1Q14 Quarterly Supplement April 11, 2014 © 2014 Wells Fargo & Company. All rights reserved. Exhibit 99.2 |
Wells Fargo 1Q14 Supplement 1 Appendix - Non-strategic/liquidating loan portfolio 20 - Purchased credit-impaired (PCI) portfolios 21 - Residential mortgage trends 22 - Real estate 1-4 family first mortgage portfolio 23 - Home equity portfolio 24 - Consumer credit card portfolio 25 - Auto portfolios 26 - Student lending portfolio 27 Common Equity Tier 1 under Basel III (General Approach) 28 Common Equity Tier 1 under Basel III (Advanced Approach, fully phased-in) 29 Forward-looking statements and additional information 30 Table of contents 1Q14 Results - 1Q14 Results Page 2 - Year-over-year results 3 - Strong revenue diversification 4 - Balance Sheet and credit overview (linked quarter) 5 - Income Statement overview (linked quarter) 6 - Loans 7 - Broad-based, year-over-year loan growth 8 - Deposits 9 - Net interest income 10 - Noninterest income 11 - Noninterest expense and efficiency ratio 12 - Community Banking 13 - Wholesale Banking 14 - Wealth, Brokerage and Retirement 15 - Credit quality 16 - Capital 17 - Summary 18 Pages 19-30 Amounts for prior periods have been revised to reflect our determination that certain factoring arrangements previously included within commercial loans, which were recorded with a corresponding obligation in other liabilities, did not qualify as loan purchases under ASC Topic 860 (Transfers and Servicing of Financial Assets) based on interpretations of the specific arrangements. Accordingly, we revised our commercial loan balances for year-end 2012 and each of the quarters in 2013 in order to appropriately present the Company’s lending trends over this period. This revision, which resulted in a reduction to total commercial loans and a corresponding decrease to other liabilities, did not impact the Company’s consolidated net income or total cash flows. We reduced our commercial loans by $3.5 billion, $3.2 billion, $2.1 billion, $1.6 billion, and $1.2 billion at December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012, respectively, which represented less than 1% of total commercial loans and less than 0.5% of our total loan portfolio. Other affected financial information, including ratios, has been appropriately revised to reflect this revision. |
Wells Fargo 1Q14 Supplement 2 1Q14 Results Record earnings of $5.9 billion, up $722 million, or 14% year-over-year (YoY), and up 5% linked quarter (LQ) Record diluted earnings per common share of $1.05, up 14% YoY and 5% LQ Strong returns – ROA (1) = 1.57%, up 8 bps YoY and 9 bps LQ – ROE = 14.35%, up 76 bps YoY and 54 bps LQ Solid loan and deposit growth – Period-end loans (1) up $28.0 billion, or 4%, YoY and up 2% annualized LQ – Period-end deposits up $83.8 billion, or 8%, YoY and up 6% annualized LQ Credit continued to improve – Net charge-offs of 41 bps, down 31 bps YoY and 6 bps LQ Efficiency ratio of 57.9% (2) , down 40 bps YoY and 60 bps LQ Capital levels continued to increase – 11.36% Common Equity Tier 1 ratio under Basel III (General Approach) and Common Equity Tier 1 ratio of 10.04% under Basel III (Advanced Approach, fully phased-in) (3) Wells Fargo Net Income ($ in millions) (1) Prior period financial information has been revised to reflect our determination that certain factoring arrangements did not qualify as loans. See page 1 for more information. (2) Efficiency ratio defined as noninterest expense divided by total revenue (net interest income plus noninterest income). (3) Estimated based on final rules adopted July 2, 2013, by the*Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act. See pages 28-29 for additional information regarding common equity ratios. Diluted earnings per common share 5,171 5,519 5,578 5,610 5,893 1Q13 2Q13 3Q13 4Q13 1Q14 $0.92 $0.98 $0.99 $1.00 $1.05 |
Wells Fargo 1Q14 Supplement 3 Year-over-year results Pre-tax Pre-provision Profit (1) ($ in billions) Net Income ($ in billions, except EPS) Diluted earnings per common share Period-end Loans (2) ($ in billions) Return on Assets (2) Return on Equity Period-end Core Deposits ($ in billions) (1) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes 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) Please see page 1 for information on prior period revisions. 8.9 8.7 1Q13 1Q14 798.4 826.4 1Q13 1Q14 1.49% 1.57% 1Q13 1Q14 5.2 5.9 1Q13 1Q14 $0.92 $1.05 939.9 994.2 1Q13 1Q14 13.59% 14.35% 1Q13 1Q14 |
Wells Fargo 1Q14 Supplement 4 Balanced Spread and Fee Income Diversified Fee Generation Deposit Service Charges 12% Card Fees 8% Total Mortgage Banking 15% Insurance 4% Net Gains from Trading 4% All data is for 1Q14. (1) Other noninterest income includes net gains on debt securities, lease income, life insurance investment income and all other noninterest income. Strong revenue diversification Total Trust & Investment Fees 34% Total Other Fees 11% Net Gains from Equity Inv. 9% Brokerage advisory, commissions and other Mortgage Orig./ Sales, net Mortgage Servicing, net Trust and investment management Investment banking Charges and fees on loans 2% Merchant processing 1% Cash network 1% CRE brokerage commissions 1% Letters of credit Card fees Deposit service charges Other noninterest income (1) Net gains from trading Insurance Net Interest Income Noninterest Income 2% All other fees Net gains from equity investments Other Noninterest Income (1) 3% 51% 49% 3% 4% 4% 6% 9% 4% 8% 3% 9% 22% 9% 12% |
