WFC
$54.32
Wells Fargo &
$.74
1.38%
Earnings Details
3rd Quarter September 2016
Friday, October 14, 2016 8:00:19 AM
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Summary

Wells Fargo & Beats

Wells Fargo & (WFC) reported 3rd Quarter September 2016 earnings of $1.03 per share on revenue of $23.9 billion. The consensus earnings estimate was $1.02 per share on revenue of $22.0 billion. The Earnings Whisper number was $1.02 per share. Revenue grew 4.4% on a year-over-year basis.

Wells Fargo & Co is a diversified financial services company. It provides retail, corporate and commercial banking services through banking stores and offices, the internet and other distribution channels to individuals, businesses and institutions.

Results
Reported Earnings
$1.03
Earnings Whisper
$1.02
Consensus Estimate
$1.02
Reported Revenue
$23.86 Bil
Revenue Estimate
$21.97 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Wells Fargo Reports $5.6 Billion in Quarterly Net Income

Wells Fargo & Company (WFC):

Continued strong financial results: -- Net income of $5.6 billion, compared with $5.8 billion in third quarter 2015

-- Diluted earnings per share (EPS) of $1.03, compared with $1.05

-- Revenue of $22.3 billion, up 2 percent

Pre-tax pre-provision profit(1) of $9.1 billion, compared with $9.5 billion

Return on assets of 1.17 percent and return on equity of 11.60 percent

Strong growth in loans and deposits: -- Total average loans of $957.5 billion, up $62.4 billion, or 7 percent, from third quarter 2015

Total average deposits of $1.3 trillion, up $62.7 billion, or 5 percent

Solid credit quality: -- Net charge-offs of $805 million, up $102 million from third quarter 2015 -- Net charge-offs were 0.33 percent of average loans (annualized), up from 0.31 percent

-- Nonaccrual loans down $551 million, or 5 percent

No reserve build(2) or release, consistent with third quarter 2015

Maintained strong capital levels while continuing to return capital to shareholders: -- Common Equity Tier 1 ratio (fully phased-in) of 10.7 percent(3)

Period-end common shares outstanding down 24.6 million from second quarter 2016.

Sales Practices Settlements(4)

On September 8, 2016, Wells Fargo & Company (WFC) reached agreements with the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the Office of the Los Angeles City Attorney, regarding allegations that some of its retail customers received products and services they did not request. The amount of the settlements, which the Company had fully accrued for as of June 30, 2016, totaled $185 million, plus $5 million in customer remediation. Key actions are being taken to ensure the Company’s culture is wholly aligned with the interests of customers including:

Eliminated product sales goals for retail banking team members as of October 1, 2016;

Implemented procedures to send customers a confirmation email approximately an hour after opening any deposit account and an acknowledgement letter after submitting a credit card application;

Attempting to contact all retail and small business deposit customers across the country, including those who have already received refunded fees, to invite them to review their accounts with their banker. Also contacting credit card customers identified as possibly having unauthorized accounts to confirm whether they need or want their credit card;

Expanding the scope of our customer account review and remediation to include 2009 and 2010;

The Independent Directors of the Board have launched an investigation into the Company’s retail banking sales practices and related matters -- Independent Directors have retained the Shearman & Sterling law firm to assist in the investigation

John Stumpf forfeited unvested equity awards valued at approximately $41 million

Carrie Tolstedt has left the Company; will receive no severance; has forfeited unvested equity awards valued at approximately $19 million; will not exercise outstanding options during investigation

-- Neither executive will receive a bonus for 2016

Executive Leadership Changes

On October 12, 2016, former Chairman and CEO John Stumpf retired from the Company after 34 years of service. The Board elected Tim Sloan, the Company’s President and Chief Operating Officer, to succeed him as CEO, and Stephen Sanger, its Lead Director, to serve as the Board’s non-executive Chairman, and independent director Elizabeth Duke to serve as Vice Chair. Sloan also was elected to the Board.

President and CEO Tim Sloan said, "I am deeply committed to restoring the trust of all of our stakeholders, including our customers, shareholders, and community partners. We know that it will take time and a lot of hard work to earn back our reputation, but I am confident because of the incredible caliber of our team members. We will work tirelessly to build a stronger and better Wells Fargo for generations to come."

Financial Results

Wells Fargo & Company (WFC) reported net income of $5.6 billion, or $1.03 per diluted common share, for third quarter 2016, compared with $5.8 billion, or $1.05 per share, for third quarter 2015, and $5.6 billion, or $1.01 per share, for second quarter 2016.

Selected Financial Information
Quarter ended
Sep 30,
Jun 30,
Sep 30,
2016
2016
2015
Earnings
Diluted earnings per common share
$
1.03
1.01
1.05
Wells Fargo net income (in billions)
5.64
5.56
5.80
Return on assets (ROA)
1.17 %
1.20
1.32
Return on equity (ROE)
11.60
11.70
12.62
Return on average tangible common equity (ROTCE)(a)
13.96
14.15
15.19
Asset Quality
Net charge-offs (annualized) as a % of average total loans
0.33 %
0.39
0.31
Allowance for credit losses as a % of total loans
1.32
1.33
1.39
Allowance for credit losses as a % of annualized net charge-offs
396
343
450
Other
Revenue (in billions)
$
22.3
22.2
21.9
Efficiency ratio
59.4 %
58.1
56.7
Average loans (in billions)
$
957.5
950.8
895.1
Average deposits (in billions)
1,261.5
1,236.7
1,198.9
Net interest margin
2.82 %
2.86
2.96
(a) Tangible common equity is a non-GAAP financial measure and
represents total equity less preferred equity, noncontrolling
interests, and goodwill and certain identifiable intangible assets
(including goodwill and intangible assets associated with certain
of our nonmarketable equity investments but excluding mortgage
servicing rights), net of applicable deferred taxes. The
methodology of determining tangible common equity may differ among
companies. Management believes that return on average tangible
common equity, which utilizes tangible common equity, is a useful
financial measure because it enables investors and others to
assess the Company’s use of equity. For additional information,
including a corresponding reconciliation to GAAP financial
measures, see the "Tangible Common Equity" tables on page 35.

Chief Financial Officer John Shrewsberry said, "Wells Fargo reported solid results for the third quarter, reflecting the benefits of our diversified business model, our strong balance sheet and improved credit performance. Revenue increased linked quarter on higher net interest income, driven by growth in earning assets and increased investment in our securities portfolio, as well as solid mortgage banking results. While expenses increased from second quarter, credit results improved from the prior period led by strong performance in consumer real estate and improvements in our oil and gas portfolio. Capital remained strong and our net payout ratio(5) was 61 percent in the quarter, as we returned $3.2 billion to shareholders through common stock dividends and net share repurchases. We will continue to monitor impacts from the recent sales practice settlements to our business activity levels."

Net Interest Income

Net interest income in third quarter 2016 increased $219 million from second quarter 2016 to $12.0 billion, primarily due to growth in investment securities, loans, trading assets and mortgages held-for-sale. The third quarter also included one additional day, accounting for approximately one third of the increase in net interest income relative to the second quarter. The benefit to net interest income from asset growth was partially offset by increased interest expense from higher debt balances and a modest increase in commercial deposit costs.

Net interest margin was 2.82 percent, down 4 basis points from second quarter 2016 primarily due to growth in long-term debt and deposits, partially offset by the benefit of earning asset growth.

Noninterest Income

Noninterest income in the third quarter was $10.4 billion, in line with second quarter 2016. Third quarter noninterest income reflected strong mortgage banking results, as well as growth in trust and investment fees, higher gains from trading activities driven by higher deferred compensation plan investment results (largely offset in employee benefits expense) and higher service charges on deposit accounts. These increases were offset by a decline in other income, which in the second quarter included a $290 million gain from the sale of our health benefit services business, and lower gains on debt securities and equity investments. Equity gains in third quarter 2016 were down $780 million from an elevated level in third quarter 2015.

Trust and investment fees were $3.6 billion, up $66 million from the prior quarter, primarily due to higher asset-based fees and higher trust and investment management fees.

Mortgage banking noninterest income was $1.7 billion, up $253 million from second quarter 2016, driven by net gains on mortgage loan origination/sales activities. Residential mortgage loan originations were $70 billion in the third quarter, up from $63 billion in the second quarter. The production margin on residential held-for-sale mortgage loan originations(6) was 1.81 percent, up from 1.66 percent in second quarter.

Noninterest Expense

Noninterest expense in the third quarter was $13.3 billion, compared with $12.9 billion in the prior quarter. Third quarter expenses included increased operating losses, reflecting higher litigation accruals, as well as higher salaries, a $107 million donation to the Wells Fargo Foundation and higher FDIC insurance expense. These increases were partially offset by gains on sales of foreclosed assets, as well as lower incentive compensation, and advertising and promotion. The efficiency ratio was 59.4 percent in third quarter 2016, compared with 58.1 percent in the prior quarter. The Company expects the efficiency ratio to remain at an elevated level.

Loans

Total loans were $961.3 billion at September 30, 2016, up $4.2 billion from June 30, 2016. Loan growth was driven by growth in commercial loans, including real estate mortgage and commercial and industrial, as well as growth in consumer loans, including real estate 1-4 family first mortgage, credit card and automobile. Total average loans were $957.5 billion in the third quarter, up $6.7 billion from the prior quarter.

Period-End Loan Balances
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Commercial
$ 496,454
494,538
488,205
456,583
447,338
Consumer
464,872
462,619
459,053
459,976
455,895
Total loans
$ 961,326
957,157
947,258
916,559
903,233
Change from prior quarter
$
4,169
9,899
30,699
13,326
14,774

Investment Securities

Investment securities were $390.8 billion at September 30, 2016, up $37.4 billion from second quarter, as approximately $57 billion of purchases, predominantly federal agency mortgage-backed securities in our available-for-sale portfolio, were partially offset by run-off, including accelerated prepayments of investment securities, and sales.

Net unrealized available-for-sale securities gains of $4.5 billion at September 30, 2016, declined $63 million from June 30, 2016, as modestly higher interest rates were partially offset by tighter credit spreads.

Deposits

Total average deposits for third quarter 2016 were $1.3 trillion, up 2 percent from the prior quarter, driven by both commercial and consumer growth. The average deposit cost for third quarter 2016 was 11 basis points, flat compared with the prior quarter.

Capital

Capital levels remained strong in the third quarter, with a Common Equity Tier 1 ratio (fully phased-in) of 10.7 percent(3), compared with 10.6 percent in the prior quarter. In third quarter 2016, the Company repurchased 38.3 million shares of its common stock, contributing to a net reduction in period-end common shares outstanding of 24.6 million shares. The Company paid a quarterly common stock dividend of $0.38 per share, up from $0.375 per share a year ago.

Credit Quality

"Credit results improved in the third quarter as our quarterly loss rate decreased to 0.33 percent (annualized)," said Chief Risk Officer Mike Loughlin. "The loan portfolio continued to perform well, led by strong performance in consumer real estate. Oil and gas portfolio performance during the quarter improved with lower credit losses and improved portfolio quality. The allowance for credit losses in the third quarter remained unchanged from the second quarter. Future allowance levels will be based on a variety of factors, including loan growth, portfolio performance and general economic conditions."

Net Loan Charge-offs

The quarterly loss rate of 0.33 percent (annualized) reflected commercial losses of 0.17 percent and consumer losses of 0.51 percent. Credit losses were $805 million in third quarter 2016, down $119 million, or 13 percent, from second quarter 2016. The decline was primarily due to a $94 million decrease in oil and gas losses. Consumer losses increased $23 million, driven by a $47 million increase in automobile losses from seasonally low losses in the second quarter, partially offset by a decrease in credit card losses of $25 million.

Net Loan Charge-Offs
Quarter ended
September 30, 2016
June 30, 2016
March 31, 2016
Net loan
As a % of
Net loan
As a % of
Net loan
As a % of
charge-
average
charge-
average
charge-
average
($ in millions)
offs
loans (a)
offs
loans (a)
offs
loans (a)
Commercial:
Commercial and industrial
$
259
0.32 %
$
368
0.46 %
$
273
0.36 %
Real estate mortgage
(28 )
(0.09 )
(20 )
(0.06 )
(29 )
(0.10 )
Real estate construction
(18 )
(0.32 )
(3 )
(0.06 )
(8 )
(0.13 )
Lease financing
2
0.04
12
0.27
1
0.01
Total commercial
215
0.17
357
0.29
237
0.20
Consumer:
Real estate 1-4 family first mortgage
20
0.03
14
0.02
48
0.07
Real estate 1-4 family junior lien mortgage
49
0.40
62
0.49
74
0.57
Credit card
245
2.82
270
3.25
262
3.16
Automobile
137
0.87
90
0.59
127
0.85
Other revolving credit and installment
139
1.40
131
1.32
138
1.42
Total consumer
590
0.51
567
0.49
649
0.57
Total
$
805
0.33 %
$
924
0.39 %
$
886
0.38 %
(a) Quarterly net charge-offs as a percentage of average loans are
annualized. See explanation on page 31 of the accounting for
purchased credit-impaired (PCI) loans and the impact on selected
financial ratios.

Nonperforming Assets

Nonperforming assets decreased $1.1 billion from second quarter 2016 to $12.0 billion. Nonaccrual loans decreased $977 million from second quarter to $11.0 billion led by a $732 million decrease in consumer nonaccruals. Foreclosed assets of $1.0 billion were down $97 million from second quarter 2016.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
September 30, 2016
June 30, 2016
March 31, 2016
As a
As a
As a
% of
% of
% of
Total
total
Total
total
Total
total
($ in millions)
balances
loans
balances
loans
balances
loans
Commercial:
Commercial and industrial
$
3,331
1.03 %
$
3,464
1.07 %
$
2,911
0.91 %
Real estate mortgage
780
0.60
872
0.68
896
0.72
Real estate construction
59
0.25
59
0.25
63
0.27
Lease financing
92
0.49
112
0.59
99
0.52
Total commercial
4,262
0.86
4,507
0.91
3,969
0.81
Consumer:
Real estate 1-4 family first mortgage
5,310
1.91
5,970
2.15
6,683
2.43
Real estate 1-4 family junior lien mortgage
1,259
2.62
1,330
2.67
1,421
2.77
Automobile
108
0.17
111
0.18
114
0.19
Other revolving credit and installment
47
0.12
45
0.11
47
0.12
Total consumer
6,724
1.45
7,456
1.61
8,265
1.80
Total nonaccrual loans
10,986
1.14
11,963
1.25
12,234
1.29
Foreclosed assets:
Government insured/guaranteed
282
321
386
Non-government insured/guaranteed
738
796
893
Total foreclosed assets
1,020
1,117
1,279
Total nonperforming assets
$ 12,006
1.25 %
$ 13,080
1.37 %
$ 13,513
1.43 %
Change from prior quarter:
Total nonaccrual loans
$
(977 )
$
(271 )
$
852
Total nonperforming assets
(1,074 )
(433 )
706

Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $853 million at September 30, 2016, up from $788 million at June 30, 2016. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgage loans and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $11.2 billion at September 30, 2016, down from $11.6 billion at June 30, 2016.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.7 billion at September 30, 2016, which was unchanged from June 30, 2016. The allowance coverage for total loans was 1.32 percent, compared with 1.33 percent in second quarter 2016. The allowance covered 4.0 times annualized third quarter net charge-offs, compared with 3.4 times in the prior quarter. The allowance coverage for nonaccrual loans was 116 percent at September 30, 2016, compared with 107 percent at June 30, 2016. "We believe the allowance was appropriate for losses inherent in the loan portfolio at September 30, 2016," said Loughlin.

