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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Wells Fargo and Company | NYSE:WFC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.15 | 0.25% | 59.98 | 60.258 | 59.12 | 60.09 | 17,293,091 | 22:59:53 |
Diluted EPS of $0.96 included net hedge ineffectiveness accounting impact of $(0.07)
Wells Fargo & Company (NYSE:WFC):
Selected Financial Information
Quarter ended Year ended Dec. 31,Dec 31,
Sep 30,
Dec 31,
2016
2016
2015
2016 2015 Earnings Diluted earnings per common share $ 0.96 1.03 1.00 3.99 4.12 Wells Fargo net income (in billions) 5.27 5.64 5.58 21.94 22.89 Return on assets (ROA) 1.08 % 1.17 1.24 1.16 1.31 Return on equity (ROE) 10.94 11.60 11.93 11.49 12.60 Return on average tangible common equity (ROTCE)(a) 13.16 13.96 14.30 13.85 15.17 Asset Quality Net charge-offs (annualized) as a % of average total loans 0.37 % 0.33 0.36 0.37 0.33 Allowance for credit losses as a % of total loans 1.30 1.32 1.37 1.30 1.37 Allowance for credit losses as a % of annualized net charge-offs 348 396 380 356 433 Other Revenue (in billions) $ 21.6 22.3 21.6 88.3 86.1 Efficiency ratio (b) 61.2 % 59.4 58.4 59.3 58.1 Average loans (in billions) $ 964.1 957.5 912.3 950.0 885.4 Average deposits (in billions) 1,284.2 1,261.5 1,216.8 1,250.6 1,194.1 Net interest margin 2.87 % 2.82 2.92 2.86 2.95(a) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.
(b) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
Wells Fargo & Company (NYSE:WFC) reported diluted earnings per common share of $3.99 for 2016, compared with $4.12 for 2015. Full year net income in 2016 was $21.9 billion, compared with $22.9 billion in 2015. For fourth quarter 2016, net income was $5.3 billion, or $0.96 per share, compared with $5.6 billion, or $1.00 per share, for fourth quarter 2015, and $5.6 billion, or $1.03 per share, for third quarter 2016.
Chief Executive Officer Tim Sloan said, "We continued to make progress in the fourth quarter in rebuilding the trust of our customers, team members and other key stakeholders. I am pleased with the progress we have made in customer remediation, the ongoing review of sales practices across the company and fulfilling our regulatory requirements for sales practices matters. As planned, we launched our new Retail Bank compensation program this month, which is based on building lifelong relationships with our customers. While we have more work to do, I am proud of the effort of our entire team to make things right for our customers and team members and to continue building a better Wells Fargo for the future.”
Chief Financial Officer John Shrewsberry said, “Wells Fargo had solid underlying performance in the fourth quarter as we continued to benefit from our diversified business model. Net interest income increased from the prior quarter, largely driven by growth in loans and investments, as well as higher interest rates. Noninterest income declined from the prior quarter due to net hedge accounting ineffectiveness associated with our hedging of long-term debt as part of our asset/liability management program, as well as lower market-sensitive revenue. Other sources of noninterest income were diversified and stable with the prior quarter. Credit quality remained solid in the quarter, and we returned $3.0 billion to shareholders in the quarter, with a full year 2016 net payout ratio2 of 61 percent."
Net Interest Income
Net interest income in fourth quarter 2016 increased $450 million from third quarter 2016 to $12.4 billion, primarily due to growth in loans and investment securities, higher interest income on trading assets, higher variable income including periodic dividends and fees, and a modest benefit from higher interest rates in the quarter.
Net interest margin was 2.87 percent, up 5 basis points from third quarter 2016, driven by growth in loans, investment securities and trading assets, and the impact from higher interest rates. Income from variable sources contributed approximately two basis points in the quarter. These benefits were partially offset by growth in funding balances, primarily long-term debt and deposits.
Noninterest Income
Noninterest income in the fourth quarter was $9.2 billion, compared with $10.4 billion in third quarter 2016. Fee income in many of the businesses in the quarter was stable compared with the prior quarter; however, linked-quarter results included a $592 million loss due to the impact of higher interest rates and currency movements on hedging results (net hedge ineffectiveness accounting loss) reflected in Other income. The linked-quarter decline also reflected decreases in trading income and mortgage banking fees, partially offset by higher equity gains and stronger investment banking fees.
Net loss from trading activities was $109 million in the fourth quarter, compared with a net gain of $415 million in the third quarter. Of the total linked-quarter decline of $524 million, $223 million resulted from a decrease in secondary trading, reflecting lower client volumes compared with a strong third quarter, as well as seasonality and fewer trading days in the quarter. Market-driven changes in credit spreads and higher swap rates resulted in a $61 million decline from credit valuation adjustments (CVA) in the quarter. Additionally, $204 million of the decline was associated with items that were offset in other areas, and were therefore neutral to net income:
Mortgage banking noninterest income was $1.4 billion, compared with $1.7 billion in third quarter 2016. Residential mortgage loan originations were $72 billion in the fourth quarter, up from $70 billion in the third quarter. The production margin on residential held-for-sale mortgage loan originations3 was 1.68 percent, down from 1.81 percent in the third quarter. Mortgage servicing income declined to $196 million in the fourth quarter from $359 million in the third quarter, primarily due to higher unreimbursed servicing costs.
Other income was $(382) million, compared with $315 million in third quarter, and included $592 million in hedge ineffectiveness losses, net of related economic hedges, resulting from certain key interest rate and foreign currency fluctuations. Full year 2016 net hedge ineffectiveness losses were $15 million, as prior quarters included net gains. Substantially all of the ineffectiveness related to hedges of U.S. dollar and non-U.S. dollar long-term debt.
Background on Hedge Ineffectiveness
As part of Wells Fargo's ongoing funding strategy, the Company is a regular issuer of long-term debt, which typically is fixed rate in order to meet the demands of debt investors. As part of the Company’s asset/liability management program, however, this fixed rate is typically swapped to floating rate in order to balance the Company's deposit-oriented liability structure to better align with the interest rate sensitivity characteristics of the Company's assets. While the majority of long-term debt is issued in U.S. dollars, non-U.S. dollar issuances are also used to diversify funding sources. Any non-U.S. dollar issuance is either swapped to U.S. dollars or is identified to be directly funding non-U.S. dollar assets. While the Company believes this hedging strategy is prudent from an asset/liability management perspective, it is generally not possible to achieve a perfect accounting hedge due to differences in the required valuation measurement of the hedging instrument, such as an interest rate swap, and the hedged risk component of the Company's long-term debt.
From an accounting standpoint, the measurement of the “effectiveness” of the hedge occurs throughout the quarter up to and including the last day of the quarter and results, therefore, can be affected by that point-in time calculation. While the hedge ineffectiveness recognized over the life of hedging relationships is expected to be zero as long as hedge accounting is maintained and the hedges are held to maturity, periodic ineffectiveness is recognized in other noninterest income as interest rate and foreign currency fluctuations occur. In first quarter 2016, for example, a sharp decline in interest rates and foreign currency fluctuations drove a net hedge accounting gain of $379 million in the Company’s other noninterest income. Conversely, the net hedge accounting losses in fourth quarter 2016 were driven by a sharp increase in certain interest rates and foreign currency fluctuations. Reported results in any quarter can also be affected by a related but separate economic hedging strategy the Company employs, also utilizing interest rate swaps, to partially offset the periodic volatility caused by the required effectiveness measurement.
The Financial Accounting Standards Board issued an exposure draft on hedge accounting guidelines and is expected to issue new guidance in 2017. If issued in its current form, the interest rate-related ineffectiveness associated with the Company's long-term debt hedges would be significantly reduced.
Noninterest Expense
Noninterest expense in the fourth quarter declined $53 million from the prior quarter to $13.2 billion, primarily due to lower operating losses, charitable donations, which were elevated in the third quarter due to a $107 million donation to the Wells Fargo Foundation, and deferred compensation expense (included in employee benefits expense and largely offset in revenue). Fourth quarter expenses included typically higher outside professional services, equipment, and advertising. Fourth quarter foreclosed asset expense increased from the third quarter which included an elevated level of commercial real estate recoveries. The efficiency ratio increased to 61.2 percent in fourth quarter 2016, compared with 59.4 percent in the prior quarter, primarily due to the impact of hedge ineffectiveness losses on revenue. The efficiency ratio for full year 2016 was 59.3 percent. The Company expects the efficiency ratio to remain at an elevated level.
Loans
Total loans were $967.6 billion at December 31, 2016, up $6.3 billion from September 30, 2016. Loan growth in the quarter was affected by the deconsolidation of certain previously sold reverse mortgage loans, which resulted from the sale of the related servicing, and reduced real estate 1-4 family first mortgages by $3.8 billion (offset in long-term debt). Commercial and industrial, commercial real estate, credit card and lease financing all grew in the quarter, while real estate 1-4 family junior lien mortgage and automobile declined. Total average loans were $964.1 billion in the fourth quarter, up $6.7 billion from the prior quarter.
Period-End Loan Balances
Dec 31,
Sep 30,
Jun 30,
Mar 31,
Dec 31,
(in millions)2016
2016
2016
2016
2015
Commercial $ 506,536 496,454 494,538 488,205 456,583 Consumer 461,068 464,872 462,619 459,053 459,976 Total loans $ 967,604 961,326 957,157 947,258 916,559 Change from prior quarter $ 6,278 4,169 9,899 30,699 13,326Investment Securities
Investment securities were $407.9 billion at December 31, 2016, up $17.1 billion from third quarter, as approximately $44 billion of purchases, predominantly federal agency mortgage-backed securities in the available-for-sale portfolio, were partially offset by run-off.
Net unrealized losses on available-for-sale securities were $1.8 billion at December 31, 2016, compared with net unrealized gains on available-for-sale securities of $4.5 billion at September 30, 2016, as the impact from higher interest rates was partially offset by tighter credit spreads.
Deposits
Total average deposits for fourth quarter 2016 were $1.3 trillion, up 2 percent from the prior quarter, driven by both commercial and consumer growth. The average deposit cost for fourth quarter 2016 was 12 basis points, up 1 basis point from the prior quarter.
Capital
Capital levels remained strong in the fourth quarter, with a Common Equity Tier 1 ratio (fully phased-in) of 10.7 percent1. While flat from the prior quarter, Common Equity Tier 1 experienced a decline due to changes in unrealized gains/losses recognized in Other comprehensive income (OCI) resulting from higher interest rates experienced in the fourth quarter, which were largely offset by a decline in standardized risk-weighted assets, primarily due to a decrease in the Company's exposure to counterparty risk. In fourth quarter 2016, the Company repurchased 24.9 million shares of its common stock and entered into a $750 million forward repurchase transaction, which settled on January 12, 2017, for 14.7 million shares. The Company paid a quarterly common stock dividend of $0.38 per share, up from $0.375 per share a year ago.
Credit Quality
“Credit results were stable in the fourth quarter and overall credit quality continued to be driven by strong performance in the commercial and consumer real estate portfolios," said Chief Risk Officer Mike Loughlin. "Continued improvement in residential real estate and stabilization in oil and gas industry conditions drove a $100 million reserve release4 in the fourth quarter."
Net Loan Charge-offs
The quarterly loss rate of 0.37 percent (annualized) reflected commercial losses of 0.20 percent and consumer losses of 0.56 percent. Credit losses were $905 million in fourth quarter 2016, up $100 million, from third quarter 2016. Consumer losses increased $64 million, driven by losses in the credit card, automobile and other revolving credit and installment portfolios. Commercial losses were up $36 million, driven by $32 million in lower recoveries.
Net Loan Charge-Offs
Quarter ended December 31, 2016 September 30, 2016 June 30, 2016Net loan
As a % of
Net loan
As a % of
Net loan
As a % of
charge-
average
charge-
average
charge-
average
($ in millions)
offs
loans (a)
offs
loans (a)
offs
loans (a)
Commercial: Commercial and industrial $ 256 0.31 % $ 259 0.32 % $ 368 0.46 % Real estate mortgage (12 ) (0.04 ) (28 ) (0.09 ) (20 ) (0.06 ) Real estate construction (8 ) (0.13 ) (18 ) (0.32 ) (3 ) (0.06 ) Lease financing 15 0.32 2 0.04 12 0.27 Total commercial 251 0.20 215 0.17 357 0.29 Consumer: Real estate 1-4 family first mortgage (3 ) — 20 0.03 140.02
Real estate 1-4 family junior lien mortgage 44 0.38 49 0.40 62 0.49 Credit card 275 3.09 245 2.82 270 3.25 Automobile 166 1.05 137 0.87 90 0.59 Other revolving credit and installment 172 1.70 139 1.40 131 1.32 Total consumer 654 0.56 590 0.51 567 0.49 Total $ 905 0.37 % $ 805 0.33 % $ 924 0.39 %
(a) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 31 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.
Nonperforming Assets
Nonperforming assets decreased $644 million from third quarter 2016 to $11.4 billion. Nonaccrual loans decreased $602 million from third quarter to $10.4 billion reflecting lower consumer real estate, commercial and industrial, and commercial real estate nonaccruals.
Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
December 31, 2016 September 30, 2016 June 30, 2016As a
As a
As a
% of
% of
% of
Total
total
Total
total
Total
total
($ in millions)balances
loans
balances
loans
balances
loans
Commercial: Commercial and industrial $ 3,216 0.97 % $ 3,331 1.03 % $ 3,464 1.07 % Real estate mortgage 685 0.52 780 0.60 872 0.68 Real estate construction 43 0.18 59 0.25 59 0.25 Lease financing 115 0.60 92 0.49 112 0.59 Total commercial 4,059 0.80 4,262 0.86 4,507 0.91 Consumer: Real estate 1-4 family first mortgage 4,962 1.80 5,310 1.91 5,970 2.15 Real estate 1-4 family junior lien mortgage 1,206 2.61 1,259 2.62 1,330 2.67 Automobile 106 0.17 108 0.17 111 0.18 Other revolving credit and installment 51 0.13 47 0.12 45 0.11 Total consumer 6,325 1.37 6,724 1.45 7,456 1.61 Total nonaccrual loans 10,384 1.07 10,986 1.14 11,963 1.25 Foreclosed assets: Government insured/guaranteed 197 282 321 Non-government insured/guaranteed 781 738 796 Total foreclosed assets 978 1,020 1,117 Total nonperforming assets $ 11,362 1.17 % $ 12,006 1.25 % $ 13,080 1.37 % Change from prior quarter: Total nonaccrual loans $ (602 ) $ (977 ) $ (271 ) Total nonperforming assets (644 ) (1,074 ) (433 )Allowance for Credit Losses
The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.5 billion at December 31, 2016, which was down $154 million from September 30, 2016. The allowance coverage for total loans was 1.30 percent, compared with 1.32 percent in third quarter 2016. The allowance covered 3.5 times annualized fourth quarter net charge-offs, compared with 4.0 times in the prior quarter. The allowance coverage for nonaccrual loans was 121 percent at December 31, 2016, compared with 116 percent at September 30, 2016. “We believe the allowance was appropriate for losses inherent in the loan portfolio at December 31, 2016,” said Loughlin.
Business Segment Performance
Wells Fargo defines its operating segments by product type and customer segment. Effective fourth quarter 2016, we realigned some personnel and business activities from Wholesale Banking to Community Banking, as a result of the formation of the new Payments, Virtual Solutions, and Innovation Group. Results for these operating segments reflect the shift prospectively from November 1, 2016. Segment net income for each of the three business segments was:
Quarter endedDec 31,
Sep 30,
Dec 31,
(in millions)2016
2016
2015
Community Banking $ 2,733 3,227 3,169 Wholesale Banking 2,194 2,047 2,104 Wealth and Investment Management 653 677 595Community 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 endedDec 31,
Sep 30,
Dec 31,
(in millions)2016
2016
2015
Total revenue $ 11,661 12,387 12,330 Provision for credit losses 631 651 704 Noninterest expense 6,985 6,953 6,893 Segment net income 2,733 3,227 3,169 (in billions) Average loans 488.1 489.2 482.2 Average assets 1,000.7 993.6 921.4 Average deposits 709.8 708.0 663.7Community Banking reported net income of $2.7 billion, down $494 million, or 15 percent, from third quarter 2016. Revenue of $11.7 billion decreased $726 million, or 6 percent, from third quarter 2016 due to lower other income (hedge ineffectiveness), mortgage banking revenue, and deposit service charges, partially offset by higher net interest income, market sensitive revenue, primarily higher gains on sales of debt securities and equity investments, and other fees. Noninterest expense increased $32 million, compared with third quarter 2016, due to higher equipment, project-related, and advertising expense, which are typically elevated in the fourth quarter, as well as higher legal expense. The increase in noninterest expense was partially offset by lower operating losses and a donation to the Wells Fargo Foundation in the prior quarter. The provision for credit losses decreased $20 million from the prior quarter.
Net income was down $436 million, or 14 percent, from fourth quarter 2015. Revenue decreased $669 million, or 5 percent, compared with a year ago due to lower other income (hedge ineffectiveness), mortgage banking revenue, and gains on equity investments, partially offset by higher net interest income and other fees. Noninterest expense increased $92 million, or 1 percent, from a year ago driven by higher personnel, legal, project-related, and FDIC expense, partially offset by lower operating losses. The provision for credit losses decreased $73 million from a year ago due to improvement in the consumer real estate portfolios.
Retail Banking and Consumer Payments
Consumer Lending
Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include Business Banking, 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 endedDec 31,
Sep 30,
Dec 31,
(in millions)2016
2016
2015
Total revenue $ 7,153 7,147 6,559 Provision for credit losses 168 157 126 Noninterest expense 4,002 4,120 3,491 Segment net income 2,194 2,047 2,104 (in billions) Average loans 461.5 454.3 417.0 Average assets 811.9 794.2 755.4 Average deposits 459.2 441.2 449.3Wholesale Banking reported net income of $2.2 billion, up $147 million, or 7 percent, from third quarter 2016. Revenue of $7.2 billion increased $6 million as higher net interest income, investment banking fees, equity investment gains and commercial real estate brokerage fees were partially offset by lower sales and trading results, and lower mortgage banking fees in multi-family capital and structured real estate. Noninterest expense decreased $118 million, or 3 percent, from the prior quarter primarily due to lower personnel expense and operating losses. The provision for credit losses increased $11 million from the prior quarter on lower recoveries.
Net income was up $90 million, or 4 percent, from fourth quarter 2015. Revenue increased $594 million, or 9 percent, from fourth quarter 2015, on increased net interest income driven by strong loan growth, including the GE Capital portfolio acquisitions, and higher trading and other earning assets. Noninterest income was down 1 percent from the prior year due to lower insurance fees driven by the sale of our crop insurance business in first quarter 2016, lower gains from trading activities, and lower gains on debt securities, partially offset by higher leasing income related to the GE Capital portfolio acquisitions and strong investment banking fees. Noninterest expense increased $511 million, or 15 percent, from a year ago primarily due to the GE Capital portfolio acquisitions and higher expenses related to growth initiatives, compliance, and regulatory requirements. The provision for credit losses increased $42 million from a year ago primarily due to higher oil and gas net charge-offs.
Wealth and Investment Management (WIM) provides a full range of personalized wealth management, investment and retirement products and services to clients across U.S. based businesses including Wells Fargo Advisors, The Private Bank, Abbot Downing, Wells Fargo Institutional Retirement and Trust, and Wells Fargo Asset Management. We deliver financial planning, private banking, credit, investment management and fiduciary services to high-net worth and ultra-high-net worth individuals and families. We also serve customers’ brokerage needs, supply retirement and trust services to institutional clients and provide investment management capabilities delivered to global institutional clients through separate accounts and the Wells Fargo Funds.
Selected Financial Information
Quarter endedDec 31,
Sep 30,
Dec 31,
(in millions)2016
2016
2015
Total revenue $ 4,074 4,099 3,947 Provision (reversal of provision) for credit losses 3 4 (6 ) Noninterest expense 3,042 2,999 2,998 Segment net income 653 677 595 (in billions) Average loans 70.0 68.4 63.0 Average assets 220.4 212.1 197.9 Average deposits 194.9 189.2 177.9Wealth and Investment Management reported net income of $653 million, down $24 million, or 4 percent, from third quarter 2016. Revenue of $4.1 billion decreased $25 million, or 1 percent, from the prior quarter, primarily due to lower deferred compensation plan investment results (offset in employee benefits expense), transaction revenue and other fee income, partially offset by higher net interest income and asset-based fees. Noninterest expense increased $43 million, or 1 percent, from the prior quarter, largely driven by higher operating losses and other non-personnel expenses, partially offset by lower deferred compensation plan expense (offset in trading revenue). The provision for credit losses decreased $1 million from third quarter 2016.
Net income was up $58 million, or 10 percent, from fourth quarter 2015. Revenue increased $127 million, or 3 percent, from a year ago primarily driven by higher net interest income and asset-based fees, partially offset by lower transaction revenue and deferred compensation plan investment results (offset in employee benefits expense). Noninterest expense increased $44 million, or 1 percent, from a year ago, primarily due to higher broker commissions and non-personnel expenses, partially offset by lower deferred compensation plan expense (offset in trading revenue). The provision for credit losses increased $9 million from a year ago.
Retail Brokerage
Wealth Management
Retirement
Asset Management
Conference Call
The Company will host a live conference call on Friday, January 13, at 8:30 a.m. PT (11:30 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~31502149.
A replay of the conference call will be available beginning at 11:30 a.m. PT (2:30 p.m. ET) on Friday, January 13 through Friday, January 27. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #31502149. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/rt/wells_fargo_ao~31502149.
Endnotes
1 See table on page 36 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules. 2 Net payout ratio means the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock. 3 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 41 for more information. 4 Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses. 5 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit. 6 Data as of November 2016, comparisons with November 2015. 7 Combined consumer and business debit card purchase volume dollars. 8 Credit card penetration defined as the percentage of Retail Banking households that have a credit card with Wells Fargo. Effective second quarter 2016, Retail Banking households reflect only those households that maintain a retail checking account, which we believe provides the foundation for long-term retail banking relationships. Prior period metrics have been revised to conform with the updated definition of Retail Banking households. Credit card household penetration rates have not been adjusted to reflect the impact of the approximately 565,000 potentially unauthorized accounts identified by an independent consulting firm because the maximum impact in any one quarter was not greater than 86 basis points, or approximately 2 percent. 9 Primarily includes retail banking, consumer lending, small business and business banking customers.Forward-Looking Statements
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we may make forward-looking statements in our other documents filed or furnished with the SEC, and our management may make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “target,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar references to future periods. In particular, forward-looking statements include, but are not limited to, statements we make about: (i) the future operating or financial performance of the Company, including our outlook for future growth; (ii) our noninterest expense and efficiency ratio; (iii) future credit quality and performance, including our expectations regarding future loan losses and allowance levels; (iv) the appropriateness of the allowance for credit losses; (v) our expectations regarding net interest income and net interest margin; (vi) loan growth or the reduction or mitigation of risk in our loan portfolios; (vii) future capital levels or targets and our estimated Common Equity Tier 1 ratio under Basel III capital standards; (viii) the performance of our mortgage business and any related exposures; (ix) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (x) future common stock dividends, common share repurchases and other uses of capital; (xi) our targeted range for return on assets and return on equity; (xii) the outcome of contingencies, such as legal proceedings; and (xiii) the Company’s plans, objectives and strategies.
Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:
In addition to the above factors, we also caution that the amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of the Company, market conditions, capital requirements (including under Basel capital standards), common stock issuance requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company’s Board of Directors, and may be subject to regulatory approval or conditions.
For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.
Any forward-looking statement made by us speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,600 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 42 countries and territories to support customers who conduct business in the global economy. With approximately 269,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 27 on Fortune’s 2016 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially.
Wells Fargo & Company and SubsidiariesQUARTERLY FINANCIAL DATATABLE OF CONTENTS
PagesSummary Information
Summary Financial Data
16
Income
Consolidated Statement of Income 18 Consolidated Statement of Comprehensive Income 20 Condensed Consolidated Statement of Changes in Total Equity 20 Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 21 Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 23 Noninterest Income and Noninterest Expense 24Balance Sheet
Consolidated Balance Sheet 26 Investment Securities 28Loans
Loans 28 Nonperforming Assets 29 Loans 90 Days or More Past Due and Still Accruing 30 Purchased Credit-Impaired Loans 31 Pick-A-Pay Portfolio 32 Changes in Allowance for Credit Losses 34Equity
Tangible Common Equity 35 Common Equity Tier 1 Under Basel III 36Operating Segments
Operating Segment Results 37Other
Mortgage Servicing and other related data 39Wells Fargo & Company and SubsidiariesSUMMARY FINANCIAL DATA
% Change
Quarter endedDec 31, 2016 from
Year endedDec 31,
Sep 30,
Dec 31,
Sep 30,
Dec 31,
Dec 31,
Dec 31,
%
($ in millions, except per share amounts)2016
2016
2015
2016
2015
2016
2015
Change
For the Period Wells Fargo net income $ 5,274 5,644 5,575 (7 )% (5 ) $ 21,938 22,894 (4 )% Wells Fargo net income applicable to common stock 4,872 5,243 5,203 (7 ) (6 ) 20,373 21,470 (5 ) Diluted earnings per common share 0.96 1.03 1.00 (7 ) (4 ) 3.99 4.12 (3 ) Profitability ratios (annualized): Wells Fargo net income to average assets (ROA) 1.08 % 1.17 1.24 (8 ) (13 ) 1.16 % 1.31 (11 ) Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 10.94 11.60 11.93 (6 ) (8 ) 11.49 12.60 (9 ) Return on average tangible common equity (ROTCE)(1) 13.16 13.96 14.30 (6 ) (8 ) 13.85 15.17 (9 ) Efficiency ratio (2) 61.2 59.4 58.4 3 5 59.3 58.1 2 Total revenue $ 21,582 22,328 21,586 (3 ) — $ 88,267 86,057 3 Pre-tax pre-provision profit (PTPP) (3) 8,367 9,060 8,987 (8 ) (7 ) 35,890 36,083 (1 ) Dividends declared per common share 0.380 0.380 0.375 — 1 1.515 1.475 3 Average common shares outstanding 5,025.6 5,043.4 5,108.5 — (2 ) 5,052.8 5,136.5 (2 ) Diluted average common shares outstanding 5,078.2 5,094.6 5,177.9 — (2 ) 5,108.3 5,209.8 (2 ) Average loans $ 964,147 957,484 912,280 1 6 $ 949,960 885,432 7 Average assets 1,944,250 1,914,586 1,787,287 2 9 1,885,441 1,742,919 8 Average total deposits 1,284,158 1,261,527 1,216,809 2 6 1,250,566 1,194,073 5 Average consumer and small business banking deposits (4) 749,946 739,066 696,484 1 8 732,620 680,221 8 Net interest margin 2.87 % 2.82 2.92 2 (2 ) 2.86 % 2.95 (3 ) At Period End Investment securities $ 407,947 390,832 347,555 4 17 $ 407,947 347,555 17 Loans 967,604 961,326 916,559 1 6 967,604 916,559 6 Allowance for loan losses 11,419 11,583 11,545 (1 ) (1 ) 11,419 11,545 (1 ) Goodwill 26,693 26,688 25,529 — 5 26,693 25,529 5 Assets 1,930,115 1,942,124 1,787,632 (1 ) 8 1,930,115 1,787,632 8 Deposits 1,306,079 1,275,894 1,223,312 2 7 1,306,079 1,223,312 7 Common stockholders' equity 176,469 179,916 172,036 (2 ) 3 176,469 172,036 3 Wells Fargo stockholders’ equity 199,581 203,028 192,998 (2 ) 3 199,581 192,998 3 Total equity 200,497 203,958 193,891 (2 ) 3 200,497 193,891 3 Tangible common equity (1) 146,737 149,829 143,337 (2 ) 2 146,737 143,337 2 Common shares outstanding 5,016.1 5,023.9 5,092.1 — (1 ) 5,016.1 5,092.1 (1 ) Book value per common share (5) $ 35.18 35.81 33.78 (2 ) 4 $ 35.18 33.78 4 Tangible book value per common share (1)(5) 29.25 29.82 28.15 (2 ) 4 29.25 28.15 4 Common stock price: High 58.02 51.00 56.34 14 3 58.02 58.77 (1 ) Low 43.55 44.10 49.51 (1 ) (12 ) 43.55 47.75 (9 ) Period end 55.11 44.28 54.36 24 1 55.11 54.36 1 Team members (active, full-time equivalent) 269,100 268,800 264,700 — 2 269,100 264,700 2(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.
