EX-99.1 2 d752866dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

 

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   Mary Eshet    Jim Rowe   
   704-383-7777    415-396-8216   

 

Friday, July 11, 2014

WELLS FARGO REPORTS $5.7 BILLION IN NET INCOME

Diluted EPS of $1.01, Up 3 Percent From Prior Year

 

  Continued strong financial results:

 

  o Net income of $5.7 billion, up 4 percent from second quarter 2013

 

  o Diluted earnings per share (EPS) of $1.01, up 3 percent

 

  o Revenue of $21.1 billion, compared with $21.4 billion

 

  ¡ Linked-quarter revenue up $441 million

 

  o Noninterest expense of $12.2 billion, down $61 million

 

  o Return on assets (ROA) of 1.47 percent and return on equity (ROE) of 13.40 percent

 

  Strong loan and deposit growth:

 

  o Total average loans of $831.0 billion, up $32.7 billion, or 4 percent, from second quarter 20131

 

  ¡ Quarter-end loans of $828.9 billion, up $29.1 billion, or 4 percent1

 

  ¡ Quarter-end core loans of $763.6 billion, up $51.3 billion, or 7 percent1,2

 

  o Total average deposits of $1.1 trillion, up $91.7 billion, or 9 percent

 

  Continued improvement in credit quality:

 

  o Net charge-offs of $717 million, down $435 million from second quarter 2013

 

  ¡ Net charge-off rate of 0.35 percent (annualized), down from 0.58 percent

 

  o Nonperforming assets down $3.0 billion, or 14 percent

 

  o $500 million reserve release3 due to improvements in credit performance

 

  Higher return to shareholders while maintaining strong capital levels4:

 

  o Increased quarterly common stock dividend to $0.35 per share from $0.30, or 17 percent, in the second quarter

 

  o Period-end common shares outstanding down 15.8 million in second quarter on 39.4 million of purchases

 

  ¡ Also entered into a forward repurchase transaction for an additional estimated 19.4 million shares expected to settle in third quarter 2014

 

  o Common Equity Tier 1 ratio under Basel III (General Approach) of 11.31 percent at June 30, 2014

 

  o Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) of 10.09 percent

 

 

1 As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information.

2 See table on page 4 for more information on core and non-strategic/liquidating loan portfolios.

3 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.

4 See tables on page 38 for more information on Common Equity Tier 1. Common Equity Tier 1 (Advanced Approach, fully phased-in) is estimated based on final rules adopted July 2, 2013, by the Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act.


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Selected Financial Information

 

 

 
           Quarter ended    
  

 

 

 
     June 30,     Mar. 31,        June 30,    
     2014     2014        2013    

 

 

Earnings

       

Diluted earnings per common share

   $ 1.01          1.05           0.98     

Wells Fargo net income (in billions)

     5.73          5.89           5.52     

Return on assets (ROA) (1)

     1.47       1.57           1.55     

Return on equity (ROE)

     13.40          14.35           14.02     

Asset Quality

       

Net charge-offs (annualized) as a % of avg. total loans

     0.35          0.41           0.58     

Allowance for credit losses as a % of total loans (1)

     1.67          1.74           2.08     

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

     481          431           360     

Other

       

Revenue (in billions)

   $ 21.1          20.6           21.4     

Efficiency ratio

     57.9       57.9           57.3     

Average loans (in billions) (1)

   $ 831.0          823.8           798.4     

Average core deposits (in billions)

     991.7          973.8           936.1     

Net interest margin (1)

     3.15       3.20           3.47     

 

 

 

(1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information.

SAN FRANCISCO – Wells Fargo & Company (NYSE:WFC) reported net income of $5.7 billion, or $1.01 per diluted common share, for second quarter 2014, up from $5.5 billion, or $0.98 per share, for second quarter 2013. For the first six months of 2014, net income was $11.6 billion, or $2.06 per share, up from $10.7 billion, or $1.90 per share, for the same period in 2013.

“Our strong results in the second quarter reflected the benefit of our diversified business model and our long-term focus on meeting the financial needs of our customers,” said Chairman and CEO John Stumpf. “By continuing to serve customers we grew loans, increased deposits and deepened our relationships. Our results also reflected strong credit quality driven by an improved economy, especially the housing market, and our continued risk discipline. We are committed to both maintaining strong capital levels and returning more capital to our shareholders. In the second quarter we increased our common stock dividend 17 percent and repurchased 39.4 million shares. We remain dedicated to building long-term shareholder value, and I am optimistic about the future as we continue to focus on meeting the needs of our consumer, small business and commercial customers.”

Chief Financial Officer John Shrewsberry said, “The primary drivers of Wells Fargo’s business remained strong in the second quarter, with broad-based loan growth, increased deposit balances, and improved credit quality. Revenue increased linked quarter as the Company grew both net interest income and noninterest income, a reflection of Wells Fargo’s diversified business model. These solid fundamental business results led to an increase in pre-tax income linked quarter. Net income was down as the Company’s effective tax rate was lower in the first quarter due to a $423 million discrete tax benefit.”


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Revenue

Revenue was $21.1 billion, up from $20.6 billion in first quarter 2014, reflecting increases in both net interest income and noninterest income. Several businesses generated linked-quarter growth, including capital markets, corporate banking, commercial real estate, corporate trust, debit card, personal lines and loans, merchant services, and retail brokerage.

Net Interest Income

Net interest income in second quarter 2014 increased $176 million on a linked-quarter basis to $10.8 billion driven by organic growth in commercial and consumer loans and higher mortgages held for sale and trading assets. Approximately one-third of the increase resulted from the benefit of one additional business day in the quarter. Interest income from variable sources, including purchased credit-impaired (PCI) loan resolutions and periodic dividends, also improved slightly linked quarter.

Net interest margin was 3.15 percent, down 5 basis points from first quarter 2014 as strong customer driven deposit growth contributed to higher cash and short-term investment balances. This deposit growth was essentially neutral to net interest income, but had the effect of diluting net interest margin approximately 5 basis points. Liquidity funding actions taken to meet regulatory expectations also diluted the margin by 1 basis point, but with minimal impact to net income. Higher interest income from variable sources contributed 1 basis point to the change in net interest margin linked quarter. The net impact of all other balance sheet growth and repricing was essentially flat from first quarter.

Noninterest Income

Noninterest income in the second quarter was $10.3 billion, up from $10.0 billion in the prior quarter. Growth was broad-based and was driven by increases in mortgage banking, trust and investment fees, deposit service charges, and card fees. These increases were partially offset by a decline in market sensitive revenue5, mainly equity gains.

Trust and investment fees were $3.6 billion, up $197 million from first quarter on higher investment banking and brokerage advisory, commissions and other fees. Investment banking fees increased $164 million linked quarter on broad-based growth. Brokerage advisory, commissions and other fees were up $39 million from the prior quarter as asset-based fees increased due to higher market valuations and net customer flows.

Mortgage banking noninterest income was $1.7 billion, up $213 million from first quarter. During the second quarter, residential mortgage originations were $47 billion, up $11 billion linked quarter, while the gain on sale margin was 1.41 percent, compared with 1.61 percent in first quarter. Net mortgage servicing rights (MSRs) results were $475 million, compared with $407 million in first quarter 2014.

 

 

5 Consists of net gains from trading activities, debt securities and equity investments.


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Noninterest Expense

Noninterest expense increased $246 million from the prior quarter to $12.2 billion, as a decline in seasonally-elevated compensation and benefits costs from first quarter 2014 was offset by higher revenue-based incentive compensation, increased salary expense due to annual merit increases and the impact of one additional day in the quarter, an $84 million linked-quarter increase in deferred compensation benefit costs (offset in revenue) and a $205 million linked-quarter increase in operating losses largely due to litigation accruals. Expenses in the quarter also included higher outside professional services and advertising expenses, which are typically lower in the first quarter. The efficiency ratio was 57.9 percent in second quarter 2014, in line with first quarter 2014. The Company expects to operate within its targeted efficiency ratio range of 55 to 59 percent in third quarter 2014.

Income Taxes

The Company’s effective income tax rate was 33.4 percent for second quarter 2014, compared with 27.9 percent in the prior quarter. The tax rate for the first quarter included a net $423 million discrete tax benefit primarily from a reduction in the reserve for uncertain tax positions due to the resolution of prior period matters.

Loans

Total loans were $828.9 billion at June 30, 2014, up $2.5 billion from March 31, 2014, driven by broad-based growth in commercial and industrial, automobile, credit card, 1-4 family first mortgage and commercial real estate loans. This growth was reduced by the transfer to loans held for sale at the end of the quarter of $9.7 billion of government guaranteed student loans, which were previously included in the Company’s non-strategic/liquidating loan portfolio. Excluding this transfer, total loans would have been up $12.2 billion, or 6 percent (annualized), from first quarter. Core loan growth was $15.1 billion, as non-strategic/liquidating portfolios declined $12.7 billion in the quarter, including the $9.7 billion transfer. Average total loans were $831.0 billion, up $7.3 billion from the prior quarter, mainly reflecting growth in commercial and industrial, automobile and commercial real estate.

