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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~FORM 10-Q~~(Mark One)



☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~THE SECURITIES EXCHANGE ACT OF 1934~~

For the quarterly period ended ~~September~~June 30, ~~2017~~2019



☐	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)



Delaware	No.	41-0449260
(State of incorporation)	(I.R.S. Employer Identification No.)

420 Montgomery Street, San Francisco, California94163

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: ~~1-866-249-3302~~ 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
Common Stock, par value $1-2/3	WFC	NYSE
7.5% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L	WFC.PRL	NYSE
Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series N	WFC.PRN	NYSE
Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series O	WFC.PRO	NYSE
Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series P	WFC.PRP	NYSE
Depositary Shares, each representing a 1/1000th interest in a share of 5.85% Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series Q	WFC.PRQ	NYSE
Depositary Shares, each representing a 1/1000th interest in a share of 6.625% Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series R	WFC.PRR	NYSE
Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series T	WFC.PRT	NYSE
Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series V	WFC.PRV	NYSE
Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series W	WFC.PRW	NYSE
Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series X	WFC.PRX	NYSE
Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series Y	WFC.PRY	NYSE
Guarantee of 5.80% Fixed-to-Floating Rate Normal Wachovia Income Trust Securities of Wachovia Capital Trust III	WBTP	NYSE
Guarantee of Medium-Term Notes, Series A, due October 30, 2028 of Wells Fargo Finance LLC	WFC/28A	NYSE

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.Yesþ No ¨



~~Yes~~ þ		No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files).



~~Yes~~ þ		No o

Yesþ 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.

Large accelerated filerþ Accelerated filer ¨



	~~Large accelerated filer~~ þ		~~Accelerated filer~~ o

	~~Non-accelerated filer~~ o ~~(Do not check if a smaller reporting company)~~		~~Smaller reporting company~~ o
			~~Emerging growth company~~ o

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. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



~~Yes~~ o		No þ

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
		~~October 25, 2017~~July 24, 2019
Common stock, $1-2/3 par value		~~4,924,261,449~~4,406,107,022


FORM 10-Q	FORM 10-Q				FORM 10-Q
CROSS-REFERENCE INDEX	CROSS-REFERENCE INDEX				CROSS-REFERENCE INDEX
PART I	Financial Information				Financial Information
Item 1.	Financial Statements			Page	Financial Statements			Page
					Consolidated Statement of Income			61
					Consolidated Statement of Comprehensive Income			62
					Consolidated Balance Sheet			63
					Consolidated Statement of Changes in Equity			64
	Consolidated Statement of Income			73	Consolidated Statement of Cash Flows			68
	Consolidated Statement of Comprehensive Income			74	Notes to Financial Statements
	Consolidated Balance Sheet			75	1	—	Summary of Significant Accounting Policies	69
	Consolidated Statement of Changes in Equity			76	2	—	Business Combinations	71
	Consolidated Statement of Cash Flows			78	3	—	Cash, Loan and Dividend Restrictions	72
	Notes to Financial Statements				4	—	Trading Activities	73
	1	—	Summary of Significant Accounting Policies	79	5	—	Available-for-Sale and Held-to-Maturity Debt Securities	74
	2	—	Business Combinations	81	6	—	Loans and Allowance for Credit Losses	80
	3	—	Federal Funds Sold, Securities Purchased under Resale Agreements and Other Short-Term Investments	81	7	—	Leasing Activity	94
	4	—	Investment Securities	82	8	—	Equity Securities	96
	5	—	Loans and Allowance for Credit Losses	89	9	—	Other Assets	98
	6	—	Other Assets	106	10	—	Securitizations and Variable Interest Entities	99
	7	—	Securitizations and Variable Interest Entities	107	11	—	Mortgage Banking Activities	106
	8	—	Mortgage Banking Activities	115	12	—	Intangible Assets	108
	9	—	Intangible Assets	118	13	—	Guarantees, Pledged Assets and Collateral, and Other Commitments	110
	10	—	Guarantees, Pledged Assets and Collateral	120	14	—	Legal Actions	114
	11	—	Legal Actions	124	15	—	Derivatives	119
	12	—	Derivatives	128	16	—	Fair Values of Assets and Liabilities	129
	13	—	Fair Values of Assets and Liabilities	135	17	—	Preferred Stock	149
	14	—	Preferred Stock	156	18	—	Revenue from Contracts with Customers	152
	15	—	Employee Benefits	159	19	—	Employee Benefits	156
	16	—	Earnings Per Common Share	160	20	—	Earnings Per Common Share	157
	17	—	Other Comprehensive Income	161	21	—	Other Comprehensive Income	158
	18	—	Operating Segments	163	22	—	Operating Segments	160
	19	—	Regulatory and Agency Capital Requirements	164	23	—	Regulatory and Agency Capital Requirements	161
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (Financial Review)				Management’s Discussion and Analysis of Financial Condition and Results of Operations (Financial Review)
	Summary Financial Data			2	Summary Financial Data			2
	Overview			3	Overview			3
	Earnings Performance			6	Earnings Performance			7
	Balance Sheet Analysis			20	Balance Sheet Analysis			20
	Off-Balance Sheet Arrangements			23	Off-Balance Sheet Arrangements			23
	Risk Management			24	Risk Management			24
	Capital Management			56	Capital Management			49
	Regulatory Matters			63	Regulatory Matters			54
	Critical Accounting Policies			64	Critical Accounting Policies			56
	Current Accounting Developments			65	Current Accounting Developments			57
	Forward-Looking Statements			69	Forward-Looking Statements			58
	Risk Factors			71	Risk Factors			59
	Glossary of Acronyms			165	Glossary of Acronyms			162
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			44	Quantitative and Qualitative Disclosures About Market Risk			43
Item 4.	Controls and Procedures			72	Controls and Procedures			60

PART II	Other Information				Other Information
Item 1.	Legal Proceedings			166	Legal Proceedings			163
Item 1A.	Risk Factors			166	Risk Factors			163
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			166	Unregistered Sales of Equity Securities and Use of Proceeds			163
Item 6.	Exhibits			167	Exhibits			164

Signature	Signature			168	Signature			165

PART I - FINANCIAL INFORMATION

FINANCIAL REVIEW


Summary Financial Data
						% Change															% Change
	Quarter ended					Sep 30, 2017 from				Nine months ended						Quarter ended					Jun 30, 2019 from				Six months ended
($ in millions, except per share amounts)	Sep 30, 2017			Jun 30, 2017	Sep 30, 2016	Jun 30, 2017		Sep 30, 2016		Sep 30, 2017			Sep 30, 2016	% Change		Jun 30, 2019			Mar 31, 2019	Jun 30, 2018	Mar 31, 2019		Jun 30, 2018		Jun 30, 2019			Jun 30, 2018	% Change
For the Period
Wells Fargo net income	$	4,596		5,810	5,644	(21	)%	(19	)	$	15,863		16,664	(5	)%	$	6,206		5,860	5,186	6	%	20		$	12,066		10,322	17	%
Wells Fargo net income applicable to common stock	4,185			5,404	5,243	(23	)	(20	)	14,645			15,501	(6	)	5,848			5,507	4,792	6		22		11,355			9,525	19
Diluted earnings per common share	0.84			1.07	1.03	(21	)	(18	)	2.91			3.03	(4	)	1.30			1.20	0.98	8		33		2.50			1.94	29
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA)	0.94		%	1.21	1.17	(22	)	(20	)	1.10		%	1.19	(8	)	1.31		%	1.26	1.10	4		19		1.29		%	1.10	17
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders' equity (ROE)	9.06			11.95	11.60	(24	)	(22	)	10.83			11.68	(7	)
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)																13.26			12.71	10.60	4		25		12.99			10.59	23
Return on average tangible common equity (ROTCE) (1)	10.79			14.26	13.96	(24	)	(23	)	12.94			14.08	(8	)	15.78			15.16	12.62	4		25		15.47			12.62	23
Efficiency ratio (2)	65.5			61.1	59.4	7		10		63.1			58.7	7		62.3			64.4	64.9	(3	)	(4	)	63.4			66.7	(5	)
Total revenue	$	21,926		22,169	22,328	(1	)	(2	)	$	66,097		66,685	(1	)	$	21,584		21,609	21,553	—		—		$	43,193		43,487	(1	)
Pre-tax pre-provision profit (PTPP) (3)	7,575			8,628	9,060	(12	)	(16	)	24,413			27,523	(11	)	8,135			7,693	7,571	6		7		15,828			14,463	9
Dividends declared per common share	0.390			0.380	0.380	3		3		1.150			1.135	1		0.45			0.45	0.39	—		15		0.90			0.78	15
Average common shares outstanding	4,948.6			4,989.9	5,043.4	(1	)	(2	)	4,982.1			5,061.9	(2	)	4,469.4			4,551.5	4,865.8	(2	)	(8	)	4,510.2			4,875.7	(7	)
Diluted average common shares outstanding	4,996.8			5,037.7	5,094.6	(1	)	(2	)	5,035.4			5,118.2	(2	)	4,495.0			4,584.0	4,899.8	(2	)	(8	)	4,540.1			4,916.1	(8	)
Average loans	$	952,343		956,879	957,484	—		(1	)	$	957,581		945,197	1		$	947,460		950,010	944,079	—		—		$	948,728		947,532	—
Average assets	1,938,523			1,927,079	1,914,586	1		1		1,932,242			1,865,694	4		1,900,627			1,883,091	1,884,884	1		1		1,891,907			1,900,304	—
Average total deposits	1,306,356			1,301,195	1,261,527	—		4		1,302,273			1,239,287	5		1,268,979			1,262,062	1,271,339	1		—		1,265,539			1,284,187	(1	)
Average consumer and small business banking deposits (4)	755,094			760,149	739,066	(1	)	2		758,443			726,798	4		742,671			739,654	754,047	—		(2	)	741,171			754,898	(2	)
Net interest margin	2.87		%	2.90	2.82	(1	)	2		2.88		%	2.86	1		2.82		%	2.91	2.93	(3	)	(4	)	2.86		%	2.89	(1	)
At Period End
Investment securities	$	414,633		409,594	390,832	1		6		$	414,633		390,832	6
Debt securities																$	482,067		483,467	475,495	—		1		$	482,067		475,495	1
Loans	951,873			957,423	961,326	(1	)	(1	)	951,873			961,326	(1	)	949,878			948,249	944,265	—		1		949,878			944,265	1
Allowance for loan losses	11,078			11,073	11,583	—		(4	)	11,078			11,583	(4	)	9,692			9,900	10,193	(2	)	(5	)	9,692			10,193	(5	)
Goodwill	26,581			26,573	26,688	—		—		26,581			26,688	—		26,415			26,420	26,429	—		—		26,415			26,429	—
Equity securities																61,537			58,440	57,505	5		7		61,537			57,505	7
Assets	1,934,939			1,930,871	1,942,124	—		—		1,934,939			1,942,124	—		1,923,388			1,887,792	1,879,700	2		2		1,923,388			1,879,700	2
Deposits	1,306,706			1,305,830	1,275,894	—		2		1,306,706			1,275,894	2		1,288,426			1,264,013	1,268,864	2		2		1,288,426			1,268,864	2
Common stockholders' equity	182,128			181,428	179,916	—		1		182,128			179,916	1
Wells Fargo stockholders' equity	205,929			205,230	203,028	—		1		205,929			203,028	1
Common stockholders’ equity																177,235			176,025	181,386	1		(2	)	177,235			181,386	(2	)
Wells Fargo stockholders’ equity																199,042			197,832	205,188	1		(3	)	199,042			205,188	(3	)
Total equity	206,824			206,145	203,958	—		1		206,824			203,958	1		200,037			198,733	206,069	1		(3	)	200,037			206,069	(3	)
Tangible common equity (1)	152,901			152,064	149,829	1		2		152,901			149,829	2		148,864			147,723	152,580	1		(2	)	148,864			152,580	(2	)
Capital ratios (5)(6):
Capital ratios (5):
Total equity to assets	10.69		%	10.68	10.50	—		2		10.69		%	10.50	2		10.40		%	10.53	10.96	(1	)	(5	)	10.40		%	10.96	(5	)
Risk-based capital:
Common Equity Tier 1	12.10			11.87	10.93	2		11		12.10			10.93	11		11.97			11.92	11.98	—		—		11.97			11.98	—
Tier 1 capital	13.95			13.68	12.60	2		11		13.95			12.60	11		13.69			13.64	13.83	—		(1	)	13.69			13.83	(1	)
Total capital	17.21			16.91	15.40	2		12		17.21			15.40	12		16.75			16.74	16.98	—		(1	)	16.75			16.98	(1	)
Tier 1 leverage	9.27			9.28	9.11	—		2		9.27			9.11	2		9.12			9.15	9.51	—		(4	)	9.12			9.51	(4	)
Common shares outstanding	4,927.9			4,966.8	5,023.9	(1	)	(2	)	4,927.9			5,023.9	(2	)	4,419.6			4,511.9	4,849.1	(2	)	(9	)	4,419.6			4,849.1	(9	)
Book value per common share (7)	$	36.96		36.53	35.81	1		3		$	36.96		35.81	3
Tangible book value per common share (1) (7)	31.03			30.62	29.82	1		4		31.03			29.82	4
Common stock price:
High	56.45			56.60	51.00	—		11		59.99			53.27	13
Low	49.28			50.84	44.10	(3	)	12		49.28			44.10	12
Period end	55.15			55.41	44.28	—		25		55.15			44.28	25
Book value per common share (6)																$	40.10		39.01	37.41	3		7		$	40.10		37.41	7
Tangible book value per common share (1)(6)																33.68			32.74	31.47	3		7		33.68			31.47	7
Team members (active, full-time equivalent)	268,000			270,600	268,800	(1	)	—		268,000			268,800	—		262,800			262,100	264,500	—		(1	)	262,800			264,500	(1	)

(1)

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


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


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


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

(5)

The risk-based capital ratios were calculated under the lower of Standardized or Advanced Approach determined pursuant to Basel ~~III~~III. Beginning January 1, 2018, the requirements for calculating common equity tier 1 and tier 1 capital, along with risk-weighted assets, became fully phased-in; accordingly, the information presented reflects fully phased-in common equity tier 1 capital, tier 1 capital and risk-weighted assets but reflects total capital still in accordance with Transition Requirements. ~~Accordingly, the total capital ratio was calculated under the Advanced Approach and the other ratios were calculated under the Standardized Approach, for each of the periods presented.~~


~~(6)~~	See the “Capital Management” section and Note 1923 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information.


~~(7)~~(6)	Book value per common share is common ~~stockholders'~~stockholders’ equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

Overview (continued)

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, ~~2016 (2016~~2018 (2018 Form 10-K).

When we refer to “Wells Fargo,” “the Company,” “we,” ~~“our”~~“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 diversified, community-based financial services company with ~~$1.93~~$1.92 trillion in assets. Founded in 1852 and headquartered in San Francisco, we provide banking, ~~insurance, investments,~~investment and mortgage products and services, as well as consumer and commercial finance, through 7,600 locations, more than ~~8,400 locations,~~ 13,000 ATMs, digital (online, mobile and social), and contact centers (phone, email and correspondence), and we have offices in 4232 countries and territories to support customers who conduct business in the global economy. With approximately ~~268,000~~263,000 active, full-time equivalent team members, we serve one in three households in the United States and ranked No. 2529 on Fortune’s ~~2017~~2019 rankings of America’s largest corporations. We ranked ~~third~~fourth in assets and ~~second~~third in the market value of our common stock among all U.S. banks at ~~September~~June 30, ~~2017.~~2019.

We use our Vision, ~~and~~ Values & Goals to guide us toward growth and success. Our vision is to satisfy our customers’ financial needs and help them succeed ~~financially, be recognized as the premier financial services company in our markets, and be one of America’s great companies.~~financially. We aspire to create deep and enduring relationships with our customers by providing them with an exceptional experience and by understanding their needs and delivering the most relevant products, services, advice, and guidance.

We have five primary values, which are based on our vision and ~~provide~~guide the ~~foundation for~~actions we take. First, we place customers at the center of everything we do. ~~First,~~We want to exceed customer expectations and build relationships that last a lifetime. Second, we value and support our people as a competitive advantage and strive to attract, develop, motivate, and retain ~~and motivate~~ the ~~most talented people we can find. Second,~~best team members. Third, we strive for the highest ethical standards ~~with our team members, our customers, our communities,~~of integrity, transparency, and ~~our shareholders. Third, with respect to our customers,~~principled performance. Fourth, we ~~strive to base our decisions~~value and ~~actions on what is right for them~~promote diversity and inclusion in ~~everything we do. Fourth, for team members we strive to build~~all aspects of business and ~~sustain a diverse and inclusive culture – one where they feel valued and respected for who they are as well as for the skills and experiences they bring to our company.~~at all levels. Fifth, we ~~also~~ look to each of our team members to be ~~leaders~~a leader in establishing, sharing, and communicating our ~~vision.~~vision for our customers, communities, team members, and shareholders. In addition to our five primary values, one of our key day-to-day priorities is to make risk management a competitive advantage by working hard to ensure that appropriate controls are in place to reduce risks to our customers, maintain and increase our competitive market position, and protect Wells Fargo’s long-term safety, soundness, and reputation.

In keeping with our primary values and risk management priorities, we ~~announced~~have six long-term goals for the Company, ~~in March 2017,~~ which entail becoming the financial services leader in the following areas:

Customer service and advice – provide ~~best-in-class~~exceptional service and guidance to our customers to help them ~~reach their financial goals.~~succeed financially.

Team member engagement – be a company where people ~~matter, teamwork~~feel included, valued, and supported; everyone is ~~rewarded, everyone feels respected~~respected; and ~~empowered to speak up, diversity and inclusion are embraced, and “how” our~~we work ~~gets done is just~~ as ~~important as getting the work done.~~a team.

Innovation – create ~~new kinds of~~ lasting value for our customers and ~~businesses by using~~increased efficiency for our operations through innovative ~~technologies~~thinking, industry-leading technology, and ~~moving quickly~~a willingness to ~~bring about change.~~test and learn.

Risk management – ~~desire to~~ set the global standard in managing all forms of risk.

Corporate citizenship – make ~~better every community in which we live~~a positive contribution to communities through philanthropy, advancing diversity and ~~do business.~~inclusion, creating economic opportunity, and promoting environmental sustainability.

Shareholder value – ~~earn the confidence of shareholders by maximizing~~deliver long-term ~~value.~~value for shareholders.

~~Over the past year, our~~The Company’s Board of Directors (Board) ~~has taken~~elected C. Allen Parker as Interim CEO and President and as a series of actions to enhance Board oversight and governance. The actions the Board has taken to date, many of which reflect the feedback we received from our shareholders and other stakeholders, include separating the roles of Chairmanmember of the Board effective March 28, 2019. The Board's external search for a permanent CEO is ongoing.

Federal Reserve Board Consent Order Regarding Governance Oversight and ~~Chief Executive Officer, amending Wells Fargo’s By-Laws~~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 Board submitted to ~~require that~~ the ~~Chairman~~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 approved and implemented to the satisfaction of the FRB, the Company’s total consolidated assets will be limited to the level as of December 31, 2017. Compliance with this asset cap will be measured on a two-quarter daily average basis to allow for management of temporary fluctuations. As of the end of second quarter 2019, our total consolidated assets, as calculated pursuant to the requirements of the consent order, were below our level of total assets as of December 31, 2017. Additionally, 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 ~~independent director, adding two new independent directors~~aggregate of $1 billion in ~~February 2017,~~civil money penalties to resolve matters regarding the Company’s compliance risk management program and ~~amending Board committee charters~~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 ~~oversight~~the Company’s internal audit program with respect to federal consumer financial law and the terms of ~~conduct risk.~~the consent orders. In ~~August 2017, the Board announced additional Board composition and governance changes that reflected a thoughtful and deliberate process~~addition, as required by the ~~Board that was informed~~consent orders, the Company submitted for non-objection plans to remediate customers affected by the ~~Company’s engagement with shareholders~~automobile collateral protection insurance and ~~other stakeholders,~~mortgage interest rate lock matters, as well as a plan for the ~~Board’s annual self-evaluation that was~~management of remediation activities conducted ~~in advance of its typical year-end timing and facilitated~~ by ~~a third party. The Board’s composition and governance actions taken in third quarter 2017 included~~ the ~~following:~~Company.

~~Elizabeth A. “Betsy” Duke was elected to serve as our new independent Board chair, effective January 1, 2018;~~

~~Juan A. Pujadas, a retired principal of PricewaterhouseCoopers LLP, was elected to the Board as a new independent director, effective September 1, 2017;~~

Changes to the leadership and composition of key Board committees were made, including appointing new chairs of the Board’s Risk Committee and Governance and Nominating Committee, effective September 1, 2017; and

To help facilitate Board refreshment and provide for an appropriate transition of committee membership, three long-serving directors, Cynthia H. Milligan, Stephen W. Sanger and Susan G. Swenson, will retire from the Board at year-end 2017.

~~In addition, the Board announced that it expects to name up to three additional independent directors before the 2018 annual shareholders' meeting. As has been our practice, we will continue~~

~~our engagement efforts with our shareholders and other stakeholders.~~

Retail Sales Practices Matters

As we have previously reported, onin September 8, 2016 we announced settlements with the ~~Consumer Financial Protection Bureau (CFPB),~~CFPB, the ~~Office of the Comptroller of the Currency (OCC),~~OCC, and the Office of the Los Angeles City Attorney, and entered into consent orders with the CFPB and the OCC, in connection with allegations that some of our retail customers received products and services they did not request. As a result, it remains our top priority to rebuild trust through a comprehensive action plan that includes making things right for our customers, team members, and other stakeholders, and ~~to build~~building a better Company for the future.

The job of rebuilding trust in Wells Fargo is a long-term effort – one requiring our commitment and perseverance. As we move forward, Wells Fargo has a specific action plan in place focused on reaching out to stakeholders who may have been affected by improper retail banking sales practices, including our communities, our customers, our regulators, our team members, and our investors.

Our priority of rebuilding trust has included ~~the following additional~~numerous actions ~~which have been~~ focused on identifying potential financial harm and customer ~~remediation:~~

~~Identifying Potential Financial Harm~~

~~In the fall of 2016, the~~remediation. The Board and management ~~undertook an enterprise-wide review~~are conducting company-wide reviews of sales practices issues. ~~This review is~~These reviews are ongoing.

A In August 2017, a third-party consulting firm ~~performed~~completed an ~~initial~~expanded data-driven review of retail banking accounts opened from ~~May 2011~~January 2009 to ~~mid-2015~~September 2016 to identify financial harm stemming from potentially unauthorized accounts. ~~The phrase “potentially unauthorized” does not mean that we are certain that~~We have completed financial remediation for the ~~accounts are unauthorized, but rather describes the accounts that the third party analysis~~customers identified as showing patterns that could indicate a lack of authorization. Since the analysis was intentionally inclusive and erred on the side of the customer, the number of potentially unauthorized accounts likely includes a population of accounts that were in fact authorized by our customers. The initial account analysis reviewed 93.5 million current and former customer accounts and identified approximately 2.1 million potentially unauthorized accounts.

~~We expanded the time periods of this review to cover the entire consent order period of January 2011~~ through September 2016, and to perform a voluntary review of accounts from 2009 to 2010. The expanded analysis reviewed more than 165 million retail banking accounts opened over the nearly eight-year period and identified a new total of approximately 3.5 million potentially unauthorized consumer and small business accounts. The 3.5 million potentially unauthorized accounts total is composed of the following:


◦	The original time period, which was re-examined following refinements to the practices and methodologies previously used by the third party to determine potentially unauthorized accounts: 2.55 million accounts identified as potentially unauthorized; and


◦	~~The additional periods back to January 2009 and forward to September 2016: 981,000 accounts identified as potentially unauthorized.~~

In connection with these 3.5 million potentially unauthorized accounts, approximately 190,000 accounts incurred fees and charges, up from 130,000 previously identified accounts that incurred fees and charges.

In addition, the expanded analysis included a review of online bill pay services, as required by the consent orders. During the almost eight-year review period, the analysis identified approximately 528,000 potentially unauthorized online bill pay enrollments.

▪

For all periods of the expanded analysis (other than some periods in 2009 and 2010 for which we do not have sufficient information), the maximum impact of the 3.5 million potentially unauthorized accounts and 528,000 potentially unauthorized online bill pay enrollments on the originally reported Community Banking cross-sell metric was, in any one quarter, 0.03 products per household (or 0.5% of the originally reported metric). Due to our historical processes, which removed from the calculation of the cross-sell metric certain accounts and other products that were inactive over various time frames, not all of these potentially unauthorized accounts affected the cross-sell metric at any one time.

~~Customer Remediation~~

We refunded $3.3 million to customers under the stipulated judgment with the Los Angeles City Attorney and under the CFPB and OCC consent orders, covering the period from May 2011 to mid-2015. In connection with the expanded account analysis, we will now provide a total of $2.9 million in additional refunds and credits on top of the $3.3 million previously refunded as a result of the initial account review. In addition, we will refund $910,000 to customers who incurred fees or charges as a result of potentially unauthorized online bill pay enrollments.

As of September 30, 2017, we had paid $5.45 million in additional payments to customers nationwide through our ongoing complaints process and free mediation services that were put in place in connection with the sales practices matters.

~~Customers also may receive compensation~~analysis. Additionally, customer outreach under the $142 million class-action lawsuit settlement concerning improper retail sales practices (Jabbari v. Wells Fargo Bank, N.A.) into which the Company entered to provide further remediation to customers, concluded in June 2018 and the period for customers to submit claims ~~dating back to 2002. After plaintiffs’ attorneys’ fees~~closed on July 7, 2018. The settlement administrator will pay claims following the calculation of compensatory damages and ~~costs~~favorable resolution of administration, the class-action settlement will provide reimbursement of fees not already paid and compensation for increased borrowing costs due to credit-score impact associated with a potentially unauthorized account. Remaining funds will be distributed to the participantspending appeals in the ~~class on a per account basis.~~

We are working to complete the requirements of our consent orders, which include the development of an action plan that addresses the findings of the independent review. The independent consultant's report, which is regulatory supervisory information that cannot be publicly disclosed, was received in August 2017.

case.

For additional information regarding sales practices matters, including related legal matters, see the “Risk Factors” section in our ~~2016~~2018 Form 10-K and Note 1114 (Legal Actions) to Financial Statements in this Report.

Additional Efforts to Rebuild Trust

Our priority of rebuilding trust has also included an effort to identify other areas or instances where customers may have experienced financial harm. We are working with our regulatory agencies in this ~~effort.~~effort, and we have accrued for the reasonably estimable remediation costs related to these matters, which amounts may change based on additional facts and information, as well as ongoing reviews and communications with our regulators. As part of this effort, we are focused on the following key areas:

~~Overview~~ ~~(continued)~~

~~Practices concerning the origination, servicing, and/or collection of consumer automobile loans, including related insurance products. For example:~~

◦•

Automobile Lending BusinessThe Company is reviewing practices concerning the origination, servicing, and collection of consumer automobile loans, including matters related to certain insurance products. In July 2017, the Company announced ~~a plan to~~it would remediate customers who may have been financially harmed due to issues related to automobile collateral protection insurance (CPI) policies purchased through a third-party vendor on their ~~behalf. Commencing~~behalf (based on an understanding that the borrowers did not have physical damage insurance coverage on their automobiles as required during the term of their automobile loans). The Company is in ~~August 2017,~~ the ~~Company began sending letters and refund checks~~process of providing remediation to affected customers ~~for policies placed between January 1, 2012, and September 30, 2016. The practice of placing CPI was discontinued by the Company on September 30, 2016. The time period in~~and/or letters to affected customers through which ~~customers~~they may ~~be eligible to~~ claim or otherwise receive remediation compensation for ~~certain CPI placements has now been extended back to~~policies placed between October 15, ~~2005. The Company currently estimates that it will provide approximately $100 million in cash remediation~~2005, and ~~$30 million in account adjustments under~~September 30, 2016. In addition, the ~~plan. The amount of remediation may be affected as the Company continues to work with its regulators on the remediation plan.~~

◦

~~The~~ Company has identified certain issues related to the unused portion of guaranteed automobile protection waiver or insurance agreements between the customer and dealer and, by assignment, the lender, which ~~may result in refunds~~will require remediation to customers in certain states. The Company is in the process of providing such remediation to affected customers. The Company has also identified certain issues related to its consumer automobile collections processes for customers in default, including legal notice practices in certain states and expenses charged in connection with certain repossessions. We expect remediation of affected customers will be required.

In October 2017, the Company announced plans to reach out to all home lending customers who paid fees for mortgage rate lock extensions requested from September 16, 2013, through February 28, 2017, and to refund customers who believe they should not have paid those fees. The plan to issue refunds follows an internal review that determined that a rate lock extension policy implemented in September 2013 was, at times, not consistently applied, resulting in some borrowers being charged fees in cases where the Company was primarily responsible for the delays that made the extensions necessary. Effective March 1, 2017, the Company changed how it manages the mortgage rate lock extension process to ensure more consistency by establishing a centralized review team that reviews all rate lock extension requests for consistent application of policy. A total of approximately $98 million in rate lock extension fees were assessed to about 110,000 borrowers during the period in question, although the Company believes a substantial number of those fees were appropriately charged under its policy. The amount ultimately refunded likely will be lower, as not all of the fees assessed were actually paid and some fees already have been refunded.

Practices related to certain consumer “add-on” products (e.g., identity theft and debt protection), including those products that are subject to an OCC consent order entered into in June 2015. Based on our ongoing review of "add-on" products, we expect remediation will be required.

