WFC
$54.05
Wells Fargo &
($.10)
(.18%)
Earnings Details
3rd Quarter September 2017
Friday, October 13, 2017 8:01:36 AM
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Summary

Wells Fargo & Misses

Wells Fargo & (WFC) reported 3rd Quarter September 2017 earnings of $1.04 per share on revenue of $24.5 billion. The consensus earnings estimate was $1.04 per share on revenue of $22.3 billion. The Earnings Whisper number was $1.06 per share. Revenue grew 2.7% 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
$1.04
Earnings Whisper
$1.06
Consensus Estimate
$1.04
Reported Revenue
$24.51 Bil
Revenue Estimate
$22.30 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Wells Fargo Reports Third Quarter 2017 Net Income of $4.6 Billion

Wells Fargo & Company (WFC):

Financial results: -- Revenue of $21.9 billion, down 2 percent from third quarter 2016 -- Net interest income of $12.5 billion, up $524 million, or 4 percent

Noninterest income of $9.5 billion, down $926 million, or 9 percent

Noninterest expense of $14.4 billion, up $1.1 billion, or 8 percent, including $752 million higher operating losses -- Third quarter 2017 included a $1 billion discrete litigation accrual (not tax-deductible), or $(0.20) per share, for previously disclosed mortgage-related regulatory investigations

Total average deposits of $1.3 trillion, up $44.8 billion, or 4 percent

Total average loans of $952.3 billion, down $5.1 billion, or 1 percent

Return on assets (ROA) of 0.94 percent and return on equity (ROE) of 9.06 percent

Solid credit quality: -- Net charge-offs of $717 million, down $88 million from third quarter 2016 -- Net charge-offs were 0.30 percent of average loans (annualized), down from 0.33 percent

-- Nonaccrual loans of $8.6 billion, down $2.4 billion, or 22 percent

No reserve build or release(1), consistent with third quarter 2016

-- Strong capital position while returning more capital to shareholders:

Common Equity Tier 1 ratio (fully phased-in) of 11.8 percent(2) -- Returned $4.0 billion to shareholders in the third quarter through common stock dividends and net share repurchases -- Net share repurchases of $2.0 billion, up 59 percent from third quarter 2016

Period-end common shares outstanding down 96.0 million shares from third quarter 2016

Quarterly common stock dividend of $0.39 per share, up from $0.38 per share in third quarter 2016

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

Selected Financial Information
Quarter ended
Sep 30,
Jun 30,
Sep 30,
2017
2017
2016
Earnings
Diluted earnings per common share
$
0.84
1.07
1.03
Wells Fargo net income (in billions)
4.60
5.81
5.64
Return on assets (ROA)
0.94 %
1.21
1.17
Return on equity (ROE)
9.06
11.95
11.60
Return on average tangible common equity (ROTCE)(a)
10.79
14.26
13.96
Asset Quality
Net charge-offs (annualized) as a % of average total loans
0.30 %
0.27
0.33
Allowance for credit losses as a % of total loans
1.27
1.27
1.32
Allowance for credit losses as a % of annualized net charge-offs
426
462
396
Other
Revenue (in billions)
$
21.9
22.2
22.3
Efficiency ratio (b)
65.5 %
61.1
59.4
Average loans (in billions)
$ 952.3
956.9
957.5
Average deposits (in billions)
1,306.4
1,301.2
1,261.5
Net interest margin
2.87 %
2.90
2.82
(a) Tangible common equity is a non-GAAP financial measure and
represents total equity less preferred equity, noncontrolling
interests, and goodwill and certain identifiable intangible assets
(including goodwill and intangible assets associated with certain
of our nonmarketable equity investments but excluding mortgage
servicing rights), net of applicable deferred taxes. The
methodology of determining tangible common equity may differ among
companies. Management believes that return on average tangible
common equity, which utilizes tangible common equity, is a useful
financial measure because it enables investors and others to
assess the Company’s use of equity. For additional information,
including a corresponding reconciliation to GAAP financial
measures, see the "Tangible Common Equity" tables on page 35.
(b) The efficiency ratio is noninterest expense divided by total
revenue (net interest income and noninterest income).

Wells Fargo & Company (WFC) reported net income of $4.6 billion, or $0.84 per diluted common share, for third quarter 2017, compared with $5.6 billion, or $1.03 per share, for third quarter 2016, and $5.8 billion, or $1.07 per share, for second quarter 2017.

Chief Executive Officer Tim Sloan said, "Over the past year we have made fundamental changes to transform Wells Fargo as part of our effort to rebuild trust and build a better bank. While our financial performance in the third quarter included the impact of a litigation accrual for previously disclosed, pre-crisis mortgage-related regulatory investigations, I am proud of the commitment of our 268,000 team members who put our customers first. We saw total average deposit growth; loan growth in our residential mortgage, credit card and subscription finance portfolios; as well as higher assets under management in Wealth and Investment Management. We also continued to invest in customer-focused innovation and have begun the rollout of our online mortgage application and "Intuitive Investor," our online platform for digital investing and professional advice. We’re also committed to helping our communities recover from the devastation of the recent hurricanes by providing payment relief and proactively waiving fees for impacted customers, and our foundation donated $2.6 million for hurricane relief efforts."

Chief Financial Officer John Shrewsberry said, "Wells Fargo reported $4.6 billion of net income in the third quarter, which included the impact of the $1 billion, or $(0.20) per share, discrete litigation accrual. We continued to see good credit performance and our liquidity and capital remained exceptionally strong. During the quarter, our first under our 2017 Capital Plan, we returned $4.0 billion to shareholders through common stock dividends and net share repurchases, up from $3.4 billion in the second quarter. We remain committed to our target of $2 billion of expense reductions by the end of 2018 which will be reinvested in the business and an additional $2 billion by the end of 2019 intended to go to the bottom line."

Net Interest Income

Net interest income in third quarter 2017 was $12.5 billion, in line with second quarter 2017, as the impacts of lower investment portfolio yields driven by accelerated prepayments and lower average loan balances were offset by the impact of one additional day and a modest benefit from all other growth and repricing.

Net interest margin was 2.87 percent, down 3 basis points from second quarter 2017. The impacts of lower investment portfolio yields driven by accelerated prepayments, lower average loan balances, growth in average deposits, and growth in trading assets and related funding were partially offset by lower average long-term debt and a modest benefit from all other growth and repricing.

Noninterest Income

Noninterest income in the third quarter was $9.5 billion, compared with $9.7 billion in second quarter 2017. Third quarter noninterest income reflected lower mortgage banking and other income, partially offset by higher market sensitive revenue(3).

Mortgage banking noninterest income was $1.0 billion, compared with $1.1 billion in second quarter 2017. Residential mortgage loan originations were $59 billion in the third quarter, up from $56 billion in the second quarter. The production margin on residential held-for-sale mortgage loan originations(4) was 1.24 percent, consistent with the second quarter. Mortgage servicing income was $309 million in the third quarter, down from $400 million in the second quarter, primarily due to higher unreimbursed servicing costs.

Other income was $97 million, compared with $249 million in the second quarter. Second quarter 2017 included a $309 million gain on the sale of a Pick-a-Pay purchased credit-impaired (PCI) loan portfolio. Third quarter 2017 included a net hedge ineffectiveness gain of $93 million, up from $21 million in the prior quarter.

Noninterest Expense

Noninterest expense in the third quarter was $14.4 billion, compared with $13.5 billion in the prior quarter. Third quarter expenses included operating losses of $1.3 billion, which included the $1 billion litigation accrual for previously disclosed mortgage-related regulatory investigations. This increase in noninterest expense was partially offset by lower charitable donations, outside professional services, employee benefits, and travel and entertainment expenses. The efficiency ratio was 65.5 percent in third quarter 2017, which included a 456 basis point impact from the $1 billion litigation accrual.

Income Taxes

The Company’s effective income tax rate was 32.4 percent for third quarter 2017, and included net discrete tax expense totaling $186 million, primarily resulting from the non-deductible treatment of the $1 billion litigation accrual, partially offset by discrete tax benefits arising from favorable resolutions of prior period matters with certain state tax authorities.

Loans

Total average loans were $952.3 billion in the third quarter, down $4.5 billion from the second quarter. Period-end loan balances were $951.9 billion at September 30, 2017, down $5.6 billion from June 30, 2017. Consumer loans increased $201 million from the prior quarter as growth in real estate 1-4 family first mortgage loans and consumer credit card loans was largely offset by expected declines in automobile loans and the legacy junior lien mortgage portfolio. Commercial loans were down $5.8 billion from June 30, 2017 reflecting paydowns and continued underwriting discipline.

Period-End Loan Balances
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(in millions)
2017
2017
2017
2016
2016
Commercial
$ 500,150
505,901
505,004
506,536
496,454
Consumer
451,723
451,522
453,401
461,068
464,872
Total loans
$ 951,873
957,423
958,405
967,604
961,326
Change from prior quarter
$
(5,550 )
(982 )
(9,199 )
6,278
4,169

Investment Securities

Investment securities were $414.6 billion at September 30, 2017, up $5.0 billion from the second quarter, as approximately $31.2 billion of purchases, mostly federal agency mortgage-backed securities (MBS) in the available-for-sale portfolio, were partially offset by run-off and sales.

Net unrealized gains on available-for-sale securities were $1.8 billion at September 30, 2017, compared with $1.1 billion at June 30, 2017, primarily due to tighter credit and agency MBS spreads during the quarter.

Deposits

Total average deposits for third quarter 2017 were $1.3 trillion, up $5.2 billion from the prior quarter. The average deposit cost for third quarter 2017 was 26 basis points, up 5 basis points from the prior quarter and 15 basis points from a year ago, primarily driven by an increase in commercial and Wealth and Investment Management deposit rates.

Capital

Capital levels remained strong in the third quarter, with a Common Equity Tier 1 ratio (fully phased-in) of 11.8 percent(2), compared with 11.6 percent in the prior quarter. In third quarter 2017, the Company repurchased 49.0 million shares of its common stock, which reduced period-end common shares outstanding by 38.9 million. The Company paid a quarterly common stock dividend of $0.39 per share, up from $0.38 per share a year ago.

Credit Quality

"Credit results remained strong in the third quarter," said Chief Risk Officer Mike Loughlin. "The loan portfolio continued to perform well, led by strong performance in consumer real estate and continued solid performance in the commercial portfolio. Separately, while it is still early in the process, we have reviewed our portfolio for potential losses from recent hurricanes and have reflected that initial estimate in our allowance. After accounting for all these factors, the allowance for credit losses in the third quarter remained relatively unchanged from the second quarter."

Net Loan Charge-offs

The quarterly loss rate was 0.30 percent (annualized), compared with 0.27 percent in the prior quarter. Commercial and consumer losses were 0.09 percent and 0.53 percent, respectively. Credit losses were $717 million in third quarter 2017, up $62 million from second quarter 2017. Commercial losses were up $38 million on higher losses in the commercial and industrial portfolio. Consumer losses increased $24 million as higher automobile losses from typically low second quarter levels more than offset lower credit card losses.

Net Loan Charge-Offs
Quarter ended
September 30, 2017
June 30, 2017
March 31, 2017
Net loan
As a % of
Net loan
As a % of
Net loan
As a % of
charge-
average
charge-
average
charge-
average
($ in millions)
offs
loans (a)
offs
loans (a)
offs
loans (a)
Commercial:
Commercial and industrial
$
125
0.15 %
$
78
0.10 %
$
171
0.21 %
Real estate mortgage
(3 )
(0.01 )
(6 )
(0.02 )
(25 )
(0.08 )
Real estate construction
(15 )
(0.24 )
(4 )
(0.05 )
(8 )
(0.15 )
Lease financing
6
0.12
7
0.15
5
0.11
Total commercial
113
0.09
75
0.06
143
0.11
Consumer:
Real estate 1-4 family first mortgage
(16 )
(0.02 )
(16 )
(0.02 )
7
0.01
Real estate 1-4 family junior lien mortgage
1
--
(4 )
(0.03 )
23
0.21
Credit card
277
3.08
320
3.67
309
3.54
Automobile
202
1.41
126
0.86
167
1.10
Other revolving credit and installment
140
1.44
154
1.58
156
1.60
Total consumer
604
0.53
580
0.51
662
0.59
Total
$
717
0.30 %
$
655
0.27 %
$
805
0.34 %
(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 $512 million from second quarter 2017 to $9.3 billion. Nonaccrual loans decreased $437 million from second quarter 2017 to $8.6 billion primarily driven by declines in commercial and industrial nonaccruals, as well as continued lower consumer real estate nonaccruals.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
September 30, 2017
June 30, 2017
March 31, 2017
As a
As a
As a
% of
% of
% of
Total
total
Total
total
Total
total
($ in millions)
balances
loans
balances
loans
balances
loans
Commercial:
Commercial and industrial
$ 2,397
0.73 %
$ 2,632
0.79 %
$
2,898
0.88 %
Real estate mortgage
593
0.46
630
0.48
672
0.51
Real estate construction
38
0.15
34
0.13
40
0.16
Lease financing
81
0.42
89
0.46
96
0.50
Total commercial
3,109
0.62
3,385
0.67
3,706
0.73
Consumer:
Real estate 1-4 family first mortgage
4,213
1.50
4,413
1.60
4,743
1.73
Real estate 1-4 family junior lien mortgage
1,101
2.68
1,095
2.56
1,153
2.60
Automobile
137
0.25
104
0.18
101
0.17
Other revolving credit and installment
59
0.15
59
0.15
56
0.14
Total consumer
5,510
1.22
5,671
1.26
6,053
1.34
Total nonaccrual loans
8,619
0.91
9,056
0.95
9,759
1.02
Foreclosed assets:
Government insured/guaranteed
137
149
179
Non-government insured/guaranteed
569
632
726
Total foreclosed assets
706
781
905
Total nonperforming assets
$ 9,325
0.98 %
$ 9,837
1.03 %
$ 10,664
1.11 %
Change from prior quarter:
Total nonaccrual loans
$
(437 )
$
(703 )
$
(625 )
Total nonperforming assets
(512 )
(827 )
(698 )

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.1 billion at September 30, 2017, in line with June 30, 2017. The third quarter 2017 allowance for credit losses reflected strong credit performance due to continued improvement in consumer real estate as well as strength in the commercial loan portfolio, including improvement in the oil and gas portfolio. These factors were offset by $450 million for coverage of our preliminary estimate of potential hurricane-related losses. The allowance coverage for total loans of 1.27 percent was stable from second quarter 2017. The allowance covered 4.3 times annualized third quarter net charge-offs, compared with 4.6 times in the prior quarter. The allowance coverage for nonaccrual loans was 141 percent at September 30, 2017, compared with 134 percent at June 30, 2017. The Company believes the allowance was appropriate for losses inherent in the loan portfolio at September 30, 2017.

