 370 376 380 391 Cash network fees 114 121 120 126 120 Commercial real estate brokerage commissions 145 129 109 85 159 Wire transfer and other remittance fees 120 120 121 116 115 All other fees   109     110     120     93     128   Total other fees   888     850     846     800     913   Mortgage banking: Servicing income, net 109 390 406 468 262 Net gains on mortgage loan origination/sales activities   358     456     364     466     666   Total mortgage banking   467     846     770     934     928   Insurance 109 104 102 114 223 Net gains (losses) from trading activities (2) 10 158 191 243 (1 ) Net gains on debt securities 9 57 41 1 157 Net gains from equity securities (2) 21 416 295 783 572 Lease income 402 453 443 455 458 Life insurance investment income 158 167 162 164 153 All other   595     466     323     438     405   Total   $ 8,336     9,369     9,012     9,696     9,737  

(1) Represents combined amount of previously reported "Charges and fees on loans" and "Letters of credit fees".

(2) Financial information for the quarter ended December 31, 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 (in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Salaries $ 4,545   4,461   4,465   4,363   4,403 Commission and incentive compensation 2,427 2,427 2,642 2,768 2,665 Employee benefits 706 1,377 1,245 1,598 1,293 Equipment 643 634 550 617 608 Net occupancy 735 718 722 713 715 Core deposit and other intangibles 264 264 265 265 288 FDIC and other deposit assessments 153 336 297 324 312 Outside professional services 843 761 881 821 1,025 Operating losses 432 605 619 1,468 3,531 Contract services (1) 616 593 536 447 410 Operating leases 392 311 311 320 325 Advertising and promotion 254 223 227 153 200 Outside data processing 168 166 164 162 208 Travel and entertainment 168 141 157 152 183 Postage, stationery and supplies 132 120 121 142 137 Telecommunications 91 90 88 92 92 Foreclosed assets 47 59 44 38 47 Insurance 25 26 24 26 28 All other (1)   698     451     624     573     330 Total   $ 13,339     13,763     13,982     15,042     16,800

(1) The quarter ended December 31, 2017, has been revised to conform with the current period presentation whereby temporary help is included in contract services rather than in all other noninterest expense.

       

Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

(in millions, except shares)   Dec 31, 2018   Dec 31,2017  

%Change

Assets Cash and due from banks $ 23,551 23,367 1

%

Interest-earning deposits with banks (1)   149,736     192,580   (22 ) Total cash, cash equivalents, and restricted cash (1)   173,287     215,947   (20 ) Federal funds sold and securities purchased under resale agreements (1) 80,207 80,025 — Debt securities: Trading, at fair value (2) 69,989 57,624 21 Available-for-sale, at fair value (2) 269,912 276,407 (2 ) Held-to-maturity, at cost 144,788 139,335 4 Mortgage loans held for sale 15,126 20,070 (25 ) Loans held for sale (2) 2,041 1,131 80 Loans 953,110 956,770 — Allowance for loan losses   (9,775 )   (11,004 ) (11 ) Net loans   943,335     945,766   — Mortgage servicing rights: Measured at fair value 14,649 13,625 8 Amortized 1,443 1,424 1 Premises and equipment, net 8,920 8,847 1 Goodwill 26,418 26,587 (1 ) Derivative assets 10,770 12,228 (12 ) Equity securities (2) 55,148 62,497 (12 ) Other assets (2)   79,850     90,244   (12 ) Total assets   $ 1,895,883     1,951,757   (3 ) Liabilities Noninterest-bearing deposits $ 349,534 373,722 (6 ) Interest-bearing deposits   936,636     962,269   (3 ) Total deposits 1,286,170 1,335,991 (4 ) Short-term borrowings 105,787 103,256 2 Derivative liabilities 8,499 8,796 (3 ) Accrued expenses and other liabilities 69,317 70,615 (2 ) Long-term debt   229,044     225,020   2 Total liabilities   1,698,817     1,743,678   (3 ) Equity Wells Fargo stockholders’ equity: Preferred stock 23,214 25,358 (8 ) Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares 9,136 9,136 — Additional paid-in capital 60,685 60,893 — Retained earnings 158,163 145,263 9 Cumulative other comprehensive income (loss) (6,336 ) (2,144 ) 196 Treasury stock – 900,557,866 shares and 590,194,846 shares (47,194 ) (29,892 ) 58 Unearned ESOP shares   (1,502 )   (1,678 ) (10 ) Total Wells Fargo stockholders’ equity 196,166 206,936 (5 ) Noncontrolling interests   900     1,143   (21 ) Total equity   197,066     208,079   (5 ) Total liabilities and equity   $ 1,895,883     1,951,757     (3 )

(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 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 CONSOLIDATED BALANCE SHEET

