Wells Fargo Reports $5.3 Billion in Quarterly Net Income

Diluted EPS of $0.96 included net hedge ineffectiveness accounting impact of $(0.07)

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

  • Full year 2016
    • Net income of $21.9 billion, compared with $22.9 billion in 2015
    • Diluted earnings per share (EPS) of $3.99, compared with $4.12
    • Revenue of $88.3 billion, up 3 percent
    • Return on assets (ROA) of 1.16 percent and return on equity (ROE) of 11.49 percent
    • Returned $12.5 billion to shareholders through common stock dividends and net share repurchases
  • Fourth quarter 2016
    • Net income of $5.3 billion, compared with $5.6 billion in fourth quarter 2015
      • Included net hedge ineffectiveness accounting impact of $(592) million
    • Diluted EPS of $0.96, compared with $1.00
      • Included net hedge ineffectiveness accounting impact of $(0.07)
    • Revenue of $21.6 billion, consistent with fourth quarter 2015
      • Net interest income of $12.4 billion, up 7 percent
    • ROA of 1.08 percent and ROE of 10.94 percent
    • Total average loans of $964.1 billion, up $51.9 billion, or 6 percent
    • Total average deposits of $1.3 trillion, up $67.3 billion, or 6 percent
    • Provision expense of $805 million, down $26 million, or 3%
    • Nonaccrual loans of $10.4 billion, down $998 million, or 9 percent
    • Common Equity Tier 1 ratio (fully phased-in) of 10.7 percent1
     

Selected Financial Information

Quarter ended Year ended Dec. 31,

Dec 31,

Sep 30,

 

Dec 31,

 
   

2016

   

2016

 

2015

  2016   2015
Earnings
Diluted earnings per common share $ 0.96 1.03 1.00 3.99 4.12
Wells Fargo net income (in billions) 5.27 5.64 5.58 21.94 22.89
Return on assets (ROA) 1.08 % 1.17 1.24 1.16 1.31
Return on equity (ROE) 10.94 11.60 11.93 11.49 12.60
Return on average tangible common equity (ROTCE)(a) 13.16 13.96 14.30 13.85 15.17
Asset Quality
Net charge-offs (annualized) as a % of average total loans 0.37 % 0.33 0.36 0.37 0.33
Allowance for credit losses as a % of total loans 1.30 1.32 1.37 1.30 1.37
Allowance for credit losses as a % of annualized net charge-offs 348 396 380 356 433
Other
Revenue (in billions) $ 21.6 22.3 21.6 88.3 86.1
Efficiency ratio (b) 61.2 % 59.4 58.4 59.3 58.1
Average loans (in billions) $ 964.1 957.5 912.3 950.0 885.4
Average deposits (in billions) 1,284.2 1,261.5 1,216.8 1,250.6 1,194.1
Net interest margin   2.87 %   2.82   2.92   2.86   2.95

(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.

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

 

Wells Fargo & Company (NYSE:WFC) reported diluted earnings per common share of $3.99 for 2016, compared with $4.12 for 2015. Full year net income in 2016 was $21.9 billion, compared with $22.9 billion in 2015. For fourth quarter 2016, net income was $5.3 billion, or $0.96 per share, compared with $5.6 billion, or $1.00 per share, for fourth quarter 2015, and $5.6 billion, or $1.03 per share, for third quarter 2016.

Chief Executive Officer Tim Sloan said, "We continued to make progress in the fourth quarter in rebuilding the trust of our customers, team members and other key stakeholders. I am pleased with the progress we have made in customer remediation, the ongoing review of sales practices across the company and fulfilling our regulatory requirements for sales practices matters. As planned, we launched our new Retail Bank compensation program this month, which is based on building lifelong relationships with our customers. While we have more work to do, I am proud of the effort of our entire team to make things right for our customers and team members and to continue building a better Wells Fargo for the future.”

Chief Financial Officer John Shrewsberry said, “Wells Fargo had solid underlying performance in the fourth quarter as we continued to benefit from our diversified business model. Net interest income increased from the prior quarter, largely driven by growth in loans and investments, as well as higher interest rates. Noninterest income declined from the prior quarter due to net hedge accounting ineffectiveness associated with our hedging of long-term debt as part of our asset/liability management program, as well as lower market-sensitive revenue. Other sources of noninterest income were diversified and stable with the prior quarter. Credit quality remained solid in the quarter, and we returned $3.0 billion to shareholders in the quarter, with a full year 2016 net payout ratio2 of 61 percent."

Net Interest Income

Net interest income in fourth quarter 2016 increased $450 million from third quarter 2016 to $12.4 billion, primarily due to growth in loans and investment securities, higher interest income on trading assets, higher variable income including periodic dividends and fees, and a modest benefit from higher interest rates in the quarter.

Net interest margin was 2.87 percent, up 5 basis points from third quarter 2016, driven by growth in loans, investment securities and trading assets, and the impact from higher interest rates. Income from variable sources contributed approximately two basis points in the quarter. These benefits were partially offset by growth in funding balances, primarily long-term debt and deposits.

Noninterest Income

Noninterest income in the fourth quarter was $9.2 billion, compared with $10.4 billion in third quarter 2016. Fee income in many of the businesses in the quarter was stable compared with the prior quarter; however, linked-quarter results included a $592 million loss due to the impact of higher interest rates and currency movements on hedging results (net hedge ineffectiveness accounting loss) reflected in Other income. The linked-quarter decline also reflected decreases in trading income and mortgage banking fees, partially offset by higher equity gains and stronger investment banking fees.

Net loss from trading activities was $109 million in the fourth quarter, compared with a net gain of $415 million in the third quarter. Of the total linked-quarter decline of $524 million, $223 million resulted from a decrease in secondary trading, reflecting lower client volumes compared with a strong third quarter, as well as seasonality and fewer trading days in the quarter. Market-driven changes in credit spreads and higher swap rates resulted in a $61 million decline from credit valuation adjustments (CVA) in the quarter. Additionally, $204 million of the decline was associated with items that were offset in other areas, and were therefore neutral to net income:

  • $98 million of losses resulted from certain hedged trading positions in our equity and residential mortgage-backed security books in which dividend and interest payments were recognized in net interest income and corresponding declines in the value of associated hedges were reflected in trading losses.
  • Deferred compensation trading gains, which were largely offset in employee benefits expense, declined $106 million from the third quarter.

Mortgage banking noninterest income was $1.4 billion, compared with $1.7 billion in third quarter 2016. Residential mortgage loan originations were $72 billion in the fourth quarter, up from $70 billion in the third quarter. The production margin on residential held-for-sale mortgage loan originations3 was 1.68 percent, down from 1.81 percent in the third quarter. Mortgage servicing income declined to $196 million in the fourth quarter from $359 million in the third quarter, primarily due to higher unreimbursed servicing costs.

Other income was $(382) million, compared with $315 million in third quarter, and included $592 million in hedge ineffectiveness losses, net of related economic hedges, resulting from certain key interest rate and foreign currency fluctuations. Full year 2016 net hedge ineffectiveness losses were $15 million, as prior quarters included net gains. Substantially all of the ineffectiveness related to hedges of U.S. dollar and non-U.S. dollar long-term debt.

Background on Hedge Ineffectiveness

As part of Wells Fargo's ongoing funding strategy, the Company is a regular issuer of long-term debt, which typically is fixed rate in order to meet the demands of debt investors. As part of the Company’s asset/liability management program, however, this fixed rate is typically swapped to floating rate in order to balance the Company's deposit-oriented liability structure to better align with the interest rate sensitivity characteristics of the Company's assets. While the majority of long-term debt is issued in U.S. dollars, non-U.S. dollar issuances are also used to diversify funding sources. Any non-U.S. dollar issuance is either swapped to U.S. dollars or is identified to be directly funding non-U.S. dollar assets. While the Company believes this hedging strategy is prudent from an asset/liability management perspective, it is generally not possible to achieve a perfect accounting hedge due to differences in the required valuation measurement of the hedging instrument, such as an interest rate swap, and the hedged risk component of the Company's long-term debt.

From an accounting standpoint, the measurement of the “effectiveness” of the hedge occurs throughout the quarter up to and including the last day of the quarter and results, therefore, can be affected by that point-in time calculation. While the hedge ineffectiveness recognized over the life of hedging relationships is expected to be zero as long as hedge accounting is maintained and the hedges are held to maturity, periodic ineffectiveness is recognized in other noninterest income as interest rate and foreign currency fluctuations occur. In first quarter 2016, for example, a sharp decline in interest rates and foreign currency fluctuations drove a net hedge accounting gain of $379 million in the Company’s other noninterest income. Conversely, the net hedge accounting losses in fourth quarter 2016 were driven by a sharp increase in certain interest rates and foreign currency fluctuations. Reported results in any quarter can also be affected by a related but separate economic hedging strategy the Company employs, also utilizing interest rate swaps, to partially offset the periodic volatility caused by the required effectiveness measurement.

The Financial Accounting Standards Board issued an exposure draft on hedge accounting guidelines and is expected to issue new guidance in 2017. If issued in its current form, the interest rate-related ineffectiveness associated with the Company's long-term debt hedges would be significantly reduced.

Noninterest Expense

Noninterest expense in the fourth quarter declined $53 million from the prior quarter to $13.2 billion, primarily due to lower operating losses, charitable donations, which were elevated in the third quarter due to a $107 million donation to the Wells Fargo Foundation, and deferred compensation expense (included in employee benefits expense and largely offset in revenue). Fourth quarter expenses included typically higher outside professional services, equipment, and advertising. Fourth quarter foreclosed asset expense increased from the third quarter which included an elevated level of commercial real estate recoveries. The efficiency ratio increased to 61.2 percent in fourth quarter 2016, compared with 59.4 percent in the prior quarter, primarily due to the impact of hedge ineffectiveness losses on revenue. The efficiency ratio for full year 2016 was 59.3 percent. The Company expects the efficiency ratio to remain at an elevated level.

