News Column

Wells Fargo Reports $5.7 Billion in Net Income

July 11, 2014

Diluted EPS of $1.01, Up 3 Percent From Prior Year

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

  • Continued strong financial results:
  • Net income of $5.7 billion, up 4 percent from second quarter 2013
  • Diluted earnings per share (EPS) of $1.01, up 3 percent
  • Revenue of $21.1 billion, compared with $21.4 billion
  • Linked-quarter revenue up $441 million
  • Noninterest expense of $12.2 billion, down $61 million
  • Return on assets (ROA) of 1.47 percent and return on equity (ROE) of 13.40 percent
  • Strong loan and deposit growth:
  • Total average loans of $831.0 billion, up $32.7 billion, or 4 percent, from second quarter 20131
  • Quarter-end loans of $828.9 billion, up $29.1 billion, or 4 percent1
  • Quarter-end core loans of $763.6 billion, up $51.3 billion, or 7 percent1,2
  • Total average deposits of $1.1 trillion, up $91.7 billion, or 9 percent
  • Continued improvement in credit quality:
  • Net charge-offs of $717 million, down $435 million from second quarter 2013
  • Net charge-off rate of 0.35 percent (annualized), down from 0.58 percent
  • Nonperforming assets down $3.0 billion, or 14 percent
  • $500 million reserve release3 due to improvements in credit performance
  • Higher return to shareholders while maintaining strong capital levels4:
  • Increased quarterly common stock dividend to $0.35 per share from $0.30, or 17 percent, in the second quarter
  • Period-end common shares outstanding down 15.8 million in second quarter on 39.4 million of purchases
  • Also entered into a forward repurchase transaction for an additional estimated 19.4 million shares expected to settle in third quarter 2014
  • Common Equity Tier 1 ratio under Basel III (General Approach) of 11.31 percent at June 30, 2014
  • Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) of 10.09 percent

    1

     

    As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the SUMMARY FINANCIAL DATA table for more information.

    2

    See Loans Breakdown table for more information on core and non-strategic/liquidating loan portfolios.

    3 Reserve release represents the amount by which net charge-offs exceed the provision for credit losses.
    4

    See FIVE QUARTER RISK-BASED CAPITAL COMPONENTS and COMMON EQUITY TIER 1 UNDER BASEL III tables for more information on Common Equity Tier 1. Common Equity Tier 1 (Advanced Approach, fully phased-in) is estimated based on final rules adopted July 2, 2013, by the Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act.

     

    Selected Financial Information

      Quarter ended
    June 30,   Mar. 31,   June 30,
        2014     2014   2013
    Earnings
    Diluted earnings per common share $1.01 1.05 0.98
    Wells Fargo net income (in billions) 5.73 5.89 5.52
    Return on assets (ROA) (1) 1.47% 1.57 1.55
    Return on equity (ROE) 13.40 14.35 14.02
     
    Asset Quality
    Net charge-offs (annualized) as a % of avg. total loans 0.35 0.41 0.58
    Allowance for credit losses as a % of total loans (1) 1.67 1.74 2.08
    Allowance for credit losses as a % of annualized net charge-offs 481 431 360
     
    Other
    Revenue (in billions) $21.1 20.6 21.4
    Efficiency ratio 57.9% 57.9 57.3
    Average loans (in billions) (1) $831.0 823.8 798.4
    Average core deposits (in billions) 991.7 973.8 936.1
    Net interest margin (1) 3.15% 3.20 3.47
                   
     

    (1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the SUMMARY FINANCIAL DATA table for more information.

     


    Wells Fargo & Company (NYSE:WFC) reported net income of $5.7 billion, or $1.01 per diluted common share, for second quarter 2014, up from $5.5 billion, or $0.98 per share, for second quarter 2013. For the first six months of 2014, net income was $11.6 billion, or $2.06 per share, up from $10.7 billion, or $1.90 per share, for the same period in 2013.

    “Our strong results in the second quarter reflected the benefit of our diversified business model and our long-term focus on meeting the financial needs of our customers,” said Chairman and CEO John Stumpf. “By continuing to serve customers we grew loans, increased deposits and deepened our relationships. Our results also reflected strong credit quality driven by an improved economy, especially the housing market, and our continued risk discipline. We are committed to both maintaining strong capital levels and returning more capital to our shareholders. In the second quarter we increased our common stock dividend 17 percent and repurchased 39.4 million shares. We remain dedicated to building long-term shareholder value, and I am optimistic about the future as we continue to focus on meeting the needs of our consumer, small business and commercial customers.”

    Chief Financial Officer John Shrewsberry said, “The primary drivers of Wells Fargo’s business remained strong in the second quarter, with broad-based loan growth, increased deposit balances, and improved credit quality. Revenue increased linked quarter as the Company grew both net interest income and noninterest income, a reflection of Wells Fargo’s diversified business model. These solid fundamental business results led to an increase in pre-tax income linked quarter. Net income was down as the Company’s effective tax rate was lower in the first quarter due to a $423 million discrete tax benefit.”

    Revenue

    Revenue was $21.1 billion, up from $20.6 billion in first quarter 2014, reflecting increases in both net interest income and noninterest income. Several businesses generated linked-quarter growth, including capital markets, corporate banking, commercial real estate, corporate trust, debit card, personal lines and loans, merchant services, and retail brokerage.

    Net Interest Income

    Net interest income in second quarter 2014 increased $176 million on a linked-quarter basis to $10.8 billion driven by organic growth in commercial and consumer loans and higher mortgages held for sale and trading assets. Approximately one-third of the increase resulted from the benefit of one additional business day in the quarter. Interest income from variable sources, including purchased credit-impaired (PCI) loan resolutions and periodic dividends, also improved slightly linked quarter.

    Net interest margin was 3.15 percent, down 5 basis points from first quarter 2014 as strong customer driven deposit growth contributed to higher cash and short-term investment balances. This deposit growth was essentially neutral to net interest income, but had the effect of diluting net interest margin approximately 5 basis points. Liquidity funding actions taken to meet regulatory expectations also diluted the margin by 1 basis point, but with minimal impact to net income. Higher interest income from variable sources contributed 1 basis point to the change in net interest margin linked quarter. The net impact of all other balance sheet growth and repricing was essentially flat from first quarter.

    Noninterest Income

    Noninterest income in the second quarter was $10.3 billion, up from $10.0 billion in the prior quarter. Growth was broad-based and was driven by increases in mortgage banking, trust and investment fees, deposit service charges, and card fees. These increases were partially offset by a decline in market sensitive revenue5, mainly equity gains.

    Trust and investment fees were $3.6 billion, up $197 million from first quarter on higher investment banking and brokerage advisory, commissions and other fees. Investment banking fees increased $164 million linked quarter on broad-based growth. Brokerage advisory, commissions and other fees were up $39 million from the prior quarter as asset-based fees increased due to higher market valuations and net customer flows.

    Mortgage banking noninterest income was $1.7 billion, up $213 million from first quarter. During the second quarter, residential mortgage originations were $47 billion, up $11 billion linked quarter, while the gain on sale margin was 1.41 percent, compared with 1.61 percent in first quarter. Net mortgage servicing rights (MSRs) results were $475 million, compared with $407 million in first quarter 2014.

    5 Consists of net gains from trading activities, debt securities and equity investments.

    Noninterest Expense

    Noninterest expense increased $246 million from the prior quarter to $12.2 billion, as a decline in seasonally-elevated compensation and benefits costs from first quarter 2014 was offset by higher revenue-based incentive compensation, increased salary expense due to annual merit increases and the impact of one additional day in the quarter, an $84 million linked-quarter increase in deferred compensation benefit costs (offset in revenue) and a $205 million linked-quarter increase in operating losses largely due to litigation accruals. Expenses in the quarter also included higher outside professional services and advertising expenses, which are typically lower in the first quarter. The efficiency ratio was 57.9 percent in second quarter 2014, in line with first quarter 2014. The Company expects to operate within its targeted efficiency ratio range of 55 to 59 percent in third quarter 2014.

    Income Taxes

    The Company’s effective income tax rate was 33.4 percent for second quarter 2014, compared with 27.9 percent in the prior quarter. The tax rate for the first quarter included a net $423 million discrete tax benefit primarily from a reduction in the reserve for uncertain tax positions due to the resolution of prior period matters.

    Loans

    Total loans were $828.9 billion at June 30, 2014, up $2.5 billion from March 31, 2014, driven by broad-based growth in commercial and industrial, automobile, credit card, 1-4 family first mortgage and commercial real estate loans. This growth was reduced by the transfer to loans held for sale at the end of the quarter of $9.7 billion of government guaranteed student loans, which were previously included in the Company’s non-strategic/liquidating loan portfolio. Excluding this transfer, total loans would have been up $12.2 billion, or 6 percent (annualized), from first quarter. Core loan growth was $15.1 billion, as non-strategic/liquidating portfolios declined $12.7 billion in the quarter, including the $9.7 billion transfer. Average total loans were $831.0 billion, up $7.3 billion from the prior quarter, mainly reflecting growth in commercial and industrial, automobile and commercial real estate.

                                   
      June 30, 2014   March 31, 2014
    (in millions)   Core   Liquidating  

    (1)

      Total   Core   Liquidating     Total
    Commercial $389,905   1,499   391,404 379,561   1,720   381,281
    Consumer     373,693   63,845       437,538   368,888   76,274     445,162
    Total loans   $763,598   65,344       828,942   748,449   77,994     826,443
     

    Change from prior quarter:

      $15,149   (12,650)(2)   2,499   7,029   (2,872 )   4,157
     

    (1) See PICK-A-PAY PORTFOLIO and NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS tables for additional information on non-strategic/liquidating loan portfolios. Management believes that the above information provides useful disclosure regarding the Company’s ongoing loan portfolios.

    (2) The change from prior quarter was predominantly due to the transfer to loans held for sale of $9.7 billion of government guaranteed student loans, which were previously included in the Company’s non-strategic/liquidating loan portfolio.

     


    Investment Securities

    Investment securities were $279.1 billion at June 30, 2014, up $8.7 billion from first quarter, as approximately $17 billion of purchases were partially offset by run-off. Held-to-maturity securities were up $12.4 billion, primarily due to an increase in U.S. Treasury and federal agency debt. Available-for-sale securities were down $3.7 billion from prior quarter, driven by declines in mortgage-backed securities and other debt securities. Average total investment securities were up $6.2 billion, mainly reflecting an increase in U.S. Treasury and federal agency debt.

    The Company had net unrealized available-for-sale securities gains of $8.2 billion at June 30, 2014, up from $6.3 billion at March 31, 2014, primarily driven by a decline in interest rates in the quarter.

    Deposits

    Total average deposits for second quarter 2014 were $1.1 trillion, up 9 percent from a year ago and up 9 percent (annualized) from first quarter 2014, driven by solid commercial and consumer growth. The average deposit cost for second quarter 2014 was 10 basis points, which improved 1 basis point from prior quarter and 4 basis points from a year ago. Average core deposits were $991.7 billion, up 6 percent from a year ago and up 7 percent (annualized) from first quarter 2014. Average mortgage escrow deposits were $27.2 billion, compared with $39.6 billion a year ago and $24.2 billion in first quarter 2014.

    Capital

    Capital levels continued to be strong in the second quarter, with Common Equity Tier 1 of $134.8 billion under Basel III (General Approach), or 11.31 percent of risk-weighted assets. The Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) was 10.09 percent4. In second quarter 2014, the Company purchased 39.4 million shares of its common stock and an additional estimated 19.4 million shares through a forward repurchase transaction expected to settle in third quarter 2014. The Company also increased its quarterly common stock dividend to $0.35 per share, up from $0.30 per share a year ago.

                   
      June 30,   Mar. 31,   June 30,
        2014 (1)     2014   2013
    Common Equity Tier 1 (2) 11.31% 11.36 10.71
    Tier 1 capital 12.73 12.63 12.12
    Tier 1 leverage 9.86 9.84 9.63
                   
     

    (1)June 30, 2014, ratios are preliminary.

    (2) See FIVE QUARTER RISK-BASED CAPITAL COMPONENTS and COMMON EQUITY TIER 1 UNDER BASEL III tables for more information on Common Equity Tier 1.

