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Wells Fargo Reports $5.5 Billion in Quarterly Net Income

April 14, 2016 8:02 AM

Diluted EPS of $0.99; Revenue Up 4 Percent from Prior Year

SAN FRANCISCO--(BUSINESS WIRE)--

Wells Fargo & Company (NYSE: WFC):

Endnotes can be found at end of release text.

Selected Financial Information

Quarter ended
Mar 31, Dec 31, Mar 31,
2016 2015 2015
Earnings
Diluted earnings per common share $ 0.99 1.00 1.04
Wells Fargo net income (in billions) 5.46 5.58 5.80
Return on assets (ROA) 1.21 % 1.24 1.38
Return on equity (ROE) 11.75 11.93 13.17
Asset Quality
Net charge-offs (annualized) as a % of average total loans 0.38 % 0.36 0.33
Allowance for credit losses as a % of total loans 1.34 1.37 1.51
Allowance for credit losses as a % of annualized net charge-offs 355 380 453
Other
Revenue (in billions) $ 22.2 21.6 21.3
Efficiency ratio 58.7 % 58.4 58.8
Average loans (in billions) $ 927.2 912.3 863.3
Average deposits (in billions) 1,219.4 1,216.8 1,174.8
Net interest margin 2.90 % 2.92 2.95

Wells Fargo & Company (NYSE: WFC) reported net income of $5.5 billion, or $0.99 per diluted common share, for first quarter 2016, compared with $5.8 billion, or $1.04 per share, for first quarter 2015, and $5.6 billion, or $1.00 per share, for fourth quarter 2015.

Chairman and CEO John Stumpf said, “Wells Fargo's first quarter results reflected the benefit of our diversified business model as we managed challenges presented by a volatile operating environment for our industry. We again generated solid growth in the fundamental drivers of long-term value creation: loans, deposits and capital. We also completed two important acquisitions from GE Capital, which are great additions to our company and demonstrate the benefit of our strong financial position. We remain focused on meeting the financial needs of our consumer and business customers, and I believe we are well positioned for the future.”

Chief Financial Officer John Shrewsberry added, “Our first quarter results demonstrated an ability to produce consistent revenue and net income across economic and interest rate cycles. While challenges in the energy industry and persistent low rates impacted our bottom line, our diversified business model was again beneficial to our results. We were disciplined in deploying liquidity into investment securities in the quarter, with gross purchases well below recent quarters. This was partially responsible for the $30 billion increase in our federal funds and short-term investment balances compared with the prior quarter. Our capital remained very strong with Common Equity Tier 1 (fully phased-in) of $142.7 billion3. Our net payout ratio4 was 60% in the quarter, as we returned $3.0 billion to shareholders through common stock dividends and net share repurchases.”

Net Interest Income

Net interest income in first quarter 2016 increased $79 million from fourth quarter 2015 to $11.7 billion. This increase was driven largely by earning asset growth, including a partial quarter impact from the assets acquired from GE Capital, the benefit of the fourth quarter increase in the federal funds rate and disciplined deposit pricing. These increases to net interest income were partially offset by reduced income from variable sources, including periodic dividends and loans fees, and one less day in the quarter.

Net interest margin was 2.90 percent, down 2 basis points from fourth quarter 2015. Income from variable sources reduced the net interest margin by approximately 2 basis points linked-quarter. All other growth, mix and repricing was essentially neutral to net interest margin.

Noninterest Income

Noninterest income in the first quarter was $10.5 billion, up from $10.0 billion in fourth quarter 2015, primarily due to a $381 million gain from the previously announced sale of our crop insurance business (included in other noninterest income) and the impact of lower interest rates and currency movements on hedging results (hedge ineffectiveness) of $379 million, driven by long-term debt. Noninterest income also reflected increases in lease income, which includes operating leases acquired in the GE Capital transactions, and trading gains, reflecting higher customer accommodation trading results in all market businesses. These increases were partially offset by lower gains from equity investments and debt securities, and declines in trust and investment fees, mortgage banking fee income, and commercial real estate brokerage commissions.

Trust and investment fees were $3.4 billion, down $126 million from the prior quarter, primarily due to lower investment banking fees and lower retail brokerage transaction activity and asset-based fees reflecting lower market valuations.

Mortgage banking noninterest income was $1.6 billion, down $62 million from fourth quarter 2015, primarily driven by a decrease in mortgage originations and production margins in the first quarter, partially offset by higher servicing income. Residential mortgage loan originations were $44 billion in the first quarter, down $3 billion linked quarter. The production margin on residential held-for-sale mortgage loan originations5 was 1.68 percent, compared with 1.83 percent in fourth quarter. Net servicing income was $850 million, compared with $730 million in fourth quarter.

Noninterest Expense

Noninterest expense in the first quarter was $13.0 billion, compared with $12.6 billion in fourth quarter 2015. First quarter expenses included seasonally higher employee benefits and incentive compensation, as well as an increase in operating lease expense due to the leases acquired in the GE Capital transactions. These higher expenses were offset by lower outside professional services, equipment and advertising, which typically decline in first quarter, and lower operating losses. The efficiency ratio was 58.7 percent in first quarter 2016, compared with 58.4 percent in the prior quarter. The Company currently expects to operate at the higher end of its targeted efficiency ratio range of 55 to 59 percent for full year 2016.

Loans

Total loans were $947.3 billion at March 31, 2016, up $30.7 billion, or 3 percent, from December 31, 2015, including $24.9 billion from the GE Capital acquisitions. First quarter organic loan growth included commercial and industrial, real estate mortgage, real estate construction, lease financing, real estate 1-4 family first mortgage and automobile. Total average loans were $927.2 billion in the first quarter, up $14.9 billion from the prior quarter, and included an $8.8 billion impact from the GE Capital acquisitions.

Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Commercial $ 488,205 456,583 447,338 438,022 415,299
Consumer 459,053 459,976 455,895 450,437 445,932
Total loans $ 947,258 916,559 903,233 888,459 861,231
Change from prior quarter $ 30,699 13,326 14,774 27,228 (1,320 )

Investment Securities

Investment securities were $334.9 billion at March 31, 2016, down $12.7 billion from fourth quarter, as a result of securities sales, runoff and modest securities purchases.

Net unrealized available-for-sale securities gains of $3.5 billion at March 31, 2016, increased from $3.0 billion at December 31, 2015, primarily due to a decline in interest rates.

Deposits

Total average deposits for first quarter 2016 were $1.2 trillion, up 4 percent from a year ago, driven by both commercial and consumer growth. The average deposit cost for first quarter 2016 was 10 basis points, up 1 basis point from a year ago and up 2 basis points from the prior quarter. The increase in deposits reflected strong consumer and small business growth, in part due to seasonally higher balances.

Capital

Capital levels remained strong in the first quarter, with Common Equity Tier 1 (fully phased-in) (CET1) of $142.7 billion, or 10.6 percent3, compared with 10.8 percent in the prior quarter. The decline in the CET1 ratio was primarily driven by the deployment of capital to support the growth in assets from the GE Capital acquisitions in the quarter. In first quarter 2016, the Company repurchased 51.7 million shares of its common stock, which reduced period-end common shares outstanding by 16.2 million shares after taking into account seasonal common stock issuances to employee benefit plans. The Company paid a quarterly common stock dividend of $0.375 per share, up from $0.35 per share a year ago.

Credit Quality

“Solid overall credit results continued in the first quarter,” said Chief Risk Officer Mike Loughlin. “The quarterly loss rate remained low at 0.38 percent (annualized). While substantially all of the loan portfolio continues to perform well, the oil and gas portfolio remains under significant stress due to low prices and excess leverage in this industry. The increases in losses and nonperforming loans in the first quarter were primarily due to continued challenges in this portfolio. The allowance for credit losses in the first quarter reflected a reserve build of $200 million as higher commercial reserves reflecting continued deterioration within the oil and gas portfolio were partially offset by continued credit quality improvements in the residential real estate portfolio. Future allowance levels will be based on a variety of factors, including loan growth, portfolio performance and general economic conditions.”

Net Loan Charge-offs

The quarterly loss rate of 0.38 percent (annualized) reflected commercial losses of 0.20 percent and consumer losses of 0.57 percent. Credit losses were $886 million in first quarter 2016, compared with $831 million in fourth quarter 2015, due to higher oil and gas portfolio losses.

Net Loan Charge-Offs

Quarter ended
March 31, 2016 December 31, 2015 September 30, 2015
Net loan As a % of Net loan As a % of Net loan As a % of
charge- average charge- average charge- average
($ in millions) offs loans (a) offs loans (a) offs loans (a)
Commercial:
Commercial and industrial $ 273 0.36 % $ 215 0.29 % $ 122 0.17 %
Real estate mortgage (29 ) (0.10 ) (19 ) (0.06 ) (23 ) (0.08 )
Real estate construction (8 ) (0.13 ) (10 ) (0.18 ) (8 ) (0.15 )
Lease financing 1 0.01 1 0.01 3 0.11
Total commercial 237 0.20 187 0.16 94 0.08
Consumer:
Real estate 1-4 family first mortgage 48 0.07 50 0.07 62 0.09
Real estate 1-4 family junior lien mortgage 74 0.57 70 0.52 89 0.64
Credit card 262 3.16 243 2.93 216 2.71
Automobile 127 0.85 135 0.90 113 0.76
Other revolving credit and installment 138 1.42 146 1.49 129 1.35
Total consumer 649 0.57 644 0.56 609 0.53
Total $ 886 0.38 % $ 831 0.36 % $ 703 0.31 %

(a) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 30 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

Nonperforming Assets

Nonperforming assets increased by $706 million from fourth quarter 2015 to $13.5 billion. Nonaccrual loans increased $852 million from fourth quarter to $12.2 billion driven by a $1.1 billion increase in the oil and gas portfolio and the addition of $343 million of nonaccrual loans from the GE Capital acquisitions. The increase in nonaccrual loans was partially offset by a $684 million decline in consumer real estate nonaccrual loans, partly due to a sale, as well as a $76 million decline in commercial real estate nonaccrual loans. Foreclosed assets were $1.3 billion, down from $1.4 billion in fourth quarter 2015.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