Loans

Total loans were $967.6 billion at December 31, 2016, up $6.3 billion from September 30, 2016. Loan growth in the quarter was affected by the deconsolidation of certain previously sold reverse mortgage loans, which resulted from the sale of the related servicing, and reduced real estate 1-4 family first mortgages by $3.8 billion (offset in long-term debt). Commercial and industrial, commercial real estate, credit card and lease financing all grew in the quarter, while real estate 1-4 family junior lien mortgage and automobile declined. Total average loans were $964.1 billion in the fourth quarter, up $6.7 billion from the prior quarter.

         

Period-End Loan Balances

                   

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

(in millions)  

2016

 

2016

 

2016

 

2016

 

2015

Commercial $ 506,536 496,454 494,538 488,205 456,583
Consumer   461,068   464,872   462,619   459,053   459,976
Total loans   $ 967,604   961,326   957,157   947,258   916,559
Change from prior quarter   $ 6,278   4,169   9,899   30,699   13,326
 

Investment Securities

Investment securities were $407.9 billion at December 31, 2016, up $17.1 billion from third quarter, as approximately $44 billion of purchases, predominantly federal agency mortgage-backed securities in the available-for-sale portfolio, were partially offset by run-off.

Net unrealized losses on available-for-sale securities were $1.8 billion at December 31, 2016, compared with net unrealized gains on available-for-sale securities of $4.5 billion at September 30, 2016, as the impact from higher interest rates was partially offset by tighter credit spreads.

Deposits

Total average deposits for fourth 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 fourth quarter 2016 was 12 basis points, up 1 basis point from the prior quarter.

Capital

Capital levels remained strong in the fourth quarter, with a Common Equity Tier 1 ratio (fully phased-in) of 10.7 percent1. While flat from the prior quarter, Common Equity Tier 1 experienced a decline due to changes in unrealized gains/losses recognized in Other comprehensive income (OCI) resulting from higher interest rates experienced in the fourth quarter, which were largely offset by a decline in standardized risk-weighted assets, primarily due to a decrease in the Company's exposure to counterparty risk. In fourth quarter 2016, the Company repurchased 24.9 million shares of its common stock and entered into a $750 million forward repurchase transaction, which settled on January 12, 2017, for 14.7 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 were stable in the fourth quarter and overall credit quality continued to be driven by strong performance in the commercial and consumer real estate portfolios," said Chief Risk Officer Mike Loughlin. "Continued improvement in residential real estate and stabilization in oil and gas industry conditions drove a $100 million reserve release4 in the fourth quarter."

Net Loan Charge-offs

The quarterly loss rate of 0.37 percent (annualized) reflected commercial losses of 0.20 percent and consumer losses of 0.56 percent. Credit losses were $905 million in fourth quarter 2016, up $100 million, from third quarter 2016. Consumer losses increased $64 million, driven by losses in the credit card, automobile and other revolving credit and installment portfolios. Commercial losses were up $36 million, driven by $32 million in lower recoveries.

 

Net Loan Charge-Offs

 
Quarter ended  
    December 31, 2016     September 30, 2016     June 30, 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 $ 256 0.31 % $ 259 0.32 % $ 368 0.46 %
Real estate mortgage (12 ) (0.04 ) (28 ) (0.09 ) (20 ) (0.06 )
Real estate construction (8 ) (0.13 ) (18 ) (0.32 ) (3 ) (0.06 )
Lease financing   15   0.32 2   0.04 12   0.27
Total commercial   251   0.20 215   0.17 357   0.29
Consumer:
Real estate 1-4 family first mortgage (3 ) 20 0.03 14

0.02

 

Real estate 1-4 family junior lien mortgage 44 0.38 49 0.40 62 0.49
Credit card 275 3.09 245 2.82 270 3.25
Automobile 166 1.05 137 0.87 90 0.59
Other revolving credit and installment   172   1.70 139   1.40 131   1.32
Total consumer   654   0.56 590   0.51 567   0.49
Total   $ 905   0.37 % $ 805   0.33 % $ 924   0.39 %
                                           

(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 $644 million from third quarter 2016 to $11.4 billion. Nonaccrual loans decreased $602 million from third quarter to $10.4 billion reflecting lower consumer real estate, commercial and industrial, and commercial real estate nonaccruals.

     

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

    December 31, 2016     September 30, 2016     June 30, 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 $ 3,216 0.97 % $ 3,331 1.03 % $ 3,464 1.07 %
Real estate mortgage 685 0.52 780 0.60 872 0.68
Real estate construction 43 0.18 59 0.25 59 0.25
Lease financing   115   0.60 92   0.49 112   0.59
Total commercial   4,059   0.80 4,262   0.86 4,507   0.91
Consumer:
Real estate 1-4 family first mortgage 4,962 1.80 5,310 1.91 5,970 2.15
Real estate 1-4 family junior lien mortgage 1,206 2.61 1,259 2.62 1,330 2.67
Automobile 106 0.17 108 0.17 111 0.18
Other revolving credit and installment   51   0.13 47   0.12 45   0.11
Total consumer   6,325   1.37 6,724   1.45 7,456   1.61
Total nonaccrual loans   10,384   1.07 10,986   1.14 11,963   1.25
Foreclosed assets:
Government insured/guaranteed 197 282 321
Non-government insured/guaranteed   781   738   796  
Total foreclosed assets   978   1,020   1,117  
Total nonperforming assets   $ 11,362   1.17 % $ 12,006   1.25 % $ 13,080   1.37 %
Change from prior quarter:
Total nonaccrual loans $ (602 ) $ (977 ) $ (271 )
Total nonperforming assets   (644 )         (1,074 )         (433 )      
 

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.5 billion at December 31, 2016, which was down $154 million from September 30, 2016. The allowance coverage for total loans was 1.30 percent, compared with 1.32 percent in third quarter 2016. The allowance covered 3.5 times annualized fourth quarter net charge-offs, compared with 4.0 times in the prior quarter. The allowance coverage for nonaccrual loans was 121 percent at December 31, 2016, compared with 116 percent at September 30, 2016. “We believe the allowance was appropriate for losses inherent in the loan portfolio at December 31, 2016,” said Loughlin.

Business Segment Performance

Wells Fargo defines its operating segments by product type and customer segment. Effective fourth quarter 2016, we realigned some personnel and business activities from Wholesale Banking to Community Banking, as a result of the formation of the new Payments, Virtual Solutions, and Innovation Group. Results for these operating segments reflect the shift prospectively from November 1, 2016. Segment net income for each of the three business segments was:

     
  Quarter ended

Dec 31,

   

Sep 30,

   

Dec 31,

(in millions)  

2016

   

2016

   

2015

Community Banking $ 2,733 3,227 3,169
Wholesale Banking 2,194 2,047 2,104
Wealth and Investment Management   653     677     595
 

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

Dec 31,

 

Sep 30,

 

Dec 31,

(in millions)  

2016

 

2016

 

2015

Total revenue $ 11,661 12,387 12,330
Provision for credit losses 631 651 704
Noninterest expense 6,985 6,953 6,893
Segment net income 2,733 3,227 3,169
(in billions)
Average loans 488.1 489.2 482.2
Average assets 1,000.7 993.6 921.4
Average deposits   709.8   708.0   663.7
 

Community Banking reported net income of $2.7 billion, down $494 million, or 15 percent, from third quarter 2016. Revenue of $11.7 billion decreased $726 million, or 6 percent, from third quarter 2016 due to lower other income (hedge ineffectiveness), mortgage banking revenue, and deposit service charges, partially offset by higher net interest income, market sensitive revenue, primarily higher gains on sales of debt securities and equity investments, and other fees. Noninterest expense increased $32 million, compared with third quarter 2016, due to higher equipment, project-related, and advertising expense, which are typically elevated in the fourth quarter, as well as higher legal expense. The increase in noninterest expense was partially offset by lower operating losses and a donation to the Wells Fargo Foundation in the prior quarter. The provision for credit losses decreased $20 million from the prior quarter.

Net income was down $436 million, or 14 percent, from fourth quarter 2015. Revenue decreased $669 million, or 5 percent, compared with a year ago due to lower other income (hedge ineffectiveness), mortgage banking revenue, and gains on equity investments, partially offset by higher net interest income and other fees. Noninterest expense increased $92 million, or 1 percent, from a year ago driven by higher personnel, legal, project-related, and FDIC expense, partially offset by lower operating losses. The provision for credit losses decreased $73 million from a year ago due to improvement in the consumer real estate portfolios.

Retail Banking and Consumer Payments

  • We recently launched a new compensation plan in our Retail Bank focused on customer service, growth in primary customers, household relationship growth and risk management. These measures are consistent with other success metrics we have introduced in the recent past and, as part of this evolution, the cross-sell metric will not be included going forward.
  • Branch customer experience survey scores continued to improve throughout the fourth quarter, with many metrics reaching close to pre-settlement ranges by the end of December; loyalty, which has also shown a strong improvement trajectory, will require a longer period to recover previous highs.
  • Primary consumer checking customers5 up 3.5 percent year-over-year6
  • Primary consumer checking customers5 in December up 3.0 percent year-over-year
  • Debit card purchase volume7 of $78.4 billion in fourth quarter, up 7 percent year-over-year
  • Credit card purchase volume of $20.2 billion in fourth quarter, up 7 percent year-over-year
  • Credit card penetration in retail banking households rose to 45.5 percent, up from 45.4 percent in prior year6,8
  • 27.4 million digital (online and mobile) active customers, including 19.6 million mobile active users6,9

Consumer Lending

  • Auto originations of $6.4 billion in fourth quarter, down 21 percent from prior quarter and down 15 percent from prior year
  • Home Lending
    • Originations of $72 billion, up from $70 billion in prior quarter
    • Applications of $75 billion, down from $100 billion in prior quarter
    • Application pipeline of $30 billion at quarter end, down from $50 billion at September 30, 2016

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

Dec 31,

 

Sep 30,

 

Dec 31,

(in millions)  

2016

 

2016

 

2015

Total revenue $ 7,153 7,147 6,559
Provision for credit losses 168 157 126
Noninterest expense 4,002 4,120 3,491
Segment net income 2,194 2,047 2,104
(in billions)
Average loans 461.5 454.3 417.0
Average assets 811.9 794.2 755.4
Average deposits   459.2   441.2   449.3
 

Wholesale Banking reported net income of $2.2 billion, up $147 million, or 7 percent, from third quarter 2016. Revenue of $7.2 billion increased $6 million as higher net interest income, investment banking fees, equity investment gains and commercial real estate brokerage fees were partially offset by lower sales and trading results, and lower mortgage banking fees in multi-family capital and structured real estate. Noninterest expense decreased $118 million, or 3 percent, from the prior quarter primarily due to lower personnel expense and operating losses. The provision for credit losses increased $11 million from the prior quarter on lower recoveries.