     


    Credit Quality

    “Credit performance continued to improve in the second quarter as credit losses remained at historically low levels, nonperforming assets continued to decrease and we continued to originate high quality loans,” said Chief Risk Officer Mike Loughlin. “Credit losses were $717 million in second quarter 2014, compared with $1.2 billion in second quarter 2013, a 38 percent improvement. The quarterly loss rate (annualized) in the second quarter was 0.35 percent with commercial losses of only 0.03 percent and consumer losses of 0.62 percent. Nonperforming assets declined by $686 million, or 15 percent (annualized), from last quarter. We released $500 million from the allowance for credit losses in the second quarter, reflecting improvements in credit performance, driven primarily by the continued housing recovery. While credit remained very strong, improvement has moderated with stable delinquency trends. We continue to expect future reserve releases absent a significant deterioration in the economic environment, but expect a lower level of future releases as the rate of credit improvement slows and the loan portfolio continues to grow.”

    Net Loan Charge-offs

    Net loan charge-offs improved to $717 million in second quarter 2014, or 0.35 percent (annualized) of average loans, compared with $825 million in first quarter 2014, or 0.41 percent (annualized) of average loans.

    Net Loan Charge-Offs

      Quarter ended
        June 30, 2014     Mar. 31, 2014     Dec. 31, 2013
      As a     As a     As a
    Net loan% ofNet loan% ofNet loan% of
    charge-averagecharge-averagecharge-average
    ($ in millions)   offs   loans (1)     offs   loans (1)     offs   loans (1)
     
    Commercial:
    Commercial and industrial $ 54 0.11 % $ 45 0.09 % $ 107 0.22 %
    Real estate mortgage (10 ) (0.04 ) (22 ) (0.08 ) (41 ) (0.15 )
    Real estate construction (20 ) (0.47 ) (23 ) (0.55 ) (13 ) (0.32 )
    Lease financing 1 0.05 1 0.03 - -
    Foreign     6   0.05   4   0.03   -   -
    Total commercial     31   0.03   5   0.01   53   0.06
     
    Consumer:
    Real estate 1-4 family first mortgage 137 0.21 170 0.27 195 0.30
    Real estate 1-4 family junior lien mortgage 160 1.02 192 1.20 226 1.34
    Credit card 211 3.20 231 3.57 220 3.38
    Automobile 46 0.35 90 0.70 108 0.85
    Other revolving credit and installment     132   1.22   137   1.29   161   1.50
    Total consumer     686   0.62   820   0.75   910   0.82
    Total   $717   0.35%$825   0.41%$963   0.47%
                                 
     

    (1) Quarterly net charge-offs as a percentage of average loans are annualized. See explanation in PURCHASED CREDIT-IMPAIRED (PCI) LOANS section of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios.

     


    Nonperforming Assets

    Nonperforming assets decreased by $686 million from first quarter to $18.1 billion. Nonaccrual loans decreased $678 million to $14.0 billion. Foreclosed assets were $4.1 billion, in line with first quarter 2014.

    Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

        June 30, 2014     Mar. 31, 2014     Dec. 31, 2013
        As a     As a     As a
    % of% of% of
    TotaltotalTotaltotalTotaltotal
    ($ in millions)   balances   loans     balances   loans     balances   loans (1)
     
    Commercial:
    Commercial and industrial $ 693 0.34 % $ 630 0.32 % $ 738 0.38 %
    Real estate mortgage 1,802 1.66 2,030 1.88 2,252 2.10
    Real estate construction 239 1.40 296 1.78 416 2.48
    Lease financing 28 0.24 31 0.26 29 0.24
    Foreign     36   0.08   40   0.08   40   0.08
    Total commercial     2,798   0.71   3,027   0.79   3,475   0.92
     
    Consumer:

    Real estate 1-4 family first mortgage

    9,026 3.47 9,357 3.61 9,799 3.79

    Real estate 1-4 family junior lien mortgage

    1,964 3.14 2,072 3.24 2,188 3.32
    Automobile 150 0.28 161 0.31 173 0.34

    Other revolving credit and installment

        34   0.10   33   0.08   33   0.08
    Total consumer     11,174   2.55   11,623   2.61   12,193   2.74
    Total nonaccrual loans     13,972   1.69   14,650   1.77   15,668   1.91
     
    Foreclosed assets:
    Government insured/guaranteed 2,359 2,302 2,093
    Non-government insured/guaranteed     1,748     1,813     1,844  
    Total foreclosed assets     4,107     4,115     3,937  

    Total nonperforming assets

     

    $18,079   2.18%$18,765   2.27%$19,605   2.38%
     
    Change from prior quarter:
    Total nonaccrual loans $ (678 ) $ (1,018 ) $ (1,225 )
    Total nonperforming assets (686 ) (840 ) (1,090 )
                                 
     

    (1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the SUMMARY FINANCIAL DATA table for more information.

     


    Loans 90 Days or More Past Due and Still Accruing

    Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $897 million at June 30, 2014, compared with $950 million at March 31, 2014. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $17.7 billion at June 30, 2014, down from $20.3 billion at March 31, 2014.

    Allowance for Credit Losses

    The allowance for credit losses, including the allowance for unfunded commitments, totaled $13.8 billion at June 30, 2014, down from $14.4 billion at March 31, 2014. The allowance coverage to total loans was 1.67 percent, compared with 1.74 percent in first quarter 2014. The allowance covered 4.8 times annualized second quarter net charge-offs, compared with 4.3 times in prior quarter. The allowance coverage to nonaccrual loans was 99 percent at June 30, 2014, compared with 98 percent at March 31, 2014. “We believe the allowance was appropriate for losses inherent in the loan portfolio at June 30, 2014,” said Loughlin.

    Business Segment Performance

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

                         
              Quarter ended
    June 30,   Mar. 31,   June 30,
    (in millions)   2014   2014   2013
    Community Banking $3,431 3,844 3,245
    Wholesale Banking 1,952 1,742 2,004
    Wealth, Brokerage and Retirement     544   475   434
     


    More financial information about the business segments is in the OPERATING SEGMENT RESULTS and FIVE QUARTER OPERATING SEGMENT RESULTS tables.

    Community Bankingoffers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and auto, student, and small business lending. Community Banking also offers investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. through its Regional Banking and Wells Fargo Home Lending business units.

    Selected Financial Information

              Quarter ended
    June 30,   Mar. 31,   June 30,
    (in millions)   2014   2014   2013
    Total revenue $12,606 12,593 12,942
    Provision for credit losses 279 419 763
    Noninterest expense 7,020 6,774 7,213
    Segment net income 3,431 3,844 3,245
     
    (in billions)
    Average loans 505.4 505.0 498.2
    Average assets 918.1 892.6 820.9
    Average core deposits     639.8   626.5   623.0
     


    Community Banking reported net income of $3.4 billion, down $413 million, or 11 percent, from first quarter 2014. Revenue of $12.6 billion rose slightly from the prior quarter. Higher net interest income, mortgage banking revenue and card fees, were offset by lower equity investment gains. Noninterest expense increased $246 million, or 4 percent, due to higher operating losses, project spending, and advertising costs. The provision for credit losses decreased $140 million due to lower consumer real estate losses.

    Net income was up $186 million, or 6 percent, from second quarter 2013. Revenue decreased $336 million, or 3 percent, from a year ago primarily due to lower mortgage banking revenue, partially offset by higher net interest income and growth in multiple fee income categories including equity gains, card fees, trust and investment fees, and deposit service charges. Noninterest expense declined $193 million, or 3 percent, from a year ago largely driven by lower mortgage volume-related expenses and lower foreclosed assets expense, partially offset by higher operating losses. The provision for credit losses decreased $484 million from a year ago due to lower consumer real estate losses.

    Regional Banking

  • Retail banking
  • Retail Bank household cross-sell ratio of 6.17 products per household, up from 6.14 year-over-year6
  • Primary consumer checking customers7 up a net 4.6 percent year-over-year6
  • Small Business/Business Banking
  • Primary business checking customers7 up a net 5.2 percent year-over-year6
  • Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) combined were up 22 percent from the prior year
  • In May, introduced Wells Fargo Works for Small BusinessSM – a broad initiative to deliver resources, guidance and services for small business owners
  • Online and Mobile Banking
  • 24.1 million active online customers, up 6 percent year-over-year6
  • 13.1 million active mobile customers, up 22 percent year-over-year6

    Consumer Lending Group

  • Home Lending
  • Originations of $47 billion, up from $36 billion in prior quarter
  • Applications of $72 billion, up from $60 billion in prior quarter
  • Application pipeline of $30 billion at quarter end, up from $27 billion at March 31, 2014
  • Residential mortgage servicing portfolio of $1.8 trillion; ratio of MSRs to related loans serviced for others was 80 basis points, compared with 85 basis points in prior quarter
  • Average note rate on the servicing portfolio was 4.49 percent, compared with 4.51 percent in prior quarter
  • Consumer Credit
  • Credit card penetration in retail banking households rose to 39.0 percent6, up from 34.9 percent in prior year
  • Auto originations of $7.8 billion, up 9 percent from prior year
    6   Data as of May 2014, comparisons with May 2013.
    7 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
     


    Wholesale Bankingprovides financial solutions to businesses across the United States and globally with annual sales generally in excess of $20 million. Products and business segments include Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments, Asset Backed Finance, and Asset Management.

    Selected Financial Information

              Quarter ended
    June 30,   Mar. 31,   June 30,
    (in millions)   2014     2014     2013  
    Total revenue $5,946 5,580 6,135
    Reversal of provision for credit losses (49) (93 ) (118 )
    Noninterest expense 3,203 3,215 3,183
    Segment net income 1,952 1,742 2,004
     
    (in billions)
    Average loans (1) 308.1 301.9 285.1
    Average assets (1) 532.4 517.4 498.1
    Average core deposits     265.8     259.0     230.5  
     

    (1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the SUMMARY FINANCIAL DATA table for more information.

     


    Wholesale Banking reported net income of $2.0 billion, up $210 million, or 12 percent, from first quarter 2014. Revenue of $5.9 billion increased $366 million, or 7 percent, from prior quarter. Net interest income increased $62 million, or 2 percent, driven by higher loan balances. Noninterest income increased $304 million, or 11 percent, on higher investment banking fees, commercial brokerage fees, asset management fees and a gain on the previously disclosed divestiture of 40 insurance offices, partially offset by lower customer accommodation trading revenue. Noninterest expense decreased $12 million linked quarter as seasonally lower personnel costs were mostly offset by increased variable expenses related to higher revenues. The provision for credit losses increased $44 million from prior quarter due to a $30 million increase in credit losses and a $14 million lower reserve release.

    Net income was down $52 million, or 3 percent, from second quarter 2013. Revenue decreased $189 million, or 3 percent, from second quarter 2013 as strong loan and deposit growth, increased asset management fees and the gain on the insurance office divestiture were more than offset by lower PCI resolution income and market sensitive revenue, including lower customer accommodation trading revenue. Noninterest expense increased $20 million, or 1 percent, from a year ago primarily due to higher non-personnel expenses related to growth initiatives and compliance and regulatory requirements. The provision for credit losses increased $69 million from a year ago due to a $54 million increase in credit losses and a $15 million lower reserve release.

  • Average loans increased 8 percent1 in second quarter 2014, compared with second quarter 2013, on broad-based growth, including asset-backed finance, capital finance, commercial banking, commercial real estate, corporate banking, and international
  • Cross-sell of 7.2 products per relationship, up from 6.9 in second quarter 2013 driven by new product sales to existing customers
  • Treasury management revenue up 7 percent from second quarter 2013
  • Assets under management of $490 billion, up $35 billion from second quarter 2013, including a $26 billion increase in equity assets under management reflecting increased market valuations and net inflows

    Wealth, Brokerage and Retirementprovides a full range of financial advisory services to clients using a planning approach to meet each client's financial needs. Wealth Management provides affluent and high net worth clients with a complete range of wealth management solutions, including financial planning, private banking, credit, investment management and fiduciary services. Abbot Downing, a Wells Fargo business, provides comprehensive wealth management services to ultra-high net worth families and individuals as well as endowments and foundations. Brokerage serves customers' advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the United States. Retirement is a national leader in providing institutional retirement and trust services (including 401(k) and pension plan record keeping) for businesses, retail retirement solutions for individuals, and reinsurance services for the life insurance industry.

