EX-99.1 2 wfc2qer7-13x2018exx991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1


wfc011415ex991pg001ba34.jpg
wfc011415ex991pg001aa36.jpg
 
 
 
 
 
Media
 
Investors
 
 
 
 
Ancel Martinez
 
John M. Campbell
 
 
 
 
415-222-3858
 
415-396-0523
Friday, July 13, 2018
WELLS FARGO REPORTS $5.2 BILLION IN QUARTERLY NET INCOME
Diluted EPS of $0.98 included net discrete income tax expense of $0.10 per share
▪
Financial results:
◦
Net income of $5.2 billion, compared with $5.9 billion in second quarter 2017
•
Second quarter 2018 included net discrete income tax expense of $481 million mostly related to state income taxes driven by the recent U.S. Supreme Court decision in South Dakota v. Wayfair
◦
Diluted earnings per share (EPS) of $0.98, compared with $1.08
◦
Revenue of $21.6 billion, down from $22.2 billion
•
Net interest income of $12.5 billion, up $70 million, or 1 percent
•
Noninterest income of $9.0 billion, down $752 million, or 8 percent
◦
Noninterest expense of $14.0 billion, up from $13.5 billion
•
Second quarter 2018 included $619 million of operating losses primarily related to non-litigation expense for previously disclosed matters
◦
Average deposits of $1.3 trillion, down $29.9 billion, or 2 percent
◦
Average loans of $944.1 billion, down $12.8 billion, or 1 percent
◦
Return on assets (ROA) of 1.10 percent, return on equity (ROE) of 10.60 percent, and return on average tangible common equity (ROTCE) of 12.62 percent1
◦
Returned $4.0 billion to shareholders through common stock dividends and net share repurchases, up 17 percent from $3.4 billion in second quarter 2017
▪
Credit quality:
◦
Provision expense of $452 million, down $103 million, or 19 percent, from second quarter 2017
•
Net charge-offs declined $53 million to $602 million, or 0.26 percent of average loans (annualized)
•
Reserve release2 of $150 million, compared with $100 million in second quarter 2017
◦
Nonaccrual loans of $7.5 billion, down $1.6 billion, or 17 percent
▪
Received a non-objection to the Company's 2018 Capital Plan submission from the Federal Reserve
◦
As part of this plan, the Company expects to increase its third quarter 2018 common stock dividend to $0.43 per share from $0.39 per share, subject to approval by the Company's Board of Directors. The plan also includes up to $24.5 billion of gross common stock repurchases for the four-quarter period from third quarter 2018 through second quarter 2019.

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



- 2 -

Selected Financial Information
 
 
 
Quarter ended
 
 
Jun 30,
2018

 
Mar 31,
2018

 
Jun 30,
2017

Earnings
 
 
 
 
 
Diluted earnings per common share
$
0.98

 
0.96

 
1.08

Wells Fargo net income (in billions)
5.19

 
5.14

 
5.86

Return on assets (ROA)
1.10
%
 
1.09

 
1.22

Return on equity (ROE)
10.60

 
10.58

 
12.06

Return on average tangible common equity (ROTCE) (a)
12.62

 
12.62

 
14.41

Asset Quality
 
 
 
 
 
Net charge-offs (annualized) as a % of average total loans
0.26
%
 
0.32

 
0.27

Allowance for credit losses as a % of total loans
1.18

 
1.19

 
1.27

Allowance for credit losses as a % of annualized net charge-offs
460

 
376

 
462

Other
 
 
 
 
 
Revenue (in billions)
$
21.6

 
21.9

 
22.2

Efficiency ratio (b)
64.9
%
 
68.6

 
60.9

Average loans (in billions)
$
944.1

 
951.0

 
956.9

Average deposits (in billions)
1,271.3

 
1,297.2

 
1,301.2

Net interest margin
2.93
%
 
2.84

 
2.90

(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 net income of $5.2 billion, or $0.98 per diluted common share, for second quarter 2018, compared with $5.9 billion, or $1.08 per share, for second quarter 2017, and $5.1 billion, or $0.96 per share, for first quarter 2018.
Chief Executive Officer Tim Sloan said, “During the second quarter we continued to transform Wells Fargo into a better, stronger company for our customers, team members, communities and shareholders. Our progress included making further improvements to our compliance and operational risk management programs; hiring a new Chief Risk Officer; announcing innovative new products including a digital application for Merchant Services customers and our enhanced Propel® Card, one of the richest no-annual-fee credit cards in the industry; launching our ‘Re-established’ marketing effort, the largest advertising campaign in our history; announcing a new $200 billion commitment to financing sustainable businesses and projects; and continuing to move forward on our expense savings initiatives. I’m also pleased with our recent CCAR results, which demonstrates the strength of our diversified business model, our sound financial risk management practices, and our strong capital position, and enables us to return more capital to our shareholders in alignment with our goal of creating long-term shareholder value.”

Chief Financial Officer John Shrewsberry said, “Wells Fargo reported $5.2 billion of net income in the second quarter, which included net discrete income tax expense of $481 million. Net interest income grew both linked quarter and year-over-year in the second quarter, credit performance and capital levels remained strong, and we are on track to meet our expense reduction expectations. In addition, we received a non-objection to our 2018 Capital Plan, which includes an increase in our quarterly common stock dividend rate in third quarter 2018 to $0.43 per share, subject to board approval, as well as up to $24.5 billion of gross common stock repurchases during the four-quarter period beginning in third quarter 2018. The shareholder returns included in the capital plan are


- 3 -

approximately 70% higher than our previous four quarter capital actions, demonstrating our commitment to returning more capital to shareholders. Our ability to return this level of capital is a result of capital built in recent years through continued stable earnings and a lower level of risk-weighted assets.”
Net Interest Income
Net interest income in the second quarter was $12.5 billion, up $303 million compared with first quarter 2018, driven predominantly by a less negative impact from hedge ineffectiveness accounting, the net benefit of rate and spread movements, and one additional day in the quarter.
Net interest margin was 2.93 percent, up 9 basis points compared with first quarter 2018. The increase was driven by a reduction in the proportion of lower yielding assets, as well as a less negative impact from hedge ineffectiveness accounting and the net benefit of rate and spread movements.
Noninterest Income
Noninterest income in the second quarter was $9.0 billion, down $684 million compared with first quarter 2018. Second quarter noninterest income included lower market sensitive revenue3, mortgage banking fees and other income, partially offset by higher card fees on stronger credit card and debit card activity.
•
Mortgage banking income was $770 million, down from $934 million in first quarter 2018. Residential mortgage loan originations increased in the second quarter to $50 billion, from $43 billion in the first quarter. The production margin on residential held-for-sale mortgage loan originations4 declined to 0.77 percent, compared with 0.94 percent in the first quarter, due to increased price competition. Net mortgage servicing income was $406 million in the second quarter, down from $468 million in the first quarter driven by higher loan prepayments.
•
Market sensitive revenue was $527 million, down from $1.0 billion in first quarter 2018, primarily due to lower unrealized gains from equity securities. Additionally, second quarter 2018 included $214 million of other-than-temporary impairment (OTTI) from the announced sale of Wells Fargo Asset Management's (WFAM) ownership stake in The Rock Creek Group, LP (RockCreek).
•
Other income was $323 million, compared with $438 million in the first quarter. Second quarter results included a $479 million gain from sales of $1.3 billion of purchased credit-impaired (PCI) Pick-a-Pay loans, compared with a $643 million gain from sales of $1.6 billion of PCI Pick-a-Pay loans in first quarter 2018.

Noninterest Expense
Noninterest expense in the second quarter declined $1.1 billion from the prior quarter to $14.0 billion, primarily due to lower operating losses, a decline in employee benefits and incentive compensation expense, which were seasonally elevated in the first quarter, and lower equipment expense. These decreases were partially offset by higher charitable donations expense, contract services, advertising and promotion, and outside professional services expense. The efficiency ratio was 64.9 percent in second quarter 2018, compared with 68.6 percent in the first quarter.
3 Market sensitive revenue represents net gains from trading activities, debt securities, and equity securities.
4 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.


- 4 -

Second quarter 2018 operating losses were $619 million, which included typical operating losses, as well as non-litigation expense for previously disclosed matters, including policies, practices and procedures in our foreign exchange business; fee calculations within certain fiduciary and custody accounts in our wealth management business; practices in our automobile lending business, including related insurance products; and mortgage interest rate lock extensions. First quarter 2018 operating losses were $1.5 billion due to elevated litigation accruals.
Income Taxes
The Company’s effective income tax rate was 25.9 percent for second quarter 2018 and included net discrete income tax expense of $481 million mostly related to state income taxes. Discrete income tax expenses in the second quarter were driven by the Company’s adjustment to its state income tax reserves following the recent U.S. Supreme Court decision in South Dakota v. Wayfair and by the true-up of certain state income tax accruals. The effective income tax rate in first quarter 2018 was 21.1 percent and included net discrete income tax expense of $137 million, predominantly resulting from the non-deductible treatment of a discrete litigation accrual. The Company currently expects the effective income tax rate for the remainder of 2018 to be approximately 19 percent, excluding the impact of any future discrete items.
Loans
Total average loans were $944.1 billion in the second quarter, down $6.9 billion from the first quarter. Period-end loan balances were $944.3 billion at June 30, 2018, down $3.0 billion from March 31, 2018. Commercial loans were down $291 million compared with March 31, 2018, with a $2.5 billion decline in commercial real estate loans, partially offset by $1.9 billion of growth in commercial and industrial loans and a $321 million increase in lease financing loans. Consumer loans decreased $2.8 billion from the prior quarter, driven by:
•
a $1.9 billion decline in automobile loans due to expected continued runoff
•
a $1.4 billion decline in the junior lien mortgage portfolio as payoffs continued to exceed new originations
•
a $376 million decline in other revolving credit and installment loans
•
these decreases were partially offset by:
◦
a $581 million increase in credit card balances
◦
a $343 million increase in 1-4 family first mortgage loans, as nonconforming mortgage loan originations were partially offset by payoffs and $1.3 billion of sales of PCI Pick-a-Pay mortgage loans
Additionally, $507 million of nonconforming mortgage loan originations that would have otherwise been included in 1-4 family first mortgage loan outstandings were designated as held for sale in anticipation of the future issuance of residential mortgage-backed securities (RMBS), and $112 million of loans were transferred to held for sale as a result of previously announced branch divestitures.
Period-End Loan Balances
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Commercial
$
503,105

 
503,396

 
503,388

 
500,150

 
505,901

Consumer
441,160

 
443,912

 
453,382

 
451,723

 
451,522

Total loans
$
944,265

 
947,308

 
956,770

 
951,873

 
957,423

Change from prior quarter
$
(3,043
)
 
(9,462
)
 
4,897

 
(5,550
)
 
(982
)


- 5 -

Debt and Equity Securities
Debt securities include available-for-sale and held-to-maturity debt securities, as well as debt securities held for trading. Debt securities were $475.5 billion at June 30, 2018, up $2.5 billion from the first quarter, driven by:
•
a $5.7 billion increase in debt securities held for trading
•
a net decrease in available-for-sale and held-to-maturity debt securities, as approximately $14.4 billion of purchases, primarily federal agency mortgage-backed securities (MBS) in the available-for-sale portfolio, were more than offset by runoff and sales
Net unrealized losses on available-for-sale debt securities were $2.4 billion at June 30, 2018, compared with net unrealized losses of $1.9 billion at March 31, 2018, primarily due to higher interest rates.
Equity securities include marketable and non-marketable equity securities, as well as equity securities held for trading. Equity securities were $57.5 billion at June 30, 2018, down $1.4 billion from the first quarter, predominantly due to a decline in equity securities held for trading.
Deposits
Total average deposits for second quarter 2018 were $1.3 trillion, down $25.8 billion from the prior quarter. The decline was driven by a decrease in commercial deposits, primarily from financial institutions, including a $13.5 billion decline from actions the Company has taken in response to 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 $754.0 billion for second quarter 2018 were down $1.4 billion from the prior quarter, with growth in Community Banking deposits more than offset by lower Wealth and Investment Management deposits, as customers allocated more cash to alternative higher-rate liquid investments. The average deposit cost for second quarter 2018 was 40 basis points, up 6 basis points from the prior quarter and 19 basis points from a year ago, primarily driven by an increase in commercial and Wealth and Investment Management deposit rates.

Capital
Capital in the second quarter continued to exceed our internal target, with a Common Equity Tier 1 ratio (fully phased-in) of 12.0 percent5, flat compared with the prior quarter. In second quarter 2018, the Company repurchased 35.8 million shares of its common stock, which reduced period-end common shares outstanding by 24.8 million. The Company paid a quarterly common stock dividend of $0.39 per share. In addition, the Company received a non-objection to its 2018 Capital Plan from the Federal Reserve. As part of this plan, the Company expects to increase its third quarter 2018 common stock dividend to $0.43 per share, subject to approval by the Company's Board of Directors. The plan also includes up to $24.5 billion of gross common stock repurchases, subject to management discretion, for the four-quarter period from third quarter 2018 through second quarter 2019.
5 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.


- 6 -

Credit Quality

Net Loan Charge-offs
The quarterly loss rate in the second quarter was 0.26 percent (annualized), compared with 0.32 percent in the prior quarter and 0.27 percent a year ago. Commercial and consumer losses were 0.05 percent and 0.49 percent, respectively. Total credit losses were $602 million in second quarter 2018, down $139 million from first quarter 2018. Commercial losses were down $11 million due to improvement in commercial and industrial loans. Consumer losses decreased $128 million driven by lower loss rates and higher recovery rates, including seasonal impacts in automobile and credit card.
Net Loan Charge-Offs
 
Quarter ended
 
 
June 30, 2018
 
 
March 31, 2018
 
 
June 30, 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
$
58

 
0.07
 %
 
$
85

 
0.10
 %
 
$
78

 
0.10
 %
Real estate mortgage
—

 
—

 
(15
)
 
(0.05
)
 
(6
)
 
(0.02
)
Real estate construction
(6
)
 
(0.09
)
 
(4
)
 
(0.07
)
 
(4
)
 
(0.05
)
Lease financing
15

 
0.32

 
12

 
0.25

 
7

 
0.15

Total commercial
67

 
0.05

 
78

 
0.06

 
75

 
0.06

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
(23
)
 
(0.03
)
 
(18
)
 
(0.03
)
 
(16
)
 
(0.02
)
Real estate 1-4 family junior lien mortgage
(13
)
 
(0.13
)
 
(8
)
 
(0.09
)
 
(4
)
 
(0.03
)
Credit card
323

 
3.61

 
332

 
3.69

 
320

 
3.67

Automobile
113

 
0.93

 
208

 
1.64

 
126

 
0.86

Other revolving credit and installment
135

 
1.44

 
149

 
1.60

 
154

 
1.58

Total consumer
535

 
0.49

 
663

 
0.60

 
580

 
0.51

Total
$
602

 
0.26
 %
 
$
741

 
0.32
 %
 
$
655

 
0.27
 %
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Quarterly net charge-offs (recoveries) as a percentage of average loans are annualized. See explanation on page 33 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.



- 7 -

Nonperforming Assets
Nonperforming assets decreased $305 million, or 4 percent, from first quarter 2018 to $8.0 billion. Nonaccrual loans decreased $233 million from first quarter 2018 to $7.5 billion predominantly driven by lower consumer real estate nonaccruals.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
 
June 30, 2018
 
 
March 31, 2018
 
 
June 30, 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
$
1,559

 
0.46
%
 
$
1,516

 
0.45
%
 
$
2,632

 
0.79
%
Real estate mortgage
765

 
0.62

 
755

 
0.60

 
630

 
0.48

Real estate construction
51

 
0.22

 
45

 
0.19

 
34

 
0.13

Lease financing
80

 
0.41

 
93

 
0.48

 
89

 
0.46

Total commercial
2,455

 
0.49

 
2,409

 
0.48

 
3,385

 
0.67

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
3,829

 
1.35

 
4,053

 
1.43

 
4,413

 
1.60

Real estate 1-4 family junior lien mortgage
1,029

 
2.82

 
1,087

 
2.87

 
1,095

 
2.56

Automobile
119

 
0.25

 
117

 
0.24

 
104

 
0.18

Other revolving credit and installment
54

 
0.14

 
53

 
0.14

 
59

 
0.15

Total consumer
5,031

 
1.14

 
5,310

 
1.20

 
5,671

 
1.26

Total nonaccrual loans
7,486

 
0.79

 
7,719

 
0.81

 
9,056

 
0.95

Foreclosed assets:
 
 
 
 
 
 
 
 
 
 
 
Government insured/guaranteed
90

 
 
 
103

 
 
 
149

 
 
Non-government insured/guaranteed
409

 
 
 
468

 
 
 
632

 
 
Total foreclosed assets
499

 
 
 
571

 
 
 
781

 
 
Total nonperforming assets
$
7,985

 
0.85
%
 
$
8,290

 
0.88
%
 
$
9,837

 
1.03
%
Change from prior quarter:
 
 
 
 
 
 
 
 
 
 
 
Total nonaccrual loans
$
(233
)
 
 
 
$
(317
)
 
 
 
$
(625
)
 
 
Total nonperforming assets
(305
)
 
 
 
(388
)
 
 
 
(827
)
 
 
 

Allowance for Credit Losses
The allowance for credit losses, including the allowance for unfunded commitments, totaled $11.1 billion at June 30, 2018, down $203 million from March 31, 2018. Second quarter 2018 included a $150 million reserve release2, which reflected strong overall credit portfolio performance and lower loan balances. The allowance coverage for total loans was 1.18 percent, compared with 1.19 percent in first quarter 2018. The allowance covered 4.6 times annualized second quarter net charge-offs, compared with 3.8 times in the prior quarter. The allowance coverage for nonaccrual loans was 148 percent at June 30, 2018, compared with 147 percent at March 31, 2018. The Company believes the allowance was appropriate for losses inherent in the loan portfolio at June 30, 2018.