 

 

 
    June 30, 2014      March 31, 2014   
 

 

 

   

 

 

 
(in millions)   Core        Liquidating (1)     Total              Core        Liquidating        Total   

 

 

Commercial

    $   389,905           1,499        391,404         379,561           1,720           381,281    

Consumer

    373,693           63,845        437,538         368,888           76,274           445,162    

 

 

Total loans

    $   763,598           65,344        828,942         748,449           77,994           826,443    

 

 

Change from prior quarter:

    $ 15,149           (12,650 ) (2)      2,499         7,029           (2,872        4,157    

 

 

 

(1) See table on page 35 for additional information on non-strategic/liquidating loan portfolios. Management believes that the above information provides useful disclosure regarding the Company’s ongoing loan portfolios.
(2) The change from prior quarter was predominantly due to the transfer to loans held for sale of $9.7 billion of government guaranteed student loans, which were previously included in the Company’s non-strategic/liquidating loan portfolio.


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Investment Securities

Investment securities were $279.1 billion at June 30, 2014, up $8.7 billion from first quarter, as approximately $17 billion of purchases were partially offset by run-off. Held-to-maturity securities were up $12.4 billion, primarily due to an increase in U.S. Treasury and federal agency debt. Available-for-sale securities were down $3.7 billion from prior quarter, driven by declines in mortgage-backed securities and other debt securities. Average total investment securities were up $6.2 billion, mainly reflecting an increase in U.S. Treasury and federal agency debt.

The Company had net unrealized available-for-sale securities gains of $8.2 billion at June 30, 2014, up from $6.3 billion at March 31, 2014, primarily driven by a decline in interest rates in the quarter.

Deposits

Total average deposits for second quarter 2014 were $1.1 trillion, up 9 percent from a year ago and up 9 percent (annualized) from first quarter 2014, driven by solid commercial and consumer growth. The average deposit cost for second quarter 2014 was 10 basis points, which improved 1 basis point from prior quarter and 4 basis points from a year ago. Average core deposits were $991.7 billion, up 6 percent from a year ago and up 7 percent (annualized) from first quarter 2014. Average mortgage escrow deposits were $27.2 billion, compared with $39.6 billion a year ago and $24.2 billion in first quarter 2014.

Capital

Capital levels continued to be strong in the second quarter, with Common Equity Tier 1 of $134.8 billion under Basel III (General Approach), or 11.31 percent of risk-weighted assets. The Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) was 10.09 percent4. In second quarter 2014, the Company purchased 39.4 million shares of its common stock and an additional estimated 19.4 million shares through a forward repurchase transaction expected to settle in third quarter 2014. The Company also increased its quarterly common stock dividend to $0.35 per share, up from $0.30 per share a year ago.

 

 

 
     June 30,        Mar. 31,         June 30,     
     2014 (1)        2014         2013     

 

 

Common Equity Tier 1 (2)

     11.31        11.36         10.71   

Tier 1 capital

     12.73           12.63         12.12   

Tier 1 leverage

     9.86           9.84         9.63   

 

 

 

(1) June 30, 2014, ratios are preliminary.
(2) See tables on page 38 for more information on Common Equity Tier 1.

Credit Quality

“Credit performance continued to improve in the second quarter as credit losses remained at historically low levels, nonperforming assets continued to decrease and we continued to originate high quality loans,” said Chief Risk Officer Mike Loughlin. “Credit losses were $717 million in second quarter 2014, compared with $1.2 billion in second quarter 2013, a 38 percent improvement. The quarterly loss rate (annualized) in the second quarter was 0.35 percent with commercial losses of only 0.03 percent and consumer losses of 0.62 percent. Nonperforming assets declined by $686 million, or 15 percent (annualized), from last quarter.


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We released $500 million from the allowance for credit losses in the second quarter, reflecting improvements in credit performance, driven primarily by the continued housing recovery. While credit remained very strong, improvement has moderated with stable delinquency trends. We continue to expect future reserve releases absent a significant deterioration in the economic environment, but expect a lower level of future releases as the rate of credit improvement slows and the loan portfolio continues to grow.”

Net Loan Charge-offs

Net loan charge-offs improved to $717 million in second quarter 2014, or 0.35 percent (annualized) of average loans, compared with $825 million in first quarter 2014, or 0.41 percent (annualized) of average loans.

Net Loan Charge-Offs

 

 

 
     Quarter ended    
     June 30, 2014     Mar. 31, 2014     Dec. 31, 2013    

 

 
 ($ in millions)   

  Net  

loan  

charge-  

offs   

    

As a  

% of  

average  

loans (1)  

   

  Net  

loan  

charge-  

offs   

    

As a  

% of  

average  

loans (1)  

   

Net loan  

charge-  

offs   

    

As a  

% of  

average  

loans (1)  

 

 

 

 Commercial:

               

 Commercial and industrial

     $ 54           0.11       $ 45           0.09       $ 107           0.22  

 Real estate mortgage

     (10)           (0.04)          (22)           (0.08)          (41)           (0.15)     

 Real estate construction

     (20)           (0.47)          (23)           (0.55)          (13)           (0.32)     

 Lease financing

     1           0.05          1           0.03          -           -     

 Foreign

     6           0.05          4           0.03          -           -     

 

      

 

 

      

 

 

    

 Total commercial

     31           0.03          5           0.01          53           0.06     

 

      

 

 

      

 

 

    

 Consumer:

               

 Real estate 1-4 family first mortgage

     137           0.21          170           0.27          195           0.30     

 Real estate 1-4 family junior lien mortgage

     160           1.02          192           1.20          226           1.34     

 Credit card

     211           3.20          231           3.57          220           3.38     

 Automobile

     46           0.35          90           0.70          108           0.85     

 Other revolving credit and installment

     132           1.22          137           1.29          161           1.50     

 

      

 

 

      

 

 

    

 Total consumer

     686           0.62          820           0.75          910           0.82     

 

      

 

 

      

 

 

    

 Total

     $   717           0.35       $   825           0.41       $   963           0.47  

 

      

 

 

      

 

 

    
               

 

 

 

(1) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 32 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

Nonperforming Assets

Nonperforming assets decreased by $686 million from first quarter to $18.1 billion. Nonaccrual loans decreased $678 million to $14.0 billion. Foreclosed assets were $4.1 billion, in line with first quarter 2014.


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Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

 

 

 
     June 30, 2014     Mar. 31, 2014     Dec. 31, 2013  

 

 
 ($ in millions)    Total  
balances  
     As a  
% of  
total  
loans  
    Total  
balances  
     As a  
% of  
total  
loans  
    Total  
balances  
     As a  
% of  
total  
loans (1)  
 

 

 

 Commercial:

               

 Commercial and industrial

     $ 693           0.34       $ 630           0.32       $ 738           0.38  

 Real estate mortgage

     1,802           1.66          2,030           1.88          2,252           2.10     

 Real estate construction

     239           1.40          296           1.78          416           2.48     

 Lease financing

     28           0.24          31           0.26          29           0.24     

 Foreign

     36           0.08          40           0.08          40           0.08     

 

      

 

 

      

 

 

    

 Total commercial

     2,798           0.71          3,027           0.79          3,475           0.92     

 

      

 

 

      

 

 

    

 Consumer:

               

 Real estate 1-4 family first mortgage

     9,026           3.47          9,357           3.61          9,799           3.79     

 Real estate 1-4 family junior lien mortgage

     1,964           3.14          2,072           3.24          2,188           3.32     

 Automobile

     150           0.28          161           0.31          173           0.34     

 Other revolving credit and installment

     34           0.10          33           0.08          33           0.08     

 

      

 

 

      

 

 

    

 Total consumer

     11,174           2.55          11,623           2.61          12,193           2.74     

 

      

 

 

      

 

 

    

 Total nonaccrual loans

     13,972           1.69          14,650           1.77          15,668           1.91     

 

      

 

 

      

 

 

    

 Foreclosed assets:

               

 Government insured/guaranteed

     2,359             2,302             2,093        

 Non-government insured/guaranteed

     1,748             1,813             1,844        

 

      

 

 

      

 

 

    

 Total foreclosed assets

     4,107             4,115             3,937        

 

      

 

 

      

 

 

    

 Total nonperforming assets

     $   18,079           2.18       $   18,765           2.27       $   19,605           2.38  

 

      

 

 

      

 

 

    

 Change from prior quarter:

               

 Total nonaccrual loans

     $ (678)             $ (1,018)             $ (1,225)        

 Total nonperforming assets

     (686)             (840)             (1,090)        
               

 

 

 

(1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information.

Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $897 million at June 30, 2014, compared with $950 million at March 31, 2014. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $17.7 billion at June 30, 2014, down from $20.3 billion at March 31, 2014.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $13.8 billion at June 30, 2014, down from $14.4 billion at March 31, 2014. The allowance coverage to total loans was 1.67 percent, compared with 1.74 percent in first quarter 2014. The allowance covered 4.8 times annualized second quarter net charge-offs, compared with 4.3 times in prior quarter. The allowance coverage to nonaccrual loans was 99 percent at June 30, 2014, compared with 98 percent at March 31, 2014. “We believe the allowance was appropriate for losses inherent in the loan portfolio at June 30, 2014,” said Loughlin.