Net income was up $90 million, or 4 percent, from fourth quarter 2015. Revenue increased $594 million, or 9 percent, from fourth quarter 2015, on increased net interest income driven by strong loan growth, including the GE Capital portfolio acquisitions, and higher trading and other earning assets. Noninterest income was down 1 percent from the prior year due to lower insurance fees driven by the sale of our crop insurance business in first quarter 2016, lower gains from trading activities, and lower gains on debt securities, partially offset by higher leasing income related to the GE Capital portfolio acquisitions and strong investment banking fees. Noninterest expense increased $511 million, or 15 percent, from a year ago primarily due to the GE Capital portfolio acquisitions and higher expenses related to growth initiatives, compliance, and regulatory requirements. The provision for credit losses increased $42 million from a year ago primarily due to higher oil and gas net charge-offs.

  • Average loans increased 11 percent from fourth quarter 2015, on broad-based growth, including asset-backed finance, commercial real estate, corporate banking, equipment finance, government and institutional banking, international, and structured real estate as well as the GE Capital portfolio acquisitions
  • Treasury management revenue up 4 percent from fourth 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  

Dec 31,

 

Sep 30,

 

Dec 31,

(in millions)  

2016

 

2016

 

2015

 
Total revenue $ 4,074 4,099 3,947
Provision (reversal of provision) for credit losses 3 4 (6 )
Noninterest expense 3,042 2,999 2,998
Segment net income 653 677 595
(in billions)
Average loans 70.0 68.4 63.0
Average assets 220.4 212.1 197.9
Average deposits   194.9   189.2   177.9  
 

Wealth and Investment Management reported net income of $653 million, down $24 million, or 4 percent, from third quarter 2016. Revenue of $4.1 billion decreased $25 million, or 1 percent, from the prior quarter, primarily due to lower deferred compensation plan investment results (offset in employee benefits expense), transaction revenue and other fee income, partially offset by higher net interest income and asset-based fees. Noninterest expense increased $43 million, or 1 percent, from the prior quarter, largely driven by higher operating losses and other non-personnel expenses, partially offset by lower deferred compensation plan expense (offset in trading revenue). The provision for credit losses decreased $1 million from third quarter 2016.

Net income was up $58 million, or 10 percent, from fourth quarter 2015. Revenue increased $127 million, or 3 percent, from a year ago primarily driven by higher net interest income and asset-based fees, partially offset by lower transaction revenue and deferred compensation plan investment results (offset in employee benefits expense). Noninterest expense increased $44 million, or 1 percent, from a year ago, primarily due to higher broker commissions and non-personnel expenses, partially offset by lower deferred compensation plan expense (offset in trading revenue). The provision for credit losses increased $9 million from a year ago.

Retail Brokerage

  • Client assets of $1.5 trillion, up 7 percent from prior year
  • Advisory assets of $464 billion, up 10 percent from prior year, primarily driven by higher market valuations and positive net flows
  • Strong loan growth, with average balances up 16 percent from prior year largely due to continued growth in non-conforming mortgage loans and security-based lending

Wealth Management

  • Client assets of $231 billion, up 3 percent from prior year
  • Average loan balances up 9 percent over prior year primarily driven by continued growth in non-conforming mortgage loans, security-based lending and commercial loans

Retirement

  • IRA assets of $379 billion, up 7 percent from prior year
  • Institutional Retirement plan assets of $351 billion, up 5 percent from prior year

Asset Management

  • Total assets under management of $482 billion, down 2 percent from prior year primarily due to equity and money market net outflows, partially offset by higher market valuations, fixed income inflows and assets acquired during the quarter

Conference Call

The Company will host a live conference call on Friday, January 13, at 8:30 a.m. PT (11:30 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~31502149.

A replay of the conference call will be available beginning at 11:30 a.m. PT (2:30 p.m. ET) on Friday, January 13 through Friday, January 27. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #31502149. 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~31502149.

 

Endnotes

1 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.
2 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.
3 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.
4 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.
5 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
6 Data as of November 2016, comparisons with November 2015.
7 Combined consumer and business debit card purchase volume dollars.
8 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. Prior period metrics have been revised to conform with the updated definition of Retail Banking households. 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.
9 Primarily includes retail banking, consumer lending, small business and business banking customers.
 

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;
  • negative effects from the retail banking sales practices matter, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, and our reputation;
  • reputational damage from negative publicity, protests, fines, penalties and other negative consequences from regulatory violations and legal actions;
  • a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
  • the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
  • fiscal and monetary policies of the Federal Reserve Board; and
  • the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016.

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 and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, 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

16

 

Income

Consolidated Statement of Income 18
Consolidated Statement of Comprehensive Income 20
Condensed Consolidated Statement of Changes in Total Equity 20
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 21
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 23
Noninterest Income and Noninterest Expense 24
 

Balance Sheet

Consolidated Balance Sheet 26
Investment Securities 28
 

Loans

Loans 28
Nonperforming Assets 29
Loans 90 Days or More Past Due and Still Accruing 30
Purchased Credit-Impaired Loans 31
Pick-A-Pay Portfolio 32
Changes in Allowance for Credit Losses 34
 

Equity

Tangible Common Equity 35
Common Equity Tier 1 Under Basel III 36
 

Operating Segments

Operating Segment Results 37
 

Other

Mortgage Servicing and other related data 39
 
       

Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA

% Change

Quarter ended

Dec 31, 2016 from

Year ended

Dec 31,

 

Sep 30,

   

Dec 31,

Sep 30,

 

Dec 31,

Dec 31,

 

Dec 31,

%

($ in millions, except per share amounts)  

2016

   

2016

   

2015

 

2016

   

2015

   

2016

   

2015

 

Change

 
For the Period
Wells Fargo net income $ 5,274 5,644 5,575 (7 )% (5 ) $ 21,938 22,894 (4 )%
Wells Fargo net income applicable to common stock 4,872 5,243 5,203 (7 ) (6 ) 20,373 21,470 (5 )
Diluted earnings per common share 0.96 1.03 1.00 (7 ) (4 ) 3.99 4.12 (3 )
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.08 % 1.17 1.24 (8 ) (13 ) 1.16 % 1.31 (11 )
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 10.94 11.60 11.93 (6 ) (8 ) 11.49 12.60 (9 )
Return on average tangible common equity (ROTCE)(1) 13.16 13.96 14.30 (6 ) (8 ) 13.85 15.17 (9 )
Efficiency ratio (2) 61.2 59.4 58.4 3 5 59.3 58.1 2
Total revenue $ 21,582 22,328 21,586 (3 ) $ 88,267 86,057 3
Pre-tax pre-provision profit (PTPP) (3) 8,367 9,060 8,987 (8 ) (7 ) 35,890 36,083 (1 )
Dividends declared per common share 0.380 0.380 0.375 1 1.515 1.475 3
Average common shares outstanding 5,025.6 5,043.4 5,108.5 (2 ) 5,052.8 5,136.5 (2 )
Diluted average common shares outstanding 5,078.2 5,094.6 5,177.9 (2 ) 5,108.3 5,209.8 (2 )
Average loans $ 964,147 957,484 912,280 1 6 $ 949,960 885,432 7
Average assets 1,944,250 1,914,586 1,787,287 2 9 1,885,441 1,742,919 8
Average total deposits 1,284,158 1,261,527 1,216,809 2 6 1,250,566 1,194,073 5
Average consumer and small business banking deposits (4) 749,946 739,066 696,484 1 8 732,620 680,221 8
Net interest margin 2.87 % 2.82 2.92 2 (2 ) 2.86 % 2.95 (3 )
At Period End
Investment securities $ 407,947 390,832 347,555 4 17 $ 407,947 347,555 17
Loans 967,604 961,326 916,559 1 6 967,604 916,559 6
Allowance for loan losses 11,419 11,583 11,545 (1 ) (1 ) 11,419 11,545 (1 )
Goodwill 26,693 26,688 25,529 5 26,693 25,529 5
Assets 1,930,115 1,942,124 1,787,632 (1 ) 8 1,930,115 1,787,632 8
Deposits 1,306,079 1,275,894 1,223,312 2 7 1,306,079 1,223,312 7
Common stockholders' equity 176,469 179,916 172,036 (2 ) 3 176,469 172,036 3
Wells Fargo stockholders’ equity 199,581 203,028 192,998 (2 ) 3 199,581 192,998 3
Total equity 200,497 203,958 193,891 (2 ) 3 200,497 193,891 3
Tangible common equity (1) 146,737 149,829 143,337 (2 ) 2 146,737 143,337 2
Common shares outstanding 5,016.1 5,023.9 5,092.1 (1 ) 5,016.1 5,092.1 (1 )
Book value per common share (5) $ 35.18 35.81 33.78 (2 ) 4 $ 35.18 33.78 4
Tangible book value per common share (1)(5) 29.25 29.82 28.15 (2 ) 4 29.25 28.15 4
Common stock price:
High 58.02 51.00 56.34 14 3 58.02 58.77 (1 )
Low 43.55 44.10 49.51 (1 ) (12 ) 43.55 47.75 (9 )
Period end 55.11 44.28 54.36 24 1 55.11 54.36 1
Team members (active, full-time equivalent)   269,100     268,800     264,700       2     269,100     264,700   2  