- 8 -

Business Segment Performance
Wells Fargo defines its operating segments by product type and customer segment. Segment net income for each of the three business segments was:
 
Quarter ended 
 
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Jun 30,
2017

Community Banking
$
2,496

 
1,913

 
2,765

Wholesale Banking
2,635

 
2,875

 
2,742

Wealth and Investment Management
445

 
714

 
711


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)
Jun 30,
2018

 
Mar 31,
2018

 
Jun 30,
2017

Total revenue
$
11,806

 
11,830

 
11,955

Provision for credit losses
484

 
218

 
623

Noninterest expense
7,290

 
8,702

 
7,266

Segment net income
2,496

 
1,913

 
2,765

(in billions)
 
 
 
 
 
Average loans
463.8

 
470.5

 
475.1

Average assets
1,034.3

 
1,061.9

 
1,083.6

Average deposits
760.6

 
747.5

 
727.7

Community Banking reported net income of $2.5 billion, up $583 million, or 30 percent, from first quarter 2018. Second quarter 2018 results included net discrete income tax expense of $481 million primarily related to state income taxes. Revenue in the second quarter was $11.8 billion, flat compared with first quarter 2018, as lower market sensitive revenue and mortgage banking income were largely offset by higher net interest income and card fees. Noninterest expense decreased $1.4 billion, or 16 percent, from first quarter 2018, driven mainly by lower operating losses and lower personnel expense that was down from a seasonally elevated first quarter. The provision for credit losses increased $266 million from the prior quarter primarily due to a lower reserve release.
Net income was down $269 million, or 10 percent, from second quarter 2017, primarily due to lower revenue and net discrete income tax expense of $481 million in second quarter 2018. Revenue declined $149 million, or 1 percent, from a year ago due to lower mortgage banking income and service charges on deposit accounts, partially offset by higher net interest income and higher gains on the sales of PCI Pick-a-Pay mortgage loans. Noninterest expense of $7.3 billion was stable from a year ago. The provision for credit losses decreased $139 million from a year ago due to improvement in the consumer real estate and automobile portfolios.



- 9 -

Retail Banking and Consumer Payments, Virtual Solutions and Innovation
•
More than 362,000 branch customer experience surveys completed during second quarter 2018, with both ‘Loyalty’ and ‘Overall Satisfaction with Most Recent Visit’ scores down due to several factors, including recent events and a risk-based policy change affecting individuals making cash deposits into an account on which they are not a signer
•
5,751 retail bank branches as of the end of second quarter 2018, reflecting 56 branch consolidations in the quarter and 114 in the first half of 2018; additionally, we announced plans to divest 52 branches in 2018 in Indiana, Ohio, Michigan and part of Wisconsin pending regulatory approval
•
Primary consumer checking customers6,7 up 1.2 percent year-over-year
•
Debit card point-of-sale purchase volume8 of $87.5 billion in the second quarter, up 9 percent year-over-year
•
General purpose credit card point-of-sale purchase volume of $19.2 billion in the second quarter, up 7 percent year-over-year
•
28.9 million digital (online and mobile) active customers, including over 22 million mobile active users7, 9
•
Dynatrace's Small Business Banking Scorecard named Wells Fargo #1 in overall performance for providing a positive small business banking experience through digital channels (July 2018)
•
For the second year in a row, Wells Fargo was number one in Nilson’s annual ranking of the top 50 U.S. debit card issuers, receiving the top ranking by both purchase volume and number of transactions (April 2018)
Consumer Lending
•
Home Lending
◦
Originations of $50 billion, up from $43 billion in prior quarter, primarily due to seasonality
◦
Applications of $67 billion, up from $58 billion in prior quarter, primarily due to seasonality
◦
Application pipeline of $26 billion at quarter end, up from $24 billion at March 31, 2018
◦
Production margin on residential held-for-sale mortgage loan originations4 of 0.77 percent, down from 0.94 percent in the prior quarter, due to increased price competition
•
Automobile originations of $4.4 billion in the second quarter were flat compared with the prior quarter; and down 3 percent from the 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 May 2018, comparisons with May 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)
Jun 30,
2018

 
Mar 31,
2018

 
Jun 30,
2017

Total revenue
$
7,197

 
7,279

 
7,479

Reversal of provision for credit losses
(36
)
 
(20
)
 
(65
)
Noninterest expense
4,219

 
3,978

 
4,036

Segment net income
2,635

 
2,875

 
2,742

(in billions)
 
 
 
 
 
Average loans
464.7

 
465.1

 
466.9

Average assets
826.4

 
829.2

 
818.8

Average deposits
414.0

 
446.0

 
462.4

Wholesale Banking reported net income of $2.6 billion, down $240 million, or 8 percent, from first quarter 2018. Revenue of $7.2 billion decreased $82 million, or 1 percent, from the prior quarter, primarily due to the gain on the sale of Wells Fargo Shareowner Services recognized in the first quarter and lower market sensitive revenue in the second quarter, partially offset by higher net interest income and investment banking fees. Noninterest expense increased $241 million, or 6 percent, from the prior quarter reflecting higher operating losses and higher regulatory, risk and technology expense, partially offset by seasonally lower personnel expense. Second quarter 2018 operating losses were $208 million and included $171 million of non-litigation expense related to our foreign exchange business. The provision for credit losses decreased $16 million from the prior quarter.
Net income decreased $107 million, or 4 percent, from second quarter 2017. Second quarter 2018 results benefited from a lower effective income tax rate, while second quarter 2017 included a discrete income tax benefit related to the sale of Wells Fargo Insurance Services USA (WFIS). Revenue decreased $282 million, or 4 percent, from second quarter 2017, primarily due to the impact of the sales of WFIS in fourth quarter 2017 and Wells Fargo Shareowner Services in first quarter 2018, as well as lower net interest income, operating lease income and mortgage banking fees, partially offset by higher market sensitive revenue. Noninterest expense increased $183 million, or 5 percent, from a year ago as higher operating losses and higher regulatory, risk and technology expense were partially offset by lower expense related to the sales of WFIS and Wells Fargo Shareowner Services. The provision for credit losses increased $29 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 clients’ brokerage needs, supply retirement and trust services to institutional clients and provide investment management capabilities delivered to global institutional clients through separate accounts and the Wells Fargo Funds.
Selected Financial Information
 
Quarter ended
 
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Jun 30,
2017

Total revenue
$
3,951

 
4,242

 
4,226

Provision (reversal of provision) for credit losses
(2
)
 
(6
)
 
7

Noninterest expense
3,361

 
3,290

 
3,071

Segment net income
445

 
714

 
711

(in billions)
 
 
 
 
 
Average loans
74.7

 
73.9

 
71.7

Average assets
84.0

 
84.2

 
82.4

Average deposits
167.1

 
177.9

 
190.1

Wealth and Investment Management reported net income of $445 million, down $269 million, or 38 percent, from first quarter 2018. Revenue of $4.0 billion decreased $291 million, or 7 percent, from the prior quarter, primarily due to the impairment from the announced sale of WFAM's ownership stake in RockCreek, as well as lower transaction revenue and asset-based fees. Noninterest expense increased $71 million, or 2 percent, from the prior quarter, primarily driven by higher operating losses and higher regulatory, risk and technology expense, partially offset by lower personnel expense from a seasonally higher first quarter and lower broker commissions. Second quarter 2018 operating losses were $127 million and included $114 million of non-litigation expense related to fee calculations within certain fiduciary and custody accounts in our wealth management business.
Net income was down $266 million, or 37 percent, from second quarter 2017. Second quarter 2018 results benefited from a lower effective income tax rate. Revenue decreased $275 million from a year ago, primarily driven by the impairment of WFAM's ownership stake in RockCreek, lower net interest income and transaction revenue, partially offset by higher asset-based fees. Noninterest expense increased $290 million, or 9 percent, from a year ago, primarily due to higher regulatory, risk and technology expense, higher operating losses, higher broker commissions and other personnel expense.
•
WIM total client assets of $1.9 trillion, up 3 percent from a year ago, driven by higher market valuations
•
Continued loan growth, with average balances up 4 percent from a year ago largely due to growth in non-conforming mortgage loans
•
Second quarter 2018 average closed referred investment assets (referrals resulting from the WIM/Community Banking partnership) were flat compared with the prior quarter and down 5 percent from a year ago



- 12 -

Retail Brokerage 
•
Client assets of $1.6 trillion, up 3 percent from prior year
•
Advisory assets of $543 billion, up 8 percent from prior year, primarily driven by higher market valuations

Wealth Management
•
Client assets of $238 billion, up 1 percent from prior year

Asset Management
•
Total assets under management of $494 billion, up 2 percent from prior year, driven by higher market valuations and positive money market net inflows, partially offset by equity and fixed income net outflows

Retirement
•
IRA assets of $403 billion, up 3 percent from prior year
•
Institutional Retirement plan assets of $389 billion, up 4 percent from prior year


Conference Call
The Company will host a live conference call on Friday, July 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~9092328.

A replay of the conference call will be available beginning at 10:00 a.m. PT (1:00 p.m. ET) on Friday, July 13 through Friday, July 27. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #9092328. 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~9092328.





- 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, return on equity, and return on tangible common equity; (xii) the outcome of contingencies, such as legal proceedings; and (xiii) the Company’s plans, objectives and strategies.
Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:
 
•
current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters (including the impact of the Tax Cuts & Jobs Act), geopolitical matters, and the overall slowdown in global economic growth;
•
our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
•
financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
•
the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;
•
the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;
•
negative effects relating to our mortgage servicing and foreclosure practices, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;
•
our ability to realize our efficiency ratio target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;
•
the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;


- 14 -

•
significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our debt securities and equity securities portfolios;
•
the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
•
negative effects from the retail banking sales practices matter and from other instances where customers may have experienced financial harm, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, and our reputation;
•
resolution of regulatory matters, litigation, or other legal actions, which may result in, among other things, additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other adverse consequences;
•
a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
•
the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
•
fiscal and monetary policies of the Federal Reserve Board; and
•
the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017.
In addition to the above factors, we also caution that the amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of the Company, market conditions, capital requirements (including under Basel capital standards), common stock issuance requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company’s Board of Directors, and may be subject to regulatory approval or conditions.
For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.
Any forward-looking statement made by us speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

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



- 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 8,050 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 38 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. 26 on Fortune’s 2018 rankings of America’s largest corporations.

# # #




- 16 -

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


- 17 -

Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
 
Quarter ended
 
 
% Change
Jun 30, 2018 from
 
 
Six months ended
 
 
 
($ in millions, except per share amounts)
Jun 30,
2018

 
Mar 31,
2018

 
Jun 30,
2017

 
Mar 31,
2018

 
Jun 30,
2017

 
Jun 30,
2018

 
Jun 30,
2017

 
%
Change

For the Period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wells Fargo net income
$
5,186

 
5,136

 
5,856

 
1
 %
 
(11
)
 
$
10,322

 
11,490

 
(10
)%
Wells Fargo net income applicable to common stock
4,792

 
4,733

 
5,450

 
1

 
(12
)
 
9,525

 
10,683

 
(11
)
Diluted earnings per common share
0.98

 
0.96

 
1.08

 
2

 
(9
)
 
1.94

 
2.11

 
(8
)
Profitability ratios (annualized):
 
 
 
 
 
 


 


 
 
 
 
 
 
Wells Fargo net income to average assets (ROA)
1.10
%
 
1.09

 
1.22

 
1

 
(10
)
 
1.10
%
 
1.20

 
(8
)
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)
10.60

 
10.58

 
12.06

 
—

 
(12
)
 
10.59

 
12.01

 
(12
)
Return on average tangible common equity (ROTCE)(1)
12.62

 
12.62

 
14.41

 
—

 
(12
)
 
12.62

 
14.38

 
(12
)
Efficiency ratio (2)
64.9

 
68.6

 
60.9

 
(5
)
 
7

 
66.7

 
61.4

 
9

Total revenue
$
21,553

 
21,934

 
22,235

 
(2
)
 
(3
)
 
$
43,487

 
44,490

 
(2
)
Pre-tax pre-provision profit (PTPP) (3)
7,571

 
6,892

 
8,694

 
10

 
(13
)
 
14,463

 
17,157

 
(16
)
Dividends declared per common share
0.39

 
0.39

 
0.38

 
—

 
3

 
0.78

 
0.760

 
3

Average common shares outstanding
4,865.8

 
4,885.7

 
4,989.9

 
—

 
(2
)
 
4,875.7

 
4,999.2

 
(2
)
Diluted average common shares outstanding
4,899.8

 
4,930.7

 
5,037.7

 
(1
)
 
(3
)
 
4,916.1

 
5,054.8

 
(3
)
Average loans
$
944,079

 
951,024

 
956,879

 
(1
)
 
(1
)
 
$
947,532

 
960,243

 
(1
)
Average assets
1,884,884

 
1,915,896

 
1,927,021

 
(2
)
 
(2
)
 
1,900,304

 
1,929,020

 
(1
)
Average total deposits
1,271,339

 
1,297,178

 
1,301,195

 
(2
)
 
(2
)
 
1,284,187

 
1,300,198

 
(1
)
Average consumer and small business banking deposits (4)
754,047

 
755,483

 
760,149

 
—

 
(1
)
 
754,898

 
759,455

 
(1
)
Net interest margin
2.93
%
 
2.84

 
2.90

 
3

 
1

 
2.89
%
 
2.89

 
—

At Period End
 
 
 
 
 
 


 


 
 
 
 
 
 
Debt securities (5)
$
475,495

 
472,968

 
462,890

 
1

 
3

 
$
475,495

 
462,890

 
3

Loans
944,265

 
947,308

 
957,423

 
—

 
(1
)
 
944,265

 
957,423

 
(1
)
Allowance for loan losses
10,193

 
10,373

 
11,073

 
(2
)
 
(8
)
 
10,193

 
11,073

 
(8
)
Goodwill
26,429

 
26,445

 
26,573

 
—

 
(1
)
 
26,429

 
26,573

 
(1
)
Equity securities (5)
57,505

 
58,935

 
55,742

 
(2
)
 
3

 
57,505

 
55,742

 
3

Assets
1,879,700

 
1,915,388

 
1,930,792

 
(2
)
 
(3
)
 
1,879,700

 
1,930,792

 
(3
)
Deposits
1,268,864

 
1,303,689

 
1,305,830

 
(3
)
 
(3
)
 
1,268,864

 
1,305,830

 
(3
)
Common stockholders' equity
181,386

 
181,150

 
181,233

 
—

 
—

 
181,386

 
181,233

 
—

Wells Fargo stockholders’ equity
205,188

 
204,952

 
205,034

 
—

 
—

 
205,188

 
205,034

 
—

Total equity
206,069

 
205,910

 
205,949

 
—

 
—

 
206,069

 
205,949

 
—

Tangible common equity (1)
152,580

 
151,878

 
151,868

 
—

 
—

 
152,580

 
151,868

 
—

Common shares outstanding
4,849.1

 
4,873.9

 
4,966.8

 
(1
)
 
(2
)
 
4,849.1

 
4,966.8

 
(2
)
Book value per common share (6)
$
37.41

 
37.17

 
36.49

 
1

 
3

 
$
37.41

 
36.49

 
3

Tangible book value per common share (1)(6)
31.47

 
31.16

 
30.58

 
1

 
3

 
31.47

 
30.58

 
3

Common stock price:

 
 
 
 
 


 


 
 
 
 
 
 
High
57.12

 
66.31

 
56.60

 
(14
)
 
1

 
66.31

 
59.99

 
11

Low
50.26

 
50.70

 
50.84

 
(1
)
 
(1
)
 
50.26

 
50.84

 
(1
)
Period end
55.44

 
52.41

 
55.41

 
6

 
—

 
55.44

 
55.41

 
—

Team members (active, full-time equivalent)
264,500

 
265,700

 
270,600

 
—

 
(2
)
 
264,500

 
270,600

 
(2
)
(1)
Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 36.
(2)
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(3)
Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(4)
Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(5)
Financial information for the prior periods of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of Accounting Standards Update (ASU) 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
(6)
Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.



