WELLS FARGO & COMPANY/MN
10-Qs and 10-Ks
PROXIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended
June 30, 2024
OR
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
||||
For the transition period from
__________
to
__________
Commission file number
001-2979
WELLS FARGO & COMPANY
(Exact name of registrant as specified in its charter)
|
|
No. |
|
||||||||||||
| (State of incorporation) | (I.R.S. Employer Identification No.) | |||||||||||||
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code:
1-
866
-
249-3302
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol |
Name of Each Exchange
on Which Registered |
||||||
|
|
|
New York Stock
Exchange
(
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
þ
No
¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
þ
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Non-accelerated filer
¨
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
|
Shares Outstanding
|
||||||||
| July 23, 2024 | ||||||||
|
Common stock, $1-2/3 par value
|
|
|||||||
| FORM 10-Q | ||||||||||||||
| CROSS-REFERENCE INDEX | ||||||||||||||
| PART I | Financial Information | |||||||||||||
| Item 1. | Financial Statements | Page | ||||||||||||
| Consolidated Statement of Income | ||||||||||||||
| Consolidated Statement of Comprehensive Income | ||||||||||||||
| Consolidated Balance Sheet | ||||||||||||||
| Consolidated Statement of Changes in Equity | ||||||||||||||
| Consolidated Statement of Cash Flows | ||||||||||||||
| Notes to Financial Statements | ||||||||||||||
| 1 | — | Summary of Significant Accounting Policies | ||||||||||||
| 2 | — | Trading Activities | ||||||||||||
| 3 | — | Available-for-Sale and Held-to-Maturity Debt Securities | ||||||||||||
| 4 | — | Equity Securities | ||||||||||||
| 5 | — | Loans and Related Allowance for Credit Losses | ||||||||||||
| 6 | — | Mortgage Banking Activities | ||||||||||||
| 7 | — | Intangible Assets and Other Assets | ||||||||||||
| 8 | — | Leasing Activity | ||||||||||||
| 9 | — | Preferred Stock | ||||||||||||
| 10 | — | Legal Actions | ||||||||||||
| 11 | — | Derivatives | ||||||||||||
| 12 | — | Fair Values of Assets and Liabilities | ||||||||||||
| 13 | — | Securitizations and Variable Interest Entities | ||||||||||||
| 14 | — | Guarantees and Other Commitments | ||||||||||||
| 15 | — |
Securities and Other Collateralized Financing Activities
|
||||||||||||
| 16 | — | Pledged Assets and Collateral | ||||||||||||
| 17 | — | Operating Segments | ||||||||||||
| 18 | — | Revenue and Expenses | ||||||||||||
| 19 | — | Employee Benefits | ||||||||||||
| 20 | — | Earnings and Dividends Per Common Share | ||||||||||||
| 21 | — | Other Comprehensive Income | ||||||||||||
| 22 | — | Regulatory Capital Requirements and Other Restrictions | ||||||||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Financial Review) | |||||||||||||
| Summary Financial Data | ||||||||||||||
| Overview | ||||||||||||||
| Earnings Performance | ||||||||||||||
| Balance Sheet Analysis | ||||||||||||||
| Off-Balance Sheet Arrangements | ||||||||||||||
| Risk Management | ||||||||||||||
| Capital Management | ||||||||||||||
| Regulatory Matters | ||||||||||||||
| Critical Accounting Policies | ||||||||||||||
| Current Accounting Developments | ||||||||||||||
| Forward-Looking Statements | ||||||||||||||
| Risk Factors | ||||||||||||||
| Glossary of Acronyms | ||||||||||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |||||||||||||
| Item 4. | Controls and Procedures | |||||||||||||
| PART II | Other Information | |||||||||||||
| Item 1. | Legal Proceedings | |||||||||||||
| Item 1A. | Risk Factors | |||||||||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||||||||||
| Item 5. | Other Information | |||||||||||||
| Item 6. | Exhibits | |||||||||||||
| Signature | ||||||||||||||
| Wells Fargo & Company |
1
|
|||||||
FINANCIAL REVIEW
|
Summary Financial Data
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Quarter ended |
Jun 30, 2024
% Change from |
Six months ended | |||||||||||||||||||||||||||||||||||||||||||||
|
($ in millions, except ratios and per share amounts)
|
Jun 30,
2024 |
Mar 31,
2024 |
Jun 30,
2023 |
Mar 31,
2024 |
Jun 30,
2023 |
Jun 30,
2024 |
Jun 30,
2023 |
%
Change |
|||||||||||||||||||||||||||||||||||||||
| Selected Income Statement Data | |||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 20,689 | 20,863 | 20,533 | (1) | % | 1 | $ | 41,552 | 41,262 | 1 | % | |||||||||||||||||||||||||||||||||||
| Noninterest expense | 13,293 | 14,338 | 12,987 | (7) | 2 | 27,631 | 26,663 | 4 | |||||||||||||||||||||||||||||||||||||||
|
Pre-tax pre-provision profit (PTPP) (1)
|
7,396 | 6,525 | 7,546 | 13 | (2) | 13,921 | 14,599 | (5) | |||||||||||||||||||||||||||||||||||||||
|
Provision for credit losses (2)
|
1,236 | 938 | 1,713 | 32 | (28) | 2,174 | 2,920 | (26) | |||||||||||||||||||||||||||||||||||||||
|
Wells Fargo net income
|
4,910 | 4,619 | 4,938 | 6 | (1) | 9,529 | 9,929 | (4) | |||||||||||||||||||||||||||||||||||||||
| Wells Fargo net income applicable to common stock | 4,640 | 4,313 | 4,659 | 8 | — | 8,953 | 9,372 | (4) | |||||||||||||||||||||||||||||||||||||||
| Common Share Data | |||||||||||||||||||||||||||||||||||||||||||||||
| Diluted earnings per common share | 1.33 | 1.20 | 1.25 | 11 | 6 | 2.53 | 2.48 | 2 | |||||||||||||||||||||||||||||||||||||||
| Dividends declared per common share | 0.35 | 0.35 | 0.30 | — | 17 | 0.70 | 0.60 | 17 | |||||||||||||||||||||||||||||||||||||||
| Common shares outstanding | 3,402.7 | 3,501.7 | 3,667.7 | (3) | (7) | ||||||||||||||||||||||||||||||||||||||||||
| Average common shares outstanding | 3,448.3 | 3,560.1 | 3,699.9 | (3) | (7) | 3,504.2 | 3,742.6 | (6) | |||||||||||||||||||||||||||||||||||||||
| Diluted average common shares outstanding | 3,486.2 | 3,600.1 | 3,724.9 | (3) | (6) | 3,543.2 | 3,772.4 | (6) | |||||||||||||||||||||||||||||||||||||||
|
Book value per common share (3)
|
$ | 47.01 | 46.40 | 43.87 | 1 | 7 | |||||||||||||||||||||||||||||||||||||||||
|
Tangible book value per common share (3)(4)
|
39.57 | 39.17 | 36.53 | 1 | 8 | ||||||||||||||||||||||||||||||||||||||||||
| Selected Equity Data (period-end) | |||||||||||||||||||||||||||||||||||||||||||||||
| Total equity | 178,148 | 182,674 | 181,952 | (2) | (2) | ||||||||||||||||||||||||||||||||||||||||||
| Common stockholders’ equity | 159,963 | 162,481 | 160,916 | (2) | (1) | ||||||||||||||||||||||||||||||||||||||||||
|
Tangible common equity (4)
|
134,660 | 137,163 | 133,990 | (2) | 1 | ||||||||||||||||||||||||||||||||||||||||||
| Performance Ratios | |||||||||||||||||||||||||||||||||||||||||||||||
|
Return on average assets (ROA) (5)
|
1.03 | % | 0.97 | 1.05 | 1.00 | % | 1.07 | ||||||||||||||||||||||||||||||||||||||||
|
Return on average equity (ROE) (6)
|
11.5 | 10.5 | 11.4 | 11.0 | 11.6 | ||||||||||||||||||||||||||||||||||||||||||
|
Return on average tangible common equity (ROTCE) (4)
|
13.7 | 12.3 | 13.7 | 13.0 | 13.9 | ||||||||||||||||||||||||||||||||||||||||||
|
Efficiency ratio (7)
|
64 | 69 | 63 | 66 | 65 | ||||||||||||||||||||||||||||||||||||||||||
| Net interest margin on a taxable-equivalent basis | 2.75 | 2.81 | 3.09 | 2.78 | 3.14 | ||||||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (average) | |||||||||||||||||||||||||||||||||||||||||||||||
| Loans | $ | 916,977 | 928,075 | 945,906 | (1) | (3) | $ | 922,526 | 947,271 | (3) | |||||||||||||||||||||||||||||||||||||
| Assets | 1,914,647 | 1,916,974 | 1,878,253 | — | 2 | 1,915,810 | 1,871,005 | 2 | |||||||||||||||||||||||||||||||||||||||
| Deposits | 1,346,478 | 1,341,628 | 1,347,449 | — | — | 1,344,052 | 1,352,046 | (1) | |||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (period-end) | |||||||||||||||||||||||||||||||||||||||||||||||
| Debt securities | 520,254 | 506,280 | 503,468 | 3 | 3 | ||||||||||||||||||||||||||||||||||||||||||
| Loans | 917,907 | 922,784 | 947,960 | (1) | (3) | ||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses for loans | 14,789 | 14,862 | 14,786 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Equity securities | 60,763 | 59,556 | 67,471 | 2 | (10) | ||||||||||||||||||||||||||||||||||||||||||
| Assets | 1,940,073 | 1,959,153 | 1,876,320 | (1) | 3 | ||||||||||||||||||||||||||||||||||||||||||
| Deposits | 1,365,894 | 1,383,147 | 1,344,584 | (1) | 2 | ||||||||||||||||||||||||||||||||||||||||||
| Headcount (#) (period-end) | 222,544 | 224,824 | 233,834 | (1) | (5) | ||||||||||||||||||||||||||||||||||||||||||
|
Capital and Other Metrics
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Risk-based capital ratios and components (8):
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Standardized Approach: | |||||||||||||||||||||||||||||||||||||||||||||||
|
Common Equity Tier 1 (CET1)
|
11.01 | % | 11.19 | 10.73 | |||||||||||||||||||||||||||||||||||||||||||
| Tier 1 capital | 12.34 | 12.68 | 12.25 | ||||||||||||||||||||||||||||||||||||||||||||
| Total capital | 15.02 | 15.40 | 15.00 | ||||||||||||||||||||||||||||||||||||||||||||
| Risk-weighted assets (RWAs) (in billions) | $ | 1,219.5 | 1,221.6 | 1,250.7 | — | (2) | |||||||||||||||||||||||||||||||||||||||||
| Advanced Approach: | |||||||||||||||||||||||||||||||||||||||||||||||
|
Common Equity Tier 1 (CET1)
|
12.28 | % | 12.43 | 12.00 | |||||||||||||||||||||||||||||||||||||||||||
| Tier 1 capital | 13.77 | 14.09 | 13.70 | ||||||||||||||||||||||||||||||||||||||||||||
| Total capital | 15.82 | 16.17 | 15.82 | ||||||||||||||||||||||||||||||||||||||||||||
| Risk-weighted assets (RWAs) (in billions) | $ | 1,093.0 | 1,099.6 | 1,118.4 | (1) | (2) | |||||||||||||||||||||||||||||||||||||||||
|
Tier 1 leverage ratio
|
7.98 | % | 8.20 | 8.28 | |||||||||||||||||||||||||||||||||||||||||||
|
Supplementary Leverage Ratio (SLR)
|
6.67 | 6.85 | 6.91 | ||||||||||||||||||||||||||||||||||||||||||||
|
Total Loss Absorbing Capacity (TLAC) Ratio (9)
|
24.78 | 25.10 | 23.12 | ||||||||||||||||||||||||||||||||||||||||||||
|
Liquidity Coverage Ratio (LCR) (10)
|
124 | 126 | 123 | ||||||||||||||||||||||||||||||||||||||||||||
(1)
Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(2)
Includes provision for credit losses for loans, debt securities, and other financial assets.
(3)
Book value per common share is common stockholders’ equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.
(4)
Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, goodwill, certain identifiable intangible assets (other than mortgage servicing rights) and goodwill and other intangibles on investments in consolidated portfolio companies, net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable management, investors, and others to assess the Company’s use of equity. For additional information, including a corresponding reconciliation to generally accepted accounting principles (GAAP) financial measures, see the “Capital Management – Tangible Common Equity” section in this Report.
(5)
Represents Wells Fargo net income divided by average assets.
(6)
Represents Wells Fargo net income applicable to common stock divided by average common stockholders’ equity.
(7)
The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(8)
For additional information, see the “Capital Management” section and Note 22 (Regulatory Capital Requirements and Other Restrictions) to Financial Statements in this Report.
(9)
Represents TLAC divided by RWAs, which is our binding TLAC ratio, determined by using the greater of RWAs under the Standardized and Advanced Approaches.
(10)
Represents average high-quality liquid assets divided by average projected net cash outflows, as each is defined under the LCR rule.
|
2
|
Wells Fargo & Company | |||||||
This Quarterly Report, including the Financial Review and the Financial Statements and related Notes, contains forward-looking statements, which may include forecasts of our financial results and condition, expectations for our operations and business, and our assumptions for those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual results may differ materially from our forward-looking statements due to several factors. Factors that could cause our actual results to differ materially from our forward-looking statements are described in this Report, including in the “Forward-Looking Statements” section, and in the “Risk Factors” and “Regulation and Supervision” sections of our Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Form 10-K).
When we refer to “Wells Fargo,” “the Company,” “we,” “our,” or “us” in this Report, we mean Wells Fargo & Company and Subsidiaries (consolidated). When we refer to the “Parent,” we mean Wells Fargo & Company. See the “Glossary of Acronyms” for definitions of terms used throughout this Report.
Financial Review
| Overview | ||
Wells Fargo & Company is a leading financial services company that has approximately $1.9 trillion in assets. We provide a diversified set of banking, investment and mortgage products and services, as well as consumer and commercial finance, through our four reportable operating segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management. Wells Fargo ranked No. 34 on Fortune’s 2024 rankings of America’s largest corporations. We ranked fourth in assets and third in the market value of our common stock among all U.S. banks at June 30, 2024.
Wells Fargo’s top priority remains building a risk and control infrastructure appropriate for its size and complexity. The Company is subject to a number of consent orders and other regulatory actions, some of which are described below. These regulatory actions may require the Company, among other things, to undertake certain changes to its business, operations, products and services, and risk management practices. Addressing these regulatory actions is expected to take multiple years, and we are likely to continue to experience issues or delays along the way in satisfying their requirements. We are also likely to continue to identify more issues as we implement our risk and control infrastructure, which may result in additional regulatory actions. Regulators have indicated the potential for escalating consequences for banks that do not timely resolve open issues or have repeat issues. Furthermore, issues or delays with one regulatory action could affect our progress on others. Failure to satisfy the requirements of a regulatory action on a timely basis could result in additional fines, penalties, business restrictions, limitations on subsidiary capital distributions, increased capital or liquidity requirements, enforcement actions, and other adverse consequences, which could be significant. While we still have significant work to do and have not yet satisfied certain aspects of these regulatory actions, the Company is committed to devoting the resources necessary to operate with strong business practices and controls, maintain the highest level of integrity, and have an appropriate culture in place.
Federal Reserve Board Consent Order Regarding Governance Oversight and Compliance and Operational Risk Management
On February 2, 2018, the Company entered into a consent order with the Board of Governors of the Federal Reserve System (FRB). As required by the consent order, the Company’s Board of Directors (Board) submitted to the FRB a plan to further enhance the Board’s governance and oversight of the Company, and the Company submitted to the FRB a plan to further improve the Company’s compliance and operational risk management program. The Company continues to engage with the FRB as the
Company works to address the consent order provisions. The consent order also requires the Company, following the FRB’s acceptance and approval of the plans and the Company’s adoption and implementation of the plans, to complete an initial third-party review of the enhancements and improvements provided for in the plans. Until this third-party review is complete and the plans are adopted and implemented to the satisfaction of the FRB, the Company’s total consolidated assets as defined under the consent order will be limited to the level as of December 31, 2017. Compliance with this asset cap is measured on a two-quarter daily average basis to allow for management of temporary fluctuations. After removal of the asset cap, a second third-party review must also be conducted to assess the efficacy and sustainability of the enhancements and improvements.
Consent Orders with the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency Regarding Compliance Risk Management Program, Automobile Collateral Protection Insurance Policies, and Mortgage Interest Rate Lock Extensions
On April 20, 2018, the Company entered into consent orders with the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) to pay an aggregate of $1 billion in civil money penalties to resolve matters regarding the Company’s compliance risk management program and past practices involving certain automobile collateral protection insurance policies and certain mortgage interest rate lock extensions. As required by the consent orders, the Company submitted to the CFPB and OCC an enterprise-wide compliance risk management plan and a plan to enhance the Company’s internal audit program with respect to federal consumer financial law and the terms of the consent orders. In addition, as required by the consent orders, the Company submitted for non-objection plans to remediate customers affected by the automobile collateral protection insurance and mortgage interest rate lock matters, as well as a plan for the management of remediation activities conducted by the Company. The Company continues to work to address the provisions of the consent orders. On September 9, 2021, the OCC assessed a $250 million civil money penalty against the Company related to insufficient progress in addressing requirements under the OCC’s April 2018 consent order and loss mitigation activities in the Company’s Home Lending business. On December 20, 2022, the CFPB modified its consent order to clarify how it would terminate.
| Wells Fargo & Company |
3
|
|||||||
Overview
(continued)
Consent Order with the OCC Regarding Loss Mitigation Activities
On September 9, 2021, the Company entered into a consent order with the OCC requiring the Company to improve the execution, risk management, and oversight of loss mitigation activities in its Home Lending business. In addition, the consent order restricts the Company from acquiring certain third-party residential mortgage servicing and limits transfers of certain mortgage loans requiring customer remediation out of the Company’s mortgage servicing portfolio until remediation is provided.
Consent Order with the CFPB Regarding Automobile Lending, Consumer Deposit Accounts, and Mortgage Lending
On December 20, 2022, the Company entered into a consent order with the CFPB requiring the Company to provide customer remediation for multiple matters related to automobile lending, consumer deposit accounts, and mortgage lending; maintain practices designed to ensure auto lending customers receive refunds for the unused portion of certain guaranteed automobile protection agreements; comply with certain business practice requirements related to consumer deposit accounts; and pay a $1.7 billion civil penalty to the CFPB. The required actions related to many of these matters were already substantially complete at the time we entered into the consent order, and the consent order lays out a path to termination after the Company completes the remainder of the required actions.
Customer Remediation Activities
Our work to build a better company has included an effort to identify areas or instances where customers may have experienced financial harm, provide remediation as appropriate, and implement additional operational and control procedures. We are working with our regulatory agencies in this effort.
We have accrued for the probable and estimable costs related to our customer remediation activities, which amounts may change based on additional facts and information, as well as ongoing reviews and communications with our regulators. We had $678 million and $819 million of accrued liabilities for customer remediation activities as of June 30, 2024, and December 31, 2023, respectively. As our ongoing reviews continue and as we continue to strengthen our risk and control infrastructure, we have identified and may in the future identify additional items or areas of potential concern. To the extent issues are identified, we will continue to assess any customer harm and provide remediation as appropriate.
Recent Developments
Capital Matters
On June 28, 2024, the Company announced that it had completed the 2024 Comprehensive Capital Analysis and Review (CCAR) stress test process. The Company expects its stress capital buffer (SCB) to be 3.80% for the period October 1, 2024, through September 30, 2025. The FRB has indicated that it will publish the Company's final SCB by August 31, 2024. Our SCB for the period October 1, 2023, through September 30, 2024, is 2.90%.
On July 23, 2024, the Board approved an increase to the Company's third quarter 2024 common stock dividend to $0.40 per share.
In July 2024, we issued $2.0 billion of our Preferred Stock, Series FF.
For additional information about capital planning, see the “Capital Management – Capital Planning and Stress Testing” section in this Report.
Federal Deposit Insurance Corporation Special Assessment
In November 2023, the Federal Deposit Insurance Corporation (FDIC) finalized a rule to recover losses to the FDIC deposit insurance fund as a result of bank failures in the first half of 2023. Under the rule, the FDIC will collect a special assessment based on an insured depository institution’s estimated amount of uninsured deposits. Upon the FDIC’s finalization of the rule, we expensed an estimated amount of our special assessment of $1.9 billion (pre-tax) in fourth quarter 2023. During 2024, the FDIC provided updates on losses to the deposit insurance fund, and we expensed an additional $52 million and $336 million (pre-tax) in the second quarter and first half of 2024, respectively, for the estimated amount of the special assessment. We expect the ultimate amount of the special assessment may continue to change as the FDIC determines the actual net losses to the deposit insurance fund.
Overdraft Fees Proposal
On January 17, 2024, the CFPB issued a proposed rule that would limit overdraft fees charged by certain banks. We expect a significant reduction to our overdraft fees, which are included in deposit-related fees, if the rule is adopted as currently proposed.
Debit Card Interchange Fees Proposal
On October 25, 2023, the FRB issued a proposed rule that would reduce the amount of debit card interchange fees received by debit card issuers. In addition, the proposed rule would allow for an update to the debit card interchange fee cap every other year based on an analysis of certain costs incurred by debit card issuers. We expect a significant reduction to our debit card interchange fees, which are included in card fees, if the rule is adopted as currently proposed.
|
4
|
Wells Fargo & Company | |||||||
Financial Performance
| Consolidated Financial Highlights | |||||||||||||||||||||||||||||||||||||||||||||||
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Selected income statement data | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 11,923 | 13,163 | (1,240) | (9) | % | $ | 24,150 | 26,499 | (2,349) | (9) | % | |||||||||||||||||||||||||||||||||||
| Noninterest income | 8,766 | 7,370 | 1,396 | 19 | 17,402 | 14,763 | 2,639 | 18 | |||||||||||||||||||||||||||||||||||||||
| Total revenue | 20,689 | 20,533 | 156 | 1 | 41,552 | 41,262 | 290 | 1 | |||||||||||||||||||||||||||||||||||||||
| Net charge-offs | 1,303 | 764 | 539 | 71 | 2,460 | 1,328 | 1,132 | 85 | |||||||||||||||||||||||||||||||||||||||
| Change in the allowance for credit losses | (67) | 949 | (1,016) | NM | (286) | 1,592 | (1,878) | NM | |||||||||||||||||||||||||||||||||||||||
| Provision for credit losses (1) | 1,236 | 1,713 | (477) | (28) | 2,174 | 2,920 | (746) | (26) | |||||||||||||||||||||||||||||||||||||||
| Noninterest expense | 13,293 | 12,987 | 306 | 2 | 27,631 | 26,663 | 968 | 4 | |||||||||||||||||||||||||||||||||||||||
| Income tax expense | 1,251 | 930 | 321 | 35 | 2,215 | 1,896 | 319 | 17 | |||||||||||||||||||||||||||||||||||||||
| Wells Fargo net income | 4,910 | 4,938 | (28) | (1) | 9,529 | 9,929 | (400) | (4) | |||||||||||||||||||||||||||||||||||||||
| Wells Fargo net income applicable to common stock | 4,640 | 4,659 | (19) | — | 8,953 | 9,372 | (419) | (4) | |||||||||||||||||||||||||||||||||||||||
NM – Not meaningful
(1)
Includes provision for credit losses for loans, debt securities, and other financial assets.
In second quarter 2024, we generated $4.9 billion of net income and diluted earnings per common share (EPS) of $1.33, compared with $4.9 billion of net income and diluted EPS of $1.25 in the same period a year ago. In the first half of 2024, we generated $9.5 billion of net income and diluted EPS of $2.53, compared with $9.9 billion of net income and diluted EPS of $2.48 in the same period a year ago. Financial performance for the second quarter and first half of 2024, compared with the same periods a year ago, included the following:
•
total revenue increased due to higher noninterest income, partially offset by lower net interest income;
•
provision for credit losses reflected decreases for auto loans, commercial real estate loans, and residential mortgage loans, partially offset by increases for credit card loans;
•
noninterest expense increased due to higher operating losses, and technology, telecommunications and equipment expense, partially offset by lower professional and outside services expense;
•
average loans decreased driven by a decline in loans in both our commercial and consumer loan portfolios; and
•
average deposits decreased driven by reductions in Consumer Banking and Lending and Wealth and Investment Management, partially offset by growth in Corporate and Investment Banking and Corporate.
Capital and Liquidity
We maintained a strong capital position in the first half of 2024, with total equity of $178.1 billion at June 30, 2024, compared with $187.4 billion at December 31, 2023. In addition, capital and liquidity at June 30, 2024, included the following:
•
our Common Equity Tier 1 (CET1) ratio was 11.01% under the Standardized Approach (our binding ratio), which continued to exceed the regulatory minimum and buffers of 8.90%;
•
our total loss absorbing capacity (TLAC) as a percentage of total risk-weighted assets was 24.78%, compared with the regulatory minimum of 21.50%; and
•
our liquidity coverage ratio (LCR) was 124%, which continued to exceed the regulatory minimum of 100%.
See the “Capital Management” and the “Risk Management – Asset/Liability Management – Liquidity Risk and Funding” sections in this Report for additional information regarding our capital and liquidity, including the calculation of our regulatory capital and liquidity amounts.
Credit Quality
Credit quality reflected the following:
•
The allowance for credit losses (ACL) for loans of $14.8 billion at June 30, 2024, decreased $299 million from December 31, 2023.
•
Our provision for credit losses for loans was $2.2 billion in the first half of 2024, compared with $3.0 billion in the same period a year ago. The ACL for loans and the provision for credit losses for loans reflected decreases for auto loans, commercial real estate loans, and residential mortgage loans, partially offset by increases for credit card loans.
•
The allowance coverage for total loans was 1.61% at both June 30, 2024, and December 31, 2023.
•
Commercial portfolio net loan charge-offs were $468 million, or 35 basis points of average commercial loans, in second quarter 2024, compared with net loan charge-offs of $200 million, or 15 basis points, in the same period a year ago, due to higher losses in all commercial portfolios, primarily in our commercial real estate portfolio driven by the office property type.
•
Consumer portfolio net loan charge-offs were $833 million, or 88 basis points of average consumer loans, in second quarter 2024, compared with net loan charge-offs of $564 million, or 58 basis points, in the same period a year ago, due to higher losses in our credit card portfolio.
•
Nonperforming assets (NPAs) of $8.7 billion at June 30, 2024, increased $207 million, or 2%, from December 31, 2023, driven by an increase in commercial real estate nonaccrual loans, predominantly within the office property type. NPAs represented 0.94% of total loans at June 30, 2024.
•
Criticized loans in the commercial portfolio were $35.5 billion at June 30, 2024, compared with $33.0 billion at December 31, 2023, predominantly driven by increases in criticized commercial and industrial loans and criticized commercial real estate loans.
| Wells Fargo & Company |
5
|
|||||||
| Earnings Performance | ||
Wells Fargo net income for second quarter 2024 was $4.9 billion ($1.33 diluted EPS), compared with $4.9 billion ($1.25 diluted EPS) in the same period a year ago. Net income was stable in second quarter 2024, compared with the same period a year ago, predominantly due to a $1.2 billion decrease in net interest income, a $321 million increase in income tax expense, and a $306 million increase in noninterest expense, offset by a $1.4 billion increase in noninterest income and a $477 million decrease in provision for credit losses.
Net income for the first half of 2024 was $9.5 billion ($2.53 diluted EPS), compared with $9.9 billion ($2.48 diluted EPS) in the same period a year ago. Net income decreased in the first half of 2024, compared with the same period a year ago, predominantly due to a $2.3 billion decrease in net interest income and a $1.0 billion increase in noninterest expense, partially offset by a $2.6 billion increase in noninterest income.
Net Interest Income
Net interest income and net interest margin decreased in both the second quarter and first half of 2024, compared with the same periods a year ago, driven by the impact of higher interest rates on interest-bearing deposits and long-term debt, as well as lower loan balances, partially offset by higher interest rates on interest-earning assets. Late in second quarter 2024, we increased pricing on sweep deposits in advisory brokerage accounts, which we expect will lower future net interest income.
Table 1 presents the individual components of net interest income and net interest margin. Net interest income and net interest margin are presented on a taxable-equivalent basis in Table 1 to consistently reflect income from taxable and tax-exempt loans and debt and equity securities. The calculation for taxable-equivalent basis was based on a federal statutory tax rate of 21%.
For additional information about net interest income and net interest margin, see the “Earnings Performance – Net Interest Income” section in our 2023 Form 10-K.
|
6
|
Wells Fargo & Company | |||||||
Table 1:
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) (1)
| Quarter ended June 30, | |||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
|
($ in millions)
|
Average
balance |
Interest
income/ expense |
Average interest
rates
|
Average
balance |
Interest
income/ expense |
Average interest
rates
|
|||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
| Interest-earning deposits with banks | $ | 196,436 | 2,467 | 5.05 | % | $ | 129,236 | 1,450 | 4.50 | % | |||||||||||||||||||||||||
| Federal funds sold and securities purchased under resale agreements | 71,769 | 942 | 5.27 | 69,505 | 820 | 4.73 | |||||||||||||||||||||||||||||
| Debt securities: | |||||||||||||||||||||||||||||||||||
| Trading debt securities | 120,590 | 1,247 | 4.14 | 102,605 | 898 | 3.50 | |||||||||||||||||||||||||||||
| Available-for-sale debt securities | 150,024 | 1,577 | 4.21 | 149,320 | 1,388 | 3.72 | |||||||||||||||||||||||||||||
| Held-to-maturity debt securities | 258,631 | 1,706 | 2.64 | 279,093 | 1,829 | 2.62 | |||||||||||||||||||||||||||||
| Total debt securities | 529,245 | 4,530 | 3.43 | 531,018 | 4,115 | 3.10 | |||||||||||||||||||||||||||||
| Loans held for sale (2) | 7,091 | 133 | 7.53 | 6,031 | 94 | 6.22 | |||||||||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||||
| Commercial and industrial – U.S. | 307,034 | 5,501 | 7.21 | 307,858 | 5,156 | 6.72 | |||||||||||||||||||||||||||||
| Commercial and industrial – Non-U.S. | 64,480 | 1,167 | 7.28 | 75,503 | 1,249 | 6.64 | |||||||||||||||||||||||||||||
| Commercial real estate mortgage | 123,731 | 2,058 | 6.69 | 130,222 | 2,076 | 6.39 | |||||||||||||||||||||||||||||
| Commercial real estate construction | 23,019 | 469 | 8.21 | 24,438 | 468 | 7.68 | |||||||||||||||||||||||||||||
| Lease financing | 16,519 | 226 | 5.47 | 15,010 | 178 | 4.76 | |||||||||||||||||||||||||||||
| Total commercial loans | 534,783 | 9,421 | 7.08 | 553,031 | 9,127 | 6.62 | |||||||||||||||||||||||||||||
| Residential mortgage – first lien | 245,876 | 2,143 | 3.49 | 253,797 | 2,109 | 3.32 | |||||||||||||||||||||||||||||
| Residential mortgage – junior lien | 10,313 | 191 | 7.45 | 12,331 | 210 | 6.83 | |||||||||||||||||||||||||||||
| Credit card | 52,642 | 1,668 | 12.75 | 46,762 | 1,511 | 12.96 | |||||||||||||||||||||||||||||
| Auto | 45,164 | 571 | 5.09 | 51,880 | 603 | 4.67 | |||||||||||||||||||||||||||||
| Other consumer | 28,199 | 601 | 8.56 | 28,105 | 582 | 8.29 | |||||||||||||||||||||||||||||
| Total consumer loans | 382,194 | 5,174 | 5.43 | 392,875 | 5,015 | 5.11 | |||||||||||||||||||||||||||||
| Total loans (2) | 916,977 | 14,595 | 6.40 | 945,906 | 14,142 | 5.99 | |||||||||||||||||||||||||||||
| Equity securities | 26,332 | 195 | 2.99 | 27,891 | 194 | 2.79 | |||||||||||||||||||||||||||||
| Other | 8,128 | 110 | 5.42 | 10,118 | 120 | 4.76 | |||||||||||||||||||||||||||||
| Total interest-earning assets | $ | 1,755,978 | 22,972 | 5.25 | % | $ | 1,719,705 | 20,935 | 4.88 | % | |||||||||||||||||||||||||
| Cash and due from banks | 28,398 | — | 27,344 | — | |||||||||||||||||||||||||||||||
| Goodwill | 25,172 | — | 25,175 | — | |||||||||||||||||||||||||||||||
| Other | 105,099 | — | 106,029 | — | |||||||||||||||||||||||||||||||
| Total noninterest-earning assets | $ | 158,669 | — | 158,548 | — | ||||||||||||||||||||||||||||||
| Total assets | $ | 1,914,647 | 22,972 | 1,878,253 | 20,935 | ||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||||||||||
| Demand deposits | $ | 450,930 | 2,448 | 2.18 | % | $ | 415,886 | 1,667 | 1.61 | % | |||||||||||||||||||||||||
| Savings deposits | 353,715 | 1,123 | 1.28 | 386,831 | 734 | 0.76 | |||||||||||||||||||||||||||||
| Time deposits | 183,251 | 2,396 | 5.26 | 115,025 | 1,260 | 4.40 | |||||||||||||||||||||||||||||
| Deposits in non-U.S. offices | 18,910 | 182 | 3.86 | 19,144 | 144 | 3.02 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 1,006,806 | 6,149 | 2.46 | 936,886 | 3,805 | 1.63 | |||||||||||||||||||||||||||||
| Short-term borrowings: | |||||||||||||||||||||||||||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | 91,572 | 1,227 | 5.39 | 66,568 | 811 | 4.89 | |||||||||||||||||||||||||||||
| Other short-term borrowings | 15,113 | 149 | 3.98 | 16,491 | 150 | 3.65 | |||||||||||||||||||||||||||||
| Total short-term borrowings | 106,685 | 1,376 | 5.19 | 83,059 | 961 | 4.64 | |||||||||||||||||||||||||||||
| Long-term debt | 182,201 | 3,164 | 6.95 | 170,843 | 2,693 | 6.31 | |||||||||||||||||||||||||||||
| Other liabilities | 34,613 | 271 | 3.13 | 34,496 | 208 | 2.41 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 1,330,305 | 10,960 | 3.31 | % | $ | 1,225,284 | 7,667 | 2.51 | % | |||||||||||||||||||||||||
|
Noninterest-bearing deposits
|
339,672 | — | 410,563 | — | |||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 63,118 | — | 57,963 | — | |||||||||||||||||||||||||||||||
| Total noninterest-bearing liabilities | $ | 402,790 | — | 468,526 | — | ||||||||||||||||||||||||||||||
| Total liabilities | $ | 1,733,095 | 10,960 | 1,693,810 | 7,667 | ||||||||||||||||||||||||||||||
| Total equity | 181,552 | — | 184,443 | — | |||||||||||||||||||||||||||||||
| Total liabilities and equity | $ | 1,914,647 | 10,960 | 1,878,253 | 7,667 | ||||||||||||||||||||||||||||||
| Interest rate spread on a taxable-equivalent basis (3) | 1.94 | % | 2.37 | % | |||||||||||||||||||||||||||||||
| Net interest income and net interest margin on a taxable-equivalent basis (3) | $ | 12,012 | 2.75 | % | $ | 13,268 | 3.09 | % | |||||||||||||||||||||||||||
(continued on following page)
| Wells Fargo & Company |
7
|
|||||||
Earnings Performance
(continued)
| Six months ended June 30, | |||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
|
($ in millions)
|
Average
balance |
Interest
income/ expense |
Average interest rates
|
Average
balance |
Interest
income/ expense |
Average interest rates
|
|||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
| Interest-earning deposits with banks | $ | 202,002 | 5,040 | 5.02 | % | $ | 122,087 | 2,617 | 4.32 | % | |||||||||||||||||||||||||
| Federal funds sold and securities purchased under resale agreements | 70,744 | 1,856 | 5.28 | 69,071 | 1,516 | 4.43 | |||||||||||||||||||||||||||||
| Debt securities: | |||||||||||||||||||||||||||||||||||
| Trading debt securities | 116,380 | 2,391 | 4.11 | 99,522 | 1,699 | 3.42 | |||||||||||||||||||||||||||||
| Available-for-sale debt securities | 145,005 | 2,973 | 4.11 | 147,616 | 2,670 | 3.63 | |||||||||||||||||||||||||||||
| Held-to-maturity debt securities | 261,693 | 3,489 | 2.67 | 279,522 | 3,609 | 2.59 | |||||||||||||||||||||||||||||
| Total debt securities | 523,078 | 8,853 | 3.39 | 526,660 | 7,978 | 3.04 | |||||||||||||||||||||||||||||
| Loans held for sale (2) | 6,463 | 247 | 7.66 | 6,320 | 191 | 6.05 | |||||||||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||||
| Commercial and industrial – U.S. | 306,097 | 10,938 | 7.18 | 307,519 | 9,928 | 6.51 | |||||||||||||||||||||||||||||
| Commercial and industrial – Non-U.S. | 67,457 | 2,444 | 7.28 | 75,800 | 2,383 | 6.34 | |||||||||||||||||||||||||||||
| Commercial real estate mortgage | 125,013 | 4,161 | 6.69 | 130,532 | 4,025 | 6.22 | |||||||||||||||||||||||||||||
| Commercial real estate construction | 23,404 | 957 | 8.23 | 24,333 | 906 | 7.51 | |||||||||||||||||||||||||||||
| Lease financing | 16,440 | 444 | 5.40 | 14,922 | 350 | 4.69 | |||||||||||||||||||||||||||||
| Total commercial loans | 538,411 | 18,944 | 7.07 | 553,106 | 17,592 | 6.41 | |||||||||||||||||||||||||||||
| Residential mortgage – first lien | 247,067 | 4,287 | 3.47 | 254,404 | 4,197 | 3.30 | |||||||||||||||||||||||||||||
| Residential mortgage – junior lien | 10,553 | 389 | 7.41 | 12,647 | 420 | 6.68 | |||||||||||||||||||||||||||||
| Credit card | 52,175 | 3,357 | 12.94 | 46,304 | 2,951 | 12.85 | |||||||||||||||||||||||||||||
| Auto | 46,139 | 1,155 | 5.04 | 52,470 | 1,200 | 4.61 | |||||||||||||||||||||||||||||
| Other consumer | 28,181 | 1,204 | 8.59 | 28,340 | 1,127 | 8.02 | |||||||||||||||||||||||||||||
| Total consumer loans | 384,115 | 10,392 | 5.43 | 394,165 | 9,895 | 5.04 | |||||||||||||||||||||||||||||
| Total loans (2) | 922,526 | 29,336 | 6.39 | 947,271 | 27,487 | 5.84 | |||||||||||||||||||||||||||||
| Equity securities | 23,841 | 345 | 2.91 | 28,269 | 364 | 2.59 | |||||||||||||||||||||||||||||
| Other | 8,534 | 224 | 5.27 | 10,578 | 245 | 4.67 | |||||||||||||||||||||||||||||
| Total interest-earning assets | $ | 1,757,188 | 45,901 | 5.25 | % | $ | 1,710,256 | 40,398 | 4.75 | % | |||||||||||||||||||||||||
| Cash and due from banks | 27,957 | — | 27,743 | — | |||||||||||||||||||||||||||||||
| Goodwill | 25,173 | — | 25,174 | — | |||||||||||||||||||||||||||||||
| Other | 105,492 | — | 107,832 | — | |||||||||||||||||||||||||||||||
| Total noninterest-earning assets | $ | 158,622 | — | 160,749 | — | ||||||||||||||||||||||||||||||
| Total assets | $ | 1,915,810 | 45,901 | 1,871,005 | 40,398 | ||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||||||||||
| Demand deposits | $ | 445,053 | 4,702 | 2.12 | % | $ | 418,347 | 3,046 | 1.47 | % | |||||||||||||||||||||||||
| Savings deposits | 352,261 | 2,030 | 1.16 | 394,515 | 1,281 | 0.66 | |||||||||||||||||||||||||||||
| Time deposits | 185,004 | 4,849 | 5.27 | 97,045 | 1,985 | 4.12 | |||||||||||||||||||||||||||||
| Deposits in non-U.S. offices | 19,522 | 379 | 3.90 | 18,695 | 254 | 2.74 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 1,001,840 | 11,960 | 2.40 | 928,602 | 6,566 | 1.43 | |||||||||||||||||||||||||||||
| Short-term borrowings: | |||||||||||||||||||||||||||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | 85,244 | 2,281 | 5.38 | 52,977 | 1,227 | 4.67 | |||||||||||||||||||||||||||||
| Other short-term borrowings | 15,592 | 313 | 4.04 | 17,868 | 304 | 3.43 | |||||||||||||||||||||||||||||
| Total short-term borrowings | 100,836 | 2,594 | 5.17 | 70,845 | 1,531 | 4.36 | |||||||||||||||||||||||||||||
| Long-term debt | 189,659 | 6,513 | 6.87 | 171,700 | 5,204 | 6.07 | |||||||||||||||||||||||||||||
| Other liabilities | 33,717 | 506 | 3.01 | 33,964 | 386 | 2.29 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 1,326,052 | 21,573 | 3.27 | % | $ | 1,205,111 | 13,687 | 2.28 | % | |||||||||||||||||||||||||
|
Noninterest-bearing deposits
|
342,212 | — | 423,444 | — | |||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 63,435 | — | 58,079 | — | |||||||||||||||||||||||||||||||
| Total noninterest-bearing liabilities | $ | 405,647 | — | 481,523 | — | ||||||||||||||||||||||||||||||
| Total liabilities | $ | 1,731,699 | 21,573 | 1,686,634 | 13,687 | ||||||||||||||||||||||||||||||
| Total equity | 184,111 | — | 184,371 | — | |||||||||||||||||||||||||||||||
| Total liabilities and equity | $ | 1,915,810 | 21,573 | 1,871,005 | 13,687 | ||||||||||||||||||||||||||||||
| Interest rate spread on a taxable-equivalent basis (3) | 1.98 | % | 2.47 | % | |||||||||||||||||||||||||||||||
|
Net interest margin and net interest income on a taxable-equivalent basis
(3)
|
$ | 24,328 | 2.78 | % | $ | 26,711 | 3.14 | % | |||||||||||||||||||||||||||
(1)
The average balance amounts represent amortized costs, except for certain held-to-maturity (HTM) debt securities, which exclude unamortized basis adjustments related to the transfer of those securities from available-for-sale (AFS) debt securities. The average interest rates are based on interest income or expense amounts for the period and are annualized. Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(2)
Nonaccrual loans and any related income are included in their respective loan categories.
(3)
Includes taxable-equivalent adjustments of $89 million and $105 million for the quarters ended June 30, 2024 and 2023, respectively, and $178 million and $212 million for the first half of 2024 and 2023, respectively, predominantly related to tax-exempt income on certain loans and securities.
|
8
|
Wells Fargo & Company | |||||||
Noninterest Income
Table 2:
Noninterest Income
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
|
($ in millions)
|
2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Deposit-related fees | $ | 1,249 | 1,165 | 84 | 7 | % | $ | 2,479 | 2,313 | 166 | 7 | % | |||||||||||||||||||||||||||||||||||
| Lending-related fees | 369 | 352 | 17 | 5 | 736 | 708 | 28 | 4 | |||||||||||||||||||||||||||||||||||||||
| Investment advisory and other asset-based fees | 2,415 | 2,163 | 252 | 12 | 4,746 | 4,277 | 469 | 11 | |||||||||||||||||||||||||||||||||||||||
| Commissions and brokerage services fees | 614 | 570 | 44 | 8 | 1,240 | 1,189 | 51 | 4 | |||||||||||||||||||||||||||||||||||||||
| Investment banking fees | 641 | 376 | 265 | 70 | 1,268 | 702 | 566 | 81 | |||||||||||||||||||||||||||||||||||||||
| Card fees | 1,101 | 1,098 | 3 | — | 2,162 | 2,131 | 31 | 1 | |||||||||||||||||||||||||||||||||||||||
| Net servicing income | 127 | 100 | 27 | 27 | 252 | 212 | 40 | 19 | |||||||||||||||||||||||||||||||||||||||
| Net gains on mortgage loan originations/sales | 116 | 102 | 14 | 14 | 221 | 222 | (1) | — | |||||||||||||||||||||||||||||||||||||||
| Mortgage banking | 243 | 202 | 41 | 20 | 473 | 434 | 39 | 9 | |||||||||||||||||||||||||||||||||||||||
| Net gains from trading activities | 1,442 | 1,122 | 320 | 29 | 2,896 | 2,464 | 432 | 18 | |||||||||||||||||||||||||||||||||||||||
|
Net gains (losses) from debt securities
|
— | 4 | (4) | (100) | (25) | 4 | (29) | NM | |||||||||||||||||||||||||||||||||||||||
|
Net gains (losses) from equity securities
|
80 | (94) | 174 | 185 | 98 | (451) | 549 | 122 | |||||||||||||||||||||||||||||||||||||||
| Lease income | 292 | 307 | (15) | (5) | 713 | 654 | 59 | 9 | |||||||||||||||||||||||||||||||||||||||
| Other | 320 | 105 | 215 | 205 | 616 | 338 | 278 | 82 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 8,766 | 7,370 | 1,396 | 19 | $ | 17,402 | 14,763 | 2,639 | 18 | |||||||||||||||||||||||||||||||||||||
Second quarter 2024 vs. second quarter 2023
Deposit-related fees
increased reflecting higher treasury management fees on commercial accounts driven by increased transaction service volumes and repricing.
Investment advisory and other asset-based
fees
increased driven by higher asset-based fees reflecting higher market valuations
.
Fees from the majority of Wealth and Investment Management (WIM) advisory assets are based on a percentage of the market value of the assets at the beginning of the quarter. For additional information on certain client investment assets, see the “Earnings Performance – Operating Segment Results – Wealth and Investment Management – WIM Advisory Assets” section in this Report.
Investment banking fees
increased due to
increased activity across all products
.
Net
gains from trading activities
increased driven by higher revenue in equities and structured products.
Net gains (losses) from equity securities
increased driven by
higher unrealized gains on nonmarketable equity securities from our venture capital investments.
O
ther income
increased driven by impacts related to the expanded use of the proportional amortization method of accounting for renewable energy tax credit investments as a result of our adoption
in first quarter 2024 of Accounting Standards Update (ASU) 2023-02 – Investments – Equity Method and Joint Ventures (Topic 323):
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
. For additional information on our adoption of ASU
2023-02, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.
First half of 2024 vs. first half of 2023
Deposit-related fees
increased reflecting higher treasury management fees on commercial accounts driven by increased transaction service volumes and repricing.
Investment advisory and other asset-based
fees
increased driven by higher asset-based fees reflecting higher market valuations
.
Investment banking fees
increased due to
increased activity across all products
.
Net
gains from trading activities
increased driven by higher revenue in structured products, equities, and foreign exchange, partially offset by lower revenue in rates.
Net gains (losses) from equity securities
increased driven by:
•
lower impairment of equity securities from our venture capital investments; and
•
higher unrealized gains on nonmarketable equity securities from our venture capital investments.
Lease income
increased
driven by a gain associated with the resolution of a legacy lease transaction.
O
ther income
increased driven by impacts related to the expanded use of the proportional amortization method of accounting for renewable energy tax credit investments as a result of our adoption of ASU 2023-02 in first quarter 2024.
| Wells Fargo & Company |
9
|
|||||||
Earnings Performance
(continued)
Noninterest Expense
Table 3:
Noninterest Expense
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Personnel | $ | 8,575 | 8,606 | (31) | — | % | $ | 18,067 | 18,021 | 46 | — | % | |||||||||||||||||||||||||||||||||||
| Technology, telecommunications and equipment | 1,106 | 947 | 159 | 17 | 2,159 | 1,869 | 290 | 16 | |||||||||||||||||||||||||||||||||||||||
| Occupancy | 763 | 707 | 56 | 8 | 1,477 | 1,420 | 57 | 4 | |||||||||||||||||||||||||||||||||||||||
|
Operating losses (1)
|
493 | 232 | 261 | 113 | 1,126 | 499 | 627 | 126 | |||||||||||||||||||||||||||||||||||||||
| Professional and outside services | 1,139 | 1,304 | (165) | (13) | 2,240 | 2,533 | (293) | (12) | |||||||||||||||||||||||||||||||||||||||
|
Leases (2)
|
159 | 180 | (21) | (12) | 323 | 357 | (34) | (10) | |||||||||||||||||||||||||||||||||||||||
| Advertising and promotion | 224 | 184 | 40 | 22 | 421 | 338 | 83 | 25 | |||||||||||||||||||||||||||||||||||||||
| Other | 834 | 827 | 7 | 1 | 1,818 | 1,626 | 192 | 12 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 13,293 | 12,987 | 306 | 2 | $ | 27,631 | 26,663 | 968 | 4 | |||||||||||||||||||||||||||||||||||||
(1)
Includes expenses for customer remediation activities of $184 million and $106 million for second quarter 2024 and 2023, respectively, and $612 million and $163 million for the first half of 2024 and 2023, respectively.
(2)
Represents expenses for assets we lease to customers.
Second quarter 2024 vs. second quarter 2023
Personnel expense
decreased due to
the impact of efficiency initiatives, partially offset by higher revenue-related compensation expense driven by higher fees in our Wealth and Investment Management business.
Technology, telecommunications and equipment expense
increased
due to higher expense for the amortization of internally developed software.
Operating losses
increased driven by
higher expense for legal actions and higher expense for customer remediation activities related to the further refinement of the remediation costs for historical mortgage lending and other consumer products matters. For additional information on customer remediation activities, see the “Overview” section above.
As previously disclosed, we have outstanding legal actions and customer remediation activities that could impact operating losses in the coming quarters.
For additional information on operating losses, see Note 18 (Revenue and Expenses) to Financial Statements in this Report.
Professional and outside services expense
decreased driven by efficiency initiatives to reduce our spending on consultants and contractors.
First half of 2024 vs. first half of 2023
Personnel expense
increased
due to higher revenue-related compensation expense driven by higher fees in our Wealth and Investment Management business, partially offset by the impact of efficiency initiatives.
Technology, telecommunications and equipment expense
increased
due to higher expense for the amortization of internally developed software.
Operating losses
increased driven by
higher expense for legal actions and higher expense for customer remediation activities related to the further refinement of the remediation costs for historical mortgage lending and other consumer products matters.
As previously disclosed, we have outstanding legal actions and customer remediation activities that could impact operating losses in the coming quarters.
Professional and outside services expense
decreased
driven by efficiency initiatives to reduce our spending on consultants and contractors.
Advertising and promotion expense
increased due to higher marketing volume.
Other expense
increased reflecting an additional expense of
$336 million
for the estimated FDIC special assessment. For additional information on the FDIC’s special assessment, see Note 18 (Revenue and Expenses) to Financial Statements in this Report.
|
10
|
Wells Fargo & Company | |||||||
Income Tax Expense
Table 4:
Income Tax Expense
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
|
($ in millions)
|
2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Income before income tax expense | $ | 6,160 | 5,833 | 327 | 6 | % | $ | 11,747 | 11,679 | 68 | 1 | % | |||||||||||||||||||||||||||||||||||
| Income tax expense | 1,251 | 930 | 321 | 35 | 2,215 | 1,896 | 319 | 17 | |||||||||||||||||||||||||||||||||||||||
| Effective income tax rate (1) | 20.3 | % | 15.8 | 18.9 | % | 16.0 | |||||||||||||||||||||||||||||||||||||||||
(1)
Represents (i) Income tax expense (benefit) divided by (ii) Income (loss) before income tax expense (benefit) less Net income (loss) from noncontrolling interests.
The increase in the effective income tax rate for the second quarter and first half of 2024, compared with the same periods a year ago, was driven by the impacts related to the expanded use of the proportional amortization method of accounting for renewable energy tax credit investments.
For additional information on our adoption in first quarter 2024 of
Accounting Standards Update (ASU) 2023-02 – Investments – Equity Method and Joint Ventures (Topic 323):
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
,
s
ee Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.
For additional information on income taxes, see Note 23 (Income Taxes) to Financial Statements in our 2023 Form 10-K.
| Wells Fargo & Company |
11
|
|||||||
Earnings Performance
(continued)
Operating Segment Results
Our management reporting is organized into four reportable operating segments: Consumer Banking and Lending; Commercial Banking; Corporate and Investment Banking; and Wealth and Investment Management. All other business activities that are not included in the reportable operating segments have been included in Corporate. For additional information, see Table 5 below. We define our reportable operating segments by type of product and customer segment, and their results are based on our management reporting process. The management reporting process measures the performance of the reportable operating segments based on the Company’s management structure, and the results are regularly reviewed with our Chief Executive Officer and relevant senior management. The management reporting process is based on U.S. GAAP and includes specific adjustments, such as funds transfer pricing for asset/liability management, shared revenue and expenses, and taxable-equivalent adjustments to consistently reflect income from taxable and tax-exempt sources, which allows management to assess performance consistently across the operating segments.
Funds Transfer Pricing
Corporate treasury manages a funds transfer pricing methodology that considers interest rate risk, liquidity risk, and other product characteristics. Operating segments pay a funding charge for their assets and receive a funding credit for their deposits, both of which are included in net interest income. The net impact of the funding charges or credits is recognized in corporate treasury.
Revenue and Expense Sharing
When lines of business jointly serve customers, the line of business that is responsible for providing the product or service recognizes revenue or expense with a referral fee paid or an allocation of cost to the other line of
business based on established internal revenue-sharing agreements.
When a line of business uses a service provided by another line of business or enterprise function (included in Corporate), expense is generally allocated based on the cost and use of the service provided. We periodically assess and update our revenue and expense allocation methodologies.
Taxable-Equivalent Adjustments
Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for affordable housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.
Allocated Capital
Reportable operating segments are allocated capital under a risk-sensitive framework that is primarily based on aspects of our regulatory capital requirements, and the assumptions and methodologies used to allocate capital are periodically assessed and updated. Management believes that return on allocated capital is a useful financial measure because it enables management, investors, and others to assess a reportable operating segment’s use of capital.
Selected Metrics
We present certain financial and nonfinancial metrics that management uses when evaluating reportable operating segment results. Management believes that these metrics are useful to investors and others to assess the performance, customer growth, and trends of reportable operating segments or lines of business.
Table 5:
Management Reporting Structure
| Wells Fargo & Company | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Consumer Banking and Lending
|
Commercial Banking
|
Corporate and Investment Banking |
Wealth and Investment Management
|
Corporate
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
• Consumer, Small and Business Banking
• Home Lending
• Credit Card
• Auto
• Personal Lending
|
• Middle Market Banking • Asset-Based Lending and Leasing |
• Banking • Commercial Real Estate • Markets |
• Wells Fargo Advisors • The Private Bank |
• Corporate Treasury
• Enterprise Functions
• Investment Portfolio
• Venture capital and private equity investments
• Non-strategic businesses
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
12
|
Wells Fargo & Company | |||||||
Table 6 and the following discussion present our results by reportable operating segment. For additional information, see Note 17 (Operating Segments) to Financial Statements in this Report.
Table 6:
Operating Segment Results – Highlights
| (in millions) | Consumer Banking and Lending | Commercial Banking | Corporate and Investment Banking | Wealth and Investment Management | Corporate (1) | Reconciling Items (2) | Consolidated Company | ||||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 7,024 | 2,281 | 1,945 | 906 | (144) | (89) | 11,923 | |||||||||||||||||||||||||||||||||
| Noninterest income | 1,982 | 841 | 2,893 | 2,952 | 392 | (294) | 8,766 | ||||||||||||||||||||||||||||||||||
| Total revenue | 9,006 | 3,122 | 4,838 | 3,858 | 248 | (383) | 20,689 | ||||||||||||||||||||||||||||||||||
| Provision for credit losses | 932 | 29 | 285 | (14) | 4 | — | 1,236 | ||||||||||||||||||||||||||||||||||
| Noninterest expense | 5,701 | 1,506 | 2,170 | 3,193 | 723 | — | 13,293 | ||||||||||||||||||||||||||||||||||
| Income (loss) before income tax expense (benefit) | 2,373 | 1,587 | 2,383 | 679 | (479) | (383) | 6,160 | ||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | 596 | 402 | 598 | 195 | (157) | (383) | 1,251 | ||||||||||||||||||||||||||||||||||
|
Net income (loss) before noncontrolling interests
|
1,777 | 1,185 | 1,785 | 484 | (322) | — | 4,909 | ||||||||||||||||||||||||||||||||||
| Less: Net income (loss) from noncontrolling interests | — | 3 | — | — | (4) | — | (1) | ||||||||||||||||||||||||||||||||||
|
Net income (loss)
|
$ | 1,777 | 1,182 | 1,785 | 484 | (318) | — | 4,910 | |||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 7,490 | 2,501 | 2,359 | 1,009 | (91) | (105) | 13,163 | |||||||||||||||||||||||||||||||||
| Noninterest income | 1,965 | 868 | 2,272 | 2,639 | 121 | (495) | 7,370 | ||||||||||||||||||||||||||||||||||
| Total revenue | 9,455 | 3,369 | 4,631 | 3,648 | 30 | (600) | 20,533 | ||||||||||||||||||||||||||||||||||
| Provision for credit losses | 874 | 26 | 933 | 24 | (144) | — | 1,713 | ||||||||||||||||||||||||||||||||||
| Noninterest expense | 6,027 | 1,630 | 2,087 | 2,974 | 269 | — | 12,987 | ||||||||||||||||||||||||||||||||||
| Income (loss) before income tax expense (benefit) | 2,554 | 1,713 | 1,611 | 650 | (95) | (600) | 5,833 | ||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | 640 | 429 | 401 | 163 | (103) | (600) | 930 | ||||||||||||||||||||||||||||||||||
|
Net income before noncontrolling interests
|
1,914 | 1,284 | 1,210 | 487 | 8 | — | 4,903 | ||||||||||||||||||||||||||||||||||
| Less: Net income (loss) from noncontrolling interests | — | 3 | — | — | (38) | — | (35) | ||||||||||||||||||||||||||||||||||
|
Net income
|
$ | 1,914 | 1,281 | 1,210 | 487 | 46 | — | 4,938 | |||||||||||||||||||||||||||||||||
| Six months ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 14,134 | 4,559 | 3,972 | 1,775 | (112) | (178) | 24,150 | |||||||||||||||||||||||||||||||||
| Noninterest income | 3,963 | 1,715 | 5,848 | 5,825 | 683 | (632) | 17,402 | ||||||||||||||||||||||||||||||||||
| Total revenue | 18,097 | 6,274 | 9,820 | 7,600 | 571 | (810) | 41,552 | ||||||||||||||||||||||||||||||||||
| Provision for credit losses | 1,720 | 172 | 290 | (11) | 3 | — | 2,174 | ||||||||||||||||||||||||||||||||||
| Noninterest expense | 11,725 | 3,185 | 4,500 | 6,423 | 1,798 | — | 27,631 | ||||||||||||||||||||||||||||||||||
| Income (loss) before income tax expense (benefit) | 4,652 | 2,917 | 5,030 | 1,188 | (1,230) | (810) | 11,747 | ||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | 1,169 | 743 | 1,264 | 323 | (474) | (810) | 2,215 | ||||||||||||||||||||||||||||||||||
| Net income (loss) before noncontrolling interests | 3,483 | 2,174 | 3,766 | 865 | (756) | — | 9,532 | ||||||||||||||||||||||||||||||||||
|
Less: Net income (loss) from noncontrolling interests
|
— | 6 | — | — | (3) | — | 3 | ||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 3,483 | 2,168 | 3,766 | 865 | (753) | — | 9,529 | |||||||||||||||||||||||||||||||||
| Six months ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 14,923 | 4,990 | 4,820 | 2,053 | (75) | (212) | 26,499 | |||||||||||||||||||||||||||||||||
| Noninterest income | 3,896 | 1,686 | 4,713 | 5,276 | 126 | (934) | 14,763 | ||||||||||||||||||||||||||||||||||
| Total revenue | 18,819 | 6,676 | 9,533 | 7,329 | 51 | (1,146) | 41,262 | ||||||||||||||||||||||||||||||||||
| Provision for credit losses | 1,741 | (17) | 1,185 | 35 | (24) | — | 2,920 | ||||||||||||||||||||||||||||||||||
| Noninterest expense | 12,065 | 3,382 | 4,304 | 6,035 | 877 | — | 26,663 | ||||||||||||||||||||||||||||||||||
| Income (loss) before income tax expense (benefit) | 5,013 | 3,311 | 4,044 | 1,259 | (802) | (1,146) | 11,679 | ||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | 1,258 | 828 | 1,016 | 315 | (375) | (1,146) | 1,896 | ||||||||||||||||||||||||||||||||||
| Net income (loss) before noncontrolling interests | 3,755 | 2,483 | 3,028 | 944 | (427) | — | 9,783 | ||||||||||||||||||||||||||||||||||
| Less: Net income (loss) from noncontrolling interests | — | 6 | — | — | (152) | — | (146) | ||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 3,755 | 2,477 | 3,028 | 944 | (275) | — | 9,929 | |||||||||||||||||||||||||||||||||
(1)
All other business activities that are not included in the reportable operating segments have been included in Corporate. For additional information, see the “Corporate” section below.