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
Sep 30,
Jun 30,
Sep 30,
(in millions)
2016
2016
2015
Community Banking
$ 3,227
3,179
3,560
Wholesale Banking
2,047
2,073
1,925
Wealth and Investment Management
677
584
606

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

Selected Financial Information
Quarter ended
Sep 30,
Jun 30,
Sep 30,
(in millions)
2016
2016
2015
Total revenue
$ 12,387
12,204
12,933
Provision for credit losses
651
689
668
Noninterest expense
6,953
6,648
6,778
Segment net income
3,227
3,179
3,560
(in billions)
Average loans
489.2
485.7
477.0
Average assets
993.6
967.6
898.9
Average deposits
708.0
703.7
655.6

Community Banking reported net income of $3.2 billion, up $48 million, or 2 percent, from second quarter 2016. Revenue of $12.4 billion increased $183 million, or 1 percent, from second quarter 2016 due to higher net interest income, mortgage banking revenue, trust and investment fees, deposit service charges, and other income (hedge ineffectiveness), partially offset by lower market sensitive revenue, primarily lower gains on sales of debt securities and equity investments. Noninterest expense increased $305 million, or 5 percent, compared with second quarter 2016, due to higher operating losses and a donation to the Wells Fargo Foundation, partially offset by lower personnel expense. The provision for credit losses decreased $38 million from the prior quarter.

Net income was down $333 million, or 9 percent, from third quarter 2015. Revenue decreased $546 million, or 4 percent, compared with a year ago due to lower gains on equity investments, partially offset by higher deferred compensation plan investment results (offset in employee benefits expense), higher gains on sales of debt securities, card fees, and deposit service charges. Noninterest expense increased $175 million, or 3 percent, from a year ago driven by higher deferred compensation plan expense (offset in trading revenue) and operating losses, partially offset by lower foreclosed assets expense. The provision for credit losses decreased $17 million from a year ago.

Regional Banking

Retail Banking -- Primary consumer checking customers(7) up 4.7 percent year-over-year(8)

Primary consumer checking customers(7) in September up 4.5 percent year-over-year

Debit card purchase volume(9) of $76.0 billion in third quarter, up 8 percent year-over-year

Retail Banking household cross-sell ratio of 6.25 products per household, compared with 6.33 year-over-year(8,10)

Small Business Banking -- For the 14th consecutive year, America’s #1 small business lender and #1 lender to small businesses in low- and moderate-income areas (loans under $1 million; 2015 Community Reinvestment Act data, released August 2016)

As part of the Wells Fargo Works for Small Business(SM) initiative, the Company launched the new Business Credit Center at wellsfargoworks.com to help business owners better understand how to prepare for and manage credit

Digital Banking -- 27.4 million digital (online and mobile) active customers, including 18.8 million mobile active users(8,11)

#1 overall performance in Keynote Mobile Banking Scorecard; also best in "Functionality," "Ease of Use," and "Best App & Mobile Web Experiences" (September 2016)

Consumer Lending Group

Home Lending -- Originations of $70 billion, up from $63 billion in prior quarter

-- Applications of $100 billion, up from $95 billion in prior quarter

Application pipeline of $50 billion at quarter end, up from $47 billion at June 30, 2016

Consumer Credit -- Credit card purchase volume of $19.6 billion in third quarter, up 8 percent year-over-year

Credit card penetration in retail banking households rose to 45.4 percent, up from 44.8 percent in prior year(8,12)

Auto originations of $8.1 billion in third quarter, down 2 percent from prior quarter and 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 Business Banking, Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments and Asset Backed Finance.

Selected Financial Information
Quarter ended
Sep 30,
Jun 30,
Sep 30,
(in millions)
2016
2016
2015
Total revenue
$ 7,147
7,284
6,326
Provision for credit losses
157
385
36
Noninterest expense
4,120
4,036
3,503
Segment net income
2,047
2,073
1,925
(in billions)
Average loans
454.3
451.4
405.6
Average assets
794.2
772.6
739.1
Average deposits
441.2
425.8
442.0

Wholesale Banking reported net income of $2.0 billion, down $26 million, or 1 percent, from second quarter 2016. Revenue of $7.1 billion decreased $137 million, or 2 percent, from prior quarter due to the $290 million gain on the sale of our health benefit services business in second quarter 2016, partially offset by higher net interest income, increased mortgage banking fees in multi-family capital and structured real estate, as well as higher commercial real estate brokerage fees. Noninterest expense increased $84 million, or 2 percent, from the prior quarter primarily due to higher FDIC insurance expense, personnel expense and operating losses. The provision for credit losses decreased $228 million from the prior quarter on lower oil and gas related net charge-offs.

Net income was up $122 million, or 6 percent, from third quarter 2015. Revenue increased $821 million, or 13 percent, from third quarter 2015, on strong loan growth, including the GE Capital portfolio acquisitions, higher customer accommodation trading, strong mortgage banking fees and increased investment banking fees, partially offset by lower insurance fees driven by the sale of our crop insurance business in first quarter 2016 and lower gains on debt securities and equity investments. Noninterest expense increased $617 million, or 18 percent, from a year ago primarily due to the GE Capital portfolio acquisitions and higher personnel expenses related to growth initiatives, compliance, and regulatory requirements. The provision for credit losses increased $121 million from a year ago primarily due to higher oil and gas net charge-offs.

Average loans increased 12 percent from third quarter 2015, on broad-based growth, including asset-backed finance, commercial real estate, corporate banking, equipment finance and structured real estate as well as the GE Capital portfolio acquisitions

-- Treasury management revenue up 2 percent from third quarter 2015

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

Selected Financial Information
Quarter ended
Sep 30,
Jun 30,
Sep 30,
(in millions)
2016
2016
2015
Total revenue
$ 4,099
3,919
3,878
Provision (reversal of provision) for credit losses
4
2
(6 )
Noninterest expense
2,999
2,976
2,909
Segment net income
677
584
606
(in billions)
Average loans
68.4
66.7
61.1
Average assets
212.1
205.3
192.6
Average deposits
189.2
182.5
172.6

Wealth and Investment Management reported net income of $677 million, up $93 million, or 16 percent, from second quarter 2016. Revenue of $4.1 billion increased $180 million, or 5 percent, from the prior quarter, primarily due to higher asset-based fees, net interest income, and higher deferred compensation plan investment results (offset in employee benefits expense). Noninterest expense increased $23 million, or 1 percent, from the prior quarter, largely driven by higher deferred compensation plan expense (offset in trading revenue) and higher broker commissions. The provision for credit losses increased $2 million from second quarter 2016.

Net income was up $71 million, or 12 percent, from third quarter 2015. Revenue increased $221 million, or 6 percent, from a year ago primarily driven by higher deferred compensation plan investment results (offset in employee benefits expense) and higher net interest income, as average loans increased $7.3 billion, or 12 percent, to $68.4 billion. Noninterest expense increased $90 million, or 3 percent, from a year ago, primarily due to higher deferred compensation plan expense (offset in trading revenue), partially offset by lower operating losses. The provision for credit losses increased $10 million from a year ago.

Retail Brokerage

-- Client assets of $1.5 trillion, up 10 percent from prior year

Advisory assets of $458 billion, up 12 percent from prior year, primarily driven by higher market valuations and positive net flows

Strong loan growth, with average balances up 18 percent from prior year largely due to continued growth in non-conforming mortgage loans and security-based lending

Wealth Management

-- Client assets of $230 billion, up 5 percent from prior year

Average loan balances up 9 percent over prior year primarily driven by continued growth in non-conforming mortgage loans, commercial loans and security-based lending

Retirement

-- IRA assets of $379 billion, up 10 percent from prior year

Institutional Retirement plan assets of $347 billion, up 5 percent from prior year

Asset Management

Total assets under management of $498 billion, up 4 percent from prior year primarily due to higher market valuations, and positive fixed income and money market net inflows, partially offset by equity outflows

Conference Call

The Company will host a live conference call on Friday, October 14, at 7 a.m. PT (10 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~101416.

A replay of the conference call will be available beginning at 10 a.m. PT (1 p.m. ET) on Friday, October 14 through Friday, October 28. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #31498547. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~101416.

Endnotes
(1)
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.
(2)
Reserve build represents the amount by which the provision for
credit losses exceeds net charge-offs, while reserve release
represents the amount by which net charge-offs exceed the provision
for credit losses.
(3)
See table on page 36 for more information on Common Equity Tier 1.
Common Equity Tier 1 (fully phased-in) is a preliminary estimate and
is calculated assuming the full phase-in of the Basel III capital
rules.
(4)
Additional information is provided in our 3Q16 Quarterly Supplement.
(5)
Net payout ratio means the ratio of (i) common stock dividends and
share repurchases less issuances and stock compensation-related
items, divided by (ii) net income applicable to common stock.
(6)
Production margin represents net gains on residential mortgage loan
origination/sales activities divided by total residential
held-for-sale mortgage originations. See the Selected Five Quarter
Residential Mortgage Production Data table on page 41 for more
information.
(7)
Customers who actively use their checking account with transactions
such as debit card purchases, online bill payments, and direct
deposit.
(8)
Data as of August 2016, comparisons with August 2015.
(9)
Combined consumer and business debit card purchase volume dollars.
(10)
Effective second quarter 2016, Retail Banking households reflect
only those households that maintain a retail checking account, which
we believe provides the foundation for long-term retail banking
relationships. Additionally, we updated the products included to
capture business products in addition to retail products that have
the potential for revenue generation and long-term viability.
Products and services that generally do not meet these criteria -
such as ATM cards, online banking, bill pay and direct deposit - are
not included. This change in methodology was the result of a
long-term evaluation spanning 18 months to best align our cross-sell
metric with our strategic focus of long-term retail banking
relationships. Prior period metrics have been revised to conform
with the updated methodology. Cross-sell metrics have not been
adjusted to reflect the de minimis impact of approximately 2.1
million potentially unauthorized accounts identified in a review by
an independent consulting firm. The maximum impact of these accounts
to this reported metric in any one quarter was 0.02 products per
household, or 0.3 percent.
(11)
Primarily includes retail banking, consumer lending, small business
and business banking customers.
(12)
Credit card penetration defined as the percentage of Retail Banking
households that have a credit card with Wells Fargo. Effective
second quarter 2016, Retail Banking households reflect only those
households that maintain a retail checking account, which we believe
provides the foundation for long-term retail banking relationships.
This change in methodology was the result of a long-term evaluation
spanning 18 months to best align our cross-sell metric with our
strategic focus of long-term retail banking relationships. Prior
period metrics have been revised to conform with the updated
methodology. Credit card household penetration rates have not been
adjusted to reflect the impact of the approximately 565,000
potentially unauthorized accounts identified by an independent
consulting firm because the maximum impact in any one quarter was
not greater than 86 basis points, or approximately 2 percent.

Forward-Looking Statements

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

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

current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and the overall slowdown in global economic growth;

our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;

financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;

the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;

the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;

negative effects relating to our mortgage servicing and foreclosure practices, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;

our ability to realize our efficiency ratio target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;

the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;

significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our investment securities portfolio;

the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;

reputational damage from negative publicity, protests, fines, penalties and other negative consequences from regulatory violations and legal actions;

a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;

the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;

-- fiscal and monetary policies of the Federal Reserve Board; and

the other risk factors and uncertainties described under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015.

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

For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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

About Wells Fargo

Wells Fargo & Company (WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,600 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 42 countries and territories to support customers who conduct business in the global economy. With approximately 269,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 27 on Fortune’s 2016 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially.

