EX-99.1 2 wfc1qer4-13x2018exx991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1


wfc011415ex991pg001ba28.jpg
wfc011415ex991pg001aa27.jpg
 
 
 
 
 
Media
 
Investors
 
 
 
 
Ancel Martinez
 
John M. Campbell
 
 
 
 
415-222-3858
 
415-396-0523
Friday, April 13, 2018
WELLS FARGO REPORTS PRELIMINARY FIRST QUARTER 2018 NET INCOME
OF $5.9 BILLION; DILUTED EPS OF $1.12
▪
Our preliminary financial results may need to be revised to reflect additional accruals for the CFPB/OCC matter, discussed on page 2, when we file our final financial statements in our Quarterly Report on Form 10-Q.
▪
Preliminary financial results:
◦
Preliminary net income of $5.9 billion, compared with $5.6 billion in first quarter 2017
◦
Diluted earnings per share (EPS) of $1.12, compared with $1.03
◦
Revenue of $21.9 billion, down from $22.3 billion
•
Net interest income of $12.2 billion, down $86 million, or 1 percent
•
Noninterest income of $9.7 billion, down $235 million, or 2 percent
◦
Average deposits of $1.3 trillion, down $2.0 billion
◦
Average loans of $951.0 billion, down $12.6 billion, or 1 percent
◦
Return on assets (ROA) of 1.26 percent, return on equity (ROE) of 12.37 percent, and return on average tangible common equity (ROTCE) of 14.75 percent1
▪
Credit quality:
◦
Provision expense of $191 million, down $414 million, or 68 percent, from first quarter 2017
•
Net charge-offs of $741 million, down $64 million
▪
Net charge-offs were 0.32 percent of average loans (annualized), down from 0.34 percent
•
Reserve release2 of $550 million, compared with a $200 million reserve release in first quarter 2017
◦
Nonaccrual loans of $7.7 billion, down $2.0 billion, or 21 percent
▪
Capital position and return:
◦
Common Equity Tier 1 ratio (fully phased-in) of 12.0 percent3
◦
Returned $4.0 billion to shareholders through common stock dividends and net share repurchases, up 30 percent from $3.1 billion in first quarter 2017
•
Net share repurchases of $2.1 billion, up 78 percent
•
Period-end common shares outstanding down 122.9 million shares
Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, including developments with respect to the resolution of regulatory matters, which could cause us to take additional accruals in the first quarter, or the discovery of additional information.
1 Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 36.
2 Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
3 See table on page 37 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules.



- 2 -

Selected Financial Information
 
 
 
Quarter ended
 
 
Mar 31,
2018

 
Dec 31,
2017

 
Mar 31,
2017

Earnings
 
 
 
 
 
Diluted earnings per common share
$
1.12

 
1.16

 
1.03

Wells Fargo net income (in billions)
5.94

 
6.15

 
5.63

Return on assets (ROA)
1.26
%
 
1.26

 
1.18

Return on equity (ROE)
12.37

 
12.47

 
11.96

Return on average tangible common equity (ROTCE) (a)
14.75

 
14.85

 
14.35

Asset Quality
 
 
 
 
 
Net charge-offs (annualized) as a % of average total loans
0.32
%
 
0.31

 
0.34

Allowance for credit losses as a % of total loans
1.19

 
1.25

 
1.28

Allowance for credit losses as a % of annualized net charge-offs
376

 
401

 
376

Other
 
 
 
 
 
Revenue (in billions)
$
21.9

 
22.1

 
22.3

Efficiency ratio (b)
64.9
%
 
76.2

 
62.0

Average loans (in billions)
$
951.0

 
951.8

 
963.6

Average deposits (in billions)
1,297.2

 
1,311.6

 
1,299.2

Net interest margin
2.84
%
 
2.84

 
2.87

(a)
Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 36.
(b)
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
SAN FRANCISCO – Wells Fargo & Company (NYSE:WFC) reported preliminary results, including net income of $5.9 billion, or $1.12 per diluted common share, for first quarter 2018, compared with $5.6 billion, or $1.03 per share, for first quarter 2017, and $6.2 billion, or $1.16 per share, for fourth quarter 2017. These preliminary results are subject to change due to our ongoing discussions with the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) to resolve matters regarding our compliance risk management program and our past practices involving certain automobile collateral protection insurance policies and certain mortgage interest rate lock extensions (the “CFPB/OCC matter”), which the CFPB and OCC have collectively offered to resolve for an aggregate of $1 billion in civil money penalties. At this time, we are unable to predict final resolution of the CFPB/OCC matter and cannot reasonably estimate our related loss contingency. Accordingly, the preliminary financial results we report today may need to be revised to reflect additional accruals for the CFPB/OCC matter when we file our final financial statements in our Quarterly Report on Form 10-Q with the SEC.
Chief Executive Officer Tim Sloan said, “I’m confident that our outstanding team will continue to transform Wells Fargo into a better, stronger company; however, we recognize that it will take time to put all of our challenges behind us. During the first quarter our team members continued to focus on our vision of satisfying our customers’ financial needs and helping them succeed financially. We also made progress on our priority of rebuilding trust with our customers, team members, communities, regulators, and shareholders. The efforts to build a better Wells Fargo during the quarter included continuing to improve our compliance and operational risk management programs, investing in innovative products and services that enhance the customer experience including the roll-out of our digital mortgage application and predictive banking service, and increasing the minimum hourly pay rate for U.S.-based team members. We also began executing on our goal to increase donations to nonprofit and community organizations by approximately 40 percent in 2018, and we’re proud that Wells Fargo was recently named number one in U.S. workplace giving for the ninth consecutive year by United Way Worldwide. In addition, we continued to


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make progress on our expense savings initiatives and remain on track to achieve our target of $4 billion in expense reductions by the end of 2019.”

Chief Financial Officer John Shrewsberry said, “Wells Fargo preliminarily reported $5.9 billion of net income in the first quarter, subject to the resolution of the CFPB/OCC matter noted in today's earnings release. Our financial results included continued strong credit performance, liquidity and capital levels. We returned $4.0 billion to shareholders through common stock dividends and net share repurchases in the first quarter, up 30 percent from a year ago. Our capital remained well above our internal target, and returning more capital to shareholders remains a priority. Our expenses in the first quarter included typically higher personnel expense; however, our noninterest expense dollar target range for full year 2018 remains unchanged.”
Net Interest Income
Net interest income in first quarter 2018 was $12.2 billion, down $75 million, compared with fourth quarter 2017, driven primarily by two fewer days in the quarter, hedge ineffectiveness accounting, and lower loan swap income related to the unwind of the receive-fixed swap portfolio, partially offset by the net repricing impact of higher interest rates.
Net interest margin was 2.84 percent, flat compared with fourth quarter 2017. The negative impact to net interest margin from hedge ineffectiveness accounting and lower loan swap income was offset by the net repricing benefit of higher interest rates.
Noninterest Income
Noninterest income in first quarter was $9.7 billion, down $41 million, compared with fourth quarter 2017. First quarter noninterest income reflected lower deposit service charges, card fees, other fees and insurance income, partially offset by higher market sensitive revenue4. First quarter results include the impact of the adoption of new accounting standards for Recognition and Measurement of Financial Assets and Financial Liabilities (Financial Instruments) and Revenue from Contracts With Customers (Revenue Recognition). See pages 17 and 18 in this Report for more information.
•
Deposit service charges of $1.2 billion were down $73 million in the first quarter primarily driven by the impact of customer-friendly changes including the first full quarter impact of Overdraft RewindSM.
•
Card fees were $908 million, down from $996 million in fourth quarter 2017, and included the impact of the new accounting standard for Revenue Recognition, which lowered card fees and reduced noninterest expense by an equal amount due to the netting of card payment network charges against related interchange and network revenues in card fees. Additionally, interchange revenue was seasonally lower in the first quarter.
•
Other fees were $800 million, compared with $913 million in fourth quarter 2017, as first quarter results included lower commercial real estate brokerage commissions.
•
Mortgage banking income was $934 million, up slightly from $928 million in fourth quarter 2017. As expected, residential mortgage loan originations declined in the first quarter, down to $43 billion, from $53 billion in the
4 Market sensitive revenue represents net gains from trading activities, debt securities, and equity securities.


- 4 -

fourth quarter. The production margin on residential held-for-sale mortgage loan originations5 was 0.94 percent, compared with 1.25 percent in the fourth quarter, due to increased price competition and a higher percentage of correspondent volume, which has lower production margins than retail originations. Net mortgage servicing income was $468 million in the first quarter, up from $262 million in the fourth quarter, driven by higher net mortgage servicing rights (MSR) valuation gains, lower unreimbursed servicing costs and lower loan payoffs.
•
Insurance income was $114 million, down $109 million from fourth quarter 2017, due to the sale of Wells Fargo Insurance Services USA, which closed in November 2017.
•
Market sensitive revenue was $1.0 billion, compared with $728 million in fourth quarter 2017. Net gains from equity securities included $250 million of gains from the impact of the new accounting standard for Financial Instruments which requires any gain or loss associated with the fair value measurement of equity securities to be reflected in earnings. In addition, net gains from trading activities were higher in first quarter 2018 due to increased trading results in Wells Fargo Securities. These increases were partially offset by lower net gains from debt securities.
•
Other income was $438 million, compared with $405 million in the fourth quarter. First quarter results included a $643 million gain from sales of $1.6 billion of purchased credit-impaired Pick-a-Pay loans and a $202 million gain from the sale of Wells Fargo Shareowner Services, which closed in February 2018. These gains were partially offset by a lower of cost or market (LOCOM) adjustment related to the previously announced sale of certain automobile loans of Reliable Financial Services Inc., as well as other mark-to-market adjustments. Fourth quarter 2017 included an $848 million gain on the sale of Wells Fargo Insurance Services USA, partially offset by $414 million of impairments on low income housing and renewable energy investments due to the Tax Cuts & Jobs Act (Tax Act).

Noninterest Expense
Noninterest expense in the first quarter was $14.2 billion, compared with $16.8 billion in the prior quarter. First quarter expenses included operating losses of $668 million, down from $3.5 billion in fourth quarter 2017, which were elevated due to litigation accruals for a variety of matters, including mortgage-related regulatory investigations, sales practices, and other consumer-related matters. First quarter expenses also included $781 million of seasonally higher employee benefits and incentive compensation expense. Other expense was higher primarily due to a reduction in other expense in fourth quarter 2017 as a result of a $117 million gain on the sale of a corporate property. Outside professional services and advertising and promotion expense, which typically decline in the first quarter, were lower compared with fourth quarter 2017. The efficiency ratio was 64.9 percent in first quarter 2018, down from 76.2 percent in the fourth quarter, driven primarily by lower operating losses.
Loans
Total average loans were $951.0 billion in the first quarter, down $798 million from the fourth quarter. Period-end loan balances were $947.3 billion at March 31, 2018, down $9.5 billion from December 31, 2017. Commercial loans were flat compared with December 31, 2017 with growth in commercial and industrial loans, largely offset by declines in commercial real estate loans. Consumer loans decreased $9.5 billion from the prior quarter, driven by:
5 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 42 for more information.


- 5 -

•
a $3.8 billion decline in automobile loans due to the reclassification of $1.6 billion to loans held for sale as a result of the previously announced sale of certain assets of Reliable Financial Services Inc., as well as expected continued runoff
•
a $1.9 billion decline in credit card balances primarily due to seasonality
•
a $1.8 billion decline in the junior lien mortgage portfolio as payoffs continued to exceed new originations
•
a $1.4 billion decline in 1-4 family first mortgage loans, driven by $1.6 billion of sales of purchased credit-impaired Pick-a-Pay loans
Period-End Loan Balances
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Commercial
$
503,396

 
503,388

 
500,150

 
505,901

 
505,004

Consumer
443,912

 
453,382

 
451,723

 
451,522

 
453,401

Total loans
$
947,308

 
956,770

 
951,873

 
957,423

 
958,405

Change from prior quarter
$
(9,462
)
 
4,897

 
(5,550
)
 
(982
)
 
(9,199
)
Debt and Equity Securities
As a result of the adoption of the new accounting standard for Financial Instruments, the balance sheet now includes more detailed disclosure of debt and equity securities.
Debt securities include debt securities available for sale and held to maturity, as well as debt securities held for trading. Debt securities were $473.0 billion at March 31, 2018, down $398 million from the fourth quarter, as approximately $13.1 billion of purchases, primarily federal agency mortgage-backed securities (MBS) in the available-for-sale portfolio, were more than offset by run-off and sales.
Net unrealized losses on available-for-sale debt securities were $(1.9) billion at March 31, 2018, compared with net unrealized gains of $1.5 billion at December 31, 2017, primarily due to higher interest rates and wider MBS spreads during the quarter.

Equity securities include marketable and non-marketable equity securities, as well as equity securities held for trading. Equity securities were $58.9 billion at March 31, 2018, down $3.6 billion from the fourth quarter, predominantly due to a decline in equity securities held for trading.
Deposits
Total average deposits for first quarter 2018 were $1.3 trillion, down $14.4 billion from the prior quarter. The decline was driven by a decrease in commercial deposits primarily from financial institutions, including a modest impact from actions the Company took to comply with the asset cap included in the consent order issued by the Board of Governors of the Federal Reserve System on February 2, 2018. Average consumer and small business banking deposits of $755.5 billion for first quarter 2018 were down $2.1 billion from the prior quarter, as growth in Community Banking deposits was more than offset by lower Wealth and Investment Management deposits. The average deposit cost for first quarter 2018 was 34 basis points, up 6 basis points from the prior quarter and 17 basis points from a year ago, primarily driven by an increase in commercial and Wealth and Investment Management deposit rates.


- 6 -

Capital
Capital in the first quarter continued to exceed our internal target, with a Common Equity Tier 1 ratio (fully phased-in) of 12.0 percent3, flat compared with the prior quarter. In first quarter 2018, the Company repurchased 50.6 million shares of its common stock, which reduced period-end common shares outstanding by 17.7 million.
Credit Quality

Net Loan Charge-offs
The quarterly loss rate was 0.32 percent (annualized), compared with 0.31 percent in the prior quarter and 0.34 percent a year ago. Commercial and consumer losses were 0.06 percent and 0.60 percent, respectively. Total credit losses were $741 million in first quarter 2018, down $10 million from fourth quarter 2017. Commercial losses were down $37 million driven by lower oil and gas portfolio losses. Consumer losses increased $27 million driven by higher automobile loan losses.
Net Loan Charge-Offs
 
Quarter ended
 
 
March 31, 2018
 
 
December 31, 2017
 
 
March 31, 2017
 
($ in millions)
Net loan 
charge- 
offs 

 
As a % of 
average 
loans (a) 

 
Net loan 
charge- 
offs 

 
As a % of 
average 
loans (a) 

 
Net loan 
charge- 
offs 

 
As a % of 
average 
loans (a) 

Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
85

 
0.10
 %
 
$
118

 
0.14
 %
 
$
171

 
0.21
 %
Real estate mortgage
(15
)
 
(0.05
)
 
(10
)
 
(0.03
)
 
(25
)
 
(0.08
)
Real estate construction
(4
)
 
(0.07
)
 
(3
)
 
(0.05
)
 
(8
)
 
(0.15
)
Lease financing
12

 
0.25

 
10

 
0.20

 
5

 
0.11

Total commercial
78

 
0.06

 
115

 
0.09

 
143

 
0.11

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
(18
)
 
(0.03
)
 
(23
)
 
(0.03
)
 
7

 
0.01

Real estate 1-4 family junior lien mortgage
(8
)
 
(0.09
)
 
(7
)
 
(0.06
)
 
23

 
0.21

Credit card
332

 
3.69

 
336

 
3.66

 
309

 
3.54

Automobile
208

 
1.64

 
188

 
1.38

 
167

 
1.10

Other revolving credit and installment
149

 
1.60

 
142

 
1.46

 
156

 
1.60

Total consumer
663

 
0.60

 
636

 
0.56

 
662

 
0.59

Total
$
741

 
0.32
 %
 
$
751

 
0.31
 %
 
$
805

 
0.34
 %
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Quarterly net charge-offs (recoveries) as a percentage of average loans are annualized. See explanation on page 34 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.



