Wells Fargo Reports $6.0 Billion in Quarterly Net Income; Diluted EPS of $1.13

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Wells Fargo & Company (NYSE:WFC):

  • Financial results:
    • Net income of $6.0 billion, compared with $4.5 billion in third quarter 2017
    • Diluted earnings per share (EPS) of $1.13, compared with $0.83
      • Third quarter 2018 included the redemption of our Series J Preferred Stock, which reduced diluted EPS by $0.03 per share
    • Revenue of $21.9 billion, up from $21.8 billion
      • Net interest income of $12.6 billion, up $123 million, or 1 percent
      • Noninterest income of $9.4 billion, down $31 million
    • Noninterest expense of $13.8 billion, down $588 million, or 4 percent
    • Average deposits of $1.3 trillion, down $40.0 billion, or 3 percent
    • Average loans of $939.5 billion, down $12.9 billion, or 1 percent
    • Return on assets (ROA) of 1.27 percent, return on equity (ROE) of 12.04 percent, and return on average tangible common equity (ROTCE) of 14.33 percent1
  • Credit quality:
    • Provision expense of $580 million, down $137 million, or 19 percent, from third quarter 2017
      • Net charge-offs decreased $37 million to $680 million, or 0.29 percent of average loans (annualized)
      • Reserve release2 of $100 million
    • Nonaccrual loans of $7.1 billion, down $1.6 billion, or 18 percent
  • Strong capital position while returning more capital to shareholders:.
    • Common Equity Tier 1 ratio (fully phased-in) of 11.9 percent3
    • Returned $8.9 billion to shareholders through common stock dividends and net share repurchases, which more than doubled from $4.0 billion in third quarter 2017
      • Net share repurchases of $6.8 billion, which more than tripled from $2.0 billion
      • Period-end common shares outstanding down 216.3 million shares, or 4 percent
      • Quarterly common stock dividend of $0.43 per share, up 10 percent from $0.39 per share

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

 

Selected Financial Information

  Quarter ended
Sep 30,   Jun 30,   Sep 30,
    2018   2018   2017
Earnings
Diluted earnings per common share $ 1.13 0.98 0.83
Wells Fargo net income (in billions) 6.01 5.19 4.54
Return on assets (ROA) 1.27 % 1.10 0.93
Return on equity (ROE) 12.04 10.60 8.96
Return on average tangible common equity (ROTCE) (a) 14.33 12.62 10.66
Asset Quality
Net charge-offs (annualized) as a % of average total loans 0.29 % 0.26 0.30
Allowance for credit losses as a % of total loans 1.16 1.18 1.27
Allowance for credit losses as a % of annualized net charge-offs 406 460 426
Other
Revenue (in billions) $ 21.9 21.6 21.8
Efficiency ratio (b) 62.7 % 64.9 65.7
Average loans (in billions) $ 939.5 944.1 952.3
Average deposits (in billions) 1,266.4 1,271.3 1,306.4
Net interest margin   2.94 %   2.93   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 securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the “Tangible Common Equity” tables on page 36.

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

 

Wells Fargo & Company (NYSE:WFC) reported net income of $6.0 billion, or $1.13 per diluted common share, for third quarter 2018, compared with $4.5 billion, or $0.83 per share, for third quarter 2017, and $5.2 billion, or $0.98 per share, for second quarter 2018.

Chief Executive Officer Tim Sloan said, “In the third quarter, we continued to make progress in our efforts to build a better Wells Fargo with a specific focus on our six goals: risk management, customer service, team member engagement, innovation, corporate citizenship and shareholder value. We are strengthening how we manage risk and have made enhancements to our risk management framework. We also continued to make progress on customer remediation, which is an important step in our efforts to rebuild trust. In addition, to better serve our customers and help them succeed financially, we launched Control TowerSM, a digital experience that simplifies our customers’ online financial lives, and our new Propel® Card, one of the richest no-annual-fee credit cards in the industry. Furthermore, our ongoing efforts in corporate citizenship and building stronger communities were recognized in a recent survey on corporate giving by the Chronicle of Philanthropy, which ranked the Wells Fargo Foundation as the No.2 corporate cash giver in the United States. Our focus on shareholder value included progress on our expense savings initiatives, and we returned a record $8.9 billion to shareholders through net common stock repurchases and dividends in the third quarter. I’m confident that our efforts to transform Wells Fargo position us for long-term success.”

Chief Financial Officer John Shrewsberry said, “Wells Fargo reported $6.0 billion of net income in the third quarter. Revenue increased and noninterest expense declined both linked quarter and year-over-year. Our positive operating leverage reflected the benefit of the transformational changes we are making at Wells Fargo, including our focus on reducing expenses. In addition, we saw positive business trends in the third quarter, including growth in primary consumer checking customers, increased debit and credit card usage, and higher year-over-year loan originations in auto, small business, home equity and personal loans and lines. Credit performance and capital levels remained strong. Our commitment to returning more capital to shareholders was demonstrated by an increase in net common share repurchases, which more than tripled from a year ago, and a higher common stock dividend.”

Net Interest Income

Net interest income in the third quarter was $12.6 billion, up $31 million from second quarter 2018. Net interest margin was 2.94 percent, up 1 basis point from the prior quarter.

Noninterest Income

Noninterest income in the third quarter was $9.4 billion, up $357 million from second quarter 2018. Third quarter noninterest income included higher other income, market sensitive revenue4, mortgage banking fees, service charges on deposit accounts, and card fees, partially offset by lower trust and investment fees.

  • Mortgage banking income was $846 million, up from $770 million in second quarter 2018. The production margin on residential held-for-sale mortgage loan originations5 increased to 0.97 percent, from 0.77 percent in the second quarter, primarily due to an improvement in secondary market conditions. Residential mortgage loan originations were $46 billion, down from $50 billion in the second quarter. Net mortgage servicing income was $390 million, down from $406 million in the second quarter.
  • Market sensitive revenue was $631 million, up from $527 million in second quarter 2018, predominantly due to higher net gains from equity securities on lower other-than-temporary impairment (OTTI).
  • Other income was $466 million, compared with $323 million in the second quarter. Third quarter results included a $638 million gain from sales of $1.7 billion of purchased credit-impaired (PCI) Pick-a-Pay loans, compared with a $479 million gain from sales of $1.3 billion of PCI Pick-a-Pay loans in second quarter 2018.

Noninterest Expense

Noninterest expense in the third quarter declined $219 million from the prior quarter to $13.8 billion, predominantly due to lower commission and incentive compensation, outside professional services and charitable donations expense. These decreases were partially offset by higher employee benefits, equipment and contract services expense. The efficiency ratio was 62.7 percent in third quarter 2018, compared with 64.9 percent in the second quarter.

Third quarter 2018 operating losses were $605 million, driven primarily by remediation expense for a variety of matters, including an additional $241 million accrual for previously disclosed issues related to automobile collateral protection insurance (CPI).

Income Taxes

The Company’s effective income tax rate was 20.1 percent for third quarter 2018 and included net discrete income tax expense related to the re-measurement of our initial estimates for the impacts of the Tax Cuts & Jobs Act recognized in fourth quarter 2017. The effective income tax rate in second quarter 2018 was 25.9 percent and included net discrete income tax expense of $481 million mostly related to state income taxes. The Company currently expects the effective income tax rate in fourth quarter 2018 to be approximately 19 percent, excluding the impact of any future discrete items.

Loans

Total average loans were $939.5 billion in the third quarter, down $4.6 billion from the second quarter. Period-end loan balances were $942.3 billion at September 30, 2018, down $2.0 billion from June 30, 2018. Commercial loans were down $1.2 billion compared with June 30, 2018, predominantly due to a $2.8 billion decline in commercial real estate loans, partially offset by $1.5 billion of growth in commercial and industrial loans. Consumer loans decreased $746 million from the prior quarter, driven by:

  • a $1.6 billion decline in automobile loans due to expected continued runoff, as well as the reclassification of the remaining $374 million of Reliable Financial Services Inc. auto loans to held for sale
  • a $1.2 billion decline in junior lien mortgage loans as payoffs continued to exceed originations
  • these decreases were partially offset by:
    • a $1.3 billion increase in 1-4 family first mortgage loans, as nonconforming mortgage loan originations were partially offset by payoffs and $1.7 billion of sales of PCI Pick-a-Pay mortgage loans
    • a $1.1 billion increase in credit card loans

Additionally, $249 million of nonconforming mortgage loan originations that would have otherwise been included in 1-4 family first mortgage loan outstandings were designated as held for sale in third quarter 2018 in anticipation of the future issuance of residential mortgage-backed securities (RMBS).

 

Period-End Loan Balances

  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Commercial $ 501,886 503,105 503,396 503,388 500,150
Consumer   440,414     441,160     443,912     453,382     451,723  
Total loans   $ 942,300     944,265     947,308     956,770     951,873  
Change from prior quarter   $ (1,965 )   (3,043 )   (9,462 )   4,897     (5,550 )
 

Debt and Equity Securities

Debt securities include available-for-sale and held-to-maturity debt securities, as well as debt securities held for trading. Debt securities were $472.3 billion at September 30, 2018, down $3.2 billion from the second quarter, predominantly due to a net decrease in available-for-sale debt securities, as approximately $14.3 billion of purchases, primarily federal agency mortgage-backed securities (MBS) in the available-for-sale portfolio, were more than offset by runoff and sales.

Net unrealized losses on available-for-sale debt securities were $3.8 billion at September 30, 2018, compared with net unrealized losses of $2.4 billion at June 30, 2018, predominantly due to higher interest rates.

Equity securities include marketable and non-marketable equity securities, as well as equity securities held for trading. Equity securities were $61.8 billion at September 30, 2018, up $4.3 billion from the second quarter, largely due to an increase in equity securities held for trading due to stronger customer activity.

Deposits

Total average deposits for third quarter 2018 were $1.3 trillion, down $5.0 billion from the prior quarter, as consumers continued to move excess liquidity to higher-rate alternatives. The average deposit cost for third quarter 2018 was 47 basis points, up 7 basis points from the prior quarter and 21 basis points from a year ago, primarily driven by an increase in Wholesale Banking and Wealth and Investment Management deposit rates.

Capital

Capital in the third quarter continued to exceed our internal target, with a Common Equity Tier 1 ratio (fully phased-in) of 11.9 percent3, down from 12.0 percent in the prior quarter. In third quarter 2018, the Company repurchased 146.5 million shares of its common stock, which reduced period-end common shares outstanding by 137.5 million. The Company paid a quarterly common stock dividend of $0.43 per share.

The Company redeemed its 8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J, on September 17, 2018, which reduced diluted earnings per common share in third quarter 2018 by $0.03 per share as a result of eliminating the purchase accounting discount recorded on these shares at the time of the Wachovia acquisition.