~~Procedures regarding~~

•

Add-on ProductsThe Company is reviewingpractices related to certain consumer “add-on” products, including identity theft and debt protection products that were subject to an OCC consent order entered into in June 2015, as well as home and automobile warranty products, and memberships in discount programs. The products were sold to customers through a number of distribution channels and, in some cases, were acquired by the Company in connection with the purchase of loans. Sales of certain of these products have been discontinued over the past few years primarily due to decisions made by the Company in the normal course of business, and by mid-2017, the Company had ceased selling any of these products to consumers. We are in the process of providing remediation where we identify affected customers, and are also providing refunds to customers who purchased certain products. The review of the Company’s historical practices with respect to these products is ongoing, focusing on, among other topics, sales practices, adequacy of disclosures, customer servicing, and volume and type of customer complaints.


•	Consumer Deposit Account Freezing/Closing The Company is reviewing certain historical practices associated with the freezing (and, in many cases, closing) of consumer deposit accounts after the Company detected suspected fraudulent activity (by third-parties or account holders) that affected those accounts. Based on our ongoing review, we expect to remediate affected customers.


•	Review of Certain Activities Within Wealth and Investment ManagementA review of certain activities within Wealth and Investment Management (WIM) being conducted by the Board, in response to inquiries from federal government agencies, is assessing whether there have

Overview (continued)

been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the Company’s investment and fiduciary services business. The Board substantially completed its review and did not uncover evidence of systemic or widespread issues in these businesses. Federal government agencies continue to review this matter.

•

Fiduciary and Custody Account Fee CalculationsThe Company is reviewing fee calculations within certain fiduciary and custody accounts in its investment and fiduciary services business, which is part of the wealth management business in WIM. The Company has determined that there have been instances of incorrect fees being applied to certain assets and accounts, resulting in both overcharges and undercharges to customers. These issues included the incorrect set-up and maintenance in the system of record of the values associated with certain assets. The Company has performed root cause analyses with the assistance of third parties and is in the process of implementing additional operational and control procedures as a result. Systems, operations, and account-level reviews are ongoing to determine the extent of any assets and accounts affected, and, as a result of its reviews to date, the Company has suspended the charging of fees on some assets and accounts, has notified the affected customers, and is continuing its analysis of those assets and accounts. We are in the process of providing remediation to affected customers and continue to review customer accounts to determine the extent of any necessary remediation, including with respect to additional accounts not yet reviewed, which may lead to additional accruals and fee suspensions.

•

Foreign Exchange BusinessThe Company has completed an assessment, with the assistance of a third party, of its policies, practices, and procedures in its foreign exchange (FX) business. The FX business has substantially completed the implementation of new policies, practices, and procedures, including those related to pricing. The Company is in the process of providing remediation to customers that may have received pricing inconsistent with commitments made to those customers, and rebates to customers where historic pricing, while consistent with contracts entered into with those customers, does not conform to recently implemented pricing review standards for prior periods. The Company’s review of affected customers is ongoing.

•

Mortgage Loan Modifications An internal review of the Company’s use of a mortgage loan modification underwriting tool identified a calculation error regarding foreclosure attorneys’ fees affecting certain accounts that were in the foreclosure process between April 13, 2010, and October 2, 2015, when the error was corrected. A subsequent expanded review identified related errors regarding the maximum allowable foreclosure attorneys’ fees permitted for certain accounts that were in the foreclosure process between March 15, 2010, and April 30, 2018, when new controls were implemented. Similar to the initial calculation error, these errors caused an overstatement of the attorneys’ fees that were included for purposes of determining whether a customer qualified for a mortgage loan modification or repayment plan pursuant to the requirements of government-sponsored enterprises (such as Fannie Mae and Freddie Mac), the Federal Housing Administration (FHA), and the U.S. Department of Treasury’s Home Affordable Modification Program. Customers were not actually charged the incorrect attorneys’ fees. As previously disclosed, the Company has identified customers who, as a result of these errors, were incorrectly denied a loan modification or were not offered a loan modification or repayment plan in cases where they otherwise would have qualified, as well as instances where a foreclosure was completed after the loan modification was denied or the customer was deemed ineligible to be offered a loan modification or repayment plan. The number of previously disclosed customers affected by these errors may change as a result of ongoing validation, but is not expected to change materially upon completion of this validation. The Company has contacted substantially all of the identified customers affected by these errors and has provided remediation as well as the option to pursue no-cost mediation with an independent mediator. The Company’s review of its mortgage loan modification practices is ongoing, and we are providing remediation to the extent we identify additional affected customers as a result of this review.

•

Consumer Deposit Account Disclosures and FeesThe Company is reviewing certain past disclosures to customers regarding the minimum qualifying debit card usage required for customers to receive a waiver of monthly service fees on certain consumer deposit accounts. Based on the possibility of confusion by some customers regarding the transactions that counted toward the waiver, we expect to refund certain monthly service and related fees to affected customers.

Separately, the Company expects to refund certain monthly service fees that were charged in the past on certain consumer deposit accounts ~~after~~prior to an initial deposit being made by the ~~Company detected suspected fraudulent activity (by third-parties or account holders) that affected those accounts.~~customer. Under the Company’s current processes, which have been in place for several years, we would no longer assess a monthly service fee on such accounts prior to an initial deposit by the customer.

~~For more information, see~~To the ~~“Risk Factors” section in our 2016 Form 10-K~~extent issues are identified, we will continue to assess any customer harm and ~~Note 11 (Legal Actions) to Financial Statements in this Report.~~

provide remediation as appropriate. This effort to identify ~~similar~~other instances in which customers may have experienced harm is ongoing, and it is possible that we may identify other areas of potential concern. For more information, including related legal and regulatory risk, see the “Risk Factors” section in our 2018 Form 10-K and Note 14 (Legal Actions) to Financial Statements in this Report.

Financial Performance

Wells Fargo net income was ~~$4.6~~$6.2 billion in ~~third~~second quarter ~~2017~~2019 with diluted earnings per common share (EPS) of ~~$0.84,~~$1.30, compared with ~~$5.6~~$5.2 billion and ~~$1.03,~~$0.98, respectively, a year ago. ~~Third~~In second quarter 2017 results included the impact of a $1.0 billion, or ($0.20) per share, discrete litigation accrual, which was not tax-deductible, for previously disclosed, pre-financial crisis mortgage-related regulatory investigations.2019:


•	revenue was $21.6 billion, up$31 million compared with a year ago, with net interest income down$446 million and noninterest income up$477 million;


•	the net interest margin was 2.82%, down 11 basis points from a year ago primarily due to balance sheet mix and repricing;


•	noninterest expense was $13.4 billion, down $533 million from a year ago primarily due to lower remediation expense, core deposit and other intangibles expense, and FDIC and other deposit assessments expense;


•	average loans were $947.5 billion, up$3.4 billion from a year ago;


•	average deposits were $1.3 trillion, down$2.4 billion from a year ago;

~~Other financial results in third quarter 2017 included:~~

~~revenue was~~ ~~$21.9 billion, down~~ ~~$402 million~~ ~~compared with a year ago, with net interest income up 4% from a year ago;~~


•	return on assets (ROA) of 1.31% and return on equity (ROE) of 13.26%, were up from 1.10% and 10.60%, respectively, a year ago;


•	our credit results remained strong with a net charge-off rate of 0.28% (annualized) of average loans in second quarter 2019, compared with 0.26% (annualized) a year ago;


•	nonaccrual loans of $5.9 billion were down$1.2 billion, or 17%, from a year ago; and


•	we returned $6.1 billion to shareholders through common stock dividends and net share repurchases, an increase of 52% from the $4.0 billion we returned in second quarter 2018 and the 16th consecutive quarter of returning more than $3 billion.

~~average loans were $952.3 billion, down $5.1 billion, or 1%, from a year ago;~~

~~total deposits were~~ ~~$1.3 trillion, up~~ ~~$30.8 billion, or~~ 2%~~, from a year ago;~~

~~Wealth and Investment Management (WIM) total client assets reached a record high of $1.9 trillion;~~

~~our credit results improved with a net charge-off rate of 0.30% (annualized) of average loans in third quarter 2017, compared with 0.33% a year ago; and~~

~~we returned $4.0 billion to shareholders through common stock dividends and net share repurchases, which was the ninth consecutive quarter of returning more than $3 billion.~~

Balance Sheet and Liquidity

Our balance sheet remained strong during ~~third~~second quarter ~~2017~~2019 with ~~high~~strong credit quality and solid levels of liquidity and capital. Our total assets were ~~$1.93~~$1.92 trillion at ~~September~~June 30, ~~2017.~~2019. Cash and other short-term investments increased ~~$5.5~~$23.1 billion from December 31, ~~2016,~~2018, reflecting ~~lower loan balances~~an increase in federal funds sold and ~~growth~~securities purchased under resale agreements. Debt securities were $482.1 billion at June 30, 2019, a decrease of $2.6 billion from December 31, 2018, predominantly due to a decrease in deposits. Investment securities reached a record $414.6 billion, with approximately $31 billion of gross purchases during third quarter 2017, partially offset by runoff and the sale of approximately $13 billion of lower-yielding short-durationavailable-for-sale debt securities. Loans were down ~~$15.7~~$3.2 billion ~~or 2%,~~ from December 31, ~~2016, largely due to a decline~~2018, driven by declines in real estate 1-4 family junior lien mortgage, commercial and ~~automobile~~industrial, commercial real estate construction, and other revolving credit and installment loans, partially offset by increases in real estate 1-4 family first mortgage and commercial real estate mortgage loans.

Average deposits in ~~third~~second quarter ~~2017 reached a record $1.31~~2019 were $1.3 trillion, ~~up $44.8~~down $2.4 billion ~~or 4%,~~ from ~~third~~second quarter ~~2016.~~2018 reflecting lower Wealth and Investment Management and Wholesale Banking deposits as customers allocated more cash into higher yielding liquid alternatives. Our average deposit cost in ~~third~~second quarter ~~2017~~2019 was 2670 basis points, up 1530 basis points from a year ago, ~~primarily~~ driven by an increase in ~~commercial~~Wholesale Banking and ~~WIM~~Wealth and Investment Management deposit ~~rates.~~rates, unfavorable deposit mix shifts and retail banking deposit campaign pricing for new deposits.

Credit Quality

Solid overall credit results continued in ~~third~~second quarter ~~2017~~2019 as losses remained low and we continued to originate high quality loans, reflecting our long-term risk focus. Net charge-offs were ~~$717~~$653 million, or ~~0.30%~~0.28% (annualized) of average loans, in ~~third~~second quarter ~~2017,~~2019, compared with ~~$805~~$602 million a year ago ~~(0.33%~~(0.26%) (annualized). The ~~decrease~~increase in net charge-offs in ~~third~~second quarter ~~2017,~~2019, compared with a year ago, was predominantly driven by ~~lower~~higher losses in the commercial and industrial ~~loan~~ portfolio ~~including~~and the credit card portfolio, partially offset by declines in the ~~oil and gas~~automobile portfolio. ~~Our total oil and gas loan exposure, which includes unfunded commitments and loans outstanding, was down 8% from a year ago.~~

Our commercial portfolio net charge-offs were ~~$113~~$165 million, or 913 basis points (annualized) of average commercial loans, in ~~third~~second quarter ~~2017,~~2019, compared with net charge-offs of ~~$215~~$67 million, or 175 basis points (annualized), a year ago. Net consumer credit losses ~~increased~~decreased to 5345 basis points (annualized) of average consumer loans in ~~third~~second quarter ~~2017~~2019 from 5149 basis points (annualized) in ~~third~~second quarter ~~2016. Our commercial real estate portfolios were in a net recovery position for the 19th consecutive quarter, reflecting our conservative risk discipline and improved market conditions. Net~~

losses on our consumer real estate portfolios improved by $84 million, or 122%, to a net recovery of $15 million from a year ago, reflecting the benefit of the continued improvement in the housing market and our continued focus on originating high quality loans. Approximately 77% of the consumer first mortgage portfolio outstanding at September 30, 2017, was originated after 2008, when more stringent underwriting standards were implemented.2018.

The allowance for credit losses as of ~~September~~June 30, ~~2017,~~2019, decreased ~~$585~~$507 million compared with a year ago and decreased ~~$431~~$104 million from December 31, ~~2016. The~~2018. We had a $150 million release in the allowance for credit losses ~~at September 30, 2017 included $450 million for coverage of our preliminary estimate of potential hurricane-related losses from Hurricanes Harvey, Irma~~in both second quarter 2019 and ~~Maria.~~2018. The allowance coverage for total loans was ~~1.27%~~1.12% at ~~September~~June 30, ~~2017,~~2019, compared with ~~1.32%~~1.18% a year ago and ~~1.30%~~1.12% at December 31, ~~2016.~~2018. The allowance covered ~~4.3~~4.0 times annualized ~~third~~second quarter net charge-offs, compared with ~~4.0~~4.6 times a year ago. Future allowance levels will be based on a variety of factors, including loan growth, portfolio performance and general economic conditions. Our provision for loan losses was ~~$717~~$503 million in ~~third~~second quarter ~~2017, down~~2019, up from ~~$805~~$452 million a year ~~ago, primarily reflecting improvement in the oil and gas portfolio.~~ago.

Nonperforming assets decreased ~~$512~~$1.0 billion, or 14%, from March 31, 2019, and $648 million, or 5%9%, from ~~June 30, 2017, the sixth consecutive quarter of decreases, with improvement across our consumer~~December 31, 2018, and ~~commercial portfolios and lower foreclosed assets. Nonperforming assets were only 0.98%~~represented 0.66% of total loans ~~the lowest level since the merger with Wachovia in 2008.~~at June 30, 2019. Nonaccrual loans decreased ~~$437~~$983 million from ~~the prior quarter primarily due to a $276 million decrease in commercial nonaccruals. In addition, foreclosed assets were down $75~~March 31, 2019, and $574 million from December 31, 2018, driven by a decline in consumer nonaccruals from the ~~prior quarter.~~reclassification of $373 million in real estate 1-4 family first mortgage nonaccrual loans to mortgage loans held for sale (MLHFS) in second quarter 2019, as well as other broad-based improvement across several commercial industry categories. Foreclosed assets decreased $59 million from March 31, 2019, and $74 million from December 31, 2018.

Capital

Our financial performance in ~~third~~second quarter ~~2017 resulted in strong~~2019 allowed us to maintain a solid capital ~~generation, which increased~~position, with total equity ~~to a record $206.8~~of $200.0 billion at ~~September~~June 30, ~~2017, up $6.3~~2019, compared with $197.1 billion ~~from~~at December 31, ~~2016. Third quarter 2017 was the first quarter our 2017 Capital Plan was effective and we~~2018. We returned ~~$4.0~~$6.1 billion to shareholders in ~~third~~second quarter ~~2017~~2019 through common stock dividends and net share repurchases, ~~an increase of 24% from a year ago.~~which was 52% more than the $4.0 billion we returned in second quarter 2018. Our net payout ratio (which is the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock) was ~~95%, up from 63% in the prior quarter.~~104%. We continued to reduce our common shares outstanding through the repurchase of ~~49.0~~104.9 million common shares in the quarter. ~~We also entered into a $1 billion forward repurchase contract with an unrelated third party in October 2017 that is expected to settle in first quarter 2018 for approximately 19 million shares.~~ We expect to reduce our common shares outstanding through share repurchases throughout the remainder of ~~2017.~~2019.

We believe an important measure of our capital strength is the Common Equity Tier 1 (CET1) ratio under Basel III, fully phased-in, which was ~~11.82%~~11.97% at ~~September~~June 30, ~~2017,~~2019, up from 11.74% at December 31, 2018, and well above our internal target ~~level~~ of 10%. ~~The growth in~~As of June 30, 2019, our ~~CET1 ratio reflected lower~~eligible external total loss absorbing capacity (TLAC) as a percentage of total risk-weighted assets ~~(RWA)~~was 24.09%, ~~driven by lower loan balances and commitments, as well as improved RWA efficiency.~~compared with the required minimum of 22.0%. Likewise, our other regulatory capital ratios remained strong. See the “Capital Management” section in this Report for more information regarding our capital, including the calculation of our regulatory capital amounts.

Earnings Performance (continued)

Earnings Performance

Wells Fargo net income for ~~third~~second quarter ~~2017~~2019 was ~~$4.6~~$6.2 billion ($~~0.84~~1.30 diluted earnings per common share), compared with ~~$5.6~~$5.2 billion ($~~1.03~~0.98 diluted per share) for ~~third~~second quarter ~~2016.~~2018. Our financial performance in second quarter 2019 benefited from a $477 million increase in noninterest income, a $533 million decrease in noninterest expense, and a $516 million decline in income tax expense, partially offset by a $446 million decrease in net interest income, and a $51 million increase in our provision for credit losses. Net income ~~for the first nine months~~in second quarter 2019 benefited from a net discrete income tax benefit of ~~2017 was $15.9 billion ($2.91),~~$14 million, compared with ~~$16.7 billion ($3.03)~~a net discrete income tax expense of $481 million for the same period a year ago. ~~Our financial performance~~Net income for the first half of 2019 was $12.1 billion, compared with $10.3 billion for the same period a year ago. The increase in net income in the first ~~nine months~~half of ~~2017,~~2019, compared with the same period a year ago, ~~benefited from~~was driven by a ~~$1.9~~$79 million increase in noninterest income, a $1.7 billion ~~increase~~decrease in noninterest expense, and a $1.0 billion decline in income tax expense, partially offset by a $373 million decrease in net interest income, and a ~~$1.1 billion decrease~~$705 million increase in our provision for credit ~~losses, offset by a $2.5 billion decrease~~losses. Net income in ~~noninterest income and a $2.5 billion increase in noninterest expense. In~~ the first ~~nine months~~half of ~~2017,~~2019 benefited from a net ~~interest~~discrete income ~~represented 56%~~tax benefit of ~~revenue,~~$311 million, compared with ~~53%~~a net discrete income tax expense of $618 million for the same period ~~in 2016. Noninterest income was $28.8 billion in the first nine months of 2017, representing 44% of revenue, compared with $31.3 billion (47%) in the first nine months of 2016.~~a year ago.

Revenue, the sum of net interest income and noninterest income, was ~~$21.9~~$21.6 billion in ~~third~~both the second quarter ~~2017,~~of 2019 and 2018. Revenue was flat in second quarter 2019, compared with ~~$22.3 billion~~the same period a year ago, with an increase in ~~third quarter 2016.~~noninterest income, offset by a decrease in net interest income. Our diversified sources of revenue generated by our businesses continued to be balanced between net interest income and noninterest income. Revenue for the first ~~nine months~~half of ~~2017~~2019 was ~~$66.1~~$43.2 billion, compared with ~~$66.7~~$43.5 billion for the first ~~nine months~~half of ~~2016.~~2018. The ~~decrease~~decline in revenue ~~for~~in the ~~third quarter and~~ first ~~nine months~~half of ~~2017,~~2019, compared with the same ~~periods in 2016,~~period a year ago, was predominantly due to a decline in ~~noninterest income, partially offset by an increase in~~net interest income. In the first half of 2019 and 2018, net interest income ~~from loans~~represented 57% of revenue. Noninterest income was $18.8 billion in the first half of 2019, representing 43% of revenue, compared with $18.7 billion and ~~investment securities.~~43% in the first half of 2018.

~~Earnings Performance (continued~~)

Net Interest Income

Net interest income is the interest earned on debt securities, loans (including yield-related loan fees) and other interest-earning assets minus the interest paid on deposits, short-term borrowings and long-term debt. The net interest margin is the average yield on earning assets minus the average interest rate paid for deposits and our other sources of funding. Net interest income and the 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 based on a ~~35%~~21% federal statutory tax ~~rate.~~rate for the periods ending June 30, 2019 and 2018.

~~While the Company believes that it has the ability to increase net interest income over time, net~~Net interest income and the net interest margin in any one period can be significantly affected by a variety of factors including the mix and overall size of our earning assets portfolio and the cost of funding those assets. In addition, ~~some~~ variable sources of interest income, such as ~~resolutions from purchased credit-impaired (PCI) loans,~~ loan fees, periodic dividends, and collection of interest on nonaccrual loans, can ~~vary~~fluctuate from period to period. Net interest income and net interest margin growth has been challenged during the prolonged low interest rate environment as higher yielding loans and securities have run off and been replaced with lower yielding assets.

Net interest income on a taxable-equivalent basis was ~~$12.8~~$12.3 billion and ~~$38.2~~$24.7 billion in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~$12.3~~$12.7 billion and ~~$36.3~~

$25.1 billion for the same periods a year ago. ~~The net~~Net interest margin on a taxable-equivalent basis was ~~2.87%~~2.82% and ~~2.88% for~~2.86% in the ~~third~~second quarter and first ~~nine months~~half of ~~2017, respectively, up from 2.82%~~2019, compared with 2.93% and ~~2.86%~~2.89% for the same periods a year ago. The ~~increase~~decrease in net interest income ~~in the third quarter~~ and first nine months of 2017 from the same periods a year ago resulted from an increase in interest income, partially offset by an increase in interest expense on funding sources. The increase in interest income was driven by balance growth in earning assets and the benefit of higher interest rates. Interest expense on funding sources increased in the third quarter and first nine months of 2017, compared with the same periods a year ago, with a significant portion due to growth and repricing of long-term debt. Deposit interest expense was also higher, primarily due to an increase in wholesale pricing resulting from higher interest rates.

~~The increase in~~ net interest margin in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, compared with the same periods a year ago, was ~~predominantly due to repricing benefits~~driven by:

unfavorable impacts of ~~earning assets from higher~~growth, mix and repricing; and

lower variable sources of interest ~~rates exceeding the repricing costs of deposits~~income;

partially offset by:

favorable hedge ineffectiveness accounting results; and ~~market based funding sources.~~

a reduction in net securities premium amortization.

Average earning assets increased ~~$42.3 billion and $81.9~~$6.7 billion in the ~~third~~second quarter ~~and first nine months of 2017, respectively,~~ compared with the same ~~periods~~period a year ago. The change was driven by increases in:


•	average federal funds sold and securities purchased under resale agreements of $18.1 billion;


•	average debt securities of $4.2 billion; and


•	average loans of $3.4 billion;

partially offset by decreases in:


•	average interest-earning deposits of $13.8 billion;


•	average equity securities of $2.1 billion;


��	average loans held for sale of $1.8 billion;


•	other earning assets of $825 million; and


•	average mortgage loans held for sale of $324 million.

Average ~~loans~~earning assets decreased ~~$5.1 billion in the third quarter and increased $12.4~~$11.5 billion in the first ~~nine months~~half of 2017, average investment securities increased $48.6 billion in third quarter 2017 and $61.9 billion in the first nine months of 2017, and average trading assets increased $14.8 billion in the third quarter and $14.9 billion in the first nine months of 2017,2019 compared with the same ~~periods~~period a year ago. In addition, average federal funds sold and other short-term investments decreased $23.2 billion and $12.2 billion in the third quarter and first nine months of 2017, respectively, compared with the same periods a year ago.The change was driven by decreases in:


•	average interest-earning deposits of $22.6 billion;


•	average equity securities of $4.4 billion;


•	average mortgage loans held for sale of $2.4 billion;


•	average loans held for sale of $1.0 billion; and


•	other earning assets of $1.2 billion;

partially offset by increases in:


•	average federal funds sold and securities purchased under resale agreements of $11.8 billion;


•	average debt securities of $7.1 billion; and


•	average loans of $1.2 billion.

Deposits are an important low-cost source of funding and affect both net interest income and the net interest margin. Deposits include noninterest-bearing deposits, interest-bearing checking, market rate and other savings, savings certificates, other time deposits, and deposits in foreign offices. Average deposits ~~of $1.31 trillion and $1.30~~were $1.27 trillion in both the ~~third~~second quarter and first ~~nine months~~half of ~~2017, increased~~2019, respectively, compared with ~~$1.26~~$1.27 trillion and ~~$1.24~~$1.28 trillion ~~for~~in the same periods a year ago, and represented ~~137%~~134% of average loans in ~~third~~second quarter ~~2017 (136%~~2019 and 133% in the first ~~nine months~~half of ~~2017),~~2019, compared with ~~132%~~135% in ~~third~~second quarter ~~2016 (131%~~2018 and 136% in the first ~~nine months~~half of ~~2016).~~2018. Average deposits were ~~74% and~~ 73% of average earning assets in both the ~~third~~second quarter and first ~~nine months~~half of ~~2017, respectively,~~2019, compared with 73% in both the ~~third~~periods a year ago. The average deposit cost for second quarter 2019 was 70 basis points, up 30 basis points from a year ago, driven by an increase in Wholesale Banking and ~~first nine months of 2016.~~WIM deposit rates, unfavorable deposit mix shifts, and retail banking deposit campaign pricing for new deposits.

Table 1:Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) (1)(2)


	Quarter ended September 30,													Quarter ended June 30,
						2017						2016							2019						2018
(in millions)	Average balance			Yields/ rates		Interest income/ expense		Average balance		Yields/ rates		Interest income/ expense		Average balance			Yields/ rates		Interest income/ expense		Average balance		Yields/ rates		Interest income/ expense
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	276,129		1.20	%	$	832	299,351		0.50	%	$	373
Trading assets	103,589			2.96		767		88,838		2.72		605
Investment securities (3):
Available-for-sale securities:
Interest-earning deposits with banks														$	141,045		2.33	%	$	819	154,846		1.75	%	$	676
Federal funds sold and securities purchased under resale agreements														98,130			2.44		598		80,020		1.73		344
Debt securities (3):
Trading debt securities														86,514			3.45		746		80,661		3.45		695
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	14,529			1.31		48		25,817		1.52		99		15,402			2.21		85		6,425		1.66		27
Securities of U.S. states and political subdivisions	52,500			4.16		546		55,170		4.28		590		45,769			4.02		460		47,388		3.91		464
Mortgage-backed securities:
Federal agencies	139,781			2.58		903		105,780		2.39		631		149,761			2.99		1,120		154,929		2.75		1,065
Residential and commercial	11,013			5.43		149		18,080		5.54		250		5,562			4.02		56		8,248		4.86		101
Total mortgage-backed securities	150,794			2.79		1,052		123,860		2.85		881		155,323			3.03		1,176		163,177		2.86		1,166
Other debt and equity securities	48,082			3.75		453		54,176		3.37		459
Total available-for-sale securities	265,905			3.15		2,099		259,023		3.13		2,029
Held-to-maturity securities:
Other debt securities														45,063			4.40		494		47,009		4.33		506
Total available-for-sale debt securities														261,557			3.39		2,215		263,999		3.28		2,163
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	44,708			2.18		246		44,678		2.19		246		44,762			2.19		244		44,731		2.19		244
Securities of U.S. states and political subdivisions	6,266			5.44		85		2,507		5.24		33		6,958			4.06		71		6,255		4.34		68
Federal agency and other mortgage-backed securities	88,272			2.26		498		47,971		1.97		236		95,506			2.64		632		94,964		2.33		552
Other debt securities	1,488			3.05		12		3,909		1.98		19		58			3.86		—		584		4.66		7
Total held-to-maturity securities	140,734			2.38		841		99,065		2.15		534
Total investment securities	406,639			2.89		2,940		358,088		2.86		2,563
Mortgages held for sale (4)	22,923			3.82		219		24,060		3.44		207
Total held-to-maturity debt securities														147,284			2.57		947		146,534		2.38		871
Total debt securities														495,355			3.16		3,908		491,194		3.04		3,729
Mortgage loans held for sale (4)														18,464			4.22		195		18,788		4.22		198
Loans held for sale (4)	152			13.35		5		199		3.04		2		1,642			4.80		20		3,481		5.48		48
Loans:
Commercial:
Commercial loans:
Commercial and industrial – U.S.	270,091			3.81		2,590		271,226		3.48		2,369		285,084			4.47		3,176		275,259		4.16		2,851
Commercial and industrial – Non U.S.	57,738			2.90		421		51,261		2.40		309		62,905			3.90		611		59,716		3.51		524
Real estate mortgage	129,087			3.83		1,245		128,809		3.48		1,127		121,869			4.58		1,390		123,982		4.27		1,319
Real estate construction	24,981			4.18		263		23,212		3.50		205		21,568			5.36		288		23,637		4.88		287
Lease financing	19,155			4.59		220		18,896		4.70		223		19,133			4.71		226		19,266		4.48		216
Total commercial	501,052			3.76		4,739		493,404		3.42		4,233
Consumer:
Total commercial loans														510,559			4.47		5,691		501,860		4.15		5,197
Consumer loans:
Real estate 1-4 family first mortgage	278,371			4.03		2,809		278,509		3.97		2,764		286,169			3.88		2,776		283,101		4.06		2,870
Real estate 1-4 family junior lien mortgage	41,916			4.95		521		48,927		4.37		537		32,609			5.75		468		37,249		5.32		495
Credit card	35,657			12.41		1,114		34,578		11.60		1,008		38,154			12.65		1,204		35,883		12.66		1,133
Automobile	56,746			5.34		764		62,461		5.60		880		45,179			5.23		589		48,568		5.18		628
Other revolving credit and installment	38,601			6.31		615		39,605		5.92		590		34,790			7.12		617		37,418		6.62		617
Total consumer	451,291			5.14		5,823		464,080		4.97		5,779
Total consumer loans														436,901			5.18		5,654		442,219		5.20		5,743
Total loans (4)	952,343			4.41		10,562		957,484		4.17		10,012		947,460			4.80		11,345		944,079		4.64		10,940
Equity securities														35,215			2.70		237		37,330		2.38		222
Other	15,007			1.69		65		6,488		2.30		36		4,693			1.76		20		5,518		1.48		21
Total earning assets	$	1,776,782		3.45	%	$	15,390	1,734,508		3.17	%	$	13,798	$	1,742,004		3.94	%	$	17,142	1,735,256		3.73	%	$	16,178
Funding sources
Deposits:
Interest-bearing checking	$	48,278		0.57	%	$	69	44,056		0.15	%	$	17	$	57,549		1.46	%	$	210	80,324		0.90	%	$	181
Market rate and other savings	681,187			0.17		293		667,185		0.07		110		690,677			0.59		1,009		676,668		0.26		434
Savings certificates	21,806			0.31		16		25,185		0.30		19		30,620			1.62		124		20,033		0.43		21
Other time deposits	66,046			1.51		252		54,921		0.93		128		96,887			2.61		630		82,061		2.26		465
Deposits in foreign offices	124,746			0.76		240		107,072		0.30		82		51,875			1.86		240		51,474		1.30		167
Total interest-bearing deposits	942,063			0.37		870		898,419		0.16		356		927,608			0.96		2,213		910,560		0.56		1,268
Short-term borrowings	99,193			0.91		226		116,228		0.29		86		114,754			2.26		646		103,795		1.54		398
Long-term debt	243,137			2.26		1,377		252,400		1.59		1,006		236,734			3.21		1,900		223,800		2.97		1,658
Other liabilities	24,851			1.74		109		16,771		2.11		88		24,314			2.18		132		28,202		2.12		150
Total interest-bearing liabilities	1,309,244			0.79		2,582		1,283,818		0.48		1,536		1,303,410			1.50		4,891		1,266,357		1.10		3,474
Portion of noninterest-bearing funding sources	467,538			—		—		450,690		—		—		438,594			—		—		468,899		—		—
Total funding sources	$	1,776,782		0.58		2,582		1,734,508		0.35		1,536		$	1,742,004		1.12		4,891		1,735,256		0.80		3,474
Net interest margin and net interest income on a taxable-equivalent basis (5)				2.87	%	$	12,808			2.82	%	$	12,262				2.82	%	$	12,251			2.93	%	$	12,704
Noninterest-earning assets
Cash and due from banks	$	18,456						18,682						$	19,475						18,609
Goodwill	26,600							26,979						26,415							26,444
Other	116,685							134,417						112,733							104,575
Total noninterest-earning assets	$	161,741						180,078						$	158,623						149,628
Noninterest-bearing funding sources
Deposits	$	364,293						363,108						$	341,371						360,779
Other liabilities	57,052							63,777						56,161							51,681
Total equity	207,934							203,883						199,685							206,067
Noninterest-bearing funding sources used to fund earning assets	(467,538		)					(450,690	)					(438,594		)					(468,899	)
Net noninterest-bearing funding sources	$	161,741						180,078						$	158,623						149,628
Total assets	$	1,938,523						1,914,586						$	1,900,627						1,884,884

(1)

Our average prime rate was ~~4.25%~~5.50% and ~~3.50%~~4.80% for the quarters ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~,2018, respectively, and ~~4.03%~~5.50% and ~~3.50%~~4.66%, for the first ~~nine months~~half of ~~2017~~2019 and ~~2016~~,2018, respectively. The average three-month London Interbank Offered Rate (LIBOR) was ~~1.31%~~2.51% and ~~0.79%~~2.34% for the quarters ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~,2018, respectively, and ~~1.20%~~2.60% and ~~0.69%~~2.13% for the first ~~nine months~~half of ~~2017~~2019 and ~~2016~~,2018, respectively.