(in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Assets Cash and due from banks $ 23,551 18,791 20,450 18,145 23,367 Interest-earning deposits with banks (1)   149,736     140,732     142,999     184,250     192,580   Total cash, cash equivalents, and restricted cash (1)   173,287     159,523     163,449     202,395     215,947   Federal funds sold and securities purchased under resale agreements (1) 80,207 83,471 80,184 73,550 80,025 Debt securities: Trading, at fair value (2) 69,989 65,188 65,602 59,866 57,624 Available-for-sale, at fair value (2) 269,912 262,964 265,687 271,656 276,407 Held-to-maturity, at cost 144,788 144,131 144,206 141,446 139,335 Mortgage loans held for sale 15,126 19,225 21,509 17,944 20,070 Loans held for sale (2) 2,041 1,765 3,408 3,581 1,131 Loans 953,110 942,300 944,265 947,308 956,770 Allowance for loan losses   (9,775 )   (10,021 )   (10,193 )   (10,373 )   (11,004 ) Net loans   943,335     932,279     934,072     936,935     945,766   Mortgage servicing rights: Measured at fair value 14,649 15,980 15,411 15,041 13,625 Amortized 1,443 1,414 1,407 1,411 1,424 Premises and equipment, net 8,920 8,802 8,882 8,828 8,847 Goodwill 26,418 26,425 26,429 26,445 26,587 Derivative assets 10,770 11,811 11,099 11,467 12,228 Equity securities (2) 55,148 61,755 57,505 58,935 62,497 Other assets (2)   79,850     78,248     80,850     85,888     90,244   Total assets   $ 1,895,883     1,872,981     1,879,700     1,915,388     1,951,757   Liabilities Noninterest-bearing deposits $ 349,534 352,869 365,021 370,085 373,722 Interest-bearing deposits   936,636     913,725     903,843     933,604     962,269   Total deposits 1,286,170 1,266,594 1,268,864 1,303,689 1,335,991 Short-term borrowings 105,787 105,451 104,496 97,207 103,256 Derivative liabilities 8,499 8,586 8,507 7,883 8,796 Accrued expenses and other liabilities 69,317 71,348 72,480 73,397 70,615 Long-term debt   229,044     221,323     219,284     227,302     225,020   Total liabilities   1,698,817     1,673,302     1,673,631     1,709,478     1,743,678   Equity Wells Fargo stockholders’ equity: Preferred stock 23,214 23,482 25,737 26,227 25,358 Common stock 9,136 9,136 9,136 9,136 9,136 Additional paid-in capital 60,685 60,738 59,644 60,399 60,893 Retained earnings 158,163 154,576 150,803 147,928 145,263 Cumulative other comprehensive income (loss) (6,336 ) (6,873 ) (5,461 ) (4,921 ) (2,144 ) Treasury stock (47,194 ) (40,538 ) (32,620 ) (31,246 ) (29,892 ) Unearned ESOP shares   (1,502 )   (1,780 )   (2,051 )   (2,571 )   (1,678 ) Total Wells Fargo stockholders’ equity 196,166 198,741 205,188 204,952 206,936 Noncontrolling interests   900     938     881     958     1,143   Total equity   197,066     199,679     206,069     205,910     208,079   Total liabilities and equity   $ 1,895,883     1,872,981     1,879,700     1,915,388     1,951,757  

(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 quarter ended December 31, 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 TRADING ASSETS AND LIABILITIES

(in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Trading assets Debt securities $ 69,989 65,188 65,602 59,866 57,624 Equity securities (1) 19,449 26,138 22,978 25,327 30,004 Loans held for sale 1,469 1,266 1,350 1,695 1,023 Gross trading derivative assets 29,216 30,302 30,758 30,644 31,340 Netting (2)   (19,807 )   (19,188 )   (20,687 )   (20,112 )   (19,629 ) Total trading derivative assets   9,409     11,114     10,071     10,532     11,711   Total trading assets   100,316     103,706     100,001     97,420     100,362   Trading liabilities Short sales 19,720 23,992 21,765 23,303 18,472 Gross trading derivative liabilities 28,717 29,268 29,847 29,717 31,386 Netting (2)   (21,178 )   (21,842 )   (22,311 )   (22,569 )   (23,062 ) Total trading derivative liabilities   7,539     7,426     7,536     7,148     8,324   Total trading liabilities   $ 27,259     31,418     29,301     30,451     26,796  

(1) Financial information for the quarter ended December 31, 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

(in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Trading debt securities   $ 69,989     65,188     65,602     59,866     57,624 Available-for-sale debt securities: Securities of U.S. Treasury and federal agencies 13,348 6,187 6,271 6,279 6,319 Securities of U.S. states and political subdivisions 49,264 48,216 47,559 49,643 51,326 Mortgage-backed securities: Federal agencies 153,203 153,511 154,556 156,814 160,219 Residential and commercial   7,000     6,939     8,286     9,264     9,173 Total mortgage-backed securities   160,203 160,450 162,842 166,078 169,392 Other debt securities   47,097     48,111     49,015     49,656     49,370 Total available-for-sale debt securities   269,912     262,964     265,687     271,656     276,407 Held-to-maturity debt securities: Securities of U.S. Treasury and federal agencies 44,751 44,743 44,735 44,727 44,720 Securities of U.S. states and political subdivisions 6,286 6,293 6,300 6,307 6,313 Federal agency and other mortgage-backed securities (1) 93,685 93,020 93,016 89,748 87,527 Other debt securities   66     75     155     664     775 Total held-to-maturity debt securities   144,788     144,131     144,206     141,446     139,335 Total debt securities   $ 484,689     472,283     475,495     472,968     473,366

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

           

