WFC
$55.22
Wells Fargo &
$.72
1.32%
Earnings Details
2nd Quarter June 2018
Friday, July 13, 2018 8:00:00 AM
Tweet Share Watch
Summary

Wells Fargo & Misses

Wells Fargo & (WFC) reported 2nd Quarter June 2018 earnings of $1.08 per share on revenue of $25.0 billion. The consensus earnings estimate was $1.12 per share on revenue of $21.5 billion. The Earnings Whisper number was $1.16 per share. Revenue grew 2.6% 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
$1.08
Earnings Whisper
$1.16
Consensus Estimate
$1.12
Reported Revenue
$25.03 Bil
Revenue Estimate
$21.54 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Wells Fargo Reports $5.2 Billion in Quarterly Net Income

Diluted EPS of $0.98 included net discrete income tax expense of $0.10 per share

SAN FRANCISCO--(BUSINESS WIRE)-- Wells Fargo & Company (NYSE:WFC):

  • Financial results:
    • Net income of $5.2 billion, compared with $5.9 billion in second quarter 2017
      • Second quarter 2018 included net discrete income tax expense of $481 million mostly related to state income taxes driven by the recent U.S. Supreme Court decision in South Dakota v. Wayfair
    • Diluted earnings per share (EPS) of $0.98, compared with $1.08
    • Revenue of $21.6 billion, down from $22.2 billion
      • Net interest income of $12.5 billion, up $70 million, or 1 percent
      • Noninterest income of $9.0 billion, down $752 million, or 8 percent
    • Noninterest expense of $14.0 billion, up from $13.5 billion
      • Second quarter 2018 included $619 million of operating losses primarily related to non-litigation expense for previously disclosed matters
    • Average deposits of $1.3 trillion, down $29.9 billion, or 2 percent
    • Average loans of $944.1 billion, down $12.8 billion, or 1 percent
    • Return on assets (ROA) of 1.10 percent, return on equity (ROE) of 10.60 percent, and return on average tangible common equity (ROTCE) of 12.62 percent1
    • Returned $4.0 billion to shareholders through common stock dividends and net share repurchases, up 17 percent from $3.4 billion in second quarter 2017
  • Credit quality:
    • Provision expense of $452 million, down $103 million, or 19 percent, from second quarter 2017
      • Net charge-offs declined $53 million to $602 million, or 0.26 percent of average loans (annualized)
      • Reserve release2 of $150 million, compared with $100 million in second quarter 2017
    • Nonaccrual loans of $7.5 billion, down $1.6 billion, or 17 percent
  • Received a non-objection to the Company's 2018 Capital Plan submission from the Federal Reserve
    • As part of this plan, the Company expects to increase its third quarter 2018 common stock dividend to $0.43 per share from $0.39 per share, subject to approval by the Company's Board of Directors. The plan also includes up to $24.5 billion of gross common stock repurchases for the four-quarter period from third quarter 2018 through second quarter 2019.1 Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the “Tangible Common Equity” tables on page 36.2 Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses.

Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.

 

Selected Financial Information

          Quarter ended
Jun 30,     Mar 31,     Jun 30,
      2018     2018     2017
Earnings
Diluted earnings per common share $ 0.98 0.96 1.08
Wells Fargo net income (in billions) 5.19 5.14 5.86
Return on assets (ROA) 1.10 % 1.09 1.22
Return on equity (ROE) 10.60 10.58 12.06
Return on average tangible common equity (ROTCE) (a) 12.62 12.62 14.41
Asset Quality
Net charge-offs (annualized) as a % of average total loans 0.26 % 0.32 0.27
Allowance for credit losses as a % of total loans 1.18 1.19 1.27
Allowance for credit losses as a % of annualized net charge-offs 460 376 462
Other
Revenue (in billions) $ 21.6 21.9 22.2
Efficiency ratio (b) 64.9 % 68.6 60.9
Average loans (in billions) $ 944.1 951.0 956.9
Average deposits (in billions) 1,271.3 1,297.2 1,301.2
Net interest margin     2.93 %     2.84     2.90

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

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

 

Wells Fargo & Company (NYSE:WFC) reported net income of $5.2 billion, or $0.98 per diluted common share, for second quarter 2018, compared with $5.9 billion, or $1.08 per share, for second quarter 2017, and $5.1 billion, or $0.96 per share, for first quarter 2018.

Chief Executive Officer Tim Sloan said, “During the second quarter we continued to transform Wells Fargo into a better, stronger company for our customers, team members, communities and shareholders. Our progress included making further improvements to our compliance and operational risk management programs; hiring a new Chief Risk Officer; announcing innovative new products including a digital application for Merchant Services customers and our enhanced Propel® Card, one of the richest no-annual-fee credit cards in the industry; launching our ‘Re-established’ marketing effort, the largest advertising campaign in our history; announcing a new $200 billion commitment to financing sustainable businesses and projects; and continuing to move forward on our expense savings initiatives. I’m also pleased with our recent CCAR results, which demonstrates the strength of our diversified business model, our sound financial risk management practices, and our strong capital position, and enables us to return more capital to our shareholders in alignment with our goal of creating long-term shareholder value.”

Chief Financial Officer John Shrewsberry said, “Wells Fargo reported $5.2 billion of net income in the second quarter, which included net discrete income tax expense of $481 million. Net interest income grew both linked quarter and year-over-year in the second quarter, credit performance and capital levels remained strong, and we are on track to meet our expense reduction expectations. In addition, we received a non-objection to our 2018 Capital Plan, which includes an increase in our quarterly common stock dividend rate in third quarter 2018 to $0.43 per share, subject to board approval, as well as up to $24.5 billion of gross common stock repurchases during the four-quarter period beginning in third quarter 2018. The shareholder returns included in the capital plan are approximately 70% higher than our previous four quarter capital actions, demonstrating our commitment to returning more capital to shareholders. Our ability to return this level of capital is a result of capital built in recent years through continued stable earnings and a lower level of risk-weighted assets.”

Net Interest Income

Net interest income in the second quarter was $12.5 billion, up $303 million compared with first quarter 2018, driven predominantly by a less negative impact from hedge ineffectiveness accounting, the net benefit of rate and spread movements, and one additional day in the quarter.

Net interest margin was 2.93 percent, up 9 basis points compared with first quarter 2018. The increase was driven by a reduction in the proportion of lower yielding assets, as well as a less negative impact from hedge ineffectiveness accounting and the net benefit of rate and spread movements.

Noninterest Income

Noninterest income in the second quarter was $9.0 billion, down $684 million compared with first quarter 2018. Second quarter noninterest income included lower market sensitive revenue3, mortgage banking fees and other income, partially offset by higher card fees on stronger credit card and debit card activity.

  • Mortgage banking income was $770 million, down from $934 million in first quarter 2018. Residential mortgage loan originations increased in the second quarter to $50 billion, from $43 billion in the first quarter. The production margin on residential held-for-sale mortgage loan originations4 declined to 0.77 percent, compared with 0.94 percent in the first quarter, due to increased price competition. Net mortgage servicing income was $406 million in the second quarter, down from $468 million in the first quarter driven by higher loan prepayments.
  • Market sensitive revenue was $527 million, down from $1.0 billion in first quarter 2018, primarily due to lower unrealized gains from equity securities. Additionally, second quarter 2018 included $214 million of other-than-temporary impairment (OTTI) from the announced sale of Wells Fargo Asset Management's (WFAM) ownership stake in The Rock Creek Group, LP (RockCreek).
  • Other income was $323 million, compared with $438 million in the first quarter. Second quarter results included a $479 million gain from sales of $1.3 billion of purchased credit-impaired (PCI) Pick-a-Pay loans, compared with a $643 million gain from sales of $1.6 billion of PCI Pick-a-Pay loans in first quarter 2018.

Noninterest Expense

Noninterest expense in the second quarter declined $1.1 billion from the prior quarter to $14.0 billion, primarily due to lower operating losses, a decline in employee benefits and incentive compensation expense, which were seasonally elevated in the first quarter, and lower equipment expense. These decreases were partially offset by higher charitable donations expense, contract services, advertising and promotion, and outside professional services expense. The efficiency ratio was 64.9 percent in second quarter 2018, compared with 68.6 percent in the first quarter.

Second quarter 2018 operating losses were $619 million, which included typical operating losses, as well as non-litigation expense for previously disclosed matters, including policies, practices and procedures in our foreign exchange business; fee calculations within certain fiduciary and custody accounts in our wealth management business; practices in our automobile lending business, including related insurance products; and mortgage interest rate lock extensions. First quarter 2018 operating losses were $1.5 billion due to elevated litigation accruals.

Income Taxes

The Company’s effective income tax rate was 25.9 percent for second quarter 2018 and included net discrete income tax expense of $481 million mostly related to state income taxes. Discrete income tax expenses in the second quarter were driven by the Company’s adjustment to its state income tax reserves following the recent U.S. Supreme Court decision in South Dakota v. Wayfair and by the true-up of certain state income tax accruals. The effective income tax rate in first quarter 2018 was 21.1 percent and included net discrete income tax expense of $137 million, predominantly resulting from the non-deductible treatment of a discrete litigation accrual. The Company currently expects the effective income tax rate for the remainder of 2018 to be approximately 19 percent, excluding the impact of any future discrete items.

Loans

Total average loans were $944.1 billion in the second quarter, down $6.9 billion from the first quarter. Period-end loan balances were $944.3 billion at June 30, 2018, down $3.0 billion from March 31, 2018. Commercial loans were down $291 million compared with March 31, 2018, with a $2.5 billion decline in commercial real estate loans, partially offset by $1.9 billion of growth in commercial and industrial loans and a $321 million increase in lease financing loans. Consumer loans decreased $2.8 billion from the prior quarter, driven by:

  • a $1.9 billion decline in automobile loans due to expected continued runoff
  • a $1.4 billion decline in the junior lien mortgage portfolio as payoffs continued to exceed new originations
  • a $376 million decline in other revolving credit and installment loans
  • these decreases were partially offset by:
    • a $581 million increase in credit card balances
    • a $343 million increase in 1-4 family first mortgage loans, as nonconforming mortgage loan originations were partially offset by payoffs and $1.3 billion of sales of PCI Pick-a-Pay mortgage loans

Additionally, $507 million of nonconforming mortgage loan originations that would have otherwise been included in 1-4 family first mortgage loan outstandings were designated as held for sale in anticipation of the future issuance of residential mortgage-backed securities (RMBS), and $112 million of loans were transferred to held for sale as a result of previously announced branch divestitures.

 

Period-End Loan Balances

    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Commercial     $ 503,105       503,396       503,388       500,150       505,901  
Consumer     441,160       443,912       453,382       451,723       451,522  
Total loans     $ 944,265       947,308       956,770       951,873       957,423  
Change from prior quarter     $ (3,043 )     (9,462 )     4,897       (5,550 )     (982 )
 

Debt and Equity Securities

Debt securities include available-for-sale and held-to-maturity debt securities, as well as debt securities held for trading. Debt securities were $475.5 billion at June 30, 2018, up $2.5 billion from the first quarter, driven by:

  • a $5.7 billion increase in debt securities held for trading
  • a net decrease in available-for-sale and held-to-maturity debt securities, as approximately $14.4 billion of purchases, primarily federal agency mortgage-backed securities (MBS) in the available-for-sale portfolio, were more than offset by runoff and sales

Net unrealized losses on available-for-sale debt securities were $2.4 billion at June 30, 2018, compared with net unrealized losses of $1.9 billion at March 31, 2018, primarily due to higher interest rates.

