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8-K - 8-K - WELLS FARGO & COMPANY/MN | wfc3qer10-14x2015form8xk.htm |
EX-99.3 - EXHIBIT 99.3 - WELLS FARGO & COMPANY/MN | wfc3qer10-14x2015exx993.htm |
EX-99.2 - EXHIBIT 99.2 - WELLS FARGO & COMPANY/MN | wellsfargo3q15quarterlye.htm |
Exhibit 99.1
Media | Investors | |||||
Ancel Martinez | Jim Rowe | |||||
415-222-3858 | 415-396-8216 |
Wednesday, October 14, 2015
WELLS FARGO REPORTS $5.8 BILLION IN NET INCOME
Diluted EPS of $1.05, Revenue of $21.9 Billion
▪ | Continued strong financial results: |
◦ | Net income of $5.8 billion, up 1 percent from third quarter 2014 |
◦ | Diluted earnings per share (EPS) of $1.05, up 3 percent |
◦ | Revenue of $21.9 billion, up 3 percent |
◦ | Pre-tax pre-provision profit1 of $9.5 billion, up 6 percent |
◦ | Return on assets (ROA) of 1.32 percent and return on equity (ROE) of 12.62 percent |
▪ | Strong growth in loans and deposits: |
◦ | Total average loans of $895.1 billion, up $61.9 billion, or 7 percent, from third quarter 2014 |
▪ | Quarter-end loans of $903.2 billion, up $64.4 billion, or 8 percent |
◦ | Quarter-end core loans2 of $849.2 billion, up $73.4 billion, or 9 percent |
◦ | Total average deposits of $1.2 trillion, up $71.8 billion, or 6 percent |
▪ | Continued strength in credit quality: |
◦ | Net charge-offs of $703 million, up $35 million from third quarter 2014 |
▪ | Net charge-off rate of 0.31 percent (annualized), down from 0.32 percent |
◦ | Nonaccrual loans down $1.8 billion, or 14 percent |
◦ | No reserve release3, compared with a $300 million release in third quarter 2014 |
▪ | Maintained strong capital levels4 and continued share repurchases: |
◦ | Common Equity Tier 1 ratio under Basel III (fully phased-in) of 10.7 percent |
◦ | Period-end common shares outstanding down 36.8 million from second quarter 2015 |
1 Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
2 See table on page 4 for more information on core and non-strategic/liquidating loan portfolios.
3 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
4 See table on page 35 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.
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Selected Financial Information
Quarter ended | |||||||||
Sep 30, 2015 | Jun 30, 2015 | Sep 30, 2014 | |||||||
Earnings | |||||||||
Diluted earnings per common share | $ | 1.05 | 1.03 | 1.02 | |||||
Wells Fargo net income (in billions) | 5.80 | 5.72 | 5.73 | ||||||
Return on assets (ROA) | 1.32 | % | 1.33 | 1.40 | |||||
Return on equity (ROE) | 12.62 | 12.71 | 13.10 | ||||||
Asset Quality | |||||||||
Net charge-offs (annualized) as a % of average total loans | 0.31 | % | 0.30 | 0.32 | |||||
Allowance for credit losses as a % of total loans | 1.39 | 1.42 | 1.61 | ||||||
Allowance for credit losses as a % of annualized net charge-offs | 450 | 484 | 509 | ||||||
Other | |||||||||
Revenue (in billions) | $ | 21.9 | 21.3 | 21.2 | |||||
Efficiency ratio | 56.7 | % | 58.5 | 57.7 | |||||
Average loans (in billions) | $ | 895.1 | 870.4 | 833.2 | |||||
Average deposits (in billions) | 1,198.9 | 1,185.3 | 1,127.0 | ||||||
Net interest margin | 2.96 | % | 2.97 | 3.06 |
SAN FRANCISCO – Wells Fargo & Company (NYSE:WFC) reported net income of $5.8 billion, or $1.05 per diluted common share, for third quarter 2015, compared with $5.7 billion, or $1.02 per share, for third quarter 2014, and $5.7 billion, or $1.03 per share, for second quarter 2015.
"Wells Fargo's strong third quarter results reflected the ability of our diversified business model to generate consistent financial performance in an uneven economic environment while continuing to meet our customers' financial needs," said Chairman and CEO John Stumpf. "Compared with a year ago, we grew loans, deposits and capital, and returned more capital to shareholders through dividends and share buybacks. Our balance sheet and credit results remained strong and our 265,000 team members continue to focus on helping our customers succeed financially."
Chief Financial Officer John Shrewsberry said, "Wells Fargo reported a solid $5.8 billion of net income for the third quarter. Revenue increased on both a linked quarter and year over year basis, on growth in both net interest income and noninterest income. We generated positive operating leverage in the quarter, as our expenses declined, and we remained within our targeted efficiency ratio range. Our return on equity and return on assets also remained within our targeted ranges, and we increased our net payout ratio5 to shareholders to 60 percent from 54 percent in second quarter."
5 Net payout ratio means the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock.
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Net Interest Income
Net interest income increased $187 million from second quarter 2015 to $11.5 billion, primarily driven by growth in investment securities and loans, including the full quarter benefit of the GE Capital loan purchase and related financing transaction that settled late in the second quarter. The third quarter also included one additional day, accounting for approximately one third of the increase in net interest income relative to the second quarter. These benefits were partially offset by reduced income from variable sources including purchased credit-impaired (PCI) loan recoveries, periodic dividends, and loan fees included in interest income.
Net interest margin was 2.96 percent, down 1 basis point from second quarter 2015. Balance sheet growth and repricing, driven by securities purchases and higher loan balances, improved the net interest margin by approximately 5 basis points linked-quarter. These benefits were offset by growth in customer deposits, which had a minimal impact to net interest income, but was dilutive to the net interest margin by 3 basis points, and by lower income from variable sources, which reduced the margin by 3 basis points.
Noninterest Income
Noninterest income was $10.4 billion, up from $10.0 billion in second quarter 2015, driven by higher equity investment gains, deposit service charges, lease income and card fees. Other noninterest income was also higher in the quarter, primarily due to the impact of lower interest rates on our debt hedging results. Offsetting this growth were lower gains from trading activities, driven by lower deferred compensation plan investment results (largely offset in employee benefits expense), debt securities gains, trust and investment fees, and seasonally lower crop insurance fees.
Mortgage banking noninterest income was $1.6 billion, down $116 million from second quarter. During the third quarter, residential mortgage originations were $55 billion, down $7 billion linked quarter. The production margin on residential held-for-sale mortgage originations6 was 1.88 percent, compared with 1.75 percent in second quarter. Net mortgage servicing rights (MSRs) results were $253 million, compared with $107 million in second quarter 2015.
Noninterest Expense
Noninterest expense declined $70 million from the prior quarter to $12.4 billion, primarily due to lower deferred compensation expense in employee benefits. This decline was partially offset by a $126 million contribution to the Wells Fargo Foundation, higher salaries expense, and increased project-related outside professional services expense. The efficiency ratio improved to 56.7 percent in third quarter 2015, compared with 58.5 percent in the prior quarter. The Company expects to operate at the higher end of its targeted efficiency ratio range of 55 to 59 percent for full year 2015.
6 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 40 for more information.
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Loans
Total loans were $903.2 billion at September 30, 2015, up $14.8 billion from June 30, 2015. Growth was broad-based and was driven by commercial and industrial, and 1-4 family first mortgage loans. Core loan growth was $17.1 billion, as non-strategic/liquidating portfolios declined $2.3 billion in the quarter. Total average loans were $895.1 billion in the third quarter, up $24.6 billion from the prior quarter, and included the benefit of the GE Capital loan purchase and related financing transaction that settled late in the second quarter.
September 30, 2015 | June 30, 2015 | |||||||||||||||||
(in millions) | Core | Non-strategic and liquidating (a) | Total | Core | Non-strategic and liquidating | Total | ||||||||||||
Commercial | $ | 446,832 | 506 | 447,338 | 437,430 | 592 | 438,022 | |||||||||||
Consumer | 402,363 | 53,532 | 455,895 | 394,670 | 55,767 | 450,437 | ||||||||||||
Total loans | $ | 849,195 | 54,038 | 903,233 | 832,100 | 56,359 | 888,459 | |||||||||||
Change from prior quarter: | $ | 17,095 | (2,321 | ) | 14,774 | 29,423 | (2,195 | ) | 27,228 |
(a) | See table on page 32 for additional information on non-strategic/liquidating loan portfolios. Management believes that the above information provides useful disclosure regarding the Company’s ongoing loan portfolios. |
Investment Securities
Investment securities were $345.1 billion at September 30, 2015, up $4.3 billion from second quarter. Purchases of approximately $19 billion (primarily federal agency mortgage-backed securities and U.S. Treasury securities), were partially offset by maturities, amortization and sales.
Net unrealized available-for-sale securities gains of $4.9 billion at September 30, 2015, declined from $5.7 billion at June 30, 2015, as the benefit of lower interest rates was offset by reductions arising from realized gains (both debt and equity), and widening credit spreads.
Deposits
Total average deposits for third quarter 2015 were $1.2 trillion, up 6 percent from a year ago and up 5 percent (annualized) from second quarter 2015, driven by both commercial and consumer growth. The average deposit cost for third quarter 2015 was 8 basis points, which was down 2 basis points from a year ago and flat compared with the prior quarter.
Capital
Capital levels remained strong in the third quarter, with Common Equity Tier 1 under Basel III (fully phased-in) of $141.9 billion. The Common Equity Tier 1 ratio under Basel III (fully phased-in) was 10.7 percent4. In third quarter 2015, the Company purchased 51.7 million shares of its common stock. The Company also paid a quarterly common stock dividend of $0.375 per share, up from $0.35 per share a year ago.
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Credit Quality
“Credit performance remained strong during the quarter," said Chief Risk Officer Mike Loughlin. "The quarterly loss rate (annualized) remained low at 0.31 percent and nonperforming assets declined by $1.1 billion, or 30 percent (annualized), from the prior quarter driven by lower nonaccrual loans. The allowance for credit losses in the third quarter remained flat (no reserve release) as continued credit quality improvements in the residential real estate portfolio were offset by higher commercial reserves reflecting deterioration in the energy sector. Future allowance levels may increase or decrease based on a variety of factors, including loan growth, portfolio performance and general economic conditions.”
Net Loan Charge-offs
The quarterly loss rate (annualized) of 0.31 percent included commercial losses of 0.08 percent and consumer losses of 0.53 percent. Credit losses were $703 million in third quarter 2015, compared with $650 million in the second quarter, an 8 percent increase, primarily driven by a seasonal increase in the auto portfolio.
Net Loan Charge-Offs
Quarter ended | ||||||||||||||||||||
September 30, 2015 | June 30, 2015 | March 31, 2015 | ||||||||||||||||||
($ in millions) | Net loan charge- offs | As a % of average loans (a) | Net loan charge- offs | As a % of average loans (a) | Net loan charge- offs | As a % of average loans (a) | ||||||||||||||
Commercial: | ||||||||||||||||||||
Commercial and industrial | $ | 122 | 0.17 | % | $ | 81 | 0.12 | % | $ | 64 | 0.10 | % | ||||||||
Real estate mortgage | (23 | ) | (0.08 | ) | (15 | ) | (0.05 | ) | (11 | ) | (0.04 | ) | ||||||||
Real estate construction | (8 | ) | (0.15 | ) | (6 | ) | (0.11 | ) | (9 | ) | (0.19 | ) | ||||||||
Lease financing | 3 | 0.11 | 2 | 0.06 | — | — | ||||||||||||||
Total commercial | 94 | 0.08 | 62 | 0.06 | 44 | 0.04 | ||||||||||||||
Consumer: | ||||||||||||||||||||
Real estate 1-4 family first mortgage | 62 | 0.09 | 67 | 0.10 | 83 | 0.13 | ||||||||||||||
Real estate 1-4 family junior lien mortgage | 89 | 0.64 | 94 | 0.66 | 123 | 0.85 | ||||||||||||||
Credit card | 216 | 2.71 | 243 | 3.21 | 239 | 3.19 | ||||||||||||||
Automobile | 113 | 0.76 | 68 | 0.48 | 101 | 0.73 | ||||||||||||||
Other revolving credit and installment | 129 | 1.35 | 116 | 1.26 | 118 | 1.32 | ||||||||||||||
Total consumer | 609 | 0.53 | 588 | 0.53 | 664 | 0.60 | ||||||||||||||
Total | $ | 703 | 0.31 | % | $ | 650 | 0.30 | % | $ | 708 | 0.33 | % | ||||||||
(a) | Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 31 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios. |
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Nonperforming Assets
Nonperforming assets declined by $1.1 billion from second quarter 2015 to $13.3 billion. Nonaccrual loans decreased $906 million to $11.5 billion on improvements in several loan categories, including a $718 million decline in consumer real estate. Foreclosed assets were $1.8 billion, down from $2.0 billion in second quarter 2015.
Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
September 30, 2015 | June 30, 2015 | March 31, 2015 | ||||||||||||||||||
($ in millions) | Total balances | As a % of total loans | Total balances | As a % of total loans | Total balances | As a % of total loans | ||||||||||||||
Commercial: | ||||||||||||||||||||
Commercial and industrial | $ | 1,031 | 0.35 | % | $ | 1,079 | 0.38 | % | $ | 663 | 0.24 | % | ||||||||
Real estate mortgage | 1,125 | 0.93 | 1,250 | 1.04 | 1,324 | 1.18 | ||||||||||||||
Real estate construction | 151 | 0.70 | 165 | 0.77 | 182 | 0.91 | ||||||||||||||
Lease financing | 29 | 0.24 | 28 | 0.23 | 23 | 0.19 | ||||||||||||||
Total commercial | 2,336 | 0.52 | 2,522 | 0.58 | 2,192 | 0.53 | ||||||||||||||
Consumer: | ||||||||||||||||||||
Real estate 1-4 family first mortgage | 7,425 | 2.74 | 8,045 | 3.00 | 8,345 | 3.15 | ||||||||||||||
Real estate 1-4 family junior lien mortgage | 1,612 | 2.95 | 1,710 | 3.04 | 1,798 | 3.11 | ||||||||||||||
Automobile | 123 | 0.21 | 126 | 0.22 | 133 | 0.24 | ||||||||||||||
Other revolving credit and installment | 41 | 0.11 | 40 | 0.11 | 42 | 0.12 | ||||||||||||||
Total consumer | 9,201 | 2.02 | 9,921 | 2.20 | 10,318 | 2.31 | ||||||||||||||
Total nonaccrual loans | 11,537 | 1.28 | 12,443 | 1.40 | 12,510 | 1.45 | ||||||||||||||
Foreclosed assets: | ||||||||||||||||||||
Government insured/guaranteed | 502 | 588 | 772 | |||||||||||||||||
Non-government insured/guaranteed | 1,265 | 1,370 | 1,557 | |||||||||||||||||
Total foreclosed assets | 1,767 | 1,958 | 2,329 | |||||||||||||||||
Total nonperforming assets | $ | 13,304 | 1.47 | % | $ | 14,401 | 1.62 | % | $ | 14,839 | 1.72 | % | ||||||||
Change from prior quarter: | ||||||||||||||||||||
Total nonaccrual loans | $ | (906 | ) | $ | (67 | ) | $ | (338 | ) | |||||||||||
Total nonperforming assets | (1,097 | ) | (438 | ) | (618 | ) |
Loans 90 Days or More Past Due and Still Accruing
Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $872 million at September 30, 2015, up from $756 million at June 30, 2015. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $13.5 billion at September 30, 2015, down from $14.4 billion at June 30, 2015.
Allowance for Credit Losses
The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.6 billion at September 30, 2015, unchanged from June 30, 2015. The allowance coverage to total loans was 1.39 percent, compared with 1.42 percent in second quarter 2015. The allowance covered 4.5 times annualized third quarter net charge-offs, compared with 4.8 times in the prior quarter. The allowance coverage to nonaccrual loans was 109 percent at September 30, 2015, compared with 101 percent at June 30, 2015. “We believe the allowance was appropriate for losses inherent in the loan portfolio at September 30, 2015,” said Loughlin.
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Business Segment Performance
Wells Fargo defines its operating segments by product type and customer segment. Effective third quarter 2015, we realigned our asset management business from Wholesale Banking to Wealth and Investment Management (WIM) (formerly Wealth, Brokerage and Retirement) and realigned our reinsurance business from WIM and our strategic auto investments from Community Banking to Wholesale Banking. Results for these operating segments were revised for prior periods to reflect the impact of these realignments. Segment net income for each of the three business segments was:
Quarter ended | |||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Sep 30, 2014 | ||||||
Community Banking | $ | 3,686 | 3,350 | 3,461 | |||||
Wholesale Banking | 1,772 | 2,035 | 1,929 | ||||||
Wealth and Investment Management | 606 | 586 | 550 |
Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and auto, student, and small business lending. Community Banking also offers investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. through its Regional Banking and Wells Fargo Home Lending business units.
Selected Financial Information
Quarter ended | |||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Sep 30, 2014 | ||||||
Total revenue | $ | 13,618 | 12,645 | 12,811 | |||||
Provision for credit losses | 658 | 363 | 465 | ||||||
Noninterest expense | 7,219 | 7,161 | 7,049 | ||||||
Segment net income | 3,686 | 3,350 | 3,461 | ||||||
(in billions) | |||||||||
Average loans | 511.0 | 506.2 | 498.3 | ||||||
Average assets | 977.1 | 987.8 | 944.8 | ||||||
Average core deposits | 690.5 | 685.7 | 646.9 |
Community Banking reported net income of $3.7 billion, up $336 million, or 10 percent, from second quarter 2015. Revenue of $13.6 billion increased $973 million, or 8 percent, from second quarter 2015 due to gains from sale of equity investments, as well as higher net interest income, deposit service charges, and other income, partially offset by lower mortgage banking fees. Noninterest expense increased $58 million, or 1 percent, primarily due to a donation to the Wells Fargo Foundation, partially offset by lower advertising costs and operating losses. The provision for credit losses increased $295 million from the prior quarter primarily due to the absence of a reserve release in the quarter.
Net income was up $225 million, or 7 percent, from third quarter 2014. Revenue was up $807 million, or 6 percent, compared with a year ago due to higher net interest income, market sensitive revenue, primarily gains from sale of equity investments, debit and credit card fees, and trust and investment fees. Noninterest expense increased $170 million, or 2 percent, from a year ago driven by higher personnel costs and a donation to the Wells Fargo Foundation, partially offset by lower foreclosed assets and travel and entertainment expenses. The provision for
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credit losses increased $193 million from a year ago as the $74 million improvement in net charge-offs was more than offset by a $267 million lower reserve release.