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


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



	Six months ended June 30,
						2019						2018
(in millions)	Average balance			Yields/ rates		Interest income/ expense		Average balance		Yields/ rates		Interest income/ expense
Earning assets
Interest-earning deposits with banks	$	140,915		2.33	%	$	1,629	163,520		1.61	%	$	1,308
Federal funds sold and securities purchased under resale agreements	90,875			2.42		1,093		79,083		1.57		615
Debt securities (3):
Trading debt securities	87,938			3.52		1,544		79,693		3.35		1,332
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	14,740			2.18		159		6,426		1.66		53
Securities of U.S. states and political subdivisions	47,049			4.02		946		48,665		3.64		885
Mortgage-backed securities:
Federal agencies	150,623			3.04		2,293		156,690		2.73		2,141
Residential and commercial	5,772			4.17		120		8,558		4.48		192
Total mortgage-backed securities	156,395			3.09		2,413		165,248		2.82		2,333
Other debt securities	45,920			4.43		1,011		47,549		4.02		950
Total available-for-sale debt securities	264,104			3.44		4,529		267,888		3.16		4,221
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	44,758			2.20		487		44,727		2.20		487
Securities of U.S. states and political subdivisions	6,560			4.05		133		6,257		4.34		136
Federal agency and other mortgage-backed securities	95,753			2.69		1,288		92,888		2.35		1,093
Other debt securities	60			3.91		1		639		3.89		12
Total held-to-maturity debt securities	147,131			2.60		1,909		144,511		2.40		1,728
Total debt securities	499,173			3.20		7,982		492,092		2.96		7,281
Mortgage loans held for sale (4)	16,193			4.28		347		18,598		4.06		377
Loans held for sale (4)	1,752			5.04		44		2,750		5.28		72
Loans:
Commercial loans:
Commercial and industrial – U.S.	285,827			4.47		6,345		273,658		4.00		5,435
Commercial and industrial – Non U.S.	62,863			3.90		1,215		59,964		3.37		1,003
Real estate mortgage	121,644			4.58		2,763		125,085		4.16		2,581
Real estate construction	21,999			5.40		589		24,041		4.70		561
Lease financing	19,261			4.66		450		19,266		4.89		471
Total commercial loans	511,594			4.48		11,362		502,014		4.03		10,051
Consumer loans:
Real estate 1-4 family first mortgage	285,694			3.92		5,597		283,651		4.04		5,722
Real estate 1-4 family junior lien mortgage	33,197			5.75		949		38,042		5.23		988
Credit card	38,168			12.76		2,416		36,174		12.71		2,280
Automobile	45,007			5.21		1,163		50,010		5.17		1,283
Other revolving credit and installment	35,068			7.13		1,240		37,641		6.54		1,221
Total consumer loans	437,134			5.22		11,365		445,518		5.18		11,494
Total loans (4)	948,728			4.82		22,727		947,532		4.57		21,545
Equity securities	34,154			2.63		448		38,536		2.37		455
Other	4,555			1.69		38		5,765		1.34		40
Total earning assets	$	1,736,345		3.97	%	$	34,308	1,747,876		3.64	%	$	31,693
Funding sources
Deposits:
Interest-bearing checking	$	56,905		1.44	%	$	407	74,084		0.84	%	$	310
Market rate and other savings	689,628			0.54		1,856		677,861		0.24		802
Savings certificates	27,940			1.46		202		20,025		0.38		38
Other time deposits	97,356			2.64		1,275		79,340		2.06		812
Deposits in foreign offices	53,649			1.88		499		73,023		1.09		396
Total interest-bearing deposits	925,478			0.92		4,239		924,333		0.51		2,358
Short-term borrowings	111,719			2.24		1,243		102,793		1.39		710
Long-term debt	234,963			3.27		3,827		224,924		2.88		3,234
Other liabilities	24,801			2.23		275		28,065		2.02		282
Total interest-bearing liabilities	1,296,961			1.49		9,584		1,280,115		1.03		6,584
Portion of noninterest-bearing funding sources	439,384					—		467,761		—		—
Total funding sources	$	1,736,345		1.11		9,584		1,747,876		0.75		6,584
Net interest margin and net interest income on a taxable-equivalent basis (5)				2.86	%	$	24,724			2.89	%	$	25,109
Noninterest-earning assets
Cash and due from banks	$	19,544						18,730
Goodwill	26,417							26,480
Other	109,601							107,218
Total noninterest-earning assets	$	155,562						152,428
Noninterest-bearing funding sources
Deposits	$	340,061						359,854
Other liabilities	55,864							54,212
Total equity	199,021							206,123
Noninterest-bearing funding sources used to fund earning assets	(439,384		)					(467,761	)
Net noninterest-bearing funding sources	$	155,562						152,428
Total assets	$	1,891,907						1,900,304


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

(5)

Includes taxable-equivalent adjustments of ~~$332~~$156 million and ~~$310~~$163 million for the quarters ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~,2018, respectively, and ~~$980~~$318 million and ~~$909~~$330 million for the first ~~nine months~~half of ~~2017~~2019 and ~~2016~~,2018, respectively, predominantly related to tax-exempt income on certain loans and securities. The federal statutory tax rate utilized was ~~35%~~21% for the periods presented.

Nine months ended September 30,
      2017
      2016
(in millions)
Average
balance

Yields/
rates

Interest
income/
expense

Average
balance

Yields/
rates

Interest
income/
expense

Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments $ 280,477
0.98 % $ 2,062
292,635
0.49 % $ 1,076
Trading assets 98,516
2.90
2,144
83,580
2.86
1,792
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies 19,182
1.48
212
30,588
1.56
358
Securities of U.S. states and political subdivisions 52,748
4.07
1,612
52,637
4.25
1,678
Mortgage-backed securities:
Federal agencies 142,748
2.60
2,782
98,099
2.57
1,889
Residential and commercial 12,671
5.44
516
19,488
5.39
787
Total mortgage-backed securities 155,419
2.83
3,298
117,587
3.03
2,676
Other debt and equity securities 49,212
3.74
1,377
53,680
3.36
1,349
Total available-for-sale securities 276,561
3.13
6,499
254,492
3.18
6,061
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,701
2.19
733
44,671
2.19
733
Securities of U.S. states and political subdivisions 6,270
5.35
251
2,274
5.34
91
Federal agency and other mortgage-backed securities 74,525
2.38
1,329
37,087
2.08
577
Other debt securities 2,531
2.48
47
4,193
1.94
61
Total held-to-maturity securities 128,027
2.46
2,360
88,225
2.21
1,462
Total investment securities 404,588
2.92
8,859
342,717
2.93
7,523
Mortgages held for sale (4) 20,869
3.82
598
20,702
3.53
549
Loans held for sale (4) 158
8.44
10
240
3.71
7
Loans:
Commercial:
Commercial and industrial – U.S. 272,621
3.70
7,547
266,622
3.44
6,874
Commercial and industrial – Non U.S. 56,512
2.83
1,196
50,658
2.29
867
Real estate mortgage 130,931
3.69
3,615
125,902
3.43
3,236
Real estate construction 24,949
4.00
747
22,978
3.53
608
Lease financing 19,094
4.78
685
17,629
4.86
643
Total commercial 504,107
3.66
13,790
483,789
3.38
12,228
Consumer:
Real estate 1-4 family first mortgage 276,330
4.04
8,380
276,369
4.01
8,311
Real estate 1-4 family junior lien mortgage 43,589
4.77
1,557
50,585
4.38
1,659
Credit card 35,322
12.19
3,219
33,774
11.58
2,927
Automobile 59,105
5.41
2,392
61,246
5.64
2,588
Other revolving credit and installment 39,128
6.15
1,801
39,434
5.94
1,755
Total consumer 453,474
5.11
17,349
461,408
4.99
17,240
Total loans (4) 957,581
4.34
31,139
945,197
4.16
29,468
Other 10,892
2.06
169
6,104
2.23
101
Total earning assets $ 1,773,081
3.39 % $ 44,981
1,691,175
3.20 % $ 40,516
Funding sources
Deposits:
Interest-bearing checking $ 49,134
0.43 % $ 156
40,858
0.13 % $ 41
Market rate and other savings 682,780
0.13
664
659,257
0.07
327
Savings certificates 22,618
0.30
50
26,432
0.37
73
Other time deposits 59,414
1.42
633
58,087
0.84
364
Deposits in foreign offices 123,553
0.64
587
100,783
0.25
190
Total interest-bearing deposits 937,499
0.30
2,090
885,417
0.15
995
Short-term borrowings 97,837
0.69
505
111,993
0.28
231
Long-term debt 250,755
2.04
3,838
235,209
1.57
2,769
Other liabilities 20,910
1.97
309
16,534
2.10
260
Total interest-bearing liabilities 1,307,001
0.69
6,742
1,249,153
0.45
4,255
Portion of noninterest-bearing funding sources 466,080
—
442,022
—
—
Total funding sources $ 1,773,081
0.51
6,742
1,691,175
0.34
4,255
Net interest margin and net interest income on a taxable-equivalent basis (5)    2.88 % $ 38,239
   2.86 % $ 36,261
Noninterest-earning assets
Cash and due from banks $ 18,443
18,499

Goodwill 26,645
26,696

Other 114,073
129,324

Total noninterest-earning assets $ 159,161
174,519

Noninterest-bearing funding sources
Deposits $ 364,774
353,870

Other liabilities 55,221
62,169

Total equity 205,246
200,502

Noninterest-bearing funding sources used to fund earning assets (466,080 ) (442,022 )
Net noninterest-bearing funding sources $ 159,161
174,519

Total assets $ 1,932,242
1,865,694

Noninterest Income

Table 2:Noninterest Income


	Quarter ended Sep 30,			%		Nine months ended Sep 30,			%		Quarter ended June 30,			%		Six months ended June 30,			%
(in millions)	2017		2016	Change		2017		2016	Change		2019		2018	Change		2019		2018	Change
Service charges on deposit accounts	$	1,276	1,370	(7	)%	$	3,865	4,015	(4	)%	$	1,206	1,163	4	%	$	2,300	2,336	(2	)%
Trust and investment fees:
Brokerage advisory, commissions and other fees	2,304		2,344	(2	)	6,957		6,874	1		2,318		2,354	(2	)	4,511		4,757	(5	)
Trust and investment management	840		849	(1	)	2,506		2,499	—		795		835	(5	)	1,581		1,685	(6	)
Investment banking	465		420	11		1,345		1,172	15		455		486	(6	)	849		916	(7	)
Total trust and investment fees	3,609		3,613	—		10,808		10,545	2		3,568		3,675	(3	)	6,941		7,358	(6	)
Card fees	1,000		997	—		2,964		2,935	1		1,025		1,001	2		1,969		1,909	3
Other fees:
Charges and fees on loans	318		306	4		950		936	1
Lending related charges and fees (1)											349		376	(7	)	696		756	(8	)
Cash network fees	126		138	(9	)	386		407	(5	)	117		120	(3	)	226		246	(8	)
Commercial real estate brokerage commissions	120		119	1		303		322	(6	)	105		109	(4	)	186		194	(4	)
Letters of credit fees	77		81	(5	)	227		242	(6	)
Wire transfer and other remittance fees	114		103	11		333		296	13		121		121	—		234		237	(1	)
All other fees	122		179	(32	)	445		562	(21	)	108		120	(10	)	228		213	7
Total other fees	877		926	(5	)	2,644		2,765	(4	)	800		846	(5	)	1,570		1,646	(5	)
Mortgage banking:
Servicing income, net	309		359	(14	)	1,165		1,569	(26	)	277		406	(32	)	641		874	(27	)
Net gains on mortgage loan origination/sales activities	737		1,308	(44	)	2,257		3,110	(27	)	481		364	32		825		830	(1	)
Total mortgage banking	1,046		1,667	(37	)	3,422		4,679	(27	)	758		770	(2	)	1,466		1,704	(14	)
Insurance	269		293	(8	)	826		1,006	(18	)	93		102	(9	)	189		216	(13	)
Net gains from trading activities	245		415	(41	)	921		943	(2	)	229		191	20		586		434	35
Net gains on debt securities	166		106	57		322		797	(60	)	20		41	(51	)	145		42	245
Net gains from equity investments	238		140	70		829		573	45
Net gains from equity securities											622		295	111		1,436		1,078	33
Lease income	475		534	(11	)	1,449		1,404	3		424		443	(4	)	867		898	(3	)
Life insurance investment income	152		152	—		441		455	(3	)	167		162	3		326		326	—
All other	97		163	(40	)	347		1,216	(71	)	577		323	79		992		761	30
Total	$	9,450	10,376	(9	)	$	28,838	31,333	(8	)	$	9,489	9,012	5		$	18,787	18,708	—


(1)	Represents combined amount of previously reported “Charges and fees on loans” and “Letters of credit fees”.

Noninterest income was $9.5 billion and ~~$28.8~~$18.8 billion ~~for~~in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~$10.4~~$9.0 billion and ~~$31.3~~$18.7 billion for the same periods a year ago. This income represented 44% of revenue for second quarter 2019 and 43% of revenue for ~~third quarter 2017 and 44% for~~ the first ~~nine months~~half of ~~2017,~~2019, compared with ~~46%~~42% and ~~47%~~43% for the same periods a year ago.

The ~~decline~~increase in noninterest income in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, compared with the same periods a year ago, was ~~due to lower mortgage banking income, lower~~predominantly driven by higher net gains from equity securities and higher all other income. The increase in the first half of 2019, compared with the same period a year ago, also reflected higher net gains from trading ~~activities,~~ and ~~lower service charges on deposit accounts. Noninterest income~~debt securities. The increases in ~~the first nine months of 2017 also reflected~~both periods were partially offset by lower ~~net gains on debt securities, insurance income, and all other noninterest income due to unfavorable net hedge ineffectiveness accounting results, but benefited from higher~~ trust and investment fees ~~net gains~~and lower mortgage banking income. For more information on ~~equity investments,~~our performance obligations and ~~deferred compensation plan investment results (offset~~the nature of services performed for certain of our revenues discussed below, see Note 18 (Revenue from Contracts with Customers) to Financial Statements in ~~employee benefits expense).~~this Report.

Service charges on deposit accounts were ~~$1.3~~$1.2 billion and ~~$3.9~~

$2.3 billion in the ~~third~~second quarter and first half of 2019, respectively, flat compared with the same periods a year ago. In second quarter 2019, compared with the same period a year ago, higher consumer service charges due to growth in overdraft and returned items fees were offset by lower treasury management fees. In the first half of 2019, compared with the same period a year ago, lower treasury management fees and lower consumer monthly service fees were offset by higher overdraft and returned

items fees. The decline in treasury management fees in both the second quarter and first ~~nine months~~half of ~~2017, respectively, compared with $1.4 billion and $4.0 billion for the same periods in 2016. The decrease in the third quarter and first nine months of 2017,~~2019, compared with the same periods a year ago, was ~~driven by lower consumer and business checking account service charges, lower overdraft fees, and~~primarily due to the impact of a higher earnings credit rate applied to commercial accounts due to increased interest rates.

Brokerage advisory, commissions and other fees ~~are received for providing full-service~~decreased to $2.3 billion and discount brokerage services predominantly to retail brokerage clients. Income from these brokerage-related activities include asset-based fees for advisory accounts, which are based on the market value of the client’s assets, and transactional commissions based on the number and size of transactions executed at the client’s direction. These fees were $2.30$4.5 billion ~~and $6.96 billion~~ in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~$2.34~~$2.4 billion and ~~$6.87~~$4.8 billion for the same periods a year ago. The decreases in ~~2016. The decrease in third quarter 2017,~~both periods, compared with the same period in 2016, was driven by lower transactional commission revenue, partially offset by higher asset-based fees. The increase for the first nine months of 2017, compared with the same period in 2016, wasperiods a year ago, were due to ~~higher~~lower asset-based fees ~~partially offset by~~and lower transactional commission revenue. Retail brokerage client assets totaled $1.6 trillion at ~~September~~both June 30, ~~2017, compared with $1.5 trillion at September 30, 2016,~~2019 and 2018, with all retail brokerage services provided by our Wealth and Investment Management (WIM) operating segment. For additional information on retail brokerage client assets, see the discussion and Tables 4d and 4e in the “Operating Segment Results – Wealth and Investment Management – Retail Brokerage Client Assets” section in this Report.

~~We earn trust and investment management fees from managing and administering assets, including mutual funds, institutional separate accounts, corporate trust, personal trust,~~

~~Earnings Performance (continued~~)

~~employee benefit trust and agency assets.~~ Trust and investment management fee income is ~~primarily~~largely from client assets under management (AUM) for which ~~the~~ fees are ~~determined~~ based on a tiered scale relative to ~~the~~ market value of the ~~AUM. AUM consists of~~ assets, and client assets under administration (AUA), for which ~~we have~~fees are generally based on the extent of services to administer the assets. Trust and investment management ~~discretion.~~ fees declined to $795 million and $1.6 billion in the second quarter and first half of 2019, respectively, from $835 million and $1.7 billion for the same

Earnings Performance (continued)

periods a year ago. The decreases in both periods, compared with the same periods a year ago, were due to lower trust fees, investment management fees, and mutual fund asset fees, driven by lower average assets under management.

Our AUM totaled ~~$678.7~~$682.0 billion at ~~September~~June 30, ~~2017,~~2019, compared with ~~$667.5~~$677.7 billion at ~~September~~June 30, ~~2016,~~2018, with substantially all of our AUM managed by our WIM operating segment. Additional information regarding our WIM operating segment AUM is provided in Table 4f and the related discussion in the “Operating Segment Results – Wealth and Investment Management – Trust and Investment Client Assets Under Management” section in this Report. ~~In addition~~

Our AUA, which includes assets administered by our Institutional Retirement and Trust business (IRT), totaled $1.8 trillion at June 30, 2019, compared with $1.7 trillion at June 30, 2018. We closed the previously announced sale of IRT on July 1, 2019, and recognized a pre-tax gain of approximately $1.1 billion, which will be reflected in our third quarter 2019 net income. We will continue to ~~AUM we have~~administer client assets ~~under administration (AUA) that earn various administrative fees which are generally based on~~at the ~~extent~~direction of the buyer for up to 24 months pursuant to a transition services ~~provided~~agreement. The buyer will receive all post-closing revenue from the client assets and will pay us a fee for costs that we incur to administer the ~~account. Our~~client assets during the transition period. The transition services fee will be recognized as other noninterest income. AUA ~~totaled $1.7 trillion~~related to IRT were $918 billion at ~~September~~June 30, ~~2017, compared with $1.6 trillion at September 30, 2016. Trust and investment management fees were $840~~2019. Noninterest income related to IRT was $188 million and ~~$2.5 billion~~$398 million for the first half of 2019 and full year 2018, respectively. Direct expenses related to IRT were $130 million and $256 million for the first half of 2019 and full year 2018, respectively. Transition period revenue is expected to approximate transition period expenses and is subject to downward adjustment as client assets transition to the buyer's platform.

Investment banking fees decreased to $455 million and $849 million in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, ~~compared with $849~~from $486 million and ~~$2.5 billion~~$916 million for the same periods in ~~2016.~~

~~We earn investment banking fees from underwriting~~2018, primarily due to lower equity and debt ~~and equity securities, arranging loan syndications, and performing other related advisory services. Investment banking fees increased to $465 million and $1.3 billion~~originations. The decrease in the ~~third quarter and~~ first ~~nine months~~half of ~~2017, respectively, from $420 million and $1.2 billion for the same periods in 2016. The increase in third quarter 2017,~~2019, compared with the same period ~~in 2016,~~a year ago, was ~~predominantly driven~~partially offset by higher ~~loan syndications.~~advisory fees.

Card fees were $1.0 billion and $2.0 billion in the second quarter and first half of 2019, respectively, compared with $1.0 billionand $1.9 billion for the same periods a year ago. The increase ~~for~~in the first ~~nine months~~half of ~~2017,~~2019, compared with the same period ~~in 2016,~~a year ago, was predominantly due to ~~growth in equity originations, loan syndications,~~higher interchange fees driven by increased purchase activity, partially offset by higher rewards costs.

Other fees decreased to $800 million and ~~advisory services.~~

~~Card fees were $1.0~~$1.57 billion ~~and $3.0 billion~~ in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, ~~compared with $997~~from $846 million and ~~$2.9~~$1.65 billion for the same periods a year ~~ago.~~

~~Other fees decreased to $877 million~~ago, driven primarily by lower lending related charges and ~~$2.6 billion in the third quarter and~~fees. The first ~~nine months~~half of ~~2017, respectively, from $926 million and $2.8 billion for~~2019, compared with the same ~~periods in 2016, driven~~period a year ago, was also impacted by lower ~~all other~~cash network fees. All other fees were $122 million and $445 million in the third quarter and first nine months of 2017, respectively, compared with $179 million and $562 million for the same periods in 2016, driven by lower other fees from discontinued products and the impact of the sale of our global fund services business in fourth quarter 2016.

Mortgage banking noninterest income, consisting of net servicing income and net gains on mortgage loan origination/sales activities, totaled ~~$1.0 billion~~$758 million and ~~$3.4~~$1.5 billion in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~$1.7 billion~~$770 million and ~~$4.7~~$1.7 billion for the same periods a year ago.

In addition to servicing fees, net mortgage loan servicing income includes amortization of commercial mortgage servicing rights (MSRs), changes in the fair value of residential MSRs during the period, as well as changes in the value of derivatives (economic hedges) used to hedge the residential MSRs. Net servicing income of ~~$309~~$277 million for ~~third~~second quarter ~~2017~~2019 included a ~~$98~~$77 million net MSR valuation gain ($~~142 million~~ 1.1 billion

decrease in the fair value of the MSRs and a ~~$240 million~~$1.2 billion hedge gain). Net servicing income of ~~$359~~$406 million for ~~third~~second quarter ~~2016~~2018 included a ~~$134~~$26 million net MSR valuation gain ($8345 million ~~decrease~~increase in the fair value of the MSRs and a ~~$142~~$319 million hedge ~~gain)~~loss). For the first ~~nine months~~half of ~~2017,~~2019, net servicing income of ~~$1.2 billion~~$641 million included a ~~$271~~$148 million net MSR valuation gain ($~~328 million decrease in the fair value of the MSRs and a $599 million hedge gain), and for the same period in 2016 net servicing income of~~

~~$1.6 billion included a $786 million net MSR valuation gain ($1.8~~2.0 billion decrease in the fair value of the MSRs and a ~~$2.6~~$2.1 billion hedge gain)~~. Net servicing income decreased~~, and for the first ~~nine months~~half of ~~2017,~~2018, net servicing income of $874 million included a $136 million net MSR valuation gain ($1.7 billion increase in the fair value of the MSRs and a $1.5 billion hedge loss). The reduction in net servicing income for the second quarter and first half of 2019, compared with the same ~~period~~periods a year ago, also reflected lower net servicing fees due to lower net MSR valuation gains. The decrease in net MSR valuation gains in the first nine months of 2017, compared with the same period in 2016, was primarily attributable to MSR valuation adjustments in the first quarter of 2016 that reflected a reduction in forecasted prepayments due to updated economic, customer data attributes,servicing portfolio runoff and ~~mortgage market rate inputs as well as higher actual prepayments experienced in 2017.~~sales.

Our portfolio of ~~mortgage~~ loans serviced for others was ~~$1.70~~$1.66 trillion at ~~September~~June 30, ~~2017~~2019, and ~~$1.68~~$1.71 trillion at December 31, ~~2016.~~2018. At ~~September~~June 30, ~~2017,~~2019, the ratio of combined residential and commercial MSRs to related loans serviced for others was ~~0.87%~~0.82%, compared with ~~0.85%~~0.94% at December 31, ~~2016.~~2018. See the “Risk Management – Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section in this Report for additional information regarding our MSRs risks and hedging approach.

Net gains on mortgage loan origination/sales activities were ~~$737~~$481 million and ~~$2.3 billion~~$825 million in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~$1.3 billion~~$364 million and ~~$3.1 billion~~$830 million for the same periods a year ~~ago.~~ago. The increase in second quarter 2019, compared with the same period a year ago, was primarily due to higher production margins. The decrease in the ~~third quarter and~~ first ~~nine months~~half of ~~2017,~~2019, compared with the same ~~periods~~period a year ago, was ~~primarily~~predominantly due to lower held for sale ~~funding volume and production margins. Total~~ mortgage loan ~~originations were $59 billion~~origination volumes, partially offset by higher margins and ~~$159 billion for the third quarter and first nine months of 2017, respectively, compared with $70 billion and $177 billion for the same periods~~ a ~~year ago.~~ higher repurchase reserve release in 2019. The production margin on residential held-for-sale mortgage loan originations, which represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage loan originations, provides a measure of the profitability of our residential mortgage origination ~~activity.~~activity. Table 2a presents the information used in determining the production margin.

Table 2a:Selected Mortgage Production Data


		Quarter ended Sep 30,				Nine months ended Sep 30,			Quarter ended June 30,				Six months ended June 30,
		2017			2016	2017	2016		2019			2018	2019			2018
Net gains on mortgage loan origination/sales activities (in millions):
Residential	(A)	$	546		953	1,636	2,229	(A)	$	322		281	$	554		605
Commercial		81			167	263	310		83			49	130			125
Residential pipeline and unsold/repurchased loan management (1)		110			188	358	571		76			34	141			100
Total		$	737		1,308	2,257	3,110		$	481		364	$	825		830
Residential real estate originations (in billions):
Held-for-sale	(B)	$	44		53	120	130	(B)	$	33		37	$	55		71
Held-for-investment		15			17	39	47		20			13	31			22
Total		$	59		70	159	177		$	53		50	$	86		93
Production margin on residential held-for-sale mortgage originations	(A)/(B)	1.24		%	1.81	1.37	1.72
Production margin on residential held-for-sale mortgage loan originations								(A)/(B)	0.98		%	0.77	1.01		%	0.86


(1)	~~Largely~~Primarily includes the results of ~~GNMA~~Government National Mortgage Association (GNMA) loss mitigation activities, interest rate management activities and changes in estimate to the liability for mortgage loan repurchase losses.