Wells Fargo & Company and Subsidiaries

FIVE QUARTER EQUITY SECURITIES

(in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Held for trading at fair value:                     Marketable equity securities   $ 19,449     26,138     22,978     25,327     30,004 Not held for trading: Fair value: Marketable equity securities (1) 4,513 5,705 5,273 4,931 4,356 Nonmarketable equity securities (2)   5,594     6,479     5,876     5,303     4,867 Total equity securities at fair value   10,107     12,184     11,149     10,234     9,223 Equity method: LIHTC (3) 10,999 10,453 10,361 10,318 10,269 Private equity 3,832 3,838 3,732 3,840 3,839 Tax-advantaged renewable energy 3,073 1,967 1,950 1,822 1,950 New market tax credit and other   311     259     262     268     294 Total equity method   18,215     16,517     16,305     16,248     16,352 Other: Federal bank stock and other at cost (4) 5,643 5,467 5,673 5,780 5,828 Private equity (5)   1,734     1,449     1,400     1,346     1,090 Total equity securities not held for trading   35,699     35,617     34,527     33,608     32,493 Total equity securities   $ 55,148     61,755     57,505     58,935     62,497

(1) Includes $3.2 billion, $3.6 billion, $3.5 billion, $3.5 billion and $3.7 billion at December 31, September 30, June 30 and March 31, 2018, and December 31, 2017, respectively, related to securities held as economic hedges of our deferred compensation plan obligations.

(2) Includes $5.5 billion, $6.3 billion, $5.5 billion, $5.0 billion and $4.9 billion at December 31, September 30, June 30 and March 31, 2018, and December 31, 2017, respectively, related to investments for which we elected the fair value option.

(3) Represents low-income housing tax credit investments.

(4) Includes $5.6 billion, $5.4 billion, $5.6 billion, $5.7 billion and $5.4 billion at December 31, September 30, June 30 and March 31, 2018, and December 31, 2017, respectively, related to investments in Federal Reserve Bank and Federal Home Loan Bank stock.

(5) Represents nonmarketable equity securities for which we have elected to account for the security under the measurement alternative.

           

Wells Fargo & Company and Subsidiaries

FIVE QUARTER LOANS

(in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Commercial: Commercial and industrial $ 350,199 338,048 336,590 334,678 333,125 Real estate mortgage 121,014 120,403 123,964 125,543 126,599 Real estate construction 22,496 23,690 22,937 23,882 24,279 Lease financing   19,696     19,745     19,614     19,293     19,385 Total commercial   513,405     501,886     503,105     503,396     503,388 Consumer: Real estate 1-4 family first mortgage 285,065 284,273 283,001 282,658 284,054 Real estate 1-4 family junior lien mortgage 34,398 35,330 36,542 37,920 39,713 Credit card 39,025 37,812 36,684 36,103 37,976 Automobile 45,069 46,075 47,632 49,554 53,371 Other revolving credit and installment   36,148     36,924     37,301     37,677     38,268 Total consumer   439,705     440,414     441,160     443,912     453,382 Total loans (1)   $ 953,110     942,300     944,265     947,308     956,770

(1) Includes $5.0 billion, $6.9 billion, $9.0 billion, $10.7 billion, and $12.8 billion of purchased credit-impaired (PCI) loans at December 31, September 30, June 30 and March 31, 2018, and December 31, 2017, respectively.

 

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

                      (in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Commercial foreign loans:           Commercial and industrial $ 62,564 61,696 61,732 59,696 60,106 Real estate mortgage 6,731 6,891 7,617 8,082 8,033 Real estate construction 1,011 726 542 668 655 Lease financing   1,159     1,187     1,097     1,077     1,126 Total commercial foreign loans   $ 71,465     70,500     70,988     69,523     69,920            

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)

(in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Nonaccrual loans: Commercial: Commercial and industrial $ 1,486 1,555 1,559 1,516 1,899 Real estate mortgage 580 603 765 755 628 Real estate construction 32 44 51 45 37 Lease financing   90     96     80     93     76 Total commercial   2,188     2,298     2,455     2,409     2,640 Consumer: Real estate 1-4 family first mortgage 3,183 3,267 3,469 3,673 3,732 Real estate 1-4 family junior lien mortgage 945 983 1,029 1,087 1,086 Automobile 130 118 119 117 130 Other revolving credit and installment   50     48     54     53     58 Total consumer   4,308     4,416     4,671     4,930     5,006 Total nonaccrual loans (1)(2)(3)   $ 6,496     6,714     7,126     7,339     7,646 As a percentage of total loans 0.68 % 0.71 0.75 0.77 0.80 Foreclosed assets: Government insured/guaranteed $ 88 87 90 103 120 Non-government insured/guaranteed   363     435     409     468     522 Total foreclosed assets   451     522     499     571     642 Total nonperforming assets   $ 6,947     7,236     7,625     7,910     8,288 As a percentage of total loans   0.73 %   0.77     0.81     0.83     0.87

(1) Financial information for periods prior to December 31, 2018 has been revised to exclude mortgage loans held for sale (MLHFS), loans held for sale (LHFS) and loans held at fair value of $339 million, $360 million, $380 million and $390 million at September 30, June 30, and March 31, 2018, and December 31, 2017, respectively.

