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Wells Fargo Reports Fourth Quarter 2017 Net Income of $6.2 Billion; Diluted EPS of $1.16

Full Year 2017 Net Income of $22.2 Billion; Diluted EPS of $4.10

SAN FRANCISCO--(BUSINESS WIRE)--

Wells Fargo & Company (NYSE:WFC):

  • Full year 2017 financial results1:
    • Net income of $22.2 billion, compared with $21.9 billion in 2016
    • Diluted earnings per share (EPS) of $4.10, compared with $3.99
    • Revenue of $88.4 billion, up from $88.3 billion
      • Net interest income of $49.6 billion, up $1.8 billion, or 4 percent
      • Noninterest income of $38.8 billion, down $1.7 billion, or 4 percent
    • Average deposits of $1.3 trillion, up $54.1 billion, or 4 percent
    • Average loans of $956.1 billion, up $6.2 billion, or 1 percent
    • Return on assets (ROA) of 1.15 percent and return on equity (ROE) of 11.35 percent
    • Net charge-offs of 0.31 percent of average loans, down from 0.37 percent
    • Nonaccrual loans of $8.0 billion, down $2.3 billion, or 23 percent
    • Returned $14.5 billion to shareholders through common stock dividends and net share repurchases, up 16 percent from $12.5 billion
      • Net share repurchases of $6.8 billion, up 42 percent
      • Period-end common shares outstanding of 4.9 billion, down 124.5 million shares, or 2 percent
  • Fourth quarter 2017 financial results included:
    • $3.35 billion after-tax benefit, or $0.67 per share, from the Tax Cuts & Jobs Act (Tax Act)
      • $3.89 billion estimated tax benefit from the reduction to net deferred income taxes
      • $370 million after-tax loss from adjustments related to leveraged leases, low income housing and tax-advantaged renewable energy investments
      • $173 million tax expense from estimated deemed repatriation
    • $848 million pre-tax gain, or $0.11 per share, on sale of Wells Fargo Insurance Services USA
    • $3.25 billion pre-tax expense, or $(0.59) per share, from litigation accruals for a variety of matters, including mortgage-related regulatory investigations, sales practices, and other consumer-related matters; a majority of this expense was not tax deductible

Final financial results and other disclosures will be reported in our Annual Report on Form 10-K for the year ended December 31, 2017, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.

Selected Financial Information

Quarter ended Year ended Dec. 31,
Dec 31,
2017
Sep 30,
2017
Dec 31,
2016
2017 2016
Earnings (a)
Diluted earnings per common share $ 1.16 0.83 0.96 4.10 3.99
Wells Fargo net income (in billions) 6.15 4.54 5.27 22.18 21.94
Return on assets (ROA) 1.26 % 0.93 1.08 1.15 1.16
Return on equity (ROE) 12.47 8.96 10.94 11.35 11.49
Return on average tangible common equity (ROTCE) (b) 14.85 10.66 13.16 13.55 13.85
Asset Quality
Net charge-offs (annualized) as a % of average total loans 0.31 % 0.30 0.37 0.31 0.37
Allowance for credit losses as a % of total loans 1.25 1.27 1.30 1.25 1.30
Allowance for credit losses as a % of annualized net charge-offs 401 426 348 408 356
Other
Revenue (in billions) (a) $ 22.1 21.8 21.6 88.4 88.3
Efficiency ratio (a)(c) 76.2 % 65.7 61.2 66.2 59.3
Average loans (in billions) $ 951.8 952.3 964.1 956.1 950.0
Average deposits (in billions) 1,311.6 1,306.4 1,284.2 1,304.6 1,250.6
Net interest margin (a) 2.84 % 2.86 2.87 2.87 2.86

(a) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

(b) 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.

(c) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).(1) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

Wells Fargo & Company (NYSE:WFC) reported net income of $6.2 billion, or $1.16 per diluted common share, for fourth quarter 2017, compared with $5.3 billion, or $0.96 per share, for fourth quarter 2016, and $4.5 billion, or $0.83 per share, for third quarter 2017.

Chief Executive Officer Tim Sloan said, “In 2017 we continued executing on our plan to build a better bank for the future, and I'm proud of the hard work and dedication of our team members to put our customers first as we transform Wells Fargo. Over the past year we have invested billions of dollars into our business and capabilities including risk management, accelerated the pace of innovation, increased our commitment to communities, enhanced team member benefits, and continued to execute on our business strategies to provide long-term value to our shareholders. The progress we made over the past year was evident in the fourth quarter in higher deposits, loan growth particularly in commercial loans, increased debit and credit card transactions, and record client assets under management in Wealth and Investment Management. While we faced challenges in 2017, we are a much better company today than we were a year ago, and I am confident that this year Wells Fargo will be even better.”

Chief Financial Officer John Shrewsberry said, “Wells Fargo reported $6.2 billion of net income in the fourth quarter, which included a net benefit from the Tax Cuts & Jobs Act and a gain on the sale of Wells Fargo Insurance Services, partially offset by litigation accruals. Compared with the third quarter we grew both loans and deposits, and our credit performance, liquidity and capital remained exceptionally strong. We returned a record $14.5 billion to shareholders through common stock dividends and net share repurchases in 2017, up 16 percent, and returning more capital to shareholders remains a priority. We've made progress on our efficiency initiatives and remain committed to our target of $2 billion of expense reductions by the end of 2018, which are being used to support our investments in the business, and an additional $2 billion by the end of 2019. In addition, by the beginning of 2019 we expect the amortization of core deposit intangible expense ($769 million in 2018) and the FDIC special assessment to be complete.”

Net Interest Income

Net interest income in fourth quarter 2017 was $12.3 billion, down $136 million, compared with third quarter 2017, driven primarily by a negative $183 million one-time adjustment related to leveraged leases due to the Tax Act, which reduced loan yields in the fourth quarter, partially offset by a modest net benefit from all other growth, repricing and variable items.

Net interest margin was 2.84 percent, down 2 basis points from third quarter 2017. The negative impacts from the one-time adjustment to leveraged leases and growth in average deposits were partially offset by lower average long-term debt and a modest net benefit from all other growth, repricing and variable items.

Noninterest Income

Noninterest income in the fourth quarter was $9.7 billion, compared with $9.4 billion in third quarter 2017. Fourth quarter noninterest income reflected higher other income, trust and investment fees, and market sensitive revenue2, partially offset by lower mortgage banking and deposit service charges.

  • Deposit service charges of $1.2 billion were down $30 million in the fourth quarter driven by the impact of customer-friendly changes including the launch of Overdraft RewindSM in November.
  • Trust and investment fees were $3.7 billion, compared with $3.6 billion in third quarter 2017, as higher asset-based fees and retail brokerage transaction activity were partially offset by lower investment banking fees.
  • Mortgage banking noninterest income was $928 million, compared with $1.0 billion in third quarter 2017. Residential mortgage loan originations were $53 billion in the fourth quarter, down from $59 billion in the third quarter. The production margin on residential held-for-sale mortgage loan originations3 was 1.25 percent, compared with 1.24 percent in the third quarter. Mortgage servicing income was $262 million in the fourth quarter, down from $309 million in the third quarter.
  • Market sensitive revenue was $728 million, compared with $649 million in third quarter 2017, driven by higher net gains from equity investments.
  • Other income was $405 million, compared with $47 million in the third quarter. Fourth quarter 2017 included an $848 million gain on the previously announced sale of Wells Fargo Insurance Services USA, which was partially offset by $414 million of impairments on low income housing and renewable energy investments due to the Tax Act.

Noninterest Expense

Noninterest expense in the fourth quarter was $16.8 billion, compared with $14.4 billion in the prior quarter. Fourth quarter expenses included operating losses of $3.5 billion, up from $1.3 billion in the third quarter, primarily reflecting litigation accruals for a variety of matters, including mortgage-related regulatory investigations, sales practices, and other consumer-related matters. Fourth quarter expenses also included higher charitable donations (up $103 million from the third quarter), commission and incentive compensation expense, outside professional services, and typically higher equipment and advertising expense, which were partially offset by a $117 million gain on the sale of a corporate property. The efficiency ratio was 76.2 percent in fourth quarter 2017, up from 65.7 percent in the third quarter, driven primarily by higher operating losses.

Income Taxes

The Company’s fourth quarter income tax expense was a $1.6 billion benefit and reflected the estimated impact of the Tax Act, including a benefit of $3.89 billion resulting from the re-measurement of the Company's estimated net deferred tax liability as of December 31, 2017, partially offset by $173 million of tax expense relating to the estimated tax impact of the deemed repatriation of the Company's previously undistributed foreign earnings. The fourth quarter income tax benefit was also adversely impacted by a $1.0 billion tax effect relating to the impact of discrete non-deductible items (primarily litigation accruals). The full year 2017 effective income tax rate was 18.1 percent. The Company currently expects its full year 2018 effective income tax rate to be approximately 19 percent.

Loans

Total average loans were $951.8 billion in the fourth quarter, down $521 million from the third quarter. Period-end loan balances were $956.8 billion at December 31, 2017, up $4.9 billion from September 30, 2017. Commercial loans were up $3.2 billion from September 30, 2017 with growth in commercial and industrial loans, partially offset by declines in commercial real estate loans. Consumer loans increased $1.7 billion from the prior quarter, as growth in real estate 1-4 family first mortgage loans and consumer credit card loans was partially offset by expected declines in automobile loans and the junior lien mortgage portfolio.

Period-End Loan Balances

(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Commercial $ 503,388 500,150 505,901 505,004 506,536
Consumer 453,382 451,723 451,522 453,401 461,068
Total loans $ 956,770 951,873 957,423 958,405 967,604
Change from prior quarter $ 4,897 (5,550 ) (982 ) (9,199 ) 6,278

Investment Securities

Investment securities were $416.4 billion at December 31, 2017, up $1.8 billion from the third quarter, as approximately $20.9 billion of purchases, mostly federal agency mortgage-backed securities (MBS) in the available-for-sale portfolio, were partially offset by run-off and sales.

Net unrealized gains on available-for-sale securities declined to $1.5 billion at December 31, 2017, compared with $1.8 billion at September 30, 2017, primarily due to gains realized in the fourth quarter. Modestly higher Treasury yields were largely offset by tighter credit and agency MBS spreads during the quarter.

Deposits

Total average deposits for fourth quarter 2017 were $1.3 trillion, up $5.2 billion from the prior quarter. The average deposit cost for fourth quarter 2017 was 28 basis points, up 2 basis points from the prior quarter and 16 basis points from a year ago, primarily driven by an increase in commercial and Wealth and Investment Management deposit rates.

Capital

Capital levels remained strong in the fourth quarter, with a Common Equity Tier 1 ratio (fully phased-in) of 11.9 percent4, compared with 11.8 percent in the prior quarter. In fourth quarter 2017, the Company repurchased 51.4 million shares of its common stock, which reduced period-end common shares outstanding by 36.3 million.

Credit Quality

Net Loan Charge-offs

The quarterly loss rate was 0.31 percent (annualized), compared with 0.30 percent in the prior quarter. Commercial and consumer losses were 0.09 percent and 0.56 percent, respectively. Total credit losses were $751 million in fourth quarter 2017, up $34 million from third quarter 2017. Commercial losses were up $2 million on lower recoveries in commercial real estate loans. Consumer losses increased $32 million, as higher recoveries on consumer real estate loans and lower losses on automobile loans were offset by higher credit card losses driven by seasonality and portfolio seasoning.

