News Release | October 14, 2020
Wells Fargo Reports Third Quarter 2020 Net Income of $2.0 Billion, or $0.42 Per Diluted Share
- Financial results1:
- Third quarter 2020 pre-tax results were impacted by the following:
- $961 million of customer remediation accruals
- $718 million of restructuring charges, predominantly severance expense
- $452 million of noninterest income related to nonmarketable equity securities
- Revenue of $18.9 billion, down from $22.0 billion
- Net interest income of $9.4 billion, down $2.3 billion
- Noninterest income of $9.5 billion, down $891 million
- Noninterest expense of $15.2 billion, up $30 million
- Average loans of $931.7 billion, down $18.1 billion, or 2%
- Average deposits of $1.4 trillion, up $107.7 billion, or 8%
- Credit quality1:
- Provision expense of $769 million, up $74 million
-
Total net charge-offs of $731 million, up $86 million
• Net loan charge-offs of 0.29% of average loans (annualized), up from 0.27% - Allowance for credit losses for loans of $20.5 billion, flat compared with second quarter 2020
-
Total net charge-offs of $731 million, up $86 million
- Nonaccrual loans of $8.0 billion, up $2.5 billion, or 45%
- Liquidity and capital positions:
- Liquidity coverage ratio2 (LCR) of 134%, which continued to exceed the regulatory minimum of 100%
- Common Equity Tier 1 (CET1) ratio of 11.4%3, up from 11.0% in second quarter 2020; the CET1 ratio continued to exceed both the regulatory minimum of 9% and our current internal target of 10%
Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.
- Comparisons in the bullet points are for third quarter 2020 versus third quarter 2019, unless otherwise specified.
- Liquidity coverage ratio (LCR) is calculated as high-quality liquid assets divided by projected net cash outflows, as each is defined under the LCR
rule. LCR is a preliminary estimate.
- See table on page 36 for more information on Common Equity Tier 1. Common Equity Tier 1 is a preliminary estimate.
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Selected Financial Information
Quarter ended | ||||
Sep 30, | Jun 30, | Sep 30, | ||
2020 | 2020 | 2019 | ||
Earnings | ||||
Diluted earnings (loss) per common share | $ | 0.42 | (0.66) | 0.92 |
Wells Fargo net income (loss) (in billions) | 2.04 | (2.38) | 4.61 | |
Return on assets (ROA) | 0.42 % | (0.49) | 0.95 | |
Return on equity (ROE) | 4.22 | (6.63) | 9.00 | |
Return on average tangible common equity (ROTCE) (a) | 5.10 | (8.00) | 10.70 | |
Asset Quality | ||||
Net loan charge-offs (annualized) as a % of average total loans | 0.29 | 0.46 | 0.27 | |
Allowance for credit losses for loans as a % of total loans | 2.22 | 2.19 | 1.11 | |
Allowance for credit losses for loans as a % of annualized net loan charge-offs | 753 | 457 | 415 | |
Other | ||||
Revenue (in billions) | $ | 18.9 | 17.8 | 22.0 |
Efficiency ratio (b) | 80.7 % | 81.6 | 69.1 | |
Average loans (in billions) | $ | 931.7 | 971.3 | 949.8 |
Average deposits (in billions) | 1,399.0 | 1,386.7 | 1,291.4 | |
Net interest margin | 2.13 % | 2.25 | 2.66 |
- Tangible common equity and return on average tangible common equity are non-GAAP financial measures. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.
- The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
SAN FRANCISCO - October 14, 2020 - Wells Fargo & Company (NYSE:WFC) reported net income of $2.0 billion, or $0.42 per diluted common share, for third quarter 2020, compared with net income of $4.6 billion, or $0.92 per share, for third quarter 2019, and a net loss of $2.4 billion, or $0.66 per share, for second quarter 2020.
Chief Executive Officer Charlie Scharf said, "Our third quarter results reflect the impact of aggressive monetary and fiscal stimulus on the US economy. Strong mortgage banking fees, higher equity markets, and declining sequential charge-offs positively impacted our results, while historically low interest rates reduced our net interest income and our expenses continued to remain elevated. We continue to provide support for our customers having helped more than 3.2 million consumers and small businesses by deferring payments and waiving fees."
"Our top priority continues to be the implementation of our risk, control, and regulatory work, but we are also taking targeted actions to improve the experience for our customers, clients, communities and employees. We expect that these actions will also improve our operational and financial performance," Scharf added.
"As we look forward, the trajectory of the economic recovery remains unclear as the negative impact of COVID continues and further fiscal stimulus is uncertain, but we remain strong with our capital and liquidity levels well above regulatory minimums," Scharf concluded.
Chief Financial Officer John Shrewsberry said, "Wells Fargo reported $2.0 billion of net income in the third quarter and diluted earnings per share of $0.42. While our net interest income declined in the third quarter, primarily due to the lower interest rate environment, we saw increases in several other income categories, including robust mortgage banking results. Our third quarter results also included a $718 million restructuring charge, predominantly related to severance expense, and $1.2 billion of operating losses, largely due to customer remediation accruals."
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Net Interest Income
Net interest income in the third quarter was $9.4 billion, down $512 million from second quarter 2020; the net interest margin was 2.13%, down 12 basis points from the prior quarter. The decline in net interest income was due to balance sheet repricing driven by the impact of the lower interest rate environment and balance sheet mix shifts into lower yielding assets including the impact of lower commercial loan balances, as well as higher mortgage-backed securities (MBS) premium amortization. These impacts were partially offset by higher variable sources of income and the benefit of one additional day in the quarter.
Noninterest Income
Noninterest income in the third quarter was $9.5 billion, up $1.5 billion from second quarter 2020. Third quarter noninterest income included higher mortgage banking income, trust and investment fees, deposit-related fees, and card fees, partially offset by lower gains from trading activities. Additionally, third quarter 2020 included
$452 million related to a change in the accounting measurement model for certain nonmarketable equity securities from our affiliated venture capital partnerships (recognized in net gains from equity securities and other noninterest income).
- Deposit-relatedfees were $1.3 billion, up from $1.1 billion in second quarter 2020, primarily due to higher debit card transaction volumes.
- Trust and investment fees were $3.5 billion, up from $3.4 billion in second quarter 2020, driven by higher asset- based fees on retail brokerage advisory assets reflecting higher market valuations at June 30, 2020, partially offset by lower investment banking revenue.
- Card fees were $912 million, up from $797 million in second quarter 2020, predominantly due to increased consumer spending.
- Mortgage banking income was $1.6 billion, up from $317 million in second quarter 2020. Net mortgage servicing income was $341 million, up from a loss of $689 million in the second quarter, which included a negative valuation adjustment as a result of higher prepayment assumptions and higher expected servicing costs due to higher projected defaults. Net gains on mortgage loan production activities increased in the third quarter driven by higher residential held-for-sale mortgage loan originations and a higher production margin4. Held-for-sale mortgage loan originations increased to $48 billion in third quarter 2020 from $43 billion in the second quarter, and the production margin4 increased to 2.16% from 2.04%.
- Net gains from trading activities were $361 million, down from a record $807 million in second quarter 2020, primarily due to lower fixed income trading results.
Noninterest Expense
Noninterest expense in the third quarter was $15.2 billion, up $678 million from the prior quarter predominantly due to $718 million of restructuring charges predominantly driven by severance expense. Additionally, operating losses of $1.2 billion in third quarter 2020 were flat compared with second quarter 2020, and included $961 million of customer remediation accruals for a variety of matters.
- Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the "Selected Five Quarter Residential Mortgage Production Data" table on page 41 for more information.
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Income Taxes
The Company's effective income tax rate was 24.1% for third quarter 2020 and included net discrete income tax benefits primarily related to the resolution and reevaluation of prior period matters with U.S. federal and state tax authorities. The effective income tax rate in second quarter 2020 was 62.2%, which reflected the impact of annual income tax benefits, primarily tax credits, and included net discrete income tax benefits predominantly related to the resolution of prior period U.S. federal income tax matters.
Loans
Average loans were $931.7 billion in the third quarter, down $39.6 billion from the second quarter. Period-end loan balances were $920.1 billion at September 30, 2020, down $15.1 billion from June 30, 2020. Commercial loans were down $30.9 billion compared with June 30, 2020, predominantly due to a $29.2 billion decline in commercial and industrial loans as a result of lower loan demand and higher paydowns reflecting continued liquidity and strength in the capital markets. Consumer loans increased $15.8 billion from the prior quarter driven by a $17.0 billion increase in real estate 1-4 family first mortgage loans, as $14 billion of originations, $21.9 billion of loans repurchased from Ginnie Mae securitization pools (early pool buyouts), and a reclassification of $9.0 billion from held for sale to held for investment were partially offset by paydowns.
Period-End Loan Balances
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Commercial | $ | 482,289 | 513,187 | 567,735 | 515,719 | 512,332 |
Consumer | 437,793 | 421,968 | 442,108 | 446,546 | 442,583 | |
Total loans | $ | 920,082 | 935,155 | 1,009,843 | 962,265 | 954,915 |
Change from prior quarter | $ | (15,073) | (74,688) | 47,578 | 7,350 | 5,037 |
Debt and Equity Securities
Debt securities include available-for-sale and held-to-maturity debt securities, as well as debt securities held for trading. Period-end debt securities were $476.4 billion at September 30, 2020, up $3.8 billion from the second quarter driven by a $5.3 billion increase in debt securities available-for-sale and held-to-maturity, as purchases of approximately $40.1 billion, largely federal agency MBS, were partially offset by runoff and sales.
Net unrealized gains on available-for-sale debt securities were $4.3 billion at September 30, 2020, compared with $4.4 billion at June 30, 2020, as the impact of lower long-term interest rates was predominantly offset by tighter credit spreads.
Equity securities include marketable and nonmarketable equity securities, as well as equity securities held for trading. Period-end equity securities were $51.2 billion at September 30, 2020, down $1.3 billion from the second quarter.
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Deposits
Period-end deposits were $1.4 trillion at September 30, 2020, down $27.5 billion from June 30, 2020. Total average deposits for third quarter 2020 were $1.4 trillion, up $12.4 billion from the prior quarter driven by growth in consumer deposits, partially offset by a decline in commercial deposits reflecting actions taken to manage under the asset cap. The average deposit cost for third quarter 2020 was 9 basis points, down 8 basis points from the prior quarter and down 62 basis points from a year ago.
Capital
The Company's CET1 ratio was 11.4%3 and continued to exceed both the regulatory minimum of 9% and our current internal target of 10%. As of September 30, 2020, our eligible external total loss absorbing capacity (TLAC) as a percentage of total risk-weighted assets was 25.8%5, compared with the required minimum of 22.0%.
Credit Quality
Credit results improved in third quarter 2020 as consumer delinquencies remained low, commercial loan criticized/ classified levels stabilized, and net charge-offs decreased. However, customer payment deferral activities instituted in response to the COVID-19 pandemic could delay the recognition of net charge-offs, delinquencies, and nonaccrual status for those customers who would have otherwise moved into past due or nonaccrual status.
Net Loan Charge-offs
The quarterly loss rate as a percentage of average loans in the third quarter was 0.29% (annualized), down from 0.46% in the prior quarter and up from 0.27% a year ago. Commercial and consumer losses were 0.29% and 0.30%, respectively. Total credit losses were $683 million in third quarter 2020, down $430 million from second quarter 2020. Commercial losses decreased $246 million driven by improved lending market conditions including strong capital markets. Consumer losses decreased $184 million driven by the impacts of government stimulus programs and customer accommodations including payment deferrals.
Net Loan Charge-Offs
Quarter ended | |||||||||||||
September 30, 2020 | June 30, 2020 | September 30, 2019 | |||||||||||
Net loan | As a % of | Net loan | As a % of | Net loan | As a % of | ||||||||
($ in millions) | charge- | average | charge- | average | charge- | average | |||||||
offs | loans (a) | offs | loans (a) | offs | loans (a) | ||||||||
Commercial: | |||||||||||||
Commercial and industrial | $ | 274 | 0.33 | % | $ | 521 | 0.55 | % | $ | 147 | 0.17 % | ||
Real estate mortgage | 56 | 0.18 | 67 | 0.22 | (8) | (0.02) | |||||||
Real estate construction | (2) | (0.03) | (1) | (0.02) | (8) | (0.14) | |||||||
Lease financing | 28 | 0.66 | 15 | 0.33 | 8 | 0.17 | |||||||
Total commercial | 356 | 0.29 | 602 | 0.44 | 139 | 0.11 | |||||||
Consumer: | |||||||||||||
Real estate 1-4 family first mortgage | (1) | - | 2 | - | (5) | (0.01) | |||||||
Real estate 1-4 family junior lien mortgage | (14) | (0.22) | (12) | (0.17) | (22) | (0.28) | |||||||
Credit card | 245 | 2.71 | 327 | 3.60 | 319 | 3.22 | |||||||
Automobile | 31 | 0.25 | 106 | 0.88 | 76 | 0.65 | |||||||
Other revolving credit and installment | 66 | 0.80 | 88 | 1.09 | 138 | 1.60 | |||||||
Total consumer | 327 | 0.30 | 511 | 0.48 | 506 | 0.46 | |||||||
Total | $ | 683 | 0.29 % | $ | 1,113 | 0.46 % | $ | 645 | 0.27 % |
- Quarterly net charge-offs (recoveries) as a percentage of average loans are annualized.
- The TLAC ratio is a preliminary estimate.
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Nonperforming Assets
Nonperforming assets increased $378 million, or 5%, from second quarter 2020 to $8.2 billion. Nonaccrual loans increased $417 million from second quarter 2020 to $8.0 billion due to a $304 million increase in consumer nonaccrual loans driven by the residential real estate and automobile portfolios and a $113 million increase in commercial nonaccrual loans predominantly driven by the commercial real estate mortgage and lease financing portfolios.
Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
September 30, 2020 | June 30, 2020 | September 30, 2019 | |||||||||||||
As a | As a | As a | |||||||||||||
Total | % of | Total | % of | Total | % of | ||||||||||
($ in millions) | total | total | total | ||||||||||||
balances | loans | balances | loans | balances | loans | ||||||||||
Commercial: | |||||||||||||||
Commercial and industrial | $ | 2,834 | 0.88 | % | $ | 2,896 | 0.83 | % | $ | 1,539 | 0.44 | % | |||
Real estate mortgage | 1,343 | 1.10 | 1,217 | 0.98 | 669 | 0.55 | |||||||||
Real estate construction | 34 | 0.15 | 34 | 0.16 | 32 | 0.16 | |||||||||
Lease financing | 187 | 1.10 | 138 | 0.79 | 72 | 0.37 | |||||||||
Total commercial | 4,398 | 0.91 | 4,285 | 4 | 0.83 | 2,312 | 0.45 | ||||||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage | 2,641 | 0.90 | 2,393 | 0.86 | 2,261 | 0.78 | |||||||||
Real estate 1-4 family junior lien mortgage | 767 | 3.05 | 753 | 2.81 | 819 | 2.66 | |||||||||
Automobile | 176 | 0.36 | 129 | 0.26 | 110 | 0.24 | |||||||||
Other revolving credit and installment | 40 | 0.12 | 45 | 0.14 | 43 | 0.12 | |||||||||
Total consumer | 3,624 | 0.83 | 3,320 | 0.79 | 3,233 | 0.73 | |||||||||
Total nonaccrual loans | 8,022 | 7,605 | 5,545 | ||||||||||||
Foreclosed assets: | |||||||||||||||
Government insured/guaranteed | 22 | 31 | 59 | ||||||||||||
Non-government insured/guaranteed | 134 | 164 | 378 | ||||||||||||
Total foreclosed assets | 156 | 195 | 437 | ||||||||||||
Total nonperforming assets | $ | 8,178 | 0.89 % | $ | 7,800 | 0.83 % | $ | 5,982 | 0.63 % | ||||||
Change from prior quarter: | |||||||||||||||
Total nonaccrual loans | $ | 417 | 1,449 | (377) | |||||||||||
Total nonperforming assets | 378 | 1,392 | (317) |
Allowance for Credit Losses for Loans
At September 30, 2020, the allowance for credit losses (ACL) for loans, including the allowance for unfunded commitments, totaled $20.5 billion, relatively flat compared with June 30, 2020. While net charge-offs declined in third quarter 2020 and certain economic indicators showed improvement, the ACL reflected continued uncertainty due to the COVID-19 pandemic. The allowance coverage for total loans was 2.22%, compared with 2.19% in second quarter 2020. The allowance covered 7.5 times annualized third quarter net charge-offs, compared with 4.6 times in the prior quarter. The allowance coverage for nonaccrual loans was 255% at September 30, 2020, compared with 269% at June 30, 2020.
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Business Segment Performance
Our operating segments are defined by product type and customer segment, and their results are based on our management reporting process. On February 11, 2020, we announced a new organizational structure. We continue to refine the composition of our operating segments and allocation methodologies. Additionally, we are still in the process of transitioning key leadership positions. We now expect to update our operating segment disclosures, including comparative financial results, in fourth quarter 2020. These changes will not impact previously reported consolidated financial results of the Company.
Segment net income (loss) for each of the three current operating segments was:
Quarter ended | ||||
(in millions) | Sep 30, | Jun 30, | Sep 30, | |
2020 | 2020 | 2019 | ||
Community Banking | $ | 336 | (331) | 999 |
Wholesale Banking | 1,488 | (2,143) | 2,644 | |
Wealth and Investment Management | 463 | 180 | 1,280 |
Community Bankingoffers a complete line of diversified financial products and services for consumers and small businesses with annual sales generally up to $5 million in which the owner generally is the financial decision maker. These financial products and services include checking and savings accounts, credit and debit cards, automobile, student, mortgage, home equity and small business lending, as well as referrals to Wholesale Banking and Wealth and Investment Management business partners. The Community Banking segment also includes the results of our Corporate Treasury activities net of allocations (including funds transfer pricing, capital, liquidity and certain corporate expenses) in support of other segments and results of investments in our affiliated venture capital and private equity partnerships.
