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Wells Fargo & Company/MN – ‘8-K’ for 7/14/17 – ‘EX-99.1’

On:  Friday, 7/14/17, at 7:59am ET   ·   For:  7/14/17   ·   Accession #:  72971-17-377   ·   File #:  1-02979

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  As Of                Filer                Filing    For·On·As Docs:Size

 7/14/17  Wells Fargo & Company/MN          8-K:2,9     7/14/17    3:11M

Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                      HTML     20K 
 2: EX-99.1     Miscellaneous Exhibit                               HTML   1.47M 
 3: EX-99.2     Miscellaneous Exhibit                               HTML     98K

EX-99.1   —   Miscellaneous Exhibit
Exhibit Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
"Summary Financial Data
"Consolidated Statement of Income
"Consolidated Statement of Comprehensive Income
"Condensed Consolidated Statement of Changes in Total Equity
"Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis)
"Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis)
"Noninterest Income and Noninterest Expense
"Consolidated Balance Sheet
"Investment Securities
"Loans
"Nonperforming Assets
"Loans 90 Days or More Past Due and Still Accruing
"Purchased Credit-Impaired Loans
"Pick-A-Pay Portfolio
"Common Equity Tier 1 Under Basel III
"Operating Segment Results
"Mortgage Servicing and other related data

This exhibit is an HTML Document rendered as filed.  [ Alternative Formats ]

  Exhibit  
Exhibit 99.1


 
wfc011415ex991pg001aa12.jpg
wfc011415ex991pg001ba12.jpg
 
 
 
 
 
 
Media
 
Investors
 
 
 
 
Ancel Martinez
 
Jim Rowe
 
 
 
 
415-222-3858
 
415-396-8216
Friday, July 14, 2017
WELLS FARGO REPORTS $5.8 BILLION IN QUARTERLY NET INCOME;
Diluted EPS of $1.07; Revenue of $22.2 billion
▪
Strong financial results:
◦
Net income of $5.8 billion, up 5 percent from second quarter 2016
◦
Diluted earnings per share (EPS) of $1.07, up 6 percent
◦
Revenue of $22.2 billion
▪
Net interest income of $12.5 billion, up $750 million, or 6 percent
◦
Total average deposits of $1.3 trillion, up $64.5 billion, or 5 percent
◦
Total average loans of $956.9 billion, up $6.1 billion, or 1 percent
◦
Return on assets (ROA) of 1.21 percent and return on equity (ROE) of 11.95 percent
•
Continued improvement in credit quality:
◦
Provision expense of $555 million, down $519 million, or 48 percent, from second quarter 2016
▪
Net charge-offs of $655 million, down $269 million
◦
Net charge-offs were 0.27 percent of average loans (annualized), down from 0.39 percent
▪
Reserve release1 of $100 million
◦
Nonaccrual loans of $9.1 billion, down $2.9 billion, or 24 percent
•
Strong capital position while returning more capital to shareholders:
◦Common Equity Tier 1 ratio (fully phased-in) of 11.6 percent2
◦Period-end common shares outstanding down 81.7 million from second quarter 2016
◦
Returned $3.4 billion to shareholders in the second quarter through common stock dividends and net share repurchases
•
Received a non-objection to the Company's 2017 Capital Plan submission from the Federal Reserve    
◦
As part of this plan, the Company expects to increase its third quarter 2017 common stock dividend to $0.39 per share from $0.38 per share, subject to approval by the Company's Board of Directors. The plan also includes up to $11.5 billion of gross common stock repurchases, subject to management discretion, for the four-quarter period from third quarter 2017 through second quarter 2018.
Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.
1 Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
2 See table on page 36 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules.



- 2 -

Selected Financial Information
 
 
 
Quarter ended
 
 
Jun 30,
2017

 
Mar 31,
2017

 
Jun 30,
2016

Earnings
 
 
 
 
 
Diluted earnings per common share
$
1.07

 
1.00

 
1.01

Wells Fargo net income (in billions)
5.81

 
5.46

 
5.56

Return on assets (ROA)
1.21
%
 
1.15

 
1.20

Return on equity (ROE)
11.95

 
11.54

 
11.70

Return on average tangible common equity (ROTCE)(a)
14.26

 
13.85

 
14.15

Asset Quality
 
 
 
 
 
Net charge-offs (annualized) as a % of average total loans
0.27
%
 
0.34

 
0.39

Allowance for credit losses as a % of total loans
1.27

 
1.28

 
1.33

Allowance for credit losses as a % of annualized net charge-offs
462

 
376

 
343

Other
 
 
 
 
 
Revenue (in billions)
$
22.2

 
22.0

 
22.2

Efficiency ratio (b)
61.1
%
 
62.7

 
58.1

Average loans (in billions)
$
956.9

 
963.6

 
950.8

Average deposits (in billions)
1,301.2

 
1,299.2

 
1,236.7

Net interest margin
2.90
%
 
2.87

 
2.86

(a)
Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.
(b)
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
SAN FRANCISCO – Wells Fargo & Company (NYSE:WFC) reported net income of $5.8 billion, or $1.07 per diluted common share, for second quarter 2017, compared with $5.6 billion, or $1.01 per share, for second quarter 2016, and $5.5 billion, or $1.00 per share, for first quarter 2017.

Chief Executive Officer Tim Sloan said, "Second quarter 2017 results demonstrated the benefit of our diversified business model as we continued to generate strong financial results, invest for the future, and adhere to our prudent risk discipline. We remain committed to reducing expenses and improving the efficiency of our company, and we are very focused on our recently announced goals. As we work to improve our efficiency, we will also continue to innovate for the future. We recently advanced a number of important customer-focused initiatives, such as the launch of the ZelleSM person-to-person payment platform to our 28 million digital customers. As always, our success starts with our customers, and I appreciate the effort of our 271,000 team members in helping our customers succeed financially. We continued to make progress this quarter in our efforts to rebuild trust and build a better Wells Fargo and, while there is still more work ahead of us, we are on the right track and I am confident about our future."

Chief Financial Officer John Shrewsberry said, “Wells Fargo reported $5.8 billion of net income in the second quarter, up on a linked-quarter and year-over-year basis. Overall results were solid in a period with continued modest economic growth and included growth in net interest income and continued improvement in credit results. Second quarter 2017 also included discrete tax benefits totaling $186 million, or approximately $0.04 per share, primarily as a result of our agreement to sell Wells Fargo Insurance Services.


- 3 -

Our liquidity and capital positions remained strong, and we returned $3.4 billion to shareholders through common stock dividends and net share repurchases for a net payout ratio3 of 63 percent in the quarter. In addition, during the quarter we received a non-objection from the Federal Reserve to our 2017 Capital Plan, which included an increase, subject to board approval, in our quarterly common stock dividend rate in third quarter 2017, to $0.39 per share from $0.38 per share, as well as increased share repurchases."

Net Interest Income
Net interest income in second quarter 2017 increased $183 million from first quarter 2017 to $12.5 billion, as the benefit of repricing earning assets in response to higher short-term interest rates exceeded the cost of repricing liabilities, due in part to continued deposit pricing discipline. Second quarter results also benefited from one additional business day. These benefits more than offset the impact of lower average loan and investment securities balances. 

Net interest margin was 2.90 percent, up 3 basis points from first quarter 2017. The benefit of higher short-term interest rates, disciplined deposit pricing, and a reduction in long-term debt was partially offset by the impacts from lower loan and investment securities balances.

Noninterest Income
Noninterest income in the second quarter was $9.7 billion, in line with first quarter 2017. Second quarter noninterest income included higher other income on a $309 million gain on the sale of a Pick-a-Pay purchased credit-impaired (PCI) loan portfolio, higher card fees on stronger credit card and debit card purchase volumes, and higher trust and investment fees reflecting stronger investment banking fees from both higher equity and debt originations. These increases were offset by lower market sensitive revenue4 and lower mortgage banking income.
•
Mortgage banking noninterest income was $1.1 billion, compared with $1.2 billion in first quarter 2017. As expected, residential mortgage loan originations increased in the second quarter, up to $56 billion, from $44 billion in the first quarter. The production margin on residential held-for-sale mortgage loan originations5 was 1.24 percent, down from 1.68 percent in the first quarter due to increased price competition and a higher percentage of correspondent volume, which has lower production margins than retail originations. Mortgage servicing income was $400 million in the second quarter, down from $456 million in the first quarter, primarily due to lower net hedge results and higher prepayments.
•
Market sensitive revenue was $545 million, compared with $878 million in first quarter 2017, as lower net gains from equity investments and trading activities were partially offset by higher gains on debt securities. Net gains from equity investments were down $215 million from the first quarter on lower venture capital gains. Net gains from trading activities were down $202 million linked quarter and included lower deferred compensation plan investment results (largely offset in employee benefits expense), as well as lower secondary trading results on reduced client activity and lower valuation adjustments.
3 Net payout ratio means the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock.
4 Market sensitive revenue represents net gains from trading activities, debt securities and equity investments.
5 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 41 for more information.


- 4 -

Noninterest Expense
Noninterest expense in the second quarter declined $251 million from the prior quarter to $13.5 billion, primarily due to lower employee benefits and commission and incentive compensation, which were seasonally elevated in the first quarter. These declines were partially offset by increases in outside professional services and salaries, as well as higher operating losses, reflecting higher litigation accruals. In addition, the second quarter included a $94 million donation to the Wells Fargo Foundation. The efficiency ratio improved to 61.1 percent in second quarter 2017, compared with 62.7 percent in the prior quarter.

Income Taxes
The Company’s effective income tax rate was 27.7 percent for second quarter 2017, and included discrete tax benefits totaling $186 million, primarily related to the deferred income tax effect of investment basis differences recognized as a result of our agreement to sell Wells Fargo Insurance Services USA and related businesses. This compares with an effective income tax rate of 27.4 percent in first quarter 2017, which included discrete tax benefits totaling $197 million, of which $183 million reflected tax benefits associated with stock compensation activity during the quarter which was subject to ASU 2016-09 accounting guidance adopted in the first quarter. The Company currently expects the full-year 2017 tax rate to be approximately 29 percent.
Loans
Total average loans were $956.9 billion in the second quarter, down $6.8 billion from the first quarter. Period-end loan balances were $957.4 billion at June 30, 2017, down $982 million from March 31, 2017, reflecting an expected decline in auto loans as our tighter underwriting standards resulted in lower origination volume. Additionally, legacy junior lien mortgage loans continued to decline as expected. These declines were partially offset by growth in commercial and industrial loans, real estate first mortgage loans, and credit card loans.
Period-End Loan Balances
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Commercial
$
505,901

 
505,004

 
506,536

 
496,454

 
494,538

Consumer
451,522

 
453,401

 
461,068

 
464,872

 
462,619

Total loans
$
957,423

 
958,405

 
967,604

 
961,326

 
957,157

Change from prior quarter
$
(982
)
 
(9,199
)
 
6,278

 
4,169

 
9,899


Investment Securities
Investment securities were $409.6 billion at June 30, 2017, up $2.0 billion from the first quarter, as approximately $37.1 billion of purchases, primarily federal agency mortgage-backed securities in the available-for-sale portfolio, were partially offset by sales and run-off.

Net unrealized gains on available-for-sale securities were $1.1 billion at June 30, 2017, compared with net unrealized losses on available-for-sale securities of $1.2 billion at March 31, 2017, primarily due to tighter credit spreads during the quarter and a modest benefit from lower long-term interest rates.




- 5 -

Deposits
Total average deposits for second quarter 2017 were $1.3 trillion, stable from the prior quarter, as growth in consumer and small business deposits was offset by lower commercial deposits. The average deposit cost for second quarter 2017 was 21 basis points, up 4 basis points from the prior quarter and 10 basis points from a year ago, primarily driven by an increase in commercial deposit rates.

Capital
Capital levels remained strong in the second quarter, with a Common Equity Tier 1 ratio (fully phased-in) of 11.6 percent2, compared with 11.2 percent in the prior quarter. In second quarter 2017, the Company repurchased 43.0 million shares of its common stock, which reduced period-end common shares outstanding by 30.0 million. The Company paid a quarterly common stock dividend of $0.38 per share. In addition, the Company received a non-objection to its 2017 Capital Plan from the Federal Reserve. As part of this plan, the Company expects to increase its third quarter 2017 common stock dividend to $0.39 per share, subject to approval by the Company's Board of Directors. The plan also includes up to $11.5 billion of gross common stock repurchases, subject to management discretion, for the four-quarter period from third quarter 2017 through second quarter 2018.

Credit Quality

Net Loan Charge-offs
The quarterly loss rate improved to 0.27 percent (annualized) from 0.34 percent in the prior quarter. Commercial and consumer losses improved to 0.06 percent and 0.51 percent, respectively. Credit losses were $655 million in second quarter 2017, down $150 million from first quarter 2017. Consumer losses decreased $82 million, driven by lower losses across all asset classes with the exception of credit card. Commercial losses were down $68 million, predominantly driven by lower losses in our oil and gas portfolio.
Net Loan Charge-Offs
 
Quarter ended
 
 
June 30, 2017
 
 
March 31, 2017
 
 
December 31, 2016
 
($ in millions)
Net loan 
charge- 
offs 

 
As a % of 
average 
loans (a) 

 
Net loan 
charge- 
offs 

 
As a % of 
average 
loans (a) 

 
Net loan 
charge- 
offs 

 
As a % of 
average 
loans (a) 

Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
78

 
0.10
 %
 
$
171

 
0.21
 %
 
$
256

 
0.31
 %
Real estate mortgage
(6
)
 
(0.02
)
 
(25
)
 
(0.08
)
 
(12
)
 
(0.04
)
Real estate construction
(4
)
 
(0.05
)
 
(8
)
 
(0.15
)
 
(8
)
 
(0.13
)
Lease financing
7

 
0.15

 
5

 
0.11

 
15

 
0.32

Total commercial
75

 
0.06

 
143

 
0.11

 
251

 
0.20

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
(16
)
 
(0.02
)
 
7

 
0.01

 
(3
)
 
—

Real estate 1-4 family junior lien mortgage
(4
)
 
(0.03
)
 
23

 
0.21

 
44

 
0.38

Credit card
320

 
3.67

 
309

 
3.54

 
275

 
3.09

Automobile
126

 
0.86

 
167

 
1.10

 
166

 
1.05

Other revolving credit and installment
154

 
1.58

 
156

 
1.60

 
172

 
1.70

Total consumer
580

 
0.51

 
662

 
0.59

 
654

 
0.56

Total
$
655

 
0.27
 %
 
$
805

 
0.34
 %
 
$
905

 
0.37
 %
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 31 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.


- 6 -

Nonperforming Assets
Nonperforming assets decreased $827 million from first quarter 2017 to $9.8 billion. Nonaccrual loans decreased $703 million from first quarter 2017 to $9.1 billion reflecting declines across all commercial asset classes, as well as continued lower consumer real estate nonaccruals.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
 
June 30, 2017
 
 
March 31, 2017
 
 
December 31, 2016
 
($ in millions)
Total 
balances 

 
As a % of 
total 
loans 

 
Total balances 

 
As a 
% of 
total 
loans 

 
Total 
balances 

 
As a 
% of 
total 
loans 

Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
2,632

 
0.79
%
 
$
2,898

 
0.88
%
 
$
3,216

 
0.97
%
Real estate mortgage
630

 
0.48

 
672

 
0.51

 
685

 
0.52

Real estate construction
34

 
0.13

 
40

 
0.16

 
43

 
0.18

Lease financing
89

 
0.46

 
96

 
0.50

 
115

 
0.60

Total commercial
3,385

 
0.67

 
3,706

 
0.73

 
4,059

 
0.80

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
4,413

 
1.60

 
4,743

 
1.73

 
4,962

 
1.80

Real estate 1-4 family junior lien mortgage
1,095

 
2.56

 
1,153

 
2.60

 
1,206

 
2.61

Automobile
104

 
0.18

 
101

 
0.17

 
106

 
0.17

Other revolving credit and installment
59

 
0.15

 
56

 
0.14

 
51

 
0.13

Total consumer
5,671

 
1.26

 
6,053

 
1.34

 
6,325

 
1.37

Total nonaccrual loans
9,056

 
0.95

 
9,759

 
1.02

 
10,384

 
1.07

Foreclosed assets:
 
 
 
 
 
 
 
 
 
 
 
Government insured/guaranteed
149

 
 
 
179

 
 
 
197

 
 
Non-government insured/guaranteed
632

 
 
 
726

 
 
 
781

 
 
Total foreclosed assets
781

 
 
 
905

 
 
 
978

 
 
Total nonperforming assets
$
9,837

 
1.03
%
 
$
10,664

 
1.11
%
 
$
11,362

 
1.17
%
Change from prior quarter:
 
 
 
 
 
 
 
 
 
 
 
Total nonaccrual loans
$
(703
)
 
 
 
$
(625
)
 
 
 
$
(602
)
 
 
Total nonperforming assets
(827
)
 
 
 
(698
)
 
 
 
(644
)
 
 
 

Allowance for Credit Losses
The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.1 billion at June 30, 2017, which was down $141 million from March 31, 2017. Second quarter 2017 included a $100 million reserve release1, reflecting continued strong credit performance. The allowance coverage for total loans was 1.27 percent, compared with 1.28 percent in first quarter 2017. 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 134 percent at June 30, 2017, compared with 126 percent at March 31, 2017. The Company believes the allowance was appropriate for losses inherent in the loan portfolio at June 30, 2017.