March 31, 2016 December 31, 2015 September 30, 2015
As a As a As a
% of % of % of
Total total Total total Total total
($ in millions) balances loans balances loans balances loans
Commercial:
Commercial and industrial $ 2,911 0.91 % $ 1,363 0.45 % $ 1,031 0.35 %
Real estate mortgage 896 0.72 969 0.79 1,125 0.93
Real estate construction 63 0.27 66 0.30 151 0.70
Lease financing 99 0.52 26 0.21 29 0.24
Total commercial 3,969 0.81 2,424 0.53 2,336 0.52
Consumer:
Real estate 1-4 family first mortgage 6,683 2.43 7,293 2.66 7,425 2.74
Real estate 1-4 family junior lien mortgage 1,421 2.77 1,495 2.82 1,612 2.95
Automobile 114 0.19 121 0.20 123 0.21
Other revolving credit and installment 47 0.12 49 0.13 41 0.11
Total consumer 8,265 1.80 8,958 1.95 9,201 2.02

Total nonaccrual loans

12,234 1.29 11,382 1.24 11,537 1.28
Foreclosed assets:
Government insured/guaranteed 386 446 502
Non-government insured/guaranteed 893 979 1,265
Total foreclosed assets 1,279 1,425 1,767
Total nonperforming assets $ 13,513 1.43 % $ 12,807 1.40 % $ 13,304 1.47 %
Change from prior quarter:
Total nonaccrual loans $ 852 $ (155 ) $ (906 )
Total nonperforming assets 706 (497 ) (1,097 )

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 $803 million at March 31, 2016, down from $981 million at December 31, 2015. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgage loans and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $12.3 billion at March 31, 2016, down from $13.4 billion at December 31, 2015.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.7 billion at March 31, 2016, compared with $12.5 billion at December 31, 2015. The allowance coverage for total loans was 1.34 percent, compared with 1.37 percent in fourth quarter 2015, as loans and leases acquired from GE Capital were recorded at fair value under the purchase method of accounting which fully reflects life-of-loan expected credit losses. The allowance covered 3.6 times annualized first quarter net charge-offs, compared with 3.8 times in the prior quarter. The allowance coverage for nonaccrual loans was 104 percent at March 31, 2016, compared with 110 percent at December 31, 2015. “We believe the allowance was appropriate for losses inherent in the loan portfolio at March 31, 2016,” said Loughlin.

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
Mar 31, Dec 31, Mar 31,
(in millions)

2016 2015 2015
Community Banking $ 3,296 3,169 3,547
Wholesale Banking 1,921 2,104 1,974
Wealth and Investment Management 512 595 529

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
Mar 31, Dec 31, Mar 31,
(in millions) 2016 2015 2015
Total revenue $ 12,614 12,330 12,111
Provision for credit losses 720 704 658
Noninterest expense 6,836 6,893 6,591
Segment net income 3,296 3,169 3,547
(in billions)
Average loans 484.3 482.2 472.2
Average assets 947.4 921.4 909.5
Average deposits 683.0 663.7 643.4

Community Banking reported net income of $3.3 billion, up $127 million, or 4 percent, from fourth quarter 2015. Revenue of $12.6 billion increased $284 million, or 2 percent, from fourth quarter 2015 due to higher net interest income and other income (hedging ineffectiveness, driven by long-term debt hedging results), partially offset by lower equity investment gains, and lower gains on deferred compensation plan investments (offset in employee benefits expense). Noninterest expense was down 1 percent, compared with fourth quarter 2015, due to lower project-related expense, equipment expense, operating losses, and deferred compensation plan expense (offset in trading revenue), partially offset by seasonally higher personnel expense. The provision for credit losses increased $16 million from the prior quarter.

Net income was down $251 million, or 7 percent, from first quarter 2015. First quarter 2015 results included a discrete tax benefit of $359 million. Revenue was up $503 million, or 4 percent, compared with a year ago due to higher net interest income, mortgage banking fees, deposit service charges, and debit and credit card fees, partially offset by lower market sensitive revenue, primarily gains on equity investments and trading activities, and lower trust and investment fees. Noninterest expense increased $245 million, or 4 percent, from a year ago driven by higher operating losses and personnel expenses, partially offset by lower foreclosed assets expense. The provision for credit losses increased $62 million from a year ago primarily due to an allowance build compared with a reserve release in first quarter 2015.

Regional Banking

Consumer Lending Group

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include Business Banking, Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments and Asset Backed Finance.

Selected Financial Information

Quarter ended
Mar 31, Dec 31, Mar 31,
(in millions) 2016 2015 2015
Total revenue $ 6,958 6,559 6,409
Provision (reversal of provision) for credit losses 363 126 (51 )
Noninterest expense 3,968 3,491 3,618
Segment net income 1,921 2,104 1,974
(in billions)
Average loans 429.8 417.0 380.0
Average assets 748.6 755.4 690.6
Average deposits 428.0 449.3 431.7

Wholesale Banking reported net income of $1.9 billion, down $183 million, or 9 percent, from fourth quarter 2015. Revenue of $7.0 billion increased $399 million, or 6 percent, from prior quarter and included the acquisitions of GE Railcar Services (closed 1/1/16) and GE Capital’s North American Commercial Distribution Finance and Vendor Finance businesses (closed 3/1/16). Net interest income increased $37 million, or 1 percent, as broad-based loan growth, including the GE Capital acquisitions, and increased trading-related revenue was partially offset by lower deposits. Noninterest income increased $362 million, or 13 percent, as the gain on sale of the crop insurance business, strong customer accommodation trading results and the GE Capital acquisitions were partially offset by lower results in commercial real estate businesses and lower investment banking fees and gains on equity fund investments. Noninterest expense increased $477 million, or 14 percent, from prior quarter due to the GE Capital acquisitions as well as seasonally higher personnel expenses, increased foreclosed asset expenses and seasonally higher insurance commissions. The provision for credit losses increased $237 million from the prior quarter, primarily due to higher loan losses in the oil and gas portfolio.

Net income was down $53 million from first quarter 2015. Revenue increased $549 million, or 9 percent, from first quarter 2015, on $311 million higher net interest income related to strong loan growth as well as the GE Capital acquisitions and $238 million higher noninterest income. Noninterest income increased due to the GE Capital acquisitions, the gain related to the sale of the crop insurance business and higher treasury management fees, partially offset by lower investment banking fees and lower gains on debt securities and trading assets. Noninterest expense increased $350 million, or 10 percent, from a year ago primarily due to the GE Capital acquisitions and higher personnel expenses related to growth initiatives, compliance, and regulatory requirements. The provision for credit losses increased $414 million from a year ago due to increased loan losses primarily related to the oil and gas portfolio. The first quarter 2015 results included a $39 million reserve release.

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

Selected Financial Information

Quarter ended
Mar 31, Dec 31, Mar 31,
(in millions) 2016 2015 2015
Total revenue $ 3,854 3,947 3,976
Reversal of provision for credit losses (14 ) (6 ) (3 )
Noninterest expense 3,042 2,998 3,122
Segment net income 512 595 529
(in billions)
Average loans 64.1 63.0 56.9
Average assets 208.1 197.9 191.6
Average deposits 184.5 177.9 170.3

Wealth and Investment Management reported net income of $512 million, down $83 million, or 14 percent, from fourth quarter 2015. Revenue of $3.9 billion decreased $93 million, or 2 percent, from the prior quarter, primarily due to lower brokerage transaction revenue, asset-based fees, and gains on deferred compensation plan investments (offset in employee benefits expense), partially offset by higher net interest income. Noninterest expense increased $44 million, or 1 percent, from the prior quarter, driven primarily by seasonally higher personnel expenses, partially offset by lower non-personnel expenses, broker commissions, and deferred compensation plan expense (offset in trading revenue). The provision for credit losses was down $8 million from fourth quarter 2015.

Net income was down $17 million, or 3 percent, from first quarter 2015. Revenue decreased $122 million, or 3 percent, from a year ago primarily driven by lower asset-based fees and brokerage transaction revenue, partially offset by higher net interest income. Noninterest expense decreased $80 million, or 3 percent, from a year ago, primarily due to lower broker commissions and operating losses, partially offset by higher other personnel expenses. The provision for credit losses decreased $11 million from a year ago.

Retail Brokerage

Wealth Management

Retirement

Asset Management

WIM cross-sell ratio of 10.55 products per household, up from 10.44 a year ago7

Conference Call

The Company will host a live conference call on Thursday, April 14, at 7 a.m. PT (10 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/index.jsp?eid=3946&seid=273.

A replay of the conference call will be available beginning at 10 a.m. PT (1 p.m. ET) on Thursday, April 14 through Sunday, April 24. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #51058505. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and at https://engage.vevent.com/index.jsp?eid=3946&seid=273.

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 Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
3

See table on page 33 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules.

4 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.
5 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 38 for more information.
6 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
7 Data as of February 2016, comparisons with February 2015.
8 Combined consumer and business debit card purchase volume dollars.
9 Primarily includes retail banking, consumer lending, small business and business banking customers.
10 Cross-sell reported on a one-quarter lag and does not reflect Business Banking relationships. Business Banking realigned from Community Banking to Wholesale Banking effective fourth quarter 2015.

Forward-Looking Statements

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

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

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

For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.8 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through 8,800 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 269,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 30 on Fortune’s 2015 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially.