Selected Financial Information
Quarter ended | ||||
(in millions) | Sep 30, | Jun 30, | Sep 30, | |
2020 | 2020 | 2019 | ||
Total revenue | $ | 10,722 | 8,766 | 11,239 |
Provision for credit losses | 556 | 3,378 | 608 | |
Noninterest expense | 8,947 | 8,346 | 8,766 | |
Segment net income (loss) | 336 | (331) | 999 | |
(in billions) | ||||
Average loans | 457.6 | 449.3 | 459.0 | |
Average assets | 1,119.8 | 1,059.8 | 1,033.9 | |
Average deposits | 881.7 | 848.5 | 789.7 |
Third Quarter 2020 vs. Second Quarter 2020
- Net income of $336 million, up from a net loss of $331 million
- Revenue of $10.7 billion, up $2.0 billion, or 22%, driven by higher mortgage banking revenue, net gains from debt and equity securities, deposit-related fees, trust and investment fees, and card fees, partially offset by lower net interest income and lower deferred compensation plan investment results (largely offset by lower employee benefits expense)
- Noninterest expense of $8.9 billion increased $601 million, or 7%, driven by restructuring charges and higher operating losses reflecting increased customer remediation accruals for a variety of matters, partially offset by lower employee benefits expense including lower deferred compensation plan expense (largely offset in revenue by lower deferred compensation plan investment results)
- Provision for credit losses decreased $2.8 billion to $556 million; second quarter 2020 included a $2.8 billion increase in the allowance for credit losses
Third Quarter 2020 vs. Third Quarter 2019
- Net income down $663 million, or 66%
- Revenue decreased $517 million, or 5%, driven by lower net interest income, deposit-related fees, and gains from the sale of purchased credit-impaired mortgage loans, partially offset by higher mortgage banking revenue
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- Noninterest expense increased $181 million, or 2%, predominantly due to restructuring charges, as well as higher personnel expense, FDIC and other deposit assessments expense, and charitable donations, partially offset by lower operating losses and advertising and promotion expense
- Provision for credit losses decreased $52 million, driven by lower net charge-offs, partially offset by an increase in the allowance for credit losses primarily for the credit card portfolio
Business Metrics and Highlights
- Primary consumer checking customers6,7 of 24.4 million, up 0.3% from a year ago
- Debit card point-of-sale purchase volume8 of $102.9 billion in the third quarter, up 11.1% from a year ago
- General purpose credit card point-of-sale purchase volume of $19.2 billion in the third quarter, down 6% from third quarter 2019
- 32.0 million digital (online and mobile) active customers, including 25.9 million mobile active customers9
- 5,229 retail bank branches as of the end of third quarter 2020, reflecting 77 branch consolidations in the quarter
- Home Lending
- Originations of $62 billion in third quarter 2020, up from $59 billion in second quarter 2020, driven primarily by lower mortgage loan interest rates and increased purchase activity
- Originations of loans held-for-sale and loans held-for-investment were $48 billion and $14 billion, respectively
- Production margin on residential held-for-sale mortgage loan originations4 of 2.16% in third quarter 2020, up from 2.04% in second quarter 2020
- Applications of $88 billion in third quarter 2020, up from $84 billion in second quarter 2020, driven by lower mortgage loan interest rates and increased purchase activity
- Unclosed application pipeline of $44 billion at quarter end, down from $50 billion at June 30, 2020, as we actively managed our pipeline
- Automobile originations of $5.4 billion in the third quarter, down 5% from second quarter 2020, reflecting the continued economic impact of the COVID-19 pandemic
- Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
Management uses this metric to help monitor trends in checking customer engagement with the Company.
- Data as of August 2020, comparisons with August 2019.
- Combined consumer and business debit card purchase volume dollars.
- Digital and mobile active customers is the number of consumer and small business customers who have logged on via a digital or mobile device in the prior 90 days.
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Wholesale Bankingprovides financial solutions to businesses with annual sales generally in excess of $5 million and to financial institutions globally. Products and businesses include Commercial Banking, Commercial Real Estate, Corporate and Investment Banking, Credit Investment Portfolio, Treasury Management, and Commercial Capital.
Selected Financial Information
Quarter ended | ||||
(in millions) | Sep 30, | Jun 30, | Sep 30, | |
2020 | 2020 | 2019 | ||
Total revenue | $ | 5,594 | 6,563 | 6,942 |
Provision for credit losses | 219 | 6,028 | 92 | |
Noninterest expense | 4,013 | 3,963 | 3,889 | |
Segment net income (loss) | 1,488 | (2,143) | 2,644 | |
(in billions) | ||||
Average loans | 455.1 | 504.3 | 474.3 | |
Average assets | 801.4 | 863.2 | 869.2 | |
Average deposits | 418.8 | 441.2 | 422.0 |
Third Quarter 2020 vs. Second Quarter 2020
- Net income of $1.5 billion, up from a net loss of $2.1 billion
- Revenue of $5.6 billion, down $969 million, or 15%, driven by lower net gains from trading activities, investment banking fees, and net interest income
- Noninterest expense of $4.0 billion increased $50 million, or 1%, predominantly due to higher personnel expense, partially offset by lower operating losses
- Provision for credit losses decreased $5.8 billion to $219 million; second quarter 2020 included a $5.5 billion increase in the allowance for credit losses
Third Quarter 2020 vs. Third Quarter 2019
- Net income down $1.2 billion, or 44%
- Revenue decreased $1.3 billion, or 19%, driven by lower net interest income, as well as declines in a variety of other income categories including lease income and commercial real estate brokerage fees (due to the sale of Eastdil, our commercial real estate brokerage business, in fourth quarter 2019). These decreases were partially offset by higher net gains from trading activities and deposit-related fees
- Noninterest expense increased $124 million, or 3%, reflecting higher risk, technology, and charitable contributions expense, partially offset by lower personnel expense
- Provision for credit losses increased $127 million, predominantly due to higher charge-offs in the oil and gas and commercial real estate portfolios
Business Metrics and Highlights
- Commercial card spend volume10 of $6.1 billion in third quarter 2020, down 31% from third quarter 2019, primarily due to reduced business spending activity due to the COVID-19 pandemic
- 2.2 billion ACH payment transactions originated11 in third quarter 2020, up 16% from third quarter 2019, primarily due to increased customer activity
- U.S. investment banking market share of 3.4% for year-to-date 202012, flat compared with year-to-date 201912
- Includes commercial card volume for the entire company.
- Includes ACH payment transactions originated by the entire company.
- Year-to-datethrough September 30. Source: Dealogic U.S. investment banking fee market share. Market share based on deals with U.S. targets (M&A), U.S. issuers (Equity Capital Markets), and deals both marketed in the U.S. and issued in U.S. dollars (Debt Capital Markets and Loan Syndications). Previous market share data reflected deals with U.S.-headquartered companies (all products). Previously reported market share metrics have been revised to reflect this definitional change.
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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, 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 clients' brokerage needs and provide investment management capabilities delivered to global institutional clients through separate accounts and the Wells Fargo Funds.
Selected Financial Information
Quarter ended | ||||
(in millions) | Sep 30, | Jun 30, | Sep 30, | |
2020 | 2020 | 2019 | ||
Total revenue | $ | 3,794 | 3,660 | 5,141 |
Provision (reversal of provision) for credit losses | (9) | 257 | 3 | |
Noninterest expense | 3,184 | 3,153 | 3,431 | |
Segment net income | 463 | 180 | 1,280 | |
(in billions) | ||||
Average loans | 79.8 | 78.7 | 75.9 | |
Average assets | 88.2 | 87.7 | 84.7 | |
Average deposits | 175.3 | 171.8 | 142.4 |
Third Quarter 2020 vs. Second Quarter 2020
- Net income of $463 million, up $283 million, or 157%
- Revenue of $3.8 billion, up $134 million, or 4%, predominantly due to higher asset-based fees and net interest income, partially offset by lower net gains from equity securities driven by a $151 million decrease in deferred compensation plan investment results (largely offset by lower employee benefits expense)
- Noninterest expense of $3.2 billion increased $31 million, or 1%, predominantly due to higher broker commissions and equipment expense, partially offset by lower employee benefits expense driven by a $147 million decrease in deferred compensation expense (largely offset in revenue by lower net gains from equity securities) and lower other personnel expense
- Reversal of provision for credit losses of $9 million, compared with a provision for credit losses of $257 million; second quarter 2020 included a $255 million increase in the allowance for credit losses
Third Quarter 2020 vs. Third Quarter 2019
- Net income decreased $817 million, or 64%
- Revenue decreased $1.3 billion, or 26%, predominantly due to a $1.1 billion gain from the sale of our Institutional Retirement and Trust business in third quarter 2019 and lower net interest income
- Noninterest expense decreased $247 million, or 7%, predominantly due to lower personnel expense, equipment expense, and operating losses, partially offset by higher regulatory, risk, and technology expense
Business Metrics and Highlights
Total WIM Segment
- WIM total client assets of $1.9 trillion, flat compared with a year ago, as higher market valuations were offset by net outflows in the Correspondent Clearing business
- Average loan balances up 5% compared with a year ago
- Average deposit balances up 23% compared with a year ago
Retail Brokerage
- Client assets of $1.6 trillion, flat compared with the prior year, primarily driven by higher market valuations, offset by net outflows in the Correspondent Clearing business
- Advisory assets of $602 billion, up 6% from a year ago, primarily driven by higher market valuations, partially offset by net outflows in the Correspondent Clearing business
- IRA assets of $437 billion, up 5% from the prior year
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Wealth Management
- Client assets of $229 billion, flat compared with the prior year
Asset Management
- Total assets under management of $607 billion, up 21% from the prior year, primarily driven by money market fund net inflows and higher market valuations, partially offset by equity net outflows
Conference Call
The Company will host a live conference call on Wednesday, October 14, at 7 a.m. PT (10 a.m. ET). You may listen to the call by dialing 866-872-5161 (U.S. and Canada) or 440-424-4922 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/and https:// engage.vevent.com/rt/wells_fargo_ao/index.jsp?seid=523.
A replay of the conference call will be available beginning at approximately 11 a.m. PT (2 p.m. ET) on Wednesday, October 14 through Wednesday, October 28. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID: 9189348. 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/index.jsp?seid=523.
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Forward-Looking Statements
This document contains forward-looking statements. In addition, we may make forward-looking statements in our other documents filed or furnished with the Securities and Exchange Commission, 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:
- 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, our allowance for credit losses, and the economic scenarios considered to develop the allowance; (iv) our expectations regarding net interest income and net interest margin; (v) loan growth or the reduction or mitigation of risk in our loan portfolios; (vi) future capital or liquidity levels, ratios or targets; (vii) the performance of our mortgage business and any related exposures; (viii) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (ix) future common stock dividends, common share repurchases and other uses of capital; (x) our targeted range for return on assets, return on equity, and return on tangible common equity; (xi) expectations regarding our effective income tax rate; (xii) the outcome of contingencies, such as legal proceedings; and (xiii) the Company's plans, objectives and strategies.
Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:
- current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth;
- the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions;
- our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
- financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
- developments in our mortgage banking business, including the extent of the success of our mortgage loan modification efforts, the amount of mortgage loan repurchase demands that we receive, any negative effects relating to our mortgage servicing, loan modification or foreclosure practices, and the effects of regulatory or judicial requirements or guidance impacting our mortgage banking business and any changes in industry standards;
- our ability to realize any efficiency ratio or expense target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;
- the effect of the current interest rate environment or changes in interest rates or in the level or composition of our assets or liabilities on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgage loans held for sale;
- significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of impairments of securities held in our debt securities and equity securities portfolios;
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- the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
- negative effects from the retail banking sales practices matter and from other instances where customers may have experienced financial harm, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified employees, and our reputation;
- resolution of regulatory matters, litigation, or other legal actions, which may result in, among other things, additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other adverse consequences;
- a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber attacks;
- the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
- fiscal and monetary policies of the Federal Reserve Board;
- changes to U.S. tax guidance and regulations, as well as the effect of discrete items on our effective income tax rate;
- our ability to develop and execute effective business plans and strategies; and
- the other risk factors and uncertainties described under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
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, 2019 and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov13.
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.
Forward-looking Non-GAAPFinancial Measures. From time to time management may discuss forward-looking non- GAAP financial measures, such as forward-looking estimates or targets for return on average tangible common equity. We are unable to provide a reconciliation of forward-lookingnon-GAAP financial measures to their most directly comparable GAAP financial measures because we are unable to provide, without unreasonable effort, a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur. Such unavailable information could be significant to future results.
13 We do not control this website. Wells Fargo has provided this link for your convenience, but does not endorse and is not responsible for the content, links, privacy policy, or security policy of this website.
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About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.92 trillion in assets. Wells Fargo's vision is to satisfy our customers' financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investment and mortgage products and services, as well as consumer and commercial finance, through 7,200 locations, more than 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 31 countries and territories to support customers who conduct business in the global economy. Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 30 on Fortune's 2020 rankings of America's largest corporations.
Contact Information
Media
Peter Gilchrist, 704-715-3213peter.gilchrist@wellsfargo.com
Ancel Martinez, 415-222-3858ancel.martinez@wellsfargo.com
or
Investor Relations
John M. Campbell, 415-396-0523john.m.campbell@wellsfargo.com
# # #
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Wells Fargo & Company and Subsidiaries | |
QUARTERLY FINANCIAL DATA | |
TABLE OF CONTENTS | |
Pages | |
Summary Information | |
Summary Financial Data | 16 |
Income | |
Consolidated Statement of Income | 18 |
Consolidated Statement of Comprehensive Income | 20 |
Condensed Consolidated Statement of Changes in Total Equity | 20 |
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) | 21 |
Noninterest Income and Noninterest Expense | 24 |
Five Quarter Deferred Compensation and Related Hedges | 25 |
Balance Sheet | |
Consolidated Balance Sheet | 26 |
Trading Activities | 28 |
Debt Securities | 28 |
Equity Securities | 29 |
Loans | |
Loans | 30 |
Nonperforming Assets | 31 |
Loans 90 Days or More Past Due and Still Accruing | 31 |
Changes in Allowance for Credit Losses for Loans | 32 |
Allocation of the Allowance for Credit Losses for Loans | 34 |
Equity | |
Tangible Common Equity | 35 |
Common Equity Tier 1 Under Basel III | 36 |
Operating Segments | |
Operating Segment Results | 37 |
Other | |
Mortgage Servicing and other related data | 39 |
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Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
Quarter ended | % Change | Nine months ended | ||||||||||
Sep 30, 2020 from | ||||||||||||
($ in millions, except per share amounts) | Sep 30, | Jun 30, | Sep 30, | Jun 30, | Sep 30, | Sep 30, | Sep 30, | % | ||||
2020 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | Change | |||||
For the Period | ||||||||||||
Wells Fargo net income (loss) | $ | 2,035 | (2,379) | 4,610 | NM | (56) | $ | 309 | 16,676 | (98) | ||
Wells Fargo net income (loss) applicable to common stock | 1,720 | (2,694) | 4,037 | NM | (57) | (932) | 15,392 | NM | ||||
Diluted earnings (loss) per common share | 0.42 | (0.66) | 0.92 | NM | (54) | (0.23) | 3.43 | NM | ||||
Profitability ratios (annualized): | ||||||||||||
Wells Fargo net income (loss) to average assets (ROA) | 0.42 % | (0.49) | 0.95 | NM | (56) | 0.02 % | 1.17 | (98) | ||||
Wells Fargo net income (loss) applicable to common stock to | 4.22 | (6.63) | 9.00 | NM | (53) | (0.76) | 11.64 | NM | ||||
average Wells Fargo common stockholders' equity (ROE) | ||||||||||||
Return on average tangible common equity (ROTCE)(1) | 5.10 | (8.00) | 10.70 | NM | (52) | (0.91) | 13.85 | NM | ||||
Efficiency ratio (2) | 80.7 | 81.6 | 69.1 | (1) | 17 | 78.7 | 65.3 | 21 | ||||
Total revenue | $ | 18,862 | 17,836 | 22,010 | 6 | (14) | $ | 54,415 | 65,203 | (17) | ||
Pre-taxpre-provision profit (PTPP)(3) | 3,633 | 3,285 | 6,811 | 11 | (47) | 11,587 | 22,639 | (49) | ||||
Dividends declared per common share | 0.10 | 0.51 | 0.51 | (80) | (80) | 1.12 | 1.41 | (21) | ||||
Average common shares outstanding | 4,123.8 | 4,105.5 | 4,358.5 | - | (5) | 4,111.4 | 4,459.1 | (8) | ||||
Diluted average common shares outstanding (4) | 4,132.2 | 4,105.5 | 4,389.6 | 1 | (6) | 4,111.4 | 4,489.5 | (8) | ||||
Average loans | $ | 931,708 | 971,266 | 949,760 | (4) | (2) | $ | 955,918 | 949,076 | 1 | ||
Average assets | 1,947,672 | 1,948,939 | 1,927,415 | - | 1 | 1,949,085 | 1,903,873 | 2 | ||||
Average total deposits | 1,399,028 | 1,386,656 | 1,291,375 | 1 | 8 | 1,374,638 | 1,274,246 | 8 | ||||
Average consumer and small business banking deposits (5) | 897,779 | 857,943 | 749,529 | 5 | 20 | 845,977 | 745,370 | 13 | ||||
Net interest margin | 2.13 % | 2.25 | 2.66 | (5) | (20) | 2.32 % | 2.79 | (17) | ||||
At Period End | ||||||||||||
Debt securities | $ | 476,421 | 472,580 | 503,528 | 1 | (5) | $ | 476,421 | 503,528 | (5) | ||
Loans | 920,082 | 935,155 | 954,915 | (2) | (4) | 920,082 | 954,915 | (4) | ||||
Allowance for loan losses | 19,463 | 18,926 | 9,715 | 3 | 100 | 19,463 | 9,715 | 100 | ||||
Goodwill | 26,387 | 26,385 | 26,388 | - | - | 26,387 | 26,388 | - | ||||
Equity securities | 51,169 | 52,494 | 63,884 | (3) | (20) | 51,169 | 63,884 | (20) | ||||
Assets | 1,922,220 | 1,968,766 | 1,943,950 | (2) | (1) | 1,922,220 | 1,943,950 | (1) | ||||
Deposits | 1,383,215 | 1,410,711 | 1,308,495 | (2) | 6 | 1,383,215 | 1,308,495 | 6 | ||||
Common stockholders' equity | 161,109 | 159,322 | 172,827 | 1 | (7) | 161,109 | 172,827 | (7) | ||||
Wells Fargo stockholders' equity | 181,173 | 179,386 | 193,304 | 1 | (6) | 181,173 | 193,304 | (6) | ||||
Total equity | 182,032 | 180,122 | 194,416 | 1 | (6) | 182,032 | 194,416 | (6) | ||||
Tangible common equity (1) | 133,179 | 131,329 | 144,481 | 1 | (8) | 133,179 | 144,481 | (8) | ||||
Common shares outstanding | 4,132.5 | 4,119.6 | 4,269.1 | - | (3) | 4,132.5 | 4,269.1 | (3) | ||||
Book value per common share (6) | $ | 38.99 | 38.67 | 40.48 | 1 | (4) | $ | 38.99 | 40.48 | (4) | ||
Tangible book value per common share (1)(6) | 32.23 | 31.88 | 33.84 | 1 | (5) | 32.23 | 33.84 | (5) | ||||
Headcount (7) | 274,900 | 276,000 | 272,700 | - | 1 | 274,900 | 272,700 | 1 |
- Tangible common equity, return on average tangible common equity, and tangible book value per common share are non-GAAP financial measures. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.
- The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
- Pre-taxpre-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.
- For second quarter 2020 and the nine months ended September 30, 2020, diluted average common shares outstanding equaled average common shares outstanding because our securities convertible into common shares had an anti-dilutive effect.
- Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
- 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.
- In third quarter 2020, we began reporting headcount rather than active, full-time equivalent employees. Prior period balances have been revised to conform with the current period presentation.
