Wells Fargo Reports $5.7 Billion in Net Income

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

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

  • Continued strong financial results:
    • Net income of $5.7 billion, up 4 percent from second quarter 2013
    • Diluted earnings per share (EPS) of $1.01, up 3 percent
    • Revenue of $21.1 billion, compared with $21.4 billion
      • Linked-quarter revenue up $441 million
    • Noninterest expense of $12.2 billion, down $61 million
    • Return on assets (ROA) of 1.47 percent and return on equity (ROE) of 13.40 percent
  • Strong loan and deposit growth:
    • Total average loans of $831.0 billion, up $32.7 billion, or 4 percent, from second quarter 20131
      • Quarter-end loans of $828.9 billion, up $29.1 billion, or 4 percent1
      • Quarter-end core loans of $763.6 billion, up $51.3 billion, or 7 percent1,2
    • Total average deposits of $1.1 trillion, up $91.7 billion, or 9 percent
  • Continued improvement in credit quality:
    • Net charge-offs of $717 million, down $435 million from second quarter 2013
      • Net charge-off rate of 0.35 percent (annualized), down from 0.58 percent
    • Nonperforming assets down $3.0 billion, or 14 percent
    • $500 million reserve release3 due to improvements in credit performance
  • Higher return to shareholders while maintaining strong capital levels4:
    • Increased quarterly common stock dividend to $0.35 per share from $0.30, or 17 percent, in the second quarter
    • Period-end common shares outstanding down 15.8 million in second quarter on 39.4 million of purchases
      • Also entered into a forward repurchase transaction for an additional estimated 19.4 million shares expected to settle in third quarter 2014
    • Common Equity Tier 1 ratio under Basel III (General Approach) of 11.31 percent at June 30, 2014
    • Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) of 10.09 percent

1

 

As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the SUMMARY FINANCIAL DATA table 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
June 30,   Mar. 31,   June 30,
    2014     2014   2013
Earnings
Diluted earnings per common share $ 1.01 1.05 0.98
Wells Fargo net income (in billions) 5.73 5.89 5.52
Return on assets (ROA) (1) 1.47 % 1.57 1.55
Return on equity (ROE) 13.40 14.35 14.02
 
Asset Quality
Net charge-offs (annualized) as a % of avg. total loans 0.35 0.41 0.58
Allowance for credit losses as a % of total loans (1) 1.67 1.74 2.08
Allowance for credit losses as a % of annualized net charge-offs 481 431 360
 
Other
Revenue (in billions) $ 21.1 20.6 21.4
Efficiency ratio 57.9 % 57.9 57.3
Average loans (in billions) (1) $ 831.0 823.8 798.4
Average core deposits (in billions) 991.7 973.8 936.1
Net interest margin (1) 3.15 % 3.20 3.47
               
 

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

 

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

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

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

Revenue

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

Net Interest Income

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

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

Noninterest Income

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

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

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

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

Noninterest Expense

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

Income Taxes

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

Loans

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

                               
  June 30, 2014   March 31, 2014
(in millions)   Core   Liquidating  

(1)

  Total   Core   Liquidating     Total
Commercial $ 389,905   1,499   391,404 379,561   1,720   381,281
Consumer     373,693   63,845       437,538   368,888   76,274     445,162
Total loans   $ 763,598   65,344       828,942   748,449   77,994     826,443
 

Change from prior quarter:

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

(1) See 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) The change from prior quarter was predominantly due to the transfer to loans held for sale of $9.7 billion of government guaranteed student loans, which were previously included in the Company’s non-strategic/liquidating loan portfolio.

 

Investment Securities

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

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

Deposits

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

Capital

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

               
  June 30,   Mar. 31,   June 30,
    2014 (1)     2014   2013
Common Equity Tier 1 (2) 11.31 % 11.36 10.71
Tier 1 capital 12.73 12.63 12.12
Tier 1 leverage 9.86 9.84 9.63
               
 

(1) June 30, 2014, ratios are preliminary.

(2) See 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 continued to improve in the second quarter as credit losses remained at historically low levels, nonperforming assets continued to decrease and we continued to originate high quality loans,” said Chief Risk Officer Mike Loughlin. “Credit losses were $717 million in second quarter 2014, compared with $1.2 billion in second quarter 2013, a 38 percent improvement. The quarterly loss rate (annualized) in the second quarter was 0.35 percent with commercial losses of only 0.03 percent and consumer losses of 0.62 percent. Nonperforming assets declined by $686 million, or 15 percent (annualized), from last quarter. We released $500 million from the allowance for credit losses in the second quarter, reflecting improvements in credit performance, driven primarily by the continued housing recovery. While credit remained very strong, improvement has moderated with stable delinquency trends. We continue to expect future reserve releases absent a significant deterioration in the economic environment, but expect a lower level of future releases as the rate of credit improvement slows and the loan portfolio continues to grow.”

Net Loan Charge-offs

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

Net Loan Charge-Offs

  Quarter ended
    June 30, 2014     Mar. 31, 2014     Dec. 31, 2013
  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 $ 54 0.11 % $ 45 0.09 % $ 107 0.22 %
Real estate mortgage (10 ) (0.04 ) (22 ) (0.08 ) (41 ) (0.15 )
Real estate construction (20 ) (0.47 ) (23 ) (0.55 ) (13 ) (0.32 )
Lease financing 1 0.05 1 0.03 - -
Foreign     6   0.05   4   0.03   -   -
Total commercial     31   0.03   5   0.01   53   0.06
 
Consumer:
Real estate 1-4 family first mortgage 137 0.21 170 0.27 195 0.30
Real estate 1-4 family junior lien mortgage 160 1.02 192 1.20 226 1.34
Credit card 211 3.20 231 3.57 220 3.38
Automobile 46 0.35 90 0.70 108 0.85
Other revolving credit and installment     132   1.22   137   1.29   161   1.50
Total consumer     686   0.62   820   0.75   910   0.82
Total   $ 717   0.35 % $ 825   0.41 % $ 963   0.47 %
                             
 

(1) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation 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 $686 million from first quarter to $18.1 billion. Nonaccrual loans decreased $678 million to $14.0 billion. Foreclosed assets were $4.1 billion, in line with first quarter 2014.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

    June 30, 2014     Mar. 31, 2014     Dec. 31, 2013
    As a     As a     As a
% of % of % of
Total total Total total Total total
($ in millions)   balances   loans     balances   loans     balances   loans (1)
 
Commercial:
Commercial and industrial $ 693 0.34 % $ 630 0.32 % $ 738 0.38 %
Real estate mortgage 1,802 1.66 2,030 1.88 2,252 2.10
Real estate construction 239 1.40 296 1.78 416 2.48
Lease financing 28 0.24 31 0.26 29 0.24
Foreign     36   0.08   40   0.08   40   0.08
Total commercial     2,798   0.71   3,027   0.79   3,475   0.92
 
Consumer:

