Wells Fargo Reports Record Quarterly Net Income

Q1 Net Income of $5.9 Billion, Up 14 Percent YoY; EPS of $1.05

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

  • Continued strong financial results:
    • Net income of $5.9 billion, up 14 percent from first quarter 2013
    • Diluted earnings per share (EPS) of $1.05, up 14 percent
    • Revenue of $20.6 billion, compared with $21.3 billion
    • Noninterest expense of $11.9 billion, down $452 million
    • Efficiency ratio of 57.9 percent, improved by 40 basis points
    • Return on assets (ROA) of 1.57 percent, up 8 basis points1
    • Return on equity (ROE) of 14.35 percent, up 76 basis points
  • Strong loan and deposit growth:
    • Total average loans of $823.8 billion, up $27.1 billion, or 3 percent from first quarter 20131
      • Quarter-end loans of $826.4 billion, up $28.1 billion, or 4 percent1
      • Quarter-end core loans of $748.4 billion, up $41.0 billion, or 6 percent1,2
    • Total average core deposits of $973.8 billion, up $47.9 billion, or 5 percent
      • Quarter-end core deposits of $994.2 billion, up $54.3 billion, or 6 percent
  • Continued improvement in credit quality:
    • Net charge-offs of $825 million, down $594 million from first quarter 2013
      • Net charge-off rate of 0.41 percent (annualized), down from 0.72 percent
    • Nonperforming assets down $4.1 billion, or 18 percent
    • $500 million reserve release3 due to continued strong credit performance and improved economic conditions
  • Strengthened capital levels4:
    • Common Equity Tier 1 ratio under Basel III (General Approach) of 11.36 percent at March 31, 2014
    • Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) of 10.04 percent
    • Received a non-objection to 2014 Capital Plan under the Comprehensive Capital Analysis and Review (CCAR), which included a proposed dividend rate of $0.35 per share for second quarter 2014, subject to Board approval, up from $0.30 per share in the first quarter. The 2014 Capital Plan also included an increase in common stock repurchase activity compared with actual repurchases in 2013.
    • In the first quarter, the Board approved an additional 350 million shares in the Company’s authority to repurchase its common stock.
1

Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the SUMMARY FINANCIAL DATA table for more information.

2

See Loans Breakdown table for more information on core and non-strategic/liquidating loan portfolios.

3 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
4

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

Selected Financial Information

             
  Quarter ended
Mar. 31,   Dec. 31,   Mar. 31,
    2014     2013   2013
Earnings
Diluted earnings per common share $ 1.05 1.00 0.92
Wells Fargo net income (in billions) 5.89 5.61 5.17
Return on assets (ROA) (1) 1.57 % 1.48 1.49
Return on equity (ROE) 14.35 13.81 13.59
 
Asset Quality
Net charge-offs (annualized) as a % of avg. total loans 0.41 0.47 0.72
Allowance for credit losses as a % of total loans (1) 1.74 1.82 2.15
Allowance for credit losses as a % of annualized net charge-offs 431 392 299
 
Other
Revenue (in billions) $ 20.6 20.7 21.3
Efficiency ratio 57.9 % 58.5 58.3
Average loans (in billions) (1) $ 823.8 813.3 796.7
Average core deposits (in billions) 973.8 965.8 925.9
Net interest margin (1) 3.20 % 3.27 3.49
               

 

(1) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the SUMMARY FINANCIAL DATA table for more information.

Wells Fargo & Company (NYSE:WFC) reported record net income of $5.9 billion, or $1.05 per diluted common share, for first quarter 2014, up from $5.2 billion, or $0.92 per share, for first quarter 2013, and up from $5.6 billion, or $1.00 per share, for fourth quarter 2013.

“Our solid first quarter results again demonstrated the ability of our diversified business model to perform for shareholders,” said Chairman and CEO John Stumpf. “Our 265,000 team members remained focused on achieving our vision of serving the financial needs of our customers as we grew loans, deposits and increased cross-sell. First quarter 2014 earnings were another record for our Company and capital levels continued to strengthen. Returning more capital to our shareholders has remained a priority for Wells Fargo and we were pleased to have received a non-objection to our 2014 CCAR submission, which included a proposed 17 percent common stock dividend increase to $0.35 per share in the second quarter of this year and higher planned share repurchases compared with 2013 repurchase activity. As we move forward in 2014, I am optimistic about the opportunities ahead and believe that we are well positioned for growth.”

Chief Financial Officer Tim Sloan said, “We are very pleased with Wells Fargo’s performance in the first quarter, particularly in some of the fundamental drivers of long term growth: loans, deposits, investments, capital and credit quality. Revenue remained relatively stable despite the impact of fewer days in the quarter, reflecting contributions from our diversified sources of fee revenue. In addition, we generated revenue more efficiently as we reduced expenses year-over-year and compared with fourth quarter of last year. Income tax expense in the first quarter was $227 million lower than the prior quarter, driven by a $423 million tax benefit recognized in the first quarter.”

Revenue

Revenue was $20.6 billion, compared with $20.7 billion in fourth quarter 2013, as higher noninterest income was more than offset by the expected decline in net interest income due to two fewer days in the quarter. Several businesses generated linked-quarter growth, including retirement services, equipment finance, wealth management, asset-backed finance, merchant services, personal lines and loans, and retail sales finance.

Net Interest Income

Net interest income in first quarter 2014 declined $188 million on a linked-quarter basis to $10.6 billion primarily due to two fewer days compared with fourth quarter 2013. In addition, interest income from mortgages held for sale and variable sources, including purchased credit-impaired (PCI) loan resolutions and loan fees included in interest income, also declined linked quarter. These impacts were partially offset by the benefits of growth in commercial and consumer loans and lower funding costs.

Net interest margin was 3.20 percent, down 7 basis points from the fourth quarter of 20131. Approximately 4 basis points of the decline was due to lower income from variable sources. Two basis points of the decrease was from customer driven deposit growth and 1 basis point from actions taken to meet regulatory expectations for liquidity. Both of these items had minimal impact to net interest income but were dilutive to net interest margin. The net impact of balance sheet repricing and growth was neutral in the first quarter, as it was in fourth quarter 2013.

Noninterest Income

Noninterest income in the first quarter was $10.0 billion, up from $9.9 billion in the prior quarter. Growth was driven by increases in market sensitive revenues5, in particular equity gains, mortgage servicing income and brokerage advisory fees. These increases were offset by a decline in mortgage gain on sale revenues, as well as lower investment banking and commercial real estate brokerage commission revenue, which were down from strong fourth quarter 2013 levels, and seasonal declines in card fees and deposit service charges.

Mortgage banking noninterest income was $1.5 billion, down $60 million from fourth quarter 2013. During the first quarter, residential mortgage originations were $36 billion, down from $50 billion in fourth quarter 2013 while the gain on sale margin was 1.61 percent, compared with 1.77 percent in the fourth quarter. Net mortgage servicing rights (MSRs) results were $407 million, compared with $266 million in fourth quarter 2013.

The Company had net unrealized securities gains of $6.2 billion at March 31, 2014, up from $3.8 billion at December 31, 2013, primarily driven by a decline in interest rates in the quarter.

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

Noninterest Expense

Noninterest expense declined $137 million from the prior quarter to $11.9 billion, as seasonally higher incentive compensation and employee benefits were more than offset by lower outside professional services, salaries and equipment. The efficiency ratio was 57.9 percent in first quarter 2014, an improvement from 58.5 percent in fourth quarter 2013. The Company expects to operate within its targeted efficiency ratio range of 55 to 59 percent in second quarter 2014.

Income Taxes

The Company’s effective income tax rate was 27.9 percent for first quarter 2014, compared with 30.9 percent in the prior quarter. The tax rate for the first quarter included a net $423 million discrete tax benefit primarily from a reduction in the reserve for uncertain tax positions due to the resolution of prior period matters with state taxing authorities. Absent additional discrete tax benefits emerging during the remainder of 2014, the Company expects its effective income tax rate for the full year 2014 to be higher than the effective income tax rate for first quarter 2014.

Loans

Total loans were $826.4 billion at March 31, 2014, up $4.2 billion1 from December 31, 2013, as growth in commercial and industrial, commercial real estate, auto and 1-4 family first mortgage more than offset the decline in junior lien mortgages and a seasonal decline in credit card loans. Core loan growth was $7.0 billion1, as non-strategic/liquidating portfolios declined $2.9 billion in the quarter. Total average loans were $823.8 billion, up $10.5 billion1 from the prior quarter, driven by growth in the core mortgage portfolio, commercial banking, corporate banking, commercial real estate and auto.

                         
  March 31, 2014   December 31, 2013
(in millions)   Core   Liquidating (1)   Total   Core (2)   Liquidating (1)   Total (2)
Commercial $ 379,561   1,720   381,281 375,230   2,013   377,243
Consumer     368,888   76,274     445,162   366,190   78,853     445,043
Total loans   $ 748,449   77,994     826,443   741,420   80,866     822,286
 
Change from prior quarter:   $ 7,029   (2,872 )   4,157   16,423   (3,272 )   13,151
 

(1) See PICK-A-PAY PORTFOLIO and NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS tables for additional information on non-strategic/liquidating loan portfolios. Management believes that the above information provides useful disclosure regarding the Company’s ongoing loan portfolios.

(2) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the SUMMARY FINANCIAL DATA table for more information.

Deposits

Total average deposits for first quarter 2014 were $1.1 trillion, up 9 percent from a year ago and up 6 percent (annualized) from fourth quarter 2013, driven by solid consumer and commercial growth. The average deposit cost for first quarter 2014 was 11 basis points, which was flat compared with the prior quarter and down 4 basis points from a year ago. Average core deposits were $973.8 billion, up 5 percent from a year ago and up 3 percent (annualized) from fourth quarter 2013. Average mortgage escrow deposits decreased to $24.2 billion, compared with $38.8 billion a year ago and $28.2 billion in fourth quarter 2013.

