Wells Fargo Reports $5.6 Billion in Quarterly Net Income

Diluted EPS of $1.03; Revenue Up 2 Percent from Prior Year

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

  • Continued strong financial results:
    • Net income of $5.6 billion, compared with $5.8 billion in third quarter 2015
    • Diluted earnings per share (EPS) of $1.03, compared with $1.05
    • Revenue of $22.3 billion, up 2 percent
    • Pre-tax pre-provision profit1 of $9.1 billion, compared with $9.5 billion
    • Return on assets of 1.17 percent and return on equity of 11.60 percent
  • Strong growth in loans and deposits:
    • Total average loans of $957.5 billion, up $62.4 billion, or 7 percent, from third quarter 2015
    • Total average deposits of $1.3 trillion, up $62.7 billion, or 5 percent
  • Solid credit quality:
    • Net charge-offs of $805 million, up $102 million from third quarter 2015
      • Net charge-offs were 0.33 percent of average loans (annualized), up from 0.31 percent
    • Nonaccrual loans down $551 million, or 5 percent
    • No reserve build2 or release, consistent with third quarter 2015
  • Maintained strong capital levels while continuing to return capital to shareholders:
    • Common Equity Tier 1 ratio (fully phased-in) of 10.7 percent3
    • Period-end common shares outstanding down 24.6 million from second quarter 2016.

Sales Practices Settlements4

On September 8, 2016, Wells Fargo & Company (NYSE:WFC) reached agreements with the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the Office of the Los Angeles City Attorney, regarding allegations that some of its retail customers received products and services they did not request. The amount of the settlements, which the Company had fully accrued for as of June 30, 2016, totaled $185 million, plus $5 million in customer remediation. Key actions are being taken to ensure the Company's culture is wholly aligned with the interests of customers including:

  • Eliminated product sales goals for retail banking team members as of October 1, 2016;
  • Implemented procedures to send customers a confirmation email approximately an hour after opening any deposit account and an acknowledgement letter after submitting a credit card application;
  • Attempting to contact all retail and small business deposit customers across the country, including those who have already received refunded fees, to invite them to review their accounts with their banker. Also contacting credit card customers identified as possibly having unauthorized accounts to confirm whether they need or want their credit card;
  • Expanding the scope of our customer account review and remediation to include 2009 and 2010;
  • The Independent Directors of the Board have launched an investigation into the Company’s retail banking sales practices and related matters
    • Independent Directors have retained the Shearman & Sterling law firm to assist in the investigation
    • John Stumpf forfeited unvested equity awards valued at approximately $41 million
    • Carrie Tolstedt has left the Company; will receive no severance; has forfeited unvested equity awards valued at approximately $19 million; will not exercise outstanding options during investigation
    • Neither executive will receive a bonus for 2016

Executive Leadership Changes

On October 12, 2016, former Chairman and CEO John Stumpf retired from the Company after 34 years of service. The Board elected Tim Sloan, the Company’s President and Chief Operating Officer, to succeed him as CEO, and Stephen Sanger, its Lead Director, to serve as the Board’s non-executive Chairman, and independent director Elizabeth Duke to serve as Vice Chair. Sloan also was elected to the Board.

President and CEO Tim Sloan said, “I am deeply committed to restoring the trust of all of our stakeholders, including our customers, shareholders, and community partners. We know that it will take time and a lot of hard work to earn back our reputation, but I am confident because of the incredible caliber of our team members. We will work tirelessly to build a stronger and better Wells Fargo for generations to come.”

Financial Results

Wells Fargo & Company (NYSE:WFC) reported net income of $5.6 billion, or $1.03 per diluted common share, for third quarter 2016, compared with $5.8 billion, or $1.05 per share, for third quarter 2015, and $5.6 billion, or $1.01 per share, for second quarter 2016.

 

Selected Financial Information

    Quarter ended
Sep 30,     Jun 30,     Sep 30,
      2016     2016     2015
Earnings
Diluted earnings per common share $ 1.03 1.01 1.05
Wells Fargo net income (in billions) 5.64 5.56 5.80
Return on assets (ROA) 1.17 % 1.20 1.32
Return on equity (ROE) 11.60 11.70 12.62
Return on average tangible common equity (ROTCE)(a) 13.96 14.15 15.19
Asset Quality
Net charge-offs (annualized) as a % of average total loans 0.33 % 0.39 0.31
Allowance for credit losses as a % of total loans 1.32 1.33 1.39
Allowance for credit losses as a % of annualized net charge-offs 396 343 450
Other
Revenue (in billions) $ 22.3 22.2 21.9
Efficiency ratio 59.4 % 58.1 56.7
Average loans (in billions) $ 957.5 950.8 895.1
Average deposits (in billions) 1,261.5 1,236.7 1,198.9
Net interest margin       2.82 %     2.86     2.96

(a) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.

 

Chief Financial Officer John Shrewsberry said, “Wells Fargo reported solid results for the third quarter, reflecting the benefits of our diversified business model, our strong balance sheet and improved credit performance. Revenue increased linked quarter on higher net interest income, driven by growth in earning assets and increased investment in our securities portfolio, as well as solid mortgage banking results. While expenses increased from second quarter, credit results improved from the prior period led by strong performance in consumer real estate and improvements in our oil and gas portfolio. Capital remained strong and our net payout ratio5 was 61 percent in the quarter, as we returned $3.2 billion to shareholders through common stock dividends and net share repurchases. We will continue to monitor impacts from the recent sales practice settlements to our business activity levels.”

Net Interest Income

Net interest income in third quarter 2016 increased $219 million from second quarter 2016 to $12.0 billion, primarily due to growth in investment securities, loans, trading assets and mortgages held-for-sale. The third quarter also included one additional day, accounting for approximately one third of the increase in net interest income relative to the second quarter. The benefit to net interest income from asset growth was partially offset by increased interest expense from higher debt balances and a modest increase in commercial deposit costs.

Net interest margin was 2.82 percent, down 4 basis points from second quarter 2016 primarily due to growth in long-term debt and deposits, partially offset by the benefit of earning asset growth.

Noninterest Income

Noninterest income in the third quarter was $10.4 billion, in line with second quarter 2016. Third quarter noninterest income reflected strong mortgage banking results, as well as growth in trust and investment fees, higher gains from trading activities driven by higher deferred compensation plan investment results (largely offset in employee benefits expense) and higher service charges on deposit accounts. These increases were offset by a decline in other income, which in the second quarter included a $290 million gain from the sale of our health benefit services business, and lower gains on debt securities and equity investments. Equity gains in third quarter 2016 were down $780 million from an elevated level in third quarter 2015.

Trust and investment fees were $3.6 billion, up $66 million from the prior quarter, primarily due to higher asset-based fees and higher trust and investment management fees.

Mortgage banking noninterest income was $1.7 billion, up $253 million from second quarter 2016, driven by net gains on mortgage loan origination/sales activities. Residential mortgage loan originations were $70 billion in the third quarter, up from $63 billion in the second quarter. The production margin on residential held-for-sale mortgage loan originations6 was 1.81 percent, up from 1.66 percent in second quarter.

Noninterest Expense

Noninterest expense in the third quarter was $13.3 billion, compared with $12.9 billion in the prior quarter. Third quarter expenses included increased operating losses, reflecting higher litigation accruals, as well as higher salaries, a $107 million donation to the Wells Fargo Foundation and higher FDIC insurance expense. These increases were partially offset by gains on sales of foreclosed assets, as well as lower incentive compensation, and advertising and promotion. The efficiency ratio was 59.4 percent in third quarter 2016, compared with 58.1 percent in the prior quarter. The Company expects the efficiency ratio to remain at an elevated level.

Loans

Total loans were $961.3 billion at September 30, 2016, up $4.2 billion from June 30, 2016. Loan growth was driven by growth in commercial loans, including real estate mortgage and commercial and industrial, as well as growth in consumer loans, including real estate 1-4 family first mortgage, credit card and automobile. Total average loans were $957.5 billion in the third quarter, up $6.7 billion from the prior quarter.

 

Period-End Loan Balances

    Sep 30,     Jun 30,     Mar 31,     Dec 31,     Sep 30,
(in millions)     2016     2016     2016     2015     2015
Commercial $ 496,454 494,538 488,205 456,583 447,338
Consumer       464,872     462,619     459,053     459,976     455,895
Total loans     $ 961,326     957,157     947,258     916,559     903,233
Change from prior quarter     $ 4,169     9,899     30,699     13,326     14,774
 

Investment Securities

Investment securities were $390.8 billion at September 30, 2016, up $37.4 billion from second quarter, as approximately $57 billion of purchases, predominantly federal agency mortgage-backed securities in our available-for-sale portfolio, were partially offset by run-off, including accelerated prepayments of investment securities, and sales.

Net unrealized available-for-sale securities gains of $4.5 billion at September 30, 2016, declined $63 million from June 30, 2016, as modestly higher interest rates were partially offset by tighter credit spreads.