- 7 -

Nonperforming Assets
Nonperforming assets decreased $388 million, or 4 percent, from fourth quarter 2017 to $8.3 billion. Nonaccrual loans decreased $317 million from fourth quarter 2017 to $7.7 billion primarily driven by lower commercial and industrial nonaccruals reflecting continued improvement in the oil and gas portfolio, as well as continued declines in consumer real estate nonaccruals.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
 
March 31, 2018
 
 
December 31, 2017
 
 
March 31, 2017
 
($ in millions)
Total 
balances 

 
As a % of 
total 
loans 

 
Total balances 

 
As a 
% of 
total 
loans 

 
Total 
balances 

 
As a 
% of 
total 
loans 

Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
1,516

 
0.45
%
 
$
1,899

 
0.57
%
 
$
2,898

 
0.88
%
Real estate mortgage
755

 
0.60

 
628

 
0.50

 
672

 
0.51

Real estate construction
45

 
0.19

 
37

 
0.15

 
40

 
0.16

Lease financing
93

 
0.48

 
76

 
0.39

 
96

 
0.50

Total commercial
2,409

 
0.48

 
2,640

 
0.52

 
3,706

 
0.73

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
4,053

 
1.43

 
4,122

 
1.45

 
4,743

 
1.73

Real estate 1-4 family junior lien mortgage
1,087

 
2.87

 
1,086

 
2.73

 
1,153

 
2.60

Automobile
117

 
0.24

 
130

 
0.24

 
101

 
0.17

Other revolving credit and installment
53

 
0.14

 
58

 
0.15

 
56

 
0.14

Total consumer
5,310

 
1.20

 
5,396

 
1.19

 
6,053

 
1.34

Total nonaccrual loans
7,719

 
0.81

 
8,036

 
0.84

 
9,759

 
1.02

Foreclosed assets:
 
 
 
 
 
 
 
 
 
 
 
Government insured/guaranteed
103

 
 
 
120

 
 
 
179

 
 
Non-government insured/guaranteed
468

 
 
 
522

 
 
 
726

 
 
Total foreclosed assets
571

 
 
 
642

 
 
 
905

 
 
Total nonperforming assets
$
8,290

 
0.88
%
 
$
8,678

 
0.91
%
 
$
10,664

 
1.11
%
Change from prior quarter:
 
 
 
 
 
 
 
 
 
 
 
Total nonaccrual loans
$
(317
)
 
 
 
$
(583
)
 
 
 
$
(625
)
 
 
Total nonperforming assets
(388
)
 
 
 
(647
)
 
 
 
(698
)
 
 
 

Allowance for Credit Losses
The allowance for credit losses, including the allowance for unfunded commitments, totaled $11.3 billion at March 31, 2018, down $647 million from December 31, 2017. “Credit performance remained strong in the first quarter,” said Chief Risk Officer Mike Loughlin. “We released $550 million from the allowance for credit losses. Approximately $400 million of the release was driven by a reduction in allowance previously held for hurricane-related losses. The remainder of the release was due to continued improvement in residential real estate, both in first and junior lien mortgage loan portfolios, and lower loan balances.” The allowance coverage for total loans was 1.19 percent, compared with 1.25 percent in fourth quarter 2017. The allowance covered 3.8 times annualized first quarter net charge-offs, compared with 4.0 times in the prior quarter. The allowance coverage for nonaccrual loans was 147 percent at March 31, 2018, compared with 149 percent at December 31, 2017. The Company believes the allowance was appropriate for losses inherent in the loan portfolio at March 31, 2018.




- 8 -

Business Segment Performance
Financial information for our operating segments reflect revisions to our previously reported amounts to reflect a change, adopted in first quarter 2018, in our methodology for assigning funding charges and credits to our lines of business and for reclassifications made in connection with the adoption a new accounting standard for Financial Instruments. See pages 17 and 18 in this Report for more information.

Wells Fargo defines its operating segments by product type and customer segment. Segment net income for each of the three business segments was:
 
Quarter ended 
 
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Mar 31,
2017

Community Banking
$
2,713

 
3,472

 
2,824

Wholesale Banking
2,875

 
2,373

 
2,485

Wealth and Investment Management
714

 
675

 
665


Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and automobile, student, mortgage, home equity and small business lending, as well as referrals to Wholesale Banking and Wealth and Investment Management business partners. The Community Banking segment also includes the results of our Corporate Treasury activities net of allocations in support of the other operating segments and results of investments in our affiliated venture capital partnerships.
Selected Financial Information
 
Quarter ended 
 
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Mar 31,
2017

Total revenue
$
11,830

 
11,720

 
11,823

Provision for credit losses
218

 
636

 
646

Noninterest expense
7,902

 
10,216

 
7,281

Segment net income
2,713

 
3,472

 
2,824

(in billions)
 
 
 
 
 
Average loans
470.5

 
473.2

 
480.7

Average assets
1,061.9

 
1,073.2

 
1,095.8

Average deposits
747.5

 
738.3

 
717.8


Community Banking reported net income of $2.7 billion, down $759 million, or 22 percent, from fourth quarter 2017. The decline in net income from fourth quarter 2017 was primarily driven by the inclusion in the fourth quarter of the benefit of the estimated impact of the Tax Act to the Company. Revenue in the first quarter was $11.8 billion, up $110 million, or 1 percent, from fourth quarter 2017, and included a gain on sales of Pick-a-Pay loans and higher market sensitive revenue, partially offset by lower net interest income, card fees, and service charges on deposit accounts. Noninterest expense decreased $2.3 billion, or 23 percent, compared with fourth quarter 2017, driven primarily by a decline in litigation accruals, partially offset by seasonally higher personnel expense. The provision for credit losses decreased $418 million from the prior quarter.
Net income was down $111 million, or 4 percent, from first quarter 2017 due to higher expenses, partially offset by a lower provision for credit losses and the lower income tax rate. Revenue was flat compared with a year ago due to higher net interest income, a gain on sales of Pick-a-Pay loans, higher market sensitive revenue, and higher trust


- 9 -

and investment fees, offset by lower mortgage banking revenue and service charges on deposit accounts. Noninterest expense increased $621 million, or 9 percent, from a year ago primarily driven by higher operating losses and personnel expense. The provision for credit losses decreased $428 million from a year ago.

Retail Banking and Consumer Payments, Virtual Solutions and Innovation
•
Nearly 387,000 branch customer experience surveys completed during first quarter 2018, with ‘Loyalty’ scores reaching their highest levels since August 2016, while ‘Overall Satisfaction with Most Recent Visit’ scores continued to improve from the prior quarter
•
5,805 retail bank branches as of the end of first quarter 2018, reflecting 58 branch consolidations in the quarter
•
Primary consumer checking customers6,7 up 0.9 percent year-over-year
•
Debit card point-of-sale purchase volume8 of $81.8 billion in first quarter, up 8 percent year-over-year
•
Credit card point-of-sale purchase volume of $17.4 billion in first quarter, up 8 percent year-over-year
•
28.8 million digital (online and mobile) active customers, including 21.8 million mobile active users7, 9
•
Dynatrace's Mobile Banking Scorecard named Wells Fargo's mobile app #1 in Overall Performance, Functionality, and Quality and Availability (March 2018)
•
In March, Barlow Research awarded Wells Fargo Gateway "Overall Most Innovative" in its 2018 Monarch Innovation Awards
Consumer Lending
•
Home Lending
◦
Originations of $43 billion, down from $53 billion in prior quarter, primarily due to seasonality
◦
Applications of $58 billion, down from $63 billion in prior quarter, primarily due to seasonality
◦
Application pipeline of $24 billion at quarter end, up from $23 billion at December 31, 2017
•
Automobile originations of $4.4 billion in first quarter, up 2 percent compared with prior quarter; and down 20 percent from prior year, as proactive steps to tighten underwriting standards resulted in lower origination volume

6 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
7 Data as of February 2018, comparisons with February 2017.
8 Combined consumer and business debit card purchase volume dollars.
9 Primarily includes retail banking, consumer lending, small business and business banking customers.


- 10 -

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include Business Banking, Commercial Real Estate, Corporate Banking, Financial Institutions Group, Government and Institutional Banking, Middle Market Banking, Principal Investments, Treasury Management, Wells Fargo Commercial Capital, and Wells Fargo Securities.
Selected Financial Information
 
Quarter ended
 
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Mar 31,
2017

Total revenue
$
7,279

 
7,440

 
7,577

Provision (reversal of provision) for credit losses
(20
)
 
20

 
(43
)
Noninterest expense
3,978

 
4,187

 
4,167

Segment net income
2,875

 
2,373

 
2,485

(in billions)
 
 
 
 
 
Average loans
465.1

 
463.5

 
468.3

Average assets
829.2

 
837.2

 
810.5

Average deposits
446.0

 
465.7

 
465.3


Wholesale Banking reported net income of $2.9 billion, up $502 million, or 21 percent, from fourth quarter 2017. First quarter results benefited from the reduced income tax rate. Revenue of $7.3 billion decreased $161 million, or 2 percent, compared with the prior quarter, due to lower net interest income, lower commercial real estate brokerage fees, lower insurance income related to the sale of Wells Fargo Insurance Services USA (WFIS), and the gain on the sale of WFIS recognized in fourth quarter 2017, partially offset by the gain on the sale of Wells Fargo Shareowner Services recognized in the first quarter and higher market sensitive revenue. Fourth quarter 2017 also included impairments on low income housing and tax-advantaged renewable energy investments due to the Tax Act. Noninterest expense decreased $209 million, or 5 percent, from the prior quarter reflecting two less months of WFIS operating expenses and lower operating losses, partially offset by seasonally higher personnel expenses. The provision for credit losses decreased $40 million from the prior quarter.
Net income increased $390 million, or 16 percent, from first quarter 2017 and benefited from the lower income tax rate. Revenue decreased $298 million, or 4 percent, from first quarter 2017, on lower net interest income, the impact of the sale of WFIS in fourth quarter 2017, lower mortgage banking fees, and lower operating lease income, partially offset by the gain related to the sale of Wells Fargo Shareowner Services. Noninterest expense decreased $189 million, or 5 percent, from a year ago reflecting the sale of WFIS, partially offset by higher regulatory, risk, cyber and technology expenses. The provision for credit losses increased $23 million from a year ago.


- 11 -

Wealth and Investment Management (WIM) provides a full range of personalized wealth management, investment and retirement products and services to clients across U.S. based businesses including Wells Fargo Advisors, The Private Bank, Abbot Downing, Wells Fargo Institutional Retirement and Trust, and Wells Fargo Asset Management. We deliver financial planning, private banking, credit, investment management and fiduciary services to high-net worth and ultra-high-net worth individuals and families. We also serve customers’ brokerage needs, supply retirement and trust services to institutional clients and provide investment management capabilities delivered to global institutional clients through separate accounts and the Wells Fargo Funds.
Selected Financial Information
 
Quarter ended
 
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Mar 31,
2017

Total revenue
$
4,242

 
4,333

 
4,257

Reversal of provision for credit losses
(6
)
 
(7
)
 
(4
)
Noninterest expense
3,290

 
3,246

 
3,204

Segment net income
714

 
675

 
665

(in billions)
 
 
 
 
 
Average loans
73.9

 
72.9

 
70.7

Average assets
84.2

 
83.7

 
81.8

Average deposits
177.9

 
184.1

 
197.5


Wealth and Investment Management reported net income of $714 million, up $39 million, or 6 percent, from fourth quarter 2017. First quarter results benefited from the reduced income tax rate. Revenue of $4.2 billion decreased $91 million, or 2 percent, from the prior quarter, primarily due to lower gains on deferred compensation plan investments (offset in employee benefits expense), lower net interest income, and lower transaction revenue, partially offset by higher asset-based fees. Noninterest expense increased $44 million, or 1 percent, from the prior quarter, primarily driven by seasonally higher personnel expenses, partially offset by lower non-personnel expense and lower deferred compensation plan expense (offset in gains on equity securities).
Net income was up $49 million, or 7 percent, from first quarter 2017 and benefited from the lower income tax rate. Revenue decreased $15 million from a year ago primarily driven by lower gains on deferred compensation plan investments (offset in employee benefits expense), lower transaction revenue, lower net interest income, and lower other revenue, partially offset by higher asset-based fees. Noninterest expense increased $86 million, or 3 percent, from a year ago, primarily due to higher broker commissions, higher regulatory, risk, cyber and technology expenses, and higher other personnel expense, partially offset by lower deferred compensation plan expense (offset in gains on equity securities).
•
WIM total client assets of $1.9 trillion, up 4 percent from a year ago, driven by higher market valuations
•
Continued loan growth, with average balances up 5 percent from a year ago largely due to growth in non-conforming mortgage loans
•
First quarter 2018 average closed referred investment assets (referrals resulting from the WIM/Community Banking partnership) were up 5 percent compared with the prior quarter and up 6 percent from a year ago



- 12 -

Retail Brokerage 
•
Client assets of $1.6 trillion, up 4 percent from prior year
•
Advisory assets of $540 billion, up 10 percent from prior year, primarily driven by higher market valuations and positive net flows

Wealth Management
•
Client assets of $242 billion, up 2 percent from prior year

Asset Management
•
Total assets under management of $497 billion, up 3 percent from prior year, driven by higher market valuations, positive money market and fixed income net flows, partially offset by equity net outflows

Retirement
•
IRA assets of $403 billion, up 5 percent from prior year
•
Institutional Retirement plan assets of $386 billion, up 7 percent from prior year


Conference Call
The Company will host a live conference call on Friday, April 13, at 7:00 a.m. PT (10:00 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 440-424-4922 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/
and https://engage.vevent.com/rt/wells_fargo_ao~1293006.

A replay of the conference call will be available beginning at 10:00 a.m. PT (1:00 p.m. ET) on Friday, April 13 through Friday, April 27. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #1293006. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~1293006.





- 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 levels; (iv) the appropriateness of the allowance for credit losses; (v) our expectations regarding net interest income and net interest margin; (vi) loan growth or the reduction or mitigation of risk in our loan portfolios; (vii) future capital or liquidity levels or targets and our estimated Common Equity Tier 1 ratio under Basel III capital standards; (viii) the performance of our mortgage business and any related exposures; (ix) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (x) future common stock dividends, common share repurchases and other uses of capital; (xi) our targeted range for return on assets and return on equity; (xii) the outcome of contingencies, such as legal proceedings; and (xiii) the Company’s plans, objectives and strategies.
Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:
 
•
current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters (including the impact of the Tax Cuts & Jobs Act), geopolitical matters, and the overall slowdown in global economic growth;
•
our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
•
financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
•
the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;
•
the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;
•
negative effects relating to our mortgage servicing and foreclosure practices, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;
•
resolution of regulatory matters, including the claims pending against us from the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency regarding our compliance risk management program and our past practices involving certain automobile collateral protection insurance policies and certain mortgage interest rate lock extensions;
•
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;
•
significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our debt securities and equity securities portfolios;
•
the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
•
negative effects from the retail banking sales practices matter and from other instances where customers may have experienced financial harm, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, and our reputation;
•
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, 2017.
In addition to the above factors, we also caution that the amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of the Company, market conditions, capital requirements (including under Basel capital standards), common stock issuance requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company’s Board of Directors, and may be subject to regulatory approval or conditions.
For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.
Any forward-looking statement made by us speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.


- 15 -

About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investments, mortgage, and consumer and commercial finance through 8,200 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 42 countries and territories to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2017 rankings of America’s largest corporations.

# # #




- 16 -

Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS
 
 
 
 
Pages
 
 
Summary Information
 
Significant Accounting and Presentation Changes
 
 
Income
 
 
 
Balance Sheet
 
Trading Activities
Equity Securities
 
 
Loans
 
Changes in Allowance for Credit Losses
 
 
Equity
 
Tangible Common Equity
 
 
Operating Segments
 
 
 
Other
 


- 17 -

SIGNIFICANT ACCOUNTING AND PRESENTATION CHANGES
Following is a discussion of key accounting and presentation changes in first quarter 2018 that resulted from adoption of new accounting standards and a change in our methodology for measuring operating segment results. Prior periods have been revised as appropriate for these changes to maintain comparability.