The production margin was ~~1.24%~~0.98% and ~~1.37%~~1.01% for the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~1.81%~~0.77% and 1.72% for the same periods in 2016. The decline in production margin in the third quarter and first nine months of 2017 was attributable to lower margins in both our retail and correspondent production channels as well as a shift to more correspondent origination volume, which has a lower production margin. Mortgage applications were $73 billion and $215 billion for the third quarter and first nine months of 2017, respectively, compared with $100 billion and $272 billion0.86% for the same periods a year ago. The increase in production margin in the second quarter and first half of 2019, compared with the same periods a year ago, was predominantly due to higher margins in our correspondent production channel and a shift to more retail origination volume, which has a higher production margin. Mortgage applications were $90 billion and $154 billion for the second quarter and first half of 2019, respectively, compared with $67 billion and $125 billion for the same periods a year ago. The 1-4 family first mortgage unclosed application pipeline was ~~$29~~$44 billion at ~~September~~June 30, ~~2017,~~2019, compared with ~~$50~~$26 billion at ~~September~~June 30, ~~2016.~~2018. For additional information about our mortgage banking activities and results, see the “Risk Management – Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section and Note 811 (Mortgage Banking Activities) and Note 1316 (Fair Values of Assets and Liabilities) to Financial Statements in this Report.

Net gains on mortgage loan origination/sales activities include adjustments to the mortgage repurchase liability. Mortgage loans are repurchased from third parties based on standard representations and warranties, and early payment default clauses in mortgage sale contracts. For the first nine months of 2017, we had a net $45 million release to the repurchase liability, compared with a net $106 million release for the first nine months of 2016. For additional information about mortgage loan repurchases, see the “Risk Management – Credit Risk Management – Liability for Mortgage Loan Repurchase Losses” section and Note 8 (Mortgage Banking Activities) to Financial Statements in this Report.

Insurance income was ~~$269~~$93 million and ~~$826~~$189 million in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~$293~~$102 million and ~~$1.0 billion~~$216 million in the same periods a year ~~ago.~~ ago. The decrease in the first ~~nine months~~half of ~~2017,~~2019, compared with the same period a year ago, was largely driven by the ~~divestiture~~wind down of our ~~crop~~personal insurance business ~~in first quarter 2016.~~activities.

Net gains from trading activities, which reflect unrealized changes in fair value of our trading positions and realized gains and losses, were ~~$245~~$229 million and ~~$921~~$586 million in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~$415~~$191 million and ~~$943~~$434 million in the same periods a year ago.The ~~decrease~~increase in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, compared with the same periods a year ago, was predominantly from the Corporate and Investment Banking business in our Wholesale operating segment driven by higher trading volumes on residential mortgage-backed securities (RMBS), partially offset by lower ~~customer accommodation~~equity trading activity. The ~~decrease in customer accommodation trading activity~~increase in the first ~~nine months~~half of ~~2017~~2019, compared with same period a year ago, was ~~partially offset~~also driven by higher ~~deferred compensation plan investment results (offset in employee benefits expense).~~credit and municipal bond trading activity. Net gains from trading activities do not include interest and dividend income and expense on trading securities. Those amounts are reported within interest income from ~~trading assets~~debt and equity securities and other interest ~~expense from trading liabilities.~~expense. For additional information about trading activities, see the “Risk Management – Asset/Liability Management – Market ~~Risk – Trading~~Risk-Trading Activities” section and Note 4 (Trading Activities) to Financial Statements in this Report.

Net gains on debt and equity securities totaled ~~$404~~$642 million and ~~$1.2~~$1.6 billion in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~$246~~$336 million and ~~$1.4~~$1.1 billion infor the ~~third quarter and first nine months of 2016,~~same periods a year ago, after other-than-temporary impairment (OTTI) write-downs of ~~$91~~$38 million and ~~$293~~$119 million for the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~$136~~$245 million and ~~$464~~$275 million for the same periods ~~in 2016.~~ a year ago. The increase in net gains on debt and equity securities in ~~third~~the second quarter ~~2017,~~and first half of 2019, compared with the same periods a year ago, was predominantly driven by higher unrealized gains on equity securities and higher deferred compensation gains (offset in employee benefits expense), partially offset by lower net realized gains from nonmarketable equity securities. Table 3a presents results for our deferred compensation plan and related investments. The increase in the first half of 2019, compared with the same period a year ago, ~~primarily~~also reflected higher net gains ~~from venture capital equity investments.~~on debt securities. The decrease in ~~net gains on debt and equity securities~~OTTI in the second quarter and first ~~nine months~~half of ~~2017,~~2019, compared with ~~the~~ same ~~period~~periods a year ago, was predominantly driven by ~~lower net gains on debt securities, partially offset by higher net gains from equity investments.~~a $214 million impairment related to the sale of our ownership stake in The Rock Creek Group, LP (RockCreek) in second quarter 2018.

Lease income was ~~$475~~$424 million and ~~$1.4 billion~~$867 million in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~$534~~$443 million and ~~$1.4 billion~~$898 million for the same periods a year ago. The ~~decrease~~decreases in ~~third~~the second quarter ~~2017,~~and first half of 2019, compared with the same periods a year ago, were driven by lower equipment lease income. Lease income in second quarter 2019 also reflected lower gains on the sale of lease assets, compared with the same period a year ~~ago, was driven by lower equipment lease income and the impact of gains on early leveraged lease terminations in third quarter 2016.~~ago.

All other income was ~~$97~~$577 million and ~~$347~~$992 million in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~$163~~$323 million and ~~$1.2 billion~~$761 million for the same periods a year ago. All other income includes ~~ineffectiveness recognized on derivatives that qualify for~~ hedge accounting results related to hedges of foreign currency risk, the results of certain economic hedges, losses on low income housing tax credit investments, foreign currency adjustments, and income from investments accounted for under the equity method, any of which can cause decreases and net losses in other income. ~~The decrease in other income in the third quarter and first nine months of 2017, compared with the same periods a year ago, was largely due to net hedge ineffectiveness results.~~ All other income included $721 million and $1.3 billion of gains from the sales of purchased credit-impaired (PCI) Pick-a-Pay loans in the ~~first nine months of 2017 also reflected the impact of a gain from the sale of our crop insurance business in first quarter 2016, and a gain from the sale of our health benefits services business in~~ second quarter ~~2016, partially offset by a $309 million gain from the sale~~and first half of a Pick-a-Pay PCI loan portfolio in second quarter 2017 and higher income from equity method investments. Hedge ineffectiveness was driven by changes in ineffectiveness recognized on interest rate swaps used to hedge our exposure to interest rate risk on long-term debt and cross-currency swaps, cross-currency interest rate swaps and forward contracts used to hedge our exposure to foreign currency risk and interest rate risk involving non-U.S. dollar denominated long-term debt. The portion of the hedge ineffectiveness recognized was partially offset by the results of certain economic hedges and, accordingly, we recognized a net hedge benefit of $93 million for third quarter 2017 and a net hedge loss of $79 million for the first nine months of 2017,2019, respectively, compared with ~~a net hedge benefit of $142~~$479 million and ~~$577 million~~$1.1 billion for the same periods a year ago. ~~For additional information about derivatives used as part~~The increase in all other income in the first half of ~~our asset/liability management, see Note 12 (Derivatives)~~2019, compared with the same period a year ago, also reflected a pre-tax gain from the sale of Business Payroll Services in first quarter 2019 and a loss related to the sale of certain assets and liabilities of Reliable Financial ~~Statements~~Services, Inc. (a subsidiary of Wells Fargo’s automobile financing business) in ~~this Report.~~first quarter 2018, partially offset by a pretax gain from the sale of Wells Fargo Shareowner Services in first quarter 2018.

Earnings Performance (continued)

Noninterest Expense

Table 3:Noninterest Expense


	Quarter ended Sep 30,				%		Nine months ended Sep 30,			%		Quarter ended June 30,			%		Six months ended June 30,			%
(in millions)	2017		2016		Change		2017		2016	Change		2019		2018	Change		2019		2018	Change
Salaries	$	4,356	4,224		3	%	$	12,960	12,359	5	%	$	4,541	4,465	2	%	$	8,966	8,828	2	%
Commission and incentive compensation	2,553		2,520		1		7,777		7,769	—		2,597		2,642	(2	)	5,442		5,410	1
Employee benefits	1,279		1,223		5		4,273		3,993	7		1,336		1,245	7		3,274		2,843	15
Equipment	523		491		7		1,629		1,512	8		607		550	10		1,268		1,167	9
Net occupancy(1)	716		718		—		2,134		2,145	(1	)	719		722	—		1,436		1,435	—
Core deposit and other intangibles	288		299		(4	)	864		891	(3	)	27		265	(90	)	55		530	(90	)
FDIC and other deposit assessments	314		310		1		975		815	20		144		297	(52	)	303		621	(51	)
Outside professional services	955		802		19		2,788		2,154	29		821		881	(7	)	1,499		1,702	(12	)
Contract services												624		536	16		1,187		983	21
Operating losses	1,329		577		130		1,961		1,365	44		247		619	(60	)	485		2,087	(77	)
Operating leases	347		363		(4	)	1,026		950	8
Contract services	351		313		12		1,025		878	17
Leases (2)												311		311	—		597		631	(5	)
Advertising and promotion												329		227	45		566		380	49
Outside data processing	227		233		(3	)	683		666	3		175		164	7		342		326	5
Travel and entertainment	154		144		7		504		509	(1	)	163		157	4		310		309	—
Postage, stationery and supplies	128		150		(15	)	407		466	(13	)	119		121	(2	)	241		263	(8	)
Advertising and promotion	137		117		17		414		417	(1	)
Telecommunications	90		101		(11	)	272		287	(5	)	93		88	6		184		180	2
Foreclosed assets	66		(17	)	NM		204		127	61		35		44	(20	)	72		82	(12	)
Insurance	24		23		4		72		156	(54	)	25		24	4		50		50	—
All other	514		677		(24	)	1,716		1,703	1		536		624	(14	)	1,088		1,197	(9	)
Total	$	14,351	13,268		8		$	41,684	39,162	6		$	13,449	13,982	(4	)	$	27,365	29,024	(6	)


(1)	Represents expenses for both leased and owned properties.


(2)	Represents expenses for assets we lease to customers.

~~NM - Not meaningful~~

Noninterest expense was ~~$14.4~~$13.4 billion in ~~third~~second quarter ~~2017, up 8%~~2019, down 4% from ~~$13.3~~$14.0 billion a year ago, ~~driven by higher operating losses, personnel expenses, outside professional~~ and ~~contract services, and foreclosed assets expense, partially offset by lower other expense. In~~$27.4 billion in the first ~~nine months~~half of ~~2017, noninterest expense was $41.7 billion, up~~2019, down 6% from the same period a year ago. The decrease in second quarter 2019, compared with the same period a year ago, was due to ~~higher personnel expenses, outside professional and contract services,~~lower operating losses, ~~FDIC~~core deposit and other intangibles expense, and ~~foreclosed assets expense,~~FDIC and other deposit assessments, partially offset by higher personnel and advertising and promotion expenses. The decrease in the first half of 2019, compared with the same period a year ago, was predominantly due to lower ~~insurance expense and postage, stationery and supplies expense.~~operating losses.

Personnel expenses, which include salaries, commissions, incentive compensation, and employee benefits, were up ~~$221~~$122 million, or 3%1%, in ~~third~~second quarter ~~2017~~2019, compared with the

same ~~quarter last~~period a year ago, and up ~~$889~~$601 million, or 4%, in the first ~~nine months~~half of ~~2017~~2019, compared with the same period a year ago. The increase in ~~both periods~~second quarter 2019, compared with the same period a year ago, was due to annual salary increases and higher ~~benefits expense,~~deferred compensation costs (offset in net gains from equity securities), partially offset by ~~one fewer payroll day.~~lower incentive compensation and lower staffing levels. The increase in the first ~~nine months~~half of ~~2017~~2019, compared with the same period a year ago, was ~~also driven by~~due to higher deferred compensation costs (offset in ~~trading revenue).~~net gains from equity securities), annual salary increases and the impact of staffing mix changes. Table 3a presents results for our deferred compensation plan and related investments.

~~FDIC~~Table 3a:Deferred Compensation Plan and Related Investments



	Quarter ended					Six months ended
(in millions)	Jun 30, 2019			Jun 30, 2018		Jun 30, 2019			Jun 30, 2018
Net interest income	$	18		13		$	31		23
Net gains (losses) from equity securities	87			37		432			31
Total revenue from deferred compensation plan investments	105			50		463			54
Employee benefits expense (1)	114			53		471			57
Income (loss) before income tax expense	$	(9	)	(3	)	$	(8	)	(3	)


(1)	Represents change in deferred compensation plan liability.

Equipment expense was up $57 million, or 10%, in second quarter 2019, compared with the same period a year ago, and up $101 million, or 9%, in the first half of 2019, compared with the same period a year ago, in each case due to higher computer software licensing and maintenance and depreciation expense, partially offset by lower small furniture and equipment expense.

Core deposit and other intangibles expense was down $238 million, or 90%, in second quarter 2019, compared with the same period a year ago, and down $475 million, or 90%, in the first half of 2019, compared with the same period a year ago, in each case due to lower amortization expense reflecting the end of the 10-year amortization period on Wachovia intangibles.

Federal Deposit Insurance Corporation (FDIC) and other deposit assessments were ~~up 1% and 20%~~down $153 million, or 52%, in ~~the third~~second quarter ~~and first nine months of 2017,~~2019, compared with the same ~~periods~~period a year ago, and down $318 million, or 51%, in the first half of 2019, compared with the same period a year ago. The ~~increase~~decrease in ~~the first nine months of 2017~~both periods was due to ~~an increase in deposit assessments as a result~~the completion of athe FDIC temporary surcharge, which ~~became effective on July 1, 2016. The FDIC expects the surcharge to be in effect for approximately two years.~~ended September 30, 2018.

Outside professional and contract services expense was up ~~17% and 26%~~$28 million, or 2%, in ~~the third~~second quarter ~~and first nine months of 2017,~~2019, compared with the same ~~periods~~period a year ~~ago. The increase in both periods reflected higher project~~ago, and ~~technology spending on regulatory and compliance related initiatives, as well as higher legal expense related to sales practices matters.~~

~~Operating losses were~~ up ~~130% and 44%~~$1 million in the ~~third quarter and~~ first ~~nine months~~half of ~~2017,~~2019, compared with the same ~~periods~~period a year ago, reflecting an increase in ~~2016, predominantly due to higher litigation accruals for various~~project spending, partially offset by lower legal ~~matters, including a non tax-deductible $1 billion discrete litigation accrual~~expenses in ~~third~~both periods.

Operating losses were down $372 million, or 60%, in second quarter ~~2017 for previously disclosed mortgage-related regulatory investigations.~~

~~Foreclosed assets expense was up $83 million and $77 million in the third quarter and first nine months of 2017,~~2019, compared with the same ~~periods~~period a year ago, ~~predominantly due to lower gains on sale of foreclosed properties.~~

~~Insurance expense was up 4% in third quarter 2017~~ and down ~~54%~~$1.6 billion, or 77%, in the first ~~nine months~~half of ~~2017,~~2019, compared with the same ~~periods~~period a year ago. The decrease in ~~the first nine months of 2017 was predominantly driven by the sale of our crop insurance business in first~~second quarter ~~2016.~~

~~Postage, stationary, and supplies expense was down 15% and 13% in the third quarter and first nine months of 2017,~~2019, compared with the same ~~periods~~period a year ago, ~~due to~~reflected lower ~~mail services and supplies expense.~~

~~All other noninterest~~remediation expense, ~~was down 24% in third quarter 2017 and up 1%~~while the decrease in the first ~~nine months~~half of ~~2017,~~2019, compared with the same ~~periods~~period a year ago, was driven by lower litigation accruals. First quarter 2018 included an $800 million discrete litigation accrual in connection with entering into the consent orders with the CFPB and OCC on April 20, 2018.

Advertising and promotion expense was up $102 million, or 45%, in second quarter 2019, compared with the same period a year ago, and up $186 million, or 49%, in the first half of 2019, compared with the same period a year ago, in each case due to increases in marketing and brand campaign volumes.

All other expense was down $88 million, or 14%, in second quarter 2019, compared with the same period a year ago, and down $109 million, or 9%, in the first half of 2019, compared with the same period a year ago. The decrease in second quarter 2019, compared with the ~~third quarter was primarily driven by~~same period a year ago, reflected lower donations expense. ~~All other noninterest expense~~The decrease in ~~third quarter 2016~~the first half of 2019, compared with the same period a year ago, included a ~~$107 million contribution to the Wells Fargo Foundation.~~state sales tax refund and lower donations expense.

Our efficiency ratio was ~~65.5%~~62.3% in ~~third~~second quarter ~~2017,~~2019, compared with ~~59.4%~~64.9% in ~~third~~second quarter ~~2016. The third quarter 2017 efficiency ratio included a 456 basis point impact from the $1 billion discrete litigation accrual.~~2018.

Income Tax Expense

Our effective income tax rate was ~~32.4%~~17.3% and ~~31.5%~~ 15.3%for ~~third~~the second quarter ~~2017~~ and ~~2016, respectively. Our effective income tax rate was 29.0%~~first half of 2019, respectively, compared with 25.9% and 23.6% for the same periods in ~~the first nine months of 2017, down from 31.9% in~~

~~the first nine months of 2016.~~2018. The increase in the effective income tax rate for third quarter 2017 was primarily from the non-deductible treatment of the $1.0 billion discrete litigation accrual, partially offset by net discrete tax benefits arising from favorable resolutions of prior period matters with state taxing authorities. The effective income tax rate for the first ~~nine months~~half of ~~2017 also included~~2019 reflected net discrete income tax benefits ~~associated with stock compensation activity subject~~related to ~~ASU 2016-09 accounting guidance adopted~~the results of U.S. federal and state income tax examinations. The rate in second quarter 2018 reflected a net discrete income tax expense of $481 million mostly related to state income taxes driven by the U.S. Supreme Court decision in South Dakota v. Wayfair. The rate for the first half of 2018 reflected the non-tax deductible treatment of an $800 million discrete litigation accrual recorded as noninterest expense in first quarter ~~2017,~~2018 in connection with the consent orders entered into with the CFPB and tax benefits associated with our agreement to sell Wells Fargo Insurance Services USA (and related businesses) in second quarter 2017. See Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report for additional information about ASU 2016-09.

OCC on April 20, 2018.

Operating Segment Results

We are organized for management reporting purposes into three operating segments: Community Banking; Wholesale Banking; and Wealth and Investment Management (WIM). These

segments are defined by product type and customer segment and their results are based on our management accounting process, for which there is no comprehensive, authoritative financial accounting guidance equivalent to generally accepted accounting principles (GAAP). Commencing in second quarter 2016, operating segment results reflect a shift in expenses between the personnel and other expense categories as a result of the movement of support staff from the Wholesale Banking and WIM segments into a consolidated organization within the Community Banking segment. Since then, personnel expenses associated with the transferred support staff have been allocated from Community Banking back to the Wholesale Banking and WIM segments through other expense. Table 4 and the following discussion present our results by operating segment. For additional description of our operating segments, including additional financial information and the underlying management accounting process, see Note 1822 (Operating Segments) to Financial Statements in this Report.

Table 4:Operating Segment Results – Highlights


(income/expense in millions,	Community Banking			Wholesale Banking			Wealth and Investment Management				Other (1)				Consolidated Company		Community Banking			Wholesale Banking			Wealth and Investment Management				Other (1)				Consolidated Company
average balances in billions)	2017		2016	2017		2016	2017		2016		2017		2016		2017	2016	2019		2018	2019	2018		2019		2018		2019		2018		2019	2018
Quarter ended Sep 30,
Quarter ended June 30,
Revenue	$	12,060	12,387	7,085		7,147	4,246		4,099		(1,465	)	(1,305	)	21,926	22,328	$	11,805	11,806	7,065	7,197		4,050		3,951		(1,336	)	(1,401	)	21,584	21,553
Provision (reversal of provision) for credit losses	650		651	69		157	(1	)	4		(1	)	(7	)	717	805	479		484	28	(36	)	(1	)	(2	)	(3	)	6		503	452
Noninterest expense	7,834		6,953	4,248		4,120	3,106		2,999		(837	)	(804	)	14,351	13,268	7,212		7,290	3,882	4,219		3,246		3,361		(891	)	(888	)	13,449	13,982
Net income (loss)	2,229		3,227	2,046		2,047	710		677		(389	)	(307	)	4,596	5,644	3,147		2,496	2,789	2,635		602		445		(332	)	(390	)	6,206	5,186
Average loans	$	473.5	489.2	463.8		454.3	72.4		68.4		(57.4	)	(54.4	)	952.3	957.5	$	457.7	463.8	474.0	464.7		75.0		74.7		(59.2	)	(59.1	)	947.5	944.1
Average deposits	734.5		708.0	463.4		441.2	188.1		189.2		(79.6	)	(76.9	)	1,306.4	1,261.5	777.6		760.6	410.4	414.0		143.5		167.1		(62.5	)	(70.4	)	1,269.0	1,271.3
Nine months ended Sep 30,
Six months ended June 30,
Revenue	$	36,442	37,205	21,074		21,389	12,621		11,872		(4,040	)	(3,781	)	66,097	66,685	$	23,555	23,636	14,176	14,476		8,129		8,193		(2,667	)	(2,818	)	43,193	43,487
Provision (reversal of provision) for credit losses	1,919		2,060	(39	)	905	2		(8	)	(5	)	8		1,877	2,965	1,189		702	162	(56	)	3		(8	)	(6	)	5		1,348	643
Noninterest expense	22,278		20,437	12,551		12,124	9,387		9,017		(2,532	)	(2,416	)	41,684	39,162	14,901		15,992	7,720	8,197		6,549		6,651		(1,805	)	(1,816	)	27,365	29,024
Net income (loss)	8,231		9,702	6,549		6,041	2,015		1,773		(932	)	(852	)	15,863	16,664	5,970		4,409	5,559	5,510		1,179		1,159		(642	)	(756	)	12,066	10,322
Average loans	$	477.8	486.4	465.0		445.2	71.6		66.4		(56.8	)	(52.8	)	957.6	945.2	$	457.9	467.1	475.2	464.9		74.7		74.3		(59.1	)	(58.8	)	948.7	947.5
Average deposits	726.4		698.3	464.1		431.7	190.6		185.4		(78.8	)	(76.1	)	1,302.3	1,239.3	771.6		754.1	410.1	429.9		148.3		172.5		(64.5	)	(72.3	)	1,265.5	1,284.2


(1)	Includes the elimination of certain items that are included in more than one business segment, ~~most of~~ which substantially represents products and services for WIM customers served through Community Banking distribution channels.

Earnings Performance (continued)

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and automobile, student, mortgage, home equity and small business lending, as well as referrals to Wholesale Banking and WIM business partners. The Community Banking segment

also includes the results of our Corporate Treasury activities net of allocations (including funds transfer pricing, capital, liquidity

and certain corporate expenses) in support of the other operating segments and results of investments in our affiliated venture capital and private equity partnerships. We have substantially completed the wind down of our personal insurance business, and we expect to fully exit this business by the end of 2019.

Table 4a provides additional financial information for Community Banking.

Table 4a:Community Banking


	Quarter ended Sep 30,							Nine months ended Sep 30,							Quarter ended June 30,							Six months ended June 30,
(in millions, except average balances which are in billions)	2017			2016		% Change		2017			2016		% Change		2019			2018		% Change		2019			2018		% Change
Net interest income	$	7,645		7,430		3	%	$	22,820		22,277		2	%	$	7,066		7,346		(4	)%	$	14,314		14,541		(2	)%
Noninterest income:
Service charges on deposit accounts	738			821		(10	)	2,203			2,347		(6	)	704			632		11		1,314			1,271		3
Trust and investment fees:
Brokerage advisory, commissions and other fees (1)	460			479		(4	)	1,356			1,384		(2	)	480			465		3		929			943		(1	)
Trust and investment management (1)	225			222		1		659			631		4		199			220		(10	)	409			453		(10	)
Investment banking (2)	(13		)	(23	)	43		(60		)	(92	)	35		(18		)	—		NM		(38		)	(10	)	NM
Total trust and investment fees	672			678		(1	)	1,955			1,923		2		661			685		(4	)	1,300			1,386		(6	)
Card fees	910			911		—		2,703			2,670		1		929			904		3		1,787			1,725		4
Other fees	362			362		—		1,152			1,100		5		335			348		(4	)	667			675		(1	)
Mortgage banking	936			1,481		(37	)	3,081			4,314		(29	)	655			695		(6	)	1,296			1,537		(16	)
Insurance	36			2		NM		64			4		NM		11			16		(31	)	22			44		(50	)
Net gains (losses) from trading activities	18			33		(45	)	87			(54	)	261
Net gains on debt securities	169			131		29		455			744		(39	)
Net gains from equity investments (3)	195			109		79		731			448		63
Net (losses) gains from trading activities															(11		)	24		NM		(6		)	23		NM
Net gains (losses) on debt securities															15			(2	)	850		52			(2	)	NM
Net gains from equity securities (3)															471			409		15		1,072			1,093		(2	)
Other income of the segment	379			429		(12	)	1,191			1,432		(17	)	969			749		29		1,737			1,343		29
Total noninterest income	4,415			4,957		(11	)	13,622			14,928		(9	)	4,739			4,460		6		9,241			9,095		2

Total revenue	12,060			12,387		(3	)	36,442			37,205		(2	)	11,805			11,806		—		23,555			23,636		—

Provision for credit losses	650			651		—		1,919			2,060		(7	)	479			484		(1	)	1,189			702		69
Noninterest expense:
Personnel expense	5,027			4,606		9		15,193			13,886		9		5,436			5,400		1		11,417			10,911		5
Equipment	511			462		11		1,569			1,421		10		584			525		11		1,225			1,121		9
Net occupancy	532			520		2		1,573			1,551		1		542			542		—		1,084			1,076		1
Core deposit and other intangibles	112			123		(9	)	335			380		(12	)	—			102		(100	)	1			203		(100	)
FDIC and other deposit assessments	171			159		8		547			453		21		94			155		(39	)	200			336		(40	)
Outside professional services	464			300		55		1,355			749		81		387			430		(10	)	703			827		(15	)
Operating losses	1,294			525		146		1,853			1,224		51		197			287		(31	)	416			1,727		(76	)
Other expense of the segment	(277		)	258		NM		(147		)	773		NM		(28		)	(151	)	81		(145		)	(209	)	31
Total noninterest expense	7,834			6,953		13		22,278			20,437		9		7,212			7,290		(1	)	14,901			15,992		(7	)
Income before income tax expense and noncontrolling interests	3,576			4,783		(25	)	12,245			14,708		(17	)	4,114			4,032		2		7,465			6,942		8
Income tax expense	1,286			1,546		(17	)	3,817			4,910		(22	)	838			1,413		(41	)	1,262			2,222		(43	)
Net income from noncontrolling interests (4)	61			10		510		197			96		105		129			123		5		233			311		(25	)
Net income	$	2,229		3,227		(31	)	$	8,231		9,702		(15	)	$	3,147		2,496		26		$	5,970		4,409		35
Average loans	$	473.5		489.2		(3	)	$	477.8		486.4		(2	)	$	457.7		463.8		(1	)	$	457.9		467.1		(2	)
Average deposits	734.5			708.0		4		726.4			698.3		4		777.6			760.6		2		771.6			754.1		2

NM -– Not meaningful


(1)	Represents income on products and services for WIM customers served through Community Banking distribution channels which is offset in our WIM segment and is eliminated in consolidation.


(2)	Includes syndication and underwriting fees paid to Wells Fargo Securities which are offset in our Wholesale Banking ~~segment.~~segment and eliminated in consolidation.


(3)	~~Predominantly~~Mostly represents gains resulting from venture capital investments.


(4)	Reflects results attributable to noncontrolling interests predominantly associated with the Company’s consolidated venture capital investments.