(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 (1)

(in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Total (excluding PCI)(2):   $ 8,704   8,838   9,087   10,351   11,532 Less: FHA insured/VA guaranteed (3)   7,725     7,906     8,246     9,385     10,475 Total, not government insured/guaranteed   $ 979     932     841     966     1,057 By segment and class, not government insured/guaranteed: Commercial: Commercial and industrial $ 43 42 23 40 26 Real estate mortgage 51 56 26 23 23 Real estate construction   —     —     —     1     — Total commercial   94     98     49     64     49 Consumer: Real estate 1-4 family first mortgage 124 128 132 163 213 Real estate 1-4 family junior lien mortgage 32 32 33 48 60 Credit card 513 460 429 473 492 Automobile 114 108 105 113 143 Other revolving credit and installment   102     106     93     105     100 Total consumer   885     834     792     902     1,008 Total, not government insured/guaranteed   $ 979     932     841     966     1,057

(1) Financial information for periods prior to December 31, 2018 has been revised to exclude MLHFS, LHFS and loans held at fair value, which reduced “Total, not government insured/guaranteed” by $1 million, $1 million, $1 million and $6 million at September 30, June 30, and March 31, 2018, and December 31, 2017, respectively.

(1) PCI loans totaled $370 million, $567 million, $811 million, $1.0 billion and $1.4 billion, at December 31, September 30 , June 30, and March 31, 2018, and December 31, 2017, respectively.

(2) Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.

 

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

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

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

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

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

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

              (in millions)   Quarterended Dec 31, 2018  

Year endedDec 31,2018

  2009-2017 Balance, beginning of period   $ 4,409   8,887   10,447 Change in accretable yield due to acquisitions — — 161 Accretion into interest income (1) (202 ) (1,094 ) (16,983 ) Accretion into noninterest income due to sales (2) (614 ) (2,374 ) (801 ) Reclassification from nonaccretable difference for loans with improving credit-related cash flows (3) 1 403 11,597 Changes in expected cash flows that do not affect nonaccretable difference (4)   (561 )   (2,789 )   4,466   Balance, end of period   $ 3,033     3,033     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 December 31, 2018, our carrying value for PCI loans totaled $5.0 billion and the remainder of nonaccretable difference established in purchase accounting totaled $480 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 December 31, Year ended December 31, (in millions)   2018     2017   2018   2017 Balance, beginning of period $ 10,956   12,109 11,960   12,540 Provision for credit losses 521 651 1,744 2,528 Interest income on certain impaired loans (1) (38 ) (49 ) (166 ) (186 ) Loan charge-offs: Commercial: Commercial and industrial (220 ) (181 ) (727 ) (789 ) Real estate mortgage (12 ) (4 ) (42 ) (38 ) Real estate construction — — — — Lease financing   (18 )   (14 )   (70 )   (45 ) Total commercial   (250 )   (199 )   (839 )   (872 ) Consumer: Real estate 1-4 family first mortgage (38 ) (49 ) (179 ) (240 ) Real estate 1-4 family junior lien mortgage (38 ) (54 ) (179 ) (279 ) Credit card (414 ) (398 ) (1,599 ) (1,481 ) Automobile (217 ) (261 ) (947 ) (1,002 ) Other revolving credit and installment   (180 )   (169 )   (685 )   (713 ) Total consumer   (887 )   (931 )   (3,589 )   (3,715 ) Total loan charge-offs   (1,137 )   (1,130 )   (4,428 )   (4,587 ) Loan recoveries: Commercial: Commercial and industrial 88 63 304 297 Real estate mortgage 24 14 70 82 Real estate construction 1 3 13 30 Lease financing   5     4     23     17   Total commercial   118     84     410     426  

Consumer:

Real estate 1-4 family first mortgage 60 72 267 288 Real estate 1-4 family junior lien mortgage 48 61 219 266 Credit card 76 62 307 239 Automobile 84 73 363 319 Other revolving credit and installment   30     27     118     121   Total consumer   298     295     1,274     1,233   Total loan recoveries   416     379     1,684     1,659   Net loan charge-offs   (721 )   (751 )   (2,744 )   (2,928 ) Other   (11 )   —     (87 )   6   Balance, end of period   $ 10,707     11,960     10,707     11,960   Components: Allowance for loan losses $ 9,775 11,004 9,775 11,004 Allowance for unfunded credit commitments   932     956     932     956   Allowance for credit losses   $ 10,707     11,960     10,707     11,960   Net loan charge-offs (annualized) as a percentage of average total loans 0.30 % 0.31 0.29 0.31 Allowance for loan losses as a percentage of total loans 1.03 1.15 1.03 1.15 Allowance for credit losses as a percentage of total loans   1.12     1.25     1.12     1.25  