- 7 -

Business Segment Performance
Wells Fargo defines its operating segments by product type and customer segment. Segment net income for each of the three business segments was:
 
Quarter ended 
 
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Jun 30,
2016

Community Banking
$
2,993

 
3,009

 
3,179

Wholesale Banking
2,388

 
2,115

 
2,073

Wealth and Investment Management
682

 
623

 
584


Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and auto, student, and small business lending. Community Banking also offers investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. through its Regional Banking and Wells Fargo Home Lending business units.
Selected Financial Information
 
Quarter ended 
 
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Jun 30,
2016

Total revenue
$
12,289

 
12,093

 
12,204

Provision for credit losses
623

 
646

 
689

Noninterest expense
7,223

 
7,221

 
6,648

Segment net income
2,993

 
3,009

 
3,179

(in billions)
 
 
 
 
 
Average loans
477.2

 
482.7

 
485.7

Average assets
983.5

 
990.7

 
967.6

Average deposits
727.2

 
717.2

 
703.7


Community Banking reported net income of $3.0 billion, down $16 million, or 1 percent, from first quarter 2017. Revenue of $12.3 billion increased $196 million, or 2 percent, from first quarter 2017, driven by the gain on the sale of a Pick-a-Pay PCI loan portfolio, higher other income (reflecting the accounting impact of net hedge ineffectiveness), higher gains on sales of debt securities and higher card fees, partially offset by lower gains on equity investments, lower net interest income and lower mortgage banking revenue. Noninterest expense was flat, compared with first quarter 2017, as lower personnel expense offset higher professional services. The provision for credit losses decreased $23 million linked quarter.
Net income decreased $186 million, or 6 percent, from second quarter 2016. Revenue increased $85 million, or 1 percent, compared with a year ago due to the gain on the sale of a Pick-a-Pay PCI loan portfolio, higher net interest income, higher gains from deferred compensation plan investments (offset in benefits expense) and higher card fees, partially offset by lower mortgage banking revenue and gains on sales of debt securities. Noninterest expense increased $575 million, or 9 percent, from a year ago driven by higher personnel and professional services expense. The provision for credit losses decreased $66 million from a year ago primarily due to improvement in the consumer real estate portfolios.



- 8 -

Retail Banking and Consumer Payments, Virtual Solutions and Innovation
•
With over 400,000 branch customer experience surveys completed during the second quarter, ‘Overall Satisfaction with Most Recent Visit’ and ‘Loyalty’ scores in June reached their highest levels since August 2016
•
5,977 retail bank branches as of the end of second quarter 2017, reflecting 54 branch consolidations in the quarter
•
Primary consumer checking customers6,7 up 0.7 percent year-over-year
•
Debit card point-of-sale purchase volume8 of $80.6 billion in second quarter, up 6 percent year-over-year
•
Credit card point-of-sale purchase volume of $20.0 billion in second quarter, up 3 percent year-over-year
•
Credit card penetration in retail banking households of 45.5 percent9
•
27.9 million digital (online and mobile) active customers in June, including 20.4 million mobile active users10
•
Keynote's Banker Scorecard named Wells Fargo as tied for #1 in online performance (May 2017)
•
Launched ZelleSM peer-to-peer payments experience to allow digital customers to send, receive, and request money with mobile banking customers across the U.S.
Consumer Lending
•
Auto originations of $4.5 billion in second quarter, down 17 percent from prior quarter and down 45 percent from prior year, as proactive steps to tighten underwriting standards resulted in lower origination volume
•
Home Lending
◦
Originations of $56 billion, up from $44 billion in prior quarter
◦
Applications of $83 billion, up from $59 billion in prior quarter
◦
Application pipeline of $34 billion at quarter end, up from $28 billion at March 31, 2017

6 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
7 Data as of May 2017, comparisons with May 2016.
8 Combined consumer and business debit card purchase volume dollars.
9 Credit card penetration defined as the percentage of Retail Banking households that have a credit card with Wells Fargo. Retail Banking households reflect only those households that maintain a retail checking account, which we believe provides the foundation for long-term retail banking relationships. Credit card household penetration rates have not been adjusted to reflect the impact of the potentially unauthorized accounts identified by an independent consulting firm late in 2016 because the maximum impact in any one quarter was not greater than 86 basis points, or approximately 2 percent. Data as of May 2017.
10 Primarily includes retail banking, consumer lending, small business and business banking customers.


- 9 -

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include Business Banking, Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments and Asset Backed Finance.
Selected Financial Information
 
Quarter ended
 
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Jun 30,
2016

Total revenue
$
6,951

 
7,038

 
7,284

Provision (reversal of provision) for credit losses
(65
)
 
(43
)
 
385

Noninterest expense
4,078

 
4,225

 
4,036

Segment net income
2,388

 
2,115

 
2,073

(in billions)
 
 
 
 
 
Average loans
464.9

 
466.3

 
451.4

Average assets
817.3

 
807.8

 
772.6

Average deposits
463.0

 
466.0

 
425.8


Wholesale Banking reported net income of $2.4 billion, up $273 million, or 13 percent, from first quarter 2017, primarily due to the tax benefit resulting from our agreement to sell Wells Fargo Insurance Services USA and related businesses and lower noninterest expense. Revenue of $7.0 billion decreased $87 million, or 1 percent, from the prior quarter. Net interest income increased $130 million, or 3 percent, on higher trading related income, increased loan yields and one additional business day in the quarter. Noninterest income decreased $217 million, or 8 percent, as lower customer accommodation trading and lower principal investing results were partially offset by higher investment banking and commercial real estate brokerage fees. Noninterest expense decreased $147 million, or 3 percent, from the prior quarter due to seasonally higher personnel expenses in the first quarter. The provision for credit losses decreased $22 million from the prior quarter, primarily due to improvements in the oil and gas portfolio.
Net income increased $315 million, or 15 percent, from second quarter 2016, primarily due to the tax benefit in second quarter 2017 and lower loan loss provision. Revenue decreased $333 million, or 5 percent, from second quarter 2016, which included the gain on sale of our health benefit services business. Net interest income increased $359 million, or 9 percent, from second quarter 2016 on deposit and loan growth, including the GE Capital portfolio acquisitions in the second half of 2016, as well as the impact of rising interest rates. Noninterest income decreased $692 million, or 21 percent, from a year ago primarily due to the second quarter 2016 gain on the sale of our health benefit services business, lower customer accommodation trading results, and lower principal investing gains. Noninterest expense increased $42 million, or 1 percent, from a year ago primarily due to higher expenses related to growth initiatives, compliance, and regulatory requirements. The provision for credit losses decreased $450 million from a year ago primarily due to improvements in the oil and gas portfolio.


- 10 -

Wealth and Investment Management (WIM) provides a full range of personalized wealth management, investment and retirement products and services to clients across U.S. based businesses including Wells Fargo Advisors, The Private Bank, Abbot Downing, Wells Fargo Institutional Retirement and Trust, and Wells Fargo Asset Management. We deliver financial planning, private banking, credit, investment management and fiduciary services to high-net worth and ultra-high-net worth individuals and families. We also serve customers’ brokerage needs, supply retirement and trust services to institutional clients and provide investment management capabilities delivered to global institutional clients through separate accounts and the Wells Fargo Funds.
Selected Financial Information
 
Quarter ended
 
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Jun 30,
2016

Total revenue
$
4,182

 
4,193

 
3,919

Provision (reversal of provision) for credit losses
7

 
(4
)
 
2

Noninterest expense
3,075

 
3,206

 
2,976

Segment net income
682

 
623

 
584

(in billions)
 
 
 
 
 
Average loans
71.7

 
70.7

 
66.7

Average assets
213.1

 
221.9

 
205.3

Average deposits
188.2

 
195.6

 
182.5


Wealth and Investment Management reported net income of $682 million, up $59 million, or 9 percent, from first quarter 2017. Revenue of $4.2 billion decreased $11 million from the prior quarter, primarily due to lower gains on deferred compensation plan investments (offset in employee benefits expense) and lower other fee income, partially offset by higher net interest income and higher asset-based fees. Noninterest expense decreased $131 million, or 4 percent, from the prior quarter, primarily driven by lower personnel expenses from seasonally-higher first quarter expense, lower other non-personnel expenses, and lower deferred compensation plan expense (offset in trading revenue), partially offset by higher operating losses.
Net income was up $98 million, or 17 percent, from second quarter 2016. Revenue increased $263 million, or 7 percent, from a year ago primarily driven by higher net interest income and asset-based fees, partially offset by lower transaction revenue. Noninterest expense increased $99 million, or 3 percent, from a year ago, primarily due to higher operating losses, broker commissions, and other personnel expenses.
•
WIM total client assets reached a record-high of $1.8 trillion, up 8 percent from a year ago, driven by higher market valuations and continued positive net flows
•
Second quarter 2017 average closed referred investment assets (referrals resulting from the WIM/Community Banking partnership) were up 12 percent from first quarter 2017



- 11 -

Retail Brokerage 
•
Client assets of $1.6 trillion, up 8 percent from prior year
•
Advisory assets of $503 billion, up 13 percent from prior year, primarily driven by higher market valuations and positive net flows
•
Strong loan growth, with average balances up 11 percent from prior year largely due to continued growth in non-conforming mortgage loans

Wealth Management
•
Client assets of $236 billion, up 5 percent from prior year
•
Average loan balances up 5 percent from prior year primarily driven by continued growth in non-conforming mortgage loans

Asset Management
•
Total assets under management of $487 billion, up 1 percent from prior year, primarily due to higher market valuations, positive fixed income net flows and assets acquired during the prior year, partially offset by equity and money market net outflows
•
Strong performance in active equity with 70 percent of active equity mutual funds outperforming their respective benchmarks year-to-date through the end of June

Retirement
•
IRA assets of $390 billion, up 6 percent from prior year
•
Institutional Retirement plan assets of $375 billion, up 11 percent from prior year




Conference Call
The Company will host a live conference call on Friday, July 14, 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~34999396.

A replay of the conference call will be available beginning at 10:00 a.m. PT (1:00 p.m. ET) on Friday, July 14 through Friday, July 28. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #34999396. 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~34999396.



- 12 -

Forward-Looking Statements

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we may make forward-looking statements in our other documents filed or furnished with the SEC, and our management may make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “target,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar references to future periods. In particular, forward-looking statements include, but are not limited to, statements we make about: (i) the future operating or financial performance of the Company, including our outlook for future growth; (ii) our noninterest expense and efficiency ratio; (iii) future credit quality and performance, including our expectations regarding future loan losses and allowance levels; (iv) the appropriateness of the allowance for credit losses; (v) our expectations regarding net interest income and net interest margin; (vi) loan growth or the reduction or mitigation of risk in our loan portfolios; (vii) future capital or liquidity levels or targets and our estimated Common Equity Tier 1 ratio under Basel III capital standards; (viii) the performance of our mortgage business and any related exposures; (ix) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (x) future common stock dividends, common share repurchases and other uses of capital; (xi) our targeted range for return on assets and return on equity; (xii) the outcome of contingencies, such as legal proceedings; and (xiii) the Company’s plans, objectives and strategies.
Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:
 
•
current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and the overall slowdown in global economic growth;
•
our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
•
financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
•
the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;
•
the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;
•
negative effects relating to our mortgage servicing and foreclosure practices, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;
•
our ability to realize our efficiency ratio target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;
•
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


- 13 -

funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our investment securities portfolio;
•
the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
•
negative effects from the retail banking sales practices matter, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, and our reputation;
•
reputational damage from negative publicity, protests, fines, penalties and other negative consequences from regulatory violations and legal actions;
•
a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
•
the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
•
fiscal and monetary policies of the Federal Reserve Board; and
•
the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.
In addition to the above factors, we also caution that the amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of the Company, market conditions, capital requirements (including under Basel capital standards), common stock issuance requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company’s Board of Directors, and may be subject to regulatory approval or conditions.
For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.
Any forward-looking statement made by us speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.


- 14 -

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, insurance, investments, mortgage, and consumer and commercial finance through more than 8,500 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 42 countries and territories to support customers who conduct business in the global economy. With approximately 271,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2017 rankings of America’s largest corporations.

# # #




- 15 -

Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS
 
 
 
 
Pages
 
 
Summary Information
 
Summary Financial Data
16
 
 
Income
 
Consolidated Statement of Income
18
Consolidated Statement of Comprehensive Income
20
Condensed Consolidated Statement of Changes in Total Equity
20
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis)
21
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis)
23
Noninterest Income and Noninterest Expense
24
 
 
Balance Sheet
 
Consolidated Balance Sheet
26
Investment Securities
28
 
 
Loans
 
Loans
28
Nonperforming Assets
29
Loans 90 Days or More Past Due and Still Accruing
30
Purchased Credit-Impaired Loans
31
Pick-A-Pay Portfolio
32
Changes in Allowance for Credit Losses
34
 
 
Equity
 
Tangible Common Equity
35
Common Equity Tier 1 Under Basel III
36
 
 
Operating Segments
 
Operating Segment Results
37
 
 
Other
 
Mortgage Servicing and other related data
39


- 16 -

Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
 
Quarter ended
 
 
% Change
Jun 30, 2017 from
 
 
Six months ended
 
 
 
($ in millions, except per share amounts)
Jun 30,
2017

 
Mar 31,
2017

 
Jun 30,
2016

 
Mar 31,
2017

 
Jun 30,
2016

 
Jun 30,
2017

 
Jun 30,
2016

 
%
Change

For the Period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wells Fargo net income
$
5,810

 
5,457

 
5,558

 
6
 %
 
5

 
$
11,267

 
11,020

 
2
 %
Wells Fargo net income applicable to common stock
5,404

 
5,056

 
5,173

 
7

 
4

 
10,460

 
10,258

 
2

Diluted earnings per common share
1.07

 
1.00

 
1.01

 
7

 
6

 
2.07

 
2.00

 
4

Profitability ratios (annualized):
 
 
 
 
 
 


 


 
 
 
 
 
 
Wells Fargo net income to average assets (ROA)
1.21
%
 
1.15

 
1.20

 
5

 
1

 
1.18
%
 
1.20

 
(2
)
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)
11.95

 
11.54

 
11.70

 
4

 
2

 
11.75

 
11.72

 
—

Return on average tangible common equity (ROTCE)(1)
14.26

 
13.85

 
14.15

 
3

 
1

 
14.06

 
14.15

 
(1
)
Efficiency ratio (2)
61.1

 
62.7

 
58.1

 
(3
)
 
5

 
61.9

 
58.4

 
6

Total revenue
$
22,169

 
22,002

 
22,162

 
1

 
—

 
$
44,171

 
44,357

 
—

Pre-tax pre-provision profit (PTPP) (3)
8,628

 
8,210

 
9,296

 
5

 
(7
)
 
16,838

 
18,463

 
(9
)
Dividends declared per common share
0.380

 
0.380

 
0.380

 
—

 
—

 
0.760

 
0.755

 
1

Average common shares outstanding
4,989.9

 
5,008.6

 
5,066.9

 
—

 
(2
)
 
4,999.2

 
5,071.3

 
(1
)
Diluted average common shares outstanding
5,037.7

 
5,070.4

 
5,118.1

 
(1
)
 
(2
)
 
5,054.8

 
5,129.8

 
(1
)
Average loans
$
956,879

 
963,645

 
950,751

 
(1
)
 
1

 
$
960,243

 
938,986

 
2

Average assets
1,927,079

 
1,931,041

 
1,862,084

 
—

 
3

 
1,929,049

 
1,840,980

 
5

Average total deposits
1,301,195

 
1,299,191

 
1,236,658

 
—

 
5

 
1,300,198

 
1,228,044

 
6

Average consumer and small business banking deposits (4)
760,149

 
758,754

 
726,359

 
—

 
5

 
759,455

 
720,598

 
5

Net interest margin
2.90
%
 
2.87

 
2.86

 
1

 
1

 
2.89
%
 
2.88

 
—

At Period End
 
 
 
 
 
 


 


 
 
 
 
 
 
Investment securities
$
409,594

 
407,560

 
353,426

 
—

 
16

 
$
409,594

 
353,426

 
16

Loans
957,423

 
958,405

 
957,157

 
—

 
—

 
957,423

 
957,157

 
—

Allowance for loan losses
11,073

 
11,168

 
11,664

 
(1
)
 
(5
)
 
11,073

 
11,664

 
(5
)
Goodwill
26,573

 
26,666

 
26,963

 
—

 
(1
)
 
26,573

 
26,963

 
(1
)
Assets
1,930,871

 
1,951,564

 
1,889,235

 
(1
)
 
2

 
1,930,871

 
1,889,235

 
2

Deposits
1,305,830

 
1,325,444

 
1,245,473

 
(1
)
 
5

 
1,305,830

 
1,245,473

 
5

Common stockholders' equity
181,428

 
178,388

 
178,633

 
2

 
2

 
181,428

 
178,633

 
2

Wells Fargo stockholders’ equity
205,230

 
201,500

 
201,745

 
2

 
2

 
205,230

 
201,745

 
2

Total equity
206,145

 
202,489

 
202,661

 
2

 
2

 
206,145

 
202,661

 
2

Tangible common equity (1)
152,173

 
148,850

 
148,110

 
2

 
3

 
152,173

 
148,110

 
3

Common shares outstanding
4,966.8

 
4,996.7

 
5,048.5

 
(1
)
 
(2
)
 
4,966.8

 
5,048.5

 
(2
)
Book value per common share (5)
$
36.53

 
35.70

 
35.38

 
2

 
3

 
$
36.53

 
35.38

 
3

Tangible book value per common share (1)(5)
30.64

 
29.79

 
29.34

 
3

 
4

 
30.64

 
29.34

 
4

Common stock price:

 
 
 
 
 


 


 
 
 
 
 
 
High
56.60

 
59.99

 
51.41

 
(6
)
 
10

 
59.99

 
53.27

 
13

Low
50.84

 
53.35

 
44.50

 
(5
)
 
14

 
50.84

 
44.50

 
14

Period end
55.41

 
55.66

 
47.33

 
—

 
17

 
55.41

 
47.33

 
17

Team members (active, full-time equivalent)
270,600

 
272,800

 
267,900

 
(1
)
 
1

 
270,600

 
267,900

 
1

(1)
Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.
(2)
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(3)
Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(4)
Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(5)
Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.