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
Quarter ended | ||||||
($ in millions, except per share amounts) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
For the Quarter | ||||||
Wells Fargo net income (loss) | $ | 2,035 | (2,379) | 653 | 2,873 | 4,610 |
Wells Fargo net income (loss) applicable to common stock | 1,720 | (2,694) | 42 | 2,546 | 4,037 | |
Diluted earnings (loss) per common share | 0.42 | (0.66) | 0.01 | 0.60 | 0.92 | |
Profitability ratios (annualized): | ||||||
Wells Fargo net income (loss) to average assets (ROA) | 0.42 % | (0.49) | 0.13 | 0.59 | 0.95 | |
Wells Fargo net income (loss) applicable to common stock to average | 4.22 | (6.63) | 0.10 | 5.91 | 9.00 | |
Wells Fargo common stockholders' equity (ROE) | ||||||
Return on average tangible common equity (ROTCE)(1) | 5.10 | (8.00) | 0.12 | 7.08 | 10.70 | |
Efficiency ratio (2) | 80.7 | 81.6 | 73.6 | 78.6 | 69.1 | |
Total revenue | $ | 18,862 | 17,836 | 17,717 | 19,860 | 22,010 |
Pre-taxpre-provision profit (PTPP)(3) | 3,633 | 3,285 | 4,669 | 4,246 | 6,811 | |
Dividends declared per common share | 0.10 | 0.51 | 0.51 | 0.51 | 0.51 | |
Average common shares outstanding | 4,123.8 | 4,105.5 | 4,104.8 | 4,197.1 | 4,358.5 | |
Diluted average common shares outstanding (4) | 4,132.2 | 4,105.5 | 4,135.3 | 4,234.6 | 4,389.6 | |
Average loans | $ | 931,708 | 971,266 | 965,046 | 956,536 | 949,760 |
Average assets | 1,947,672 | 1,948,939 | 1,950,659 | 1,941,843 | 1,927,415 | |
Average total deposits | 1,399,028 | 1,386,656 | 1,337,963 | 1,321,913 | 1,291,375 | |
Average consumer and small business banking deposits (5) | 897,779 | 857,943 | 779,521 | 763,169 | 749,529 | |
Net interest margin | 2.13 % | 2.25 | 2.58 | 2.53 | 2.66 | |
At Quarter End | ||||||
Debt securities | $ | 476,421 | 472,580 | 501,563 | 497,125 | 503,528 |
Loans | 920,082 | 935,155 | 1,009,843 | 962,265 | 954,915 | |
Allowance for loan losses | 19,463 | 18,926 | 11,263 | 9,551 | 9,715 | |
Goodwill | 26,387 | 26,385 | 26,381 | 26,390 | 26,388 | |
Equity securities | 51,169 | 52,494 | 54,047 | 68,241 | 63,884 | |
Assets | 1,922,220 | 1,968,766 | 1,981,349 | 1,927,555 | 1,943,950 | |
Deposits | 1,383,215 | 1,410,711 | 1,376,532 | 1,322,626 | 1,308,495 | |
Common stockholders' equity | 161,109 | 159,322 | 162,654 | 166,669 | 172,827 | |
Wells Fargo stockholders' equity | 181,173 | 179,386 | 182,718 | 187,146 | 193,304 | |
Total equity | 182,032 | 180,122 | 183,330 | 187,984 | 194,416 | |
Tangible common equity (1) | 133,179 | 131,329 | 134,787 | 138,506 | 144,481 | |
Common shares outstanding | 4,132.5 | 4,119.6 | 4,096.4 | 4,134.4 | 4,269.1 | |
Book value per common share (6) | $ | 38.99 | 38.67 | 39.71 | 40.31 | 40.48 |
Tangible book value per common share (1)(6) | 32.23 | 31.88 | 32.90 | 33.50 | 33.84 | |
Headcount (7) | 274,900 | 276,000 | 272,300 | 271,900 | 272,700 |
- Tangible common equity, return on average tangible common equity, and tangible book value per common share are non-GAAP financial measures. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on page 35.
- The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
- Pre-taxpre-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.
- In second quarter 2020, diluted average common shares outstanding equaled average common shares outstanding because our securities convertible into common shares had an anti-dilutive effect.
- Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits.
- 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.
- In third quarter 2020, we began reporting headcount rather than active, full-time equivalent employees. Prior period balances have been revised to conform with the current period presentation.
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Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
Quarter ended September 30, | % | Nine months ended September 30, | % | ||||||
(in millions, except per share amounts) | 2020 | 2019 | Change | 2020 | 2019 | Change | |||
Interest income | |||||||||
Debt securities | $ | 2,446 | 3,666 | (33)% | $ | 8,864 | 11,388 | (22)% | |
Mortgage loans held for sale | 232 | 232 | - | 659 | 579 | 14 | |||
Loans held for sale | 7 | 20 | (65) | 26 | 64 | (59) | |||
Loans | 7,954 | 10,982 | (28) | 26,467 | 33,652 | (21) | |||
Equity securities | 101 | 247 | (59) | 423 | 693 | (39) | |||
Other interest income | 60 | 1,352 | (96) | 889 | 4,112 | (78) | |||
Total interest income | 10,800 | 16,499 | (35) | 37,328 | 50,488 | (26) | |||
Interest expense | |||||||||
Deposits | 314 | 2,324 | (86) | 2,641 | 6,563 | (60) | |||
Short-term borrowings | (12) | 635 | NM | 262 | 1,877 | (86) | |||
Long-term debt | 1,038 | 1,780 | (42) | 3,515 | 5,607 | (37) | |||
Other interest expense | 92 | 135 | (32) | 350 | 410 | (15) | |||
Total interest expense | 1,432 | 4,874 | (71) | 6,768 | 14,457 | (53) | |||
Net interest income | 9,368 | 11,625 | (19) | 30,560 | 36,031 | (15) | |||
Provision for credit losses: | |||||||||
Debt securities | 18 | - | NM | 159 | - | NM | |||
Loans | 751 | 695 | 8 | 14,149 | 2,043 | 593 | |||
Net interest income after provision for credit losses | 8,599 | 10,930 | (21) | 16,252 | 33,988 | (52) | |||
Noninterest income (1) | |||||||||
Deposit-related fees | 1,299 | 1,480 | (12) | 3,888 | 4,289 | (9) | |||
Trust and investment fees | 3,514 | 3,559 | (1) | 10,439 | 10,500 | (1) | |||
Card fees | 912 | 1,027 | (11) | 2,601 | 2,996 | (13) | |||
Lending-related fees | 352 | 374 | (6) | 1,025 | 1,116 | (8) | |||
Mortgage banking | 1,590 | 466 | 241 | 2,286 | 1,932 | 18 | |||
Net gains from trading activities | 361 | 276 | 31 | 1,232 | 862 | 43 | |||
Net gains on debt securities | 264 | 3 | NM | 713 | 148 | 382 | |||
Net gains (losses) from equity securities | 649 | 956 | (32) | (219) | 2,392 | NM | |||
Lease income | 333 | 402 | (17) | 1,021 | 1,270 | (20) | |||
Other | 220 | 1,842 | (88) | 869 | 3,667 | (76) | |||
Total noninterest income | 9,494 | 10,385 | (9) | 23,855 | 29,172 | (18) | |||
Noninterest expense (2) | |||||||||
Personnel | 8,624 | 8,604 | - | 25,863 | 26,309 | (2) | |||
Technology, telecommunications and equipment | 791 | 821 | (4) | 2,261 | 2,340 | (3) | |||
Occupancy | 851 | 760 | 12 | 2,437 | 2,196 | 11 | |||
Operating losses | 1,219 | 1,920 | (37) | 2,902 | 2,405 | 21 | |||
Professional and outside services | 1,760 | 1,737 | 1 | 5,042 | 4,956 | 2 | |||
Leases | 291 | 272 | 7 | 795 | 869 | (9) | |||
Advertising and promotion | 144 | 266 | (46) | 462 | 832 | (44) | |||
Restructuring charges | 718 | - | NM | 718 | - | - | |||
Other | 831 | 819 | 1 | 2,348 | 2,657 | (12) | |||
Total noninterest expense | 15,229 | 15,199 | - | 42,828 | 42,564 | 1 | |||
Income (loss) before income tax expense (benefit) | 2,864 | 6,116 | (53) | (2,721) | 20,596 | NM | |||
Income tax expense (benefit) | 645 | 1,304 | (51) | (3,113) | 3,479 | NM | |||
Net income before noncontrolling interests | 2,219 | 4,812 | (54) | 392 | 17,117 | (98) | |||
Less: Net income from noncontrolling interests | 184 | 202 | (9) | 83 | 441 | (81) | |||
Wells Fargo net income | $ | 2,035 | 4,610 | (56) | $ | 309 | 16,676 | (98) | |
Less: Preferred stock dividends and other | 315 | 573 | (45) | 1,241 | 1,284 | (3) | |||
Wells Fargo net income (loss) applicable to common stock | $ | 1,720 | 4,037 | (57) | $ | (932) | 15,392 | NM | |
Per share information | |||||||||
Earnings (loss) per common share | $ | 0.42 | 0.93 | (55) | $ | (0.23) | 3.45 | NM | |
Diluted earnings (loss) per common share | 0.42 | 0.92 | (54) | (0.23) | 3.43 | NM | |||
Average common shares outstanding | 4,123.8 | 4,358.5 | (5) | 4,111.4 | 4,459.1 | (8) | |||
Diluted average common shares outstanding (3) | 4,132.2 | 4,389.6 | (6) | 4,111.4 | 4,489.5 | (8) |
NM - Not meaningful
- In third quarter 2020, service charges on deposit accounts, cash network fees, wire transfer and other remittance fees, and certain other fees were combined into a single line item for deposit-related fees; certain fees associated with lending activities were combined into a single line item for lending-related fees; and certain other fees were reclassified to other noninterest income. Prior period balances have been revised to conform with the current period presentation.
- In third quarter 2020, expenses for outside professional services, contract services, and outside data processing were combined into a single line item for professional and outside services expense; expenses for technology and equipment and telecommunications were combined into a single line item for technology, telecommunications and equipment expense; and certain other expenses were reclassified to other noninterest expense. Prior period balances have been revised to conform with the current period presentation.
- For the nine months ended September 30, 2020, diluted average common shares outstanding equaled average common shares outstanding because our securities convertible into common shares had an anti-dilutive effect.
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Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter ended | ||||||
(in millions, except per share amounts) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Interest income | ||||||
Debt securities | $ | 2,446 | 2,946 | 3,472 | 3,567 | 3,666 |
Mortgage loans held for sale | 232 | 230 | 197 | 234 | 232 | |
Loans held for sale | 7 | 7 | 12 | 15 | 20 | |
Loans | 7,954 | 8,448 | 10,065 | 10,494 | 10,982 | |
Equity securities | 101 | 116 | 206 | 269 | 247 | |
Other interest income | 60 | 54 | 775 | 1,016 | 1,352 | |
Total interest income | 10,800 | 11,801 | 14,727 | 15,595 | 16,499 | |
Interest expense | ||||||
Deposits | 314 | 585 | 1,742 | 2,072 | 2,324 | |
Short-term borrowings | (12) | (17) | 291 | 439 | 635 | |
Long-term debt | 1,038 | 1,237 | 1,240 | 1,743 | 1,780 | |
Other interest expense | 92 | 116 | 142 | 141 | 135 | |
Total interest expense | 1,432 | 1,921 | 3,415 | 4,395 | 4,874 | |
Net interest income | 9,368 | 9,880 | 11,312 | 11,200 | 11,625 | |
Provision (reversal of provision) for credit losses: | ||||||
Debt securities | 18 | (31) | 172 | - | - | |
Loans | 751 | 9,565 | 3,833 | 644 | 695 | |
Net interest income after provision for credit losses | 8,599 | 346 | 7,307 | 10,556 | 10,930 | |
Noninterest income (1) | ||||||
Deposit-related fees | 1,299 | 1,142 | 1,447 | 1,530 | 1,480 | |
Trust and investment fees | 3,514 | 3,351 | 3,574 | 3,572 | 3,559 | |
Card fees | 912 | 797 | 892 | 1,020 | 1,027 | |
Lending-related fees | 352 | 323 | 350 | 358 | 374 | |
Mortgage banking | 1,590 | 317 | 379 | 783 | 466 | |
Net gains from trading activities | 361 | 807 | 64 | 131 | 276 | |
Net gains (losses) on debt securities | 264 | 212 | 237 | (8) | 3 | |
Net gains (losses) from equity securities | 649 | 533 | (1,401) | 451 | 956 | |
Lease income | 333 | 335 | 353 | 344 | 402 | |
Other | 220 | 139 | 510 | 479 | 1,842 | |
Total noninterest income | 9,494 | 7,956 | 6,405 | 8,660 | 10,385 | |
Noninterest expense (2) | ||||||
Personnel | 8,624 | 8,916 | 8,323 | 8,819 | 8,604 | |
Technology, telecommunications and equipment | 791 | 672 | 798 | 936 | 821 | |
Occupancy | 851 | 871 | 715 | 749 | 760 | |
Operating losses | 1,219 | 1,219 | 464 | 1,916 | 1,920 | |
Professional and outside services | 1,760 | 1,676 | 1,606 | 1,789 | 1,737 | |
Leases | 291 | 244 | 260 | 286 | 272 | |
Advertising and promotion | 144 | 137 | 181 | 244 | 266 | |
Restructuring charges | 718 | - | - | - | - | |
Other | 831 | 816 | 701 | 875 | 819 | |
Total noninterest expense | 15,229 | 14,551 | 13,048 | 15,614 | 15,199 | |
Income (loss) before income tax expense (benefit) | 2,864 | (6,249) | 664 | 3,602 | 6,116 | |
Income tax expense (benefit) | 645 | (3,917) | 159 | 678 | 1,304 | |
Net income (loss) before noncontrolling interests | 2,219 | (2,332) | 505 | 2,924 | 4,812 | |
Less: Net income (loss) from noncontrolling interests | 184 | 47 | (148) | 51 | 202 | |
Wells Fargo net income (loss) | $ | 2,035 | (2,379) | 653 | 2,873 | 4,610 |
Less: Preferred stock dividends and other | 315 | 315 | 611 | 327 | 573 | |
Wells Fargo net income (loss) applicable to common stock | $ | 1,720 | (2,694) | 42 | 2,546 | 4,037 |
Per share information | ||||||
Earnings (loss) per common share | $ | 0.42 | (0.66) | 0.01 | 0.61 | 0.93 |
Diluted earnings (loss) per common share | 0.42 | (0.66) | 0.01 | 0.60 | 0.92 | |
Average common shares outstanding | 4,123.8 | 4,105.5 | 4,104.8 | 4,197.1 | 4,358.5 | |
Diluted average common shares outstanding (3) | 4,132.2 | 4,105.5 | 4,135.3 | 4,234.6 | 4,389.6 |
- In third quarter 2020, service charges on deposit accounts, cash network fees, wire transfer and other remittance fees, and certain other fees were combined into a single line item for deposit-related fees; certain fees associated with lending activities were combined into a single line item for lending-related fees; and certain other fees were reclassified to other noninterest income. Prior period balances have been revised to conform with the current period presentation.
- In third quarter 2020, expenses for outside professional services, contract services, and outside data processing were combined into a single line item for professional and outside services expense; expenses for technology and equipment and telecommunications were combined into a single line item for technology, telecommunications and equipment expense; and certain other expenses were reclassified to other noninterest expense. Prior period balances have been revised to conform with the current period presentation.
- In second quarter 2020, diluted average common shares outstanding equaled average common shares outstanding because our securities convertible into common shares had an anti-dilutive effect.
- 20 -
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarter ended Sep 30, | % | Nine months ended Sep 30, | % | |||||
(in millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | ||
Wells Fargo net income | $ | 2,035 | 4,610 | (56)% | $ | 309 | 16,676 | (98)% |
Other comprehensive income (loss), before tax: | ||||||||
Debt securities: | ||||||||
Net unrealized gains arising during the period | 96 | 652 | (85) | 1,582 | 5,192 | (70) | ||
Reclassification of net (gains) losses to net income | (95) | 76 | NM | (357) | 34 | NM | ||
Derivative and hedging activities: | ||||||||
Net unrealized gains (losses) arising during the period | (70) | 10 | NM | 2 | 32 | (94) | ||
Reclassification of net losses to net income | 52 | 75 | (31) | 165 | 233 | (29) | ||
Defined benefit plans adjustments: | ||||||||
Net actuarial and prior service losses arising during the period | (89) | - | - | (760) | (4) | NM | ||
Amortization of net actuarial loss, settlements and other to net income | 68 | 33 | 106 | 205 | 101 | 103 | ||
Foreign currency translation adjustments: | ||||||||
Net unrealized gains (losses) arising during the period | 74 | (53) | NM | (70) | 3 | NM | ||
Other comprehensive income, before tax | 36 | 793 | (95) | 767 | 5,591 | (86) | ||
Income tax benefit (expense) related to other comprehensive income | 13 | (208) | NM | (206) | (1,375) | (85) | ||
Other comprehensive income, net of tax | 49 | 585 | (92) | 561 | 4,216 | (87) | ||
Less: Other comprehensive income from noncontrolling interests | 1 | - | - | - | - | - | ||
Wells Fargo other comprehensive income, net of tax | 48 | 585 | (92) | 561 | 4,216 | (87) | ||
Wells Fargo comprehensive income | 2,083 | 5,195 | (60) | 870 | 20,892 | (96) | ||
Comprehensive income from noncontrolling interests | 185 | 202 | (8) | 83 | 441 | (81) | ||
Total comprehensive income | $ | 2,268 | 5,397 | (58) | $ | 953 | 21,333 | (96) |
NM - Not meaningful
FIVE QUARTER CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
Quarter ended | ||||||
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Balance, beginning of period | $ | 180,122 | 183,330 | 187,984 | 194,416 | 200,037 |
Cumulative effect from change in accounting policies (1) | - | - | 991 | - | - | |
Wells Fargo net income (loss) | 2,035 | (2,379) | 653 | 2,873 | 4,610 | |
Wells Fargo other comprehensive income (loss), net of tax | 48 | 766 | (253) | 328 | 585 | |
Noncontrolling interests | 123 | 124 | (226) | (274) | 117 | |
Common stock issued | 325 | 367 | 1,677 | 341 | 278 | |
Common stock repurchased | (3) | (2) | (3,407) | (7,367) | (7,448) | |
Preferred stock redeemed (2) | - | - | (2,470) | - | (1,550) | |
Preferred stock released by ESOP | - | 249 | - | - | 142 | |
Preferred stock issued (3) | - | - | 1,968 | - | - | |
Common stock dividends | (413) | (2,093) | (2,096) | (2,145) | (2,230) | |
Preferred stock dividends | (315) | (315) | (339) | (327) | (353) | |
Stock incentive compensation expense | 136 | 120 | 181 | 181 | 262 | |
Net change in deferred compensation and related plans | (26) | (45) | (1,333) | (42) | (34) | |
Balance, end of period | $ | 182,032 | 180,122 | 183,330 | 187,984 | 194,416 |
- Effective January 1, 2020, we adopted Accounting Standards Update (ASU) 2016-13,Financial Instruments - Credit Losses.