Regional Banking
• | Retail banking |
◦ | Primary consumer checking customers7 up 5.8 percent year-over-year8 |
◦ | Retail Bank household cross-sell ratio of 6.13 products per household, compared with 6.15 year-over-year8,9 |
• | Small Business/Business Banking |
◦ | Primary business checking customers7 up 5.0 percent year-over-year8 |
◦ | Combined Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) were up 6 percent in the first nine months of 2015, compared with the same period in the prior year |
◦ | For the 13th consecutive year, America’s #1 small business lender (in both loans under $100,000 and under $1 million) and #1 lender to small businesses in low- and moderate-income areas (2014 CRA data, released August 2015) |
◦ | For seventh consecutive year, Wells Fargo was nation’s #1 SBA 7(a) small business lender in dollars, and #1 in units for the first time in the full-year results10 |
• | Online and Mobile Banking |
◦ | 26.3 million active online customers, up 8 percent year-over-year8 |
◦ | 16.0 million active mobile customers, up 17 percent year-over-year8 |
◦ | #1 ranking in Keynote’s Small Business Banking Scorecard; best in “Functionality” (August 2015) |
Consumer Lending Group
• | Home Lending |
◦ | Originations of $55 billion, down from $62 billion in prior quarter |
◦ | Applications of $73 billion, down from $81 billion in prior quarter |
◦ | Application pipeline of $34 billion at quarter end, down from $38 billion at June 30, 2015 |
• | Consumer Credit |
◦ | Credit card penetration in retail banking households rose to 42.9 percent8, up from 39.7 percent in prior year |
◦ | Auto originations of $8.3 billion in third quarter, up 2 percent from prior quarter and 10 percent from prior year |
7 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
8 Data as of August 2015, comparisons with August 2014.
9 August 2015 Retail Bank household cross-sell ratio includes the impact of the sale of government guaranteed student loans in fourth quarter 2014.
10 U.S. SBA data, federal fiscal years 2009-2015 (year-ending September).
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Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $20 million. Products and business segments include Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments, and Asset Backed Finance.
Selected Financial Information
Quarter ended | |||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Sep 30, 2014 | ||||||
Total revenue | $ | 5,570 | 5,862 | 5,667 | |||||
Provision (reversal of provision) for credit losses | 45 | (58 | ) | (85 | ) | ||||
Noninterest expense | 3,036 | 3,035 | 2,997 | ||||||
Segment net income | 1,772 | 2,035 | 1,929 | ||||||
(in billions) | |||||||||
Average loans | 363.1 | 343.9 | 316.8 | ||||||
Average assets | 652.6 | 627.7 | 562.0 | ||||||
Average core deposits | 311.3 | 304.1 | 278.3 |
Wholesale Banking reported net income of $1.8 billion, down $263 million, or 13 percent, from second quarter 2015. Revenue of $5.6 billion decreased $292 million, or 5 percent, from prior quarter. Net interest income increased $13 million, as the benefit of strong broad-based loan growth and higher other earning assets were largely offset by lower loan resolutions. Noninterest income decreased $305 million, or 11 percent, due to lower gains on equity fund investments and debt securities related to higher other-than-temporary impairment on energy sector investments, mortgage banking fees in real estate capital markets, investment banking fees, trading revenues and seasonally lower insurance fees. Noninterest expense increased $1 million as lower variable compensation expenses were more than offset by higher operating losses. The provision for credit losses increased $103 million from prior quarter due to the absence of a reserve release and increased net charge-offs.
Net income was down $157 million, or 8 percent, from third quarter 2014. Revenue decreased $97 million, or 2 percent, from third quarter 2014 as $67 million, or 2 percent, growth in net interest income related to strong loan and deposit growth was more than offset by lower noninterest income. Noninterest income declined $164 million, or 6 percent, on lower gains on equity investments and lower mortgage banking and commercial real estate brokerage fees. Noninterest expense increased $39 million, or 1 percent, from a year ago primarily due to higher personnel expenses related to growth initiatives, compliance, and regulatory requirements, as well as increased operating losses. The provision for credit losses increased $130 million from a year ago.
• | Average loans increased 15 percent in third quarter 2015, compared with third quarter 2014, on broad-based growth, including the benefit from loan acquisitions, with growth in asset-backed finance, capital finance, commercial banking, commercial real estate, corporate banking, equipment finance, government and institutional banking, and real estate capital markets |
• | Cross-sell of 7.3 products per relationship, up 0.1 from third quarter 201411 |
• | Treasury management revenue up 9 percent from third quarter 2014 |
11 Cross-sell reported on a one-quarter lag.
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Wealth and Investment Management (formerly Wealth, Brokerage and Retirement) 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 Advantage Funds.
Selected Financial Information
Quarter ended | |||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Sep 30, 2014 | ||||||
Total revenue | $ | 3,878 | 3,976 | 3,805 | |||||
Reversal of provision for credit losses | (6 | ) | (10 | ) | (25 | ) | |||
Noninterest expense | 2,909 | 3,038 | 2,945 | ||||||
Segment net income | 606 | 586 | 550 | ||||||
(in billions) | |||||||||
Average loans | 61.1 | 59.3 | 52.6 | ||||||
Average assets | 192.6 | 189.1 | 185.2 | ||||||
Average core deposits | 163.0 | 159.5 | 153.7 |
Wealth and Investment Management (WIM) reported net income of $606 million, up $20 million, or 3 percent, from second quarter 2015. Revenue of $3.9 billion decreased $98 million, or 2 percent, from the prior quarter, primarily driven by lower gains on deferred compensation plan investments (offset in compensation expense), asset-based fees and transaction revenue, partially offset by higher net interest income. Noninterest expense decreased $129 million, or 4 percent, from the prior quarter, primarily due to lower personnel expenses driven by lower deferred compensation plan expense (offset in trading revenue), and lower operating losses reflecting decreased litigation accruals. The reversal of the provision for credit losses decreased $4 million from second quarter 2015.
Net income was up $56 million, or 10 percent, from third quarter 2014. Revenue increased $73 million, or 2 percent, from a year ago on growth in net interest income, partially offset by lower gains on deferred compensation plan investments (offset in compensation expense). Noninterest expense decreased $36 million, or 1 percent, from a year ago, primarily due to lower personnel expenses driven by lower deferred compensation plan expense (offset in trading revenue), partially offset by higher non-personnel expenses. The reversal of the provision for credit losses decreased $19 million from a year ago due to the absence of a reserve release in the quarter.
Retail Brokerage
• | Client assets of $1.4 trillion, down 4 percent from prior year |
• | Managed account assets of $409 billion, flat compared with prior year |
• | Strong loan growth, with average balances up 26 percent from prior year largely due to growth in non-conforming mortgage loans and security-based lending |
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Wealth Management
• | Client assets of $218 billion, down 1 percent from prior year |
• | Average loan balances up 13 percent over prior year primarily driven by growth in non-conforming mortgage loans, commercial loans and security-based lending |
Retirement
• | IRA assets of $344 billion, down 3 percent from prior year |
• | Institutional Retirement plan assets of $330 billion, down 2 percent from prior year |
Asset Management
• | Total assets under management of $480 billion, down $4 billion from third quarter 2014 as fixed income net client inflows were more than offset by equity and stable value outflows |
Brokerage and Wealth cross-sell ratio of 10.52 products per household, up from 10.44 a year ago8
Conference Call
The Company will host a live conference call on Wednesday, October 14, at 7 a.m. PDT (10 a.m. EDT). You may participate by dialing 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~101415.
A replay of the conference call will be available beginning at 10 a.m. PDT (1 p.m. EDT) on Wednesday, October 14 through Sunday, October 25. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #6954691. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~101415.
- 12 -
Forward-Looking Statements
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we may make forward-looking statements in our other documents filed or furnished with the SEC, and our management may make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “target,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar references to future periods. In particular, forward-looking statements include, but are not limited to, statements we make about: (i) the future operating or financial performance of the Company, including our outlook for future growth; (ii) our noninterest expense and efficiency ratio; (iii) future credit quality and performance, including our expectations regarding future loan losses and allowance levels; (iv) the appropriateness of the allowance for credit losses; (v) our expectations regarding net interest income and net interest margin; (vi) loan growth or the reduction or mitigation of risk in our loan portfolios; (vii) future capital levels or targets and our estimated Common Equity Tier 1 ratio under Basel III capital standards; (viii) the performance of our mortgage business and any related exposures; (ix) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (x) future common stock dividends, common share repurchases and other uses of capital; (xi) our targeted range for return on assets and return on equity; (xii) the outcome of contingencies, such as legal proceedings; and (xiii) the Company’s plans, objectives and strategies.
Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:
• | current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and the overall slowdown in global economic growth; |
• | our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms; |
• | financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services; |
• | the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications; |
• | the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans; |
• | negative effects relating to our mortgage servicing and foreclosure practices, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures; |
• | our ability to realize our efficiency ratio target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters; |
• | the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; |
• | significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased |
- 13 -
funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our investment securities portfolio;
• | the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses; |
• | reputational damage from negative publicity, protests, fines, penalties and other negative consequences from regulatory violations and legal actions; |
• | a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks; |
• | the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; |
• | fiscal and monetary policies of the Federal Reserve Board; and |
• | the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014. |
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, 2014, 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.
- 14 -
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.8 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through 8,700 locations, 12,800 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 30 on Fortune’s 2015 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially.
# # #
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Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS
Pages | |
Summary Information | |
Income | |
Balance Sheet | |
Loans | |
Changes in Allowance for Credit Losses | |
Equity | |
Operating Segments | |
Other | |
- 16 -
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
Quarter ended | % Change Sep 30, 2015 from | Nine months ended | |||||||||||||||||||||||
($ in millions, except per share amounts) | Sep 30, 2015 | Jun 30, 2015 | Sep 30, 2014 | Jun 30, 2015 | Sep 30, 2014 | Sep 30, 2015 | Sep 30, 2014 | % Change | |||||||||||||||||
For the Period | |||||||||||||||||||||||||
Wells Fargo net income | $ | 5,796 | 5,719 | 5,729 | 1 | % | 1 | $ | 17,319 | 17,348 | — | % | |||||||||||||
Wells Fargo net income applicable to common stock | 5,443 | 5,363 | 5,408 | 1 | 1 | 16,267 | 16,439 | (1 | ) | ||||||||||||||||
Diluted earnings per common share | 1.05 | 1.03 | 1.02 | 2 | 3 | 3.12 | 3.08 | 1 | |||||||||||||||||
Profitability ratios (annualized): | |||||||||||||||||||||||||
Wells Fargo net income to average assets (ROA) | 1.32 | % | 1.33 | 1.40 | (1 | ) | (6 | ) | 1.34 | 1.48 | (9 | ) | |||||||||||||
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) | 12.62 | 12.71 | 13.10 | (1 | ) | (4 | ) | 12.83 | 13.60 | (6 | ) | ||||||||||||||
Efficiency ratio (1) | 56.7 | 58.5 | 57.7 | (3 | ) | (2 | ) | 58.0 | 57.9 | — | |||||||||||||||
Total revenue | $ | 21,875 | 21,318 | 21,213 | 3 | 3 | $ | 64,471 | 62,904 | 2 | |||||||||||||||
Pre-tax pre-provision profit (PTPP) (2) | 9,476 | 8,849 | 8,965 | 7 | 6 | 27,096 | 26,514 | 2 | |||||||||||||||||
Dividends declared per common share | 0.375 | 0.375 | 0.35 | — | 7 | 1.10 | 1.00 | 10 | |||||||||||||||||
Average common shares outstanding | 5,125.8 | 5,151.9 | 5,225.9 | (1 | ) | (2 | ) | 5,145.9 | 5,252.2 | (2 | ) | ||||||||||||||
Diluted average common shares outstanding | 5,193.8 | 5,220.5 | 5,310.4 | (1 | ) | (2 | ) | 5,220.3 | 5,339.2 | (2 | ) | ||||||||||||||
Average loans | $ | 895,095 | 870,446 | 833,199 | 3 | 7 | $ | 876,384 | 829,378 | 6 | |||||||||||||||
Average assets | 1,746,402 | 1,729,278 | 1,617,942 | 1 | 8 | 1,727,967 | 1,569,621 | 10 | |||||||||||||||||
Average total deposits | 1,198,874 | 1,185,304 | 1,127,049 | 1 | 6 | 1,186,412 | 1,102,129 | 8 | |||||||||||||||||
Average core deposits (3) | 1,093,608 | 1,079,160 | 1,012,219 | 1 | 8 | 1,078,778 | 992,723 | 9 | |||||||||||||||||
Average retail core deposits (4) | 749,838 | 741,500 | 703,062 | 1 | 7 | 740,984 | 697,535 | 6 | |||||||||||||||||
Net interest margin | 2.96 | % | 2.97 | 3.06 | — | (3 | ) | 2.96 | 3.13 | (5 | ) | ||||||||||||||
At Period End | |||||||||||||||||||||||||
Investment securities | $ | 345,074 | 340,769 | 289,009 | 1 | 19 | $ | 345,074 | 289,009 | 19 | |||||||||||||||