Deposits

Total average deposits for third quarter 2016 were $1.3 trillion, up 2 percent from the prior quarter, driven by both commercial and consumer growth. The average deposit cost for third quarter 2016 was 11 basis points, flat compared with the prior quarter.

Capital

Capital levels remained strong in the third quarter, with a Common Equity Tier 1 ratio (fully phased-in) of 10.7 percent3, compared with 10.6 percent in the prior quarter. In third quarter 2016, the Company repurchased 38.3 million shares of its common stock, contributing to a net reduction in period-end common shares outstanding of 24.6 million shares. The Company paid a quarterly common stock dividend of $0.38 per share, up from $0.375 per share a year ago.

Credit Quality

Credit results improved in the third quarter as our quarterly loss rate decreased to 0.33 percent (annualized),” said Chief Risk Officer Mike Loughlin. “The loan portfolio continued to perform well, led by strong performance in consumer real estate. Oil and gas portfolio performance during the quarter improved with lower credit losses and improved portfolio quality. The allowance for credit losses in the third quarter remained unchanged from the second quarter. Future allowance levels will be based on a variety of factors, including loan growth, portfolio performance and general economic conditions.”

Net Loan Charge-offs

The quarterly loss rate of 0.33 percent (annualized) reflected commercial losses of 0.17 percent and consumer losses of 0.51 percent. Credit losses were $805 million in third quarter 2016, down $119 million, or 13 percent, from second quarter 2016. The decline was primarily due to a $94 million decrease in oil and gas losses. Consumer losses increased $23 million, driven by a $47 million increase in automobile losses from seasonally low losses in the second quarter, partially offset by a decrease in credit card losses of $25 million.

 

Net Loan Charge-Offs

 
    Quarter ended  
      September 30, 2016       June 30, 2016       March 31, 2016  
Net loan     As a % of Net loan     As a % of Net loan     As a % of
charge- average charge- average charge- average
($ in millions)     offs       loans (a)       offs       loans (a)       offs       loans (a)  
Commercial:
Commercial and industrial $ 259 0.32 % $ 368 0.46 % $ 273 0.36 %
Real estate mortgage (28 ) (0.09 ) (20 ) (0.06 ) (29 ) (0.10 )
Real estate construction (18 ) (0.32 ) (3 ) (0.06 ) (8 ) (0.13 )
Lease financing       2   0.04   12   0.27   1   0.01
Total commercial       215   0.17   357   0.29   237   0.20
Consumer:
Real estate 1-4 family first mortgage 20 0.03 14 0.02 48 0.07
Real estate 1-4 family junior lien mortgage 49 0.40 62 0.49 74 0.57
Credit card 245 2.82 270 3.25 262 3.16
Automobile 137 0.87 90 0.59 127 0.85
Other revolving credit and installment       139   1.40   131   1.32   138   1.42
Total consumer       590   0.51   567   0.49   649   0.57
Total     $ 805   0.33 % $ 924   0.39 % $ 886   0.38 %
                                                       

(a) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 31 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

 

Nonperforming Assets

Nonperforming assets decreased $1.1 billion from second quarter 2016 to $12.0 billion. Nonaccrual loans decreased $977 million from second quarter to $11.0 billion led by a $732 million decrease in consumer nonaccruals. Foreclosed assets of $1.0 billion were down $97 million from second quarter 2016.

 

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

 
      September 30, 2016       June 30, 2016       March 31, 2016  
        As a         As a           As a
% of % of % of
Total total Total total Total total
($ in millions)     balances       loans       balances       loans       balances       loans  
Commercial:
Commercial and industrial $ 3,331 1.03 % $ 3,464 1.07 % $ 2,911 0.91 %
Real estate mortgage 780 0.60 872 0.68 896 0.72
Real estate construction 59 0.25 59 0.25 63 0.27
Lease financing       92   0.49   112   0.59   99 0.52
Total commercial       4,262   0.86   4,507   0.91   3,969 0.81
Consumer:
Real estate 1-4 family first mortgage 5,310 1.91 5,970 2.15 6,683 2.43
Real estate 1-4 family junior lien mortgage 1,259 2.62 1,330 2.67 1,421 2.77
Automobile 108 0.17 111 0.18 114 0.19
Other revolving credit and installment       47   0.12   45   0.11   47 0.12
Total consumer       6,724   1.45   7,456   1.61   8,265 1.80
Total nonaccrual loans       10,986   1.14   11,963   1.25   12,234 1.29
Foreclosed assets:
Government insured/guaranteed 282 321 386
Non-government insured/guaranteed       738     796     893
Total foreclosed assets       1,020     1,117     1,279
Total nonperforming assets     $ 12,006   1.25 % $ 13,080   1.37 % $ 13,513 1.43 %
Change from prior quarter:
Total nonaccrual loans $ (977 ) $ (271 ) $ 852
Total nonperforming assets       (1,074 )               (433 )               706          
 

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 $853 million at September 30, 2016, up from $788 million at June 30, 2016. 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 mortgage loans and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $11.2 billion at September 30, 2016, down from $11.6 billion at June 30, 2016.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.7 billion at September 30, 2016, which was unchanged from June 30, 2016. The allowance coverage for total loans was 1.32 percent, compared with 1.33 percent in second quarter 2016. The allowance covered 4.0 times annualized third quarter net charge-offs, compared with 3.4 times in the prior quarter. The allowance coverage for nonaccrual loans was 116 percent at September 30, 2016, compared with 107 percent at June 30, 2016. “We believe the allowance was appropriate for losses inherent in the loan portfolio at September 30, 2016,” 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
Sep 30,     Jun 30,     Sep 30,
(in millions)     2016     2016     2015
Community Banking $ 3,227 3,179 3,560
Wholesale Banking 2,047 2,073 1,925
Wealth and Investment Management       677     584     606
 

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
Sep 30,     Jun 30,     Sep 30,
(in millions)       2016     2016     2015
Total revenue $ 12,387 12,204 12,933
Provision for credit losses 651 689 668
Noninterest expense 6,953 6,648 6,778
Segment net income 3,227 3,179 3,560
(in billions)
Average loans 489.2 485.7 477.0
Average assets 993.6 967.6 898.9
Average deposits       708.0     703.7     655.6
 

Community Banking reported net income of $3.2 billion, up $48 million, or 2 percent, from second quarter 2016. Revenue of $12.4 billion increased $183 million, or 1 percent, from second quarter 2016 due to higher net interest income, mortgage banking revenue, trust and investment fees, deposit service charges, and other income (hedge ineffectiveness), partially offset by lower market sensitive revenue, primarily lower gains on sales of debt securities and equity investments. Noninterest expense increased $305 million, or 5 percent, compared with second quarter 2016, due to higher operating losses and a donation to the Wells Fargo Foundation, partially offset by lower personnel expense. The provision for credit losses decreased $38 million from the prior quarter.

Net income was down $333 million, or 9 percent, from third quarter 2015. Revenue decreased $546 million, or 4 percent, compared with a year ago due to lower gains on equity investments, partially offset by higher deferred compensation plan investment results (offset in employee benefits expense), higher gains on sales of debt securities, card fees, and deposit service charges. Noninterest expense increased $175 million, or 3 percent, from a year ago driven by higher deferred compensation plan expense (offset in trading revenue) and operating losses, partially offset by lower foreclosed assets expense. The provision for credit losses decreased $17 million from a year ago.

Regional Banking

  • Retail Banking
    • Primary consumer checking customers7 up 4.7 percent year-over-year8
    • Primary consumer checking customers7 in September up 4.5 percent year-over-year
    • Debit card purchase volume9 of $76.0 billion in third quarter, up 8 percent year-over-year
    • Retail Banking household cross-sell ratio of 6.25 products per household, compared with 6.33 year-over-year8,10
  • Small Business Banking
    • For the 14th consecutive year, America’s #1 small business lender and #1 lender to small businesses in low- and moderate-income areas (loans under $1 million; 2015 Community Reinvestment Act data, released August 2016)
    • As part of the Wells Fargo Works for Small BusinessSM initiative, the Company launched the new Business Credit Center at wellsfargoworks.com to help business owners better understand how to prepare for and manage credit
  • Digital Banking
    • 27.4 million digital (online and mobile) active customers, including 18.8 million mobile active users8,11
    • #1 overall performance in Keynote Mobile Banking Scorecard; also best in “Functionality,” “Ease of Use,” and “Best App & Mobile Web Experiences” (September 2016)

Consumer Lending Group

  • Home Lending
    • Originations of $70 billion, up from $63 billion in prior quarter
    • Applications of $100 billion, up from $95 billion in prior quarter
    • Application pipeline of $50 billion at quarter end, up from $47 billion at June 30, 2016
  • Consumer Credit
    • Credit card purchase volume of $19.6 billion in third quarter, up 8 percent year-over-year
    • Credit card penetration in retail banking households rose to 45.4 percent, up from 44.8 percent in prior year8,12
    • Auto originations of $8.1 billion in third quarter, down 2 percent from prior quarter and prior year

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include Business Banking, 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 and Asset Backed Finance.