(2) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(3) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(4) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(5) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.
Wells Fargo & Company and SubsidiariesFIVE QUARTER SUMMARY FINANCIAL DATA
Quarter endedDec 31,
Sep 30,
Jun 30,
Mar 31,
Dec 31,
($ in millions, except per share amounts)2016
2016
2016
2016
2015
For the Quarter Wells Fargo net income $ 5,274 5,644 5,558 5,462 5,575 Wells Fargo net income applicable to common stock 4,872 5,243 5,173 5,085 5,203 Diluted earnings per common share 0.96 1.03 1.01 0.99 1.00 Profitability ratios (annualized): Wells Fargo net income to average assets (ROA) 1.08 % 1.17 1.20 1.21 1.24 Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 10.94 11.60 11.70 11.75 11.93 Return on average tangible common equity (ROTCE)(1) 13.16 13.96 14.15 14.15 14.30 Efficiency ratio (2) 61.2 59.4 58.1 58.7 58.4 Total revenue $ 21,582 22,328 22,162 22,195 21,586 Pre-tax pre-provision profit (PTPP) (3) 8,367 9,060 9,296 9,167 8,987 Dividends declared per common share 0.380 0.380 0.380 0.375 0.375 Average common shares outstanding 5,025.6 5,043.4 5,066.9 5,075.7 5,108.5 Diluted average common shares outstanding 5,078.2 5,094.6 5,118.1 5,139.4 5,177.9 Average loans $ 964,147 957,484 950,751 927,220 912,280 Average assets 1,944,250 1,914,586 1,862,084 1,819,875 1,787,287 Average total deposits 1,284,158 1,261,527 1,236,658 1,219,430 1,216,809 Average consumer and small business banking deposits (4) 749,946 739,066 726,359 714,837 696,484 Net interest margin 2.87 % 2.82 2.86 2.90 2.92 At Quarter End Investment securities $ 407,947 390,832 353,426 334,899 347,555 Loans 967,604 961,326 957,157 947,258 916,559 Allowance for loan losses 11,419 11,583 11,664 11,621 11,545 Goodwill 26,693 26,688 26,963 27,003 25,529 Assets 1,930,115 1,942,124 1,889,235 1,849,182 1,787,632 Deposits 1,306,079 1,275,894 1,245,473 1,241,490 1,223,312 Common stockholders' equity 176,469 179,916 178,633 175,534 172,036 Wells Fargo stockholders’ equity 199,581 203,028 201,745 197,496 192,998 Total equity 200,497 203,958 202,661 198,504 193,891 Tangible common equity (1) 146,737 149,829 148,110 144,679 143,337 Common shares outstanding 5,016.1 5,023.9 5,048.5 5,075.9 5,092.1 Book value per common share (5) $ 35.18 35.81 35.38 34.58 33.78 Tangible book value per common share (1)(5) 29.25 29.82 29.34 28.50 28.15 Common stock price: High 58.02 51.00 51.41 53.27 56.34 Low 43.55 44.10 44.50 44.50 49.51 Period end 55.11 44.28 47.33 48.36 54.36 Team members (active, full-time equivalent) 269,100 268,800 267,900 268,600 264,700(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.
(2) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(3) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(4) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(5) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
Quarter ended December 31, % Year ended December 31, % (in millions, except per share amounts) 2016 2015 Change 2016 2015 Change Interest income Trading assets $ 745 558 34 % $ 2,506 1,971 27 % Investment securities 2,512 2,323 8 9,248 8,937 3 Mortgages held for sale 235 176 34 784 785 — Loans held for sale 2 5 (60 ) 9 19 (53 ) Loans 10,128 9,323 9 39,505 36,575 8 Other interest income 436 258 69 1,611 990 63 Total interest income 14,058 12,643 11 53,663 49,277 9 Interest expense Deposits 400 241 66 1,395 963 45 Short-term borrowings 101 13 677 330 64 416 Long-term debt 1,061 713 49 3,830 2,592 48 Other interest expense 94 88 7 354 357 (1 ) Total interest expense 1,656 1,055 57 5,909 3,976 49 Net interest income 12,402 11,588 7 47,754 45,301 5 Provision for credit losses 805 831 (3 ) 3,770 2,442 54 Net interest income after provision for credit losses 11,597 10,757 8 43,984 42,859 3 Noninterest income Service charges on deposit accounts 1,357 1,329 2 5,372 5,168 4 Trust and investment fees 3,698 3,511 5 14,243 14,468 (2 ) Card fees 1,001 966 4 3,936 3,720 6 Other fees 962 1,040 (8 ) 3,727 4,324 (14 ) Mortgage banking 1,417 1,660 (15 ) 6,096 6,501 (6 ) Insurance 262 427 (39 ) 1,268 1,694 (25 ) Net gains (losses) from trading activities (109 ) 99 NM 834 614 36 Net gains on debt securities 145 346 (58 ) 942 952 (1 ) Net gains from equity investments 306 423 (28 ) 879 2,230 (61 ) Lease income 523 145 261 1,927 621 210 Other (382 ) 52 NM 1,289 464 178 Total noninterest income 9,180 9,998 (8 ) 40,513 40,756 (1 ) Noninterest expense Salaries 4,193 4,061 3 16,552 15,883 4 Commission and incentive compensation 2,478 2,457 1 10,247 10,352 (1 ) Employee benefits 1,101 1,042 6 5,094 4,446 15 Equipment 642 640 — 2,154 2,063 4 Net occupancy 710 725 (2 ) 2,855 2,886 (1 ) Core deposit and other intangibles 301 311 (3 ) 1,192 1,246 (4 ) FDIC and other deposit assessments 353 258 37 1,168 973 20 Other 3,437 3,105 11 13,115 12,125 8 Total noninterest expense 13,215 12,599 5 52,377 49,974 5 Income before income tax expense 7,562 8,156 (7 ) 32,120 33,641 (5 ) Income tax expense 2,258 2,533 (11 ) 10,075 10,365 (3 ) Net income before noncontrolling interests 5,304 5,623 (6 ) 22,045 23,276 (5 ) Less: Net income from noncontrolling interests 30 48 (38 ) 107 382 (72 ) Wells Fargo net income $ 5,274 5,575 (5 ) $ 21,938 22,894 (4 ) Less: Preferred stock dividends and other 402 372 8 1,565 1,424 10 Wells Fargo net income applicable to common stock $ 4,872 5,203 (6 ) $ 20,373 21,470 (5 ) Per share information Earnings per common share $ 0.97 1.02 (5 ) $ 4.03 4.18 (4 ) Diluted earnings per common share 0.96 1.00 (4 ) 3.99 4.12 (3 ) Dividends declared per common share 0.380 0.375 1 1.515 1.475 3 Average common shares outstanding 5,025.6 5,108.5 (2 ) 5,052.8 5,136.5 (2 ) Diluted average common shares outstanding 5,078.2 5,177.9 (2 ) 5,108.3 5,209.8 (2 )NM – Not meaningful
Wells Fargo & Company and SubsidiariesFIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter endedDec 31,
Sep 30,
Jun 30,
Mar 31,
Dec 31,
(in millions, except per share amounts)2016
2016
2016
2016
2015
Interest income Trading assets $ 745 593 572 596 558 Investment securities 2,512 2,298 2,176 2,262 2,323 Mortgages held for sale 235 207 181 161 176 Loans held for sale 2 2 3 2 5 Loans 10,128 9,978 9,822 9,577 9,323 Other interest income 436 409 392 374 258 Total interest income 14,058 13,487 13,146 12,972 12,643 Interest expense Deposits 400 356 332 307 241 Short-term borrowings 101 85 77 67 13 Long-term debt 1,061 1,006 921 842 713 Other interest expense 94 88 83 89 88 Total interest expense 1,656 1,535 1,413 1,305 1,055 Net interest income 12,402 11,952 11,733 11,667 11,588 Provision for credit losses 805 805 1,074 1,086 831 Net interest income after provision for credit losses 11,597 11,147 10,659 10,581 10,757 Noninterest income Service charges on deposit accounts 1,357 1,370 1,336 1,309 1,329 Trust and investment fees 3,698 3,613 3,547 3,385 3,511 Card fees 1,001 997 997 941 966 Other fees 962 926 906 933 1,040 Mortgage banking 1,417 1,667 1,414 1,598 1,660 Insurance 262 293 286 427 427 Net gains (losses) from trading activities (109 ) 415 328 200 99 Net gains on debt securities 145 106 447 244 346 Net gains from equity investments 306 140 189 244 423 Lease income 523 534 497 373 145 Other (382 ) 315 482 874 52 Total noninterest income 9,180 10,376 10,429 10,528 9,998 Noninterest expense Salaries 4,193 4,224 4,099 4,036 4,061 Commission and incentive compensation 2,478 2,520 2,604 2,645 2,457 Employee benefits 1,101 1,223 1,244 1,526 1,042 Equipment 642 491 493 528 640 Net occupancy 710 718 716 711 725 Core deposit and other intangibles 301 299 299 293 311 FDIC and other deposit assessments 353 310 255 250 258 Other 3,437 3,483 3,156 3,039 3,105 Total noninterest expense 13,215 13,268 12,866 13,028 12,599 Income before income tax expense 7,562 8,255 8,222 8,081 8,156 Income tax expense 2,258 2,601 2,649 2,567 2,533 Net income before noncontrolling interests 5,304 5,654 5,573 5,514 5,623 Less: Net income from noncontrolling interests 30 10 15 52 48 Wells Fargo net income $ 5,274 5,644 5,558 5,462 5,575 Less: Preferred stock dividends and other 402 401 385 377 372 Wells Fargo net income applicable to common stock $ 4,872 5,243 5,173 5,085 5,203 Per share information Earnings per common share $ 0.97 1.04 1.02 1.00 1.02 Diluted earnings per common share 0.96 1.03 1.01 0.99 1.00 Dividends declared per common share 0.380 0.380 0.380 0.375 0.375 Average common shares outstanding 5,025.6 5,043.4 5,066.9 5,075.7 5,108.5 Diluted average common shares outstanding 5,078.2 5,094.6 5,118.1 5,139.4 5,177.9 Wells Fargo & Company and SubsidiariesCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarter ended Dec 31, % Year ended Dec 31, % (in millions) 2016 2015 Change 2016 2015 Change Wells Fargo net income $ 5,274 5,575 (5 )% $ 21,938 22,894 (4 )% Other comprehensive income (loss), before tax: Investment securities: Net unrealized losses arising during the period (5,936 ) (1,301 ) 356 (3,458 ) (3,318 ) 4 Reclassification of net gains to net income (239 ) (573 ) (58 ) (1,240 ) (1,530 ) (19 ) Derivatives and hedging activities: Net unrealized gains (losses) arising during the period (2,434 ) (684 ) 256 177 1,549 (89 ) Reclassification of net gains on cash flow hedges to net income (246 ) (294 ) (16 ) (1,029 ) (1,089 ) (6 ) Defined benefit plans adjustments: Net actuarial and prior service gains (losses) arising during the period 422 (501 ) NM (52 ) (512 ) (90 ) Amortization of net actuarial loss, settlements and other to net income 43 11 291 158 114 39 Foreign currency translation adjustments: Net unrealized losses arising during the period (30 ) (33 ) (9 ) (3 ) (137 ) (98 ) Reclassification of net gains to net income — (5 ) — — (5 ) — Other comprehensive loss, before tax (8,420 ) (3,380 ) 149 (5,447 ) (4,928 ) 11 Income tax benefit related to other comprehensive income 3,106 1,230 153 1,996 1,774 13 Other comprehensive loss, net of tax (5,314 ) (2,150 ) 147 (3,451 ) (3,154 ) 9 Less: Other comprehensive income (loss) from noncontrolling interests 7 (58 ) NM (17 ) 67 NM Wells Fargo other comprehensive loss, net of tax (5,321 ) (2,092 ) 154 (3,434 ) (3,221 ) 7 Wells Fargo comprehensive income (loss) (47 ) 3,483 NM 18,504 19,673 (6 ) Comprehensive income (loss) from noncontrolling interests 37 (10 ) NM 90 449 (80 ) Total comprehensive income (loss) $ (10 ) 3,473 NM $ 18,594 20,122 (8 )NM – Not meaningful
FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
Quarter ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Balance, beginning of period $ 203,958 202,661 198,504 193,891 194,043 Cumulative effect from change in consolidation accounting (1) — — — 121 — Wells Fargo net income 5,274 5,644 5,558 5,462 5,575 Wells Fargo other comprehensive income (loss), net of tax (5,321 ) (764 ) 1,174 1,477 (2,092 ) Noncontrolling interests (13 ) 14 (92 ) (5 ) (100 ) Common stock issued 610 300 397 1,079 310 Common stock repurchased (2) (2,034 ) (1,839 ) (2,214 ) (2,029 ) (1,974 ) Preferred stock released by ESOP 43 236 371 313 210 Common stock warrants repurchased/exercised — (17 ) — — — Preferred stock issued — — 1,126 975 — Common stock dividends (1,909 ) (1,918 ) (1,930 ) (1,904 ) (1,917 ) Preferred stock dividends (401 ) (401 ) (386 ) (378 ) (371 ) Tax benefit from stock incentive compensation 74 31 23 149 22 Stock incentive compensation expense 232 39 139 369 204 Net change in deferred compensation and related plans (16 ) (28 ) (9 ) (1,016 ) (19 ) Balance, end of period $ 200,497 203,958 202,661 198,504 193,891(1) Effective January 1, 2016, we adopted changes in consolidation accounting pursuant to Accounting Standards Update 2015-02 (Amendments to the Consolidation Analysis). Accordingly, we recorded a $121 million net increase to beginning noncontrolling interests as a cumulative-effect adjustment.