- Represents the impact of the redemption of the remaining shares of Preferred Stock, Series K, in first quarter 2020, the partial redemption of Preferred Stock, Series T, in first quarter 2020, and the partial redemption of Preferred Stock, Series K, in third quarter 2019.
- Represents the issuance of Preferred Stock, Series Z, in first quarter 2020.
- 21 -
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
Quarter ended September 30, | |||||||||||||||
2020 | 2019 | ||||||||||||||
Average | Yields/ | Interest | Average | Yields/ | Interest | ||||||||||
(in millions) | income/ | income/ | |||||||||||||
balance | rates | expense | balance | rates | expense | ||||||||||
Earning assets | |||||||||||||||
Interest-earning deposits with banks | $ | 216,958 | 0.11 % | $ | 58 | 134,017 | 2.14 % | $ | 723 | ||||||
Federal funds sold and securities purchased under resale agreements | 80,431 | 0.02 | 3 | 105,919 | 2.24 | 599 | |||||||||
Debt securities (2): | |||||||||||||||
Trading debt securities | 88,021 | 2.49 | 548 | 94,737 | 3.35 | 794 | |||||||||
Available-for-sale debt securities: | |||||||||||||||
Securities of U.S. Treasury and federal agencies | 8,126 | 0.87 | 18 | 16,040 | 2.14 | 87 | |||||||||
Securities of U.S. states and political subdivisions | 32,326 | 2.16 | 174 | 43,305 | 3.78 | 409 | |||||||||
Mortgage-backed securities: | |||||||||||||||
Federal agencies | 131,182 | 2.03 | 665 | 154,134 | 2.77 | 1,066 | |||||||||
Residential and commercial | 4,051 | 1.58 | 16 | 5,175 | 4.02 | 52 | |||||||||
Total mortgage-backed securities | 135,233 | 2.02 | 681 | 159,309 | 2.81 | 1,118 | |||||||||
Other debt securities | 41,871 | 1.84 | 194 | 42,435 | 4.12 | 440 | |||||||||
Total available-for-sale debt securities | 217,556 | 1.96 | 1,067 | 261,089 | 3.14 | 2,054 | |||||||||
Held-to-maturity debt securities: | |||||||||||||||
Securities of U.S. Treasury and federal agencies | 48,582 | 2.14 | 261 | 44,770 | 2.18 | 247 | |||||||||
Securities of U.S. states and political subdivisions | 14,145 | 3.84 | 136 | 8,688 | 4.01 | 87 | |||||||||
Federal agency and other mortgage-backed securities | 113,646 | 1.85 | 525 | 95,434 | 2.54 | 606 | |||||||||
Other debt securities | 11 | 1.66 | - | 50 | 3.58 | - | |||||||||
Total held-to-maturity debt securities | 176,384 | 2.09 | 922 | 148,942 | 2.52 | 940 | |||||||||
Total debt securities | 481,961 | 2.10 | 2,537 | 504,768 | 3.00 | 3,788 | |||||||||
Mortgage loans held for sale (3) | 29,426 | 3.15 | 232 | 22,743 | 4.08 | 232 | |||||||||
Loans held for sale (3) | 1,597 | 1.60 | 7 | 1,964 | 4.17 | 20 | |||||||||
Loans: | |||||||||||||||
Commercial loans: | |||||||||||||||
Commercial and industrial - U.S. | 270,998 | 2.53 | 1,721 | 284,278 | 4.21 | 3,015 | |||||||||
Commercial and industrial - Non-U.S. | 64,048 | 2.14 | 344 | 64,016 | 3.67 | 593 | |||||||||
Real estate mortgage | 123,391 | 2.81 | 870 | 121,819 | 4.36 | 1,338 | |||||||||
Real estate construction | 22,216 | 3.13 | 175 | 20,686 | 5.13 | 267 | |||||||||
Lease financing | 17,091 | 3.41 | 146 | 19,266 | 4.34 | 209 | |||||||||
Total commercial loans | 497,744 | 2.60 | 3,256 | 510,065 | 4.22 | 5,422 | |||||||||
Consumer loans: | |||||||||||||||
Real estate 1-4 family first mortgage | 290,607 | 3.24 | 2,357 | 288,383 | 3.74 | 2,699 | |||||||||
Real estate 1-4 family junior lien mortgage | 26,018 | 4.13 | 270 | 31,454 | 5.66 | 448 | |||||||||
Credit card | 35,965 | 11.70 | 1,057 | 39,204 | 12.55 | 1,240 | |||||||||
Automobile | 48,718 | 4.90 | 600 | 46,286 | 5.13 | 599 | |||||||||
Other revolving credit and installment | 32,656 | 5.25 | 431 | 34,368 | 6.95 | 601 | |||||||||
Total consumer loans | 433,964 | 4.33 | 4,715 | 439,695 | 5.06 | 5,587 | |||||||||
Total loans (3) | 931,708 | 3.41 | 7,971 | 949,760 | 4.61 | 11,009 | |||||||||
Equity securities | 25,185 | 1.61 | 100 | 37,075 | 2.68 | 249 | |||||||||
Other | 6,974 | (0.02) | - | 6,695 | 1.77 | 30 | |||||||||
Total earning assets | $ | 1,774,240 | 2.45 % | $ | 10,908 | 1,762,941 | 3.76 % | $ | 16,650 | ||||||
Funding sources | |||||||||||||||
Deposits: | |||||||||||||||
Interest-bearing checking | $ | 49,608 | 0.07 % | $ | 8 | 59,310 | 1.39 % | $ | 208 | ||||||
Market rate and other savings | 803,942 | 0.08 | 157 | 711,334 | 0.66 | 1,182 | |||||||||
Savings certificates | 24,808 | 0.83 | 52 | 32,751 | 1.72 | 142 | |||||||||
Other time deposits | 46,920 | 0.64 | 75 | 91,820 | 2.42 | 561 | |||||||||
Deposits in non-U.S. offices | 33,992 | 0.25 | 22 | 51,709 | 1.77 | 231 | |||||||||
Total interest-bearing deposits | 959,270 | 0.13 | 314 | 946,924 | 0.97 | 2,324 | |||||||||
Short-term borrowings | 57,292 | (0.08) | (12) | 121,842 | 2.07 | 635 | |||||||||
Long-term debt | 222,862 | 1.86 | 1,038 | 229,689 | 3.09 | 1,780 | |||||||||
Other liabilities | 27,679 | 1.33 | 92 | 26,173 | 2.06 | 135 | |||||||||
Total interest-bearing liabilities | 1,267,103 | 0.45 | 1,432 | 1,324,628 | 1.46 | 4,874 | |||||||||
Portion of noninterest-bearing funding sources | 507,137 | - | - | 438,313 | - | - | |||||||||
Total funding sources | $ | 1,774,240 | 0.32 | 1,432 | 1,762,941 | 1.10 | 4,874 | ||||||||
Net interest margin and net interest income on a taxable-equivalent basis (4) | 2.13 | % | $ | 9,476 | 2.66 % | $ | 11,776 | ||||||||
Noninterest-earning assets | $ | 21,991 | |||||||||||||
Cash and due from banks | 19,199 | ||||||||||||||
Goodwill | 26,388 | 26,413 | |||||||||||||
Other | 125,053 | 118,862 | |||||||||||||
Total noninterest-earning assets | $ | 173,432 | 164,474 | ||||||||||||
Noninterest-bearing funding sources | |||||||||||||||
Deposits | $ | 439,758 | 344,451 | ||||||||||||
Other liabilities | 57,961 | 58,241 | |||||||||||||
Total equity | 182,850 | 200,095 | |||||||||||||
Noninterest-bearing funding sources used to fund earning assets | (507,137) | (438,313) | |||||||||||||
Net noninterest-bearing funding sources | $ | 173,432 | 164,474 | ||||||||||||
Total assets | $ | 1,947,672 | 1,927,415 | ||||||||||||
Average prime rate | 3.25 % | 5.31 % | |||||||||||||
Average three-month London Interbank Offered Rate (LIBOR) | 0.25 | 2.20 |
- Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
- 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.
- Nonaccrual loans and related income are included in their respective loan categories.
- Includes taxable-equivalent adjustments of $108 million and $151 million for the quarters ended September 30, 2020 and 2019, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate utilized was 21% for the periods presented.
- 22 -
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
Nine months ended September 30, | |||||||||||||||
2020 | 2019 | ||||||||||||||
Average | Yields/ | Interest | Average | Yields/ | Interest | ||||||||||
(in millions) | income/ | income/ | |||||||||||||
balance | rates | expense | balance | rates | expense | ||||||||||
Earning assets | |||||||||||||||
Interest-earning deposits with banks | $ | 174,425 | 0.37 % | $ | 490 | 138,591 | 2.27 % | $ | 2,352 | ||||||
Federal funds sold and securities purchased under resale agreements | 88,095 | 0.58 | 385 | 95,945 | 2.36 | 1,692 | |||||||||
Debt securities (2): | |||||||||||||||
Trading debt securities | 95,018 | 2.78 | 1,981 | 90,229 | 3.46 | 2,338 | |||||||||
Available-for-sale debt securities: | |||||||||||||||
Securities of U.S. Treasury and federal agencies | 9,448 | 1.06 | 75 | 15,178 | 2.17 | 246 | |||||||||
Securities of U.S. states and political subdivisions | 35,656 | 2.90 | 775 | 45,787 | 3.95 | 1,355 | |||||||||
Mortgage-backed securities: | |||||||||||||||
Federal agencies | 144,425 | 2.37 | 2,564 | 151,806 | 2.95 | 3,359 | |||||||||
Residential and commercial | 4,376 | 2.25 | 74 | 5,571 | 4.12 | 172 | |||||||||
Total mortgage-backed securities | 148,801 | 2.36 | 2,638 | 157,377 | 2.99 | 3,531 | |||||||||
Other debt securities | 40,220 | 2.67 | 805 | 44,746 | 4.33 | 1,451 | |||||||||
Total available-for-sale debt securities | 234,125 | 2.45 | 4,293 | 263,088 | 3.34 | 6,583 | |||||||||
Held-to-maturity debt securities: | |||||||||||||||
Securities of U.S. Treasury and federal agencies | 47,701 | 2.16 | 770 | 44,762 | 2.19 | 734 | |||||||||
Securities of U.S. states and political subdivisions | 13,950 | 3.83 | 401 | 7,277 | 4.03 | 220 | |||||||||
Federal agency and other mortgage-backed securities | 105,393 | 2.19 | 1,728 | 95,646 | 2.64 | 1,894 | |||||||||
Other debt securities | 17 | 2.64 | - | 56 | 3.81 | 1 | |||||||||
Total held-to-maturity debt securities | 167,061 | 2.31 | 2,899 | 147,741 | 2.57 | 2,849 | |||||||||
Total debt securities | 496,204 | 2.47 | 9,173 | 501,058 | 3.13 | 11,770 | |||||||||
Mortgage loans held for sale (3) | 25,264 | 3.48 | 659 | 18,401 | 4.20 | 579 | |||||||||
Loans held for sale (3) | 1,577 | 2.19 | 26 | 1,823 | 4.72 | 64 | |||||||||
Loans: | |||||||||||||||
Commercial loans: | |||||||||||||||
Commercial and industrial - U.S. | 289,799 | 2.88 | 6,257 | 285,305 | 4.39 | 9,360 | |||||||||
Commercial and industrial - Non-U.S. | 68,965 | 2.61 | 1,345 | 63,252 | 3.82 | 1,808 | |||||||||
Real estate mortgage | 122,903 | 3.25 | 2,987 | 121,703 | 4.51 | 4,101 | |||||||||
Real estate construction | 21,288 | 3.66 | 583 | 21,557 | 5.31 | 856 | |||||||||
Lease financing | 18,152 | 4.07 | 554 | 19,262 | 4.56 | 659 | |||||||||
Total commercial loans | 521,107 | 3.01 | 11,726 | 511,079 | 4.39 | 16,784 | |||||||||
Consumer loans: | |||||||||||||||
Real estate 1-4 family first mortgage | 288,355 | 3.43 | 7,421 | 286,600 | 3.86 | 8,296 | |||||||||
Real estate 1-4 family junior lien mortgage | 27,535 | 4.52 | 932 | 32,610 | 5.72 | 1,397 | |||||||||
Credit card | 37,415 | 11.58 | 3,243 | 38,517 | 12.69 | 3,656 | |||||||||
Automobile | 48,473 | 4.95 | 1,797 | 45,438 | 5.18 | 1,762 | |||||||||
Other revolving credit and installment | 33,033 | 5.68 | 1,405 | 34,832 | 7.07 | 1,841 | |||||||||
Total consumer loans | 434,811 | 4.54 | 14,798 | 437,997 | 5.17 | 16,952 | |||||||||
Total loans (3) | 955,918 | 3.70 | 26,524 | 949,076 | 4.75 | 33,736 | |||||||||
Equity securities | 30,027 | 1.89 | 425 | 35,139 | 2.65 | 697 | |||||||||
Other | 7,373 | 0.24 | 14 | 5,275 | 1.73 | 68 | |||||||||
Total earning assets | $ | 1,778,883 | 2.83 % | $ | 37,696 | 1,745,308 | 3.90 % | $ | 50,958 | ||||||
Funding sources | |||||||||||||||
Deposits: | |||||||||||||||
Interest-bearing checking | $ | 55,407 | 0.37 % | $ | 152 | 57,715 | 1.42 % | $ | 615 | ||||||
Market rate and other savings | 788,732 | 0.24 | 1,446 | 696,943 | 0.58 | 3,038 | |||||||||
Savings certificates | 27,310 | 1.16 | 237 | 29,562 | 1.56 | 344 | |||||||||
Other time deposits | 62,881 | 1.23 | 580 | 95,490 | 2.57 | 1,836 | |||||||||
Deposits in non-U.S. offices | 41,642 | 0.73 | 226 | 52,995 | 1.84 | 730 | |||||||||
Total interest-bearing deposits | 975,972 | 0.36 | 2,641 | 932,705 | 0.94 | 6,563 | |||||||||
Short-term borrowings | 74,538 | 0.47 | 263 | 115,131 | 2.18 | 1,878 | |||||||||
Long-term debt | 228,067 | 2.06 | 3,515 | 233,186 | 3.21 | 5,607 | |||||||||
Other liabilities | 29,270 | 1.59 | 350 | 25,263 | 2.17 | 410 | |||||||||
Total interest-bearing liabilities | 1,307,847 | 0.69 | 6,769 | 1,306,285 | 1.48 | 14,458 | |||||||||
Portion of noninterest-bearing funding sources | 471,036 | - | - | 439,023 | - | - | |||||||||
Total funding sources | $ | 1,778,883 | 0.51 | 6,769 | 1,745,308 | 1.11 | 14,458 | ||||||||
Net interest margin and net interest income on a taxable-equivalent basis (4) | 2.32 | % | $ | 30,927 | 2.79 % | $ | 36,500 | ||||||||
Noninterest-earning assets | |||||||||||||||
Cash and due from banks | $ | 21,266 | 19,428 | ||||||||||||
Goodwill | 26,386 | 26,416 | |||||||||||||
Other | 122,550 | 112,721 | |||||||||||||
Total noninterest-earning assets | $ | 170,202 | 158,565 | ||||||||||||
Noninterest-bearing funding sources | |||||||||||||||
Deposits | $ | 398,666 | 341,541 | ||||||||||||
Other liabilities | 57,537 | 56,664 | |||||||||||||
Total equity | 185,035 | 199,383 | |||||||||||||
Noninterest-bearing funding sources used to fund earning assets | (471,036) | (439,023) | |||||||||||||
Net noninterest-bearing funding sources | $ | 170,202 | 158,565 | ||||||||||||
Total assets | $ | 1,949,085 | 1,903,873 | ||||||||||||
Average prime rate | 3.63 % | 5.43 % | |||||||||||||
Average three-month London Interbank Offered Rate (LIBOR) | 0.79 | 2.46 |
- Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
- 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.
- Nonaccrual loans and related income are included in their respective loan categories.
- Includes taxable-equivalent adjustments of $367 million and $469 million for the first nine months of 2020 and 2019, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate utilized was 21% for the periods presented.