 

Selected Financial Information

    Quarter ended
Sep 30,     Jun 30,     Sep 30,
(in millions)     2016     2016     2015
Total revenue $ 7,147 7,284 6,326
Provision for credit losses 157 385 36
Noninterest expense 4,120 4,036 3,503
Segment net income 2,047 2,073 1,925
(in billions)
Average loans 454.3 451.4 405.6
Average assets 794.2 772.6 739.1
Average deposits       441.2     425.8     442.0
 

Wholesale Banking reported net income of $2.0 billion, down $26 million, or 1 percent, from second quarter 2016. Revenue of $7.1 billion decreased $137 million, or 2 percent, from prior quarter due to the $290 million gain on the sale of our health benefit services business in second quarter 2016, partially offset by higher net interest income, increased mortgage banking fees in multi-family capital and structured real estate, as well as higher commercial real estate brokerage fees. Noninterest expense increased $84 million, or 2 percent, from the prior quarter primarily due to higher FDIC insurance expense, personnel expense and operating losses. The provision for credit losses decreased $228 million from the prior quarter on lower oil and gas related net charge-offs.

Net income was up $122 million, or 6 percent, from third quarter 2015. Revenue increased $821 million, or 13 percent, from third quarter 2015, on strong loan growth, including the GE Capital portfolio acquisitions, higher customer accommodation trading, strong mortgage banking fees and increased investment banking fees, partially offset by lower insurance fees driven by the sale of our crop insurance business in first quarter 2016 and lower gains on debt securities and equity investments. Noninterest expense increased $617 million, or 18 percent, from a year ago primarily due to the GE Capital portfolio acquisitions and higher personnel expenses related to growth initiatives, compliance, and regulatory requirements. The provision for credit losses increased $121 million from a year ago primarily due to higher oil and gas net charge-offs.

  • Average loans increased 12 percent from third quarter 2015, on broad-based growth, including asset-backed finance, commercial real estate, corporate banking, equipment finance and structured real estate as well as the GE Capital portfolio acquisitions
  • Treasury management revenue up 2 percent from third quarter 2015

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

 

Selected Financial Information

 
    Quarter ended  
Sep 30,     Jun 30,     Sep 30,
(in millions)     2016     2016     2015  
Total revenue $ 4,099 3,919 3,878
Provision (reversal of provision) for credit losses 4 2 (6 )
Noninterest expense 2,999 2,976 2,909
Segment net income 677 584 606
(in billions)
Average loans 68.4 66.7 61.1
Average assets 212.1 205.3 192.6
Average deposits       189.2     182.5     172.6  
 

Wealth and Investment Management reported net income of $677 million, up $93 million, or 16 percent, from second quarter 2016. Revenue of $4.1 billion increased $180 million, or 5 percent, from the prior quarter, primarily due to higher asset-based fees, net interest income, and higher deferred compensation plan investment results (offset in employee benefits expense). Noninterest expense increased $23 million, or 1 percent, from the prior quarter, largely driven by higher deferred compensation plan expense (offset in trading revenue) and higher broker commissions. The provision for credit losses increased $2 million from second quarter 2016.

Net income was up $71 million, or 12 percent, from third quarter 2015. Revenue increased $221 million, or 6 percent, from a year ago primarily driven by higher deferred compensation plan investment results (offset in employee benefits expense) and higher net interest income, as average loans increased $7.3 billion, or 12 percent, to $68.4 billion. Noninterest expense increased $90 million, or 3 percent, from a year ago, primarily due to higher deferred compensation plan expense (offset in trading revenue), partially offset by lower operating losses. The provision for credit losses increased $10 million from a year ago.

Retail Brokerage

  • Client assets of $1.5 trillion, up 10 percent from prior year
  • Advisory assets of $458 billion, up 12 percent from prior year, primarily driven by higher market valuations and positive net flows
  • Strong loan growth, with average balances up 18 percent from prior year largely due to continued growth in non-conforming mortgage loans and security-based lending

Wealth Management

  • Client assets of $230 billion, up 5 percent from prior year
  • Average loan balances up 9 percent over prior year primarily driven by continued growth in non-conforming mortgage loans, commercial loans and security-based lending

Retirement

  • IRA assets of $379 billion, up 10 percent from prior year
  • Institutional Retirement plan assets of $347 billion, up 5 percent from prior year

Asset Management

  • Total assets under management of $498 billion, up 4 percent from prior year primarily due to higher market valuations, and positive fixed income and money market net inflows, partially offset by equity outflows

Conference Call

The Company will host a live conference call on Friday, October 14, at 7 a.m. PT (10 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~101416.

A replay of the conference call will be available beginning at 10 a.m. PT (1 p.m. ET) on Friday, October 14 through Friday, October 28. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #31498547. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~101416.

 

Endnotes

1   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.
2 Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
3 See table on page 36 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules.
4 Additional information is provided in our 3Q16 Quarterly Supplement.
5 Net payout ratio means the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock.
6 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 41 for more information.
7 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
8 Data as of August 2016, comparisons with August 2015.
9 Combined consumer and business debit card purchase volume dollars.
10 Effective second quarter 2016, Retail Banking households reflect only those households that maintain a retail checking account, which we believe provides the foundation for long-term retail banking relationships. Additionally, we updated the products included to capture business products in addition to retail products that have the potential for revenue generation and long-term viability. Products and services that generally do not meet these criteria – such as ATM cards, online banking, bill pay and direct deposit – are not included. This change in methodology was the result of a long-term evaluation spanning 18 months to best align our cross-sell metric with our strategic focus of long-term retail banking relationships. Prior period metrics have been revised to conform with the updated methodology. Cross-sell metrics have not been adjusted to reflect the de minimis impact of approximately 2.1 million potentially unauthorized accounts identified in a review by an independent consulting firm. The maximum impact of these accounts to this reported metric in any one quarter was 0.02 products per household, or 0.3 percent.
11 Primarily includes retail banking, consumer lending, small business and business banking customers.
12 Credit card penetration defined as the percentage of Retail Banking households that have a credit card with Wells Fargo. Effective second quarter 2016, Retail Banking households reflect only those households that maintain a retail checking account, which we believe provides the foundation for long-term retail banking relationships. This change in methodology was the result of a long-term evaluation spanning 18 months to best align our cross-sell metric with our strategic focus of long-term retail banking relationships. Prior period metrics have been revised to conform with the updated methodology. Credit card household penetration rates have not been adjusted to reflect the impact of the approximately 565,000 potentially unauthorized accounts identified by an independent consulting firm because the maximum impact in any one quarter was not greater than 86 basis points, or approximately 2 percent.
 

Forward-Looking Statements

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

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

  • current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and the overall slowdown in global economic growth;
  • our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
  • financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
  • the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;
  • the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;
  • negative effects relating to our mortgage servicing and foreclosure practices, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;
  • our ability to realize our efficiency ratio target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;
  • the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;
  • significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our 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, 2015.

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, 2015, 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 diversified, community-based financial services company with $1.9 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 8,600 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 42 countries and territories to support customers who conduct business in the global economy. With approximately 269,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 27 on Fortune’s 2016 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy 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
 

Income

Consolidated Statement of Income 19
Consolidated Statement of Comprehensive Income 21
Condensed Consolidated Statement of Changes in Total Equity 21
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 22
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 25
Noninterest Income and Noninterest Expense 27
 

Balance Sheet

Consolidated Balance Sheet 30
Investment Securities 32
 

Loans

Loans 32
Nonperforming Assets 33
Loans 90 Days or More Past Due and Still Accruing 34
Purchased Credit-Impaired Loans 35
Pick-A-Pay Portfolio 36
Changes in Allowance for Credit Losses 38
 

Equity

Tangible Common Equity 39
Common Equity Tier 1 Under Basel III 40
 

Operating Segments

Operating Segment Results 41
 

Other

Mortgage Servicing and other related data 43
 
 

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA

          % Change          
Quarter ended   Sep 30, 2016 from   Nine months ended  

($ in millions, except per share amounts)

    Sep 30,
2016
      Jun 30,
2016
    Sep 30,
2015
      Jun 30,
2016
      Sep 30,
2015
      Sep 30,
2016
      Sep 30,
2015
      %
Change
 