Wells Fargo & Company and 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
25
(Taxable-Equivalent Basis)
Noninterest Income and Noninterest Expense
27
Balance Sheet
Consolidated Balance Sheet
30
Investment Securities
32
Loans
Loans
32
Nonperforming Assets
33
Loans 90 Days or More Past Due and Still Accruing
34
Purchased Credit-Impaired Loans
35
Pick-A-Pay Portfolio
36
Changes in Allowance for Credit Losses
38
Equity
Tangible Common Equity
39
Common Equity Tier 1 Under Basel III
40
Operating Segments
Operating Segment Results
41
Other
Mortgage Servicing and other related data
43
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
% Change
Quarter ended
Sep 30, 2016 from
Nine months ended
($ in millions, except per share amounts)
Sep 30,
Jun 30,
Sep 30,
Jun 30,
Sep 30,
Sep 30,
Sep 30,
%
2016
2016
2015
2016
2015
2016
2015
Change
For the Period
Wells Fargo net income
$
5,644
5,558
5,796
2 %
(3 )
$
16,664
17,319
(4 )%
Wells Fargo net income applicable to common stock
5,243
5,173
5,443
1
(4 )
15,501
16,267
(5 )
Diluted earnings per common share
1.03
1.01
1.05
2
(2 )
3.03
3.12
(3 )
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA)
1.17 %
1.20
1.32
(3 )
(11 )
1.19 %
1.34
(11 )
Wells Fargo net income applicable to common stock to average Wells
11.60
11.70
12.62
(1 )
(8 )
11.68
12.83
(9 )
Fargo common stockholders’ equity (ROE)
Return on average tangible common equity (ROTCE)(1)
13.96
14.15
15.19
(1 )
(8 )
14.08
15.46
(9 )
Efficiency ratio (2)
59.4
58.1
56.7
2
5
58.7
58.0
1
Total revenue
$
22,328
22,162
21,875
1
2
$
66,685
64,471
3
Pre-tax pre-provision profit (PTPP) (3)
9,060
9,296
9,476
(3 )
(4 )
27,523
27,096
2
Dividends declared per common share
0.380
0.380
0.375
--
1
1.135
1.10
3
Average common shares outstanding
5,043.4
5,066.9
5,125.8
--
(2 )
5,061.9
5,145.9
(2 )
Diluted average common shares outstanding
5,094.6
5,118.1
5,193.8
--
(2 )
5,118.2
5,220.3
(2 )
Average loans
$
957,484
950,751
895,095
1
7
$
945,197
876,384
8
Average assets
1,914,586
1,862,084
1,746,402
3
10
1,865,694
1,727,967
8
Average total deposits
1,261,527
1,236,658
1,198,874
2
5
1,239,287
1,186,412
4
Average consumer and small business banking deposits (4)
739,066
726,359
683,245
2
8
726,798
674,741
8
Net interest margin
2.82 %
2.86
2.96
(1 )
(5 )
2.86 %
2.96
(3 )
At Period End
Investment securities
$
390,832
353,426
345,074
11
13
$
390,832
345,074
13
Loans
961,326
957,157
903,233
--
6
961,326
903,233
6
Allowance for loan losses
11,583
11,664
11,659
(1 )
(1 )
11,583
11,659
(1 )
Goodwill
26,688
26,963
25,684
(1 )
4
26,688
25,684
4
Assets
1,942,124
1,889,235
1,751,265
3
11
1,942,124
1,751,265
11
Deposits
1,275,894
1,245,473
1,202,179
2
6
1,275,894
1,202,179
6
Common stockholders’ equity
179,916
178,633
172,089
1
5
179,916
172,089
5
Wells Fargo stockholders’ equity
203,028
201,745
193,051
1
5
203,028
193,051
5
Total equity
203,958
202,661
194,043
1
5
203,958
194,043
5
Tangible common equity (1)
149,829
148,110
143,352
1
5
149,829
143,352
5
Common shares outstanding
5,023.9
5,048.5
5,108.5
--
(2 )
5,023.9
5,108.5
(2 )
Book value per common share (5)
$
35.81
35.38
33.69
1
6
$
35.81
33.69
6
Tangible book value per common share (1)(5)
29.82
29.34
28.06
2
6
29.82
28.06
6
Common stock price:
High
51.00
51.41
58.77
(1 )
(13 )
53.27
58.77
(9 )
Low
44.10
44.50
47.75
(1 )
(8 )
44.10
47.75
(8 )
Period end
44.28
47.33
51.35
(6 )
(14 )
44.28
51.35
(14 )
Team members (active, full-time equivalent)
268,800
267,900
265,200
--
1
268,800
265,200
1
(1) Tangible common equity is a non-GAAP financial measure and
represents total equity less preferred equity, noncontrolling
interests, and goodwill and certain identifiable intangible assets
(including goodwill and intangible assets associated with certain
of our nonmarketable equity investments but excluding mortgage
servicing rights), net of applicable deferred taxes. The
methodology of determining tangible common equity may differ among
companies. Management believes that return on average tangible
common equity and tangible book value per common share, which
utilize tangible common equity, are useful financial measures
because they enable investors and others to assess the Company’s
use of equity. For additional information, including a
corresponding reconciliation to GAAP financial measures, see the
"Tangible Common Equity" tables on page 35.
(2) The efficiency ratio is noninterest expense divided by total
revenue (net interest income and noninterest income).
(3) Pre-tax pre-provision profit (PTPP) is total revenue less
noninterest expense. Management believes that PTPP is a useful
financial measure because it enables investors and others to
assess the Company’s ability to generate capital to cover credit
losses through a credit cycle.
(4) Consumer and small business banking deposits are total deposits
excluding mortgage escrow and wholesale deposits.
(5) Book value per common share is common stockholders’ equity
divided by common shares outstanding. Tangible book value per
common share is tangible common equity divided by common shares
outstanding.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
Quarter ended
($ in millions, except per share amounts)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2016
2016
2016
2015
2015
For the Quarter
Wells Fargo net income
$
5,644
5,558
5,462
5,575
5,796
Wells Fargo net income applicable to common stock
5,243
5,173
5,085
5,203
5,443
Diluted earnings per common share
1.03
1.01
0.99
1.00
1.05
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA)
1.17 %
1.20
1.21
1.24
1.32
Wells Fargo net income applicable to common stock to average Wells
11.60
11.70
11.75
11.93
12.62
Fargo common stockholders’ equity (ROE)
Return on average tangible common equity (ROTCE)(1)
13.96
14.15
14.15
14.30
15.19
Efficiency ratio (2)
59.4
58.1
58.7
58.4
56.7
Total revenue
$
22,328
22,162
22,195
21,586
21,875
Pre-tax pre-provision profit (PTPP) (3)
9,060
9,296
9,167
8,987
9,476
Dividends declared per common share
0.380
0.380
0.375
0.375
0.375
Average common shares outstanding
5,043.4
5,066.9
5,075.7
5,108.5
5,125.8
Diluted average common shares outstanding
5,094.6
5,118.1
5,139.4
5,177.9
5,193.8
Average loans
$
957,484
950,751
927,220
912,280
895,095
Average assets
1,914,586
1,862,084
1,819,875
1,787,287
1,746,402
Average total deposits
1,261,527
1,236,658
1,219,430
1,216,809
1,198,874
Average consumer and small business banking deposits (4)
739,066
726,359
714,837
696,484
683,245
Net interest margin
2.82 %
2.86
2.90
2.92
2.96
At Quarter End
Investment securities
$
390,832
353,426
334,899
347,555
345,074
Loans
961,326
957,157
947,258
916,559
903,233
Allowance for loan losses
11,583
11,664
11,621
11,545
11,659
Goodwill
26,688
26,963
27,003
25,529
25,684
Assets
1,942,124
1,889,235
1,849,182
1,787,632
1,751,265
Deposits
1,275,894
1,245,473
1,241,490
1,223,312
1,202,179
Common stockholders’ equity
179,916
178,633
175,534
172,036
172,089
Wells Fargo stockholders’ equity
203,028
201,745
197,496
192,998
193,051
Total equity
203,958
202,661
198,504
193,891
194,043
Tangible common equity (1)
149,829
148,110
144,679
143,337
143,352
Common shares outstanding
5,023.9
5,048.5
5,075.9
5,092.1
5,108.5
Book value per common share (5)
$
35.81
35.38
34.58
33.78
33.69
Tangible book value per common share (1)(5)
29.82
29.34
28.50
28.15
28.06
Common stock price:
High
51.00
51.41
53.27
56.34
58.77
Low
44.10
44.50
44.50
49.51
47.75
Period end
44.28
47.33
48.36
54.36
51.35
Team members (active, full-time equivalent)
268,800
267,900
268,600
264,700
265,200
(1) Tangible common equity is a non-GAAP financial measure and
represents total equity less preferred equity, noncontrolling
interests, and goodwill and certain identifiable intangible assets
(including goodwill and intangible assets associated with certain
of our nonmarketable equity investments but excluding mortgage
servicing rights), net of applicable deferred taxes. The
methodology of determining tangible common equity may differ among
companies. Management believes that return on average tangible
common equity and tangible book value per common share, which
utilize tangible common equity, are useful financial measures
because they enable investors and others to assess the Company’s
use of equity. For additional information, including a
corresponding reconciliation to GAAP financial measures, see the
"Tangible Common Equity" tables on page 35.
(2) The efficiency ratio is noninterest expense divided by total
revenue (net interest income and noninterest income).
(3) Pre-tax pre-provision profit (PTPP) is total revenue less
noninterest expense. Management believes that PTPP is a useful
financial measure because it enables investors and others to
assess the Company’s ability to generate capital to cover credit
losses through a credit cycle.
(4) Consumer and small business banking deposits are total
deposits excluding mortgage escrow and wholesale deposits.
(5) Book value per common share is common stockholders’ equity
divided by common shares outstanding. Tangible book value per
common share is tangible common equity divided by common shares
outstanding.
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
Quarter ended September 30,
%
Nine months ended September 30,
%
(in millions, except per share amounts)
2016
2015
Change
2016
2015
Change
Interest income
Trading assets
$
593
485
22 %
$
1,761
1,413
25 %
Investment securities
2,298
2,289
--
6,736
6,614
2
Mortgages held for sale
207
223
(7 )
549
609
(10 )
Loans held for sale
2
4
(50 )
7
14
(50 )
Loans
9,978
9,216
8
29,377
27,252
8
Other interest income
409
228
79
1,175
732
61
Total interest income
13,487
12,445
8
39,605
36,634
8
Interest expense
Deposits
356
232
53
995
722
38
Short-term borrowings
85
12
608
229
51
349
Long-term debt
1,006
655
54
2,769
1,879
47
Other interest expense
88
89
(1 )
260
269
(3 )
Total interest expense
1,535
988
55
4,253
2,921
46
Net interest income
11,952
11,457
4
35,352
33,713
5
Provision for credit losses
805
703
15
2,965
1,611
84
Net interest income after provision for credit losses
11,147
10,754
4
32,387
32,102
1
Noninterest income
Service charges on deposit accounts
1,370
1,335
3
4,015
3,839
5
Trust and investment fees
3,613
3,570
1
10,545
10,957
(4 )
Card fees
997
953
5
2,935
2,754
7
Other fees
926
1,099
(16 )
2,765
3,284
(16 )
Mortgage banking
1,667
1,589
5
4,679
4,841
(3 )
Insurance
293
376
(22 )
1,006
1,267
(21 )
Net gains (losses) from trading activities
415
(26 )
NM
943
515
83
Net gains on debt securities
106
147
(28 )
797
606
32
Net gains from equity investments
140
920
(85 )
573
1,807
(68 )
Lease income
534
189
183
1,404
476
195
Other
315
266
18
1,671
412
306
Total noninterest income
10,376
10,418
--
31,333
30,758
2
Noninterest expense
Salaries
4,224
4,035
5
12,359
11,822
5
Commission and incentive compensation
2,520
2,604
(3 )
7,769
7,895
(2 )
Employee benefits
1,223
821
49
3,993
3,404
17
Equipment
491
459
7
1,512
1,423
6
Net occupancy
718
728
(1 )
2,145
2,161
(1 )
Core deposit and other intangibles
299
311
(4 )
891
935
(5 )
FDIC and other deposit assessments
310
245
27
815
715
14
Other
3,483
3,196
9
9,678
9,020
7
Total noninterest expense
13,268
12,399
7
39,162
37,375
5
Income before income tax expense
8,255
8,773
(6 )
24,558
25,485
(4 )
Income tax expense
2,601
2,790
(7 )
7,817
7,832
--
Net income before noncontrolling interests
5,654
5,983
(5 )
16,741
17,653
(5 )
Less: Net income from noncontrolling interests
10
187
(95 )
77
334
(77 )
Wells Fargo net income
$
5,644
5,796
(3 )
$
16,664
17,319
(4 )
Less: Preferred stock dividends and other
401
353
14
1,163
1,052
11
Wells Fargo net income applicable to common stock
$
5,243
5,443
(4 )
$
15,501
16,267
(5 )
Per share information
Earnings per common share
$
1.04
1.06
(2 )
$
3.06
3.16
(3 )
Diluted earnings per common share
1.03
1.05
(2 )
3.03
3.12
(3 )
Dividends declared per common share
0.380
0.375
1
1.135
1.100
3
Average common shares outstanding
5,043.4
5,125.8
(2 )
5,061.9
5,145.9
(2 )
Diluted average common shares outstanding
5,094.6
5,193.8
(2 )
5,118.2
5,220.3
(2 )
NM - Not meaningful
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions, except per share amounts)
2016
2016
2016
2015
2015
Interest income
Trading assets
$
593
572
596
558
485
Investment securities
2,298
2,176
2,262
2,323
2,289
Mortgages held for sale
207
181
161
176
223
Loans held for sale
2
3
2
5
4
Loans
9,978
9,822
9,577
9,323
9,216
Other interest income
409
392
374
258
228
Total interest income
13,487
13,146
12,972
12,643
12,445
Interest expense
Deposits
356
332
307
241
232
Short-term borrowings
85
77
67
13
12
Long-term debt
1,006
921
842
713
655
Other interest expense
88
83
89
88
89
Total interest expense
1,535
1,413
1,305
1,055
988
Net interest income
11,952
11,733
11,667
11,588
11,457
Provision for credit losses
805
1,074
1,086
831
703
Net interest income after provision for credit losses
11,147
10,659
10,581
10,757
10,754
Noninterest income
Service charges on deposit accounts
1,370
1,336
1,309
1,329
1,335
Trust and investment fees
3,613
3,547
3,385
3,511
3,570
Card fees
997
997
941
966
953
Other fees
926
906
933
1,040
1,099
Mortgage banking
1,667
1,414
1,598
1,660
1,589
Insurance
293
286
427
427
376
Net gains (losses) from trading activities
415
328
200
99
(26 )
Net gains on debt securities
106
447
244
346
147
Net gains from equity investments
140
189
244
423
920
Lease income
534
497
373
145
189
Other
315
482
874
52
266
Total noninterest income
10,376
10,429
10,528
9,998
10,418
Noninterest expense
Salaries
4,224
4,099
4,036
4,061
4,035
Commission and incentive compensation
