Wells Fargo Reports Preliminary First Quarter 2018 Net Income of $5.9 Billion; Diluted EPS of $1.12

Wells Fargo & Company (NYSE:WFC):

Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, including developments with respect to the resolution of regulatory matters, which could cause us to take additional accruals in the first quarter, or the discovery of additional information.

       

Selected Financial Information

           
      Quarter ended
Mar 31, Dec 31,     Mar 31,
      2018     2017     2017
Earnings
Diluted earnings per common share $ 1.12 1.16 1.03
Wells Fargo net income (in billions) 5.94 6.15 5.63
Return on assets (ROA) 1.26 % 1.26 1.18
Return on equity (ROE) 12.37 12.47 11.96
Return on average tangible common equity (ROTCE) (a) 14.75 14.85 14.35
Asset Quality
Net charge-offs (annualized) as a % of average total loans 0.32 % 0.31 0.34
Allowance for credit losses as a % of total loans 1.19 1.25 1.28
Allowance for credit losses as a % of annualized net charge-offs 376 401 376
Other
Revenue (in billions) $ 21.9 22.1 22.3
Efficiency ratio (b) 64.9 % 76.2 62.0
Average loans (in billions) $ 951.0 951.8 963.6
Average deposits (in billions) 1,297.2 1,311.6 1,299.2
Net interest margin     2.84 %     2.84       2.87

(a) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 36.

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

Wells Fargo & Company (NYSE:WFC) reported preliminary results, including net income of $5.9 billion, or $1.12 per diluted common share, for first quarter 2018, compared with $5.6 billion, or $1.03 per share, for first quarter 2017, and $6.2 billion, or $1.16 per share, for fourth quarter 2017. These preliminary results are subject to change due to our ongoing discussions with the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) to resolve matters regarding our compliance risk management program and our past practices involving certain automobile collateral protection insurance policies and certain mortgage interest rate lock extensions (the “CFPB/OCC matter”), which the CFPB and OCC have collectively offered to resolve for an aggregate of $1 billion in civil money penalties. At this time, we are unable to predict final resolution of the CFPB/OCC matter and cannot reasonably estimate our related loss contingency. Accordingly, the preliminary financial results we report today may need to be revised to reflect additional accruals for the CFPB/OCC matter when we file our final financial statements in our Quarterly Report on Form 10-Q with the SEC.

Chief Executive Officer Tim Sloan said, “I’m confident that our outstanding team will continue to transform Wells Fargo into a better, stronger company; however, we recognize that it will take time to put all of our challenges behind us. During the first quarter our team members continued to focus on our vision of satisfying our customers’ financial needs and helping them succeed financially. We also made progress on our priority of rebuilding trust with our customers, team members, communities, regulators, and shareholders. The efforts to build a better Wells Fargo during the quarter included continuing to improve our compliance and operational risk management programs, investing in innovative products and services that enhance the customer experience including the roll-out of our digital mortgage application and predictive banking service, and increasing the minimum hourly pay rate for U.S.-based team members. We also began executing on our goal to increase donations to nonprofit and community organizations by approximately 40 percent in 2018, and we’re proud that Wells Fargo was recently named number one in U.S. workplace giving for the ninth consecutive year by United Way Worldwide. In addition, we continued to make progress on our expense savings initiatives and remain on track to achieve our target of $4 billion in expense reductions by the end of 2019.”

Chief Financial Officer John Shrewsberry said, “Wells Fargo preliminarily reported $5.9 billion of net income in the first quarter, subject to the resolution of the CFPB/OCC matter noted in today's earnings release. Our financial results included continued strong credit performance, liquidity and capital levels. We returned $4.0 billion to shareholders through common stock dividends and net share repurchases in the first quarter, up 30 percent from a year ago. Our capital remained well above our internal target, and returning more capital to shareholders remains a priority. Our expenses in the first quarter included typically higher personnel expense; however, our noninterest expense dollar target range for full year 2018 remains unchanged.”

Net Interest Income

Net interest income in first quarter 2018 was $12.2 billion, down $75 million, compared with fourth quarter 2017, driven primarily by two fewer days in the quarter, hedge ineffectiveness accounting, and lower loan swap income related to the unwind of the receive-fixed swap portfolio, partially offset by the net repricing impact of higher interest rates.

Net interest margin was 2.84 percent, flat compared with fourth quarter 2017. The negative impact to net interest margin from hedge ineffectiveness accounting and lower loan swap income was offset by the net repricing benefit of higher interest rates.

Noninterest Income

Noninterest income in first quarter was $9.7 billion, down $41 million, compared with fourth quarter 2017. First quarter noninterest income reflected lower deposit service charges, card fees, other fees and insurance income, partially offset by higher market sensitive revenue4. First quarter results include the impact of the adoption of new accounting standards for Recognition and Measurement of Financial Assets and Financial Liabilities (Financial Instruments) and Revenue from Contracts With Customers (Revenue Recognition). See pages 17 and 18 in this Report for more information.

Noninterest Expense

Noninterest expense in the first quarter was $14.2 billion, compared with $16.8 billion in the prior quarter. First quarter expenses included operating losses of $668 million, down from $3.5 billion in fourth quarter 2017, which were elevated due to litigation accruals for a variety of matters, including mortgage-related regulatory investigations, sales practices, and other consumer-related matters. First quarter expenses also included $781 million of seasonally higher employee benefits and incentive compensation expense. Other expense was higher primarily due to a reduction in other expense in fourth quarter 2017 as a result of a $117 million gain on the sale of a corporate property. Outside professional services and advertising and promotion expense, which typically decline in the first quarter, were lower compared with fourth quarter 2017. The efficiency ratio was 64.9 percent in first quarter 2018, down from 76.2 percent in the fourth quarter, driven primarily by lower operating losses.

Loans

Total average loans were $951.0 billion in the first quarter, down $798 million from the fourth quarter. Period-end loan balances were $947.3 billion at March 31, 2018, down $9.5 billion from December 31, 2017. Commercial loans were flat compared with December 31, 2017 with growth in commercial and industrial loans, largely offset by declines in commercial real estate loans. Consumer loans decreased $9.5 billion from the prior quarter, driven by:

 

                   

Period-End Loan Balances

                             
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions)     2018     2017     2017     2017     2017
Commercial $ 503,396 503,388 500,150 505,901 505,004
Consumer     443,912       453,382       451,723       451,522       453,401  
Total loans     $ 947,308       956,770       951,873       957,423       958,405  
Change from prior quarter     $ (9,462 )     4,897       (5,550 )     (982 )     (9,199 )
 

Debt and Equity Securities

As a result of the adoption of the new accounting standard for Financial Instruments, the balance sheet now includes more detailed disclosure of debt and equity securities.

Debt securities include debt securities available for sale and held to maturity, as well as debt securities held for trading. Debt securities were $473.0 billion at March 31, 2018, down $398 million from the fourth quarter, as approximately $13.1 billion of purchases, primarily federal agency mortgage-backed securities (MBS) in the available-for-sale portfolio, were more than offset by run-off and sales.

Net unrealized losses on available-for-sale debt securities were $(1.9) billion at March 31, 2018, compared with net unrealized gains of $1.5 billion at December 31, 2017, primarily due to higher interest rates and wider MBS spreads during the quarter.

Equity securities include marketable and non-marketable equity securities, as well as equity securities held for trading. Equity securities were $58.9 billion at March 31, 2018, down $3.6 billion from the fourth quarter, predominantly due to a decline in equity securities held for trading.

Deposits

Total average deposits for first quarter 2018 were $1.3 trillion, down $14.4 billion from the prior quarter. The decline was driven by a decrease in commercial deposits primarily from financial institutions, including a modest impact from actions the Company took to comply with the asset cap included in the consent order issued by the Board of Governors of the Federal Reserve System on February 2, 2018. Average consumer and small business banking deposits of $755.5 billion for first quarter 2018 were down $2.1 billion from the prior quarter, as growth in Community Banking deposits was more than offset by lower Wealth and Investment Management deposits. The average deposit cost for first quarter 2018 was 34 basis points, up 6 basis points from the prior quarter and 17 basis points from a year ago, primarily driven by an increase in commercial and Wealth and Investment Management deposit rates.

Capital

Capital in the first quarter continued to exceed our internal target, with a Common Equity Tier 1 ratio (fully phased-in) of 12.0 percent3, flat compared with the prior quarter. In first quarter 2018, the Company repurchased 50.6 million shares of its common stock, which reduced period-end common shares outstanding by 17.7 million.

Credit Quality

Net Loan Charge-offs

The quarterly loss rate was 0.32 percent (annualized), compared with 0.31 percent in the prior quarter and 0.34 percent a year ago. Commercial and consumer losses were 0.06 percent and 0.60 percent, respectively. Total credit losses were $741 million in first quarter 2018, down $10 million from fourth quarter 2017. Commercial losses were down $37 million driven by lower oil and gas portfolio losses. Consumer losses increased $27 million driven by higher automobile loan losses.

