Form 8-K WELLS FARGO & COMPANY/MN For: Jan 14
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 14, 2015
WELLS FARGO & COMPANY
(Exact Name of Registrant as Specified in Charter)
Delaware | 001-02979 | No. 41-0449260 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
420 Montgomery Street, San Francisco, California 94163
(Address of Principal Executive Offices) (Zip Code)
1-866-249-3302
(Registrant’s telephone number, including area code)
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On January 14, 2015, Wells Fargo & Company (the “Company”) issued a press release regarding its results of operations and financial condition for the quarter and year ended December 31, 2014 (the “Press Release”), and posted on its website its 4Q14 Quarterly Supplement (the “Quarterly Supplement”), which contains certain additional historical and forward-looking information relating to the Company. The Press Release is included as Exhibit 99.1 to this report and is incorporated by reference into this Item 2.02. The information included in Exhibit 99.1 is considered to be “filed” for purposes of Section 18 under the Securities Exchange Act of 1934. The Quarterly Supplement is included as Exhibit 99.2 to this report and is incorporated by reference into this Item 2.02. Exhibit 99.2 shall not be considered “filed” for purposes of Section 18 under the Securities Exchange Act of 1934 and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933.
On January 14, 2015, the Company intends to host a live conference call that will also be available by webcast to discuss the Press Release, the Quarterly Supplement, and other matters relating to the Company.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits | |
99.1 | The Press Release, deemed “filed” under the Securities Exchange Act of 1934 |
99.2 | The Quarterly Supplement, deemed “furnished” under the Securities Exchange Act of 1934 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: | January 14, 2015 | WELLS FARGO & COMPANY | |
By: | /s/ RICHARD D. LEVY | ||
Richard D. Levy | |||
Executive Vice President and Controller | |||
(Principal Accounting Officer) | |||
Exhibit 99.1
 | |
 | |
Media | Investors | |||||
Mary Eshet | Jim Rowe | |||||
704-383-7777 | 415-396-8216 | |||||
Wednesday, January 14, 2015
WELLS FARGO REPORTS RECORD FULL YEAR NET INCOME
2014 Net Income of $23.1 Billion, Up 5% from 2013; Diluted EPS of $4.10
Q4 Net Income of $5.7 Billion, Up 2% YoY; Diluted EPS of $1.02
Continued strong financial results:
◦ | Full year 2014: |
▪ | Net income of $23.1 billion, up 5 percent from 2013 |
▪ | Diluted earnings per share (EPS) of $4.10, up 5 percent |
▪ | Revenue of $84.3 billion, up 1 percent |
▪ | Pre-tax pre-provision profit (PTPP)1 of $35.3 billion, up 1 percent |
▪ | Return on assets (ROA) of 1.45 percent and return on equity (ROE) of 13.41 percent |
▪ | Returned $12.5 billion to shareholders through dividends and net share repurchases, up from $7.2 billion in 2013 |
◦ | Fourth quarter 2014: |
▪ | Net income of $5.7 billion, up 2 percent from fourth quarter 2013 |
▪ | Diluted EPS of $1.02, up 2 percent |
▪ | Revenue of $21.4 billion, up 4 percent |
▪ | PTPP1 of $8.8 billion, up 3 percent |
▪ | ROA of 1.36 percent and ROE of 12.84 percent |
▪ | Strong loan and deposit growth: |
◦ | Total average loans of $849.4 billion, up $36.1 billion, or 4 percent, from fourth quarter 2013 |
▪ | Quarter-end loans of $862.6 billion, up $40.3 billion, or 5 percent |
▪ | Quarter-end core loans of $801.8 billion, up $60.3 billion, or 8 percent2 |
◦ | Total average deposits of $1.1 trillion, up $89.4 billion, or 8 percent |
▪ | Continued strength in credit quality: |
◦ | Net charge-offs of $735 million, down $228 million from fourth quarter 2013 |
▪ | Net charge-off rate of 0.34 percent (annualized), down from 0.47 percent |
◦ | Nonaccrual loans down $2.8 billion, or 18 percent |
◦ | $250 million reserve release3 |
Endnotes can be found on page 12
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▪Maintained strong capital levels4 and increased share repurchases:
◦ | Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) of 10.44 percent |
◦ | Period-end common shares outstanding down 44.7 million from third quarter 2014 |
Selected Financial Information
Quarter ended | Year ended Dec. 31, | ||||||||||||||
Dec 31, 2014 | Sep 30, 2014 | Dec 31, 2013 | 2014 | 2013 | |||||||||||
Earnings | |||||||||||||||
Diluted earnings per common share | $ | 1.02 | 1.02 | 1.00 | 4.10 | 3.89 | |||||||||
Wells Fargo net income (in billions) | 5.71 | 5.73 | 5.61 | 23.06 | 21.88 | ||||||||||
Return on assets (ROA) | 1.36 | % | 1.40 | 1.48 | 1.45 | 1.51 | |||||||||
Return on equity (ROE) | 12.84 | 13.10 | 13.81 | 13.41 | 13.87 | ||||||||||
Asset Quality | |||||||||||||||
Net charge-offs (annualized) as a % of avg. total loans | 0.34 | % | 0.32 | 0.47 | 0.35 | 0.56 | |||||||||
Allowance for credit losses as a % of total loans | 1.53 | 1.61 | 1.82 | 1.53 | 1.82 | ||||||||||
Allowance for credit losses as a % of annualized net charge-offs | 452 | 509 | 392 | 447 | 332 | ||||||||||
Other | |||||||||||||||
Revenue (in billions) | $ | 21.4 | 21.2 | 20.7 | 84.3 | 83.8 | |||||||||
Efficiency ratio | 59.0 | % | 57.7 | 58.5 | 58.1 | 58.3 | |||||||||
Average loans (in billions) | $ | 849.4 | 833.2 | 813.3 | 834.4 | 802.7 | |||||||||
Average core deposits (in billions) | 1,036.0 | 1,012.2 | 965.8 | 1,003.6 | 942.1 | ||||||||||
Net interest margin | 3.04 | % | 3.06 | 3.27 | 3.11 | 3.40 | |||||||||
SAN FRANCISCO – Wells Fargo & Company (NYSE: WFC) reported diluted earnings per common share of $4.10 for 2014, up 5 percent from $3.89 in 2013. Full year net income was $23.1 billion, compared with $21.9 billion in 2013. For fourth quarter 2014, net income was $5.7 billion, or $1.02 per share, compared with $5.6 billion, or $1.00 per share, for fourth quarter 2013.
"Wells Fargo had another strong year in 2014, with continued strength in the fundamental drivers of long-term performance: growing customers, loans, deposits and capital," said Chairman and CEO John Stumpf. "As a result of this performance, we were able to return more capital to our shareholders during the year. Our success is the result of our 265,000 team members remaining focused on meeting the financial needs of our customers in the communities we serve. As the U.S. economy continues to build momentum, I'm optimistic that our diversified business model will continue to benefit all of our stakeholders in 2015.”
Chief Financial Officer John Shrewsberry said, “Our performance in the fourth quarter was a great example of the benefit of our diversified business model and reflected a continuation of the solid results we generated all year. Compared with the prior quarter, we increased deposits and grew commercial and consumer loans while maintaining our risk and pricing discipline. Revenue increased as net interest income benefited from loan growth and the prudent deployment of our liquidity. Fee income remained strong and diversified. Credit quality continued to improve. We also maintained strong capital and liquidity, and returned more capital to shareholders in the quarter."
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Revenue
Revenue was $21.4 billion in the fourth quarter, up from $21.2 billion in third quarter 2014, driven by an increase in net interest income. Revenue sources remained balanced between spread and fee income and the sources of fee income were broad-based.
Net Interest Income
Net interest income in fourth quarter 2014 increased $239 million on a linked-quarter basis to $11.2 billion. The increase resulted primarily from loan growth, an increase in investment securities, higher trading assets and slightly higher income from variable sources, including purchased credit-impaired (PCI) loan resolutions and periodic dividends. This was partially offset by lower income from a reduction in loans held-for-sale and mortgages held-for-sale.
Net interest margin was 3.04 percent, down 2 basis points from third quarter 2014, predominantly due to an increase in the average balance of cash and short-term investments driven by strong customer deposit growth and higher average balances in liquidity-related funding. While the growth in these two categories had minimal impact to net interest income, the increased deposit balances diluted net interest margin by approximately 4 basis points and the liquidity actions diluted the margin by 2 basis points. The net impact of all other balance sheet growth and repricing resulted in 3 basis points of benefit linked quarter due to a larger loan and investment portfolio. Higher interest income from variable sources benefited net interest margin by 1 basis point.
Noninterest Income
Noninterest income in the fourth quarter was $10.3 billion. On a linked-quarter basis, noninterest income was stable as increases in trust and investment fees, card fees, and other income, which included a $217 million gain related to the sale of an $8.3 billion portfolio of government guaranteed student loans, were offset by lower deposit service charges, mortgage banking fees, and market sensitive revenue5, primarily equity gains.
Trust and investment fees were $3.7 billion, up $151 million from third quarter on higher investment banking revenue, including higher loan syndication fees, high-yield debt origination fees and equity underwriting.
Mortgage banking noninterest income was $1.5 billion, down $118 million from third quarter, primarily driven by a decrease in mortgage originations in the fourth quarter. Residential mortgage originations were $44 billion in the fourth quarter, down $4 billion linked quarter, due to the seasonal slowdown in the purchase market. The gain on sale margin was 1.80 percent, compared with 1.82 percent in third quarter.
Noninterest Expense
Noninterest expense of $12.6 billion increased $399 million from third quarter 2014. This increase reflected higher personnel costs, including expenses related to fourth quarter revenue, continued investment in our risk infrastructure and some typically elevated fourth quarter costs. Compared with third quarter, deferred compensation expense was $128 million higher (offset in revenue) due to changes in market levels. Additionally, revenue-driven incentive compensation increased $77 million from the prior quarter. Fourth quarter
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expenses included typically higher outside professional services, which increased $116 million, equipment (up $124 million) and advertising and promotion (up $42 million). Operating losses were $108 million lower in fourth quarter, driven by lower litigation accruals in the quarter. The efficiency ratio for full year 2014 was 58.1 percent, and the Company expects to operate within its targeted efficiency ratio range of 55 to 59 percent for full year 2015.
Income Taxes
Our effective tax rate was 30.6 percent for fourth quarter 2014, compared with 31.6 percent for third quarter 2014. The lower effective tax rate in fourth quarter 2014 was due primarily to the passage of federal tax legislation renewing certain tax benefits and from the resolution of prior period matters with federal and state taxing authorities.
Loans
Total loans were $862.6 billion at December 31, 2014, up $23.7 billion from September 30, 2014, reflecting broad-based growth in our portfolios. Core loan growth was $26.0 billion, and our non-strategic/liquidating portfolios declined $2.3 billion in the quarter. Loan growth included the acquisition of the Dillard's credit card portfolio as well as $6.5 billion from the financing related to the sale of government guaranteed student loans.
December 31, 2014 | September 30, 2014 | |||||||||||||||||
(in millions) | Core | Non-strategic and liquidating (a) | Total | Core | Non-strategic and liquidating | Total | ||||||||||||
Commercial | $ | 413,701 | 1,125 | 414,826 | 394,894 | 1,465 | 396,359 | |||||||||||
Consumer | 388,062 | 59,663 | 447,725 | 380,897 | 61,627 | 442,524 | ||||||||||||
Total loans | $ | 801,763 | 60,788 | 862,551 | 775,791 | 63,092 | 838,883 | |||||||||||
Change from prior quarter: | $ | 25,972 | (2,304 | ) | 23,668 | 12,193 | (2,252 | ) | 9,941 | |||||||||
(a) | See table on page 35 for additional information on non-strategic/liquidating loan portfolios. Management believes that the above information provides useful disclosure regarding the Company’s ongoing loan portfolios. |
Investment Securities
Investment securities were $312.9 billion at December 31, 2014, up $23.9 billion from third quarter. Purchases of approximately $35 billion, primarily U.S. Treasury and federal agency securities, were partially offset by run-off and maturities.
The Company had net unrealized available-for-sale securities gains of $7.8 billion at December 31, 2014, up from $6.6 billion at September 30, 2014, primarily driven by marketable equity securities.
Deposits
Average total deposits for fourth quarter 2014 were $1.1 trillion, up 8 percent from a year ago and up 8 percent (annualized) from third quarter 2014, driven by both commercial and consumer growth. The average deposit cost for fourth quarter 2014 was 9 basis points, an improvement of 1 basis point from the prior quarter and 2 basis points from a year ago. Average core deposits were $1.0 trillion, up 7 percent from a year ago and up 9 percent (annualized) from third quarter 2014. Average mortgage escrow deposits were $29.2 billion, compared with $28.2 billion a year ago and $30.7 billion in third quarter 2014.
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Capital
Capital levels continued to be strong in the fourth quarter, with Common Equity Tier 1 of $137.2 billion under Basel III (General Approach), or 11.04 percent of risk-weighted assets. The Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) was 10.44 percent4. In fourth quarter 2014, the Company purchased 61.6 million shares of its common stock and entered into a $750 million forward repurchase transaction for an additional estimated 14.3 million shares which is expected to settle in first quarter 2015. The Company also paid a quarterly common stock dividend of $0.35 per share, up from $0.30 per share a year ago.
Dec 31, 2014 (a) | Sep 30, 2014 | Dec 31, 2013 | ||||
Common Equity Tier 1 (b) | 11.04 | % | 11.11 | 10.82 | ||
Tier 1 capital | 12.45 | 12.55 | 12.33 | |||
Tier 1 leverage | 9.45 | 9.64 | 9.60 | |||
(a) | December 31, 2014, ratios are preliminary. |
(b) | See tables on page 38 for more information on Common Equity Tier 1. |
Credit Quality
“Credit losses were 0.35 percent of average loans in 2014 and remained near historic lows. In the fourth quarter, loan losses remained low, nonperforming assets decreased, and delinquency rates were stable compared with the prior quarter, and we continued to grow the portfolio with high quality loans,” said Chief Risk Officer Mike Loughlin. “Credit losses were $735 million in fourth quarter 2014, compared with $963 million in fourth quarter 2013, a 24 percent improvement. The quarterly loss rate (annualized) was 0.34 percent with commercial losses of 0.03 percent and consumer losses of 0.63 percent. Nonperforming assets declined by $739 million, or 18 percent (annualized), from the prior quarter. We released $250 million from the allowance for credit losses in the fourth quarter, reflecting continued credit quality improvement. Future allowance levels may increase or decrease based on a variety of factors, including loan growth, portfolio performance and general economic conditions."
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Net Loan Charge-offs
Net loan charge-offs were $735 million in fourth quarter 2014, or 0.34 percent (annualized) of average loans, compared with $668 million in third quarter 2014, or 0.32 percent (annualized) of average loans.
Net Loan Charge-Offs
Quarter ended | ||||||||||||||||||||
December 31, 2014 | September 30, 2014 | June 30, 2014 | ||||||||||||||||||
($ 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 | $ | 82 | 0.12 | % | $ | 67 | 0.11 | % | $ | 60 | 0.10 | % | ||||||||
Real estate mortgage | (25 | ) | (0.09 | ) | (37 | ) | (0.13 | ) | (10 | ) | (0.04 | ) | ||||||||
Real estate construction | (26 | ) | (0.56 | ) | (58 | ) | (1.27 | ) | (20 | ) | (0.47 | ) | ||||||||
Lease financing | 1 | 0.05 | 4 | 0.10 | 1 | 0.05 | ||||||||||||||
Total commercial | 32 | 0.03 | (24 | ) | (0.02 | ) | 31 | 0.03 | ||||||||||||
Consumer: | ||||||||||||||||||||
Real estate 1-4 family first mortgage | 88 | 0.13 | 114 | 0.17 | 137 | 0.21 | ||||||||||||||
Real estate 1-4 family junior lien mortgage | 134 | 0.88 | 140 | 0.90 | 160 | 1.02 | ||||||||||||||
Credit card | 221 | 2.97 | 201 | 2.87 | 211 | 3.20 | ||||||||||||||
Automobile | 132 | 0.94 | 112 | 0.81 | 46 | 0.35 | ||||||||||||||
Other revolving credit and installment | 128 | 1.45 | 125 | 1.46 | 132 | 1.22 | ||||||||||||||
Total consumer | 703 | 0.63 | 692 | 0.62 | 686 | 0.62 | ||||||||||||||
Total | $ | 735 | 0.34 | % | $ | 668 | 0.32 | % | $ | 717 | 0.35 | % | ||||||||
(a) | Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 32 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios. |
Nonperforming Assets
Nonperforming assets decreased by $739 million from third quarter to $15.5 billion. Nonaccrual loans decreased $517 million to $12.8 billion. Foreclosed assets were $2.6 billion, down from $2.8 billion in third quarter 2014 on lower government insured/guaranteed and commercial balances.
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Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
December 31, 2014 | September 30, 2014 | June 30, 2014 | ||||||||||||||||||
($ 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 | $ | 538 | 0.20 | % | $ | 614 | 0.24 | % | $ | 724 | 0.29 | % | ||||||||
Real estate mortgage | 1,490 | 1.33 | 1,636 | 1.46 | 1,805 | 1.59 | ||||||||||||||
Real estate construction | 187 | 1.00 | 217 | 1.20 | 239 | 1.38 | ||||||||||||||
Lease financing | 24 | 0.20 | 27 | 0.22 | 29 | 0.24 | ||||||||||||||
Total commercial | 2,239 | 0.54 | 2,494 | 0.63 | 2,797 | 0.71 | ||||||||||||||
Consumer: | ||||||||||||||||||||
Real estate 1-4 family first mortgage | 8,583 | 3.23 | 8,785 | 3.34 | 9,026 | 3.47 | ||||||||||||||
Real estate 1-4 family junior lien mortgage | 1,848 | 3.09 | 1,903 | 3.13 | 1,965 | 3.14 | ||||||||||||||
Automobile | 137 | 0.25 | 143 | 0.26 | 150 | 0.28 | ||||||||||||||
Other revolving credit and installment | 41 | 0.11 | 40 | 0.11 | 34 | 0.10 | ||||||||||||||
Total consumer | 10,609 | 2.37 | 10,871 | 2.46 | 11,175 | 2.55 | ||||||||||||||
Total nonaccrual loans | 12,848 | 1.49 | 13,365 | 1.59 | 13,972 | 1.69 | ||||||||||||||
Foreclosed assets: | ||||||||||||||||||||
Government insured/guaranteed (a) | 982 | 1,140 | 1,257 | |||||||||||||||||
Non-government insured/guaranteed | 1,627 | 1,691 | 1,748 | |||||||||||||||||
Total foreclosed assets | 2,609 | 2,831 | 3,005 | |||||||||||||||||
Total nonperforming assets | $ | 15,457 | 1.79 | % | $ | 16,196 | 1.93 | % | $ | 16,977 | 2.05 | % | ||||||||
Change from prior quarter: | ||||||||||||||||||||
Total nonaccrual loans | $ | (517 | ) | $ | (607 | ) | $ | (1,095 | ) | |||||||||||
Total nonperforming assets | (739 | ) | (781 | ) | (678 | ) | ||||||||||||||
(a) | During fourth quarter 2014, we adopted Accounting Standards Update (ASU) 2014-14, Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure, effective as of January 1, 2014. This ASU requires that government guaranteed real estate mortgage loans that meet specific criteria be recognized as other receivables upon foreclosure; previously, these assets were included in foreclosed assets. Government guaranteed residential real estate mortgage loans that completed foreclosure during 2014 and met the criteria specified by ASU 2014-14 are excluded from this table and included in Accounts Receivable in Other Assets. |
Loans 90 Days or More Past Due and Still Accruing
Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $920 million at December 31, 2014, compared with $946 million at September 30, 2014. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $16.9 billion at December 31, 2014, down from $17.3 billion at September 30, 2014.
Allowance for Credit Losses
The allowance for credit losses, including the allowance for unfunded commitments, totaled $13.2 billion at December 31, 2014, down from $13.5 billion at September 30, 2014. The allowance coverage to total loans was 1.53 percent, compared with 1.61 percent in third quarter 2014. The allowance covered 4.5 times annualized fourth quarter net charge-offs, compared with 5.1 times in the prior quarter. The allowance coverage to nonaccrual loans was 103 percent at December 31, 2014, compared with 101 percent at September 30, 2014. “We believe the allowance was appropriate for losses inherent in the loan portfolio at December 31, 2014,” said Loughlin.
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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, 2014 | Sep 30, 2014 | Dec 31, 2013 | ||||||
Community Banking | $ | 3,435 | 3,470 | 3,222 | |||||
Wholesale Banking | 1,970 | 1,920 | 2,111 | ||||||
Wealth, Brokerage and Retirement | 514 | 550 | 491 | ||||||
Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and auto, student, and small business lending. Community Banking also offers investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. through its Regional Banking and Wells Fargo Home Lending business units.
Selected Financial Information
Quarter ended | |||||||||
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Dec 31, 2013 | ||||||
Total revenue | $ | 12,835 | 12,828 | 12,254 | |||||
Provision for credit losses | 518 | 465 | 490 | ||||||
Noninterest expense | 7,281 | 7,051 | 7,073 | ||||||
Segment net income | 3,435 | 3,470 | 3,222 | ||||||
(in billions) | |||||||||
Average loans | 503.8 | 498.6 | 502.5 | ||||||
Average assets | 974.9 | 950.2 | 883.6 | ||||||
Average core deposits | 655.6 | 646.9 | 620.2 | ||||||
Community Banking reported net income of $3.4 billion, down $35 million, or 1 percent, from third quarter 2014. Revenue of $12.8 billion was up slightly as higher net interest income, credit card fees, gains on deferred compensation plan investments (offset in employee benefits expense), and a gain on sale of government guaranteed student loans were largely offset by lower market sensitive revenue, mainly lower gains on sale of debt securities and equity investments. Noninterest expense increased $230 million, or 3 percent, from the prior quarter due to higher equipment expense, project spending, and deferred compensation plan expense (offset in trading revenue), partially offset by lower operating losses. The provision for credit losses increased $53 million from the prior quarter.
Net income was up $213 million, or 7 percent, from fourth quarter 2013. Revenue increased $581 million, or 5 percent, from a year ago primarily due to higher net interest income, trust and investment fees, revenue from debit and credit card volumes, gains on sale of debt securities, and a gain on sale of government guaranteed student loans, partially offset by lower gains on equity investments. Noninterest expense increased $208 million, or 3 percent, from a year ago driven by higher personnel expenses and operating losses, partially offset by lower FDIC expense. The provision for credit losses increased $28 million from a year ago as the $232 million improvement in net charge-offs was more than offset by a lower reserve release.
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Regional Banking
• | Retail banking |
◦ | Primary consumer checking customers6 up 5.2 percent year-over-year7 |
◦ | Retail Bank household cross-sell ratio of 6.17 products per household, up from 6.16 year-over-year7 |
• | Small Business/Business Banking |
◦ | Primary business checking customers6 up 5.4 percent year-over-year7 |
◦ | Combined Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) in 2014 were up 22 percent from 2013 |
◦ | $18 billion in new loan commitments to small business customers (primarily with annual revenues less than $20 million) in 2014 |
◦ | For sixth consecutive year, Wells Fargo was nation's #1 SBA 7(a) small business lender in dollars8 |
• | Online and Mobile Banking |
◦ | 24.8 million active online customers, up 8 percent year-over-year7 |
◦ | 14.1 million active mobile customers, up 19 percent year-over-year7 |
◦ | Wells Fargo named "Best App" in Money magazine's "Best Banks in America" annual list (October 2014) |
Consumer Lending Group
• | Home Lending |
◦ | Originations of $44 billion, down from $48 billion in prior quarter |
◦ | Applications of $66 billion, up from $64 billion in prior quarter |
◦ | Application pipeline of $26 billion at quarter end, up from $25 billion at September 30, 2014 |
◦ | Residential mortgage servicing portfolio of $1.8 trillion; ratio of MSRs to related loans serviced for others was 75 basis points, compared with 82 basis points in prior quarter |
◦ | Average note rate on the servicing portfolio was 4.45 percent, compared with 4.47 percent in prior quarter |
• | Consumer Credit |
◦ | Credit card penetration in retail banking households rose to 41.5 percent7, up from 37.0 percent in prior year |
◦ | Auto originations of $6.7 billion in fourth quarter, down 1 percent from prior year |
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Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $20 million. Products and business segments include Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments, Asset Backed Finance, and Asset Management.
Selected Financial Information
Quarter ended | |||||||||
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Dec 31, 2013 | ||||||
Total revenue | $ | 6,054 | 5,902 | 5,972 | |||||
Reversal of provision for credit losses | (39 | ) | (85 | ) | (125 | ) | |||
Noninterest expense | 3,307 | 3,250 | 3,020 | ||||||
Segment net income | 1,970 | 1,920 | 2,111 | ||||||
(in billions) | |||||||||
Average loans | 326.8 | 316.5 | 294.6 | ||||||
Average assets | 573.3 | 553.0 | 509.0 | ||||||
Average core deposits | 292.4 | 278.4 | 258.5 | ||||||
Wholesale Banking reported net income of $2.0 billion, up $50 million, or 3 percent, from third quarter 2014. Revenue of $6.1 billion increased $152 million, or 3 percent, from prior quarter. Net interest income increased $97 million, or 3 percent, due to higher loan and other earning asset balances. Noninterest income increased $55 million, or 2 percent, driven by growth in investment banking fees, loan fees and commercial real estate brokerage fees. Noninterest expense increased $57 million, or 2 percent, linked quarter as seasonally higher project spending as well as higher personnel costs were partially offset by seasonally lower insurance commissions. The provision for credit losses increased $46 million from prior quarter due to a reduced level of net recoveries and lower reserve release.