- 17 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
 
Quarter ended
 
($ in millions, except per share amounts)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

For the Quarter
 
 
 
 
 
 
 
 
 
Wells Fargo net income
$
5,810

 
5,457

 
5,274

 
5,644

 
5,558

Wells Fargo net income applicable to common stock
5,404

 
5,056

 
4,872

 
5,243

 
5,173

Diluted earnings per common share
1.07

 
1.00

 
0.96

 
1.03

 
1.01

Profitability ratios (annualized):
 
 
 
 
 
 
 
 
 
Wells Fargo net income to average assets (ROA)
1.21
%
 
1.15

 
1.08

 
1.17

 
1.20

Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)
11.95

 
11.54

 
10.94

 
11.60

 
11.70

Return on average tangible common equity (ROTCE)(1)
14.26

 
13.85

 
13.16

 
13.96

 
14.15

Efficiency ratio (2)
61.1

 
62.7

 
61.2

 
59.4

 
58.1

Total revenue
$
22,169

 
22,002

 
21,582

 
22,328

 
22,162

Pre-tax pre-provision profit (PTPP) (3)
8,628

 
8,210

 
8,367

 
9,060

 
9,296

Dividends declared per common share
0.380

 
0.380

 
0.380

 
0.380

 
0.380

Average common shares outstanding
4,989.9

 
5,008.6

 
5,025.6

 
5,043.4

 
5,066.9

Diluted average common shares outstanding
5,037.7

 
5,070.4

 
5,078.2

 
5,094.6

 
5,118.1

Average loans
$
956,879

 
963,645

 
964,147

 
957,484

 
950,751

Average assets
1,927,079

 
1,931,041

 
1,944,250

 
1,914,586

 
1,862,084

Average total deposits
1,301,195

 
1,299,191

 
1,284,158

 
1,261,527

 
1,236,658

Average consumer and small business banking deposits (4)
760,149

 
758,754

 
749,946

 
739,066

 
726,359

Net interest margin
2.90
%
 
2.87

 
2.87

 
2.82

 
2.86

At Quarter End
 
 
 
 
 
 
 
 
 
Investment securities
$
409,594

 
407,560

 
407,947

 
390,832

 
353,426

Loans
957,423

 
958,405

 
967,604

 
961,326

 
957,157

Allowance for loan losses
11,073

 
11,168

 
11,419

 
11,583

 
11,664

Goodwill
26,573

 
26,666

 
26,693

 
26,688

 
26,963

Assets
1,930,871

 
1,951,564

 
1,930,115

 
1,942,124

 
1,889,235

Deposits
1,305,830

 
1,325,444

 
1,306,079

 
1,275,894

 
1,245,473

Common stockholders' equity
181,428

 
178,388

 
176,469

 
179,916

 
178,633

Wells Fargo stockholders’ equity
205,230

 
201,500

 
199,581

 
203,028

 
201,745

Total equity
206,145

 
202,489

 
200,497

 
203,958

 
202,661

Tangible common equity (1)
152,173

 
148,850

 
146,737

 
149,829

 
148,110

Common shares outstanding
4,966.8

 
4,996.7

 
5,016.1

 
5,023.9

 
5,048.5

Book value per common share (5)
$
36.53

 
35.70

 
35.18

 
35.81

 
35.38

Tangible book value per common share (1)(5)
30.64

 
29.79

 
29.25

 
29.82

 
29.34

Common stock price:
 
 
 
 
 
 
 
 
 
High
56.60

 
59.99

 
58.02

 
51.00

 
51.41

Low
50.84

 
53.35

 
43.55

 
44.10

 
44.50

Period end
55.41

 
55.66

 
55.11

 
44.28

 
47.33

Team members (active, full-time equivalent)
270,600

 
272,800

 
269,100

 
268,800

 
267,900

(1)
Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.
(2)
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(3)
Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(4)
Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(5)
Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.


- 18 -

Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
 
Quarter ended June 30,
 
 
%

 
Six months ended June 30,
 
 
%

(in millions, except per share amounts)
2017

 
2016

 
Change

 
2017

 
2016

 
Change

Interest income
 
 
 
 
 
 
 
 
 
 
 
Trading assets
$
710

 
572

 
24
 %
 
$
1,353

 
1,168

 
16
 %
Investment securities
2,698

 
2,176

 
24

 
5,373

 
4,438

 
21

Mortgages held for sale
195

 
181

 
8

 
379

 
342

 
11

Loans held for sale
4

 
3

 
33

 
5

 
5

 
—

Loans
10,358

 
9,822

 
5

 
20,499

 
19,399

 
6

Other interest income
750

 
392

 
91

 
1,332

 
766

 
74

Total interest income
14,715

 
13,146

 
12

 
28,941

 
26,118

 
11

Interest expense
 
 
 
 
 
 
 
 
 
 
 
Deposits
683

 
332

 
106

 
1,220

 
639

 
91

Short-term borrowings
163

 
77

 
112

 
277

 
144

 
92

Long-term debt
1,278

 
921

 
39

 
2,461

 
1,763

 
40

Other interest expense
108

 
83

 
30

 
200

 
172

 
16

Total interest expense
2,232

 
1,413

 
58

 
4,158

 
2,718

 
53

Net interest income
12,483

 
11,733

 
6

 
24,783

 
23,400

 
6

Provision for credit losses
555

 
1,074

 
(48
)
 
1,160

 
2,160

 
(46
)
Net interest income after provision for credit losses
11,928

 
10,659

 
12

 
23,623

 
21,240

 
11

Noninterest income
 
 
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
1,276

 
1,336

 
(4
)
 
2,589

 
2,645

 
(2
)
Trust and investment fees
3,629

 
3,547

 
2

 
7,199

 
6,932

 
4

Card fees
1,019

 
997

 
2

 
1,964

 
1,938

 
1

Other fees
902

 
906

 
—

 
1,767

 
1,839

 
(4
)
Mortgage banking
1,148

 
1,414

 
(19
)
 
2,376

 
3,012

 
(21
)
Insurance
280

 
286

 
(2
)
 
557

 
713

 
(22
)
Net gains from trading activities
237

 
328

 
(28
)
 
676

 
528

 
28

Net gains on debt securities
120

 
447

 
(73
)
 
156

 
691

 
(77
)
Net gains from equity investments
188

 
189

 
(1
)
 
591

 
433

 
36

Lease income
493

 
497

 
(1
)
 
974

 
870

 
12

Other
394

 
482

 
(18
)
 
539

 
1,356

 
(60
)
Total noninterest income
9,686

 
10,429

 
(7
)
 
19,388

 
20,957

 
(7
)
Noninterest expense
 
 
 
 
 
 
 
 
 
 
 
Salaries
4,343

 
4,099

 
6

 
8,604

 
8,135

 
6

Commission and incentive compensation
2,499

 
2,604

 
(4
)
 
5,224

 
5,249

 
—

Employee benefits
1,308

 
1,244

 
5

 
2,994

 
2,770

 
8

Equipment
529

 
493

 
7

 
1,106

 
1,021

 
8

Net occupancy
706

 
716

 
(1
)
 
1,418

 
1,427

 
(1
)
Core deposit and other intangibles
287

 
299

 
(4
)
 
576

 
592

 
(3
)
FDIC and other deposit assessments
328

 
255

 
29

 
661

 
505

 
31

Other
3,541

 
3,156

 
12

 
6,750

 
6,195

 
9

Total noninterest expense
13,541

 
12,866

 
5

 
27,333

 
25,894

 
6

Income before income tax expense
8,073

 
8,222

 
(2
)
 
15,678

 
16,303

 
(4
)
Income tax expense
2,225

 
2,649

 
(16
)
 
4,282

 
5,216

 
(18
)
Net income before noncontrolling interests
5,848

 
5,573

 
5

 
11,396

 
11,087

 
3

Less: Net income from noncontrolling interests
38

 
15

 
153

 
129

 
67

 
93

Wells Fargo net income
$
5,810

 
5,558

 
5

 
$
11,267

 
11,020

 
2

Less: Preferred stock dividends and other
406

 
385

 
5

 
807

 
762

 
6

Wells Fargo net income applicable to common stock
$
5,404

 
5,173

 
4

 
$
10,460

 
10,258

 
2

Per share information
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share
$
1.08

 
1.02

 
6

 
$
2.09

 
2.02

 
3

Diluted earnings per common share
1.07

 
1.01

 
6

 
2.07

 
2.00

 
4

Dividends declared per common share
0.380

 
0.380

 
—

 
0.760

 
0.755

 
1

Average common shares outstanding
4,989.9

 
5,066.9

 
(2
)
 
4,999.2

 
5,071.3

 
(1
)
Diluted average common shares outstanding
5,037.7

 
5,118.1

 
(2
)
 
5,054.8

 
5,129.8

 
(1
)



- 19 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
 
Quarter ended
 
(in millions, except per share amounts)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Interest income
 
 
 
 
 
 
 
 
 
Trading assets
$
710

 
643

 
745

 
593

 
572

Investment securities
2,698

 
2,675

 
2,512

 
2,298

 
2,176

Mortgages held for sale
195

 
184

 
235

 
207

 
181

Loans held for sale
4

 
1

 
2

 
2

 
3

Loans
10,358

 
10,141

 
10,128

 
9,978

 
9,822

Other interest income
750

 
582

 
436

 
409

 
392

Total interest income
14,715

 
14,226

 
14,058

 
13,487

 
13,146

Interest expense
 
 
 
 
 
 
 
 
 
Deposits
683

 
537

 
400

 
356

 
332

Short-term borrowings
163

 
114

 
101

 
85

 
77

Long-term debt
1,278

 
1,183

 
1,061

 
1,006

 
921

Other interest expense
108

 
92

 
94

 
88

 
83

Total interest expense
2,232

 
1,926

 
1,656

 
1,535

 
1,413

Net interest income
12,483

 
12,300

 
12,402

 
11,952

 
11,733

Provision for credit losses
555

 
605

 
805

 
805

 
1,074

Net interest income after provision for credit losses
11,928

 
11,695

 
11,597

 
11,147

 
10,659

Noninterest income
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
1,276

 
1,313

 
1,357

 
1,370

 
1,336

Trust and investment fees
3,629

 
3,570

 
3,698

 
3,613

 
3,547

Card fees
1,019

 
945

 
1,001

 
997

 
997

Other fees
902

 
865

 
962

 
926

 
906

Mortgage banking
1,148

 
1,228

 
1,417

 
1,667

 
1,414

Insurance
280

 
277

 
262

 
293

 
286

Net gains (losses) from trading activities
237

 
439

 
(109
)
 
415

 
328

Net gains on debt securities
120

 
36

 
145

 
106

 
447

Net gains from equity investments
188

 
403

 
306

 
140

 
189

Lease income
493

 
481

 
523

 
534

 
497

Other
394

 
145

 
(382
)
 
315

 
482

Total noninterest income
9,686

 
9,702

 
9,180

 
10,376

 
10,429

Noninterest expense
 
 
 
 
 
 
 
 
 
Salaries
4,343

 
4,261

 
4,193

 
4,224

 
4,099

Commission and incentive compensation
2,499

 
2,725

 
2,478

 
2,520

 
2,604

Employee benefits
1,308

 
1,686

 
1,101

 
1,223

 
1,244

Equipment
529

 
577

 
642

 
491

 
493

Net occupancy
706

 
712

 
710

 
718

 
716

Core deposit and other intangibles
287

 
289

 
301

 
299

 
299

FDIC and other deposit assessments
328

 
333

 
353

 
310

 
255

Other
3,541

 
3,209

 
3,437

 
3,483

 
3,156

Total noninterest expense
13,541

 
13,792

 
13,215

 
13,268

 
12,866

Income before income tax expense
8,073

 
7,605

 
7,562

 
8,255

 
8,222

Income tax expense
2,225

 
2,057

 
2,258

 
2,601

 
2,649

Net income before noncontrolling interests
5,848

 
5,548

 
5,304

 
5,654

 
5,573

Less: Net income from noncontrolling interests
38

 
91

 
30

 
10

 
15

Wells Fargo net income
$
5,810

 
5,457

 
5,274

 
5,644

 
5,558

Less: Preferred stock dividends and other
406

 
401

 
402

 
401

 
385

Wells Fargo net income applicable to common stock
$
5,404

 
5,056

 
4,872

 
5,243

 
5,173

Per share information
 
 
 
 
 
 
 
 
 
Earnings per common share
$
1.08

 
1.01

 
0.97

 
1.04

 
1.02

Diluted earnings per common share
1.07

 
1.00

 
0.96

 
1.03

 
1.01

Dividends declared per common share
0.380

 
0.380

 
0.380

 
0.380

 
0.380

Average common shares outstanding
4,989.9

 
5,008.6

 
5,025.6

 
5,043.4

 
5,066.9

Diluted average common shares outstanding
5,037.7

 
5,070.4

 
5,078.2

 
5,094.6

 
5,118.1



- 20 -

Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
Quarter ended June 30,
 
 
%
 
Six months ended June 30,
 
 
%
(in millions)
2017

 
2016

 
Change
 
2017

 
2016

 
Change
Wells Fargo net income
$
5,810

 
5,558

 
5%
 
$
11,267

 
11,020

 
2
 %
Other comprehensive income (loss), before tax:
 
 
 
 

 
 
 
 
 


Investment securities:
 
 
 
 

 
 
 
 
 


Net unrealized gains arising during the period
1,565

 
1,571

 
—
 
1,934

 
2,366

 
(18
)
Reclassification of net gains to net income
(177
)
 
(504
)
 
(65)
 
(322
)
 
(808
)
 
(60
)
Derivatives and hedging activities:
 
 
 
 

 
 
 
 
 


Net unrealized gains arising during the period
376

 
1,057

 
(64)
 
243

 
3,056

 
(92
)
Reclassification of net gains on cash flow hedges to net income
(153
)
 
(265
)
 
(42)
 
(355
)
 
(521
)
 
(32
)
Defined benefit plans adjustments:
 
 
 
 

 
 
 
 
 


Net actuarial and prior service losses arising during the period
—

 
(19
)
 
(100)
 
(7
)
 
(27
)
 
(74
)
Amortization of net actuarial loss, settlements and other to net income
41

 
39

 
5
 
79

 
76

 
4

Foreign currency translation adjustments:
 
 
 
 

 
 
 
 
 


Net unrealized gains (losses) arising during the period
31

 
(6
)
 
NM
 
47

 
37

 
27

Other comprehensive income, before tax
1,683


1,873

 
(10)
 