Wells Fargo 1Q14 Supplement 5 Balance Sheet and credit overview (linked quarter) Loans (1) Total period-end loans up $4.1 billion - Core loans (2) increased $7.0 billion, up 4% annualized LQ, on broad-based growth - Non-strategic/liquidating portfolio (2) decreased $2.9 billion Short-term investments/ Fed funds sold Up $9.0 billion primarily due to deposit growth Investment securities Investment securities up $6.0 billion as gross purchases of ~$13 billion were partially offset by run-off Deposits Up $15.4 billion on strong consumer and small business growth Common stock repurchases Common shares outstanding up 8.6 million on annual employee benefit plan issuances Purchased 33.5 million common shares in the quarter Credit Provision expense of $325 million, down $38 million - Net charge-offs of $825 million, or 41 bps, down $138 million - $500 million reserve release (3) vs. $600 million in 4Q13 on continued strong credit performance and improved economic conditions Period-end balances. All comparisons are 1Q14 compared with 4Q13. (1) Please see page 1 for information on prior period revisions. (2) (3) Provision expense minus net charge-offs. See pages 7 and 20 for additional information regarding core loans and the non-strategic/liquidating portfolio, which comprises the Pick-a-Pay, liquidating home equity,*legacy*WFF*indirect*auto,*legacy*WFF*debt*consolidation,*Education *Finance-government*guaranteed,*and*legacy*Wachovia*commercial*&*industrial, commercial*real*estate,*foreign*and*other*PCI*loan*portfolios. |
Wells Fargo 1Q14 Supplement 6 Income Statement overview (linked quarter) All comparisons are 1Q14 compared with 4Q13. (1) Please see page 1 for information on prior period revisions. (2) Consists of net gains from trading activities, debt securities and equity investments. Total revenue Stable revenue of $20.6 billion Net interest income variable sources and mortgages held for sale 4Q13 liquidity funding Noninterest income Noninterest income up $148 million - Service charges on deposit accounts and card fees down $111 million reflecting seasonality - partially offset by higher retail brokerage asset-based fees - Mortgage banking down $60 million as $229 million of higher servicing income was more than offset by lower production revenue - • Net gains from trading up $107 million on strong customer accommodation results • Net gains from equity investments up $193 million reflecting strong equity markets Noninterest expense Noninterest expense down $137 million - incentive compensation and employee benefits expense, partially offset by $133 million lower deferred compensation expense (P&L neutral), lower salaries - Equipment, professional services and advertising expenses down $319 million from elevated 4Q13 levels Income tax Tax expense down $227 million NII down $188 million reflecting 2 fewer days in the quarter, and lower income from NIM (1) down 7 bps to 3.20% reflecting lower variable income, deposit growth and Market sensitive revenue (2) up $397 million Personnel expense up $198 million; included $661 million in seasonally higher expense on 2 fewer days and lower revenue-based incentive compensation 27.9% effective income tax rate included a $423 million discrete tax benefit Trust and investment fees down $46 million as lower investment banking was |
Wells Fargo 1Q14 Supplement 7 Loans (1) Period-end loans up $28.0 billion YoY and $4.1 billion LQ – Commercial loans up $4.0 billion LQ • $3.0 billion increase in C&I on growth in Corporate Banking, Capital Finance and Government and Institutional Banking • $0.8 billion increase in CRE reflecting new originations – Consumer loans stable LQ as growth in nonconforming mortgage and auto was offset by lower home equity and seasonally lower credit card Core loans grew $40.8 billion, or 6%, YoY and $7.0 billion LQ Non-strategic/liquidating loans (2) down $12.8 billion YoY and $2.9 billion from 4Q13 Total average loans of $823.8 billion up $27.1 billion YoY and $10.5 billion LQ Total average loan yield of 4.29%, down 7 bps LQ - Core loan yield excluding the non-strategic/ liquidating portfolio was down 3 bps - Non-strategic/liquidating portfolio yield of 4.96% (1) Please see page 1 for information on prior period revisions. (2) See page 20 for additional information regarding the non-strategic/liquidating portfolio, which comprises the Pick-a-Pay, liquidating home equity, legacy WFF indirect Period–end Loans Outstanding ($ in billions) (2) Total average loan yield auto, legacy WFF debt consolidation, Education Finance-government guaranteed, and legacy Wachovia commercial & industrial, commercial real estate, foreign and other PCI loan portfolios. 4.49% 4.47% 4.42% 4.36% 4.29% 707.6 712.3 725.0 741.4 748.4 90.8 87.6 84.1 80.9 78.0 798.4 799.9 809.1 822.3 826.4 1Q13 2Q13 3Q13 4Q13 1Q14 Core loans Non-strategic/liquidating loans |
Wells Fargo 1Q14 Supplement 8 175.0 180.0 185.0 190.0 195.0 200.0 1Q13 1Q14 Commercial and Industrial 238.0 242.0 246.0 250.0 254.0 258.0 262.0 1Q13 1Q14 Real Estate 1-4 Family First Mortgage 44.0 45.0 46.0 47.0 48.0 49.0 50.0 51.0 52.0 53.0 54.0 1Q13 1Q14 Automobile 23.0 23.5 24.0 24.5 25.0 25.5 26.0 26.5 1Q13 1Q14 Credit Card 35.0 37.0 39.0 41.0 43.0 45.0 47.0 49.0 51.0 53.0 55.0 1Q13 1Q14 Foreign Broad-based, year-over-year loan (1) growth Period-end loans up $28.0 billion, or 4% year-over-year Growth in nonconforming mortgage Record originations, up 15% Record new account growth, up 6% ($ in billions) Growth in Asset Backed Finance, Corporate Banking and Government and Institutional Banking Trade finance growth and 3Q13 U.K. CRE acquisition (1) Please see page 1 for information on prior period revisions. |