Wells Fargo & Company and Subsidiaries

QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS

Pages

Summary Information

Summary Financial Data

16

Income

Consolidated Statement of Income 18
Consolidated Statement of Comprehensive Income 20
Condensed Consolidated Statement of Changes in Total Equity 20
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 21
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 22
Noninterest Income and Noninterest Expense 23

Balance Sheet

Consolidated Balance Sheet 25
Investment Securities 27

Loans

Loans 27
Nonperforming Assets 28
Loans 90 Days or More Past Due and Still Accruing 29
Purchased Credit-Impaired Loans 30
Pick-A-Pay Portfolio 31
Changes in Allowance for Credit Losses 32

Equity

Common Equity Tier 1 Under Basel III 33

Operating Segments

Operating Segment Results 34

Other

Mortgage Servicing and other related data 36

Wells Fargo & Company and Subsidiaries

SUMMARY FINANCIAL DATA
% Change
Quarter ended Mar 31, 2016 from
Mar 31, Dec 31, Mar 31, Dec 31, Mar 31,
($ in millions, except per share amounts) 2016 2015 2015 2015 2015
For the Period
Wells Fargo net income $ 5,462 5,575 5,804 (2 )% (6 )
Wells Fargo net income applicable to common stock 5,085 5,203 5,461 (2 ) (7 )
Diluted earnings per common share 0.99 1.00 1.04 (1 ) (5 )
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.21 % 1.24 1.38 (2 ) (12 )
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 11.75 11.93 13.17 (2 ) (11 )
Efficiency ratio (1) 58.7 58.4 58.8 1 —
Total revenue $ 22,195 21,586 21,278 3 4
Pre-tax pre-provision profit (PTPP) (2) 9,167 8,987 8,771 2 5
Dividends declared per common share 0.375 0.375 0.350 — 7
Average common shares outstanding 5,075.7 5,108.5 5,160.4 (1 ) (2 )
Diluted average common shares outstanding 5,139.4 5,177.9 5,243.6 (1 ) (2 )
Average loans $ 927,220 912,280 863,261 2 7
Average assets 1,819,875 1,787,287 1,707,798 2 7
Average total deposits 1,219,430 1,216,809 1,174,793 — 4
Average consumer and small business banking deposits (3) 714,837 696,484 665,896 3 7
Net interest margin 2.90 % 2.92 2.95 (1 ) (2 )
At Period End
Investment securities $ 334,899 347,555 324,736 (4 ) 3
Loans 947,258 916,559 861,231 3 10
Allowance for loan losses 11,621 11,545 12,176 1 (5 )
Goodwill 27,003 25,529 25,705 6 5
Assets 1,849,182 1,787,632 1,737,737 3 6
Deposits 1,241,490 1,223,312 1,196,663 1 4
Common stockholders' equity 175,534 172,036 168,834 2 4
Wells Fargo stockholders’ equity 197,496 192,998 188,796 2 5
Total equity 198,504 193,891 189,964 2 4
Common shares outstanding 5,075.9 5,092.1 5,162.9 — (2 )
Book value per common share (4) $ 34.58 33.78 32.70 2 6
Common stock price:
High 53.27 56.34 56.29 (5 ) (5 )
Low 44.50 49.51 50.42 (10 ) (12 )
Period end 48.36 54.36 54.40 (11 ) (11 )
Team members (active, full-time equivalent) 268,600 264,700 266,000 1 1

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

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

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

(4) Book value per common share is common stockholders' equity divided by common shares outstanding.
Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA

Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
($ in millions, except per share amounts) 2016 2015 2015 2015 2015
For the Quarter
Wells Fargo net income $ 5,462 5,575 5,796 5,719 5,804
Wells Fargo net income applicable to common stock 5,085 5,203 5,443 5,363 5,461
Diluted earnings per common share 0.99 1.00 1.05 1.03 1.04
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.21 % 1.24 1.32 1.33 1.38
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 11.75 11.93 12.62 12.71 13.17
Efficiency ratio (1) 58.7 58.4 56.7 58.5 58.8
Total revenue $ 22,195 21,586 21,875 21,318 21,278
Pre-tax pre-provision profit (PTPP) (2) 9,167 8,987 9,476 8,849 8,771
Dividends declared per common share 0.375 0.375 0.375 0.375 0.350
Average common shares outstanding 5,075.7 5,108.5 5,125.8 5,151.9 5,160.4
Diluted average common shares outstanding 5,139.4 5,177.9 5,193.8 5,220.5 5,243.6
Average loans $ 927,220 912,280 895,095 870,446 863,261
Average assets 1,819,875 1,787,287 1,746,402 1,729,278 1,707,798
Average total deposits 1,219,430 1,216,809 1,198,874 1,185,304 1,174,793
Average consumer and small business banking deposits (3) 714,837 696,484 683,245 674,889 665,896
Net interest margin 2.90 % 2.92 2.96 2.97 2.95
At Quarter End
Investment securities $ 334,899 347,555 345,074 340,769 324,736
Loans 947,258 916,559 903,233 888,459 861,231
Allowance for loan losses 11,621 11,545 11,659 11,754 12,176
Goodwill 27,003 25,529 25,684 25,705 25,705
Assets 1,849,182 1,787,632 1,751,265 1,720,617 1,737,737
Deposits 1,241,490 1,223,312 1,202,179 1,185,828 1,196,663
Common stockholders' equity 175,534 172,036 172,089 169,596 168,834
Wells Fargo stockholders’ equity 197,496 192,998 193,051 189,558 188,796
Total equity 198,504 193,891 194,043 190,676 189,964
Common shares outstanding 5,075.9 5,092.1 5,108.5 5,145.2 5,162.9
Book value per common share (4) $ 34.58 33.78 33.69 32.96 32.70
Common stock price:
High 53.27 56.34 58.77 58.26 56.29
Low 44.50 49.51 47.75 53.56 50.42
Period end 48.36 54.36 51.35 56.24 54.40
Team members (active, full-time equivalent) 268,600 264,700 265,200 265,800 266,000

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

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

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

(4) Book value per common share is common stockholders' equity divided by common shares outstanding.

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME
Quarter ended March 31, %
(in millions, except per share amounts) 2016 2015 Change
Interest income
Trading assets $ 596 445 34 %
Investment securities 2,262 2,144 6
Mortgages held for sale 161 177 (9 )
Loans held for sale 2 5 (60 )
Loans 9,577 8,938 7
Other interest income 374 254 47
Total interest income 12,972 11,963 8
Interest expense
Deposits 307 258 19
Short-term borrowings 67 18 272
Long-term debt 842 604 39
Other interest expense 89 97 (8 )
Total interest expense 1,305 977 34
Net interest income 11,667 10,986 6
Provision for credit losses 1,086 608 79
Net interest income after provision for credit losses 10,581 10,378 2
Noninterest income
Service charges on deposit accounts 1,309 1,215 8
Trust and investment fees 3,385 3,677 (8 )
Card fees 941 871 8
Other fees 933 1,078 (13 )
Mortgage banking 1,598 1,547 3
Insurance 427 430 (1 )
Net gains from trading activities 200 408 (51 )
Net gains on debt securities 244 278 (12 )
Net gains from equity investments 244 370 (34 )
Lease income 373 132 183
Other 874 286 206
Total noninterest income 10,528 10,292 2
Noninterest expense
Salaries 4,036 3,851 5
Commission and incentive compensation 2,645 2,685 (1 )
Employee benefits 1,526 1,477 3
Equipment 528 494 7
Net occupancy 711 723 (2 )
Core deposit and other intangibles 293 312 (6 )
FDIC and other deposit assessments 250 248 1
Other 3,039 2,717 12
Total noninterest expense 13,028 12,507 4
Income before income tax expense 8,081 8,163 (1 )
Income tax expense 2,567 2,279 13
Net income before noncontrolling interests 5,514 5,884 (6 )
Less: Net income from noncontrolling interests 52 80 (35 )
Wells Fargo net income $ 5,462 5,804 (6 )
Less: Preferred stock dividends and other 377 343 10
Wells Fargo net income applicable to common stock $ 5,085 5,461 (7 )
Per share information
Earnings per common share $ 1.00 1.06 (6 )
Diluted earnings per common share 0.99 1.04 (5 )
Dividends declared per common share 0.375 0.350 7
Average common shares outstanding 5,075.7 5,160.4 (2 )
Diluted average common shares outstanding 5,139.4 5,243.6 (2 )

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions, except per share amounts) 2016 2015 2015 2015 2015
Interest income
Trading assets $ 596 558 485 483 445
Investment securities 2,262 2,323 2,289 2,181 2,144
Mortgages held for sale 161 176 223 209 177
Loans held for sale 2 5 4 5 5
Loans 9,577 9,323 9,216 9,098 8,938
Other interest income 374 258 228 250 254
Total interest income 12,972 12,643 12,445 12,226 11,963
Interest expense
Deposits 307 241 232 232 258
Short-term borrowings 67 13 12 21 18
Long-term debt 842 713 655 620 604
Other interest expense 89 88 89 83 97
Total interest expense 1,305 1,055 988 956 977
Net interest income 11,667 11,588 11,457 11,270 10,986
Provision for credit losses 1,086 831 703 300 608
Net interest income after provision for credit losses 10,581 10,757 10,754 10,970 10,378
Noninterest income
Service charges on deposit accounts 1,309 1,329 1,335 1,289 1,215
Trust and investment fees 3,385 3,511 3,570 3,710 3,677
Card fees 941 966 953 930 871
Other fees 933 1,040 1,099 1,107 1,078
Mortgage banking 1,598 1,660 1,589 1,705 1,547
Insurance 427 427 376 461 430
Net gains (losses) from trading activities 200 99 (26 ) 133 408
Net gains on debt securities 244 346 147 181 278
Net gains from equity investments 244 423 920 517 370
Lease income 373 145 189 155 132
Other 874 52 266 (140 ) 286
Total noninterest income 10,528 9,998 10,418 10,048 10,292
Noninterest expense
Salaries 4,036 4,061 4,035 3,936 3,851
Commission and incentive compensation 2,645 2,457 2,604 2,606 2,685
Employee benefits 1,526 1,042 821 1,106 1,477
Equipment 528 640 459 470 494
Net occupancy 711 725 728 710 723
Core deposit and other intangibles 293 311 311 312 312
FDIC and other deposit assessments 250 258 245 222 248
Other 3,039 3,105 3,196 3,107 2,717
Total noninterest expense 13,028 12,599 12,399 12,469 12,507
Income before income tax expense 8,081 8,156 8,773 8,549 8,163
Income tax expense 2,567 2,533 2,790 2,763 2,279
Net income before noncontrolling interests 5,514 5,623 5,983 5,786 5,884
Less: Net income from noncontrolling interests 52 48 187 67 80
Wells Fargo net income $ 5,462 5,575 5,796 5,719 5,804
Less: Preferred stock dividends and other 377 372 353 356 343
Wells Fargo net income applicable to common stock $ 5,085 5,203 5,443 5,363 5,461
Per share information
Earnings per common share $ 1.00 1.02 1.06 1.04 1.06
Diluted earnings per common share 0.99 1.00 1.05 1.03 1.04
Dividends declared per common share 0.375 0.375 0.375 0.375 0.350
Average common shares outstanding 5,075.7 5,108.5 5,125.8 5,151.9 5,160.4
Diluted average common shares outstanding 5,139.4 5,177.9 5,193.8 5,220.5 5,243.6