 

Net Loan Charge-Offs

    Quarter ended
      March 31, 2018     December 31, 2017     March 31, 2017
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 $ 85 0.10 % $ 118 0.14 % $ 171 0.21 %
Real estate mortgage (15 ) (0.05 ) (10 ) (0.03 ) (25 ) (0.08 )
Real estate construction (4 ) (0.07 ) (3 ) (0.05 ) (8 ) (0.15 )
Lease financing     12   0.25 10   0.20 5   0.11
Total commercial     78   0.06 115   0.09 143   0.11
Consumer:
Real estate 1-4 family first mortgage (18 ) (0.03 ) (23 ) (0.03 ) 7 0.01
Real estate 1-4 family junior lien mortgage (8 ) (0.09 ) (7 ) (0.06 ) 23 0.21
Credit card 332 3.69 336 3.66 309 3.54
Automobile 208 1.64 188 1.38 167 1.10
Other revolving credit and installment     149   1.60 142   1.46 156   1.60
Total consumer     663   0.60 636   0.56 662   0.59
Total     $ 741   0.32 % $ 751   0.31 % $ 805   0.34 %
                                                       

(a) Quarterly net charge-offs (recoveries) as a percentage of average loans are annualized. See explanation on page 34 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

 

Nonperforming Assets

Nonperforming assets decreased $388 million, or 4 percent, from fourth quarter 2017 to $8.3 billion. Nonaccrual loans decreased $317 million from fourth quarter 2017 to $7.7 billion primarily driven by lower commercial and industrial nonaccruals reflecting continued improvement in the oil and gas portfolio, as well as continued declines in consumer real estate nonaccruals.

 

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

      March 31, 2018     December 31, 2017     March 31, 2017
        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 $ 1,516 0.45 % $ 1,899 0.57 % $ 2,898 0.88 %
Real estate mortgage 755 0.60 628 0.50 672 0.51
Real estate construction 45 0.19 37 0.15 40 0.16
Lease financing     93   0.48 76   0.39 96   0.50
Total commercial     2,409   0.48 2,640   0.52 3,706   0.73
Consumer:
Real estate 1-4 family first mortgage 4,053 1.43 4,122 1.45 4,743 1.73
Real estate 1-4 family junior lien mortgage 1,087 2.87 1,086 2.73 1,153 2.60
Automobile 117 0.24 130 0.24 101 0.17
Other revolving credit and installment     53   0.14 58   0.15 56   0.14
Total consumer     5,310   1.20 5,396   1.19 6,053   1.34
Total nonaccrual loans     7,719   0.81 8,036   0.84 9,759   1.02
Foreclosed assets:
Government insured/guaranteed 103 120 179
Non-government insured/guaranteed     468   522   726  
Total foreclosed assets     571   642   905  
Total nonperforming assets     $ 8,290   0.88 % $ 8,678   0.91 % $ 10,664   1.11 %
Change from prior quarter:
Total nonaccrual loans $ (317 ) $ (583 ) $ (625 )
Total nonperforming assets     (388 )           (647 )           (698 )      
 

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $11.3 billion at March 31, 2018, down $647 million from December 31, 2017. “Credit performance remained strong in the first quarter,” said Chief Risk Officer Mike Loughlin. “We released $550 million from the allowance for credit losses. Approximately $400 million of the release was driven by a reduction in allowance previously held for hurricane-related losses. The remainder of the release was due to continued improvement in residential real estate, both in first and junior lien mortgage loan portfolios, and lower loan balances.” The allowance coverage for total loans was 1.19 percent, compared with 1.25 percent in fourth quarter 2017. The allowance covered 3.8 times annualized first quarter net charge-offs, compared with 4.0 times in the prior quarter. The allowance coverage for nonaccrual loans was 147 percent at March 31, 2018, compared with 149 percent at December 31, 2017. The Company believes the allowance was appropriate for losses inherent in the loan portfolio at March 31, 2018.

Business Segment Performance

Financial information for our operating segments reflect revisions to our previously reported amounts to reflect a change, adopted in first quarter 2018, in our methodology for assigning funding charges and credits to our lines of business and for reclassifications made in connection with the adoption of a new accounting standard for Financial Instruments. See pages 17 and 18 in this Report for more information.

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

       
    Quarter ended
Mar 31,     Dec 31,     Mar 31,
(in millions)     2018     2017     2017
Community Banking $ 2,713 3,472 2,824
Wholesale Banking 2,875 2,373 2,485
Wealth and Investment Management     714       675       665
 

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and automobile, student, mortgage, home equity and small business lending, as well as referrals to Wholesale Banking and Wealth and Investment Management business partners. The Community Banking segment also includes the results of our Corporate Treasury activities net of allocations in support of the other operating segments and results of investments in our affiliated venture capital partnerships.

 

Selected Financial Information

     
    Quarter ended
Mar 31,     Dec 31,     Mar 31,
(in millions)     2018     2017     2017
Total revenue $ 11,830 11,720 11,823
Provision for credit losses 218 636 646
Noninterest expense 7,902 10,216 7,281
Segment net income 2,713 3,472 2,824
(in billions)
Average loans 470.5 473.2 480.7
Average assets 1,061.9 1,073.2 1,095.8
Average deposits     747.5       738.3       717.8
 

Community Banking reported net income of $2.7 billion, down $759 million, or 22 percent, from fourth quarter 2017. The decline in net income from fourth quarter 2017 was primarily driven by the inclusion in the fourth quarter of the benefit of the estimated impact of the Tax Act to the Company. Revenue in the first quarter was $11.8 billion, up $110 million, or 1 percent, from fourth quarter 2017, and included a gain on sales of Pick-a-Pay loans and higher market sensitive revenue, partially offset by lower net interest income, card fees, and service charges on deposit accounts. Noninterest expense decreased $2.3 billion, or 23 percent, compared with fourth quarter 2017, driven primarily by a decline in litigation accruals, partially offset by seasonally higher personnel expense. The provision for credit losses decreased $418 million from the prior quarter.

Net income was down $111 million, or 4 percent, from first quarter 2017 due to higher expenses, partially offset by a lower provision for credit losses and the lower income tax rate. Revenue was flat compared with a year ago due to higher net interest income, a gain on sales of Pick-a-Pay loans, higher market sensitive revenue, and higher trust and investment fees, offset by lower mortgage banking revenue and service charges on deposit accounts. Noninterest expense increased $621 million, or 9 percent, from a year ago primarily driven by higher operating losses and personnel expense. The provision for credit losses decreased $428 million from a year ago.

Retail Banking and Consumer Payments, Virtual Solutions and Innovation

Consumer Lending

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include Business Banking, Commercial Real Estate, Corporate Banking, Financial Institutions Group, Government and Institutional Banking, Middle Market Banking, Principal Investments, Treasury Management, Wells Fargo Commercial Capital, and Wells Fargo Securities.

Selected Financial Information

     
    Quarter ended
Mar 31,     Dec 31,     Mar 31,
(in millions)     2018     2017     2017
Total revenue $ 7,279 7,440 7,577
Provision (reversal of provision) for credit losses (20 ) 20 (43 )
Noninterest expense 3,978 4,187 4,167
Segment net income 2,875 2,373 2,485
(in billions)
Average loans 465.1 463.5 468.3
Average assets 829.2 837.2 810.5
Average deposits     446.0       465.7     465.3  

Wholesale Banking reported net income of $2.9 billion, up $502 million, or 21 percent, from fourth quarter 2017. First quarter results benefited from the reduced income tax rate. Revenue of $7.3 billion decreased $161 million, or 2 percent, compared with the prior quarter, due to lower net interest income, lower commercial real estate brokerage fees, lower insurance income related to the sale of Wells Fargo Insurance Services USA (WFIS), and the gain on the sale of WFIS recognized in fourth quarter 2017, partially offset by the gain on the sale of Wells Fargo Shareowner Services recognized in the first quarter and higher market sensitive revenue. Fourth quarter 2017 also included impairments on low income housing and tax-advantaged renewable energy investments due to the Tax Act. Noninterest expense decreased $209 million, or 5 percent, from the prior quarter reflecting two less months of WFIS operating expenses and lower operating losses, partially offset by seasonally higher personnel expenses. The provision for credit losses decreased $40 million from the prior quarter.

Net income increased $390 million, or 16 percent, from first quarter 2017 and benefited from the lower income tax rate. Revenue decreased $298 million, or 4 percent, from first quarter 2017, on lower net interest income, the impact of the sale of WFIS in fourth quarter 2017, lower mortgage banking fees, and lower operating lease income, partially offset by the gain related to the sale of Wells Fargo Shareowner Services. Noninterest expense decreased $189 million, or 5 percent, from a year ago reflecting the sale of WFIS, partially offset by higher regulatory, risk, cyber and technology expenses. The provision for credit losses increased $23 million from a year ago.

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
Mar 31,     Dec 31,     Mar 31,
(in millions)     2018     2017     2017
Total revenue $ 4,242 4,333 4,257
Reversal of provision for credit losses (6 ) (7 ) (4 )
Noninterest expense 3,290 3,246 3,204
Segment net income 714 675 665
(in billions)
Average loans 73.9 72.9 70.7
Average assets 84.2 83.7 81.8
Average deposits     177.9       184.1       197.5  
 

Wealth and Investment Management reported net income of $714 million, up $39 million, or 6 percent, from fourth quarter 2017. First quarter results benefited from the reduced income tax rate. Revenue of $4.2 billion decreased $91 million, or 2 percent, from the prior quarter, primarily due to lower gains on deferred compensation plan investments (offset in employee benefits expense), lower net interest income, and lower transaction revenue, partially offset by higher asset-based fees. Noninterest expense increased $44 million, or 1 percent, from the prior quarter, primarily driven by seasonally higher personnel expenses, partially offset by lower non-personnel expense and lower deferred compensation plan expense (offset in gains on equity securities).