Loans | 903,233 | 888,459 | 838,883 | 2 | 8 | 903,233 | 838,883 | 8 | |||||||||||||||||
Allowance for loan losses | 11,659 | 11,754 | 12,681 | (1 | ) | (8 | ) | 11,659 | 12,681 | (8 | ) | ||||||||||||||
Goodwill | 25,684 | 25,705 | 25,705 | — | — | 25,684 | 25,705 | — | |||||||||||||||||
Assets | 1,751,265 | 1,720,617 | 1,636,855 | 2 | 7 | 1,751,265 | 1,636,855 | 7 | |||||||||||||||||
Deposits | 1,202,179 | 1,185,828 | 1,130,625 | 1 | 6 | 1,202,179 | 1,130,625 | 6 | |||||||||||||||||
Core deposits (3) | 1,094,083 | 1,082,634 | 1,016,478 | 1 | 8 | 1,094,083 | 1,016,478 | 8 | |||||||||||||||||
Wells Fargo stockholders’ equity | 193,051 | 189,558 | 182,481 | 2 | 6 | 193,051 | 182,481 | 6 | |||||||||||||||||
Total equity | 194,043 | 190,676 | 182,990 | 2 | 6 | 194,043 | 182,990 | 6 | |||||||||||||||||
Common shares outstanding | 5,108.5 | 5,145.2 | 5,215.0 | (1 | ) | (2 | ) | 5,108.5 | 5,215.0 | (2 | ) | ||||||||||||||
Book value per common share | $ | 33.69 | 32.96 | 31.55 | 2 | 7 | $ | 33.69 | 31.55 | 7 | |||||||||||||||
Common stock price: | |||||||||||||||||||||||||
High | 58.77 | 58.26 | 53.80 | 1 | 9 | 58.77 | 53.80 | 9 | |||||||||||||||||
Low | 47.75 | 53.56 | 49.47 | (11 | ) | (3 | ) | 47.75 | 44.17 | 8 | |||||||||||||||
Period end | 51.35 | 56.24 | 51.87 | (9 | ) | (1 | ) | 51.35 | 51.87 | (1 | ) | ||||||||||||||
Team members (active, full-time equivalent) | 265,200 | 265,800 | 263,900 | — | — | 265,200 | 263,900 | — |
(1) | The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). |
(2) | 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. |
(3) | Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). |
(4) | Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. |
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
Quarter ended | |||||||||||||||
($ in millions, except per share amounts) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
For the Quarter | |||||||||||||||
Wells Fargo net income | $ | 5,796 | 5,719 | 5,804 | 5,709 | 5,729 | |||||||||
Wells Fargo net income applicable to common stock | 5,443 | 5,363 | 5,461 | 5,382 | 5,408 | ||||||||||
Diluted earnings per common share | 1.05 | 1.03 | 1.04 | 1.02 | 1.02 | ||||||||||
Profitability ratios (annualized): | |||||||||||||||
Wells Fargo net income to average assets (ROA) | 1.32 | % | 1.33 | 1.38 | 1.36 | 1.40 | |||||||||
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) | 12.62 | 12.71 | 13.17 | 12.84 | 13.10 | ||||||||||
Efficiency ratio (1) | 56.7 | 58.5 | 58.8 | 59.0 | 57.7 | ||||||||||
Total revenue | $ | 21,875 | 21,318 | 21,278 | 21,443 | 21,213 | |||||||||
Pre-tax pre-provision profit (PTPP) (2) | 9,476 | 8,849 | 8,771 | 8,796 | 8,965 | ||||||||||
Dividends declared per common share | 0.375 | 0.375 | 0.35 | 0.35 | 0.35 | ||||||||||
Average common shares outstanding | 5,125.8 | 5,151.9 | 5,160.4 | 5,192.5 | 5,225.9 | ||||||||||
Diluted average common shares outstanding | 5,193.8 | 5,220.5 | 5,243.6 | 5,279.2 | 5,310.4 | ||||||||||
Average loans | $ | 895,095 | 870,446 | 863,261 | 849,429 | 833,199 | |||||||||
Average assets | 1,746,402 | 1,729,278 | 1,707,798 | 1,663,760 | 1,617,942 | ||||||||||
Average total deposits | 1,198,874 | 1,185,304 | 1,174,793 | 1,149,796 | 1,127,049 | ||||||||||
Average core deposits (3) | 1,093,608 | 1,079,160 | 1,063,234 | 1,035,999 | 1,012,219 | ||||||||||
Average retail core deposits (4) | 749,838 | 741,500 | 731,413 | 714,572 | 703,062 | ||||||||||
Net interest margin | 2.96 | % | 2.97 | 2.95 | 3.04 | 3.06 | |||||||||
At Quarter End | |||||||||||||||
Investment securities | $ | 345,074 | 340,769 | 324,736 | 312,925 | 289,009 | |||||||||
Loans | 903,233 | 888,459 | 861,231 | 862,551 | 838,883 | ||||||||||
Allowance for loan losses | 11,659 | 11,754 | 12,176 | 12,319 | 12,681 | ||||||||||
Goodwill | 25,684 | 25,705 | 25,705 | 25,705 | 25,705 | ||||||||||
Assets | 1,751,265 | 1,720,617 | 1,737,737 | 1,687,155 | 1,636,855 | ||||||||||
Deposits | 1,202,179 | 1,185,828 | 1,196,663 | 1,168,310 | 1,130,625 | ||||||||||
Core deposits (3) | 1,094,083 | 1,082,634 | 1,086,993 | 1,054,348 | 1,016,478 | ||||||||||
Wells Fargo stockholders’ equity | 193,051 | 189,558 | 188,796 | 184,394 | 182,481 | ||||||||||
Total equity | 194,043 | 190,676 | 189,964 | 185,262 | 182,990 | ||||||||||
Common shares outstanding | 5,108.5 | 5,145.2 | 5,162.9 | 5,170.3 | 5,215.0 | ||||||||||
Book value per common share | $ | 33.69 | 32.96 | 32.70 | 32.19 | 31.55 | |||||||||
Common stock price: | |||||||||||||||
High | 58.77 | 58.26 | 56.29 | 55.95 | 53.80 | ||||||||||
Low | 47.75 | 53.56 | 50.42 | 46.44 | 49.47 | ||||||||||
Period end | 51.35 | 56.24 | 54.40 | 54.82 | 51.87 | ||||||||||
Team members (active, full-time equivalent) | 265,200 | 265,800 | 266,000 | 264,500 | 263,900 |
(1) | The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). |
(2) | 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. |
(3) | Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). |
(4) | Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. |
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Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
Quarter ended September 30, | % | Nine Months Ended September 30, | % | ||||||||||||||||
(in millions, except per share amounts) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||
Interest income | |||||||||||||||||||
Trading assets | $ | 485 | 427 | 14 | % | $ | 1,413 | 1,208 | 17 | % | |||||||||
Investment securities | 2,289 | 2,066 | 11 | 6,614 | 6,288 | 5 | |||||||||||||
Mortgages held for sale | 223 | 215 | 4 | 609 | 580 | 5 | |||||||||||||
Loans held for sale | 4 | 50 | (92 | ) | 14 | 53 | (74 | ) | |||||||||||
Loans | 9,216 | 8,963 | 3 | 27,252 | 26,561 | 3 | |||||||||||||
Other interest income | 228 | 243 | (6 | ) | 732 | 679 | 8 | ||||||||||||
Total interest income | 12,445 | 11,964 | 4 | 36,634 | 35,369 | 4 | |||||||||||||
Interest expense | |||||||||||||||||||
Deposits | 232 | 273 | (15 | ) | 722 | 827 | (13 | ) | |||||||||||
Short-term borrowings | 12 | 15 | (20 | ) | 51 | 41 | 24 | ||||||||||||
Long-term debt | 655 | 629 | 4 | 1,879 | 1,868 | 1 | |||||||||||||
Other interest expense | 89 | 106 | (16 | ) | 269 | 286 | (6 | ) | |||||||||||
Total interest expense | 988 | 1,023 | (3 | ) | 2,921 | 3,022 | (3 | ) | |||||||||||
Net interest income | 11,457 | 10,941 | 5 | 33,713 | 32,347 | 4 | |||||||||||||
Provision for credit losses | 703 | 368 | 91 | 1,611 | 910 | 77 | |||||||||||||
Net interest income after provision for credit losses | 10,754 | 10,573 | 2 | 32,102 | 31,437 | 2 | |||||||||||||
Noninterest income | |||||||||||||||||||
Service charges on deposit accounts | 1,335 | 1,311 | 2 | 3,839 | 3,809 | 1 | |||||||||||||
Trust and investment fees | 3,570 | 3,554 | — | 10,957 | 10,575 | 4 | |||||||||||||
Card fees | 953 | 875 | 9 | 2,754 | 2,506 | 10 | |||||||||||||
Other fees | 1,099 | 1,090 | 1 | 3,284 | 3,225 | 2 | |||||||||||||
Mortgage banking | 1,589 | 1,633 | (3 | ) | 4,841 | 4,866 | (1 | ) | |||||||||||
Insurance | 376 | 388 | (3 | ) | 1,267 | 1,273 | — | ||||||||||||
Net gains from trading activities | (26 | ) | 168 | NM | 515 | 982 | (48 | ) | |||||||||||
Net gains on debt securities | 147 | 253 | (42 | ) | 606 | 407 | 49 | ||||||||||||
Net gains from equity investments | 920 | 712 | 29 | 1,807 | 2,008 | (10 | ) | ||||||||||||
Lease income | 189 | 137 | 38 | 476 | 399 | 19 | |||||||||||||
Other | 266 | 151 | 76 | 412 | 507 | (19 | ) | ||||||||||||
Total noninterest income | 10,418 | 10,272 | 1 | 30,758 | 30,557 | 1 | |||||||||||||
Noninterest expense | |||||||||||||||||||
Salaries | 4,035 | 3,914 | 3 | 11,822 | 11,437 | 3 | |||||||||||||
Commission and incentive compensation | 2,604 | 2,527 | 3 | 7,895 | 7,388 | 7 | |||||||||||||
Employee benefits | 821 | 931 | (12 | ) | 3,404 | 3,473 | (2 | ) | |||||||||||
Equipment | 459 | 457 | — | 1,423 | 1,392 | 2 | |||||||||||||
Net occupancy | 728 | 731 | — | 2,161 | 2,195 | (2 | ) | ||||||||||||
Core deposit and other intangibles | 311 | 342 | (9 | ) | 935 | 1,032 | (9 | ) | |||||||||||
FDIC and other deposit assessments | 245 | 229 | 7 | 715 | 697 | 3 | |||||||||||||
Other | 3,196 | 3,117 | 3 | 9,020 | 8,776 | 3 | |||||||||||||
Total noninterest expense | 12,399 | 12,248 | 1 | 37,375 | 36,390 | 3 | |||||||||||||
Income before income tax expense | 8,773 | 8,597 | 2 | 25,485 | 25,604 | — | |||||||||||||
Income tax expense | 2,790 | 2,642 | 6 | 7,832 | 7,788 | 1 | |||||||||||||
Net income before noncontrolling interests | 5,983 | 5,955 | — | 17,653 | 17,816 | (1 | ) | ||||||||||||
Less: Net income from noncontrolling interests | 187 | 226 | (17 | ) | 334 | 468 | (29 | ) | |||||||||||
Wells Fargo net income | $ | 5,796 | 5,729 | 1 | $ | 17,319 | 17,348 | — | |||||||||||
Less: Preferred stock dividends and other | 353 | 321 | 10 | 1,052 | 909 | 16 | |||||||||||||
Wells Fargo net income applicable to common stock | $ | 5,443 | 5,408 | 1 | $ | 16,267 | 16,439 | (1 | ) | ||||||||||
Per share information | |||||||||||||||||||
Earnings per common share | $ | 1.06 | 1.04 | 2 | $ | 3.16 | 3.13 | 1 |
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Diluted earnings per common share | 1.05 | 1.02 | 3 | 3.12 | 3.08 | 1 | |||||||||||||
Dividends declared per common share | 0.375 | 0.35 | 7 | 1.10 | 1.00 | 10 | |||||||||||||
Average common shares outstanding | 5,125.8 | 5,225.9 | (2 | ) | 5,145.9 | 5,252.2 | (2 | ) | |||||||||||
Diluted average common shares outstanding | 5,193.8 | 5,310.4 | (2 | ) | 5,220.3 | 5,339.2 | (2 | ) |
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter ended | |||||||||||||||
(in millions, except per share amounts) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Interest income | |||||||||||||||
Trading assets | $ | 485 | 483 | 445 | 477 | 427 | |||||||||
Investment securities | 2,289 | 2,181 | 2,144 | 2,150 | 2,066 | ||||||||||
Mortgages held for sale | 223 | 209 | 177 | 187 | 215 | ||||||||||
Loans held for sale | 4 | 5 | 5 | 25 | 50 | ||||||||||
Loans | 9,216 | 9,098 | 8,938 | 9,091 | 8,963 | ||||||||||
Other interest income | 228 | 250 | 254 | 253 | 243 | ||||||||||
Total interest income | 12,445 | 12,226 | 11,963 | 12,183 | 11,964 | ||||||||||
Interest expense | |||||||||||||||
Deposits | 232 | 232 | 258 | 269 | 273 | ||||||||||
Short-term borrowings | 12 | 21 | 18 | 18 | 15 | ||||||||||
Long-term debt | 655 | 620 | 604 | 620 | 629 | ||||||||||
Other interest expense | 89 | 83 | 97 | 96 | 106 | ||||||||||
Total interest expense | 988 | 956 | 977 | 1,003 | 1,023 | ||||||||||
Net interest income | 11,457 | 11,270 | 10,986 | 11,180 | 10,941 | ||||||||||
Provision for credit losses | 703 | 300 | 608 | 485 | 368 | ||||||||||
Net interest income after provision for credit losses | 10,754 | 10,970 | 10,378 | 10,695 | 10,573 | ||||||||||
Noninterest income | |||||||||||||||
Service charges on deposit accounts | 1,335 | 1,289 | 1,215 | 1,241 | 1,311 | ||||||||||
Trust and investment fees | 3,570 | 3,710 | 3,677 | 3,705 | 3,554 | ||||||||||
Card fees | 953 | 930 | 871 | 925 | 875 | ||||||||||
Other fees | 1,099 | 1,107 | 1,078 | 1,124 | 1,090 | ||||||||||
Mortgage banking | 1,589 | 1,705 | 1,547 | 1,515 | 1,633 | ||||||||||
Insurance | 376 | 461 | 430 | 382 | 388 | ||||||||||
Net gains from trading activities | (26 | ) | 133 | 408 | 179 | 168 | |||||||||
Net gains on debt securities | 147 | 181 | 278 | 186 | 253 | ||||||||||
Net gains from equity investments | 920 | 517 | 370 | 372 | 712 | ||||||||||
Lease income | 189 | 155 | 132 | 127 | 137 | ||||||||||
Other | 266 | (140 | ) | 286 | 507 | 151 | |||||||||
Total noninterest income | 10,418 | 10,048 | 10,292 | 10,263 | 10,272 | ||||||||||
Noninterest expense | |||||||||||||||
Salaries | 4,035 | 3,936 | 3,851 | 3,938 | 3,914 | ||||||||||
Commission and incentive compensation | 2,604 | 2,606 | 2,685 | 2,582 | 2,527 | ||||||||||
Employee benefits | 821 | 1,106 | 1,477 | 1,124 | 931 | ||||||||||
Equipment | 459 | 470 | 494 | 581 | 457 | ||||||||||
Net occupancy | 728 | 710 | 723 | 730 | 731 | ||||||||||
Core deposit and other intangibles | 311 | 312 | 312 | 338 | 342 | ||||||||||
FDIC and other deposit assessments | 245 | 222 | 248 | 231 | 229 | ||||||||||
Other | 3,196 | 3,107 | 2,717 | 3,123 | 3,117 | ||||||||||
Total noninterest expense | 12,399 | 12,469 | 12,507 | 12,647 | 12,248 | ||||||||||
Income before income tax expense | 8,773 | 8,549 | 8,163 | 8,311 | 8,597 | ||||||||||
Income tax expense | 2,790 | 2,763 | 2,279 | 2,519 | 2,642 | ||||||||||
Net income before noncontrolling interests | 5,983 | 5,786 | 5,884 | 5,792 | 5,955 | ||||||||||
Less: Net income from noncontrolling interests | 187 | 67 | 80 | 83 | 226 | ||||||||||
Wells Fargo net income | $ | 5,796 | 5,719 | 5,804 | 5,709 | 5,729 | |||||||||
Less: Preferred stock dividends and other | 353 | 356 | 343 | 327 | 321 | ||||||||||
Wells Fargo net income applicable to common stock | $ | 5,443 | 5,363 | 5,461 | 5,382 | 5,408 | |||||||||
Per share information | |||||||||||||||
Earnings per common share | $ | 1.06 | 1.04 | 1.06 | 1.04 | 1.04 | |||||||||
Diluted earnings per common share | 1.05 | 1.03 | 1.04 | 1.02 | 1.02 | ||||||||||
Dividends declared per common share | 0.375 | 0.375 | 0.35 | 0.35 | 0.35 | ||||||||||
Average common shares outstanding | 5,125.8 | 5,151.9 | 5,160.4 | 5,192.5 | 5,225.9 | ||||||||||
Diluted average common shares outstanding | 5,193.8 | 5,220.5 | 5,243.6 | 5,279.2 | 5,310.4 |
- 21 -
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarter ended Sep 30, | % | Nine months ended Sep 30, | % | ||||||||||||||
(in millions) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||
Wells Fargo net income | $ | 5,796 | 5,729 | 1% | $ | 17,319 | 17,348 | —% | |||||||||
Other comprehensive income (loss), before tax: | |||||||||||||||||
Investment securities: | |||||||||||||||||
Net unrealized gains (losses) arising during the period | (441 | ) | (944 | ) | (53) | (2,017 | ) | 3,866 | NM | ||||||||
Reclassification of net gains to net income | (439 | ) | (661 | ) | (34) | (957 | ) | (1,205 | ) | (21) | |||||||
Derivatives and hedging activities: | |||||||||||||||||
Net unrealized gains (losses) arising during the period | 1,769 | (34 | ) | NM | 2,233 | 222 | 906 | ||||||||||
Reclassification of net gains on cash flow hedges to net income | (293 | ) | (127 | ) | 131 | (795 | ) | (348 | ) | 128 | |||||||
Defined benefit plans adjustments: | |||||||||||||||||
Net actuarial losses arising during the period | — | — | — | (11 | ) | (12 | ) | (8) | |||||||||
Amortization of net actuarial loss, settlements and other to net income | 30 | 18 | 67 | 103 | 56 | 84 | |||||||||||
Foreign currency translation adjustments: | |||||||||||||||||
Net unrealized losses arising during the period | (59 | ) | (32 | ) | 84 | (104 | ) | (32 | ) | 225 | |||||||
Reclassification of net losses to net income | — | — | — | — | 6 | (100) | |||||||||||
Other comprehensive income (loss), before tax | 567 | (1,780 | ) | NM | (1,548 | ) | 2,553 | NM | |||||||||