    Selected Financial Information

              Quarter ended
    June 30,   Mar. 31,   June 30,
    (in millions)   2014     2014     2013
    Total revenue $3,550 3,468 3,261
    Provision (reversal of provision) for credit losses (25) (8 ) 19
    Noninterest expense 2,695 2,711 2,542
    Segment net income 544 475 434
     
    (in billions)
    Average loans 51.0 50.0 45.4
    Average assets 187.6 190.6 177.1
    Average core deposits     153.0     156.0     146.4
     


    Wealth, Brokerage and Retirement (WBR) reported net income of $544 million, up $69 million, or 15 percent, from first quarter 2014. Revenue of $3.6 billion increased $82 million, or 2 percent, from the prior quarter as increased asset-based fees and higher gains on deferred compensation plan investments (offset in compensation expense) were partially offset by lower brokerage transaction revenue. Noninterest expense was down 1 percent from the prior quarter. The expense reduction from the seasonally higher first quarter 2014 personnel expenses was largely offset by higher deferred compensation plan expense (offset in trading revenue) and increased broker commissions and other incentives. The provision for credit losses decreased $17 million from first quarter 2014. The provision in second quarter 2014 included a $21 million reserve release, compared with $8 million in first quarter 2014.

    Net income was up $110 million, or 25 percent, from second quarter 2013. Revenue increased $289 million, or 9 percent, from a year ago as strong growth in both asset-based fees and net interest income along with higher gains on deferred compensation plan investments, were partially offset by a decrease in brokerage transaction revenue. Noninterest expense increased $153 million, or 6 percent, from a year ago due to higher deferred compensation plan expense, increased broker commissions, and higher other expenses. The provision for credit losses decreased $44 million from a year ago primarily due to decreased net charge-offs. The provision in second quarter 2013 included a $5 million reserve release.

    Retail Brokerage

  • Client assets of $1.4 trillion, up 12 percent from prior year
  • Managed account assets of $409 billion, increased $78 billion, or 24 percent, from prior year, reflecting increased market valuations and net flows
  • Strong loan growth, with average balances up 19 percent from prior year on growth in first mortgage and security-based lending

    Wealth Management

  • Client assets of $221 billion, up 10 percent from prior year
  • Strong loan growth, with average balances up 10 percent over prior year

    Retirement

  • IRA assets of $357 billion, up 13 percent from prior year
  • Institutional Retirement plan assets of $319 billion, up 12 percent from prior year

    WBR cross-sellratio of 10.44 products per household, up from 10.35 a year ago

    Conference Call

    The Company will host a live conference call on Friday, July 11, at 7 a.m. PDT (10 a.m. EDT). You may participate by dialing 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). No password is required. The call will also be available online at wellsfargo.com/invest_relations/earnings and at https://engage.vevent.com/rt/audiostreaming~wellsfargo_071114.

    A replay of the conference call will be available beginning at 10 a.m. PDT (1 p.m. EDT) on July 11 through Friday, July 18. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #44408705. The replay will also be available online at wellsfargo.com/invest_relations/earnings and at https://engage.vevent.com/rt/audiostreaming~wellsfargo_071114.

    Forward-Looking Statements

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

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

  • current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, and the overall slowdown in global economic growth;
  • our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
  • financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
  • the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;
  • the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;
  • negative effects relating to our mortgage servicing and foreclosure practices, including our obligations under the settlement with the Department of Justice and other federal and state government entities, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;
  • our ability to realize our efficiency ratio target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;
  • the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;
  • a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our investment securities portfolio;
  • the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
  • reputational damage from negative publicity, protests, fines, penalties and other negative consequences from regulatory violations and legal actions;
  • a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks;
  • the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
  • fiscal and monetary policies of the Federal Reserve Board; and
  • the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013.

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

    For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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

    About Wells Fargo

    Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.6 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 locations, 12,500 ATMs, and the internet (wellsfargo.com), and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 29 on Fortune’s 2014 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

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

    Summary Information

    Summary Financial Data 17-18
     

    Income

    Consolidated Statement of Income 19
    Consolidated Statement of Comprehensive Income 20
    Condensed Consolidated Statement of Changes in Total Equity 20
    Five Quarter Consolidated Statement of Income 21
    Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 22-23
    Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 24
    Noninterest Income and Noninterest Expense 25-26
     

    Balance Sheet

    Consolidated Balance Sheet 27-28
    Investment Securities 29
     

    Loans

    Loans 29
    Nonperforming Assets 30
    Loans 90 Days or More Past Due and Still Accruing 31
    Purchased Credit-Impaired Loans 32-34
    Pick-A-Pay Portfolio 35
    Non-Strategic and Liquidating Loan Portfolios 35
    Changes in Allowance for Credit Losses 36-37
     

    Equity

    Five Quarter Risk-Based Capital Components 38
    Common Equity Tier 1 Under Basel III 38
     

    Operating Segments

    Operating Segment Results 39-40
     

    Other

    Mortgage Servicing and other related data 41-43
         
     
    Wells Fargo & Company and Subsidiaries
    SUMMARY FINANCIAL DATA
                           
    % Change
      Quarter ended June 30, 2014 from   Six months ended
    June 30,Mar. 31, June 30, Mar. 31, June 30, June 30,June 30, %
    ($ in millions, except per share amounts)     2014     2014   2013     2014       2013       2014   2013   Change  
    For the Period
    Wells Fargo net income $5,726 5,893 5,519 (3 ) % 4 $11,619 10,690 9 %

    Wells Fargo net income applicable to common stock

    5,424 5,607 5,272 (3 ) 3 11,031 10,203 8
    Diluted earnings per common share 1.01 1.05 0.98 (4 ) 3 2.06 1.90 8
    Profitability ratios (annualized):

    Wells Fargo net income to average assets (ROA) (1)

    1.47% 1.57 1.55 (6 ) (5 ) 1.52 1.52 -

    Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders' equity (ROE)

    13.40 14.35 14.02 (7 ) (4 ) 13.86 13.81 -
    Efficiency ratio (2) 57.9 57.9 57.3 - 1 57.9 57.8 -
    Total revenue $21,066 20,625 21,378 2 (1 ) $41,691 42,637 (2 )
    Pre-tax pre-provision profit (PTPP) (3) 8,872 8,677 9,123 2 (3 ) 17,549 17,982 (2 )
    Dividends declared per common share 0.35 0.30 0.30 17 17 0.65 0.55 18
    Average common shares outstanding 5,268.4 5,262.8 5,304.7 - (1 ) 5,265.6 5,291.9 -
    Diluted average common shares outstanding 5,350.8 5,353.3 5,384.6 - (1 ) 5,353.2 5,369.9 -
    Average loans (1) $831,043 823,790 798,386 1 4 $827,436 797,528 4
    Average assets (1) 1,564,003 1,525,905 1,427,150 2 10 1,545,060 1,415,105 9
    Average core deposits (4) 991,727 973,801 936,090 2 6 982,814 931,006 6
    Average retail core deposits (5) 698,763 690,643 666,043 1 5 694,726 664,487 5
    Net interest margin (1) 3.15% 3.20 3.47 (2 ) (9 ) 3.17 3.48 (9 )
    At Period End
    Investment securities $279,069 270,327 249,439 3 12 $279,069 249,439 12
    Loans (1) 828,942 826,443 799,867 - 4 828,942 799,867 4
    Allowance for loan losses 13,101 13,695 16,144 (4 ) (19 ) 13,101 16,144 (19 )
    Goodwill 25,705 25,637 25,637 - - 25,705 25,637 -
    Assets (1) 1,598,874 1,546,707 1,438,456 3 11 1,598,874 1,438,456 11
    Core deposits (4) 1,007,485 994,185 941,158 1 7 1,007,485 941,158 7
    Wells Fargo stockholders' equity 180,859 175,654 162,421 3 11 180,859 162,421 11
    Total equity 181,549 176,469 163,777 3 11 181,549 163,777 11
    Capital ratios:
    Total equity to assets (1) 11.35% 11.41 11.39 - - 11.35 11.39 -
    Risk-based capital (6):
    Tier 1 capital 12.73 12.63 12.12 1 5 12.73 12.12 5
    Total capital 15.90 15.71 15.03 1 6 15.90 15.03 6
    Tier 1 leverage (6) 9.86 9.84 9.63 - 2 9.86 9.63 2
    Common Equity Tier 1 (6)(7) 11.31 11.36 10.71 - 6 11.31 10.71 6
    Common shares outstanding 5,249.9 5,265.7 5,302.2 - (1 ) 5,249.9 5,302.2 (1 )
    Book value per common share $31.18 30.48 28.26 2 10 $31.18 28.26 10
    Common stock price:
    High 53.05 49.97 41.74 6 27 53.05 41.74 27
    Low 46.72 44.17 36.19 6 29 44.17 34.43 28
    Period end 52.56 49.74 41.27 6 27 52.56 41.27 27
    Team members (active, full-time equivalent) 263,500 265,300 274,300 (1 ) (4 ) 263,500 274,300 (4 )
                                                           
     

    (1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. Accordingly, we revised our commercial loan balances for year-end 2012 and each of the quarters in 2013 in order to present the Company’s lending trends on a comparable basis over this period. This revision, which resulted in a reduction to total commercial loans and a corresponding decrease to other liabilities, did not impact the Company’s consolidated net income or total cash flows. We reduced our commercial loans by $3.5 billion, $3.2 billion, $2.1 billion, $1.6 billion, and $1.2 billion at December 31, September 30, June 30, and March 31, 2013, and December 31, 2012, respectively, which represented less than 1% of total commercial loans and less than 0.5% of our total loan portfolio. Other affected financial information, including financial guarantees and financial ratios, has been appropriately revised to reflect this revision.

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

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

    (4) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

    (5) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.

    (6) The June 30, 2014, ratios are preliminary.

    (7) See the "Five Quarter Risk-Based Capital Components" table for additional information.

     
    Wells Fargo & Company and Subsidiaries
    FIVE QUARTER SUMMARY FINANCIAL DATA
                   
      Quarter ended
    June 30,Mar. 31, Dec. 31, Sept. 30, June 30,
    ($ in millions, except per share amounts)     2014     2014   2013   2013   2013
    For the Quarter
    Wells Fargo net income $5,726 5,893 5,610 5,578 5,519
    Wells Fargo net income applicable to common stock 5,424 5,607 5,369 5,317 5,272
    Diluted earnings per common share 1.01 1.05 1.00 0.99 0.98
    Profitability ratios (annualized):
    Wells Fargo net income to average assets (ROA) (1) 1.47% 1.57 1.48 1.53 1.55

    Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders' equity (ROE)

    13.40 14.35 13.81 14.07 14.02
    Efficiency ratio (2) 57.9 57.9 58.5 59.1 57.3
    Total revenue $21,066 20,625 20,665 20,478 21,378
    Pre-tax pre-provision profit (PTPP) (3) 8,872 8,677 8,580 8,376 9,123
    Dividends declared per common share 0.35 0.30 0.30 0.30 0.30
    Average common shares outstanding 5,268.4 5,262.8 5,270.3 5,295.3 5,304.7
    Diluted average common shares outstanding 5,350.8 5,353.3 5,358.6 5,381.7 5,384.6
    Average loans (1) $831,043 823,790 813,318 802,134 798,386
    Average assets (1) 1,564,003 1,525,905 1,505,766 1,446,965 1,427,150
    Average core deposits (4) 991,727 973,801 965,828 940,279 936,090
    Average retail core deposits (5) 698,763 690,643 679,355 670,335 666,043
    Net interest margin (1) 3.15% 3.20 3.27 3.39 3.47
    At Quarter End
    Investment securities $279,069 270,327 264,353 259,399 249,439
    Loans (1) 828,942 826,443 822,286 809,135 799,867
    Allowance for loan losses 13,101 13,695 14,502 15,159 16,144
    Goodwill 25,705 25,637 25,637 25,637 25,637
    Assets (1) 1,598,874 1,546,707 1,523,502 1,484,865 1,438,456
    Core deposits (4) 1,007,485 994,185 980,063 947,805 941,158
    Wells Fargo stockholders' equity 180,859 175,654 170,142 167,165 162,421
    Total equity 181,549 176,469 171,008 168,813 163,777
    Capital ratios:
    Total equity to assets (1) 11.35% 11.41 11.22 11.37 11.39
    Risk-based capital (6):
    Tier 1 capital 12.73 12.63 12.33 12.11 12.12
    Total capital 15.90 15.71 15.43 15.09 15.03
    Tier 1 leverage (6) 9.86 9.84 9.60 9.76 9.63
    Common Equity Tier 1 (6)(7) 11.31 11.36 10.82 10.60 10.71
    Common shares outstanding 5,249.9 5,265.7 5,257.2 5,273.7 5,302.2
    Book value per common share $31.18 30.48 29.48 28.98 28.26
    Common stock price:
    High 53.05 49.97 45.64 44.79 41.74
    Low 46.72 44.17 40.07 40.79 36.19
    Period end 52.56 49.74 45.40 41.32 41.27
    Team members (active, full-time equivalent) 263,500 265,300 264,900 270,600 274,300
                                   
     

    (1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the SUMMARY FINANCIAL DATA table for more information.