Real estate 1-4 family first mortgage

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

Real estate 1-4 family junior lien mortgage

1,964 3.14 2,072 3.24 2,188 3.32
Automobile 150 0.28 161 0.31 173 0.34

Other revolving credit and installment

    34   0.10   33   0.08   33   0.08
Total consumer     11,174   2.55   11,623   2.61   12,193   2.74
Total nonaccrual loans     13,972   1.69   14,650   1.77   15,668   1.91
 
Foreclosed assets:
Government insured/guaranteed 2,359 2,302 2,093
Non-government insured/guaranteed     1,748     1,813     1,844  
Total foreclosed assets     4,107     4,115     3,937  

Total nonperforming assets

 

$ 18,079   2.18 % $ 18,765   2.27 % $ 19,605   2.38 %
 
Change from prior quarter:
Total nonaccrual loans $ (678 ) $ (1,018 ) $ (1,225 )
Total nonperforming assets (686 ) (840 ) (1,090 )
                             
 

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

 

Loans 90 Days or More Past Due and Still Accruing

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

Allowance for Credit Losses

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

Business Segment Performance

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

                     
          Quarter ended
June 30,   Mar. 31,   June 30,
(in millions)   2014   2014   2013
Community Banking $ 3,431 3,844 3,245
Wholesale Banking 1,952 1,742 2,004
Wealth, Brokerage and Retirement     544   475   434
 

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

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

Selected Financial Information

          Quarter ended
June 30,   Mar. 31,   June 30,
(in millions)   2014   2014   2013
Total revenue $ 12,606 12,593 12,942
Provision for credit losses 279 419 763
Noninterest expense 7,020 6,774 7,213
Segment net income 3,431 3,844 3,245
 
(in billions)
Average loans 505.4 505.0 498.2
Average assets 918.1 892.6 820.9
Average core deposits     639.8   626.5   623.0
 

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

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

Regional Banking

  • Retail banking
    • Retail Bank household cross-sell ratio of 6.17 products per household, up from 6.14 year-over-year6
    • Primary consumer checking customers7 up a net 4.6 percent year-over-year6
  • Small Business/Business Banking
    • Primary business checking customers7 up a net 5.2 percent year-over-year6
    • Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) combined were up 22 percent from the prior year
    • In May, introduced Wells Fargo Works for Small BusinessSM – a broad initiative to deliver resources, guidance and services for small business owners
  • Online and Mobile Banking
    • 24.1 million active online customers, up 6 percent year-over-year6
    • 13.1 million active mobile customers, up 22 percent year-over-year6

Consumer Lending Group

  • Home Lending
    • Originations of $47 billion, up from $36 billion in prior quarter
    • Applications of $72 billion, up from $60 billion in prior quarter
    • Application pipeline of $30 billion at quarter end, up from $27 billion at March 31, 2014
    • Residential mortgage servicing portfolio of $1.8 trillion; ratio of MSRs to related loans serviced for others was 80 basis points, compared with 85 basis points in prior quarter
    • Average note rate on the servicing portfolio was 4.49 percent, compared with 4.51 percent in prior quarter
  • Consumer Credit
    • Credit card penetration in retail banking households rose to 39.0 percent6, up from 34.9 percent in prior year
    • Auto originations of $7.8 billion, up 9 percent from prior year
6   Data as of May 2014, comparisons with May 2013.
7 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
 

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
June 30,   Mar. 31,   June 30,
(in millions)   2014     2014     2013  
Total revenue $ 5,946 5,580 6,135
Reversal of provision for credit losses (49 ) (93 ) (118 )
Noninterest expense 3,203 3,215 3,183
Segment net income 1,952 1,742 2,004
 
(in billions)
Average loans (1) 308.1 301.9 285.1
Average assets (1) 532.4 517.4 498.1
Average core deposits     265.8     259.0     230.5  
 

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

 

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

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

  • Average loans increased 8 percent1 in second quarter 2014, compared with second quarter 2013, on broad-based growth, including asset-backed finance, capital finance, commercial banking, commercial real estate, corporate banking, and international
  • Cross-sell of 7.2 products per relationship, up from 6.9 in second quarter 2013 driven by new product sales to existing customers
  • Treasury management revenue up 7 percent from second quarter 2013
  • Assets under management of $490 billion, up $35 billion from second quarter 2013, including a $26 billion increase in equity assets under management reflecting increased market valuations and net inflows

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

Selected Financial Information

          Quarter ended
June 30,   Mar. 31,   June 30,
(in millions)   2014     2014     2013
Total revenue $ 3,550 3,468 3,261
Provision (reversal of provision) for credit losses (25 ) (8 ) 19
Noninterest expense 2,695 2,711 2,542
Segment net income 544 475 434
 
(in billions)
Average loans 51.0 50.0 45.4
Average assets 187.6 190.6 177.1
Average core deposits     153.0     156.0     146.4
 

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

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

Retail Brokerage

  • Client assets of $1.4 trillion, up 12 percent from prior year
  • Managed account assets of $409 billion, increased $78 billion, or 24 percent, from prior year, reflecting increased market valuations and net flows
  • Strong loan growth, with average balances up 19 percent from prior year on growth in first mortgage and security-based lending

Wealth Management

  • Client assets of $221 billion, up 10 percent from prior year
  • Strong loan growth, with average balances up 10 percent over prior year

Retirement

  • IRA assets of $357 billion, up 13 percent from prior year
  • Institutional Retirement plan assets of $319 billion, up 12 percent from prior year

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

Conference Call

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

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

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

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

Summary Information

Summary Financial Data 17-18
 

Income

Consolidated Statement of Income 19
Consolidated Statement of Comprehensive Income 20
Condensed Consolidated Statement of Changes in Total Equity 20
Five Quarter Consolidated Statement of Income 21
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 22-23
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 24
Noninterest Income and Noninterest Expense 25-26
 

Balance Sheet

Consolidated Balance Sheet 27-28
Investment Securities 29
 

Loans

Loans 29
Nonperforming Assets 30
Loans 90 Days or More Past Due and Still Accruing 31
Purchased Credit-Impaired Loans 32-34
Pick-A-Pay Portfolio 35
Non-Strategic and Liquidating Loan Portfolios 35
Changes in Allowance for Credit Losses 36-37
 

Equity

Five Quarter Risk-Based Capital Components 38
Common Equity Tier 1 Under Basel III 38
 

Operating Segments

Operating Segment Results 39-40
 

Other

Mortgage Servicing and other related data 41-43
     
 
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
                       
% Change
  Quarter ended June 30, 2014 from   Six months ended
June 30, Mar. 31, June 30, Mar. 31, June 30, June 30, June 30, %
($ in millions, except per share amounts)     2014     2014   2013     2014       2013       2014   2013   Change  
For the Period
Wells Fargo net income $ 5,726 5,893 5,519 (3 ) % 4 $ 11,619 10,690 9 %

Wells Fargo net income applicable to common stock

5,424 5,607 5,272 (3 ) 3 11,031 10,203 8
Diluted earnings per common share 1.01 1.05 0.98 (4 ) 3 2.06 1.90 8
Profitability ratios (annualized):