For the Period                
Wells Fargo net income $ 5,644 5,558 5,796 2 % (3 ) $ 16,664 17,319 (4 )%
Wells Fargo net income applicable to common stock 5,243 5,173 5,443 1 (4 ) 15,501 16,267 (5 )
Diluted earnings per common share 1.03 1.01 1.05 2 (2 ) 3.03 3.12 (3 )
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.17 % 1.20 1.32 (3 ) (11 ) 1.19 % 1.34 (11 )
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 11.60 11.70 12.62 (1 ) (8 ) 11.68 12.83 (9 )
Return on average tangible common equity (ROTCE)(1) 13.96 14.15 15.19 (1 ) (8 ) 14.08 15.46 (9 )
Efficiency ratio (2) 59.4 58.1 56.7 2 5 58.7 58.0 1
Total revenue $ 22,328 22,162 21,875 1 2 $ 66,685 64,471 3
Pre-tax pre-provision profit (PTPP) (3) 9,060 9,296 9,476 (3 ) (4 ) 27,523 27,096 2
Dividends declared per common share 0.380 0.380 0.375 1 1.135 1.10 3
Average common shares outstanding 5,043.4 5,066.9 5,125.8 (2 ) 5,061.9 5,145.9 (2 )
Diluted average common shares outstanding 5,094.6 5,118.1 5,193.8 (2 ) 5,118.2 5,220.3 (2 )
Average loans $ 957,484 950,751 895,095 1 7 $ 945,197 876,384 8
Average assets 1,914,586 1,862,084 1,746,402 3 10 1,865,694 1,727,967 8
Average total deposits 1,261,527 1,236,658 1,198,874 2 5 1,239,287 1,186,412 4
Average consumer and small business banking deposits (4) 739,066 726,359 683,245 2 8 726,798 674,741 8
Net interest margin 2.82 % 2.86 2.96 (1 ) (5 ) 2.86 % 2.96 (3 )
At Period End
Investment securities $ 390,832 353,426 345,074 11 13 $ 390,832 345,074 13
Loans 961,326 957,157 903,233 6 961,326 903,233 6
Allowance for loan losses 11,583 11,664 11,659 (1 ) (1 ) 11,583 11,659 (1 )
Goodwill 26,688 26,963 25,684 (1 ) 4 26,688 25,684 4
Assets 1,942,124 1,889,235 1,751,265 3 11 1,942,124 1,751,265 11
Deposits 1,275,894 1,245,473 1,202,179 2 6 1,275,894 1,202,179 6
Common stockholders' equity 179,916 178,633 172,089 1 5 179,916 172,089 5
Wells Fargo stockholders’ equity 203,028 201,745 193,051 1 5 203,028 193,051 5
Total equity 203,958 202,661 194,043 1 5 203,958 194,043 5
Tangible common equity (1) 149,829 148,110 143,352 1 5 149,829 143,352 5
Common shares outstanding 5,023.9 5,048.5 5,108.5 (2 ) 5,023.9 5,108.5 (2 )
Book value per common share (5) $ 35.81 35.38 33.69 1 6 $ 35.81 33.69 6
Tangible book value per common share (1)(5) 29.82 29.34 28.06 2 6 29.82 28.06 6
Common stock price:
High 51.00 51.41 58.77 (1 ) (13 ) 53.27 58.77 (9 )
Low 44.10 44.50 47.75 (1 ) (8 ) 44.10 47.75 (8 )
Period end 44.28 47.33 51.35 (6 ) (14 ) 44.28 51.35 (14 )
Team members (active, full-time equivalent)       268,800       267,900     265,200             1         268,800       265,200       1  

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.

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

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

(4) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.

(5) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

 
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA

 
    Quarter ended  
($ in millions, except per share amounts)     Sep 30,
2016
      Jun 30,
2016
    Mar 31,
2016
    Dec 31,
2015
    Sep 30,
2015
 
For the Quarter                
Wells Fargo net income $ 5,644 5,558 5,462 5,575 5,796
Wells Fargo net income applicable to common stock 5,243 5,173 5,085 5,203 5,443
Diluted earnings per common share 1.03 1.01 0.99 1.00 1.05
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.17 % 1.20 1.21 1.24 1.32
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 11.60 11.70 11.75 11.93 12.62
Return on average tangible common equity (ROTCE)(1) 13.96 14.15 14.15 14.30 15.19
Efficiency ratio (2) 59.4 58.1 58.7 58.4 56.7
Total revenue $ 22,328 22,162 22,195 21,586 21,875
Pre-tax pre-provision profit (PTPP) (3) 9,060 9,296 9,167 8,987 9,476
Dividends declared per common share 0.380 0.380 0.375 0.375 0.375
Average common shares outstanding 5,043.4 5,066.9 5,075.7 5,108.5 5,125.8
Diluted average common shares outstanding 5,094.6 5,118.1 5,139.4 5,177.9 5,193.8
Average loans $ 957,484 950,751 927,220 912,280 895,095
Average assets 1,914,586 1,862,084 1,819,875 1,787,287 1,746,402
Average total deposits 1,261,527 1,236,658 1,219,430 1,216,809 1,198,874
Average consumer and small business banking deposits (4) 739,066 726,359 714,837 696,484 683,245
Net interest margin 2.82 % 2.86 2.90 2.92 2.96
At Quarter End
Investment securities $ 390,832 353,426 334,899 347,555 345,074
Loans 961,326 957,157 947,258 916,559 903,233
Allowance for loan losses 11,583 11,664 11,621 11,545 11,659
Goodwill 26,688 26,963 27,003 25,529 25,684
Assets 1,942,124 1,889,235 1,849,182 1,787,632 1,751,265
Deposits 1,275,894 1,245,473 1,241,490 1,223,312 1,202,179
Common stockholders' equity 179,916 178,633 175,534 172,036 172,089
Wells Fargo stockholders’ equity 203,028 201,745 197,496 192,998 193,051
Total equity 203,958 202,661 198,504 193,891 194,043
Tangible common equity (1) 149,829 148,110 144,679 143,337 143,352
Common shares outstanding 5,023.9 5,048.5 5,075.9 5,092.1 5,108.5
Book value per common share (5) $ 35.81 35.38 34.58 33.78 33.69
Tangible book value per common share (1)(5) 29.82 29.34 28.50 28.15 28.06
Common stock price:
High 51.00 51.41 53.27 56.34 58.77
Low 44.10 44.50 44.50 49.51 47.75
Period end 44.28 47.33 48.36 54.36 51.35
Team members (active, full-time equivalent)       268,800       267,900     268,600     264,700     265,200  

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.

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

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

(4) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.

(5) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

 
 
Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

 
    Quarter ended September 30,       %     Nine months ended September 30,       %
(in millions, except per share amounts)     2016       2015       Change       2016       2015       Change  
Interest income              
Trading assets $ 593 485 22 % $ 1,761 1,413 25 %
Investment securities 2,298 2,289 6,736 6,614 2
Mortgages held for sale 207 223 (7 ) 549 609 (10 )
Loans held for sale 2 4 (50 ) 7 14 (50 )
Loans 9,978 9,216 8 29,377 27,252 8
Other interest income       409       228   79   1,175       732   61
Total interest income       13,487       12,445   8   39,605       36,634   8
Interest expense
Deposits 356 232 53 995 722 38
Short-term borrowings 85 12 608 229 51 349
Long-term debt 1,006 655 54 2,769 1,879 47
Other interest expense       88       89   (1 )   260       269   (3 )
Total interest expense       1,535       988   55   4,253       2,921   46
Net interest income 11,952 11,457 4 35,352 33,713 5
Provision for credit losses       805       703   15   2,965       1,611   84
Net interest income after provision for credit losses       11,147       10,754   4   32,387       32,102   1
Noninterest income
Service charges on deposit accounts 1,370 1,335 3 4,015 3,839 5
Trust and investment fees 3,613 3,570 1 10,545 10,957 (4 )
Card fees 997 953 5 2,935 2,754 7
Other fees 926 1,099 (16 ) 2,765 3,284 (16 )
Mortgage banking 1,667 1,589 5 4,679 4,841 (3 )
Insurance 293 376 (22 ) 1,006 1,267 (21 )
Net gains (losses) from trading activities 415 (26 ) NM 943 515 83
Net gains on debt securities 106 147 (28 ) 797 606 32
Net gains from equity investments 140 920 (85 ) 573 1,807 (68 )
Lease income 534 189 183 1,404 476 195
Other       315       266   18   1,671       412   306
Total noninterest income       10,376       10,418     31,333       30,758   2
Noninterest expense
Salaries 4,224 4,035 5 12,359 11,822 5
Commission and incentive compensation 2,520 2,604 (3 ) 7,769 7,895 (2 )
Employee benefits 1,223 821 49 3,993 3,404 17
Equipment 491 459 7 1,512 1,423 6
Net occupancy 718 728 (1 ) 2,145 2,161 (1 )
Core deposit and other intangibles 299 311 (4 ) 891 935 (5 )
FDIC and other deposit assessments 310 245 27 815 715 14
Other       3,483       3,196   9   9,678       9,020   7
Total noninterest expense       13,268       12,399   7   39,162       37,375   5
Income before income tax expense 8,255 8,773 (6 ) 24,558 25,485 (4 )
Income tax expense       2,601       2,790   (7 )   7,817       7,832  
Net income before noncontrolling interests 5,654 5,983 (5 ) 16,741 17,653 (5 )
Less: Net income from noncontrolling interests       10       187   (95 )   77       334   (77 )
Wells Fargo net income     $ 5,644       5,796   (3 ) $ 16,664       17,319   (4 )
Less: Preferred stock dividends and other       401       353   14   1,163       1,052   11
Wells Fargo net income applicable to common stock     $ 5,243       5,443   (4 ) $ 15,501       16,267   (5 )
Per share information
Earnings per common share $ 1.04 1.06 (2 ) $ 3.06 3.16 (3 )
Diluted earnings per common share 1.03 1.05 (2 ) 3.03 3.12 (3 )
Dividends declared per common share 0.380 0.375 1 1.135 1.100 3
Average common shares outstanding 5,043.4 5,125.8 (2 ) 5,061.9 5,145.9 (2 )
Diluted average common shares outstanding       5,094.6       5,193.8       (2 )       5,118.2       5,220.3       (2 )