Equity securities include marketable and non-marketable equity securities, as well as equity securities held for trading. Equity securities were $57.5 billion at June 30, 2018, down $1.4 billion from the first quarter, predominantly due to a decline in equity securities held for trading.

Deposits

Total average deposits for second quarter 2018 were $1.3 trillion, down $25.8 billion from the prior quarter. The decline was driven by a decrease in commercial deposits, primarily from financial institutions, including a $13.5 billion decline from actions the Company has taken in response to the asset cap included in the consent order issued by the Board of Governors of the Federal Reserve System on February 2, 2018. Average consumer and small business banking deposits of $754.0 billion for second quarter 2018 were down $1.4 billion from the prior quarter, with growth in Community Banking deposits more than offset by lower Wealth and Investment Management deposits, as customers allocated more cash to alternative higher-rate liquid investments. The average deposit cost for second quarter 2018 was 40 basis points, up 6 basis points from the prior quarter and 19 basis points from a year ago, primarily driven by an increase in commercial and Wealth and Investment Management deposit rates.

Capital

Capital in the second quarter continued to exceed our internal target, with a Common Equity Tier 1 ratio (fully phased-in) of 12.0 percent5, flat compared with the prior quarter. In second quarter 2018, the Company repurchased 35.8 million shares of its common stock, which reduced period-end common shares outstanding by 24.8 million. The Company paid a quarterly common stock dividend of $0.39 per share. In addition, the Company received a non-objection to its 2018 Capital Plan from the Federal Reserve. As part of this plan, the Company expects to increase its third quarter 2018 common stock dividend to $0.43 per share, subject to approval by the Company's Board of Directors. The plan also includes up to $24.5 billion of gross common stock repurchases, subject to management discretion, for the four-quarter period from third quarter 2018 through second quarter 2019.

Credit Quality

Net Loan Charge-offs

The quarterly loss rate in the second quarter was 0.26 percent (annualized), compared with 0.32 percent in the prior quarter and 0.27 percent a year ago. Commercial and consumer losses were 0.05 percent and 0.49 percent, respectively. Total credit losses were $602 million in second quarter 2018, down $139 million from first quarter 2018. Commercial losses were down $11 million due to improvement in commercial and industrial loans. Consumer losses decreased $128 million driven by lower loss rates and higher recovery rates, including seasonal impacts in automobile and credit card.

 

Net Loan Charge-Offs

    Quarter ended
      June 30, 2018     March 31, 2018     June 30, 2017
Net loan     As a % of     Net loan     As a % of     Net loan     As a % of
charge- average charge- average charge- average
($ in millions)     offs     loans (a)     offs     loans (a)     offs     loans (a)
Commercial:
Commercial and industrial $ 58 0.07 % $ 85 0.10 % $ 78 0.10 %
Real estate mortgage (15 ) (0.05 ) (6 ) (0.02 )
Real estate construction (6 ) (0.09 ) (4 ) (0.07 ) (4 ) (0.05 )
Lease financing     15   0.32 12   0.25 7   0.15
Total commercial     67   0.05 78   0.06 75   0.06
Consumer:
Real estate 1-4 family first mortgage (23 ) (0.03 ) (18 ) (0.03 ) (16 ) (0.02 )
Real estate 1-4 family junior lien mortgage (13 ) (0.13 ) (8 ) (0.09 ) (4 ) (0.03 )
Credit card 323 3.61 332 3.69 320 3.67
Automobile 113 0.93 208 1.64 126 0.86
Other revolving credit and installment     135   1.44 149   1.60 154   1.58
Total consumer     535   0.49 663   0.60 580   0.51
Total     $ 602   0.26 % $ 741   0.32 % $ 655   0.27 %
 

(a) Quarterly net charge-offs (recoveries) as a percentage of average loans are annualized. See explanation on page 33 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

 

Nonperforming Assets

Nonperforming assets decreased $305 million, or 4 percent, from first quarter 2018 to $8.0 billion. Nonaccrual loans decreased $233 million from first quarter 2018 to $7.5 billion predominantly driven by lower consumer real estate nonaccruals.

 

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

      June 30, 2018     March 31, 2018     June 30, 2017
        As a         As a         As a
% of % of % of
Total total Total total Total total
($ in millions)     balances     loans     balances     loans     balances     loans
Commercial:
Commercial and industrial $ 1,559 0.46 % $ 1,516 0.45 % $ 2,632 0.79 %
Real estate mortgage 765 0.62 755 0.60 630 0.48
Real estate construction 51 0.22 45 0.19 34 0.13
Lease financing     80   0.41 93   0.48 89   0.46
Total commercial     2,455   0.49 2,409   0.48 3,385   0.67
Consumer:
Real estate 1-4 family first mortgage 3,829 1.35 4,053 1.43 4,413 1.60
Real estate 1-4 family junior lien mortgage 1,029 2.82 1,087 2.87 1,095 2.56
Automobile 119 0.25 117 0.24 104 0.18
Other revolving credit and installment     54   0.14 53   0.14 59   0.15
Total consumer     5,031   1.14 5,310   1.20 5,671   1.26
Total nonaccrual loans     7,486   0.79 7,719   0.81 9,056   0.95
Foreclosed assets:
Government insured/guaranteed 90 103 149
Non-government insured/guaranteed     409   468   632  
Total foreclosed assets     499   571   781  
Total nonperforming assets     $ 7,985   0.85 % $ 8,290   0.88 % $ 9,837   1.03 %
Change from prior quarter:
Total nonaccrual loans $ (233 ) $ (317 ) $ (625 )
Total nonperforming assets     (305 )           (388 )           (827 )      
 

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $11.1 billion at June 30, 2018, down $203 million from March 31, 2018. Second quarter 2018 included a $150 million reserve release2, which reflected strong overall credit portfolio performance and lower loan balances. The allowance coverage for total loans was 1.18 percent, compared with 1.19 percent in first quarter 2018. The allowance covered 4.6 times annualized second quarter net charge-offs, compared with 3.8 times in the prior quarter. The allowance coverage for nonaccrual loans was 148 percent at June 30, 2018, compared with 147 percent at March 31, 2018. The Company believes the allowance was appropriate for losses inherent in the loan portfolio at June 30, 2018.

Business Segment Performance

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

 
    Quarter ended
Jun 30,     Mar 31,     Jun 30,
(in millions)     2018     2018     2017
Community Banking $ 2,496 1,913 2,765
Wholesale Banking 2,635 2,875 2,742
Wealth and Investment Management     445     714     711
 

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

 

Selected Financial Information

    Quarter ended
Jun 30,     Mar 31,     Jun 30,
(in millions)     2018     2018     2017
Total revenue $ 11,806 11,830 11,955
Provision for credit losses 484 218 623
Noninterest expense 7,290 8,702 7,266
Segment net income 2,496 1,913 2,765
(in billions)
Average loans 463.8 470.5 475.1
Average assets 1,034.3 1,061.9 1,083.6
Average deposits     760.6     747.5     727.7
 

Community Banking reported net income of $2.5 billion, up $583 million, or 30 percent, from first quarter 2018. Second quarter 2018 results included net discrete income tax expense of $481 million primarily related to state income taxes. Revenue in the second quarter was $11.8 billion, flat compared with first quarter 2018, as lower market sensitive revenue and mortgage banking income were largely offset by higher net interest income and card fees. Noninterest expense decreased $1.4 billion, or 16 percent, from first quarter 2018, driven mainly by lower operating losses and lower personnel expense that was down from a seasonally elevated first quarter. The provision for credit losses increased $266 million from the prior quarter primarily due to a lower reserve release.

Net income was down $269 million, or 10 percent, from second quarter 2017, primarily due to lower revenue and net discrete income tax expense of $481 million in second quarter 2018. Revenue declined $149 million, or 1 percent, from a year ago due to lower mortgage banking income and service charges on deposit accounts, partially offset by higher net interest income and higher gains on the sales of PCI Pick-a-Pay mortgage loans. Noninterest expense of $7.3 billion was stable from a year ago. The provision for credit losses decreased $139 million from a year ago due to improvement in the consumer real estate and automobile portfolios.

Retail Banking and Consumer Payments, Virtual Solutions and Innovation

  • More than 362,000 branch customer experience surveys completed during second quarter 2018, with both ‘Loyalty’ and ‘Overall Satisfaction with Most Recent Visit’ scores down due to several factors, including recent events and a risk-based policy change affecting individuals making cash deposits into an account on which they are not a signer
  • 5,751 retail bank branches as of the end of second quarter 2018, reflecting 56 branch consolidations in the quarter and 114 in the first half of 2018; additionally, we announced plans to divest 52 branches in 2018 in Indiana, Ohio, Michigan and part of Wisconsin pending regulatory approval
  • Primary consumer checking customers6,7 up 1.2 percent year-over-year
  • Debit card point-of-sale purchase volume8 of $87.5 billion in the second quarter, up 9 percent year-over-year
  • General purpose credit card point-of-sale purchase volume of $19.2 billion in the second quarter, up 7 percent year-over-year
  • 28.9 million digital (online and mobile) active customers, including over 22 million mobile active users7,9
  • Dynatrace's Small Business Banking Scorecard named Wells Fargo #1 in overall performance for providing a positive small business banking experience through digital channels (July 2018)
  • For the second year in a row, Wells Fargo was number one in Nilson’s annual ranking of the top 50 U.S. debit card issuers, receiving the top ranking by both purchase volume and number of transactions (April 2018)

Consumer Lending

  • Home Lending
  • Originations of $50 billion, up from $43 billion in prior quarter, primarily due to seasonality
  • Applications of $67 billion, up from $58 billion in prior quarter, primarily due to seasonality
  • Application pipeline of $26 billion at quarter end, up from $24 billion at March 31, 2018
  • Production margin on residential held-for-sale mortgage loan originations4 of 0.77 percent, down from 0.94 percent in the prior quarter, due to increased price competition
  • Automobile originations of $4.4 billion in the second quarter were flat compared with the prior quarter; and down 3 percent from the prior year, as proactive steps to tighten underwriting standards resulted in lower origination volume

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

 

Selected Financial Information

    Quarter ended
Jun 30,     Mar 31,     Jun 30,
(in millions)     2018     2018     2017
Total revenue $ 7,197 7,279 7,479
Reversal of provision for credit losses (36 ) (20 ) (65 )
Noninterest expense 4,219 3,978 4,036
Segment net income 2,635 2,875 2,742
(in billions)
Average loans 464.7 465.1 466.9
Average assets 826.4 829.2 818.8
Average deposits     414.0       446.0       462.4  
 

Wholesale Banking reported net income of $2.6 billion, down $240 million, or 8 percent, from first quarter 2018. Revenue of $7.2 billion decreased $82 million, or 1 percent, from the prior quarter, primarily due to the gain on the sale of Wells Fargo Shareowner Services recognized in the first quarter and lower market sensitive revenue in the second quarter, partially offset by higher net interest income and investment banking fees. Noninterest expense increased $241 million, or 6 percent, from the prior quarter reflecting higher operating losses and higher regulatory, risk and technology expense, partially offset by seasonally lower personnel expense. Second quarter 2018 operating losses were $208 million and included $171 million of non-litigation expense related to our foreign exchange business. The provision for credit losses decreased $16 million from the prior quarter.