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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    
  

 

 

 
       June 30,      Mar. 31,      June 30,    
(in millions)    2014      2014      2013    

 

 

Community Banking

     $   3,431         3,844         3,245     

Wholesale Banking

     1,952         1,742         2,004     

Wealth, Brokerage and Retirement

     544         475         434     

 

 

More financial information about the business segments is on pages 39 and 40.

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

Selected Financial Information

 

 
     Quarter ended    
  

 

 

 
       June 30,      Mar. 31,      June 30,    
(in millions)    2014      2014      2013    

 

 

Total revenue

     $   12,606         12,593         12,942     

Provision for credit losses

     279         419         763     

Noninterest expense

     7,020         6,774         7,213     

Segment net income

     3,431         3,844         3,245     
(in billions)                     

Average loans

     505.4         505.0         498.2     

Average assets

     918.1         892.6         820.9     

Average core deposits

     639.8         626.5         623.0     

 

 

Community Banking reported net income of $3.4 billion, down $413 million, or 11 percent, from first quarter 2014. Revenue of $12.6 billion rose slightly from the prior quarter. Higher net interest income, mortgage banking revenue and card fees, were offset by lower equity investment gains. Noninterest expense increased $246 million, or 4 percent, due to higher operating losses, project spending, and advertising costs. The provision for credit losses decreased $140 million due to lower consumer real estate losses.

Net income was up $186 million, or 6 percent, from second quarter 2013. Revenue decreased $336 million, or 3 percent, from a year ago primarily due to lower mortgage banking revenue, partially offset by higher net interest income and growth in multiple fee income categories including equity gains, card fees, trust and investment fees, and deposit service charges. Noninterest expense declined $193 million, or 3 percent, from a year ago largely driven by lower mortgage volume-related expenses and lower foreclosed assets expense, partially offset by higher operating losses. The provision for credit losses decreased $484 million from a year ago due to lower consumer real estate losses.


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Regional Banking

 

  Retail banking

 

  o Retail Bank household cross-sell ratio of 6.17 products per household, up from 6.14 year-over-year6

 

  o Primary consumer checking customers7 up a net 4.6 percent year-over-year6

 

  Small Business/Business Banking

 

  o Primary business checking customers7 up a net 5.2 percent year-over-year6

 

  o Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) combined were up 22 percent from the prior year

 

  o In May, introduced Wells Fargo Works for Small BusinessSM – a broad initiative to deliver resources, guidance and services for small business owners

 

  Online and Mobile Banking

 

  o 24.1 million active online customers, up 6 percent year-over-year6

 

  o 13.1 million active mobile customers, up 22 percent year-over-year6

Consumer Lending Group

 

  Home Lending

 

  o Originations of $47 billion, up from $36 billion in prior quarter

 

  o Applications of $72 billion, up from $60 billion in prior quarter

 

  o Application pipeline of $30 billion at quarter end, up from $27 billion at March 31, 2014

 

  o Residential mortgage servicing portfolio of $1.8 trillion; ratio of MSRs to related loans serviced for others was 80 basis points, compared with 85 basis points in prior quarter

 

  o Average note rate on the servicing portfolio was 4.49 percent, compared with 4.51 percent in prior quarter

 

  Consumer Credit

 

  o Credit card penetration in retail banking households rose to 39.0 percent6, up from 34.9 percent in prior year

 

  o Auto originations of $7.8 billion, up 9 percent from prior year

 

 

6 Data as of May 2014, comparisons with May 2013.

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


- 10 -

 

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $20 million. Products and business segments include Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments, Asset Backed Finance, and Asset Management.

Selected Financial Information

 

 

 
     Quarter ended    
  

 

 

 
(in millions)      June 30,
2014
    Mar. 31,
2014
    June 30,  
2013  
 

 

 

Total revenue

   $ 5,946        5,580        6,135   

Reversal of provision for credit losses

     (49     (93     (118

Noninterest expense

     3,203        3,215        3,183   

Segment net income

     1,952        1,742        2,004   
(in billions)                   

Average loans (1)

     308.1        301.9        285.1   

Average assets (1)

     532.4        517.4        498.1   

Average core deposits

     265.8        259.0        230.5   

 

 

 

(1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information.

Wholesale Banking reported net income of $2.0 billion, up $210 million, or 12 percent, from first quarter 2014. Revenue of $5.9 billion increased $366 million, or 7 percent, from prior quarter. Net interest income increased $62 million, or 2 percent, driven by higher loan balances. Noninterest income increased $304 million, or 11 percent, on higher investment banking fees, commercial brokerage fees, asset management fees and a gain on the previously disclosed divestiture of 40 insurance offices, partially offset by lower customer accommodation trading revenue. Noninterest expense decreased $12 million linked quarter as seasonally lower personnel costs were mostly offset by increased variable expenses related to higher revenues. The provision for credit losses increased $44 million from prior quarter due to a $30 million increase in credit losses and a $14 million lower reserve release.

Net income was down $52 million, or 3 percent, from second quarter 2013. Revenue decreased $189 million, or 3 percent, from second quarter 2013 as strong loan and deposit growth, increased asset management fees and the gain on the insurance office divestiture were more than offset by lower PCI resolution income and market sensitive revenue, including lower customer accommodation trading revenue. Noninterest expense increased $20 million, or 1 percent, from a year ago primarily due to higher non-personnel expenses related to growth initiatives and compliance and regulatory requirements. The provision for credit losses increased $69 million from a year ago due to a $54 million increase in credit losses and a $15 million lower reserve release.

 

  Average loans increased 8 percent1 in second quarter 2014, compared with second quarter 2013, on broad-based growth, including asset-backed finance, capital finance, commercial banking, commercial real estate, corporate banking, and international

 

  Cross-sell of 7.2 products per relationship, up from 6.9 in second quarter 2013 driven by new product sales to existing customers

 

  Treasury management revenue up 7 percent from second quarter 2013


- 11 -

 

  Assets under management of $490 billion, up $35 billion from second quarter 2013, including a $26 billion increase in equity assets under management reflecting increased market valuations and net inflows

Wealth, Brokerage and Retirement provides a full range of financial advisory services to clients using a planning approach to meet each client’s financial needs. Wealth Management provides affluent and high net worth clients with a complete range of wealth management solutions, including financial planning, private banking, credit, investment management and fiduciary services. Abbot Downing, a Wells Fargo business, provides comprehensive wealth management services to ultra-high net worth families and individuals as well as endowments and foundations. Brokerage serves customers’ advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the United States. Retirement is a national leader in providing institutional retirement and trust services (including 401(k) and pension plan record keeping) for businesses, retail retirement solutions for individuals, and reinsurance services for the life insurance industry.

Selected Financial Information

 

 

 
     Quarter ended    
  

 

 

 
(in millions)    June 30,
2014
    Mar. 31,
2014
    June 30,  
2013  
 

 

 

Total revenue

   $ 3,550        3,468        3,261     

Provision (reversal of provision) for credit losses

     (25     (8     19     

Noninterest expense

     2,695        2,711        2,542     

Segment net income

     544        475        434     
(in billions)                   

Average loans

     51.0        50.0        45.4     

Average assets

     187.6        190.6        177.1     

Average core deposits

     153.0        156.0        146.4     

 

 

Wealth, Brokerage and Retirement (WBR) reported net income of $544 million, up $69 million, or 15 percent, from first quarter 2014. Revenue of $3.6 billion increased $82 million, or 2 percent, from the prior quarter as increased asset-based fees and higher gains on deferred compensation plan investments (offset in compensation expense) were partially offset by lower brokerage transaction revenue. Noninterest expense was down 1 percent from the prior quarter. The expense reduction from the seasonally higher first quarter 2014 personnel expenses was largely offset by higher deferred compensation plan expense (offset in trading revenue) and increased broker commissions and other incentives. The provision for credit losses decreased $17 million from first quarter 2014. The provision in second quarter 2014 included a $21 million reserve release, compared with $8 million in first quarter 2014.

Net income was up $110 million, or 25 percent, from second quarter 2013. Revenue increased $289 million, or 9 percent, from a year ago as strong growth in both asset-based fees and net interest income along with higher gains on deferred compensation plan investments, were partially offset by a decrease in brokerage transaction revenue. Noninterest expense increased $153 million, or 6 percent, from a year ago due to higher deferred compensation plan expense, increased broker commissions, and higher other expenses. The provision for credit losses decreased $44 million from a year ago primarily due to decreased net charge-offs. The provision in second quarter 2013 included a $5 million reserve release.