Net income was up $49 million, or 7 percent, from first quarter 2017 and benefited from the lower income tax rate. Revenue decreased $15 million from a year ago primarily driven by lower gains on deferred compensation plan investments (offset in employee benefits expense), lower transaction revenue, lower net interest income, and lower other revenue, partially offset by higher asset-based fees. Noninterest expense increased $86 million, or 3 percent, from a year ago, primarily due to higher broker commissions, higher regulatory, risk, cyber and technology expenses, and higher other personnel expense, partially offset by lower deferred compensation plan expense (offset in gains on equity securities).

Retail Brokerage

Wealth Management

Asset Management

Retirement

Conference Call

The Company will host a live conference call on Friday, April 13, at 7:00 a.m. PT (10:00 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 440-424-4922 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~1293006.

A replay of the conference call will be available beginning at 10:00 a.m. PT (1:00 p.m. ET) on Friday, April 13 through Friday, April 27. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #1293006. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~1293006.

End Notes

1 Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 36.

2 Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses.

3 See table on page 37 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules.

4 Market sensitive revenue represents net gains from trading activities, debt securities, and equity securities.

5 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 42 for more information.

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

7 Data as of February 2018, comparisons with February 2017.

8 Combined consumer and business debit card purchase volume dollars.

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 or liquidity levels or targets and our estimated Common Equity Tier 1 ratio under Basel III capital standards; (viii) the performance of our mortgage business and any related exposures; (ix) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (x) future common stock dividends, common share repurchases and other uses of capital; (xi) our targeted range for return on assets 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:

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

For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investments, mortgage, and consumer and commercial finance through 8,200 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 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2017 rankings of America’s largest corporations.

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

Summary Information

Significant Accounting and Presentation Changes

17

Summary Financial Data 19
 

Income

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

Balance Sheet

Consolidated Balance Sheet 28
Trading Activities 30
Debt Securities 30
Equity Securities 31
 

Loans

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

Equity

Tangible Common Equity 36
Common Equity Tier 1 Under Basel III 37
 

Operating Segments

Operating Segment Results 38
 

Other

Mortgage Servicing and other related data 40
 

SIGNIFICANT ACCOUNTING AND PRESENTATION CHANGES

Following is a discussion of key accounting and presentation changes in first quarter 2018 that resulted from adoption of new accounting standards and a change in our methodology for measuring operating segment results. Prior periods have been revised as appropriate for these changes to maintain comparability.

Accounting Standards Adopted in 2018

In first quarter 2018, we adopted the following new accounting guidance:

In connection with the adoption of ASU 2016-18 we have changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

ASU 2016-04 modifies the accounting for certain prepaid card products to require the recognition of breakage. Breakage represents the estimated amount that will not be redeemed by the cardholder for goods or services. Upon adoption, we recorded a cumulative-effect adjustment that increased retained earnings, given estimated breakage, by $26 million.

ASU 2016-01 changes the accounting for certain equity investments to record at fair value with unrealized gains or losses reflected in earnings, as well as improve the disclosures of equity investments and the fair value of financial instruments.

We adopted the Update in first quarter 2018 and recorded a cumulative-effect adjustment as of January 1, 2018, that increased retained earnings by $106 million as a result of a transition adjustment to reclassify $118 million in net unrealized gains from other comprehensive income to retained earnings, partially offset by a transition adjustment to decrease retained earnings by $12 million to adjust the carrying value of our auction rate securities from cost to fair value. No transition adjustment was recorded for investments changed to the measurement alternative (described below), which was applied prospectively.

As a result of adopting this ASU, our investments in marketable equity securities, including those previously classified as available-for-sale, are now accounted for at fair value with unrealized gains or losses reflected in earnings. Additionally, our share of unrealized gains or losses of marketable equity securities held by investees in our nonmarketable equity securities accounted for using the equity method are now reflected in earnings. Prior to adoption, such unrealized gains and losses were reflected in other comprehensive income. Our investments in nonmarketable equity securities previously accounted for under the cost method of accounting, except for federal bank stock, are now accounted for either at fair value with unrealized gains and losses reflected in earnings or using the measurement alternative. The measurement alternative is similar to the cost method of accounting, except the carrying value is adjusted through earnings for impairment, if any, and changes in observable and orderly transactions in the same or similar investment. We now account for substantially all of our private equity investments using the measurement alternative, except for those accounted for using the equity method of accounting. Our auction rate securities portfolio is now accounted for at fair value with unrealized gains or losses reflected in earnings.

In connection with our adoption of this Update, we have modified our balance sheet and income statement presentation to report marketable and nonmarketable equity securities and their results separately from debt securities by now reporting all equity securities in a new line labeled “Equity securities” in both the balance sheet and income statement. Additionally we now report loans held for trading purposes in loans held for sale and have reclassified net gains and losses on marketable equity securities used as economic hedges of deferred compensation obligations from “Net gains for trading activities” to “Net gains from equity securities”. All prior periods have been revised to conform to these changes in reporting.

The following table provides a summary of our reporting changes implemented in connection with our adoption of ASU 2016-01.

             
Financial instrument or        
transaction type     As previously reported     Revised reporting
Balance Sheet
Marketable equity securities Trading assets and available for sale investment securities Equity securities (new caption)
Nonmarketable equity securities Other assets Equity securities (new caption)
Loans held for trading Trading assets Loans held for sale
Debt securities held for trading Trading assets Debt securities (formerly “Investment securities”)
 
Income Statement
Interest income:
Marketable equity securities Trading assets and investment securities Equity securities (new caption)
Nonmarketable equity securities Other Equity securities (new caption)
Loans held for trading Trading assets Loans held for sale
Debt securities held for trading Trading assets Debt securities (formerly “Investment securities”)
Noninterest income:
Deferred compensation gains (1)     Net gains from trading activities     Net gains from equity securities

(1) Reclassification of net gains and losses on marketable equity securities economically hedging our deferred compensation obligations.

 

The following table illustrates the changes to the balance sheet as of December 31, 2017, and related consolidated statement of income for the year ended December 31, 2017, in connection with our adoption of ASU 2016-01.

 
        Reclassification adjustments        

 

    Marketable    

 

   

 

As previously

Debt equity

Nonmarketable

Loans held for

Revised Change in
(in millions)     reported     securities     securities    

equity securities

    trading     reporting     balance
Balance sheet as of December 31, 2017:
Trading assets $ 92,329 (57,624 ) (33,682 ) (1,023 ) (92,329 )
Debt securities:
Trading 57,624 57,624 57,624
Available for sale 277,085 (678 ) 276,407 (678 )
Loans held for sale 108 1,023 1,131 1,023
Equity securities 34,360 28,137 62,497 62,497
Other assets 118,381             (28,137 )       90,244 (28,137 )
Total impact to assets                                          
 
Income statement for the year ended December 31, 2017:
Interest income:
Trading assets 2,928 (2,313 ) (577 ) (38 ) (2,928 )
Debt securities 10,664 2,313 (31 ) 12,946 2,282
Loans held for sale 12 38 50 38
Equity securities 608 191 799 799
Other 3,131             (191 )       2,940 (191 )
Total impact to interest income
 
Noninterest income:
Net gains from trading activities 1,053 (511 ) 542 (511 )
Net gains from equity securities 1,268       511               1,779 511  
Total impact to noninterest income                                          
 

ASU 2014-09 modifies the guidance used to recognize revenue from contracts with customers for transfers of goods or services and transfers of non-financial assets, unless those contracts are within the scope of other guidance. Upon adoption, we recorded a cumulative-effect adjustment that decreased retained earnings by $44 million, due to changes in the timing of revenue for corporate trust services that are provided over the life of the associated trust. In addition, we changed the presentation of some costs such that underwriting expenses of our broker-dealer business that were previously netted against revenue are now included in noninterest expense, and card payment network charges that were previously included in noninterest expense are now netted against card fee revenue.

Operating Segment Financial Information Changes

Financial information for our operating segments presented in this Report reflect revisions to our previously reported amounts to reflect a change, adopted in first quarter 2018, in our methodology for assigning funding charges and credits to our lines of business and for the reclassifications made in connection with the adoption of ASU 2016-01. Effective first quarter 2018, assets and liabilities will receive a funding charge or credit that considers interest rate risk, liquidity risk, and other product characteristics on a more granular level. This methodology change affects results across all three of our reportable operating segments. Our previously reported consolidated financial results were not impacted by the methodology change; however, in connection with the adoption of ASU 2016-01, certain reclassifications will occur within noninterest income.