Net Loan Charge-Offs

Quarter ended
December 31, 2017 September 30, 2017 June 30, 2017
($ in millions) Net loan

charge-

offs

As a % of

average

loans (a)

Net loan

charge-

offs

As a % of

average

loans (a)

Net loan

charge-

offs

As a % of

average

loans (a)

Commercial:
Commercial and industrial $ 118 0.14 % $ 125 0.15 % $ 78 0.10 %
Real estate mortgage (10 ) (0.03 ) (3 ) (0.01 ) (6 ) (0.02 )
Real estate construction (3 ) (0.05 ) (15 ) (0.24 ) (4 ) (0.05 )
Lease financing 10 0.20 6 0.12 7 0.15
Total commercial 115 0.09 113 0.09 75 0.06
Consumer:
Real estate 1-4 family first mortgage (23 ) (0.03 ) (16 ) (0.02 ) (16 ) (0.02 )
Real estate 1-4 family junior lien mortgage (7 ) (0.06 ) 1 (4 ) (0.03 )
Credit card 336 3.66 277 3.08 320 3.67
Automobile 188 1.38 202 1.41 126 0.86
Other revolving credit and installment 142 1.46 140 1.44 154 1.58
Total consumer 636 0.56 604 0.53 580 0.51
Total $ 751 0.31 % $ 717 0.30 % $ 655 0.27 %

(a) Quarterly net charge-offs (recoveries) 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 $647 million, or 7 percent, from third quarter 2017 to $8.7 billion. Nonaccrual loans decreased $583 million from third quarter 2017 to $8.0 billion primarily driven by lower commercial and industrial nonaccruals reflecting continued improvement in the oil and gas portfolio, as well as continued declines in consumer real estate nonaccruals.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

December 31, 2017 September 30, 2017 June 30, 2017
($ in millions)

Total
balances

As a
% of
total
loans

Total
balances

As a
% of
total
loans

Total
balances

As a
% of
total
loans

Commercial:
Commercial and industrial $ 1,899 0.57 % $ 2,397 0.73 % $ 2,632 0.79 %
Real estate mortgage 628 0.50 593 0.46 630 0.48
Real estate construction 37 0.15 38 0.15 34 0.13
Lease financing 76 0.39 81 0.42 89 0.46
Total commercial 2,640 0.52 3,109 0.62 3,385 0.67
Consumer:
Real estate 1-4 family first mortgage 4,122 1.45 4,213 1.50 4,413 1.60
Real estate 1-4 family junior lien mortgage 1,086 2.73 1,101 2.68 1,095 2.56
Automobile 130 0.24 137 0.25 104 0.18
Other revolving credit and installment 58 0.15 59 0.15 59 0.15
Total consumer 5,396 1.19 5,510 1.22 5,671 1.26
Total nonaccrual loans 8,036 0.84 8,619 0.91 9,056 0.95
Foreclosed assets:
Government insured/guaranteed 120 137 149
Non-government insured/guaranteed 522 569 632
Total foreclosed assets 642 706 781
Total nonperforming assets $ 8,678 0.91 % $ 9,325 0.98 % $ 9,837 1.03 %
Change from prior quarter:
Total nonaccrual loans $ (583 ) $ (437 ) $ (703 )
Total nonperforming assets (647 ) (512 ) (827 )

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.0 billion at December 31, 2017, down $149 million from September 30, 2017. Fourth quarter 2017 included a $100 million reserve release5, reflecting continued strong credit performance. The allowance coverage for total loans was 1.25 percent compared with 1.27 percent in third quarter 2017. The allowance covered 4.0 times annualized fourth quarter net charge-offs, compared with 4.3 times in the prior quarter. The allowance coverage for nonaccrual loans was 149 percent at December 31, 2017, compared with 141 percent at September 30, 2017. The Company believes the allowance was appropriate for losses inherent in the loan portfolio at December 31, 2017.

Business Segment Performance

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

Quarter ended
(in millions) Dec 31,
2017
Sep 30,
2017
Dec 31,
2016
Community Banking (a) $ 3,673 2,176 2,733
Wholesale Banking (a) 2,148 2,045 2,194
Wealth and Investment Management 659 710 653

(a) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

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

Selected Financial Information

Quarter ended
(in millions) Dec 31,
2017
Sep 30,
2017
Dec 31,
2016
Total revenue (a) $ 12,028 11,984 11,661
Provision for credit losses 636 650 631
Noninterest expense 10,200 7,834 6,985
Segment net income (a) 3,673 2,176 2,733
(in billions)
Average loans 473.5 473.5 488.1
Average assets 974.0 988.9 1,000.7
Average deposits 738.1 734.5 709.8

(a) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

Community Banking reported net income of $3.7 billion, up $1.5 billion, or 69 percent, from third quarter 2017. Fourth quarter income tax expense reflected the estimated impact of the Tax Act to the Company and the impact of discrete non-deductible items, primarily litigation accruals. Revenue in the fourth quarter was $12.0 billion, flat compared with third quarter 2017, and included lower net interest income, mortgage banking revenue, and service charges on deposit accounts, offset by higher market sensitive revenue and trust and investment fees. Noninterest expense increased $2.4 billion, or 30 percent, compared with third quarter 2017, driven primarily by litigation accruals. The provision for credit losses decreased $14 million from the prior quarter.

Net income was up $940 million, or 34 percent, from fourth quarter 2016, and included the income tax benefit from the Tax Act. Revenue increased $367 million, or 3 percent, compared with a year ago due to higher market sensitive revenue and other income, partially offset by lower mortgage banking revenue, service charges on deposit accounts, and net interest income. Noninterest expense increased $3.2 billion, or 46 percent, from a year ago primarily driven by litigation accruals. The provision for credit losses increased $5 million from a year ago.

Retail Banking and Consumer Payments, Virtual Solutions and Innovation

  • 1.6 million branch customer experience surveys completed during 2017, both ‘Loyalty’ and ‘Overall Satisfaction with Most Recent Visit’ scores improved in fourth quarter from third quarter
  • 5,861 retail bank branches as of the end of fourth quarter 2017, reflecting 214 branch consolidations for full year 2017
  • For the 15th consecutive year, America's #1 small business lender and #1 lender to small businesses in low-and moderate-income areas (loans under $1 million; 2016 Community Reinvestment Act data, released November 2017)
  • Primary consumer checking customers6,7up 0.2 percent year-over-year
  • Debit card point-of-sale purchase volume8 of $83.1 billion in fourth quarter, up 6 percent year-over-year
  • Credit card point-of-sale purchase volume of $19.1 billion in fourth quarter, up 6 percent year-over-year
  • Credit card penetration in retail banking households of 45.3 percent9
  • 28.1 million digital (online and mobile) active customers, including 21.2 million mobile active users7,10
  • Bank Monitor Awards provided Wells Fargo a Gold Medal, the highest level, in Website Design and Usability (December 2017)
  • Dynatrace (formerly Keynote) ranked Wells Fargo #1 in Functionality, Open Accounts, and Transact in its fourth quarter Online Banking Scorecard (November 2017)

Consumer Lending

  • Home Lending
    • Originations of $53 billion, down from $59 billion in prior quarter
    • Applications of $63 billion, down from $73 billion in prior quarter
    • Application pipeline of $23 billion at quarter end, down from $29 billion at September 30, 2017
  • Automobile originations of $4.3 billion in fourth quarter, flat compared with prior quarter and down 33 percent from prior year, as proactive steps to tighten underwriting standards resulted in lower origination volume

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

Selected Financial Information

Quarter ended
(in millions) Dec 31,
2017
Sep 30,
2017
Dec 31,
2016
Total revenue (a) $ 7,094 7,084 7,153
Provision for credit losses 20 69 168
Noninterest expense 4,204 4,248 4,002
Segment net income (a) 2,148 2,045 2,194
(in billions)
Average loans 463.5 463.8 461.5
Average assets 837.3 824.3 811.9
Average deposits 465.7 463.4 459.2

(a) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

Wholesale Banking reported net income of $2.1 billion, up $103 million, or 5 percent, from third quarter 2017. Fourth quarter results included the loss from adjustments related to leveraged leases and other tax advantaged businesses due to the Tax Act, as well as a gain related to the completion of the previously announced sale of Wells Fargo Insurance Services USA (WFIS). Revenue of $7.1 billion was flat compared with the prior quarter, as the gain related to the sale of WFIS was offset by the impact of the Tax Act and lower market sensitive revenue. Net interest income decreased $134 million, or 3 percent, as the impact to leveraged leases due to the Tax Act was partially offset by higher trading related income and a modest benefit from higher interest rates. Noninterest income increased $144 million, or 5 percent, as the gain related to the sale of WFIS and higher commercial real estate brokerage fees were partially offset by impairments on low income housing and tax-advantaged renewable energy investments due to the Tax Act, lower market sensitive revenue and one less month of WFIS operating income. Noninterest expense decreased $44 million, or 1 percent, from the prior quarter reflecting one less month of WFIS operating expenses and lower operating lease expense. The provision for credit losses decreased $49 million from the prior quarter, primarily due to a reserve release in the fourth quarter.

Net income of $2.1 billion decreased $46 million, or 2 percent, from fourth quarter 2016. Revenue decreased $59 million, or 1 percent, from fourth quarter 2016, as lower net interest income was partially offset by higher noninterest income. Net interest income decreased $112 million, or 3 percent, from fourth quarter 2016, as the impact to leveraged leases due to the Tax Act was partially offset by the impact of rising interest rates. Noninterest income increased $53 million, or 2 percent, from a year ago as the gain related to the sale of WFIS and higher market sensitive revenue were partially offset by impairments on low income housing and tax-advantaged renewable energy investments due to the Tax Act, lower investment banking results, and one less month of WFIS operating income. Noninterest expense increased $202 million, or 5 percent, from a year ago reflecting increased personnel expense and higher regulatory, risk, cyber and technology expenses. The provision for credit losses decreased $148 million from a year ago primarily due to improvements in the oil and gas portfolio.

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

Selected Financial Information

Quarter ended
(in millions) Dec 31,
2017
Sep 30,
2017
Dec 31,
2016
Total revenue $ 4,305 4,246 4,074
Provision (reversal of provision) for credit losses (7 ) (1 ) 3
Noninterest expense 3,244 3,106 3,042
Segment net income 659 710 653
(in billions)
Average loans 72.8 72.4 70.0
Average assets 209.3 213.4 220.4
Average deposits 184.2 188.1 194.9

Wealth and Investment Management reported net income of $659 million, down $51 million, or 7 percent, from third quarter 2017. Revenue of $4.3 billion increased $59 million from the prior quarter, primarily due to higher asset-based fees and transaction revenue, partially offset by lower net interest income. Noninterest expense increased $138 million, or 4 percent, from the prior quarter, primarily due to higher non-personnel expense and broker commissions.

Net income was up $6 million, or 1 percent, from fourth quarter 2016. Revenue increased $231 million, or 6 percent, from a year ago primarily driven by higher asset-based fees, higher net interest income, and higher gains on deferred compensation plan investments (offset in employee benefits expense), partially offset by lower transaction revenue. Noninterest expense increased $202 million, or 7 percent, from a year ago, primarily due to higher regulatory, risk, cyber and technology expenses, as well as higher broker commissions and deferred compensation plan expense (offset in trading revenue), partially offset by lower other non-personnel expense.

  • WIM total client assets reached a record-high of $1.9 trillion, up 11 percent from a year ago, driven by higher market valuations
  • Fourth quarter 2017 average closed referred investment assets (referrals resulting from the WIM/Community Banking partnership) were flat compared with the prior quarter and up 12 percent from prior year

Retail Brokerage

  • Client assets of $1.7 trillion, up 11 percent from prior year
  • Advisory assets of $543 billion, up 17 percent from prior year, primarily driven by higher market valuations and positive net flows
  • Continued loan growth, with average balances up 7 percent from prior year largely due to growth in non-conforming mortgage loans

Wealth Management

  • Client assets of $248 billion, up 7 percent from prior year
  • Average loan balances up 3 percent from prior year primarily driven by continued growth in non-conforming mortgage loans

Asset Management

  • Total assets under management of $504 billion, up 5 percent from prior year as higher market valuations, positive fixed income and money market net flows were partially offset by equity net outflows

Retirement

  • IRA assets of $410 billion, up 8 percent from prior year
  • Institutional Retirement plan assets of $393 billion, up 12 percent from prior year

Conference Call

The Company will host a live conference call on Friday, January 12, at 7:00 a.m. PT (10:00 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 440-424-4922 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~6099528.

A replay of the conference call will be available beginning at 10:00 a.m. PT (1:00 p.m. ET) on Friday, January 12 through Friday, January 26. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #6099528. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~6099528.

Endnotes

1 Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

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

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 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.

5 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.

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

7 Data as of November 2017, comparisons with November 2016.

8 Combined consumer and business debit card purchase volume dollars.

9 Penetration defined as the percentage of Retail Banking households that have a credit card with Wells Fargo. 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. Credit card household penetration rates have not been adjusted to reflect the impact of the potentially unauthorized accounts (determined principally based on whether the account was activated by the customer) identified by a third party consulting firm in August 2017 because the maximum impact in any one quarter was not greater than 127 bps.

10 Primarily includes retail banking, consumer lending, small business and business banking customers.

Forward-Looking Statements

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

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

  • current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters (including the impact of the Tax Cuts & Jobs Act), geopolitical matters, and the overall slowdown in global economic growth;
  • our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
  • financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
  • the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;
  • the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;
  • negative effects relating to our mortgage servicing and foreclosure practices, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;
  • our ability to realize our efficiency ratio target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;
  • losses related to recent hurricanes, which primarily affected Texas, Florida and Puerto Rico, and related to recent California wildfires, in each case including from damage or loss to our collateral for loans in our consumer and commercial loan portfolios and from the impact on the ability of our borrowers to repay their loans;
  • the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;
  • significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our investment securities portfolio;
  • the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
  • negative effects from the retail banking sales practices matter and from other instances where customers may have experienced financial harm, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, and our reputation;
  • reputational damage from negative publicity, protests, fines, penalties and other negative consequences from regulatory violations and legal actions;
  • a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
  • the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
  • fiscal and monetary policies of the Federal Reserve Board; and
  • the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.

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

For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 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 $2.0 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investments, mortgage, and consumer and commercial finance through more than 8,300 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 263,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2017 rankings of America’s largest corporations.