Capital

Capital continued to strengthen in the first quarter, with Common Equity Tier 1 of $132.7 billion under Basel III (General Approach), or 11.36 percent of risk-weighted assets. The Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) was 10.04 percent.6 In first quarter 2014, the Company purchased 33.5 million shares of its common stock. The Company also paid a quarterly common stock dividend of $0.30 per share, up from $0.25 per share a year ago.

On March 26, 2014, the Company received a non-objection to its 2014 Capital Plan under the CCAR, which included a proposed dividend rate of $0.35 per share for second quarter 2014, subject to Board approval. The 2014 Capital Plan also included an increase in common stock repurchase activity compared with actual repurchases in 2013.

In the first quarter, the Board approved an additional 350 million shares in the Company’s authority to repurchase its common stock.

6 Estimated based on final rules adopted July 2, 2013, by the Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act.
 
  Mar. 31,   Dec. 31,   Mar. 31,
(as a percent of total risk-weighted assets)   2014 (1)     2013   2013
Common Equity Tier 1 (2) 11.36 % 10.82 10.39
Tier 1 capital 12.63 12.33 11.80
Tier 1 leverage 9.83 9.60 9.53
               
 

(1) March 31, 2014, ratios are preliminary.

(2) See FIVE QUARTER RISK-BASED CAPITAL COMPONENTS and COMMON EQUITY TIER 1 UNDER BASEL III tables for more information on Common Equity Tier 1.

Credit Quality

“Credit performance was strong in the first quarter as losses remained at historically low levels, nonperforming assets continued to decrease and we continued to originate high quality loans,” said Chief Risk Officer Mike Loughlin. “Credit losses were $825 million in first quarter 2014, compared with $1.4 billion in first quarter 2013, a 42 percent year-over-year improvement. The quarterly loss rate (annualized) was 0.41 percent with commercial losses of only 0.01 percent and consumer losses of 0.75 percent. Nonperforming assets declined by $840 million, or 17 percent (annualized) from last quarter. We released $500 million from the allowance for credit losses in the first quarter, reflecting improved credit performance. We continue to expect future reserve releases absent a significant deterioration in the economic environment.”

Net Loan Charge-offs

Net loan charge-offs improved to $825 million in first quarter 2014, or 0.41 percent (annualized) of average loans, compared with $963 million in fourth quarter 2013, or 0.47 percent (annualized) of average loans.

Net Loan Charge-Offs                                  
  Quarter ended
    Mar. 31, 2014     Dec. 31, 2013     Sept. 30, 2013
  As a     As a     As a
Net loan % of Net loan % of Net loan % of
charge- average charge- average charge- average
($ in millions)   offs   loans (1)     offs   loans (1)     offs   loans (1)
     
Commercial:
Commercial and industrial $ 45 0.09 % $ 107 0.22 % $ 58 0.12 %
Real estate mortgage (22 ) (0.08 ) (41 ) (0.15 ) (20 ) (0.08 )
Real estate construction (23 ) (0.55 ) (13 ) (0.32 ) (17 ) (0.41 )
Lease financing 1 0.03 - - - -
Foreign     4   0.03   -   -   (2 ) (0.02 )
Total commercial     5   0.01   53   0.06   19   0.02
 
Consumer:
Real estate 1-4 family first mortgage 170 0.27 195 0.30 242 0.38
Real estate 1-4 family junior lien mortgage 192 1.20 226 1.34 275 1.58
Credit card 231 3.57 220 3.38 207 3.28
Automobile 90 0.70 108 0.85 78 0.63
Other revolving credit and installment     137   1.29   161   1.50   154   1.46
Total consumer     820   0.75   910   0.82   956   0.86
Total   $ 825   0.41 % $ 963   0.47 % $ 975   0.48 %
                                   
 

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

Nonperforming Assets

Nonperforming assets decreased by $840 million from the prior quarter to $18.8 billion. Nonaccrual loans decreased $1.0 billion from the prior quarter to $14.7 billion. Foreclosed assets were $4.1 billion, up from $3.9 billion in fourth quarter 2013.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
    Mar. 31, 2014     Dec. 31, 2013     Sept. 30, 2013
    As a     As a     As a
% of % of % of
Total total Total total Total total
($ in millions)   balances   loans     balances   loans (1)     balances   loans (1)
 
Commercial:
Commercial and industrial $ 630 0.32 % $ 738 0.38 % $ 809 0.43 %
Real estate mortgage 2,030 1.88 2,252 2.10 2,496 2.36
Real estate construction 296 1.78 416 2.48 517 3.15
Lease financing 31 0.26 29 0.24 17 0.15
Foreign     40   0.08   40   0.08   47   0.10
Total commercial     3,027   0.79   3,475   0.92   3,886   1.05
 
Consumer:

Real estate 1-4 family first mortgage

9,357 3.61 9,799 3.79 10,450 4.10

Real estate 1-4 family junior lien mortgage

2,072 3.24 2,188 3.32 2,333 3.45
Automobile 161 0.31 173 0.34 188 0.38

Other revolving credit and installment

33 0.08 33 0.08 36 0.08
Total consumer     11,623   2.61   12,193   2.74   13,007   2.95
Total nonaccrual loans     14,650   1.77   15,668   1.91   16,893   2.09
 
Foreclosed assets:
Government insured/guaranteed 2,302 2,093 1,781
Non-government insured/guaranteed     1,813     1,844     2,021  
Total foreclosed assets     4,115     3,937     3,802  
Total nonperforming assets   $ 18,765   2.27 % $ 19,605   2.38 % $ 20,695   2.56 %
 
Change from prior quarter:
Total nonaccrual loans $ (1,018 ) $ (1,225 ) $ (1,022 )
Total nonperforming assets (840 ) (1,090 ) (360 )
                             
 

(1) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the SUMMARY FINANCIAL DATA table for more information.

Loans 90 Days or More Past Due and Still Accruing

Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $950 million at March 31, 2014, compared with $1.0 billion at December 31, 2013. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $20.3 billion at March 31, 2014, down from $22.2 billion at December 31, 2013.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $14.4 billion at March 31, 2014, down from $15.0 billion at December 31, 2013. The allowance coverage to total loans was 1.74 percent, compared with 1.82 percent1 in fourth quarter 2013. The allowance covered 4.3 times annualized first quarter net charge-offs, compared with 3.9 times in the prior quarter. The allowance coverage to nonaccrual loans was 98 percent at March 31, 2014 compared with 96 percent at December 31, 2013. “We believe the allowance was appropriate for losses inherent in the loan portfolio at March 31, 2014,” said Loughlin.

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
Mar. 31,   Dec. 31,   Mar. 31,
(in millions)   2014   2013   2013
Community Banking $ 3,844 3,222 2,924
Wholesale Banking 1,742 2,111 2,045
Wealth, Brokerage and Retirement     475   491   337

More financial information about the business segments is in the FIVE QUARTER OPERATING SEGMENT RESULTS table.

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

Selected Financial Information

  Quarter ended
Mar. 31,   Dec. 31,   Mar. 31,
(in millions)   2014   2013   2013
Total revenue $ 12,593 12,254 12,899
Provision for credit losses 419 490 1,262
Noninterest expense 6,774 7,073 7,377
Segment net income 3,844 3,222 2,924
 
(in billions)
Average loans 505.0 502.5 498.9
Average assets 892.6 883.6 799.6
Average core deposits     626.5   620.2   619.2

Community Banking reported net income of $3.8 billion, up $622 million, or 19 percent, from fourth quarter 2013. Revenue of $12.6 billion increased $339 million, or 3 percent, primarily due to higher equity investments gains and other noninterest income, partially offset by the impact of seasonally lower deposit service charges and card fees. Noninterest expense declined $299 million, or 4 percent, due to lower operating losses, project spending, advertising, and annual license renewal costs, partially offset by seasonally higher personnel costs. The provision for credit losses decreased $71 million driven by a $119 million decline in net charge-offs, partially offset by a lower reserve release.

Net income was up $920 million, or 31 percent, from first quarter 2013. Revenue decreased $306 million, or 2 percent, from a year ago primarily due to lower mortgage banking revenue, partially offset by higher net interest income and equity investment gains. Noninterest expense declined $603 million, or 8 percent, from a year ago largely driven by lower mortgage volume-related expenses and foreclosed asset expense. The provision for credit losses decreased $843 million from a year ago due to improved portfolio performance reflecting lower consumer real estate losses.

Regional Banking

  • Retail banking
    • Retail Bank household cross-sell ratio of 6.17 products per household, up from 6.10 year-over-year7
    • Primary consumer checking customers8 up a net 5.1 percent year-over-year7
    • Customers rated their experience with Wells Fargo stores at an all-time high based on first quarter survey results
  • Small Business/Business Banking
    • Primary business checking customers8 up a net 5.1 percent year-over-year7
    • Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) were up 15 percent from the prior year
  • Online and Mobile Banking
    • 23.8 million active online customers, up 6 percent year-over-year7
    • 12.5 million active mobile customers, up 23 percent year-over-year7

Consumer Lending Group

  • Home Lending
    • Originations of $36 billion, compared with $50 billion in prior quarter
    • Applications of $60 billion, compared with $65 billion in prior quarter
    • Application pipeline of $27 billion at quarter end, up from $25 billion at December 31, 2013
    • Residential mortgage servicing portfolio of $1.8 trillion; ratio of MSRs to related loans serviced for others was 85 basis points, compared with 88 basis points in prior quarter
    • Average note rate on the servicing portfolio was 4.51 percent, compared with 4.52 percent in prior quarter
  • Consumer Credit
    • Credit card penetration in retail banking households rose to 38.0 percent7, up from 34.1 percent in prior year
    • Record auto originations of $7.8 billion, up 16 percent from prior quarter and up 15 percent from prior year

7

Data as of February 2014, comparisons with February 2013.