- 12 -

 

Retail Brokerage

 

  Client assets of $1.4 trillion, up 12 percent from prior year

 

  Managed account assets of $409 billion, increased $78 billion, or 24 percent, from prior year, reflecting increased market valuations and net flows

 

  Strong loan growth, with average balances up 19 percent from prior year on growth in first mortgage and security-based lending

Wealth Management

 

  Client assets of $221 billion, up 10 percent from prior year

 

  Strong loan growth, with average balances up 10 percent over prior year

Retirement

 

  IRA assets of $357 billion, up 13 percent from prior year

 

  Institutional Retirement plan assets of $319 billion, up 12 percent from prior year

WBR cross-sell ratio of 10.44 products per household, up from 10.35 a year ago

Conference Call

The Company will host a live conference call on Friday, July 11, at 7 a.m. PDT (10 a.m. EDT). You may participate by dialing 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). No password is required. The call will also be available online at wellsfargo.com/invest_relations/earnings and at https://engage.vevent.com/rt/audiostreaming~wellsfargo_071114.

A replay of the conference call will be available beginning at 10 a.m. PDT (1 p.m. EDT) on July 11 through Friday, July 18. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #44408705. The replay will also be available online at wellsfargo.com/invest_relations/earnings and at https://engage.vevent.com/rt/audiostreaming~wellsfargo_071114.


- 13 -

 

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 releases; (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 levels and our estimated Common Equity Tier 1 ratio under Basel III capital standards; (viii) the performance of our mortgage business and any related exposures; (ix) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (x) future common stock dividends, common share repurchases and other uses of capital; (xi) our targeted range for return on assets and return on equity; (xii) the outcome of contingencies, such as legal proceedings; and (xiii) the Company’s plans, objectives and strategies.

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

 

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

 

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

 

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

 

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

 

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

 

    negative effects relating to our mortgage servicing and foreclosure practices, including our obligations under the settlement with the Department of Justice and other federal and state government entities, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;

 

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


- 14 -

 

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

 

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

 

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

 

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

 

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

 

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

 

    fiscal and monetary policies of the Federal Reserve Board; and

 

    the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013.

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, 2013, 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.


- 15 -

 

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.6 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 locations, 12,500 ATMs, and the internet (wellsfargo.com), and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 29 on Fortune’s 2014 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

# # #


16

 

Wells Fargo & Company and Subsidiaries

QUARTERLY FINANCIAL DATA

TABLE OF CONTENTS

 

 

           Pages  

Summary Information

  

Summary Financial Data

     17-18   

Income

  

Consolidated Statement of Income

     19   

Consolidated Statement of Comprehensive Income

     20   

Condensed Consolidated Statement of Changes in Total Equity

     20   

Five Quarter Consolidated Statement of Income

     21   

Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis)

     22-23   

Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis)

     24   

Noninterest Income and Noninterest Expense

     25-26   

Balance Sheet

  

Consolidated Balance Sheet

     27-28   

Investment Securities

     29   

Loans

  

Loans

     29   

Nonperforming Assets

     30   

Loans 90 Days or More Past Due and Still Accruing

     31   

Purchased Credit-Impaired Loans

     32-34   

Pick-A-Pay Portfolio

     35   

Non-Strategic and Liquidating Loan Portfolios

     35   

Changes in Allowance for Credit Losses

     36-37   

Equity

  

Five Quarter Risk-Based Capital Components

     38   

Common Equity Tier 1 Under Basel III

     38   

Operating Segments

  

Operating Segment Results

     39-40   

Other

  

Mortgage Servicing and other related data

     41-43   

 

 


17

 

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA

 

 
    Quarter ended    

% Change

June 30, 2014 from

    Six months ended        
 

 

 

   

 

 

   

 

 

   
($ in millions, except per share amounts)   June 30,
2014
    Mar. 31,
2014
    June 30,
2013
    Mar. 31,
2014
    June 30,
2013
    June 30,
2014
    June 30,
2013
    %
Change
 

 

 

For the Period

               

Wells Fargo net income

  $ 5,726        5,893        5,519        (3)          $ 11,619        10,690       

Wells Fargo net income applicable to common stock

    5,424        5,607        5,272        (3)               11,031        10,203         

Diluted earnings per common share

    1.01        1.05        0.98        (4)               2.06        1.90         

Profitability ratios (annualized):

               

Wells Fargo net income to average assets (ROA) (1)

    1.47      1.57        1.55        (6)         (5)        1.52        1.52         

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

    13.40        14.35        14.02        (7)         (4)        13.86        13.81         

Efficiency ratio (2)

    57.9        57.9        57.3        -               57.9        57.8         

Total revenue

  $ 21,066        20,625        21,378        2         (1)      $ 41,691        42,637        (2)   

Pre-tax pre-provision profit (PTPP) (3)

    8,872        8,677        9,123        2         (3)        17,549        17,982        (2)   

Dividends declared per common share

    0.35        0.30        0.30        17         17        0.65        0.55        18   

Average common shares outstanding

    5,268.4        5,262.8        5,304.7        -         (1)        5,265.6        5,291.9         

Diluted average common shares outstanding

    5,350.8        5,353.3        5,384.6        -         (1)        5,353.2        5,369.9         

Average loans (1)

  $ 831,043        823,790        798,386        1             $ 827,436        797,528         

Average assets (1)

    1,564,003        1,525,905        1,427,150        2         10        1,545,060        1,415,105         

Average core deposits (4)

    991,727        973,801        936,090        2               982,814        931,006         

Average retail core deposits (5)

    698,763        690,643        666,043        1               694,726        664,487         

Net interest margin (1)

    3.15      3.20        3.47        (2)         (9)        3.17        3.48        (9)   

At Period End

               

Investment securities

  $ 279,069        270,327        249,439        3         12      $ 279,069        249,439        12   

Loans (1)

    828,942        826,443        799,867        -               828,942        799,867         

Allowance for loan losses

    13,101        13,695        16,144        (4)         (19)        13,101        16,144        (19)   

Goodwill

    25,705        25,637        25,637        -               25,705        25,637         

Assets (1)

    1,598,874        1,546,707        1,438,456        3         11        1,598,874        1,438,456        11   

Core deposits (4)

    1,007,485        994,185        941,158        1               1,007,485        941,158         

Wells Fargo stockholders’ equity

    180,859        175,654        162,421        3         11        180,859        162,421        11   

Total equity

    181,549        176,469        163,777        3         11        181,549        163,777        11   

Capital ratios:

               

Total equity to assets (1)

    11.35      11.41        11.39        -                11.35        11.39         

Risk-based capital (6):

               

Tier 1 capital

    12.73        12.63        12.12        1               12.73        12.12         

Total capital

    15.90        15.71        15.03        1               15.90        15.03         

Tier 1 leverage (6)

    9.86        9.84        9.63        -               9.86        9.63         

Common Equity Tier 1 (6)(7)

    11.31        11.36        10.71        -               11.31        10.71         

Common shares outstanding

    5,249.9        5,265.7        5,302.2        -         (1)        5,249.9        5,302.2        (1)   

Book value per common share

  $ 31.18        30.48        28.26        2         10      $ 31.18        28.26        10   

Common stock price:

               

High

    53.05        49.97        41.74        6         27        53.05        41.74        27   

Low

    46.72        44.17        36.19        6         29        44.17        34.43        28   

Period end

    52.56        49.74        41.27        6         27        52.56        41.27        27   

Team members (active, full-time equivalent)

    263,500        265,300        274,300        (1)         (4)        263,500        274,300        (4)   

 

 

 

(1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. Accordingly, we revised our commercial loan balances for year-end 2012 and each of the quarters in 2013 in order to present the Company’s lending trends on a comparable basis over this period. This revision, which resulted in a reduction to total commercial loans and a corresponding decrease to other liabilities, did not impact the Company’s consolidated net income or total cash flows. We reduced our commercial loans by $3.5 billion, $3.2 billion, $2.1 billion, $1.6 billion, and $1.2 billion at December 31, September 30, June 30, and March 31, 2013, and December 31, 2012, respectively, which represented less than 1% of total commercial loans and less than 0.5% of our total loan portfolio. Other affected financial information, including financial guarantees and financial ratios, has been appropriately revised to reflect this revision.
(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) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(5) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(6) The June 30, 2014, ratios are preliminary.
(7) See the “Five Quarter Risk-Based Capital Components” table for additional information.