Income tax (expense) benefit related to other comprehensive income | (268 | ) | 560 | NM | 544 | (1,087 | ) | NM | |||||||||
Other comprehensive income (loss), net of tax | 299 | (1,220 | ) | NM | (1,004 | ) | 1,466 | NM | |||||||||
Less: Other comprehensive income (loss) from noncontrolling interests | (22 | ) | (221 | ) | (90) | 125 | (266 | ) | NM | ||||||||
Wells Fargo other comprehensive income (loss), net of tax | 321 | (999 | ) | NM | (1,129 | ) | 1,732 | NM | |||||||||
Wells Fargo comprehensive income | 6,117 | 4,730 | 29 | 16,190 | 19,080 | (15) | |||||||||||
Comprehensive income from noncontrolling interests | 165 | 5 | NM | 459 | 202 | 127 | |||||||||||
Total comprehensive income | $ | 6,282 | 4,735 | 33 | $ | 16,649 | 19,282 | (14) |
NM - Not meaningful
FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
Quarter ended | |||||||||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Balance, beginning of period | $ | 190,676 | 189,964 | 185,262 | 182,990 | 181,549 | |||||||||
Wells Fargo net income | 5,796 | 5,719 | 5,804 | 5,709 | 5,729 | ||||||||||
Wells Fargo other comprehensive income (loss), net of tax | 321 | (1,709 | ) | 259 | 400 | (999 | ) | ||||||||
Noncontrolling interests | (123 | ) | (51 | ) | 301 | 353 | (181 | ) | |||||||
Common stock issued | 505 | 502 | 1,327 | 508 | 402 | ||||||||||
Common stock repurchased (1) | (2,137 | ) | (1,994 | ) | (2,592 | ) | (2,945 | ) | (2,490 | ) | |||||
Preferred stock released by ESOP | 225 | 349 | 41 | 166 | 170 | ||||||||||
Common stock warrants repurchased/exercised | (17 | ) | (24 | ) | (8 | ) | (9 | ) | — | ||||||
Preferred stock issued | 975 | — | 1,997 | — | 780 | ||||||||||
Common stock dividends | (1,926 | ) | (1,932 | ) | (1,805 | ) | (1,816 | ) | (1,828 | ) | |||||
Preferred stock dividends | (356 | ) | (355 | ) | (344 | ) | (327 | ) | (321 | ) | |||||
Tax benefit from stock incentive compensation | 22 | 55 | 354 | 75 | 48 | ||||||||||
Stock incentive compensation expense | 98 | 166 | 376 | 176 | 144 | ||||||||||
Net change in deferred compensation and related plans | (16 | ) | (14 | ) | (1,008 | ) | (18 | ) | (13 | ) | |||||
Balance, end of period | $ | 194,043 | 190,676 | 189,964 | 185,262 | 182,990 |
(1) | For the quarters ended June 30 and March 31, 2015, and December 31 and September 30, 2014, includes $750 million, $750 million, $750 million, and $1.0 billion, respectively, related to private forward repurchase transactions that settled in subsequent quarters for 13.6 million, 14.0 million, 14.3 million, and 19.8 million shares of common stock, respectively. |
- 22 -
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended September 30, | ||||||||||||||||||||
2015 | 2014 | |||||||||||||||||||
(in millions) | Average balance | Yields/ rates | Interest income/ expense | Average balance | Yields/ rates | Interest income/ expense | ||||||||||||||
Earning assets | ||||||||||||||||||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | $ | 250,104 | 0.26 | % | $ | 167 | 253,231 | 0.28 | % | $ | 180 | |||||||||
Trading assets | 67,223 | 2.93 | 492 | 57,439 | 3.00 | 432 | ||||||||||||||
Investment securities (3): | ||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 35,709 | 1.59 | 143 | 8,816 | 1.69 | 38 | ||||||||||||||
Securities of U.S. states and political subdivisions | 48,238 | 4.22 | 510 | 43,324 | 4.24 | 459 | ||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Federal agencies | 98,459 | 2.70 | 665 | 113,022 | 2.76 | 780 | ||||||||||||||
Residential and commercial | 21,876 | 5.84 | 319 | 25,946 | 5.98 | 388 | ||||||||||||||
Total mortgage-backed securities | 120,335 | 3.27 | 984 | 138,968 | 3.36 | 1,168 | ||||||||||||||
Other debt and equity securities | 50,371 | 3.40 | 430 | 47,131 | 3.45 | 408 | ||||||||||||||
Total available-for-sale securities | 254,653 | 3.24 | 2,067 | 238,239 | 3.48 | 2,073 | ||||||||||||||
Held-to-maturity securities: | ||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 44,649 | 2.18 | 245 | 23,672 | 2.22 | 133 | ||||||||||||||
Securities of U.S. states and political subdivisions | 2,151 | 5.17 | 28 | 66 | 5.51 | 1 | ||||||||||||||
Federal agency mortgage-backed securities | 27,079 | 2.38 | 161 | 5,854 | 2.23 | 32 | ||||||||||||||
Other debt securities | 5,371 | 1.75 | 24 | 5,918 | 1.83 | 28 | ||||||||||||||
Total held-to-maturity securities | 79,250 | 2.30 | 458 | 35,510 | 2.17 | 194 | ||||||||||||||
Total investment securities | 333,903 | 3.02 | 2,525 | 273,749 | 3.31 | 2,267 | ||||||||||||||
Mortgages held for sale (4) | 24,159 | 3.69 | 223 | 21,444 | 4.01 | 215 | ||||||||||||||
Loans held for sale (4) | 568 | 2.57 | 4 | 9,533 | 2.10 | 50 | ||||||||||||||
Loans: | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
Commercial and industrial - U.S. | 241,409 | 3.30 | 2,005 | 207,570 | 3.29 | 1,716 | ||||||||||||||
Commercial and industrial - Non U.S. | 45,923 | 1.83 | 212 | 42,362 | 2.11 | 225 | ||||||||||||||
Real estate mortgage | 120,983 | 3.31 | 1,009 | 112,946 | 3.69 | 1,050 | ||||||||||||||
Real estate construction | 21,626 | 3.39 | 184 | 17,824 | 3.94 | 178 | ||||||||||||||
Lease financing | 12,282 | 4.18 | 129 | 12,348 | 5.38 | 166 | ||||||||||||||
Total commercial | 442,223 | 3.18 | 3,539 | 393,050 | 3.37 | 3,335 | ||||||||||||||
Consumer: | ||||||||||||||||||||
Real estate 1-4 family first mortgage | 269,437 | 4.10 | 2,762 | 262,144 | 4.23 | 2,773 | ||||||||||||||
Real estate 1-4 family junior lien mortgage | 55,298 | 4.22 | 588 | 61,606 | 4.30 | 666 | ||||||||||||||
Credit card | 31,649 | 11.73 | 936 | 27,724 | 11.96 | 836 | ||||||||||||||
Automobile | 58,534 | 5.80 | 855 | 54,638 | 6.19 | 852 | ||||||||||||||
Other revolving credit and installment | 37,954 | 5.84 | 559 | 34,037 | 6.03 | 517 | ||||||||||||||
Total consumer | 452,872 | 5.01 | 5,700 | 440,149 | 5.11 | 5,644 | ||||||||||||||
Total loans (4) | 895,095 | 4.11 | 9,239 | 833,199 | 4.29 | 8,979 | ||||||||||||||
Other | 5,028 | 5.11 | 64 | 4,674 | 5.41 | 64 | ||||||||||||||
Total earning assets | $ | 1,576,080 | 3.21 | % | $ | 12,714 | 1,453,269 | 3.34 | % | $ | 12,187 | |||||||||
Funding sources | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Interest-bearing checking | $ | 37,783 | 0.05 | % | $ | 5 | 41,368 | 0.07 | % | $ | 7 | |||||||||
Market rate and other savings | 628,119 | 0.06 | 90 | 586,353 | 0.07 | 98 | ||||||||||||||
Savings certificates | 30,897 | 0.58 | 44 | 37,347 | 0.84 | 80 | ||||||||||||||
Other time deposits | 48,676 | 0.46 | 57 | 55,128 | 0.39 | 54 | ||||||||||||||
Deposits in foreign offices | 111,521 | 0.13 | 36 | 98,862 | 0.14 | 34 | ||||||||||||||
Total interest-bearing deposits | 856,996 | 0.11 | 232 | 819,058 | 0.13 | 273 | ||||||||||||||
Short-term borrowings | 90,357 | 0.06 | 13 | 62,285 | 0.10 | 16 | ||||||||||||||
Long-term debt | 180,569 | 1.45 | 655 | 172,982 | 1.46 | 629 | ||||||||||||||
Other liabilities | 16,435 | 2.13 | 89 | 15,536 | 2.73 | 106 | ||||||||||||||
Total interest-bearing liabilities | 1,144,357 | 0.34 | 989 | 1,069,861 | 0.38 | 1,024 | ||||||||||||||
Portion of noninterest-bearing funding sources | 431,723 | 383,408 | ||||||||||||||||||
Total funding sources | $ | 1,576,080 | 0.25 | 989 | 1,453,269 | 0.28 | 1,024 | |||||||||||||
Net interest margin and net interest income on a taxable-equivalent basis (5) | 2.96 | % | $ | 11,725 | 3.06 | % | $ | 11,163 | ||||||||||||
Noninterest-earning assets | ||||||||||||||||||||
Cash and due from banks | $ | 16,979 | 16,189 | |||||||||||||||||
Goodwill | 25,703 | 25,705 | ||||||||||||||||||
Other | 127,640 | 122,779 | ||||||||||||||||||
Total noninterest-earning assets | $ | 170,322 | 164,673 | |||||||||||||||||
Noninterest-bearing funding sources | ||||||||||||||||||||
Deposits | $ | 341,878 | 307,991 | |||||||||||||||||
Other liabilities | 67,964 | 57,979 | ||||||||||||||||||
Total equity | 192,203 | 182,111 | ||||||||||||||||||
Noninterest-bearing funding sources used to fund earning assets | (431,723 | ) | (383,408 | ) | ||||||||||||||||
Net noninterest-bearing funding sources | $ | 170,322 | 164,673 | |||||||||||||||||
Total assets | $ | 1,746,402 | 1,617,942 | |||||||||||||||||
(1) | Our average prime rate was 3.25% for the quarters ended September 30, 2015 and 2014. The average three-month London Interbank Offered Rate (LIBOR) was 0.31% and 0.23% for the same quarters, respectively. |
(2) | Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories. |
(3) | Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented. |
(4) | Nonaccrual loans and related income are included in their respective loan categories. |
(5) | Includes taxable-equivalent adjustments of $268 million and $222 million for the quarters ended September 30, 2015 and 2014, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented. |
- 23 -
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Nine months ended September 30, | ||||||||||||||||||||
2015 | 2014 | |||||||||||||||||||
(in millions) | Average balance | Yields/ rates | Interest income/ expense | Average balance | Yields/ rates | Interest income/ expense | ||||||||||||||
Earning assets | ||||||||||||||||||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | $ | 264,218 | 0.27 | % | $ | 543 | 232,241 | 0.28 | % | $ | 485 | |||||||||
Trading assets | 65,954 | 2.91 | 1,437 | 53,373 | 3.07 | 1,227 | ||||||||||||||
Investment securities (3): | ||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 31,242 | 1.57 | 368 | 7,331 | 1.72 | 95 | ||||||||||||||
Securities of U.S. states and political subdivisions | 46,765 | 4.18 | 1,468 | 42,884 | 4.29 | 1,380 | ||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Federal agencies | 99,523 | 2.71 | 2,021 | 115,696 | 2.85 | 2,475 | ||||||||||||||
Residential and commercial | 22,823 | 5.80 | 992 | 27,070 | 6.07 | 1,233 | ||||||||||||||
Total mortgage-backed securities | 122,346 | 3.28 | 3,013 | 142,766 | 3.46 | 3,708 | ||||||||||||||
Other debt and equity securities | 48,758 | 3.44 | 1,257 | 48,333 | 3.60 | 1,303 | ||||||||||||||
Total available-for-sale securities | 249,111 | 3.27 | 6,106 | 241,314 | 3.58 | 6,486 | ||||||||||||||
Held-to-maturity securities: | ||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 44,010 | 2.19 | 722 | 11,951 | 2.22 | 198 | ||||||||||||||
Securities of U.S. states and political subdivisions | 2,064 | 5.16 | 80 | 25 | 5.51 | 1 | ||||||||||||||
Federal agency mortgage-backed securities | 19,871 | 2.14 | 319 | 6,034 | 2.70 | 122 | ||||||||||||||
Other debt securities | 6,139 | 1.72 | 79 | 5,844 | 1.86 | 82 | ||||||||||||||
Total held-to-maturity securities | 72,084 | 2.22 | 1,200 | 23,854 | 2.26 | 403 | ||||||||||||||
Total investment securities | 321,195 | 3.03 | 7,306 | 265,168 | 3.47 | 6,889 | ||||||||||||||
Mortgages held for sale (4) | 22,416 | 3.62 | 609 | 18,959 | 4.08 | 580 | ||||||||||||||
Loans held for sale (4) | 644 | 2.93 | 14 | 3,302 | 2.15 | 53 | ||||||||||||||
Loans: | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
Commercial and industrial - U.S. | 233,598 | 3.31 | 5,788 | 200,277 | 3.37 | 5,044 | ||||||||||||||
Commercial and industrial - Non U.S. | 45,373 | 1.88 | 638 | 42,530 | 2.03 | 646 | ||||||||||||||
Real estate mortgage | 115,224 | 3.45 | 2,972 | 112,855 | 3.62 | 3,056 | ||||||||||||||
Real estate construction | 20,637 | 3.68 | 567 | 17,454 | 4.16 | 544 | ||||||||||||||
Lease financing | 12,322 | 4.77 | 441 | 12,254 | 5.73 | 526 | ||||||||||||||
Total commercial | 427,154 | 3.26 | 10,406 | 385,370 | 3.40 | 9,816 | ||||||||||||||
Consumer: | ||||||||||||||||||||
Real estate 1-4 family first mortgage | 267,107 | 4.12 | 8,243 | 260,549 | 4.20 | 8,207 | ||||||||||||||
Real estate 1-4 family junior lien mortgage | 57,068 | 4.24 | 1,812 | 63,296 | 4.30 | 2,038 | ||||||||||||||
Credit card | 30,806 | 11.74 | 2,704 | 26,822 | 12.08 | 2,424 | ||||||||||||||
Automobile | 57,180 | 5.87 | 2,512 | 53,314 | 6.34 | 2,528 | ||||||||||||||
Other revolving credit and installment | 37,069 | 5.91 | 1,638 | 40,027 | 5.32 | 1,593 | ||||||||||||||
Total consumer | 449,230 | 5.03 | 16,909 | 444,008 | 5.05 | 16,790 | ||||||||||||||
Total loans (4) | 876,384 | 4.16 | 27,315 | 829,378 | 4.28 | 26,606 | ||||||||||||||
Other | 4,874 | 5.21 | 191 | 4,622 | 5.62 | 195 | ||||||||||||||
Total earning assets | $ | 1,555,685 | 3.21 | % | $ | 37,415 | 1,407,043 | 3.42 | % | $ | 36,035 | |||||||||
Funding sources | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Interest-bearing checking | $ | 38,491 | 0.05 | % | $ | 15 | 39,470 | 0.07 | % | $ | 20 | |||||||||
Market rate and other savings | 620,510 | 0.06 | 274 | 583,128 | 0.07 | 304 | ||||||||||||||
Savings certificates | 32,639 | 0.66 | 160 | 38,867 | 0.86 | 251 | ||||||||||||||
Other time deposits | 52,459 | 0.43 | 168 | 49,855 | 0.41 | 152 | ||||||||||||||
Deposits in foreign offices | 107,153 | 0.13 | 105 | 94,743 | 0.14 | 100 | ||||||||||||||
Total interest-bearing deposits | 851,252 | 0.11 | 722 | 806,063 | 0.14 | 827 | ||||||||||||||
Short-term borrowings | 82,258 | 0.09 | 52 | 58,573 | 0.10 | 43 | ||||||||||||||
Long-term debt | 183,130 | 1.37 | 1,879 | 162,073 | 1.54 | 1,868 | ||||||||||||||
Other liabilities | 16,576 | 2.16 | 269 | 14,005 | 2.73 | 286 | ||||||||||||||
Total interest-bearing liabilities | 1,133,216 | 0.34 | 2,922 | 1,040,714 | 0.39 | 3,024 | ||||||||||||||
Portion of noninterest-bearing funding sources | 422,469 | 366,329 | — | |||||||||||||||||
Total funding sources | $ | 1,555,685 | 0.25 | 2,922 | 1,407,043 | 0.29 | 3,024 | |||||||||||||
Net interest margin and net interest income on a taxable-equivalent basis (5)(6) | 2.96 | % | $ | 34,493 | 3.13 | % | $ | 33,011 | ||||||||||||
Noninterest-earning assets | ||||||||||||||||||||
Cash and due from banks | $ | 17,167 | 16,169 | |||||||||||||||||
Goodwill | 25,703 | 25,681 | ||||||||||||||||||
Other | 129,412 | 120,728 | ||||||||||||||||||
Total noninterest-earning assets | $ | 172,282 | 162,578 | |||||||||||||||||
Noninterest-bearing funding sources | ||||||||||||||||||||
Deposits | $ | 335,160 | 296,066 | |||||||||||||||||
Other liabilities | 69,167 | 54,057 | ||||||||||||||||||
Total equity | 190,424 | 178,784 | ||||||||||||||||||
Noninterest-bearing funding sources used to fund earning assets | (422,469 | ) | (366,329 | ) | ||||||||||||||||
Net noninterest-bearing funding sources | $ | 172,282 | 162,578 | |||||||||||||||||
Total assets | $ | 1,727,967 | 1,569,621 |
(1) | Our average prime rate was 3.25% for the nine months ended September 30, 2015 and 2014. The average three-month London Interbank Offered Rate (LIBOR) was 0.28% and 0.23% for the same periods, respectively. |
(2) | Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories. |
(3) | Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented. |
(4) | Nonaccrual loans and related income are included in their respective loan categories. |
(5) | Includes taxable-equivalent adjustments of $780 million and $664 million for the nine months ended September 30, 2015 and 2014, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented. |
