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Wells Fargo Reports $5.5 Billion in Quarterly Net Income

April 13, 2017 8:01 AM

Diluted EPS of $1.00; Revenue of $22.0 billion

SAN FRANCISCO--(BUSINESS WIRE)-- Wells Fargo & Company (NYSE: WFC):

Selected Financial Information

Quarter ended
Mar 31, Dec 31, Mar 31,
2017 2016 2016
Earnings
Diluted earnings per common share $ 1.00 0.96 0.99
Wells Fargo net income (in billions) 5.46 5.27 5.46
Return on assets (ROA) 1.15 % 1.08 1.21
Return on equity (ROE) 11.54 10.94 11.75
Return on average tangible common equity (ROTCE)(a) 13.85 13.16 14.15
Asset Quality
Net charge-offs (annualized) as a % of average total loans 0.34 % 0.37 0.38
Allowance for credit losses as a % of total loans 1.28 1.30 1.34
Allowance for credit losses as a % of annualized net charge-offs 376 348 355
Other
Revenue (in billions) $ 22.0 21.6 22.2
Efficiency ratio (b) 62.7 % 61.2 58.7
Average loans (in billions) $ 963.6 964.1 927.2
Average deposits (in billions) 1,299.2 1,284.2 1,219.4
Net interest margin 2.87 % 2.87 2.90

(a) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 32.

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

Wells Fargo & Company (NYSE: WFC) reported net income of $5.5 billion, or $1.00 per diluted common share, for first quarter 2017, compared with $5.5 billion, or $0.99 per share, for first quarter 2016, and $5.3 billion, or $0.96 per share, for fourth quarter 2016.

Chief Executive Officer Tim Sloan said, "Wells Fargo continued to make meaningful progress in the first quarter in rebuilding trust with customers and other important stakeholders, while producing solid financial results. We have taken significant actions throughout the company to date and we are committed to building a better bank as we move Wells Fargo forward. Earlier this week, the independent directors of Wells Fargo’s Board of Directors issued a report on their investigation into the company's retail banking sales practices. The findings are valuable to us and beneficial in helping to identify areas for further improvement. While we have more work to do, I am pleased with all we have accomplished thus far. Our 273,000 team members have remained committed to helping our customers succeed financially, as reflected in improved retail customer service scores, record levels of deposits, more primary consumer checking customers, record client assets in Wealth and Investment Management, and industry-leading mortgage originations."

Chief Financial Officer John Shrewsberry said, "Our diversified business model generated higher revenue and net income compared with last quarter, as well as higher ROA and ROE. Expenses were elevated compared with last quarter, driven by typically-higher first quarter personnel-related expenses. Credit results improved, with lower net charge-offs and nonaccrual loans, and we benefited from lower income tax expense. The balance sheet remained strong with high levels of capital and liquidity, and record deposits. We ended first quarter with Common Equity Tier 1 (fully phased-in) of $148.7 billion, or a Common Equity Tier 1 ratio (fully phased-in) of 11.2 percent2, and returned $3.1 billion to shareholders during the quarter, for a net payout ratio3 of 61 percent."

Net Interest Income

Net interest income in first quarter 2017 decreased $102 million from fourth quarter 2016 to $12.3 billion, primarily due to two fewer days in the quarter. The impact of balance declines in trading assets and mortgages held-for-sale, as well as lower income from variable sources, was offset by average balance growth in investment securities and the benefit from higher interest rates in the quarter.

Net interest margin was 2.87 percent, stable with fourth quarter 2016. The benefit of higher interest rates, a reduction in short-term market funding, and average balance growth in investment securities was offset by lower income from trading assets and mortgages held-for-sale, higher deposit and long-term debt balances, and lower income from variable sources.

Noninterest Income

Noninterest income in the first quarter was $9.7 billion, up from $9.2 billion in fourth quarter 2016, driven by higher other income and higher market-sensitive revenue, particularly in trading. These increases were partially offset by lower mortgage banking income, investment banking fees and commercial real estate brokerage commissions.

Noninterest Expense

Noninterest expense in the first quarter was $13.8 billion, compared with $13.2 billion in fourth quarter 2016. First quarter expenses included $790 million of seasonally higher employee benefits and incentive compensation expense, and an increase in deferred compensation expense (included in employee benefits expense and offset in revenue), partially offset by lower outside professional services, equipment, and advertising and promotion expenses, which typically decline in first quarter. The efficiency ratio increased to 62.7 percent in first quarter 2017, compared with 61.2 percent in the prior quarter. The Company currently expects the efficiency ratio to remain elevated.

Income Taxes

The Company’s effective income tax rate was 27.4 percent for first quarter 2017, compared with 30.0 percent in the prior quarter. The effective tax rate for the first quarter included discrete tax benefits totaling $197 million, of which $183 million resulted from tax benefits associated with stock compensation activity during the quarter which was subject to ASU 2016-09 accounting guidance adopted in first quarter 2017. The Company currently expects the full year 2017 tax rate to be approximately 30 percent.

Loans

Total average loans were $963.6 billion in the first quarter, down $502 million from the fourth quarter. Period-end loan balances were $958.4 billion at March 31, 2017, down $9.2 billion from December 31, 2016, driven by a decline in credit card balances due to seasonality, a slowdown in new credit card account openings, and a continued decline in junior lien mortgage loans. In addition, there was an expected decline in auto loans from the fourth quarter as continued proactive steps to tighten underwriting standards resulted in lower origination volume.

Period-End Loan Balances

Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2017 2016 2016 2016 2016
Commercial $ 505,004 506,536 496,454 494,538 488,205
Consumer 453,401 461,068 464,872 462,619 459,053
Total loans $ 958,405 967,604 961,326 957,157 947,258
Change from prior quarter $ (9,199 ) 6,278 4,169 9,899 30,699

Cash, Cash Equivalents and Investment Securities

Cash, federal funds sold, securities purchased under resale agreements and other short-term investments reached an all-time high of $328.4 billion at March 31, 2017, up $41.7 billion from the fourth quarter, driven by deposit growth and a linked-quarter decline in the loan portfolio. Investment securities were $407.6 billion at March 31, 2017, down $387 million from the fourth quarter, as approximately $16 billion of purchases were more than offset by run-off and sales.

Net unrealized losses on available-for-sale securities were $1.2 billion at March 31, 2017, compared with net unrealized losses on available-for-sale securities of $1.8 billion at December 31, 2016, primarily due to tighter credit spreads during the quarter and a modest benefit from lower long-term interest rates.

Deposits

Total average deposits for first quarter 2017 were $1.3 trillion, up 1 percent from the prior quarter, driven by growth in consumer and small business, as well as commercial. The average deposit cost for first quarter 2017 was 17 basis points, up 5 basis points from the prior quarter and 7 basis points from a year ago, primarily driven by an increase in commercial deposit rates.

Capital

Capital levels remained strong in the first quarter, with a Common Equity Tier 1 ratio (fully phased-in) of 11.2 percent2, compared with 10.8 percent in the prior quarter. In first quarter 2017, the Company repurchased 53.1 million shares of its common stock, which reduced period-end common shares outstanding by 19.4 million after taking into account seasonally higher common stock issuances to employee benefit plans. The Company paid a quarterly common stock dividend of $0.38 per share, up from $0.375 per share a year ago.

Credit Quality

"First quarter credit results reflected strong performance in our commercial portfolios and consumer real estate portfolios," said Chief Risk Officer Mike Loughlin. "Improvement in the oil and gas portfolio, as well as continued improvement in residential real estate, drove a $200 million reserve release1 in the quarter."

Net Loan Charge-offs

The quarterly loss rate of 0.34 percent (annualized) reflected commercial losses of 0.11 percent and consumer losses of 0.59 percent. Credit losses were $805 million in first quarter 2017, down $100 million from fourth quarter 2016. Consumer losses increased $8 million, driven by higher credit card losses, predominantly offset by lower losses in 1-4 family junior lien mortgage and other revolving credit and installment portfolios. Commercial losses were down $108 million driven by lower oil and gas losses and increased recoveries.

Net Loan Charge-Offs

Quarter ended
March 31, 2017 December 31, 2016 September 30, 2016
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 $ 171 0.21 % $ 256 0.31 % $ 259 0.32 %
Real estate mortgage (25 ) (0.08 ) (12 ) (0.04 ) (28 ) (0.09 )
Real estate construction (8 ) (0.15 ) (8 ) (0.13 ) (18 ) (0.32 )
Lease financing 5 0.11 15 0.32 2 0.04
Total commercial 143 0.11 251 0.20 215 0.17
Consumer:
Real estate 1-4 family first mortgage 7 0.01 (3 ) — 20 0.03
Real estate 1-4 family junior lien mortgage 23 0.21 44 0.38 49 0.40
Credit card 309 3.54 275 3.09 245 2.82
Automobile 167 1.10 166 1.05 137 0.87
Other revolving credit and installment 156 1.60 172 1.70 139 1.40
Total consumer 662 0.59 654 0.56 590 0.51
Total $ 805 0.34 % $ 905 0.37 % $ 805 0.33 %

(a) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 29 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

Nonperforming Assets

Nonperforming assets decreased $698 million from fourth quarter 2016 to $10.7 billion. Nonaccrual loans decreased $625 million from fourth quarter to $9.8 billion reflecting declines across all major commercial asset classes, as well as continued lower consumer real estate nonaccruals.

Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

March 31, 2017 December 31, 2016 September 30, 2016
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 $ 2,898 0.88 % $ 3,216 0.97 % $ 3,331 1.03 %
Real estate mortgage 672 0.51 685 0.52 780 0.60
Real estate construction 40 0.16 43 0.18 59 0.25
Lease financing 96 0.50 115 0.60 92 0.49
Total commercial 3,706 0.73 4,059 0.80 4,262 0.86
Consumer:
Real estate 1-4 family first mortgage 4,743 1.73 4,962 1.80 5,310 1.91
Real estate 1-4 family junior lien mortgage 1,153 2.60 1,206 2.61 1,259 2.62
Automobile 101 0.17 106 0.17 108 0.17
Other revolving credit and installment 56 0.14 51 0.13 47 0.12
Total consumer 6,053 1.34 6,325 1.37 6,724 1.45
Total nonaccrual loans 9,759 1.02 10,384 1.07 10,986 1.14
Foreclosed assets:
Government insured/guaranteed 179 197 282
Non-government insured/guaranteed 726 781 738
Total foreclosed assets 905 978 1,020
Total nonperforming assets $ 10,664 1.11 % $ 11,362 1.17 % $ 12,006 1.25 %
Change from prior quarter:
Total nonaccrual loans $ (625 ) $ (602 ) $ (977 )
Total nonperforming assets (698 ) (644 ) (1,074 )

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $12.3 billion at March 31, 2017, which was down $253 million from December 31, 2016. The allowance coverage for total loans was 1.28 percent, compared with 1.30 percent in fourth quarter 2016. The allowance covered 3.8 times annualized first quarter net charge-offs, compared with 3.5 times in the prior quarter. The allowance coverage for nonaccrual loans was 126 percent at March 31, 2017, compared with 121 percent at December 31, 2016. “We believe the allowance was appropriate for losses inherent in the loan portfolio at March 31, 2017,” 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) 2017 2016 2016
Community Banking $ 3,009 2,733 3,296
Wholesale Banking 2,115 2,194 1,921
Wealth and Investment Management 623 653 512

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) 2017 2016 2016
Total revenue $ 12,093 11,661 12,614
Provision for credit losses 646 631 720
Noninterest expense 7,221 6,985 6,836
Segment net income 3,009 2,733 3,296
(in billions)
Average loans 482.7 488.1 484.3
Average assets 990.7 1,000.7 947.4
Average deposits 717.2 709.8 683.0

Community Banking reported net income of $3.0 billion, up $276 million, or 10 percent, from fourth quarter 2016. Revenue of $12.1 billion increased $432 million, or 4 percent, from fourth quarter 2016, driven by higher other income (reflecting the accounting impact of net hedge ineffectiveness), gains on equity investments, and net interest income, partially offset by lower mortgage banking revenue and gains on sales of debt securities. Noninterest expense increased $236 million, compared with fourth quarter 2016, due to seasonally higher personnel expense and higher deferred compensation plan expense (offset in trading revenue), partially offset by lower professional services, equipment, and advertising expense.

Net income was down $287 million, or 9 percent, from first quarter 2016. Revenue decreased $521 million, or 4 percent, compared with a year ago due to lower other income (reflecting the accounting impact of net hedge ineffectiveness), mortgage banking revenue, and gains on sales of debt securities, partially offset by higher gains on equity investments, net interest income, and deferred compensation plan investments (offset in employee benefits expense). Noninterest expense increased $385 million, or 6 percent, from a year ago driven by higher personnel, deferred compensation plan expense (offset in trading revenue), professional services, and equipment expense, partially offset by lower operating losses and other expense. The provision for credit losses decreased $74 million from a year ago primarily due to improvement in the consumer real estate portfolios.

Retail Banking and Consumer Payments

Consumer Lending

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

Selected Financial Information

Quarter ended
Mar 31, Dec 31, Mar 31,
(in millions) 2017 2016 2016
Total revenue $ 7,038 7,153 6,958
Provision (reversal of provision) for credit losses (43 ) 168 363
Noninterest expense 4,225 4,002 3,968
Segment net income 2,115 2,194 1,921
(in billions)
Average loans 466.3 461.5 429.8
Average assets 807.8 811.9 748.6
Average deposits 466.0 459.2 428.0

Wholesale Banking reported net income of $2.1 billion, down $79 million, or 4 percent, from fourth quarter 2016. Revenue of $7.0 billion decreased $115 million, or 2 percent, from the prior quarter. Net interest income decreased $175 million, or 4 percent, as loan growth was more than offset by lower trading-related interest income as well as the impact of two fewer days in the quarter. Noninterest income increased $60 million, or 2 percent, as strong customer accommodation trading results were partially offset by lower investment banking and commercial real estate brokerage fees. Noninterest expense increased $223 million, or 6 percent, from the prior quarter due to seasonally higher personnel expenses. The provision for credit losses decreased $211 million from the prior quarter, primarily due to improvements in the oil and gas portfolio.

Net income increased $194 million, or 10 percent, from first quarter 2016. Revenue increased $80 million, or 1 percent, from first quarter 2016, driven by a $400 million increase in net interest income primarily related to loan growth including the GE Capital portfolio acquisitions. Noninterest income decreased $320 million, or 10 percent, primarily due to the first quarter 2016 sale of our crop insurance business which resulted in lower insurance and gain on sale income, partially offset by higher investment banking fees, customer accommodation trading, and lease income related to the GE Capital portfolio acquisitions. Noninterest expense increased $257 million, or 6 percent, from a year ago primarily due to the GE Capital portfolio acquisitions and higher expenses related to growth initiatives, compliance, and regulatory requirements. The provision for credit losses decreased $406 million from a year ago primarily due to improvements in the oil and gas portfolio.

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

Selected Financial Information

Quarter ended
Mar 31, Dec 31, Mar 31,
(in millions) 2017 2016 2016
Total revenue $ 4,193 4,074 3,854
Provision (reversal of provision) for credit losses (4 ) 3 (14 )
Noninterest expense 3,206 3,042 3,042
Segment net income 623 653 512
(in billions)
Average loans 70.7 70.0 64.1
Average assets 221.9 220.4 208.1
Average deposits 195.6 194.9 184.5

Wealth and Investment Management reported net income of $623 million, down $30 million, or 5 percent, from fourth quarter 2016. Revenue of $4.2 billion increased $119 million, or 3 percent, from the prior quarter, primarily due to higher gains on deferred compensation plan investments (offset in employee benefits expense), other fee income, and net interest income. Noninterest expense increased $164 million, or 5 percent, from the prior quarter, primarily driven by seasonally higher personnel expenses and deferred compensation plan expense (offset in trading revenue).

Net income was up $111 million, or 22 percent, from first quarter 2016. Revenue increased $339 million, or 9 percent, from a year ago primarily driven by higher net interest income, asset-based fees, deferred compensation plan investments (offset in employee benefits expense), and other fee income. Noninterest expense increased $164 million, or 5 percent, from a year ago, primarily due to higher non-personnel expenses, deferred compensation plan expense (offset in trading revenue), and broker commissions.

Retail Brokerage

Wealth Management

Retirement

Asset Management

Conference Call

The Company will host a live conference call on Thursday, April 13, at 7:00 a.m. PT (10:00 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 https://engage.vevent.com/rt/wells_fargo_ao~56300037.

A replay of the conference call will be available beginning at 10:00 a.m. PT (1:00 p.m. ET) on Thursday, April 13 through Friday, April 28. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #56300037. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~56300037.

Endnotes

1

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.

2

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.

3

Net payout ratio means the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock.

4

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.

5

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

6

Combined consumer and business debit card purchase volume dollars.

7

Data as of February 2017, comparisons with February 2016.
8 Credit card penetration defined as the percentage of Retail Banking households that have a credit card with Wells Fargo. Effective second quarter 2016, Retail Banking households reflect only those households that maintain a retail checking account, which we believe provides the foundation for long-term retail banking relationships. Prior period metrics have been revised to conform with the updated definition of Retail Banking households. Credit card household penetration rates have not been adjusted to reflect the impact of the approximately 565,000 potentially unauthorized accounts identified by an independent consulting firm because the maximum impact in any one quarter was not greater than 86 basis points, or approximately 2 percent.
9 Primarily includes retail banking, consumer lending, small business and business banking customers.

Forward-Looking Statements

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

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

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

For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $2.0 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,500 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 42 countries and territories to support customers who conduct business in the global economy. With approximately 273,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 27 on Fortune’s 2016 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially.

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

Pages

Summary Information

Summary Financial Data

15

Income

Consolidated Statement of Income 17
Consolidated Statement of Comprehensive Income 19
Condensed Consolidated Statement of Changes in Total Equity 19
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 20
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 21
Noninterest Income and Noninterest Expense 22

Balance Sheet

Consolidated Balance Sheet 24
Investment Securities 26

Loans

Loans 26
Nonperforming Assets 27
Loans 90 Days or More Past Due and Still Accruing 28
Purchased Credit-Impaired Loans 29
Pick-A-Pay Portfolio 30
Changes in Allowance for Credit Losses 31

Equity

Tangible Common Equity 32
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, 2017 from
Mar 31, Dec 31, Mar 31, Dec 31, Mar 31,
($ in millions, except per share amounts) 2017 2016 2016 2016 2016
For the Period
Wells Fargo net income $ 5,457 5,274 5,462 3 % —
Wells Fargo net income applicable to common stock 5,056 4,872 5,085 4 (1 )
Diluted earnings per common share 1.00 0.96 0.99 4 1
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.15 % 1.08 1.21 6 (5 )
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 11.54 10.94 11.75 5 (2 )
Return on average tangible common equity (ROTCE)(1) 13.85 13.16 14.15 5 (2 )
Efficiency ratio (2) 62.7 61.2 58.7 2 7
Total revenue $ 22,002 21,582 22,195 2 (1 )
Pre-tax pre-provision profit (PTPP) (3) 8,210 8,367 9,167 (2 ) (10 )
Dividends declared per common share 0.380 0.380 0.375 — 1
Average common shares outstanding 5,008.6 5,025.6 5,075.7 — (1 )
Diluted average common shares outstanding 5,070.4 5,078.2 5,139.4 — (1 )
Average loans $ 963,645 964,147 927,220 — 4
Average assets 1,931,041 1,944,250 1,819,875 (1 ) 6
Average total deposits 1,299,191 1,284,158 1,219,430 1 7
Average consumer and small business banking deposits (4) 758,754 749,946 714,837 1 6
Net interest margin 2.87 % 2.87 2.90 — (1 )
At Period End
Investment securities $ 407,560 407,947 334,899 — 22
Loans 958,405 967,604 947,258 (1 ) 1
Allowance for loan losses 11,168 11,419 11,621 (2 ) (4 )
Goodwill 26,666 26,693 27,003 — (1 )
Assets 1,951,564 1,930,115 1,849,182 1 6
Deposits 1,325,444 1,306,079 1,241,490 1 7
Common stockholders' equity 178,388 176,469 175,534 1 2
Wells Fargo stockholders’ equity 201,500 199,581 197,496 1 2
Total equity 202,489 200,497 198,504 1 2
Tangible common equity (1) 148,850 146,737 144,679 1 3
Common shares outstanding 4,996.7 5,016.1 5,075.9 — (2 )
Book value per common share (5) $ 35.70 35.18 34.58 1 3
Tangible book value per common share (1)(5) 29.79 29.25 28.50 2 5
Common stock price:
High 59.99 58.02 53.27 3 13
Low 53.35 43.55 44.50 23 20
Period end 55.66 55.11 48.36 1 15
Team members (active, full-time equivalent) 272,800 269,100 268,600 1 2

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 32.