Net income decreased $107 million, or 4 percent, from second quarter 2017. Second quarter 2018 results benefited from a lower effective income tax rate, while second quarter 2017 included a discrete income tax benefit related to the sale of Wells Fargo Insurance Services USA (WFIS). Revenue decreased $282 million, or 4 percent, from second quarter 2017, primarily due to the impact of the sales of WFIS in fourth quarter 2017 and Wells Fargo Shareowner Services in first quarter 2018, as well as lower net interest income, operating lease income and mortgage banking fees, partially offset by higher market sensitive revenue. Noninterest expense increased $183 million, or 5 percent, from a year ago as higher operating losses and higher regulatory, risk and technology expense were partially offset by lower expense related to the sales of WFIS and Wells Fargo Shareowner Services. The provision for credit losses increased $29 million from a year ago.

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

 

Selected Financial Information

    Quarter ended
Jun 30,     Mar 31,     Jun 30,
(in millions)     2018     2018     2017
Total revenue $ 3,951 4,242 4,226
Provision (reversal of provision) for credit losses (2 ) (6 ) 7
Noninterest expense 3,361 3,290 3,071
Segment net income 445 714 711
(in billions)
Average loans 74.7 73.9 71.7
Average assets 84.0 84.2 82.4
Average deposits     167.1       177.9       190.1
 

Wealth and Investment Management reported net income of $445 million, down $269 million, or 38 percent, from first quarter 2018. Revenue of $4.0 billion decreased $291 million, or 7 percent, from the prior quarter, primarily due to the impairment from the announced sale of WFAM's ownership stake in RockCreek, as well as lower transaction revenue and asset-based fees. Noninterest expense increased $71 million, or 2 percent, from the prior quarter, primarily driven by higher operating losses and higher regulatory, risk and technology expense, partially offset by lower personnel expense from a seasonally higher first quarter and lower broker commissions. Second quarter 2018 operating losses were $127 million and included $114 million of non-litigation expense related to fee calculations within certain fiduciary and custody accounts in our wealth management business.

Net income was down $266 million, or 37 percent, from second quarter 2017. Second quarter 2018 results benefited from a lower effective income tax rate. Revenue decreased $275 million from a year ago, primarily driven by the impairment of WFAM's ownership stake in RockCreek, lower net interest income and transaction revenue, partially offset by higher asset-based fees. Noninterest expense increased $290 million, or 9 percent, from a year ago, primarily due to higher regulatory, risk and technology expense, higher operating losses, higher broker commissions and other personnel expense.

  • WIM total client assets of $1.9 trillion, up 3 percent from a year ago, driven by higher market valuations
  • Continued loan growth, with average balances up 4 percent from a year ago largely due to growth in non-conforming mortgage loans
  • Second quarter 2018 average closed referred investment assets (referrals resulting from the WIM/Community Banking partnership) were flat compared with the prior quarter and down 5 percent from a year ago

Retail Brokerage

  • Client assets of $1.6 trillion, up 3 percent from prior year
  • Advisory assets of $543 billion, up 8 percent from prior year, primarily driven by higher market valuations

Wealth Management

  • Client assets of $238 billion, up 1 percent from prior year

Asset Management

  • Total assets under management of $494 billion, up 2 percent from prior year, driven by higher market valuations and positive money market net inflows, partially offset by equity and fixed income net outflows

Retirement

  • IRA assets of $403 billion, up 3 percent from prior year
  • Institutional Retirement plan assets of $389 billion, up 4 percent from prior year

Conference Call

The Company will host a live conference call on Friday, July 13, at 7:00 a.m. PT (10:00 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 440-424-4922 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~9092328.

A replay of the conference call will be available beginning at 10:00 a.m. PT (1:00 p.m. ET) on Friday, July 13 through Friday, July 27. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #9092328. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~9092328.

End Notes

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

2 Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses.

3 Market sensitive revenue represents net gains from trading activities, debt securities, and equity securities.

4 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 42 for more information.

5 See table on page 37 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules.

6 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.

7 Data as of May 2018, comparisons with May 2017.

8 Combined consumer and business debit card purchase volume dollars.

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

Forward-Looking Statements

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

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

  • current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters (including the impact of the Tax Cuts & Jobs Act), geopolitical matters, and the overall slowdown in global economic growth;
  • our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
  • financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
  • the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;
  • the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;
  • negative effects relating to our mortgage servicing and foreclosure practices, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;
  • our ability to realize our efficiency ratio target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;
  • the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;
  • significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our debt securities and equity securities portfolios;
  • the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
  • negative effects from the retail banking sales practices matter and from other instances where customers may have experienced financial harm, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, and our reputation;
  • resolution of regulatory matters, litigation, or other legal actions, which may result in, among other things, additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other adverse consequences;
  • a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
  • the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
  • fiscal and monetary policies of the Federal Reserve Board; and
  • the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017.

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

For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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

Forward-looking Non-GAAP Financial Measures. From time to time management may discuss forward-looking non-GAAP financial measures, such as forward-looking estimates or targets for return on average tangible common equity. We are unable to provide a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because we are unable to provide, without unreasonable effort, a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur. Such unavailable information could be significant to future results.

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investments, mortgage, and consumer and commercial finance through 8,050 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 38 countries and territories to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2018 rankings of America’s largest corporations.

 
Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS
 
    Pages
 

Summary Information

Summary Financial Data

17
 

Income

Consolidated Statement of Income 19
Consolidated Statement of Comprehensive Income 21
Condensed Consolidated Statement of Changes in Total Equity 21
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 22
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 24
Noninterest Income and Noninterest Expense 25
 

Balance Sheet

Consolidated Balance Sheet 27
Trading Activities 29
Debt Securities 29
Equity Securities 30
 

Loans

Loans 31
Nonperforming Assets 32
Loans 90 Days or More Past Due and Still Accruing 32
Purchased Credit-Impaired Loans 33
Changes in Allowance for Credit Losses 35
 

Equity

Tangible Common Equity 36
Common Equity Tier 1 Under Basel III 37
 

Operating Segments

Operating Segment Results 38
 

Other

Mortgage Servicing and other related data 40
 
 

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA
       

% Change

       
Quarter ended

Jun 30, 2018 from

Six months ended
($ in millions, except per share Jun 30,     Mar 31,     Jun 30,

Mar 31,

    Jun 30, Jun 30,     Jun 30, %
amounts)     2018     2018     2017     2018     2017     2018     2017     Change
For the Period
Wells Fargo net income $ 5,186 5,136 5,856 1 % (11 ) $ 10,322 11,490 (10 )%
Wells Fargo net income applicable to common stock 4,792 4,733 5,450 1 (12 ) 9,525 10,683 (11 )
Diluted earnings per common share 0.98 0.96 1.08 2 (9 ) 1.94 2.11 (8 )
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.10 % 1.09 1.22 1 (10 ) 1.10 % 1.20 (8 )
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 10.60 10.58 12.06 (12 ) 10.59 12.01 (12 )
Return on average tangible common equity (ROTCE)(1) 12.62 12.62 14.41 (12 ) 12.62 14.38 (12 )
Efficiency ratio (2) 64.9 68.6 60.9 (5 ) 7 66.7 61.4 9
Total revenue $ 21,553 21,934 22,235 (2 ) (3 ) $ 43,487 44,490 (2 )
Pre-tax pre-provision profit (PTPP) (3) 7,571 6,892 8,694 10 (13 ) 14,463 17,157 (16 )
Dividends declared per common share 0.39 0.39 0.38 3 0.78 0.760 3
Average common shares outstanding 4,865.8 4,885.7 4,989.9 (2 ) 4,875.7 4,999.2 (2 )
Diluted average common shares outstanding 4,899.8 4,930.7 5,037.7 (1 ) (3 ) 4,916.1 5,054.8 (3 )
Average loans $ 944,079 951,024 956,879 (1 ) (1 ) $ 947,532 960,243 (1 )
Average assets 1,884,884 1,915,896 1,927,021 (2 ) (2 ) 1,900,304 1,929,020 (1 )
Average total deposits 1,271,339 1,297,178 1,301,195 (2 ) (2 ) 1,284,187 1,300,198 (1 )
Average consumer and small business banking deposits (4) 754,047 755,483 760,149 (1 ) 754,898 759,455 (1 )
Net interest margin 2.93 % 2.84 2.90 3 1 2.89 % 2.89
At Period End
Debt securities (5) $ 475,495 472,968 462,890 1 3 $ 475,495 462,890 3
Loans 944,265 947,308 957,423 (1 ) 944,265 957,423 (1 )
Allowance for loan losses 10,193 10,373 11,073 (2 ) (8 ) 10,193 11,073 (8 )
Goodwill 26,429 26,445 26,573 (1 ) 26,429 26,573 (1 )
Equity securities (5) 57,505 58,935 55,742 (2 ) 3 57,505 55,742 3
Assets 1,879,700 1,915,388 1,930,792 (2 ) (3 ) 1,879,700 1,930,792 (3 )
Deposits 1,268,864 1,303,689 1,305,830 (3 ) (3 ) 1,268,864 1,305,830 (3 )
Common stockholders' equity 181,386 181,150 181,233 181,386 181,233
Wells Fargo stockholders’ equity 205,188 204,952 205,034 205,188 205,034
Total equity 206,069 205,910 205,949 206,069 205,949
Tangible common equity (1) 152,580 151,878 151,868 152,580 151,868
Common shares outstanding 4,849.1 4,873.9 4,966.8 (1 ) (2 ) 4,849.1 4,966.8 (2 )
Book value per common share (6) $ 37.41 37.17 36.49 1 3 $ 37.41 36.49 3
Tangible book value per common share (1)(6) 31.47 31.16 30.58 1 3 31.47 30.58 3
Common stock price:
High 57.12 66.31 56.60 (14 ) 1 66.31 59.99 11
Low 50.26 50.70 50.84 (1 ) (1 ) 50.26 50.84 (1 )
Period end 55.44 52.41 55.41 6 55.44 55.41
Team members (active, full-time equivalent)     264,500       265,700       270,600             (2 )     264,500       270,600       (2 )

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

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

(3) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.

(4) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.

