Wells Fargo Reports $5.8 Billion in Quarterly Net Income

Diluted EPS of $1.07; Revenue of $22.2 billion

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

  • 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.

 

Selected Financial Information

  Quarter ended
Jun 30,   Mar 31,     Jun 30,
    2017     2017     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).

 

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.

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.

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

    Jun 30,   Mar 31,   Dec 31,     Sep 30,     Jun 30,
(in millions)     2017     2017     2016     2016     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.

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  
Net loan   As a % of Net loan   As a % of Net loan   As a % of
charge- average charge- average charge- average
($ in millions)   offs     loans (a)     offs     loans (a)     offs     loans (a)  
Commercial:
Commercial and industrial $ 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.

 

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  
      As a     As a     As a
% of % of % of
Total total Total total Total total
($ in millions)     balances     loans     balances     loans     balances     loans  
Commercial:
Commercial and industrial $ 2,632 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.

Business Segment Performance

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

 
    Quarter ended
Jun 30,     Mar 31,     Jun 30,
(in millions)     2017     2017     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
Jun 30,     Mar 31,     Jun 30,
(in millions)     2017     2017     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.

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

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
Jun 30,   Mar 31,   Jun 30,
(in millions)     2017     2017     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.

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
Jun 30,     Mar 31,   Jun 30,
(in millions)     2017     2017     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

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.

 

Endnotes

1   Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
2 See table on page 36 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules.
3 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.
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.
 

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 funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our investment securities portfolio;
  • the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
  • negative effects from the retail banking sales practices matter, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, and our reputation;
  • reputational damage from negative publicity, protests, fines, penalties and other negative consequences from regulatory violations and legal actions;
  • a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
  • the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
  • fiscal and monetary policies of the Federal Reserve Board; and
  • the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.

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

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

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

About Wells Fargo

Wells Fargo & Company (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.

 
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
 
 
Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA

 
      % Change      
Quarter ended   Jun 30, 2017 from   Six months ended  

($ in millions, except per

Jun 30,   Mar 31,     Jun 30, Mar 31,   Jun 30, Jun 30,   Jun 30, %

share amounts)

  2017     2017     2016     2017     2016     2017     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.

 
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA

  Quarter ended
Jun 30,   Mar 31,     Dec 31,     Sep 30,     Jun 30,
($ in millions, except per share amounts)   2017     2017     2016     2016     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.

 
 
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 )
 
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

    Quarter ended
Jun 30,     Mar 31,     Dec 31,   Sep 30,     Jun 30,
(in millions, except per share amounts)     2017     2017     2016     2016     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
 
 
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  
Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,
(in millions)   2017     2017     2016     2016     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.

 
 

Wells Fargo & Company and Subsidiaries

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

 
  Quarter ended June 30,  
2017     2016  
    Interest       Interest
Average Yields/ income/ Average Yields/ income/
(in millions)   balance     rates     expense     balance     rates     expense  
Earning assets
Federal funds sold, securities purchased under resale agreements and 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.

 
 
Wells Fargo & Company and Subsidiaries

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

 
  Six months ended June 30,  
2017     2016  
    Interest       Interest
Average Yields/ income/ Average Yields/ income/
(in millions)   balance     rates     expense     balance     rates     expense  
Earning assets
Federal funds sold, securities purchased under resale agreements and 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.

 
 
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  
Average   Yields/   Average   Yields/   Average   Yields/   Average   Yields/   Average   Yields/
($ in billions)   balance     rates     balance     rates     balance     rates     balance     rates     balance     rates  
Earning assets
Federal funds sold, securities purchased under resale agreements and 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.

 
 

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  
 
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

    Quarter ended
Jun 30,     Mar 31,     Dec 31,   Sep 30,   Jun 30,
(in millions)     2017     2017     2016     2016     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
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(in millions)     2017     2017     2016     2016     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
 
     

Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET
Jun 30, Dec 31, %
(in millions, except shares)   2017     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      
 
         

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(in millions)   2017     2017     2016     2016     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  
 
         

Wells Fargo & Company and Subsidiaries

FIVE QUARTER INVESTMENT SECURITIES
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(in millions)   2017   2017   2016   2016   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

                     
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(in millions)   2017   2017   2016   2016   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.

                       

Jun 30,

Mar 31

Dec 31,

Sep 30,

Jun 30,

(in millions)

 

2017

 

2017

 

2016

 

2016

 

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

 
               

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(in millions)   2017     2017     2016     2016     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.

 
                 

Wells Fargo & Company and Subsidiaries

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(in millions)   2017     2017     2016     2016     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