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

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

    (4) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

    (5) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.

    (6) The June 30, 2014, ratios are preliminary.

    (7) See the "Five Quarter Risk-Based Capital Components" table for additional information.

     
    Wells Fargo & Company and Subsidiaries
    CONSOLIDATED STATEMENT OF INCOME    
               
    Six months
    Quarter ended June 30, % ended June 30, %
    (in millions, except per share amounts)     2014   2013     Change       2014   2013     Change
    Interest income
    Trading assets $407 340 20 % $781 667 17 %
    Investment securities 2,112 2,034 4 4,222 3,959 7
    Mortgages held for sale 195 378 (48 ) 365 749 (51 )
    Loans held for sale 1 4 (75 ) 3 7 (57 )
    Loans 8,852 8,902 (1 ) 17,598 17,763 (1 )
    Other interest income     226   169   34   436   332   31
    Total interest income     11,793   11,827   -   23,405   23,477   -
    Interest expense
    Deposits 275 353 (22 ) 554 722 (23 )
    Short-term borrowings 14 17 (18 ) 26 37 (30 )
    Long-term debt 620 632 (2 ) 1,239 1,329 (7 )
    Other interest expense     93   75   24   180   140   29
    Total interest expense     1,002   1,077   (7 )   1,999   2,228   (10 )
    Net interest income10,791 10,750 - 21,406 21,249 1
    Provision for credit losses     217   652   (67 )   542   1,871   (71 )
    Net interest income after provision for credit losses     10,574   10,098   5   20,864   19,378   8
    Noninterest income
    Service charges on deposit accounts 1,283 1,248 3 2,498 2,462 1
    Trust and investment fees 3,609 3,494 3 7,021 6,696 5
    Card fees 847 813 4 1,631 1,551 5
    Other fees 1,088 1,089 - 2,135 2,123 1
    Mortgage banking 1,723 2,802 (39 ) 3,233 5,596 (42 )
    Insurance 453 485 (7 ) 885 948 (7 )
    Net gains from trading activities 382 331 15 814 901 (10 )
    Net gains (losses) on debt securities 71 (54 ) NM 154 (9 ) NM
    Net gains from equity investments 449 203 121 1,296 316 310
    Lease income 129 225 (43 ) 262 355 (26 )
    Other     241   (8 ) NM   356   449   (21 )
    Total noninterest income     10,275   10,628   (3 )   20,285   21,388   (5 )
    Noninterest expense
    Salaries 3,795 3,768 1 7,523 7,431 1
    Commission and incentive compensation 2,445 2,626 (7 ) 4,861 5,203 (7 )
    Employee benefits 1,170 1,118 5 2,542 2,701 (6 )
    Equipment 445 418 6 935 946 (1 )
    Net occupancy 722 716 1 1,464 1,435 2
    Core deposit and other intangibles 349 377 (7 ) 690 754 (8 )
    FDIC and other deposit assessments 225 259 (13 ) 468 551 (15 )
    Other     3,043   2,973   2   5,659   5,634   -
    Total noninterest expense     12,194   12,255   -   24,142   24,655   (2 )
    Income before income tax expense8,655 8,471 2 17,007 16,111 6
    Income tax expense     2,869   2,863   -   5,146   5,283   (3 )
    Net income before noncontrolling interests5,786 5,608 3 11,861 10,828 10
    Less: Net income from noncontrolling interests     60   89   (33 )   242   138   75
    Wells Fargo net income   $5,726   5,519   4 $11,619   10,690   9
    Less: Preferred stock dividends and other     302   247   22   588   487   21
    Wells Fargo net income applicable to common stock   $5,424   5,272   3 $11,031   10,203   8
    Per share information
    Earnings per common share $1.02 1.00 2 $2.09 1.93 8
    Diluted earnings per common share 1.01 0.98 3 2.06 1.90 8
    Dividends declared per common share 0.35 0.30 17 0.65 0.55 18
    Average common shares outstanding 5,268.4 5,304.7 (1 ) 5,265.6 5,291.9 -
    Diluted average common shares outstanding 5,350.8 5,384.6 (1 ) 5,353.2 5,369.9 -
                                       
     
    NM - Not meaningful
     
    Wells Fargo & Company and Subsidiaries
    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME        
               
    Quarter ended June 30, % Six months ended June 30, %
    (in millions)     2014     2013     Change       2014     2013     Change
    Wells Fargo net income   $5,726     5,519   4 % $11,619     10,690   9 %
    Other comprehensive income (loss), before tax:
    Investment securities:
    Net unrealized gains (losses) arising during the period 2,085 (6,130 ) NM 4,810 (6,764 ) NM
    Reclassification of net (gains) losses to net income (150) 30 NM (544) (83 ) 555
    Derivatives and hedging activities:
    Net unrealized gains (losses) arising during the period 212 (10 ) NM 256 (3 ) NM
    Reclassification of net gains on cash flow hedges to net income (115) (69 ) 67 (221) (156 ) 42
    Defined benefit plans adjustments:
    Net actuarial gains (losses) arising during the period (12) 772 NM (12) 778 NM

    Amortization of net actuarial loss, settlements and other to net income

    20 113 (82 ) 38 162 (77 )
    Foreign currency translation adjustments:
    Net unrealized gains (losses) arising during the period 17 (21 ) NM - (39 ) (100 )
    Reclassification of net (gains) losses to net income     -     (15 ) (100 )   6     (15 ) NM
    Other comprehensive income (loss), before tax2,057 (5,330 ) NM 4,333 (6,120 ) NM
    Income tax (expense) benefit related to other comprehensive income     (816)   1,979   NM   (1,647)   2,267   NM
    Other comprehensive income (loss), net of tax1,241 (3,351 ) NM 2,686 (3,853 ) NM
    Less: Other comprehensive loss from noncontrolling interests     (124)   (3 ) NM   (45)   -   -
    Wells Fargo other comprehensive income (loss), net of tax     1,365     (3,348 ) NM   2,731     (3,853 ) NM
     
    Wells Fargo comprehensive income7,091 2,171 227 14,350 6,837 110
    Comprehensive income (loss) from noncontrolling interests     (64)   86   NM   197     138   43
    Total comprehensive income   $7,027     2,257     211       $14,547     6,975     109  
     
    NM - Not meaningful
     
    CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY  
         
    Six months ended June 30,  
    (in millions)     2014     2013  
    Balance, beginning of period$171,008 158,911
    Wells Fargo net income 11,619 10,690
    Wells Fargo other comprehensive income (loss), net of tax 2,731 (3,853 )
    Common stock issued 1,573 1,799
    Common stock repurchased (1) (3,979) (1,936 )
    Preferred stock released by ESOP 735 720
    Preferred stock issued 1,995 610
    Common stock dividends (3,423) (2,911 )
    Preferred stock dividends and other (588) (487 )
    Noncontrolling interests and other, net     (122)   234  
    Balance, end of period   $181,549     163,777  
     

    (1) For the six months ended June 30, 2014, includes $1.0 billion related to a private forward repurchase transaction entered into in second quarter 2014 that is expected to settle in third quarter 2014 for an estimated 19 million shares of common stock. For the six months ended June 30, 2013, includes $500 million related to a private forward repurchase transaction entered into in second quarter 2013 that settled in third quarter 2013 for 13 million shares of common stock.

     
    Wells Fargo & Company and Subsidiaries
    FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME      
             
      Quarter ended
    June 30,Mar. 31, Dec. 31, Sept. 30, June 30,
    (in millions, except per share amounts)     2014   2014   2013     2013     2013  
    Interest Income
    Trading assets $407 374 378 331 340
    Investment securities 2,112 2,110 2,119 2,038 2,034
    Mortgages held for sale 195 170 221 320 378
    Loans held for sale 1 2 3 3 4
    Loans 8,852 8,746 8,907 8,901 8,902
    Other interest income     226   210   208     183     169  
    Total interest income     11,793   11,612   11,836     11,776     11,827  
    Interest expense
    Deposits 275 279 297 318 353
    Short-term borrowings 14 12 14 9 17
    Long-term debt 620 619 635 621 632
    Other interest expense     93   87   87     80     75  
    Total interest expense     1,002   997   1,033     1,028     1,077  
    Net interest income10,791 10,615 10,803 10,748 10,750
    Provision for credit losses     217   325   363     75     652  
    Net interest income after provision for credit losses     10,574   10,290   10,440     10,673     10,098  
    Noninterest income
    Service charges on deposit accounts 1,283 1,215 1,283 1,278 1,248
    Trust and investment fees 3,609 3,412 3,458 3,276 3,494
    Card fees 847 784 827 813 813
    Other fees 1,088 1,047 1,119 1,098 1,089
    Mortgage banking 1,723 1,510 1,570 1,608 2,802
    Insurance 453 432 453 413 485
    Net gains from trading activities 382 432 325 397 331
    Net gains (losses) on debt securities 71 83 (14 ) (6 ) (54 )
    Net gains from equity investments 449 847 654 502 203
    Lease income 129 133 148 160 225
    Other     241   115   39     191     (8 )
    Total noninterest income     10,275   10,010   9,862     9,730     10,628  
    Noninterest expense
    Salaries 3,795 3,728 3,811 3,910 3,768
    Commission and incentive compensation 2,445 2,416 2,347 2,401 2,626
    Employee benefits 1,170 1,372 1,160 1,172 1,118
    Equipment 445 490 567 471 418
    Net occupancy 722 742 732 728 716
    Core deposit and other intangibles 349 341 375 375 377
    FDIC and other deposit assessments 225 243 196 214 259
    Other     3,043   2,616   2,897     2,831     2,973  
    Total noninterest expense     12,194   11,948   12,085     12,102     12,255  
    Income before income tax expense8,655 8,352 8,217 8,301 8,471
    Income tax expense     2,869   2,277   2,504     2,618     2,863  
    Net income before noncontrolling interests5,786 6,075 5,713 5,683 5,608
    Less: Net income from noncontrolling interests     60   182   103     105     89  
    Wells Fargo net income   $5,726   5,893   5,610     5,578     5,519  
    Less: Preferred stock dividends and other     302   286   241     261     247  
    Wells Fargo net income applicable to common stock   $5,424   5,607   5,369     5,317     5,272  
    Per share information
    Earnings per common share $1.02 1.07 1.02 1.00 1.00
    Diluted earnings per common share 1.01 1.05 1.00 0.99 0.98
    Dividends declared per common share 0.35 0.30 0.30 0.30 0.30
    Average common shares outstanding 5,268.4 5,262.8 5,270.3 5,295.3 5,304.7
    Diluted average common shares outstanding 5,350.8 5,353.3 5,358.6 5,381.7 5,384.6
                                 
     
    Wells Fargo & Company and Subsidiaries
    AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
               
    Quarter ended June 30,
                2014           2013
    Interest Interest
    AverageYields/income/ Average Yields/ income/
    (in millions)     balance   rates     expense   balance   rates     expense
    Earning assets

    Federal funds sold, securities purchased under resale agreements and other short-term investments