 

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA

        % Change
Quarter ended Mar 31, 2018 from
Mar 31,     Dec 31,     Mar 31, Dec 31,     Mar 31,
($ in millions, except per share amounts)     2018     2017     2017     2017     2017
For the Period
Wells Fargo net income $ 5,936 6,151 5,634 (3 )% 5
Wells Fargo net income applicable to common stock 5,533 5,740 5,233 (4 ) 6
Diluted earnings per common share 1.12 1.16 1.03 (3 ) 9
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.26 % 1.26 1.18 7
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.37 12.47 11.96 (1 ) 3
Return on average tangible common equity (ROTCE)(1) 14.75 14.85 14.35 (1 ) 3
Efficiency ratio (2) 64.9 76.2 62.0 (15 ) 5
Total revenue $ 21,934 22,050 22,255 (1 ) (1 )
Pre-tax pre-provision profit (PTPP) (3) 7,692 5,250 8,463 47 (9 )
Dividends declared per common share 0.39 0.39 0.38 3
Average common shares outstanding 4,885.7 4,912.5 5,008.6 (1 ) (2 )
Diluted average common shares outstanding 4,930.7 4,963.1 5,070.4 (1 ) (3 )
Average loans $ 951,024 951,822 963,645 (1 )
Average assets 1,915,896 1,935,318 1,931,040 (1 ) (1 )
Average total deposits 1,297,178 1,311,592 1,299,191 (1 )
Average consumer and small business banking deposits (4) 755,483 757,541 758,754
Net interest margin 2.84 % 2.84 2.87 (1 )
At Period End
Debt securities (5) $ 472,968 473,366 456,969 4
Loans 947,308 956,770 958,405 (1 ) (1 )
Allowance for loan losses 10,373 11,004 11,168 (6 ) (7 )
Goodwill 26,445 26,587 26,666 (1 ) (1 )
Equity securities (5) 58,935 62,497 56,991 (6 ) 3
Assets 1,915,388 1,951,757 1,951,501 (2 ) (2 )
Deposits 1,303,689 1,335,991 1,325,444 (2 ) (2 )
Common stockholders' equity 181,950 183,134 178,209 (1 ) 2
Wells Fargo stockholders’ equity 205,752 206,936 201,321 (1 ) 2
Total equity 206,710 208,079 202,310 (1 ) 2
Tangible common equity (1) 152,678 153,730 148,671 (1 ) 3
Common shares outstanding 4,873.9 4,891.6 4,996.7 (2 )
Book value per common share (6) $ 37.33 37.44 35.67 5
Tangible book value per common share (1)(6) 31.33 31.43 29.75 5
Common stock price:
High 66.31 62.24 59.99 7 11
Low 50.70 52.84 53.35 (4 ) (5 )
Period end 52.41 60.67 55.66 (14 ) (6 )
Team members (active, full-time equivalent)     265,700       262,700       272,800       1       (3 )

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 36.

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

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

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

(5) Financial information for prior quarters has been revised to reflect the impact of the adoption of Accounting Standards Update (ASU) 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA
    Quarter ended
Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
($ in millions, except per share amounts)     2018     2017     2017     2017     2017
For the Quarter
Wells Fargo net income $ 5,936 6,151 4,542 5,856 5,634
Wells Fargo net income applicable to common stock 5,533 5,740 4,131 5,450 5,233
Diluted earnings per common share 1.12 1.16 0.83 1.08 1.03
Profitability ratios (annualized) :
Wells Fargo net income to average assets (ROA) 1.26 % 1.26 0.93 1.22 1.18
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.37 12.47 8.96 12.06 11.96
Return on average tangible common equity (ROTCE)(1) 14.75 14.85 10.66 14.41 14.35
Efficiency ratio (2) 64.9 76.2 65.7 60.9 62.0
Total revenue $ 21,934 22,050 21,849 22,235 22,255
Pre-tax pre-provision profit (PTPP) (3) 7,692 5,250 7,498 8,694 8,463
Dividends declared per common share 0.39 0.39 0.39 0.38 0.38
Average common shares outstanding 4,885.7 4,912.5 4,948.6 4,989.9 5,008.6
Diluted average common shares outstanding 4,930.7 4,963.1 4,996.8 5,037.7 5,070.4
Average loans $ 951,024 951,822 952,343 956,879 963,645
Average assets 1,915,896 1,935,318 1,938,461 1,927,021 1,931,040
Average total deposits 1,297,178 1,311,592 1,306,356 1,301,195 1,299,191
Average consumer and small business banking deposits (4) 755,483 757,541 755,094 760,149 758,754
Net interest margin 2.84 % 2.84 2.86 2.90 2.87
At Quarter End
Debt securities (5) $ 472,968 473,366 474,710 462,890 456,969
Loans 947,308 956,770 951,873 957,423 958,405
Allowance for loan losses 10,373 11,004 11,078 11,073 11,168
Goodwill 26,445 26,587 26,581 26,573 26,666
Equity securities (5) 58,935 62,497 54,981 55,742 56,991
Assets 1,915,388 1,951,757 1,934,880 1,930,792 1,951,501
Deposits 1,303,689 1,335,991 1,306,706 1,305,830 1,325,444
Common stockholders' equity 181,950 183,134 181,920 181,233 178,209
Wells Fargo stockholders’ equity 205,752 206,936 205,722 205,034 201,321
Total equity 206,710 208,079 206,617 205,949 202,310
Tangible common equity (1) 152,678 153,730 152,694 151,868 148,671
Common shares outstanding 4,873.9 4,891.6 4,927.9 4,966.8 4,996.7
Book value per common share (6) $ 37.33 37.44 36.92 36.49 35.67
Tangible book value per common share (1)(6) 31.33 31.43 30.99 30.58 29.75
Common stock price:
High 66.31 62.24 56.45 56.60 59.99
Low 50.70 52.84 49.28 50.84 53.35
Period end 52.41 60.67 55.15 55.41 55.66
Team members (active, full-time equivalent)     265,700       262,700       268,000       270,600       272,800

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 36.

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

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

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

(5) Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

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

 
 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME
    Quarter ended March 31,     %
(in millions, except per share amounts)     2018     2017     Change
Interest income    
Debt securities (1) $ 3,414 3,173 8 %
Mortgages held for sale 179 182 (2 )
Loans held for sale (1) 24 10 140
Loans 10,579 10,141 4
Equity securities (1) 231 175 32
Other interest income     920       532   73
Total interest income     15,347       14,213   8
Interest expense
Deposits 1,090 536 103
Short-term borrowings 311 114 173
Long-term debt 1,576 1,147 37
Other interest expense     132       92   43
Total interest expense     3,109       1,889   65
Net interest income 12,238 12,324 (1 )
Provision for credit losses     191       605   (68 )
Net interest income after provision for credit losses     12,047       11,719   3
Noninterest income
Service charges on deposit accounts 1,173 1,313 (11 )
Trust and investment fees 3,683 3,570 3
Card fees 908 945 (4 )
Other fees 800 865 (8 )
Mortgage banking 934 1,228 (24 )
Insurance 114 277 (59 )
Net gains from trading activities (1) 243 272 (11 )
Net gains on debt securities 1 36 (97 )
Net gains from equity securities (1) 783 570 37
Lease income 455 481 (5 )
Other     602       374   61
Total noninterest income     9,696       9,931   (2 )
Noninterest expense
Salaries 4,363 4,261 2
Commission and incentive compensation 2,768 2,725 2
Employee benefits 1,598 1,686 (5 )
Equipment 617 577 7
Net occupancy 713 712
Core deposit and other intangibles 265 289 (8 )
FDIC and other deposit assessments 324 333 (3 )
Other     3,594       3,209   12
Total noninterest expense     14,242       13,792   3
Income before income tax expense 7,501 7,858 (5 )
Income tax expense     1,374       2,133   (36 )
Net income before noncontrolling interests 6,127 5,725 7
Less: Net income from noncontrolling interests     191       91   110
Wells Fargo net income     $ 5,936       5,634   5
Less: Preferred stock dividends and other     403       401  
Wells Fargo net income applicable to common stock     $ 5,533       5,233   6
Per share information
Earnings per common share $ 1.13 1.05 8
Diluted earnings per common share 1.12 1.03 9
Dividends declared per common share 0.390 0.380 3
Average common shares outstanding 4,885.7 5,008.6 (2 )
Diluted average common shares outstanding     4,930.7       5,070.4       (3 )

(1) Financial information for the prior quarter has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
    Quarter ended
Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
(in millions, except per share amounts)     2018     2017     2017     2017     2017
Interest income
Debt securities (1) $ 3,414 3,294 3,253 3,226 3,173
Mortgages held for sale 179 196 217 191 182
Loans held for sale (1) 24 12 15 13 10
Loans 10,579 10,367 10,522 10,358 10,141
Equity securities (1) 231 239 186 199 175
Other interest income     920       850       851       707       532
Total interest income     15,347       14,958       15,044       14,694       14,213
Interest expense
Deposits 1,090 931 869 677 536
Short-term borrowings 311 255 226 163 114
Long-term debt 1,576 1,344 1,391 1,275 1,147
Other interest expense     132       115       109       108       92
Total interest expense     3,109       2,645       2,595       2,223       1,889
Net interest income 12,238 12,313 12,449 12,471 12,324
Provision for credit losses     191       651       717       555       605
Net interest income after provision for credit losses     12,047       11,662       11,732       11,916       11,719
Noninterest income
Service charges on deposit accounts 1,173 1,246 1,276 1,276 1,313
Trust and investment fees 3,683 3,687 3,609 3,629 3,570
Card fees 908 996 1,000 1,019 945
Other fees 800 913 877 902 865
Mortgage banking 934 928 1,046 1,148 1,228
Insurance 114 223 269 280 277
Net gains (losses) from trading activities (1) 243 (1 ) 120 151 272
Net gains on debt securities 1 157 166 120 36
Net gains from equity securities (1) 783 572 363 274 570
Lease income 455 458 475 493 481
Other     602       558       199       472       374
Total noninterest income     9,696       9,737       9,400       9,764       9,931
Noninterest expense
Salaries 4,363 4,403 4,356 4,343 4,261
Commission and incentive compensation 2,768 2,665 2,553 2,499 2,725
Employee benefits 1,598 1,293 1,279 1,308 1,686
Equipment 617 608 523 529 577
Net occupancy 713 715 716 706 712
Core deposit and other intangibles 265 288 288 287 289
FDIC and other deposit assessments 324 312 314 328 333
Other     3,594       6,516       4,322       3,541       3,209
Total noninterest expense     14,242       16,800       14,351       13,541       13,792
Income before income tax expense 7,501 4,599 6,781 8,139 7,858
Income tax expense (benefit)     1,374       (1,642 )     2,181       2,245       2,133
Net income before noncontrolling interests 6,127 6,241 4,600 5,894 5,725
Less: Net income from noncontrolling interests     191       90       58       38       91
Wells Fargo net income     $ 5,936       6,151       4,542       5,856       5,634
Less: Preferred stock dividends and other     403       411       411       406       401
Wells Fargo net income applicable to common stock     $ 5,533       5,740       4,131       5,450       5,233
Per share information
Earnings per common share $ 1.13 1.17 0.83 1.09 1.05
Diluted earnings per common share 1.12 1.16 0.83 1.08 1.03
Dividends declared per common share 0.390 0.390 0.390 0.380 0.380
Average common shares outstanding 4,885.7 4,912.5 4,948.6 4,989.9 5,008.6
Diluted average common shares outstanding     4,930.7       4,963.1       4,996.8       5,037.7       5,070.4