Credit Quality

Net Loan Charge-offs

The quarterly loss rate in the third quarter was 0.29 percent (annualized), compared with 0.26 percent in the prior quarter and 0.30 percent a year ago. Commercial and consumer losses were 0.12 percent and 0.47 percent, respectively. Total credit losses were $680 million in third quarter 2018, up $78 million from second quarter 2018. Commercial losses were up $85 million driven by higher commercial and industrial loan charge-offs and lower recoveries, while consumer losses decreased $7 million.

 

Net Loan Charge-Offs

  Quarter ended
    September 30, 2018   June 30, 2018   September 30, 2017
Net loan   As a % of Net loan   As a % of Net loan   As a % of
charge- average charge- average charge- average
($ in millions)   offs   loans (a)   offs   loans (a)   offs   loans (a)
Commercial:
Commercial and industrial $ 148 0.18 % $ 58 0.07 % $ 125 0.15 %
Real estate mortgage (1 ) — — — (3 ) (0.01 )
Real estate construction (2 ) (0.04 ) (6 ) (0.09 ) (15 ) (0.24 )
Lease financing   7   0.14 15   0.32 6   0.12
Total commercial   152   0.12 67   0.05 113   0.09
Consumer:
Real estate 1-4 family first mortgage (25 ) (0.04 ) (23 ) (0.03 ) (16 ) (0.02 )
Real estate 1-4 family junior lien mortgage (9 ) (0.10 ) (13 ) (0.13 ) 1 —
Credit card 299 3.22 323 3.61 277 3.08
Automobile 130 1.10 113 0.93 202 1.41
Other revolving credit and installment   133   1.44 135   1.44 140   1.44
Total consumer   528   0.47 535   0.49 604   0.53
Total   $ 680   0.29 % $ 602   0.26 % $ 717   0.30 %
 

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

 

Nonperforming Assets

Nonperforming assets decreased $410 million, or 5 percent, from second quarter 2018 to $7.6 billion. Nonaccrual loans decreased $433 million from second quarter 2018 to $7.1 billion reflecting both lower consumer and commercial nonaccruals.

 

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

    September 30, 2018   June 30, 2018   September 30, 2017
   

As a

    As a     As a

% of

% of % of
Total total Total total Total total
($ in millions)   balances   loans   balances   loans   balances   loans
Commercial:
Commercial and industrial $ 1,555 0.46 % $ 1,559 0.46 % $ 2,397 0.73 %
Real estate mortgage 603 0.50 765 0.62 593 0.46
Real estate construction 44 0.19 51 0.22 38 0.15
Lease financing   96   0.49 80   0.41 81   0.42
Total commercial   2,298   0.46 2,455   0.49 3,109   0.62
Consumer:
Real estate 1-4 family first mortgage 3,605 1.27 3,829 1.35 4,213 1.50
Real estate 1-4 family junior lien mortgage 984 2.79 1,029 2.82 1,101 2.68
Automobile 118 0.26 119 0.25 137 0.25
Other revolving credit and installment   48   0.13 54   0.14 59   0.15
Total consumer   4,755   1.08 5,031   1.14 5,510   1.22
Total nonaccrual loans   7,053   0.75 7,486   0.79 8,619   0.91
Foreclosed assets:
Government insured/guaranteed 87 90 137
Non-government insured/guaranteed   435   409   569  
Total foreclosed assets   522   499   706  
Total nonperforming assets   $ 7,575   0.80 % $ 7,985   0.85 % $ 9,325   0.98 %
Change from prior quarter:
Total nonaccrual loans $ (433 ) $ (233 ) $ (437 )
Total nonperforming assets   (410 )       (305 )       (512 )    
 

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $11.0 billion at September 30, 2018, down $154 million from June 30, 2018. Third quarter 2018 included a $100 million reserve release2, which reflected strong credit performance and lower loan balances. The allowance coverage for total loans was 1.16 percent, compared with 1.18 percent in second quarter 2018. The allowance covered 4.1 times annualized third quarter net charge-offs, compared with 4.6 times in the prior quarter. The allowance coverage for nonaccrual loans was 155 percent at September 30, 2018, compared with 148 percent at June 30, 2018. The Company believes the allowance was appropriate for losses inherent in the loan portfolio at September 30, 2018.

Business Segment Performance

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

 
  Quarter ended
Sep 30,   Jun 30,   Sep 30,
(in millions)   2018   2018   2017
Community Banking $ 2,816 2,496 1,877
Wholesale Banking 2,851 2,635 2,314
Wealth and Investment Management   732     445     719
 

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

 

Selected Financial Information

  Quarter ended
Sep 30,   Jun 30,   Sep 30,
(in millions)   2018   2018   2017
Total revenue $ 11,816 11,806 11,520
Provision for credit losses 547 484 650
Noninterest expense 7,467 7,290 7,852
Segment net income 2,816 2,496 1,877
(in billions)
Average loans 460.9 463.8 473.7
Average assets 1,024.9 1,034.3 1,089.6
Average deposits   760.9   760.6     734.6
 

Third Quarter 2018 vs. Second Quarter 2018

  • Net income of $2.8 billion, up $320 million, or 13 percent. Second quarter 2018 results included net discrete income tax expense of $481 million mostly related to state income taxes
  • Revenue was flat at $11.8 billion, as higher service charges on deposit accounts, mortgage banking income, gains from sales of PCI Pick-a-Pay loans, and card fees were predominantly offset by lower market sensitive revenue
  • Noninterest expense was up $177 million, or 2 percent, driven mainly by higher operating losses and equipment expense, partially offset by lower charitable contributions, outside professional services and other expense

Third Quarter 2018 vs. Third Quarter 2017

  • Net income was up $939 million, or 50 percent, predominantly due to lower noninterest expense and higher revenue
  • Revenue increased $296 million, or 3 percent, due to a gain from the sales of PCI Pick-a-Pay loans and higher net interest income, partially offset by lower mortgage banking income, market sensitive revenue and service charges on deposit accounts
  • Noninterest expense of $7.5 billion decreased $385 million, or 5 percent, driven by lower operating losses, partially offset by higher personnel expense
  • Provision for credit losses decreased $103 million due to credit improvement in the automobile and consumer real estate portfolios

Business Metrics and Highlights

  • Primary consumer checking customers6,7 up 1.7 percent year-over-year
  • More than 357,000 branch customer experience surveys completed during third quarter 2018, with both ‘Loyalty’ and ‘Overall Satisfaction with Most Recent Visit’ scores up from the prior quarter
  • #1 in retail deposits8, based on the FDIC's recently published Summary of Deposits annual survey
  • Debit card point-of-sale purchase volume9 of $87.5 billion in the third quarter, up 9 percent year-over-year
  • General purpose credit card point-of-sale purchase volume of $19.4 billion in the third quarter, up 7 percent year-over-year
  • Business Insider named our Propel® Card the #1 no-fee credit card on its list of "The 8 Best No-Fee Credit Cards to Open in 2018"
  • 29.0 million digital (online and mobile) active customers, including 22.5 million mobile active users7,10
  • 5,663 retail bank branches as of the end of third quarter 2018, reflecting 93 branch consolidations in the quarter and 207 in the first nine months of 2018; additionally, we expect to complete the previously announced divestiture of 52 branches in Indiana, Ohio, Michigan and part of Wisconsin in fourth quarter 2018
  • Home Lending
  • Originations of $46 billion, down from $50 billion in the prior quarter, primarily due to seasonality; included home equity originations of $713 million, up 3 percent from the prior quarter and up 16 percent from the prior year
  • Applications of $57 billion, down from $67 billion in the prior quarter, primarily due to seasonality
  • Application pipeline of $22 billion at quarter end, down from $26 billion at June 30, 2018
  • Production margin on residential held-for-sale mortgage loan originations5 of 0.97 percent, up from 0.77 percent in the prior quarter, due to an improvement in secondary market conditions
  • For the 10th consecutive year, Wells Fargo received first place in the Dynatrace 2018 Mortgage and Home Equity Scorecard, a customer experience best practice benchmark of mortgage and home equity digital channels
  • Automobile originations of $4.8 billion in the third quarter, up 8 percent from the prior quarter and up 10 percent from the prior year
  • Originations of personal loans and lines of $684 million in third quarter 2018, up 3 percent from the prior year
  • Small Business Lending11 originations of $627 million, up 28 percent from the prior year

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

 

Selected Financial Information

  Quarter ended
Sep 30,   Jun 30,   Sep 30,
(in millions)   2018   2018   2017
Total revenue $ 7,304 7,197 7,504
Provision (reversal of provision) for credit losses 26 (36 ) 69
Noninterest expense 3,935 4,219 4,234
Segment net income 2,851 2,635 2,314
(in billions)
Average loans 462.8 464.7 463.7
Average assets 827.2 826.4 824.2
Average deposits   413.6     414.0     463.4
 

Third Quarter 2018 vs. Second Quarter 2018

  • Net income of $2.9 billion, up $216 million, or 8 percent
  • Revenue of $7.3 billion increased $107 million, or 1 percent, driven by higher net interest income, other income and mortgage banking income, partially offset by lower market sensitive revenue
  • Noninterest expense decreased $284 million, or 7 percent, reflecting lower operating losses and personnel expense
  • Provision for credit losses increased $62 million driven by higher loan losses and lower recoveries

Third Quarter 2018 vs. Third Quarter 2017

  • Net income increased $537 million, or 23 percent, as third quarter 2018 results benefited from a lower effective income tax rate
  • Revenue decreased $200 million, or 3 percent, primarily due to the impact of the sales of Wells Fargo Insurance Services USA (WFIS) in fourth quarter 2017 and Wells Fargo Shareowner Services in first quarter 2018, as well as lower net interest income, treasury management fees and operating lease income
  • Noninterest expense decreased $299 million, or 7 percent, on lower expense related to the sales of WFIS and Wells Fargo Shareowner Services, lower project-related expense and operating losses, partially offset by higher regulatory, risk and technology expense

Business Metrics and Highlights

  • Commercial card spend volume12 of $8.2 billion, up 9 percent from the prior year on increased transaction volumes primarily reflecting customer growth, and flat compared with second quarter 2018
  • U.S. investment banking market share of 3.3 percent year-to-date 201813, compared with 3.6 percent year-to-date 201713

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

 

Selected Financial Information

  Quarter ended
Sep 30,   Jun 30,   Sep 30,
(in millions)   2018   2018   2017
Total revenue $ 4,226 3,951 4,256
Provision (reversal of provision) for credit losses 6 (2 ) (1 )
Noninterest expense 3,243 3,361 3,102
Segment net income 732 445 719
(in billions)
Average loans 74.6 74.7 72.4
Average assets 83.8 84.0 83.2
Average deposits   159.8   167.1     184.4  
 