Business Segment Performance

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

Quarter ended
Sep 30,
Jun 30,
Sep 30,
(in millions)
2017
2017
2016
Community Banking
$ 2,229
2,993
3,227
Wholesale Banking
2,046
2,388
2,047
Wealth and Investment Management
710
682
677

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and automobile, student, mortgage, home equity and small business lending, as well as referrals to Wholesale Banking and Wealth and Investment Management business partners. The Community Banking segment also includes the results of our Corporate Treasury activities net of allocations in support of the other operating segments and results of investments in our affiliated venture capital partnerships.

Selected Financial Information
Quarter ended
Sep 30,
Jun 30,
Sep 30,
(in millions)
2017
2017
2016
Total revenue
$ 12,060
12,289
12,387
Provision for credit losses
650
623
651
Noninterest expense
7,834
7,223
6,953
Segment net income
2,229
2,993
3,227
(in billions)
Average loans
473.5
477.2
489.2
Average assets
988.9
983.5
993.6
Average deposits
734.5
727.2
708.0

Community Banking reported net income of $2.2 billion, down $764 million, or 26 percent, from second quarter 2017, and included the $1 billion litigation accrual (not tax-deductible) for previously disclosed mortgage-related regulatory investigations. Revenue of $12.1 billion decreased $229 million, or 2 percent, from second quarter 2017, primarily due to a gain on the sale of a Pick-a-Pay PCI loan portfolio in the prior quarter. The decline in revenue from the second quarter was also driven by lower mortgage banking revenue, partially offset by higher net interest income and the favorable accounting impact of net hedge ineffectiveness. Noninterest expense increased $611 million, or 8 percent, compared with second quarter 2017, due to higher operating losses and personnel expense, partially offset by lower charitable donations, lower professional services expense and the favorable impact of updated intra-segment allocations to Wholesale Banking and Wealth and Investment Management for regulatory, risk, cyber and technology expenses. The provision for credit losses increased $27 million from the prior quarter.

Net income was down $1.0 billion, or 31 percent, from third quarter 2016, and included the $1 billion litigation accrual (not tax-deductible) for previously disclosed mortgage-related regulatory investigations. Revenue decreased $327 million, or 3 percent, compared with a year ago due to lower mortgage banking revenue and deposit service charges, partially offset by higher net interest income and market sensitive revenue. Noninterest expense increased $881 million, or 13 percent, from a year ago due to higher operating losses, higher professional services expense and the favorable impact of updated intra-segment allocations to Wholesale Banking and Wealth and Investment Management for regulatory, risk, cyber and technology expenses.

Retail Banking and Consumer Payments, Virtual Solutions and Innovation

With nearly 400,000 branch customer experience surveys completed during the third quarter, ’Loyalty’ and ’Overall Satisfaction with Most Recent Visit’ scores declined in September after our announcement of the expanded third party account review, which followed post-sales practice settlement highs for ’Loyalty’ in July of 58.8 percent and ’Overall Satisfaction with Most Recent Visit’ in August of 78.2 percent

5,927 retail bank branches as of the end of third quarter 2017, reflecting 145 branch consolidations year-to-date through September 30, 2017

Wells Fargo was the nation’s #1 SBA 7(a) lender in dollars and units for full year 2017(5)

Primary consumer checking customers(6,7)down 0.2 percent year-over-year

Debit card point-of-sale purchase volume(8) of $80.0 billion in third quarter, up 5 percent year-over-year

Credit card point-of-sale purchase volume of $18.2 billion in third quarter, up 4 percent year-over-year

-- Credit card penetration in retail banking households of 45.4 percent(9)

27.8 million digital (online and mobile) active customers, including 20.9 million mobile active users(7,10)

According to BI Intelligence’s Mobile Banking Competitive Edge study, Wells Fargo scored top marks in the transfers, wallets, and security categories of our scorecard, and ranked first overall

For the fourth consecutive time, Dynatrace (formerly Keynote) ranked Wells Fargo #1 overall in online performance (August 2017)

In Javelin Strategy’s recent 2017 Account Safety in Banking Scorecard, Wells Fargo was recognized as a leader in fraud prevention, detection, and resolution

Consumer Lending

Home Lending -- Originations of $59 billion, up from $56 billion in prior quarter

-- Applications of $73 billion, down from $83 billion in prior quarter

Application pipeline of $29 billion at quarter end, down from $34 billion at June 30, 2017

Automobile originations of $4.3 billion in third quarter, down 6 percent from prior quarter and down 47 percent from prior year, as proactive steps to tighten underwriting standards resulted in lower origination volume

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include Business Banking, Commercial Real Estate, Corporate Banking, Financial Institutions Group, Government and Institutional Banking, Insurance, Middle Market Banking, Principal Investments, Treasury Management, Wells Fargo Commercial Capital, and Wells Fargo Securities.

Selected Financial Information
Quarter ended
Sep 30,
Jun 30,
Sep 30,
(in millions)
2017
2017
2016
Total revenue
$ 7,085
6,951
7,147
Provision (reversal of provision) for credit losses
69
(65 )
157
Noninterest expense
4,248
4,078
4,120
Segment net income
2,046
2,388
2,047
(in billions)
Average loans
463.8
464.9
454.3
Average assets
824.3
817.3
794.2
Average deposits
463.4
463.0
441.2

Wholesale Banking reported net income of $2.0 billion, down $342 million, or 14 percent, from second quarter 2017 which included a tax benefit resulting from our agreement to sell Wells Fargo Insurance Services USA and related businesses. Revenue of $7.1 billion increased $134 million, or 2 percent, from the prior quarter. Net interest income increased $75 million, or 2 percent, on higher trading related income and one additional business day in the quarter. Noninterest income increased $59 million, or 2 percent, on higher gains on equity investments and debt securities. Noninterest expense increased $170 million, or 4 percent, from the prior quarter reflecting updated intra-segment allocations from Community Banking for regulatory, risk, cyber and technology expenses. The provision for credit losses increased $134 million from the prior quarter, primarily due to a reserve release in the second quarter as well as higher losses in the third quarter.

Net income of $2.0 billion was in line with third quarter 2016. Revenue decreased $62 million, or 1 percent, from third quarter 2016, as higher net interest income was more than offset by lower noninterest income. Net interest income increased $291 million, or 7 percent, from third quarter 2016 on deposit and loan growth, including the GE Capital portfolio acquisitions in the second half of 2016, as well as the impact of rising interest rates. Noninterest income decreased $353 million, or 11 percent, from a year ago primarily due to lower customer accommodation trading and lower commercial mortgage banking results. Noninterest expense increased $128 million, or 3 percent, from a year ago reflecting updated intra-segment allocations from Community Banking for regulatory, risk, cyber and technology expenses. The provision for credit losses decreased $88 million from a year ago primarily due to improvements in the oil and gas portfolio.

Launched CEO Mobile Token which allows Treasury Management customers a secure, convenient way to provide secondary authentication anytime they need to complete a transaction (August 2017)

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)
2017
2017
2016
Total revenue
$ 4,246
4,182
4,099
Provision (reversal of provision) for credit losses
(1 )
7
4
Noninterest expense
3,106
3,075
2,999
Segment net income
710
682
677
(in billions)
Average loans
72.4
71.7
68.4
Average assets
213.4
213.1
212.1
Average deposits
188.1
188.2
189.2

Wealth and Investment Management reported net income of $710 million, up $28 million, or 4 percent, from second quarter 2017. Revenue of $4.2 billion increased $64 million from the prior quarter, primarily due to higher net interest income, asset-based fees, and gains on deferred compensation plan investments (offset in employee benefits expense), partially offset by lower transaction revenue. Noninterest expense increased $31 million, or 1 percent, from the prior quarter, reflecting updated intra-segment allocations from Community Banking for regulatory, risk, cyber and technology expenses and higher deferred compensation plan expense (offset in trading revenue).

Net income was up $33 million, or 5 percent, from third quarter 2016. Revenue increased $147 million, or 4 percent, from a year ago primarily driven by higher net interest income and asset-based fees, partially offset by lower transaction revenue. Noninterest expense increased $107 million, or 4 percent, from a year ago, reflecting updated intra-segment allocations from Community Banking for regulatory, risk, cyber and technology expenses and higher personnel expense, partially offset by lower professional services expense.

WIM total client assets reached a record-high of $1.9 trillion, up 8 percent from a year ago, driven by higher market valuations and continued positive net flows

Third quarter 2017 average closed referred investment assets (referrals resulting from the WIM/Community Banking partnership) were down 12 percent from the prior quarter

Retail Brokerage

-- Client assets of $1.6 trillion, up 9 percent from prior year

Advisory assets of $522 billion, up 14 percent from prior year, primarily driven by higher market valuations and positive net flows

Strong loan growth, with average balances up 10 percent from prior year largely due to continued growth in non-conforming mortgage loans

Wealth Management

-- Client assets of $241 billion, up 5 percent from prior year

Average loan balances up 4 percent from prior year primarily driven by continued growth in non-conforming mortgage loans

Asset Management

Total assets under management of $496 billion, flat from prior year as equity and money market net outflows were offset by higher market valuations, positive fixed income net flows and assets acquired during the prior year

Retirement

-- IRA assets of $400 billion, up 6 percent from prior year

Institutional Retirement plan assets of $387 billion, up 11 percent from prior year

Conference Call

The Company will host a live conference call on Friday, October 13, at 7:00 a.m. PT (10:00 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 440-424-4922 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~88580303.

A replay of the conference call will be available beginning at 10:00 a.m. PT (1:00 p.m. ET) on Friday, October 13 through Friday, October 27. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #88580303. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~88580303.

Endnotes
(1)
Reserve build represents the amount by which the provision for
credit losses exceeds net charge-offs, while reserve release
represents the amount by which net charge-offs exceed the provision
for credit losses.
(2)
See table on page 36 for more information on Common Equity Tier 1.
Common Equity Tier 1 (fully phased-in) is a preliminary estimate and
is calculated assuming the full phase-in of the Basel III capital
rules.
(3)
Market sensitive revenue represents net gains from trading
activities, debt securities and equity investments.
(4)
Production margin represents net gains on residential mortgage loan
origination/sales activities divided by total residential
held-for-sale mortgage originations. See the Selected Five Quarter
Residential Mortgage Production Data table on page 41 for more
information.
(5)
U.S. SBA data, federal fiscal year ended September 30, 2017.
(6)
Customers who actively use their checking account with transactions
such as debit card purchases, online bill payments, and direct
deposit.
(7)
Data as of August 2017, comparisons with August 2016.
(8)
Combined consumer and business debit card purchase volume dollars.
(9)
Penetration defined as the percentage of Retail Banking households
that have a credit card with Wells Fargo. Retail Banking households
reflect only those households that maintain a retail checking
account, which we believe provides the foundation for long-term
retail banking relationships. Credit card household penetration
rates have not been adjusted to reflect the impact of the
potentially unauthorized accounts (determined principally based on
whether the account was activated by the customer) identified by a
third party consulting firm in August 2017 because the maximum
impact in any one quarter was not greater than 127 bps.
(10)
Primarily includes retail banking, consumer lending, small
business and business banking customers.

Forward-Looking Statements

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

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

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

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

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

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

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

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

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

losses related to recent hurricanes, which primarily impacted Texas, Florida and Puerto Rico, including from damage or loss to our collateral for loans in our consumer and commercial loan portfolios and from the impact on the ability of our borrowers to repay their loans;

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

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

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

negative effects from the retail banking sales practices matter, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, and our reputation;

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

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

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

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

the other risk factors and uncertainties described under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016.

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

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

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

About Wells Fargo

Wells Fargo & Company (WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,400 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 268,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2017 rankings of America’s largest corporations.

Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS
Pages
Summary Information
Summary Financial Data
16
Income
Consolidated Statement of Income
18
Consolidated Statement of Comprehensive Income
20
Condensed Consolidated Statement of Changes in Total Equity
20
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis)
21
Five Quarter Average Balances, Yields and Rates Paid
23
(Taxable-Equivalent Basis)
Noninterest Income and Noninterest Expense
24
Balance Sheet
Consolidated Balance Sheet
26
Investment Securities
28
Loans
Loans
28
Nonperforming Assets
29
Loans 90 Days or More Past Due and Still Accruing
30
Purchased Credit-Impaired Loans
31
Pick-A-Pay Portfolio
32
Changes in Allowance for Credit Losses
34
Equity
Tangible Common Equity
35
Common Equity Tier 1 Under Basel III
36
Operating Segments
Operating Segment Results
37
Other
Mortgage Servicing and other related data
39
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
% Change
Quarter ended
Sep 30, 2017 from
Nine months ended
Sep 30,
Jun 30,
Sep 30,
Jun 30,
Sep 30,
Sep 30,
Sep 30,
%
2017
2017
2016
2017
2016
2017
2016
Change
($ in millions, except per share amounts)
For the Period
Wells Fargo net income
$
4,596
5,810
5,644
(21 )%
(19 )
$
15,863
16,664
(5 )%
Wells Fargo net income applicable to common stock
4,185
5,404
5,243
(23 )
(20 )
14,645
15,501
(6 )
Diluted earnings per common share
0.84
1.07
1.03
(21 )
(18 )
2.91
3.03
(4 )
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA)
0.94 %
1.21
1.17
(22 )
(20 )
1.10 %
1.19
(8 )
Wells Fargo net income applicable to common stock to average Wells
9.06
11.95
11.60
(24 )
(22 )
10.83
11.68
(7 )
Fargo common stockholders’ equity (ROE)
Return on average tangible common equity (ROTCE)(1)
10.79
14.26
13.96
(24 )
(23 )
12.94
14.08
(8 )
Efficiency ratio (2)
65.5
61.1
59.4
7
10
63.1
58.7
7
Total revenue
$
21,926
22,169
22,328
(1 )
(2 )
$
66,097
66,685
(1 )
Pre-tax pre-provision profit (PTPP) (3)
7,575
8,628
9,060
(12 )
(16 )
24,413
27,523
(11 )
Dividends declared per common share
0.390
0.380
0.380
3
3
1.150
1.135
1
Average common shares outstanding
4,948.6
4,989.9
5,043.4
(1 )
(2 )
4,982.1
5,061.9
(2 )
Diluted average common shares outstanding
4,996.8
5,037.7
5,094.6
(1 )
(2 )
5,035.4
5,118.2
(2 )
Average loans
$ 952,343
956,879
957,484
--
(1 )
$ 957,581
945,197
1
Average assets
1,938,523
1,927,079
1,914,586
1
1
1,932,242
1,865,694
4
Average total deposits
1,306,356
1,301,195
1,261,527
--
4
1,302,273
1,239,287
5
Average consumer and small business banking deposits (4)
755,094
760,149
739,066
(1 )
2
758,443
726,798
4
Net interest margin
2.87 %
2.90
2.82
(1 )
2
2.88 %
2.86
1
At Period End
Investment securities
$ 414,633
409,594
390,832
1
6
$ 414,633
390,832
6
Loans
951,873
957,423
961,326
(1 )
(1 )
951,873
961,326
(1 )
Allowance for loan losses
11,078
11,073
11,583
--
(4 )
11,078
11,583
(4 )
Goodwill
26,581
26,573
26,688
--
--
26,581
26,688
--
Assets
1,934,939
1,930,871
1,942,124
--
--
1,934,939
1,942,124
--
Deposits
1,306,706
1,305,830
1,275,894
--
2
1,306,706
1,275,894
2
Common stockholders’ equity
182,128
181,428
179,916
--
1
182,128
179,916
1
Wells Fargo stockholders’ equity
205,929
205,230
203,028
--
1
205,929
203,028
1
Total equity
206,824
206,145
203,958
--
1
206,824
203,958
1
Tangible common equity (1)
152,901
152,064
149,829
1
2
152,901
149,829
2
Common shares outstanding
4,927.9
4,966.8
5,023.9
(1 )
(2 )
4,927.9
5,023.9
(2 )
Book value per common share (5)
$
36.96
36.53
35.81
1
3
$
36.96
35.81
3
Tangible book value per common share (1)(5)
31.03
30.62
29.82
1
4
31.03
29.82
4
Common stock price:
High
56.45
56.60
51.00
--
11
59.99
53.27
13
Low
49.28
50.84
44.10
(3 )
12
49.28
44.10
12
Period end
55.15
55.41
44.28
--
25
55.15
44.28
25
Team members (active, full-time equivalent)
268,000
270,600
268,800
(1 )
--
268,000
268,800
--
(1) Tangible common equity is a non-GAAP financial measure and
represents total equity less preferred equity, noncontrolling
interests, and goodwill and certain identifiable intangible assets
(including goodwill and intangible assets associated with certain
of our nonmarketable equity 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
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
($ in millions, except per share amounts)
2017
2017
2017
2016
2016
For the Quarter
Wells Fargo net income
$
4,596
5,810
5,457
5,274
5,644
Wells Fargo net income applicable to common stock
4,185
5,404
5,056
4,872
5,243
Diluted earnings per common share
0.84
1.07
1.00
0.96
1.03
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA)
0.94 %
1.21
1.15
1.08
1.17
Wells Fargo net income applicable to common stock to average Wells
9.06
11.95
11.54
10.94
11.60
Fargo common stockholders’ equity (ROE)
Return on average tangible common equity (ROTCE)(1)
10.79
14.26
13.85
13.16
13.96
Efficiency ratio (2)
65.5
61.1
62.7
61.2
59.4
Total revenue
$
21,926
22,169
22,002
21,582
22,328
Pre-tax pre-provision profit (PTPP) (3)
7,575
8,628
8,210
8,367
9,060
Dividends declared per common share
0.39
0.38
0.38
0.38
0.38
Average common shares outstanding
4,948.6
4,989.9
5,008.6
5,025.6
5,043.4
Diluted average common shares outstanding
4,996.8
5,037.7
5,070.4
5,078.2
5,094.6
Average loans
$ 952,343
956,879
963,645
964,147
957,484
Average assets
1,938,523
1,927,079
1,931,041
1,944,250
1,914,586
Average total deposits
1,306,356
1,301,195
1,299,191
1,284,158
1,261,527
Average consumer and small business banking deposits (4)
755,094
760,149
758,754
749,946
739,066
Net interest margin
2.87 %
2.90
2.87
2.87
2.82
At Quarter End
Investment securities
$ 414,633
409,594
407,560
407,947
390,832
Loans
951,873
957,423
958,405
967,604
961,326
Allowance for loan losses
11,078
11,073
11,168
11,419
11,583
Goodwill
26,581
26,573
26,666
26,693
26,688
Assets
1,934,939
1,930,871
1,951,564
1,930,115
1,942,124
Deposits
1,306,706
1,305,830
1,325,444
1,306,079
1,275,894
Common stockholders’ equity
182,128
181,428
178,388
176,469
179,916
Wells Fargo stockholders’ equity
205,929
205,230
201,500
199,581
203,028
Total equity
206,824
206,145
202,489
200,497
203,958
Tangible common equity (1)
152,901
152,064
148,850
146,737
149,829
Common shares outstanding
4,927.9
4,966.8
4,996.7
5,016.1
5,023.9
Book value per common share (5)
$
36.96
36.53
35.70
35.18
35.81
Tangible book value per common share (1)(5)
31.03
30.62
29.79
29.25
29.82
Common stock price:
High
56.45
56.60
59.99
58.02
51.00
Low
49.28
50.84
53.35
43.55
44.10
Period end
55.15
55.41
55.66
55.11
44.28
Team members (active, full-time equivalent)
268,000
270,600
272,800
269,100
268,800
(1) Tangible common equity is a non-GAAP financial measure and
represents total equity less preferred equity, noncontrolling
interests, and goodwill and certain identifiable intangible assets
(including goodwill and intangible assets associated with certain
of our nonmarketable equity 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)
2017
2016
Change
2017
2016
Change
Interest income
Trading assets
$
754
593
27 %
$
2,107
1,761
20 %
Investment securities
2,662
2,298
16
8,035
6,736
19
Mortgages held for sale
219
207
6
598
549
9
Loans held for sale
5
2
150
10
7
43
Loans
10,522
9,978
5
31,021
29,377
6
Other interest income
896
409
119
2,228
1,175
90
Total interest income
15,058
13,487
12
43,999
39,605
11
Interest expense
Deposits
870
356
144
2,090
995
110
Short-term borrowings
226
85
166
503
229
120
Long-term debt
1,377
1,006
37
3,838
2,769
39
Other interest expense
109
88
24
309
260
19
Total interest expense
2,582
1,535
68
6,740
4,253
58
Net interest income
12,476
11,952
4
37,259
35,352
5
Provision for credit losses
717
805
(11 )
1,877
2,965
(37 )
Net interest income after provision for credit losses
11,759
11,147
5
35,382
32,387
9
Noninterest income
Service charges on deposit accounts
1,276
1,370
(7 )
3,865
4,015
(4 )
Trust and investment fees
3,609
3,613
--
10,808
10,545
2
Card fees
1,000
997
--
2,964
2,935
1
Other fees
877
926
(5 )
2,644
2,765
(4 )
Mortgage banking
1,046
1,667
(37 )
3,422
4,679
(27 )
Insurance
269
293
(8 )
826
1,006
(18 )
Net gains from trading activities
245
415
(41 )
921
943
(2 )
Net gains on debt securities
166
106
57
322
797
(60 )
Net gains from equity investments
238
140
70
829
573
45
Lease income
475
534
(11 )
1,449
1,404
3
Other
249
315
(21 )
788
1,671
(53 )
Total noninterest income
9,450
10,376
(9 )
28,838
31,333
(8 )
Noninterest expense
Salaries
4,356
4,224
3
12,960
12,359
5
Commission and incentive compensation
2,553
2,520
1
7,777
7,769
--
Employee benefits
1,279
1,223
5
4,273
3,993
7
Equipment
523
491
7
1,629
1,512
8
Net occupancy
716
718
--
2,134
2,145
(1 )
Core deposit and other intangibles
288
299
(4 )
864
891
(3 )
FDIC and other deposit assessments
314
310
1
975
815
20
Other
4,322
3,483
24
11,072
9,678
14
Total noninterest expense
14,351
13,268
8
41,684
39,162
6
Income before income tax expense
6,858
8,255
(17 )
22,536
24,558
(8 )
Income tax expense
2,204
2,601
(15 )
6,486
7,817
(17 )
Net income before noncontrolling interests
4,654
5,654
(18 )
16,050
16,741
(4 )
Less: Net income from noncontrolling interests
58
10
480
187
77
143
Wells Fargo net income
$ 4,596
5,644
(19 )
$ 15,863
16,664
(5 )
Less: Preferred stock dividends and other
411
401
2
1,218
1,163
5
Wells Fargo net income applicable to common stock
$ 4,185
5,243
(20 )
$ 14,645
15,501
(6 )
Per share information
Earnings per common share
$
0.85
1.04
(18 )
$
2.94
3.06
(4 )
Diluted earnings per common share
0.84
1.03
(18 )
2.91
3.03
(4 )
Dividends declared per common share
0.390
0.380
3
1.150
1.135
1
Average common shares outstanding
4,948.6
5,043.4
(2 )
4,982.1
5,061.9
(2 )
Diluted average common shares outstanding
4,996.8
5,094.6
(2 )
5,035.4
5,118.2
(2 )
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)
2017
2017
2017
2016
2016
Interest income
Trading assets
$
754
710
643
745
593
Investment securities
2,662
2,698
2,675
2,512
2,298
Mortgages held for sale
219
195
184
235
207
Loans held for sale
5
4
1
2
2
Loans
10,522
10,358
10,141
10,128
9,978
Other interest income
896
750
582
436
409
Total interest income
15,058
14,715
14,226
14,058
13,487
Interest expense
Deposits
870
683
537
400
356
Short-term borrowings
226
163
114
101
85
Long-term debt
1,377
1,278
1,183
1,061
1,006
Other interest expense
109
108
92
94
88
Total interest expense
2,582
2,232
1,926
1,656
1,535
Net interest income
12,476
12,483
12,300
12,402
11,952
Provision for credit losses
717
555
605
805
805
Net interest income after provision for credit losses
11,759
11,928
11,695
11,597
11,147
Noninterest income
Service charges on deposit accounts
1,276
1,276
1,313
1,357
1,370
Trust and investment fees
3,609
3,629
3,570
3,698
3,613
Card fees
1,000
1,019
945
1,001
997
Other fees
877
902
865
962
926
Mortgage banking
1,046
1,148
1,228
1,417
1,667
Insurance
269
280
277
262
293
Net gains (losses) from trading activities
245
237
439
(109 )
415
Net gains on debt securities
166
120
36
145
106
Net gains from equity investments
238
188
403
306
140
Lease income
475
493
481
523
534
Other
249
394
145
(382 )
315
Total noninterest income
9,450
9,686
9,702
9,180
10,376
Noninterest expense
Salaries
4,356
4,343
4,261
4,193
4,224
Commission and incentive compensation
2,553
2,499
2,725
2,478
2,520
Employee benefits
1,279
1,308
1,686
1,101
1,223
Equipment
523
529
577
642
491
Net occupancy
716
706
712
710
718
Core deposit and other intangibles
288
287
289
301
299
FDIC and other deposit assessments
314
328
333
353
310
Other
4,322
3,541
3,209
3,437
3,483
Total noninterest expense
14,351
13,541
13,792
13,215
13,268
Income before income tax expense
6,858
8,073
7,605
7,562
8,255
Income tax expense
2,204
2,225
2,057
2,258
2,601
Net income before noncontrolling interests
4,654
5,848