1,619


4,179

 
(61
)
Income tax expense related to other comprehensive income
(624
)
 
(714
)
 
(13)
 
(587
)
 
(1,571
)
 
(63
)
Other comprehensive income, net of tax
1,059


1,159

 
(9)
 
1,032


2,608

 
(60
)
Less: Other comprehensive income (loss) from noncontrolling interests
(9
)
 
(15
)
 
(40)
 
5

 
(43
)
 
NM

Wells Fargo other comprehensive income, net of tax
1,068


1,174

 
(9)
 
1,027


2,651

 
(61
)
Wells Fargo comprehensive income
6,878


6,732

 
2
 
12,294


13,671

 
(10
)
Comprehensive income from noncontrolling interests
29

 
—

 
—
 
134

 
24

 
458

Total comprehensive income
$
6,907


6,732

 
3
 
$
12,428


13,695

 
(9
)
NM – Not meaningful
FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
 
Quarter ended
 
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Balance, beginning of period
$
202,489

 
200,497

 
203,958

 
202,661

 
198,504

Wells Fargo net income
5,810

 
5,457

 
5,274

 
5,644

 
5,558

Wells Fargo other comprehensive income (loss), net of tax
1,068

 
(41
)
 
(5,321
)
 
(764
)
 
1,174

Noncontrolling interests
(75
)
 
75

 
(13
)
 
14

 
(92
)
Common stock issued
252

 
1,406

 
610

 
300

 
397

Common stock repurchased (1)
(2,287
)
 
(2,175
)
 
(2,034
)
 
(1,839
)
 
(2,214
)
Preferred stock released by ESOP
406

 
—

 
43

 
236

 
371

Common stock warrants repurchased/exercised
(24
)
 
(44
)
 
—

 
(17
)
 
—

Preferred stock issued
677

 
—

 
—

 
—

 
1,126

Common stock dividends
(1,899
)
 
(1,903
)
 
(1,909
)
 
(1,918
)
 
(1,930
)
Preferred stock dividends
(406
)
 
(401
)
 
(401
)
 
(401
)
 
(386
)
Tax benefit from stock incentive compensation (2)
—

 
—

 
74

 
31

 
23

Stock incentive compensation expense
145

 
389

 
232

 
39

 
139

Net change in deferred compensation and related plans
(11
)
 
(771
)
 
(16
)
 
(28
)
 
(9
)
Balance, end of period
$
206,145

 
202,489

 
200,497

 
203,958

 
202,661

(1)
For the quarter ended December 31, 2016, includes $750 million related to a private forward repurchase transaction that settled in first quarter 2017 for 14.7 million shares of common stock.
(2)
Effective January 1, 2017, we adopted Accounting Standards Update 2016-09 (Improvements to Employee Share-Based Payment Accounting). Accordingly, tax benefit from stock incentive compensation is reported in income tax expense in the consolidated statement of income.


- 21 -

Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
Quarter ended June 30,
 
 
2017
 
 
2016
 
(in millions)
Average
balance

 
Yields/
rates

 
Interest
income/
expense

 
Average
balance

 
Yields/
rates

 
Interest
income/
expense

Earning assets
 
 
 
 
 
 
 
 
 
 
 
Federal funds sold, securities purchased under resale agreements and other short-term investments
$
281,619

 
0.99
%
 
$
698

 
293,783

 
0.49
%
 
$
359

Trading assets
98,086

 
2.95

 
722

 
81,380

 
2.86

 
582

Investment securities (3):
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
18,099

 
1.53

 
69

 
31,525

 
1.56

 
123

Securities of U.S. states and political subdivisions
53,492

 
4.03

 
540

 
52,201

 
4.24

 
553

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
132,032

 
2.63

 
868

 
92,010

 
2.53

 
583

Residential and commercial
12,586

 
5.55

 
175

 
19,571

 
5.44

 
266

Total mortgage-backed securities
144,618

 
2.89

 
1,043

 
111,581

 
3.04

 
849

Other debt and equity securities
48,962

 
3.87

 
472

 
53,301

 
3.48

 
461

Total available-for-sale securities
265,171

 
3.21

 
2,124

 
248,608

 
3.20

 
1,986

Held-to-maturity securities:
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
44,701

 
2.19

 
244

 
44,671

 
2.19

 
243

Securities of U.S. states and political subdivisions
6,270

 
5.29

 
83

 
2,155

 
5.41

 
29

Federal agency and other mortgage-backed securities
83,116

 
2.44

 
507

 
35,057

 
1.90

 
166

Other debt securities
2,798

 
2.34

 
16

 
4,077

 
1.92

 
20

Total held-to-maturity securities
136,885

 
2.49

 
850

 
85,960

 
2.14

 
458

Total investment securities
402,056

 
2.96

 
2,974

 
334,568

 
2.93

 
2,444

Mortgages held for sale (4)
19,758

 
3.94

 
195

 
20,140

 
3.60

 
181

Loans held for sale (4)
210

 
6.95

 
4

 
239

 
4.83

 
3

Loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial - U.S.
273,073

 
3.70

 
2,521

 
270,862

 
3.45

 
2,328

Commercial and industrial - Non U.S.
56,426

 
2.86

 
402

 
51,201

 
2.35

 
300

Real estate mortgage
131,293

 
3.68

 
1,206

 
126,126

 
3.41

 
1,069

Real estate construction
25,271

 
4.10

 
259

 
23,115

 
3.49

 
200

Lease financing
19,058

 
4.82

 
230

 
18,930

 
5.12

 
242

Total commercial
505,121

 
3.67

 
4,618

 
490,234

 
3.39

 
4,139

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
275,108

 
4.08

 
2,805

 
275,854

 
4.01

 
2,765

Real estate 1-4 family junior lien mortgage
43,602

 
4.78

 
521

 
50,609

 
4.37

 
551

Credit card
34,868

 
12.18

 
1,059

 
33,368

 
11.52

 
956

Automobile
59,112

 
5.43

 
800

 
61,149

 
5.66

 
860

Other revolving credit and installment
39,068

 
6.13

 
596

 
39,537

 
5.91

 
581

Total consumer
451,758

 
5.13

 
5,781

 
460,517

 
4.98

 
5,713

Total loans (4)
956,879

 
4.36

 
10,399

 
950,751

 
4.16

 
9,852

Other
10,713

 
2.00

 
54

 
6,014

 
2.30

 
35

Total earning assets
$
1,769,321

 
3.41
%
 
$
15,046

 
1,686,875

 
3.20
%
 
$
13,456

Funding sources
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking
$
48,465

 
0.41
%
 
$
50

 
39,772

 
0.13
%
 
$
13

Market rate and other savings
683,014

 
0.13

 
214

 
658,944

 
0.07

 
110

Savings certificates
22,599

 
0.30

 
17

 
26,246

 
0.35

 
23

Other time deposits
57,158

 
1.43

 
203

 
61,170

 
0.85

 
129

Deposits in foreign offices
123,684

 
0.65

 
199

 
97,525

 
0.23

 
57

Total interest-bearing deposits
934,920

 
0.29

 
683

 
883,657

 
0.15

 
332

Short-term borrowings
95,763

 
0.69

 
164

 
111,848

 
0.28

 
78

Long-term debt
249,518

 
2.05

 
1,278

 
236,156

 
1.56

 
921

Other liabilities
20,981

 
2.05

 
108

 
16,336

 
2.06

 
83

Total interest-bearing liabilities
1,301,182

 
0.69

 
2,233

 
1,247,997

 
0.45

 
1,414

Portion of noninterest-bearing funding sources
468,139

 
—

 
—

 
438,878

 


 


Total funding sources
$
1,769,321

 
0.51

 
2,233

 
1,686,875

 
0.34

 
1,414

Net interest margin and net interest income on a taxable-equivalent basis (5)
 
 
2.90
%
 
$
12,813

 
 
 
2.86
%
 
$
12,042

Noninterest-earning assets
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
18,171

 
 
 
 
 
18,818

 
 
 
 
Goodwill
26,664

 
 
 
 
 
27,037

 
 
 
 
Other
112,923

 
 
 
 
 
129,354

 
 
 
 
Total noninterest-earning assets
$
157,758

 
 
 
 
 
175,209

 
 
 
 
Noninterest-bearing funding sources
 
 
 
 
 
 
 
 
 
 
 
Deposits
$
366,275

 
 
 
 
 
353,001

 
 
 
 
Other liabilities
53,654

 
 
 
 
 
60,083

 
 
 
 
Total equity
205,968

 
 
 
 
 
201,003

 
 
 
 
Noninterest-bearing funding sources used to fund earning assets
(468,139
)
 
 
 
 
 
(438,878
)
 
 
 
 
Net noninterest-bearing funding sources
$
157,758

 
 
 
 
 
175,209

 
 
 
 
Total assets
$
1,927,079

 
 
 
 
 
1,862,084

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Our average prime rate was 4.05% and 3.50% for the quarters ended June 30, 2017 and 2016, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.21% and 0.64% for the same quarters, respectively.
(2)
Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3)
Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4)
Nonaccrual loans and related income are included in their respective loan categories.
(5)
Includes taxable-equivalent adjustments of $330 million and $309 million for the quarters ended June 30, 2017 and 2016, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.


- 22 -

Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
Six months ended June 30,
 
 
2017
 
 
2016
 
(in millions)
Average
balance

 
Yields/
rates

 
Interest
income/
expense

 
Average
balance

 
Yields/
rates

 
Interest
income/
expense

Earning assets
 
 
 
 
 
 
 
 
 
 
 
Federal funds sold, securities purchased under resale agreements and other short-term investments
$
282,687

 
0.88
%
 
$
1,230

 
289,240

 
0.49
%
 
$
703

Trading assets
95,937

 
2.87

 
1,377

 
80,922

 
2.94

 
1,187

Investment securities (3):
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
21,547

 
1.53

 
164

 
33,000

 
1.58

 
259

Securities of U.S. states and political subdivisions
52,873

 
4.03

 
1,066

 
51,357

 
4.24

 
1,088

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
144,257

 
2.61

 
1,879

 
94,216

 
2.67

 
1,258

Residential and commercial
13,514

 
5.43

 
367

 
20,199

 
5.32

 
537

Total mortgage-backed securities
157,771

 
2.85

 
2,246

 
114,415

 
3.14

 
1,795

Other debt and equity securities
49,787

 
3.73

 
924

 
53,430

 
3.34

 
890

Total available-for-sale securities
281,978

 
3.13

 
4,400

 
252,202

 
3.20

 
4,032

Held-to-maturity securities:
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
44,697

 
2.20

 
487

 
44,667

 
2.19

 
487

Securities of U.S. states and political subdivisions
6,271

 
5.30

 
166

 
2,155

 
5.41

 
58

Federal agency and other mortgage-backed securities
67,538

 
2.46

 
831

 
31,586

 
2.16

 
341

Other debt securities
3,062

 
2.34

 
35

 
4,338

 
1.92

 
42

Total held-to-maturity securities
121,568

 
2.51

 
1,519

 
82,746

 
2.25

 
928

Total investment securities
403,546

 
2.94

 
5,919

 
334,948

 
2.97

 
4,960

Mortgages held for sale (4)
19,825

 
3.82

 
379

 
19,005

 
3.60

 
342

Loans held for sale (4)
161

 
6.08

 
5

 
260

 
3.97

 
5

Loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial - U.S.
273,905

 
3.65

 
4,957

 
264,295

 
3.42

 
4,505

Commercial and industrial - Non U.S.
55,890

 
2.80

 
775

 
50,354

 
2.23

 
558

Real estate mortgage
131,868

 
3.62

 
2,370

 
124,432

 
3.41

 
2,109

Real estate construction
24,933

 
3.91

 
484

 
22,859

 
3.55

 
403

Lease financing
19,064

 
4.88

 
465

 
16,989

 
4.95

 
420

Total commercial
505,660

 
3.61

 
9,051

 
478,929

 
3.35

 
7,995

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
275,293

 
4.05

 
5,571

 
275,288

 
4.03

 
5,547

Real estate 1-4 family junior lien mortgage
44,439

 
4.69

 
1,036

 
51,423

 
4.38

 
1,122

Credit card
35,151

 
12.07

 
2,105

 
33,367

 
11.56

 
1,919

Automobile
60,304

 
5.45

 
1,628

 
60,631

 
5.66

 
1,708

Other revolving credit and installment
39,396

 
6.07

 
1,186

 
39,348

 
5.95

 
1,165

Total consumer
454,583

 
5.09

 
11,526

 
460,057

 
5.00

 
11,461

Total loans (4)
960,243

 
4.31

 
20,577

 
938,986

 
4.16

 
19,456

Other
8,801

 
2.37

 
104

 
5,910

 
2.18

 
65

Total earning assets
$
1,771,200

 
3.36
%
 
$
29,591

 
1,669,271

 
3.21
%
 
$
26,718

Funding sources
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking
$
49,569

 
0.35
%
 
$
87

 
39,242

 
0.12
%
 
$
24

Market rate and other savings
683,591

 
0.11

 
371

 
655,247

 
0.07

 
217

Savings certificates
23,030

 
0.29

 
34

 
27,063

 
0.40

 
54

Other time deposits
56,043

 
1.37

 
381

 
59,688

 
0.80

 
236

Deposits in foreign offices
122,946

 
0.57

 
347

 
97,604

 
0.22

 
108

Total interest-bearing deposits
935,179

 
0.26

 
1,220

 
878,844

 
0.15

 
639

Short-term borrowings
97,149

 
0.58

 
279

 
109,853

 
0.27

 
145

Long-term debt
254,627

 
1.94

 
2,461

 
226,519

 
1.56

 
1,763

Other liabilities
18,905

 
2.12

 
200

 
16,414

 
2.10

 
172

Total interest-bearing liabilities
1,305,860

 
0.64

 
4,160

 
1,231,630

 
0.44

 
2,719

Portion of noninterest-bearing funding sources
465,340

 
—

 
—

 
437,641

 
—

 
—

Total funding sources
$
1,771,200

 
0.47

 
4,160

 
1,669,271

 
0.33

 
2,719

Net interest margin and net interest income on a taxable-equivalent basis (5)
 
 
2.89
%
 
$
25,431

 
 
 
2.88
%
 
$
23,999

Noninterest-earning assets
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
18,437

 
 
 
 
 
18,407

 
 
 
 
Goodwill
26,668

 
 
 
 
 
26,553

 
 
 
 
Other
112,744

 
 
 
 
 
126,749

 
 
 
 
Total noninterest-earning assets
$
157,849

 
 
 
 
 
171,709

 
 
 
 
Noninterest-bearing funding sources
 
 
 
 
 
 
 
 
 
 
 
Deposits
$
365,019

 
 
 
 
 
349,200

 
 
 
 
Other liabilities
54,291

 
 
 
 
 
61,355

 
 
 
 
Total equity
203,879

 
 
 
 
 
198,795

 
 
 
 
Noninterest-bearing funding sources used to fund earning assets
(465,340
)
 
 
 
 
 
(437,641
)
 
 
 
 
Net noninterest-bearing funding sources
$
157,849

 
 
 
 
 
171,709

 
 
 
 
Total assets
$
1,929,049

 
 
 
 
 
1,840,980

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Our average prime rate was 3.92% and 3.50% for the first half of 2017 and 2016, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.14% and 0.63% for the same periods, respectively.
(2)
Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3)
Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4)
Nonaccrual loans and related income are included in their respective loan categories.
(5)
Includes taxable-equivalent adjustments of $648 million and $599 million for the first half of 2017 and 2016, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.