Wells Fargo 1Q14 Supplement 9 Deposits Average deposits up $91.1 billion YoY and $16.9 billion LQ on solid consumer and commercial growth and an increase in liquidity-related term deposits in 4Q13 Average core deposits of $973.8 billion up $47.9 billion, or 5%, YoY and up $8.0 billion, or 3% annualized LQ – 118% of average loans – Average retail core deposits up 4% YoY and 7% annualized LQ • Primary consumer checking customers (1) up a net 5.1% YoY Stable funding costs of 11 bps Average Deposits and Rates ($ in billions) Average deposit cost Average Core Deposits ($ in billions) 925.9 965.8 973.8 1Q13 4Q13 1Q14 (1) Metrics reported on a one-month lag from reported quarter-end; for example 1Q14 cross-sell is as of February 2014. Checking customer growth is 12-months ending for each respective period. Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit. 711.9 773.0 793.2 274.3 287.4 284.1 986.2 1,060.4 1,077.3 1Q13 4Q13 1Q14 Noninterest-bearing deposits Interest-bearing deposits 0.15% 0.11% 0.11% |
Wells Fargo 1Q14 Supplement 10 Net interest income (TE) (1) up $157 million YoY reflecting lower funding costs Net interest income (TE) (1) down $190 million LQ on 2 fewer days in the quarter, lower variable income (PCI loan recoveries and loan fees), and lower income from mortgages held for sale Average earning assets up $20.2 billion, or 2%, LQ - Short-term investments/fed funds sold up $8.0 billion - Loans up $10.5 billion - Investment securities up $3.8 billion NIM (2) of 3.20% down 7 bps from 4Q13 on: - Variable income = (4) bps - Customer-driven deposit growth = (2) bps - Liquidity–related activity = (1) bps - Balance sheet repricing, growth and mix = 0 bps Net interest income Net Interest Income (TE) (1) ($ in millions) Net Interest Margin (NIM) (2) 10,675 10,946 10,949 11,022 10,832 1Q13 2Q13 3Q13 4Q13 1Q14 3.49% 3.47% 3.39% 3.27% 3.20% (1) (2) Please see page 1 for information on prior period revisions. Tax-equivalent net interest income is based on the federal statutory rate of 35% for the periods presented. Net interest income was $10,499 million, $10,750 million, $10,748 million, $10,803 million and $10,615 million for 1Q13, 2Q13, 3Q13, 4Q13 and 1Q14 respectively. |
Wells Fargo 1Q14 Supplement 11 7,966 7,826 8,122 8,292 8,500 2,794 2,802 1,608 1,570 1,510 10,760 10,628 9,730 9,862 10,010 1Q13 2Q13 3Q13 4Q13 1Q14 Noninterest income Deposit service charges down $68 million LQ on seasonality Trust and investment fees down $46 million, or 1%, LQ as lower investment banking was partially offset by higher retail brokerage asset- based fees Mortgage banking down $60 million - Gain on sale revenue down $289 million reflecting a 28% decline in originations and a 16 bps decline in gain on sale margin to 1.61% - Net servicing income up $229 million reflecting higher MSR hedge performance Equity gains up $193 million on continued strength in business line results reflecting gains from multiple investments on strong public and private equity markets Mortgage banking Noninterest income excluding Mortgage banking vs vs ($ in millions) 1Q14 4Q13 1Q13 Noninterest income Service charges on deposit accounts $ 1,215 (5) % - Trust and investment fees Brokerage advisory, commissions and other fees 2,241 4 9 Trust and investment management 844 (1) 6 Investment banking 327 (29) (7) Card fees 784 (5) 6 Other fees 1,047 (6) 1 Mortgage banking 1,510 (4) (46) Insurance 432 (5) (7) Net gains from trading activities 432 33 (24) Net gains on debt securities 83 n.m. 84 Net gains from equity investments 847 30 n.m. Lease income 133 (10) 2 Other 115 n.m. (75) Total noninterest income $ 10,010 2 % (7) Card fees down $43 million on seasonality Other fees down $72 million on lower commercial real estate brokerage commissions from a strong 4Q13 Trading gains up $107 million on strong customer accommodation trading |
Wells Fargo 1Q14 Supplement 12 Noninterest expense and efficiency ratio (1) Noninterest expense down $137 million LQ - Personnel expense up $198 million • Salaries down $83 million reflecting 2 fewer days in the quarter • Commission and incentive compensation up $69 million as $221 million in annual equity awards to retirement-eligible employees was partially offset by lower revenue-based compensation • Benefits expense up $212 million as $440 million in seasonally higher payroll taxes and 401(k) matching expenses were partially offset by $133 million lower deferred compensation - Equipment expense down $77 million from a 4Q13 that included annual license renewals - Outside professional services (2) down $195 million from elevated 4Q13 levels - Other expense (2) down $86 million • Advertising down $47 million from elevated 4Q13 levels Efficiency ratio down 60 bps LQ to 57.9% Expect to operate within targeted efficiency ratio range of 55%-59% in 2Q14 12,400 12,255 12,102 12,085 11,948 58.3% 57.3% 59.1% 58.5% 57.9% 1Q13 2Q13 3Q13 4Q13 1Q14 Efficiency Ratio vs vs ($ in millions) 1Q14 4Q13 1Q13 Noninterest expense Salaries $ 3,728 (2) % 2 Commission and incentive compensation 2,416 3 (6) Employee benefits 1,372 18 (13) Equipment 490 (14) (7) Net occupancy 742 1 3 Core deposit and other intangibles 341 (9) (10) FDIC and other deposit assessments 243 24 (17) Outside professional services (2) 559 (26) 4 Other (2) 2,057 (4) (3) Total noninterest expense $ 11,948 (1) % (4) (1) (2) The sum of Outside professional services expense and Other expense ties to Other noninterest expense in the Consolidated Statement of Income, pages 19 and 21 of the press release. Efficiency ratio defined as noninterest expense divided by total revenue (net interest income plus noninterest income). Noninterest expense and our efficiency ratio may be affected by a variety of factors, including business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our business and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters. |