(2) For the quarter ended December 31, 2016, includes $750 million related to a private forward repurchase transaction that settled in first quarter 2017 for 14.7 million shares of common stock. For the quarter ended December 31, 2015, includes $500 million related to a private forward repurchase transaction that settled in first quarter 2016 for 9.2 million shares of common stock.
Wells Fargo & Company and SubsidiariesAVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended December 31, 2016 2015 Interest Interest Average Yields/ income/ Average Yields/ income/ (in millions) balance rates expense balance rates expense Earning assets Federal funds sold, securities purchased under resale agreements and other short-term investments $ 273,073 0.56 % $ 381 274,589 0.28 % $ 195 Trading assets 102,757 2.96 761 68,833 3.33 573 Investment securities (3): Available-for-sale securities: Securities of U.S. Treasury and federal agencies 25,935 1.53 99 34,617 1.58 137 Securities of U.S. states and political subdivisions 53,917 4.06 547 49,300 4.37 539 Mortgage-backed securities: Federal agencies 147,980 2.37 875 102,281 2.79 712 Residential and commercial 16,456 5.87 242 21,502 5.51 297 Total mortgage-backed securities 164,436 2.72 1,117 123,783 3.26 1,009 Other debt and equity securities 52,692 3.71 492 52,701 3.35 444 Total available-for-sale securities 296,980 3.03 2,255 260,401 3.27 2,129 Held-to-maturity securities: Securities of U.S. Treasury and federal agencies 44,686 2.20 246 44,656 2.18 246 Securities of U.S. states and political subdivisions 4,738 5.31 63 2,158 6.07 33 Federal agency and other mortgage-backed securities 46,009 1.81 209 28,185 2.42 170 Other debt securities 3,597 2.26 20 4,876 1.77 22 Total held-to-maturity securities 99,030 2.17 538 79,875 2.35 471 Total investment securities 396,010 2.82 2,793 340,276 3.05 2,600 Mortgages held for sale (4) 27,503 3.43 235 19,189 3.66 176 Loans held for sale (4) 155 5.42 2 363 4.96 5 Loans: Commercial: Commercial and industrial - U.S. 272,828 3.46 2,369 250,445 3.25 2,048 Commercial and industrial - Non U.S. 54,410 2.58 352 47,972 1.97 239 Real estate mortgage 131,195 3.44 1,135 121,844 3.30 1,012 Real estate construction 23,850 3.61 216 21,993 3.27 182 Lease financing 18,904 5.78 273 12,241 4.48 136 Total commercial 501,187 3.45 4,345 454,495 3.16 3,617 Consumer: Real estate 1-4 family first mortgage 277,732 4.01 2,785 272,871 4.04 2,759 Real estate 1-4 family junior lien mortgage 47,203 4.42 524 53,788 4.28 579 Credit card 35,383 11.73 1,043 32,795 11.61 960 Automobile 62,521 5.54 870 59,505 5.74 862 Other revolving credit and installment 40,121 5.91 595 38,826 5.83 571 Total consumer 462,960 5.01 5,817 457,785 4.99 5,731 Total loans (4) 964,147 4.20 10,162 912,280 4.08 9,348 Other 6,729 3.27 56 5,166 4.82 61 Total earning assets $ 1,770,374 3.24 % $ 14,390 1,620,696 3.18 % $ 12,958 Funding sources Deposits: Interest-bearing checking $ 46,907 0.17 % $ 19 39,082 0.05 % $ 5 Market rate and other savings 676,365 0.07 122 640,503 0.06 93 Savings certificates 24,362 0.30 18 29,654 0.54 41 Other time deposits 49,170 1.16 144 49,806 0.52 64 Deposits in foreign offices 110,425 0.35 97 107,094 0.14 38 Total interest-bearing deposits 907,229 0.18 400 866,139 0.11 241 Short-term borrowings 124,698 0.33 102 102,915 0.05 12 Long-term debt 252,162 1.68 1,061 190,861 1.49 713 Other liabilities 17,210 2.15 94 16,453 2.14 88 Total interest-bearing liabilities 1,301,299 0.51 1,657 1,176,368 0.36 1,054 Portion of noninterest-bearing funding sources 469,075 — — 444,328 — — Total funding sources $ 1,770,374 0.37 1,657 1,620,696 0.26 1,054 Net interest margin and net interest income on a taxable-equivalent basis (5) 2.87 % $ 12,733 2.92 % $ 11,904 Noninterest-earning assets Cash and due from banks $ 18,967 17,804 Goodwill 26,713 25,580 Other 128,196 123,207 Total noninterest-earning assets $ 173,876 166,591 Noninterest-bearing funding sources Deposits $ 376,929 350,670 Other liabilities 64,775 65,224 Total equity 201,247 195,025 Noninterest-bearing funding sources used to fund earning assets (469,075 ) (444,328 ) Net noninterest-bearing funding sources $ 173,876 166,591 Total assets $ 1,944,250 1,787,287(1) Our average prime rate was 3.54% and 3.29% for the quarters ended December 31, 2016 and 2015, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.92% and 0.41% for the same quarters, respectively.
(2) Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
(4) Nonaccrual loans and related income are included in their respective loan categories.(5) Includes taxable-equivalent adjustments of $331 million and $316 million for the quarters ended December 31, 2016 and 2015, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
Wells Fargo & Company and SubsidiariesAVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Year ended December 31, 2016 2015 Interest Interest Average Yields/ income/ Average Yields/ income/ (in millions) balance rates expense balance rates expense Earning assets Federal funds sold, securities purchased under resale agreements and other short-term investments $ 287,718 0.51 % $ 1,457 266,832 0.28 % $ 738 Trading assets 88,400 2.89 2,553 66,679 3.01 2,010 Investment securities (3): Available-for-sale securities: Securities of U.S. Treasury and federal agencies 29,418 1.56 457 32,093 1.58 505 Securities of U.S. states and political subdivisions 52,959 4.20 2,225 47,404 4.23 2,007 Mortgage-backed securities: Federal agencies 110,637 2.50 2,764 100,218 2.73 2,733 Residential and commercial 18,725 5.49 1,029 22,490 5.73 1,289 Total mortgage-backed securities 129,362 2.93 3,793 122,708 3.28 4,022 Other debt and equity securities 53,433 3.44 1,841 49,752 3.42 1,701 Total available-for-sale securities 265,172 3.14 8,316 251,957 3.27 8,235 Held-to-maturity securities: Securities of U.S. Treasury and federal agencies 44,675 2.19 979 44,173 2.19 968 Securities of U.S. states and political subdivisions 2,893 5.32 154 2,087 5.40 113 Federal agency and other mortgage-backed securities 39,330 2.00 786 21,967 2.23 489 Other debt securities 4,043 2.01 81 5,821 1.73 101 Total held-to-maturity securities 90,941 2.20 2,000 74,048 2.26 1,671 Total investment securities 356,113 2.90 10,316 326,005 3.04 9,906 Mortgages held for sale (4) 22,412 3.50 784 21,603 3.63 785 Loans held for sale (4) 218 4.01 9 573 3.25 19 Loans: Commercial: Commercial and industrial - U.S. 268,182 3.45 9,243 237,844 3.29 7,836 Commercial and industrial - Non U.S. 51,601 2.36 1,219 46,028 1.90 877 Real estate mortgage 127,232 3.44 4,371 116,893 3.41 3,984 Real estate construction 23,197 3.55 824 20,979 3.57 749 Lease financing 17,950 5.10 916 12,301 4.70 577 Total commercial 488,162 3.39 16,573 434,045 3.23 14,023 Consumer: Real estate 1-4 family first mortgage 276,712 4.01 11,096 268,560 4.10 11,002 Real estate 1-4 family junior lien mortgage 49,735 4.39 2,183 56,242 4.25 2,391 Credit card 34,178 11.62 3,970 31,307 11.70 3,664 Automobile 61,566 5.62 3,458 57,766 5.84 3,374 Other revolving credit and installment 39,607 5.93 2,350 37,512 5.89 2,209 Total consumer 461,798 4.99 23,057 451,387 5.02 22,640 Total loans (4) 949,960 4.17 39,630 885,432 4.14 36,663 Other 6,262 2.51 157 4,947 5.11 252Total earning assets
$ 1,711,083 3.21 % $ 54,906 1,572,071 3.20 % $ 50,373 Funding sources Deposits: Interest-bearing checking $ 42,379 0.14 % $ 60 38,640 0.05 % $ 20 Market rate and other savings 663,557 0.07 449 625,549 0.06 367 Savings certificates 25,912 0.35 91 31,887 0.63 201 Other time deposits 55,846 0.91 508 51,790 0.45 232 Deposits in foreign offices 103,206 0.28 287 107,138 0.13 143 Total interest-bearing deposits 890,900 0.16 1,395 855,004 0.11 963 Short-term borrowings 115,187 0.29 333 87,465 0.07 64 Long-term debt 239,471 1.60 3,830 185,078 1.40 2,592 Other liabilities 16,702 2.12 354 16,545 2.15 357 Total interest-bearing liabilities 1,262,260 0.47 5,912 1,144,092 0.35 3,976 Portion of noninterest-bearing funding sources 448,823 — — 427,979 — — Total funding sources $ 1,711,083 0.35 5,912 1,572,071 0.25 3,976 Net interest margin and net interest income on a taxable-equivalent basis (5) 2.86 % $ 48,994 2.95 % $ 46,397 Noninterest-earning assets Cash and due from banks $ 18,617 17,327 Goodwill 26,700 25,673 Other 129,041 127,848 Total noninterest-earning assets $ 174,358 170,848 Noninterest-bearing funding sources Deposits $ 359,666 339,069 Other liabilities 62,825 68,174 Total equity 200,690 191,584 Noninterest-bearing funding sources used to fund earning assets (448,823 ) (427,979 ) Net noninterest-bearing funding sources $ 174,358 170,848 Total assets $ 1,885,441 1,742,919(1) Our average prime rate was 3.51% and 3.26% for the years ended December 31, 2016 and 2015, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.74% and 0.32% for the same periods, respectively.