2,520
2,604
2,645
2,457
2,604
Employee benefits
1,223
1,244
1,526
1,042
821
Equipment
491
493
528
640
459
Net occupancy
718
716
711
725
728
Core deposit and other intangibles
299
299
293
311
311
FDIC and other deposit assessments
310
255
250
258
245
Other
3,483
3,156
3,039
3,105
3,196
Total noninterest expense
13,268
12,866
13,028
12,599
12,399
Income before income tax expense
8,255
8,222
8,081
8,156
8,773
Income tax expense
2,601
2,649
2,567
2,533
2,790
Net income before noncontrolling interests
5,654
5,573
5,514
5,623
5,983
Less: Net income from noncontrolling interests
10
15
52
48
187
Wells Fargo net income
$
5,644
5,558
5,462
5,575
5,796
Less: Preferred stock dividends and other
401
385
377
372
353
Wells Fargo net income applicable to common stock
$
5,243
5,173
5,085
5,203
5,443
Per share information
Earnings per common share
$
1.04
1.02
1.00
1.02
1.06
Diluted earnings per common share
1.03
1.01
0.99
1.00
1.05
Dividends declared per common share
0.380
0.380
0.375
0.375
0.375
Average common shares outstanding
5,043.4
5,066.9
5,075.7
5,108.5
5,125.8
Diluted average common shares outstanding
5,094.6
5,118.1
5,139.4
5,177.9
5,193.8
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarter ended
Nine months ended
September 30,
%
September 30,
%
(in millions)
2016
2015
Change
2016
2015
Change
Wells Fargo net income
$
5,644
5,796
(3)%
$ 16,664
17,319
(4)%
Other comprehensive income (loss), before tax:
Investment securities:
Net unrealized gains (losses) arising during the period
112
(441 )
NM
2,478
(2,017 )
NM
Reclassification of net gains to net income
(193 )
(439 )
(56)
(1,001 )
(957 )
5
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period
(445 )
1,769
NM
2,611
2,233
17
Reclassification of net gains on cash flow hedges to net income
(262 )
(293 )
(11)
(783 )
(795 )
(2)
Defined benefit plans adjustments:
Net actuarial losses arising during the period
(447 )
--
NM
(474 )
(11 )
NM
Amortization of net actuarial loss, settlements and other to net
39
30
30
115
103
12
income
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period
(10 )
(59 )
(83)
27
(104 )
NM
Other comprehensive income (loss), before tax
(1,206 )
567
NM
2,973
(1,548 )
NM
Income tax (expense) benefit related to other comprehensive income
461
(268 )
NM
(1,110 )
544
NM
Other comprehensive income (loss), net of tax
(745 )
299
NM
1,863
(1,004 )
NM
Less: Other comprehensive income (loss) from noncontrolling interests
19
(22 )
NM
(24 )
125
NM
Wells Fargo other comprehensive income (loss), net of tax
(764 )
321
NM
1,887
(1,129 )
NM
Wells Fargo comprehensive income
4,880
6,117
(20)
18,551
16,190
15
Comprehensive income from noncontrolling interests
29
165
(82)
53
459
(88)
Total comprehensive income
$
4,909
6,282
(22)
$ 18,604
16,649
12
NM - Not meaningful
FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
TOTAL EQUITY
Quarter ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Balance, beginning of period
$
202,661
198,504
193,891
194,043
190,676
Cumulative effect from change in consolidation accounting (1)
--
--
121
--
--
Wells Fargo net income
5,644
5,558
5,462
5,575
5,796
Wells Fargo other comprehensive income (loss), net of tax
(764 )
1,174
1,477
(2,092 )
321
Noncontrolling interests
14
(92 )
(5 )
(100 )
(123 )
Common stock issued
300
397
1,079
310
505
Common stock repurchased (2)
(1,839 )
(2,214 )
(2,029 )
(1,974 )
(2,137 )
Preferred stock released by ESOP
236
371
313
210
225
Common stock warrants repurchased/exercised
(17 )
--
--
--
(17 )
Preferred stock issued
--
1,126
975
--
975
Common stock dividends
(1,918 )
(1,930 )
(1,904 )
(1,917 )
(1,926 )
Preferred stock dividends
(401 )
(386 )
(378 )
(371 )
(356 )
Tax benefit from stock incentive compensation
31
23
149
22
22
Stock incentive compensation expense
39
139
369
204
98
Net change in deferred compensation and related plans
(28 )
(9 )
(1,016 )
(19 )
(16 )
Balance, end of period
$
203,958
202,661
198,504
193,891
194,043
(1) Effective January 1, 2016, we adopted changes in consolidation
accounting pursuant to Accounting Standards Update 2015-02 (Amendments
to the Consolidation Analysis). Accordingly, we recorded a
$121 million net increase to beginning noncontrolling interests as
a cumulative-effect adjustment.
(2) For the quarter ended December 31, 2015, includes $500 million
related to a private forward repurchase transaction that settled
in first quarter 2016 for 9.2 million shares of common stock.
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT
BASIS) (1)(2)
Quarter ended September 30,
2016
2015
Interest
Interest
Average
Yields/
income/
Average
Yields/
income/
(in millions)
balance
rates
expense
balance
rates
expense
Earning assets
Federal funds sold, securities purchased under resale agreements and
$
299,351
0.50 %
$
373
250,104
0.26 %
$
167
other short-term investments
Trading assets
88,838
2.72
605
67,223
2.93
492
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies
25,817
1.52
99
35,709
1.59
143
Securities of U.S. states and political subdivisions
55,170
4.28
590
48,238
4.22
510
Mortgage-backed securities:
Federal agencies
105,780
2.39
631
98,459
2.70
665
Residential and commercial
18,080
5.54
250
21,876
5.84
319
Total mortgage-backed securities
123,860
2.85
881
120,335
3.27
984
Other debt and equity securities
54,176
3.37
459
50,371
3.40
430
Total available-for-sale securities
259,023
3.13
2,029
254,653
3.24
2,067
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies
44,678
2.19
246
44,649
2.18
245
Securities of U.S. states and political subdivisions
2,507
5.24
33
2,151
5.17
28
Federal agency and other mortgage-backed securities
47,971
1.97
236
27,079
2.38
161
Other debt securities
3,909
1.98
19
5,371
1.75
24
Total held-to-maturity securities
99,065
2.15
534
79,250
2.30
458
Total investment securities
358,088
2.86
2,563
333,903
3.02
2,525
Mortgages held for sale (4)
24,060
3.44
207
24,159
3.69
223
Loans held for sale (4)
199
3.04
2
568
2.57
4
Loans:
Commercial:
Commercial and industrial - U.S.
271,226
3.48
2,369
241,409
3.30
2,005
Commercial and industrial - Non U.S.
51,261
2.40
309
45,923
1.83
212
Real estate mortgage
128,809
3.48
1,127
120,983
3.31
1,009
Real estate construction
23,212
3.50
205
21,626
3.39
184
Lease financing
18,896
4.70
223
12,282
4.18
129
Total commercial
493,404
3.42
4,233
442,223
3.18
3,539
Consumer:
Real estate 1-4 family first mortgage
278,509
3.97
2,764
269,437
4.10
2,762
Real estate 1-4 family junior lien mortgage
48,927
4.37
537
55,298
4.22
588
Credit card
34,578
11.60
1,008
31,649
11.73
936
Automobile
62,461
5.60
880
58,534
5.80
855
Other revolving credit and installment
39,605
5.92
590
37,954
5.84
559
Total consumer
464,080
4.97
5,779
452,872
5.01
5,700
Total loans (4)
957,484
4.17
10,012
895,095
4.11
9,239
Other
6,488
2.30
36
5,028
5.11
64
Total earning assets
$
1,734,508
3.17 %
$
13,798
1,576,080
3.21 %
$
12,714
Funding sources
Deposits:
Interest-bearing checking
$
44,056
0.15 %
$
17
37,783
0.05 %
$
5
Market rate and other savings
667,185
0.07
110
628,119
0.06
90
Savings certificates
25,185
0.30
19
30,897
0.58
44
Other time deposits
54,921
0.93
128
48,676
0.46
57
Deposits in foreign offices
107,072
0.30
82
111,521
0.13
36
Total interest-bearing deposits
898,419
0.16
356
856,996
0.11
232
Short-term borrowings
116,228
0.29
86
90,357
0.06
13
Long-term debt
252,400
1.59
1,006
180,569
1.45
655
Other liabilities
16,771
2.11
88
16,435
2.13
89
Total interest-bearing liabilities
1,283,818
0.48
1,536
1,144,357
0.34
989
Portion of noninterest-bearing funding sources
450,690
--
--
431,723
--
--
Total funding sources
$
1,734,508
0.35
1,536
1,576,080
0.25
989
Net interest margin and net interest income on a
2.82 %
$
12,262
2.96 %
$
11,725
taxable-equivalent basis (5)
Noninterest-earning assets
Cash and due from banks
$
18,682
16,979
Goodwill
26,979
25,703
Other
134,417
127,640
Total noninterest-earning assets
$
180,078
170,322
Noninterest-bearing funding sources
Deposits
$
363,108
341,878
Other liabilities
63,777
67,964
Total equity
203,883
192,203
Noninterest-bearing funding sources used to fund earning assets
(450,690 )
(431,723 )
Net noninterest-bearing funding sources
$
180,078
170,322
Total assets
$
1,914,586
1,746,402
(1) Our average prime rate was 3.50% and 3.25% for the quarters
ended September 30, 2016 and 2015, respectively. The average
three-month London Interbank Offered Rate (LIBOR) was 0.79% and
0.31% for the same quarters, respectively.
(2) Yields/rates and amounts include the effects of hedge and risk
management activities associated with the respective asset and
liability categories.
(3) Yields and rates are based on interest income/expense amounts
for the period, annualized based on the accrual basis for the
respective accounts. The average balance amounts represent
amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their
respective loan categories.
(5) Includes taxable-equivalent adjustments of $310 million and
$268 million for the quarters ended September 30, 2016 and 2015,
respectively, predominantly related to tax-exempt income on
certain loans and securities. The federal statutory tax rate was
35% for the periods presented.
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT
BASIS) (1)(2)
Nine months ended September 30,
2016
2015
Interest
Interest
Average
Yields/
income/
Average
Yields/
income/
(in millions)
balance
rates
expense
balance
rates
expense
Earning assets
Federal funds sold, securities purchased under resale agreements and
$
292,635
0.49 %
$
1,076
264,218
0.27 %
$
543
other short-term investments
Trading assets
83,580
2.86
1,792
65,954
2.91
1,437
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies
30,588
1.56
358
31,242
1.57
368
Securities of U.S. states and political subdivisions
52,637
4.25
1,678
46,765
4.18
1,468
Mortgage-backed securities:
Federal agencies
98,099
2.57
1,889
99,523
2.71
2,021
Residential and commercial
19,488
5.39
787
22,823
5.80
992
Total mortgage-backed securities
117,587
3.03
2,676
122,346
3.28
3,013
Other debt and equity securities
53,680
3.36
1,349
48,758
3.44
1,257
Total available-for-sale securities
254,492
3.18
6,061
249,111
3.27
6,106
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies
44,671
2.19
733
44,010
2.19
722
Securities of U.S. states and political subdivisions
2,274
5.34
91
2,064
5.16
80
Federal agency and other mortgage-backed securities
37,087
2.08
577
19,871
2.14
319
Other debt securities
4,193
1.94
61
6,139
1.72
79
Total held-to-maturity securities
88,225
2.21
1,462
72,084
2.22
1,200
Total investment securities
342,717
2.93
7,523
321,195
3.03
7,306
Mortgages held for sale (4)
20,702
3.53
549
22,416
3.62
609
Loans held for sale (4)
240
3.71
7
644
2.93
14
Loans:
Commercial:
Commercial and industrial - U.S.
266,622
3.44
6,874
233,598
3.31
5,788
Commercial and industrial - Non U.S.
50,658
2.29
867
45,373
1.88
638
Real estate mortgage
125,902
3.43
3,236
115,224
3.45
2,972
Real estate construction
22,978
3.53
608
20,637
3.68
567
Lease financing
17,629
4.86
643
12,322
4.77
441
Total commercial
483,789
3.38
12,228
427,154
3.26
10,406
Consumer:
Real estate 1-4 family first mortgage
276,369
4.01
8,311
267,107
4.12
8,243
Real estate 1-4 family junior lien mortgage
50,585
4.38
1,659
57,068
4.24
1,812
Credit card
33,774
11.58
2,927
30,806
11.74
2,704
Automobile
61,246
5.64
2,588
57,180
5.87
2,512
Other revolving credit and installment
39,434
5.94
1,755
37,069
5.91
1,638
Total consumer
461,408
4.99
17,240
449,230
5.03
16,909
945,197
4.16
29,468
876,384
4.16
27,315
Total loans (4)
Other
6,104
2.23
101
4,874
5.21
191
Total earning assets
$
1,691,175
3.20 %
$
40,516
1,555,685
3.21 %
$
37,415
Funding sources
Deposits:
Interest-bearing checking
$
40,858
0.13 %
$
41
38,491
0.05 %
$
15
Market rate and other savings
659,257
0.07
327
620,510
0.06
274
Savings certificates
26,432
0.37
73
32,639
0.66
160
Other time deposits
58,087
0.84
364
52,459
0.43
168
Deposits in foreign offices
100,783
0.25
190
107,153
0.13
105
885,417
0.15
995
851,252
0.11
722
Total interest-bearing deposits
Short-term borrowings
111,993
0.28
231
82,258
0.09
52
Long-term debt
235,209
1.57
2,769
183,130
1.37
1,879
Other liabilities
16,534
2.10
260
16,576
2.16
269
Total interest-bearing liabilities
1,249,153
0.45
4,255
1,133,216
0.34
2,922
Portion of noninterest-bearing funding sources
442,022
--
--
422,469
--
--
Total funding sources
$
1,691,175
0.34
4,255
1,555,685
0.25
2,922
Net interest margin and net interest income on a
2.86 %
$
36,261
2.96 %
$
34,493
taxable-equivalent basis (5)
Noninterest-earning assets
Cash and due from banks
$
18,499
17,167
Goodwill
26,696
25,703
Other
129,324
129,412
Total noninterest-earning assets
$
174,519
172,282
Noninterest-bearing funding sources
Deposits
$
353,870
335,160
Other liabilities
62,169
69,167
Total equity
200,502
190,424
Noninterest-bearing funding sources used to fund earning assets
(442,022 )
(422,469 )
Net noninterest-bearing funding sources
$
174,519
172,282
Total assets
$
1,865,694
1,727,967
(1) Our average prime rate was 3.50% and 3.25% for the first nine
months of 2016 and 2015, respectively. The average three- month
London Interbank Offered Rate (LIBOR) was 0.69% and 0.28% for the
same periods, respectively.
(2) Yields/rates and amounts include the effects of hedge and risk
management activities associated with the respective asset and
liability categories.
(3) Yields and rates are based on interest income/expense amounts
for the period, annualized based on the accrual basis for the
respective accounts. The average balance amounts represent
amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their