Net income was down $141 million, or 7 percent, from fourth quarter 2013. Revenue increased $82 million, or 1 percent, from fourth quarter 2013 on strong loan and deposit growth, and higher investment banking, treasury management, commercial real estate brokerage and foreign exchange fees, as well as increased gains on equity investments. Noninterest expense increased $287 million, or 10 percent, from a year ago primarily due to expenses related to growth initiatives, compliance, and regulatory requirements. The provision for credit losses increased $86 million from a year ago primarily due to a $72 million lower reserve release.
• | Average loans increased 11 percent in fourth quarter 2014, compared with fourth quarter 2013, on broad-based growth, including asset-backed finance, capital finance, commercial banking, commercial real estate, corporate banking, equipment finance, government and institutional banking, and real estate capital markets |
• | Cross-sell of 7.2 products per relationship, up from 7.1 in fourth quarter 2013 driven by new product sales to existing customers |
• | Treasury management revenue up 11 percent from fourth quarter 2013 |
• | Assets under management of $496 billion, up $9 billion from fourth quarter 2013, including a $5 billion increase in fixed income assets under management reflecting increased market valuations and net inflows |
• | Wells Fargo Insurance was named Best Insurance Broker in North America by Global Finance magazine (January 2015) |
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Wealth, Brokerage and Retirement provides a full range of financial advisory services to clients using a planning approach to meet each client’s financial needs. Wealth Management provides affluent and high net worth clients with a complete range of wealth management solutions, including financial planning, private banking, credit, investment management and fiduciary services. Abbot Downing, a Wells Fargo business, provides comprehensive wealth management services to ultra high net worth families and individuals as well as endowments and foundations. Brokerage serves customers’ advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the United States. Retirement is a national leader in providing institutional retirement and trust services (including 401(k) and pension plan record keeping) for businesses and reinsurance services for the life insurance industry.
Selected Financial Information
Quarter ended | |||||||||
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Dec 31, 2013 | ||||||
Total revenue | $ | 3,647 | 3,553 | 3,438 | |||||
Provision (reversal of provision) for credit losses | 8 | (25 | ) | (11 | ) | ||||
Noninterest expense | 2,811 | 2,690 | 2,655 | ||||||
Segment net income | 514 | 550 | 491 | ||||||
(in billions) | |||||||||
Average loans | 54.8 | 52.6 | 48.4 | ||||||
Average assets | 192.2 | 188.8 | 185.3 | ||||||
Average core deposits | 157.0 | 153.6 | 153.9 | ||||||
Wealth, Brokerage and Retirement (WBR) reported net income of $514 million, down $36 million, or 7 percent, from third quarter 2014. Revenue of $3.6 billion increased $94 million from the prior quarter, driven largely by increased net interest income and higher gains on deferred compensation plan investments (offset in compensation expense). Noninterest expense increased $121 million, or 4 percent, from the prior quarter driven primarily by higher deferred compensation plan expense (offset in trading revenue) and higher project spend for technology platform enhancements. The provision for credit losses increased $33 million from third quarter 2014.
Net income was up $23 million, or 5 percent, from fourth quarter 2013. Revenue increased $209 million, or 6 percent, from a year ago as strong growth in asset-based fees and higher net interest income were partially offset by lower gains on deferred compensation plan investments (offset in compensation expense) and lower brokerage transaction revenue. Noninterest expense increased $156 million, or 6 percent, from a year ago primarily due to increased non-personnel expenses, primarily higher FDIC expense, as well as increased broker commissions, partially offset by lower deferred compensation plan expense (offset in trading revenue). The provision for credit losses was up $19 million from a year ago.
Retail Brokerage
• | Client assets of $1.4 trillion, up 4 percent from prior year |
• | Managed account assets of $423 billion, increased $48 billion, or 13 percent, from prior year, reflecting net flows and increased market valuations |
• | Strong loan growth, with average balances up 21 percent from prior year largely due to growth in non-conforming mortgages and security-based lending |
Wealth Management
• | Client assets of $225 billion, up 5 percent from prior year |
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• | Loan growth, with average balances up 10 percent over prior year predominantly driven by growth in non-conforming mortgages |
Retirement
• | IRA assets of $359 billion, up 5 percent from prior year |
• | Institutional Retirement plan assets of $341 billion, up 2 percent from prior year |
WBR cross-sell ratio of 10.49 products per household, up from 10.42 a year ago
Conference Call
The Company will host a live conference call on Wednesday, January 14, at 7 a.m. PST (10 a.m. EST). You may participate by dialing 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). The call will also be available online at wellsfargo.com/invest_relations/earnings and at https://engage.vevent.com/rt/wells_fargo_ao~011415.
A replay of the conference call will be available beginning at 10 a.m. PST (1 p.m. EST) on January 14 through Wednesday, January 21. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #36848763. The replay will also be available online at wellsfargo.com/invest_relations/earnings and at https://engage.vevent.com/rt/wells_fargo_ao~011415.
Endnotes
1 | Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. |
2 | See table on page 4 for more information on core and non-strategic/liquidating loan portfolios. |
3 | Reserve release represents the amount by which net charge-offs exceed the provision for credit losses. |
4 | See tables on page 38 for more information on Common Equity Tier 1. Common Equity Tier 1 (Advanced Approach, fully phased-in) is estimated based on final rules adopted July 2, 2013, by the Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act. |
5 | Consists of net gains from trading activities, debt securities and equity investments. |
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 2014, comparisons with November 2013; November 2014 Retail Bank household cross-sell ratio includes the Dillard's credit card portfolio acquisition. |
8 | U.S. SBA data, federal fiscal years 2009-2014 (year-ending September). |
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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 releases; (iv) the appropriateness of the allowance for credit losses; (v) our expectations regarding net interest income and net interest margin; (vi) loan growth or the reduction or mitigation of risk in our loan portfolios; (vii) future capital levels 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, 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, including our obligations under the settlement with the Department of Justice and other federal and state government entities, 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; |
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• | 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; |
• | a recurrence of significant turbulence or 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; |
• | 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, 2013. |
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, 2013, 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.
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About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.7 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,700 locations, 12,500 ATMs, and the internet (wellsfargo.com), and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 29 on Fortune’s 2014 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.
# # #
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Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS
Pages | |
Summary Information | |
Income | |
Balance Sheet | |
Loans | |
Equity | |
Operating Segments | |
Other | |
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Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
Quarter ended | % Change Dec 31, 2014 from | Year ended | |||||||||||||||||||||||
($ in millions, except per share amounts) | Dec 31, 2014 | Sep 30, 2014 | Dec 31, 2013 | Sep 30, 2014 | Dec 31, 2013 | Dec 31, 2014 | Dec 31, 2013 | % Change | |||||||||||||||||
For the Period | |||||||||||||||||||||||||
Wells Fargo net income | $ | 5,709 | 5,729 | 5,610 | — | % | 2 | $ | 23,057 | 21,878 | 5 | % | |||||||||||||
Wells Fargo net income applicable to common stock | 5,382 | 5,408 | 5,369 | — | — | 21,821 | 20,889 | 4 | |||||||||||||||||
Diluted earnings per common share | 1.02 | 1.02 | 1.00 | — | 2 | 4.10 | 3.89 | 5 | |||||||||||||||||
Profitability ratios (annualized): | |||||||||||||||||||||||||
Wells Fargo net income to average assets (ROA) (1) | 1.36 | % | 1.40 | 1.48 | (3 | ) | (8 | ) | 1.45 | 1.51 | (4 | ) | |||||||||||||
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) | 12.84 | 13.10 | 13.81 | (2 | ) | (7 | ) | 13.41 | 13.87 | (3 | ) | ||||||||||||||
Efficiency ratio (2) | 59.0 | 57.7 | 58.5 | 2 | 1 | 58.1 | 58.3 | — | |||||||||||||||||
Total revenue | $ | 21,443 | 21,213 | 20,665 | 1 | 4 | $ | 84,347 | 83,780 | 1 | |||||||||||||||
Pre-tax pre-provision profit (PTPP) (3) | 8,796 | 8,965 | 8,580 | (2 | ) | 3 | 35,310 | 34,938 | 1 | ||||||||||||||||
Dividends declared per common share | 0.35 | 0.35 | 0.30 | — | 17 | 1.35 | 1.15 | 17 | |||||||||||||||||
Average common shares outstanding | 5,192.5 | 5,225.9 | 5,270.3 | (1 | ) | (1 | ) | 5,237.2 | 5,287.3 | (1 | ) | ||||||||||||||
Diluted average common shares outstanding | 5,279.2 | 5,310.4 | 5,358.6 | (1 | ) | (1 | ) | 5,324.4 | 5,371.2 | (1 | ) | ||||||||||||||
Average loans (1) | $ | 849,429 | 833,199 | 813,318 | 2 | 4 | $ | 834,432 | 802,670 | 4 | |||||||||||||||
Average assets (1) | 1,663,760 | 1,617,942 | 1,505,766 | 3 | 10 | 1,593,349 | 1,445,983 | 10 | |||||||||||||||||
Average core deposits (4) | 1,035,999 | 1,012,219 | 965,828 | 2 | 7 | 1,003,631 | 942,120 | 7 | |||||||||||||||||
Average retail core deposits (5) | 714,572 | 703,062 | 679,355 | 2 | 5 | 701,829 | 669,657 | 5 | |||||||||||||||||
Net interest margin (1) | 3.04 | % | 3.06 | 3.27 | (1 | ) | (7 | ) | 3.11 | 3.40 | (9 | ) | |||||||||||||
At Period End | |||||||||||||||||||||||||
Investment securities | $ | 312,925 | 289,009 | 264,353 | 8 | 18 | $ | 312,925 | 264,353 | 18 | |||||||||||||||
Loans (1) | 862,551 | 838,883 | 822,286 | 3 | 5 | 862,551 | 822,286 | 5 | |||||||||||||||||
Allowance for loan losses | 12,319 | 12,681 | 14,502 | (3 | ) | (15 | ) | 12,319 | 14,502 | (15 | ) | ||||||||||||||
Goodwill | 25,705 | 25,705 | 25,637 | — | — | 25,705 | 25,637 | — | |||||||||||||||||
Assets (1) | 1,687,155 | 1,636,855 | 1,523,502 | 3 | 11 | 1,687,155 | 1,523,502 | 11 | |||||||||||||||||
Core deposits (4) | 1,054,348 | 1,016,478 | 980,063 | 4 | 8 | 1,054,348 | 980,063 | 8 | |||||||||||||||||
Wells Fargo stockholders’ equity | 184,394 | 182,481 | 170,142 | 1 | 8 | 184,394 | 170,142 | 8 | |||||||||||||||||
Total equity | 185,262 | 182,990 | 171,008 | 1 | 8 | 185,262 | 171,008 | 8 | |||||||||||||||||
Capital ratios: | |||||||||||||||||||||||||
Total equity to assets (1) | 10.98 | % | 11.18 | 11.22 | (2 | ) | (2 | ) | 10.98 | 11.22 | (2 | ) | |||||||||||||
Risk-based capital (6): | |||||||||||||||||||||||||
Tier 1 capital | 12.45 | 12.55 | 12.33 | (1 | ) | 1 | 12.45 | 12.33 | 1 | ||||||||||||||||
Total capital | 15.54 | 15.58 | 15.43 | — | 1 | 15.54 | 15.43 | 1 | |||||||||||||||||
Tier 1 leverage (6) | 9.45 | 9.64 | 9.60 | (2 | ) | (2 | ) | 9.45 | 9.60 | (2 | ) | ||||||||||||||
Common Equity Tier 1 (6)(7) | 11.04 | 11.11 | 10.82 | (1 | ) | 2 | 11.04 | 10.82 | 2 | ||||||||||||||||
Common shares outstanding | 5,170.3 | 5,215.0 | 5,257.2 | (1 | ) | (2 | ) | 5,170.3 | 5,257.2 | (2 | ) | ||||||||||||||
Book value per common share | $ | 32.19 | 31.55 | 29.48 | 2 | 9 | $ | 32.19 | 29.48 | 9 | |||||||||||||||
Common stock price: | |||||||||||||||||||||||||
High | 55.95 | 53.80 | 45.64 | 4 | 23 | 55.95 | 45.64 | 23 | |||||||||||||||||
Low | 46.44 | 49.47 | 40.07 | (6 | ) | 16 | 44.17 | 34.43 | 28 | ||||||||||||||||
Period end | 54.82 | 51.87 | 45.40 | 6 | 21 | 54.82 | 45.40 | 21 | |||||||||||||||||
Team members (active, full-time equivalent) | 264,500 | 263,900 | 264,900 | — | — | 264,500 | 264,900 | — | |||||||||||||||||
(1) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. Accordingly, we revised our commercial loan balances for year-end 2012 and each of the quarters in 2013 in order to present the Company’s lending trends on a comparable basis over this period. This revision, which resulted in a reduction to total commercial loans and a corresponding decrease to other liabilities, did not impact the Company’s consolidated net income or total cash flows. We reduced our commercial loans by $3.5 billion, $3.2 billion, $2.1 billion, $1.6 billion, and $1.2 billion at December 31, September 30, June 30, and March 31, 2013, and December 31, 2012, respectively, which represented less than 1% of total commercial loans and less than 0.5% of our total loan portfolio. Other affected financial information, including financial guarantees and financial ratios, has been appropriately revised to reflect this revision. |
(2) | The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). |
(3) | Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. |
(4) | Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). |
(5) | Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. |
(6) | The December 31, 2014, ratios are preliminary. |
(7) | See the “Five Quarter Risk-Based Capital Components” table for additional information. |
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
Quarter ended | |||||||||||||||
($ in millions, except per share amounts) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
For the Quarter | |||||||||||||||
Wells Fargo net income | $ | 5,709 | 5,729 | 5,726 | 5,893 | 5,610 | |||||||||
Wells Fargo net income applicable to common stock | 5,382 | 5,408 | 5,424 | 5,607 | 5,369 | ||||||||||
Diluted earnings per common share | 1.02 | 1.02 | 1.01 | 1.05 | 1.00 | ||||||||||
Profitability ratios (annualized): | |||||||||||||||
Wells Fargo net income to average assets (ROA) (1) | 1.36 | % | 1.40 | 1.47 | 1.57 | 1.48 | |||||||||
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) | 12.84 | 13.10 | 13.40 | 14.35 | 13.81 | ||||||||||
Efficiency ratio (2) | 59.0 | 57.7 | 57.9 | 57.9 | 58.5 | ||||||||||
Total revenue | $ | 21,443 | 21,213 | 21,066 | 20,625 | 20,665 | |||||||||
Pre-tax pre-provision profit (PTPP) (3) | 8,796 | 8,965 | 8,872 | 8,677 | 8,580 | ||||||||||
Dividends declared per common share | 0.35 | 0.35 | 0.35 | 0.30 | 0.30 | ||||||||||
Average common shares outstanding | 5,192.5 | 5,225.9 | 5,268.4 | 5,262.8 | 5,270.3 | ||||||||||
Diluted average common shares outstanding | 5,279.2 | 5,310.4 | 5,350.8 | 5,353.3 | 5,358.6 | ||||||||||
Average loans (1) | 849,429 | 833,199 | 831,043 | 823,790 | 813,318 | ||||||||||
Average assets (1) | 1,663,760 | 1,617,942 | 1,564,003 | 1,525,905 | 1,505,766 | ||||||||||
Average core deposits (4) | 1,035,999 | 1,012,219 | 991,727 | 973,801 | 965,828 | ||||||||||
Average retail core deposits (5) | 714,572 | 703,062 | 698,763 | 690,643 | 679,355 | ||||||||||
Net interest margin (1) | 3.04 | % | 3.06 | 3.15 | 3.20 | 3.27 | |||||||||
At Quarter End | |||||||||||||||
Investment securities | $ | 312,925 | 289,009 | 279,069 | 270,327 | 264,353 | |||||||||
Loans (1) | 862,551 | 838,883 | 828,942 | 826,443 | 822,286 | ||||||||||
Allowance for loan losses | 12,319 | 12,681 | 13,101 | 13,695 | 14,502 | ||||||||||
Goodwill | 25,705 | 25,705 | 25,705 | 25,637 | 25,637 | ||||||||||
Assets (1) | 1,687,155 | 1,636,855 | 1,598,874 | 1,546,707 | 1,523,502 | ||||||||||
Core deposits (4) | 1,054,348 | 1,016,478 | 1,007,485 | 994,185 | 980,063 | ||||||||||
Wells Fargo stockholders’ equity | 184,394 | 182,481 | 180,859 | 175,654 | 170,142 | ||||||||||
Total equity | 185,262 | 182,990 | 181,549 | 176,469 | 171,008 | ||||||||||
Capital ratios: | |||||||||||||||
Total equity to assets (1) | 10.98 | % | 11.18 | 11.35 | 11.41 | 11.22 | |||||||||
Risk-based capital (6): | |||||||||||||||
Tier 1 capital | 12.45 | 12.55 | 12.72 | 12.63 | 12.33 | ||||||||||
Total capital | 15.54 | 15.58 | 15.89 | 15.71 | 15.43 | ||||||||||
Tier 1 leverage (6) | 9.45 | 9.64 | 9.86 | 9.84 | 9.60 | ||||||||||
Common Equity Tier 1 (6)(7) | 11.04 | 11.11 | 11.31 | 11.36 | 10.82 | ||||||||||
Common shares outstanding | 5,170.3 | 5,215.0 | 5,249.9 | 5,265.7 | 5,257.2 | ||||||||||
Book value per common share | $ | 32.19 | 31.55 | 31.18 | 30.48 | 29.48 | |||||||||
Common stock price: | |||||||||||||||
High | 55.95 | 53.80 | 53.05 | 49.97 | 45.64 | ||||||||||
Low | 46.44 | 49.47 | 46.72 | 44.17 | 40.07 | ||||||||||
Period end | 54.82 | 51.87 | 52.56 | 49.74 | 45.40 | ||||||||||
Team members (active, full-time equivalent) | 264,500 | 263,900 | 263,500 | 265,300 | 264,900 | ||||||||||
(1) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
(2) | The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). |
(3) | Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. |
(4) | Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). |
(5) | Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. |
(6) | The December 31, 2014, ratios are preliminary. |
(7) | See the “Five Quarter Risk-Based Capital Components” table for additional information. |
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Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
Quarter ended Dec 31, | % | Year ended Dec 31, | % | ||||||||||||||||
(in millions, except per share amounts) | 2014 | 2013 | Change | 2014 | 2013 | Change | |||||||||||||
Interest income | |||||||||||||||||||
Trading assets | $ | 477 | 378 | 26 | % | $ | 1,685 | 1,376 | 22 | % | |||||||||
Investment securities | 2,150 | 2,119 | 1 | 8,438 | 8,116 | 4 | |||||||||||||
Mortgages held for sale | 187 | 221 | (15 | ) | 767 | 1,290 | (41 | ) | |||||||||||
Loans held for sale | 25 | 3 | 733 | 78 | 13 | 500 | |||||||||||||
Loans | 9,091 | 8,907 | 2 | 35,652 | 35,571 | — | |||||||||||||
Other interest income | 253 | 208 | 22 | 932 | 723 | 29 | |||||||||||||
Total interest income | 12,183 | 11,836 | 3 | 47,552 | 47,089 | 1 | |||||||||||||
Interest expense | |||||||||||||||||||
Deposits | 269 | 297 | (9 | ) | 1,096 | 1,337 | (18 | ) | |||||||||||
Short-term borrowings | 18 | 14 | 29 | 59 | 60 | (2 | ) | ||||||||||||
Long-term debt | 620 | 635 | (2 | ) | 2,488 | 2,585 | (4 | ) | |||||||||||
Other interest expense | 96 | 87 | 10 | 382 | 307 | 24 | |||||||||||||
Total interest expense | 1,003 | 1,033 | (3 | ) | 4,025 | 4,289 | (6 | ) | |||||||||||
Net interest income | 11,180 | 10,803 | 3 | 43,527 | 42,800 | 2 | |||||||||||||
Provision for credit losses | 485 | 363 | 34 | 1,395 | 2,309 | (40 | ) | ||||||||||||
Net interest income after provision for credit losses | 10,695 | 10,440 | 2 | 42,132 | 40,491 | 4 | |||||||||||||
Noninterest income | |||||||||||||||||||
Service charges on deposit accounts | 1,241 | 1,283 | (3 | ) | 5,050 | 5,023 | 1 | ||||||||||||
Trust and investment fees | 3,705 | 3,458 | 7 | 14,280 | 13,430 | 6 | |||||||||||||
Card fees | 925 | 827 | 12 | 3,431 | 3,191 | 8 | |||||||||||||
Other fees | 1,124 | 1,119 | — | 4,349 | 4,340 | — | |||||||||||||
Mortgage banking | 1,515 | 1,570 | (4 | ) | 6,381 | 8,774 | (27 | ) | |||||||||||
Insurance | 382 | 453 | (16 | ) | 1,655 | 1,814 | (9 | ) | |||||||||||
Net gains from trading activities | 179 | 325 | (45 | ) | 1,161 | 1,623 | (28 | ) | |||||||||||
Net gains (losses) on debt securities | 186 | (14 | ) | NM | 593 | (29 | ) | NM | |||||||||||
Net gains from equity investments | 372 | 654 | (43 | ) | 2,380 | 1,472 | 62 | ||||||||||||
Lease income | 127 | 148 | (14 | ) | 526 | 663 | (21 | ) | |||||||||||
Other | 507 | 39 | NM | 1,014 | 679 | 49 | |||||||||||||
Total noninterest income | 10,263 | 9,862 | 4 | 40,820 | 40,980 | — | |||||||||||||
Noninterest expense | |||||||||||||||||||
Salaries | 3,938 | 3,811 | 3 | 15,375 | 15,152 | 1 | |||||||||||||
Commission and incentive compensation | 2,582 | 2,347 | 10 | 9,970 | 9,951 | — | |||||||||||||
Employee benefits | 1,124 | 1,160 | (3 | ) | 4,597 | 5,033 | (9 | ) | |||||||||||
Equipment | 581 | 567 | 2 | 1,973 | 1,984 | (1 | ) | ||||||||||||
Net occupancy | 730 | 732 | — | 2,925 | 2,895 | 1 | |||||||||||||
Core deposit and other intangibles | 338 | 375 | (10 | ) | 1,370 | 1,504 | (9 | ) | |||||||||||
FDIC and other deposit assessments | 231 | 196 | 18 | 928 | 961 | (3 | ) | ||||||||||||
Other | 3,123 | 2,897 | 8 | 11,899 | 11,362 | 5 | |||||||||||||
Total noninterest expense | 12,647 | 12,085 | 5 | 49,037 | 48,842 | — | |||||||||||||
Income before income tax expense | 8,311 | 8,217 | 1 | 33,915 | 32,629 | 4 | |||||||||||||
Income tax expense | 2,519 | 2,504 | 1 | 10,307 | 10,405 | (1 | ) | ||||||||||||
Net income before noncontrolling interests | 5,792 | 5,713 | 1 | 23,608 | 22,224 | 6 | |||||||||||||
Less: Net income from noncontrolling interests | 83 | 103 | (19 | ) | 551 | 346 | 59 | ||||||||||||
Wells Fargo net income | $ | 5,709 | 5,610 | 2 | $ | 23,057 | 21,878 | 5 | |||||||||||
Less: Preferred stock dividends and other | 327 | 241 | 36 | 1,236 | 989 | 25 | |||||||||||||
Wells Fargo net income applicable to common stock | $ | 5,382 | 5,369 | — | $ | 21,821 | 20,889 | 4 | |||||||||||
Per share information | |||||||||||||||||||
Earnings per common share | $ | 1.04 | 1.02 | 2 | $ | 4.17 | 3.95 | 6 | |||||||||||
Diluted earnings per common share | 1.02 | 1.00 | 2 | 4.10 | 3.89 | 5 | |||||||||||||
Dividends declared per common share | 0.35 | 0.30 | 17 | 1.35 | 1.15 | 17 | |||||||||||||
Average common shares outstanding | 5,192.5 | 5,270.3 | (1 | ) | 5,237.2 | 5,287.3 | (1 | ) | |||||||||||
Diluted average common shares outstanding | 5,279.2 | 5,358.6 | (1 | ) | 5,324.4 | 5,371.2 | (1 | ) | |||||||||||
NM - Not meaningful
- 20 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter ended | |||||||||||||||
(in millions, except per share amounts) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Interest Income | |||||||||||||||
Trading assets | $ | 477 | 427 | 407 | 374 | 378 | |||||||||
Investment securities | 2,150 | 2,066 | 2,112 | 2,110 | 2,119 | ||||||||||
Mortgages held for sale | 187 | 215 | 195 | 170 | 221 | ||||||||||
Loans held for sale | 25 | 50 | 1 | 2 | 3 | ||||||||||
Loans | 9,091 | 8,963 | 8,852 | 8,746 | 8,907 | ||||||||||
Other interest income | 253 | 243 | 226 | 210 | 208 | ||||||||||