18

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA

 

 
     Quarter ended  
  

 

 

 
($ in millions, except per share amounts)    June 30,
2014
    Mar. 31,
2014
     Dec. 31,
2013
     Sept. 30,
2013
     June 30,
2013
 

For the Quarter

             

Wells Fargo net income

   $ 5,726        5,893         5,610         5,578         5,519   

Wells Fargo net income applicable to common stock

     5,424        5,607         5,369         5,317         5,272   

Diluted earnings per common share

     1.01        1.05         1.00         0.99         0.98   

Profitability ratios (annualized):

             

Wells Fargo net income to average assets (ROA) (1)

     1.47       1.57         1.48         1.53         1.55   

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

     13.40        14.35         13.81         14.07         14.02   

Efficiency ratio (2)

     57.9        57.9         58.5         59.1         57.3   

Total revenue

   $ 21,066        20,625         20,665         20,478         21,378   

Pre-tax pre-provision profit (PTPP) (3)

     8,872        8,677         8,580         8,376         9,123   

Dividends declared per common share

     0.35        0.30         0.30         0.30         0.30   

Average common shares outstanding

     5,268.4        5,262.8         5,270.3         5,295.3         5,304.7   

Diluted average common shares outstanding

     5,350.8        5,353.3         5,358.6         5,381.7         5,384.6   

Average loans (1)

   $ 831,043        823,790         813,318         802,134         798,386   

Average assets (1)

     1,564,003        1,525,905         1,505,766         1,446,965         1,427,150   

Average core deposits (4)

     991,727        973,801         965,828         940,279         936,090   

Average retail core deposits (5)

     698,763        690,643         679,355         670,335         666,043   

Net interest margin (1)

     3.15       3.20         3.27         3.39         3.47   

At Quarter End

             

Investment securities

   $ 279,069        270,327         264,353         259,399         249,439   

Loans (1)

     828,942        826,443         822,286         809,135         799,867   

Allowance for loan losses

     13,101        13,695         14,502         15,159         16,144   

Goodwill

     25,705        25,637         25,637         25,637         25,637   

Assets (1)

     1,598,874        1,546,707         1,523,502         1,484,865         1,438,456   

Core deposits (4)

     1,007,485        994,185         980,063         947,805         941,158   

Wells Fargo stockholders’ equity

     180,859        175,654         170,142         167,165         162,421   

Total equity

     181,549        176,469         171,008         168,813         163,777   

Capital ratios:

             

Total equity to assets (1)

     11.35       11.41         11.22         11.37         11.39   

Risk-based capital (6):

             

Tier 1 capital

     12.73        12.63         12.33         12.11         12.12   

Total capital

     15.90        15.71         15.43         15.09         15.03   

Tier 1 leverage (6)

     9.86        9.84         9.60         9.76         9.63   

Common Equity Tier 1 (6)(7)

     11.31        11.36         10.82         10.60         10.71   

Common shares outstanding

     5,249.9        5,265.7         5,257.2         5,273.7         5,302.2   

Book value per common share

   $ 31.18        30.48         29.48         28.98         28.26   

Common stock price:

             

High

     53.05        49.97         45.64         44.79         41.74   

Low

     46.72        44.17         40.07         40.79         36.19   

Period end

     52.56        49.74         45.40         41.32         41.27   

Team members (active, full-time equivalent)

     263,500        265,300         264,900         270,600         274,300   

 

 

 

(1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information.
(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) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(5) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(6) The June 30, 2014, ratios are preliminary.
(7) See the “Five Quarter Risk-Based Capital Components” table for additional information.


19

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

 

 
     Quarter ended June 30,      %    

Six months

ended June 30,

     %  
  

 

 

      

 

 

    
(in millions, except per share amounts)    2014      2013      Change     2014      2013      Change  

 

 

Interest income

                

Trading assets

   $ 407        340         20    $ 781        667         17 

Investment securities

     2,112        2,034               4,222        3,959          

Mortgages held for sale

     195        378         (48)        365        749         (51)   

Loans held for sale

     1               (75)        3               (57)   

Loans

     8,852        8,902         (1)        17,598        17,763         (1)   

Other interest income

     226        169         34        436        332         31   

 

      

 

 

    

Total interest income

     11,793        11,827               23,405        23,477          

 

      

 

 

    

Interest expense

                

Deposits

     275        353         (22)        554        722         (23)   

Short-term borrowings

     14        17         (18)        26        37         (30)   

Long-term debt

     620        632         (2)        1,239        1,329         (7)   

Other interest expense

     93        75         24        180        140         29   

 

      

 

 

    

Total interest expense

     1,002        1,077         (7)        1,999        2,228         (10)   

 

      

 

 

    

Net interest income

     10,791        10,750               21,406        21,249          

Provision for credit losses

     217        652         (67)        542        1,871         (71)   

 

      

 

 

    

Net interest income after provision for credit losses

     10,574        10,098               20,864        19,378          

 

      

 

 

    

Noninterest income

                

Service charges on deposit accounts

     1,283        1,248               2,498        2,462          

Trust and investment fees

     3,609        3,494               7,021        6,696          

Card fees

     847        813               1,631        1,551          

Other fees

     1,088        1,089               2,135        2,123          

Mortgage banking

     1,723        2,802         (39)        3,233        5,596         (42)   

Insurance

     453        485         (7)        885        948         (7)   

Net gains from trading activities

     382        331         15        814        901         (10)   

Net gains (losses) on debt securities

     71        (54)         NM         154        (9)         NM    

Net gains from equity investments

     449        203         121        1,296        316         310   

Lease income

     129        225         (43)        262        355         (26)   

Other

     241        (8)         NM         356        449         (21)   

 

      

 

 

    

Total noninterest income

     10,275        10,628         (3)        20,285        21,388         (5)   

 

      

 

 

    

Noninterest expense

                

Salaries

     3,795        3,768               7,523        7,431          

Commission and incentive compensation

     2,445        2,626         (7)        4,861        5,203         (7)   

Employee benefits

     1,170        1,118               2,542        2,701         (6)   

Equipment

     445        418               935        946         (1)   

Net occupancy

     722        716               1,464        1,435          

Core deposit and other intangibles

     349        377         (7)        690        754         (8)   

FDIC and other deposit assessments

     225        259         (13)        468        551         (15)   

Other

     3,043        2,973               5,659        5,634          

 

      

 

 

    

Total noninterest expense

     12,194        12,255               24,142        24,655         (2)   

 

      

 

 

    

Income before income tax expense

     8,655        8,471               17,007        16,111          

Income tax expense

     2,869        2,863               5,146        5,283         (3)   

 

      

 

 

    

Net income before noncontrolling interests

     5,786        5,608               11,861        10,828         10   

Less: Net income from noncontrolling interests

     60        89         (33)        242        138         75   

 

      

 

 

    

Wells Fargo net income

   $ 5,726        5,519             $ 11,619        10,690          

 

      

 

 

    

Less: Preferred stock dividends and other

     302        247         22        588        487         21   

 

      

 

 

    

Wells Fargo net income applicable to common stock

   $ 5,424        5,272             $ 11,031        10,203          

 

      

 

 

    

Per share information

                

Earnings per common share

   $ 1.02        1.00             $ 2.09        1.93          

Diluted earnings per common share

     1.01        0.98               2.06        1.90          

Dividends declared per common share

     0.35        0.30         17        0.65        0.55         18   

Average common shares outstanding

     5,268.4        5,304.7         (1)        5,265.6        5,291.9          

Diluted average common shares outstanding

     5,350.8        5,384.6         (1)        5,353.2        5,369.9          

 

 

NM - Not meaningful


20

 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 
     Quarter ended June 30,      %     Six months ended June 30,      %  
  

 

 

      

 

 

    
(in millions)    2014       2013      Change     2014       2013      Change  

 

 

Wells Fargo net income

   $ 5,726         5,519          $ 11,619         10,690       

 

      

 

 

    

Other comprehensive income (loss), before tax:

                

Investment securities:

                

Net unrealized gains (losses) arising during the period

     2,085         (6,130)         NM         4,810         (6,764)         NM    

Reclassification of net (gains) losses to net income

     (150)         30         NM         (544)         (83)         555   

Derivatives and hedging activities:

                

Net unrealized gains (losses) arising during the period

     212         (10)         NM         256         (3)         NM    

Reclassification of net gains on cash flow hedges to net income

     (115)         (69)         67        (221)         (156)         42   

Defined benefit plans adjustments:

                

Net actuarial gains (losses) arising during the period

     (12)         772         NM         (12)         778         NM    

Amortization of net actuarial loss, settlements and other to net income

     20         113          (82)        38         162          (77)   

Foreign currency translation adjustments:

                

Net unrealized gains (losses) arising during the period

     17         (21)         NM                (39)         (100)   

Reclassification of net (gains) losses to net income

            (15)         (100)               (15)         NM    

 

      

 

 

    

Other comprehensive income (loss), before tax

     2,057         (5,330)         NM         4,333         (6,120)         NM    

Income tax (expense) benefit related to other comprehensive income

     (816)         1,979         NM         (1,647)         2,267         NM    

 

      

 

 

    

Other comprehensive income (loss), net of tax

     1,241         (3,351)         NM         2,686         (3,853)         NM    

Less: Other comprehensive loss from noncontrolling interests

     (124)         (3)         NM         (45)                  

 

      

 

 

    

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

     1,365         (3,348)         NM         2,731         (3,853)         NM    

 

      

 

 

    

Wells Fargo comprehensive income

     7,091         2,171         227        14,350         6,837         110   

Comprehensive income (loss) from noncontrolling interests

     (64)         86         NM         197         138         43   

 

      

 

 

    

Total comprehensive income

   $ 7,027         2,257         211      $ 14,547         6,975         109   

 

 

NM - Not meaningful

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

 

 
     Six months ended June 30,  
  

 

 

 
(in millions)    2014       2013   

 

 

Balance, beginning of period

   $     171,008         158,911   

Wells Fargo net income

     11,619         10,690   

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

     2,731         (3,853)   

Common stock issued

     1,573         1,799   

Common stock repurchased (1)

     (3,979)         (1,936)   

Preferred stock released by ESOP

     735         720   

Preferred stock issued

     1,995         610   

Common stock dividends

     (3,423)         (2,911)   

Preferred stock dividends and other

     (588)         (487)   

Noncontrolling interests and other, net

     (122)         234   

 

 

Balance, end of period

   $ 181,549         163,777   

 

 

 

(1) For the six months ended June 30, 2014, includes $1.0 billion related to a private forward repurchase transaction entered into in second quarter 2014 that is expected to settle in third quarter 2014 for an estimated 19 million shares of common stock. For the six months ended June 30, 2013, includes $500 million related to a private forward repurchase transaction entered into in second quarter 2013 that settled in third quarter 2013 for 13 million shares of common stock.