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

1.47 % 1.57 1.55 (6 ) (5 ) 1.52 1.52 -

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

13.40 14.35 14.02 (7 ) (4 ) 13.86 13.81 -
Efficiency ratio (2) 57.9 57.9 57.3 - 1 57.9 57.8 -
Total revenue $ 21,066 20,625 21,378 2 (1 ) $ 41,691 42,637 (2 )
Pre-tax pre-provision profit (PTPP) (3) 8,872 8,677 9,123 2 (3 ) 17,549 17,982 (2 )
Dividends declared per common share 0.35 0.30 0.30 17 17 0.65 0.55 18
Average common shares outstanding 5,268.4 5,262.8 5,304.7 - (1 ) 5,265.6 5,291.9 -
Diluted average common shares outstanding 5,350.8 5,353.3 5,384.6 - (1 ) 5,353.2 5,369.9 -
Average loans (1) $ 831,043 823,790 798,386 1 4 $ 827,436 797,528 4
Average assets (1) 1,564,003 1,525,905 1,427,150 2 10 1,545,060 1,415,105 9
Average core deposits (4) 991,727 973,801 936,090 2 6 982,814 931,006 6
Average retail core deposits (5) 698,763 690,643 666,043 1 5 694,726 664,487 5
Net interest margin (1) 3.15 % 3.20 3.47 (2 ) (9 ) 3.17 3.48 (9 )
At Period End
Investment securities $ 279,069 270,327 249,439 3 12 $ 279,069 249,439 12
Loans (1) 828,942 826,443 799,867 - 4 828,942 799,867 4
Allowance for loan losses 13,101 13,695 16,144 (4 ) (19 ) 13,101 16,144 (19 )
Goodwill 25,705 25,637 25,637 - - 25,705 25,637 -
Assets (1) 1,598,874 1,546,707 1,438,456 3 11 1,598,874 1,438,456 11
Core deposits (4) 1,007,485 994,185 941,158 1 7 1,007,485 941,158 7
Wells Fargo stockholders' equity 180,859 175,654 162,421 3 11 180,859 162,421 11
Total equity 181,549 176,469 163,777 3 11 181,549 163,777 11
Capital ratios:
Total equity to assets (1) 11.35 % 11.41 11.39 - - 11.35 11.39 -
Risk-based capital (6):
Tier 1 capital 12.73 12.63 12.12 1 5 12.73 12.12 5
Total capital 15.90 15.71 15.03 1 6 15.90 15.03 6
Tier 1 leverage (6) 9.86 9.84 9.63 - 2 9.86 9.63 2
Common Equity Tier 1 (6)(7) 11.31 11.36 10.71 - 6 11.31 10.71 6
Common shares outstanding 5,249.9 5,265.7 5,302.2 - (1 ) 5,249.9 5,302.2 (1 )
Book value per common share $ 31.18 30.48 28.26 2 10 $ 31.18 28.26 10
Common stock price:
High 53.05 49.97 41.74 6 27 53.05 41.74 27
Low 46.72 44.17 36.19 6 29 44.17 34.43 28
Period end 52.56 49.74 41.27 6 27 52.56 41.27 27
Team members (active, full-time equivalent) 263,500 265,300 274,300 (1 ) (4 ) 263,500 274,300 (4 )
                                                       
 

(1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. Accordingly, we revised our commercial loan balances for year-end 2012 and each of the quarters in 2013 in order to present the Company’s lending trends on a comparable basis over this period. This revision, which resulted in a reduction to total commercial loans and a corresponding decrease to other liabilities, did not impact the Company’s consolidated net income or total cash flows. We reduced our commercial loans by $3.5 billion, $3.2 billion, $2.1 billion, $1.6 billion, and $1.2 billion at December 31, September 30, June 30, and March 31, 2013, and December 31, 2012, respectively, which represented less than 1% of total commercial loans and less than 0.5% of our total loan portfolio. Other affected financial information, including financial guarantees and financial ratios, has been appropriately revised to reflect this revision.

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

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

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

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

(6) The June 30, 2014, ratios are preliminary.

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

 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
               
  Quarter ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
($ in millions, except per share amounts)     2014     2014   2013   2013   2013
For the Quarter
Wells Fargo net income $ 5,726 5,893 5,610 5,578 5,519
Wells Fargo net income applicable to common stock 5,424 5,607 5,369 5,317 5,272
Diluted earnings per common share 1.01 1.05 1.00 0.99 0.98
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) (1) 1.47 % 1.57 1.48 1.53 1.55

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

13.40 14.35 13.81 14.07 14.02
Efficiency ratio (2) 57.9 57.9 58.5 59.1 57.3
Total revenue $ 21,066 20,625 20,665 20,478 21,378
Pre-tax pre-provision profit (PTPP) (3) 8,872 8,677 8,580 8,376 9,123
Dividends declared per common share 0.35 0.30 0.30 0.30 0.30
Average common shares outstanding 5,268.4 5,262.8 5,270.3 5,295.3 5,304.7
Diluted average common shares outstanding 5,350.8 5,353.3 5,358.6 5,381.7 5,384.6
Average loans (1) $ 831,043 823,790 813,318 802,134 798,386
Average assets (1) 1,564,003 1,525,905 1,505,766 1,446,965 1,427,150
Average core deposits (4) 991,727 973,801 965,828 940,279 936,090
Average retail core deposits (5) 698,763 690,643 679,355 670,335 666,043
Net interest margin (1) 3.15 % 3.20 3.27 3.39 3.47
At Quarter End
Investment securities $ 279,069 270,327 264,353 259,399 249,439
Loans (1) 828,942 826,443 822,286 809,135 799,867
Allowance for loan losses 13,101 13,695 14,502 15,159 16,144
Goodwill 25,705 25,637 25,637 25,637 25,637
Assets (1) 1,598,874 1,546,707 1,523,502 1,484,865 1,438,456
Core deposits (4) 1,007,485 994,185 980,063 947,805 941,158
Wells Fargo stockholders' equity 180,859 175,654 170,142 167,165 162,421
Total equity 181,549 176,469 171,008 168,813 163,777
Capital ratios:
Total equity to assets (1) 11.35 % 11.41 11.22 11.37 11.39
Risk-based capital (6):
Tier 1 capital 12.73 12.63 12.33 12.11 12.12
Total capital 15.90 15.71 15.43 15.09 15.03
Tier 1 leverage (6) 9.86 9.84 9.60 9.76 9.63
Common Equity Tier 1 (6)(7) 11.31 11.36 10.82 10.60 10.71
Common shares outstanding 5,249.9 5,265.7 5,257.2 5,273.7 5,302.2
Book value per common share $ 31.18 30.48 29.48 28.98 28.26
Common stock price:
High 53.05 49.97 45.64 44.79 41.74
Low 46.72 44.17 40.07 40.79 36.19
Period end 52.56 49.74 45.40 41.32 41.27
Team members (active, full-time equivalent) 263,500 265,300 264,900 270,600 274,300
                               
 

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

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

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

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

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

(6) The June 30, 2014, ratios are preliminary.