Third Quarter 2018 vs. Second Quarter 2018

  • Net income of $732 million, up $287 million, or 64 percent
  • Revenue of $4.2 billion increased $275 million, or 7 percent, primarily due to higher net gains from equity securities primarily on lower OTTI from a second quarter that included an impairment of $214 million related to the sale of Wells Fargo Asset Management's (WFAM) ownership stake in The Rock Creek Group, LP (RockCreek), and higher deferred compensation plan investments (offset in employee benefits expense)
  • Noninterest expense decreased $118 million, or 4 percent, predominantly driven by lower operating losses and personnel expense, partially offset by higher employee benefits from deferred compensation plan expense (offset in net gains from equity securities)

Third Quarter 2018 vs. Third Quarter 2017

  • Net income up $13 million, or 2 percent, as third quarter 2018 results benefited from a lower effective income tax rate
  • Revenue decreased $30 million, driven by lower net interest income and brokerage transaction revenue, partially offset by higher asset-based fees and net gains from equity securities
  • Noninterest expense increased $141 million, or 5 percent, primarily due to higher regulatory, risk and technology expense, higher broker commissions and other non-personnel expense

Business Metrics and Highlights

Total WIM Segment

  • WIM total client assets of $1.9 trillion, up 2 percent from a year ago, driven by higher market valuations, partially offset by net outflows
  • Average loan balances up 3 percent from a year ago largely due to growth in non-conforming mortgage loans
  • Third quarter 2018 closed referred investment assets (referrals resulting from the WIM/Community Banking partnership) were flat compared with a year ago

Retail Brokerage

  • Client assets of $1.6 trillion, up 2 percent from prior year, primarily driven by higher market valuations, partially offset by net outflows
  • Advisory assets of $560 billion, up 7 percent from prior year, primarily driven by higher market valuations

Wealth Management

  • Client assets of $240 billion, flat compared with prior year

Asset Management

  • Total assets under management (AUM) of $483 billion, down 3 percent from prior year, as a result of the sale of WFAM's ownership stake in RockCreek and removal of the associated AUM, as well as equity and fixed income net outflows, partially offset by higher market valuations and money market fund net inflows

Retirement

  • IRA assets of $418 billion, up 5 percent from prior year
  • Institutional Retirement plan assets of $398 billion, up 3 percent from prior year

Conference Call

The Company will host a live conference call on Friday, October 12, 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~8888608.

A replay of the conference call will be available beginning at 11:00 a.m. PT (2:00 p.m. ET) on Friday, October 12 through Friday, October 26. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #8888608. 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~8888608.

End Notes

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

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

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

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

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 42 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 August 2018, comparisons with August 2017.

8 FDIC data, SNL Financial, as of June 2018. Retail deposit data is pro forma for acquisitions and caps deposits at $1 billion in a single banking branch and excludes credit union deposits.

9 Combined consumer and business debit card purchase volume dollars.

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

11 Small Business Lending includes credit card, lines of credit and loan products (primarily under $100,000 sold through our retail banking branches).

12 Includes commercial card volume for the entire company.

13 Year-to-date through September. Source: Dealogic U.S. investment banking fee market share.

Forward-Looking Statements

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

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

  • current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters (including the impact of the Tax Cuts & Jobs Act), geopolitical matters, and any 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 any efficiency ratio or expense 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 interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgage loans held for sale;
  • significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our debt securities and equity securities portfolios;
  • the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
  • negative effects from the retail banking sales practices matter and from other instances where customers may have experienced financial harm, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, and our reputation;
  • resolution of regulatory matters, litigation, or other legal actions, which may result in, among other things, additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other adverse consequences;
  • a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
  • the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
  • fiscal and monetary policies of the Federal Reserve Board; and
  • the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017.

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

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

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

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

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investments, mortgage, and consumer and commercial finance through 7,950 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 37 countries and territories to support customers who conduct business in the global economy. With approximately 262,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2018 rankings of America’s largest corporations.

 

Wells Fargo & Company and Subsidiaries

QUARTERLY FINANCIAL DATA

TABLE OF CONTENTS

 
  Pages
 

Summary Information

Summary Financial Data

18
 

Income

Consolidated Statement of Income 20
Consolidated Statement of Comprehensive Income 22
Condensed Consolidated Statement of Changes in Total Equity 22
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 23
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 25
Noninterest Income and Noninterest Expense 26
 

Balance Sheet

Consolidated Balance Sheet 28
Trading Activities 30
Debt Securities 30
Equity Securities 31
 

Loans

Loans 32
Nonperforming Assets 33
Loans 90 Days or More Past Due and Still Accruing 33
Purchased Credit-Impaired Loans 34
Changes in Allowance for Credit Losses 36
 

Equity

Tangible Common Equity 37
Common Equity Tier 1 Under Basel III 38
 

Operating Segments

Operating Segment Results 39
 

Other

Mortgage Servicing and other related data 41
 

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA
   

% Change

   
Quarter ended

Sep 30, 2018 from

Nine months ended

 

Sep 30,   Jun 30,   Sep 30,

Jun 30,

  Sep 30, Sep 30,   Sep 30, %

($ in millions, except per share amounts)

  2018   2018   2017   2018   2017   2018   2017   Change
For the Period
Wells Fargo net income $ 6,007 5,186 4,542 16 % 32 $ 16,329 16,032 2 %
Wells Fargo net income applicable to common stock 5,453 4,792 4,131 14 32 14,978 14,814 1
Diluted earnings per common share 1.13 0.98 0.83 15 36 3.07 2.94 4
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.27 % 1.10 0.93 15 37 1.15 % 1.11 4
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.04 10.60 8.96 14 34 11.08 10.97 1
Return on average tangible common equity (ROTCE)(1) 14.33 12.62 10.66 14 34 13.19 13.11 1
Efficiency ratio (2) 62.7 64.9 65.7 (3 ) (5 ) 65.4 62.8 4
Total revenue $ 21,941 21,553 21,849 2 — $ 65,428 66,339 (1 )
Pre-tax pre-provision profit (PTPP) (3) 8,178 7,571 7,498 8 9 22,641 24,655 (8 )
Dividends declared per common share 0.43 0.39 0.39 10 10 1.21 1.15 5
Average common shares outstanding 4,784.0 4,865.8 4,948.6 (2 ) (3 ) 4,844.8 4,982.1 (3 )
Diluted average common shares outstanding 4,823.2 4,899.8 4,996.8 (2 ) (3 ) 4,885.0 5,035.4 (3 )
Average loans $ 939,462 944,079 952,343 — (1 ) $ 944,813 957,581 (1 )
Average assets 1,876,283 1,884,884 1,938,461 — (3 ) 1,892,209 1,932,201 (2 )
Average total deposits 1,266,378 1,271,339 1,306,356 — (3 ) 1,278,185 1,302,273 (2 )
Average consumer and small business banking deposits (4) 743,503 754,047 755,094 (1 ) (2 ) 751,030 758,443 (1 )
Net interest margin 2.94 % 2.93 2.86 — 3 2.90 % 2.88 1
At Period End
Debt securities (5) $ 472,283 475,495 474,710 (1 ) (1 ) $ 472,283 474,710 (1 )
Loans 942,300 944,265 951,873 — (1 ) 942,300 951,873 (1 )
Allowance for loan losses 10,021 10,193 11,078 (2 ) (10 ) 10,021 11,078 (10 )
Goodwill 26,425 26,429 26,581 — (1 ) 26,425 26,581 (1 )
Equity securities (5) 61,755 57,505 54,981 7 12 61,755 54,981 12
Assets 1,872,981 1,879,700 1,934,880 — (3 ) 1,872,981 1,934,880 (3 )
Deposits 1,266,594 1,268,864 1,306,706 — (3 ) 1,266,594 1,306,706 (3 )
Common stockholders' equity 176,934 181,386 181,920 (2 ) (3 ) 176,934 181,920 (3 )
Wells Fargo stockholders’ equity 198,741 205,188 205,722 (3 ) (3 ) 198,741 205,722 (3 )
Total equity 199,679 206,069 206,617 (3 ) (3 ) 199,679 206,617 (3 )
Tangible common equity (1) 148,391 152,580 152,694 (3 ) (3 ) 148,391 152,694 (3 )
Common shares outstanding 4,711.6 4,849.1 4,927.9 (3 ) (4 ) 4,711.6 4,927.9 (4 )
Book value per common share (6) $ 37.55 37.41 36.92 — 2 $ 37.55 36.92 2
Tangible book value per common share (1)(6) 31.49 31.47 30.99 — 2 31.49 30.99 2
Team members (active, full-time equivalent)   261,700     264,500     268,000     (1 )   (2 )   261,700     268,000     (2 )

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

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

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

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

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

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA
  Quarter ended
Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
($ in millions, except per share amounts)   2018   2018   2018   2017   2017
For the Quarter
Wells Fargo net income $ 6,007 5,186 5,136 6,151 4,542
Wells Fargo net income applicable to common stock 5,453 4,792 4,733 5,740 4,131
Diluted earnings per common share 1.13 0.98 0.96 1.16 0.83
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.27 % 1.10 1.09 1.26 0.93
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.04 10.60 10.58 12.47 8.96
Return on average tangible common equity (ROTCE)(1) 14.33 12.62 12.62 14.85 10.66
Efficiency ratio (2) 62.7 64.9 68.6 76.2 65.7
Total revenue $ 21,941 21,553 21,934 22,050 21,849
Pre-tax pre-provision profit (PTPP) (3) 8,178 7,571 6,892 5,250 7,498
Dividends declared per common share 0.43 0.39 0.39 0.39 0.39
Average common shares outstanding 4,784.0 4,865.8 4,885.7 4,912.5 4,948.6
Diluted average common shares outstanding 4,823.2 4,899.8 4,930.7 4,963.1 4,996.8
Average loans $ 939,462 944,079 951,024 951,822 952,343
Average assets 1,876,283 1,884,884 1,915,896 1,935,318 1,938,461
Average total deposits 1,266,378 1,271,339 1,297,178 1,311,592 1,306,356
Average consumer and small business banking deposits (4) 743,503 754,047 755,483 757,541 755,094
Net interest margin 2.94 % 2.93 2.84 2.84 2.86
At Quarter End
Debt securities (5) $ 472,283 475,495 472,968 473,366 474,710
Loans 942,300 944,265 947,308 956,770 951,873
Allowance for loan losses 10,021 10,193 10,373 11,004 11,078
Goodwill 26,425 26,429 26,445 26,587 26,581
Equity securities (5) 61,755 57,505 58,935 62,497 54,981
Assets 1,872,981 1,879,700 1,915,388 1,951,757 1,934,880
Deposits 1,266,594 1,268,864 1,303,689 1,335,991 1,306,706
Common stockholders' equity 176,934 181,386 181,150 183,134 181,920
Wells Fargo stockholders’ equity 198,741 205,188 204,952 206,936 205,722
Total equity 199,679 206,069 205,910 208,079 206,617
Tangible common equity (1) 148,391 152,580 151,878 153,730 152,694
Common shares outstanding 4,711.6 4,849.1 4,873.9 4,891.6 4,927.9
Book value per common share (6) $ 37.55 37.41 37.17 37.44 36.92
Tangible book value per common share (1)(6) 31.49 31.47 31.16 31.43 30.99
Team members (active, full-time equivalent)   261,700     264,500     265,700     262,700     268,000