Total interest income | 12,183 | 11,964 | 11,793 | 11,612 | 11,836 | ||||||||||
Interest expense | |||||||||||||||
Deposits | 269 | 273 | 275 | 279 | 297 | ||||||||||
Short-term borrowings | 18 | 15 | 14 | 12 | 14 | ||||||||||
Long-term debt | 620 | 629 | 620 | 619 | 635 | ||||||||||
Other interest expense | 96 | 106 | 93 | 87 | 87 | ||||||||||
Total interest expense | 1,003 | 1,023 | 1,002 | 997 | 1,033 | ||||||||||
Net interest income | 11,180 | 10,941 | 10,791 | 10,615 | 10,803 | ||||||||||
Provision for credit losses | 485 | 368 | 217 | 325 | 363 | ||||||||||
Net interest income after provision for credit losses | 10,695 | 10,573 | 10,574 | 10,290 | 10,440 | ||||||||||
Noninterest income | |||||||||||||||
Service charges on deposit accounts | 1,241 | 1,311 | 1,283 | 1,215 | 1,283 | ||||||||||
Trust and investment fees | 3,705 | 3,554 | 3,609 | 3,412 | 3,458 | ||||||||||
Card fees | 925 | 875 | 847 | 784 | 827 | ||||||||||
Other fees | 1,124 | 1,090 | 1,088 | 1,047 | 1,119 | ||||||||||
Mortgage banking | 1,515 | 1,633 | 1,723 | 1,510 | 1,570 | ||||||||||
Insurance | 382 | 388 | 453 | 432 | 453 | ||||||||||
Net gains from trading activities | 179 | 168 | 382 | 432 | 325 | ||||||||||
Net gains (losses) on debt securities | 186 | 253 | 71 | 83 | (14 | ) | |||||||||
Net gains from equity investments | 372 | 712 | 449 | 847 | 654 | ||||||||||
Lease income | 127 | 137 | 129 | 133 | 148 | ||||||||||
Other | 507 | 151 | 241 | 115 | 39 | ||||||||||
Total noninterest income | 10,263 | 10,272 | 10,275 | 10,010 | 9,862 | ||||||||||
Noninterest expense | |||||||||||||||
Salaries | 3,938 | 3,914 | 3,795 | 3,728 | 3,811 | ||||||||||
Commission and incentive compensation | 2,582 | 2,527 | 2,445 | 2,416 | 2,347 | ||||||||||
Employee benefits | 1,124 | 931 | 1,170 | 1,372 | 1,160 | ||||||||||
Equipment | 581 | 457 | 445 | 490 | 567 | ||||||||||
Net occupancy | 730 | 731 | 722 | 742 | 732 | ||||||||||
Core deposit and other intangibles | 338 | 342 | 349 | 341 | 375 | ||||||||||
FDIC and other deposit assessments | 231 | 229 | 225 | 243 | 196 | ||||||||||
Other | 3,123 | 3,117 | 3,043 | 2,616 | 2,897 | ||||||||||
Total noninterest expense | 12,647 | 12,248 | 12,194 | 11,948 | 12,085 | ||||||||||
Income before income tax expense | 8,311 | 8,597 | 8,655 | 8,352 | 8,217 | ||||||||||
Income tax expense | 2,519 | 2,642 | 2,869 | 2,277 | 2,504 | ||||||||||
Net income before noncontrolling interests | 5,792 | 5,955 | 5,786 | 6,075 | 5,713 | ||||||||||
Less: Net income from noncontrolling interests | 83 | 226 | 60 | 182 | 103 | ||||||||||
Wells Fargo net income | $ | 5,709 | 5,729 | 5,726 | 5,893 | 5,610 | |||||||||
Less: Preferred stock dividends and other | 327 | 321 | 302 | 286 | 241 | ||||||||||
Wells Fargo net income applicable to common stock | $ | 5,382 | 5,408 | 5,424 | 5,607 | 5,369 | |||||||||
Per share information | |||||||||||||||
Earnings per common share | $ | 1.04 | 1.04 | 1.02 | 1.07 | 1.02 | |||||||||
Diluted earnings per common share | 1.02 | 1.02 | 1.01 | 1.05 | 1.00 | ||||||||||
Dividends declared per common share | 0.35 | 0.35 | 0.35 | 0.30 | 0.30 | ||||||||||
Average common shares outstanding | 5,192.5 | 5,225.9 | 5,268.4 | 5,262.8 | 5,270.3 | ||||||||||
Diluted average common shares outstanding | 5,279.2 | 5,310.4 | 5,350.8 | 5,353.3 | 5,358.6 | ||||||||||
- 21 -
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarter ended Dec 31, | % | Year ended Dec 31, | % | ||||||||||||||||
(in millions) | 2014 | 2013 | Change | 2014 | 2013 | Change | |||||||||||||
Wells Fargo net income | $ | 5,709 | 5,610 | 2 | % | $ | 23,057 | 21,878 | 5 | % | |||||||||
Other comprehensive income (loss), before tax: | |||||||||||||||||||
Investment securities: | |||||||||||||||||||
Net unrealized gains (losses) arising during the period | 1,560 | (1,739 | ) | NM | 5,426 | (7,661 | ) | NM | |||||||||||
Reclassification of net gains to net income | (327 | ) | (88 | ) | 272 | (1,532 | ) | (285 | ) | 438 | |||||||||
Derivatives and hedging activities: | |||||||||||||||||||
Net unrealized gains (losses) arising during the period | 730 | (22 | ) | NM | 952 | (32 | ) | NM | |||||||||||
Reclassification of net gains on cash flow hedges to net income | (197 | ) | (71 | ) | 177 | (545 | ) | (296 | ) | 84 | |||||||||
Defined benefit plans adjustments: | |||||||||||||||||||
Net actuarial gains (losses) arising during the period | (1,104 | ) | 458 | NM | (1,116 | ) | 1,533 | NM | |||||||||||
Amortization of net actuarial loss, settlements and other to net income | 18 | 55 | (67 | ) | 74 | 276 | (73 | ) | |||||||||||
Foreign currency translation adjustments: | |||||||||||||||||||
Net unrealized losses arising during the period | (28 | ) | (17 | ) | 65 | (60 | ) | (44 | ) | 36 | |||||||||
Reclassification of net (gains) losses to net income | — | — | — | 6 | (12 | ) | NM | ||||||||||||
Other comprehensive income (loss), before tax | 652 | (1,424 | ) | NM | 3,205 | (6,521 | ) | NM | |||||||||||
Income tax (expense) benefit related to other comprehensive income | (213 | ) | 522 | NM | (1,300 | ) | 2,524 | NM | |||||||||||
Other comprehensive income (loss), net of tax | 439 | (902 | ) | NM | 1,905 | (3,997 | ) | NM | |||||||||||
Less: Other comprehensive income (loss) from noncontrolling interests | 39 | 1 | NM | (227 | ) | 267 | NM | ||||||||||||
Wells Fargo other comprehensive income (loss), net of tax | 400 | (903 | ) | NM | 2,132 | (4,264 | ) | NM | |||||||||||
Wells Fargo comprehensive income | 6,109 | 4,707 | 30 | 25,189 | 17,614 | 43 | |||||||||||||
Comprehensive income from noncontrolling interests | 122 | 104 | 17 | 324 | 613 | (47 | ) | ||||||||||||
Total comprehensive income | $ | 6,231 | 4,811 | 30 | $ | 25,513 | 18,227 | 40 | |||||||||||
NM - Not meaningful
FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
Quarter ended | |||||||||||||||
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Balance, beginning of period | $ | 182,990 | 181,549 | 176,469 | 171,008 | 168,813 | |||||||||
Wells Fargo net income | 5,709 | 5,729 | 5,726 | 5,893 | 5,610 | ||||||||||
Wells Fargo other comprehensive income (loss), net of tax | 400 | (999 | ) | 1,365 | 1,366 | (903 | ) | ||||||||
Common stock issued | 508 | 402 | 579 | 994 | 353 | ||||||||||
Common stock repurchased (1) | (2,945 | ) | (2,490 | ) | (2,954 | ) | (1,025 | ) | (1,378 | ) | |||||
Preferred stock released by ESOP | 166 | 170 | 430 | 305 | 122 | ||||||||||
Preferred stock issued | — | 780 | 1,995 | — | 828 | ||||||||||
Common stock warrants exercised/repurchased | (9 | ) | — | — | — | — | |||||||||
Common stock dividends | (1,816 | ) | (1,828 | ) | (1,844 | ) | (1,579 | ) | (1,582 | ) | |||||
Preferred stock dividends and other | (327 | ) | (321 | ) | (302 | ) | (286 | ) | (241 | ) | |||||
Noncontrolling interests and other, net | 586 | (2 | ) | 85 | (207 | ) | (614 | ) | |||||||
Balance, end of period | $ | 185,262 | 182,990 | 181,549 | 176,469 | 171,008 | |||||||||
(1) | For the quarter ended December 31, 2014, includes $750 million related to a private forward repurchase transaction that is expected to settle in first quarter 2015 for an estimated 14.3 million shares of common stock. For the quarters ended September 30, 2014, June 30, 2014, and December 31, 2013, includes $1.0 billion, $1.0 billion, and $500 million, respectively, related to private forward repurchase transactions that settled in subsequent quarters for 19.8 million, 19.5 million, and 11.1 million shares of common stock, respectively. |
- 22 -
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended December 31, | ||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||
(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 | $ | 268,109 | 0.28 | % | $ | 188 | 205,276 | 0.28 | % | $ | 148 | |||||||||
Trading assets | 60,383 | 3.21 | 485 | 45,379 | 3.40 | 386 | ||||||||||||||
Investment securities (3): | ||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 19,506 | 1.55 | 76 | 6,611 | 1.67 | 27 | ||||||||||||||
Securities of U.S. states and political subdivisions | 43,891 | 4.30 | 472 | 42,025 | 4.38 | 460 | ||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Federal agencies | 109,270 | 2.78 | 760 | 117,910 | 2.94 | 866 | ||||||||||||||
Residential and commercial | 24,711 | 5.89 | 364 | 29,233 | 6.35 | 464 | ||||||||||||||
Total mortgage-backed securities | 133,981 | 3.36 | 1,124 | 147,143 | 3.62 | 1,330 | ||||||||||||||
Other debt and equity securities | 44,980 | 3.87 | 438 | 55,325 | 3.43 | 478 | ||||||||||||||
Total available-for-sale securities | 242,358 | 3.48 | 2,110 | 251,104 | 3.65 | 2,295 | ||||||||||||||
Held-to-maturity securities: | ||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 32,930 | 2.25 | 187 | — | — | — | ||||||||||||||
Securities of U.S. states and political subdivisions | 902 | 4.92 | 11 | — | — | — | ||||||||||||||
Federal agency mortgage-backed securities | 5,586 | 2.07 | 29 | 2,780 | 3.11 | 22 | ||||||||||||||
Other debt securities | 6,118 | 1.81 | 27 | 65 | 1.99 | — | ||||||||||||||
Total held-to-maturity securities | 45,536 | 2.22 | 254 | 2,845 | 3.09 | 22 | ||||||||||||||
Total investment securities | 287,894 | 3.28 | 2,364 | 253,949 | 3.65 | 2,317 | ||||||||||||||
Mortgages held for sale (4) | 19,191 | 3.90 | 187 | 21,396 | 4.13 | 221 | ||||||||||||||
Loans held for sale (4) | 6,968 | 1.43 | 25 | 138 | 8.21 | 3 | ||||||||||||||
Loans: | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
Commercial and industrial - U.S. (5) | 218,297 | 3.32 | 1,825 | 189,939 | 3.54 | 1,696 | ||||||||||||||
Commercial and industrial - Non U.S. | 43,049 | 2.03 | 221 | 41,062 | 1.88 | 194 | ||||||||||||||
Real estate mortgage | 112,277 | 3.69 | 1,044 | 110,674 | 3.90 | 1,087 | ||||||||||||||
Real estate construction | 18,336 | 4.33 | 200 | 16,744 | 4.76 | 201 | ||||||||||||||
Lease financing | 12,268 | 5.35 | 164 | 12,085 | 5.68 | 171 | ||||||||||||||
Total commercial (5) | 404,227 | 3.39 | 3,454 | 370,504 | 3.59 | 3,349 | ||||||||||||||
Consumer: | ||||||||||||||||||||
Real estate 1-4 family first mortgage | 264,799 | 4.16 | 2,754 | 257,265 | 4.15 | 2,672 | ||||||||||||||
Real estate 1-4 family junior lien mortgage | 60,177 | 4.28 | 648 | 66,809 | 4.29 | 721 | ||||||||||||||
Credit card | 29,477 | 11.71 | 870 | 25,865 | 12.23 | 798 | ||||||||||||||
Automobile | 55,457 | 6.08 | 849 | 50,213 | 6.70 | 849 | ||||||||||||||
Other revolving credit and installment | 35,292 | 6.01 | 534 | 42,662 | 4.94 | 531 | ||||||||||||||
Total consumer | 445,202 | 5.06 | 5,655 | 442,814 | 5.01 | 5,571 | ||||||||||||||
Total loans (4)(5) | 849,429 | 4.27 | 9,109 | 813,318 | 4.36 | 8,920 | ||||||||||||||
Other | 4,829 | 5.30 | 64 | 4,728 | 5.22 | 61 | ||||||||||||||
Total earning assets (5) | $ | 1,496,803 | 3.31 | % | $ | 12,422 | 1,344,184 | 3.57 | % | $ | 12,056 | |||||||||
Funding sources | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Interest-bearing checking | $ | 40,498 | 0.06 | % | $ | 6 | 35,171 | 0.07 | % | $ | 6 | |||||||||
Market rate and other savings | 593,940 | 0.07 | 99 | 568,750 | 0.08 | 110 | ||||||||||||||
Savings certificates | 35,870 | 0.80 | 72 | 43,067 | 0.94 | 102 | ||||||||||||||
Other time deposits | 56,119 | 0.39 | 55 | 39,700 | 0.48 | 47 | ||||||||||||||
Deposits in foreign offices | 99,289 | 0.15 | 37 | 86,333 | 0.15 | 32 | ||||||||||||||
Total interest-bearing deposits | 825,716 | 0.13 | 269 | 773,021 | 0.15 | 297 | ||||||||||||||
Short-term borrowings | 64,676 | 0.12 | 19 | 52,286 | 0.12 | 15 | ||||||||||||||
Long-term debt | 183,286 | 1.35 | 620 | 153,470 | 1.65 | 635 | ||||||||||||||
Other liabilities | 15,580 | 2.44 | 96 | 12,822 | 2.70 | 87 | ||||||||||||||
Total interest-bearing liabilities | 1,089,258 | 0.37 | 1,004 | 991,599 | 0.42 | 1,034 | ||||||||||||||
Portion of noninterest-bearing funding sources (5) | 407,545 | — | — | 352,585 | — | — | ||||||||||||||
Total funding sources (5) | $ | 1,496,803 | 0.27 | 1,004 | 1,344,184 | 0.30 | 1,034 | |||||||||||||
Net interest margin and net interest income on a taxable-equivalent basis (5)(6) | 3.04 | % | $ | 11,418 | 3.27 | % | $ | 11,022 | ||||||||||||
Noninterest-earning assets | ||||||||||||||||||||
Cash and due from banks | $ | 16,932 | 15,998 | |||||||||||||||||
Goodwill | 25,705 | 25,637 | ||||||||||||||||||
Other | 124,320 | 119,947 | ||||||||||||||||||
Total noninterest-earning assets | $ | 166,957 | 161,582 | |||||||||||||||||
Noninterest-bearing funding sources | ||||||||||||||||||||
Deposits | $ | 324,080 | 287,379 | |||||||||||||||||
Other liabilities (5) | 65,672 | 57,138 | ||||||||||||||||||
Total equity | 184,750 | 169,650 | ||||||||||||||||||
Noninterest-bearing funding sources used to fund earning assets (5) | (407,545 | ) | (352,585 | ) | ||||||||||||||||
Net noninterest-bearing funding sources | $ | 166,957 | 161,582 | |||||||||||||||||
Total assets (5) | $ | 1,663,760 | 1,505,766 | |||||||||||||||||
(1) | Our average prime rate was 3.25% for the quarters ended December 31, 2014 and 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.24% for the same quarters. |
(2) | Yield/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) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
(6) | Includes taxable-equivalent adjustments of $238 million and $219 million for the quarters ended December 31, 2014 and 2013, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented. |
- 23 -
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Year ended December 31, | ||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||
(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 | $ | 241,282 | 0.28 | % | $ | 673 | 154,902 | 0.32 | % | $ | 489 | |||||||||
Trading assets | 55,140 | 3.10 | 1,712 | 44,745 | 3.14 | 1,406 | ||||||||||||||
Investment securities (3): | ||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 10,400 | 1.64 | 171 | 6,750 | 1.66 | 112 | ||||||||||||||
Securities of U.S. states and political subdivisions | 43,138 | 4.29 | 1,852 | 39,922 | 4.38 | 1,748 | ||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Federal agencies | 114,076 | 2.84 | 3,235 | 107,148 | 2.83 | 3,031 | ||||||||||||||
Residential and commercial | 26,475 | 6.03 | 1,597 | 30,717 | 6.47 | 1,988 | ||||||||||||||
Total mortgage-backed securities | 140,551 | 3.44 | 4,832 | 137,865 | 3.64 | 5,019 | ||||||||||||||
Other debt and equity securities | 47,488 | 3.66 | 1,741 | 55,002 | 3.53 | 1,940 | ||||||||||||||
Total available-for-sale securities | 241,577 | 3.56 | 8,596 | 239,539 | 3.68 | 8,819 | ||||||||||||||
Held-to-maturity securities: | ||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 17,239 | 2.23 | 385 | — | — | — | ||||||||||||||
Securities of U.S. states and political subdivisions | 246 | 4.93 | 12 | — | — | — | ||||||||||||||
Federal agency mortgage-backed securities | 5,921 | 2.55 | 151 | 701 | 3.09 | 22 | ||||||||||||||
Other debt securities | 5,913 | 1.85 | 109 | 16 | 1.99 | — | ||||||||||||||
Total held-to-maturity securities | 29,319 | 2.24 | 657 | 717 | 3.06 | 22 | ||||||||||||||
Total investment securities | 270,896 | 3.42 | 9,253 | 240,256 | 3.68 | 8,841 | ||||||||||||||
Mortgages held for sale (4) | 19,018 | 4.03 | 767 | 35,273 | 3.66 | 1,290 | ||||||||||||||
Loans held for sale (4) | 4,226 | 1.85 | 78 | 163 | 7.95 | 13 | ||||||||||||||
Loans: | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
Commercial and industrial - U.S. (5) | 204,819 | 3.35 | 6,869 | 185,813 | 3.66 | 6,807 | ||||||||||||||
Commercial and industrial - Non U.S. | 42,661 | 2.03 | 867 | 40,987 | 2.03 | 832 | ||||||||||||||
Real estate mortgage | 112,710 | 3.64 | 4,100 | 107,316 | 3.94 | 4,233 | ||||||||||||||
Real estate construction | 17,676 | 4.21 | 744 | 16,537 | 4.76 | 787 | ||||||||||||||
Lease financing | 12,257 | 5.63 | 690 | 12,373 | 6.10 | 755 | ||||||||||||||
Total commercial (5) | 390,123 | 3.40 | 13,270 | 363,026 | 3.70 | 13,414 | ||||||||||||||
Consumer: | ||||||||||||||||||||
Real estate 1-4 family first mortgage | 261,620 | 4.19 | 10,961 | 254,012 | 4.22 | 10,717 | ||||||||||||||
Real estate 1-4 family junior lien mortgage | 62,510 | 4.30 | 2,686 | 70,264 | 4.29 | 3,014 | ||||||||||||||
Credit card | 27,491 | 11.98 | 3,294 | 24,757 | 12.46 | 3,084 | ||||||||||||||
Automobile | 53,854 | 6.27 | 3,377 | 48,476 | 6.94 | 3,365 | ||||||||||||||
Other revolving credit and installment | 38,834 | 5.48 | 2,127 | 42,135 | 4.80 | 2,024 | ||||||||||||||
Total consumer | 444,309 | 5.05 | 22,445 | 439,644 | 5.05 | 22,204 | ||||||||||||||
Total loans (4)(5) | 834,432 | 4.28 | 35,715 | 802,670 | 4.44 | 35,618 | ||||||||||||||
Other | 4,673 | 5.54 | 259 | 4,354 | 5.39 | 235 | ||||||||||||||
Total earning assets (5) | $ | 1,429,667 | 3.39 | % | $ | 48,457 | 1,282,363 | 3.73 | % | $ | 47,892 | |||||||||
Funding sources | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Interest-bearing checking | $ | 39,729 | 0.07 | % | $ | 26 | 35,570 | 0.06 | % | $ | 22 | |||||||||
Market rate and other savings | 585,854 | 0.07 | 403 | 550,394 | 0.08 | 450 | ||||||||||||||
Savings certificates | 38,111 | 0.85 | 323 | 49,510 | 1.13 | 559 | ||||||||||||||
Other time deposits | 51,434 | 0.40 | 207 | 28,090 | 0.69 | 194 | ||||||||||||||
Deposits in foreign offices | 95,889 | 0.14 | 137 | 76,894 | 0.15 | 112 | ||||||||||||||
Total interest-bearing deposits | 811,017 | 0.14 | 1,096 | 740,458 | 0.18 | 1,337 | ||||||||||||||
Short-term borrowings | 60,111 | 0.10 | 62 | 54,716 | 0.13 | 71 | ||||||||||||||
Long-term debt | 167,420 | 1.49 | 2,488 | 134,937 | 1.92 | 2,585 | ||||||||||||||
Other liabilities | 14,401 | 2.65 | 382 | 12,471 | 2.46 | 307 | ||||||||||||||
Total interest-bearing liabilities | 1,052,949 | 0.38 | 4,028 | 942,582 | 0.46 | 4,300 | ||||||||||||||
Portion of noninterest-bearing funding sources (5) | 376,718 | 339,781 | — | — | ||||||||||||||||
Total funding sources (5) | $ | 1,429,667 | 0.28 | 4,028 | 1,282,363 | 0.33 | 4,300 | |||||||||||||
Net interest margin and net interest income on a taxable-equivalent basis (5)(6) | 3.11 | % | $ | 44,429 | 3.40 | % | $ | 43,592 | ||||||||||||
Noninterest-earning assets | ||||||||||||||||||||
Cash and due from banks | $ | 16,361 | 16,272 | |||||||||||||||||
Goodwill | 25,687 | 25,637 | ||||||||||||||||||
Other | 121,634 | 121,711 | ||||||||||||||||||
Total noninterest-earning assets | $ | 163,682 | 163,620 | |||||||||||||||||
Noninterest-bearing funding sources | ||||||||||||||||||||
Deposits | $ | 303,127 | 280,229 | |||||||||||||||||
Other liabilities (5) | 56,985 | 58,178 | ||||||||||||||||||
Total equity | 180,288 | 164,994 | ||||||||||||||||||
Noninterest-bearing funding sources used to fund earning assets (5) | (376,718 | ) | (339,781 | ) | ||||||||||||||||
Net noninterest-bearing funding sources | $ | 163,682 | 163,620 | |||||||||||||||||
Total assets (5) | $ | 1,593,349 | 1,445,983 | |||||||||||||||||
(1) | Our average prime rate was 3.25% for the year ended December 31, 2014 and 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.23% and 0.27% for the same periods, respectively. |
(2) | Yield/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) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
(6) | Includes taxable-equivalent adjustments of $902 million and $792 million for the year ended December 31, 2014 and 2013, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented. |
- 24 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
Quarter ended | ||||||||||||||||||||||||||||||||||
Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||||||||||||||||||||||
($ 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 | $ | 268.1 | 0.28 | % | $ | 253.2 | 0.28 | % | $ | 229.8 | 0.28 | % | $ | 213.3 | 0.27 | % | $ | 205.3 | 0.28 | % | ||||||||||||||
Trading assets | 60.4 | 3.21 | 57.5 | 3.00 | 54.4 | 3.05 | 48.2 | 3.17 | 45.4 | 3.40 | ||||||||||||||||||||||||
Investment securities (2): | ||||||||||||||||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 19.5 | 1.55 | 8.8 | 1.69 | 6.6 | 1.78 | 6.6 | 1.68 | 6.6 | 1.67 | ||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | 43.9 | 4.30 | 43.3 | 4.24 | 42.7 | 4.26 | 42.6 | 4.37 | 42.0 | 4.38 | ||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||||
Federal agencies | 109.3 | 2.78 | 113.0 | 2.76 | 116.5 | 2.85 | 117.6 | 2.94 | 117.9 | 2.94 | ||||||||||||||||||||||||
Residential and commercial | 24.7 | 5.89 | 26.0 | 5.98 | 27.3 | 6.11 | 28.0 | 6.12 | 29.2 | 6.35 | ||||||||||||||||||||||||
Total mortgage-backed securities | 134.0 | 3.36 | 139.0 | 3.36 | 143.8 | 3.47 | 145.6 | 3.55 | 147.1 | 3.62 | ||||||||||||||||||||||||
Other debt and equity securities | 45.0 | 3.87 | 47.1 | 3.45 | 48.7 | 3.76 | 49.2 | 3.59 | 55.4 | 3.43 | ||||||||||||||||||||||||
Total available-for-sale securities | 242.4 | 3.48 | 238.2 | 3.48 | 241.8 | 3.62 | 244.0 | 3.65 | 251.1 | 3.65 | ||||||||||||||||||||||||
Held-to-maturity securities: | ||||||||||||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 32.9 | 2.25 | 23.7 | 2.22 | 10.8 | 2.20 | 1.1 | 2.18 | — | — | ||||||||||||||||||||||||
Securities of U.S. states and political subdivisions | 0.9 | 4.92 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Federal agency mortgage-backed securities | 5.6 | 2.07 | 5.9 | 2.23 | 6.1 | 2.74 | 6.2 | 3.11 | 2.7 | 3.11 | ||||||||||||||||||||||||
Other debt securities | 6.1 | 1.81 | 5.9 | 1.83 | 5.2 | 1.90 | 6.4 | 1.86 | 0.1 | 1.99 | ||||||||||||||||||||||||
Total held-to-maturity securities | 45.5 | 2.22 | 35.5 | 2.17 | 22.1 | 2.28 | 13.7 | 2.45 | 2.8 | 3.09 | ||||||||||||||||||||||||
Total investment securities | 287.9 | 3.28 | 273.7 | 3.31 | 263.9 | 3.51 | 257.7 | 3.59 | 253.9 | 3.65 | ||||||||||||||||||||||||
Mortgages held for sale | 19.2 | 3.90 | 21.5 | 4.01 | 18.8 | 4.16 | 16.6 | 4.11 | 21.4 | 4.13 | ||||||||||||||||||||||||
Loans held for sale | 7.0 | 1.43 | 9.5 | 2.10 | 0.2 | 2.55 | 0.1 | 6.28 | 0.1 | 8.21 | ||||||||||||||||||||||||
Loans: | ||||||||||||||||||||||||||||||||||
Commercial: | ||||||||||||||||||||||||||||||||||
Commercial and industrial - U.S. (3) | 218.3 | 3.32 | 207.6 | 3.29 | 199.2 | 3.39 | 193.9 | 3.43 | 189.9 | 3.54 | ||||||||||||||||||||||||
Commercial and industrial - Non U.S. | 43.0 | 2.03 | 42.4 | 2.11 | 43.0 | 2.06 | 42.2 | 1.92 | 41.1 | 1.88 | ||||||||||||||||||||||||
Real estate mortgage | 112.3 | 3.69 | 113.0 | 3.69 | 112.8 | 3.61 | 112.8 | 3.56 | 110.7 | 3.90 | ||||||||||||||||||||||||
Real estate construction | 18.3 | 4.33 | 17.8 | 3.94 | 17.5 | 4.18 | 17.1 | 4.38 | 16.7 | 4.76 | ||||||||||||||||||||||||
Lease financing | 12.3 | 5.35 | 12.3 | 5.38 | 12.2 | 5.68 | 12.2 | 6.12 | 12.1 | 5.68 | ||||||||||||||||||||||||
Total commercial (3) | 404.2 | 3.39 | 393.1 | 3.37 | 384.7 | 3.42 | 378.2 | 3.43 | 370.5 | 3.59 | ||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 264.8 | 4.16 | 262.2 | 4.23 | 260.0 | 4.20 | 259.5 | 4.17 | 257.3 | 4.15 | ||||||||||||||||||||||||
Real estate 1-4 family junior lien mortgage | 60.2 | 4.28 | 61.6 | 4.30 | 63.3 | 4.31 | 65.0 | 4.30 | 66.8 | 4.29 | ||||||||||||||||||||||||
Credit card | 29.5 | 11.71 | 27.7 | 11.96 | 26.4 | 11.97 | 26.3 | 12.32 | 25.9 | 12.23 | ||||||||||||||||||||||||
Automobile | 55.4 | 6.08 | 54.6 | 6.19 | 53.5 | 6.34 | 51.8 | 6.50 | 50.2 | 6.70 | ||||||||||||||||||||||||