21

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

 

 
     Quarter ended  
  

 

 

 
     June 30,      Mar. 31,      Dec. 31,      Sept. 30,      June 30,  
(in millions, except per share amounts)    2014       2014       2013       2013       2013   

 

 

Interest Income

              

Trading assets

   $ 407         374         378         331         340   

Investment securities

     2,112         2,110         2,119         2,038         2,034   

Mortgages held for sale

     195         170         221         320         378   

Loans held for sale

                                  

Loans

     8,852         8,746         8,907         8,901         8,902   

Other interest income

     226         210         208         183         169   

 

 

Total interest income

     11,793         11,612         11,836         11,776         11,827   

 

 

Interest expense

              

Deposits

     275         279         297         318         353   

Short-term borrowings

     14         12         14                17   

Long-term debt

     620         619         635         621         632   

Other interest expense

     93         87         87         80         75   

 

 

Total interest expense

     1,002         997         1,033         1,028         1,077   

 

 

Net interest income

     10,791         10,615         10,803         10,748         10,750   

Provision for credit losses

     217         325         363         75         652   

 

 

Net interest income after provision for credit losses

     10,574         10,290         10,440         10,673         10,098   

 

 

Noninterest income

              

Service charges on deposit accounts

     1,283         1,215         1,283         1,278         1,248   

Trust and investment fees

     3,609         3,412         3,458         3,276         3,494   

Card fees

     847         784         827         813         813   

Other fees

     1,088         1,047         1,119         1,098         1,089   

Mortgage banking

     1,723         1,510         1,570         1,608         2,802   

Insurance

     453         432         453         413         485   

Net gains from trading activities

     382         432         325         397         331   

Net gains (losses) on debt securities

     71         83         (14)          (6)          (54)    

Net gains from equity investments

     449         847         654         502         203   

Lease income

     129         133         148         160         225   

Other

     241         115         39         191         (8)    

 

 

Total noninterest income

     10,275         10,010         9,862         9,730         10,628   

 

 

Noninterest expense

              

Salaries

     3,795         3,728         3,811         3,910         3,768   

Commission and incentive compensation

     2,445         2,416         2,347         2,401         2,626   

Employee benefits

     1,170         1,372         1,160         1,172         1,118   

Equipment

     445         490         567         471         418   

Net occupancy

     722         742         732         728         716   

Core deposit and other intangibles

     349         341         375         375         377   

FDIC and other deposit assessments

     225         243         196         214         259   

Other

     3,043         2,616         2,897         2,831         2,973   

 

 

Total noninterest expense

     12,194         11,948         12,085         12,102         12,255   

 

 

Income before income tax expense

     8,655         8,352         8,217         8,301         8,471   

Income tax expense

     2,869         2,277         2,504         2,618         2,863   

 

 

Net income before noncontrolling interests

     5,786         6,075         5,713         5,683         5,608   

Less: Net income from noncontrolling interests

     60         182         103         105         89   

 

 

Wells Fargo net income

   $ 5,726         5,893         5,610         5,578         5,519   

 

 

Less: Preferred stock dividends and other

     302         286         241         261         247   

 

 

Wells Fargo net income applicable to common stock

   $ 5,424         5,607         5,369         5,317         5,272   

 

 

Per share information

              

Earnings per common share

   $ 1.02         1.07         1.02         1.00         1.00   

Diluted earnings per common share

     1.01         1.05         1.00         0.99         0.98   

Dividends declared per common share

     0.35         0.30         0.30         0.30         0.30   

Average common shares outstanding

     5,268.4         5,262.8         5,270.3         5,295.3         5,304.7   

Diluted average common shares outstanding

             5,350.8         5,353.3         5,358.6         5,381.7         5,384.6   

 

 


22

 

Wells Fargo & Company and Subsidiaries

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

 

 
    Quarter ended June 30,  
 

 

 

 
                       2014                             2013  
 

 

 

      

 

 

 
(in millions)   Average
balance
    Yields/
rates
            Interest
income/
expense
          Average
balance
    Yields/
rates
            Interest
income/
expense
 

Earning assets

                    

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

  $ 229,770       0.28         %        $ 161          136,484       0.33         %        $ 113  

Trading assets

    54,347       3.05          414          46,622       2.98          347  

Investment securities (3):

                    

Available-for-sale securities:

                    

Securities of U.S. Treasury and federal agencies

    6,580       1.78          29          6,684       1.73          29  

Securities of U.S. states and political subdivisions

    42,721       4.26          456          39,267       4.42          434  

Mortgage-backed securities:

                    

Federal agencies

    116,475       2.85          831          102,007       2.79          711  

Residential and commercial

    27,252       6.11          416          31,315       6.50          509  

Total mortgage-backed securities

    143,727       3.47          1,247          133,322       3.66          1,220  

Other debt and equity securities

    48,734       3.76          457          55,533       3.84          531  

Total available-for-sale securities

    241,762       3.62          2,189          234,806       3.77          2,214  

Held-to-maturity securities:

                    

Securities of U.S. Treasury and federal agencies

    10,829       2.20          59          -          -             -     

Securities of U.S. states and political subdivisions

    8       6.00          -             -          -             -     

Federal agency mortgage-backed securities

    6,089       2.74          42          -          -             -     

Other debt securities

    5,206       1.90          25          -          -             -     

Total held-to-maturity securities

    22,132       2.28          126          -          -             -     

Total investment securities

    263,894       3.51          2,315          234,806       3.77          2,214  

Mortgages held for sale (4)

    18,824       4.16          195          43,422       3.48          378  

Loans held for sale (4)

    157       2.55          1          177       7.85          4  

Loans:

                    

Commercial:

                    

Commercial and industrial (5)

    199,246       3.39          1,687          184,306       3.73          1,714  

Real estate mortgage

    107,673       3.56          955          105,261       3.92          1,029  

Real estate construction

    17,249       4.17          179          16,458       5.02          206  

Lease financing

    11,824       5.70          169          12,338       6.66          206  

Foreign (5)

    48,847       2.39          290          42,242       2.23          235  

Total commercial (5)

    384,839       3.42          3,280          360,605       3.77          3,390  

Consumer:

                    

Real estate 1-4 family first mortgage

    259,974       4.20          2,729          252,558       4.23          2,671  

Real estate 1-4 family junior lien mortgage

    63,273       4.31          680          71,376       4.29          764  

Credit card

    26,431       11.97          789          24,023       12.55          752  

Automobile

    53,480       6.34          845          47,942       7.05          842  

Other revolving credit and installment

    43,046       5.07          544          41,882       4.74          495  

Total consumer

    446,204       5.02          5,587          437,781       5.05          5,524  

Total loans (4)(5)

    831,043       4.28                8,867          798,386       4.47                8,914  

Other

    4,535       5.74          65          4,151       5.55          57  

Total earning assets (5)

  $ 1,402,570       3.43         %        $ 12,018              1,264,048       3.81         %        $ 12,027  

Funding sources

                    

Deposits:

                    

Interest-bearing checking

  $ 40,193       0.07         %        $ 7          40,422       0.06         %        $ 6  

Market rate and other savings

    583,907       0.07          101          541,843       0.08          111  

Savings certificates

    38,754       0.86          82          52,552       1.23          161  

Other time deposits

    48,512       0.41          50          26,045       0.76          50  

Deposits in foreign offices

    94,232       0.15          35          68,871       0.15          25  

Total interest-bearing deposits

    805,598       0.14          275          729,733       0.19          353  

Short-term borrowings

    58,845       0.10          14          57,812       0.14          21  

Long-term debt

    159,233       1.56          620          125,496       2.02          632  

Other liabilities

    13,589       2.73          93          13,315       2.25          75  

Total interest-bearing liabilities

    1,037,265       0.39          1,002          926,356       0.47          1,081  

Portion of noninterest-bearing funding sources (5)

    365,305       -             -             337,692       -             -     

Total funding sources (5)

  $ 1,402,570       0.28          1,002          1,264,048       0.34          1,081  

Net interest margin and net interest income on a taxable-equivalent basis (5)(6)

      3.15         %        $ 11,016            3.47         %        $ 10,946  

Noninterest-earning assets

                    

Cash and due from banks

  $ 15,956                 16,214         

Goodwill

    25,699                 25,637         

Other

    119,778                 121,251         

Total noninterest-earning assets

  $ 161,433                 163,102         

Noninterest-bearing funding sources

                    

Deposits

  $ 295,875                 280,029         

Other liabilities (5)

    51,184                 56,104         

Total equity

    179,679                 164,661         

Noninterest-bearing funding sources used to fund earning assets (5)

    (365,305               (337,692       

Net noninterest-bearing funding sources

  $ 161,433                 163,102         

Total assets (5)

  $ 1,564,003                 1,427,150         

 

 

 

(1) Our average prime rate was 3.25% for the quarters ended June 30, 2014 and 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.23% and 0.28% for the same quarters, respectively.
(2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information.
(6) Includes taxable-equivalent adjustments of $225 million and $196 million for the quarters ended June 30, 2014 and 2013, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.