(1) Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

 
       

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME            
Quarter ended Mar 31, %
(in millions)     2018     2017     Change
Wells Fargo net income     $ 5,936       5,634   5 %
Other comprehensive income (loss), before tax:    
Debt securities (1):
Net unrealized gains (losses) arising during the period (3,443 ) 369 NM
Reclassification of net (gains) losses to net income 68 (145 ) NM
Derivatives and hedging activities:
Net unrealized losses arising during the period (242 ) (362 ) (33 )
Reclassification of net (gains) losses to net income 60 (202 ) NM
Defined benefit plans adjustments:
Net actuarial and prior service gains (losses) arising during the period 6 (7 ) NM
Amortization of net actuarial loss, settlements and other to net income 32 38 (16 )
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period     (2 )     16   NM
Other comprehensive loss, before tax (3,521 ) (293 ) NM
Income tax benefit related to other comprehensive income     862       123   601
Other comprehensive loss, net of tax (2,659 ) (170 ) NM
Less: Other comprehensive income from noncontrolling interests           14   (100 )
Wells Fargo other comprehensive loss, net of tax     (2,659 )     (184 ) NM
Wells Fargo comprehensive income 3,277 5,450 (40 )
Comprehensive income from noncontrolling interests     191       105   82
Total comprehensive income     $ 3,468       5,555       (38 )

NM – Not meaningful

 

(1) The quarter ended March 31, 2017, includes net unrealized gains from equity securities of $61 million and reclassification of gains to net income related to equity securities of ($116) million. Per the adoption of ASU 2016-01, the quarter ended March 31, 2018, reflects only net unrealized gains and reclassification of net gains to net income from debt securities.

 
 

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

    Quarter ended
Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
(in millions)     2018     2017     2017     2017     2017
Balance, beginning of period $ 208,079 206,617 205,949 202,310 200,497
Cumulative effect from change in accounting policy (1) (24 ) (213 )
Wells Fargo net income 5,936 6,151 4,542 5,856 5,634
Wells Fargo other comprehensive income (loss), net of tax (2,659 ) (522 ) 526 1,005 (184 )
Noncontrolling interests (178 ) 247 (20 ) (75 ) 75
Common stock issued 1,208 436 254 252 1,406
Common stock repurchased (3,029 ) (2,845 ) (2,601 ) (2,287 ) (2,175 )
Preferred stock released by ESOP 231 218 209 406
Common stock warrants repurchased/exercised (157 ) (46 ) (19 ) (24 ) (44 )
Preferred stock issued 677
Common stock dividends (1,911 ) (1,920 ) (1,936 ) (1,899 ) (1,903 )
Preferred stock dividends (410 ) (411 ) (411 ) (406 ) (401 )
Stock incentive compensation expense 437 206 135 145 389
Net change in deferred compensation and related plans     (813 )     (52 )     (11 )     (11 )     (771 )
Balance, end of period     $ 206,710       208,079       206,617       205,949       202,310  

(1) The cumulative effect for the quarter ended March 31, 2018, reflects the impact of the adoption in first quarter 2018 of ASU 2016-04, ASU 2016-01 and ASU 2014-09. See pages 17 and 18 for more information. The cumulative effect for the quarter ended March 31, 2017, reflects the impact of the adoption in fourth quarter 2017 of ASU 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.

 
 

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
    Quarter ended March 31,
2018     2017
        Interest         Interest
Average Yields/ income/ Average Yields/ income/
(in millions)     balance     rates     expense     balance     rates     expense
Earning assets
Interest-earning deposits with banks (3) $ 172,291 1.49 % $ 632 208,486 0.79 % $ 405
Federal funds sold, securities purchased under resale agreements and other short-term investments (3) 78,135 1.40 271 75,281 0.68 127
Debt securities (4):
Trading debt securities (7) 78,715 3.24 637 69,120 3.03 523
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6,426 1.66 26 25,034 1.54 95
Securities of U.S. states and political subdivisions (7) 49,956 3.37 421 52,248 3.93 513
Mortgage-backed securities:
Federal agencies 158,472 2.72 1,076 156,617 2.58 1,011
Residential and commercial (7)     8,871   4.12 91   14,452   5.34 193
Total mortgage-backed securities (7) 167,343 2.79 1,167 171,069 2.81 1,204
Other debt securities (7)(8)     48,094   3.73 444   50,149   3.61 447
Total available-for-sale debt securities (7)(8)     271,819   3.04 2,058   298,500   3.04 2,259
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44,723 2.20 243 44,693 2.20 243
Securities of U.S. states and political subdivisions 6,259 4.34 68 6,273 5.30 83
Federal agency and other mortgage-backed securities 90,789 2.38 541 51,786 2.51 324
Other debt securities     695   3.23 5   3,329   2.34 19
Total held-to-maturity debt securities     142,466   2.42 857   106,081   2.54 669
Total debt securities (7)(8) 493,000 2.89 3,552 473,701 2.92 3,451
Mortgages held for sale (5)(7) 18,406 3.89 179 19,893 3.67 182
Loans held for sale (5)(8) 2,011 4.92 24 1,600 2.50 10
Commercial loans:
Commercial and industrial - U.S. 272,040 3.85 2,584 274,749 3.59 2,436
Commercial and industrial - Non U.S. 60,216 3.23 479 55,347 2.73 373
Real estate mortgage 126,200 4.05 1,262 132,449 3.56 1,164
Real estate construction 24,449 4.54 274 24,591 3.72 225
Lease financing     19,265   5.30 255   19,070   4.94 235
Total commercial loans     502,170   3.91 4,854   506,206   3.54 4,433
Consumer loans:
Real estate 1-4 family first mortgage 284,207 4.02 2,852 275,480 4.02 2,766
Real estate 1-4 family junior lien mortgage 38,844 5.13 493 45,285 4.60 515
Credit card 36,468 12.75 1,147 35,437 11.97 1,046
Automobile 51,469 5.16 655 61,510 5.46 828
Other revolving credit and installment     37,866   6.46 604   39,727   6.02 590
Total consumer loans     448,854   5.16 5,751   457,439   5.06 5,745
Total loans (5) 951,024 4.50 10,605 963,645 4.26 10,178
Equity securities (8) 39,754 2.35 233 33,926 2.11 179
Other (8)     6,015   1.21 19    
Total earning assets (7)(8)     $ 1,760,636   3.55 % $ 15,515   1,776,532   3.30 % $ 14,532
Funding sources
Deposits:
Interest-bearing checking $ 67,774 0.77 % $ 129 50,686 0.29 % $ 37
Market rate and other savings 679,068 0.22 368 684,175 0.09 157
Savings certificates 20,018 0.34 17 23,466 0.29 17
Other time deposits (7) 76,589 1.84 347 54,915 1.30 177
Deposits in foreign offices     94,810   0.98 229   122,200   0.49 148
Total interest-bearing deposits (7) 938,259 0.47 1,090 935,442 0.23 536
Short-term borrowings 101,779 1.24 312 98,549 0.47 115
Long-term debt (7) 226,062 2.80 1,576 260,130 1.77 1,147
Other liabilities     27,927   1.92 132   16,806   2.22 92
Total interest-bearing liabilities (7) 1,294,027 0.97 3,110 1,310,927 0.58 1,890
Portion of noninterest-bearing funding sources (7)(8)     466,609     465,605  
Total funding sources (7)(8)     $ 1,760,636   0.71   3,110   1,776,532   0.43   1,890
Net interest margin and net interest income on a taxable-equivalent basis (6)(7) 2.84 %   $ 12,405   2.87 %   $ 12,642
Noninterest-earning assets
Cash and due from banks $ 18,853 18,706
Goodwill 26,516 26,673
Other (7)(8)     109,891   109,129  
Total noninterest-earning assets (7)(8)     $ 155,260   154,508  
Noninterest-bearing funding sources
Deposits $ 358,919 363,749
Other liabilities (7) 56,761 54,805
Total equity (7) 206,189 201,559
Noninterest-bearing funding sources used to fund earning assets (7)(8)     (466,609 ) (465,605 )
Net noninterest-bearing funding sources (7)(8)     $ 155,260   154,508  
Total assets (7)     $ 1,915,896   1,931,040  
                                           

(1) Our average prime rate was 4.52% and 3.80% for the quarters ended March 31, 2018 and 2017, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.93% and 1.07% for the same quarters, respectively.