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity 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

Dec 31,

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

($ in millions, except per share amounts)  

2016

   

2016

 

2016

 

2016

 

2015

For the Quarter
Wells Fargo net income $ 5,274 5,644 5,558 5,462 5,575
Wells Fargo net income applicable to common stock 4,872 5,243 5,173 5,085 5,203
Diluted earnings per common share 0.96 1.03 1.01 0.99 1.00
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.08 % 1.17 1.20 1.21 1.24
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 10.94 11.60 11.70 11.75 11.93
Return on average tangible common equity (ROTCE)(1) 13.16 13.96 14.15 14.15 14.30
Efficiency ratio (2) 61.2 59.4 58.1 58.7 58.4
Total revenue $ 21,582 22,328 22,162 22,195 21,586
Pre-tax pre-provision profit (PTPP) (3) 8,367 9,060 9,296 9,167 8,987
Dividends declared per common share 0.380 0.380 0.380 0.375 0.375
Average common shares outstanding 5,025.6 5,043.4 5,066.9 5,075.7 5,108.5
Diluted average common shares outstanding 5,078.2 5,094.6 5,118.1 5,139.4 5,177.9
Average loans $ 964,147 957,484 950,751 927,220 912,280
Average assets 1,944,250 1,914,586 1,862,084 1,819,875 1,787,287
Average total deposits 1,284,158 1,261,527 1,236,658 1,219,430 1,216,809
Average consumer and small business banking deposits (4) 749,946 739,066 726,359 714,837 696,484
Net interest margin 2.87 % 2.82 2.86 2.90 2.92
At Quarter End
Investment securities $ 407,947 390,832 353,426 334,899 347,555
Loans 967,604 961,326 957,157 947,258 916,559
Allowance for loan losses 11,419 11,583 11,664 11,621 11,545
Goodwill 26,693 26,688 26,963 27,003 25,529
Assets 1,930,115 1,942,124 1,889,235 1,849,182 1,787,632
Deposits 1,306,079 1,275,894 1,245,473 1,241,490 1,223,312
Common stockholders' equity 176,469 179,916 178,633 175,534 172,036
Wells Fargo stockholders’ equity 199,581 203,028 201,745 197,496 192,998
Total equity 200,497 203,958 202,661 198,504 193,891
Tangible common equity (1) 146,737 149,829 148,110 144,679 143,337
Common shares outstanding 5,016.1 5,023.9 5,048.5 5,075.9 5,092.1
Book value per common share (5) $ 35.18 35.81 35.38 34.58 33.78
Tangible book value per common share (1)(5) 29.25 29.82 29.34 28.50 28.15
Common stock price:
High 58.02 51.00 51.41 53.27 56.34
Low 43.55 44.10 44.50 44.50 49.51
Period end 55.11 44.28 47.33 48.36 54.36
Team members (active, full-time equivalent)   269,100     268,800   267,900   268,600   264,700

(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 December 31, % Year ended December 31, %
(in millions, except per share amounts)   2016     2015   Change     2016   2015   Change  
Interest income    
Trading assets $ 745 558 34 % $ 2,506 1,971 27 %
Investment securities 2,512 2,323 8 9,248 8,937 3
Mortgages held for sale 235 176 34 784 785
Loans held for sale 2 5 (60 ) 9 19 (53 )
Loans 10,128 9,323 9 39,505 36,575 8
Other interest income   436     258 69   1,611   990 63
Total interest income   14,058     12,643 11   53,663   49,277 9
Interest expense
Deposits 400 241 66 1,395 963 45
Short-term borrowings 101 13 677 330 64 416
Long-term debt 1,061 713 49 3,830 2,592 48
Other interest expense   94     88 7   354   357 (1 )
Total interest expense   1,656     1,055 57   5,909   3,976 49
Net interest income 12,402 11,588 7 47,754 45,301 5
Provision for credit losses   805     831 (3 )   3,770   2,442 54
Net interest income after provision for credit losses   11,597     10,757 8   43,984   42,859 3
Noninterest income
Service charges on deposit accounts 1,357 1,329 2 5,372 5,168 4
Trust and investment fees 3,698 3,511 5 14,243 14,468 (2 )
Card fees 1,001 966 4 3,936 3,720 6
Other fees 962 1,040 (8 ) 3,727 4,324 (14 )
Mortgage banking 1,417 1,660 (15 ) 6,096 6,501 (6 )
Insurance 262 427 (39 ) 1,268 1,694 (25 )
Net gains (losses) from trading activities (109 ) 99 NM 834 614 36
Net gains on debt securities 145 346 (58 ) 942 952 (1 )
Net gains from equity investments 306 423 (28 ) 879 2,230 (61 )
Lease income 523 145 261 1,927 621 210
Other   (382 )   52 NM   1,289   464 178
Total noninterest income   9,180     9,998 (8 )   40,513   40,756 (1 )
Noninterest expense
Salaries 4,193 4,061 3 16,552 15,883 4
Commission and incentive compensation 2,478 2,457 1 10,247 10,352 (1 )
Employee benefits 1,101 1,042 6 5,094 4,446 15
Equipment 642 640 2,154 2,063 4
Net occupancy 710 725 (2 ) 2,855 2,886 (1 )
Core deposit and other intangibles 301 311 (3 ) 1,192 1,246 (4 )
FDIC and other deposit assessments 353 258 37 1,168 973 20
Other   3,437     3,105 11   13,115   12,125 8
Total noninterest expense   13,215     12,599 5   52,377   49,974 5
Income before income tax expense 7,562 8,156 (7 ) 32,120 33,641 (5 )
Income tax expense   2,258     2,533 (11 )   10,075   10,365 (3 )
Net income before noncontrolling interests 5,304 5,623 (6 ) 22,045 23,276 (5 )
Less: Net income from noncontrolling interests   30     48 (38 )   107   382 (72 )
Wells Fargo net income   $ 5,274     5,575 (5 )   $ 21,938   22,894 (4 )
Less: Preferred stock dividends and other   402     372 8   1,565   1,424 10
Wells Fargo net income applicable to common stock   $ 4,872     5,203 (6 )   $ 20,373   21,470 (5 )
Per share information
Earnings per common share $ 0.97 1.02 (5 ) $ 4.03 4.18 (4 )
Diluted earnings per common share 0.96 1.00 (4 ) 3.99 4.12 (3 )
Dividends declared per common share 0.380 0.375 1 1.515 1.475 3
Average common shares outstanding 5,025.6 5,108.5 (2 ) 5,052.8 5,136.5 (2 )
Diluted average common shares outstanding   5,078.2     5,177.9   (2 )   5,108.3   5,209.8   (2 )

NM – Not meaningful

 
 

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME

           
Quarter ended

Dec 31,

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

(in millions, except per share amounts)  

2016

   

2016

 

2016

 

2016

 

2015

Interest income
Trading assets $ 745 593 572 596 558
Investment securities 2,512 2,298 2,176 2,262 2,323
Mortgages held for sale 235 207 181 161 176
Loans held for sale 2 2 3 2 5
Loans 10,128 9,978 9,822 9,577 9,323
Other interest income   436     409   392   374   258
Total interest income   14,058     13,487   13,146   12,972   12,643
Interest expense
Deposits 400 356 332 307 241
Short-term borrowings 101 85 77 67 13
Long-term debt 1,061 1,006 921 842 713
Other interest expense   94     88   83   89   88
Total interest expense   1,656     1,535   1,413   1,305   1,055
Net interest income 12,402 11,952 11,733 11,667 11,588
Provision for credit losses   805     805   1,074   1,086   831
Net interest income after provision for credit losses   11,597     11,147   10,659   10,581   10,757
Noninterest income
Service charges on deposit accounts 1,357 1,370 1,336 1,309 1,329
Trust and investment fees 3,698 3,613 3,547 3,385 3,511
Card fees 1,001 997 997 941 966
Other fees 962 926 906 933 1,040
Mortgage banking 1,417 1,667 1,414 1,598 1,660
Insurance 262 293 286 427 427
Net gains (losses) from trading activities (109 ) 415 328 200 99
Net gains on debt securities 145 106 447 244 346
Net gains from equity investments 306 140 189 244 423
Lease income 523 534 497 373 145
Other   (382 )   315   482   874   52
Total noninterest income   9,180     10,376   10,429   10,528   9,998
Noninterest expense
Salaries 4,193 4,224 4,099 4,036 4,061
Commission and incentive compensation 2,478 2,520 2,604 2,645 2,457
Employee benefits 1,101 1,223 1,244 1,526 1,042
Equipment 642 491 493 528 640
Net occupancy 710 718 716 711 725
Core deposit and other intangibles 301 299 299 293 311
FDIC and other deposit assessments 353 310 255 250 258
Other   3,437     3,483   3,156   3,039   3,105
Total noninterest expense   13,215     13,268   12,866   13,028   12,599
Income before income tax expense 7,562 8,255 8,222 8,081 8,156
Income tax expense   2,258     2,601   2,649   2,567   2,533
Net income before noncontrolling interests 5,304 5,654 5,573 5,514 5,623
Less: Net income from noncontrolling interests   30     10   15   52   48
Wells Fargo net income   $ 5,274     5,644   5,558   5,462   5,575
Less: Preferred stock dividends and other   402     401   385   377   372
Wells Fargo net income applicable to common stock   $ 4,872     5,243   5,173   5,085   5,203
Per share information
Earnings per common share $ 0.97 1.04 1.02 1.00 1.02
Diluted earnings per common share 0.96 1.03 1.01 0.99 1.00
Dividends declared per common share 0.380 0.380 0.380 0.375 0.375
Average common shares outstanding 5,025.6 5,043.4 5,066.9 5,075.7 5,108.5
Diluted average common shares outstanding   5,078.2     5,094.6   5,118.1   5,139.4   5,177.9
 