23

 

Wells Fargo & Company and Subsidiaries

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

 

    Six months ended June 30,  
 

 

 

 
                       2014                             2013  
 

 

 

      

 

 

 
(in millions)   Average
balance
    Yields/
rates
           Interest
income/
expense
         Average
balance
    Yields/
rates
           Interest
income/
expense
 

 

 

Earning assets

                    

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

  $ 221,573       0.28         %        $ 305          128,797       0.35         %        $ 221  

Trading assets

    51,306       3.10          795          44,388       3.07          681  

Investment securities (3):

                    

Available-for-sale securities:

                    

Securities of U.S. Treasury and federal agencies

    6,576       1.73          57          6,880       1.65          56  

Securities of U.S. states and political subdivisions

    42,661       4.32          921          38,430       4.40          844  

Mortgage-backed securities:

                    

Federal agencies

    117,055       2.90          1,695          98,705       2.77          1,365  

Residential and commercial

    27,641       6.12          845          31,726       6.48          1,028  

Total mortgage-backed securities

    144,696       3.51          2,540          130,431       3.67          2,393  

Other debt and equity securities

    48,944       3.68          895          54,634       3.71          1,008  

Total available-for-sale securities

    242,877       3.64          4,413          230,375       3.74          4,301  

Held-to-maturity securities:

                    

Securities of U.S. Treasury and federal agencies

    5,993       2.20          65          -         -            -    

Securities of U.S. states and political subdivisions

    4       5.97          -            -         -            -    

Federal agency mortgage-backed securities

    6,125       2.93          90          -         -            -    

Other debt securities

    5,807       1.88          54          -         -            -    

Total held-to-maturity securities

    17,929       2.34          209          -         -            -    

Total investment securities

    260,806       3.55          4,622          230,375       3.74          4,301  

Mortgages held for sale (4)

    17,696       4.13          365          43,367       3.45          749  

Loans held for sale (4)

    134       4.08          3          159       8.28          7  

Loans:

                    

Commercial:

                    

Commercial and industrial (5)

    196,570       3.41          3,328          183,715       3.74          3,414  

Real estate mortgage

    107,735       3.54          1,892          105,738       3.88          2,035  

Real estate construction

    17,065       4.27          361          16,508       4.93          404  

Lease financing

    11,879       5.92          352          12,381       6.72          416  

Foreign (5)

    48,364       2.30          552          41,069       2.20          448  

Total commercial (5)

    381,613       3.42          6,485          359,411       3.76          6,717  

Consumer:

                    

Real estate 1-4 family first mortgage

    259,727       4.19          5,434          252,305       4.26          5,374  

Real estate 1-4 family junior lien mortgage

    64,122       4.31          1,372          72,715       4.29          1,548  

Credit card

    26,352       12.14          1,587          24,060       12.58          1,502  

Automobile

    52,642       6.42          1,676          47,258       7.12          1,668  

Other revolving credit and installment

    42,980       5.03          1,073          41,779       4.72          977  

Total consumer

    445,823       5.02          11,142          438,117       5.08          11,069  

Total loans (4)(5)

    827,436       4.28          17,627          797,528       4.48          17,786  

Other

    4,595       5.73          131          4,203       5.37          112  

Total earning assets (5)

  $ 1,383,546       3.46         %        $ 23,848              1,248,817       3.84         %        $ 23,857  

Funding sources

                    

Deposits:

                    

Interest-bearing checking

  $ 38,506       0.07         %        $ 13          36,316       0.06         %        $ 11  

Market rate and other savings

    581,489       0.07          206          539,708       0.09          233  

Savings certificates

    39,639       0.87          171          53,887       1.23          328  

Other time deposits

    47,174       0.42          98          21,003       0.95          99  

Deposits in foreign offices

    92,650       0.14          66          69,968       0.15          51  

Total interest-bearing deposits

    799,458       0.14          554          720,882       0.20          722  

Short-term borrowings

    56,686       0.10          27          56,618       0.16          44  

Long-term debt

    156,528       1.59          1,239          126,299       2.11          1,329  

Other liabilities

    13,226       2.72          180          12,467       2.24          140  

Total interest-bearing liabilities

    1,025,898       0.39          2,000          916,266       0.49          2,235  

Portion of noninterest-bearing funding sources (5)

    357,648       -            -            332,551       -            -    

Total funding sources (5)

  $ 1,383,546       0.29                2,000          1,248,817       0.36                2,235  

Net interest margin and net interest income on a taxable-equivalent basis (5)(6)

      3.17         %        $ 21,848            3.48         %        $ 21,622  

Noninterest-earning assets

                    

Cash and due from banks

  $ 16,159                 16,372         

Goodwill

    25,668                 25,637         

Other

    119,687                 124,279         

Total noninterest-earning assets

  $ 161,514                 166,288         

Noninterest-bearing funding sources

                    

Deposits

  $ 290,004                 277,141         

Other liabilities (5)

    52,065                 59,148         

Total equity

    177,093                 162,550         

Noninterest-bearing funding sources used to fund earning assets (5)

    (357,648               (332,551       

Net noninterest-bearing funding sources

  $ 161,514                 166,288         

Total assets (5)

  $ 1,545,060                 1,415,105         

 

 

 

(1) Our average prime rate was 3.25% for the six months ended June 30, 2014 and 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.23% and 0.28% for the same periods, respectively.
(2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their respective loan categories.
(5) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information.
(6) Includes taxable-equivalent adjustments of $442 million and $373 million for the six months ended June 30, 2014 and 2013, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.


24

 

Wells Fargo & Company and Subsidiaries

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

 

 

     Quarter ended        
  

 

 

   
     June 30, 2014                  Mar. 31, 2014                  Dec. 31, 2013                  Sept. 30, 2013                  June 30, 2013        

 

   
($ in billions)    Average
balance
    Yields/
rates
                   Average
balance
    Yields/
rates
                   Average
balance
    Yields/
rates
                   Average
balance
    Yields/
rates
                   Average
balance
    Yields/
rates
        

Earning assets

                                          

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

   $ 229.8       0.28        %       $           213.3       0.27        %       $           205.3       0.28        %       $           155.9       0.31        %       $           136.5       0.33        %   

Trading assets

     54.4       3.05            48.2       3.17            45.4       3.40            44.8       3.02            46.6       2.98    

Investment securities (2):

                                          

Available-for-sale securities:

                                          

Securities of U.S. Treasury and federal agencies

     6.6       1.78            6.6       1.68            6.6       1.67            6.6       1.69            6.7       1.73    

Securities of U.S. states and political subdivisions

     42.7       4.26            42.6       4.37            42.0       4.38            40.8       4.35            39.3       4.42    

Mortgage-backed securities:

                                          

Federal agencies

     116.5       2.85            117.6       2.94            117.9       2.94            113.0       2.83            102.0       2.79    

Residential and commercial

     27.3       6.11            28.0       6.12            29.2       6.35            30.2       6.56            31.3       6.50    

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total mortgage-backed securities

     143.8       3.47            145.6       3.55            147.1       3.62            143.2       3.62            133.3       3.66    

Other debt and equity securities

     48.7       3.76            49.2       3.59            55.4       3.43            55.4       3.27            55.5       3.84    

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total available-for-sale securities

     241.8       3.62            244.0       3.65            251.1       3.65            246.0       3.61            234.8       3.77    

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Held-to-maturity securities:

                                          

Securities of U.S. Treasury and federal agencies

     10.8       2.20            1.1       2.18            -        -             -        -             -        -     

Federal agency mortgage-backed securities

     6.1       2.74            6.2       3.11            2.7       3.11            -        -             -        -     

Other debt securities

     5.2       1.90            6.4       1.86            0.1       1.99            -        -             -        -     

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total held-to-maturity securities

     22.1       2.28            13.7       2.45            2.8       3.09            -        -             -        -     

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total investment securities

     263.9       3.51            257.7       3.59            253.9       3.65            246.0       3.61            234.8       3.77    

Mortgages held for sale

     18.8       4.16            16.6       4.11            21.4       4.13            33.2       3.86            43.4       3.48    

Loans held for sale

     0.2       2.55            0.1       6.28            0.1       8.21            0.2       7.25            0.2       7.85    

Loans:

                                          

Commercial:

                                          

Commercial and industrial (3)