- 24 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended | ||||||||||||||||||||||||||||||||||
Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||||||||||||||||||||||
($ in billions) | Average balance | Yields/ rates | Average balance | Yields/ rates | Average balance | Yields/ rates | Average balance | Yields/ rates | Average balance | Yields/ rates | ||||||||||||||||||||||||
Earning assets | ||||||||||||||||||||||||||||||||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | $ | 250.1 | 0.26 | % | $ | 267.1 | 0.28 | % | $ | 275.7 | 0.28 | % | $ | 268.1 | 0.28 | % | $ | 253.2 | 0.28 | % | ||||||||||||||
Trading assets | 67.2 | 2.93 | 67.6 | 2.91 | 63.0 | 2.88 | 60.4 | 3.21 | 57.5 | 3.00 | ||||||||||||||||||||||||
Investment securities (3): | ||||||||||||||||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 35.7 | 1.59 | 31.7 | 1.58 | 26.2 | 1.55 | 19.5 | 1.55 | 8.8 | 1.69 | ||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | 48.2 | 4.22 | 47.1 | 4.13 | 44.9 | 4.20 | 43.9 | 4.30 | 43.3 | 4.24 | ||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||||
Federal agencies | 98.4 | 2.70 | 98.0 | 2.65 | 102.2 | 2.76 | 109.3 | 2.78 | 113.0 | 2.76 | ||||||||||||||||||||||||
Residential and commercial | 21.9 | 5.84 | 22.7 | 5.84 | 23.9 | 5.71 | 24.7 | 5.89 | 26.0 | 5.98 | ||||||||||||||||||||||||
Total mortgage-backed securities | 120.3 | 3.27 | 120.7 | 3.25 | 126.1 | 3.32 | 134.0 | 3.36 | 139.0 | 3.36 | ||||||||||||||||||||||||
Other debt and equity securities | 50.4 | 3.40 | 48.8 | 3.51 | 47.1 | 3.43 | 45.0 | 3.87 | 47.1 | 3.45 | ||||||||||||||||||||||||
Total available-for-sale securities | 254.6 | 3.24 | 248.3 | 3.25 | 244.3 | 3.32 | 242.4 | 3.48 | 238.2 | 3.48 | ||||||||||||||||||||||||
Held-to-maturity securities: | ||||||||||||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 44.6 | 2.18 | 44.5 | 2.19 | 42.9 | 2.21 | 32.9 | 2.25 | 23.7 | 2.22 | ||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | 2.2 | 5.17 | 2.1 | 5.17 | 1.9 | 5.16 | 0.9 | 4.92 | — | — | ||||||||||||||||||||||||
Federal agency mortgage-backed securities | 27.1 | 2.38 | 21.0 | 2.00 | 11.3 | 1.87 | 5.6 | 2.07 | 5.9 | 2.23 | ||||||||||||||||||||||||
Other debt securities | 5.4 | 1.75 | 6.3 | 1.70 | 6.8 | 1.72 | 6.1 | 1.81 | 5.9 | 1.83 | ||||||||||||||||||||||||
Total held-to-maturity securities | 79.3 | 2.30 | 73.9 | 2.18 | 62.9 | 2.19 | 45.5 | 2.22 | 35.5 | 2.17 | ||||||||||||||||||||||||
Total investment securities | 333.9 | 3.02 | 322.2 | 3.01 | 307.2 | 3.08 | 287.9 | 3.28 | 273.7 | 3.31 | ||||||||||||||||||||||||
Mortgages held for sale | 24.2 | 3.69 | 23.5 | 3.57 | 19.6 | 3.61 | 19.2 | 3.90 | 21.5 | 4.01 | ||||||||||||||||||||||||
Loans held for sale | 0.6 | 2.57 | 0.7 | 3.51 | 0.7 | 2.67 | 7.0 | 1.43 | 9.5 | 2.10 | ||||||||||||||||||||||||
Loans: | ||||||||||||||||||||||||||||||||||
Commercial: | ||||||||||||||||||||||||||||||||||
Commercial and industrial - U.S. | 241.4 | 3.30 | 231.5 | 3.36 | 227.7 | 3.28 | 218.3 | 3.32 | 207.6 | 3.29 | ||||||||||||||||||||||||
Commercial and industrial - Non U.S. | 45.9 | 1.83 | 45.1 | 1.93 | 45.1 | 1.88 | 43.0 | 2.03 | 42.4 | 2.11 | ||||||||||||||||||||||||
Real estate mortgage | 121.0 | 3.31 | 113.1 | 3.48 | 111.5 | 3.57 | 112.3 | 3.69 | 113.0 | 3.69 | ||||||||||||||||||||||||
Real estate construction | 21.6 | 3.39 | 20.8 | 4.12 | 19.5 | 3.52 | 18.3 | 4.33 | 17.8 | 3.94 | ||||||||||||||||||||||||
Lease financing | 12.3 | 4.18 | 12.4 | 5.16 | 12.3 | 4.95 | 12.3 | 5.35 | 12.3 | 5.38 | ||||||||||||||||||||||||
Total commercial | 442.2 | 3.18 | 422.9 | 3.33 | 416.1 | 3.26 | 404.2 | 3.39 | 393.1 | 3.37 | ||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 269.4 | 4.10 | 266.0 | 4.12 | 265.8 | 4.13 | 264.8 | 4.16 | 262.2 | 4.23 | ||||||||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 55.3 | 4.22 | 57.0 | 4.23 | 58.9 | 4.27 | 60.2 | 4.28 | 61.6 | 4.30 | ||||||||||||||||||||||||
Credit card | 31.7 | 11.73 | 30.4 | 11.69 | 30.4 | 11.78 | 29.5 | 11.71 | 27.7 | 11.96 | ||||||||||||||||||||||||
Automobile | 58.5 | 5.80 | 57.0 | 5.88 | 56.0 | 5.95 | 55.4 | 6.08 | 54.6 | 6.19 | ||||||||||||||||||||||||
Other revolving credit and installment | 38.0 | 5.84 | 37.1 | 5.88 | 36.1 | 6.01 | 35.3 | 6.01 | 34.0 | 6.03 | ||||||||||||||||||||||||
Total consumer | 452.9 | 5.01 | 447.5 | 5.02 | 447.2 | 5.05 | 445.2 | 5.06 | 440.1 | 5.11 | ||||||||||||||||||||||||
Total loans | 895.1 | 4.11 | 870.4 | 4.20 | 863.3 | 4.19 | 849.4 | 4.27 | 833.2 | 4.29 | ||||||||||||||||||||||||
Other | 5.0 | 5.11 | 4.8 | 5.14 | 4.7 | 5.41 | 4.8 | 5.30 | 4.7 | 5.41 | ||||||||||||||||||||||||
Total earning assets | $ | 1,576.1 | 3.21 | % | $ | 1,556.3 | 3.22 | % | $ | 1,534.2 | 3.21 | % | $ | 1,496.8 | 3.31 | % | $ | 1,453.3 | 3.34 | % | ||||||||||||||
Funding sources | ||||||||||||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||||||||||||
Interest-bearing checking | $ | 37.8 | 0.05 | % | $ | 38.6 | 0.05 | % | $ | 39.2 | 0.05 | % | $ | 40.5 | 0.06 | % | $ | 41.4 | 0.07 | % | ||||||||||||||
Market rate and other savings | 628.1 | 0.06 | 619.8 | 0.06 | 613.4 | 0.06 | 593.9 | 0.07 | 586.4 | 0.07 | ||||||||||||||||||||||||
Savings certificates | 30.9 | 0.58 | 32.5 | 0.63 | 34.6 | 0.75 | 35.9 | 0.80 | 37.3 | 0.84 | ||||||||||||||||||||||||
Other time deposits | 48.7 | 0.46 | 52.2 | 0.42 | 56.5 | 0.39 | 56.1 | 0.39 | 55.1 | 0.39 | ||||||||||||||||||||||||
Deposits in foreign offices | 111.5 | 0.13 | 104.3 | 0.13 | 105.5 | 0.14 | 99.3 | 0.15 | 98.9 | 0.14 | ||||||||||||||||||||||||
Total interest-bearing deposits | 857.0 | 0.11 | 847.4 | 0.11 | 849.2 | 0.12 | 825.7 | 0.13 | 819.1 | 0.13 | ||||||||||||||||||||||||
Short-term borrowings | 90.4 | 0.06 | 84.5 | 0.09 | 71.7 | 0.11 | 64.7 | 0.12 | 62.3 | 0.10 | ||||||||||||||||||||||||
Long-term debt | 180.6 | 1.45 | 185.1 | 1.34 | 183.8 | 1.32 | 183.3 | 1.35 | 173.0 | 1.46 | ||||||||||||||||||||||||
Other liabilities | 16.4 | 2.13 | 16.4 | 2.03 | 16.9 | 2.30 | 15.6 | 2.44 | 15.5 | 2.73 | ||||||||||||||||||||||||
Total interest-bearing liabilities | 1,144.4 | 0.34 | 1,133.4 | 0.34 | 1,121.6 | 0.35 | 1,089.3 | 0.37 | 1,069.9 | 0.38 | ||||||||||||||||||||||||
Portion of noninterest-bearing funding sources | 431.7 | — | 422.9 | — | 412.6 | — | 407.5 | — | 383.4 | — | ||||||||||||||||||||||||
Total funding sources | $ | 1,576.1 | 0.25 | $ | 1,556.3 | 0.25 | $ | 1,534.2 | 0.26 | $ | 1,496.8 | 0.27 | $ | 1,453.3 | 0.28 | |||||||||||||||||||
Net interest margin on a taxable-equivalent basis | 2.96 | % | 2.97 | % | 2.95 | % | 3.04 | % | 3.06 | % | ||||||||||||||||||||||||
Noninterest-earning assets | ||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | 17.0 | 17.5 | 17.1 | 16.9 | 16.2 | ||||||||||||||||||||||||||||
Goodwill | 25.7 | 25.7 | 25.7 | 25.7 | 25.7 | |||||||||||||||||||||||||||||
Other | 127.6 | 129.8 | 130.8 | 124.4 | 122.7 | |||||||||||||||||||||||||||||
Total noninterest-earnings assets | $ | 170.3 | 173.0 | 173.6 | 167.0 | 164.6 | ||||||||||||||||||||||||||||
Noninterest-bearing funding sources | ||||||||||||||||||||||||||||||||||
Deposits | $ | 341.9 | 337.9 | 325.6 | 324.1 | 308.0 | ||||||||||||||||||||||||||||
Other liabilities | 67.9 | 67.6 | 72.0 | 65.7 | 57.9 | |||||||||||||||||||||||||||||
Total equity | 192.2 | 190.4 | 188.6 | 184.7 | 182.1 | |||||||||||||||||||||||||||||
Noninterest-bearing funding sources used to fund earning assets | (431.7 | ) | (422.9 | ) | (412.6 | ) | (407.5 | ) | (383.4 | ) | ||||||||||||||||||||||||
Net noninterest-bearing funding sources | $ | 170.3 | 173.0 | 173.6 | 167.0 | 164.6 | ||||||||||||||||||||||||||||
Total assets | $ | 1,746.4 | 1,729.3 | 1,707.8 | 1,663.8 | 1,617.9 | ||||||||||||||||||||||||||||
(1) | Our average prime rate was 3.25% for quarters ended September 30, June 30 and March 31, 2015, and December 31 and September 30, 2014. The average three-month London Interbank Offered Rate (LIBOR) was 0.31%, 0.28%, 0.26%, 0.24% and 0.23% for the same quarters, respectively. |
(2) | Yields/rates include the effects of hedge and risk management activities associated with the respective asset and liability categories. |
(3) | Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented. |
- 25 -
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
Quarter ended Sep 30, | % | Nine months ended Sep 30, | % | ||||||||||||||||
(in millions) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||
Service charges on deposit accounts | $ | 1,335 | 1,311 | 2 | % | $ | 3,839 | 3,809 | 1 | % | |||||||||
Trust and investment fees: | |||||||||||||||||||
Brokerage advisory, commissions and other fees | 2,368 | 2,327 | 2 | 7,147 | 6,848 | 4 | |||||||||||||
Trust and investment management | 843 | 856 | (2 | ) | 2,556 | 2,538 | 1 | ||||||||||||
Investment banking | 359 | 371 | (3 | ) | 1,254 | 1,189 | 5 | ||||||||||||
Total trust and investment fees | 3,570 | 3,554 | — | 10,957 | 10,575 | 4 | |||||||||||||
Card fees | 953 | 875 | 9 | 2,754 | 2,506 | 10 | |||||||||||||
Other fees: | |||||||||||||||||||
Charges and fees on loans | 307 | 296 | 4 | 920 | 1,005 | (8 | ) | ||||||||||||
Merchant processing fees | 200 | 184 | 9 | 589 | 539 | 9 | |||||||||||||
Cash network fees | 136 | 134 | 1 | 393 | 382 | 3 | |||||||||||||
Commercial real estate brokerage commissions | 124 | 143 | (13 | ) | 394 | 314 | 25 | ||||||||||||
Letters of credit fees | 89 | 100 | (11 | ) | 267 | 288 | (7 | ) | |||||||||||
All other fees | 243 | 233 | 4 | 721 | 697 | 3 | |||||||||||||
Total other fees | 1,099 | 1,090 | 1 | 3,284 | 3,225 | 2 | |||||||||||||
Mortgage banking: | |||||||||||||||||||
Servicing income, net | 674 | 679 | (1 | ) | 1,711 | 2,652 | (35 | ) | |||||||||||
Net gains on mortgage loan origination/sales activities | 915 | 954 | (4 | ) | 3,130 | 2,214 | 41 | ||||||||||||
Total mortgage banking | 1,589 | 1,633 | (3 | ) | 4,841 | 4,866 | (1 | ) | |||||||||||
Insurance | 376 | 388 | (3 | ) | 1,267 | 1,273 | — | ||||||||||||
Net gains (losses) from trading activities | (26 | ) | 168 | NM | 515 | 982 | (48 | ) | |||||||||||
Net gains on debt securities | 147 | 253 | (42 | ) | 606 | 407 | 49 | ||||||||||||
Net gains from equity investments | 920 | 712 | 29 | 1,807 | 2,008 | (10 | ) | ||||||||||||
Lease income | 189 | 137 | 38 | 476 | 399 | 19 | |||||||||||||
Life insurance investment income | 150 | 143 | 5 | 440 | 413 | 7 | |||||||||||||
All other | 116 | 8 | NM | (28 | ) | 94 | NM | ||||||||||||
Total | $ | 10,418 | 10,272 | 1 | $ | 30,758 | 30,557 | 1 | |||||||||||
NM - Not meaningful | |||||||||||||||||||
NONINTEREST EXPENSE | |||||||||||||||||||
Quarter ended Sep 30, | % | Nine months ended Sep 30, | % | ||||||||||||||||
(in millions) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||
Salaries | $ | 4,035 | 3,914 | 3 | % | $ | 11,822 | 11,437 | 3 | % | |||||||||
Commission and incentive compensation | 2,604 | 2,527 | 3 | 7,895 | 7,388 | 7 | |||||||||||||
Employee benefits | 821 | 931 | (12 | ) | 3,404 | 3,473 | (2 | ) | |||||||||||
Equipment | 459 | 457 | — | 1,423 | 1,392 | 2 | |||||||||||||
Net occupancy | 728 | 731 | — | 2,161 | 2,195 | (2 | ) | ||||||||||||
Core deposit and other intangibles | 311 | 342 | (9 | ) | 935 | 1,032 | (9 | ) | |||||||||||
FDIC and other deposit assessments | 245 | 229 | 7 | 715 | 697 | 3 | |||||||||||||
Outside professional services | 663 | 684 | (3 | ) | 1,838 | 1,889 | (3 | ) | |||||||||||
Operating losses | 523 | 417 | 25 | 1,339 | 940 | 42 | |||||||||||||
Outside data processing | 258 | 264 | (2 | ) | 780 | 764 | 2 | ||||||||||||
Contract services | 249 | 247 | 1 | 712 | 730 | (2 | ) | ||||||||||||
Travel and entertainment | 166 | 226 | (27 | ) | 496 | 688 | (28 | ) | |||||||||||
Postage, stationery and supplies | 174 | 182 | (4 | ) | 525 | 543 | (3 | ) | |||||||||||
Advertising and promotion | 135 | 153 | (12 | ) | 422 | 458 | (8 | ) | |||||||||||
Foreclosed assets | 109 | 157 | (31 | ) | 361 | 419 | (14 | ) | |||||||||||
Telecommunications | 109 | 122 | (11 | ) | 333 | 347 | (4 | ) | |||||||||||
Insurance | 95 | 97 | (2 | ) | 391 | 362 | 8 | ||||||||||||
Operating leases | 79 | 58 | 36 | 205 | 162 | 27 | |||||||||||||
All other | 636 | 510 | 25 | 1,618 | 1,474 | 10 | |||||||||||||
Total | $ | 12,399 | 12,248 | 1 | $ | 37,375 | 36,390 | 3 |
- 26 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
Quarter ended | |||||||||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Service charges on deposit accounts | $ | 1,335 | 1,289 | 1,215 | 1,241 | 1,311 | |||||||||
Trust and investment fees: | |||||||||||||||
Brokerage advisory, commissions and other fees | 2,368 | 2,399 | 2,380 | 2,335 | 2,327 | ||||||||||
Trust and investment management | 843 | 861 | 852 | 849 | 856 | ||||||||||
Investment banking | 359 | 450 | 445 | 521 | 371 | ||||||||||
Total trust and investment fees | 3,570 | 3,710 | 3,677 | 3,705 | 3,554 | ||||||||||
Card fees | 953 | 930 | 871 | 925 | 875 | ||||||||||
Other fees: | |||||||||||||||
Charges and fees on loans | 307 | 304 | 309 | 311 | 296 | ||||||||||
Merchant processing fees | 200 | 202 | 187 | 187 | 184 | ||||||||||
Cash network fees | 136 | 132 | 125 | 125 | 134 | ||||||||||
Commercial real estate brokerage commissions | 124 | 141 | 129 | 155 | 143 | ||||||||||
Letters of credit fees | 89 | 90 | 88 | 102 | 100 | ||||||||||
All other fees | 243 | 238 | 240 | 244 | 233 | ||||||||||
Total other fees | 1,099 | 1,107 | 1,078 | 1,124 | 1,090 | ||||||||||
Mortgage banking: | |||||||||||||||
Servicing income, net | 674 | 514 | 523 | 685 | 679 | ||||||||||
Net gains on mortgage loan origination/sales activities | 915 | 1,191 | 1,024 | 830 | 954 | ||||||||||
Total mortgage banking | 1,589 | 1,705 | 1,547 | 1,515 | 1,633 | ||||||||||
Insurance | 376 | 461 | 430 | 382 | 388 | ||||||||||
Net gains (losses) from trading activities | (26 | ) | 133 | 408 | 179 | 168 | |||||||||
Net gains on debt securities | 147 | 181 | 278 | 186 | 253 | ||||||||||
Net gains from equity investments | 920 | 517 | 370 | 372 | 712 | ||||||||||
Lease income | 189 | 155 | 132 | 127 | 137 | ||||||||||
Life insurance investment income | 150 | 145 | 145 | 145 | 143 | ||||||||||
All other | 116 | (285 | ) | 141 | 362 | 8 | |||||||||
Total | $ | 10,418 | 10,048 | 10,292 | 10,263 | 10,272 | |||||||||
FIVE QUARTER NONINTEREST EXPENSE | |||||||||||||||
Quarter ended | |||||||||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Salaries | $ | 4,035 | 3,936 | 3,851 | 3,938 | 3,914 | |||||||||
Commission and incentive compensation | 2,604 | 2,606 | 2,685 | 2,582 | 2,527 | ||||||||||
Employee benefits | 821 | 1,106 | 1,477 | 1,124 | 931 | ||||||||||
Equipment | 459 | 470 | 494 | 581 | 457 | ||||||||||
Net occupancy | 728 | 710 | 723 | 730 | 731 | ||||||||||
Core deposit and other intangibles | 311 | 312 | 312 | 338 | 342 | ||||||||||
FDIC and other deposit assessments | 245 | 222 | 248 | 231 | 229 | ||||||||||
Outside professional services | 663 | 627 | 548 | 800 | 684 | ||||||||||
Operating losses | 523 | 521 | 295 | 309 | 417 | ||||||||||
Outside data processing | 258 | 269 | 253 | 270 | 264 | ||||||||||
Contract services | 249 | 238 | 225 | 245 | 247 | ||||||||||