8

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

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

Selected Financial Information

  Quarter ended
Mar. 31,   Dec. 31,   Mar. 31,
(in millions)   2014   2013   2013
Total revenue $ 5,580 5,972 6,086
Reversal of provision for credit losses (93) (125) (58)
Noninterest expense 3,215 3,020 3,091
Segment net income 1,742 2,111 2,045
 
(in billions)
Average loans (1) 301.9 294.6 283.1
Average assets (1) 517.4 509.0 494.7
Average core deposits   259.0   258.5   224.1
 

(1) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the SUMMARY FINANCIAL DATA table for more information.

Wholesale Banking reported net income of $1.7 billion, down $369 million, or 17 percent, from fourth quarter 2013. Revenue of $5.6 billion decreased $392 million, or 7 percent, from prior quarter. Net interest income declined $242 million as higher loan volume was offset by lower PCI resolutions and two fewer days in the quarter. Noninterest income decreased $150 million as lower investment banking, commercial brokerage fees, and corporate banking energy capital gains were partially offset by increased sales and trading results on higher customer accommodation trading. Noninterest expense increased $195 million, or 6 percent, from fourth quarter 2013 reflecting seasonally higher personnel costs and insurance commissions.

Net income was down $303 million, or 15 percent, from first quarter 2013. Revenue decreased $506 million, or 8 percent, from first quarter 2013 as strong loan and deposit growth was more than offset by lower PCI resolution income and market sensitive revenue, including reduced customer accommodation trading revenue. Noninterest expense increased $124 million, or 4 percent from a year ago due to higher personnel expenses and support costs. The provision for credit losses decreased $35 million from a year ago due to a $51 million reduction in credit losses partially offset by $16 million lower reserve release. The first quarter 2014 provision included a $34 million reserve release, compared with $50 million a year ago.

  • Average loans increased 7 percent1 in first quarter 2014 compared with first quarter 2013 on broad-based growth, including asset-backed finance, commercial real estate, corporate banking, government and institutional banking, and international
  • Cross-sell of 7.2 products per relationship up from 7.1 in prior quarter and 6.8 in first quarter 2013
  • Treasury management revenue up 4 percent from first quarter 2013
  • Assets under management of $479 billion, up $16 billion from first quarter 2013, reflecting increased market valuation

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

Selected Financial Information

  Quarter ended
Mar. 31,   Dec. 31,   Mar. 31,
(in millions)   2014   2013   2013
Total revenue $ 3,468 3,438 3,197
Provision (reversal of provision) for credit losses (8 ) (11 ) 14
Noninterest expense 2,711 2,655 2,639
Segment net income 475 491 337
 
(in billions)
Average loans 50.0 48.4 43.8
Average assets 190.6 185.3 180.3
Average core deposits     156.0     153.9     149.4

Wealth, Brokerage and Retirement (WBR) reported net income of $475 million, down $16 million, or 3 percent, from fourth quarter 2013. Revenue of $3.5 billion increased $30 million, or 1 percent, from the prior quarter as higher asset-based fees were largely offset by lower gains on deferred compensation plan investments (offset in compensation expense). Noninterest expense was up 2 percent over the prior quarter and included seasonally higher personnel costs and lower deferred compensation plan expense (offset in trading income).

Net income was up $138 million, or 41 percent, from first quarter 2013. Revenue increased $271 million, or 8 percent, from a year ago primarily driven by strong growth in asset-based fees and higher net interest income, partially offset by a decrease in brokerage transaction revenue. Noninterest expense increased $72 million, or 3 percent, from a year ago primarily due to higher broker commissions. The provision for credit losses decreased $22 million from a year ago.

Retail Brokerage

  • Client assets of $1.4 trillion, up 8 percent from prior year
  • Managed account assets increased $63 billion, or 19 percent, from prior year
  • Average deposit balances increased 4 percent from prior year
  • Strong loan growth, with average balances up 23 percent from prior year

Wealth Management

  • Client assets of $217 billion, up 6 percent from prior year
  • Strong loan growth, with average balances up 11 percent over prior year

Retirement

  • IRA assets of $344 billion, up 9 percent from prior year
  • Institutional Retirement plan assets of $310 billion, up 8 percent from prior year

WBR cross-sell ratio of 10.42 products per household, up from 10.33 in first quarter 2013

Conference Call

The Company will host a live conference call on Friday, April 11, at 7 a.m. PDT (10 a.m. EDT). To access the call, please dial 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings and http://us.meeting-stream.com/wellsfargocompany_041114.

A replay of the conference call will be available beginning at approximately noon PDT (3 p.m. EDT) on April 11 through Friday, April 18. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #75709909. The replay will also be available online at wellsfargo.com/invest_relations/earnings.

Forward-Looking Statements

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

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

  • current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, and the overall slowdown in global economic growth;
  • our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
  • financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
  • the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;
  • the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;
  • negative effects relating to our mortgage servicing and foreclosure practices, including our obligations under the settlement with the Department of Justice and other federal and state government entities, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;
  • our ability to realize our efficiency ratio target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;
  • the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;
  • a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our investment securities portfolio;
  • the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
  • reputational damage from negative publicity, protests, fines, penalties and other negative consequences from regulatory violations and legal actions;
  • a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
  • the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
  • fiscal and monetary policies of the Federal Reserve Board; and
  • the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013.

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

For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.5 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 locations, 12,000 ATMs, and the Internet (wellsfargo.com), and has offices in 36 countries to support our customers who conduct business in the global economy. With more than 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2013 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

 
Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS
   
Pages
 

Summary Information

Summary Financial Data 17-18
 

Income

Consolidated Statement of Income 19
Consolidated Statement of Comprehensive Income 20
Condensed Consolidated Statement of Changes in Total Equity 20
Five Quarter Consolidated Statement of Income 21
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 22
Noninterest Income and Noninterest Expense 23-24
 

Balance Sheet

Consolidated Balance Sheet 25-26
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 27
 

Loans

Investment Securities 28
Loans 28
Nonperforming Assets 29
Loans 90 Days or More Past Due and Still Accruing 30
Purchased Credit-Impaired Loans 31-33
Pick-A-Pay Portfolio 34
Non-Strategic and Liquidating Loan Portfolios 34
Changes in Allowance for Credit Losses 35
 

Equity

Five Quarter Risk-Based Capital Components 36
Common Equity Tier 1 Under Basel III 36
 

Operating Segments

Operating Segment Results 37
 

Other

Mortgage Servicing and other related data 38-40
       
 
 
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA  
         
% Change
Quarter ended Mar. 31, 2014 from  
Mar. 31, Dec. 31, Mar. 31, Dec. 31, Mar. 31,
($ in millions, except per share amounts)   2014     2013   2013   2013       2013  
For the Period
Wells Fargo net income $ 5,893 5,610 5,171 5 % 14
Wells Fargo net income applicable to common stock 5,607 5,369 4,931 4 14
Diluted earnings per common share 1.05 1.00 0.92 5 14
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) (1) 1.57 % 1.48 1.49 6 5
Wells Fargo net income applicable to common stock to average
Wells Fargo common stockholders' equity (ROE) 14.35 13.81 13.59 4 6
Efficiency ratio (2) 57.9 58.5 58.3 (1 ) (1 )
Total revenue $ 20,625 20,665 21,259 - (3 )
Pre-tax pre-provision profit (PTPP) (3) 8,677 8,580 8,859 1 (2 )
Dividends declared per common share 0.30 0.30 0.25 - 20
Average common shares outstanding 5,262.8 5,270.3 5,279.0 - -
Diluted average common shares outstanding 5,353.3 5,358.6 5,353.5 - -
Average loans (1) $ 823,790 813,318 796,662 1 3
Average assets (1) 1,525,905 1,505,766 1,402,922 1 9
Average core deposits (4) 973,801 965,828 925,866 1 5
Average retail core deposits (5) 690,643 679,355 662,913 2 4
Net interest margin (1) 3.20 % 3.27 3.49 (2 ) (8 )
At Period End
Investment Securities $ 270,327 264,353 248,160 2 9
Loans (1) 826,443 822,286 798,362 1 4
Allowance for loan losses 13,695 14,502 16,711 (6 ) (18 )
Goodwill 25,637 25,637 25,637 - -
Assets (1) 1,546,707 1,523,502 1,435,030 2 8
Core deposits (4) 994,185 980,063 939,934 1 6
Wells Fargo stockholders' equity 175,654 170,142 162,086 3 8
Total equity 176,469 171,008 163,395 3 8
Capital ratios:
Total equity to assets (1) 11.41 % 11.22 11.39 2 -
Risk-based capital (6):
Tier 1 capital 12.63 12.33 11.80 2 7
Total capital 15.70 15.43 14.76 2 6
Tier 1 leverage (6) 9.83 9.60 9.53 2 3
Common Equity Tier 1 (6)(7) 11.36 10.82 10.39 5 9

Common shares outstanding

5,265.7 5,257.2 5,288.8 - -
Book value per common share $ 30.48 29.48 28.27 3 8
Common stock price:
High 49.97 45.64 38.20 9 31
Low 44.17 40.07 34.43 10 28
Period end 49.74 45.40 36.99 10 34
Team members (active, full-time equivalent) 265,300 264,900 274,300 - (3 )
                               
 

(1) Amounts for prior periods have been revised to reflect our determination that certain factoring arrangements previously included within commercial loans, which were recorded with a corresponding obligation in other liabilities, did not qualify as loan purchases under ASC Topic 860 (Transfers and Servicing of Financial Assets) based on interpretations of the specific arrangements. Accordingly, we revised our commercial loan balances for year-end 2012 and each of the quarters in 2013 in order to appropriately present the Company’s lending trends over this period. This revision, which resulted in a reduction to total commercial loans and a corresponding decrease to other liabilities, did not impact the Company’s consolidated net income or total cash flows. We reduced our commercial loans by $3.5 billion, $3.2 billion, $2.1 billion, $1.6 billion, and $1.2 billion at December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012, respectively, which represented less than 1% of total commercial loans and less than 0.5% of our total loan portfolio. Other affected financial information, including ratios, has been appropriately revised to reflect this revision.