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

 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME    
           
Six months
Quarter ended June 30, % ended June 30, %
(in millions, except per share amounts)     2014   2013     Change       2014   2013     Change
Interest income
Trading assets $ 407 340 20 % $ 781 667 17 %
Investment securities 2,112 2,034 4 4,222 3,959 7
Mortgages held for sale 195 378 (48 ) 365 749 (51 )
Loans held for sale 1 4 (75 ) 3 7 (57 )
Loans 8,852 8,902 (1 ) 17,598 17,763 (1 )
Other interest income     226   169   34   436   332   31
Total interest income     11,793   11,827   -   23,405   23,477   -
Interest expense
Deposits 275 353 (22 ) 554 722 (23 )
Short-term borrowings 14 17 (18 ) 26 37 (30 )
Long-term debt 620 632 (2 ) 1,239 1,329 (7 )
Other interest expense     93   75   24   180   140   29
Total interest expense     1,002   1,077   (7 )   1,999   2,228   (10 )
Net interest income 10,791 10,750 - 21,406 21,249 1
Provision for credit losses     217   652   (67 )   542   1,871   (71 )
Net interest income after provision for credit losses     10,574   10,098   5   20,864   19,378   8
Noninterest income
Service charges on deposit accounts 1,283 1,248 3 2,498 2,462 1
Trust and investment fees 3,609 3,494 3 7,021 6,696 5
Card fees 847 813 4 1,631 1,551 5
Other fees 1,088 1,089 - 2,135 2,123 1
Mortgage banking 1,723 2,802 (39 ) 3,233 5,596 (42 )
Insurance 453 485 (7 ) 885 948 (7 )
Net gains from trading activities 382 331 15 814 901 (10 )
Net gains (losses) on debt securities 71 (54 ) NM 154 (9 ) NM
Net gains from equity investments 449 203 121 1,296 316 310
Lease income 129 225 (43 ) 262 355 (26 )
Other     241   (8 ) NM   356   449   (21 )
Total noninterest income     10,275   10,628   (3 )   20,285   21,388   (5 )
Noninterest expense
Salaries 3,795 3,768 1 7,523 7,431 1
Commission and incentive compensation 2,445 2,626 (7 ) 4,861 5,203 (7 )
Employee benefits 1,170 1,118 5 2,542 2,701 (6 )
Equipment 445 418 6 935 946 (1 )
Net occupancy 722 716 1 1,464 1,435 2
Core deposit and other intangibles 349 377 (7 ) 690 754 (8 )
FDIC and other deposit assessments 225 259 (13 ) 468 551 (15 )
Other     3,043   2,973   2   5,659   5,634   -
Total noninterest expense     12,194   12,255   -   24,142   24,655   (2 )
Income before income tax expense 8,655 8,471 2 17,007 16,111 6
Income tax expense     2,869   2,863   -   5,146   5,283   (3 )
Net income before noncontrolling interests 5,786 5,608 3 11,861 10,828 10
Less: Net income from noncontrolling interests     60   89   (33 )   242   138   75
Wells Fargo net income   $ 5,726   5,519   4 $ 11,619   10,690   9
Less: Preferred stock dividends and other     302   247   22   588   487   21
Wells Fargo net income applicable to common stock   $ 5,424   5,272   3 $ 11,031   10,203   8
Per share information
Earnings per common share $ 1.02 1.00 2 $ 2.09 1.93 8
Diluted earnings per common share 1.01 0.98 3 2.06 1.90 8
Dividends declared per common share 0.35 0.30 17 0.65 0.55 18
Average common shares outstanding 5,268.4 5,304.7 (1 ) 5,265.6 5,291.9 -
Diluted average common shares outstanding 5,350.8 5,384.6 (1 ) 5,353.2 5,369.9 -
                                   
 
NM - Not meaningful
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME        
           
Quarter ended June 30, % Six months ended June 30, %
(in millions)     2014     2013     Change       2014     2013     Change
Wells Fargo net income   $ 5,726     5,519   4 % $ 11,619     10,690   9 %
Other comprehensive income (loss), before tax:
Investment securities:
Net unrealized gains (losses) arising during the period 2,085 (6,130 ) NM 4,810 (6,764 ) NM
Reclassification of net (gains) losses to net income (150 ) 30 NM (544 ) (83 ) 555
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period 212 (10 ) NM 256 (3 ) NM
Reclassification of net gains on cash flow hedges to net income (115 ) (69 ) 67 (221 ) (156 ) 42
Defined benefit plans adjustments:
Net actuarial gains (losses) arising during the period (12 ) 772 NM (12 ) 778 NM

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

20 113 (82 ) 38 162 (77 )
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period 17 (21 ) NM - (39 ) (100 )
Reclassification of net (gains) losses to net income     -     (15 ) (100 )   6     (15 ) NM
Other comprehensive income (loss), before tax 2,057 (5,330 ) NM 4,333 (6,120 ) NM
Income tax (expense) benefit related to other comprehensive income     (816 )   1,979   NM   (1,647 )   2,267   NM
Other comprehensive income (loss), net of tax 1,241 (3,351 ) NM 2,686 (3,853 ) NM
Less: Other comprehensive loss from noncontrolling interests     (124 )   (3 ) NM   (45 )   -   -
Wells Fargo other comprehensive income (loss), net of tax     1,365     (3,348 ) NM   2,731     (3,853 ) NM
 
Wells Fargo comprehensive income 7,091 2,171 227 14,350 6,837 110
Comprehensive income (loss) from noncontrolling interests     (64 )   86   NM   197     138   43
Total comprehensive income   $ 7,027     2,257     211       $ 14,547     6,975     109  
 
NM - Not meaningful
 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY  
     
Six months ended June 30,  
(in millions)     2014     2013  
Balance, beginning of period $ 171,008 158,911
Wells Fargo net income 11,619 10,690
Wells Fargo other comprehensive income (loss), net of tax 2,731 (3,853 )
Common stock issued 1,573 1,799
Common stock repurchased (1) (3,979 ) (1,936 )
Preferred stock released by ESOP 735 720
Preferred stock issued 1,995 610
Common stock dividends (3,423 ) (2,911 )
Preferred stock dividends and other (588 ) (487 )
Noncontrolling interests and other, net     (122 )   234  
Balance, end of period   $ 181,549     163,777  
 