(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 (in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Balance, beginning of quarter $ 10,956   11,110   11,313   11,960   12,109 Provision for credit losses 521 580 452 191 651 Interest income on certain impaired loans (1) (38 ) (42 ) (43 ) (43 ) (49 ) Loan charge-offs: Commercial: Commercial and industrial (220 ) (209 ) (134 ) (164 ) (181 ) Real estate mortgage (12 ) (9 ) (19 ) (2 ) (4 ) Real estate construction — — — — — Lease financing   (18 )   (15 )   (20 )   (17 )   (14 ) Total commercial   (250 )   (233 )   (173 )   (183 )   (199 ) Consumer: Real estate 1-4 family first mortgage (38 ) (45 ) (55 ) (41 ) (49 ) Real estate 1-4 family junior lien mortgage (38 ) (47 ) (47 ) (47 ) (54 ) Credit card (414 ) (376 ) (404 ) (405 ) (398 ) Automobile (217 ) (214 ) (216 ) (300 ) (261 ) Other revolving credit and installment   (180 )   (161 )   (164 )   (180 )   (169 ) Total consumer   (887 )   (843 )   (886 )   (973 )   (931 ) Total loan charge-offs   (1,137 )   (1,076 )   (1,059 )   (1,156 )   (1,130 ) Loan recoveries: Commercial: Commercial and industrial 88 61 76 79 63 Real estate mortgage 24 10 19 17 14 Real estate construction 1 2 6 4 3 Lease financing   5     8     5     5     4   Total commercial   118     81     106     105     84   Consumer: Real estate 1-4 family first mortgage 60 70 78 59 72 Real estate 1-4 family junior lien mortgage 48 56 60 55 61 Credit card 76 77 81 73 62 Automobile 84 84 103 92 73 Other revolving credit and installment   30     28     29     31     27   Total consumer   298     315     351     310     295   Total loan recoveries   416     396     457     415     379   Net loan charge-offs   (721 )   (680 )   (602 )   (741 )   (751 ) Other   (11 )   (12 )   (10 )   (54 )   —   Balance, end of quarter   $ 10,707     10,956     11,110     11,313     11,960   Components: Allowance for loan losses $ 9,775 10,021 10,193 10,373 11,004 Allowance for unfunded credit commitments   932     935     917     940     956   Allowance for credit losses   $ 10,707     10,956     11,110     11,313     11,960   Net loan charge-offs (annualized) as a percentage of average total loans 0.30 % 0.29 0.26 0.32 0.31 Allowance for loan losses as a percentage of: Total loans 1.03 1.06 1.08 1.10 1.15 Nonaccrual loans (2) 150 149 143 141 144 Nonaccrual loans and other nonperforming assets (2) 141 138 134 131 133 Allowance for credit losses as a percentage of: Total loans 1.12 1.16 1.18 1.19 1.25 Nonaccrual loans (2) 165 163 156 154 156 Nonaccrual loans and other nonperforming assets (2)   154     151     146     143     144  

(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.

(2) Financial information for periods prior to the quarter ended December 31, 2018 has been revised to exclude MLHFS, LHFS and loans held at fair value.

             

Wells Fargo & Company and Subsidiaries

TANGIBLE COMMON EQUITY (1)

(in millions, except ratios)       Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Tangible book value per common share (1): Total equity $ 197,066 199,679 206,069 205,910 208,079 Adjustments: Preferred stock (23,214 ) (23,482 ) (25,737 ) (26,227 ) (25,358 ) Additional paid-in capital on ESOP

preferred stock

(95 ) (105 ) (116 ) (146 ) (122 ) Unearned ESOP shares 1,502 1,780 2,051 2,571 1,678 Noncontrolling interests       (900 )   (938 )   (881 )   (958 )   (1,143 ) Total common stockholders' equity (A) 174,359 176,934 181,386 181,150 183,134 Adjustments: Goodwill (26,418 ) (26,425 ) (26,429 ) (26,445 ) (26,587 ) Certain identifiable intangible assets

(other than MSRs)

(559 ) (826 ) (1,091 ) (1,357 ) (1,624 ) Other assets (2) (2,187 ) (2,121 ) (2,160 ) (2,388 ) (2,155 ) Applicable deferred taxes (3)       785     829     874     918     962   Tangible common equity   (B)   $ 145,980     148,391     152,580     151,878     153,730   Common shares outstanding (C) 4,581.3 4,711.6 4,849.1 4,873.9 4,891.6 Book value per common share (A)/(C) $ 38.06 37.55 37.41 37.17 37.44 Tangible book value per common share   (B)/(C)   31.86     31.49     31.47     31.16     31.43                       Quarter ended     Year ended (in millions, except ratios)       Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017     Dec 31, 2018   Dec 31,2017 Return on average tangible common equity (1):           Net income applicable to common stock (A) $ 5,711 5,453 4,792 4,733 5,740 20,689 20,554 Average total equity 198,442 202,826 206,067 206,180 207,413 203,356 205,654 Adjustments: Preferred stock (23,463 ) (24,219 ) (26,021 ) (26,157 ) (25,569 ) (24,956 ) (25,592 ) Additional paid-in capital on ESOP preferred stock (105 ) (115 ) (129 ) (153 ) (129 ) (125 ) (139 ) Unearned ESOP shares 1,761 2,026 2,348 2,508 1,896 2,159 2,143 Noncontrolling interests       (910 )   (892 )   (919 )   (997 )   (998 )     (929 )   (948 ) Average common stockholders’ equity (B) 175,725 179,626 181,346 181,381 182,613 179,505 181,118 Adjustments: Goodwill (26,423 ) (26,429 ) (26,444 ) (26,516 ) (26,579 ) (26,453 ) (26,629 ) Certain identifiable intangible assets (other than MSRs) (693 ) (958 ) (1,223 ) (1,489 ) (1,767 ) (1,088 ) (2,176 ) Other assets (2) (2,204 ) (2,083 ) (2,271 ) (2,233 ) (2,245 ) (2,197 ) (2,184 ) Applicable deferred taxes (3)       800     845     889     933     1,332       866     1,570   Average tangible common equity   (C)   $ 147,205     151,001     152,297     152,076     153,354       150,633     151,699   Return on average common stockholders' equity (ROE) (annualized) (A)/(B) 12.89 % 12.04 10.60 10.58 12.47 11.53 11.35 Return on average tangible common equity (ROTCE) (annualized)   (A)/(C)   15.39     14.33     12.62     12.62     14.85       13.73     13.55  