(2) Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) The average balance amounts represent amortized cost for the periods presented. (4) Nonaccrual loans and related income are included in their respective loan categories.(5) Includes taxable-equivalent adjustments of $1.2 billion and $1.1 billion for the years ended December 31, 2016 and 2015, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
Wells Fargo & Company and SubsidiariesFIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended Dec 31, 2016 Sep 30, 2016 Jun 30, 2016 Mar 31, 2016 Dec 31, 2015 Average Yields/ Average Yields/ Average Yields/ Average Yields/ Average Yields/ ($ in billions) balance rates balance rates balance rates balance rates balance rates Earning assets Federal funds sold, securities purchased under resale agreements and other short-term investments $ 273.1 0.56 % $ 299.4 0.50 % $ 293.8 0.49 % $ 284.7 0.49 % $ 274.6 0.28 % Trading assets 102.8 2.96 88.8 2.72 81.4 2.86 80.5 3.01 68.8 3.33 Investment securities (3): Available-for-sale securities: Securities of U.S. Treasury and federal agencies 25.9 1.53 25.8 1.52 31.5 1.56 34.4 1.59 34.6 1.58 Securities of U.S. states and political subdivisions 53.9 4.06 55.2 4.28 52.2 4.24 50.5 4.24 49.3 4.37 Mortgage-backed securities: Federal agencies 148.0 2.37 105.8 2.39 92.0 2.53 96.5 2.80 102.3 2.79 Residential and commercial 16.5 5.87 18.1 5.54 19.6 5.44 20.8 5.20 21.5 5.51 Total mortgage-backed securities 164.5 2.72 123.9 2.85 111.6 3.04 117.3 3.23 123.8 3.26 Other debt and equity securities 52.7 3.71 54.2 3.37 53.3 3.48 53.6 3.21 52.7 3.35 Total available-for-sale securities 297.0 3.03 259.1 3.13 248.6 3.20 255.8 3.20 260.4 3.27 Held-to-maturity securities: Securities of U.S. Treasury and federal agencies 44.7 2.20 44.6 2.19 44.6 2.19 44.7 2.20 44.7 2.18 Securities of U.S. states and political subdivisions 4.7 5.31 2.5 5.24 2.2 5.41 2.1 5.41 2.1 6.07 Federal agency and other mortgage-backed securities 46.0 1.81 48.0 1.97 35.1 1.90 28.1 2.49 28.2 2.42 Other debt securities 3.6 2.26 3.9 1.98 4.1 1.92 4.6 1.92 4.9 1.77 Total held-to-maturity securities 99.0 2.17 99.0 2.15 86.0 2.14 79.5 2.37 79.9 2.35 Total investment securities 396.0 2.82 358.1 2.86 334.6 2.93 335.3 3.01 340.3 3.05 Mortgages held for sale 27.5 3.43 24.1 3.44 20.1 3.60 17.9 3.59 19.2 3.66 Loans held for sale 0.2 5.42 0.2 3.04 0.2 4.83 0.3 3.23 0.4 4.96 Loans: Commercial: Commercial and industrial - U.S. 272.8 3.46 271.2 3.48 270.9 3.45 257.7 3.39 250.5 3.25 Commercial and industrial - Non U.S. 54.4 2.58 51.3 2.40 51.2 2.35 49.5 2.10 48.0 1.97 Real estate mortgage 131.2 3.44 128.8 3.48 126.1 3.41 122.7 3.41 121.8 3.30 Real estate construction 23.9 3.61 23.2 3.50 23.1 3.49 22.6 3.61 22.0 3.27 Lease financing 18.9 5.78 18.9 4.70 19.0 5.12 15.1 4.74 12.2 4.48 Total commercial 501.2 3.45 493.4 3.42 490.3 3.39 467.6 3.31 454.5 3.16 Consumer: Real estate 1-4 family first mortgage 277.7 4.01 278.5 3.97 275.9 4.01 274.7 4.05 272.9 4.04 Real estate 1-4 family junior lien mortgage 47.2 4.42 48.9 4.37 50.6 4.37 52.2 4.39 53.8 4.28 Credit card 35.4 11.73 34.6 11.60 33.4 11.52 33.4 11.61 32.8 11.61 Automobile 62.5 5.54 62.5 5.60 61.1 5.66 60.1 5.67 59.5 5.74 Other revolving credit and installment 40.1 5.91 39.6 5.92 39.5 5.91 39.2 5.99 38.8 5.83 Total consumer 462.9 5.01 464.1 4.97 460.5 4.98 459.6 5.02 457.8 4.99 Total loans 964.1 4.20 957.5 4.17 950.8 4.16 927.2 4.16 912.3 4.08 Other 6.7 3.27 6.4 2.30 6.0 2.30 5.8 2.06 5.1 4.82 Total earning assets $ 1,770.4 3.24 % $ 1,734.5 3.17 % $ 1,686.9 3.20 % $ 1,651.7 3.22 % $ 1,620.7 3.18 % Funding sources Deposits: Interest-bearing checking $ 46.9 0.17 % $ 44.0 0.15 % $ 39.8 0.13 % $ 38.7 0.12 % $ 39.1 0.05 % Market rate and other savings 676.4 0.07 667.2 0.07 659.0 0.07 651.5 0.07 640.5 0.06 Savings certificates 24.4 0.30 25.2 0.30 26.2 0.35 27.9 0.45 29.6 0.54 Other time deposits 49.2 1.16 54.9 0.93 61.2 0.85 58.2 0.74 49.8 0.52 Deposits in foreign offices 110.4 0.35 107.1 0.30 97.5 0.23 97.7 0.21 107.1 0.14 Total interest-bearing deposits 907.3 0.18 898.4 0.16 883.7 0.15 874.0 0.14 866.1 0.11 Short-term borrowings 124.7 0.33 116.2 0.29 111.8 0.28 107.9 0.25 102.9 0.05 Long-term debt 252.2 1.68 252.4 1.59 236.2 1.56 216.9 1.56 190.9 1.49 Other liabilities 17.1 2.15 16.8 2.11 16.3 2.06 16.5 2.14 16.5 2.14 Total interest-bearing liabilities 1,301.3 0.51 1,283.8 0.48 1,248.0 0.45 1,215.3 0.43 1,176.4 0.36 Portion of noninterest-bearing funding sources 469.1 — 450.7 — 438.9 — 436.4 — 444.3 — Total funding sources $ 1,770.4 0.37 $ 1,734.5 0.35 $ 1,686.9 0.34 $ 1,651.7 0.32 $ 1,620.7 0.26 Net interest margin on a taxable-equivalent basis 2.87 % 2.82 % 2.86 % 2.90 % 2.92 % Noninterest-earning assets Cash and due from banks $ 19.0 18.7 18.8 18.0 17.8 Goodwill 26.7 27.0 27.0 26.1 25.6 Other 128.2 134.4 129.4 124.1 123.2 Total noninterest-earnings assets $ 173.9 180.1 175.2 168.2 166.6 Noninterest-bearing funding sources Deposits $ 376.9 363.1 353.0 345.4 350.7 Other liabilities 64.9 63.8 60.1 62.6 65.2 Total equity 201.2 203.9 201.0 196.6 195.0 Noninterest-bearing funding sources used to fund earning assets (469.1 ) (450.7 ) (438.9 ) (436.4 ) (444.3 ) Net noninterest-bearing funding sources $ 173.9 180.1 175.2 168.2 166.6 Total assets $ 1,944.3 1,914.6 1,862.1 1,819.9 1,787.3(1) Our average prime rate was 3.54% for the quarter ended December 31, 2016, 3.50% for the quarters ended September 30, June 30 and March 31, 2016, and 3.29% for the quarter ended December 31, 2015. The average three-month London Interbank Offered Rate (LIBOR) was 0.92%, 0.79%, 0.64%, 0.62% and 0.41% for the same quarters, respectively.
(2) Yields/rates include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
Wells Fargo & Company and SubsidiariesNONINTEREST INCOME
Quarter ended December 31, % Year ended December 31, % (in millions) 2016 2015 Change 2016 2015 Change Service charges on deposit accounts $ 1,357 1,329 2 % $ 5,372 5,168 4 % Trust and investment fees: Brokerage advisory, commissions and other fees 2,342 2,288 2 9,216 9,435 (2 ) Trust and investment management 837 838 — 3,336 3,394 (2 ) Investment banking 519 385 35 1,691 1,639 3 Total trust and investment fees 3,698 3,511 5 14,243 14,468 (2 ) Card fees 1,001 966 4 3,936 3,720 6 Other fees: Charges and fees on loans 305 308 (1 ) 1,241 1,228 1 Cash network fees 130 129 1 537 522 3 Commercial real estate brokerage commissions 172 224 (23 ) 494 618 (20 ) Letters of credit fees 79 86 (8 ) 321 353 (9 ) Wire transfer and other remittance fees 105 95 11 401 370 8 All other fees (1)(2)(3) 171 198 (14 ) 733 1,233 (41 ) Total other fees 962 1,040 (8 ) 3,727 4,324 (14 ) Mortgage banking: Servicing income, net 196 730 (73 ) 1,765 2,441 (28 ) Net gains on mortgage loan origination/sales activities 1,221 930 31 4,331 4,060 7 Total mortgage banking 1,417 1,660 (15 ) 6,096 6,501 (6 ) Insurance 262 427 (39 ) 1,268 1,694 (25 ) Net gains (losses) from trading activities (109 ) 99 NM 834 614 36 Net gains on debt securities 145 346 (58 ) 942 952 (1 ) Net gains from equity investments 306 423 (28 ) 879 2,230 (61 ) Lease income 523 145 261 1,927 621 210 Life insurance investment income 132 139 (5 ) 587 579 1 All other (3) (514 ) (87 ) 491 702 (115 ) NM Total $ 9,180 9,998 (8 ) $ 40,513 40,756 (1 ) NM – Not meaningful (1) Wire transfer and other remittance fees, reflected in all other fees prior to 2016, have been separately disclosed. (2) All other fees have been revised to include merchant processing fees for all periods presented. (3) Effective fourth quarter 2015, the Company's proportionate share of its merchant services joint venture earnings is included in All other income.NONINTEREST EXPENSE
Quarter ended Dec 31, % Year ended Dec 31, % (in millions) 2016 2015 Change 2016 2015 Change Salaries $ 4,193 4,061 3 % $ 16,552 15,883 4 % Commission and incentive compensation 2,478 2,457 1 10,247 10,352 (1 ) Employee benefits 1,101 1,042 6 5,094 4,446 15 Equipment 642 640 — 2,154 2,063 4 Net occupancy 710 725 (2 ) 2,855 2,886 (1 ) Core deposit and other intangibles 301 311 (3 ) 1,192 1,246 (4 ) FDIC and other deposit assessments 353 258 37 1,168 973 20 Outside professional services 984 827 19 3,138 2,665 18 Operating losses 243 532 (54 ) 1,608 1,871 (14 ) Operating leases 379 73 419 1,329 278 378 Contract services 325 266 22 1,203 978 23 Outside data processing 222 205 8 888 985 (10 ) Travel and entertainment 195 196 (1 ) 704 692 2 Postage, stationery and supplies 156 177 (12 ) 622 702 (11 ) Advertising and promotion 178 184 (3 ) 595 606 (2 ) Telecommunications 96 106 (9 ) 383 439 (13 ) Foreclosed assets 75 20 275 202 381 (47 ) Insurance 23 57 (60 ) 179 448 (60 ) All other 561 462 21 2,264 2,080 9 Total $ 13,215 12,599 5 $ 52,377 49,974 5 Wells Fargo & Company and SubsidiariesFIVE QUARTER NONINTEREST INCOME
Quarter ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Service charges on deposit accounts $ 1,357 1,370 1,336 1,309 1,329 Trust and investment fees: Brokerage advisory, commissions and other fees 2,342 2,344 2,291 2,239 2,288 Trust and investment management 837 849 835 815 838 Investment banking 519 420 421 331 385 Total trust and investment fees 3,698 3,613 3,547 3,385 3,511 Card fees 1,001 997 997 941 966 Other fees: Charges and fees on loans 305 306 317 313 308 Cash network fees 130 138 138 131 129 Commercial real estate brokerage commissions 172 119 86 117 224 Letters of credit fees 79 81 83 78 86 Wire transfer and other remittance fees 105 103 101 92 95 All other fees (1)(2)(3) 171 179 181 202 198 Total other fees 962 926 906 933 1,040 Mortgage banking: Servicing income, net 196 359 360 850 730 Net gains on mortgage loan origination/sales activities 1,221 1,308 1,054 748 930 Total mortgage banking 1,417 1,667 1,414 1,598 1,660 Insurance 262 293 286 427 427 Net gains (losses) from trading activities (109 ) 415 328 200 99 Net gains on debt securities 145 106 447 244 346 Net gains from equity investments 306 140 189 244 423 Lease income 523 534 497 373 145 Life insurance investment income 132 152 149 154 139 All other (3) (514 ) 163 333 720 (87 ) Total $ 9,180 10,376 10,429 10,528 9,998(1) Wire transfer and other remittance fees, reflected in all other fees prior to 2016, have been separately disclosed.
(2) All other fees have been revised to include merchant processing fees for all periods presented.(3) Effective fourth quarter 2015, the Company's proportionate share of its merchant services joint venture earnings is included in All other income.