Wells Fargo 1Q14 Supplement 13 vs vs ($ in millions) 1Q14 4Q13 1Q13 Net interest income $ 7,275 1 % 2 Noninterest income 5,318 6 (8) Provision for credit losses 419 (14) (67) Noninterest expense 6,774 (4) (8) Income tax expense 1,376 - 7 Segment net income $ 3,844 19 % 31 ($ in billions) Avg loans, net $ 505.0 - 1 Avg core deposits 626.5 1 1 1Q14 4Q13 1Q13 Regional Banking Primary consumer checking customers (1)(2)(3) 5.1 % 4.7 2.1 Primary business checking customers (1)(2)(3) 5.1 4.7 Retail Bank household cross-sell (1) 6.17 6.16 6.10 vs vs ($ in billions) 1Q14 4Q13 1Q13 Consumer Lending Credit card payment volumes (POS) $ 13.3 (7) % 14 Credit card penetration (1)(4) 38.0 % 94 bps 389 Home Lending Applications $ 60 (8) % (57) Application pipeline 27 8 (64) Originations 36 (28) (67) Gain on sale margin 1.61 % (16) bps (95) Community Banking Net income of $3.8 billion, up 31% YoY and 19% LQ Regional Banking Continued franchise and cross-sell growth (1) – Primary consumer checking customers (2) (3) up a net 5.1% YoY – Primary business checking customers (2) (3) up a net 5.1% YoY – Retail bank cross-sell of 6.17 products per household up from 6.10 in 1Q13 Consumer Lending Credit card penetration (1) (4) rose to 38.0%, up from 37.0% in 4Q13 and 34.1% in 1Q13 Record consumer auto originations of $7.8 billion, up 16% LQ and 15% YoY Mortgage originations of $36 billion down 28% LQ and 67% YoY - 7% of originations were from HARP (5) vs. 6% in 4Q13 and 10% in 1Q13 - 66% of originations were purchases, up from 31% in 1Q13 (1) Metrics reported on a one-month lag from reported quarter-end; for example 1Q14 cross-sell is as of February 2014. (2) Checking customer growth is 12-months ending for each respective period. (3) Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit. (4) Household penetration as of February 2014 and defined as the percentage of retail bank households that have a credit card with Wells Fargo. (5) Home Affordable Refinance Program. |
Wells Fargo 1Q14 Supplement 14 vs vs ($ in millions) 1Q14 4Q13 1Q13 Net interest income $ 2,891 (8) % (4) Noninterest income 2,689 (5) (13) Reversal of provision for credit losses (93) (26) 60 Noninterest expense 3,215 6 4 Income tax expense 714 (26) (29) Segment net income $ 1,742 (17) % (15) ($ in billions) Avg loans, net (1) $ 301.9 2 7 Avg core deposits 259.0 - 16 vs vs ($ in billions) 1Q14 4Q13 1Q13 Key Metrics: Cross-sell 7.2 1 % 6 Commercial card spend volume $ 5.3 4 21 U.S. investment banking market share % (3) 4.0 % (160) bps (60) Total AUM $ 478.8 (2) % 3 Advantage Funds AUM 233.9 (4) 5 Wholesale Banking Net income of $1.7 billion, down 15% YoY and 17% LQ Net interest income down 8% LQ on lower PCI loan recoveries; average loans (1) up 2% on broad-based growth Noninterest income down 5% LQ on lower investment banking, commercial brokerage fees, and corporate banking energy capital gains Cross-sell Cross-sell of 7.2 products per relationship (2) up from 6.8 in 1Q13 Treasury Management Commercial card spend volume of $5.3 billion up 4% LQ and 21% YoY Wholesale treasury management revenue up 3% LQ and 4% YoY reflecting new product sales Investment Banking U.S. investment banking market share (3) of 4.0% Asset Management Total AUM up $16 billion YoY on growth in equity assets driven by higher market valuations partially offset by money market outflows (1) Please see page 1 for information on prior period revisions. (2) Cross-sell reported on a one-quarter lag. (3) Source: Dealogic U.S. investment banking fee market share. (2) |
Wells Fargo 1Q14 Supplement 15 Wealth, Brokerage and Retirement Net income up 41% YoY and down 3% LQ Net interest income flat LQ; average loans up 3% and average core deposits up 1% LQ Noninterest income up 1% LQ as higher asset- based fees were largely offset by lower gains on deferred compensation plan investments Noninterest expense up 2% LQ and included seasonally higher personnel costs and lower deferred compensation plan expense Retail Brokerage Managed account assets of $388 billion, up 4% LQ and 19% YoY driven by net flows and market performance Wealth Management Wealth Management client assets up 1% LQ and 6% YoY Retirement IRA assets up 1% LQ and 9% YoY Institutional Retirement plan assets up 1% LQ and 8% YoY (1) Includes deposits. (2) Data as of February 2014. vs vs ($ in millions) 1Q14 4Q13 1Q13 Net interest income $ 768 - % 15 Noninterest income 2,700 1 7 Reversal of provision for credit losses (8) (27) n.m. Noninterest expense 2,711 2 3 Income tax expense 290 (4) 40 Segment net income $ 475 (3) % 41 ($ in billions) Avg loans, net $ 50.0 3 14 Avg core deposits 156.0 1 4 vs vs ($ in billions, except where noted) 1Q14 4Q13 1Q13 Key Metrics: WBR Client Assets (1) ($ in trillions) $ 1.6 1 % 8 Cross-sell (2) 10.42 - 1 Retail Brokerage Financial Advisors 15,146 (1) (1) Managed account assets 388 4 19 Client assets (1) ($ in trillions) 1.4 1 8 Wealth Management Client assets (1) 217 1 6 Retirement IRA Assets 344 1 9 Institutional Retirement Plan Assets 310 1 8 |