Other revolving credit and installment | 35.3 | 6.01 | 34.0 | 6.03 | 43.1 | 5.07 | 43.0 | 5.00 | 42.6 | 4.94 | ||||||||||||||||||||||||
Total consumer | 445.2 | 5.06 | 440.1 | 5.11 | 446.3 | 5.02 | 445.6 | 5.02 | 442.8 | 5.01 | ||||||||||||||||||||||||
Total loans (3) | 849.4 | 4.27 | 833.2 | 4.29 | 831.0 | 4.28 | 823.8 | 4.29 | 813.3 | 4.36 | ||||||||||||||||||||||||
Other | 4.8 | 5.30 | 4.7 | 5.41 | 4.5 | 5.74 | 4.6 | 5.72 | 4.7 | 5.22 | ||||||||||||||||||||||||
Total earning assets (3) | $ | 1,496.8 | 3.31 | % | $ | 1,453.3 | 3.34 | % | $ | 1,402.6 | 3.43 | % | $ | 1,364.3 | 3.49 | % | $ | 1,344.1 | 3.57 | % | ||||||||||||||
Funding sources | ||||||||||||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||||||||||||
Interest-bearing checking | $ | 40.5 | 0.06 | % | $ | 41.4 | 0.07 | % | $ | 40.2 | 0.07 | % | $ | 36.8 | 0.07 | % | $ | 35.2 | 0.07 | % | ||||||||||||||
Market rate and other savings | 593.9 | 0.07 | 586.4 | 0.07 | 583.9 | 0.07 | 579.0 | 0.07 | 568.7 | 0.08 | ||||||||||||||||||||||||
Savings certificates | 35.9 | 0.80 | 37.3 | 0.84 | 38.8 | 0.86 | 40.5 | 0.89 | 43.1 | 0.94 | ||||||||||||||||||||||||
Other time deposits | 56.1 | 0.39 | 55.1 | 0.39 | 48.5 | 0.41 | 45.8 | 0.42 | 39.7 | 0.48 | ||||||||||||||||||||||||
Deposits in foreign offices | 99.3 | 0.15 | 98.9 | 0.14 | 94.2 | 0.15 | 91.1 | 0.14 | 86.3 | 0.15 | ||||||||||||||||||||||||
Total interest-bearing deposits | 825.7 | 0.13 | 819.1 | 0.13 | 805.6 | 0.14 | 793.2 | 0.14 | 773.0 | 0.15 | ||||||||||||||||||||||||
Short-term borrowings | 64.7 | 0.12 | 62.3 | 0.10 | 58.9 | 0.10 | 54.5 | 0.09 | 52.3 | 0.12 | ||||||||||||||||||||||||
Long-term debt | 183.3 | 1.35 | 173.0 | 1.46 | 159.2 | 1.56 | 153.8 | 1.62 | 153.5 | 1.65 | ||||||||||||||||||||||||
Other liabilities | 15.6 | 2.44 | 15.5 | 2.73 | 13.6 | 2.73 | 12.9 | 2.72 | 12.8 | 2.70 | ||||||||||||||||||||||||
Total interest-bearing liabilities | 1,089.3 | 0.37 | 1,069.9 | 0.38 | 1,037.3 | 0.39 | 1,014.4 | 0.40 | 991.6 | 0.42 | ||||||||||||||||||||||||
Portion of noninterest-bearing funding sources (3) | 407.5 | — | 383.4 | — | 365.3 | — | 349.9 | — | 352.5 | — | ||||||||||||||||||||||||
Total funding sources (3) | $ | 1,496.8 | 0.27 | $ | 1,453.3 | 0.28 | $ | 1,402.6 | 0.28 | $ | 1,364.3 | 0.29 | $ | 1,344.1 | 0.30 | |||||||||||||||||||
Net interest margin on a taxable-equivalent basis (3) | 3.04 | % | 3.06 | % | 3.15 | % | 3.20 | % | 3.27 | % | ||||||||||||||||||||||||
Noninterest-earning assets | ||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | 16.9 | 16.2 | 15.9 | 16.4 | 16.0 | ||||||||||||||||||||||||||||
Goodwill | 25.7 | 25.7 | 25.7 | 25.6 | 25.6 | |||||||||||||||||||||||||||||
Other | 124.4 | 122.7 | 119.8 | 119.6 | 120.0 | |||||||||||||||||||||||||||||
Total noninterest-earnings assets | $ | 167.0 | 164.6 | 161.4 | 161.6 | 161.6 | ||||||||||||||||||||||||||||
Noninterest-bearing funding sources | ||||||||||||||||||||||||||||||||||
Deposits | $ | 324.1 | 308.0 | 295.9 | 284.1 | 287.4 | ||||||||||||||||||||||||||||
Other liabilities (3) | 65.7 | 57.9 | 51.1 | 52.9 | 57.1 | |||||||||||||||||||||||||||||
Total equity | 184.7 | 182.1 | 179.7 | 174.5 | 169.6 | |||||||||||||||||||||||||||||
Noninterest-bearing funding sources used to fund earning assets (3) | (407.5 | ) | (383.4 | ) | (365.3 | ) | (349.9 | ) | (352.5 | ) | ||||||||||||||||||||||||
Net noninterest-bearing funding sources | $ | 167.0 | 164.6 | 161.4 | 161.6 | 161.6 | ||||||||||||||||||||||||||||
Total assets (3) | $ | 1,663.8 | 1,617.9 | 1,564.0 | 1,525.9 | 1,505.7 | ||||||||||||||||||||||||||||
(1) | Our average prime rate was 3.25% for quarters ended December 31, September 30, June 30 and March 31, 2014, and December 31, 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.24%, 0.23%, 0.23%, 0.24% and 0.24% for the same quarters, respectively. |
(2) | 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. |
(3) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
- 25 -
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
Quarter ended Dec 31, | % | Year ended Dec 31, | % | ||||||||||||||||
(in millions) | 2014 | 2013 | Change | 2014 | 2013 | Change | |||||||||||||
Service charges on deposit accounts | $ | 1,241 | 1,283 | (3 | )% | $ | 5,050 | 5,023 | 1 | % | |||||||||
Trust and investment fees: | |||||||||||||||||||
Brokerage advisory, commissions and other fees | 2,335 | 2,150 | 9 | 9,183 | 8,395 | 9 | |||||||||||||
Trust and investment management | 849 | 850 | — | 3,387 | 3,289 | 3 | |||||||||||||
Investment banking | 521 | 458 | 14 | 1,710 | 1,746 | (2 | ) | ||||||||||||
Total trust and investment fees | 3,705 | 3,458 | 7 | 14,280 | 13,430 | 6 | |||||||||||||
Card fees | 925 | 827 | 12 | 3,431 | 3,191 | 8 | |||||||||||||
Other fees: | |||||||||||||||||||
Charges and fees on loans | 311 | 379 | (18 | ) | 1,316 | 1,540 | (15 | ) | |||||||||||
Merchant processing fees | 187 | 172 | 9 | 726 | 669 | 9 | |||||||||||||
Cash network fees | 125 | 122 | 2 | 507 | 493 | 3 | |||||||||||||
Commercial real estate brokerage commissions | 155 | 129 | 20 | 469 | 338 | 39 | |||||||||||||
Letters of credit fees | 102 | 99 | 3 | 390 | 410 | (5 | ) | ||||||||||||
All other fees | 244 | 218 | 12 | 941 | 890 | 6 | |||||||||||||
Total other fees | 1,124 | 1,119 | — | 4,349 | 4,340 | — | |||||||||||||
Mortgage banking: | |||||||||||||||||||
Servicing income, net | 685 | 709 | (3 | ) | 3,337 | 1,920 | 74 | ||||||||||||
Net gains on mortgage loan origination/sales activities | 830 | 861 | (4 | ) | 3,044 | 6,854 | (56 | ) | |||||||||||
Total mortgage banking | 1,515 | 1,570 | (4 | ) | 6,381 | 8,774 | (27 | ) | |||||||||||
Insurance | 382 | 453 | (16 | ) | 1,655 | 1,814 | (9 | ) | |||||||||||
Net gains from trading activities | 179 | 325 | (45 | ) | 1,161 | 1,623 | (28 | ) | |||||||||||
Net gains (losses) on debt securities | 186 | (14 | ) | NM | 593 | (29 | ) | NM | |||||||||||
Net gains from equity investments | 372 | 654 | (43 | ) | 2,380 | 1,472 | 62 | ||||||||||||
Lease income | 127 | 148 | (14 | ) | 526 | 663 | (21 | ) | |||||||||||
Life insurance investment income | 145 | 125 | 16 | 558 | 566 | (1 | ) | ||||||||||||
All other | 362 | (86 | ) | NM | 456 | 113 | 304 | ||||||||||||
Total | $ | 10,263 | 9,862 | 4 | $ | 40,820 | 40,980 | — | |||||||||||
NM - Not meaningful | |||||||||||||||||||
NONINTEREST EXPENSE | |||||||||||||||||||
Quarter ended Dec 31, | % | Year ended Dec 31, | % | ||||||||||||||||
(in millions) | 2014 | 2013 | Change | 2014 | 2013 | Change | |||||||||||||
Salaries | $ | 3,938 | 3,811 | 3 | % | $ | 15,375 | 15,152 | 1 | % | |||||||||
Commission and incentive compensation | 2,582 | 2,347 | 10 | 9,970 | 9,951 | — | |||||||||||||
Employee benefits | 1,124 | 1,160 | (3 | ) | 4,597 | 5,033 | (9 | ) | |||||||||||
Equipment | 581 | 567 | 2 | 1,973 | 1,984 | (1 | ) | ||||||||||||
Net occupancy | 730 | 732 | — | 2,925 | 2,895 | 1 | |||||||||||||
Core deposit and other intangibles | 338 | 375 | (10 | ) | 1,370 | 1,504 | (9 | ) | |||||||||||
FDIC and other deposit assessments | 231 | 196 | 18 | 928 | 961 | (3 | ) | ||||||||||||
Outside professional services | 800 | 754 | 6 | 2,689 | 2,519 | 7 | |||||||||||||
Operating losses | 309 | 181 | 71 | 1,249 | 821 | 52 | |||||||||||||
Outside data processing | 270 | 264 | 2 | 1,034 | 983 | 5 | |||||||||||||
Contract services | 245 | 261 | (6 | ) | 975 | 935 | 4 | ||||||||||||
Travel and entertainment | 216 | 234 | (8 | ) | 904 | 885 | 2 | ||||||||||||
Postage, stationery and supplies | 190 | 189 | 1 | 733 | 756 | (3 | ) | ||||||||||||
Advertising and promotion | 195 | 165 | 18 | 653 | 610 | 7 | |||||||||||||
Foreclosed assets | 164 | 103 | 59 | 583 | 605 | (4 | ) | ||||||||||||
Telecommunications | 106 | 118 | (10 | ) | 453 | 482 | (6 | ) | |||||||||||
Insurance | 60 | 59 | 2 | 422 | 437 | (3 | ) | ||||||||||||
Operating leases | 58 | 51 | 14 | 220 | 204 | 8 | |||||||||||||
All other | 510 | 518 | (2 | ) | 1,984 | 2,125 | (7 | ) | |||||||||||
Total | $ | 12,647 | 12,085 | 5 | $ | 49,037 | 48,842 | — | |||||||||||
- 26 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
Quarter ended | |||||||||||||||
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Service charges on deposit accounts | $ | 1,241 | 1,311 | 1,283 | 1,215 | 1,283 | |||||||||
Trust and investment fees: | |||||||||||||||
Brokerage advisory, commissions and other fees | 2,335 | 2,327 | 2,280 | 2,241 | 2,150 | ||||||||||
Trust and investment management | 849 | 856 | 838 | 844 | 850 | ||||||||||
Investment banking | 521 | 371 | 491 | 327 | 458 | ||||||||||
Total trust and investment fees | 3,705 | 3,554 | 3,609 | 3,412 | 3,458 | ||||||||||
Card fees | 925 | 875 | 847 | 784 | 827 | ||||||||||
Other fees: | |||||||||||||||
Charges and fees on loans | 311 | 296 | 342 | 367 | 379 | ||||||||||
Merchant processing fees | 187 | 184 | 183 | 172 | 172 | ||||||||||
Cash network fees | 125 | 134 | 128 | 120 | 122 | ||||||||||
Commercial real estate brokerage commissions | 155 | 143 | 99 | 72 | 129 | ||||||||||
Letters of credit fees | 102 | 100 | 92 | 96 | 99 | ||||||||||
All other fees | 244 | 233 | 244 | 220 | 218 | ||||||||||
Total other fees | $ | 1,124 | 1,090 | 1,088 | 1,047 | 1,119 | |||||||||
Mortgage banking: | |||||||||||||||
Servicing income, net | 685 | 679 | 1,035 | 938 | 709 | ||||||||||
Net gains on mortgage loan origination/sales activities | 830 | 954 | 688 | 572 | 861 | ||||||||||
Total mortgage banking | 1,515 | 1,633 | 1,723 | 1,510 | 1,570 | ||||||||||
Insurance | 382 | 388 | 453 | 432 | 453 | ||||||||||
Net gains from trading activities | 179 | 168 | 382 | 432 | 325 | ||||||||||
Net gains (losses) on debt securities | 186 | 253 | 71 | 83 | (14 | ) | |||||||||
Net gains from equity investments | 372 | 712 | 449 | 847 | 654 | ||||||||||
Lease income | 127 | 137 | 129 | 133 | 148 | ||||||||||
Life insurance investment income | 145 | 143 | 138 | 132 | 125 | ||||||||||
All other | 362 | 8 | 103 | (17 | ) | (86 | ) | ||||||||
Total | $ | 10,263 | 10,272 | 10,275 | 10,010 | 9,862 | |||||||||
FIVE QUARTER NONINTEREST EXPENSE | |||||||||||||||
Quarter ended | |||||||||||||||
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Salaries | $ | 3,938 | 3,914 | 3,795 | 3,728 | 3,811 | |||||||||
Commission and incentive compensation | 2,582 | 2,527 | 2,445 | 2,416 | 2,347 | ||||||||||
Employee benefits | 1,124 | 931 | 1,170 | 1,372 | 1,160 | ||||||||||
Equipment | 581 | 457 | 445 | 490 | 567 | ||||||||||
Net occupancy | 730 | 731 | 722 | 742 | 732 | ||||||||||
Core deposit and other intangibles | 338 | 342 | 349 | 341 | 375 | ||||||||||
FDIC and other deposit assessments | 231 | 229 | 225 | 243 | 196 | ||||||||||
Outside professional services | 800 | 684 | 646 | 559 | 754 | ||||||||||
Operating losses | 309 | 417 | 364 | 159 | 181 | ||||||||||
Outside data processing | 270 | 264 | 259 | 241 | 264 | ||||||||||
Contract services | 245 | 247 | 249 | 234 | 261 | ||||||||||
Travel and entertainment | 216 | 226 | 243 | 219 | 234 | ||||||||||
Postage, stationery and supplies | 190 | 182 | 170 | 191 | 189 | ||||||||||
Advertising and promotion | 195 | 153 | 187 | 118 | 165 | ||||||||||
Foreclosed assets | 164 | 157 | 130 | 132 | 103 | ||||||||||
Telecommunications | 106 | 122 | 111 | 114 | 118 | ||||||||||
Insurance | 60 | 97 | 140 | 125 | 59 | ||||||||||
Operating leases | 58 | 58 | 54 | 50 | 51 | ||||||||||
All other | 510 | 510 | 490 | 474 | 518 | ||||||||||
Total | $ | 12,647 | 12,248 | 12,194 | 11,948 | 12,085 | |||||||||
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Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions, except shares) | Dec 31, 2014 | Dec 31, 2013 | % Change | ||||||
Assets | |||||||||
Cash and due from banks | $ | 19,571 | 19,919 | (2 | )% | ||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | 258,429 | 213,793 | 21 | ||||||
Trading assets | 78,255 | 62,813 | 25 | ||||||
Investment securities: | |||||||||
Available-for-sale, at fair value | 257,442 | 252,007 | 2 | ||||||
Held-to-maturity, at cost (fair value $56,359 and $12,247) | 55,483 | 12,346 | 349 | ||||||
Mortgages held for sale (includes $15,565 and $13,879 carried at fair value) (1) | 19,536 | 16,763 | 17 | ||||||
Loans held for sale (includes $1 and $1 carried at fair value) (1) | 722 | 133 | 443 | ||||||
Loans (includes $7,164 and $5,995 carried at fair value) (1)(2) | 862,551 | 822,286 | 5 | ||||||
Allowance for loan losses | (12,319 | ) | (14,502 | ) | (15 | ) | |||
Net loans (2) | 850,232 | 807,784 | 5 | ||||||
Mortgage servicing rights: | |||||||||
Measured at fair value | 12,738 | 15,580 | (18 | ) | |||||
Amortized | 1,242 | 1,229 | 1 | ||||||
Premises and equipment, net | 8,743 | 9,156 | (5 | ) | |||||
Goodwill | 25,705 | 25,637 | — | ||||||
Other assets (includes $2,512 and $1,386 carried at fair value) (1) | 99,057 | 86,342 | 15 | ||||||
Total assets (2) | $ | 1,687,155 | 1,523,502 | 11 | |||||
Liabilities | |||||||||
Noninterest-bearing deposits | $ | 321,963 | 288,117 | 12 | |||||
Interest-bearing deposits | 846,347 | 791,060 | 7 | ||||||
Total deposits | 1,168,310 | 1,079,177 | 8 | ||||||
Short-term borrowings | 63,518 | 53,883 | 18 | ||||||
Accrued expenses and other liabilities (2) | 86,122 | 66,436 | 30 | ||||||
Long-term debt | 183,943 | 152,998 | 20 | ||||||
Total liabilities (2) | 1,501,893 | 1,352,494 | 11 | ||||||
Equity | |||||||||
Wells Fargo stockholders’ equity: | |||||||||
Preferred stock | 19,213 | 16,267 | 18 | ||||||
Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares and 5,481,811,474 shares | 9,136 | 9,136 | — | ||||||
Additional paid-in capital | 60,537 | 60,296 | — | ||||||
Retained earnings | 107,040 | 92,361 | 16 | ||||||
Cumulative other comprehensive income | 3,518 | 1,386 | 154 | ||||||
Treasury stock – 311,462,276 shares and 224,648,769 shares | (13,690 | ) | (8,104 | ) | 69 | ||||
Unearned ESOP shares | (1,360 | ) | (1,200 | ) | 13 | ||||
Total Wells Fargo stockholders’ equity | 184,394 | 170,142 | 8 | ||||||
Noncontrolling interests | 868 | 866 | — | ||||||
Total equity | 185,262 | 171,008 | 8 | ||||||
Total liabilities and equity (2) | $ | 1,687,155 | 1,523,502 | 11 | |||||
(1) | Parenthetical amounts represent assets and liabilities for which we have elected the fair value option. |
(2) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Assets | |||||||||||||||
Cash and due from banks | $ | 19,571 | 18,032 | 20,635 | 19,731 | 19,919 | |||||||||
Federal funds sold, securities purchased under resale agreements and other short-term investments | 258,429 | 261,932 | 238,719 | 222,781 | 213,793 | ||||||||||
Trading assets | 78,255 | 67,755 | 71,674 | 63,753 | 62,813 | ||||||||||
Investment securities: | |||||||||||||||
Available-for-sale, at fair value | 257,442 | 248,251 | 248,961 | 252,665 | 252,007 | ||||||||||
Held-to-maturity, at cost | 55,483 | 40,758 | 30,108 | 17,662 | 12,346 | ||||||||||
Mortgages held for sale | 19,536 | 20,178 | 21,064 | 16,233 | 16,763 | ||||||||||
Loans held for sale | 722 | 9,292 | 9,762 | 91 | 133 | ||||||||||
Loans (1) | 862,551 | 838,883 | 828,942 | 826,443 | 822,286 | ||||||||||
Allowance for loan losses | (12,319 | ) | (12,681 | ) | (13,101 | ) | (13,695 | ) | (14,502 | ) | |||||
Net loans (1) | 850,232 | 826,202 | 815,841 | 812,748 | 807,784 | ||||||||||
Mortgage servicing rights: | |||||||||||||||
Measured at fair value | 12,738 | 14,031 | 13,900 | 14,953 | 15,580 | ||||||||||
Amortized | 1,242 | 1,224 | 1,196 | 1,219 | 1,229 | ||||||||||
Premises and equipment, net | 8,743 | 8,768 | 8,977 | 9,020 | 9,156 | ||||||||||
Goodwill | 25,705 | 25,705 | 25,705 | 25,637 | 25,637 | ||||||||||
Other assets | 99,057 | 94,727 | 92,332 | 90,214 | 86,342 | ||||||||||
Total assets (1) | $ | 1,687,155 | 1,636,855 | 1,598,874 | 1,546,707 | 1,523,502 | |||||||||
Liabilities | |||||||||||||||
Noninterest-bearing deposits | $ | 321,963 | 313,791 | 308,099 | 294,863 | 288,117 | |||||||||
Interest-bearing deposits | 846,347 | 816,834 | 810,478 | 799,713 | 791,060 | ||||||||||
Total deposits | 1,168,310 | 1,130,625 | 1,118,577 | 1,094,576 | 1,079,177 | ||||||||||
Short-term borrowings | 63,518 | 62,927 | 61,849 | 57,061 | 53,883 | ||||||||||
Accrued expenses and other liabilities (1) | 86,122 | 75,727 | 69,021 | 65,179 | 66,436 | ||||||||||
Long-term debt | 183,943 | 184,586 | 167,878 | 153,422 | 152,998 | ||||||||||
Total liabilities (1) | 1,501,893 | 1,453,865 | 1,417,325 | 1,370,238 | 1,352,494 | ||||||||||
Equity | |||||||||||||||
Wells Fargo stockholders’ equity: | |||||||||||||||
Preferred stock | 19,213 | 19,379 | 18,749 | 17,179 | 16,267 | ||||||||||
Common stock | 9,136 | 9,136 | 9,136 | 9,136 | 9,136 | ||||||||||
Additional paid-in capital | 60,537 | 60,100 | 59,926 | 60,618 | 60,296 | ||||||||||
Retained earnings | 107,040 | 103,494 | 99,926 | 96,368 | 92,361 | ||||||||||
Cumulative other comprehensive income | 3,518 | 3,118 | 4,117 | 2,752 | 1,386 | ||||||||||
Treasury stock | (13,690 | ) | (11,206 | ) | (9,271 | ) | (8,206 | ) | (8,104 | ) | |||||
Unearned ESOP shares | (1,360 | ) | (1,540 | ) | (1,724 | ) | (2,193 | ) | (1,200 | ) | |||||
Total Wells Fargo stockholders’ equity | 184,394 | 182,481 | 180,859 | 175,654 | 170,142 | ||||||||||
Noncontrolling interests | 868 | 509 | 690 | 815 | 866 | ||||||||||
Total equity | 185,262 | 182,990 | 181,549 | 176,469 | 171,008 | ||||||||||
Total liabilities and equity (1) | $ | 1,687,155 | 1,636,855 | 1,598,874 | 1,546,707 | 1,523,502 | |||||||||
(1) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER INVESTMENT SECURITIES
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Available-for-sale securities: | |||||||||||||||
Securities of U.S. Treasury and federal agencies | $ | 25,804 | 14,794 | 6,414 | 6,359 | 6,280 | |||||||||
Securities of U.S. states and political subdivisions | 44,944 | 45,805 | 44,779 | 44,140 | 42,536 | ||||||||||
Mortgage-backed securities: | |||||||||||||||
Federal agencies | 110,089 | 112,613 | 116,908 | 118,090 | 117,591 | ||||||||||
Residential and commercial | 26,263 | 27,491 | 29,433 | 30,362 | 31,200 | ||||||||||
Total mortgage-backed securities | 136,352 | 140,104 | 146,341 | 148,452 | 148,791 | ||||||||||
Other debt securities | 46,666 | 45,013 | 48,312 | 50,253 | 51,015 | ||||||||||
Total available-for-sale debt securities | 253,766 | 245,716 | 245,846 | 249,204 | 248,622 | ||||||||||
Marketable equity securities | 3,676 | 2,535 | 3,115 | 3,461 | 3,385 | ||||||||||
Total available-for-sale securities | 257,442 | 248,251 | 248,961 | 252,665 | 252,007 | ||||||||||
Held-to-maturity securities: | |||||||||||||||
Securities of U.S. Treasury and federal agencies | 40,886 | 28,887 | 17,777 | 5,861 | — | ||||||||||
Securities of U.S. states and political subdivisions | 1,962 | 123 | 41 | — | — | ||||||||||
Federal agency mortgage-backed securities | 5,476 | 5,770 | 6,030 | 6,199 | 6,304 | ||||||||||
Other debt securities | 7,159 | 5,978 | 6,260 | 5,602 | 6,042 | ||||||||||
Total held-to-maturity debt securities | 55,483 | 40,758 | 30,108 | 17,662 | 12,346 | ||||||||||
Total investment securities | $ | 312,925 | 289,009 | 279,069 | 270,327 | 264,353 | |||||||||
FIVE QUARTER LOANS
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Commercial: | |||||||||||||||
Commercial and industrial (1) | $ | 271,795 | 254,199 | 248,192 | 239,233 | 235,358 | |||||||||
Real estate mortgage | 111,996 | 112,064 | 113,564 | 112,920 | 112,427 | ||||||||||
Real estate construction | 18,728 | 18,090 | 17,272 | 16,816 | 16,934 | ||||||||||
Lease financing | 12,307 | 12,006 | 12,252 | 12,164 | 12,371 | ||||||||||
Total commercial | 414,826 | 396,359 | 391,280 | 381,133 | 377,090 | ||||||||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage | 265,386 | 263,337 | 260,114 | 259,488 | 258,507 | ||||||||||
Real estate 1-4 family junior lien mortgage | 59,717 | 60,875 | 62,487 | 63,998 | 65,950 | ||||||||||
Credit card | 31,119 | 28,280 | 27,226 | 26,073 | 26,882 | ||||||||||
Automobile | 55,740 | 55,242 | 54,095 | 52,607 | 50,808 | ||||||||||
Other revolving credit and installment | 35,763 | 34,790 | 33,740 | 43,144 | 43,049 | ||||||||||
Total consumer | 447,725 | 442,524 | 437,662 | 445,310 | 445,196 | ||||||||||
Total loans (2) | $ | 862,551 | 838,883 | 828,942 | 826,443 | 822,286 | |||||||||
(1) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
(2) | Includes $23.3 billion, $24.2 billion, $25.0 billion, $25.9 billion and $26.7 billion of purchased credit-impaired (PCI) loans at December 31, September 30, June 30 and March 31, 2014, and December 31, 2013, respectively. See the PCI loans table for detail of PCI loans. |
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, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Commercial foreign loans: | |||||||||||||||
Commercial and industrial | $ | 44,707 | 41,829 | 42,136 | 42,465 | 41,547 | |||||||||
Real estate mortgage | 4,776 | 4,856 | 5,146 | 4,952 | 5,328 | ||||||||||
Real estate construction | 218 | 209 | 216 | 201 | 187 | ||||||||||
Lease financing | 336 | 332 | 344 | 322 | 338 | ||||||||||
Total commercial foreign loans | $ | 50,037 | 47,226 | 47,842 | 47,940 | 47,400 | |||||||||
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Nonaccrual loans: | |||||||||||||||
Commercial: | |||||||||||||||
Commercial and industrial | $ | 538 | 614 | 724 | 664 | 775 | |||||||||
Real estate mortgage | 1,490 | 1,636 | 1,805 | 2,034 | 2,254 | ||||||||||
Real estate construction | 187 | 217 | 239 | 296 | 416 | ||||||||||
Lease financing | 24 | 27 | 29 | 32 | 30 | ||||||||||
Total commercial | 2,239 | 2,494 | 2,797 | 3,026 | 3,475 | ||||||||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage | 8,583 | 8,785 | 9,026 | 9,357 | 9,799 | ||||||||||
Real estate 1-4 family junior lien mortgage | 1,848 | 1,903 | 1,965 | 2,073 | 2,188 | ||||||||||
Automobile | 137 | 143 | 150 | 161 | 173 | ||||||||||
Other revolving credit and installment | 41 | 40 | 34 | 33 | 33 | ||||||||||
Total consumer | 10,609 | 10,871 | 11,175 | 11,624 | 12,193 | ||||||||||
Total nonaccrual loans (1)(2)(3) | 12,848 | 13,365 | 13,972 | 14,650 | 15,668 | ||||||||||
As a percentage of total loans (4) | 1.49 | % | 1.59 | 1.69 | 1.77 | 1.91 | |||||||||
Foreclosed assets: | |||||||||||||||
Government insured/guaranteed (5) | $ | 982 | 1,140 | 1,257 | 1,609 | 2,093 | |||||||||
Non-government insured/guaranteed | 1,627 | 1,691 | 1,748 | 1,813 | 1,844 | ||||||||||
Total foreclosed assets | 2,609 | 2,831 | 3,005 | 3,422 | 3,937 | ||||||||||
Total nonperforming assets | $ | 15,457 | 16,196 | 16,977 | 18,072 | 19,605 | |||||||||
As a percentage of total loans (4) | 1.79 | % | 1.93 | 2.05 | 2.19 | 2.38 | |||||||||
(1) | Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories. |
(2) | Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms. |
(3) | Real estate 1-4 family mortgage loans predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed. |
(4) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