5,548
5,304
5,654
Less: Net income from noncontrolling interests
58
38
91
30
10
Wells Fargo net income
$ 4,596
5,810
5,457
5,274
5,644
Less: Preferred stock dividends and other
411
406
401
402
401
Wells Fargo net income applicable to common stock
$ 4,185
5,404
5,056
4,872
5,243
Per share information
Earnings per common share
$
0.85
1.08
1.01
0.97
1.04
Diluted earnings per common share
0.84
1.07
1.00
0.96
1.03
Dividends declared per common share
0.390
0.380
0.380
0.380
0.380
Average common shares outstanding
4,948.6
4,989.9
5,008.6
5,025.6
5,043.4
Diluted average common shares outstanding
4,996.8
5,037.7
5,070.4
5,078.2
5,094.6
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarter ended September 30,
%
Nine months ended September 30,
%
(in millions)
2017
2016
Change
2017
2016
Change
Wells Fargo net income
$ 4,596
5,644
(19)%
$ 15,863
16,664
(5)%
Other comprehensive income (loss), before tax:
Investment securities:
Net unrealized gains arising during the period
891
112
696
2,825
2,478
14
Reclassification of net gains to net income
(200 )
(193 )
4
(522 )
(1,001 )
(48)
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period
36
(445 )
NM
279
2,611
(89)
Reclassification of net gains on cash flow hedges to net income
(105 )
(262 )
(60)
(460 )
(783 )
(41)
Defined benefit plans adjustments:
Net actuarial and prior service gains (losses) arising during the
11
(447 )
NM
4
(474 )
NM
period
Amortization of net actuarial loss, settlements and other to net
41
39
5
120
115
4
income
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period
40
(10 )
NM
87
27
222
Other comprehensive income (loss), before tax
714
(1,206 )
NM
2,333
2,973
(22)
Income tax benefit (expense) related to other comprehensive income
(265 )
461
NM
(852 )
(1,110 )
(23)
Other comprehensive income (loss), net of tax
449
(745 )
NM
1,481
1,863
(21)
Less: Other comprehensive income (loss) from noncontrolling interests
(34 )
19
NM
(29 )
(24 )
21
Wells Fargo other comprehensive income (loss), net of tax
483
(764 )
NM
1,510
1,887
(20)
Wells Fargo comprehensive income
5,079
4,880
4
17,373
18,551
(6)
Comprehensive income from noncontrolling interests
24
29
(17)
158
53
198
Total comprehensive income
$ 5,103
4,909
4
$ 17,531
18,604
(6)
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)
2017
2017
2017
2016
2016
Balance, beginning of period
$ 206,145
202,489
200,497
203,958
202,661
Wells Fargo net income
4,596
5,810
5,457
5,274
5,644
Wells Fargo other comprehensive income (loss), net of tax
483
1,068
(41 )
(5,321 )
(764 )
Noncontrolling interests
(20 )
(75 )
75
(13 )
14
Common stock issued
254
252
1,406
610
300
Common stock repurchased (1)
(2,601 )
(2,287 )
(2,175 )
(2,034 )
(1,839 )
Preferred stock released by ESOP
209
406
--
43
236
Common stock warrants repurchased/exercised
(19 )
(24 )
(44 )
--
(17 )
Preferred stock issued
--
677
--
--
--
Common stock dividends
(1,936 )
(1,899 )
(1,903 )
(1,909 )
(1,918 )
Preferred stock dividends
(411 )
(406 )
(401 )
(401 )
(401 )
Tax benefit from stock incentive compensation (2)
--
--
--
74
31
Stock incentive compensation expense
135
145
389
232
39
Net change in deferred compensation and related plans
(11 )
(11 )
(771 )
(16 )
(28 )
Balance, end of period
$ 206,824
206,145
202,489
200,497
203,958
(1) For the quarter ended December 31, 2016, includes $750 million
related to a private forward repurchase transaction that settled
in first quarter 2017 for 14.7 million shares of common stock.
(2) Effective January 1, 2017, we adopted Accounting Standards
Update 2016-09 (Improvements to Employee Share-Based Payment
Accounting). Accordingly, tax benefit from stock incentive
compensation is reported in income tax expense in the consolidated
statement of income.
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT
BASIS) (1)(2)
Quarter ended September 30,
2017
2016
(in millions)
Average
Yields/
Interest
Average
Yields/
Interest
balance
rates
income/
balance
rates
income/
expense
expense
Earning assets
Federal funds sold, securities purchased under resale agreements and
$
276,129
1.20 %
$
832
299,351
0.50 %
$
373
other short-term investments
Trading assets
103,589
2.96
767
88,838
2.72
605
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies
14,529
1.31
48
25,817
1.52
99
Securities of U.S. states and political subdivisions
52,500
4.16
546
55,170
4.28
590
Mortgage-backed securities:
Federal agencies
139,781
2.58
903
105,780
2.39
631
Residential and commercial
11,013
5.43
149
18,080
5.54
250
Total mortgage-backed securities
150,794
2.79
1,052
123,860
2.85
881
Other debt and equity securities
48,082
3.75
453
54,176
3.37
459
Total available-for-sale securities
265,905
3.15
2,099
259,023
3.13
2,029
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies
44,708
2.18
246
44,678
2.19
246
Securities of U.S. states and political subdivisions
6,266
5.44
85
2,507
5.24
33
Federal agency and other mortgage-backed securities
88,272
2.26
498
47,971
1.97
236
Other debt securities
1,488
3.05
12
3,909
1.98
19
Total held-to-maturity securities
140,734
2.38
841
99,065
2.15
534
Total investment securities
406,639
2.89
2,940
358,088
2.86
2,563
Mortgages held for sale (4)
22,923
3.82
219
24,060
3.44
207
Loans held for sale (4)
152
13.35
5
199
3.04
2
Loans:
Commercial:
Commercial and industrial - U.S.
270,091
3.81
2,590
271,226
3.48
2,369
Commercial and industrial - Non U.S.
57,738
2.90
421
51,261
2.40
309
Real estate mortgage
129,087
3.83
1,245
128,809
3.48
1,127
Real estate construction
24,981
4.18
263
23,212
3.50
205
Lease financing
19,155
4.59
220
18,896
4.70
223
Total commercial
501,052
3.76
4,739
493,404
3.42
4,233
Consumer:
Real estate 1-4 family first mortgage
278,371
4.03
2,809
278,509
3.97
2,764
Real estate 1-4 family junior lien mortgage
41,916
4.95
521
48,927
4.37
537
Credit card
35,657
12.41
1,114
34,578
11.60
1,008
Automobile
56,746
5.34
764
62,461
5.60
880
Other revolving credit and installment
38,601
6.31
615
39,605
5.92
590
Total consumer
451,291
5.14
5,823
464,080
4.97
5,779
Total loans (4)
952,343
4.41
10,562
957,484
4.17
10,012
Other
15,007
1.69
65
6,488
2.30
36
Total earning assets
$
1,776,782
3.45 %
$
15,390
1,734,508
3.17 %
$
13,798
Funding sources
Deposits:
Interest-bearing checking
$
48,278
0.57 %
$
69
44,056
0.15 %
$
17
Market rate and other savings
681,187
0.17
293
667,185
0.07
110
Savings certificates
21,806
0.31
16
25,185
0.30
19
Other time deposits
66,046
1.51
252
54,921
0.93
128
Deposits in foreign offices
124,746
0.76
240
107,072
0.30
82
Total interest-bearing deposits
942,063
0.37
870
898,419
0.16
356
Short-term borrowings
99,193
0.91
226
116,228
0.29
86
Long-term debt
243,137
2.26
1,377
252,400
1.59
1,006
Other liabilities
24,851
1.74
109
16,771
2.11
88
Total interest-bearing liabilities
1,309,244
0.79
2,582
1,283,818
0.48
1,536
Portion of noninterest-bearing funding sources
467,538
--
--
450,690
--
--
Total funding sources
$
1,776,782
0.58
2,582
1,734,508
0.35
1,536
Net interest margin and net interest income on a
2.87 %
$
12,808
2.82 %
$
12,262
taxable-equivalent basis (5)
Noninterest-earning assets
Cash and due from banks
$
18,456
18,682
Goodwill
26,600
26,979
Other
116,685
134,417
Total noninterest-earning assets
$
161,741
180,078
Noninterest-bearing funding sources
Deposits
$
364,293
363,108
Other liabilities
57,052
63,777
Total equity
207,934
203,883
Noninterest-bearing funding sources used to fund earning assets
(467,538 )
(450,690 )
Net noninterest-bearing funding sources
$
161,741
180,078
Total assets
$
1,938,523
1,914,586
(1) Our average prime rate was 4.25% and 3.50% for the quarters
ended September 30, 2017 and 2016, respectively. The average
three-month London Interbank Offered Rate (LIBOR) was 1.31% and
0.79% 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 $332 million and
$310 million for the quarters ended September 30, 2017 and 2016,
respectively, predominantly related to tax-exempt income on
certain loans and securities. The federal statutory tax rate was
35% for the periods presented.
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT
BASIS) (1)(2)
Nine months ended September 30,
2017
2016
(in millions)
Average
Yields/
Interest
Average
Yields/
Interest
balance
rates
income/
balance
rates
income/
expense
expense
Earning assets
Federal funds sold, securities purchased under resale agreements and
$
280,477
0.98 %
$
2,062
292,635
0.49 %
$
1,076
other short-term investments
Trading assets
98,516
2.90
2,144
83,580
2.86
1,792
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies
19,182
1.48
212
30,588
1.56
358
Securities of U.S. states and political subdivisions
52,748
4.07
1,612
52,637
4.25
1,678
Mortgage-backed securities:
Federal agencies
142,748
2.60
2,782
98,099
2.57
1,889
Residential and commercial
12,671
5.44
516
19,488
5.39
787
Total mortgage-backed securities
155,419
2.83
3,298
117,587
3.03
2,676
Other debt and equity securities
49,212
3.74
1,377
53,680
3.36
1,349
Total available-for-sale securities
276,561
3.13
6,499
254,492
3.18
6,061
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies
44,701
2.19
733
44,671
2.19
733
Securities of U.S. states and political subdivisions
6,270
5.35
251
2,274
5.34
91
Federal agency and other mortgage-backed securities
74,525
2.38
1,329
37,087
2.08
577
Other debt securities
2,531
2.48
47
4,193
1.94
61
Total held-to-maturity securities
128,027
2.46
2,360
88,225
2.21
1,462
Total investment securities
404,588
2.92
8,859
342,717
2.93
7,523
Mortgages held for sale (4)
20,869
3.82
598
20,702
3.53
549
Loans held for sale (4)
158
8.44
10
240
3.71
7
Loans:
Commercial:
Commercial and industrial - U.S.
272,621
3.70
7,547
266,622
3.44
6,874
Commercial and industrial - Non U.S.
56,512
2.83
1,196
50,658
2.29
867
Real estate mortgage
130,931
3.69
3,615
125,902
3.43
3,236
Real estate construction
24,949
4.00
747
22,978
3.53
608
Lease financing
19,094
4.78
685
17,629
4.86
643
Total commercial
504,107
3.66
13,790
483,789
3.38
12,228
Consumer:
Real estate 1-4 family first mortgage
276,330
4.04
8,380
276,369
4.01
8,311
Real estate 1-4 family junior lien mortgage
43,589
4.77
1,557
50,585
4.38
1,659
Credit card
35,322
12.19
3,219
33,774
11.58
2,927
Automobile
59,105
5.41
2,392
61,246
5.64
2,588
Other revolving credit and installment
39,128
6.15
1,801
39,434
5.94
1,755
Total consumer
453,474
5.11
17,349
461,408
4.99
17,240
Total loans (4)
957,581
4.34
31,139
945,197
4.16
29,468
Other
10,892
2.06
169
6,104
2.23
101
Total earning assets
$
1,773,081
3.39 %
$
44,981
1,691,175
3.20 %
$
40,516
Funding sources
Deposits:
Interest-bearing checking
$
49,134
0.43 %
$
156
40,858
0.13 %
$
41
Market rate and other savings
682,780
0.13
664
659,257
0.07
327
Savings certificates
22,618
0.30
50
26,432
0.37
73
Other time deposits
59,414
1.42
633
58,087
0.84
364
Deposits in foreign offices
123,553
0.64
587
100,783
0.25
190
Total interest-bearing deposits
937,499
0.30
2,090
885,417
0.15
995
Short-term borrowings
97,837
0.69
505
111,993
0.28
231
Long-term debt
250,755
2.04
3,838
235,209
1.57
2,769
Other liabilities
20,910
1.97
309
16,534
2.10
260
Total interest-bearing liabilities
1,307,001
0.69
6,742
1,249,153
0.45
4,255
Portion of noninterest-bearing funding sources
466,080
--
--
442,022
--
--
Total funding sources
$
1,773,081
0.51
6,742
1,691,175
0.34
4,255
Net interest margin and net interest income on a
2.88 %
$
38,239
2.86 %
$
36,261
taxable-equivalent basis (5)
Noninterest-earning assets
Cash and due from banks
$
18,443
18,499
Goodwill
26,645
26,696
Other
114,073
129,324
Total noninterest-earning assets
$
159,161
174,519
Noninterest-bearing funding sources
Deposits
$
364,774
353,870
Other liabilities
55,221
62,169
Total equity
205,246
200,502