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarter ended Mar 31, %
(in millions) 2016 2015 Change
Wells Fargo net income $ 5,462 5,804 (6 )%
Other comprehensive income, before tax:
Investment securities:
Net unrealized gains arising during the period 795 393 102
Reclassification of net gains to net income (304 ) (300 ) 1
Derivatives and hedging activities:
Net unrealized gains arising during the period 1,999 952 110
Reclassification of net gains on cash flow hedges to net income (256 ) (234 ) 9
Defined benefit plans adjustments:
Net actuarial losses arising during the period (8 ) (11 ) (27 )
Amortization of net actuarial loss, settlements and other to net income 37 43 (14 )
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period 43 (55 ) NM
Other comprehensive income, before tax 2,306 788 193
Income tax expense related to other comprehensive income (857 ) (228 ) 276
Other comprehensive income, net of tax 1,449 560 159
Less: Other comprehensive income (loss) from noncontrolling interests (28 ) 301 NM
Wells Fargo other comprehensive income, net of tax 1,477 259 470
Wells Fargo comprehensive income 6,939 6,063 14
Comprehensive income from noncontrolling interests 24 381 (94 )
Total comprehensive income $ 6,963 6,444 8

NM - Not meaningful

FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Balance, beginning of period $ 193,891 194,043 190,676 189,964 185,262
Cumulative effect from change in consolidation accounting (1) 121 — — — —
Wells Fargo net income 5,462 5,575 5,796 5,719 5,804
Wells Fargo other comprehensive income (loss), net of tax 1,477 (2,092 ) 321 (1,709 ) 259
Noncontrolling interests (5 ) (100 ) (123 ) (51 ) 301
Common stock issued 1,079 310 505 502 1,327
Common stock repurchased (2) (2,029 ) (1,974 ) (2,137 ) (1,994 ) (2,592 )
Preferred stock released by ESOP 313 210 225 349 41
Common stock warrants repurchased/exercised — — (17 ) (24 ) (8 )
Preferred stock issued 975 — 975 — 1,997
Common stock dividends (1,904 ) (1,917 ) (1,926 ) (1,932 ) (1,805 )
Preferred stock dividends (378 ) (371 ) (356 ) (355 ) (344 )
Tax benefit from stock incentive compensation 149 22 22 55 354
Stock incentive compensation expense 369 204 98 166 376
Net change in deferred compensation and related plans (1,016 ) (19 ) (16 ) (14 ) (1,008 )
Balance, end of period $ 198,504 193,891 194,043 190,676 189,964

(1) Effective January 1, 2016, we adopted changes in consolidation accounting pursuant to Accounting Standards Update 2015-02 (Amendments to the Consolidation Analysis). Accordingly, we recorded a $121 million net increase to beginning noncontrolling interests as a cumulative-effect adjustment.

(2) For the quarters ended December 31, June 30, and March 31, 2015, includes $500 million, $750 million and $750 million related to private forward repurchase transactions that settled in subsequent quarters for 9.2 million, 13.6 million and 14.0 million shares of common stock, respectively.

Wells Fargo & Company and Subsidiaries

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended March 31,
2016 2015
Interest Interest
Average Yields/ income/ Average Yields/ income/
(in millions) balance rates expense balance rates expense
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 284,697 0.49 % $ 344 275,731 0.28 % $ 190
Trading assets 80,464 3.01 605 62,977 2.88 453
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 34,474 1.59 136 26,163 1.55 100
Securities of U.S. states and political subdivisions 50,512 4.24 535 44,948 4.20 472
Mortgage-backed securities:
Federal agencies 96,423 2.80 675 102,193 2.76 706
Residential and commercial 20,827 5.20 271 23,938 5.71 342
Total mortgage-backed securities 117,250 3.23 946 126,131 3.32 1,048
Other debt and equity securities 53,558 3.21 429 47,051 3.43 400
Total available-for-sale securities 255,794 3.20 2,046 244,293 3.32 2,020
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,664 2.20 244 42,869 2.21 234
Securities of U.S. states and political subdivisions 2,156 5.41 29 1,948 5.16 25
Federal agency mortgage-backed securities 28,114 2.49 175 11,318 1.87 53
Other debt securities 4,598 1.92 22 6,792 1.72 29
Total held-to-maturity securities 79,532 2.37 470 62,927 2.19 341
Total investment securities 335,326 3.01 2,516 307,220 3.08 2,361
Mortgages held for sale (4) 17,870 3.59 161 19,583 3.61 177
Loans held for sale (4) 282 3.23 2 700 2.67 5
Loans:
Commercial:
Commercial and industrial - U.S. 257,727 3.39 2,177 227,682 3.28 1,844
Commercial and industrial - Non U.S. 49,508 2.10 258 45,062 1.88 209
Real estate mortgage 122,739 3.41 1,040 111,497 3.57 981
Real estate construction 22,603 3.61 203 19,492 3.52 169
Lease financing 15,047 4.74 178 12,319 4.95 152
Total commercial 467,624 3.31 3,856 416,052 3.26 3,355
Consumer:
Real estate 1-4 family first mortgage 274,722 4.05 2,782 265,823 4.13 2,741
Real estate 1-4 family junior lien mortgage 52,236 4.39 571 58,880 4.27 621
Credit card 33,366 11.61 963 30,380 11.78 883
Automobile 60,114 5.67 848 56,004 5.95 821
Other revolving credit and installment 39,158 5.99 584 36,122 6.01 535
Total consumer 459,596 5.02 5,748 447,209 5.05 5,601

Total loans (4)

927,220 4.16 9,604 863,261 4.19 8,956
Other 5,808 2.06 30 4,730 5.41 63
Total earning assets $ 1,651,667 3.22 % $ 13,262 1,534,202 3.21 % $ 12,205
Funding sources
Deposits:
Interest-bearing checking $ 38,711 0.12 % $ 11 39,155 0.05 % $ 5
Market rate and other savings 651,551 0.07 107 613,413 0.06 97
Savings certificates 27,880 0.45 31 34,608 0.75 64
Other time deposits 58,206 0.74 107 56,549 0.39 56
Deposits in foreign offices 97,682 0.21 51 105,537 0.14 36
Total interest-bearing deposits 874,030 0.14 307 849,262 0.12 258
Short-term borrowings 107,857 0.25 67 71,712 0.11 18
Long-term debt 216,883 1.56 842 183,763 1.32 604
Other liabilities 16,492 2.14 89 16,894 2.30 97
Total interest-bearing liabilities 1,215,262 0.43 1,305 1,121,631 0.35 977
Portion of noninterest-bearing funding sources 436,405 412,571
Total funding sources $ 1,651,667 0.32 1,305 1,534,202 0.26 977
Net interest margin and net interest income on a taxable-equivalent basis (5) 2.90 % $ 11,957 2.95 % $ 11,228
Noninterest-earning assets
Cash and due from banks $ 17,995 17,059
Goodwill 26,069 25,705
Other 124,144 130,832
Total noninterest-earning assets $ 168,208 173,596
Noninterest-bearing funding sources
Deposits $ 345,400 325,531
Other liabilities 62,627 71,988
Total equity 196,586 188,648
Noninterest-bearing funding sources used to fund earning assets (436,405 ) (412,571 )
Net noninterest-bearing funding sources $ 168,208 173,596
Total assets $ 1,819,875 1,707,798

(1) Our average prime rate was 3.50% and 3.25% for the quarters ended March 31, 2016 and 2015, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.62% and 0.26% for the same quarters, respectively.

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

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

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

(5) Includes taxable-equivalent adjustments of $290 million and $242 million for the quarters ended March 31, 2016 and 2015, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