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

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

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

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

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

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

 
 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME
      Nine months  
Quarter ended September 30, % ended September 30, %
(in millions, except per share amounts)   2018   2017   Change   2018   2017   Change
Interest income    
Debt securities (1) $ 3,595 3,253 11 % $ 10,603 9,652 10 %
Mortgage loans held for sale 210 217 (3 ) 587 590 (1 )
Loans held for sale (1) 35 15 133 107 38 182
Loans 11,116 10,522 6 32,607 31,021 5
Equity securities (1) 280 186 51 732 560 31
Other interest income (1)   1,128   851 33   3,090   2,090 48
Total interest income   16,364   15,044 9   47,726   43,951 9
Interest expense
Deposits 1,499 869 72 3,857 2,082 85
Short-term borrowings 462 226 104 1,171 503 133
Long-term debt 1,667 1,391 20 4,901 3,813 29
Other interest expense   164   109 50   446   309 44
Total interest expense   3,792   2,595 46   10,375   6,707 55
Net interest income 12,572 12,449 1 37,351 37,244 —
Provision for credit losses   580   717 (19 )   1,223   1,877 (35 )
Net interest income after provision for credit losses   11,992   11,732 2   36,128   35,367 2
Noninterest income
Service charges on deposit accounts 1,204 1,276 (6 ) 3,540 3,865 (8 )
Trust and investment fees 3,631 3,609 1 10,989 10,808 2
Card fees 1,017 1,000 2 2,926 2,964 (1 )
Other fees 850 877 (3 ) 2,496 2,644 (6 )
Mortgage banking 846 1,046 (19 ) 2,550 3,422 (25 )
Insurance 104 269 (61 ) 320 826 (61 )
Net gains from trading activities (1) 158 120 32 592 543 9
Net gains on debt securities 57 166 (66 ) 99 322 (69 )
Net gains from equity securities (1) 416 363 15 1,494 1,207 24
Lease income 453 475 (5 ) 1,351 1,449 (7 )
Other   633   199 218   1,720   1,045 65
Total noninterest income   9,369   9,400 —   28,077   29,095 (3 )
Noninterest expense
Salaries 4,461 4,356 2 13,289 12,960 3
Commission and incentive compensation 2,427 2,553 (5 ) 7,837 7,777 1
Employee benefits 1,377 1,279 8 4,220 4,273 (1 )
Equipment 634 523 21 1,801 1,629 11
Net occupancy 718 716 — 2,153 2,134 1
Core deposit and other intangibles 264 288 (8 ) 794 864 (8 )
FDIC and other deposit assessments 336 314 7 957 975 (2 )
Other   3,546   4,322 (18 )   11,736   11,072 6
Total noninterest expense   13,763   14,351 (4 )   42,787   41,684 3
Income before income tax expense 7,598 6,781 12 21,418 22,778 (6 )
Income tax expense   1,512   2,181 (31 )   4,696   6,559 (28 )
Net income before noncontrolling interests 6,086 4,600 32 16,722 16,219 3
Less: Net income from noncontrolling interests   79   58 36   393   187 110
Wells Fargo net income   $ 6,007   4,542 32   $ 16,329   16,032 2
Less: Preferred stock dividends and other   554   411 35   1,351   1,218 11
Wells Fargo net income applicable to common stock   $ 5,453   4,131 32   $ 14,978   14,814 1
Per share information
Earnings per common share $ 1.14 0.83 37 $ 3.09 2.97 4
Diluted earnings per common share 1.13 0.83 36 3.07 2.94 4
Average common shares outstanding 4,784.0 4,948.6 (3 ) 4,844.8 4,982.1 (3 )
Diluted average common shares outstanding   4,823.2   4,996.8   (3 )   4,885.0   5,035.4   (3 )

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
  Quarter ended
Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions, except per share amounts)   2018   2018   2018   2017   2017
Interest income
Debt securities (1) $ 3,595 3,594 3,414 3,294 3,253
Mortgage loans held for sale 210 198 179 196 217
Loans held for sale (1) 35 48 24 12 15
Loans 11,116 10,912 10,579 10,367 10,522
Equity securities (1) 280 221 231 239 186
Other interest income (1)   1,128   1,042   920   850   851
Total interest income   16,364   16,015   15,347   14,958   15,044
Interest expense
Deposits 1,499 1,268 1,090 931 869
Short-term borrowings 462 398 311 255 226
Long-term debt 1,667 1,658 1,576 1,344 1,391
Other interest expense   164   150   132   115   109
Total interest expense   3,792   3,474   3,109   2,645   2,595
Net interest income 12,572 12,541 12,238 12,313 12,449
Provision for credit losses   580   452   191   651   717
Net interest income after provision for credit losses   11,992   12,089   12,047   11,662   11,732
Noninterest income
Service charges on deposit accounts 1,204 1,163 1,173 1,246 1,276
Trust and investment fees 3,631 3,675 3,683 3,687 3,609
Card fees 1,017 1,001 908 996 1,000
Other fees 850 846 800 913 877
Mortgage banking 846 770 934 928 1,046
Insurance 104 102 114 223 269
Net gains (losses) from trading activities (1) 158 191 243 (1) 120
Net gains on debt securities 57 41 1 157 166
Net gains from equity securities (1) 416 295 783 572 363
Lease income 453 443 455 458 475
Other   633   485   602   558   199
Total noninterest income   9,369   9,012   9,696   9,737   9,400
Noninterest expense
Salaries 4,461 4,465 4,363 4,403 4,356
Commission and incentive compensation 2,427 2,642 2,768 2,665 2,553
Employee benefits 1,377 1,245 1,598 1,293 1,279
Equipment 634 550 617 608 523
Net occupancy 718 722 713 715 716
Core deposit and other intangibles 264 265 265 288 288
FDIC and other deposit assessments 336 297 324 312 314
Other   3,546   3,796   4,394   6,516   4,322
Total noninterest expense   13,763   13,982   15,042   16,800   14,351
Income before income tax expense 7,598 7,119 6,701 4,599 6,781
Income tax expense (benefit)   1,512   1,810   1,374   (1,642)   2,181
Net income before noncontrolling interests 6,086 5,309 5,327 6,241 4,600
Less: Net income from noncontrolling interests   79   123   191   90   58
Wells Fargo net income   $ 6,007   5,186   5,136   6,151   4,542
Less: Preferred stock dividends and other   554   394   403   411   411
Wells Fargo net income applicable to common stock   $ 5,453   4,792   4,733   5,740   4,131
Per share information
Earnings per common share $ 1.14 0.98 0.97 1.17 0.83
Diluted earnings per common share 1.13 0.98 0.96 1.16 0.83
Average common shares outstanding 4,784.0 4,865.8 4,885.7 4,912.5 4,948.6
Diluted average common shares outstanding   4,823.2   4,899.8   4,930.7   4,963.1   4,996.8

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

 

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
  Quarter ended September 30,   %   Nine months ended September 30,   %
(in millions)   2018   2017   Change   2018   2017   Change
Wells Fargo net income   $ 6,007     4,542   32% $ 16,329     16,032   2%
Other comprehensive income (loss), before tax:    
Debt securities (1):
Net unrealized gains (losses) arising during the period (1,468 ) 891 NM (5,528 ) 2,825 NM
Reclassification of net (gains) losses to net income 51 (200 ) NM 168 (522 ) NM
Derivatives and hedging activities (2):
Net unrealized gains (losses) arising during the period (24 ) 104 NM (416 ) 18 NM
Reclassification of net (gains) losses to net income 79 (105 ) NM 216 (460 ) NM
Defined benefit plans adjustments:
Net actuarial and prior service gains arising during the period — 11 (100) 6 4 50
Amortization of net actuarial loss, settlements and other to net income 29 41 (29) 90 120 (25)
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period (9 )   39   NM (94 )   86   NM
Other comprehensive income (loss), before tax (2) (1,342 ) 781 NM (5,558 ) 2,071 NM
Income tax benefit (expense) related to other comprehensive income (2) 330     (289 ) NM 1,346     (753 ) NM
Other comprehensive income (loss), net of tax (2) (1,012 ) 492 NM (4,212 ) 1,318 NM
Less: Other comprehensive loss from noncontrolling interests —     (34 ) (100) (1 )   (29 ) (97)
Wells Fargo other comprehensive income (loss), net of tax (2) (1,012 )   526   NM (4,211 )   1,347   NM
Wells Fargo comprehensive income (2) 4,995 5,068 (1) 12,118 17,379 (30)
Comprehensive income from noncontrolling interests 79     24   229 392     158   148
Total comprehensive income (2)   $ 5,074     5,092     —   $ 12,510     17,537     (29)

NM – Not meaningful

(1) The quarter and nine months ended September 30, 2017, includes net unrealized gains (losses) arising during the period from equity securities of ($13) million and $113 million and reclassification of net (gains) losses to net income related to equity securities of $(106) million and $(323) million, respectively. With the adoption in first quarter 2018 of ASU 2016-01, the quarter and nine months ended September 30, 2018, reflects net unrealized (gains) losses arising during the period and reclassification of net (gains) losses to net income from only debt securities.

(2) Financial information for the prior periods has been revised to reflect the impact of the adoption in fourth quarter 2017 of ASU 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, effective January 1, 2017.