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

(3) Financial information has been revised to reflect the impact of the adoption of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

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

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

(6) Includes taxable-equivalent adjustments of $167 million and $318 million for the quarters ended March 31, 2018 and 2017, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 21% and 35% for the quarters ended March 31, 2018 and 2017, respectively.

(7) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of ASU 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.

(8) Financial information for the prior quarter has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
    Quarter ended
      Mar 31, 2018     Dec 31, 2017     Sep 30, 2017     Jun 30, 2017     Mar 31, 2017
Average     Yields/     Average     Yields/     Average     Yields/     Average     Yields/     Average     Yields/
($ in billions)     balance     rates     balance     rates     balance     rates     balance     rates     balance     rates
Earning assets
Interest-earning deposits with banks (3) $ 172.3 1.49 % $ 189.1 1.27 % $ 205.5 1.21 % $ 204.5 1.03 % $ 208.5 0.79 %
Federal funds sold, securities purchased under resale agreements and other short-term investments (3) 78.1 1.40 75.8 1.20 70.6 1.14 77.1 0.91 75.3 0.68
Debt securities (4):
Trading debt securities (5) 78.7 3.24 81.6 3.17 76.6 3.21 70.4 3.24 69.1 3.03
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6.4 1.66 6.4 1.66 14.5 1.31 18.1 1.53 25.0 1.54
Securities of U.S. states and political subdivisions 50.0 3.37 52.4 3.91 52.5 4.08 53.5 3.89 52.2 3.93
Mortgage-backed securities:
Federal agencies 158.4 2.72 152.9 2.62 139.8 2.58 132.0 2.63 156.6 2.58
Residential and commercial     8.9   4.12 9.4   4.85 11.0   5.44 12.6   5.55 14.5   5.34
Total mortgage-backed securities 167.3 2.79 162.3 2.75 150.8 2.79 144.6 2.89 171.1 2.81
Other debt securities (5)     48.1   3.73 48.6   3.62 47.7   3.73 48.5   3.77 50.2   3.61
Total available-for-sale debt securities (5)     271.8   3.04 269.7   3.10 265.5   3.13 264.7   3.16 298.5   3.04
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44.7 2.20 44.7 2.19 44.7 2.18 44.7 2.19 44.7 2.20
Securities of U.S. states and political subdivisions 6.3 4.34 6.3 5.26 6.3 5.44 6.3 5.29 6.3 5.30
Federal agency and other mortgage-backed securities 90.8 2.38 89.6 2.25 88.3 2.26 83.1 2.44 51.8 2.51
Other debt securities     0.7   3.23 1.2   2.64 1.4   3.05 2.8   2.34 3.3   2.34
Total held-to-maturity debt securities     142.5   2.42 141.8   2.36 140.7   2.38 136.9   2.49 106.1   2.54
Total debt securities (5) 493.0 2.89 493.1 2.90 482.8 2.93 472.0 2.98 473.7 2.92
Mortgages held for sale 18.4 3.89 20.5 3.82 22.9 3.79 19.8 3.87 19.9 3.67
Loans held for sale (5) 2.0 4.92 1.5 3.19 1.4 4.39 1.5 3.65 1.6 2.50
Commercial loans:
Commercial and industrial - U.S. 272.0 3.85 270.3 3.89 270.1 3.81 273.1 3.70 274.8 3.59
Commercial and industrial - Non U.S. 60.2 3.23 59.2 2.96 57.7 2.89 56.4 2.86 55.3 2.73
Real estate mortgage 126.2 4.05 127.2 3.88 129.1 3.83 131.3 3.68 132.4 3.56
Real estate construction 24.4 4.54 24.4 4.38 25.0 4.18 25.3 4.10 24.6 3.72
Lease financing     19.4   5.30 19.3   0.62 19.2   4.59 19.0   4.82 19.1   4.94
Total commercial loans     502.2   3.91 500.4   3.68 501.1   3.76 505.1   3.67 506.2   3.54
Consumer loans:
Real estate 1-4 family first mortgage 284.2 4.02 282.0 4.01 278.4 4.03 275.1 4.08 275.5 4.02
Real estate 1-4 family junior lien mortgage 38.8 5.13 40.4 4.96 41.9 4.95 43.6 4.78 45.3 4.60
Credit card 36.4 12.75 36.4 12.37 35.6 12.41 34.9 12.18 35.4 11.97
Automobile 51.5 5.16 54.3 5.13 56.7 5.34 59.1 5.43 61.5 5.46
Other revolving credit and installment     37.9   6.46 38.3   6.28 38.6   6.31 39.1   6.13 39.7   6.02
Total consumer loans     448.8   5.16 451.4   5.10 451.2   5.14 451.8   5.13 457.4   5.06
Total loans 951.0 4.50 951.8 4.35 952.3 4.41 956.9 4.36 963.6 4.26
Equity securities (5) 39.8 2.35 38.0 2.60 35.9 2.12 36.6 2.24 33.9 2.11
Other (5)     6.0   1.21 7.2   0.88 8.7   0.90 4.3   0.70  
Total earning assets (5)     $ 1,760.6   3.55 % $ 1,777.0   3.43 % $ 1,780.1   3.44 % $ 1,772.7   3.40 % $ 1,776.5   3.30 %
Funding sources
Deposits:
Interest-bearing checking $ 67.8 0.77 % $ 50.5 0.68 % $ 48.3 0.57 % $ 48.5 0.41 % $ 50.7 0.29 %
Market rate and other savings 679.1 0.22 679.9 0.19 681.2 0.17 683.0 0.13 684.2 0.09
Savings certificates 20.0 0.34 20.9 0.31 21.8 0.31 22.6 0.30 23.5 0.29
Other time deposits 76.6 1.84 68.2 1.49 66.1 1.51 57.1 1.39 54.9 1.30
Deposits in foreign offices     94.8   0.98 124.6   0.81 124.7   0.76 123.7   0.65 122.2   0.49
Total interest-bearing deposits 938.3 0.47 944.1 0.39 942.1 0.37 934.9 0.29 935.5 0.23
Short-term borrowings 101.8 1.24 102.1 0.99 99.2 0.91 95.8 0.69 98.5 0.47
Long-term debt 226.0 2.80 231.6 2.32 243.5 2.28 249.9 2.04 260.1 1.77
Other liabilities     27.9   1.92 24.7   1.86 24.8   1.74 21.0   2.05 16.8   2.22
Total interest-bearing liabilities 1,294.0 0.97 1,302.5 0.81 1,309.6 0.79 1,301.6 0.68 1,310.9 0.58
Portion of noninterest-bearing funding sources (5)     466.6   474.5   470.5   471.1   465.6  
Total funding sources (5)     $ 1,760.6   0.71   $ 1,777.0   0.59   $ 1,780.1   0.58   $ 1,772.7   0.50   $ 1,776.5   0.43  
Net interest margin on a taxable-equivalent basis 2.84 % 2.84 % 2.86 % 2.90 % 2.87 %
Noninterest-earning assets
Cash and due from banks $ 18.9 19.2 18.5 18.2 18.7
Goodwill 26.5 26.6 26.6 26.7 26.7
Other (5)     109.9   112.5   113.3   109.4   109.1  
Total noninterest-earnings assets (5)     $ 155.3   158.3   158.4   154.3   154.5  
Noninterest-bearing funding sources
Deposits $ 358.9 367.5 364.3 366.3 363.7
Other liabilities (5) 56.8 57.9 56.9 53.3 54.8
Total equity 206.2 207.4 207.7 205.8 201.6
Noninterest-bearing funding sources used to fund earning assets (5)     (466.6 ) (474.5 ) (470.5 ) (471.1 ) (465.6 )
Net noninterest-bearing funding sources (5)     $ 155.3   158.3   158.4   154.3   154.5  
Total assets     $ 1,915.9   1,935.3   1,938.5   1,927.0   1,931.0  
                                                                         

(1) Our average prime rate was 4.52% for the quarter ended March 31, 2018, 4.30% for the quarter ended December 31,2017, 4.25% for the quarter ended September 30, 2017, 4.05% for the quarter ended June 30, 2017 and 3.80% for the quarter ended March 31, 2017. The average three-month London Interbank Offered Rate (LIBOR) was 1.93%, 1.46%, 1.31%, 1.21% and 1.07% for the same quarters, respectively.

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

(3) Financial information has been revised to reflect the impact of the adoption of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

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

(5) Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

 
(1)     Our average prime rate was 4.52% for the quarter ended March 31, 2018, 4.30% for the quarter ended December 31,2017, 4.25% for the quarter ended September 30, 2017, 4.05% for the quarter ended June 30, 2017 and 3.80% for the quarter ended March 31, 2017. The average three-month London Interbank Offered Rate (LIBOR) was 1.93%, 1.46%, 1.31%, 1.21% and 1.07% for the same quarters, respectively.
(2) Yields/rates include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Financial information has been revised to reflect the impact of the adoption of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.
(4) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(5) Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.
 