Accounting Standards Adopted in 2018
In first quarter 2018, we adopted the following new accounting guidance:
•
Accounting Standards Update (ASU or Update) 2016-18 - Statement of Cash Flows (Topic 230): Restricted Cash
•
ASU 2016-04 - Liabilities - Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products;
•
ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities; and
•
ASU 2014-09 - Revenue from Contracts With Customers (Topic 606) and subsequent related Updates.

In connection with the adoption of ASU 2016-18 we have changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

ASU 2016-04 modifies the accounting for certain prepaid card products to require the recognition of breakage. Breakage represents the estimated amount that will not be redeemed by the cardholder for goods or services. Upon adoption, we recorded a cumulative-effect adjustment that increased retained earnings, given estimated breakage, by $26 million.

ASU 2016-01 changes the accounting for certain equity investments to record at fair value with unrealized gains or losses reflected in earnings, as well as improve the disclosures of equity investments and the fair value of financial instruments.
We adopted the Update in first quarter 2018 and recorded a cumulative-effect adjustment as of January 1, 2018, that increased retained earnings by $106 million as a result of a transition adjustment to reclassify $118 million in net unrealized gains from other comprehensive income to retained earnings, partially offset by a transition adjustment to decrease retained earnings by $12 million to adjust the carrying value of our auction rate securities from cost to fair value. No transition adjustment was recorded for investments changed to the measurement alternative (described below), which was applied prospectively.
As a result of adopting this ASU, our investments in marketable equity securities, including those previously classified as available-for-sale, are now accounted for at fair value with unrealized gains or losses reflected in earnings. Additionally, our share of unrealized gains or losses of marketable equity securities held by investees in our nonmarketable equity securities accounted for using the equity method are now reflected in earnings. Prior to adoption, such unrealized gains and losses were reflected in other comprehensive income. Our investments in nonmarketable equity securities previously accounted for under the cost method of accounting, except for federal bank stock, are now accounted for either at fair value with unrealized gains and losses reflected in earnings or using the measurement alternative. The measurement alternative is similar to the cost method of accounting, except the carrying value is adjusted through earnings for impairment, if any, and changes in observable and orderly transactions in the same or similar investment. We now account for substantially all of our private equity investments using the measurement alternative, except for those accounted for using the equity method of accounting. Our auction rate securities portfolio is now accounted for at fair value with unrealized gains or losses reflected in earnings.
In connection with our adoption of this Update, we have modified our balance sheet and income statement presentation to report marketable and nonmarketable equity securities and their results separately from debt securities by now reporting all equity securities in a new line labeled “Equity securities” in both the balance sheet and income statement. Additionally we now report loans held for trading purposes in loans held for sale and have reclassified net gains and losses on marketable equity securities used as economic hedges of deferred compensation obligations from “Net gains for trading activities” to “Net gains from equity securities”. All prior periods have been revised to conform to these changes in reporting.

The following table provides a summary of our reporting changes implemented in connection with our adoption of ASU 2016-01.
Financial instrument or transaction type
As previously reported
Revised reporting
Balance Sheet
 
 
   Marketable equity securities
Trading assets and available for sale investment securities
Equity securities (new caption)
   Nonmarketable equity securities
Other assets
Equity securities (new caption)
   Loans held for trading
Trading assets
Loans held for sale
   Debt securities held for trading
Trading assets
Debt securities (formerly “Investment securities”)
 
 
 
Income Statement
 
 
   Interest income:
 
 
      Marketable equity securities
Trading assets and investment securities
Equity securities (new caption)
      Nonmarketable equity securities
Other
Equity securities (new caption)
      Loans held for trading
Trading assets
Loans held for sale
      Debt securities held for trading
Trading assets
Debt securities (formerly “Investment securities”)
   Noninterest income:
 
 
      Deferred compensation gains (1)
Net gains from trading activities
Net gains from equity securities
(1)
Reclassification of net gains and losses on marketable equity securities economically hedging our deferred compensation obligations.



- 18 -

The following table illustrates the changes to the balance sheet as of December 31, 2017, and related consolidated statement of income for the year ended December 31, 2017, in connection with our adoption of ASU 2016-01.
 
 
Reclassification adjustments
 
 
(in millions)
As previously reported

Debt securities

Marketable equity securities

Nonmarketable equity securities

Loans held for trading

Revised reporting

Change in balance

Balance sheet as of December 31, 2017:
 
 
 
 
 
 
 
Trading assets
$
92,329

(57,624
)
(33,682
)
—

(1,023
)
—

(92,329
)
Debt securities:
 
 
 
 
 
 
 
Trading
—

57,624

—

—

—

57,624

57,624

Available for sale
277,085

—

(678
)
—

—

276,407

(678
)
Loans held for sale
108

—

—

—

1,023

1,131

1,023

Equity securities
—

—

34,360

28,137

—

62,497

62,497

Other assets
118,381

—

—

(28,137
)
—

90,244

(28,137
)
Total impact to assets
 
—

—

—

—

 
—

 
 
 
 
 
 
 
 
Income statement for the year ended December 31, 2017:
 
 
 
 
 
 
 
Interest income:
 
 
 
 
 
 
 
Trading assets
2,928

(2,313
)
(577
)
—

(38
)
—

(2,928
)
Debt securities
10,664

2,313

(31
)
—

—

12,946

2,282

Loans held for sale
12

—

—

—

38

50

38

Equity securities
—

—

608

191

—

799

799

Other
3,131

—

—

(191
)
—

2,940

(191
)
Total impact to interest income
 
—

—

—

—

 
—

 
 
 
 
 
 
 
 
Noninterest income:
 
 
 
 
 
 
 
Net gains from trading activities
1,053

—

(511
)
—

—

542

(511
)
Net gains from equity securities
1,268

—

511

—

—

1,779

511

Total impact to noninterest income
 
—

—

—

—

 
—



ASU 2014-09 modifies the guidance used to recognize revenue from contracts with customers for transfers of goods or services and transfers of non-financial assets, unless those contracts are within the scope of other guidance. Upon adoption, we recorded a cumulative-effect adjustment that decreased retained earnings by $44 million, due to changes in the timing of revenue for corporate trust services that are provided over the life of the associated trust. In addition, we changed the presentation of some costs such that underwriting expenses of our broker-dealer business that were previously netted against revenue are now included in noninterest expense, and card payment network charges that were previously included in noninterest expense are now netted against card fee revenue.

Operating Segment Financial Information Changes
Financial information for our operating segments presented in this Report reflect revisions to our previously reported amounts to reflect a change, adopted in first quarter 2018, in our methodology for assigning funding charges and credits to our lines of business and for the reclassifications made in connection with the adoption of ASU 2016-01. Effective first quarter 2018, assets and liabilities will receive a funding charge or credit that considers interest rate risk, liquidity risk, and other product characteristics on a more granular level. This methodology change affects results across all three of our reportable operating segments. Our previously reported consolidated financial results were not impacted by the methodology change; however, in connection with the adoption of ASU 2016-01, certain reclassifications will occur within noninterest income.




- 19 -

Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
 
Quarter ended
 
 
% Change
Mar 31, 2018 from
 
($ in millions, except per share amounts)
Mar 31,
2018

 
Dec 31,
2017

 
Mar 31,
2017

 
Dec 31,
2017

 
Mar 31,
2017

For the Period
 
 
 
 
 
 
 
 
 
Wells Fargo net income
$
5,936

 
6,151

 
5,634

 
(3
)%
 
5

Wells Fargo net income applicable to common stock
5,533

 
5,740

 
5,233

 
(4
)
 
6

Diluted earnings per common share
1.12

 
1.16

 
1.03

 
(3
)
 
9

Profitability ratios (annualized):
 
 
 
 
 
 


 


Wells Fargo net income to average assets (ROA)
1.26
%
 
1.26

 
1.18

 
—

 
7

Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)
12.37

 
12.47

 
11.96

 
(1
)
 
3

Return on average tangible common equity (ROTCE)(1)
14.75

 
14.85

 
14.35

 
(1
)
 
3

Efficiency ratio (2)
64.9

 
76.2

 
62.0

 
(15
)
 
5

Total revenue
$
21,934

 
22,050

 
22,255

 
(1
)
 
(1
)
Pre-tax pre-provision profit (PTPP) (3)
7,692

 
5,250

 
8,463

 
47

 
(9
)
Dividends declared per common share
0.39

 
0.39

 
0.38

 
—

 
3

Average common shares outstanding
4,885.7

 
4,912.5

 
5,008.6

 
(1
)
 
(2
)
Diluted average common shares outstanding
4,930.7

 
4,963.1

 
5,070.4

 
(1
)
 
(3
)
Average loans
$
951,024

 
951,822

 
963,645

 
—

 
(1
)
Average assets
1,915,896

 
1,935,318

 
1,931,040

 
(1
)
 
(1
)
Average total deposits
1,297,178

 
1,311,592

 
1,299,191

 
(1
)
 
—

Average consumer and small business banking deposits (4)
755,483

 
757,541

 
758,754

 
—

 
—

Net interest margin
2.84
%
 
2.84

 
2.87

 
—

 
(1
)
At Period End
 
 
 
 
 
 


 


Debt securities (5)
$
472,968

 
473,366

 
456,969

 
—

 
4

Loans
947,308

 
956,770

 
958,405

 
(1
)
 
(1
)
Allowance for loan losses
10,373

 
11,004

 
11,168

 
(6
)
 
(7
)
Goodwill
26,445

 
26,587

 
26,666

 
(1
)
 
(1
)
Equity securities (5)
58,935

 
62,497

 
56,991

 
(6
)
 
3

Assets
1,915,388

 
1,951,757

 
1,951,501

 
(2
)
 
(2
)
Deposits
1,303,689

 
1,335,991

 
1,325,444

 
(2
)
 
(2
)
Common stockholders' equity
181,950

 
183,134

 
178,209

 
(1
)
 
2

Wells Fargo stockholders’ equity
205,752

 
206,936

 
201,321

 
(1
)
 
2

Total equity
206,710

 
208,079

 
202,310

 
(1
)
 
2

Tangible common equity (1)
152,678

 
153,730

 
148,671

 
(1
)
 
3

Common shares outstanding
4,873.9

 
4,891.6

 
4,996.7

 
—

 
(2
)
Book value per common share (6)
$
37.33

 
37.44

 
35.67

 
—

 
5

Tangible book value per common share (1)(6)
31.33

 
31.43

 
29.75

 
—

 
5

Common stock price:

 
 
 
 
 


 


High
66.31

 
62.24

 
59.99

 
7

 
11

Low
50.70

 
52.84

 
53.35

 
(4
)
 
(5
)
Period end
52.41

 
60.67

 
55.66

 
(14
)
 
(6
)
Team members (active, full-time equivalent)
265,700

 
262,700

 
272,800

 
1

 
(3
)
(1)
Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 36.
(2)
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(3)
Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(4)
Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(5)
Financial information for prior quarters has been revised to reflect the impact of the adoption of Accounting Standards Update (ASU) 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.
(6)
Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.



- 20 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
 
Quarter ended
 
($ in millions, except per share amounts)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

For the Quarter
 
 
 
 
 
 
 
 
 
Wells Fargo net income
$
5,936

 
6,151

 
4,542

 
5,856

 
5,634

Wells Fargo net income applicable to common stock
5,533

 
5,740

 
4,131

 
5,450

 
5,233

Diluted earnings per common share
1.12

 
1.16

 
0.83

 
1.08

 
1.03

Profitability ratios (annualized) :
 
 
 
 
 
 
 
 
 
Wells Fargo net income to average assets (ROA)
1.26
%
 
1.26

 
0.93

 
1.22

 
1.18

Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)
12.37

 
12.47

 
8.96

 
12.06

 
11.96

Return on average tangible common equity (ROTCE)(1)
14.75

 
14.85

 
10.66

 
14.41

 
14.35

Efficiency ratio (2)
64.9

 
76.2

 
65.7

 
60.9

 
62.0

Total revenue
$
21,934

 
22,050

 
21,849

 
22,235

 
22,255

Pre-tax pre-provision profit (PTPP) (3)
7,692

 
5,250

 
7,498

 
8,694

 
8,463

Dividends declared per common share
0.39

 
0.39

 
0.39

 
0.38

 
0.38

Average common shares outstanding
4,885.7

 
4,912.5

 
4,948.6

 
4,989.9

 
5,008.6

Diluted average common shares outstanding
4,930.7

 
4,963.1

 
4,996.8

 
5,037.7

 
5,070.4

Average loans
$
951,024

 
951,822

 
952,343

 
956,879

 
963,645

Average assets
1,915,896

 
1,935,318

 
1,938,461

 
1,927,021

 
1,931,040

Average total deposits
1,297,178

 
1,311,592

 
1,306,356

 
1,301,195

 
1,299,191

Average consumer and small business banking deposits (4)
755,483

 
757,541

 
755,094

 
760,149

 
758,754

Net interest margin
2.84
%
 
2.84

 
2.86

 
2.90

 
2.87

At Quarter End
 
 
 
 
 
 
 
 
 
Debt securities (5)
$
472,968

 
473,366

 
474,710

 
462,890

 
456,969

Loans
947,308

 
956,770

 
951,873

 
957,423

 
958,405

Allowance for loan losses
10,373

 
11,004

 
11,078

 
11,073

 
11,168

Goodwill
26,445

 
26,587

 
26,581

 
26,573

 
26,666

Equity securities (5)
58,935

 
62,497

 
54,981

 
55,742

 
56,991

Assets
1,915,388

 
1,951,757

 
1,934,880

 
1,930,792

 
1,951,501

Deposits
1,303,689

 
1,335,991

 
1,306,706

 
1,305,830

 
1,325,444

Common stockholders' equity
181,950

 
183,134

 
181,920

 
181,233

 
178,209

Wells Fargo stockholders’ equity
205,752

 
206,936

 
205,722

 
205,034

 
201,321

Total equity
206,710

 
208,079

 
206,617

 
205,949

 
202,310

Tangible common equity (1)
152,678

 
153,730

 
152,694

 
151,868

 
148,671

Common shares outstanding
4,873.9

 
4,891.6

 
4,927.9

 
4,966.8

 
4,996.7

Book value per common share (6)
$
37.33

 
37.44

 
36.92

 
36.49

 
35.67

Tangible book value per common share (1)(6)
31.33

 
31.43

 
30.99

 
30.58

 
29.75

Common stock price:
 
 
 
 
 
 
 
 
 
High
66.31

 
62.24

 
56.45

 
56.60

 
59.99

Low
50.70

 
52.84

 
49.28

 
50.84

 
53.35

Period end
52.41

 
60.67

 
55.15

 
55.41

 
55.66

Team members (active, full-time equivalent)
265,700

 
262,700

 
268,000

 
270,600

 
272,800

(1)
Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 36.
(2)
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(3)
Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(4)
Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(5)
Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.
(6)
Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.


- 21 -

Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
 
Quarter ended March 31,
 
 
%

(in millions, except per share amounts)
2018

 
2017

 
Change

Interest income
 
 
 
 
 
Debt securities (1)
$
3,414

 
3,173

 
8
 %
Mortgages held for sale
179

 
182

 
(2
)
Loans held for sale (1)
24

 
10

 
140

Loans
10,579

 
10,141

 
4

Equity securities (1)
231

 
175

 
32

Other interest income
920

 
532

 
73

Total interest income
15,347

 
14,213

 
8

Interest expense
 
 
 
 
 
Deposits
1,090

 
536

 
103

Short-term borrowings
311

 
114

 
173

Long-term debt
1,576

 
1,147

 
37

Other interest expense
132

 
92

 
43

Total interest expense
3,109

 
1,889

 
65

Net interest income
12,238

 
12,324

 
(1
)
Provision for credit losses
191

 
605

 
(68
)
Net interest income after provision for credit losses
12,047

 
11,719

 
3

Noninterest income
 
 
 
 
 
Service charges on deposit accounts
1,173

 
1,313

 
(11
)
Trust and investment fees
3,683

 
3,570

 
3

Card fees
908

 
945

 
(4
)
Other fees
800

 
865

 
(8
)
Mortgage banking
934

 
1,228

 
(24
)
Insurance
114

 
277

 
(59
)
Net gains from trading activities (1)
243

 
272

 
(11
)
Net gains on debt securities
1

 
36

 
(97
)
Net gains from equity securities (1)
783

 
570

 
37

Lease income
455

 
481

 
(5
)
Other
602

 
374

 
61

Total noninterest income
9,696

 
9,931

 
(2
)
Noninterest expense
 
 
 
 
 
Salaries
4,363

 
4,261

 
2

Commission and incentive compensation
2,768

 
2,725

 
2

Employee benefits
1,598

 
1,686

 
(5
)
Equipment
617

 
577

 
7

Net occupancy
713

 
712

 
—

Core deposit and other intangibles
265

 
289

 
(8
)
FDIC and other deposit assessments
324

 
333

 
(3
)
Other
3,594

 
3,209

 
12

Total noninterest expense
14,242

 
13,792

 
3

Income before income tax expense
7,501

 
7,858

 
(5
)
Income tax expense
1,374

 
2,133

 
(36
)
Net income before noncontrolling interests
6,127

 
5,725

 
7

Less: Net income from noncontrolling interests
191

 
91

 
110

Wells Fargo net income
$
5,936

 
5,634

 
5

Less: Preferred stock dividends and other
403

 
401

 
—

Wells Fargo net income applicable to common stock
$
5,533

 
5,233

 
6

Per share information
 
 
 
 
 
Earnings per common share
$
1.13

 
1.05

 
8

Diluted earnings per common share
1.12

 
1.03

 
9

Dividends declared per common share
0.390

 
0.380

 
3

Average common shares outstanding
4,885.7

 
5,008.6

 
(2
)
Diluted average common shares outstanding
4,930.7

 
5,070.4

 
(3
)
(1)
Financial information for the prior quarter has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.