Travel and entertainment | 166 | 172 | 158 | 216 | 226 | ||||||||||
Postage, stationery and supplies | 174 | 180 | 171 | 190 | 182 | ||||||||||
Advertising and promotion | 135 | 169 | 118 | 195 | 153 | ||||||||||
Foreclosed assets | 109 | 117 | 135 | 164 | 157 | ||||||||||
Telecommunications | 109 | 113 | 111 | 106 | 122 | ||||||||||
Insurance | 95 | 156 | 140 | 60 | 97 | ||||||||||
Operating leases | 79 | 64 | 62 | 58 | 58 | ||||||||||
All other | 636 | 481 | 501 | 510 | 510 | ||||||||||
Total | $ | 12,399 | 12,469 | 12,507 | 12,647 | 12,248 |
- 27 -
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions, except shares) | Sep 30, 2015 | Dec 31, 2014 | % Change | |||||||
Assets | ||||||||||
Cash and due from banks | $ | 17,395 | 19,571 | (11 | )% | |||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | 254,811 | 258,429 | (1 | ) | ||||||
Trading assets | 73,894 | 78,255 | (6 | ) | ||||||
Investment securities: | ||||||||||
Available-for-sale, at fair value | 266,406 | 257,442 | 3 | |||||||
Held-to-maturity, at cost | 78,668 | 55,483 | 42 | |||||||
Mortgages held for sale | 21,840 | 19,536 | 12 | |||||||
Loans held for sale | 430 | 722 | (40 | ) | ||||||
Loans | 903,233 | 862,551 | 5 | |||||||
Allowance for loan losses | (11,659 | ) | (12,319 | ) | (5 | ) | ||||
Net loans | 891,574 | 850,232 | 5 | |||||||
Mortgage servicing rights: | ||||||||||
Measured at fair value | 11,778 | 12,738 | (8 | ) | ||||||
Amortized | 1,277 | 1,242 | 3 | |||||||
Premises and equipment, net | 8,800 | 8,743 | 1 | |||||||
Goodwill | 25,684 | 25,705 | — | |||||||
Other assets | 98,708 | 99,057 | — | |||||||
Total assets | $ | 1,751,265 | $ | 1,687,155 | 4 | |||||
Liabilities | ||||||||||
Noninterest-bearing deposits | $ | 339,761 | 321,963 | 6 | ||||||
Interest-bearing deposits | 862,418 | 846,347 | 2 | |||||||
Total deposits | 1,202,179 | 1,168,310 | 3 | |||||||
Short-term borrowings | 88,069 | 63,518 | 39 | |||||||
Accrued expenses and other liabilities | 81,700 | 86,122 | (5 | ) | ||||||
Long-term debt | 185,274 | 183,943 | 1 | |||||||
Total liabilities | 1,557,222 | 1,501,893 | 4 | |||||||
Equity | ||||||||||
Wells Fargo stockholders’ equity: | ||||||||||
Preferred stock | 22,424 | 19,213 | 17 | |||||||
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 | 60,998 | 60,537 | 1 | |||||||
Retained earnings | 117,593 | 107,040 | 10 | |||||||
Cumulative other comprehensive income | 2,389 | 3,518 | (32 | ) | ||||||
Treasury stock – 373,337,506 shares and 311,462,276 shares | (17,899 | ) | (13,690 | ) | 31 | |||||
Unearned ESOP shares | (1,590 | ) | (1,360 | ) | 17 | |||||
Total Wells Fargo stockholders’ equity | 193,051 | 184,394 | 5 | |||||||
Noncontrolling interests | 992 | 868 | 14 | |||||||
Total equity | 194,043 | 185,262 | 5 | |||||||
Total liabilities and equity | $ | 1,751,265 | $ | 1,687,155 | 4 |
- 28 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Assets | |||||||||||||||
Cash and due from banks | $ | 17,395 | 19,687 | 19,793 | 19,571 | 18,032 | |||||||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | 254,811 | 232,247 | 291,317 | 258,429 | 261,932 | ||||||||||
Trading assets | 73,894 | 80,236 | 79,278 | 78,255 | 67,755 | ||||||||||
Investment securities: | |||||||||||||||
Available-for-sale, at fair value | 266,406 | 260,667 | 257,603 | 257,442 | 248,251 | ||||||||||
Held-to-maturity, at cost | 78,668 | 80,102 | 67,133 | 55,483 | 40,758 | ||||||||||
Mortgages held for sale | 21,840 | 25,447 | 23,606 | 19,536 | 20,178 | ||||||||||
Loans held for sale | 430 | 621 | 681 | 722 | 9,292 | ||||||||||
Loans | 903,233 | 888,459 | 861,231 | 862,551 | 838,883 | ||||||||||
Allowance for loan losses | (11,659 | ) | (11,754 | ) | (12,176 | ) | (12,319 | ) | (12,681 | ) | |||||
Net loans | 891,574 | 876,705 | 849,055 | 850,232 | 826,202 | ||||||||||
Mortgage servicing rights: | |||||||||||||||
Measured at fair value | 11,778 | 12,661 | 11,739 | 12,738 | 14,031 | ||||||||||
Amortized | 1,277 | 1,262 | 1,252 | 1,242 | 1,224 | ||||||||||
Premises and equipment, net | 8,800 | 8,692 | 8,696 | 8,743 | 8,768 | ||||||||||
Goodwill | 25,684 | 25,705 | 25,705 | 25,705 | 25,705 | ||||||||||
Other assets | 98,708 | 96,585 | 101,879 | 99,057 | 94,727 | ||||||||||
Total assets | $ | 1,751,265 | 1,720,617 | 1,737,737 | 1,687,155 | 1,636,855 | |||||||||
Liabilities | |||||||||||||||
Noninterest-bearing deposits | $ | 339,761 | 343,582 | 335,858 | 321,963 | 313,791 | |||||||||
Interest-bearing deposits | 862,418 | 842,246 | 860,805 | 846,347 | 816,834 | ||||||||||
Total deposits | 1,202,179 | 1,185,828 | 1,196,663 | 1,168,310 | 1,130,625 | ||||||||||
Short-term borrowings | 88,069 | 82,963 | 77,697 | 63,518 | 62,927 | ||||||||||
Accrued expenses and other liabilities | 81,700 | 81,399 | 90,121 | 86,122 | 75,727 | ||||||||||
Long-term debt | 185,274 | 179,751 | 183,292 | 183,943 | 184,586 | ||||||||||
Total liabilities | 1,557,222 | 1,529,941 | 1,547,773 | 1,501,893 | 1,453,865 | ||||||||||
Equity | |||||||||||||||
Wells Fargo stockholders’ equity: | |||||||||||||||
Preferred stock | 22,424 | 21,649 | 21,998 | 19,213 | 19,379 | ||||||||||
Common stock | 9,136 | 9,136 | 9,136 | 9,136 | 9,136 | ||||||||||
Additional paid-in capital | 60,998 | 60,154 | 59,980 | 60,537 | 60,100 | ||||||||||
Retained earnings | 117,593 | 114,093 | 110,676 | 107,040 | 103,494 | ||||||||||
Cumulative other comprehensive income | 2,389 | 2,068 | 3,777 | 3,518 | 3,118 | ||||||||||
Treasury stock | (17,899 | ) | (15,707 | ) | (14,556 | ) | (13,690 | ) | (11,206 | ) | |||||
Unearned ESOP shares | (1,590 | ) | (1,835 | ) | (2,215 | ) | (1,360 | ) | (1,540 | ) | |||||
Total Wells Fargo stockholders’ equity | 193,051 | 189,558 | 188,796 | 184,394 | 182,481 | ||||||||||
Noncontrolling interests | 992 | 1,118 | 1,168 | 868 | 509 | ||||||||||
Total equity | 194,043 | 190,676 | 189,964 | 185,262 | 182,990 | ||||||||||
Total liabilities and equity | $ | 1,751,265 | 1,720,617 | 1,737,737 | 1,687,155 | 1,636,855 |
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER INVESTMENT SECURITIES
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Available-for-sale securities: | |||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 35,423 | 35,944 | 30,031 | 25,804 | 14,794 | |||||||||
Securities of U.S. states and political subdivisions | 49,423 | 48,298 | 47,380 | 44,944 | 45,805 | ||||||||||
Mortgage-backed securities: | |||||||||||||||
Federal agencies | 105,023 | 100,078 | 103,217 | 110,089 | 112,613 | ||||||||||
Residential and commercial | 22,836 | 23,770 | 24,712 | 26,263 | 27,491 | ||||||||||
Total mortgage-backed securities | 127,859 | 123,848 | 127,929 | 136,352 | 140,104 | ||||||||||
Other debt securities | 51,760 | 50,090 | 48,759 | 46,666 | 45,013 | ||||||||||
Total available-for-sale debt securities | 264,465 | 258,180 | 254,099 | 253,766 | 245,716 | ||||||||||
Marketable equity securities | 1,941 | 2,487 | 3,504 | 3,676 | 2,535 | ||||||||||
Total available-for-sale securities | 266,406 | 260,667 | 257,603 | 257,442 | 248,251 | ||||||||||
Held-to-maturity securities: | |||||||||||||||
Securities of U.S. Treasury and federal agencies | 44,653 | 44,645 | 44,244 | 40,886 | 28,887 | ||||||||||
Securities of U.S. states and political subdivisions | 2,187 | 2,174 | 2,092 | 1,962 | 123 | ||||||||||
Federal agency mortgage-backed securities | 26,828 | 27,577 | 14,311 | 5,476 | 5,770 | ||||||||||
Other debt securities | 5,000 | 5,706 | 6,486 | 7,159 | 5,978 | ||||||||||
Total held-to-maturity debt securities | 78,668 | 80,102 | 67,133 | 55,483 | 40,758 | ||||||||||
Total investment securities | $ | 345,074 | 340,769 | 324,736 | 312,925 | 289,009 |
FIVE QUARTER LOANS
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Commercial: | |||||||||||||||
Commercial and industrial | $ | 292,234 | 284,817 | 271,088 | 271,795 | 254,199 | |||||||||
Real estate mortgage | 121,252 | 119,695 | 111,848 | 111,996 | 112,064 | ||||||||||
Real estate construction | 21,710 | 21,309 | 19,981 | 18,728 | 18,090 | ||||||||||
Lease financing | 12,142 | 12,201 | 12,382 | 12,307 | 12,006 | ||||||||||
Total commercial | 447,338 | 438,022 | 415,299 | 414,826 | 396,359 | ||||||||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage | 271,311 | 267,868 | 265,213 | 265,386 | 263,337 | ||||||||||
Real estate 1-4 family junior lien mortgage | 54,592 | 56,164 | 57,839 | 59,717 | 60,875 | ||||||||||
Credit card | 32,286 | 31,135 | 30,078 | 31,119 | 28,280 | ||||||||||
Automobile | 59,164 | 57,801 | 56,339 | 55,740 | 55,242 | ||||||||||
Other revolving credit and installment | 38,542 | 37,469 | 36,463 | 35,763 | 34,790 | ||||||||||
Total consumer | 455,895 | 450,437 | 445,932 | 447,725 | 442,524 | ||||||||||
Total loans (1) | $ | 903,233 | 888,459 | 861,231 | 862,551 | 838,883 |
(1) | Includes $20.7 billion, $21.6 billion, $22.4 billion, $23.3 billion, and $24.2 billion of purchased credit-impaired (PCI) loans at September 30, June 30 and March 31, 2015, and December 31 and September 30, 2014, 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.
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Commercial foreign loans: | |||||||||||||||
Commercial and industrial | $ | 46,380 | 44,838 | 45,325 | 44,707 | 41,829 | |||||||||
Real estate mortgage | 8,662 | 9,125 | 5,171 | 4,776 | 4,856 | ||||||||||
Real estate construction | 396 | 389 | 241 | 218 | 209 | ||||||||||
Lease financing | 279 | 301 | 307 | 336 | 332 | ||||||||||
Total commercial foreign loans | $ | 55,717 | 54,653 | 51,044 | 50,037 | 47,226 |
- 30 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Nonaccrual loans: | |||||||||||||||
Commercial: | |||||||||||||||
Commercial and industrial | $ | 1,031 | 1,079 | 663 | 538 | 614 | |||||||||
Real estate mortgage | 1,125 | 1,250 | 1,324 | 1,490 | 1,636 | ||||||||||
Real estate construction | 151 | 165 | 182 | 187 | 217 | ||||||||||
Lease financing | 29 | 28 | 23 | 24 | 27 | ||||||||||
Total commercial | 2,336 | 2,522 | 2,192 | 2,239 | 2,494 | ||||||||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage | 7,425 | 8,045 | 8,345 | 8,583 | 8,785 | ||||||||||
Real estate 1-4 family junior lien mortgage | 1,612 | 1,710 | 1,798 | 1,848 | 1,903 | ||||||||||
Automobile | 123 | 126 | 133 | 137 | 143 | ||||||||||
Other revolving credit and installment | 41 | 40 | 42 | 41 | 40 | ||||||||||
Total consumer | 9,201 | 9,921 | 10,318 | 10,609 | 10,871 | ||||||||||
Total nonaccrual loans (1)(2)(3) | $ | 11,537 | 12,443 | 12,510 | 12,848 | 13,365 | |||||||||
As a percentage of total loans | 1.28 | % | 1.40 | 1.45 | 1.49 | 1.59 | |||||||||
Foreclosed assets: | |||||||||||||||
Government insured/guaranteed (4) | $ | 502 | 588 | 772 | 982 | 1,140 | |||||||||
Non-government insured/guaranteed | 1,265 | 1,370 | 1,557 | 1,627 | 1,691 | ||||||||||
Total foreclosed assets | 1,767 | 1,958 | 2,329 | 2,609 | 2,831 | ||||||||||
Total nonperforming assets | $ | 13,304 | 14,401 | 14,839 | 15,457 | 16,196 | |||||||||
As a percentage of total loans | 1.47 | % | 1.62 | 1.72 | 1.79 | 1.93 |
(1) | Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories. |
(2) | Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms. |
(3) | Real estate 1-4 family mortgage loans predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed. |
(4) | Consistent with regulatory reporting requirements, foreclosed real estate resulting from government insured/guaranteed loans are classified as nonperforming. Both principal and interest related to these foreclosed real estate assets are collectible because the loans were predominantly insured by the FHA or guaranteed by the VA. Foreclosure of certain government guaranteed residential real estate mortgage loans that meet criteria specified by Accounting Standards Update (ASU) 2014-14, Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure, effective as of January 1, 2014, are excluded from this table and included in Accounts Receivable in Other Assets. For more information on ASU 2014-14 and the classification of certain government-guaranteed mortgage loans upon foreclosure, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2014 Form 10-K. |
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Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Loans 90 days or more past due and still accruing: | |||||||||||||||
Total (excluding PCI)(1): | $ | 14,405 | 15,161 | 16,344 | 17,810 | 18,295 | |||||||||
Less: FHA insured/guaranteed by the VA (2)(3) | 13,500 | 14,359 | 15,453 | 16,827 | 16,628 | ||||||||||
Less: Student loans guaranteed under the FFELP (4) | 33 | 46 | 50 | 63 | 721 | ||||||||||
Total, not government insured/guaranteed | $ | 872 | 756 | 841 | 920 | 946 | |||||||||
By segment and class, not government insured/guaranteed: | |||||||||||||||
Commercial: | |||||||||||||||
Commercial and industrial | $ | 53 | 17 | 31 | 31 | 35 | |||||||||
Real estate mortgage | 24 | 10 | 43 | 16 | 37 | ||||||||||
Real estate construction | — | — | — | — | 18 | ||||||||||
Total commercial | 77 | 27 | 74 | 47 | 90 | ||||||||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage (3) | 216 | 220 | 221 | 260 | 327 | ||||||||||
Real estate 1-4 family junior lien mortgage (3) | 61 | 65 | 55 | 83 | 78 | ||||||||||
Credit card | 353 | 304 | 352 | 364 | 302 | ||||||||||
Automobile | 66 | 51 | 47 | 73 | 64 | ||||||||||
Other revolving credit and installment | 99 | 89 | 92 | 93 | 85 | ||||||||||
Total consumer | 795 | 729 | 767 | 873 | 856 | ||||||||||
Total, not government insured/guaranteed | $ | 872 | 756 | 841 | 920 | 946 |
(1) | PCI loans totaled $3.2 billion, $3.4 billion, $3.6 billion, $3.7 billion and $4.0 billion, at September 30, June 30 and March 31, 2015, and December 31 and September 30, 2014, respectively. |
(2) | Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA. |
(3) | Includes mortgages held for sale 90 days or more past due and still accruing. |
(4) | Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP. In fourth quarter 2014, substantially all government guaranteed loans were sold. |
- 32 -
Wells Fargo & Company and Subsidiaries
CHANGES IN ACCRETABLE YIELD RELATED TO PURCHASED CREDIT-IMPAIRED (PCI) LOANS
Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans predominantly represent loans acquired from Wachovia that were deemed to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent LTV percentages. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date.
As a result of PCI loan accounting, certain credit-related ratios cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.
The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:
• | Changes in interest rate indices for variable rate PCI loans - Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows; |
• | Changes in prepayment assumptions - Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and |
• | Changes in the expected principal and interest payments over the estimated life - Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected. |
The change in the accretable yield related to PCI loans is presented in the following table.