- 23 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
Quarter ended
 
 
Jun 30, 2017
 
 
Mar 31, 2017
 
 
Dec 31, 2016
 
 
Sep 30, 2016
 
 
Jun 30, 2016
 
($ in billions)
Average
balance

 
Yields/
rates

 
Average
balance

 
Yields/
rates

 
Average
balance

 
Yields/
rates

 
Average
balance

 
Yields/
rates

 
Average
balance

 
Yields/
rates

Earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal funds sold, securities purchased under resale agreements and other short-term investments
$
281.6

 
0.99
%
 
$
283.8

 
0.76
%
 
$
273.1

 
0.56
%
 
$
299.4

 
0.50
%
 
$
293.8

 
0.49
%
Trading assets
98.1

 
2.95

 
93.8

 
2.80

 
102.8

 
2.96

 
88.8

 
2.72

 
81.4

 
2.86

Investment securities (3):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
18.1

 
1.53

 
25.0

 
1.54

 
25.9

 
1.53

 
25.8

 
1.52

 
31.5

 
1.56

Securities of U.S. states and political subdivisions
53.5

 
4.03

 
52.2

 
4.03

 
53.9

 
4.06

 
55.2

 
4.28

 
52.2

 
4.24

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
132.0

 
2.63

 
156.6

 
2.58

 
148.0

 
2.37

 
105.8

 
2.39

 
92.0

 
2.53

Residential and commercial
12.6

 
5.55

 
14.5

 
5.32

 
16.5

 
5.87

 
18.1

 
5.54

 
19.6

 
5.44

Total mortgage-backed securities
144.6

 
2.89

 
171.1

 
2.81

 
164.5

 
2.72

 
123.9

 
2.85

 
111.6

 
3.04

Other debt and equity securities
49.0

 
3.87

 
50.7

 
3.60

 
52.7

 
3.71

 
54.2

 
3.37

 
53.3

 
3.48

Total available-for-sale securities
265.2

 
3.21

 
299.0

 
3.05

 
297.0

 
3.03

 
259.1

 
3.13

 
248.6

 
3.20

Held-to-maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
44.7

 
2.19

 
44.7

 
2.20

 
44.7

 
2.20

 
44.6

 
2.19

 
44.6

 
2.19

Securities of U.S. states and political subdivisions
6.3

 
5.29

 
6.3

 
5.30

 
4.7

 
5.31

 
2.5

 
5.24

 
2.2

 
5.41

Federal agency and other mortgage-backed securities
83.1

 
2.44

 
51.8

 
2.51

 
46.0

 
1.81

 
48.0

 
1.97

 
35.1

 
1.90

Other debt securities
2.8

 
2.34

 
3.3

 
2.34

 
3.6

 
2.26

 
3.9

 
1.98

 
4.1

 
1.92

Total held-to-maturity securities
136.9

 
2.49

 
106.1

 
2.54

 
99.0

 
2.17

 
99.0

 
2.15

 
86.0

 
2.14

     Total investment securities
402.1

 
2.96

 
405.1

 
2.92

 
396.0

 
2.82

 
358.1

 
2.86

 
334.6

 
2.93

Mortgages held for sale
19.8

 
3.94

 
19.9

 
3.70

 
27.5

 
3.43

 
24.1

 
3.44

 
20.1

 
3.60

Loans held for sale
0.2

 
6.95

 
0.1

 
4.44

 
0.2

 
5.42

 
0.2

 
3.04

 
0.2

 
4.83

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial - U.S.
273.1

 
3.70

 
274.8

 
3.59

 
272.8

 
3.46

 
271.2

 
3.48

 
270.9

 
3.45

Commercial and industrial - Non U.S.
56.4

 
2.86

 
55.3

 
2.73

 
54.4

 
2.58

 
51.3

 
2.40

 
51.2

 
2.35

Real estate mortgage
131.3

 
3.68

 
132.4

 
3.56

 
131.2

 
3.44

 
128.8

 
3.48

 
126.1

 
3.41

Real estate construction
25.3

 
4.10

 
24.6

 
3.72

 
23.9

 
3.61

 
23.2

 
3.50

 
23.1

 
3.49

Lease financing
19.0

 
4.82

 
19.1

 
4.94

 
18.9

 
5.78

 
18.9

 
4.70

 
19.0

 
5.12

Total commercial
505.1

 
3.67

 
506.2

 
3.54

 
501.2

 
3.45

 
493.4

 
3.42

 
490.3

 
3.39

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
275.1

 
4.08

 
275.5

 
4.02

 
277.7

 
4.01

 
278.5

 
3.97

 
275.9

 
4.01

Real estate 1-4 family junior lien mortgage
43.6

 
4.78

 
45.3

 
4.60

 
47.2

 
4.42

 
48.9

 
4.37

 
50.6

 
4.37

Credit card
34.9

 
12.18

 
35.4

 
11.97

 
35.4

 
11.73

 
34.6

 
11.60

 
33.4

 
11.52

Automobile
59.1

 
5.43

 
61.5

 
5.46

 
62.5

 
5.54

 
62.5

 
5.60

 
61.1

 
5.66

Other revolving credit and installment
39.1

 
6.13

 
39.7

 
6.02

 
40.1

 
5.91

 
39.6

 
5.92

 
39.5

 
5.91

Total consumer
451.8

 
5.13

 
457.4

 
5.06

 
462.9

 
5.01

 
464.1

 
4.97

 
460.5

 
4.98

Total loans
956.9

 
4.36

 
963.6

 
4.26

 
964.1

 
4.20

 
957.5

 
4.17

 
950.8

 
4.16

Other
10.6

 
2.00

 
6.8

 
2.96

 
6.7

 
3.27

 
6.4

 
2.30

 
6.0

 
2.30

     Total earning assets
$
1,769.3

 
3.41
%
 
$
1,773.1

 
3.31
%
 
$
1,770.4

 
3.24
%
 
$
1,734.5

 
3.17
%
 
$
1,686.9

 
3.20
%
Funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking
$
48.5

 
0.41
%
 
$
50.7

 
0.29
%
 
$
46.9

 
0.17
%
 
$
44.0

 
0.15
%
 
$
39.8

 
0.13
%
Market rate and other savings
683.0

 
0.13

 
684.2

 
0.09

 
676.4

 
0.07

 
667.2

 
0.07

 
659.0

 
0.07

Savings certificates
22.6

 
0.30

 
23.5

 
0.29

 
24.4

 
0.30

 
25.2

 
0.30

 
26.2

 
0.35

Other time deposits
57.1

 
1.43

 
54.9

 
1.31

 
49.2

 
1.16

 
54.9

 
0.93

 
61.2

 
0.85

Deposits in foreign offices
123.7

 
0.65

 
122.2

 
0.49

 
110.4

 
0.35

 
107.1

 
0.30

 
97.5

 
0.23

Total interest-bearing deposits
934.9

 
0.29

 
935.5

 
0.23

 
907.3

 
0.18

 
898.4

 
0.16

 
883.7

 
0.15

Short-term borrowings
95.8

 
0.69

 
98.5

 
0.47

 
124.7

 
0.33

 
116.2

 
0.29

 
111.8

 
0.28

Long-term debt
249.5

 
2.05

 
259.8

 
1.83

 
252.2

 
1.68

 
252.4

 
1.59

 
236.2

 
1.56

Other liabilities
21.0

 
2.05

 
16.8

 
2.22

 
17.1

 
2.15

 
16.8

 
2.11

 
16.3

 
2.06

Total interest-bearing liabilities
1,301.2

 
0.69

 
1,310.6

 
0.59

 
1,301.3

 
0.51

 
1,283.8

 
0.48

 
1,248.0

 
0.45

Portion of noninterest-bearing funding sources
468.1

 
—

 
462.5

 
—

 
469.1

 
—

 
450.7

 
—

 
438.9

 
—

     Total funding sources
$
1,769.3

 
0.51

 
$
1,773.1

 
0.44

 
$
1,770.4

 
0.37

 
$
1,734.5

 
0.35

 
$
1,686.9

 
0.34

Net interest margin on a taxable-equivalent basis
 
 
2.90
%
 
 
 
2.87
%
 
 
 
2.87
%
 
 
 
2.82
%
 
 
 
2.86
%
Noninterest-earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
18.2

 
 
 
18.7

 
 
 
19.0

 
 
 
18.7

 
 
 
18.8

 
 
Goodwill
26.7

 
 
 
26.7

 
 
 
26.7

 
 
 
27.0

 
 
 
27.0

 
 
Other
112.9

 
 
 
112.5

 
 
 
128.2

 
 
 
134.4

 
 
 
129.4

 
 
     Total noninterest-earnings assets
$
157.8

 
 
 
157.9

 
 
 
173.9

 
 
 
180.1

 
 
 
175.2

 
 
Noninterest-bearing funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
$
366.3

 
 
 
363.7

 
 
 
376.9

 
 
 
363.1

 
 
 
353.0

 
 
Other liabilities
53.6

 
 
 
54.9

 
 
 
64.9

 
 
 
63.8

 
 
 
60.1

 
 
Total equity
206.0

 
 
 
201.8

 
 
 
201.2

 
 
 
203.9

 
 
 
201.0

 
 
Noninterest-bearing funding sources used to fund earning assets
(468.1
)
 
 
 
(462.5
)
 
 
 
(469.1
)
 
 
 
(450.7
)
 
 
 
(438.9
)
 
 
        Net noninterest-bearing funding sources
$
157.8

 
 
 
157.9

 
 
 
173.9

 
 
 
180.1

 
 
 
175.2

 
 
          Total assets
$
1,927.1

 
 
 
1,931.0

 
 
 
1,944.3

 
 
 
1,914.6

 
 
 
1,862.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Our average prime rate was 4.05% for the quarter ended June 30, 2017, 3.80% for the quarter ended March 31, 2017, 3.54% for the quarter ended December 31, 2016 and 3.50% for the quarters ended September 30 and June 30, 2016. The average three-month London Interbank Offered Rate (LIBOR) was 1.21%, 1.07%, 0.92%, 0.79% and 0.64% for the same quarters, respectively.
(2)
Yields/rates include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3)
Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.


- 24 -

Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
 
Quarter ended June 30,
 
 
%

 
Six months ended June 30,
 
 
%

(in millions)
2017

 
2016

 
Change

 
2017

 
2016

 
Change

Service charges on deposit accounts
$
1,276

 
1,336

 
(4
)%
 
$
2,589

 
2,645

 
(2
)%
Trust and investment fees:
 
 
 
 


 
 
 
 
 

Brokerage advisory, commissions and other fees
2,329

 
2,291

 
2

 
4,653

 
4,530

 
3

Trust and investment management
837

 
835

 
—

 
1,666

 
1,650

 
1

Investment banking
463

 
421

 
10

 
880

 
752

 
17

Total trust and investment fees
3,629

 
3,547

 
2

 
7,199


6,932

 
4

Card fees
1,019

 
997

 
2

 
1,964

 
1,938

 
1

Other fees:
 
 
 
 


 
 
 
 
 

Charges and fees on loans
325

 
317

 
3

 
632

 
630

 
—

Cash network fees
134

 
138

 
(3
)
 
260

 
269

 
(3
)
Commercial real estate brokerage commissions
102

 
86

 
19

 
183

 
203

 
(10
)
Letters of credit fees
76

 
83

 
(8
)
 
150

 
161

 
(7
)
Wire transfer and other remittance fees
112

 
101

 
11

 
219

 
193

 
13

All other fees
153

 
181

 
(15
)
 
323

 
383

 
(16
)
Total other fees
902

 
906

 
—

 
1,767

 
1,839

 
(4
)
Mortgage banking:
 
 
 
 


 
 
 
 
 

Servicing income, net
400

 
360

 
11

 
856

 
1,210

 
(29
)
Net gains on mortgage loan origination/sales activities
748

 
1,054

 
(29
)
 
1,520

 
1,802

 
(16
)
Total mortgage banking
1,148

 
1,414

 
(19
)
 
2,376

 
3,012

 
(21
)
Insurance
280

 
286

 
(2
)
 
557

 
713

 
(22
)
Net gains from trading activities
237

 
328

 
(28
)
 
676

 
528

 
28

Net gains on debt securities
120

 
447

 
(73
)
 
156

 
691

 
(77
)
Net gains from equity investments
188

 
189

 
(1
)
 
591

 
433

 
36

Lease income
493

 
497

 
(1
)
 
974

 
870

 
12

Life insurance investment income
145

 
149

 
(3
)
 
289

 
303

 
(5
)
All other
249

 
333

 
(25
)
 
250

 
1,053

 
(76
)
Total
$
9,686


10,429

 
(7
)
 
$
19,388

 
20,957

 
(7
)



NONINTEREST EXPENSE
 
Quarter ended June 30,
 
 
%

 
Six months ended June 30,
 
 
%

(in millions)
2017

 
2016

 
Change

 
2017

 
2016

 
Change

Salaries
$
4,343

 
4,099

 
6
 %
 
$
8,604

 
8,135

 
6
 %
Commission and incentive compensation
2,499

 
2,604

 
(4
)
 
5,224

 
5,249

 
—

Employee benefits
1,308

 
1,244

 
5

 
2,994

 
2,770

 
8

Equipment
529

 
493

 
7

 
1,106

 
1,021

 
8

Net occupancy
706

 
716

 
(1
)
 
1,418

 
1,427

 
(1
)
Core deposit and other intangibles
287

 
299

 
(4
)
 
576

 
592

 
(3
)
FDIC and other deposit assessments
328

 
255

 
29

 
661

 
505

 
31

Outside professional services
1,029

 
769

 
34

 
1,833

 
1,352

 
36

Operating losses
350

 
334

 
5

 
632

 
788

 
(20
)
Operating leases
334

 
352

 
(5
)
 
679

 
587

 
16

Contract services
349

 
283

 
23

 
674

 
565

 
19

Outside data processing
236

 
225

 
5

 
456

 
433

 
5

Travel and entertainment
171

 
193

 
(11
)
 
350

 
365

 
(4
)
Postage, stationery and supplies
134

 
153

 
(12
)
 
279

 
316

 
(12
)
Advertising and promotion
150

 
166

 
(10
)
 
277

 
300

 
(8
)
Telecommunications
91

 
94

 
(3
)
 
182

 
186

 
(2
)
Foreclosed assets
52

 
66

 
(21
)
 
138

 
144

 
(4
)
Insurance
24

 
22

 
9

 
48

 
133

 
(64
)
All other
621

 
499

 
24

 
1,202

 
1,026

 
17

Total
$
13,541

 
12,866

 
5

 
$
27,333

 
25,894

 
6




- 25 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
 
Quarter ended
 
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Service charges on deposit accounts
$
1,276

 
1,313

 
1,357

 
1,370

 
1,336

Trust and investment fees:
 
 
 
 
 
 
 
 
 
Brokerage advisory, commissions and other fees
2,329

 
2,324

 
2,342

 
2,344

 
2,291

Trust and investment management
837

 
829

 
837

 
849

 
835

Investment banking
463

 
417

 
519

 
420

 
421

Total trust and investment fees
3,629

 
3,570

 
3,698

 
3,613

 
3,547

Card fees
1,019

 
945

 
1,001

 
997

 
997

Other fees:
 
 
 
 
 
 
 
 
 
Charges and fees on loans
325

 
307

 
305

 
306

 
317

Cash network fees
134

 
126

 
130

 
138

 
138

Commercial real estate brokerage commissions
102

 
81

 
172

 
119

 
86

Letters of credit fees
76

 
74

 
79

 
81

 
83

Wire transfer and other remittance fees
112

 
107

 
105

 
103

 
101

All other fees
153

 
170

 
171

 
179

 
181

Total other fees
902

 
865

 
962

 
926

 
906

Mortgage banking:
 
 
 
 
 
 
 
 
 
Servicing income, net
400

 
456

 
196

 
359

 
360

Net gains on mortgage loan origination/sales activities
748

 
772

 
1,221

 
1,308

 
1,054

Total mortgage banking
1,148

 
1,228

 
1,417

 
1,667

 
1,414

Insurance
280

 
277

 
262

 
293

 
286

Net gains (losses) from trading activities
237

 
439

 
(109
)
 
415

 
328

Net gains on debt securities
120

 
36

 
145

 
106

 
447

Net gains from equity investments
188

 
403

 
306

 
140

 
189

Lease income
493

 
481

 
523

 
534

 
497

Life insurance investment income
145

 
144

 
132

 
152

 
149

All other
249

 
1

 
(514
)
 
163

 
333

Total
$
9,686

 
9,702

 
9,180

 
10,376

 
10,429




FIVE QUARTER NONINTEREST EXPENSE
 
Quarter ended
 
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Salaries
$
4,343

 
4,261

 
4,193

 
4,224

 
4,099

Commission and incentive compensation
2,499

 
2,725

 
2,478

 
2,520

 
2,604

Employee benefits
1,308

 
1,686

 
1,101

 
1,223

 
1,244

Equipment
529

 
577

 
642

 
491

 
493

Net occupancy
706

 
712

 
710

 
718

 
716

Core deposit and other intangibles
287

 
289

 
301

 
299

 
299

FDIC and other deposit assessments
328

 
333

 
353

 
310

 
255

Outside professional services
1,029

 
804

 
984

 
802

 
769

Operating losses
350

 
282

 
243

 
577

 
334

Operating leases
334

 
345

 
379

 
363

 
352

Contract services
349

 
325

 
325

 
313

 
283

Outside data processing
236

 
220

 
222

 
233

 
225

Travel and entertainment
171

 
179

 
195

 
144

 
193

Postage, stationery and supplies
134

 
145

 
156

 
150

 
153

Advertising and promotion
150

 
127

 
178

 
117

 
166

Telecommunications
91

 
91

 
96

 
101

 
94

Foreclosed assets
52

 
86

 
75

 
(17
)
 