respective loan categories.
(5) Includes taxable-equivalent adjustments of $909 million and
$780 million for the first nine months of 2016 and 2015,
respectively, predominantly related to tax-exempt income on
certain loans and securities. The federal statutory tax rate was
35% for the periods presented.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID
(TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended
Sep 30, 2016
Jun 30, 2016
Mar 31, 2016
Dec 31, 2015
Sep 30, 2015
Average
Yields/
Average
Yields/
Average
Yields/
Average
Yields/
Average
Yields/
($ in billions)
balance
rates
balance
rates
balance
rates
balance
rates
balance
rates
Earning assets
Federal funds sold, securities purchased under resale agreements and
$
299.4
0.50 %
$
293.8
0.49 %
$
284.7
0.49 %
$
274.6
0.28 %
$
250.1
0.26 %
other short-term investments
Trading assets
88.8
2.72
81.4
2.86
80.5
3.01
68.8
3.33
67.2
2.93
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies
25.8
1.52
31.5
1.56
34.4
1.59
34.6
1.58
35.7
1.59
Securities of U.S. states and political subdivisions
55.2
4.28
52.2
4.24
50.5
4.24
49.3
4.37
48.2
4.22
Mortgage-backed securities:
Federal agencies
105.8
2.39
92.0
2.53
96.5
2.80
102.3
2.79
98.4
2.70
Residential and commercial
18.1
5.54
19.6
5.44
20.8
5.20
21.5
5.51
21.9
5.84
Total mortgage-backed securities
123.9
2.85
111.6
3.04
117.3
3.23
123.8
3.26
120.3
3.27
Other debt and equity securities
54.2
3.37
53.3
3.48
53.6
3.21
52.7
3.35
50.4
3.40
Total available-for-sale securities
259.1
3.13
248.6
3.20
255.8
3.20
260.4
3.27
254.6
3.24
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies
44.6
2.19
44.6
2.19
44.7
2.20
44.7
2.18
44.6
2.18
Securities of U.S. states and political subdivisions
2.5
5.24
2.2
5.41
2.1
5.41
2.1
6.07
2.2
5.17
Federal agency and other mortgage-backed securities
48.0
1.97
35.1
1.90
28.1
2.49
28.2
2.42
27.1
2.38
Other debt securities
3.9
1.98
4.1
1.92
4.6
1.92
4.9
1.77
5.4
1.75
Total held-to-maturity securities
99.0
2.15
86.0
2.14
79.5
2.37
79.9
2.35
79.3
2.30
Total investment securities
358.1
2.86
334.6
2.93
335.3
3.01
340.3
3.05
333.9
3.02
Mortgages held for sale
24.1
3.44
20.1
3.60
17.9
3.59
19.2
3.66
24.2
3.69
Loans held for sale
0.2
3.04
0.2
4.83
0.3
3.23
0.4
4.96
0.6
2.57
Loans:
Commercial:
Commercial and industrial - U.S.
271.2
3.48
270.9
3.45
257.7
3.39
250.5
3.25
241.4
3.30
Commercial and industrial - Non U.S.
51.3
2.40
51.2
2.35
49.5
2.10
48.0
1.97
45.9
1.83
Real estate mortgage
128.8
3.48
126.1
3.41
122.7
3.41
121.8
3.30
121.0
3.31
Real estate construction
23.2
3.50
23.1
3.49
22.6
3.61
22.0
3.27
21.6
3.39
Lease financing
18.9
4.70
19.0
5.12
15.1
4.74
12.2
4.48
12.3
4.18
Total commercial
493.4
3.42
490.3
3.39
467.6
3.31
454.5
3.16
442.2
3.18
Consumer:
Real estate 1-4 family first mortgage
278.5
3.97
275.9
4.01
274.7
4.05
272.9
4.04
269.4
4.10
Real estate 1-4 family junior lien mortgage
48.9
4.37
50.6
4.37
52.2
4.39
53.8
4.28
55.3
4.22
Credit card
34.6
11.60
33.4
11.52
33.4
11.61
32.8
11.61
31.7
11.73
Automobile
62.5
5.60
61.1
5.66
60.1
5.67
59.5
5.74
58.5
5.80
Other revolving credit and installment
39.6
5.92
39.5
5.91
39.2
5.99
38.8
5.83
38.0
5.84
Total consumer
464.1
4.97
460.5
4.98
459.6
5.02
457.8
4.99
452.9
5.01
Total loans
957.5
4.17
950.8
4.16
927.2
4.16
912.3
4.08
895.1
4.11
Other
6.4
2.30
6.0
2.30
5.8
2.06
5.1
4.82
5.0
5.11
Total earning assets
$
1,734.5
3.17 %
$
1,686.9
3.20 %
$
1,651.7
3.22 %
$
1,620.7
3.18 %
$
1,576.1
3.21 %
Funding sources
Deposits:
Interest-bearing checking
$
44.0
0.15 %
$
39.8
0.13 %
$
38.7
0.12 %
$
39.1
0.05 %
$
37.8
0.05 %
Market rate and other savings
667.2
0.07
659.0
0.07
651.5
0.07
640.5
0.06
628.1
0.06
Savings certificates
25.2
0.30
26.2
0.35
27.9
0.45
29.6
0.54
30.9
0.58
Other time deposits
54.9
0.93
61.2
0.85
58.2
0.74
49.8
0.52
48.7
0.46
Deposits in foreign offices
107.1
0.30
97.5
0.23
97.7
0.21
107.1
0.14
111.5
0.13
Total interest-bearing deposits
898.4
0.16
883.7
0.15
874.0
0.14
866.1
0.11
857.0
0.11
Short-term borrowings
116.2
0.29
111.8
0.28
107.9
0.25
102.9
0.05
90.4
0.06
Long-term debt
252.4
1.59
236.2
1.56
216.9
1.56
190.9
1.49
180.6
1.45
Other liabilities
16.8
2.11
16.3
2.06
16.5
2.14
16.5
2.14
16.4
2.13
Total interest-bearing liabilities
1,283.8
0.48
1,248.0
0.45
1,215.3
0.43
1,176.4
0.36
1,144.4
0.34
Portion of noninterest-bearing funding sources
450.7
--
438.9
--
436.4
--
444.3
--
431.7
--
Total funding sources
$
1,734.5
0.35
$
1,686.9
0.34
$
1,651.7
0.32
$
1,620.7
0.26
$
1,576.1
0.25
Net interest margin on a taxable-equivalent basis
2.82 %
2.86 %
2.90 %
2.92 %
2.96 %
Noninterest-earning assets
Cash and due from banks
$
18.7
18.8
18.0
17.8
17.0
Goodwill
27.0
27.0
26.1
25.6
25.7
Other
134.4
129.4
124.1
123.2
127.6
Total noninterest-earnings assets
$
180.1
175.2
168.2
166.6
170.3
Noninterest-bearing funding sources
Deposits
$
363.1
353.0
345.4
350.7
341.9
Other liabilities
63.8
60.1
62.6
65.2
67.9
Total equity
203.9
201.0
196.6
195.0
192.2
Noninterest-bearing funding sources used to fund earning assets
(450.7 )
(438.9 )
(436.4 )
(444.3 )
(431.7 )
Net noninterest-bearing funding sources
$
180.1
175.2
168.2
166.6
170.3
Total assets
$
1,914.6
1,862.1
1,819.9
1,787.3
1,746.4
(1) Our average prime rate was 3.50% for the quarters ended
September 30, June 30 and March 31, 2016, 3.29% for the quarter
ended December 31, 2015 and 3.25% for the quarter ended September
30, 2015. The average three-month London Interbank Offered Rate
(LIBOR) was 0.79%, 0.64%, 0.62%, 0.41% and 0.31% for the same
quarters, respectively.
(2) Yields/rates include the effects of hedge and risk management
activities associated with the respective asset and liability
categories.
(3) Yields and rates are based on interest income/expense amounts
for the period, annualized based on the accrual basis for the
respective accounts. The average balance amounts represent
amortized cost for the periods presented.
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
Quarter ended
Nine months ended
September 30,
%
September 30,
%
(in millions)
2016
2015
Change
2016
2015
Change
Service charges on deposit accounts
$
1,370
1,335
3 %
$
4,015
3,839
5 %
Trust and investment fees:
Brokerage advisory, commissions and other fees
2,344
2,368
(1 )
6,874
7,147
(4 )
Trust and investment management
849
843
1
2,499
2,556
(2 )
Investment banking
420
359
17
1,172
1,254
(7 )
Total trust and investment fees
3,613
3,570
1
10,545
10,957
(4 )
Card fees
997
953
5
2,935
2,754
7
Other fees:
Charges and fees on loans
306
307
--
936
920
2
Cash network fees
138
136
1
407
393
4
Commercial real estate brokerage commissions
119
124
(4 )
322
394
(18 )
Letters of credit fees
81
89
(9 )
242
267
(9 )
Wire transfer and other remittance fees
103
95
8
296
275
8
All other fees (1)(2)(3)
179
348
(49 )
562
1,035
(46 )
Total other fees
926
1,099
(16 )
2,765
3,284
(16 )
Mortgage banking:
Servicing income, net
359
674
(47 )
1,569
1,711
(8 )
Net gains on mortgage loan origination/sales activities
1,308
915
43
3,110
3,130
(1 )
Total mortgage banking
1,667
1,589
5
4,679
4,841
(3 )
Insurance
293
376
(22 )
1,006
1,267
(21 )
Net gains (losses) from trading activities
415
(26 )
NM
943
515
83
Net gains on debt securities
106
147
(28 )
797
606
32
Net gains from equity investments
140
920
(85 )
573
1,807
(68 )
Lease income
534
189
183
1,404
476
195
Life insurance investment income
152
150
1
455
440
3
All other (3)
163
116
41
1,216
(28 )
NM
Total
$ 10,376
10,418
--
$ 31,333
30,758
2
NM - Not meaningful
(1) Wire transfer and other remittance fees, reflected in all other
fees prior to 2016, have been separately disclosed.
(2) All other fees have been revised to include merchant processing
fees for all periods presented.
(3) Effective fourth quarter 2015, the Company’s proportionate
share of its merchant services joint venture earnings is included
in All other income.
NONINTEREST EXPENSE
Quarter ended Sep 30,
%
Nine months ended Sep 30,
%
(in millions)
2016
2015
Change
2016
2015
Change
Salaries
$
4,224
4,035
5 %
$ 12,359
11,822
5 %
Commission and incentive compensation
2,520
2,604
(3 )
7,769
7,895
(2 )
Employee benefits
1,223
821
49
3,993
3,404
17
Equipment
491
459
7
1,512
1,423
6
Net occupancy
718
728
(1 )
2,145
2,161
(1 )
Core deposit and other intangibles
299
311
(4 )
891
935
(5 )
FDIC and other deposit assessments
310
245
27
815
715
14
Outside professional services
802
663
21
2,154
1,838
17
Operating losses
577
523
10
1,365
1,339
2
Outside data processing
233
258
(10 )
666
780
(15 )
Contract services
313
249
26
878
712
23
Postage, stationery and supplies
150
174
(14 )
466
525
(11 )
Travel and entertainment
144
166
(13 )
509
496
3
Advertising and promotion
117
135
(13 )
417
422
(1 )
Insurance
23
95
(76 )
156
391
(60 )
Telecommunications
101
109
(7 )
287
333
(14 )
Foreclosed assets
(17 )
109
NM
127
361
(65 )
Operating leases
363
79
359
950
205
363
All other
677
636
6
1,703
1,618
5
Total
$ 13,268
12,399
7
$ 39,162
37,375
5
NM - Not meaningful
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
Quarter ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Service charges on deposit accounts
$
1,370
1,336
1,309
1,329
1,335
Trust and investment fees:
Brokerage advisory, commissions and other fees
2,344
2,291
2,239
2,288
2,368
Trust and investment management
849
835
815
838
843
Investment banking
420
421
331
385
359
Total trust and investment fees
3,613
3,547
3,385
3,511
3,570
Card fees
997
997
941
966
953
Other fees:
Charges and fees on loans
306
317
313
308
307
Cash network fees
138
138
131
129
136
Commercial real estate brokerage commissions
119
86
117
224
124
Letters of credit fees
81
83
78
86
89
Wire transfer and other remittance fees
103
101
92
95
95
All other fees (1)(2)(3)
179
181
202
198
348
Total other fees
926
906
933
1,040
1,099
Mortgage banking:
Servicing income, net
359
360
850
730
674
Net gains on mortgage loan origination/sales activities
1,308
1,054
748
930
915
Total mortgage banking
1,667
1,414
1,598
1,660
1,589
Insurance
293
286
427
427
376
Net gains (losses) from trading activities
415
328
200
99
(26 )
Net gains on debt securities
106
447
244
346
147
Net gains from equity investments
140
189
244
423
920
Lease income
534
497
373
145
189
Life insurance investment income
152
149
154
139
150
All other (3)
163
333
720
(87 )
116
$ 10,376
10,429
10,528
9,998
10,418
Total
(1) Wire transfer and other remittance fees, reflected in all
other fees prior to 2016, have been separately disclosed.
(2) All other fees have been revised to include merchant processing
fees for all periods presented.
(3) Effective fourth quarter 2015, the Company’s proportionate
share of its merchant services joint venture earnings is included
in All other income.
FIVE QUARTER NONINTEREST EXPENSE
Quarter ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Salaries
$
4,224
4,099
4,036
4,061
4,035
Commission and incentive compensation
2,520
2,604
2,645
2,457
2,604
Employee benefits
1,223
1,244
1,526
1,042
821
Equipment
491
493
528
640
459
Net occupancy
718
716
711
725
728
Core deposit and other intangibles
299
299
293
311
311
FDIC and other deposit assessments
310
255
250
258
245
Outside professional services
802
769
583
827
663
Operating losses
577
334
454
532
523
Outside data processing
233
225
208
205
258
Contract services
313
283
282
266
249
Postage, stationery and supplies
150
153
163
177
174
Travel and entertainment
144
193
172
196
166
Advertising and promotion
117
166
134
184
135
Insurance
23
22
111
57
95
Telecommunications
101
94
92
106
109
Foreclosed assets
(17 )
66
78
20
109
Operating leases
363
352
235
73
79
All other
677
499
527
462
636
Total
$ 13,268
12,866
13,028
12,599
12,399
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
Sep 30,
Dec 31,
%
(in millions, except shares)
2016
2015
Change
Assets
Cash and due from banks
$
19,287
19,111
1 %
Federal funds sold, securities purchased under resale agreements and
298,325
270,130
10
other short-term investments
Trading assets
85,946
77,202
11
Investment securities:
Available-for-sale, at fair value
291,591
267,358
9
Held-to-maturity, at cost
99,241
80,197
24
Mortgages held for sale
27,423
19,603
40
Loans held for sale
183
279
(34 )
Loans
961,326
916,559
5
Allowance for loan losses
(11,583 )
(11,545 )
--
Net loans
949,743
905,014
5
Mortgage servicing rights:
Measured at fair value
10,415
12,415
(16 )
Amortized
1,373
1,308
5
Premises and equipment, net
8,322
8,704
(4 )
Goodwill
26,688
25,529
5
Other assets
123,587
100,782
23
Total assets
$ 1,942,124
1,787,632
9
Liabilities
Noninterest-bearing deposits
$
376,136
351,579
7
Interest-bearing deposits
899,758
871,733
3
Total deposits
1,275,894
1,223,312
4
Short-term borrowings
124,668
97,528
28
Accrued expenses and other liabilities
82,769
73,365
13
Long-term debt
254,835
199,536
28
Total liabilities
1,738,166
1,593,741
9
Equity
Wells Fargo stockholders’ equity:
Preferred stock
24,594
22,214
11
Common stock - $1-2/3 par value, authorized 9,000,000,000 shares;
9,136
9,136
--
issued 5,481,811,474 shares
Additional paid-in capital
60,685
60,714
--
Retained earnings
130,288
120,866
8
Cumulative other comprehensive income
2,184
297
635
Treasury stock - 457,922,273 shares and 389,682,664 shares
(22,247 )
(18,867 )
18
Unearned ESOP shares
(1,612 )
(1,362 )
18
Total Wells Fargo stockholders’ equity
203,028
192,998
5
Noncontrolling interests
930
893
4
Total equity
203,958
193,891
5
Total liabilities and equity
$ 1,942,124
1,787,632
9
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Assets
Cash and due from banks
$
19,287
20,407
19,084
19,111
17,395