 
Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 
    Quarter ended Dec 31,     %     Year ended Dec 31,     %
(in millions)     2016       2015       Change       2016       2015       Change  
Wells Fargo net income     $ 5,274       5,575   (5 )% $ 21,938       22,894   (4 )%
Other comprehensive income (loss), before tax:        
Investment securities:
Net unrealized losses arising during the period (5,936 ) (1,301 ) 356 (3,458 ) (3,318 ) 4
Reclassification of net gains to net income (239 ) (573 ) (58 ) (1,240 ) (1,530 ) (19 )
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period (2,434 ) (684 ) 256 177 1,549 (89 )
Reclassification of net gains on cash flow hedges to net income (246 ) (294 ) (16 ) (1,029 ) (1,089 ) (6 )
Defined benefit plans adjustments:
Net actuarial and prior service gains (losses) arising during the period 422 (501 ) NM (52 ) (512 ) (90 )
Amortization of net actuarial loss, settlements and other to net income 43 11 291 158 114 39
Foreign currency translation adjustments:
Net unrealized losses arising during the period (30 ) (33 ) (9 ) (3 ) (137 ) (98 )
Reclassification of net gains to net income             (5 )         (5 )
Other comprehensive loss, before tax (8,420 ) (3,380 ) 149 (5,447 ) (4,928 ) 11
Income tax benefit related to other comprehensive income       3,106       1,230   153   1,996       1,774   13
Other comprehensive loss, net of tax (5,314 ) (2,150 ) 147 (3,451 ) (3,154 ) 9
Less: Other comprehensive income (loss) from noncontrolling interests       7       (58 ) NM   (17 )     67   NM
Wells Fargo other comprehensive loss, net of tax       (5,321 )     (2,092 ) 154   (3,434 )     (3,221 ) 7
Wells Fargo comprehensive income (loss) (47 ) 3,483 NM 18,504 19,673 (6 )
Comprehensive income (loss) from noncontrolling interests       37       (10 ) NM   90       449   (80 )
Total comprehensive income (loss)     $ (10 )     3,473       NM       $ 18,594       20,122       (8 )

NM – Not meaningful

 

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

 
  Quarter ended  
Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,
(in millions)   2016     2016     2016     2016     2015  
Balance, beginning of period $ 203,958 202,661 198,504 193,891 194,043
Cumulative effect from change in consolidation accounting (1) 121
Wells Fargo net income 5,274 5,644 5,558 5,462 5,575
Wells Fargo other comprehensive income (loss), net of tax (5,321 ) (764 ) 1,174 1,477 (2,092 )
Noncontrolling interests (13 ) 14 (92 ) (5 ) (100 )
Common stock issued 610 300 397 1,079 310
Common stock repurchased (2) (2,034 ) (1,839 ) (2,214 ) (2,029 ) (1,974 )
Preferred stock released by ESOP 43 236 371 313 210
Common stock warrants repurchased/exercised (17 )
Preferred stock issued 1,126 975
Common stock dividends (1,909 ) (1,918 ) (1,930 ) (1,904 ) (1,917 )
Preferred stock dividends (401 ) (401 ) (386 ) (378 ) (371 )
Tax benefit from stock incentive compensation 74 31 23 149 22
Stock incentive compensation expense 232 39 139 369 204
Net change in deferred compensation and related plans     (16 )   (28 )   (9 )   (1,016 )   (19 )
Balance, end of period   $ 200,497     203,958     202,661     198,504     193,891  

(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, 2016, includes $750 million related to a private forward repurchase transaction that settled in first quarter 2017 for 14.7 million shares of common stock. 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 December 31,
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 $ 273,073 0.56 % $ 381 274,589 0.28 % $ 195
Trading assets 102,757 2.96 761 68,833 3.33 573
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 25,935 1.53 99 34,617 1.58 137
Securities of U.S. states and political subdivisions 53,917 4.06 547 49,300 4.37 539
Mortgage-backed securities:
Federal agencies 147,980 2.37 875 102,281 2.79 712
Residential and commercial     16,456   5.87   242 21,502   5.51   297
Total mortgage-backed securities 164,436 2.72 1,117 123,783 3.26 1,009
Other debt and equity securities     52,692   3.71   492 52,701   3.35   444
Total available-for-sale securities     296,980   3.03   2,255 260,401   3.27   2,129
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,686 2.20 246 44,656 2.18 246
Securities of U.S. states and political subdivisions 4,738 5.31 63 2,158 6.07 33
Federal agency and other mortgage-backed securities 46,009 1.81 209 28,185 2.42 170
Other debt securities     3,597   2.26   20 4,876   1.77   22
Total held-to-maturity securities     99,030   2.17   538 79,875   2.35   471
Total investment securities 396,010 2.82 2,793 340,276 3.05 2,600
Mortgages held for sale (4) 27,503 3.43 235 19,189 3.66 176
Loans held for sale (4) 155 5.42 2 363 4.96 5
Loans:
Commercial:
Commercial and industrial - U.S. 272,828 3.46 2,369 250,445 3.25 2,048
Commercial and industrial - Non U.S. 54,410 2.58 352 47,972 1.97 239
Real estate mortgage 131,195 3.44 1,135 121,844 3.30 1,012
Real estate construction 23,850 3.61 216 21,993 3.27 182
Lease financing     18,904   5.78   273 12,241   4.48   136
Total commercial     501,187   3.45   4,345 454,495   3.16   3,617
Consumer:
Real estate 1-4 family first mortgage 277,732 4.01 2,785 272,871 4.04 2,759
Real estate 1-4 family junior lien mortgage 47,203 4.42 524 53,788 4.28 579
Credit card 35,383 11.73 1,043 32,795 11.61 960
Automobile 62,521 5.54 870 59,505 5.74 862
Other revolving credit and installment     40,121   5.91   595 38,826   5.83   571
Total consumer     462,960   5.01   5,817 457,785   4.99   5,731
Total loans (4) 964,147 4.20 10,162 912,280 4.08 9,348
Other     6,729   3.27   56 5,166   4.82   61
Total earning assets   $ 1,770,374   3.24 % $ 14,390 1,620,696   3.18 % $ 12,958
Funding sources
Deposits:
Interest-bearing checking $ 46,907 0.17 % $ 19 39,082 0.05 % $ 5
Market rate and other savings 676,365 0.07 122 640,503 0.06 93
Savings certificates 24,362 0.30 18 29,654 0.54 41
Other time deposits 49,170 1.16 144 49,806 0.52 64
Deposits in foreign offices     110,425   0.35   97 107,094   0.14   38
Total interest-bearing deposits 907,229 0.18 400 866,139 0.11 241
Short-term borrowings 124,698 0.33 102 102,915 0.05 12
Long-term debt 252,162 1.68 1,061 190,861 1.49 713
Other liabilities     17,210   2.15   94 16,453   2.14   88
Total interest-bearing liabilities 1,301,299 0.51 1,657 1,176,368 0.36 1,054
Portion of noninterest-bearing funding sources     469,075     444,328    
Total funding sources   $ 1,770,374   0.37     1,657 1,620,696   0.26     1,054
Net interest margin and net interest income on a taxable-equivalent basis (5) 2.87 %   $ 12,733 2.92 %   $ 11,904
Noninterest-earning assets
Cash and due from banks $ 18,967 17,804
Goodwill 26,713 25,580
Other     128,196   123,207  
Total noninterest-earning assets   $ 173,876   166,591  
Noninterest-bearing funding sources
Deposits $ 376,929 350,670
Other liabilities 64,775 65,224
Total equity 201,247 195,025
Noninterest-bearing funding sources used to fund earning assets     (469,075 ) (444,328 )
Net noninterest-bearing funding sources   $ 173,876   166,591  
Total assets   $ 1,944,250   1,787,287  
 

(1) Our average prime rate was 3.54% and 3.29% for the quarters ended December 31, 2016 and 2015, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.92% and 0.41% 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 $331 million and $316 million for the quarters ended December 31, 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)

  Year ended December 31,
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 $ 287,718 0.51 % $ 1,457 266,832 0.28 % $ 738
Trading assets 88,400 2.89 2,553 66,679 3.01 2,010
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 29,418 1.56 457 32,093 1.58 505
Securities of U.S. states and political subdivisions 52,959 4.20 2,225 47,404 4.23 2,007
Mortgage-backed securities:
Federal agencies 110,637 2.50 2,764 100,218 2.73 2,733
Residential and commercial     18,725   5.49   1,029 22,490   5.73   1,289
Total mortgage-backed securities 129,362 2.93 3,793 122,708 3.28 4,022
Other debt and equity securities     53,433   3.44   1,841 49,752   3.42   1,701
Total available-for-sale securities     265,172   3.14   8,316 251,957   3.27   8,235
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,675 2.19 979 44,173 2.19 968
Securities of U.S. states and political subdivisions 2,893 5.32 154 2,087 5.40 113
Federal agency and other mortgage-backed securities 39,330 2.00 786 21,967 2.23 489
Other debt securities     4,043   2.01   81 5,821   1.73   101
Total held-to-maturity securities     90,941   2.20   2,000 74,048   2.26   1,671
Total investment securities 356,113 2.90 10,316 326,005 3.04 9,906
Mortgages held for sale (4) 22,412 3.50 784 21,603 3.63 785
Loans held for sale (4) 218 4.01 9 573 3.25 19
Loans:
Commercial:
Commercial and industrial - U.S. 268,182 3.45 9,243 237,844 3.29 7,836
Commercial and industrial - Non U.S. 51,601 2.36 1,219 46,028 1.90 877
Real estate mortgage 127,232 3.44 4,371 116,893 3.41 3,984
Real estate construction 23,197 3.55 824 20,979 3.57 749
Lease financing     17,950   5.10   916 12,301   4.70   577
Total commercial     488,162   3.39   16,573 434,045   3.23   14,023
Consumer:
Real estate 1-4 family first mortgage 276,712 4.01 11,096 268,560 4.10 11,002
Real estate 1-4 family junior lien mortgage 49,735 4.39 2,183 56,242 4.25 2,391
Credit card 34,178 11.62 3,970 31,307 11.70 3,664
Automobile 61,566 5.62 3,458 57,766 5.84 3,374
Other revolving credit and installment     39,607   5.93   2,350 37,512   5.89   2,209
Total consumer     461,798   4.99   23,057 451,387   5.02   22,640
Total loans (4) 949,960 4.17 39,630 885,432 4.14 36,663
Other     6,262   2.51   157 4,947   5.11   252