- 22 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
 
Quarter ended
 
(in millions, except per share amounts)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Interest income
 
 
 
 
 
 
 
 
 
Debt securities (1)
$
3,414

 
3,294

 
3,253

 
3,226

 
3,173

Mortgages held for sale
179

 
196

 
217

 
191

 
182

Loans held for sale (1)
24

 
12

 
15

 
13

 
10

Loans
10,579

 
10,367

 
10,522

 
10,358

 
10,141

Equity securities (1)
231

 
239

 
186

 
199

 
175

Other interest income
920

 
850

 
851

 
707

 
532

Total interest income
15,347

 
14,958

 
15,044

 
14,694

 
14,213

Interest expense
 
 
 
 
 
 
 
 
 
Deposits
1,090

 
931

 
869

 
677

 
536

Short-term borrowings
311

 
255

 
226

 
163

 
114

Long-term debt
1,576

 
1,344

 
1,391

 
1,275

 
1,147

Other interest expense
132

 
115

 
109

 
108

 
92

Total interest expense
3,109

 
2,645

 
2,595

 
2,223

 
1,889

Net interest income
12,238

 
12,313

 
12,449

 
12,471

 
12,324

Provision for credit losses
191

 
651

 
717

 
555

 
605

Net interest income after provision for credit losses
12,047

 
11,662

 
11,732

 
11,916

 
11,719

Noninterest income
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
1,173

 
1,246

 
1,276

 
1,276

 
1,313

Trust and investment fees
3,683

 
3,687

 
3,609

 
3,629

 
3,570

Card fees
908

 
996

 
1,000

 
1,019

 
945

Other fees
800

 
913

 
877

 
902

 
865

Mortgage banking
934

 
928

 
1,046

 
1,148

 
1,228

Insurance
114

 
223

 
269

 
280

 
277

Net gains (losses) from trading activities (1)
243

 
(1
)
 
120

 
151

 
272

Net gains on debt securities
1

 
157

 
166

 
120

 
36

Net gains from equity securities (1)
783

 
572

 
363

 
274

 
570

Lease income
455

 
458

 
475

 
493

 
481

Other
602

 
558

 
199

 
472

 
374

Total noninterest income
9,696

 
9,737

 
9,400

 
9,764

 
9,931

Noninterest expense
 
 
 
 
 
 
 
 
 
Salaries
4,363

 
4,403

 
4,356

 
4,343

 
4,261

Commission and incentive compensation
2,768

 
2,665

 
2,553

 
2,499

 
2,725

Employee benefits
1,598

 
1,293

 
1,279

 
1,308

 
1,686

Equipment
617

 
608

 
523

 
529

 
577

Net occupancy
713

 
715

 
716

 
706

 
712

Core deposit and other intangibles
265

 
288

 
288

 
287

 
289

FDIC and other deposit assessments
324

 
312

 
314

 
328

 
333

Other
3,594

 
6,516

 
4,322

 
3,541

 
3,209

Total noninterest expense
14,242

 
16,800

 
14,351

 
13,541

 
13,792

Income before income tax expense
7,501

 
4,599

 
6,781

 
8,139

 
7,858

Income tax expense (benefit)
1,374

 
(1,642
)
 
2,181

 
2,245

 
2,133

Net income before noncontrolling interests
6,127

 
6,241

 
4,600

 
5,894

 
5,725

Less: Net income from noncontrolling interests
191

 
90

 
58

 
38

 
91

Wells Fargo net income
$
5,936

 
6,151

 
4,542

 
5,856

 
5,634

Less: Preferred stock dividends and other
403

 
411

 
411

 
406

 
401

Wells Fargo net income applicable to common stock
$
5,533

 
5,740

 
4,131

 
5,450

 
5,233

Per share information
 
 
 
 
 
 
 
 
 
Earnings per common share
$
1.13

 
1.17

 
0.83

 
1.09

 
1.05

Diluted earnings per common share
1.12

 
1.16

 
0.83

 
1.08

 
1.03

Dividends declared per common share
0.390

 
0.390

 
0.390

 
0.380

 
0.380

Average common shares outstanding
4,885.7

 
4,912.5

 
4,948.6

 
4,989.9

 
5,008.6

Diluted average common shares outstanding
4,930.7

 
4,963.1

 
4,996.8

 
5,037.7

 
5,070.4

(1)
Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.


- 23 -

Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
Quarter ended Mar 31,
 
 
%
(in millions)
2018

 
2017

 
Change
Wells Fargo net income
$
5,936

 
5,634

 
5
 %
Other comprehensive income (loss), before tax:
 
 
 
 


Debt securities (1):
 
 
 
 


Net unrealized gains (losses) arising during the period
(3,443
)
 
369

 
NM

Reclassification of net (gains) losses to net income
68

 
(145
)
 
NM

Derivatives and hedging activities:
 
 
 
 


Net unrealized losses arising during the period
(242
)
 
(362
)
 
(33
)
Reclassification of net (gains) losses to net income
60

 
(202
)
 
NM

Defined benefit plans adjustments:
 
 
 
 


Net actuarial and prior service gains (losses) arising during the period
6

 
(7
)
 
NM

Amortization of net actuarial loss, settlements and other to net income
32

 
38

 
(16
)
Foreign currency translation adjustments:
 
 
 
 


Net unrealized gains (losses) arising during the period
(2
)
 
16

 
NM

Other comprehensive loss, before tax
(3,521
)

(293
)
 
NM

Income tax benefit related to other comprehensive income
862

 
123

 
601

Other comprehensive loss, net of tax
(2,659
)

(170
)
 
NM

Less: Other comprehensive income from noncontrolling interests
—

 
14

 
(100
)
Wells Fargo other comprehensive loss, net of tax
(2,659
)

(184
)
 
NM

Wells Fargo comprehensive income
3,277


5,450

 
(40
)
Comprehensive income from noncontrolling interests
191

 
105

 
82

Total comprehensive income
$
3,468


5,555

 
(38
)
NM – Not meaningful
(1)
The quarter ended March 31, 2017, includes net unrealized gains from equity securities of $61 million and reclassification of gains to net income related to equity securities of ($116) million. Per the adoption of ASU 2016-01, the quarter ended March 31, 2018, reflects only net unrealized gains and reclassification of net gains to net income from debt securities.
FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
 
Quarter ended
 
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Balance, beginning of period
$
208,079

 
206,617

 
205,949

 
202,310

 
200,497

Cumulative effect from change in accounting policy (1)
(24
)
 
—

 
—

 
—

 
(213
)
Wells Fargo net income
5,936

 
6,151

 
4,542

 
5,856

 
5,634

Wells Fargo other comprehensive income (loss), net of tax
(2,659
)
 
(522
)
 
526

 
1,005

 
(184
)
Noncontrolling interests
(178
)
 
247

 
(20
)
 
(75
)
 
75

Common stock issued
1,208

 
436

 
254

 
252

 
1,406

Common stock repurchased
(3,029
)
 
(2,845
)
 
(2,601
)
 
(2,287
)
 
(2,175
)
Preferred stock released by ESOP
231

 
218

 
209

 
406

 
—

Common stock warrants repurchased/exercised
(157
)
 
(46
)
 
(19
)
 
(24
)
 
(44
)
Preferred stock issued
—

 
—

 
—

 
677

 
—

Common stock dividends
(1,911
)
 
(1,920
)
 
(1,936
)
 
(1,899
)
 
(1,903
)
Preferred stock dividends
(410
)
 
(411
)
 
(411
)
 
(406
)
 
(401
)
Stock incentive compensation expense
437

 
206

 
135

 
145

 
389

Net change in deferred compensation and related plans
(813
)
 
(52
)
 
(11
)
 
(11
)
 
(771
)
Balance, end of period
$
206,710

 
208,079

 
206,617

 
205,949

 
202,310

(1)
The cumulative effect for the quarter ended March 31, 2018, reflects the impact of the adoption in first quarter 2018 of ASU 2016-04, ASU 2016-01 and ASU 2014-09. See pages 17 and 18 for more information. The cumulative effect for the quarter ended March 31, 2017, reflects the impact of the adoption in fourth quarter 2017 of ASU 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.



- 24 -

Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
Quarter ended March 31,
 
 
2018
 
 
2017
 
(in millions)
Average
balance

 
Yields/
rates

 
Interest
income/
expense

 
Average
balance

 
Yields/
rates

 
Interest
income/
expense

Earning assets
 
 
 
 
 
 
 
 
 
 
 
Interest-earning deposits with banks (3)
$
172,291

 
1.49
%
 
$
632

 
208,486

 
0.79
%
 
$
405

Federal funds sold, securities purchased under resale agreements and other short-term investments (3)
78,135

 
1.40

 
271

 
75,281

 
0.68

 
127

Debt securities (4):
 
 
 
 
 
 
 
 
 
 
 
Trading debt securities (7)
78,715

 
3.24

 
637

 
69,120

 
3.03

 
523

Available-for-sale debt securities:
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
6,426

 
1.66

 
26

 
25,034

 
1.54

 
95

Securities of U.S. states and political subdivisions (7)
49,956

 
3.37

 
421

 
52,248

 
3.93

 
513

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
158,472

 
2.72

 
1,076

 
156,617

 
2.58

 
1,011

Residential and commercial (7)
8,871

 
4.12

 
91

 
14,452

 
5.34

 
193

Total mortgage-backed securities (7)
167,343

 
2.79

 
1,167

 
171,069

 
2.81

 
1,204

Other debt securities (7)(8)
48,094

 
3.73

 
444

 
50,149

 
3.61

 
447

Total available-for-sale debt securities (7)(8)
271,819

 
3.04

 
2,058

 
298,500

 
3.04

 
2,259

Held-to-maturity debt securities:
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
44,723

 
2.20

 
243

 
44,693

 
2.20

 
243

Securities of U.S. states and political subdivisions
6,259

 
4.34

 
68

 
6,273

 
5.30

 
83

Federal agency and other mortgage-backed securities
90,789

 
2.38

 
541

 
51,786

 
2.51

 
324

Other debt securities
695

 
3.23

 
5

 
3,329

 
2.34

 
19

Total held-to-maturity debt securities
142,466

 
2.42

 
857

 
106,081

 
2.54

 
669

Total debt securities (7)(8)
493,000

 
2.89

 
3,552

 
473,701

 
2.92

 
3,451

Mortgages held for sale (5)(7)
18,406

 
3.89

 
179

 
19,893

 
3.67

 
182

Loans held for sale (5)(8)
2,011

 
4.92

 
24

 
1,600

 
2.50

 
10

Commercial loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial - U.S.
272,040

 
3.85

 
2,584

 
274,749

 
3.59

 
2,436

Commercial and industrial - Non U.S.
60,216

 
3.23

 
479

 
55,347

 
2.73

 
373

Real estate mortgage
126,200

 
4.05

 
1,262

 
132,449

 
3.56

 
1,164

Real estate construction
24,449

 
4.54

 
274

 
24,591

 
3.72

 
225

Lease financing
19,265

 
5.30

 
255

 
19,070

 
4.94

 
235

Total commercial loans
502,170

 
3.91

 
4,854

 
506,206

 
3.54

 
4,433

Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
284,207

 
4.02

 
2,852

 
275,480

 
4.02

 
2,766

Real estate 1-4 family junior lien mortgage
38,844

 
5.13

 
493

 
45,285

 
4.60

 
515

Credit card
36,468

 
12.75

 
1,147

 
35,437

 
11.97

 
1,046

Automobile
51,469

 
5.16

 
655

 
61,510

 
5.46

 
828

Other revolving credit and installment
37,866

 
6.46

 
604

 
39,727

 
6.02

 
590

Total consumer loans
448,854

 
5.16

 
5,751

 
457,439

 
5.06

 
5,745

Total loans (5)
951,024

 
4.50

 
10,605

 
963,645

 
4.26

 
10,178

Equity securities (8)
39,754

 
2.35

 
233

 
33,926

 
2.11

 
179

Other (8)
6,015

 
1.21

 
19

 
—

 
—

 
—

Total earning assets (7)(8)
$
1,760,636

 
3.55
%
 
$
15,515

 
1,776,532

 
3.30
%
 
$
14,532

Funding sources
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking
$
67,774

 
0.77
%
 
$
129

 
50,686

 
0.29
%
 
$
37

Market rate and other savings
679,068

 
0.22

 
368

 
684,175

 
0.09

 
157

Savings certificates
20,018

 
0.34

 
17

 
23,466

 
0.29

 
17

Other time deposits (7)
76,589

 
1.84

 
347

 
54,915

 
1.30

 
177

Deposits in foreign offices
94,810

 
0.98

 
229

 
122,200

 
0.49

 
148

Total interest-bearing deposits (7)
938,259

 
0.47

 
1,090

 
935,442

 
0.23

 
536

Short-term borrowings
101,779

 
1.24

 
312

 
98,549

 
0.47

 
115

Long-term debt (7)
226,062

 
2.80

 
1,576

 
260,130

 
1.77

 
1,147

Other liabilities
27,927

 
1.92

 
132

 
16,806

 
2.22

 
92

Total interest-bearing liabilities (7)
1,294,027

 
0.97

 
3,110

 
1,310,927

 
0.58

 
1,890

Portion of noninterest-bearing funding sources (7)(8)
466,609

 
—

 
—

 
465,605

 
—

 
—

Total funding sources (7)(8)
$
1,760,636

 
0.71

 
3,110

 
1,776,532

 
0.43

 
1,890

Net interest margin and net interest income on a taxable-equivalent basis (6)(7)
 
 
2.84
%
 
$
12,405

 
 
 
2.87
%
 
$
12,642

Noninterest-earning assets
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
18,853

 
 
 
 
 
18,706

 
 
 
 
Goodwill
26,516

 
 
 
 
 
26,673

 
 
 
 
Other (7)(8)
109,891

 
 
 
 
 
109,129

 
 
 
 
Total noninterest-earning assets (7)(8)
$
155,260

 
 
 
 
 
154,508

 
 
 
 
Noninterest-bearing funding sources
 
 
 
 
 
 
 
 
 
 
 
Deposits
$
358,919

 
 
 
 
 
363,749

 
 
 
 
Other liabilities (7)
56,761

 
 
 
 
 
54,805

 
 
 
 
Total equity (7)
206,189

 
 
 
 
 
201,559

 
 
 
 
Noninterest-bearing funding sources used to fund earning assets (7)(8)
(466,609
)
 
 
 
 
 
(465,605
)
 
 
 
 
Net noninterest-bearing funding sources (7)(8)
$
155,260

 
 
 
 
 
154,508

 
 
 
 
Total assets (7)
$
1,915,896

 
 
 
 
 
1,931,040

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Our average prime rate was 4.52% and 3.80% for the quarters ended March 31, 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.93% and 1.07% for the same quarters, respectively.
(2)
Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3)
Financial information has been revised to reflect the impact of the adoption of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.
(4)
Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(5)
Nonaccrual loans and related income are included in their respective loan categories.
(6)
Includes taxable-equivalent adjustments of $167 million and $318 million for the quarters ended March 31, 2018 and 2017, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 21% and 35% for the quarters ended March 31, 2018 and 2017, respectively.
(7)
Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of ASU 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.
(8)
Financial information for the prior quarter has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.