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

Summary Information

Summary Financial Data

16

Income

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

Balance Sheet

Consolidated Balance Sheet 26
Investment Securities 28

Loans

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

Equity

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

Operating Segments

Operating Segment Results 37

Other

Mortgage Servicing and other related data 39

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA
Quarter ended

% Change
Dec 31, 2017 from

Year ended
($ in millions, except per share amounts) Dec 31,
2017
Sep 30,
2017
Dec 31,
2016
Sep 30,
2017
Dec 31,
2016
Dec 31,
2017
Dec 31,
2016
%
Change
For the Period
Wells Fargo net income (1) $ 6,151 4,542 5,274 35 % 17 $ 22,183 21,938 1 %
Wells Fargo net income applicable to common stock (1) 5,740 4,131 4,872 39 18 20,554 20,373 1
Diluted earnings per common share (1) 1.16 0.83 0.96 40 21 4.10 3.99 3
Profitability ratios (annualized) (1):
Wells Fargo net income to average assets (ROA) 1.26 % 0.93 1.08 35 17 1.15 % 1.16 (1 )
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.47 8.96 10.94 39 14 11.35 11.49 (1 )
Return on average tangible common equity (ROTCE)(2) 14.85 10.66 13.16 39 13 13.55 13.85 (2 )
Efficiency ratio (1)(3) 76.2 65.7 61.2 16 25 66.2 59.3 12
Total revenue (1) $ 22,050 21,849 21,582 1 2 $ 88,389 88,267
Pre-tax pre-provision profit (PTPP) (1)(4) 5,250 7,498 8,367 (30 ) (37 ) 29,905 35,890 (17 )
Dividends declared per common share 0.390 0.390 0.380 3 1.540 1.515 2
Average common shares outstanding 4,912.5 4,948.6 5,025.6 (1 ) (2 ) 4,964.6 5,052.8 (2 )
Diluted average common shares outstanding 4,963.1 4,996.8 5,078.2 (1 ) (2 ) 5,017.3 5,108.3 (2 )
Average loans $ 951,822 952,343 964,147 (1 ) $ 956,129 949,960 1
Average assets (1) 1,935,318 1,938,461 1,944,250 1,933,005 1,885,441 3
Average total deposits 1,311,592 1,306,356 1,284,158 2 1,304,622 1,250,566 4
Average consumer and small business banking deposits (5) 757,541 755,094 749,946 1 758,271 732,620 4
Net interest margin (1) 2.84 % 2.86 2.87 (1 ) (1 ) 2.87 % 2.86
At Period End
Investment securities $ 416,420 414,633 407,947 2 $ 416,420 407,947 2
Loans 956,770 951,873 967,604 1 (1 ) 956,770 967,604 (1 )
Allowance for loan losses 11,004 11,078 11,419 (1 ) (4 ) 11,004 11,419 (4 )
Goodwill 26,587 26,581 26,693 26,587 26,693
Assets (1) 1,951,757 1,934,880 1,930,115 1 1 1,951,757 1,930,115 1
Deposits 1,335,991 1,306,706 1,306,079 2 2 1,335,991 1,306,079 2
Common stockholders' equity (1) 183,134 181,920 176,469 1 4 183,134 176,469 4
Wells Fargo stockholders’ equity (1) 206,936 205,722 199,581 1 4 206,936 199,581 4
Total equity (1) 208,079 206,617 200,497 1 4 208,079 200,497 4
Tangible common equity (1)(2) 153,730 152,694 146,737 1 5 153,730 146,737 5
Common shares outstanding 4,891.6 4,927.9 5,016.1 (1 ) (2 ) 4,891.6 5,016.1 (2 )
Book value per common share (1)(6) $ 37.44 36.92 35.18 1 6 $ 37.44 35.18 6
Tangible book value per common share (1)(2)(6) 31.43 30.99 29.25 1 7 31.43 29.25 7
Common stock price:
High 62.24 56.45 58.02 10 7 62.24 58.02 7
Low 52.84 49.28 43.55 7 21 49.28 43.55 13
Period end 60.67 55.15 55.11 10 10 60.67 55.11 10
Team members (active, full-time equivalent) 262,700 268,000 269,100 (2 ) (2 ) 262,700 269,100 (2 )

(1) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities in fourth quarter 2017. The retrospective application of the changes to certain hedging strategies resulted in a cumulative effect adjustment to opening retained earnings effective January 1, 2017. The adjustment reduced retained earnings by $381 million and increased other comprehensive income by $168 million. The effect of adoption on previously reported September 30, 2017, year-to-date net income resulted in an increase of $169 million ($242 million pre-tax) and a decrease in other comprehensive income of $163 million. Other affected financial information, including financial ratios, has been revised to reflect this adoption.

(2) 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.

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

(4) 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.

(5) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(6) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA
Quarter ended
($ in millions, except per share amounts) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
For the Quarter
Wells Fargo net income (1) $ 6,151 4,542 5,856 5,634 5,274
Wells Fargo net income applicable to common stock (1) 5,740 4,131 5,450 5,233 4,872
Diluted earnings per common share (1) 1.16 0.83 1.08 1.03 0.96
Profitability ratios (annualized) (1):
Wells Fargo net income to average assets (ROA) 1.26 % 0.93 1.22 1.18 1.08
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.47 8.96 12.06 11.96 10.94
Return on average tangible common equity (ROTCE)(2) 14.85 10.66 14.41 14.35 13.16
Efficiency ratio (1)(3) 76.2 65.7 60.9 62.0 61.2
Total revenue (1) $ 22,050 21,849 22,235 22,255 21,582
Pre-tax pre-provision profit (PTPP) (1)(4) 5,250 7,498 8,694 8,463 8,367
Dividends declared per common share 0.39 0.39 0.38 0.38 0.38
Average common shares outstanding 4,912.5 4,948.6 4,989.9 5,008.6 5,025.6
Diluted average common shares outstanding 4,963.1 4,996.8 5,037.7 5,070.4 5,078.2
Average loans $ 951,822 952,343 956,879 963,645 964,147
Average assets (1) 1,935,318 1,938,461 1,927,021 1,931,040 1,944,250
Average total deposits 1,311,592 1,306,356 1,301,195 1,299,191 1,284,158
Average consumer and small business banking deposits (5) 757,541 755,094 760,149 758,754 749,946
Net interest margin (1) 2.84 % 2.86 2.90 2.87 2.87
At Quarter End
Investment securities $ 416,420 414,633 409,594 407,560 407,947
Loans 956,770 951,873 957,423 958,405 967,604
Allowance for loan losses 11,004 11,078 11,073 11,168 11,419
Goodwill 26,587 26,581 26,573 26,666 26,693
Assets (1) 1,951,757 1,934,880 1,930,792 1,951,501 1,930,115
Deposits 1,335,991 1,306,706 1,305,830 1,325,444 1,306,079
Common stockholders' equity (1) 183,134 181,920 181,233 178,209 176,469
Wells Fargo stockholders’ equity (1) 206,936 205,722 205,034 201,321 199,581
Total equity (1) 208,079 206,617 205,949 202,310 200,497
Tangible common equity (1)(2) 153,730 152,694 151,868 148,671 146,737
Common shares outstanding 4,891.6 4,927.9 4,966.8 4,996.7 5,016.1
Book value per common share (1)(6) $ 37.44 36.92 36.49 35.67 35.18
Tangible book value per common share (1)(2)(6) 31.43 30.99 30.58 29.75 29.25
Common stock price:
High 62.24 56.45 56.60 59.99 58.02
Low 52.84 49.28 50.84 53.35 43.55
Period end 60.67 55.15 55.41 55.66 55.11
Team members (active, full-time equivalent) 262,700 268,000 270,600 272,800 269,100

(1) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities in fourth quarter 2017. The retrospective application of the changes to certain hedging strategies resulted in a cumulative effect adjustment to opening retained earnings effective January 1, 2017. The adjustment reduced retained earnings by $381 million and increased other comprehensive income by $168 million. The effect of adoption on previously reported September 30, 2017, year-to-date net income resulted in an increase of $169 million ($242 million pre-tax) and a decrease in other comprehensive income of $163 million. Other affected financial information, including financial ratios, has been revised to reflect this adoption.

(2) 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.

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

(4) 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.

(5) Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
(6) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME
Quarter ended December 31, % Year ended December 31, %
(in millions, except per share amounts) 2017 2016 Change 2017 2016 Change
Interest income
Trading assets $ 821 745 10 % $ 2,928 2,506 17 %
Investment securities 2,669 2,512 6 10,664 9,248 15
Mortgages held for sale 196 235 (17 ) 786 784
Loans held for sale 2 2 12 9 33
Loans 10,367 10,128 2 41,388 39,505 5
Other interest income 903 436 107 3,131 1,611 94
Total interest income 14,958 14,058 6 58,909 53,663 10
Interest expense
Deposits 931 400 133 3,013 1,395 116
Short-term borrowings 255 101 152 758 330 130
Long-term debt 1,344 1,061 27 5,157 3,830 35
Other interest expense 115 94 22 424 354 20
Total interest expense 2,645 1,656 60 9,352 5,909 58
Net interest income 12,313 12,402 (1 ) 49,557 47,754 4
Provision for credit losses 651 805 (19 ) 2,528 3,770 (33 )
Net interest income after provision for credit losses 11,662 11,597 1 47,029 43,984 7
Noninterest income
Service charges on deposit accounts 1,246 1,357 (8 ) 5,111 5,372 (5 )
Trust and investment fees 3,687 3,698 14,495 14,243 2
Card fees 996 1,001 3,960 3,936 1
Other fees 913 962 (5 ) 3,557 3,727 (5 )
Mortgage banking 928 1,417 (35 ) 4,350 6,096 (29 )
Insurance 223 262 (15 ) 1,049 1,268 (17 )
Net gains (losses) from trading activities 132 (109 ) NM 1,053 834 26
Net gains on debt securities 157 145 8 479 942 (49 )
Net gains from equity investments 439 306 43 1,268 879 44
Lease income 458 523 (12 ) 1,907 1,927 (1 )
Other 558 (382 ) NM 1,603 1,289 24
Total noninterest income 9,737 9,180 6 38,832 40,513 (4 )
Noninterest expense
Salaries 4,403 4,193 5 17,363 16,552 5
Commission and incentive compensation 2,665 2,478 8 10,442 10,247 2
Employee benefits 1,293 1,101 17 5,566 5,094 9
Equipment 608 642 (5 ) 2,237 2,154 4
Net occupancy 715 710 1 2,849 2,855
Core deposit and other intangibles 288 301 (4 ) 1,152 1,192 (3 )
FDIC and other deposit assessments 312 353 (12 ) 1,287 1,168 10
Other 6,516 3,437 90 17,588 13,115 34
Total noninterest expense 16,800 13,215 27 58,484 52,377 12
Income before income tax expense 4,599 7,562 (39 ) 27,377 32,120 (15 )
Income tax expense (benefit) (1,642 ) 2,258 NM 4,917 10,075 (51 )
Net income before noncontrolling interests 6,241 5,304 18 22,460 22,045 2
Less: Net income from noncontrolling interests 90 30 200 277 107 159
Wells Fargo net income $ 6,151 5,274 17 $ 22,183 21,938 1
Less: Preferred stock dividends and other 411 402 2 1,629 1,565 4
Wells Fargo net income applicable to common stock $ 5,740 4,872 18 $ 20,554 20,373 1
Per share information
Earnings per common share $ 1.17 0.97 21 $ 4.14 4.03 3
Diluted earnings per common share 1.16 0.96 21 4.10 3.99 3
Dividends declared per common share 0.390 0.380 3 1.540 1.515 2
Average common shares outstanding 4,912.5 5,025.6 (2 ) 4,964.6 5,052.8 (2 )
Diluted average common shares outstanding 4,963.1 5,078.2 (2 ) 5,017.3 5,108.3 (2 )