66

Insurance
24

 
24

 
23

 
23

 
22

All other
621

 
581

 
561

 
677

 
499

Total
$
13,541

 
13,792

 
13,215

 
13,268

 
12,866



- 26 -

Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions, except shares)
Jun 30,
2017

 
Dec 31,
2016

 
%
Change

Assets
 
 
 
 
 
Cash and due from banks
$
20,248

 
20,729

 
(2
)%
Federal funds sold, securities purchased under resale agreements and other short-term investments
264,706

 
266,038

 
(1
)
Trading assets
83,607

 
74,397

 
12

Investment securities:
 
 
 
 


Available-for-sale, at fair value
269,202

 
308,364

 
(13
)
Held-to-maturity, at cost
140,392

 
99,583

 
41

Mortgages held for sale
24,807

 
26,309

 
(6
)
Loans held for sale
156

 
80

 
95

Loans
957,423

 
967,604

 
(1
)
Allowance for loan losses
(11,073
)
 
(11,419
)
 
(3
)
Net loans
946,350

 
956,185

 
(1
)
Mortgage servicing rights:
 
 
  
 


Measured at fair value
12,789

 
12,959

 
(1
)
Amortized
1,399

 
1,406

 
—

Premises and equipment, net
8,403

 
8,333

 
1

Goodwill
26,573

 
26,693

 
—

Derivative assets
13,273

 
14,498

 
(8
)
Other assets
118,966

 
114,541

 
4

Total assets
$
1,930,871


1,930,115

 
—

Liabilities
 
 
  
 


Noninterest-bearing deposits
$
372,766

 
375,967

 
(1
)
Interest-bearing deposits
933,064

 
930,112

 
—

Total deposits
1,305,830

 
1,306,079

 
—

Short-term borrowings
95,356

 
96,781

 
(1
)
Derivative liabilities
11,636

 
14,492

 
(20
)
Accrued expenses and other liabilities
73,035

 
57,189

 
28

Long-term debt
238,869

 
255,077

 
(6
)
Total liabilities
1,724,726


1,729,618

 
—

Equity
 
 
  
 


Wells Fargo stockholders’ equity:
 
 
  
 


Preferred stock
25,785

 
24,551

 
5

Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares
9,136

 
9,136

 
—

Additional paid-in capital
60,689

 
60,234

 
1

Retained earnings
139,524

 
133,075

 
5

Cumulative other comprehensive income (loss)
(2,110
)
 
(3,137
)
 
(33
)
Treasury stock – 515,041,424 shares and 465,702,148 shares 
(25,675
)
 
(22,713
)
 
13

Unearned ESOP shares
(2,119
)
 
(1,565
)
 
35

Total Wells Fargo stockholders’ equity
205,230


199,581

 
3

Noncontrolling interests
915

 
916

 
—

Total equity
206,145


200,497

 
3

Total liabilities and equity
$
1,930,871

 
1,930,115

 
—



- 27 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
20,248

 
19,698

 
20,729

 
19,287

 
20,407

Federal funds sold, securities purchased under resale agreements and other short-term investments
264,706

 
308,747

 
266,038

 
298,325

 
295,521

Trading assets
83,607

 
80,326

 
74,397

 
81,094

 
71,556

Investment securities:
 
 
 
 
 
 
 
 

Available-for-sale, at fair value
269,202

 
299,530

 
308,364

 
291,591

 
253,006

Held-to-maturity, at cost
140,392

 
108,030

 
99,583

 
99,241

 
100,420

Mortgages held for sale
24,807

 
17,822

 
26,309

 
27,423

 
23,930

Loans held for sale
156

 
253

 
80

 
183

 
220

Loans
957,423

 
958,405

 
967,604

 
961,326

 
957,157

Allowance for loan losses
(11,073
)
 
(11,168
)
 
(11,419
)
 
(11,583
)
 
(11,664
)
Net loans
946,350

 
947,237

 
956,185

 
949,743

 
945,493

Mortgage servicing rights:
 
 
 
 
 
 
 
 
 
Measured at fair value
12,789

 
13,208

 
12,959

 
10,415

 
10,396

Amortized
1,399

 
1,402

 
1,406

 
1,373

 
1,353

Premises and equipment, net
8,403

 
8,320

 
8,333

 
8,322

 
8,289

Goodwill
26,573

 
26,666

 
26,693

 
26,688

 
26,963

Derivative assets
13,273

 
12,564

 
14,498

 
18,736

 
20,999

Other assets
118,966

 
107,761

 
114,541

 
109,703

 
110,682

Total assets
$
1,930,871


1,951,564


1,930,115


1,942,124


1,889,235

Liabilities
 
 
 
 
 
 
 
 
 
Noninterest-bearing deposits
$
372,766

 
365,780

 
375,967

 
376,136

 
361,934

Interest-bearing deposits
933,064

 
959,664

 
930,112

 
899,758

 
883,539

Total deposits
1,305,830


1,325,444


1,306,079


1,275,894


1,245,473

Short-term borrowings
95,356

 
94,871

 
96,781

 
124,668

 
120,258

Derivative liabilities
11,636

 
12,461

 
14,492

 
13,603

 
15,483

Accrued expenses and other liabilities
73,035

 
59,831

 
57,189

 
69,166

 
61,433

Long-term debt
238,869

 
256,468

 
255,077

 
254,835

 
243,927

Total liabilities
1,724,726


1,749,075


1,729,618


1,738,166


1,686,574

Equity
 
 
 
 
 
 
 
 
 
Wells Fargo stockholders’ equity:
 
 
 
 
 
 
 
 
 
Preferred stock
25,785

 
25,501

 
24,551

 
24,594

 
24,830

Common stock
9,136

 
9,136

 
9,136

 
9,136

 
9,136

Additional paid-in capital
60,689

 
60,585

 
60,234

 
60,685

 
60,691

Retained earnings
139,524

 
136,032

 
133,075

 
130,288

 
127,076

Cumulative other comprehensive income (loss)
(2,110
)
 
(3,178
)
 
(3,137
)
 
2,184

 
2,948

Treasury stock
(25,675
)
 
(24,030
)
 
(22,713
)
 
(22,247
)
 
(21,068
)
Unearned ESOP shares
(2,119
)
 
(2,546
)
 
(1,565
)
 
(1,612
)
 
(1,868
)
Total Wells Fargo stockholders’ equity
205,230


201,500


199,581


203,028


201,745

Noncontrolling interests
915

 
989

 
916

 
930

 
916

Total equity
206,145


202,489


200,497


203,958


202,661

Total liabilities and equity
$
1,930,871


1,951,564


1,930,115


1,942,124


1,889,235




- 28 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER INVESTMENT SECURITIES
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Available-for-sale securities:
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
$
17,896

 
24,625

 
25,819

 
26,376

 
27,939

Securities of U.S. states and political subdivisions
52,013

 
52,061

 
51,101

 
55,366

 
54,024

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Federal agencies
135,938

 
156,966

 
161,230

 
135,692

 
95,868

Residential and commercial
12,772

 
14,233

 
16,318

 
18,387

 
19,938

Total mortgage-backed securities
148,710


171,199


177,548


154,079


115,806

Other debt securities
49,555

 
50,520

 
52,685

 
54,537

 
53,935

Total available-for-sale debt securities
268,174

 
298,405

 
307,153

 
290,358

 
251,704

Marketable equity securities
1,028

 
1,125

 
1,211

 
1,233

 
1,302

Total available-for-sale securities
269,202


299,530


308,364


291,591


253,006

Held-to-maturity securities:
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
44,704

 
44,697

 
44,690

 
44,682

 
44,675

Securities of U.S. states and political subdivisions
6,325

 
6,331

 
6,336

 
2,994

 
2,181

Federal agency and other mortgage-backed securities (1)
87,525

 
53,778

 
45,161

 
47,721

 
49,594

Other debt securities
1,838

 
3,224

 
3,396

 
3,844

 
3,970

Total held-to-maturity debt securities
140,392

 
108,030

 
99,583

 
99,241

 
100,420

Total investment securities
$
409,594


407,560


407,947


390,832


353,426

(1)
Predominantly consists of federal agency mortgage-backed securities.
FIVE QUARTER LOANS
(in millions)
Jun 30,
2017


Mar 31,
2017


Dec 31,
2016


Sep 30,
2016


Jun 30,
2016

Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
331,113

 
329,252

 
330,840

 
324,020

 
323,858

Real estate mortgage
130,277

 
131,532

 
132,491

 
130,223

 
128,320

Real estate construction
25,337

 
25,064

 
23,916

 
23,340

 
23,387

Lease financing
19,174

 
19,156

 
19,289

 
18,871

 
18,973

Total commercial
505,901

 
505,004

 
506,536

 
496,454

 
494,538

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
276,566

 
274,633

 
275,579

 
278,689

 
277,162

Real estate 1-4 family junior lien mortgage
42,747

 
44,333

 
46,237

 
48,105

 
49,772

Credit card
35,305

 
34,742

 
36,700

 
34,992

 
34,137

Automobile
57,958

 
60,408

 
62,286

 
62,873

 
61,939

Other revolving credit and installment
38,946

 
39,285

 
40,266

 
40,213

 
39,609

Total consumer
451,522

 
453,401

 
461,068

 
464,872

 
462,619

Total loans (1)
$
957,423

 
958,405

 
967,604

 
961,326

 
957,157

(1)
Includes $14.3 billion, $15.7 billion, $16.7 billion, $17.7 billion, and $19.3 billion of purchased credit-impaired (PCI) loans at June 30, and March 31, 2017, and December 31, September 30, and June 30, 2016, respectively.
Our foreign loans are reported by respective class of financing receivable in the table above. Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign primarily based on whether the borrower's primary address is outside of the United States. The following table presents total commercial foreign loans outstanding by class of financing receivable.
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Commercial foreign loans:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
57,825

 
56,987

 
55,396

 
51,515

 
50,515

Real estate mortgage
8,359

 
8,206

 
8,541

 
8,466

 
8,467

Real estate construction
585

 
471

 
375

 
310

 
246

Lease financing
1,092

 
986

 
972

 
958

 
987

Total commercial foreign loans
$
67,861

 
66,650

 
65,284

 
61,249

 
60,215




- 29 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Nonaccrual loans:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
2,632

 
2,898

 
3,216

 
3,331

 
3,464

Real estate mortgage
630

 
672

 
685

 
780

 
872

Real estate construction
34

 
40

 
43

 
59

 
59

Lease financing
89

 
96

 
115

 
92

 
112

Total commercial
3,385

 
3,706

 
4,059

 
4,262

 
4,507

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
4,413

 
4,743

 
4,962

 
5,310

 
5,970

Real estate 1-4 family junior lien mortgage
1,095

 
1,153

 
1,206

 
1,259

 
1,330

Automobile
104

 
101

 
106

 
108

 
111

Other revolving credit and installment
59

 
56

 
51

 
47

 
45

Total consumer
5,671

 
6,053

 
6,325

 
6,724

 
7,456

Total nonaccrual loans (1)(2)(3)
$
9,056

 
9,759

 
10,384

 
10,986

 
11,963

As a percentage of total loans
0.95
%
 
1.02

 
1.07

 
1.14

 
1.25

Foreclosed assets:
 
 
 
 
 
 
 
 
 
Government insured/guaranteed
$
149

 
179

 
197

 
282

 
321

Non-government insured/guaranteed
632

 
726

 
781

 
738

 
796

Total foreclosed assets
781

 
905

 
978

 
1,020

 
1,117

Total nonperforming assets
$
9,837

 
10,664

 
11,362

 
12,006

 
13,080

As a percentage of total loans
1.03
%
 
1.11

 
1.17

 
1.25

 
1.37

(1)
Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
(2)
Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.
(3)
Real estate 1-4 family mortgage loans predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans largely guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed. All remaining student loans guaranteed under the FFELP were sold as of March 31, 2017.


- 30 -

Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Total (excluding PCI)(1):
$
9,716

 
10,525

 
11,858

 
12,068

 
12,385

Less: FHA insured/guaranteed by the VA (2)(3)
8,873

 
9,585

 
10,883

 
11,198

 
11,577

Less: Student loans guaranteed under the FFELP (4)
—

 
—

 
3

 
17

 
20

Total, not government insured/guaranteed
$
843

 
940

 
972

 
853

 
788

By segment and class, not government insured/guaranteed:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
42

 
88

 
28

 
47

 
36

Real estate mortgage
2

 
11

 
36

 
4

 
22

Real estate construction
10

 
3

 
—

 
—

 
—

Total commercial
54


102


64


51


58

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage (3)
145

 
149

 
175

 
171

 
169

Real estate 1-4 family junior lien mortgage (3)
44

 
42

 
56

 
54

 
52

Credit card
411

 
453

 
452

 
392

 
348

Automobile
91

 
79

 
112

 
81

 
64

Other revolving credit and installment
98

 
115

 
113

 
104

 
97

Total consumer
789


838


908


802


730

Total, not government insured/guaranteed
$
843


940


972


853


788

(1)
PCI loans totaled $1.5 billion, $1.8 billion, $2.0 billion, $2.2 billion and $2.4 billion, at June 30 and March 31, 2017 and December 31, September 30, and June 30, 2016, respectively.
(2)
Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
(3)
Includes mortgages held for sale 90 days or more past due and still accruing.
(4)
Represents loans whose repayments are largely guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP. All remaining student loans guaranteed under the FFELP were sold as of March 31, 2017.


- 31 -

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

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

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

The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:
•
Changes in interest rate indices for variable rate PCI loans - Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows;
•
Changes in prepayment assumptions - Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and
•
Changes in the expected principal and interest payments over the estimated life - Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.

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

(in millions)
Quarter ended June 30, 2017

 
Six months
ended June 30, 2017

 
2009-2016

Balance, beginning of period
$
10,315

 
11,216

 
10,447

Change in accretable yield due to acquisitions
—

 
2

 
159

Accretion into interest income (1)
(374
)
 
(731
)
 
(15,577
)
Accretion into noninterest income due to sales (2)
(309
)
 
(334
)
 
(467
)
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (3)
—

 
406

 
10,955

Changes in expected cash flows that do not affect nonaccretable difference (4)
(263
)
 
(1,190
)
 
5,699

Balance, end of period 
$
9,369

 
9,369

 
11,216

(1)
Includes accretable yield released as a result of settlements with borrowers, which is included in interest income.
(2)
Includes accretable yield released as a result of sales to third parties, which is included in noninterest income.
(3)
At June 30, 2017, our carrying value for PCI loans totaled $14.3 billion and the remainder of nonaccretable difference established in purchase accounting totaled $649 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.


- 32 -

Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)
 
June 30, 2017
 
 
PCI loans
 
 
All other loans
 
(in millions)
Adjusted
unpaid
principal
balance (2)

 
Current
LTV
ratio (3)

 
Carrying
value (4)

 
Ratio of
carrying
value to
current
value (5)

 
Carrying
value (4)

 
Ratio of
carrying
value to
current
value (5)

California
$
12,263

 
63
%
 
$
9,511

 
48
%
 
$
7,077

 
45
%
Florida
1,540

 
70

 
1,146

 
51

 
1,502

 
56

New Jersey
609

 
77

 
447

 
56

 
995

 
63

New York
458

 
70

 
360

 
51

 
497

 
60

Texas
141

 
49

 
108

 
37

 
598

 
38

Other states
3,057

 
70

 
2,308

 
52

 
4,147

 
57

Total Pick-a-Pay loans
$
18,068

 
65

 
$
13,880

 
49

 
$
14,816

 
51

 
 
 
 
 
 
 
 
 
 
 
 
(1)
The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2017.
(2)
Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.
(3)
The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.
(4)
Carrying value, which does not reflect the allowance for loan losses, includes remaining purchase accounting adjustments, which, for PCI loans may include the nonaccretable difference and the accretable yield and, for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs.
(5)
The ratio of carrying value to current value is calculated as the carrying value divided by the collateral value.