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

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

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

(5) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA

Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
($ in millions, except per share amounts) 2017 2016 2016 2016 2016
For the Quarter
Wells Fargo net income $ 5,457 5,274 5,644 5,558 5,462
Wells Fargo net income applicable to common stock 5,056 4,872 5,243 5,173 5,085
Diluted earnings per common share 1.00 0.96 1.03 1.01 0.99
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 1.15 % 1.08 1.17 1.20 1.21
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 11.54 10.94 11.60 11.70 11.75
Return on average tangible common equity (ROTCE)(1) 13.85 13.16 13.96 14.15 14.15
Efficiency ratio (2) 62.7 61.2 59.4 58.1 58.7
Total revenue $ 22,002 21,582 22,328 22,162 22,195
Pre-tax pre-provision profit (PTPP) (3) 8,210 8,367 9,060 9,296 9,167
Dividends declared per common share 0.380 0.380 0.380 0.380 0.375
Average common shares outstanding 5,008.6 5,025.6 5,043.4 5,066.9 5,075.7
Diluted average common shares outstanding 5,070.4 5,078.2 5,094.6 5,118.1 5,139.4
Average loans $ 963,645 964,147 957,484 950,751 927,220
Average assets 1,931,041 1,944,250 1,914,586 1,862,084 1,819,875
Average total deposits 1,299,191 1,284,158 1,261,527 1,236,658 1,219,430
Average consumer and small business banking deposits (4) 758,754 749,946 739,066 726,359 714,837
Net interest margin 2.87 % 2.87 2.82 2.86 2.90
At Quarter End
Investment securities $ 407,560 407,947 390,832 353,426 334,899
Loans 958,405 967,604 961,326 957,157 947,258
Allowance for loan losses 11,168 11,419 11,583 11,664 11,621
Goodwill 26,666 26,693 26,688 26,963 27,003
Assets 1,951,564 1,930,115 1,942,124 1,889,235 1,849,182
Deposits 1,325,444 1,306,079 1,275,894 1,245,473 1,241,490
Common stockholders' equity 178,388 176,469 179,916 178,633 175,534
Wells Fargo stockholders’ equity 201,500 199,581 203,028 201,745 197,496
Total equity 202,489 200,497 203,958 202,661 198,504
Tangible common equity (1) 148,850 146,737 149,829 148,110 144,679
Common shares outstanding 4,996.7 5,016.1 5,023.9 5,048.5 5,075.9
Book value per common share (5) $ 35.70 35.18 35.81 35.38 34.58
Tangible book value per common share (1)(5) 29.79 29.25 29.82 29.34 28.50
Common stock price:
High 59.99 58.02 51.00 51.41 53.27
Low 53.35 43.55 44.10 44.50 44.50
Period end 55.66 55.11 44.28 47.33 48.36
Team members (active, full-time equivalent) 272,800 269,100 268,800 267,900 268,600

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 32.

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

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

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

(5) Book value per common share is common stockholders' equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

Quarter ended March 31, %
(in millions, except per share amounts) 2017 2016 Change
Interest income
Trading assets $ 643 596 8 %
Investment securities 2,675 2,262 18
Mortgages held for sale 184 161 14
Loans held for sale 1 2 (50 )
Loans 10,141 9,577 6
Other interest income 582 374 56
Total interest income 14,226 12,972 10
Interest expense
Deposits 537 307 75
Short-term borrowings 114 67 70
Long-term debt 1,183 842 40
Other interest expense 92 89 3
Total interest expense 1,926 1,305 48
Net interest income 12,300 11,667 5
Provision for credit losses 605 1,086 (44 )
Net interest income after provision for credit losses 11,695 10,581 11
Noninterest income
Service charges on deposit accounts 1,313 1,309 —
Trust and investment fees 3,570 3,385 5
Card fees 945 941 —
Other fees 865 933 (7 )
Mortgage banking 1,228 1,598 (23 )
Insurance 277 427 (35 )
Net gains from trading activities 439 200 120
Net gains on debt securities 36 244 (85 )
Net gains from equity investments 403 244 65
Lease income 481 373 29
Other 145 874 (83 )
Total noninterest income 9,702 10,528 (8 )
Noninterest expense
Salaries 4,261 4,036 6
Commission and incentive compensation 2,725 2,645 3
Employee benefits 1,686 1,526 10
Equipment 577 528 9
Net occupancy 712 711 —
Core deposit and other intangibles 289 293 (1 )
FDIC and other deposit assessments 333 250 33
Other 3,209 3,039 6
Total noninterest expense 13,792 13,028 6
Income before income tax expense 7,605 8,081 (6 )
Income tax expense 2,057 2,567 (20 )
Net income before noncontrolling interests 5,548 5,514 1
Less: Net income from noncontrolling interests 91 52 75
Wells Fargo net income $ 5,457 5,462 —
Less: Preferred stock dividends and other 401 377 6
Wells Fargo net income applicable to common stock $ 5,056 5,085 (1 )
Per share information
Earnings per common share $ 1.01 1.00 1
Diluted earnings per common share 1.00 0.99 1
Dividends declared per common share 0.380 0.375 1
Average common shares outstanding 5,008.6 5,075.7 (1 )
Diluted average common shares outstanding 5,070.4 5,139.4 (1 )
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) 2017 2016 2016 2016 2016
Interest income
Trading assets $ 643 745 593 572 596
Investment securities 2,675 2,512 2,298 2,176 2,262
Mortgages held for sale 184 235 207 181 161
Loans held for sale 1 2 2 3 2
Loans 10,141 10,128 9,978 9,822 9,577
Other interest income 582 436 409 392 374
Total interest income 14,226 14,058 13,487 13,146 12,972
Interest expense
Deposits 537 400 356 332 307
Short-term borrowings 114 101 85 77 67
Long-term debt 1,183 1,061 1,006 921 842
Other interest expense 92 94 88 83 89
Total interest expense 1,926 1,656 1,535 1,413 1,305
Net interest income 12,300 12,402 11,952 11,733 11,667
Provision for credit losses 605 805 805 1,074 1,086
Net interest income after provision for credit losses 11,695 11,597 11,147 10,659 10,581
Noninterest income
Service charges on deposit accounts 1,313 1,357 1,370 1,336 1,309
Trust and investment fees 3,570 3,698 3,613 3,547 3,385
Card fees 945 1,001 997 997 941
Other fees 865 962 926 906 933
Mortgage banking 1,228 1,417 1,667 1,414 1,598
Insurance 277 262 293 286 427
Net gains (losses) from trading activities 439 (109 ) 415 328 200
Net gains on debt securities 36 145 106 447 244
Net gains from equity investments 403 306 140 189 244
Lease income 481 523 534 497 373
Other 145 (382 ) 315 482 874
Total noninterest income 9,702 9,180 10,376 10,429 10,528
Noninterest expense
Salaries 4,261 4,193 4,224 4,099 4,036
Commission and incentive compensation 2,725 2,478 2,520 2,604 2,645
Employee benefits 1,686 1,101 1,223 1,244 1,526
Equipment 577 642 491 493 528
Net occupancy 712 710 718 716 711
Core deposit and other intangibles 289 301 299 299 293
FDIC and other deposit assessments 333 353 310 255 250
Other 3,209 3,437 3,483 3,156 3,039
Total noninterest expense 13,792 13,215 13,268 12,866 13,028
Income before income tax expense 7,605 7,562 8,255 8,222 8,081
Income tax expense 2,057 2,258 2,601 2,649 2,567
Net income before noncontrolling interests 5,548 5,304 5,654 5,573 5,514
Less: Net income from noncontrolling interests 91 30 10 15 52
Wells Fargo net income $ 5,457 5,274 5,644 5,558 5,462
Less: Preferred stock dividends and other 401 402 401 385 377
Wells Fargo net income applicable to common stock $ 5,056 4,872 5,243 5,173 5,085
Per share information
Earnings per common share $ 1.01 0.97 1.04 1.02 1.00
Diluted earnings per common share 1.00 0.96 1.03 1.01 0.99
Dividends declared per common share 0.380 0.380 0.380 0.380 0.375
Average common shares outstanding 5,008.6 5,025.6 5,043.4 5,066.9 5,075.7
Diluted average common shares outstanding 5,070.4 5,078.2 5,094.6 5,118.1 5,139.4

Wells Fargo & Company and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Quarter ended Mar 31, %
(in millions) 2017 2016 Change
Wells Fargo net income $ 5,457 5,462 —%
Other comprehensive income (loss), before tax:
Investment securities:
Net unrealized gains arising during the period 369 795 (54)
Reclassification of net gains to net income (145 ) (304 ) (52)
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period (133 ) 1,999 NM
Reclassification of net gains on cash flow hedges to net income (202 ) (256 ) (21)
Defined benefit plans adjustments:
Net actuarial and prior service losses arising during the period (7 ) (8 ) (13)
Amortization of net actuarial loss, settlements and other to net income 38 37 3
Foreign currency translation adjustments:
Net unrealized gains arising during the period 16 43 (63)
Other comprehensive income (loss), before tax (64 ) 2,306 NM
Income tax (expense) benefit related to other comprehensive income 37 (857 ) NM
Other comprehensive income (loss), net of tax (27 ) 1,449 NM
Less: Other comprehensive income (loss) from noncontrolling interests 14 (28 ) NM
Wells Fargo other comprehensive income (loss), net of tax (41 ) 1,477 NM
Wells Fargo comprehensive income 5,416 6,939 (22)
Comprehensive income from noncontrolling interests 105 24 338
Total comprehensive income $ 5,521 6,963 (21)