Community Banking reported net income of ~~$2.2~~$3.1 billion, ~~down $998~~up $651 million, or ~~31%~~26%, from ~~third~~second quarter ~~2016,~~2018, and ~~$8.2~~$6.0 billion for the first ~~nine months~~half of ~~2017, down $1.5~~2019, up $1.6 billion, or ~~15%~~35%, compared with the same period a year ago. ~~Third quarter 2017 results included a $1 billion discrete litigation accrual (not tax deductible) for previously disclosed mortgage-related regulatory investigations.~~ Revenue of ~~$12.1~~$11.8 billion ~~decreased $327 million, or 3%, from third~~was flat compared with second quarter ~~2016,~~2018 and was ~~$36.4~~$23.6 billion for the first ~~nine months~~half of ~~2017,~~2019, a decrease of ~~$763~~$81 million ~~or 2%,~~ compared with the same period ~~last year.~~a year ago. Revenue in second quarter 2019 was flat, compared with the same period a year ago, as lower net interest income, mortgage banking income, and net gains from trading activities were offset by higher gains from the sales of Pick-a-Pay PCI mortgage loans, service charges on deposit accounts, and net gains from equity securities. The decrease ~~from third quarter 2016~~in revenue in the first half of 2019, compared with the same period a year ago, was ~~predominantly~~ due to lower mortgage banking ~~revenue~~income, net interest income, and ~~deposit service charges,~~trust and investment fees, partially offset by higher ~~net interest income, and~~ gains ~~on equity investments. The decrease~~ from the ~~first nine months of 2016 was predominantly due to lower mortgage banking revenue, gains on~~ sales of Pick-a-Pay PCI mortgage loans, card fees, and net gains from debt ~~securities, and other income driven by net hedge ineffectiveness accounting related to our long-term debt hedging results, partially offset by higher net interest income and gains on~~securities. Average loans of $457.7 billion in second

~~equity investments. Average loans of $473.5 billion in third~~ quarter ~~2017~~2019 decreased ~~$15.7~~$6.1 billion, or 3%1%, from ~~third~~second quarter ~~2016,~~2018, and average loans of ~~$477.8~~$457.9 billion in the first ~~nine months~~half of ~~2017~~2019 decreased ~~$8.6~~$9.2 billion, or 2%, from the first ~~nine months~~half of ~~2016.~~2018. The decline in average loans for both periods was predominantly due to lower ~~loan origination in the consumer lending portfolio.~~junior lien mortgages and automobile loans, partially offset by higher real estate 1-4 family first mortgages and credit cards. Average deposits of ~~$734.5~~$777.6 billion in second quarter 2019 increased ~~$26.5~~$17.0 billion, or 4%2%, from ~~third~~second quarter ~~2016~~2018, and ~~average deposits~~increased $17.5 billion, or 2%, from the first half of ~~$726.4~~2018.

Noninterest expense was $7.2 billion in second quarter 2019, down $78 million, or 1%, from second quarter 2018, and $14.9 billion in the first ~~nine months~~half of ~~2017 increased $28.1~~2019, down $1.1 billion, or 4%7%, from the first ~~nine months~~half of 2016. Primary consumer checking customers (customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit) as of August 2017 were down 0.2% from August 2016. Noninterest2018. The decrease in noninterest expense increased 13% from third quarter 2016 and 9% from the first nine months of 2016. The increase from third quarter 2016 was driven by higher operating losses (including the $1 billion discrete litigation accrual in third quarter 2017) and higher personnel expenses mainly due to the

impact of annual salary increases and higher professional services driven by increased project spending, partially offset by higher expenses allocated to the Wholesale Banking and Wealth and Investment Management operating segments related to increased project and technology spending on regulatory and compliance related initiatives. The increase from the first nine months of 2016for both periods was predominantly due to ~~higher personnel expenses, including deferred compensation plan expense (offset in trading revenue), and higher~~lower operating losses, core deposit and other intangibles amortization, FDIC expense, and outside professional services, partially offset by ~~lower other~~higher personnel, equipment, contract services, and advertising

and promotion expense. The provision for credit losses was ~~flat compared with third~~down $5 million from second quarter ~~2016~~2018 and ~~decreased $141~~up $487 million from the first ~~nine months~~half of ~~2016 predominantly due to an improvement~~2018. The increase in the ~~consumer lending~~

~~portfolio, primarily consumer real estate,~~provision for credit losses in the first half of 2019, compared with the same ~~periods~~period a year ~~ago.~~ago, was due to an allowance release in the first half of 2018, partially offset by lower net charge-offs in the automobile portfolio in the first half of 2019. Income tax expense decreased $575 million from second quarter 2018, driven by a net discrete income tax expense of $481 million in second quarter 2018 mostly related to state income taxes. Income tax expense decreased $960 million in the first half of 2019, compared with the same period a year ago, driven by net discrete income tax benefits in the first half of 2019 related mostly to the results of

U.S. federal and state income tax examinations as well as the aforementioned net discrete income tax expense in the first half of 2018.

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include ~~Business~~Commercial Banking, Commercial Real Estate, Corporate and Investment Banking, ~~Financial Institutions Group, Government and Institutional Banking, Insurance, Middle Market Banking, Principal Investments,~~Credit Investment Portfolio, Treasury Management, ~~Wells Fargo~~and Commercial ~~Capital, and Wells Fargo Securities.~~Capital. Table 4b provides additional financial information for Wholesale Banking.

Table 4b:Wholesale Banking


	Quarter ended Sep 30,							Nine months ended Sep 30,							Quarter ended June 30,						Six months ended June 30,
(in millions, except average balances which are in billions)	2017			2016		% Change		2017			2016		% Change		2019		2018		% Change		2019		2018		% Change
Net interest income	$	4,353		4,062		7	%	$	12,779		11,729		9	%	$	4,535	4,693		(3	)%	$	9,069	9,225		(2	)%
Noninterest income:
Service charges on deposit accounts	539			549		(2	)	1,662			1,667		—		502		530		(5	)	985		1,064		(7	)
Trust and investment fees:
Brokerage advisory, commissions and other fees	65			91		(29	)	231			276		(16	)	74		78		(5	)	152		145		5
Trust and investment management	130			117		11		390			351		11		117		110		6		231		223		4
Investment banking	478			444		8		1,407			1,265		11		475		485		(2	)	887		925		(4	)
Total trust and investment fees	673			652		3		2,028			1,892		7		666		673		(1	)	1,270		1,293		(2	)
Card fees	90			85		6		260			263		(1	)	95		96		(1	)	181		183		(1	)
Other fees	513			562		(9	)	1,487			1,660		(10	)	464		496		(6	)	901		968		(7	)
Mortgage banking	110			186		(41	)	343			367		(7	)	104		75		39		172		168		2
Insurance	224			291		(23	)	736			1,002		(27	)	75		78		(4	)	153		157		(3	)
Net gains from trading activities	156			302		(48	)	614			853		(28	)	226		154		47		559		379		47
Net gains (losses) on debt securities	(5		)	(25	)	80		(135		)	52		NM
Net gains from equity investments	40			26		54		92			118		(22	)
Net gains on debt securities															5		42		(88	)	93		43		116
Net gains from equity securities															116		89		30		193		182		6
Other income of the segment	392			457		(14	)	1,208			1,786		(32	)	277		271		2		600		814		(26	)
Total noninterest income	2,732			3,085		(11	)	8,295			9,660		(14	)	2,530		2,504		1		5,107		5,251		(3	)

Total revenue	7,085			7,147		(1	)	21,074			21,389		(1	)	7,065		7,197		(2	)	14,176		14,476		(2	)

Provision (reversal of provision) for credit losses	69			157		(56	)	(39		)	905		NM		28		(36	)	178		162		(56	)	389
Noninterest expense:
Personnel expense	1,607			1,806		(11	)	5,048			5,563		(9	)	1,384		1,386		—		2,894		2,922		(1	)
Equipment	12			18		(33	)	42			55		(24	)	10		14		(29	)	19		26		(27	)
Net occupancy	106			116		(9	)	326			350		(7	)	96		100		(4	)	191		200		(5	)
Core deposit and other intangibles	102			101		1		310			286		8		23		94		(76	)	47		189		(75	)
FDIC and other deposit assessments	120			125		(4	)	358			299		20		44		122		(64	)	89		244		(64	)
Outside professional services	301			269		12		842			759		11		231		255		(9	)	415		488		(15	)
Operating losses	22			55		(60	)	34			130		(74	)	10		208		(95	)	11		216		(95	)
Other expense of the segment	1,978			1,630		21		5,591			4,682		19		2,084		2,040		2		4,054		3,912		4
Total noninterest expense	4,248			4,120		3		12,551			12,124		4		3,882		4,219		(8	)	7,720		8,197		(6	)
Income before income tax expense and noncontrolling interests	2,768			2,870		(4	)	8,562			8,360		2		3,155		3,014		5		6,294		6,335		(1	)
Income tax expense	729			827		(12	)	2,034			2,341		(13	)	365		379		(4	)	734		827		(11	)
Net loss from noncontrolling interests	(7		)	(4	)	(75	)	(21		)	(22	)	5		1		—		NM		1		(2	)	150
Net income	$	2,046		2,047		—		$	6,549		6,041		8		$	2,789	2,635		6		$	5,559	5,510		1
Average loans	$	463.8		454.3		2		$	465.0		445.2		4		$	474.0	464.7		2		$	475.2	464.9		2
Average deposits	463.4			441.2		5		464.1			431.7		8		410.4		414.0		(1	)	410.1		429.9		(5	)

NM – Not meaningful

Wholesale Banking reported net income of ~~$2.0~~$2.8 billion in ~~third~~second quarter ~~2017, down $1~~2019, up $154 million, or 6%, from ~~third~~second quarter ~~2016.~~2018. In the first ~~nine months~~half of ~~2017,~~2019, net income of ~~$6.5~~$5.6 billion increased ~~$508~~$49.0 million, or 8%1%, from the same period a year ago. ~~Net~~Revenue decreased $132 million, or 2%, from second quarter 2018, largely due to lower net interest income ~~results for~~and treasury management fees, partially offset by higher market sensitive revenue and mortgage banking fees. Revenue decreased $300 million, or 2%, from the first ~~nine months~~half of ~~2017 included a tax benefit resulting from our agreement~~2018, predominantly due to ~~sell~~the gain related to the sale of Wells Fargo ~~Insurance~~Shareowner Services ~~USA~~in first quarter 2018 and ~~related businesses. Revenue~~lower net interest income, partially offset by higher market sensitive revenue. Net interest income decreased ~~$62~~$158 million, or 3%, from second quarter 2018, and $156 million, or 2%, from the first half of 2018, as lower

income on trading and debt investments and lower income on loans due to spread compression was partially offset by higher average loan balances and the positive impact of higher interest rates. Noninterest income increased $26 million, or 1%, from ~~third~~second quarter ~~2016 and $315~~2018, as higher market sensitive revenue was partially offset by lower treasury management fees related to an increased earnings credit rate provided to customers. Noninterest income decreased $144 million, or 1%3%, from the first ~~nine months~~half of 2016 as an increase in net interest income was more than offset by lower noninterest income. Net interest income increased $291 million, or 7%, from third quarter 2016 and $1.1 billion, or 9%, from the first nine months of 2016 driven by strong loan growth, which

~~included the benefit from the GE Capital business acquisitions in 2016, and rising interest rates. Noninterest income decreased $353 million, or 11%, from third quarter 2016 due~~2018 predominantly ~~to lower customer accommodation trading, mortgage banking fees, and insurance income. Noninterest income decreased $1.4 billion, or 14%, from the first nine months of 2016 largely~~ due to the ~~first quarter 2016 sale of our crop insurance business, which resulted in lower insurance and~~ gain ~~on sale income, and the second quarter 2016 gain on~~related to the sale of ~~our health benefits services business, as well as~~Wells Fargo Shareowner Services in first quarter 2018, lower ~~gains on debt securities~~treasury management fees, loan fees, and ~~customer accommodation trading. The decrease in noninterest income from the first nine months of 2016 was~~investment banking fees, partially offset by higher ~~investment banking fees as well as higher lease income~~

~~Earnings Performance (continued~~)

~~related to the GE Capital business acquisitions.~~market sensitive revenue. Average loans of ~~$463.8~~$474.0 billion in ~~third~~second quarter ~~2017~~2019 increased ~~$9.5~~$9.3 billion, or 2%, from ~~third~~second quarter ~~2016,~~2018, and average loans of ~~$465.0~~

Earnings Performance (continued)

$475.2 billion in the first ~~nine months~~half of ~~2017~~2019 increased ~~$19.8~~$10.3 billion, or 4%2%, from the first ~~nine months~~half of ~~2016. Average loan growth was driven by~~2018, as growth in ~~asset backed finance, capital finance, government~~commercial and ~~institutional banking, middle market banking, and structured~~industrial loans was partially offset by lower commercial real estate ~~as well as the GE Capital business acquisitions in 2016.~~loans. Average deposits of ~~$463.4~~$410.4 billion ~~increased $22.2~~in second quarter 2019 decreased $3.6 billion, or 1%, from second quarter 2018, and average deposits of $410.1 billion in the first half of 2019 decreased $19.8 billion, or 5%, from ~~third quarter 2016 and $32.4 billion,~~the first half of 2018. The decline in average deposits for both periods was driven by declines across many businesses as commercial customers allocated more cash to alternative higher-rate liquid investments. The decline from the first half of 2018 was also affected by actions taken in 2018 in response to the asset cap included in the FRB consent order on February 2, 2018. Noninterest expense decreased $337 million, or 8%, from ~~the first nine months of 2016 reflecting growth in corporate banking, commercial real estate, corporate trust, financial institutions~~second quarter 2018, and ~~structured real estate. Noninterest expense increased $128~~decreased $477 million, or ~~3%, from third quarter 2016 and $427 million, or 4%~~6%, from the first ~~nine months~~half of ~~2016, due to~~2018 as lower operating losses, FDIC expense, and core deposit and other intangibles amortization, were partially offset by higher ~~expenses allocated from Community Banking related to increased project~~regulatory, risk, and technology ~~spending on regulatory and compliance related initiatives, and higher expense related to growth initiatives.~~expenses. The provision for credit losses ~~decreased $88~~increased $64 million from ~~third~~

second quarter ~~2016~~2018, and ~~$944~~$218 million from the first ~~nine months~~half of ~~2016 driven by improvement in the oil~~2018, reflecting higher charge-offs and ~~gas portfolio.~~lower recoveries.

Wealth and Investment Management provides a full range of personalized wealth management, investment and retirement products and services to clients across U.S. based businesses including Wells Fargo Advisors, The Private Bank, Abbot Downing, Wells Fargo Institutional Retirement and Trust, and Wells Fargo Asset Management. We deliver financial planning, private banking, credit, investment management and fiduciary services to high-net worth and ultra-high-net worth individuals and families. We also serve clients’ brokerage needs, supply retirement and trust services to institutional clients and provide investment management capabilities delivered to global institutional clients through separate accounts and the Wells Fargo Funds. The previously announced sale of our IRT business closed on July 1, 2019. For additional information on the IRT sale, including its anticipated impact on our AUA and associated revenue and expenses, see the “Noninterest Income” section in this Report. Table 4c provides additional financial information for WIM.

Table 4c:Wealth and Investment Management


	Quarter ended Sep 30,							Nine months ended Sep 30,							Quarter ended June 30,							Six months ended June 30,
(in millions, except average balances which are in billions)	2017			2016		% Change		2017			2016		% Change		2019			2018		% Change		2019			2018		% Change
Net interest income	$	1,159		977		19	%	$	3,360		2,852		18	%	$	1,037		1,111		(7	)%	$	2,138		2,223		(4	)%
Noninterest income:
Service charges on deposit accounts	2			5		(60	)	12			15		(20	)	4			5		(20	)	8			9		(11	)
Trust and investment fees:
Brokerage advisory, commissions and other fees	2,241			2,256		(1	)	6,741			6,618		2		2,248			2,284		(2	)	4,372			4,628		(6	)
Trust and investment management	718			738		(3	)	2,138			2,168		(1	)	687			731		(6	)	1,363			1,474		(8	)
Investment banking ~~(1)~~	(1		)	—		NM		(3		)	(1	)	NM		(1		)	1		NM		4			1		300
Total trust and investment fees	2,958			2,994		(1	)	8,876			8,785		1		2,934			3,016		(3	)	5,739			6,103		(6	)
Card fees	1			2		(50	)	4			5		(20	)	2			2		—		3			3		—
Other fees	5			4		25		14			13		8		4			5		(20	)	8			9		(11	)
Mortgage banking	(2		)	(2	)	—		(7		)	(6	)	(17	)	(3		)	(2	)	(50	)	(6		)	(5	)	(20	)
Insurance	21			—		NM		63			—		NM		17			18		(6	)	34			36		(6	)
Net gains from trading activities	71			80		(11	)	220			144		53		13			13		—		32			32		—
Net gains on debt securities	2			—		NM		2			1		NM		—			1		(100	)	—			1		(100	)
Net gains from equity investments	3			5		(40	)	6			7		(14	)
Net gains (losses) from equity securities															35			(203	)	117		171			(197	)	187
Other income of the segment	26			34		(24	)	71			56		27		7			(15	)	147		2			(21	)	110
Total noninterest income	3,087			3,122		(1	)	9,261			9,020		3		3,013			2,840		6		5,991			5,970		—

Total revenue	4,246			4,099		4		12,621			11,872		6		4,050			3,951		3		8,129			8,193		(1	)

Provision (reversal of provision) for credit losses	(1		)	4		NM		2			(8	)	125		(1		)	(2	)	50		3			(8	)	138
Noninterest expense:
Personnel expense	1,983			1,966		1		6,068			5,902		3		2,112			2,037		4		4,309			4,202		3
Equipment	—			12		(100	)	20			40		(50	)	14			11		27		25			21		19
Net occupancy	108			111		(3	)	323			332		(3	)	112			110		2		224			219		2
Core deposit and other intangibles	74			75		(1	)	219			225		(3	)	4			69		(94	)	7			138		(95	)
FDIC and other deposit assessments	39			44		(11	)	118			106		11		12			34		(65	)	26			70		(63	)
Outside professional services	198			241		(18	)	613			668		(8	)	210			202		4		394			400		(2	)
Operating losses	16			(1	)	NM		81			17		376		43			127		(66	)	64			149		(57	)
Other expense of the segment	688			551		25		1,945			1,727		13		739			771		(4	)	1,500			1,452		3
Total noninterest expense	3,106			2,999		4		9,387			9,017		4		3,246			3,361		(3	)	6,549			6,651		(2	)
Income before income tax expense and noncontrolling interests	1,141			1,096		4		3,232			2,863		13		805			592		36		1,577			1,550		2
Income tax expense	427			415		3		1,206			1,087		11		201			147		37		393			386		2
Net income from noncontrolling interests	4			4		—		11			3		267		2			—		NM		5			5		—
Net income	$	710		677		5		$	2,015		1,773		14		$	602		445		35		$	1,179		1,159		2
Average loans	$	72.4		68.4		6		$	71.6		66.4		8		$	75.0		74.7		—		$	74.7		74.3		1
Average deposits	188.1			189.2		(1	)	190.6			185.4		3		143.5			167.1		(14	)	148.3			172.5		(14	)

NM – Not meaningful


~~(1)~~	~~Includes syndication and underwriting fees paid to Wells Fargo Securities which are offset in our Wholesale Banking segment.~~

WIM reported net income of ~~$710~~$602 million in ~~third~~second quarter ~~2017,~~2019, up ~~$33~~$157 million, or 35%, from ~~third~~second quarter ~~2016.~~2018. Net income for the first ~~nine months~~half of ~~2017~~2019 was ~~$2.0~~$1.2 billion, up ~~$242~~$20 million, or ~~14%~~2%, ~~compared with~~from the same period a year ago. Revenue was up ~~$147~~$99 million, or 4%3%, from ~~third~~second quarter ~~2016, due to an increase in net interest income,~~2018, and ~~up $749~~down $64 million, or 6%1%, from the first ~~nine months~~half of ~~2016, resulting from increases~~2018.Revenue in ~~both net interest~~second

~~income and noninterest income. Net interest income increased 19%~~quarter 2019 was up from ~~third~~second quarter ~~2016 and 18% from the first nine months of 2016,~~2018 largely due to the 2018 impairment on the sale of our ownership stake in RockCreek and higher interest rates and growth in investment securities and loan balances. Noninterest income decreased 1% from third quarter 2016 substantially driven by lower brokerage transaction revenue, and increased 3% from the first nine months of 2016 substantially driven by higher asset-based fees and

deferred compensation plan investments (offset in employee benefits expense), partially offset by lower trust and investment fees and lower net interest income. Revenue in the first half of 2019 was down from the first half of 2018

predominantly due to lower trust and investment fees and lower net interest income, partially offset by the 2018 impairment on the sale of our ownership stake in RockCreek and higher deferred compensation plan investments (offset in employee benefits expense). Net interest income decreased 7% from second quarter 2018, and 4% from the first half of 2018, primarily driven by lower deposit balances in both periods. Noninterest income increased $173 million from second quarter 2018, and $21 million from the first half of 2018, in both periods primarily due to the 2018 impairment on the sale of our ownership stake in RockCreek and higher deferred compensation plan investments (offset in employee benefits expense), partially offset by lower asset-based fees and lower brokerage transaction revenue. Asset-based fees ~~were up predominantly~~decreased due to ~~higher~~lower brokerage advisory account client assets driven by ~~higher~~lower market valuations ~~and positive net flows.~~at the end of 2018. Average loans of ~~$72.4~~$75.0 billion in ~~third~~second quarter ~~2017 increased 6% from third quarter 2016. Average~~2019 were flat compared with the same period a year ago, while average loans of $74.7 billion in the first ~~nine months~~half of ~~2017~~2019 increased 8%1% from the same period a year ~~ago. Average loan growth was~~ago, driven by growth in ~~non-conforming~~nonconforming mortgage loans. Average deposits of $143.5 billion in ~~third~~second quarter ~~2017~~2019 decreased $23.6 billion, or 14%, from second quarter 2018, and average deposits of ~~$188.1~~$148.3 billion ~~decreased 1% from third quarter 2016. Average deposits~~ in the first ~~nine months~~half of ~~2017 increased 3%~~2019 decreased $24.2 billion, or 14%, from the ~~same period a year ago.~~first half of 2018, as customers continued to allocate more cash into higher yielding liquid alternatives. Noninterest expense was ~~up 4%~~down 3% from ~~both the third~~second quarter 2018, and first nine months of 2016, due to higher expenses allocated from Community Banking related to increased project and technology spending on regulatory and compliance related initiatives, and higher broker commissions mainly due to higher brokerage revenue. The increase in noninterest expensedown 2% from the first ~~nine months~~half of ~~2016 was also affected~~2018, in both periods driven by lower core deposit and other intangibles amortization expense, lower operating losses, and lower broker commissions, partially offset by higher employee benefits expense primarily from higher deferred compensation

plan expense (offset in ~~trading revenue)~~net gains from equity securities). ~~Total~~Second quarter 2018 operating losses included $114 million of non-litigation expense related to fee calculations within certain fiduciary and custody accounts in our wealth management business. The provision for credit losses ~~decreased $5~~increased $1 million from ~~third~~second quarter ~~2016 driven by lower net charge-offs,~~2018 and ~~increased $10~~$11 million from the first ~~nine months~~half of ~~2016 driven by higher~~

~~net charge-offs.~~2018.

The following discussions provide additional information for client assets we oversee in our retail brokerage advisory and trust and investment management business lines.

Retail Brokerage Client Assets Brokerage advisory, commissions and other fees are received for providing full-service and discount brokerage services predominantly to retail brokerage clients. Offering advisory account relationships to our brokerage clients is an important component of our broader strategy of meeting their financial needs. Although a majority of our retail brokerage client assets are in accounts that earn brokerage commissions, the fees from those accounts generally represent transactional commissions based on the number and size of transactions executed at the client’s direction. Fees ~~earned~~ from advisory accounts are ~~asset-based and depend~~based on ~~changes in~~a percentage of the market value of the ~~client’s~~ 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 ~~the level of assets resulting from~~asset inflows and outflows. A majority of our brokerage advisory, commissions and other fee income is earned from advisory accounts. Table 4d shows advisory account client assets as a percentage of total retail brokerage client assets at ~~September~~June 30, ~~2017~~2019 and ~~2016.~~2018.

Table 4d:Retail Brokerage Client Assets


	September 30,				June 30,
(in billions)	2017			2016
($ in billions)					2019			2018
Retail brokerage client assets	$	1,612.1		1,483.3	$	1,620.5		1,623.7
Advisory account client assets	521.8			458.3	561.3			542.6
Advisory account client assets as a percentage of total client assets	32		%	31	35		%	33

Retail Brokerage 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. ~~These advisory accounts generate fees as a percentage of the market value of the assets, which vary across the account types based on the distinct services provided,~~

For second quarter 2019 and ~~are affected by investment performance as well as asset inflows and outflows. For the third quarter and first nine months of 2017 and 2016,~~2018, the average fee rate by account type ranged from 80 to 120 basis points. Table 4e presents retail brokerage advisory account client assets activity by account type for the ~~third~~second quarter and first ~~nine months~~half of ~~2017~~2019 and ~~2016.~~2018.

Earnings Performance (continued)

Table 4e:Retail Brokerage Advisory Account Client Assets


	Quarter ended							Nine months ended						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	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
September 30, 2017
June 30, 2019
Client directed (4)	$	163.8	8.2	(8.9	)	3.7	166.8	159.1	28.5	(30.1	)	9.3	166.8	$	163.6	8.6	(9.7	)	3.7	166.2	$	151.5	16.5	(19.0	)	17.2		166.2
Financial advisor directed (5)	131.7		6.7	(5.2	)	6.0	139.2	115.7	23.0	(17.4	)	17.9	139.2	156.9		8.6	(8.7	)	6.4	163.2	141.9		16.1	(16.4	)	21.6		163.2
Separate accounts (6)	137.7		5.6	(5.0	)	4.7	143.0	125.7	20.1	(17.2	)	14.4	143.0	148.3		6.2	(8.0	)	5.4	151.9	136.4		11.8	(14.9	)	18.6		151.9
Mutual fund advisory (7)	69.3		3.2	(2.3	)	2.6	72.8	63.3	9.9	(8.0	)	7.6	72.8	77.9		2.9	(3.5	)	2.7	80.0	71.3		5.7	(6.7	)	9.7		80.0
Total advisory client assets	$	502.5	23.7	(21.4	)	17.0	521.8	463.8	81.5	(72.7	)	49.2	521.8	$	546.7	26.3	(29.9	)	18.2	561.3	$	501.1	50.1	(57.0	)	67.1		561.3
September 30, 2016
June 30, 2018
Client directed (4)	$	158.5	9.2	(9.5	)	3.1	161.3	154.7	27.4	(27.7	)	6.9	161.3	$	168.4	8.2	(11.1	)	2.0	167.5	$	170.9	17.6	(20.3	)	(0.7	)	167.5
Financial advisor directed (5)	104.2		6.3	(4.7	)	4.7	110.5	91.9	21.4	(13.5	)	10.7	110.5	148.6		7.5	(9.5	)	3.4	150.0	147.0		15.6	(16.5	)	3.9		150.0
Separate accounts (6)	118.9		6.0	(5.6	)	3.5	122.8	110.4	19.0	(15.6	)	9.0	122.8	146.6		5.6	(7.0	)	2.0	147.2	149.1		12.4	(14.3	)	—		147.2
Mutual fund advisory (7)	62.1		2.2	(2.6	)	2.0	63.7	62.9	6.1	(8.5	)	3.2	63.7	76.8		3.2	(3.3	)	1.2	77.9	75.8		7.2	(6.3	)	1.2		77.9
Total advisory client assets	$	443.7	23.7	(22.4	)	13.3	458.3	419.9	73.9	(65.3	)	29.8	458.3	$	540.4	24.5	(30.9	)	8.6	542.6	$	542.8	52.8	(57.4	)	4.4		542.6


(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 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 Wells Fargo Asset Management ~~advisors~~ or 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.

~~Earnings Performance (continued~~)

Trust and Investment Client Assets Under Management We earn trust and investment management fees from managing and administering assets, including mutual funds, institutional separate accounts, personal trust, employee benefit trust and agency assets through our asset management, wealth and retirement businesses. Our asset management business is conducted by Wells Fargo Asset Management (WFAM), which offers Wells Fargo proprietary mutual funds and manages institutional separate accounts. Our wealth business manages

assets for high net worth clients, and our retirement business

provides total retirement management, investments, and trust and custody solutions tailored to meet the needs of institutional clients. Substantially all of our trust and investment management fee income is earned from AUM where we have discretionary management authority over the investments and generate fees as a percentage of the market value of the AUM. Table 4f presents AUM activity for the ~~third~~second quarter and first ~~nine months~~half of ~~2017~~2019 and ~~2016.~~2018.

Table 4f:WIM Trust and Investment – Assets Under Management


	Quarter ended							Nine months ended						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	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
September 30, 2017
June 30, 2019
Assets managed by WFAM (4):
Money market funds (5)	$	94.7	7.7	—		—	102.4	102.6	—	(0.2	)	—	102.4	$	109.5	10.3	—		—	119.8	$	112.4	7.4	—		—		119.8
Other assets managed	392.5		25.4	(31.2	)	7.3	394.0	379.6	89.0	(98.8	)	24.2	394.0	367.0		22.2	(23.0	)	9.1	375.3	353.5		41.5	(44.9	)	25.2		375.3
Assets managed by Wealth and Retirement (6)	175.6		10.1	(8.7	)	4.0	181.0	168.5	29.5	(29.1	)	12.1	181.0	181.4		8.2	(11.2	)	3.5	181.9	170.7		17.4	(21.6	)	15.4		181.9
Total assets under management	$	662.8	43.2	(39.9	)	11.3	677.4	650.7	118.5	(128.1	)	36.3	677.4	$	657.9	40.7	(34.2	)	12.6	677.0	$	636.6	66.3	(66.5	)	40.6		677.0
September 30, 2016
June 30, 2018
Assets managed by WFAM (4):
Money market funds (5)	$	108.9	7.4	—		—	116.3	123.6	—	(7.3	)	—	116.3	$	105.0	2.7	—		—	107.7	$	108.2	—	(0.5	)	—		107.7
Other assets managed	374.9		31.0	(30.3	)	6.2	381.8	366.1	86.9	(85.2	)	14.0	381.8	391.8		20.9	(27.3	)	1.1	386.5	395.7		46.6	(56.5	)	0.7		386.5
Assets managed by Wealth and Retirement (6)	164.6		8.4	(7.4	)	3.1	168.7	162.1	25.7	(25.4	)	6.3	168.7	183.3		9.1	(10.3	)	1.1	183.2	186.2		19.5	(21.7	)	(0.8	)	183.2
Total assets under management	$	648.4	46.8	(37.7	)	9.3	666.8	651.8	112.6	(117.9	)	20.3	666.8	$	680.1	32.7	(37.6	)	2.2	677.4	$	690.1	66.1	(78.7	)	(0.1	)	677.4


(1)	Inflows include new managed account assets, contributions, dividends and interest.