NM – Not meaningful

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter ended
(in millions, except per share amounts) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Interest income
Trading assets $ 821 754 710 643 745
Investment securities (1) 2,669 2,650 2,681 2,664 2,512
Mortgages held for sale (1) 196 217 191 182 235
Loans held for sale 2 5 4 1 2
Loans 10,367 10,522 10,358 10,141 10,128
Other interest income 903 896 750 582 436
Total interest income (1) 14,958 15,044 14,694 14,213 14,058
Interest expense
Deposits (1) 931 869 677 536 400
Short-term borrowings 255 226 163 114 101
Long-term debt (1) 1,344 1,391 1,275 1,147 1,061
Other interest expense 115 109 108 92 94
Total interest expense (1) 2,645 2,595 2,223 1,889 1,656
Net interest income (1) 12,313 12,449 12,471 12,324 12,402
Provision for credit losses 651 717 555 605 805
Net interest income after provision for credit losses 11,662 11,732 11,916 11,719 11,597
Noninterest income
Service charges on deposit accounts 1,246 1,276 1,276 1,313 1,357
Trust and investment fees 3,687 3,609 3,629 3,570 3,698
Card fees 996 1,000 1,019 945 1,001
Other fees 913 877 902 865 962
Mortgage banking 928 1,046 1,148 1,228 1,417
Insurance 223 269 280 277 262
Net gains (losses) from trading activities 132 245 237 439 (109 )
Net gains on debt securities 157 166 120 36 145
Net gains from equity investments 439 238 188 403 306
Lease income 458 475 493 481 523
Other (1) 558 199 472 374 (382 )
Total noninterest income (1) 9,737 9,400 9,764 9,931 9,180
Noninterest expense
Salaries 4,403 4,356 4,343 4,261 4,193
Commission and incentive compensation 2,665 2,553 2,499 2,725 2,478
Employee benefits 1,293 1,279 1,308 1,686 1,101
Equipment 608 523 529 577 642
Net occupancy 715 716 706 712 710
Core deposit and other intangibles 288 288 287 289 301
FDIC and other deposit assessments 312 314 328 333 353
Other 6,516 4,322 3,541 3,209 3,437
Total noninterest expense 16,800 14,351 13,541 13,792 13,215
Income before income tax expense (1) 4,599 6,781 8,139 7,858 7,562
Income tax expense (benefit) (1) (1,642 ) 2,181 2,245 2,133 2,258
Net income before noncontrolling interests (1) 6,241 4,600 5,894 5,725 5,304
Less: Net income from noncontrolling interests 90 58 38 91 30
Wells Fargo net income (1) $ 6,151 4,542 5,856 5,634 5,274
Less: Preferred stock dividends and other 411 411 406 401 402
Wells Fargo net income applicable to common stock (1) $ 5,740 4,131 5,450 5,233 4,872
Per share information
Earnings per common share (1) $ 1.17 0.83 1.09 1.05 0.97
Diluted earnings per common share (1) 1.16 0.83 1.08 1.03 0.96
Dividends declared per common share 0.390 0.390 0.380 0.380 0.380
Average common shares outstanding 4,912.5 4,948.6 4,989.9 5,008.6 5,025.6
Diluted average common shares outstanding 4,963.1 4,996.8 5,037.7 5,070.4 5,078.2

(1) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarter ended Dec 31, % Year ended Dec 31, %
(in millions) 2017 2016 Change 2017 2016 Change
Wells Fargo net income $ 6,151 5,274 17% $ 22,183 21,938 1%
Other comprehensive income (loss), before tax:
Investment securities:
Net unrealized gains (losses) arising during the period (106 ) (5,936 ) (98) 2,719 (3,458 ) NM
Reclassification of net gains to net income (215 ) (239 ) (10) (737 ) (1,240 ) (41)
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period (558 ) (2,434 ) (77) (540 ) 177 NM
Reclassification of net gains on cash flow hedges to net income (83 ) (246 ) (66) (543 ) (1,029 ) (47)
Defined benefit plans adjustments:
Net actuarial and prior service gains (losses) arising during the period 45 422 (89) 49 (52 ) NM
Amortization of net actuarial loss, settlements and other to net income 33 43 (23) 153 158 (3)
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period 10 (30 ) NM 96 (3 ) NM
Other comprehensive income (loss), before tax (874 ) (8,420 ) (90) 1,197 (5,447 ) NM
Income tax benefit (expense) related to other comprehensive income 319 3,106 (90) (434 ) 1,996 NM
Other comprehensive income (loss), net of tax (555 ) (5,314 ) (90) 763 (3,451 ) NM
Less: Other comprehensive income (loss) from noncontrolling interests (33 ) 7 NM (62 ) (17 ) 265
Wells Fargo other comprehensive income (loss), net of tax (522 ) (5,321 ) (90) 825 (3,434 ) NM
Wells Fargo comprehensive income (loss) 5,629 (47 ) NM 23,008 18,504 24
Comprehensive income from noncontrolling interests 57 37 54 215 90 139
Total comprehensive income (loss) $ 5,686 (10 ) NM $ 23,223 18,594 25

NM – Not meaningful

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

Quarter ended
(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Balance, beginning of period (1) $ 206,617 205,949 202,310 200,497 203,958
Cumulative effect from change in hedge accounting (1)

(213

)
Wells Fargo net income (1) 6,151 4,542 5,856 5,634 5,274
Wells Fargo other comprehensive income (loss), net of tax (1) (522 ) 526 1,005 (184 ) (5,321 )
Noncontrolling interests 247 (20 ) (75 ) 75 (13 )
Common stock issued 436 254 252 1,406 610
Common stock repurchased (2) (2,845 ) (2,601 ) (2,287 ) (2,175 ) (2,034 )
Preferred stock released by ESOP 218 209 406 43
Common stock warrants repurchased/exercised (46 ) (19 ) (24 ) (44 )
Preferred stock issued 677
Common stock dividends (1,920 ) (1,936 ) (1,899 ) (1,903 ) (1,909 )
Preferred stock dividends (411 ) (411 ) (406 ) (401 ) (401 )
Tax benefit from stock incentive compensation (3) 74
Stock incentive compensation expense 206 135 145 389 232
Net change in deferred compensation and related plans (52 ) (11 ) (11 ) (771 ) (16 )
Balance, end of period (1) $ 208,079 206,617 205,949 202,310 200,497

(1) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

(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.

(3) Effective January 1, 2017, we adopted Accounting Standards Update 2016-09 (Improvements to Employee Share-Based Payment Accounting). Accordingly, tax benefit from stock incentive compensation is reported in income tax expense in the consolidated statement of income.

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended December 31,
2017 2016
(in millions) Average

balance

Yields/

rates

Interest

income/

expense

Average

balance

Yields/

rates

Interest

income/

expense

Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 264,940 1.25 % $ 835 273,073 0.56 % $ 381
Trading assets 111,213 3.01 838 102,757 2.96 761
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 6,423 1.66 27 25,935 1.53 99
Securities of U.S. states and political subdivisions 52,390 3.91 513 53,917 4.06 547
Mortgage-backed securities:
Federal agencies 152,910 2.62 1,000 147,980 2.37 875
Residential and commercial 9,371 4.85 114 16,456 5.87 242
Total mortgage-backed securities 162,281 2.75 1,114 164,436 2.72 1,117
Other debt and equity securities 49,138 3.70 456 52,692 3.71 492
Total available-for-sale securities 270,232 3.12 2,110 296,980 3.03 2,255
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,716 2.19 246 44,686 2.20 246
Securities of U.S. states and political subdivisions 6,263 5.26 83 4,738 5.31 63
Federal agency and other mortgage-backed securities 89,622 2.25 503 46,009 1.81 209
Other debt securities 1,194 2.64 8 3,597 2.26 20
Total held-to-maturity securities 141,795 2.36 840 99,030 2.17 538
Total investment securities 412,027 2.86 2,950 396,010 2.82 2,793
Mortgages held for sale (4) 20,517 3.82 196 27,503 3.43 235
Loans held for sale (4) 114 8.14 2 155 5.42 2
Loans:
Commercial:
Commercial and industrial - U.S. 270,294 3.89 2,649 272,828 3.46 2,369
Commercial and industrial - Non U.S. 59,233 2.96 442 54,410 2.58 352
Real estate mortgage 127,199 3.88 1,244 131,195 3.44 1,135
Real estate construction 24,408 4.38 270 23,850 3.61 216
Lease financing 19,226 0.62 31 18,904 5.78 273
Total commercial 500,360 3.68 4,636 501,187 3.45 4,345
Consumer:
Real estate 1-4 family first mortgage 281,966 4.01 2,826 277,732 4.01 2,785
Real estate 1-4 family junior lien mortgage 40,379 4.96 505 47,203 4.42 524
Credit card 36,428 12.37 1,136 35,383 11.73 1,043
Automobile 54,323 5.13 702 62,521 5.54 870
Other revolving credit and installment 38,366 6.28 607 40,121 5.91 595
Total consumer 451,462 5.10 5,776 462,960 5.01 5,817
Total loans (4) 951,822 4.35 10,412 964,147 4.20 10,162
Other 13,084 2.06 68 6,729 3.27 56
Total earning assets $ 1,773,717 3.43 % $ 15,301 1,770,374 3.24 % $ 14,390
Funding sources
Deposits:
Interest-bearing checking $ 50,483 0.68 % $ 86 46,907 0.17 % $ 19
Market rate and other savings 679,893 0.19 319 676,365 0.07 122
Savings certificates 20,920 0.31 17 24,362 0.30 18
Other time deposits 68,187 1.49 255 49,170 1.16 144
Deposits in foreign offices 124,597 0.81 254 110,425 0.35 97
Total interest-bearing deposits 944,080 0.39 931 907,229 0.18 400
Short-term borrowings 102,142 0.99 256 124,698 0.33 102
Long-term debt 231,598 2.32 1,344 252,162 1.68 1,061
Other liabilities 24,728 1.86 115 17,210 2.15 94
Total interest-bearing liabilities 1,302,548 0.81 2,646 1,301,299 0.51 1,657
Portion of noninterest-bearing funding sources 471,169 469,075
Total funding sources $ 1,773,717 0.59 2,646 1,770,374 0.37 1,657
Net interest margin and net interest income on a taxable-equivalent basis (5) 2.84 % $ 12,655 2.87 % $ 12,733
Noninterest-earning assets
Cash and due from banks $ 19,152 18,967
Goodwill 26,579 26,713
Other 115,870 128,196
Total noninterest-earning assets $ 161,601 173,876
Noninterest-bearing funding sources
Deposits $ 367,512 376,929
Other liabilities 57,845 64,775
Total equity 207,413 201,247
Noninterest-bearing funding sources used to fund earning assets (471,169 ) (469,075 )
Net noninterest-bearing funding sources $ 161,601 173,876
Total assets $ 1,935,318 1,944,250
(1) Our average prime rate was 4.30% and 3.54% for the quarters ended December 31, 2017 and 2016, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.46% and 0.92% 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 $342 million and $331 million for the quarters ended December 31, 2017 and 2016, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Year ended December 31,
2017 2016
(in millions) Average

balance

Yields/

rates

Interest

income/

expense

Average

balance

Yields/

rates

Interest

income/

expense

Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 276,561 1.05 % $ 2,897 287,718 0.51 % $ 1,457
Trading assets 101,716 2.93 2,982 88,400 2.89 2,553
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 15,966 1.49 239 29,418 1.56 457
Securities of U.S. states and political subdivisions 52,658 3.95 2,082 52,959 4.20 2,225
Mortgage-backed securities:
Federal agencies 145,310 2.60 3,782 110,637 2.50 2,764
Residential and commercial 11,839 5.33 631 18,725 5.49 1,029
Total mortgage-backed securities 157,149 2.81 4,413 129,362 2.93 3,793
Other debt and equity securities 49,193 3.73 1,834 53,433 3.44 1,841
Total available-for-sale securities 274,966 3.12 8,568 265,172 3.14 8,316
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,705 2.19 979 44,675 2.19 979
Securities of U.S. states and political subdivisions 6,268 5.32 334 2,893 5.32 154
Federal agency and other mortgage-backed securities 78,330 2.34 1,832 39,330 2.00 786
Other debt securities 2,194 2.50 55 4,043 2.01 81
Total held-to-maturity securities 131,497 2.43 3,200 90,941 2.20 2,000
Total investment securities 406,463 2.90 11,768 356,113 2.90 10,316
Mortgages held for sale (4) 20,780 3.78 786 22,412 3.50 784
Loans held for sale (4) 147 8.38 12 218 4.01 9
Loans:
Commercial:
Commercial and industrial - U.S. 272,034 3.75 10,196 268,182 3.45 9,243
Commercial and industrial - Non U.S. 57,198 2.86 1,639 51,601 2.36 1,219
Real estate mortgage 129,990 3.74 4,859 127,232 3.44 4,371
Real estate construction 24,813 4.10 1,017 23,197 3.55 824
Lease financing 19,128 3.74 715 17,950 5.10 916
Total commercial 503,163 3.66 18,426 488,162 3.39 16,573
Consumer:
Real estate 1-4 family first mortgage 277,751 4.03 11,206 276,712 4.01 11,096
Real estate 1-4 family junior lien mortgage 42,780 4.82 2,062 49,735 4.39 2,183
Credit card 35,600 12.23 4,355 34,178 11.62 3,970
Automobile 57,900 5.34 3,094 61,566 5.62 3,458
Other revolving credit and installment 38,935 6.18 2,408 39,607 5.93 2,350
Total consumer 452,966 5.11 23,125 461,798 4.99 23,057
Total loans (4) 956,129 4.35 41,551 949,960 4.17 39,630
Other 11,445 2.06 237 6,262 2.51 157
Total earning assets $ 1,773,241 3.40 % $ 60,233 1,711,083 3.21 % $ 54,906
Funding sources
Deposits:
Interest-bearing checking $ 49,474 0.49 % $ 242 42,379 0.14 % $ 60
Market rate and other savings 682,053 0.14 983 663,557 0.07 449
Savings certificates 22,190 0.30 67 25,912 0.35 91
Other time deposits 61,625 1.43 880 55,846 0.91 508
Deposits in foreign offices 123,816 0.68 841 103,206 0.28 287
Total interest-bearing deposits 939,158 0.32 3,013 890,900 0.16 1,395
Short-term borrowings 98,922 0.77 761 115,187 0.29 333
Long-term debt 246,195 2.09 5,157 239,471 1.60 3,830
Other liabilities 21,872 1.94 424 16,702 2.12 354
Total interest-bearing liabilities 1,306,147 0.72 9,355 1,262,260 0.47 5,912
Portion of noninterest-bearing funding sources 467,094 448,823
Total funding sources $ 1,773,241 0.53 9,355 1,711,083 0.35 5,912
Net interest margin and net interest income on a taxable-equivalent basis (5) 2.87 % $ 50,878 2.86 % $ 48,994
Noninterest-earning assets
Cash and due from banks $ 18,622 18,617
Goodwill 26,629 26,700
Other 114,513 129,041
Total noninterest-earning assets $ 159,764 174,358
Noninterest-bearing funding sources
Deposits $ 365,464 359,666
Other liabilities 55,740 62,825
Total equity 205,654 200,690
Noninterest-bearing funding sources used to fund earning assets (467,094 ) (448,823 )
Net noninterest-bearing funding sources $ 159,764 174,358
Total assets $ 1,933,005 1,885,441
(1) Our average prime rate was 4.10% and 3.51% for the 2017 and 2016, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.26% and 0.74% 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 $1.3 billion and $1.2 billion for the 2017 and 2016, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