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) 2017 2016 2016 2016 2016
Balance, beginning of period $ 200,497 203,958 202,661 198,504 193,891
Cumulative effect from change in consolidation accounting (1) — — — — 121
Wells Fargo net income 5,457 5,274 5,644 5,558 5,462
Wells Fargo other comprehensive income (loss), net of tax (41 ) (5,321 ) (764 ) 1,174 1,477
Noncontrolling interests 75 (13 ) 14 (92 ) (5 )
Common stock issued 1,406 610 300 397 1,079
Common stock repurchased (2) (2,175 ) (2,034 ) (1,839 ) (2,214 ) (2,029 )
Preferred stock released by ESOP — 43 236 371 313
Common stock warrants repurchased/exercised (44 ) — (17 ) — —
Preferred stock issued — — — 1,126 975
Common stock dividends (1,903 ) (1,909 ) (1,918 ) (1,930 ) (1,904 )
Preferred stock dividends (401 ) (401 ) (401 ) (386 ) (378 )
Tax benefit from stock incentive compensation (3) — 74 31 23 149
Stock incentive compensation expense 389 232 39 139 369
Net change in deferred compensation and related plans (771 ) (16 ) (28 ) (9 ) (1,016 )
Balance, end of period $ 202,489 200,497 203,958 202,661 198,504

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

(2) For the quarter ended December 31, 2016, includes $750 million related to a private forward repurchase transaction that settled in first quarter 2017 for 14.7 million shares of common stock.

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

Wells Fargo & Company and Subsidiaries

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

Quarter ended March 31,
2017 2016
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 $ 283,767 0.76 % $ 532 284,697 0.49 % $ 344
Trading assets 93,765 2.80 655 80,464 3.01 605
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 25,034 1.54 95 34,474 1.59 136
Securities of U.S. states and political subdivisions 52,248 4.03 526 50,512 4.24 535
Mortgage-backed securities:
Federal agencies 156,617 2.58 1,011 96,423 2.80 675
Residential and commercial 14,452 5.32 192 20,827 5.20 271
Total mortgage-backed securities 171,069 2.81 1,203 117,250 3.23 946
Other debt and equity securities 50,620 3.60 452 53,558 3.21 429
Total available-for-sale securities 298,971 3.05 2,276 255,794 3.20 2,046
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,693 2.20 243 44,664 2.20 244
Securities of U.S. states and political subdivisions 6,273 5.30 83 2,156 5.41 29
Federal agency and other mortgage-backed securities 51,786 2.51 324 28,114 2.49 175
Other debt securities 3,329 2.34 19 4,598 1.92 22
Total held-to-maturity securities 106,081 2.54 669 79,532 2.37 470
Total investment securities 405,052 2.92 2,945 335,326 3.01 2,516
Mortgages held for sale (4) 19,893 3.70 184 17,870 3.59 161
Loans held for sale (4) 112 4.44 1 282 3.23 2
Loans:
Commercial:
Commercial and industrial - U.S. 274,749 3.59 2,436 257,727 3.39 2,177
Commercial and industrial - Non U.S. 55,347 2.73 373 49,508 2.10 258
Real estate mortgage 132,449 3.56 1,164 122,739 3.41 1,040
Real estate construction 24,591 3.72 225 22,603 3.61 203
Lease financing 19,070 4.94 235 15,047 4.74 178
Total commercial 506,206 3.54 4,433 467,624 3.31 3,856
Consumer:
Real estate 1-4 family first mortgage 275,480 4.02 2,766 274,722 4.05 2,782
Real estate 1-4 family junior lien mortgage 45,285 4.60 515 52,236 4.39 571
Credit card 35,437 11.97 1,046 33,366 11.61 963
Automobile 61,510 5.46 828 60,114 5.67 848
Other revolving credit and installment 39,727 6.02 590 39,158 5.99 584
Total consumer 457,439 5.06 5,745 459,596 5.02 5,748
Total loans (4) 963,645 4.26 10,178 927,220 4.16 9,604
Other 6,865 2.96 50 5,808 2.06 30
Total earning assets $ 1,773,099 3.31 % $ 14,545 1,651,667 3.22 % $ 13,262
Funding sources
Deposits:
Interest-bearing checking $ 50,686 0.29 % $ 37 38,711 0.12 % $ 11
Market rate and other savings 684,175 0.09 157 651,551 0.07 107
Savings certificates 23,466 0.29 17 27,880 0.45 31
Other time deposits 54,915 1.31 178 58,206 0.74 107
Deposits in foreign offices 122,200 0.49 148 97,682 0.21 51
Total interest-bearing deposits 935,442 0.23 537 874,030 0.14 307
Short-term borrowings 98,549 0.47 115 107,857 0.25 67
Long-term debt 259,793 1.83 1,183 216,883 1.56 842
Other liabilities 16,806 2.22 92 16,492 2.14 89
Total interest-bearing liabilities 1,310,590 0.59 1,927 1,215,262 0.43 1,305
Portion of noninterest-bearing funding sources 462,509 — — 436,405 — —
Total funding sources $ 1,773,099 0.44 1,927 1,651,667 0.32 1,305
Net interest margin and net interest income on a taxable-equivalent basis (5) 2.87 % $ 12,618 2.90 % $ 11,957
Noninterest-earning assets
Cash and due from banks $ 18,706 17,995
Goodwill 26,673 26,069
Other 112,563 124,144
Total noninterest-earning assets $ 157,942 168,208
Noninterest-bearing funding sources
Deposits $ 363,749 345,400
Other liabilities 54,935 62,627
Total equity 201,767 196,586
Noninterest-bearing funding sources used to fund earning assets (462,509 ) (436,405 )
Net noninterest-bearing funding sources $ 157,942 168,208
Total assets $ 1,931,041 1,819,875

(1) Our average prime rate was 3.80% and 3.50% for the quarters ended March 31, 2017 and 2016, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.07% and 0.62% 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 $318 million and $290 million for the quarters ended March 31, 2017 and 2016, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

Wells Fargo & Company and Subsidiaries

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

Quarter ended
Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Jun 30, 2016 Mar 31, 2016
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 $ 283.8 0.76 % $ 273.1 0.56 % $ 299.4 0.50 % $ 293.8 0.49 % $ 284.7 0.49 %
Trading assets 93.8 2.80 102.8 2.96 88.8 2.72 81.4 2.86 80.5 3.01
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 25.0 1.54 25.9 1.53 25.8 1.52 31.5 1.56 34.4 1.59
Securities of U.S. states and political subdivisions 52.2 4.03 53.9 4.06 55.2 4.28 52.2 4.24 50.5 4.24
Mortgage-backed securities:
Federal agencies 156.6 2.58 148.0 2.37 105.8 2.39 92.0 2.53 96.5 2.80
Residential and commercial 14.5 5.32 16.5 5.87 18.1 5.54 19.6 5.44 20.8 5.20
Total mortgage-backed securities 171.1 2.81 164.5 2.72 123.9 2.85 111.6 3.04 117.3 3.23
Other debt and equity securities 50.7 3.60 52.7 3.71 54.2 3.37 53.3 3.48 53.6 3.21
Total available-for-sale securities 299.0 3.05 297.0 3.03 259.1 3.13 248.6 3.20 255.8 3.20
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44.7 2.20 44.7 2.20 44.6 2.19 44.6 2.19 44.7 2.20
Securities of U.S. states and political subdivisions 6.3 5.30 4.7 5.31 2.5 5.24 2.2 5.41 2.1 5.41
Federal agency and other mortgage-backed securities 51.8 2.51 46.0 1.81 48.0 1.97 35.1 1.90 28.1 2.49
Other debt securities 3.3 2.34 3.6 2.26 3.9 1.98 4.1 1.92 4.6 1.92
Total held-to-maturity securities 106.1 2.54 99.0 2.17 99.0 2.15 86.0 2.14 79.5 2.37
Total investment securities 405.1 2.92 396.0 2.82 358.1 2.86 334.6 2.93 335.3 3.01
Mortgages held for sale 19.9 3.70 27.5 3.43 24.1 3.44 20.1 3.60 17.9 3.59
Loans held for sale 0.1 4.44 0.2 5.42 0.2 3.04 0.2 4.83 0.3 3.23
Loans:
Commercial:
Commercial and industrial - U.S. 274.8 3.59 272.8 3.46 271.2 3.48 270.9 3.45 257.7 3.39
Commercial and industrial - Non U.S. 55.3 2.73 54.4 2.58 51.3 2.40 51.2 2.35 49.5 2.10
Real estate mortgage 132.4 3.56 131.2 3.44 128.8 3.48 126.1 3.41 122.7 3.41
Real estate construction 24.6 3.72 23.9 3.61 23.2 3.50 23.1 3.49 22.6 3.61
Lease financing 19.1 4.94 18.9 5.78 18.9 4.70 19.0 5.12 15.1 4.74
Total commercial 506.2 3.54 501.2 3.45 493.4 3.42 490.3 3.39 467.6 3.31
Consumer:
Real estate 1-4 family first mortgage 275.5 4.02 277.7 4.01 278.5 3.97 275.9 4.01 274.7 4.05
Real estate 1-4 family junior lien mortgage 45.3 4.60 47.2 4.42 48.9 4.37 50.6 4.37 52.2 4.39
Credit card 35.4 11.97 35.4 11.73 34.6 11.60 33.4 11.52 33.4 11.61
Automobile 61.5 5.46 62.5 5.54 62.5 5.60 61.1 5.66 60.1 5.67
Other revolving credit and installment 39.7 6.02 40.1 5.91 39.6 5.92 39.5 5.91 39.2 5.99
Total consumer 457.4 5.06 462.9 5.01 464.1 4.97 460.5 4.98 459.6 5.02
Total loans 963.6 4.26 964.1 4.20 957.5 4.17 950.8 4.16 927.2 4.16
Other 6.8 2.96 6.7 3.27 6.4 2.30 6.0 2.30 5.8 2.06
Total earning assets $ 1,773.1 3.31 % $ 1,770.4 3.24 % $ 1,734.5 3.17 % $ 1,686.9 3.20 % $ 1,651.7 3.22 %
Funding sources
Deposits:
Interest-bearing checking $ 50.7 0.29 % $ 46.9 0.17 % $ 44.0 0.15 % $ 39.8 0.13 % $ 38.7 0.12 %
Market rate and other savings 684.2 0.09 676.4 0.07 667.2 0.07 659.0 0.07 651.5 0.07
Savings certificates 23.5 0.29 24.4 0.30 25.2 0.30 26.2 0.35 27.9 0.45
Other time deposits 54.9 1.31 49.2 1.16 54.9 0.93 61.2 0.85 58.2 0.74
Deposits in foreign offices 122.2 0.49 110.4 0.35 107.1 0.30 97.5 0.23 97.7 0.21
Total interest-bearing deposits 935.5 0.23 907.3 0.18 898.4 0.16 883.7 0.15 874.0 0.14
Short-term borrowings 98.5 0.47 124.7 0.33 116.2 0.29 111.8 0.28 107.9 0.25
Long-term debt 259.8 1.83 252.2 1.68 252.4 1.59 236.2 1.56 216.9 1.56
Other liabilities 16.8 2.22 17.1 2.15 16.8 2.11 16.3 2.06 16.5 2.14
Total interest-bearing liabilities 1,310.6 0.59 1,301.3 0.51 1,283.8 0.48 1,248.0 0.45 1,215.3 0.43
Portion of noninterest-bearing funding sources 462.5 — 469.1 — 450.7 — 438.9 — 436.4 —
Total funding sources $ 1,773.1 0.44 $ 1,770.4 0.37 $ 1,734.5 0.35 $ 1,686.9 0.34 $ 1,651.7 0.32
Net interest margin on a taxable-equivalent basis 2.87 % 2.87 % 2.82 % 2.86 % 2.90 %
Noninterest-earning assets
Cash and due from banks $ 18.7 19.0 18.7 18.8 18.0
Goodwill 26.7 26.7 27.0 27.0 26.1
Other 112.5 128.2 134.4 129.4 124.1
Total noninterest-earnings assets $ 157.9 173.9 180.1 175.2 168.2
Noninterest-bearing funding sources
Deposits $ 363.7 376.9 363.1 353.0 345.4
Other liabilities 54.9 64.9 63.8 60.1 62.6
Total equity 201.8 201.2 203.9 201.0 196.6
Noninterest-bearing funding sources used to fund earning assets (462.5 ) (469.1 ) (450.7 ) (438.9 ) (436.4 )
Net noninterest-bearing funding sources $ 157.9 173.9 180.1 175.2 168.2
Total assets $ 1,931.0 1,944.3 1,914.6 1,862.1 1,819.9