(5) Financial information for the prior periods of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of Accounting Standards Update (ASU) 2016-01Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

(6) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA
    Quarter ended
Jun 30,     Mar 31,     Dec 31,     Sep 30,   Jun 30,
($ in millions, except per share amounts)     2018     2018     2017     2017   2017
For the Quarter
Wells Fargo net income $ 5,186 5,136 6,151 4,542 5,856
Wells Fargo net income applicable to common stock 4,792 4,733 5,740 4,131 5,450
Diluted earnings per common share 0.98 0.96 1.16 0.83 1.08
Profitability ratios (annualized) :
Wells Fargo net income to average assets (ROA) 1.10 % 1.09 1.26 0.93 1.22
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 10.60 10.58 12.47 8.96 12.06
Return on average tangible common equity (ROTCE)(1) 12.62 12.62 14.85 10.66 14.41
Efficiency ratio (2) 64.9 68.6 76.2 65.7 60.9
Total revenue $ 21,553 21,934 22,050 21,849 22,235
Pre-tax pre-provision profit (PTPP) (3) 7,571 6,892 5,250 7,498 8,694
Dividends declared per common share 0.39 0.39 0.39 0.39 0.38
Average common shares outstanding 4,865.8 4,885.7 4,912.5 4,948.6 4,989.9
Diluted average common shares outstanding 4,899.8 4,930.7 4,963.1 4,996.8 5,037.7
Average loans $ 944,079 951,024 951,822 952,343 956,879
Average assets 1,884,884 1,915,896 1,935,318 1,938,461 1,927,021
Average total deposits 1,271,339 1,297,178 1,311,592 1,306,356 1,301,195
Average consumer and small business banking deposits (4) 754,047 755,483 757,541 755,094 760,149
Net interest margin 2.93 % 2.84 2.84 2.86 2.90
At Quarter End
Debt securities (5) $ 475,495 472,968 473,366 474,710 462,890
Loans 944,265 947,308 956,770 951,873 957,423
Allowance for loan losses 10,193 10,373 11,004 11,078 11,073
Goodwill 26,429 26,445 26,587 26,581 26,573
Equity securities (5) 57,505 58,935 62,497 54,981 55,742
Assets 1,879,700 1,915,388 1,951,757 1,934,880 1,930,792
Deposits 1,268,864 1,303,689 1,335,991 1,306,706 1,305,830
Common stockholders' equity 181,386 181,150 183,134 181,920 181,233
Wells Fargo stockholders’ equity 205,188 204,952 206,936 205,722 205,034
Total equity 206,069 205,910 208,079 206,617 205,949
Tangible common equity (1) 152,580 151,878 153,730 152,694 151,868
Common shares outstanding 4,849.1 4,873.9 4,891.6 4,927.9 4,966.8
Book value per common share (6) $ 37.41 37.17 37.44 36.92 36.49
Tangible book value per common share (1)(6) 31.47 31.16 31.43 30.99 30.58
Common stock price:
High 57.12 66.31 62.24 56.45 56.60
Low 50.26 50.70 52.84 49.28 50.84
Period end 55.44 52.41 60.67 55.15 55.41
Team members (active, full-time equivalent)     264,500       265,700       262,700       268,000     270,600

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

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

(3) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.

(4) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.

(5) Financial information for the prior quarters of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

(6) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

 
 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME
    Quarter ended June 30,     %     Six months ended June 30,     %
(in millions, except per share amounts)     2018     2017     Change     2018     2017     Change
Interest income        
Debt securities (1) $ 3,594 3,226 11 % $ 7,008 6,399 10 %
Mortgages held for sale 198 191 4 377 373 1
Loans held for sale (1) 48 13 269 72 23 213
Loans 10,912 10,358 5 21,491 20,499 5
Equity securities (1) 221 199 11 452 374 21
Other interest income (1)     1,042       707   47     1,962       1,239   58
Total interest income     16,015       14,694   9     31,362       28,907   8
Interest expense
Deposits 1,268 677 87 2,358 1,213 94
Short-term borrowings 398 163 144 709 277 156
Long-term debt 1,658 1,275 30 3,234 2,422 34
Other interest expense     150       108   39     282       200   41
Total interest expense     3,474       2,223   56     6,583       4,112   60
Net interest income 12,541 12,471 1 24,779 24,795
Provision for credit losses     452       555   (19 )     643       1,160   (45 )
Net interest income after provision for credit losses     12,089       11,916   1     24,136       23,635   2
Noninterest income
Service charges on deposit accounts 1,163 1,276 (9 ) 2,336 2,589 (10 )
Trust and investment fees 3,675 3,629 1 7,358 7,199 2
Card fees 1,001 1,019 (2 ) 1,909 1,964 (3 )
Other fees 846 902 (6 ) 1,646 1,767 (7 )
Mortgage banking 770 1,148 (33 ) 1,704 2,376 (28 )
Insurance 102 280 (64 ) 216 557 (61 )
Net gains from trading activities (1) 191 151 26 434 423 3
Net gains on debt securities 41 120 (66 ) 42 156 (73 )
Net gains from equity securities (1) 295 274 8 1,078 844 28
Lease income 443 493 (10 ) 898 974 (8 )
Other     485       472   3     1,087       846   28
Total noninterest income     9,012       9,764   (8 )     18,708       19,695   (5 )
Noninterest expense
Salaries 4,465 4,343 3 8,828 8,604 3
Commission and incentive compensation 2,642 2,499 6 5,410 5,224 4
Employee benefits 1,245 1,308 (5 ) 2,843 2,994 (5 )
Equipment 550 529 4 1,167 1,106 6
Net occupancy 722 706 2 1,435 1,418 1
Core deposit and other intangibles 265 287 (8 ) 530 576 (8 )
FDIC and other deposit assessments 297 328 (9 ) 621 661 (6 )
Other     3,796       3,541   7     8,190       6,750   21
Total noninterest expense     13,982       13,541   3     29,024       27,333   6
Income before income tax expense 7,119 8,139 (13 ) 13,820 15,997 (14 )
Income tax expense     1,810       2,245   (19 )     3,184       4,378   (27 )
Net income before noncontrolling interests 5,309 5,894 (10 ) 10,636 11,619 (8 )
Less: Net income from noncontrolling interests     123       38   224     314       129   143
Wells Fargo net income     $ 5,186       5,856   (11 )     $ 10,322       11,490   (10 )
Less: Preferred stock dividends and other     394       406   (3 )     797       807   (1 )
Wells Fargo net income applicable to common stock     $ 4,792       5,450   (12 )     $ 9,525       10,683   (11 )
Per share information
Earnings per common share $ 0.98 1.09 (10 ) $ 1.95 2.14 (9 )
Diluted earnings per common share 0.98 1.08 (9 ) 1.94 2.11 (8 )
Dividends declared per common share 0.39 0.38 3 0.78 0.76 3
Average common shares outstanding 4,865.8 4,989.9 (2 ) 4,875.7 4,999.2 (2 )
Diluted average common shares outstanding     4,899.8       5,037.7       (3 )     4,916.1       5,054.8       (3 )

(1) Financial information for the prior periods of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
    Quarter ended
Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions, except per share amounts)     2018     2018     2017     2017     2017
Interest income
Debt securities (1) $ 3,594 3,414 3,294 3,253 3,226
Mortgages held for sale 198 179 196 217 191
Loans held for sale (1) 48 24 12 15 13
Loans 10,912 10,579 10,367 10,522 10,358
Equity securities (1) 221 231 239 186 199
Other interest income (1)     1,042       920       850       851       707
Total interest income     16,015       15,347       14,958       15,044       14,694
Interest expense
Deposits 1,268 1,090 931 869 677
Short-term borrowings 398 311 255 226 163
Long-term debt 1,658 1,576 1,344 1,391 1,275
Other interest expense     150       132       115       109       108
Total interest expense     3,474       3,109       2,645       2,595       2,223
Net interest income 12,541 12,238 12,313 12,449 12,471
Provision for credit losses     452       191       651       717       555
Net interest income after provision for credit losses     12,089       12,047       11,662       11,732       11,916
Noninterest income
Service charges on deposit accounts 1,163 1,173 1,246 1,276 1,276
Trust and investment fees 3,675 3,683 3,687 3,609 3,629
Card fees 1,001 908 996 1,000 1,019
Other fees 846 800 913 877 902
Mortgage banking 770 934 928 1,046 1,148
Insurance 102 114 223 269 280
Net gains (losses) from trading activities (1) 191 243 (1 ) 120 151
Net gains on debt securities 41 1 157 166 120
Net gains from equity securities (1) 295 783 572 363 274
Lease income 443 455 458 475 493
Other     485       602       558       199       472
Total noninterest income     9,012       9,696       9,737       9,400       9,764
Noninterest expense
Salaries 4,465 4,363 4,403 4,356 4,343
Commission and incentive compensation 2,642 2,768 2,665 2,553 2,499
Employee benefits 1,245 1,598 1,293 1,279 1,308
Equipment 550 617 608 523 529
Net occupancy 722 713 715 716 706
Core deposit and other intangibles 265 265 288 288 287
FDIC and other deposit assessments 297 324 312 314 328
Other     3,796       4,394       6,516       4,322       3,541
Total noninterest expense     13,982       15,042       16,800       14,351       13,541
Income before income tax expense 7,119 6,701 4,599 6,781 8,139
Income tax expense (benefit)     1,810       1,374       (1,642 )     2,181       2,245
Net income before noncontrolling interests 5,309 5,327 6,241 4,600 5,894
Less: Net income from noncontrolling interests     123       191       90       58       38
Wells Fargo net income     $ 5,186       5,136       6,151       4,542       5,856
Less: Preferred stock dividends and other     394       403       411       411       406
Wells Fargo net income applicable to common stock     $ 4,792       4,733       5,740       4,131       5,450
Per share information
Earnings per common share $ 0.98 0.97 1.17 0.83 1.09
Diluted earnings per common share 0.98 0.96 1.16 0.83 1.08
Dividends declared per common share 0.39 0.39 0.39 0.39 0.38
Average common shares outstanding 4,865.8 4,885.7 4,912.5 4,948.6 4,989.9
Diluted average common shares outstanding     4,899.8       4,930.7       4,963.1       4,996.8       5,037.7

(1) Financial information for the prior quarters of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 
 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
    Quarter ended June 30,     %     Six months ended June 30,     %
(in millions)     2018     2017     Change     2018     2017     Change
Wells Fargo net income     $ 5,186       5,856   (11)% $ 10,322       11,490   (10)%
Other comprehensive income (loss), before tax:      
Debt securities (1):
Net unrealized gains (losses) arising during the period (617 ) 1,565 NM (4,060 ) 1,934 NM
Reclassification of net (gains) losses to net income 49 (177 ) NM 117 (322 ) NM
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period (150 ) 276 NM (392 ) (86 ) 356
Reclassification of net (gains) losses to net income 77 (153 ) NM 137 (355 ) NM
Defined benefit plans adjustments:
Net actuarial and prior service gains (losses) arising during the period 6 (7 ) NM
Amortization of net actuarial loss, settlements and other to net income 29 41 (29) 61 79 (23)
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period     (83 )     31   NM (85 )     47   NM
Other comprehensive income (loss), before tax (695 ) 1,583 NM (4,216 ) 1,290 NM

Income tax benefit (expense) related to other comprehensive income

    154       (587 ) NM 1,016       (464 ) NM
Other comprehensive income (loss), net of tax (541 ) 996 NM (3,200 ) 826 NM
Less: Other comprehensive income (loss) from noncontrolling interests     (1 )     (9 ) (89) (1 )     5   NM
Wells Fargo other comprehensive income (loss), net of tax     (540 )     1,005   NM (3,199 )     821   NM
Wells Fargo comprehensive income 4,646 6,861 (32) 7,123 12,311 (42)
Comprehensive income from noncontrolling interests     122       29   321 313       134   134
Total comprehensive income     $ 4,768       6,890       (31)     $ 7,436       12,445       (40)

NM – Not meaningful

(1) The quarter and six months ended June 30, 2017, includes net unrealized gains (losses) arising during the period from equity securities of $65 million and $126 million and reclassification of net (gains) losses to net income related to equity securities of $(101) million and $(217) million, respectively. With the adoption in first quarter 2018 of ASU 2016-01, the quarter and six months ended June 30, 2018, reflects net unrealized (gains) losses arising during the period and reclassification of net (gains) losses to net income from only debt securities.