(2)
Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for affordable housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.
| Wells Fargo & Company |
13
|
|||||||
Earnings Performance
(continued)
Consumer Banking and Lending
offers diversified financial products and services for consumers and small businesses with annual sales generally up to $10 million. These financial products and services include checking and savings accounts, credit and
debit cards, as well as home, auto, personal, and small business lending. Table 6a and Table 6b provide additional information for Consumer Banking and Lending.
Table 6a:
Consumer Banking and Lending – Income Statement and Selected Metrics
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions, unless otherwise noted) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Income Statement | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 7,024 | 7,490 | (466) | (6) | % | $ | 14,134 | 14,923 | (789) | (5) | % | |||||||||||||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||||||||||||||
| Deposit-related fees | 690 | 666 | 24 | 4 | 1,367 | 1,338 | 29 | 2 | |||||||||||||||||||||||||||||||||||||||
| Card fees | 1,036 | 1,022 | 14 | 1 | 2,026 | 1,980 | 46 | 2 | |||||||||||||||||||||||||||||||||||||||
| Mortgage banking | 135 | 132 | 3 | 2 | 328 | 292 | 36 | 12 | |||||||||||||||||||||||||||||||||||||||
| Other | 121 | 145 | (24) | (17) | 242 | 286 | (44) | (15) | |||||||||||||||||||||||||||||||||||||||
| Total noninterest income | 1,982 | 1,965 | 17 | 1 | 3,963 | 3,896 | 67 | 2 | |||||||||||||||||||||||||||||||||||||||
| Total revenue | 9,006 | 9,455 | (449) | (5) | 18,097 | 18,819 | (722) | (4) | |||||||||||||||||||||||||||||||||||||||
| Net charge-offs | 907 | 621 | 286 | 46 | 1,788 | 1,210 | 578 | 48 | |||||||||||||||||||||||||||||||||||||||
| Change in the allowance for credit losses | 25 | 253 | (228) | (90) | (68) | 531 | (599) | NM | |||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | 932 | 874 | 58 | 7 | 1,720 | 1,741 | (21) | (1) | |||||||||||||||||||||||||||||||||||||||
| Noninterest expense | 5,701 | 6,027 | (326) | (5) | 11,725 | 12,065 | (340) | (3) | |||||||||||||||||||||||||||||||||||||||
| Income before income tax expense | 2,373 | 2,554 | (181) | (7) | 4,652 | 5,013 | (361) | (7) | |||||||||||||||||||||||||||||||||||||||
| Income tax expense | 596 | 640 | (44) | (7) | 1,169 | 1,258 | (89) | (7) | |||||||||||||||||||||||||||||||||||||||
| Net income | $ | 1,777 | 1,914 | (137) | (7) | $ | 3,483 | 3,755 | (272) | (7) | |||||||||||||||||||||||||||||||||||||
| Revenue by Line of Business | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer, Small and Business Banking | $ | 6,129 | 6,448 | (319) | (5) | $ | 12,221 | 12,822 | (601) | (5) | |||||||||||||||||||||||||||||||||||||
| Consumer Lending: | |||||||||||||||||||||||||||||||||||||||||||||||
| Home Lending | 823 | 847 | (24) | (3) | 1,687 | 1,710 | (23) | (1) | |||||||||||||||||||||||||||||||||||||||
| Credit Card | 1,452 | 1,449 | 3 | — | 2,948 | 2,866 | 82 | 3 | |||||||||||||||||||||||||||||||||||||||
| Auto | 282 | 378 | (96) | (25) | 582 | 770 | (188) | (24) | |||||||||||||||||||||||||||||||||||||||
| Personal Lending | 320 | 333 | (13) | (4) | 659 | 651 | 8 | 1 | |||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 9,006 | 9,455 | (449) | (5) | $ | 18,097 | 18,819 | (722) | (4) | |||||||||||||||||||||||||||||||||||||
| Selected Metrics | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer Banking and Lending: | |||||||||||||||||||||||||||||||||||||||||||||||
|
Return on allocated capital (1)
|
15.1 | % | 16.9 | 14.8 | % | 16.7 | |||||||||||||||||||||||||||||||||||||||||
|
Efficiency ratio (2)
|
63 | 64 | 65 | 64 | |||||||||||||||||||||||||||||||||||||||||||
|
Retail bank branches (#, period-end)
|
4,227 | 4,455 | (5) | ||||||||||||||||||||||||||||||||||||||||||||
|
Digital active customers (# in millions, period-end) (3)
|
35.6 | 34.2 | 4 | ||||||||||||||||||||||||||||||||||||||||||||
|
Mobile active customers (# in millions, period-end) (3)
|
30.8 | 29.1 | 6 | ||||||||||||||||||||||||||||||||||||||||||||
|
Consumer, Small and Business Banking:
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Deposit spread (4)
|
2.5 | % | 2.6 | 2.5 | % | 2.6 | |||||||||||||||||||||||||||||||||||||||||
|
Debit card purchase volume ($ in billions) (5)
|
$ | 128.2 | 124.9 | 3.3 | 3 | $ | 249.7 | 242.2 | 7.5 | 3 | |||||||||||||||||||||||||||||||||||||
|
Debit card purchase transactions (# in millions) (5)
|
2,581 | 2,535 | 2 | 5,023 | 4,904 | 2 | |||||||||||||||||||||||||||||||||||||||||
(continued on following page)
|
14
|
Wells Fargo & Company | |||||||
(continued from previous page)
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions, unless otherwise noted) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Home Lending: | |||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage banking: | |||||||||||||||||||||||||||||||||||||||||||||||
| Net servicing income | $ | 89 | 62 | 27 | 44 | % | $ | 180 | 146 | 34 | 23 | % | |||||||||||||||||||||||||||||||||||
| Net gains on mortgage loan originations/sales | 46 | 70 | (24) | (34) | 148 | 146 | 2 | 1 | |||||||||||||||||||||||||||||||||||||||
| Total mortgage banking | $ | 135 | 132 | 3 | 2 | $ | 328 | 292 | 36 | 12 | |||||||||||||||||||||||||||||||||||||
|
Retail originations ($ in billions)
|
$ | 5.3 | 7.7 | (2.4) | (31) | $ | 8.8 | 13.3 | (4.5) | (34) | |||||||||||||||||||||||||||||||||||||
| % of originations held for sale (HFS) | 38.6 | % | 45.3 | 40.6 | % | 46.0 | |||||||||||||||||||||||||||||||||||||||||
|
Third-party mortgage loans serviced ($ in billions, period-end) (6)
|
$ | 512.8 | 609.1 | (96.3) | (16) | ||||||||||||||||||||||||||||||||||||||||||
| Mortgage servicing rights (MSR) carrying value (period-end) | 7,061 | 8,251 | (1,190) | (14) | |||||||||||||||||||||||||||||||||||||||||||
|
Ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end) (6)
|
1.38 | % | 1.35 | ||||||||||||||||||||||||||||||||||||||||||||
|
Home lending loans 30+ days delinquency rate (period-end) (7)(8)(9)
|
0.33 | 0.25 | |||||||||||||||||||||||||||||||||||||||||||||
|
Credit Card:
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Point of sale (POS) volume ($ in billions) | $ | 42.9 | 38.3 | 4.6 | 12 | $ | 82.0 | 72.5 | 9.5 | 13 | |||||||||||||||||||||||||||||||||||||
|
New accounts (# in thousands)
|
677 | 618 | 10 | 1,328 | 1,197 | 11 | |||||||||||||||||||||||||||||||||||||||||
|
Credit card loans 30+ days delinquency rate (period-end) (8)(9)
|
2.71 | % | 2.31 | ||||||||||||||||||||||||||||||||||||||||||||
|
Credit card loans 90+ days delinquency rate (period-end) (8)(9)
|
1.40 | 1.10 | |||||||||||||||||||||||||||||||||||||||||||||
| Auto: | |||||||||||||||||||||||||||||||||||||||||||||||
| Auto originations ($ in billions) | $ | 3.7 | 4.8 | (1.1) | (23) | $ | 7.8 | 9.8 | (2.0) | (20) | |||||||||||||||||||||||||||||||||||||
|
Auto loans 30+ days delinquency rate (period-end) (8)(9)
|
2.31 | % | 2.55 | ||||||||||||||||||||||||||||||||||||||||||||
| Personal Lending: | |||||||||||||||||||||||||||||||||||||||||||||||
| New volume ($ in billions) | $ | 2.7 | 3.3 | (0.6) | (18) | $ | 4.9 | 6.2 | (1.3) | (21) | |||||||||||||||||||||||||||||||||||||
NM – Not meaningful
(1)
Return on allocated capital is segment net income (loss) applicable to common stock divided by segment average allocated capital. Segment net income (loss) applicable to common stock is segment net income (loss) less allocated preferred stock dividends.
(2)
Efficiency ratio is segment noninterest expense divided by segment total revenue (net interest income and noninterest income).
(3)
Digital and mobile active customers is based on the number of consumer and small business customers who have logged on via a digital or mobile device, respectively, in the prior 90 days. Digital active customers includes both online and mobile customers.
(4)
Deposit spread is (i) the internal funds transfer pricing credit on segment deposits minus interest paid to customers for segment deposits, divided by (ii) average segment deposits.
(5)
Debit card purchase volume and transactions reflect combined activity for both consumer and business debit card purchases.
(6)
Excludes residential mortgage loans subserviced for others.
(7)
Excludes residential mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).
(8)
Excludes loans held for sale.
(9)
Delinquency balances exclude nonaccrual loans.
Second quarter 2024 vs. second quarter 2023
Revenue
decreased driven by lower net interest income due to lower deposit balances and lower loan balances.
Provision for credit losses
reflected an increase in the allowance for credit card loans, partially offset by a lower allowance for auto loans and residential mortgage loans.
Noninterest expense
decreased due to lower operating costs and the impact of efficiency initiatives, partially offset by higher advertising and occupancy expense.
First half of 2024 vs. first half of 2023
Revenue
decreased driven by lower net interest income due to lower deposit balances and lower loan balances.
Provision for credit losses
reflected a decrease in the allowance for auto loans and residential mortgage loans, partially offset by a higher allowance for credit card loans.
Noninterest expense
decreased due to:
•
lower personnel expense and operating costs driven by the impact of efficiency initiatives;
partially offset by:
•
higher operating losses due to higher expense for customer remediation activities; and
•
higher advertising expense due to higher marketing volume.
| Wells Fargo & Company |
15
|
|||||||
Earnings Performance
(continued)
Table 6b:
Consumer Banking and Lending – Balance Sheet
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
|
($ in millions)
|
2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (average) | |||||||||||||||||||||||||||||||||||||||||||||||
| Loans by Line of Business: | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer, Small and Business Banking | $ | 6,370 | 6,831 | (461) | (7) | % | $ | 6,418 | 6,933 | (515) | (7) | % | |||||||||||||||||||||||||||||||||||
| Consumer Lending: | |||||||||||||||||||||||||||||||||||||||||||||||
| Home Lending | 211,994 | 220,641 | (8,647) | (4) | 213,164 | 221,596 | (8,432) | (4) | |||||||||||||||||||||||||||||||||||||||
|
Credit Card
|
47,463 | 41,609 | 5,854 | 14 | 46,937 | 41,066 | 5,871 | 14 | |||||||||||||||||||||||||||||||||||||||
| Auto | 45,650 | 52,476 | (6,826) | (13) | 46,636 | 53,073 | (6,437) | (12) | |||||||||||||||||||||||||||||||||||||||
| Personal Lending | 14,462 | 14,794 | (332) | (2) | 14,679 | 14,657 | 22 | — | |||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 325,939 | 336,351 | (10,412) | (3) | $ | 327,834 | 337,325 | (9,491) | (3) | |||||||||||||||||||||||||||||||||||||
| Total deposits | 778,228 | 823,339 | (45,111) | (5) | 775,738 | 832,252 | (56,514) | (7) | |||||||||||||||||||||||||||||||||||||||
| Allocated capital | 45,500 | 44,000 | 1,500 | 3 | 45,500 | 44,000 | 1,500 | 3 | |||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (period-end) | |||||||||||||||||||||||||||||||||||||||||||||||
| Loans by Line of Business: | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer, Small and Business Banking | $ | 6,513 | 6,937 | (424) | (6) | ||||||||||||||||||||||||||||||||||||||||||
| Consumer Lending: | |||||||||||||||||||||||||||||||||||||||||||||||
| Home Lending | 211,172 | 219,595 | (8,423) | (4) | |||||||||||||||||||||||||||||||||||||||||||
|
Credit Card
|
48,400 | 42,415 | 5,985 | 14 | |||||||||||||||||||||||||||||||||||||||||||
| Auto | 44,780 | 52,175 | (7,395) | (14) | |||||||||||||||||||||||||||||||||||||||||||
| Personal Lending | 14,495 | 15,095 | (600) | (4) | |||||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 325,360 | 336,217 | (10,857) | (3) | ||||||||||||||||||||||||||||||||||||||||||
| Total deposits | 781,817 | 820,495 | (38,678) | (5) | |||||||||||||||||||||||||||||||||||||||||||
Second quarter and first half of 2024 vs. second quarter and first half of 2023
Total loans (average and period-end)
decreased due to:
•
a decline in loan balances in our Home Lending business reflecting lower loan demand due to the impact of the higher interest rate environment; and
•
a decline in loan balances in our Auto business due to lower origination volumes reflecting credit tightening actions;
partially offset by:
•
an increase in loan balances in our Credit Card business driven by higher point of sale volume and new account growth.
Total deposits (average and period-end)
decreased driven by customer migration to higher yielding deposit products, including promotional savings and time deposit accounts.
|
16
|
Wells Fargo & Company | |||||||
Commercial Banking
provides financial solutions to private, family owned and certain public companies. Products and services include banking and credit products across multiple
industry sectors and municipalities, secured lending and lease products, and treasury management. Table 6c and Table 6d provide additional information for Commercial Banking.
Table 6c:
Commercial Banking – Income Statement and Selected Metrics
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Income Statement | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 2,281 | 2,501 | (220) | (9) | % | $ | 4,559 | 4,990 | (431) | (9) | % | |||||||||||||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||||||||||||||
| Deposit-related fees | 290 | 248 | 42 | 17 | 574 | 484 | 90 | 19 | |||||||||||||||||||||||||||||||||||||||
| Lending-related fees | 139 | 131 | 8 | 6 | 277 | 260 | 17 | 7 | |||||||||||||||||||||||||||||||||||||||
| Lease income | 133 | 167 | (34) | (20) | 282 | 336 | (54) | (16) | |||||||||||||||||||||||||||||||||||||||
| Other | 279 | 322 | (43) | (13) | 582 | 606 | (24) | (4) | |||||||||||||||||||||||||||||||||||||||
| Total noninterest income | 841 | 868 | (27) | (3) | 1,715 | 1,686 | 29 | 2 | |||||||||||||||||||||||||||||||||||||||
| Total revenue | 3,122 | 3,369 | (247) | (7) | 6,274 | 6,676 | (402) | (6) | |||||||||||||||||||||||||||||||||||||||
| Net charge-offs | 97 | 63 | 34 | 54 | 172 | 24 | 148 | 617 | |||||||||||||||||||||||||||||||||||||||
| Change in the allowance for credit losses | (68) | (37) | (31) | (84) | — | (41) | 41 | 100 | |||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | 29 | 26 | 3 | 12 | 172 | (17) | 189 | NM | |||||||||||||||||||||||||||||||||||||||
| Noninterest expense | 1,506 | 1,630 | (124) | (8) | 3,185 | 3,382 | (197) | (6) | |||||||||||||||||||||||||||||||||||||||
| Income before income tax expense | 1,587 | 1,713 | (126) | (7) | 2,917 | 3,311 | (394) | (12) | |||||||||||||||||||||||||||||||||||||||
| Income tax expense | 402 | 429 | (27) | (6) | 743 | 828 | (85) | (10) | |||||||||||||||||||||||||||||||||||||||
| Less: Net income from noncontrolling interests | 3 | 3 | — | — | 6 | 6 | — | — | |||||||||||||||||||||||||||||||||||||||
| Net income | $ | 1,182 | 1,281 | (99) | (8) | $ | 2,168 | 2,477 | (309) | (12) | |||||||||||||||||||||||||||||||||||||
| Revenue by Line of Business | |||||||||||||||||||||||||||||||||||||||||||||||
|
Middle Market Banking (1)
|
$ | 2,153 | 2,199 | (46) | (2) | $ | 4,231 | 4,354 | (123) | (3) | |||||||||||||||||||||||||||||||||||||
|
Asset-Based Lending and Leasing (1)
|
969 | 1,170 | (201) | (17) | 2,043 | 2,322 | (279) | (12) | |||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 3,122 | 3,369 | (247) | (7) | $ | 6,274 | 6,676 | (402) | (6) | |||||||||||||||||||||||||||||||||||||
| Revenue by Product | |||||||||||||||||||||||||||||||||||||||||||||||
| Lending and leasing | $ | 1,308 | 1,332 | (24) | (2) | $ | 2,617 | 2,656 | (39) | (1) | |||||||||||||||||||||||||||||||||||||
| Treasury management and payments | 1,412 | 1,584 | (172) | (11) | 2,833 | 3,146 | (313) | (10) | |||||||||||||||||||||||||||||||||||||||
| Other | 402 | 453 | (51) | (11) | 824 | 874 | (50) | (6) | |||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 3,122 | 3,369 | (247) | (7) | $ | 6,274 | 6,676 | (402) | (6) | |||||||||||||||||||||||||||||||||||||
| Selected Metrics | |||||||||||||||||||||||||||||||||||||||||||||||
| Return on allocated capital | 17.3 | % | 19.3 | 15.8 | % | 18.7 | |||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio | 48 | 48 | 51 | 51 | |||||||||||||||||||||||||||||||||||||||||||
NM – Not meaningful
(1)
In second quarter 2024, we prospectively transferred our commercial auto business from Asset-Based Lending and Leasing to Middle Market Banking.
Second quarter 2024 vs. second quarter 2023
Revenue
decreased driven by:
•
lower net interest income reflecting the impact of higher interest rates on deposit costs;
partially offset by:
•
higher deposit-related fees reflecting
higher treasury management fees on commercial accounts driven by increased transaction service volumes and repricing
.
Noninterest expense
decreased due to lower personnel expense reflecting the impact of efficiency initiatives, and lower operating costs.
First half of 2024 vs. first half of 2023
Revenue
decreased driven by:
•
lower net interest income reflecting the impact of higher interest rates on deposit costs;
partially offset by:
•
higher deposit-related fees reflecting
higher treasury management fees on commercial accounts driven by increased transaction service volumes and repricing
.
Provision for credit losses
reflected an increase in net charge-offs.
Noninterest expense
decreased due to lower personnel expense reflecting the impact of efficiency initiatives.
| Wells Fargo & Company |
17
|
|||||||
Earnings Performance
(continued)
Table 6d:
Commercial Banking – Balance Sheet
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
|
($ in millions)
|
2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (average) | |||||||||||||||||||||||||||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 164,027 | 165,980 | (1,953) | (1) | % | $ | 163,650 | 164,603 | (953) | (1) | % | |||||||||||||||||||||||||||||||||||
| Commercial real estate | 44,990 | 45,855 | (865) | (2) | 45,143 | 45,858 | (715) | (2) | |||||||||||||||||||||||||||||||||||||||
| Lease financing and other | 15,406 | 13,989 | 1,417 | 10 | 15,379 | 13,872 | 1,507 | 11 | |||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 224,423 | 225,824 | (1,401) | (1) | $ | 224,172 | 224,333 | (161) | — | |||||||||||||||||||||||||||||||||||||
| Loans by Line of Business: | |||||||||||||||||||||||||||||||||||||||||||||||
|
Middle Market Banking (1)
|
$ | 128,259 | 122,204 | 6,055 | 5 | $ | 123,766 | 121,916 | 1,850 | 2 | |||||||||||||||||||||||||||||||||||||
|
Asset-Based Lending and Leasing (1)
|
96,164 | 103,620 | (7,456) | (7) | 100,406 | 102,417 | (2,011) | (2) | |||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 224,423 | 225,824 | (1,401) | (1) | $ | 224,172 | 224,333 | (161) | — | |||||||||||||||||||||||||||||||||||||
| Total deposits | 166,892 | 166,747 | 145 | — | 165,460 | 168,597 | (3,137) | (2) | |||||||||||||||||||||||||||||||||||||||
| Allocated capital | 26,000 | 25,500 | 500 | 2 | 26,000 | 25,500 | 500 | 2 | |||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (period-end) | |||||||||||||||||||||||||||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 165,878 | 168,492 | (2,614) | (2) | ||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | 44,978 | 45,784 | (806) | (2) | |||||||||||||||||||||||||||||||||||||||||||
| Lease financing and other | 15,617 | 14,435 | 1,182 | 8 | |||||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 226,473 | 228,711 | (2,238) | (1) | ||||||||||||||||||||||||||||||||||||||||||
| Loans by Line of Business: | |||||||||||||||||||||||||||||||||||||||||||||||
|
Middle Market Banking (1)
|
$ | 129,023 | 122,104 | 6,919 | 6 | ||||||||||||||||||||||||||||||||||||||||||
|
Asset-Based Lending and Leasing (1)
|
97,450 | 106,607 | (9,157) | (9) | |||||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 226,473 | 228,711 | (2,238) | (1) | ||||||||||||||||||||||||||||||||||||||||||
| Total deposits | 168,979 | 164,764 | 4,215 | 3 | |||||||||||||||||||||||||||||||||||||||||||
(1)
In second quarter 2024, we prospectively transferred our commercial auto business from Asset-Based Lending and Leasing to Middle Market Banking.
Second quarter 2024 vs. second quarter 2023
Total loans (average and period-end)
decreased driven by lower loan demand reflecting the impact of a higher interest rate environment, partially offset by increased client working capital needs.
|
18
|
Wells Fargo & Company | |||||||
Corporate and Investment Banking
delivers a suite of capital markets, banking, and financial products and services to corporate, commercial real estate, government and institutional clients globally. Products and services include corporate banking, investment banking, treasury management, commercial real
estate lending and servicing, equity and fixed income solutions as well as sales, trading, and research capabilities. Table 6e and Table 6f provide additional information for Corporate and Investment Banking.
Table 6e:
Corporate and Investment Banking – Income Statement and Selected Metrics
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Income Statement | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 1,945 | 2,359 | (414) | (18) | % | $ | 3,972 | 4,820 | (848) | (18) | % | |||||||||||||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||||||||||||||
| Deposit-related fees | 263 | 247 | 16 | 6 | 525 | 483 | 42 | 9 | |||||||||||||||||||||||||||||||||||||||
| Lending-related fees | 205 | 191 | 14 | 7 | 408 | 385 | 23 | 6 | |||||||||||||||||||||||||||||||||||||||
| Investment banking fees | 634 | 390 | 244 | 63 | 1,281 | 704 | 577 | 82 | |||||||||||||||||||||||||||||||||||||||
| Net gains from trading activities | 1,387 | 1,081 | 306 | 28 | 2,792 | 2,338 | 454 | 19 | |||||||||||||||||||||||||||||||||||||||
| Other | 404 | 363 | 41 | 11 | 842 | 803 | 39 | 5 | |||||||||||||||||||||||||||||||||||||||
| Total noninterest income | 2,893 | 2,272 | 621 | 27 | 5,848 | 4,713 | 1,135 | 24 | |||||||||||||||||||||||||||||||||||||||
| Total revenue | 4,838 | 4,631 | 207 | 4 | 9,820 | 9,533 | 287 | 3 | |||||||||||||||||||||||||||||||||||||||
| Net charge-offs | 303 | 83 | 220 | 265 | 499 | 100 | 399 | 399 | |||||||||||||||||||||||||||||||||||||||
| Change in the allowance for credit losses | (18) | 850 | (868) | NM | (209) | 1,085 | (1,294) | NM | |||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | 285 | 933 | (648) | (69) | 290 | 1,185 | (895) | (76) | |||||||||||||||||||||||||||||||||||||||
| Noninterest expense | 2,170 | 2,087 | 83 | 4 | 4,500 | 4,304 | 196 | 5 | |||||||||||||||||||||||||||||||||||||||
| Income before income tax expense | 2,383 | 1,611 | 772 | 48 | 5,030 | 4,044 | 986 | 24 | |||||||||||||||||||||||||||||||||||||||
| Income tax expense | 598 | 401 | 197 | 49 | 1,264 | 1,016 | 248 | 24 | |||||||||||||||||||||||||||||||||||||||
| Net income | $ | 1,785 | 1,210 | 575 | 48 | $ | 3,766 | 3,028 | 738 | 24 | |||||||||||||||||||||||||||||||||||||
| Revenue by Line of Business | |||||||||||||||||||||||||||||||||||||||||||||||
| Banking: | |||||||||||||||||||||||||||||||||||||||||||||||
| Lending | $ | 688 | 685 | 3 | — | $ | 1,369 | 1,377 | (8) | (1) | |||||||||||||||||||||||||||||||||||||
| Treasury Management and Payments | 687 | 762 | (75) | (10) | 1,373 | 1,547 | (174) | (11) | |||||||||||||||||||||||||||||||||||||||
| Investment Banking | 430 | 311 | 119 | 38 | 904 | 591 | 313 | 53 | |||||||||||||||||||||||||||||||||||||||
| Total Banking | 1,805 | 1,758 | 47 | 3 | 3,646 | 3,515 | 131 | 4 | |||||||||||||||||||||||||||||||||||||||
| Commercial Real Estate | 1,283 | 1,333 | (50) | (4) | 2,506 | 2,644 | (138) | (5) | |||||||||||||||||||||||||||||||||||||||
| Markets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Fixed Income, Currencies, and Commodities (FICC) | 1,228 | 1,133 | 95 | 8 | 2,587 | 2,418 | 169 | 7 | |||||||||||||||||||||||||||||||||||||||
| Equities | 558 | 397 | 161 | 41 | 1,008 | 834 | 174 | 21 | |||||||||||||||||||||||||||||||||||||||
| Credit Adjustment (CVA/DVA) and Other | 7 | 14 | (7) | (50) | 26 | 85 | (59) | (69) | |||||||||||||||||||||||||||||||||||||||
| Total Markets | 1,793 | 1,544 | 249 | 16 | 3,621 | 3,337 | 284 | 9 | |||||||||||||||||||||||||||||||||||||||
| Other | (43) | (4) | (39) | NM | 47 | 37 | 10 | 27 | |||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 4,838 | 4,631 | 207 | 4 | $ | 9,820 | 9,533 | 287 | 3 | |||||||||||||||||||||||||||||||||||||
| Selected Metrics | |||||||||||||||||||||||||||||||||||||||||||||||
| Return on allocated capital | 15.4 | % | 10.2 | 16.3 | % | 13.0 | |||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio | 45 | 45 | 46 | 45 | |||||||||||||||||||||||||||||||||||||||||||
NM – Not meaningful
Second quarter 2024 vs. second quarter 2023
Revenue
increased driven by:
•
higher net gains from trading activities
driven by higher revenue in equities, including a gain of $122 million related to an exchange of shares of Visa Inc. Class B common stock, and structured products
; and
•
higher investment banking fees due to increased activity across all products;
partially offset by:
•
lower net interest income driven by higher deposit costs and lower loan balances.
Provision for credit losses
reflected a decrease in the allowance for credit losses, primarily driven by commercial real estate loans.
Noninterest expense
increased driven by higher operating costs, partially offset by the impact of efficiency initiatives.
| Wells Fargo & Company |
19
|
|||||||
Earnings Performance
(continued)
First half of 2024 vs. first half of 2023
Revenue
increased driven by:
•
higher investment banking fees due to increased activity across all products; and
•
higher net gains from trading activities
driven by higher revenue in structured products, equities, and foreign exchange, partially offset by lower revenue in rates
;
partially offset by:
•
lower net interest income driven by higher deposit costs and lower loan balances.
Provision for credit losses
reflected a decrease in the allowance for credit losses driven by commercial real estate loans.
Noninterest expense
increased driven by higher operating costs, partially offset by the impact of efficiency initiatives.
Table 6f:
Corporate and Investment Banking – Balance Sheet
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
|
($ in millions)
|
2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (average) | |||||||||||||||||||||||||||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 180,789 | 190,529 | (9,740) | (5) | % | $ | 183,110 | 192,141 | (9,031) | (5) | % | |||||||||||||||||||||||||||||||||||
| Commercial real estate | 94,998 | 100,941 | (5,943) | (6) | 96,405 | 100,956 | (4,551) | (5) | |||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 275,787 | 291,470 | (15,683) | (5) | $ | 279,515 | 293,097 | (13,582) | (5) | |||||||||||||||||||||||||||||||||||||
| Loans by Line of Business: | |||||||||||||||||||||||||||||||||||||||||||||||
| Banking | $ | 86,130 | 95,413 | (9,283) | (10) | $ | 88,513 | 97,235 | (8,722) | (9) | |||||||||||||||||||||||||||||||||||||
| Commercial Real Estate | 128,107 | 136,473 | (8,366) | (6) | 129,908 | 136,639 | (6,731) | (5) | |||||||||||||||||||||||||||||||||||||||
| Markets | 61,550 | 59,584 | 1,966 | 3 | 61,094 | 59,223 | 1,871 | 3 | |||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 275,787 | 291,470 | (15,683) | (5) | $ | 279,515 | 293,097 | (13,582) | (5) | |||||||||||||||||||||||||||||||||||||
| Trading-related assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Trading account securities | $ | 136,101 | 118,462 | 17,639 | 15 | $ | 128,724 | 115,561 | 13,163 | 11 | |||||||||||||||||||||||||||||||||||||
| Reverse repurchase agreements/securities borrowed | 64,896 | 60,164 | 4,732 | 8 | 63,876 | 58,997 | 4,879 | 8 | |||||||||||||||||||||||||||||||||||||||
| Derivative assets | 18,552 | 17,522 | 1,030 | 6 | 17,793 | 17,724 | 69 | — | |||||||||||||||||||||||||||||||||||||||
| Total trading-related assets | $ | 219,549 | 196,148 | 23,401 | 12 | $ | 210,393 | 192,282 | 18,111 | 9 | |||||||||||||||||||||||||||||||||||||
| Total assets | 558,063 | 550,091 | 7,972 | 1 | 554,498 | 549,453 | 5,045 | 1 | |||||||||||||||||||||||||||||||||||||||
| Total deposits | 187,545 | 160,251 | 27,294 | 17 | 185,408 | 158,908 | 26,500 | 17 | |||||||||||||||||||||||||||||||||||||||
| Allocated capital | 44,000 | 44,000 | — | — | 44,000 | 44,000 | — | — | |||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (period-end) | |||||||||||||||||||||||||||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 181,441 | 190,317 | (8,876) | (5) | ||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | 93,889 | 101,028 | (7,139) | (7) | |||||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 275,330 | 291,345 | (16,015) | (5) | ||||||||||||||||||||||||||||||||||||||||||
| Loans by Line of Business: | |||||||||||||||||||||||||||||||||||||||||||||||
| Banking | $ | 84,054 | 93,596 | (9,542) | (10) | ||||||||||||||||||||||||||||||||||||||||||
| Commercial Real Estate | 126,080 | 136,257 | (10,177) | (7) | |||||||||||||||||||||||||||||||||||||||||||
| Markets | 65,196 | 61,492 | 3,704 | 6 | |||||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 275,330 | 291,345 | (16,015) | (5) | ||||||||||||||||||||||||||||||||||||||||||
| Trading-related assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Trading account securities | $ | 140,928 | 130,008 | 10,920 | 8 | ||||||||||||||||||||||||||||||||||||||||||
|
Reverse repurchase agreements/securities borrowed
|
70,615 | 59,020 | 11,595 | 20 | |||||||||||||||||||||||||||||||||||||||||||
| Derivative assets | 19,186 | 17,804 | 1,382 | 8 | |||||||||||||||||||||||||||||||||||||||||||
| Total trading-related assets | $ | 230,729 | 206,832 | 23,897 | 12 | ||||||||||||||||||||||||||||||||||||||||||
| Total assets | 565,334 | 559,520 | 5,814 | 1 | |||||||||||||||||||||||||||||||||||||||||||
| Total deposits | 200,920 | 158,770 | 42,150 | 27 | |||||||||||||||||||||||||||||||||||||||||||
Second quarter and first half of 2024 vs. second quarter and first half of 2023
Total loans (average and period-end)
decreased driven by lower origination volumes reflecting decreased loan demand.
Total trading-related assets (average and period-end)
increased reflecting:
•
higher trading account securities driven by higher mortgage-backed securities; and
•
an increased volume of reverse repurchase agreements.
Total deposits (average and period-end)
increased driven by additions of deposits from new and existing customers.
|
20
|
Wells Fargo & Company | |||||||
Wealth and Investment Management
provides personalized wealth management, brokerage, financial planning, lending, private banking, trust and fiduciary products and services to affluent, high-net worth and ultra-high-net worth clients. We operate through financial advisors in our brokerage and wealth
offices, consumer bank branches, independent offices, and digitally through WellsTrade® and Intuitive Investor®
.
Table 6g and Table 6h provide additional information for Wealth and Investment Management (WIM).
Table 6g:
Wealth and Investment Management
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions, unless otherwise noted) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Income Statement | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 906 | 1,009 | (103) | (10) | % | $ | 1,775 | 2,053 | (278) | (14) | % | |||||||||||||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||||||||||||||
| Investment advisory and other asset-based fees | 2,357 | 2,110 | 247 | 12 | 4,624 | 4,171 | 453 | 11 | |||||||||||||||||||||||||||||||||||||||
| Commissions and brokerage services fees | 521 | 494 | 27 | 5 | 1,066 | 1,035 | 31 | 3 | |||||||||||||||||||||||||||||||||||||||
| Other | 74 | 35 | 39 | 111 | 135 | 70 | 65 | 93 | |||||||||||||||||||||||||||||||||||||||
| Total noninterest income | 2,952 | 2,639 | 313 | 12 | 5,825 | 5,276 | 549 | 10 | |||||||||||||||||||||||||||||||||||||||
| Total revenue | 3,858 | 3,648 | 210 | 6 | 7,600 | 7,329 | 271 | 4 | |||||||||||||||||||||||||||||||||||||||
| Net charge-offs | (2) | (1) | (1) | (100) | 4 | (2) | 6 | 300 | |||||||||||||||||||||||||||||||||||||||
| Change in the allowance for credit losses | (12) | 25 | (37) | NM | (15) | 37 | (52) | NM | |||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | (14) | 24 | (38) | NM | (11) | 35 | (46) | NM | |||||||||||||||||||||||||||||||||||||||
| Noninterest expense | 3,193 | 2,974 | 219 | 7 | 6,423 | 6,035 | 388 | 6 | |||||||||||||||||||||||||||||||||||||||
| Income before income tax expense | 679 | 650 | 29 | 4 | 1,188 | 1,259 | (71) | (6) | |||||||||||||||||||||||||||||||||||||||
| Income tax expense | 195 | 163 | 32 | 20 | 323 | 315 | 8 | 3 | |||||||||||||||||||||||||||||||||||||||
| Net income | $ | 484 | 487 | (3) | (1) | $ | 865 | 944 | (79) | (8) | |||||||||||||||||||||||||||||||||||||
| Selected Metrics | |||||||||||||||||||||||||||||||||||||||||||||||
| Return on allocated capital | 29.0 | % | 30.5 | 25.8 | % | 29.7 | |||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio | 83 | 82 | 85 | 82 | |||||||||||||||||||||||||||||||||||||||||||
| Client assets ($ in billions, period-end): | |||||||||||||||||||||||||||||||||||||||||||||||
| Advisory assets | $ | 945 | 850 | 95 | 11 | ||||||||||||||||||||||||||||||||||||||||||
| Other brokerage assets and deposits | 1,255 | 1,148 | 107 | 9 | |||||||||||||||||||||||||||||||||||||||||||
| Total client assets | $ | 2,200 | 1,998 | 202 | 10 | ||||||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (average) | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 83,166 | 83,045 | 121 | — | $ | 82,824 | 83,331 | (507) | (1) | |||||||||||||||||||||||||||||||||||||
| Total deposits | 102,843 | 112,360 | (9,517) | (8) | 102,158 | 119,443 | (17,285) | (14) | |||||||||||||||||||||||||||||||||||||||
| Allocated capital | 6,500 | 6,250 | 250 | 4 | 6,500 | 6,250 | 250 | 4 | |||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (period-end) | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 83,338 | 82,456 | 882 | 1 | ||||||||||||||||||||||||||||||||||||||||||
| Total deposits | 103,722 | 108,532 | (4,810) | (4) | |||||||||||||||||||||||||||||||||||||||||||
Second quarter 2024 vs. second quarter 2023
Revenue
increased driven by:
•
higher investment advisory and other asset-based fees driven by higher asset-based fees reflecting higher market valuations;
partially offset by:
•
lower net interest income driven by lower deposit balances and higher deposit costs.
Noninterest expense
increased reflecting:
•
higher personnel expense driven by higher revenue-related compensation; and
•
higher operating losses;
partially offset by:
•
the impact of efficiency initiatives; and
•
lower operating costs.
Total deposits (average and period-end)
decreased due to customer migration to higher yielding alternatives.
First half of 2024 vs. first half of 2023
Revenue
increased driven by:
•
higher investment advisory and other asset-based fees driven by higher asset-based fees reflecting higher market valuations;
partially offset by:
•
lower net interest income driven by lower deposit balances.
Noninterest expense
increased reflecting:
•
higher personnel expense driven by higher revenue-related compensation; and
•
higher operating losses;
partially offset by:
•
the impact of efficiency initiatives; and
•
lower operating costs.
Total deposits (average)
decreased due to customer migration to higher yielding alternatives.
| Wells Fargo & Company |
21
|
|||||||
Earnings Performance
(continued)
The Federal Trade Commission issued a final rule that broadly prohibits worker non-compete provisions. The rule has an effective date of September 4, 2024, but is pending the results of third party litigation challenging the rule. If the rule becomes effective in its current form, we would expect an acceleration of expenses related to certain deferred compensation award programs for retired and retirement eligible employees in our WIM business that feature a non-compete provision as a condition of award vesting.
WIM Advisory Assets
In addition to transactional accounts, WIM offers advisory account relationships to brokerage customers. Fees from advisory accounts are based on a percentage of the market value of the assets as of the beginning of the quarter, which vary across the account types based on the distinct services provided, and are affected by investment
performance as well as asset inflows and outflows. Advisory accounts include assets that are financial advisor-directed and separately managed by third-party managers as well as certain client-directed brokerage assets where we earn a fee for advisory and other services, but do not have investment discretion.
WIM also manages personal trust and other assets for high net worth clients, with fee income earned based on a percentage of the market value of these assets. Table 6h presents advisory assets activity by WIM line of business. Management believes that advisory assets is a useful metric because it allows management, investors, and others to assess how changes in asset amounts may impact the generation of certain asset-based fees.
For the second quarter of both 2024 and 2023, the average fee rate by account type ranged from 50 to 120 basis points.
Table 6h:
WIM Advisory Assets
| Quarter ended | Six months ended | ||||||||||||||||||||||||||||||||||
| (in billions) |
Balance, beginning
of period
|
Inflows (1) | Outflows (2) | Market impact (3) | Balance, end of period |
Balance, beginning
of period
|
Inflows (1) | Outflows (2) | Market impact (3) | Balance, end of period | |||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Client-directed (4) | $ | 194.2 | 9.1 | (10.1) | 3.2 | 196.4 | $ | 185.3 | 18.0 | (20.4) | 13.5 | 196.4 | |||||||||||||||||||||||
| Financial advisor-directed (5) | 284.5 | 13.0 | (12.1) | 5.7 | 291.1 | 264.6 | 25.0 | (22.5) | 24.0 | 291.1 | |||||||||||||||||||||||||
| Separate accounts (6) | 209.2 | 8.3 | (8.4) | 1.3 | 210.4 | 198.4 | 15.7 | (15.9) | 12.2 | 210.4 | |||||||||||||||||||||||||
| Mutual fund advisory (7) | 86.7 | 2.2 | (3.5) | 0.3 | 85.7 | 83.3 | 4.4 | (6.6) | 4.6 | 85.7 | |||||||||||||||||||||||||
| Total Wells Fargo Advisors | $ | 774.6 | 32.6 | (34.1) | 10.5 | 783.6 | $ | 731.6 | 63.1 | (65.4) | 54.3 | 783.6 | |||||||||||||||||||||||
| The Private Bank (8) | 164.2 | 6.0 | (9.6) | 0.9 | 161.5 | 159.5 | 11.6 | (17.6) | 8.0 | 161.5 | |||||||||||||||||||||||||
| Total WIM advisory assets | $ | 938.8 | 38.6 | (43.7) | 11.4 | 945.1 | $ | 891.1 | 74.7 | (83.0) | 62.3 | 945.1 | |||||||||||||||||||||||
| June 30, 2023 | |||||||||||||||||||||||||||||||||||
| Client-directed (4) | $ | 171.9 | 8.2 | (9.1) | 6.4 | 177.4 | $ | 165.2 | 16.4 | (17.5) | 13.3 | 177.4 | |||||||||||||||||||||||
| Financial advisor-directed (5) | 233.1 | 9.5 | (10.1) | 11.2 | 243.7 | 222.9 | 18.9 | (19.3) | 21.2 | 243.7 | |||||||||||||||||||||||||
| Separate accounts (6) | 182.7 | 5.8 | (6.8) | 6.8 | 188.5 | 176.5 | 11.7 | (12.9) | 13.2 | 188.5 | |||||||||||||||||||||||||
| Mutual fund advisory (7) | 80.6 | 1.8 | (3.1) | 2.6 | 81.9 | 78.6 | 3.8 | (6.2) | 5.7 | 81.9 | |||||||||||||||||||||||||
| Total Wells Fargo Advisors | $ | 668.3 | 25.3 | (29.1) | 27.0 | 691.5 | $ | 643.2 | 50.8 | (55.9) | 53.4 | 691.5 | |||||||||||||||||||||||
| The Private Bank (8) | 156.8 | 6.1 | (8.9) | 4.0 | 158.0 | 153.6 | 13.4 | (18.2) | 9.2 | 158.0 | |||||||||||||||||||||||||
| Total WIM advisory assets | $ | 825.1 | 31.4 | (38.0) | 31.0 | 849.5 | $ | 796.8 | 64.2 | (74.1) | 62.6 | 849.5 | |||||||||||||||||||||||
(1)
Inflows include new advisory account assets, contributions, dividends, and interest.
(2)
Outflows include closed advisory account assets, withdrawals, and client management fees.
(3)
Market impact reflects gains and losses on portfolio investments.
(4)
Investment advice and other services are provided to the client, but decisions are made by the client and the fees earned are based on a percentage of the advisory account assets, not the number and size of transactions executed by the client.
(5)
Professionally managed portfolios with fees earned based on respective strategies and as a percentage of certain client assets.
(6)
Professional advisory portfolios managed by third-party asset managers. Fees are earned based on a percentage of certain client assets.
(7)
Program with portfolios constructed of load-waived, no-load, and institutional share class mutual funds. Fees are earned based on a percentage of certain client assets.
(8)
Discretionary and non-discretionary portfolios held in personal trusts, investment agency, or custody accounts with fees earned based on a percentage of client assets.
|
22
|
Wells Fargo & Company | |||||||
Corporate
includes corporate treasury and enterprise functions, net of allocations (including funds transfer pricing, capital, liquidity and certain expenses), in support of the reportable operating segments, as well as our investment portfolio and venture capital and private equity investments. Corporate also
includes certain lines of business that management has determined are no longer consistent with the long-term strategic goals of the Company as well as results for previously divested businesses. Table 6i and Table 6j provide additional information for Corporate.
Table 6i:
Corporate – Income Statement
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
|
($ in millions)
|
2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Income Statement | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | (144) | (91) | (53) | (58) | % | $ | (112) | (75) | (37) | (49) | % | |||||||||||||||||||||||||||||||||||
| Noninterest income | 392 | 121 | 271 | 224 | 683 | 126 | 557 | 442 | |||||||||||||||||||||||||||||||||||||||
| Total revenue | 248 | 30 | 218 | 727 | 571 | 51 | 520 | NM | |||||||||||||||||||||||||||||||||||||||
| Net charge-offs | (2) | (2) | — | — | (3) | (4) | 1 | 25 | |||||||||||||||||||||||||||||||||||||||
| Change in the allowance for credit losses | 6 | (142) | 148 | 104 | 6 | (20) | 26 | 130 | |||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | 4 | (144) | 148 | 103 | 3 | (24) | 27 | 113 | |||||||||||||||||||||||||||||||||||||||
| Noninterest expense | 723 | 269 | 454 | 169 | 1,798 | 877 | 921 | 105 | |||||||||||||||||||||||||||||||||||||||
|
Loss before income tax benefit
|
(479) | (95) | (384) | NM | (1,230) | (802) | (428) | (53) | |||||||||||||||||||||||||||||||||||||||
|
Income tax benefit
|
(157) | (103) | (54) | (52) | (474) | (375) | (99) | (26) | |||||||||||||||||||||||||||||||||||||||
|
Less: Net loss from noncontrolling interests (1)
|
(4) | (38) | 34 | 89 | (3) | (152) | 149 | 98 | |||||||||||||||||||||||||||||||||||||||
|
Net income (loss)
|
$ | (318) | 46 | (364) | NM | $ | (753) | (275) | (478) | NM | |||||||||||||||||||||||||||||||||||||
NM – Not meaningful
(1)
Reflects results attributable to noncontrolling interests predominantly associated with the Company’s consolidated venture capital investments.
Second quarter 2024 vs. second quarter 2023
Revenue
increased driven by higher net gains from equity securities reflecting higher unrealized gains on nonmarketable equity securities from our venture capital investments.
Provision for credit losses
reflected an increase in allowance for credit losses.
Noninterest expense
increased due to:
•
higher operating losses due to higher expense for customer remediation activities; and
•
an additional expense of $52 million for the estimated FDIC special assessment.
First half of 2024 vs. first half of 2023
Revenue
increased driven by
higher net gains from equity securities reflecting lower impairment of equity securities and
higher unrealized gains on nonmarketable equity securities
from our venture capital investments.
Noninterest expense
increased due to:
•
higher operating losses due to higher expense for customer remediation activities; and
•
an additional expense of
$336 million
for the estimated FDIC special assessment
.
Corporate includes our rail car leasing business, which had long-lived operating lease assets, net of accumulated depreciation, of $4.5 billion and $4.6 billion
at June 30, 2024, and December 31, 2023, respectively. We may incur impairment charges based on changing economic and market conditions affecting the long-term demand and utility of specific types of rail cars. For additional information, see the “Earnings Performance – Operating Segment Results – Corporate” section in our 2023 Form 10-K.
| Wells Fargo & Company |
23
|
|||||||
Earnings Performance
(continued)
Table 6j:
Corporate – Balance Sheet
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
|
($ in millions)
|
2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (average) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks, and interest-earning deposits with banks | $ | 202,812 | 132,505 | 70,307 | 53 | % | $ | 207,212 | 125,004 | 82,208 | 66 | % | |||||||||||||||||||||||||||||||||||
|
Available-for-sale debt securities
|
131,822 | 130,496 | 1,326 | 1 | 127,308 | 129,638 | (2,330) | (2) | |||||||||||||||||||||||||||||||||||||||
|
Held-to-maturity debt securities
|
251,100 | 270,999 | (19,899) | (7) | 254,094 | 271,854 | (17,760) | (7) | |||||||||||||||||||||||||||||||||||||||
| Equity securities | 15,571 | 15,327 | 244 | 2 | 15,765 | 15,422 | 343 | 2 | |||||||||||||||||||||||||||||||||||||||
| Total loans | 7,662 | 9,216 | (1,554) | (17) | 8,181 | 9,185 | (1,004) | (11) | |||||||||||||||||||||||||||||||||||||||
| Total assets | 656,535 | 610,417 | 46,118 | 8 | 660,009 | 603,293 | 56,716 | 9 | |||||||||||||||||||||||||||||||||||||||
| Total deposits | 110,970 | 84,752 | 26,218 | 31 | 115,288 | 72,846 | 42,442 | 58 | |||||||||||||||||||||||||||||||||||||||
| Selected Balance Sheet Data (period-end) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks, and interest-earning deposits with banks | $ | 211,050 | 128,077 | 82,973 | 65 | ||||||||||||||||||||||||||||||||||||||||||
|
Available-for-sale debt securities
|
138,087 | 123,169 | 14,918 | 12 | |||||||||||||||||||||||||||||||||||||||||||
|
Held-to-maturity debt securities
|
247,746 | 269,414 | (21,668) | (8) | |||||||||||||||||||||||||||||||||||||||||||
| Equity securities | 15,297 | 15,097 | 200 | 1 | |||||||||||||||||||||||||||||||||||||||||||
| Total loans | 7,406 | 9,231 | (1,825) | (20) | |||||||||||||||||||||||||||||||||||||||||||
| Total assets | 670,494 | 593,597 | 76,897 | 13 | |||||||||||||||||||||||||||||||||||||||||||
| Total deposits | 110,456 | 92,023 | 18,433 | 20 | |||||||||||||||||||||||||||||||||||||||||||
Second quarter and first half of 2024 vs. second quarter and first half of 2023
Total assets (average and period-end)
increased reflecting:
•
an increase in cash and due from banks, and interest-earning deposits with banks that are managed by corporate treasury;
partially offset by:
•
paydowns and maturities of HTM debt securities.
Total deposits (average and period-end)
increased driven by issuances of certificates of deposits (CDs).
|
24
|
Wells Fargo & Company | |||||||
| Balance Sheet Analysis | ||
At June 30, 2024, our assets totaled $1.94 trillion, up $7.6 billion from December 31, 2023.
The following discussion provides additional information about the major components of our consolidated balance sheet. See the “Capital Management” section in this Report for information on changes in our equity.
Available-for-Sale and Held-to-Maturity Debt Securities
Table 7:
Available-for-Sale and Held-to-Maturity Debt Securities
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) |
Amortized
cost, net (1) |
Net
unrealized gains (losses) |
Fair value |
Weighted
average expected maturity (yrs) |
Amortized
cost, net (1) |
Net
unrealized gains (losses) |
Fair value | Weighted average expected maturity (yrs) | |||||||||||||||||||||||||||||||||||||||
| Available-for-sale (2) | $ | 156,417 | (7,665) | 148,752 | 6.1 | $ | 137,155 | (6,707) | 130,448 | 4.7 | |||||||||||||||||||||||||||||||||||||
| Held-to-maturity (3) | 250,736 | (41,095) | 209,641 | 8.1 | 262,708 | (35,392) | 227,316 | 7.6 | |||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 407,153 | (48,760) | 358,393 |
n/a
|
$ | 399,863 | (42,099) | 357,764 |
n/a
|
|||||||||||||||||||||||||||||||||||||
(1)
Represents amortized cost of the securities, net of the allowance for credit losses of $7 million and $1 million related to available-for-sale debt securities and $97 million and $93 million related to held-to-maturity debt securities at June 30, 2024, and December 31, 2023, respectively.
(2)
Available-for-sale debt securities are carried on our consolidated balance sheet at fair value.
(3)
Held-to-maturity debt securities are carried on our consolidated balance sheet at amortized cost, net of the allowance for credit losses.
Table 7 presents a summary of our portfolio of investments in available-for-sale (AFS) and held-to-maturity (HTM) debt securities. See the “Balance Sheet Analysis – Available-for-Sale and Held-to-Maturity Debt Securities” section in our 2023 Form 10-K for additional information on our investment management objectives and practices and the “Risk Management – Asset/Liability Management” section in this Report for information on liquidity and interest rate risk.
The amortized cost, net of the allowance for credit losses, of the total AFS and HTM debt securities portfolio increased from December 31, 2023. Purchases of AFS debt securities were partially offset by paydowns and maturities of AFS and HTM debt securities, as well as sales of AFS debt securities
.
The total net unrealized losses on AFS and HTM debt securities increased from December 31, 2023, due to changes in interest rates.
At June 30, 2024, 99% of the combined AFS and HTM debt securities portfolio was rated AA- or above. Ratings are based on external ratings where available and, where not available, based on internal credit grades. See Note 3 (Available-for-Sale and Held-to-Maturity Debt Securities) to Financial Statements in this Report for additional information on AFS and HTM debt securities, including a summary of debt securities by security type.
| Wells Fargo & Company |
25
|
|||||||
Balance Sheet Analysis
(continued)
Loan Portfolios
Table 8 provides a summary of total outstanding loans by portfolio segment. Commercial loans decreased from December 31, 2023, due to decreases in both the commercial and industrial and commercial real estate loan portfolios as paydowns exceeded originations and advances. Consumer loans
decreased from December 31, 2023, driven by decreases in the residential mortgage and auto loan portfolios as paydowns exceeded originations, partially offset by an increase in credit card loans due to higher purchase volume driven by new account growth.
Table 8:
Loan Portfolios
| ($ in millions) | Jun 30, 2024 | Dec 31, 2023 | $ Change | % Change | |||||||||||||||||||
| Commercial | $ | 536,611 | 547,427 | (10,816) | (2) | % | |||||||||||||||||
| Consumer | 381,296 | 389,255 | (7,959) | (2) | |||||||||||||||||||
| Total loans | $ | 917,907 | 936,682 | (18,775) | (2) | ||||||||||||||||||
Average loan balances and a comparative detail of average loan balances is included in Table 1 under “Earnings Performance – Net Interest Income” earlier in this Report. Additional information on total loans outstanding by portfolio segment and class of financing receivable is included in the “Risk Management – Credit Risk Management” section in this Report. Period-end balances and other loan related information are in Note 5 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
See the “Balance Sheet Analysis – Loan Portfolios” section in our 2023 Form 10-K for additional information regarding contractual loan maturities and the distribution of loans to changes in interest rates.
Deposits
Deposits increased from December 31, 2023, reflecting:
•
growth in commercial deposits;
partially offset by:
•
customer migration to higher yielding alternatives; and
•
lower time deposits driven by maturities of CDs.
Table 9 provides additional information regarding deposit balances. Information regarding the impact of deposits on net interest income and a comparison of average deposit balances is provided in the “Earnings Performance – Net Interest Income” section and Table 1 earlier in this Report. Our average deposit cost in second quarter 2024 increased to 1.84%, compared with 1.58% in fourth quarter 2023.
Table 9:
Deposits
| ($ in millions) |
Jun 30,
2024 |
% of
total
deposits
|
Dec 31,
2023 |
% of
total deposits |
$ Change | % Change | |||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 348,525 | 26 | % | $ | 360,279 | 26 | % | $ | (11,754) | (3) | % | |||||||||||||||||||||||
| Interest-bearing demand deposits | 463,453 | 34 | 436,908 | 32 | 26,545 | 6 | |||||||||||||||||||||||||||||
| Savings deposits | 351,927 | 26 | 349,181 | 26 | 2,746 | 1 | |||||||||||||||||||||||||||||
| Time deposits | 182,583 | 13 | 187,989 | 14 | (5,406) | (3) | |||||||||||||||||||||||||||||
| Interest-bearing deposits in non-U.S. offices | 19,406 | 1 | 23,816 | 2 | (4,410) | (19) | |||||||||||||||||||||||||||||
| Total deposits | $ | 1,365,894 | 100 | % | $ | 1,358,173 | 100 | % | $ | 7,721 | 1 | ||||||||||||||||||||||||
|
26
|
Wells Fargo & Company | |||||||
| Off-Balance Sheet Arrangements | ||
In the ordinary course of business, we engage in financial transactions that are not recorded on our consolidated balance sheet, or may be recorded on our consolidated balance sheet in amounts that are different from the full contract or notional amount of the transaction. Our off-balance sheet arrangements include unfunded credit commitments, transactions with unconsolidated entities, guarantees, derivatives, and other commitments. These transactions are designed to (1) meet the financial needs of customers, (2) manage our credit, market or liquidity risks, and/or (3) diversify our funding sources.