(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 (in billions, except ratio)       Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Total equity $ 197.1 199.7 206.1 205.9 208.1 Adjustments: Preferred stock (23.2 ) (23.5 ) (25.7 ) (26.2 ) (25.4 ) Additional paid-in capital on ESOP

preferred stock

(0.1 ) (0.1 ) (0.1 ) (0.1 ) (0.1 ) Unearned ESOP shares 1.5 1.8 2.0 2.6 1.7 Noncontrolling interests       (0.9 )   (0.9 )   (0.9 )   (1.0 )   (1.1 ) Total common stockholders' equity 174.4 177.0 181.4 181.2 183.2 Adjustments: Goodwill (26.4 ) (26.4 ) (26.4 ) (26.4 ) (26.6 ) Certain identifiable intangible assets (other than MSRs) (0.6 ) (0.8 ) (1.1 ) (1.4 ) (1.6 ) Other assets (2) (2.2 ) (2.1 ) (2.2 ) (2.4 ) (2.2 ) Applicable deferred taxes (3) 0.8 0.8 0.9 0.9 1.0 Investment in certain subsidiaries and other       0.4     0.4     0.4     0.4     0.2   Common Equity Tier 1 (Fully Phased-In) under Basel III   (A)   146.4     148.9     153.0     152.3     154.0   Total risk-weighted assets (RWAs) anticipated under Basel III (4)(5)   (B)   $ 1,248.4     1,250.2     1,276.3     1,278.1     1,285.6   Common Equity Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In) (5)   (A)/(B)   11.7 %   11.9     12.0     11.9     12.0  

(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 December 31, 2018, is subject to detailed analysis of considerable data, our CET1 ratio at that date has been estimated using the Basel III definition of capital under the Basel III Standardized Approach RWAs. The capital ratio for September 30, June 30 and March 31, 2018, and December 31, 2017, was calculated under the Basel III Standardized Approach RWAs.

(5) The Company’s December 31, 2018, RWAs and capital ratio are preliminary estimates.

           

Wells Fargo & Company and Subsidiaries

OPERATING SEGMENT RESULTS (1)

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

  CommunityBanking

WholesaleBanking

Wealth andInvestmentManagement

Other (2)

ConsolidatedCompany

  2018   2017   2018   2017   2018   2017   2018   2017   2018   2017 Quarter ended Dec 31,           Net interest income (3) $ 7,340 7,239 4,739 4,557 1,116 1,152 (551 ) (635 ) 12,644 12,313 Provision (reversal of provision) for credit losses 534 636 (28 ) 20 (3 ) (7 ) 18 2 521 651 Noninterest income 4,121 4,481 2,187 2,883 2,841 3,181 (813 ) (808 ) 8,336 9,737 Noninterest expense   7,032     10,216     4,025     4,187     3,044     3,246     (762 )   (849 )   13,339     16,800   Income (loss) before income tax expense (benefit) 3,895 868 2,929 3,233 916 1,094 (620 ) (596 ) 7,120 4,599 Income tax expense (benefit)   637     (2,682 )   253     854     231     413     (155 )   (227 )   966     (1,642 ) Net income (loss) before noncontrolling interests 3,258 3,550 2,676 2,379 685 681 (465 ) (369 ) 6,154 6,241 Less: Net income (loss) from noncontrolling interests   89     78     5     6     (4 )   6     —     —     90     90   Net income (loss)   $ 3,169     3,472     2,671     2,373     689     675     (465 )   (369 )   6,064     6,151     Average loans $ 459.7 473.2 470.2 463.5 75.2 72.9 (58.8 ) (57.8 ) 946.3 951.8 Average assets 1,015.9 1,073.2 839.1 837.2 83.6 83.7 (59.6 ) (58.8 ) 1,879.0 1,935.3 Average deposits 759.4 738.3 421.6 465.7 155.5 184.1 (67.6 ) (76.5 ) 1,268.9 1,311.6   Year ended Dec 31, Net interest income (3) $ 29,219 28,658 18,690 18,810 4,441 4,641 (2,355 ) (2,552 ) 49,995 49,557 Provision (reversal of provision) for credit losses 1,783 2,555 (58 ) (19 ) (5 ) (5 ) 24 (3 ) 1,744 2,528 Noninterest income 17,694 18,360 10,016 11,190 11,935 12,431 (3,232 ) (3,149 ) 36,413 38,832 Noninterest expense   30,491     32,615     16,157     16,624     12,938     12,623     (3,460 )   (3,378 )   56,126     58,484   Income (loss) before income tax expense (benefit) 14,639 11,848 12,607 13,395 3,443 4,454 (2,151 ) (2,320 ) 28,538 27,377 Income tax expense (benefit)   3,784     634     1,555     3,496     861     1,668     (538 )   (881 )   5,662     4,917   Net income (loss) before noncontrolling interests 10,855 11,214 11,052 9,899 2,582 2,786 (1,613 ) (1,439 ) 22,876 22,460 Less: Net income (loss) from noncontrolling interests   461     276     20     (15 )   2     16     —     —     483     277   Net income (loss)   $ 10,394     10,938     11,032     9,914     2,580     2,770     (1,613 )   (1,439 )   22,393     22,183     Average loans $ 463.7 475.7 465.7 465.6 74.6 71.9 (58.8 ) (57.1 ) 945.2 956.1 Average assets 1,034.1 1,085.5 830.5 822.8 83.9 82.8 (59.6 ) (58.1 ) 1,888.9 1,933.0 Average deposits 757.2 729.6 423.7 464.2 165.0 189.0 (70.0 ) (78.2 ) 1,275.9 1,304.6                                                              