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

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

(4) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

(5) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.

(6) The March 31, 2014, ratios are preliminary.

(7) See the "Five Quarter Risk-Based Capital Components" table for additional information.

 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
         
Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
($ in millions, except per share amounts)   2014     2013   2013   2013   2013
For the Quarter
Wells Fargo net income $ 5,893 5,610 5,578 5,519 5,171
Wells Fargo net income applicable to common stock 5,607 5,369 5,317 5,272 4,931
Diluted earnings per common share 1.05 1.00 0.99 0.98 0.92
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) (1) 1.57 % 1.48 1.53 1.55 1.49
Wells Fargo net income applicable to common stock to average
Wells Fargo common stockholders' equity (ROE) 14.35 13.81 14.07 14.02 13.59
Efficiency ratio (2) 57.9 58.5 59.1 57.3 58.3
Total revenue $ 20,625 20,665 20,478 21,378 21,259
Pre-tax pre-provision profit (PTPP) (3) 8,677 8,580 8,376 9,123 8,859
Dividends declared per common share 0.30 0.30 0.30 0.30 0.25
Average common shares outstanding 5,262.8 5,270.3 5,295.3 5,304.7 5,279.0
Diluted average common shares outstanding 5,353.3 5,358.6 5,381.7 5,384.6 5,353.5
Average loans (1) $ 823,790 813,318 802,134 798,386 796,662
Average assets (1) 1,525,905 1,505,766 1,446,965 1,427,150 1,402,922
Average core deposits (4) 973,801 965,828 940,279 936,090 925,866
Average retail core deposits (5) 690,643 679,355 670,335 666,043 662,913
Net interest margin (1) 3.20 % 3.27 3.39 3.47 3.49
At Quarter End
Investment securities $ 270,327 264,353 259,399 249,439 248,160
Loans (1) 826,443 822,286 809,135 799,867 798,362
Allowance for loan losses 13,695 14,502 15,159 16,144 16,711
Goodwill 25,637 25,637 25,637 25,637 25,637
Assets (1) 1,546,707 1,523,502 1,484,865 1,438,456 1,435,030
Core deposits (4) 994,185 980,063 947,805 941,158 939,934
Wells Fargo stockholders' equity 175,654 170,142 167,165 162,421 162,086
Total equity 176,469 171,008 168,813 163,777 163,395
Capital ratios:
Total equity to assets (1) 11.41 % 11.22 11.37 11.39 11.39
Risk-based capital (6):
Tier 1 capital 12.63 12.33 12.11 12.12 11.80
Total capital 15.70 15.43 15.09 15.03 14.76
Tier 1 leverage (6) 9.83 9.60 9.76 9.63 9.53
Common Equity Tier 1 (6)(7) 11.36 10.82 10.60 10.71 10.39
Common shares outstanding 5,265.7 5,257.2 5,273.7 5,302.2 5,288.8
Book value per common share $ 30.48 29.48 28.98 28.26 28.27
Common stock price:
High 49.97 45.64 44.79 41.74 38.20
Low 44.17 40.07 40.79 36.19 34.43
Period end 49.74 45.40 41.32 41.27 36.99
Team members (active, full-time equivalent) 265,300 264,900 270,600 274,300 274,300
 
 

(1) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

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

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

(4) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

(5) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.

(6) The March 31, 2014, ratios are preliminary.

(7) See the "Five Quarter Risk-Based Capital Components" table for additional information.

 
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME  
     
Quarter ended March 31, %
(in millions, except per share amounts)   2014   2013   Change  
Interest income
Trading assets $ 374 327 14 %
Investment securities 2,110 1,925 10
Mortgages held for sale 170 371 (54 )
Loans held for sale 2 3 (33 )
Loans 8,746 8,861 (1 )
Other interest income     210   163 29
Total interest income     11,612   11,650 -
Interest expense
Deposits 279 369 (24 )
Short-term borrowings 12 20 (40 )
Long-term debt 619 697 (11 )
Other interest expense     87   65 34
Total interest expense     997   1,151 (13 )
Net interest income 10,615 10,499 1
Provision for credit losses     325   1,219 (73 )
Net interest income after provision for credit losses     10,290   9,280 11
Noninterest income
Service charges on deposit accounts 1,215 1,214 -
Trust and investment fees 3,412 3,202 7
Card fees 784 738 6
Other fees 1,047 1,034 1
Mortgage banking 1,510 2,794 (46 )
Insurance 432 463 (7 )
Net gains from trading activities 432 570 (24 )
Net gains on debt securities 83 45 84
Net gains from equity investments 847 113 650
Lease income 133 130 2
Other     115   457 (75 )
Total noninterest income     10,010   10,760 (7 )
Noninterest expense
Salaries 3,728 3,663 2
Commission and incentive compensation 2,416 2,577 (6 )
Employee benefits 1,372 1,583 (13 )
Equipment 490 528 (7 )
Net occupancy 742 719 3
Core deposit and other intangibles 341 377 (10 )
FDIC and other deposit assessments 243 292 (17 )
Other     2,616   2,661 (2 )
Total noninterest expense     11,948   12,400 (4 )
Income before income tax expense 8,352 7,640 9
Income tax expense     2,277   2,420 (6 )
Net income before noncontrolling interests 6,075 5,220 16
Less: Net income from noncontrolling interests     182   49 271
Wells Fargo net income   $ 5,893   5,171 14
Less: Preferred stock dividends and other     286   240 19
Wells Fargo net income applicable to common stock   $ 5,607   4,931 14
Per share information
Earnings per common share $ 1.07 0.93 15
Diluted earnings per common share 1.05 0.92 14
Dividends declared per common share 0.30 0.25 20
Average common shares outstanding 5,262.8 5,279.0 -
Diluted average common shares outstanding 5,353.3 5,353.5 -
                   
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME  
 
  Quarter ended March 31,     %
(in millions)   2014     2013     Change  
Wells Fargo net income   $ 5,893       5,171   14 %
Other comprehensive income (loss), before tax:  
Investment securities:
Net unrealized gains (losses) arising during the period 2,725 (634 ) NM
Reclassification of net gains to net income (394 ) (113 ) 249
Derivatives and hedging activities:
Net unrealized gains arising during the period 44 7 529
Reclassification of net gains on cash flow hedges to net income (106 ) (87 ) 22
Defined benefit plans adjustments:
Net unrealized gains arising during the period - 6 (100 )
Amortization of net actuarial loss, settlements, and other to net income 18 49 (63 )
Foreign currency translation adjustments:
Net unrealized losses arising during the period (17 ) (18 ) (6 )
Reclassification of net losses to net income     6       -   NM
Other comprehensive income (loss), before tax 2,276 (790 ) NM
Income tax (expense) benefit related to other comprehensive income     (831 )     288   NM
Other comprehensive income (loss), net of tax 1,445 (502 ) NM
Less: Other comprehensive income from noncontrolling interests     79       3   NM
Wells Fargo other comprehensive income (loss), net of tax     1,366       (505 ) NM
 
Wells Fargo comprehensive income 7,259 4,666 56
Comprehensive income from noncontrolling interests     261       52   402
Total comprehensive income   $ 7,520       4,718     59  
 
NM - Not meaningful
 
 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY  
 
Quarter ended March 31,  
(in millions)   2014     2013  
Balance, beginning of period $ 171,008 158,911
Wells Fargo net income 5,893 5,171
Wells Fargo other comprehensive income (loss), net of tax 1,366 (505

)

 

Common stock issued 994 878
Common stock repurchased (1,025 ) (383

)

 

Preferred stock released by ESOP 305 296
Preferred stock issued - 610
Common stock dividends (1,579 ) (1,319

)

 

Preferred stock dividends and other (286 ) (240

)

 

Noncontrolling interests and other, net     (207 )   (24

)

 

Balance, end of period   $ 176,469     163,395  
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
         
  Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions, except per share amounts)     2014   2013     2013     2013     2013
Interest Income
Trading assets $ 374 378 331 340 327
Investment securities 2,110 2,119 2,038 2,034 1,925
Mortgages held for sale 170 221 320 378 371
Loans held for sale 2 3 3 4 3
Loans 8,746 8,907 8,901 8,902 8,861
Other interest income     210   208     183     169     163
Total interest income     11,612   11,836     11,776     11,827     11,650
Interest expense
Deposits 279 297 318 353 369
Short-term borrowings 12 14 9 17 20
Long-term debt 619 635 621 632 697
Other interest expense     87   87     80     75     65
Total interest expense     997   1,033     1,028     1,077     1,151
Net interest income 10,615 10,803 10,748 10,750 10,499
Provision for credit losses     325   363     75     652     1,219
Net interest income after provision for credit losses     10,290   10,440     10,673     10,098     9,280
Noninterest income
Service charges on deposit accounts 1,215 1,283 1,278 1,248 1,214
Trust and investment fees 3,412 3,458 3,276 3,494 3,202
Card fees 784 827 813 813 738
Other fees 1,047 1,119 1,098 1,089 1,034
Mortgage banking 1,510 1,570 1,608 2,802 2,794
Insurance 432 453 413 485 463
Net gains from trading activities 432 325 397 331 570
Net gains (losses) on debt securities 83 (14 ) (6 ) (54 ) 45
Net gains from equity investments 847 654 502 203 113
Lease income 133 148 160 225 130
Other     115   39     191     (8 )   457
Total noninterest income     10,010   9,862     9,730     10,628     10,760
Noninterest expense
Salaries 3,728 3,811 3,910 3,768 3,663
Commission and incentive compensation 2,416 2,347 2,401 2,626 2,577
Employee benefits 1,372 1,160 1,172 1,118 1,583
Equipment 490 567 471 418 528
Net occupancy 742 732 728 716 719
Core deposit and other intangibles 341 375 375 377 377
FDIC and other deposit assessments 243 196 214 259 292
Other     2,616   2,897     2,831     2,973     2,661
Total noninterest expense     11,948   12,085     12,102     12,255     12,400
Income before income tax expense 8,352 8,217 8,301 8,471 7,640
Income tax expense     2,277   2,504     2,618     2,863     2,420
Net income before noncontrolling interests 6,075 5,713 5,683 5,608 5,220
Less: Net income from noncontrolling interests     182   103     105     89     49
Wells Fargo net income   $ 5,893   5,610     5,578     5,519     5,171
Less: Preferred stock dividends and other     286   241     261     247     240
Wells Fargo net income applicable to common stock   $ 5,607   5,369     5,317     5,272     4,931
Per share information
Earnings per common share $ 1.07 1.02 1.00 1.00 0.93
Diluted earnings per common share 1.05 1.00 0.99 0.98 0.92
Dividends declared per common share 0.30 0.30 0.30 0.30 0.25
Average common shares outstanding 5,262.8 5,270.3 5,295.3 5,304.7 5,279.0
Diluted average common shares outstanding 5,353.3 5,358.6 5,381.7 5,384.6 5,353.5
 
 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
           
Quarter ended March 31,
2014 2013
Interest Interest
Average Yields/ income/ Average Yields/ income/
(in millions)   balance   rates     expense   balance   rates     expense
Earning assets

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

$ 213,284 0.27 % $ 144 121,024 0.36 % $ 107
Trading assets 48,231 3.17 381 42,130 3.17 334
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 6,572 1.68 28 7,079 1.56 28
Securities of U.S. states and political subdivisions 42,600 4.37 465 37,584 4.38 410
Mortgage-backed securities:
Federal agencies 117,641 2.94 864 95,368 2.74 654
Residential and commercial     28,035   6.12   429 32,141   6.46   519
Total mortgage-backed securities 145,676 3.55 1,293 127,509 3.68 1,173
Other debt and equity securities     49,156   3.59   438 53,724   3.58   476
Total available-for-sale securities 244,004 3.65 2,224 225,896 3.70 2,087
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 1,104 2.18 6 - - -
Federal agency mortgage-backed securities 6,162 3.11 48 - - -
Other debt securities     6,414   1.86   29 -   -   -
Total held-to-maturity securities 13,680 2.45 83 - - -
Mortgages held for sale (4) 16,556 4.11 170 43,312 3.42 371
Loans held for sale (4) 111 6.28 2 141 8.83 3
Loans:
Commercial:
Commercial and industrial (5) 193,865 3.43 1,641 183,122 3.76 1,700
Real estate mortgage 107,797 3.52 937 106,221 3.84 1,006
Real estate construction 16,879 4.37 182 16,559 4.84 197
Lease financing 11,936 6.15 183 12,424 6.78 210
Foreign (5)     47,876   2.21   262 39,881   2.16   213
Total commercial (5)     378,353   3.43   3,205 358,207   3.76   3,326
Consumer:
Real estate 1-4 family first mortgage 259,477 4.17 2,705 252,049 4.29 2,702
Real estate 1-4 family junior lien mortgage 64,980 4.30 692 74,068 4.28 785
Credit card 26,272 12.32 798 24,097 12.62 750
Automobile 51,794 6.50 831 46,566 7.20 826
Other revolving credit and installment     42,914   5.00   529 41,675   4.70   483
Total consumer     445,437   5.02   5,555 438,455   5.10   5,546
Total loans (4)(5) 823,790 4.29 8,760 796,662 4.49 8,872
Other     4,655   5.72   66 4,255   5.19   55
Total earning assets (5)   $ 1,364,311   3.49 % $ 11,830 1,233,420   3.87 % $ 11,829
Funding sources
Deposits:
Interest-bearing checking $ 36,799 0.07 % $ 6 32,165 0.06 % $ 5
Market rate and other savings 579,044 0.07 105 537,549 0.09 122
Savings certificates 40,535 0.89 89 55,238 1.22 167
Other time deposits 45,822 0.42 48 15,905 1.25 50
Deposits in foreign offices     91,050   0.14   31 71,077   0.14   25
Total interest-bearing deposits 793,250 0.14 279 711,934 0.21 369
Short-term borrowings 54,502 0.09 13 55,410 0.17 23
Long-term debt 153,793 1.62 619 127,112 2.20 697
Other liabilities     12,859   2.72   87 11,608   2.24   65
Total interest-bearing liabilities 1,014,404 0.40 998 906,064 0.51 1,154
Portion of noninterest-bearing funding sources (5)     349,907   -   - 327,356   -   -
Total funding sources (5)   $ 1,364,311     0.29   998 1,233,420     0.38   1,154

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

3.20 %   $ 10,832 3.49 %   $ 10,675
Noninterest-earning assets
Cash and due from banks $ 16,363 16,529
Goodwill 25,637 25,637
Other     119,594   127,336  
Total noninterest-earning assets   $ 161,594   169,502  
Noninterest-bearing funding sources
Deposits $ 284,069 274,221
Other liabilities (5) 52,955 62,222
Total equity 174,477 160,415
Noninterest-bearing funding sources used to fund earning assets (5)     (349,907 ) (327,356 )
Net noninterest-bearing funding sources   $ 161,594   169,502  
Total assets   $ 1,525,905   1,402,922  
 
 

(1) Our average prime rate was 3.25% for the quarters ended March 31, 2014 and 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.24% and 0.29% for the same quarters, respectively.

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

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

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

(5) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

(6) Includes taxable-equivalent adjustments of $217 million and $176 million for the quarters ended March 31, 2014 and 2013, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
 
  Quarter ended
Mar. 31, 2014     Dec. 31, 2013     Sept. 30, 2013     June 30, 2013     Mar. 31, 2013
Average   Yields/ Average   Yields/ Average   Yields/ Average   Yields/ Average   Yields/
($ in billions)   balance   rates     balance   rates     balance   rates     balance   rates     balance   rates
Earning assets

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

$ 213.3 0.27 % $ 205.3 0.28 % $ 155.9 0.31 % $ 136.5 0.33 % $ 121.0 0.36

%

Trading assets 48.2 3.17 45.4 3.40 44.8 3.02 46.6 2.98 42.1 3.17
Investment securities (2):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 6.6 1.68 6.6 1.67 6.6 1.69 6.7 1.73 7.1 1.56
Securities of U.S. states and political subdivisions 42.6 4.37 42.0 4.38 40.8 4.35 39.3 4.42 37.6 4.38
Mortgage-backed securities:
Federal agencies 117.6 2.94 117.9 2.94 113.0 2.83 102.0 2.79 95.4 2.74
Residential and commercial     28.0   6.12   29.2   6.35   30.2   6.56   31.3   6.50   32.1   6.46
Total mortgage-backed securities 145.6 3.55 147.1 3.62 143.2 3.62 133.3 3.66 127.5 3.68
Other debt and equity securities     49.2   3.59   55.4   3.43   55.4   3.27   55.5   3.84   53.7   3.58
Total available-for-sale securities 244.0 3.65 251.1 3.65 246.0 3.61 234.8 3.77 225.9 3.70
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 1.1 2.18 - - - - - - - -
Federal agency mortgage-backed securities 6.2 3.11 2.7 3.11 - - - - - -
Other debt securities     6.4   1.86   0.1   1.99   -   -   -   -   -   -
Total held-to-maturity securities 13.7 2.45 2.8 3.09 - - - - - -
Mortgages held for sale 16.6 4.11 21.4 4.13 33.2 3.86 43.4 3.48 43.3 3.42
Loans held for sale 0.1 6.28 0.1 8.21 0.2 7.25 0.2 7.85 0.1 8.83
Loans:
Commercial:
Commercial and industrial (3) 193.9 3.43 189.9 3.54 185.8 3.63 184.3 3.73 183.1 3.76
Real estate mortgage 107.8 3.52 105.8 3.85 104.6 4.12 105.3 3.92 106.2 3.84
Real estate construction 16.9 4.37 16.6 4.79 16.2 4.43 16.4 5.02 16.6 4.84
Lease financing 11.9 6.15 11.7 5.70 11.7 5.29 12.3 6.66 12.4 6.78
Foreign (3)     47.9   2.21   46.6   2.24 44.8   2.09 42.3   2.23 39.9   2.16
Total commercial (3)     378.4   3.43   370.6   3.59   363.1   3.67   360.6   3.77   358.2   3.76
Consumer:
Real estate 1-4 family first mortgage 259.5 4.17 257.2 4.15 254.1 4.20 252.6 4.23 252.0 4.29