Wells Fargo 1Q14 Supplement 16 1.2 0.7 0.1 0.4 0.3 1.4 1.2 1.0 1.0 0.8 0.72% 0.58% 0.48% 0.47% 0.41% 1Q13 2Q13 3Q13 4Q13 1Q14 Provision Expense Net Charge-offs Net charge-off rate 19.5 19.5 16.9 15.7 14.7 3.4 3.2 3.8 3.9 4.1 22.9 21.1 20.7 19.6 18.8 1Q13 2Q13 3Q13 4Q13 1Q14 Nonaccrual loans Foreclosed assets Credit quality Provision expense of $325 million, down $38 million from 4Q13 Net charge-offs of $825 million, down $138 million, or 14%, LQ 0.41% net charge-off rate (1) - Commercial losses of 0.01% (1) , down 5 bps LQ - Consumer losses of 0.75%, down 7 bps LQ NPAs declined $840 million LQ - $1.0 billion decline in nonaccrual loans - $178 million increase in foreclosed assets Reserve release (3) of $500 million vs. $600 million in 4Q13 - Continue to expect future reserve releases, absent significant deterioration in the economy Allowance for credit losses = $14.4 billion - Allowance covered 4.3x annualized 1Q14 net charge-offs PCI nonaccretable = 20.5% of remaining UPB (4) (1) Please see page 1 for information on prior period revisions. (2) 30-89 days and 90 days or more past due and still accruing, and nonperforming loans, include held for sale loans reported on Balance Sheet. (3) Provision expense minus net charge-offs. (4) Unpaid principal balance for PCI loans that have not had a UPB charge-off. Provision Expense and Net Charge-offs ($ in billions) Nonperforming Assets (2) ($ in billions) (1) |
Wells Fargo 1Q14 Supplement 17 Capital Capital continued to strengthen Common Equity Tier 1 ratio under Basel III (General Approach) of 11.36% Common Equity Tier 1 ratio under Basel III (Advanced Approach, fully phased-in) of 10.04% at 3/31/14 (1) Period-end common shares outstanding up 8.6 million LQ on annual employee benefit plan issuances - Purchased 33.5 million common shares in 1Q14 Board approved an additional 350 million shares in our repurchase authority Expect share count to decline in the remainder of 2014 on anticipated share repurchase activity See pages 28-29 for additional information regarding common equity ratios. 1Q14 capital ratios are preliminary estimates. Common Equity Tier 1 Ratio Under Basel I Basel III (General Approach) 10.39% 10.71% 10.60% 10.82% 11.36% 1Q13 2Q13 3Q13 4Q13 1Q14 (1) Estimated based on final rules adopted July 2, 2013, by the Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act. |
Wells Fargo 1Q14 Supplement 18 Summary 1Q14 Record earnings of $5.9 billion, up $722 million, or 14% from 1Q13 Record diluted EPS of $1.05, up 14% - 17 consecutive quarters of EPS growth Strong returns - ROA (1) = 1.57%, up 8 bps - ROE = 14.35%, up 76 bps Improved efficiency - Expenses down $452 million, or 4% - Efficiency ratio of 57.9%, down 40 bps Solid loan and deposit growth - Loans (1) up $28.0 billion, or 4%, on broad-based growth - Deposits up $83.8 billion, or 8% Improved credit quality - Net charge-offs of 0.41%, down 31 bps Capital continued to strengthen - Returned $2.6 billion to shareholders through dividends and share repurchases (1) Please see page 1 for information on prior period revisions. |
Appendix |
Wells Fargo 1Q14 Supplement 20 (1) Net of purchase accounting adjustments. -$100.0 Non-strategic/liquidating loan portfolio -$3.2 -$112.8 -$3.5 -$3.2 -$2.9 ($ in billions) 1Q14 4Q13 3Q13 2Q13 1Q13 4Q08 Pick-a-Pay mortgage (1) $ 49.5 51.0 52.8 54.8 56.6 95.3 Liquidating home equity 3.5 3.7 3.9 4.2 4.4 10.3 Legacy WFF indirect auto 0.1 0.2 0.3 0.5 0.6 18.2 Legacy WFF debt consolidation 12.6 12.9 13.3 13.7 14.1 25.3 Education Finance - gov't guaranteed 10.2 10.7 11.1 11.5 11.9 20.5 Legacy WB C&I, CRE and foreign PCI loans (1) 1.7 2.0 2.3 2.5 2.8 18.7 Legacy WB other PCI loans (1) 0.4 0.4 0.4 0.4 0.4 2.5 Total $ 78.0 80.9 84.1 87.6 90.8 190.8 |
Wells Fargo 1Q14 Supplement 21 Purchased credit-impaired (PCI) portfolios Legacy Wachovia PCI loans continued to perform better than originally expected Nonaccretable difference $5.1 billion remains to absorb losses on PCI loans - Nonaccretable = 20.5% of remaining unpaid principal balance (UPB) (3) • Pick-a-Pay nonaccretable = 21.1% of Pick-a-Pay UPB (3) Accretable yield $17.1 billion expected to accrete to income over the remaining life of the underlying loans - Commercial accretable yield balance of $501 million; weighted average life of portfolio is 2.1 years - Pick-a-Pay accretable yield balance of $16.2 billion; weighted average life of 12.5 years Balance decreased $306 million LQ and included $375 million accreted into interest income in 1Q14 - $110 million reclassified from nonaccretable difference (1) Includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan. (2) Reflects releases of $1.9 billion for loan resolutions and $6.4 billion from the reclassification of nonaccretable difference to the accretable yield, which will result in increasing income over the remaining life of the loan or pool of loans. (3) Unpaid principal balance of loans without write-downs. ($ in billions) (1) December 31, 2008 $ 29.2 62.5 6.5 98.2 December 31, 2013 3.1 28.8 0.8 32.7 March 31, 2014 2.7 28.2 0.8 31.7 12/31/08 Nonaccretable difference $ 10.4 26.5 4.0 40.9 Addition of nonaccretable difference due to acquisitions 0.2 - - 0.2 Losses from loan resolutions and write-downs (6.9) (17.9) (2.9) (27.7) Release of nonaccretable difference since merger (3.5) (3.9) (0.9) (8.3) (2) 3/31/14 Remaining nonaccretable difference 0.2 4.7 0.2 5.1 Life-to-date net performance Additional provision since 2008 merger $ (1.6) - (0.1) (1.7) Release of nonaccretable difference since 2008 merger 3.5 3.9 0.9 8.3 (2) Net performance 1.9 3.9 0.8 6.6 Commercial Pick-a-Pay Other consumer Total Adjusted unpaid principal balance Nonaccretable difference rollforward |