Total earning assets

  $ 1,711,083   3.21 % $ 54,906 1,572,071   3.20 % $ 50,373
Funding sources
Deposits:
Interest-bearing checking $ 42,379 0.14 % $ 60 38,640 0.05 % $ 20
Market rate and other savings 663,557 0.07 449 625,549 0.06 367
Savings certificates 25,912 0.35 91 31,887 0.63 201
Other time deposits 55,846 0.91 508 51,790 0.45 232
Deposits in foreign offices     103,206   0.28   287 107,138   0.13   143
Total interest-bearing deposits 890,900 0.16 1,395 855,004 0.11 963
Short-term borrowings 115,187 0.29 333 87,465 0.07 64
Long-term debt 239,471 1.60 3,830 185,078 1.40 2,592
Other liabilities     16,702   2.12   354 16,545   2.15   357
Total interest-bearing liabilities 1,262,260 0.47 5,912 1,144,092 0.35 3,976
Portion of noninterest-bearing funding sources     448,823     427,979    
Total funding sources   $ 1,711,083   0.35     5,912 1,572,071   0.25     3,976
Net interest margin and net interest income on a taxable-equivalent basis (5) 2.86 %   $ 48,994 2.95 %   $ 46,397
Noninterest-earning assets
Cash and due from banks $ 18,617 17,327
Goodwill 26,700 25,673
Other     129,041   127,848  
Total noninterest-earning assets   $ 174,358   170,848  
Noninterest-bearing funding sources
Deposits $ 359,666 339,069
Other liabilities 62,825 68,174
Total equity 200,690 191,584
Noninterest-bearing funding sources used to fund earning assets     (448,823 ) (427,979 )
Net noninterest-bearing funding sources   $ 174,358   170,848  
Total assets   $ 1,885,441   1,742,919  
 

(1) Our average prime rate was 3.51% and 3.26% for the years ended December 31, 2016 and 2015, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.74% and 0.32% 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) 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 $1.2 billion and $1.1 billion for the years ended December 31, 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  
    Dec 31, 2016     Sep 30, 2016     Jun 30, 2016     Mar 31, 2016     Dec 31, 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 $ 273.1 0.56 % $ 299.4 0.50 % $ 293.8 0.49 % $ 284.7 0.49 % $ 274.6 0.28 %
Trading assets 102.8 2.96 88.8 2.72 81.4 2.86 80.5 3.01 68.8 3.33
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 25.9 1.53 25.8 1.52 31.5 1.56 34.4 1.59 34.6 1.58
Securities of U.S. states and political subdivisions 53.9 4.06 55.2 4.28 52.2 4.24 50.5 4.24 49.3 4.37
Mortgage-backed securities:
Federal agencies 148.0 2.37 105.8 2.39 92.0 2.53 96.5 2.80 102.3 2.79
Residential and commercial     16.5   5.87   18.1   5.54   19.6   5.44   20.8   5.20   21.5   5.51
Total mortgage-backed securities 164.5 2.72 123.9 2.85 111.6 3.04 117.3 3.23 123.8 3.26
Other debt and equity securities     52.7   3.71   54.2   3.37   53.3   3.48   53.6   3.21   52.7   3.35
Total available-for-sale securities     297.0   3.03   259.1   3.13   248.6   3.20   255.8   3.20   260.4   3.27
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44.7 2.20 44.6 2.19 44.6 2.19 44.7 2.20 44.7 2.18
Securities of U.S. states and political subdivisions 4.7 5.31 2.5 5.24 2.2 5.41 2.1 5.41 2.1 6.07
Federal agency and other mortgage-backed securities 46.0 1.81 48.0 1.97 35.1 1.90 28.1 2.49 28.2 2.42
Other debt securities     3.6   2.26   3.9   1.98   4.1   1.92   4.6   1.92   4.9   1.77
Total held-to-maturity securities     99.0   2.17   99.0   2.15   86.0   2.14   79.5   2.37   79.9   2.35
Total investment securities 396.0 2.82 358.1 2.86 334.6 2.93 335.3 3.01 340.3 3.05
Mortgages held for sale 27.5 3.43 24.1 3.44 20.1 3.60 17.9 3.59 19.2 3.66
Loans held for sale 0.2 5.42 0.2 3.04 0.2 4.83 0.3 3.23 0.4 4.96
Loans:
Commercial:
Commercial and industrial - U.S. 272.8 3.46 271.2 3.48 270.9 3.45 257.7 3.39 250.5 3.25
Commercial and industrial - Non U.S. 54.4 2.58 51.3 2.40 51.2 2.35 49.5 2.10 48.0 1.97
Real estate mortgage 131.2 3.44 128.8 3.48 126.1 3.41 122.7 3.41 121.8 3.30
Real estate construction 23.9 3.61 23.2 3.50 23.1 3.49 22.6 3.61 22.0 3.27
Lease financing     18.9   5.78   18.9   4.70   19.0   5.12   15.1   4.74   12.2   4.48
Total commercial     501.2   3.45   493.4   3.42   490.3   3.39   467.6   3.31   454.5   3.16
Consumer:
Real estate 1-4 family first mortgage 277.7 4.01 278.5 3.97 275.9 4.01 274.7 4.05 272.9 4.04
Real estate 1-4 family junior lien mortgage 47.2 4.42 48.9 4.37 50.6 4.37 52.2 4.39 53.8 4.28
Credit card 35.4 11.73 34.6 11.60 33.4 11.52 33.4 11.61 32.8 11.61
Automobile 62.5 5.54 62.5 5.60 61.1 5.66 60.1 5.67 59.5 5.74
Other revolving credit and installment     40.1   5.91   39.6   5.92   39.5   5.91   39.2   5.99   38.8   5.83
Total consumer     462.9   5.01   464.1   4.97   460.5   4.98   459.6   5.02   457.8   4.99
Total loans 964.1 4.20 957.5 4.17 950.8 4.16 927.2 4.16 912.3 4.08
Other     6.7   3.27   6.4   2.30   6.0   2.30   5.8   2.06   5.1   4.82
Total earning assets   $ 1,770.4   3.24 % $ 1,734.5   3.17 % $ 1,686.9   3.20 % $ 1,651.7   3.22 % $ 1,620.7   3.18 %
Funding sources
Deposits:
Interest-bearing checking $ 46.9 0.17 % $ 44.0 0.15 % $ 39.8 0.13 % $ 38.7 0.12 % $ 39.1 0.05 %
Market rate and other savings 676.4 0.07 667.2 0.07 659.0 0.07 651.5 0.07 640.5 0.06
Savings certificates 24.4 0.30 25.2 0.30 26.2 0.35 27.9 0.45 29.6 0.54
Other time deposits 49.2 1.16 54.9 0.93 61.2 0.85 58.2 0.74 49.8 0.52
Deposits in foreign offices     110.4   0.35   107.1   0.30   97.5   0.23   97.7   0.21   107.1   0.14
Total interest-bearing deposits 907.3 0.18 898.4 0.16 883.7 0.15 874.0 0.14 866.1 0.11
Short-term borrowings 124.7 0.33 116.2 0.29 111.8 0.28 107.9 0.25 102.9 0.05
Long-term debt 252.2 1.68 252.4 1.59 236.2 1.56 216.9 1.56 190.9 1.49
Other liabilities     17.1   2.15   16.8   2.11   16.3   2.06   16.5   2.14   16.5   2.14
Total interest-bearing liabilities 1,301.3 0.51 1,283.8 0.48 1,248.0 0.45 1,215.3 0.43 1,176.4 0.36
Portion of noninterest-bearing funding sources     469.1     450.7     438.9     436.4     444.3  
Total funding sources   $ 1,770.4   0.37   $ 1,734.5   0.35   $ 1,686.9   0.34   $ 1,651.7   0.32   $ 1,620.7   0.26  
Net interest margin on a taxable-equivalent basis 2.87 % 2.82 % 2.86 % 2.90 % 2.92 %
Noninterest-earning assets
Cash and due from banks $ 19.0 18.7 18.8 18.0 17.8
Goodwill 26.7 27.0 27.0 26.1 25.6
Other     128.2     134.4     129.4     124.1     123.2  
Total noninterest-earnings assets   $ 173.9     180.1     175.2     168.2     166.6  
Noninterest-bearing funding sources
Deposits $ 376.9 363.1 353.0 345.4 350.7
Other liabilities 64.9 63.8 60.1 62.6 65.2
Total equity 201.2 203.9 201.0 196.6 195.0
Noninterest-bearing funding sources used to fund earning assets     (469.1 )   (450.7 )   (438.9 )   (436.4 )   (444.3 )
Net noninterest-bearing funding sources   $ 173.9     180.1     175.2     168.2     166.6  
Total assets   $ 1,944.3     1,914.6     1,862.1     1,819.9     1,787.3  
   