Wells Fargo & Company and Subsidiaries

FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended
Mar 31, 2016 Dec 31, 2015 Sep 30, 2015 Jun 30, 2015 Mar 31, 2015
Average Yields/ Average Yields/ Average Yields/ Average Yields/ Average Yields/
($ in billions) balance rates balance rates balance rates balance rates balance rates
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 284.7 0.49 % $ 274.6 0.28 % $ 250.1 0.26 % $ 267.1 0.28 % $ 275.7 0.28 %
Trading assets 80.5 3.01 68.8 3.33 67.2 2.93 67.6 2.91 63.0 2.88
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 34.4 1.59 34.6 1.58 35.7 1.59 31.7 1.58 26.2 1.55
Securities of U.S. states and political subdivisions 50.5 4.24 49.3 4.37 48.2 4.22 47.1 4.13 44.9 4.20
Mortgage-backed securities:
Federal agencies 96.5 2.80 102.3 2.79 98.4 2.70 98.0 2.65 102.2 2.76
Residential and commercial 20.8 5.20 21.5 5.51 21.9 5.84 22.7 5.84 23.9 5.71
Total mortgage-backed securities 117.3 3.23 123.8 3.26 120.3 3.27 120.7 3.25 126.1 3.32
Other debt and equity securities 53.6 3.21 52.7 3.35 50.4 3.40 48.8 3.51 47.1 3.43
Total available-for-sale securities 255.8 3.20 260.4 3.27 254.6 3.24 248.3 3.25 244.3 3.32
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44.7 2.20 44.7 2.18 44.6 2.18 44.5 2.19 42.9 2.21
Securities of U.S. states and political subdivisions 2.1 5.41 2.1 6.07 2.2 5.17 2.1 5.17 1.9 5.16
Federal agency mortgage-backed securities 28.1 2.49 28.2 2.42 27.1 2.38 21.0 2.00 11.3 1.87
Other debt securities 4.6 1.92 4.9 1.77 5.4 1.75 6.3 1.70 6.8 1.72
Total held-to-maturity securities 79.5 2.37 79.9 2.35 79.3 2.30 73.9 2.18 62.9 2.19
Total investment securities 335.3 3.01 340.3 3.05 333.9 3.02 322.2 3.01 307.2 3.08
Mortgages held for sale 17.9 3.59 19.2 3.66 24.2 3.69 23.5 3.57 19.6 3.61
Loans held for sale 0.3 3.23 0.4 4.96 0.6 2.57 0.7 3.51 0.7 2.67
Loans:
Commercial:
Commercial and industrial - U.S. 257.7 3.39 250.5 3.25 241.4 3.30 231.5 3.36 227.7 3.28
Commercial and industrial - Non U.S. 49.5 2.10 48.0 1.97 45.9 1.83 45.1 1.93 45.1 1.88
Real estate mortgage 122.7 3.41 121.8 3.30 121.0 3.31 113.1 3.48 111.5 3.57
Real estate construction 22.6 3.61 22.0 3.27 21.6 3.39 20.8 4.12 19.5 3.52
Lease financing 15.1 4.74 12.2 4.48 12.3 4.18 12.4 5.16 12.3 4.95
Total commercial 467.6 3.31 454.5 3.16 442.2 3.18 422.9 3.33 416.1 3.26
Consumer:
Real estate 1-4 family first mortgage 274.7 4.05 272.9 4.04 269.4 4.10 266.0 4.12 265.8 4.13
Real estate 1-4 family junior lien mortgage 52.2 4.39 53.8 4.28 55.3 4.22 57.0 4.23 58.9 4.27
Credit card 33.4 11.61 32.8 11.61 31.7 11.73 30.4 11.69 30.4 11.78
Automobile 60.1 5.67 59.5 5.74 58.5 5.80 57.0 5.88 56.0 5.95
Other revolving credit and installment 39.2 5.99 38.8 5.83 38.0 5.84 37.1 5.88 36.1 6.01
Total consumer 459.6 5.02 457.8 4.99 452.9 5.01 447.5 5.02 447.2 5.05
Total loans 927.2 4.16 912.3 4.08 895.1 4.11 870.4 4.20 863.3 4.19
Other 5.8 2.06 5.1 4.82 5.0 5.11 4.8 5.14 4.7 5.41
Total earning assets $ 1,651.7 3.22 % $ 1,620.7 3.18 % $ 1,576.1 3.21 % $ 1,556.3 3.22 % $ 1,534.2 3.21 %
Funding sources
Deposits:
Interest-bearing checking $ 38.7 0.12 % $ 39.1 0.05 % $ 37.8 0.05 % $ 38.6 0.05 % $ 39.2 0.05 %
Market rate and other savings 651.5 0.07 640.5 0.06 628.1 0.06 619.8 0.06 613.4 0.06
Savings certificates 27.9 0.45 29.6 0.54 30.9 0.58 32.5 0.63 34.6 0.75
Other time deposits 58.2 0.74 49.8 0.52 48.7 0.46 52.2 0.42 56.5 0.39
Deposits in foreign offices 97.7 0.21 107.1 0.14 111.5 0.13 104.3 0.13 105.5 0.14
Total interest-bearing deposits 874.0 0.14 866.1 0.11 857.0 0.11 847.4 0.11 849.2 0.12
Short-term borrowings 107.9 0.25 102.9 0.05 90.4 0.06 84.5 0.09 71.7 0.11
Long-term debt 216.9 1.56 190.9 1.49 180.6 1.45 185.1 1.34 183.8 1.32
Other liabilities 16.5 2.14 16.5 2.14 16.4 2.13 16.4 2.03 16.9 2.30
Total interest-bearing liabilities 1,215.3 0.43 1,176.4 0.36 1,144.4 0.34 1,133.4 0.34 1,121.6 0.35
Portion of noninterest-bearing funding sources 436.4 — 444.3 — 431.7 — 422.9 — 412.6 —
Total funding sources $ 1,651.7 0.32 $ 1,620.7 0.26 $ 1,576.1 0.25 $ 1,556.3 0.25 $ 1,534.2 0.26
Net interest margin on a taxable-equivalent basis 2.90 % 2.92 % 2.96 % 2.97 % 2.95 %
Noninterest-earning assets
Cash and due from banks $ 18.0 17.8 17.0 17.5 17.1
Goodwill 26.1 25.6 25.7 25.7 25.7
Other 124.1 123.2 127.6 129.8 130.8
Total noninterest-earnings assets $ 168.2 166.6 170.3 173.0 173.6
Noninterest-bearing funding sources
Deposits $ 345.4 350.7 341.9 337.9 325.6
Other liabilities 62.6 65.2 67.9 67.6 72.0
Total equity 196.6 195.0 192.2 190.4 188.6
Noninterest-bearing funding sources used to fund earning assets (436.4 ) (444.3 ) (431.7 ) (422.9 ) (412.6 )
Net noninterest-bearing funding sources $ 168.2 166.6 170.3 173.0 173.6
Total assets $ 1,819.9 1,787.3 1,746.4 1,729.3 1,707.8

(1) Our average prime rate was 3.50% for the quarter ended March 31, 2016, 3.29% for the quarter ended December 31,2015, and 3.25% for the quarters ended September 30, June 30 and March 31, 2015. The average three-month London Interbank Offered Rate (LIBOR) was 0.62%, 0.41%, 0.31%, 0.28% and 0.26% for the same quarters, respectively.

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

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

Wells Fargo & Company and Subsidiaries

NONINTEREST INCOME
Quarter ended Mar 31, %
(in millions) 2016 2015 Change
Service charges on deposit accounts $ 1,309 1,215 8 %
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,239 2,380 (6 )
Trust and investment management 815 852 (4 )
Investment banking 331 445 (26 )
Total trust and investment fees 3,385 3,677 (8 )
Card fees 941 871 8
Other fees:
Charges and fees on loans 313 309 1
Cash network fees 131 125 5
Commercial real estate brokerage commissions 117 129 (9 )
Letters of credit fees 78 88 (11 )
Wire transfer and other remittance fees 92 87 6
All other fees (1)(2)(3) 202 340 (41 )
Total other fees 933 1,078 (13 )
Mortgage banking:
Servicing income, net 850 523 63
Net gains on mortgage loan origination/sales activities 748 1,024 (27 )
Total mortgage banking 1,598 1,547 3
Insurance 427 430 (1 )
Net gains from trading activities 200 408 (51 )
Net gains on debt securities 244 278 (12 )
Net gains from equity investments 244 370 (34 )
Lease income 373 132 183
Life insurance investment income 154 145 6
All other (3) 720 141 411
Total $ 10,528 10,292 2

(1) Wire transfer and other remittance fees, reflected in all other fees prior to 2016, have been separately disclosed.

(2) All other fees have been revised to include merchant processing fees for all periods presented.

(3) Effective fourth quarter 2015, the Company's proportionate share of its merchant services joint venture earnings is included in all other income.

NONINTEREST EXPENSE

Quarter ended Mar 31, %
(in millions) 2016 2015 Change
Salaries $ 4,036 3,851 5 %
Commission and incentive compensation 2,645 2,685 (1 )
Employee benefits 1,526 1,477 3
Equipment 528 494 7
Net occupancy 711 723 (2 )
Core deposit and other intangibles 293 312 (6 )
FDIC and other deposit assessments 250 248 1
Outside professional services 583 548 6
Operating losses 454 295 54
Outside data processing 208 253 (18 )
Contract services 282 225 25
Postage, stationery and supplies 163 171 (5 )
Travel and entertainment 172 158 9
Advertising and promotion 134 118 14
Insurance 111 140 (21 )
Telecommunications 92 111 (17 )
Foreclosed assets 78 135 (42 )
Operating leases 235 62 279
All other 527 501 5
Total $ 13,028 12,507 4

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Service charges on deposit accounts $ 1,309 1,329 1,335 1,289 1,215
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,239 2,288 2,368 2,399 2,380
Trust and investment management 815 838 843 861 852
Investment banking 331 385 359 450 445

Total trust and investment fees

3,385 3,511 3,570 3,710 3,677
Card fees 941 966 953 930 871
Other fees:
Charges and fees on loans 313 308 307 304 309
Cash network fees 131 129 136 132 125
Commercial real estate brokerage commissions 117 224 124 141 129
Letters of credit fees 78 86 89 90 88
Wire transfer and other remittance fees 92 95 95 93 87
All other fees (1)(2)(3) 202 198 348 347 340
Total other fees 933 1,040 1,099 1,107 1,078
Mortgage banking:
Servicing income, net 850 730 674 514 523
Net gains on mortgage loan origination/sales activities 748 930 915 1,191 1,024
Total mortgage banking 1,598 1,660 1,589 1,705 1,547
Insurance 427 427 376 461 430
Net gains (losses) from trading activities 200 99 (26 ) 133 408
Net gains on debt securities 244 346 147 181 278
Net gains from equity investments 244 423 920 517 370
Lease income 373 145 189 155 132
Life insurance investment income 154 139 150 145 145
All other (3) 720 (87 ) 116 (285 ) 141
Total $ 10,528 9,998 10,418 10,048 10,292

(1) Wire transfer and other remittance fees, reflected in all other fees prior to 2016, have been separately disclosed.

(2) All other fees have been revised to include merchant processing fees for all periods presented.

(3) Effective fourth quarter 2015, the Company's proportionate share of its merchant services joint venture earnings is included in all other income.

FIVE QUARTER NONINTEREST EXPENSE

Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Salaries $ 4,036 4,061 4,035 3,936 3,851
Commission and incentive compensation 2,645 2,457 2,604 2,606 2,685
Employee benefits 1,526 1,042 821 1,106 1,477
Equipment 528 640 459 470 494
Net occupancy 711 725 728 710 723
Core deposit and other intangibles 293 311 311 312 312
FDIC and other deposit assessments 250 258 245 222 248
Outside professional services 583 827 663 627 548
Operating losses 454 532 523 521 295
Outside data processing 208 205 258 269 253
Contract services 282 266 249 238 225
Postage, stationery and supplies 163 177 174 180 171
Travel and entertainment 172 196 166 172 158
Advertising and promotion 134 184 135 169 118
Insurance 111 57 95 156 140
Telecommunications 92 106 109 113 111
Foreclosed assets 78 20 109 117 135
Operating leases 235 73 79 64 62
All other 527 462 636 481 501
Total $ 13,028 12,599 12,399 12,469 12,507

Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET
Mar 31, Dec 31, %
(in millions, except shares) 2016 2015 Change
Assets
Cash and due from banks $ 19,084 19,111 — %
Federal funds sold, securities purchased under resale agreements and other short-term investments 300,547 270,130 11
Trading assets 73,158 77,202 (5 )
Investment securities:
Available-for-sale, at fair value 255,551 267,358 (4 )
Held-to-maturity, at cost 79,348 80,197 (1 )
Mortgages held for sale 18,041 19,603 (8 )
Loans held for sale 280 279 —
Loans 947,258 916,559 3
Allowance for loan losses (11,621 ) (11,545 ) 1
Net loans 935,637 905,014 3
Mortgage servicing rights:
Measured at fair value 11,333 12,415 (9 )
Amortized 1,359 1,308 4
Premises and equipment, net 8,349 8,704 (4 )
Goodwill 27,003 25,529 6
Other assets 119,492 100,782 19
Total assets $ 1,849,182 1,787,632 3
Liabilities
Noninterest-bearing deposits $ 348,888 351,579 (1 )
Interest-bearing deposits 892,602 871,733 2
Total deposits 1,241,490 1,223,312 1
Short-term borrowings 107,703 97,528 10
Accrued expenses and other liabilities 73,597 73,365 —
Long-term debt 227,888 199,536 14
Total liabilities 1,650,678 1,593,741 4
Equity
Wells Fargo stockholders’ equity:
Preferred stock 24,051 22,214 8
Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares 9,136 9,136 —
Additional paid-in capital 60,602 60,714 —
Retained earnings 123,891 120,866 3
Cumulative other comprehensive income 1,774 297 497
Treasury stock – 405,908,584 shares and 389,682,664 shares (19,687 ) (18,867 ) 4
Unearned ESOP shares (2,271 ) (1,362 ) 67
Total Wells Fargo stockholders’ equity 197,496 192,998 2
Noncontrolling interests 1,008 893 13
Total equity 198,504 193,891 2
Total liabilities and equity $ 1,849,182 1,787,632 3

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Assets
Cash and due from banks $ 19,084 19,111 17,395 19,687 19,793
Federal funds sold, securities purchased under resale agreements and other short-term investments 300,547 270,130 254,811 232,247 291,317
Trading assets 73,158 77,202 73,894 80,236 79,278
Investment securities:
Available-for-sale, at fair value 255,551 267,358 266,406 260,667 257,603
Held-to-maturity, at cost 79,348 80,197 78,668 80,102 67,133
Mortgages held for sale 18,041 19,603 21,840 25,447 23,606
Loans held for sale 280 279 430 621 681
Loans 947,258 916,559 903,233 888,459 861,231
Allowance for loan losses (11,621 ) (11,545 ) (11,659 ) (11,754 ) (12,176 )
Net loans 935,637 905,014 891,574 876,705 849,055
Mortgage servicing rights:
Measured at fair value 11,333 12,415 11,778 12,661 11,739
Amortized 1,359 1,308 1,277 1,262 1,252
Premises and equipment, net 8,349 8,704 8,800 8,692 8,696
Goodwill 27,003 25,529 25,684 25,705 25,705
Other assets 119,492 100,782 98,708 96,585 101,879
Total assets $ 1,849,182 1,787,632 1,751,265 1,720,617 1,737,737
Liabilities
Noninterest-bearing deposits $ 348,888 351,579 339,761 343,582 335,858
Interest-bearing deposits 892,602 871,733 862,418 842,246 860,805
Total deposits 1,241,490 1,223,312 1,202,179 1,185,828 1,196,663
Short-term borrowings 107,703 97,528 88,069 82,963 77,697
Accrued expenses and other liabilities 73,597 73,365 81,700 81,399 90,121
Long-term debt 227,888 199,536 185,274 179,751 183,292
Total liabilities 1,650,678 1,593,741 1,557,222 1,529,941 1,547,773
Equity
Wells Fargo stockholders’ equity:
Preferred stock 24,051 22,214 22,424 21,649 21,998
Common stock 9,136 9,136 9,136 9,136 9,136
Additional paid-in capital 60,602 60,714 60,998 60,154 59,980
Retained earnings 123,891 120,866 117,593 114,093 110,676
Cumulative other comprehensive income 1,774 297 2,389 2,068 3,777
Treasury stock (19,687 ) (18,867 ) (17,899 ) (15,707 ) (14,556 )
Unearned ESOP shares (2,271 ) (1,362 ) (1,590 ) (1,835 ) (2,215 )
Total Wells Fargo stockholders’ equity 197,496 192,998 193,051 189,558 188,796
Noncontrolling interests 1,008 893 992 1,118 1,168
Total equity 198,504 193,891 194,043 190,676 189,964
Total liabilities and equity $ 1,849,182 1,787,632 1,751,265 1,720,617 1,737,737

Wells Fargo & Company and Subsidiaries

FIVE QUARTER INVESTMENT SECURITIES
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ 33,813 36,250 35,423 35,944 30,031
Securities of U.S. states and political subdivisions 51,574 49,990 49,423 48,298 47,380
Mortgage-backed securities:
Federal agencies 95,463 104,546 105,023 100,078 103,217
Residential and commercial 21,246 22,646 22,836 23,770 24,712
Total mortgage-backed securities 116,709 127,192 127,859 123,848 127,929
Other debt securities 51,956 52,289 51,760 50,090 48,759
Total available-for-sale debt securities 254,052 265,721 264,465 258,180 254,099
Marketable equity securities 1,499 1,637 1,941 2,487 3,504
Total available-for-sale securities 255,551 267,358 266,406 260,667 257,603
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,667 44,660 44,653 44,645 44,244
Securities of U.S. states and political subdivisions 2,183 2,185 2,187 2,174 2,092
Federal agency mortgage-backed securities 28,016 28,604 26,828 27,577 14,311
Other debt securities 4,482 4,748 5,000 5,706 6,486
Total held-to-maturity debt securities 79,348 80,197 78,668 80,102 67,133
Total investment securities $ 334,899 347,555 345,074 340,769 324,736

FIVE QUARTER LOANS

Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Commercial:
Commercial and industrial $ 321,547 299,892 292,234 284,817 271,088
Real estate mortgage 124,711 122,160 121,252 119,695 111,848
Real estate construction 22,944 22,164 21,710 21,309 19,981
Lease financing 19,003 12,367 12,142 12,201 12,382
Total commercial 488,205 456,583 447,338 438,022 415,299
Consumer:
Real estate 1-4 family first mortgage 274,734 273,869 271,311 267,868 265,213
Real estate 1-4 family junior lien mortgage 51,324 53,004 54,592 56,164 57,839
Credit card 33,139 34,039 32,286 31,135 30,078
Automobile 60,658 59,966 59,164 57,801 56,339
Other revolving credit and installment 39,198 39,098 38,542 37,469 36,463
Total consumer 459,053 459,976 455,895 450,437 445,932
Total loans (1) $ 947,258 916,559 903,233 888,459 861,231

(1) Includes $20.3 billion, $20.0 billion, $20.7 billion, $21.6 billion, and $22.4 billion of purchased credit-impaired (PCI) loans at March 31, 2016, and December 31, September 30, June 30, and March 31, 2015, respectively.

Our foreign loans are reported by respective class of financing receivable in the table above. Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign primarily based on whether the borrower's primary address is outside of the United States. The following table presents total commercial foreign loans outstanding by class of financing receivable.
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Commercial foreign loans:
Commercial and industrial $ 51,884 49,049 46,380 44,838 45,325
Real estate mortgage 8,367 8,350 8,662 9,125 5,171
Real estate construction 311 444 396 389 241
Lease financing 983 274 279 301 307
Total commercial foreign loans $ 61,545 58,117 55,717 54,653 51,044

Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)

Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Nonaccrual loans:
Commercial:
Commercial and industrial $ 2,911 1,363 1,031 1,079 663
Real estate mortgage 896 969 1,125 1,250 1,324
Real estate construction 63 66 151 165 182
Lease financing 99 26 29 28 23
Total commercial 3,969 2,424 2,336 2,522 2,192
Consumer:
Real estate 1-4 family first mortgage 6,683 7,293 7,425 8,045 8,345
Real estate 1-4 family junior lien mortgage 1,421 1,495 1,612 1,710 1,798
Automobile 114 121 123 126 133
Other revolving credit and installment 47 49 41 40 42
Total consumer 8,265 8,958 9,201 9,921 10,318
Total nonaccrual loans (1)(2)(3) $ 12,234 11,382 11,537 12,443 12,510
As a percentage of total loans 1.29 % 1.24 1.28 1.40 1.45
Foreclosed assets:
Government insured/guaranteed $ 386 446 502 588 772
Non-government insured/guaranteed 893 979 1,265 1,370 1,557
Total foreclosed assets 1,279 1,425 1,767 1,958 2,329
Total nonperforming assets $ 13,513 12,807 13,304 14,401 14,839
As a percentage of total loans 1.43 % 1.40 1.47 1.62 1.72

(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.

Wells Fargo & Company and Subsidiaries

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Total (excluding PCI)(1): $ 13,060 14,380 14,405 15,161 16,344
Less: FHA insured/guaranteed by the VA (2)(3) 12,233 13,373 13,500 14,359 15,453
Less: Student loans guaranteed under the FFELP (4) 24 26 33 46 50
Total, not government insured/guaranteed $ 803 981 872 756 841
By segment and class, not government insured/guaranteed:
Commercial:

Commercial and industrial

$ 24 97 53 17 31
Real estate mortgage 8 13 24 10 43
Real estate construction 2 4 — — —

Total commercial

34 114 77 27 74
Consumer:
Real estate 1-4 family first mortgage (3) 167 224 216 220 221
Real estate 1-4 family junior lien mortgage (3) 55 65 61 65 55
Credit card 389 397 353 304 352
Automobile 55 79 66 51 47
Other revolving credit and installment 103 102 99 89 92
Total consumer 769 867 795 729 767
Total, not government insured/guaranteed $ 803 981 872 756 841

(1) PCI loans totaled $2.7 billion, $2.9 billion, $3.2 billion, $3.4 billion and $3.6 billion, at March 31, 2016 and December 31, September 30, June 30 and March 31, 2015, respectively.

(2) Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
(3) Includes mortgages held for sale 90 days or more past due and still accruing.

(4) Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP.

Wells Fargo & Company and Subsidiaries

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

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans predominantly represent loans acquired from Wachovia that were deemed to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent LTV percentages. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date.
As a result of PCI loan accounting, certain credit-related ratios cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.
The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:

•

Changes in interest rate indices for variable rate PCI loans - Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows;

•

Changes in prepayment assumptions - Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and

•

Changes in the expected principal and interest payments over the estimated life - Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.

The change in the accretable yield related to PCI loans is presented in the following table.