 
 

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

    Quarter ended
Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Balance, beginning of period $ 205,910 208,079 206,617 205,949 202,310
Cumulative effect from change in accounting policies (1) (24 )
Wells Fargo net income 5,186 5,136 6,151 4,542 5,856
Wells Fargo other comprehensive income (loss), net of tax (540 ) (2,659 ) (522 ) 526 1,005
Noncontrolling interests (77 ) (178 ) 247 (20 ) (75 )
Common stock issued 73 1,208 436 254 252
Common stock repurchased (2) (2,923 ) (3,029 ) (2,845 ) (2,601 ) (2,287 )
Preferred stock released by ESOP 490 231 218 209 406
Common stock warrants repurchased/exercised (1 ) (157 ) (46 ) (19 ) (24 )
Preferred stock issued 677
Common stock dividends (1,900 ) (1,911 ) (1,920 ) (1,936 ) (1,899 )
Preferred stock dividends (394 ) (410 ) (411 ) (411 ) (406 )
Stock incentive compensation expense 258 437 206 135 145
Net change in deferred compensation and related plans     (13 )     (813 )     (52 )     (11 )     (11 )
Balance, end of period     $ 206,069       205,910       208,079       206,617       205,949  

(1) The cumulative effect for the quarter ended March 31, 2018, reflects the impact of the adoption in first quarter 2018 of ASU 2016-04, ASU 2016-01 and ASU 2014-09.

(2) For the quarter ended June 30, 2018, includes $1.0 billion related to a private forward repurchase transaction expected to settle in third quarter 2018.

 
 

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
    Quarter ended June 30,
2018     2017
        Interest         Interest
Average Yields/ income/ Average Yields/ income/
(in millions)     balance     rates     expense     balance     rates     expense
Earning assets
Interest-earning deposits with banks (3) $ 154,846 1.75 % $ 676 204,541 1.03 % $ 523
Federal funds sold and securities purchased under resale agreements (3) 80,020 1.73 344 77,078 0.91 175
Debt securities (4):
Trading debt securities (8) 80,661 3.45 695 70,411 3.24 570
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6,425 1.66 27 18,099 1.53 69
Securities of U.S. states and political subdivisions (7) 47,388 3.91 464 53,492 3.89 521
Mortgage-backed securities:
Federal agencies 154,929 2.75 1,065 132,032 2.63 868
Residential and commercial     8,248   4.86 101   12,586   5.55 175
Total mortgage-backed securities 163,177 2.86 1,166 144,618 2.89 1,043
Other debt securities (8)     47,009   4.33 506   48,466   3.77 457
Total available-for-sale debt securities (7)(8)     263,999   3.28 2,163   264,675   3.16 2,090
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44,731 2.19 244 44,701 2.19 244
Securities of U.S. states and political subdivisions 6,255 4.34 68 6,270 5.29 83
Federal agency and other mortgage-backed securities 94,964 2.33 552 83,116 2.44 507
Other debt securities     584   4.66 7   2,798   2.34 16
Total held-to-maturity debt securities     146,534   2.38 871   136,885   2.49 850
Total debt securities (7)(8) 491,194 3.04 3,729 471,971 2.98 3,510
Mortgages held for sale (5)(7) 18,788 4.22 198 19,758 3.87 191
Loans held for sale (5)(8) 3,481 5.48 48 1,476 3.65 13
Commercial loans:
Commercial and industrial - U.S. 275,259 4.16 2,851 273,073 3.70 2,521
Commercial and industrial - Non U.S. 59,716 3.51 524 56,426 2.86 402
Real estate mortgage 123,982 4.27 1,319 131,293 3.68 1,206
Real estate construction 23,637 4.88 287 25,271 4.10 259
Lease financing     19,266   4.48 216   19,058   4.82 230
Total commercial loans     501,860   4.15 5,197   505,121   3.67 4,618
Consumer loans:
Real estate 1-4 family first mortgage 283,101 4.06 2,870 275,108 4.08 2,805
Real estate 1-4 family junior lien mortgage 37,249 5.32 495 43,602 4.78 521
Credit card 35,883 12.66 1,133 34,868 12.18 1,059
Automobile 48,568 5.18 628 59,112 5.43 800
Other revolving credit and installment     37,418   6.62 617   39,068   6.13 596
Total consumer loans     442,219   5.20 5,743   451,758   5.13 5,781
Total loans (5) 944,079 4.64 10,940 956,879 4.36 10,399
Equity securities (8) 37,330 2.38 222 36,604 2.24 205
Other (8)     5,518   1.48 21   4,400   0.70 8
Total earning assets (7)(8)     $ 1,735,256   3.73 % $ 16,178   1,772,707   3.40 % $ 15,024
Funding sources
Deposits:
Interest-bearing checking $ 80,324 0.90 % $ 181 48,465 0.41 % $ 50
Market rate and other savings 676,668 0.26 434 683,014 0.13 214
Savings certificates 20,033 0.43 21 22,599 0.30 17
Other time deposits (7) 82,061 2.26 465 57,158 1.39 197
Deposits in foreign offices     51,474   1.30 167   123,684   0.65 199
Total interest-bearing deposits (7) 910,560 0.56 1,268 934,920 0.29 677
Short-term borrowings 103,795 1.54 398 95,763 0.69 164
Long-term debt (7) 223,800 2.97 1,658 249,889 2.04 1,274
Other liabilities     28,202   2.12 150   20,981   2.05 108
Total interest-bearing liabilities (7) 1,266,357 1.10 3,474 1,301,553 0.68 2,223
Portion of noninterest-bearing funding sources (7)(8)     468,899     471,154  
Total funding sources (7)(8)     $ 1,735,256   0.80   3,474   1,772,707   0.50   2,223
Net interest margin and net interest income on a taxable-equivalent basis (6)(7) 2.93 %     $ 12,704   2.90 %     $ 12,801
Noninterest-earning assets
Cash and due from banks $ 18,609 18,171
Goodwill 26,444 26,664
Other (7)(8)     104,575   109,479  
Total noninterest-earning assets (7)(8)     $ 149,628   154,314  
Noninterest-bearing funding sources
Deposits $ 360,779 366,275
Other liabilities (7) 51,681 53,438
Total equity (7) 206,067 205,755
Noninterest-bearing funding sources used to fund earning assets (7)(8)     (468,899 ) (471,154 )
Net noninterest-bearing funding sources (7)(8)     $ 149,628   154,314  
Total assets (7)     $ 1,884,884   1,927,021  

(1) Our average prime rate was 4.80% and 4.05% for the quarters ended June 30, 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 2.34% and 1.21% for the same quarters, respectively.

(2) Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.

(3) Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

(4) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.

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

(6) Includes taxable-equivalent adjustments of $163 million and $330 million for the quarters ended June 30, 2018 and 2017, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 21% and 35% for the quarters ended June 30, 2018 and 2017, respectively.

(7) Financial information for the prior period has been revised to reflect the impact of the adoption in fourth quarter 2017 of ASU 2017-12Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.

(8) Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
    Six months ended June 30,
2018     2017
        Interest         Interest
Average Yields/ income/ Average Yields/ income/
(in millions)     balance     rates     expense     balance     rates     expense
Earning assets
Interest-earning deposits with banks (3) $ 163,520 1.61 % $ 1,308 206,503 0.91 % $ 928
Federal funds sold and securities purchased under resale agreements (3) 79,083 1.57 615 76,184 0.80 302
Debt securities (4):
Trading debt securities (8) 79,693 3.35 1,332 69,769 3.14 1,093
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6,426 1.66 53 21,547 1.53 164
Securities of U.S. states and political subdivisions (7) 48,665 3.64 885 52,873 3.91 1,034
Mortgage-backed securities:
Federal agencies 156,690 2.73 2,141 144,257 2.61 1,879
Residential and commercial (7)     8,558   4.48 192   13,514   5.44 368
Total mortgage-backed securities (7) 165,248 2.82 2,333 157,771 2.85 2,247
Other debt securities (7)(8)     47,549   4.02 950   49,303   3.69 904
Total available-for-sale debt securities (7)(8)     267,888   3.16 4,221   281,494   3.09 4,349
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44,727 2.20 487 44,697 2.20 487
Securities of U.S. states and political subdivisions 6,257 4.34 136 6,271 5.30 166
Federal agency and other mortgage-backed securities 92,888 2.35 1,093 67,538 2.46 831
Other debt securities     639   3.89 12   3,062   2.34 35
Total held-to-maturity debt securities     144,511   2.40 1,728   121,568   2.51 1,519
Total debt securities (7)(8) 492,092 2.96 7,281 472,831 2.95 6,961
Mortgages held for sale (5)(7) 18,598 4.06 377 19,825 3.77 373
Loans held for sale (5)(8) 2,750 5.28 72 1,538 3.05 23
Commercial loans:
Commercial and industrial - U.S. 273,658 4.00 5,435 273,905 3.65 4,957
Commercial and industrial - Non U.S. 59,964 3.37 1,003 55,890 2.80 775
Real estate mortgage 125,085 4.16 2,581 131,868 3.62 2,370
Real estate construction 24,041 4.70 561 24,933 3.91 484
Lease financing     19,266   4.89 471   19,064   4.88 465
Total commercial loans     502,014   4.03 10,051   505,660   3.61 9,051
Consumer loans:
Real estate 1-4 family first mortgage 283,651 4.04 5,722 275,293 4.05 5,571
Real estate 1-4 family junior lien mortgage 38,042 5.23 988 44,439 4.69 1,036
Credit card 36,174 12.71 2,280 35,151 12.07 2,105
Automobile 50,010 5.17 1,283 60,304 5.45 1,628
Other revolving credit and installment     37,641   6.54 1,221   39,396   6.07 1,186
Total consumer loans     445,518   5.18 11,494   454,583   5.09 11,526
Total loans (5) 947,532 4.57 21,545 960,243 4.31 20,577
Equity securities (8) 38,536 2.37 455 35,272 2.18 384
Other (8)     5,765   1.34 40   2,213   0.70 8
Total earning assets (7)(8)     $ 1,747,876   3.64 % $ 31,693   1,774,609   3.36 % $ 29,556
Funding sources
Deposits:
Interest-bearing checking $ 74,084 0.84 % $ 310 49,569 0.35 % $ 87
Market rate and other savings 677,861 0.24 802 683,591 0.11 371
Savings certificates 20,025 0.38 38 23,030 0.29 34
Other time deposits (7) 79,340 2.06 812 56,043 1.34 374
Deposits in foreign offices     73,023   1.09 396   122,946   0.57 347

Total interest-bearing deposits (7)

924,333 0.51 2,358 935,179 0.26 1,213
Short-term borrowings 102,793 1.39 710 97,149 0.58 279
Long-term debt (7) 224,924 2.88 3,234 254,981 1.90 2,421
Other liabilities     28,065   2.02 282   18,905   2.12 200
Total interest-bearing liabilities (7) 1,280,115 1.03 6,584 1,306,214 0.63 4,113
Portion of noninterest-bearing funding sources (7)(8)     467,761     468,395  
Total funding sources (7)(8)     $ 1,747,876   0.75   6,584   1,774,609   0.47   4,113
Net interest margin and net interest income on a taxable-equivalent basis (6)(7) 2.89 %     $ 25,109   2.89 %     $ 25,443
Noninterest-earning assets
Cash and due from banks $ 18,730 18,437
Goodwill 26,480 26,668
Other (7)(8)     107,218   109,306  
Total noninterest-earning assets (7)(8)     $ 152,428   154,411  
Noninterest-bearing funding sources
Deposits $ 359,854 365,019
Other liabilities (7) 54,212 54,119
Total equity (7) 206,123 203,668
Noninterest-bearing funding sources used to fund earning assets (7)(8)     (467,761 ) (468,395 )
Net noninterest-bearing funding sources (7)(8)     $ 152,428   154,411  
Total assets (7)     $ 1,900,304   1,929,020  
 

(1) Our average prime rate was 4.66% and 3.92% for the first half of 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 2.13% and 1.14% for the same periods, respectively.