    $229,7700.28%$161 136,484 0.33 % $ 113
    Trading assets 54,3473.05414 46,622 2.98 347
    Investment securities (3):
    Available-for-sale securities:
    Securities of U.S. Treasury and federal agencies 6,5801.7829 6,684 1.73 29
    Securities of U.S. states and political subdivisions 42,7214.26456 39,267 4.42 434
    Mortgage-backed securities:
    Federal agencies 116,4752.85831 102,007 2.79 711
    Residential and commercial     27,2526.11   416 31,315 6.50   509
    Total mortgage-backed securities 143,7273.471,247 133,322 3.66 1,220
    Other debt and equity securities     48,7343.76   457 55,533 3.84   531
    Total available-for-sale securities     241,7623.62   2,189 234,806 3.77   2,214
    Held-to-maturity securities:
    Securities of U.S. Treasury and federal agencies 10,8292.2059 - - -
    Securities of U.S. states and political subdivisions 86.00- - - -
    Federal agency mortgage-backed securities 6,0892.7442 - - -
    Other debt securities     5,2061.90   25 - -   -
    Total held-to-maturity securities     22,1322.28   126 - -   -
    Total investment securities 263,8943.512,315 234,806 3.77 2,214
    Mortgages held for sale (4) 18,8244.16195 43,422 3.48 378
    Loans held for sale (4) 1572.551 177 7.85 4
    Loans:
    Commercial:
    Commercial and industrial (5) 199,2463.391,687 184,306 3.73 1,714
    Real estate mortgage 107,6733.56955 105,261 3.92 1,029
    Real estate construction 17,2494.17179 16,458 5.02 206
    Lease financing 11,8245.70169 12,338 6.66 206
    Foreign (5)     48,8472.39   290 42,242 2.23   235
    Total commercial (5)     384,8393.42   3,280 360,605 3.77   3,390
    Consumer:
    Real estate 1-4 family first mortgage 259,9744.202,729 252,558 4.23 2,671
    Real estate 1-4 family junior lien mortgage 63,2734.31680 71,376 4.29 764
    Credit card 26,43111.97789 24,023 12.55 752
    Automobile 53,4806.34845 47,942 7.05 842
    Other revolving credit and installment     43,0465.07   544 41,882 4.74   495
    Total consumer     446,2045.02   5,587 437,781 5.05   5,524

    Total loans (4)(5)

    831,0434.288,867 798,386 4.47 8,914
    Other     4,5355.74   65 4,151 5.55   57
    Total earning assets (5)   $1,402,5703.43%$12,018 1,264,048 3.81 % $ 12,027
    Funding sources
    Deposits:
    Interest-bearing checking $40,1930.07%$7 40,422 0.06 % $ 6
    Market rate and other savings 583,9070.07101 541,843 0.08 111
    Savings certificates 38,7540.8682 52,552 1.23 161
    Other time deposits 48,5120.4150 26,045 0.76 50
    Deposits in foreign offices     94,2320.15   35 68,871 0.15   25
    Total interest-bearing deposits 805,5980.14275 729,733 0.19 353
    Short-term borrowings 58,8450.1014 57,812 0.14 21
    Long-term debt 159,2331.56620 125,496 2.02 632
    Other liabilities     13,5892.73   93 13,315 2.25   75
    Total interest-bearing liabilities 1,037,2650.391,002 926,356 0.47 1,081
    Portion of noninterest-bearing funding sources (5)     365,305-   - 337,692 -   -
    Total funding sources (5)   $1,402,570   0.28   1,002 1,264,048   0.34   1,081

    Net interest margin and net interest income on a taxable-equivalent basis (5)(6)

    3.15%   $11,016 3.47 %   $ 10,946
    Noninterest-earning assets
    Cash and due from banks $15,956 16,214
    Goodwill 25,699 25,637
    Other     119,778 121,251
    Total noninterest-earning assets   $161,433 163,102
    Noninterest-bearing funding sources
    Deposits $295,875 280,029
    Other liabilities (5) 51,184 56,104
    Total equity 179,679 164,661
    Noninterest-bearing funding sources used to fund earning assets (5)     (365,305) (337,692)
    Net noninterest-bearing funding sources   $161,433 163,102
    Total assets (5)   $1,564,003 1,427,150
                                       
     
    (1) Our average prime rate was 3.25% for the quarters ended June 30, 2014 and 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.23% and 0.28% for the same quarters, respectively.
    (2) Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
    (3) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.
    (4) Nonaccrual loans and related income are included in their respective loan categories.

    (5) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

    (6) Includes taxable-equivalent adjustments of $225 million and $196 million for the quarters ended June 30, 2014 and 2013, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
     
    Wells Fargo & Company and Subsidiaries
    AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
               
    Six months ended June 30,
    2014 2013
    Interest Interest
    AverageYields/income/ Average Yields/ income/
    (in millions)     balance   rates       expense   balance   rates       expense
    Earning assets

    Federal funds sold, securities purchased under resale agreements and other short-term investments

    $221,5730.28%$305 128,797 0.35 % $ 221
    Trading assets 51,3063.10795 44,388 3.07 681
    Investment securities (3):
    Available-for-sale securities:
    Securities of U.S. Treasury and federal agencies 6,5761.7357 6,880 1.65 56
    Securities of U.S. states and political subdivisions 42,6614.32921 38,430 4.40 844
    Mortgage-backed securities:
    Federal agencies 117,0552.901,695 98,705 2.77 1,365
    Residential and commercial     27,641   6.12   845 31,726   6.48   1,028
    Total mortgage-backed securities 144,6963.512,540 130,431 3.67 2,393
    Other debt and equity securities     48,944   3.68   895 54,634   3.71   1,008
    Total available-for-sale securities     242,877   3.64   4,413 230,375   3.74   4,301
    Held-to-maturity securities:
    Securities of U.S. Treasury and federal agencies 5,9932.2065 - - -
    Securities of U.S. states and political subdivisions 45.97- - - -
    Federal agency mortgage-backed securities 6,1252.9390 - - -
    Other debt securities     5,807   1.88   54 -   -   -
    Total held-to-maturity securities     17,929   2.34   209 -   -   -
    Total investment securities 260,8063.554,622 230,375 3.74 4,301
    Mortgages held for sale (4) 17,6964.13365 43,367 3.45 749
    Loans held for sale (4) 1344.083 159 8.28 7
    Loans:
    Commercial:
    Commercial and industrial (5) 196,5703.413,328 183,715 3.74 3,414
    Real estate mortgage 107,7353.541,892 105,738 3.88 2,035
    Real estate construction 17,0654.27361 16,508 4.93 404
    Lease financing 11,8795.92352 12,381 6.72 416
    Foreign (5)     48,364   2.30   552 41,069   2.20   448
    Total commercial (5)     381,613   3.42   6,485 359,411   3.76   6,717
    Consumer:
    Real estate 1-4 family first mortgage 259,7274.195,434 252,305 4.26 5,374
    Real estate 1-4 family junior lien mortgage 64,1224.311,372 72,715 4.29 1,548
    Credit card 26,35212.141,587 24,060 12.58 1,502
    Automobile 52,6426.421,676 47,258 7.12 1,668
    Other revolving credit and installment     42,980   5.03   1,073 41,779   4.72   977
    Total consumer     445,823   5.02   11,142 438,117   5.08   11,069
    Total loans (4)(5) 827,4364.2817,627 797,528 4.48 17,786
    Other     4,595   5.73   131 4,203   5.37   112
    Total earning assets (5)   $1,383,546   3.46%$23,848 1,248,817   3.84 % $ 23,857
    Funding sources
    Deposits:
    Interest-bearing checking $38,5060.07%$13 36,316 0.06 % $ 11
    Market rate and other savings 581,4890.07206 539,708 0.09 233
    Savings certificates 39,6390.87171 53,887 1.23 328
    Other time deposits 47,1740.4298 21,003 0.95 99
    Deposits in foreign offices     92,650   0.14   66 69,968   0.15   51
    Total interest-bearing deposits 799,4580.14554 720,882 0.20 722
    Short-term borrowings 56,6860.1027 56,618 0.16 44
    Long-term debt 156,5281.591,239 126,299 2.11 1,329
    Other liabilities     13,226   2.72   180 12,467   2.24   140
    Total interest-bearing liabilities 1,025,8980.392,000 916,266 0.49 2,235
    Portion of noninterest-bearing funding sources (5)     357,648   -   - 332,551   -   -
    Total funding sources (5)   $1,383,546     0.29   2,000 1,248,817     0.36   2,235

    Net interest margin and net interest income on a taxable-equivalent basis (5)(6)

    3.17%   $21,848 3.48 %   $ 21,622
    Noninterest-earning assets
    Cash and due from banks $16,159 16,372
    Goodwill 25,668 25,637
    Other     119,687   124,279  
    Total noninterest-earning assets   $161,514   166,288  
    Noninterest-bearing funding sources
    Deposits $290,004 277,141
    Other liabilities (5) 52,065 59,148
    Total equity 177,093 162,550
    Noninterest-bearing funding sources used to fund earning assets (5)     (357,648) (332,551 )
    Net noninterest-bearing funding sources   $161,514   166,288  
    Total assets (5)   $1,545,060   1,415,105  
                                       
     

    (1) Our average prime rate was 3.25% for the six months ended June 30, 2014 and 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.23% and 0.28% for the same periods, respectively.

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

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

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

    (5) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

    (6) Includes taxable-equivalent adjustments of $442 million and $373 million for the six months ended June 30, 2014 and 2013, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

     
    Wells Fargo & Company and Subsidiaries
    FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS)(1)
                       
      Quarter ended
      June 30, 2014       Mar. 31, 2014       Dec. 31, 2013       Sept. 30, 2013       June 30, 2013

     

    Average

    Yields/

     

    Average

    Yields/

     

    Average

    Yields/

     

    Average

    Yields/

     

    Average

    Yields/
    ($ in billions)  

     

    balance

      rates    

     

    balance

      rates    

     

    balance

      rates    

     

    balance

      rates    

     

    balance

      rates
    Earning assets

    Federal funds sold, securities purchased under resale agreements and other short-term investments