Noninterest-bearing funding sources used to fund earning assets
(466,080 )
(442,022 )
Net noninterest-bearing funding sources
$
159,161
174,519
Total assets
$
1,932,242
1,865,694
(1) Our average prime rate was 4.03% and 3.50% for the first nine
months of 2017 and 2016, respectively. The average three-month
London Interbank Offered Rate (LIBOR) was 1.20% and 0.69% 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 $980 million and
$909 million for the first nine months of 2017 and 2016,
respectively, predominantly related to tax-exempt income on
certain loans and securities. The federal statutory tax rate was
35% for the periods presented.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID
(TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended
Sep 30, 2017
Jun 30, 2017
Mar 31, 2017
Dec 31, 2016
Sep 30, 2016
($ in billions)
Average
Yields/
Average
Yields/
Average
Yields/
Average
Yields/
Average
Yields/
balance
rates
balance
rates
balance
rates
balance
rates
balance
rates
Earning assets
Federal funds sold, securities purchased under resale agreements and
$
276.1
1.20 %
$
281.6
0.99 %
$
283.8
0.76 %
$
273.1
0.56 %
$
299.4
0.50 %
other short-term investments
Trading assets
103.6
2.96
98.1
2.95
93.8
2.80
102.8
2.96
88.8
2.72
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies
14.5
1.31
18.1
1.53
25.0
1.54
25.9
1.53
25.8
1.52
Securities of U.S. states and political subdivisions
52.5
4.16
53.5
4.03
52.2
4.03
53.9
4.06
55.2
4.28
Mortgage-backed securities:
Federal agencies
139.8
2.58
132.0
2.63
156.6
2.58
148.0
2.37
105.8
2.39
Residential and commercial
11.0
5.43
12.6
5.55
14.5
5.32
16.5
5.87
18.1
5.54
Total mortgage-backed securities
150.8
2.79
144.6
2.89
171.1
2.81
164.5
2.72
123.9
2.85
Other debt and equity securities
48.1
3.75
49.0
3.87
50.7
3.60
52.7
3.71
54.2
3.37
Total available-for-sale securities
265.9
3.15
265.2
3.21
299.0
3.05
297.0
3.03
259.1
3.13
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies
44.7
2.18
44.7
2.19
44.7
2.20
44.7
2.20
44.6
2.19
Securities of U.S. states and political subdivisions
6.3
5.44
6.3
5.29
6.3
5.30
4.7
5.31
2.5
5.24
Federal agency and other mortgage-backed securities
88.3
2.26
83.1
2.44
51.8
2.51
46.0
1.81
48.0
1.97
Other debt securities
1.4
3.05
2.8
2.34
3.3
2.34
3.6
2.26
3.9
1.98
Total held-to-maturity securities
140.7
2.38
136.9
2.49
106.1
2.54
99.0
2.17
99.0
2.15
Total investment securities
406.6
2.89
402.1
2.96
405.1
2.92
396.0
2.82
358.1
2.86
Mortgages held for sale
22.9
3.82
19.8
3.94
19.9
3.70
27.5
3.43
24.1
3.44
Loans held for sale
0.2
13.35
0.2
6.95
0.1
4.44
0.2
5.42
0.2
3.04
Loans:
Commercial:
Commercial and industrial - U.S.
270.1
3.81
273.1
3.70
274.8
3.59
272.8
3.46
271.2
3.48
Commercial and industrial - Non U.S.
57.7
2.90
56.4
2.86
55.3
2.73
54.4
2.58
51.3
2.40
Real estate mortgage
129.1
3.83
131.3
3.68
132.4
3.56
131.2
3.44
128.8
3.48
Real estate construction
25.0
4.18
25.3
4.10
24.6
3.72
23.9
3.61
23.2
3.50
Lease financing
19.2
4.59
19.0
4.82
19.1
4.94
18.9
5.78
18.9
4.70
Total commercial
501.1
3.76
505.1
3.67
506.2
3.54
501.2
3.45
493.4
3.42
Consumer:
Real estate 1-4 family first mortgage
278.4
4.03
275.1
4.08
275.5
4.02
277.7
4.01
278.5
3.97
Real estate 1-4 family junior lien mortgage
41.9
4.95
43.6
4.78
45.3
4.60
47.2
4.42
48.9
4.37
Credit card
35.6
12.41
34.9
12.18
35.4
11.97
35.4
11.73
34.6
11.60
Automobile
56.7
5.34
59.1
5.43
61.5
5.46
62.5
5.54
62.5
5.60
Other revolving credit and installment
38.6
6.31
39.1
6.13
39.7
6.02
40.1
5.91
39.6
5.92
Total consumer
451.2
5.14
451.8
5.13
457.4
5.06
462.9
5.01
464.1
4.97
Total loans
952.3
4.41
956.9
4.36
963.6
4.26
964.1
4.20
957.5
4.17
Other
15.1
1.69
10.6
2.00
6.8
2.96
6.7
3.27
6.4
2.30
Total earning assets
$
1,776.8
3.45 %
$
1,769.3
3.41 %
$
1,773.1
3.31 %
$
1,770.4
3.24 %
$
1,734.5
3.17 %
Funding sources
Deposits:
Interest-bearing checking
$
48.3
0.57 %
$
48.5
0.41 %
$
50.7
0.29 %
$
46.9
0.17 %
$
44.0
0.15 %
Market rate and other savings
681.2
0.17
683.0
0.13
684.2
0.09
676.4
0.07
667.2
0.07
Savings certificates
21.8
0.31
22.6
0.30
23.5
0.29
24.4
0.30
25.2
0.30
Other time deposits
66.1
1.51
57.1
1.43
54.9
1.31
49.2
1.16
54.9
0.93
Deposits in foreign offices
124.7
0.76
123.7
0.65
122.2
0.49
110.4
0.35
107.1
0.30
Total interest-bearing deposits
942.1
0.37
934.9
0.29
935.5
0.23
907.3
0.18
898.4
0.16
Short-term borrowings
99.2
0.91
95.8
0.69
98.5
0.47
124.7
0.33
116.2
0.29
Long-term debt
243.1
2.26
249.5
2.05
259.8
1.83
252.2
1.68
252.4
1.59
Other liabilities
24.8
1.74
21.0
2.05
16.8
2.22
17.1
2.15
16.8
2.11
Total interest-bearing liabilities
1,309.2
0.79
1,301.2
0.69
1,310.6
0.59
1,301.3
0.51
1,283.8
0.48
Portion of noninterest-bearing funding sources
467.6
--
468.1
--
462.5
--
469.1
--
450.7
--
Total funding sources
$
1,776.8
0.58
$
1,769.3
0.51
$
1,773.1
0.44
$
1,770.4
0.37
$
1,734.5
0.35
Net interest margin on a taxable-equivalent basis
2.87 %
2.90 %
2.87 %
2.87 %
2.82 %
Noninterest-earning assets
Cash and due from banks
$
18.5
18.2
18.7
19.0
18.7
Goodwill
26.6
26.7
26.7
26.7
27.0
Other
116.6
112.9
112.5
128.2
134.4
Total noninterest-earnings assets
$
161.7
157.8
157.9
173.9
180.1
Noninterest-bearing funding sources
Deposits
$
364.3
366.3
363.7
376.9
363.1
Other liabilities
57.0
53.6
54.9
64.9
63.8
Total equity
207.9
206.0
201.8
201.2
203.9
Noninterest-bearing funding sources used to fund earning assets
(467.5 )
(468.1 )
(462.5 )
(469.1 )
(450.7 )
Net noninterest-bearing funding sources
$
161.7
157.8
157.9
173.9
180.1
Total assets
$
1,938.5
1,927.1
1,931.0
1,944.3
1,914.6
(1) Our average prime rate was 4.25% for the quarter ended
September 30, 2017, 4.05% for the quarter ended June 30, 2017,
3.80% for the quarter ended March 31, 2017, 3.54% for the quarter
ended December 31, 2016 and 3.50% for the quarter ended September
30, 2016. The average three-month London Interbank Offered Rate
(LIBOR) was 1.31%, 1.21%, 1.07%, 0.92% and 0.79% 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 Sep 30,
%
Nine months ended Sep 30,
%
(in millions)
2017
2016
Change
2017
2016
Change
Service charges on deposit accounts
$ 1,276
1,370
(7 )%
$
3,865
4,015
(4 )%
Trust and investment fees:
Brokerage advisory, commissions and other fees
2,304
2,344
(2 )
6,957
6,874
1
Trust and investment management
840
849
(1 )
2,506
2,499
--
Investment banking
465
420
11
1,345
1,172
15
Total trust and investment fees
3,609
3,613
--
10,808
10,545
2
Card fees
1,000
997
--
2,964
2,935
1
Other fees:
Charges and fees on loans
318
306
4
950
936
1
Cash network fees
126
138
(9 )
386
407
(5 )
Commercial real estate brokerage commissions
120
119
1
303
322
(6 )
Letters of credit fees
77
81
(5 )
227
242
(6 )
Wire transfer and other remittance fees
114
103
11
333
296
13
All other fees
122
179
(32 )
445
562
(21 )
Total other fees
877
926
(5 )
2,644
2,765
(4 )
Mortgage banking:
Servicing income, net
309
359
(14 )
1,165
1,569
(26 )
Net gains on mortgage loan origination/sales activities
737
1,308
(44 )
2,257
3,110
(27 )
Total mortgage banking
1,046
1,667
(37 )
3,422
4,679
(27 )
Insurance
269
293
(8 )
826
1,006
(18 )
Net gains from trading activities
245
415
(41 )
921
943
(2 )
Net gains on debt securities
166
106
57
322
797
(60 )
Net gains from equity investments
238
140
70
829
573
45
Lease income
475
534
(11 )
1,449
1,404
3
Life insurance investment income
152
152
--
441
455
(3 )
All other
97
163
(40 )
347
1,216
(71 )
Total
$ 9,450
10,376
(9 )
$ 28,838
31,333
(8 )
NONINTEREST EXPENSE
Quarter ended Sep 30,
%
Nine months ended Sep 30,
%
(in millions)
2017
2016
Change
2017
2016
Change
Salaries
$
4,356
4,224
3 %
$ 12,960
12,359
5 %
Commission and incentive compensation
2,553
2,520
1
7,777
7,769
--
Employee benefits
1,279
1,223
5
4,273
3,993
7
Equipment
523
491
7
1,629
1,512
8
Net occupancy
716
718
--
2,134
2,145
(1 )
Core deposit and other intangibles
288
299
(4 )
864
891
(3 )
FDIC and other deposit assessments
314
310
1
975
815
20
Outside professional services
955
802
19
2,788
2,154
29
Operating losses
1,329
577
130
1,961
1,365
44
Operating leases
347
363
(4 )
1,026
950
8
Contract services
351
313
12
1,025
878
17
Outside data processing
227
233
(3 )
683
666
3
Travel and entertainment
154
144
7
504
509
(1 )
Postage, stationery and supplies
128
150
(15 )
407
466
(13 )
Advertising and promotion
137
117
17
414
417
(1 )
Telecommunications
90
101
(11 )
272
287
(5 )
Foreclosed assets
66
(17 )
NM
204
127
61
Insurance
24
23
4
72
156
(54 )
All other
514
677
(24 )
1,716
1,703
1
Total
$ 14,351
13,268
8
$
41,684
39,162
6
NM - Not meaningful
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
Quarter ended
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Service charges on deposit accounts
$
1,276
1,276
1,313
1,357
1,370
Trust and investment fees:
Brokerage advisory, commissions and other fees
2,304
2,329
2,324
2,342
2,344
Trust and investment management
840
837
829
837
849
Investment banking
465
463
417
519
420
Total trust and investment fees
3,609
3,629
3,570
3,698
3,613
Card fees
1,000
1,019
945
1,001
997
Other fees:
Charges and fees on loans
318
325
307
305
306
Cash network fees
126
134
126
130
138
Commercial real estate brokerage commissions
120
102
81
172
119
Letters of credit fees
77
76
74
79
81
Wire transfer and other remittance fees
114
112
107
105
103
All other fees
122
153
170
171
179
Total other fees
877
902
865
962
926
Mortgage banking:
Servicing income, net
309
400
456
196
359
Net gains on mortgage loan origination/sales activities
737
748
772
1,221
1,308
Total mortgage banking
1,046
1,148
1,228
1,417
1,667
Insurance
269
280
277
262
293
Net gains (losses) from trading activities
245
237
439
(109 )
415
Net gains on debt securities
166
120
36
145
106
Net gains from equity investments
238
188
403
306
140
Lease income
475
493
481
523
534
Life insurance investment income
152
145
144
132
152
All other
97
249
1
(514 )
163
Total
$
9,450
9,686
9,702
9,180
10,376
FIVE QUARTER NONINTEREST EXPENSE
Quarter ended
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Salaries
$
4,356
4,343
4,261
4,193
4,224
Commission and incentive compensation
2,553
2,499
2,725
2,478
2,520
Employee benefits
1,279
1,308
1,686
1,101
1,223
Equipment
523
529
577
642
491
Net occupancy
716
706
712
710
718
Core deposit and other intangibles
288
287
289
301
299
FDIC and other deposit assessments
314
328
333
353
310
Outside professional services
955
1,029
804
984
802
Operating losses
1,329
350
282
243
577
Operating leases
347
334
345
379
363
Contract services
351
349
325
325
313
Outside data processing
227
236
220
222
233
Travel and entertainment
154
171
179
195
144
Postage, stationery and supplies
128
134
145
156
150
Advertising and promotion
137
150
127
178
117
Telecommunications
90
91
91
96
101
Foreclosed assets
66
52
86
75
(17 )
Insurance
24
24
24
23
23
All other
514
621
581
561
677
Total
$ 14,351
13,541
13,792
13,215
13,268
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions, except shares)
Sep 30,
Dec 31,
%
2017
2016
Change
Assets
Cash and due from banks
$
19,206
20,729
(7 )%
Federal funds sold, securities purchased under resale agreements and
273,105
266,038
3
other short-term investments
Trading assets
88,404
74,397
19
Investment securities:
Available-for-sale, at fair value
272,210
308,364
(12 )
Held-to-maturity, at cost
142,423
99,583
43
Mortgages held for sale
20,009
26,309
(24 )
Loans held for sale
157
80
96
Loans
951,873
967,604
(2 )
Allowance for loan losses
(11,078 )
(11,419 )
(3 )
Net loans
940,795
956,185
(2 )
Mortgage servicing rights:
Measured at fair value
13,338
12,959
3
Amortized
1,406
1,406
--
Premises and equipment, net
8,449
8,333
1
Goodwill
26,581
26,693
--
Derivative assets
12,580
14,498
(13 )
Other assets
116,276
114,541
2
Total assets
$ 1,934,939
1,930,115
--