NM – Not meaningful

 
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

 
    Quarter ended  
Sep 30,     Jun 30,     Mar 31,     Dec 31,     Sep 30,
(in millions, except per share amounts)     2016     2016     2016     2015     2015  
Interest income
Trading assets $ 593 572 596 558 485
Investment securities 2,298 2,176 2,262 2,323 2,289
Mortgages held for sale 207 181 161 176 223
Loans held for sale 2 3 2 5 4
Loans 9,978 9,822 9,577 9,323 9,216
Other interest income       409     392     374     258     228  
Total interest income       13,487     13,146     12,972     12,643     12,445  
Interest expense
Deposits 356 332 307 241 232
Short-term borrowings 85 77 67 13 12
Long-term debt 1,006 921 842 713 655
Other interest expense       88     83     89     88     89  
Total interest expense       1,535     1,413     1,305     1,055     988  
Net interest income 11,952 11,733 11,667 11,588 11,457
Provision for credit losses       805     1,074     1,086     831     703  
Net interest income after provision for credit losses       11,147     10,659     10,581     10,757     10,754  
Noninterest income
Service charges on deposit accounts 1,370 1,336 1,309 1,329 1,335
Trust and investment fees 3,613 3,547 3,385 3,511 3,570
Card fees 997 997 941 966 953
Other fees 926 906 933 1,040 1,099
Mortgage banking 1,667 1,414 1,598 1,660 1,589
Insurance 293 286 427 427 376
Net gains (losses) from trading activities 415 328 200 99 (26 )
Net gains on debt securities 106 447 244 346 147
Net gains from equity investments 140 189 244 423 920
Lease income 534 497 373 145 189
Other       315     482     874     52     266  
Total noninterest income       10,376     10,429     10,528     9,998     10,418  
Noninterest expense
Salaries 4,224 4,099 4,036 4,061 4,035
Commission and incentive compensation 2,520 2,604 2,645 2,457 2,604
Employee benefits 1,223 1,244 1,526 1,042 821
Equipment 491 493 528 640 459
Net occupancy 718 716 711 725 728
Core deposit and other intangibles 299 299 293 311 311
FDIC and other deposit assessments 310 255 250 258 245
Other       3,483     3,156     3,039     3,105     3,196  
Total noninterest expense       13,268     12,866     13,028     12,599     12,399  
Income before income tax expense 8,255 8,222 8,081 8,156 8,773
Income tax expense       2,601     2,649     2,567     2,533     2,790  
Net income before noncontrolling interests 5,654 5,573 5,514 5,623 5,983
Less: Net income from noncontrolling interests       10     15     52     48     187  
Wells Fargo net income     $ 5,644     5,558     5,462     5,575     5,796  
Less: Preferred stock dividends and other       401     385     377     372     353  
Wells Fargo net income applicable to common stock     $ 5,243     5,173     5,085     5,203     5,443  
Per share information
Earnings per common share $ 1.04 1.02 1.00 1.02 1.06
Diluted earnings per common share 1.03 1.01 0.99 1.00 1.05
Dividends declared per common share 0.380 0.380 0.375 0.375 0.375
Average common shares outstanding 5,043.4 5,066.9 5,075.7 5,108.5 5,125.8
Diluted average common shares outstanding       5,094.6     5,118.1     5,139.4     5,177.9     5,193.8  
 
 
Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

    Quarter ended         Nine months ended    
September 30,   % September 30,   %
(in millions)     2016       2015       Change     2016       2015       Change
Wells Fargo net income     $ 5,644       5,796   (3)% $ 16,664       17,319   (4)%
Other comprehensive income (loss), before tax:        
Investment securities:
Net unrealized gains (losses) arising during the period 112 (441 ) NM 2,478 (2,017 ) NM
Reclassification of net gains to net income (193 ) (439 ) (56) (1,001 ) (957 ) 5
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period (445 ) 1,769 NM 2,611 2,233 17
Reclassification of net gains on cash flow hedges to net income (262 ) (293 ) (11) (783 ) (795 ) (2)
Defined benefit plans adjustments:
Net actuarial losses arising during the period (447 ) NM (474 ) (11 ) NM
Amortization of net actuarial loss, settlements and other to net income 39 30 30 115 103 12
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period       (10 )     (59 ) (83)   27       (104 ) NM
Other comprehensive income (loss), before tax (1,206 ) 567 NM 2,973 (1,548 ) NM
Income tax (expense) benefit related to other comprehensive income       461       (268 ) NM   (1,110 )     544   NM
Other comprehensive income (loss), net of tax (745 ) 299 NM 1,863 (1,004 ) NM
Less: Other comprehensive income (loss) from noncontrolling interests       19       (22 ) NM   (24 )     125   NM
Wells Fargo other comprehensive income (loss), net of tax       (764 )     321   NM   1,887       (1,129 ) NM
Wells Fargo comprehensive income 4,880 6,117 (20) 18,551 16,190 15
Comprehensive income from noncontrolling interests       29       165   (82)   53       459   (88)
Total comprehensive income     $ 4,909       6,282       (22)     $ 18,604       16,649       12

NM – Not meaningful

 
 

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

 
    Quarter ended  
Sep 30,     Jun 30,     Mar 31,     Dec 31,     Sep 30,
(in millions)     2016       2016       2016       2015       2015  
Balance, beginning of period $ 202,661 198,504 193,891 194,043 190,676
Cumulative effect from change in consolidation accounting (1) 121
Wells Fargo net income 5,644 5,558 5,462 5,575 5,796
Wells Fargo other comprehensive income (loss), net of tax (764 ) 1,174 1,477 (2,092 ) 321
Noncontrolling interests 14 (92 ) (5 ) (100 ) (123 )
Common stock issued 300 397 1,079 310 505
Common stock repurchased (2) (1,839 ) (2,214 ) (2,029 ) (1,974 ) (2,137 )
Preferred stock released by ESOP 236 371 313 210 225
Common stock warrants repurchased/exercised (17 ) (17 )
Preferred stock issued 1,126 975 975
Common stock dividends (1,918 ) (1,930 ) (1,904 ) (1,917 ) (1,926 )
Preferred stock dividends (401 ) (386 ) (378 ) (371 ) (356 )
Tax benefit from stock incentive compensation 31 23 149 22 22
Stock incentive compensation expense 39 139 369 204 98
Net change in deferred compensation and related plans       (28 )     (9 )     (1,016 )     (19 )     (16 )
Balance, end of period     $ 203,958       202,661       198,504       193,891       194,043  

(1) Effective January 1, 2016, we adopted changes in consolidation accounting pursuant to Accounting Standards Update 2015-02 (Amendments to the Consolidation Analysis). Accordingly, we recorded a $121 million net increase to beginning noncontrolling interests as a cumulative-effect adjustment.

(2) For the quarter ended December 31, 2015, includes $500 million related to a private forward repurchase transaction that settled in first quarter 2016 for 9.2 million shares of common stock.

 
 