Wells Fargo & Company and Subsidiaries

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

Quarter ended
Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016
($ in billions) Average

balance

Yields/

rates

Average

balance

Yields/

rates

Average

balance

Yields/

rates

Average

balance

Yields/

rates

Average

balance

Yields/

rates

Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 264.9 1.25 % $ 276.1 1.20 % $ 281.6 0.99 % $ 283.8 0.76 % $ 273.1 0.56 %
Trading assets 111.2 3.01 103.6 2.96 98.1 2.95 93.8 2.80 102.8 2.96
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 6.4 1.66 14.5 1.31 18.1 1.53 25.0 1.54 25.9 1.53
Securities of U.S. states and political subdivisions (4) 52.4 3.91 52.5 4.08 53.5 3.89 52.2 3.93 53.9 4.06
Mortgage-backed securities:
Federal agencies 152.9 2.62 139.8 2.58 132.0 2.63 156.6 2.58 148.0 2.37
Residential and commercial (4) 9.4 4.85 11.0 5.44 12.6 5.55 14.5 5.34 16.5 5.87
Total mortgage-backed securities 162.3 2.75 150.8 2.79 144.6 2.89 171.1 2.81 164.5 2.72
Other debt and equity securities (4) 49.1 3.70 48.1 3.74 49.0 3.87 50.7 3.61 52.7 3.71
Total available-for-sale securities (4) 270.2 3.12 265.9 3.14 265.2 3.18 299.0 3.04 297.0 3.03
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44.7 2.19 44.7 2.18 44.7 2.19 44.7 2.20 44.7 2.20
Securities of U.S. states and political subdivisions 6.3 5.26 6.3 5.44 6.3 5.29 6.3 5.30 4.7 5.31
Federal agency and other mortgage-backed securities 89.6 2.25 88.3 2.26 83.1 2.44 51.8 2.51 46.0 1.81
Other debt securities 1.2 2.64 1.4 3.05 2.8 2.34 3.3 2.34 3.6 2.26
Total held-to-maturity securities 141.8 2.36 140.7 2.38 136.9 2.49 106.1 2.54 99.0 2.17
Total investment securities (4) 412.0 2.86 406.6 2.88 402.1 2.94 405.1 2.91 396.0 2.82
Mortgages held for sale (4) 20.5 3.82 22.9 3.79 19.8 3.87 19.9 3.67 27.5 3.43
Loans held for sale 0.1 8.14 0.2 13.35 0.2 6.95 0.1 4.44 0.2 5.42
Loans:
Commercial:
Commercial and industrial - U.S. 270.3 3.89 270.1 3.81 273.1 3.70 274.8 3.59 272.8 3.46
Commercial and industrial - Non U.S. (4) 59.2 2.96 57.7 2.89 56.4 2.86 55.3 2.73 54.4 2.58
Real estate mortgage 127.2 3.88 129.1 3.83 131.3 3.68 132.4 3.56 131.2 3.44
Real estate construction 24.4 4.38 25.0 4.18 25.3 4.10 24.6 3.72 23.9 3.61
Lease financing 19.3 0.62 19.2 4.59 19.0 4.82 19.1 4.94 18.9 5.78
Total commercial 500.4 3.68 501.1 3.76 505.1 3.67 506.2 3.54 501.2 3.45
Consumer:
Real estate 1-4 family first mortgage 282.0 4.01 278.4 4.03 275.1 4.08 275.5 4.02 277.7 4.01
Real estate 1-4 family junior lien mortgage 40.4 4.96 41.9 4.95 43.6 4.78 45.3 4.60 47.2 4.42
Credit card 36.4 12.37 35.6 12.41 34.9 12.18 35.4 11.97 35.4 11.73
Automobile 54.3 5.13 56.7 5.34 59.1 5.43 61.5 5.46 62.5 5.54
Other revolving credit and installment 38.3 6.28 38.6 6.31 39.1 6.13 39.7 6.02 40.1 5.91
Total consumer 451.4 5.10 451.2 5.14 451.8 5.13 457.4 5.06 462.9 5.01
Total loans 951.8 4.35 952.3 4.41 956.9 4.36 963.6 4.26 964.1 4.20
Other 13.2 2.06 15.1 1.69 10.6 2.00 6.8 2.96 6.7 3.27
Total earning assets (4) $ 1,773.7 3.43 % $ 1,776.8 3.44 % $ 1,769.3 3.40 % $ 1,773.1 3.30 % $ 1,770.4 3.24 %
Funding sources
Deposits:
Interest-bearing checking $ 50.5 0.68 % $ 48.3 0.57 % $ 48.5 0.41 % $ 50.7 0.29 % $ 46.9 0.17 %
Market rate and other savings 679.9 0.19 681.2 0.17 683.0 0.13 684.2 0.09 676.4 0.07
Savings certificates 20.9 0.31 21.8 0.31 22.6 0.30 23.5 0.29 24.4 0.30
Other time deposits (4) 68.2 1.49 66.1 1.51 57.1 1.39 54.9 1.30 49.2 1.16
Deposits in foreign offices 124.6 0.81 124.7 0.76 123.7 0.65 122.2 0.49 110.4 0.35
Total interest-bearing deposits 944.1 0.39 942.1 0.37 934.9 0.29 935.5 0.23 907.3 0.18
Short-term borrowings 102.1 0.99 99.2 0.91 95.8 0.69 98.5 0.47 124.7 0.33
Long-term debt (4) 231.6 2.32 243.5 2.28 249.9 2.04 260.1 1.77 252.2 1.68
Other liabilities 24.7 1.86 24.8 1.74 21.0 2.05 16.8 2.22 17.1 2.15
Total interest-bearing liabilities (4) 1,302.5 0.81 1,309.6 0.79 1,301.6 0.68 1,310.9 0.58 1,301.3 0.51
Portion of noninterest-bearing funding sources (4) 471.2 467.2 467.7 462.2 469.1
Total funding sources (4) $ 1,773.7 0.59 $ 1,776.8 0.58 $ 1,769.3 0.50 $ 1,773.1 0.43 $ 1,770.4 0.37
Net interest margin on a taxable-equivalent basis (4) 2.84 % 2.86 % 2.90 % 2.87 % 2.87 %
Noninterest-earning assets
Cash and due from banks $ 19.2 18.5 18.2 18.7 19.0
Goodwill 26.6 26.6 26.7 26.7 26.7
Other (4) 115.8 116.6 112.8 112.5 128.2
Total noninterest-earnings assets (4) $ 161.6 161.7 157.7 157.9 173.9
Noninterest-bearing funding sources
Deposits $ 367.5 364.3 366.3 363.7 376.9
Other liabilities (4) 57.8 56.8 53.4 54.8 64.9
Total equity (4) 207.4 207.7 205.8 201.6 201.2
Noninterest-bearing funding sources used to fund earning assets (4) (471.1 ) (467.1 ) (467.8 ) (462.2 ) (469.1 )
Net noninterest-bearing funding sources (4) $ 161.6 161.7 157.7 157.9 173.9
Total assets (4) $ 1,935.3 1,938.5 1,927.0 1,931.0 1,944.3

(1) Our average prime rate was 4.30% for the quarter ended December 31, 2017, 4.25% for the quarter ended September 30, 2017, 4.05% for the quarter ended June 30, 2017, 3.80% for the quarter ended March 31, 2017 and 3.54% for the quarter ended December 31, 2016. The average three-month London Interbank Offered Rate (LIBOR) was 1.46%, 1.31%, 1.21%, 1.07% and 0.92% 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.

(4) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME

Quarter ended December 31, % Year ended December 31, %
(in millions) 2017 2016 Change 2017 2016 Change
Service charges on deposit accounts $ 1,246 1,357 (8 )% $ 5,111 5,372 (5 )%
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,401 2,342 3 9,358 9,216 2
Trust and investment management 866 837 3 3,372 3,336 1
Investment banking 420 519 (19 ) 1,765 1,691 4
Total trust and investment fees 3,687 3,698 14,495 14,243 2
Card fees 996 1,001 3,960 3,936 1
Other fees:
Charges and fees on loans 313 305 3 1,263 1,241 2
Cash network fees 120 130 (8 ) 506 537 (6 )
Commercial real estate brokerage commissions 159 172 (8 ) 462 494 (6 )
Letters of credit fees 78 79 (1 ) 305 321 (5 )
Wire transfer and other remittance fees 115 105 10 448 401 12
All other fees 128 171 (25 ) 573 733 (22 )
Total other fees 913 962 (5 ) 3,557 3,727 (5 )
Mortgage banking:
Servicing income, net 262 196 34 1,427 1,765 (19 )
Net gains on mortgage loan origination/sales activities 666 1,221 (45 ) 2,923 4,331 (33 )
Total mortgage banking 928 1,417 (35 ) 4,350 6,096 (29 )
Insurance 223 262 (15 ) 1,049 1,268 (17 )
Net gains (losses) from trading activities 132 (109 ) NM 1,053 834 26
Net gains on debt securities 157 145 8 479 942 (49 )
Net gains from equity investments 439 306 43 1,268 879 44
Lease income 458 523 (12 ) 1,907 1,927 (1 )
Life insurance investment income 153 132 16 594 587 1
All other 405 (514 ) NM 1,009 702 44
Total $ 9,737 9,180 6 $ 38,832 40,513 (4 )

NM – Not meaningful

NONINTEREST EXPENSE

Quarter ended December 31, % Year ended December 31, %
(in millions) 2017 2016 Change 2017 2016 Change
Salaries $ 4,403 4,193 5 % $ 17,363 16,552 5 %
Commission and incentive compensation 2,665 2,478 8 10,442 10,247 2
Employee benefits 1,293 1,101 17 5,566 5,094 9
Equipment 608 642 (5 ) 2,237 2,154 4
Net occupancy 715 710 1 2,849 2,855
Core deposit and other intangibles 288 301 (4 ) 1,152 1,192 (3 )
FDIC and other deposit assessments 312 353 (12 ) 1,287 1,168 10
Operating losses 3,531 243 NM 5,492 1,608 242
Outside professional services 1,025 984 4 3,813 3,138 22
Contract services 344 325 6 1,369 1,203 14
Operating leases 325 379 (14 ) 1,351 1,329 2
Outside data processing 208 222 (6 ) 891 888
Travel and entertainment 183 195 (6 ) 687 704 (2 )
Advertising and promotion 200 178 12 614 595 3
Postage, stationery and supplies 137 156 (12 ) 544 622 (13 )
Telecommunications 92 96 (4 ) 364 383 (5 )
Foreclosed assets 47 75 (37 ) 251 202 24
Insurance 28 23 22 100 179 (44 )
All other 396 561 (29 ) 2,112 2,264 (7 )
Total $ 16,800 13,215 27 $ 58,484 52,377 12

NM – Not meaningful

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

Quarter ended
(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Service charges on deposit accounts $ 1,246 1,276 1,276 1,313 1,357
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,401 2,304 2,329 2,324 2,342
Trust and investment management 866 840 837 829 837
Investment banking 420 465 463 417 519
Total trust and investment fees 3,687 3,609 3,629 3,570 3,698
Card fees 996 1,000 1,019 945 1,001
Other fees:
Charges and fees on loans 313 318 325 307 305
Cash network fees 120 126 134 126 130
Commercial real estate brokerage commissions 159 120 102 81 172
Letters of credit fees 78 77 76 74 79
Wire transfer and other remittance fees 115 114 112 107 105
All other fees 128 122 153 170 171
Total other fees 913 877 902 865 962
Mortgage banking:
Servicing income, net 262 309 400 456 196
Net gains on mortgage loan origination/sales activities 666 737 748 772 1,221
Total mortgage banking 928 1,046 1,148 1,228 1,417
Insurance 223 269 280 277 262
Net gains (losses) from trading activities 132 245 237 439 (109 )
Net gains on debt securities 157 166 120 36 145
Net gains from equity investments 439 238 188 403 306
Lease income 458 475 493 481 523
Life insurance investment income 153 152 145 144 132
All other (1) 405 47 327 230 (514 )
Total $ 9,737 9,400 9,764 9,931 9,180