(in millions) | |||
Balance, December 31, 2008 | $ | 10,447 | |
Addition of accretable yield due to acquisitions | 132 | ||
Accretion into interest income (1) | (12,783 | ) | |
Accretion into noninterest income due to sales (2) | (430 | ) | |
Reclassification from nonaccretable difference for loans with improving credit-related cash flows | 8,568 | ||
Changes in expected cash flows that do not affect nonaccretable difference (3) | 11,856 | ||
Balance, December 31, 2014 | 17,790 | ||
Addition of accretable yield due to acquisitions | — | ||
Accretion into interest income (1) | (1,102 | ) | |
Accretion into noninterest income due to sales (2) | (28 | ) | |
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (4) | 31 | ||
Changes in expected cash flows that do not affect nonaccretable difference (3) | (34 | ) | |
Balance, September 30, 2015 | $ | 16,657 | |
Balance, June 30, 2015 | $ | 16,970 | |
Addition of accretable yield due to acquisitions | — | ||
Accretion into interest income (1) | (338 | ) | |
Accretion into noninterest income due to sales (2) | — | ||
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (4) | 1 | ||
Changes in expected cash flows that do not affect nonaccretable difference (3) | 24 | ||
Balance, September 30, 2015 | $ | 16,657 |
(1) | Includes accretable yield released as a result of settlements with borrowers, which is included in interest income. |
(2) | Includes accretable yield released as a result of sales to third parties, which is included in noninterest income. |
(3) | Represents changes in cash flows expected to be collected due to the impact of modifications, changes in prepayment assumptions, changes in interest rates on variable rate PCI loans and sales to third parties. |
(4) | At September 30, 2015, our carrying value for PCI loans totaled $20.7 billion and the remainder of nonaccretable difference established in purchase accounting totaled $3.0 billion. The nonaccretable difference absorbs losses of contractual amounts that exceed our carrying value for PCI loans. |
- 33 -
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)
September 30, 2015 | ||||||||||||||||||||
PCI loans | All other loans | |||||||||||||||||||
(in millions) | Adjusted unpaid principal balance (2) | Current LTV ratio (3) | Carrying value (4) | Ratio of carrying value to current value (5) | Carrying value (4) | Ratio of carrying value to current value (5) | ||||||||||||||
California | $ | 17,030 | 74 | % | $ | 13,860 | 60 | % | $ | 10,117 | 54 | % | ||||||||
Florida | 1,932 | 83 | 1,372 | 57 | 2,093 | 67 | ||||||||||||||
New Jersey | 803 | 81 | 641 | 61 | 1,364 | 69 | ||||||||||||||
New York | 539 | 75 | 477 | 61 | 658 | 65 | ||||||||||||||
Texas | 210 | 58 | 191 | 51 | 813 | 45 | ||||||||||||||
Other states | 3,952 | 79 | 3,179 | 62 | 5,813 | 66 | ||||||||||||||
Total Pick-a-Pay loans | $ | 24,466 | 76 | $ | 19,720 | 60 | $ | 20,858 | 59 | |||||||||||
(1) | The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2015. |
(2) | Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan. |
(3) | The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas. |
(4) | Carrying value, which does not reflect the allowance for loan losses, includes remaining purchase accounting adjustments, which, for PCI loans may include the nonaccretable difference and the accretable yield and, for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs. |
(5) | The ratio of carrying value to current value is calculated as the carrying value divided by the collateral value. |
NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Commercial: | |||||||||||||||
Legacy Wachovia commercial and industrial and commercial real estate PCI loans (1) | $ | 506 | 592 | 699 | 1,125 | 1,465 | |||||||||
Total commercial | 506 | 592 | 699 | 1,125 | 1,465 | ||||||||||
Consumer: | |||||||||||||||
Pick-a-Pay mortgage (1)(2) | 40,578 | 42,222 | 43,745 | 45,002 | 46,389 | ||||||||||
Legacy Wells Fargo Financial debt consolidation (3) | 10,315 | 10,702 | 11,067 | 11,417 | 11,781 | ||||||||||
Liquidating home equity | 2,388 | 2,566 | 2,744 | 2,910 | 3,083 | ||||||||||
Legacy Wachovia other PCI loans (1) | 240 | 262 | 276 | 300 | 320 | ||||||||||
Legacy Wells Fargo Financial indirect auto (3) | 11 | 15 | 23 | 34 | 54 | ||||||||||
Total consumer | 53,532 | 55,767 | 57,855 | 59,663 | 61,627 | ||||||||||
Total non-strategic and liquidating loan portfolios | $ | 54,038 | 56,359 | 58,554 | 60,788 | 63,092 |
(1) | Net of purchase accounting adjustments related to PCI loans. |
(2) | Includes PCI loans of $19.7 billion, $20.4 billion, $21.0 billion, $21.5 billion and $22.1 billion at September 30, June 30 and March 31, 2015, and December 31 and September 30, 2014, respectively. |
(3) | When we refer to "Legacy Wells Fargo", we mean Wells Fargo excluding Wachovia Corporation (Wachovia). |
- 34 -
Wells Fargo & Company and Subsidiaries
CHANGES IN ALLOWANCE FOR CREDIT LOSSES
Quarter ended September 30, | Nine months ended September 30, | |||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | ||||||||
Balance, beginning of period | $ | 12,614 | 13,834 | 13,169 | 14,971 | |||||||
Provision for credit losses | 703 | 368 | 1,611 | 910 | ||||||||
Interest income on certain impaired loans (1) | (48 | ) | (52 | ) | (150 | ) | (163 | ) | ||||
Loan charge-offs: | ||||||||||||
Commercial: | ||||||||||||
Commercial and industrial | (172 | ) | (157 | ) | (459 | ) | (466 | ) | ||||
Real estate mortgage | (9 | ) | (11 | ) | (48 | ) | (47 | ) | ||||
Real estate construction | — | (3 | ) | (2 | ) | (7 | ) | |||||
Lease financing | (5 | ) | (5 | ) | (11 | ) | (12 | ) | ||||
Total commercial | (186 | ) | (176 | ) | (520 | ) | (532 | ) | ||||
Consumer: | ||||||||||||
Real estate 1-4 family first mortgage | (145 | ) | (167 | ) | (394 | ) | (583 | ) | ||||
Real estate 1-4 family junior lien mortgage | (159 | ) | (202 | ) | (501 | ) | (671 | ) | ||||
Credit card | (259 | ) | (236 | ) | (821 | ) | (769 | ) | ||||
Automobile | (186 | ) | (192 | ) | (531 | ) | (515 | ) | ||||
Other revolving credit and installment | (160 | ) | (160 | ) | (465 | ) | (508 | ) | ||||
Total consumer | (909 | ) | (957 | ) | (2,712 | ) | (3,046 | ) | ||||
Total loan charge-offs | (1,095 | ) | (1,133 | ) | (3,232 | ) | (3,578 | ) | ||||
Loan recoveries: | ||||||||||||
Commercial: | ||||||||||||
Commercial and industrial | 50 | 90 | 192 | 290 | ||||||||
Real estate mortgage | 32 | 48 | 97 | 116 | ||||||||
Real estate construction | 8 | 61 | 25 | 108 | ||||||||
Lease financing | 2 | 1 | 6 | 6 | ||||||||
Total commercial | 92 | 200 | 320 | 520 | ||||||||
Consumer: | ||||||||||||
Real estate 1-4 family first mortgage | 83 | 53 | 182 | 162 | ||||||||
Real estate 1-4 family junior lien mortgage | 70 | 62 | 195 | 179 | ||||||||
Credit card | 43 | 35 | 123 | 126 | ||||||||
Automobile | 73 | 80 | 249 | 267 | ||||||||
Other revolving credit and installment | 31 | 35 | 102 | 114 | ||||||||
Total consumer | 300 | 265 | 851 | 848 | ||||||||
Total loan recoveries | 392 | 465 | 1,171 | 1,368 | ||||||||
Net loan charge-offs (2) | (703 | ) | (668 | ) | (2,061 | ) | (2,210 | ) | ||||
Allowances related to business combinations/other | (4 | ) | (1 | ) | (7 | ) | (27 | ) | ||||
Balance, end of period | $ | 12,562 | 13,481 | 12,562 | 13,481 | |||||||
Components: | ||||||||||||
Allowance for loan losses | $ | 11,659 | 12,681 | 11,659 | 12,681 | |||||||
Allowance for unfunded credit commitments | 903 | 800 | 903 | 800 | ||||||||
Allowance for credit losses (3) | $ | 12,562 | 13,481 | 12,562 | 13,481 | |||||||
Net loan charge-offs (annualized) as a percentage of average total loans (2) | 0.31 | % | 0.32 | 0.31 | 0.36 | |||||||
Allowance for loan losses as a percentage of total loans (3) | 1.29 | 1.51 | 1.29 | 1.51 | ||||||||
Allowance for credit losses as a percentage of total loans (3) | 1.39 | 1.61 | 1.39 | 1.61 |
(1) | Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income. |
(2) | For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting estimates. |
(3) | The allowance for credit losses includes $5 million and $11 million at September 30, 2015 and 2014, respectively, related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs. |
- 35 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
Quarter ended | |||||||||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Balance, beginning of quarter | $ | 12,614 | 13,013 | 13,169 | 13,481 | 13,834 | |||||||||
Provision for credit losses | 703 | 300 | 608 | 485 | 368 | ||||||||||
Interest income on certain impaired loans (1) | (48 | ) | (50 | ) | (52 | ) | (48 | ) | (52 | ) | |||||
Loan charge-offs: | |||||||||||||||
Commercial: | |||||||||||||||
Commercial and industrial | (172 | ) | (154 | ) | (133 | ) | (161 | ) | (157 | ) | |||||
Real estate mortgage | (9 | ) | (16 | ) | (23 | ) | (19 | ) | (11 | ) | |||||
Real estate construction | — | (1 | ) | (1 | ) | (2 | ) | (3 | ) | ||||||
Lease financing | (5 | ) | (3 | ) | (3 | ) | (3 | ) | (5 | ) | |||||
Total commercial | (186 | ) | (174 | ) | (160 | ) | (185 | ) | (176 | ) | |||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage | (145 | ) | (119 | ) | (130 | ) | (138 | ) | (167 | ) | |||||
Real estate 1-4 family junior lien mortgage | (159 | ) | (163 | ) | (179 | ) | (193 | ) | (202 | ) | |||||
Credit card | (259 | ) | (284 | ) | (278 | ) | (256 | ) | (236 | ) | |||||
Automobile | (186 | ) | (150 | ) | (195 | ) | (214 | ) | (192 | ) | |||||
Other revolving credit and installment | (160 | ) | (151 | ) | (154 | ) | (160 | ) | (160 | ) | |||||
Total consumer | (909 | ) | (867 | ) | (936 | ) | (961 | ) | (957 | ) | |||||
Total loan charge-offs | (1,095 | ) | (1,041 | ) | (1,096 | ) | (1,146 | ) | (1,133 | ) | |||||
Loan recoveries: | |||||||||||||||
Commercial: | |||||||||||||||
Commercial and industrial | 50 | 73 | 69 | 79 | 90 | ||||||||||
Real estate mortgage | 32 | 31 | 34 | 44 | 48 | ||||||||||
Real estate construction | 8 | 7 | 10 | 28 | 61 | ||||||||||
Lease financing | 2 | 1 | 3 | 2 | 1 | ||||||||||
Total commercial | 92 | 112 | 116 | 153 | 200 | ||||||||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage | 83 | 52 | 47 | 50 | 53 | ||||||||||
Real estate 1-4 family junior lien mortgage | 70 | 69 | 56 | 59 | 62 | ||||||||||
Credit card | 43 | 41 | 39 | 35 | 35 | ||||||||||
Automobile | 73 | 82 | 94 | 82 | 80 | ||||||||||
Other revolving credit and installment | 31 | 35 | 36 | 32 | 35 | ||||||||||
Total consumer | 300 | 279 | 272 | 258 | 265 | ||||||||||
Total loan recoveries | 392 | 391 | 388 | 411 | 465 | ||||||||||
Net loan charge-offs | (703 | ) | (650 | ) | (708 | ) | (735 | ) | (668 | ) | |||||
Allowances related to business combinations/other | (4 | ) | 1 | (4 | ) | (14 | ) | (1 | ) | ||||||
Balance, end of quarter | $ | 12,562 | 12,614 | 13,013 | 13,169 | 13,481 | |||||||||
Components: | |||||||||||||||
Allowance for loan losses | $ | 11,659 | 11,754 | 12,176 | 12,319 | 12,681 | |||||||||
Allowance for unfunded credit commitments | 903 | 860 | 837 | 850 | 800 | ||||||||||
Allowance for credit losses | $ | 12,562 | 12,614 | 13,013 | 13,169 | 13,481 | |||||||||
Net loan charge-offs (annualized) as a percentage of average total loans | 0.31 | % | 0.30 | 0.33 | 0.34 | 0.32 | |||||||||
Allowance for loan losses as a percentage of: | |||||||||||||||
Total loans | 1.29 | 1.32 | 1.41 | 1.43 | 1.51 | ||||||||||
Nonaccrual loans | 101 | 94 | 97 | 96 | 95 | ||||||||||
Nonaccrual loans and other nonperforming assets | 88 | 82 | 82 | 80 | 78 | ||||||||||
Allowance for credit losses as a percentage of: | |||||||||||||||
Total loans | 1.39 | 1.42 | 1.51 | 1.53 | 1.61 | ||||||||||
Nonaccrual loans | 109 | 101 | 104 | 103 | 101 | ||||||||||
Nonaccrual loans and other nonperforming assets | 94 | 88 | 88 | 85 | 83 |
(1) | Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income. |
- 36 -
Wells Fargo & Company and Subsidiaries
COMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1)
Estimated | ||||||||||
(in billions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | ||||||
Total equity | $ | 194.0 | 190.7 | 190.0 | 185.3 | |||||
Noncontrolling interests | (0.9 | ) | (1.1 | ) | (1.2 | ) | (0.9 | ) | ||
Total Wells Fargo stockholders’ equity | 193.1 | 189.6 | 188.8 | 184.4 | ||||||
Adjustments: | ||||||||||
Preferred stock | (21.0 | ) | (20.0 | ) | (20.0 | ) | (18.0 | ) | ||
Goodwill and other intangible assets (2) | (28.7 | ) | (29.1 | ) | (28.9 | ) | (29.0 | ) | ||
Investment in certain subsidiaries and other | (1.5 | ) | (0.6 | ) | (0.9 | ) | (0.7 | ) | ||
Common Equity Tier 1 (Fully Phased-In) under Basel III (1) | (A) | 141.9 | 139.9 | 139.0 | 136.7 | |||||
Total risk-weighted assets (RWAs) anticipated under Basel III (3)(4) | (B) | $ | 1,329.5 | 1,325.6 | 1,326.3 | 1,310.5 | ||||
Common Equity Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In) (4) | (A)/(B) | 10.7 | % | 10.6 | 10.5 | 10.4 |
(1) | Basel III capital rules, adopted by the Federal Reserve Board on July 2, 2013, revised the definition of capital, increased minimum capital ratios, and introduced a minimum Common Equity Tier 1 (CET1) ratio. These rules established a new comprehensive capital framework for U.S. banking organizations that implements the Basel III capital framework and certain provisions of the Dodd-Frank Act. The rules are being phased in through the end of 2021. Fully phased-in capital amounts, ratios and RWAs are calculated assuming the full phase-in of the Basel III capital rules. Fully phased-in regulatory capital amounts, ratios and RWAs are considered non-GAAP financial measures that are used by management, bank regulatory agencies, investors and analysts to assess and monitor the Company’s capital position. We have included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants. |
(2) | Goodwill and other intangible assets are net of any associated deferred tax liabilities. |
(3) | The final Basel III capital rules provide for two capital frameworks: the Standardized Approach, which replaced Basel I, and the Advanced Approach applicable to certain institutions. Under the final rules, we are subject to the lower of our CET1 ratio calculated under the Standardized Approach and under the Advanced Approach in the assessment of our capital adequacy. Because the final determination of our CET1 ratio and which approach will produce the lower CET1 ratio as of September 30, 2015, is subject to detailed analysis of considerable data, our CET1 ratio at that date has been estimated using the Basel III definition of capital under the Basel III Standardized Approach RWAs. The capital ratio for June 30, 2015, was calculated under the Basel III Standardized Approach RWAs, and the capital ratio for March 31, 2015, and December 31, 2014, was calculated under the Basel III Advanced Approach RWAs. |
(4) | The Company’s September 30, 2015, RWAs and capital ratio are preliminary estimates. |
- 37 -
Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
(income/expense in millions, average balances in billions) | Community Banking | Wholesale Banking | Wealth and Investment Management | Other (2) | Consolidated Company | |||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
Quarter ended Sep 30, | ||||||||||||||||||||||||||||||
Net interest income (3) | $ | 7,822 | 7,455 | 3,128 | 3,061 | 887 | 753 | (380 | ) | (328 | ) | 11,457 | 10,941 | |||||||||||||||||
Provision (reversal of provision) for credit losses | 658 | 465 | 45 | (85 | ) | (6 | ) | (25 | ) | 6 | 13 | 703 | 368 | |||||||||||||||||
Noninterest income | 5,796 | 5,356 | 2,442 | 2,606 | 2,991 | 3,052 | (811 | ) | (742 | ) | 10,418 | 10,272 | ||||||||||||||||||
Noninterest expense | 7,219 | 7,049 | 3,036 | 2,997 | 2,909 | 2,945 | (765 | ) | (743 | ) | 12,399 | 12,248 | ||||||||||||||||||
Income (loss) before income tax expense (benefit) | 5,741 | 5,297 | 2,489 | 2,755 | 975 | 885 | (432 | ) | (340 | ) | 8,773 | 8,597 | ||||||||||||||||||
Income tax expense (benefit) | 1,861 | 1,603 | 722 | 830 | 371 | 338 | (164 | ) | (129 | ) | 2,790 | 2,642 | ||||||||||||||||||
Net income (loss) before noncontrolling interests | 3,880 | 3,694 | 1,767 | 1,925 | 604 | 547 | (268 | ) | (211 | ) | 5,983 | 5,955 | ||||||||||||||||||
Less: Net income (loss) from noncontrolling interests | 194 | 233 | (5 | ) | (4 | ) | (2 | ) | (3 | ) | — | — | 187 | 226 | ||||||||||||||||
Net income (loss) | $ | 3,686 | 3,461 | 1,772 | 1,929 | 606 | 550 | (268 | ) | (211 | ) | 5,796 | 5,729 | |||||||||||||||||
Average loans | $ | 511.0 | 498.3 | 363.1 | 316.8 | 61.1 | 52.6 | (40.1 | ) | (34.5 | ) | 895.1 | 833.2 | |||||||||||||||||
Average assets | 977.1 | 944.8 | 652.6 | 562.0 | 192.6 | 185.2 | (75.9 | ) | (74.1 | ) | 1,746.4 | 1,617.9 | ||||||||||||||||||
Average core deposits | 690.5 | 646.9 | 311.3 | 278.3 | 163.0 | 153.7 | (71.2 | ) | (66.7 | ) | 1,093.6 | 1,012.2 | ||||||||||||||||||
Nine months ended Sep 30, | ||||||||||||||||||||||||||||||
Net interest income (3) | $ | 23,051 | 22,075 | 9,215 | 9,021 | 2,545 | 2,221 | (1,098 | ) | (970 | ) | 33,713 | 32,347 | |||||||||||||||||
Provision (reversal of provision) for credit losses | 1,638 | 1,163 | (19 | ) | (227 | ) | (19 | ) | (58 | ) | 11 | 32 | 1,611 | 910 | ||||||||||||||||
Noninterest income | 15,980 | 15,883 | 7,902 | 7,691 | 9,285 | 9,135 | (2,409 | ) | (2,152 | ) | 30,758 | 30,557 | ||||||||||||||||||
Noninterest expense | 21,442 | 20,839 | 9,191 | 8,843 | 9,069 | 8,927 | (2,327 | ) | (2,219 | ) | 37,375 | 36,390 | ||||||||||||||||||
Income (loss) before income tax expense (benefit) | 15,951 | 15,956 | 7,945 | 8,096 | 2,780 | 2,487 | (1,191 | ) | (935 | ) | 25,485 | 25,604 | ||||||||||||||||||
Income tax expense (benefit) | 4,921 | 4,781 | 2,309 | 2,418 | 1,054 | 944 | (452 | ) | (355 | ) | 7,832 | 7,788 | ||||||||||||||||||
Net income (loss) before noncontrolling interests | 11,030 | 11,175 | 5,636 | 5,678 | 1,726 | 1,543 | (739 | ) | (580 | ) | 17,653 | 17,816 | ||||||||||||||||||
Less: Net income (loss) from noncontrolling interests | 337 | 469 | (8 | ) | (3 | ) | 5 | 2 | — | — | 334 | 468 | ||||||||||||||||||