    $229.80.28% $ 213.3 0.27 % $ 205.3 0.28 % $ 155.9 0.31 % $ 136.5 0.33 %
    Trading assets 54.43.05 48.2 3.17 45.4 3.40 44.8 3.02 46.6 2.98
    Investment securities (2):
    Available-for-sale securities:
    Securities of U.S. Treasury and federal agencies 6.61.78 6.6 1.68 6.6 1.67 6.6 1.69 6.7 1.73
    Securities of U.S. states and political subdivisions 42.74.26 42.6 4.37 42.0 4.38 40.8 4.35 39.3 4.42
    Mortgage-backed securities:
    Federal agencies 116.52.85 117.6 2.94 117.9 2.94 113.0 2.83 102.0 2.79
    Residential and commercial     27.36.11   28.0 6.12   29.2 6.35   30.2 6.56   31.3 6.50
    Total mortgage-backed securities 143.83.47 145.6 3.55 147.1 3.62 143.2 3.62 133.3 3.66
    Other debt and equity securities     48.73.76   49.2 3.59   55.4 3.43   55.4 3.27   55.5 3.84
    Total available-for-sale securities     241.83.62   244.0 3.65   251.1 3.65   246.0 3.61   234.8 3.77
    Held-to-maturity securities:
    Securities of U.S. Treasury and federal agencies 10.82.20 1.1 2.18 - - - - - -
    Federal agency mortgage-backed securities 6.12.74 6.2 3.11 2.7 3.11 - - - -
    Other debt securities     5.21.90   6.4 1.86   0.1 1.99   - -   - -
    Total held-to-maturity securities     22.12.28   13.7 2.45   2.8 3.09   - -   - -
    Total investment securities 263.93.51 257.7 3.59 253.9 3.65 246.0 3.61 234.8 3.77
    Mortgages held for sale 18.84.16 16.6 4.11 21.4 4.13 33.2 3.86 43.4 3.48
    Loans held for sale 0.22.55 0.1 6.28 0.1 8.21 0.2 7.25 0.2 7.85
    Loans:
    Commercial:
    Commercial and industrial (3) 199.23.39 193.9 3.43 189.9 3.54 185.8 3.63 184.3 3.73
    Real estate mortgage 107.73.56 107.8 3.52 105.8 3.85 104.6 4.12 105.3 3.92
    Real estate construction 17.34.17 16.9 4.37 16.6 4.79 16.2 4.43 16.4 5.02
    Lease financing 11.85.70 11.9 6.15 11.7 5.70 11.7 5.29 12.3 6.66
    Foreign (3)     48.82.39   47.9 2.21   46.6 2.24   44.8 2.09   42.3 2.23
    Total commercial (3)     384.83.42   378.4 3.43   370.6 3.59   363.1 3.67   360.6 3.77
    Consumer:
    Real estate 1-4 family first mortgage 260.04.20 259.5 4.17 257.2 4.15 254.1 4.20 252.6 4.23
    Real estate 1-4 family junior lien mortgage 63.34.31 65.0 4.30 66.8 4.29 68.8 4.30 71.4 4.29
    Credit card 26.411.97 26.2 12.32 25.9 12.23 25.0 12.45 24.0 12.55
    Automobile 53.56.34 51.8 6.50 50.2 6.70 49.1 6.85 47.9 7.05
    Other revolving credit and installment     43.05.07   42.9 5.00 42.6 4.94 42.0 4.83 41.9 4.74
    Total consumer     446.25.02   445.4 5.02   442.7 5.01   439.0 5.04   437.8 5.05
    Total loans (3) 831.04.28 823.8 4.29 813.3 4.36 802.1 4.42 798.4 4.47
    Other     4.55.74   4.6 5.72   4.7 5.22   4.3 5.62   4.2 5.55
    Total earning assets (3)   $1,402.63.43% $ 1,364.3 3.49 % $ 1,344.1 3.57 % $ 1,286.5 3.71 % $ 1,264.1 3.81 %
    Funding sources
    Deposits:
    Interest-bearing checking $40.20.07% $ 36.8 0.07 % $ 35.2 0.07 % $ 34.5 0.06 % $ 40.4 0.06 %
    Market rate and other savings 583.90.07 579.0 0.07 568.7 0.08 553.1 0.08 541.8 0.08
    Savings certificates 38.80.86 40.5 0.89 43.1 0.94 47.3 1.08 52.6 1.23
    Other time deposits 48.50.41 45.8 0.42 39.7 0.48 30.4 0.62 26.0 0.76
    Deposits in foreign offices     94.20.15   91.1 0.14   86.3 0.15   81.1 0.15   68.9 0.15
    Total interest-bearing deposits 805.60.14 793.2 0.14 773.0 0.15 746.4 0.17 729.7 0.19
    Short-term borrowings 58.90.10 54.5 0.09 52.3 0.12 53.4 0.08 57.8 0.14
    Long-term debt 159.21.56 153.8 1.62 153.5 1.65 133.4 1.86 125.5 2.02
    Other liabilities     13.62.73   12.9 2.72   12.8 2.70   12.1 2.64   13.3 2.25
    Total interest-bearing liabilities 1,037.30.39 1,014.4 0.40 991.6 0.42 945.3 0.43 926.3 0.47
    Portion of noninterest-bearing funding sources (3)     365.3-   349.9 -   352.5 -   341.2 -   337.8 -
    Total funding sources (3)   $1,402.6   0.28 $ 1,364.3   0.29 $ 1,344.1   0.30 $ 1,286.5   0.32 $ 1,264.1   0.34

    Net interest margin on a taxable-equivalent basis (3)

    3.15% 3.20 % 3.27 % 3.39 % 3.47 %
    Noninterest-earning assets
    Cash and due from banks $15.9 16.4 16.0 16.4 16.2
    Goodwill 25.7 25.6 25.6 25.6 25.6
    Other     119.8   119.6   120.0   118.4   121.3
    Total noninterest-earnings assets   $161.4   161.6   161.6   160.4   163.1
    Noninterest-bearing funding sources
    Deposits $295.9 284.1 287.4 279.2 280.0
    Other liabilities (3) 51.1 52.9 57.1 57.3 56.2
    Total equity 179.7 174.5 169.6 165.1 164.7

    Noninterest-bearing funding sources used to fund earning assets (3)

        (365.3)   (349.9)   (352.5)   (341.2)   (337.8)

    Net noninterest-bearing funding sources

      $161.4   161.6   161.6   160.4   163.1
    Total assets (3)   $1,564.0   1,525.9   1,505.7   1,446.9   1,427.2
                                                               
     
    (1) Our average prime rate was 3.25% for quarters ended June 30, and March 31 2014, and December 31, September 30 and June 30, 2013. The average three-month London Interbank Offered Rate (LIBOR) was 0.23%, 0.24%, 0.24%, 0.26% and 0.28% for the same quarters, respectively.
    (2) Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented.

    (3) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

     
    Wells Fargo & Company and Subsidiaries
    NONINTEREST INCOME
                   
    Six months
    Quarter ended June 30,   % ended June 30,   %
    (in millions)     2014   2013     Change         2014   2013     Change  
    Service charges on deposit accounts $1,283 1,248 3 % $2,498 2,462 1 %
    Trust and investment fees:
    Brokerage advisory, commissions and other fees 2,280 2,127 7 4,521 4,177 8
    Trust and investment management 838 829 1 1,682 1,628 3
    Investment banking     491   538   (9 )   818   891   (8 )
    Total trust and investment fees     3,609   3,494   3   7,021   6,696   5
    Card fees 847 813 4 1,631 1,551 5
    Other fees:
    Charges and fees on loans 342 387 (12 ) 709 771 (8 )
    Merchant processing fees 183 174 5 355 328 8
    Cash network fees 128 125 2 248 242 2
    Commercial real estate brokerage commissions 99 73 36 171 118 45
    Letters of credit fees 92 102 (10 ) 188 211 (11 )
    All other fees     244   228   7   464   453   2
    Total other fees     1,088   1,089   -   2,135   2,123   1
    Mortgage banking:
    Servicing income, net 1,035 393 163 1,973 707 179
    Net gains on mortgage loan origination/sales activities     688   2,409   (71 )   1,260   4,889   (74 )
    Total mortgage banking     1,723   2,802   (39 )   3,233   5,596   (42 )
    Insurance 453 485 (7 ) 885 948 (7 )
    Net gains from trading activities 382 331 15 814 901 (10 )
    Net gains (losses) on debt securities 71 (54 ) NM 154 (9 ) NM
    Net gains from equity investments 449 203 121 1,296 316 310
    Lease income 129 225 (43 ) 262 355 (26 )
    Life insurance investment income 138 142 (3 ) 270 287 (6 )
    All other     103   (150 ) NM   86   162   (47 )
    Total   $10,275   10,628     (3 )     $20,285   21,388     (5 )
     
    NM - Not meaningful
     
    NONINTEREST EXPENSE    
                       

     

    Six months

    Quarter ended June 30,

    %  

    ended June 30,

    %
    (in millions)     2014   2013   Change         2014   2013   Change  
    Salaries $3,795 3,768 1 % $7,523 7,431 1 %
    Commission and incentive compensation 2,445 2,626 (7 ) 4,861 5,203 (7 )
    Employee benefits 1,170 1,118 5 2,542 2,701 (6 )
    Equipment 445 418 6 935 946 (1 )
    Net occupancy 722 716 1 1,464 1,435 2
    Core deposit and other intangibles 349 377 (7 ) 690 754 (8 )
    FDIC and other deposit assessments 225 259 (13 ) 468 551 (15 )
    Outside professional services 646 607 6 1,205 1,142 6
    Outside data processing 259 235 10 500 468 7
    Contract services 249 226 10 483 433 12
    Travel and entertainment 243 229 6 462 442 5
    Operating losses 364 288 26 523 445 18
    Postage, stationery and supplies 170 184 (8 ) 361 383 (6 )
    Advertising and promotion 187 183 2 305 288 6
    Foreclosed assets 130 146 (11 ) 262 341 (23 )
    Telecommunications 111 125 (11 ) 225 248 (9 )
    Insurance 140 143 (2 ) 265 280 (5 )
    Operating leases 54 49 10 104 97 7
    All other     490   558 (12 )   964   1,067 (10 )
    Total   $12,194   12,255   -       $24,142   24,655   (2 )
     
    Wells Fargo & Company and Subsidiaries
    FIVE QUARTER NONINTEREST INCOME
             
      Quarter ended
    June 30,Mar. 31, Dec. 31, Sept. 30, June 30,
    (in millions)     2014   2014     2013     2013     2013  
    Service charges on deposit accounts $1,283 1,215 1,283 1,278 1,248
    Trust and investment fees:
    Brokerage advisory, commissions and other fees 2,280 2,241 2,150 2,068 2,127
    Trust and investment management 838 844 850 811 829
    Investment banking     491   327     458     397     538  
    Total trust and investment fees     3,609   3,412     3,458     3,276     3,494  
    Card fees 847 784 827 813 813
    Other fees:
    Charges and fees on loans 342 367 379 390 387
    Merchant transaction processing fees 183 172 172 169 174
    Cash network fees 128 120 122 129 125
    Commercial real estate brokerage commissions 99 72 129 91 73
    Letters of credit fees 92 96 99 100 102
    All other fees     244   220     218     219     228  
    Total other fees     1,088   1,047     1,119     1,098     1,089  
    Mortgage banking:
    Servicing income, net 1,035 938 709 504 393
    Net gains on mortgage loan origination/sales activities     688   572     861     1,104     2,409  
    Total mortgage banking     1,723   1,510     1,570     1,608     2,802  
    Insurance 453 432 453 413 485
    Net gains from trading activities 382 432 325 397 331
    Net gains (losses) on debt securities 71 83 (14 ) (6 ) (54 )
    Net gains from equity investments 449 847 654 502 203
    Lease income 129 133 148 160 225
    Life insurance investment income 138 132 125 154 142
    All other     103   (17 )   (86 )   37     (150 )
    Total   $10,275   10,010     9,862     9,730     10,628  
     
    FIVE QUARTER NONINTEREST EXPENSE
     
      Quarter ended
    June 30,Mar. 31, Dec. 31, Sept. 30, June 30,
    (in millions)     2014   2014     2013     2013     2013  
    Salaries $3,795 3,728 3,811 3,910 3,768
    Commission and incentive compensation 2,445 2,416 2,347 2,401 2,626
    Employee benefits 1,170 1,372 1,160 1,172 1,118
    Equipment 445 490 567 471 418
    Net occupancy 722 742 732 728 716
    Core deposit and other intangibles 349 341 375 375 377
    FDIC and other deposit assessments 225 243 196 214 259
    Outside professional services 646 559 754 623 607
    Outside data processing 259 241 264 251 235
    Contract services 249 234 261 241 226
    Travel and entertainment 243 219 234 209 229
    Operating losses 364 159 181 195 288
    Postage, stationery and supplies 170 191 189 184 184
    Advertising and promotion 187 118 165 157 183
    Foreclosed assets 130 132 103 161 146
    Telecommunications 111 114 118 116 125
    Insurance 140 125 59 98 143
    Operating leases 54 50 51 56 49
    All other     490   474     518     540     558  
    Total   $12,194   11,948     12,085     12,102     12,255  
     
    Wells Fargo & Company and Subsidiaries
    CONSOLIDATED BALANCE SHEET
     
    June 30,Dec. 31, %
    (in millions, except shares)     2014   2013   Change  
    Assets
    Cash and due from banks $20,635 19,919 4 %
    Federal funds sold, securities purchased under resale agreements and other short-term investments 238,719 213,793 12
    Trading assets 71,674 62,813 14
    Investment securities:
    Available-for-sale, at fair value 248,961 252,007 (1 )
    Held-to-maturity, at cost (fair value $30,386 and $12,247) 30,108 12,346 144
    Mortgages held for sale (includes $16,448 and $13,879 carried at fair value) (1) 21,064 16,763 26
    Loans held for sale (includes $1 and $1 carried at fair value) (1) 9,762 133 NM
     
    Loans (includes $5,926 and $5,995 carried at fair value) (1)(2) 828,942 822,286 1
    Allowance for loan losses     (13,101) (14,502 ) (10 )
    Net loans (2)     815,841   807,784   1
    Mortgage servicing rights:
    Measured at fair value 13,900 15,580 (11 )
    Amortized 1,196 1,229 (3 )
    Premises and equipment, net 8,977 9,156 (2 )
    Goodwill 25,705 25,637 -
    Other assets (includes $1,902 and $1,386 carried at fair value) (1)     92,332   86,342   7
    Total assets (2)   $1,598,874   1,523,502   5
    Liabilities
    Noninterest-bearing deposits $308,099 288,117 7
    Interest-bearing deposits     810,478   791,060   2
    Total deposits 1,118,577 1,079,177 4
    Short-term borrowings 61,849 53,883 15
    Accrued expenses and other liabilities (2) 69,021 66,436 4
    Long-term debt     167,878   152,998   10
    Total liabilities (2)     1,417,325   1,352,494   5
    Equity
    Wells Fargo stockholders' equity:
    Preferred stock 18,749 16,267 15

    Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares and 5,481,811,474 shares

    9,136 9,136 -
    Additional paid-in capital 59,926 60,296 (1 )
    Retained earnings 99,926 92,361 8
    Cumulative other comprehensive income 4,117 1,386 197
    Treasury stock – 231,916,784 shares and 224,648,769 shares (9,271) (8,104 ) 14
    Unearned ESOP shares     (1,724) (1,200 ) 44
    Total Wells Fargo stockholders' equity 180,859 170,142 6
    Noncontrolling interests     690   866   (20 )
    Total equity     181,549   171,008   6
    Total liabilities and equity (2)   $1,598,874   1,523,502   5  
     
    NM - Not meaningful.