- 23 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
Quarter ended | |||||||||||||||||||||||||
Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | |||||||||||||||||||||
($ in billions) | Average | Yields/ | Average | Yields/ | Average | Yields/ | Average | Yields/ | Average | Yields/ | |||||||||||||||
balance | rates | balance | rates | balance | rates | balance | rates | balance | rates | ||||||||||||||||
Earning assets | |||||||||||||||||||||||||
Interest-earning deposits with banks | $ | 217.0 | 0.11 % | $ | 176.3 | 0.12 % | $ | 129.5 | 1.18 % | $ | 127.3 | 1.63 % | $ | 134.0 | 2.14 % | ||||||||||
Federal funds sold and securities purchased under resale agreements | 80.4 | 0.02 | 76.4 | 0.01 | 107.6 | 1.42 | 109.2 | 1.72 | 105.9 | 2.24 | |||||||||||||||
Debt securities (2): | |||||||||||||||||||||||||
Trading debt securities | 88.0 | 2.49 | 96.0 | 2.76 | 101.1 | 3.05 | 103.8 | 3.12 | 94.7 | 3.35 | |||||||||||||||
Available-for-sale debt securities: | |||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 8.1 | 0.87 | 9.5 | 0.83 | 10.8 | 1.40 | 15.6 | 1.79 | 16.0 | 2.14 | |||||||||||||||
Securities of U.S. states and political subdivisions | 32.3 | 2.16 | 35.7 | 2.98 | 39.0 | 3.43 | 39.5 | 3.58 | 43.3 | 3.78 | |||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||
Federal agencies | 131.2 | 2.03 | 143.6 | 2.33 | 158.6 | 2.68 | 161.1 | 2.58 | 154.1 | 2.77 | |||||||||||||||
Residential and commercial | 4.1 | 1.58 | 4.4 | 2.27 | 4.6 | 2.82 | 4.8 | 4.40 | 5.2 | 4.02 | |||||||||||||||
Total mortgage-backed securities | 135.3 | 2.02 | 148.0 | 2.33 | 163.2 | 2.68 | 165.9 | 2.63 | 159.3 | 2.81 | |||||||||||||||
Other debt securities | 41.9 | 1.84 | 39.2 | 2.75 | 39.6 | 3.48 | 40.5 | 3.88 | 42.5 | 4.12 | |||||||||||||||
Total available-for-sale debt securities | 217.6 | 1.96 | 232.4 | 2.44 | 252.6 | 2.87 | 261.5 | 2.92 | 261.1 | 3.14 | |||||||||||||||
Held-to-maturity debt securities: | |||||||||||||||||||||||||
Securities of U.S. Treasury and federal agencies | 48.6 | 2.14 | 48.7 | 2.14 | 45.9 | 2.19 | 45.1 | 2.19 | 44.8 | 2.18 | |||||||||||||||
Securities of U.S. states and political subdivisions | 14.1 | 3.84 | 14.2 | 3.81 | 13.5 | 3.84 | 12.8 | 3.88 | 8.7 | 4.01 | |||||||||||||||
Federal agency and other mortgage-backed securities | 113.7 | 1.85 | 104.0 | 2.21 | 98.4 | 2.55 | 95.3 | 2.49 | 95.4 | 2.54 | |||||||||||||||
Other debt securities | - | 1.66 | - | 2.58 | - | 3.10 | - | 3.28 | 0.1 | 3.58 | |||||||||||||||
Total held-to-maturity debt securities | 176.4 | 2.09 | 166.9 | 2.33 | 157.8 | 2.56 | 153.2 | 2.51 | 149.0 | 2.52 | |||||||||||||||
Total debt securities | 482.0 | 2.10 | 495.3 | 2.46 | 511.5 | 2.81 | 518.5 | 2.84 | 504.8 | 3.00 | |||||||||||||||
Mortgage loans held for sale (3) | 29.4 | 3.15 | 26.0 | 3.55 | 20.4 | 3.87 | 24.0 | 3.90 | 22.7 | 4.08 | |||||||||||||||
Loans held for sale (3) | 1.6 | 1.60 | 1.7 | 1.87 | 1.5 | 3.17 | 1.4 | 4.13 | 2.0 | 4.17 | |||||||||||||||
Loans: | |||||||||||||||||||||||||
Commercial loans: | |||||||||||||||||||||||||
Commercial and industrial - U.S. | 271.0 | 2.53 | 310.1 | 2.58 | 288.4 | 3.55 | 283.7 | 3.84 | 284.3 | 4.21 | |||||||||||||||
Commercial and industrial - Non-U.S. | 64.0 | 2.14 | 72.2 | 2.48 | 70.7 | 3.16 | 67.3 | 3.40 | 64.0 | 3.67 | |||||||||||||||
Real estate mortgage | 123.4 | 2.81 | 123.5 | 3.03 | 121.8 | 3.92 | 122.1 | 4.07 | 121.8 | 4.36 | |||||||||||||||
Real estate construction | 22.2 | 3.13 | 21.4 | 3.37 | 20.3 | 4.54 | 20.1 | 4.71 | 20.7 | 5.13 | |||||||||||||||
Lease financing | 17.1 | 3.41 | 18.1 | 4.34 | 19.3 | 4.40 | 19.4 | 4.41 | 19.3 | 4.34 | |||||||||||||||
Total commercial loans | 497.7 | 2.60 | 545.3 | 2.76 | 520.5 | 3.65 | 512.6 | 3.90 | 510.1 | 4.22 | |||||||||||||||
Consumer loans: | |||||||||||||||||||||||||
Real estate 1-4 family first mortgage | 290.6 | 3.24 | 280.9 | 3.44 | 293.5 | 3.61 | 292.4 | 3.66 | 288.4 | 3.74 | |||||||||||||||
Real estate 1-4 family junior lien mortgage | 26.0 | 4.13 | 27.7 | 4.24 | 28.9 | 5.14 | 30.1 | 5.32 | 31.5 | 5.66 | |||||||||||||||
Credit card | 36.0 | 11.70 | 36.5 | 10.78 | 39.8 | 12.21 | 39.9 | 12.26 | 39.2 | 12.55 | |||||||||||||||
Automobile | 48.7 | 4.90 | 48.5 | 4.99 | 48.3 | 4.96 | 47.3 | 5.04 | 46.3 | 5.13 | |||||||||||||||
Other revolving credit and installment | 32.7 | 5.25 | 32.4 | 5.45 | 34.0 | 6.32 | 34.2 | 6.60 | 34.3 | 6.95 | |||||||||||||||
Total consumer loans | 434.0 | 4.33 | 426.0 | 4.45 | 444.5 | 4.83 | 443.9 | 4.92 | 439.7 | 5.06 | |||||||||||||||
Total loans (3) | 931.7 | 3.41 | 971.3 | 3.50 | 965.0 | 4.20 | 956.5 | 4.37 | 949.8 | 4.61 | |||||||||||||||
Equity securities | 25.2 | 1.61 | 27.4 | 1.70 | 37.5 | 2.22 | 38.3 | 2.81 | 37.1 | 2.68 | |||||||||||||||
Other | 6.9 | (0.02) | 7.6 | (0.02) | 7.4 | 0.77 | 6.4 | 1.36 | 6.6 | 1.77 | |||||||||||||||
Total earning assets | $ | 1,774.2 | 2.45 % | $ | 1,782.0 | 2.68 % | $ | 1,780.4 | 3.35 % | $ | 1,781.6 | 3.51 % | $ | 1,762.9 | 3.76 % | ||||||||||
Funding sources | |||||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||||
Interest-bearing checking | $ | 49.6 | 0.07 % | $ | 53.6 | 0.07 % | $ | 63.1 | 0.86 % | $ | 63.3 | 1.09 % | $ | 59.3 | 1.39 % | ||||||||||
Market rate and other savings | 804.0 | 0.08 | 799.9 | 0.16 | 762.1 | 0.52 | 732.7 | 0.59 | 711.3 | 0.66 | |||||||||||||||
Savings certificates | 24.8 | 0.83 | 27.1 | 1.11 | 30.1 | 1.47 | 32.3 | 1.68 | 32.8 | 1.72 | |||||||||||||||
Other time deposits | 46.9 | 0.64 | 59.9 | 1.01 | 82.0 | 1.74 | 87.1 | 2.10 | 91.8 | 2.42 | |||||||||||||||
Deposits in non-U.S. offices | 34.0 | 0.25 | 37.7 | 0.44 | 53.3 | 1.23 | 54.8 | 1.50 | 51.7 | 1.77 | |||||||||||||||
Total interest-bearing deposits | 959.3 | 0.13 | 978.2 | 0.24 | 990.6 | 0.71 | 970.2 | 0.85 | 946.9 | 0.97 | |||||||||||||||
Short-term borrowings | 57.3 | (0.08) | 63.5 | (0.10) | 103.0 | 1.14 | 115.9 | 1.50 | 121.8 | 2.07 | |||||||||||||||
Long-term debt | 222.9 | 1.86 | 232.4 | 2.13 | 229.0 | 2.17 | 230.4 | 3.02 | 229.7 | 3.09 | |||||||||||||||
Other liabilities | 27.6 | 1.33 | 30.0 | 1.53 | 30.2 | 1.90 | 27.3 | 2.04 | 26.2 | 2.06 | |||||||||||||||
Total interest-bearing liabilities | 1,267.1 | 0.45 | 1,304.1 | 0.59 | 1,352.8 | 1.01 | 1,343.8 | 1.30 | 1,324.6 | 1.46 | |||||||||||||||
Portion of noninterest-bearing funding sources | 507.1 | - | 477.9 | - | 427.6 | - | 437.8 | - | 438.3 | - | |||||||||||||||
Total funding sources | $ | 1,774.2 | 0.32 | $ | 1,782.0 | 0.43 | $ | 1,780.4 | 0.77 | $ | 1,781.6 | 0.98 | $ | 1,762.9 | 1.10 | ||||||||||
Net interest margin on a taxable-equivalent basis | 2.13 | % | 2.25 % | 2.58 % | 2.53 % | 2.66 % | |||||||||||||||||||
Noninterest-earning assets | |||||||||||||||||||||||||
Cash and due from banks | $ | 22.0 | 21.2 | 20.6 | 19.9 | 19.2 | |||||||||||||||||||
Goodwill | 26.4 | 26.4 | 26.4 | 26.4 | 26.4 | ||||||||||||||||||||
Other | 125.1 | 119.3 | 123.3 | 113.9 | 118.9 | ||||||||||||||||||||
Total noninterest-earnings assets | $ | 173.5 | 166.9 | 170.3 | 160.2 | 164.5 | |||||||||||||||||||
Noninterest-bearing funding sources | |||||||||||||||||||||||||
Deposits | $ | 439.7 | 408.5 | 347.4 | 351.7 | 344.5 | |||||||||||||||||||
Other liabilities | 58.0 | 52.2 | 62.3 | 53.9 | 58.2 | ||||||||||||||||||||
Total equity | 182.9 | 184.1 | 188.2 | 192.4 | 200.1 | ||||||||||||||||||||
Noninterest-bearing funding sources used to fund earning assets | (507.1) | (477.9) | (427.6) | (437.8) | (438.3) | ||||||||||||||||||||
Net noninterest-bearing funding sources | $ | 173.5 | 166.9 | 170.3 | 160.2 | 164.5 | |||||||||||||||||||
Total assets | $ | 1,947.7 | 1,948.9 | 1,950.7 | 1,941.8 | 1,927.4 | |||||||||||||||||||
Average prime rate | 3.25 % | 3.25 | 4.41 | 4.83 | 5.31 | ||||||||||||||||||||
Average three-month London Interbank Offered Rate (LIBOR) | 0.25 | 0.60 | 1.53 | 1.93 | 2.20 |
- Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
- 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.
- Nonaccrual loans and related income are included in their respective loan categories.
- 24 -
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
Quarter ended September 30, | % | Nine months ended September 30, | % | |||||
(in millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | ||
Deposit-related fees (1) | $ | 1,299 | 1,480 | (12)% | $ | 3,888 | 4,289 | (9)% |
Trust and investment fees: | ||||||||
Brokerage advisory, commissions and other fees | 2,336 | 2,346 | - | 6,935 | 6,857 | 1 | ||
Trust and investment management | 737 | 729 | 1 | 2,125 | 2,310 | (8) | ||
Investment banking | 441 | 484 | (9) | 1,379 | 1,333 | 3 | ||
Total trust and investment fees | 3,514 | 3,559 | (1) | 10,439 | 10,500 | (1) | ||
Card fees | 912 | 1,027 | (11) | 2,601 | 2,996 | (13) | ||
Lending-related fees (1) | 352 | 374 | (6) | 1,025 | 1,116 | (8) | ||
Mortgage banking: | ||||||||
Servicing income, net | 341 | (142) | NM | (77) | 499 | NM | ||
Net gains on mortgage loan origination/sales activities | 1,249 | 608 | 105 | 2,363 | 1,433 | 65 | ||
Total mortgage banking | 1,590 | 466 | 241 | 2,286 | 1,932 | 18 | ||
Net gains from trading activities | 361 | 276 | 31 | 1,232 | 862 | 43 | ||
Net gains on debt securities | 264 | 3 | NM | 713 | 148 | 382 | ||
Net gains (losses) from equity securities | 649 | 956 | (32) | (219) | 2,392 | NM | ||
Lease income | 333 | 402 | (17) | 1,021 | 1,270 | (20) | ||
Life insurance investment income | 156 | 173 | (10) | 480 | 499 | (4) | ||
Other (1) | 64 | 1,669 | (96) | 389 | 3,168 | (88) | ||
Total | $ | 9,494 | 10,385 | (9) | $ | 23,855 | 29,172 | (18) |
NM - Not meaningful
- In third quarter 2020, service charges on deposit accounts, cash network fees, wire transfer and other remittance fees, and certain other fees were combined into a single line item for deposit-related fees; certain fees associated with lending activities were combined into a single line item for lending-related fees; and certain other fees were reclassified to other noninterest income. Prior period balances have been revised to conform with the current period presentation.
NONINTEREST EXPENSE
Quarter ended September 30, | % | Nine months ended September 30, | % | ||||||
(in millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | |||
Personnel | $ | 8,624 | 8,604 | - % | $ | 25,863 | 26,309 | (2)% | |
Technology, telecommunications and equipment (1) | 791 | 821 | (4) | 2,261 | 2,340 | (3) | |||
Occupancy (2) | 851 | 760 | 12 | 2,437 | 2,196 | 11 | |||
Operating losses | 1,219 | 1,920 | (37) | 2,902 | 2,405 | 21 | |||
Professional and outside services (1) | 1,760 | 1,737 | 1 | 5,042 | 4,956 | 2 | |||
Leases (3) | 291 | 272 | 7 | 795 | 869 | (9) | |||
Advertising and promotion | 144 | 266 | (46) | 462 | 832 | (44) | |||
Restructuring charges | 718 | - | NM | 718 | - | NM | |||
Other (1) | 831 | 819 | 1 | 2,348 | 2,657 | (12) | |||
Total | $ | 15,229 | 15,199 | - | $ | 42,828 | 42,564 | 1 |
NM - Not meaningful
- In third quarter 2020, expenses for outside professional services, contract services, and outside data processing were combined into a single line item for professional and outside services expense; expenses for technology and equipment and telecommunications were combined into a single line item for technology, telecommunications and equipment expense; and certain other expenses were reclassified to other noninterest expense. Prior period balances have been revised to conform with the current period presentation.
- Represents expenses for both leased and owned properties.
- Represents expenses for assets we lease to customers.
- 25 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
Quarter ended | ||||||
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Deposit-related fees (1) | $ | 1,299 | 1,142 | 1,447 | 1,530 | 1,480 |
Trust and investment fees: | ||||||
Brokerage advisory, commissions and other fees | 2,336 | 2,117 | 2,482 | 2,380 | 2,346 | |
Trust and investment management | 737 | 687 | 701 | 728 | 729 | |
Investment banking | 441 | 547 | 391 | 464 | 484 | |
Total trust and investment fees | 3,514 | 3,351 | 3,574 | 3,572 | 3,559 | |
Card fees | 912 | 797 | 892 | 1,020 | 1,027 | |
Lending-related fees (1) | 352 | 323 | 350 | 358 | 374 | |
Mortgage banking: | ||||||
Servicing income, net | 341 | (689) | 271 | 23 | (142) | |
Net gains on mortgage loan origination/sales activities | 1,249 | 1,006 | 108 | 760 | 608 | |
Total mortgage banking | 1,590 | 317 | 379 | 783 | 466 | |
Net gains from trading activities | 361 | 807 | 64 | 131 | 276 | |
Net gains (losses) on debt securities | 264 | 212 | 237 | (8) | 3 | |
Net gains (losses) from equity securities | 649 | 533 | (1,401) | 451 | 956 | |
Lease income | 333 | 335 | 353 | 344 | 402 | |
Life insurance investment income | 156 | 163 | 161 | 159 | 173 | |
Other (1) | 64 | (24) | 349 | 320 | 1,669 | |
Total | $ | 9,494 | 7,956 | 6,405 | 8,660 | 10,385 |
- In third quarter 2020, service charges on deposit accounts, cash network fees, wire transfer and other remittance fees, and certain other fees were combined into a single line item for deposit-related fees; certain fees associated with lending activities were combined into a single line item for lending-related fees; and certain other fees were reclassified to other noninterest income. Prior period balances have been revised to conform with the current period presentation.
FIVE QUARTER NONINTEREST EXPENSE
Quarter ended | ||||||
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Personnel | $ | 8,624 | 8,916 | 8,323 | 8,819 | 8,604 |
Technology, telecommunications and equipment (1) | 791 | 672 | 798 | 936 | 821 | |
Occupancy (2) | 851 | 871 | 715 | 749 | 760 | |
Operating losses | 1,219 | 1,219 | 464 | 1,916 | 1,920 | |
Professional and outside services (1) | 1,760 | 1,676 | 1,606 | 1,789 | 1,737 | |
Leases (3) | 291 | 244 | 260 | 286 | 272 | |
Advertising and promotion | 144 | 137 | 181 | 244 | 266 | |
Restructuring charges | 718 | - | - | - | - | |
Other (1) | 831 | 816 | 701 | 875 | 819 | |
Total | $ | 15,229 | 14,551 | 13,048 | 15,614 | 15,199 |
- In third quarter 2020, expenses for outside professional services, contract services, and outside data processing were combined into a single line item for professional and outside services expense; expenses for technology and equipment and telecommunications were combined into a single line item for technology, telecommunications and equipment expense; and certain other expenses were reclassified to other noninterest expense. Prior period balances have been revised to conform with the current period presentation.
- Represents expenses for both leased and owned properties.
- Represents expenses for assets we lease to customers.
FIVE QUARTER DEFERRED COMPENSATION AND RELATED HEDGES
Quarter ended | ||||||
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Net interest income | $ | - | 3 | 12 | 26 | 13 |
Net gains (losses) from equity securities | 1 | 346 | (621) | 236 | (4) | |
Total revenue (losses) from deferred compensation plan investments | 1 | 349 | (609) | 262 | 9 | |
Change in deferred compensation plan liabilities | 220 | 490 | (598) | 263 | 5 | |
Net derivative (gains) losses from economic hedges of deferred compensation (1) | (215) | (141) | - | - | - | |
Personnel expense | 5 | 349 | (598) | 263 | 5 | |
Income (loss) before income tax expense | $ | (4) | - | (11) | (1) | 4 |
- In second quarter 2020, we entered into arrangements to transition our economic hedges of our deferred compensation plan liabilities from equity securities to derivative instruments. Changes in the fair value of derivatives used as economic hedges are presented within the same financial statement line as the related business activity being hedged.