(5) | During fourth quarter 2014, we adopted Accounting Standards Update (ASU) 2014-14, Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure, effective as of January 1, 2014. This ASU requires that government guaranteed real estate mortgage loans that meet specific criteria be recognized as other receivables upon foreclosure; previously, these assets were included in foreclosed assets. Government guaranteed residential real estate mortgage loans that completed foreclosure during 2014 and met the criteria specified by ASU 2014-14 are excluded from this table and included in Accounts Receivable in Other Assets. |
- 31 -
Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Loans 90 days or more past due and still accruing: | |||||||||||||||
Total (excluding PCI)(1): | $ | 17,810 | 18,295 | 18,582 | 21,215 | 23,219 | |||||||||
Less: FHA insured/guaranteed by the VA (2)(3) | 16,827 | 16,628 | 16,978 | 19,405 | 21,274 | ||||||||||
Less: Student loans guaranteed under the FFELP (4) | 63 | 721 | 707 | 860 | 900 | ||||||||||
Total, not government insured/guaranteed | $ | 920 | 946 | 897 | 950 | 1,045 | |||||||||
By segment and class, not government insured/guaranteed: | |||||||||||||||
Commercial: | |||||||||||||||
Commercial and industrial | $ | 31 | 35 | 52 | 12 | 11 | |||||||||
Real estate mortgage | 16 | 37 | 53 | 13 | 35 | ||||||||||
Real estate construction | — | 18 | 16 | 69 | 97 | ||||||||||
Total commercial | 47 | 90 | 121 | 94 | 143 | ||||||||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage (3) | 260 | 327 | 311 | 333 | 354 | ||||||||||
Real estate 1-4 family junior lien mortgage (3) | 83 | 78 | 70 | 88 | 86 | ||||||||||
Credit card | 364 | 302 | 266 | 308 | 321 | ||||||||||
Automobile | 73 | 64 | 48 | 41 | 55 | ||||||||||
Other revolving credit and installment | 93 | 85 | 81 | 86 | 86 | ||||||||||
Total consumer | 873 | 856 | 776 | 856 | 902 | ||||||||||
Total, not government insured/guaranteed | $ | 920 | 946 | 897 | 950 | 1,045 | |||||||||
(1) | PCI loans totaled $3.7 billion, $4.0 billion, $4.0 billion, $4.3 billion and $4.5 billion, at December 31, September 30, June 30, and March 31, 2014, and December 31, 2013, respectively. |
(2) | Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA. |
(3) | Includes mortgages held for sale 90 days or more past due and still accruing. |
(4) | Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP. At the end of second quarter 2014, all government guaranteed loans were transferred to loans held for sale. |
- 32 -
Wells Fargo & Company and Subsidiaries
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.
Under the accounting guidance for PCI loans, the excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan, or pool of loans, in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.
Subsequent to acquisition, we regularly evaluate our estimates of cash flows expected to be collected. These evaluations, performed quarterly, require the continued usage of key assumptions and estimates, similar to the initial estimate of fair value. If we have probable decreases in the expected cash flows (other than due to decreases in interest rate indices and changes in prepayment assumptions), we charge the provision for credit losses, resulting in an increase to the allowance for loan losses. If we have probable and significant increases in the expected cash flows subsequent to establishing an additional allowance, we first reverse any previously established allowance and then increase interest income over the remaining life of the loan, or pool of loans.
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.
Substantially all of our PCI loans were acquired from Wachovia on December 31, 2008, at which time we acquired $18.7 billion of commercial and $40.1 billion of consumer PCI loans. The following table provides information for PCI loans by loan class.
December 31, | ||||||
(in millions) | 2014 | 2013 | ||||
Commercial: | ||||||
Commercial and industrial | $ | 75 | 215 | |||
Real estate mortgage | 1,261 | 1,856 | ||||
Real estate construction | 171 | 433 | ||||
Total commercial | 1,507 | 2,504 | ||||
Consumer: | ||||||
Real estate 1-4 family first mortgage | 21,712 | 24,100 | ||||
Real estate 1-4 family junior lien mortgage | 101 | 123 | ||||
Automobile | — | — | ||||
Total consumer | 21,813 | 24,223 | ||||
Total PCI loans (carrying value) | $ | 23,320 | 26,727 | |||
- 33 -
Wells Fargo & Company and Subsidiaries
CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS
The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference. A nonaccretable difference is established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Substantially all our commercial and industrial, CRE and foreign PCI loans are accounted for as individual loans. Conversely, Pick-a-Pay and other consumer PCI loans have been aggregated into several pools based on common risk characteristics. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Resolutions of loans may include sales to third parties, receipt of payments in settlement with the borrower, or foreclosure of the collateral. Our policy is to remove an individual loan from a pool based on comparing the amount received from its resolution with its contractual amount. Any difference between these amounts is absorbed by the nonaccretable difference. This removal method assumes that the amount received from resolution approximates pool performance expectations. The accretable yield percentage is unaffected by the resolution and any changes in the effective yield for the remaining loans in the pool are addressed by our quarterly cash flow evaluation process for each pool. For loans that are resolved by payment in full, there is no release of the nonaccretable difference for the pool because there is no difference between the amount received at resolution and the contractual amount of the loan. Modified PCI loans are not removed from a pool even if those loans would otherwise be deemed troubled debt restructurings (TDRs). Modified PCI loans that are accounted for individually are considered TDRs, and removed from PCI accounting, if there has been a concession granted in excess of the original nonaccretable difference. The following table provides an analysis of changes in the nonaccretable difference.
(in millions) | Commercial | Pick-a-Pay | Other consumer | Total | ||||||||
Balance, December 31, 2008 | $ | 10,410 | 26,485 | 4,069 | 40,964 | |||||||
Addition of nonaccretable difference due to acquisitions | 213 | — | — | 213 | ||||||||
Release of nonaccretable difference due to: | ||||||||||||
Loans resolved by settlement with borrower (1) | (1,512 | ) | — | — | (1,512 | ) | ||||||
Loans resolved by sales to third parties (2) | (308 | ) | — | (85 | ) | (393 | ) | |||||
Reclassification to accretable yield for loans with improving credit-related cash flows (3) | (1,605 | ) | (3,897 | ) | (823 | ) | (6,325 | ) | ||||
Use of nonaccretable difference due to: | ||||||||||||
Losses from loan resolutions and write-downs (4) | (6,933 | ) | (17,884 | ) | (2,961 | ) | (27,778 | ) | ||||
Balance, December 31, 2013 | 265 | 4,704 | 200 | 5,169 | ||||||||
Addition of nonaccretable difference due to acquisitions | 13 | — | — | 13 | ||||||||
Release of nonaccretable difference due to: | ||||||||||||
Loans resolved by settlement with borrower (1) | (33 | ) | — | — | (33 | ) | ||||||
Loans resolved by sales to third parties (2) | (28 | ) | — | — | (28 | ) | ||||||
Reclassification to accretable yield for loans with improving credit-related cash flows (3) | (129 | ) | (2,094 | ) | (20 | ) | (2,243 | ) | ||||
Use of nonaccretable difference due to: | ||||||||||||
Net recoveries (losses) from loan resolutions and write-downs (4) | (15 | ) | 29 | 17 | 31 | |||||||
Balance, December 31, 2014 | $ | 73 | 2,639 | 197 | 2,909 | |||||||
Balance, September 30, 2014 | $ | 114 | 2,772 | 196 | 3,082 | |||||||
Addition of nonaccretable difference due to acquisitions | — | — | — | — | ||||||||
Release of nonaccretable difference due to: | ||||||||||||
Loans resolved by settlement with borrower (1) | (6 | ) | — | — | (6 | ) | ||||||
Loans resolved by sales to third parties (2) | (14 | ) | — | — | (14 | ) | ||||||
Reclassification to accretable yield for loans with improving credit-related cash flows (3) | (13 | ) | (140 | ) | (1 | ) | (154 | ) | ||||
Use of nonaccretable difference due to: | ||||||||||||
Net recoveries (losses) from loan resolutions and write-downs (4) | (8 | ) | 7 | 2 | 1 | |||||||
Balance, December 31, 2014 | $ | 73 | 2,639 | 197 | 2,909 | |||||||
(1) | Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases for settlements with borrowers due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations. |
(2) | Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale. |
(3) | Reclassification of nonaccretable difference to accretable yield will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans. |
(4) | Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable difference when 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. Also includes foreign exchange adjustments related to underlying principal for which the nonaccretable difference was established. |
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Wells Fargo & Company and Subsidiaries
CHANGES IN ACCRETABLE YIELD RELATED TO PCI LOANS
The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:
• | Changes in interest rate indices for variable rate PCI loans – Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows; |
• | Changes in prepayment assumptions – Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and |
• | Changes in the expected principal and interest payments over the estimated life – Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected. |
The change in the accretable yield related to PCI loans is presented in the following table.
(in millions) | |||
Balance, December 31, 2008 | $ | 10,447 | |
Addition of accretable yield due to acquisitions | 132 | ||
Accretion into interest income (1) | (11,184 | ) | |
Accretion into noninterest income due to sales (2) | (393 | ) | |
Reclassification from nonaccretable difference for loans with improving credit-related cash flows | 6,325 | ||
Changes in expected cash flows that do not affect nonaccretable difference (3) | 12,065 | ||
Balance, December 31, 2013 | 17,392 | ||
Addition of accretable yield due to acquisitions | — | ||
Accretion into interest income (1) | (1,599 | ) | |
Accretion into noninterest income due to sales (2) | (37 | ) | |
Reclassification from nonaccretable difference for loans with improving credit-related cash flows | 2,243 | ||
Changes in expected cash flows that do not affect nonaccretable difference (3) | (209 | ) | |
Balance, December 31, 2014 | $ | 17,790 | |
Balance, September 30, 2014 | $ | 17,979 | |
Addition of accretable yield due to acquisitions | — | ||
Accretion into interest income (1) | (416 | ) | |
Accretion into noninterest income due to sales (2) | (2 | ) | |
Reclassification from nonaccretable difference for loans with improving credit-related cash flows | 154 | ||
Changes in expected cash flows that do not affect nonaccretable difference (3) | 75 | ||
Balance, December 31, 2014 | $ | 17,790 | |
(1) | Includes accretable yield released as a result of settlements with borrowers, which is included in interest income. |
(2) | Includes accretable yield released as a result of sales to third parties, which is included in noninterest income. |
(3) | Represents changes in cash flows expected to be collected due to the impact of modifications, changes in prepayment assumptions, changes in interest rates on variable rate PCI loans and sales to third parties. |
CHANGES IN ALLOWANCE FOR PCI LOAN LOSSES
When it is estimated that the expected cash flows have decreased subsequent to acquisition for a PCI loan or pool of loans, an allowance is established and a provision for additional loss is recorded as a charge to income. The following table summarizes the changes in allowance for PCI loan losses.
(in millions) | Commercial | Pick-a-Pay | Other consumer | Total | ||||||||
Balance, December 31, 2008 | $ | — | — | — | — | |||||||
Provision for loan losses | 1,641 | — | 107 | 1,748 | ||||||||
Charge-offs | (1,615 | ) | — | (103 | ) | (1,718 | ) | |||||
Balance, December 31, 2013 | 26 | — | 4 | 30 | ||||||||
Reversal of provision for loan losses | (12 | ) | — | (3 | ) | (15 | ) | |||||
Charge-offs | (3 | ) | — | (1 | ) | (4 | ) | |||||
Balance, December 31, 2014 | $ | 11 | — | — | 11 | |||||||
Balance, September 30, 2014 | 8 | — | 3 | 11 | ||||||||
Provision (reversal of provision) for loan losses | 3 | — | (3 | ) | — | |||||||
Recoveries (charge-offs) | — | — | — | — | ||||||||
Balance, December 31, 2014 | $ | 11 | — | — | 11 | |||||||
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Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)
December 31, 2014 | ||||||||||||||||||||
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 | $ | 18,257 | 77 | % | $ | 15,001 | 62 | % | $ | 11,426 | 57 | % | ||||||||
Florida | 2,108 | 87 | 1,523 | 59 | 2,375 | 71 | ||||||||||||||
New Jersey | 890 | 83 | 768 | 65 | 1,527 | 70 | ||||||||||||||
New York | 564 | 77 | 522 | 64 | 714 | 67 | ||||||||||||||
Texas | 233 | 62 | 206 | 54 | 920 | 50 | ||||||||||||||
Other states | 4,252 | 82 | 3,493 | 65 | 6,527 | 69 | ||||||||||||||
Total Pick-a-Pay loans | $ | 26,304 | $ | 21,513 | $ | 23,489 | ||||||||||||||
(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 2014. |
(2) | Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan. |
(3) | The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas. |
(4) | Carrying value, which does not reflect the allowance for loan losses, includes remaining purchase accounting adjustments, which, for PCI loans may include the nonaccretable difference and the accretable yield and, for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs. |
(5) | The ratio of carrying value to current value is calculated as the carrying value divided by the collateral value. |
NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Commercial: | |||||||||||||||
Legacy Wachovia commercial and industrial and commercial real estate PCI loans (1) | $ | 1,125 | 1,465 | 1,499 | 1,720 | 2,013 | |||||||||
Total commercial | 1,125 | 1,465 | 1,499 | 1,720 | 2,013 | ||||||||||
Consumer: | |||||||||||||||
Pick-a-Pay mortgage (1) | 45,002 | 46,389 | 47,965 | 49,533 | 50,971 | ||||||||||
Liquidating home equity | 2,910 | 3,083 | 3,290 | 3,505 | 3,695 | ||||||||||
Legacy Wells Fargo Financial indirect auto | 34 | 54 | 85 | 132 | 207 | ||||||||||
Legacy Wells Fargo Financial debt consolidation | 11,417 | 11,781 | 12,169 | 12,545 | 12,893 | ||||||||||
Education Finance-government guaranteed (2) | — | — | — | 10,204 | 10,712 | ||||||||||
Legacy Wachovia other PCI loans (1) | 300 | 320 | 336 | 355 | 375 | ||||||||||
Total consumer | 59,663 | 61,627 | 63,845 | 76,274 | 78,853 | ||||||||||
Total non-strategic and liquidating loan portfolios | $ | 60,788 | 63,092 | 65,344 | 77,994 | 80,866 | |||||||||
(1) | Net of purchase accounting adjustments related to PCI loans. |
(2) | The government guaranteed student loan portfolio was transferred to held for sale at the end of second quarter 2014. |
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Wells Fargo & Company and Subsidiaries
CHANGES IN ALLOWANCE FOR CREDIT LOSSES
Quarter ended Dec 31, | Year ended Dec 31, | |||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||
Balance, beginning of period | $ | 13,481 | 15,647 | 14,971 | 17,477 | |||||||
Provision for credit losses | 485 | 363 | 1,395 | 2,309 | ||||||||
Interest income on certain impaired loans (1) | (48 | ) | (55 | ) | (211 | ) | (264 | ) | ||||
Loan charge-offs: | ||||||||||||
Commercial: | ||||||||||||
Commercial and industrial | (161 | ) | (202 | ) | (627 | ) | (739 | ) | ||||
Real estate mortgage | (19 | ) | (37 | ) | (66 | ) | (190 | ) | ||||
Real estate construction | (2 | ) | (10 | ) | (9 | ) | (28 | ) | ||||
Lease financing | (3 | ) | (3 | ) | (15 | ) | (34 | ) | ||||
Total commercial | (185 | ) | (252 | ) | (717 | ) | (991 | ) | ||||
Consumer: | ||||||||||||
Real estate 1-4 family first mortgage | (138 | ) | (269 | ) | (721 | ) | (1,439 | ) | ||||
Real estate 1-4 family junior lien mortgage | (193 | ) | (291 | ) | (864 | ) | (1,579 | ) | ||||
Credit card | (256 | ) | (251 | ) | (1,025 | ) | (1,022 | ) | ||||
Automobile | (214 | ) | (182 | ) | (729 | ) | (625 | ) | ||||
Other revolving credit and installment | (160 | ) | (195 | ) | (668 | ) | (754 | ) | ||||
Total consumer | (961 | ) | (1,188 | ) | (4,007 | ) | (5,419 | ) | ||||
Total loan charge-offs | (1,146 | ) | (1,440 | ) | (4,724 | ) | (6,410 | ) | ||||
Loan recoveries: | ||||||||||||
Commercial: | ||||||||||||
Commercial and industrial | 79 | 95 | 369 | 396 | ||||||||
Real estate mortgage | 44 | 78 | 160 | 226 | ||||||||
Real estate construction | 28 | 23 | 136 | 137 | ||||||||
Lease financing | 2 | 3 | 8 | 17 | ||||||||
Total commercial | 153 | 199 | 673 | 776 | ||||||||
Consumer: | ||||||||||||
Real estate 1-4 family first mortgage | 50 | 74 | 212 | 246 | ||||||||
Real estate 1-4 family junior lien mortgage | 59 | 65 | 238 | 269 | ||||||||
Credit card | 35 | 31 | 161 | 127 | ||||||||
Automobile | 82 | 74 | 349 | 322 | ||||||||
Other revolving credit and installment | 32 | 34 | 146 | 161 | ||||||||
Total consumer | 258 | 278 | 1,106 | 1,125 | ||||||||
Total loan recoveries | 411 | 477 | 1,779 | 1,901 | ||||||||
Net loan charge-offs (2) | (735 | ) | (963 | ) | (2,945 | ) | (4,509 | ) | ||||
Allowances related to business combinations/other | (14 | ) | (21 | ) | (41 | ) | (42 | ) | ||||
Balance, end of period | $ | 13,169 | 14,971 | 13,169 | 14,971 | |||||||
Components: | ||||||||||||
Allowance for loan losses | $ | 12,319 | 14,502 | 12,319 | 14,502 | |||||||
Allowance for unfunded credit commitments | 850 | 469 | 850 | 469 | ||||||||
Allowance for credit losses (3) | $ | 13,169 | 14,971 | 13,169 | 14,971 | |||||||
Net loan charge-offs (annualized) as a percentage of average total loans (2) | 0.34 | % | 0.47 | 0.35 | 0.56 | |||||||
Allowance for loan losses as a percentage of total loans (3)(4) | 1.43 | 1.76 | 1.43 | 1.76 | ||||||||
Allowance for credit losses as a percentage of total loans (3)(4) | 1.53 | 1.82 | 1.53 | 1.82 | ||||||||
(1) | Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income. |
(2) | For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting estimates. |
(3) | The allowance for credit losses includes $11 million and $30 million at December 31, 2014 and 2013, respectively, related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs. |
(4) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
Quarter ended | |||||||||||||||
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Balance, beginning of quarter | $ | 13,481 | 13,834 | 14,414 | 14,971 | 15,647 | |||||||||
Provision for credit losses | 485 | 368 | 217 | 325 | 363 | ||||||||||
Interest income on certain impaired loans (1) | (48 | ) | (52 | ) | (55 | ) | (56 | ) | (55 | ) | |||||
Loan charge-offs: | |||||||||||||||
Commercial: | |||||||||||||||
Commercial and industrial | (161 | ) | (157 | ) | (146 | ) | (163 | ) | (202 | ) | |||||
Real estate mortgage | (19 | ) | (11 | ) | (16 | ) | (20 | ) | (37 | ) | |||||
Real estate construction | (2 | ) | (3 | ) | (3 | ) | (1 | ) | (10 | ) | |||||
Lease financing | (3 | ) | (5 | ) | (3 | ) | (4 | ) | (3 | ) | |||||
Total commercial | (185 | ) | (176 | ) | (168 | ) | (188 | ) | (252 | ) | |||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage | (138 | ) | (167 | ) | (193 | ) | (223 | ) | (269 | ) | |||||
Real estate 1-4 family junior lien mortgage | (193 | ) | (202 | ) | (220 | ) | (249 | ) | (291 | ) | |||||
Credit card | (256 | ) | (236 | ) | (266 | ) | (267 | ) | (251 | ) | |||||
Automobile | (214 | ) | (192 | ) | (143 | ) | (180 | ) | (182 | ) | |||||
Other revolving credit and installment | (160 | ) | (160 | ) | (171 | ) | (177 | ) | (195 | ) | |||||
Total consumer | (961 | ) | (957 | ) | (993 | ) | (1,096 | ) | (1,188 | ) | |||||
Total loan charge-offs | (1,146 | ) | (1,133 | ) | (1,161 | ) | (1,284 | ) | (1,440 | ) | |||||
Loan recoveries: | |||||||||||||||
Commercial: | |||||||||||||||
Commercial and industrial | 79 | 90 | 86 | 114 | 95 | ||||||||||
Real estate mortgage | 44 | 48 | 26 | 42 | 78 | ||||||||||
Real estate construction | 28 | 61 | 23 | 24 | 23 | ||||||||||
Lease financing | 2 | 1 | 2 | 3 | 3 | ||||||||||
Total commercial | 153 | 200 | 137 | 183 | 199 | ||||||||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage | 50 | 53 | 56 | 53 | 74 | ||||||||||
Real estate 1-4 family junior lien mortgage | 59 | 62 | 60 | 57 | 65 | ||||||||||
Credit card | 35 | 35 | 55 | 36 | 31 | ||||||||||
Automobile | 82 | 80 | 97 | 90 | 74 | ||||||||||
Other revolving credit and installment | 32 | 35 | 39 | 40 | 34 | ||||||||||
Total consumer | 258 | 265 | 307 | 276 | 278 | ||||||||||
Total loan recoveries | 411 | 465 | 444 | 459 | 477 | ||||||||||
Net loan charge-offs | (735 | ) | (668 | ) | (717 | ) | (825 | ) | (963 | ) | |||||
Allowances related to business combinations/other | (14 | ) | (1 | ) | (25 | ) | (1 | ) | (21 | ) | |||||
Balance, end of quarter | $ | 13,169 | 13,481 | 13,834 | 14,414 | 14,971 | |||||||||
Components: | |||||||||||||||
Allowance for loan losses | $ | 12,319 | 12,681 | 13,101 | 13,695 | 14,502 | |||||||||
Allowance for unfunded credit commitments | 850 | 800 | 733 | 719 | 469 | ||||||||||
Allowance for credit losses | $ | 13,169 | 13,481 | 13,834 | 14,414 | 14,971 | |||||||||
Net loan charge-offs (annualized) as a percentage of average total loans | 0.34 | % | 0.32 | 0.35 | 0.41 | 0.47 | |||||||||
Allowance for loan losses as a percentage of: | |||||||||||||||
Total loans (2) | 1.43 | 1.51 | 1.58 | 1.66 | 1.76 | ||||||||||
Nonaccrual loans | 96 | 95 | 94 | 93 | 93 | ||||||||||
Nonaccrual loans and other nonperforming assets | 80 | 78 | 77 | 76 | 74 | ||||||||||
Allowance for credit losses as a percentage of: | |||||||||||||||
Total loans (2) | 1.53 | 1.61 | 1.67 | 1.74 | 1.82 | ||||||||||
Nonaccrual loans | 103 | 101 | 99 | 98 | 96 | ||||||||||
Nonaccrual loans and other nonperforming assets | 85 | 83 | 81 | 80 | 76 | ||||||||||
(1) | Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income. |
(2) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER RISK-BASED CAPITAL COMPONENTS
Under Basel III (General Approach) (1) | Under Basel I | |||||||||||||||
(in billions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | |||||||||||
Total equity | $ | 185.3 | 183.0 | 181.5 | 176.5 | 171.0 | ||||||||||
Noncontrolling interests | (0.9 | ) | (0.5 | ) | (0.6 | ) | (0.8 | ) | (0.9 | ) | ||||||
Total Wells Fargo stockholders’ equity | 184.4 | 182.5 | 180.9 | 175.7 | 170.1 | |||||||||||
Adjustments: | ||||||||||||||||
Preferred stock | (18.0 | ) | (18.0 | ) | (17.2 | ) | (15.2 | ) | (15.2 | ) | ||||||
Cumulative other comprehensive income (2) | (2.6 | ) | (2.5 | ) | (3.2 | ) | (2.2 | ) | (1.4 | ) | ||||||
Goodwill and other intangible assets (2)(3) | (26.3 | ) | (26.1 | ) | (25.6 | ) | (25.6 | ) | (29.6 | ) | ||||||
Investment in certain subsidiaries and other | (0.3 | ) | — | (0.1 | ) | — | (0.4 | ) | ||||||||
Common Equity Tier 1 (1)(4) | (A) | 137.2 | 135.9 | 134.8 | 132.7 | 123.5 | ||||||||||