Federal funds sold, securities purchased under resale agreements and
298,325
295,521
300,547
270,130
254,811
other short-term investments
Trading assets
85,946
80,093
73,158
77,202
73,894
Investment securities:
Available-for-sale, at fair value
291,591
253,006
255,551
267,358
266,406
Held-to-maturity, at cost
99,241
100,420
79,348
80,197
78,668
Mortgages held for sale
27,423
23,930
18,041
19,603
21,840
Loans held for sale
183
220
280
279
430
Loans
961,326
957,157
947,258
916,559
903,233
Allowance for loan losses
(11,583 )
(11,664 )
(11,621 )
(11,545 )
(11,659 )
Net loans
949,743
945,493
935,637
905,014
891,574
Mortgage servicing rights:
Measured at fair value
10,415
10,396
11,333
12,415
11,778
Amortized
1,373
1,353
1,359
1,308
1,277
Premises and equipment, net
8,322
8,289
8,349
8,704
8,800
Goodwill
26,688
26,963
27,003
25,529
25,684
Other assets
123,587
123,144
119,492
100,782
98,708
Total assets
$ 1,942,124
1,889,235
1,849,182
1,787,632
1,751,265
Liabilities
Noninterest-bearing deposits
$
376,136
361,934
348,888
351,579
339,761
Interest-bearing deposits
899,758
883,539
892,602
871,733
862,418
Total deposits
1,275,894
1,245,473
1,241,490
1,223,312
1,202,179
Short-term borrowings
124,668
120,258
107,703
97,528
88,069
Accrued expenses and other liabilities
82,769
76,916
73,597
73,365
81,700
Long-term debt
254,835
243,927
227,888
199,536
185,274
Total liabilities
1,738,166
1,686,574
1,650,678
1,593,741
1,557,222
Equity
Wells Fargo stockholders’ equity:
Preferred stock
24,594
24,830
24,051
22,214
22,424
Common stock
9,136
9,136
9,136
9,136
9,136
Additional paid-in capital
60,685
60,691
60,602
60,714
60,998
Retained earnings
130,288
127,076
123,891
120,866
117,593
Cumulative other comprehensive income
2,184
2,948
1,774
297
2,389
Treasury stock
(22,247 )
(21,068 )
(19,687 )
(18,867 )
(17,899 )
Unearned ESOP shares
(1,612 )
(1,868 )
(2,271 )
(1,362 )
(1,590 )
Total Wells Fargo stockholders’ equity
203,028
201,745
197,496
192,998
193,051
Noncontrolling interests
930
916
1,008
893
992
Total equity
203,958
202,661
198,504
193,891
194,043
Total liabilities and equity
$ 1,942,124
1,889,235
1,849,182
1,787,632
1,751,265
Wells Fargo & Company and Subsidiaries
FIVE QUARTER INVESTMENT SECURITIES
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies
$
26,376
27,939
33,813
36,250
35,423
Securities of U.S. states and political subdivisions
55,366
54,024
51,574
49,990
49,423
Mortgage-backed securities:
Federal agencies
135,692
95,868
95,463
104,546
105,023
Residential and commercial
18,387
19,938
21,246
22,646
22,836
Total mortgage-backed securities
154,079
115,806
116,709
127,192
127,859
Other debt securities
54,537
53,935
51,956
52,289
51,760
Total available-for-sale debt securities
290,358
251,704
254,052
265,721
264,465
Marketable equity securities
1,233
1,302
1,499
1,637
1,941
Total available-for-sale securities
291,591
253,006
255,551
267,358
266,406
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies
44,682
44,675
44,667
44,660
44,653
Securities of U.S. states and political subdivisions
2,994
2,181
2,183
2,185
2,187
Federal agency and other mortgage-backed securities (1)
47,721
49,594
28,016
28,604
26,828
Other debt securities
3,844
3,970
4,482
4,748
5,000
Total held-to-maturity debt securities
99,241
100,420
79,348
80,197
78,668
Total investment securities
$
390,832
353,426
334,899
347,555
345,074
(1) Predominantly consists of federal agency mortgage-backed
securities.
FIVE QUARTER LOANS
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Commercial:
Commercial and industrial
$
324,020
323,858
321,547
299,892
292,234
Real estate mortgage
130,223
128,320
124,711
122,160
121,252
Real estate construction
23,340
23,387
22,944
22,164
21,710
Lease financing
18,871
18,973
19,003
12,367
12,142
Total commercial
496,454
494,538
488,205
456,583
447,338
Consumer:
Real estate 1-4 family first mortgage
278,689
277,162
274,734
273,869
271,311
Real estate 1-4 family junior lien mortgage
48,105
49,772
51,324
53,004
54,592
Credit card
34,992
34,137
33,139
34,039
32,286
Automobile
62,873
61,939
60,658
59,966
59,164
Other revolving credit and installment
40,213
39,609
39,198
39,098
38,542
Total consumer
464,872
462,619
459,053
459,976
455,895
$
961,326
957,157
947,258
916,559
903,233
Total loans (1)
(1) Includes $17.7 billion, $19.3 billion, $20.3 billion, $20.0
billion, and $20.7 billion of purchased credit-impaired (PCI)
loans at September 30, June 30, and March 31, 2016, and December
31, and September 30, 2015, respectively.
Our foreign loans are reported by respective class of financing
receivable in the table above. Substantially all of our foreign
loan portfolio is commercial loans. Loans are classified as
foreign primarily based on whether the borrower’s primary address
is outside of the United States. The following table presents
total commercial foreign loans outstanding by class of financing
receivable.
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Commercial foreign loans:
Commercial and industrial
$
51,515
50,515
51,884
49,049
46,380
Real estate mortgage
8,466
8,467
8,367
8,350
8,662
Real estate construction
310
246
311
444
396
Lease financing
958
987
983
274
279
Total commercial foreign loans
$
61,249
60,215
61,545
58,117
55,717
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND
FORECLOSED ASSETS)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Nonaccrual loans:
Commercial:
Commercial and industrial
$
3,331
3,464
2,911
1,363
1,031
Real estate mortgage
780
872
896
969
1,125
Real estate construction
59
59
63
66
151
Lease financing
92
112
99
26
29
Total commercial
4,262
4,507
3,969
2,424
2,336
Consumer:
Real estate 1-4 family first mortgage
5,310
5,970
6,683
7,293
7,425
Real estate 1-4 family junior lien mortgage
1,259
1,330
1,421
1,495
1,612
Automobile
108
111
114
121
123
Other revolving credit and installment
47
45
47
49
41
Total consumer
6,724
7,456
8,265
8,958
9,201
Total nonaccrual loans (1)(2)(3)
$ 10,986
11,963
12,234
11,382
11,537
As a percentage of total loans
1.14 %
1.25
1.29
1.24
1.28
Foreclosed assets:
Government insured/guaranteed
$
282
321
386
446
502
Non-government insured/guaranteed
738
796
893
979
1,265
Total foreclosed assets
1,020
1,117
1,279
1,425
1,767
Total nonperforming assets
$ 12,006
13,080
13,513
12,807
13,304
As a percentage of total loans
1.25 %
1.37
1.43
1.40
1.47
(1) Includes nonaccrual mortgages held for sale and loans held for
sale in their respective loan categories.
(2) Excludes PCI loans because they continue to earn interest
income from accretable yield, independent of performance in
accordance with their contractual terms.
(3) Real estate 1-4 family mortgage loans predominantly insured by
the Federal Housing Administration (FHA) or guaranteed by the
Department of Veterans Affairs (VA) and student loans
predominantly guaranteed by agencies on behalf of the U.S.
Department of Education under the Federal Family Education Loan
Program are not placed on nonaccrual status because they are
insured or guaranteed.
Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Total (excluding PCI)(1):
$
12,068
12,385
13,060
14,380
14,405
Less: FHA insured/guaranteed by the VA (2)(3)
11,198
11,577
12,233
13,373
13,500
Less: Student loans guaranteed under the FFELP (4)
17
20
24
26
33
$
853
788
803
981
872
Total, not government insured/guaranteed
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial
$
47
36
24
97
53
Real estate mortgage
4
22
8
13
24
Real estate construction
--
--
2
4
--
Total commercial
51
58
34
114
77
Consumer:
Real estate 1-4 family first mortgage (3)
171
169
167
224
216
Real estate 1-4 family junior lien mortgage (3)
54
52
55
65
61
Credit card
392
348
389
397
353
Automobile
81
64
55
79
66
Other revolving credit and installment
104
97
103
102
99
Total consumer
802
730
769
867
795
Total, not government insured/guaranteed
$
853
788
803
981
872
(1) PCI loans totaled $2.2 billion, $2.4 billion, $2.7 billion,
$2.9 billion and $3.2 billion, at September 30, June 30, and March
31, 2016, and December 31, and September 30, 2015, respectively.
(2) Represents loans whose repayments are predominantly insured by
the FHA or guaranteed by the VA.
(3) Includes mortgages held for sale 90 days or more past due and
still accruing.
(4) Represents loans whose repayments are predominantly guaranteed
by agencies on behalf of the U.S. Department of Education under
the FFELP.
Wells Fargo & Company and Subsidiaries
CHANGES IN ACCRETABLE YIELD RELATED TO PURCHASED CREDIT-IMPAIRED
(PCI) LOANS
Loans purchased with evidence of credit deterioration since
origination and for which it is probable that all contractually
required payments will not be collected are considered to be
credit impaired. PCI loans predominantly represent loans acquired
from Wachovia that were deemed to be credit impaired. Evidence of
credit quality deterioration as of the purchase date may include
statistics such as past due and nonaccrual status, recent borrower
credit scores and recent LTV percentages. PCI loans are initially
measured at fair value, which includes estimated future credit
losses expected to be incurred over the life of the loan.
Accordingly, the associated allowance for credit losses related to
these loans is not carried over at the acquisition date.
As a result of PCI loan accounting, certain credit-related ratios
cannot be used to compare a portfolio that includes PCI loans
against one that does not, or to compare ratios across quarters or
years. The ratios particularly affected include the allowance for
loan losses and allowance for credit losses as percentages of
loans, of nonaccrual loans and of nonperforming assets; nonaccrual
loans and nonperforming assets as a percentage of total loans; and
net charge-offs as a percentage of loans.
The excess of cash flows expected to be collected over the
carrying value of PCI loans is referred to as the accretable yield
and is accreted into interest income over the estimated lives of
the PCI loans using the effective yield method. The accretable
yield is affected by:
?
Changes in interest rate indices for variable rate PCI loans -
Expected future cash flows are based on the variable rates in
effect at the time of the quarterly assessment of expected cash
flows;
?
Changes in prepayment assumptions - Prepayments affect the
estimated life of PCI loans which may change the amount of
interest income, and possibly principal, expected to be collected;
and
?
Changes in the expected principal and interest payments over the
estimated life - Updates to changes in expected cash flows are
driven by the credit outlook and actions taken with borrowers.
Changes in expected future cash flows from loan modifications are
included in the regular evaluations of cash flows expected to be
collected.
The change in the accretable yield related to PCI loans since the
merger with Wachovia is presented in the following table.
(in millions)
Quarter
Nine months
2009-2015
ended
ended
Sep 30, 2016
Sep 30, 2016
Balance, beginning of period
$
15,727
16,301
10,447
Addition of accretable yield due to acquisitions
(11 )
58
132
Accretion into interest income (1)
(324 )
(992 )
(14,212 )
Accretion into noninterest income due to sales (2)
--
(9 )
(458 )
Reclassification from nonaccretable difference for loans with
1,163
1,221
9,734
improving credit-related cash flows (3)
Changes in expected cash flows that do not affect nonaccretable
(4,936 )
(4,960 )
10,658
difference (4)
Balance, end of period
$
11,619
11,619
16,301
(1) Includes accretable yield released as a result of settlements
with borrowers, which is included in interest income.
(2) Includes accretable yield released as a result of sales to
third parties, which is included in noninterest income.
(3) At September 30, 2016, our carrying value for PCI loans
totaled $17.7 billion and the remainder of nonaccretable
difference established in purchase accounting totaled $936
million. The nonaccretable difference absorbs losses of
contractual amounts that exceed our carrying value for PCI loans.
(4) Represents changes in cash flows expected to be collected due
to the impact of modifications, changes in prepayment assumptions,
changes in interest rates on variable rate PCI loans and sales to
third parties.
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)
September 30, 2016
PCI loans
All other loans
(in millions)
Adjusted
Current
Carrying
Ratio of
Carrying
Ratio of
unpaid
LTV
value (4)
carrying
value (4)
carrying
principal
ratio (3)
value to
value to
balance (2)
current
current
value (5)
value (5)
California
$
14,852
66 %
$
11,643
51 %
$
8,330
48 %
Florida
1,701
76
1,266
55
1,740
61
New Jersey
697
80
509
57
1,142
67
New York
494
75
415
57
561
64
Texas
182
50
161
44
686
40
Other states
3,458
75
2,712
58
4,834
61
Total Pick-a-Pay loans
$
21,384
69
$
16,706
53
$
17,293
54
(1) The individual states shown in this table represent the top
five states based on the total net carrying value of the
Pick-a-Pay loans at the beginning of 2016.
(2) Adjusted unpaid principal balance includes write-downs taken
on loans where severe delinquency (normally 180 days) or other
indications of severe borrower financial stress exist that
indicate there will be a loss of contractually due amounts upon
final resolution of the loan.
(3) The current LTV ratio is calculated as the adjusted unpaid
principal balance divided by the collateral value. Collateral
values are generally determined using automated valuation models
(AVM) and are updated quarterly. AVMs are computer-based tools
used to estimate market values of homes based on processing large