Real estate 1-4 family junior lien mortgage

65.0 4.30 66.8 4.29 68.8 4.30 71.4 4.29 74.1 4.28
Credit card 26.2 12.32 25.9 12.23 25.0 12.45 24.0 12.55 24.1 12.62
Automobile 51.8 6.50 50.2 6.70 49.1 6.85 47.9 7.05 46.6 7.20
Other revolving credit and installment     42.9   5.00   42.6   4.94 42.0   4.83 41.9   4.74 41.7   4.70
Total consumer     445.4   5.02   442.7   5.01   439.0   5.04   437.8   5.05   438.5   5.10
Total loans (3) 823.8 4.29 813.3 4.36 802.1 4.42 798.4 4.47 796.7 4.49
Other     4.6   5.72   4.7   5.22   4.3   5.62   4.2   5.55   4.3   5.19
Total earning assets (3)   $ 1,364.3   3.49 % $ 1,344.1   3.57 % $ 1,286.5   3.71 % $ 1,264.1   3.81 % $ 1,233.4   3.87

%

Funding sources
Deposits:
Interest-bearing checking $ 36.8 0.07 % $ 35.2 0.07 % $ 34.5 0.06 % $ 40.4 0.06 % $ 32.2 0.06

%

Market rate and other savings 579.0 0.07 568.7 0.08 553.1 0.08 541.8 0.08 537.5 0.09
Savings certificates 40.5 0.89 43.1 0.94 47.3 1.08 52.6 1.23 55.2 1.22
Other time deposits 45.8 0.42 39.7 0.48 30.4 0.62 26.0 0.76 15.9 1.25
Deposits in foreign offices     91.1   0.14   86.3   0.15   81.1   0.15   68.9   0.15   71.1   0.14
Total interest-bearing deposits 793.2 0.14 773.0 0.15 746.4 0.17 729.7 0.19 711.9 0.21
Short-term borrowings 54.5 0.09 52.3 0.12 53.4 0.08 57.8 0.14 55.4 0.17
Long-term debt 153.8 1.62 153.5 1.65 133.4 1.86 125.5 2.02 127.1 2.20
Other liabilities     12.9   2.72   12.8   2.70   12.1   2.64   13.3   2.25   11.6   2.24
Total interest-bearing liabilities 1,014.4 0.40 991.6 0.42 945.3 0.43 926.3 0.47 906.0 0.51
Portion of noninterest-bearing funding sources (3)     349.9   -   352.5   -   341.2   -   337.8   -   327.4   -
Total funding sources (3)   $ 1,364.3     0.29 $ 1,344.1     0.30 $ 1,286.5     0.32 $ 1,264.1     0.34 $ 1,233.4     0.38

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

3.20 % 3.27 % 3.39 % 3.47 % 3.49

%

Noninterest-earning assets
Cash and due from banks $ 16.4 16.0 16.4 16.2 16.5
Goodwill 25.6 25.6 25.6 25.6 25.6
Other     119.6     120.0     118.4     121.3     127.4  
Total noninterest-earnings assets   $ 161.6     161.6     160.4     163.1     169.5  
Noninterest-bearing funding sources
Deposits $ 284.1 287.4 279.2 280.0 274.2
Other liabilities (3) 52.9 57.1 57.3 56.2 62.3
Total equity 174.5 169.6 165.1 164.7 160.4

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

    (349.9 )   (352.5 )   (341.2 )   (337.8 )   (327.4 )

Net noninterest-bearing funding sources

  $ 161.6     161.6     160.4     163.1     169.5  
Total assets (3)   $ 1,525.9     1,505.7     1,446.9     1,427.2     1,402.9  
 
 

(1) Our average prime rate was 3.25% for quarters ended March 31, 2014, and December 31, September 30, June 30 and March 31, 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.24%, 0.24%, 0.26%, 0.28% and 0.29% for the same quarters, respectively.

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

(3) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

 
 
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME  
     
Quarter ended March 31, %
(in millions)   2014     2013   Change  
Service charges on deposit accounts $ 1,215 1,214 - %
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,241 2,050 9
Trust and investment management 844 799 6
Investment banking     327     353 (7 )
Total trust and investment fees     3,412     3,202 7
Card fees 784 738 6
Other fees:
Charges and fees on loans 367 384 (4 )
Merchant transaction processing fees 172 154 12
Cash network fees 120 117 3
Commercial real estate brokerage commissions 72 45 60
Letters of credit fees 96 109 (12 )
All other fees     220     225 (2 )
Total other fees     1,047     1,034 1
Mortgage banking:
Servicing income, net 938 314 199
Net gains on mortgage loan origination/sales activities     572     2,480 (77 )
Total mortgage banking     1,510     2,794 (46 )
Insurance 432 463 (7 )
Net gains from trading activities 432 570 (24 )
Net gains on debt securities 83 45 84
Net gains from equity investments 847 113 650
Lease income 133 130 2
Life insurance investment income 132 145 (9 )
All other     (17 )   312 NM
Total   $ 10,010     10,760   (7 )
 
NM - Not meaningful
 
 
NONINTEREST EXPENSE                
 
Quarter ended March 31, %
(in millions)     2014     2013   Change  
Salaries $ 3,728 3,663 2 %
Commission and incentive compensation 2,416 2,577 (6 )
Employee benefits 1,372 1,583 (13 )
Equipment 490 528 (7 )
Net occupancy 742 719 3
Core deposit and other intangibles 341 377 (10 )
FDIC and other deposit assessments 243 292 (17 )
Outside professional services 559 535 4
Outside data processing 241 233 3
Contract services 234 207 13
Travel and entertainment 219 213 3
Operating losses 159 157 1
Postage, stationery and supplies 191 199 (4 )
Advertising and promotion 118 105 12
Foreclosed assets 132 195 (32 )
Telecommunications 114 123 (7 )
Insurance 125 137 (9 )
Operating leases 50 48 4
All other     474     509 (7 )
Total   $ 11,948     12,400   (4 )
 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
 
  Quarter ended
Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31,
(in millions)   2014     2013     2013     2013     2013
Service charges on deposit accounts $ 1,215 1,283 1,278 1,248 1,214
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,241 2,150 2,068 2,127 2,050
Trust and investment management 844 850 811 829 799
Investment banking     327     458     397     538     353
Total trust and investment fees     3,412     3,458     3,276     3,494     3,202
Card fees 784 827 813 813 738
Other fees:
Charges and fees on loans 367 379 390 387 384
Merchant transaction processing fees 172 172 169 174 154
Cash network fees 120 122 129 125 117
Commercial real estate brokerage commissions 72 129 91 73 45
Letters of credit fees 96 99 100 102 109
All other fees     220     218     219     228     225
Total other fees     1,047     1,119     1,098     1,089     1,034
Mortgage banking:
Servicing income, net 938 709 504 393 314
Net gains on mortgage loan origination/sales activities     572     861     1,104     2,409     2,480
Total mortgage banking     1,510     1,570     1,608     2,802     2,794
Insurance 432 453 413 485 463
Net gains from trading activities 432 325 397 331 570
Net gains (losses) on debt securities 83 (14 ) (6 ) (54 ) 45
Net gains from equity investments 847 654 502 203 113
Lease income 133 148 160 225 130
Life insurance investment income 132 125 154 142 145
All other     (17 )   (86 )   37     (150 )   312
Total   $ 10,010     9,862     9,730     10,628     10,760
 
 
FIVE QUARTER NONINTEREST EXPENSE                              
 
Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)   2014     2013     2013     2013     2013
Salaries $ 3,728 3,811 3,910 3,768 3,663
Commission and incentive compensation 2,416 2,347 2,401 2,626 2,577
Employee benefits 1,372 1,160 1,172 1,118 1,583
Equipment 490 567 471 418 528
Net occupancy 742 732 728 716 719
Core deposit and other intangibles 341 375 375 377 377
FDIC and other deposit assessments 243 196 214 259 292
Outside professional services 559 754 623 607 535
Outside data processing 241 264 251 235 233
Contract services 234 261 241 226 207
Travel and entertainment 219 234 209 229 213
Operating losses 159 181 195 288 157
Postage, stationery and supplies 191 189 184 184 199
Advertising and promotion 118 165 157 183 105
Foreclosed assets 132 103 161 146 195
Telecommunications 114 118 116 125 123
Insurance 125 59 98 143 137
Operating leases 50 51 56 49 48
All other     474     518     540     558     509
Total   $ 11,948     12,085     12,102     12,255     12,400
 
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET  
 
  Mar. 31,   Dec. 31,   %
(in millions, except shares)   2014     2013     Change  
Assets
Cash and due from banks $ 19,731 19,919 (1 ) %
Federal funds sold, securities purchased under resale agreements and other short-term investments 222,781 213,793 4
Trading assets 63,753 62,813 1
Investment securities:
Available-for-sale, at fair value 252,665 252,007 -
Held-to-maturity, at cost (fair value $17,621 and $12,247) 17,662 12,346 43
Mortgages held for sale (includes $12,994 and $13,879 carried at fair value) (1) 16,233 16,763 (3 )
Loans held for sale (includes $1 and $1 carried at fair value) (1) 91 133 (32 )
 
Loans (includes $5,959 and $5,995 carried at fair value) (1)(2) 826,443 822,286 1
Allowance for loan losses     (13,695 )   (14,502 ) (6 )
Net loans (2)     812,748     807,784   1
Mortgage servicing rights:
Measured at fair value 14,953 15,580 (4 )
Amortized 1,219 1,229 (1 )
Premises and equipment, net 9,020 9,156 (1 )
Goodwill 25,637 25,637 -
Other assets (includes $1,933 and $1,386 carried at fair value) (1)     90,214     86,342   4
Total assets (2)   $ 1,546,707     1,523,502   2
Liabilities
Noninterest-bearing deposits $ 294,863 288,117 2
Interest-bearing deposits     799,713     791,060   1
Total deposits 1,094,576 1,079,177 1
Short-term borrowings 57,061 53,883 6
Accrued expenses and other liabilities (2) 65,179 66,436 (2 )
Long-term debt     153,422     152,998   -
Total liabilities (2)     1,370,238     1,352,494   1
Equity
Wells Fargo stockholders' equity:
Preferred stock 17,179 16,267 6

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

9,136 9,136 -
Additional paid-in capital 60,618 60,296 1
Retained earnings 96,368 92,361 4
Cumulative other comprehensive income 2,752 1,386 99
Treasury stock – 216,084,768 shares and 224,648,769 shares (8,206 ) (8,104 ) 1
Unearned ESOP shares     (2,193 )   (1,200 ) 83
Total Wells Fargo stockholders' equity 175,654 170,142 3
Noncontrolling interests     815     866   (6 )
Total equity     176,469     171,008   3
Total liabilities and equity (2)   $ 1,546,707     1,523,502     2  
 

(1) Parenthetical amounts represent assets and liabilities for which we have elected the fair value option.