    (1) Parenthetical amounts represent assets and liabilities for which we have elected the fair value option.

    (2) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

     
    Wells Fargo & Company and Subsidiaries
    FIVE QUARTER CONSOLIDATED BALANCE SHEET
             
    June 30,Mar. 31, Dec. 31, Sept. 30, June 30,
    (in millions)     2014     2014     2013     2013     2013  
    Assets
    Cash and due from banks $20,635 19,731 19,919 18,928 17,939
    Federal funds sold, securities purchased under
    resale agreements and other short-term investments 238,719 222,781 213,793 182,036 148,665
    Trading assets 71,674 63,753 62,813 60,203 58,619
    Investment securities:
    Available-for-sale, at fair value 248,961 252,665 252,007 259,399 249,439
    Held-to-maturity, at cost 30,108 17,662 12,346 - -
    Mortgages held for sale 21,064 16,233 16,763 25,395 38,785
    Loans held for sale 9,762 91 133 204 190
     
    Loans (1) 828,942 826,443 822,286 809,135 799,867
    Allowance for loan losses     (13,101)   (13,695 )   (14,502 )   (15,159 )   (16,144 )
    Net loans (1)     815,841     812,748     807,784     793,976     783,723  
    Mortgage servicing rights:
    Measured at fair value 13,900 14,953 15,580 14,501 14,185
    Amortized 1,196 1,219 1,229 1,204 1,176
    Premises and equipment, net 8,977 9,020 9,156 9,120 9,190
    Goodwill 25,705 25,637 25,637 25,637 25,637
    Other assets     92,332     90,214     86,342     94,262     90,908  
    Total assets (1)   $1,598,874     1,546,707     1,523,502     1,484,865     1,438,456  
    Liabilities
    Noninterest-bearing deposits $308,099 294,863 288,117 279,911 277,648
    Interest-bearing deposits     810,478     799,713     791,060     761,960     743,937  
    Total deposits 1,118,577 1,094,576 1,079,177 1,041,871 1,021,585
    Short-term borrowings 61,849 57,061 53,883 53,851 56,983
    Accrued expenses and other liabilities (1) 69,021 65,179 66,436 69,118 72,736
    Long-term debt     167,878     153,422     152,998     151,212     123,375  
    Total liabilities (1)     1,417,325     1,370,238     1,352,494     1,316,052     1,274,679  
    Equity
    Wells Fargo stockholders' equity:
    Preferred stock 18,749 17,179 16,267 15,549 13,988
    Common stock 9,136 9,136 9,136 9,136 9,136
    Additional paid-in capital 59,926 60,618 60,296 60,188 59,945
    Retained earnings 99,926 96,368 92,361 88,625 84,923
    Cumulative other comprehensive income 4,117 2,752 1,386 2,289 1,797
    Treasury stock (9,271) (8,206 ) (8,104 ) (7,290 ) (5,858 )
    Unearned ESOP shares     (1,724)   (2,193 )   (1,200 )   (1,332 )   (1,510 )

    Total Wells Fargo stockholders' equity

    180,859 175,654 170,142 167,165 162,421
    Noncontrolling interests     690     815     866     1,648     1,356  
    Total equity     181,549     176,469     171,008     168,813     163,777  
    Total liabilities and equity (1)   $1,598,874     1,546,707     1,523,502     1,484,865     1,438,456  
     

    (1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

     
    Wells Fargo & Company and Subsidiaries
    FIVE QUARTER INVESTMENT SECURITIES
             
    June 30,Mar. 31, Dec. 31, Sept. 30, June 30,
    (in millions)     2014   2014   2013   2013   2013
    Available-for-sale securities:
    Securities of U.S. Treasury and federal agencies $6,414 6,359 6,280 6,406 6,383
    Securities of U.S. states and political subdivisions 44,779 44,140 42,536 42,293 40,890
    Mortgage-backed securities:
    Federal agencies 116,908 118,090 117,591 118,963 110,561
    Residential and commercial     29,433   30,362   31,200   32,329   33,423
    Total mortgage-backed securities 146,341 148,452 148,791 151,292 143,984
    Other debt securities     48,312   50,253   51,015   55,828   55,425
    Total available-for-sale debt securities 245,846 249,204 248,622 255,819 246,682
    Marketable equity securities     3,115   3,461   3,385   3,580   2,757
    Total available-for-sale securities     248,961   252,665   252,007   259,399   249,439
    Held-to-maturity securities:
    Securities of U.S. Treasury and federal agencies 17,777 5,861 - - -
    Securities of U.S. states and political subdivisions 41 - - - -
    Federal agency mortgage-backed securities 6,030 6,199 6,304 - -
    Other debt securities     6,260   5,602   6,042   -   -
    Total held-to-maturity debt securities     30,108   17,662   12,346   -   -
    Total investment securities   $279,069   270,327   264,353   259,399   249,439
     
    FIVE QUARTER LOANS
                   
    June 30,Mar. 31, Dec. 31, Sept. 30, June 30,
    (in millions)     2014   2014   2013   2013   2013
    Commercial:
    Commercial and industrial (1) $206,055 196,768 193,811 188,593 186,692
    Real estate mortgage 108,418 107,969 107,100 105,540 104,673
    Real estate construction 17,056 16,615 16,747 16,413 16,442
    Lease financing 11,908 11,841 12,034 11,688 11,766
    Foreign (1)(2)     47,967   48,088   47,551   46,621   41,792
    Total commercial     391,404   381,281   377,243   368,855   361,365
    Consumer:
    Real estate 1-4 family first mortgage 260,104 259,478 258,497 254,924 252,841
    Real estate 1-4 family junior lien mortgage 62,455 63,965 65,914 67,675 70,059
    Credit card 27,215 26,061 26,870 25,448 24,815
    Automobile 54,095 52,607 50,808 49,693 48,648
    Other revolving credit and installment     33,669   43,051   42,954   42,540   42,139
    Total consumer     437,538   445,162   445,043   440,280   438,502
    Total loans (3)   $828,942   826,443   822,286   809,135   799,867
     

    (1) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

    (2) Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign primarily based on whether the borrower's primary address is outside of the United States.

    (3) Includes $25.0 billion, $25.9 billion, $26.7 billion, $27.8 billion and $28.8 billion of purchased credit-impaired (PCI) loans at June 30 and March 31, 2014, and December 31, September 30 and June 30, 2013, respectively. See the PCI loans table for detail of PCI loans.

     
    Wells Fargo & Company and Subsidiaries
    FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
             
    June 30,Mar. 31, Dec. 31, Sept. 30, June 30,
    (in millions)     2014     2014   2013   2013   2013
    Nonaccrual loans:
    Commercial:
    Commercial and industrial $693 630 738 809 1,022
    Real estate mortgage 1,802 2,030 2,252 2,496 2,708
    Real estate construction 239 296 416 517 665
    Lease financing 28 31 29 17 20
    Foreign     36     40   40   47   40
    Total commercial     2,798     3,027   3,475   3,886   4,455
    Consumer:
    Real estate 1-4 family first mortgage 9,026 9,357 9,799 10,450 10,705
    Real estate 1-4 family junior lien mortgage 1,964 2,072 2,188 2,333 2,522
    Automobile 150 161 173 188 200
    Other revolving credit and installment     34     33   33   36   33
    Total consumer     11,174     11,623   12,193   13,007   13,460
    Total nonaccrual loans (1)(2)(3)     13,972     14,650   15,668   16,893   17,915
    As a percentage of total loans (4) 1.69% 1.77 1.91 2.09 2.24
    Foreclosed assets:
    Government insured/guaranteed (5) $2,359 2,302 2,093 1,781 1,026
    Non-government insured/guaranteed     1,748     1,813   1,844   2,021   2,114
    Total foreclosed assets     4,107     4,115   3,937   3,802   3,140
    Total nonperforming assets   $18,079     18,765   19,605   20,695   21,055
    As a percentage of total loans (4)     2.18%   2.27   2.38   2.56   2.63
     

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

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

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

    (4) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

    (5) Consistent with regulatory reporting requirements, foreclosed real estate resulting from government insured/guaranteed loans are classified as nonperforming. Both principal and interest related to these foreclosed real estate assets are collectible because the loans were predominantly insured by the FHA or guaranteed by the VA. Previous enhancements to loan modification programs and release of an FHA foreclosure moratorium contributed to elevated levels of foreclosed assets in the latter half of 2013. As a result, the increase in balance at June 30, 2014, reflects an industry slowdown in meeting U.S. Department of Housing and Urban Development (HUD) conveyance requirements due to industry resource constraints to deal with the elevated levels, as well as other factors, including an increase in foreclosures in states with longer redemption periods, longer occupant evacuation periods, increased maintenance required for aging foreclosures and longer repair authorization periods.

     
    Wells Fargo & Company and Subsidiaries
    LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
             
    June 30,Mar. 31, Dec. 31, Sept. 30, June 30,
    (in millions)   2014   2014   2013   2013   2013
    Loans 90 days or more past due and still accruing:
    Total (excluding PCI)(1): $18,582 21,215 23,219 22,181 22,197
    Less: FHA insured/guaranteed by the VA (2)(3) 16,978 19,405 21,274 20,214 20,112
    Less: Student loans guaranteed under the FFELP (4)     707   860   900   917   931
    Total, not government insured/guaranteed   $897   950   1,045   1,050   1,154
     
    By segment and class, not government insured/guaranteed:
    Commercial:
    Commercial and industrial $51 11 11 125 37
    Real estate mortgage 53 13 35 40 175
    Real estate construction 16 69 97 1 4
    Foreign     2   2   -   1   -
    Total commercial     122   95   143   167   216
    Consumer:
    Real estate 1-4 family first mortgage (3) 311 333 354 383 476
    Real estate 1-4 family junior lien mortgage (3) 70 88 86 89 92
    Credit card 266 308 321 285 263
    Automobile 48 41 55 48 32
    Other revolving credit and installment     80   85   86   78   75
    Total consumer     775   855   902   883   938
    Total, not government insured/guaranteed   $897   950   1,045   1,050   1,154
     

    (1) The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $4.0 billion, $4.3 billion, $4.5 billion, $4.9 billion and $5.4 billion, at June 30 and March 31, 2014 and December 31, September 30 and June 30, 2013, respectively. These amounts are excluded from the above table as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status.

    (2) Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.

    (3) Includes mortgages held for sale 90 days or more past due and still accruing.

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

     
    Wells Fargo & Company and Subsidiaries
    PURCHASED CREDIT-IMPAIRED (PCI) LOANS
             

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

     

    Under the accounting guidance for PCI loans, the excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan, or pool of loans, in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.

     

    Subsequent to acquisition, we regularly evaluate our estimates of cash flows expected to be collected. These evaluations, performed quarterly, require the continued usage of key assumptions and estimates, similar to the initial estimate of fair value. If we have probable decreases in the expected cash flows (other than due to decreases in interest rate indices and changes in prepayment assumptions), we charge the provision for credit losses, resulting in an increase to the allowance for loan losses. If we have probable and significant increases in the expected cash flows subsequent to establishing an additional allowance, we first reverse any previously established allowance and then increase interest income over the remaining life of the loan, or pool of loans.