- 18 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
 
Quarter ended
 
($ in millions, except per share amounts)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

For the Quarter
 
 
 
 
 
 
 
 
 
Wells Fargo net income
$
5,186

 
5,136

 
6,151

 
4,542

 
5,856

Wells Fargo net income applicable to common stock
4,792

 
4,733

 
5,740

 
4,131

 
5,450

Diluted earnings per common share
0.98

 
0.96

 
1.16

 
0.83

 
1.08

Profitability ratios (annualized) :
 
 
 
 
 
 
 
 
 
Wells Fargo net income to average assets (ROA)
1.10
%
 
1.09

 
1.26

 
0.93

 
1.22

Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)
10.60

 
10.58

 
12.47

 
8.96

 
12.06

Return on average tangible common equity (ROTCE)(1)
12.62

 
12.62

 
14.85

 
10.66

 
14.41

Efficiency ratio (2)
64.9

 
68.6

 
76.2

 
65.7

 
60.9

Total revenue
$
21,553

 
21,934

 
22,050

 
21,849

 
22,235

Pre-tax pre-provision profit (PTPP) (3)
7,571

 
6,892

 
5,250

 
7,498

 
8,694

Dividends declared per common share
0.39

 
0.39

 
0.39

 
0.39

 
0.38

Average common shares outstanding
4,865.8

 
4,885.7

 
4,912.5

 
4,948.6

 
4,989.9

Diluted average common shares outstanding
4,899.8

 
4,930.7

 
4,963.1

 
4,996.8

 
5,037.7

Average loans
$
944,079

 
951,024

 
951,822

 
952,343

 
956,879

Average assets
1,884,884

 
1,915,896

 
1,935,318

 
1,938,461

 
1,927,021

Average total deposits
1,271,339

 
1,297,178

 
1,311,592

 
1,306,356

 
1,301,195

Average consumer and small business banking deposits (4)
754,047

 
755,483

 
757,541

 
755,094

 
760,149

Net interest margin
2.93
%
 
2.84

 
2.84

 
2.86

 
2.90

At Quarter End
 
 
 
 
 
 
 
 
 
Debt securities (5)
$
475,495

 
472,968

 
473,366

 
474,710

 
462,890

Loans
944,265

 
947,308

 
956,770

 
951,873

 
957,423

Allowance for loan losses
10,193

 
10,373

 
11,004

 
11,078

 
11,073

Goodwill
26,429

 
26,445

 
26,587

 
26,581

 
26,573

Equity securities (5)
57,505

 
58,935

 
62,497

 
54,981

 
55,742

Assets
1,879,700

 
1,915,388

 
1,951,757

 
1,934,880

 
1,930,792

Deposits
1,268,864

 
1,303,689

 
1,335,991

 
1,306,706

 
1,305,830

Common stockholders' equity
181,386

 
181,150

 
183,134

 
181,920

 
181,233

Wells Fargo stockholders’ equity
205,188

 
204,952

 
206,936

 
205,722

 
205,034

Total equity
206,069

 
205,910

 
208,079

 
206,617

 
205,949

Tangible common equity (1)
152,580

 
151,878

 
153,730

 
152,694

 
151,868

Common shares outstanding
4,849.1

 
4,873.9

 
4,891.6

 
4,927.9

 
4,966.8

Book value per common share (6)
$
37.41

 
37.17

 
37.44

 
36.92

 
36.49

Tangible book value per common share (1)(6)
31.47

 
31.16

 
31.43

 
30.99

 
30.58

Common stock price:
 
 
 
 
 
 
 
 
 
High
57.12

 
66.31

 
62.24

 
56.45

 
56.60

Low
50.26

 
50.70

 
52.84

 
49.28

 
50.84

Period end
55.44

 
52.41

 
60.67

 
55.15

 
55.41

Team members (active, full-time equivalent)
264,500

 
265,700

 
262,700

 
268,000

 
270,600

(1)
Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 36.
(2)
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(3)
Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(4)
Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(5)
Financial information for the prior quarters of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
(6)
Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.


- 19 -

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

 
Six months ended June 30,
 
 
%

(in millions, except per share amounts)
2018

 
2017

 
Change

 
2018

 
2017

 
Change

Interest income
 
 
 
 
 
 
 
 
 
 
 
Debt securities (1)
$
3,594

 
3,226

 
11
 %
 
$
7,008

 
6,399

 
10
 %
Mortgages held for sale
198

 
191

 
4

 
377

 
373

 
1

Loans held for sale (1)
48

 
13

 
269

 
72

 
23

 
213

Loans
10,912

 
10,358

 
5

 
21,491

 
20,499

 
5

Equity securities (1)
221

 
199

 
11

 
452

 
374

 
21

Other interest income (1)
1,042

 
707

 
47

 
1,962

 
1,239

 
58

Total interest income
16,015

 
14,694

 
9

 
31,362

 
28,907

 
8

Interest expense
 
 
 
 
 
 
 
 
 
 
 
Deposits
1,268

 
677

 
87

 
2,358

 
1,213

 
94

Short-term borrowings
398

 
163

 
144

 
709

 
277

 
156

Long-term debt
1,658

 
1,275

 
30

 
3,234

 
2,422

 
34

Other interest expense
150

 
108

 
39

 
282

 
200

 
41

Total interest expense
3,474

 
2,223

 
56

 
6,583

 
4,112

 
60

Net interest income
12,541

 
12,471

 
1

 
24,779

 
24,795

 
—

Provision for credit losses
452

 
555

 
(19
)
 
643

 
1,160

 
(45
)
Net interest income after provision for credit losses
12,089

 
11,916

 
1

 
24,136

 
23,635

 
2

Noninterest income
 
 
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
1,163

 
1,276

 
(9
)
 
2,336

 
2,589

 
(10
)
Trust and investment fees
3,675

 
3,629

 
1

 
7,358

 
7,199

 
2

Card fees
1,001

 
1,019

 
(2
)
 
1,909

 
1,964

 
(3
)
Other fees
846

 
902

 
(6
)
 
1,646

 
1,767

 
(7
)
Mortgage banking
770

 
1,148

 
(33
)
 
1,704

 
2,376

 
(28
)
Insurance
102

 
280

 
(64
)
 
216

 
557

 
(61
)
Net gains from trading activities (1)
191

 
151

 
26

 
434

 
423

 
3

Net gains on debt securities
41

 
120

 
(66
)
 
42

 
156

 
(73
)
Net gains from equity securities (1)
295

 
274

 
8

 
1,078

 
844

 
28

Lease income
443

 
493

 
(10
)
 
898

 
974

 
(8
)
Other
485

 
472

 
3

 
1,087

 
846

 
28

Total noninterest income
9,012

 
9,764

 
(8
)
 
18,708

 
19,695

 
(5
)
Noninterest expense
 
 
 
 
 
 
 
 
 
 
 
Salaries
4,465

 
4,343

 
3

 
8,828

 
8,604

 
3

Commission and incentive compensation
2,642

 
2,499

 
6

 
5,410

 
5,224

 
4

Employee benefits
1,245

 
1,308

 
(5
)
 
2,843

 
2,994

 
(5
)
Equipment
550

 
529

 
4

 
1,167

 
1,106

 
6

Net occupancy
722

 
706

 
2

 
1,435

 
1,418

 
1

Core deposit and other intangibles
265

 
287

 
(8
)
 
530

 
576

 
(8
)
FDIC and other deposit assessments
297

 
328

 
(9
)
 
621

 
661

 
(6
)
Other
3,796

 
3,541

 
7

 
8,190

 
6,750

 
21

Total noninterest expense
13,982

 
13,541

 
3

 
29,024

 
27,333

 
6

Income before income tax expense
7,119

 
8,139

 
(13
)
 
13,820

 
15,997

 
(14
)
Income tax expense
1,810

 
2,245

 
(19
)
 
3,184

 
4,378

 
(27
)
Net income before noncontrolling interests
5,309

 
5,894

 
(10
)
 
10,636

 
11,619

 
(8
)
Less: Net income from noncontrolling interests
123

 
38

 
224

 
314

 
129

 
143

Wells Fargo net income
$
5,186

 
5,856

 
(11
)
 
$
10,322

 
11,490

 
(10
)
Less: Preferred stock dividends and other
394

 
406

 
(3
)
 
797

 
807

 
(1
)
Wells Fargo net income applicable to common stock
$
4,792

 
5,450

 
(12
)
 
$
9,525

 
10,683

 
(11
)
Per share information
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share
$
0.98

 
1.09

 
(10
)
 
$
1.95

 
2.14

 
(9
)
Diluted earnings per common share
0.98

 
1.08

 
(9
)
 
1.94

 
2.11

 
(8
)
Dividends declared per common share
0.39

 
0.38

 
3

 
0.78

 
0.76

 
3

Average common shares outstanding
4,865.8

 
4,989.9

 
(2
)
 
4,875.7

 
4,999.2

 
(2
)
Diluted average common shares outstanding
4,899.8

 
5,037.7

 
(3
)
 
4,916.1

 
5,054.8

 
(3
)
(1)
Financial information for the prior periods of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.


- 20 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
 
Quarter ended
 
(in millions, except per share amounts)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Interest income
 
 
 
 
 
 
 
 
 
Debt securities (1)
$
3,594

 
3,414

 
3,294

 
3,253

 
3,226

Mortgages held for sale
198

 
179

 
196

 
217

 
191

Loans held for sale (1)
48

 
24

 
12

 
15

 
13

Loans
10,912

 
10,579

 
10,367

 
10,522

 
10,358

Equity securities (1)
221

 
231

 
239

 
186

 
199

Other interest income (1)
1,042

 
920

 
850

 
851

 
707

Total interest income
16,015

 
15,347

 
14,958

 
15,044

 
14,694

Interest expense
 
 
 
 
 
 
 
 
 
Deposits
1,268

 
1,090

 
931

 
869

 
677

Short-term borrowings
398

 
311

 
255

 
226

 
163

Long-term debt
1,658

 
1,576

 
1,344

 
1,391

 
1,275

Other interest expense
150

 
132

 
115

 
109

 
108

Total interest expense
3,474

 
3,109

 
2,645

 
2,595

 
2,223

Net interest income
12,541

 
12,238

 
12,313

 
12,449

 
12,471

Provision for credit losses
452

 
191

 
651

 
717

 
555

Net interest income after provision for credit losses
12,089

 
12,047

 
11,662

 
11,732

 
11,916

Noninterest income
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
1,163

 
1,173

 
1,246

 
1,276

 
1,276

Trust and investment fees
3,675

 
3,683

 
3,687

 
3,609

 
3,629

Card fees
1,001

 
908

 
996

 
1,000

 
1,019

Other fees
846

 
800

 
913

 
877

 
902

Mortgage banking
770

 
934

 
928

 
1,046

 
1,148

Insurance
102

 
114

 
223

 
269

 
280

Net gains (losses) from trading activities (1)
191

 
243

 
(1
)
 
120

 
151

Net gains on debt securities
41

 
1

 
157

 
166

 
120

Net gains from equity securities (1)
295

 
783

 
572

 
363

 
274

Lease income
443

 
455

 
458

 
475

 
493

Other
485

 
602

 
558

 
199

 
472

Total noninterest income
9,012

 
9,696

 
9,737

 
9,400

 
9,764

Noninterest expense
 
 
 
 
 
 
 
 
 
Salaries
4,465

 
4,363

 
4,403

 
4,356

 
4,343

Commission and incentive compensation
2,642

 
2,768

 
2,665

 
2,553

 
2,499

Employee benefits
1,245

 
1,598

 
1,293

 
1,279

 
1,308

Equipment
550

 
617

 
608

 
523

 
529

Net occupancy
722

 
713

 
715

 
716

 
706

Core deposit and other intangibles
265

 
265

 
288

 
288

 
287

FDIC and other deposit assessments
297

 
324

 
312

 
314

 
328

Other
3,796

 
4,394

 
6,516

 
4,322

 
3,541

Total noninterest expense
13,982

 
15,042

 
16,800

 
14,351

 
13,541

Income before income tax expense
7,119

 
6,701

 
4,599

 
6,781

 
8,139

Income tax expense (benefit)
1,810

 
1,374

 
(1,642
)
 
2,181

 
2,245

Net income before noncontrolling interests
5,309

 
5,327

 
6,241

 
4,600

 
5,894

Less: Net income from noncontrolling interests
123

 
191

 
90

 
58

 
38

Wells Fargo net income
$
5,186

 
5,136

 
6,151

 
4,542

 
5,856

Less: Preferred stock dividends and other
394

 
403

 
411

 
411

 
406

Wells Fargo net income applicable to common stock
$
4,792

 
4,733

 
5,740

 
4,131

 
5,450

Per share information
 
 
 
 
 
 
 
 
 
Earnings per common share
$
0.98

 
0.97

 
1.17

 
0.83

 
1.09

Diluted earnings per common share
0.98

 
0.96

 
1.16

 
0.83

 
1.08

Dividends declared per common share
0.39

 
0.39

 
0.39

 
0.39

 
0.38

Average common shares outstanding
4,865.8

 
4,885.7

 
4,912.5

 
4,948.6

 
4,989.9

Diluted average common shares outstanding
4,899.8

 
4,930.7

 
4,963.1

 
4,996.8

 
5,037.7

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


- 21 -

Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
Quarter ended June 30,
 
 
%
 
Six months ended June 30,
 
 
%
(in millions)
2018

 
2017

 
Change
 
2018

 
2017

 
Change
Wells Fargo net income
$
5,186

 
5,856

 
(11)%
 
$
10,322

 
11,490

 
(10)%
Other comprehensive income (loss), before tax:
 
 
 
 

 
 
 
 
 

Debt securities (1):
 
 
 
 

 
 
 
 
 

Net unrealized gains (losses) arising during the period
(617
)
 
1,565

 
NM
 
(4,060
)
 
1,934

 
NM
Reclassification of net (gains) losses to net income
49

 
(177
)
 
NM
 
117

 
(322
)
 
NM
Derivatives and hedging activities:
 
 
 
 

 
 
 
 
 

Net unrealized gains (losses) arising during the period
(150
)
 
276

 
NM
 
(392
)
 
(86
)
 
356
Reclassification of net (gains) losses to net income
77

 
(153
)
 
NM
 
137

 
(355
)
 
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
29

 
41

 
(29)
 
61

 
79

 
(23)
Foreign currency translation adjustments:
 
 
 
 

 
 
 
 
 

       Net unrealized gains (losses) arising during the period
(83
)
 
31

 
NM
 
(85
)
 
47

 
NM
Other comprehensive income (loss), before tax
(695
)

1,583

 
NM
 
(4,216
)

1,290

 
NM
Income tax benefit (expense) related to other comprehensive
    income
154

 
(587
)
 
NM
 
1,016

 
(464
)
 
NM
Other comprehensive income (loss), net of tax
(541
)

996

 
NM
 
(3,200
)

826

 
NM
Less: Other comprehensive income (loss) from noncontrolling interests
(1
)
 
(9
)
 
(89)
 
(1
)
 
5

 
NM
Wells Fargo other comprehensive income (loss), net of tax
(540
)

1,005

 
NM
 
(3,199
)

821

 
NM
Wells Fargo comprehensive income
4,646


6,861

 
(32)
 
7,123


12,311

 
(42)
Comprehensive income from noncontrolling interests
122

 
29

 
321
 
313

 
134

 
134
Total comprehensive income
$
4,768


6,890

 
(31)
 
$
7,436


12,445

 
(40)
NM – Not meaningful
(1)
The quarter and six months ended June 30, 2017, includes net unrealized gains (losses) arising during the period from equity securities of $65 million and $126 million and reclassification of net (gains) losses to net income related to equity securities of $(101) million and $(217) million, respectively. With the adoption in first quarter 2018 of ASU 2016-01, the quarter and six months ended June 30, 2018, reflects net unrealized (gains) losses arising during the period and reclassification of net (gains) losses to net income from only debt securities.
FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
 
Quarter ended
 
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Balance, beginning of period
$
205,910

 
208,079

 
206,617

 
205,949

 
202,310

Cumulative effect from change in accounting policies (1)
—

 
(24
)
 
—

 
—

 
—

Wells Fargo net income
5,186

 
5,136

 
6,151

 
4,542

 
5,856

Wells Fargo other comprehensive income (loss), net of tax
(540
)
 
(2,659
)
 
(522
)
 
526

 
1,005

Noncontrolling interests
(77
)
 
(178
)
 
247

 
(20
)
 
(75
)
Common stock issued
73

 
1,208

 
436

 
254

 
252

Common stock repurchased (2)
(2,923
)
 
(3,029
)
 
(2,845
)
 
(2,601
)
 
(2,287
)
Preferred stock released by ESOP
490

 
231

 
218

 
209

 
406

Common stock warrants repurchased/exercised
(1
)
 
(157
)
 
(46
)
 
(19
)
 
(24
)
Preferred stock issued
—

 
—

 
—

 
—

 
677

Common stock dividends
(1,900
)
 
(1,911
)
 
(1,920
)
 
(1,936
)
 
(1,899
)
Preferred stock dividends
(394
)
 
(410
)
 
(411
)
 
(411
)
 
(406
)
Stock incentive compensation expense
258

 
437

 
206

 
135

 
145

Net change in deferred compensation and related plans
(13
)
 
(813
)
 
(52
)
 
(11
)
 
(11
)
Balance, end of period
$
206,069

 
205,910

 
208,079

 
206,617

 
205,949

(1)
The cumulative effect for the quarter ended March 31, 2018, reflects the impact of the adoption in first quarter 2018 of ASU 2016-04, ASU 2016-01 and ASU 2014-09.
(2)
For the quarter ended June 30, 2018, includes $1.0 billion related to a private forward repurchase transaction expected to settle in third quarter 2018.