(2) Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.

(3) Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

(4) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.

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

(6) Includes taxable-equivalent adjustments of $330 million and $648 million for the first half of 2018 and 2017, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 21% and 35% for the first half of 2018 and 2017, respectively.

(7) Financial information for the prior period has been revised to reflect the impact of the adoption in fourth quarter 2017 of ASU 2017-12Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.

(8) Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
    Quarter ended
      Jun 30, 2018     Mar 31, 2018     Dec 31, 2017     Sep 30, 2017     Jun 30, 2017
Average     Yields/     Average     Yields/     Average     Yields/     Average     Yields/     Average     Yields/
($ in billions)     balance     rates     balance     rates     balance     rates     balance     rates     balance     rates
Earning assets
Interest-earning deposits with banks (3) $ 154.8 1.75 % $ 172.3 1.49 % $ 189.1 1.27 % $ 205.5 1.21 % $ 204.5 1.03 %
Federal funds sold and securities purchased under resale agreements (3) 80.0 1.73 78.1 1.40 75.8 1.20 70.6 1.14 77.1 0.91
Debt securities (4):
Trading debt securities (5) 80.7 3.45 78.7 3.24 81.6 3.17 76.6 3.21 70.4 3.24
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6.4 1.66 6.4 1.66 6.4 1.66 14.5 1.31 18.1 1.53
Securities of U.S. states and political subdivisions 47.4 3.91 50.0 3.37 52.4 3.91 52.5 4.08 53.5 3.89
Mortgage-backed securities:
Federal agencies 154.9 2.75 158.4 2.72 152.9 2.62 139.8 2.58 132.0 2.63
Residential and commercial     8.2   4.86 8.9   4.12 9.4   4.85 11.0   5.44 12.6   5.55
Total mortgage-backed securities 163.1 2.86 167.3 2.79 162.3 2.75 150.8 2.79 144.6 2.89
Other debt securities (5)     47.1   4.33 48.1   3.73 48.6   3.62 47.7   3.73 48.5   3.77
Total available-for-sale debt securities (5)     264.0   3.28 271.8   3.04 269.7   3.10 265.5   3.13 264.7   3.16
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44.7 2.19 44.7 2.20 44.7 2.19 44.7 2.18 44.7 2.19
Securities of U.S. states and political subdivisions 6.3 4.34 6.3 4.34 6.3 5.26 6.3 5.44 6.3 5.29
Federal agency and other mortgage-backed securities 94.9 2.33 90.8 2.38 89.6 2.25 88.3 2.26 83.1 2.44
Other debt securities     0.6   4.66 0.7   3.23 1.2   2.64 1.4   3.05 2.8   2.34
Total held-to-maturity debt securities     146.5   2.38 142.5   2.42 141.8   2.36 140.7   2.38 136.9   2.49
Total debt securities (5) 491.2 3.04 493.0 2.89 493.1 2.90 482.8 2.93 472.0 2.98
Mortgages held for sale 18.8 4.22 18.4 3.89 20.5 3.82 22.9 3.79 19.8 3.87
Loans held for sale (5) 3.5 5.48 2.0 4.92 1.5 3.19 1.4 4.39 1.5 3.65
Commercial loans:
Commercial and industrial - U.S. 275.3 4.16 272.0 3.85 270.3 3.89 270.1 3.81 273.1 3.70
Commercial and industrial - Non U.S. 59.7 3.51 60.2 3.23 59.2 2.96 57.7 2.89 56.4 2.86
Real estate mortgage 124.0 4.27 126.2 4.05 127.2 3.88 129.1 3.83 131.3 3.68
Real estate construction 23.6 4.88 24.4 4.54 24.4 4.38 25.0 4.18 25.3 4.10
Lease financing     19.3   4.48 19.4   5.30 19.3   0.62 19.2   4.59 19.0   4.82
Total commercial loans     501.9   4.15 502.2   3.91 500.4   3.68 501.1   3.76 505.1   3.67
Consumer loans:
Real estate 1-4 family first mortgage 283.1 4.06 284.2 4.02 282.0 4.01 278.4 4.03 275.1 4.08
Real estate 1-4 family junior lien mortgage 37.2 5.32 38.8 5.13 40.4 4.96 41.9 4.95 43.6 4.78
Credit card 35.9 12.66 36.4 12.75 36.4 12.37 35.6 12.41 34.9 12.18
Automobile 48.6 5.18 51.5 5.16 54.3 5.13 56.7 5.34 59.1 5.43
Other revolving credit and installment     37.4   6.62 37.9   6.46 38.3   6.28 38.6   6.31 39.1   6.13
Total consumer loans     442.2   5.20 448.8   5.16 451.4   5.10 451.2   5.14 451.8   5.13
Total loans 944.1 4.64 951.0 4.50 951.8 4.35 952.3 4.41 956.9 4.36
Equity securities (5) 37.3 2.38 39.8 2.35 38.0 2.60 35.9 2.12 36.6 2.24
Other (5)     5.6   1.48 6.0   1.21 7.2   0.88 8.7   0.90 4.3   0.70
Total earning assets (5)     $ 1,735.3   3.73 % $ 1,760.6   3.55 % $ 1,777.0   3.43 % $ 1,780.1   3.44 % $ 1,772.7   3.40 %
Funding sources
Deposits:
Interest-bearing checking $ 80.3 0.90 % $ 67.8 0.77 % $ 50.5 0.68 % $ 48.3 0.57 % $ 48.5 0.41 %
Market rate and other savings 676.7 0.26 679.1 0.22 679.9 0.19 681.2 0.17 683.0 0.13
Savings certificates 20.0 0.43 20.0 0.34 20.9 0.31 21.8 0.31 22.6 0.30
Other time deposits 82.1 2.26 76.6 1.84 68.2 1.49 66.1 1.51 57.1 1.39
Deposits in foreign offices     51.5   1.30 94.8   0.98 124.6   0.81 124.7   0.76 123.7   0.65
Total interest-bearing deposits 910.6 0.56 938.3 0.47 944.1 0.39 942.1 0.37 934.9 0.29
Short-term borrowings 103.8 1.54 101.8 1.24 102.1 0.99 99.2 0.91 95.8 0.69
Long-term debt 223.8 2.97 226.0 2.80 231.6 2.32 243.5 2.28 249.9 2.04
Other liabilities     28.2   2.12 27.9   1.92 24.7   1.86 24.8   1.74 21.0   2.05
Total interest-bearing liabilities 1,266.4 1.10 1,294.0 0.97 1,302.5 0.81 1,309.6 0.79 1,301.6 0.68
Portion of noninterest-bearing funding sources (5)     468.9   466.6   474.5   470.5   471.1  
Total funding sources (5)     $ 1,735.3   0.80   $ 1,760.6   0.71   $ 1,777.0   0.59   $ 1,780.1   0.58   $ 1,772.7   0.50  
Net interest margin on a taxable-equivalent basis 2.93 % 2.84 % 2.84 % 2.86 % 2.90 %
Noninterest-earning assets
Cash and due from banks $ 18.6 18.9 19.2 18.5 18.2
Goodwill 26.4 26.5 26.6 26.6 26.7
Other (5)     104.6   109.9   112.5   113.3   109.4  
Total noninterest-earnings assets (5)     $ 149.6   155.3   158.3   158.4   154.3  
Noninterest-bearing funding sources
Deposits $ 360.7 358.9 367.5 364.3 366.3
Other liabilities (5) 51.7 56.8 57.9 56.9 53.3
Total equity 206.1 206.2 207.4 207.7 205.8
Noninterest-bearing funding sources used to fund earning assets (5)     (468.9 ) (466.6 ) (474.5 ) (470.5 ) (471.1 )
Net noninterest-bearing funding sources (5)     $ 149.6   155.3   158.3   158.4   154.3  
Total assets     $ 1,884.9   1,915.9   1,935.3   1,938.5   1,927.0  
 

(1) Our average prime rate was 4.80% for the quarter ended June 30, 2018, 4.52% for the quarter ended March 31,2018, 4.30% for the quarter ended December 31, 2017, 4.25% for the quarter ended September 30, 2017 and 4.05% for the quarter ended June 30, 2017. The average three-month London Interbank Offered Rate (LIBOR) was 2.34%, 1.93%, 1.46%, 1.31% and 1.21% for the same quarters, respectively.

(2) Yields/rates include the effects of hedge and risk management activities associated with the respective asset and liability categories.

(3) Financial information for the prior quarters of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

(4) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.

(5) Financial information for the prior quarters of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 
 

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME
    Quarter ended June 30,     %     Six months ended June 30,     %
(in millions)     2018     2017     Change     2018     2017     Change
Service charges on deposit accounts $ 1,163     1,276 (9 )% $ 2,336     2,589 (10 )%
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,354 2,329 1 4,757 4,653 2
Trust and investment management 835 837 1,685 1,666 1
Investment banking     486       463   5 916     880   4
Total trust and investment fees     3,675       3,629   1 7,358     7,199   2
Card fees 1,001 1,019 (2 ) 1,909 1,964 (3 )
Other fees:
Charges and fees on loans 304 325 (6 ) 605 632 (4 )
Cash network fees 120 134 (10 ) 246 260 (5 )
Commercial real estate brokerage commissions 109 102 7 194 183 6
Letters of credit fees 72 76 (5 ) 151 150 1
Wire transfer and other remittance fees 121 112 8 237 219 8
All other fees     120       153   (22 ) 213     323   (34 )
Total other fees     846       902   (6 ) 1,646     1,767   (7 )
Mortgage banking:
Servicing income, net 406 400 2 874 856 2
Net gains on mortgage loan origination/sales activities     364       748   (51 ) 830     1,520   (45 )
Total mortgage banking     770       1,148   (33 ) 1,704     2,376   (28 )
Insurance 102 280 (64 ) 216 557 (61 )
Net gains from trading activities (1) 191 151 26 434 423 3
Net gains on debt securities 41 120 (66 ) 42 156 (73 )
Net gains from equity securities (1) 295 274 8 1,078 844 28
Lease income 443 493 (10 ) 898 974 (8 )
Life insurance investment income 162 145 12 326 289 13
All other     323       327   (1 ) 761     557   37
Total     $ 9,012       9,764       (8 )     $ 18,708       19,695       (5 )

(1) Financial information for the prior periods has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 
 

NONINTEREST EXPENSE

 

    Quarter ended June 30,     %     Six months ended June 30,     %
(in millions)     2018     2017     Change     2018     2017     Change
Salaries $ 4,465     4,343 3 % $ 8,828     8,604 3 %
Commission and incentive compensation 2,642 2,499 6 5,410 5,224 4
Employee benefits 1,245 1,308 (5 ) 2,843 2,994 (5 )
Equipment 550 529 4 1,167 1,106 6
Net occupancy 722 706 2 1,435 1,418 1
Core deposit and other intangibles 265 287 (8 ) 530 576 (8 )
FDIC and other deposit assessments 297 328 (9 ) 621 661 (6 )
Operating losses 619 350 77 2,087 632 230
Outside professional services 881 1,029 (14 ) 1,702 1,833 (7 )
Contract services (1) 536 416 29 983 813 21
Operating leases 311 334 (7 ) 631 679 (7 )
Outside data processing 164 236 (31 ) 326 456 (29 )
Travel and entertainment 157 171 (8 ) 309 350 (12 )
Advertising and promotion 227 150 51 380 277 37
Postage, stationery and supplies 121 134 (10 ) 263 279 (6 )
Telecommunications 88 91 (3 ) 180 182 (1 )
Foreclosed assets 44 52 (15 ) 82 138 (41 )
Insurance 24 24 50 48 4
All other (1)     624       554       13       1,197       1,063       13  
Total     $ 13,982       13,541       3       $ 29,024       27,333       6  

(1) The prior periods have been revised to conform with the current period presentation whereby temporary help is included in contract services rather than in all other noninterest expense.