- 33 -

Wells Fargo & Company and Subsidiaries
CHANGES IN ALLOWANCE FOR CREDIT LOSSES
 
Quarter ended June 30,
 
 
Six months ended June 30,
 
(in millions)
2017

 
2016

 
2017

 
2016

Balance, beginning of period
$
12,287

 
12,668

 
12,540

 
12,512

Provision for credit losses
555

 
1,074

 
1,160

 
2,160

Interest income on certain impaired loans (1)
(46
)
 
(51
)
 
(94
)
 
(99
)
Loan charge-offs:
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
Commercial and industrial
(161
)
 
(437
)
 
(414
)
 
(786
)
Real estate mortgage
(8
)
 
(3
)
 
(13
)
 
(6
)
Real estate construction
—

 
(1
)
 
—

 
(1
)
Lease financing
(13
)
 
(17
)
 
(20
)
 
(21
)
Total commercial
(182
)
 
(458
)
 
(447
)
 
(814
)
Consumer:
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
(55
)
 
(123
)
 
(124
)
 
(260
)
Real estate 1-4 family junior lien mortgage
(62
)
 
(133
)
 
(155
)
 
(266
)
Credit card
(379
)
 
(320
)
 
(746
)
 
(634
)
Automobile
(212
)
 
(176
)
 
(467
)
 
(387
)
Other revolving credit and installment
(185
)
 
(163
)
 
(374
)
 
(338
)
Total consumer
(893
)
 
(915
)
 
(1,866
)
 
(1,885
)
Total loan charge-offs
(1,075
)
 
(1,373
)
 
(2,313
)
 
(2,699
)
Loan recoveries:
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
Commercial and industrial
83

 
69

 
165

 
145

Real estate mortgage
14

 
23

 
44

 
55

Real estate construction
4

 
4

 
12

 
12

Lease financing
6

 
5

 
8

 
8

Total commercial
107

 
101

 
229

 
220

Consumer:
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
71

 
109

 
133

 
198

Real estate 1-4 family junior lien mortgage
66

 
71

 
136

 
130

Credit card
59

 
50

 
117

 
102

Automobile
86

 
86

 
174

 
170

Other revolving credit and installment
31

 
32

 
64

 
69

Total consumer
313

 
348

 
624

 
669

Total loan recoveries
420

 
449

 
853

 
889

Net loan charge-offs
(655
)
 
(924
)
 
(1,460
)
 
(1,810
)
Other
5

 
(18
)
 
—

 
(14
)
Balance, end of period
$
12,146

 
12,749

 
12,146

 
12,749

Components:
 
 
 
 
 
 
 
Allowance for loan losses
$
11,073

 
11,664

 
11,073

 
11,664

Allowance for unfunded credit commitments
1,073

 
1,085

 
1,073

 
1,085

Allowance for credit losses
$
12,146

 
12,749

 
12,146

 
12,749

Net loan charge-offs (annualized) as a percentage of average total loans
0.27
%
 
0.39

 
0.31

 
0.39

Allowance for loan losses as a percentage of total loans
1.16

 
1.22

 
1.16

 
1.22

Allowance for credit losses as a percentage of total loans
1.27

 
1.33

 
1.27

 
1.33

(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.


- 34 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
 
Quarter ended
 
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Balance, beginning of quarter
$
12,287

 
12,540

 
12,694

 
12,749

 
12,668

Provision for credit losses
555

 
605

 
805

 
805

 
1,074

Interest income on certain impaired loans (1)
(46
)
 
(48
)
 
(52
)
 
(54
)
 
(51
)
Loan charge-offs:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
(161
)
 
(253
)
 
(309
)
 
(324
)
 
(437
)
Real estate mortgage
(8
)
 
(5
)
 
(14
)
 
(7
)
 
(3
)
Real estate construction
—

 
—

 
—

 
—

 
(1
)
Lease financing
(13
)
 
(7
)
 
(16
)
 
(4
)
 
(17
)
Total commercial
(182
)
 
(265
)
 
(339
)
 
(335
)
 
(458
)
Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
(55
)
 
(69
)
 
(86
)
 
(106
)
 
(123
)
Real estate 1-4 family junior lien mortgage
(62
)
 
(93
)
 
(110
)
 
(119
)
 
(133
)
Credit card
(379
)
 
(367
)
 
(329
)
 
(296
)
 
(320
)
Automobile
(212
)
 
(255
)
 
(243
)
 
(215
)
 
(176
)
Other revolving credit and installment
(185
)
 
(189
)
 
(200
)
 
(170
)
 
(163
)
Total consumer
(893
)
 
(973
)
 
(968
)
 
(906
)
 
(915
)
Total loan charge-offs
(1,075
)
 
(1,238
)
 
(1,307
)
 
(1,241
)
 
(1,373
)
Loan recoveries:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
83

 
82

 
53

 
65

 
69

Real estate mortgage
14

 
30

 
26

 
35

 
23

Real estate construction
4

 
8

 
8

 
18

 
4

Lease financing
6

 
2

 
1

 
2

 
5

Total commercial
107

 
122

 
88

 
120

 
101

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
71

 
62

 
89

 
86

 
109

Real estate 1-4 family junior lien mortgage
66

 
70

 
66

 
70

 
71

Credit card
59

 
58

 
54

 
51

 
50

Automobile
86

 
88

 
77

 
78

 
86

Other revolving credit and installment
31

 
33

 
28

 
31

 
32

Total consumer
313

 
311

 
314

 
316

 
348

Total loan recoveries
420

 
433

 
402

 
436

 
449

Net loan charge-offs
(655
)
 
(805
)
 
(905
)
 
(805
)
 
(924
)
Other
5

 
(5
)
 
(2
)
 
(1
)
 
(18
)
Balance, end of quarter
$
12,146

 
12,287

 
12,540

 
12,694

 
12,749

Components:
 
 
 
 
 
 
 
 
 
Allowance for loan losses
$
11,073

 
11,168

 
11,419

 
11,583

 
11,664

Allowance for unfunded credit commitments
1,073

 
1,119

 
1,121

 
1,111

 
1,085

Allowance for credit losses
$
12,146

 
12,287

 
12,540

 
12,694

 
12,749

Net loan charge-offs (annualized) as a percentage of average total loans
0.27
%
 
0.34

 
0.37

 
0.33

 
0.39

Allowance for loan losses as a percentage of:
 
 
 
 
 
 
 
 
 
Total loans
1.16

 
1.17

 
1.18

 
1.20

 
1.22

Nonaccrual loans
122

 
114

 
110

 
105

 
98

Nonaccrual loans and other nonperforming assets
113

 
105

 
101

 
96

 
89

Allowance for credit losses as a percentage of:
 
 
 
 
 
 
 
 
 
Total loans
1.27

 
1.28

 
1.30

 
1.32

 
1.33

Nonaccrual loans
134

 
126

 
121

 
116

 
107

Nonaccrual loans and other nonperforming assets
123

 
115

 
110

 
106

 
97

(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.


- 35 -

Wells Fargo & Company and Subsidiaries
TANGIBLE COMMON EQUITY (1)
(in millions, except ratios)


Jun 30,
2017

Mar 31,
2017

Dec 31,
2016

Sep 30,
2016

Jun 30,
2016

Tangible book value per common share (1):







Total equity


$
206,145

202,489

200,497

203,958

202,661

Adjustments:
 
 
 
 
 
 
 
Preferred stock


(25,785
)
(25,501
)
(24,551
)
(24,594
)
(24,830
)
Additional paid-in capital on ESOP
preferred stock


(136
)
(157
)
(126
)
(130
)
(150
)
Unearned ESOP shares


2,119

2,546

1,565

1,612

1,868

Noncontrolling interests


(915
)
(989
)
(916
)
(930
)
(916
)
Total common stockholders' equity
(A)

181,428

178,388

176,469

179,916

178,633

Adjustments:
 
 
 
 
 
 
 
Goodwill


(26,573
)
(26,666
)
(26,693
)
(26,688
)
(26,963
)
Certain identifiable intangible assets
(other than MSRs)


(2,147
)
(2,449
)
(2,723
)
(3,001
)
(3,356
)
Other assets (2)


(2,159
)
(2,121
)
(2,088
)
(2,230
)
(2,110
)
Applicable deferred taxes (3)


1,624

1,698

1,772

1,832

1,906

Tangible common equity
(B)

$
152,173

148,850

146,737

149,829

148,110

Common shares outstanding
(C)

4,966.8

4,996.7

5,016.1

5,023.9

5,048.5

Book value per common share
(A)/(C)

$
36.53

35.70

35.18

35.81

35.38

Tangible book value per common share
(B)/(C)

30.64

29.79

29.25

29.82

29.34

 
 
 
Quarter ended
 
 
Six months ended
 
(in millions, except ratios)
 
 
Jun 30,
2017

Mar 31,
2017

Dec 31,
2016

Sep 30,
2016

Jun 30,
2016

 
Jun 30,
2017

Jun 30,
2016

Return on average tangible common equity (1):
 
 
 
 
 
 
 
 
 
 
Net income applicable to common stock
(A)
 
$
5,404

5,056

4,872

5,243

5,173

 
10,460

10,258

Average total equity
 
 
205,968

201,767

201,247

203,883

201,003

 
203,879

198,795

Adjustments:
 
 

 
 
 
 
 
 
 
Preferred stock
 
 
(25,849
)
(25,163
)
(24,579
)
(24,813
)
(24,091
)
 
(25,508
)
(24,027
)
Additional paid-in capital on ESOP preferred stock
 
 
(144
)
(146
)
(128
)
(148
)
(168
)
 
(145
)
(184
)
Unearned ESOP shares
 
 
2,366

2,198

1,596

1,850

2,094

 
2,282

2,302

Noncontrolling interests
 
 
(910
)
(957
)
(928
)
(927
)
(984
)
 
(934
)
(944
)
Average common stockholders’ equity
(B)
 
181,431

177,699

177,208

179,845

177,854

 
179,574

175,942

Adjustments:
 
 

 
 
 
 
 
 
 
Goodwill
 
 
(26,664
)
(26,673
)
(26,713
)
(26,979
)
(27,037
)
 
(26,668
)
(26,553
)
Certain identifiable intangible assets (other than MSRs)
 
 
(2,303
)
(2,588
)
(2,871
)
(3,145
)
(3,600
)
 
(2,445
)
(3,503
)
Other assets (2)
 
 
(2,160
)
(2,095
)
(2,175
)
(2,131
)
(2,096
)
 
(2,128
)
(2,081
)
Applicable deferred taxes (3)
 
 
1,648

1,722

1,785

1,855

1,934

 
1,685

1,974

Average tangible common equity
(C)
 
$
151,952

148,065

147,234

149,445

147,055

 
150,018

145,779

Return on average common stockholders' equity (ROE)
(A)/(B)
 
11.95
%
11.54

10.94

11.60

11.70

 
11.75

11.72

Return on average tangible common equity (ROTCE)
(A)/(C)
 
14.26

13.85

13.16

13.96

14.15

 
14.06

14.15

(1)
Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity.
(2)
Represents goodwill and other intangibles on nonmarketable equity investments, which are included in other assets.
(3)
Applicable deferred taxes relate to goodwill and other intangible assets. They were determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.


- 36 -

Wells Fargo & Company and Subsidiaries
COMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1) 
 
 
Estimated

 
 
 
 
(in billions, except ratio)
 
Jun 30,
2017

Mar 31,
2017

Dec 31,
2016

Sep 30,
2016

Jun 30,
2016

Total equity
 
$
206.1

202.5

200.5

204.0

202.7

Adjustments:
 
 
 
 
 
 
Preferred stock
 
(25.8
)
(25.5
)
(24.6
)
(24.6
)
(24.8
)
Additional paid-in capital on ESOP
preferred stock
 
(0.1
)
(0.2
)
(0.1
)
(0.1
)
(0.2
)
Unearned ESOP shares
 
2.1

2.5

1.6

1.6

1.9

Noncontrolling interests
 
(0.9
)
(1.0
)
(0.9
)
(1.0
)
(1.0
)
Total common stockholders' equity
 
181.4

178.3

176.5

179.9

178.6

Adjustments:
 
 
 
 
 
 
Goodwill
 
(26.6
)
(26.7
)
(26.7
)
(26.7
)
(27.0
)
Certain identifiable intangible assets (other than MSRs)
 
(2.1
)
(2.4
)
(2.7
)
(3.0
)
(3.4
)
Other assets (2)
 
(2.2
)
(2.1
)
(2.1
)
(2.2
)
(2.0
)
Applicable deferred taxes (3)
 
1.6

1.7

1.8

1.8

1.9

Investment in certain subsidiaries and other
 
(0.2
)
(0.1
)
(0.4
)
(2.0
)
(2.5
)
Common Equity Tier 1 (Fully Phased-In) under Basel III
(A)
151.9

148.7

146.4

147.8

145.6

Total risk-weighted assets (RWAs) anticipated under Basel III (4)(5)
(B)
$
1,312.6

1,324.5

1,358.9

1,380.0

1,372.9

Common Equity Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In) (5)
(A)/(B)
11.6
%
11.2

10.8

10.7

10.6

(1)
Basel III capital rules, adopted by the Federal Reserve Board on July 2, 2013, revised the definition of capital, increased minimum capital ratios, and introduced a minimum Common Equity Tier 1 (CET1) ratio. These rules established a new comprehensive capital framework for U.S. banking organizations that implements the Basel III capital framework and certain provisions of the Dodd-Frank Act. The rules are being phased in through the end of 2021. Fully phased-in capital amounts, ratios and RWAs are calculated assuming the full phase-in of the Basel III capital rules. Fully phased-in regulatory capital amounts, ratios and RWAs are considered non-GAAP financial measures that are used by management, bank regulatory agencies, investors and analysts to assess and monitor the Company’s capital position.
(2)
Represents goodwill and other intangibles on nonmarketable equity investments, which are included in other assets.
(3)
Applicable deferred taxes relate to goodwill and other intangible assets. They were determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.
(4)
The final Basel III capital rules provide for two capital frameworks: the Standardized Approach, which replaced Basel I, and the Advanced Approach applicable to certain institutions. Under the final rules, we are subject to the lower of our CET1 ratio calculated under the Standardized Approach and under the Advanced Approach in the assessment of our capital adequacy. Because the final determination of our CET1 ratio and which approach will produce the lower CET1 ratio as of June 30, 2017, is subject to detailed analysis of considerable data, our CET1 ratio at that date has been estimated using the Basel III definition of capital under the Basel III Standardized Approach RWAs. The capital ratio for March 31, 2017, and December 31, September 30 and June 30, 2016, was calculated under the Basel III Standardized Approach RWAs.
(5)
The Company’s June 30, 2017, RWAs and capital ratio are preliminary estimates.


- 37 -

Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
(income/expense in millions,
average balances in billions)
Community
Banking
 
 
Wholesale
Banking
 
 
Wealth and Investment Management
 
 
Other (2)
 
 
Consolidated
Company
 
2017

 
2016

 
2017

 
2016

 
2017

 
2016

 
2017

 
2016

 
2017

 
2016

Quarter ended Jun 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (3)
$
7,548

 
7,379

 
4,278

 
3,919

 
1,127

 
932

 
(470
)
 
(497
)
 
12,483

 
11,733

Provision (reversal of provision) for credit losses
623

 
689

 
(65
)
 
385

 
7

 
2

 
(10
)
 
(2
)
 
555

 
1,074

Noninterest income
4,741

 
4,825

 
2,673

 
3,365

 
3,055

 
2,987

 
(783
)
 
(748
)
 
9,686

 
10,429

Noninterest expense
7,223

 
6,648

 
4,078

 
4,036

 
3,075

 
2,976

 
(835
)
 
(794
)
 
13,541

 
12,866

Income (loss) before income tax expense (benefit)
4,443

 
4,867

 
2,938

 
2,863

 
1,100

 
941

 
(408
)
 
(449
)
 
8,073

 
8,222

Income tax expense (benefit)
1,404

 
1,667

 
559

 
795

 
417

 
358

 
(155
)
 
(171
)
 
2,225

 
2,649

Net income (loss) before noncontrolling interests
3,039

 
3,200

 
2,379

 
2,068

 
683

 
583

 
(253
)
 
(278
)
 
5,848

 
5,573

Less: Net income (loss) from noncontrolling interests
46

 
21

 
(9
)
 
(5
)
 
1

 
(1
)
 
—

 
—

 
38

 
15

Net income (loss)
$
2,993

 
3,179

 
2,388

 
2,073

 
682

 
584

 
(253
)
 
(278
)
 
5,810

 
5,558

 
Average loans
$
477.2

 
485.7

 
464.9

 
451.4

 
71.7

 
66.7

 
(56.9
)
 
(53.0
)
 
956.9

 
950.8

Average assets
983.5

 
967.6

 
817.3

 
772.6

 
213.1

 
205.3

 
(86.8
)
 
(83.4
)
 
1,927.1

 
1,862.1

Average deposits
727.2

 
703.7

 
463.0

 
425.8

 
188.2

 
182.5

 
(77.2
)
 
(75.3
)
 
1,301.2

 
1,236.7

 
Six months ended June 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (3)
$
15,175

 
14,847

 
8,426

 
7,667

 
2,201

 
1,875

 
(1,019
)
 
(989
)
 
24,783

 
23,400

Provision (reversal of provision) for credit losses
1,269

 
1,409

 
(108
)
 
748

 
3

 
(12
)
 
(4
)
 
15

 
1,160

 
2,160

Noninterest income
9,207

 
9,971

 
5,563

 
6,575

 
6,174

 
5,898

 
(1,556
)
 
(1,487
)
 
19,388

 
20,957

Noninterest expense
14,444

 
13,484

 
8,303

 
8,004

 
6,281

 
6,018

 
(1,695
)
 
(1,612
)
 
27,333

 
25,894

Income (loss) before income tax expense (benefit)
8,669

 
9,925

 
5,794

 
5,490

 
2,091

 
1,767

 
(876
)
 
(879
)
 
15,678

 
16,303

Income tax expense (benefit)
2,531

 
3,364

 
1,305

 
1,514

 
779

 
672

 
(333
)
 
(334
)
 
4,282

 
5,216

Net income (loss) before noncontrolling interests
6,138

 
6,561

 
4,489

 
3,976

 
1,312

 
1,095

 
(543
)
 
(545
)
 
11,396

 
11,087

Less: Net income (loss) from noncontrolling interests
136

 
86

 
(14
)
 
(18
)
 
7

 
(1
)
 
—

 
—

 
129

 
67

Net income (loss)
$
6,002

 
6,475

 
4,503

 
3,994

 
1,305

 
1,096

 
(543
)
 
(545
)
 
11,267

 
11,020

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average loans
$
479.9

 
485.0

 
465.6

 
440.6

 
71.2

 
65.4

 
(56.5
)
 
(52.0
)
 
960.2

 
939.0

Average assets
987.0

 
957.5

 
812.6

 
760.6

 
217.5

 
206.7

 
(88.1
)
 
(83.8
)
 
1,929.0

 
1,841.0

Average deposits
722.2

 
693.3

 
464.5

 
426.9

 
191.9

 
183.5

 
(78.4
)
 
(75.7
)
 
1,300.2

 
1,228.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment.
(2)
Includes the elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for Wealth and Investment Management customers served through Community Banking distribution channels.
(3)
Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.