- 25 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
Quarter ended
 
 
Mar 31, 2018
 
 
Dec 31, 2017
 
 
Sep 30, 2017
 
 
Jun 30, 2017
 
 
Mar 31, 2017
 
($ in billions)
Average
balance

 
Yields/
rates

 
Average
balance

 
Yields/
rates

 
Average
balance

 
Yields/
rates

 
Average
balance

 
Yields/
rates

 
Average
balance

 
Yields/
rates

Earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning deposits with banks (3)
$
172.3

 
1.49
%
 
$
189.1

 
1.27
%
 
$
205.5

 
1.21
%
 
$
204.5

 
1.03
%
 
$
208.5

 
0.79
%
Federal funds sold, securities purchased under resale agreements and other short-term investments (3)
78.1

 
1.40

 
75.8

 
1.20

 
70.6

 
1.14

 
77.1

 
0.91

 
75.3

 
0.68

Debt securities (4):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading debt securities (5)
78.7

 
3.24

 
81.6

 
3.17

 
76.6

 
3.21

 
70.4

 
3.24

 
69.1

 
3.03

Available-for-sale debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
6.4

 
1.66

 
6.4

 
1.66

 
14.5

 
1.31

 
18.1

 
1.53

 
25.0

 
1.54

Securities of U.S. states and political subdivisions
50.0

 
3.37

 
52.4

 
3.91

 
52.5

 
4.08

 
53.5

 
3.89

 
52.2

 
3.93

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
158.4

 
2.72

 
152.9

 
2.62

 
139.8

 
2.58

 
132.0

 
2.63

 
156.6

 
2.58

Residential and commercial
8.9

 
4.12

 
9.4

 
4.85

 
11.0

 
5.44

 
12.6

 
5.55

 
14.5

 
5.34

Total mortgage-backed securities
167.3

 
2.79

 
162.3

 
2.75

 
150.8

 
2.79

 
144.6

 
2.89

 
171.1

 
2.81

Other debt securities (5)
48.1

 
3.73

 
48.6

 
3.62

 
47.7

 
3.73

 
48.5

 
3.77

 
50.2

 
3.61

Total available-for-sale debt securities (5)
271.8

 
3.04

 
269.7

 
3.10

 
265.5

 
3.13

 
264.7

 
3.16

 
298.5

 
3.04

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

 
2.20

 
44.7

 
2.19

 
44.7

 
2.18

 
44.7

 
2.19

 
44.7

 
2.20

Securities of U.S. states and political subdivisions
6.3

 
4.34

 
6.3

 
5.26

 
6.3

 
5.44

 
6.3

 
5.29

 
6.3

 
5.30

Federal agency and other mortgage-backed securities
90.8

 
2.38

 
89.6

 
2.25

 
88.3

 
2.26

 
83.1

 
2.44

 
51.8

 
2.51

Other debt securities
0.7

 
3.23

 
1.2

 
2.64

 
1.4

 
3.05

 
2.8

 
2.34

 
3.3

 
2.34

Total held-to-maturity debt securities
142.5

 
2.42

 
141.8

 
2.36

 
140.7

 
2.38

 
136.9

 
2.49

 
106.1

 
2.54

     Total debt securities (5)
493.0

 
2.89

 
493.1

 
2.90

 
482.8

 
2.93

 
472.0

 
2.98

 
473.7

 
2.92

Mortgages held for sale
18.4

 
3.89

 
20.5

 
3.82

 
22.9

 
3.79

 
19.8

 
3.87

 
19.9

 
3.67

Loans held for sale (5)
2.0

 
4.92

 
1.5

 
3.19

 
1.4

 
4.39

 
1.5

 
3.65

 
1.6

 
2.50

Commercial loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial - U.S.
272.0

 
3.85

 
270.3

 
3.89

 
270.1

 
3.81

 
273.1

 
3.70

 
274.8

 
3.59

Commercial and industrial - Non U.S.
60.2

 
3.23

 
59.2

 
2.96

 
57.7

 
2.89

 
56.4

 
2.86

 
55.3

 
2.73

Real estate mortgage
126.2

 
4.05

 
127.2

 
3.88

 
129.1

 
3.83

 
131.3

 
3.68

 
132.4

 
3.56

Real estate construction
24.4

 
4.54

 
24.4

 
4.38

 
25.0

 
4.18

 
25.3

 
4.10

 
24.6

 
3.72

Lease financing
19.4

 
5.30

 
19.3

 
0.62

 
19.2

 
4.59

 
19.0

 
4.82

 
19.1

 
4.94

Total commercial loans
502.2

 
3.91

 
500.4

 
3.68

 
501.1

 
3.76

 
505.1

 
3.67

 
506.2

 
3.54

Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
284.2

 
4.02

 
282.0

 
4.01

 
278.4

 
4.03

 
275.1

 
4.08

 
275.5

 
4.02

Real estate 1-4 family junior lien mortgage
38.8

 
5.13

 
40.4

 
4.96

 
41.9

 
4.95

 
43.6

 
4.78

 
45.3

 
4.60

Credit card
36.4

 
12.75

 
36.4

 
12.37

 
35.6

 
12.41

 
34.9

 
12.18

 
35.4

 
11.97

Automobile
51.5

 
5.16

 
54.3

 
5.13

 
56.7

 
5.34

 
59.1

 
5.43

 
61.5

 
5.46

Other revolving credit and installment
37.9

 
6.46

 
38.3

 
6.28

 
38.6

 
6.31

 
39.1

 
6.13

 
39.7

 
6.02

Total consumer loans
448.8

 
5.16

 
451.4

 
5.10

 
451.2

 
5.14

 
451.8

 
5.13

 
457.4

 
5.06

Total loans
951.0

 
4.50

 
951.8

 
4.35

 
952.3

 
4.41

 
956.9

 
4.36

 
963.6

 
4.26

Equity securities (5)
39.8

 
2.35

 
38.0

 
2.60

 
35.9

 
2.12

 
36.6

 
2.24

 
33.9

 
2.11

Other (5)
6.0

 
1.21

 
7.2

 
0.88

 
8.7

 
0.90

 
4.3

 
0.70

 
—

 
—

     Total earning assets (5)
$
1,760.6

 
3.55
%
 
$
1,777.0

 
3.43
%
 
$
1,780.1

 
3.44
%
 
$
1,772.7

 
3.40
%
 
$
1,776.5

 
3.30
%
Funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking
$
67.8

 
0.77
%
 
$
50.5

 
0.68
%
 
$
48.3

 
0.57
%
 
$
48.5

 
0.41
%
 
$
50.7

 
0.29
%
Market rate and other savings
679.1

 
0.22

 
679.9

 
0.19

 
681.2

 
0.17

 
683.0

 
0.13

 
684.2

 
0.09

Savings certificates
20.0

 
0.34

 
20.9

 
0.31

 
21.8

 
0.31

 
22.6

 
0.30

 
23.5

 
0.29

Other time deposits
76.6

 
1.84

 
68.2

 
1.49

 
66.1

 
1.51

 
57.1

 
1.39

 
54.9

 
1.30

Deposits in foreign offices
94.8

 
0.98

 
124.6

 
0.81

 
124.7

 
0.76

 
123.7

 
0.65

 
122.2

 
0.49

Total interest-bearing deposits
938.3

 
0.47

 
944.1

 
0.39

 
942.1

 
0.37

 
934.9

 
0.29

 
935.5

 
0.23

Short-term borrowings
101.8

 
1.24

 
102.1

 
0.99

 
99.2

 
0.91

 
95.8

 
0.69

 
98.5

 
0.47

Long-term debt
226.0

 
2.80

 
231.6

 
2.32

 
243.5

 
2.28

 
249.9

 
2.04

 
260.1

 
1.77

Other liabilities
27.9

 
1.92

 
24.7

 
1.86

 
24.8

 
1.74

 
21.0

 
2.05

 
16.8

 
2.22

Total interest-bearing liabilities
1,294.0

 
0.97

 
1,302.5

 
0.81

 
1,309.6

 
0.79

 
1,301.6

 
0.68

 
1,310.9

 
0.58

Portion of noninterest-bearing funding sources (5)
466.6

 
—

 
474.5

 
—

 
470.5

 
—

 
471.1

 
—

 
465.6

 
—

     Total funding sources (5)
$
1,760.6

 
0.71

 
$
1,777.0

 
0.59

 
$
1,780.1

 
0.58

 
$
1,772.7

 
0.50

 
$
1,776.5

 
0.43

Net interest margin on a taxable-equivalent basis
 
 
2.84
%
 
 
 
2.84
%
 
 
 
2.86
%
 
 
 
2.90
%
 
 
 
2.87
%
Noninterest-earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
18.9

 
 
 
19.2

 
 
 
18.5

 
 
 
18.2

 
 
 
18.7

 
 
Goodwill
26.5

 
 
 
26.6

 
 
 
26.6

 
 
 
26.7

 
 
 
26.7

 
 
Other (5)
109.9

 
 
 
112.5

 
 
 
113.3

 
 
 
109.4

 
 
 
109.1

 
 
     Total noninterest-earnings assets (5)
$
155.3

 
 
 
158.3

 
 
 
158.4

 
 
 
154.3

 
 
 
154.5

 
 
Noninterest-bearing funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
$
358.9

 
 
 
367.5

 
 
 
364.3

 
 
 
366.3

 
 
 
363.7

 
 
Other liabilities (5)
56.8

 
 
 
57.9

 
 
 
56.9

 
 
 
53.3

 
 
 
54.8

 
 
Total equity
206.2

 
 
 
207.4

 
 
 
207.7

 
 
 
205.8

 
 
 
201.6

 
 
Noninterest-bearing funding sources used to fund earning assets (5)
(466.6
)
 
 
 
(474.5
)
 
 
 
(470.5
)
 
 
 
(471.1
)
 
 
 
(465.6
)
 
 
        Net noninterest-bearing funding sources (5)
$
155.3

 
 
 
158.3

 
 
 
158.4

 
 
 
154.3

 
 
 
154.5

 
 
          Total assets
$
1,915.9

 
 
 
1,935.3

 
 
 
1,938.5

 
 
 
1,927.0

 
 
 
1,931.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Our average prime rate was 4.52% for the quarter ended March 31, 2018, 4.30% for the quarter ended December 31,2017, 4.25% for the quarter ended September 30, 2017, 4.05% for the quarter ended June 30, 2017 and 3.80% for the quarter ended March 31, 2017. The average three-month London Interbank Offered Rate (LIBOR) was 1.93%, 1.46%, 1.31%, 1.21% and 1.07% for the same quarters, respectively.
(2)
Yields/rates include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3)
Financial information has been revised to reflect the impact of the adoption of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.
(4)
Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(5)
Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.


- 26 -

Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
 
Quarter ended March 31,
 
 
%

(in millions)
2018

 
2017

 
Change

Service charges on deposit accounts
$
1,173

 
1,313

 
(11
)%
Trust and investment fees:
 
 
 
 

Brokerage advisory, commissions and other fees
2,403

 
2,324

 
3

Trust and investment management
850

 
829

 
3

Investment banking
430

 
417

 
3

Total trust and investment fees
3,683


3,570

 
3

Card fees
908

 
945

 
(4
)
Other fees:
 
 
 
 

Charges and fees on loans
301

 
307

 
(2
)
Cash network fees
126

 
126

 
—

Commercial real estate brokerage commissions
85

 
81

 
5

Letters of credit fees
79

 
74

 
7

Wire transfer and other remittance fees
116

 
107

 
8

All other fees
93

 
170

 
(45
)
Total other fees
800

 
865

 
(8
)
Mortgage banking:
 
 
 
 

Servicing income, net
468

 
456

 
3

Net gains on mortgage loan origination/sales activities
466

 
772

 
(40
)
Total mortgage banking
934

 
1,228

 
(24
)
Insurance
114

 
277

 
(59
)
Net gains from trading activities (1)
243

 
272

 
(11
)
Net gains on debt securities
1

 
36

 
(97
)
Net gains from equity securities (1)
783

 
570

 
37

Lease income
455

 
481

 
(5
)
Life insurance investment income
164

 
144

 
14

All other
438

 
230

 
90

Total
$
9,696

 
9,931

 
(2
)
(1)
Financial information for the prior quarter has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

NONINTEREST EXPENSE
 
 
Quarter ended March 31,
 
 
%

(in millions)
 
2018

 
2017

 
Change

Salaries
 
$
4,363

 
4,261

 
2
 %
Commission and incentive compensation
 
2,768

 
2,725

 
2

Employee benefits
 
1,598

 
1,686

 
(5
)
Equipment
 
617

 
577

 
7

Net occupancy
 
713

 
712

 
—

Core deposit and other intangibles
 
265

 
289

 
(8
)
FDIC and other deposit assessments
 
324

 
333

 
(3
)
Operating losses
 
668

 
282

 
137

Outside professional services
 
821

 
804

 
2

Contract services (1)
 
447

 
397

 
13

Operating leases
 
320

 
345

 
(7
)
Outside data processing
 
162

 
220

 
(26
)
Travel and entertainment
 
152

 
179

 
(15
)
Advertising and promotion
 
153

 
127

 
20

Postage, stationery and supplies
 
142

 
145

 
(2
)
Telecommunications
 
92

 
91

 
1

Foreclosed assets
 
38

 
86

 
(56
)
Insurance
 
26

 
24

 
8

All other (1)
 
573

 
509

 
13

Total
 
$
14,242

 
13,792

 
3

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



- 27 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
 
Quarter ended
 
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Service charges on deposit accounts
$
1,173

 
1,246

 
1,276

 
1,276

 
1,313

Trust and investment fees:
 
 
 
 
 
 
 
 
 
Brokerage advisory, commissions and other fees
2,403

 
2,401

 
2,304

 
2,329

 
2,324

Trust and investment management
850

 
866

 
840

 
837

 
829

Investment banking
430

 
420

 
465

 
463

 
417

Total trust and investment fees
3,683

 
3,687

 
3,609

 
3,629

 
3,570

Card fees
908

 
996

 
1,000

 
1,019

 
945

Other fees:
 
 
 
 
 
 
 
 
 
Charges and fees on loans
301

 
313

 
318

 
325

 
307

Cash network fees
126

 
120

 
126

 
134

 
126

Commercial real estate brokerage commissions
85

 
159

 
120

 
102

 
81

Letters of credit fees
79

 
78

 
77

 
76

 
74

Wire transfer and other remittance fees
116

 
115

 
114

 
112

 
107

All other fees
93

 
128

 
122

 
153

 
170

Total other fees
800

 
913

 
877

 
902

 
865

Mortgage banking:
 
 
 
 
 
 
 
 
 
Servicing income, net
468

 
262

 
309

 
400

 
456

Net gains on mortgage loan origination/sales activities
466

 
666

 
737

 
748

 
772

Total mortgage banking
934

 
928

 
1,046

 
1,148

 
1,228

Insurance
114

 
223

 
269

 
280

 
277

Net gains (losses) from trading activities (1)
243

 
(1
)
 