volumes of market data including market comparables and price
trends for local market areas.
(4) Carrying value, which does not reflect the allowance for loan
losses, includes remaining purchase accounting adjustments, which,
for PCI loans may include the nonaccretable difference and the
accretable yield and, for all other loans, an adjustment to mark
the loans to a market yield at date of merger less any subsequent
charge-offs.
(5) The ratio of carrying value to current value is calculated as
the carrying value divided by the collateral value.
Wells Fargo & Company and Subsidiaries
CHANGES IN ALLOWANCE FOR CREDIT LOSSES
Quarter ended September 30,
Nine months ended September 30,
(in millions)
2016
2015
2016
2015
Balance, beginning of period
$
12,749
12,614
12,512
13,169
Provision for credit losses
805
703
2,965
1,611
Interest income on certain impaired loans (1)
(54 )
(48 )
(153 )
(150 )
Loan charge-offs:
Commercial:
Commercial and industrial
(324 )
(172 )
(1,110 )
(459 )
Real estate mortgage
(7 )
(9 )
(13 )
(48 )
Real estate construction
--
--
(1 )
(2 )
Lease financing
(4 )
(5 )
(25 )
(11 )
Total commercial
(335 )
(186 )
(1,149 )
(520 )
Consumer:
Real estate 1-4 family first mortgage
(106 )
(145 )
(366 )
(394 )
Real estate 1-4 family junior lien mortgage
(119 )
(159 )
(385 )
(501 )
Credit card
(296 )
(259 )
(930 )
(821 )
Automobile
(215 )
(186 )
(602 )
(531 )
Other revolving credit and installment
(170 )
(160 )
(508 )
(465 )
Total consumer
(906 )
(909 )
(2,791 )
(2,712 )
Total loan charge-offs
(1,241 )
(1,095 )
(3,940 )
(3,232 )
Loan recoveries:
Commercial:
Commercial and industrial
65
50
210
192
Real estate mortgage
35
32
90
97
Real estate construction
18
8
30
25
Lease financing
2
2
10
6
Total commercial
120
92
340
320
Consumer:
Real estate 1-4 family first mortgage
86
83
284
182
Real estate 1-4 family junior lien mortgage
70
70
200
195
Credit card
51
43
153
123
Automobile
78
73
248
249
Other revolving credit and installment
31
31
100
102
Total consumer
316
300
985
851
Total loan recoveries
436
392
1,325
1,171
Net loan charge-offs
(805 )
(703 )
(2,615 )
(2,061 )
Other
(1 )
(4 )
(15 )
(7 )
Balance, end of period
$
12,694
12,562
12,694
12,562
Components:
Allowance for loan losses
$
11,583
11,659
11,583
11,659
Allowance for unfunded credit commitments
1,111
903
1,111
903
Allowance for credit losses
$
12,694
12,562
12,694
12,562
Net loan charge-offs (annualized) as a percentage of average total
0.33 %
0.31
0.37
0.31
loans
Allowance for loan losses as a percentage of total loans
1.20
1.29
1.20
1.29
Allowance for credit losses as a percentage of total loans
1.32
1.39
1.32
1.39
(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
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Balance, beginning of quarter
$
12,749
12,668
12,512
12,562
12,614
Provision for credit losses
805
1,074
1,086
831
703
Interest income on certain impaired loans (1)
(54 )
(51 )
(48 )
(48 )
(48 )
Loan charge-offs:
Commercial:
Commercial and industrial
(324 )
(437 )
(349 )
(275 )
(172 )
Real estate mortgage
(7 )
(3 )
(3 )
(11 )
(9 )
Real estate construction
--
(1 )
--
(2 )
--
Lease financing
(4 )
(17 )
(4 )
(3 )
(5 )
Total commercial
(335 )
(458 )
(356 )
(291 )
(186 )
Consumer:
Real estate 1-4 family first mortgage
(106 )
(123 )
(137 )
(113 )
(145 )
Real estate 1-4 family junior lien mortgage
(119 )
(133 )
(133 )
(134 )
(159 )
Credit card
(296 )
(320 )
(314 )
(295 )
(259 )
Automobile
(215 )
(176 )
(211 )
(211 )
(186 )
Other revolving credit and installment
(170 )
(163 )
(175 )
(178 )
(160 )
Total consumer
(906 )
(915 )
(970 )
(931 )
(909 )
Total loan charge-offs
(1,241 )
(1,373 )
(1,326 )
(1,222 )
(1,095 )
Loan recoveries:
Commercial:
Commercial and industrial
65
69
76
60
50
Real estate mortgage
35
23
32
30
32
Real estate construction
18
4
8
12
8
Lease financing
2
5
3
2
2
Total commercial
120
101
119
104
92
Consumer:
Real estate 1-4 family first mortgage
86
109
89
63
83
Real estate 1-4 family junior lien mortgage
70
71
59
64
70
Credit card
51
50
52
52
43
Automobile
78
86
84
76
73
Other revolving credit and installment
31
32
37
32
31
Total consumer
316
348
321
287
300
Total loan recoveries
436
449
440
391
392
Net loan charge-offs
(805 )
(924 )
(886 )
(831 )
(703 )
Other
(1 )
(18 )
4
(2 )
(4 )
Balance, end of quarter
$
12,694
12,749
12,668
12,512
12,562
Components:
Allowance for loan losses
$
11,583
11,664
11,621
11,545
11,659
Allowance for unfunded credit commitments
1,111
1,085
1,047
967
903
Allowance for credit losses
$
12,694
12,749
12,668
12,512
12,562
Net loan charge-offs (annualized) as a percentage of average total
0.33 %
0.39
0.38
0.36
0.31
loans
Allowance for loan losses as a percentage of:
Total loans
1.20
1.22
1.23
1.26
1.29
Nonaccrual loans
105
98
95
101
101
Nonaccrual loans and other nonperforming assets
96
89
86
90
88
Allowance for credit losses as a percentage of:
Total loans
1.32
1.33
1.34
1.37
1.39
Nonaccrual loans
116
107
104
110
109
Nonaccrual loans and other nonperforming assets
106
97
94
98
94
(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
reductions in allowance attributable to the passage of time as
interest income.
Wells Fargo & Company and Subsidiaries
TANGIBLE COMMON EQUITY (1)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions, except ratios)
2016
2016
2016
2015
2015
Tangible book value per common share (1):
Total equity
$ 203,958
202,661
198,504
193,891
194,043
Adjustments:
Preferred stock
(24,594 )
(24,830 )
(24,051 )
(22,214 )
(22,424 )
(130 )
(150 )
(182 )
(110 )
(128 )
Additional paid-in capital on ESOP preferred stock
Unearned ESOP shares
1,612
1,868
2,271
1,362
1,590
Noncontrolling interests
(930 )
(916 )
(1,008 )
(893 )
(992 )
Total common stockholders’ equity
(A)
179,916
178,633
175,534
172,036
172,089
Adjustments:
Goodwill
(26,688 )
(26,963 )
(27,003 )
(25,529 )
(25,684 )
(3,001 )
(3,356 )
(3,814 )
(3,167 )
(3,479 )
Certain identifiable intangible assets (other than MSRs)
Other assets (2)
(2,230 )
(2,110 )
(2,023 )
(2,074 )
(1,742 )
Applicable deferred taxes (3)
1,832
1,906
1,985
2,071
2,168
Tangible common equity
(B)
$ 149,829
148,110
144,679
143,337
143,352
Common shares outstanding
(C)
5,023.9
5,048.5
5,075.9
5,092.1
5,108.5
Book value per common share
(A)/(C)
$
35.81
35.38
34.58
33.78
33.69
Tangible book value per common share
(B)/(C)
29.82
29.34
28.50
28.15
28.06
Quarter ended
Nine months ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Sep 30,
Sep 30,
(in millions, except ratios)
2016
2016
2016
2015
2015
2016
2015
Return on average tangible common
equity (1):
Net income applicable to common stock
(A)
$
5,243
5,173
5,085
5,203
5,443
15,501
16,267
Average total equity
203,883
201,003
196,586
195,025
192,203
200,502
190,424
Adjustments:
Preferred stock
(24,813 )
(24,091 )
(23,963 )
(22,407 )
(21,807 )
(24,291 )
(21,481 )
(148 )
(168 )
(201 )
(127 )
(147 )
(172 )
(142 )
Additional paid-in capital on ESOP preferred stock
Unearned ESOP shares
1,850
2,094
2,509
1,572
1,818
2,150
1,764
Noncontrolling interests
(927 )
(984 )
(904 )
(979 )
(1,012 )
(938 )
(1,071 )
Average common stockholders’ equity
(B)
179,845
177,854
174,027
173,084
171,055
177,251
169,494
Adjustments:
Goodwill
(26,979 )
(27,037 )
(26,069 )
(25,580 )
(25,703 )
(26,696 )
(25,703 )
(3,145 )
(3,600 )
(3,407 )
(3,317 )
(3,636 )
(3,383 )
(3,953 )
Certain identifiable intangible assets (other than MSRs)
Other assets (2)
(2,131 )
(2,096 )
(2,065 )
(1,987 )
(1,757 )
(2,097 )
(1,542 )
Applicable deferred taxes (3)
1,855
1,934
2,014
2,103
2,200
1,973
2,344
Average tangible common equity
(C)
$ 149,445
147,055
144,500
144,303
142,159
147,048
140,640
Return on average common stockholders’ equity (ROE)
(A)/(B)
11.60
%
11.70
11.75
11.93
12.62
11.68
12.83
Return on average tangible common equity (ROTCE)
(A)/(C)
13.96
14.15
14.15
14.30
15.19
14.08
15.46
(1) Tangible common equity is a non-GAAP financial measure and
represents total equity less preferred equity, noncontrolling
interests, and goodwill and certain identifiable intangible assets
(including goodwill and intangible assets associated with certain
of our nonmarketable equity investments but excluding mortgage
servicing rights), net of applicable deferred taxes. The
methodology of determining tangible common equity may differ among
companies. Management believes that return on average tangible
common equity and tangible book value per common share, which
utilize tangible common equity, are useful financial measures
because they enable investors and others to assess the Company’s
use of equity.
(2) Represents goodwill and other intangibles on nonmarketable
equity investments, which are included in other assets.
(3) Applicable deferred taxes relate to goodwill and other
intangible assets. They were determined by applying the combined
federal statutory rate and composite state income tax rates to the
difference between book and tax basis of the respective goodwill
and intangible assets at period end.
Wells Fargo & Company and Subsidiaries
COMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1)
Estimated
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in billions, except ratio)
2016
2016
2016
2015
2015
Total equity
$
204.0
202.7
198.5
193.9
194.0
Adjustments:
Preferred stock
(24.6 )
(24.8 )
(24.1 )
(22.2 )
(22.4 )
(0.1 )
(0.2 )
(0.2 )
(0.1 )
(0.1 )
Additional paid-in capital on ESOP preferred stock
Unearned ESOP shares
1.6
1.9
2.3
1.3
1.5
Noncontrolling interests
(1.0 )
(1.0 )
(1.0 )
(0.9 )
(0.9 )
Total common stockholders’ equity
179.9
178.6
175.5
172.0
172.1
Adjustments:
Goodwill
(26.7 )
(27.0 )
(27.0 )
(25.5 )
(25.7 )
Certain identifiable intangible assets (other than MSRs)
(3.0 )
(3.4 )
(3.8 )
(3.2 )
(3.5 )
Other assets (2)
(2.2 )
(2.0 )
(2.1 )
(2.1 )
(1.7 )
Applicable deferred taxes (3)
1.8
1.9
2.0
2.1
2.2
Investment in certain subsidiaries and other
(2.0 )
(2.5 )
(1.9 )
(0.9 )
(1.6 )
Common Equity Tier 1 (Fully Phased-In) under Basel III
(A)
147.8
145.6
142.7
142.4
141.8
Total risk-weighted assets (RWAs) anticipated under Basel III (4)(5)
(B)
$ 1,386.7
1,372.9
1,345.1
1,321.7
1,331.8
Common Equity Tier 1 to total RWAs anticipated under Basel III
(A)/(B)
10.7 %
10.6
10.6
10.8
10.6
(Fully Phased-In) (5)
(1) Basel III capital rules, adopted by the Federal Reserve Board
on July 2, 2013, revised the definition of capital, increased
minimum capital ratios, and introduced a minimum Common Equity
Tier 1 (CET1) ratio. These rules established a new comprehensive
capital framework for U.S. banking organizations that implements
the Basel III capital framework and certain provisions of the
Dodd-Frank Act. The rules are being phased in through the end of
2021. Fully phased-in capital amounts, ratios and RWAs are
calculated assuming the full phase-in of the Basel III capital
rules. Fully phased-in regulatory capital amounts, ratios and RWAs
are considered non-GAAP financial measures that are used by
management, bank regulatory agencies, investors and analysts to
assess and monitor the Company’s capital position.
(2) Represents goodwill and other intangibles on nonmarketable
equity investments, which are included in other assets.
(3) Applicable deferred taxes relate to goodwill and other
intangible assets. They were determined by applying the combined
federal statutory rate and composite state income tax rates to the
difference between book and tax basis of the respective goodwill
and intangible assets at period end.
(4) The final Basel III capital rules provide for two capital
frameworks: the Standardized Approach, which replaced Basel I, and
the Advanced Approach applicable to certain institutions. Under
the final rules, we are subject to the lower of our CET1 ratio
calculated under the Standardized Approach and under the Advanced
Approach in the assessment of our capital adequacy. Because the
final determination of our CET1 ratio and which approach will
produce the lower CET1 ratio as of September 30, 2016, is subject
to detailed analysis of considerable data, our CET1 ratio at that
date has been estimated using the Basel III definition of capital
under the Basel III Standardized Approach RWAs. The capital ratio
for June 30 and March 31, 2016, and December 31 and September 30,
2015, was calculated under the Basel III Standardized Approach
RWAs.
(5) The Company’s September 30, 2016, RWAs and capital ratio are
preliminary estimates.
Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
(income/expense in millions,
Community
Wholesale
Wealth and
Other (2)
Consolidated
average balances in billions)
Banking
Banking
Investment
Company
Management
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Quarter ended Sep 30,
Net interest income (3)
$
7,430
7,409
4,062
3,611
977
887
(517 )
(450 )
11,952
11,457
Provision (reversal of provision) for credit losses
651
668
157
36
4
(6 )
(7 )
5
805
703
Noninterest income
4,957
5,524
3,085
2,715
3,122
2,991
(788 )
(812 )
10,376
10,418
Noninterest expense
6,953
6,778
4,120
3,503
2,999
2,909
(804 )
(791 )
13,268
12,399
Income (loss) before income tax expense (benefit)
4,783
5,487
2,870
2,787
1,096
975
(494 )
(476 )
8,255
8,773
Income tax expense (benefit)
1,546
1,785
827
815
415
371
(187 )
(181 )
2,601
2,790
Net income (loss) before noncontrolling interests
3,237
3,702
2,043
1,972
681
604
(307 )
(295 )
5,654
5,983
Less: Net income (loss) from noncontrolling interests
10
142
(4 )
47
4
(2 )
--
--
10
187
Net income (loss)
$
3,227
3,560
2,047
1,925
677
606
(307 )
(295 )
5,644
5,796
Average loans
$
489.2
477.0
454.3
405.6
68.4
61.1
(54.4 )
(48.6 )
957.5
895.1
Average assets