Wells Fargo 1Q14 Supplement 22 Residential mortgage trends Mortgage production $36 billion of mortgage originations, down 28% LQ - 66% of originations were purchases, down from 68% in 4Q13 but up from 31% in 1Q13 Announced team member reductions of approximately 1,100 FTEs in 1Q14 Servicing portfolio Residential servicing portfolio of $1.8 trillion - Wells Fargo servicing portfolio’s total delinquency and foreclosure ratio for 1Q14 was 5.56%, down 84 bps LQ and 98 bps YoY (1) Net gains on mortgage loan origination/or sales activities less repurchase reserve build divided by total originations. Residential mortgage production trends ($ in billions) 1Q14 4Q13 3Q13 2Q13 1Q13 Applications $ 60 65 87 146 140 Pipeline 27 25 35 63 74 Originations 36 50 80 112 109 Refinance % 34 % 32 41 56 69 Purchase % 66 68 59 44 31 Gain on Sale (1) 1.61 1.77 1.42 2.21 2.56 |
Wells Fargo 1Q14 Supplement 23 Real estate 1-4 family first mortgage portfolio First lien mortgage loans up modestly as growth in core first lien mortgage was partially offset by continued run-off in the liquidating portfolio – Core first lien up $2.8 billion, or 1%, reflecting nonconforming mortgage originations • Nonconforming mortgages increased $5.8 billion to $87.4 billion (4) – Pick-a-Pay non-PCI portfolio down 3% – PCI portfolio down 2% – Debt consolidation first lien down 3% Pick-a-Pay non-PCI portfolio • $184 million of nonaccrual TDRs reclassified to accruing TDR status based on borrower payment performance • $3.3 billion in nonaccruals included $1.7 billion of nonaccruing TDRs Core net charge-offs down $3 million LQ – Loans down 3% LQ driven by loans paid-in-full – 87% of portfolio current – Nonaccrual loans decreased $195 million, or 6%, LQ – Net charge-offs of $24 million down $10 million LQ on improved portfolio performance and lower severities (1) The carrying value, which does not reflect the allowance for loan losses, includes purchase accounting adjustments, which, for PCI loans, are the nonaccretable difference and the accretable yield, and for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs. (2) Ratios on Legacy WFF debt consolidation first mortgage loan portfolio only. (3) Ratios on non run-off first lien mortgage loan portfolio only. (4) Nonconforming mortgages originated post February 2009. ($ in millions) 1Q14 4Q13 Total real estate 1-4 family first mortgage $ 259,478 258,497 Less consumer non-strategic/liquidating portfolios: Pick-a-Pay non-PCI first lien mortgage 26,241 27,123 PCI first lien mortgage 23,530 24,100 Debt consolidation first mortgage portfolio 12,292 12,621 Core first lien mortgage 197,415 194,653 Non-PCI loans Carrying value (1) 26,241 27,123 Nonaccrual loans $ 3,253 3,448 as % of loans 12.40 % 12.71 Net charge-offs $ 24 34 as % of average loans 0.36 % 0.49 90+ days past due as % of loans 8.57 8.79 PCI loans carrying value (1) 23,292 23,848 Nonaccrual loans $ 2,092 2,156 as % of loans 17.02 % 17.08 Net charge-offs $ 65 77 as % of average loans 2.13 % 2.38 Nonaccrual loans $ 4,012 4,195 as % of loans 2.03 % 2.16 Net charge-offs $ 81 84 as % of loans 0.17 % 0.17 Pick-a-Pay first lien mortgage Legacy WFF debt consolidation first mortgage loan performance (2) Core first lien mortgage loan performance (3) |
Wells Fargo 1Q14 Supplement 24 Home equity portfolio Core Portfolio (1) Outstandings down 3% - High quality new originations with weighted average CLTV of 61%, 778 FICO, and 32% total debt service ratio 1Q14 losses decreased $34 million 2+ delinquencies decreased $85 million Delinquency rate for loans with a CLTV >100% decreased 18 bps Liquidating Portfolio Outstandings of $3.5 billion down 5% Credit performance continued to improve Total home equity portfolio = $82 billion 22% in 1 lien position 39% in junior lien position behind WFC owned or serviced 1 lien - Current 1 lien, Current junior lien = 96.7% - Current 1 lien, Delinquent junior lien = 1.0% - Delinquent 1 lien, Current junior lien = 1.0% - Delinquent 1 lien, Delinquent junior lien = 1.3% 39% in junior lien position behind third party 1 lien Excludes purchased credit-impaired loans. ($ in millions) 1Q14 4Q13 Core Portfolio (1) Outstandings 78,342 80,434 Net charge-offs 181 215 as % of avg loans 0.92 % 1.05 2+ payments past due 1,941 2,026 as % loans 2.49 % 2.53 % CLTV > 100% (2) 23 23 2+ payments past due 3.05 3.23 % Unsecured balances (3) 9 9 % 1st lien position 23 23 (1) Includes equity lines of credit and closed-end junior liens associated with the Pick- a-Pay portfolio totaling $1.2 billion at March 31, 2014 and $1.2 billion at December 31, 2013. (2) CLTV is calculated based on outstanding balance plus unused lines of credit divided by estimated home value. Estimated home values are determined predominantly based on automated valuation models updated through March 2014. (3) Unsecured balances, representing the percentage of outstanding balances above the most recent home value. st st st st st st st |
Wells Fargo 1Q14 Supplement 25 Consumer credit card portfolio Credit card outstandings down 3% LQ on seasonality and up 8% YoY reflecting continued new account growth - Record new accounts (1) up 8% LQ and up 6% YoY - Credit Card household penetration (2) of 38.0%, up from 37.0% in 4Q13 - Purchase dollar volume down 7% LQ on seasonality and up 14% YoY reflecting growth in the account base - POS transactions down 7% LQ on seasonality and up 16% YoY reflecting new accounts and active account growth Net charge-offs up $11 million, or 19 bps, LQ (1) Consumer credit card new account openings, excludes private label. (2) Household penetration as of February 2014 and defined as the percentage of retail banking deposit households that have a credit card with Wells Fargo. ($ in millions) 1Q14 4Q13 Credit card outstandings $ 26,061 26,870 Net charge-offs 231 220 as % of avg loans 3.57 % 3.38 Key Metrics: Purchase volume $ 13,280 14,355 POS transactions (millions) 188 202 New accounts (1) 613,157 565,277 Penetration (2) 38.0 % 37.0 |