120

 
151

 
272

Net gains on debt securities
1

 
157

 
166

 
120

 
36

Net gains from equity securities (1)
783

 
572

 
363

 
274

 
570

Lease income
455

 
458

 
475

 
493

 
481

Life insurance investment income
164

 
153

 
152

 
145

 
144

All other
438

 
405

 
47

 
327

 
230

Total
$
9,696

 
9,737

 
9,400

 
9,764

 
9,931

(1)
Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

FIVE QUARTER NONINTEREST EXPENSE
 
Quarter ended
 
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Salaries
$
4,363

 
4,403

 
4,356

 
4,343

 
4,261

Commission and incentive compensation
2,768

 
2,665

 
2,553

 
2,499

 
2,725

Employee benefits
1,598

 
1,293

 
1,279

 
1,308

 
1,686

Equipment
617

 
608

 
523

 
529

 
577

Net occupancy
713

 
715

 
716

 
706

 
712

Core deposit and other intangibles
265

 
288

 
288

 
287

 
289

FDIC and other deposit assessments
324

 
312

 
314

 
328

 
333

Operating losses
668

 
3,531

 
1,329

 
350

 
282

Outside professional services
821

 
1,025

 
955

 
1,029

 
804

Contract services (1)
447

 
410

 
415

 
416

 
397

Operating leases
320

 
325

 
347

 
334

 
345

Outside data processing
162

 
208

 
227

 
236

 
220

Travel and entertainment
152

 
183

 
154

 
171

 
179

Advertising and promotion
153

 
200

 
137

 
150

 
127

Postage, stationery and supplies
142

 
137

 
128

 
134

 
145

Telecommunications
92

 
92

 
90

 
91

 
91

Foreclosed assets
38

 
47

 
66

 
52

 
86

Insurance
26

 
28

 
24

 
24

 
24

All other (1)
573

 
330

 
450

 
554

 
509

Total
$
14,242

 
16,800

 
14,351

 
13,541

 
13,792

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


- 28 -

Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions, except shares)
Mar 31,
2018

 
Dec 31,
2017

 
%
Change

Assets
 
 
 
 
 
Cash and due from banks
$
18,145

 
23,367

 
(22
)%
Interest-earning deposits with banks (1)
184,250

 
192,580

 
(4
)
Total cash, cash equivalents, and restricted cash (1)
202,395

 
215,947

 
(6
)
Federal funds sold, securities purchased under resale agreements and other short-term investments (1)
73,550

 
80,025

 
(8
)
Debt securities:
 
 
 
 


Trading, at fair value (2)
59,866

 
57,624

 
4

Available-for-sale, at fair value (2)
271,656

 
276,407

 
(2
)
Held-to-maturity, at cost
141,446

 
139,335

 
2

Mortgages held for sale
17,944

 
20,070

 
(11
)
Loans held for sale (2)
3,581

 
1,131

 
217

Loans
947,308

 
956,770

 
(1
)
Allowance for loan losses
(10,373
)
 
(11,004
)
 
(6
)
Net loans
936,935

 
945,766

 
(1
)
Mortgage servicing rights:
 
 
 
 


Measured at fair value
15,041

 
13,625

 
10

Amortized
1,411

 
1,424

 
(1
)
Premises and equipment, net
8,828

 
8,847

 
—

Goodwill
26,445

 
26,587

 
(1
)
Derivative assets
11,467

 
12,228

 
(6
)
Equity securities (2)
58,935

 
62,497

 
(6
)
Other assets (2)
85,888

 
90,244

 
(5
)
Total assets
$
1,915,388


1,951,757

 
(2
)
Liabilities
 
 
 
 


Noninterest-bearing deposits
$
370,085

 
373,722

 
(1
)
Interest-bearing deposits
933,604

 
962,269

 
(3
)
Total deposits
1,303,689

 
1,335,991

 
(2
)
Short-term borrowings
97,207

 
103,256

 
(6
)
Derivative liabilities
7,883

 
8,796

 
(10
)
Accrued expenses and other liabilities
72,597

 
70,615

 
3

Long-term debt
227,302

 
225,020

 
1

Total liabilities
1,708,678


1,743,678

 
(2
)
Equity
 
 
 
 


Wells Fargo stockholders’ equity:
 
 
 
 


Preferred stock
26,227

 
25,358

 
3

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

 
9,136

 
—

Additional paid-in capital
60,399

 
60,893

 
(1
)
Retained earnings
148,728

 
145,263

 
2

Cumulative other comprehensive income (loss)
(4,921
)
 
(2,144
)
 
130

Treasury stock – 607,928,993 shares and 590,194,846 shares 
(31,246
)
 
(29,892
)
 
5

Unearned ESOP shares
(2,571
)
 
(1,678
)
 
53

Total Wells Fargo stockholders’ equity
205,752


206,936

 
(1
)
Noncontrolling interests
958

 
1,143

 
(16
)
Total equity
206,710


208,079

 
(1
)
Total liabilities and equity
$
1,915,388

 
1,951,757

 
(2
)
(1)
Financial information has been revised to reflect the impact of the adoption of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.
(2)
Financial information for the prior quarter has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.


- 29 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
18,145

 
23,367

 
19,206

 
20,248

 
19,698

Interest-earning deposits with banks (1)
184,250

 
192,580

 
205,648

 
195,700

 
227,635

Total cash, cash equivalents, and restricted cash (1)
202,395

 
215,947

 
224,854

 
215,948

 
247,333

Federal funds sold, securities purchased under resale agreements and other short-term investments (1)
73,550

 
80,025

 
67,457

 
69,006

 
81,112

Debt securities:
 
 
 
 
 
 
 
 

Trading, at fair value (2)
59,866

 
57,624

 
60,970

 
54,324

 
50,534

Available-for-sale, at fair value (2)
271,656

 
276,407

 
271,317

 
268,174

 
298,405

Held-to-maturity, at cost
141,446

 
139,335

 
142,423

 
140,392

 
108,030

Mortgages held for sale
17,944

 
20,070

 
20,009

 
24,807

 
17,822

Loans held for sale (2)
3,581

 
1,131

 
1,339

 
1,898

 
1,373

Loans
947,308

 
956,770

 
951,873

 
957,423

 
958,405

Allowance for loan losses
(10,373
)
 
(11,004
)
 
(11,078
)
 
(11,073
)
 
(11,168
)
Net loans
936,935

 
945,766

 
940,795

 
946,350

 
947,237

Mortgage servicing rights:
 
 
 
 
 
 
 
 
 
Measured at fair value
15,041

 
13,625

 
13,338

 
12,789

 
13,208

Amortized
1,411

 
1,424

 
1,406

 
1,399

 
1,402

Premises and equipment, net
8,828

 
8,847

 
8,449

 
8,403

 
8,320

Goodwill
26,445

 
26,587

 
26,581

 
26,573

 
26,666

Derivative assets
11,467

 
12,228

 
12,580

 
13,273

 
12,564

Equity securities (2)
58,935

 
62,497

 
54,981

 
55,742

 
56,991

Other assets (2)
85,888

 
90,244

 
88,381

 
91,714

 
80,504

Total assets
$
1,915,388


1,951,757


1,934,880


1,930,792


1,951,501

Liabilities
 
 
 
 
 
 
 
 
 
Noninterest-bearing deposits
$
370,085

 
373,722

 
366,528

 
372,766

 
365,780

Interest-bearing deposits
933,604

 
962,269

 
940,178

 
933,064

 
959,664

Total deposits
1,303,689


1,335,991


1,306,706


1,305,830


1,325,444

Short-term borrowings
97,207

 
103,256

 
93,811

 
95,356

 
94,871

Derivative liabilities
7,883

 
8,796

 
9,497

 
11,636

 
12,461

Accrued expenses and other liabilities
72,597

 
70,615

 
78,993

 
72,799

 
59,629

Long-term debt
227,302

 
225,020

 
239,256

 
239,222

 
256,786

Total liabilities
1,708,678


1,743,678


1,728,263


1,724,843


1,749,191

Equity
 
 
 
 
 
 
 
 
 
Wells Fargo stockholders’ equity:
 
 
 
 
 
 
 
 
 
Preferred stock
26,227

 
25,358

 
25,576

 
25,785

 
25,501

Common stock
9,136

 
9,136

 
9,136

 
9,136

 
9,136

Additional paid-in capital
60,399

 
60,893

 
60,759

 
60,689

 
60,585

Retained earnings
148,728

 
145,263

 
141,549

 
139,366

 
135,828

Cumulative other comprehensive income (loss)
(4,921
)
 
(2,144
)
 
(1,622
)
 
(2,148
)
 
(3,153
)
Treasury stock
(31,246
)
 
(29,892
)
 
(27,772
)
 
(25,675
)
 
(24,030
)
Unearned ESOP shares
(2,571
)
 
(1,678
)
 
(1,904
)
 
(2,119
)
 
(2,546
)
Total Wells Fargo stockholders’ equity
205,752


206,936


205,722


205,034


201,321

Noncontrolling interests
958

 
1,143

 
895

 
915

 
989

Total equity
206,710


208,079


206,617


205,949


202,310

Total liabilities and equity
$
1,915,388


1,951,757


1,934,880


1,930,792


1,951,501

(1)
Financial information has been revised to reflect the impact of the adoption of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.
(2)
Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.


- 30 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER TRADING ASSETS AND LIABILITIES
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Trading assets
 
 
 
 
 
 
 
 
 
Debt securities
$
59,866

 
57,624

 
60,970

 
54,324

 
50,534

Equity securities (1)
25,327

 
30,004

 
22,797

 
24,229

 
25,358

Loans held for sale
1,695

 
1,023

 
1,182

 
1,742

 
1,120

Gross trading derivative assets
30,644

 
31,340

 
31,052

 
31,451

 
71,793

Netting (2)
(20,112
)
 
(19,629
)
 
(18,881
)
 
(19,289
)
 
(60,483
)
Total trading derivative assets
10,532

 
11,711

 
12,171

 
12,162

 
11,310

Total trading assets
97,420


100,362


97,120


92,457


88,322

Trading liabilities
 
 
 
 
 
 
 
 
 
Short sales
23,303

 
18,472

 
19,096

 
16,845

 
19,982

Gross trading derivative liabilities
29,717

 
31,386

 
30,365

 
31,172

 
75,441

Netting (2)
(22,569
)
 
(23,062
)
 
(21,662
)
 
(20,544
)
 
(64,138
)
Total trading derivative liabilities
7,148

 
8,324

 
8,703

 
10,628

 
11,303

Total trading liabilities
$
30,451

 
26,796

 
27,799

 
27,473

 
31,285

(1)
Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 and assets held as economic hedges for our deferred compensation plan obligations have been reclassified as marketable equity securities not held for trading.
(2)
Represents balance sheet netting for trading derivative assets and liability balances, and trading portfolio level counterparty valuation adjustments.
FIVE QUARTER DEBT SECURITIES
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Trading debt securities
$
59,866

 
57,624

 
60,970

 
54,324

 
50,534

Available-for-sale debt securities:
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
6,279

 
6,319

 
6,350

 
17,896

 
24,625

Securities of U.S. states and political subdivisions
49,643

 
51,326

 
52,774

 
52,013

 
52,061

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Federal agencies
156,814

 
160,219

 
150,181

 
135,938

 
156,966

Residential and commercial
9,264

 
9,173

 
11,046

 
12,772

 
14,233

Total mortgage-backed securities
166,078


169,392


161,227


148,710


171,199

Other debt securities
49,656

 
49,370

 
50,966

 
49,555

 
50,520

Total available-for-sale debt securities
271,656

 
276,407

 
271,317

 
268,174

 
298,405

Held-to-maturity debt securities:
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
44,727

 
44,720

 
44,712

 
44,704

 
44,697

Securities of U.S. states and political subdivisions
6,307

 
6,313

 
6,321

 
6,325

 
6,331

Federal agency and other mortgage-backed securities (1)
89,748

 
87,527

 
90,071

 
87,525

 
53,778

Other debt securities
664

 
775

 
1,319

 
1,838

 
3,224

Total held-to-maturity debt securities
141,446

 
139,335

 
142,423

 
140,392

 
108,030

Total debt securities
$
472,968


473,366


474,710


462,890


456,969

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


- 31 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER EQUITY SECURITIES
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Held for trading at fair value
 
 
 
 
 
 
 
 
 
Marketable equity securities
$
25,327

 
30,004

 
22,797

 
24,229

 
25,358

Not held for trading:
 
 
 
 
 
 
 
 
 
Fair value:
 
 
 
 
 
 
 
 
 
Marketable equity securities (1)
4,931

 
4,356

 
4,348

 
4,340

 
4,439

Nonmarketable equity securities (2)
5,303

 
4,867

 
4,523

 
3,986

 
3,780

Total equity securities at fair value
10,234

 
9,223

 
8,871

 
8,326

 
8,219

Equity method:
 
 
 
 
 
 
 
 
 
LIHTC (3)
10,318

 
10,269

 
9,884

 
9,828

 
9,624

Private equity
3,840

 
3,839

 
3,757

 
3,740

 
3,620

Tax-advantaged renewable energy
1,822

 
1,950

 
1,954

 
1,960

 
2,013

New market tax credit and other
268

 
294

 
292

 
295

 
277

Total equity method
16,248

 
16,352

 
15,887

 
15,823

 
15,534

Other:
 
 
 
 
 
 
 
 
 
Federal bank stock and other at cost (4)
5,780

 
5,828

 
6,251

 
6,247

 
6,645

Private equity (5)
1,346

 
1,090

 
1,175

 
1,117

 
1,235

Total equity securities not held for trading
33,608

 
32,493

 
32,184

 
31,513

 
31,633

Total equity securities
58,935


62,497

 
54,981

 
55,742

 
56,991

(1)
Includes $3.5 billion, $3.7 billion, $3.5 billion, $3.3 billion and $3.3 billion at March 31, 2018, and December 31, September 30, June 30, and March 31, 2017, respectively, related to investments held as economic hedges of our deferred compensation plan obligations.
(2)
Includes $5.0 billion, $4.9 billion, $4.5 billion, $4.0 billion and $3.8 billion at March 31, 2018, and December 31, September 30, June 30, and March 31, 2017, respectively, related to investments in which we elected the fair value option.
(3)
Represents low-income housing tax credit investments.
(4)
Includes $5.7 billion, $5.4 billion, $5.8 billion, $5.8 billion and $6.2 billion at March 31, 2018, and December 31, September 30, June 30, and March 31, 2017, respectively, related to investments in Federal Reserve Bank and Federal Home Loan Bank stock.
(5)
Represents nonmarketable equity securities for which we have elected to account for the investment under the measurement alternative.



- 32 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER LOANS
(in millions)
Mar 31,
2018


Dec 31,
2017


Sep 30,
2017


Jun 30,
2017


Mar 31,
2017

Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
334,678

 
333,125

 
327,944

 
331,113

 
329,252

Real estate mortgage
125,543

 
126,599

 
128,475

 
130,277

 
131,532

Real estate construction
23,882

 
24,279

 
24,520

 
25,337

 
25,064

Lease financing
19,293

 
19,385

 
19,211

 
19,174

 
19,156

Total commercial
503,396

 
503,388

 
500,150

 
505,901

 
505,004

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
282,658

 
284,054

 
280,173

 
276,566

 
274,633

Real estate 1-4 family junior lien mortgage
37,920

 
39,713

 
41,152

 
42,747

 
44,333

Credit card
36,103

 
37,976

 
36,249

 
35,305

 
34,742

Automobile
49,554

 
53,371

 
55,455

 
57,958

 
60,408

Other revolving credit and installment
37,677

 
38,268

 
38,694

 
38,946

 
39,285

Total consumer
443,912

 
453,382

 
451,723

 
451,522

 
453,401

Total loans (1)
$
947,308

 
956,770

 
951,873

 
957,423

 
958,405

(1)
Includes $10.7 billion, $12.8 billion, $13.6 billion, $14.3 billion, and $15.7 billion of purchased credit-impaired (PCI) loans at March 31, 2018 and December 31, September 30, June 30, and March 31, 2017, respectively.
Our foreign loans are reported by respective class of financing receivable in the table above. Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign primarily based on whether the borrower's primary address is outside of the United States. The following table presents total commercial foreign loans outstanding by class of financing receivable.
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Commercial foreign loans:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
59,696

 
60,106

 
58,570

 
57,825

 
56,987

Real estate mortgage
8,082

 
8,033

 
8,032

 
8,359

 
8,206

Real estate construction
668

 
655

 
647

 
585

 
471

Lease financing
1,077

 
1,126

 
1,141

 
1,092

 
986

Total commercial foreign loans
$
69,523

 
69,920

 
68,390

 
67,861

 
66,650





- 33 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Nonaccrual loans:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
1,516