(1) Our average prime rate was 3.80% for the quarter ended March 31, 2017, 3.54% for the quarter ended December 31, 2016, and 3.50% for the quarters ended September 30, June 30 and March 31, 2016. The average three-month London Interbank Offered Rate (LIBOR) was 1.07%, 0.92%, 0.79%, 0.64% and 0.62% 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 March 31, %
(in millions) 2017 2016 Change
Service charges on deposit accounts $ 1,313 1,309 — %
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,324 2,239 4
Trust and investment management 829 815 2
Investment banking 417 331 26
Total trust and investment fees 3,570 3,385 5
Card fees 945 941 —
Other fees:
Charges and fees on loans 307 313 (2 )
Cash network fees 126 131 (4 )
Commercial real estate brokerage commissions 81 117 (31 )
Letters of credit fees 74 78 (5 )
Wire transfer and other remittance fees 107 92 16
All other fees 170 202 (16 )
Total other fees 865 933 (7 )
Mortgage banking:
Servicing income, net 456 850 (46 )
Net gains on mortgage loan origination/sales activities 772 748 3
Total mortgage banking 1,228 1,598 (23 )
Insurance 277 427 (35 )
Net gains from trading activities 439 200 120
Net gains on debt securities 36 244 (85 )
Net gains from equity investments 403 244 65
Lease income 481 373 29
Life insurance investment income 144 154 (6 )
All other 1 720 (100 )
Total $ 9,702 10,528 (8 )

NONINTEREST EXPENSE

Quarter ended Mar 31, %
(in millions) 2017 2016 Change
Salaries $ 4,261 4,036 6 %
Commission and incentive compensation 2,725 2,645 3
Employee benefits 1,686 1,526 10
Equipment 577 528 9
Net occupancy 712 711 —
Core deposit and other intangibles 289 293 (1 )
FDIC and other deposit assessments 333 250 33
Outside professional services 804 583 38
Operating losses 282 454 (38 )
Operating leases 345 235 47
Contract services 325 282 15
Outside data processing 220 208 6
Travel and entertainment 179 172 4
Postage, stationery and supplies 145 163 (11 )
Advertising and promotion 127 134 (5 )
Telecommunications 91 92 (1 )
Foreclosed assets 86 78 10
Insurance 24 111 (78 )
All other 581 527 10
Total $ 13,792 13,028 6
Wells Fargo & Company and Subsidiaries

FIVE QUARTER NONINTEREST INCOME

Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2017 2016 2016 2016 2016
Service charges on deposit accounts $ 1,313 1,357 1,370 1,336 1,309
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,324 2,342 2,344 2,291 2,239
Trust and investment management 829 837 849 835 815
Investment banking 417 519 420 421 331
Total trust and investment fees 3,570 3,698 3,613 3,547 3,385
Card fees 945 1,001 997 997 941
Other fees:
Charges and fees on loans 307 305 306 317 313
Cash network fees 126 130 138 138 131
Commercial real estate brokerage commissions 81 172 119 86 117
Letters of credit fees 74 79 81 83 78
Wire transfer and other remittance fees 107 105 103 101 92
All other fees 170 171 179 181 202
Total other fees 865 962 926 906 933
Mortgage banking:
Servicing income, net 456 196 359 360 850
Net gains on mortgage loan origination/sales activities 772 1,221 1,308 1,054 748
Total mortgage banking 1,228 1,417 1,667 1,414 1,598
Insurance 277 262 293 286 427
Net gains (losses) from trading activities 439 (109 ) 415 328 200
Net gains on debt securities 36 145 106 447 244
Net gains from equity investments 403 306 140 189 244
Lease income 481 523 534 497 373
Life insurance investment income 144 132 152 149 154
All other 1 (514 ) 163 333 720
Total $ 9,702 9,180 10,376 10,429 10,528

FIVE QUARTER NONINTEREST EXPENSE

Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2017 2016 2016 2016 2016
Salaries $ 4,261 4,193 4,224 4,099 4,036
Commission and incentive compensation 2,725 2,478 2,520 2,604 2,645
Employee benefits 1,686 1,101 1,223 1,244 1,526
Equipment 577 642 491 493 528
Net occupancy 712 710 718 716 711
Core deposit and other intangibles 289 301 299 299 293
FDIC and other deposit assessments 333 353 310 255 250
Outside professional services 804 984 802 769 583
Operating losses 282 243 577 334 454
Operating leases 345 379 363 352 235
Contract services 325 325 313 283 282
Outside data processing 220 222 233 225 208
Travel and entertainment 179 195 144 193 172
Postage, stationery and supplies 145 156 150 153 163
Advertising and promotion 127 178 117 166 134
Telecommunications 91 96 101 94 92
Foreclosed assets 86 75 (17 ) 66 78
Insurance 24 23 23 22 111
All other 581 561 677 499 527
Total $ 13,792 13,215 13,268 12,866 13,028
Wells Fargo & Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

Mar 31, Dec 31, %
(in millions, except shares) 2017 2016 Change
Assets
Cash and due from banks $ 19,698 20,729 (5 )%
Federal funds sold, securities purchased under resale agreements and other short-term investments 308,747 266,038 16
Trading assets 80,326 74,397 8
Investment securities:
Available-for-sale, at fair value 299,530 308,364 (3 )
Held-to-maturity, at cost 108,030 99,583 8
Mortgages held for sale 17,822 26,309 (32 )
Loans held for sale 253 80 216
Loans 958,405 967,604 (1 )
Allowance for loan losses (11,168 ) (11,419 ) (2 )
Net loans 947,237 956,185 (1 )
Mortgage servicing rights:
Measured at fair value 13,208 12,959 2
Amortized 1,402 1,406 —
Premises and equipment, net 8,320 8,333 —
Goodwill 26,666 26,693 —
Derivative assets 12,564 14,498 (13 )
Other assets 107,761 114,541 (6 )
Total assets $ 1,951,564 1,930,115 1
Liabilities
Noninterest-bearing deposits $ 365,780 375,967 (3 )
Interest-bearing deposits 959,664 930,112 3
Total deposits 1,325,444 1,306,079 1
Short-term borrowings 94,871 96,781 (2 )
Derivative liabilities 12,461 14,492 (14 )
Accrued expenses and other liabilities 59,831 57,189 5
Long-term debt 256,468 255,077 1
Total liabilities 1,749,075 1,729,618 1
Equity
Wells Fargo stockholders’ equity:
Preferred stock 25,501 24,551 4
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 60,585 60,234 1
Retained earnings 136,032 133,075 2
Cumulative other comprehensive income (loss) (3,178 ) (3,137 ) 1
Treasury stock – 485,076,875 shares and 465,702,148 shares (24,030 ) (22,713 ) 6
Unearned ESOP shares (2,546 ) (1,565 ) 63
Total Wells Fargo stockholders’ equity 201,500 199,581 1
Noncontrolling interests 989 916 8
Total equity 202,489 200,497 1
Total liabilities and equity $ 1,951,564 1,930,115 1
Wells Fargo & Company and Subsidiaries