(1) Our average prime rate was 3.54% for the quarter ended December 31, 2016, 3.50% for the quarters ended September 30, June 30 and March 31, 2016, and 3.29% for the quarter ended December 31, 2015. The average three-month London Interbank Offered Rate (LIBOR) was 0.92%, 0.79%, 0.64%, 0.62% and 0.41% 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 December 31,   %   Year ended December 31,   %
(in millions)   2016     2015     Change     2016   2015     Change  
Service charges on deposit accounts $ 1,357   1,329 2 % $ 5,372   5,168 4 %
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,342 2,288 2 9,216 9,435 (2 )
Trust and investment management 837 838 3,336 3,394 (2 )
Investment banking     519     385   35   1,691   1,639   3
Total trust and investment fees     3,698     3,511   5   14,243   14,468   (2 )
Card fees 1,001 966 4 3,936 3,720 6
Other fees:
Charges and fees on loans 305 308 (1 ) 1,241 1,228 1
Cash network fees 130 129 1 537 522 3
Commercial real estate brokerage commissions 172 224 (23 ) 494 618 (20 )
Letters of credit fees 79 86 (8 ) 321 353 (9 )
Wire transfer and other remittance fees 105 95 11 401 370 8
All other fees (1)(2)(3)     171     198   (14 )   733   1,233   (41 )
Total other fees     962     1,040   (8 )   3,727   4,324   (14 )
Mortgage banking:
Servicing income, net 196 730 (73 ) 1,765 2,441 (28 )
Net gains on mortgage loan origination/sales activities     1,221     930   31   4,331   4,060   7
Total mortgage banking     1,417     1,660   (15 )   6,096   6,501   (6 )
Insurance 262 427 (39 ) 1,268 1,694 (25 )
Net gains (losses) from trading activities (109 ) 99 NM 834 614 36
Net gains on debt securities 145 346 (58 ) 942 952 (1 )
Net gains from equity investments 306 423 (28 ) 879 2,230 (61 )
Lease income 523 145 261 1,927 621 210
Life insurance investment income 132 139 (5 ) 587 579 1
All other (3)     (514 )   (87 ) 491   702   (115 ) NM
Total   $ 9,180     9,998     (8 )   $ 40,513   40,756     (1 )
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 Dec 31,     %     Year ended Dec 31,     %
(in millions)     2016     2015     Change       2016     2015     Change  
Salaries $ 4,193     4,061 3 % $ 16,552     15,883 4 %
Commission and incentive compensation 2,478 2,457 1 10,247 10,352 (1 )
Employee benefits 1,101 1,042 6 5,094 4,446 15
Equipment 642 640 2,154 2,063 4
Net occupancy 710 725 (2 ) 2,855 2,886 (1 )
Core deposit and other intangibles 301 311 (3 ) 1,192 1,246 (4 )
FDIC and other deposit assessments 353 258 37 1,168 973 20
Outside professional services 984 827 19 3,138 2,665 18
Operating losses 243 532 (54 ) 1,608 1,871 (14 )
Operating leases 379 73 419 1,329 278 378
Contract services 325 266 22 1,203 978 23
Outside data processing 222 205 8 888 985 (10 )
Travel and entertainment 195 196 (1 ) 704 692 2
Postage, stationery and supplies 156 177 (12 ) 622 702 (11 )
Advertising and promotion 178 184 (3 ) 595 606 (2 )
Telecommunications 96 106 (9 ) 383 439 (13 )
Foreclosed assets 75 20 275 202 381 (47 )
Insurance 23 57 (60 ) 179 448 (60 )
All other       561     462 21   2,264     2,080 9
Total     $ 13,215     12,599     5       $ 52,377     49,974     5  
 
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

 
  Quarter ended  
Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,
(in millions)   2016     2016     2016   2016   2015  
Service charges on deposit accounts $ 1,357 1,370 1,336 1,309 1,329
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,342 2,344 2,291 2,239 2,288
Trust and investment management 837 849 835 815 838
Investment banking     519     420     421   331   385  
Total trust and investment fees     3,698     3,613     3,547   3,385   3,511  
Card fees 1,001 997 997 941 966
Other fees:
Charges and fees on loans 305 306 317 313 308
Cash network fees 130 138 138 131 129
Commercial real estate brokerage commissions 172 119 86 117 224
Letters of credit fees 79 81 83 78 86
Wire transfer and other remittance fees 105 103 101 92 95
All other fees (1)(2)(3)     171     179     181   202   198  
Total other fees     962     926     906   933   1,040  
Mortgage banking:
Servicing income, net 196 359 360 850 730
Net gains on mortgage loan origination/sales activities     1,221     1,308     1,054   748   930  
Total mortgage banking     1,417     1,667     1,414   1,598   1,660  
Insurance 262 293 286 427 427
Net gains (losses) from trading activities (109 ) 415 328 200 99
Net gains on debt securities 145 106 447 244 346
Net gains from equity investments 306 140 189 244 423
Lease income 523 534 497 373 145
Life insurance investment income 132 152 149 154 139
All other (3)     (514 )   163     333   720   (87 )
Total   $ 9,180     10,376     10,429   10,528   9,998  

(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  
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(in millions)   2016     2016     2016   2016   2015  
Salaries $ 4,193 4,224 4,099 4,036 4,061
Commission and incentive compensation 2,478 2,520 2,604 2,645 2,457
Employee benefits 1,101 1,223 1,244 1,526 1,042
Equipment 642 491 493 528 640
Net occupancy 710 718 716 711 725
Core deposit and other intangibles 301 299 299 293 311
FDIC and other deposit assessments 353 310 255 250 258
Outside professional services 984 802 769 583 827
Operating losses 243 577 334 454 532
Operating leases 379 363 352 235 73
Contract services 325 313 283 282 266
Outside data processing 222 233 225 208 205
Travel and entertainment 195 144 193 172 196
Postage, stationery and supplies 156 150 153 163 177
Advertising and promotion 178 117 166 134 184
Telecommunications 96 101 94 92 106
Foreclosed assets 75 (17 ) 66 78 20
Insurance 23 23 22 111 57
All other     561     677     499   527   462  
Total   $ 13,215     13,268     12,866   13,028   12,599  
 
 
Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

 
  Dec 31,   Dec 31,   %
(in millions, except shares)   2016   2015   Change  
Assets
Cash and due from banks $ 20,729 19,111 8 %
Federal funds sold, securities purchased under resale agreements and other short-term investments 266,038 270,130 (2 )
Trading assets (1) 74,397 64,815 15
Investment securities:
Available-for-sale, at fair value 308,364 267,358 15
Held-to-maturity, at cost 99,583 80,197 24
Mortgages held for sale 26,309 19,603 34
Loans held for sale 80 279 (71 )
Loans 967,604 916,559 6
Allowance for loan losses     (11,419 )   (11,545 ) (1 )
Net loans     956,185     905,014   6
Mortgage servicing rights:
Measured at fair value 12,959 12,415 4
Amortized 1,406 1,308 7
Premises and equipment, net 8,333 8,704 (4 )
Goodwill 26,693 25,529 5
Derivative assets 14,498 17,656 (18 )
Other assets (1)     114,541     95,513   20
Total assets   $ 1,930,115     1,787,632   8
Liabilities
Noninterest-bearing deposits $ 375,967 351,579 7
Interest-bearing deposits     930,112     871,733   7
Total deposits 1,306,079 1,223,312 7
Short-term borrowings 96,781 97,528 (1 )
Derivative liabilities 14,492 13,920 4
Accrued expenses and other liabilities (1) 57,189 59,445 (4 )
Long-term debt     255,077     199,536   28
Total liabilities     1,729,618     1,593,741   9
Equity
Wells Fargo stockholders’ equity:
Preferred stock 24,551 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 60,234 60,714 (1 )
Retained earnings 133,075 120,866 10
Cumulative other comprehensive income (loss) (3,137 ) 297 NM
Treasury stock – 465,702,148 shares and 389,682,664 shares (22,713 ) (18,867 ) 20
Unearned ESOP shares     (1,565 )   (1,362 ) 15
Total Wells Fargo stockholders’ equity 199,581 192,998 3
Noncontrolling interests     916     893   3
Total equity     200,497     193,891   3
Total liabilities and equity   $ 1,930,115     1,787,632     8  
NM – Not meaningful

(1) Prior period has been revised to conform to the current period presentation of reporting derivative assets and liabilities separately.

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET

 
  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,
(in millions)   2016     2016     2016     2016     2015  
Assets
Cash and due from banks $ 20,729 19,287 20,407 19,084 19,111
Federal funds sold, securities purchased under resale agreements and other short-term investments 266,038 298,325 295,521 300,547 270,130
Trading assets (1) 74,397 81,094 71,556 62,657 64,815
Investment securities:
Available-for-sale, at fair value 308,364 291,591 253,006 255,551 267,358
Held-to-maturity, at cost 99,583 99,241 100,420 79,348 80,197
Mortgages held for sale 26,309 27,423 23,930 18,041 19,603
Loans held for sale 80 183 220 280 279
Loans 967,604 961,326 957,157 947,258 916,559
Allowance for loan losses     (11,419 )   (11,583 )   (11,664 )   (11,621 )   (11,545 )
Net loans     956,185     949,743     945,493     935,637     905,014  
Mortgage servicing rights:
Measured at fair value 12,959 10,415 10,396 11,333 12,415
Amortized 1,406 1,373 1,353 1,359 1,308
Premises and equipment, net 8,333 8,322 8,289 8,349 8,704
Goodwill 26,693 26,688 26,963 27,003 25,529
Derivative assets 14,498 18,736 20,999 20,043 17,656
Other assets (1)     114,541     109,703     110,682     109,950     95,513  
Total assets   $ 1,930,115     1,942,124     1,889,235     1,849,182     1,787,632  
Liabilities
Noninterest-bearing deposits $ 375,967 376,136 361,934 348,888 351,579
Interest-bearing deposits     930,112     899,758     883,539     892,602     871,733  
Total deposits 1,306,079 1,275,894 1,245,473 1,241,490 1,223,312
Short-term borrowings 96,781 124,668 120,258 107,703 97,528
Derivative liabilities 14,492 13,603 15,483 15,184 13,920
Accrued expenses and other liabilities (1) 57,189 69,166 61,433 58,413 59,445
Long-term debt     255,077     254,835     243,927     227,888     199,536  
Total liabilities     1,729,618     1,738,166     1,686,574     1,650,678     1,593,741  
Equity
Wells Fargo stockholders’ equity:
Preferred stock 24,551 24,594 24,830 24,051 22,214
Common stock 9,136 9,136 9,136 9,136 9,136
Additional paid-in capital 60,234 60,685 60,691 60,602 60,714
Retained earnings 133,075 130,288 127,076 123,891 120,866
Cumulative other comprehensive income (loss) (3,137 ) 2,184 2,948 1,774 297
Treasury stock (22,713 ) (22,247 ) (21,068 ) (19,687 ) (18,867 )
Unearned ESOP shares     (1,565 )   (1,612 )   (1,868 )   (2,271 )   (1,362 )
Total Wells Fargo stockholders’ equity 199,581 203,028 201,745 197,496 192,998
Noncontrolling interests     916     930     916     1,008     893  
Total equity     200,497     203,958     202,661     198,504     193,891  
Total liabilities and equity   $ 1,930,115     1,942,124     1,889,235     1,849,182     1,787,632  