(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 (income/expense in millions, average balances in billions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 COMMUNITY BANKING   Net interest income (2) $ 7,340 7,338 7,346 7,195 7,239 Provision for credit losses 534 547 484 218 636 Noninterest income 4,121 4,478 4,460 4,635 4,481 Noninterest expense   7,032     7,467     7,290     8,702     10,216   Income before income tax expense 3,895 3,802 4,032 2,910 868 Income tax expense (benefit)   637     925     1,413     809     (2,682 ) Net income before noncontrolling interests 3,258 2,877 2,619 2,101 3,550 Less: Net income from noncontrolling interests   89     61     123     188     78   Segment net income   $ 3,169     2,816     2,496     1,913     3,472   Average loans $ 459.7 460.9 463.8 470.5 473.2 Average assets 1,015.9 1,024.9 1,034.3 1,061.9 1,073.2 Average deposits   759.4     760.9     760.6     747.5     738.3   WHOLESALE BANKING Net interest income (2) $ 4,739 4,726 4,693 4,532 4,557 Provision (reversal of provision) for credit losses (28 ) 26 (36 ) (20 ) 20 Noninterest income 2,187 2,578 2,504 2,747 2,883 Noninterest expense   4,025     3,935     4,219     3,978     4,187   Income before income tax expense 2,929 3,343 3,014 3,321 3,233 Income tax expense   253     475     379     448     854   Net income before noncontrolling interests 2,676 2,868 2,635 2,873 2,379 Less: Net income (loss) from noncontrolling interests   5     17     —     (2 )   6   Segment net income   $ 2,671     2,851     2,635     2,875     2,373   Average loans $ 470.2 462.8 464.7 465.1 463.5 Average assets 839.1 827.2 826.4 829.2 837.2 Average deposits   421.6     413.6     414.0     446.0     465.7   WEALTH AND INVESTMENT MANAGEMENT Net interest income (2) $ 1,116 1,102 1,111 1,112 1,152 Provision (reversal of provision) for credit losses (3 ) 6 (2 ) (6 ) (7 ) Noninterest income 2,841 3,124 2,840 3,130 3,181 Noninterest expense   3,044     3,243     3,361     3,290     3,246   Income before income tax expense 916 977 592 958 1,094 Income tax expense   231     244     147     239     413   Net income before noncontrolling interests 685 733 445 719 681 Less: Net income (loss) from noncontrolling interests   (4 )   1     —     5     6   Segment net income   $ 689     732     445     714     675   Average loans $ 75.2 74.6 74.7 73.9 72.9 Average assets 83.6 83.8 84.0 84.2 83.7 Average deposits   155.5     159.8     167.1     177.9     184.1   OTHER (3) Net interest income (2) $ (551 ) (594 ) (609 ) (601 ) (635 ) Provision (reversal of provision) for credit losses 18 1 6 (1 ) 2 Noninterest income (813 ) (811 ) (792 ) (816 ) (808 ) Noninterest expense   (762 )   (882 )   (888 )   (928 )   (849 ) Loss before income tax benefit (620 ) (524 ) (519 ) (488 ) (596 ) Income tax benefit   (155 )   (132 )   (129 )   (122 )   (227 ) Net loss before noncontrolling interests (465 ) (392 ) (390 ) (366 ) (369 ) Less: Net income from noncontrolling interests   —     —     —     —     —   Other net loss   $ (465 )   (392 )   (390 )   (366 )   (369 ) Average loans $ (58.8 ) (58.8 ) (59.1 ) (58.5 ) (57.8 ) Average assets (59.6 ) (59.6 ) (59.8 ) (59.4 ) (58.8 ) Average deposits   (67.6 )   (67.9 )   (70.4 )   (74.2 )   (76.5 ) CONSOLIDATED COMPANY Net interest income (2) $ 12,644 12,572 12,541 12,238 12,313 Provision for credit losses 521 580 452 191 651 Noninterest income 8,336 9,369 9,012 9,696 9,737 Noninterest expense   13,339     13,763     13,982     15,042     16,800   Income before income tax expense 7,120 7,598 7,119 6,701 4,599 Income tax expense (benefit)   966     1,512     1,810     1,374     (1,642 ) Net income before noncontrolling interests 6,154 6,086 5,309 5,327 6,241 Less: Net income from noncontrolling interests   90     79     123     191     90   Wells Fargo net income   $ 6,064     6,007     5,186     5,136     6,151   Average loans $ 946.3 939.5 944.1 951.0 951.8 Average assets 1,879.0 1,876.3 1,884.9 1,915.9 1,935.3 Average deposits   1,268.9     1,266.4     1,271.3     1,297.2     1,311.6  