FIVE QUARTER CONSOLIDATED BALANCE SHEET

Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2017 2016 2016 2016 2016
Assets
Cash and due from banks $ 19,698 20,729 19,287 20,407 19,084
Federal funds sold, securities purchased under resale agreements and other short-term investments 308,747 266,038 298,325 295,521 300,547
Trading assets 80,326 74,397 81,094 71,556 62,657
Investment securities:
Available-for-sale, at fair value 299,530 308,364 291,591 253,006 255,551
Held-to-maturity, at cost 108,030 99,583 99,241 100,420 79,348
Mortgages held for sale 17,822 26,309 27,423 23,930 18,041
Loans held for sale 253 80 183 220 280
Loans 958,405 967,604 961,326 957,157 947,258
Allowance for loan losses (11,168 ) (11,419 ) (11,583 ) (11,664 ) (11,621 )
Net loans 947,237 956,185 949,743 945,493 935,637
Mortgage servicing rights:
Measured at fair value 13,208 12,959 10,415 10,396 11,333
Amortized 1,402 1,406 1,373 1,353 1,359
Premises and equipment, net 8,320 8,333 8,322 8,289 8,349
Goodwill 26,666 26,693 26,688 26,963 27,003
Derivative assets 12,564 14,498 18,736 20,999 20,043
Other assets 107,761 114,541 109,703 110,682 109,950
Total assets $ 1,951,564 1,930,115 1,942,124 1,889,235 1,849,182
Liabilities
Noninterest-bearing deposits $ 365,780 375,967 376,136 361,934 348,888
Interest-bearing deposits 959,664 930,112 899,758 883,539 892,602
Total deposits 1,325,444 1,306,079 1,275,894 1,245,473 1,241,490
Short-term borrowings 94,871 96,781 124,668 120,258 107,703
Derivative liabilities 12,461 14,492 13,603 15,483 15,184
Accrued expenses and other liabilities 59,831 57,189 69,166 61,433 58,413
Long-term debt 256,468 255,077 254,835 243,927 227,888
Total liabilities 1,749,075 1,729,618 1,738,166 1,686,574 1,650,678
Equity
Wells Fargo stockholders’ equity:
Preferred stock 25,501 24,551 24,594 24,830 24,051
Common stock 9,136 9,136 9,136 9,136 9,136
Additional paid-in capital 60,585 60,234 60,685 60,691 60,602
Retained earnings 136,032 133,075 130,288 127,076 123,891
Cumulative other comprehensive income (loss) (3,178 ) (3,137 ) 2,184 2,948 1,774
Treasury stock (24,030 ) (22,713 ) (22,247 ) (21,068 ) (19,687 )
Unearned ESOP shares (2,546 ) (1,565 ) (1,612 ) (1,868 ) (2,271 )
Total Wells Fargo stockholders’ equity 201,500 199,581 203,028 201,745 197,496
Noncontrolling interests 989 916 930 916 1,008
Total equity 202,489 200,497 203,958 202,661 198,504
Total liabilities and equity $ 1,951,564 1,930,115 1,942,124 1,889,235 1,849,182
Wells Fargo & Company and Subsidiaries

FIVE QUARTER INVESTMENT SECURITIES

Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2017 2016 2016 2016 2016
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ 24,625 25,819 26,376 27,939 33,813
Securities of U.S. states and political subdivisions 52,061 51,101 55,366 54,024 51,574
Mortgage-backed securities:
Federal agencies 156,966 161,230 135,692 95,868 95,463
Residential and commercial 14,233 16,318 18,387 19,938 21,246
Total mortgage-backed securities 171,199 177,548 154,079 115,806 116,709
Other debt securities 50,520 52,685 54,537 53,935 51,956
Total available-for-sale debt securities 298,405 307,153 290,358 251,704 254,052
Marketable equity securities 1,125 1,211 1,233 1,302 1,499
Total available-for-sale securities 299,530 308,364 291,591 253,006 255,551
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,697 44,690 44,682 44,675 44,667
Securities of U.S. states and political subdivisions 6,331 6,336 2,994 2,181 2,183
Federal agency and other mortgage-backed securities (1) 53,778 45,161 47,721 49,594 28,016
Other debt securities 3,224 3,396 3,844 3,970 4,482
Total held-to-maturity debt securities 108,030 99,583 99,241 100,420 79,348
Total investment securities $ 407,560 407,947 390,832 353,426 334,899

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

FIVE QUARTER LOANS

Mar 31, Dec 31, Sep 30,

Jun 30,

Mar 31,
(in millions) 2017 2016 2016

2016

2016
Commercial:
Commercial and industrial $ 329,252 330,840 324,020 323,858 321,547
Real estate mortgage 131,532 132,491 130,223 128,320 124,711
Real estate construction 25,064 23,916 23,340 23,387 22,944
Lease financing 19,156 19,289 18,871 18,973 19,003
Total commercial 505,004 506,536 496,454 494,538 488,205
Consumer:
Real estate 1-4 family first mortgage 274,633 275,579 278,689 277,162 274,734
Real estate 1-4 family junior lien mortgage 44,333 46,237 48,105 49,772 51,324
Credit card 34,742 36,700 34,992 34,137 33,139
Automobile 60,408 62,286 62,873 61,939 60,658
Other revolving credit and installment 39,285 40,266 40,213 39,609 39,198
Total consumer 453,401 461,068 464,872 462,619 459,053
Total loans (1) $ 958,405 967,604 961,326 957,157 947,258

(1) Includes $15.7 billion, $16.7 billion, $17.7 billion, $19.3 billion, and $20.3 billion of purchased credit-impaired (PCI) loans at March 31, 2017, and December 31, September 30, June 30, and March 31, 2016, respectively.

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

Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2017 2016 2016 2016 2016
Commercial foreign loans:
Commercial and industrial $ 56,987 55,396 51,515 50,515 51,884
Real estate mortgage 8,206 8,541 8,466 8,467 8,367
Real estate construction 471 375 310 246 311
Lease financing 986 972 958 987 983
Total commercial foreign loans $ 66,650 65,284 61,249 60,215 61,545

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) 2017 2016 2016 2016 2016
Nonaccrual loans:
Commercial:
Commercial and industrial $ 2,898 3,216 3,331 3,464 2,911
Real estate mortgage 672 685 780 872 896
Real estate construction 40 43 59 59 63
Lease financing 96 115 92 112 99
Total commercial 3,706 4,059 4,262 4,507 3,969
Consumer:
Real estate 1-4 family first mortgage 4,743 4,962 5,310 5,970 6,683
Real estate 1-4 family junior lien mortgage 1,153 1,206 1,259 1,330 1,421
Automobile 101 106 108 111 114
Other revolving credit and installment 56 51 47 45 47
Total consumer 6,053 6,325 6,724 7,456 8,265
Total nonaccrual loans (1)(2)(3) $ 9,759 10,384 10,986 11,963 12,234
As a percentage of total loans 1.02 % 1.07 1.14 1.25 1.29
Foreclosed assets:
Government insured/guaranteed $ 179 197 282 321 386
Non-government insured/guaranteed 726 781 738 796 893
Total foreclosed assets 905 978 1,020 1,117 1,279
Total nonperforming assets $ 10,664 11,362 12,006 13,080 13,513
As a percentage of total loans 1.11 % 1.17 1.25 1.37 1.43

(1) Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.

(2) Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.

(3) Real estate 1-4 family mortgage loans predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans largely guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed.

Wells Fargo & Company and Subsidiaries

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2017 2016 2016 2016 2016
Total (excluding PCI)(1): $ 10,525 11,858 12,068 12,385 13,060
Less: FHA insured/guaranteed by the VA (2)(3) 9,585 10,883 11,198 11,577 12,233
Less: Student loans guaranteed under the FFELP (4) — 3 17 20 24
Total, not government insured/guaranteed $ 940 972 853 788 803
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 88 28 47 36 24
Real estate mortgage 11 36 4 22 8
Real estate construction 3 — — — 2
Total commercial 102 64 51 58 34
Consumer:
Real estate 1-4 family first mortgage (3) 149 175 171 169 167
Real estate 1-4 family junior lien mortgage (3) 42 56 54 52 55
Credit card 453 452 392 348 389
Automobile 79 112 81 64 55
Other revolving credit and installment 115 113 104 97 103
Total consumer 838 908 802 730 769
Total, not government insured/guaranteed $ 940 972 853 788 803

(1) PCI loans totaled $1.8 billion, $2.0 billion, $2.2 billion, $2.4 billion and $2.7 billion, at March 31, 2017, and December 31, September 30, June 30, and March 31, 2016, respectively.

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

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

Wells Fargo & Company and Subsidiaries

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

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

As a result of PCI loan accounting, certain credit-related ratios cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.
The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:

•

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

•

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

•

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

The change in the accretable yield related to PCI loans since the merger with Wachovia is presented in the following table.
Quarter
ended
March 31,
(in millions) 2017 2009-2016
Balance, beginning of period $ 11,216 10,447
Change in accretable yield due to acquisitions 2 159
Accretion into interest income (1) (357 ) (15,577 )
Accretion into noninterest income due to sales (2) (25 ) (467 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows (3) 406 10,955
Changes in expected cash flows that do not affect nonaccretable difference (4) (927 ) 5,699
Balance, end of period $ 10,315 11,216

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

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

(3) At March 31, 2017, our carrying value for PCI loans totaled $15.7 billion and the remainder of nonaccretable difference established in purchase accounting totaled $585 million. The nonaccretable difference absorbs losses of contractual amounts that exceed our carrying value for PCI loans.

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

Wells Fargo & Company and Subsidiaries

PICK-A-PAY PORTFOLIO (1)
March 31, 2017
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 $ 13,659 64 % $ 10,525 49 % $ 7,477 46 %
Florida 1,597 71 1,210 53 1,582 57
New Jersey 632 78 473 57 1,048 64
New York 471 70 385 53 523 61
Texas 168 49 127 37 626 38
Other states 3,195 71 2,445 54 4,370 58
Total Pick-a-Pay loans $ 19,722 66 $ 15,165 50 $ 15,626 52

(1) The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2017.