     199.2       3.39            193.9       3.43            189.9       3.54            185.8       3.63            184.3       3.73    

Real estate mortgage

     107.7       3.56            107.8       3.52            105.8       3.85            104.6       4.12            105.3       3.92    

Real estate construction

     17.3       4.17            16.9       4.37            16.6       4.79            16.2       4.43            16.4       5.02    

Lease financing

     11.8       5.70            11.9       6.15            11.7       5.70            11.7       5.29            12.3       6.66    

Foreign (3)

     48.8       2.39            47.9       2.21            46.6       2.24            44.8       2.09            42.3       2.23    

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total commercial (3)

     384.8       3.42            378.4       3.43            370.6       3.59            363.1       3.67            360.6       3.77    

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Consumer:

                                          

Real estate 1-4 family first mortgage

     260.0       4.20            259.5       4.17            257.2       4.15            254.1       4.20            252.6       4.23    

Real estate 1-4 family junior lien mortgage

     63.3       4.31            65.0       4.30            66.8       4.29            68.8       4.30            71.4       4.29    

Credit card

     26.4       11.97            26.2       12.32            25.9       12.23            25.0       12.45            24.0       12.55    

Automobile

     53.5       6.34            51.8       6.50            50.2       6.70            49.1       6.85            47.9       7.05    

Other revolving credit and installment

     43.0       5.07            42.9       5.00            42.6       4.94            42.0       4.83            41.9       4.74    

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total consumer

     446.2       5.02            445.4       5.02            442.7       5.01            439.0       5.04            437.8       5.05    

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total loans (3)

     831.0       4.28            823.8       4.29            813.3       4.36            802.1       4.42            798.4       4.47    

Other

     4.5       5.74            4.6       5.72            4.7       5.22            4.3       5.62            4.2       5.55    

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total earning assets (3)

   $     1,402.6       3.43             $           1,364.3       3.49             $           1,344.1       3.57             $           1,286.5       3.71             $           1,264.1       3.81          

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Funding sources

                                          

Deposits:

                                          

Interest-bearing checking

   $ 40.2       0.07             $           36.8       0.07             $           35.2       0.07             $           34.5       0.06             $           40.4       0.06          

Market rate and other savings

     583.9       0.07            579.0       0.07            568.7       0.08            553.1       0.08            541.8       0.08    

Savings certificates

     38.8       0.86            40.5       0.89            43.1       0.94            47.3       1.08            52.6       1.23    

Other time deposits

     48.5       0.41            45.8       0.42            39.7       0.48            30.4       0.62            26.0       0.76    

Deposits in foreign offices

     94.2       0.15            91.1       0.14            86.3       0.15            81.1       0.15            68.9       0.15    

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total interest-bearing deposits

     805.6       0.14            793.2       0.14            773.0       0.15            746.4       0.17            729.7       0.19    

Short-term borrowings

     58.9       0.10            54.5       0.09            52.3       0.12            53.4       0.08            57.8       0.14    

Long-term debt

     159.2       1.56            153.8       1.62            153.5       1.65            133.4       1.86            125.5       2.02    

Other liabilities

     13.6       2.73            12.9       2.72            12.8       2.70            12.1       2.64            13.3       2.25    

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total interest-bearing liabilities

     1,037.3       0.39            1,014.4       0.40            991.6       0.42            945.3       0.43            926.3       0.47    

Portion of noninterest-bearing funding sources (3)

     365.3       -             349.9       -             352.5       -             341.2       -             337.8       -     

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total funding sources (3)

   $ 1,402.6       0.28       $           1,364.3       0.29       $           1,344.1       0.30       $           1,286.5       0.32       $           1,264.1       0.34    

 

   

 

 

        

 

 

   

 

 

        

 

 

   

 

 

        

 

 

   

 

 

        

 

 

   

 

 

   

Net interest margin on a taxable-equivalent basis (3)

       3.15                    3.20                    3.27                    3.39                    3.47          
    

 

 

          

 

 

          

 

 

          

 

 

          

 

 

   

Noninterest-earning assets

                                          

Cash and due from banks

   $ 15.9              16.4              16.0              16.4              16.2      

Goodwill

     25.7              25.6              25.6              25.6              25.6      

Other

     119.8              119.6              120.0              118.4              121.3      

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total noninterest-earnings assets

   $ 161.4              161.6              161.6              160.4              163.1      

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Noninterest-bearing funding sources

                                          

Deposits

   $ 295.9              284.1              287.4              279.2              280.0      

Other liabilities (3)

     51.1              52.9              57.1              57.3              56.2      

Total equity

     179.7              174.5              169.6              165.1              164.7      

Noninterest-bearing funding sources used to fund earning assets (3)

     (365.3            (349.9            (352.5            (341.2            (337.8    

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Net noninterest-bearing funding sources

   $ 161.4              161.6              161.6              160.4              163.1      

 

          

 

 

          

 

 

          

 

 

          

 

 

     

Total assets (3)

   $ 1,564.0              1,525.9              1,505.7              1,446.9              1,427.2      

 

          

 

 

          

 

 

          

 

 

          

 

 

     

 

 

 

(1) Our average prime rate was 3.25% for quarters ended June 30, and March 31 2014, and December 31, September 30 and June 30, 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.23%, 0.24%, 0.24%, 0.26% and 0.28% for the same quarters, respectively.
(2) 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.
(3) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information.


25

 

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME

 

 
     Quarter ended June 30,      %    

Six months

ended June 30,

     %  
  

 

 

      

 

 

    
(in millions)    2014      2013       Change     2014      2013       Change  

 

 

Service charges on deposit accounts

   $ 1,283        1,248           $ 2,498        2,462        

Trust and investment fees:

                

Brokerage advisory, commissions and other fees

     2,280        2,127               4,521        4,177          

Trust and investment management

     838        829               1,682        1,628          

Investment banking

     491        538         (9)        818        891         (8)   

 

      

 

 

    

Total trust and investment fees

     3,609        3,494               7,021        6,696          

 

      

 

 

    

Card fees

     847        813               1,631        1,551          

Other fees:

                

Charges and fees on loans

     342        387         (12)        709        771         (8)   

Merchant processing fees

     183        174               355        328          

Cash network fees

     128        125               248        242          

Commercial real estate brokerage commissions

     99        73         36        171        118         45   

Letters of credit fees

     92        102         (10)        188        211         (11)   

All other fees

     244        228               464        453          

 

      

 

 

    

Total other fees

     1,088        1,089               2,135        2,123          

 

      

 

 

    

Mortgage banking:

                

Servicing income, net

     1,035        393         163        1,973        707         179   

Net gains on mortgage loan origination/sales activities

     688        2,409         (71)        1,260        4,889         (74)   

 

      

 

 

    

Total mortgage banking

     1,723        2,802         (39)        3,233        5,596         (42)   

 

      

 

 

    

Insurance

     453        485         (7)        885        948         (7)   

Net gains from trading activities

     382        331         15        814        901         (10)   

Net gains (losses) on debt securities

     71        (54)         NM         154        (9)         NM    

Net gains from equity investments

     449        203         121        1,296        316         310   

Lease income

     129        225         (43)        262        355         (26)   

Life insurance investment income

     138        142         (3)        270        287         (6)   

All other

     103        (150)         NM         86        162         (47)   

 

      

 

 

    

Total

   $ 10,275        10,628         (3)      $     20,285        21,388         (5)   

 

 

 

NM - Not meaningful

 

NONINTEREST EXPENSE

                

 

 
     Quarter ended June 30,      %    

Six months

ended June 30,

     %  
  

 

 

      

 

 

    
(in millions)    2014      2013       Change     2014      2013       Change  

 

 

Salaries

   $ 3,795        3,768           $ 7,523        7,431        

Commission and incentive compensation

     2,445        2,626         (7)        4,861        5,203         (7)   

Employee benefits

     1,170        1,118               2,542        2,701         (6)   

Equipment

     445        418               935        946         (1)   

Net occupancy

     722        716               1,464        1,435          

Core deposit and other intangibles

     349        377         (7)        690        754         (8)   

FDIC and other deposit assessments

     225        259         (13)        468        551         (15)   

Outside professional services

     646        607               1,205        1,142          

Outside data processing

     259        235         10        500        468          

Contract services

     249        226         10        483        433         12   

Travel and entertainment

     243        229               462        442          

Operating losses

     364        288         26        523        445         18   

Postage, stationery and supplies

     170        184         (8)        361        383         (6)   

Advertising and promotion

     187        183               305        288          

Foreclosed assets

     130        146         (11)        262        341         (23)   

Telecommunications

     111        125         (11)        225        248         (9)   

Insurance

     140        143         (2)        265        280         (5)   

Operating leases

     54        49         10        104        97          

All other

     490        558         (12)        964        1,067         (10)   

 

      

 

 

    

Total

   $     12,194        12,255             $ 24,142        24,655         (2)   

 

 


26

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

 

 
     Quarter ended  
  

 

 

 
(in millions)    June 30,
2014 
    

Mar. 31,

2014 

    

Dec. 31,

2013