(1) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

FIVE QUARTER NONINTEREST EXPENSE

Quarter ended
(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Salaries $ 4,403 4,356 4,343 4,261 4,193
Commission and incentive compensation 2,665 2,553 2,499 2,725 2,478
Employee benefits 1,293 1,279 1,308 1,686 1,101
Equipment 608 523 529 577 642
Net occupancy 715 716 706 712 710
Core deposit and other intangibles 288 288 287 289 301
FDIC and other deposit assessments 312 314 328 333 353
Operating losses 3,531 1,329 350 282 243
Outside professional services 1,025 955 1,029 804 984
Contract services 344 351 349 325 325
Operating leases 325 347 334 345 379
Outside data processing 208 227 236 220 222
Travel and entertainment 183 154 171 179 195
Advertising and promotion 200 137 150 127 178
Postage, stationery and supplies 137 128 134 145 156
Telecommunications 92 90 91 91 96
Foreclosed assets 47 66 52 86 75
Insurance 28 24 24 24 23
All other 396 514 621 581 561
Total $ 16,800 14,351 13,541 13,792 13,215

Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

(in millions, except shares) Dec 31,
2017
Dec 31,
2016
%

Change

Assets
Cash and due from banks $ 23,367 20,729 13 %
Federal funds sold, securities purchased under resale agreements and other short-term investments 272,605 266,038 2
Trading assets 92,329 74,397 24
Investment securities:
Available-for-sale, at fair value 277,085 308,364 (10 )
Held-to-maturity, at cost 139,335 99,583 40
Mortgages held for sale 20,070 26,309 (24 )
Loans held for sale 108 80 35
Loans 956,770 967,604 (1 )
Allowance for loan losses (11,004 ) (11,419 ) (4 )
Net loans 945,766 956,185 (1 )
Mortgage servicing rights:
Measured at fair value 13,625 12,959 5
Amortized 1,424 1,406 1
Premises and equipment, net 8,847 8,333 6
Goodwill 26,587 26,693
Derivative assets 12,228 14,498 (16 )
Other assets 118,381 114,541 3
Total assets $ 1,951,757 1,930,115 1
Liabilities
Noninterest-bearing deposits $ 373,722 375,967 (1 )
Interest-bearing deposits 962,269 930,112 3
Total deposits 1,335,991 1,306,079 2
Short-term borrowings 103,256 96,781 7
Derivative liabilities 8,796 14,492 (39 )
Accrued expenses and other liabilities 70,615 57,189 23
Long-term debt 225,020 255,077 (12 )
Total liabilities 1,743,678 1,729,618 1
Equity
Wells Fargo stockholders’ equity:
Preferred stock 25,358 24,551 3
Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares 9,136 9,136
Additional paid-in capital 60,893 60,234 1
Retained earnings 145,263 133,075 9
Cumulative other comprehensive income (loss) (2,144 ) (3,137 ) (32 )
Treasury stock – 590,194,846 shares and 465,702,148 shares (29,892 ) (22,713 ) 32
Unearned ESOP shares (1,678 ) (1,565 ) 7
Total Wells Fargo stockholders’ equity 206,936 199,581 4
Noncontrolling interests 1,143 916 25
Total equity 208,079 200,497 4
Total liabilities and equity $ 1,951,757 1,930,115 1

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET

(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Assets
Cash and due from banks $ 23,367 19,206 20,248 19,698 20,729
Federal funds sold, securities purchased under resale agreements and other short-term investments 272,605 273,105 264,706 308,747 266,038
Trading assets 92,329 88,404 83,607 80,326 74,397
Investment securities:
Available-for-sale, at fair value 277,085 272,210 269,202 299,530 308,364
Held-to-maturity, at cost 139,335 142,423 140,392 108,030 99,583
Mortgages held for sale 20,070 20,009 24,807 17,822 26,309
Loans held for sale 108 157 156 253 80
Loans 956,770 951,873 957,423 958,405 967,604
Allowance for loan losses (11,004 ) (11,078 ) (11,073 ) (11,168 ) (11,419 )
Net loans 945,766 940,795 946,350 947,237 956,185
Mortgage servicing rights:
Measured at fair value 13,625 13,338 12,789 13,208 12,959
Amortized 1,424 1,406 1,399 1,402 1,406
Premises and equipment, net 8,847 8,449 8,403 8,320 8,333
Goodwill 26,587 26,581 26,573 26,666 26,693
Derivative assets 12,228 12,580 13,273 12,564 14,498
Other assets (1) 118,381 116,217 118,887 107,698 114,541
Total assets (1) $ 1,951,757 1,934,880 1,930,792 1,951,501 1,930,115
Liabilities
Noninterest-bearing deposits $ 373,722 366,528 372,766 365,780 375,967
Interest-bearing deposits 962,269 940,178 933,064 959,664 930,112
Total deposits 1,335,991 1,306,706 1,305,830 1,325,444 1,306,079
Short-term borrowings 103,256 93,811 95,356 94,871 96,781
Derivative liabilities 8,796 9,497 11,636 12,461 14,492
Accrued expenses and other liabilities (1) 70,615 78,993 72,799 59,629 57,189
Long-term debt (1) 225,020 239,256 239,222 256,786 255,077
Total liabilities (1) 1,743,678 1,728,263 1,724,843 1,749,191 1,729,618
Equity
Wells Fargo stockholders’ equity:
Preferred stock 25,358 25,576 25,785 25,501 24,551
Common stock 9,136 9,136 9,136 9,136 9,136
Additional paid-in capital 60,893 60,759 60,689 60,585 60,234
Retained earnings (1) 145,263 141,549 139,366 135,828 133,075
Cumulative other comprehensive income (loss) (1) (2,144 ) (1,622 ) (2,148 ) (3,153 ) (3,137 )
Treasury stock (29,892 ) (27,772 ) (25,675 ) (24,030 ) (22,713 )
Unearned ESOP shares (1,678 ) (1,904 ) (2,119 ) (2,546 ) (1,565 )
Total Wells Fargo stockholders’ equity (1) 206,936 205,722 205,034 201,321 199,581
Noncontrolling interests 1,143 895 915 989 916
Total equity (1) 208,079 206,617 205,949 202,310 200,497
Total liabilities and equity (1) $ 1,951,757 1,934,880 1,930,792 1,951,501 1,930,115

(1) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

Wells Fargo & Company and Subsidiaries

FIVE QUARTER INVESTMENT SECURITIES

(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ 6,319 6,350 17,896 24,625 25,819
Securities of U.S. states and political subdivisions 51,326 52,774 52,013 52,061 51,101
Mortgage-backed securities:
Federal agencies 160,219 150,181 135,938 156,966 161,230
Residential and commercial 9,173 11,046 12,772 14,233 16,318
Total mortgage-backed securities 169,392 161,227 148,710 171,199 177,548
Other debt securities 49,370 50,966 49,555 50,520 52,685
Total available-for-sale debt securities 276,407 271,317 268,174 298,405 307,153
Marketable equity securities 678 893 1,028 1,125 1,211
Total available-for-sale securities 277,085 272,210 269,202 299,530 308,364
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,720 44,712 44,704 44,697 44,690
Securities of U.S. states and political subdivisions 6,313 6,321 6,325 6,331 6,336
Federal agency and other mortgage-backed securities (1) 87,527 90,071 87,525 53,778 45,161
Other debt securities 775 1,319 1,838 3,224 3,396
Total held-to-maturity debt securities 139,335 142,423 140,392 108,030 99,583
Total investment securities $ 416,420 414,633 409,594 407,560 407,947

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

FIVE QUARTER LOANS

(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Commercial:
Commercial and industrial $ 333,125 327,944 331,113 329,252 330,840
Real estate mortgage 126,599 128,475 130,277 131,532 132,491
Real estate construction 24,279 24,520 25,337 25,064 23,916
Lease financing 19,385 19,211 19,174 19,156 19,289
Total commercial 503,388 500,150 505,901 505,004 506,536
Consumer:
Real estate 1-4 family first mortgage 284,054 280,173 276,566 274,633 275,579
Real estate 1-4 family junior lien mortgage 39,713 41,152 42,747 44,333 46,237
Credit card 37,976 36,249 35,305 34,742 36,700
Automobile 53,371 55,455 57,958 60,408 62,286
Other revolving credit and installment 38,268 38,694 38,946 39,285 40,266
Total consumer 453,382 451,723 451,522 453,401 461,068
Total loans (1) $ 956,770 951,873 957,423 958,405 967,604

(1) Includes $12.8 billion, $13.6 billion, $14.3 billion, $15.7 billion, and $16.7 billion of purchased credit-impaired (PCI) loans at December 31, September 30, June 30, and March 31, 2017 and December 31, 2016, respectively.

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

(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Commercial foreign loans:
Commercial and industrial $ 60,106 58,570 57,825 56,987 55,396
Real estate mortgage 8,033 8,032 8,359 8,206 8,541
Real estate construction 655 647 585 471 375
Lease financing 1,126 1,141 1,092 986 972
Total commercial foreign loans $ 69,920 68,390 67,861 66,650 65,284

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)

(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Nonaccrual loans:
Commercial:
Commercial and industrial $ 1,899 2,397 2,632 2,898 3,216
Real estate mortgage 628 593 630 672 685
Real estate construction 37 38 34 40 43
Lease financing 76 81 89 96 115
Total commercial 2,640 3,109 3,385 3,706 4,059
Consumer:
Real estate 1-4 family first mortgage 4,122 4,213 4,413 4,743 4,962
Real estate 1-4 family junior lien mortgage 1,086 1,101 1,095 1,153 1,206
Automobile 130 137 104 101 106
Other revolving credit and installment 58 59 59 56 51
Total consumer 5,396 5,510 5,671 6,053 6,325
Total nonaccrual loans (1)(2)(3) $ 8,036 8,619 9,056 9,759 10,384
As a percentage of total loans 0.84 % 0.91 0.95 1.02 1.07
Foreclosed assets:
Government insured/guaranteed $ 120 137 149 179 197
Non-government insured/guaranteed 522 569 632 726 781
Total foreclosed assets 642 706 781 905 978
Total nonperforming assets $ 8,678 9,325 9,837 10,664 11,362
As a percentage of total loans 0.91 % 0.98 1.03 1.11 1.17

(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. All remaining student loans guaranteed under the FFELP were sold as of March 31, 2017.

Wells Fargo & Company and Subsidiaries

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Total (excluding PCI)(1): $ 11,997 10,227 9,716 10,525 11,858
Less: FHA insured/guaranteed by the VA (2)(3) 10,934 9,266 8,873 9,585 10,883
Less: Student loans guaranteed under the FFELP (4) 3
Total, not government insured/guaranteed $ 1,063 961 843 940 972
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 26 27 42 88 28
Real estate mortgage 23 11 2 11 36
Real estate construction 10 3
Total commercial 49 38 54 102 64
Consumer:
Real estate 1-4 family first mortgage (3) 219 190 145 149 175
Real estate 1-4 family junior lien mortgage (3) 60 49 44 42 56
Credit card 492 475 411 453 452
Automobile 143 111 91 79 112
Other revolving credit and installment 100 98 98 115 113
Total consumer 1,014 923 789 838 908
Total, not government insured/guaranteed $ 1,063 961 843 940 972

(1) PCI loans totaled $1.4 billion, $1.4 billion, $1.5 billion, $1.8 billion and $2.0 billion, at December 31, September 30, June 30, and March 31, 2017 and December 31, 2016, 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. All remaining student loans guaranteed under the FFELP were sold as of March 31, 2017.

Wells Fargo & Company and Subsidiaries

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

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

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

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

  • Changes in interest rate indices for variable rate PCI loans - Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows;
  • Changes in prepayment assumptions - Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and
  • Changes in the expected principal and interest payments over the estimated life - Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.

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

(in millions) Quarter
ended
Dec 31,
2017
Year ended
Dec 31,
2017
2009-2016
Balance, beginning of period $ 9,243 11,216 10,447
Change in accretable yield due to acquisitions 2 159
Accretion into interest income (1) (335 ) (1,406 ) (15,577 )
Accretion into noninterest income due to sales (2) (334 ) (467 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (3) 2 642 10,955
Changes in expected cash flows that do not affect nonaccretable difference (4) (23 ) (1,233 ) 5,699
Balance, end of period $ 8,887 8,887 11,216

(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, 2017, our carrying value for PCI loans totaled $12.8 billion and the remainder of nonaccretable difference established in purchase accounting totaled $474 million. The nonaccretable difference absorbs losses of contractual amounts that exceed our carrying value for PCI loans.