 
1,899

 
2,397

 
2,632

 
2,898

Real estate mortgage
755

 
628

 
593

 
630

 
672

Real estate construction
45

 
37

 
38

 
34

 
40

Lease financing
93

 
76

 
81

 
89

 
96

Total commercial
2,409

 
2,640

 
3,109

 
3,385

 
3,706

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
4,053

 
4,122

 
4,213

 
4,413

 
4,743

Real estate 1-4 family junior lien mortgage
1,087

 
1,086

 
1,101

 
1,095

 
1,153

Automobile
117

 
130

 
137

 
104

 
101

Other revolving credit and installment
53

 
58

 
59

 
59

 
56

Total consumer
5,310

 
5,396

 
5,510

 
5,671

 
6,053

Total nonaccrual loans (1)(2)(3)
$
7,719

 
8,036

 
8,619

 
9,056

 
9,759

As a percentage of total loans
0.81
%
 
0.84

 
0.91

 
0.95

 
1.02

Foreclosed assets:
 
 
 
 
 
 
 
 
 
Government insured/guaranteed
$
103

 
120

 
137

 
149

 
179

Non-government insured/guaranteed
468

 
522

 
569

 
632

 
726

Total foreclosed assets
571

 
642

 
706

 
781

 
905

Total nonperforming assets
$
8,290

 
8,678

 
9,325

 
9,837

 
10,664

As a percentage of total loans
0.88
%
 
0.91

 
0.98

 
1.03

 
1.11

(1)
Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
(2)
Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.
(3)
Real estate 1-4 family mortgage loans predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) are not placed on nonaccrual status because they are insured or guaranteed.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Total (excluding PCI)(1):
$
10,753

 
11,997

 
10,227

 
9,716

 
10,525

Less: FHA insured/guaranteed by the VA (2)(3)
9,786

 
10,934

 
9,266

 
8,873

 
9,585

Total, not government insured/guaranteed
$
967

 
1,063

 
961

 
843

 
940

By segment and class, not government insured/guaranteed:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
40

 
26

 
27

 
42

 
88

Real estate mortgage
23

 
23

 
11

 
2

 
11

Real estate construction
1

 
—

 
—

 
10

 
3

Total commercial
64


49


38


54


102

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage (3)
164

 
219

 
190

 
145

 
149

Real estate 1-4 family junior lien mortgage (3)
48

 
60

 
49

 
44

 
42

Credit card
473

 
492

 
475

 
411

 
453

Automobile
113

 
143

 
111

 
91

 
79

Other revolving credit and installment
105

 
100

 
98

 
98

 
115

Total consumer
903


1,014


923


789


838

Total, not government insured/guaranteed
$
967


1,063


961


843


940

(1)
PCI loans totaled $1.0 billion, $1.4 billion, $1.4 billion, $1.5 billion and $1.8 billion, at March 31, 2018 and December 31, September 30, June 30, and March 31, 2017, respectively.
(2)
Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
(3)
Includes mortgages held for sale 90 days or more past due and still accruing.



- 34 -

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

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

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

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

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

(in millions)
Quarter
ended
March 31,
2018

 
2009-2017

Balance, beginning of period
$
8,887

 
10,447

Change in accretable yield due to acquisitions
—

 
161

Accretion into interest income (1)
(314
)
 
(16,983
)
Accretion into noninterest income due to sales (2)
(643
)
 
(801
)
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (3)
340

 
11,597

Changes in expected cash flows that do not affect nonaccretable difference (4)
(1,406
)
 
4,466

Balance, end of period 
$
6,864

 
8,887

(1)
Includes accretable yield released as a result of settlements with borrowers, which is included in interest income.
(2)
Includes accretable yield released as a result of sales to third parties, which is included in noninterest income.
(3)
At March 31, 2018, our carrying value for PCI loans totaled $10.7 billion and the remainder of nonaccretable difference established in purchase accounting totaled $293 million. The nonaccretable difference absorbs losses of contractual amounts that exceed our carrying value for PCI loans.
(4)
Represents changes in cash flows expected to be collected due to the impact of modifications, changes in prepayment assumptions, changes in interest rates on variable rate PCI loans and sales to third parties.


- 35 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
 
Quarter ended
 
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Balance, beginning of quarter
$
11,960

 
12,109

 
12,146

 
12,287

 
12,540

Provision for credit losses
191

 
651

 
717

 
555

 
605

Interest income on certain impaired loans (1)
(43
)
 
(49
)
 
(43
)
 
(46
)
 
(48
)
Loan charge-offs:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
(164
)
 
(181
)
 
(194
)
 
(161
)
 
(253
)
Real estate mortgage
(2
)
 
(4
)
 
(21
)
 
(8
)
 
(5
)
Real estate construction
—

 
—

 
—

 
—

 
—

Lease financing
(17
)
 
(14
)
 
(11
)
 
(13
)
 
(7
)
Total commercial
(183
)
 
(199
)
 
(226
)
 
(182
)
 
(265
)
Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
(41
)
 
(49
)
 
(67
)
 
(55
)
 
(69
)
Real estate 1-4 family junior lien mortgage
(47
)
 
(54
)
 
(70
)
 
(62
)
 
(93
)
Credit card
(405
)
 
(398
)
 
(337
)
 
(379
)
 
(367
)
Automobile
(300
)
 
(261
)
 
(274
)
 
(212
)
 
(255
)
Other revolving credit and installment
(180
)
 
(169
)
 
(170
)
 
(185
)
 
(189
)
Total consumer
(973
)
 
(931
)
 
(918
)
 
(893
)
 
(973
)
Total loan charge-offs
(1,156
)
 
(1,130
)
 
(1,144
)
 
(1,075
)
 
(1,238
)
Loan recoveries:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
79

 
63

 
69

 
83

 
82

Real estate mortgage
17

 
14

 
24

 
14

 
30

Real estate construction
4

 
3

 
15

 
4

 
8

Lease financing
5

 
4

 
5

 
6

 
2

Total commercial
105

 
84

 
113

 
107

 
122

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
59

 
72

 
83

 
71

 
62

Real estate 1-4 family junior lien mortgage
55

 
61

 
69

 
66

 
70

Credit card
73

 
62

 
60

 
59

 
58

Automobile
92

 
73

 
72

 
86

 
88

Other revolving credit and installment
31

 
27

 
30

 
31

 
33

Total consumer
310

 
295

 
314

 
313

 
311

Total loan recoveries
415

 
379

 
427

 
420

 
433

Net loan charge-offs
(741
)
 
(751
)
 
(717
)
 
(655
)
 
(805
)
Other
(54
)
 
—

 
6

 
5

 
(5
)
Balance, end of quarter
$
11,313

 
11,960

 
12,109

 
12,146

 
12,287

Components:
 
 
 
 
 
 
 
 
 
Allowance for loan losses
$
10,373

 
11,004

 
11,078

 
11,073

 
11,168

Allowance for unfunded credit commitments
940

 
956

 
1,031

 
1,073

 
1,119

Allowance for credit losses
$
11,313

 
11,960

 
12,109

 
12,146

 
12,287

Net loan charge-offs (annualized) as a percentage of average total loans
0.32
%
 
0.31

 
0.30

 
0.27

 
0.34

Allowance for loan losses as a percentage of:
 
 
 
 
 
 
 
 
 
Total loans
1.10

 
1.15

 
1.16

 
1.16

 
1.17

Nonaccrual loans
134

 
137

 
129

 
122

 
114

Nonaccrual loans and other nonperforming assets
125

 
127

 
119

 
113

 
105

Allowance for credit losses as a percentage of:
 
 
 
 
 
 
 
 
 
Total loans
1.19

 
1.25

 
1.27

 
1.27

 
1.28

Nonaccrual loans
147

 
149

 
141

 
134

 
126

Nonaccrual loans and other nonperforming assets
136

 
138

 
130

 
123

 
115

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


- 36 -

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


Mar 31,
2018

Dec 31,
2017

Sep 30,
2017

Jun 30,
2017

Mar 31,
2017

Tangible book value per common share (1):







Total equity


$
206,710

208,079

206,617

205,949

202,310

Adjustments:
 
 
 
 
 
 
 
Preferred stock


(26,227
)
(25,358
)
(25,576
)
(25,785
)
(25,501
)
Additional paid-in capital on ESOP
preferred stock


(146
)
(122
)
(130
)
(136
)
(157
)
Unearned ESOP shares


2,571

1,678

1,904

2,119

2,546

Noncontrolling interests


(958
)
(1,143
)
(895
)
(915
)
(989
)
Total common stockholders' equity
(A)

181,950

183,134

181,920

181,232

178,209

Adjustments:
 
 
 
 
 
 
 
Goodwill


(26,445
)
(26,587
)
(26,581
)
(26,573
)
(26,666
)
Certain identifiable intangible assets
(other than MSRs)


(1,357
)
(1,624
)
(1,913
)
(2,147
)
(2,449
)
Other assets (2)


(2,388
)
(2,155
)
(2,282
)
(2,268
)
(2,121
)
Applicable deferred taxes (3)


918

962

1,550

1,624

1,698

Tangible common equity
(B)

$
152,678

153,730

152,694

151,868

148,671

Common shares outstanding
(C)

4,873.9

4,891.6

4,927.9

4,966.8

4,996.7

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

$
37.33

37.44

36.92

36.49

35.67

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

31.33

31.43

30.99

30.58

29.75

 
 
 
Quarter ended
 
(in millions, except ratios)
 
 
Mar 31,
2018

Dec 31,
2017

Sep 30,
2017

Jun 30,
2017

Mar 31,
2017

Return on average tangible common equity (1):
 
 
 
 
 
 
 
Net income applicable to common stock
(A)
 
$
5,533

5,740

4,131

5,450

5,233

Average total equity
 
 
206,189

207,413

207,723

205,755

201,559

Adjustments:
 
 

 
 
 
 
Preferred stock
 
 
(26,157
)
(25,569
)
(25,780
)
(25,849
)
(25,163
)
Additional paid-in capital on ESOP preferred stock
 
 
(153
)
(129
)
(136
)
(144
)
(146
)
Unearned ESOP shares
 
 
2,508

1,896

2,114

2,366

2,198

Noncontrolling interests
 
 
(997
)
(998
)
(926
)
(910
)
(957
)
Average common stockholders’ equity
(B)
 
181,390

182,613

182,995

181,218

177,491

Adjustments:
 
 

 
 
 
 
Goodwill
 
 
(26,516
)
(26,579
)
(26,600
)
(26,664
)
(26,673
)
Certain identifiable intangible assets (other than MSRs)
 
 
(1,489
)
(1,767
)
(2,056
)
(2,303
)
(2,588
)
Other assets (2)
 
 
(2,233
)
(2,245
)
(2,231
)
(2,160
)
(2,095
)
Applicable deferred taxes (3)
 
 
933

1,332

1,579

1,648

1,722

Average tangible common equity
(C)
 
$
152,085

153,354

153,687

151,739

147,857

Return on average common stockholders' equity (ROE) (annualized)
(A)/(B)
 
12.37
%
12.47

8.96

12.06

11.96

Return on average tangible common equity (ROTCE) (annualized)
(A)/(C)
 
14.75

14.85

10.66

14.41

14.35

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


- 37 -

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

 
 
 
 
(in billions, except ratio)
 
Mar 31,
2018

Dec 31,
2017

Sep 30,
2017

Jun 30,
2017

Mar 31,
2017

Total equity
 
$
206.7

208.1

206.6

205.9

202.3

Adjustments:
 
 
 
 
 
 
Preferred stock
 
(26.2
)
(25.4
)
(25.6
)
(25.8
)
(25.5
)
Additional paid-in capital on ESOP
preferred stock
 
(0.1
)
(0.1
)
(0.1
)
(0.1
)
(0.2
)
Unearned ESOP shares
 
2.6

1.7

1.9

2.1

2.5

Noncontrolling interests
 
(1.0
)
(1.1
)
(0.9
)
(0.9
)
(1.0
)
Total common stockholders' equity
 
182.0

183.2

181.9

181.2

178.1

Adjustments:
 
 
 
 
 
 
Goodwill
 
(26.4
)
(26.6
)
(26.6
)
(26.6
)
(26.7
)
Certain identifiable intangible assets (other than MSRs)
 
(1.4
)
(1.6
)
(1.9
)
(2.1
)
(2.4
)
Other assets (2)
 
(2.4
)
(2.2
)
(2.3
)
(2.2
)
(2.1
)
Applicable deferred taxes (3)
 
0.9

1.0

1.6

1.6

1.7

Investment in certain subsidiaries and other
 
0.4

0.2

(0.1
)
(0.2
)
(0.1
)
Common Equity Tier 1 (Fully Phased-In) under Basel III
(A)
153.1

154.0

152.6

151.7

148.5

Total risk-weighted assets (RWAs) anticipated under Basel III (4)(5)
(B)
$
1,280.9

1,285.6

1,292.8

1,310.5

1,324.5

Common Equity Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In) (5)
(A)/(B)
12.0
%
12.0

11.8

11.6

11.2

(1)
Basel III capital rules, adopted by the Federal Reserve Board on July 2, 2013, revised the definition of capital, increased minimum capital ratios, and introduced a minimum Common Equity Tier 1 (CET1) ratio. These rules established a new comprehensive capital framework for U.S. banking organizations that implements the Basel III capital framework and certain provisions of the Dodd-Frank Act. The rules are being phased in through the end of 2021. Fully phased-in capital amounts, ratios and RWAs are calculated assuming the full phase-in of the Basel III capital rules. Fully phased-in regulatory capital amounts, ratios and RWAs are considered non-GAAP financial measures that are used by management, bank regulatory agencies, investors and analysts to assess and monitor the Company’s capital position.
(2)
Represents goodwill and other intangibles on nonmarketable equity securities.
(3)
Applicable deferred taxes relate to goodwill and other intangible assets. They were determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.
(4)
The final Basel III capital rules provide for two capital frameworks: the Standardized Approach, which replaced Basel I, and the Advanced Approach applicable to certain institutions. Under the final rules, we are subject to the lower of our CET1 ratio calculated under the Standardized Approach and under the Advanced Approach in the assessment of our capital adequacy. Because the final determination of our CET1 ratio and which approach will produce the lower CET1 ratio as of March 31, 2018, is subject to detailed analysis of considerable data, our CET1 ratio at that date has been estimated using the Basel III definition of capital under the Basel III Standardized Approach RWAs. The capital ratio for December 31, September 30, June 30 and March 31, 2017, was calculated under the Basel III Standardized Approach RWAs.
(5)
The Company’s March 31, 2018, RWAs and capital ratio are preliminary estimates.


- 38 -

Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
(income/expense in millions,
average balances in billions)
Community
Banking
 
 
Wholesale
Banking
 
 
Wealth and Investment Management
 
 
Other (2)
 
 
Consolidated
Company
 
2018

 
2017

 
2018

 
2017

 
2018

 
2017

 
2018

 
2017

 
2018

 
2017

Quarter ended March 31,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (3)
$
7,195

 
7,132

 
4,532

 
4,681

 
1,112

 
1,141

 
(601
)
 
(630
)
 
12,238

 
12,324

Provision (reversal of provision) for credit losses
218

 
646

 
(20
)
 
(43
)
 
(6
)
 
(4
)
 
(1
)
 
6

 
191

 
605

Noninterest income
4,635

 
4,691

 
2,747

 
2,896

 
3,130

 
3,116

 
(816
)
 
(772
)
 
9,696

 
9,931

Noninterest expense
7,902

 
7,281

 
3,978

 
4,167

 
3,290

 
3,204

 
(928
)
 
(860
)
 
14,242

 
13,792

Income (loss) before income tax expense (benefit)
3,710

 
3,896

 
3,321

 
3,453

 
958

 
1,057

 
(488
)
 
(548
)
 
7,501

 
7,858

Income tax expense (benefit)
809

 
982

 
448

 
973

 
239

 
386

 
(122
)
 
(208
)
 
1,374

 
2,133

Net income (loss) before noncontrolling interests
2,901

 
2,914

 
2,873

 
2,480

 
719

 
671

 
(366
)
 
(340
)
 
6,127

 
5,725

Less: Net income (loss) from noncontrolling interests
188

 
90

 
(2
)
 
(5
)
 
5

 
6

 
—

 
—

 
191

 
91

Net income (loss)
$
2,713

 
2,824

 
2,875

 
2,485

 
714

 
665

 
(366
)
 
(340
)
 
5,936

 
5,634

 
Average loans
$
470.5

 
480.7

 
465.1

 
468.3

 
73.9

 
70.7

 
(58.5
)
 
(56.1
)
 
951.0

 
963.6

Average assets
1,061.9

 
1,095.8

 
829.2

 
810.5

 
84.2

 
81.8

 
(59.4
)
 
(57.1
)
 
1,915.9

 
1,931.0

Average deposits
747.5

 
717.8

 
446.0

 
465.3

 
177.9

 
197.5

 
(74.2
)
 
(81.4
)
 
1,297.2

 
1,299.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. Effective first quarter 2018, assets and liabilities receive a funding charge or credit that considers interest rate risk, liquidity risk, and other product characteristics on a more granular level. This methodology change affects results across all three of our reportable operating segments and prior period operating segment results have been revised to reflect this methodology change. Our previously reported consolidated financial results were not impacted by the methodology change; however, in connection with the adoption of ASU 2016-01 in first quarter 2018, certain reclassifications will occur within noninterest income.
(2)
Includes the elimination of certain items that are included in more than one business segment, most of which represents products and services for Wealth and Investment Management customers served through Community Banking distribution channels.
(3)
Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets as well as interest credits for any funding of a segment available to be provided to other segments. The cost of liabilities includes actual interest expense on segment liabilities as well as funding charges for any funding provided from other segments.