- 26 -
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions, except shares) | Sep 30, | Dec 31, | % | ||
2020 | 2019 | Change | |||
Assets | |||||
Cash and due from banks | $ | 25,535 | 21,757 | 17 % | |
Interest-earning deposits with banks | 221,235 | 119,493 | 85 | ||
Total cash, cash equivalents, and restricted cash | 246,770 | 141,250 | 75 | ||
Federal funds sold and securities purchased under resale agreements | 69,304 | 102,140 | (32) | ||
Debt securities: | |||||
Trading, at fair value | 73,253 | 79,733 | (8) | ||
Available-for-sale, at fair value (includes allowance for credit losses) | 220,573 | 263,459 | (16) | ||
Held-to-maturity, at amortized cost, net of allowance for credit losses | 182,595 | 153,933 | 19 | ||
Mortgage loans held for sale | 23,307 | 23,342 | - | ||
Loans held for sale | 1,697 | 977 | 74 | ||
Loans | 920,082 | 962,265 | (4) | ||
Allowance for loan losses | (19,463) | (9,551) | 104 | ||
Net loans | 900,619 | 952,714 | (5) | ||
Mortgage servicing rights: | |||||
Measured at fair value | 6,355 | 11,517 | (45) | ||
Amortized | 1,325 | 1,430 | (7) | ||
Premises and equipment, net | 8,977 | 9,309 | (4) | ||
Goodwill | 26,387 | 26,390 | - | ||
Derivative assets | 23,715 | 14,203 | 67 | ||
Equity securities | 51,169 | 68,241 | (25) | ||
Other assets | 86,174 | 78,917 | 9 | ||
Total assets | $ | 1,922,220 | 1,927,555 | - | |
Liabilities | |||||
Noninterest-bearing deposits | $ | 447,011 | 344,496 | 30 | |
Interest-bearing deposits | 936,204 | 978,130 | (4) | ||
Total deposits | 1,383,215 | 1,322,626 | 5 | ||
Short-term borrowings | 55,224 | 104,512 | (47) | ||
Derivative liabilities | 13,767 | 9,079 | 52 | ||
Accrued expenses and other liabilities | 72,271 | 75,163 | (4) | ||
Long-term debt | 215,711 | 228,191 | (5) | ||
Total liabilities | 1,740,188 | 1,739,571 | - | ||
Equity | |||||
Wells Fargo stockholders' equity: | |||||
Preferred stock | 21,098 | 21,549 | (2) | ||
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 | 60,035 | 61,049 | (2) | ||
Retained earnings | 160,913 | 166,697 | (3) | ||
Cumulative other comprehensive income (loss) | (750) | (1,311) | (43) | ||
Treasury stock - 1,349,294,592 shares and 1,347,385,537 shares | (68,384) | (68,831) | (1) | ||
Unearned ESOP shares | (875) | (1,143) | (23) | ||
Total Wells Fargo stockholders' equity | 181,173 | 187,146 | (3) | ||
Noncontrolling interests | 859 | 838 | 3 | ||
Total equity | 182,032 | 187,984 | (3) | ||
Total liabilities and equity | $ | 1,922,220 | 1,927,555 | - |
- 27 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Assets | ||||||
Cash and due from banks | $ | 25,535 | 24,704 | 22,738 | 21,757 | 22,401 |
Interest-earning deposits with banks | 221,235 | 237,799 | 128,071 | 119,493 | 126,330 | |
Total cash, cash equivalents, and restricted cash | 246,770 | 262,503 | 150,809 | 141,250 | 148,731 | |
Federal funds sold and securities purchased under resale agreements | 69,304 | 79,289 | 86,465 | 102,140 | 103,051 | |
Debt securities: | ||||||
Trading, at fair value | 73,253 | 74,679 | 80,425 | 79,733 | 79,113 | |
Available-for-sale, at fair value (includes allowance for credit losses) | 220,573 | 228,899 | 251,229 | 263,459 | 271,236 | |
Held-to-maturity, at amortized cost, net of allowance for credit losses | 182,595 | 169,002 | 169,909 | 153,933 | 153,179 | |
Mortgage loans held for sale | 23,307 | 32,355 | 21,795 | 23,342 | 25,448 | |
Loans held for sale | 1,697 | 1,339 | 1,883 | 977 | 1,532 | |
Loans | 920,082 | 935,155 | 1,009,843 | 962,265 | 954,915 | |
Allowance for loan losses | (19,463) | (18,926) | (11,263) | (9,551) | (9,715) | |
Net loans | 900,619 | 916,229 | 998,580 | 952,714 | 945,200 | |
Mortgage servicing rights: | ||||||
Measured at fair value | 6,355 | 6,819 | 8,126 | 11,517 | 11,072 | |
Amortized | 1,325 | 1,361 | 1,406 | 1,430 | 1,397 | |
Premises and equipment, net | 8,977 | 9,025 | 9,108 | 9,309 | 9,315 | |
Goodwill | 26,387 | 26,385 | 26,381 | 26,390 | 26,388 | |
Derivative assets | 23,715 | 22,776 | 25,023 | 14,203 | 14,680 | |
Equity securities | 51,169 | 52,494 | 54,047 | 68,241 | 63,884 | |
Other assets | 86,174 | 85,611 | 96,163 | 78,917 | 89,724 | |
Total assets | $ | 1,922,220 | 1,968,766 | 1,981,349 | 1,927,555 | 1,943,950 |
Liabilities | ||||||
Noninterest-bearing deposits | $ | 447,011 | 432,857 | 379,678 | 344,496 | 355,259 |
Interest-bearing deposits | 936,204 | 977,854 | 996,854 | 978,130 | 953,236 | |
Total deposits | 1,383,215 | 1,410,711 | 1,376,532 | 1,322,626 | 1,308,495 | |
Short-term borrowings | 55,224 | 60,485 | 92,289 | 104,512 | 123,908 | |
Derivative liabilities | 13,767 | 11,368 | 15,618 | 9,079 | 9,948 | |
Accrued expenses and other liabilities | 72,271 | 75,159 | 76,238 | 75,163 | 76,532 | |
Long-term debt | 215,711 | 230,921 | 237,342 | 228,191 | 230,651 | |
Total liabilities | 1,740,188 | 1,788,644 | 1,798,019 | 1,739,571 | 1,749,534 | |
Equity | ||||||
Wells Fargo stockholders' equity: | ||||||
Preferred stock | 21,098 | 21,098 | 21,347 | 21,549 | 21,549 | |
Common stock | 9,136 | 9,136 | 9,136 | 9,136 | 9,136 | |
Additional paid-in capital | 60,035 | 59,923 | 59,849 | 61,049 | 60,866 | |
Retained earnings | 160,913 | 159,952 | 165,308 | 166,697 | 166,320 | |
Cumulative other comprehensive income (loss) | (750) | (798) | (1,564) | (1,311) | (1,639) | |
Treasury stock | (68,384) | (69,050) | (70,215) | (68,831) | (61,785) | |
Unearned ESOP shares | (875) | (875) | (1,143) | (1,143) | (1,143) | |
Total Wells Fargo stockholders' equity | 181,173 | 179,386 | 182,718 | 187,146 | 193,304 | |
Noncontrolling interests | 859 | 736 | 612 | 838 | 1,112 | |
Total equity | 182,032 | 180,122 | 183,330 | 187,984 | 194,416 | |
Total liabilities and equity | $ | 1,922,220 | 1,968,766 | 1,981,349 | 1,927,555 | 1,943,950 |
- 28 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER TRADING ASSETS AND LIABILITIES
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Trading assets | ||||||
Debt securities | $ | 73,253 | 74,679 | 80,425 | 79,733 | 79,113 |
Equity securities | 14,058 | 12,591 | 13,573 | 27,440 | 24,436 | |
Loans held for sale | 1,688 | 1,201 | 1,673 | 972 | 1,501 | |
Gross trading derivative assets | 57,990 | 60,644 | 72,527 | 34,825 | 39,926 | |
Netting (1) | (35,662) | (39,885) | (49,821) | (21,463) | (26,414) | |
Total trading derivative assets | 22,328 | 20,759 | 22,706 | 13,362 | 13,512 | |
Total trading assets | 111,327 | 109,230 | 118,377 | 121,507 | 118,562 | |
Trading liabilities | ||||||
Short sales | 18,779 | 20,213 | 17,603 | 17,430 | 18,290 | |
Gross trading derivative liabilities | 51,241 | 54,985 | 67,891 | 33,861 | 38,308 | |
Netting (1) | (39,278) | (44,901) | (53,598) | (26,074) | (29,708) | |
Total trading derivative liabilities | 11,963 | 10,084 | 14,293 | 7,787 | 8,600 | |
Total trading liabilities | $ | 30,742 | 30,297 | 31,896 | 25,217 | 26,890 |
- Represents balance sheet netting for trading derivative asset and liability balances, and trading portfolio level counterparty valuation adjustments.
FIVE QUARTER DEBT SECURITIES
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Trading debt securities | $ | 73,253 | 74,679 | 80,425 | 79,733 | 79,113 |
Available-for-sale debt securities: | ||||||
Securities of U.S. Treasury and federal agencies | 5,975 | 7,983 | 11,036 | 14,960 | 16,549 | |
Securities of U.S. states and political subdivisions | 31,511 | 33,011 | 38,144 | 40,337 | 40,503 | |
Mortgage-backed securities: | ||||||
Federal agencies | 135,227 | 144,835 | 160,214 | 162,453 | 167,535 | |
Residential and commercial | 3,884 | 4,100 | 4,430 | 4,761 | 5,079 | |
Total mortgage-backed securities | 139,111 | 148,935 | 164,644 | 167,214 | 172,614 | |
Other debt securities | 43,976 | 38,970 | 37,405 | 40,948 | 41,570 | |
Total available-for-sale debt securities | 220,573 | 228,899 | 251,229 | 263,459 | 271,236 | |
Held-to-maturity debt securities: | ||||||
Securities of U.S. Treasury and federal agencies | 48,587 | 48,578 | 48,569 | 45,541 | 44,774 | |
Securities of U.S. states and political subdivisions | 14,232 | 14,277 | 14,304 | 13,486 | 12,719 | |
Federal agency and other mortgage-backed securities (1) | 119,766 | 106,133 | 107,013 | 94,869 | 95,637 | |
Other debt securities | 10 | 14 | 23 | 37 | 49 | |
Total held-to-maturity debt securities | 182,595 | 169,002 | 169,909 | 153,933 | 153,179 | |
Total debt securities | $ | 476,421 | 472,580 | 501,563 | 497,125 | 503,528 |
Allowance for credit losses for debt securities (2): | ||||||
Available-for-sale debt securities (included in fair value) | $ | 79 | 114 | 161 | - | - |
Held-to-maturity debt securities (netted against amortized cost) | 26 | 20 | 11 | - | - | |
Total allowance for credit losses for debt securities | $ | 105 | 134 | 172 | - | - |
- Predominantly consists of federal agency mortgage-backed securities.
- Represents the allowance for credit losses for debt securities as a result of our adoption of ASU 2016-13,Financial Instruments - Credit Losses, on January 1, 2020.
- 29 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER EQUITY SECURITIES
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Held for trading at fair value: | ||||||
Marketable equity securities | $ | 14,058 | 12,591 | 13,573 | 27,440 | 24,436 |
Not held for trading: | ||||||
Fair value: | ||||||
Marketable equity securities (1) | 2,412 | 6,426 | 7,708 | 6,481 | 6,639 | |
Nonmarketable equity securities | 8,583 | 8,322 | 6,895 | 8,015 | 7,293 | |
Total equity securities at fair value | 10,995 | 14,748 | 14,603 | 14,496 | 13,932 | |
Equity method: | ||||||
Low-income housing tax credit investments | 11,295 | 11,294 | 11,290 | 11,343 | 11,068 | |
Private equity | 2,841 | 3,351 | 3,351 | 3,459 | 3,425 | |
Tax-advantaged renewable energy | 4,142 | 3,940 | 3,991 | 3,811 | 3,143 | |
New market tax credit and other | 356 | 377 | 387 | 387 | 390 | |
Total equity method | 18,634 | 18,962 | 19,019 | 19,000 | 18,026 | |
Other: | ||||||
Federal Reserve Bank stock and other at cost (2) | 3,585 | 3,794 | 4,512 | 4,790 | 5,021 | |
Private equity (3) | 3,897 | 2,399 | 2,340 | 2,515 | 2,469 | |
Total equity securities not held for trading | 37,111 | 39,903 | 40,474 | 40,801 | 39,448 | |
Total equity securities | $ | 51,169 | 52,494 | 54,047 | 68,241 | 63,884 |
- Includes $206 million, $191 million, $3.1 billion, $3.8 billion and $3.5 billion at September 30, June 30 and March 31, 2020, and December 31 and September 30, 2019, respectively, related to securities held as economic hedges of our deferred compensation plan liabilities. In second quarter 2020, we entered into arrangements to transition our economic hedges of our deferred compensation plan liabilities from equity securities to derivative instruments.
- Includes $3.5 billion, $3.8 billion, $4.5 billion, $4.8 billion and $5.0 billion at September 30, June 30 and March 31, 2020, and December 31 and September 30, 2019, respectively, related to investments in Federal Reserve Bank and Federal Home Loan Bank stock.
- Represents nonmarketable equity securities accounted for under the measurement alternative.
- 30 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER LOANS
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Commercial: | ||||||
Commercial and industrial | $ | 320,913 | 350,116 | 405,020 | 354,125 | 350,875 |
Real estate mortgage | 121,910 | 123,967 | 122,767 | 121,824 | 121,936 | |
Real estate construction | 22,519 | 21,694 | 20,812 | 19,939 | 19,921 | |
Lease financing | 16,947 | 17,410 | 19,136 | 19,831 | 19,600 | |
Total commercial | 482,289 | 513,187 | 567,735 | 515,719 | 512,332 | |
Consumer: | ||||||
Real estate 1-4 family first mortgage | 294,990 | 277,945 | 292,920 | 293,847 | 290,604 | |
Real estate 1-4 family junior lien mortgage | 25,162 | 26,839 | 28,527 | 29,509 | 30,838 | |
Credit card | 36,021 | 36,018 | 38,582 | 41,013 | 39,629 | |
Automobile | 48,450 | 48,808 | 48,568 | 47,873 | 46,738 | |
Other revolving credit and installment | 33,170 | 32,358 | 33,511 | 34,304 | 34,774 | |
Total consumer | 437,793 | 421,968 | 442,108 | 446,546 | 442,583 | |
Total loans | $ | 920,082 | 935,155 | 1,009,843 | 962,265 | 954,915 |
Our non-U.S. loans are reported by respective class of financing receivable in the table above. Substantially all of our non-U.S. loan portfolio is commercial loans. The following table presents total non-U.S. commercial loans outstanding by class of financing receivable.
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Non-U.S. commercial loans: | ||||||
Commercial and industrial | $ | 61,594 | 67,015 | 78,753 | 70,494 | 64,418 |
Real estate mortgage | 6,228 | 6,460 | 6,309 | 7,004 | 7,056 | |
Real estate construction | 1,898 | 1,697 | 1,478 | 1,434 | 1,262 | |
Lease financing | 1,156 | 1,146 | 1,120 | 1,220 | 1,197 | |
Total non-U.S. commercial loans | $ | 70,876 | 76,318 | 87,660 | 80,152 | 73,933 |
- 31 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Nonaccrual loans: | ||||||
Commercial: | ||||||
Commercial and industrial | $ | 2,834 | 2,896 | 1,779 | 1,545 | 1,539 |
Real estate mortgage | 1,343 | 1,217 | 944 | 573 | 669 | |
Real estate construction | 34 | 34 | 21 | 41 | 32 | |
Lease financing | 187 | 138 | 131 | 95 | 72 | |
Total commercial | 4,398 | 4,285 | 2,875 | 2,254 | 2,312 | |
Consumer: | ||||||
Real estate 1-4 family first mortgage (1) (2) | 2,641 | 2,393 | 2,372 | 2,150 | 2,261 | |
Real estate 1-4 family junior lien mortgage (2) | 767 | 753 | 769 | 796 | 819 | |
Automobile | 176 | 129 | 99 | 106 | 110 | |
Other revolving credit and installment | 40 | 45 | 41 | 40 | 43 | |
Total consumer | 3,624 | 3,320 | 3,281 | 3,092 | 3,233 | |
Total nonaccrual loans | $ | 8,022 | 7,605 | 6,156 | 5,346 | 5,545 |
As a percentage of total loans | 0.87 % | 0.81 | 0.61 | 0.56 | 0.58 | |
Foreclosed assets: | ||||||
Government insured/guaranteed | $ | 22 | 31 | 43 | 50 | 59 |
Non-government insured/guaranteed | 134 | 164 | 209 | 253 | 378 | |
Total foreclosed assets | 156 | 195 | 252 | 303 | 437 | |
Total nonperforming assets | $ | 8,178 | 7,800 | 6,408 | 5,649 | 5,982 |
As a percentage of total loans | 0.89 % | 0.83 | 0.63 | 0.59 | 0.63 |
- Amounts are not comparative due to our adoption of ASU 2016-13,Financial Instruments - Credit Losses, on January 1, 2020. Prior to January 1, 2020, pools of individual purchased credit-impaired (PCI) loans were excluded because they continued to earn interest income from the accretable yield at the pool level. With the adoption of ASU 2016-13, the pools were discontinued and performance is based on contractual terms for individual loans.
- Real estate 1-4 family mortgage loans predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) are not placed on nonaccrual status because they are insured or guaranteed.
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Total: | $ | 11,698 | 9,739 | 7,023 | 7,285 | 7,130 |
Less: FHA insured/VA guaranteed (1) | 11,041 | 8,922 | 6,142 | 6,352 | 6,308 | |
Total, not government insured/guaranteed | $ | 657 | 817 | 881 | 933 | 822 |
By segment and class, not government insured/guaranteed: | ||||||
Commercial: | ||||||
Commercial and industrial | $ | 61 | 101 | 24 | 47 | 6 |
Real estate mortgage | 47 | 44 | 28 | 31 | 28 | |
Real estate construction | - | - | 1 | - | - | |
Total commercial | 108 | 145 | 53 | 78 | 34 | |
Consumer: | ||||||
Real estate 1-4 family first mortgage (2) | 97 | 93 | 128 | 112 | 100 | |
Real estate 1-4 family junior lien mortgage (2) | 28 | 19 | 25 | 32 | 35 | |
Credit card | 297 | 418 | 528 | 546 | 491 | |
Automobile | 50 | 54 | 69 | 78 | 75 | |
Other revolving credit and installment | 77 | 88 | 78 | 87 | 87 | |
Total consumer | 549 | 672 | 828 | 855 | 788 | |
Total, not government insured/guaranteed | $ | 657 | 817 | 881 | 933 | 822 |
- Represents loans whose repayments are largely insured by the FHA or guaranteed by the VA.
- Amounts are not comparative due to our adoption of ASU 2016-13,Financial Instruments - Credit Losses, on January 1, 2020. Total loans 90 days or more past due and still accruing exclude PCI loans of $102 million and $119 million at December 31 and September 30, 2019, respectively.