- 22 -

Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
Quarter ended June 30,
 
 
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)
$
154,846

 
1.75
%
 
$
676

 
204,541

 
1.03
%
 
$
523

Federal funds sold and securities purchased under resale agreements (3)
80,020

 
1.73

 
344

 
77,078

 
0.91

 
175

Debt securities (4):
 
 
 
 
 
 
 
 
 
 
 
Trading debt securities (8)
80,661

 
3.45

 
695

 
70,411

 
3.24

 
570

Available-for-sale debt securities:
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
6,425

 
1.66

 
27

 
18,099

 
1.53

 
69

Securities of U.S. states and political subdivisions (7)
47,388

 
3.91

 
464

 
53,492

 
3.89

 
521

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
154,929

 
2.75

 
1,065

 
132,032

 
2.63

 
868

Residential and commercial
8,248

 
4.86

 
101

 
12,586

 
5.55

 
175

Total mortgage-backed securities
163,177

 
2.86

 
1,166

 
144,618

 
2.89

 
1,043

Other debt securities (8)
47,009

 
4.33

 
506

 
48,466

 
3.77

 
457

Total available-for-sale debt securities (7)(8)
263,999

 
3.28

 
2,163

 
264,675

 
3.16

 
2,090

Held-to-maturity debt securities:
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
44,731

 
2.19

 
244

 
44,701

 
2.19

 
244

Securities of U.S. states and political subdivisions
6,255

 
4.34

 
68

 
6,270

 
5.29

 
83

Federal agency and other mortgage-backed securities
94,964

 
2.33

 
552

 
83,116

 
2.44

 
507

Other debt securities
584

 
4.66

 
7

 
2,798

 
2.34

 
16

Total held-to-maturity debt securities
146,534

 
2.38

 
871

 
136,885

 
2.49

 
850

Total debt securities (7)(8)
491,194

 
3.04

 
3,729

 
471,971

 
2.98

 
3,510

Mortgages held for sale (5)(7)
18,788

 
4.22

 
198

 
19,758

 
3.87

 
191

Loans held for sale (5)(8)
3,481

 
5.48

 
48

 
1,476

 
3.65

 
13

Commercial loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial - U.S.
275,259

 
4.16

 
2,851

 
273,073

 
3.70

 
2,521

Commercial and industrial - Non U.S.
59,716

 
3.51

 
524

 
56,426

 
2.86

 
402

Real estate mortgage
123,982

 
4.27

 
1,319

 
131,293

 
3.68

 
1,206

Real estate construction
23,637

 
4.88

 
287

 
25,271

 
4.10

 
259

Lease financing
19,266

 
4.48

 
216

 
19,058

 
4.82

 
230

Total commercial loans
501,860

 
4.15

 
5,197

 
505,121

 
3.67

 
4,618

Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
283,101

 
4.06

 
2,870

 
275,108

 
4.08

 
2,805

Real estate 1-4 family junior lien mortgage
37,249

 
5.32

 
495

 
43,602

 
4.78

 
521

Credit card
35,883

 
12.66

 
1,133

 
34,868

 
12.18

 
1,059

Automobile
48,568

 
5.18

 
628

 
59,112

 
5.43

 
800

Other revolving credit and installment
37,418

 
6.62

 
617

 
39,068

 
6.13

 
596

Total consumer loans
442,219

 
5.20

 
5,743

 
451,758

 
5.13

 
5,781

Total loans (5)
944,079

 
4.64

 
10,940

 
956,879

 
4.36

 
10,399

Equity securities (8)
37,330

 
2.38

 
222

 
36,604

 
2.24

 
205

Other (8)
5,518

 
1.48

 
21

 
4,400

 
0.70

 
8

Total earning assets (7)(8)
$
1,735,256

 
3.73
%
 
$
16,178

 
1,772,707

 
3.40
%
 
$
15,024

Funding sources
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking
$
80,324

 
0.90
%
 
$
181

 
48,465

 
0.41
%
 
$
50

Market rate and other savings
676,668

 
0.26

 
434

 
683,014

 
0.13

 
214

Savings certificates
20,033

 
0.43

 
21

 
22,599

 
0.30

 
17

Other time deposits (7)
82,061

 
2.26

 
465

 
57,158

 
1.39

 
197

Deposits in foreign offices
51,474

 
1.30

 
167

 
123,684

 
0.65

 
199

Total interest-bearing deposits (7)
910,560

 
0.56

 
1,268

 
934,920

 
0.29

 
677

Short-term borrowings
103,795

 
1.54

 
398

 
95,763

 
0.69

 
164

Long-term debt (7)
223,800

 
2.97

 
1,658

 
249,889

 
2.04

 
1,274

Other liabilities
28,202

 
2.12

 
150

 
20,981

 
2.05

 
108

Total interest-bearing liabilities (7)
1,266,357

 
1.10

 
3,474

 
1,301,553

 
0.68

 
2,223

Portion of noninterest-bearing funding sources (7)(8)
468,899

 
—

 
—

 
471,154

 
—

 
—

Total funding sources (7)(8)
$
1,735,256

 
0.80

 
3,474

 
1,772,707

 
0.50

 
2,223

Net interest margin and net interest income on a taxable-equivalent basis (6)(7)
 
 
2.93
%
 
$
12,704

 
 
 
2.90
%
 
$
12,801

Noninterest-earning assets
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
18,609

 
 
 
 
 
18,171

 
 
 
 
Goodwill
26,444

 
 
 
 
 
26,664

 
 
 
 
Other (7)(8)
104,575

 
 
 
 
 
109,479

 
 
 
 
Total noninterest-earning assets (7)(8)
$
149,628

 
 
 
 
 
154,314

 
 
 
 
Noninterest-bearing funding sources
 
 
 
 
 
 
 
 
 
 
 
Deposits
$
360,779

 
 
 
 
 
366,275

 
 
 
 
Other liabilities (7)
51,681

 
 
 
 
 
53,438

 
 
 
 
Total equity (7)
206,067

 
 
 
 
 
205,755

 
 
 
 
Noninterest-bearing funding sources used to fund earning assets (7)(8)
(468,899
)
 
 
 
 
 
(471,154
)
 
 
 
 
Net noninterest-bearing funding sources (7)(8)
$
149,628

 
 
 
 
 
154,314

 
 
 
 
Total assets (7)
$
1,884,884

 
 
 
 
 
1,927,021

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Our average prime rate was 4.80% and 4.05% for the quarters ended June 30, 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 2.34% and 1.21% for the same quarters, respectively.
(2)
Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3)
Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.
(4)
Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(5)
Nonaccrual loans and related income are included in their respective loan categories.
(6)
Includes taxable-equivalent adjustments of $163 million and $330 million for the quarters ended June 30, 2018 and 2017, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 21% and 35% for the quarters ended June 30, 2018 and 2017, respectively.
(7)
Financial information for the prior period has been revised to reflect the impact of the adoption in fourth quarter 2017 of ASU 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.
(8)
Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.


- 23 -

Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
Six months ended June 30,
 
 
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)
$
163,520

 
1.61
%
 
$
1,308

 
206,503

 
0.91
%
 
$
928

Federal funds sold and securities purchased under resale agreements (3)
79,083

 
1.57

 
615

 
76,184

 
0.80

 
302

Debt securities (4):
 
 
 
 
 
 
 
 
 
 
 
Trading debt securities (8)
79,693

 
3.35

 
1,332

 
69,769

 
3.14

 
1,093

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

 
1.66

 
53

 
21,547

 
1.53

 
164

Securities of U.S. states and political subdivisions (7)
48,665

 
3.64

 
885

 
52,873

 
3.91

 
1,034

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
156,690

 
2.73

 
2,141

 
144,257

 
2.61

 
1,879

Residential and commercial (7)
8,558

 
4.48

 
192

 
13,514

 
5.44

 
368

Total mortgage-backed securities (7)
165,248

 
2.82

 
2,333

 
157,771

 
2.85

 
2,247

Other debt securities (7)(8)
47,549

 
4.02

 
950

 
49,303

 
3.69

 
904

Total available-for-sale debt securities (7)(8)
267,888

 
3.16

 
4,221

 
281,494

 
3.09

 
4,349

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

 
2.20

 
487

 
44,697

 
2.20

 
487

Securities of U.S. states and political subdivisions
6,257

 
4.34

 
136

 
6,271

 
5.30

 
166

Federal agency and other mortgage-backed securities
92,888

 
2.35

 
1,093

 
67,538

 
2.46

 
831

Other debt securities
639

 
3.89

 
12

 
3,062

 
2.34

 
35

Total held-to-maturity debt securities
144,511

 
2.40

 
1,728

 
121,568

 
2.51

 
1,519

Total debt securities (7)(8)
492,092

 
2.96

 
7,281

 
472,831

 
2.95

 
6,961

Mortgages held for sale (5)(7)
18,598

 
4.06

 
377

 
19,825

 
3.77

 
373

Loans held for sale (5)(8)
2,750

 
5.28

 
72

 
1,538

 
3.05

 
23

Commercial loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial - U.S.
273,658

 
4.00

 
5,435

 
273,905

 
3.65

 
4,957

Commercial and industrial - Non U.S.
59,964

 
3.37

 
1,003

 
55,890

 
2.80

 
775

Real estate mortgage
125,085

 
4.16

 
2,581

 
131,868

 
3.62

 
2,370

Real estate construction
24,041

 
4.70

 
561

 
24,933

 
3.91

 
484

Lease financing
19,266

 
4.89

 
471

 
19,064

 
4.88

 
465

Total commercial loans
502,014

 
4.03

 
10,051

 
505,660

 
3.61

 
9,051

Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
283,651

 
4.04

 
5,722

 
275,293

 
4.05

 
5,571

Real estate 1-4 family junior lien mortgage
38,042

 
5.23

 
988

 
44,439

 
4.69

 
1,036

Credit card
36,174

 
12.71

 
2,280

 
35,151

 
12.07

 
2,105

Automobile
50,010

 
5.17

 
1,283

 
60,304

 
5.45

 
1,628

Other revolving credit and installment
37,641

 
6.54

 
1,221

 
39,396

 
6.07

 
1,186

Total consumer loans
445,518

 
5.18

 
11,494

 
454,583

 
5.09

 
11,526

Total loans (5)
947,532

 
4.57

 
21,545

 
960,243

 
4.31

 
20,577

Equity securities (8)
38,536

 
2.37

 
455

 
35,272

 
2.18

 
384

Other (8)
5,765

 
1.34

 
40

 
2,213

 
0.70

 
8

Total earning assets (7)(8)
$
1,747,876

 
3.64
%
 
$
31,693

 
1,774,609

 
3.36
%
 
$
29,556

Funding sources
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking
$
74,084

 
0.84
%
 
$
310

 
49,569

 
0.35
%
 
$
87

Market rate and other savings
677,861

 
0.24

 
802

 
683,591

 
0.11

 
371

Savings certificates
20,025

 
0.38

 
38

 
23,030

 
0.29

 
34

Other time deposits (7)
79,340

 
2.06

 
812

 
56,043

 
1.34

 
374

Deposits in foreign offices
73,023

 
1.09

 
396

 
122,946

 
0.57

 
347

Total interest-bearing deposits (7)
924,333

 
0.51

 
2,358

 
935,179

 
0.26

 
1,213

Short-term borrowings
102,793

 
1.39

 
710

 
97,149

 
0.58

 
279

Long-term debt (7)
224,924

 
2.88

 
3,234

 
254,981

 
1.90

 
2,421

Other liabilities
28,065

 
2.02

 
282

 
18,905

 
2.12

 
200

Total interest-bearing liabilities (7)
1,280,115

 
1.03

 
6,584

 
1,306,214

 
0.63

 
4,113

Portion of noninterest-bearing funding sources (7)(8)
467,761

 
—

 
—

 
468,395

 
—

 
—

Total funding sources (7)(8)
$
1,747,876

 
0.75

 
6,584

 
1,774,609

 
0.47

 
4,113

Net interest margin and net interest income on a taxable-equivalent basis (6)(7)
 
 
2.89
%
 
$
25,109

 
 
 
2.89
%
 
$
25,443

Noninterest-earning assets
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
18,730

 
 
 
 
 
18,437

 
 
 
 
Goodwill
26,480

 
 
 
 
 
26,668

 
 
 
 
Other (7)(8)
107,218

 
 
 
 
 
109,306

 
 
 
 
Total noninterest-earning assets (7)(8)
$
152,428

 
 
 
 
 
154,411

 
 
 
 
Noninterest-bearing funding sources
 
 
 
 
 
 
 
 
 
 
 
Deposits
$
359,854

 
 
 
 
 
365,019

 
 
 
 
Other liabilities (7)
54,212

 
 
 
 
 
54,119

 
 
 
 
Total equity (7)
206,123

 
 
 
 
 
203,668

 
 
 
 
Noninterest-bearing funding sources used to fund earning assets (7)(8)
(467,761
)
 
 
 
 
 
(468,395
)
 
 
 
 
Net noninterest-bearing funding sources (7)(8)
$
152,428

 
 
 
 
 
154,411

 
 
 
 
Total assets (7)
$
1,900,304

 
 
 
 
 
1,929,020

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Our average prime rate was 4.66% and 3.92% for the first half of 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 2.13% and 1.14% for the same periods, respectively.
(2)
Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3)
Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.
(4)
Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(5)
Nonaccrual loans and related income are included in their respective loan categories.
(6)
Includes taxable-equivalent adjustments of $330 million and $648 million for the first half of 2018 and 2017, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 21% and 35% for the first half of 2018 and 2017, respectively.
(7)
Financial information for the prior period has been revised to reflect the impact of the adoption in fourth quarter 2017 of ASU 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.
(8)
Financial information for the prior period has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.