Unfunded Credit Commitments
Unfunded credit commitments are legally binding agreements to lend to customers with terms covering usage of funds, contractual interest rates, expiration dates, and any required collateral. The maximum credit risk for these commitments will generally be lower than the contractual amount because these commitments may expire without being used or may be cancelled at the customer’s request. Our credit risk monitoring activities include managing the amount of commitments, both to individual customers and in total, and the size and maturity structure of these commitments. For additional information, see Note 5 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
Transactions with Unconsolidated Entities
In the normal course of business, we enter into various types of on- and off-balance sheet transactions with special purpose entities (SPEs), which are corporations, trusts, limited liability companies or partnerships that are established for a limited purpose. Generally, SPEs are formed in connection with securitization transactions and are considered variable interest entities (VIEs). For additional information, see Note 13 (Securitizations and Variable Interest Entities) to Financial Statements in this Report.
Guarantees and Other Commitments
Guarantees are contracts that contingently require us to make payments to a guaranteed party based on an event or a change in an underlying asset, liability, rate or index. Guarantees are generally in the form of standby and direct pay letters of credit, written options, recourse obligations, exchange and clearing house guarantees, indemnifications, and other types of similar arrangements. We also enter into other commitments such as commitments to purchase securities under resale agreements. For additional information, see Note 14 (Guarantees and Other Commitments) to Financial Statements in this Report.
Derivatives
We use derivatives to manage exposure to market risk, including interest rate risk, credit risk and foreign currency risk, and to assist customers with their risk management objectives. Derivatives are recorded on our consolidated balance sheet at fair value, and volume can be measured in terms of the notional amount, which is generally not exchanged, but is used only as the basis on which interest and other payments are determined. The notional amount is not recorded on our consolidated balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. For additional information, see Note 11 (Derivatives) to Financial Statements in this Report.
| Wells Fargo & Company |
27
|
|||||||
| Risk Management | ||
Wells Fargo manages a variety of risks that can significantly affect our financial performance and our ability to meet the expectations of our customers, shareholders, regulators and other stakeholders.
For additional information about how we manage risk, see the “Risk Management” section in our 2023 Form 10-K. The discussion that follows supplements our discussion of the management of certain risks contained in the “Risk Management” section in our 2023 Form 10-K.
Credit Risk Management
Credit risk is the risk of loss associated with a borrower or counterparty default (failure to meet obligations in accordance with agreed upon terms). Credit risk exists with many of the Company’s assets and exposures such as debt security holdings, certain derivatives, and loans.
The Board’s Risk Committee has primary oversight responsibility for credit risk. At the management level, Corporate Credit Risk, which is part of Independent Risk Management, has oversight responsibility for credit risk. Corporate Credit Risk reports to the Chief Risk Officer and supports periodic reports related to credit risk provided to the Board’s Risk Committee.
Loan Portfolio
Our loan portfolios represent the largest component of assets on our consolidated balance sheet for which we have credit risk. Table 10 presents our total loans outstanding by portfolio segment and class of financing receivable.
Table 10:
Total Loans Outstanding by Portfolio Segment and Class of Financing Receivable
|
(in millions)
|
Jun 30, 2024 | Dec 31, 2023 | |||||||||
| Commercial and industrial | $ | 374,588 | 380,388 | ||||||||
| Commercial real estate | 145,318 | 150,616 | |||||||||
| Lease financing | 16,705 | 16,423 | |||||||||
| Total commercial | 536,611 | 547,427 | |||||||||
| Residential mortgage | 255,085 | 260,724 | |||||||||
| Credit card | 53,756 | 52,230 | |||||||||
| Auto | 44,280 | 47,762 | |||||||||
| Other consumer | 28,175 | 28,539 | |||||||||
| Total consumer | 381,296 | 389,255 | |||||||||
| Total loans | $ | 917,907 | 936,682 | ||||||||
We manage our credit risk by establishing what we believe are sound credit policies for underwriting new business, while monitoring and reviewing the performance of our existing loan portfolios. We employ various credit risk management and monitoring activities to mitigate risks associated with multiple risk factors affecting loans we hold including:
•
Loan concentrations and related credit quality;
•
Counterparty credit risk;
•
Economic and market conditions;
•
Legislative or regulatory mandates;
•
Changes in interest rates;
•
Merger and acquisition activities; and
•
Reputation risk.
In addition, the Company will continue to integrate climate considerations into its credit risk management activities.
Our credit risk management oversight process is governed centrally, but provides for direct management and accountability by our lines of business. Our overall credit process includes comprehensive credit policies, disciplined credit underwriting, frequent and detailed risk measurement and modeling, extensive credit training programs, and a continual loan review and audit process.
A key to our credit risk management is adherence to a well-controlled underwriting process, which we believe is appropriate for the needs of our customers as well as investors who purchase the loans or securities collateralized by the loans.
Credit Quality Overview
Table 11 provides credit quality trends
.
Table 11:
Credit Quality Overview
|
($ in millions)
|
Jun 30, 2024 | Dec 31, 2023 | |||||||||
| Nonaccrual loans | |||||||||||
| Commercial loans | $ | 5,161 | 4,914 | ||||||||
| Consumer loans | 3,273 | 3,342 | |||||||||
| Total nonaccrual loans | $ | 8,434 | 8,256 | ||||||||
| Nonaccrual loans as a % of total loans | 0.92 | % | 0.88 | ||||||||
| Allowance for credit losses (ACL) for loans | $ | 14,789 | 15,088 | ||||||||
| ACL for loans as a % of total loans | 1.61 | % | 1.61 | ||||||||
| Quarter ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net loan charge-offs as a % of: | |||||||||||
| Average commercial loans | 0.35 | % | 0.15 | ||||||||
| Average consumer loans | 0.88 | 0.58 | |||||||||
| Six months ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Average commercial loans | 0.30 | % | 0.10 | ||||||||
| Average consumer loans | 0.86 | 0.57 | |||||||||
Additional information on our loan portfolios and our credit quality trends follows.
|
28
|
Wells Fargo & Company | |||||||
Significant Loan Portfolio Reviews
Our credit risk monitoring process is designed to enable early identification of developing risk and to support our determination of an appropriate allowance for credit losses. The following discussion provides additional characteristics and analysis of our significant portfolios. See Note 5 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report for more analysis and credit metric information for each of the following portfolios.
COMMERCIAL AND INDUSTRIAL LOANS AND LEASE FINANCING
For purposes of portfolio risk management, we aggregate commercial and industrial loans and lease financing according to market segmentation and standard industry codes. We generally subject commercial and industrial loans and lease financing to individual risk assessment using our internal borrower and collateral quality ratings. Our ratings are aligned to regulatory definitions of pass and criticized categories with criticized segmented among special mention, substandard, doubtful, and loss categories.
We had $16.0 billion of the commercial and industrial loans and lease financing portfolio internally classified as criticized in accordance with regulatory guidance at June 30, 2024, compared with $14.6 billion at December 31, 2023. The increase was driven by the entertainment and recreation, auto related, technology, telecom and media, and transportation services industries, partially offset by the financials except banks industry.
The majority of our commercial and industrial loans and lease financing portfolio is secured by short-term assets, such as accounts receivable, inventory and debt securities, as well as long-lived assets, such as equipment and other business assets. Generally, the primary source of repayment for this portfolio is the operating cash flows of customers, with the collateral securing this portfolio representing a secondary source of repayment.
The portfolio decreased at June 30, 2024, compared with December 31, 2023, as a result of paydowns and decreased loan draws. Table 12 provides our commercial and industrial loans and lease financing by industry. The industry categories are based on the North American Industry Classification System.
Table 12:
Commercial and Industrial Loans and Lease Financing by Industry
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | Nonaccrual loans | Loans outstanding balance | % of total loans | Total commitments (1) | Nonaccrual loans | Loans outstanding balance | % of total loans | Total commitments (1) | |||||||||||||||||||||||||||||||||||||||
| Financials except banks | $ | 51 | 145,269 | 16 | % | $ | 231,777 | 9 | 146,635 | 16 | % | $ | 234,513 | ||||||||||||||||||||||||||||||||||
| Technology, telecom and media | 87 | 24,661 | 3 | 61,246 | 60 | 25,460 | 3 | 59,216 | |||||||||||||||||||||||||||||||||||||||
| Real estate and construction | 87 | 26,090 | 3 | 54,542 | 55 | 24,987 | 3 | 54,345 | |||||||||||||||||||||||||||||||||||||||
| Equipment, machinery and parts manufacturing | 37 | 25,727 | 3 | 49,539 | 37 | 24,785 | 3 | 48,265 | |||||||||||||||||||||||||||||||||||||||
| Retail | 53 | 19,674 | 2 | 47,691 | 72 | 19,596 | 2 | 48,829 | |||||||||||||||||||||||||||||||||||||||
| Materials and commodities | 28 | 14,842 | 2 | 37,380 | 112 | 14,235 | 2 | 37,758 | |||||||||||||||||||||||||||||||||||||||
| Food and beverage manufacturing | 22 | 16,535 | 2 | 33,390 | 15 | 16,047 | 2 | 33,957 | |||||||||||||||||||||||||||||||||||||||
| Oil, gas and pipelines | 26 | 10,308 | 1 | 32,284 | 2 | 10,730 | 1 | 32,544 | |||||||||||||||||||||||||||||||||||||||
| Auto related | 11 | 17,224 | 2 | 30,723 | 8 | 15,203 | 2 | 28,795 | |||||||||||||||||||||||||||||||||||||||
| Health care and pharmaceuticals | 66 | 14,508 | 2 | 29,647 | 26 | 14,863 | 2 | 30,386 | |||||||||||||||||||||||||||||||||||||||
| Commercial services | 33 | 10,699 | 1 | 26,288 | 37 | 11,095 | 1 | 26,025 | |||||||||||||||||||||||||||||||||||||||
| Utilities | 1 | 6,839 | * | 24,269 | 1 | 8,325 | * | 25,710 | |||||||||||||||||||||||||||||||||||||||
| Diversified or miscellaneous | 56 | 8,395 | * | 21,908 | 67 | 8,284 | * | 22,877 | |||||||||||||||||||||||||||||||||||||||
| Entertainment and recreation | 22 | 13,040 | 1 | 19,429 | 18 | 13,968 | 1 | 20,250 | |||||||||||||||||||||||||||||||||||||||
| Insurance and fiduciaries | 1 | 5,749 | * | 17,285 | 1 | 4,715 | * | 15,724 | |||||||||||||||||||||||||||||||||||||||
| Transportation services | 161 | 9,407 | 1 | 16,360 | 134 | 9,277 | * | 16,750 | |||||||||||||||||||||||||||||||||||||||
| Agribusiness | 11 | 5,980 | * | 11,235 | 31 | 6,466 | * | 12,080 | |||||||||||||||||||||||||||||||||||||||
| Government and education | 40 | 5,566 | * | 11,075 | 26 | 5,603 | * | 11,552 | |||||||||||||||||||||||||||||||||||||||
| Banks | — | 8,276 | * | 9,314 | — | 11,820 | 1 | 12,981 | |||||||||||||||||||||||||||||||||||||||
| Other (2) | 47 | 2,504 | * | 12,133 | 15 | 4,717 | * | 12,297 | |||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 840 | 391,293 | 43 | % | $ | 777,515 | 726 | 396,811 | 42 | % | $ | 784,854 | ||||||||||||||||||||||||||||||||||
*
Less than 1%.
(1)
Total commitments consist of loans outstanding plus unfunded credit commitments, excluding issued letters of credit and discretionary amounts where our approval or consent is required prior to any loan funding or commitment increase. For additional information on issued letters of credit, see Note 14 (Guarantees and Other Commitments) to Financial Statements in this Report.
(2)
No other single industry had total loans in excess of $3.3 billion and $3.0 billion at June 30, 2024, and December 31, 2023, respectively.
| Wells Fargo & Company |
29
|
|||||||
Risk Management – Credit Risk Management
(continued)
Table 12a provides further loan segmentation for our largest industry category, financials except banks. This category includes loans to investment firms, financial vehicles, nonbank creditors, rental and leasing companies, securities firms, and investment banks. These loans are generally secured and have features to help manage credit risk, such as structural credit enhancements,
collateral eligibility requirements, contractual re-margining of collateral supporting the loans, and loan amounts limited to a percentage of the value of the underlying assets considering underlying credit risk, asset duration, and ongoing performance.
Table 12a:
Financials Except Banks Industry Category
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | Nonaccrual loans | Loans outstanding balance | % of total loans | Total commitments (1) | Nonaccrual loans | Loans outstanding balance | % of total loans | Total commitments (1) | |||||||||||||||||||||||||||||||||||||||
| Asset managers and funds (2) | $ | 1 | 52,000 | 6 | % | $ | 95,190 | — | 51,842 | 6 | % | $ | 98,074 | ||||||||||||||||||||||||||||||||||
| Commercial finance (3) | 2 | 50,778 | 6 | 77,657 | 2 | 52,007 | 6 | 78,369 | |||||||||||||||||||||||||||||||||||||||
| Consumer finance (4) | 31 | 20,594 | 2 | 35,116 | — | 20,308 | 2 | 33,547 | |||||||||||||||||||||||||||||||||||||||
| Real estate finance (5) | 17 | 21,897 | 2 | 23,814 | 7 | 22,478 | 2 | 24,523 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 51 | 145,269 | 16 | % | $ | 231,777 | 9 | 146,635 | 16 | % | $ | 234,513 | ||||||||||||||||||||||||||||||||||
(1)
Total commitments consist of loans outstanding plus unfunded credit commitments, excluding issued letters of credit and discretionary amounts where our approval or consent is required prior to any loan funding or commitment increase.
For additional information on issued letters of credit, see Note 14 (Guarantees and Other Commitments) to Financial Statements in this Report.
(2)
Includes loans for subscription or capital calls and loans to prime brokerage customers and securities firms.
(3)
Includes asset-based lending and leasing, including loans to special purpose entities, loans to commercial leasing entities, structured lending facilities to commercial loan managers, and also includes collateralized loan obligations (CLOs) in loan form, all of which were rated AA or above, of $5.9 billion and $7.6 billion at June 30, 2024, and December 31, 2023, respectively.
(4)
Includes originators or servicers of financial assets collateralized by consumer loans such as auto loans and leases, and credit cards.
(5)
Includes originators or servicers of financial assets collateralized by commercial or residential real estate loans.
Our commercial and industrial loans and lease financing portfolio included non-U.S. loans of $64.9 billion and $72.9 billion at June 30, 2024, and December 31, 2023, respectively. Significant industry concentrations of non-U.S. loans at June 30, 2024, and December 31, 2023, respectively, included:
•
$37.0 billion and $40.5 billion in the financials except banks industry;
•
$8.0 billion and $11.4 billion in the banks industry; and
•
$2.4 billion and $2.0 billion in the oil, gas and pipelines industry.
|
30
|
Wells Fargo & Company | |||||||
COMMERCIAL REAL ESTATE (CRE)
Our CRE loan portfolio is composed of CRE mortgage and CRE construction loans. The total CRE loan portfolio decreased $5.3 billion from December 31, 2023, as paydowns exceeded originations and advances. The portfolio is diversified both geographically and by property type. The largest geographic concentrations of CRE loans are in California, New York, Florida, and Texas, which represented a combined 48% of the total CRE portfolio. The largest property type concentrations are apartments at 30% and office at 20% of the portfolio. Unfunded credit commitments at June 30, 2024, and December 31, 2023, were $6.5 billion and $7.7 billion, respectively, for CRE mortgage loans and $9.9 billion and $13.2 billion, respectively, for CRE construction loans.
We generally subject CRE loans to individual risk assessment using our internal borrower and collateral quality ratings. We had
$18.3 billion of CRE mortgage loans classified as criticized at June 30, 2024, compared with $17.5 billion at December 31, 2023. We had $1.2 billion of CRE construction loans classified as criticized at June 30, 2024, compared with $830 million at December 31, 2023. The increase in criticized CRE loans was predominantly driven by the apartments property type, partially offset by the institutional property type.
We continue to closely monitor the credit quality of the office property type given weakened demand for office space. Loans in California and New York represented approximately 40% of the office property type at both June 30, 2024, and December 31, 2023.
Table 13 provides our CRE loans by state and property type.
Table 13:
CRE Loans by State and Property Type
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Real estate mortgage | Real estate construction | Total commercial real estate | Total commercial real estate | ||||||||||||||||||||||||||||||||||||||
| ($ in millions) | Nonaccrual loans | Loans outstanding balance | Nonaccrual loans | Loans outstanding balance | Nonaccrual loans | Loans outstanding balance | Loans as % of total loans | Total commitments (1) | Loans outstanding balance | Total commitments (1) | |||||||||||||||||||||||||||||||
| By state: | |||||||||||||||||||||||||||||||||||||||||
| California | $ | 1,346 | 26,778 | — | 3,191 | 1,346 | 29,969 | 3% | $ | 33,399 | 31,619 | 35,629 | |||||||||||||||||||||||||||||
| New York | 605 | 14,211 | — | 2,487 | 605 | 16,698 | 2 | 17,846 | 16,575 | 17,930 | |||||||||||||||||||||||||||||||
| Florida | 82 | 9,389 | — | 2,565 | 82 | 11,954 | 1 | 13,673 | 12,492 | 14,577 | |||||||||||||||||||||||||||||||
| Texas | 212 | 9,564 | — | 1,398 | 212 | 10,962 | 1 | 12,159 | 12,033 | 14,224 | |||||||||||||||||||||||||||||||
| Georgia | 312 | 5,076 | — | 1,121 | 312 | 6,197 | * | 6,622 | 6,105 | 6,804 | |||||||||||||||||||||||||||||||
| Arizona | 9 | 4,590 | — | 630 | 9 | 5,220 | * | 5,838 | 5,182 | 5,806 | |||||||||||||||||||||||||||||||
| Washington | 263 | 3,892 | — | 950 | 263 | 4,842 | * | 5,461 | 5,247 | 5,994 | |||||||||||||||||||||||||||||||
| North Carolina | 66 | 3,726 | — | 1,092 | 66 | 4,818 | * | 5,369 | 5,397 | 6,408 | |||||||||||||||||||||||||||||||
| New Jersey | 5 | 2,809 | — | 1,741 | 5 | 4,550 | * | 5,022 | 4,364 | 5,130 | |||||||||||||||||||||||||||||||
| Virginia | 119 | 3,726 | — | 886 | 119 | 4,612 | * | 5,008 | 4,372 | 4,983 | |||||||||||||||||||||||||||||||
| Other (2) | 1,300 | 38,772 | 2 | 6,724 | 1,302 | 45,496 | 5 | 51,361 | 47,230 | 53,982 | |||||||||||||||||||||||||||||||
| Total | $ | 4,319 | 122,533 | 2 | 22,785 | 4,321 | 145,318 | 15% | $ | 161,758 | 150,616 | 171,467 | |||||||||||||||||||||||||||||
|
By property:
|
|||||||||||||||||||||||||||||||||||||||||
| Apartments | $ | 28 | 31,249 | — | 11,799 | 28 | 43,048 | 5% | $ | 49,846 | 42,585 | 51,749 | |||||||||||||||||||||||||||||
| Office | 3,693 | 26,714 | — | 2,990 | 3,693 | 29,704 | 3 | 31,636 | 31,526 | 34,295 | |||||||||||||||||||||||||||||||
| Industrial/warehouse | 25 | 21,024 | — | 3,853 | 25 | 24,877 | 3 | 27,268 | 25,413 | 28,493 | |||||||||||||||||||||||||||||||
| Retail (excl shopping center) | 113 | 11,193 | 1 | 80 | 114 | 11,273 | 1 | 12,197 | 11,670 | 12,338 | |||||||||||||||||||||||||||||||
| Hotel/motel | 252 | 10,839 | — | 762 | 252 | 11,601 | 1 | 12,130 | 12,725 | 13,612 | |||||||||||||||||||||||||||||||
| Shopping center | 165 | 8,402 | — | 316 | 165 | 8,718 | * | 9,256 | 8,745 | 9,356 | |||||||||||||||||||||||||||||||
| Institutional | 13 | 4,323 | — | 1,232 | 13 | 5,555 | * | 5,992 | 5,986 | 6,568 | |||||||||||||||||||||||||||||||
| Mixed use properties | 22 | 2,877 | — | 46 | 22 | 2,923 | * | 3,117 | 3,511 | 3,763 | |||||||||||||||||||||||||||||||
| Storage facility | — | 2,194 | — | 151 | — | 2,345 | * | 2,507 | 2,782 | 3,002 | |||||||||||||||||||||||||||||||
| 1-4 family structure | — | — | — | 1,143 | — | 1,143 | * | 2,455 | 1,195 | 2,691 | |||||||||||||||||||||||||||||||
| Other | 8 | 3,718 | 1 | 413 | 9 | 4,131 | * | 5,354 | 4,478 | 5,600 | |||||||||||||||||||||||||||||||
| Total | $ | 4,319 | 122,533 | 2 | 22,785 | 4,321 | 145,318 | 15 | % | $ | 161,758 | 150,616 | 171,467 | ||||||||||||||||||||||||||||
* Less than 1%.
(1)
Total commitments consist of loans outstanding plus unfunded credit commitments, excluding issued letters of credit. For additional information on issued letters of credit, see Note 14 (Guarantees and Other Commitments) to Financial Statements in this Report.
(2)
Includes 40 states and non-U.S. loans. No state in Other had loans in excess of $4.1 billion and $4.4 billion at June 30, 2024, and December 31, 2023, respectively. Non-U.S. loans were $6.0 billion and $6.9 billion at June 30, 2024, and December 31, 2023, respectively.
| Wells Fargo & Company |
31
|
|||||||
Risk Management – Credit Risk Management
(continued)
NON-U.S. LOANS
Our classification of non-U.S. loans is based on whether the borrower’s primary address is outside of the United States. At June 30, 2024, non-U.S. loans totaled $71.1 billion, representing approximately 8% of our total consolidated loans outstanding, compared with $80.0 billion, or approximately 9% of our total consolidated loans outstanding, at December 31, 2023. Non-U.S. loans were approximately 4% of our total consolidated assets at both June 30, 2024, and December 31, 2023.
COUNTRY RISK EXPOSURE
Our country risk monitoring process incorporates centralized monitoring of economic, political, social, legal, and transfer risks in countries where we do or plan to do business, along with frequent dialogue with our customers, counterparties and regulatory agencies. We establish exposure limits for each country through a centralized oversight process based on customer needs, and through consideration of the relevant and distinct risk of each country. We monitor exposures closely and adjust our country limits in response to changing conditions. We evaluate our individual country risk exposure based on our assessment of a borrower’s ability to repay,
which gives consideration for allowable transfers of risk, such as guarantees and collateral, and may be different from the reporting based on a borrower’s primary address.
Our largest single country exposure outside the U.S. at June 30, 2024, was the United Kingdom, which totaled
$28.9 billion, or approximately 1% of our total assets, and included $5.7 billion of sovereign claims. Our United Kingdom sovereign claims arise from deposits we have placed with the Bank of England pursuant to regulatory requirements in support of our London branch.
Table 14 provides information regarding our top 20 exposures by country (excluding the U.S.), based on our assessment of risk, which gives consideration to the country of any guarantors and/or underlying collateral. With respect to Table 14:
•
Lending and deposits with banks exposure includes outstanding loans, unfunded credit commitments (excluding discretionary amounts where our approval or consent is required prior to any loan funding or commitment increase), and deposits with non-U.S. banks. These balances are presented prior to the deduction of the allowance for credit losses or collateral received under the terms of the credit agreements, if any.
•
Securities exposure represents debt and equity securities of non-U.S. issuers. Long and short positions are netted, and net short positions are reflected as negative exposure.
•
Derivatives and other exposure represents foreign exchange contracts, derivative contracts, securities resale agreements, and securities lending agreements.
Table 14:
Select Country Exposures
| June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Lending and deposits with banks (1)
|
Securities | Derivatives and other | Total exposure | |||||||||||||||||||||||||||||||||||||||||||||||||
|
(in millions)
|
Sovereign | Non-sovereign | Sovereign | Non-sovereign | Sovereign | Non-sovereign | Sovereign |
Non-sovereign (2)
|
Total | ||||||||||||||||||||||||||||||||||||||||||||
| Top 20 country exposures: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| United Kingdom | $ | 5,680 | 21,002 | (3) | 33 | — | 2,194 | 5,677 | 23,229 | 28,906 | |||||||||||||||||||||||||||||||||||||||||||
| Canada | 9 | 15,885 | 188 | 134 | 178 | 467 | 375 | 16,486 | 16,861 | ||||||||||||||||||||||||||||||||||||||||||||
| Japan | 8,328 | 670 | 1,334 | 377 | — | 138 | 9,662 | 1,185 | 10,847 | ||||||||||||||||||||||||||||||||||||||||||||
| Luxembourg | — | 7,742 | 5 | 274 | — | 206 | 5 | 8,222 | 8,227 | ||||||||||||||||||||||||||||||||||||||||||||
| Cayman Islands | — | 7,903 | — | — | — | 240 | — | 8,143 | 8,143 | ||||||||||||||||||||||||||||||||||||||||||||
| Ireland | — | 4,340 | — | 157 | — | 174 | — | 4,671 | 4,671 | ||||||||||||||||||||||||||||||||||||||||||||
| France | 33 | 4,102 | 129 | 282 | — | 78 | 162 | 4,462 | 4,624 | ||||||||||||||||||||||||||||||||||||||||||||
| Bermuda | — | 3,845 | — | 13 | — | 67 | — | 3,925 | 3,925 | ||||||||||||||||||||||||||||||||||||||||||||
| Germany | — | 3,118 | (211) | 470 | — | 138 | (211) | 3,726 | 3,515 | ||||||||||||||||||||||||||||||||||||||||||||
| Guernsey | — | 2,517 | — | — | — | 3 | — | 2,520 | 2,520 | ||||||||||||||||||||||||||||||||||||||||||||
| Netherlands | — | 2,003 | — | 160 | — | 69 | — | 2,232 | 2,232 | ||||||||||||||||||||||||||||||||||||||||||||
| China | 44 | 1,017 | (177) | 580 | 13 | 159 | (120) | 1,756 | 1,636 | ||||||||||||||||||||||||||||||||||||||||||||
| Switzerland | — | 1,118 | — | 113 | 2 | 396 | 2 | 1,627 | 1,629 | ||||||||||||||||||||||||||||||||||||||||||||
| Australia | — | 1,114 | — | 357 | — | 87 | — | 1,558 | 1,558 | ||||||||||||||||||||||||||||||||||||||||||||
| Chile | — | 1,359 | — | 62 | — | 1 | — | 1,422 | 1,422 | ||||||||||||||||||||||||||||||||||||||||||||
| Hong Kong | — | 479 | 7 | 804 | — | 12 | 7 | 1,295 | 1,302 | ||||||||||||||||||||||||||||||||||||||||||||
| South Korea | — | 987 | (98) | 163 | 13 | 9 | (85) | 1,159 | 1,074 | ||||||||||||||||||||||||||||||||||||||||||||
| Jersey | — | 826 | — | 114 | — | 107 | — | 1,047 | 1,047 | ||||||||||||||||||||||||||||||||||||||||||||
| Spain | — | 708 | — | 20 | — | 262 | — | 990 | 990 | ||||||||||||||||||||||||||||||||||||||||||||
| Brazil | — | 966 | — | 10 | 8 | 1 | 8 | 977 | 985 | ||||||||||||||||||||||||||||||||||||||||||||
| Total top 20 country exposures | $ | 14,094 | 81,701 | 1,174 | 4,123 | 214 | 4,808 | 15,482 | 90,632 | 106,114 | |||||||||||||||||||||||||||||||||||||||||||
(1)
Includes sovereign and non-sovereign deposits with banks of $14.0 billion and $3.3 billion, respectively.
(2)
Total non-sovereign exposure consisted of $44.4 billion exposure to financial institutions and $46.2 billion to non-financial corporations at June 30, 2024.
|
32
|
Wells Fargo & Company | |||||||
RESIDENTIAL MORTGAGE LOANS
Our residential mortgage loan portfolio is composed of 1–4 family first and junior lien mortgage loans. Residential mortgage – first lien loans represented 96% of the total residential mortgage loan portfolio at both June 30, 2024, and December 31, 2023.
The residential mortgage loan portfolio includes loans with adjustable-rate features. We monitor the risk of default as a result of interest rate increases on adjustable-rate mortgage (ARM) loans, which may be mitigated by product features that limit the amount of the increase in the contractual interest rate. The default risk of these loans is considered in our ACL for loans. ARM loans totaled $66.3 billion, or 7% of total loans, at June 30, 2024, compared with $66.7 billion, or 7% of total loans, at December 31, 2023, with an initial reset date in 2026 or later for the majority of this portfolio at June 30, 2024. We do not offer option ARM products, nor do we offer variable-rate mortgage products with fixed payment amounts, commonly referred to within the financial services industry as negative amortizing mortgage loans.
The residential mortgage – junior lien portfolio consists of residential mortgage lines of credit and loans that are subordinate in rights to an existing lien on the same property. These lines and loans may have draw periods, interest-only payments, balloon payments, adjustable rates and similar features. The outstanding balance of residential mortgage lines of credit was $13.6 billion at June 30, 2024, compared with $15.0 billion at December 31, 2023. The unfunded credit commitments for these lines of credit totaled $25.9 billion at June 30, 2024, compared with $28.6 billion at December 31, 2023. For additional information on our residential mortgage
loan portfolio, see the “Risk Management – Credit Risk Management – Residential Mortgage Loans” section in our 2023 Form 10-K.
We monitor changes in real estate values and underlying economic or market conditions for the geographic areas of our
residential mortgage loan portfolio as part of our credit risk management process. Our periodic review of this portfolio includes original appraisals adjusted for the change in Home Price Index (HPI) or estimates from automated valuation models (AVMs) to support property values. For additional information about our use of appraisals and AVMs, see Note 5 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report and the “Risk Management – Credit Risk Management – Residential Mortgage Loans” section in our 2023 Form 10-K.
Part of our credit monitoring includes tracking delinquency, current Fair Isaac Corporation (FICO) credit scores and loan to collateral values (LTV) on the entire residential mortgage loan portfolio. For junior lien mortgages, LTV uses the total combined loan balance of first and junior lien mortgages (including unused line of credit amounts). For additional information regarding credit quality indicators, see Note 5 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
We continue to modify residential mortgage loans to assist homeowners and other borrowers experiencing financial difficulties. For additional information on loan modifications, see Note 5 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report and the “Risk Management – Credit Risk Management – Residential Mortgage Loans” section in our 2023 Form 10-K.
Residential Mortgage – First Lien Portfolio
Our residential mortgage – first lien portfolio decreased $4.6 billion from
December 31, 2023, due to loan paydowns, partially offset by originations.
Table 15 shows certain delinquency and loss information for the residential mortgage – first lien portfolio and lists the top five states by outstanding balance.
Table 15:
Residential Mortgage – First Lien Portfolio Performance
| Outstanding balance | % of total loans |
% of loans 30 days
or more past due
|
Net loan charge-off rate quarter ended (1) | ||||||||||||||||||||||||||||||||||||||||||||
|
($ in millions)
|
Jun 30,
2024 |
Dec 31,
2023 |
Jun 30,
2024 |
Dec 31,
2023 |
Jun 30,
2024 |
Dec 31,
2023 |
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||||||||||||||||||||||||||||||||
| California (2) | $ | 108,844 | 109,972 | 11.86 | % | 11.74 | 0.41 | 0.36 | (0.01) | 0.03 | |||||||||||||||||||||||||||||||||||||
| New York | 31,029 | 31,322 | 3.38 | 3.34 | 0.78 | 0.79 | (0.02) | 0.02 | |||||||||||||||||||||||||||||||||||||||
| Washington | 10,668 | 10,672 | 1.16 | 1.14 | 0.21 | 0.29 | — | — | |||||||||||||||||||||||||||||||||||||||
| New Jersey | 9,989 | 10,161 | 1.09 | 1.08 | 1.10 | 1.13 | (0.02) | (0.03) | |||||||||||||||||||||||||||||||||||||||
| Florida | 9,688 | 10,065 | 1.06 | 1.07 | 1.15 | 1.11 | (0.09) | (0.06) | |||||||||||||||||||||||||||||||||||||||
|
Other (3)
|
67,584 | 69,893 | 7.36 | 7.46 | 0.90 | 0.82 | (0.02) | 0.02 | |||||||||||||||||||||||||||||||||||||||
| Total | 237,802 | 242,085 | 25.91 | 25.83 | 0.65 | 0.61 | (0.02) | 0.02 | |||||||||||||||||||||||||||||||||||||||
|
Government insured/guaranteed loans (4)
|
7,206 | 7,568 | 0.79 | 0.81 | |||||||||||||||||||||||||||||||||||||||||||
| Total first lien mortgage portfolio | $ | 245,008 | 249,653 | 26.70 | % | 26.64 | |||||||||||||||||||||||||||||||||||||||||
(1)
Quarterly net charge-offs as a percentage of average respective loans are annualized.
(2)
Our residential mortgage loans to borrowers in California are located predominantly within the larger metropolitan areas, with no single California metropolitan area consisting of more than 4% of total loans.
(3)
Consists of 45 states; no state in Other had loans in excess of $7.2 billion and $7.4 billion at June 30, 2024, and December 31, 2023, respectively.
(4)
Represents loans, substantially all of which were purchased from Government National Mortgage Association (GNMA) loan securitization pools, where the repayment of the loans is predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). For additional information on GNMA loan securitization pools, see the “Risk Management – Credit Risk Management – Mortgage Banking Activities” section in this Report.
| Wells Fargo & Company |
33
|
|||||||
Risk Management – Credit Risk Management
(continued)
Residential Mortgage – Junior Lien Portfolio
Our residential mortgage – junior lien portfolio decreased $994 million from December 31, 2023, driven by loan paydowns.
Table 16 shows certain delinquency and loss information for the residential mortgage – junior lien portfolio and lists the top five states by outstanding balance.
Table 16:
Residential Mortgage – Junior Lien Portfolio Performance
| Outstanding balance | % of total loans |
% of loans 30 days
or more past due
|
Net loan charge-off rate quarter ended (1) | ||||||||||||||||||||||||||||||||||||||||||||
|
($ in millions)
|
Jun 30,
2024 |
Dec 31,
2023 |
Jun 30,
2024 |
Dec 31,
2023 |
Jun 30,
2024 |
Dec 31,
2023 |
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||||||||||||||||||||||||||||||||
| California | $ | 2,900 | 3,101 | 0.32 | % | 0.33 | 1.69 | 1.65 | (0.10) | (0.16) | |||||||||||||||||||||||||||||||||||||
| New Jersey | 1,004 | 1,114 | 0.11 | 0.12 | 2.54 | 2.81 | (0.72) | (0.25) | |||||||||||||||||||||||||||||||||||||||
| Florida | 818 | 924 | 0.09 | 0.10 | 2.27 | 2.42 | (0.57) | (0.71) | |||||||||||||||||||||||||||||||||||||||
| Pennsylvania | 602 | 673 | 0.07 | 0.07 | 2.50 | 2.70 | (0.25) | (0.08) | |||||||||||||||||||||||||||||||||||||||
| New York | 601 | 661 | 0.07 | 0.07 | 3.06 | 3.26 | (0.11) | 0.14 | |||||||||||||||||||||||||||||||||||||||
|
Other (2)
|
4,152 | 4,598 | 0.45 | 0.49 | 2.14 | 2.05 | (0.43) | (0.31) | |||||||||||||||||||||||||||||||||||||||
| Total junior lien mortgage portfolio | $ | 10,077 | 11,071 | 1.11 | % | 1.18 | 2.14 | 2.16 | (0.34) | (0.26) | |||||||||||||||||||||||||||||||||||||
(1)
Quarterly net charge-offs as a percentage of average respective loans are annualized.
(2)
Consists of 45 states; no state in Other had loans in excess of $580 million and $640 million at June 30, 2024, and December 31, 2023, respectively.
CREDIT CARD, AUTO, AND OTHER CONSUMER LOANS
Table 17 shows the outstanding balance of our credit card, auto, and other consumer loan portfolios. For information regarding credit quality indicators for these portfolios, see Note 5 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
Table 17:
Credit Card, Auto, and Other Consumer Loans
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| ($ in millions) |
Outstanding
balance |
% of
total loans |
Outstanding
balance |
% of
total loans |
||||||||||||||||||||||
| Credit card | $ | 53,756 | 5.86 | % | $ | 52,230 | 5.58 | % | ||||||||||||||||||
| Auto | 44,280 | 4.82 | 47,762 | 5.10 | ||||||||||||||||||||||
| Other consumer (1) | 28,175 | 3.07 | 28,539 | 3.05 | ||||||||||||||||||||||
| Total | $ | 126,211 | 13.75 | % | $ | 128,531 | 13.73 | % | ||||||||||||||||||
(1)
Includes $19.8 billion and $18.3 billion at June 30, 2024, and December 31, 2023, respectively, of securities-based loans originated by the WIM operating segment.
Credit Card
The increase in the outstanding balance at June 30, 2024, compared with December 31, 2023, was due to higher purchase volume driven by new account growth.
Auto
The decrease in the outstanding balance at June 30, 2024, compared with December 31, 2023, was due to paydowns exceeding originations.
Other Consumer
The outstanding balance at June 30, 2024, was stable compared with December 31, 2023.
|
34
|
Wells Fargo & Company | |||||||
NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
For information about when we generally place loans on nonaccrual status, see Note 1 (Summary of Significant
Accounting Policies) to Financial Statements in our 2023 Form 10-K. Table 18 summarizes nonperforming assets.
Table 18:
Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
| ($ in millions) | Jun 30, 2024 | Dec 31, 2023 | ||||||||||||
| Nonaccrual loans: | ||||||||||||||
| Commercial and industrial | $ | 754 | 662 | |||||||||||
| Commercial real estate | 4,321 | 4,188 | ||||||||||||
| Lease financing | 86 | 64 | ||||||||||||
| Total commercial | 5,161 | 4,914 | ||||||||||||
| Residential mortgage (1) | 3,135 | 3,192 | ||||||||||||
| Auto | 103 | 115 | ||||||||||||
| Other consumer | 35 | 35 | ||||||||||||
| Total consumer | 3,273 | 3,342 | ||||||||||||
| Total nonaccrual loans | $ | 8,434 | 8,256 | |||||||||||
| As a percentage of total loans | 0.92 | % | 0.88 | |||||||||||
| Foreclosed assets: | ||||||||||||||
| Government insured/guaranteed (2) | $ | 2 | 12 | |||||||||||
|
Non-government insured/guaranteed
|
214 | 175 | ||||||||||||
|
Total foreclosed assets
|
216 | 187 | ||||||||||||
| Total nonperforming assets | $ | 8,650 | 8,443 | |||||||||||
| As a percentage of total loans | 0.94 | % | 0.90 | |||||||||||
(1)
Residential mortgage loans predominantly insured by the FHA or guaranteed by the VA are not placed on nonaccrual status because they are insured or guaranteed.
(2)
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. Receivables related to the foreclosure of certain government guaranteed real estate mortgage loans are excluded from this table and included in accounts receivable in other assets. For additional information on the classification of certain government-guaranteed mortgage loans upon foreclosure, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2023 Form 10-K.
Commercial nonaccrual loans increased $247 million from December 31, 2023, driven by an increase in commercial real estate nonaccrual loans, predominantly within the office property type. For additional information on commercial nonaccrual loans, see the “Risk Management – Credit Risk Management – Commercial and Industrial Loans and Lease Financing” and “Risk Management – Credit Risk Management – Commercial Real Estate” sections in this Report.
Consumer nonaccrual loans were stable compared with December 31, 2023.
| Wells Fargo & Company |
35
|
|||||||
Risk Management – Credit Risk Management
(continued)
Table 19 provides an analysis of the changes in nonaccrual loans. Typically, changes to nonaccrual loans period-over-period represent inflows for loans that are placed on nonaccrual status in accordance with our policies, offset by reductions for loans
that are paid down, charged off, sold, foreclosed, or are no longer classified as nonaccrual as a result of continued performance and an improvement in the borrower’s financial condition and loan repayment capabilities.
Table 19:
Analysis of Changes in Nonaccrual Loans
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Commercial nonaccrual loans | |||||||||||||||||||||||
| Balance, beginning of period | $ | 4,739 | 2,275 | $ | 4,914 | 1,823 | |||||||||||||||||
| Inflows | 1,765 | 1,761 | 2,539 | 2,807 | |||||||||||||||||||
| Outflows: | |||||||||||||||||||||||
| Returned to accruing | (366) | (61) | (519) | (207) | |||||||||||||||||||
| Foreclosures | (58) | — | (58) | — | |||||||||||||||||||
| Charge-offs | (500) | (215) | (853) | (330) | |||||||||||||||||||
| Payments, sales and other | (419) | (331) | (862) | (664) | |||||||||||||||||||
| Total outflows | (1,343) | (607) | (2,292) | (1,201) | |||||||||||||||||||
| Balance, end of period | 5,161 | 3,429 | 5,161 | 3,429 | |||||||||||||||||||
| Consumer nonaccrual loans | |||||||||||||||||||||||
| Balance, beginning of period | 3,336 | 3,735 | 3,342 | 3,803 | |||||||||||||||||||
| Inflows | 321 | 336 | 663 | 683 | |||||||||||||||||||
| Outflows: | |||||||||||||||||||||||
| Returned to accruing | (180) | (266) | (321) | (458) | |||||||||||||||||||
| Foreclosures | (18) | (25) | (42) | (51) | |||||||||||||||||||
| Charge-offs | (21) | (44) | (51) | (82) | |||||||||||||||||||
| Payments, sales and other | (165) | (279) | (318) | (438) | |||||||||||||||||||
| Total outflows | (384) | (614) | (732) | (1,029) | |||||||||||||||||||
| Balance, end of period | 3,273 | 3,457 | 3,273 | 3,457 | |||||||||||||||||||
| Total nonaccrual loans | $ | 8,434 | 6,886 | $ | 8,434 | 6,886 | |||||||||||||||||
We considered the risk of losses on nonaccrual loans in developing our allowance for loan losses. We believe exposure to losses on nonaccrual loans is mitigated by the following factors at June 30, 2024:
•
98% of total commercial nonaccrual loans were secured, predominantly by real estate.
•
66% of total commercial nonaccrual loans were current on interest and 56% of commercial nonaccrual loans were current on both principal and interest, but were on nonaccrual status because the full or timely collection of interest or principal had become uncertain.
•
99% of total consumer nonaccrual loans were secured, of which 96% were secured by real estate and 98% had an LTV ratio of 80% or less.
•
$463 million of the $591 million of consumer loans in bankruptcy or discharged in bankruptcy, and classified as nonaccrual, were current.
Table 20 provides a summary of foreclosed assets and an analysis of changes in foreclosed assets.
Table 20:
Foreclosed Assets
| (in millions) | Jun 30, 2024 | Dec 31, 2023 | |||||||||||||||||||||
| Summary by loan segment | |||||||||||||||||||||||
| Government insured/guaranteed | $ | 2 | 12 | ||||||||||||||||||||
| Commercial | 180 | 135 | |||||||||||||||||||||
| Consumer | 34 | 40 | |||||||||||||||||||||
|
Total foreclosed assets
|
$ | 216 | 187 | ||||||||||||||||||||
| (in millions) | Quarter ended June 30, | Six months ended June 30, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Analysis of changes in foreclosed assets | |||||||||||||||||||||||
| Balance, beginning of period | $ | 165 | 132 | $ | 187 | 137 | |||||||||||||||||
|
Net change in government insured/guaranteed (1)
|
1 | (2) | (10) | (6) | |||||||||||||||||||
|
Additions to foreclosed assets (2)
|
158 | 135 | 263 | 258 | |||||||||||||||||||
| Reductions from sales and write-downs | (108) | (132) | (224) | (256) | |||||||||||||||||||
| Balance, end of period | $ | 216 | 133 | $ | 216 | 133 | |||||||||||||||||
(1)
Foreclosed government insured/guaranteed loans are temporarily transferred to and held by us as servicer, until reimbursement is received from the FHA or the VA.
(2)
Includes loans moved into foreclosed assets from nonaccrual status and repossessed autos.
|
36
|
Wells Fargo & Company | |||||||
NET CHARGE-OFFS
Table 21 presents net loan charge-offs.
Table 21:
Net Loan Charge-offs
| Quarter ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) |
Net loan
charge- offs |
% of
avg. loans (1) |
Net loan
charge- offs |
% of
avg. loans (1) |
Net loan
charge- offs |
% of
avg.
loans (1)
|
Net loan
charge- offs |
% of
avg.
loans (1)
|
||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 188 | 0.20 | % | $ | 119 | 0.12 | % | $ | 336 | 0.18 | % | $ | 162 | 0.09 | % | ||||||||||||||||||||||||||||||||||
| Commercial real estate | 271 | 0.74 | 79 | 0.21 | 458 | 0.62 | 96 | 0.13 | ||||||||||||||||||||||||||||||||||||||||||
| Lease financing | 9 | 0.21 | 2 | 0.05 | 15 | 0.17 | 5 | 0.06 | ||||||||||||||||||||||||||||||||||||||||||
| Total commercial | 468 | 0.35 | 200 | 0.15 | 809 | 0.30 | 263 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | (19) | (0.03) | (12) | (0.02) | (32) | (0.02) | (23) | (0.02) | ||||||||||||||||||||||||||||||||||||||||||
| Credit card | 649 | 4.96 | 396 | 3.39 | 1,226 | 4.72 | 740 | 3.22 | ||||||||||||||||||||||||||||||||||||||||||
| Auto | 79 | 0.70 | 89 | 0.68 | 191 | 0.83 | 210 | 0.81 | ||||||||||||||||||||||||||||||||||||||||||
| Other consumer | 124 | 1.77 | 91 | 1.31 | 256 | 1.82 | 178 | 1.26 | ||||||||||||||||||||||||||||||||||||||||||
| Total consumer | 833 | 0.88 | 564 | 0.58 | 1,641 | 0.86 | 1,105 | 0.57 | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 1,301 | 0.57 | % | $ | 764 | 0.32 | % | $ | 2,450 | 0.53 | % | $ | 1,368 | 0.29 | % | ||||||||||||||||||||||||||||||||||
(1)
Net loan charge-offs (recoveries) as a percentage of average loans are annualized.
The increase in commercial net loan charge-offs in second quarter 2024, compared with the same period a year ago, was due to higher losses in all commercial portfolios, primarily in our commercial real estate portfolio driven by the office property type.
The increase in consumer net loan charge-offs in second quarter 2024, compared with the same period a year ago, was due to higher losses in our credit card portfolio.
ALLOWANCE FOR CREDIT LOSSES
We maintain an allowance for credit losses (ACL) for loans, which is management’s estimate of the expected lifetime credit losses in the loan portfolio and unfunded credit commitments, at the balance sheet date, excluding loans and unfunded credit commitments carried at fair value or held for sale. Additionally, we maintain an ACL for debt securities classified as either AFS or HTM, other financial assets measured at amortized cost, including deposits with banks, net investments in leases, and other off-balance sheet credit exposures.
The process for establishing the ACL for loans takes into consideration many factors, including historical and forecasted loss trends, loan-level credit quality ratings and loan grade-specific characteristics. The process involves subjective and complex judgments. In addition, we review a variety of credit metrics and trends. These credit metrics and trends, however, do not solely determine the amount of the allowance as we use several analytical tools. For additional information on our ACL, see the “Critical Accounting Policies – Allowance for Credit Losses” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2023 Form 10-K. For additional information on our ACL for loans, see Note 5 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report, and for additional information on our ACL for debt securities, see Note 3 (Available-for-Sale and Held-to-Maturity Debt Securities) to Financial Statements in this Report.
Table 22 presents the allocation of the ACL for loans by loan portfolio segment and class.
| Wells Fargo & Company |
37
|
|||||||
Risk Management – Credit Risk Management
(continued)
Table 22:
Allocation of the ACL for Loans
| Jun 30, 2024 | Dec 31, 2023 | ||||||||||||||||||||||||||||||||||
| ($ in millions) | ACL |
ACL
as % of loan class |
Loans
as % of total loans |
ACL |
ACL
as % of loan class |
Loans
as % of total loans |
|||||||||||||||||||||||||||||
| Commercial and industrial | $ | 4,276 | 1.14 | % | 41 | $ | 4,272 | 1.12 | % | 40 | |||||||||||||||||||||||||
| Commercial real estate | 3,754 | 2.58 | 15 | 3,939 | 2.62 | 16 | |||||||||||||||||||||||||||||
| Lease financing | 206 | 1.23 | 2 | 201 | 1.22 | 2 | |||||||||||||||||||||||||||||
| Total commercial | 8,236 | 1.53 | 58 | 8,412 | 1.54 | 58 | |||||||||||||||||||||||||||||
| Residential mortgage (1) | 521 | 0.20 | 28 | 652 | 0.25 | 28 | |||||||||||||||||||||||||||||
| Credit card | 4,517 | 8.40 | 6 | 4,223 | 8.09 | 6 | |||||||||||||||||||||||||||||
| Auto | 804 | 1.82 | 5 | 1,042 | 2.18 | 5 | |||||||||||||||||||||||||||||
| Other consumer | 711 | 2.52 | 3 | 759 | 2.66 | 3 | |||||||||||||||||||||||||||||
| Total consumer | 6,553 | 1.72 | 42 | 6,676 | 1.72 | 42 | |||||||||||||||||||||||||||||
| Total | $ | 14,789 | 1.61 | % | 100 | $ | 15,088 | 1.61 | % | 100 | |||||||||||||||||||||||||
| Components: | |||||||||||||||||||||||||||||||||||
|
Allowance for loan losses
|
$ | 14,360 | 14,606 | ||||||||||||||||||||||||||||||||
|
Allowance for unfunded credit commitments
|
429 | 482 | |||||||||||||||||||||||||||||||||
|
Allowance for credit losses
|
$ | 14,789 | 15,088 | ||||||||||||||||||||||||||||||||
| Ratio of allowance for loan losses to total net loan charge-offs (2) | 2.74x | 4.21 | |||||||||||||||||||||||||||||||||
| Ratio of allowance for loan losses to total nonaccrual loans | 1.70 | 1.77 | |||||||||||||||||||||||||||||||||
|
Allowance for loan losses as a percentage of total loans
|
1.56 | % | 1.56 | ||||||||||||||||||||||||||||||||
(1)
Includes negative allowance for expected recoveries of amounts previously charged off.
(2)
Total net loan charge-offs are annualized for the quarter ended June 30, 2024.
The ratios for the allowance for loan losses and the ACL for loans presented in Table 22 may fluctuate from period to period due to such factors as the mix of loan types in the portfolio, borrower credit strength, and the value and marketability of collateral.
The ACL for loans decreased $299 million, or 2%, from December 31, 2023, reflecting decreases for auto loans, commercial real estate loans, and residential mortgage loans, partially offset by increases for credit card loans. The detail of the changes in the ACL for loans by portfolio segment (including charge-offs and recoveries by loan class) is included in Note 5 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
We consider multiple economic scenarios to develop our estimate of the ACL for loans, which generally include a base scenario, along with an optimistic (upside) and one or more pessimistic (downside) scenarios. We weighted the base scenario and the downside scenarios in our estimate of the ACL for loans at June 30, 2024. The base scenario assumed slowing inflation with slowing economic growth and also reflected a significant decline in commercial real estate prices and increased unemployment rates from historically low levels. The downside scenarios assumed a more substantial economic contraction due to declining property values, high inflation, and lower business and consumer confidence.
Additionally, we consider qualitative factors that represent the risk of limitations inherent in our processes and assumptions such as economic environmental factors, modeling assumptions and performance, and other subjective factors, including industry trends and emerging risk assessments.
The forecasted key economic variables used in our estimate of the ACL for loans at June 30, 2024, and March 31, 2024, are presented in Table 23.
Table 23:
Forecasted
Key
Economic Variables
| 4Q 2024 | 2Q 2025 | 4Q 2025 | |||||||||||||||
| Weighted blend of economic scenarios: | |||||||||||||||||
| U.S. unemployment rate (1): | |||||||||||||||||
| June 30, 2024 | 4.4 | % | 5.2 | 5.8 | |||||||||||||
| March 31, 2024 | 4.9 | 5.6 | 5.9 | ||||||||||||||
| U.S. real GDP (2): | |||||||||||||||||
| June 30, 2024 | (0.4) | (0.5) | 0.9 | ||||||||||||||
| March 31, 2024 | (0.5) | 0.4 | 1.7 | ||||||||||||||
| Home price index (3): | |||||||||||||||||
| June 30, 2024 | (0.4) | (4.0) | (4.6) | ||||||||||||||
| March 31, 2024 | (5.2) | (6.3) | (5.2) | ||||||||||||||
| Commercial real estate asset prices (3): | |||||||||||||||||
| June 30, 2024 | (6.7) | (12.1) | (9.4) | ||||||||||||||
| March 31, 2024 | (11.2) | (13.6) | (7.5) | ||||||||||||||
(1)
Quarterly average.
(2)
Percent change from the preceding period, seasonally adjusted annualized rate.
(3)
Percent change year over year of national average; outlook differs by geography and property type.
Future amounts of the ACL for loans will be based on a variety of factors, including loan balance changes, portfolio credit quality and mix changes, and changes in general economic conditions and expectations (including for unemployment and real GDP), among other factors.
|
38
|
Wells Fargo & Company | |||||||
We believe the ACL for loans of $14.8 billion at June 30, 2024, was appropriate to cover expected credit losses, including unfunded credit commitments, at that date. The entire allowance is available to absorb credit losses from the total loan portfolio. The ACL for loans is subject to change and reflects existing factors as of the date of determination, including economic or market conditions and ongoing internal and external examination processes. Due to the sensitivity of the ACL for loans to changes in the economic and business environment, it is possible that we will incur incremental credit losses not anticipated as of the balance sheet date. Our process for determining the ACL is discussed in the “Critical Accounting Policies – Allowance for Credit Losses” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2023 Form 10-K.
MORTGAGE BANKING ACTIVITIES
We sell residential and commercial mortgage loans to various parties. In connection with our sales and securitization of residential mortgage loans, we have established a mortgage repurchase liability. For information on our repurchase liability, see the “Risk Management – Credit Risk Management – Mortgage Banking Activities” section in our 2023 Form 10-K.
In addition to servicing loans in our portfolio, we act as servicer and/or master servicer of residential and commercial mortgage loans included in government-sponsored enterprise (GSE) mortgage securitizations, GNMA-guaranteed mortgage securitizations of FHA-insured/VA-guaranteed mortgages and private label mortgage securitizations, as well as for unsecuritized loans owned by institutional investors.
As a servicer, we are required to advance certain delinquent payments of principal and interest on mortgage loans we service. The amount and timing of reimbursement for advances of delinquent payments vary by investor and the applicable servicing agreements. See Note 6 (Mortgage Banking Activities) to Financial Statements in this Report for additional information about residential and commercial servicing rights, servicer advances and servicing fees.
In accordance with applicable servicing guidelines, upon transfer as servicer, we have the option to repurchase loans from certain loan securitizations, which generally becomes exercisable based on delinquency status such as when three scheduled loan payments are past due. When we have the unilateral option to repurchase a loan, we recognize the loan and a corresponding liability on our balance sheet regardless of our intent to repurchase the loan. We may repurchase these loans for cash and as a result, our total consolidated assets do not change.
Loans repurchased from GNMA securitization pools that regain current status or are otherwise modified in accordance with applicable servicing guidelines may be included in future GNMA loan securitization pools. At June 30, 2024, and December 31, 2023, these loans, which we have repurchased or have the unilateral option to repurchase, were $7.5 billion and $7.8 billion, respectively, which included $7.2 billion and $7.4 billion, respectively, in loans held for investment, with the remainder in loans held for sale. See Note 13 (Securitizations and Variable Interest Entities) to Financial Statements in this Report for additional information about our involvement with mortgage loan securitizations.
For additional information about the risks related to our servicing activities, see the “Risk Management – Credit Risk Management – Mortgage Banking Activities” section in our 2023 Form 10-K. For additional information on mortgage banking activities, see Note 6 (Mortgage Banking Activities) to Financial Statements in this Report.
Asset/Liability Management
Asset/liability management involves measuring, monitoring and managing interest rate risk, market risk, liquidity and funding. For additional information on our oversight of asset/liability risks, see the "Risk Management – Asset/Liability Management" section in our 2023 Form 10-K.
INTEREST RATE RISK
Interest rate risk is the risk that market fluctuations in interest rates, credit spreads, or foreign exchange can cause a loss of the Company’s earnings and capital stemming from mismatches in the cash flows of the Company’s assets and liabilities generally arising from customer-related lending and deposit-taking activities. We are subject to interest rate risk because:
•
assets and liabilities may mature or reprice at different times or by different amounts;
•
short-term and long-term market interest rates may change independently or with different magnitudes;
•
the remaining maturity for various assets or liabilities may shorten or lengthen as interest rates change; or
•
interest rates may also have a direct or indirect effect on loan demand, collateral values, credit losses, loan origination volume, and the fair value of financial instruments and MSRs.
We assess interest rate risk by comparing the earnings outcomes from multiple interest rate scenarios that differ in the direction of interest rate changes, the degree and speed of interest rate changes over time, and the projected shape of the yield curve. These scenarios require assumptions regarding drivers of earnings and balance sheet composition such as loan originations, prepayment rates on loans and debt securities, deposit flows and mix, as well as pricing strategies. We periodically assess and enhance our scenarios and assumptions. Our scenario assumptions reflected the following:
•
Scenarios are dynamic and reflect anticipated changes to our assets and liabilities over time.
•
Mortgage prepayment and origination assumptions vary across scenarios and reflect only the impact of the higher or lower interest rates.
•
Other macroeconomic variables that could be correlated with the changes in interest rates are held constant.
•
The funding forecast in our base scenario incorporates deposit mix changes and market funding levels consistent with the base interest rate trajectory. Our hypothetical scenarios incorporate deposit mix that is the same as in the base scenario. In higher interest rate scenarios, customer deposit activity that shifts balances into higher yielding products and/or requires additional market funding could reduce the expected benefit from higher rates.