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

Wells Fargo & Company and Subsidiaries

PICK-A-PAY PORTFOLIO (1)

December 31, 2017
PCI loans All other loans
(in millions) Adjusted

unpaid

principal

balance (2)

Current

LTV

ratio (3)

Carrying

value (4)

Ratio of

carrying

value to

current

value (5)

Carrying

value (4)

Ratio of

carrying

value to

current

value (5)

California $ 11,286 60 % $ 8,632 45 % $ 6,365 43 %
Florida 1,436 67 1,065 49 1,372 53
New Jersey 565 74 410 53 909 61
New York 434 67 348 50 458 57
Texas 130 48 98 36 545 37
Other states 2,818 67 2,086 49 3,750 54
Total Pick-a-Pay loans $ 16,669 62 $ 12,639 46 $ 13,399 48

(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 2017.

(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 Subsidiaries

CHANGES IN ALLOWANCE FOR CREDIT LOSSES

Quarter ended December 31, Year ended December 31,
(in millions) 2017 2016 2017 2016
Balance, beginning of period $ 12,109 12,694 12,540 12,512
Provision for credit losses 651 805 2,528 3,770
Interest income on certain impaired loans (1) (49 ) (52 ) (186 ) (205 )
Loan charge-offs:
Commercial:
Commercial and industrial (181 ) (309 ) (789 ) (1,419 )
Real estate mortgage (4 ) (14 ) (38 ) (27 )
Real estate construction (1 )
Lease financing (14 ) (16 ) (45 ) (41 )
Total commercial (199 ) (339 ) (872 ) (1,488 )
Consumer:
Real estate 1-4 family first mortgage (49 ) (86 ) (240 ) (452 )
Real estate 1-4 family junior lien mortgage (54 ) (110 ) (279 ) (495 )
Credit card (398 ) (329 ) (1,481 ) (1,259 )
Automobile (261 ) (243 ) (1,002 ) (845 )
Other revolving credit and installment (169 ) (200 ) (713 ) (708 )
Total consumer (931 ) (968 ) (3,715 ) (3,759 )
Total loan charge-offs (1,130 ) (1,307 ) (4,587 ) (5,247 )
Loan recoveries:
Commercial:
Commercial and industrial 63 53 297 263
Real estate mortgage 14 26 82 116
Real estate construction 3 8 30 38
Lease financing 4 1 17 11
Total commercial 84 88 426 428
Consumer:
Real estate 1-4 family first mortgage 72 89 288 373
Real estate 1-4 family junior lien mortgage 61 66 266 266
Credit card 62 54 239 207
Automobile 73 77 319 325
Other revolving credit and installment 27 28 121 128
Total consumer 295 314 1,233 1,299
Total loan recoveries 379 402 1,659 1,727
Net loan charge-offs (751 ) (905 ) (2,928 ) (3,520 )
Other (2 ) 6 (17 )
Balance, end of period $ 11,960 12,540 11,960 12,540
Components:
Allowance for loan losses $ 11,004 11,419 11,004 11,419
Allowance for unfunded credit commitments 956 1,121 956 1,121
Allowance for credit losses $ 11,960 12,540 11,960 12,540
Net loan charge-offs (annualized) as a percentage of average total loans 0.31 % 0.37 0.31 0.37
Allowance for loan losses as a percentage of total loans 1.15 1.18 1.15 1.18
Allowance for credit losses as a percentage of total loans 1.25 1.30 1.25 1.30

(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 Subsidiaries

FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES

Quarter ended
(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Balance, beginning of quarter $ 12,109 12,146 12,287 12,540 12,694
Provision for credit losses 651 717 555 605 805
Interest income on certain impaired loans (1) (49 ) (43 ) (46 ) (48 ) (52 )
Loan charge-offs:
Commercial:
Commercial and industrial (181 ) (194 ) (161 ) (253 ) (309 )
Real estate mortgage (4 ) (21 ) (8 ) (5 ) (14 )
Real estate construction
Lease financing (14 ) (11 ) (13 ) (7 ) (16 )
Total commercial (199 ) (226 ) (182 ) (265 ) (339 )
Consumer:
Real estate 1-4 family first mortgage (49 ) (67 ) (55 ) (69 ) (86 )
Real estate 1-4 family junior lien mortgage (54 ) (70 ) (62 ) (93 ) (110 )
Credit card (398 ) (337 ) (379 ) (367 ) (329 )
Automobile (261 ) (274 ) (212 ) (255 ) (243 )
Other revolving credit and installment (169 ) (170 ) (185 ) (189 ) (200 )
Total consumer (931 ) (918 ) (893 ) (973 ) (968 )
Total loan charge-offs (1,130 ) (1,144 ) (1,075 ) (1,238 ) (1,307 )
Loan recoveries:
Commercial:
Commercial and industrial 63 69 83 82 53
Real estate mortgage 14 24 14 30 26
Real estate construction 3 15 4 8 8
Lease financing 4 5 6 2 1
Total commercial 84 113 107 122 88
Consumer:
Real estate 1-4 family first mortgage 72 83 71 62 89
Real estate 1-4 family junior lien mortgage 61 69 66 70 66
Credit card 62 60 59 58 54
Automobile 73 72 86 88 77
Other revolving credit and installment 27 30 31 33 28
Total consumer 295 314 313 311 314
Total loan recoveries 379 427 420 433 402
Net loan charge-offs (751 ) (717 ) (655 ) (805 ) (905 )
Other 6 5 (5 ) (2 )
Balance, end of quarter $ 11,960 12,109 12,146 12,287 12,540
Components:
Allowance for loan losses $ 11,004 11,078 11,073 11,168 11,419
Allowance for unfunded credit commitments 956 1,031 1,073 1,119 1,121
Allowance for credit losses $ 11,960 12,109 12,146 12,287 12,540
Net loan charge-offs (annualized) as a percentage of average total loans 0.31 % 0.30 0.27 0.34 0.37
Allowance for loan losses as a percentage of:
Total loans 1.15 1.16 1.16 1.17 1.18
Nonaccrual loans 137 129 122 114 110
Nonaccrual loans and other nonperforming assets 127 119 113 105 101
Allowance for credit losses as a percentage of:
Total loans 1.25 1.27 1.27 1.28 1.30
Nonaccrual loans 149 141 134 126 121
Nonaccrual loans and other nonperforming assets 138 130 123 115 110

(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 Subsidiaries
TANGIBLE COMMON EQUITY (1)

(in millions, except ratios) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Tangible book value per common share (1):
Total equity (2) $ 208,079 206,617 205,949 202,310 200,497
Adjustments:
Preferred stock (25,358 ) (25,576 ) (25,785 ) (25,501 ) (24,551 )
Additional paid-in capital on ESOP

preferred stock

(122 ) (130 ) (136 ) (157 ) (126 )
Unearned ESOP shares 1,678 1,904 2,119 2,546 1,565
Noncontrolling interests (1,143 ) (895 ) (915 ) (989 ) (916 )
Total common stockholders' equity (2) (A) 183,134 181,920 181,232 178,209 176,469
Adjustments:
Goodwill (26,587 ) (26,581 ) (26,573 ) (26,666 ) (26,693 )
Certain identifiable intangible assets

(other than MSRs)

(1,624 ) (1,913 ) (2,147 ) (2,449 ) (2,723 )
Other assets (3) (2,155 ) (2,282 ) (2,268 ) (2,121 ) (2,088 )
Applicable deferred taxes (4) 962 1,550 1,624 1,698 1,772
Tangible common equity (2) (B) $ 153,730 152,694 151,868 148,671 146,737
Common shares outstanding (C) 4,891.6 4,927.9 4,966.8 4,996.7 5,016.1
Book value per common share (2) (A)/(C) $ 37.44 36.92 36.49 35.67 35.18
Tangible book value per common share (2) (B)/(C) 31.43 30.99 30.58 29.75 29.25
Quarter ended Year ended
(in millions, except ratios) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Dec 31,
2017
Dec 31,
2016
Return on average tangible common equity (1):
Net income applicable to common stock (2) (A) $ 5,740 4,131 5,450 5,233 4,872 20,554 20,373
Average total equity (2) 207,413 207,723 205,755 201,559 201,247 205,654 200,690
Adjustments:
Preferred stock (25,569 ) (25,780 ) (25,849 ) (25,163 ) (24,579 ) (25,592 ) (24,363 )
Additional paid-in capital on ESOP preferred stock (129 ) (136 ) (144 ) (146 ) (128 ) (139 ) (161 )
Unearned ESOP shares 1,896 2,114 2,366 2,198 1,596 2,143 2,011
Noncontrolling interests (998 ) (926 ) (910 ) (957 ) (928 ) (948 ) (936 )
Average common stockholders’ equity (2) (B) 182,613 182,995 181,218 177,491 177,208 181,118 177,241
Adjustments:
Goodwill (26,579 ) (26,600 ) (26,664 ) (26,673 ) (26,713 ) (26,629 ) (26,700 )
Certain identifiable intangible assets (other than MSRs) (1,767 ) (2,056 ) (2,303 ) (2,588 ) (2,871 ) (2,176 ) (3,254 )
Other assets (3) (2,245 ) (2,231 ) (2,160 ) (2,095 ) (2,175 ) (2,184 ) (2,117 )
Applicable deferred taxes (4) 1,332 1,579 1,648 1,722 1,785 1,570 1,897
Average tangible common equity (2) (C) $ 153,354 153,687 151,739 147,857 147,234 151,699 147,067
Return on average common stockholders' equity (ROE) (annualized) (2) (A)/(B) 12.47 % 8.96 12.06 11.96 10.94 11.35 11.49
Return on average tangible common equity (ROTCE) (annualized) (2) (A)/(C) 14.85 10.66 14.41 14.35 13.16 13.55 13.85

(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) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

(3) Represents goodwill and other intangibles on nonmarketable equity investments, which are included in other assets.

(4) 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 Subsidiaries

COMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1)

Estimated
(in billions, except ratio) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Total equity (2) $ 208.1 206.6 205.9 202.3 200.5
Adjustments:
Preferred stock (25.4 ) (25.6 ) (25.8 ) (25.5 ) (24.6 )
Additional paid-in capital on ESOP

preferred stock

(0.1 ) (0.1 ) (0.1 ) (0.2 ) (0.1 )
Unearned ESOP shares 1.7 1.9 2.1 2.5 1.6
Noncontrolling interests (1.1 ) (0.9 ) (0.9 ) (1.0 ) (0.9 )
Total common stockholders' equity (2) 183.2 181.9 181.2 178.1 176.5
Adjustments:
Goodwill (26.6 ) (26.6 ) (26.6 ) (26.7 ) (26.7 )
Certain identifiable intangible assets (other than MSRs) (1.6 ) (1.9 ) (2.1 ) (2.4 ) (2.7 )
Other assets (3) (2.2 ) (2.3 ) (2.2 ) (2.1 ) (2.1 )
Applicable deferred taxes (4) 1.0 1.6 1.6 1.7 1.8
Investment in certain subsidiaries and other 0.2 (0.1 ) (0.2 ) (0.1 ) (0.4 )
Common Equity Tier 1 (Fully Phased-In) under Basel III (A) 154.0 152.6 151.7 148.5 146.4
Total risk-weighted assets (RWAs) anticipated under Basel III (5)(6) (B) $ 1,292.3 1,292.8 1,310.5 1,324.5 1,358.9
Common Equity Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In) (6) (A)/(B) 11.9 % 11.8 11.6 11.2 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) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

(3) Represents goodwill and other intangibles on nonmarketable equity investments, which are included in other assets.

(4) 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.

(5) 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, 2017, 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, 2017, and December 31, 2016, was calculated under the Basel III Standardized Approach RWAs.

(6) The Company’s December 31, 2017, RWAs and capital ratio are preliminary estimates.