Liabilities
Noninterest-bearing deposits
$
366,528
375,967
(3 )
Interest-bearing deposits
940,178
930,112
1
Total deposits
1,306,706
1,306,079
--
Short-term borrowings
93,811
96,781
(3 )
Derivative liabilities
9,497
14,492
(34 )
Accrued expenses and other liabilities
79,208
57,189
39
Long-term debt
238,893
255,077
(6 )
Total liabilities
1,728,115
1,729,618
--
Equity
Wells Fargo stockholders’ equity:
Preferred stock
25,576
24,551
4
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
60,759
60,234
1
Retained earnings
141,761
133,075
7
Cumulative other comprehensive income (loss)
(1,627 )
(3,137 )
(48 )
Treasury stock - 553,940,326 shares and 465,702,148 shares
(27,772 )
(22,713 )
22
Unearned ESOP shares
(1,904 )
(1,565 )
22
Total Wells Fargo stockholders’ equity
205,929
199,581
3
Noncontrolling interests
895
916
(2 )
Total equity
206,824
200,497
3
Total liabilities and equity
$ 1,934,939
1,930,115
--
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Assets
Cash and due from banks
$
19,206
20,248
19,698
20,729
19,287
Federal funds sold, securities purchased under resale agreements and
273,105
264,706
308,747
266,038
298,325
other short-term investments
Trading assets
88,404
83,607
80,326
74,397
81,094
Investment securities:
Available-for-sale, at fair value
272,210
269,202
299,530
308,364
291,591
Held-to-maturity, at cost
142,423
140,392
108,030
99,583
99,241
Mortgages held for sale
20,009
24,807
17,822
26,309
27,423
Loans held for sale
157
156
253
80
183
Loans
951,873
957,423
958,405
967,604
961,326
Allowance for loan losses
(11,078 )
(11,073 )
(11,168 )
(11,419 )
(11,583 )
Net loans
940,795
946,350
947,237
956,185
949,743
Mortgage servicing rights:
Measured at fair value
13,338
12,789
13,208
12,959
10,415
Amortized
1,406
1,399
1,402
1,406
1,373
Premises and equipment, net
8,449
8,403
8,320
8,333
8,322
Goodwill
26,581
26,573
26,666
26,693
26,688
Derivative assets
12,580
13,273
12,564
14,498
18,736
Other assets
116,276
118,966
107,761
114,541
109,703
Total assets
$ 1,934,939
1,930,871
1,951,564
1,930,115
1,942,124
Liabilities
Noninterest-bearing deposits
$
366,528
372,766
365,780
375,967
376,136
Interest-bearing deposits
940,178
933,064
959,664
930,112
899,758
Total deposits
1,306,706
1,305,830
1,325,444
1,306,079
1,275,894
Short-term borrowings
93,811
95,356
94,871
96,781
124,668
Derivative liabilities
9,497
11,636
12,461
14,492
13,603
Accrued expenses and other liabilities
79,208
73,035
59,831
57,189
69,166
Long-term debt
238,893
238,869
256,468
255,077
254,835
Total liabilities
1,728,115
1,724,726
1,749,075
1,729,618
1,738,166
Equity
Wells Fargo stockholders’ equity:
Preferred stock
25,576
25,785
25,501
24,551
24,594
Common stock
9,136
9,136
9,136
9,136
9,136
Additional paid-in capital
60,759
60,689
60,585
60,234
60,685
Retained earnings
141,761
139,524
136,032
133,075
130,288
Cumulative other comprehensive income (loss)
(1,627 )
(2,110 )
(3,178 )
(3,137 )
2,184
Treasury stock
(27,772 )
(25,675 )
(24,030 )
(22,713 )
(22,247 )
Unearned ESOP shares
(1,904 )
(2,119 )
(2,546 )
(1,565 )
(1,612 )
Total Wells Fargo stockholders’ equity
205,929
205,230
201,500
199,581
203,028
Noncontrolling interests
895
915
989
916
930
Total equity
206,824
206,145
202,489
200,497
203,958
Total liabilities and equity
$ 1,934,939
1,930,871
1,951,564
1,930,115
1,942,124
Wells Fargo & Company and Subsidiaries
FIVE QUARTER INVESTMENT SECURITIES
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies
$
6,350
17,896
24,625
25,819
26,376
Securities of U.S. states and political subdivisions
52,774
52,013
52,061
51,101
55,366
Mortgage-backed securities:
Federal agencies
150,181
135,938
156,966
161,230
135,692
Residential and commercial
11,046
12,772
14,233
16,318
18,387
Total mortgage-backed securities
161,227
148,710
171,199
177,548
154,079
Other debt securities
50,966
49,555
50,520
52,685
54,537
Total available-for-sale debt securities
271,317
268,174
298,405
307,153
290,358
Marketable equity securities
893
1,028
1,125
1,211
1,233
Total available-for-sale securities
272,210
269,202
299,530
308,364
291,591
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies
44,712
44,704
44,697
44,690
44,682
Securities of U.S. states and political subdivisions
6,321
6,325
6,331
6,336
2,994
Federal agency and other mortgage-backed securities (1)
90,071
87,525
53,778
45,161
47,721
Other debt securities
1,319
1,838
3,224
3,396
3,844
Total held-to-maturity debt securities
142,423
140,392
108,030
99,583
99,241
Total investment securities
$
414,633
409,594
407,560
407,947
390,832
(1)
Predominantly consists of federal agency mortgage-backed
securities.
FIVE QUARTER LOANS
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Commercial:
Commercial and industrial
$ 327,944
331,113
329,252
330,840
324,020
Real estate mortgage
128,475
130,277
131,532
132,491
130,223
Real estate construction
24,520
25,337
25,064
23,916
23,340
Lease financing
19,211
19,174
19,156
19,289
18,871
Total commercial
500,150
505,901
505,004
506,536
496,454
Consumer:
Real estate 1-4 family first mortgage
280,173
276,566
274,633
275,579
278,689
Real estate 1-4 family junior lien mortgage
41,152
42,747
44,333
46,237
48,105
Credit card
36,249
35,305
34,742
36,700
34,992
Automobile
55,455
57,958
60,408
62,286
62,873
Other revolving credit and installment
38,694
38,946
39,285
40,266
40,213
Total consumer
451,723
451,522
453,401
461,068
464,872
Total loans (1)
$ 951,873
957,423
958,405
967,604
961,326
(1)
Includes $13.6 billion, $14.3 billion, $15.7 billion, $16.7
billion, and $17.7 billion of purchased credit-impaired (PCI)
loans at September 30, June 30, and March 31, 2017 and December
31, and September 30, 2016, respectively.
Our foreign loans are reported by respective class of financing
receivable in the table above. Substantially all of our foreign
loan portfolio is commercial loans. Loans are classified as
foreign primarily based on whether the borrower’s primary address
is outside of the United States. The following table presents
total commercial foreign loans outstanding by class of financing
receivable.
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Commercial foreign loans:
Commercial and industrial
$
58,570
57,825
56,987
55,396
51,515
Real estate mortgage
8,032
8,359
8,206
8,541
8,466
Real estate construction
647
585
471
375
310
Lease financing
1,141
1,092
986
972
958
Total commercial foreign loans
$
68,390
67,861
66,650
65,284
61,249
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND
FORECLOSED ASSETS)
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Nonaccrual loans:
Commercial:
Commercial and industrial
$ 2,397
2,632
2,898
3,216
3,331
Real estate mortgage
593
630
672
685
780
Real estate construction
38
34
40
43
59
Lease financing
81
89
96
115
92
Total commercial
3,109
3,385
3,706
4,059
4,262
Consumer:
Real estate 1-4 family first mortgage
4,213
4,413
4,743
4,962
5,310
Real estate 1-4 family junior lien mortgage
1,101
1,095
1,153
1,206
1,259
Automobile
137
104
101
106
108
Other revolving credit and installment
59
59
56
51
47
Total consumer
5,510
5,671
6,053
6,325
6,724
Total nonaccrual loans (1)(2)(3)
$ 8,619
9,056
9,759
10,384
10,986
As a percentage of total loans
0.91 %
0.95
1.02
1.07
1.14
Foreclosed assets:
Government insured/guaranteed
$
137
149
179
197
282
Non-government insured/guaranteed
569
632
726
781
738
Total foreclosed assets
706
781
905
978
1,020
Total nonperforming assets
$ 9,325
9,837
10,664
11,362
12,006
As a percentage of total loans
0.98 %
1.03
1.11
1.17
1.25
(1) Includes nonaccrual mortgages held for sale and loans held for
sale in their respective loan categories.
(2) Excludes PCI loans because they continue to earn interest income
from accretable yield, independent of performance in accordance with
their contractual terms.
(3) Real estate 1-4 family mortgage loans predominantly insured by
the Federal Housing Administration (FHA) or guaranteed by the
Department of Veterans Affairs (VA) and student loans largely
guaranteed by agencies on behalf of the U.S. Department of
Education under the Federal Family Education Loan Program are not
placed on nonaccrual status because they are insured or
guaranteed. All remaining student loans guaranteed under the FFELP
were sold as of March 31, 2017
Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Total (excluding PCI)(1):
$
10,227
9,716
10,525
11,858
12,068
Less: FHA insured/guaranteed by the VA (2)(3)
9,266
8,873
9,585
10,883
11,198
Less: Student loans guaranteed under the FFELP (4)
--
--
--
3
17
Total, not government insured/guaranteed
$
961
843
940
972
853
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial
$
27
42
88
28
47
Real estate mortgage
11
2
11
36
4
Real estate construction
--
10
3
--
--
Total commercial
38
54
102
64
51
Consumer:
Real estate 1-4 family first mortgage (3)
190
145
149
175
171
Real estate 1-4 family junior lien mortgage (3)
49
44
42
56
54
Credit card
475
411
453
452
392
Automobile
111
91
79
112
81
Other revolving credit and installment
98
98
115
113
104
Total consumer
923
789
838
908
802
Total, not government insured/guaranteed
$
961
843
940
972
853
(1) PCI loans totaled $1.4 billion, $1.5 billion, $1.8 billion, $2.0
billion and $2.2 billion, at September 30, June 30 and March 31,
2017 and December 31 and September 30, 2016, respectively.
(2) Represents loans whose repayments are predominantly insured by
the FHA or guaranteed by the VA.
(3) Includes mortgages held for sale 90 days or more past due and
still accruing.
(4) Represents loans whose repayments are largely guaranteed by
agencies on behalf of the U.S. Department of Education under the
FFELP. All remaining student loans guaranteed under the FFELP were
sold as of March 31, 2017.
Wells Fargo & Company and 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
2009-2016
ended
ended
Sep 30,
Sep 30,
2017
2017
Balance, beginning of period
$
9,369
11,216
10,447
Change in accretable yield due to acquisitions
--
2
159
Accretion into interest income (1)
(340 )
(1,071 )
(15,577 )
Accretion into noninterest income due to sales (2)
--
(334 )
(467 )
Reclassification from nonaccretable difference for loans with
234
640
10,955
improving credit-related cash flows (3)
Changes in expected cash flows that do not affect nonaccretable
(20 )
(1,210 )
5,699
difference (4)
Balance, end of period
$
9,243
9,243
11,216
(1) Includes accretable yield released as a result of settlements
with borrowers, which is included in interest income.
(2) Includes accretable yield released as a result of sales to third
parties, which is included in noninterest income.
(3) At September 30, 2017, our carrying value for PCI loans
totaled $13.6 billion and the remainder of nonaccretable
difference established in purchase accounting totaled $454
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, 2017
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
$
11,753
61 %
$
9,033
47 %
$
6,703
44 %
Florida
1,481
69
1,076
49
1,439
54
New Jersey
586
76
429
55
953
62
New York
446
69
363
52
477
59
Texas
135
48
102
36
570
37
Other states
2,928
68
2,208
51
3,942
56
Total Pick-a-Pay loans
$
17,329
64
$
13,211
48
$
14,084
50
(1) The individual states shown in this table represent the top five
states based on the total net carrying value of the Pick-a-Pay loans
at the beginning of 2017.
(2) Adjusted unpaid principal balance includes write-downs taken
on loans where severe delinquency (normally 180 days) or other
indications of severe borrower financial stress exist that
indicate there will be a loss of contractually due amounts upon
final resolution of the loan.
(3) The current LTV ratio is calculated as the adjusted unpaid
principal balance divided by the collateral value. Collateral