•
The interest rate sensitivity of deposits as market interest rates change, referred to as deposit betas, are informed by historical behavior and expectations for near-term pricing strategies. Our actual experience may differ from expectations due to the lag or acceleration of deposit repricing, changes in consumer behavior, and other factors.
| Wells Fargo & Company |
39
|
|||||||
Risk Management – Asset/Liability Management
(continued)
Table 24 presents the results of the estimated net interest income sensitivity over the next 12 months from the multiple scenarios compared with our base scenario. The base scenario is a reference point used by the Company for financial planning purposes. These hypothetical scenarios include instantaneous movements across the yield curve with both lower and higher interest rates under a parallel shift, as well as steeper and flatter non-parallel changes in the yield curve. Long-term interest rates are defined as all tenors three years and longer, and short-term interest rates are defined as all tenors less than three years.
Table 24:
Net Interest Income Sensitivity Over the Next 12 Months Using Instantaneous Movements
|
($ in billions)
|
Jun 30, 2024 | Dec 31, 2023 | |||||||||
| Parallel shift: | |||||||||||
| +100 bps shift in interest rates | $ | 1.2 | 1.8 | ||||||||
| -100 bps shift in interest rates | (1.7) | (2.0) | |||||||||
| -200 bps shift in interest rates | (3.4) | (4.3) | |||||||||
| Steeper yield curve: | |||||||||||
| +100 bps shift in long-term interest rates | 1.1 | 1.1 | |||||||||
| -100 bps shift in short-term interest rates | (0.6) | (1.0) | |||||||||
| Flatter yield curve: | |||||||||||
| +100 bps shift in short-term interest rates | 0.1 | 0.7 | |||||||||
| -100 bps shift in long-term interest rates | (1.1) | (1.1) | |||||||||
Our interest rate sensitivity indicates that we would expect to benefit from higher interest rates as our assets would reprice faster and to a greater degree than our liabilities, while in the case of lower interest rates, our assets would reprice downward and to a greater degree than our liabilities resulting in lower net interest income. The changes in our interest rate sensitivity from December 31, 2023, to June 30, 2024, reflected updates for our expected balance sheet composition, including a shift to higher cost deposits. The magnitude of the benefit, if any, from higher interest rates may vary from our scenarios, including because future deposit pricing and balances may be different from our current expectations. The realized impact of interest rate changes may also vary from our base and hypothetical scenarios for various reasons, including any deposit pricing lags.
We use interest rate derivatives and our debt securities portfolio to manage our interest rate exposures. We use derivatives for asset/liability management to (i) convert cash flows from selected assets and/or liabilities from floating-rate payments to fixed-rate payments, or vice versa, (ii) reduce accumulated other comprehensive income (AOCI) sensitivity of our AFS debt securities portfolio, and/or (iii) economically hedge our mortgage origination pipeline, funded mortgage loans, and MSRs. Derivatives used to hedge our interest rate risk exposures are presented in Note 11 (Derivatives) to Financial Statements in this Report. As interest rates increase, changes in the fair value of AFS debt securities may negatively affect AOCI, which lowers the amount of our regulatory capital. AOCI also includes unrealized gains or losses related to the transfer of debt securities from AFS to HTM, which are subsequently amortized into earnings over the life of the security with no further impact from interest rate changes. See Note 1 (Summary of Significant Accounting Policies) and Note 3 (Available-for-Sale and Held-to-Maturity Debt Securities) to Financial Statements in this Report for additional information on our debt securities portfolio.
In addition to the net interest income sensitivity above, we also measure and evaluate the economic value sensitivity (EVS) of our balance sheet. EVS is the change in the present value of the life-time cash flows of the Company’s assets and liabilities
across a range of scenarios. It is based on the existing balance sheet, at a point in time, and helps indicate whether we are exposed to higher or lower interest rates. We manage EVS through a set of limits that are designed to align with our interest rate risk appetite.
Our interest rate sensitive noninterest income and expense are impacted by mortgage banking activities that may have sensitivity impacts that move in the opposite direction of our net interest income. See the “Risk Management – Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section in our 2023 Form 10-K for additional information.
Interest rate sensitive noninterest income is also impacted by changes in earnings credit for noninterest-bearing deposits that reduce treasury management deposit-related service fees on commercial accounts, and by trading assets. In addition, the impact to net interest income does not include the fair value changes of trading securities, which, along with the effects of related economic hedges, are recorded in noninterest income. In addition to changes in interest rates, net interest income and noninterest income from trading securities may be impacted by the actual composition of the trading portfolio. For additional information on our trading assets and liabilities, see Note 2 (Trading Activities) to Financial Statements in this Report.
MORTGAGE BANKING INTEREST RATE AND MARKET RISK
We originate and service mortgage loans, which subjects us to various risks, including market, interest rate, credit, and liquidity risks that can be substantial. Based on market conditions and other factors, we reduce credit and liquidity risks by selling or securitizing mortgage loans. We determine whether mortgage loans will be held for investment or held for sale at the time of commitment, but may change our intent to hold loans for investment or sale as part of our corporate asset/liability management activities. We may also retain securities in our investment portfolio at the time we securitize mortgage loans.
Changes in interest rates may impact mortgage banking noninterest income, including origination and servicing fees, and the fair value of our residential MSRs, LHFS, and derivative loan commitments (interest rate “locks”) extended to mortgage applicants. Interest rate changes will generally impact our mortgage banking noninterest income on a lagging basis due to the time it takes for the market to reflect a shift in customer demand, as well as the time required for processing a new application, providing the commitment, and securitizing and selling the loan. The amount and timing of the impact will depend on the magnitude, speed and duration of the changes in interest rates. For additional information on mortgage banking, including key assumptions and the sensitivity of the fair value of MSRs, see the “Risk Management – Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section and Note 6 (Mortgage Banking Activities), Note 14 (Derivatives), and Note 15 (Fair Values of Assets and Liabilities) to Financial Statements in our 2023 Form 10-K.
MARKET RISK
Market risk is the risk of possible economic loss from adverse changes in market risk factors such as interest rates, credit spreads, foreign exchange rates, equity and commodity prices, and the risk of possible loss due to counterparty exposure. This applies to implied volatility risk, basis risk, and market liquidity risk. It includes price risk in the trading book, mortgage servicing rights, the hedge effectiveness risk associated with the mortgage book held at fair value, and impairment on private equity investments. For additional information on our oversight of market risk, see the “Risk
|
40
|
Wells Fargo & Company | |||||||
Management – Asset/Liability Management – Market Risk” section in our 2023 Form 10-K.
MARKET RISK – TRADING ACTIVITIES
We engage in trading activities to accommodate the investment and risk management activities of our customers and to execute economic hedging to manage certain balance sheet risks. These trading activities predominantly occur within our CIB businesses. Debt and equity securities held for trading, trading loans, and trading derivatives are financial instruments used in our trading activities, and are measured at fair value through earnings. Income earned on the financial instruments used in our trading activities include net interest income, changes in fair value, and realized gains and losses. Net interest income earned from our trading activities is reflected in the interest income and interest expense components of our consolidated statement of income. Changes in fair value and realized gains and losses of the financial
instruments used in our trading activities are reflected in net gains from trading activities. For additional information on the financial instruments used in our trading activities and the income from these trading activities, see Note 2 (Trading Activities) to Financial Statements in this Report.
Value-at-risk (VaR) is a statistical risk measure used to estimate the potential loss from adverse moves in the financial markets, and Trading VaR is a measure used to provide insight into the market risk exhibited by the Company’s trading positions on our consolidated balance sheet. The Company uses these VaR metrics complemented with sensitivity analysis and stress testing in measuring and monitoring market risk. Table 25 shows the Company’s Trading General VaR by risk category. For additional information on our monitoring activities, sensitivity analysis, stress testing, Trading VaR, and Trading General VaR, see the “Risk Management – Asset/Liability Management – Market Risk – Trading Activities” section in our 2023 Form 10-K.
Table 25:
Trading 1-Day 99% General VaR by Risk Category
| Quarter ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | March 31, 2024 | June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) |
Period
end |
Average | Low | High |
Period
end |
Average | Low | High |
Period
end |
Average | Low | High | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Company Trading General VaR Risk Categories
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit | $ | 31 | 29 | 23 | 36 | 35 | 40 | 29 | 58 | 50 | 39 | 21 | 51 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate | 30 | 24 | 16 | 32 | 33 | 26 | 13 | 45 | 42 | 44 | 29 | 65 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity | 20 | 20 | 15 | 24 | 22 | 21 | 18 | 24 | 19 | 19 | 13 | 24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commodity | 6 | 4 | 2 | 11 | 2 | 3 | 2 | 4 | 4 | 4 | 3 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange | 0 | 1 | 0 | 2 | 1 | 1 | 0 | 1 | 1 | 1 | 0 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diversification benefit (1) | (59) | (49) | (57) | (51) | (78) | (72) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Company Trading General VaR
|
$ | 28 | 29 | 36 | 40 | 38 | 35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)
The period-end VaR was less than the sum of the VaR components described above due to portfolio diversification. The diversification effect arises because the risks are not perfectly correlated causing a portfolio of positions to usually be less risky than the sum of the risks of the positions alone. The diversification benefit is not meaningful for low and high metrics since they may occur on different days.
MARKET RISK – EQUITY SECURITIES
We are directly and indirectly affected by changes in the equity markets. We make and manage equity investments in various businesses, such as start-up companies and emerging growth companies. We also invest in funds that make similar private equity investments. For additional information, see the “Risk Management – Asset/Liability Management – Market Risk – Equity Securities” section in our 2023 Form 10-K.
As part of our business to support our customers, we trade public equities, listed/over-the-counter equity derivatives, and convertible bonds. We have parameters that govern these activities. We also have marketable equity securities that include investments relating to our venture capital activities. For additional information, see Note 4 (Equity Securities) to Financial Statements in this Report.
Changes in equity market prices may also indirectly affect our net income by (1) the value of third-party assets under management and, hence, fee income, (2) borrowers whose ability to repay principal and/or interest may be affected by the stock market, or (3) brokerage activity, related commission income and other business activities. Each business line monitors and manages these indirect risks.
LIQUIDITY RISK AND FUNDING
Liquidity risk is the risk arising from the inability of the Company to meet obligations when they come due, or roll over funds at a reasonable cost, without incurring heightened costs. In the ordinary course of business, we enter into contractual obligations that may require future cash payments, including funding for customer loan requests,
customer deposit maturities and withdrawals, debt service, leases for premises and equipment, and other cash commitments. Liquidity risk also considers the stability of deposits, including the risk of losing uninsured or non-operational deposits. The objective of effective liquidity management is to be able to meet our contractual obligations and other cash commitments efficiently under both normal operating conditions and under periods of Wells Fargo-specific and/or market stress.
To help achieve this objective, the Board establishes liquidity guidelines that require sufficient asset-based liquidity to cover potential funding requirements and to avoid over-dependence on volatile, less reliable funding markets. These guidelines are monitored on a monthly basis by the management-level Corporate Asset/Liability Committee and on a quarterly basis by the Board. These guidelines are established and monitored for both the Company and the Parent on a stand-alone basis so that the Parent is a source of strength for its banking subsidiaries. For additional information on liquidity risk and funding management, see the “Risk Management – Liquidity Risk and Funding” section in our 2023 Form 10-K.
Liquidity Standards
We are subject to a rule issued by the FRB, OCC and FDIC that establishes a quantitative minimum liquidity requirement consistent with the liquidity coverage ratio (LCR) established by the Basel Committee on Banking Supervision (BCBS). The rule requires a covered banking organization to hold high-quality liquid assets (HQLA) in an amount equal to or greater than its projected net cash outflows during a 30-day
| Wells Fargo & Company |
41
|
|||||||
Risk Management – Asset/Liability Management
(continued)
stress period. Our HQLA under the rule mainly consists of central bank deposits, government debt securities, and mortgage-backed securities of federal agencies. The LCR applies to the Company and to our insured depository institutions (IDIs) with total assets of $10 billion or more. In addition, rules issued by the FRB impose enhanced liquidity risk management standards on large bank holding companies (BHCs), such as Wells Fargo.
We are also subject to a rule issued by the FRB, OCC and FDIC that establishes a stable funding requirement, known as the net stable funding ratio (NSFR), which requires a covered banking organization, such as Wells Fargo, to maintain a minimum amount of stable funding, including common equity, long-term debt and most types of deposits, in relation to its assets,
derivative exposures and commitments over a one-year horizon period. The NSFR applies to the Company and to our IDIs with total assets of $10 billion or more. As of June 30, 2024, we were compliant with the NSFR requirement.
Liquidity Coverage Ratio
As of June 30, 2024, the Company, Wells Fargo Bank, N.A., and Wells Fargo National Bank West exceeded the minimum LCR requirement of 100%. Table 26 presents the Company’s quarterly average values for the daily-calculated LCR and its components calculated pursuant to the LCR rule requirements. The LCR represents average HQLA divided by average projected net cash outflows, as each is defined under the LCR rule.
Table 26:
Liquidity Coverage Ratio
| Average for quarter ended | |||||||||||||||||
| (in millions, except ratio) | Jun 30, 2024 | Mar 31, 2024 | Jun 30, 2023 | ||||||||||||||
| HQLA (1): | |||||||||||||||||
| Eligible cash | $ | 190,761 | 201,358 | 121,126 | |||||||||||||
| Eligible securities (2) | 165,530 | 151,669 | 227,955 | ||||||||||||||
| Total HQLA | 356,291 | 353,027 | 349,081 | ||||||||||||||
| Projected net cash outflows (3) | 286,631 | 281,173 | 283,609 | ||||||||||||||
| LCR | 124 | % | 126 | 123 | |||||||||||||
(1)
Excludes excess HQLA at certain subsidiaries that are not transferable to other Wells Fargo entities.
(2)
Net of applicable haircuts required under the LCR rule.
(3)
Projected net cash outflows are calculated by applying a standardized set of outflow and inflow assumptions, defined by the LCR rule, to various exposures and liability types, such as deposits and unfunded loan commitments, which are prescribed based on a number of factors, including the type of customer and the nature of the account.
Liquidity Sources
We maintain liquidity in the form of cash, interest-earning deposits with banks, and unencumbered high-quality, liquid debt securities. These assets make up our primary sources of liquidity. Our primary sources of liquidity are substantially the same in composition as HQLA under the LCR rule; however, our primary sources of liquidity will generally
exceed HQLA calculated under the LCR rule due to the applicable haircuts to HQLA and the exclusion of excess HQLA at our subsidiary IDIs required under the LCR rule. Our primary sources of liquidity are presented in Table 27 at fair value, which also includes encumbered securities that are not included as available HQLA in the calculation of the LCR.
Table 27:
Primary Sources of Liquidity
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (in millions) | Total | Encumbered | Unencumbered | Total | Encumbered | Unencumbered | |||||||||||||||||||||||||||||
| Interest-earning deposits with banks (1) | $ | 198,079 | — | 198,079 | 203,026 | — | 203,026 | ||||||||||||||||||||||||||||
| Debt securities of U.S. Treasury and federal agencies | 40,863 | 2,847 | 38,016 | 47,754 | 9,351 | 38,403 | |||||||||||||||||||||||||||||
|
Federal agency mortgage-backed securities (2)
|
256,395 | 15,046 | 241,349 | 237,966 | 28,471 | 209,495 | |||||||||||||||||||||||||||||
| Total | $ | 495,337 | 17,893 | 477,444 | 488,746 | 37,822 | 450,924 | ||||||||||||||||||||||||||||
(1)
Excludes time deposits, which are included in interest-earning deposits with banks in our consolidated balance sheet.
(2)
Encumbered securities at June 30, 2024, includes securities with a fair value of $52 million which were purchased in June 2024, but settled in July 2024.
Our interest-earning deposits with banks are mainly on deposit with the Federal Reserve. We believe the debt securities included in Table 27 provide quick and reliable sources of liquidity through sales or by pledging to obtain financing, regardless of market conditions. Debt securities within our HTM portfolio are not intended for sale but may be pledged to obtain financing.
As of June 30, 2024, we had approximately $563.0 billion of available borrowing capacity at various Federal Home Loan Banks (FHLB) and the Federal Reserve Discount Window, based on collateral pledged. Although available, we do not view this borrowing capacity as a primary source of liquidity.
In addition, liquidity is also available through the sale or financing of other debt securities, including trading and/or AFS debt securities, as well as through the sale, securitization, or financing of loans, to the extent such debt securities and loans are not encumbered.
Funding Sources
The Parent acts as a source of funding for the Company through the issuance of long-term debt and equity.
WFC Holdings, LLC (the “IHC”) is an intermediate holding company and subsidiary of the Parent, which provides funding support for the ongoing operational requirements of the Parent and certain of its direct and indirect subsidiaries. For additional information on the IHC, see the “Regulatory Matters – ‘Living Will’ Requirements and Related Matters” section in our 2023 Form 10-K. Additional subsidiary funding is provided by deposits, short-term borrowings and long-term debt.
Deposits have historically provided a sizable source of relatively low-cost funds. Loans were 67% and 69% of total deposits at June 30, 2024, and December 31, 2023, respectively.
Table 28 presents a summary of our short-term borrowings, which generally mature in less than 30 days. The balances of federal funds purchased and securities sold under agreements to repurchase may vary over time due to client activity, our own demand for financing, and our overall mix of liabilities. For additional information on the classification of our short-term borrowings, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2023 Form 10-K. We
|
42
|
Wells Fargo & Company | |||||||
pledge certain financial instruments that we own to collateralize repurchase agreements and other securities financings, as well as borrowings from the FHLB. For additional information, see the
“Pledged Assets” section of Note 16 (Pledged Assets and Collateral) to Financial Statements in this Report.
Table 28:
Short-Term Borrowings
|
(in millions)
|
Jun 30, 2024 | Dec 31, 2023 | |||||||||
| Federal funds purchased and securities sold under agreements to repurchase | $ | 105,833 | 77,676 | ||||||||
| Other short-term borrowings (1) | 13,001 | 11,883 | |||||||||
|
Total
|
$ | 118,834 | 89,559 | ||||||||
(1)
Includes $1.0 billion and $0 of FHLB advances at June 30, 2024, and December 31, 2023, respectively.
We access domestic and international capital markets for long-term funding through issuances of registered debt securities, private placements, securitizations, and asset-backed secured funding. We issue long-term debt in a variety of maturities and currencies to achieve cost-efficient funding and to maintain an appropriate maturity profile. Proceeds from securities issued were used for general corporate purposes unless otherwise specified in the applicable prospectus or prospectus supplement, and we expect the proceeds from securities issued in the future will be used for the same purposes. Depending on market conditions and our liquidity position, we may redeem or
repurchase, and subsequently retire, our outstanding debt securities in privately negotiated or open market transactions, by tender offer, or otherwise. In March 2024, we issued long-term debt of $1.2 billion by securitizing credit card loans. For additional information about credit card securitizations, see
Note 13 (Securitizations and Variable Interest Entities) to Financial Statements in this Report. Table 29 provides the aggregate carrying value of long-term debt maturities (based on contractual payment dates) for the remainder of 2024 and the following years thereafter, as of June 30, 2024.
Table 29:
Maturity of Long-Term Debt
| June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| (in millions) |
Remaining 2024
|
2025 | 2026 | 2027 |
2028
|
Thereafter | Total | ||||||||||||||||||||||||||||||||||
| Wells Fargo & Company (Parent Only) | |||||||||||||||||||||||||||||||||||||||||
| Senior notes | $ | 2,767 | 11,973 | 24,148 | 7,744 | 18,799 | 63,461 | 128,892 | |||||||||||||||||||||||||||||||||
| Subordinated notes | — | 960 | 2,642 | 2,354 | — | 11,391 | 17,347 | ||||||||||||||||||||||||||||||||||
| Junior subordinated notes | — | — | — | 361 | — | 796 | 1,157 | ||||||||||||||||||||||||||||||||||
|
Total long-term debt – Parent
|
2,767 | 12,933 | 26,790 | 10,459 | 18,799 | 75,648 | 147,396 | ||||||||||||||||||||||||||||||||||
| Wells Fargo Bank, N.A. and other bank entities (Bank) | |||||||||||||||||||||||||||||||||||||||||
| Senior notes (1) | 8,233 | 6,986 | 7,635 | 3 | 3 | 178 | 23,038 | ||||||||||||||||||||||||||||||||||
| Subordinated notes | — | 148 | — | 27 | 192 | 2,912 | 3,279 | ||||||||||||||||||||||||||||||||||
| Junior subordinated notes | — | — | — | 421 | — | — | 421 | ||||||||||||||||||||||||||||||||||
|
Credit card securitizations
|
— | — | — | 1,243 | — | — | 1,243 | ||||||||||||||||||||||||||||||||||
|
Other bank debt
|
29 | 43 | 17 | 28 | 27 | 2,634 | 2,778 | ||||||||||||||||||||||||||||||||||
|
Total long-term debt – Bank
|
8,262 | 7,177 | 7,652 | 1,722 | 222 | 5,724 | 30,759 | ||||||||||||||||||||||||||||||||||
| Other consolidated subsidiaries | |||||||||||||||||||||||||||||||||||||||||
| Senior notes | 38 | 386 | 221 | — | 5 | 331 | 981 | ||||||||||||||||||||||||||||||||||
|
Total long-term debt – Other consolidated subsidiaries
|
38 | 386 | 221 | — | 5 | 331 | 981 | ||||||||||||||||||||||||||||||||||
| Total long-term debt | $ | 11,067 | 20,496 | 34,663 | 12,181 | 19,026 | 81,703 | 179,136 | |||||||||||||||||||||||||||||||||
(1)
Includes $11.0 billion of FHLB advances.
| Wells Fargo & Company |
43
|
|||||||
Risk Management – Asset/Liability Management
(continued)
Credit Ratings
Investors in the long-term capital markets, as well as other market participants, generally will consider, among other factors, a company’s debt rating in making investment decisions. Rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, the level and quality of earnings, and rating agency assumptions regarding the probability and extent of federal financial assistance or support for certain large financial institutions. Adverse changes in these factors could result in a reduction of our credit rating; however, our debt securities do not contain credit rating covenants.
There were no actions undertaken by the rating agencies with regard to our credit ratings during second quarter 2024.
See the “Risk Factors” section in our 2023 Form 10-K for additional information regarding our credit ratings and the potential impact a credit rating downgrade would have on our liquidity and operations as well as Note 11 (Derivatives) to Financial Statements in this Report for information regarding additional collateral and funding obligations required for certain derivative instruments in the event our credit ratings were to fall below investment grade.
The credit ratings of the Parent and Wells Fargo Bank, N.A., as of June 30, 2024, are presented in Table 30.
Table 30:
Credit Ratings as of June 30, 2024
| Wells Fargo & Company | Wells Fargo Bank, N.A. | ||||||||||||||||||||||||||||
| Senior debt |
Short-term
borrowings
|
Long-term
deposits
|
Short-term
borrowings
|
||||||||||||||||||||||||||
| Moody’s | A1 | P-1 | Aa1 | P-1 | |||||||||||||||||||||||||
| S&P Global Ratings | BBB+ | A-2 | A+ | A-1 | |||||||||||||||||||||||||
| Fitch Ratings | A+ | F1 | AA | F1+ | |||||||||||||||||||||||||
| DBRS Morningstar | AA (low) | R-1 (middle) | AA | R-1 (high) | |||||||||||||||||||||||||
|
44
|
Wells Fargo & Company | |||||||
| Capital Management | ||
We have an active program for managing capital through a comprehensive process for assessing the Company’s overall capital adequacy. Our objective is to maintain capital at an amount commensurate with our risk profile and risk tolerance objectives, and to meet both regulatory and market expectations. We primarily fund our capital needs through the retention of earnings net of both dividends and share repurchases, as well as through the issuance of preferred stock and long- and short-term debt. For additional information about capital planning, see the “Capital Planning and Stress Testing” section below.
Regulatory Capital Requirements
The Company and each of our IDIs are subject to various regulatory capital adequacy requirements administered by the FRB and the OCC. Risk-based capital rules establish risk-adjusted ratios relating regulatory capital to different categories of assets and off-balance sheet exposures as discussed below.
RISK-BASED CAPITAL AND RISK-WEIGHTED ASSETS
The Company is subject to rules issued by federal banking regulators to implement Basel III capital requirements for U.S. banking organizations. The rules contain two frameworks for calculating capital requirements, a Standardized Approach and an Advanced Approach applicable to certain institutions, including Wells Fargo, and we must calculate our risk-based capital ratios under both approaches. The Company is required to satisfy the risk-based capital ratio requirements to avoid restrictions on capital distributions and discretionary bonus payments.
In July 2023, federal banking regulators issued a proposed rule to implement the final components of Basel III, which would impact risk-based capital requirements for certain banks. The proposed rule would eliminate the current Advanced Approach and replace it with a new expanded risk-based approach for the measurement of risk-weighted assets, including more granular risk weights for credit risk, a new market risk framework, and a new standardized approach for measuring operational risk. Officials from federal banking regulators have since commented that there may be significant changes to the proposed rule.
Table 31 and Table 32 present the risk-based capital requirements applicable to the Company under the Standardized Approach and Advanced Approach, respectively, as of June 30, 2024.
Table 31:
Risk-Based Capital Requirements – Standardized Approach
Table 32:
Risk-Based Capital Requirements – Advanced Approach
In addition to the risk-based capital requirements described in Table 31 and Table 32, if the FRB determines that a period of excessive credit growth is contributing to an increase in systemic risk, a countercyclical buffer of up to 2.50% could be added to the risk-based capital ratio requirements under federal banking regulations. The countercyclical buffer in effect at June 30, 2024, was 0.00%.
The capital conservation buffer is applicable to certain institutions, including Wells Fargo, under the Advanced Approach and is intended to absorb losses during times of economic or financial stress.
The stress capital buffer is calculated based on the decrease in a BHC’s risk-based capital ratios under the severely adverse scenario in the FRB’s annual supervisory stress test and related Comprehensive Capital Analysis and Review (CCAR), plus four quarters of planned common stock dividends. Because the stress capital buffer is calculated annually based on data that can differ over time, our stress capital buffer, and thus our risk-based capital ratio requirements under the Standardized Approach, are subject to change in future periods. Our stress capital buffer for the period October 1, 2023, through September 30, 2024, is 2.90%. We expect our stress capital buffer for the period October 1, 2024, through September 30, 2025, to increase to 3.80%.
| Wells Fargo & Company |
45
|
|||||||
Capital Management
(continued)
As a global systemically important bank (G-SIB), we are also subject to the FRB’s rule implementing an additional capital surcharge between 1.00-4.50% on the risk-based capital ratio requirements of G-SIBs. Under the rule, we must annually calculate our surcharge under two methods and use the higher of the two surcharges. The first method (method one) considers our size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity, consistent with the methodology developed by the BCBS and the Financial Stability Board (FSB). The second method (method two) uses similar inputs, but replaces substitutability with use of short-term wholesale funding and will generally result in higher surcharges than under method one. Because the G-SIB capital surcharge is calculated annually based on data that can differ over time, the amount of the surcharge is subject to change in future years. If our annual calculation results in a decrease to our G-SIB capital surcharge, the decrease takes effect the next calendar year. If our annual calculation results in an increase to our G-SIB capital
surcharge, the increase takes effect in two calendar years. Our G-SIB capital surcharge will continue to be 1.50% in 2024. On July 27, 2023, the FRB issued a proposed rule that would impact the methodology used to calculate the G-SIB capital surcharge.
Under the risk-based capital rules, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets (RWAs).
The tables that follow provide information about our risk-based capital and related ratios as calculated under Basel III capital rules. Table 33 summarizes our CET1, Tier 1 capital, Total capital, RWAs and capital ratios.
Table 33:
Capital Components and Ratios
| Standardized Approach | Advanced Approach | |||||||||||||||||||||||||||||||||||||
| ($ in millions) |
Required
Capital Ratios (1) |
Jun 30,
2024 |
Dec 31,
2023 |
Required
Capital Ratios (1) |
Jun 30,
2024 |
Dec 31,
2023 |
||||||||||||||||||||||||||||||||
| Common Equity Tier 1 | (A) | $ | 134,249 | 140,783 | 134,249 | 140,783 | ||||||||||||||||||||||||||||||||
| Tier 1 capital | (B) | 150,547 | 159,823 | 150,547 | 159,823 | |||||||||||||||||||||||||||||||||
| Total capital | (C) | 183,201 | 193,061 | 172,927 | 182,726 | |||||||||||||||||||||||||||||||||
| Risk-weighted assets | (D) | 1,219,533 | 1,231,668 | 1,093,025 | 1,114,281 | |||||||||||||||||||||||||||||||||
| Common Equity Tier 1 capital ratio | (A)/(D) | 8.90 | % | 11.01 | * | 11.43 | 8.50 | 12.28 | 12.63 | |||||||||||||||||||||||||||||
| Tier 1 capital ratio | (B)/(D) | 10.40 | 12.34 | * | 12.98 | 10.00 | 13.77 | 14.34 | ||||||||||||||||||||||||||||||
| Total capital ratio | (C)/(D) | 12.40 | 15.02 | * | 15.67 | 12.00 | 15.82 | 16.40 | ||||||||||||||||||||||||||||||
*
Denotes the binding ratio under the Standardized and Advanced Approaches at June 30, 2024.
(1)
Represents the minimum ratios required to avoid restrictions on capital distributions and discretionary bonus payments at June 30, 2024.
|
46
|
Wells Fargo & Company | |||||||
Table 34 provides information regarding the calculation and composition of our risk-based capital under the Standardized and Advanced Approaches.
Table 34:
Risk-Based Capital Calculation and Components
|
(in millions)
|
Jun 30,
2024 |
Dec 31,
2023 |
||||||||||||
|
Total equity
|
$ | 178,148 | 187,443 | |||||||||||
| Adjustments: | ||||||||||||||
| Preferred stock | (16,608) | (19,448) | ||||||||||||
| Additional paid-in capital on preferred stock | 141 | 157 | ||||||||||||
| Noncontrolling interests | (1,718) | (1,708) | ||||||||||||
| Total common stockholders’ equity | $ | 159,963 | 166,444 | |||||||||||
| Adjustments: | ||||||||||||||
| Goodwill | (25,172) | (25,175) | ||||||||||||
| Certain identifiable intangible assets (other than MSRs) | (96) | (118) | ||||||||||||
|
Goodwill and other intangibles on investments in consolidated portfolio companies (included in other assets)
|
(968) | (878) | ||||||||||||
|
Applicable deferred taxes related to goodwill and other intangible assets (1)
|
933 | 919 | ||||||||||||
|
Other (2)
|
(411) | (409) | ||||||||||||
| Common Equity Tier 1 under the Standardized and Advanced Approaches | $ | 134,249 | 140,783 | |||||||||||
| Preferred stock | 16,608 | 19,448 | ||||||||||||
| Additional paid-in capital on preferred stock | (141) | (157) | ||||||||||||
| Other | (169) | (251) | ||||||||||||
| Total Tier 1 capital under the Standardized and Advanced Approaches | (A) | $ | 150,547 | 159,823 | ||||||||||
| Long-term debt and other instruments qualifying as Tier 2 | 18,299 | 19,020 | ||||||||||||
|
Qualifying allowance for credit losses (3)
|
14,706 | 14,805 | ||||||||||||
| Other | (351) | (587) | ||||||||||||
| Total Tier 2 capital under the Standardized Approach | (B) | $ | 32,654 | 33,238 | ||||||||||
| Total qualifying capital under the Standardized Approach | (A)+(B) | $ | 183,201 | 193,061 | ||||||||||
| Long-term debt and other instruments qualifying as Tier 2 | 18,299 | 19,020 | ||||||||||||
|
Qualifying allowance for credit losses (3)
|
4,432 | 4,470 | ||||||||||||
| Other | (351) | (587) | ||||||||||||
| Total Tier 2 capital under the Advanced Approach | (C) | $ | 22,380 | 22,903 | ||||||||||
| Total qualifying capital under the Advanced Approach | (A)+(C) | $ | 172,927 | 182,726 | ||||||||||
(1)
Determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period-end.
(2)
Includes a $60 million increase and $120 million increase at June 30, 2024, and December 31, 2023, respectively, related to a current expected credit loss accounting standard (CECL) transition provision. In second quarter 2020, the Company elected to apply a modified transition provision issued by federal banking regulators related to the impact of CECL on regulatory capital. The rule permits certain banking organizations to exclude from regulatory capital the initial adoption impact of CECL, plus 25% of the cumulative changes in the allowance for credit losses (ACL) under CECL for each period until December 31, 2021, followed by a three-year phase-out period in which the benefit is reduced by 25% in year one, 50% in year two and 75% in year three.
(3)
Differences between the approaches are driven by the qualifying amounts of ACL includable in Tier 2 capital. Under the Advanced Approach, eligible credit reserves represented by the amount of qualifying ACL in excess of expected credit losses (using regulatory definitions) is limited to 0.60% of Advanced credit RWAs, whereas the Standardized Approach includes ACL in Tier 2 capital up to 1.25% of Standardized credit RWAs. Under both approaches, any excess ACL is deducted from the respective total RWAs.
| Wells Fargo & Company |
47
|
|||||||
Capital Management
(continued)
Table 35 provides the composition and net changes in the components of RWAs under the Standardized and Advanced Approaches.
Table 35:
Risk-Weighted Assets
|
|
Standardized Approach | Advanced Approach (1) | ||||||||||||||||||||||||||||||||||||
| (in millions) |
Jun 30,
2024 |
Dec 31,
2023 |
$ Change
2024/
2023
|
Jun 30,
2024 |
Dec 31,
2023 |
$ Change
2024/
2023
|
||||||||||||||||||||||||||||||||
| Risk-weighted assets (RWAs): | ||||||||||||||||||||||||||||||||||||||
| Credit risk | $ | 1,175,437 | 1,182,805 | (7,368) | 753,679 | 756,905 | (3,226) | |||||||||||||||||||||||||||||||
| Market risk | 44,096 | 48,863 | (4,767) | 44,096 | 48,863 | (4,767) | ||||||||||||||||||||||||||||||||
| Operational risk |
N/A
|
N/A
|
N/A
|
295,250 | 308,513 | (13,263) | ||||||||||||||||||||||||||||||||
| Total RWAs | $ | 1,219,533 | 1,231,668 | (12,135) | 1,093,025 | 1,114,281 | (21,256) | |||||||||||||||||||||||||||||||
(1)
RWAs calculated under the Advanced Approach utilize a risk-sensitive methodology, which relies upon the use of internal credit models based upon our experience with internal rating grades. The Advanced Approach also includes an operational risk component, which reflects the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events.
Table 36 provides an analysis of changes in CET1.
Table 36:
Analysis of Changes in Common Equity Tier 1
|
(in millions)
|
||||||||
|
Common Equity Tier 1 at December 31, 2023
|
$ | 140,783 | ||||||
| Cumulative effect from change in accounting policy (1) | (158) | |||||||
| Net income applicable to common stock | 8,953 | |||||||
| Common stock dividends | (2,455) | |||||||
| Common stock issued, repurchased, and stock compensation-related items | (11,679) | |||||||
| Changes in accumulated other comprehensive income (loss) | (1,141) | |||||||
| Goodwill | 3 | |||||||
| Certain identifiable intangible assets (other than MSRs) | 22 | |||||||
|
Goodwill and other intangibles on investments in consolidated portfolio companies (included in other assets)
|
(90) | |||||||
|
Applicable deferred taxes related to goodwill and other intangible assets (2)
|
14 | |||||||
|
Other (3)
|
(3) | |||||||
| Change in Common Equity Tier 1 | (6,534) | |||||||
|
Common Equity Tier 1 at June 30, 2024
|
$ | 134,249 | ||||||
(1)
Effective January 1, 2024, we adopted ASU 2023-02. For additional information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.
(2)
Determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period-end.
(3)
Includes a $60 million decrease from December 31, 2023, related to a CECL transition provision. In second quarter 2020, the Company elected to apply a modified transition provision issued by federal banking regulators related to the impact of CECL on regulatory capital. The rule permits certain banking organizations to exclude from regulatory capital the initial adoption impact of CECL, plus 25% of the cumulative changes in the allowance for credit losses (ACL) under CECL for each period until December 31, 2021, followed by a three-year phase-out period in which the benefit is reduced by 25% in year one, 50% in year two and 75% in year three.
|
48
|
Wells Fargo & Company | |||||||
TANGIBLE COMMON EQUITY
We also evaluate our business based on certain ratios that utilize tangible common equity. Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, goodwill, certain identifiable intangible assets (other than MSRs) and goodwill and other intangibles on investments in consolidated portfolio companies, net of applicable deferred taxes. The ratios are (i) tangible book value per common share, which represents tangible common equity divided by common shares outstanding; and (ii) return on average tangible common
equity (ROTCE), which represents our annualized earnings as a percentage of tangible common equity. The methodology of determining tangible common equity may differ among companies. Management believes that tangible book value per common share and return on average tangible common equity, which utilize tangible common equity, are useful financial measures because they enable management, investors, and others to assess the Company’s use of equity.
Table 37 provides a reconciliation of these non-GAAP financial measures to GAAP financial measures.
Table 37:
Tangible Common Equity
| Balance at period-end | Average balance | |||||||||||||||||||||||||||||||||||||
|
Period ended
|
Quarter ended | Six months ended | ||||||||||||||||||||||||||||||||||||
| (in millions, except ratios) |
Jun 30,
2024 |
Mar 31,
2024 |
Jun 30,
2023 |
Jun 30,
2024 |
Mar 31,
2024 |
Jun 30,
2023 |
Jun 30,
2024 |
Jun 30,
2023 |
||||||||||||||||||||||||||||||
| Total equity | $ | 178,148 | 182,674 | 181,952 | 181,552 | 186,669 | 184,443 | 184,111 | 184,371 | |||||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||
|
Preferred stock
|
(16,608) | (18,608) | (19,448) | (18,300) | (19,291) | (19,448) | (18,795) | (19,448) | ||||||||||||||||||||||||||||||
|
Additional paid-in capital on preferred stock
|
141 | 146 | 173 | 145 | 155 | 173 | 150 | 173 | ||||||||||||||||||||||||||||||
| Noncontrolling interests | (1,718) | (1,731) | (1,761) | (1,743) | (1,710) | (1,924) | (1,727) | (1,971) | ||||||||||||||||||||||||||||||
| Total common stockholders’ equity | (A) | 159,963 | 162,481 | 160,916 | 161,654 | 165,823 | 163,244 | 163,739 | 163,125 | |||||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||
| Goodwill | (25,172) | (25,173) | (25,175) | (25,172) | (25,174) | (25,175) | (25,173) | (25,174) | ||||||||||||||||||||||||||||||
| Certain identifiable intangible assets (other than MSRs) | (96) | (107) | (145) | (101) | (112) | (140) | (106) | (142) | ||||||||||||||||||||||||||||||
|
Goodwill and other intangibles on investments in consolidated portfolio companies (included in other assets) (1)
|
(968) | (965) | (2,511) | (965) | (879) | (2,487) | (922) | (2,464) | ||||||||||||||||||||||||||||||
|
Applicable deferred taxes related to goodwill and other intangible assets (2)
|
933 | 927 | 905 | 931 | 924 | 903 | 928 | 899 | ||||||||||||||||||||||||||||||
| Tangible common equity | (B) | $ | 134,660 | 137,163 | 133,990 | 136,347 | 140,582 | 136,345 | 138,466 | 136,244 | ||||||||||||||||||||||||||||
| Common shares outstanding | (C) | 3,402.7 | 3,501.7 | 3,667.7 | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Net income applicable to common stock | (D) | N/A | N/A | N/A | $ | 4,640 | 4,313 | 4,659 | $ | 8,953 | 9,372 | |||||||||||||||||||||||||||
| Book value per common share | (A)/(C) | $ | 47.01 | 46.40 | 43.87 | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||
| Tangible book value per common share | (B)/(C) | 39.57 | 39.17 | 36.53 | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Return on average common stockholders’ equity (ROE) | (D)/(A) | N/A | N/A | N/A | 11.54 | % | 10.46 | 11.45 | 11.00 | % | 11.59 | |||||||||||||||||||||||||||
| Return on average tangible common equity (ROTCE) | (D)/(B) | N/A | N/A | N/A | 13.69 | 12.34 | 13.71 | 13.00 | 13.87 | |||||||||||||||||||||||||||||
(1)
In third quarter 2023, we sold investments in certain private equity funds. As a result, we have removed the related goodwill and other intangible assets on investments in consolidated portfolio companies.
(2)
Determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period-end.
LEVERAGE REQUIREMENTS
As a BHC, we are required to maintain a supplementary leverage ratio (SLR) to avoid restrictions on capital distributions and discretionary bonus payments and maintain a minimum Tier 1 leverage ratio. Table 38 presents the leverage requirements applicable to the Company as of June 30, 2024.
Table 38:
Leverage Requirements Applicable to the Company
| Wells Fargo & Company |
49
|
|||||||
Capital Management
(continued)
In addition, our IDIs are required to maintain an SLR of at least 6.00% to be considered well-capitalized under applicable regulatory capital adequacy rules and maintain a minimum Tier 1 leverage ratio of 4.00%.
Table 39 presents information regarding the calculation and components of the Company’s SLR and Tier 1 leverage ratio. At June 30, 2024, each of our IDIs exceeded their applicable SLR requirements.
Table 39:
Leverage Ratios for the Company
| ($ in millions) | Quarter ended June 30, 2024 | |||||||
| Tier 1 capital | (A) | $ | 150,547 | |||||
| Total average assets | 1,914,708 | |||||||
| Less: Goodwill and other permitted Tier 1 capital deductions (net of deferred tax liabilities) | 27,201 | |||||||
| Total adjusted average assets |
(B)
|
1,887,507 | ||||||
| Plus adjustments for off-balance sheet exposures: | ||||||||
| Derivatives (1) | 59,932 | |||||||
| Repo-style transactions (2) | 5,711 | |||||||
| Other (3) | 305,374 | |||||||
| Total off-balance sheet exposures | 371,017 | |||||||
| Total leverage exposure |
(C)
|
$ | 2,258,524 | |||||
| Supplementary leverage ratio | (A)/(C) | 6.67 | % | |||||
|
Tier 1 leverage ratio
|
(A)/(B) | 7.98 | % | |||||
(1)
Adjustment represents derivatives and collateral netting exposures as defined for supplementary leverage ratio determination purposes.
(2)
Adjustment represents counterparty credit risk for repo-style transactions where Wells Fargo & Company is the principal counterparty facing the client.
(3)
Adjustment represents credit equivalent amounts of other off-balance sheet exposures not already included as derivatives and repo-style transactions exposures.
TOTAL LOSS ABSORBING CAPACITY
As a G-SIB, we are required to have a minimum amount of equity and unsecured long-term debt for purposes of resolvability and resiliency, often referred to as Total Loss Absorbing Capacity (TLAC). U.S. G-SIBs are required to have a minimum amount of TLAC (consisting of CET1 capital and additional Tier 1 capital issued directly by the top-tier or covered BHC plus eligible external long-term debt) to avoid restrictions on capital distributions and discretionary bonus payments as well as a minimum amount of eligible unsecured long-term debt.
The components used to calculate our minimum TLAC and eligible unsecured long-term debt requirements as of June 30, 2024, are presented in Table 40.
Table 40:
Components Used to Calculate TLAC and Eligible Unsecured Long-Term Debt Requirements
|
TLAC requirement
Greater of:
|
||||||||||||||
| 18.00% of RWAs |
7.50% of total leverage exposure
(the denominator of the SLR calculation) |
|||||||||||||
| + | + | |||||||||||||
| TLAC buffer (equal to 2.50% of RWAs + method one G-SIB capital surcharge + any countercyclical buffer) |
External TLAC leverage buffer
(equal to 2.00% of total leverage exposure) |
|||||||||||||
|
Minimum amount of eligible unsecured long-term debt
Greater of:
|
||||||||||||||
| 6.00% of RWAs | 4.50% of total leverage exposure | |||||||||||||
| + | ||||||||||||||
| Greater of method one and method two G-SIB capital surcharge | ||||||||||||||
In August 2023, the FRB proposed rules that would, among other things, modify the calculation of eligible long-term debt that counts towards the TLAC requirements, which would reduce our TLAC ratios.
Table 41 provides our TLAC and eligible unsecured long-term debt and related ratios.
Table 41:
TLAC and Eligible Unsecured Long-Term Debt
| June 30, 2024 | ||||||||||||||||||||||||||
| ($ in millions) | TLAC (1) | Regulatory Minimum (2) | Eligible Unsecured Long-term Debt | Regulatory Minimum | ||||||||||||||||||||||
| Total eligible amount | $ | 302,253 | 138,087 | |||||||||||||||||||||||
| Percentage of RWAs (3) | 24.78 | % | 21.50 | 11.32 | 7.50 | |||||||||||||||||||||
| Percentage of total leverage exposure | 13.38 | 9.50 | 6.11 | 4.50 | ||||||||||||||||||||||
(1)
TLAC ratios are calculated using the CECL transition provision issued by federal banking regulators.
(2)
Represents the minimum required to avoid restrictions on capital distributions and discretionary bonus payments.
(3)
Our minimum TLAC and eligible unsecured long-term debt requirements are calculated based on the greater of RWAs determined under the Standardized and Advanced Approaches.
OTHER REGULATORY CAPITAL AND LIQUIDITY MATTERS
For information regarding the U.S. implementation of the Basel III LCR and NSFR, see the “Risk Management – Asset/ Liability Management – Liquidity Risk and Funding – Liquidity Standards” section in this Report.
Our principal U.S. broker-dealer subsidiaries, Wells Fargo Securities, LLC, and Wells Fargo Clearing Services, LLC, are subject to regulations to maintain minimum net capital requirements. As of June 30, 2024, these broker-dealer subsidiaries were in compliance with their respective regulatory minimum net capital requirements.
Capital Planning and Stress Testing
Our planned long-term capital structure is designed to meet regulatory and market expectations. We believe that our long-term targeted capital structure enables us to invest in and grow our business, satisfy our customers’ financial needs in varying environments, access markets, and maintain flexibility to return capital to our shareholders. Our long-term targeted capital structure also considers capital levels sufficient to exceed capital requirements, including the G-SIB capital surcharge and the stress capital buffer, as well as potential changes to regulatory requirements for our capital ratios, planned capital actions, changes in our risk profile and other factors. Accordingly, our long-term target capital levels are set above their respective regulatory minimums plus buffers.
In June 2024, we redeemed all of our Preferred Stock, Series S. In July 2024, we issued $2.0 billion of our Preferred Stock, Series FF. For additional information, see Note 9 (Preferred Stock) to Financial Statements in this Report.
During the first half of 2024, we issued $676 million of common stock, substantially all of which was issued in connection with employee compensation and benefits, and we repurchased 213 million shares of common stock at a cost of $12.1 billion. We paid $3.1 billion of common and preferred stock dividends during the first half of 2024.
On July 23, 2024, the Board approved an increase to the Company's third quarter 2024 common stock dividend to $0.40 per share.
The FRB capital plan rule establishes capital planning and other requirements that govern capital distributions, including dividends and share repurchases, by certain BHCs, including
|
50
|
Wells Fargo & Company | |||||||
Wells Fargo. The FRB assesses, among other things, the overall financial condition, risk profile, and capital adequacy of BHCs when evaluating their capital plans.
As part of the annual CCAR, the FRB generates a supervisory stress test. The FRB reviews the supervisory stress test results as required under the Dodd-Frank Act using a common set of capital actions for all large BHCs and also reviews the Company’s proposed capital actions.
Federal banking regulators also require large BHCs and banks to conduct their own stress tests to evaluate whether the institution has sufficient capital to continue to operate during periods of adverse economic and financial conditions.
Securities Repurchases
On July 25, 2023, we announced that our Board authorized a common stock repurchase program of up to $30 billion. Unless modified or revoked by the Board, this authorization does not expire and is our only common stock repurchase program in effect. At June 30, 2024, we had remaining Board authority to repurchase up to approximately $14.7 billion of common stock.
Various factors impact the amount and timing of our share repurchases, including the earnings, cash requirements and
financial condition of the Company, the impact to our balance sheet of expected customer activity, our capital requirements and long-term targeted capital structure, the results of supervisory stress tests, market conditions (including the trading price of our stock), and regulatory and legal considerations, including regulatory requirements under the FRB’s capital plan rule. Although we announce when the Board authorizes a share repurchase program, we typically do not give any public notice before we repurchase our shares. Due to the various factors that may impact the amount and timing of our share repurchases and the fact that we may be in the market throughout the year, our share repurchases occur at various prices. We may suspend share repurchase activity at any time.
Furthermore, the Company has a variety of benefit plans in which employees may own or obtain shares of our common stock. The Company may buy shares from these plans to accommodate employee preferences and these purchases are subtracted from our repurchase authority.
For additional information about share repurchases during second quarter 2024, see Part II, Item 2 in this Report.
| Regulatory Matters | ||
The U.S. financial services industry is subject to significant regulation and regulatory oversight initiatives. This regulation and oversight may continue to impact how U.S. financial services companies conduct business and may continue to result in increased regulatory compliance costs.
For a discussion of certain consent orders applicable to the Company, see the “Overview” section in this Report. The following supplements our discussion of other significant regulations and regulatory oversight initiatives that have affected or may affect our business contained in the “Regulatory Matters” and “Risk Factors” sections in our 2023 Form 10-K and the “Regulatory Matters” section in our 2024 First Quarter Report on Form 10-Q.
“Living Will” Requirements and Related Matters
Rules adopted by the FRB and the FDIC under the Dodd-Frank Act require large financial institutions, including Wells Fargo, to prepare and periodically submit resolution plans, also known as “living wills,” designed to facilitate their rapid and orderly resolution in the event of material financial distress or failure. Under the rules, rapid and orderly resolution means a reorganization or liquidation of the covered company under the U.S. Bankruptcy Code that can be accomplished in a reasonable period of time and in a manner that substantially mitigates the risk that failure would have serious adverse effects on the financial stability of the United States. In addition to the Company’s resolution plan, our national bank subsidiary, Wells Fargo Bank, N.A. (the “Bank”), is also required to prepare and periodically submit a resolution plan. If the FRB and/or FDIC determine that our resolution plan has deficiencies, they may impose more stringent capital, leverage or liquidity requirements on us or restrict our growth, activities or operations until we adequately remedy the deficiencies. If the FRB and/or FDIC ultimately determine that we have been unable to remedy any deficiencies, they could require us to divest certain assets or operations. On June 21, 2024, the FRB and FDIC announced that the Company’s most recent resolution plan did not have any shortcomings or deficiencies.
If Wells Fargo were to fail, it may be resolved in a bankruptcy proceeding or, if certain conditions are met, under the resolution regime created by the Dodd-Frank Act known as the “orderly liquidation authority.” The orderly liquidation authority allows for the appointment of the FDIC as receiver for a systemically important financial institution that is in default or in danger of default if, among other things, the resolution of the institution under the U.S. Bankruptcy Code would have serious adverse effects on financial stability in the United States. If the FDIC is appointed as receiver for the Parent, then the orderly liquidation authority, rather than the U.S. Bankruptcy Code, would determine the powers of the receiver and the rights and obligations of our security holders. The FDIC’s orderly liquidation authority requires that security holders of a company in receivership bear all losses before U.S. taxpayers are exposed to any losses. There are substantial differences in the rights of creditors between the orderly liquidation authority and the U.S. Bankruptcy Code, including the right of the FDIC to disregard the strict priority of creditor claims under the U.S. Bankruptcy Code in certain circumstances and the use of an administrative claims procedure instead of a judicial procedure to determine creditors’ claims.
The strategy described in our most recent resolution plan is a single point of entry strategy, in which the Parent would be the only material legal entity to enter resolution proceedings. However, the strategy described in our resolution plan is not binding in the event of an actual resolution of Wells Fargo, whether conducted under the U.S. Bankruptcy Code or by the FDIC under the orderly liquidation authority. The FDIC has announced that a single point of entry strategy may be a desirable strategy under its implementation of the orderly liquidation authority, but not all aspects of how the FDIC might exercise this authority are known and additional rulemaking is possible.
To facilitate the orderly resolution of systemically important financial institutions in case of material distress or failure, federal banking regulations require that institutions, such as Wells Fargo, maintain a minimum amount of equity and unsecured debt to absorb losses and recapitalize operating subsidiaries. Federal
| Wells Fargo & Company |
51
|
|||||||
Regulatory Matters
(continued)
banking regulators have also required measures to facilitate the continued operation of operating subsidiaries notwithstanding the failure of their parent companies, such as limitations on parent guarantees, and have issued guidance encouraging institutions to take legally binding measures to provide capital and liquidity resources to certain subsidiaries to facilitate an orderly resolution. In response to the regulators’ guidance and to facilitate the orderly resolution of the Company, on June 28, 2017, the Parent entered into a support agreement, as amended and restated on June 26, 2019 (the “Support Agreement”), with WFC Holdings, LLC, an intermediate holding company and subsidiary of the Parent (the “IHC”), the Bank, Wells Fargo Securities, LLC (“WFS”), Wells Fargo Clearing Services, LLC (“WFCS”), and certain other subsidiaries of the Parent designated from time to time as material entities for resolution planning purposes (the “Covered Entities”) or identified from time to time as related support entities in our resolution plan (the “Related Support Entities”). Pursuant to the Support Agreement, the Parent transferred a significant amount of its assets, including the majority of its cash, deposits, liquid securities and intercompany loans (but excluding its equity interests in its subsidiaries and certain other assets), to the IHC and will continue to transfer those types of assets to the IHC from time to time. In the event of our material financial distress or failure, the IHC will be obligated to use the transferred assets to provide capital and/or liquidity to the Bank, WFS, WFCS, and the Covered Entities pursuant to the Support Agreement. Under the Support Agreement, the IHC will also provide funding and liquidity to the Parent through subordinated notes and a committed line of credit, which, together with the issuance of dividends, is expected to provide the Parent, during business as usual operating conditions, with the same access to cash necessary to service its debts, pay dividends, repurchase its shares, and perform its other obligations as it would have had if it had not entered into these arrangements and transferred any assets. If certain liquidity and/or capital metrics fall below defined triggers, or if the Parent’s board of directors authorizes it to file a case under the U.S. Bankruptcy Code, the subordinated notes would be forgiven, the committed line of credit would terminate, and the IHC’s ability to pay dividends to the Parent would be restricted, any of which could materially and adversely impact the Parent’s liquidity and its ability to satisfy its debts and other obligations, and could result in the commencement of bankruptcy proceedings by the Parent at an earlier time than might have otherwise occurred if the Support Agreement were not implemented. The respective obligations under the Support Agreement of the Parent, the IHC, the Bank, and the Related Support Entities are secured pursuant to a related security agreement.
In addition to our resolution plans, we must also prepare and periodically submit to the FRB a recovery plan that identifies a range of options that we may consider during times of idiosyncratic or systemic economic stress to remedy any financial weaknesses and restore market confidence without extraordinary government support. Recovery options include the possible sale, transfer or disposal of assets, securities, loan portfolios or businesses. The Bank must also prepare and periodically submit to the OCC a recovery plan that sets forth the Bank’s plan to remain a going concern when the Bank is experiencing considerable financial or operational stress, but has not yet deteriorated to the point where liquidation or resolution is imminent. If either the FRB or the OCC determines that our recovery plan is deficient, they may impose fines, restrictions on our business or ultimately require us to divest assets.
|
52
|
Wells Fargo & Company | |||||||
| Critical Accounting Policies | ||
Our significant accounting policies are fundamental to understanding our results of operations and financial condition because they require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results. Six of these policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. These policies govern:
•
the allowance for credit losses;
•
the valuation of residential MSRs;
•
the fair value of financial instruments;
•
income taxes;
•
liability for legal actions; and
•
goodwill impairment.
Management has discussed these critical accounting policies and the related estimates and judgments with the Board’s Audit Committee. For additional information, see the “Critical Accounting Policies” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2023 Form 10-K and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.
| Current Accounting Developments | ||
Table 42 provides the significant accounting updates applicable to us that have been issued by the Financial Accounting Standards Board (FASB) but are not yet effective.
Table 42:
Current Accounting Developments – Issued Standards
| Description and Effective Date | Financial statement impact | |||||||
|
ASU 2023-07 – Segment Reporting (Topic 280):
Improvements to Reportable Segment Disclosures
|
||||||||
|
The Update, effective December 31, 2024 (with early adoption permitted), enhances reportable segment disclosure requirements, primarily through enhanced disclosures related to significant segment expenses and additional interim disclosure requirements.
|
The Update impacts disclosure only, and therefore does not have an impact on our consolidated financial statements. We are currently evaluating the impact of the Update to our operating segment disclosures. The following aspects of the Update may result in disclosure changes:
•
Requirement to disclose significant segment expenses by reportable segment if they are regularly provided to the chief operating decision maker (CODM) and included in the reported measure of segment profit or loss.
•
Requirement to disclose an amount for “other segment items” by reportable segment and provide a description of its composition; other segment items is measured as the difference between reported segment revenues less the significant segment expenses disclosed in accordance with the principle described above and reported segment profit or loss.
•
Requirement to disclose the CODM’s title and position and explain how the CODM uses the reported segment profit or loss measure in assessing segment performance and deciding how to allocate resources.
|
|||||||
|
ASU 2023-09 – Income Taxes (Topic 740):
Improvements to Income Tax Disclosures
|
||||||||
|
The Update, effective January 1, 2025 (with early adoption permitted), enhances annual income tax disclosures primarily to further disaggregate existing disclosures related to the effective income tax rate reconciliation and income taxes paid.
|
The impact of the Update is limited to our annual income tax disclosures. We are currently evaluating the impact of the Update to our income tax disclosures. Upon adoption, those disclosures may change as follows:
•
For the tabular effective income tax rate reconciliation, alignment to specific categories (where applicable) and further disaggregation of certain categories (where applicable) by nature and/or jurisdiction if the reconciling item is 5% or more of the statutory tax expense.
•
Description of states and local jurisdictions that contribute the majority of the effect of the state and local income tax category of the effective income tax rate reconciliation.
•
Disaggregate the amount of income taxes paid (net of refunds) by federal, state, and non-U.S. taxes and further disaggregate by individual jurisdictions where income taxes paid (net of refunds) is 5% or more of total income taxes paid (net of refunds).