     

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

                       
     
    June 30,December 31,
    (in millions)     2014     2013   2008
    Commercial:
    Commercial and industrial $192 215 4,580
    Real estate mortgage 1,003 1,136 5,803
    Real estate construction 305 433 6,462
    Foreign     467     720   1,859
    Total commercial     1,967     2,504   18,704
    Consumer:
    Real estate 1-4 family first mortgage 22,888 24,100 39,214
    Real estate 1-4 family junior lien mortgage 112 123 728
    Automobile     -     -   151
    Total consumer     23,000     24,223   40,093
    Total PCI loans (carrying value)   $24,967     26,727   58,797
     
    Wells Fargo & Company and Subsidiaries
    CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS
                   

    The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference. A nonaccretable difference is established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Substantially all our commercial and industrial, CRE and foreign PCI loans are accounted for as individual loans. Conversely, Pick-a-Pay and other consumer PCI loans have been aggregated into several pools based on common risk characteristics. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Resolutions of loans may include sales to third parties, receipt of payments in settlement with the borrower, or foreclosure of the collateral. Our policy is to remove an individual loan from a pool based on comparing the amount received from its resolution with its contractual amount. Any difference between these amounts is absorbed by the nonaccretable difference. This removal method assumes that the amount received from resolution approximates pool performance expectations. The accretable yield percentage is unaffected by the resolution and any changes in the effective yield for the remaining loans in the pool are addressed by our quarterly cash flow evaluation process for each pool. For loans that are resolved by payment in full, there is no release of the nonaccretable difference for the pool because there is no difference between the amount received at resolution and the contractual amount of the loan. Modified PCI loans are not removed from a pool even if those loans would otherwise be deemed troubled debt restructurings (TDRs). Modified PCI loans that are accounted for individually are considered TDRs, and removed from PCI accounting, if there has been a concession granted in excess of the original nonaccretable difference. The following table provides an analysis of changes in the nonaccretable difference.

                                     
     
    Other
    (in millions)   Commercial     Pick-a-Pay     consumer     Total
    Balance, December 31, 2008 $ 10,410 26,485 4,069 40,964
    Addition of nonaccretable difference due to acquisitions 213 - - 213
    Release of nonaccretable difference due to:
    Loans resolved by settlement with borrower (1) (1,512 ) - - (1,512 )
    Loans resolved by sales to third parties (2) (308 ) - (85 ) (393 )
    Reclassification to accretable yield for loans with improving credit-related cash flows (3) (1,605 ) (3,897 ) (823 ) (6,325 )
    Use of nonaccretable difference due to:
    Losses from loan resolutions and write-downs (4)     (6,933 )   (17,884 )   (2,961 )   (27,778 )
    Balance, December 31, 20132654,7042005,169
    Addition of nonaccretable difference due to acquisitions13--13
    Release of nonaccretable difference due to:
    Loans resolved by settlement with borrower (1)(18)--(18)
    Loans resolved by sales to third parties (2)(14)--(14)
    Reclassification to accretable yield for loans with improving credit-related cash flows (3)(103)(1,954)(19)(2,076)
    Use of nonaccretable difference due to:
    Net recoveries (losses) from loan resolutions and write-downs (4)     (3)   21     19     37  
    Balance, June 30, 2014   $140     2,771     200     3,111  
                                     
    Balance, March 31, 2014$1454,7042125,061
    Addition of nonaccretable difference due to acquisitions13--13
    Release of nonaccretable difference due to:
    Loans resolved by settlement with borrower (1)(13)--(13)
    Loans resolved by sales to third parties (2)----
    Reclassification to accretable yield for loans with improving credit-related cash flows (3)(2)(1,954)(10)(1,966)
    Use of nonaccretable difference due to:
    Net recoveries (losses) from loan resolutions and write-downs (4)     (3)   21     (2)   16  
    Balance, June 30, 2014   $140     2,771     200     3,111  
     

    (1) Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases for settlements with borrowers due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations.

    (2) Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.

    (3) Reclassification of nonaccretable difference to accretable yield will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans.

    (4) Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan. Also includes foreign exchange adjustments related to underlying principal for which the nonaccretable difference was established.

     
    Wells Fargo & Company and Subsidiaries
    CHANGES IN ACCRETABLE YIELD RELATED TO PCI LOANS
             
    The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:
     

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

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

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

     
    The change in the accretable yield related to PCI loans is presented in the following table.
                   
     
    (in millions)      
    Balance, December 31, 2008 $ 10,447
    Addition of accretable yield due to acquisitions 132
    Accretion into interest income (1) (11,184 )
    Accretion into noninterest income due to sales (2) (393 )
    Reclassification from nonaccretable difference for loans with improving credit-related cash flows 6,325
    Changes in expected cash flows that do not affect nonaccretable difference (3)     12,065  
    Balance, December 31, 201317,392
    Addition of accretable yield due to acquisitions-
    Accretion into interest income (1)(737)
    Accretion into noninterest income due to sales (2)(35)
    Reclassification from nonaccretable difference for loans with improving credit-related cash flows2,076
    Changes in expected cash flows that do not affect nonaccretable difference (3)     (278)
    Balance, June 30, 2014   $18,418  
                   
    Balance, March 31, 2014$17,086
    Addition of accretable yield due to acquisitions-
    Accretion into interest income (1)(362)
    Accretion into noninterest income due to sales (2)-
    Reclassification from nonaccretable difference for loans with improving credit-related cash flows1,966
    Changes in expected cash flows that do not affect nonaccretable difference (3)     (272)
    Balance, June 30, 2014   $18,418  
     

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

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

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

     
    CHANGES IN ALLOWANCE FOR PCI LOAN LOSSES
                 
    When it is estimated that the expected cash flows have decreased subsequent to acquisition for a PCI loan or pool of loans, an allowance is established and a provision for additional loss is recorded as a charge to income. The following table summarizes the changes in allowance for PCI loan losses.
                                   
     
    Other
    (in millions)

     

    Commercial

        Pick-a-Pay   consumer     Total  
    Balance, December 31, 2008 $ - - - -
    Provision for loan losses 1,641 - 107 1,748
    Charge-offs   (1,615 )   -   (103 )   (1,718 )
    Balance, December 31, 201326-430
    Provision (reversal of provision) for loan losses(19)-1(18)
    Charge-offs   (2)   -   (2)   (4)
    Balance, June 30, 2014$5     -   3     8  
                                   
    Balance, March 31, 2014$18-321
    Reversal of provision for loan losses(14)--(14)
    Recoveries   1     -   -     1  
    Balance, June 30, 2014$5     -   3     8  
     
    Wells Fargo & Company and Subsidiaries
    PICK-A-PAY PORTFOLIO (1)
                         
    June 30, 2014
    PCI loans All other loans
    Ratio of Ratio of
    Adjusted carrying carrying
    unpaid Current value to value to
    principal LTV Carrying current Carrying current
    (in millions)   balance (2)   ratio (3)     value (4)   value (5)     value (4)   value (5)
    California $ 19,078 85 % $ 15,673 69 % $ 12,317 62 %
    Florida 2,253 94 1,705 66 2,561 76
    New Jersey 953 85 832 67 1,650 73
    New York 585 80 534 66 753 70
    Texas 250 67 222 59 998 53
    Other states     4,483 86   3,698 69   7,022 72
    Total Pick-a-Pay loans   $ 27,602 $ 22,664 $ 25,301
                                                 
     

    (1) The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2014.

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

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

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

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

     
    NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS
               
    June 30,Mar. 31, Dec. 31, Sept. 30, June 30,
    (in millions) 2014   2014   2013   2013  

    2013

    Commercial:            

    Legacy Wachovia commercial and industrial, commercial real estate and foreign PCI loans (1)

    $1,499 1,720 2,013 2,342 2,532
    Total commercial     1,499   1,720   2,013   2,342   2,532
    Consumer:
    Pick-a-Pay mortgage (1) 47,965 49,533 50,971 52,805 54,755
    Liquidating home equity 3,290 3,505 3,695 3,911 4,173
    Legacy Wells Fargo Financial indirect auto 85 132 207 299 428
    Legacy Wells Fargo Financial debt consolidation 12,169 12,545 12,893 13,281 13,707
    Education Finance - government guaranteed (2) - 10,204 10,712 11,094 11,534
    Legacy Wachovia other PCI loans (1)     336   355   375   406   435
    Total consumer     63,845   76,274   78,853   81,796   85,032
    Total non-strategic and liquidating loan portfolios   $65,344   77,994   80,866   84,138   87,564
     

    (1) Net of purchase accounting adjustments related to PCI loans.

    (2) The change from prior quarter was predominantly due to the transfer of government guaranteed student loans to loans held for sale.

     
    Wells Fargo & Company and Subsidiaries
    CHANGES IN ALLOWANCE FOR CREDIT LOSSES
               
    Quarter ended June 30, Year ended June 30,
    (in millions)   2014       2013       2014     2013  
    Balance, beginning of period$14,414 17,193 14,971 17,477
    Provision for credit losses 217 652 542 1,871
    Interest income on certain impaired loans (1) (55) (73 ) (111) (146 )
    Loan charge-offs:
    Commercial:
    Commercial and industrial (139) (184 ) (297) (365 )
    Real estate mortgage (15) (49 ) (35) (109 )
    Real estate construction (3) (7 ) (4) (12 )
    Lease financing (3) (24 ) (7) (27 )
    Foreign     (8)     (8 )     (13)   (19 )
    Total commercial     (168)     (272 )     (356)   (532 )
    Consumer:
    Real estate 1-4 family first mortgage (193) (392 ) (416) (867 )
    Real estate 1-4 family junior lien mortgage (220) (428 ) (469) (942 )
    Credit card (266) (266 ) (533) (532 )
    Automobile (143) (126 ) (323) (290 )
    Other revolving credit and installment     (171)     (185 )     (348)   (367 )
    Total consumer     (993)     (1,397 )     (2,089)   (2,998 )
    Total loan charge-offs     (1,161)     (1,669 )     (2,445)   (3,530 )
    Loan recoveries:
    Commercial:
    Commercial and industrial 85 107 198 195
    Real estate mortgage 25 54 67 85
    Real estate construction 23 52 47 91
    Lease financing 2 6 5 10
    Foreign     2       9       3     17  
    Total commercial     137       228       320     398  
    Consumer:
    Real estate 1-4 family first mortgage 56 64 109 110
    Real estate 1-4 family junior lien mortgage 60 69 117 134
    Credit card 55 32 91 63
    Automobile 97 84 187 172
    Other revolving credit and installment     39       40       79     82  
    Total consumer     307       289       583     561  
    Total loan recoveries     444       517       903     959  
    Net loan charge-offs (2)     (717)     (1,152 )     (1,542)   (2,571 )
    Allowances related to business combinations/other     (25)     (2 )     (26)   (13 )
    Balance, end of period   $13,834       16,618       13,834     16,618  
    Components:
    Allowance for loan losses $13,101 16,144 13,101 16,144
    Allowance for unfunded credit commitments     733       474       733     474  
    Allowance for credit losses (3)   $13,834       16,618       13,834     16,618  
    Net loan charge-offs (annualized) as a percentage of average total loans (2) 0.35% 0.58 0.38 0.65
    Allowance for loan losses as a percentage of total loans (3)(4) 1.58 2.02 1.58 2.02
    Allowance for credit losses as a percentage of total loans (3)(4)     1.67       2.08       1.67     2.08  
     

    (1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan's effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income.

    (2) For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting estimates.

    (3) The allowance for credit losses includes $8 million and $71 million at June 30, 2014 and 2013, respectively, related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs.

    (4) As previously disclosed with our first quarter 2014 results, financial information for certain periods prior to 2014 was revised to reflect our determination that certain factoring arrangements did not qualify as loans. See footnote (1) to the Summary Financial Data table for more information.

     
    Wells Fargo & Company and Subsidiaries
    FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
               
    Quarter ended
    June 30,Mar. 31, Dec. 31, Sept. 30, June 30,
    (in millions)     2014       2014     2013     2013     2013  
    Balance, beginning of quarter$14,414 14,971 15,647 16,618 17,193
    Provision for credit losses 217 325 363 75 652
    Interest income on certain impaired loans (1) (55) (56 ) (55 ) (63 ) (73 )
    Loan charge-offs:
    Commercial:
    Commercial and industrial (139) (158 )