(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 (in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 MSRs measured using the fair value method:         Fair value, beginning of quarter $ 15,980 15,411 15,041 13,625 13,338 Servicing from securitizations or asset transfers (1) 449 502 486 573 639 Sales and other (2)   (64 )   (2 )   (1 )   (4 )   (32 ) Net additions   385     500     485     569     607   Changes in fair value: Due to changes in valuation model inputs or assumptions: Mortgage interest rates (3) (874 ) 582 376 1,253 221 Servicing and foreclosure costs (4) 763 (9 ) 30 34 23 Discount rates (5) (821 ) (9 ) — — 13 Prepayment estimates and other (6)   (314 )   (33 )   (61 )   43     (55 ) Net changes in valuation model inputs or assumptions   (1,246 )   531     345     1,330     202   Changes due to collection/realization of expected cash flows over time   (470 )   (462 )   (460 )   (483 )   (522 ) Total changes in fair value   (1,716 )   69     (115 )   847     (320 ) Fair value, end of quarter   $ 14,649     15,980     15,411     15,041     13,625  

(1) Includes impacts associated with exercising our right to repurchase delinquent loans from Government National Mortgage Association (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 (in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Amortized MSRs:           Balance, beginning of quarter $ 1,414 1,407 1,411 1,424 1,406 Purchases 45 42 22 18 40 Servicing from securitizations or asset transfers 52 33 39 34 43 Amortization   (68 )   (68 )   (65 )   (65 )   (65 ) Balance, end of quarter   $ 1,443     1,414     1,407     1,411     1,424   Fair value of amortized MSRs: Beginning of quarter $ 2,389 2,309 2,307 2,025 1,990 End of quarter   2,288     2,389     2,309     2,307     2,025        

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)

  Quarter ended (in millions)       Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Servicing income, net:         Servicing fees (1) $ 925 890 905 906 833 Changes in fair value of MSRs carried at fair value: Due to changes in valuation model inputs or assumptions (2) (A) (1,246 ) 531 345 1,330 202 Changes due to collection/realization of expected cash flows over time       (470 )   (462 )   (460 )   (483 )   (522 ) Total changes in fair value of MSRs carried at fair value (1,716 ) 69 (115 ) 847 (320 ) Amortization (68 ) (68 ) (65 ) (65 ) (65 ) Net derivative gains (losses) from economic hedges (3)   (B)   968     (501 )   (319 )   (1,220 )   (186 ) Total servicing income, net       $ 109     390     406     468     262   Market-related valuation changes to MSRs, net of hedge results (2)(3)  

(A)+(B)

  $ (278 )   30     26     110     16  

(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.

                        (in billions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Managed servicing portfolio (1):           Residential mortgage servicing: Serviced for others $ 1,164 1,184 1,190 1,201 1,209 Owned loans serviced 334 337 340 337 342 Subserviced for others   4     5     4     5     3 Total residential servicing   1,502     1,526     1,534     1,543     1,554 Commercial mortgage servicing: Serviced for others 543 529 518 510 495 Owned loans serviced 121 121 124 125 127 Subserviced for others   9     9     10     10     9 Total commercial servicing   673     659     652     645     631 Total managed servicing portfolio   $ 2,175     2,185     2,186     2,188     2,185 Total serviced for others $ 1,707 1,713 1,708 1,711 1,704 Ratio of MSRs to related loans serviced for others 0.94 % 1.02 0.98 0.96 0.88 Weighted-average note rate (mortgage loans serviced for others)   4.32     4.29     4.27     4.24     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         Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Net gains on mortgage loan origination/sales activities (in millions):           Residential (A) $ 245 324 281 324 504 Commercial 65 75 49 76 95 Residential pipeline and unsold/repurchased loan management (1)       48     57     34     66     67 Total       $ 358     456     364     466     666 Application data (in billions): Wells Fargo first mortgage quarterly applications $ 48 57 67 58 63 Refinances as a percentage of applications 30 % 26 25 35 38 Wells Fargo first mortgage unclosed pipeline, at quarter end       $ 18     22     26     24     23 Residential real estate originations: Purchases as a percentage of originations 78 % 81 78 65 64 Refinances as a percentage of originations       22     19     22     35     36 Total       100 %   100     100     100     100 Wells Fargo first mortgage loans (in billions): Retail $ 16 18 21 16 23 Correspondent 21 27 28 27 30 Other (2)       1     1     1     —     — Total quarter-to-date       $ 38     46     50     43     53 Held-for-sale (B) $ 28 33 37 34 40 Held-for-investment       10     13     13     9     13 Total quarter-to-date       $ 38     46     50     43     53 Total year-to-date       $ 177     139     93     43     212 Production margin on residential held-for-sale mortgage originations   (A)/(B)   0.89 %   0.97     0.77     0.94     1.25

(1) Predominantly includes the results of sales of modified 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 (in millions)   Dec 31, 2018   Sep 30,2018   Jun 30,2018   Mar 31,2018   Dec 31,2017 Balance, beginning of period $ 178   179   181 181   179 Provision for repurchase losses: Loan sales 5 5 4 3 4 Change in estimate (1)   (15 )   (4 )   (2 )   1     2   Net additions (reductions) to provision (10 ) 1 2 4 6 Losses   (3 )   (2 )   (4 )   (4 )   (4 ) Balance, end of period   $ 165     178     179     181     181  

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190115005297/en/

MediaAncel Martinez, 415-222-3858ancel.martinez@wellsfargo.comorInvestor RelationsJohn M. Campbell, 415-396-0523john.m.campbell@wellsfargo.com