(2)	Outflows include closed managed account assets, withdrawals and client management fees.


(3)	Market impact reflects gains and losses on portfolio investments.


(4)	Assets managed by WFAM consist of equity, alternative, balanced, fixed income, money market, and stable value, and include client assets that are managed or sub-advised on behalf of other Wells Fargo lines of business.


(5)	Money Market funds activity is presented on a net inflow or net outflow basis, because the gross flows are not meaningful nor used by management as an indicator of performance.


(6)	Includes ~~$5.7~~$4.5 billion and ~~$7.7~~$5.2 billion as of ~~September~~June 30, ~~2017~~2019 and ~~2016~~,2018, respectively, of client assets invested in proprietary funds managed by WFAM.

Balance Sheet Analysis

At ~~September~~June 30, ~~2017,~~2019, our assets totaled ~~$1.93~~$1.92 trillion, up ~~$4.8~~$27.5 billion from December 31, ~~2016. Asset~~2018. The asset growth was ~~predominantly~~ driven by ~~growth~~increases in ~~trading assets~~federal funds sold and ~~investment~~securities purchased under resale agreements and equity securities, which increased ~~$14.0~~by $31.9 billion and ~~$6.7~~$6.4 billion, respectively, from December 31, ~~2016,~~2018. Liabilities totaled $1.72 trillion, up $24.5 billion from December 31, 2018. The increase in liabilities was due to increases in short-term borrowings and long-term debt, which increased by $9.6 billion and $12.4 billion, respectively, from December 31, 2018. Total equity increased by $3.0 billion from December 31, 2018, predominantly due to a $4.1 billion increase

in cumulative other comprehensive income driven largely by the increase in fair value of available-for-sale debt securities, and a $6.4 billion increase in retained earnings, net of dividends paid, partially offset by a ~~$15.7~~$7.6 billion ~~decrease~~increase in loans. Total equity growth of $6.3 billion from December 31, 2016, was the predominant source that funded our asset growth from December 31, 2016. Equity growth benefited from $8.7 billion in earnings net of dividends paid.treasury stock.

The following discussion provides additional information about the major components of our balance sheet. Information regarding our capital and changes in our asset mix is included in the “Earnings Performance – Net Interest Income” and “Capital Management” sections and Note 1923 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report.

~~Investment~~Available-for-Sale and Held-to-Maturity Debt Securities

Table 5:~~Investment~~Available-for-Sale and Held-to-Maturity Debt Securities ~~– Summary~~

September 30, 2017 December 31, 2016
(in millions) Amortized Cost

Net
unrealized
gain (loss)

Fair value
Amortized Cost

Net
unrealized
gain (loss)

Fair value
Available-for-sale securities:

Debt securities $ 269,779
1,538
271,317
309,447
(2,294 ) 307,153
Marketable equity securities 606
287
893
706
505
1,211
Total available-for-sale securities 270,385
1,825
272,210
310,153
(1,789 ) 308,364
Held-to-maturity debt securities 142,423
395
142,818
99,583
(428 ) 99,155
Total investment securities (1) $ 412,808
2,220
415,028
409,736
(2,217 ) 407,519



	June 30, 2019				December 31, 2018
(in millions)	Amortized cost		Net unrealized gain (loss)	Fair value	Amortized cost	Net unrealized gain (loss)		Fair value
Available-for-sale	263,458		2,525	265,983	272,471	(2,559	)	269,912
Held-to-maturity	145,876		1,988	147,864	144,788	(2,673	)	142,115
Total (1)	$	409,334	4,513	413,847	417,259	(5,232	)	412,027


(1)	Available-for-sale debt securities are carried on the balance sheet at fair value. Held-to-maturity debt securities are carried on the balance sheet at amortized cost.

Table 5 presents a summary of our ~~investment~~available-for-sale and held-to-maturity debt securities, ~~portfolio,~~ which ~~increased $6.7~~decreased $2.8 billion in balance sheet carrying value from December 31, ~~2016, predominantly~~2018, largely due to ~~purchases~~net declines in securities of ~~federal agency mortgage-backed securities,~~U.S. states and political subdivisions and collateralized debt obligations, partially offset by ~~sales and paydowns on other security classes including securities~~net purchases of U.S. ~~treasury~~Treasury and federal ~~agencies and mortgage-backed~~agency debt securities.

The total net unrealized gains on available-for-sale debt securities were ~~$1.8~~$2.5 billion at ~~September~~June 30, ~~2017,~~2019, up from net unrealized losses of ~~$1.8~~$2.6 billion at December 31, ~~2016,~~2018, primarily due to lower ~~long-term~~U.S. interest ~~rates, tighter credit spreads and the transfer of available-for-sale securities to held-to-maturity.~~rates. For a discussion of our investment management objectives and practices, see the “Balance Sheet Analysis” section in our ~~2016~~2018 Form 10-K. Also, see the “Risk Management – Asset/Liability Management” section in this Report for information on our use of investments to manage liquidity and interest rate risk.

We analyze debt securities for ~~other-than-temporary impairment (OTTI)~~OTTI quarterly or more often if a potential loss-triggering event occurs. OfIn the ~~$293~~first half of 2019, we recognized $52 million inof OTTI write-downs ~~recognized in earnings in the first nine months of 2017, $107 million related to~~on debt securities, $5 million related to marketable equity securities, which are included in available-for-sale securities, and $181 million related to nonmarketable equity investments, which are included in other assets. OTTI write-downs recognized in earnings related to oil and gas investments totaled $77 million in the first nine months of 2017, of which $24 million related to investment securities and $53 million related to nonmarketable equity investments.securities. For a discussion of our OTTI accounting policies and underlying considerations and analysis, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our ~~2016~~2018 Form 10-K and Note ~~4 (Investment~~5 (Available-for-Sale and Held-to-Maturity Debt Securities) to Financial Statements in this Report.

At ~~September~~June 30, ~~2017, investment~~2019, debt securities included ~~$59.1~~$53.0 billion of municipal bonds, of which ~~95.9%~~96.1% were rated “A-” or better based ~~largely~~predominantly on external and, in some cases, internal ratings. Additionally, some of the debt securities in our total municipal

bond portfolio are guaranteed against loss by bond insurers. These guaranteed bonds are predominantly investment grade and were generally underwritten in accordance with our own investment standards prior to the determination to purchase, without relying on the bond insurer’s guarantee in making the investment decision. The credit quality of our municipal bond holdings are monitored as part of our ongoing impairment analysis.

The weighted-average expected maturity of debt securities available-for-sale was ~~6.8~~5.0 years at ~~September~~June 30, ~~2017.~~2019. The expected remaining maturity is shorter than the remaining contractual maturity for the ~~59%~~61% of this portfolio that is ~~MBS~~mortgage-backed securities (MBS) because borrowers generally have the right to prepay obligations before the underlying mortgages mature. The estimated effects of a 200 basis point increase or decrease in interest rates on the fair value and the expected remaining maturity of the MBS available-for-sale portfolio are shown in Table 6.

Table 6:Mortgage-Backed Securities Available for Sale


(in billions)	Fair value		Net unrealized gain (loss)		Expected remaining maturity (in years)	Fair value		Net unrealized gain (loss)		Expected remaining maturity (in years)
At September 30, 2017
At June 30, 2019
Actual	$	161.2	0.8		6.5	$	161.3	1.4		4.5
Assuming a 200 basis point:
Increase in interest rates	143.9		(16.5	)	8.5	146.0		(13.9	)	6.8
Decrease in interest rates	167.4		7.0		2.6	170.7		10.8		3.3

The weighted-average expected maturity of debt securities held-to-maturity (HTM) was ~~6.5~~4.5 years at ~~September~~June 30, ~~2017.~~2019. HTM debt securities are measured at amortized cost and, therefore, changes in the fair value of our held-to-maturity MBS resulting from changes in interest rates are not recognized in our financial results. See Note ~~4 (Investment~~5 (Available-for-Sale and Held-to-Maturity Debt Securities) to Financial Statements in this Report for a summary of ~~investment~~debt securities by security type.

Balance Sheet Analysis (continued)

Loan Portfolios

Table 7 provides a summary of total outstanding loans by portfolio segment. Total loans decreased ~~$15.7~~$3.2 billion from December 31, ~~2016, reflecting paydowns,~~2018, with a ~~continued~~ decline in both commercial and consumer loans. Consumer loans were down $2.1 billion from December 31, 2018, as growth in the real estate 1-4 family first mortgage and automobile loan portfolios was more than offset by the sale of $3.5 billion of Pick-a-Pay PCI loans, the

reclassification of $1.8 billion of real estate 1-4 family first mortgage loans to MLHFS, and a decline in junior lien mortgage loans ~~and an expected decline~~as paydowns continued to exceed originations in ~~automobile~~the first half of 2019. Commercial loans were down $1.2 billion from December 31, 2018, as ~~the effect of tighter underwriting standards implemented last year resulted~~growth in ~~lower origination volume.~~our credit investment portfolio was more than offset by declines across several commercial industry categories.

Table 7:Loan Portfolios


(in millions)	September 30, 2017			December 31, 2016	June 30, 2019			December 31, 2018
Commercial	$	500,150		506,536	$	512,245		513,405
Consumer	451,723			461,068	437,633			439,705
Total loans	$	951,873		967,604	$	949,878		953,110
Change from prior year-end	$	(15,731	)	51,045	$	(3,232	)	(3,660	)

A discussion of 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 56 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Table 8 shows contractual loan maturities for loan categories normally not subject to regular periodic principal reduction and the contractual distribution of loans in those categories to changes in interest rates.

Table 8:Maturities for Selected Commercial Loan Categories


	September 30, 2017					December 31, 2016				June 30, 2019					December 31, 2018
(in millions)	Within one year		After one year through five years	After five years	Total	Within one year	After one year through five years	After five years	Total	Within one year		After one year through five years	After five years	Total	Within one year	After one year through five years	After five years	Total
Selected loan maturities:
Commercial and industrial	$	98,776	203,785	25,383	327,944	105,421	199,211	26,208	330,840	$	109,939	210,083	28,824	348,846	109,566	213,425	27,208	350,199
Real estate mortgage	19,720		66,245	42,510	128,475	22,713	68,928	40,850	132,491	16,089		65,324	41,595	123,008	16,413	63,648	40,953	121,014
Real estate construction	10,431		12,801	1,288	24,520	9,576	13,102	1,238	23,916	9,663		10,575	829	21,067	9,958	11,343	1,195	22,496
Total selected loans	$	128,927	282,831	69,181	480,939	137,710	281,241	68,296	487,247	$	135,691	285,982	71,248	492,921	135,937	288,416	69,356	493,709
Distribution of loans to changes in interest rates:
Loans at fixed interest rates	$	18,405	28,261	26,234	72,900	19,389	29,748	26,859	75,996	$	17,815	26,912	28,872	73,599	17,619	28,545	28,163	74,327
Loans at floating/variable interest rates	110,522		254,570	42,947	408,039	118,321	251,493	41,437	411,251	117,876		259,070	42,376	419,322	118,318	259,871	41,193	419,382
Total selected loans	$	128,927	282,831	69,181	480,939	137,710	281,241	68,296	487,247	$	135,691	285,982	71,248	492,921	135,937	288,416	69,356	493,709

Deposits

Deposits were $1.3 trillion at ~~September~~June 30, ~~2017,~~2019, up ~~$627 million~~$2.3 billion from December 31, ~~2016,~~2018, due to an increase in mortgage escrow deposits reflecting an inflow of higher mortgage payoffs to be remitted to investors in accordance with servicing contracts, partially offset by a decrease in consumer and small business banking deposits. The decrease in consumer and small business banking deposits was driven by seasonality as well as higher balance customers moving a portion of those balances to other

higher rate liquid alternatives, partially offset by growth in ~~retail deposits and Treasury institutional~~ certificates of deposit ~~partially offset~~(CDs) and high-yield savings that was driven by ~~lower wealth and commercial deposits.~~an increase in promotional activity. Table 9

provides additional information regarding deposits. 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.

Table 9:Deposits


($ in millions)	Sep 30, 2017		% of total deposits		Dec 31, 2016		% of total deposits		% Change		Jun 30, 2019		% of total deposits		Dec 31, 2018		% of total deposits		% Change
Noninterest-bearing	$	366,528	28	%	$	375,967	29	%	(3	)	$	340,813	26	%	$	349,534	27	%	(2	)
Interest-bearing checking	47,366		4		49,403		4		(4	)	54,722		4		56,797		4		(4	)
Market rate and other savings	687,323		52		687,846		52		—		713,219		56		703,338		55		1
Savings certificates	21,396		2		23,968		2		(11	)	32,379		3		22,648		2		43
Other time deposits	66,884		5		52,649		4		27		93,868		7		95,602		7		(2	)
Deposits in foreign offices (1)	117,209		9		116,246		9		1		53,425		4		58,251		5		(8	)
Total deposits	$	1,306,706	100	%	$	1,306,079	100	%	—		$	1,288,426	100	%	$	1,286,170	100	%	—


(1)	Includes Eurodollar sweep balances of ~~$72.8~~$26.4 billion and ~~$74.8~~$31.8 billion at ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, respectively.

Fair Value of Financial Instruments

We use fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures. See the “Critical Accounting Policies” section in our ~~2016~~2018 Form 10-K and Note 16 (Fair Values of Assets and Liabilities) to Financial Statements in this Report for a description of our critical accounting policy related to fair value of financial instruments and a discussion of our fair value measurement techniques.

Table 10 presents the summary of the fair value of financial instruments recorded at fair value on a recurring basis, and the amounts measured using significant Level 3 inputs (before derivative netting adjustments). The fair value of the remaining assets and liabilities were measured using valuation methodologies involving market-based or market-derived information (collectively Level 1 and 2 measurements).

Table 10:Fair Value Level 3 Summary


	September 30, 2017				December 31, 2016		June 30, 2019				December 31, 2018
($ in billions)	Total balance			Level 3 (1)	Total balance	Level 3 (1)	Total balance			Level 3 (1)	Total balance	Level 3 (1)
Assets carried at fair value	$	407.9		24.1	436.3	23.5	$	415.1		24.9	408.4	25.3
As a percentage of total assets	21		%	1	23	1	22		%	1	22	1
Liabilities carried at fair value	$	28.6		2.0	30.9	1.7	$	24.4		2.3	28.2	1.6
As a percentage of total liabilities	2		%	*	2	*	1		%	*	2	*

* Less than 1%.


(1)	Before derivative netting adjustments.

See Note 1316 (Fair Values of Assets and Liabilities) to Financial Statements in this Report for additional information on fair value measurements and a description of the Level 1, 2 and 3 fair value hierarchy.

Equity

Total equity was ~~$206.8~~$200.0 billion at ~~September~~June 30, ~~2017,~~2019, compared with ~~$200.5~~$197.1 billion at December 31, ~~2016.~~2018. The increase was ~~predominantly~~ driven by a ~~$8.7~~$4.1 billion increase in cumulative other comprehensive income primarily due to a decrease in U.S. interest rates resulting in an increase in the value of available-for-sale debt securities, and a $6.4 billion increase in retained ~~earnings from~~ earnings net of dividends paid, partially offset by a ~~net reduction~~$7.6 billion increase in ~~common stock due to repurchases.~~

treasury stock.

Off-Balance Sheet Arrangements

In the ordinary course of business, we engage in financial transactions that are not recorded on the balance sheet, or may be recorded on the balance sheet in amounts that are different from the full contract or notional amount of the transaction. Our off-balance sheet arrangements include commitments to lend and purchase debt and equity securities, 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.

Commitments to Lend and Purchase Debt and Equity Securities

We enter into commitments to lend funds to customers, which are usually at a stated interest rate, if funded, and for specific purposes and time periods. When we make commitments, we are exposed to credit risk. However, the maximum credit risk for these commitments will generally be lower than the contractual amount because a significant portion of these commitments is expected to expire without being used by the customer. For more information on lending commitments, see Note 56 (Loans and Allowance for Credit Losses) to Financial Statements in this Report. We also enter into commitments to purchase securities under resale agreements. For more information on commitments to purchase securities under resale agreements, see Note ~~3 (Federal Funds Sold, Securities Purchased under Resale Agreements~~13 (Guarantees, Pledged Assets and Collateral, and Other ~~Short-Term Investments)~~Commitments) to Financial Statements in this Report. We also may enter into commitments to purchase debt and equity securities to provide capital for customers’ funding, liquidity or other future needs. For more information, see the “Off-Balance Sheet Arrangements – Contractual Cash Obligations” section in our 2018 Form 10-K and Note 13 (Guarantees, Pledged Assets and Collateral, and Other Commitments) 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 more information on securitizations, including sales proceeds and cash flows from securitizations, see Note 710 (Securitizations and Variable Interest Entities) to Financial Statements in this Report.

Guarantees and Certain Contingent Arrangements

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 letters of credit, securities lending and other indemnifications, written put options, recourse obligations and other types of similar arrangements. For more information on guarantees and certain contingent arrangements, see Note 1013 (Guarantees, Pledged Assets and ~~Collateral)~~Collateral, 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 the 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 the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. For more information on derivatives, see Note 1215 (Derivatives) to Financial Statements in this Report.

~~Other Commitments~~

We also have other off-balance sheet transactions, including obligations to make rental payments under noncancelable operating leases and commitments to purchase certain debt and equity securities. Our operating lease obligations are discussed in Note 7 (Premises, Equipment, Lease Commitments and Other Assets) to Financial Statements in our 2016 Form 10-K. For more information on commitments to purchase debt and equity securities, see the “Off-Balance Sheet Arrangements – Contractual Cash Obligations” section in our 2016 Form 10-K.

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, ~~stockholders,~~shareholders, regulators and other stakeholders. Among the risks that we manage are conduct risk, operational risk, credit risk, and asset/liability management related risks, which include interest rate risk, market risk, liquidity risk, and funding related risks. We operate under a ~~Board-level~~Board approved risk management framework which outlines our company-wide approach to risk management and oversight and describes the structures and practices employed to manage current and emerging risks inherent to Wells Fargo. For more information about how we manage ~~these risks,~~risk, see the “Risk Management” section in our ~~2016~~2018 Form 10-K. The discussion that follows ~~provides an update regarding these risks.~~

~~Conduct Risk Management~~

~~Our Board oversees the alignment~~supplements our discussion of ~~team member conduct to the Company’s risk appetite (which the Board approves annually) and culture as reflected in our~~ ~~Vision and Values~~ and Code of Ethics and Business Conduct. The Board’s Risk Committee has primary oversight responsibility for enterprise-wide conduct risk, while certain other Board committees have primary oversight responsibility for specific components of conduct risk.

At the management ~~level, several committees have primary oversight responsibility for key elements~~ of conduct risk, including internal investigations, sales practices oversight, complaints oversight, and ethics oversight. These management-level committees have escalation and informational reporting paths to the relevant Board committee.

Our Conduct Management Office, which reports to our Chief Risk Officer and has an informational reporting path to the Board's Risk Committee, is responsible for fostering and promoting an enterprise-wide culture of prudent conduct risk management and compliance with internal directives, rules, regulations, and regulatory expectations throughout the Company and to provide assurance that the Company’s internal operations and its treatment of customers and other external stakeholders are safe and sound, fair, and ethical.

~~Operational Risk Management~~

Operational risk is the risk of loss resulting from inadequate or failed internal controls and processes, people and systems, or resulting from external events. These losses may be caused by events such as fraud, breaches of customer privacy, business disruptions, vendors that do not adequately or appropriately perform their responsibilities, and regulatory fines and penalties.

Information security is a significant operational risk for financial institutions such as Wells Fargo, and includes the risk of losses resulting from cyber attacks. Wells Fargo and other financial institutions continue to be the target of various evolving and adaptive cyber attacks, including malware and denial-of-service, as part of an effort to disrupt the operations of financial institutions, potentially test their cybersecurity capabilities, or obtain confidential, proprietary or other information. Cyber attacks have also focused on targeting the infrastructure of the internet, causing the widespread unavailability of websites and degrading website performance. Wells Fargo has not experienced any material losses relating to these or other cyber attacks. Addressing cybersecuritycertain risks ~~is a priority for Wells Fargo, and we continue to develop and enhance our controls, processes and systems~~contained in ~~order to protect our networks, computers, software and data from attack, damage or unauthorized access. We are~~

also proactively involved in industry cybersecurity efforts and working with other parties, including our third-party service providers and governmental agencies, to continue to enhance defenses and improve resiliency to cybersecurity threats. See the “Risk ~~Factors”~~Management” section in our ~~2016~~2018 Form ~~10-K for additional information regarding the risks associated with a failure or breach of our operational or security systems or infrastructure, including as a result of cyber attacks.~~

10-K.

Credit Risk Management

We define credit risk as 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 our assets and exposures such as debt security holdings, certain derivatives, and loans.

The Board’s Credit Committee has primary oversight responsibility for credit risk. At the management level, the Corporate Credit function, which is part of Corporate Risk, has primary oversight responsibility for credit risk. The Corporate Credit function reports to the Chief Risk Officer (CRO) and also provides periodic reporting related to credit risk to the Board’s Credit Committee. In addition, the Risk & Control Committee for each business group and enterprise function reports credit risk matters to the Enterprise Risk & Control Committee.

The following discussion focuses on our loan portfolios, which represent the largest component of assets on our balance sheet for which we have credit risk. Table 11 presents our total loans outstanding by portfolio segment and class of financing receivable.

Table 11:Total Loans Outstanding by Portfolio Segment and Class of Financing Receivable


(in millions)	Sep 30, 2017		Dec 31, 2016	Jun 30, 2019		Dec 31, 2018
Commercial:
Commercial and industrial	$	327,944	330,840	$	348,846	350,199
Real estate mortgage	128,475		132,491	123,008		121,014
Real estate construction	24,520		23,916	21,067		22,496
Lease financing	19,211		19,289	19,324		19,696
Total commercial	500,150		506,536	512,245		513,405
Consumer:
Real estate 1-4 family first mortgage	280,173		275,579	286,427		285,065
Real estate 1-4 family junior lien mortgage	41,152		46,237	32,068		34,398
Credit card	36,249		36,700	38,820		39,025
Automobile	55,455		62,286	45,664		45,069
Other revolving credit and installment	38,694		40,266	34,654		36,148
Total consumer	451,723		461,068	437,633		439,705
Total loans	$	951,873	967,604	$	949,878	953,110

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, could acquire or originate 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

Reputation risk

Our credit risk management oversight process is governed centrally, but provides for decentralized 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 OverviewSolidcredit quality continued in ~~third~~second quarter ~~2017,~~2019, as our net charge-off rate remained low at ~~0.30%~~0.28% (annualized) of average total loans. ~~We continued to benefit from improvements~~Second quarter 2019 results reflected:

•

Nonaccrual loans were $5.9 billion at June 30, 2019, down from $6.5 billion at December 31, 2018. Commercial nonaccrual loans increased to $2.5 billion at June 30, 2019, compared with $2.2 billion at December 31, 2018, and consumer nonaccrual loans declined to $3.5 billion at June 30, 2019, compared with $4.3 billion at December 31, 2018. The overall decrease in nonaccrual loans was primarily due to a decrease in consumer nonaccruals from the reclassification of $373 million of real estate 1-4 family first mortgage nonaccrual loans to MLHFS. Nonaccrual loans represented 0.62% of total loans at June 30, 2019, compared with 0.68% at December 31, 2018.

•

Net charge-offs (annualized) as a percentage of average total loans were 0.28% and 0.29% in the second quarter and first half of 2019, respectively, compared with 0.26% and 0.29% for the same periods a year ago. Net charge-offs (annualized) as a percentage of our average commercial and consumer portfolios were 0.13% and 0.45% in second quarter 2019 and 0.12% and 0.48% in the first half of 2019, respectively, compared with 0.05% and 0.49% in second quarter 2018 and 0.06% and 0.54% in the first half of 2018.


•	Loans that are not government insured/guaranteed and 90 days or more past due and still accruing were $41 million and $739 million in our commercial and consumer portfolios, respectively, at June 30, 2019, compared with $94 million and $885 million at December 31, 2018.

•

Our provision for credit losses was $503 million and $1.3 billion in the second quarter and first half of 2019, respectively, compared with $452 million and $643 million for the same periods a year ago. The increase in provision for credit losses in second quarter 2019, compared with the same period a year ago, primarily reflected loan growth. The increase in the first half of 2019, compared with the same period a year ago, was due to an allowance build in first quarter 2019 reflecting a higher probability of slightly less favorable economic conditions, compared with an allowance

release in ~~the performance of our residential real estate portfolio as well as reduced losses~~first quarter 2018 reflecting improvement in our ~~oil and gas portfolio. In particular:~~

~~Nonaccrual loans were~~ ~~$8.6 billion~~ at ~~September 30, 2017, down from~~ ~~$10.4 billion~~ at ~~December 31, 2016. Commercial nonaccrual loans~~ ~~declined~~ to ~~$3.1 billion~~ at ~~September 30, 2017, compared with~~ ~~$4.1 billion~~ at ~~December 31, 2016, and consumer nonaccrual loans~~ ~~declined~~ to ~~$5.5 billion~~ at ~~September 30, 2017, compared with~~ ~~$6.3 billion~~ at ~~December 31, 2016. The~~ ~~decline~~ in consumer nonaccrual loans reflected an improved housing market, while the decline in commercial nonaccrual loans was predominantly driven by loans in our oil and gas portfolio. Nonaccrual loans represented ~~0.91%~~ ~~of total loans at~~ ~~September 30, 2017, compared with~~ ~~1.07%~~ at ~~December 31, 2016~~.

~~Net charge-offs (annualized) as a percentage of average total loans decreased to~~ ~~0.30%~~ ~~in both the~~ ~~third~~ ~~quarter and~~ ~~first nine months of 2017, compared with~~ ~~0.33%~~ ~~and~~ ~~0.37%~~ ~~in the same periods a year ago.Net charge-offs (annualized) as a percentage of our average commercial and consumer portfolios were~~ ~~0.09%~~ ~~and~~ ~~0.53%~~ ~~in the~~ ~~third~~ ~~quarter and~~ ~~0.09%~~ ~~and~~ ~~0.54%~~ ~~in the~~ ~~first nine months of 2017, respectively, compared with~~ ~~0.17%~~ ~~and~~ ~~0.51%~~ ~~in the~~ ~~third~~ ~~quarter and~~ ~~0.22%~~ ~~and~~ ~~0.52%~~ ~~in the~~ ~~first nine months of 2016~~.

~~Loans that are not government insured/guaranteed and 90 days or more past due and still accruing were$38 million~~ ~~and~~ ~~$923 million~~ ~~in our commercial and consumer portfolios, respectively, at~~ ~~September 30, 2017, compared with~~ ~~$64 million~~ ~~and~~ ~~$908 million~~ at ~~December 31, 2016~~.

~~Our provision~~outlook for ~~credit losses was~~ ~~$717 million~~ ~~and~~ ~~$1.9 billion~~ ~~in the~~ ~~third~~ ~~quarter and~~ ~~first nine months of~~ 2017~~, respectively, compared with~~ ~~$805 million~~ ~~and~~ ~~$3.0 billion~~ ~~for the same periods a year ago.~~

~~The allowance for credit losses totaled~~ ~~$12.1 billion, or~~ ~~1.27%~~ ~~of total loans, at~~ ~~September 30, 2017, down from~~ ~~$12.5 billion, or~~ ~~1.30%, at~~ ~~December 31, 2016~~.

During third quarter 2017, Hurricanes Harvey, Irma and Maria caused considerable damage in several geographic markets where the Company has significant lending exposure. The impact was in both our commercial and consumer lending portfolios. Based on our analysis to date of the level of insurance coverage, types of loans, location, and potential damage to collateral, we believe the ultimate collectability of these loans will be impacted. Our allowance for credit losses at September 30, 2017 included $450 million for coverage of our preliminary estimate of potential hurricane-related losses. We will continue to assess the impact to our customers and our business as a result of the hurricanes and refine our estimates as more information becomes available. However, in light of the ongoing recovery challenges in Puerto Rico after Hurricane Maria, it may take longer to assess the hurricane’s impact on our portfolios there.

~~We are still evaluating the impact on our portfolio from the California wildfires that occurred in October 2017.~~


•	The allowance for credit losses totaled $10.6 billion, or 1.12% of total loans, at June 30, 2019, down from $10.7 billion, or 1.12%, at December 31, 2018.

Additional information on our loan portfolios and our credit quality trends follows.

PURCHASED CREDIT-IMPAIRED (PCI) LOANSLoans acquired with evidence of credit deterioration since their origination and where it is probable that we will not collect all contractually required principal and interest payments are PCI loans. Substantially all of our PCI loans were acquired in the Wachovia acquisition on December 31, 2008. PCI loans are recorded at fair value at the date of acquisition, and the historical allowance for credit losses related to these loans is not carried over. The carrying value of PCI loans at September 30, 2017, totaled $13.6 billion, compared with $16.7 billion at December 31, 2016, and $58.8 billion at December 31, 2008. The decrease from December 31, 2016, was due in part to higher prepayment trends observed in our Pick-a-Pay PCI portfolio, as home price appreciation and the resulting reduction in loan to collateral value ratios enabled more borrowers to qualify for refinancing options, as well as the sale of $569 million of Pick-a-Pay PCI loans in second quarter 2017. PCI loans are considered to be accruing due to the existence of the accretable yield amount, which represents the cash expected to be collected in excess of their carrying value, and not based on consideration given to contractual interest payments. The accretable yield at September 30, 2017, was $9.2 billion.