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME

    Quarter ended March 31,     %
(in millions)     2018     2017     Change
Service charges on deposit accounts $ 1,173     1,313 (11 )%
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,403 2,324 3
Trust and investment management 850 829 3
Investment banking     430     417 3
Total trust and investment fees     3,683     3,570 3
Card fees 908 945 (4 )
Other fees:
Charges and fees on loans 301 307 (2 )
Cash network fees 126 126
Commercial real estate brokerage commissions 85 81 5
Letters of credit fees 79 74 7
Wire transfer and other remittance fees 116 107 8
All other fees     93     170 (45 )
Total other fees     800     865 (8 )
Mortgage banking:
Servicing income, net 468 456 3
Net gains on mortgage loan origination/sales activities     466     772 (40 )
Total mortgage banking     934     1,228 (24 )
Insurance 114 277 (59 )
Net gains from trading activities (1) 243 272 (11 )
Net gains on debt securities 1 36 (97 )
Net gains from equity securities (1) 783 570 37
Lease income 455 481 (5 )
Life insurance investment income 164 144 14
All other     438     230 90
Total     $ 9,696     9,931     (2 )

(1) Financial information for the prior quarter has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

 
 

NONINTEREST EXPENSE

    Quarter ended March 31,     %
(in millions)     2018     2017     Change
Salaries $ 4,363     4,261 2 %
Commission and incentive compensation 2,768 2,725 2
Employee benefits 1,598 1,686 (5 )
Equipment 617 577 7
Net occupancy 713 712
Core deposit and other intangibles 265 289 (8 )
FDIC and other deposit assessments 324 333 (3 )
Operating losses 668 282 137
Outside professional services 821 804 2
Contract services (1) 447 397 13
Operating leases 320 345 (7 )
Outside data processing 162 220 (26 )
Travel and entertainment 152 179 (15 )
Advertising and promotion 153 127 20
Postage, stationery and supplies 142 145 (2 )
Telecommunications 92 91 1
Foreclosed assets 38 86 (56 )
Insurance 26 24 8
All other (1) 573     509     13  
Total     $ 14,242     13,792     3  

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME
    Quarter ended
Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
(in millions)     2018     2017     2017     2017     2017
Service charges on deposit accounts $ 1,173 1,246 1,276 1,276 1,313
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,403 2,401 2,304 2,329 2,324
Trust and investment management 850 866 840 837 829
Investment banking     430     420       465     463     417
Total trust and investment fees     3,683     3,687       3,609     3,629     3,570
Card fees 908 996 1,000 1,019 945
Other fees:
Charges and fees on loans 301 313 318 325 307
Cash network fees 126 120 126 134 126
Commercial real estate brokerage commissions 85 159 120 102 81
Letters of credit fees 79 78 77 76 74
Wire transfer and other remittance fees 116 115 114 112 107
All other fees     93     128       122     153     170
Total other fees     800     913       877     902     865
Mortgage banking:
Servicing income, net 468 262 309 400 456
Net gains on mortgage loan origination/sales activities     466     666       737     748     772
Total mortgage banking     934     928       1,046     1,148     1,228
Insurance 114 223 269 280 277
Net gains (losses) from trading activities (1) 243 (1 ) 120 151 272
Net gains on debt securities 1 157 166 120 36
Net gains from equity securities (1) 783 572 363 274 570
Lease income 455 458 475 493 481
Life insurance investment income 164 153 152 145 144
All other     438     405       47     327     230
Total     $ 9,696     9,737       9,400     9,764     9,931

(1) Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

 
 

FIVE QUARTER NONINTEREST EXPENSE

    Quarter ended
Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
(in millions)     2018     2017     2017     2017     2017
Salaries $ 4,363 4,403 4,356 4,343 4,261
Commission and incentive compensation 2,768 2,665 2,553 2,499 2,725
Employee benefits 1,598 1,293 1,279 1,308 1,686
Equipment 617 608 523 529 577
Net occupancy 713 715 716 706 712
Core deposit and other intangibles 265 288 288 287 289
FDIC and other deposit assessments 324 312 314 328 333
Operating losses 668 3,531 1,329 350 282
Outside professional services 821 1,025 955 1,029 804
Contract services (1) 447 410 415 416 397
Operating leases 320 325 347 334 345
Outside data processing 162 208 227 236 220
Travel and entertainment 152 183 154 171 179
Advertising and promotion 153 200 137 150 127
Postage, stationery and supplies 142 137 128 134 145
Telecommunications 92 92 90 91 91
Foreclosed assets 38 47 66 52 86
Insurance 26 28 24 24 24
All other (1)     573     330     450     554     509
Total     $ 14,242     16,800     14,351     13,541     13,792

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

 
 

Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET
    Mar 31,     Dec 31,     %
(in millions, except shares)     2018     2017     Change
Assets
Cash and due from banks $ 18,145 23,367 (22 )%
Interest-earning deposits with banks (1)     184,250       192,580   (4 )
Total cash, cash equivalents, and restricted cash (1)     202,395       215,947   (6 )
Federal funds sold, securities purchased under resale agreements and other short-term investments (1) 73,550 80,025 (8 )
Debt securities:
Trading, at fair value (2) 59,866 57,624 4
Available-for-sale, at fair value (2) 271,656 276,407 (2 )
Held-to-maturity, at cost 141,446 139,335 2
Mortgages held for sale 17,944 20,070 (11 )
Loans held for sale (2) 3,581 1,131 217
Loans 947,308 956,770 (1 )
Allowance for loan losses     (10,373 )     (11,004 ) (6 )
Net loans     936,935       945,766   (1 )
Mortgage servicing rights:
Measured at fair value 15,041 13,625 10
Amortized 1,411 1,424 (1 )
Premises and equipment, net 8,828 8,847
Goodwill 26,445 26,587 (1 )
Derivative assets 11,467 12,228 (6 )
Equity securities (2) 58,935 62,497 (6 )
Other assets (2)     85,888       90,244   (5 )
Total assets     $ 1,915,388       1,951,757   (2 )
Liabilities
Noninterest-bearing deposits $ 370,085 373,722 (1 )
Interest-bearing deposits     933,604       962,269   (3 )
Total deposits 1,303,689 1,335,991 (2 )
Short-term borrowings 97,207 103,256 (6 )
Derivative liabilities 7,883 8,796 (10 )
Accrued expenses and other liabilities 72,597 70,615 3
Long-term debt     227,302       225,020   1
Total liabilities     1,708,678       1,743,678   (2 )
Equity
Wells Fargo stockholders’ equity:
Preferred stock 26,227 25,358 3
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 60,399 60,893 (1 )
Retained earnings 148,728 145,263 2
Cumulative other comprehensive income (loss) (4,921 ) (2,144 ) 130
Treasury stock – 607,928,993 shares and 590,194,846 shares (31,246 ) (29,892 ) 5
Unearned ESOP shares     (2,571 )     (1,678 ) 53
Total Wells Fargo stockholders’ equity 205,752 206,936 (1 )
Noncontrolling interests     958       1,143   (16 )
Total equity     206,710       208,079   (1 )

Total liabilities and equity

    $ 1,915,388       1,951,757       (2 )

(1) Financial information has been revised to reflect the impact of the adoption of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

(2) Financial information for the prior quarter has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET
    Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
(in millions)     2018     2017     2017     2017     2017
Assets
Cash and due from banks $ 18,145 23,367 19,206 20,248 19,698
Interest-earning deposits with banks (1)     184,250       192,580       205,648       195,700       227,635  
Total cash, cash equivalents, and restricted cash (1)     202,395       215,947       224,854       215,948       247,333  
Federal funds sold, securities purchased under resale agreements and other short-term investments (1) 73,550 80,025 67,457 69,006 81,112
Debt securities:
Trading, at fair value (2) 59,866 57,624 60,970 54,324 50,534
Available-for-sale, at fair value (2) 271,656 276,407 271,317 268,174 298,405
Held-to-maturity, at cost 141,446 139,335 142,423 140,392 108,030
Mortgages held for sale 17,944 20,070 20,009 24,807 17,822
Loans held for sale (2) 3,581 1,131 1,339 1,898 1,373
Loans 947,308 956,770 951,873 957,423 958,405
Allowance for loan losses     (10,373 )     (11,004 )     (11,078 )     (11,073 )     (11,168 )
Net loans     936,935       945,766       940,795       946,350       947,237  
Mortgage servicing rights:
Measured at fair value 15,041 13,625 13,338 12,789 13,208
Amortized 1,411 1,424 1,406 1,399 1,402
Premises and equipment, net 8,828 8,847 8,449 8,403 8,320
Goodwill 26,445 26,587 26,581 26,573 26,666
Derivative assets 11,467 12,228 12,580 13,273 12,564
Equity securities (2) 58,935 62,497 54,981 55,742 56,991
Other assets (2)     85,888       90,244       88,381       91,714       80,504  
Total assets     $ 1,915,388       1,951,757       1,934,880       1,930,792       1,951,501  
Liabilities
Noninterest-bearing deposits $ 370,085 373,722 366,528 372,766 365,780
Interest-bearing deposits     933,604       962,269       940,178       933,064       959,664  

Total deposits

1,303,689 1,335,991 1,306,706 1,305,830 1,325,444
Short-term borrowings 97,207 103,256 93,811 95,356 94,871
Derivative liabilities 7,883 8,796 9,497 11,636 12,461
Accrued expenses and other liabilities 72,597 70,615 78,993 72,799 59,629
Long-term debt     227,302       225,020       239,256       239,222       256,786  
Total liabilities     1,708,678       1,743,678       1,728,263       1,724,843       1,749,191  
Equity
Wells Fargo stockholders’ equity:
Preferred stock 26,227 25,358 25,576 25,785 25,501
Common stock 9,136 9,136 9,136 9,136 9,136
Additional paid-in capital 60,399 60,893 60,759 60,689 60,585
Retained earnings 148,728 145,263 141,549 139,366 135,828
Cumulative other comprehensive income (loss) (4,921 ) (2,144 ) (1,622 ) (2,148 ) (3,153 )
Treasury stock (31,246 ) (29,892 ) (27,772 ) (25,675 ) (24,030 )
Unearned ESOP shares     (2,571 )     (1,678 )     (1,904 )     (2,119 )     (2,546 )
Total Wells Fargo stockholders’ equity 205,752 206,936 205,722 205,034 201,321
Noncontrolling interests     958       1,143       895       915       989  
Total equity     206,710       208,079       206,617       205,949       202,310  
Total liabilities and equity     $ 1,915,388       1,951,757       1,934,880       1,930,792       1,951,501  

(1) Financial information has been revised to reflect the impact of the adoption of ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash in which we changed the presentation of our cash and cash equivalents to include both cash and due from banks as well as interest-earning deposits with banks, which are inclusive of any restricted cash.