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME
    Quarter ended
Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Service charges on deposit accounts $ 1,163 1,173 1,246 1,276 1,276
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,354 2,403 2,401 2,304 2,329
Trust and investment management 835 850 866 840 837
Investment banking     486       430       420       465       463
Total trust and investment fees     3,675       3,683       3,687       3,609       3,629
Card fees 1,001 908 996 1,000 1,019
Other fees:
Charges and fees on loans 304 301 313 318 325
Cash network fees 120 126 120 126 134
Commercial real estate brokerage commissions 109 85 159 120 102
Letters of credit fees 72 79 78 77 76
Wire transfer and other remittance fees 121 116 115 114 112
All other fees     120       93       128       122       153
Total other fees     846       800       913       877       902
Mortgage banking:
Servicing income, net 406 468 262 309 400
Net gains on mortgage loan origination/sales activities     364       466       666       737       748
Total mortgage banking     770       934       928       1,046       1,148
Insurance 102 114 223 269 280
Net gains (losses) from trading activities (1) 191 243 (1 ) 120 151
Net gains on debt securities 41 1 157 166 120
Net gains from equity securities (1) 295 783 572 363 274
Lease income 443 455 458 475 493
Life insurance investment income 162 164 153 152 145
All other     323       438       405       47       327
Total     $ 9,012       9,696       9,737       9,400       9,764

(1) Financial information for the prior quarters of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 
 

FIVE QUARTER NONINTEREST EXPENSE

    Quarter ended
Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Salaries $ 4,465 4,363 4,403 4,356 4,343
Commission and incentive compensation 2,642 2,768 2,665 2,553 2,499
Employee benefits 1,245 1,598 1,293 1,279 1,308
Equipment 550 617 608 523 529
Net occupancy 722 713 715 716 706
Core deposit and other intangibles 265 265 288 288 287
FDIC and other deposit assessments 297 324 312 314 328
Operating losses 619 1,468 3,531 1,329 350
Outside professional services 881 821 1,025 955 1,029
Contract services (1) 536 447 410 415 416
Operating leases 311 320 325 347 334
Outside data processing 164 162 208 227 236
Travel and entertainment 157 152 183 154 171
Advertising and promotion 227 153 200 137 150
Postage, stationery and supplies 121 142 137 128 134
Telecommunications 88 92 92 90 91
Foreclosed assets 44 38 47 66 52
Insurance 24 26 28 24 24
All other (1)     624     573     330     450     554
Total     $ 13,982     15,042     16,800     14,351     13,541

(1) The prior quarters of 2017 have been revised to conform with the current period presentation whereby temporary help is included in contract services rather than in all other noninterest expense.

 
 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET
    Jun 30,     Dec 31,     %
(in millions, except shares)     2018     2017     Change
Assets
Cash and due from banks $ 20,450 23,367 (12 )%
Interest-earning deposits with banks (1)     142,999       192,580   (26 )
Total cash, cash equivalents, and restricted cash (1)     163,449       215,947   (24 )
Federal funds sold and securities purchased under resale agreements (1) 80,184 80,025
Debt securities:
Trading, at fair value (2) 65,602 57,624 14
Available-for-sale, at fair value (2) 265,687 276,407 (4 )
Held-to-maturity, at cost 144,206 139,335 3
Mortgages held for sale 21,509 20,070 7
Loans held for sale (2) 3,408 1,131 201
Loans 944,265 956,770 (1 )
Allowance for loan losses     (10,193 )     (11,004 ) (7 )
Net loans     934,072       945,766   (1 )
Mortgage servicing rights:
Measured at fair value 15,411 13,625 13
Amortized 1,407 1,424 (1 )
Premises and equipment, net 8,882 8,847
Goodwill 26,429 26,587 (1 )
Derivative assets 11,099 12,228 (9 )
Equity securities (2) 57,505 62,497 (8 )
Other assets (2)     80,850       90,244   (10 )
Total assets     $ 1,879,700       1,951,757   (4 )
Liabilities
Noninterest-bearing deposits $ 365,021 373,722 (2 )
Interest-bearing deposits     903,843       962,269   (6 )
Total deposits 1,268,864 1,335,991 (5 )
Short-term borrowings 104,496 103,256 1
Derivative liabilities 8,507 8,796 (3 )
Accrued expenses and other liabilities 72,480 70,615 3
Long-term debt     219,284       225,020   (3 )
Total liabilities     1,673,631       1,743,678   (4 )
Equity
Wells Fargo stockholders’ equity:
Preferred stock 25,737 25,358 1
Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares 9,136 9,136
Additional paid-in capital 59,644 60,893 (2 )
Retained earnings 150,803 145,263 4
Cumulative other comprehensive income (loss) (5,461 ) (2,144 ) 155
Treasury stock – 632,743,620 shares and 590,194,846 shares (32,620 ) (29,892 ) 9
Unearned ESOP shares     (2,051 )     (1,678 ) 22
Total Wells Fargo stockholders’ equity     205,188       206,936   (1 )
Noncontrolling interests 881 1,143 (23 )
Total equity     206,069       208,079   (1 )
Total liabilities and equity     $ 1,879,700       1,951,757       (4 )

(1) Financial information has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

(2) Financial information for the prior quarter has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET
    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Assets
Cash and due from banks $ 20,450 18,145 23,367 19,206 20,248
Interest-earning deposits with banks (1)     142,999       184,250       192,580       205,648       195,700  
Total cash, cash equivalents, and restricted cash (1)     163,449       202,395       215,947       224,854       215,948  
Federal funds sold and securities purchased under resale agreements (1) 80,184 73,550 80,025 67,457 69,006
Debt securities:
Trading, at fair value (2) 65,602 59,866 57,624 60,970 54,324
Available-for-sale, at fair value (2) 265,687 271,656 276,407 271,317 268,174
Held-to-maturity, at cost 144,206 141,446 139,335 142,423 140,392
Mortgages held for sale 21,509 17,944 20,070 20,009 24,807
Loans held for sale (2) 3,408 3,581 1,131 1,339 1,898
Loans 944,265 947,308 956,770 951,873 957,423
Allowance for loan losses     (10,193 )     (10,373 )     (11,004 )     (11,078 )     (11,073 )
Net loans     934,072       936,935       945,766       940,795       946,350  
Mortgage servicing rights:
Measured at fair value 15,411 15,041 13,625 13,338 12,789
Amortized 1,407 1,411 1,424 1,406 1,399
Premises and equipment, net 8,882 8,828 8,847 8,449 8,403
Goodwill 26,429 26,445 26,587 26,581 26,573
Derivative assets 11,099 11,467 12,228 12,580 13,273
Equity securities (2) 57,505 58,935 62,497 54,981 55,742
Other assets (2)     80,850       85,888       90,244       88,381       91,714  
Total assets     $ 1,879,700       1,915,388       1,951,757       1,934,880       1,930,792  
Liabilities
Noninterest-bearing deposits $ 365,021 370,085 373,722 366,528 372,766
Interest-bearing deposits     903,843       933,604       962,269       940,178       933,064  
Total deposits 1,268,864 1,303,689 1,335,991 1,306,706 1,305,830
Short-term borrowings 104,496 97,207 103,256 93,811 95,356
Derivative liabilities 8,507 7,883 8,796 9,497 11,636
Accrued expenses and other liabilities 72,480 73,397 70,615 78,993 72,799
Long-term debt     219,284       227,302       225,020       239,256       239,222  
Total liabilities     1,673,631       1,709,478       1,743,678       1,728,263       1,724,843  
Equity
Wells Fargo stockholders’ equity:
Preferred stock 25,737 26,227 25,358 25,576 25,785
Common stock 9,136 9,136 9,136 9,136 9,136
Additional paid-in capital 59,644 60,399 60,893 60,759 60,689
Retained earnings 150,803 147,928 145,263 141,549 139,366
Cumulative other comprehensive income (loss) (5,461 ) (4,921 ) (2,144 ) (1,622 ) (2,148 )
Treasury stock (32,620 ) (31,246 ) (29,892 ) (27,772 ) (25,675 )
Unearned ESOP shares     (2,051 )     (2,571 )     (1,678 )     (1,904 )     (2,119 )
Total Wells Fargo stockholders’ equity 205,188 204,952 206,936 205,722 205,034
Noncontrolling interests     881       958       1,143       895       915  
Total equity     206,069       205,910       208,079       206,617       205,949  
Total liabilities and equity     $ 1,879,700       1,915,388       1,951,757       1,934,880       1,930,792  

(1) Financial information has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

(2) Financial information for prior quarters has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER TRADING ASSETS AND LIABILITIES

    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Trading assets
Debt securities $ 65,602 59,866 57,624 60,970 54,324
Equity securities (1) 22,978 25,327 30,004 22,797 24,229
Loans held for sale 1,350 1,695 1,023 1,182 1,742
Gross trading derivative assets 30,758 30,644 31,340 31,052 31,451
Netting (2)     (20,687 )     (20,112 )     (19,629 )     (18,881 )     (19,289 )
Total trading derivative assets     10,071       10,532       11,711       12,171       12,162  
Total trading assets     100,001       97,420       100,362       97,120       92,457  
Trading liabilities
Short sales 21,765 23,303 18,472 19,096 16,845
Gross trading derivative liabilities 29,847 29,717 31,386 30,365 31,172
Netting (2)     (22,311 )     (22,569 )     (23,062 )     (21,662 )     (20,544 )
Total trading derivative liabilities     7,536       7,148       8,324       8,703       10,628  
Total trading liabilities     $ 29,301       30,451       26,796       27,799       27,473  

(1) Financial information for the prior quarters of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 and assets held as economic hedges for our deferred compensation plan obligations have been reclassified as marketable equity securities not held for trading.

(2) Represents balance sheet netting for trading derivative assets and liability balances, and trading portfolio level counterparty valuation adjustments.