- 38 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)
 
 
 
 
 
 
 
Quarter ended
 
(income/expense in millions, average balances in billions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

COMMUNITY BANKING
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
7,548

 
7,627

 
7,556

 
7,430

 
7,379

Provision for credit losses
623

 
646

 
631

 
651

 
689

Noninterest income
4,741

 
4,466

 
4,105

 
4,957

 
4,825

Noninterest expense
7,223

 
7,221

 
6,985

 
6,953

 
6,648

Income before income tax expense
4,443

 
4,226

 
4,045

 
4,783

 
4,867

Income tax expense
1,404

 
1,127

 
1,272

 
1,546

 
1,667

Net income before noncontrolling interests
3,039

 
3,099

 
2,773

 
3,237

 
3,200

Less: Net income from noncontrolling interests
46

 
90

 
40

 
10

 
21

Segment net income
$
2,993

 
3,009

 
2,733

 
3,227

 
3,179

Average loans
$
477.2

 
482.7

 
488.1

 
489.2

 
485.7

Average assets
983.5

 
990.7

 
1,000.7

 
993.6

 
967.6

Average deposits
727.2

 
717.2

 
709.8

 
708.0

 
703.7

WHOLESALE BANKING
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
4,278

 
4,148

 
4,323

 
4,062

 
3,919

Provision (reversal of provision) for credit losses
(65
)
 
(43
)
 
168

 
157

 
385

Noninterest income
2,673

 
2,890

 
2,830

 
3,085

 
3,365

Noninterest expense
4,078

 
4,225

 
4,002

 
4,120

 
4,036

Income before income tax expense
2,938

 
2,856

 
2,983

 
2,870

 
2,863

Income tax expense
559

 
746

 
795

 
827

 
795

Net income before noncontrolling interests
2,379

 
2,110

 
2,188

 
2,043

 
2,068

Less: Net loss from noncontrolling interests
(9
)
 
(5
)
 
(6
)
 
(4
)
 
(5
)
Segment net income
$
2,388

 
2,115

 
2,194

 
2,047

 
2,073

Average loans
$
464.9

 
466.3

 
461.5

 
454.3

 
451.4

Average assets
817.3

 
807.8

 
811.9

 
794.2

 
772.6

Average deposits
463.0

 
466.0

 
459.2

 
441.2

 
425.8

WEALTH AND INVESTMENT MANAGEMENT
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
1,127

 
1,074

 
1,061

 
977

 
932

Provision (reversal of provision) for credit losses
7

 
(4
)
 
3

 
4

 
2

Noninterest income
3,055

 
3,119

 
3,013

 
3,122

 
2,987

Noninterest expense
3,075

 
3,206

 
3,042

 
2,999

 
2,976

Income before income tax expense
1,100

 
991

 
1,029

 
1,096

 
941

Income tax expense
417

 
362

 
380

 
415

 
358

Net income before noncontrolling interests
683

 
629

 
649

 
681

 
583

Less: Net income (loss) from noncontrolling interests
1

 
6

 
(4
)
 
4

 
(1
)
Segment net income
$
682

 
623

 
653

 
677

 
584

Average loans
$
71.7

 
70.7

 
70.0

 
68.4

 
66.7

Average assets
213.1

 
221.9

 
220.4

 
212.1

 
205.3

Average deposits
188.2

 
195.6

 
194.9

 
189.2

 
182.5

OTHER (3)
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
(470
)
 
(549
)
 
(538
)
 
(517
)
 
(497
)
Provision (reversal of provision) for credit losses
(10
)
 
6

 
3

 
(7
)
 
(2
)
Noninterest income
(783
)
 
(773
)
 
(768
)
 
(788
)
 
(748
)
Noninterest expense
(835
)
 
(860
)
 
(814
)
 
(804
)
 
(794
)
Loss before income tax benefit
(408
)
 
(468
)
 
(495
)
 
(494
)
 
(449
)
Income tax benefit
(155
)
 
(178
)
 
(189
)
 
(187
)
 
(171
)
Net loss before noncontrolling interests
(253
)
 
(290
)
 
(306
)
 
(307
)
 
(278
)
Less: Net income from noncontrolling interests
—

 
—

 
—

 
—

 
—

Other net loss
$
(253
)
 
(290
)
 
(306
)
 
(307
)
 
(278
)
Average loans
$
(56.9
)
 
(56.1
)
 
(55.5
)
 
(54.4
)
 
(53.0
)
Average assets
(86.8
)
 
(89.4
)
 
(88.7
)
 
(85.3
)
 
(83.4
)
Average deposits
(77.2
)
 
(79.6
)
 
(79.7
)
 
(76.9
)
 
(75.3
)
CONSOLIDATED COMPANY
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
12,483

 
12,300

 
12,402

 
11,952

 
11,733

Provision for credit losses
555

 
605

 
805

 
805

 
1,074

Noninterest income
9,686

 
9,702

 
9,180

 
10,376

 
10,429

Noninterest expense
13,541

 
13,792


13,215


13,268


12,866

Income before income tax expense
8,073

 
7,605

 
7,562

 
8,255

 
8,222

Income tax expense
2,225

 
2,057

 
2,258

 
2,601

 
2,649

Net income before noncontrolling interests
5,848

 
5,548

 
5,304

 
5,654

 
5,573

Less: Net income from noncontrolling interests
38

 
91

 
30

 
10

 
15

Wells Fargo net income
$
5,810

 
5,457

 
5,274

 
5,644

 
5,558

Average loans
$
956.9

 
963.6

 
964.1

 
957.5

 
950.8

Average assets
1,927.1

 
1,931.0

 
1,944.3

 
1,914.6

 
1,862.1

Average deposits
1,301.2

 
1,299.2

 
1,284.2

 
1,261.5

 
1,236.7

(1)
The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment.
(2)
Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.
(3)
Includes the elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for Wealth and Investment Management customers served through Community Banking distribution channels.


- 39 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
 
 Quarter ended
 
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

MSRs measured using the fair value method:
 
 
 
 
 
 
 
 
 
Fair value, beginning of quarter
$
13,208

 
12,959

 
10,415

 
10,396

 
11,333

Servicing from securitizations or asset transfers (1)
436

 
583

 
752

 
609

 
477

Sales and other (2)
(8
)
 
(47
)
 
(47
)
 
4

 
(22
)
Net additions
428

 
536

 
705

 
613

 
455

Changes in fair value:
 
 
 
 
 
 
 
 
 
Due to changes in valuation model inputs or assumptions:
 
 
 
 
 
 
 
 
 
Mortgage interest rates (3)
(305
)
 
152

 
2,367

 
39

 
(779
)
Servicing and foreclosure costs (4)
(14
)
 
27

 
93

 
(10
)
 
(4
)
Prepayment estimates and other (5)
(41
)
 
(5
)
 
(106
)
 
(37
)
 
(41
)
Net changes in valuation model inputs or assumptions
(360
)
 
174

 
2,354

 
(8
)
 
(824
)
Changes due to collection/realization of expected cash flows over time
(487
)
 
(461
)
 
(515
)
 
(586
)
 
(568
)
Total changes in fair value
(847
)
 
(287
)
 
1,839

 
(594
)
 
(1,392
)
Fair value, end of quarter
$
12,789

 
13,208

 
12,959

 
10,415

 
10,396

(1)
Includes impacts associated with exercising our right to repurchase delinquent loans from GNMA loan securitization pools.
(2)
Includes sales and transfers of MSRs, which can result in an increase of total reported MSRs if the sales or transfers are related to nonperforming loan portfolios.
(3)
Includes prepayment speed changes as well as other valuation changes due to changes in mortgage interest rates (such as changes in estimated interest earned on custodial deposit balances)
(4)
Includes costs to service and unreimbursed foreclosure costs.
(5)
Represents changes driven by other valuation model inputs or assumptions including prepayment speed estimation changes and other assumption updates. Prepayment speed estimation changes are influenced by observed changes in borrower behavior and other external factors that occur independent of interest rate changes.



 
Quarter ended
 
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Amortized MSRs:
 
 
 
 
 
 
 
 
 
Balance, beginning of quarter
$
1,402

 
1,406

 
1,373

 
1,353

 
1,359

Purchases
26

 
18

 
34

 
18

 
24

Servicing from securitizations or asset transfers
37

 
45

 
66

 
69

 
38

Amortization
(66
)
 
(67
)
 
(67
)
 
(67
)
 
(68
)
Balance, end of quarter
$
1,399

 
1,402

 
1,406

 
1,373

 
1,353

Fair value of amortized MSRs:
 
 
 
 
 
 
 
 
 
Beginning of quarter
$
2,051

 
1,956

 
1,627

 
1,620

 
1,725

End of quarter
1,989

 
2,051

 
1,956

 
1,627

 
1,620



- 40 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
 
 
Quarter ended
 
(in millions)
 
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Servicing income, net:
 
 
 
 
 
 
 
 
 
 
Servicing fees (1)
 
$
882

 
882

 
738

 
878

 
842

Changes in fair value of MSRs carried at fair value:
 
 
 
 
 
 
 
 
 
 
Due to changes in valuation model inputs or assumptions (2)
(A)
(360
)
 
174

 
2,354

 
(8
)
 
(824
)
Changes due to collection/realization of expected cash flows over time
 
(487
)
 
(461
)
 
(515
)
 
(586
)
 
(568
)
Total changes in fair value of MSRs carried at fair value
 
(847
)
 
(287
)
 
1,839

 
(594
)
 
(1,392
)
Amortization
 
(66
)
 
(67
)
 
(67
)
 
(67
)
 
(68
)
Net derivative gains (losses) from economic hedges (3)
(B)
431

 
(72
)
 
(2,314
)
 
142

 
978

Total servicing income, net
 
$
400

 
456

 
196

 
359

 
360

Market-related valuation changes to MSRs, net of hedge results (2)(3)
(A)+(B)
$
71

 
102

 
40

 
134

 
154

(1)
Includes contractually specified servicing fees, late charges and other ancillary revenues, net of unreimbursed direct servicing costs.
(2)
Refer to the changes in fair value MSRs table on the previous page for more detail.
(3)
Represents results from economic hedges used to hedge the risk of changes in fair value of MSRs.



(in billions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Managed servicing portfolio (1):
 
 
 
 
 
 
 
 
 
Residential mortgage servicing:
 
 
 
 
 
 
 
 
 
Serviced for others
$
1,189

 
1,204

 
1,205

 
1,226

 
1,250

Owned loans serviced
343

 
335

 
347

 
352

 
349

Subserviced for others
4

 
4

 
8

 
4

 
4

Total residential servicing
1,536

 
1,543

 
1,560

 
1,582

 
1,603

Commercial mortgage servicing:
 
 
 
 
 
 
 
 
 
Serviced for others
475

 
474

 
479

 
477

 
478

Owned loans serviced
130

 
132

 
132

 
130

 
128

Subserviced for others
8

 
7

 
8

 
8

 
8

Total commercial servicing
613

 
613

 
619

 
615

 
614

Total managed servicing portfolio
$
2,149

 
2,156

 
2,179

 
2,197

 
2,217

Total serviced for others
$
1,664

 
1,678

 
1,684

 
1,703

 
1,728

Ratio of MSRs to related loans serviced for others
0.85
%
 
0.87

 
0.85

 
0.69

 
0.68

Weighted-average note rate (mortgage loans serviced for others)
4.23

 
4.23

 
4.26

 
4.28

 
4.32

(1)
The components of our managed servicing portfolio are presented at unpaid principal balance for loans serviced and subserviced for others and at book value for owned loans serviced.


- 41 -

Wells Fargo & Company and Subsidiaries
SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA
 
 
Quarter ended
 
 
 
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016


Jun 30,
2016

Net gains on mortgage loan origination/sales activities (in millions):
 
 
 
 
 
 
 
 
 
 
Residential
(A)
$
521

 
569

 
939

 
953

 
744

Commercial
 
81

 
101

 
90

 
167

 
72

Residential pipeline and unsold/repurchased loan management (1)
 
146

 
102

 
192

 
188

 
238

Total
 
$
748

 
772

 
1,221

 
1,308

 
1,054

Application data (in billions):
 
 
 
 
 
 
 
 
 
 
Wells Fargo first mortgage quarterly applications
 
$
83

 
59

 
75

 
100

 
95

Refinances as a percentage of applications
 
32
%
 
36

 
48

 
55

 
46

Wells Fargo first mortgage unclosed pipeline, at quarter end
 
$
34

 
28

 
30

 
50

 
47

Residential real estate originations:
 
 
 
 
 
 
 
 
 
 
Purchases as a percentage of originations
 
75
%
 
61

 
50

 
58

 
60

Refinances as a percentage of originations
 
25

 
39

 
50

 
42

 
40

Total
 
100
%
 
100

 
100

 
100

 
100

Wells Fargo first mortgage loans (in billions):
 
 
 
 
 
 
 
 
 
 
Retail
 
$
25

 
21

 
35

 
37

 
34

Correspondent
 
31

 
22

 
36

 
32

 
28

Other (2)
 
—

 
1

 
1

 
1

 
1

Total quarter-to-date
 
$
56

 
44

 
72

 
70

 
63

Held-for-sale
(B)
$
42

 
34

 
56

 
53

 
46

Held-for-investment
 
14

 
10

 
16

 
17

 
17

Total quarter-to-date
 
$
56

 
44

 
72

 
70

 
63

Total year-to-date
 
$
100

 
44

 
249

 
177

 
107

Production margin on residential held-for-sale mortgage originations
(A)/(B)
1.24
%
 
1.68

 
1.68

 
1.81

 
1.66

(1)
Largely includes the results of GNMA loss mitigation activities, interest rate management activities and changes in estimate to the liability for mortgage loan repurchase losses.
(2)
Consists of home equity loans and lines.


CHANGES IN MORTGAGE REPURCHASE LIABILITY
 
 
 
 
Quarter ended
 
(in millions)
Jun 30,
2017

 
Mar 31,
2017

 
Dec 31,
2016

 
Sep 30,
2016

 
Jun 30,
2016

Balance, beginning of period
$
222

 
229

 
239

 
255

 
355

Provision for repurchase losses:
 
 
 
 
 
 
 
 
 
Loan sales
6

 
8

 
10

 
11

 
8

Change in estimate (1)
(45
)
 
(8
)
 
(7
)
 
(24
)
 
(89
)
Net additions (reductions)
(39
)

—


3

 
(13
)
 
(81
)
Losses
(5
)
 
(7
)
 
(13
)
 
(3
)
 
(19
)
Balance, end of period
$
178


222


229

 
239

 
255

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




Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘8-K’ Filing    Date    Other Filings
Filed on / For Period End:7/14/17
6/30/17424B2,  8-K,  FWP
3/31/1710-Q,  13F-HR,  4/A,  424B2,  8-K
1/1/174
12/31/1610-K,  11-K,  13F-HR,  5
6/30/1610-Q,  13F-HR,  424B2
7/2/134,  424B2,  8-K
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Filing Submission 0000072971-17-000377   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
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