(in millions)
Balance, December 31, 2008 $ 10,447
Addition of accretable yield due to acquisitions 132
Accretion into interest income (1) (14,212 )
Accretion into noninterest income due to sales (2) (458 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 9,734
Changes in expected cash flows that do not affect nonaccretable difference (3) 10,658
Balance, December 31, 2015 16,301
Addition of accretable yield due to acquisitions (1 )
Accretion into interest income (1) (339 )
Accretion into noninterest income due to sales (2) (9 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (4) 34
Changes in expected cash flows that do not affect nonaccretable difference (3) (8 )
Balance, March 31, 2016 $ 15,978

(1) Includes accretable yield released as a result of settlements with borrowers, which is included in interest income.

(2) Includes accretable yield released as a result of sales to third parties, which is included in noninterest income.

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

(4) At March 31, 2016, our carrying value for PCI loans totaled $20.3 billion and the remainder of nonaccretable difference established in purchase accounting totaled $2.3 billion. The nonaccretable difference absorbs losses of contractual amounts that exceed our carrying value for PCI loans.

Wells Fargo & Company and Subsidiaries

PICK-A-PAY PORTFOLIO (1)
March 31, 2016
PCI loans All other loans

Ratio of Ratio of

Adjusted

carrying carrying

unpaid

Current value to value to

principal

LTV Carrying current Carrying current
(in millions)

balance (2)

ratio (3) value (4) value (5) value (4) value (5)
California $ 16,079 72 % $ 12,838 57 % $ 9,311 52 %
Florida 1,819 81 1,392 60 1,932 65
New Jersey 751 81 578 60 1,272 68
New York 518 77 440 59 624 67
Texas 196 55 176 49 753 43
Other states 3,724 78 2,972 61 5,388 64
Total Pick-a-Pay loans $ 23,087 74 $ 18,396 58 $ 19,280 58

(1) The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2016.

(2) Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.

(3) The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.

(4) Carrying value, which does not reflect the allowance for loan losses, includes remaining purchase accounting adjustments, which, for PCI loans may include the nonaccretable difference and the accretable yield and, for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs.

(5) The ratio of carrying value to current value is calculated as the carrying value divided by the collateral value.

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES

Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015

Balance, beginning of quarter

$ 12,512 12,562 12,614 13,013 13,169
Provision for credit losses 1,086 831 703 300 608
Interest income on certain impaired loans (1) (48 ) (48 ) (48 ) (50 ) (52 )
Loan charge-offs:
Commercial:
Commercial and industrial (349 ) (275 ) (172 ) (154 ) (133 )
Real estate mortgage (3 ) (11 ) (9 ) (16 ) (23 )
Real estate construction — (2 ) — (1 ) (1 )
Lease financing (4 ) (3 ) (5 ) (3 ) (3 )
Total commercial (356 ) (291 ) (186 ) (174 ) (160 )
Consumer:
Real estate 1-4 family first mortgage (137 ) (113 ) (145 ) (119 ) (130 )
Real estate 1-4 family junior lien mortgage (133 ) (134 ) (159 ) (163 ) (179 )
Credit card (314 ) (295 ) (259 ) (284 ) (278 )
Automobile (211 ) (211 ) (186 ) (150 ) (195 )
Other revolving credit and installment (175 ) (178 ) (160 ) (151 ) (154 )
Total consumer (970 ) (931 ) (909 ) (867 ) (936 )
Total loan charge-offs (1,326 ) (1,222 ) (1,095 ) (1,041 ) (1,096 )
Loan recoveries:
Commercial:
Commercial and industrial 76 60 50 73 69
Real estate mortgage 32 30 32 31 34
Real estate construction 8 12 8 7 10
Lease financing 3 2 2 1 3

Total commercial

119 104 92 112 116
Consumer:
Real estate 1-4 family first mortgage 89 63 83 52 47
Real estate 1-4 family junior lien mortgage 59 64 70 69 56
Credit card 52 52 43 41 39
Automobile 84 76 73 82 94
Other revolving credit and installment 37 32 31 35 36
Total consumer 321 287 300 279 272
Total loan recoveries 440 391 392 391 388

Net loan charge-offs

(886 ) (831 ) (703 ) (650 ) (708 )
Other 4 (2 ) (4 ) 1 (4 )
Balance, end of quarter $ 12,668 12,512 12,562 12,614 13,013
Components:
Allowance for loan losses $ 11,621 11,545 11,659 11,754 12,176
Allowance for unfunded credit commitments 1,047 967 903 860 837
Allowance for credit losses $ 12,668 12,512 12,562 12,614 13,013
Net loan charge-offs (annualized) as a percentage of average total loans 0.38 % 0.36 0.31 0.30 0.33
Allowance for loan losses as a percentage of:
Total loans 1.23 1.26 1.29 1.32 1.41
Nonaccrual loans 95 101 101 94 97
Nonaccrual loans and other nonperforming assets 86 90 88 82 82
Allowance for credit losses as a percentage of:
Total loans 1.34 1.37 1.39 1.42 1.51
Nonaccrual loans 104 110 109 101 104
Nonaccrual loans and other nonperforming assets 94 98 94 88 88

(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.

Wells Fargo & Company and Subsidiaries

COMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1)
Estimated
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in billions) 2016 2015 2015 2015 2015
Total equity $ 198.5 193.9 194.0 190.7 190.0
Noncontrolling interests (1.0 ) (0.9 ) (0.9 ) (1.1 ) (1.2 )
Total Wells Fargo stockholders’ equity 197.5 193.0 193.1 189.6 188.8
Adjustments:
Preferred stock (22.0 ) (21.0 ) (21.0 ) (20.0 ) (20.0 )
Goodwill and other intangible assets (2) (30.9 ) (28.7 ) (28.7 ) (29.1 ) (28.9 )
Investment in certain subsidiaries and other (1.9 ) (0.9 ) (1.6 ) (0.6 ) (0.9 )
Common Equity Tier 1 (Fully Phased-In) under Basel III (1) (A) 142.7 142.4 141.8 139.9 139.0
Total risk-weighted assets (RWAs) anticipated under Basel III (3)(4) (B) $ 1,341.2 1,321.7 1,331.8 1,325.6 1,326.3
Common Equity Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In) (4) (A)/(B) 10.6 % 10.8 10.6 10.6 10.5

(1) Basel III capital rules, adopted by the Federal Reserve Board on July 2, 2013, revised the definition of capital, increased minimum capital ratios, and introduced a minimum Common Equity Tier 1 (CET1) ratio. These rules established a new comprehensive capital framework for U.S. banking organizations that implements the Basel III capital framework and certain provisions of the Dodd-Frank Act. The rules are being phased in through the end of 2021. Fully phased-in capital amounts, ratios and RWAs are calculated assuming the full phase-in of the Basel III capital rules. Fully phased-in regulatory capital amounts, ratios and RWAs are considered non-GAAP financial measures that are used by management, bank regulatory agencies, investors and analysts to assess and monitor the Company’s capital position. We have included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants.

(2) Goodwill and other intangible assets are net of any associated deferred tax liabilities.

(3) The final Basel III capital rules provide for two capital frameworks: the Standardized Approach, which replaced Basel I, and the Advanced Approach applicable to certain institutions. Under the final rules, we are subject to the lower of our CET1 ratio calculated under the Standardized Approach and under the Advanced Approach in the assessment of our capital adequacy. Because the final determination of our CET1 ratio and which approach will produce the lower CET1 ratio as of March 31, 2016, is subject to detailed analysis of considerable data, our CET1 ratio at that date has been estimated using the Basel III definition of capital under the Basel III Standardized Approach RWAs. The capital ratio for December 31, 2015, September 30, 2015, and June 30, 2015, was calculated under the Basel III Standardized Approach RWAs, and the capital ratio for March 31, 2015 was calculated under the Basel III Advanced Approach RWAs.

(4) The Company’s March 31, 2016, RWAs and capital ratio are preliminary estimates.

Wells Fargo & Company and Subsidiaries

OPERATING SEGMENT RESULTS (1)

(income/expense in millions,average balances in billions)

CommunityBanking

WholesaleBanking

Wealth andInvestmentManagement

Other (2)

ConsolidatedCompany

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Quarter ended Mar 31,
Net interest income (3) $ 7,468 7,147 3,748 3,437 943 826 (492 ) (424 ) 11,667 10,986
Provision (reversal of provision) for credit losses 720 658 363 (51 ) (14 ) (3 ) 17 4 1,086 608
Noninterest income 5,146 4,964 3,210 2,972 2,911 3,150 (739 ) (794 ) 10,528 10,292
Noninterest expense 6,836 6,591 3,968 3,618 3,042 3,122 (818 ) (824 ) 13,028 12,507
Income (loss) before income tax expense (benefit) 5,058 4,862 2,627 2,842 826 857 (430 ) (398 ) 8,081 8,163
Income tax expense (benefit) 1,697 1,290 719 817 314 324 (163 ) (152 ) 2,567 2,279
Net income (loss) before noncontrolling interests 3,361 3,572 1,908 2,025 512 533 (267 ) (246 ) 5,514 5,884
Less: Net income (loss) from noncontrolling interests 65 25 (13 ) 51 — 4 — — 52 80
Net income (loss) $ 3,296 3,547 1,921 1,974 512 529 (267 ) (246 ) 5,462 5,804
Average loans $ 484.3 472.2 429.8 380.0 64.1 56.9 (51.0 ) (45.8 ) 927.2 863.3
Average assets 947.4 909.5 748.6 690.6 208.1 191.6 (84.2 ) (83.9 ) 1,819.9 1,707.8
Average deposits 683.0 643.4 428.0 431.7 184.5 170.3 (76.1 ) (70.6 ) 1,219.4 1,174.8

(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) Includes items not specific to a business segment and elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for Wealth and Investment Management customers served through Community Banking distribution channels.

(3) Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.