 
 

FIVE QUARTER DEBT SECURITIES

    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Trading debt securities     $ 65,602     59,866     57,624     60,970     54,324
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6,271 6,279 6,319 6,350 17,896
Securities of U.S. states and political subdivisions 47,559 49,643 51,326 52,774 52,013
Mortgage-backed securities:
Federal agencies 154,556 156,814 160,219 150,181 135,938
Residential and commercial     8,286     9,264     9,173     11,046     12,772

Total mortgage-backed securities

162,842 166,078 169,392 161,227 148,710
Other debt securities     49,015     49,656     49,370     50,966     49,555
Total available-for-sale debt securities     265,687     271,656     276,407     271,317     268,174
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44,735 44,727 44,720 44,712 44,704
Securities of U.S. states and political subdivisions 6,300 6,307 6,313 6,321 6,325
Federal agency and other mortgage-backed securities (1) 93,016 89,748 87,527 90,071 87,525
Other debt securities     155     664     775     1,319     1,838
Total held-to-maturity debt securities     144,206     141,446     139,335     142,423     140,392
Total debt securities     $ 475,495     472,968     473,366     474,710     462,890

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER EQUITY SECURITIES
    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Held for trading at fair value                              
Marketable equity securities     $ 22,978     25,327     30,004     22,797     24,229
Not held for trading:
Fair value:
Marketable equity securities (1) 5,273 4,931 4,356 4,348 4,340
Nonmarketable equity securities (2)     5,876     5,303     4,867     4,523     3,986
Total equity securities at fair value     11,149     10,234     9,223     8,871     8,326
Equity method:
LIHTC (3) 10,361 10,318 10,269 9,884 9,828
Private equity 3,732 3,840 3,839 3,757 3,740
Tax-advantaged renewable energy 1,950 1,822 1,950 1,954 1,960
New market tax credit and other     262     268     294     292     295
Total equity method     16,305     16,248     16,352     15,887     15,823
Other:
Federal bank stock and other at cost (4) 5,673 5,780 5,828 6,251 6,247
Private equity (5)     1,400     1,346     1,090     1,175     1,117
Total equity securities not held for trading     34,527     33,608     32,493     32,184     31,513
Total equity securities     $ 57,505     58,935     62,497     54,981     55,742

(1) Includes $3.5 billion, $3.5 billion, $3.7 billion, $3.5 billion and $3.3 billion at June 30 and March 31, 2018, and December 31, September 30, and June 30, 2017, respectively, related to securities held as economic hedges of our deferred compensation plan obligations.

(2) Includes $5.5 billion, $5.0 billion, $4.9 billion, $4.5 billion and $4.0 billion at June 30 and March 31, 2018, and December 31, September 30, and June 30, 2017, respectively, related to investments in which we elected the fair value option.

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

(4) Includes $5.6 billion, $5.7 billion, $5.4 billion, $5.8 billion and $5.8 billion at June 30 and March 31, 2018, and December 31, September 30, and June 30, 2017, respectively, related to investments in Federal Reserve Bank and Federal Home Loan Bank stock.

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER LOANS
    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Commercial:
Commercial and industrial $ 336,590 334,678 333,125 327,944 331,113
Real estate mortgage 123,964 125,543 126,599 128,475 130,277
Real estate construction 22,937 23,882 24,279 24,520 25,337
Lease financing     19,614     19,293     19,385     19,211     19,174
Total commercial     503,105     503,396     503,388     500,150     505,901
Consumer:
Real estate 1-4 family first mortgage 283,001 282,658 284,054 280,173 276,566
Real estate 1-4 family junior lien mortgage 36,542 37,920 39,713 41,152 42,747
Credit card 36,684 36,103 37,976 36,249 35,305
Automobile 47,632 49,554 53,371 55,455 57,958
Other revolving credit and installment     37,301     37,677     38,268     38,694     38,946
Total consumer     441,160     443,912     453,382     451,723     451,522
Total loans (1)     $ 944,265     947,308     956,770     951,873     957,423

(1) Includes $9.0 billion, $10.7 billion, $12.8 billion, $13.6 billion, and $14.3 billion of purchased credit-impaired (PCI) loans at June 30 and March 31, 2018, and December 31, September 30 and June 30, 2017, respectively.

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

 
    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Commercial foreign loans:
Commercial and industrial $ 61,732 59,696 60,106 58,570 57,825
Real estate mortgage 7,617 8,082 8,033 8,032 8,359
Real estate construction 542 668 655 647 585
Lease financing     1,097     1,077     1,126     1,141     1,092
Total commercial foreign loans     $ 70,988     69,523     69,920     68,390     67,861
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Nonaccrual loans:
Commercial:
Commercial and industrial $ 1,559 1,516 1,899 2,397 2,632
Real estate mortgage 765 755 628 593 630
Real estate construction 51 45 37 38 34
Lease financing     80       93       76       81       89
Total commercial     2,455       2,409       2,640       3,109       3,385
Consumer:
Real estate 1-4 family first mortgage 3,829 4,053 4,122 4,213 4,413
Real estate 1-4 family junior lien mortgage 1,029 1,087 1,086 1,101 1,095
Automobile 119 117 130 137 104
Other revolving credit and installment     54       53       58       59       59
Total consumer     5,031       5,310       5,396       5,510       5,671
Total nonaccrual loans (1)(2)(3)     $ 7,486       7,719       8,036       8,619       9,056
As a percentage of total loans 0.79 % 0.81 0.84 0.91 0.95
Foreclosed assets:
Government insured/guaranteed $ 90 103 120 137 149
Non-government insured/guaranteed     409       468       522       569       632
Total foreclosed assets     499       571       642       706       781
Total nonperforming assets     $ 7,985       8,290       8,678       9,325       9,837
As a percentage of total loans     0.85 %     0.88       0.91       0.98       1.03

(1) Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.

(2) Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.

(3) Real estate 1-4 family mortgage loans predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) are not placed on nonaccrual status because they are insured or guaranteed.

 
 

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

    Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Total (excluding PCI)(1): $ 9,464 10,753 11,997 10,227 9,716
Less: FHA insured/guaranteed by the VA (2)(3)     8,622     9,786     10,934     9,266     8,873
Total, not government insured/guaranteed     $ 842     967     1,063     961     843
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 23 40 26 27 42
Real estate mortgage 26 23 23 11 2
Real estate construction         1             10
Total commercial     49     64     49     38     54
Consumer:
Real estate 1-4 family first mortgage (3) 133 164 219 190 145
Real estate 1-4 family junior lien mortgage (3) 33 48 60 49 44
Credit card 429 473 492 475 411
Automobile 105 113 143 111 91
Other revolving credit and installment     93     105     100     98     98
Total consumer     793     903     1,014     923     789
Total, not government insured/guaranteed     $ 842     967     1,063     961     843

(1) PCI loans totaled $811 million, $1.0 billion, $1.4 billion, $1.4 billion and $1.5 billion, at June 30 and March 31, 2018, and December 31, September 30 and June 30, 2017, respectively.

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

(3) Includes mortgages held for sale 90 days or more past due and still accruing.

 

Wells Fargo & Company and Subsidiaries

CHANGES IN ACCRETABLE YIELD RELATED TO PURCHASED CREDIT-IMPAIRED (PCI) LOANS

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

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

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

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

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

 
    Quarter     Six months    
ended ended
June 30, June 30,
(in millions)     2018     2018     2009-2017
Balance, beginning of period $ 6,864 8,887 10,447
Change in accretable yield due to acquisitions 161
Accretion into interest income (1) (299 ) (613 ) (16,983 )
Accretion into noninterest income due to sales (2) (479 ) (1,122 ) (801 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (3) 59 399 11,597
Changes in expected cash flows that do not affect nonaccretable difference (4)     (412 )     (1,818 )     4,466  
Balance, end of period     $ 5,733       5,733       8,887  

(1) Includes accretable yield released as a result of settlements with borrowers, which is included in interest income.

(2) Includes accretable yield released as a result of sales to third parties, which is included in noninterest income.

(3) At June 30, 2018, our carrying value for PCI loans totaled $9.0 billion and the remainder of nonaccretable difference established in purchase accounting totaled $313 million. The nonaccretable difference absorbs losses of contractual amounts that exceed our carrying value for PCI loans.

(4) Represents changes in cash flows expected to be collected due to the impact of modifications, changes in prepayment assumptions, changes in interest rates on variable rate PCI loans and sales to third parties.

 
 

Wells Fargo & Company and Subsidiaries

CHANGES IN ALLOWANCE FOR CREDIT LOSSES
    Quarter ended June 30,     Six months ended June 30,
(in millions)     2018     2017     2018     2017
Balance, beginning of period $ 11,313     12,287 11,960     12,540
Provision for credit losses 452 555 643 1,160
Interest income on certain impaired loans (1) (43 ) (46 ) (86 ) (94 )
Loan charge-offs:
Commercial:
Commercial and industrial (134 ) (161 ) (298 ) (414 )
Real estate mortgage (19 ) (8 ) (21 ) (13 )
Real estate construction
Lease financing     (20 )     (13 )     (37 )     (20 )
Total commercial     (173 )     (182 )     (356 )     (447 )
Consumer:
Real estate 1-4 family first mortgage (55 ) (55 ) (96 ) (124 )
Real estate 1-4 family junior lien mortgage (47 ) (62 ) (94 ) (155 )
Credit card (404 ) (379 ) (809 ) (746 )
Automobile (216 ) (212 ) (516 ) (467 )
Other revolving credit and installment     (164 )     (185 )     (344 )     (374 )
Total consumer     (886 )     (893 )     (1,859 )     (1,866 )
Total loan charge-offs     (1,059 )     (1,075 )     (2,215 )     (2,313 )
Loan recoveries:
Commercial:
Commercial and industrial 76 83 155 165
Real estate mortgage 19 14 36 44
Real estate construction 6 4 10 12
Lease financing     5       6       10       8  
Total commercial     106       107       211       229  
Consumer:
Real estate 1-4 family first mortgage 78 71 137 133
Real estate 1-4 family junior lien mortgage 60 66 115 136
Credit card 81 59 154 117
Automobile 103 86 195 174
Other revolving credit and installment     29       31       60       64  
Total consumer     351       313       661       624  
Total loan recoveries     457       420       872       853  
Net loan charge-offs     (602 )     (655 )     (1,343 )     (1,460 )
Other     (10 )     5       (64 )      
Balance, end of period     $ 11,110       12,146       11,110       12,146  
Components:
Allowance for loan losses $ 10,193 11,073 10,193 11,073
Allowance for unfunded credit commitments     917       1,073       917       1,073  
Allowance for credit losses     $ 11,110       12,146       11,110       12,146  
Net loan charge-offs (annualized) as a percentage of average total loans 0.26 % 0.27 0.29 0.31
Allowance for loan losses as a percentage of total loans 1.08 1.16 1.08 1.16
Allowance for credit losses as a percentage of total loans     1.18       1.27       1.18       1.27  

(1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize changes in allowance attributable to the passage of time as interest income.

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
    Quarter ended
Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
(in millions)     2018     2018     2017     2017     2017
Balance, beginning of quarter $ 11,313 11,960 12,109 12,146 12,287
Provision for credit losses 452 191 651 717 555
Interest income on certain impaired loans (1) (43 ) (43 ) (49 ) (43 ) (46 )
Loan charge-offs:
Commercial:
Commercial and industrial (134 ) (164 ) (181 ) (194 ) (161 )
Real estate mortgage (19 ) (2 ) (4 ) (21 ) (8 )
Real estate construction
Lease financing     (20 )     (17 )     (14 )     (11 )     (13 )
Total commercial     (173 )     (183 )     (199 )     (226 )     (182 )
Consumer:
Real estate 1-4 family first mortgage (55 ) (41 ) (49 ) (67 ) (55 )
Real estate 1-4 family junior lien mortgage (47 ) (47 ) (54 ) (70 ) (62 )
Credit card (404 ) (405 ) (398 ) (337 ) (379 )
Automobile (216 ) (300 ) (261 ) (274 ) (212 )
Other revolving credit and installment     (164 )     (180 )     (169 )     (170 )     (185 )
Total consumer     (886 )     (973 )     (931 )     (918 )     (893 )
Total loan charge-offs     (1,059 )     (1,156 )     (1,130 )     (1,144 )     (1,075 )
Loan recoveries:
Commercial:
Commercial and industrial 76 79 63 69 83
Real estate mortgage