- 24 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
 
Quarter ended
 
 
Jun 30, 2018
 
 
Mar 31, 2018
 
 
Dec 31, 2017
 
 
Sep 30, 2017
 
 
Jun 30, 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)
$
154.8

 
1.75
%
 
$
172.3

 
1.49
%
 
$
189.1

 
1.27
%
 
$
205.5

 
1.21
%
 
$
204.5

 
1.03
%
Federal funds sold and securities purchased under resale agreements (3)
80.0

 
1.73

 
78.1

 
1.40

 
75.8

 
1.20

 
70.6

 
1.14

 
77.1

 
0.91

Debt securities (4):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading debt securities (5)
80.7

 
3.45

 
78.7

 
3.24

 
81.6

 
3.17

 
76.6

 
3.21

 
70.4

 
3.24

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

 
1.66

 
6.4

 
1.66

 
6.4

 
1.66

 
14.5

 
1.31

 
18.1

 
1.53

Securities of U.S. states and political subdivisions
47.4

 
3.91

 
50.0

 
3.37

 
52.4

 
3.91

 
52.5

 
4.08

 
53.5

 
3.89

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
154.9

 
2.75

 
158.4

 
2.72

 
152.9

 
2.62

 
139.8

 
2.58

 
132.0

 
2.63

Residential and commercial
8.2

 
4.86

 
8.9

 
4.12

 
9.4

 
4.85

 
11.0

 
5.44

 
12.6

 
5.55

Total mortgage-backed securities
163.1

 
2.86

 
167.3

 
2.79

 
162.3

 
2.75

 
150.8

 
2.79

 
144.6

 
2.89

Other debt securities (5)
47.1

 
4.33

 
48.1

 
3.73

 
48.6

 
3.62

 
47.7

 
3.73

 
48.5

 
3.77

Total available-for-sale debt securities (5)
264.0

 
3.28

 
271.8

 
3.04

 
269.7

 
3.10

 
265.5

 
3.13

 
264.7

 
3.16

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

 
2.19

 
44.7

 
2.20

 
44.7

 
2.19

 
44.7

 
2.18

 
44.7

 
2.19

Securities of U.S. states and political subdivisions
6.3

 
4.34

 
6.3

 
4.34

 
6.3

 
5.26

 
6.3

 
5.44

 
6.3

 
5.29

Federal agency and other mortgage-backed securities
94.9

 
2.33

 
90.8

 
2.38

 
89.6

 
2.25

 
88.3

 
2.26

 
83.1

 
2.44

Other debt securities
0.6

 
4.66

 
0.7

 
3.23

 
1.2

 
2.64

 
1.4

 
3.05

 
2.8

 
2.34

Total held-to-maturity debt securities
146.5

 
2.38

 
142.5

 
2.42

 
141.8

 
2.36

 
140.7

 
2.38

 
136.9

 
2.49

     Total debt securities (5)
491.2

 
3.04

 
493.0

 
2.89

 
493.1

 
2.90

 
482.8

 
2.93

 
472.0

 
2.98

Mortgages held for sale
18.8

 
4.22

 
18.4

 
3.89

 
20.5

 
3.82

 
22.9

 
3.79

 
19.8

 
3.87

Loans held for sale (5)
3.5

 
5.48

 
2.0

 
4.92

 
1.5

 
3.19

 
1.4

 
4.39

 
1.5

 
3.65

Commercial loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial - U.S.
275.3

 
4.16

 
272.0

 
3.85

 
270.3

 
3.89

 
270.1

 
3.81

 
273.1

 
3.70

Commercial and industrial - Non U.S.
59.7

 
3.51

 
60.2

 
3.23

 
59.2

 
2.96

 
57.7

 
2.89

 
56.4

 
2.86

Real estate mortgage
124.0

 
4.27

 
126.2

 
4.05

 
127.2

 
3.88

 
129.1

 
3.83

 
131.3

 
3.68

Real estate construction
23.6

 
4.88

 
24.4

 
4.54

 
24.4

 
4.38

 
25.0

 
4.18

 
25.3

 
4.10

Lease financing
19.3

 
4.48

 
19.4

 
5.30

 
19.3

 
0.62

 
19.2

 
4.59

 
19.0

 
4.82

Total commercial loans
501.9

 
4.15

 
502.2

 
3.91

 
500.4

 
3.68

 
501.1

 
3.76

 
505.1

 
3.67

Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
283.1

 
4.06

 
284.2

 
4.02

 
282.0

 
4.01

 
278.4

 
4.03

 
275.1

 
4.08

Real estate 1-4 family junior lien mortgage
37.2

 
5.32

 
38.8

 
5.13

 
40.4

 
4.96

 
41.9

 
4.95

 
43.6

 
4.78

Credit card
35.9

 
12.66

 
36.4

 
12.75

 
36.4

 
12.37

 
35.6

 
12.41

 
34.9

 
12.18

Automobile
48.6

 
5.18

 
51.5

 
5.16

 
54.3

 
5.13

 
56.7

 
5.34

 
59.1

 
5.43

Other revolving credit and installment
37.4

 
6.62

 
37.9

 
6.46

 
38.3

 
6.28

 
38.6

 
6.31

 
39.1

 
6.13

Total consumer loans
442.2

 
5.20

 
448.8

 
5.16

 
451.4

 
5.10

 
451.2

 
5.14

 
451.8

 
5.13

Total loans
944.1

 
4.64

 
951.0

 
4.50

 
951.8

 
4.35

 
952.3

 
4.41

 
956.9

 
4.36

Equity securities (5)
37.3

 
2.38

 
39.8

 
2.35

 
38.0

 
2.60

 
35.9

 
2.12

 
36.6

 
2.24

Other (5)
5.6

 
1.48

 
6.0

 
1.21

 
7.2

 
0.88

 
8.7

 
0.90

 
4.3

 
0.70

     Total earning assets (5)
$
1,735.3

 
3.73
%
 
$
1,760.6

 
3.55
%
 
$
1,777.0

 
3.43
%
 
$
1,780.1

 
3.44
%
 
$
1,772.7

 
3.40
%
Funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking
$
80.3

 
0.90
%
 
$
67.8

 
0.77
%
 
$
50.5

 
0.68
%
 
$
48.3

 
0.57
%
 
$
48.5

 
0.41
%
Market rate and other savings
676.7

 
0.26

 
679.1

 
0.22

 
679.9

 
0.19

 
681.2

 
0.17

 
683.0

 
0.13

Savings certificates
20.0

 
0.43

 
20.0

 
0.34

 
20.9

 
0.31

 
21.8

 
0.31

 
22.6

 
0.30

Other time deposits
82.1

 
2.26

 
76.6

 
1.84

 
68.2

 
1.49

 
66.1

 
1.51

 
57.1

 
1.39

Deposits in foreign offices
51.5

 
1.30

 
94.8

 
0.98

 
124.6

 
0.81

 
124.7

 
0.76

 
123.7

 
0.65

Total interest-bearing deposits
910.6

 
0.56

 
938.3

 
0.47

 
944.1

 
0.39

 
942.1

 
0.37

 
934.9

 
0.29

Short-term borrowings
103.8

 
1.54

 
101.8

 
1.24

 
102.1

 
0.99

 
99.2

 
0.91

 
95.8

 
0.69

Long-term debt
223.8

 
2.97

 
226.0

 
2.80

 
231.6

 
2.32

 
243.5

 
2.28

 
249.9

 
2.04

Other liabilities
28.2

 
2.12

 
27.9

 
1.92

 
24.7

 
1.86

 
24.8

 
1.74

 
21.0

 
2.05

Total interest-bearing liabilities
1,266.4

 
1.10

 
1,294.0

 
0.97

 
1,302.5

 
0.81

 
1,309.6

 
0.79

 
1,301.6

 
0.68

Portion of noninterest-bearing funding sources (5)
468.9

 
—

 
466.6

 
—

 
474.5

 
—

 
470.5

 
—

 
471.1

 
—

     Total funding sources (5)
$
1,735.3

 
0.80

 
$
1,760.6

 
0.71

 
$
1,777.0

 
0.59

 
$
1,780.1

 
0.58

 
$
1,772.7

 
0.50

Net interest margin on a taxable-equivalent basis
 
 
2.93
%
 
 
 
2.84
%
 
 
 
2.84
%
 
 
 
2.86
%
 
 
 
2.90
%
Noninterest-earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
18.6

 
 
 
18.9

 
 
 
19.2

 
 
 
18.5

 
 
 
18.2

 
 
Goodwill
26.4

 
 
 
26.5

 
 
 
26.6

 
 
 
26.6

 
 
 
26.7

 
 
Other (5)
104.6

 
 
 
109.9

 
 
 
112.5

 
 
 
113.3

 
 
 
109.4

 
 
     Total noninterest-earnings assets (5)
$
149.6

 
 
 
155.3

 
 
 
158.3

 
 
 
158.4

 
 
 
154.3

 
 
Noninterest-bearing funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
$
360.7

 
 
 
358.9

 
 
 
367.5

 
 
 
364.3

 
 
 
366.3

 
 
Other liabilities (5)
51.7

 
 
 
56.8

 
 
 
57.9

 
 
 
56.9

 
 
 
53.3

 
 
Total equity
206.1

 
 
 
206.2

 
 
 
207.4

 
 
 
207.7

 
 
 
205.8

 
 
Noninterest-bearing funding sources used to fund earning assets (5)
(468.9
)
 
 
 
(466.6
)
 
 
 
(474.5
)
 
 
 
(470.5
)
 
 
 
(471.1
)
 
 
        Net noninterest-bearing funding sources (5)
$
149.6

 
 
 
155.3

 
 
 
158.3

 
 
 
158.4

 
 
 
154.3

 
 
          Total assets
$
1,884.9

 
 
 
1,915.9

 
 
 
1,935.3

 
 
 
1,938.5

 
 
 
1,927.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Our average prime rate was 4.80% for the quarter ended June 30, 2018, 4.52% for the quarter ended March 31,2018, 4.30% for the quarter ended December 31, 2017, 4.25% for the quarter ended September 30, 2017 and 4.05% for the quarter ended June 30, 2017. The average three-month London Interbank Offered Rate (LIBOR) was 2.34%, 1.93%, 1.46%, 1.31% and 1.21% for the same quarters, respectively.
(2)
Yields/rates include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3)
Financial information for the prior quarters of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.
(4)
Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(5)
Financial information for the prior quarters of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.


- 25 -

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

 
Six months ended June 30,
 
 
%

(in millions)
2018

 
2017

 
Change

 
2018

 
2017

 
Change

Service charges on deposit accounts
$
1,163

 
1,276

 
(9
)%
 
$
2,336

 
2,589

 
(10
)%
Trust and investment fees:
 
 
 
 


 
 
 
 
 

Brokerage advisory, commissions and other fees
2,354

 
2,329

 
1

 
4,757

 
4,653

 
2

Trust and investment management
835

 
837

 
—

 
1,685

 
1,666

 
1

Investment banking
486

 
463

 
5

 
916

 
880

 
4

Total trust and investment fees
3,675

 
3,629

 
1

 
7,358


7,199

 
2

Card fees
1,001

 
1,019

 
(2
)
 
1,909

 
1,964

 
(3
)
Other fees:
 
 
 
 


 
 
 
 
 

Charges and fees on loans
304

 
325

 
(6
)
 
605

 
632

 
(4
)
Cash network fees
120

 
134

 
(10
)
 
246

 
260

 
(5
)
Commercial real estate brokerage commissions
109

 
102

 
7

 
194

 
183

 
6

Letters of credit fees
72

 
76

 
(5
)
 
151

 
150

 
1

Wire transfer and other remittance fees
121

 
112

 
8

 
237

 
219

 
8

All other fees
120

 
153

 
(22
)
 
213

 
323

 
(34
)
Total other fees
846

 
902

 
(6
)
 
1,646

 
1,767

 
(7
)
Mortgage banking:
 
 
 
 


 
 
 
 
 

Servicing income, net
406

 
400

 
2

 
874

 
856

 
2

Net gains on mortgage loan origination/sales activities
364

 
748

 
(51
)
 
830

 
1,520

 
(45
)
Total mortgage banking
770

 
1,148

 
(33
)
 
1,704

 
2,376

 
(28
)
Insurance
102

 
280

 
(64
)
 
216

 
557

 
(61
)
Net gains from trading activities (1)
191

 
151

 
26

 
434

 
423

 
3

Net gains on debt securities
41

 
120

 
(66
)
 
42

 
156

 
(73
)
Net gains from equity securities (1)
295

 
274

 
8

 
1,078

 
844

 
28

Lease income
443

 
493

 
(10
)
 
898

 
974

 
(8
)
Life insurance investment income
162

 
145

 
12

 
326

 
289

 
13

All other
323

 
327

 
(1
)
 
761

 
557

 
37

Total
$
9,012


9,764

 
(8
)
 
$
18,708

 
19,695

 
(5
)
(1)
Financial information for the prior periods has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

NONINTEREST EXPENSE
 
Quarter ended June 30,
 
 
%

 
Six months ended June 30,
 
 
%

(in millions)
2018

 
2017

 
Change

 
2018

 
2017

 
Change

Salaries
$
4,465

 
4,343

 
3
 %
 
$
8,828

 
8,604

 
3
 %
Commission and incentive compensation
2,642

 
2,499

 
6

 
5,410

 
5,224

 
4

Employee benefits
1,245

 
1,308

 
(5
)
 
2,843

 
2,994

 
(5
)
Equipment
550

 
529

 
4

 
1,167

 
1,106

 
6

Net occupancy
722

 
706

 
2

 
1,435

 
1,418

 
1

Core deposit and other intangibles
265

 
287

 
(8
)
 
530

 
576

 
(8
)
FDIC and other deposit assessments
297

 
328

 
(9
)
 
621

 
661

 
(6
)
Operating losses
619

 
350

 
77

 
2,087

 
632

 
230

Outside professional services
881

 
1,029

 
(14
)
 
1,702

 
1,833

 
(7
)
Contract services (1)
536

 
416

 
29

 
983

 
813

 
21

Operating leases
311

 
334

 
(7
)
 
631

 
679

 
(7
)
Outside data processing
164

 
236

 
(31
)
 
326

 
456

 
(29
)
Travel and entertainment
157

 
171

 
(8
)
 
309

 
350

 
(12
)
Advertising and promotion
227

 
150

 
51

 
380

 
277

 
37

Postage, stationery and supplies
121

 
134

 
(10
)
 
263

 
279

 
(6
)
Telecommunications
88

 
91

 
(3
)
 
180

 
182

 
(1
)
Foreclosed assets
44

 
52

 
(15
)
 
82

 
138

 
(41
)
Insurance
24

 
24

 
—

 
50

 
48

 
4

All other (1)
624

 
554

 
13

 
1,197

 
1,063

 
13

Total
$
13,982

 
13,541

 
3

 
$
29,024

 
27,333

 
6

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



- 26 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
 
Quarter ended
 
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Service charges on deposit accounts
$
1,163

 
1,173

 
1,246

 
1,276

 
1,276

Trust and investment fees:
 
 
 
 
 
 
 
 
 
Brokerage advisory, commissions and other fees
2,354

 
2,403

 
2,401

 
2,304

 
2,329

Trust and investment management
835

 
850

 
866

 
840

 
837

Investment banking
486

 
430

 
420

 
465

 
463

Total trust and investment fees
3,675

 
3,683

 
3,687

 
3,609

 
3,629

Card fees
1,001

 
908

 
996

 
1,000

 
1,019

Other fees:
 
 
 
 
 
 
 
 
 
Charges and fees on loans
304

 
301

 
313

 
318

 
325

Cash network fees
120

 
126

 
120

 
126

 
134

Commercial real estate brokerage commissions
109

 
85

 
159

 
120

 
102

Letters of credit fees
72

 
79

 
78

 
77

 
76

Wire transfer and other remittance fees
121

 
116

 
115

 
114

 
112

All other fees
120

 
93

 
128

 
122

 
153

Total other fees
846

 
800

 
913

 
877

 
902

Mortgage banking:
 
 
 
 
 
 
 
 
 
Servicing income, net
406

 
468

 
262

 
309

 
400

Net gains on mortgage loan origination/sales activities
364

 
466

 
666

 
737

 
748

Total mortgage banking
770

 
934

 
928

 
1,046

 
1,148

Insurance
102

 
114

 
223

 
269

 
280

Net gains (losses) from trading activities (1)
191

 
243

 
(1
)
 
120

 
151

Net gains on debt securities
41

 
1

 
157

 
166

 
120

Net gains from equity securities (1)
295

 
783

 
572

 
363

 
274

Lease income
443

 
455

 
458

 
475

 
493

Life insurance investment income
162

 
164

 
153

 
152

 
145

All other
323

 
438

 
405

 
47

 
327

Total
$
9,012

 
9,696

 
9,737

 
9,400

 
9,764

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

FIVE QUARTER NONINTEREST EXPENSE
 
Quarter ended
 
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Salaries
$
4,465

 
4,363

 
4,403

 
4,356

 
4,343

Commission and incentive compensation
2,642

 
2,768

 
2,665

 
2,553

 
2,499

Employee benefits
1,245

 
1,598

 
1,293

 
1,279

 
1,308

Equipment
550

 
617

 
608

 
523

 
529

Net occupancy
722

 
713

 
715

 
716

 
706

Core deposit and other intangibles
265

 
265

 
288

 
288

 
287

FDIC and other deposit assessments
297

 
324

 
312

 
314

 
328

Operating losses
619

 
1,468

 
3,531

 
1,329

 
350

Outside professional services
881

 
821

 
1,025

 
955

 
1,029

Contract services (1)
536

 
447

 
410

 
415

 
416

Operating leases
311

 
320

 
325

 
347

 
334

Outside data processing
164

 
162

 
208

 
227

 
236

Travel and entertainment
157

 
152

 
183

 
154

 
171

Advertising and promotion
227

 
153

 
200

 
137

 
150

Postage, stationery and supplies
121

 
142

 
137

 
128

 
134

Telecommunications
88

 
92

 
92

 
90

 
91

Foreclosed assets
44

 
38

 
47

 
66

 
52

Insurance
24

 
26

 
28

 
24

 
24

All other (1)
624

 
573

 
330

 
450

 
554

Total
$
13,982

 
15,042

 
16,800

 
14,351

 
13,541

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


- 27 -

Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions, except shares)
Jun 30,
2018