Net income (loss) | $ | 10,693 | 10,706 | 5,644 | 5,681 | 1,721 | 1,541 | (739 | ) | (580 | ) | 17,319 | 17,348 | |||||||||||||||||
Average loans | $ | 507.8 | 502.7 | 348.4 | 309.2 | 59.1 | 51.2 | (38.9 | ) | (33.7 | ) | 876.4 | 829.4 | |||||||||||||||||
Average assets | 984.0 | 914.5 | 628.6 | 544.0 | 191.1 | 185.4 | (75.7 | ) | (74.3 | ) | 1,728.0 | 1,569.6 | ||||||||||||||||||
Average core deposits | 681.8 | 637.8 | 306.2 | 267.7 | 161.4 | 154.3 | (70.6 | ) | (67.1 | ) | 1,078.8 | 992.7 | ||||||||||||||||||
(1) | The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. Effective third quarter 2015, we realigned our asset management business from Wholesale Banking to Wealth and Investment Management (WIM) (formerly Wealth, Brokerage and Retirement), and realigned our reinsurance business from WIM and our strategic auto investments from Community Banking to Wholesale Banking. Results for these operating segments were revised for prior periods to reflect the impact of these realignments. |
(2) | Includes items not specific to a business segment and elimination of certain items that are included in more than one business segment, substantially all of which represents services for wealth management customers provided in Community Banking stores. |
(3) | Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment. |
- 38 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)
Quarter ended | |||||||||||||||
(income/expense in millions, average balances in billions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
COMMUNITY BANKING | |||||||||||||||
Net interest income (2) | $ | 7,822 | 7,684 | 7,545 | 7,560 | 7,455 | |||||||||
Provision for credit losses | 658 | 363 | 617 | 518 | 465 | ||||||||||
Noninterest income | 5,796 | 4,961 | 5,223 | 5,259 | 5,356 | ||||||||||
Noninterest expense | 7,219 | 7,161 | 7,062 | 7,279 | 7,049 | ||||||||||
Income before income tax expense | 5,741 | 5,121 | 5,089 | 5,022 | 5,297 | ||||||||||
Income tax expense | 1,861 | 1,702 | 1,358 | 1,540 | 1,603 | ||||||||||
Net income before noncontrolling interests | 3,880 | 3,419 | 3,731 | 3,482 | 3,694 | ||||||||||
Less: Net income from noncontrolling interests | 194 | 69 | 74 | 56 | 233 | ||||||||||
Segment net income | $ | 3,686 | 3,350 | 3,657 | 3,426 | 3,461 | |||||||||
Average loans | $ | 511.0 | 506.2 | 506.1 | 503.5 | 498.3 | |||||||||
Average assets | 977.1 | 987.8 | 987.1 | 969.6 | 944.8 | ||||||||||
Average core deposits | 690.5 | 685.7 | 668.9 | 655.6 | 646.9 | ||||||||||
WHOLESALE BANKING | |||||||||||||||
Net interest income (2) | $ | 3,128 | 3,115 | 2,972 | 3,155 | 3,061 | |||||||||
Reversal of provision for credit losses | 45 | (58 | ) | (6 | ) | (39 | ) | (85 | ) | ||||||
Noninterest income | 2,442 | 2,747 | 2,713 | 2,649 | 2,606 | ||||||||||
Noninterest expense | 3,036 | 3,035 | 3,120 | 3,054 | 2,997 | ||||||||||
Income before income tax expense | 2,489 | 2,885 | 2,571 | 2,789 | 2,755 | ||||||||||
Income tax expense | 722 | 855 | 732 | 790 | 830 | ||||||||||
Net income before noncontrolling interests | 1,767 | 2,030 | 1,839 | 1,999 | 1,925 | ||||||||||
Less: Net income (loss) from noncontrolling interests | (5 | ) | (5 | ) | 2 | 25 | (4 | ) | |||||||
Segment net income | $ | 1,772 | 2,035 | 1,837 | 1,974 | 1,929 | |||||||||
Average loans | $ | 363.1 | 343.9 | 337.9 | 327.1 | 316.8 | |||||||||
Average assets | 652.6 | 627.7 | 605.0 | 582.6 | 562.0 | ||||||||||
Average core deposits | 311.3 | 304.1 | 303.2 | 292.3 | 278.3 | ||||||||||
WEALTH AND INVESTMENT MANAGEMENT | |||||||||||||||
Net interest income (2) | $ | 887 | 832 | 826 | 811 | 753 | |||||||||
Provision (reversal of provision) for credit losses | (6 | ) | (10 | ) | (3 | ) | 8 | (25 | ) | ||||||
Noninterest income | 2,991 | 3,144 | 3,150 | 3,102 | 3,052 | ||||||||||
Noninterest expense | 2,909 | 3,038 | 3,122 | 3,066 | 2,945 | ||||||||||
Income before income tax expense | 975 | 948 | 857 | 839 | 885 | ||||||||||
Income tax expense | 371 | 359 | 324 | 318 | 338 | ||||||||||
Net income before noncontrolling interests | 604 | 589 | 533 | 521 | 547 | ||||||||||
Less: Net income from noncontrolling interests | (2 | ) | 3 | 4 | 2 | (3 | ) | ||||||||
Segment net income | $ | 606 | 586 | 529 | 519 | 550 | |||||||||
Average loans | $ | 61.1 | 59.3 | 56.9 | 54.8 | 52.6 | |||||||||
Average assets | 192.6 | 189.1 | 191.6 | 188.2 | 185.2 | ||||||||||
Average core deposits | 163.0 | 159.5 | 161.6 | 157.1 | 153.7 | ||||||||||
OTHER (3) | |||||||||||||||
Net interest income (2) | $ | (380 | ) | (361 | ) | (357 | ) | (346 | ) | (328 | ) | ||||
Provision (reversal of provision) for credit losses | 6 | 5 | — | (2 | ) | 13 | |||||||||
Noninterest income | (811 | ) | (804 | ) | (794 | ) | (747 | ) | (742 | ) | |||||
Noninterest expense | (765 | ) | (765 | ) | (797 | ) | (752 | ) | (743 | ) | |||||
Loss before income tax benefit | (432 | ) | (405 | ) | (354 | ) | (339 | ) | (340 | ) | |||||
Income tax benefit | (164 | ) | (153 | ) | (135 | ) | (129 | ) | (129 | ) | |||||
Net loss before noncontrolling interests | (268 | ) | (252 | ) | (219 | ) | (210 | ) | (211 | ) | |||||
Less: Net income from noncontrolling interests | — | — | — | — | — | ||||||||||
Other net loss | $ | (268 | ) | (252 | ) | (219 | ) | (210 | ) | (211 | ) | ||||
Average loans | $ | (40.1 | ) | (39.0 | ) | (37.6 | ) | (36.0 | ) | (34.5 | ) | ||||
Average assets | (75.9 | ) | (75.3 | ) | (75.9 | ) | (76.6 | ) | (74.1 | ) | |||||
Average core deposits | (71.2 | ) | (70.1 | ) | (70.5 | ) | (69.0 | ) | (66.7 | ) | |||||
CONSOLIDATED COMPANY | |||||||||||||||
Net interest income (2) | $ | 11,457 | 11,270 | 10,986 | 11,180 | 10,941 | |||||||||
Provision for credit losses | 703 | 300 | 608 | 485 | 368 | ||||||||||
Noninterest income | 10,418 | 10,048 | 10,292 | 10,263 | 10,272 | ||||||||||
Noninterest expense | 12,399 | 12,469 | 12,507 | 12,647 | 12,248 | ||||||||||
Income before income tax expense | 8,773 | 8,549 | 8,163 | 8,311 | 8,597 | ||||||||||
Income tax expense | 2,790 | 2,763 | 2,279 | 2,519 | 2,642 | ||||||||||
Net income before noncontrolling interests | 5,983 | 5,786 | 5,884 | 5,792 | 5,955 | ||||||||||
Less: Net income from noncontrolling interests | 187 | 67 | 80 | 83 | 226 | ||||||||||
Wells Fargo net income | $ | 5,796 | 5,719 | 5,804 | 5,709 | 5,729 | |||||||||
Average loans | $ | 895.1 | 870.4 | 863.3 | 849.4 | 833.2 | |||||||||
Average assets | 1,746.4 | 1,729.3 | 1,707.8 | 1,663.8 | 1,617.9 | ||||||||||
Average core deposits | 1,093.6 | 1,079.2 | 1,063.2 | 1,036.0 | 1,012.2 |
(1) | The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. Effective third quarter 2015, we realigned our asset management business from Wholesale Banking to Wealth and Investment Management (WIM) (formerly Wealth, Brokerage and Retirement), and realigned our reinsurance business from WIM and our strategic auto investments from Community Banking to Wholesale Banking. Results for these operating segments were revised for prior periods to reflect the impact of these realignments. |
(2) | Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment. |
(3) | Includes items not specific to a business segment and elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for wealth management customers provided in Community Banking stores. |
- 39 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
Quarter ended | |||||||||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
MSRs measured using the fair value method: | |||||||||||||||
Fair value, beginning of quarter | $ | 12,661 | 11,739 | 12,738 | 14,031 | 13,900 | |||||||||
Servicing from securitizations or asset transfers | 448 | 428 | 308 | 296 | 340 | ||||||||||
Sales and other (1) | 6 | (5 | ) | (1 | ) | (7 | ) | — | |||||||
Net additions | 454 | 423 | 307 | 289 | 340 | ||||||||||
Changes in fair value: | |||||||||||||||
Due to changes in valuation model inputs or assumptions: | |||||||||||||||
Mortgage interest rates (2) | (858 | ) | 1,117 | (572 | ) | (1,016 | ) | 251 | |||||||
Servicing and foreclosure costs (3) | (18 | ) | (10 | ) | (18 | ) | (5 | ) | (4 | ) | |||||
Prepayment estimates and other (4) | 43 | (54 | ) | (183 | ) | (78 | ) | 6 | |||||||
Net changes in valuation model inputs or assumptions | (833 | ) | 1,053 | (773 | ) | (1,099 | ) | 253 | |||||||
Other changes in fair value (5) | (504 | ) | (554 | ) | (533 | ) | (483 | ) | (462 | ) | |||||
Total changes in fair value | (1,337 | ) | 499 | (1,306 | ) | (1,582 | ) | (209 | ) | ||||||
Fair value, end of quarter | $ | 11,778 | 12,661 | 11,739 | 12,738 | 14,031 |
(1) | Includes sales and transfers of MSRs, which can result in an increase of total reported MSRs if the sales or transfers are related to nonperforming loan portfolios. |
(2) | Includes prepayment speed changes as well as other valuation changes due to changes in mortgage interest rates (such as changes in estimated interest earned on custodial deposit balances). |
(3) | Includes costs to service and unreimbursed foreclosure costs. |
(4) | Represents changes driven by other valuation model inputs or assumptions including prepayment speed estimation changes and other assumption updates. Prepayment speed estimation changes are influenced by observed changes in borrower behavior and other external factors that occur independent of interest rate changes. |
(5) | Represents changes due to collection/realization of expected cash flows over time. |
Quarter ended | |||||||||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Amortized MSRs: | |||||||||||||||
Balance, beginning of quarter | $ | 1,262 | 1,252 | 1,242 | 1,224 | 1,196 | |||||||||
Purchases | 45 | 29 | 22 | 38 | 47 | ||||||||||
Servicing from securitizations or asset transfers | 35 | 46 | 50 | 43 | 29 | ||||||||||
Amortization | (65 | ) | (65 | ) | (62 | ) | (63 | ) | (48 | ) | |||||
Balance, end of quarter | $ | 1,277 | 1,262 | 1,252 | 1,242 | 1,224 | |||||||||
Fair value of amortized MSRs: | |||||||||||||||
Beginning of quarter | $ | 1,692 | 1,522 | 1,637 | 1,647 | 1,577 | |||||||||
End of quarter | 1,643 | 1,692 | 1,522 | 1,637 | 1,647 |
- 40 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
Quarter ended | ||||||||||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | |||||||||||
Servicing income, net: | ||||||||||||||||
Servicing fees (1) | $ | 990 | 1,026 | 1,010 | 996 | 919 | ||||||||||
Changes in fair value of MSRs carried at fair value: | ||||||||||||||||
Due to changes in valuation model inputs or assumptions (2) | (A) | (833 | ) | 1,053 | (773 | ) | (1,099 | ) | 253 | |||||||
Other changes in fair value (3) | (504 | ) | (554 | ) | (533 | ) | (483 | ) | (462 | ) | ||||||
Total changes in fair value of MSRs carried at fair value | (1,337 | ) | 499 | (1,306 | ) | (1,582 | ) | (209 | ) | |||||||
Amortization | (65 | ) | (65 | ) | (62 | ) | (63 | ) | (48 | ) | ||||||
Net derivative gains (losses) from economic hedges (4) | (B) | 1,086 | (946 | ) | 881 | 1,334 | 17 | |||||||||
Total servicing income, net | $ | 674 | 514 | 523 | 685 | 679 | ||||||||||
Market-related valuation changes to MSRs, net of hedge results (2)(4) | (A)+(B) | $ | 253 | 107 | 108 | 235 | 270 |
(1) | Includes contractually specified servicing fees, late charges and other ancillary revenues. |
(2) | Refer to the changes in fair value MSRs table on the previous page for more detail. |
(3) | Represents changes due to collection/realization of expected cash flows over time. |
(4) | Represents results from economic hedges used to hedge the risk of changes in fair value of MSRs. |
(in billions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Managed servicing portfolio (1): | |||||||||||||||
Residential mortgage servicing: | |||||||||||||||
Serviced for others | $ | 1,323 | 1,344 | 1,374 | 1,405 | 1,430 | |||||||||
Owned loans serviced | 346 | 347 | 344 | 342 | 342 | ||||||||||
Subserviced for others | 4 | 5 | 5 | 5 | 5 | ||||||||||
Total residential servicing | 1,673 | 1,696 | 1,723 | 1,752 | 1,777 | ||||||||||
Commercial mortgage servicing: | |||||||||||||||
Serviced for others | 470 | 465 | 461 | 456 | 440 | ||||||||||
Owned loans serviced | 121 | 120 | 112 | 112 | 107 | ||||||||||
Subserviced for others | 7 | 7 | 7 | 7 | 7 | ||||||||||
Total commercial servicing | 598 | 592 | 580 | 575 | 554 | ||||||||||
Total managed servicing portfolio | $ | 2,271 | 2,288 | 2,303 | 2,327 | 2,331 | |||||||||
Total serviced for others | $ | 1,793 | 1,809 | 1,835 | 1,861 | 1,870 | |||||||||
Ratio of MSRs to related loans serviced for others | 0.73 | % | 0.77 | 0.71 | 0.75 | 0.82 | |||||||||
Weighted-average note rate (mortgage loans serviced for others) | 4.39 | 4.41 | 4.43 | 4.45 | 4.47 |
(1) | The components of our managed servicing portfolio are presented at unpaid principal balance for loans serviced and subserviced for others and at book value for owned loans serviced. |
- 41 -
Wells Fargo & Company and Subsidiaries
SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA
Quarter ended | ||||||||||||||||
Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||||
Net gains on mortgage loan origination/sales activities (in millions): | ||||||||||||||||
Residential | (A) | $ | 736 | 814 | 711 | 605 | 603 | |||||||||
Commercial | 55 | 108 | 91 | 66 | 103 | |||||||||||
Residential pipeline and unsold/repurchased loan management (1) | 124 | 269 | 222 | 159 | 248 | |||||||||||
Total | $ | 915 | 1,191 | 1,024 | 830 | 954 | ||||||||||
Application data (in billions): | ||||||||||||||||
Wells Fargo first mortgage quarterly applications | $ | 73 | 81 | 93 | 66 | 64 | ||||||||||
Refinances as a percentage of applications | 44 | % | 45 | 61 | 52 | 40 | ||||||||||
Wells Fargo first mortgage unclosed pipeline, at quarter end | $ | 34 | 38 | 44 | 26 | 25 | ||||||||||
Residential real estate originations: | ||||||||||||||||
Purchases as a percentage of originations | 66 | % | 54 | 45 | 60 | 70 | ||||||||||
Refinances as a percentage of originations | 34 | 46 | 55 | 40 | 30 | |||||||||||
Total | 100 | % | 100 | 100 | 100 | 100 | ||||||||||
Wells Fargo first mortgage loans (in billions): | ||||||||||||||||
Retail | $ | 32 | 36 | 28 | 27 | 27 | ||||||||||
Correspondent | 22 | 25 | 20 | 16 | 20 | |||||||||||
Other (2) | 1 | 1 | 1 | 1 | 1 | |||||||||||
Total quarter-to-date | $ | 55 | 62 | 49 | 44 | 48 | ||||||||||
Held-for-sale | (B) | $ | 39 | 46 | 37 | 31 | 36 | |||||||||
Held-for-investment | 16 | 16 | 12 | 13 | 12 | |||||||||||
Total quarter-to-date | $ | 55 | 62 | 49 | 44 | 48 | ||||||||||
Total year-to-date | $ | 166 | 111 | 49 | 175 | 131 | ||||||||||
Production margin on residential held-for-sale mortgage originations | (A)/(B) | 1.88 | % | 1.75 | 1.93 | 1.94 | 1.70 |
(1) | Primarily includes the results of GNMA loss mitigation activities, interest rate management activities and changes in estimate to the liability for mortgage loan repurchase losses. |
(2) | Consists of home equity loans and lines. |
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Wells Fargo & Company and Subsidiaries
CHANGES IN MORTGAGE REPURCHASE LIABILITY
Quarter ended | |||||||||||||||
(in millions) | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | ||||||||||
Balance, beginning of period | $ | 557 | 586 | 615 | 669 | 766 | |||||||||
Provision for repurchase losses: | |||||||||||||||
Loan sales | 11 | 13 | 10 | 10 | 12 | ||||||||||
Change in estimate (1) | (17 | ) | (31 | ) | (26 | ) | (49 | ) | (93 | ) | |||||
Total reductions | (6 | ) | (18 | ) | (16 | ) | (39 | ) | (81 | ) | |||||
Losses | (13 | ) | (11 | ) | (13 | ) | (15 | ) | (16 | ) | |||||
Balance, end of period | $ | 538 | 557 | 586 | 615 | 669 |
(1) | Results from changes in investor demand, mortgage insurer practices, credit and the financial stability of correspondent lenders. |
UNRESOLVED REPURCHASE DEMANDS AND MORTGAGE INSURANCE RESCISSIONS
($ in millions) | Government sponsored entities | Private | Mortgage insurance rescissions with no demand (1) | Total | ||||||||
September 30, 2015 | ||||||||||||
Number of loans | 210 | 59 | 103 | 372 | ||||||||
Original loan balance (2) | $ | 46 | 12 | 26 | 84 | |||||||
June 30, 2015 | ||||||||||||
Number of loans | 385 | 148 | 107 | 640 | ||||||||
Original loan balance (2) | $ | 83 | 24 | 27 | 134 | |||||||
March 31, 2015 | ||||||||||||
Number of loans | 526 | 161 | 108 | 795 | ||||||||
Original loan balance (2) | $ | 118 | 29 | 28 | 175 | |||||||
December 31, 2014 | ||||||||||||
Number of loans | 546 | 173 | 120 | 839 | ||||||||
Original loan balance (2) | $ | 118 | 34 | 31 | 183 | |||||||
September 30, 2014 | ||||||||||||
Number of loans | 426 | 322 | 233 | 981 | ||||||||
Original loan balance (2) | $ | 93 | 75 | 52 | 220 |
(1) | As part of our representations and warranties in our loan sales contracts, we typically represent to GSEs and private investors that certain loans have mortgage insurance to the extent there are loans that have loan to value ratios in excess of 80% that require mortgage insurance. To the extent the mortgage insurance is rescinded by the mortgage insurer due to a claim of breach of a contractual representation or warranty, the lack of insurance may result in a repurchase demand from an investor. Similar to repurchase demands, we evaluate mortgage insurance rescission notices for validity and appeal for reinstatement if the rescission was not based on a contractual breach. When investor demands are received due to lack of mortgage insurance, they are reported as unresolved repurchase demands based on the applicable investor category for the loan (GSE or private). |
(2) | While the original loan balances related to these demands are presented above, the establishment of the repurchase liability is based on a combination of factors, such as our appeals success rates, reimbursement by correspondent and other third party originators, and projected loss severity, which is driven by the difference between the current loan balance and the estimated collateral value less costs to sell the property. |