Wells Fargo & Company and Subsidiaries

FIVE QUARTER OPERATING SEGMENT RESULTS (1)
Quarter ended

Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,

(income/expense in millions, average balances in billions)

2016 2015 2015 2015 2015
COMMUNITY BANKING
Net interest income (2) $ 7,468 7,409 7,409 7,277 7,147
Provision for credit losses 720 704 668 397 658
Noninterest income 5,146 4,921 5,524 4,690 4,964
Noninterest expense 6,836 6,893 6,778 6,719 6,591
Income before income tax expense 5,058 4,733 5,487 4,851 4,862
Income tax expense 1,697 1,507 1,785 1,620 1,290
Net income before noncontrolling interests 3,361 3,226 3,702 3,231 3,572
Less: Net income from noncontrolling interests 65 57 142 16 25
Segment net income $ 3,296 3,169 3,560 3,215 3,547
Average loans $ 484.3 482.2 477.0 472.3 472.2
Average assets 947.4 921.4 898.9 910.0 909.5
Average deposits 683.0 663.7 655.6 654.8 643.4
WHOLESALE BANKING
Net interest income (2) $ 3,748 3,711 3,611 3,591 3,437
Provision (reversal of provision) for credit losses 363 126 36 (84 ) (51 )
Noninterest income 3,210 2,848 2,715 3,019 2,972
Noninterest expense 3,968 3,491 3,503 3,504 3,618
Income before income tax expense 2,627 2,942 2,787 3,190 2,842
Income tax expense 719 841 815 951 817
Net income before noncontrolling interests 1,908 2,101 1,972 2,239 2,025
Less: Net income (loss) from noncontrolling interests (13 ) (3 ) 47 48 51
Segment net income $ 1,921 2,104 1,925 2,191 1,974
Average loans $ 429.8 417.0 405.6 386.2 380.0
Average assets 748.6 755.4 739.1 713.7 690.6
Average deposits 428.0 449.3 442.0 432.4 431.7
WEALTH AND INVESTMENT MANAGEMENT
Net interest income (2) $ 943 933 887 832 826
Reversal of provision for credit losses (14 ) (6 ) (6 ) (10 ) (3 )
Noninterest income 2,911 3,014 2,991 3,144 3,150
Noninterest expense 3,042 2,998 2,909 3,038 3,122
Income before income tax expense 826 955 975 948 857
Income tax expense 314 366 371 359 324
Net income before noncontrolling interests 512 589 604 589 533
Less: Net income (loss) from noncontrolling interests — (6 ) (2 ) 3 4
Segment net income $ 512 595 606 586 529
Average loans $ 64.1 63.0 61.1 59.3 56.9
Average assets 208.1 197.9 192.6 189.1 191.6
Average deposits 184.5 177.9 172.6 168.2 170.3
OTHER (3)
Net interest income (2) $ (492 ) (465 ) (450 ) (430 ) (424 )
Provision (reversal of provision) for credit losses 17 7 5 (3 ) 4
Noninterest income (739 ) (785 ) (812 ) (805 ) (794 )
Noninterest expense (818 ) (783 ) (791 ) (792 ) (824 )
Loss before income tax benefit (430 ) (474 ) (476 ) (440 ) (398 )
Income tax benefit (163 ) (181 ) (181 ) (167 ) (152 )
Net loss before noncontrolling interests (267 ) (293 ) (295 ) (273 ) (246 )
Less: Net income from noncontrolling interests — — — — —
Other net loss $ (267 ) (293 ) (295 ) (273 ) (246 )
Average loans $ (51.0 ) (49.9 ) (48.6 ) (47.4 ) (45.8 )
Average assets (84.2 ) (87.4 ) (84.2 ) (83.5 ) (83.9 )
Average deposits (76.1 ) (74.1 ) (71.3 ) (70.1 ) (70.6 )
CONSOLIDATED COMPANY
Net interest income (2) $ 11,667 11,588 11,457 11,270 10,986
Provision for credit losses 1,086 831 703 300 608
Noninterest income 10,528 9,998 10,418 10,048 10,292
Noninterest expense 13,028 12,599 12,399 12,469 12,507
Income before income tax expense 8,081 8,156 8,773 8,549 8,163
Income tax expense 2,567 2,533 2,790 2,763 2,279
Net income before noncontrolling interests 5,514 5,623 5,983 5,786 5,884
Less: Net income from noncontrolling interests 52 48 187 67 80
Wells Fargo net income $ 5,462 5,575 5,796 5,719 5,804
Average loans $ 927.2 912.3 895.1 870.4 863.3
Average assets 1,819.9 1,787.3 1,746.4 1,729.3 1,707.8
Average deposits 1,219.4 1,216.8 1,198.9 1,185.3 1,174.8

(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 items not specific to a business segment and elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for Wealth and Investment Management customers served through Community Banking distribution channels.

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
MSRs measured using the fair value method:
Fair value, beginning of quarter $ 12,415 11,778 12,661 11,739 12,738
Servicing from securitizations or asset transfers 366 372 448 428 308
Sales and other (1) — (9 ) 6 (5 ) (1 )
Net additions 366 363 454 423 307
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (2) (1,084 ) 560 (858 ) 1,117 (572 )
Servicing and foreclosure costs (3) 27 (37 ) (18 ) (10 ) (18 )
Prepayment estimates and other (4) 100 244 43 (54 ) (183 )
Net changes in valuation model inputs or assumptions (957 ) 767 (833 ) 1,053 (773 )
Other changes in fair value (5) (491 ) (493 ) (504 ) (554 ) (533 )
Total changes in fair value (1,448 ) 274 (1,337 ) 499 (1,306 )
Fair value, end of quarter $ 11,333 12,415 11,778 12,661 11,739

(1) Includes sales and transfers of MSRs, which can result in an increase of total reported MSRs if the sales or transfers are related to nonperforming loan portfolios.

(2) Includes prepayment speed changes as well as other valuation changes due to changes in mortgage interest rates (such as changes in estimated interest earned on custodial deposit balances).

(3) Includes costs to service and unreimbursed foreclosure costs.

(4) Represents changes driven by other valuation model inputs or assumptions including prepayment speed estimation changes and other assumption updates. Prepayment speed estimation changes are influenced by observed changes in borrower behavior and other external factors that occur independent of interest rate changes.

(5) Represents changes due to collection/realization of expected cash flows over time.
Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Amortized MSRs:
Balance, beginning of quarter $ 1,308 1,277 1,262 1,252 1,242
Purchases 21 48 45 29 22
Servicing from securitizations or asset transfers 97 49 35 46 50
Amortization (67 ) (66 ) (65 ) (65 ) (62 )
Balance, end of quarter $ 1,359 1,308 1,277 1,262 1,252
Fair value of amortized MSRs:
Beginning of quarter $ 1,680 1,643 1,692 1,522 1,637
End of quarter 1,725 1,680 1,643 1,692 1,522

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)

Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Servicing income, net:
Servicing fees (1) $ 910 872 990 1,026 1,010
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2) (A) (957 ) 767 (833 ) 1,053 (773 )
Other changes in fair value (3) (491 ) (493 ) (504 ) (554 ) (533 )
Total changes in fair value of MSRs carried at fair value (1,448 ) 274 (1,337 ) 499 (1,306 )
Amortization (67 ) (66 ) (65 ) (65 ) (62 )
Net derivative gains (losses) from economic hedges (4) (B) 1,455 (350 ) 1,086 (946 ) 881
Total servicing income, net $ 850 730 674 514 523
Market-related valuation changes to MSRs, net of hedge results (2)(4) (A)+(B) $ 498 417 253 107 108
(1) Includes contractually specified servicing fees, late charges and other ancillary revenues.
(2) Refer to the changes in fair value MSRs table on the previous page for more detail.
(3) Represents changes due to collection/realization of expected cash flows over time.
(4) Represents results from economic hedges used to hedge the risk of changes in fair value of MSRs.
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in billions) 2016 2015 2015 2015 2015
Managed servicing portfolio (1):
Residential mortgage servicing:
Serviced for others $ 1,280 1,300 1,323 1,344 1,374
Owned loans serviced 342 345 346 347 344
Subserviced for others 4 4 4 5 5
Total residential servicing 1,626 1,649 1,673 1,696 1,723
Commercial mortgage servicing:
Serviced for others 485 478 470 465 461
Owned loans serviced 125 122 121 120 112
Subserviced for others 8 7 7 7 7
Total commercial servicing 618 607 598 592 580
Total managed servicing portfolio $ 2,244 2,256 2,271 2,288 2,303
Total serviced for others $ 1,765 1,778 1,793 1,809 1,835
Ratio of MSRs to related loans serviced for others 0.72 % 0.77 0.73 0.77 0.71
Weighted-average note rate (mortgage loans serviced for others) 4.34 4.37 4.39 4.41 4.43

(1) The components of our managed servicing portfolio are presented at unpaid principal balance for loans serviced and subserviced for others and at book value for owned loans serviced.

Wells Fargo & Company and Subsidiaries

SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA
Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2016 2015 2015 2015 2015
Net gains on mortgage loan origination/sales activities (in millions):
Residential (A) $ 532 600 736 814 711
Commercial 71 108 55 108 91
Residential pipeline and unsold/repurchased loan management (1) 145 222 124 269 222
Total $ 748 930 915 1,191 1,024
Application data (in billions):
Wells Fargo first mortgage quarterly applications $ 77 64 73 81 93
Refinances as a percentage of applications 52 % 48 44 45 61
Wells Fargo first mortgage unclosed pipeline, at quarter end $ 39 29 34 38 44
Residential real estate originations:
Purchases as a percentage of originations 55 % 59 66 54 45
Refinances as a percentage of originations 45 41 34 46 55
Total 100 % 100 100 100 100
Wells Fargo first mortgage loans (in billions):
Retail $ 24 27 32 36 28
Correspondent 19 19 22 25 20
Other (2) 1 1 1 1 1
Total quarter-to-date $ 44 47 55 62 49
Held-for-sale (B) $ 31 33 39 46 37
Held-for-investment 13 14 16 16 12
Total quarter-to-date $ 44 47 55 62 49
Total year-to-date $ 44 213 166 111 49
Production margin on residential held-for-sale mortgage originations (A)/(B) 1.68 % 1.83 1.88 1.75 1.93

(1) Primarily includes the results of GNMA loss mitigation activities, interest rate management activities and changes in estimate to the liability for mortgage loan repurchase losses.

(2) Consists of home equity loans and lines.

CHANGES IN MORTGAGE REPURCHASE LIABILITY

Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2016 2015 2015 2015 2015
Balance, beginning of period $ 378 538 557 586 615
Provision for repurchase losses:
Loan sales 7 9 11 13 10
Change in estimate (1) (19 ) (128 ) (17 ) (31 ) (26 )
Net reductions (12 ) (119 ) (6 ) (18 ) (16 )
Losses (11 ) (41 ) (13 ) (11 ) (13 )
Balance, end of period $ 355 378 538 557 586

(1) Results from changes in investor demand and mortgage insurer practices, credit deterioration and changes in the financial stability of correspondent lenders.

Wells Fargo & Company

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