values are generally determined using automated valuation models
(AVM) and are updated quarterly. AVMs are computer-based tools
used to estimate market values of homes based on processing large
volumes of market data including market comparables and price
trends for local market areas.
(4) Carrying value, which does not reflect the allowance for loan
losses, includes remaining purchase accounting adjustments, which,
for PCI loans may include the nonaccretable difference and the
accretable yield and, for all other loans, an adjustment to mark
the loans to a market yield at date of merger less any subsequent
charge-offs.
(5) The ratio of carrying value to current value is calculated as
the carrying value divided by the collateral value.
Wells Fargo & Company and Subsidiaries
CHANGES IN ALLOWANCE FOR CREDIT LOSSES
Quarter ended September 30,
Nine months ended September 30,
(in millions)
2017
2016
2017
2016
Balance, beginning of period
$
12,146
12,749
12,540
12,512
Provision for credit losses
717
805
1,877
2,965
Interest income on certain impaired loans (1)
(43 )
(54 )
(137 )
(153 )
Loan charge-offs:
Commercial:
Commercial and industrial
(194 )
(324 )
(608 )
(1,110 )
Real estate mortgage
(21 )
(7 )
(34 )
(13 )
Real estate construction
--
--
--
(1 )
Lease financing
(11 )
(4 )
(31 )
(25 )
Total commercial
(226 )
(335 )
(673 )
(1,149 )
Consumer:
Real estate 1-4 family first mortgage
(67 )
(106 )
(191 )
(366 )
Real estate 1-4 family junior lien mortgage
(70 )
(119 )
(225 )
(385 )
Credit card
(337 )
(296 )
(1,083 )
(930 )
Automobile
(274 )
(215 )
(741 )
(602 )
Other revolving credit and installment
(170 )
(170 )
(544 )
(508 )
Total consumer
(918 )
(906 )
(2,784 )
(2,791 )
Total loan charge-offs
(1,144 )
(1,241 )
(3,457 )
(3,940 )
Loan recoveries:
Commercial:
Commercial and industrial
69
65
234
210
Real estate mortgage
24
35
68
90
Real estate construction
15
18
27
30
Lease financing
5
2
13
10
Total commercial
113
120
342
340
Consumer:
Real estate 1-4 family first mortgage
83
86
216
284
Real estate 1-4 family junior lien mortgage
69
70
205
200
Credit card
60
51
177
153
Automobile
72
78
246
248
Other revolving credit and installment
30
31
94
100
Total consumer
314
316
938
985
Total loan recoveries
427
436
1,280
1,325
Net loan charge-offs
(717 )
(805 )
(2,177 )
(2,615 )
Other
6
(1 )
6
(15 )
Balance, end of period
$
12,109
12,694
12,109
12,694
Components:
Allowance for loan losses
$
11,078
11,583
11,078
11,583
Allowance for unfunded credit commitments
1,031
1,111
1,031
1,111
Allowance for credit losses
$
12,109
12,694
12,109
12,694
Net loan charge-offs (annualized) as a percentage of average total
0.30 %
0.33
0.30
0.37
loans
Allowance for loan losses as a percentage of total loans
1.16
1.20
1.16
1.20
Allowance for credit losses as a percentage of total loans
1.27
1.32
1.27
1.32
(1)
Certain impaired loans with an allowance calculated by
discounting expected cash flows using the loan’s effective
interest rate over the remaining life of the loan recognize
changes in allowance attributable to the passage of time as
interest income.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
Quarter ended
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Balance, beginning of quarter
$
12,146
12,287
12,540
12,694
12,749
Provision for credit losses
717
555
605
805
805
Interest income on certain impaired loans (1)
(43 )
(46 )
(48 )
(52 )
(54 )
Loan charge-offs:
Commercial:
Commercial and industrial
(194 )
(161 )
(253 )
(309 )
(324 )
Real estate mortgage
(21 )
(8 )
(5 )
(14 )
(7 )
Real estate construction
--
--
--
--
--
Lease financing
(11 )
(13 )
(7 )
(16 )
(4 )
Total commercial
(226 )
(182 )
(265 )
(339 )
(335 )
Consumer:
Real estate 1-4 family first mortgage
(67 )
(55 )
(69 )
(86 )
(106 )
Real estate 1-4 family junior lien mortgage
(70 )
(62 )
(93 )
(110 )
(119 )
Credit card
(337 )
(379 )
(367 )
(329 )
(296 )
Automobile
(274 )
(212 )
(255 )
(243 )
(215 )
Other revolving credit and installment
(170 )
(185 )
(189 )
(200 )
(170 )
Total consumer
(918 )
(893 )
(973 )
(968 )
(906 )
Total loan charge-offs
(1,144 )
(1,075 )
(1,238 )
(1,307 )
(1,241 )
Loan recoveries:
Commercial:
Commercial and industrial
69
83
82
53
65
Real estate mortgage
24
14
30
26
35
Real estate construction
15
4
8
8
18
Lease financing
5
6
2
1
2
Total commercial
113
107
122
88
120
Consumer:
Real estate 1-4 family first mortgage
83
71
62
89
86
Real estate 1-4 family junior lien mortgage
69
66
70
66
70
Credit card
60
59
58
54
51
Automobile
72
86
88
77
78
Other revolving credit and installment
30
31
33
28
31
Total consumer
314
313
311
314
316
Total loan recoveries
427
420
433
402
436
Net loan charge-offs
(717 )
(655 )
(805 )
(905 )
(805 )
Other
6
5
(5 )
(2 )
(1 )
Balance, end of quarter
$
12,109
12,146
12,287
12,540
12,694
Components:
Allowance for loan losses
$
11,078
11,073
11,168
11,419
11,583
Allowance for unfunded credit commitments
1,031
1,073
1,119
1,121
1,111
Allowance for credit losses
$
12,109
12,146
12,287
12,540
12,694
Net loan charge-offs (annualized) as a percentage of average total
0.30 %
0.27
0.34
0.37
0.33
loans
Allowance for loan losses as a percentage of:
Total loans
1.16
1.16
1.17
1.18
1.20
Nonaccrual loans
129
122
114
110
105
Nonaccrual loans and other nonperforming assets
119
113
105
101
96
Allowance for credit losses as a percentage of:
Total loans
1.27
1.27
1.28
1.30
1.32
Nonaccrual loans
141
134
126
121
116
Nonaccrual loans and other nonperforming assets
130
123
115
110
106
(1)
Certain impaired loans with an allowance calculated by
discounting expected cash flows using the loan’s effective
interest rate over the remaining life of the loan recognize
changes in allowance attributable to the passage of time as
interest income.
Wells Fargo & Company and Subsidiaries
TANGIBLE COMMON EQUITY (1)
(in millions, except ratios)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Tangible book value per common share (1):
Total equity
$ 206,824
206,145
202,489
200,497
203,958
Adjustments:
Preferred stock
(25,576 )
(25,785 )
(25,501 )
(24,551 )
(24,594 )
Additional paid-in capital on ESOP
(130 )
(136 )
(157 )
(126 )
(130 )
preferred stock
Unearned ESOP shares
1,904
2,119
2,546
1,565
1,612
Noncontrolling interests
(895 )
(915 )
(989 )
(916 )
(930 )
Total common stockholders’ equity
(A)
182,127
181,428
178,388
176,469
179,916
Adjustments:
Goodwill
(26,581 )
(26,573 )
(26,666 )
(26,693 )
(26,688 )
Certain identifiable intangible assets
(1,913 )
(2,147 )
(2,449 )
(2,723 )
(3,001 )
(other than MSRs)
Other assets (2)
(2,282 )
(2,268 )
(2,121 )
(2,088 )
(2,230 )
Applicable deferred taxes (3)
1,550
1,624
1,698
1,772
1,832
Tangible common equity
(B)
$ 152,901
152,064
148,850
146,737
149,829
Common shares outstanding
(C)
4,927.9
4,966.8
4,996.7
5,016.1
5,023.9
Book value per common share
(A)/(C)
$
36.96
36.53
35.70
35.18
35.81
Tangible book value per common share
(B)/(C)
31.03
30.62
29.79
29.25
29.82
Quarter ended
Nine months ended
(in millions, except ratios)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Sep 30,
Sep 30,
2017
2017
2017
2016
2016
2017
2016
Return on average tangible common equity (1):
Net income applicable to common stock
(A)
$
4,185
5,404
5,056
4,872
5,243
14,645
15,501
Average total equity
207,934
205,968
201,767
201,247
203,883
205,246
200,502
Adjustments:
Preferred stock
(25,780 )
(25,849 )
(25,163 )
(24,579 )
(24,813 )
(25,600 )
(24,291 )
Additional paid-in capital on ESOP preferred stock
(136 )
(144 )
(146 )
(128 )
(148 )
(142 )
(172 )
Unearned ESOP shares
2,114
2,366
2,198
1,596
1,850
2,226
2,150
Noncontrolling interests
(926 )
(910 )
(957 )
(928 )
(927 )
(931 )
(938 )
Average common stockholders’ equity
(B)
183,206
181,431
177,699
177,208
179,845
180,799
177,251
Adjustments:
Goodwill
(26,600 )
(26,664 )
(26,673 )
(26,713 )
(26,979 )
(26,645 )
(26,696 )
Certain identifiable intangible assets (other than MSRs)
(2,056 )
(2,303 )
(2,588 )
(2,871 )
(3,145 )
(2,314 )
(3,383 )
Other assets (2)
(2,231 )
(2,160 )
(2,095 )
(2,175 )
(2,131 )
(2,163 )
(2,097 )
Applicable deferred taxes (3)
1,579
1,648
1,722
1,785
1,855
1,650
1,973
Average tangible common equity
(C)
$ 153,898
151,952
148,065
147,234
149,445
151,327
147,048
Return on average common stockholders’ equity (ROE) (annualized)
(A)/(B)
9.06 %
11.95
11.54
10.94
11.60
10.83
11.68
Return on average tangible common equity (ROTCE) (annualized)
(A)/(C)
10.79
14.26
13.85
13.16
13.96
12.94
14.08
(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
(in billions, except ratio)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Total equity
$
206.8
206.1
202.5
200.5
204.0
Adjustments:
Preferred stock
(25.6 )
(25.8 )
(25.5 )
(24.6 )
(24.6 )
Additional paid-in capital on ESOP
(0.1 )
(0.1 )
(0.2 )
(0.1 )
(0.1 )
preferred stock
Unearned ESOP shares
1.9
2.1
2.5
1.6
1.6
Noncontrolling interests
(0.9 )
(0.9 )
(1.0 )
(0.9 )
(1.0 )
Total common stockholders’ equity
182.1
181.4
178.3
176.5
179.9
Adjustments:
Goodwill
(26.6 )
(26.6 )
(26.7 )
(26.7 )
(26.7 )
Certain identifiable intangible assets (other than MSRs)
(1.9 )
(2.1 )
(2.4 )
(2.7 )
(3.0 )
Other assets (2)
(2.3 )
(2.2 )
(2.1 )
(2.1 )
(2.2 )
Applicable deferred taxes (3)
1.6
1.6
1.7
1.8
1.8
Investment in certain subsidiaries and other
(0.1 )
(0.2 )
(0.1 )
(0.4 )
(2.0 )
Common Equity Tier 1 (Fully Phased-In) under Basel III
(A)
152.8
151.9
148.7
146.4
147.8
Total risk-weighted assets (RWAs) anticipated under Basel III (4)(5)
(B)
$ 1,297.1
1,310.5
1,324.5
1,358.9
1,380.0
Common Equity Tier 1 to total RWAs anticipated under Basel III
(A)/(B)
11.8 %
11.6
11.2
10.8
10.7
(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, 2017, is subject to
detailed analysis of considerable data, our CET1 ratio at that date
has been estimated using the Basel III definition of capital under
the Basel III Standardized Approach RWAs. The capital ratio for June
30 and March 31, 2017, and December 31 and September 30, 2016, was
calculated under the Basel III Standardized Approach RWAs.
(5) The Company’s September 30, 2017, RWAs and capital ratio are
preliminary estimates.
Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
Community
Wholesale
Wealth and
Other (2)
Consolidated
Banking
Banking
Investment
Company
Management
(income/expense in millions, average balances in billions)
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Quarter ended Sep 30,
Net interest income (3)
$
7,645
7,430
4,353
4,062
1,159
977
(681 )
(517 )
12,476
11,952
Provision (reversal of provision) for credit losses
650
651
69
157
(1 )
4
(1 )
(7 )
717
805
Noninterest income
4,415
4,957
2,732
3,085
3,087
3,122
(784 )
(788 )
9,450
10,376
Noninterest expense
7,834
6,953
4,248
4,120
3,106
2,999
(837 )
(804 )
14,351
13,268
Income (loss) before income tax expense (benefit)
3,576
4,783
2,768
2,870
1,141
1,096
(627 )
(494 )
6,858
8,255
Income tax expense (benefit)
1,286
1,546
729
827
427
415
(238 )
(187 )
2,204
2,601
Net income (loss) before noncontrolling interests
2,290
3,237
2,039
2,043
714
681
(389 )
(307 )
4,654
5,654
Less: Net income (loss) from noncontrolling interests
61
10
(7 )
(4 )
4
4
--
--
58
10
Net income (loss)
$
2,229
3,227
2,046
2,047
710
677
(389 )
(307 )
4,596
5,644
Average loans
$
473.5
489.2
463.8
454.3
72.4
68.4
(57.4 )
(54.4 )
952.3
957.5
Average assets
988.9
993.6
824.3
794.2
213.4
212.1
(88.1 )
(85.3 )
1,938.5
1,914.6
Average deposits
734.5
708.0
463.4
441.2
188.1
189.2
(79.6 )
(76.9 )
1,306.4
1,261.5
Nine months ended Sep 30,
Net interest income (3)
$ 22,820
22,277
12,779
11,729
3,360
2,852
(1,700 )
(1,506 )
37,259
35,352
Provision (reversal of provision) for credit losses
1,919
2,060
(39 )
905
2
(8 )
(5 )
8
1,877
2,965
Noninterest income
13,622
14,928