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

 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME      
         
  Quarter ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions, except per share amounts)     2014   2014   2013     2013     2013  
Interest Income
Trading assets $ 407 374 378 331 340
Investment securities 2,112 2,110 2,119 2,038 2,034
Mortgages held for sale 195 170 221 320 378
Loans held for sale 1 2 3 3 4
Loans 8,852 8,746 8,907 8,901 8,902
Other interest income     226   210   208     183     169  
Total interest income     11,793   11,612   11,836     11,776     11,827  
Interest expense
Deposits 275 279 297 318 353
Short-term borrowings 14 12 14 9 17
Long-term debt 620 619 635 621 632
Other interest expense     93   87   87     80     75  
Total interest expense     1,002   997   1,033     1,028     1,077  
Net interest income 10,791 10,615 10,803 10,748 10,750
Provision for credit losses     217   325   363     75     652  
Net interest income after provision for credit losses     10,574   10,290   10,440     10,673     10,098  
Noninterest income
Service charges on deposit accounts 1,283 1,215 1,283 1,278 1,248
Trust and investment fees 3,609 3,412 3,458 3,276 3,494
Card fees 847 784 827 813 813
Other fees 1,088 1,047 1,119 1,098 1,089
Mortgage banking 1,723 1,510 1,570 1,608 2,802
Insurance 453 432 453 413 485
Net gains from trading activities 382 432 325 397 331
Net gains (losses) on debt securities 71 83 (14 ) (6 ) (54 )
Net gains from equity investments 449 847 654 502 203
Lease income 129 133 148 160 225
Other     241   115   39     191     (8 )
Total noninterest income     10,275   10,010   9,862     9,730     10,628  
Noninterest expense
Salaries 3,795 3,728 3,811 3,910 3,768
Commission and incentive compensation 2,445 2,416 2,347 2,401 2,626
Employee benefits 1,170 1,372 1,160 1,172 1,118
Equipment 445 490 567 471 418
Net occupancy 722 742 732 728 716
Core deposit and other intangibles 349 341 375 375 377
FDIC and other deposit assessments 225 243 196 214 259
Other     3,043   2,616   2,897     2,831     2,973  
Total noninterest expense     12,194   11,948   12,085     12,102     12,255  
Income before income tax expense 8,655 8,352 8,217 8,301 8,471
Income tax expense     2,869   2,277   2,504     2,618     2,863  
Net income before noncontrolling interests 5,786 6,075 5,713 5,683 5,608
Less: Net income from noncontrolling interests     60   182   103     105     89  
Wells Fargo net income   $ 5,726   5,893   5,610     5,578     5,519  
Less: Preferred stock dividends and other     302   286   241     261     247  
Wells Fargo net income applicable to common stock   $ 5,424   5,607   5,369     5,317     5,272  
Per share information
Earnings per common share $ 1.02 1.07 1.02 1.00 1.00
Diluted earnings per common share 1.01 1.05 1.00 0.99 0.98
Dividends declared per common share 0.35 0.30 0.30 0.30 0.30
Average common shares outstanding 5,268.4 5,262.8 5,270.3 5,295.3 5,304.7
Diluted average common shares outstanding 5,350.8 5,353.3 5,358.6 5,381.7 5,384.6
                             
 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
           
Quarter ended June 30,
            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

$ 229,770 0.28 % $ 161 136,484 0.33 % $ 113
Trading assets 54,347 3.05 414 46,622 2.98 347
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 6,580 1.78 29 6,684 1.73 29
Securities of U.S. states and political subdivisions 42,721 4.26 456 39,267 4.42 434
Mortgage-backed securities:
Federal agencies 116,475 2.85 831 102,007 2.79 711
Residential and commercial     27,252 6.11   416 31,315 6.50   509
Total mortgage-backed securities 143,727 3.47 1,247 133,322 3.66 1,220
Other debt and equity securities     48,734 3.76   457 55,533 3.84   531
Total available-for-sale securities     241,762 3.62   2,189 234,806 3.77   2,214
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 10,829 2.20 59 - - -
Securities of U.S. states and political subdivisions 8 6.00 - - - -
Federal agency mortgage-backed securities 6,089 2.74 42 - - -
Other debt securities     5,206 1.90   25 - -   -
Total held-to-maturity securities     22,132 2.28   126 - -   -
Total investment securities 263,894 3.51 2,315 234,806 3.77 2,214
Mortgages held for sale (4) 18,824 4.16 195 43,422 3.48 378
Loans held for sale (4) 157 2.55 1 177 7.85 4
Loans:
Commercial:
Commercial and industrial (5) 199,246 3.39 1,687 184,306 3.73 1,714
Real estate mortgage 107,673 3.56 955 105,261 3.92 1,029
Real estate construction 17,249 4.17 179 16,458 5.02 206
Lease financing 11,824 5.70 169 12,338 6.66 206
Foreign (5)     48,847 2.39   290 42,242 2.23   235
Total commercial (5)     384,839 3.42   3,280 360,605 3.77   3,390
Consumer:
Real estate 1-4 family first mortgage 259,974 4.20 2,729 252,558 4.23 2,671
Real estate 1-4 family junior lien mortgage 63,273 4.31 680 71,376 4.29 764
Credit card 26,431 11.97 789 24,023 12.55 752
Automobile 53,480 6.34 845 47,942 7.05 842
Other revolving credit and installment     43,046 5.07   544 41,882 4.74   495
Total consumer     446,204 5.02   5,587 437,781 5.05   5,524

Total loans (4)(5)

831,043 4.28 8,867 798,386 4.47 8,914
Other     4,535 5.74   65 4,151 5.55   57
Total earning assets (5)   $ 1,402,570 3.43 % $ 12,018 1,264,048 3.81 % $ 12,027
Funding sources
Deposits:
Interest-bearing checking $ 40,193 0.07 % $ 7 40,422 0.06 % $ 6
Market rate and other savings 583,907 0.07 101 541,843 0.08 111
Savings certificates 38,754 0.86 82 52,552 1.23 161
Other time deposits 48,512 0.41 50 26,045 0.76 50
Deposits in foreign offices     94,232 0.15   35 68,871 0.15   25
Total interest-bearing deposits 805,598 0.14 275 729,733 0.19 353
Short-term borrowings 58,845 0.10 14 57,812 0.14 21
Long-term debt 159,233 1.56 620 125,496 2.02 632
Other liabilities     13,589 2.73   93 13,315 2.25   75
Total interest-bearing liabilities 1,037,265 0.39 1,002 926,356 0.47 1,081
Portion of noninterest-bearing funding sources (5)     365,305 -   - 337,692 -   -
Total funding sources (5)   $ 1,402,570   0.28   1,002 1,264,048   0.34   1,081

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

3.15 %   $ 11,016 3.47 %   $ 10,946
Noninterest-earning assets
Cash and due from banks $ 15,956 16,214
Goodwill 25,699 25,637
Other     119,778 121,251
Total noninterest-earning assets   $ 161,433 163,102
Noninterest-bearing funding sources
Deposits $ 295,875 280,029
Other liabilities (5) 51,184 56,104
Total equity 179,679 164,661
Noninterest-bearing funding sources used to fund earning assets (5)     (365,305) (337,692)
Net noninterest-bearing funding sources   $ 161,433 163,102
Total assets (5)   $ 1,564,003 1,427,150
                                   
 
(1) Our average prime rate was 3.25% for the quarters ended June 30, 2014 and 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.23% and 0.28% for the same quarters, respectively.
(2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their respective loan categories.