Wells Fargo & Company and Subsidiaries

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

 
    Quarter ended September 30,  
2016       2015  
        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 $ 299,351 0.50 % $ 373 250,104 0.26 % $ 167
Trading assets 88,838 2.72 605 67,223 2.93 492
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 25,817 1.52 99 35,709 1.59 143
Securities of U.S. states and political subdivisions 55,170 4.28 590 48,238 4.22 510
Mortgage-backed securities:
Federal agencies 105,780 2.39 631 98,459 2.70 665
Residential and commercial       18,080   5.54   250   21,876   5.84   319  
Total mortgage-backed securities 123,860 2.85 881 120,335 3.27 984
Other debt and equity securities       54,176   3.37   459   50,371   3.40   430  
Total available-for-sale securities       259,023   3.13   2,029   254,653   3.24   2,067  
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,678 2.19 246 44,649 2.18 245
Securities of U.S. states and political subdivisions 2,507 5.24 33 2,151 5.17 28
Federal agency and other mortgage-backed securities 47,971 1.97 236 27,079 2.38 161
Other debt securities       3,909   1.98   19   5,371   1.75   24  
Total held-to-maturity securities       99,065   2.15   534   79,250   2.30   458  
Total investment securities 358,088 2.86 2,563 333,903 3.02 2,525
Mortgages held for sale (4) 24,060 3.44 207 24,159 3.69 223
Loans held for sale (4) 199 3.04 2 568 2.57 4
Loans:
Commercial:
Commercial and industrial - U.S. 271,226 3.48 2,369 241,409 3.30 2,005
Commercial and industrial - Non U.S. 51,261 2.40 309 45,923 1.83 212
Real estate mortgage 128,809 3.48 1,127 120,983 3.31 1,009
Real estate construction 23,212 3.50 205 21,626 3.39 184
Lease financing       18,896   4.70   223   12,282   4.18   129  
Total commercial       493,404   3.42   4,233   442,223   3.18   3,539  
Consumer:
Real estate 1-4 family first mortgage 278,509 3.97 2,764 269,437 4.10 2,762
Real estate 1-4 family junior lien mortgage 48,927 4.37 537 55,298 4.22 588
Credit card 34,578 11.60 1,008 31,649 11.73 936
Automobile 62,461 5.60 880 58,534 5.80 855
Other revolving credit and installment       39,605   5.92   590   37,954   5.84   559  
Total consumer       464,080   4.97   5,779   452,872   5.01   5,700  
Total loans (4) 957,484 4.17 10,012 895,095 4.11 9,239
Other       6,488   2.30   36   5,028   5.11   64  
Total earning assets     $ 1,734,508   3.17 % $ 13,798   1,576,080   3.21 % $ 12,714  
Funding sources
Deposits:
Interest-bearing checking $ 44,056 0.15 % $ 17 37,783 0.05 % $ 5
Market rate and other savings 667,185 0.07 110 628,119 0.06 90
Savings certificates 25,185 0.30 19 30,897 0.58 44
Other time deposits 54,921 0.93 128 48,676 0.46 57
Deposits in foreign offices       107,072   0.30   82   111,521   0.13   36  
Total interest-bearing deposits 898,419 0.16 356 856,996 0.11 232
Short-term borrowings 116,228 0.29 86 90,357 0.06 13
Long-term debt 252,400 1.59 1,006 180,569 1.45 655
Other liabilities       16,771   2.11   88   16,435   2.13   89  
Total interest-bearing liabilities 1,283,818 0.48 1,536 1,144,357 0.34 989
Portion of noninterest-bearing funding sources       450,690       431,723      
Total funding sources     $ 1,734,508   0.35     1,536   1,576,080   0.25     989  
Net interest margin and net interest income on a taxable-equivalent basis (5) 2.82 %     $ 12,262   2.96 %     $ 11,725  
Noninterest-earning assets
Cash and due from banks $ 18,682 16,979
Goodwill 26,979 25,703
Other       134,417   127,640  
Total noninterest-earning assets     $ 180,078   170,322  
Noninterest-bearing funding sources
Deposits $ 363,108 341,878
Other liabilities 63,777 67,964
Total equity 203,883 192,203
Noninterest-bearing funding sources used to fund earning assets       (450,690 ) (431,723 )
Net noninterest-bearing funding sources     $ 180,078   170,322  
Total assets     $ 1,914,586   1,746,402  
                                                   

(1) Our average prime rate was 3.50% and 3.25% for the quarters ended September 30, 2016 and 2015, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.79% and 0.31% for the same quarters, respectively.

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

(3) 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) Includes taxable-equivalent adjustments of $310 million and $268 million for the quarters ended September 30, 2016 and 2015, respectively, predominantly 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)

 
    Nine months ended September 30,  
2016       2015  
        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 $ 292,635 0.49 % $ 1,076 264,218 0.27 % $ 543
Trading assets 83,580 2.86 1,792 65,954 2.91 1,437
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 30,588 1.56 358 31,242 1.57 368
Securities of U.S. states and political subdivisions 52,637 4.25 1,678 46,765 4.18 1,468
Mortgage-backed securities:
Federal agencies 98,099 2.57 1,889 99,523 2.71 2,021
Residential and commercial       19,488   5.39   787   22,823   5.80   992  
Total mortgage-backed securities 117,587 3.03 2,676 122,346 3.28 3,013
Other debt and equity securities       53,680   3.36   1,349   48,758   3.44   1,257  
Total available-for-sale securities       254,492   3.18   6,061   249,111   3.27   6,106  
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,671 2.19 733 44,010 2.19 722
Securities of U.S. states and political subdivisions 2,274 5.34 91 2,064 5.16 80
Federal agency and other mortgage-backed securities 37,087 2.08 577 19,871 2.14 319
Other debt securities       4,193   1.94   61   6,139   1.72   79  
Total held-to-maturity securities       88,225   2.21   1,462   72,084   2.22   1,200  
Total investment securities 342,717 2.93 7,523 321,195 3.03 7,306
Mortgages held for sale (4) 20,702 3.53 549 22,416 3.62 609
Loans held for sale (4) 240 3.71 7 644 2.93 14
Loans:
Commercial:
Commercial and industrial - U.S. 266,622 3.44 6,874 233,598 3.31 5,788
Commercial and industrial - Non U.S. 50,658 2.29 867 45,373 1.88 638
Real estate mortgage 125,902 3.43 3,236 115,224 3.45 2,972
Real estate construction 22,978 3.53 608 20,637 3.68 567
Lease financing       17,629   4.86   643   12,322   4.77   441  
Total commercial       483,789   3.38   12,228   427,154   3.26   10,406  
Consumer:
Real estate 1-4 family first mortgage 276,369 4.01 8,311 267,107 4.12 8,243
Real estate 1-4 family junior lien mortgage 50,585 4.38 1,659 57,068 4.24 1,812
Credit card 33,774 11.58 2,927 30,806 11.74 2,704
Automobile 61,246 5.64 2,588 57,180 5.87 2,512
Other revolving credit and installment       39,434   5.94   1,755   37,069   5.91   1,638  
Total consumer       461,408   4.99   17,240   449,230   5.03   16,909  

Total loans (4)

945,197 4.16 29,468 876,384 4.16 27,315
Other       6,104   2.23   101   4,874   5.21   191  
Total earning assets     $ 1,691,175   3.20 % $ 40,516   1,555,685   3.21 % $ 37,415  
Funding sources
Deposits:
Interest-bearing checking $ 40,858 0.13 % $ 41 38,491 0.05 % $ 15
Market rate and other savings 659,257 0.07 327 620,510 0.06 274
Savings certificates 26,432 0.37 73 32,639 0.66 160
Other time deposits 58,087 0.84 364 52,459 0.43 168
Deposits in foreign offices       100,783   0.25   190   107,153   0.13   105  

Total interest-bearing deposits

885,417 0.15 995 851,252 0.11 722
Short-term borrowings 111,993 0.28 231 82,258 0.09 52
Long-term debt 235,209 1.57 2,769 183,130 1.37 1,879
Other liabilities       16,534   2.10   260   16,576   2.16   269  
Total interest-bearing liabilities 1,249,153 0.45 4,255 1,133,216 0.34 2,922
Portion of noninterest-bearing funding sources       442,022       422,469      
Total funding sources     $ 1,691,175   0.34     4,255   1,555,685   0.25     2,922  
Net interest margin and net interest income on a taxable-equivalent basis (5) 2.86 %     $ 36,261   2.96 %     $ 34,493  
Noninterest-earning assets
Cash and due from banks $ 18,499 17,167
Goodwill 26,696 25,703
Other       129,324   129,412  
Total noninterest-earning assets     $ 174,519   172,282  
Noninterest-bearing funding sources
Deposits $ 353,870 335,160
Other liabilities 62,169 69,167
Total equity 200,502 190,424
Noninterest-bearing funding sources used to fund earning assets       (442,022 ) (422,469 )
Net noninterest-bearing funding sources     $ 174,519   172,282  
Total assets     $ 1,865,694   1,727,967  
                                                   

(1) Our average prime rate was 3.50% and 3.25% for the first nine months of 2016 and 2015, respectively. The average three- month London Interbank Offered Rate (LIBOR) was 0.69% and 0.28% for the same periods, respectively.