•
Disaggregate net income (or loss) before income tax expense (or benefit) between domestic and non-U.S.
|
|||||||
Other Accounting Developments
The following Update is applicable to us but is not expected to have a material impact on our consolidated financial statements:
•
ASU 2023-08 – Intangibles – Goodwill and Other – Crypto Assets (Subtopic 350-60):
Accounting for and Disclosure of Crypto Assets
| Wells Fargo & Company |
53
|
|||||||
|
Forward-Looking Statements
|
||
This document contains forward-looking statements. In addition, we may make forward-looking statements in our other documents filed or furnished with the Securities and Exchange Commission, and our management may make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “target,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar references to future periods. In particular, forward-looking statements include, but are not limited to, statements we make about: (i) the future operating or financial performance of the Company, including our outlook for future growth; (ii) our expectations regarding noninterest expense and our efficiency ratio; (iii) future credit quality and performance, including our expectations regarding future loan losses, our allowance for credit losses, and the economic scenarios considered to develop the allowance; (iv) our expectations regarding net interest income and net interest margin; (v) loan growth or the reduction or mitigation of risk in our loan portfolios; (vi) future capital or liquidity levels, ratios or targets; (vii) our expectations regarding our mortgage business and any related commitments or exposures; (viii) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (ix) future common stock dividends, common share repurchases and other uses of capital; (x) our targeted range for return on assets, return on equity, and return on tangible common equity; (xi) expectations regarding our effective income tax rate; (xii) the outcome of contingencies, such as legal actions; (xiii) environmental, social and governance related goals or commitments; and (xiv) 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, declines in commercial real estate prices, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any 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;
•
current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including rules and regulations relating to bank products and financial services;
•
our ability to realize any efficiency ratio or expense target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;
•
the effect of the current interest rate environment or changes in interest rates or in the level or composition of our assets or liabilities on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgage loans held for sale;
•
significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of impairment of securities held in our debt securities and equity securities portfolios;
•
the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage and wealth management businesses;
•
developments in our mortgage banking business, including any negative effects relating to our mortgage servicing, loan modification or foreclosure practices, and any changes in industry standards, regulatory or judicial requirements, or our strategic plans for the business;
•
negative effects from instances where customers may have experienced financial harm, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified employees, and our reputation;
•
regulatory matters, including the failure to resolve outstanding matters on a timely basis and the potential impact of new matters, litigation, or other legal actions, which may result in, among other things, additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other adverse consequences;
•
a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber attacks;
•
the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
•
fiscal and monetary policies of the Federal Reserve Board;
•
changes to tax laws, regulations, and guidance as well as the effect of discrete items on our effective income tax rate;
•
our ability to develop and execute effective business plans and strategies; and
•
the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.
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, the impact to our balance sheet of expected customer activity, our capital requirements and long-term targeted capital structure, the results of supervisory stress tests, market conditions (including the trading
|
54
|
Wells Fargo & Company | |||||||
price of our stock), regulatory and legal considerations, including regulatory requirements under the Federal Reserve Board’s capital plan rule, and other factors deemed relevant by the Company, and may be subject to regulatory approval or conditions.
For additional 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, 2023, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.
1
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.
|
1
We do not control this website. Wells Fargo has provided this link for your convenience, but does not endorse and is not responsible for the content, links, privacy policy, or security policy of this website.
|
||
Forward-looking Non-GAAP Financial Measures
. From time to time management may discuss forward-looking non-GAAP financial measures, such as forward-looking estimates or targets for return on average tangible common equity. We are unable to provide a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because we are unable to provide, without unreasonable effort, a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur. Such unavailable information could be significant to future results.
| Wells Fargo & Company |
55
|
|||||||
|
Risk Factors
|
||
An investment in the Company involves risk, including the possibility that the value of the investment could fall substantially and that dividends or other distributions on the investment could be reduced or eliminated. For a discussion of risk factors that could adversely affect our financial results and condition, and the value of, and return on, an investment in the Company, we refer you to the “Risk Factors” section in our 2023 Form 10-K.
|
56
|
Wells Fargo & Company | |||||||
| Controls and Procedures | ||
|
Disclosure Controls and Procedures
|
||
The Company’s management evaluated the effectiveness, as of June 30, 2024, of the Company’s disclosure controls and procedures. The Company’s chief executive officer and chief financial officer participated in the evaluation. Based on this evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2024.
| Internal Control Over Financial Reporting | ||
Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (GAAP) and includes those policies and procedures that:
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Company;
•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. No change occurred during second quarter 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Wells Fargo & Company |
57
|
|||||||
Financial Statements
| Wells Fargo & Company and Subsidiaries | |||||||||||||||||||||||
| Consolidated Statement of Income (Unaudited) | |||||||||||||||||||||||
|
|
Quarter ended June 30, | Six months ended June 30, | |||||||||||||||||||||
| (in millions, except per share amounts) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Debt securities | $ |
|
|
$ |
|
|
|||||||||||||||||
| Loans held for sale |
|
|
|
|
|||||||||||||||||||
| Loans |
|
|
|
|
|||||||||||||||||||
| Equity securities |
|
|
|
|
|||||||||||||||||||
| Other interest income |
|
|
|
|
|||||||||||||||||||
| Total interest income |
|
|
|
|
|||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Deposits |
|
|
|
|
|||||||||||||||||||
| Short-term borrowings |
|
|
|
|
|||||||||||||||||||
| Long-term debt |
|
|
|
|
|||||||||||||||||||
| Other interest expense |
|
|
|
|
|||||||||||||||||||
| Total interest expense |
|
|
|
|
|||||||||||||||||||
| Net interest income |
|
|
|
|
|||||||||||||||||||
| Noninterest income | |||||||||||||||||||||||
| Deposit and lending-related fees |
|
|
|
|
|||||||||||||||||||
| Investment advisory and other asset-based fees |
|
|
|
|
|||||||||||||||||||
| Commissions and brokerage services fees |
|
|
|
|
|||||||||||||||||||
| Investment banking fees |
|
|
|
|
|||||||||||||||||||
| Card fees |
|
|
|
|
|||||||||||||||||||
| Mortgage banking |
|
|
|
|
|||||||||||||||||||
|
Net gains from trading and securities
|
|
|
|
|
|||||||||||||||||||
|
Other
|
|
|
|
|
|||||||||||||||||||
| Total noninterest income |
|
|
|
|
|||||||||||||||||||
| Total revenue |
|
|
|
|
|||||||||||||||||||
| Provision for credit losses |
|
|
|
|
|||||||||||||||||||
| Noninterest expense | |||||||||||||||||||||||
| Personnel |
|
|
|
|
|||||||||||||||||||
| Technology, telecommunications and equipment |
|
|
|
|
|||||||||||||||||||
| Occupancy |
|
|
|
|
|||||||||||||||||||
| Operating losses |
|
|
|
|
|||||||||||||||||||
| Professional and outside services |
|
|
|
|
|||||||||||||||||||
| Advertising and promotion |
|
|
|
|
|||||||||||||||||||
|
Other
|
|
|
|
|
|||||||||||||||||||
| Total noninterest expense |
|
|
|
|
|||||||||||||||||||
| Income before income tax expense |
|
|
|
|
|||||||||||||||||||
|
Income tax expense
|
|
|
|
|
|||||||||||||||||||
| Net income before noncontrolling interests |
|
|
|
|
|||||||||||||||||||
|
Less: Net income (loss) from noncontrolling interests
|
(
|
(
|
|
(
|
|||||||||||||||||||
|
Wells Fargo net income
|
$ |
|
|
$ |
|
|
|||||||||||||||||
| Less: Preferred stock dividends and other |
|
|
|
|
|||||||||||||||||||
| Wells Fargo net income applicable to common stock | $ |
|
|
$ |
|
|
|||||||||||||||||
| Per share information | |||||||||||||||||||||||
| Earnings per common share | $ |
|
|
$ |
|
|
|||||||||||||||||
| Diluted earnings per common share |
|
|
|
|
|||||||||||||||||||
| Average common shares outstanding |
|
|
|
|
|||||||||||||||||||
| Diluted average common shares outstanding |
|
|
|
|
|||||||||||||||||||
The accompanying notes are an integral part of these statements.
|
58
|
Wells Fargo & Company | |||||||
| Wells Fargo & Company and Subsidiaries | |||||||||||||||||||||||
| Consolidated Statement of Comprehensive Income (Unaudited) | |||||||||||||||||||||||
|
|
Quarter ended June 30, | Six months ended June 30, | |||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
|
Net income before noncontrolling interests
|
$ |
|
|
$ |
|
|
|||||||||||||||||
| Other comprehensive income (loss), after tax: | |||||||||||||||||||||||
| Net change in debt securities |
(
|
(
|
(
|
|
|||||||||||||||||||
| Net change in derivatives and hedging activities |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Defined benefit plans adjustments |
|
|
|
|
|||||||||||||||||||
|
Other
|
(
|
|
(
|
|
|||||||||||||||||||
| Other comprehensive loss, after tax |
(
|
(
|
(
|
(
|
|||||||||||||||||||
|
Total comprehensive income before noncontrolling interests
|
|
|
|
|
|||||||||||||||||||
| Less: Other comprehensive income from noncontrolling interests |
|
|
|
|
|||||||||||||||||||
|
Less: Net income (loss) from noncontrolling interests
|
(
|
(
|
|
(
|
|||||||||||||||||||
|
Wells Fargo comprehensive income
|
$ |
|
|
$ |
|
|
|||||||||||||||||
The accompanying notes are an integral part of these statements.
| Wells Fargo & Company |
59
|
|||||||
| Wells Fargo & Company and Subsidiaries | |||||||||||
|
Consolidated Balance Sheet (Unaudited)
|
|||||||||||
| (in millions, except shares) |
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||
| Assets | |||||||||||
| Cash and due from banks | $ |
|
|
||||||||
| Interest-earning deposits with banks |
|
|
|||||||||
|
Federal funds sold and securities purchased under resale agreements
|
|
|
|||||||||
| Debt securities: | |||||||||||
|
Trading, at fair value (includes assets pledged as collateral of
$
|
|
|
|||||||||
|
Available-for-sale, at fair value (amortized cost of
$
|
|
|
|||||||||
|
Held-to-maturity, at amortized cost (fair value
$
|
|
|
|||||||||
|
Loans held for sale (includes
$
|
|
|
|||||||||
| Loans |
|
|
|||||||||
| Allowance for loan losses |
(
|
(
|
|||||||||
| Net loans |
|
|
|||||||||
|
Mortgage servicing rights (includes
$
|
|
|
|||||||||
| Premises and equipment, net |
|
|
|||||||||
| Goodwill |
|
|
|||||||||
| Derivative assets |
|
|
|||||||||
|
Equity securities (includes
$
|
|
|
|||||||||
|
Other assets
|
|
|
|||||||||
|
Total assets (1)
|
$ |
|
|
||||||||
| Liabilities | |||||||||||
|
Noninterest-bearing deposits
|
$ |
|
|
||||||||
|
Interest-bearing deposits (includes
$
|
|
|
|||||||||
| Total deposits |
|
|
|||||||||
|
Short-term borrowings (includes
$
|
|
|
|||||||||
|
Derivative liabilities
|
|
|
|||||||||
|
Accrued expenses and other liabilities (includes
$
|
|
|
|||||||||
|
Long-term debt (includes
$
|
|
|
|||||||||
|
Total liabilities (2)
|
|
|
|||||||||
| Equity | |||||||||||
| Wells Fargo stockholders’ equity: | |||||||||||
|
Preferred stock – aggregate liquidation preference of
$
|
|
|
|||||||||
|
Common stock – $1-2/3 par value, authorized
|
|
|
|||||||||
| Additional paid-in capital |
|
|
|||||||||
|
Retained earnings
|
|
|
|||||||||
|
Accumulated other comprehensive loss
|
(
|
(
|
|||||||||
|
Treasury stock, at cost –
|
(
|
(
|
|||||||||
| Total Wells Fargo stockholders’ equity |
|
|
|||||||||
| Noncontrolling interests |
|
|
|||||||||
| Total equity |
|
|
|||||||||
| Total liabilities and equity | $ |
|
|
||||||||
(1)
Our consolidated assets at June 30, 2024, and December 31, 2023, include the following assets of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs: Loans, $
10.6
billion and $
4.9
billion; all other assets, $
520
million and $
435
million; and Total assets, $
11.1
billion and $
5.3
billion, respectively.
(2)
Our consolidated liabilities at June 30, 2024, and December 31, 2023, include the following VIE liabilities for which the VIE creditors do not have recourse to Wells Fargo: Long-term debt, $
1.2
billion and $
0
; all other liabilities, $
134
million and $
115
million; and Total liabilities $
1.4
billion and $
115
million, respectively.
The accompanying notes are an integral part of these statements.
|
60
|
Wells Fargo & Company | |||||||
| Wells Fargo & Company and Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated Statement of Changes in Equity (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Wells Fargo stockholders’ equity
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock | Common stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ and shares in millions) | Shares | Amount | Shares | Amount |
Additional
paid-in capital |
Retained
earnings |
Accumulated
other comprehensive income (loss) |
Treasury
stock |
Unearned
ESOP shares |
Noncontrolling
interests |
Total
equity |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balance March 31, 2024
|
|
$ |
|
|
$ |
|
|
|
(
|
(
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Net income (loss)
|
|
(
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Other comprehensive loss,
net of tax
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests |
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued |
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchased |
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Preferred stock redeemed (1)
|
(
|
(
|
|
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock dividends |
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends |
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change in deferred compensation and related plans |
(
|
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change |
(
|
(
|
(
|
|
|
|
(
|
(
|
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balance June 30, 2024
|
|
$ |
|
|
$ |
|
|
|
(
|
(
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balance March 31, 2023
|
|
$ |
|
|
$ |
|
|
|
(
|
(
|
(
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) |
|
(
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Other comprehensive income (loss),
net of tax
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests |
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued |
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchased |
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock redeemed |
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock dividends |
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends |
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change in deferred compensation and related plans |
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change |
|
|
(
|
|
|
|
(
|
(
|
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balance June 30, 2023
|
|
$ |
|
|
$ |
|
|
|
(
|
(
|
(
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)
Represents the impact of the redemption of Preferred Stock, Series S, in second quarter 2024.
The accompanying notes are an integral part of these statements.
| Wells Fargo & Company |
61
|
|||||||
| Wells Fargo & Company and Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated Statement of Changes in Equity (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Wells Fargo stockholders’ equity
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock | Common stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ and shares in millions) | Shares | Amount | Shares | Amount |
Additional
paid-in capital |
Retained
earnings |
Accumulated
other comprehensive income (loss) |
Treasury
stock |
Unearned
ESOP shares |
Noncontrolling
interests |
Total
equity |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2023 |
|
$ |
|
|
$ |
|
|
|
(
|
(
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cumulative effect from change in accounting policy (1) |
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance January 1, 2024 |
|
|
|
|
|
|
(
|
(
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Net income
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Other comprehensive loss,
net of tax
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued |
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchased |
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock redeemed (2) |
(
|
(
|
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock dividends |
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends |
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change in deferred compensation and related plans |
(
|
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change |
(
|
(
|
(
|
|
(
|
|
(
|
(
|
|
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balance June 30, 2024
|
|
$ |
|
|
$ |
|
|
|
(
|
(
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2022 |
|
$ |
|
|
$ |
|
|
|
(
|
(
|
(
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cumulative effect from change in accounting policy (3) |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balance January 1, 2023
|
|
|
|
|
|
|
(
|
(
|
(
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) |
|
(
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Other comprehensive loss,
net of tax
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests |
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued |
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchased |
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock redeemed |
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock dividends |
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends |
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change in deferred compensation and related plans |
(
|
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change |
|
|
(
|
|
(
|
|
(
|
(
|
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balance June 30, 2023
|
|
$ |
|
|
$ |
|
|
|
(
|
(
|
(
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)
Effective January 1, 2024, we adopted ASU 2023-02 –
Investments
– Equity Method and Joint Ventures (Topic 323):
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
. For additional information, see Note 1 (Summary of Significant Accounting Policies).
(2)
Represents the impact of the redemption of Preferred Stock, Series R, in first quarter 2024, and Preferred Stock, Series S, in second quarter 2024.
(3)
Effective January 1, 2023, we adopted ASU 2022-02 – Financial Instruments – Credit Losses (Topic 326):
Troubled Debt Restructurings and Vintage Disclosures
.
The accompanying notes are an integral part of these statements.
|
62
|
Wells Fargo & Company | |||||||
|
Wells Fargo & Company and Subsidiaries
|
|||||||||||
| Consolidated Statement of Cash Flows (Unaudited) | |||||||||||
| Six months ended June 30, | |||||||||||
| (in millions) | 2024 | 2023 | |||||||||
| Cash flows from operating activities: | |||||||||||
|
Net income before noncontrolling interests
|
$ |
|
|
||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Provision for credit losses |
|
|
|||||||||
| Changes in fair value of MSRs and LHFS carried at fair value |
|
|
|||||||||
| Depreciation, amortization and accretion |
|
|
|||||||||
|
Deferred income tax expense (benefit)
|
(
|
|
|||||||||
| Other, net |
(
|
|
|||||||||
| Originations and purchases of loans held for sale |
(
|
(
|
|||||||||
| Proceeds from sales of and paydowns on loans originally classified as held for sale |
|
|
|||||||||
| Net change in: | |||||||||||
| Debt and equity securities, held for trading |
(
|
(
|
|||||||||
|
Derivative assets and liabilities
|
(
|
|
|||||||||
|
Other assets
|
|
(
|
|||||||||
|
Other accrued expenses and liabilities
|
|
|
|||||||||
| Net cash provided (used) by operating activities |
(
|
|
|||||||||
| Cash flows from investing activities: | |||||||||||
| Net change in: | |||||||||||
|
Federal funds sold and securities purchased under resale agreements
|
(
|
|
|||||||||
| Available-for-sale debt securities: | |||||||||||
| Proceeds from sales |
|
|
|||||||||
| Paydowns and maturities |
|
|
|||||||||
| Purchases |
(
|
(
|
|||||||||
| Held-to-maturity debt securities: | |||||||||||
| Paydowns and maturities |
|
|
|||||||||
| Purchases |
|
(
|
|||||||||
| Equity securities, not held for trading: | |||||||||||
| Proceeds from sales and capital returns |
|
|
|||||||||
| Purchases |
(
|
(
|
|||||||||
| Loans: | |||||||||||
| Loans originated by banking subsidiaries, net of principal collected |
|
|
|||||||||
| Proceeds from sales of loans originally classified as held for investment |
|
|
|||||||||
| Purchases of loans |
(
|
(
|
|||||||||
| Principal collected on nonbank entities’ loans |
|
|
|||||||||
| Loans originated by nonbank entities |
(
|
(
|
|||||||||
| Other, net |
|
(
|
|||||||||
|
Net cash provided by investing activities
|
|
|
|||||||||
| Cash flows from financing activities: | |||||||||||
| Net change in: | |||||||||||
| Deposits |
|
(
|
|||||||||
| Short-term borrowings |
|
|
|||||||||
| Long-term debt: | |||||||||||
| Proceeds from issuance |
|
|
|||||||||
| Repayment |
(
|
(
|
|||||||||
| Preferred stock: | |||||||||||
| Redeemed |
(
|
|
|||||||||
| Cash dividends paid |
(
|
(
|
|||||||||
| Common stock: | |||||||||||
| Repurchased |
(
|
(
|
|||||||||
| Cash dividends paid |
(
|
(
|
|||||||||
| Other, net |
(
|
(
|
|||||||||
|
Net cash used by financing activities
|
(
|
(
|
|||||||||
| Net change in cash, cash equivalents, and restricted cash |
(
|
(
|
|||||||||
|
Cash, cash equivalents, and restricted cash at beginning of period (1)
|
|
|
|||||||||
|
Cash, cash equivalents, and restricted cash at end of period (1)
|
$ |
|
|
||||||||
| Supplemental cash flow disclosures: | |||||||||||
| Cash paid for interest | $ |
|
|
||||||||
| Net cash paid (refunded) for income taxes |
(
|
(
|
|||||||||
(1)
Includes Cash and due from banks and Interest-earning deposits with banks on our consolidated balance sheet and excludes time deposits, which are included in Interest-earning deposits with banks.
The accompanying notes are an integral part of these statements. See Note 1 (Summary of Significant Accounting Policies) for noncash activities.
| Wells Fargo & Company |
63
|
|||||||
Notes to Financial Statements
See the “Glossary of Acronyms” at the end of this Report for terms used throughout the Financial Statements and related Notes.
|
Note 1:
Summary of Significant Accounting Policies
|
||
Wells Fargo & Company is a diversified financial services company. We provide banking, investment and mortgage products and services, as well as consumer and commercial finance, through banking locations and offices, the internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia, and in countries outside the U.S. When we refer to “Wells Fargo,” “the Company,” “we,” “our” or “us,” we mean Wells Fargo & Company and Subsidiaries (consolidated). Wells Fargo & Company (the Parent) is a financial holding company and a bank holding company. We also hold a majority interest in a real estate investment trust, which has publicly traded preferred stock outstanding.
Our accounting and reporting policies conform with U.S. generally accepted accounting principles (GAAP) and practices in the financial services industry. For a discussion of our significant accounting policies, see Note 1 (Summary of Significant Accounting Policies) in our Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Form 10-K). There were no material changes to these policies in the first half of 2024.
To prepare the financial statements in conformity with GAAP, management must make estimates based on assumptions about future economic and market conditions (for example, unemployment, market liquidity, real estate prices, etc.) that affect the reported amounts of assets and liabilities at the date of the financial statements, income and expenses during the reporting period and the related disclosures. Although our estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Management has made significant estimates in several areas, including:
•
allowance for credit losses (Note 5 (Loans and Related Allowance for Credit Losses) and Note 3 (Available-for-Sale and Held-to-Maturity Debt Securities));
•
valuations of residential mortgage servicing rights (MSRs) (Note 6 (Mortgage Banking Activities) and Note 13 (Securitizations and Variable Interest Entities));
•
valuations of financial instruments (Note 12 (Fair Values of Assets and Liabilities));
•
liability for legal actions (Note 10 (Legal Actions));
•
income taxes; and
•
goodwill impairment (Note 7 (Intangible Assets and Other Assets)).
Actual results could differ from those estimates.
These unaudited interim financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q. The results of operations in the interim financial statements do not necessarily indicate the results that may be expected for the full year. The interim financial information should be read in conjunction with our 2023 Form 10-K.
Accounting Standards Adopted in 2024
In 2024, we adopted the following new accounting guidance:
•
Accounting Standards Update (ASU) 2023-02, Investments – Equity Method and Joint Ventures (Topic 323):
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
•
ASU 2022-03, Fair Value Measurement (Topic 820):
Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
ASU 2023-02
expands the use of the proportional amortization method of accounting for tax credit investments, which previously was limited to affordable housing investments that generate low-income housing tax credits. Upon adoption of the Update, an entity may elect to account for equity investments that generate income tax credits and benefits using the proportional amortization method if certain eligibility criteria are met.
The proportional amortization method amortizes the cost of a tax credit investment in proportion to the income tax credits and income tax benefits received. The amortization and related income tax credits and benefits are recorded on a net basis within income tax expense. The cost of an investment includes unfunded commitments that are either legally binding or contingent but probable of funding. Such unfunded commitments are not recognized under other methods of accounting.
We adopted the Update on January 1, 2024, on a modified retrospective basis with a cumulative effect adjustment to retained earnings. Upon adoption, we elected to account for eligible investments in our renewable energy tax credit portfolio using the proportional amortization method. These investments were previously accounted for using the equity method. We also elected to continue use of the proportional amortization method to account for our affordable housing investments. In addition, we elected to classify liabilities recognized for unfunded commitments related to proportional amortization method investments in accrued expenses and other liabilities on our consolidated balance sheet, including a change to unfunded commitments for affordable housing investments that were previously included in long-term debt. Prior period amounts were not impacted by these accounting changes.
|
64
|
Wells Fargo & Company | |||||||
Table 1.1 presents the transition adjustments recorded upon the adoption of ASU 2023-02 as of January 1, 2024.
Table 1.1:
Transition Adjustment of ASU 2023-02
|
(in millions)
|
Dec 31,
2023 |
Transition adjustment upon adoption | Jan 1, 2024 | ||||||||||||||||||||
| Selected Balance Sheet Data | |||||||||||||||||||||||
| Equity securities | $ |
|
|
|
|||||||||||||||||||
| Other assets |
|
|
|
||||||||||||||||||||
| Accrued expenses and other liabilities |
|
|
|
||||||||||||||||||||
| Long-term debt |
|
(
|
|
||||||||||||||||||||
| Retained earnings |
|
(
|
|
||||||||||||||||||||
ASU 2022-03
clarifies the guidance regarding the measurement of fair value of equity securities subject to contractual restrictions that prohibit the sale of the security. Specifically, that such restrictions are not part of the unit of account of the
security and therefore are not considered when measuring fair value. We adopted the Update on January 1, 2024, on a prospective basis. The Update did not have a material impact to our consolidated financial statements.
Supplemental Cash Flow Information
Significant noncash activities are presented in Table 1.2.
Table 1.2:
Supplemental Cash Flow Information
|
|
Six months ended June 30, | ||||||||||
| (in millions) | 2024 | 2023 | |||||||||
| Transfers from available-for-sale debt securities to held-to-maturity debt securities | $ |
|
|
||||||||
| Transfers from held-to-maturity debt securities to available-for-sale debt securities (1) |
|
|
|||||||||
| Reclassification of long-term debt to accrued expenses and other liabilities (2) |
|
|
|||||||||
(1)
In first quarter 2023, we reclassified HTM debt securities to AFS debt securities in connection with the adoption of ASU 2022-01, Derivatives and Hedging (Topic 815):
Fair Value Hedging – Portfolio Layer Method
. For additional information, see Note 1 (Summary of Significant Accounting Policies) in our 2023 Form 10-K.
(2)
Effective January 1, 2024, we reclassified unfunded commitment liabilities for affordable housing investments from Long-term debt to Accrued expenses and other liabilities in connection with the adoption of ASU 2023-02.
Subsequent Events
We have evaluated the effects of events that have occurred subsequent to June 30, 2024, and except as disclosed in Note 9 (Preferred Stock), there have been no material events that would require recognition in our second quarter 2024 consolidated financial statements or disclosure in the Notes to the consolidated financial statements.
| Wells Fargo & Company |
65
|
|||||||
|
Note 2:
Trading Activities
|
||
Table 2.1 presents a summary of our trading assets and liabilities measured at fair value through earnings.
Table 2.1:
Trading Assets and Liabilities
|
(in millions)
|
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||
| Trading assets: | |||||||||||
| Debt securities | $ |
|
|
||||||||
| Equity securities |
|
|
|||||||||
| Loans held for sale |
|
|
|||||||||
| Gross trading derivative assets |
|
|
|||||||||
| Netting (1) |
(
|
(
|
|||||||||
| Total trading derivative assets |
|
|
|||||||||
| Total trading assets |
|
|
|||||||||
| Trading liabilities: | |||||||||||
| Short sale and other liabilities |
|
|
|||||||||
| Interest-bearing deposits |
|
|
|||||||||
| Long-term debt |
|
|
|||||||||
| Gross trading derivative liabilities |
|
|
|||||||||
| Netting (1) |
(
|
(
|
|||||||||
| Total trading derivative liabilities |
|
|
|||||||||
| Total trading liabilities | $ |
|
|
||||||||
(1)
Represents balance sheet netting for trading derivative asset and liability balances, and trading portfolio level counterparty valuation adjustments.
Table 2.2 provides net interest income earned from trading securities, and net gains and losses due to the realized and unrealized gains and losses from trading activities.
Net interest income also includes dividend income on trading securities and dividend expense on trading securities we have sold, but not yet purchased.
Table 2.2:
Net Interest Income and Net Gains (Losses) from Trading Activities
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
|
Net interest income:
|
|||||||||||||||||||||||
|
Interest income (1)
|
$ |
|
|
$ |
|
|
|||||||||||||||||
|
Interest expense
|
|
|
|
|
|||||||||||||||||||
|
Total net interest income
|
|
|
|
|
|||||||||||||||||||
|
Net gains (losses) from trading activities, by risk type:
|
|||||||||||||||||||||||
| Interest rate |
|
|
|
|
|||||||||||||||||||
| Commodity |
|
|
|
|
|||||||||||||||||||
| Equity |
|
|
|
|
|||||||||||||||||||
| Foreign exchange |
|
|
|
|
|||||||||||||||||||
|
Credit
|
|
|
|
|
|||||||||||||||||||
| Total net gains from trading activities |
|
|
|
|
|||||||||||||||||||
| Total trading-related net interest and noninterest income | $ |
|
|
$ |
|
|
|||||||||||||||||
(1)
Substantially all relates to interest income on debt and equity securities.
|
66
|
Wells Fargo & Company | |||||||
|
Note 3:
Available-for-Sale and Held-to-Maturity Debt Securities
|
||
Table 3.1 provides the amortized cost, net of the allowance for credit losses (ACL) for debt securities, and fair value by major categories of available-for-sale (AFS) debt securities, which are carried at fair value, and held-to-maturity (HTM) debt securities, which are carried at amortized cost, net of the ACL. The net unrealized gains (losses) for AFS debt securities are reported as a component of accumulated other comprehensive income (AOCI), net of the ACL and applicable income taxes. Information on debt securities held for trading is included in Note 2 (Trading Activities).
Outstanding balances exclude accrued interest receivable on AFS and HTM debt securities, which are included in other assets. See Note 7 (Intangible Assets and Other Assets) for additional information on accrued interest receivable. Amounts considered to be uncollectible are reversed through interest income. The interest income reversed in the second quarter and first half of both 2024 and 2023 was insignificant.
Table 3.1:
Available-for-Sale and Held-to-Maturity Debt Securities Outstanding
| (in millions) |
Amortized
cost, net (1) |
Gross
unrealized gains |
Gross
unrealized losses |
Net unrealized gains (losses) | Fair value | ||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||
| Available-for-sale debt securities: | |||||||||||||||||||||||||||||
| Securities of U.S. Treasury and federal agencies | $ |
|
|
(
|
(
|
|
|||||||||||||||||||||||
| Securities of U.S. states and political subdivisions (2) |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Federal agency mortgage-backed securities |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Non-agency mortgage-backed securities (3) |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Collateralized loan obligations |
|
|
|
|
|
||||||||||||||||||||||||
| Other debt securities |
|
|
(
|
|
|
||||||||||||||||||||||||
| Total available-for-sale debt securities, excluding portfolio level basis adjustments |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Portfolio level basis adjustments (4) |
(
|
|
— | ||||||||||||||||||||||||||
| Total available-for-sale debt securities |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Held-to-maturity debt securities: | |||||||||||||||||||||||||||||
| Securities of U.S. Treasury and federal agencies |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Securities of U.S. states and political subdivisions |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Federal agency mortgage-backed securities |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Non-agency mortgage-backed securities (3) |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Collateralized loan obligations |
|
|
(
|
|
|
||||||||||||||||||||||||
| Other debt securities |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Total held-to-maturity debt securities |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Total | $ |
|
|
(
|
(
|
|
|||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||
| Available-for-sale debt securities: | |||||||||||||||||||||||||||||
| Securities of U.S. Treasury and federal agencies | $ |
|
|
(
|
(
|
|
|||||||||||||||||||||||
| Securities of U.S. states and political subdivisions (2) |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Federal agency mortgage-backed securities |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Non-agency mortgage-backed securities (3) |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Collateralized loan obligations |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Other debt securities |
|
|
(
|
|
|
||||||||||||||||||||||||
|
Total available-for-sale debt securities, excluding portfolio level basis adjustments
|
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Portfolio level basis adjustments (4) |
(
|
|
— | ||||||||||||||||||||||||||
| Total available-for-sale debt securities |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Held-to-maturity debt securities: | |||||||||||||||||||||||||||||
| Securities of U.S. Treasury and federal agencies |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Securities of U.S. states and political subdivisions |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Federal agency mortgage-backed securities |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Non-agency mortgage-backed securities (3) |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Collateralized loan obligations |
|
|
(
|
|
|
||||||||||||||||||||||||
| Other debt securities |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Total held-to-maturity debt securities |
|
|
(
|
(
|
|
||||||||||||||||||||||||
| Total | $ |
|
|
(
|
(
|
|
|||||||||||||||||||||||
(1)
Represents amortized cost of the securities, net of the ACL of $
7
million and $
1
million related to AFS debt securities at June 30, 2024, and December 31, 2023, respectively, and $
97
million and $
93
million related to HTM debt securities at June 30, 2024, and December 31, 2023, respectively.
(2)
Includes investments in tax-exempt preferred debt securities issued by investment funds or trusts that predominantly invest in tax-exempt municipal securities. The amortized cost, net of the ACL, and fair value of these types of securities, was $
4.5
billion at June 30, 2024, and $
5.5
billion at December 31, 2023.
(3)
Predominantly consists of commercial mortgage-backed securities at both June 30, 2024, and December 31, 2023.
(4)
Represents fair value hedge basis adjustments related to active portfolio layer method hedges of AFS debt securities, which are not allocated to individual securities in the portfolio. For additional information, see Note 11 (Derivatives).
| Wells Fargo & Company |
67
|
|||||||
Note 3:
Available-for-Sale and Held-to-Maturity Debt Securities
(continued)
Table 3.2 details the breakout of purchases of and transfers to HTM debt securities by major category of security. The table excludes the transfer of HTM debt securities
with a fair value of $
23.2
billion to AFS debt securities in first quarter 2023 in
connection with the adoption of ASU 2022-01. For additional information, see Note 1
(Summary of Significant Accounting Policies) in our 2023 Form 10-K.
Table 3.2:
Held-to-Maturity Debt Securities Purchases and Transfers
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Purchases of held-to-maturity debt securities (1): | |||||||||||||||||||||||
| Federal agency mortgage-backed securities |
|
|
$ |
|
|
||||||||||||||||||
| Non-agency mortgage-backed securities |
|
|
|
|
|||||||||||||||||||
|
Total purchases of held-to-maturity debt securities
|
|
|
|
|
|||||||||||||||||||
| Transfers from available-for-sale debt securities to held-to-maturity debt securities (2): | |||||||||||||||||||||||
| Federal agency mortgage-backed securities |
|
|
|
|
|||||||||||||||||||
| Total transfers from available-for-sale debt securities to held-to-maturity debt securities | $ |
|
|
$ |
|
|
|||||||||||||||||
(1)
Inclusive of securities purchased but not yet settled and noncash purchases from securitization of loans held for sale (LHFS).
(2)
Represents fair value as of the date of the transfers. Debt securities transferred from available-for-sale to held-to-maturity had pre-tax unrealized losses recorded in AOCI of $
320
million in the first half of 2023, at the time of the transfers.
Table 3.3 shows the composition of interest income, provision for credit losses, and gross realized gains and losses
from sales and impairment write-downs included in earnings related to AFS and HTM debt securities (pre-tax)
.
Table 3.3:
Income Statement Impacts for Available-for-Sale and Held-to-Maturity Debt Securities
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Interest income (1): | |||||||||||||||||||||||
|
Available-for-sale
|
$ |
|
|
$ |
|
|
|||||||||||||||||
|
Held-to-maturity
|
|
|
|
|
|||||||||||||||||||
| Total interest income |
|
|
|
|
|||||||||||||||||||
| Provision for credit losses: | |||||||||||||||||||||||
|
Available-for-sale
|
|
|
|
(
|
|||||||||||||||||||
|
Held-to-maturity
|
|
(
|
|
(
|
|||||||||||||||||||
| Total provision for credit losses |
|
(
|
|
(
|
|||||||||||||||||||
| Realized gains and losses (2): | |||||||||||||||||||||||
| Gross realized gains |
|
|
|
|
|||||||||||||||||||
| Gross realized losses |
|
(
|
(
|
(
|
|||||||||||||||||||
|
Net realized gains (losses)
|
$ |
|
|
$ |
(
|
|
|||||||||||||||||
(1)
Excludes interest income from trading debt securities, which is disclosed in Note 2 (Trading Activities).
(2)
Realized gains and losses relate to AFS debt securities. There were
no
realized gains or losses from HTM debt securities in all periods presented.
Credit Quality
We monitor credit quality of debt securities by evaluating various attributes and utilize such information in our evaluation of the appropriateness of the ACL for debt securities. The credit quality indicators that we most closely monitor include credit ratings and delinquency status and are based on information as of our financial statement date.
CREDIT RATINGS
Credit ratings express opinions about the credit quality of a debt security. We determine the credit rating of a security according to the lowest credit rating made available by national recognized statistical rating organizations (NRSROs). Debt securities rated investment grade, that is those with ratings similar to BBB-/Baa3 or above, as defined by NRSROs, are generally considered by the rating agencies and market participants to be low credit risk. Conversely, debt securities rated below investment grade, labeled as “speculative grade” by the rating agencies, are considered to be distinctively higher credit risk than investment grade debt securities. For debt securities not rated by NRSROs, we determine an internal credit grade of the debt securities (used for credit risk management purposes) equivalent to the credit ratings assigned by major
credit agencies. Substantially all of our debt securities were rated by NRSROs at June 30, 2024, and December 31, 2023.
Table 3.4 shows the percentage of fair value of AFS debt securities and amortized cost of HTM debt securities determined to be rated investment grade, inclusive of securities rated based on internal credit grades.
|
68
|
Wells Fargo & Company | |||||||
Table 3.4:
Investment Grade Debt Securities
| Available-for-Sale | Held-to-Maturity | ||||||||||||||||
| ($ in millions) | Fair value | % investment grade | Amortized cost | % investment grade | |||||||||||||
| June 30, 2024 | |||||||||||||||||
| Total portfolio (1) | $ |
|
|
% | $ |
|
|
% | |||||||||
| Breakdown by category: | |||||||||||||||||
| Securities of U.S. Treasury and federal agencies (2) | $ |
|
|
% | $ |
|
|
% | |||||||||
| Securities of U.S. states and political subdivisions |
|
|
|
|
|||||||||||||
| Collateralized loan obligations (3) |
|
|
|
|
|||||||||||||
| All other debt securities (4) |
|
|
|
|
|||||||||||||
| December 31, 2023 | |||||||||||||||||
| Total portfolio (1) | $ |
|
|
% | $ |
|
|
% | |||||||||
| Breakdown by category: | |||||||||||||||||
| Securities of U.S. Treasury and federal agencies (2) | $ |
|
|
% | $ |
|
|
% | |||||||||
| Securities of U.S. states and political subdivisions |
|
|
|
|
|||||||||||||
| Collateralized loan obligations (3) |
|
|
|
|
|||||||||||||
| All other debt securities (4) |
|
|
|
|
|||||||||||||
(1)
99
% were rated AA- and above at both June 30, 2024, and December 31, 2023.
(2)
Includes federal agency mortgage-backed securities.
(3)
100
% were rated AA- and above at both June 30, 2024, and December 31, 2023.
(4)
Includes non-U.S. government, non-agency mortgage-backed, and all other debt securities.
DELINQUENCY STATUS AND NONACCRUAL DEBT SECURITIES
Debt security issuers that are delinquent in payment of amounts due under contractual debt agreements have a higher probability of recognition of credit losses. As such, as part of our monitoring of the credit quality of the debt security portfolio, we consider whether debt securities we own are past due in payment of principal or interest payments and whether any securities have been placed into nonaccrual status.
Debt securities that are past due and still accruing or in nonaccrual status were insignificant at both June 30, 2024, and December 31, 2023. Net charge-offs on debt securities were insignificant in the second quarter and first half of both 2024 and 2023.
| Wells Fargo & Company |
69
|
|||||||
Note 3:
Available-for-Sale and Held-to-Maturity Debt Securities
(continued)
Unrealized Losses of Available-for-Sale Debt Securities
Table 3.5 shows the gross unrealized losses and fair value of AFS debt securities by length of time those individual securities in each category have been in a continuous loss position. Debt securities on which we have recorded credit impairment are
categorized as being “less than 12 months” or “12 months or more” in a continuous loss position based on the point in time that the fair value declined to below the amortized cost basis, net of the allowance for credit losses.
Table 3.5:
Gross Unrealized Losses and Fair Value – Available-for-Sale Debt Securities
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||
| (in millions) |
Gross unrealized losses (1)
|
Fair value | Gross unrealized losses (1) | Fair value |
Gross unrealized losses (1)
|
Fair value | |||||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Available-for-sale debt securities: | |||||||||||||||||||||||||||||||||||
|
Securities of U.S. Treasury and federal agencies
|
$ |
(
|
|
(
|
|
(
|
|
||||||||||||||||||||||||||||
|
Securities of U.S. states and political subdivisions
|
(
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||
| Federal agency mortgage-backed securities |
(
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||
| Non-agency mortgage-backed securities |
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||
| Other debt securities |
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||
| Total available-for-sale debt securities | $ |
(
|
|
(
|
|
(
|
|
||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Available-for-sale debt securities: | |||||||||||||||||||||||||||||||||||
|
Securities of U.S. Treasury and federal agencies
|
$ |
(
|
|
(
|
|
(
|
|
||||||||||||||||||||||||||||
|
Securities of U.S. states and political subdivisions
|
(
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||
| Federal agency mortgage-backed securities |
(
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||
| Non-agency mortgage-backed securities |
(
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||
|
Collateralized loan obligations
|
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||
| Other debt securities |
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||
| Total available-for-sale debt securities | $ |
(
|
|
(
|
|
(
|
|
||||||||||||||||||||||||||||
(1)
Gross unrealized losses exclude portfolio level basis adjustments.
We have assessed each debt security with gross unrealized losses included in the previous table for credit impairment. As part of that assessment we evaluated and concluded that we do not intend to sell any of the debt securities, and that it is more likely than not that we will not be required to sell, prior to recovery of the amortized cost basis. We evaluate, where necessary, whether credit impairment exists by comparing the present value of the expected cash flows to the debt securities’ amortized cost basis. Credit impairment is recorded as an ACL for debt securities.
For descriptions of the factors we consider when analyzing debt securities for impairment as well as methodology and significant inputs used to measure credit losses, see Note 1 (Summary of Significant Accounting Policies) in our 2023 Form 10-K.
|
70
|
Wells Fargo & Company | |||||||
Contractual Maturities
Table 3.6 and Table 3.7 show the remaining contractual maturities, amortized cost, net of the ACL, fair value and weighted average effective yields of AFS and HTM debt securities, respectively. The remaining contractual principal
maturities for mortgage-backed securities (MBS) do not consider prepayments. Remaining expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature.
Table 3.6:
Contractual Maturities – Available-for-Sale Debt Securities
| By remaining contractual maturity ($ in millions) | Total |
Within
one year |
After
one year through five years |
After
five years through ten years |
After
ten years |
||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||
| Available-for-sale debt securities (1)(2): | |||||||||||||||||||||||||||||
| Securities of U.S. Treasury and federal agencies | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
| Weighted average yield |
|
% |
|
|
|
|
|||||||||||||||||||||||
| Securities of U.S. states and political subdivisions | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
| Weighted average yield |
|
% |
|
|
|
|
|||||||||||||||||||||||
| Federal agency mortgage-backed securities | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
| Weighted average yield |
|
% |
|
|
|
|
|||||||||||||||||||||||
| Non-agency mortgage-backed securities | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
| Weighted average yield |
|
% |
|
|
|
|
|||||||||||||||||||||||
| Collateralized loan obligations | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
| Weighted average yield |
|
% |
|
|
|
|
|||||||||||||||||||||||
| Other debt securities | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
| Weighted average yield |
|
% |
|
|
|
|
|||||||||||||||||||||||
| Total available-for-sale debt securities | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
| Weighted average yield |
|
% |
|
|
|
|
|||||||||||||||||||||||
(1)
Weighted average yields displayed by maturity bucket are weighted based on amortized cost without effect for any related hedging derivatives and are shown pre-tax.
(2)
Amortized cost, net excludes portfolio level basis adjustments of $(
64
) million.
| Wells Fargo & Company |
71
|
|||||||
Note 3:
Available-for-Sale and Held-to-Maturity Debt Securities
(continued)
Table 3.7:
Contractual Maturities – Held-to-Maturity Debt Securities
| By remaining contractual maturity ($ in millions) | Total |
Within
one year |
After
one year through five years |
After
five years through ten years |
After
ten years |
||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||
| Held-to-maturity debt securities (1): | |||||||||||||||||||||||||||||
| Securities of U.S. Treasury and federal agencies | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
|
Weighted average yield
|
|
% |
|
|
|
|
|||||||||||||||||||||||
| Securities of U.S. states and political subdivisions | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
|
Weighted average yield
|
|
% |
|
|
|
|
|||||||||||||||||||||||
| Federal agency mortgage-backed securities | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
|
Weighted average yield
|
|
% |
|
|
|
|
|||||||||||||||||||||||
| Non-agency mortgage-backed securities | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
|
Weighted average yield
|
|
% |
|
|
|
|
|||||||||||||||||||||||
| Collateralized loan obligations | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
|
Weighted average yield
|
|
% |
|
|
|
|
|||||||||||||||||||||||
| Other debt securities | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
| Weighted average yield |
|
% |
|
|
|
|
|||||||||||||||||||||||
| Total held-to-maturity debt securities | |||||||||||||||||||||||||||||
| Amortized cost, net | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Fair value |
|
|
|
|
|
||||||||||||||||||||||||
|
Weighted average yield
|
|
% |
|
|
|
|
|||||||||||||||||||||||
(1)
Weighted average yields displayed by maturity bucket are weighted based on amortized cost, excluding unamortized basis adjustments related to the transfer of certain debt securities from AFS to HTM, and are shown pre-tax.
|
72
|
Wells Fargo & Company | |||||||
|
Note 4:
Equity Securities
|
||
Table 4.1 provides a summary of our equity securities by business purpose and accounting method.
Table 4.1:
Equity Securities
| (in millions) |
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||
| Held for trading at fair value: | |||||||||||
|
Marketable equity securities (1)
|
$ |
|
|
||||||||
| Nonmarketable equity securities |
|
|
|||||||||
|
Total equity securities held for trading (2)
|
|
|
|||||||||
| Not held for trading: | |||||||||||
| Equity securities at fair value |
|
|
|||||||||
|
Tax credit investments (3)
|
|
|
|||||||||
|
Private equity (4)
|
|
|
|||||||||
|
Federal Reserve Bank stock and other at cost (5)
|
|
|
|||||||||
| Total equity securities not held for trading |
|
|
|||||||||
| Total equity securities | $ |
|
|
||||||||
(1)
Includes $
1.5
billion of securities acquired in second quarter 2024 subject to a contractual lock-up period restricting the sale of the securities until third quarter 2024.
(2)
Represents securities held as part of our customer accommodation trading activities. For additional information on these activities, see Note 2 (Trading Activities).
(3)
Includes affordable housing investments of $
12.6
billion and $
12.9
billion at June 30, 2024, and December 31, 2023, respectively, and renewable energy investments of $
8.7
billion and $
6.8
billion at June 30, 2024, and December 31, 2023, respectively. Tax credit investments are accounted for using either the proportional amortization method or the equity method. See Note 13 (Securitizations and Variable Interest Entities) for information about tax credit investments.
(4)
Includes nonmarketable equity securities accounted for under the measurement alternative of $
9.2
billion and $
9.1
billion at June 30, 2024, and December 31, 2023, respectively, which were predominantly securities associated with our venture capital investments. The remaining securities are accounted for using the equity method.
(5)
Includes $
3.5
billion of investments in Federal Reserve Bank stock at both June 30, 2024, and December 31, 2023, and $
583
million and $
1.7
billion of investments in Federal Home Loan Bank stock at June 30, 2024, and December 31, 2023, respectively.
Net Gains and Losses Not Held for Trading
Table 4.2 provides a summary of the net gains and losses from equity securities not held for trading, which excludes equity method adjustments for our share of the investee’s earnings or
losses that are recognized in other noninterest income. Gains and losses for securities held for trading are reported in net gains from trading and securities.
Table 4.2:
Net Gains (Losses) from Equity Securities Not Held for Trading
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Net gains (losses) from equity securities carried at fair value: | |||||||||||||||||||||||
| Marketable equity securities | $ |
|
|
$ |
|
|
|||||||||||||||||
| Nonmarketable equity securities |
|
(
|
|
(
|
|||||||||||||||||||
| Total equity securities carried at fair value |
|
|
|
|
|||||||||||||||||||
| Net gains (losses) from nonmarketable equity securities not carried at fair value (1): | |||||||||||||||||||||||
| Impairment write-downs |
(
|
(
|
(
|
(
|
|||||||||||||||||||
|
Net unrealized gains (losses) (2)
|
|
(
|
|
|
|||||||||||||||||||
|
Net realized gains from sale
|
|
|
|
|
|||||||||||||||||||
| Total nonmarketable equity securities not carried at fair value |
|
(
|
|
(
|
|||||||||||||||||||
|
Total net gains (losses) from equity securities not held for trading
|
$ |
|
(
|
$ |
|
(
|
|||||||||||||||||
(1)
Includes amounts related to venture capital and private equity investments in consolidated portfolio companies, which are not reported in equity securities on our consolidated balance sheet.
(2)
Includes unrealized gains (losses) due to observable price changes from equity securities accounted for under the measurement alternative.
| Wells Fargo & Company |
73
|
|||||||
Note 4:
Equity Securities
(continued)
Measurement Alternative
Table 4.3 provides additional information about the impairment write-downs and observable price changes from nonmarketable
equity securities accounted for under the measurement alternative. Gains and losses related to these adjustments are also included in Table 4.2.
Table 4.3:
Net Gains (Losses) from Measurement Alternative Equity Securities
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Net gains (losses) recognized in earnings during the period: | |||||||||||||||||||||||
| Gross unrealized gains from observable price changes | $ |
|
|
$ |
|
|
|||||||||||||||||
| Gross unrealized losses from observable price changes |
(
|
(
|
(
|
(
|
|||||||||||||||||||
|
Impairment write-downs
|
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Net realized gains from sale |
|
|
|
|
|||||||||||||||||||
|
Total net gains (losses) recognized during the period
|
$ |
|
$ |
(
|
$ |
|
(
|
||||||||||||||||
Table 4.4 presents cumulative carrying value adjustments to nonmarketable equity securities accounted for under the measurement alternative that were still held at the end of each reporting period presented.
Table 4.4:
Measurement Alternative Cumulative Gains (Losses)
| (in millions) |
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||
| Cumulative gains (losses): | |||||||||||
| Gross unrealized gains from observable price changes | $ |
|
|
||||||||
| Gross unrealized losses from observable price changes |
(
|
(
|
|||||||||
| Impairment write-downs |
(
|
(
|
|||||||||
|
74
|
Wells Fargo & Company | |||||||
|
Note 5:
Loans and Related Allowance for Credit Losses
|
||
Table 5.1 presents total loans outstanding by portfolio segment and class of financing receivable. Outstanding balances include unearned income, net deferred loan fees or costs, and unamortized discounts and premiums. These amounts were less than
1
% of our total loans outstanding at both June 30, 2024, and December 31, 2023.
Outstanding balances exclude accrued interest receivable on loans, except for certain revolving loans, such as credit card loans.
See Note 7 (Intangible Assets and Other Assets) for additional information on accrued interest receivable. Amounts considered to be uncollectible are reversed through interest income. During the first half of 2024, we reversed accrued interest receivable of $
23
million for our commercial portfolio segment and $
202
million for our consumer portfolio segment, compared with $
19
million and $
118
million, respectively, for the same period a year ago.
Table 5.1:
Loans Outstanding
| (in millions) |
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||
| Commercial and industrial | $ |
|
|
||||||||
| Commercial real estate |
|
|
|||||||||
| Lease financing |
|
|
|||||||||
| Total commercial |
|
|
|||||||||
| Residential mortgage |
|
|
|||||||||
| Credit card |
|
|
|||||||||
| Auto |
|
|
|||||||||
| Other consumer (1) |
|
|
|||||||||
| Total consumer |
|
|
|||||||||
| Total loans | $ |
|
|
||||||||
(1)
Includes $
19.8
billion and $
18.3
billion at June 30, 2024, and December 31, 2023, respectively, of securities-based loans originated by the Wealth and Investment Management (WIM) operating segment.
Our non-U.S. loans are reported by respective class of financing receivable in the table above. Substantially all of our non-U.S. loan portfolio is commercial loans. Table 5.2 presents
total non-U.S. commercial loans outstanding by class of financing receivable.
Table 5.2:
Non-U.S. Commercial Loans Outstanding
| (in millions) |
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||
| Commercial and industrial | $ |
|
|
||||||||
| Commercial real estate |
|
|
|||||||||
| Lease financing |
|
|
|||||||||
| Total non-U.S. commercial loans | $ |
|
|
||||||||
Loan Purchases, Sales, and Transfers
Table 5.3 presents the proceeds paid or received for purchases and sales of loans and transfers from loans held for investment to mortgages/loans held for sale. The table excludes loans for
which we have elected the fair value option and government insured/guaranteed loans because their loan activity normally does not impact the ACL.
Table 5.3:
Loan Purchases, Sales, and Transfers
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| (in millions) | Commercial | Consumer | Total | Commercial | Consumer | Total | |||||||||||||||||||||||||||||
| Quarter ended June 30, | |||||||||||||||||||||||||||||||||||
| Purchases | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Sales and net transfers (to)/from LHFS |
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||
| Six months ended June 30, | |||||||||||||||||||||||||||||||||||
| Purchases | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Sales and net transfers (to)/from LHFS |
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||
| Wells Fargo & Company |
75
|
|||||||
Note 5:
Loans and Related Allowance for Credit Losses
(continued)
Unfunded Credit Commitments
Unfunded credit commitments are legally binding agreements to lend to customers with terms covering usage of funds, contractual interest rates, expiration dates, and any required collatera
l. Our commercial lending commitments include, but are not limited to, (i) commitments for working capital and general corporate purposes, (ii) financing to customers who warehouse financial assets secured by real estate, consumer, or corporate loans, (iii) financing that is expected to be syndicated or replaced with other forms of long-term financing, and (iv) commercial real estate lending. We also originate multipurpose lending commitments under which commercial customers have the option to draw on the facility in one of several forms, including the issuance of letters of credit, which reduces the unfunded commitment amounts of the facility.
The maximum credit risk for these commitments will generally be lower than the contractual amount because these commitments may expire without being used or may be cancelled at the customer’s request. We may reduce or cancel lines of credit in accordance with the contracts and applicable law. Our credit risk monitoring activities include managing the amount of commitments, both to individual customers and in total, and the size and maturity structure of these commitments. We do not recognize an ACL for commitments that are unconditionally cancellable at our discretion.
We issue commercial letters of credit to assist customers in purchasing goods or services, typically for international trade. At June 30, 2024, and December 31, 2023, we had $
1.5
billion and $
1.1
billion, respectively, of outstanding issued commercial letters of credit. See Note 14 (Guarantees and Other Commitments) for additional information on issued standby letters of credit.
We may be a fronting bank, whereby we act as a representative for other lenders, and advance funds or provide for the issuance of letters of credit under syndicated loan or letter of credit agreements. Any advances are generally repaid in less than a week and would normally require default of both the customer and another lender to expose us to loss.
The contractual amount of our unfunded credit commitments, including unissued letters of credit, is summarized in Table 5.4. The table is presented net of commitments syndicated to others, including the fronting arrangements described above, and excludes issued letters of credit and discretionary amounts where our approval or consent is required prior to any loan funding or commitment increase.
Table 5.4:
Unfunded Credit Commitments
| (in millions) |
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||
|
Commercial and industrial
|
$ |
|
|
||||||||
| Commercial real estate |
|
|
|||||||||
| Total commercial |
|
|
|||||||||
|
Residential mortgage (1)
|
|
|
|||||||||
| Credit card |
|
|
|||||||||
|
Other consumer
|
|
|
|||||||||
| Total consumer |
|
|
|||||||||
| Total unfunded credit commitments | $ |
|
|
||||||||
(1)
Includes lines of credit totaling
$
25.9
billion
and $
28.6
billion as of
June 30, 2024,
and
December 31, 2023
, respectively.
|
76
|
Wells Fargo & Company | |||||||
Allowance for Credit Losses
Table 5.5 presents the ACL for loans, which consists of the allowance for loan losses and the allowance for unfunded credit commitments. The ACL for loans decreased $
299
million from
December 31, 2023, reflecting decreases for auto loans, commercial real estate loans, and residential mortgage loans, partially offset by increases for credit card loans.
Table 5.5:
Allowance for Credit Losses for Loans
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Balance, beginning of period | $ |
|
|
$ |
|
|
|||||||||||||||||
| Cumulative effect from change in accounting policy (1) |
|
|
|
(
|
|||||||||||||||||||
| Balance, beginning of period, adjusted |
|
|
|
|
|||||||||||||||||||
| Provision for credit losses |
|
|
|
|
|||||||||||||||||||
| Loan charge-offs: | |||||||||||||||||||||||
| Commercial and industrial |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Commercial real estate |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Lease financing |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Total commercial |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Residential mortgage |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Credit card |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Auto |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Other consumer |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Total consumer |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Total loan charge-offs |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Loan recoveries: | |||||||||||||||||||||||
| Commercial and industrial |
|
|
|
|
|||||||||||||||||||
| Commercial real estate |
|
|
|
|
|||||||||||||||||||
| Lease financing |
|
|
|
|
|||||||||||||||||||
| Total commercial |
|
|
|
|
|||||||||||||||||||
| Residential mortgage |
|
|
|
|
|||||||||||||||||||
| Credit card |
|
|
|
|
|||||||||||||||||||
| Auto |
|
|
|
|
|||||||||||||||||||
| Other consumer |
|
|
|
|
|||||||||||||||||||
| Total consumer |
|
|
|
|
|||||||||||||||||||
| Total loan recoveries |
|
|
|
|
|||||||||||||||||||
| Net loan charge-offs |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Other |
(
|
|
(
|
|
|||||||||||||||||||
| Balance, end of period | $ |
|
|
$ |
|
|
|||||||||||||||||
| Components: | |||||||||||||||||||||||
| Allowance for loan losses | $ |
|
|
$ |
|
|
|||||||||||||||||
| Allowance for unfunded credit commitments |
|
|
|
|
|||||||||||||||||||
| Allowance for credit losses | $ |
|
|
$ |
|
|
|||||||||||||||||
|
Net loan charge-offs (annualized) as a percentage of average total loans
|
|
% |
|
|
% |
|
|||||||||||||||||
| Allowance for loan losses as a percentage of total loans |
|
|
|
|
|||||||||||||||||||
| Allowance for credit losses for loans as a percentage of total loans |
|
|
|
|
|||||||||||||||||||
(1)
Represents the change in our allowance for credit losses for loans as a result of our adoption of ASU 2022–02, Financial Instruments – Credit Losses (Topic 326):
Troubled Debt Restructurings and Vintage Disclosures,
on January 1, 2023. For additional information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2023 Form 10-K.
| Wells Fargo & Company |
77
|
|||||||
Note 5:
Loans and Related Allowance for Credit Losses
(continued)
Table 5.6 summarizes the activity in the ACL by our commercial and consumer portfolio segments.