(2) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET  
 
  Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31,
(in millions)   2014     2013     2013     2013     2013  
Assets
Cash and due from banks $ 19,731 19,919 18,928 17,939 16,217

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

222,781 213,793 182,036 148,665 143,804
Trading assets 63,753 62,813 60,203 58,619 62,274
Investment securities:
Available-for-sale, at fair value 252,665 252,007 259,399 249,439 248,160
Held-to-maturity, at cost 17,662 12,346 - - -
Mortgages held for sale 16,233 16,763 25,395 38,785 46,702
Loans held for sale 91 133 204 190 194
 
Loans (1) 826,443 822,286 809,135 799,867 798,362
Allowance for loan losses     (13,695 )   (14,502 )   (15,159 )   (16,144 )   (16,711 )
Net loans (1)     812,748     807,784     793,976     783,723     781,651  
Mortgage servicing rights:
Measured at fair value 14,953 15,580 14,501 14,185 12,061
Amortized 1,219 1,229 1,204 1,176 1,181
Premises and equipment, net 9,020 9,156 9,120 9,190 9,263
Goodwill 25,637 25,637 25,637 25,637 25,637
Other assets     90,214     86,342     94,262     90,908     87,886  
Total assets (1)   $ 1,546,707     1,523,502     1,484,865     1,438,456     1,435,030  
Liabilities
Noninterest-bearing deposits $ 294,863 288,117 279,911 277,648 278,909
Interest-bearing deposits     799,713     791,060     761,960     743,937     731,824  
Total deposits 1,094,576 1,079,177 1,041,871 1,021,585 1,010,733
Short-term borrowings 57,061 53,883 53,851 56,983 60,693
Accrued expenses and other liabilities (1) 65,179 66,436 69,118 72,736 74,018
Long-term debt     153,422     152,998     151,212     123,375     126,191  
Total liabilities (1)     1,370,238     1,352,494     1,316,052     1,274,679     1,271,635  
Equity
Wells Fargo stockholders' equity:
Preferred stock 17,179 16,267 15,549 13,988 14,412
Common stock 9,136 9,136 9,136 9,136 9,136
Additional paid-in capital 60,618 60,296 60,188 59,945 60,136
Retained earnings 96,368 92,361 88,625 84,923 81,264
Cumulative other comprehensive income 2,752 1,386 2,289 1,797 5,145
Treasury stock (8,206 ) (8,104 ) (7,290 ) (5,858 ) (6,036 )
Unearned ESOP shares     (2,193 )   (1,200 )   (1,332 )   (1,510 )   (1,971 )
Total Wells Fargo stockholders' equity 175,654 170,142 167,165 162,421 162,086
Noncontrolling interests     815     866     1,648     1,356     1,309  
Total equity     176,469     171,008     168,813     163,777     163,395  
Total liabilities and equity (1)   $ 1,546,707     1,523,502     1,484,865     1,438,456     1,435,030  
 

(1) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER INVESTMENT SECURITIES
 
  Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31,
(in millions)   2014   2013   2013   2013   2013
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ 6,359 6,280 6,406 6,383 6,884
Securities of U.S. states and political subdivisions 44,140 42,536 42,293 40,890 40,456
Mortgage-backed securities:
Federal agencies 118,090 117,591 118,963 110,561 105,472
Residential and commercial     30,362   31,200   32,329   33,423   35,179
Total mortgage-backed securities 148,452 148,791 151,292 143,984 140,651
Other debt securities     50,253   51,015   55,828   55,425   57,390
Total available-for-sale debt securities 249,204 248,622 255,819 246,682 245,381
Marketable equity securities     3,461   3,385   3,580   2,757   2,779
Total available-for-sale securities     252,665   252,007   259,399   249,439   248,160
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 5,861 - - - -
Federal agency mortgage-backed securities 6,199 6,304 - - -
Other debt securities     5,602   6,042   -   -   -
Total held-to-maturity debt securities     17,662   12,346   -   -   -
Total investment securities   $ 270,327   264,353   259,399   249,439   248,160
 
FIVE QUARTER LOANS
 
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)   2014   2013   2013   2013   2013
Commercial:
Commercial and industrial (1) $ 196,768 193,811 188,593 186,692 184,039
Real estate mortgage 107,969 107,100 105,540 104,673 106,119
Real estate construction 16,615 16,747 16,413 16,442 16,650
Lease financing 11,841 12,034 11,688 11,766 12,402
Foreign (1)(2)     48,088   47,551   46,621   41,792   40,900
Total commercial (1)     381,281   377,243   368,855   361,365   360,110
Consumer:
Real estate 1-4 family first mortgage 259,478 258,497 254,924 252,841 252,307
Real estate 1-4 family junior lien mortgage 63,965 65,914 67,675 70,059 72,543
Credit card 26,061 26,870 25,448 24,815 24,120
Automobile 52,607 50,808 49,693 48,648 47,259
Other revolving credit and installment     43,051   42,954   42,540   42,139   42,023
Total consumer     445,162   445,043   440,280   438,502   438,252
Total loans (1)(3)   $ 826,443   822,286   809,135   799,867   798,362
 

(1) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

(2) 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.

(3) Includes $25.9 bllion, $26.7 billion, $27.8 billion, $28.8 billion and $29.7 billion of purchased credit-impaired (PCI) loans at March 31, 2014, and December 31, September 30, June 30 and March 31, 2013, respectively. See the PCI loans table for detail of PCI loans.

 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
 
  Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31,
(in millions)   2014     2013   2013   2013   2013
Nonaccrual loans:
Commercial:
Commercial and industrial $ 630 738 809 1,022 1,193
Real estate mortgage 2,030 2,252 2,496 2,708 3,098
Real estate construction 296 416 517 665 870
Lease financing 31 29 17 20 25
Foreign     40     40   47   40   56
Total commercial     3,027     3,475   3,886   4,455   5,242
Consumer:
Real estate 1-4 family first mortgage 9,357 9,799 10,450 10,705 11,320
Real estate 1-4 family junior lien mortgage 2,072 2,188 2,333 2,522 2,712
Automobile 161 173 188 200 220
Other revolving credit and installment     33     33   36   33   32
Total consumer     11,623     12,193   13,007   13,460   14,284
Total nonaccrual loans (1)(2)(3)     14,650     15,668   16,893   17,915   19,526
As a percentage of total loans (4) 1.77 % 1.91 2.09 2.24 2.45
Foreclosed assets:
Government insured/guaranteed (5) $ 2,302 2,093 1,781 1,026 969
Non-government insured/guaranteed     1,813     1,844   2,021   2,114   2,381
Total foreclosed assets     4,115     3,937   3,802   3,140   3,350
Total nonperforming assets   $ 18,765     19,605   20,695   21,055   22,876
As a percentage of total loans (4)     2.27 %   2.38   2.56   2.63   2.87
 

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

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

(3) Real estate 1-4 family mortgage loans predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed.

(4) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

(5) Consistent with regulatory reporting requirements, foreclosed real estate resulting from government insured/guaranteed loans are classified as nonperforming. Both principal and interest related to these foreclosed real estate assets are collectible because the loans were predominantly insured by the FHA or guaranteed by the VA. Previous enhancements to loan modification programs and release of an FHA foreclosure moratorium contributed to elevated levels of foreclosed assets in the latter half of 2013. As a result, the increase in balance at March 31, 2014, reflects an industry slowdown in meeting U.S. Department of Housing and Urban Development (HUD) conveyance requirements due to industry resource constraints to deal with the elevated levels, as well as other factors, including an increase in foreclosures in states with longer redemption periods, longer occupant evacuation periods, increased maintenance required for aging foreclosures and longer repair authorization periods.

 
 
Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
 
  Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31,
(in millions)   2014   2013   2013   2013   2013
Loans 90 days or more past due and still accruing:
Total (excluding PCI)(1): $ 21,215 23,219 22,181 22,197 23,082
Less: FHA insured/guaranteed by the VA (2)(3) 19,405 21,274 20,214 20,112 20,745
Less: Student loans guaranteed under the FFELP (4)     860   900   917   931   977
Total, not government insured/guaranteed   $ 950   1,045   1,050   1,154   1,360
 
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 11 11 125 37 47
Real estate mortgage 13 35 40 175 164
Real estate construction 69 97 1 4 47
Foreign     2   -   1   -   7
Total commercial     95   143   167   216   265
Consumer:
Real estate 1-4 family first mortgage (3) 333 354 383 476 563
Real estate 1-4 family junior lien mortgage (3) 88 86 89 92 112
Credit card 308 321 285 263 306
Automobile 41 55 48 32 33
Other revolving credit and installment     85   86   78   75   81
Total consumer     855   902   883   938   1,095
Total, not government insured/guaranteed   $ 950   1,045   1,050   1,154   1,360
 

(1) The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $4.3 billion, $4.5 billion, $4.9 billion, $5.4 billion and $5.8 billion, at March 31, 2014 and December 31, September 30, June 30 and March 31, 2013, respectively. These amounts are excluded from the above table as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status.