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

(6) Includes taxable-equivalent adjustments of $225 million and $196 million for the quarters ended June 30, 2014 and 2013, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
           
Six months ended June 30,
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

$ 221,573 0.28 % $ 305 128,797 0.35 % $ 221
Trading assets 51,306 3.10 795 44,388 3.07 681
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 6,576 1.73 57 6,880 1.65 56
Securities of U.S. states and political subdivisions 42,661 4.32 921 38,430 4.40 844
Mortgage-backed securities:
Federal agencies 117,055 2.90 1,695 98,705 2.77 1,365
Residential and commercial     27,641   6.12   845 31,726   6.48   1,028
Total mortgage-backed securities 144,696 3.51 2,540 130,431 3.67 2,393
Other debt and equity securities     48,944   3.68   895 54,634   3.71   1,008
Total available-for-sale securities     242,877   3.64   4,413 230,375   3.74   4,301
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 5,993 2.20 65 - - -
Securities of U.S. states and political subdivisions 4 5.97 - - - -
Federal agency mortgage-backed securities 6,125 2.93 90 - - -
Other debt securities     5,807   1.88   54 -   -   -
Total held-to-maturity securities     17,929   2.34   209 -   -   -
Total investment securities 260,806 3.55 4,622 230,375 3.74 4,301
Mortgages held for sale (4) 17,696 4.13 365 43,367 3.45 749
Loans held for sale (4) 134 4.08 3 159 8.28 7
Loans:
Commercial:
Commercial and industrial (5) 196,570 3.41 3,328 183,715 3.74 3,414
Real estate mortgage 107,735 3.54 1,892 105,738 3.88 2,035
Real estate construction 17,065 4.27 361 16,508 4.93 404
Lease financing 11,879 5.92 352 12,381 6.72 416
Foreign (5)     48,364   2.30   552 41,069   2.20   448
Total commercial (5)     381,613   3.42   6,485 359,411   3.76   6,717
Consumer:
Real estate 1-4 family first mortgage 259,727 4.19 5,434 252,305 4.26 5,374
Real estate 1-4 family junior lien mortgage 64,122 4.31 1,372 72,715 4.29 1,548
Credit card 26,352 12.14 1,587 24,060 12.58 1,502
Automobile 52,642 6.42 1,676 47,258 7.12 1,668
Other revolving credit and installment     42,980   5.03   1,073 41,779   4.72   977
Total consumer     445,823   5.02   11,142 438,117   5.08   11,069
Total loans (4)(5) 827,436 4.28 17,627 797,528 4.48 17,786
Other     4,595   5.73   131 4,203   5.37   112
Total earning assets (5)   $ 1,383,546   3.46 % $ 23,848 1,248,817   3.84 % $ 23,857
Funding sources
Deposits:
Interest-bearing checking $ 38,506 0.07 % $ 13 36,316 0.06 % $ 11
Market rate and other savings 581,489 0.07 206 539,708 0.09 233
Savings certificates 39,639 0.87 171 53,887 1.23 328
Other time deposits 47,174 0.42 98 21,003 0.95 99
Deposits in foreign offices     92,650   0.14   66 69,968   0.15   51
Total interest-bearing deposits 799,458 0.14 554 720,882 0.20 722
Short-term borrowings 56,686 0.10 27 56,618 0.16 44
Long-term debt 156,528 1.59 1,239 126,299 2.11 1,329
Other liabilities     13,226   2.72   180 12,467   2.24   140
Total interest-bearing liabilities 1,025,898 0.39 2,000 916,266 0.49 2,235
Portion of noninterest-bearing funding sources (5)     357,648   -   - 332,551   -   -
Total funding sources (5)   $ 1,383,546     0.29   2,000 1,248,817     0.36   2,235

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

3.17 %   $ 21,848 3.48 %   $ 21,622
Noninterest-earning assets
Cash and due from banks $ 16,159 16,372
Goodwill 25,668 25,637
Other     119,687   124,279  
Total noninterest-earning assets   $ 161,514   166,288  
Noninterest-bearing funding sources
Deposits $ 290,004 277,141
Other liabilities (5) 52,065 59,148
Total equity 177,093 162,550
Noninterest-bearing funding sources used to fund earning assets (5)     (357,648 ) (332,551 )
Net noninterest-bearing funding sources   $ 161,514   166,288  
Total assets (5)   $ 1,545,060   1,415,105  
                                   
 

(1) Our average prime rate was 3.25% for the six months ended June 30, 2014 and 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.23% and 0.28% for the same periods, respectively.

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

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

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

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

(6) Includes taxable-equivalent adjustments of $442 million and $373 million for the six months ended June 30, 2014 and 2013, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
                   
  Quarter ended
  June 30, 2014       Mar. 31, 2014       Dec. 31, 2013       Sept. 30, 2013       June 30, 2013

 