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

(3) 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) Includes taxable-equivalent adjustments of $909 million and $780 million for the first nine months of 2016 and 2015, respectively, predominantly 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)(2)

 
    Quarter ended  
      Sep 30, 2016     Jun 30, 2016     Mar 31, 2016     Dec 31, 2015     Sep 30, 2015  
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 $ 299.4 0.50 % $ 293.8 0.49 % $ 284.7 0.49 % $ 274.6 0.28 % $ 250.1 0.26 %
Trading assets 88.8 2.72 81.4 2.86 80.5 3.01 68.8 3.33 67.2 2.93
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 25.8 1.52 31.5 1.56 34.4 1.59 34.6 1.58 35.7 1.59
Securities of U.S. states and political subdivisions 55.2 4.28 52.2 4.24 50.5 4.24 49.3 4.37 48.2 4.22
Mortgage-backed securities:
Federal agencies 105.8 2.39 92.0 2.53 96.5 2.80 102.3 2.79 98.4 2.70
Residential and commercial       18.1   5.54   19.6   5.44   20.8   5.20   21.5   5.51   21.9   5.84
Total mortgage-backed securities 123.9 2.85 111.6 3.04 117.3 3.23 123.8 3.26 120.3 3.27
Other debt and equity securities       54.2   3.37   53.3   3.48   53.6   3.21   52.7   3.35   50.4   3.40
Total available-for-sale securities       259.1   3.13   248.6   3.20   255.8   3.20   260.4   3.27   254.6   3.24
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44.6 2.19 44.6 2.19 44.7 2.20 44.7 2.18 44.6 2.18
Securities of U.S. states and political subdivisions 2.5 5.24 2.2 5.41 2.1 5.41 2.1 6.07 2.2 5.17
Federal agency and other mortgage-backed securities 48.0 1.97 35.1 1.90 28.1 2.49 28.2 2.42 27.1 2.38
Other debt securities       3.9   1.98   4.1   1.92   4.6   1.92   4.9   1.77   5.4   1.75
Total held-to-maturity securities       99.0   2.15   86.0   2.14   79.5   2.37   79.9   2.35   79.3   2.30
Total investment securities 358.1 2.86 334.6 2.93 335.3 3.01 340.3 3.05 333.9 3.02
Mortgages held for sale 24.1 3.44 20.1 3.60 17.9 3.59 19.2 3.66 24.2 3.69
Loans held for sale 0.2 3.04 0.2 4.83 0.3 3.23 0.4 4.96 0.6 2.57
Loans:
Commercial:
Commercial and industrial - U.S. 271.2 3.48 270.9 3.45 257.7 3.39 250.5 3.25 241.4 3.30
Commercial and industrial - Non U.S. 51.3 2.40 51.2 2.35 49.5 2.10 48.0 1.97 45.9 1.83
Real estate mortgage 128.8 3.48 126.1 3.41 122.7 3.41 121.8 3.30 121.0 3.31
Real estate construction 23.2 3.50 23.1 3.49 22.6 3.61 22.0 3.27 21.6 3.39
Lease financing       18.9   4.70   19.0   5.12   15.1   4.74   12.2   4.48   12.3   4.18
Total commercial       493.4   3.42   490.3   3.39   467.6   3.31   454.5   3.16   442.2   3.18
Consumer:
Real estate 1-4 family first mortgage 278.5 3.97 275.9 4.01 274.7 4.05 272.9 4.04 269.4 4.10
Real estate 1-4 family junior lien mortgage 48.9 4.37 50.6 4.37 52.2 4.39 53.8 4.28 55.3 4.22
Credit card 34.6 11.60 33.4 11.52 33.4 11.61 32.8 11.61 31.7 11.73
Automobile 62.5 5.60 61.1 5.66 60.1 5.67 59.5 5.74 58.5 5.80
Other revolving credit and installment       39.6   5.92   39.5   5.91   39.2   5.99   38.8   5.83   38.0   5.84
Total consumer       464.1   4.97   460.5   4.98   459.6   5.02   457.8   4.99   452.9   5.01
Total loans 957.5 4.17 950.8 4.16 927.2 4.16 912.3 4.08 895.1 4.11
Other       6.4   2.30   6.0   2.30   5.8   2.06   5.1   4.82   5.0   5.11
Total earning assets     $ 1,734.5   3.17 % $ 1,686.9   3.20 % $ 1,651.7   3.22 % $ 1,620.7   3.18 % $ 1,576.1   3.21 %
Funding sources
Deposits:
Interest-bearing checking $ 44.0 0.15 % $ 39.8 0.13 % $ 38.7 0.12 % $ 39.1 0.05 % $ 37.8 0.05 %
Market rate and other savings 667.2 0.07 659.0 0.07 651.5 0.07 640.5 0.06 628.1 0.06
Savings certificates 25.2 0.30 26.2 0.35 27.9 0.45 29.6 0.54 30.9 0.58
Other time deposits 54.9 0.93 61.2 0.85 58.2 0.74 49.8 0.52 48.7 0.46
Deposits in foreign offices       107.1   0.30   97.5   0.23   97.7   0.21   107.1   0.14   111.5   0.13
Total interest-bearing deposits 898.4 0.16 883.7 0.15 874.0 0.14 866.1 0.11 857.0 0.11
Short-term borrowings 116.2 0.29 111.8 0.28 107.9 0.25 102.9 0.05 90.4 0.06
Long-term debt 252.4 1.59 236.2 1.56 216.9 1.56 190.9 1.49 180.6 1.45
Other liabilities       16.8   2.11   16.3   2.06   16.5   2.14   16.5   2.14   16.4   2.13
Total interest-bearing liabilities 1,283.8 0.48 1,248.0 0.45 1,215.3 0.43 1,176.4 0.36 1,144.4 0.34
Portion of noninterest-bearing funding sources       450.7     438.9     436.4     444.3     431.7  
Total funding sources     $ 1,734.5   0.35   $ 1,686.9   0.34   $ 1,651.7   0.32   $ 1,620.7   0.26   $ 1,576.1   0.25  
Net interest margin on a taxable-equivalent basis 2.82 % 2.86 % 2.90 % 2.92 % 2.96 %
Noninterest-earning assets
Cash and due from banks $ 18.7 18.8 18.0 17.8 17.0
Goodwill 27.0 27.0 26.1 25.6 25.7
Other       134.4     129.4     124.1     123.2     127.6  
Total noninterest-earnings assets     $ 180.1     175.2     168.2     166.6     170.3  
Noninterest-bearing funding sources
Deposits $ 363.1 353.0 345.4 350.7 341.9
Other liabilities 63.8 60.1 62.6 65.2 67.9
Total equity 203.9 201.0 196.6 195.0 192.2
Noninterest-bearing funding sources used to fund earning assets       (450.7 )   (438.9 )   (436.4 )   (444.3 )   (431.7 )
Net noninterest-bearing funding sources     $ 180.1     175.2     168.2     166.6     170.3  
Total assets     $ 1,914.6     1,862.1     1,819.9     1,787.3     1,746.4  
                                                                         

(1) Our average prime rate was 3.50% for the quarters ended September 30, June 30 and March 31, 2016, 3.29% for the quarter ended December 31, 2015 and 3.25% for the quarter ended September 30, 2015. The average three-month London Interbank Offered Rate (LIBOR) was 0.79%, 0.64%, 0.62%, 0.41% and 0.31% for the same quarters, respectively.

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

(3) 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.

 
 
Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME

 
    Quarter ended     Nine months ended  
September 30,   % September 30,   %
(in millions)     2016     2015     Change     2016     2015     Change  
Service charges on deposit accounts $ 1,370     1,335 3 % $ 4,015     3,839 5 %
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,344 2,368 (1 ) 6,874 7,147 (4 )
Trust and investment management 849 843 1 2,499 2,556 (2 )
Investment banking       420     359   17   1,172     1,254   (7 )
Total trust and investment fees       3,613     3,570   1   10,545     10,957   (4 )
Card fees 997 953 5 2,935 2,754 7
Other fees:
Charges and fees on loans 306 307 936 920 2
Cash network fees 138 136 1 407 393 4
Commercial real estate brokerage commissions 119 124 (4 ) 322 394 (18 )
Letters of credit fees 81 89 (9 ) 242 267 (9 )
Wire transfer and other remittance fees 103 95 8 296 275 8
All other fees (1)(2)(3)       179     348   (49 )   562     1,035   (46 )
Total other fees       926     1,099   (16 )   2,765     3,284   (16 )
Mortgage banking:
Servicing income, net 359 674 (47 ) 1,569 1,711 (8 )
Net gains on mortgage loan origination/sales activities       1,308     915   43   3,110     3,130   (1 )
Total mortgage banking       1,667     1,589   5   4,679     4,841   (3 )
Insurance 293 376 (22 ) 1,006 1,267 (21 )
Net gains (losses) from trading activities 415 (26 ) NM 943 515 83
Net gains on debt securities 106 147 (28 ) 797 606 32
Net gains from equity investments 140 920 (85 ) 573 1,807 (68 )
Lease income 534 189 183 1,404 476 195
Life insurance investment income 152 150 1 455 440 3
All other (3)       163     116   41   1,216     (28 ) NM
Total     $ 10,376     10,418         $ 31,333     30,758     2  
NM – Not meaningful
(1) Wire transfer and other remittance fees, reflected in all other fees prior to 2016, have been separately disclosed.
(2) All other fees have been revised to include merchant processing fees for all periods presented.

(3) Effective fourth quarter 2015, the Company's proportionate share of its merchant services joint venture earnings is included in All other income.