 
 

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

  Quarter ended
Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Balance, beginning of period $ 206,069 205,910 208,079 206,617 205,949
Cumulative effect from change in accounting policies (1) — — (24 ) — —
Wells Fargo net income 6,007 5,186 5,136 6,151 4,542
Wells Fargo other comprehensive income (loss), net of tax (1,012 ) (540 ) (2,659 ) (522 ) 526
Noncontrolling interests 57 (77 ) (178 ) 247 (20 )
Common stock issued 156 73 1,208 436 254
Common stock repurchased (2) (7,382 ) (2,923 ) (3,029 ) (2,845 ) (2,601 )
Preferred stock redeemed (3) (2,150 ) — — — —
Preferred stock released by ESOP 260 490 231 218 209
Common stock warrants repurchased/exercised (36 ) (1 ) (157 ) (46 ) (19 )
Common stock dividends (2,062 ) (1,900 ) (1,911 ) (1,920 ) (1,936 )
Preferred stock dividends (399 ) (394 ) (410 ) (411 ) (411 )
Stock incentive compensation expense 202 258 437 206 135
Net change in deferred compensation and related plans   (31 )   (13 )   (813 )   (52 )   (11 )
Balance, end of period   $ 199,679     206,069     205,910     208,079     206,617  

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

(2) For the quarter ended June 30, 2018, includes $1.0 billion related to a private forward repurchase transaction that settled in third quarter 2018 for 18.8 million shares of common stock.

(3) Represents the impact of the redemption of preferred stock, series J, in third quarter 2018.

 
 

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
  Quarter ended September 30,
2018   2017
    Interest     Interest
Average Yields/ income/ Average Yields/ income/
(in millions)   balance   rates   expense   balance   rates   expense
Earning assets
Interest-earning deposits with banks (3) $ 148,565 1.93 % $ 721 205,489 1.21 % $ 629
Federal funds sold and securities purchased under resale agreements (3) 79,931 1.93 390 70,640 1.14 203
Debt securities (4):
Trading debt securities (8) 84,481 3.45 730 76,627 3.21 616
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6,421 1.65 27 14,529 1.31 48
Securities of U.S. states and political subdivisions (7) 46,615 3.76 438 52,500 4.08 535
Mortgage-backed securities:
Federal agencies 155,525 2.77 1,079 139,781 2.58 903
Residential and commercial (7)   7,318   4.68 85   11,013   5.44 149
Total mortgage-backed securities 162,843 2.86 1,164 150,794 2.79 1,052
Other debt securities (7)(8)   46,353   4.39 512   47,592   3.73 447
Total available-for-sale debt securities (7)(8)   262,232   3.26 2,141   265,415   3.13 2,082
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44,739 2.18 246 44,708 2.18 246
Securities of U.S. states and political subdivisions 6,251 4.33 68 6,266 5.44 85
Federal agency and other mortgage-backed securities 95,298 2.27 539 88,272 2.26 498
Other debt securities   106   5.61 2   1,488   3.05 12
Total held-to-maturity debt securities   146,394   2.33 855   140,734   2.38 841
Total debt securities (7)(8) 493,107 3.02 3,726 482,776 2.93 3,539
Mortgage loans held for sale (5)(7) 19,343 4.33 210 22,923 3.79 217
Loans held for sale (5)(8) 2,619 5.28 35 1,383 4.39 15
Commercial loans:
Commercial and industrial - U.S. 273,814 4.22 2,915 270,091 3.81 2,590
Commercial and industrial - Non U.S. (7) 60,884 3.63 556 57,738 2.89 422
Real estate mortgage 121,284 4.35 1,329 129,087 3.83 1,245
Real estate construction 23,276 5.05 296 24,981 4.18 263
Lease financing (7)   19,512   4.69 229   19,155   4.59 219
Total commercial loans   498,770   4.24 5,325   501,052   3.76 4,739
Consumer loans:
Real estate 1-4 family first mortgage 284,133 4.07 2,891 278,371 4.03 2,809
Real estate 1-4 family junior lien mortgage 35,863 5.50 496 41,916 4.95 521
Credit card 36,893 12.77 1,187 35,657 12.41 1,114
Automobile 46,963 5.20 616 56,746 5.34 764
Other revolving credit and installment   36,840   6.78 630   38,601   6.31 615
Total consumer loans   440,692   5.26 5,820   451,291   5.14 5,823

Total loans (5)

939,462 4.72 11,145 952,343 4.41 10,562
Equity securities (8) 37,902 2.98 283 35,846 2.12 191
Other (8)   4,702   1.47 16   8,656   0.90 20
Total earning assets (7)(8)   $ 1,725,631   3.81 % $ 16,526   1,780,056   3.44 % $ 15,376
Funding sources
Deposits:
Interest-bearing checking $ 51,177 1.01 % $ 131 48,278 0.57 % $ 69
Market rate and other savings 693,937 0.35 614 681,187 0.17 293
Savings certificates 20,586 0.62 32 21,806 0.31 16
Other time deposits (7) 87,752 2.35 519 66,046 1.51 251
Deposits in foreign offices   53,933   1.50 203   124,746   0.76 240
Total interest-bearing deposits (7) 907,385 0.66 1,499 942,063 0.37 869
Short-term borrowings (8) 105,472 1.74 463 99,193 0.91 226
Long-term debt (7)(8) 220,654 3.02 1,667 243,507 2.28 1,392
Other liabilities (8)   27,108   2.40 164   24,851   1.74 109
Total interest-bearing liabilities (7)(8) 1,260,619 1.20 3,793 1,309,614 0.79 2,596
Portion of noninterest-bearing funding sources (7)(8)   465,012   — —   470,442   — —
Total funding sources (7)(8)   $ 1,725,631   0.87   3,793   1,780,056   0.58   2,596
Net interest margin and net interest income on a taxable-equivalent basis (6)(7) 2.94 %   $ 12,733   2.86 %   $ 12,780
Noninterest-earning assets
Cash and due from banks $ 18,356 18,456
Goodwill 26,429 26,600
Other (7)(8)   105,867   113,349  
Total noninterest-earning assets (7)(8)   $ 150,652   158,405  
Noninterest-bearing funding sources
Deposits $ 358,993 364,293
Other liabilities (7)(8) 53,845 56,831
Total equity (7) 202,826 207,723
Noninterest-bearing funding sources used to fund earning assets (7)(8)   (465,012 ) (470,442 )
Net noninterest-bearing funding sources (7)(8)   $ 150,652   158,405  
Total assets (7)   $ 1,876,283   1,938,461  
 

(1) Our average prime rate was 5.01% and 4.25% for the quarters ended September 30, 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 2.34% and 1.31% for the same quarters, respectively.

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

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

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

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

(6) Includes taxable-equivalent adjustments of $161 million and $332 million for the quarters ended September 30, 2018 and 2017, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 21% and 35% for the quarters ended September 30, 2018 and 2017, respectively.

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

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

 
 

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
  Nine months ended September 30,
2018   2017
    Interest     Interest
Average Yields/ income/ Average Yields/ income/
(in millions)   balance   rates   expense   balance   rates   expense
Earning assets
Interest-earning deposits with banks (3) $ 158,480 1.71 % $ 2,029 206,161 1.01 % $ 1,557
Federal funds sold and securities purchased under resale agreements (3) 79,368 1.69 1,005 74,316 0.91 505
Debt securities (4):
Trading debt securities (8) 81,307 3.38 2,062 72,080 3.16 1,709
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6,424 1.66 80 19,182 1.48 212
Securities of U.S. states and political subdivisions (7) 47,974 3.68 1,323 52,748 3.97 1,569
Mortgage-backed securities:
Federal agencies 156,298 2.75 3,220 142,748 2.60 2,782
Residential and commercial (7)   8,140   4.54 277   12,671   5.44 517
Total mortgage-backed securities (7) 164,438 2.84 3,497 155,419 2.83 3,299
Other debt securities (7)(8)   47,146   4.14 1,462   48,727   3.70 1,351
Total available-for-sale debt securities (7)(8)   265,982   3.19 6,362   276,076   3.11 6,431
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44,731 2.19 733 44,701 2.19 733
Securities of U.S. states and political subdivisions 6,255 4.34 204 6,270 5.35 251
Federal agency and other mortgage-backed securities 93,699 2.32 1,632 74,525 2.38 1,329
Other debt securities   460   4.02 14   2,531   2.48 47
Total held-to-maturity debt securities   145,145   2.38 2,583   128,027   2.46 2,360
Total debt securities (7)(8) 492,434 2.98 11,007 476,183 2.94 10,500
Mortgage loans held for sale (5)(7) 18,849 4.15 587 20,869 3.77 590
Loans held for sale (5)(8) 2,706 5.28 107 1,485 3.47 38
Commercial loans:
Commercial and industrial - U.S. 273,711 4.08 8,350 272,621 3.70 7,547
Commercial and industrial - Non U.S. (7) 60,274 3.46 1,559 56,512 2.83 1,197
Real estate mortgage 123,804 4.22 3,910 130,931 3.69 3,615
Real estate construction 23,783 4.82 857 24,949 4.00 747
Lease financing (7)   19,349   4.82 700   19,094   4.78 684
Total commercial loans   500,921   4.10 15,376   504,107   3.66 13,790
Consumer loans:
Real estate 1-4 family first mortgage 283,814 4.05 8,613 276,330 4.04 8,380
Real estate 1-4 family junior lien mortgage 37,308 5.31 1,484 43,589 4.77 1,557
Credit card 36,416 12.73 3,467 35,322 12.19 3,219
Automobile 48,983 5.18 1,899 59,105 5.41 2,392
Other revolving credit and installment   37,371   6.62 1,851   39,128   6.15 1,801
Total consumer loans   443,892   5.21 17,314   453,474   5.11 17,349
Total loans (5) 944,813 4.62 32,690 957,581 4.34 31,139
Equity securities (8) 38,322 2.57 738 35,466 2.16 575
Other (8)   5,408   1.38 56   4,383   0.83 28
Total earning assets (7)(8)   $ 1,740,380   3.70 % $ 48,219   1,776,444   3.38 % $ 44,932
Funding sources
Deposits:
Interest-bearing checking $ 66,364 0.89 % $ 441 49,134 0.43 % $ 156
Market rate and other savings 683,279 0.28 1,416 682,780 0.13 664
Savings certificates 20,214 0.46 70 22,618 0.30 50
Other time deposits (7) 82,175 2.16 1,331 59,414 1.41 625
Deposits in foreign offices   66,590   1.20 599   123,553   0.64 587
Total interest-bearing deposits (7) 918,622 0.56 3,857 937,499 0.30 2,082
Short-term borrowings 103,696 1.51 1,173 97,837 0.69 505
Long-term debt (7) 223,485 2.93 4,901 251,114 2.03 3,813
Other liabilities   27,743   2.14 446   20,910   1.97 309
Total interest-bearing liabilities (7) 1,273,546 1.09 10,377 1,307,360 0.69 6,709
Portion of noninterest-bearing funding sources (7)(8)   466,834   — —   469,084   — —
Total funding sources (7)(8)   $ 1,740,380   0.80   10,377   1,776,444   0.50   6,709
Net interest margin and net interest income on a taxable-equivalent basis (6)(7) 2.90 %   $ 37,842   2.88 %   $ 38,223
Noninterest-earning assets
Cash and due from banks $ 18,604 18,443
Goodwill 26,463 26,645
Other (7)(8)   106,762   110,669  
Total noninterest-earning assets (7)(8)   $ 151,829   155,757  
Noninterest-bearing funding sources
Deposits $ 359,563 364,774
Other liabilities (7) 54,088 55,032
Total equity (7) 205,012 205,035
Noninterest-bearing funding sources used to fund earning assets (7)(8)   (466,834 ) (469,084 )
Net noninterest-bearing funding sources (7)(8)   $ 151,829   155,757  
Total assets (7)   $ 1,892,209   1,932,201  
 

(1) Our average prime rate was 4.78% and 4.03% for the first nine months of 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 2.20% and 1.20% for the same periods, respectively.