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

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

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

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

Wells Fargo & Company and Subsidiaries

FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2017 2016 2016 2016 2016
Balance, beginning of quarter $ 12,540 12,694 12,749 12,668 12,512
Provision for credit losses 605 805 805 1,074 1,086
Interest income on certain impaired loans (1) (48 ) (52 ) (54 ) (51 ) (48 )
Loan charge-offs:
Commercial:
Commercial and industrial (253 ) (309 ) (324 ) (437 ) (349 )
Real estate mortgage (5 ) (14 ) (7 ) (3 ) (3 )
Real estate construction — — — (1 ) —
Lease financing (7 ) (16 ) (4 ) (17 ) (4 )
Total commercial (265 ) (339 ) (335 ) (458 ) (356 )
Consumer:
Real estate 1-4 family first mortgage (69 ) (86 ) (106 ) (123 ) (137 )
Real estate 1-4 family junior lien mortgage (93 ) (110 ) (119 ) (133 ) (133 )
Credit card (367 ) (329 ) (296 ) (320 ) (314 )
Automobile (255 ) (243 ) (215 ) (176 ) (211 )
Other revolving credit and installment (189 ) (200 ) (170 ) (163 ) (175 )
Total consumer (973 ) (968 ) (906 ) (915 ) (970 )
Total loan charge-offs (1,238 ) (1,307 ) (1,241 ) (1,373 ) (1,326 )
Loan recoveries:
Commercial:
Commercial and industrial 82 53 65 69 76
Real estate mortgage 30 26 35 23 32
Real estate construction 8 8 18 4 8
Lease financing 2 1 2 5 3
Total commercial 122 88 120 101 119
Consumer:
Real estate 1-4 family first mortgage 62 89 86 109 89
Real estate 1-4 family junior lien mortgage 70 66 70 71 59
Credit card 58 54 51 50 52
Automobile 88 77 78 86 84
Other revolving credit and installment 33 28 31 32 37
Total consumer 311 314 316 348 321
Total loan recoveries 433 402 436 449 440
Net loan charge-offs (805 ) (905 ) (805 ) (924 ) (886 )
Other (5 ) (2 ) (1 ) (18 ) 4
Balance, end of quarter $ 12,287 12,540 12,694 12,749 12,668
Components:
Allowance for loan losses $ 11,168 11,419 11,583 11,664 11,621
Allowance for unfunded credit commitments 1,119 1,121 1,111 1,085 1,047
Allowance for credit losses $ 12,287 12,540 12,694 12,749 12,668
Net loan charge-offs (annualized) as a percentage of average total loans 0.34 % 0.37 0.33 0.39 0.38
Allowance for loan losses as a percentage of:
Total loans 1.17 1.18 1.20 1.22 1.23
Nonaccrual loans 114 110 105 98 95
Nonaccrual loans and other nonperforming assets 105 101 96 89 86
Allowance for credit losses as a percentage of:
Total loans 1.28 1.30 1.32 1.33 1.34
Nonaccrual loans 126 121 116 107 104
Nonaccrual loans and other nonperforming assets 115 110 106 97 94

(1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize changes in allowance attributable to the passage of time as interest income.

Wells Fargo & Company and Subsidiaries

TANGIBLE COMMON EQUITY (1)
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions, except ratios) 2017 2016 2016 2016 2016
Tangible book value per common share (1):
Total equity $202,489 200,497 203,958 202,661 198,504
Adjustments:
Preferred stock (25,501 ) (24,551 ) (24,594 ) (24,830 ) (24,051 )
Additional paid-in capital on ESOP

preferred stock

(157 ) (126 ) (130 ) (150 ) (182 )
Unearned ESOP shares 2,546 1,565 1,612 1,868 2,271
Noncontrolling interests (989 ) (916 ) (930 ) (916 ) (1,008 )
Total common stockholders' equity (A) 178,388 176,469 179,916 178,633 175,534
Adjustments:
Goodwill (26,666 ) (26,693 ) (26,688 ) (26,963 ) (27,003 )
Certain identifiable intangible assets

(other than MSRs)

(2,449 ) (2,723 ) (3,001 ) (3,356 ) (3,814 )
Other assets (2) (2,121 ) (2,088 ) (2,230 ) (2,110 ) (2,023 )
Applicable deferred taxes (3) 1,698 1,772 1,832 1,906 1,985
Tangible common equity (B) $148,850 146,737 149,829 148,110 144,679
Common shares outstanding (C) 4,996.7 5,016.1 5,023.9 5,048.5 5,075.9
Book value per common share (A)/(C) $35.70 35.18 35.81 35.38 34.58
Tangible book value per common share (B)/(C) 29.79 29.25 29.82 29.34 28.50
Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions, except ratios) 2017 2016 2016 2016 2016
Return on average tangible common equity (1):
Net income applicable to common stock (A) $ 5,056 4,872 5,243 5,173 5,085
Average total equity 201,767 201,247 203,883 201,003 196,586
Adjustments:
Preferred stock

(25,163

)

(24,579 ) (24,813 ) (24,091 ) (23,963 )
Additional paid-in capital on ESOP preferred stock

(146

)

(128 ) (148 ) (168 ) (201 )
Unearned ESOP shares 2,198 1,596 1,850 2,094 2,509
Noncontrolling interests

(957

)

(928 ) (927 ) (984 ) (904 )
Average common stockholders’ equity (B) 177,699 177,208 179,845 177,854 174,027
Adjustments:
Goodwill

(26,673

)

(26,713 ) (26,979 ) (27,037 ) (26,069 )
Certain identifiable intangible assets (other than MSRs)

(2,588

)

(2,871 ) (3,145 ) (3,600 ) (3,407 )
Other assets (2) (2,095) (2,175 ) (2,131 ) (2,096 ) (2,065 )
Applicable deferred taxes (3) 1,722 1,785 1,855 1,934 2,014
Average tangible common equity (C) $ 148,065 147,234 149,445 147,055 144,500
Return on average common stockholders' equity (ROE) (A)/(B)

11.54

%

10.94 11.60 11.70 11.75
Return on average tangible common equity (ROTCE) (A)/(C) 13.85 13.16 13.96 14.15 14.15

(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity.

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

(3) Applicable deferred taxes relate to goodwill and other intangible assets. They were determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.

Wells Fargo & Company and 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, except ratio) 2017 2016 2016 2016 2016
Total equity $ 202.5 200.5 204.0 202.7 198.5
Adjustments:
Preferred stock (25.5 ) (24.6 ) (24.6 ) (24.8 ) (24.1 )

Additional paid-in capital on ESOP

preferred stock

(0.2 ) (0.1 ) (0.1 ) (0.2 ) (0.2 )
Unearned ESOP shares 2.5 1.6 1.6 1.9 2.3
Noncontrolling interests (1.0 ) (0.9 ) (1.0 ) (1.0 ) (1.0 )
Total common stockholders' equity 178.3 176.5 179.9 178.6 175.5
Adjustments:
Goodwill (26.7 ) (26.7 ) (26.7 ) (27.0 ) (27.0 )
Certain identifiable intangible assets (other than MSRs) (2.4 ) (2.7 ) (3.0 ) (3.4 ) (3.8 )
Other assets (2) (2.1 ) (2.1 ) (2.2 ) (2.0 ) (2.1 )
Applicable deferred taxes (3) 1.7 1.8 1.8 1.9 2.0
Investment in certain subsidiaries and other (0.1 ) (0.4 ) (2.0 ) (2.5 ) (1.9 )
Common Equity Tier 1 (Fully Phased-In) under Basel III (A) 148.7 146.4 147.8 145.6 142.7
Total risk-weighted assets (RWAs) anticipated under Basel III (4)(5) (B) $ 1,327.4 1,358.9 1,380.0 1,372.9 1,345.1
Common Equity Tier 1 to total RWAs anticipated under Basel III (Fully Phased-In) (5) (A)/(B) 11.2 % 10.8 10.7 10.6 10.6

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

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

(3) Applicable deferred taxes relate to goodwill and other intangible assets. They were determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.

(4) The final Basel III capital rules provide for two capital frameworks: the Standardized Approach, which replaced Basel I, and the Advanced Approach applicable to certain institutions. Under the final rules, we are subject to the lower of our CET1 ratio calculated under the Standardized Approach and under the Advanced Approach in the assessment of our capital adequacy. Because the final determination of our CET1 ratio and which approach will produce the lower CET1 ratio as of March 31, 2017, is subject to detailed analysis of considerable data, our CET1 ratio at that date has been estimated using the Basel III definition of capital under the Basel III Standardized Approach RWAs. The capital ratio for December 31, September 30, June 30, and March 31, 2016, was calculated under the Basel III Standardized Approach RWAs.

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

Wells Fargo & Company and Subsidiaries

OPERATING SEGMENT RESULTS (1)

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

CommunityBanking

WholesaleBanking

Wealth andInvestmentManagement

Other (2)

ConsolidatedCompany

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Quarter ended Mar 31,
Net interest income (3) $ 7,627 7,468 4,148 3,748 1,074 943 (549 ) (492 ) 12,300 11,667
Provision (reversal of provision) for credit losses 646 720 (43 ) 363 (4 ) (14 ) 6 17 605 1,086
Noninterest income 4,466 5,146 2,890 3,210 3,119 2,911 (773 ) (739 ) 9,702 10,528
Noninterest expense 7,221 6,836 4,225 3,968 3,206 3,042 (860 ) (818 ) 13,792 13,028
Income (loss) before income tax expense (benefit) 4,226 5,058 2,856 2,627 991 826 (468 ) (430 ) 7,605 8,081
Income tax expense (benefit) 1,127 1,697 746 719 362 314 (178 ) (163 ) 2,057 2,567
Net income (loss) before noncontrolling interests 3,099 3,361 2,110 1,908 629 512 (290 ) (267 ) 5,548 5,514
Less: Net income (loss) from noncontrolling interests 90 65 (5 ) (13 ) 6 — — — 91 52
Net income (loss) $ 3,009 3,296 2,115 1,921 623 512 (290 ) (267 ) 5,457 5,462
Average loans $ 482.7 484.3 466.3 429.8 70.7 64.1 (56.1 ) (51.0 ) 963.6 927.2
Average assets 990.7 947.4 807.8 748.6 221.9 208.1 (89.4 ) (84.2 ) 1,931.0 1,819.9
Average deposits 717.2 683.0 466.0 428.0 195.6 184.5 (79.6 ) (76.1 ) 1,299.2 1,219.4