FIVE QUARTER NONINTEREST EXPENSE
Quarter ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Salaries $ 4,193 4,224 4,099 4,036 4,061 Commission and incentive compensation 2,478 2,520 2,604 2,645 2,457 Employee benefits 1,101 1,223 1,244 1,526 1,042 Equipment 642 491 493 528 640 Net occupancy 710 718 716 711 725 Core deposit and other intangibles 301 299 299 293 311 FDIC and other deposit assessments 353 310 255 250 258 Outside professional services 984 802 769 583 827 Operating losses 243 577 334 454 532 Operating leases 379 363 352 235 73 Contract services 325 313 283 282 266 Outside data processing 222 233 225 208 205 Travel and entertainment 195 144 193 172 196 Postage, stationery and supplies 156 150 153 163 177 Advertising and promotion 178 117 166 134 184 Telecommunications 96 101 94 92 106 Foreclosed assets 75 (17 ) 66 78 20 Insurance 23 23 22 111 57 All other 561 677 499 527 462 Total $ 13,215 13,268 12,866 13,028 12,599 Wells Fargo & Company and SubsidiariesCONSOLIDATED BALANCE SHEET
Dec 31, Dec 31, % (in millions, except shares) 2016 2015 Change Assets Cash and due from banks $ 20,729 19,111 8 % Federal funds sold, securities purchased under resale agreements and other short-term investments 266,038 270,130 (2 ) Trading assets (1) 74,397 64,815 15 Investment securities: Available-for-sale, at fair value 308,364 267,358 15 Held-to-maturity, at cost 99,583 80,197 24 Mortgages held for sale 26,309 19,603 34 Loans held for sale 80 279 (71 ) Loans 967,604 916,559 6 Allowance for loan losses (11,419 ) (11,545 ) (1 ) Net loans 956,185 905,014 6 Mortgage servicing rights: Measured at fair value 12,959 12,415 4 Amortized 1,406 1,308 7 Premises and equipment, net 8,333 8,704 (4 ) Goodwill 26,693 25,529 5 Derivative assets 14,498 17,656 (18 ) Other assets (1) 114,541 95,513 20 Total assets $ 1,930,115 1,787,632 8 Liabilities Noninterest-bearing deposits $ 375,967 351,579 7 Interest-bearing deposits 930,112 871,733 7 Total deposits 1,306,079 1,223,312 7 Short-term borrowings 96,781 97,528 (1 ) Derivative liabilities 14,492 13,920 4 Accrued expenses and other liabilities (1) 57,189 59,445 (4 ) Long-term debt 255,077 199,536 28 Total liabilities 1,729,618 1,593,741 9 Equity Wells Fargo stockholders’ equity: Preferred stock 24,551 22,214 11 Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares 9,136 9,136 — Additional paid-in capital 60,234 60,714 (1 ) Retained earnings 133,075 120,866 10 Cumulative other comprehensive income (loss) (3,137 ) 297 NM Treasury stock – 465,702,148 shares and 389,682,664 shares (22,713 ) (18,867 ) 20 Unearned ESOP shares (1,565 ) (1,362 ) 15 Total Wells Fargo stockholders’ equity 199,581 192,998 3 Noncontrolling interests 916 893 3 Total equity 200,497 193,891 3 Total liabilities and equity $ 1,930,115 1,787,632 8 NM – Not meaningful(1) Prior period has been revised to conform to the current period presentation of reporting derivative assets and liabilities separately.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Assets Cash and due from banks $ 20,729 19,287 20,407 19,084 19,111 Federal funds sold, securities purchased under resale agreements and other short-term investments 266,038 298,325 295,521 300,547 270,130 Trading assets (1) 74,397 81,094 71,556 62,657 64,815 Investment securities: Available-for-sale, at fair value 308,364 291,591 253,006 255,551 267,358 Held-to-maturity, at cost 99,583 99,241 100,420 79,348 80,197 Mortgages held for sale 26,309 27,423 23,930 18,041 19,603 Loans held for sale 80 183 220 280 279 Loans 967,604 961,326 957,157 947,258 916,559 Allowance for loan losses (11,419 ) (11,583 ) (11,664 ) (11,621 ) (11,545 ) Net loans 956,185 949,743 945,493 935,637 905,014 Mortgage servicing rights: Measured at fair value 12,959 10,415 10,396 11,333 12,415 Amortized 1,406 1,373 1,353 1,359 1,308 Premises and equipment, net 8,333 8,322 8,289 8,349 8,704 Goodwill 26,693 26,688 26,963 27,003 25,529 Derivative assets 14,498 18,736 20,999 20,043 17,656 Other assets (1) 114,541 109,703 110,682 109,950 95,513 Total assets $ 1,930,115 1,942,124 1,889,235 1,849,182 1,787,632 Liabilities Noninterest-bearing deposits $ 375,967 376,136 361,934 348,888 351,579 Interest-bearing deposits 930,112 899,758 883,539 892,602 871,733 Total deposits 1,306,079 1,275,894 1,245,473 1,241,490 1,223,312 Short-term borrowings 96,781 124,668 120,258 107,703 97,528 Derivative liabilities 14,492 13,603 15,483 15,184 13,920 Accrued expenses and other liabilities (1) 57,189 69,166 61,433 58,413 59,445 Long-term debt 255,077 254,835 243,927 227,888 199,536 Total liabilities 1,729,618 1,738,166 1,686,574 1,650,678 1,593,741 Equity Wells Fargo stockholders’ equity: Preferred stock 24,551 24,594 24,830 24,051 22,214 Common stock 9,136 9,136 9,136 9,136 9,136 Additional paid-in capital 60,234 60,685 60,691 60,602 60,714 Retained earnings 133,075 130,288 127,076 123,891 120,866 Cumulative other comprehensive income (loss) (3,137 ) 2,184 2,948 1,774 297 Treasury stock (22,713 ) (22,247 ) (21,068 ) (19,687 ) (18,867 ) Unearned ESOP shares (1,565 ) (1,612 ) (1,868 ) (2,271 ) (1,362 ) Total Wells Fargo stockholders’ equity 199,581 203,028 201,745 197,496 192,998 Noncontrolling interests 916 930 916 1,008 893 Total equity 200,497 203,958 202,661 198,504 193,891 Total liabilities and equity $ 1,930,115 1,942,124 1,889,235 1,849,182 1,787,632(1) Prior periods have been revised to conform to the current period presentation of reporting derivative assets and liabilities separately.
Wells Fargo & Company and SubsidiariesFIVE QUARTER INVESTMENT SECURITIES
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Available-for-sale securities: Securities of U.S. Treasury and federal agencies $ 25,819 26,376 27,939 33,813 36,250 Securities of U.S. states and political subdivisions 51,101 55,366 54,024 51,574 49,990 Mortgage-backed securities: Federal agencies 161,230 135,692 95,868 95,463 104,546 Residential and commercial 16,318 18,387 19,938 21,246 22,646 Total mortgage-backed securities 177,548 154,079 115,806 116,709 127,192 Other debt securities 52,685 54,537 53,935 51,956 52,289 Total available-for-sale debt securities 307,153 290,358 251,704 254,052 265,721 Marketable equity securities 1,211 1,233 1,302 1,499 1,637 Total available-for-sale securities 308,364 291,591 253,006 255,551 267,358 Held-to-maturity securities: Securities of U.S. Treasury and federal agencies 44,690 44,682 44,675 44,667 44,660 Securities of U.S. states and political subdivisions 6,336 2,994 2,181 2,183 2,185 Federal agency and other mortgage-backed securities (1) 45,161 47,721 49,594 28,016 28,604 Other debt securities 3,396 3,844 3,970 4,482 4,748 Total held-to-maturity debt securities 99,583 99,241 100,420 79,348 80,197 Total investment securities $ 407,947 390,832 353,426 334,899 347,555(1) Predominantly consists of federal agency mortgage-backed securities.
FIVE QUARTER LOANS
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Commercial: Commercial and industrial $ 330,840 324,020 323,858 321,547 299,892 Real estate mortgage 132,491 130,223 128,320 124,711 122,160 Real estate construction 23,916 23,340 23,387 22,944 22,164 Lease financing 19,289 18,871 18,973 19,003 12,367 Total commercial 506,536 496,454 494,538 488,205 456,583 Consumer: Real estate 1-4 family first mortgage 275,579 278,689 277,162 274,734 273,869 Real estate 1-4 family junior lien mortgage 46,237 48,105 49,772 51,324 53,004 Credit card 36,700 34,992 34,137 33,139 34,039 Automobile 62,286 62,873 61,939 60,658 59,966 Other revolving credit and installment 40,266 40,213 39,609 39,198 39,098 Total consumer 461,068 464,872 462,619 459,053 459,976 Total loans (1) $ 967,604 961,326 957,157 947,258 916,559(1) Includes $16.7 billion, $17.7 billion, $19.3 billion, $20.3 billion, and $20.0 billion of purchased credit-impaired (PCI) loans at December 31, September 30, June 30, and March 31, 2016, and December 31, 2015, respectively.
Our foreign loans are reported by respective class of financing receivable in the table above. Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign primarily based on whether the borrower's primary address is outside of the United States. The following table presents total commercial foreign loans outstanding by class of financing receivable.
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Commercial foreign loans: Commercial and industrial $ 55,396 51,515 50,515 51,884 49,049 Real estate mortgage 8,541 8,466 8,467 8,367 8,350 Real estate construction 375 310 246 311 444 Lease financing 972 958 987 983 274 Total commercial foreign loans $ 65,284 61,249 60,215 61,545 58,117 Wells Fargo & Company and SubsidiariesFIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Nonaccrual loans: Commercial: Commercial and industrial $ 3,216 3,331 3,464 2,911 1,363 Real estate mortgage 685 780 872 896 969 Real estate construction 43 59 59 63 66 Lease financing 115 92 112 99 26 Total commercial 4,059 4,262 4,507 3,969 2,424 Consumer: Real estate 1-4 family first mortgage 4,962 5,310 5,970 6,683 7,293 Real estate 1-4 family junior lien mortgage 1,206 1,259 1,330 1,421 1,495 Automobile 106 108 111 114 121 Other revolving credit and installment 51 47 45 47 49 Total consumer 6,325 6,724 7,456 8,265 8,958 Total nonaccrual loans (1)(2)(3) $ 10,384 10,986 11,963 12,234 11,382 As a percentage of total loans 1.07 % 1.14 1.25 1.29 1.24 Foreclosed assets: Government insured/guaranteed $ 197 282 321 386 446 Non-government insured/guaranteed 781 738 796 893 979 Total foreclosed assets 978 1,020 1,117 1,279 1,425 Total nonperforming assets $ 11,362 12,006 13,080 13,513 12,807 As a percentage of total loans 1.17 % 1.25 1.37 1.43 1.40 (1) Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.(2) Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.
(3) Real estate 1-4 family mortgage loans predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans largely guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed.
Wells Fargo & Company and SubsidiariesLOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Total (excluding PCI)(1): $ 11,858 12,068 12,385 13,060 14,380 Less: FHA insured/guaranteed by the VA (2)(3) 10,883 11,198 11,577 12,233 13,373 Less: Student loans guaranteed under the FFELP (4) 3 17 20 24 26 Total, not government insured/guaranteed $ 972 853 788 803 981 By segment and class, not government insured/guaranteed: Commercial: Commercial and industrial $ 28 47 36 24 97 Real estate mortgage 36 4 22 8 13 Real estate construction — — — 2 4 Total commercial 64 51 58 34 114 Consumer: Real estate 1-4 family first mortgage (3) 175 171 169 167 224 Real estate 1-4 family junior lien mortgage (3) 56 54 52 55 65 Credit card 452 392 348 389 397 Automobile 112 81 64 55 79 Other revolving credit and installment 113 104 97 103 102 Total consumer 908 802 730 769 867 Total, not government insured/guaranteed $ 972 853 788 803 981(1) PCI loans totaled $2.0 billion, $2.2 billion, $2.4 billion, $2.7 billion and $2.9 billion, at December 31, September 30, June 30, and March 31, 2016, and December 31, 2015, respectively.
(2) Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA. (3) Includes mortgages held for sale 90 days or more past due and still accruing. (4) Represents loans whose repayments are largely guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP. Wells Fargo & Company and SubsidiariesCHANGES IN ACCRETABLE YIELD RELATED TO PURCHASED CREDIT-IMPAIRED (PCI) LOANS
Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans predominantly represent loans acquired from Wachovia that were deemed to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent LTV percentages. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date.
As a result of PCI loan accounting, certain credit-related ratios cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.
The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:
•
Changes in interest rate indices for variable rate PCI loans - Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows;
•
Changes in prepayment assumptions - Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and
•
Changes in the expected principal and interest payments over the estimated life - Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.
The change in the accretable yield related to PCI loans since the merger with Wachovia is presented in the following table.
Quarter Year ended ended Dec 31, Dec 31, (in millions) 2016 2016 2009-2015 Balance, beginning of period $ 11,619 16,301 10,447 Change in accretable yield due to acquisitions (31 ) 27 132 Accretion into interest income (1) (373 ) (1,365 ) (14,212 ) Accretion into noninterest income due to sales (2) — (9 ) (458 )Reclassification from nonaccretable difference for loans with improving credit-related cash flows (3)
— 1,221 9,734Changes in expected cash flows that do not affect nonaccretable difference (4)
1 (4,959 ) 10,658 Balance, end of period $ 11,216 11,216 16,301 (1) Includes accretable yield released as a result of settlements with borrowers, which is included in interest income. (2) Includes accretable yield released as a result of sales to third parties, which is included in noninterest income.(3) At December 31, 2016, our carrying value for PCI loans totaled $16.7 billion and the remainder of nonaccretable difference established in purchase accounting totaled $954 million. The nonaccretable difference absorbs losses of contractual amounts that exceed our carrying value for PCI loans.
(4) Represents changes in cash flows expected to be collected due to the impact of modifications, changes in prepayment assumptions, changes in interest rates on variable rate PCI loans and sales to third parties.