(2) Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See pages 17 and 18 for more information.

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER TRADING ASSETS AND LIABILITIES
    Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
(in millions)     2018     2017     2017     2017     2017
Trading assets
Debt securities $ 59,866 57,624 60,970 54,324 50,534
Equity securities (1) 25,327 30,004 22,797 24,229 25,358
Loans held for sale 1,695 1,023 1,182 1,742 1,120
Gross trading derivative assets 30,644 31,340 31,052 31,451 71,793
Netting (2)     (20,112 )     (19,629 )     (18,881 )     (19,289 )     (60,483 )
Total trading derivative assets     10,532       11,711       12,171       12,162       11,310  
Total trading assets     97,420       100,362       97,120       92,457       88,322  
Trading liabilities
Short sales 23,303 18,472 19,096 16,845 19,982
Gross trading derivative liabilities 29,717 31,386 30,365 31,172 75,441
Netting (2)     (22,569 )     (23,062 )     (21,662 )     (20,544 )     (64,138 )
Total trading derivative liabilities     7,148       8,324       8,703       10,628       11,303  
Total trading liabilities     $ 30,451       26,796       27,799       27,473       31,285  

(1) Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01 and assets held as economic hedges for our deferred compensation plan obligations have been reclassified as marketable equity securities not held for trading.

(2) Represents balance sheet netting for trading derivative assets and liability balances, and trading portfolio level counterparty valuation adjustments.

 
 

FIVE QUARTER DEBT SECURITIES

    Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
(in millions)     2018     2017     2017     2017     2017
Trading debt securities     $ 59,866     57,624     60,970     54,324     50,534
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 6,279 6,319 6,350 17,896 24,625
Securities of U.S. states and political subdivisions 49,643 51,326 52,774 52,013 52,061
Mortgage-backed securities:
Federal agencies 156,814 160,219 150,181 135,938 156,966
Residential and commercial     9,264     9,173     11,046     12,772     14,233
Total mortgage-backed securities 166,078 169,392 161,227 148,710 171,199
Other debt securities     49,656     49,370     50,966     49,555     50,520
Total available-for-sale debt securities     271,656     276,407     271,317     268,174     298,405
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 44,727 44,720 44,712 44,704 44,697
Securities of U.S. states and political subdivisions 6,307 6,313 6,321 6,325 6,331
Federal agency and other mortgage-backed securities (1) 89,748 87,527 90,071 87,525 53,778
Other debt securities     664     775     1,319     1,838     3,224
Total held-to-maturity debt securities     141,446     139,335     142,423     140,392     108,030
Total debt securities     $ 472,968     473,366     474,710     462,890     456,969

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

 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER EQUITY SECURITIES
    Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
(in millions)     2018     2017     2017     2017     2017
Held for trading at fair value                              
Marketable equity securities     $ 25,327     30,004     22,797     24,229     25,358
Not held for trading:
Fair value:
Marketable equity securities (1) 4,931 4,356 4,348 4,340 4,439
Nonmarketable equity securities (2)     5,303     4,867     4,523     3,986     3,780
Total equity securities at fair value     10,234     9,223     8,871     8,326     8,219
Equity method:
LIHTC (3) 10,318 10,269 9,884 9,828 9,624
Private equity 3,840 3,839 3,757 3,740 3,620
Tax-advantaged renewable energy 1,822 1,950 1,954 1,960 2,013
New market tax credit and other     268     294     292     295     277
Total equity method     16,248     16,352     15,887     15,823     15,534
Other:
Federal bank stock and other at cost (4) 5,780 5,828 6,251 6,247 6,645
Private equity (5)     1,346     1,090     1,175     1,117     1,235
Total equity securities not held for trading     33,608     32,493     32,184     31,513     31,633
Total equity securities     58,935     62,497     54,981     55,742     56,991

(1) Includes $3.5 billion, $3.7 billion, $3.5 billion, $3.3 billion and $3.3 billion at March 31, 2018, and December 31, September 30, June 30, and March 31, 2017, respectively, related to investments held as economic hedges of our deferred compensation plan obligations.

(2) Includes $5.0 billion, $4.9 billion, $4.5 billion, $4.0 billion and $3.8 billion at March 31, 2018, and December 31, September 30, June 30, and March 31, 2017, respectively, related to investments in which we elected the fair value option.

(3) Represents low-income housing tax credit investments.

(4) Includes $5.7 billion, $5.4 billion, $5.8 billion, $5.8 billion and $6.2 billion at March 31, 2018, and December 31, September 30, June 30, and March 31, 2017, respectively, related to investments in Federal Reserve Bank and Federal Home Loan Bank stock.

(5) Represents nonmarketable equity securities for which we have elected to account for the investment under the measurement alternative.

 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER LOANS
    Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
(in millions)     2018     2017     2017     2017     2017
Commercial:
Commercial and industrial $ 334,678 333,125 327,944 331,113 329,252
Real estate mortgage 125,543 126,599 128,475 130,277 131,532
Real estate construction 23,882 24,279 24,520 25,337 25,064
Lease financing     19,293     19,385     19,211     19,174     19,156
Total commercial     503,396     503,388     500,150     505,901     505,004
Consumer:
Real estate 1-4 family first mortgage 282,658 284,054 280,173 276,566 274,633
Real estate 1-4 family junior lien mortgage 37,920 39,713 41,152 42,747 44,333
Credit card 36,103 37,976 36,249 35,305 34,742
Automobile 49,554 53,371 55,455 57,958 60,408
Other revolving credit and installment     37,677     38,268     38,694     38,946     39,285
Total consumer     443,912     453,382     451,723     451,522     453,401
Total loans (1)     $ 947,308     956,770     951,873     957,423     958,405

(1) Includes $10.7 billion, $12.8 billion, $13.6 billion, $14.3 billion, and $15.7 billion of purchased credit-impaired (PCI) loans at March 31, 2018 and December 31,  September 30, June 30, and March 31, 2017, respectively.

 

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

 
    Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
(in millions)     2018     2017     2017     2017     2017
Commercial foreign loans:
Commercial and industrial $ 59,696 60,106 58,570 57,825 56,987
Real estate mortgage 8,082 8,033 8,032 8,359 8,206
Real estate construction 668 655 647 585 471
Lease financing     1,077     1,126     1,141     1,092     986
Total commercial foreign loans     $ 69,523     69,920     68,390     67,861     66,650
 
 

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
    Mar 31,     Dec 31,     Sep 30,     Jun 30,   Mar 31,
(in millions)     2018     2017     2017     2017   2017
Nonaccrual loans:
Commercial:
Commercial and industrial $ 1,516 1,899 2,397 2,632 2,898
Real estate mortgage 755 628 593 630 672
Real estate construction 45 37 38 34 40
Lease financing     93       76     81     89     96
Total commercial     2,409       2,640     3,109     3,385     3,706
Consumer:
Real estate 1-4 family first mortgage 4,053 4,122 4,213 4,413 4,743
Real estate 1-4 family junior lien mortgage 1,087 1,086 1,101 1,095 1,153
Automobile 117 130 137 104 101
Other revolving credit and installment     53       58     59     59     56
Total consumer     5,310       5,396     5,510     5,671     6,053
Total nonaccrual loans (1)(2)(3)     $ 7,719       8,036     8,619     9,056     9,759
As a percentage of total loans 0.81 % 0.84 0.91 0.95 1.02
Foreclosed assets:
Government insured/guaranteed $ 103 120 137 149 179
Non-government insured/guaranteed     468       522     569     632     726
Total foreclosed assets     571       642     706     781     905
Total nonperforming assets     $ 8,290       8,678     9,325     9,837     10,664
As a percentage of total loans     0.88 %     0.91     0.98     1.03     1.11

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

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

(3) Real estate 1-4 family mortgage loans predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) are not placed on nonaccrual status because they are insured or guaranteed.

 

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

    Mar 31,     Dec 31,     Sep 30,     Jun 30,     Mar 31,
(in millions)     2018     2017     2017     2017     2017
Total (excluding PCI)(1): $ 10,753 11,997 10,227 9,716 10,525
Less: FHA insured/guaranteed by the VA (2)(3)     9,786     10,934     9,266     8,873     9,585
Total, not government insured/guaranteed     $ 967     1,063     961     843     940
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 40