Preferred stock | 18.0 | 18.0 | 17.2 | 15.2 | 15.2 | |||||||||||
Qualifying hybrid securities and noncontrolling interests | — | — | — | — | 2.0 | |||||||||||
Other | (0.5 | ) | (0.5 | ) | (0.3 | ) | (0.3 | ) | — | |||||||
Total Tier 1 capital | 154.7 | 153.4 | 151.7 | 147.6 | 140.7 | |||||||||||
Long-term debt and other instruments qualifying as Tier 2 | 25.0 | 23.7 | 24.0 | 21.7 | 20.5 | |||||||||||
Qualifying allowance for credit losses | 13.2 | 13.5 | 13.8 | 14.1 | 14.3 | |||||||||||
Other | 0.2 | (0.1 | ) | — | 0.2 | 0.7 | ||||||||||
Total Tier 2 capital | 38.4 | 37.1 | 37.8 | 36.0 | 35.5 | |||||||||||
Total qualifying capital | (B) | $ | 193.1 | 190.5 | 189.5 | 183.6 | 176.2 | |||||||||
Basel III Risk-Weighted Assets (RWAs) (5)(6): | ||||||||||||||||
Credit risk | $ | 1,193.1 | 1,171.8 | 1,145.7 | 1,120.3 | |||||||||||
Market risk | 49.6 | 51.1 | 46.8 | 48.1 | ||||||||||||
Basel I RWAs (5)(6): | ||||||||||||||||
Credit risk | 1,105.2 | |||||||||||||||
Market risk | 36.3 | |||||||||||||||
Total Basel III / Basel I RWAs | (C) | $ | 1,242.7 | 1,222.9 | 1,192.5 | 1,168.4 | 1,141.5 | |||||||||
Capital Ratios (6): | ||||||||||||||||
Common Equity Tier 1 to total RWAs | (A)/(C) | 11.04 | % | 11.11 | 11.31 | 11.36 | 10.82 | |||||||||
Total capital to total RWAs | (B)/(C) | 15.54 | 15.58 | 15.89 | 15.71 | 15.43 | ||||||||||
(1) | Basel III revises the definition of capital, increases minimum capital ratios, and introduces a minimum Common Equity Tier 1 (CET1) ratio. These changes are being fully phased in effective January 1, 2014 through the end of 2021 and the capital ratios will be determined using Basel III (General Approach) RWAs during 2014. |
(2) | Under transition provisions to Basel III, cumulative other comprehensive income (previously deducted under Basel I) is included in CET1 over a specified phase-in period. In addition, certain intangible assets includable in CET1 are phased out over a specified period. |
(3) | Goodwill and other intangible assets are net of any associated deferred tax liabilities. |
(4) | CET1 (formerly Tier 1 common equity under Basel I) is a non-GAAP financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews CET1 along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants. |
(5) | Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWAs. |
(6) | The Company’s December 31, 2014, RWAs and capital ratios are preliminary. |
- 39 -
Wells Fargo & Company and Subsidiaries
COMMON EQUITY TIER 1 UNDER BASEL III (ADVANCED APPROACH, FULLY PHASED-IN) (1)(2)
(in billions) | Dec 31, 2014 | |||
Common Equity Tier 1 (transition amount) under Basel III | $ | 137.2 | ||
Adjustments from transition amount to fully phased-in under Basel III (3): | ||||
Cumulative other comprehensive income | 2.6 | |||
Other | (2.8 | ) | ||
Total adjustments | (0.2 | ) | ||
Common Equity Tier 1 (fully phased-in) under Basel III | (C) | $ | 137.0 | |
Total RWAs anticipated under Basel III (4)(5) | (D) | $ | 1,312.8 | |
Common Equity Tier 1 to total RWAs anticipated under Basel III (Advanced Approach, fully phased-in) (5) | (C)/(D) | 10.44 | % | |
(1) | CET1 is a non-GAAP financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews CET1 along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants. |
(2) | The Basel III CET1 and RWAs are estimated based on the Basel III capital rules adopted July 2, 2013, by the FRB. The rules establish a new comprehensive capital framework for U.S. banking organizations that implement the Basel III capital framework and certain provisions of the Dodd-Frank Act. The rules are being phased in effective January 1, 2014 through the end of 2021. |
(3) | Assumes cumulative other comprehensive income is fully phased in and certain other intangible assets are fully phased out under Basel III capital rules. |
(4) | The final Basel III capital rules provide for two capital frameworks: the Standardized Approach intended to replace Basel I, and the Advanced Approach applicable to certain institutions. Under the final rules, we will be 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. While the amount of RWAs determined under the Standardized and Advanced Approaches has been converging, management’s estimate of RWAs as of December 31, 2014, is based on the Advanced Approach, which is currently estimated to be higher than RWAs under the Standardized Approach, resulting in a lower CET1 compared with the Standardized Approach. Basel III capital rules adopted by the Federal Reserve Board incorporate different classification of assets, with risk weights based on Wells Fargo’s internal models, along with adjustments to address a combination of credit/counterparty, operational and market risks, and other Basel III elements. |
(5) | The Company’s December 31, 2014, RWAs and capital ratio are preliminary. |
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Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
(income/expense in millions, average balances in billions) | Community Banking | Wholesale Banking | Wealth, Brokerage and Retirement | Other (2) | Consolidated Company | |||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
Quarter ended Dec. 31, | ||||||||||||||||||||||||||||||
Net interest income (3) | $ | 7,576 | 7,225 | 3,104 | 3,133 | 846 | 770 | (346 | ) | (325 | ) | 11,180 | 10,803 | |||||||||||||||||
Provision (reversal of provision) for credit losses | 518 | 490 | (39 | ) | (125 | ) | 8 | (11 | ) | (2 | ) | 9 | 485 | 363 | ||||||||||||||||
Noninterest income | 5,259 | 5,029 | 2,950 | 2,839 | 2,801 | 2,668 | (747 | ) | (674 | ) | 10,263 | 9,862 | ||||||||||||||||||
Noninterest expense | 7,281 | 7,073 | 3,307 | 3,020 | 2,811 | 2,655 | (752 | ) | (663 | ) | 12,647 | 12,085 | ||||||||||||||||||
Income (loss) before income tax expense (benefit) | 5,036 | 4,691 | 2,786 | 3,077 | 828 | 794 | (339 | ) | (345 | ) | 8,311 | 8,217 | ||||||||||||||||||
Income tax expense (benefit) | 1,545 | 1,373 | 789 | 960 | 314 | 302 | (129 | ) | (131 | ) | 2,519 | 2,504 | ||||||||||||||||||
Net income (loss) before noncontrolling interests | 3,491 | 3,318 | 1,997 | 2,117 | 514 | 492 | (210 | ) | (214 | ) | 5,792 | 5,713 | ||||||||||||||||||
Less: Net income (loss) from noncontrolling interests | 56 | 96 | 27 | 6 | — | 1 | — | — | 83 | 103 | ||||||||||||||||||||
Net income (loss) (4) | $ | 3,435 | 3,222 | 1,970 | 2,111 | 514 | 491 | (210 | ) | (214 | ) | 5,709 | 5,610 | |||||||||||||||||
Average loans (5) | $ | 503.8 | 502.5 | 326.8 | 294.6 | 54.8 | 48.4 | (36.0 | ) | (32.2 | ) | 849.4 | 813.3 | |||||||||||||||||
Average assets (5) | 974.9 | 883.6 | 573.3 | 509.0 | 192.2 | 185.3 | (76.6 | ) | (72.1 | ) | 1,663.8 | 1,505.8 | ||||||||||||||||||
Average core deposits | 655.6 | 620.2 | 292.4 | 258.5 | 157.0 | 153.9 | (69.0 | ) | (66.8 | ) | 1,036.0 | 965.8 | ||||||||||||||||||
Year ended Dec. 31, | ||||||||||||||||||||||||||||||
Net interest income (3) | $ | 29,709 | 28,839 | 11,955 | 12,298 | 3,179 | 2,888 | (1,316 | ) | (1,225 | ) | 43,527 | 42,800 | |||||||||||||||||
Provision (reversal of provision) for credit losses | 1,681 | 2,755 | (266 | ) | (445 | ) | (50 | ) | (16 | ) | 30 | 15 | 1,395 | 2,309 | ||||||||||||||||
Noninterest income | 21,153 | 21,500 | 11,527 | 11,766 | 11,039 | 10,315 | (2,899 | ) | (2,601 | ) | 40,820 | 40,980 | ||||||||||||||||||
Noninterest expense | 28,126 | 28,723 | 12,975 | 12,378 | 10,907 | 10,455 | (2,971 | ) | (2,714 | ) | 49,037 | 48,842 | ||||||||||||||||||
Income (loss) before income tax expense (benefit) | 21,055 | 18,861 | 10,773 | 12,131 | 3,361 | 2,764 | (1,274 | ) | (1,127 | ) | 33,915 | 32,629 | ||||||||||||||||||
Income tax expense (benefit) | 6,350 | 5,799 | 3,165 | 3,984 | 1,276 | 1,050 | (484 | ) | (428 | ) | 10,307 | 10,405 | ||||||||||||||||||
Net income (loss) before noncontrolling interests | 14,705 | 13,062 | 7,608 | 8,147 | 2,085 | 1,714 | (790 | ) | (699 | ) | 23,608 | 22,224 | ||||||||||||||||||
Less: Net income (loss) from noncontrolling interests | 525 | 330 | 24 | 14 | 2 | 2 | — | — | 551 | 346 | ||||||||||||||||||||
Net income (loss) (4) | $ | 14,180 | 12,732 | 7,584 | 8,133 | 2,083 | 1,712 | (790 | ) | (699 | ) | 23,057 | 21,878 | |||||||||||||||||
Average loans (5) | $ | 503.2 | 499.3 | 313.4 | 287.7 | 52.1 | 46.1 | (34.3 | ) | (30.4 | ) | 834.4 | 802.7 | |||||||||||||||||
Average assets (5) | 934.2 | 835.4 | 544.2 | 500.0 | 189.8 | 180.9 | (74.9 | ) | (70.3 | ) | 1,593.3 | 1,446.0 | ||||||||||||||||||
Average core deposits | 642.3 | 620.1 | 274.0 | 237.2 | 154.9 | 150.1 | (67.6 | ) | (65.3 | ) | 1,003.6 | 942.1 | ||||||||||||||||||
(1) | The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. |
(2) | Includes corporate items not specific to a business segment and the elimination of certain items that are included in more than one business segment, substantially all of which represents services for wealth management customers provided in Community Banking stores. |
(3) | Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment. |
(4) | Represents segment net income (loss) for Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement segments and Wells Fargo net income for the consolidated company. |
(5) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)
Quarter ended | |||||||||||||||
(income/expense in millions, average balances in billions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
COMMUNITY BANKING | |||||||||||||||
Net interest income (2) | $ | 7,576 | 7,472 | 7,386 | 7,275 | 7,225 | |||||||||
Provision for credit losses | 518 | 465 | 279 | 419 | 490 | ||||||||||
Noninterest income | 5,259 | 5,356 | 5,220 | 5,318 | 5,029 | ||||||||||
Noninterest expense | 7,281 | 7,051 | 7,020 | 6,774 | 7,073 | ||||||||||
Income before income tax expense | 5,036 | 5,312 | 5,307 | 5,400 | 4,691 | ||||||||||
Income tax expense | 1,545 | 1,609 | 1,820 | 1,376 | 1,373 | ||||||||||
Net income before noncontrolling interests | 3,491 | 3,703 | 3,487 | 4,024 | 3,318 | ||||||||||
Less: Net income from noncontrolling interests | 56 | 233 | 56 | 180 | 96 | ||||||||||
Segment net income | 3,435 | 3,470 | 3,431 | 3,844 | 3,222 | ||||||||||
Average loans | $ | 503.8 | 498.6 | 505.4 | 505.0 | 502.5 | |||||||||
Average assets | 974.9 | 950.2 | 918.1 | 892.6 | 883.6 | ||||||||||
Average core deposits | 655.6 | 646.9 | 639.8 | 626.5 | 620.2 | ||||||||||
WHOLESALE BANKING | |||||||||||||||
Net interest income (2) | $ | 3,104 | 3,007 | 2,953 | 2,891 | 3,133 | |||||||||
Reversal of provision for credit losses | (39 | ) | (85 | ) | (49 | ) | (93 | ) | (125 | ) | |||||
Noninterest income | 2,950 | 2,895 | 2,993 | 2,689 | 2,839 | ||||||||||
Noninterest expense | 3,307 | 3,250 | 3,203 | 3,215 | 3,020 | ||||||||||
Income before income tax expense | 2,786 | 2,737 | 2,792 | 2,458 | 3,077 | ||||||||||
Income tax expense | 789 | 824 | 838 | 714 | 960 | ||||||||||
Net income before noncontrolling interests | 1,997 | 1,913 | 1,954 | 1,744 | 2,117 | ||||||||||
Less: Net income (loss) from noncontrolling interests | 27 | (7 | ) | 2 | 2 | 6 | |||||||||
Segment net income | $ | 1,970 | 1,920 | 1,952 | 1,742 | 2,111 | |||||||||
Average loans (4) | $ | 326.8 | 316.5 | 308.1 | 301.9 | 294.6 | |||||||||
Average assets (4) | 573.3 | 553.0 | 532.4 | 517.4 | 509.0 | ||||||||||
Average core deposits | 292.4 | 278.4 | 265.8 | 259.0 | 258.5 | ||||||||||
WEALTH, BROKERAGE AND RETIREMENT | |||||||||||||||
Net interest income (2) | $ | 846 | 790 | 775 | 768 | 770 | |||||||||
Provision (reversal of provision) for credit losses | 8 | (25 | ) | (25 | ) | (8 | ) | (11 | ) | ||||||
Noninterest income | 2,801 | 2,763 | 2,775 | 2,700 | 2,668 | ||||||||||
Noninterest expense | 2,811 | 2,690 | 2,695 | 2,711 | 2,655 | ||||||||||
Income before income tax expense | 828 | 888 | 880 | 765 | 794 | ||||||||||
Income tax expense | 314 | 338 | 334 | 290 | 302 | ||||||||||
Net income before noncontrolling interests | 514 | 550 | 546 | 475 | 492 | ||||||||||
Less: Net income from noncontrolling interests | — | — | 2 | — | 1 | ||||||||||
Segment net income | $ | 514 | 550 | 544 | 475 | 491 | |||||||||
Average loans | $ | 54.8 | 52.6 | 51.0 | 50.0 | 48.4 | |||||||||
Average assets | 192.2 | 188.8 | 187.6 | 190.6 | 185.3 | ||||||||||
Average core deposits | 157.0 | 153.6 | 153.0 | 156.0 | 153.9 | ||||||||||
OTHER (3) | |||||||||||||||
Net interest income (2) | $ | (346 | ) | (328 | ) | (323 | ) | (319 | ) | (325 | ) | ||||
Provision (reversal of provision) for credit losses | (2 | ) | 13 | 12 | 7 | 9 | |||||||||
Noninterest income | (747 | ) | (742 | ) | (713 | ) | (697 | ) | (674 | ) | |||||
Noninterest expense | (752 | ) | (743 | ) | (724 | ) | (752 | ) | (663 | ) | |||||
Loss before income tax benefit | (339 | ) | (340 | ) | (324 | ) | (271 | ) | (345 | ) | |||||
Income tax benefit | (129 | ) | (129 | ) | (123 | ) | (103 | ) | (131 | ) | |||||
Net loss before noncontrolling interests | (210 | ) | (211 | ) | (201 | ) | (168 | ) | (214 | ) | |||||
Less: Net income from noncontrolling interests | — | — | — | — | — | ||||||||||
Other net loss | $ | (210 | ) | (211 | ) | (201 | ) | (168 | ) | (214 | ) | ||||
Average loans | $ | (36.0 | ) | (34.5 | ) | (33.5 | ) | (33.1 | ) | (32.2 | ) | ||||
Average assets | (76.6 | ) | (74.1 | ) | (74.1 | ) | (74.7 | ) | (72.1 | ) | |||||
Average core deposits | (69.0 | ) | (66.7 | ) | (66.9 | ) | (67.7 | ) | (66.8 | ) | |||||
CONSOLIDATED COMPANY | |||||||||||||||
Net interest income (2) | $ | 11,180 | 10,941 | 10,791 | 10,615 | 10,803 | |||||||||
Provision for credit losses | 485 | 368 | 217 | 325 | 363 | ||||||||||
Noninterest income | 10,263 | 10,272 | 10,275 | 10,010 | 9,862 | ||||||||||
Noninterest expense | 12,647 | 12,248 | 12,194 | 11,948 | 12,085 | ||||||||||
Income before income tax expense | 8,311 | 8,597 | 8,655 | 8,352 | 8,217 | ||||||||||
Income tax expense | 2,519 | 2,642 | 2,869 | 2,277 | 2,504 | ||||||||||
Net income before noncontrolling interests | 5,792 | 5,955 | 5,786 | 6,075 | 5,713 | ||||||||||
Less: Net income from noncontrolling interests | 83 | 226 | 60 | 182 | 103 | ||||||||||
Wells Fargo net income | $ | 5,709 | 5,729 | 5,726 | 5,893 | 5,610 | |||||||||
Average loans (4) | $ | 849.4 | 833.2 | 831.0 | 823.8 | 813.3 | |||||||||
Average assets (4) | 1,663.8 | 1,617.9 | 1,564.0 | 1,525.9 | 1,505.8 | ||||||||||
Average core deposits | 1,036.0 | 1,012.2 | 991.7 | 973.8 | 965.8 | ||||||||||
(1) | The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. |
(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 corporate items not specific to a business segment and the elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for wealth management customers provided in Community Banking stores. |
(4) | Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table on page 17 for more information. |
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
Quarter ended | |||||||||||||||
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
MSRs measured using the fair value method: | |||||||||||||||
Fair value, beginning of quarter | $ | 14,031 | 13,900 | 14,953 | 15,580 | 14,501 | |||||||||
Servicing from securitizations or asset transfers | 296 | 340 | 271 | 289 | 520 | ||||||||||
Sales | (7 | ) | — | — | — | — | |||||||||
Net additions | 289 | 340 | 271 | 289 | 520 | ||||||||||
Changes in fair value: | |||||||||||||||
Due to changes in valuation model inputs or assumptions: | |||||||||||||||
Mortgage interest rates (1) | (1,016 | ) | 251 | (876 | ) | (509 | ) | 1,048 | |||||||
Servicing and foreclosure costs (2) | (5 | ) | (4 | ) | 23 | (34 | ) | (54 | ) | ||||||
Discount rates (3) | — | — | (55 | ) | — | — | |||||||||
Prepayment estimates and other (4) | (78 | ) | 6 | 73 | 102 | (11 | ) | ||||||||
Net changes in valuation model inputs or assumptions | (1,099 | ) | 253 | (835 | ) | (441 | ) | 983 | |||||||
Other changes in fair value (5) | (483 | ) | (462 | ) | (489 | ) | (475 | ) | (424 | ) | |||||
Total changes in fair value | (1,582 | ) | (209 | ) | (1,324 | ) | (916 | ) | 559 | ||||||
Fair value, end of quarter | $ | 12,738 | 14,031 | 13,900 | 14,953 | 15,580 | |||||||||
(1) | 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). |
(2) | Includes costs to service and unreimbursed foreclosure costs. |
(3) | Reflects discount rate assumption change, excluding portion attributable to changes in mortgage interest rates. |
(4) | Represents changes driven by other valuation model inputs or assumptions including prepayment speed estimation changes and other assumption updates. Prepayment speed estimation changes are influenced by observed changes in borrower behavior that occur independent of interest rate changes. |
(5) | Represents changes due to collection/realization of expected cash flows over time. |
Quarter ended | |||||||||||||||
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Amortized MSRs: | |||||||||||||||
Balance, beginning of quarter | $ | 1,224 | 1,196 | 1,219 | 1,229 | 1,204 | |||||||||
Purchases | 38 | 47 | 32 | 40 | 64 | ||||||||||
Servicing from securitizations or asset transfers | 43 | 29 | 24 | 14 | 28 | ||||||||||
Amortization | (63 | ) | (48 | ) | (79 | ) | (64 | ) | (67 | ) | |||||
Balance, end of quarter | $ | 1,242 | 1,224 | 1,196 | 1,219 | 1,229 | |||||||||
Fair value of amortized MSRs: | |||||||||||||||
Beginning of quarter | $ | 1,647 | 1,577 | 1,624 | 1,575 | 1,525 | |||||||||
End of quarter | 1,637 | 1,647 | 1,577 | 1,624 | 1,575 | ||||||||||
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
Quarter ended | |||||||||||||||
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Servicing income, net: | |||||||||||||||
Servicing fees (1) | $ | 996 | 919 | 1,128 | 1,070 | 934 | |||||||||
Changes in fair value of MSRs carried at fair value: | |||||||||||||||
Due to changes in valuation model inputs or assumptions (2) | (1,099 | ) | 253 | (835 | ) | (441 | ) | 983 | |||||||
Other changes in fair value (3) | (483 | ) | (462 | ) | (489 | ) | (475 | ) | (424 | ) | |||||
Total changes in fair value of MSRs carried at fair value | (1,582 | ) | (209 | ) | (1,324 | ) | (916 | ) | 559 | ||||||
Amortization | (63 | ) | (48 | ) | (79 | ) | (64 | ) | (67 | ) | |||||
Net derivative gains (losses) from economic hedges (4) | 1,334 | 17 | 1,310 | 848 | (717 | ) | |||||||||
Total servicing income, net | $ | 685 | 679 | 1,035 | 938 | 709 | |||||||||
Market-related valuation changes to MSRs, net of hedge results (2)+(4) | $ | 235 | 270 | 475 | 407 | 266 | |||||||||
(1) | Includes contractually specified servicing fees, late charges and other ancillary revenues. |
(2) | Refer to the changes in fair value MSRs table on the previous page for more detail. |
(3) | Represents changes due to collection/realization of expected cash flows over time. |
(4) | Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs. |
(in billions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Managed servicing portfolio (1): | |||||||||||||||
Residential mortgage servicing: | |||||||||||||||
Serviced for others | $ | 1,405 | 1,430 | 1,451 | 1,470 | 1,485 | |||||||||
Owned loans serviced | 342 | 342 | 341 | 337 | 338 | ||||||||||
Subserviced for others | 5 | 5 | 5 | 5 | 6 | ||||||||||
Total residential servicing | 1,752 | 1,777 | 1,797 | 1,812 | 1,829 | ||||||||||
Commercial mortgage servicing: | |||||||||||||||
Serviced for others | 456 | 440 | 429 | 424 | 419 | ||||||||||
Owned loans serviced | 112 | 107 | 109 | 108 | 107 | ||||||||||
Subserviced for others | 7 | 7 | 7 | 7 | 7 | ||||||||||
Total commercial servicing | 575 | 554 | 545 | 539 | 533 | ||||||||||
Total managed servicing portfolio | $ | 2,327 | 2,331 | 2,342 | 2,351 | 2,362 | |||||||||
Total serviced for others | $ | 1,861 | 1,870 | 1,880 | 1,894 | 1,904 | |||||||||
Ratio of MSRs to related loans serviced for others | 0.75 | % | 0.82 | 0.80 | 0.85 | 0.88 | |||||||||
Weighted-average note rate (mortgage loans serviced for others) | 4.45 | 4.47 | 4.49 | 4.51 | 4.52 | ||||||||||
(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. |
SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA
Quarter ended | |||||||||||||||
(in billions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | ||||||||||
Application data: | |||||||||||||||
Wells Fargo first mortgage quarterly applications | $ | 66 | 64 | 72 | 60 | 65 | |||||||||
Refinances as a percentage of applications | 52 | % | 40 | 36 | 39 | 42 | |||||||||
Wells Fargo first mortgage unclosed pipeline, at quarter end | $ | 26 | 25 | 30 | 27 | 25 | |||||||||
Residential real estate originations: | |||||||||||||||
Wells Fargo first mortgage loans: | |||||||||||||||
Retail | $ | 27 | 27 | 25 | 20 | 26 | |||||||||
Correspondent | 16 | 20 | 21 | 16 | 23 | ||||||||||
Other (1) | 1 | 1 | 1 | — | 1 | ||||||||||
Total quarter-to-date | $ | 44 | 48 | 47 | 36 | 50 | |||||||||
Total year-to-date | $ | 175 | 131 | 83 | 36 | 351 | |||||||||
(1) | Consists of home equity loans and lines. |
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Wells Fargo & Company and Subsidiaries
CHANGES IN MORTGAGE REPURCHASE LIABILITY
Quarter ended | Year ended | ||||||||||||||
(in millions) | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Dec 31, 2014 | Dec 31, 2013 | ||||||||||
Balance, beginning of period | $ | 669 | 766 | 799 | 899 | 2,206 | |||||||||
Provision for repurchase losses: | |||||||||||||||
Loan sales | 10 | 12 | 12 | 44 | 143 | ||||||||||
Change in estimate (1) | (49 | ) | (93 | ) | (38 | ) | (184 | ) | 285 | ||||||
Total additions (reductions) | (39 | ) | (81 | ) | (26 | ) | (140 | ) | 428 | ||||||
Losses | (15 | ) | (16 | ) | (7 | ) | (144 | ) | (1,735 | ) | |||||
Balance, end of period | $ | 615 | 669 | 766 | 615 | 899 | |||||||||
(1) | Results from changes in investor demand, mortgage insurer practices, credit and the financial stability of correspondent lenders. |
UNRESOLVED REPURCHASE DEMANDS AND MORTGAGE INSURANCE RESCISSIONS
($ in millions) | Government sponsored entities (1) | Private | Mortgage insurance rescissions with no demand (2) | Total | ||||||||
December 31, 2014 | ||||||||||||
Number of loans | 546 | 173 | 120 | 839 | ||||||||
Original loan balance (3) | $ | 118 | 34 | 31 | 183 | |||||||
September 30, 2014 | ||||||||||||
Number of loans | 426 | 322 | 233 | 981 | ||||||||
Original loan balance (3) | $ | 93 | 75 | 52 | 220 | |||||||
June 30, 2014 | ||||||||||||
Number of loans | 678 | 362 | 305 | 1,345 | ||||||||
Original loan balance (3) | $ | 149 | 80 | 66 | 295 | |||||||
March 31, 2014 | ||||||||||||
Number of loans | 599 | 391 | 409 | 1,399 | ||||||||
Original loan balance (3) | $ | 126 | 89 | 90 | 305 | |||||||
December 31, 2013 | ||||||||||||
Number of loans | 674 | 2,260 | 394 | 3,328 | ||||||||
Original loan balance (3) | $ | 124 | 497 | 87 | 708 | |||||||
(1) | Includes repurchase demands of 4 and $1 million, 7 and $1 million, 14 and $3 million, 25 and $3 million, and 42 and $6 million at December 31, September 30, June 30 and March 31, 2014, and December 31, 2013, respectively, received from investors on mortgage servicing rights acquired from other originators. We generally have the right of recourse against the seller and may be able to recover losses related to such repurchase demands subject to counterparty risk associated with the seller. |