 
Dec 31,
2017

 
%
Change

Assets
 
 
 
 
 
Cash and due from banks
$
20,450

 
23,367

 
(12
)%
Interest-earning deposits with banks (1)
142,999

 
192,580

 
(26
)
Total cash, cash equivalents, and restricted cash (1)
163,449

 
215,947

 
(24
)
Federal funds sold and securities purchased under resale agreements (1)
80,184

 
80,025

 
—

Debt securities:
 
 
 
 


Trading, at fair value (2)
65,602

 
57,624

 
14

Available-for-sale, at fair value (2)
265,687

 
276,407

 
(4
)
Held-to-maturity, at cost
144,206

 
139,335

 
3

Mortgages held for sale
21,509

 
20,070

 
7

Loans held for sale (2)
3,408

 
1,131

 
201

Loans
944,265

 
956,770

 
(1
)
Allowance for loan losses
(10,193
)
 
(11,004
)
 
(7
)
Net loans
934,072

 
945,766

 
(1
)
Mortgage servicing rights:
 
 
 
 


Measured at fair value
15,411

 
13,625

 
13

Amortized
1,407

 
1,424

 
(1
)
Premises and equipment, net
8,882

 
8,847

 
—

Goodwill
26,429

 
26,587

 
(1
)
Derivative assets
11,099

 
12,228

 
(9
)
Equity securities (2)
57,505

 
62,497

 
(8
)
Other assets (2)
80,850

 
90,244

 
(10
)
Total assets
$
1,879,700


1,951,757

 
(4
)
Liabilities
 
 
 
 


Noninterest-bearing deposits
$
365,021

 
373,722

 
(2
)
Interest-bearing deposits
903,843

 
962,269

 
(6
)
Total deposits
1,268,864

 
1,335,991

 
(5
)
Short-term borrowings
104,496

 
103,256

 
1

Derivative liabilities
8,507

 
8,796

 
(3
)
Accrued expenses and other liabilities
72,480

 
70,615

 
3

Long-term debt
219,284

 
225,020

 
(3
)
Total liabilities
1,673,631


1,743,678

 
(4
)
Equity
 
 
 
 


Wells Fargo stockholders’ equity:
 
 
 
 


Preferred stock
25,737

 
25,358

 
1

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
59,644

 
60,893

 
(2
)
Retained earnings
150,803

 
145,263

 
4

Cumulative other comprehensive income (loss)
(5,461
)
 
(2,144
)
 
155

Treasury stock – 632,743,620 shares and 590,194,846 shares 
(32,620
)
 
(29,892
)
 
9

Unearned ESOP shares
(2,051
)
 
(1,678
)
 
22

Total Wells Fargo stockholders’ equity
205,188


206,936

 
(1
)
Noncontrolling interests
881

 
1,143

 
(23
)
Total equity
206,069


208,079

 
(1
)
Total liabilities and equity
$
1,879,700

 
1,951,757

 
(4
)
(1)
Financial information has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.
(2)
Financial information for the prior quarter has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.


- 28 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
20,450

 
18,145

 
23,367

 
19,206

 
20,248

Interest-earning deposits with banks (1)
142,999

 
184,250

 
192,580

 
205,648

 
195,700

Total cash, cash equivalents, and restricted cash (1)
163,449

 
202,395

 
215,947

 
224,854

 
215,948

Federal funds sold and securities purchased under resale agreements (1)
80,184

 
73,550

 
80,025

 
67,457

 
69,006

Debt securities:
 
 
 
 
 
 
 
 

Trading, at fair value (2)
65,602

 
59,866

 
57,624

 
60,970

 
54,324

Available-for-sale, at fair value (2)
265,687

 
271,656

 
276,407

 
271,317

 
268,174

Held-to-maturity, at cost
144,206

 
141,446

 
139,335

 
142,423

 
140,392

Mortgages held for sale
21,509

 
17,944

 
20,070

 
20,009

 
24,807

Loans held for sale (2)
3,408

 
3,581

 
1,131

 
1,339

 
1,898

Loans
944,265

 
947,308

 
956,770

 
951,873

 
957,423

Allowance for loan losses
(10,193
)
 
(10,373
)
 
(11,004
)
 
(11,078
)
 
(11,073
)
Net loans
934,072

 
936,935

 
945,766

 
940,795

 
946,350

Mortgage servicing rights:
 
 
 
 
 
 
 
 
 
Measured at fair value
15,411

 
15,041

 
13,625

 
13,338

 
12,789

Amortized
1,407

 
1,411

 
1,424

 
1,406

 
1,399

Premises and equipment, net
8,882

 
8,828

 
8,847

 
8,449

 
8,403

Goodwill
26,429

 
26,445

 
26,587

 
26,581

 
26,573

Derivative assets
11,099

 
11,467

 
12,228

 
12,580

 
13,273

Equity securities (2)
57,505

 
58,935

 
62,497

 
54,981

 
55,742

Other assets (2)
80,850

 
85,888

 
90,244

 
88,381

 
91,714

Total assets
$
1,879,700


1,915,388


1,951,757


1,934,880


1,930,792

Liabilities
 
 
 
 
 
 
 
 
 
Noninterest-bearing deposits
$
365,021

 
370,085

 
373,722

 
366,528

 
372,766

Interest-bearing deposits
903,843

 
933,604

 
962,269

 
940,178

 
933,064

Total deposits
1,268,864


1,303,689


1,335,991


1,306,706


1,305,830

Short-term borrowings
104,496

 
97,207

 
103,256

 
93,811

 
95,356

Derivative liabilities
8,507

 
7,883

 
8,796

 
9,497

 
11,636

Accrued expenses and other liabilities
72,480

 
73,397

 
70,615

 
78,993

 
72,799

Long-term debt
219,284

 
227,302

 
225,020

 
239,256

 
239,222

Total liabilities
1,673,631


1,709,478


1,743,678


1,728,263


1,724,843

Equity
 
 
 
 
 
 
 
 
 
Wells Fargo stockholders’ equity:
 
 
 
 
 
 
 
 
 
Preferred stock
25,737

 
26,227

 
25,358

 
25,576

 
25,785

Common stock
9,136

 
9,136

 
9,136

 
9,136

 
9,136

Additional paid-in capital
59,644

 
60,399

 
60,893

 
60,759

 
60,689

Retained earnings
150,803

 
147,928

 
145,263

 
141,549

 
139,366

Cumulative other comprehensive income (loss)
(5,461
)
 
(4,921
)
 
(2,144
)
 
(1,622
)
 
(2,148
)
Treasury stock
(32,620
)
 
(31,246
)
 
(29,892
)
 
(27,772
)
 
(25,675
)
Unearned ESOP shares
(2,051
)
 
(2,571
)
 
(1,678
)
 
(1,904
)
 
(2,119
)
Total Wells Fargo stockholders’ equity
205,188


204,952


206,936


205,722


205,034

Noncontrolling interests
881

 
958

 
1,143

 
895

 
915

Total equity
206,069


205,910


208,079


206,617


205,949

Total liabilities and equity
$
1,879,700


1,915,388


1,951,757


1,934,880


1,930,792

(1)
Financial information has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.
(2)
Financial information for prior quarters has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.


- 29 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER TRADING ASSETS AND LIABILITIES
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Trading assets
 
 
 
 
 
 
 
 
 
Debt securities
$
65,602

 
59,866

 
57,624

 
60,970

 
54,324

Equity securities (1)
22,978

 
25,327

 
30,004

 
22,797

 
24,229

Loans held for sale
1,350

 
1,695

 
1,023

 
1,182

 
1,742

Gross trading derivative assets
30,758

 
30,644

 
31,340

 
31,052

 
31,451

Netting (2)
(20,687
)
 
(20,112
)
 
(19,629
)
 
(18,881
)
 
(19,289
)
Total trading derivative assets
10,071

 
10,532

 
11,711

 
12,171

 
12,162

Total trading assets
100,001

 
97,420

 
100,362

 
97,120

 
92,457

Trading liabilities
 
 
 
 
 
 
 
 
 
Short sales
21,765

 
23,303

 
18,472

 
19,096

 
16,845

Gross trading derivative liabilities
29,847

 
29,717

 
31,386

 
30,365

 
31,172

Netting (2)
(22,311
)
 
(22,569
)
 
(23,062
)
 
(21,662
)
 
(20,544
)
Total trading derivative liabilities
7,536

 
7,148

 
8,324

 
8,703

 
10,628

Total trading liabilities
$
29,301

 
30,451

 
26,796

 
27,799

 
27,473

(1)
Financial information for the prior quarters of 2017 has been revised to reflect the impact of the adoption in first quarter 2018 of ASU 2016-01 and assets held as economic hedges for our deferred compensation plan obligations have been reclassified as marketable equity securities not held for trading.
(2)
Represents balance sheet netting for trading derivative assets and liability balances, and trading portfolio level counterparty valuation adjustments.
FIVE QUARTER DEBT SECURITIES
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Trading debt securities
$
65,602

 
59,866

 
57,624

 
60,970

 
54,324

Available-for-sale debt securities:
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
6,271

 
6,279

 
6,319

 
6,350

 
17,896

Securities of U.S. states and political subdivisions
47,559

 
49,643

 
51,326

 
52,774

 
52,013

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Federal agencies
154,556

 
156,814

 
160,219

 
150,181

 
135,938

Residential and commercial
8,286

 
9,264

 
9,173

 
11,046

 
12,772

Total mortgage-backed securities
162,842

 
166,078

 
169,392

 
161,227

 
148,710

Other debt securities
49,015

 
49,656

 
49,370

 
50,966

 
49,555

Total available-for-sale debt securities
265,687

 
271,656

 
276,407

 
271,317

 
268,174

Held-to-maturity debt securities:
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
44,735

 
44,727

 
44,720

 
44,712

 
44,704

Securities of U.S. states and political subdivisions
6,300

 
6,307

 
6,313

 
6,321

 
6,325

Federal agency and other mortgage-backed securities (1)
93,016

 
89,748

 
87,527

 
90,071

 
87,525

Other debt securities
155

 
664

 
775

 
1,319

 
1,838

Total held-to-maturity debt securities
144,206

 
141,446

 
139,335

 
142,423

 
140,392

Total debt securities
$
475,495


472,968


473,366


474,710


462,890

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


- 30 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER EQUITY SECURITIES
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Held for trading at fair value
 
 
 
 
 
 
 
 
 
Marketable equity securities
$
22,978

 
25,327

 
30,004

 
22,797

 
24,229

Not held for trading:
 
 
 
 
 
 
 
 
 
Fair value:
 
 
 
 
 
 
 
 
 
Marketable equity securities (1)
5,273

 
4,931

 
4,356

 
4,348

 
4,340

Nonmarketable equity securities (2)
5,876

 
5,303

 
4,867

 
4,523

 
3,986

Total equity securities at fair value
11,149

 
10,234

 
9,223

 
8,871

 
8,326

Equity method:
 
 
 
 
 
 
 
 
 
LIHTC (3)
10,361

 
10,318

 
10,269

 
9,884

 
9,828

Private equity
3,732

 
3,840

 
3,839

 
3,757

 
3,740

Tax-advantaged renewable energy
1,950

 
1,822

 
1,950

 
1,954

 
1,960

New market tax credit and other
262

 
268

 
294

 
292

 
295

Total equity method
16,305

 
16,248

 
16,352

 
15,887

 
15,823

Other:
 
 
 
 
 
 
 
 
 
Federal bank stock and other at cost (4)
5,673

 
5,780

 
5,828

 
6,251

 
6,247

Private equity (5)
1,400

 
1,346

 
1,090

 
1,175

 
1,117

Total equity securities not held for trading
34,527

 
33,608

 
32,493

 
32,184

 
31,513

Total equity securities
$
57,505


58,935

 
62,497

 
54,981

 
55,742

(1)
Includes $3.5 billion, $3.5 billion, $3.7 billion, $3.5 billion and $3.3 billion at June 30 and March 31, 2018, and December 31, September 30, and June 30, 2017, respectively, related to securities held as economic hedges of our deferred compensation plan obligations.
(2)
Includes $5.5 billion, $5.0 billion, $4.9 billion, $4.5 billion and $4.0 billion at June 30 and March 31, 2018, and December 31, September 30, and June 30, 2017, respectively, related to investments in which we elected the fair value option.
(3)
Represents low-income housing tax credit investments.
(4)
Includes $5.6 billion, $5.7 billion, $5.4 billion, $5.8 billion and $5.8 billion at June 30 and March 31, 2018, and December 31, September 30, and June 30, 2017, respectively, related to investments in Federal Reserve Bank and Federal Home Loan Bank stock.
(5)
Represents nonmarketable equity securities for which we have elected to account for the security under the measurement alternative.



- 31 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER LOANS
(in millions)
Jun 30,
2018


Mar 31,
2018


Dec 31,
2017


Sep 30,
2017


Jun 30,
2017

Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
336,590

 
334,678

 
333,125

 
327,944

 
331,113

Real estate mortgage
123,964

 
125,543

 
126,599

 
128,475

 
130,277

Real estate construction
22,937

 
23,882

 
24,279

 
24,520

 
25,337

Lease financing
19,614

 
19,293

 
19,385

 
19,211

 
19,174

Total commercial
503,105

 
503,396

 
503,388

 
500,150

 
505,901

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
283,001

 
282,658

 
284,054

 
280,173

 
276,566

Real estate 1-4 family junior lien mortgage
36,542

 
37,920

 
39,713

 
41,152

 
42,747

Credit card
36,684

 
36,103

 
37,976

 
36,249

 
35,305

Automobile
47,632

 
49,554

 
53,371

 
55,455

 
57,958

Other revolving credit and installment
37,301

 
37,677

 
38,268

 
38,694

 
38,946

Total consumer
441,160

 
443,912

 
453,382

 
451,723

 
451,522

Total loans (1)
$
944,265

 
947,308

 
956,770

 
951,873

 
957,423

(1)
Includes $9.0 billion, $10.7 billion, $12.8 billion, $13.6 billion, and $14.3 billion of purchased credit-impaired (PCI) loans at June 30 and March 31, 2018, and December 31, September 30 and June 30, 2017, respectively.
Our foreign loans are reported by respective class of financing receivable in the table above. Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign primarily based on whether the borrower's primary address is outside of the United States. The following table presents total commercial foreign loans outstanding by class of financing receivable.
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Commercial foreign loans:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
61,732

 
59,696

 
60,106

 
58,570

 
57,825

Real estate mortgage
7,617

 
8,082

 
8,033

 
8,032

 
8,359

Real estate construction
542

 
668

 
655

 
647

 
585

Lease financing
1,097

 
1,077

 
1,126

 
1,141

 
1,092

Total commercial foreign loans
$
70,988

 
69,523

 
69,920

 
68,390

 
67,861





- 32 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Nonaccrual loans:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
1,559

 
1,516

 
1,899

 
2,397

 
2,632

Real estate mortgage
765

 
755

 
628

 
593

 
630

Real estate construction
51

 
45

 
37

 
38

 
34

Lease financing
80

 
93

 
76

 
81

 
89

Total commercial
2,455

 
2,409

 
2,640

 
3,109

 
3,385

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
3,829

 
4,053

 
4,122

 
4,213

 
4,413

Real estate 1-4 family junior lien mortgage
1,029

 
1,087

 
1,086

 
1,101

 
1,095

Automobile
119

 
117

 
130

 
137

 
104

Other revolving credit and installment
54

 
53

 
58

 
59

 
59

Total consumer
5,031

 
5,310

 
5,396

 
5,510

 
5,671

Total nonaccrual loans (1)(2)(3)
$
7,486

 
7,719

 
8,036

 
8,619

 
9,056

As a percentage of total loans
0.79
%
 
0.81

 
0.84

 
0.91

 
0.95

Foreclosed assets:
 
 
 
 
 
 
 
 
 
Government insured/guaranteed
$
90

 
103

 
120

 
137

 
149

Non-government insured/guaranteed
409

 
468

 
522

 
569

 
632

Total foreclosed assets
499

 
571

 
642

 
706

 
781

Total nonperforming assets
$
7,985

 
8,290

 
8,678

 
9,325

 
9,837

As a percentage of total loans
0.85
%
 
0.88

 
0.91

 
0.98

 
1.03

(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)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Total (excluding PCI)(1):
$
9,464

 
10,753

 
11,997

 
10,227

 
9,716

Less: FHA insured/guaranteed by the VA (2)(3)
8,622

 
9,786

 
10,934

 
9,266

 
8,873

Total, not government insured/guaranteed
$
842

 
967

 
1,063

 
961

 
843

By segment and class, not government insured/guaranteed:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
23

 
40

 
26

 
27

 
42

Real estate mortgage
26

 
23

 
23

 
11

 
2

Real estate construction
—

 
1

 
—

 
—

 
10

Total commercial
49


64


49


38


54

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage (3)
133

 
164

 
219

 
190

 
145

Real estate 1-4 family junior lien mortgage (3)
33

 
48

 
60

 
49

 
44

Credit card
429

 
473

 
492

 
475

 
411

Automobile
105

 
113

 
143

 
111

 
91

Other revolving credit and installment
93

 
105

 
100

 
98

 
98

Total consumer
793


903


1,014


923


789

Total, not government insured/guaranteed
$
842


967


1,063


961


843

(1)
PCI loans totaled $811 million, $1.0 billion, $1.4 billion, $1.4 billion and $1.5 billion, at June 30 and March 31, 2018, and December 31, September 30 and June 30, 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.