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

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

2017 2016 2016 2016 2016
COMMUNITY BANKING
Net interest income (2) $ 7,627 7,556 7,430 7,379 7,468
Provision for credit losses 646 631 651 689 720
Noninterest income 4,466 4,105 4,957 4,825 5,146
Noninterest expense 7,221 6,985 6,953 6,648 6,836
Income before income tax expense 4,226 4,045 4,783 4,867 5,058
Income tax expense 1,127 1,272 1,546 1,667 1,697
Net income before noncontrolling interests 3,099 2,773 3,237 3,200 3,361
Less: Net income from noncontrolling interests 90 40 10 21 65
Segment net income $ 3,009 2,733 3,227 3,179 3,296
Average loans $ 482.7 488.1 489.2 485.7 484.3
Average assets 990.7 1,000.7 993.6 967.6 947.4
Average deposits 717.2 709.8 708.0 703.7 683.0
WHOLESALE BANKING
Net interest income (2) $ 4,148 4,323 4,062 3,919 3,748
Provision (reversal of provision) for credit losses (43 ) 168 157 385 363
Noninterest income 2,890 2,830 3,085 3,365 3,210
Noninterest expense 4,225 4,002 4,120 4,036 3,968
Income before income tax expense 2,856 2,983 2,870 2,863 2,627
Income tax expense 746 795 827 795 719
Net income before noncontrolling interests 2,110 2,188 2,043 2,068 1,908
Less: Net loss from noncontrolling interests (5 ) (6 ) (4 ) (5 ) (13 )
Segment net income $ 2,115 2,194 2,047 2,073 1,921
Average loans $ 466.3 461.5 454.3 451.4 429.8
Average assets 807.8 811.9 794.2 772.6 748.6
Average deposits 466.0 459.2 441.2 425.8 428.0
WEALTH AND INVESTMENT MANAGEMENT
Net interest income (2) $ 1,074 1,061 977 932 943
Provision (reversal of provision) for credit losses (4 ) 3 4 2 (14 )
Noninterest income 3,119 3,013 3,122 2,987 2,911
Noninterest expense 3,206 3,042 2,999 2,976 3,042
Income before income tax expense 991 1,029 1,096 941 826
Income tax expense 362 380 415 358 314
Net income before noncontrolling interests 629 649 681 583 512
Less: Net income (loss) from noncontrolling interests 6 (4 ) 4 (1 ) —
Segment net income $ 623 653 677 584 512
Average loans $ 70.7 70.0 68.4 66.7 64.1
Average assets 221.9 220.4 212.1 205.3 208.1
Average deposits 195.6 194.9 189.2 182.5 184.5
OTHER (3)
Net interest income (2) $ (549 ) (538 ) (517 ) (497 ) (492 )
Provision (reversal of provision) for credit losses 6 3 (7 ) (2 ) 17
Noninterest income (773 ) (768 ) (788 ) (748 ) (739 )
Noninterest expense (860 ) (814 ) (804 ) (794 ) (818 )
Loss before income tax benefit (468 ) (495 ) (494 ) (449 ) (430 )
Income tax benefit (178 ) (189 ) (187 ) (171 ) (163 )
Net loss before noncontrolling interests (290 ) (306 ) (307 ) (278 ) (267 )
Less: Net income from noncontrolling interests — — — — —
Other net loss $ (290 ) (306 ) (307 ) (278 ) (267 )
Average loans $ (56.1 ) (55.5 ) (54.4 ) (53.0 ) (51.0 )
Average assets (89.4 ) (88.7 ) (85.3 ) (83.4 ) (84.2 )
Average deposits (79.6 ) (79.7 ) (76.9 ) (75.3 ) (76.1 )
CONSOLIDATED COMPANY
Net interest income (2) $ 12,300 12,402 11,952 11,733 11,667
Provision for credit losses 605 805 805 1,074 1,086
Noninterest income 9,702 9,180 10,376 10,429 10,528
Noninterest expense 13,792 13,215 13,268 12,866 13,028
Income before income tax expense 7,605 7,562 8,255 8,222 8,081
Income tax expense 2,057 2,258 2,601 2,649 2,567
Net income before noncontrolling interests 5,548 5,304 5,654 5,573 5,514
Less: Net income from noncontrolling interests 91 30 10 15 52
Wells Fargo net income $ 5,457 5,274 5,644 5,558 5,462
Average loans $ 963.6 964.1 957.5 950.8 927.2
Average assets 1,931.0 1,944.3 1,914.6 1,862.1 1,819.9
Average deposits 1,299.2 1,284.2 1,261.5 1,236.7 1,219.4

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

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

(3) Includes the elimination of certain items that are included in more than one business segment, 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) 2017 2016 2016 2016 2016
MSRs measured using the fair value method:
Fair value, beginning of quarter $ 12,959 10,415 10,396 11,333 12,415
Servicing from securitizations or asset transfers (1) 583 752 609 477 366
Sales and other (2) (47 ) (47 ) 4 (22 ) —
Net additions 536 705 613 455 366
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (3) 152 2,367 39 (779 ) (1,084 )
Servicing and foreclosure costs (4) 27 93 (10 ) (4 ) 27
Prepayment estimates and other (5) (5 ) (106 ) (37 ) (41 ) 100
Net changes in valuation model inputs or assumptions 174 2,354 (8 ) (824 ) (957 )
Changes due to collection/realization of expected cash flows over time (461 ) (515 ) (586 ) (568 ) (491 )
Total changes in fair value (287 ) 1,839 (594 ) (1,392 ) (1,448 )
Fair value, end of quarter $ 13,208 12,959 10,415 10,396 11,333

(1) Includes impacts associated with exercising our right to repurchase delinquent loans from GNMA loan securitization pools.

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

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

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

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

Quarter ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in millions) 2017 2016 2016 2016 2016
Amortized MSRs:
Balance, beginning of quarter $ 1,406 1,373 1,353 1,359 1,308
Purchases 18 34 18 24 21
Servicing from securitizations or asset transfers 45 66 69 38 97
Amortization (67 ) (67 ) (67 ) (68 ) (67 )
Balance, end of quarter $ 1,402 1,406 1,373 1,353 1,359
Fair value of amortized MSRs:
Beginning of quarter $ 1,956 1,627 1,620 1,725 1,680
End of quarter 2,051 1,956 1,627 1,620 1,725

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) 2017 2016 2016 2016 2016
Servicing income, net:
Servicing fees (1) $ 882 738 878 842 910
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2) (A) 174 2,354 (8 ) (824 ) (957 )
Changes due to collection/realization of expected cash flows over time (461 ) (515 ) (586 ) (568 ) (491 )
Total changes in fair value of MSRs carried at fair value (287 ) 1,839 (594 ) (1,392 ) (1,448 )
Amortization (67 ) (67 ) (67 ) (68 ) (67 )
Net derivative gains (losses) from economic hedges (3) (B) (72 ) (2,314 ) 142 978 1,455
Total servicing income, net $ 456 196 359 360 850
Market-related valuation changes to MSRs, net of hedge results (2)(3) (A)+(B) $ 102 40 134 154 498

(1) Includes contractually specified servicing fees, late charges and other ancillary revenues, net of unreimbursed direct servicing costs.

(2) Refer to the changes in fair value MSRs table on the previous page for more detail.

(3) Represents results from economic hedges used to hedge the risk of changes in fair value of MSRs.
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in billions) 2017 2016 2016 2016 2016
Managed servicing portfolio (1):
Residential mortgage servicing:
Serviced for others $ 1,204 1,205 1,226 1,250 1,280
Owned loans serviced 335 347 352 349 342
Subserviced for others 4 8 4 4 4
Total residential servicing 1,543 1,560 1,582 1,603 1,626
Commercial mortgage servicing:
Serviced for others 474 479 477 478 485
Owned loans serviced 132 132 130 128 125
Subserviced for others 7 8 8 8 8
Total commercial servicing 613 619 615 614 618
Total managed servicing portfolio $ 2,156 2,179 2,197 2,217 2,244
Total serviced for others $ 1,678 1,684 1,703 1,728 1,765
Ratio of MSRs to related loans serviced for others 0.87 % 0.85 0.69 0.68 0.72
Weighted-average note rate (mortgage loans serviced for others) 4.23 4.26 4.28 4.32 4.34

(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,
2017 2016 2016 2016 2016
Net gains on mortgage loan origination/sales activities (in millions):
Residential (A) $ 569 939 953 744 532
Commercial 101 90 167 72 71
Residential pipeline and unsold/repurchased loan management (1) 102 192 188 238 145
Total $ 772 1,221 1,308 1,054 748
Application data (in billions):
Wells Fargo first mortgage quarterly applications $ 59 75 100 95 77
Refinances as a percentage of applications 36 % 48 55 46 52
Wells Fargo first mortgage unclosed pipeline, at quarter end $ 28 30 50 47 39
Residential real estate originations:
Purchases as a percentage of originations 61 % 50 58 60 55
Refinances as a percentage of originations 39 50 42 40 45
Total 100 % 100 100 100 100
Wells Fargo first mortgage loans (in billions):
Retail $ 21 35 37 34 24
Correspondent 22 36 32 28 19
Other (2) 1 1 1 1 1
Total quarter-to-date $ 44 72 70 63 44
Held-for-sale (B) $ 34 56 53 46 31
Held-for-investment 10 16 17 17 13
Total quarter-to-date $ 44 72 70 63 44
Total year-to-date $ 44 249 177 107 44
Production margin on residential held-for-sale mortgage originations (A)/(B) 1.68 % 1.68 1.81 1.66 1.68

(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) 2017 2016 2016 2016 2016
Balance, beginning of period $ 229 239 255 355 378
Provision for repurchase losses:
Loan sales 8 10 11 8 7
Change in estimate (1) (8 ) (7 ) (24 ) (89 ) (19 )
Net additions (reductions) — 3 (13 ) (81 ) (12 )
Losses (7 ) (13 ) (3 ) (19 ) (11 )
Balance, end of period $ 222 229 239 255 355

(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

Media

Ancel Martinez, 415-222-3858

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Investors

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Source: Wells Fargo & Company

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