- 32 -
Wells Fargo & Company and Subsidiaries
CHANGES IN ALLOWANCE FOR CREDIT LOSSES FOR LOANS
Quarter ended September 30, Nine months ended September 30, | ||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | ||
Balance, beginning of period | $ | 20,436 | 10,603 | 10,456 | 10,707 | |
Cumulative effect from change in accounting policies (1) | - | - | (1,337) | - | ||
Allowance for purchased credit deteriorated (PCD) loans (2) | - | - | 8 | - | ||
Balance, beginning of period, adjusted | 20,436 | 10,603 | 9,127 | 10,707 | ||
Provision for credit losses | 751 | 695 | 14,149 | 2,043 | ||
Interest income on certain impaired loans (3) | (41) | (34) | (117) | (112) | ||
Loan charge-offs: | ||||||
Commercial: | ||||||
Commercial and industrial | (327) | (209) | (1,260) | (590) | ||
Real estate mortgage | (59) | (2) | (134) | (28) | ||
Real estate construction | - | - | - | (1) | ||
Lease financing | (34) | (12) | (66) | (35) | ||
Total commercial | (420) | (223) | (1,460) | (654) | ||
Consumer: | ||||||
Real estate 1-4 family first mortgage | (20) | (31) | (63) | (101) | ||
Real estate 1-4 family junior lien mortgage | (22) | (27) | (70) | (90) | ||
Credit card | (339) | (404) | (1,225) | (1,278) | ||
Automobile | (99) | (156) | (413) | (485) | ||
Other revolving credit and installment | (94) | (168) | (372) | (497) | ||
Total consumer | (574) | (786) | (2,143) | (2,451) | ||
Total loan charge-offs | (994) | (1,009) | (3,603) | (3,105) | ||
Loan recoveries: | ||||||
Commercial: | ||||||
Commercial and industrial | 53 | 62 | 132 | 151 | ||
Real estate mortgage | 3 | 10 | 13 | 26 | ||
Real estate construction | 2 | 8 | 19 | 13 | ||
Lease financing | 6 | 4 | 14 | 15 | ||
Total commercial | 64 | 84 | 178 | 205 | ||
Consumer: | ||||||
Real estate 1-4 family first mortgage | 21 | 36 | 65 | 148 | ||
Real estate 1-4 family junior lien mortgage | 36 | 49 | 101 | 140 | ||
Credit card | 94 | 85 | 276 | 258 | ||
Automobile | 68 | 80 | 194 | 266 | ||
Other revolving credit and installment | 28 | 30 | 84 | 95 | ||
Total consumer | 247 | 280 | 720 | 907 | ||
Total loan recoveries | 311 | 364 | 898 | 1,112 | ||
Net loan charge-offs | (683) | (645) | (2,705) | (1,993) | ||
Other | 8 | (6) | 17 | (32) | ||
Balance, end of period | $ | 20,471 | 10,613 | 20,471 | 10,613 | |
Components: | ||||||
Allowance for loan losses | $ | 19,463 | 9,715 | 19,463 | 9,715 | |
Allowance for unfunded credit commitments | 1,008 | 898 | 1,008 | 898 | ||
Allowance for credit losses for loans | $ | 20,471 | 10,613 | 20,471 | 10,613 | |
Net loan charge-offs (annualized) as a percentage of average total loans | 0.29 % | 0.27 | 0.38 | 0.28 | ||
Allowance for loan losses as a percentage of total loans | 2.12 | 1.02 | 2.12 | 1.02 | ||
Allowance for credit losses for loans as a percentage of total loans | 2.22 | 1.11 | 2.22 | 1.11 |
- Represents the overall decrease in our allowance for credit losses for loans as a result of our adoption of ASU 2016-13,Financial Instruments - Credit Losses, on January 1, 2020.
- Represents the allowance for credit losses for PCI loans that automatically became purchased credit-deteriorated (PCD) loans with the adoption of ASU 2016-13.
- Certain impaired loans with an allowance for credit losses calculated by discounting expected cash flows using the loan's effective interest rate over the remaining life of the loan recognize changes in the allowance for credit losses attributable to the passage of time as interest income.
- 33 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES FOR LOANS
Quarter ended | ||||||
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Balance, beginning of quarter | $ | 20,436 | 12,022 | 10,456 | 10,613 | 10,603 |
Cumulative effect from change in accounting policies (1) | - | - | (1,337) | - | - | |
Allowance for purchased credit-deteriorated (PCD) loans (2) | - | - | 8 | - | - | |
Balance, beginning of quarter, adjusted | 20,436 | 12,022 | 9,127 | 10,613 | 10,603 | |
Provision for credit losses | 751 | 9,565 | 3,833 | 644 | 695 | |
Interest income on certain loans (3) | (41) | (38) | (38) | (35) | (34) | |
Loan charge-offs: | ||||||
Commercial: | ||||||
Commercial and industrial | (327) | (556) | (377) | (212) | (209) | |
Real estate mortgage | (59) | (72) | (3) | (10) | (2) | |
Real estate construction | - | - | - | - | - | |
Lease financing | (34) | (19) | (13) | (35) | (12) | |
Total commercial | (420) | (647) | (393) | (257) | (223) | |
Consumer: | ||||||
Real estate 1-4 family first mortgage | (20) | (20) | (23) | (28) | (31) | |
Real estate 1-4 family junior lien mortgage | (22) | (18) | (30) | (28) | (27) | |
Credit card | (339) | (415) | (471) | (436) | (404) | |
Automobile | (99) | (158) | (156) | (162) | (156) | |
Other revolving credit and installment | (94) | (113) | (165) | (177) | (168) | |
Total consumer | (574) | (724) | (845) | (831) | (786) | |
Total loan charge-offs | (994) | (1,371) | (1,238) | (1,088) | (1,009) | |
Loan recoveries: | ||||||
Commercial: | ||||||
Commercial and industrial | 53 | 35 | 44 | 44 | 62 | |
Real estate mortgage | 3 | 5 | 5 | 6 | 10 | |
Real estate construction | 2 | 1 | 16 | - | 8 | |
Lease financing | 6 | 4 | 4 | 4 | 4 | |
Total commercial | 64 | 45 | 69 | 54 | 84 | |
Consumer: | ||||||
Real estate 1-4 family first mortgage | 21 | 18 | 26 | 31 | 36 | |
Real estate 1-4 family junior lien mortgage | 36 | 30 | 35 | 44 | 49 | |
Credit card | 94 | 88 | 94 | 86 | 85 | |
Automobile | 68 | 52 | 74 | 75 | 80 | |
Other revolving credit and installment | 28 | 25 | 31 | 29 | 30 | |
Total consumer | 247 | 213 | 260 | 265 | 280 | |
Total loan recoveries | 311 | 258 | 329 | 319 | 364 | |
Net loan charge-offs | (683) | (1,113) | (909) | (769) | (645) | |
Other | 8 | - | 9 | 3 | (6) | |
Balance, end of quarter | $ | 20,471 | 20,436 | 12,022 | 10,456 | 10,613 |
Components: | ||||||
Allowance for loan losses | $ | 19,463 | 18,926 | 11,263 | 9,551 | 9,715 |
Allowance for unfunded credit commitments | 1,008 | 1,510 | 759 | 905 | 898 | |
Allowance for credit losses for loans | $ | 20,471 | 20,436 | 12,022 | 10,456 | 10,613 |
Net loan charge-offs (annualized) as a percentage of average total loans | 0.29 % | 0.46 | 0.38 | 0.32 | 0.27 | |
Allowance for loan losses as a percentage of: | ||||||
Total loans | 2.12 | 2.02 | 1.12 | 0.99 | 1.02 | |
Nonaccrual loans | 243 | 249 | 183 | 179 | 175 | |
Nonaccrual loans and other nonperforming assets | 238 | 243 | 176 | 169 | 162 | |
Total net loan charge-offs (annualized) | 716 | 422 | 308 | 346 | 379 | |
Allowance for credit losses for loans as a percentage of: | ||||||
Total loans | 2.22 | 2.19 | 1.19 | 1.09 | 1.11 | |
Nonaccrual loans | 255 | 269 | 195 | 196 | 191 | |
Nonaccrual loans and other nonperforming assets | 250 | 262 | 188 | 185 | 177 |
- Represents the overall decrease in our allowance for credit losses for loans as a result of our adoption of ASU 2016-13,Financial Instruments - Credit Losses, on January 1, 2020.
- Represents the allowance for credit losses for PCI loans that automatically became PCD loans with the adoption of ASU 2016-13.
- Loans with an allowance for credit losses measured by discounting expected cash flows using the loan's effective interest rate over the remaining life of the loan recognize changes in the allowance for credit losses attributable to the passage of time as interest income.
- 34 -
Wells Fargo & Company and Subsidiaries
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES FOR LOANS
Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Jan 1, 2020 | Dec 31, 2019 (1) | |||||||||||
ACL | ACL | ACL | ACL | ACL | |||||||||||
as % | as % | as % | as % | as % | |||||||||||
($ in millions) | ACL | of loan | ACL | of loan | ACL | of loan | ACL | of loan | ACL | of loan | |||||
class | class | class | class | class | |||||||||||
Commercial: | |||||||||||||||
Commercial and industrial | $ | 7,845 | 2.44 % | $ | 8,109 | 2.32 % | $ | 4,231 | 1.04 % | $ | 2,490 | 0.70 % | $ | 3,600 | 1.02 % |
Real estate mortgage | 2,517 | 2.06 | 2,395 | 1.93 | 848 | 0.69 | 702 | 0.58 | 1,236 | 1.01 | |||||
Real estate construction | 521 | 2.31 | 484 | 2.23 | 36 | 0.17 | 42 | 0.21 | 1,079 | 5.41 | |||||
Lease financing | 659 | 3.89 | 681 | 3.91 | 164 | 0.86 | 149 | 0.75 | 330 | 1.66 | |||||
Total commercial | 11,542 | 2.39 | 11,669 | 2.27 | 5,279 | 0.93 | 3,383 | 0.66 | 6,245 | 1.21 | |||||
Consumer: | |||||||||||||||
Real estate 1-4 family first mortgage | 1,519 | 0.51 | 1,541 | 0.55 | 836 | 0.29 | 845 | 0.29 | 692 | 0.24 | |||||
Real estate 1-4 family junior lien | 710 | 2.82 | 725 | 2.70 | 125 | 0.44 | 78 | 0.26 | 247 | 0.84 | |||||
mortgage | |||||||||||||||
Credit card | 4,082 | 11.33 | 3,777 | 10.49 | 3,481 | 9.02 | 2,913 | 7.10 | 2,252 | 5.49 | |||||
Automobile | 1,225 | 2.53 | 1,174 | 2.41 | 1,016 | 2.09 | 719 | 1.50 | 459 | 0.96 | |||||
Other revolving credit and installment | 1,393 | 4.20 | 1,550 | 4.79 | 1,285 | 3.83 | 1,188 | 3.46 | 561 | 1.64 | |||||
Total consumer | 8,929 | 2.04 | 8,767 | 2.08 | 6,743 | 1.53 | 5,743 | 1.29 | 4,211 | 0.94 | |||||
Total | $ | 20,471 | 2.22 % | $ | 20,436 | 2.19 % | $ | 12,022 | 1.19 % | $ | 9,126 | 0.95 % | $ | 10,456 | 1.09 % |
- Amounts are not comparative due to our adoption of ASU 2016-13,Financial Instruments - Credit Losses, on January 1, 2020.
- 35 -
Wells Fargo & Company and Subsidiaries
TANGIBLE COMMON EQUITY
We also evaluate our business based on certain ratios that utilize tangible common equity. Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, goodwill, certain identifiable intangible assets (other than mortgage servicing rights (MSRs)) and goodwill and other intangibles on nonmarketable equity securities, net of applicable deferred taxes. These tangible common equity ratios are as follows:
- Tangible book value per common share, which represents tangible common equity divided by common shares outstanding; and
- Return on average tangible common equity (ROTCE), which represents our annualized earnings contribution as a percentage of tangible common equity.
The methodology of determining tangible common equity may differ among companies. Management believes that tangible book value per common share and return on average tangible common equity, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the Company's use of equity.
The tables below provide a reconciliation of these non-GAAP financial measures to GAAP financial measures.
(in millions, except ratios) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |||||
2020 | 2020 | 2020 | 2019 | 2019 | ||||||
Tangible book value per common share: | ||||||||||
Total equity | $ | 182,032 | 180,122 | 183,330 | 187,984 | 194,416 | ||||
Adjustments: | ||||||||||
Preferred stock | (21,098) | (21,098) | (21,347) | (21,549) | (21,549) | |||||
Additional paid-in capital on preferred stock | 159 | 159 | 140 | (71) | (71) | |||||
Unearned ESOP shares | 875 | 875 | 1,143 | 1,143 | 1,143 | |||||
Noncontrolling interests | (859) | (736) | (612) | (838) | (1,112) | |||||
Total common stockholders' equity | (A) | 161,109 | 159,322 | 162,654 | 166,669 | 172,827 | ||||
Adjustments: | ||||||||||
Goodwill | (26,387) | (26,385) | (26,381) | (26,390) | (26,388) | |||||
Certain identifiable intangible assets (other than MSRs) | (366) | (389) | (413) | (437) | (465) | |||||
Goodwill and other intangibles on nonmarketable equity | (2,019) | (2,050) | (1,894) | (2,146) | (2,295) | |||||
securities (included in other assets) | ||||||||||
Applicable deferred taxes related to goodwill and other | 842 | 831 | 821 | 810 | 802 | |||||
intangible assets (1) | ||||||||||
Tangible common equity | (B) | $ | 133,179 | 131,329 | 134,787 | 138,506 | 144,481 | |||
Common shares outstanding | (C) | 4,132.5 | 4,119.6 | 4,096.4 | 4,134.4 | 4,269.1 | ||||
Book value per common share | (A)/(C) | $ | 38.99 | 38.67 | 39.71 | 40.31 | 40.48 | |||
Tangible book value per common share | (B)/(C) | 32.23 | 31.88 | 32.90 | 33.50 | 33.84 | ||||
Quarter ended | Nine months ended | |||||||||
(in millions, except ratios) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | Sep 30, | Sep 30, | |||
2020 | 2020 | 2020 | 2019 | 2019 | 2020 | 2019 | ||||
Return on average tangible common equity: | ||||||||||
Net income applicable to common stock | (A) | $ | 1,720 | (2,694) | 42 | 2,546 | 4,037 | (932) | 15,392 | |
Average total equity | 182,850 | 184,108 | 188,170 | 192,393 | 200,095 | 185,035 | 199,383 | |||
Adjustments: | ||||||||||
Preferred stock | (21,098) | (21,344) | (21,794) | (21,549) | (22,325) | (21,411) | (22,851) | |||
Additional paid-in capital on preferred stock | 158 | 140 | 135 | (71) | (78) | 145 | (84) | |||
Unearned ESOP shares | 875 | 1,140 | 1,143 | 1,143 | 1,290 | 1,052 | 1,361 | |||
Noncontrolling interests | (761) | (643) | (785) | (945) | (1,065) | (730) | (968) | |||
Average common stockholders' equity | (B) | 162,024 | 163,401 | 166,869 | 170,971 | 177,917 | 164,091 | 176,841 | ||
Adjustments: | ||||||||||
Goodwill | (26,388) | (26,384) | (26,387) | (26,389) | (26,413) | (26,386) | (26,416) | |||
Certain identifiable intangible assets (other than | (378) | (402) | (426) | (449) | (477) | (401) | (508) | |||
MSRs) | ||||||||||
Goodwill and other intangibles on nonmarketable | (2,045) | (1,922) | (2,152) | (2,223) | (2,159) | (2,040) | (2,158) | |||
equity securities (included in other assets) | ||||||||||
Applicable deferred taxes related to goodwill and | 838 | 828 | 818 | 807 | 797 | 828 | 787 | |||
other intangible assets (1) | ||||||||||
Average tangible common equity | (C) | $ 134,051 | 135,521 | 138,722 | 142,717 | 149,665 | 136,092 | 148,546 | ||
Return on average common stockholders' equity (ROE) | (A)/(B) | 4.22 % | (6.63) | 0.10 | 5.91 | 9.00 | (0.76) | 11.64 | ||
(annualized) | ||||||||||
Return on average tangible common equity (ROTCE) | (A)/(C) | 5.10 | (8.00) | 0.12 | 7.08 | 10.70 | (0.91) | 13.85 | ||
(annualized) |
- 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.
- 36 -
Wells Fargo & Company and Subsidiaries
COMMON EQUITY TIER 1 UNDER BASEL III - STANDARDIZED APPROACH (1)
Estimated | |||||||
(in billions, except ratio) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | ||
2020 | 2020 | 2020 | 2019 | 2019 | |||
Total equity | $ | 182.0 | 180.1 | 183.3 | 188.0 | 194.4 | |
Adjustments: | |||||||
Preferred stock | (21.1) | (21.1) | (21.3) | (21.5) | (21.5) | ||
Additional paid-in capital on preferred stock | 0.1 | 0.1 | 0.1 | (0.1) | (0.1) | ||
Unearned ESOP shares | 0.9 | 0.9 | 1.1 | 1.1 | 1.1 | ||
Noncontrolling interests | (0.9) | (0.7) | (0.6) | (0.8) | (1.1) | ||
Total common stockholders' equity | 161.0 | 159.3 | 162.6 | 166.7 | 172.8 | ||
Adjustments: | |||||||
Goodwill | (26.4) | (26.4) | (26.4) | (26.4) | (26.4) | ||
Certain identifiable intangible assets (other than MSRs) | (0.4) | (0.4) | (0.4) | (0.4) | (0.5) | ||
Goodwill and other intangibles on nonmarketable equity securities (included | (2.0) | (2.1) | (1.9) | (2.1) | (2.3) | ||
in other assets) | |||||||
Applicable deferred taxes related to goodwill and other intangible assets (2) | 0.8 | 0.8 | 0.8 | 0.8 | 0.8 | ||
CECL transition provision (3) | 1.9 | 1.9 | - | - | - | ||
Other | - | (0.1) | - | 0.2 | 0.3 | ||
Common Equity Tier 1 under Basel III | (A) | 134.9 | 133.0 | 134.7 | 138.8 | 144.7 | |
Total risk-weighted assets (RWAs) anticipated under Basel III (4) | (B) | $ | 1,184.4 | 1,213.1 | 1,262.8 | 1,245.8 | 1,246.2 |
Common Equity Tier 1 to total RWAs anticipated under Basel III (4) | (A)/(B) | 11.4 % | 11.0 | 10.7 | 11.1 | 11.6 |
- 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. The rules are being phased in through the end of 2021. The Basel III capital requirements for calculating CET1 and tier 1 capital, along with RWAs, are fully phased-in.
- 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.
- In second quarter 2020, the Company elected to apply a modified transition provision issued by federal banking regulators related to the impact of the current expected credit loss (CECL) accounting standard on regulatory capital. The rule permits certain banking organizations to exclude from regulatory capital the initial adoption impact of CECL, plus 25% of the cumulative changes in the allowance for credit losses (ACL) under CECL for each period until December 31, 2021, followed by a three-yearphase-out of the benefits. The impact of the CECL transition provision on our regulatory capital at September 30, 2020, was an increase in capital of $1.9 billion, reflecting a $991 million (post-tax) increase in capital recognized upon our initial adoption of CECL, offset by 25% of the $11.5 billion increase in our ACL under CECL from January 1, 2020, through September 30, 2020.
- The final Basel III capital rules provide for two capital frameworks: the Standardized Approach and the Advanced Approach applicable to certain institutions. Accordingly, in the assessment of our capital adequacy, we must report the lower of our CET1, tier 1 and total capital ratios calculated under the Standardized Approach and under the Advanced Approach. Based on preliminary estimates, our CET1 ratio as of September 30, 2020, was lower under the Basel III Standardized Approach RWAs. Our CET1 ratio for June 30 and March 31, 2020, and December 31 and September 30, 2019, was lower under the Basel III Standardized Approach RWAs.