Table 5.6:
Allowance for Credit Losses for Loans Activity by Portfolio Segment
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| (in millions) | Commercial | Consumer | Total | Commercial | Consumer | Total | |||||||||||||||||||||||||||||
| Quarter ended June 30, | |||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Provision for credit losses |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Loan charge-offs
|
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||
|
Loan recoveries
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Net loan charge-offs
|
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||
|
Other
|
(
|
|
(
|
|
|
|
|||||||||||||||||||||||||||||
| Balance, end of period | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Six months ended June 30, | |||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
Cumulative effect from change in accounting policy (1)
|
|
|
|
|
(
|
(
|
|||||||||||||||||||||||||||||
| Balance, beginning of period, adjusted |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Provision for credit losses |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Loan charge-offs
|
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||
|
Loan recoveries
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Net loan charge-offs |
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||
|
Other
|
(
|
|
(
|
|
|
|
|||||||||||||||||||||||||||||
| Balance, end of period | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
(1)
Represents the change in our allowance for credit losses for loans as a result of our adoption of ASU 2022–02, Financial Instruments – Credit Losses (Topic 326):
Troubled Debt Restructurings and Vintage Disclosures,
on January 1, 2023. For additional information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2023 Form 10-K.
Credit Quality
We monitor credit quality by evaluating various attributes and utilize such information in our evaluation of the appropriateness of the ACL for loans. The following sections provide the credit quality indicators we most closely monitor. The credit quality indicators are generally based on information as of our financial statement date.
COMMERCIAL CREDIT QUALITY INDICATORS
We manage a consistent process for assessing commercial loan credit quality. Commercial loans are generally subject to individual risk assessment using our internal borrower and collateral quality ratings, which is our primary credit quality indicator. Our ratings are aligned to regulatory definitions of pass and criticized categories with the criticized segmented among special mention, substandard, doubtful, and loss categories.
Table 5.7 provides the outstanding balances of our commercial loan portfolio by risk category and credit quality information by origination year for term loans. Revolving loans may convert to term loans as a result of a contractual provision in the original loan agreement or if modified for a borrower experiencing financial difficulty. At June 30, 2024, we had $
501.1
billion and $
35.5
billion of pass and criticized commercial loans, respectively. Gross charge-offs by loan class are included in the following table for the six months ended June 30, 2024, and year ended December 31, 2023, which we monitor as part of our credit risk management practices; however, charge-offs are not a primary credit quality indicator for our loan portfolio.
|
78
|
Wells Fargo & Company | |||||||
Table 5.7:
Commercial Loan Categories by Risk Categories and Vintage
|
|
Term loans by origination year | Revolving loans | Revolving loans converted to term loans | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | |||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Pass
|
$ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
|
Criticized
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Gross charge-offs (1) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Pass
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Criticized |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Gross charge-offs |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Lease financing | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Pass
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Criticized
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total lease financing
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Gross charge-offs |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total commercial loans
|
$ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Term loans by origination year | Revolving loans | Revolving loans converted to term loans | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | Prior | ||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Criticized |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Gross charge-offs (1) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Criticized |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Gross charge-offs |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Lease financing | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Criticized |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Total lease financing |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Gross charge-offs
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Total commercial loans | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Wells Fargo & Company |
79
|
|||||||
Note 5:
Loans and Related Allowance for Credit Losses
(continued)
Table 5.8 provides days past due (DPD) information for commercial loans, which we monitor as part of our credit risk management practices; however, delinquency is not a primary credit quality indicator for commercial loans.
Table 5.8:
Commercial Loan Categories by Delinquency Status
|
|
Still accruing | Nonaccrual loans |
Total
commercial loans |
||||||||||||||||||||||||||
| (in millions) | Current-29 DPD | 30-89 DPD | 90+ DPD | ||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Commercial real estate |
|
|
|
|
|
||||||||||||||||||||||||
| Lease financing |
|
|
|
|
|
||||||||||||||||||||||||
|
Total commercial loans
|
$ |
|
|
|
|
|
|||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Commercial real estate |
|
|
|
|
|
||||||||||||||||||||||||
| Lease financing |
|
|
|
|
|
||||||||||||||||||||||||
|
Total commercial loans
|
$ |
|
|
|
|
|
|||||||||||||||||||||||
CONSUMER CREDIT QUALITY INDICATORS
We have various classes of consumer loans that present unique credit risks. Loan delinquency, Fair Isaac Corporation (FICO) credit scores and loan-to-value (LTV) for residential mortgage loans are the primary credit quality indicators that we monitor and utilize in our evaluation of the appropriateness of the ACL for the consumer loan portfolio segment.
Many of our loss estimation techniques used for the ACL for loans rely on delinquency-based models; therefore, delinquency is an important indicator of credit quality in the establishment of our ACL for consumer loans.
We obtain FICO scores at loan origination and the scores are generally updated at least quarterly, except in limited circumstances, including compliance with the Fair Credit Reporting Act (FCRA). FICO scores are not available for certain loan types or may not be required if we deem it unnecessary due to strong collateral and other borrower attributes.
LTV is the ratio of the outstanding loan balance divided by the property collateral value. For junior lien mortgages, we use the total combined loan balance of first and junior lien mortgages (including unused line of credit amounts). We obtain LTVs using a cascade approach which first uses values provided by automated valuation models (AVMs) for the property. If an AVM is not available, then the value is estimated using the original appraised value adjusted by the change in Home Price Index (HPI) for the property location. If an HPI is not available, the original appraised value is used. The HPI value is normally the only method considered for high value properties, generally with an original value of $
1.5
million or more, as the AVM values have proven less accurate for these properties. Generally, we update LTVs on a quarterly basis. Certain loans do not have an LTV due to a lack of industry data availability and portfolios acquired from or serviced by other institutions.
Gross charge-offs by loan class are included in the following tables for the six months ended June 30, 2024, and year ended December 31, 2023, which we monitor as part of our credit risk management practices; however, charge-offs are not a primary credit quality indicator for our loan portfolio.
Credit quality information is provided with the year of origination for term loans. Revolving loans may convert to term loans as a result of a contractual provision in the original loan agreement or if modified for a borrower experiencing financial difficulty.
Table 5.9 provides the outstanding balances of our residential mortgage loans by our primary credit quality indicators.
|
80
|
Wells Fargo & Company | |||||||
Table 5.9:
Credit Quality Indicators for Residential Mortgage Loans by Vintage
|
|
Term loans by origination year | Revolving loans | Revolving loans converted to term loans | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| By delinquency status: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current-29 DPD | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| 30-89 DPD |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 90+ DPD |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Government insured/guaranteed loans (1) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
|
By updated FICO:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
| 740+ | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| 700-739 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 660-699 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 620-659 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| <620 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| No FICO available |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Government insured/guaranteed loans (1) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
|
By updated LTV:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
| 0-80% | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
|
80.01-100%
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| >100% (2) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| No LTV available |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Government insured/guaranteed loans (1) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Gross charge-offs | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Term loans by origination year | Revolving loans | Revolving loans converted to term loans | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | |||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| By delinquency status: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current-29 DPD | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| 30-89 DPD |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 90+ DPD |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Government insured/guaranteed loans (1) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Total | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
|
By updated FICO:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
| 740+ | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| 700-739 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 660-699 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 620-659 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| <620 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| No FICO available |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Government insured/guaranteed loans (1) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Total | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
|
By updated LTV:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
| 0-80% | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| 80.01-100% |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| >100% (2) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| No LTV available |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Government insured/guaranteed loans (1) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Total | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
|
Gross charge-offs
|
$ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
(1)
Government insured or guaranteed loans represent loans whose repayments are predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Loans insured/guaranteed by the FHA/VA and 90+ DPD totaled $
2.6
billion at both June 30, 2024, and December 31, 2023.
(2)
Reflects total loan balances with LTV amounts in excess of 100%. In the event of default, the loss content would generally be limited to only the amount in excess of 100% LTV.
| Wells Fargo & Company |
81
|
|||||||
Note 5:
Loans and Related Allowance for Credit Losses
(continued)
Table 5.10 provides the outstanding balances of our credit card loan portfolio by primary credit quality indicators.
The revolving loans converted to term loans in the credit
card loan category represent credit card loans with modified terms that require payment over a specific term.
Table 5.10:
Credit Quality Indicators for Credit Card Loans
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
|
|
Revolving loans | Revolving loans converted to term loans | Revolving loans | Revolving loans converted to term loans | ||||||||||||||||||||||||||||||||||
| (in millions) | Total | Total | ||||||||||||||||||||||||||||||||||||
| By delinquency status: | ||||||||||||||||||||||||||||||||||||||
| Current-29 DPD | $ |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
| 30-89 DPD |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| 90+ DPD |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Total
|
$ |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
| By updated FICO: | ||||||||||||||||||||||||||||||||||||||
| 740+ | $ |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
| 700-739 |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| 660-699 |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| 620-659 |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| <620 |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| No FICO available |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Total
|
$ |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
Gross charge-offs
|
$ |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
82
|
Wells Fargo & Company | |||||||
Table 5.11 provides the outstanding balances of our Auto loan portfolio by primary credit quality indicators.
Table 5.11:
Credit Quality Indicators for Auto Loans by Vintage
|
|
Term loans by origination year | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Total | ||||||||||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| By delinquency status: | |||||||||||||||||||||||||||||||||||||||||
| Current-29 DPD | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| 30-89 DPD |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| 90+ DPD |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Total
|
$ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
|
By updated FICO:
|
|||||||||||||||||||||||||||||||||||||||||
| 740+ | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| 700-739 |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| 660-699 |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| 620-659 |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| <620 |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| No FICO available |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Total
|
$ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Gross charge-offs | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Term loans by origination year | |||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Total | ||||||||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| By delinquency status: | |||||||||||||||||||||||||||||||||||||||||
| Current-29 DPD | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| 30-89 DPD |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| 90+ DPD |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
|
By updated FICO:
|
|||||||||||||||||||||||||||||||||||||||||
| 740+ | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| 700-739 |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| 660-699 |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| 620-659 |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| <620 |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| No FICO available |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Gross charge-offs | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Wells Fargo & Company |
83
|
|||||||
Note 5:
Loans and Related Allowance for Credit Losses
(continued)
Table 5.12 provides the outstanding balances of our Other consumer loans portfolio by primary credit quality indicators.
Table 5.12:
Credit Quality Indicators for Other Consumer Loans by Vintage
|
|
Term loans by origination year | Revolving loans | Revolving loans converted to term loans | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| By delinquency status: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current-29 DPD | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| 30-89 DPD |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 90+ DPD |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
|
By updated FICO:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
| 740+ | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| 700-739 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 660-699 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 620-659 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| <620 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| No FICO available (1) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Gross charge-offs (2) | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Term loans by origination year | Revolving loans | Revolving loans converted to term loans | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | |||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| By delinquency status: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current-29 DPD | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| 30-89 DPD |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 90+ DPD |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
|
By updated FICO:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
| 740+ | $ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| 700-739 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 660-699 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| 620-659 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| <620 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
| No FICO available (1) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
|
Gross charge-offs (2)
|
$ |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
(1)
Substantially all loans do not require a FICO score and are revolving securities-based loans originated by the WIM operating segment.
|
84
|
Wells Fargo & Company | |||||||
NONACCRUAL LOANS
Table 5.13 provides loans on nonaccrual status. Nonaccrual loans may have an ACL or a negative allowance for credit losses from expected recoveries of amounts previously written off.
Table 5.13:
Nonaccrual Loans
| Amortized cost | Recognized interest income | ||||||||||||||||||||||||||||||||||
| Nonaccrual loans | Nonaccrual loans without related allowance for credit losses (1) | Six months ended June 30, | |||||||||||||||||||||||||||||||||
| (in millions) |
Jun 30,
2024 |
Dec 31,
2023 |
Jun 30,
2024 |
Dec 31,
2023 |
2024 | 2023 | |||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Commercial real estate |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Lease financing |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Residential mortgage |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Auto |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Other consumer |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total nonaccrual loans | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
(1)
Nonaccrual loans may not have an allowance for credit losses if the loss expectations are zero given the related collateral value.
LOANS IN PROCESS OF FORECLOSURE
Our recorded investment in consumer mortgage loans collateralized by residential real estate property that are in process of foreclosure was $
693
million and $
837
million at June 30, 2024, and December 31, 2023, respectively, which included $
542
million and $
660
million, respectively, of loans that are government insured/guaranteed. Under the Consumer Financial Protection Bureau guidelines, we do not commence the foreclosure process on residential mortgage loans until after the loan is 120 days delinquent. Foreclosure procedures and timelines vary depending on whether the property address resides in a judicial or non-judicial state. Judicial states require the foreclosure to be processed through the state’s courts while non-judicial states are processed without court intervention. Foreclosure timelines vary according to state law.
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
Certain loans 90 days or more past due are still accruing, because they are (1) well-secured and in the process of collection or (2) residential mortgage or consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due.
Table 5.14 shows loans 90 days or more past due and still accruing by class for loans not government insured/guaranteed.
Table 5.14:
Loans 90 Days or More Past Due and Still Accruing
| (in millions) |
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||
| Total: | $ |
|
|
||||||||
| Less: FHA insured/VA guaranteed (1) |
|
|
|||||||||
| Total, not government insured/guaranteed | $ |
|
|
||||||||
|
By segment and class, not government insured/guaranteed:
|
|||||||||||
| Commercial and industrial | $ |
|
|
||||||||
| Commercial real estate |
|
|
|||||||||
| Total commercial |
|
|
|||||||||
| Residential mortgage |
|
|
|||||||||
| Credit card |
|
|
|||||||||
| Auto |
|
|
|||||||||
| Other consumer |
|
|
|||||||||
| Total consumer |
|
|
|||||||||
| Total, not government insured/guaranteed | $ |
|
|
||||||||
| Wells Fargo & Company |
85
|
|||||||
Note 5:
Loans and Related Allowance for Credit Losses
(continued)
LOAN MODIFICATIONS TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY
We may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty.
The following disclosures were added on a prospective basis as a result of our adoption of ASU 2022-02, Financial Instruments-Credit Losses (Topic 326):
Troubled Debt Restructurings and Vintage Disclosures,
on January 1, 2023. These disclosures provide information on loan modifications in the form of principal forgiveness, interest rate reductions, other-than-insignificant (e.g., greater than three months) payment delays, term extensions or a combination of these modifications, as well as the financial effects of these modifications, and loan performance in the twelve months following the modification. Loans that both modify and are paid off or charged-off during the period are not included in the disclosures below. Additionally,
where amortized cost balances are presented below, accrued interest receivable is not included. See Note 7 (Intangible Assets and Other Assets) for additional information on accrued interest receivable. These disclosures do not include loans discharged by a bankruptcy court as the only concession, which were insignificant for the second quarter and first half of both 2024 and 2023.
For additional information on our loan modifications to borrowers experiencing financial difficulty, see Note 5 (Loans and Related Allowance for Credit Losses) in our 2023 Form 10-K.
Table 5.15 presents the amortized cost of modified commercial loans and the related financial effects of these modifications.
Table 5.15:
Commercial Loan Modifications and Financial Effects
|
|
Quarter ended June 30, | Six months ended June 30, | |||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
|
Commercial and industrial modifications:
|
|||||||||||||||||||||||
|
Term extension
|
$ |
|
|
|
|
||||||||||||||||||
|
All other modifications and combinations
|
|
|
|
|
|||||||||||||||||||
|
Total commercial and industrial modifications
|
$ |
|
|
|
|
||||||||||||||||||
|
Total commercial and industrial modifications as a % of loan class
|
|
% |
|
|
|
||||||||||||||||||
|
Financial effects:
|
|||||||||||||||||||||||
|
Weighted average interest rate reduction (1)
|
|
% |
|
|
|
||||||||||||||||||
|
Weighted average payments deferred (months)
|
|
|
|
|
|||||||||||||||||||
|
Weighted average term extension (months)
|
|
|
|
|
|||||||||||||||||||
|
Commercial real estate modifications:
|
|||||||||||||||||||||||
|
Term extension
|
$ |
|
|
|
|
||||||||||||||||||
|
All other modifications and combinations
|
|
|
|
|
|||||||||||||||||||
|
Total commercial real estate modifications
|
$ |
|
|
|
|
||||||||||||||||||
|
Total commercial real estate modifications as a % of loan class
|
|
% |
|
|
|
||||||||||||||||||
|
Financial effects:
|
|||||||||||||||||||||||
|
Weighted average interest rate reduction
|
|
% |
|
|
|
||||||||||||||||||
| Weighted average payments deferred (months) |
|
|
|
|
|||||||||||||||||||
|
Weighted average term extension (months)
|
|
|
|
|
|||||||||||||||||||
(1)
Includes modifications for small business credit card customers.
|
86
|
Wells Fargo & Company | |||||||
Commercial loans that received a modification in the past 12 months as of June 30, 2024, and subsequently defaulted in the second quarter and first half of 2024, were insignificant. Commercial loans that received a modification in the second quarter and first half of 2023, and subsequently defaulted in the same period were insignificant.
Table 5.16 provides past due information as of June 30, 2024, for commercial loans that received a modification in the
past 12 months and past due information as of June 30, 2023, for commercial loans that received a modification in the first half of 2023. For loan modifications that include a payment deferral, payment performance is not included in the table below until the loan exits the deferral period and payments resume. The table also includes the amount of gross charge-offs that occurred on these modifications during the second quarter and first half of both 2024 and 2023.
Table 5.16:
Payment Performance of Commercial Loan Modifications
|
|
By delinquency status | Gross charge-offs | |||||||||||||||||||||||||||||||||
| (in millions) |
Current-29 DPD
|
30-89 DPD | 90+ DPD | Total | Quarter ended | Six months ended | |||||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Commercial real estate |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total commercial | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| June 30, 2023 | |||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Commercial real estate |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total commercial | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
Table 5.17 presents the amortized cost of modified consumer loans and the related financial effects of these modifications. Modified loans within the Auto and Other consumer loan classes were insignificant for the second quarter and first half of both 2024 and 2023, and accordingly, are excluded from the following tables and disclosures.
Loans in a trial payment period are not included in the following loan modification disclosures until the borrower has successfully completed the trial period and the loan modification is formally executed. Residential mortgage loans in a trial payment period totaled $
110
million and $
132
million
at June 30, 2024 and 2023, respectively.
Table 5.17:
Consumer Loan Modifications and Financial Effects
|
|
Quarter ended June 30, | Six months ended June 30, | |||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
|
Residential mortgage modifications (1):
|
|||||||||||||||||||||||
|
Payment delay
|
$ |
|
|
|
|
||||||||||||||||||
|
Term extension
|
|
|
|
|
|||||||||||||||||||
|
Term extension and payment delay
|
|
|
|
|
|||||||||||||||||||
|
Interest rate reduction, and term extension, and payment delay
|
|
|
|
|
|||||||||||||||||||
|
All other modifications and combinations
|
|
|
|
|
|||||||||||||||||||
|
Total residential mortgage modifications
|
$ |
|
|
|
|
||||||||||||||||||
|
Total residential mortgage modifications as a % of loan class
|
|
% |
|
|
|
||||||||||||||||||
| Financial effects: | |||||||||||||||||||||||
|
Weighted average interest rate reduction
|
|
% |
|
|
|
||||||||||||||||||
|
Weighted average payments deferred (months) (2)
|
|
|
|
|
|||||||||||||||||||
|
Weighted average term extension (years)
|
|
|
|
|
|||||||||||||||||||
|
Credit card modifications:
|
|||||||||||||||||||||||
|
Interest rate reduction
|
$ |
|
|
|
|
||||||||||||||||||
|
Total credit card modifications
|
$ |
|
|
|
|
||||||||||||||||||
|
Total credit card modifications as a % of loan class
|
|
% |
|
|
|
||||||||||||||||||
| Financial effects: | |||||||||||||||||||||||
| Weighted average interest rate reduction |
|
% |
|
|
|
||||||||||||||||||
(1)
Payment delay modifications may include loan modifications that defer a set amount of principal to the end of the loan term.
(2)
Excludes the financial effects of residential mortgage loans with a set amount of principal deferred to the end of the loan term. The weighted average period of principal deferred was
25.4
years and
26.8
years in second quarter 2024 and 2023, respectively, and
25.2
years and
27.0
years for the first half of 2024 and 2023, respectively.
| Wells Fargo & Company |
87
|
|||||||
Note 5:
Loans and Related Allowance for Credit Losses
(continued)
Consumer loans that received a modification within the past 12 months as of June 30, 2024, and subsequently defaulted in the second quarter and first half of 2024, totaled $
104
million and $
182
million, respectively, and the majority of these defaults related to payment delay modifications in the residential mortgage loan portfolio. Consumer loans that received a modification in the second quarter and first half of 2023, and subsequently defaulted in the same period totaled $
141
million and $
158
million, respectively, and predominantly related to payment delay modifications in the residential mortgage loan portfolio.
Table 5.18 provides past due information as of June 30, 2024, for consumer loans that received a modification in the past 12 months and past due information as of June 30, 2023, for consumer loans that received a modification in the first half of 2023. For loan modifications that include a payment deferral, payment performance is not included in the table below until the loan exits the deferral period and payments resume. The table also includes the amount of gross charge-offs that occurred on these modifications during the second quarter and first half of both 2024 and 2023.
Table 5.18:
Payment Performance of Consumer Loan Modifications
|
|
By delinquency status | Gross charge-offs | |||||||||||||||||||||||||||||||||
| (in millions) |
Current-29 DPD
|
30-89 DPD | 90+ DPD | Total | Quarter ended | Six months ended | |||||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||||||||
|
Residential mortgage
|
$ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
Credit card (1)
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total consumer
|
$ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| June 30, 2023 | |||||||||||||||||||||||||||||||||||
|
Residential mortgage (2)
|
$ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Credit card (1) |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total consumer
|
$ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
(1)
Credit card loans that are past due at the time of the modification do not become current until they have three consecutive months of payment performance.
(2)
Includes loans that were past due prior to entering a payment delay modification. Delinquency advancement is paused during the deferral period and resumes upon exit.
Commitments to lend additional funds on commercial loans modified during the first half of 2024 and 2023, were $
236
million and $
82
million, respectively, substantially all of which were in the commercial and industrial portfolio.
Commitments to lend additional funds on consumer loans modified during the first half of both 2024 and 2023, were insignificant.
|
88
|
Wells Fargo & Company | |||||||
|
Note 6:
Mortgage Banking Activities
|
||
Mortgage banking activities consist of residential and commercial mortgage originations, sales and servicing.
We apply the fair value method to residential mortgage
servicing rights (MSRs) and apply the amortization method to
commercial MSRs.
Table 6.1 presents MSRs, including the changes in MSRs measured using the fair value method and the amortization method.
Table 6.1:
Mortgage Servicing Rights
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
|
Residential MSRs at fair value, beginning of period
|
$ |
|
|
$ |
|
|
|||||||||||||||||
| Originations/purchases |
|
|
|
|
|||||||||||||||||||
|
Sales and other
|
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Net additions |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Changes in fair value: | |||||||||||||||||||||||
| Due to valuation inputs or assumptions: | |||||||||||||||||||||||
|
Market interest rates (1)
|
|
|
|
|
|||||||||||||||||||
| Servicing and foreclosure costs |
(
|
|
(
|
|
|||||||||||||||||||
| Discount rates |
(
|
|
(
|
(
|
|||||||||||||||||||
|
Prepayment estimates and other (2)
|
|
(
|
|
(
|
|||||||||||||||||||
| Net changes in valuation inputs or assumptions |
|
|
|
|
|||||||||||||||||||
|
Changes due to collection/realization of expected cash flows (3)
|
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Total changes in fair value |
(
|
(
|
(
|
(
|
|||||||||||||||||||
|
Residential MSRs at fair value, end of period
|
|
|
|
|
|||||||||||||||||||
|
Commercial MSRs at amortized cost, end of period (4)
|
|
|
|
|
|||||||||||||||||||
| Total MSRs | $ |
|
|
$ |
|
|
|||||||||||||||||
(1)
Includes prepayment rate changes due to changes in market interest rates. Residential MSRs are economically hedged with derivative instruments to reduce exposure to changes in market interest rates.
(2)
Represents other changes in valuation model inputs or assumptions, including prepayment rate estimation changes that are independent of mortgage interest rate changes.
(3)
Represents the reduction in the residential MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.
(4)
The estimated fair value of commercial MSRs was $
1.7
billion and $
1.9
billion, at June 30, 2024 and 2023, respectively.
Table 6.2 provides key weighted-average assumptions used in the valuation of residential MSRs and sensitivity of the current fair value of residential MSRs to immediate adverse changes in
those assumptions. See Note 12 (Fair Values of Assets and Liabilities) for additional information on key assumptions for residential MSRs.
Table 6.2:
Assumptions and Sensitivity of Residential MSRs
|
($ in millions, except cost to service amounts)
|
Jun 30, 2024 | Dec 31, 2023 | |||||||||
| Fair value of interests held | $ |
|
|
||||||||
| Expected weighted-average life (in years) |
|
|
|||||||||
| Key assumptions: | |||||||||||
| Prepayment rate assumption (1) |
|
% |
|
||||||||
| Impact on fair value from 10% adverse change | $ |
(
|
(
|
||||||||
| Impact on fair value from 25% adverse change |
(
|
(
|
|||||||||
| Discount rate assumption |
|
% |
|
||||||||
| Impact on fair value from 100 basis point increase | $ |
(
|
(
|
||||||||
| Impact on fair value from 200 basis point increase |
(
|
(
|
|||||||||
| Cost to service assumption ($ per loan) |
|
|
|||||||||
| Impact on fair value from 10% adverse change |
(
|
(
|
|||||||||
| Impact on fair value from 25% adverse change |
(
|
(
|
|||||||||
(1)
Includes a blend of prepayment speeds and expected defaults. Prepayment speeds are influenced by mortgage interest rates as well as our estimation of drivers of borrower behavior.
The sensitivities in the preceding table are hypothetical and caution should be exercised when relying on this data. Changes in value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in value may not be linear. Also, the effect of a variation in a particular assumption on the value of the other interests held is calculated independently without changing any other assumptions. In reality, changes in one factor may
result in changes in others, which might magnify or counteract the sensitivities.
| Wells Fargo & Company |
89
|
|||||||
Note 6:
Mortgage Banking Activities
(continued)
We present information for our managed servicing portfolio in Table 6.3 using unpaid principal balance for loans serviced and subserviced for others and carrying value for owned loans serviced.
As the servicer of loans for others, we advance certain payments of principal, interest, taxes, insurance, and default-related expenses. The credit risk related to these advances is limited since the reimbursement is generally senior to cash payments to investors and are generally reimbursed within a short timeframe from cash flows from the trust, government-
sponsored enterprise (GSEs), insurer, or borrower. We maintain an allowance for uncollectible amounts for advances on loans serviced for others that may not be reimbursed if the payments were not made in accordance with applicable servicing agreements or if the insurance or servicing agreements contain limitations on reimbursements. We also advance payments of taxes and insurance for our owned loans which are collectible from the borrower. Servicing advances on owned loans are written-off when deemed uncollectible.
Table 6.3:
Managed Servicing Portfolio
| Jun 30, 2024 | Dec 31, 2023 | ||||||||||||||||||||||
| ($ in billions, unless otherwise noted) | Residential mortgages | Commercial mortgages | Residential mortgages | Commercial mortgages | |||||||||||||||||||
| Serviced and subserviced for others | $ |
|
|
|
|
||||||||||||||||||
| Owned loans serviced |
|
|
|
|
|||||||||||||||||||
| Total managed servicing portfolio |
|
|
|
|
|||||||||||||||||||
| Total serviced for others, excluding subserviced for others |
|
|
|
|
|||||||||||||||||||
| MSRs as a percentage of loans serviced for others |
|
% |
|
|
|
||||||||||||||||||
| Weighted average note rate (mortgage loans serviced for others) |
|
|
|
|
|||||||||||||||||||
| Servicer advances, net of an allowance for uncollectible amounts ($ in millions) | $ |
|
|
|
|
||||||||||||||||||
Table 6.4 presents the components of mortgage banking noninterest income.
Table 6.4:
Mortgage Banking Noninterest Income
| Quarter ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Contractually specified servicing fees, late charges and ancillary fees | $ |
|
|
$ |
|
|
||||||||||||||||||||
| Unreimbursed servicing costs (1) |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
| Amortization for commercial MSRs (2) |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
| Changes due to collection/realization of expected cash flows (3) | (A) |
(
|
(
|
(
|
(
|
|||||||||||||||||||||
| Net servicing fees |
|
|
|
|
||||||||||||||||||||||
| Changes in fair value of MSRs due to valuation inputs or assumptions (4) | (B) |
|
|
|
|
|||||||||||||||||||||
| Net derivative losses from economic hedges (5) |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
| Market-related valuation changes to residential MSRs, net of hedge results |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
| Total net servicing income |
|
|
|
|
||||||||||||||||||||||
| Net gains on mortgage loan originations/sales (6) |
|
|
|
|
||||||||||||||||||||||
| Total mortgage banking noninterest income | $ |
|
|
$ |
|
|
||||||||||||||||||||
| Total changes in residential MSRs carried at fair value | (A)+(B) | $ |
(
|
(
|
$ |
(
|
(
|
|||||||||||||||||||
(1)
Includes costs associated with foreclosures, unreimbursed interest advances to investors, other interest costs, and transaction costs associated with sales of residential MSRs.
(2)
Estimated future amortization expense for commercial MSRs was $
114
million for the remainder of 2024, and $
204
million, $
165
million, $
130
million, $
110
million, and $
79
million for the years ended December 31, 2025, 2026, 2027, 2028, and 2029, respectively.
(3)
Represents the reduction in the cash flows expected to be collected during the period, net of income accreted due to the passage of time, for residential MSRs measured using the fair value method.
(4)
Refer to the analysis of changes in residential MSRs presented in Table 6.1 in this Note for more detail.
(5)
See Note 11 (Derivatives) for additional information on economic hedges for residential MSRs.
(6)
Includes net gains of $
14
million and $
51
million in the second quarter and first half of 2024, respectively, and $
89
million and $
50
million in the second quarter and first half of 2023, respectively, related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments.
|
90
|
Wells Fargo & Company | |||||||
|
Note 7:
Intangible Assets and Other Assets
|
||
Intangible assets include MSRs, goodwill, and customer relationship and other intangibles. For additional information on MSRs, see Note 6 (Mortgage Banking Activities). Customer relationship and other intangibles, which are included in other assets on our consolidated balance sheet, had a net carrying
value of $
96
million and $
118
million at June 30, 2024, and December 31, 2023, respectively.
Table 7.1 shows the allocation of goodwill to our reportable operating segments.
Table 7.1:
Goodwill
| (in millions) | Consumer Banking and Lending | Commercial Banking | Corporate and Investment Banking | Wealth and Investment Management | Corporate | Consolidated Company | |||||||||||||||||||||||||||||
| December 31, 2023 | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Foreign currency translation |
|
(
|
|
|
|
(
|
|||||||||||||||||||||||||||||
| June 30, 2024 | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
Table 7.2 presents the components of other assets.
Table 7.2:
Other Assets
| (in millions) | Jun 30, 2024 | Dec 31, 2023 | |||||||||
| Corporate/bank-owned life insurance (1) | $ |
|
|
||||||||
| Accounts receivable (2) |
|
|
|||||||||
| Interest receivable: | |||||||||||
| AFS and HTM debt securities |
|
|
|||||||||
| Loans |
|
|
|||||||||
| Trading and other |
|
|
|||||||||
| Operating lease assets (lessor) |
|
|
|||||||||
| Operating lease ROU assets (lessee) |
|
|
|||||||||
|
Other (3)
|
|
|
|||||||||
| Total other assets | $ |
|
|
||||||||
(1)
Corporate/bank-owned life insurance is recorded at cash surrender value.
(2)
Primarily includes derivatives clearinghouse receivables, trade date receivables, and servicer advances, which are recorded at amortized cost.
(3)
Primarily includes income tax receivables, prepaid expenses, foreclosed assets, and venture capital and private equity investments in consolidated portfolio companies.
| Wells Fargo & Company |
91
|
|||||||
|
Note 8:
Leasing Activity
|
||
The information below provides a summary of our leasing activities as a lessor and lessee. See Note 8 (Leasing Activity) in our 2023 Form 10-K for additional information about our leasing activities.
As a Lessor
Noninterest income on leases, included in Table 8.1, is included in other noninterest income on our consolidated statement of income. Lease expense, included in other noninterest expense on our consolidated statement of income, was $
159
million and $
180
million for the quarters ended June 30, 2024 and 2023, respectively, and $
323
million and $
357
million for the first half of 2024 and 2023, respectively.
Table 8.1:
Leasing Revenue
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Interest income on lease financing | $ |
|
|
$ |
|
|
|||||||||||||||||
| Other lease revenue: | |||||||||||||||||||||||
| Variable revenue on lease financing |
|
|
|
|
|||||||||||||||||||
| Fixed revenue on operating leases |
|
|
|
|
|||||||||||||||||||
| Variable revenue on operating leases |
|
|
|
|
|||||||||||||||||||
| Other lease-related revenue (1) |
|
|
|
|
|||||||||||||||||||
| Noninterest income on leases |
|
|
|
|
|||||||||||||||||||
| Total leasing revenue | $ |
|
|
$ |
|
|
|||||||||||||||||
(1) Includes net gains (losses) on disposition of assets leased under operating leases or lease financings.
As a Lessee
Substantially all of our leases are operating leases.
Table 8.2 presents balances for our operating leases.
Table 8.2:
Operating Lease Right-of-Use (ROU) Assets and Lease Liabilities
| (in millions) | Jun 30, 2024 | Dec 31, 2023 | ||||||
| ROU assets | $ | |||||||
| Lease liabilities | ||||||||
|
92
|
Wells Fargo & Company | |||||||
|
Note 9:
Preferred Stock
|
||
We are authorized to issue
20
million shares of preferred stock, without par value. Outstanding preferred shares rank senior to common shares both as to the payment of dividends and liquidation preferences but have no general voting rights. All outstanding preferred stock with a liquidation preference value, except for Series L Preferred Stock, may be redeemed for the liquidation preference value, plus any accrued but unpaid dividends, on any dividend payment date on or after the earliest redemption date for that series. Additionally, these same series of preferred stock may be redeemed following a “regulatory capital treatment event,” as described in the terms of each series. Capital actions, including redemptions of our preferred stock, may be subject to regulatory approval or conditions.
In addition, we are authorized to issue
4
million shares of preference stock, without par value. We have
not
issued any preference shares under this authorization. If issued, preference shares would be limited to
one
vote per share.
In March 2024, we redeemed our Preferred Stock, Series R. In June 2024, we redeemed our Preferred Stock, Series S. In July 2024, we issued $
2.0
billion of our Preferred Stock,
Series FF.
Table 9.1 summarizes information about our preferred stock.
Table 9.1:
Preferred Stock
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except shares) | Earliest redemption date |
Shares
authorized and designated |
Shares issued and outstanding | Liquidation preference value |
Carrying
value |
Shares
authorized and designated |
Shares
issued and outstanding |
Liquidation preference value | Carrying value | |||||||||||||||||||||||||||||||||||||||||||||||
| DEP Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividend Equalization Preferred Shares (DEP) | Currently redeemable |
|
|
$ |
|
|
|
|
$ |
|
|
|||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Series L
(1)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
— |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Redeemed |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series S | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Redeemed |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series U | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
6/15/2025 |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Currently redeemable |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series Z | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
3/15/2025 |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series AA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
12/15/2025 |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series BB | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
3/15/2026 |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series CC | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
3/15/2026 |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series DD | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
9/15/2026 |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series EE | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
9/15/2028 |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Total |
|
|
$ |
|
|
|
|
$ |
|
|
||||||||||||||||||||||||||||||||||||||||||||||
(1)
At the option of the holder, each share of Series L Preferred Stock may be converted at any time into
6.3814
shares of common stock, plus cash in lieu of fractional shares, subject to anti-dilution adjustments. If converted within 30 days of certain liquidation or change of control events, the holder may receive up to
16.5916
additional shares, or, at our option, receive an equivalent amount of cash in lieu of common stock. We may convert some or all of the Series L Preferred Stock into shares of common stock if the closing price of our common stock exceeds 130 percent of the conversion price of the Series L Preferred Stock for 20 trading days during any period of 30 consecutive trading days. We declared dividends of $
74
million on Series L Preferred Stock for both quarters ended June 30, 2024, and June 30, 2023.
| Wells Fargo & Company |
93
|
|||||||
|
Note 10:
Legal Actions
|
||
Wells Fargo and certain of our subsidiaries are involved in a number of judicial, regulatory, governmental, arbitration, and other proceedings or investigations concerning matters arising from the conduct of our business activities, and many of those proceedings and investigations expose Wells Fargo to potential financial loss or other adverse consequences. These proceedings and investigations include actions brought against Wells Fargo and/or our subsidiaries with respect to corporate-related matters and transactions in which Wells Fargo and/or our subsidiaries were involved. In addition, Wells Fargo and our subsidiaries may be requested to provide information to or otherwise cooperate with government authorities in the conduct of investigations of other persons or industry groups. We establish accruals for legal actions when potential losses associated with the actions become probable and the costs can be reasonably estimated. For such accruals, we record the amount we consider to be the best estimate within a range of potential losses that are both probable and estimable; however, if we cannot determine a best estimate, then we record the low end of the range of those potential losses. There can be no assurance as to the ultimate outcome of legal actions, including the matters described below, and the actual costs of resolving legal actions may be substantially higher or lower than the amounts accrued for those actions.
ADVISORY ACCOUNT CASH SWEEP INVESTIGATION
The United States Securities and Exchange Commission (SEC) has undertaken an investigation regarding the cash sweep options that the Company provides to investment advisory clients at account opening. The Company is in resolution discussions with the SEC, although there can be no assurance as to the outcome of these discussions.
ANTI-MONEY LAUNDERING AND ECONOMIC SANCTIONS RELATED INVESTIGATIONS
Government authorities have been conducting inquiries or investigations regarding issues related to the Company’s anti-money laundering and sanctions
programs.
COMPANY 401(K) PLAN LITIGATION
On September 26, 2022, participants in the Company’s 401(k) plan filed a putative class action in the United States District Court for the District of Minnesota alleging that the Company violated the Employee Retirement Income Security Act of 1974 in connection with certain transactions associated with the Employee Stock Ownership Plan feature of the Company’s 401(k) plan, including the manner in which the 401(k) plan purchased certain securities used in connection with the Company’s contributions to the 401(k) plan.
HIRING PRACTICES MATTERS
Government agencies, including the United States Department of Justice and the SEC, have undertaken formal or informal inquiries or investigations regarding the Company’s hiring practices related to diversity. The United States Department of Justice and the SEC have since closed their investigations without taking action. A putative securities fraud class action has also been filed in the United States District Court for the Northern District of California alleging that the Company and certain of its executive officers made false or misleading statements about the Company’s hiring practices related to diversity. Allegations related to the Company’s hiring practices related to diversity are also among the subjects of a shareholder derivative lawsuit pending in the
United States District Court for the Northern District of California.
HOME MORTGAGE DISCRIMINATION LITIGATION
Plaintiffs representing a class of home mortgage applicants and customers filed putative class actions against Wells Fargo alleging that Wells Fargo’s mortgage lending policies and practices resulted in disparate treatment and disparate impact against minority applicants. These actions have been consolidated in the United States District Court for the Northern District of California.
INTERCHANGE LITIGATION
Plaintiffs representing a class of merchants have filed putative class actions, and individual merchants have filed individual actions, alleging that Visa and Mastercard, as well as certain payment card issuing banks including Wells Fargo, unlawfully colluded to set interchange rates associated with Visa and Mastercard payment card transactions and that enforcement of certain Visa and Mastercard rules and alleged tying and bundling of services offered to merchants were anticompetitive. These actions have been consolidated in the United States District Court for the Eastern District of New York. Wells Fargo, along with other defendants and entities, are parties to loss and judgment sharing agreements, which provide that they, along with other entities, will share, based on a formula, in any losses or judgments from the relevant litigation. In July 2012, Visa, Mastercard, and the financial institution defendants, including Wells Fargo, agreed to pay a total of approximately $
6.6
billion in order to settle the consolidated action. Several merchants opted out of the settlement and are pursuing individual actions. In June 2016, the United States Court of Appeals for the Second Circuit vacated the settlement agreement and reversed and remanded the consolidated action to the district court for further proceedings. In November 2016, the district court appointed lead class counsel for a damages class and an equitable relief class. The parties entered into a settlement agreement to resolve the damages class claims pursuant to which defendants agreed to pay a total of approximately $
6.2
billion, which includes approximately $
5.3
billion of funds remaining in escrow from the 2012 settlement and $
900
million in additional funding. Wells Fargo’s allocated responsibility for the additional funding is approximately $
94.5
million. The court granted final approval of the settlement on December 13, 2019, which was affirmed by the Second Circuit on March 15, 2023. On September 27, 2021, the district court granted the plaintiffs’ motion for class certification in the equitable relief case. On March 26, 2024, Visa and Mastercard entered into a settlement agreement to resolve the equitable relief class claims, which was denied by the district court on June 25, 2024. Some of the opt-out and direct-action cases have been settled while others remain pending.
RMBS TRUSTEE LITIGATION
In December 2014, Phoenix Light SF Limited (Phoenix Light) and certain related entities filed a complaint in the United States District Court for the Southern District of New York alleging claims against Wells Fargo Bank, N.A., in its capacity as trustee for a number of residential mortgage-backed securities (RMBS) trusts. Complaints raising similar allegations have been filed by Commerzbank AG in the Southern District of New York, IKB International and IKB Deutsche Industriebank (together, IKB) in New York state court, and Park Royal I LLC and Park Royal II LLC in New York state court. In each case, the plaintiffs allege that Wells Fargo Bank, N.A., as trustee, caused losses to investors, and plaintiffs assert
|
94
|
Wells Fargo & Company | |||||||
causes of action based upon, among other things, the trustee’s alleged failure to notify and enforce repurchase obligations of mortgage loan sellers for purported breaches of representations and warranties, notify investors of alleged events of default, and abide by appropriate standards of care following alleged events of default. In July 2022, the district court dismissed Phoenix Light’s claims and certain of the claims asserted by Commerzbank AG, and subsequently entered judgment in each case in favor of Wells Fargo Bank, N.A. In August 2022, Phoenix Light and Commerzbank AG each appealed the district court’s decision to the United States Court of Appeals for the Second Circuit. Phoenix Light dismissed its appeal in May 2023, terminating its case. In November 2023, the Company entered into an agreement with IKB to resolve IKB’s claims. The Company previously settled
two
class actions filed by institutional investors and an action filed by the National Credit Union Administration with similar allegations.
SEMINOLE TRIBE TRUSTEE LITIGATION
The Seminole Tribe of Florida filed a complaint in Florida state court alleging that Wells Fargo, as trustee, charged excess fees in connection with the administration of a minor’s trust and failed to invest the assets of the trust prudently. The complaint was later amended to include
three
individual current and former beneficiaries as plaintiffs and to remove the Tribe as a party to the case.
ZELLE INVESTIGATION
Government authorities have been conducting formal or informal inquiries or investigations regarding the handling of customer disputes related to fund transfers made through the Zelle Network.
OUTLOOK
As described above, the Company establishes accruals for legal actions when potential losses associated with the actions become probable and the costs can be reasonably estimated. The high end of the range of reasonably possible losses in excess of the Company’s accrual for probable and estimable losses was approximately $
2.0
billion as of June 30, 2024. The outcomes of legal actions are unpredictable and subject to significant uncertainties, and it is inherently difficult to determine whether any loss is probable or even possible. It is also inherently difficult to estimate the amount of any loss and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Accordingly, actual losses may be in excess of the established accrual or the range of reasonably possible loss. Based on information currently available, advice of counsel, available insurance coverage, and established reserves, Wells Fargo believes that the eventual outcome of the actions against Wells Fargo and/or its subsidiaries will not, individually or in the aggregate, have a material adverse effect on Wells Fargo’s consolidated financial condition. However, it is possible that the ultimate resolution of a matter, if unfavorable, may be material to Wells Fargo’s results of operations for any particular period.
| Wells Fargo & Company |
95
|
|||||||
|
Note 11:
Derivatives
|
||
We use derivatives to manage exposure to market risk, including interest rate risk, credit risk and foreign currency risk, and to assist customers with their risk management objectives. We designate certain derivatives as hedging instruments in qualifying hedge accounting relationships (fair value or cash flow hedges). Our remaining derivatives consist of economic hedges that do not qualify for hedge accounting and derivatives held for customer accommodation trading purposes. For additional information on our derivative activities, see Note 14 (Derivatives) in our 2023 Form 10-K.
Table 11.1 presents the total notional or contractual amounts and fair values for our derivatives. Derivative transactions can be measured in terms of the notional amount, but this amount is not recorded on our consolidated balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged, but is used only as the basis on which derivative cash flows are determined.
Table 11.1:
Notional or Contractual Amounts and Fair Values of Derivatives
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Notional or contractual amount | Fair value | Notional or contractual amount | Fair value | ||||||||||||||||||||||||||||||||
| Derivative assets | Derivative liabilities | Derivative assets | Derivative liabilities | ||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Interest rate contracts | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Commodity contracts |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Foreign exchange contracts |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total derivatives designated as qualifying hedging instruments |
|
|
|
|
|||||||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Interest rate contracts |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Commodity contracts |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Equity contracts
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Foreign exchange contracts |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Credit contracts |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total derivatives not designated as hedging instruments |
|
|
|
|
|||||||||||||||||||||||||||||||
| Total derivatives before netting |
|
|
|
|
|||||||||||||||||||||||||||||||
| Netting |
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||
| Total | $ |
|
|
|
|
||||||||||||||||||||||||||||||
Balance Sheet Offsetting
We execute substantially all of our derivative transactions under master netting arrangements. Where legally enforceable, these master netting arrangements give the ability, in the event of default by the counterparty, to liquidate securities held as collateral and to offset receivables and payables with the same counterparty. We reflect all derivative balances and related cash collateral subject to enforceable master netting arrangements on a net basis on our consolidated balance sheet. We do not net non-cash collateral that we receive or pledge against derivative balances on our consolidated balance sheet.
For disclosure purposes, we present “Total Derivatives, net” which represents the aggregate of our net exposure to each counterparty after considering the balance sheet netting
adjustments and any non-cash collateral. We manage derivative exposure by monitoring the credit risk associated with each counterparty using counterparty-specific credit risk limits, using master netting arrangements and obtaining collateral.
Table 11.2 provides information on the fair values of derivative assets and liabilities subject to enforceable master netting arrangements, the balance sheet netting adjustments and the resulting net fair value amount recorded on our consolidated balance sheet, as well as the non-cash collateral associated with such arrangements. In addition to the netting amounts included in the table, we also have balance sheet netting related to resale and repurchase agreements that are disclosed within Note 15 (Securities and Other Collateralized Financing Activities).
|
96
|
Wells Fargo & Company | |||||||
Table 11.2:
Offsetting of Derivative Assets and Liabilities
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| (in millions) | Derivative Assets | Derivative Liabilities | Derivative Assets | Derivative Liabilities | |||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||
| Over-the-counter (OTC) | $ |
|
|
|
|
||||||||||||||||||
| OTC cleared |
|
|
|
|
|||||||||||||||||||
| Exchange traded |
|
|
|
|
|||||||||||||||||||
| Total interest rate contracts |
|
|
|
|
|||||||||||||||||||
| Commodity contracts | |||||||||||||||||||||||
| OTC |
|
|
|
|
|||||||||||||||||||
| Exchange traded |
|
|
|
|
|||||||||||||||||||
| Total commodity contracts |
|
|
|
|
|||||||||||||||||||
| Equity contracts | |||||||||||||||||||||||
| OTC |
|
|
|
|
|||||||||||||||||||
| Exchange traded |
|
|
|
|
|||||||||||||||||||
| Total equity contracts |
|
|
|
|
|||||||||||||||||||
| Foreign exchange contracts | |||||||||||||||||||||||
| OTC |
|
|
|
|
|||||||||||||||||||
| Total foreign exchange contracts |
|
|
|
|
|||||||||||||||||||
| Credit contracts | |||||||||||||||||||||||
| OTC |
|
|
|
|
|||||||||||||||||||
| Total credit contracts |
|
|
|
|
|||||||||||||||||||
| Total derivatives subject to enforceable master netting arrangements, gross |
|
|
|
|
|||||||||||||||||||
| Less: Gross amounts offset | |||||||||||||||||||||||
| Counterparty netting (1) |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Cash collateral netting |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Total derivatives subject to enforceable master netting arrangements, net |
|
|
|
|
|||||||||||||||||||
|
Derivatives not subject to enforceable master netting arrangements
|
|
|
|
|
|||||||||||||||||||
| Total derivatives recognized in consolidated balance sheet, net |
|
|
|
|
|||||||||||||||||||
| Non-cash collateral |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Total Derivatives, net | $ |
|
|
|
|
||||||||||||||||||
(1)
Represents amounts with counterparties subject to enforceable master netting arrangements that have been offset in our consolidated balance sheet, including portfolio level counterparty valuation adjustments related to customer accommodation and other trading derivatives. Counterparty valuation adjustments related to derivative assets were $
268
million and $
292
million and debit valuation adjustments related to derivative liabilities were $
211
million and $
222
million as of June 30, 2024, and December 31, 2023, respectively, and were primarily related to interest rate contracts.
Fair Value and Cash Flow Hedges
For fair value hedges, we use interest rate swaps to convert certain of our fixed-rate long-term debt and time certificates of deposit to floating rates to hedge our exposure to interest rate risk. We also enter into cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge our exposure to foreign currency risk and interest rate risk associated with the issuance of non-U.S. dollar denominated long-term debt. We also enter into futures contracts, forward contracts, and swap contracts to hedge our exposure to the price risk of physical commodities included in other assets on our consolidated balance sheet. In addition, we use interest rate swaps, cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge against changes in fair value of certain investments in AFS debt securities due to changes in interest rates, foreign currency rates, or both. For certain fair value hedges of interest rate risk, we use the portfolio layer method to hedge stated amounts of closed portfolios of AFS debt securities. For certain fair value hedges of foreign currency risk, changes in fair value of cross-currency swaps attributable to changes in cross-currency basis spreads are excluded from the assessment of hedge effectiveness and recorded in other
comprehensive income (OCI). See Note 21 (Other Comprehensive Income) for the amounts recognized in other comprehensive income.
For cash flow hedges, we use interest rate swaps to hedge the variability in interest payments received on certain interest-earning deposits with banks and certain floating-rate commercial loans. We also use cross-currency swaps to hedge variability in interest payments on fixed-rate foreign currency-denominated long-term debt due to changes in foreign exchange rates.
We estimate $
835
million pre-tax of deferred net losses related to cash flow hedges in OCI at June 30, 2024, will be reclassified into net interest income during the next twelve months. For cash flow hedges as of June 30, 2024, we are hedging our interest rate and foreign currency exposure to the variability of future cash flows for all forecasted transactions for a maximum of approximately
8
years. For additional information on our accounting hedges, see Note 1 (Summary of Significant Accounting Policies) in our 2023 Form 10-K.
Table 11.3 and Table 11.4 show the net gains (losses) related to derivatives in cash flow and fair value hedging relationships, respectively.
| Wells Fargo & Company |
97
|
|||||||
Note 11:
Derivatives
(continued)
Table 11.3:
Gains (Losses) Recognized on Cash Flow Hedging Relationships
| Net interest income | Total recorded in net income | Total recorded in OCI | ||||||||||||||||||
| (in millions) | Loans | Other interest income | Long-term debt | Derivative gains (losses) | Derivative gains (losses) | |||||||||||||||
| Quarter ended June 30, 2024 | ||||||||||||||||||||
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ |
|
|
(
|
N/A |
(
|
||||||||||||||
| Interest rate contracts: | ||||||||||||||||||||
| Realized gains (losses) (pre-tax) reclassified from OCI into net income |
(
|
(
|
|
(
|
|
|||||||||||||||
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | N/A | N/A |
(
|
|||||||||||||||
| Total gains (losses) (pre-tax) on interest rate contracts |
(
|
(
|
|
(
|
(
|
|||||||||||||||
| Foreign exchange contracts: | ||||||||||||||||||||
| Realized gains (losses) (pre-tax) reclassified from OCI into net income |
|
|
(
|
(
|
|
|||||||||||||||
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | N/A | N/A |
|
|||||||||||||||
| Total gains (losses) (pre-tax) on foreign exchange contracts |
|
|
(
|
(
|
|
|||||||||||||||
| Total gains (losses) (pre-tax) recognized on cash flow hedges | $ |
(
|
(
|
(
|
(
|
(
|
||||||||||||||
| Quarter ended June 30, 2023 | ||||||||||||||||||||
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ |
|
|
(
|
N/A |
(
|
||||||||||||||
| Interest rate contracts: | ||||||||||||||||||||
| Realized gains (losses) (pre-tax) reclassified from OCI into net income |
(
|
(
|
|
(
|
|
|||||||||||||||
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | N/A | N/A |
(
|
|||||||||||||||
| Total gains (losses) (pre-tax) on interest rate contracts |
(
|
(
|
|
(
|
(
|
|||||||||||||||
| Foreign exchange contracts: | ||||||||||||||||||||
| Realized gains (losses) (pre-tax) reclassified from OCI into net income |
|
|
(
|
(
|
|
|||||||||||||||
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | N/A | N/A |
(
|
|||||||||||||||
| Total gains (losses) (pre-tax) on foreign exchange contracts |
|
|
(
|
(
|
|
|||||||||||||||
| Total gains (losses) (pre-tax) recognized on cash flow hedges | $ |
(
|
(
|
(
|
(
|
(
|
||||||||||||||
| Six months ended June 30, 2024 | ||||||||||||||||||||
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ |
|
|
(
|
N/A |
(
|
||||||||||||||
| Interest rate contracts: | ||||||||||||||||||||
| Realized gains (losses) (pre-tax) reclassified from OCI into net income |
(
|
(
|
|
(
|
|
|||||||||||||||
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | N/A | N/A |
(
|
|||||||||||||||
| Total gains (losses) (pre-tax) on interest rate contracts |
(
|
(
|
|
(
|
(
|
|||||||||||||||
| Foreign exchange contracts: | ||||||||||||||||||||
| Realized gains (losses) (pre-tax) reclassified from OCI into net income |
|
|
(
|
(
|
|
|||||||||||||||
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | N/A | N/A |
|
|||||||||||||||
| Total gains (losses) (pre-tax) on foreign exchange contracts |
|
|
(
|
(
|
|
|||||||||||||||
| Total gains (losses) (pre-tax) recognized on cash flow hedges | $ |
(
|
(
|
(
|
(
|
(
|
||||||||||||||
| Six months ended June 30, 2023 | ||||||||||||||||||||
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ |
|
|
(
|
N/A |
(
|
||||||||||||||
| Interest rate contracts: | ||||||||||||||||||||
| Realized gains (losses) (pre-tax) reclassified from OCI into net income |
(
|
(
|
|
(
|
|
|||||||||||||||
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | N/A | N/A |
(
|
|||||||||||||||
| Total gains (losses) (pre-tax) on interest rate contracts |
(
|
(
|
|
(
|
(
|
|||||||||||||||
| Foreign exchange contracts: | ||||||||||||||||||||
| Realized gains (losses) (pre-tax) reclassified from OCI into net income |
|
|
(
|
(
|
|
|||||||||||||||
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | N/A | N/A |
|
|||||||||||||||
| Total gains (losses) (pre-tax) on foreign exchange contracts |
|
|
(
|
(
|
|
|||||||||||||||
| Total gains (losses) (pre-tax) recognized on cash flow hedges | $ |
(
|
(
|
(
|
(
|
(
|
||||||||||||||
|
98
|
Wells Fargo & Company | |||||||
Table 11.4:
Gains (Losses) Recognized on Fair Value Hedging Relationships
| Net interest income | Noninterest income | Total recorded in net income | Total recorded in OCI | |||||||||||||||||||||||||||||
| (in millions) | Debt securities | Deposits | Long-term debt | Net gains from trading and securities | Other | Derivative gains (losses) | Derivative gains (losses) | |||||||||||||||||||||||||
| Quarter ended June 30, 2024 | ||||||||||||||||||||||||||||||||
|
Total amounts presented in the consolidated statement of income and other comprehensive income
|
$ |
|
(
|
(
|
|
|
N/A |
(
|
||||||||||||||||||||||||
| Interest contracts | ||||||||||||||||||||||||||||||||
|
Amounts related to cash flows on derivatives
|
|
(
|
(
|
|
|
(
|
N/A | |||||||||||||||||||||||||
| Recognized on derivatives |
(
|
(
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
|
|
|
|
|
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on interest rate contracts |
|
(
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Foreign exchange contracts | ||||||||||||||||||||||||||||||||
|
Amounts related to cash flows on derivatives
|
|
|
(
|
|
|
(
|
N/A | |||||||||||||||||||||||||
| Recognized on derivatives |
|
|
(
|
|
|
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
|
|
(
|
(
|
|
(
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on foreign exchange contracts |
|
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Commodity contracts | ||||||||||||||||||||||||||||||||
| Recognized on derivatives |
|
|
|
|
(
|
(
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
|
|
|
|
|
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on commodity contracts |
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
Total gains (losses) (pre-tax) recognized on fair value hedges
|
$ |
|
(
|
(
|
|
|
(
|
|
||||||||||||||||||||||||
| Quarter ended June 30, 2023 | ||||||||||||||||||||||||||||||||
|
Total amounts presented in the consolidated statement of income and other comprehensive income
|
$ |
|
(
|
(
|
|
|
N/A |
(
|
||||||||||||||||||||||||
| Interest contracts | ||||||||||||||||||||||||||||||||
|
Amounts related to cash flows on derivatives
|
|
(
|
(
|
|
|
(
|
N/A | |||||||||||||||||||||||||
| Recognized on derivatives |
|
(
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
(
|
|
|
|
|
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on interest rate contracts |
|
(
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Foreign exchange contracts | ||||||||||||||||||||||||||||||||
|
Amounts related to cash flows on derivatives
|
|
|
(
|
|
|
(
|
N/A | |||||||||||||||||||||||||
| Recognized on derivatives |
|
|
(
|
|
(
|
(
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
|
|
|
|
|
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on foreign exchange contracts |
|
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Commodity contracts | ||||||||||||||||||||||||||||||||
| Recognized on derivatives |
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
|
|
|
|
(
|
(
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on commodity contracts |
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
Total gains (losses) (pre-tax) recognized on fair value hedges
|
$ |
|
(
|
(
|
|
|
(
|
|
||||||||||||||||||||||||
(continued on following page)
| Wells Fargo & Company |
99
|
|||||||
Note 11:
Derivatives
(continued)
(continued from previous page)
| Net interest income |
Noninterest income
|
Total recorded in net income | Total recorded in OCI | |||||||||||||||||||||||||||||
| (in millions) | Debt securities | Deposits | Long-term debt | Net gains from trading and securities | Other | Derivative gains (losses) | Derivative gains (losses) | |||||||||||||||||||||||||
| Six months ended June 30, 2024 | ||||||||||||||||||||||||||||||||
|
Total amounts presented in the consolidated statement of income and other comprehensive income
|
$ |
|
(
|
(
|
|
|
N/A |
(
|
||||||||||||||||||||||||
| Interest contracts | ||||||||||||||||||||||||||||||||
| Amounts related to cash flows on derivatives |
|
(
|
(
|
|
|
(
|
N/A | |||||||||||||||||||||||||
| Recognized on derivatives |
|
(
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
(
|
|
|
|
|
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on interest rate contracts |
|
(
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Foreign exchange contracts | ||||||||||||||||||||||||||||||||
| Amounts related to cash flows on derivatives |
|
|
(
|
|
|
(
|
N/A | |||||||||||||||||||||||||
| Recognized on derivatives |
|
|
(
|
(
|
|
(
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
|
|
|
|
|
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on foreign exchange contracts |
|
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Commodity contracts | ||||||||||||||||||||||||||||||||
| Recognized on derivatives |
|
|
|
|
(
|
(
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
|
|
|
|
|
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on commodity contracts |
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
Total gains (losses) (pre-tax) recognized on fair value hedges
|
$ |
|
(
|
(
|
|
|
(
|
|
||||||||||||||||||||||||
| Six months ended June 30, 2023 | ||||||||||||||||||||||||||||||||
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ |
|
(
|
(
|
|
|
N/A |
(
|
||||||||||||||||||||||||
| Interest contracts | ||||||||||||||||||||||||||||||||
| Amounts related to cash flows on derivatives |
|
(
|
(
|
|
|
(
|
N/A | |||||||||||||||||||||||||
| Recognized on derivatives |
|
(
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
(
|
|
|
|
|
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on interest rate contracts |
|
(
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Foreign exchange contracts | ||||||||||||||||||||||||||||||||
| Amounts related to cash flows on derivatives |
|
|
(
|
|
|
(
|
N/A | |||||||||||||||||||||||||
| Recognized on derivatives |
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
|
|
(
|
|
(
|
(
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on foreign exchange contracts |
|
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||
| Commodity contracts | ||||||||||||||||||||||||||||||||
| Recognized on derivatives |
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Recognized on hedged items |
|
|
|
|
(
|
(
|
N/A | |||||||||||||||||||||||||
| Total gains (losses) (pre-tax) on commodity contracts |
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
Total gains (losses) (pre-tax) recognized on fair value hedges
|
$ |
|
(
|
(
|
|
|
(
|
|
||||||||||||||||||||||||
|
100
|
Wells Fargo & Company | |||||||
Table 11.5 shows the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships.