Wells Fargo & Company and SubsidiariesPICK-A-PAY PORTFOLIO (1)
December 31, 2016 PCI loans All other loans Ratio of Ratio of Adjusted carrying carrying unpaid Current value to value to principal LTV Carrying current Carrying current (in millions) balance (2) ratio (3) value (4) value (5) value (4) value (5) California $ 14,219 65 % $ 11,070 50 % $ 7,871 47 % Florida 1,648 72 1,216 52 1,651 58 New Jersey 663 77 470 54 1,090 65 New York 483 72 408 56 542 61 Texas 175 50 154 44 654 39 Other states 3,323 72 2,585 55 4,581 59 Total Pick-a-Pay loans $ 20,511 67 $ 15,903 51 $ 16,389 53(1) The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2016.
(2) Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.
(3) The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing 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.
Wells Fargo & Company and SubsidiariesCHANGES IN ALLOWANCE FOR CREDIT LOSSES
Quarter ended December 31, Year ended December 31, (in millions) 2016 2015 2016 2015 Balance, beginning of period $ 12,694 12,562 12,512 13,169 Provision for credit losses 805 831 3,770 2,442 Interest income on certain impaired loans (1) (52 ) (48 ) (205 ) (198 ) Loan charge-offs: Commercial: Commercial and industrial (309 ) (275 ) (1,419 ) (734 ) Real estate mortgage (14 ) (11 ) (27 ) (59 ) Real estate construction — (2 ) (1 ) (4 ) Lease financing (16 ) (3 ) (41 ) (14 ) Total commercial (339 ) (291 ) (1,488 ) (811 ) Consumer: Real estate 1-4 family first mortgage (86 ) (113 ) (452 ) (507 ) Real estate 1-4 family junior lien mortgage (110 ) (134 ) (495 ) (635 ) Credit card (329 ) (295 ) (1,259 ) (1,116 ) Automobile (243 ) (211 ) (845 ) (742 ) Other revolving credit and installment (200 ) (178 ) (708 ) (643 ) Total consumer (968 ) (931 ) (3,759 ) (3,643 ) Total loan charge-offs (1,307 ) (1,222 ) (5,247 ) (4,454 ) Loan recoveries: Commercial: Commercial and industrial 53 60 263 252 Real estate mortgage 26 30 116 127 Real estate construction 8 12 38 37 Lease financing 1 2 11 8 Total commercial 88 104 428 424 Consumer: Real estate 1-4 family first mortgage 89 63 373 245 Real estate 1-4 family junior lien mortgage 66 64 266 259 Credit card 54 52 207 175 Automobile 77 76 325 325 Other revolving credit and installment 28 32 128 134 Total consumer 314 287 1,299 1,138 Total loan recoveries 402 391 1,727 1,562 Net loan charge-offs (905 ) (831 ) (3,520 ) (2,892 ) Other (2 ) (2 ) (17 ) (9 ) Balance, end of period $ 12,540 12,512 12,540 12,512 Components: Allowance for loan losses $ 11,419 11,545 11,419 11,545 Allowance for unfunded credit commitments 1,121 967 1,121 967 Allowance for credit losses $ 12,540 12,512 12,540 12,512 Net loan charge-offs (annualized) as a percentage of average total loans 0.37 % 0.36 0.37 0.33 Allowance for loan losses as a percentage of total loans 1.18 1.26 1.18 1.26 Allowance for credit losses as a percentage of total loans 1.30 1.37 1.30 1.37(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 changes in allowance attributable to the passage of time as interest income.
Wells Fargo & Company and SubsidiariesFIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
Quarter ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Balance, beginning of quarter $ 12,694 12,749 12,668 12,512 12,562 Provision for credit losses 805 805 1,074 1,086 831 Interest income on certain impaired loans (1) (52 ) (54 ) (51 ) (48 ) (48 ) Loan charge-offs: Commercial: Commercial and industrial (309 ) (324 ) (437 ) (349 ) (275 ) Real estate mortgage (14 ) (7 ) (3 ) (3 ) (11 ) Real estate construction — — (1 ) — (2 ) Lease financing (16 ) (4 ) (17 ) (4 ) (3 ) Total commercial (339 ) (335 ) (458 ) (356 ) (291 ) Consumer: Real estate 1-4 family first mortgage (86 ) (106 ) (123 ) (137 ) (113 ) Real estate 1-4 family junior lien mortgage (110 ) (119 ) (133 ) (133 ) (134 ) Credit card (329 ) (296 ) (320 ) (314 ) (295 ) Automobile (243 ) (215 ) (176 ) (211 ) (211 ) Other revolving credit and installment (200 ) (170 ) (163 ) (175 ) (178 ) Total consumer (968 ) (906 ) (915 ) (970 ) (931 ) Total loan charge-offs (1,307 ) (1,241 ) (1,373 ) (1,326 ) (1,222 ) Loan recoveries: Commercial: Commercial and industrial 53 65 69 76 60 Real estate mortgage 26 35 23 32 30 Real estate construction 8 18 4 8 12 Lease financing 1 2 5 3 2 Total commercial 88 120 101 119 104 Consumer: Real estate 1-4 family first mortgage 89 86 109 89 63 Real estate 1-4 family junior lien mortgage 66 70 71 59 64 Credit card 54 51 50 52 52 Automobile 77 78 86 84 76 Other revolving credit and installment 28 31 32 37 32 Total consumer 314 316 348 321 287 Total loan recoveries 402 436 449 440 391 Net loan charge-offs (905 ) (805 ) (924 ) (886 ) (831 ) Other (2 ) (1 ) (18 ) 4 (2 ) Balance, end of quarter $ 12,540 12,694 12,749 12,668 12,512 Components: Allowance for loan losses $ 11,419 11,583 11,664 11,621 11,545 Allowance for unfunded credit commitments 1,121 1,111 1,085 1,047 967 Allowance for credit losses $ 12,540 12,694 12,749 12,668 12,512 Net loan charge-offs (annualized) as a percentage of average total loans 0.37 % 0.33 0.39 0.38 0.36 Allowance for loan losses as a percentage of: Total loans 1.18 1.20 1.22 1.23 1.26 Nonaccrual loans 110 105 98 95 101 Nonaccrual loans and other nonperforming assets 101 96 89 86 90 Allowance for credit losses as a percentage of: Total loans 1.30 1.32 1.33 1.34 1.37 Nonaccrual loans 121 116 107 104 110 Nonaccrual loans and other nonperforming assets 110 106 97 94 98(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 changes in allowance attributable to the passage of time as interest income.
Wells Fargo & Company and SubsidiariesTANGIBLE COMMON EQUITY (1)
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions, except ratios) 2016 2016 2016 2016 2015 Tangible book value per common share (1): Total equity $ 200,497 203,958 202,661 198,504 193,891 Adjustments: Preferred stock (24,551 ) (24,594 ) (24,830 ) (24,051 ) (22,214 )Additional paid-in capital on ESOP preferred stock
(126 ) (130 ) (150 ) (182 ) (110 ) Unearned ESOP shares 1,565 1,612 1,868 2,271 1,362 Noncontrolling interests (916 ) (930 ) (916 ) (1,008 ) (893 ) Total common stockholders' equity (A) 176,469 179,916 178,633 175,534 172,036 Adjustments: Goodwill (26,693 ) (26,688 ) (26,963 ) (27,003 ) (25,529 )Certain identifiable intangible assets (other than MSRs)
(2,723
) (3,001 ) (3,356 ) (3,814 ) (3,167 ) Other assets (2) (2,088 ) (2,230 ) (2,110 ) (2,023 ) (2,074 ) Applicable deferred taxes (3) 1,772 1,832 1,906 1,985 2,071 Tangible common equity (B) $ 146,737 149,829 148,110 144,679 143,337 Common shares outstanding (C) 5,016.1 5,023.9 5,048.5 5,075.9 5,092.1 Book value per common share (A)/(C) $ 35.18 35.81 35.38 34.58 33.78 Tangible book value per common share (B)/(C) 29.25 29.82 29.34 28.50 28.15 Quarter ended Year ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Dec 31, Dec 31, (in millions, except ratios) 2016 2016 2016 2016 2015 2016 2015Return on average tangible common equity (1):
Net income applicable to common stock (A) $ 4,872 5,243 5,173 5,085 5,203 20,373 21,470 Average total equity 201,247 203,883 201,003 196,586 195,025 200,690 191,584 Adjustments: Preferred stock (24,579 ) (24,813 ) (24,091 ) (23,963 ) (22,407 ) (24,363 ) (21,715 )Additional paid-in capital on ESOP preferred stock
(128 ) (148 ) (168 ) (201 ) (127 ) (161 ) (138 ) Unearned ESOP shares 1,596 1,850 2,094 2,509 1,572 2,011 1,716 Noncontrolling interests (928 ) (927 )(984
) (904 ) (979 ) (936 ) (1,048 ) Average common stockholders’ equity (B) 177,208 179,845 177,854 174,027 173,084 177,241 170,399 Adjustments: Goodwill (26,713 ) (26,979 ) (27,037 ) (26,069 ) (25,580 ) (26,700 ) (25,673 ) Certain identifiable intangible assets(other than MSRs)
(2,871 ) (3,145 ) (3,600 ) (3,407 ) (3,317 ) (3,254 ) (3,793 ) Other assets (2) (2,175 ) (2,131 ) (2,096 ) (2,065 ) (1,987 ) (2,117 ) (1,654 ) Applicable deferred taxes (3) 1,785 1,855 1,934 2,014 2,103 1,897 2,248 Average tangible common equity (C) $ 147,234 149,445 147,055 144,500 144,303 147,067 141,527 Return on average common stockholders' equity (ROE) (A)/(B) 10.94 % 11.60 11.70 11.75 11.93 11.49 12.60 Return on average tangible common equity (ROTCE) (A)/(C) 13.16 13.96 14.15 14.15 14.30 13.85 15.17(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity.
(2) Represents goodwill and other intangibles on nonmarketable equity investments, which are included in other assets.(3) Applicable deferred taxes relate to goodwill and other intangible assets. They were determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.
Wells Fargo & Company and SubsidiariesCOMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1)
Estimated Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in billions, except ratio) 2016 2016 2016 2016 2015 Total equity $ 200.5 204.0 202.7 198.5 193.9 Adjustments: Preferred stock (24.6 ) (24.6 ) (24.8 ) (24.1 ) (22.2 )Additional paid-in capital on ESOP preferred stock
(0.1 ) (0.1 ) (0.2 ) (0.2 ) (0.1 ) Unearned ESOP shares 1.6 1.6 1.9 2.3 1.3 Noncontrolling interests (0.9 ) (1.0 ) (1.0 ) (1.0 ) (0.9 ) Total common stockholders' equity 176.5 179.9 178.6 175.5 172.0 Adjustments: Goodwill (26.7 ) (26.7 ) (27.0 ) (27.0 ) (25.5 ) Certain identifiable intangible assets (other than MSRs) (2.7 ) (3.0 ) (3.4 ) (3.8 ) (3.2 ) Other assets (2) (2.1 ) (2.2 ) (2.0 ) (2.1 ) (2.1 ) Applicable deferred taxes (3) 1.8 1.8 1.9 2.0 2.1 Investment in certain subsidiaries and other (0.4 ) (2.0 ) (2.5 ) (1.9 ) (0.9 ) Common Equity Tier 1 (Fully Phased-In) under Basel III (A) 146.4 147.8 145.6 142.7 142.4 Total risk-weighted assets (RWAs) anticipated under Basel III (4)(5) (B) $ 1,369.8 1,380.0 1,372.9 1,345.1 1,321.7 Common Equity Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In) (5) (A)/(B) 10.7 % 10.7 10.6 10.6 10.8(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.
(2) Represents goodwill and other intangibles on nonmarketable equity investments, which are included in other assets.(3) Applicable deferred taxes relate to goodwill and other intangible assets. They were determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.
(4) 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 December 31, 2016, 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 September 30, June 30 and March 31, 2016, and December 31, 2015, was calculated under the Basel III Standardized Approach RWAs.