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

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

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

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

(6) Includes taxable-equivalent adjustments of $491 million and $980 million for the first nine months of 2018 and 2017, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 21% and 35% for the first nine months of 2018 and 2017, respectively.

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

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
  Quarter ended
    Sep 30, 2018   Jun 30, 2018   Mar 31, 2018   Dec 31, 2017   Sep 30, 2017
Average   Yields/   Average   Yields/   Average   Yields/   Average   Yields/   Average   Yields/
($ in billions)   balance   rates   balance   rates   balance   rates   balance   rates balance rates
Earning assets
Interest-earning deposits with banks (3) $ 148.6 1.93 % $ 154.8 1.75 % $ 172.3 1.49 % $ 189.1 1.27 % $ 205.5 1.21 %
Federal funds sold and securities purchased under resale agreements (3) 79.9 1.93 80.0 1.73 78.1 1.40 75.8 1.20 70.6 1.14
Debt securities (4):
Trading debt securities (5) 84.5 3.45 80.7 3.45 78.7 3.24 81.6 3.17 76.6 3.21
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6.4 1.65 6.4 1.66 6.4 1.66 6.4 1.66 14.5 1.31
Securities of U.S. states and political subdivisions 46.6 3.76 47.4 3.91 50.0 3.37 52.4 3.91 52.5 4.08
Mortgage-backed securities:
Federal agencies 155.5 2.77 154.9 2.75 158.4 2.72 152.9 2.62 139.8 2.58
Residential and commercial   7.3   4.68 8.2   4.86 8.9   4.12 9.4   4.85 11.0   5.44
Total mortgage-backed securities 162.8 2.86 163.1 2.86 167.3 2.79 162.3 2.75 150.8 2.79
Other debt securities (5)   46.4   4.39 47.1   4.33 48.1   3.73 48.6   3.62 47.7   3.73
Total available-for-sale debt securities (5)   262.2   3.26 264.0   3.28 271.8   3.04 269.7   3.10 265.5   3.13
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44.7 2.18 44.7 2.19 44.7 2.20 44.7 2.19 44.7 2.18
Securities of U.S. states and political subdivisions 6.3 4.33 6.3 4.34 6.3 4.34 6.3 5.26 6.3 5.44
Federal agency and other mortgage-backed securities 95.3 2.27 94.9 2.33 90.8 2.38 89.6 2.25 88.3 2.26
Other debt securities   0.1   5.61 0.6   4.66 0.7   3.23 1.2   2.64 1.4   3.05
Total held-to-maturity debt securities   146.4   2.33 146.5   2.38 142.5   2.42 141.8   2.36 140.7   2.38
Total debt securities (5) 493.1 3.02 491.2 3.04 493.0 2.89 493.1 2.90 482.8 2.93
Mortgage loans held for sale 19.3 4.33 18.8 4.22 18.4 3.89 20.5 3.82 22.9 3.79
Loans held for sale (5) 2.6 5.28 3.5 5.48 2.0 4.92 1.5 3.19 1.4 4.39
Commercial loans:
Commercial and industrial - U.S. 273.8 4.22 275.3 4.16 272.0 3.85 270.3 3.89 270.1 3.81
Commercial and industrial - Non U.S. 60.9 3.63 59.7 3.51 60.2 3.23 59.2 2.96 57.7 2.89
Real estate mortgage 121.3 4.35 124.0 4.27 126.2 4.05 127.2 3.88 129.1 3.83
Real estate construction 23.3 5.05 23.6 4.88 24.4 4.54 24.4 4.38 25.0 4.18
Lease financing   19.5   4.69 19.3   4.48 19.4   5.30 19.3   0.62 19.2   4.59
Total commercial loans   498.8   4.24 501.9   4.15 502.2   3.91 500.4   3.68 501.1   3.76
Consumer loans:
Real estate 1-4 family first mortgage 284.1 4.07 283.1 4.06 284.2 4.02 282.0 4.01 278.4 4.03
Real estate 1-4 family junior lien mortgage 35.9 5.50 37.2 5.32 38.8 5.13 40.4 4.96 41.9 4.95
Credit card 36.9 12.77 35.9 12.66 36.4 12.75 36.4 12.37 35.6 12.41
Automobile 47.0 5.20 48.6 5.18 51.5 5.16 54.3 5.13 56.7 5.34
Other revolving credit and installment   36.8   6.78 37.4   6.62 37.9   6.46 38.3   6.28 38.6   6.31
Total consumer loans   440.7   5.26 442.2   5.20 448.8   5.16 451.4   5.10 451.2   5.14
Total loans 939.5 4.72 944.1 4.64 951.0 4.50 951.8 4.35 952.3 4.41
Equity securities (5) 37.9 2.98 37.3 2.38 39.8 2.35 38.0 2.60 35.9 2.12
Other (5)   4.7   1.47 5.6   1.48 6.0   1.21 7.2   0.88 8.7   0.90
Total earning assets (5)   $ 1,725.6   3.81 % $ 1,735.3   3.73 % $ 1,760.6   3.55 % $ 1,777.0   3.43 % $ 1,780.1   3.44 %
Funding sources
Deposits:
Interest-bearing checking $ 51.2 1.01 % $ 80.3 0.90 % $ 67.8 0.77 % $ 50.5 0.68 % $ 48.3 0.57 %
Market rate and other savings 693.9 0.35 676.7 0.26 679.1 0.22 679.9 0.19 681.2 0.17
Savings certificates 20.6 0.62 20.0 0.43 20.0 0.34 20.9 0.31 21.8 0.31
Other time deposits 87.8 2.35 82.1 2.26 76.6 1.84 68.2 1.49 66.1 1.51
Deposits in foreign offices   53.9   1.50 51.5   1.30 94.8   0.98 124.6   0.81 124.7   0.76
Total interest-bearing deposits 907.4 0.66 910.6 0.56 938.3 0.47 944.1 0.39 942.1 0.37
Short-term borrowings 105.5 1.74 103.8 1.54 101.8 1.24 102.1 0.99 99.2 0.91
Long-term debt 220.7 3.02 223.8 2.97 226.0 2.80 231.6 2.32 243.5 2.28
Other liabilities   27.0   2.40 28.2   2.12 27.9   1.92 24.7   1.86 24.8   1.74
Total interest-bearing liabilities 1,260.6 1.20 1,266.4 1.10 1,294.0 0.97 1,302.5 0.81 1,309.6 0.79
Portion of noninterest-bearing funding sources (5)   465.0   — 468.9   — 466.6   — 474.5   — 470.5   —
Total funding sources (5)   $ 1,725.6   0.87   $ 1,735.3   0.80   $ 1,760.6   0.71   $ 1,777.0   0.59   $ 1,780.1   0.58  
Net interest margin on a taxable-equivalent basis 2.94 % 2.93 % 2.84 % 2.84 % 2.86 %
Noninterest-earning assets
Cash and due from banks $ 18.4 18.6 18.9 19.2 18.5
Goodwill 26.4 26.4 26.5 26.6 26.6
Other (5)   105.9   104.6   109.9   112.5   113.3  
Total noninterest-earnings assets (5)   $ 150.7   149.6   155.3   158.3   158.4  
Noninterest-bearing funding sources
Deposits $ 359.0 360.7 358.9 367.5 364.3
Other liabilities (5) 53.9 51.7 56.8 57.9 56.9
Total equity 202.8 206.1 206.2 207.4 207.7
Noninterest-bearing funding sources used to fund earning assets (5)   (465.0 ) (468.9 ) (466.6 ) (474.5 ) (470.5 )
Net noninterest-bearing funding sources (5)   $ 150.7   149.6   155.3   158.3   158.4  

Total assets

  $ 1,876.3   1,884.9   1,915.9   1,935.3   1,938.5  

 

(1) Our average prime rate was 5.01% for the quarter ended September 30, 2018, 4.80% for the quarter ended June 30,2018, 4.52% for the quarter ended March 31, 2018, 4.30% for the quarter ended December 31, 2017 and 4.25% for the quarter ended September 30, 2017. The average three-month London Interbank Offered Rate (LIBOR) was 2.34%, 2.34%, 1.93%, 1.46% and 1.31% for the same quarters, respectively.

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

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

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

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

 
 

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME
 
  Quarter ended September 30,   %   Nine months ended September 30,   %
(in millions)   2018   2017   Change   2018   2017   Change
Service charges on deposit accounts $ 1,204   1,276 (6 )% $ 3,540   3,865 (8 )%
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,334 2,304 1 7,091 6,957 2
Trust and investment management 835 840 (1 ) 2,520 2,506 1
Investment banking   462     465   (1 ) 1,378     1,345   2
Total trust and investment fees   3,631     3,609   1 10,989     10,808   2
Card fees 1,017 1,000 2 2,926 2,964 (1 )
Other fees:
Charges and fees on loans 298 318 (6 ) 903 950 (5 )
Cash network fees 121 126 (4 ) 367 386 (5 )
Commercial real estate brokerage commissions 129 120 8 323 303 7
Letters of credit fees 72 77 (6 ) 223 227 (2 )
Wire transfer and other remittance fees 120 114 5 357 333 7
All other fees   110     122   (10 ) 323     445   (27 )
Total other fees   850     877   (3 ) 2,496     2,644   (6 )
Mortgage banking:
Servicing income, net 390 309 26 1,264 1,165 8
Net gains on mortgage loan origination/sales activities   456     737   (38 ) 1,286     2,257   (43 )
Total mortgage banking   846     1,046   (19 ) 2,550     3,422   (25 )
Insurance 104 269 (61 ) 320 826 (61 )
Net gains from trading activities (1) 158 120 32 592 543 9
Net gains on debt securities 57 166 (66 ) 99 322 (69 )
Net gains from equity securities (1) 416 363 15 1,494 1,207 24
Lease income 453 475 (5 ) 1,351 1,449 (7 )
Life insurance investment income 167 152 10 493 441 12
All other   466     47   891 1,227     604   103
Total   $ 9,369     9,400     —     $ 28,077     29,095     (3 )
 