Table 11.5:
Hedged Items in Fair Value Hedging Relationships
| Hedged items currently designated | Hedged items no longer designated | ||||||||||||||||
| (in millions) | Carrying amount of assets/(liabilities) (1)(2) |
Hedge accounting
basis adjustment assets/(liabilities) (3) |
Carrying amount of assets/(liabilities) (2) |
Hedge accounting basis adjustment
assets/(liabilities) |
|||||||||||||
| June 30, 2024 | |||||||||||||||||
| Available-for-sale debt securities (4)(5) | $ |
|
(
|
|
|
||||||||||||
| Other assets |
|
(
|
|
|
|||||||||||||
|
Interest-bearing deposits
|
(
|
|
|
|
|||||||||||||
| Long-term debt |
(
|
|
|
|
|||||||||||||
| December 31, 2023 | |||||||||||||||||
| Available-for-sale debt securities (4) | $ |
|
(
|
|
|
||||||||||||
| Other assets |
|
|
|
|
|||||||||||||
|
Interest-bearing deposits
|
(
|
(
|
|
|
|||||||||||||
| Long-term debt |
(
|
|
|
|
|||||||||||||
(1)
Does not include the carrying amount of hedged items where only foreign currency risk is the designated hedged risk. The carrying amount excluded $
and $
for AFS debt securities where only foreign currency risk is the designated hedged risk as of June 30, 2024, and December 31, 2023, respectively.
(2)
Represents the full carrying amount of the hedged asset or liability item as of the balance sheet date, except for circumstances in which only a portion of the asset or liability was designated as the hedged item in which case only the portion designated is presented.
(3)
The balance includes $
26
million and $
632
million of debt securities and long-term debt cumulative basis adjustments, respectively, as of June 30, 2024, and $
32
million and $
731
million of debt securities and long-term debt cumulative basis adjustments, respectively, as of December 31, 2023, on terminated hedges whereby the hedged items have subsequently been re-designated into existing hedges.
(4)
Carrying amount represents the amortized cost.
(5)
The balance includes cumulative basis adjustments of $(
64
) million and $(
46
) million as of June 30, 2024, and December 31, 2023, respectively, related to certain AFS debt securities designated as the hedged item in a fair value hedge using the portfolio layer method. At June 30, 2024, the aggregated designated hedged items using the portfolio layer method had a carrying amount of $
14.5
billion from closed portfolios of financial assets totaling $
14.5
billion. At December 31, 2023, the aggregated designated hedged items using the portfolio layer method had a carrying amount of $
25.8
billion from closed portfolios of financial assets totaling $
28.2
billion.
Derivatives Not Designated as Hedging Instruments
Derivatives not designated as hedging instruments include economic hedges and derivatives entered into for customer accommodation trading purposes.
We use economic hedge derivatives to manage our exposure to interest rate risk, equity price risk, foreign currency risk, and credit risk. We also use economic hedge derivatives to mitigate the periodic earnings volatility caused by mismatches between the changes in fair value of the hedged item and hedging instrument recognized on our fair value accounting hedges.
For additional information on economic hedges and other derivatives, see Note 14 (Derivatives) in our 2023 Form 10-K.
Table 11.6 shows the net gains (losses) related to derivatives not designated as hedging instruments. Gains (losses) on customer accommodation trading derivatives are excluded from the following table. For additional information, see Note 2 (Trading Activities).
Table 11.6:
Gains (Losses) on Derivatives Not Designated as Hedging Instruments
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Interest rate contracts (1) | $ |
(
|
(
|
$ |
(
|
(
|
|||||||||||||||||
| Equity contracts (2) |
|
(
|
|
|
|||||||||||||||||||
| Foreign exchange contracts (3) |
|
(
|
|
(
|
|||||||||||||||||||
| Credit contracts (4) |
|
|
|
(
|
|||||||||||||||||||
| Net gains (losses) recognized related to derivatives not designated as hedging instruments | $ |
(
|
(
|
$ |
(
|
(
|
|||||||||||||||||
(1)
Derivative gains and (losses) related to mortgage banking activities were recorded in mortgage banking noninterest income. Other derivative gains and (losses) not related to mortgage banking were recorded in other noninterest income. For additional information on our mortgage banking interest rate contracts, see Note 6 (Mortgage Banking Activities).
(2)
Includes derivative gains and (losses) used to economically hedge the deferred compensation plan, which were recorded in personnel noninterest expense, and derivative instruments related to our previous sales of shares of Visa Inc. Class B common stock, which were recorded in other noninterest income.
(3)
Includes derivatives used to mitigate foreign exchange risk of specified foreign currency-denominated assets and liabilities. In 2024, gains and (losses) were recorded in net gains from trading and securities within noninterest income. Prior to 2024, gains and (losses) were recorded in other noninterest income.
(4)
Includes credit derivatives used to mitigate credit risk associated with lending exposure. Gains and (losses) were recorded in other noninterest income.
| Wells Fargo & Company |
101
|
|||||||
Note 11:
Derivatives
(continued)
Credit Derivatives
Credit derivative contracts are arrangements whose value is derived from the transfer of credit risk of a reference asset or entity from one party (the purchaser of credit protection) to another party (the seller of credit protection). We generally use credit derivatives to assist customers with their risk management objectives by purchasing and selling credit protection on corporate debt obligations through the use of credit default swaps or through risk participation swaps to help manage counterparty exposure. We would be required to perform under the credit derivatives we sold in the event of default by the referenced obligors. Events of default include events such as bankruptcy, capital restructuring or lack of principal and/or interest payment.
Table 11.7 provides details of sold credit derivatives.
Table 11.7:
Sold Credit Derivatives
| Notional amount | ||||||||
| (in millions) | Protection sold | Protection sold – non-investment grade | ||||||
| June 30, 2024 | ||||||||
| Credit default swaps | $ |
|
|
|||||
| Risk participation swaps |
|
|
||||||
| Total credit derivatives | $ |
|
|
|||||
| December 31, 2023 | ||||||||
| Credit default swaps | $ |
|
|
|||||
| Risk participation swaps |
|
|
||||||
| Total credit derivatives | $ |
|
|
|||||
Protection sold represents the estimated maximum exposure to loss that would be incurred if, upon an event of default, the value of our interests and any associated collateral declined to zero, and does not take into consideration any recovery value from the referenced obligation or offset from collateral held or any economic hedges.
The amounts under non-investment grade represent the notional amounts of those credit derivatives on which we have a higher risk of being required to perform under the terms of the credit derivative and are a function of the underlying assets.
We consider the credit risk to be low if the underlying assets under the credit derivative have an external rating that is investment grade. If an external rating is not available, we classify the credit derivative as non-investment grade.
Our maximum exposure to sold credit derivatives is managed through posted collateral and purchased credit derivatives with identical or similar reference positions in order to achieve our desired credit risk profile. The credit risk management is designed to provide an ability to recover a significant portion of any amounts that would be paid under sold credit derivatives.
Credit-Risk Contingent Features
Certain of our derivative contracts contain provisions whereby if the credit rating of our debt were to be downgraded by certain major credit rating agencies, the counterparty could demand additional collateral or require termination or replacement of derivative instruments in a net liability position.
Table 11.8 illustrates our exposure to OTC bilateral derivative contracts with credit-risk contingent features, collateral we have posted, and the additional collateral we would be required to post if the credit rating of our debt was downgraded below investment grade.
Table 11.8:
Credit-Risk Contingent Features
| (in billions) |
Jun 30,
2024 |
Dec 31,
2023 |
||||||
| Net derivative liabilities with credit-risk contingent features | $ |
|
|
|||||
| Collateral posted |
|
|
||||||
| Additional collateral to be posted upon a below investment grade credit rating (1) |
|
|
||||||
(1)
Any credit rating below investment grade requires us to post the maximum amount of collateral.
|
102
|
Wells Fargo & Company | |||||||
|
Note 12:
Fair Values of Assets and Liabilities
|
||
We use fair value measurements to record fair value adjustments to certain assets and liabilities and to fulfill fair value disclosure requirements. Assets and liabilities recorded at fair value on a recurring basis, such as derivatives, residential MSRs, and trading or AFS debt securities, are presented in Table 12.1 in this Note. Additionally, from time to time, we record fair value adjustments on a nonrecurring basis. These nonrecurring adjustments typically involve application of lower of cost or fair value (LOCOM) accounting, write-downs of individual assets or application of the measurement alternative for nonmarketable equity securities. Assets recorded at fair value on a nonrecurring basis are presented in Table 12.4 in this Note. We provide in Table 12.9 estimates of fair value for financial instruments that are not recorded at fair value, such as loans and debt liabilities carried at amortized cost.
See Note 1
(Summary of Significant Accounting Policies) in our 2023 Form 10-K for a discussion of how we determine fair value. For descriptions of the valuation methodologies we use for assets and liabilities recorded at fair value on a recurring or nonrecurring basis, see Note 15
(
Fair Values of Assets and Liabilities) in our 2023 Form 10-K.
FAIR VALUE HIERARCHY
We classify our assets and liabilities recorded at fair value as either Level 1, 2, or 3 in the fair value hierarchy. The highest priority (Level 1) is assigned to valuations based on unadjusted quoted prices in active markets and the lowest priority (Level 3) is assigned to valuations based on significant unobservable inputs. See Note 1 (Summary of Significant Accounting Policies) in our 2023 Form 10-K for a detailed description of the fair value hierarchy.
In the determination of the classification of financial instruments in Level 2 or Level 3 of the fair value hierarchy, we consider all available information, including observable market data, indications of market liquidity and orderliness, and our understanding of the valuation techniques and significant inputs used. This determination is ultimately based upon the specific facts and circumstances of each instrument or instrument category and judgments are made regarding the significance of the unobservable inputs to the instruments’ fair value measurement in its entirety. If unobservable inputs are considered significant, the instrument is classified as Level 3.
We do not classify nonmarketable equity securities in the fair value hierarchy if we use the non-published net asset value (NAV) per share (or its equivalent) as a practical expedient to measure fair value. Marketable equity securities with published NAVs are classified in the fair value hierarchy.
| Wells Fargo & Company |
103
|
|||||||
Note 12:
Fair Values of Assets and Liabilities
(continued)
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Table 12.1 presents the balances of assets and liabilities recorded at fair value on a recurring basis.
Table 12.1:
Fair Value on a Recurring Basis
|
|
June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||
| Trading debt securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Securities of U.S. Treasury and federal agencies | $ |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
| Collateralized loan obligations |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Corporate debt securities |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Federal agency mortgage-backed securities |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Non-agency mortgage-backed securities |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Other debt securities |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Total trading debt securities |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Available-for-sale debt securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Securities of U.S. Treasury and federal agencies |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Securities of U.S. states and political subdivisions |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Federal agency mortgage-backed securities |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Non-agency mortgage-backed securities |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Collateralized loan obligations |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Other debt securities |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Total available-for-sale debt securities |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Loans held for sale |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Mortgage servicing rights (residential) |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Derivative assets (gross): | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Commodity contracts |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Equity contracts |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Credit contracts |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Total derivative assets (gross) |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Equity securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Marketable |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Nonmarketable |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Total equity securities |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
Other assets
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Total assets prior to derivative netting | $ |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
Derivative netting (1)
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||
| Total assets after derivative netting | $ |
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Derivative liabilities (gross): | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts | $ |
(
|
(
|
(
|
(
|
(
|
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||
| Commodity contracts |
|
(
|
(
|
(
|
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||
|
Equity contracts
|
(
|
(
|
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts |
|
(
|
(
|
(
|
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||
| Credit contracts |
|
(
|
(
|
(
|
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||
| Total derivative liabilities (gross) |
(
|
(
|
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||
|
Short-sale and other liabilities
|
(
|
(
|
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||
|
Interest-bearing deposits
|
|
(
|
|
(
|
|
(
|
|
(
|
|||||||||||||||||||||||||||||||||||||||
| Long-term debt |
|
(
|
|
(
|
|
(
|
|
(
|
|||||||||||||||||||||||||||||||||||||||
| Total liabilities prior to derivative netting | $ |
(
|
$ |
(
|
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||
|
Derivative netting (1)
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities after derivative netting | $ |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||
(1)
Represents balance sheet netting of derivative asset and liability balances, related cash collateral, and portfolio level counterparty valuation adjustments. See Note 11 (Derivatives) for additional information.
|
104
|
Wells Fargo & Company | |||||||
Level 3 Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Table 12.2 presents the changes in Level 3 assets and liabilities measured at fair value on a recurring basis.
Table 12.2:
Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis
|
|
Net unrealized gains (losses)
related to assets and liabilities held at period end |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) |
Balance,
beginning of period |
Net gains/(losses) (1) | Purchases (2) | Sales | Settlements |
Transfers
into Level 3 (3) |
Transfers
out of Level 3 (4) |
Balance,
end of period |
(5) | |||||||||||||||||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trading debt securities | $ |
|
|
|
(
|
(
|
|
(
|
|
|
(6) | |||||||||||||||||||||||||||||||||||||||||||||
| Available-for-sale debt securities |
|
(
|
|
|
(
|
|
(
|
|
(
|
(6) | ||||||||||||||||||||||||||||||||||||||||||||||
| Loans held for sale |
|
(
|
|
(
|
(
|
|
(
|
|
(
|
(7) | ||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage servicing rights (residential) (8) |
|
(
|
|
(
|
|
|
|
|
|
(7) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net derivative assets and liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts |
(
|
(
|
|
|
|
|
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Equity contracts |
(
|
(
|
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Other derivative contracts |
(
|
|
|
(
|
(
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Total derivative contracts |
(
|
(
|
|
(
|
|
|
|
(
|
|
(9) | ||||||||||||||||||||||||||||||||||||||||||||||
| Equity securities |
|
|
|
(
|
|
|
|
|
|
(6) | ||||||||||||||||||||||||||||||||||||||||||||||
| Other assets and liabilities |
|
(
|
|
|
|
|
|
|
(
|
(10) | ||||||||||||||||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trading debt securities | $ |
|
(
|
|
(
|
(
|
|
(
|
|
(
|
(6) | |||||||||||||||||||||||||||||||||||||||||||||
| Available-for-sale debt securities |
|
(
|
|
|
(
|
|
(
|
|
(
|
(6) | ||||||||||||||||||||||||||||||||||||||||||||||
| Loans held for sale |
|
(
|
|
(
|
(
|
|
(
|
|
(
|
(7) | ||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage servicing rights (residential) (8) |
|
(
|
|
(
|
|
|
|
|
|
(7) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net derivative assets and liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts |
(
|
(
|
|
(
|
|
(
|
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Equity contracts |
(
|
(
|
|
|
|
(
|
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Other derivative contracts |
(
|
(
|
|
(
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Total derivative contracts |
(
|
(
|
|
(
|
|
(
|
|
(
|
(
|
(9) | ||||||||||||||||||||||||||||||||||||||||||||||
| Equity securities |
|
(
|
|
(
|
|
|
|
|
(
|
(6) | ||||||||||||||||||||||||||||||||||||||||||||||
|
Other assets and liabilities
|
(
|
|
|
|
|
|
|
(
|
|
(10) | ||||||||||||||||||||||||||||||||||||||||||||||
| Six months ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trading debt securities | $ |
|
|
|
(
|
(
|
|
(
|
|
(
|
(6) | |||||||||||||||||||||||||||||||||||||||||||||
| Available-for-sale debt securities |
|
(
|
|
|
(
|
|
(
|
|
(
|
(6) | ||||||||||||||||||||||||||||||||||||||||||||||
| Loans held for sale |
|
(
|
|
(
|
(
|
|
(
|
|
(
|
(7) | ||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage servicing rights (residential) (8) |
|
(
|
|
(
|
|
|
|
|
|
(7) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net derivative assets and liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts |
(
|
(
|
|
|
|
|
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Equity contracts |
(
|
(
|
|
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Other derivative contracts |
|
|
|
(
|
(
|
|
|
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Total derivative contracts |
(
|
(
|
|
(
|
|
(
|
|
(
|
(
|
(9) | ||||||||||||||||||||||||||||||||||||||||||||||
| Equity securities |
|
|
|
(
|
|
|
|
|
|
(6) | ||||||||||||||||||||||||||||||||||||||||||||||
| Other assets and liabilities |
(
|
|
|
(
|
|
|
|
|
|
(10) | ||||||||||||||||||||||||||||||||||||||||||||||
| Six months ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trading debt securities | $ |
|
(
|
|
(
|
(
|
|
(
|
|
(
|
(6) | |||||||||||||||||||||||||||||||||||||||||||||
| Available-for-sale debt securities |
|
(
|
|
|
(
|
|
(
|
|
(
|
(6) | ||||||||||||||||||||||||||||||||||||||||||||||
| Loans held for sale |
|
|
|
(
|
(
|
|
(
|
|
(
|
(7) | ||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage servicing rights (residential) (8) |
|
(
|
|
(
|
|
|
|
|
|
(7) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net derivative assets and liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts |
(
|
(
|
|
(
|
|
(
|
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Equity contracts
|
(
|
(
|
|
|
|
(
|
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Other derivative contracts |
|
(
|
|
(
|
|
(
|
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Total derivative contracts |
(
|
(
|
|
(
|
|
(
|
|
(
|
(
|
(9) | ||||||||||||||||||||||||||||||||||||||||||||||
| Equity securities |
|
(
|
|
(
|
|
|
|
|
(
|
(6) | ||||||||||||||||||||||||||||||||||||||||||||||
|
Other assets and liabilities
|
(
|
|
|
|
|
|
|
(
|
|
(10) | ||||||||||||||||||||||||||||||||||||||||||||||
(1)
All amounts represent net gains (losses) included in net income except for AFS debt securities and other assets and liabilities which also included net gains (losses) in other comprehensive income. Net gains (losses) included in other comprehensive income for AFS debt securities were $(
2
) million for both the second quarter and first half of 2024, and $(
3
) million and $(
19
) million for the second quarter and first half of 2023, respectively. Net gains (losses) included in other comprehensive income for other assets and liabilities were $(
8
) million and $(
10
) million for the second quarter and first half of 2024, respectively, and $
5
million for both the second quarter and first half of 2023.
(2)
Includes originations of mortgage servicing rights and loans held for sale.
(3)
All assets and liabilities transferred into Level 3 were previously classified within Level 2.
(4)
All assets and liabilities transferred out of Level 3 are classified as Level 2.
(5)
All amounts represent net unrealized gains (losses) related to assets and liabilities held at period end included in net income except for AFS debt securities and other assets and liabilities which also included net unrealized gains (losses) related to assets and liabilities held at period end in other comprehensive income. Net unrealized gains (losses) included in other comprehensive income for AFS debt securities were $(
2
) million and $(
1
) million for the second quarter and first half of 2024, respectively, and $(
2
) million and $(
17
) million for the second quarter and first half of 2023, respectively. Net unrealized gains (losses) included in other comprehensive income for other assets and liabilities were $(
8
) million and $(
10
) million for the second quarter and first half of 2024, and $
5
million for both the second quarter and first half of 2023.
(6)
Included in net gains from trading and securities on our consolidated statement of income.
(7)
Included in mortgage banking income on our consolidated statement of income.
(8)
For additional information on the changes in mortgage servicing rights, see Note 6 (Mortgage Banking Activities).
(9)
Included in mortgage banking income, net gains from trading and securities, and other noninterest income on our consolidated statement of income.
(10)
Included in other noninterest income on our consolidated statement of income.
| Wells Fargo & Company |
105
|
|||||||
Note 12:
Fair Values of Assets and Liabilities
(continued)
Table 12.3 provides quantitative information about the valuation techniques and significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value on a recurring basis.
The significant unobservable inputs for Level 3 assets inherent in the fair values obtained from third-party vendors are not included in the table, as the specific inputs applied are not
provided by the vendor (for additional information on vendor-developed valuations, see Note 15 (Fair Values of Assets and Liabilities) in our 2023 Form 10-K).
Weighted averages of inputs are calculated using outstanding unpaid principal balance for cash instruments, such as loans and securities, and notional amounts for derivative instruments.
Table 12.3:
Valuation Techniques – Recurring Basis
| ($ in millions, except cost to service amounts) | Fair Value Level 3 | Valuation Technique |
Significant
Unobservable Input |
Range of Inputs |
Weighted
Average |
|||||||||||||||||||||||||||||||||
| June 30, 2024 | ||||||||||||||||||||||||||||||||||||||
| Trading and available-for-sale debt securities | $ |
|
Discounted cash flow | Discount rate |
|
- |
|
% |
|
|||||||||||||||||||||||||||||
|
|
Market comparable pricing | Comparability adjustment |
(
|
- |
|
|
||||||||||||||||||||||||||||||||
|
|
Market comparable pricing | Multiples | 0.9x | - | 16.2x | 5.5x | ||||||||||||||||||||||||||||||||
| Loans held for sale |
|
Discounted cash flow | Default rate |
|
- |
|
% |
|
||||||||||||||||||||||||||||||
| Discount rate |
|
- |
|
|
||||||||||||||||||||||||||||||||||
| Loss severity |
|
- |
|
|
||||||||||||||||||||||||||||||||||
| Prepayment rate |
|
- |
|
|
||||||||||||||||||||||||||||||||||
|
|
Market comparable pricing | Comparability adjustment |
(
|
- |
|
(
|
||||||||||||||||||||||||||||||||
| Mortgage servicing rights (residential) |
|
Discounted cash flow | Cost to service per loan (1) | $ |
|
- |
|
|
||||||||||||||||||||||||||||||
| Discount rate |
|
- |
|
% |
|
|||||||||||||||||||||||||||||||||
| Prepayment rate (2) |
|
- |
|
|
||||||||||||||||||||||||||||||||||
| Net derivative assets and (liabilities): | ||||||||||||||||||||||||||||||||||||||
| Interest rate contracts |
(
|
Discounted cash flow | Discount rate |
|
- |
|
|
|||||||||||||||||||||||||||||||
|
(
|
Discounted cash flow | Default rate |
|
- |
|
|
||||||||||||||||||||||||||||||||
| Loss severity |
|
- |
|
|
||||||||||||||||||||||||||||||||||
|
Interest rate contracts: derivative loan
commitments
|
(
|
Discounted cash flow | Fall-out factor |
|
- |
|
|
|||||||||||||||||||||||||||||||
| Initial-value servicing | 5.0 | - | 141.0 | bps | 24.2 | |||||||||||||||||||||||||||||||||
| Equity contracts |
(
|
Discounted cash flow | Conversion factor |
(
|
- |
|
% |
(
|
||||||||||||||||||||||||||||||
| Weighted average life |
|
- |
|
yrs |
|
|||||||||||||||||||||||||||||||||
|
(
|
Option model | Correlation factor |
(
|
- |
|
% |
|
|||||||||||||||||||||||||||||||
| Volatility factor |
|
- |
|
|
||||||||||||||||||||||||||||||||||
| Insignificant Level 3 assets, net of liabilities |
|
|||||||||||||||||||||||||||||||||||||
| Total Level 3 assets, net of liabilities | $ |
|
(3)
|
|||||||||||||||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||||||||||||||
| Trading and available-for-sale debt securities | $ |
|
Discounted cash flow | Discount rate |
|
- |
|
% |
|
|||||||||||||||||||||||||||||
|
|
Market comparable pricing | Comparability adjustment |
(
|
- |
|
(
|
||||||||||||||||||||||||||||||||
|
|
Market comparable pricing | Multiples | 1.2x | - | 10.3x | 5.6x | ||||||||||||||||||||||||||||||||
| Loans held for sale |
|
Discounted cash flow | Default rate |
|
- |
|
% |
|
||||||||||||||||||||||||||||||
| Discount rate |
|
- |
|
|
||||||||||||||||||||||||||||||||||
| Loss severity |
|
- |
|
|
||||||||||||||||||||||||||||||||||
| Prepayment rate |
|
- |
|
|
||||||||||||||||||||||||||||||||||
|
|
Market comparable pricing
|
Comparability adjustment |
(
|
- |
|
(
|
||||||||||||||||||||||||||||||||
| Mortgage servicing rights (residential) |
|
Discounted cash flow | Cost to service per loan (1) | $ |
|
- |
|
|
||||||||||||||||||||||||||||||
| Discount rate |
|
- |
|
% |
|
|||||||||||||||||||||||||||||||||
| Prepayment rate (2) |
|
- |
|
|
||||||||||||||||||||||||||||||||||
| Net derivative assets and (liabilities): | ||||||||||||||||||||||||||||||||||||||
| Interest rate contracts |
(
|
Discounted cash flow | Discount rate |
|
- |
|
|
|||||||||||||||||||||||||||||||
|
(
|
Discounted cash flow | Default rate |
|
- |
|
|
||||||||||||||||||||||||||||||||
| Loss severity |
|
- |
|
|
||||||||||||||||||||||||||||||||||
| Prepayment rate |
|
- |
|
|
||||||||||||||||||||||||||||||||||
|
Interest rate contracts: derivative loan
commitments
|
(
|
Discounted cash flow | Fall-out factor |
|
- |
|
|
|||||||||||||||||||||||||||||||
| Initial-value servicing | (5.5) | - | 141.0 | bps | 10.0 | |||||||||||||||||||||||||||||||||
|
Equity contracts
|
(
|
Discounted cash flow | Conversion factor |
(
|
- |
|
% |
(
|
||||||||||||||||||||||||||||||
| Weighted average life |
|
- |
|
yrs |
|
|||||||||||||||||||||||||||||||||
|
(
|
Option model | Correlation factor |
(
|
- |
|
% |
|
|||||||||||||||||||||||||||||||
| Volatility factor |
|
- |
|
|
||||||||||||||||||||||||||||||||||
| Insignificant Level 3 assets, net of liabilities |
|
|||||||||||||||||||||||||||||||||||||
| Total Level 3 assets, net of liabilities | $ |
|
(3)
|
|||||||||||||||||||||||||||||||||||
(1)
The high end of the range of inputs is for servicing modified loans. For non-modified loans, the range is $
59
- $
165
at June 30, 2024, and $
52
- $
167
at December 31, 2023.
(2)
Includes a blend of prepayment speeds and expected defaults. Prepayment speeds are influenced by mortgage interest rates as well as our estimation of drivers of borrower behavior.
(3)
Consists of total Level 3 assets of $
8.7
billion and $
9.5
billion and total Level 3 liabilities of $
6.8
billion and $
6.2
billion, before netting of derivative balances, at June 30, 2024, and December 31, 2023, respectively.
|
106
|
Wells Fargo & Company | |||||||
For additional information on the valuation techniques and significant unobservable inputs used in the valuation of our Level 3 assets and liabilities, including how changes in these inputs affect fair value estimates, see Note 15 (Fair Values of Assets and Liabilities) in our 2023 Form 10-K.
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with
GAAP. These adjustments to fair value usually result from application of LOCOM accounting, write-downs of individual assets, or application of the measurement alternative for certain nonmarketable equity securities.
Table 12.4 provides the fair value hierarchy and fair value at the date of the nonrecurring fair value adjustment for all assets that were still held as of June 30, 2024, and December 31, 2023, and for which a nonrecurring fair value adjustment was recorded during the six months ended June 30, 2024, and the year ended December 31, 2023.
Table 12.4:
Fair Value on a Nonrecurring Basis
|
|
June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||
| (in millions) | Level 2 | Level 3 | Total | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||
| Loans held for sale (1) | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||||
| Commercial |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Consumer |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total loans |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Nonmarketable equity securities |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Other assets |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total assets at fair value on a nonrecurring basis | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
(1)
Consists of commercial mortgages and residential mortgage – first lien loans.
Table 12.5 presents the gains (losses) on certain assets held at the end of the reporting periods presented for which a nonrecurring fair value adjustment was recognized in earnings during the respective periods.
Table 12.5:
Gains (Losses) on Assets with Nonrecurring Fair Value Adjustment
|
|
Six months ended June 30, | ||||||||||
| (in millions) | 2024 | 2023 | |||||||||
| Loans held for sale | $ |
(
|
(
|
||||||||
| Loans: | |||||||||||
| Commercial |
(
|
(
|
|||||||||
| Consumer |
(
|
(
|
|||||||||
| Total loans |
(
|
(
|
|||||||||
| Nonmarketable equity securities (1) |
(
|
(
|
|||||||||
| Other assets (2) |
|
(
|
|||||||||
| Total | $ |
(
|
(
|
||||||||
(1)
Includes impairment of nonmarketable equity securities and observable price changes related to nonmarketable equity securities accounted for under the measurement alternative.
(2)
Includes impairment of operating lease ROU assets, valuation of physical commodities, valuation losses on foreclosed real estate and other collateral owned.
| Wells Fargo & Company |
107
|
|||||||
Note 12:
Fair Values of Assets and Liabilities
(continued)
Table 12.6 provides quantitative information about the valuation techniques and significant unobservable inputs used in the valuation of our Level 3 assets that are measured at fair value on a nonrecurring basis and determined using an internal model. The table is limited to financial instruments that had nonrecurring fair value adjustments during the periods presented. Weighted averages of inputs are calculated using outstanding unpaid principal balance for cash instruments, such as loans, and carrying value prior to the nonrecurring fair value measurement for nonmarketable equity securities and venture capital and private equity investments in consolidated portfolio companies.
Table 12.6:
Valuation Techniques – Nonrecurring Basis
|
($ in millions)
|
Fair Value
Level 3 |
Valuation
Technique (1) |
Significant
Unobservable Input (1) |
Range of Inputs
Positive (Negative) |
Weighted
Average |
|||||||||||||||||||||||||||
| June 30, 2024 | ||||||||||||||||||||||||||||||||
| Loans held for sale | $ |
|
Discounted cash flow | Default rate |
|
- |
|
% |
|
|||||||||||||||||||||||
| Discount rate |
|
- |
|
|
||||||||||||||||||||||||||||
| Loss severity |
|
- |
|
|
||||||||||||||||||||||||||||
| Prepayment rate |
|
- |
|
|
||||||||||||||||||||||||||||
| Nonmarketable equity securities |
|
Market comparable pricing | Multiples | 0.9x | - | 9.3x | 2.4x | |||||||||||||||||||||||||
|
|
Market comparable pricing | Comparability Adjustment |
(
|
- |
(
|
% |
(
|
|||||||||||||||||||||||||
| Insignificant Level 3 assets |
|
|||||||||||||||||||||||||||||||
| Total | $ |
|
||||||||||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||||||||
| Loans held for sale | $ |
|
Discounted cash flow | Default rate |
|
- |
|
% |
|
|||||||||||||||||||||||
| Discount rate |
|
- |
|
|
||||||||||||||||||||||||||||
| Loss severity |
|
- |
|
|
||||||||||||||||||||||||||||
| Prepayment rate |
|
- |
|
|
||||||||||||||||||||||||||||
| Nonmarketable equity securities |
|
Market comparable pricing | Multiples | 0.7x | - | 27.1x | 8.4x | |||||||||||||||||||||||||
|
|
Market comparable pricing | Comparability Adjustment |
(
|
- |
(
|
% |
(
|
|||||||||||||||||||||||||
|
|
Discounted cash flow | Discount rate |
|
- |
|
|
||||||||||||||||||||||||||
| Insignificant Level 3 assets |
|
|||||||||||||||||||||||||||||||
| Total | $ |
|
||||||||||||||||||||||||||||||
(1)
See Note 15 (Fair Values of Assets and Liabilities) in our 2023 Form 10-K for additional information on the valuation technique(s) and significant unobservable inputs used in the valuation of Level 3 assets.
|
108
|
Wells Fargo & Company | |||||||
Fair Value Option
The fair value option is an irrevocable election, generally only permitted upon initial recognition of financial assets or liabilities, to measure eligible financial instruments at fair value with changes in fair value reflected in earnings. We may elect the fair value option to align the measurement model with how the financial assets or liabilities are managed or to reduce complexity or accounting asymmetry. Following is a discussion of the
portfolios for which we elected the fair value option. For additional information, including the basis for our fair value option elections, see Note 15 (Fair Values of Assets and Liabilities) in our 2023 Form 10-K.
Table 12.7 reflects differences between the fair value carrying amount of the assets and liabilities for which we have elected the fair value option and the contractual aggregate unpaid principal amount at maturity.
Table 12.7:
Fair Value Option
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (in millions) | Fair value carrying amount | Aggregate unpaid principal | Fair value carrying amount less aggregate unpaid principal | Fair value carrying amount | Aggregate unpaid principal |
Fair value carrying amount less aggregate
unpaid principal |
|||||||||||||||||||||||||||||
| Loans held for sale (1) | $ |
|
|
(
|
|
|
(
|
||||||||||||||||||||||||||||
| Interest-bearing deposits |
(
|
(
|
|
(
|
(
|
|
|||||||||||||||||||||||||||||
| Long-term debt (2) |
(
|
(
|
|
(
|
(
|
|
|||||||||||||||||||||||||||||
(1)
Nonaccrual loans and loans 90 days or more past due and still accruing included in LHFS for which we have elected the fair value option were insignificant at June 30, 2024, and December 31, 2023.
(2)
Includes zero coupon notes for which the aggregate unpaid principal amount reflects the contractual principal due at maturity.
Table 12.8 reflects amounts included in earnings related to initial measurement and subsequent changes in fair value, by income statement line item, for assets and liabilities for which
the fair value option was elected. Amounts recorded in net interest income are excluded from the table below.
Table 12.8:
Gains (Losses) on Changes in Fair Value Included in Earnings
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| (in millions) | Mortgage banking noninterest income |
Net gains from trading and securities
|
Other noninterest income | Mortgage banking noninterest income |
Net gains from trading and securities
|
Other noninterest income | |||||||||||||||||||||||||||||
| Quarter ended June 30, | |||||||||||||||||||||||||||||||||||
| Loans held for sale | $ |
|
(
|
|
|
|
|
||||||||||||||||||||||||||||
|
Interest-bearing deposits
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Long-term debt |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Six months ended June 30, | |||||||||||||||||||||||||||||||||||
| Loans held for sale | $ |
|
|
|
|
|
(
|
||||||||||||||||||||||||||||
|
Interest-bearing deposits
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Long-term debt |
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||
For performing loans, instrument-specific credit risk gains or losses are derived principally by determining the change in fair value of the loans due to changes in the observable or implied credit spread. Credit spread is the market yield on the loans less the relevant risk-free benchmark interest rate. For nonperforming loans, we attribute all changes in fair value to instrument-specific credit risk. For LHFS accounted for under the fair value option, instrument-specific credit gains or losses were insignificant during the second quarter and first half of both 2024 and 2023.
For interest-bearing deposits and long-term debt, instrument-specific credit risk gains or losses represent the impact of changes in fair value due to changes in our credit spread and are generally derived using observable secondary bond market information. These impacts are recorded within the debit valuation adjustments (DVA) in OCI. See Note 21 (Other Comprehensive Income) for additional information.
| Wells Fargo & Company |
109
|
|||||||
Note 12:
Fair Values of Assets and Liabilities
(continued)
Disclosures about Fair Value of Financial Instruments
Table 12.9 presents a summary of fair value estimates for financial instruments that are not carried at fair value on a recurring basis. Some financial instruments are excluded from the scope of this table, such as certain insurance contracts, certain nonmarketable equity securities, and leases. This table also excludes assets and liabilities that are not financial instruments such as the value of the long-term relationships with our deposit, credit card and trust customers, MSRs, premises and equipment, goodwill and deferred taxes.
Loan commitments, standby letters of credit and commercial and similar letters of credit are not included in
Table 12.9. A reasonable estimate of the fair value of these instruments is the carrying value of deferred fees plus the allowance for unfunded credit commitments, which totaled $
514
million and $
575
million at June 30, 2024, and December 31, 2023, respectively.
The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying fair value of the Company.
Table 12.9:
Fair Value Estimates for Financial Instruments
| Estimated fair value | |||||||||||||||||||||||||||||
| (in millions) | Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||
| Financial assets | |||||||||||||||||||||||||||||
| Cash and due from banks (1) | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Interest-earning deposits with banks (1) |
|
|
|
|
|
||||||||||||||||||||||||
| Federal funds sold and securities purchased under resale agreements (1) |
|
|
|
|
|
||||||||||||||||||||||||
| Held-to-maturity debt securities |
|
|
|
|
|
||||||||||||||||||||||||
| Loans held for sale |
|
|
|
|
|
||||||||||||||||||||||||
| Loans, net (2) |
|
|
|
|
|
||||||||||||||||||||||||
| Nonmarketable equity securities (cost method) |
|
|
|
|
|
||||||||||||||||||||||||
| Total financial assets | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Financial liabilities | |||||||||||||||||||||||||||||
| Deposits (3) | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Short-term borrowings |
|
|
|
|
|
||||||||||||||||||||||||
| Long-term debt (4) |
|
|
|
|
|
||||||||||||||||||||||||
| Total financial liabilities | $ |
|
|
|
|
|
|||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||
| Financial assets | |||||||||||||||||||||||||||||
| Cash and due from banks (1) | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Interest-earning deposits with banks (1) |
|
|
|
|
|
||||||||||||||||||||||||
| Federal funds sold and securities purchased under resale agreements (1) |
|
|
|
|
|
||||||||||||||||||||||||
| Held-to-maturity debt securities |
|
|
|
|
|
||||||||||||||||||||||||
| Loans held for sale |
|
|
|
|
|
||||||||||||||||||||||||
| Loans, net (2) |
|
|
|
|
|
||||||||||||||||||||||||
| Nonmarketable equity securities (cost method) |
|
|
|
|
|
||||||||||||||||||||||||
| Total financial assets | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Financial liabilities | |||||||||||||||||||||||||||||
| Deposits (3) | $ |
|
|
|
|
|
|||||||||||||||||||||||
| Short-term borrowings |
|
|
|
|
|
||||||||||||||||||||||||
| Long-term debt (4) |
|
|
|
|
|
||||||||||||||||||||||||
| Total financial liabilities | $ |
|
|
|
|
|
|||||||||||||||||||||||
(1)
Amounts consist of financial instruments for which carrying value approximates fair value.
(2)
Excludes lease financing with a carrying amount of $
16.5
billion and $
16.2
billion at June 30, 2024, and December 31, 2023, respectively.
(3)
Excludes deposit liabilities with no defined or contractual maturity of $
1.2
trillion at both June 30, 2024, and December 31, 2023.
(4)
Excludes obligations under finance leases of $
17
million and $
19
million at June 30, 2024, and December 31, 2023, respectively.
|
110
|
Wells Fargo & Company | |||||||
|
Note 13:
Securitizations and Variable Interest Entities
|
||
Involvement with Variable Interest Entities (VIEs)
In the normal course of business, we enter into various types of on- and off-balance sheet transactions with special purpose entities (SPEs), which are corporations, trusts, limited liability companies or partnerships that are established for a limited purpose. SPEs are often formed in connection with securitization transactions whereby financial assets are transferred to an SPE. SPEs formed in connection with securitization transactions are generally considered variable interest entities (VIEs). The VIE may alter the risk profile of the asset by entering into derivative transactions or obtaining credit support, and issues various forms of interests in those assets to investors. When we transfer financial assets from our consolidated balance sheet to a VIE in connection with a securitization, we typically receive cash and sometimes other interests in the VIE as proceeds for the assets we transfer. In certain transactions with VIEs, we may retain the right to service the transferred assets and repurchase the transferred assets if the outstanding balance of the assets falls below the level at which the cost to service the assets exceed the benefits. In addition, we may purchase the right to service loans transferred to a VIE by a third party.
In connection with our securitization or other VIE activities, we have various forms of ongoing involvement with VIEs, which may include:
•
underwriting securities issued by VIEs and subsequently making markets in those securities;
•
providing credit enhancement on securities issued by VIEs through the use of letters of credit or financial guarantees;
•
entering into other derivative contracts with VIEs;
•
holding senior or subordinated interests in VIEs;
•
acting as servicer or investment manager for VIEs;
•
providing administrative or trustee services to VIEs; and
•
providing seller financing to VIEs.
Loan Sales and Securitization Activity
We periodically transfer consumer and commercial loans and other types of financial assets in securitization and whole loan sale transactions.
MORTGAGE LOANS SOLD TO GOVERNMENT SPONSORED ENTERPRISES AND TRANSACTIONS WITH GINNIE MAE
In the normal course of business we sell residential and commercial mortgage loans to GSEs. These loans are generally transferred into securitizations sponsored by the GSEs, which provide certain credit guarantees to investors and servicers. We also transfer mortgage loans into securitization pools pursuant to Government National Mortgage Association (GNMA) guidelines which are insured by the FHA or guaranteed by the VA. Mortgage loans eligible for securitization with the GSEs or GNMA are considered conforming loans. The GSEs or GNMA design the structure of these securitizations, sponsor the involved VIEs, and have power over the activities most significant to the VIE.
We account for loans transferred in conforming mortgage loan securitization transactions as sales and do not consolidate the VIEs as we are not the primary beneficiary. In exchange for the transfer of loans, we typically receive securities issued by the VIEs which we sell to third parties for cash or hold for investment purposes as HTM or AFS securities. We also retain servicing rights on the transferred loans. As a servicer, we retain the option to repurchase loans from certain loan securitizations, which becomes exercisable based on delinquency status such as when three scheduled loan payments are past due. When we have the
unilateral option to repurchase a loan, we recognize the loan and a corresponding liability on our balance sheet regardless of our intent to repurchase the loan, and the loans remain pledged to the securitization. At June 30, 2024, and December 31, 2023, we recorded assets and related liabilities of $
1.2
billion and $
1.0
billion, respectively, where we did not exercise our option to repurchase eligible loans. We repurchased loans of $
18
million and $
108
million, during the second quarter and first half of 2024, respectively, and $
99
million and $
191
million during the second quarter and first half of 2023, respectively.
Upon transfers of loans, we also provide indemnification for losses incurred due to material breaches of contractual representations and warranties as well as other recourse arrangements. At June 30, 2024, and December 31, 2023, our liability for these repurchase and recourse arrangements was $
202
million and $
229
million, respectively, and the maximum exposure to loss was $
13.5
billion and $
13.6
billion
at June 30, 2024, and December 31, 2023, respectively.
Substantially all residential servicing activity is related to assets transferred to GSE and GNMA securitizations. See Note 6 (Mortgage Banking Activities) for additional information about residential and commercial servicing rights, advances and servicing fees.
NONCONFORMING MORTGAGE LOAN SECURITIZATIONS
In the normal course of business, we sell nonconforming mortgage loans in securitization transactions that we design and sponsor. Nonconforming mortgage loan securitizations do not involve a government credit guarantee, and accordingly, beneficial interest holders are subject to credit risk of the underlying assets held by the securitization VIE. We typically originate the transferred loans and account for the transfers as sales. We also typically retain the right to service the loans and may hold other beneficial interests issued by the VIE, such as debt securities held for investment purposes. Our servicing role related to nonconforming commercial mortgage loan securitizations is limited to primary or master servicer. We do not consolidate the VIE because the most significant decisions impacting the performance of the VIE are generally made by the special servicer or the controlling class security holder. For our residential nonconforming mortgage loan securitizations accounted for as sales, we either do not hold variable interests that we consider potentially significant or are not the primary servicer for a majority of the VIE assets.
WHOLE LOAN SALE TRANSACTIONS
We may also sell whole loans to VIEs where we have continuing involvement in the form of financing. We account for these transfers as sales, and do not consolidate the VIEs as we do not have the power to direct the most significant activities of the VIEs.
Table 13.1 presents information about transfers of assets during the periods presented for which we recorded the transfers as sales and have continuing involvement with the transferred assets. In connection with these transfers, we received proceeds and recorded servicing assets and securities. Each of these interests are initially measured at fair value. Servicing rights are classified as Level 3 measurements, and generally securities are classified as Level 2. Transfers of residential mortgage loans are transactions with the GSEs or GNMA and generally result in
no
gain or loss because the loans are typically measured at fair value on a recurring basis. Transfers of commercial mortgage loans
| Wells Fargo & Company |
111
|
|||||||
Note 13:
Securitizations and Variable Interest Entities
(continued)
include both transactions with the GSEs or GNMA and nonconforming transactions. These commercial mortgage loans are carried at the lower of cost or market, and we recognize gains
on such transfers when the market value is greater than the carrying value of the loan when it is sold.
Table 13.1:
Transfers with Continuing Involvement
| 2024 | 2023 | ||||||||||||||||||||||
| (in millions) | Residential mortgages | Commercial mortgages | Residential mortgages | Commercial mortgages | |||||||||||||||||||
| Quarter ended June 30, | |||||||||||||||||||||||
| Assets sold | $ |
|
|
|
|
||||||||||||||||||
| Proceeds from transfer (1) |
|
|
|
|
|||||||||||||||||||
| Net gains (losses) on sale |
|
|
|
|
|||||||||||||||||||
| Continuing involvement (2): | |||||||||||||||||||||||
| Servicing rights recognized | $ |
|
|
|
|
||||||||||||||||||
| Securities recognized (3) |
|
|
|
|
|||||||||||||||||||
| Six months ended June 30, | |||||||||||||||||||||||
| Assets sold | $ |
|
|
|
|
||||||||||||||||||
| Proceeds from transfer (1) |
|
|
|
|
|||||||||||||||||||
| Net gains (losses) on sale |
|
|
|
|
|||||||||||||||||||
| Continuing involvement (2): | |||||||||||||||||||||||
| Servicing rights recognized | $ |
|
|
|
|
||||||||||||||||||
| Securities recognized (3) |
|
|
|
|
|||||||||||||||||||
(1)
Represents cash proceeds and the fair value of non-cash beneficial interests recognized at securitization settlement.
(2)
Represents assets or liabilities recognized at securitization settlement date related to our continuing involvement in the transferred assets.
(3)
Represents debt securities obtained at securitization settlement held for investment purposes that are classified as available-for-sale or held-to-maturity. Excludes trading debt securities held temporarily for market-marking purposes, which are sold to third parties at or shortly after securitization settlement, of $
1.1
billion and $
1.7
billion during the second quarter and first half of 2024, respectively, and $
1.8
billion and $
3.7
billion during the second quarter and first half of 2023, respectively.
In the normal course of business, we purchase certain
non-agency securities at initial securitization or subsequently in the secondary market, which we hold for investment. We also provide seller financing in the form of loans. We received cash flows of $
34
million and $
192
million during the second quarter and first half of 2024, respectively, and $
91
million and $
141
million during the second quarter and first half of 2023, respectively, related to principal and interest payments on these securities and loans, which exclude cash flows related to trading activities.
Table 13.2 presents the key weighted-average assumptions we used to initially measure residential MSRs recognized during the periods presented.
Table 13.2:
Residential MSRs – Assumptions at Securitization Date
| 2024 | 2023 | ||||||||||
| Quarter ended June 30, | |||||||||||
| Prepayment rate (1) |
|
% |
|
||||||||
| Discount rate |
|
|
|||||||||
| Cost to service ($ per loan) | $ |
|
|
||||||||
| Six months ended June 30, | |||||||||||
| Prepayment rate (1) |
|
% |
|
||||||||
| Discount rate |
|
|
|||||||||
| Cost to service ($ per loan) | $ |
|
|
||||||||
(1)
Includes a blend of prepayment speeds and expected defaults. Prepayment speeds are influenced by mortgage interest rates as well as our estimation of drivers of borrower behavior.
See Note 12 (Fair Values of Assets and Liabilities) and
Note 6 (Mortgage Banking Activities) for additional information on key assumptions for residential MSRs.
RESECURITIZATION ACTIVITIES
We enter into resecuritization transactions as part of our trading activities to accommodate the investment and risk management activities of our customers. In resecuritization transactions, we transfer trading debt securities to VIEs in exchange for new beneficial interests that are sold to third parties at or shortly after securitization settlement. This activity is performed for customers seeking a specific return or risk profile. Substantially all of our transactions involve the resecuritization of conforming mortgage-backed securities issued by the GSEs or guaranteed by GNMA. We do not consolidate the resecuritization VIEs as we share in the decision-making power with third parties and do not hold significant economic interests in the VIEs other than for market-making activities. During the six months ended June 30, 2024 and 2023, we transferred securities of $
5.2
billion and $
6.1
billion, respectively, to resecuritization VIEs, and retained $
211
million and $
329
million, respectively. These amounts are not included in Table 13.1. Related total VIE assets were $
109.5
billion and $
110.4
billion
at June 30, 2024, and December 31, 2023, respectively. As of June 30, 2024, and December 31, 2023, we held $
528
million and $
984
million of securities, respectively.
|
112
|
Wells Fargo & Company | |||||||
Sold or Securitized Loans Serviced for Others
Table 13.3 presents information about loans that we have originated and sold or securitized in which we have ongoing involvement as servicer. For loans sold or securitized where servicing is our only form of continuing involvement, we generally experience a loss only if we were required to repurchase a delinquent loan or foreclosed asset due to a breach in representations and warranties associated with our loan sale or servicing contracts. Table 13.3 excludes mortgage loans sold to
and held or securitized by GSEs or GNMA of $
550.0
billion and $
592.5
billion at June 30, 2024, and December 31, 2023, respectively. Delinquent loans include loans 90 days or more past due and loans in bankruptcy, regardless of delinquency status. Delinquent loans and foreclosed assets related to loans sold to and held or securitized by GSEs and GNMA were $
2.7
billion and $
3.4
billion at June 30, 2024, and December 31, 2023, respectively.
Table 13.3:
Sold or Securitized Loans Serviced for Others
| Net charge-offs | |||||||||||||||||||||||||||||||||||
| Total loans |
Delinquent loans
and foreclosed assets (1) |
Six months ended June 30, | |||||||||||||||||||||||||||||||||
| (in millions) | Jun 30, 2024 | Dec 31, 2023 | Jun 30, 2024 | Dec 31, 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| Commercial | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Residential |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total off-balance sheet sold or securitized loans | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
(1)
Includes $
226
million and $
163
million of commercial foreclosed assets and $
18
million and $
22
million of residential foreclosed assets at June 30, 2024, and December 31, 2023, respectively.
Transactions with Unconsolidated VIEs
MORTGAGE LOAN SECURITIZATIONS
Table 13.4 includes nonconforming mortgage loan securitizations where we originate and transfer the loans to the unconsolidated securitization VIEs that we sponsor. For additional information about these VIEs, see the “Loan Sales and Securitization Activity” section within this Note. Nonconforming mortgage loan securitizations also include commercial mortgage loan securitizations sponsored by third parties where we did not originate or transfer the loans but serve as master servicer and invest in securities that could be potentially significant to the VIE.
Conforming loan securitization and resecuritization transactions involving the GSEs and GNMA are excluded from Table 13.4 because we are not the sponsor or we do not have power over the activities most significant to the VIEs. Additionally, due to the nature of the guarantees provided by the GSEs and the FHA and VA, our credit risk associated with these VIEs is limited. For additional information about conforming mortgage loan securitizations and resecuritizations, see the “Loan Sales and Securitization Activity” and “Resecuritization Activities” sections within this Note.
COMMERCIAL REAL ESTATE LOANS
We may transfer purchased industrial development bonds and GSE credit enhancements to VIEs in exchange for beneficial interests. We may also acquire such beneficial interests in transactions where we do not act as a transferor. We own all of the beneficial interests and may also service the underlying mortgages that serve as collateral to the bonds. The GSEs have the power to direct the servicing and workout activities of the VIE in the event of a default, therefore we do not have control over the key decisions of the VIEs.
OTHER VIE STRUCTURES
We engage in various forms of structured finance arrangements with other VIEs, including asset-backed finance structures and other securitizations collateralized by asset classes other than mortgages. Collateral may include rental properties, asset-backed securities, student loans and mortgage loans. We may participate in structuring or marketing the arrangements as well as provide financing, service one or more of the underlying assets, or enter into derivatives with the VIEs. We may also receive fees for those services. We are not the primary beneficiary of these structures because we
do not have power to direct the most significant activities of the VIEs.
Table 13.4 provides a summary of our exposure to the unconsolidated VIEs described above, which includes investments in securities, loans, guarantees, liquidity agreements, commitments and certain derivatives. We exclude certain transactions with unconsolidated VIEs when our continuing involvement is temporary or administrative in nature or insignificant in size.
In Table 13.4, “Total VIE assets” represents the remaining principal balance of assets held by unconsolidated VIEs using the most current information available. “Carrying value” is the amount in our consolidated balance sheet related to our involvement with the unconsolidated VIEs. “Maximum exposure to loss” is determined as the carrying value of our investment in the VIEs excluding the unconditional repurchase options that have not been exercised, plus the remaining undrawn liquidity and lending commitments, the notional amount of net written derivative contracts, and generally the notional amount of, or stressed loss estimate for, other commitments and guarantees.
Debt, guarantees and other commitments include amounts related to lending arrangements, liquidity agreements, and certain loss sharing obligations associated with loans originated, sold, and serviced under certain GSE programs.
“Maximum exposure to loss” represents estimated loss that would be incurred under severe, hypothetical circumstances, for which we believe the possibility is extremely remote, such as where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. Accordingly, this disclosure is not an indication of expected loss.
| Wells Fargo & Company |
113
|
|||||||
Note 13:
Securitizations and Variable Interest Entities
(continued)
Table 13.4:
Unconsolidated VIEs
|
Carrying value – asset (liability)
|
|||||||||||||||||||||||||||||||||||||||||
| (in millions) |
Total
VIE assets |
Loans |
Debt
securities (1) |
Equity securities |
All other
assets (2) |
Debt and other liabilities | Net assets | ||||||||||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Nonconforming mortgage loan securitizations | $ |
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||
| Commercial real estate loans |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||
| Maximum exposure to loss | |||||||||||||||||||||||||||||||||||||||||
| Loans |
Debt
securities (1) |
Equity securities |
All other
assets (2) |
Debt, guarantees,
and other commitments |
Total exposure | ||||||||||||||||||||||||||||||||||||
| Nonconforming mortgage loan securitizations | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commercial real estate loans |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Total | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Carrying value – asset (liability)
|
|||||||||||||||||||||||||||||||||||||||||
|
(in millions)
|
Total
VIE assets |
Loans |
Debt
securities (1) |
Equity
securities |
All other
assets (2) |
Debt and other liabilities | Net assets | ||||||||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Nonconforming mortgage loan securitizations | $ |
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||
| Commercial real estate loans |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||
| Maximum exposure to loss | |||||||||||||||||||||||||||||||||||||||||
| Loans |
Debt
securities (1) |
Equity
securities |
All other
assets (2) |
Debt,
guarantees, and other commitments |
Total exposure | ||||||||||||||||||||||||||||||||||||
| Nonconforming mortgage loan securitizations | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commercial real estate loans |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Total | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
(1)
Includes $
247
million and $
301
million of securities classified as trading at June 30, 2024, and December 31, 2023, respectively.
(2)
All other assets includes mortgage servicing rights, derivative assets, and other assets (predominantly servicing advances).
INVOLVEMENT WITH TAX CREDIT VIES
In addition to the unconsolidated VIEs in Table 13.4, we may invest in or provide funding to affordable housing, renewable energy or similar projects that are designed to generate a return primarily through the realization of federal income tax credits and other income tax benefits. Our affordable housing investments generate low-income housing tax credits and our renewable energy investments generate either production tax credits, investment tax credits, or both. The projects are typically managed by third-party sponsors who have the power over the VIE’s assets; therefore, we do not consolidate the VIEs. The carrying value of our equity investments in tax credit VIEs was $
21.3
billion and $
19.7
billion at June 30, 2024, and December 31, 2023, respectively. Additionally, we had loans to tax credit VIEs with a carrying value of $
2.0
billion and $
2.1
billion at June 30, 2024, and December 31, 2023, respectively.