A nonaccretable difference is established for PCI loans to absorb losses expected on the contractual amounts of those ~~loans in excess of the fair value recorded at the date of acquisition.~~loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Since December 31, 2008, we have released $13.6 billion in nonaccretable difference, including $11.6 billion transferred from the nonaccretable difference to the accretable yield due to decreases in our initial estimate of loss on contractual amounts, and $2.0 billion released to income through loan resolutions. Also, we have provided $1.7 billion for losses on certain PCI loans or poolsThe carrying value of PCI loans ~~that have had credit-related decreases to cash flows expected to be collected. The net result is an $11.9~~at June 30, 2019, totaled $1.2 billion, ~~reduction from~~compared with $5.0 billion at December 31, ~~2008, through September 30, 2017,~~2018. The decline in ~~our initial projected losses~~carrying value was due to the sale of ~~$41.0~~$3.5 billion ~~on all~~of Pick-a-Pay PCI loans ~~acquired~~ in the ~~Wachovia acquisition. At September 30, 2017, $454 million in nonaccretable difference remained to absorb losses on PCI loans.~~first half of 2019 and paydowns.

For additional information on PCI loans, see the “Risk Management – Credit Risk Management – Real Estate 1-4 Family First and Junior Lien Mortgage Loans – Pick-a-Pay Portfolio” section in this Report, Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our ~~2016~~2018 Form 10-K, and Note 56 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Significant Loan Portfolio ReviewsMeasuring and monitoring our credit risk is an ongoing process that tracks delinquencies, collateral values, ~~FICO~~Fair Isaac Corporation (FICO) scores, economic trends by geographic areas, loan-level risk grading for certain portfolios (typically commercial) and other indications of credit risk. 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 56 (Loans and 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 FINANCINGFor 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 ~~divided between~~segmented among special mention, substandard, doubtful and loss categories.

The commercial and industrial loans and lease financing portfolio totaled ~~$347.2~~$368.2 billion, or ~~36%~~39% of total loans, at ~~September~~June 30, ~~2017.~~2019. The ~~annualized~~ net charge-off rate (annualized) for this portfolio was ~~0.15%~~0.18% and 0.17% in ~~both~~ the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with ~~0.30%~~0.08% and ~~0.36%~~0.10% for the same periods a year ago. At ~~September~~June 30, ~~2017, 0.71%~~2019, 0.46% of this portfolio was nonaccruing, compared with ~~0.95%~~0.43% at December 31, ~~2016,~~2018, reflecting ~~a decrease~~an increase of ~~$853~~$121 million in nonaccrual loans ~~predominantly~~ due to ~~improvement~~a customer in the utilities industry, as well as increases in the oil, gas and ~~gas portfolio. Also, $20.0~~pipelines portfolio, partially offset by improvement across various industry categories. At June 30, 2019, $15.9 billion of ~~the~~ commercial and industrial loan and lease financing ~~portfolio was~~loans were internally classified as criticized in accordance with regulatory guidance, ~~at September 30, 2017,~~ compared with ~~$24.0~~$15.8 billion at December 31, ~~2016. The decrease in criticized loans, which also includes the decrease in nonaccrual loans, was primarily due to improvement in the oil and gas portfolio.~~2018.

Most 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 collateral securing this portfolio represents a secondary source of repayment.

Table 12 provides a breakout of commercial and industrial loans and lease financing by industry, and includes ~~$59.7~~foreign loans of $64.5 billion and $63.7 billion at June 30, 2019, and December 31, 2018, respectively. Significant industry concentrations of foreign loans ~~at September 30, 2017. Foreign loans totaled $19.4~~include $26.9 billion ~~within~~and $25.6 billion in the ~~investor~~financials except banks category, ~~$16.2~~$17.0 billion ~~within~~and $18.1 billion in the ~~financial institutions~~banks category, and ~~$1.4~~$1.5 billion ~~within~~and $1.2 billion in the oil, gas and ~~gas category.~~pipelines category at June 30, 2019, and December 31, 2018, respectively. The industry categories were updated in 2019, to align with industry groupings that our regulators use to monitor industry concentration risks.

~~The investors category includes~~Loans to financials except banks, our largest industry concentration, were $107.3 billion, or 11% of total outstanding loans, at June 30, 2019, compared with $105.9 billion, or 11% of total outstanding loans, at December 31, 2018. These are predominantly loans to ~~special purpose~~investment firms, financial vehicles, ~~(SPVs) formed by sponsoring~~and non-bank creditors. A significant portion of this industry category consists of loans to entities tothat invest in financial assets backed predominantly by commercial ~~and~~or residential real estate or ~~corporate cash flow,~~consumer loan assets and are repaid from ~~the~~ asset cash flows or the sale of ~~assets by~~ the ~~SPV.~~assets. We limit our loan amounts to a percentage of the value of the underlying assets ~~as determined by us, based on analysis of~~considering underlying credit risk, ~~and other factors such as~~ asset duration, and ongoing performance.

~~We provide financial institutions with a variety~~Oil, gas and pipelines loans were $13.6 billion, or 1% of ~~relationship focused products and services, including~~total outstanding loans, supporting short-term trade finance and working capital needs. The $16.2 billion of foreign loans in the financial institutions category were predominantly originated by our Financial Institutions business.

~~The oil and gas loan portfolio totaled~~at June 30, 2019, compared with $12.8 billion, or 1% of total outstanding loans, at ~~September~~December 31, 2018. Oil, gas and pipelines nonaccrual loans increased to $636 million at June 30, ~~2017,~~2019, compared with ~~$14.8 billion, or 2% of total outstanding loans,~~$417 million at December 31, 2016. Unfunded loan commitments in the oil and gas loan portfolio totaled $22.6 billion at September 30, 2017. Approximately half of our oil and gas loans were to businesses in the exploration and production (E&P) sector. Most of these E&P loans are secured by oil and/or gas reserves and have underlying borrowing base arrangements which include regular (typically semi-annual) “redeterminations” that consider refinements to borrowing structure and prices used to determine borrowing limits. The majority of the other oil and gas loans were to midstream companies. We proactively monitor our oil and gas loan portfolio and work with customers to address any emerging issues. Oil and gas nonaccrual loans decreased to $1.6 billion at September 30, 2017, compared with $2.4 billion at December 31, 2016,2018, due to ~~improved~~weaker portfolio credit performance.

Table 12:Commercial and Industrial Loans and Lease Financing by Industry (1)

September 30, 2017
(in millions)
Nonaccrual
loans

Total
portfolio

(2)
% of
total
loans

Investors $ 6
60,929
6 %
Financial institutions 2
37,951
4
Cyclical retailers 92
25,919
3
Food and beverage 10
16,876
2
Healthcare 27
15,969
2
Industrial equipment 175
15,177
2
Real estate lessor 10
14,391
2
Technology 33
13,737
1
Oil and gas 1,559
12,825
1
Transportation 130
9,109
1
Public administration 28
9,101
1
Business services 23
8,474
1
Other 383
106,697
(3) 10
Total $ 2,478
347,155
36 %



	June 30, 2019					December 31, 2018
(in millions)	Nonaccrual loans		Total portfolio	% of total loans		Nonaccrual loans		Total portfolio	% of total loans
Financials except banks	$	160	107,292	11	%	$	305	105,925	11	%
Technology, telecom and media	46		24,648	3		26		25,681	3
Real estate and construction	43		22,463	2		31		23,380	2
Equipment, machinery and parts manufacturing	66		22,298	2		47		20,850	2
Retail	88		20,351	2		87		19,541	2
Materials and commodities	94		19,599	2		136		18,688	2
Banks	—		17,136	2		—		18,407	2
Automobile related	23		16,673	2		16		16,801	2
Food and beverage manufacturing	5		14,640	2		48		15,448	2
Health care and pharmaceuticals	24		14,555	2		124		15,529	2
Entertainment and recreation	36		13,644	1		33		14,045	1
Oil, gas and pipelines	636		13,562	1		417		12,840	1
Transportation services	88		11,797	1		176		12,029	1
Commercial services	50		10,820	1		48		10,591	1
Agribusiness	61		7,118	1		46		7,996	1
Utilities	224		5,864	1		6		5,756	1
Government and education	2		5,765	1		3		6,160	1
Other (2)	51		19,945	2		27		20,228	2
Total	$	1,697	368,170	39	%	$	1,576	369,895	39	%

(1)

Industry categories are based on the North American Industry Classification System and the amounts ~~reported~~ include foreign loans. ~~See Note 5 (Loans and Allowance~~The industry categories were updated in 2019 to align with industry groupings that our regulators use to monitor industry concentration risks. The amounts for ~~Credit Losses)~~December 31, 2018, have been reclassified to ~~Financial Statements in this Report for a breakout of commercial foreign loans.~~conform with the current period presentation.


(2)	~~Includes~~ ~~$116 million~~ ~~of PCI loans, which are considered to be accruing due to the existence of the accretable yield and not based on consideration given to contractual interest payments.~~


~~(3)~~	No other single industry had total loans in excess of ~~$6.8~~$5.0 billion. and $4.5 billion at June 30, 2019 and December 31, 2018, respectively.

Risk Management - Credit Risk Management (~~continued~~)(continued)

COMMERCIAL REAL ESTATE (CRE) We generally subject CRE loans 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 ~~divided~~segmented among special mention, substandard, doubtful and loss categories. The CRE portfolio, which included ~~$8.7~~$8.1 billion of foreign CRE loans, totaled ~~$153.0~~$144.1 billion, or ~~16%~~15% of total loans, at ~~September~~June 30, ~~2017,~~2019, and consisted of ~~$128.5~~$123.0 billion of mortgage loans and ~~$24.5~~$21.1 billion of construction loans.

Table 13 summarizes CRE loans by state and property type with the related nonaccrual totals. The portfolio is diversified both geographically and by property type. The largest geographic

concentrations of CRE loans are in California, New York, ~~Texas~~

Florida and ~~Florida,~~Texas, which combined represented 49% of the total CRE portfolio. By property type, the largest concentrations are office buildings at ~~28%~~27% and apartments at ~~16%~~17% of the portfolio. CRE nonaccrual loans totaled ~~0.4%~~0.5% of the CRE outstanding balance at ~~September~~June 30, ~~2017,~~2019, compared with ~~0.5%~~0.4% at December 31, ~~2016.~~2018. At ~~September~~June 30, ~~2017,~~2019, we had ~~$4.8~~$4.2 billion of criticized CRE mortgage loans, compared with ~~$5.4~~$4.5 billion at December 31, ~~2016,~~2018, and ~~$327~~$184 million of criticized CRE construction loans, compared with ~~$461~~$289 million at December 31, ~~2016.~~2018.

At September 30, 2017, the recorded investment in PCI CRE loans totaled $118 million, down from $12.3 billion when acquired at December 31, 2008, reflecting principal payments, loan resolutions and write-downs.

Table 13:CRE Loans by State and Property Type


	September 30, 2017												June 30, 2019
	Real estate mortgage				Real estate construction			Total					Real estate mortgage			Real estate construction		Total
(in millions)	Nonaccrual loans		Total portfolio	(1)	Nonaccrual loans	Total portfolio	(1)	Nonaccrual loans	Total portfolio	(1)	% of total loans		Nonaccrual loans		Total portfolio	Nonaccrual loans	Total portfolio	Nonaccrual loans	Total portfolio		% of total loans
By state:
California	$	127	36,398		2	4,245		129	40,643		4	%	$	142	33,152	9	4,502	151	37,654		4	%
New York	12		10,366		—	2,869		12	13,235		1		23		11,926	2	2,387	25	14,313		2
Florida													19		8,078	3	1,554	22	9,632		1
Texas	102		9,245		—	2,160		102	11,405		1		56		7,833	4	1,437	60	9,270		1
Florida	33		8,016		—	1,830		33	9,846		1
Arizona													70		4,632	—	312	70	4,944		1
North Carolina	31		4,100		6	785		37	4,885		1		23		3,663	4	904	27	4,567		*
Arizona	27		3,944		—	643		27	4,587		*
Georgia	17		3,356		1	852		18	4,208		*		14		3,908	—	517	14	4,425		*
Virginia	11		3,230		—	893		11	4,123		*
Washington	15		3,381		—	619		15	4,000		*		17		3,450	—	599	17	4,049		*
Illinois	5		3,263		—	590		5	3,853		*		176		3,477	—	348	176	3,825		*
Virginia													8		2,749	—	903	8	3,652		*
Other	213		43,176		29	9,034		242	52,210	(2)	5		189		40,140	14	7,604	203	47,744	(1)	5
Total	$	593	128,475		38	24,520		631	152,995		16	%	$	737	123,008	36	21,067	773	144,075		15	%
By property:
Office buildings	$	130	39,959		2	3,187		132	43,146		5	%	$	152	36,237	5	2,618	157	38,855		4	%
Apartments	24		15,417		—	8,857		24	24,274		3		13		16,886	—	6,937	13	23,823		3
Industrial/warehouse	142		15,801		2	1,847		144	17,648		2		80		15,711	2	1,303	82	17,014		2
Retail (excluding shopping center)	66		16,873		—	617		66	17,490		2		98		15,072	10	349	108	15,421		2
Shopping center	16		11,835		—	1,158		16	12,993		1		83		10,999	—	1,364	83	12,363		1
Hotel/motel	8		9,685		4	1,716		12	11,401		1		86		9,711	—	1,574	86	11,285		1
Real estate - other	90		6,849		—	170		90	7,019		1
Mixed use properties (2)													93		6,705	—	447	93	7,152		1
Institutional	36		3,247		—	1,564		36	4,811		1		39		3,478	—	1,888	39	5,366		1
Collateral pool													—		2,428	—	7	—	2,435		*
Agriculture	30		2,613		—	19		30	2,632		*		80		2,419	—	7	80	2,426		*
1-4 family structure	—		10		7	2,460		7	2,470		*
Other	51		6,186		23	2,925		74	9,111		1		13		3,362	19	4,573	32	7,935		1
Total	$	593	128,475		38	24,520		631	152,995		16	%	$	737	123,008	36	21,067	773	144,075		15	%


*	Less than 1%.


~~(1)~~	~~Includes a total of~~ ~~$118 million~~ ~~PCI loans, consisting of~~ ~~$108 million~~ ~~of real estate mortgage and~~ ~~$10 million~~ ~~of real estate construction, which are considered to be accruing due to the existence of the accretable yield and not based on consideration given to contractual interest payments.~~ (1)Includes 40 states; no state had loans in excess of $3.3 billion.


(2)	~~Includes~~ 40 ~~states; no state had loans in excess of~~ ~~$3.6 billion~~. Mixed use properties are primarily owner occupied real estate, including data centers, flexible space leased to multiple tenants, light manufacturing and other specialized uses.

FOREIGN LOANS AND COUNTRY RISK EXPOSURE We classify loans for financial statement and certain regulatory purposes as foreign primarily based on whether the borrower’s primary address is outside of the United States. At ~~September~~June 30, ~~2017,~~2019, foreign loans totaled ~~$68.8~~$73.0 billion, representing approximately 7%8% of our total consolidated loans outstanding, compared with ~~$65.7~~$71.9 billion, or approximately 7%8% of total consolidated loans outstanding, at December 31, ~~2016.~~2018. Foreign loans were approximately 4% of our consolidated total assets at ~~September~~both June 30, ~~2017~~2019 and 3% at December 31, ~~2016.~~2018.

Our country risk monitoring process incorporates frequent dialogue with our financial institution customers, counterparties and regulatory agencies, enhanced by centralized monitoring of macroeconomic and capital markets conditions in the respective countries. We establish exposure limits for each country through a centralized oversight process based on customer needs, and in consideration of relevant economic, political, social, legal, and transfer risks. 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 the 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 the borrower’s primary address. Our largest single foreign country exposure based on our assessment of risk at ~~September~~June 30, ~~2017,~~2019, was the United Kingdom, which totaled ~~$29.6~~$27.7 billion, or approximately 2%1% of our total assets, and included ~~$7.1~~$4.2 billion of sovereign claims. Our United Kingdom sovereign claims arise predominantly from deposits we have placed with the Bank of England pursuant to regulatory requirements in support of our London branch. The United Kingdom officially announced its intention to leave the European Union (Brexit) on March 29, 2017, ~~starting~~and the ~~two-year~~ negotiation process leading to its ~~departure.~~departure has been extended to October 31, 2019. We continue to ~~conduct assessments and are executing~~implement plans for Brexit with our ~~implementation plans~~primary goal to ~~ensure we can~~ continue to ~~prudently~~ serve our ~~customers post-Brexit.~~existing clients in the United Kingdom and the European Union as well as to continue to meet the needs of our domestic clients as they do business in the United Kingdom and the European Union. We have an existing authorized bank in Ireland and an asset management entity in Luxembourg. We also have obtained regulatory approval to establish a broker dealer in France. We plan to leverage these entities in order to continue to serve clients in the European Union. In addition, we are implementing actions where possible to mitigate the impact of Brexit on our supplier contracts, staffing and business operations in the European Union. For additional information on risks associated with Brexit, see the “Risk Factors” section in our 2018 Form 10-K.

We conduct periodic stress tests of our significant country risk exposures, analyzing the direct and indirect impacts on the risk of loss from various macroeconomic and capital markets scenarios. We do not have significant exposure to foreign country risks because our foreign credit exposure is relatively small. However, we have identified exposure to increased loss from U.S. borrowers associated with the potential impact of a regional or worldwide economic downturn on the U.S. economy. We seek to mitigate these potential impacts on the risk of loss through our normal risk management processes which include active monitoring and, if necessary, the application of aggressive loss mitigation strategies.

Table 14 provides information regarding our top 20 exposures by country (excluding the U.S.) and our Eurozone exposure, based on our assessment of risk, which gives consideration to the country of any guarantors and/or underlying collateral. ~~Our~~With respect to Table 14:

Lending exposure includes outstanding loans, unfunded credit commitments, and deposits with foreign banks. These balances are presented prior to ~~Puerto Rico (considered part~~the deduction of ~~U.S. exposure) is largely through automobile lending~~allowance for credit losses or collateral received under the terms of the credit agreements, if any.

Securities exposure represents debt and ~~was not material to our consolidated country~~equity securities of foreign issuers. Long and short positions are netted, and net short positions are reflected as negative exposure. For information on potential credit impacts from recent hurricanes, see the “Risk Management – Credit Risk Management – Credit Quality Overview” section and Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

~~Risk Management - Credit Risk Management (continued~~)

~~Table 14:Select Country Exposures~~-

September 30, 2017
Lending (1) Securities (2) Derivatives and other (3) Total exposure
(in millions) Sovereign

Non-
sovereign

Sovereign

Non-
sovereign

Sovereign

Non-
sovereign

Sovereign

Non-
sovereign (4)

Total
Top 20 country exposures:
United Kingdom $ 7,079
20,200
—
1,852
—
473
7,079
22,525
29,604
Canada 29
18,240
61
189
—
507
90
18,936
19,026
Cayman Islands —
6,723
—
—
—
151
—
6,874
6,874
Germany 3,349
1,664
5
162
3
392
3,357
2,218
5,575
Ireland —
3,528
—
118
—
140
—
3,786
3,786
Bermuda —
2,827
—
112
—
196
—
3,135
3,135
China —
2,761
(2 ) 182
32
30
30
2,973
3,003
Netherlands —
2,278
22
285
2
247
24
2,810
2,834
India —
2,092
—
112
—
—
—
2,204
2,204
Luxembourg —
1,258
—
656
—
120
—
2,034
2,034
Guernsey —
1,971
—
3
—
3
—
1,977
1,977
Australia —
1,581
—
282
—
78
—
1,941
1,941
Brazil —
1,689
—
17
—
—
—
1,706
1,706
Chile —
1,485
—
21
—
—
—
1,506
1,506
South Korea —
1,352
2
85
2
8
4
1,445
1,449
Switzerland —
1,210
—
(2 ) —
35
—
1,243
1,243
Jersey, Channel lslands —
645
—
469
—
14
—
1,128
1,128
Japan 285
710
6
42
—
63
291
815
1,106
France —
798
—
205
—
67
—
1,070
1,070
Mexico 56
925
—
4
—
4
56
933
989
Total top 20 country exposures $ 10,798
73,937
94
4,794
39
2,528
10,931
81,259
92,190
Eurozone exposure:
Eurozone countries included in Top 20 above (5) $ 3,349
9,526
27
1,426
5
966
3,381
11,918
15,299
Austria —
590
—
3
—
3
—
596
596
Spain —
362
—
54
—
19
—
435
435
Belgium —
274
—
(45 ) —
5
—
234
234
Other Eurozone exposure (6) 24
211
—
47
—
—
24
258
282
Total Eurozone exposure $ 3,373
10,963
27
1,485
5
993
3,405
13,441
16,846

~~(1)~~•

~~Lending~~Derivatives and other exposure includes funded loans and unfunded commitments, leveraged leases, and money market placements presented on a gross basis prior to the deduction of impairment allowance and collateral received under the terms of the credit agreements. For the countries listed above, includes ~~$17 million~~ ~~in PCI loans to customers in Germany and the Netherlands, and~~ ~~$680 million~~ ~~in defeased leases secured primarily by U.S. Treasury and government agency securities.~~


~~(2)~~	~~Represents exposure on debt and equity securities of foreign issuers. Long and short positions are netted and net short positions are reflected as negative exposure.~~

~~(3)~~

~~Represents counterparty exposure on~~represents foreign exchange ~~and~~contracts, derivative contracts, ~~and~~ securities resale agreements, and securities lending agreements. This exposure is presented net of counterparty netting adjustments and reduced by the amount of cash ~~collateral.~~collateral, if any. It includes credit default swaps (CDS) predominantly used for market making activities in the ~~U.S. and London based~~U.S.-based trading businesses, which sometimes results in selling and purchasing protection on the identical reference entities. Generally, we do not use market instruments such as CDS to hedge the credit risk of our ~~investment~~investments or loan positions, although we do use them to manage risk in our trading ~~businesses~~businesses. At ~~September~~June 30, ~~2017~~2019, the gross notional amount of our CDS sold that reference assets in the Top 20 or Eurozone countries that contain non-sovereign debt was $~~348~~280 million, which was offset by the notional amount of CDS purchased of $~~469~~472 million. ~~We did not have any~~At June 30, 2019, the gross notional amount of our CDS ~~purchased or~~ sold that reference ~~pools of~~ assets in the Top 20 or Eurozone countries that contain sovereign debt ~~or where~~was $410 million, which was offset by the ~~reference asset was solely the sovereign debt~~notional amount of ~~a foreign country.~~CDS purchased of $390 million.

Risk Management - Credit Risk Management (continued)

Table 14:Select Country Exposures



	June 30, 2019
	Lending			Securities			Derivatives and other		Total exposure
(in millions)	Sovereign		Non- sovereign	Sovereign	Non- sovereign		Sovereign	Non- sovereign	Sovereign	Non- sovereign (1)	Total
Top 20 country exposures:
United Kingdom	$	4,193	21,727	—	1,552		—	266	4,193	23,545	27,738
Canada	32		17,696	42	258		—	112	74	18,066	18,140
Cayman Islands	—		6,598	—	43		—	134	—	6,775	6,775
Ireland	62		4,464	—	143		—	163	62	4,770	4,832
Bermuda	—		3,634	—	115		—	73	—	3,822	3,822
Netherlands	—		2,744	95	337		—	32	95	3,113	3,208
Luxembourg	—		2,473	—	583		—	32	—	3,088	3,088
Germany	—		2,304	19	228		—	305	19	2,837	2,856
China	—		2,345	15	339		15	25	30	2,709	2,739
Guernsey	—		2,704	—	—		—	1	—	2,705	2,705
France	—		1,999	—	67		39	1	39	2,067	2,106
Australia	—		1,913	—	51		—	1	—	1,965	1,965
India	—		1,824	—	66		—	—	—	1,890	1,890
Chile	1		1,734	—	(1	)	—	103	1	1,836	1,837
Brazil	—		1,772	—	2		5	—	5	1,774	1,779
South Korea	—		1,364	1	60		—	7	1	1,431	1,432
Virgin Islands (British)	—		1,276	—	45		—	—	—	1,321	1,321
Japan	311		1,042	3	(49	)	—	8	314	1,001	1,315
United Arab Emirates	—		1,262	—	2		—	—	—	1,264	1,264
Mexico	—		1,156	—	7		—	1	—	1,164	1,164
Total top 20 country exposures	$	4,599	82,031	175	3,848		59	1,264	4,833	87,143	91,976
Eurozone exposure:
Eurozone countries included in Top 20 above (2)	$	62	13,984	114	1,358		39	533	215	15,875	16,090
Belgium	—		545	—	(66	)	—	2	—	481	481
Spain	—		405	—	25		—	1	—	431	431
Austria	—		265	—	(2	)	—	—	—	263	263
Other Eurozone exposure (3)	—		218	—	88		—	—	—	306	306
Total Eurozone exposure	$	62	15,417	114	1,403		39	536	215	17,356	17,571


~~(4)~~(1)	For countries presented in the table, total non-sovereign exposure comprises ~~$39.9~~$44.4 billion exposure to financial institutions and ~~$42.9~~$44.2 billion to non-financial corporations at ~~September~~June 30, ~~2017~~. 2019.


~~(5)~~(2)	Consists of exposure to ~~Germany,~~ Ireland, Netherlands, Luxembourg, Germany and France included in Top 20.


~~(6)~~(3)	Includes non-sovereign exposure to Italy, Portugal, and Greece in the amount of ~~$133~~$135 million,, ~~$17~~ $19 million and $1$3 million,, respectively. We had no sovereign ~~debt~~ exposure ~~to Portugal and Greece, and the exposure to Italy was immaterial~~in these countries at ~~September~~June 30, ~~2017~~. 2019.

REAL ESTATE 1-4 FAMILY FIRST AND JUNIOR LIEN MORTGAGE LOANSOur real estate 1-4 family first and junior lien mortgage loans asare presented in Table ~~15, include loans we have made to customers and retained as part of our asset/liability management strategy, the Pick-a-Pay portfolio acquired from~~

~~Wachovia which is discussed later in this Report and other purchased loans, and loans included on our balance sheet as a result of consolidation of variable interest entities (VIEs).~~15.

Table 15:Real Estate 1-4 Family First and Junior Lien Mortgage Loans


	September 30, 2017				December 31, 2016				June 30, 2019				December 31, 2018
(in millions)	Balance		% of portfolio		Balance		% of portfolio		Balance		% of portfolio		Balance		% of portfolio
Real estate 1-4 family first mortgage	$	280,173	87	%	$	275,579	86	%	$	286,427	90	%	$	285,065	89	%
Real estate 1-4 family junior lien mortgage	41,152		13		46,237		14		32,068		10		34,398		11
Total real estate 1-4 family mortgage loans	$	321,325	100	%	$	321,816	100	%	$	318,495	100	%	$	319,463	100	%

The real estate 1-4 family mortgage loan portfolio includes some loans with adjustable-rate features and some with an interest-only feature as part of the loan terms. Interest-only loans were approximately 5%3% and 7%4% of total loans at ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, respectively. We believe we have manageable adjustable-rate mortgage (ARM) reset risk across our owned mortgage loan portfolios. 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 option ARMs we do have are included in the Pick-a-Pay portfolio which was acquired from Wachovia. Since our acquisition of the Pick-a-Pay loan portfolio at the end of 2008, the option payment portion of the portfolio has reduced from 86% to 36% at September 30, 2017, as a result of our modification and loss mitigation efforts. For more information, see the ~~“Pick-a-Pay~~“Risk Management – Credit Risk Management – Real Estate 1-4 Family First and Junior Lien Mortgage Loans – Pick-a-Pay Portfolio” section in this Report.

We continue to modify real estate 1-4 family mortgage loans to assist homeowners and other borrowers experiencing financial difficulties. For more information on our modification programs, see the “Risk Management – Credit Risk Management – Real Estate 1-4 Family First and Junior Lien Mortgage Loans” section in our ~~2016~~2018 Form 10-K.

Part of our credit monitoring includes tracking delinquency, current FICO scores and loan/combined loan to collateral values (LTV/CLTV) on the entire real estate 1-4 family mortgage loan portfolio. These credit risk indicators, which exclude government insured/guaranteed loans, continued to improve in ~~third~~second quarter ~~2017~~2019 on the non-PCI mortgage portfolio. Loans 30 days or more delinquent at ~~September~~June 30, ~~2017,~~2019, totaled ~~$5.3~~$3.4 billion, or 2%1% of total non-PCI mortgages, compared with ~~$5.9~~$4.0 billion, or 2%1%, at December 31, ~~2016.~~2018. Loans with FICO scores lower than 640 totaled ~~$12.2~~$8.3 billion, or 4%3% of total non-PCI mortgages at ~~September~~June 30, ~~2017,~~2019, compared with ~~$16.6~~$9.7 billion, or 5%3%, at December 31, ~~2016.~~2018. Mortgages with a LTV/CLTV greater than 100% totaled ~~$6.7~~$3.3 billion at ~~September~~June 30, ~~2017,~~2019, or 2%1% of total non-PCI mortgages, compared with ~~$8.9~~$3.9 billion, or 3%1%, at December 31, ~~2016.~~2018. Information regarding ~~credit quality indicators, including PCI~~ credit quality indicators can be found in Note 56 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Real estate 1-4 family first and junior lien mortgage loans by state are presented in Table 16. Our real estate 1-4 family non-PCI mortgage loans ~~(including PCI loans)~~ to borrowers in California represented ~~approximately~~ 13% of total loans at ~~September~~June 30, ~~2017,~~2019, located ~~mostly~~predominantly within the larger metropolitan areas, with no single California metropolitan area consisting of more than 5% of total loans. We monitor changes in real estate values and underlying economic or market conditions for all geographic areas of our real estate 1-4 family first and junior lien mortgage ~~portfolio~~portfolios as part of

our credit risk management process. Our underwriting and periodic review of loans and lines secured by residential real estate collateral includes appraisals or estimates from automated valuation models (AVMs) to support property values. Additional information about AVMs and our policy for their use can be

found in Note 56 (Loans and Allowance for Credit Losses) to Financial Statements in this Report and the “Risk Management – Credit Risk Management – Real Estate 1-4 Family First and Junior Lien Mortgage Loans” section in our ~~2016~~2018 Form 10-K.