- 39 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)
 
 
 
 
 
 
 
Quarter ended
 
(income/expense in millions, average balances in billions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

COMMUNITY BANKING
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
7,195

 
7,239

 
7,154

 
7,133

 
7,132

Provision for credit losses
218

 
636

 
650

 
623

 
646

Noninterest income
4,635

 
4,481

 
4,366

 
4,822

 
4,691

Noninterest expense
7,902

 
10,216

 
7,852

 
7,266

 
7,281

Income before income tax expense
3,710

 
868

 
3,018

 
4,066

 
3,896

Income tax expense (benefit)
809

 
(2,682
)
 
1,079

 
1,255

 
982

Net income before noncontrolling interests
2,901

 
3,550

 
1,939

 
2,811

 
2,914

Less: Net income from noncontrolling interests
188

 
78

 
62

 
46

 
90

Segment net income
$
2,713

 
3,472

 
1,877

 
2,765

 
2,824

Average loans
$
470.5

 
473.2

 
473.7

 
475.1

 
480.7

Average assets
1,061.9

 
1,073.2

 
1,089.6

 
1,083.6

 
1,095.8

Average deposits
747.5

 
738.3

 
734.6

 
727.7

 
717.8

WHOLESALE BANKING
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
4,532

 
4,557

 
4,763

 
4,809

 
4,681

Provision (reversal of provision) for credit losses
(20
)
 
20

 
69

 
(65
)
 
(43
)
Noninterest income
2,747

 
2,883

 
2,741

 
2,670

 
2,896

Noninterest expense
3,978

 
4,187

 
4,234

 
4,036

 
4,167

Income before income tax expense
3,321

 
3,233

 
3,201

 
3,508

 
3,453

Income tax expense
448

 
854

 
894

 
775

 
973

Net income before noncontrolling interests
2,873

 
2,379

 
2,307

 
2,733

 
2,480

Less: Net income (loss) from noncontrolling interests
(2
)
 
6

 
(7
)
 
(9
)
 
(5
)
Segment net income
$
2,875

 
2,373

 
2,314

 
2,742

 
2,485

Average loans
$
465.1

 
463.5

 
463.7

 
466.9

 
468.3

Average assets
829.2

 
837.2

 
824.2

 
818.8

 
810.5

Average deposits
446.0

 
465.7

 
463.4

 
462.4

 
465.3

WEALTH AND INVESTMENT MANAGEMENT
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
1,112

 
1,152

 
1,177

 
1,171

 
1,141

Provision (reversal of provision) for credit losses
(6
)
 
(7
)
 
(1
)
 
7

 
(4
)
Noninterest income
3,130

 
3,181

 
3,079

 
3,055

 
3,116

Noninterest expense
3,290

 
3,246

 
3,102

 
3,071

 
3,204

Income before income tax expense
958

 
1,094

 
1,155

 
1,148

 
1,057

Income tax expense
239

 
413

 
433

 
436

 
386

Net income before noncontrolling interests
719

 
681

 
722

 
712

 
671

Less: Net income from noncontrolling interests
5

 
6

 
3

 
1

 
6

Segment net income
$
714

 
675

 
719

 
711

 
665

Average loans
$
73.9

 
72.9

 
72.4

 
71.7

 
70.7

Average assets
84.2

 
83.7

 
83.2

 
82.4

 
81.8

Average deposits
177.9

 
184.1

 
184.4

 
190.1

 
197.5

OTHER (3)
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
(601
)
 
(635
)
 
(645
)
 
(642
)
 
(630
)
Provision (reversal of provision) for credit losses
(1
)
 
2

 
(1
)
 
(10
)
 
6

Noninterest income
(816
)
 
(808
)
 
(786
)
 
(783
)
 
(772
)
Noninterest expense
(928
)
 
(849
)
 
(837
)
 
(832
)
 
(860
)
Loss before income tax benefit
(488
)
 
(596
)
 
(593
)
 
(583
)
 
(548
)
Income tax benefit
(122
)
 
(227
)
 
(225
)
 
(221
)
 
(208
)
Net loss before noncontrolling interests
(366
)
 
(369
)
 
(368
)
 
(362
)
 
(340
)
Less: Net income from noncontrolling interests
—

 
—

 
—

 
—

 
—

Other net loss
$
(366
)
 
(369
)
 
(368
)
 
(362
)
 
(340
)
Average loans
$
(58.5
)
 
(57.8
)
 
(57.5
)
 
(56.8
)
 
(56.1
)
Average assets
(59.4
)
 
(58.8
)
 
(58.5
)
 
(57.8
)
 
(57.1
)
Average deposits
(74.2
)
 
(76.5
)
 
(76.0
)
 
(79.0
)
 
(81.4
)
CONSOLIDATED COMPANY
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
12,238

 
12,313

 
12,449

 
12,471

 
12,324

Provision for credit losses
191

 
651

 
717

 
555

 
605

Noninterest income
9,696

 
9,737

 
9,400

 
9,764

 
9,931

Noninterest expense
14,242

 
16,800


14,351


13,541


13,792

Income before income tax expense
7,501

 
4,599

 
6,781

 
8,139

 
7,858

Income tax expense (benefit)
1,374

 
(1,642
)
 
2,181

 
2,245

 
2,133

Net income before noncontrolling interests
6,127

 
6,241

 
4,600

 
5,894

 
5,725

Less: Net income from noncontrolling interests
191

 
90

 
58

 
38

 
91

Wells Fargo net income
$
5,936

 
6,151

 
4,542

 
5,856

 
5,634

Average loans
$
951.0

 
951.8

 
952.3

 
956.9

 
963.6

Average assets
1,915.9

 
1,935.3

 
1,938.5

 
1,927.0

 
1,931.0

Average deposits
1,297.2

 
1,311.6

 
1,306.4

 
1,301.2

 
1,299.2

(1)
The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. Effective first quarter 2018, assets and liabilities receive a funding charge or credit that considers interest rate risk, liquidity risk, and other product characteristics on a more granular level. This methodology change affects results across all three of our reportable operating segments and prior period operating segment results have been revised to reflect this methodology change. Our previously reported consolidated financial results were not impacted by the methodology change; however, in connection with the adoption of ASU 2016-01 in first quarter 2018, certain reclassifications will occur within noninterest income.
(2)
Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets as well as interest credits for any funding of a segment available to be provided to other segments. The cost of liabilities includes actual interest expense on segment liabilities as well as funding charges for any funding provided from other segments.
(3)
Includes the elimination of certain items that are included in more than one business segment, most of which represents products and services for Wealth and Investment Management customers served through Community Banking distribution channels.


- 40 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
 
 Quarter ended
 
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

MSRs measured using the fair value method:
 
 
 
 
 
 
 
 
 
Fair value, beginning of quarter
$
13,625

 
13,338

 
12,789

 
13,208

 
12,959

Purchases
—

 
—

 
541

 
—

 
—

Servicing from securitizations or asset transfers (1)
573

 
639

 
605

 
436

 
583

Sales and other (2)
(4
)
 
(32
)
 
64

 
(8
)
 
(47
)
Net additions
569

 
607

 
1,210

 
428

 
536

Changes in fair value:
 
 
 
 
 
 
 
 
 
Due to changes in valuation model inputs or assumptions:
 
 
 
 
 
 
 
 
 
Mortgage interest rates (3)
1,253

 
221

 
(171
)
 
(305
)
 
152

Servicing and foreclosure costs (4)
34

 
23

 
60

 
(14
)
 
27

Discount rates (5)
—

 
13

 
—

 
—

 
—

Prepayment estimates and other (6)
43

 
(55
)
 
(31
)
 
(41
)
 
(5
)
Net changes in valuation model inputs or assumptions
1,330

 
202

 
(142
)
 
(360
)
 
174

Changes due to collection/realization of expected cash flows over time
(483
)
 
(522
)
 
(519
)
 
(487
)
 
(461
)
Total changes in fair value
847

 
(320
)
 
(661
)
 
(847
)
 
(287
)
Fair value, end of quarter
$
15,041

 
13,625

 
13,338

 
12,789

 
13,208

(1)
Includes impacts associated with exercising our right to repurchase delinquent loans from GNMA loan securitization pools.
(2)
Includes sales and transfers of MSRs, which can result in an increase of total reported MSRs if the sales or transfers are related to nonperforming loan portfolios or portfolios with servicing liabilities.
(3)
Includes prepayment speed changes as well as other valuation changes due to changes in mortgage interest rates (such as changes in estimated interest earned on custodial deposit balances)
(4)
Includes costs to service and unreimbursed foreclosure costs.
(5)
Reflects discount rate assumption change, excluding portion attributable to changes in mortgage interest rates.
(6)
Represents changes driven by other valuation model inputs or assumptions including prepayment speed estimation changes and other assumption updates. Prepayment speed estimation changes are influenced by observed changes in borrower behavior and other external factors that occur independent of interest rate changes.



 
Quarter ended
 
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Amortized MSRs:
 
 
 
 
 
 
 
 
 
Balance, beginning of quarter
$
1,424

 
1,406

 
1,399

 
1,402

 
1,406

Purchases
18

 
40

 
31

 
26

 
18

Servicing from securitizations or asset transfers
34

 
43

 
41

 
37

 
45

Amortization
(65
)
 
(65
)
 
(65
)
 
(66
)
 
(67
)
Balance, end of quarter
$
1,411

 
1,424

 
1,406

 
1,399

 
1,402

Fair value of amortized MSRs:
 
 
 
 
 
 
 
 
 
Beginning of quarter
$
2,025

 
1,990

 
1,989

 
2,051

 
1,956

End of quarter
2,307

 
2,025

 
1,990

 
1,989

 
2,051



- 41 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
 
 
Quarter ended
 
(in millions)
 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Servicing income, net:
 
 
 
 
 
 
 
 
 
 
Servicing fees (1)
 
$
906

 
833

 
795

 
882

 
882

Changes in fair value of MSRs carried at fair value:
 
 
 
 
 
 
 
 
 
 
Due to changes in valuation model inputs or assumptions (2)
(A)
1,330

 
202

 
(142
)
 
(360
)
 
174

Changes due to collection/realization of expected cash flows over time
 
(483
)
 
(522
)
 
(519
)
 
(487
)
 
(461
)
Total changes in fair value of MSRs carried at fair value
 
847

 
(320
)
 
(661
)
 
(847
)
 
(287
)
Amortization
 
(65
)
 
(65
)
 
(65
)
 
(66
)
 
(67
)
Net derivative gains (losses) from economic hedges (3)
(B)
(1,220
)
 
(186
)
 
240

 
431

 
(72
)
Total servicing income, net
 
$
468

 
262

 
309

 
400

 
456

Market-related valuation changes to MSRs, net of hedge results (2)(3)
(A)+(B)
$
110

 
16

 
98

 
71

 
102

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



(in billions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Managed servicing portfolio (1):
 
 
 
 
 
 
 
 
 
Residential mortgage servicing:
 
 
 
 
 
 
 
 
 
Serviced for others
$
1,201

 
1,209

 
1,223

 
1,189

 
1,204

Owned loans serviced
337

 
342

 
340

 
343

 
335

Subserviced for others
5

 
3

 
3

 
4

 
4

Total residential servicing
1,543

 
1,554

 
1,566

 
1,536

 
1,543

Commercial mortgage servicing:
 
 
 
 
 
 
 
 
 
Serviced for others
510

 
495

 
480

 
475

 
474

Owned loans serviced
125

 
127

 
128

 
130

 
132

Subserviced for others
10

 
9

 
8

 
8

 
7

Total commercial servicing
645

 
631

 
616

 
613

 
613

Total managed servicing portfolio
$
2,188

 
2,185

 
2,182

 
2,149

 
2,156

Total serviced for others
$
1,711

 
1,704

 
1,703

 
1,664

 
1,678

Ratio of MSRs to related loans serviced for others
0.96
%
 
0.88

 
0.87

 
0.85

 
0.87

Weighted-average note rate (mortgage loans serviced for others)
4.24

 
4.23

 
4.23

 
4.23

 
4.23

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


- 42 -

Wells Fargo & Company and Subsidiaries
SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA
 
 
Quarter ended
 
 
 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017


Mar 31,
2017

Net gains on mortgage loan origination/sales activities (in millions):
 
 
 
 
 
 
 
 
 
 
Residential
(A)
$
324

 
504

 
546

 
521

 
569

Commercial
 
76

 
95

 
81

 
81

 
101

Residential pipeline and unsold/repurchased loan management (1)
 
66

 
67

 
110

 
146

 
102

Total
 
$
466

 
666

 
737

 
748

 
772

Application data (in billions):
 
 
 
 
 
 
 
 
 
 
Wells Fargo first mortgage quarterly applications
 
$
58

 
63

 
73

 
83

 
59

Refinances as a percentage of applications
 
35
%
 
38

 
37

 
32

 
36

Wells Fargo first mortgage unclosed pipeline, at quarter end
 
$
24

 
23

 
29

 
34

 
28

Residential real estate originations:
 
 
 
 
 
 
 
 
 
 
Purchases as a percentage of originations
 
65
%
 
64

 
72

 
75

 
61

Refinances as a percentage of originations
 
35

 
36

 
28

 
25

 
39

Total
 
100
%
 
100

 
100

 
100

 
100

Wells Fargo first mortgage loans (in billions):
 
 
 
 
 
 
 
 
 
 
Retail
 
$
16

 
23

 
26

 
25

 
21

Correspondent
 
27

 
30

 
32

 
31

 
22

Other (2)
 
—

 
—

 
1

 
—

 
1

Total quarter-to-date
 
$
43

 
53

 
59

 
56

 
44

Held-for-sale
(B)
$
34

 
40

 
44

 
42

 
34

Held-for-investment
 
9

 
13

 
15

 
14

 
10

Total quarter-to-date
 
$
43

 
53

 
59

 
56

 
44

Total year-to-date
 
$
43

 
212

 
159

 
100

 
44

Production margin on residential held-for-sale mortgage originations
(A)/(B)
0.94
%
 
1.25

 
1.24

 
1.24

 
1.68

(1)
Predominantly includes the results of sales of modified Government National Mortgage Association (GNMA) loans, interest rate management activities and changes in estimate to the liability for mortgage loan repurchase losses.
(2)
Consists of home equity loans and lines.


CHANGES IN MORTGAGE REPURCHASE LIABILITY
 
 
 
 
Quarter ended
 
(in millions)
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

 
Mar 31,
2017

Balance, beginning of period
$
181

 
179

 
178

 
222

 
229

Assumed with MSR purchases (1)
—

 
—

 
10

 
—

 
—

Provision for repurchase losses:
 
 
 
 
 
 
 
 
 
Loan sales
3

 
4

 
6

 
6

 
8

Change in estimate (2)
1

 
2

 
(12
)
 
(45
)
 
(8
)
Net additions (reductions) to provision
4


6


(6
)
 
(39
)
 
—

Losses
(4
)
 
(4
)
 
(3
)
 
(5
)
 
(7
)
Balance, end of period
$
181


181


179

 
178

 
222

(1)
Represents repurchase liability associated with portfolio of loans underlying mortgage servicing rights acquired during the period.
(2)
Results from changes in investor demand and mortgage insurer practices, credit deterioration and changes in the financial stability of correspondent lenders.