 

NONINTEREST EXPENSE

 
    Quarter ended Sep 30,     %   Nine months ended Sep 30,     %
(in millions)     2016     2015     Change     2016     2015     Change  
Salaries $ 4,224   4,035   5 % $ 12,359     11,822   5 %
Commission and incentive compensation 2,520 2,604 (3 ) 7,769 7,895 (2 )
Employee benefits 1,223 821 49 3,993 3,404 17
Equipment 491 459 7 1,512 1,423 6
Net occupancy 718 728 (1 ) 2,145 2,161 (1 )
Core deposit and other intangibles 299 311 (4 ) 891 935 (5 )
FDIC and other deposit assessments 310 245 27 815 715 14
Outside professional services 802 663 21 2,154 1,838 17
Operating losses 577 523 10 1,365 1,339 2
Outside data processing 233 258 (10 ) 666 780 (15 )
Contract services 313 249 26 878 712 23
Postage, stationery and supplies 150 174 (14 ) 466 525 (11 )
Travel and entertainment 144 166 (13 ) 509 496 3
Advertising and promotion 117 135 (13 ) 417 422 (1 )
Insurance 23 95 (76 ) 156 391 (60 )
Telecommunications 101 109 (7 ) 287 333 (14 )
Foreclosed assets (17 ) 109 NM 127 361 (65 )
Operating leases 363 79 359 950 205 363
All other       677     636   6   1,703     1,618   5
Total     $ 13,268     12,399     7     $ 39,162     37,375     5  

NM - Not meaningful

 
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

 
    Quarter ended  
Sep 30,     Jun 30,     Mar 31,     Dec 31,   Sep 30,
(in millions)     2016     2016     2016     2015     2015  
Service charges on deposit accounts $ 1,370 1,336 1,309 1,329 1,335
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,344 2,291 2,239 2,288 2,368
Trust and investment management 849 835 815 838 843
Investment banking       420     421     331     385     359  
Total trust and investment fees       3,613     3,547     3,385     3,511     3,570  
Card fees 997 997 941 966 953
Other fees:
Charges and fees on loans 306 317 313 308 307
Cash network fees 138 138 131 129 136
Commercial real estate brokerage commissions 119 86 117 224 124
Letters of credit fees 81 83 78 86 89
Wire transfer and other remittance fees 103 101 92 95 95
All other fees (1)(2)(3)       179     181     202     198     348  
Total other fees       926     906     933     1,040     1,099  
Mortgage banking:
Servicing income, net 359 360 850 730 674
Net gains on mortgage loan origination/sales activities       1,308     1,054     748     930     915  
Total mortgage banking       1,667     1,414     1,598     1,660     1,589  
Insurance 293 286 427 427 376
Net gains (losses) from trading activities 415 328 200 99 (26 )
Net gains on debt securities 106 447 244 346 147
Net gains from equity investments 140 189 244 423 920
Lease income 534 497 373 145 189
Life insurance investment income 152 149 154 139 150
All other (3)       163     333     720     (87 )   116  

Total

    $ 10,376     10,429     10,528     9,998     10,418  

(1) Wire transfer and other remittance fees, reflected in all other fees prior to 2016, have been separately disclosed.

(2) All other fees have been revised to include merchant processing fees for all periods presented.

(3) Effective fourth quarter 2015, the Company's proportionate share of its merchant services joint venture earnings is included in All other income.

 

FIVE QUARTER NONINTEREST EXPENSE

 
    Quarter ended  
Sep 30,   Jun 30,     Mar 31,     Dec 31,     Sep 30,
(in millions)     2016     2016     2016     2015     2015  
Salaries $ 4,224 4,099 4,036 4,061 4,035
Commission and incentive compensation 2,520 2,604 2,645 2,457 2,604
Employee benefits 1,223 1,244 1,526 1,042 821
Equipment 491 493 528 640 459
Net occupancy 718 716 711 725 728
Core deposit and other intangibles 299 299 293 311 311
FDIC and other deposit assessments 310 255 250 258 245
Outside professional services 802 769 583 827 663
Operating losses 577 334 454 532 523
Outside data processing 233 225 208 205 258
Contract services 313 283 282 266 249
Postage, stationery and supplies 150 153 163 177 174
Travel and entertainment 144 193 172 196 166
Advertising and promotion 117 166 134 184 135
Insurance 23 22 111 57 95
Telecommunications 101 94 92 106 109
Foreclosed assets (17 ) 66 78 20 109
Operating leases 363 352 235 73 79
All other       677     499     527     462     636  
Total     $ 13,268     12,866     13,028     12,599     12,399  
 
 
Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

 
    Sep 30,   Dec 31,     %
(in millions, except shares)     2016     2015       Change  
Assets
Cash and due from banks $ 19,287 19,111 1 %
Federal funds sold, securities purchased under resale agreements and other short-term investments 298,325 270,130 10
Trading assets 85,946 77,202 11
Investment securities:
Available-for-sale, at fair value 291,591 267,358 9
Held-to-maturity, at cost 99,241 80,197 24
Mortgages held for sale 27,423 19,603 40
Loans held for sale 183 279 (34 )
Loans 961,326 916,559 5
Allowance for loan losses       (11,583 )   (11,545 )
Net loans       949,743     905,014   5
Mortgage servicing rights:
Measured at fair value 10,415 12,415 (16 )
Amortized 1,373 1,308 5
Premises and equipment, net 8,322 8,704 (4 )
Goodwill 26,688 25,529 5
Other assets       123,587     100,782   23
Total assets     $ 1,942,124     1,787,632   9
Liabilities
Noninterest-bearing deposits $ 376,136 351,579 7
Interest-bearing deposits       899,758     871,733   3
Total deposits 1,275,894 1,223,312 4
Short-term borrowings 124,668 97,528 28
Accrued expenses and other liabilities 82,769 73,365 13
Long-term debt       254,835     199,536     28
Total liabilities       1,738,166     1,593,741     9
Equity
Wells Fargo stockholders’ equity:
Preferred stock 24,594 22,214 11
Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares 9,136 9,136
Additional paid-in capital 60,685 60,714
Retained earnings 130,288 120,866 8
Cumulative other comprehensive income 2,184 297 635
Treasury stock – 457,922,273 shares and 389,682,664 shares (22,247 ) (18,867 ) 18
Unearned ESOP shares       (1,612 )   (1,362 ) 18
Total Wells Fargo stockholders’ equity 203,028 192,998 5
Noncontrolling interests       930     893   4
Total equity       203,958     193,891   5
Total liabilities and equity     $ 1,942,124     1,787,632       9  
 
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET

 
    Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(in millions)     2016     2016     2016     2015     2015  
Assets
Cash and due from banks $ 19,287 20,407 19,084 19,111 17,395
Federal funds sold, securities purchased under resale agreements and other short-term investments 298,325 295,521 300,547 270,130 254,811
Trading assets 85,946 80,093 73,158 77,202 73,894
Investment securities:
Available-for-sale, at fair value 291,591 253,006 255,551 267,358 266,406
Held-to-maturity, at cost 99,241 100,420 79,348 80,197 78,668
Mortgages held for sale 27,423 23,930 18,041 19,603 21,840
Loans held for sale 183 220 280 279 430
Loans 961,326 957,157 947,258 916,559 903,233
Allowance for loan losses       (11,583 )   (11,664 )   (11,621 )   (11,545 )   (11,659 )
Net loans       949,743     945,493     935,637     905,014     891,574  
Mortgage servicing rights:
Measured at fair value 10,415 10,396 11,333 12,415 11,778
Amortized 1,373 1,353 1,359 1,308 1,277
Premises and equipment, net 8,322 8,289 8,349 8,704 8,800
Goodwill 26,688 26,963 27,003 25,529 25,684
Other assets       123,587     123,144     119,492     100,782     98,708  
Total assets     $ 1,942,124     1,889,235     1,849,182     1,787,632     1,751,265  
Liabilities
Noninterest-bearing deposits $ 376,136 361,934 348,888 351,579 339,761
Interest-bearing deposits       899,758     883,539     892,602     871,733     862,418  
Total deposits 1,275,894 1,245,473 1,241,490 1,223,312 1,202,179
Short-term borrowings 124,668 120,258 107,703 97,528 88,069
Accrued expenses and other liabilities 82,769 76,916 73,597 73,365 81,700
Long-term debt       254,835     243,927     227,888     199,536     185,274  
Total liabilities       1,738,166     1,686,574     1,650,678     1,593,741     1,557,222  
Equity
Wells Fargo stockholders’ equity:
Preferred stock 24,594 24,830 24,051 22,214 22,424
Common stock 9,136 9,136 9,136 9,136 9,136
Additional paid-in capital 60,685 60,691 60,602 60,714 60,998
Retained earnings 130,288 127,076 123,891 120,866 117,593
Cumulative other comprehensive income 2,184 2,948 1,774 297 2,389
Treasury stock (22,247 ) (21,068 ) (19,687 ) (18,867 ) (17,899 )
Unearned ESOP shares       (1,612 )   (1,868 )   (2,271 )   (1,362 )   (1,590 )
Total Wells Fargo stockholders’ equity 203,028 201,745 197,496 192,998 193,051
Noncontrolling interests       930     916     1,008     893     992  
Total equity       203,958     202,661     198,504     193,891     194,043  
Total liabilities and equity     $ 1,942,124     1,889,235     1,849,182     1,787,632     1,751,265  
 
                   

Wells Fargo & Company and Subsidiaries

FIVE QUARTER INVESTMENT SECURITIES

Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(in millions)     2016     2016     2016     2015     2015
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ 26,376 27,939 33,813 36,250 35,423
Securities of U.S. states and political subdivisions 55,366 54,024 51,574