(5) The Company’s December 31, 2016, RWAs and capital ratio are preliminary estimates. Wells Fargo & Company and SubsidiariesOPERATING SEGMENT RESULTS (1)
(income/expense in millions,average balances in billions)
CommunityBanking
WholesaleBanking
Wealth andInvestmentManagement
Other (2)
ConsolidatedCompany
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Quarter ended Dec 31, Net interest income (3) $ 7,556 7,409 4,323 3,711 1,061 933 (538 ) (465 ) 12,402 11,588 Provision (reversal of provision) for credit losses 631 704 168 126 3 (6 ) 3 7 805 831 Noninterest income 4,105 4,921 2,830 2,848 3,013 3,014 (768 ) (785 ) 9,180 9,998 Noninterest expense 6,985 6,893 4,002 3,491 3,042 2,998 (814 ) (783 ) 13,215 12,599 Income (loss) before income tax expense (benefit) 4,045 4,733 2,983 2,942 1,029 955 (495 ) (474 ) 7,562 8,156 Income tax expense (benefit) 1,272 1,507 795 841 380 366 (189 ) (181 ) 2,258 2,533 Net income (loss) before noncontrolling interests 2,773 3,226 2,188 2,101 649 589 (306 ) (293 ) 5,304 5,623 Less: Net income (loss) from noncontrolling interests 40 57 (6 ) (3 ) (4 ) (6 ) — — 30 48 Net income (loss) $ 2,733 3,169 2,194 2,104 653 595 (306 ) (293 ) 5,274 5,575 Average loans $ 488.1 482.2 461.5 417.0 70.0 63.0 (55.5 ) (49.9 ) 964.1 912.3 Average assets 1,000.7 921.4 811.9 755.4 220.4 197.9 (88.7 ) (87.4 ) 1,944.3 1,787.3 Average deposits 709.8 663.7 459.2 449.3 194.9 177.9 (79.7 ) (74.1 ) 1,284.2 1,216.8 Year ended Dec 31, Net interest income (3) $ 29,833 29,242 16,052 14,350 3,913 3,478 (2,044 ) (1,769 ) 47,754 45,301 Provision (reversal of provision) for credit losses 2,691 2,427 1,073 27 (5 ) (25 ) 11 13 3,770 2,442 Noninterest income 19,033 20,099 12,490 11,554 12,033 12,299 (3,043 ) (3,196 ) 40,513 40,756 Noninterest expense 27,422 26,981 16,126 14,116 12,059 12,067 (3,230 ) (3,190 ) 52,377 49,974 Income (loss) before income tax expense (benefit) 18,753 19,933 11,343 11,761 3,892 3,735 (1,868 ) (1,788 ) 32,120 33,641 Income tax expense (benefit) 6,182 6,202 3,136 3,424 1,467 1,420 (710 ) (681 ) 10,075 10,365 Net income (loss) before noncontrolling interests 12,571 13,731 8,207 8,337 2,425 2,315 (1,158 ) (1,107 ) 22,045 23,276 Less: Net income (loss) from noncontrolling interests 136 240 (28 ) 143 (1 ) (1 ) — — 107 382 Net income (loss) $ 12,435 13,491 8,235 8,194 2,426 2,316 (1,158 ) (1,107 ) 21,938 22,894 Average loans $ 486.9 475.9 449.3 397.3 67.3 60.1 (53.5 ) (47.9 ) 950.0 885.4 Average assets 977.3 910.0 782.0 724.9 211.5 192.8 (85.4 ) (84.8 ) 1,885.4 1,742.9 Average deposits 701.2 654.4 438.6 438.9 187.8 172.3 (77.0 ) (71.5 ) 1,250.6 1,194.1(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 fourth quarter 2016, we realigned some personnel and business activities from Wholesale Banking to Community Banking, as a result of the formation of the new Payments, Virtual Solutions, and Innovation Group. Results for these operating segments reflect the shift prospectively from November 1, 2016.
(2) Includes the elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for Wealth and Investment Management customers served through Community Banking distribution channels.
(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.
Wells Fargo & Company and SubsidiariesFIVE QUARTER OPERATING SEGMENT RESULTS (1)
Quarter ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (income/expense in millions, average balances in billions) 2016 2016 2016 2016 2015 COMMUNITY BANKING Net interest income (2) $ 7,556 7,430 7,379 7,468 7,409 Provision for credit losses 631 651 689 720 704 Noninterest income 4,105 4,957 4,825 5,146 4,921 Noninterest expense 6,985 6,953 6,648 6,836 6,893 Income before income tax expense 4,045 4,783 4,867 5,058 4,733 Income tax expense 1,272 1,546 1,667 1,697 1,507 Net income before noncontrolling interests 2,773 3,237 3,200 3,361 3,226 Less: Net income from noncontrolling interests 40 10 21 65 57 Segment net income $ 2,733 3,227 3,179 3,296 3,169 Average loans $ 488.1 489.2 485.7 484.3 482.2 Average assets 1,000.7 993.6 967.6 947.4 921.4 Average deposits 709.8 708.0 703.7 683.0 663.7 WHOLESALE BANKING Net interest income (2) $ 4,323 4,062 3,919 3,748 3,711 Provision for credit losses 168 157 385 363 126 Noninterest income 2,830 3,085 3,365 3,210 2,848 Noninterest expense 4,002 4,120 4,036 3,968 3,491 Income before income tax expense 2,983 2,870 2,863 2,627 2,942 Income tax expense 795 827 795 719 841 Net income before noncontrolling interests 2,188 2,043 2,068 1,908 2,101 Less: Net loss from noncontrolling interests (6 ) (4 ) (5 ) (13 ) (3 ) Segment net income $ 2,194 2,047 2,073 1,921 2,104 Average loans $ 461.5 454.3 451.4 429.8 417.0 Average assets 811.9 794.2 772.6 748.6 755.4 Average deposits 459.2 441.2 425.8 428.0 449.3 WEALTH AND INVESTMENT MANAGEMENT Net interest income (2) $ 1,061 977 932 943 933 Provision (reversal of provision) for credit losses 3 4 2 (14 ) (6 ) Noninterest income 3,013 3,122 2,987 2,911 3,014 Noninterest expense 3,042 2,999 2,976 3,042 2,998 Income before income tax expense 1,029 1,096 941 826 955 Income tax expense 380 415 358 314 366 Net income before noncontrolling interests 649 681 583 512 589 Less: Net income (loss) from noncontrolling interests (4 ) 4 (1 ) — (6 ) Segment net income $ 653 677 584 512 595 Average loans $ 70.0 68.4 66.7 64.1 63.0 Average assets 220.4 212.1 205.3 208.1 197.9 Average deposits 194.9 189.2 182.5 184.5 177.9 OTHER (3) Net interest income (2) $ (538 ) (517 ) (497 ) (492 ) (465 ) Provision (reversal of provision) for credit losses 3 (7 ) (2 ) 17 7 Noninterest income (768 ) (788 ) (748 ) (739 ) (785 ) Noninterest expense (814 ) (804 ) (794 ) (818 ) (783 ) Loss before income tax benefit (495 ) (494 ) (449 ) (430 ) (474 ) Income tax benefit (189 ) (187 ) (171 ) (163 ) (181 ) Net loss before noncontrolling interests (306 ) (307 ) (278 ) (267 ) (293 ) Less: Net income from noncontrolling interests — — — — — Other net loss $ (306 ) (307 ) (278 ) (267 ) (293 ) Average loans $ (55.5 ) (54.4 ) (53.0 ) (51.0 ) (49.9 ) Average assets (88.7 ) (85.3 ) (83.4 ) (84.2 ) (87.4 ) Average deposits (79.7 ) (76.9 ) (75.3 ) (76.1 ) (74.1 ) CONSOLIDATED COMPANY Net interest income (2) $ 12,402 11,952 11,733 11,667 11,588 Provision for credit losses 805 805 1,074 1,086 831 Noninterest income 9,180 10,376 10,429 10,528 9,998 Noninterest expense 13,215 13,268 12,866 13,028 12,599 Income before income tax expense 7,562 8,255 8,222 8,081 8,156 Income tax expense 2,258 2,601 2,649 2,567 2,533 Net income before noncontrolling interests 5,304 5,654 5,573 5,514 5,623 Less: Net income from noncontrolling interests 30 10 15 52 48 Wells Fargo net income $ 5,274 5,644 5,558 5,462 5,575 Average loans $ 964.1 957.5 950.8 927.2 912.3 Average assets 1,944.3 1,914.6 1,862.1 1,819.9 1,787.3 Average deposits 1,284.2 1,261.5 1,236.7 1,219.4 1,216.8(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 fourth quarter 2016, we realigned some personnel and business activities from Wholesale Banking to Community Banking, as a result of the formation of the new Payments, Virtual Solutions, and Innovation Group. Results for these operating segments reflect the shift prospectively from November 1, 2016.
(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 the elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for Wealth and Investment Management customers served through Community Banking distribution channels.
Wells Fargo & Company and SubsidiariesFIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
Quarter ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 MSRs measured using the fair value method: Fair value, beginning of quarter $ 10,415 10,396 11,333 12,415 11,778 Servicing from securitizations or asset transfers (1) 752 609 477 366 372 Sales and other (2) (47 ) 4 (22 ) — (9 ) Net additions 705 613 455 366 363 Changes in fair value: Due to changes in valuation model inputs or assumptions: Mortgage interest rates (3) 2,367 39 (779 ) (1,084 ) 560 Servicing and foreclosure costs (4) 93 (10 ) (4 ) 27 (37 ) Prepayment estimates and other (5) (106 ) (37 ) (41 ) 100 244 Net changes in valuation model inputs or assumptions 2,354 (8 ) (824 ) (957 ) 767 Other changes in fair value (6) (515 ) (586 ) (568 ) (491 ) (493 ) Total changes in fair value 1,839 (594 ) (1,392 ) (1,448 ) 274 Fair value, end of quarter $ 12,959 10,415 10,396 11,333 12,415 (1) Includes impacts associated with exercising our right to repurchase delinquent loans from GNMA loan securitization pools. (2) 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.(3) 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)
(4) Includes costs to service and unreimbursed foreclosure costs.(5) 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.
(6) Represents changes due to collection/realization of expected cash flows over time. Quarter ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Amortized MSRs: Balance, beginning of quarter $ 1,373 1,353 1,359 1,308 1,277 Purchases 34 18 24 21 48 Servicing from securitizations or asset transfers 66 69 38 97 49 Amortization (67 ) (67 ) (68 ) (67 ) (66 ) Balance, end of quarter $ 1,406 1,373 1,353 1,359 1,308 Fair value of amortized MSRs: Beginning of quarter $ 1,627 1,620 1,725 1,680 1,643 End of quarter 1,956 1,627 1,620 1,725 1,680 Wells Fargo & Company and SubsidiariesFIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
Quarter ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Servicing income, net: Servicing fees (1) $ 738 878 842 910 872 Changes in fair value of MSRs carried at fair value: Due to changes in valuation model inputs or assumptions (2) (A) 2,354 (8 ) (824 ) (957 ) 767 Other changes in fair value (3) (515 ) (586 ) (568 ) (491 ) (493 ) Total changes in fair value of MSRs carried at fair value 1,839 (594 ) (1,392 ) (1,448 ) 274 Amortization (67 ) (67 ) (68 ) (67 ) (66 ) Net derivative gains (losses) from economic hedges (4) (B) (2,314 ) 142 978 1,455 (350 ) Total servicing income, net $ 196 359 360 850 730 Market-related valuation changes to MSRs, net of hedge results (2)(4) (A)+(B) $ 40 134 154 498 417(1) Includes contractually specified servicing fees, late charges and other ancillary revenues, net of unreimbursed direct servicing costs.
(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. Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in billions) 2016 2016 2016 2016 2015 Managed servicing portfolio (1): Residential mortgage servicing: Serviced for others $ 1,205 1,226 1,250 1,280 1,300 Owned loans serviced 347 352 349 342 345 Subserviced for others 8 4 4 4 4 Total residential servicing 1,560 1,582 1,603 1,626 1,649 Commercial mortgage servicing: Serviced for others 479 477 478 485 478 Owned loans serviced 132 130 128 125 122 Subserviced for others 8 8 8 8 7 Total commercial servicing 619 615 614 618 607 Total managed servicing portfolio $ 2,179 2,197 2,217 2,244 2,256 Total serviced for others $ 1,684 1,703 1,728 1,765 1,778 Ratio of MSRs to related loans serviced for others 0.85 % 0.69 0.68 0.72 0.77 Weighted-average note rate (mortgage loans serviced for others) 4.26 4.28 4.32 4.34 4.37(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.
Wells Fargo & Company and SubsidiariesSELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA
Quarter ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, 2016 2016 2016 2016 2015 Net gains on mortgage loan origination/sales activities (in millions): Residential (A) $ 939 953 744 532 600 Commercial 90 167 72 71 108 Residential pipeline and unsold/repurchased loan management (1) 192 188 238 145 222 Total $ 1,221 1,308 1,054 748 930 Application data (in billions): Wells Fargo first mortgage quarterly applications $ 75 100 95 77 64 Refinances as a percentage of applications 48 % 55 46 52 48 Wells Fargo first mortgage unclosed pipeline, at quarter end $ 30 50 47 39 29 Residential real estate originations: Purchases as a percentage of originations 50 % 58 60 55 59 Refinances as a percentage of originations 50 42 40 45 41 Total 100 % 100 100 100 100 Wells Fargo first mortgage loans (in billions): Retail $ 35 37 34 24 27 Correspondent 36 32 28 19 19 Other (2) 1 1 1 1 1 Total quarter-to-date $ 72 70 63 44 47 Held-for-sale (B) $ 56 53 46 31 33 Held-for-investment 16 17 17 13 14 Total quarter-to-date $ 72 70 63 44 47 Total year-to-date $ 249 177 107 44 213 Production margin on residential held-for-sale mortgage originations (A)/(B) 1.68 % 1.81 1.66 1.68 1.83(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.CHANGES IN MORTGAGE REPURCHASE LIABILITY
Quarter ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in millions) 2016 2016 2016 2016 2015 Balance, beginning of period $ 239 255 355 378 538 Provision for repurchase losses: Loan sales 10 11 8 7 9 Change in estimate (1) (7 ) (24 ) (89 ) (19 ) (128 ) Net additions (reductions) 3 (13 ) (81 ) (12 ) (119 ) Losses (13 ) (3 ) (19 ) (11 ) (41 ) Balance, end of period $ 229 239 255 355 378(1) Results from changes in investor demand and mortgage insurer practices, credit deterioration and changes in the financial stability of correspondent lenders.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170113005120/en/
Wells Fargo & CompanyMediaAncel Martinez, 415-222-3858orInvestorsJim Rowe, 415-396-8216
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