(1) Prior periods have been revised to conform to the current period presentation of reporting derivative assets and liabilities separately.

 
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER INVESTMENT SECURITIES

    Dec 31,     Sep 30,     Jun 30,     Mar 31,     Dec 31,
(in millions)     2016     2016     2016     2016     2015
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ 25,819 26,376 27,939 33,813 36,250
Securities of U.S. states and political subdivisions 51,101 55,366 54,024 51,574 49,990
Mortgage-backed securities:
Federal agencies 161,230 135,692 95,868 95,463 104,546
Residential and commercial       16,318     18,387     19,938     21,246     22,646
Total mortgage-backed securities 177,548 154,079 115,806 116,709 127,192
Other debt securities       52,685     54,537     53,935     51,956     52,289
Total available-for-sale debt securities 307,153 290,358 251,704 254,052 265,721
Marketable equity securities       1,211     1,233     1,302     1,499     1,637
Total available-for-sale securities       308,364     291,591     253,006     255,551     267,358
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,690 44,682 44,675 44,667 44,660
Securities of U.S. states and political subdivisions 6,336 2,994 2,181 2,183 2,185
Federal agency and other mortgage-backed securities (1) 45,161 47,721 49,594 28,016 28,604
Other debt securities       3,396     3,844     3,970     4,482     4,748
Total held-to-maturity debt securities       99,583     99,241     100,420     79,348     80,197
Total investment securities     $ 407,947     390,832     353,426     334,899     347,555

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

 

FIVE QUARTER LOANS

  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,
(in millions)   2016   2016   2016   2016   2015
Commercial:
Commercial and industrial $ 330,840 324,020 323,858 321,547 299,892
Real estate mortgage 132,491 130,223 128,320 124,711 122,160
Real estate construction 23,916 23,340 23,387 22,944 22,164
Lease financing     19,289   18,871   18,973   19,003   12,367
Total commercial     506,536   496,454   494,538   488,205   456,583
Consumer:
Real estate 1-4 family first mortgage 275,579 278,689 277,162 274,734 273,869
Real estate 1-4 family junior lien mortgage 46,237 48,105 49,772 51,324 53,004
Credit card 36,700 34,992 34,137 33,139 34,039
Automobile 62,286 62,873 61,939 60,658 59,966
Other revolving credit and installment     40,266   40,213   39,609   39,198   39,098
Total consumer     461,068   464,872   462,619   459,053   459,976
Total loans (1)   $ 967,604   961,326   957,157   947,258   916,559

(1) Includes $16.7 billion, $17.7 billion, $19.3 billion, $20.3 billion, and $20.0 billion of purchased credit-impaired (PCI) loans at December 31, September 30, June 30, and March 31, 2016, and December 31, 2015, respectively.

 

Our foreign loans are reported by respective class of financing receivable in the table above. Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign primarily based on whether the borrower's primary address is outside of the United States. The following table presents total commercial foreign loans outstanding by class of financing receivable.

 
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(in millions)   2016   2016   2016   2016   2015
Commercial foreign loans:
Commercial and industrial $ 55,396 51,515 50,515 51,884 49,049
Real estate mortgage 8,541 8,466 8,467 8,367 8,350
Real estate construction 375 310 246 311 444
Lease financing     972   958   987   983   274
Total commercial foreign loans   $ 65,284   61,249   60,215   61,545   58,117
 
 
Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)

  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,
(in millions)   2016     2016   2016   2016   2015
Nonaccrual loans:
Commercial:
Commercial and industrial $ 3,216 3,331 3,464 2,911 1,363
Real estate mortgage 685 780 872 896 969
Real estate construction 43 59 59 63 66
Lease financing     115     92   112   99   26
Total commercial     4,059     4,262   4,507   3,969   2,424
Consumer:
Real estate 1-4 family first mortgage 4,962 5,310 5,970 6,683 7,293
Real estate 1-4 family junior lien mortgage 1,206 1,259 1,330 1,421 1,495
Automobile 106 108 111 114 121
Other revolving credit and installment     51     47   45   47   49
Total consumer     6,325     6,724   7,456   8,265   8,958
Total nonaccrual loans (1)(2)(3)   $ 10,384     10,986   11,963   12,234   11,382
As a percentage of total loans 1.07 % 1.14 1.25 1.29 1.24
Foreclosed assets:
Government insured/guaranteed $ 197 282 321 386 446
Non-government insured/guaranteed     781     738   796   893   979
Total foreclosed assets     978     1,020   1,117   1,279   1,425
Total nonperforming assets   $ 11,362     12,006   13,080   13,513   12,807
As a percentage of total loans     1.17 %   1.25   1.37   1.43   1.40
(1) Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.

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

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

 
 
Wells Fargo & Company and Subsidiaries

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,
(in millions)   2016   2016   2016   2016   2015
Total (excluding PCI)(1): $ 11,858 12,068 12,385 13,060 14,380
Less: FHA insured/guaranteed by the VA (2)(3) 10,883 11,198 11,577 12,233 13,373
Less: Student loans guaranteed under the FFELP (4)     3   17   20   24   26
Total, not government insured/guaranteed   $ 972   853   788   803   981
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 28 47 36 24 97
Real estate mortgage 36 4 22 8 13
Real estate construction           2   4
Total commercial     64   51   58   34   114
Consumer:
Real estate 1-4 family first mortgage (3) 175 171 169 167 224
Real estate 1-4 family junior lien mortgage (3) 56 54 52 55 65
Credit card 452 392 348 389 397
Automobile 112 81 64 55 79
Other revolving credit and installment     113   104   97   103   102
Total consumer     908   802   730   769   867
Total, not government insured/guaranteed   $ 972   853   788   803   981

(1) PCI loans totaled $2.0 billion, $2.2 billion, $2.4 billion, $2.7 billion and $2.9 billion, at December 31, September 30, June 30, and March 31, 2016, and December 31, 2015, respectively.

(2) Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
(3) Includes mortgages held for sale 90 days or more past due and still accruing.
(4) Represents loans whose repayments are largely guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP.
 
 
Wells Fargo & Company and Subsidiaries

CHANGES IN ACCRETABLE YIELD RELATED TO PURCHASED CREDIT-IMPAIRED (PCI) LOANS

 

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

 

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

 

The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:

 

Changes in interest rate indices for variable rate PCI loans - Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows;

Changes in prepayment assumptions - Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and

Changes in the expected principal and interest payments over the estimated life - Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.

 

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

                   
  Quarter   Year  
ended ended
Dec 31, Dec 31,
(in millions)   2016     2016     2009-2015  
Balance, beginning of period $ 11,619 16,301 10,447
Change in accretable yield due to acquisitions (31 ) 27 132
Accretion into interest income (1) (373 ) (1,365 ) (14,212 )
Accretion into noninterest income due to sales (2) (9 ) (458 )

Reclassification from nonaccretable difference for loans with improving credit-related cash flows (3)

1,221 9,734

Changes in expected cash flows that do not affect nonaccretable difference (4)

    1     (4,959 )   10,658  
Balance, end of period   $ 11,216     11,216     16,301  
(1) Includes accretable yield released as a result of settlements with borrowers, which is included in interest income.
(2) Includes accretable yield released as a result of sales to third parties, which is included in noninterest income.

(3) At December 31, 2016, our carrying value for PCI loans totaled $16.7 billion and the remainder of nonaccretable difference established in purchase accounting totaled $954 million. The nonaccretable difference absorbs losses of contractual amounts that exceed our carrying value for PCI loans.

(4) Represents changes in cash flows expected to be collected due to the impact of modifications, changes in prepayment assumptions, changes in interest rates on variable rate PCI loans and sales to third parties.

 
 
Wells Fargo & Company and Subsidiaries

PICK-A-PAY PORTFOLIO (1)

 
  December 31, 2016  
PCI loans     All other loans  
        Ratio of     Ratio of
Adjusted carrying carrying
unpaid Current value to value to
principal LTV Carrying current Carrying current
(in millions)   balance (2)     ratio (3)     value (4)   value (5)     value (4)     value (5)  
California $ 14,219 65 % $ 11,070 50 % $ 7,871 47 %
Florida 1,648 72 1,216 52 1,651 58
New Jersey 663 77 470 54 1,090 65
New York 483 72 408 56 542 61
Texas 175 50 154 44 654 39
Other states     3,323   72   2,585 55   4,581   59
Total Pick-a-Pay loans   $ 20,511   67 $ 15,903 51 $ 16,389   53
   

(1) The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2016.

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

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