993.6
898.9
794.2
739.1
212.1
192.6
(85.3 )
(84.2 )
1,914.6
1,746.4
Average deposits
708.0
655.6
441.2
442.0
189.2
172.6
(76.9 )
(71.3 )
1,261.5
1,198.9
Nine months ended Sep 30,
Net interest income (3)
$ 22,277
21,833
11,729
10,639
2,852
2,545
(1,506 )
(1,304 )
35,352
33,713
Provision (reversal of provision) for credit losses
2,060
1,723
905
(99 )
(8 )
(19 )
8
6
2,965
1,611
Noninterest income
14,928
15,178
9,660
8,706
9,020
9,285
(2,275 )
(2,411 )
31,333
30,758
Noninterest expense
20,437
20,088
12,124
10,625
9,017
9,069
(2,416 )
(2,407 )
39,162
37,375
Income (loss) before income tax expense (benefit)
14,708
15,200
8,360
8,819
2,863
2,780
(1,373 )
(1,314 )
24,558
25,485
Income tax expense (benefit)
4,910
4,695
2,341
2,583
1,087
1,054
(521 )
(500 )
7,817
7,832
Net income (loss) before noncontrolling interests
9,798
10,505
6,019
6,236
1,776
1,726
(852 )
(814 )
16,741
17,653
Less: Net income (loss) from noncontrolling interests
96
183
(22 )
146
3
5
--
--
77
334
Net income (loss)
$
9,702
10,322
6,041
6,090
1,773
1,721
(852 )
(814 )
16,664
17,319
Average loans
$
486.4
473.9
445.2
390.7
66.4
59.1
(52.8 )
(47.3 )
945.2
876.4
Average assets
969.6
906.2
771.9
714.6
208.5
191.1
(84.3 )
(83.9 )
1,865.7
1,728.0
Average deposits
698.3
651.3
431.7
435.4
185.4
170.4
(76.1 )
(70.7 )
1,239.3
1,186.4
(1) The management accounting process measures the performance of
the operating segments based on our management structure and is
not necessarily comparable with other similar information for
other financial services companies. We define our operating
segments by product type and customer segment.
(2) Includes the elimination of certain items that are included in
more than one business segment, substantially all of which
represents products and services for Wealth and Investment
Management customers served through Community Banking distribution
channels.
(3) Net interest income is the difference between interest earned
on assets and the cost of liabilities to fund those assets.
Interest earned includes actual interest earned on segment assets
and, if the segment has excess liabilities, interest credits for
providing funding to other segments. The cost of liabilities
includes interest expense on segment liabilities and, if the
segment does not have enough liabilities to fund its assets, a
funding charge based on the cost of excess liabilities from
another segment.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)
Quarter ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(income/expense in millions, average balances in billions)
2016
2016
2016
2015
2015
COMMUNITY BANKING
Net interest income (2)
$
7,430
7,379
7,468
7,409
7,409
Provision for credit losses
651
689
720
704
668
Noninterest income
4,957
4,825
5,146
4,921
5,524
Noninterest expense
6,953
6,648
6,836
6,893
6,778
Income before income tax expense
4,783
4,867
5,058
4,733
5,487
Income tax expense
1,546
1,667
1,697
1,507
1,785
Net income before noncontrolling interests
3,237
3,200
3,361
3,226
3,702
Less: Net income from noncontrolling interests
10
21
65
57
142
Segment net income
$
3,227
3,179
3,296
3,169
3,560
Average loans
$
489.2
485.7
484.3
482.2
477.0
Average assets
993.6
967.6
947.4
921.4
898.9
Average deposits
708.0
703.7
683.0
663.7
655.6
WHOLESALE BANKING
Net interest income (2)
$
4,062
3,919
3,748
3,711
3,611
Provision for credit losses
157
385
363
126
36
Noninterest income
3,085
3,365
3,210
2,848
2,715
Noninterest expense
4,120
4,036
3,968
3,491
3,503
Income before income tax expense
2,870
2,863
2,627
2,942
2,787
Income tax expense
827
795
719
841
815
Net income before noncontrolling interests
2,043
2,068
1,908
2,101
1,972
Less: Net income (loss) from noncontrolling interests
(4 )
(5 )
(13 )
(3 )
47
Segment net income
$
2,047
2,073
1,921
2,104
1,925
Average loans
$
454.3
451.4
429.8
417.0
405.6
Average assets
794.2
772.6
748.6
755.4
739.1
Average deposits
441.2
425.8
428.0
449.3
442.0
WEALTH AND INVESTMENT MANAGEMENT
Net interest income (2)
$
977
932
943
933
887
Provision (reversal of provision) for credit losses
4
2
(14 )
(6 )
(6 )
Noninterest income
3,122
2,987
2,911
3,014
2,991
Noninterest expense
2,999
2,976
3,042
2,998
2,909
Income before income tax expense
1,096
941
826
955
975
Income tax expense
415
358
314
366
371
Net income before noncontrolling interests
681
583
512
589
604
Less: Net income (loss) from noncontrolling interests
4
(1 )
--
(6 )
(2 )
Segment net income
$
677
584
512
595
606
Average loans
$
68.4
66.7
64.1
63.0
61.1
Average assets
212.1
205.3
208.1
197.9
192.6
Average deposits
189.2
182.5
184.5
177.9
172.6
OTHER (3)
Net interest income (2)
$
(517 )
(497 )
(492 )
(465 )
(450 )
Provision (reversal of provision) for credit losses
(7 )
(2 )
17
7
5
Noninterest income
(788 )
(748 )
(739 )
(785 )
(812 )
Noninterest expense
(804 )
(794 )
(818 )
(783 )
(791 )
Loss before income tax benefit
(494 )
(449 )
(430 )
(474 )
(476 )
Income tax benefit
(187 )
(171 )
(163 )
(181 )
(181 )
Net loss before noncontrolling interests
(307 )
(278 )
(267 )
(293 )
(295 )
Less: Net income from noncontrolling interests
--
--
--
--
--
Other net loss
$
(307 )
(278 )
(267 )
(293 )
(295 )
Average loans
$
(54.4 )
(53.0 )
(51.0 )
(49.9 )
(48.6 )
Average assets
(85.3 )
(83.4 )
(84.2 )
(87.4 )
(84.2 )
Average deposits
(76.9 )
(75.3 )
(76.1 )
(74.1 )
(71.3 )
CONSOLIDATED COMPANY
Net interest income (2)
$
11,952
11,733
11,667
11,588
11,457
Provision for credit losses
805
1,074
1,086
831
703
Noninterest income
10,376
10,429
10,528
9,998
10,418
Noninterest expense
13,268
12,866
13,028
12,599
12,399
Income before income tax expense
8,255
8,222
8,081
8,156
8,773
Income tax expense
2,601
2,649
2,567
2,533
2,790
Net income before noncontrolling interests
5,654
5,573
5,514
5,623
5,983
Less: Net income from noncontrolling interests
10
15
52
48
187
Wells Fargo net income
$
5,644
5,558
5,462
5,575
5,796
Average loans
$
957.5
950.8
927.2
912.3
895.1
Average assets
1,914.6
1,862.1
1,819.9
1,787.3
1,746.4
Average deposits
1,261.5
1,236.7
1,219.4
1,216.8
1,198.9
(1) The management accounting process measures the performance of
the operating segments based on our management structure and is
not necessarily comparable with other similar information for
other financial services companies. We define our operating
segments by product type and customer segment.
(2) Net interest income is the difference between interest earned
on assets and the cost of liabilities to fund those assets.
Interest earned includes actual interest earned on segment assets
and, if the segment has excess liabilities, interest credits for
providing funding to other segments. The cost of liabilities
includes interest expense on segment liabilities and, if the
segment does not have enough liabilities to fund its assets, a
funding charge based on the cost of excess liabilities from
another segment.
(3) Includes the elimination of certain items that are included in
more than one business segment, substantially all of which
represents products and services for Wealth and Investment
Management customers served through Community Banking distribution
channels.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
Quarter ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
MSRs measured using the fair value method:
Fair value, beginning of quarter
$ 10,396
11,333
12,415
11,778
12,661
Servicing from securitizations or asset transfers (1)
609
477
366
372
448
Sales and other (2)
4
(22 )
--
(9 )
6
Net additions
613
455
366
363
454
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (3)
39
(779 )
(1,084 )
560
(858 )
Servicing and foreclosure costs (4)
(10 )
(4 )
27
(37 )
(18 )
Prepayment estimates and other (5)
(37 )
(41 )
100
244
43
Net changes in valuation model inputs or assumptions
(8 )
(824 )
(957 )
767
(833 )
Other changes in fair value (6)
(586 )
(568 )
(491 )
(493 )
(504 )
Total changes in fair value
(594 )
(1,392 )
(1,448 )
274
(1,337 )
Fair value, end of quarter
$ 10,415
10,396
11,333
12,415
11,778
(1) Includes impacts associated with exercising our right to
repurchase delinquent loans from GNMA loan securitization pools.
(2) Includes sales and transfers of MSRs, which can result in an
increase of total reported MSRs if the sales or transfers are
related to nonperforming loan portfolios.
(3) Includes prepayment speed changes as well as other valuation
changes due to changes in mortgage interest rates (such as changes
in estimated interest earned on custodial deposit balances)
(4) Includes costs to service and unreimbursed foreclosure costs.
(5) Represents changes driven by other valuation model inputs or
assumptions including prepayment speed estimation changes and
other assumption updates. Prepayment speed estimation changes are
influenced by observed changes in borrower behavior and other
external factors that occur independent of interest rate changes.
(6) Represents changes due to collection/realization of expected
cash flows over time.
Quarter ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Amortized MSRs:
Balance, beginning of quarter
$
1,353
1,359
1,308
1,277
1,262
Purchases
18
24
21
48
45
Servicing from securitizations or asset transfers
69
38
97
49
35
Amortization
(67 )
(68 )
(67 )
(66 )
(65 )
Balance, end of quarter
$
1,373
1,353
1,359
1,308
1,277
Fair value of amortized MSRs:
Beginning of quarter
$
1,620
1,725
1,680
1,643
1,692
End of quarter
1,627
1,620
1,725
1,680
1,643
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
Quarter ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Servicing income, net:
Servicing fees (1)
$
878
842
910
872
990
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2)
(A)
(8 )
(824 )
(957 )
767
(833 )
Other changes in fair value (3)
(586 )
(568 )
(491 )
(493 )
(504 )
Total changes in fair value of MSRs carried at fair value
(594 )
(1,392 )
(1,448 )
274
(1,337 )
Amortization
(67 )
(68 )
(67 )
(66 )
(65 )
Net derivative gains (losses) from economic hedges (4)
(B)
142
978
1,455
(350 )
1,086
Total servicing income, net
$
359
360
850
730
674
Market-related valuation changes to MSRs, net of hedge results (2)(4)
(A)+(B)
$
134
154
498
417
253
(1) Includes contractually specified servicing fees, late charges
and other ancillary revenues, net of unreimbursed direct servicing
costs.
(2) Refer to the changes in fair value MSRs table on the previous
page for more detail.
(3) Represents changes due to collection/realization of expected
cash flows over time.
(4) Represents results from economic hedges used to hedge the risk
of changes in fair value of MSRs.
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in billions)
2016
2016
2016
2015
2015
Managed servicing portfolio (1):
Residential mortgage servicing:
Serviced for others
$
1,226
1,250
1,280
1,300
1,323
Owned loans serviced
352
349
342
345
346
Subserviced for others
4
4
4
4
4
Total residential servicing
1,582
1,603
1,626
1,649
1,673
Commercial mortgage servicing:
Serviced for others
477
478
485
478
470
Owned loans serviced
130
128
125
122
121
Subserviced for others
8
8
8
7
7
Total commercial servicing
615
614
618
607
598
Total managed servicing portfolio
$
2,197
2,217
2,244
2,256
2,271
Total serviced for others
$
1,703
1,728
1,765
1,778
1,793
Ratio of MSRs to related loans serviced for others
0.69 %
0.68
0.72
0.77
0.73
Weighted-average note rate (mortgage loans serviced for others)
4.28
4.32
4.34
4.37
4.39
(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
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2016
2016
2016
2015
2015
Net gains on mortgage loan origination/sales activities (in
millions):
Residential
(A)
$
953
744
532
600
736
Commercial
167
72
71
108
55
Residential pipeline and unsold/repurchased loan management (1)
188
238
145
222
124
Total
$ 1,308
1,054
748
930
915
Application data (in billions):
Wells Fargo first mortgage quarterly applications
$
100
95
77
64
73
Refinances as a percentage of applications
55 %
46
52
48
44
Wells Fargo first mortgage unclosed pipeline, at quarter end
$
50
47
39
29
34
Residential real estate originations:
Purchases as a percentage of originations
58 %
60
55
59
66
Refinances as a percentage of originations
42
40
45
41
34
Total
100 %
100
100
100
100
Wells Fargo first mortgage loans (in billions):
Retail
$
37
34
24
27
32
Correspondent
32
28
19
19
22
Other (2)
1
1
1
1
1
Total quarter-to-date
$
70
63
44
47
55
Held-for-sale
(B)
$
53
46
31
33
39
Held-for-investment
17
17
13
14
16
Total quarter-to-date
$
70
63
44
47
55
Total year-to-date
$
177
107
44
213
166
Production margin on residential held-for-sale mortgage
(A)/(B)
1.81 %
1.66
1.68
1.83
1.88
originations
(1) Primarily includes the results of GNMA loss mitigation
activities, interest rate management activities and changes in
estimate to the liability for mortgage loan repurchase losses.
(2) Consists of home equity loans and lines.
CHANGES IN MORTGAGE REPURCHASE LIABILITY
Quarter ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2016
2016
2016
2015
2015
Balance, beginning of period
$
255
355
378
538
557
Provision for repurchase losses:
Loan sales
11
8
7
9
11
Change in estimate (1)
(24 )
(89 )
(19 )
(128 )
(17 )
(13 )
(81 )
(12 )
(119 )
(6 )
Net reductions
Losses
(3 )
(19 )
(11 )
(41 )
(13 )
Balance, end of period
$
239
255
355
378
538
(1) Results from changes in investor demand and mortgage insurer
practices, credit deterioration and changes in the financial
stability of correspondent lenders.

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SOURCE: Wells Fargo & Company

Wells Fargo & Company
Media
Ancel Martinez, 415-222-3858
or
Investors
Jim Rowe, 415-396-8216