(2) | As part of our representations and warranties in our loan sales contracts, we typically represent to GSEs and private investors that certain loans have mortgage insurance to the extent there are loans that have loan to value ratios in excess of 80% that require mortgage insurance. To the extent the mortgage insurance is rescinded by the mortgage insurer due to a claim of breach of a contractual representation or warranty, the lack of insurance may result in a repurchase demand from an investor. Similar to repurchase demands, we evaluate mortgage insurance rescission notices for validity and appeal for reinstatement if the rescission was not based on a contractual breach. When investor demands are received due to lack of mortgage insurance, they are reported as unresolved repurchase demands based on the applicable investor category for the loan (GSE or private). |
(3) | While the original loan balances related to these demands are presented above, the establishment of the repurchase liability is based on a combination of factors, such as our appeals success rates, reimbursement by correspondent and other third party originators, and projected loss severity, which is driven by the difference between the current loan balance and the estimated collateral value less costs to sell the property. |
4Q14 Quarterly Supplement January 14, 2015 © 2015 Wells Fargo & Company. All rights reserved. Exhibit 99.2
Wells Fargo 4Q14 Supplement 1 Appendix Pages 21-32 - Non-strategic/liquidating loan portfolio 22 - Purchased credit-impaired (PCI) portfolios 23 - Residential mortgage trends 24 - Real estate 1-4 family first mortgage portfolio 25 - Real estate 1-4 family junior lien mortgage portfolio 26 - Consumer credit card portfolio 27 - Auto portfolios 28 - Student lending portfolio 29 Common Equity Tier 1 under Basel III (General Approach) 30 Common Equity Tier 1 under Basel III (Advanced Approach, fully phased-in) 31 Forward-looking statements and additional information 32 Table of contents 4Q14 Results - 4Q14 Highlights Page 2 - Year-over-year results 3 - 4Q14 Revenue diversification 4 - Balance Sheet and credit overview (linked quarter) 5 - Income Statement overview (linked quarter) 6 - Loans 7 - Broad-based, year-over-year loan growth 8 - Commercial and Industrial diversified loan growth 9 - Deposits 10 - Net interest income 11 - Noninterest income 12 - Noninterest expense and efficiency ratio 13 - Community Banking 14 - Wholesale Banking 15 - Wealth, Brokerage and Retirement 16 - Credit quality 17 - Capital position 18 - Capital return 19 - Summary 20 Financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. Accordingly, we revised our commercial loan balances for year-end 2012 and each of the quarters in 2013 in order to present the Company’s lending trends on a comparable basis over this period. This revision, which resulted in a reduction to total commercial loans and a corresponding decrease to other liabilities, did not impact the Company’s consolidated net income or total cash flows. We reduced our commercial loans by $3.5 billion, $3.2 billion, $2.1 billion, $1.6 billion, and $1.2 billion at December 31, September 30, June 30, and March 31, 2013, and December 31, 2012, respectively, which represented less than 1% of total commercial loans and less than 0.5% of our total loan portfolio. Other affected financial information, including financial guarantees and financial ratios, has been appropriately revised to reflect this revision.
Wells Fargo 4Q14 Supplement 2 5,610 5,893 5,726 5,729 5,709 4Q13 1Q14 2Q14 3Q14 4Q14 4Q14 Highlights Strong earnings of $5.7 billion, up $99 million, or 2% year-over-year (YoY), and stable linked quarter (LQ) Diluted earnings per common share of $1.02, up 2% YoY and stable LQ Revenue growth of 4% YoY and 1% LQ - Net interest income up 3% YoY and 2% LQ - Noninterest income up 4% YoY and stable LQ Solid loan and deposit growth, with core loans (1) and deposits both up 3%, or 13% annualized, LQ Credit quality remained strong with net charge- offs of 34 bps of average loans Strong capital position - Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) of 10.44% at 12/31/14 (2) Returned $3.9 billion to shareholders through common stock dividends and net share repurchases Wells Fargo Net Income ($ in millions) (1) See pages 7 and 22 for additional information regarding core loans and the non-strategic/liquidating portfolio, which is comprised of Pick-a-Pay, liquidating home equity, legacy WFF indirect auto, legacy WFF debt consolidation, Education Finance-government guaranteed, and legacy Wachovia commercial & industrial, commercial real estate, and other PCI loan portfolios. (2) 4Q14 capital ratios are preliminary estimates. See pages 30-31 for additional information regarding common equity ratios. Estimated based on final rules adopted July 2, 2013, by the Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act. Diluted earnings per common share $1.00 $1.05 $1.01 $1.02 $1.02
Wells Fargo 4Q14 Supplement 3 980.1 1,054.3 99.1 114.0$1,079.2 $1,168.3 2013 2014 Core Deposits Year-over-year results (1) Please see page 1 for information on certain prior period revisions. (2) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. (3) Net payout ratio means the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock. Pre-tax Pre-provision Profit (2) ($ in billions) $34.9 $35.3 2013 2014 Net Income ($ in billions, except EPS) $21.9 $23.1 2013 2014 $3.89 $4.10 Diluted earnings per common share Period-end Loans (1) ($ in billions) Period-end Deposits ($ in billions) Net Payout Ratio (3) 741.4 801.8 80.9 60.8 $822.3 $862.6 2013 2014 Core Loans Non-strategic/liquidating loans Revenue ($ in billions) $83.8 $84.3 2013 2014 34% 57% 2013 2014
Wells Fargo 4Q14 Supplement 4 Balanced Spread and Fee Income Diversified Fee Generation Deposit Service Charges 12% Card Fees 9% Total Mortgage Banking 15% Insurance 4% Net Gains from Trading 2% (1) Other noninterest income includes lease income, life insurance investment income and all other noninterest income. 4Q14 Revenue diversification Total Trust & Investment Fees 36% Total Other Fees 10% Net Gains from Equity Inv. 4% Brokerage advisory, commissions and other Mortgage Orig./ Sales, net Mortgage Servicing, net Trust and investment management Investment banking Charges and fees on loans Merchant processing 1% Cash network 1% CRE brokerage commissions 1% Letters of credit Card fees Deposit service charges Other noninterest income (1) Net gains from trading Insurance 48%52% Net Interest Income Noninterest Income All other fees Net gains from equity investments Other Noninterest Income (1) 6% 12% 23% 8% 5%9% 3% 2% 2% 7% 8% 4% 2% 2% 4% 6% Net Gains on Debt Securities 2% Net gains on debt securities $21.4 billion $10.3 billion
Wells Fargo 4Q14 Supplement 5 Balance Sheet and credit overview (linked quarter) Loans Core loans (1) increased $26.0 billion, or 13% annualized, LQ on broad-based growth - Diversified loan growth included $6.5 billion from financing related to government guaranteed student loan sale, as well as the acquisition of the Dillard’s credit card portfolio Non-strategic/liquidating portfolio (1) decreased $2.3 billion Short-term investments/ Fed funds sold Down $3.5 billion primarily due to deployment of liquidity into loans and investment securities Trading assets Up $10.5 billion on increased inventory for market making activity Investment securities Up $23.9 billion as gross purchases of ~$35 billion were partially offset by run-off and maturities Deposits Up $37.7 billion on strong customer-driven commercial, small business and consumer growth Common stock repurchases Common shares outstanding down 44.7 million on net share repurchases Entered into a $750 million forward repurchase transaction that is expected to settle for an estimated 14.3 million shares in 1Q15 Credit Provision expense of $485 million, up $117 million - Net charge-offs of $735 million, or 34 bps, up $67 million on lower recoveries - $250 million reserve release (2) vs. $300 million in 3Q14 from strong credit performance Period-end balances. All comparisons are 4Q14 compared with 3Q14. (1) See pages 7 and 22 for additional information regarding core loans and the non-strategic/liquidating portfolio, which is comprised of Pick-a-Pay, liquidating home equity, legacy WFF indirect auto, legacy WFF debt consolidation, Education Finance-government guaranteed, and legacy Wachovia commercial & industrial, commercial real estate, and other PCI loan portfolios. (2) Provision expense minus net charge-offs.
Wells Fargo 4Q14 Supplement 6 Income Statement overview (linked quarter) Total revenue Revenue of $21.4 billion, up $230 million Net interest income NII up $239 million driven by growth in earning assets NIM down 2 bps to 3.04% reflecting deposit growth and 3Q14 liquidity-related funding actions Noninterest income Noninterest income stable - Service charges on deposit accounts down $70 million driven by lower customer overdraft activity - Card fees up $50 million on higher transaction volumes - Trust and investment fees up $151 million on higher investment banking fees - Mortgage banking down $118 million on lower production revenue reflecting seasonality - Market sensitive revenue (1) down $396 million primarily driven by a $340 million decline in net gains from equity investments - Other income up $356 million and included a $217 million gain on the sale of government guaranteed student loans Noninterest expense Noninterest expense up $399 million - Personnel expense up $272 million including higher deferred compensation plan investment results (2) - Equipment expense up $124 million primarily on annual software license renewals - Outside professional services up $116 million on higher project spend on business investments and risk-related initiatives - Operating losses down $108 million primarily from lower litigation accruals Income tax Tax expense down $123 million reflecting the passage of federal tax legislation, as well as the resolution of prior period matters All comparisons are 4Q14 compared with 3Q14. (1) Consists of net gains from trading activities, debt securities and equity investments. (2) Deferred compensation plan investment results are essentially P&L neutral as the employee benefits expense is hedged with offsetting trading revenue.
Wells Fargo 4Q14 Supplement 7 Loans (1) Period-end Core loans grew $60.4 billion, or 8%, YoY and $26.0 billion, or 13% annualized, LQ - Commercial loans up $18.8 billion LQ driven by growth in C&I, real estate construction and lease financing • Growth in Asset Backed Finance included $6.5 billion from financing related to government guaranteed student loan sale - Consumer loans up $7.2 billion LQ on growth in nonconforming mortgage, credit card and auto Non-strategic/liquidating loans (2) down $20.1 billion YoY and $2.3 billion from 3Q14 Average Total average loans of $849.4 billion up $36.1 billion YoY and $16.2 billion LQ Total average loan yield of 4.27%, down 2 bps LQ - Core loan yield excluding the non-strategic/ liquidating portfolio was down 2 bps (1) Please see page 1 for information on certain prior period revisions. (2) See page 22 for additional information regarding the non-strategic/liquidating portfolio, which is comprised of Pick-a-Pay, liquidating home equity, legacy WFF indirect auto, legacy WFF debt consolidation, Education Finance-government guaranteed, and legacy Wachovia commercial & industrial, commercial real estate, and other PCI loan portfolios. At the end of 2Q14, $9.7 billion in Education Finance-government guaranteed loans were transferred to loans held for sale. Period–end Loans Outstanding ($ in billions) (2) Total average loan yield 741.4 748.4 763.6 775.8 801.8 80.9 78.0 65.3 63.1 60.8822.3 826.4 828.9 838.9 862.6 4Q13 1Q14 2Q14 3Q14 4Q14 Core loans Non-strategic/liquidating loans 4.36% 4.29% 4.28% 4.29% 4.27%
Wells Fargo 4Q14 Supplement 8 8 12 16 20 24 28 32 4Q13 4Q14 Credit Card 24 29 34 39 44 49 54 59 4Q13 4Q14 Automobile 125 145 165 185 205 225 4Q13 4Q14 Core 1-4 Family First Mortgage (2) 150 170 190 210 230 250 270 290 4Q13 4Q14 Commercial and Industrial (1) Broad-based, year-over-year loan growth Growth in nonconforming mortgage 2014 originations New account growth and Dillard’s card portfolio acquisition ($ in billions) Broad-based growth, see page 9 for additional information (1) Please see page 1 for information on certain prior period revisions. (2) Please see page 25 for additional information.
Wells Fargo 4Q14 Supplement 9 $235.4 $271.8 $150 $170 $190 $210 $230 $250 $270 Asset Backed Finance 4Q13 4Q14 Corporate Banking Govt. & Institutional Banking Commercial Banking CRE All Other C&I Commercial and Industrial diversified loan growth WF Capital Finance Equipment Finance Commercial Dealer Services Period-end balances. ($ in billions)
Wells Fargo 4Q14 Supplement 10 773.0 819.1 825.7 1,060.4 1,127.1 1,149.8 287.4 308.0 324.1 4Q13 3Q14 4Q14 Noninterest-bearing deposits Interest-bearing deposits Deposits Average Deposits up $89.4 billion, or 8%, YoY and $22.7 billion, or 8% annualized, LQ Average deposit cost of 9 bps, down 1 bp LQ and down 2 bps YoY Core deposits (1) of $1.0 trillion up $70.2 billion, or 7%, YoY and up $23.8 billion, or 9% annualized, LQ - Average retail core deposits up 5% YoY on both existing and new customer account balance growth, and up 6% annualized, LQ Period-end Total period-end deposits of $1.2 trillion up $89.1 billion, or 8%, YoY and up $37.7 billion, or 13% annualized, LQ Primary consumer checking customers (2) up 5.2% YoY Primary small business and business banking checking customers (2) up 5.4% YoY Average Deposits and Rates ($ in billions) Average deposit cost Period-end Deposits ($ in billions) (1) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). (2) Data as of November 2014, comparisons with November 2013; customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposits. 0.11% 0.10% 0.09% 1,079.2 1,130.6 1,168.3 4Q13 3Q14 4Q14
Wells Fargo 4Q14 Supplement 11 Net interest income (TE) (1) up $255 million LQ on growth in earning assets Average earning assets up $43.5 billion, or 3%, LQ - Loans up $16.2 billion - Short-term investments/fed funds sold up $14.9 billion - Investment securities up $14.2 billion - Trading assets up $2.9 billion - Mortgages and loans held for sale down $4.8 billion NIM of 3.04% down 2 bps from 3Q14 on: - Customer-driven deposit growth = (4) bps - Liquidity-related activity = (2) bps - Balance sheet repricing, growth and mix = 3 bps - Variable income = 1 bp Net interest income Net Interest Income (TE) (1) ($ in millions) Net Interest Margin (NIM) (2) (1) Tax-equivalent net interest income is based on the federal statutory rate of 35% for the periods presented. Net interest income was $10,803 million, $10,615 million, $10,791 million, $10,941 million and $11,180 million for 4Q13, 1Q14, 2Q14, 3Q14 and 4Q14 respectively. (2) Please see page 1 for information on certain prior period revisions. 11,022 10,832 11,016 11,163 11,418 4Q13 1Q14 2Q14 3Q14 4Q14 3.27% 3.20% 3.15% 3.06% 3.04%
Wells Fargo 4Q14 Supplement 12 Noninterest income Deposit service charges down $70 million LQ driven by lower customer overdraft activity Trust and investment fees up $151 million, or 4%, LQ driven by higher investment banking Card fees up $50 million on higher transaction volumes reflecting seasonal spending Other fees up $34 million on higher loan fees and higher CRE brokerage commissions Mortgage banking down $118 million on lower gain on sale revenue reflecting seasonally lower origination volumes Trading gains up $11 million as $106 million higher deferred compensation investment income (P&L neutral), $53 million in 4Q14 vs. ($53) million in 3Q14, was largely offset by lower customer accommodation trading Gains on sale of debt securities down $67 million Equity gains down $340 million from strong 3Q14 results All other income up $354 million and included a $217 million gain on the sale of government guaranteed student loans vs vs ($ in millions) 4Q14 3Q14 4Q13 Noninterest income Service charges on deposit accounts $ 1,241 (5) % (3) Trust and investment fees Brokerage advisory, commissions and other fees 2,335 - 9 Trust and investment management 849 (1) - Investment banking 521 40 14 Card fees 925 6 12 Other fees 1,124 3 - Mortgage banking 1,515 (7) (4) Insurance 382 (2) (16) Net gains from trading activities 179 7 (45) Net gains (losses) on debt securities 186 (26) n.m. Net gains from equity investments 372 (48) (43) Lease income 127 (7) (14) Life insurance investment income 145 1 16 All other 362 n.m. n.m. Total noninterest income $ 10,263 - % 4 9,862 10,010 10,275 10,272 10,263 4Q13 1Q14 2Q14 3Q14 4Q14
Wells Fargo 4Q14 Supplement 13 Noninterest expense and efficiency ratio (1) Noninterest expense up $399 million LQ - Personnel expense up $272 million • Salaries up $24 million reflecting higher FTEs including risk-related FTEs • Commission and incentive compensation up $55 million driven by higher revenue-based incentive compensation • Employee benefits expense up $193 million and included $128 million higher deferred compensation expense ($81 million vs. ($47) million in 3Q14) as well as higher healthcare expense - Equipment expense up $124 million primarily on annual software license renewals - Outside professional services (2) up $116 million on typically higher 4Q project spend on business investments, as well as higher risk-related initiatives - Other expense (2) down $110 million • Operating losses down $108 million on lower litigation accruals • Advertising expense up $42 million on seasonality Full year 2014 efficiency ratio of 58.1% Expect to operate within targeted efficiency ratio range of 55%-59% for full year 2015 Efficiency Ratio (1) Efficiency ratio defined as noninterest expense divided by total revenue (net interest income plus noninterest income). Noninterest expense and our efficiency ratio may be affected by a variety of factors, including business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our business and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters. (2) The sum of Outside professional services expense and Other expense equals Other noninterest expense in the Consolidated Statement of Income, pages 19 and 20 of the press release. vs vs ($ in millions) 4Q14 3Q14 4Q13 Noninterest expense Salaries $ 3,938 1 % 3 Commission and incentive compensation 2,582 2 10 Employee benefits 1,124 21 (3) Equipment 581 27 2 Net occupancy 730 - - Core deposit and other intangibles 338 (1) (10) FDIC and other deposit assessments 231 1 18 Outside professional services (2) 800 17 6 Other (2) 2,323 (5) 8 Total noninterest expense $ 12,647 3 % 5 12,085 11,948 12,194 12,248 12,647 4Q13 1Q14 2Q14 3Q14 4Q14 58.5% 57.9% 57.9% 57.7% 59.0%
Wells Fargo 4Q14 Supplement 14 Community Banking Net income of $3.4 billion, up 7% YoY on higher net interest income and gain on sale of government guaranteed student loans Regional Banking (1) Primary consumer checking customers (2) up 5.2% YoY Primary business checking customers (2) up 5.4% YoY Retail bank cross-sell of 6.17 (3) products per household Consumer Lending Credit card penetration (1) (4) rose to 41.5%, up from 39.7% in 3Q14 and 37.0% in 4Q13 Consumer auto originations of $6.7 billion, down 12% LQ on seasonality and down 1% YoY reflecting continued discipline in a competitive market Mortgage originations of $44 billion, down 8% LQ on seasonality - 60% of originations were for purchases, compared with 70% in 3Q14 - 1.80% gain on sale margin (1) Metrics reported on a one-month lag from reported quarter-end; for example 4Q14 data as of November 2014 compared with November 2013. (2) Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit. (3) November 2014 Retail Bank household cross-sell ratio includes the Dillard’s credit card portfolio acquisition. (4) Household penetration as of November 2014 and defined as the percentage of Retail Bank households that have a credit card with Wells Fargo. vs vs ($ in millions) 4Q14 3Q14 4Q13 Net interest income $ 7,576 1 % 5 Noninterest income 5,259 (2) 5 Provision for credit losses 518 11 6 Noninterest expense 7,281 3 3 Income tax expense 1,545 (4) 13 Segment net income $ 3,435 (1) % 7 ($ in billions) Avg loans, net $ 503.8 1 - Avg core deposits 655.6 1 6 4Q14 3Q14 4Q13 Regional Banking Primary consumer checking customers (1)(2) 5.2 % 4.9 4.7 Primary business checking customers (1)(2) 5.4 5.6 4.7 Retail Bank household cross-sell (1) (3) 6.17 6.15 6.16 vs vs ($ in billions) 4Q14 3Q14 4Q13 Consumer Lending Credit card payment volumes (POS) $ 16.8 6 % 17 Credit card penetration (1)(4) 41.5 % 189 bps 451 Home Lending Applications $ 66 3 % 2 Application pipeline 26 4 4 Originations 44 (8) (12) Gain on sale margin 1.80 % (2) bps 3
Wells Fargo 4Q14 Supplement 15 Wholesale Banking Net income of $2.0 billion, down 7% YoY and up 3% LQ Net interest income up 3% LQ reflecting average loan growth of 3% Noninterest income up 2% LQ on higher investment banking, loan fees and commercial real estate brokerage fees Noninterest expense up 2% LQ on higher project spending and incentive compensation expense Cross-sell Cross-sell of 7.2 products per relationship (2) up from 7.1 in 4Q13 Treasury Management Commercial card spend volume of $5.9 billion up 4% LQ and 17% YoY Wholesale treasury management revenue up 2% LQ and 11% YoY reflecting new product sales and repricing Investment Banking U.S. investment banking market share of 4.4% (3) Asset Management Total AUM up $9 billion YoY, including a $5 billion increase in fixed income AUM reflecting higher market valuations and net inflows (1) Please see page 1 for information on certain prior period revisions. (2) Cross-sell reported on a one-quarter lag. (3) Source: Dealogic U.S. investment banking fee market share. vs vs ($ in millions) 4Q14 3Q14 4Q13 Net interest income $ 3,104 3 % (1) Noninterest income 2,950 2 4 Reversal of provision for credit losses (39) (54) (69) Noninterest expense 3,307 2 10 Income tax expense 789 (4) (18) Segment net income $ 1,970 3 % (7) ($ in billions) Avg loans, net (1) $ 326.8 3 11 Avg core deposits 292.4 5 13 vs vs ($ in billions) 4Q14 3Q14 4Q13 Key Metrics: Cross-sell (2) 7.2 - % 1 Commercial card spend volume $ 5.9 4 17 U.S. investment banking market share % (3) 4.4 % (10) bps (120) Total AUM $ 495.8 2 % 2 Advantage Funds AUM 245.2 5 1