Wells Fargo 1Q14 Supplement 26 Auto portfolios (1) Consumer Portfolio Auto outstandings of $52.6 billion up 4% LQ and 12% YoY – Record 1Q14 originations of $7.8 billion up 16% LQ and up 15% YoY Nonaccrual loans declined $12 million LQ and $59 million YoY Net charge-offs were down $18 million LQ reflecting seasonality, and up $14 million YoY – March Manheim index of 124.4 down 2% LQ and 3% from March 2013 30+ days past due decreased $300 million LQ reflecting seasonality and increased $113 million YoY Commercial Portfolio Loans of $8.5 billion up 1% LQ and 12% YoY (1) The consumer auto portfolio includes the liquidating legacy Wells Fargo Financial indirect portfolio of $132 million. ($ in millions) 1Q14 4Q13 Auto outstandings $ 50,058 48,335 Nonaccrual loans 150 159 as % of loans 0.30 % 0.33 Net charge-offs $ 89 105 as % of avg loans 0.73 % 0.87 30+ days past due $ 737 1,030 as % of loans 1.47 % 2.13 Auto outstandings $ 2,549 2,473 Nonaccrual loans 11 14 as % of loans 0.43 % 0.57 Net charge-offs $ 1 3 as % of avg loans 0.22 % 0.51 30+ days past due $ 9 16 as % of loans 0.35 % 0.65 Commercial Portfolio Auto outstandings $ 8,477 8,424 Nonaccrual loans 19 2 as % of loans 0.22 % 0.02 Net charge-offs $ - - as % of avg loans n.m. % n.m. Indirect Consumer Portfolio Direct Consumer Portfolio |
Wells Fargo 1Q14 Supplement 27 Student lending portfolio $21.9 billion student lending outstandings down 1% LQ Private Portfolio $11.7 billion private loan outstandings up 3% LQ and 7% YoY Net charge-offs down $6 million LQ, due to repayment seasonality 30+ days past due declined $35 million LQ on seasonality Government Portfolio $10.2 billion liquidating government guaranteed outstandings declined 5% LQ and 14% YoY - Average FICO of 749 and 80% of the total outstandings have been co-signed - Originations increased 157% LQ due to seasonality, up 12% YoY ($ in millions) 1Q14 4Q13 Education Finance Total outstandings $ 21,907 22,073 Private Portfolio Private outstandings $ 11,703 11,361 Net charge-offs 33 39 as % of avg loans 1.14 % 1.36 30 days past due $ 223 258 as % of loans 1.90 % 2.27 Government Guaranteed Portfolio Government outstandings $ 10,204 10,712 |
Wells Fargo 1Q14 Supplement 28 Common Equity Tier 1 under Basel III (General Approach) Wells Fargo & Company FIVE QUARTER RISK-BASED CAPITAL COMPONENTS Under Basel III Mar. 31, Dec. 31, Sept 30, June 30, Mar. 31, (in billions) 2014 2013 2013 2013 2013 Total equity $ 176.5 171.0 168.8 163.8 163.4 Noncontrolling interests (0.8) (0.9) (1.6) (1.4) (1.3) Total Wells Fargo stockholders' equity 175.7 170.1 167.2 162.4 162.1 Adjustments: Preferred stock (15.2) (15.2) (14.3) (12.6) (12.6) Cumulative other comprehensive income (2) (2.2) (1.4) (2.2) (1.8) (5.1) Goodwill and other intangible assets (2)(3) (25.6) (29.6) (29.8) (30.0) (30.2) Investment in certain subsidiaries and other - (0.4) (0.6) (0.5) (0.6) Common Equity Tier 1 (1)(4) (A) 132.7 123.5 120.3 117.5 113.6 Preferred stock 15.2 15.2 14.3 12.6 12.6 Qualifying hybrid securities and noncontrolling interests - 2.0 2.9 2.9 2.9 Other (0.3) - - - - Total Tier 1 capital 147.6 140.7 137.5 133.0 129.1 Long-term debt and other instruments qualifying as Tier 2 21.7 20.5 18.9 18.0 18.4 Qualifying allowance for credit losses 14.0 14.3 14.3 13.8 13.8 Other 0.2 0.7 0.6 0.2 0.3 Total Tier 2 capital 35.9 35.5 33.8 32.0 32.5 Total qualifying capital (B) 183.5 176.2 171.3 165.0 161.6 Basel I (General Approach) RWAs (5)(6): Credit risk $ 1,118.7 1,105.2 1,099.2 1,061.1 1,056.5 Market risk 49.7 36.3 35.9 36.3 37.8 Total Basel I (General Approach) RWAs (C) 1,168.4 1,141.5 1,135.1 1,097.4 1,094.3 Capital Ratios (6): Common equity tier 1 to total RWAs (A)/(C) 11.36 % 10.82 10.60 10.71 10.39 Total capital to total RWAs (B)/(C) 15.70 15.43 15.09 15.03 14.76 (1) (2) (3) (4) (5) (6) Under the regulatory guidelines for risk-based capital, 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 RWAs. Under Basel I The Company's March 31, 2014, RWA and capital ratios are preliminary. (General Approach) (1) Under transition provisions to Basel III, cumulative other comprehensive income (previously deducted under Basel I) is included in Common Equity Tier 1 over a specified phase-in period. In addition, certain intangible assets includable in Common Equity Tier 1 are phased out over a specified period. Goodwill and other intangible assets are net of any associated deferred tax liabilities. Common Equity Tier 1 (formerly Tier 1 common equity under Basel I) is a non-GAAP financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews Common Equity Tier 1 along with other Basel III revises the definition of capital, increases minimum capital ratios, and introduces a minimum Common Equity Tier 1 ratio. These changes are being phased in effective January 1, 2014 through the end of 2021 and the capital ratios will be determined using Basel I (General Approach) RWAs during 2014. $ $ measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants. |