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

 
 

NONINTEREST EXPENSE

 
  Quarter ended Sep 30,   %   Nine months ended Sep 30,   %
(in millions)   2018   2017   Change   2018   2017   Change
Salaries $ 4,461   4,356 2 % $ 13,289   12,960 3 %
Commission and incentive compensation 2,427 2,553 (5 ) 7,837 7,777 1
Employee benefits 1,377 1,279 8 4,220 4,273 (1 )
Equipment 634 523 21 1,801 1,629 11
Net occupancy 718 716 — 2,153 2,134 1
Core deposit and other intangibles 264 288 (8 ) 794 864 (8 )
FDIC and other deposit assessments 336 314 7 957 975 (2 )
Operating losses 605 1,329 (54 ) 2,692 1,961 37
Outside professional services 761 955 (20 ) 2,463 2,788 (12 )
Contract services (1) 593 415 43 1,576 1,228 28
Operating leases 311 347 (10 ) 942 1,026 (8 )
Outside data processing 166 227 (27 ) 492 683 (28 )
Travel and entertainment 141 154 (8 ) 450 504 (11 )
Advertising and promotion 223 137 63 603 414 46
Postage, stationery and supplies 120 128 (6 ) 383 407 (6 )
Telecommunications 90 90 — 270 272 (1 )
Foreclosed assets 59 66 (11 ) 141 204 (31 )
Insurance 26 24 8 76 72 6
All other (1)   451     450     —     1,648     1,513     9  
Total   $ 13,763     14,351     (4 )   $ 42,787     41,684     3  
 

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME
 
  Quarter ended
Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Service charges on deposit accounts $ 1,204 1,163 1,173 1,246 1,276
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,334 2,354 2,403 2,401 2,304
Trust and investment management 835 835 850 866 840
Investment banking   462     486     430     420     465
Total trust and investment fees   3,631     3,675     3,683     3,687     3,609
Card fees 1,017 1,001 908 996 1,000
Other fees:
Charges and fees on loans 298 304 301 313 318
Cash network fees 121 120 126 120 126
Commercial real estate brokerage commissions 129 109 85 159 120
Letters of credit fees 72 72 79 78 77
Wire transfer and other remittance fees 120 121 116 115 114
All other fees   110     120     93     128     122
Total other fees   850     846     800     913     877
Mortgage banking:
Servicing income, net 390 406 468 262 309
Net gains on mortgage loan origination/sales activities   456     364     466     666     737
Total mortgage banking   846     770     934     928     1,046
Insurance 104 102 114 223 269
Net gains (losses) from trading activities (1) 158 191 243 (1 ) 120
Net gains on debt securities 57 41 1 157 166
Net gains from equity securities (1) 416 295 783 572 363
Lease income 453 443 455 458 475
Life insurance investment income 167 162 164 153 152
All other   466     323     438     405     47
Total   $ 9,369     9,012     9,696     9,737     9,400
 

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

 
 

FIVE QUARTER NONINTEREST EXPENSE

 
  Quarter ended
Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Salaries $ 4,461 4,465 4,363 4,403 4,356
Commission and incentive compensation 2,427 2,642 2,768 2,665 2,553
Employee benefits 1,377 1,245 1,598 1,293 1,279
Equipment 634 550 617 608 523
Net occupancy 718 722 713 715 716
Core deposit and other intangibles 264 265 265 288 288
FDIC and other deposit assessments 336 297 324 312 314
Operating losses 605 619 1,468 3,531 1,329
Outside professional services 761 881 821 1,025 955
Contract services (1) 593 536 447 410 415
Operating leases 311 311 320 325 347
Outside data processing 166 164 162 208 227
Travel and entertainment 141 157 152 183 154
Advertising and promotion 223 227 153 200 137
Postage, stationery and supplies 120 121 142 137 128
Telecommunications 90 88 92 92 90
Foreclosed assets 59 44 38 47 66
Insurance 26 24 26 28 24
All other (1)   451     624     573     330     450
Total   $ 13,763     13,982     15,042     16,800     14,351
 

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

 
 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

 
  Sep 30,   Dec 31,   %
(in millions, except shares)   2018   2017   Change
Assets
Cash and due from banks $ 18,791 23,367 (20 )%
Interest-earning deposits with banks (1)   140,732     192,580   (27 )
Total cash, cash equivalents, and restricted cash (1)   159,523     215,947   (26 )
Federal funds sold and securities purchased under resale agreements (1) 83,471 80,025 4
Debt securities:
Trading, at fair value (2) 65,188 57,624 13
Available-for-sale, at fair value (2) 262,964 276,407 (5 )
Held-to-maturity, at cost 144,131 139,335 3
Mortgage loans held for sale 19,225 20,070 (4 )
Loans held for sale (2) 1,765 1,131 56
Loans 942,300 956,770 (2 )
Allowance for loan losses   (10,021 )   (11,004 ) (9 )
Net loans   932,279     945,766   (1 )
Mortgage servicing rights:
Measured at fair value 15,980 13,625 17
Amortized 1,414 1,424 (1 )
Premises and equipment, net 8,802 8,847 (1 )
Goodwill 26,425 26,587 (1 )
Derivative assets 11,811 12,228 (3 )
Equity securities (2) 61,755 62,497 (1 )
Other assets (2)   78,248     90,244   (13 )
Total assets   $ 1,872,981     1,951,757   (4 )
Liabilities
Noninterest-bearing deposits $ 352,869 373,722 (6 )
Interest-bearing deposits   913,725     962,269   (5 )
Total deposits 1,266,594 1,335,991 (5 )
Short-term borrowings 105,451 103,256 2
Derivative liabilities 8,586 8,796 (2 )
Accrued expenses and other liabilities 71,348 70,615 1
Long-term debt   221,323     225,020     (2 )
Total liabilities   1,673,302     1,743,678     (4 )
Equity
Wells Fargo stockholders’ equity:
Preferred stock 23,482 25,358 (7 )
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 60,583 60,893 (1 )
Retained earnings 154,731 145,263 7
Cumulative other comprehensive income (loss) (6,873 ) (2,144 ) 221
Treasury stock – 770,250,428 shares and 590,194,846 shares (40,538 ) (29,892 ) 36
Unearned ESOP shares   (1,780 )   (1,678 ) 6
Total Wells Fargo stockholders’ equity 198,741 206,936 (4 )
Noncontrolling interests   938     1,143   (18 )
Total equity   199,679     208,079   (4 )
Total liabilities and equity   $ 1,872,981     1,951,757     (4 )
 

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

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET
 
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Assets
Cash and due from banks $ 18,791 20,450 18,145 23,367 19,206
Interest-earning deposits with banks (1)   140,732     142,999     184,250     192,580     205,648  
Total cash, cash equivalents, and restricted cash (1)   159,523     163,449     202,395     215,947     224,854  
Federal funds sold and securities purchased under resale agreements (1) 83,471 80,184 73,550 80,025 67,457
Debt securities:
Trading, at fair value (2) 65,188 65,602 59,866 57,624 60,970
Available-for-sale, at fair value (2) 262,964 265,687 271,656 276,407 271,317
Held-to-maturity, at cost 144,131 144,206 141,446 139,335 142,423
Mortgage loans held for sale 19,225 21,509 17,944 20,070 20,009
Loans held for sale (2) 1,765 3,408 3,581 1,131 1,339
Loans 942,300 944,265 947,308 956,770 951,873
Allowance for loan losses   (10,021 )   (10,193 )   (10,373 )   (11,004 )   (11,078 )
Net loans   932,279     934,072     936,935     945,766     940,795  
Mortgage servicing rights:
Measured at fair value 15,980 15,411 15,041 13,625 13,338
Amortized 1,414 1,407 1,411 1,424 1,406
Premises and equipment, net 8,802 8,882 8,828 8,847 8,449
Goodwill 26,425 26,429 26,445 26,587 26,581
Derivative assets 11,811 11,099 11,467 12,228 12,580
Equity securities (2) 61,755 57,505 58,935 62,497 54,981
Other assets (2)   78,248     80,850     85,888     90,244     88,381  
Total assets   $ 1,872,981     1,879,700     1,915,388     1,951,757     1,934,880  
Liabilities
Noninterest-bearing deposits $ 352,869 365,021 370,085 373,722 366,528
Interest-bearing deposits   913,725     903,843     933,604     962,269     940,178  
Total deposits 1,266,594 1,268,864 1,303,689 1,335,991 1,306,706
Short-term borrowings 105,451 104,496 97,207 103,256 93,811
Derivative liabilities 8,586 8,507 7,883 8,796 9,497
Accrued expenses and other liabilities 71,348 72,480 73,397 70,615 78,993
Long-term debt   221,323     219,284     227,302     225,020     239,256  
Total liabilities   1,673,302     1,673,631     1,709,478     1,743,678     1,728,263  
Equity
Wells Fargo stockholders’ equity:
Preferred stock 23,482 25,737 26,227 25,358 25,576
Common stock 9,136 9,136 9,136 9,136 9,136
Additional paid-in capital 60,583 59,644 60,399 60,893 60,759
Retained earnings 154,731 150,803 147,928 145,263 141,549
Cumulative other comprehensive income (loss) (6,873 ) (5,461 ) (4,921 ) (2,144 ) (1,622 )
Treasury stock (40,538 ) (32,620 ) (31,246 ) (29,892 ) (27,772 )
Unearned ESOP shares   (1,780 )   (2,051 )   (2,571 )   (1,678 )   (1,904 )
Total Wells Fargo stockholders’ equity 198,741 205,188 204,952 206,936 205,722
Noncontrolling interests   938     881     958     1,143     895  
Total equity   199,679     206,069     205,910     208,079     206,617  

Total liabilities and equity

  $ 1,872,981     1,879,700     1,915,388     1,951,757     1,934,880  

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

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER TRADING ASSETS AND LIABILITIES
 
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Trading assets
Debt securities $ 65,188 65,602 59,866 57,624 60,970
Equity securities (1) 26,138 22,978 25,327 30,004 22,797
Loans held for sale 1,266 1,350 1,695 1,023 1,182
Gross trading derivative assets 30,302 30,758 30,644 31,340 31,052
Netting (2)   (19,188 )   (20,687 )   (20,112 )   (19,629 )   (18,881 )
Total trading derivative assets   11,114     10,071    

10,532

    11,711     12,171  

Total trading assets

  103,706     100,001     97,420     100,362     97,120  
Trading liabilities
Short sales 23,992 21,765 23,303 18,472 19,096
Gross trading derivative liabilities 29,268 29,847 29,717 31,386 30,365
Netting (2)   (21,842 )   (22,311 )   (22,569 )   (23,062 )   (21,662 )
Total trading derivative liabilities   7,426     7,536     7,148     8,324     8,703  