- 37 -
Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
(income/expense in millions, | Community | Wholesale | Wealth and | Consolidated | |||||||||||
Investment | Other (2) | ||||||||||||||
average balances in billions) | Banking | Banking | Management | Company | |||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||
Quarter ended September 30, | |||||||||||||||
Net interest income (3) | $ | 5,587 | 6,769 | 3,481 | 4,382 | 771 | 989 | (471) | (515) | 9,368 | 11,625 | ||||
Provision (reversal of provision) for | 556 | 608 | 219 | 92 | (9) | 3 | 3 | (8) | 769 | 695 | |||||
credit losses | |||||||||||||||
Noninterest income | 5,135 | 4,470 | 2,113 | 2,560 | 3,023 | 4,152 | (777) | (797) | 9,494 | 10,385 | |||||
Noninterest expense | 8,947 | 8,766 | 4,013 | 3,889 | 3,184 | 3,431 | (915) | (887) | 15,229 | 15,199 | |||||
Income (loss) before income tax expense | 1,219 | 1,865 | 1,362 | 2,961 | 619 | 1,707 | (336) | (417) | 2,864 | 6,116 | |||||
(benefit) | |||||||||||||||
Income tax expense (benefit) (4) | 703 | 667 | (127) | 315 | 153 | 426 | (84) | (104) | 645 | 1,304 | |||||
Net income (loss) before noncontrolling | 516 | 1,198 | 1,489 | 2,646 | 466 | 1,281 | (252) | (313) | 2,219 | 4,812 | |||||
interests | |||||||||||||||
Less: Net income (loss) from | 180 | 199 | 1 | 2 | 3 | 1 | - | - | 184 | 202 | |||||
noncontrolling interests | |||||||||||||||
Net income (loss) | $ | 336 | 999 | 1,488 | 2,644 | 463 | 1,280 | (252) | (313) | 2,035 | 4,610 | ||||
Average loans | $ | 457.6 | 459.0 | 455.1 | 474.3 | 79.8 | 75.9 | (60.8) | (59.4) | 931.7 | 949.8 | ||||
Average assets | 1,119.8 | 1,033.9 | 801.4 | 869.2 | 88.2 | 84.7 | (61.7) | (60.4) | 1,947.7 | 1,927.4 | |||||
Average deposits | 881.7 | 789.7 | 418.8 | 422.0 | 175.3 | 142.4 | (76.8) | (62.7) | 1,399.0 | 1,291.4 | |||||
Nine months ended September 30, | |||||||||||||||
Net interest income (3) | $ | 18,073 | 21,083 | 11,508 | 13,451 | 2,374 | 3,127 | (1,395) | (1,630) | 30,560 | 36,031 | ||||
Provision (reversal of provision) for | 5,652 | 1,797 | 8,535 | 254 | 256 | 6 | (135) | (14) | 14,308 | 2,043 | |||||
credit losses | |||||||||||||||
Noninterest income | 10,911 | 13,711 | 6,466 | 7,667 | 8,795 | 10,143 | (2,317) | (2,349) | 23,855 | 29,172 | |||||
Noninterest expense | 24,409 | 23,667 | 11,739 | 11,609 | 9,440 | 9,980 | (2,760) | (2,692) | 42,828 | 42,564 | |||||
Income (loss) before income tax expense | (1,077) | 9,330 | (2,300) | 9,255 | 1,473 | 3,284 | (817) | (1,273) | (2,721) | 20,596 | |||||
(benefit) | |||||||||||||||
Income tax expense (benefit) (4) | (1,319) | 1,929 | (1,959) | 1,049 | 369 | 819 | (204) | (318) | (3,113) | 3,479 | |||||
Net income (loss) before noncontrolling | 242 | 7,401 | (341) | 8,206 | 1,104 | 2,465 | (613) | (955) | 392 | 17,117 | |||||
interests | |||||||||||||||
Less: Net income (loss) from | 82 | 432 | 3 | 3 | (2) | 6 | - | - | 83 | 441 | |||||
noncontrolling interests | |||||||||||||||
Net income (loss) | $ | 160 | 6,969 | (344) | 8,203 | 1,106 | 2,459 | (613) | (955) | 309 | 16,676 | ||||
Average loans | $ | 456.5 | 458.3 | 481.2 | 474.9 | 79.0 | 75.1 | (60.8) | (59.2) | 955.9 | 949.1 | ||||
Average assets | 1,073.1 | 1,024.8 | 849.7 | 855.4 | 88.0 | 83.9 | (61.7) | (60.2) | 1,949.1 | 1,903.9 | |||||
Average deposits | 843.0 | 777.7 | 438.8 | 414.1 | 166.2 | 146.3 | (73.4) | (63.9) | 1,374.6 | 1,274.2 |
- 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.
- 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.
- 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 as well as interest credits for any funding of a segment available to be provided to other segments. The cost of liabilities includes actual interest expense on segment liabilities as well as funding charges for any funding provided from other segments.
- Income tax expense (benefit) for our Wholesale Banking operating segment included income tax credits related to low-income housing and renewable energy investments of$469 million and $1.4 billion for the third quarter and first nine months of 2020, respectively, and $422 million and $1.3 billion for the third quarter and first nine months of 2019, respectively.
- 38 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)
Quarter ended | ||||||
(income/expense in millions, average balances in billions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
COMMUNITY BANKING | ||||||
Net interest income (2) | $ | 5,587 | 5,699 | 6,787 | 6,527 | 6,769 |
Provision for credit losses | 556 | 3,378 | 1,718 | 522 | 608 | |
Noninterest income | 5,135 | 3,067 | 2,709 | 3,995 | 4,470 | |
Noninterest expense | 8,947 | 8,346 | 7,116 | 9,029 | 8,766 | |
Income (loss) before income tax expense (benefit) | 1,219 | (2,958) | 662 | 971 | 1,865 | |
Income tax expense (benefit) | 703 | (2,666) | 644 | 497 | 667 | |
Net income (loss) before noncontrolling interests | 516 | (292) | 18 | 474 | 1,198 | |
Less: Net income (loss) from noncontrolling interests | 180 | 39 | (137) | 45 | 199 | |
Segment net income (loss) | $ | 336 | (331) | 155 | 429 | 999 |
Average loans | $ | 457.6 | 449.3 | 462.6 | 462.5 | 459.0 |
Average assets | 1,119.8 | 1,059.8 | 1,039.2 | 1,039.3 | 1,033.9 | |
Average deposits | 881.7 | 848.5 | 798.6 | 794.6 | 789.7 | |
WHOLESALE BANKING | ||||||
Net interest income (2) | $ | 3,481 | 3,891 | 4,136 | 4,248 | 4,382 |
Provision for credit losses | 219 | 6,028 | 2,288 | 124 | 92 | |
Noninterest income | 2,113 | 2,672 | 1,681 | 2,311 | 2,560 | |
Noninterest expense | 4,013 | 3,963 | 3,763 | 3,743 | 3,889 | |
Income (loss) before income tax expense (benefit) | 1,362 | (3,428) | (234) | 2,692 | 2,961 | |
Income tax expense (benefit) (3) | (127) | (1,286) | (546) | 197 | 315 | |
Net income (loss) before noncontrolling interests | 1,489 | (2,142) | 312 | 2,495 | 2,646 | |
Less: Net income from noncontrolling interests | 1 | 1 | 1 | 2 | 2 | |
Segment net income (loss) | $ | 1,488 | (2,143) | 311 | 2,493 | 2,644 |
Average loans | $ | 455.1 | 504.3 | 484.5 | 476.5 | 474.3 |
Average assets | 801.4 | 863.2 | 885.0 | 877.6 | 869.2 | |
Average deposits | 418.8 | 441.2 | 456.6 | 447.4 | 422.0 | |
WEALTH AND INVESTMENT MANAGEMENT | ||||||
Net interest income (2) | $ | 771 | 736 | 867 | 910 | 989 |
Provision (reversal of provision) for credit losses | (9) | 257 | 8 | (1) | 3 | |
Noninterest income | 3,023 | 2,924 | 2,848 | 3,161 | 4,152 | |
Noninterest expense | 3,184 | 3,153 | 3,103 | 3,729 | 3,431 | |
Income before income tax expense | 619 | 250 | 604 | 343 | 1,707 | |
Income tax expense | 153 | 63 | 153 | 85 | 426 | |
Net income before noncontrolling interests | 466 | 187 | 451 | 258 | 1,281 | |
Less: Net income (loss) from noncontrolling interests | 3 | 7 | (12) | 4 | 1 | |
Segment net income | $ | 463 | 180 | 463 | 254 | 1,280 |
Average loans | $ | 79.8 | 78.7 | 78.5 | 77.1 | 75.9 |
Average assets | 88.2 | 87.7 | 88.1 | 85.5 | 84.7 | |
Average deposits | 175.3 | 171.8 | 151.4 | 145.0 | 142.4 | |
OTHER (4) | ||||||
Net interest income (2) | $ | (471) | (446) | (478) | (485) | (515) |
Provision (reversal of provision) for credit losses | 3 | (129) | (9) | (1) | (8) | |
Noninterest income | (777) | (707) | (833) | (807) | (797) | |
Noninterest expense | (915) | (911) | (934) | (887) | (887) | |
Loss before income tax benefit | (336) | (113) | (368) | (404) | (417) | |
Income tax benefit | (84) | (28) | (92) | (101) | (104) | |
Net loss before noncontrolling interests | (252) | (85) | (276) | (303) | (313) | |
Less: Net income from noncontrolling interests | - | - | - | - | - | |
Other net loss | $ | (252) | (85) | (276) | (303) | (313) |
Average loans | $ | (60.8) | (61.0) | (60.6) | (59.6) | (59.4) |
Average assets | (61.7) | (61.8) | (61.6) | (60.6) | (60.4) | |
Average deposits | (76.8) | (74.8) | (68.6) | (65.1) | (62.7) | |
CONSOLIDATED COMPANY | ||||||
Net interest income (2) | $ | 9,368 | 9,880 | 11,312 | 11,200 | 11,625 |
Provision for credit losses | 769 | 9,534 | 4,005 | 644 | 695 | |
Noninterest income | 9,494 | 7,956 | 6,405 | 8,660 | 10,385 | |
Noninterest expense | 15,229 | 14,551 | 13,048 | 15,614 | 15,199 | |
Income (loss) before income tax expense (benefit) | 2,864 | (6,249) | 664 | 3,602 | 6,116 | |
Income tax expense (benefit) | 645 | (3,917) | 159 | 678 | 1,304 | |
Net income (loss) before noncontrolling interests | 2,219 | (2,332) | 505 | 2,924 | 4,812 | |
Less: Net income (loss) from noncontrolling interests | 184 | 47 | (148) | 51 | 202 | |
Wells Fargo net income (loss) | $ | 2,035 | (2,379) | 653 | 2,873 | 4,610 |
Average loans | $ | 931.7 | 971.3 | 965.0 | 956.5 | 949.8 |
Average assets | 1,947.7 | 1,948.9 | 1,950.7 | 1,941.8 | 1,927.4 | |
Average deposits | 1,399.0 | 1,386.7 | 1,338.0 | 1,321.9 | 1,291.4 |
- 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.
- 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 as well as interest credits for any funding of a segment available to be provided to other segments. The cost of liabilities includes actual interest expense on segment liabilities as well as funding charges for any funding provided from other segments.
- Income tax expense (benefit) for our Wholesale Banking operating segment included income tax credits related to low-income housing and renewable energy investments of$469 million, $465 million, $491 million, $478 million, and $422 million for the quarters ended September 30, June 30 and March 31, 2020, and December 31 and September 30, 2019, respectively.
- Includes the elimination of certain items that are included in more than one business segment, most of which represents products and services for Wealth and Investment Management customers served through Community Banking distribution channels.
- 39 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
Quarter ended | ||||||
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
MSRs measured using the fair value method: | ||||||
Fair value, beginning of quarter | $ | 6,819 | 8,126 | 11,517 | 11,072 | 12,096 |
Servicing from securitizations or asset transfers (1) | 351 | 462 | 461 | 654 | 538 | |
Sales and other (2) | - | (1) | (31) | - | (4) | |
Net additions | 351 | 461 | 430 | 654 | 534 | |
Changes in fair value: | ||||||
Due to changes in valuation inputs or assumptions: | ||||||
Mortgage interest rates (3) | (294) | (600) | (3,022) | 405 | (718) | |
Servicing and foreclosure costs (4) | 157 | (349) | (73) | 45 | 13 | |
Discount rates | - | - | 27 | (34) | 188 | |
Prepayment estimates and other (5) | (80) | (182) | (189) | (54) | (445) | |
Net changes in valuation inputs or assumptions | (217) | (1,131) | (3,257) | 362 | (962) | |
Changes due to collection/realization of expected cash flows (6) | (598) | (637) | (564) | (571) | (596) | |
Total changes in fair value | (815) | (1,768) | (3,821) | (209) | (1,558) | |
Fair value, end of quarter | $ | 6,355 | 6,819 | 8,126 | 11,517 | 11,072 |
- Includes impacts associated with exercising cleanup calls on securitizations and our right to repurchase delinquent loans from Government National Mortgage Association (GNMA) loan securitization pools. MSRs may increase upon repurchase due to servicing liabilities associated with these delinquent GNMA loans.
- Includes sales and transfers of MSRs, which can result in an increase in MSRs if related to portfolios with servicing liabilities.
- Includes prepayment speed changes as well as other valuation changes due to changes in mortgage interest rates.
- Includes costs to service and unreimbursed foreclosure costs.
- Represents other changes in inputs or assumptions, including prepayment speed estimation changes that are independent of mortgage interest rate changes.
- Represents the reduction in the MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.
Quarter ended | ||||||
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Amortized MSRs: | ||||||
Balance, beginning of quarter | $ | 1,361 | 1,406 | 1,430 | 1,397 | 1,407 |
Purchases | 6 | 7 | 8 | 35 | 25 | |
Servicing from securitizations or asset transfers | 32 | 48 | 34 | 69 | 33 | |
Amortization (1) | (74) | (100) | (66) | (71) | (68) | |
Balance, end of quarter | $ | 1,325 | 1,361 | 1,406 | 1,430 | 1,397 |
Fair value of amortized MSRs: | ||||||
Beginning of quarter | $ | 1,401 | 1,490 | 1,872 | 1,813 | 1,897 |
End of quarter | 1,400 | 1,401 | 1,490 | 1,872 | 1,813 |
- Includes recorded impairment of $7 million and $30 million, and an associated valuation allowance of $37 million and $30 million, for the third and second quarters of 2020, respectively.
- 40 -
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
Quarter ended | |||||||
(in millions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | ||
2020 | 2020 | 2020 | 2019 | 2019 | |||
Servicing income, net: | |||||||
Servicing fees (1) | $ | 717 | 644 | 758 | 780 | 806 | |
Amortization (2) | (74) | (100) | (66) | (71) | (68) | ||
Changes due to collection/realization of expected cash flows (3) | (A) | (598) | (637) | (564) | (571) | (596) | |
Net servicing fees | 45 | (93) | 128 | 138 | 142 | ||
Changes in fair value of MSRs due to valuation inputs or assumptions (4) | (B) | (217) | (1,131) | (3,257) | 362 | (962) | |
Net derivative gains (losses) from economic hedges of MSRs | 513 | 535 | 3,400 | (477) | 678 | ||
Market-related valuation changes to MSRs, net of hedge results | 296 | (596) | 143 | (115) | (284) | ||
Total servicing income (loss), net | $ | 341 | (689) | 271 | 23 | (142) | |
Total changes in fair value of MSRs carried at fair value | (A)+(B) | $ | (815) | (1,768) | (3,821) | (209) | (1,558) |
- Includes contractually specified servicing fees, late charges and other ancillary revenues, net of unreimbursed direct servicing costs.
- Includes recorded impairment of $7 million and $30 million, and an associated valuation allowance of $37 million and $30 million, for the third and second quarters of 2020, respectively.
- Represents the reduction in the MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.
- Refer to the changes in fair value MSRs table on the previous page for more detail.
(in billions) | Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |
2020 | 2020 | 2020 | 2019 | 2019 | ||
Managed servicing portfolio (1): | ||||||
Residential mortgage servicing: | ||||||
Serviced and subserviced for others | $ | 920 | 992 | 1,041 | 1,065 | 1,086 |
Owned loans serviced | 342 | 335 | 341 | 343 | 346 | |
Total residential servicing | 1,262 | 1,327 | 1,382 | 1,408 | 1,432 | |
Commercial mortgage servicing: | ||||||
Serviced and subserviced for others | 579 | 578 | 573 | 575 | 560 | |
Owned loans serviced | 123 | 125 | 124 | 124 | 122 | |
Total commercial servicing | 702 | 703 | 697 | 699 | 682 | |
Total managed servicing portfolio | $ | 1,964 | 2,030 | 2,079 | 2,107 | 2,114 |
Total serviced for others, excluding subserviced for others | $ | 1,488 | 1,558 | 1,602 | 1,629 | 1,634 |
Ratio of MSRs to related loans serviced for others | 0.52 % | 0.52 | 0.60 | 0.79 | 0.76 | |
Weighted-average note rate (mortgage loans serviced for others) | 4.13 | 4.13 | 4.20 | 4.25 | 4.29 |
- 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.
- 41 -
Wells Fargo & Company and Subsidiaries
SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA
Quarter ended | ||||||||
Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | ||||
2020 | 2020 | 2020 | 2019 | 2019 | ||||
Net gains on mortgage loan origination/sales activities (in millions): | ||||||||
Residential | (A) | $ | 1,039 | 866 | 360 | 503 | 461 | |
Commercial | 45 | 83 | 23 | 101 | 106 | |||
Residential pipeline and unsold/repurchased loan management (1) | 165 | 57 | (275) | 156 | 41 | |||
Total | $ | 1,249 | 1,006 | 108 | 760 | 608 | ||
Application data (in billions): | ||||||||
Wells Fargo first mortgage quarterly applications | $ | 88 | 84 | 108 | 72 | 85 | ||
Refinances as a percentage of applications | 56 % | 60 | 65 | 51 | 50 | |||
Wells Fargo first mortgage unclosed pipeline, at quarter end | $ | 44 | 50 | 62 | 33 | 44 | ||
Residential real estate originations: | ||||||||
Purchases as a percentage of originations | 49 % | 38 | 48 | 50 | 60 | |||
Refinances as a percentage of originations | 51 | 62 | 52 | 50 | 40 | |||
Total | 100 % | 100 | 100 | 100 | 100 | |||
Wells Fargo first mortgage loans (in billions): | ||||||||
Retail | $ | 33 | 30 | 23 | 27 | 27 | ||
Correspondent | 29 | 28 | 25 | 33 | 30 | |||
Other (2) | - | 1 | - | - | 1 | |||
Total quarter-to-date | $ | 62 | 59 | 48 | 60 | 58 | ||
Held-for-sale | (B) | $ | 48 | 43 | 33 | 42 | 38 | |
Held-for-investment | 14 | 16 | 15 | 18 | 20 | |||
Total quarter-to-date | $ | 62 | 59 | 48 | 60 | 58 | ||
Total year-to-date | $ | 169 | 107 | 48 | 204 | 144 | ||
Production margin on residential held-for-sale mortgage originations | (A)/(B) | 2.16 | % | 2.04 | 1.08 | 1.21 | 1.21 |
- Predominantly includes the results of sales of modified GNMA loans, interest rate management activities and changes in the estimate of our liability for mortgage loan repurchase losses.
- Consists of home equity loans and lines.
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Wells Fargo & Company published this content on 14 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 October 2020 12:49:07 UTC