- 33 -

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

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

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

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

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

(in millions)
Quarter
ended
June 30,
2018

 
Six months ended
June 30,
2018

 
2009-2017

Balance, beginning of period
$
6,864

 
8,887

 
10,447

Change in accretable yield due to acquisitions
—

 
—

 
161

Accretion into interest income (1)
(299
)
 
(613
)
 
(16,983
)
Accretion into noninterest income due to sales (2)
(479
)
 
(1,122
)
 
(801
)
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (3)
59

 
399

 
11,597

Changes in expected cash flows that do not affect nonaccretable difference (4)
(412
)
 
(1,818
)
 
4,466

Balance, end of period 
$
5,733

 
5,733

 
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 June 30, 2018, our carrying value for PCI loans totaled $9.0 billion and the remainder of nonaccretable difference established in purchase accounting totaled $313 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.


- 34 -

Wells Fargo & Company and Subsidiaries
CHANGES IN ALLOWANCE FOR CREDIT LOSSES
 
Quarter ended June 30,
 
 
Six months ended June 30,
 
(in millions)
2018

 
2017

 
2018

 
2017

Balance, beginning of period
$
11,313

 
12,287

 
11,960

 
12,540

Provision for credit losses
452

 
555

 
643

 
1,160

Interest income on certain impaired loans (1)
(43
)
 
(46
)
 
(86
)
 
(94
)
Loan charge-offs:
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
Commercial and industrial
(134
)
 
(161
)
 
(298
)
 
(414
)
Real estate mortgage
(19
)
 
(8
)
 
(21
)
 
(13
)
Real estate construction
—

 
—

 
—

 
—

Lease financing
(20
)
 
(13
)
 
(37
)
 
(20
)
Total commercial
(173
)
 
(182
)
 
(356
)
 
(447
)
Consumer:
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
(55
)
 
(55
)
 
(96
)
 
(124
)
Real estate 1-4 family junior lien mortgage
(47
)
 
(62
)
 
(94
)
 
(155
)
Credit card
(404
)
 
(379
)
 
(809
)
 
(746
)
Automobile
(216
)
 
(212
)
 
(516
)
 
(467
)
Other revolving credit and installment
(164
)
 
(185
)
 
(344
)
 
(374
)
Total consumer
(886
)
 
(893
)
 
(1,859
)
 
(1,866
)
Total loan charge-offs
(1,059
)
 
(1,075
)
 
(2,215
)
 
(2,313
)
Loan recoveries:
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
Commercial and industrial
76

 
83

 
155

 
165

Real estate mortgage
19

 
14

 
36

 
44

Real estate construction
6

 
4

 
10

 
12

Lease financing
5

 
6

 
10

 
8

Total commercial
106

 
107

 
211

 
229

Consumer:
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
78

 
71

 
137

 
133

Real estate 1-4 family junior lien mortgage
60

 
66

 
115

 
136

Credit card
81

 
59

 
154

 
117

Automobile
103

 
86

 
195

 
174

Other revolving credit and installment
29

 
31

 
60

 
64

Total consumer
351

 
313

 
661

 
624

Total loan recoveries
457

 
420

 
872

 
853

Net loan charge-offs
(602
)
 
(655
)
 
(1,343
)
 
(1,460
)
Other
(10
)
 
5

 
(64
)
 
—

Balance, end of period
$
11,110

 
12,146

 
11,110

 
12,146

Components:
 
 
 
 
 
 
 
Allowance for loan losses
$
10,193

 
11,073

 
10,193

 
11,073

Allowance for unfunded credit commitments
917

 
1,073

 
917

 
1,073

Allowance for credit losses
$
11,110

 
12,146

 
11,110

 
12,146

Net loan charge-offs (annualized) as a percentage of average total loans
0.26
%
 
0.27

 
0.29

 
0.31

Allowance for loan losses as a percentage of total loans
1.08

 
1.16

 
1.08

 
1.16

Allowance for credit losses as a percentage of total loans
1.18

 
1.27

 
1.18

 
1.27

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


- 35 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
 
Quarter ended
 
(in millions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Balance, beginning of quarter
$
11,313

 
11,960

 
12,109

 
12,146

 
12,287

Provision for credit losses
452

 
191

 
651

 
717

 
555

Interest income on certain impaired loans (1)
(43
)
 
(43
)
 
(49
)
 
(43
)
 
(46
)
Loan charge-offs:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
(134
)
 
(164
)
 
(181
)
 
(194
)
 
(161
)
Real estate mortgage
(19
)
 
(2
)
 
(4
)
 
(21
)
 
(8
)
Real estate construction
—

 
—

 
—

 
—

 
—

Lease financing
(20
)
 
(17
)
 
(14
)
 
(11
)
 
(13
)
Total commercial
(173
)
 
(183
)
 
(199
)
 
(226
)
 
(182
)
Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
(55
)
 
(41
)
 
(49
)
 
(67
)
 
(55
)
Real estate 1-4 family junior lien mortgage
(47
)
 
(47
)
 
(54
)
 
(70
)
 
(62
)
Credit card
(404
)
 
(405
)
 
(398
)
 
(337
)
 
(379
)
Automobile
(216
)
 
(300
)
 
(261
)
 
(274
)
 
(212
)
Other revolving credit and installment
(164
)
 
(180
)
 
(169
)
 
(170
)
 
(185
)
Total consumer
(886
)
 
(973
)
 
(931
)
 
(918
)
 
(893
)
Total loan charge-offs
(1,059
)
 
(1,156
)
 
(1,130
)
 
(1,144
)
 
(1,075
)
Loan recoveries:
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
76

 
79

 
63

 
69

 
83

Real estate mortgage
19

 
17

 
14

 
24

 
14

Real estate construction
6

 
4

 
3

 
15

 
4

Lease financing
5

 
5

 
4

 
5

 
6

Total commercial
106

 
105

 
84

 
113

 
107

Consumer:
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
78

 
59

 
72

 
83

 
71

Real estate 1-4 family junior lien mortgage
60

 
55

 
61

 
69

 
66

Credit card
81

 
73

 
62

 
60

 
59

Automobile
103

 
92

 
73

 
72

 
86

Other revolving credit and installment
29

 
31

 
27

 
30

 
31

Total consumer
351

 
310

 
295

 
314

 
313

Total loan recoveries
457

 
415

 
379

 
427

 
420

Net loan charge-offs
(602
)
 
(741
)
 
(751
)
 
(717
)
 
(655
)
Other
(10
)
 
(54
)
 
—

 
6

 
5

Balance, end of quarter
$
11,110

 
11,313

 
11,960

 
12,109

 
12,146

Components:
 
 
 
 
 
 
 
 
 
Allowance for loan losses
$
10,193

 
10,373

 
11,004

 
11,078

 
11,073

Allowance for unfunded credit commitments
917

 
940

 
956

 
1,031

 
1,073

Allowance for credit losses
$
11,110

 
11,313

 
11,960

 
12,109

 
12,146

Net loan charge-offs (annualized) as a percentage of average total loans
0.26
%
 
0.32

 
0.31

 
0.30

 
0.27

Allowance for loan losses as a percentage of:
 
 
 
 
 
 
 
 
 
Total loans
1.08

 
1.10

 
1.15

 
1.16

 
1.16

Nonaccrual loans
136

 
134

 
137

 
129

 
122

Nonaccrual loans and other nonperforming assets
128

 
125

 
127

 
119

 
113

Allowance for credit losses as a percentage of:
 
 
 
 
 
 
 
 
 
Total loans
1.18

 
1.19

 
1.25

 
1.27

 
1.27

Nonaccrual loans
148

 
147

 
149

 
141

 
134

Nonaccrual loans and other nonperforming assets
139

 
136

 
138

 
130

 
123

(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)


Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

Sep 30,
2017

Jun 30,
2017

Tangible book value per common share (1):







Total equity


$
206,069

205,910

208,079

206,617

205,949

Adjustments:
 
 
 
 
 
 
 
Preferred stock


(25,737
)
(26,227
)
(25,358
)
(25,576
)
(25,785
)
Additional paid-in capital on ESOP
preferred stock


(116
)
(146
)
(122
)
(130
)
(136
)
Unearned ESOP shares


2,051

2,571

1,678

1,904

2,119

Noncontrolling interests


(881
)
(958
)
(1,143
)
(895
)
(915
)
Total common stockholders' equity
(A)

181,386

181,150

183,134

181,920

181,232

Adjustments:
 
 
 
 
 
 
 
Goodwill


(26,429
)
(26,445
)
(26,587
)
(26,581
)
(26,573
)
Certain identifiable intangible assets
(other than MSRs)


(1,091
)
(1,357
)
(1,624
)
(1,913
)
(2,147
)
Other assets (2)


(2,160
)
(2,388
)
(2,155
)
(2,282
)
(2,268
)
Applicable deferred taxes (3)


874

918

962

1,550

1,624

Tangible common equity
(B)

$
152,580

151,878

153,730

152,694

151,868

Common shares outstanding
(C)

4,849.1

4,873.9

4,891.6

4,927.9

4,966.8

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

$
37.41

37.17

37.44

36.92

36.49

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

31.47

31.16

31.43

30.99

30.58

 
 
 
Quarter ended
 
 
Six months ended
 
(in millions, except ratios)
 
 
Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

Sep 30,
2017

Jun 30,
2017

 
Jun 30,
2018

Jun 30,
2017

Return on average tangible common equity (1):
 
 
 
 
 
 
 
 
 
 
Net income applicable to common stock
(A)
 
$
4,792

4,733

5,740

4,131

5,450

 
9,525

10,683

Average total equity
 
 
206,067

206,180

207,413

207,723

205,755

 
206,123

203,668

Adjustments:
 
 

 
 
 
 
 
 
 
Preferred stock
 
 
(26,021
)
(26,157
)
(25,569
)
(25,780
)
(25,849
)
 
(26,089
)
(25,508
)
Additional paid-in capital on ESOP preferred stock
 
 
(129
)
(153
)
(129
)
(136
)
(144
)
 
(141
)
(145
)
Unearned ESOP shares
 
 
2,348

2,508

1,896

2,114

2,366

 
2,428

2,282

Noncontrolling interests
 
 
(919
)
(997
)
(998
)
(926
)
(910
)
 
(958
)
(934
)
Average common stockholders’ equity
(B)
 
181,346

181,381

182,613

182,995

181,218

 
181,363

179,363

Adjustments:
 
 

 
 
 
 
 
 
 
Goodwill
 
 
(26,444
)
(26,516
)
(26,579
)
(26,600
)
(26,664
)
 
(26,480
)
(26,668
)
Certain identifiable intangible assets (other than MSRs)
 
 
(1,223
)
(1,489
)
(1,767
)
(2,056
)
(2,303
)
 
(1,355
)
(2,445
)
Other assets (2)
 
 
(2,271
)
(2,233
)
(2,245
)
(2,231
)
(2,160
)
 
(2,252
)
(2,128
)
Applicable deferred taxes (3)
 
 
889

933

1,332

1,579

1,648

 
911

1,685

Average tangible common equity
(C)
 
$
152,297

152,076

153,354

153,687

151,739

 
152,187

149,807

Return on average common stockholders' equity (ROE) (annualized)
(A)/(B)
 
10.60
%
10.58

12.47

8.96

12.06

 
10.59

12.01

Return on average tangible common equity (ROTCE) (annualized)
(A)/(C)
 
12.62

12.62

14.85

10.66

14.41

 
12.62

14.38

(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, which are included in other assets.
(3)
Applicable deferred taxes relate to goodwill and other intangible assets. They were determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.


- 37 -

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

 
 
 
 
(in billions, except ratio)
 
Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

Sep 30,
2017

Jun 30,
2017

Total equity
 
$
206.1

205.9

208.1

206.6

205.9

Adjustments:
 
 
 
 
 
 
Preferred stock
 
(25.7
)
(26.2
)
(25.4
)
(25.6
)
(25.8
)
Additional paid-in capital on ESOP
preferred stock
 
(0.1
)
(0.1
)
(0.1
)
(0.1
)
(0.1
)
Unearned ESOP shares
 
2.0

2.6

1.7

1.9

2.1

Noncontrolling interests
 
(0.9
)
(1.0
)
(1.1
)
(0.9
)
(0.9
)
Total common stockholders' equity
 
181.4

181.2

183.2

181.9

181.2

Adjustments:
 
 
 
 
 
 
Goodwill
 
(26.4
)
(26.4
)
(26.6
)
(26.6
)
(26.6
)
Certain identifiable intangible assets (other than MSRs)
 
(1.1
)
(1.4
)
(1.6
)
(1.9
)
(2.1
)
Other assets (2)
 
(2.2
)
(2.4
)
(2.2
)
(2.3
)
(2.2
)
Applicable deferred taxes (3)
 
0.9

0.9

1.0

1.6

1.6

Investment in certain subsidiaries and other
 
0.4

0.4

0.2

(0.1
)
(0.2
)
Common Equity Tier 1 (Fully Phased-In) under Basel III
(A)
153.0

152.3

154.0

152.6

151.7

Total risk-weighted assets (RWAs) anticipated under Basel III (4)(5)
(B)
$
1,279.7

1,278.1

1,285.6

1,292.8

1,310.5

Common Equity Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In) (5)
(A)/(B)
12.0
%
11.9

12.0

11.8

11.6

(1)
Basel III capital rules, adopted by the Federal Reserve Board on July 2, 2013, revised the definition of capital, increased minimum capital ratios, and introduced a minimum Common Equity Tier 1 (CET1) ratio. 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. Beginning January 1, 2018, the requirements for calculating CET1 and tier 1 capital, along with RWAs, became fully phased-in.
(2)
Represents goodwill and other intangibles on nonmarketable equity securities, which are included in other assets.
(3)
Applicable deferred taxes relate to goodwill and other intangible assets. They were determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.
(4)
The final Basel III capital rules provide for two capital frameworks: the Standardized Approach, which replaced Basel I, and the Advanced Approach applicable to certain institutions. Under the final rules, we are subject to the lower of our CET1 ratio calculated under the Standardized Approach and under the Advanced Approach in the assessment of our capital adequacy. Because the final determination of our CET1 ratio and which approach will produce the lower CET1 ratio as of June 30, 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 March 31, 2018, and December 31, September 30 and June 30, 2017, was calculated under the Basel III Standardized Approach RWAs.
(5)
The Company’s June 30, 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 June 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (3)
$
7,346

 
7,133

 
4,693

 
4,809

 
1,111

 
1,171

 
(609
)
 
(642
)
 
12,541

 
12,471

Provision (reversal of provision) for credit losses
484

 
623

 
(36
)
 
(65
)
 
(2
)
 
7

 
6

 
(10
)
 
452

 
555

Noninterest income
4,460

 
4,822

 
2,504

 
2,670

 
2,840

 
3,055

 
(792
)
 
(783
)
 
9,012

 
9,764

Noninterest expense
7,290

 
7,266

 
4,219

 
4,036

 
3,361

 
3,071

 
(888
)
 
(832
)
 