Wells Fargo 1Q14 Supplement 29 Common Equity Tier 1 under Basel III (Advanced Approach, fully phased-in) Wells Fargo & Company COMMON EQUITY TIER 1 UNDER BASEL III (ADVANCED APPROACH, FULLY PHASED-IN) (1)(2) (in billions) Mar. 31, 2014 Common Equity Tier 1 (transition amount) under Basel III 132.7 $ Adjustments from transition amount to fully phased-in under Basel III (3): Cumulative other comprehensive income 2.8 Other (3.4) Total adjustments (0.6) Common Equity Tier 1 (fully phased-in) under Basel III (C) 132.1 $ Total RWAs anticipated under Basel III (4) (D) 1,315.2 $ Common Equity Tier 1 to RWAs anticipated under Basel III (Advanced Approach, fully phased-in) (C)/(D) 10.04 % (1) Common Equity Tier 1 is a non-GAAP financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews Common Equity Tier 1 along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants. (2) The Basel III Common Equity Tier 1 and RWA are estimated based on the Basel III capital rules adopted July 2, 2013, by the FRB. The rules establish a new comprehensive capital framework for U.S. banking organizations that implement the Basel III capital framework and certain provisions of the Dodd-Frank Act. The rules are being phased in effective January 1, 2014 through the end of 2021. (3) Assumes cumulative other comprehensive income is fully phased in and certain other intangible assets are fully phased out under Basel III capital rules. (4) The final Basel III capital rules provide for two capital frameworks: the Standardized Approach intended to replace Basel I, and the Advanced Approach applicable to certain institutions. Under the final rules, we will be subject to the lower of our Common Equity Tier 1 ratio calculated under the Standardized Approach and under the Advanced Approach in the assessment of our capital adequacy. Accordingly, the estimate of RWAs has been determined under the Advanced Approach because management expects RWAs to be higher using the Advanced Approach, and thus result in a lower Common Equity Tier 1, compared with the Standardized Approach. Basel III capital rules adopted by the Federal Reserve Board incorporate different classification of assets, with risk weights based on Wells Fargo's internal models, along with adjustments to address a combination of credit/counterparty, operational and market risks, and other Basel III elements. |
Wells Fargo 1Q14 Supplement 30 Forward-looking statements and additional information Forward-looking statements: This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we may make forward-looking statements in our other documents filed or furnished with the SEC, and our management may make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “target,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar references to future periods. In particular, forward-looking statements include, but are not limited to, statements we make about: (i) the future operating or financial performance of the Company, including our outlook for future growth; (ii) our noninterest expense and efficiency ratio; (iii) future credit quality and performance, including our expectations regarding future loan losses and allowance releases; (iv) the appropriateness of the allowance for credit losses; (v) our expectations regarding net interest income and net interest margin; (vi) loan growth or the reduction or mitigation of risk in our loan portfolios; (vii) future capital levels and our estimated Common Equity Tier 1 ratio under Basel III capital standards; (viii) the performance of our mortgage business and any related exposures; (ix) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (x) future common stock dividends, common share repurchases and other uses of capital; (xi) our targeted range for return on assets and return on equity; (xii) the outcome of contingencies, such as legal proceedings; and (xiii) the Company’s plans, objectives and strategies. Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions. Investors are urged to not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. For more information about factors that could cause actual results to differ materially from expectations, refer to the “Forward-Looking Statements” discussion in Wells Fargo’s press release announcing our first quarter 2014 results and in our most recent Quarterly Report on Form 10-Q, as well as to Wells Fargo’s other reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013. Purchased credit-impaired loan portfolio: Loans that were acquired from Wachovia that were considered credit impaired were written down at acquisition date in purchase accounting to an amount estimated to be collectible and the related allowance for loan losses was not carried over to Wells Fargo’s allowance. In addition, such purchased credit-impaired loans are not classified as nonaccrual or nonperforming, and are not included in loans that were contractually 90+ days past due and still accruing. Any losses on such loans are charged against the nonaccretable difference established in purchase accounting and are not reported as charge-offs (until such difference is fully utilized). As a result of accounting for purchased loans with evidence of credit deterioration, certain ratios of the combined company are not comparable to a portfolio that does not include purchased credit-impaired loans. In certain cases, the purchased credit-impaired loans may affect portfolio credit ratios and trends. Management believes that the presentation of information adjusted to exclude the purchased credit-impaired loans provides useful disclosure regarding the credit quality of the non-impaired loan portfolio. Accordingly, certain of the loan balances and credit ratios in this document have been adjusted to exclude the purchased credit-impaired loans. References in this document to impaired loans mean the purchased credit-impaired loans. Please see pages 31-33 of the press release announcing our 1Q14 results for additional information regarding the purchased credit-impaired loans. |