Wells Fargo 4Q14 Supplement 16 Wealth, Brokerage and Retirement Net income up 5% YoY and down 7% LQ Net interest income up 7% LQ; average loans up 4% Noninterest income up 1% LQ primarily driven by higher deferred compensation gains Noninterest expense up 4% LQ primarily driven by higher deferred compensation plan expense and increased project spending for technology platform enhancements Retail Brokerage Managed account assets of $423 billion, up 3% LQ and 13% YoY; YoY growth driven by net flows and market performance Wealth Management Wealth Management client assets up 3% LQ and 5% YoY Retirement IRA assets up 2% LQ and 5% YoY Institutional Retirement plan assets up 1% LQ and 2% YoY (3) (1) Includes deposits. (2) Data as of November 2014. (3) Linked quarter and year-over-year percentage changes reflect revision of prior periods to conform with current period classification of Institutional Retirement Plan assets. vs vs ($ in millions) 4Q14 3Q14 4Q13 Net interest income $ 846 7 % 10 Noninterest income 2,801 1 5 Provision for credit losses 8 n.m. n.m. Noninterest expense 2,811 4 6 Income tax expense 314 (7) 4 Segment net income $ 514 (7) % 5 ($ in billions) Avg loans, net $ 54.8 4 13 Avg core deposits 157.0 2 2 vs vs ($ in billions, except where noted) 4Q14 3Q14 4Q13 Key Metrics: WBR Client Assets (1) ($ in trillions) $ 1.6 1 % 4 Cross-sell (2) 10.49 - 1 Retail Brokerage Financial Advisors 15,187 - (1) Managed account assets $ 423 3 13 Client assets (1) ($ in trillions) 1.4 1 4 Wealth Management Client assets (1) 225 3 5 Retirement IRA Assets 359 2 5 Institutional Retirement Plan Assets (3) 341 1 2
Wells Fargo 4Q14 Supplement 17 0.4 0.3 0.2 0.4 0.5 1.0 0.8 0.7 0.7 0.7 0.47% 0.41% 0.35% 0.32% 0.34% 4Q13 1Q14 2Q14 3Q14 4Q14 Provision Expense Net Charge-offs Net charge-off rate Credit quality Provision expense of $485 million, up $117 million from 3Q14 Net charge-offs of $735 million, up $67 million, or 10%, LQ 0.34% net charge-off rate - Commercial losses of 3 bps, up 5 bps LQ on lower recoveries - Consumer losses of 63 bps, up 1 bp LQ NPAs declined $739 million LQ - $517 million decline in nonaccrual loans - $222 million decrease in foreclosed assets (4) Reserve release (3) of $250 million, down $50 million LQ Allowance for credit losses = $13.2 billion - Allowance covered 4.5x annualized 4Q14 net charge-offs - Future allowance levels may increase or decrease based on a variety of factors, including loan growth, portfolio performance and general economic conditions (1) Please see page 1 for information on certain prior period revisions. (2) 30-89 days and 90 days or more past due and still accruing, and nonperforming loans, include held for sale loans reported on Balance Sheet. (3) Provision expense minus net charge-offs. (4) Upon adoption of ASU 2014-14 government guaranteed residential real estate mortgage loans that completed foreclosure during 2014 and met the criteria specified are excluded from foreclosed asset balances. Provision Expense and Net Charge-offs ($ in billions) Nonperforming Assets (2) ($ in billions) (1) 15.7 14.7 14.0 13.4 12.8 3.9 3.4 3.0 2.8 2.6 19.6 18.1 17.0 16.2 15.5 4Q13 1Q14 2Q14 3Q14 4Q14 Nonaccrual loans Foreclosed assets(4)
Wells Fargo 4Q14 Supplement 18 11.36% 11.31% 11.11% 11.04% 1Q14 2Q14 3Q14 4Q14 Capital remained strong Common Equity Tier 1 ratio under Basel III (General Approach) of 11.04%, down 7 bps LQ primarily due to balance sheet growth Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) of 10.44% at 12/31/14 (1) - Advanced and standardized approaches are converging - Linked quarter decline reflects higher risk- weighted assets (RWAs) on balance sheet growth Capital position See pages 30-31 for additional information regarding common equity ratios. 4Q14 capital ratios are preliminary estimates. (1) Estimated based on final rules adopted July 2, 2013, by the Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act. Common Equity Tier 1 Ratio Basel III (General Approach)
Wells Fargo 4Q14 Supplement 19 Our strong capital levels have allowed us to return more capital to shareholders - Returned $3.9 billion to shareholders in 4Q14 Capital return (1) Dividend payout ratio means the ratio of (i) common stock dividends, divided by (ii) net income applicable to common stock. (2) Net payout ratio means the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock. Payout Ratios Period-end common shares outstanding down 44.7 million LQ - Purchased 61.6 million common shares - Issued 16.9 million common shares Entered into a $750 million forward repurchase transaction which is expected to settle in 1Q15 for an estimated 14.3 million shares (17) 9 (16) (35) (45) (50) (40) (30) (20) (10) - 10 20 4Q13 1Q14 2Q14 3Q14 4Q14 Net Change in Ending Common Shares Outstanding (shares in millions) 29% 28% 34% 34% 34% 43% 26% 66% 66% 72% 4Q13 1Q14 2Q14 3Q14 4Q14 Dividend Payout Ratio Net Payout Ratio(1) (2)
Wells Fargo 4Q14 Supplement 20 Summary 2014 Record earnings of $23.1 billion, up $1.2 billion, or 5% from 2013 Record diluted earnings per share (EPS) of $4.10, up 5% Returned $12.5 billion to shareholders through common stock dividends and net share repurchases - Net payout ratio (1) of 57% 4Q14 Strong earnings of $5.7 billion, up $99 million, or 2% from 4Q13 - Diluted EPS of $1.02, up 2% Solid returns - ROA = 1.36% - ROE = 12.84% Strong loan and deposit growth - Period-end loans (2) up $40.3 billion, or 5%, YoY with core loans up $60.4 billion, or 8%, on broad-based growth - Period-end deposits up $89.1 billion, or 8% YoY Diversified and high quality loan portfolio - Credit quality remained strong with net charge-offs of 0.34% (annualized), down from 0.47% a year ago - Maintained our risk and pricing discipline Strong capital levels while returning more capital to shareholders - Returned $3.9 billion to shareholders through common stock dividends and net share repurchases Strong liquidity (1) Net payout ratio means the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock. (2) Please see page 1 for information on certain prior period revisions.
Appendix
Wells Fargo 4Q14 Supplement 22 (1) Net of purchase accounting adjustments. (2) At the end of 2Q14, $9.7 billion in Education Finance-government guaranteed loans were transferred to loans held for sale. -$109.9 Non-strategic/liquidating loan portfolio -$2.9 -$130.0 -$12.7 -$2.2 -$2.3 ($ in billions) 4Q14 3Q14 2Q14 1Q14 4Q13 4Q08 Pick-a-Pay mortgage (1) $ 45.0 46.4 48.0 49.5 51.0 95.3 Liquidating home equity 2.9 3.1 3.3 3.5 3.7 10.3 Legacy WFF indirect auto - 0.1 0.1 0.1 0.2 18.2 Legacy WFF debt consolidation 11.4 11.8 12.2 12.6 12.9 25.3 Education Finance - gov't guaranteed (2) - - - 10.2 10.7 20.5 Legacy WB C&I and CRE PCI loans (1) 1.1 1.5 1.5 1.7 2.0 18.7 Legacy WB other PCI loans (1) 0.4 0.2 0.2 0.4 0.4 2.5 Total $ 60.8 63.1 65.3 78.0 80.9 190.8
Wells Fargo 4Q14 Supplement 23 Purchased credit-impaired (PCI) portfolios (1) 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. (2) Reflects releases of $1.9 billion for loan resolutions and $8.6 billion from the reclassification of nonaccretable difference to the accretable yield, which will result in increasing income over the remaining life of the loan or pool of loans. Nonaccretable difference $2.9 billion remains to absorb losses on PCI loans Accretable yield $416 million accreted into interest income in 4Q14 vs. $446 million in 3Q14 $154 million reclassified from nonaccretable, primarily from the Pick-a-Pay portfolio $17.8 billion expected to accrete to income over the remaining life of the underlying loans - Commercial accretable yield balance of $274 million; weighted average life of portfolio is 2.0 years - Pick-a-Pay accretable yield balance of $17.2 billion; weighted average life of 11.7 years • 4Q14 accretable yield percentage of 6.15% stable LQ; yield expected to increase in 1Q15 to 6.21% on $140 million reclassification ($ in billions) Adjusted unpaid principal balance (1) December 31, 2008 $ 29.2 62.5 6.5 98.2 December 31, 2014 1.7 26.3 0.8 28.8 Nonaccretable difference rollforward 12/31/08 Nonaccretable difference $ 10.4 26.5 4.0 40.9 Addition of nonaccretable difference due to acquisitions 0.2 - - 0.2 Losses from loan resolutions and write-downs (6.9) (17.9) (2.9) (27.7) Release of nonaccretable difference since merger (3.6) (6.0) (0.9) (10.5) (2) 12/31/14 Remaining nonaccretable difference 0.1 2.6 0.2 2.9 Life-to-date net performance Additional provision since 2008 merger $ (1.6) - (0.1) (1.7) Release of nonaccretable difference since 2008 merger 3.6 6.0 0.9 10.5 (2) Net performance 2.0 6.0 0.8 8.8 Commercial Pick-a-Pay Other consumer Total
Wells Fargo 4Q14 Supplement 24 Residential mortgage trends Mortgage production $44 billion of mortgage originations, down 8% LQ - 60% of originations were for purchases, compared with 70% in 3Q14 Mortgage repurchase liability $615 million balance - Total provision for repurchases losses: $39 million net reduction in 4Q14; primarily reflecting release of $49 million for change in estimate vs. $81 million net reduction in 3Q14 - Outstanding repurchase demands (dollars) down 17% LQ Servicing portfolio Residential servicing portfolio of $1.8 trillion - Wells Fargo servicing portfolio’s total delinquency and foreclosure ratio for 4Q14 was 5.79%, down 1 bp LQ and down 61 bps YoY (1) Net gains on mortgage loan origination/or sales activities less repurchase reserve build/release divided by total originations. Residential mortgage production trends ($ in billions) 4Q14 3Q14 2Q14 1Q14 4Q13 Applications $ 66 64 72 60 65 Pipeline 26 25 30 27 25 Originations 44 48 47 36 50 Refinance % 40 % 30 26 34 32 Purchase % 60 70 74 66 68 Gain on Sale (1) 1.80 1.82 1.41 1.61 1.77
Wells Fargo 4Q14 Supplement 25 Real estate 1-4 family first mortgage portfolio First lien mortgage loans up 1% as growth in core first lien mortgage was partially offset by continued run-off in the liquidating portfolio Core first lien up $3.8 billion, or 2%, reflecting nonconforming mortgage originations - Nonconforming mortgages increased $6.5 billion to $110.5 billion (2) - First lien home equity lines of $17.0 billion, down $365 million Strong core first lien credit performance - Nonaccrual loans down $81 million, or 7 bps, LQ - Net charge-offs down $5 million LQ to 6 bps Pick-a-Pay non-PCI portfolio - Loans of $23.5 billion down 3% LQ driven by loans paid-in-full - Nonaccrual loans decreased $113 million, or 4%, LQ - Net charge-offs of $9 million, or 14 bps, down $3 million LQ on improved portfolio performance and lower severities - Current average LTV of 62% (3) (1) Non-strategic and liquidating loan portfolios primarily consist of Pick-a-Pay and PCI loans acquired from Wachovia and certain portfolios from legacy Wells Fargo Home Equity and Wells Fargo Financial. (2) Nonconforming mortgages originated post February 2009. (3) The current loan-to-value (LTV) ratio is calculated as the net carrying value divided by the collateral value. ($ in millions) 4Q14 3Q14 Real estate 1-4 family first mortgage: $ Core portfolio 208,851 205,042 Non-strategic and liquidating loan portfolios (1) 56,535 58,295 Total real estate 1-4 family first mortgage portfolio 265,386 263,337 Nonaccrual loans $ 3,720 3,801 as % of loans 1.78 % 1.85 Net charge-offs $ 32 37 as % of average loans 0.06 % 0.07 Nonaccrual loans $ 4,863 4,984 as % of loans 8.60 % 8.55 Net charge-offs $ 56 77 as % of average loans 0.39 % 0.52 Core first lien mortgage Non-strategic and liquidating first lien mortgage portfolio
Wells Fargo 4Q14 Supplement 26 Real estate 1-4 family junior lien mortgage portfolio Junior lien mortgage loans down 2% LQ as high quality new originations were more than offset by paydowns Core junior nonaccruals down $51 million, or 3%, LQ Core junior net charge-offs of $111 million, or 77 bps, down $7 million LQ (1) Non-strategic and liquidating loan portfolios primarily consist of PCI loans acquired from Wachovia and certain portfolios from legacy Wells Fargo Home Equity and Wells Fargo Financial. ($ in millions) 4Q14 3Q14 Real estate 1-4 family junior mortgage: $ Core portfolio 56,631 57,608 Non-strategic and liquidating loan portfolios (1) 3,086 3,267 Total real estate 1-4 family junior mortgage portfolio 59,717 60,875 Nonaccrual loans $ 1,722 1,773 as % of loans 3.04 % 3.08 Net charge-offs $ 111 118 as % of average loans 0.77 % 0.80 Nonaccrual loans $ 126 130 as % of loans 4.08 % 3.98 Net charge-offs $ 23 22 as % of average loans 2.87 % 2.58 Core junior lien mortgage Non-strategic and liquidating junior lien mortgage portfolio
Wells Fargo 4Q14 Supplement 27 Consumer credit card portfolio Credit card outstandings up 10% LQ and 16% YoY reflecting continued new account growth and growth in private label and co-brand outstandings driven by the Dillard’s card portfolio acquisition - Credit card household penetration (2) of 41.5%, up 189 bps LQ and 451 bps YoY reflecting the Dillard’s card acquisition and continued new account growth - Purchase dollar volume up 6% LQ and POS transactions up 7% LQ on seasonal spending and the Dillard’s card acquisition - Purchase dollar volume up 17% YoY and POS transactions up 19% YoY reflecting growth in the account base, as well as the Dillard’s card acquisition Net charge-offs up $20 million, or 10 bps, LQ on seasonality (1) Consumer credit card new account openings, excludes private label and co-brand. (2) Household penetration as of November 2014 and defined as the percentage of Retail Bank households that have a credit card with Wells Fargo. ($ in millions) 4Q14 3Q14 Credit card outstandings $ 31,119 28,280 Net charge-offs 221 201 as % of avg loans 2.97 % 2.87 Key Metrics: Purchase volume $ 16,839 15,858 POS transactions (millions) 239 224 New accounts (1) 501,763 546,640 Penetration (2) 41.5 % 39.7
Wells Fargo 4Q14 Supplement 28 Auto portfolios (1) Consumer Portfolio Auto outstandings of $55.7 billion up 1% LQ and 10% YoY - 4Q14 originations of $6.7 billion down 12% LQ on seasonality and down 1% YoY reflecting continued discipline in a competitive market Nonaccrual loans declined $6 million LQ and $36 million YoY Net charge-offs were up $20 million LQ reflecting seasonality, and up $24 million YoY on portfolio growth - December Manheim index of 123.9 up 2% LQ and YoY 30+ days past due increased $240 million, or 42 bps, LQ reflecting seasonality and increased $295 million, or 35 bps, YoY on portfolio mix and aging Commercial Portfolio Loans of $9.0 billion up 6% LQ and up 7% YoY (1) The consumer auto portfolio includes the liquidating legacy Wells Fargo Financial indirect portfolio of $34 million. ($ in millions) 4Q14 3Q14 Auto outstandings $ 52,672 52,245 Nonaccrual loans 131 136 as % of loans 0.25 % 0.26 Net charge-offs $ 128 110 as % of avg loans 0.96 % 0.84 30+ days past due $ 1,325 1,090 as % of loans 2.52 % 2.09 Auto outstandings $ 3,068 2,997 Nonaccrual loans 6 7 as % of loans 0.18 % 0.23 Net charge-offs $ 4 2 as % of avg loans 0.46 % 0.28 30+ days past due $ 16 11 as % of loans 0.52 % 0.37 Commercial Auto outstandings $ 8,973 8,470 Nonaccrual loans 17 18 as % of loans 0.19 % 0.21 Net charge-offs $ - - as % of avg loans n.m. % n.m. Indirect Consumer Direct Consumer
Wells Fargo 4Q14 Supplement 29 Student lending portfolio Private Portfolio $11.9 billion private loan outstandings stable LQ and up 5% YoY - Average FICO of 753 and 80% of the total outstandings have been co-signed Net charge-offs increased $8 million LQ due to seasonality of repayment 30+ days past due increased $23 million LQ on seasonality Government Portfolio Transferred to held for sale at the end of 2Q14 - $8.3 billion sold in 4Q14 - $0.7 billion remains in held for sale ($ in millions) 4Q14 3Q14 Private Portfolio Private outstandings $ 11,936 11,916 Net charge-offs 38 30 as % of avg loans 1.27 % 1.03 30 days past due $ 253 230 as % of loans 2.12 % 1.93
Wells Fargo 4Q14 Supplement 30 Common Equity Tier 1 under Basel III (General Approach) Wells Fargo & Company and Subsidiaries FIVE QUARTER RISK-BASED CAPITAL COMPONENTS Under Basel I Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, 2014 2014 2014 2014 2013 $ 185.3 183.0 181.5 176.5 171.0 (0.9) (0.5) (0.6) (0.8) (0.9) 184.4 182.5 180.9 175.7 170.1 (18.0) (18.0) (17.2) (15.2) (15.2) (2.6) (2.5) (3.2) (2.2) (1.4) (26.3) (26.1) (25.6) (25.6) (29.6) (0.3) - (0.1) - (0.4) (A) 137.2 135.9 134.8 132.7 123.5 18.0 18.0 17.2 15.2 15.2 - - - - 2.0 (0.5) (0.5) (0.3) (0.3) - 154.7 153.4 151.7 147.6 140.7 25.0 23.7 24.0 21.7 20.5 13.2 13.5 13.8 14.1 14.3 0.2 (0.1) - 0.2 0.7 38.4 37.1 37.8 36.0 35.5 (B) $ 193.1 190.5 189.5 183.6 176.2 $ 1,193.1 1,171.8 1,145.7 1,120.3 49.6 51.1 46.8 48.1 1,105.2 36.3 (C) $ 1,242.7 1,222.9 1,192.5 1,168.4 1,141.5 (A)/(C) 11.04 % 11.11 11.31 11.36 10.82 (B)/(C) 15.54 15.58 15.89 15.71 15.43 (1) (2) (3) (4) (5) (6) Total Basel III / Basel I RWAs Capital Ratios (6): Common Equity Tier 1 to total RWAs Total capital to total RWAs Basel III revises the definition of capital, increases minimum capital ratios, and introduces a minimum Common Equity Tier 1 (CET1) ratio. These changes are being fully phased in effective January 1, 2014 through the end of 2021 and the capital ratios will be determined using Basel III (General Approach) RWAs during 2014. Under transition provisions to Basel III, cumulative other comprehensive income (previously deducted under Basel I) is included in CET1 over a specified phase-in period. In addition, certain intangible assets includable in CET1 are phased out over a specified period. Goodwill and other intangible assets are net of any associated deferred tax liabilities. CET1 (formerly Tier 1 common equity under Basel I) is a non-GAAP financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews CET1 along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants. Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWAs. The Company's December 31, 2014, RWAs and capital ratios are preliminary. Market risk Total Tier 1 capital Long-term debt and other instruments qualifying as Tier 2 Qualifying allowance for credit losses Other Total Tier 2 capital Total qualifying capital Basel III Risk-Weighted Assets (RWAs) (5)(6): Credit risk Market risk Basel I RWAs (5)(6): Credit risk Other Total equity Noncontrolling interests Total Wells Fargo stockholders' equity Adjustments: Preferred stock Cumulative other comprehensive income (2) Goodwill and other intangible assets (2)(3) Investment in certain subsidiaries and other Common Equity Tier 1 (1)(4) Preferred stock Qualifying hybrid securities and noncontrolling interests (in billions) (General Approach) (1) Under Basel III
Wells Fargo 4Q14 Supplement 31 Common Equity Tier 1 under Basel III (Advanced Approach, fully phased-in) Wells Fargo & Company and Subsidiaries COMMON EQUITY TIER 1 UNDER BASEL III (ADVANCED APPROACH, FULLY PHASED-IN) (1)(2) Dec 31, 2014 $ 137.2 2.6 (2.8) (0.2) Common Equity Tier 1 (fully phased-in) under Basel III (C) $ 137.0 (D) $ 1,312.8 Common Equity Tier 1 to total RWAs anticipated under Basel III (Advanced Approach, fully phased-in) (5) (C)/(D) 10.44 % (1) (2) (3) (4) (5) Common Equity Tier 1 (transition amount) under Basel III (in billions) Adjustments from transition amount to fully phased-in under Basel III (3): Cumulative other comprehensive income Other Total adjustments Total RWAs anticipated under Basel III (4)(5) The Company’s December 31, 2014, RWAs and capital ratio are preliminary. CET1 is a non-GAAP financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews CET1 along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants. The Basel III CET1 and RWAs are estimated based on the Basel III capital rules adopted July 2, 2013, by the FRB. The rules establish a new comprehensive capital framework for U.S. banking organizations that implement the Basel III capital framework and certain provisions of the Dodd-Frank Act. The rules are being phased in effective January 1, 2014 through the end of 2021. Assumes cumulative other comprehensive income is fully phased in and certain other intangible assets are fully phased out under Basel III capital rules. The final Basel III capital rules provide for two capital frameworks: the Standardized Approach intended to replace Basel I, and the Advanced Approach applicable to certain institutions. Under the final rules, we will be 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. While the amount of RWAs determined under the Standardized and Advanced Approaches has been converging, management’s estimate of RWAs as of December 31, 2014, is based on the Advanced Approach, which is currently estimated to be higher than RWAs under the Standardized Approach, resulting in a lower CET1 compared with the Standardized Approach. Basel III capital rules adopted by the Federal Reserve Board incorporate different classification of assets, with risk weights based on Wells Fargo's internal models, along with adjustments to address a combination of credit/counterparty, operational and market risks, and other Basel III elements.
Wells Fargo 4Q14 Supplement 32 Forward-looking statements and additional information 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 releases; (iv) the appropriateness of the allowance for credit losses; (v) our expectations regarding net interest income and net interest margin; (vi) loan growth or the reduction or mitigation of risk in our loan portfolios; (vii) future capital levels 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. Investors are urged to not unduly rely on forward- looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. For more information about factors that could cause actual results to differ materially from expectations, refer to the “Forward-Looking Statements” discussion in Wells Fargo’s press release announcing our fourth quarter 2014 results and in our most recent Quarterly Report on Form 10-Q, as well as to Wells Fargo’s other 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, 2013. Purchased credit-impaired loan portfolio: Loans that were acquired from Wachovia that were considered credit impaired were written down at acquisition date in purchase accounting to an amount estimated to be collectible and the related allowance for loan losses was not carried over to Wells Fargo’s allowance. In addition, such purchased credit-impaired loans are not classified as nonaccrual or nonperforming, and are not included in loans that were contractually 90+ days past due and still accruing. Any losses on such loans are charged against the nonaccretable difference established in purchase accounting and are not reported as charge-offs (until such difference is fully utilized). As a result of accounting for purchased loans with evidence of credit deterioration, certain ratios of the combined company are not comparable to a portfolio that does not include purchased credit-impaired loans. In certain cases, the purchased credit-impaired loans may affect portfolio credit ratios and trends. Management believes that the presentation of information adjusted to exclude the purchased credit-impaired loans provides useful disclosure regarding the credit quality of the non-impaired loan portfolio. Accordingly, certain of the loan balances and credit ratios in this document have been adjusted to exclude the purchased credit-impaired loans. References in this document to impaired loans mean the purchased credit-impaired loans. Please see pages 32-34 of the press release announcing our 4Q14 results for additional information regarding the purchased credit-impaired loans.
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