(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.

(4) Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program (FFELP).

 
 
Wells Fargo & Company and Subsidiaries
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.

Under the accounting guidance for PCI loans, the excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan, or pool of loans, in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.

Subsequent to acquisition, we regularly evaluate our estimates of cash flows expected to be collected. These evaluations, performed quarterly, require the continued usage of key assumptions and estimates, similar to the initial estimate of fair value. If we have probable decreases in the expected cash flows (other than due to decreases in interest rate indices and changes in prepayment assumptions), we charge the provision for credit losses, resulting in an increase to the allowance for loan losses. If we have probable and significant increases in the expected cash flows subsequent to establishing an additional allowance, we first reverse any previously established allowance and then increase interest income over the remaining life of the loan, or pool of loans.

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.

 
 
  March 31,   December 31,
(in millions)   2014   2013   2008
Commercial:  
Commercial and industrial $ 184 215 4,580
Real estate mortgage 1,098 1,136 5,803
Real estate construction 392 433 6,462
Foreign     531   720   1,859
Total commercial     2,205   2,504   18,704
Consumer:
Real estate 1-4 family first mortgage 23,530 24,100 39,214
Real estate 1-4 family junior lien mortgage 117 123 728
Automobile     -   -   151
Total consumer     23,647   24,223   40,093
Total PCI loans (carrying value)   $ 25,852   26,727   58,797
 
 
Wells Fargo & Company and Subsidiaries
CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS
 

The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference. A nonaccretable difference is established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Substantially all our commercial and industrial, CRE and foreign PCI loans are accounted for as individual loans. Conversely, Pick-a-Pay and other consumer PCI loans have been aggregated into several pools based on common risk characteristics. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Resolutions of loans may include sales to third parties, receipt of payments in settlement with the borrower, or foreclosure of the collateral. Our policy is to remove an individual loan from a pool based on comparing the amount received from its resolution with its contractual amount. Any difference between these amounts is absorbed by the nonaccretable difference. This removal method assumes that the amount received from resolution approximates pool performance expectations. The accretable yield percentage is unaffected by the resolution and any changes in the effective yield for the remaining loans in the pool are addressed by our quarterly cash flow evaluation process for each pool. For loans that are resolved by payment in full, there is no release of the nonaccretable difference for the pool because there is no difference between the amount received at resolution and the contractual amount of the loan. Modified PCI loans are not removed from a pool even if those loans would otherwise be deemed troubled debt restructurings (TDRs). Modified PCI loans that are accounted for individually are considered TDRs, and removed from PCI accounting, if there has been a concession granted in excess of the original nonaccretable difference. The following table provides an analysis of changes in the nonaccretable difference.

   
 
      Other  
(in millions)   Commercial   Pick-a-Pay   consumer   Total  
Balance, December 31, 2008 $ 10,410 26,485 4,069 40,964
Addition of nonaccretable difference due to acquisitions 213 - - 213
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (1,512 ) - - (1,512 )
Loans resolved by sales to third parties (2) (308 ) - (85 ) (393 )
Reclassification to accretable yield for loans with improving credit-related cash flows (3) (1,605 ) (3,897 ) (823 ) (6,325 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)     (6,933 )   (17,884 )   (2,961 )   (27,778 )
Balance, December 31, 2013 265 4,704 200 5,169
Addition of nonaccretable difference due to acquisitions - - - -
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1) (5 ) - - (5 )
Loans resolved by sales to third parties (2) (14 ) - - (14 )
Reclassification to accretable yield for loans with improving credit-related cash flows (3) (101 ) - (9 ) (110 )
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)     -     -     21     21  
Balance, March 31, 2014   $ 145     4,704     212     5,061  
 

(1) Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases for settlements with borrowers due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations.

(2) Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.

(3) Reclassification of nonaccretable difference to accretable yield for loans with increased cash flow estimates will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans.

(4) Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan. Also includes foreign exchange adjustments related to underlying principal for which the nonaccretable difference was established.

 
 
Wells Fargo & Company and Subsidiaries
CHANGES IN ACCRETABLE YIELD RELATED TO PCI 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 is presented in the following table.
 
 
(in millions)        
Balance, December 31, 2008 $ 10,447
Addition of accretable yield due to acquisitions 132
Accretion into interest income (1) (11,184 )
Accretion into noninterest income due to sales (2) (393 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 6,325
Changes in expected cash flows that do not affect nonaccretable difference (3)     12,065  
Balance, December 31, 2013 17,392
Addition of accretable yield due to acquisitions -
Accretion into interest income (1) (375 )
Accretion into noninterest income due to sales (2) (35 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 110
Changes in expected cash flows that do not affect nonaccretable difference (3)     (6 )
Balance, March 31, 2014   $ 17,086  
 

(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) 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.

 
CHANGES IN ALLOWANCE FOR PCI LOAN LOSSES
 
When it is estimated that the expected cash flows have decreased subsequent to acquisition for a PCI loan or pool of loans, an allowance is established and a provision for additional loss is recorded as a charge to income. The following table summarizes the changes in allowance for PCI loan losses.
   
 
      Other
(in millions)     Commercial     Pick-a-Pay   consumer     Total  
Balance, December 31, 2008 $ - - - -
Provision for losses due to credit deterioration 1,641 - 107 1,748
Charge-offs     (1,615 )   -   (103 )     (1,718 )
Balance, December 31, 2013 26 - 4 30
Provision for losses due to credit deterioration / (reversal of provision) (5 ) - 1 (4 )
Charge-offs     (3 )   -   (2 )     (5 )
Balance, March 31, 2014   $ 18     -   3       21  
 
 
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)
 
  March 31, 2014
PCI loans   All other loans
      Ratio of   Ratio of
Adjusted carrying carrying
unpaid Current value to value to
principal LTV Carrying current Carrying current
(in millions)   balance (2)   ratio (3)     value (4)   value (5)     value (4)   value (5)
California $ 19,459 88 % $ 16,029 71 % $   12,781 64
Florida 2,329 97 1,813 69 2,667 78
New Jersey 995 86 878 69 1,710 74
New York 596 83 542 68 776 72
Texas 258 69 229 60 1,040 55
Other states     4,587 88   3,801 71     7,267 74
Total Pick-a-Pay loans   $ 28,224 $ 23,292 $   26,241
                                     
 

(1) The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2014.

(2) Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.

(3) The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.

(4) Carrying value, which does not reflect the allowance for loan losses, includes remaining purchase accounting adjustments, which, for PCI loans may include the nonaccretable difference and the accretable yield and, for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs.

(5) The ratio of carrying value to current value is calculated as the carrying value divided by the collateral value.

     
 
NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS
 
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in millions)   2014   2013   2013   2013   2013
Commercial:

Legacy Wachovia commercial and industrial, commercial real estate and foreign PCI loans (1)

  $ 1,720   2,013   2,342   2,532   2,770
Total commercial     1,720   2,013   2,342   2,532   2,770
Consumer:
Pick-a-Pay mortgage (1) 49,533 50,971 52,805 54,755 56,608
Liquidating home equity 3,505 3,695 3,911 4,173 4,421
Legacy Wells Fargo Financial indirect auto 132 207 299 428 593
Legacy Wells Fargo Financial debt consolidation 12,545 12,893 13,281 13,707 14,115
Education Finance - government guaranteed 10,204 10,712 11,094 11,534 11,922
Legacy Wachovia other PCI loans (1)     355   375   406   435   462
Total consumer     76,274   78,853   81,796   85,032   88,121
Total non-strategic and liquidating loan portfolios   $ 77,994   80,866   84,138   87,564   90,891
 

(1) Net of purchase accounting adjustments related to PCI loans.

 
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES  
 
  Quarter ended  
Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31,
(in millions)   2014       2013     2013     2013     2013  
Balance, beginning of quarter $ 14,971 15,647 16,618 17,193 17,477
Provision for credit losses 325 363 75 652 1,219
Interest income on certain impaired loans (1) (56 ) (55 ) (63 ) (73 ) (73 )
Loan charge-offs:
Commercial:
Commercial and industrial (158 ) (199 ) (151 ) (184 ) (181 )
Real estate mortgage (20 ) (37 ) (44 ) (49 ) (60 )
Real estate construction (1 ) (10 ) (6 ) (7 ) (5 )
Lease financing (4 ) (3 ) (3 ) (24 ) (3 )
Foreign     (5 )     (4 )   (4 )   (8 )   (11 )
Total commercial     (188 )     (253 )   (208 )   (272 )   (260 )
Consumer:
Real estate 1-4 family first mortgage (223 ) (269 ) (303 ) (392 ) (475 )
Real estate 1-4 family junior lien mortgage (249 ) (291 ) (345 ) (428 ) (514 )
Credit card (267 ) (251 ) (239 ) (266 ) (266 )
Automobile (180 ) (182 ) (153 ) (126 ) (164 )
Other revolving credit and installment     (177 )     (195 )   (191 )   (185 )   (182 )
Total consumer     (1,096 )     (1,188 )   (1,231 )   (1,397 )   (1,601 )
Total loan charge-offs     (1,284 )     (1,441 )   (1,439 )   (1,669 )   (1,861 )
Loan recoveries:
Commercial:
Commercial and industrial 113 92 93 107 88
Real estate mortgage 42 78 64 54 31
Real estate construction 24 23 23 52 39
Lease financing 3 3 3 6 4
Foreign     1       4     6     9     8  
Total commercial     183       200     189     228     170  
Consumer:
Real estate 1-4 family first mortgage 53 74 61 64 46
Real estate 1-4 family junior lien mortgage