13,982

 
13,541

Income (loss) before income tax expense (benefit)
4,032

 
4,066

 
3,014

 
3,508

 
592

 
1,148

 
(519
)
 
(583
)
 
7,119

 
8,139

Income tax expense (benefit)
1,413

 
1,255

 
379

 
775

 
147

 
436

 
(129
)
 
(221
)
 
1,810

 
2,245

Net income (loss) before noncontrolling interests
2,619

 
2,811

 
2,635

 
2,733

 
445

 
712

 
(390
)
 
(362
)
 
5,309

 
5,894

Less: Net income (loss) from noncontrolling interests
123

 
46

 
—

 
(9
)
 
—

 
1

 
—

 
—

 
123

 
38

Net income (loss)
$
2,496

 
2,765

 
2,635

 
2,742

 
445

 
711

 
(390
)
 
(362
)
 
5,186

 
5,856

 
Average loans
$
463.8

 
475.1

 
464.7

 
466.9

 
74.7

 
71.7

 
(59.1
)
 
(56.8
)
 
944.1

 
956.9

Average assets
1,034.3

 
1,083.6

 
826.4

 
818.8

 
84.0

 
82.4

 
(59.8
)
 
(57.8
)
 
1,884.9

 
1,927.0

Average deposits
760.6

 
727.7

 
414.0

 
462.4

 
167.1

 
190.1

 
(70.4
)
 
(79.0
)
 
1,271.3

 
1,301.2

 
Six months ended June 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (3)
$
14,541

 
14,265

 
9,225

 
9,490

 
2,223

 
2,312

 
(1,210
)
 
(1,272
)
 
24,779

 
24,795

Provision (reversal of provision) for credit losses
702

 
1,269

 
(56
)
 
(108
)
 
(8
)
 
3

 
5

 
(4
)
 
643

 
1,160

Noninterest income
9,095

 
9,513

 
5,251

 
5,566

 
5,970

 
6,171

 
(1,608
)
 
(1,555
)
 
18,708

 
19,695

Noninterest expense
15,992

 
14,547

 
8,197

 
8,203

 
6,651

 
6,275

 
(1,816
)
 
(1,692
)
 
29,024

 
27,333

Income (loss) before income tax expense (benefit)
6,942

 
7,962

 
6,335

 
6,961

 
1,550

 
2,205

 
(1,007
)
 
(1,131
)
 
13,820

 
15,997

Income tax expense (benefit)
2,222

 
2,237

 
827

 
1,748

 
386

 
822

 
(251
)
 
(429
)
 
3,184

 
4,378

Net income (loss) before noncontrolling interests
4,720

 
5,725

 
5,508

 
5,213

 
1,164

 
1,383

 
(756
)
 
(702
)
 
10,636

 
11,619

Less: Net income (loss) from noncontrolling interests
311

 
136

 
(2
)
 
(14
)
 
5

 
7

 
—

 
—

 
314

 
129

Net income (loss)
$
4,409

 
5,589

 
5,510

 
5,227

 
1,159

 
1,376

 
(756
)
 
(702
)
 
10,322

 
11,490

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average loans
$
467.1

 
477.9

 
464.9

 
467.6

 
74.3

 
71.2

 
(58.8
)
 
(56.5
)
 
947.5

 
960.2

Average assets
1,048.0

 
1,089.7

 
827.8

 
814.7

 
84.1

 
82.1

 
(59.6
)
 
(57.5
)
 
1,900.3

 
1,929.0

Average deposits
754.1

 
722.8

 
429.9

 
463.8

 
172.5

 
193.8

 
(72.3
)
 
(80.2
)
 
1,284.2

 
1,300.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 results for all periods prior to 2018 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 occurred 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)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

COMMUNITY BANKING
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
7,346

 
7,195

 
7,239

 
7,154

 
7,133

Provision for credit losses
484

 
218

 
636

 
650

 
623

Noninterest income
4,460

 
4,635

 
4,481

 
4,366

 
4,822

Noninterest expense
7,290

 
8,702

 
10,216

 
7,852

 
7,266

Income before income tax expense
4,032

 
2,910

 
868

 
3,018

 
4,066

Income tax expense (benefit)
1,413

 
809

 
(2,682
)
 
1,079

 
1,255

Net income before noncontrolling interests
2,619

 
2,101

 
3,550

 
1,939

 
2,811

Less: Net income from noncontrolling interests
123

 
188

 
78

 
62

 
46

Segment net income
$
2,496

 
1,913

 
3,472

 
1,877

 
2,765

Average loans
$
463.8

 
470.5

 
473.2

 
473.7

 
475.1

Average assets
1,034.3

 
1,061.9

 
1,073.2

 
1,089.6

 
1,083.6

Average deposits
760.6

 
747.5

 
738.3

 
734.6

 
727.7

WHOLESALE BANKING
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
4,693

 
4,532

 
4,557

 
4,763

 
4,809

Provision (reversal of provision) for credit losses
(36
)
 
(20
)
 
20

 
69

 
(65
)
Noninterest income
2,504

 
2,747

 
2,883

 
2,741

 
2,670

Noninterest expense
4,219

 
3,978

 
4,187

 
4,234

 
4,036

Income before income tax expense
3,014

 
3,321

 
3,233

 
3,201

 
3,508

Income tax expense
379

 
448

 
854

 
894

 
775

Net income before noncontrolling interests
2,635

 
2,873

 
2,379

 
2,307

 
2,733

Less: Net income (loss) from noncontrolling interests
—

 
(2
)
 
6

 
(7
)
 
(9
)
Segment net income
$
2,635

 
2,875

 
2,373

 
2,314

 
2,742

Average loans
$
464.7

 
465.1

 
463.5

 
463.7

 
466.9

Average assets
826.4

 
829.2

 
837.2

 
824.2

 
818.8

Average deposits
414.0

 
446.0

 
465.7

 
463.4

 
462.4

WEALTH AND INVESTMENT MANAGEMENT
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
1,111

 
1,112

 
1,152

 
1,177

 
1,171

Provision (reversal of provision) for credit losses
(2
)
 
(6
)
 
(7
)
 
(1
)
 
7

Noninterest income
2,840

 
3,130

 
3,181

 
3,079

 
3,055

Noninterest expense
3,361

 
3,290

 
3,246

 
3,102

 
3,071

Income before income tax expense
592

 
958

 
1,094

 
1,155

 
1,148

Income tax expense
147

 
239

 
413

 
433

 
436

Net income before noncontrolling interests
445

 
719

 
681

 
722

 
712

Less: Net income from noncontrolling interests
—

 
5

 
6

 
3

 
1

Segment net income
$
445

 
714

 
675

 
719

 
711

Average loans
$
74.7

 
73.9

 
72.9

 
72.4

 
71.7

Average assets
84.0

 
84.2

 
83.7

 
83.2

 
82.4

Average deposits
167.1

 
177.9

 
184.1

 
184.4

 
190.1

OTHER (3)
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
(609
)
 
(601
)
 
(635
)
 
(645
)
 
(642
)
Provision (reversal of provision) for credit losses
6

 
(1
)
 
2

 
(1
)
 
(10
)
Noninterest income
(792
)
 
(816
)
 
(808
)
 
(786
)
 
(783
)
Noninterest expense
(888
)
 
(928
)
 
(849
)
 
(837
)
 
(832
)
Loss before income tax benefit
(519
)
 
(488
)
 
(596
)
 
(593
)
 
(583
)
Income tax benefit
(129
)
 
(122
)
 
(227
)
 
(225
)
 
(221
)
Net loss before noncontrolling interests
(390
)
 
(366
)
 
(369
)
 
(368
)
 
(362
)
Less: Net income from noncontrolling interests
—

 
—

 
—

 
—

 
—

Other net loss
$
(390
)
 
(366
)
 
(369
)
 
(368
)
 
(362
)
Average loans
$
(59.1
)
 
(58.5
)
 
(57.8
)
 
(57.5
)
 
(56.8
)
Average assets
(59.8
)
 
(59.4
)
 
(58.8
)
 
(58.5
)
 
(57.8
)
Average deposits
(70.4
)
 
(74.2
)
 
(76.5
)
 
(76.0
)
 
(79.0
)
CONSOLIDATED COMPANY
 
 
 
 
 
 
 
 
 
Net interest income (2)
$
12,541

 
12,238

 
12,313

 
12,449

 
12,471

Provision for credit losses
452

 
191

 
651

 
717

 
555

Noninterest income
9,012

 
9,696

 
9,737

 
9,400

 
9,764

Noninterest expense
13,982

 
15,042


16,800


14,351


13,541

Income before income tax expense
7,119

 
6,701

 
4,599

 
6,781

 
8,139

Income tax expense (benefit)
1,810

 
1,374

 
(1,642
)
 
2,181

 
2,245

Net income before noncontrolling interests
5,309

 
5,327

 
6,241

 
4,600

 
5,894

Less: Net income from noncontrolling interests
123

 
191

 
90

 
58

 
38

Wells Fargo net income
$
5,186

 
5,136

 
6,151

 
4,542

 
5,856

Average loans
$
944.1

 
951.0

 
951.8

 
952.3

 
956.9

Average assets
1,884.9

 
1,915.9

 
1,935.3

 
1,938.5

 
1,927.0

Average deposits
1,271.3

 
1,297.2

 
1,311.6

 
1,306.4

 
1,301.2

(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 results for all periods prior to 2018 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 occurred 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)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

MSRs measured using the fair value method:
 
 
 
 
 
 
 
 
 
Fair value, beginning of quarter
$
15,041

 
13,625

 
13,338

 
12,789

 
13,208

Purchases
—

 
—

 
—

 
541

 
—

Servicing from securitizations or asset transfers (1)
486

 
573

 
639

 
605

 
436

Sales and other (2)
(1
)
 
(4
)
 
(32
)
 
64

 
(8
)
Net additions
485

 
569

 
607

 
1,210

 
428

Changes in fair value:
 
 
 
 
 
 
 
 
 
Due to changes in valuation model inputs or assumptions:
 
 
 
 
 
 
 
 
 
Mortgage interest rates (3)
376

 
1,253

 
221

 
(171
)
 
(305
)
Servicing and foreclosure costs (4)
30

 
34

 
23

 
60

 
(14
)
Discount rates (5)
—

 
—

 
13

 
—

 
—

Prepayment estimates and other (6)
(61
)
 
43

 
(55
)
 
(31
)
 
(41
)
Net changes in valuation model inputs or assumptions
345

 
1,330

 
202

 
(142
)
 
(360
)
Changes due to collection/realization of expected cash flows over time
(460
)
 
(483
)
 
(522
)
 
(519
)
 
(487
)
Total changes in fair value
(115
)
 
847

 
(320
)
 
(661
)
 
(847
)
Fair value, end of quarter
$
15,411

 
15,041

 
13,625

 
13,338

 
12,789

(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)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Amortized MSRs:
 
 
 
 
 
 
 
 
 
Balance, beginning of quarter
$
1,411

 
1,424

 
1,406

 
1,399

 
1,402

Purchases
22

 
18

 
40

 
31

 
26

Servicing from securitizations or asset transfers
39

 
34

 
43

 
41

 
37

Amortization
(65
)
 
(65
)
 
(65
)
 
(65
)
 
(66
)
Balance, end of quarter
$
1,407

 
1,411

 
1,424

 
1,406

 
1,399

Fair value of amortized MSRs:
 
 
 
 
 
 
 
 
 
Beginning of quarter
$
2,307

 
2,025

 
1,990

 
1,989

 
2,051

End of quarter
2,309

 
2,307

 
2,025

 
1,990

 
1,989



- 41 -

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
 
 
Quarter ended
 
(in millions)
 
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Servicing income, net:
 
 
 
 
 
 
 
 
 
 
Servicing fees (1)
 
$
905

 
906

 
833

 
795

 
882

Changes in fair value of MSRs carried at fair value:
 
 
 
 
 
 
 
 
 
 
Due to changes in valuation model inputs or assumptions (2)
(A)
345

 
1,330

 
202

 
(142
)
 
(360
)
Changes due to collection/realization of expected cash flows over time
 
(460
)
 
(483
)
 
(522
)
 
(519
)
 
(487
)
Total changes in fair value of MSRs carried at fair value
 
(115
)
 
847

 
(320
)
 
(661
)
 
(847
)
Amortization
 
(65
)
 
(65
)
 
(65
)
 
(65
)
 
(66
)
Net derivative gains (losses) from economic hedges (3)
(B)
(319
)
 
(1,220
)
 
(186
)
 
240

 
431

Total servicing income, net
 
$
406

 
468

 
262

 
309

 
400

Market-related valuation changes to MSRs, net of hedge results (2)(3)
(A)+(B)
$
26

 
110

 
16

 
98

 
71

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



(in billions)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Managed servicing portfolio (1):
 
 
 
 
 
 
 
 
 
Residential mortgage servicing:
 
 
 
 
 
 
 
 
 
Serviced for others
$
1,190

 
1,201

 
1,209

 
1,223

 
1,189

Owned loans serviced
340

 
337

 
342

 
340

 
343

Subserviced for others
4

 
5

 
3

 
3

 
4

Total residential servicing
1,534

 
1,543

 
1,554

 
1,566

 
1,536

Commercial mortgage servicing:
 
 
 
 
 
 
 
 
 
Serviced for others
518

 
510

 
495

 
480

 
475

Owned loans serviced
124

 
125

 
127

 
128

 
130

Subserviced for others
10

 
10

 
9

 
8

 
8

Total commercial servicing
652

 
645

 
631

 
616

 
613

Total managed servicing portfolio
$
2,186

 
2,188

 
2,185

 
2,182

 
2,149

Total serviced for others
$
1,708

 
1,711

 
1,704

 
1,703

 
1,664

Ratio of MSRs to related loans serviced for others
0.98
%
 
0.96

 
0.88

 
0.87

 
0.85

Weighted-average note rate (mortgage loans serviced for others)
4.27

 
4.24

 
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
 
 
 
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017


Jun 30,
2017

Net gains on mortgage loan origination/sales activities (in millions):
 
 
 
 
 
 
 
 
 
 
Residential
(A)
$
281

 
324

 
504

 
546

 
521

Commercial
 
49

 
76

 
95

 
81

 
81

Residential pipeline and unsold/repurchased loan management (1)
 
34

 
66

 
67

 
110

 
146

Total
 
$
364

 
466

 
666

 
737

 
748

Application data (in billions):
 
 
 
 
 
 
 
 
 
 
Wells Fargo first mortgage quarterly applications
 
$
67

 
58

 
63

 
73

 
83

Refinances as a percentage of applications
 
25
%
 
35

 
38

 
37

 
32

Wells Fargo first mortgage unclosed pipeline, at quarter end
 
$
26

 
24

 
23

 
29

 
34

Residential real estate originations:
 
 
 
 
 
 
 
 
 
 
Purchases as a percentage of originations
 
78
%
 
65

 
64

 
72

 
75

Refinances as a percentage of originations
 
22

 
35

 
36

 
28

 
25

Total
 
100
%
 
100

 
100

 
100

 
100

Wells Fargo first mortgage loans (in billions):
 
 
 
 
 
 
 
 
 
 
Retail
 
$
21

 
16

 
23

 
26

 
25

Correspondent
 
28

 
27

 
30

 
32

 
31

Other (2)
 
1

 
—

 
—

 
1

 
—

Total quarter-to-date
 
$
50

 
43

 
53

 
59

 
56

Held-for-sale
(B)
$
37

 
34

 
40

 
44

 
42

Held-for-investment
 
13

 
9

 
13

 
15

 
14

Total quarter-to-date
 
$
50

 
43

 
53

 
59

 
56

Total year-to-date
 
$
93

 
43

 
212

 
159

 
100

Production margin on residential held-for-sale mortgage originations
(A)/(B)
0.77
%
 
0.94

 
1.25

 
1.24

 
1.24

(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)
Jun 30,
2018

 
Mar 31,
2018

 
Dec 31,
2017

 
Sep 30,
2017

 
Jun 30,
2017

Balance, beginning of period
$
181

 
181

 
179

 
178

 
222

Assumed with MSR purchases (1)
—

 
—

 
—

 
10

 
—

Provision for repurchase losses:
 
 
 
 
 
 
 
 
 
Loan sales
4

 
3

 
4

 
6

 
6

Change in estimate (2)
(2
)
 
1

 
2

 
(12
)
 
(45
)
Net additions (reductions) to provision
2


4


6

 
(6
)
 
(39
)
Losses
(4
)
 
(4
)
 
(4
)
 
(3
)
 
(5
)
Balance, end of period
$
179


181


181

 
179

 
178

(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.