Total trading liabilities

  $ 31,418     29,301     30,451     26,796     27,799  

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

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

 
 

FIVE QUARTER DEBT SECURITIES

 
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Trading debt securities   $ 65,188     65,602     59,866     57,624     60,970
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6,187 6,271 6,279 6,319 6,350
Securities of U.S. states and political subdivisions 48,216 47,559 49,643 51,326 52,774
Mortgage-backed securities:
Federal agencies 153,511 154,556 156,814 160,219 150,181
Residential and commercial   6,939     8,286     9,264     9,173     11,046
Total mortgage-backed securities 160,450 162,842 166,078 169,392 161,227
Other debt securities   48,111     49,015     49,656     49,370     50,966
Total available-for-sale debt securities   262,964     265,687     271,656     276,407     271,317
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44,743 44,735 44,727 44,720 44,712
Securities of U.S. states and political subdivisions 6,293 6,300 6,307 6,313 6,321
Federal agency and other mortgage-backed securities (1) 93,020 93,016 89,748 87,527 90,071
Other debt securities   75     155     664     775     1,319
Total held-to-maturity debt securities   144,131     144,206     141,446     139,335     142,423
Total debt securities   $ 472,283     475,495     472,968     473,366     474,710

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER EQUITY SECURITIES
 
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Held for trading at fair value:                    
Marketable equity securities   $ 26,138     22,978     25,327     30,004     22,797
Not held for trading:
Fair value:
Marketable equity securities (1) 5,705 5,273 4,931 4,356 4,348
Nonmarketable equity securities (2)   6,479     5,876     5,303     4,867     4,523
Total equity securities at fair value   12,184     11,149     10,234     9,223     8,871
Equity method:
LIHTC (3) 10,453 10,361 10,318 10,269 9,884
Private equity 3,838 3,732 3,840 3,839 3,757
Tax-advantaged renewable energy 1,967 1,950 1,822 1,950 1,954
New market tax credit and other   259     262     268     294     292
Total equity method   16,517     16,305     16,248     16,352     15,887
Other:
Federal bank stock and other at cost (4) 5,467 5,673 5,780 5,828 6,251
Private equity (5)   1,449     1,400     1,346     1,090     1,175
Total equity securities not held for trading   35,617     34,527     33,608     32,493     32,184
Total equity securities   $ 61,755     57,505     58,935     62,497     54,981

(1) Includes $3.6 billion, $3.5 billion, $3.5 billion, $3.7 billion and $3.5 billion at September 30, June 30 and March 31, 2018, and December 31 and September 30, 2017, respectively, related to securities held as economic hedges of our deferred compensation plan obligations.

(2) Includes $6.3 billion, $5.5 billion, $5.0 billion, $4.9 billion and $4.5 billion at September 30, June 30 and March 31, 2018, and December 31 and September 30, 2017, respectively, related to investments for which we elected the fair value option.

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

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

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER LOANS
 
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Commercial:
Commercial and industrial $ 338,048 336,590 334,678 333,125 327,944
Real estate mortgage 120,403 123,964 125,543 126,599 128,475
Real estate construction 23,690 22,937 23,882 24,279 24,520
Lease financing   19,745     19,614     19,293     19,385     19,211

Total commercial

  501,886     503,105     503,396     503,388     500,150
Consumer:
Real estate 1-4 family first mortgage 284,273 283,001 282,658 284,054 280,173
Real estate 1-4 family junior lien mortgage 35,330 36,542 37,920 39,713 41,152
Credit card 37,812 36,684 36,103 37,976 36,249
Automobile 46,075 47,632 49,554 53,371 55,455
Other revolving credit and installment   36,924     37,301     37,677     38,268     38,694
Total consumer   440,414     441,160     443,912     453,382     451,723
Total loans (1)   $ 942,300     944,265     947,308     956,770     951,873

(1) Includes $6.9 billion, $9.0 billion, $10.7 billion, $12.8 billion, and $13.6 billion of purchased credit-impaired (PCI) loans at September 30, June 30 and March 31, 2018, and December 31 and September 30, 2017, respectively.

 

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

 
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Commercial foreign loans:
Commercial and industrial $ 61,696 61,732 59,696 60,106 58,570
Real estate mortgage 6,891 7,617 8,082 8,033 8,032
Real estate construction 726 542 668 655 647
Lease financing   1,187     1,097     1,077     1,126     1,141
Total commercial foreign loans   $ 70,500     70,988     69,523     69,920     68,390
 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)

 
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Nonaccrual loans:
Commercial:
Commercial and industrial $ 1,555 1,559 1,516 1,899 2,397
Real estate mortgage 603 765 755 628 593
Real estate construction 44 51 45 37 38
Lease financing   96     80     93     76     81
Total commercial   2,298     2,455     2,409     2,640     3,109
Consumer:
Real estate 1-4 family first mortgage 3,605 3,829 4,053 4,122 4,213
Real estate 1-4 family junior lien mortgage 984 1,029 1,087 1,086 1,101
Automobile 118 119 117 130 137
Other revolving credit and installment   48     54     53     58     59
Total consumer   4,755     5,031     5,310     5,396     5,510
Total nonaccrual loans (1)(2)(3)   $ 7,053     7,486     7,719     8,036     8,619
As a percentage of total loans 0.75 % 0.79 0.81 0.84 0.91
Foreclosed assets:
Government insured/guaranteed $ 87 90 103 120 137
Non-government insured/guaranteed   435     409     468     522     569
Total foreclosed assets   522     499     571     642     706
Total nonperforming assets   $ 7,575     7,985     8,290     8,678     9,325
As a percentage of total loans   0.80 %   0.85     0.88     0.91     0.98

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

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

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

 
 

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

 
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Total (excluding PCI)(1): $ 9,209 9,464 10,753 11,997 10,227
Less: FHA insured/VA guaranteed (2)(3)   8,276     8,622     9,786     10,934     9,266
Total, not government insured/guaranteed   $ 933     842     967     1,063     961
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 42 23 40 26 27
Real estate mortgage 56 26 23 23 11
Real estate construction   —     —     1     —     —
Total commercial   98     49     64     49     38
Consumer:
Real estate 1-4 family first mortgage (3) 129 133 164 219 190
Real estate 1-4 family junior lien mortgage (3) 32 33 48 60 49
Credit card 460 429 473 492 475
Automobile 108 105 113 143 111
Other revolving credit and installment   106     93     105     100     98
Total consumer   835     793     903     1,014     923
Total, not government insured/guaranteed   $ 933     842     967     1,063     961

(1) PCI loans totaled $567 million, $811 million, $1.0 billion, $1.4 billion and $1.4 billion, at September 30, June 30 and March 31, 2018, and December 31 and September 30, 2017, respectively.

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

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

 

Wells Fargo & Company and Subsidiaries

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

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

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

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

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

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

 
  Quarter   Nine months  
ended ended
Sep 30, Sep 30,
(in millions)   2018   2018   2009-2017
Balance, beginning of period $ 5,733 8,887 10,447
Change in accretable yield due to acquisitions — — 161
Accretion into interest income (1) (279 ) (892 ) (16,983 )
Accretion into noninterest income due to sales (2) (638 ) (1,760 ) (801 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (3) 3 402 11,597
Changes in expected cash flows that do not affect nonaccretable difference (4)   (410 )   (2,228 )   4,466  
Balance, end of period   $ 4,409     4,409     8,887  

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

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

(3) At September 30, 2018, our carrying value for PCI loans totaled $6.9 billion and the remainder of nonaccretable difference established in purchase accounting totaled $419 million. The nonaccretable difference absorbs losses of contractual amounts that exceed our carrying value for PCI loans.

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

 
 

Wells Fargo & Company and Subsidiaries

CHANGES IN ALLOWANCE FOR CREDIT LOSSES
 
  Quarter ended September 30,   Nine months ended September 30,
(in millions)   2018     2017   2018   2017
Balance, beginning of period $ 11,110   12,146 11,960   12,540
Provision for credit losses 580 717 1,223 1,877
Interest income on certain impaired loans (1) (42 ) (43 ) (128 ) (137 )
Loan charge-offs:
Commercial:
Commercial and industrial (209 ) (194 ) (507 ) (608 )
Real estate mortgage (9 ) (21 ) (30 ) (34 )
Real estate construction — — — —
Lease financing   (15 )   (11 )   (52 )   (31 )
Total commercial   (233 )   (226 )   (589 )   (673 )
Consumer:
Real estate 1-4 family first mortgage (45 ) (67 ) (141 ) (191 )
Real estate 1-4 family junior lien mortgage (47 ) (70 ) (141 ) (225 )
Credit card (376 ) (337 ) (1,185 ) (1,083 )
Automobile (214 ) (274 ) (730 ) (741 )
Other revolving credit and installment   (161 )   (170 )   (505 )   (544 )
Total consumer   (843 )   (918 )   (2,702 )   (2,784 )
Total loan charge-offs   (1,076 )   (1,144 )   (3,291 )   (3,457 )
Loan recoveries:
Commercial:
Commercial and industrial 61 69 216 234
Real estate mortgage 10 24 46 68
Real estate construction 2 15 12 27
Lease financing   8     5     18     13  
Total commercial   81     113     292     342  
Consumer:
Real estate 1-4 family first mortgage 70 83 207 216
Real estate 1-4 family junior lien mortgage 56 69 171 205
Credit card 77 60 231 177
Automobile 84 72 279 246
Other revolving credit and installment   28     30     88     94  
Total consumer   315     314     976     938  
Total loan recoveries   396     427     1,268     1,280  
Net loan charge-offs   (680 )   (717 )   (2,023 )   (2,177 )
Other   (12 )   6     (76 )   6  
Balance, end of period   $ 10,956     12,109     10,956     12,109  
Components:
Allowance for loan losses $ 10,021 11,078 10,021 11,078
Allowance for unfunded credit commitments   935     1,031     935     1,031  
Allowance for credit losses   $ 10,956     12,109     10,956     12,109  
Net loan charge-offs (annualized) as a percentage of average total loans 0.29 % 0.30 0.29 0.30
Allowance for loan losses as a percentage of total loans 1.06 1.16 1.06 1.16
Allowance for credit losses as a percentage of total loans   1.16     1.27     1.16     1.27  

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
 
  Quarter ended
Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)   2018   2018   2018   2017   2017
Balance, beginning of quarter $ 11,110 11,313 11,960 12,109 12,146
Provision for credit losses 580 452 191 651 717
Interest income on certain impaired loans (1) (42 ) (43 ) (43 ) (49 ) (43 )
Loan charge-offs:
Commercial:
Commercial and industrial (209