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

$ 229.8 0.28 % $ 213.3 0.27 % $ 205.3 0.28 % $ 155.9 0.31 % $ 136.5 0.33 %
Trading assets 54.4 3.05 48.2 3.17 45.4 3.40 44.8 3.02 46.6 2.98
Investment securities (2):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 6.6 1.78 6.6 1.68 6.6 1.67 6.6 1.69 6.7 1.73
Securities of U.S. states and political subdivisions 42.7 4.26 42.6 4.37 42.0 4.38 40.8 4.35 39.3 4.42
Mortgage-backed securities:
Federal agencies 116.5 2.85 117.6 2.94 117.9 2.94 113.0 2.83 102.0 2.79
Residential and commercial     27.3 6.11   28.0 6.12   29.2 6.35   30.2 6.56   31.3 6.50
Total mortgage-backed securities 143.8 3.47 145.6 3.55 147.1 3.62 143.2 3.62 133.3 3.66
Other debt and equity securities     48.7 3.76   49.2 3.59   55.4 3.43   55.4 3.27   55.5 3.84
Total available-for-sale securities     241.8 3.62   244.0 3.65   251.1 3.65   246.0 3.61   234.8 3.77
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 10.8 2.20 1.1 2.18 - - - - - -
Federal agency mortgage-backed securities 6.1 2.74 6.2 3.11 2.7 3.11 - - - -
Other debt securities     5.2 1.90   6.4 1.86   0.1 1.99   - -   - -
Total held-to-maturity securities     22.1 2.28   13.7 2.45   2.8 3.09   - -   - -
Total investment securities 263.9 3.51 257.7 3.59 253.9 3.65 246.0 3.61 234.8 3.77
Mortgages held for sale 18.8 4.16 16.6 4.11 21.4 4.13 33.2 3.86 43.4 3.48
Loans held for sale 0.2 2.55 0.1 6.28 0.1 8.21 0.2 7.25 0.2 7.85
Loans:
Commercial:
Commercial and industrial (3) 199.2 3.39 193.9 3.43 189.9 3.54 185.8 3.63 184.3 3.73
Real estate mortgage 107.7 3.56 107.8 3.52 105.8 3.85 104.6 4.12 105.3 3.92
Real estate construction 17.3 4.17 16.9 4.37 16.6 4.79 16.2 4.43 16.4 5.02
Lease financing 11.8 5.70 11.9 6.15 11.7 5.70 11.7 5.29 12.3 6.66
Foreign (3)     48.8 2.39   47.9 2.21   46.6 2.24   44.8 2.09   42.3 2.23
Total commercial (3)     384.8 3.42   378.4 3.43   370.6 3.59   363.1 3.67   360.6 3.77
Consumer:
Real estate 1-4 family first mortgage 260.0 4.20 259.5 4.17 257.2 4.15 254.1 4.20 252.6 4.23
Real estate 1-4 family junior lien mortgage 63.3 4.31 65.0 4.30 66.8 4.29 68.8 4.30 71.4 4.29
Credit card 26.4 11.97 26.2 12.32 25.9 12.23 25.0 12.45 24.0 12.55
Automobile 53.5 6.34 51.8 6.50 50.2 6.70 49.1 6.85 47.9 7.05
Other revolving credit and installment     43.0 5.07   42.9 5.00 42.6 4.94 42.0 4.83 41.9 4.74
Total consumer     446.2 5.02   445.4 5.02   442.7 5.01   439.0 5.04   437.8 5.05
Total loans (3) 831.0 4.28 823.8 4.29 813.3 4.36 802.1 4.42 798.4 4.47
Other     4.5 5.74   4.6 5.72   4.7 5.22   4.3 5.62   4.2 5.55
Total earning assets (3)   $ 1,402.6 3.43 % $ 1,364.3 3.49 % $ 1,344.1 3.57 % $ 1,286.5 3.71 % $ 1,264.1 3.81 %
Funding sources
Deposits:
Interest-bearing checking $ 40.2 0.07 % $ 36.8 0.07 % $ 35.2 0.07 % $ 34.5 0.06 % $ 40.4 0.06 %
Market rate and other savings 583.9 0.07 579.0 0.07 568.7 0.08 553.1 0.08 541.8 0.08
Savings certificates 38.8 0.86 40.5 0.89 43.1 0.94 47.3 1.08 52.6 1.23
Other time deposits 48.5 0.41 45.8 0.42 39.7 0.48 30.4 0.62 26.0 0.76
Deposits in foreign offices     94.2 0.15   91.1 0.14   86.3 0.15   81.1 0.15   68.9 0.15
Total interest-bearing deposits 805.6 0.14 793.2 0.14 773.0 0.15 746.4 0.17 729.7 0.19
Short-term borrowings 58.9 0.10 54.5 0.09 52.3 0.12 53.4 0.08 57.8 0.14
Long-term debt 159.2 1.56 153.8 1.62 153.5 1.65 133.4 1.86 125.5 2.02
Other liabilities     13.6 2.73   12.9 2.72   12.8 2.70   12.1 2.64   13.3 2.25
Total interest-bearing liabilities 1,037.3 0.39 1,014.4 0.40 991.6 0.42 945.3 0.43 926.3 0.47
Portion of noninterest-bearing funding sources (3)     365.3 -   349.9 -   352.5 -   341.2 -   337.8 -
Total funding sources (3)   $ 1,402.6   0.28 $ 1,364.3   0.29 $ 1,344.1   0.30 $ 1,286.5   0.32 $ 1,264.1   0.34

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

3.15 % 3.20 % 3.27 % 3.39 % 3.47 %
Noninterest-earning assets
Cash and due from banks $ 15.9 16.4 16.0 16.4 16.2
Goodwill 25.7 25.6 25.6 25.6 25.6
Other     119.8   119.6   120.0   118.4   121.3
Total noninterest-earnings assets   $ 161.4   161.6   161.6   160.4   163.1
Noninterest-bearing funding sources
Deposits $ 295.9 284.1 287.4 279.2 280.0
Other liabilities (3) 51.1 52.9 57.1 57.3 56.2
Total equity 179.7 174.5 169.6 165.1 164.7

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

    (365.3)   (349.9)   (352.5)   (341.2)   (337.8)

Net noninterest-bearing funding sources

  $ 161.4   161.6   161.6   160.4   163.1
Total assets (3)   $ 1,564.0   1,525.9   1,505.7   1,446.9   1,427.2
                                                           
 
(1) Our average prime rate was 3.25% for quarters ended June 30, and March 31 2014, and December 31, September 30 and June 30, 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.23%, 0.24%, 0.24%, 0.26% and 0.28% for the same quarters, respectively.
(2) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.

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

 
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
               
Six months
Quarter ended June 30,   % ended June 30,   %
(in millions)     2014   2013     Change         2014   2013     Change  
Service charges on deposit accounts $ 1,283 1,248 3 % $ 2,498 2,462 1 %
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,280 2,127 7 4,521 4,177 8
Trust and investment management 838 829 1 1,682 1,628 3
Investment banking     491   538   (9 )   818   891   (8 )
Total trust and investment fees     3,609   3,494   3   7,021   6,696   5
Card fees 847 813 4 1,631 1,551 5
Other fees:
Charges and fees on loans 342 387 (12 ) 709 771 (8 )
Merchant processing fees 183 174 5 355 328 8
Cash network fees 128 125 2 248 242 2
Commercial real estate brokerage commissions 99 73 36 171 118 45
Letters of credit fees 92 102 (10 ) 188 211 (11 )
All other fees     244   228   7   464   453   2
Total other fees     1,088   1,089   -   2,135   2,123   1
Mortgage banking:
Servicing income, net 1,035 393 163 1,973 707 179
Net gains on mortgage loan origination/sales activities     688   2,409   (71 )   1,260   4,889   (74 )
Total mortgage banking     1,723   2,802   (39 )   3,233   5,596   (42 )
Insurance 453 485 (7 ) 885 948 (7 )
Net gains from trading activities 382 331 15 814 901 (10 )
Net gains (losses) on debt securities 71 (54 ) NM 154 (9 ) NM
Net gains from equity investments 449 203 121 1,296 316 310
Lease income 129 225 (43 ) 262 355 (26 )
Life insurance investment income 138 142 (3 ) 270 287 (6 )
All other     103   (150 ) NM   86   162   (47 )
Total   $ 10,275   10,628     (3 )     $ 20,285   21,388     (5 )
 
NM - Not meaningful
 
NONINTEREST EXPENSE    
                   

 

Six months

Quarter ended June 30,

%  

ended June 30,

%
(in millions)     2014   2013   Change         2014   2013   Change  
Salaries $ 3,795 3,768 1 % $ 7,523 7,431 1 %
Commission and incentive compensation 2,445 2,626 (7 ) 4,861 5,203 (7 )
Employee benefits 1,170 1,118 5 2,542 2,701 (6 )
Equipment 445 418 6 935 946 (1 )
Net occupancy 722 716 1 1,464 1,435 2
Core deposit and other intangibles 349 377 (7 ) 690 754 (8 )
FDIC and other deposit assessments 225 259 (13 ) 468 551 (15 )
Outside professional services 646 607 6 1,205 1,142 6
Outside data processing 259 235 10 500 468 7
Contract services 249 226 10 483 433 12
Travel and entertainment 243 229 6 462 442 5
Operating losses 364 288 26 523 445 18
Postage, stationery and supplies 170 184 (8 ) 361 383 (6 )
Advertising and promotion 187 183 2 305 288 6
Foreclosed assets 130 146 (11 ) 262 341 (23 )
Telecommunications 111 125 (11 ) 225 248 (9 )
Insurance 140 143 (2 ) 265 280 (5 )
Operating leases 54 49 10 104 97 7
All other     490   558 (12 )   964   1,067 (10 )
Total   $ 12,194   12,255   -       $ 24,142   24,655   (2 )
 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
         