Wells Fargo & Company and Subsidiaries

OPERATING SEGMENT RESULTS (1)

(income/expense in millions,

average balances in billions)

Community

Banking

Wholesale

Banking

Wealth and

Investment

Management

Other (2) Consolidated

Company

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Quarter ended December 31,
Net interest income (3) $ 7,537 7,556 4,211 4,323 1,133 1,061 (568 ) (538 ) 12,313 12,402
Provision (reversal of provision) for credit losses 636 631 20 168 (7 ) 3 2 3 651 805
Noninterest income 4,491 4,105 2,883 2,830 3,172 3,013 (809 ) (768 ) 9,737 9,180
Noninterest expense 10,200 6,985 4,204 4,002 3,244 3,042 (848 ) (814 ) 16,800 13,215
Income (loss) before income tax expense (benefit) 1,192 4,045 2,870 2,983 1,068 1,029 (531 ) (495 ) 4,599 7,562
Income tax expense (benefit) (2,560 ) 1,272 716 795 404 380 (202 ) (189 ) (1,642 ) 2,258
Net income (loss) before noncontrolling interests 3,752 2,773 2,154 2,188 664 649 (329 ) (306 ) 6,241 5,304
Less: Net income (loss) from noncontrolling interests 79 40 6 (6 ) 5 (4 ) 90 30
Net income (loss) $ 3,673 2,733 2,148 2,194 659 653 (329 ) (306 ) 6,151 5,274
Average loans $ 473.5 488.1 463.5 461.5 72.8 70.0 (58.0 ) (55.5 ) 951.8 964.1
Average assets 974.0 1,000.7 837.3 811.9 209.3 220.4 (85.3 ) (88.7 ) 1,935.3 1,944.3
Average deposits 738.1 709.8 465.7 459.2 184.2 194.9 (76.4 ) (79.7 ) 1,311.6 1,284.2
Year ended December 31,
Net interest income (3) $ 30,365 29,833 16,967 16,052 4,493 3,913 (2,268 ) (2,044 ) 49,557 47,754
Provision (reversal of provision) for credit losses 2,555 2,691 (19 ) 1,073 (5 ) (5 ) (3 ) 11 2,528 3,770
Noninterest income 18,342 19,033 11,206 12,490 12,433 12,033 (3,149 ) (3,043 ) 38,832 40,513
Noninterest expense 32,478 27,422 16,755 16,126 12,631 12,059 (3,380 ) (3,230 ) 58,484 52,377
Income (loss) before income tax expense (benefit) 13,674 18,753 11,437 11,343 4,300 3,892 (2,034 ) (1,868 ) 27,377 32,120
Income tax expense (benefit) 1,327 6,182 2,753 3,136 1,610 1,467 (773 ) (710 ) 4,917 10,075
Net income (loss) before noncontrolling interests 12,347 12,571 8,684 8,207 2,690 2,425 (1,261 ) (1,158 ) 22,460 22,045
Less: Net income (loss) from noncontrolling interests 276 136 (15 ) (28 ) 16 (1 ) 277 107
Net income (loss) $ 12,071 12,435 8,699 8,235 2,674 2,426 (1,261 ) (1,158 ) 22,183 21,938
Average loans $ 476.7 486.9 464.6 449.3 71.9 67.3 (57.1 ) (53.5 ) 956.1 950.0
Average assets 984.2 977.3 821.8 782.0 214.4 211.5 (87.4 ) (85.4 ) 1,933.0 1,885.4
Average deposits 729.3 701.2 464.5 438.6 189.0 187.8 (78.2 ) (77.0 ) 1,304.6 1,250.6

(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.

(2) Includes the elimination of certain items that are included in more than one business segment, most 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 Subsidiaries

FIVE QUARTER OPERATING SEGMENT RESULTS (1)

Quarter ended
(income/expense in millions, average balances in billions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
COMMUNITY BANKING
Net interest income (2)(4) $ 7,537 7,626 7,543 7,659 7,556
Provision for credit losses 636 650 623 646 631
Noninterest income (4) 4,491 4,358 4,810 4,683 4,105
Noninterest expense 10,200 7,834 7,223 7,221 6,985
Income before income tax expense (4) 1,192 3,500 4,507 4,475 4,045
Income tax expense (benefit) (4) (2,560 ) 1,263 1,423 1,201 1,272
Net income before noncontrolling interests (4) 3,752 2,237 3,084 3,274 2,773
Less: Net income from noncontrolling interests 79 61 46 90 40
Segment net income (4) $ 3,673 2,176 3,038 3,184 2,733
Average loans $ 473.5 473.5 477.2 482.7 488.1
Average assets 974.0 988.9 983.4 990.7 1,000.7
Average deposits 738.1 734.5 727.2 717.2 709.8
WHOLESALE BANKING
Net interest income (2)(4) $ 4,211 4,345 4,271 4,140 4,323
Provision (reversal of provision) for credit losses 20 69 (65 ) (43 ) 168
Noninterest income (4) 2,883 2,739 2,682 2,902 2,830
Noninterest expense 4,204 4,248 4,078 4,225 4,002
Income before income tax expense (4) 2,870 2,767 2,940 2,860 2,983
Income tax expense (4) 716 729 560 748 795
Net income before noncontrolling interests (4) 2,154 2,038 2,380 2,112 2,188
Less: Net loss from noncontrolling interests 6 (7 ) (9 ) (5 ) (6 )
Segment net income (4) $ 2,148 2,045 2,389 2,117 2,194
Average loans $ 463.5 463.8 464.9 466.3 461.5
Average assets 837.3 824.3 817.3 807.8 811.9
Average deposits 465.7 463.4 463.0 466.0 459.2
WEALTH AND INVESTMENT MANAGEMENT
Net interest income (2) $ 1,133 1,159 1,127 1,074 1,061
Provision (reversal of provision) for credit losses (7 ) (1 ) 7 (4 ) 3
Noninterest income 3,172 3,087 3,055 3,119 3,013
Noninterest expense 3,244 3,106 3,075 3,206 3,042
Income before income tax expense 1,068 1,141 1,100 991 1,029
Income tax expense 404 427 417 362 380
Net income before noncontrolling interests 664 714 683 629 649
Less: Net income (loss) from noncontrolling interests 5 4 1 6 (4 )
Segment net income $ 659 710 682 623 653
Average loans $ 72.8 72.4 71.7 70.7 70.0
Average assets 209.3 213.4 213.1 221.9 220.4
Average deposits 184.2 188.1 188.2 195.6 194.9
OTHER (3)
Net interest income (2) $ (568 ) (681 ) (470 ) (549 ) (538 )
Provision (reversal of provision) for credit losses 2 (1 ) (10 ) 6 3
Noninterest income (809 ) (784 ) (783 ) (773 ) (768 )
Noninterest expense (848 ) (837 ) (835 ) (860 ) (814 )
Loss before income tax benefit (531 ) (627 ) (408 ) (468 ) (495 )
Income tax benefit (202 ) (238 ) (155 ) (178 ) (189 )
Net loss before noncontrolling interests (329 ) (389 ) (253 ) (290 ) (306 )
Less: Net income from noncontrolling interests
Other net loss $ (329 ) (389 ) (253 ) (290 ) (306 )
Average loans $ (58.0 ) (57.4 ) (56.9 ) (56.1 ) (55.5 )
Average assets (85.3 ) (88.1 ) (86.8 ) (89.4 ) (88.7 )
Average deposits (76.4 ) (79.6 ) (77.2 ) (79.6 ) (79.7 )
CONSOLIDATED COMPANY
Net interest income (2)(4) $ 12,313 12,449 12,471 12,324 12,402
Provision for credit losses 651 717 555 605 805
Noninterest income (4) 9,737 9,400 9,764 9,931 9,180
Noninterest expense 16,800 14,351 13,541 13,792 13,215
Income before income tax expense (4) 4,599 6,781 8,139 7,858 7,562
Income tax expense (benefit) (4) (1,642 ) 2,181 2,245 2,133 2,258
Net income before noncontrolling interests (4) 6,241 4,600 5,894 5,725 5,304
Less: Net income from noncontrolling interests 90 58 38 91 30
Wells Fargo net income (4) $ 6,151 4,542 5,856 5,634 5,274
Average loans $ 951.8 952.3 956.9 963.6 964.1
Average assets (4) 1,935.3 1,938.5 1,927.0 1,931.0 1,944.3
Average deposits 1,311.6 1,306.4 1,301.2 1,299.2 1,284.2

(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment.

(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, most of which represents products and services for Wealth and Investment Management customers served through Community Banking distribution channels.

(4) Financial information for prior quarters in 2017 has been revised to reflect the impact of the adoption in fourth quarter 2017 of Accounting Standards Update (ASU) 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. See footnote (1) to the Summary Financial Data table on page 16 for more information.

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
Quarter ended
(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
MSRs measured using the fair value method:
Fair value, beginning of quarter $ 13,338 12,789 13,208 12,959 10,415
Purchases 541
Servicing from securitizations or asset transfers (1) 639 605 436 583 752
Sales and other (2) (32 ) 64 (8 ) (47 ) (47 )
Net additions 607 1,210 428 536 705
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (3) 221 (171 ) (305 ) 152 2,367
Servicing and foreclosure costs (4) 23 60 (14 ) 27 93
Discount rates (5) 13
Prepayment estimates and other (6) (55 ) (31 ) (41 ) (5 ) (106 )
Net changes in valuation model inputs or assumptions 202 (142 ) (360 ) 174 2,354
Changes due to collection/realization of expected cash flows over time (522 ) (519 ) (487 ) (461 ) (515 )
Total changes in fair value (320 ) (661 ) (847 ) (287 ) 1,839
Fair value, end of quarter $ 13,625 13,338 12,789 13,208 12,959
(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 or portfolios with servicing liabilities.
(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) Reflects discount rate assumption change, excluding portion attributable to changes in mortgage interest rates.
(6) 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.
Quarter ended
(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Amortized MSRs:
Balance, beginning of quarter $ 1,406 1,399 1,402 1,406 1,373
Purchases 40 31 26 18 34
Servicing from securitizations or asset transfers 43 41 37 45 66
Amortization (65 ) (65 ) (66 ) (67 ) (67 )
Balance, end of quarter $ 1,424 1,406 1,399 1,402 1,406
Fair value of amortized MSRs:
Beginning of quarter $ 1,990 1,989 2,051 1,956 1,627
End of quarter 2,025 1,990 1,989 2,051 1,956
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
Quarter ended
(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Servicing income, net:
Servicing fees (1) $ 833 795 882 882 738
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2)

(A)

202

(142 ) (360 ) 174 2,354
Changes due to collection/realization of expected cash flows over time (522 ) (519 ) (487 ) (461 ) (515 )
Total changes in fair value of MSRs carried at fair value (320 ) (661 ) (847 ) (287 ) 1,839
Amortization (65 ) (65 ) (66 ) (67 ) (67 )
Net derivative gains (losses) from economic hedges (3)

(B)

(186

)

240 431 (72 ) (2,314 )
Total servicing income, net $ 262 309 400 456 196
Market-related valuation changes to MSRs, net of hedge results (2)(3)

(A)+(B)

$

16

98 71 102 40
(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 results from economic hedges used to hedge the risk of changes in fair value of MSRs.
(in billions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Managed servicing portfolio (1):
Residential mortgage servicing:
Serviced for others $ 1,209 1,223 1,189 1,204 1,205
Owned loans serviced 342 340 343 335 347
Subserviced for others 3 3 4 4 8
Total residential servicing 1,554 1,566 1,536 1,543 1,560
Commercial mortgage servicing:
Serviced for others 495 480 475 474 479
Owned loans serviced 127 128 130 132 132
Subserviced for others 9 8 8 7 8
Total commercial servicing 631 616 613 613 619
Total managed servicing portfolio $ 2,185 2,182 2,149 2,156 2,179
Total serviced for others $ 1,704 1,703 1,664 1,678 1,684
Ratio of MSRs to related loans serviced for others 0.88 % 0.87 0.85 0.87 0.85
Weighted-average note rate (mortgage loans serviced for others) 4.23 4.23 4.23 4.23 4.26
(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 Subsidiaries

SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA

Quarter ended
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Net gains on mortgage loan origination/sales activities (in millions):
Residential (A) $ 504 546 521 569 939
Commercial 95 81 81 101 90
Residential pipeline and unsold/repurchased loan management (1) 67 110 146 102 192
Total $ 666 737 748 772 1,221
Application data (in billions):
Wells Fargo first mortgage quarterly applications $ 63 73 83 59 75
Refinances as a percentage of applications 38 % 37 32 36 48
Wells Fargo first mortgage unclosed pipeline, at quarter end $ 23 29 34 28 30
Residential real estate originations:
Purchases as a percentage of originations 64 % 72 75 61 50
Refinances as a percentage of originations 36 28 25 39 50
Total 100 % 100 100 100 100
Wells Fargo first mortgage loans (in billions):
Retail $ 23 26 25 21 35
Correspondent 30 32 31 22 36
Other (2) 1 1 1
Total quarter-to-date $ 53 59 56 44 72
Held-for-sale (B) $ 40 44 42 34 56
Held-for-investment 13 15 14 10 16
Total quarter-to-date $ 53 59 56 44 72
Total year-to-date $ 212 159 100 44 249
Production margin on residential held-for-sale mortgage originations (A)/(B) 1.25 % 1.24 1.24 1.68 1.68

(1) Predominantly 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
(in millions) Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Balance, beginning of period $ 179 178 222 229 239
Assumed with MSR purchases (1) 10
Provision for repurchase losses:
Loan sales 4 6 6 8 10
Change in estimate (2) 2 (12 ) (45 ) (8 ) (7 )
Net additions (reductions) to provision 6 (6 ) (39 ) 3
Losses (4 ) (3 ) (5 ) (7 ) (13 )
Balance, end of period $ 181 179 178 222 229

(1) Represents repurchase liability associated with portfolio of loans underlying mortgage servicing rights acquired during the period.

(2) 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/20180112005127/en/

Media
Ancel Martinez, 415-222-3858
or
Investors
John M. Campbell, 415-396-0523

Source: Wells Fargo & Company