8,295
9,660
9,261
9,020
(2,340 )
(2,275 )
28,838
31,333
Noninterest expense
22,278
20,437
12,551
12,124
9,387
9,017
(2,532 )
(2,416 )
41,684
39,162
Income (loss) before income tax expense (benefit)
12,245
14,708
8,562
8,360
3,232
2,863
(1,503 )
(1,373 )
22,536
24,558
Income tax expense (benefit)
3,817
4,910
2,034
2,341
1,206
1,087
(571 )
(521 )
6,486
7,817
Net income (loss) before noncontrolling interests
8,428
9,798
6,528
6,019
2,026
1,776
(932 )
(852 )
16,050
16,741
Less: Net income (loss) from noncontrolling interests
197
96
(21 )
(22 )
11
3
--
--
187
77
Net income (loss)
$
8,231
9,702
6,549
6,041
2,015
1,773
(932 )
(852 )
15,863
16,664
Average loans
$
477.8
486.4
465.0
445.2
71.6
66.4
(56.8 )
(52.8 )
957.6
945.2
Average assets
987.7
969.6
816.5
771.9
216.1
208.5
(88.1 )
(84.3 )
1,932.2
1,865.7
Average deposits
726.4
698.3
464.1
431.7
190.6
185.4
(78.8 )
(76.1 )
1,302.3
1,239.3
(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, most of which represents products
and services for Wealth and Investment Management customers served
through Community Banking distribution channels.
(3) Net interest income is the difference between interest earned on
assets and the cost of liabilities to fund those assets. Interest
earned includes actual interest earned on segment assets 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
(income/expense in millions, average balances in billions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
COMMUNITY BANKING
Net interest income (2)
$
7,645
7,548
7,627
7,556
7,430
Provision for credit losses
650
623
646
631
651
Noninterest income
4,415
4,741
4,466
4,105
4,957
Noninterest expense
7,834
7,223
7,221
6,985
6,953
Income before income tax expense
3,576
4,443
4,226
4,045
4,783
Income tax expense
1,286
1,404
1,127
1,272
1,546
Net income before noncontrolling interests
2,290
3,039
3,099
2,773
3,237
Less: Net income from noncontrolling interests
61
46
90
40
10
Segment net income
$
2,229
2,993
3,009
2,733
3,227
Average loans
$
473.5
477.2
482.7
488.1
489.2
Average assets
988.9
983.5
990.7
1,000.7
993.6
Average deposits
734.5
727.2
717.2
709.8
708.0
WHOLESALE BANKING
Net interest income (2)
$
4,353
4,278
4,148
4,323
4,062
Provision (reversal of provision) for credit losses
69
(65 )
(43 )
168
157
Noninterest income
2,732
2,673
2,890
2,830
3,085
Noninterest expense
4,248
4,078
4,225
4,002
4,120
Income before income tax expense
2,768
2,938
2,856
2,983
2,870
Income tax expense
729
559
746
795
827
Net income before noncontrolling interests
2,039
2,379
2,110
2,188
2,043
Less: Net loss from noncontrolling interests
(7 )
(9 )
(5 )
(6 )
(4 )
Segment net income
$
2,046
2,388
2,115
2,194
2,047
Average loans
$
463.8
464.9
466.3
461.5
454.3
Average assets
824.3
817.3
807.8
811.9
794.2
Average deposits
463.4
463.0
466.0
459.2
441.2
WEALTH AND INVESTMENT MANAGEMENT
Net interest income (2)
$
1,159
1,127
1,074
1,061
977
Provision (reversal of provision) for credit losses
(1 )
7
(4 )
3
4
Noninterest income
3,087
3,055
3,119
3,013
3,122
Noninterest expense
3,106
3,075
3,206
3,042
2,999
Income before income tax expense
1,141
1,100
991
1,029
1,096
Income tax expense
427
417
362
380
415
Net income before noncontrolling interests
714
683
629
649
681
Less: Net income (loss) from noncontrolling interests
4
1
6
(4 )
4
Segment net income
$
710
682
623
653
677
Average loans
$
72.4
71.7
70.7
70.0
68.4
Average assets
213.4
213.1
221.9
220.4
212.1
Average deposits
188.1
188.2
195.6
194.9
189.2
OTHER (3)
Net interest income (2)
$
(681 )
(470 )
(549 )
(538 )
(517 )
Provision (reversal of provision) for credit losses
(1 )
(10 )
6
3
(7 )
Noninterest income
(784 )
(783 )
(773 )
(768 )
(788 )
Noninterest expense
(837 )
(835 )
(860 )
(814 )
(804 )
Loss before income tax benefit
(627 )
(408 )
(468 )
(495 )
(494 )
Income tax benefit
(238 )
(155 )
(178 )
(189 )
(187 )
Net loss before noncontrolling interests
(389 )
(253 )
(290 )
(306 )
(307 )
Less: Net income from noncontrolling interests
--
--
--
--
--
Other net loss
$
(389 )
(253 )
(290 )
(306 )
(307 )
Average loans
$
(57.4 )
(56.9 )
(56.1 )
(55.5 )
(54.4 )
Average assets
(88.1 )
(86.8 )
(89.4 )
(88.7 )
(85.3 )
Average deposits
(79.6 )
(77.2 )
(79.6 )
(79.7 )
(76.9 )
CONSOLIDATED COMPANY
Net interest income (2)
$
12,476
12,483
12,300
12,402
11,952
Provision for credit losses
717
555
605
805
805
Noninterest income
9,450
9,686
9,702
9,180
10,376
Noninterest expense
14,351
13,541
13,792
13,215
13,268
Income before income tax expense
6,858
8,073
7,605
7,562
8,255
Income tax expense
2,204
2,225
2,057
2,258
2,601
Net income before noncontrolling interests
4,654
5,848
5,548
5,304
5,654
Less: Net income from noncontrolling interests
58
38
91
30
10
Wells Fargo net income
$
4,596
5,810
5,457
5,274
5,644
Average loans
$
952.3
956.9
963.6
964.1
957.5
Average assets
1,938.5
1,927.1
1,931.0
1,944.3
1,914.6
Average deposits
1,306.4
1,301.2
1,299.2
1,284.2
1,261.5
(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, most of which represents products
and services for Wealth and Investment Management customers served
through Community Banking distribution channels.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
Quarter ended
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
MSRs measured using the fair value method:
Fair value, beginning of quarter
$ 12,789
13,208
12,959
10,415
10,396
Purchases
541
--
--
--
--
Servicing from securitizations or asset transfers (1)
605
436
583
752
609
Sales and other (2)
64
(8 )
(47 )
(47 )
4
Net additions
1,210
428
536
705
613
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (3)
(171 )
(305 )
152
2,367
39
Servicing and foreclosure costs (4)
60
(14 )
27
93
(10 )
Prepayment estimates and other (5)
(31 )
(41 )
(5 )
(106 )
(37 )
Net changes in valuation model inputs or assumptions
(142 )
(360 )
174
2,354
(8 )
Changes due to collection/realization of expected cash flows over
(519 )
(487 )
(461 )
(515 )
(586 )
time
Total changes in fair value
(661 )
(847 )
(287 )
1,839
(594 )
Fair value, end of quarter
$ 13,338
12,789
13,208
12,959
10,415
(1) Includes impacts associated with exercising our right to
repurchase delinquent loans from GNMA loan securitization pools.
(2) Includes sales and transfers of MSRs, which can result in an
increase of total reported MSRs if the sales or transfers are
related to nonperforming loan portfolios or portfolios with
servicing liabilities.
(3) Includes prepayment speed changes as well as other valuation
changes due to changes in mortgage interest rates (such as changes
in estimated interest earned on custodial deposit balances)
(4) Includes costs to service and unreimbursed foreclosure costs.
(5) Represents changes driven by other valuation model inputs or
assumptions including prepayment speed estimation changes and other
assumption updates. Prepayment speed estimation changes are
influenced by observed changes in borrower behavior and other
external factors that occur independent of interest rate changes.
Quarter ended
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Amortized MSRs:
Balance, beginning of quarter
$
1,399
1,402
1,406
1,373
1,353
Purchases
31
26
18
34
18
Servicing from securitizations or asset transfers
41
37
45
66
69
Amortization
(65 )
(66 )
(67 )
(67 )
(67 )
Balance, end of quarter
$
1,406
1,399
1,402
1,406
1,373
Fair value of amortized MSRs:
Beginning of quarter
$
1,989
2,051
1,956
1,627
1,620
End of quarter
1,990
1,989
2,051
1,956
1,627
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
Quarter ended
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Servicing income, net:
Servicing fees (1)
$
795
882
882
738
878
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2)
(A)
(142 )
(360 )
174
2,354
(8 )
Changes due to collection/realization of expected cash flows over
(519 )
(487 )
(461 )
(515 )
(586 )
time
Total changes in fair value of MSRs carried at fair value
(661 )
(847 )
(287 )
1,839
(594 )
Amortization
(65 )
(66 )
(67 )
(67 )
(67 )
Net derivative gains (losses) from economic hedges (3)
(B)
240
431
(72 )
(2,314 )
142
Total servicing income, net
$
309
400
456
196
359
Market-related valuation changes to MSRs, net of hedge results (2)(3)
(A)+(B)
$
98
71
102
40
134
(1) Includes contractually specified servicing fees, late charges
and other ancillary revenues, net of unreimbursed direct servicing
costs.
(2) Refer to the changes in fair value MSRs table on the previous
page for more detail.
(3) Represents results from economic hedges used to hedge the risk
of changes in fair value of MSRs.
(in billions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Managed servicing portfolio (1):
Residential mortgage servicing:
Serviced for others
$ 1,223
1,189
1,204
1,205
1,226
Owned loans serviced
340
343
335
347
352
Subserviced for others
3
4
4
8
4
Total residential servicing
1,566
1,536
1,543
1,560
1,582
Commercial mortgage servicing:
Serviced for others
480
475
474
479
477
Owned loans serviced
128
130
132
132
130
Subserviced for others
8
8
7
8
8
Total commercial servicing
616
613
613
619
615
Total managed servicing portfolio
$ 2,182
2,149
2,156
2,179
2,197
Total serviced for others
$ 1,703
1,664
1,678
1,684
1,703
Ratio of MSRs to related loans serviced for others
0.87
%
0.85
0.87
0.85
0.69
Weighted-average note rate (mortgage loans serviced for others)
4.23
4.23
4.23
4.26
4.28
(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,
2017
2017
2017
2016
2016
Net gains on mortgage loan origination/sales activities (in
millions):
Residential
(A)
$ 546
521
569
939
953
Commercial
81
81
101
90
167
Residential pipeline and unsold/repurchased loan management (1)
110
146
102
192
188
Total
$ 737
748
772
1,221
1,308
Application data (in billions):
Wells Fargo first mortgage quarterly applications
$
73
83
59
75
100
Refinances as a percentage of applications
37 %
32
36
48
55
Wells Fargo first mortgage unclosed pipeline, at quarter end
$
29
34
28
30
50
Residential real estate originations:
Purchases as a percentage of originations
72 %
75
61
50
58
Refinances as a percentage of originations
28
25
39
50
42
Total
100 %
100
100
100
100
Wells Fargo first mortgage loans (in billions):
Retail
$
26
25
21
35
37
Correspondent
32
31
22
36
32
Other (2)
1
--
1
1
1
Total quarter-to-date
$
59
56
44
72
70
Held-for-sale
(B)
$
44
42
34
56
53
Held-for-investment
15
14
10
16
17
Total quarter-to-date
$
59
56
44
72
70
Total year-to-date
$ 159
100
44
249
177
Production margin on residential held-for-sale mortgage
(A)/(B)
1.24 %
1.24
1.68
1.68
1.81
originations
(1) Largely includes the results of GNMA loss mitigation activities,
interest rate management activities and changes in estimate to the
liability for mortgage loan repurchase losses.
(2) Consists of home equity loans and lines.
CHANGES IN MORTGAGE REPURCHASE LIABILITY
Quarter ended
(in millions)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2017
2017
2017
2016
2016
Balance, beginning of period
$
178
222
229
239
255
Assumed with MSR purchases (1)
10
--
--
--
--
Provision for repurchase losses:
Loan sales
6
6
8
10
11
Change in estimate (2)
(12 )
(45 )
(8 )
(7 )
(24 )
Net additions (reductions) to provision
(6 )
(39 )
--
3
(13 )
Losses
(3 )
(5 )
(7 )
(13 )
(3 )
Balance, end of period
$
179
178
222
229
239
(1) Represents repurchase liability associated with portfolio of
loans underlying mortgage servicing rights acquired during the
period.
(2) Results from changes in investor demand and mortgage insurer
practices, credit deterioration and changes in the financial
stability of correspondent lenders.

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SOURCE: Wells Fargo & Company

Media
Ancel Martinez, 415-222-3858
or
Investors
John M. Campbell, 415-396-0523