Our maximum exposure to loss for tax credit VIEs at June 30, 2024, and December 31, 2023, was $
29.7
billion and $
30.6
billion, respectively. Our maximum exposure to loss included total unfunded equity and lending commitments of $
6.3
billion and $
8.7
billion at June 30, 2024, and December 31, 2023, respectively. Under these commitments, we are required to provide additional financial support during the investment period, at the discretion of project sponsors, or for certain renewable energy investments, on a contingent basis based on the amount of income tax credits earned. For equity investments
accounted for using the proportional amortization method, a liability is recognized for unfunded commitments that are either legally binding or contingent but probable of funding. The liability recognized for these commitments at June 30, 2024, and December 31, 2023, was $
7.2
billion and $
4.9
billion, respectively. Substantially all of these commitments are expected to be funded within
three years
. See Note 1 (Summary of Significant Accounting Policies) for additional information on our adoption of ASU 2023-02 effective January 1, 2024, which impacted the accounting for our tax credit equity investments and related unfunded commitments. See also Note 14 (Guarantees and Other Commitments) for additional information about unrecognized commitments to purchase equity securities.
Table 13.5 summarizes the impacts to our consolidated statement of income related to our affordable housing and renewable energy equity investments.
|
114
|
Wells Fargo & Company | |||||||
Table 13.5:
Income Statement Impacts for Affordable Housing and Renewable Energy Tax Credit Investments (1)
| Quarter ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Loss before income tax expense (2) | (A) | $ |
(
|
(
|
$ |
(
|
(
|
|||||||||||||||||||
| Income tax expense (benefit): | ||||||||||||||||||||||||||
| Proportional amortization of investments |
|
|
|
|
||||||||||||||||||||||
| Income tax credits and other income tax benefits |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
| Net expense (benefit) recognized within income tax expense | (B) |
(
|
(
|
(
|
(
|
|||||||||||||||||||||
| Net income related to affordable housing and renewable energy tax credit investments | (A)-(B) | $ |
|
|
$ |
|
|
|||||||||||||||||||
(1)
Amounts presented include the impacts for affordable housing and renewable energy tax credit investments, which are accounted for using either the proportional amortization method or the equity method. Prior period balances in this table do not reflect accounting changes related to our adoption of ASU 2023-02
,
effective January 1, 2024. For additional information, see Note 1 (Summary of Significant Accounting Policies).
(2)
Loss before income tax expense predominantly relates to equity method losses from renewable energy tax credit investments, which are recorded in other noninterest income on our consolidated statement of income.
Consolidated VIEs
We consolidate VIEs where we are the primary beneficiary. We are the primary beneficiary of the following structure types:
COMMERCIAL AND INDUSTRIAL LOANS AND LEASES
We previously securitized dealer floor plan loans in a revolving master trust entity. As servicer and holder of all beneficial interests, we control the key decisions of the trust and consolidate the VIE. In first quarter 2024, we removed the loans held by the master trust entity by transferring them to another subsidiary of Wells Fargo, which had no impact on our consolidated balance sheet. In a separate transaction structure, we may provide the majority of debt and equity financing to an SPE that engages in lending and leasing to specific vendors and we service the underlying collateral.
CREDIT CARD SECURITIZATIONS
Beginning in first quarter 2024, we securitized a portion of our credit card loans to provide a source of funding. Credit card securitizations involve the transfer of credit card loans to a master trust that issues debt securities to third party investors that are collateralized by the transferred credit card loans. The underlying securitized credit card loans and other assets in the master trust are available only for payment of the debt securities issued by the master trust; they are not available to pay our other obligations. In addition, the investors in the debt securities do not have recourse to the general credit of Wells Fargo.
We consolidate the master trust because, as the servicer of the credit card loans, we have the power to direct the activities that most significantly impact the economic performance and hold variable interests potentially significant to the VIE. We hold a minimum of
5
% seller’s interest in the transferred credit card loans and we retain subordinated securities issued by the master trust, which collectively could result in exposure to potentially significant losses or benefits from the master trust. As of June 30, 2024, we held seller’s interest of $
7.1
billion in the transferred credit card loans and subordinated securities of $
750
million (at par) issued by the master trust, which are both eliminated in our consolidated financial statements. The transferred credit card loans and debt securities issued to third parties are recognized on our consolidated balance sheet, and classified as loans and long-term debt, respectively.
Table 13.6 presents a summary of financial assets and liabilities of our consolidated VIEs. The carrying value represents assets and liabilities recognized on our consolidated balance sheet. “Total VIE assets” includes affiliate balances that are eliminated upon consolidation, and therefore in some instances will differ from the carrying value of assets.
On our consolidated balance sheet, we separately disclose (1) the consolidated assets of certain VIEs that can only be used to settle the liabilities of those VIEs, and (2) the consolidated liabilities of certain VIEs for which the VIE creditors do not have recourse to Wells Fargo.
Table 13.6:
Transactions with Consolidated VIEs
|
Carrying value – asset (liability)
|
|||||||||||||||||||||||||||||
| (in millions) |
Total
VIE assets |
Loans |
All other
assets (1) |
Long-term debt |
All other liabilities (2)
|
||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||
| Commercial and industrial loans and leases | $ |
|
|
|
|
(
|
|||||||||||||||||||||||
|
Credit card securitizations
|
|
|
|
(
|
(
|
||||||||||||||||||||||||
| Other |
|
|
|
|
|
||||||||||||||||||||||||
| Total consolidated VIEs | $ |
|
|
|
(
|
(
|
|||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||
| Commercial and industrial loans and leases | $ |
|
|
|
|
(
|
|||||||||||||||||||||||
|
Credit card securitizations
|
|
|
|
|
|
||||||||||||||||||||||||
| Other |
|
|
|
|
|
||||||||||||||||||||||||
| Total consolidated VIEs | $ |
|
|
|
|
(
|
|||||||||||||||||||||||
(1)
All other assets includes loans held for sale and other assets.
(2)
All other liabilities includes short-term borrowings, and accrued expenses and other liabilities.
| Wells Fargo & Company |
115
|
|||||||
Note 13:
Securitizations and Variable Interest Entities
(continued)
Other Transactions
In addition to the transactions included in the previous tables, we have used wholly-owned trust preferred security VIEs to issue debt securities or preferred equity exclusively to third-party investors. As the sole assets of the VIEs are receivables from us, we do not consolidate the VIEs even though we own all of the voting equity shares of the VIEs, have fully guaranteed the obligations of the VIEs, and may have the right to redeem the third-party securities under certain circumstances. On our consolidated balance sheet, we reported the debt securities issued to the VIEs as long-term junior subordinated debt with a carrying value of $
421
million and $
414
million at June 30, 2024, and December 31, 2023, respectively.
|
116
|
Wells Fargo & Company | |||||||
|
Note 14:
Guarantees and Other Commitments
|
||
Guarantees are contracts that contingently require us to make payments to a guaranteed party based on an event or a change in an underlying asset, liability, rate or index. For additional
descriptions of our guarantees, see Note 17 (Guarantees and Other Commitments) in our 2023 Form 10-K.
Table 14.1 shows carrying value and maximum exposure to loss on our guarantees.
Table 14.1:
Guarantees – Carrying Value and Maximum Exposure to Loss
| Maximum exposure to loss | |||||||||||||||||||||||||||||||||||||||||
| (in millions) | Carrying value of obligation | Expires in one year or less | Expires after one year through three years | Expires after three years through five years | Expires after five years | Total | Non-investment grade | ||||||||||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
|
Standby letters of credit
(1)
|
$ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Direct pay letters of credit (1) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Loans and LHFS sold with recourse
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Exchange and clearing house guarantees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other guarantees and indemnifications |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total guarantees | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Standby letters of credit (1) | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Direct pay letters of credit (1) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Loans and LHFS sold with recourse
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Exchange and clearing house guarantees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Other guarantees and indemnifications
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total guarantees | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
(1)
Standby and direct pay letters of credit are reported net of syndications and participations.
Maximum exposure to loss represents the estimated loss that would be incurred under an assumed hypothetical circumstance, despite what we believe is a remote possibility, where the value of our interests and any associated collateral declines to zero. Maximum exposure to loss estimates in
Table 14.1 do not reflect economic hedges or collateral we could use to offset or recover losses we may incur under our guarantee agreements. Accordingly, these amounts are not an indication of expected loss. We believe the carrying value is more representative of our current exposure to loss than maximum exposure to loss. The carrying value represents the fair value of the guarantee, if any, and also includes an ACL for guarantees, if applicable. In determining the ACL for guarantees, we consider the credit risk of the related contingent obligation.
For our guarantees in Table 14.1, non-investment grade represents those guarantees on which we have a higher risk of performance under the terms of the guarantee, which is determined based on an external rating or an internal credit grade that is below investment grade, if applicable.
WRITTEN OPTIONS
We enter into written foreign currency options and over-the-counter written equity put options that are derivative contracts that have the characteristics of a guarantee. The fair value of written options represents our view of the probability that we will be required to perform under the contract. The fair value of these written options was an asset of $
282
million and $
178
million at June 30, 2024, and December 31, 2023, respectively. The fair value may be an asset as a result of deferred premiums on certain option trades. The maximum exposure to loss represents the notional value of these derivative contracts. At June 30, 2024, the maximum exposure to loss was $
28.7
billion, with $
26.3
billion expiring in three years or less compared with $
34.0
billion and $
31.9
billion, respectively, at December 31, 2023. See Note 11 (Derivatives) for additional information regarding written derivative contracts.
MERCHANT PROCESSING SERVICES
We provide debit and credit card transaction processing services through payment networks directly for merchants and as a sponsor for merchant processing servicers, including our joint venture with a third party that is accounted for as an equity method investment. In our role as the merchant acquiring bank, we have a potential obligation in connection with payment and delivery disputes between the merchant and the cardholder that are resolved in favor of the cardholder, referred to as a charge-back transaction. We estimate our potential maximum exposure to be the total merchant transaction volume processed in the preceding four months, which is generally the lifecycle for a charge-back transaction. As of June 30, 2024, our potential maximum exposure was approximately $
669.8
billion, and related losses, including those from our joint venture entity, were insignificant.
GUARANTEES OF SUBSIDIARIES
The Parent fully and unconditionally guarantees the payment of principal, interest, and any other amounts that may be due on securities that its 100% owned finance subsidiary, Wells Fargo Finance LLC, may issue.
These securities are not guaranteed by any other subsidiary of the Parent. The guaranteed liabilities were $
1.0
billion and $
834
million at June 30, 2024, and December 31, 2023, respectively. These guarantees rank on parity with all of the Parent’s other unsecured and unsubordinated indebtedness.
OTHER COMMITMENTS
As of June 30, 2024, and December 31, 2023, we had commitments to purchase equity securities of $
7.0
billion and $
9.2
billion, respectively, which predominantly included Federal Reserve Bank stock and tax credit investments accounted for using the equity method.
As part of maintaining our memberships in certain clearing organizations, we are required to stand ready to provide liquidity to sustain market clearing activity in the event unforeseen events occur or are deemed likely to occur. Certain of these
| Wells Fargo & Company |
117
|
|||||||
Note 14:
Guarantees and Other Commitments
(continued)
obligations are guarantees of other members’ performance and accordingly are included in Table 14.1 in Other guarantees and indemnifications.
We have commitments to enter into resale and securities borrowing agreements as well as repurchase and securities lending agreements with certain counterparties, including central clearing organizations. The amount of our unfunded contractual commitments for resale and securities borrowing agreements was $
16.7
billion and $
17.5
billion as of June 30, 2024, and December 31, 2023, respectively. The amount of our unfunded contractual commitments for repurchase and securities lending agreements was $
1.7
billion and $
746
million as of June 30, 2024, and December 31, 2023, respectively.
Given the nature of these commitments, they are excluded from Table 5.4 (Unfunded Credit Commitments) in Note 5 (Loans and Related Allowance for Credit Losses).
|
118
|
Wells Fargo & Company | |||||||
|
Note 15:
Securities and Other Collateralized Financing Activities
|
||
We enter into resale and repurchase agreements and securities borrowing and lending agreements (collectively, “securities financing activities”) typically to finance trading positions (including securities and derivatives), acquire securities to cover short trading positions, accommodate customers’ financing needs, and settle other securities obligations. These activities are conducted through our broker-dealer subsidiaries and, to a lesser extent, through other bank entities. Our securities financing activities primarily involve high-quality, liquid securities such as U.S. Treasury securities and government agency securities and, to a lesser extent, less liquid securities, including equity securities, corporate bonds and asset-backed securities. We account for these transactions as collateralized financings in which we typically receive or pledge securities as collateral. We believe these financing transactions generally do not have material credit risk given the collateral provided and the related monitoring processes. We also enter into resale agreements involving collateral other than securities, such as loans, as part of our commercial lending business activities.
OFFSETTING OF SECURITIES AND OTHER COLLATERALIZED FINANCING ACTIVITIES
Table 15.1 presents resale and repurchase agreements subject to master repurchase agreements (MRA) and securities borrowing and lending agreements subject to master securities lending agreements (MSLA). Where legally enforceable, these master netting arrangements give the ability, in the event of default by the counterparty, to liquidate securities held as collateral and to offset receivables and payables with the
same counterparty. Collateralized financings with the same counterparty are presented net on our consolidated balance sheet, provided certain criteria are met that permit balance sheet netting. The majority of transactions subject to these agreements do not meet those criteria and thus are not eligible for balance sheet netting.
Collateral we pledged consists of non-cash instruments, such as securities or loans, and is not netted on our consolidated balance sheet against the related liability. Collateral we received includes securities or loans and is not recognized on our consolidated balance sheet. Collateral pledged or received may be increased or decreased over time to maintain certain contractual thresholds, as the assets underlying each arrangement fluctuate in value. For additional information on collateral pledged and accepted, see Note 16 (Pledged Assets and Collateral). Generally, these agreements require collateral to exceed the asset or liability recognized on the balance sheet. The following table includes the amount of collateral pledged or received related to exposures subject to enforceable MRAs or MSLAs. While these agreements are typically over-collateralized, the disclosure in this table is limited to the reported amount of such collateral to the amount of the related recognized asset or liability for each counterparty.
In addition to the amounts included in Table 15.1, we also have balance sheet netting related to derivatives that is disclosed in Note 11 (Derivatives).
Table 15.1:
Offsetting – Securities and Other Collateralized Financing Activities
|
(in millions)
|
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||
| Assets: | |||||||||||
| Resale and securities borrowing agreements | |||||||||||
| Gross amounts recognized | $ |
|
|
||||||||
| Gross amounts offset in consolidated balance sheet (1) |
(
|
(
|
|||||||||
| Net amounts in consolidated balance sheet (2) |
|
|
|||||||||
|
Collateral received not recognized in consolidated balance sheet (3)
|
(
|
(
|
|||||||||
| Net amount (4) | $ |
|
|
||||||||
| Liabilities: | |||||||||||
| Repurchase and securities lending agreements | |||||||||||
| Gross amounts recognized | $ |
|
|
||||||||
| Gross amounts offset in consolidated balance sheet (1) |
(
|
(
|
|||||||||
| Net amounts in consolidated balance sheet (5) |
|
|
|||||||||
| Collateral pledged but not netted in consolidated balance sheet (6) |
(
|
(
|
|||||||||
| Net amount (4) | $ |
|
|
||||||||
(1)
Represents recognized amount of resale and repurchase agreements with counterparties subject to enforceable MRAs that have been offset within our consolidated balance sheet.
(2)
Includes $
82.2
billion and $
80.4
billion classified on our consolidated balance sheet in federal funds sold and securities purchased under resale agreements at June 30, 2024, and December 31, 2023, respectively. Also includes $
19.7
billion and $
20.5
billion classified on our consolidated balance sheet in loans at June 30, 2024, and December 31, 2023, respectively.
(3)
Represents the fair value of collateral we have received under enforceable MRAs or MSLAs, limited in the table above to the amount of the recognized asset due from each counterparty.
(4)
Represents the amount of our exposure (assets) or obligation (liabilities) that is not collateralized and/or is not subject to an enforceable MRA or MSLA.
(5)
Amount is classified in short-term borrowings on our consolidated balance sheet.
(6)
Represents the fair value of collateral we have pledged, related to enforceable MRAs or MSLAs, limited in the table above to the amount of the recognized liability owed to each counterparty.
| Wells Fargo & Company |
119
|
|||||||
Note 15:
Securities and Other Collateralized Financing Activities
(continued)
REPURCHASE AND SECURITIES LENDING AGREEMENTS
Securities sold under repurchase agreements and securities lending arrangements are effectively short-term collateralized borrowings. In these transactions, we receive cash in exchange for transferring securities as collateral and recognize an obligation to reacquire the securities for cash at the transaction’s maturity. These types of transactions create risks, including (1) the counterparty may fail to return the securities at maturity, (2) the fair value of the securities transferred may decline below the amount of our obligation to reacquire the securities, and therefore create an obligation for us to pledge additional amounts, and (3) the counterparty may accelerate the maturity on demand, requiring us to reacquire the security prior to
contractual maturity. We attempt to mitigate these risks in various ways. Our collateral primarily consists of highly liquid securities. In addition, we underwrite and monitor the financial strength of our counterparties, monitor the fair value of collateral pledged relative to contractually required repurchase amounts, and monitor that our collateral is properly returned through the clearing and settlement process in advance of our cash repayment.
Table 15.2 provides the gross amounts recognized on our consolidated balance sheet (before the effects of offsetting) of our liabilities for repurchase and securities lending agreements disaggregated by underlying collateral type.
Table 15.2:
Gross Obligations by Underlying Collateral Type
|
(in millions)
|
Jun 30,
2024 |
Dec 31,
2023 |
||||||||||||
| Repurchase agreements: | ||||||||||||||
| Securities of U.S. Treasury and federal agencies | $ |
|
|
|||||||||||
| Securities of U.S. States and political subdivisions |
|
|
||||||||||||
| Federal agency mortgage-backed securities |
|
|
||||||||||||
| Non-agency mortgage-backed securities |
|
|
||||||||||||
| Corporate debt securities |
|
|
||||||||||||
| Asset-backed securities |
|
|
||||||||||||
| Equity securities |
|
|
||||||||||||
| Other |
|
|
||||||||||||
| Total repurchases |
|
|
||||||||||||
| Securities lending arrangements: | ||||||||||||||
| Securities of U.S. Treasury and federal agencies |
|
|
||||||||||||
| Federal agency mortgage-backed securities |
|
|
||||||||||||
| Corporate debt securities |
|
|
||||||||||||
|
Equity securities
|
|
|
||||||||||||
| Other |
|
|
||||||||||||
| Total securities lending |
|
|
||||||||||||
| Total repurchases and securities lending | $ |
|
|
|||||||||||
Table 15.3 provides the contractual maturities of our gross obligations under repurchase and securities lending agreements. Securities lending is executed under agreements that allow either party to terminate the transaction without notice, while
repurchase agreements have a term structure that matures at a point in time. The overnight agreements require an election by both parties to roll the trade, while continuous agreements require an election by either party to terminate the agreement.
Table 15.3:
Contractual Maturities of Gross Obligations
|
(in millions)
|
Repurchase agreements | Securities lending agreements | ||||||
| June 30, 2024 | ||||||||
| Overnight/continuous | $ |
|
|
|||||
| Up to 30 days |
|
|
||||||
| 30-90 days |
|
|
||||||
| >90 days |
|
|
||||||
| Total gross obligation | $ |
|
|
|||||
| December 31, 2023 | ||||||||
| Overnight/continuous | $ |
|
|
|||||
| Up to 30 days |
|
|
||||||
| 30-90 days |
|
|
||||||
| >90 days |
|
|
||||||
| Total gross obligation | $ |
|
|
|||||
|
120
|
Wells Fargo & Company | |||||||
|
Note 16:
Pledged Assets and Collateral
|
||
Pledged Assets
We pledge financial assets that we own to counterparties for the collateralization of securities and other collateralized financing activities, to secure trust and public deposits, and to collateralize derivative contracts. See Note 15 (Securities and Other Collateralized Financing Activities) for additional information on securities financing activities. As part of our liquidity management strategy, we may also pledge assets to secure borrowings and letters of credit from Federal Home Loan Banks (FHLBs), to maintain potential borrowing capacity with FHLBs and at the discount window of the Board of Governors of the Federal Reserve System (FRB), and for other purposes as required or permitted by law or insurance statutory requirements. The collateral that we pledge may include our own collateral as well as collateral that we have received from third parties and have the right to repledge.
Table 16.1 provides the carrying values of assets recognized on our consolidated balance sheet that we have pledged to third parties. Assets pledged in transactions where our counterparty has the right to sell or repledge those assets are presented parenthetically on our consolidated balance sheet.
VIE RELATED
We also pledge assets in connection with various types of transactions entered into with VIEs, which are excluded from Table 16.1. These pledged assets can only be used to settle the liabilities of those entities. We also have loans recorded on our consolidated balance sheet which represent certain delinquent loans that are eligible for repurchase from GNMA loan securitizations. See Note 13 (Securitizations and Variable Interest Entities) for additional information on consolidated and unconsolidated VIE assets.
Table 16.1:
Pledged Assets
|
(in millions)
|
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||
| Pledged to counterparties that had the right to sell or repledge: | |||||||||||
| Debt securities: | |||||||||||
|
Trading
|
$ |
|
|
||||||||
|
Available-for-sale
|
|
|
|||||||||
| Equity securities |
|
|
|||||||||
|
All other assets
|
|
|
|||||||||
| Total assets pledged to counterparties that had the right to sell or repledge |
|
|
|||||||||
| Pledged to counterparties that did not have the right to sell or repledge: | |||||||||||
| Debt securities: | |||||||||||
|
Trading
|
|
|
|||||||||
|
Available-for-sale
|
|
|
|||||||||
| Held-to-maturity |
|
|
|||||||||
| Loans |
|
|
|||||||||
| Equity securities |
|
|
|||||||||
|
All other assets
|
|
|
|||||||||
| Total assets pledged to counterparties that did not have the right to sell or repledge |
|
|
|||||||||
| Total pledged assets | $ |
|
|
||||||||
Collateral Accepted
We receive financial assets as collateral that we are permitted to sell or repledge. This collateral is obtained in connection with securities purchased under resale agreements and securities borrowing transactions, customer margin loans, and derivative contracts. We may use this collateral in connection with securities sold under repurchase agreements and securities lending transactions, derivative contracts, and short sales. At June 30, 2024, and December 31, 2023, the fair value of this collateral received that we have the right to sell or repledge was $
215.1
billion and $
216.6
billion, respectively, of which $
109.4
billion and $
103.3
billion, respectively, were sold or repledged.
| Wells Fargo & Company |
121
|
|||||||
|
Note 17:
Operating Segments
|
||
Our management reporting is organized into
four
reportable operating segments: Consumer Banking and Lending; Commercial Banking; Corporate and Investment Banking; and Wealth and Investment Management. All other business activities that are not included in the reportable operating segments have been included in Corporate. We define our reportable operating segments by type of product and customer segment, and their results are based on our management reporting process. The management reporting process measures the performance of the reportable operating segments based on the Company’s management structure, and the results are regularly reviewed with our Chief Executive Officer and relevant senior management. The management reporting process is based on U.S. GAAP and includes specific adjustments, such as funds transfer pricing for asset/liability management, shared revenue and expenses, and taxable-equivalent adjustments to consistently reflect income from taxable and tax-exempt sources, which allows management to assess performance consistently across the operating segments.
Consumer Banking and Lending
offers diversified financial products and services for consumers and small businesses with annual sales generally up to $
10
million. These financial products and services include checking and savings accounts, credit and debit cards as well as home, auto, personal, and small business lending.
Commercial Banking
provides financial solutions to private, family owned and certain public companies. Products and services include banking and credit products across multiple industry sectors and municipalities, secured lending and lease products, and treasury management.
Corporate and Investment Banking
delivers a suite of capital markets, banking, and financial products and services to corporate, commercial real estate, government and institutional clients globally. Products and services include corporate banking, investment banking, treasury management, commercial real estate lending and servicing, equity and fixed income solutions as well as sales, trading, and research capabilities.
Wealth and Investment Management
provides personalized wealth management, brokerage, financial planning, lending, private banking, trust and fiduciary products and services to affluent, high-net worth and ultra-high-net worth clients. We operate through financial advisors in our brokerage and wealth offices, consumer bank branches, independent offices, and digitally through WellsTrade
®
and Intuitive Investor
®.
Corporate
includes corporate treasury and enterprise functions, net of allocations (including funds transfer pricing, capital, liquidity and certain expenses), in support of the reportable operating segments, as well as our investment portfolio and venture capital and private equity investments. Corporate also includes certain lines of business that management has determined are no longer consistent with the long-term strategic goals of the Company as well as results for previously divested businesses.
Basis of Presentation
FUNDS TRANSFER PRICING
Corporate treasury manages a funds transfer pricing methodology that considers interest rate risk, liquidity risk, and other product characteristics. Operating segments pay a funding charge for their assets and receive a funding credit for their deposits, both of which are included in net interest income. The net impact of the funding charges or credits is recognized in corporate treasury.
REVENUE AND EXPENSE SHARING
When lines of business jointly serve customers, the line of business that is responsible for providing the product or service recognizes revenue or expense with a referral fee paid or an allocation of cost to the other line of business based on established internal revenue-sharing agreements.
When a line of business uses a service provided by another line of business or enterprise function (included in Corporate), expense is generally allocated based on the cost and use of the service provided. We periodically assess and update our revenue and expense allocation methodologies.
TAXABLE-EQUIVALENT ADJUSTMENTS
Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for affordable housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.
|
122
|
Wells Fargo & Company | |||||||
Table 17.1 presents our results by operating segment.
Table 17.1:
Operating Segments
|
(in millions)
|
Consumer Banking and Lending | Commercial Banking | Corporate and Investment Banking | Wealth and Investment Management |
Corporate
|
Reconciling Items (1)
|
Consolidated
Company |
||||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
|
Net interest income (2)
|
$ |
|
|
|
|
(
|
(
|
|
|||||||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total revenue |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Provision for credit losses |
|
|
|
(
|
|
|
|
||||||||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Income (loss) before income tax expense (benefit) |
|
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) |
|
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||||
| Net income (loss) before noncontrolling interests |
|
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Less: Net income (loss) from noncontrolling interests |
|
|
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
| Net income (loss) | $ |
|
|
|
|
(
|
|
|
|||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
|
Net interest income (2)
|
$ |
|
|
|
|
(
|
(
|
|
|||||||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total revenue |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Provision for credit losses |
|
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Income (loss) before income tax expense (benefit) |
|
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) |
|
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||||
|
Net income before noncontrolling interests
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Less: Net income (loss) from noncontrolling interests |
|
|
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
|
Net income
|
$ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Six months ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
|
Net interest income (2)
|
$ |
|
|
|
|
(
|
(
|
|
|||||||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total revenue |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Provision for credit losses |
|
|
|
(
|
|
|
|
||||||||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Income (loss) before income tax expense (benefit) |
|
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) |
|
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||||
| Net income (loss) before noncontrolling interests |
|
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Less: Net income (loss) from noncontrolling interests |
|
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Net income (loss) | $ |
|
|
|
|
(
|
|
|
|||||||||||||||||||||||||||||||||
| Six months ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
|
Net interest income (2)
|
$ |
|
|
|
|
(
|
(
|
|
|||||||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total revenue |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Provision for credit losses |
|
(
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Income (loss) before income tax expense (benefit) |
|
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) |
|
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||||
| Net income (loss) before noncontrolling interests |
|
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Less: Net income (loss) from noncontrolling interests |
|
|
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
| Net income (loss) | $ |
|
|
|
|
(
|
|
|
|||||||||||||||||||||||||||||||||
| (continued on following page) | |||||||||||||||||||||||||||||||||||||||||
| Wells Fargo & Company |
123
|
|||||||
Note 17:
Operating Segments
(continued)
| (continued from previous page) | |||||||||||||||||||||||||||||||||||||||||
|
|
Consumer Banking and Lending | Commercial Banking | Corporate and Investment Banking | Wealth and Investment Management |
Corporate
|
Reconciling Items (1)
|
Consolidated
Company |
||||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Loans (average) | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Assets (average) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Deposits (average) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Six months ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Loans (average) | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Assets (average) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Deposits (average) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Loans (period-end) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Assets (period-end) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Deposits (period-end) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Loans (average) | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Assets (average) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Deposits (average) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Six months ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Loans (average) | $ |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Assets (average) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Deposits (average) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Loans (period-end) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Assets (period-end) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Deposits (period-end) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
(1)
Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for affordable housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.
|
124
|
Wells Fargo & Company | |||||||
|
Note 18:
Revenue and Expenses
|
||
Revenue
Our revenue includes net interest income on financial instruments and noninterest income.
Table 18.1 presents our
revenue by operating segment. For additional description of our
operating segments, including additional financial information
and the underlying management accounting process, see
Note 17 (Operating Segments). For a description of our revenue from contracts with customers, see Note 21 (Revenue and Expenses) in our 2023 Form 10-K.
Table 18.1:
Revenue by Operating Segment
|
(in millions)
|
Consumer Banking and Lending | Commercial Banking | Corporate and Investment Banking | Wealth and Investment Management | Corporate |
Reconciling
Items (1) |
Consolidated
Company |
||||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Net interest income (2) | $ |
|
|
|
|
(
|
(
|
|
|||||||||||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||||||||
| Deposit-related fees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Lending-related fees (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Investment advisory and other asset-based fees (3) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commissions and brokerage services fees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Investment banking fees |
(
|
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Card fees: | |||||||||||||||||||||||||||||||||||||||||
| Card interchange and network revenue (4) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other card fees (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total card fees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Mortgage banking (2) |
|
|
|
(
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net gains (losses) from trading activities (2) |
|
(
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Net gains from debt securities (2)
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net gains (losses) from equity securities (2) |
|
(
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Lease income (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other (2) |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total noninterest income |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total revenue | $ |
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Net interest income (2) | $ |
|
|
|
|
(
|
(
|
|
|||||||||||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||||||||
| Deposit-related fees |
|
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Lending-related fees (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Investment advisory and other asset-based fees (3) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commissions and brokerage services fees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Investment banking fees |
(
|
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Card fees: | |||||||||||||||||||||||||||||||||||||||||
| Card interchange and network revenue (4) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other card fees (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total card fees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Mortgage banking (2) |
|
|
|
(
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net gains (losses) from trading activities (2) |
|
(
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net gains from debt securities (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net gains (losses) from equity securities (2) |
|
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
| Lease income (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other (2)(5) |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total noninterest income |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total revenue | $ |
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||
| (continued on following page) | |||||||||||||||||||||||||||||||||||||||||
| Wells Fargo & Company |
125
|
|||||||
Note 18:
Revenue and Expenses
(continued)
|
(continued from previous page)
|
|||||||||||||||||||||||||||||||||||||||||
|
(in millions)
|
Consumer Banking and Lending | Commercial Banking | Corporate and Investment Banking | Wealth and Investment Management | Corporate |
Reconciling
Items (1) |
Consolidated
Company |
||||||||||||||||||||||||||||||||||
| Six months ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Net interest income (2) | $ |
|
|
|
|
(
|
(
|
|
|||||||||||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||||||||
| Deposit-related fees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Lending-related fees (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Investment advisory and other asset-based fees (3) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commissions and brokerage services fees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Investment banking fees |
(
|
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Card fees: | |||||||||||||||||||||||||||||||||||||||||
| Card interchange and network revenue (4) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other card fees (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total card fees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Mortgage banking (2) |
|
|
|
(
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net gains (losses) from trading activities (2) |
|
(
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Net losses from debt securities (2)
|
|
|
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
|
Net gains from equity securities (2)
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Lease income (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other (2) |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total noninterest income |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total revenue | $ |
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||
| Six months ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Net interest income (2) | $ |
|
|
|
|
(
|
(
|
|
|||||||||||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||||||||
| Deposit-related fees |
|
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Lending-related fees (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Investment advisory and other asset-based fees (3) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commissions and brokerage services fees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Investment banking fees |
(
|
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||||
| Card fees: | |||||||||||||||||||||||||||||||||||||||||
| Card interchange and network revenue (4) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other card fees (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total card fees |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Mortgage banking (2) |
|
|
|
(
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net gains (losses) from trading activities (2) |
|
(
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net gains from debt securities (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Net losses from equity securities (2)
|
|
(
|
(
|
(
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
| Lease income (2) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Other (2)
|
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total noninterest income |
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||||
| Total revenue | $ |
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||
(1)
Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for affordable housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.
(2)
These revenue types are related to financial assets and liabilities, including loans, leases, securities and derivatives, with additional details included in other footnotes to our financial statements.
(3)
We earned trailing commissions of $
232
million and $
463
million for the second quarter and first half of 2024, respectively, and $
227
million and $
454
million for the second quarter and first half of 2023, respectively.
(4)
The cost of credit card rewards and rebates of $
690
million and $
1.3
billion for the second quarter and first half of 2024, respectively, and $
628
million and $
1.2
billion for the second quarter and first half of 2023, respectively, are presented net against the related revenue.
|
126
|
Wells Fargo & Company | |||||||
Expenses
OPERATING LOSSES
Operating losses consist of expenses related to:
•
Legal actions such as litigation and regulatory matters. For additional information on legal actions, see Note 10 (Legal Actions);
•
Customer remediation activities, which are associated with our efforts to identify areas or instances where customers may have experienced financial harm and provide remediation as appropriate. We have accrued for the probable and estimable costs related to our customer remediation activities, which amounts may change based on additional facts and information, as well as ongoing reviews and communications with our regulators; and
•
Other business activities such as deposit overdraft losses, fraud losses, and isolated instances of customer redress.
Table 18.2 provides the components of our operating losses included in our consolidated statement of income.
Table 18.2:
Operating Losses
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
|
(in millions)
|
2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
|
Legal actions
|
$ |
|
(
|
$ |
|
(
|
|||||||||||||||||
|
Customer remediation
|
|
|
|
|
|||||||||||||||||||
|
Other
|
|
|
|
|
|||||||||||||||||||
| Total operating losses | $ |
|
|
$ |
|
|
|||||||||||||||||
Operating losses may have significant variability given the inherent and unpredictable nature of legal actions and customer remediation activities. The timing and determination of the amount of any associated losses for these matters depends on a variety of factors, some of which are outside of our control.
OTHER EXPENSES
Regulatory Charges and Assessments expense, which is included in other noninterest expense, was $
335
million and $
886
million in the second quarter and first half of 2024, respectively, compared with $
301
million and $
572
million in the same periods a year ago, and predominantly consisted of Federal Deposit Insurance Corporation (FDIC) deposit assessment expense.
In November 2023, the FDIC finalized a rule to recover losses to the FDIC deposit insurance fund as a result of bank failures in the first half of 2023. Under the rule, the FDIC will collect a special assessment based on an insured depository institution’s estimated amount of uninsured deposits. Upon the FDIC’s finalization of the rule, we expensed an estimated amount of our special assessment of $
1.9
billion (pre-tax) in fourth quarter 2023. During 2024, the FDIC provided updates on losses to the deposit insurance fund, and we expensed an additional $
52
million and $
336
million (pre-tax) in the second quarter and first half of 2024, respectively, for the estimated amount of the special assessment. We expect the ultimate amount of the special assessment may continue to change as the FDIC determines the actual net losses to the deposit insurance fund.
| Wells Fargo & Company |
127
|
|||||||
|
Note 19:
Employee Benefits
|
||
Pension and Postretirement Plans
We sponsor a frozen noncontributory qualified defined benefit retirement plan, the Wells Fargo & Company Cash Balance Plan (Cash Balance Plan), which covers eligible employees of Wells Fargo. The Cash Balance Plan was frozen on July 1, 2009, and
no
new benefits accrue after that date. For additional information on our pension and postretirement plans, including plan assumptions, investment strategy and asset allocation,
projected benefit payments, and valuation methodologies used for assets measured at fair value, see Note 1 (Summary of Significant Accounting Policies) and Note 22 (Employee Benefits) in our 2023 Form 10-K.
Table 19.1 presents the components of net periodic benefit cost. Service cost is reported in personnel expense and all other components of net periodic benefit cost are reported in other noninterest expense on our consolidated statement of income.
Table 19.1:
Net Periodic Benefit Cost
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| Pension benefits | Pension benefits | ||||||||||||||||||||||||||||||||||
| (in millions) | Qualified |
Non-
qualified
|
Other
benefits
|
Qualified |
Non-
qualified
|
Other
benefits
|
|||||||||||||||||||||||||||||
| Quarter ended June 30, | |||||||||||||||||||||||||||||||||||
| Service cost | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Interest cost |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Expected return on plan assets |
(
|
|
(
|
(
|
|
(
|
|||||||||||||||||||||||||||||
| Amortization of net actuarial loss (gain) |
|
|
(
|
|
|
(
|
|||||||||||||||||||||||||||||
| Amortization of prior service credit |
|
|
(
|
|
|
(
|
|||||||||||||||||||||||||||||
|
Net periodic benefit cost
|
$ |
|
|
(
|
|
|
(
|
||||||||||||||||||||||||||||
| Six months ended June 30, | |||||||||||||||||||||||||||||||||||
| Service cost | $ |
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Interest cost |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Expected return on plan assets |
(
|
|
(
|
(
|
|
(
|
|||||||||||||||||||||||||||||
| Amortization of net actuarial loss (gain) |
|
|
(
|
|
|
(
|
|||||||||||||||||||||||||||||
| Amortization of prior service credit |
|
|
(
|
|
|
(
|
|||||||||||||||||||||||||||||
|
Net periodic benefit cost
|
$ |
|
|
(
|
|
|
(
|
||||||||||||||||||||||||||||
|
128
|
Wells Fargo & Company | |||||||
|
Note 20:
Earnings and Dividends Per Common Share
|
||
Table 20.1 shows earnings per common share and diluted earnings per common share and reconciles the numerator and denominator of both earnings per common share calculations.
Table 20.1:
Earnings Per Common Share Calculations
| Quarter ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| (in millions, except per share amounts) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
|
Wells Fargo net income
|
$ |
|
|
$ |
|
|
||||||||||||||||||||
|
Less: Preferred stock dividends and other (1)
|
|
|
|
|
||||||||||||||||||||||
| Wells Fargo net income applicable to common stock (numerator) | $ |
|
|
$ |
|
|
||||||||||||||||||||
| Earnings per common share | ||||||||||||||||||||||||||
| Average common shares outstanding (denominator) |
|
|
|
|
||||||||||||||||||||||
| Per share | $ |
|
|
$ |
|
|
||||||||||||||||||||
| Diluted earnings per common share | ||||||||||||||||||||||||||
| Average common shares outstanding |
|
|
|
|
||||||||||||||||||||||
|
Add: Restricted share rights (2)
|
|
|
|
|
||||||||||||||||||||||
| Diluted average common shares outstanding (denominator) |
|
|
|
|
||||||||||||||||||||||
| Per share | $ |
|
|
$ |
|
|
||||||||||||||||||||
(1)
Includes costs associated with any preferred stock redemption.
(2)
Calculated using the treasury stock method.
Table 20.2 presents the outstanding securities that were anti-dilutive and therefore not included in the calculation of diluted earnings per common share.
Table 20.2:
Outstanding Anti-Dilutive Securities
| Weighted-average shares | |||||||||||||||||||||||
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Convertible Preferred Stock, Series L (1) |
|
|
|
|
|||||||||||||||||||
| Restricted share rights (2) |
|
|
|
|
|||||||||||||||||||
(1) Calculated using the if-converted method.
(2) Calculated using the treasury stock method.
Table 20.3 presents dividends declared per common share.
Table 20.3:
Dividends Declared Per Common Share
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Per common share | $ |
|
|
$ |
|
|
|||||||||||||||||
| Wells Fargo & Company |
129
|
|||||||
|
Note 21:
Other Comprehensive Income
|
||
Table 21.1 provides the components of other comprehensive income (OCI), reclassifications to net income by income statement line item, and the related tax effects.
Table 21.1:
Summary of Other Comprehensive Income
| Quarter ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) |
Before
tax |
Tax
effect
|
Net of
tax |
Before
tax |
Tax
effect |
Net of
tax |
Before
tax |
Tax
effect
|
Net of
tax |
Before
tax |
Tax
effect |
Net of
tax |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt securities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) arising during the period | $ |
(
|
|
(
|
(
|
|
(
|
$ |
(
|
|
(
|
(
|
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of net (gains) losses to net income |
|
(
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change |
(
|
|
(
|
(
|
|
(
|
(
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives and hedging activities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Hedges: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in fair value of excluded components on fair value hedges (1) |
|
(
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash Flow Hedges: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) arising during the period on cash flow hedges |
(
|
|
(
|
(
|
|
(
|
(
|
|
(
|
(
|
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of net (gains) losses to net income |
|
(
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change |
(
|
|
(
|
(
|
|
(
|
(
|
|
(
|
(
|
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Defined benefit plans adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net actuarial and prior service gains (losses) arising during the period |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of amounts to noninterest expense (2) |
|
(
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change |
|
(
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debit valuation adjustments (DVA) and other: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Net unrealized gains (losses) arising during the period
|
(
|
|
(
|
(
|
|
(
|
(
|
|
(
|
(
|
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of net (gains) losses to net income |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change |
(
|
|
(
|
(
|
|
(
|
(
|
|
(
|
(
|
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) arising during the period |
|
|
|
|
|
|
(
|
(
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of net (gains) losses to net income |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change |
|
|
|
|
|
|
(
|
(
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | $ |
(
|
|
(
|
(
|
|
(
|
$ |
(
|
|
(
|
(
|
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Less: Other comprehensive income from noncontrolling interests, net of tax
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Wells Fargo other comprehensive loss, net of tax
|
$ |
(
|
(
|
$ |
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)
Represents changes in fair value of cross-currency swaps attributable to changes in cross-currency basis spreads, which are excluded from the assessment of hedge effectiveness and recorded in other comprehensive income.
(2)
These items are included in the computation of net periodic benefit cost (see Note 19 (Employee Benefits) for additional information).
|
130
|
Wells Fargo & Company | |||||||
Table 21.2 provides the accumulated OCI balance activity on an after-tax basis.
Table 21.2:
Accumulated OCI Balances
|
(in millions)
|
Debt
securities (1)
|
Fair value hedges (2)
|
Cash flow hedges (3)
|
Defined
benefit plans adjustments |
Debit valuation adjustments
(DVA) and other |
Foreign
currency translation adjustments |
Accumulated
other comprehensive income (loss) |
||||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period |
(
|
(
|
(
|
(
|
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) arising during the period |
(
|
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net change |
(
|
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
| Less: Other comprehensive income from noncontrolling interests |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Balance, end of period (3)
|
$ |
(
|
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||
| Quarter ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
|
Balance, beginning of period
|
(
|
(
|
(
|
(
|
|
(
|
(
|
||||||||||||||||||||||||||||||||||
|
Net unrealized gains arising during the period
|
(
|
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net change |
(
|
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
|
Less: Other comprehensive loss from noncontrolling interests
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Balance, end of period (3)
|
$ |
(
|
(
|
(
|
(
|
|
(
|
(
|
|||||||||||||||||||||||||||||||||
| Six months ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
|
Balance, beginning of period
|
$ |
(
|
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) arising during the period |
(
|
|
(
|
|
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net change |
(
|
|
(
|
|
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||
| Less: Other comprehensive income from noncontrolling interests |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Balance, end of period
|
$ |
(
|
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||
| Six months ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ |
(
|
(
|
(
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||
|
Transition adjustment
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Balance, beginning of period
|
(
|
(
|
(
|
(
|
|
(
|
(
|
||||||||||||||||||||||||||||||||||
|
Net unrealized gains arising during the period
|
(
|
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net change |
|
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||||
|
Less: Other comprehensive loss from noncontrolling interests
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Balance, end of period
|
$ |
(
|
(
|
(
|
(
|
|
(
|
(
|
|||||||||||||||||||||||||||||||||
(1)
At June 30, 2024 and 2023, accumulated other comprehensive loss includes unamortized after-tax unrealized losses of $
3.3
billion and $
3.7
billion, respectively, associated with the transfer of securities from AFS to HTM. These amounts are subsequently amortized into earnings over the same period as the related unamortized premiums and discounts.
(2)
Substantially all of the amounts for fair value hedges are foreign exchange contracts.
(3)
Substantially all of the amounts for cash flow hedges are interest rate contracts.
| Wells Fargo & Company |
131
|
|||||||
|
Note 22:
Regulatory Capital Requirements and Other Restrictions
|
||
Regulatory Capital Requirements
The Company and each of its subsidiary banks are subject to regulatory capital adequacy requirements promulgated by federal banking regulators. The FRB establishes capital requirements for the consolidated financial holding company, and the Office of the Comptroller of the Currency (OCC) has similar requirements for the Company’s national banks, including Wells Fargo Bank, N.A. (the Bank).
Table 22.1 presents regulatory capital information for the Company and the Bank in accordance with Basel III capital
requirements. We must calculate our risk-based capital ratios under both the Standardized and Advanced Approaches. The Standardized Approach applies assigned risk weights to broad risk categories, while the calculation of risk-weighted assets (RWAs) under the Advanced Approach differs by requiring applicable banks to utilize a risk-sensitive methodology, which relies upon the use of internal credit models, and includes an operational risk component.
Table 22.1:
Regulatory Capital Information
|
|
Wells Fargo & Company | Wells Fargo Bank, N.A. | |||||||||||||||||||||||||||||||||||||||||||||
| Standardized Approach | Advanced Approach | Standardized Approach | Advanced Approach | ||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except ratios) | June 30, 2024 | December 31, 2023 | June 30, 2024 | December 31, 2023 | June 30, 2024 | December 31, 2023 | June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||||
| Regulatory capital: | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Equity Tier 1 | $ |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
| Tier 1 |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Total |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Risk-weighted assets |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
Adjusted average assets (1)
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Regulatory capital ratios: | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Equity Tier 1 capital |
|
% | * |
|
|
|
|
* |
|
|
|
||||||||||||||||||||||||||||||||||||
| Tier 1 capital |
|
* |
|
|
|
|
* |
|
|
|
|||||||||||||||||||||||||||||||||||||
| Total capital |
|
* |
|
|
|
|
* |
|
|
|
|||||||||||||||||||||||||||||||||||||
| Required minimum capital ratios: | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Equity Tier 1 capital |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Tier 1 capital |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Total capital |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Wells Fargo & Company | Wells Fargo Bank, N.A. | ||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | December 31, 2023 | June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Regulatory leverage: | |||||||||||||||||||||||||||||||||||||||||||||||
|
Total leverage exposure (1)
|
$ |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
|
Supplementary leverage ratio (1)
|
|
% |
|
|
|
||||||||||||||||||||||||||||||||||||||||||
|
Tier 1 leverage ratio (2)
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Required minimum leverage: | |||||||||||||||||||||||||||||||||||||||||||||||
| Supplementary leverage ratio |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Tier 1 leverage ratio |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
*
Denotes the binding ratio under the Standardized and Advanced Approaches at June 30, 2024.
(1)
The supplementary leverage ratio consists of Tier 1 capital divided by total leverage exposure. Total leverage exposure consists of adjusted average assets plus certain off-balance sheet exposures. Adjusted average assets consists of total quarterly average assets less goodwill and other permitted Tier 1 capital deductions (net of deferred tax liabilities).
(2)
The Tier 1 leverage ratio consists of Tier 1 capital divided by total quarterly average assets, excluding goodwill and certain other items as determined under the rule.
At June 30, 2024, the Common Equity Tier 1 (CET1), Tier 1 and Total capital ratio requirements for the Company included a global systemically important bank (G-SIB) surcharge of
1.50
% and a countercyclical buffer of
0.00
%. In addition, these ratios included a stress capital buffer of
2.90
% under the Standardized Approach and a capital conservation buffer of
2.50
% under the Advanced Approach. The Company is required to maintain these risk-based capital ratios and to maintain a supplementary leverage ratio (SLR) that included a supplementary leverage buffer of
2.00
% to avoid restrictions on capital distributions and discretionary bonus payments. The CET1, Tier 1 and Total capital ratio requirements for the Bank included a capital conservation buffer of
2.50
% under both the Standardized and Advanced Approaches. The G-SIB surcharge and countercyclical buffer are not applicable to the Bank. At June 30, 2024, the Bank and our
other insured depository institutions were considered well-capitalized under the requirements of the Federal Deposit Insurance Act.
Capital Planning Requirements
The FRB’s capital plan rule establishes capital planning and other requirements that govern capital distributions, including dividends and share repurchases, by certain large bank holding companies (BHCs), including Wells Fargo. The FRB conducts an annual Comprehensive Capital Analysis and Review exercise and has also published guidance regarding its supervisory expectations for capital planning, including capital policies regarding the process relating to common stock dividend and repurchase decisions in the FRB’s SR Letter 15-18. The Parent’s
|
132
|
Wells Fargo & Company | |||||||
ability to make certain capital distributions is subject to the requirements of the capital plan rule and is also subject to the Parent meeting or exceeding certain regulatory capital minimums.
Loan and Dividend Restrictions
Federal law restricts the amount and the terms of both credit and non-credit transactions between a bank and its nonbank affiliates. Additionally, federal laws and regulations limit, and regulators can impose additional limitations on, the dividends that a national bank may pay.
Our nonbank subsidiaries are also limited by certain federal and state statutory provisions and regulations covering the amount of dividends that may be paid in any given year. In addition, we have entered into a Support Agreement dated June 28, 2017, as amended and restated on June 26, 2019, among Wells Fargo & Company, the parent holding company (Parent), WFC Holdings, LLC, an intermediate holding company and subsidiary of the Parent (IHC), the Bank, Wells Fargo Securities, LLC, Wells Fargo Clearing Services, LLC, and certain other subsidiaries of the Parent designated from time to time as material entities for resolution planning purposes or identified from time to time as related support entities in our resolution plan, pursuant to which the IHC may be restricted from making dividend payments to the Parent if certain liquidity and/or capital metrics fall below defined triggers or if the Parent’s board of directors authorizes it to file a case under the U.S. Bankruptcy Code.
For additional information on loan and dividend restrictions, see Note 26 (Regulatory Capital Requirements and Other Restrictions) in our 2023 Form 10-K.
Cash Restrictions
Cash and cash equivalents may be restricted as to usage or withdrawal.
Table 22.2 provides a
summary of restrictions on cash and cash equivalents
.
Table 22.2:
Nature of Restrictions on Cash and Cash Equivalents
| (in millions) |
Jun 30,
2024 |
Dec 31,
2023 |
|||||||||
| Reserve balance for non-U.S. central banks | $ |
|
|
||||||||
| Segregated for benefit of brokerage customers under federal and other brokerage regulations |
|
|
|||||||||
| Wells Fargo & Company |
133
|
|||||||
| Glossary of Acronyms | |||||||||||
| ACL | Allowance for credit losses | HQLA | High-quality liquid assets | ||||||||
| AFS | Available-for-sale | HTM | Held-to-maturity | ||||||||
| AOCI | Accumulated other comprehensive income | LCR | Liquidity coverage ratio | ||||||||
| ARM | Adjustable-rate mortgage | LHFS | Loans held for sale | ||||||||
| ASC | Accounting Standards Codification | LOCOM | Lower of cost or fair value | ||||||||
| ASU | Accounting Standards Update | LTV | Loan-to-value | ||||||||
| AVM | Automated valuation model | MBS | Mortgage-backed securities | ||||||||
| BCBS | Basel Committee on Banking Supervision | MSR | Mortgage servicing right | ||||||||
| BHC | Bank holding company | NAV | Net asset value | ||||||||
| CCAR | Comprehensive Capital Analysis and Review | NPA | Nonperforming asset | ||||||||
| CD | Certificate of deposit | NSFR | Net stable funding ratio | ||||||||
| CECL | Current expected credit loss | OCC | Office of the Comptroller of the Currency | ||||||||
| CET1 | Common Equity Tier 1 | OCI | Other comprehensive income | ||||||||
| CFPB | Consumer Financial Protection Bureau | OTC | Over-the-counter | ||||||||
| CLO | Collateralized loan obligation | PCD | Purchased credit-deteriorated | ||||||||
| CRE | Commercial real estate | RMBS | Residential mortgage-backed securities | ||||||||
| DPD | Days past due | ROA | Return on average assets | ||||||||
| ESOP | Employee Stock Ownership Plan | ROE | Return on average equity | ||||||||
| FASB | Financial Accounting Standards Board | ROTCE | Return on average tangible common equity | ||||||||
| FDIC | Federal Deposit Insurance Corporation | RWAs | Risk-weighted assets | ||||||||
| FHA | Federal Housing Administration | SEC | Securities and Exchange Commission | ||||||||
| FHLB | Federal Home Loan Bank | S&P | Standard & Poor’s Global Ratings | ||||||||
| FHLMC | Federal Home Loan Mortgage Corporation | SLR | Supplementary leverage ratio | ||||||||
| FICO | Fair Isaac Corporation (credit rating) | SOFR | Secured Overnight Financing Rate | ||||||||
| FNMA | Federal National Mortgage Association | SPE | Special purpose entity | ||||||||
| FRB | Board of Governors of the Federal Reserve System | TLAC | Total Loss Absorbing Capacity | ||||||||
| GAAP | Generally accepted accounting principles | VA | Department of Veterans Affairs | ||||||||
| GNMA | Government National Mortgage Association | VaR | Value-at-Risk | ||||||||
| GSE |
Government-sponsored enterprise
|
VIE | Variable interest entity | ||||||||
| G-SIB | Global systemically important bank | WIM | Wealth and Investment Management | ||||||||
|
134
|
Wells Fargo & Company | |||||||
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Information in response to this item can be found in Note 10 (Legal Actions) to Financial Statements in this Report which information is incorporated by reference into this item.
Item 1A. Risk Factors
Information in response to this item can be found under the “Financial Review – Risk Factors” section in this Report which information is incorporated by reference into this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table shows Company repurchases of its common stock for each calendar month in the quarter ended June 30, 2024.
| Calendar month |
Total number
of shares repurchased (1) |
Weighted average
price paid per share |
Approximate dollar
value of shares that
may yet be
repurchased under
the authorization
(in millions)
|
||||||||||||||
|
April
|
31,198,596 | $ | 59.27 | $ | 18,872 | ||||||||||||
|
May
|
51,976,400 | 60.85 | 15,709 | ||||||||||||||
|
June
|
17,364,206 | 57.59 | 14,709 | ||||||||||||||
| Total | 100,539,202 | ||||||||||||||||
(1)
All shares were repurchased under an authorization covering up to $30 billion of common stock approved by the Board of Directors and publicly announced by the Company on July 25, 2023. Unless modified or revoked by the Board of Directors, this authorization does not expire.
Item 5. Other Information
Trading Plans
During the three months ended June 30, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company
adopted
or
terminated
a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
| Wells Fargo & Company |
135
|
|||||||
Item 6. Exhibits
A list of exhibits to this Form 10-Q is set forth below.
The Company’s SEC file number is 001-2979. On and before November 2, 1998, the Company filed documents with the SEC under the name Norwest Corporation. The former Wells Fargo & Company filed documents under SEC file number 001-6214.
|
Exhibit
Number
|
Description | Location | ||||||||||||||||||||||||||||||||||||
| Filed herewith. | ||||||||||||||||||||||||||||||||||||||
|
Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed January 24, 2024.
|
||||||||||||||||||||||||||||||||||||||
| 4(a) | See Exhibits 3(a) and 3(b). | |||||||||||||||||||||||||||||||||||||
| 4(b) | The Company agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of the Company. | |||||||||||||||||||||||||||||||||||||
| Filed herewith. | ||||||||||||||||||||||||||||||||||||||
| Incorporated by reference to Exhibit 22 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023. | ||||||||||||||||||||||||||||||||||||||
| Filed herewith. | ||||||||||||||||||||||||||||||||||||||
| Filed herewith. | ||||||||||||||||||||||||||||||||||||||
| Furnished herewith. | ||||||||||||||||||||||||||||||||||||||
| Furnished herewith. | ||||||||||||||||||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | ||||||||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed herewith. | ||||||||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith. | ||||||||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definitions Linkbase Document | Filed herewith. | ||||||||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed herewith. | ||||||||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith. | ||||||||||||||||||||||||||||||||||||
| 104 |
Cover Page Interactive Data File
|
Formatted as Inline XBRL and contained in Exhibit 101. | ||||||||||||||||||||||||||||||||||||
|
136
|
Wells Fargo & Company | |||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 1, 2024 WELLS FARGO & COMPANY
| By: | /s/ MUNEERA S. CARR | ||||
| Muneera S. Carr | |||||
|
Executive Vice President,
Chief Accounting Officer and Controller
|
|||||
| (Principal Accounting Officer) | |||||
| Wells Fargo & Company |
137
|
|||||||
TABLE OF CONTENTS
Note 1: Summary Of Significant Accounting PoliciesprintNote 2: Trading ActivitiesprintNote 3: Available-for-sale and Held-to-maturity Debt SecuritiesprintNote 3: Available-for-sale and Held-to-maturity Debt Securities (continued)printNote 4: Equity SecuritiesprintNote 4: Equity Securities (continued)printNote 5: Loans and Related Allowance For Credit LossesprintNote 5: Loans and Related Allowance For Credit Losses (continued)printNote 6: Mortgage Banking ActivitiesprintNote 6: Mortgage Banking Activities (continued)printNote 7: Intangible Assets and Other AssetsprintNote 8: Leasing ActivityprintNote 9: Preferred StockprintNote 10: Legal ActionsprintNote 11: DerivativesprintNote 11: Derivatives (continued)printNote 12: Fair Values Of Assets and LiabilitiesprintNote 12: Fair Values Of Assets and Liabilities (continued)printNote 13: Securitizations and Variable Interest EntitiesprintNote 13: Securitizations and Variable Interest Entities (continued)printNote 6 (mortgage Banking Activities) For Additional Information on Key Assumptions For Residential MsrsprintNote 14: Guarantees and Other CommitmentsprintNote 14: Guarantees and Other Commitments (continued)printNote 15: Securities and Other Collateralized Financing ActivitiesprintNote 15: Securities and Other Collateralized Financing Activities (continued)printNote 16: Pledged Assets and CollateralprintNote 17: Operating SegmentsprintNote 17: Operating Segments (continued)printNote 18: Revenue and ExpensesprintNote 18: Revenue and Expenses (continued)printNote 19: Employee BenefitsprintNote 20: Earnings and Dividends Per Common ShareprintNote 21: Other Comprehensive IncomeprintNote 22: Regulatory Capital Requirements and Other RestrictionsprintPart II Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 5. Other InformationprintItem 6. Exhibitsprint