  Quarter ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)     2014   2014     2013     2013     2013  
Service charges on deposit accounts $ 1,283 1,215 1,283 1,278 1,248
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,280 2,241 2,150 2,068 2,127
Trust and investment management 838 844 850 811 829
Investment banking     491   327     458     397     538  
Total trust and investment fees     3,609   3,412     3,458     3,276     3,494  
Card fees 847 784 827 813 813
Other fees:
Charges and fees on loans 342 367 379 390 387
Merchant transaction processing fees 183 172 172 169 174
Cash network fees 128 120 122 129 125
Commercial real estate brokerage commissions 99 72 129 91 73
Letters of credit fees 92 96 99 100 102
All other fees     244   220     218     219     228  
Total other fees     1,088   1,047     1,119     1,098     1,089  
Mortgage banking:
Servicing income, net 1,035 938 709 504 393
Net gains on mortgage loan origination/sales activities     688   572     861     1,104     2,409  
Total mortgage banking     1,723   1,510     1,570     1,608     2,802  
Insurance 453 432 453 413 485
Net gains from trading activities 382 432 325 397 331
Net gains (losses) on debt securities 71 83 (14 ) (6 ) (54 )
Net gains from equity investments 449 847 654 502 203
Lease income 129 133 148 160 225
Life insurance investment income 138 132 125 154 142
All other     103   (17 )   (86 )   37     (150 )
Total   $ 10,275   10,010     9,862     9,730     10,628  
 
FIVE QUARTER NONINTEREST EXPENSE
 
  Quarter ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)     2014   2014     2013     2013     2013  
Salaries $ 3,795 3,728 3,811 3,910 3,768
Commission and incentive compensation 2,445 2,416 2,347 2,401 2,626
Employee benefits 1,170 1,372 1,160 1,172 1,118
Equipment 445 490 567 471 418
Net occupancy 722 742 732 728 716
Core deposit and other intangibles 349 341 375 375 377
FDIC and other deposit assessments 225 243 196 214 259
Outside professional services 646 559 754 623 607
Outside data processing 259 241 264 251 235
Contract services 249 234 261 241 226
Travel and entertainment 243 219 234 209 229
Operating losses 364 159 181 195 288
Postage, stationery and supplies 170 191 189 184 184
Advertising and promotion 187 118 165 157 183
Foreclosed assets 130 132 103 161 146
Telecommunications 111 114 118 116 125
Insurance 140 125 59 98 143
Operating leases 54 50 51 56 49
All other     490   474     518     540     558  
Total   $ 12,194   11,948     12,085     12,102     12,255  
 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
 
June 30, Dec. 31, %
(in millions, except shares)     2014   2013   Change  
Assets
Cash and due from banks $ 20,635 19,919 4 %
Federal funds sold, securities purchased under resale agreements and other short-term investments 238,719 213,793 12
Trading assets 71,674 62,813 14
Investment securities:
Available-for-sale, at fair value 248,961 252,007 (1 )
Held-to-maturity, at cost (fair value $30,386 and $12,247) 30,108 12,346 144
Mortgages held for sale (includes $16,448 and $13,879 carried at fair value) (1) 21,064 16,763 26
Loans held for sale (includes $1 and $1 carried at fair value) (1) 9,762 133 NM
 
Loans (includes $5,926 and $5,995 carried at fair value) (1)(2) 828,942 822,286 1
Allowance for loan losses     (13,101 ) (14,502 ) (10 )
Net loans (2)     815,841   807,784   1
Mortgage servicing rights:
Measured at fair value 13,900 15,580 (11 )
Amortized 1,196 1,229 (3 )
Premises and equipment, net 8,977 9,156 (2 )
Goodwill 25,705 25,637 -
Other assets (includes $1,902 and $1,386 carried at fair value) (1)     92,332   86,342   7
Total assets (2)   $ 1,598,874   1,523,502   5
Liabilities
Noninterest-bearing deposits $ 308,099 288,117 7
Interest-bearing deposits     810,478   791,060   2
Total deposits 1,118,577 1,079,177 4
Short-term borrowings 61,849 53,883 15
Accrued expenses and other liabilities (2) 69,021 66,436 4
Long-term debt     167,878   152,998   10
Total liabilities (2)     1,417,325   1,352,494   5
Equity
Wells Fargo stockholders' equity:
Preferred stock 18,749 16,267 15

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 59,926 60,296 (1 )
Retained earnings 99,926 92,361 8
Cumulative other comprehensive income 4,117 1,386 197
Treasury stock – 231,916,784 shares and 224,648,769 shares (9,271 ) (8,104 ) 14
Unearned ESOP shares     (1,724 ) (1,200 ) 44
Total Wells Fargo stockholders' equity 180,859 170,142 6
Noncontrolling interests     690   866   (20 )
Total equity     181,549   171,008   6
Total liabilities and equity (2)   $ 1,598,874   1,523,502   5  
 
NM - Not meaningful.

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

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

 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
         
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(in millions)     2014     2014     2013     2013     2013  
Assets
Cash and due from banks $ 20,635 19,731 19,919 18,928 17,939
Federal funds sold, securities purchased under
resale agreements and other short-term investments 238,719 222,781 213,793 182,036 148,665
Trading assets 71,674 63,753 62,813 60,203 58,619
Investment securities:
Available-for-sale, at fair value 248,961 252,665 252,007 259,399 249,439
Held-to-maturity, at cost 30,108 17,662 12,346 - -
Mortgages held for sale 21,064 16,233 16,763 25,395 38,785
Loans held for sale 9,762 91 133 204 190
 
Loans (1) 828,942 826,443 822,286 809,135 799,867
Allowance for loan losses     (13,101 )   (13,695 )   (14,502 )   (15,159 )   (16,144 )
Net loans (1)     815,841     812,748     807,784     793,976     783,723  
Mortgage servicing rights:
Measured at fair value 13,900 14,953 15,580 14,501 14,185
Amortized 1,196 1,219 1,229 1,204 1,176
Premises and equipment, net 8,977 9,020 9,156 9,120 9,190
Goodwill 25,705 25,637 25,637 25,637 25,637
Other assets     92,332     90,214     86,342     94,262     90,908  
Total assets (1)   $ 1,598,874     1,546,707     1,523,502     1,484,865     1,438,456  
Liabilities
Noninterest-bearing deposits $ 308,099 294,863 288,117 279,911 277,648
Interest-bearing deposits     810,478     799,713     791,060     761,960     743,937  
Total deposits 1,118,577 1,094,576 1,079,177 1,041,871 1,021,585
Short-term borrowings 61,849 57,061 53,883 53,851 56,983
Accrued expenses and other liabilities (1) 69,021 65,179 66,436 69,118 72,736
Long-term debt     167,878     153,422     152,998     151,212     123,375  
Total liabilities (1)     1,417,325     1,370,238     1,352,494     1,316,052