Table 16:Real Estate 1-4 Family First and Junior Lien Mortgage Loans by State


	September 30, 2017						June 30, 2019
(in millions)	Real estate 1-4 family first mortgage		Real estate 1-4 family junior lien mortgage	Total real estate 1-4 family mortgage	% of total loans		Real estate 1-4 family first mortgage		Real estate 1-4 family junior lien mortgage	Total real estate 1-4 family mortgage	% of total loans
Real estate 1-4 family loans (excluding PCI):
California	$	99,380	11,006	110,386	12	%	$	113,523	8,812	122,335	13	%
New York	26,008		1,989	27,997	3		30,032		1,612	31,644	3
New Jersey							13,923		2,955	16,878	2
Florida	13,278		3,824	17,102	2		11,943		2,853	14,796	2
New Jersey	13,116		3,704	16,820	2
Washington							10,380		719	11,099	1
Virginia	7,899		2,442	10,341	1		8,627		1,858	10,485	1
Washington	8,589		900	9,489	1
Texas	8,732		746	9,478	1		8,746		626	9,372	1
North Carolina	6,053		1,930	7,983	1		5,883		1,484	7,367	1
Pennsylvania	5,681		2,275	7,956	1		5,341		1,792	7,133	1
Other (1)	64,530		12,307	76,837	8		65,496		9,342	74,838	8
Government insured/ guaranteed loans (2)	13,606		—	13,606	1		11,374		—	11,374	1
Real estate 1-4 family loans (excluding PCI)	266,872		41,123	307,995	33		285,268		32,053	317,321	34
Real estate 1-4 family PCI loans ~~(3)~~	13,301		29	13,330	1		1,159		15	1,174	—
Total	$	280,173	41,152	321,325	34	%	$	286,427	32,068	318,495	34	%


(1)	Consists of 41 states; no state had loans in excess of ~~$6.9 billion~~. $7.0 billion.


(2)	Represents loans whose repayments are predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).


~~(3)~~	~~Includes~~ ~~$9.1 billion~~ ~~in real estate 1-4 family mortgage PCI loans in California.~~

Risk Management - Credit Risk Management (~~continued~~)(continued)

First Lien Mortgage PortfolioOur total real estate 1-4 family first lien mortgage portfolio increased ~~$3.6~~$1.9 billion and $1.4 billion in ~~third~~the second quarter ~~2017~~ and ~~$4.6~~first half of 2019, respectively. The increase was the result of retaining mortgage loan originations of $19.8 billion and $30.4 billion in the second quarter and first half of 2019, respectively, partially offset by paydowns, $1.6 billion and $3.5 billion of sales of Pick-a-Pay PCI loans in the second quarter and first half of 2019, respectively, and the reclassification in second quarter 2019 of $1.8 billion of mortgage loans to MLHFS. In addition, nonconforming mortgage loan originations of $658 million in second quarter 2019 and $1.4 billion in the first ~~nine months~~half of ~~2017,~~2019 that would have otherwise been included in this portfolio were designated as ~~non-conforming loan growth was partially offset by a decline~~MLHFS in ~~Pick-a-Pay loan balances. We retained $14.2 billion and $36.6 billion in non-conforming originations, consisting~~anticipation of ~~loans that exceed conventional conforming loan amount limits established by federal government-sponsored entities (GSEs) in~~ the ~~third quarter and first nine months~~future issuance of ~~2017, respectively.~~residential mortgage-backed securities.

The credit performance associated with our real estate 1-4 family first lien mortgage portfolio ~~continued to improve~~improved in ~~third~~second quarter ~~2017,~~

2019, as measured through net charge-offs and nonaccrual loans. Net charge-offs (annualized) as a percentage of average real estate 1-4 family first lien mortgage loans ~~improved~~

towas a net recovery of ~~0.02%~~0.04% and ~~0.01%~~0.03% in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, compared with a net ~~charge-off~~recovery of 0.03% ~~and 0.04%~~ for both the same periods a year ago. Nonaccrual loans were ~~$4.2~~$2.4 billion at ~~September~~June 30, ~~2017, compared with $5.0 billion at~~2019, down $758 million from December 31, ~~2016. Improvement~~2018. The decrease in ~~the credit performance~~nonaccrual loans from December 31, 2018, was driven by ~~an improving housing environment. Real estate 1-4 family first lien mortgage~~the reclassification of nonaccrual loans ~~originated after 2008, which generally utilized tighter underwriting standards, have resulted~~to MLHFS in ~~minimal losses~~anticipation of future sales, nonaccrual loan sales, and a reduction in inflows due to ~~date and were approximately 77% of our total real estate 1-4 family first lien mortgage portfolio as of September 30, 2017.~~credit stabilization.

Table 17 shows certain delinquency and loss information for the first lien mortgage portfolio and lists the top five states by outstanding balance.

Table 17:First Lien Mortgage Portfolio Performance


	Outstanding balance			% of loans 30 days or more past due			Loss (recovery) rate (annualized) quarter ended										Outstanding balance			% of loans 30 days or more past due			Loss (recovery) rate (annualized) quarter ended
(in millions)	Sep 30, 2017		Dec 31, 2016	Sep 30, 2017		Dec 31, 2016	Sep 30, 2017		Jun 30, 2017		Mar 31, 2017		Dec 31, 2016		Sep 30, 2016		Jun 30, 2019		Dec 31, 2018	Jun 30, 2019		Dec 31, 2018	Jun 30, 2019		Mar 31, 2019		Dec 31, 2018		Sep 30, 2018		Jun 30, 2018
California	$	99,380	94,015	0.97	%	1.21	(0.09	)	(0.08	)	(0.05	)	(0.08	)	(0.08	)	$	113,523	109,092	0.55	%	0.68	(0.04	)	(0.03	)	(0.04	)	(0.05	)	(0.07	)
New York	26,008		23,815	1.75		1.97	0.05		0.02		0.06		0.04		0.07		30,032		28,954	1.00		1.12	—		0.02		0.02		0.04		0.09
New Jersey																	13,923		13,811	1.60		1.91	(0.06	)	0.08		0.05		(0.02	)	0.02
Florida	13,278		13,737	4.17		3.62	(0.22	)	(0.18	)	(0.08	)	(0.18	)	(0.04	)	11,943		12,350	2.22		2.58	(0.11	)	(0.10	)	(0.18	)	(0.22	)	(0.15	)
New Jersey	13,116		12,669	2.83		3.66	0.15		0.17		0.22		0.21		0.37
Texas	8,732		8,584	2.60		2.19	—		—		(0.01	)	(0.01	)	0.06
Washington																	10,380		9,677	0.42		0.57	(0.03	)	(0.04	)	(0.06	)	(0.06	)	(0.06	)
Other	92,752		91,136	2.11		2.51	0.02		0.01		0.05		0.06		0.10		94,093		93,261	1.40		1.70	(0.06	)	(0.02	)	(0.03	)	(0.03	)	(0.03	)
Total	253,266		243,956	1.79		2.07	(0.03	)	(0.03	)	0.01		—		0.03		273,894		267,145	1.01		1.23	(0.04	)	(0.02	)	(0.03	)	(0.04	)	(0.04	)
Government insured/guaranteed loans	13,606		15,605														11,374		12,932
PCI	13,301		16,018														1,159		4,988
Total first lien mortgages	$	280,173	275,579														$	286,427	285,065

Pick-a-Pay PortfolioThe Pick-a-Pay portfolio was one of the consumer residential first lien mortgage portfolios we acquired from Wachovia and a majority of the portfolio was identified as PCI loans.

The Pick-a-Pay portfolio includes loans that offer payment options (Pick-a-Pay option payment loans), and also includes loans that were originated without the option payment feature, loans that no longer offer the option feature as a result of our modification efforts since the acquisition, and loans where the customer voluntarily converted to a fixed-rate product. The Pick-a-Pay portfolio is included in the consumer real estate 1-4 family

first mortgage class of loans throughout this

Report. Pick-a-Pay option payment loans may have fixed or adjustable rates with payment options that include a minimum payment, an interest-only payment or fully amortizing payment (both 15 and 30 year options). Table 18 provides balances by types of loans as of ~~September~~June 30, 2017, as a result of modification efforts, compared to the types of loans included in the portfolio at acquisition. Total adjusted unpaid principal balance of PCI Pick-a-Pay loans was $17.3 billion at September 30, 2017, compared with $61.0 billion at acquisition. Due to loan modification and loss mitigation efforts, the adjusted unpaid principal balance of option payment PCI loans has declined to 14% of the total Pick-a-Pay portfolio at September 30, 2017, compared with 51% at acquisition.2019.

Table 18:Pick-a-Pay Portfolio ~~– Comparison to Acquisition Date~~


					December 31,
	September 30, 2017				2016				2008				June 30, 2019				December 31, 2018
(in millions)	Adjusted unpaid principal balance (1)		% of total		Adjusted unpaid principal balance (1)		% of total		Adjusted unpaid principal balance (1)		% of total		Adjusted unpaid principal balance (1)		% of total		Adjusted unpaid principal balance (1)		% of total
Option payment loans	$	11,460	36	%	$	13,618	37	%	$	99,937	86	%	$	5,618	52	%	$	8,813	50	%
Non-option payment adjustable-rate and fixed-rate loans	3,951		13		4,630		13		15,763		14		2,433		22		2,848		16
Full-term loan modifications	15,958		51		18,598		50		—		—		2,783		26		6,080		34
Total adjusted unpaid principal balance	$	31,369	100	%	$	36,846	100	%	$	115,700	100	%	$	10,834	100	%	$	17,741	100	%
Total carrying value	$	27,295			32,292				95,315				$	10,512			16,115


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

Table 19 reflects the geographic distribution of the Pick-a-Pay portfolio broken out between PCI loans and all other loans. The LTV ratio is a useful metric in evaluating future real estate 1-4 family first mortgage loan performance, including potential charge-offs. Because PCI loans were initially recorded at fair value, including write-downs for expected credit losses, the ratio

of the carrying value to the current collateral value will be lower compared with the LTV based on the adjusted unpaid principal balance. For informational purposes, we have included both ratios for PCI loans in the following table.

~~Table 19:Pick-a-Pay Portfolio (1)~~

September 30, 2017
PCI loans All other loans
(in millions)
Adjusted
unpaid
principal
balance (2)

Current
LTV
ratio (3)

Carrying
value (4)

Ratio of
carrying
value to
current
value (5)

Carrying
value (4)

Ratio of
carrying
value to
current
value (5)

California $ 11,753
61 % $ 9,033
47 % $ 6,703
44 %
Florida 1,481
69
1,076
49
�� 1,439
54
New Jersey 586
76
429
55
953
62
New York 446
69
363
52
477
59
Texas 135
48
102
36
570
37
Other 2,928
68
2,208
51
3,942
56
Total Pick-a-Pay loans $ 17,329
64
$ 13,211
48
$ 14,084
50


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


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

~~(3)~~

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


~~(4)~~	~~Carrying value does not reflect related allowance for loan losses but does reflect remaining purchase accounting adjustments and any charge-offs.~~


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

Since the Wachovia acquisition, we have completed over 137,800 proprietary and Home Affordability Modification Program (HAMP) Pick-a-Pay loan modifications, including over 200 modifications in third quarter 2017. Pick-a-Pay loan modifications have resulted in over $6.1 billion of principal forgiveness since December 31, 2008. We have also provided interest rate reductions and loan term extensions to enable sustainable homeownership for our Pick-a-Pay customers. As a result of these loss mitigation programs, approximately 71% of our Pick-a-Pay PCI adjusted unpaid principal balance as of September 30, 2017 has been modified.

The predominant portion of our remaining PCI loans is included in the Pick-a-Pay portfolio. ~~We regularly evaluate our estimates~~Total carrying value of cash flows expected to be collected on our PCI loans. Our cash flows expected to be collected have been favorably affected over time by lower expected defaults and losses as a result of observed and forecasted economic strengthening, particularly in housing prices, and our loan modification efforts. When we periodically update our cash flow estimates we have historically expected that the credit-stressed borrower characteristics and distressed collateral values associated with our Pick-a-Pay PCI loans ~~would limit the ability~~was $1.1 billion at June 30, 2019, compared with $4.9 billion at December 31, 2018. During second quarter 2019, we sold $1.9 billion of ~~these borrowers to prepay their loans, thus increasing the future expected weighted-average life of the portfolio since acquisition. However, the higher prepayment trend that emerged in our~~ Pick-a-Pay PCI loans ~~portfolio~~that resulted in a gain of $721 million. We also expect to close on the ~~prior year, which we attribute to the benefits~~sale of ~~home price appreciation has continued to result in more loan (unpaid principal balance) to value ratios reaching an important industry refinancing inflection point~~approximately $500 million of below 80%. As a result, we have continued to experience an increased level of borrowers qualifying for products to refinance their loans which may not have previously been available to them. Therefore, during first quarter 2017, we revised our Pick-a-Pay PCI ~~loan cash flow estimates to reflect our expectation that the modified portion of the portfolio will have higher prepayments over the remainder of~~

~~its life. The increase~~loans in ~~expected prepayments in the first~~third quarter ~~and passage of time lowered our estimated weighted-average life to approximately 6.8 years at September 30, 2017, from 7.4 years at December 31, 2016.~~2019. The accretable yield balance ~~related to~~of our Pick-a-Pay PCI loan portfolio ~~declined $104~~was $411 million ($~~126~~594 million for all PCI loans) ~~during third quarter 2017, driven by realized accretion of $315 million~~at June 30, 2019, compared with $2.8 billion ($~~340 million~~3.0 billion for all PCI loans)~~, $233 million reclassification from nonaccretable difference for loans with improving cash flows~~ at December 31, 2018. The estimated weighted-average life was approximately 5.2 years and ~~a $22 million reduction in expected interest cash flows resulting from improved cash flow timing.~~5.5 years at June 30, 2019 and December 31, 2018, respectively. The accretable yield percentage for Pick-a-Pay PCI loans for ~~third~~second quarter ~~2017~~2019 was ~~9.32%~~11.56%, ~~up from 8.22% for fourth quarter 2016, due to an increase in the amount of accretable yield relative to the shortened weighted-average life. Due to the improving cash flow timing,~~and we expect the ~~accretable yield~~ percentage to ~~be 9.83%~~increase to approximately 12.24% for ~~fourth~~third quarter ~~2017.~~

Since acquisition, due to better than expected performance observed on the PCI portion of the Pick-a-Pay portfolio compared with the original acquisition estimates, we have reclassified $8.9 billion from the nonaccretable difference to the accretable yield. Fluctuations in the accretable yield are driven by changes in interest rate indices for variable rate PCI loans, prepayment assumptions, and expected principal and interest payments over the estimated life of the portfolio, which will be affected by the pace and degree of improvements in the U.S. economy and housing markets and projected lifetime performance resulting from loan modification activity. Changes in the projected timing of cash flow events, including loan liquidations, modifications and short sales, can also affect the accretable yield and the estimated weighted-average life of the portfolio.2019.

For ~~further~~additional information on ~~the judgment involved in estimating expected cash flows for~~ PCI loans, see ~~the “Critical Accounting Policies – Purchased Credit-Impaired Loans” section and~~ Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our ~~2016~~2018 Form 10-K.

Risk Management - Credit Risk Management (~~continued~~)(continued)

For further information on the Pick-a-Pay portfolio, including recast risk, deferral of interest and loan modifications, see the “Risk Management – Credit Risk Management – Pick-a-Pay Portfolio” section in our 2016 Form 10-K.

Junior Lien Mortgage Portfolio The junior lien mortgage portfolio consists of residential mortgage lines and loans that are subordinate in rights to an existing lien on the same property. It is not unusual for these lines and loans to have draw periods, interest only payments, balloon payments, adjustable rates and similar features. Junior lien loan products are mostly amortizing payment loans with fixed interest rates and repayment periods between five to 30 years.

We continuously monitor the credit performance of our junior lien mortgage portfolio for trends and factors that influence the frequency and severity of loss. We have observed that the severity of loss for junior lien mortgages is high and generally not affected by whether we or a third party own or service the related first lien mortgage, but the frequency of delinquency is typically lower when we own or service the first lien mortgage. In general, we have limited information available on the delinquency status of the third party owned or serviced ~~senior~~first lien where we also hold a junior lien. To capture this inherent loss content, our allowance process for junior lien mortgages considers the relative difference in loss experience for

junior lien mortgages behind first lien mortgage loans we own or service, compared with those behind first lien mortgage loans owned or serviced by third parties. In addition, our allowance

process for junior lien mortgages ~~that are current, but are in their revolving period,~~ considers the inherent loss where the borrower is delinquent on the corresponding first lien mortgage loans.

Table 2019 shows certain delinquency and loss information for the junior lien mortgage portfolio and lists the top five states by outstanding balance. The decrease in outstanding balances since December 31, ~~2016,~~2018, predominantly reflects loan paydowns. As of ~~September~~June 30, ~~2017, 10%~~2019, 6% of the outstanding balance of the junior lien mortgage portfolio was associated with loans that had a combined loan to value (CLTV) ratio in excess of 100%. Of those junior lien mortgages with a CLTV ratio in excess of 100%, ~~2.96%~~3% were 30 days or more past due. CLTV means the ratio of the total loan balance of first lien mortgages and junior lien mortgages (including unused line amounts for credit line products) to property collateral value. The unsecured portion (the outstanding amount that was in excess of the most recent property collateral value) of the outstanding balances of these loans totaled 3%2% of the junior lien mortgage portfolio at ~~September~~June 30, ~~2017.~~2019. For additional information on consumer loans by LTV/CLTV, see Table ~~5.12~~6.12 in Note 56 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Table ~~20:~~19:Junior Lien Mortgage Portfolio Performance


	Outstanding balance			% of loans 30 days or more past due			Loss (recovery) rate (annualized) quarter ended										Outstanding balance			% of loans 30 days or more past due			Loss (recovery) rate (annualized) quarter ended
(in millions)	Sep 30, 2017		Dec 31, 2016	Sep 30, 2017		Dec 31, 2016	Sep 30, 2017		Jun 30, 2017		Mar 31, 2017		Dec 31, 2016		Sep 30, 2016		Jun 30, 2019		Dec 31, 2018	Jun 30, 2019		Dec 31, 2018	Jun 30, 2019		Mar 31, 2019		Dec 31, 2018		Sep 30, 2018		Jun 30, 2018
California	$	11,006	12,539	1.89	%	1.86	(0.46	)	(0.42	)	(0.37	)	(0.18	)	(0.13	)	$	8,812	9,338	1.64	%	1.67	(0.40	)	(0.39	)	(0.33	)	(0.51	)	(0.56	)
New Jersey																	2,955		3,152	2.77		2.57	(0.07	)	0.12		0.03		0.24		0.28
Florida	3,824		4,252	2.78		2.17	0.06		(0.10	)	0.30		0.47		0.56		2,853		3,140	2.82		2.73	(0.11	)	(0.05	)	0.07		0.12		(0.05	)
New Jersey	3,704		4,031	2.79		2.79	0.58		0.44		1.06		1.36		0.96
Virginia	2,442		2,696	1.93		1.97	0.33		0.17		0.48		0.67		0.55		1,858		2,020	2.03		1.91	(0.17	)	0.14		0.04		0.16		0.30
Pennsylvania	2,275		2,494	2.07		2.07	0.47		0.29		0.67		1.01		0.75		1,792		1,929	2.19		2.10	(0.19	)	0.04		0.25		0.18		0.13
Other	17,872		20,189	2.11		2.09	0.06		0.05		0.28		0.39		0.51		13,783		14,802	1.99		2.12	(0.22	)	(0.03	)	(0.11	)	(0.05	)	(0.06	)
Total	41,123		46,201	2.16		2.09	—		(0.03	)	0.21		0.38		0.40		32,053		34,381	2.05		2.08	(0.24	)	(0.10	)	(0.11	)	(0.10	)	(0.13	)
PCI	29		36														15		17
Total junior lien mortgages	$	41,152	46,237														$	32,068	34,398

Our junior lien, as well as first lien, lines of credit portfolios generally have draw periods of 10, 15 or 20 years with variable interest rate and payment options available during the draw period of (1) interest only or (2) 1.5% of outstanding principal balance plus accrued interest. As of June 30, 2019, lines of credit in a draw period primarily used the interest-only option. During the draw period, the borrower has the option of converting all or a portion of the line from a variable interest rate to a fixed rate with terms including interest-only payments for a fixed period between three to seven years or a fully amortizing payment with a fixed period between five to 30 years. At the end of the draw period, a line of credit generally converts to an amortizing payment schedule with repayment terms of up to 30 years based on the balance at time of conversion. Certain lines and loans have been structured with a balloon payment, which requires full repayment of the outstanding balance at the end of the term period. The conversion of lines or loans to fully amortizing or balloon payoff may result in a significant payment increase, which can affect some borrowers’ ability to repay the outstanding balance.

On a monthly basis, we monitor the payment characteristics of borrowers in our first and junior lien ~~portfolio.~~lines of credit portfolios. In ~~September 2017,~~June 2019, approximately ~~48%~~46% of these borrowers paid only the minimum amount due and approximately ~~46%~~49% paid more than the minimum amount due. The rest were either delinquent or paid less than the minimum amount due. For the borrowers with an

interest only payment feature, approximately ~~33%~~31% paid only the minimum amount due and approximately ~~62%~~63% paid more than the minimum amount due.

The lines that enter their amortization period may experience higher delinquencies and higher loss rates than the ones in their draw or term period. We have considered this increased inherent risk in our allowance for credit loss estimate.

In anticipation of our borrowers reaching the end of their contractual commitment, we have created a program to inform, educate and help these borrowers transition from interest-only to fully-amortizing payments or full repayment. We monitor the performance of the borrowers moving through the program in an effort to refine our ongoing program strategy.

Table 2120 reflects the outstanding balance of our portfolio of junior lien mortgages, including lines and loans, and ~~senior~~first lien lines segregated into scheduled end of draw or end of term periods and products that are currently amortizing, or in balloon repayment status. It excludes real estate 1-4 family first lien line reverse mortgages, which total ~~$144~~$94 million, because they are predominantly insured by the FHA, and it excludes PCI loans, which total ~~$51~~$30 million, because their losses were generally reflected in our nonaccretable difference established at the date of acquisition. At June 30, 2019, $531 million, or 2%, of lines in their draw period were 30 days or more past due, compared with $431 million, or 4%, of amortizing lines of credit. Included in the amortizing amounts in Table 20 is $51 million of end-of-term balloon payments which were past due. The unfunded credit commitments for junior and first lien lines totaled $59.6 billion at June 30, 2019.

Table ~~21:~~20:Junior Lien Mortgage Line and Loan and ~~Senior~~First Lien Mortgage Line Portfolios Payment Schedule


					Scheduled end of draw / term										Scheduled end of draw / term
(in millions)	Outstanding balance September 30, 2017			Remainder of 2017	2018	2019	2020	2021	2022 and thereafter (1)	Amortizing	Outstanding balance June 30, 2019			Remainder of 2019	2020	2021	2022	2023	2024 and thereafter (1)	Amortizing
Junior lien lines and loans	$	41,123		538	1,771	770	703	1,410	22,562	13,369	$	32,053		165	405	984	3,636	2,501	14,043	10,319
First lien lines	13,809			89	578	284	263	616	9,899	2,080	11,059			58	164	460	1,749	1,307	5,437	1,884
Total ~~(3)~~	$	54,932		627	2,349	1,054	966	2,026	32,461	15,449	$	43,112		223	569	1,444	5,385	3,808	19,480	12,203
% of portfolios	100		%	1	4	2	2	4	59	28	100		%	1	1	3	12	9	45	29
End-of-term balloon payments included in Total											$	764		75	185	322	153	6	23


(1)	Substantially all lines and loans are scheduled to convert to amortizing loans by the end of ~~2026,~~2028, with annual scheduled amounts through ~~that date~~2028 ranging from ~~$4.2~~$2.1 billion to ~~$7.2~~$5.3 billion and averaging ~~$6.1~~$3.6 billion per year.


~~(2)~~	~~Junior and first lien lines are mostly interest-only during their draw period. The unfunded credit commitments for junior and first lien lines totaled~~ ~~$63.1 billion~~ at ~~September 30, 2017~~.

~~(3)~~

~~Includes scheduled end-of-term balloon payments for lines and loans totaling~~ ~~$52 million~~, ~~$257 million~~, ~~$278 million~~, ~~$304 million~~, ~~$479 million~~ ~~and~~ ~~$279 million~~ ~~for~~ ~~2017~~, ~~2018~~, ~~2019~~, ~~2020~~, ~~2021, and 2022 and thereafter, respectively. Amortizing lines and loans include~~ ~~$100 million~~ ~~of end-of-term balloon payments, which are past due. At~~ ~~September 30, 2017~~, ~~$533 million, or~~ 4% ~~of outstanding lines of credit that are amortizing, are 30 days or more past due compared to~~ ~~$649 million~~ or 2% ~~for lines in their draw period.~~

CREDIT CARDS Our credit card portfolio totaled ~~$36.2~~$38.8 billion at ~~September~~June 30, ~~2017,~~2019, which represented 4% of our total outstanding loans. The net charge-off rate (annualized) for our credit card portfolio was ~~3.08%~~3.68% for ~~third~~second quarter ~~2017,~~2019, compared with ~~2.82%~~3.61% for ~~third~~second quarter ~~2016~~2018 and ~~3.43%~~3.71% and ~~3.07%~~3.65% for the first ~~nine months~~half of ~~2017~~2019 and ~~2016, respectively, principally from seasoning of newer vintages.~~2018, respectively.

AUTOMOBILEOur automobile portfolio, predominantly composed of indirect loans, totaled ~~$55.5~~$45.7 billion at ~~September~~June 30, ~~2017.~~2019. The net charge-off rate (annualized) for our automobile portfolio was ~~1.41%~~0.46% for ~~third~~second quarter ~~2017,~~2019, compared with ~~0.87%~~0.93% for ~~third~~second quarter ~~2016~~2018 and ~~1.12%~~0.64% and ~~0.77%~~1.30% for the first ~~nine months~~half of ~~2017~~2019 and ~~2016,~~2018, respectively. The ~~increase~~decreases in the net ~~charge-offs~~charge-off rate in ~~2017,~~the second quarter and first half of 2019, compared with ~~2016, was due to increased loss severities resulting from a temporary moratorium~~the same periods in 2018, were driven by lower losses on certain repossessions for customers who have had collateral protection insurance (CPI) policies purchased on their behalf while we remediate the previously disclosed CPI issues, as well as updated industry regulatory guidance regarding the timing of loss recognition for automobile loans in bankruptcy, and also reflected the current trend of increased charge-offs in the automobile lending industry.

higher quality originations.

OTHER REVOLVING CREDIT AND INSTALLMENTOther revolving credit and installment loans totaled ~~$38.7~~$34.7 billion at ~~September~~June 30, ~~2017,~~2019, and primarily included student and securities-based loans. Our private student loan portfolio totaled ~~$12.2~~$10.9 billion at ~~September~~June 30, ~~2017. All remaining student loans guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program (FFELP) were sold as of March 31, 2017.~~2019. The net charge-off rate (annualized) for other revolving credit and installment loans was 1.56% for second quarter 2019, compared with 1.44% for ~~third~~second quarter ~~2017, compared with 1.40%~~2018 and 1.52% for ~~third quarter 2016 and 1.54% and 1.38% for~~both the first ~~nine months~~half of ~~2017~~2019 and ~~2016, respectively.~~

2018.

Risk Management - Credit Risk Management (~~continued~~)(continued)

NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)Table 2221 summarizes nonperforming assets (NPAs) for each of the last four quarters. Total NPAs decreased ~~$512 million~~$1.0 billion from ~~second~~first quarter ~~2017~~2019 to ~~$9.3 billion with improvement across our consumer and commercial portfolios.~~$6.3 billion. Nonaccrual loans decreased ~~$437~~$983 million from ~~second~~first quarter ~~2017~~2019 to ~~$8.6~~$5.9 billion, ~~reflecting declines~~due to a decline in ~~commercial and industrial~~consumer nonaccruals from the reclassification of $373 million in real estate 1-4 family first mortgage nonaccrual loans to MLHFS, as well as ~~continued lower consumer real estate nonaccruals.~~other broad-based improvement across several commercial industry categories. Foreclosed assets of ~~$706~~$377 million were down ~~$75~~

$59 million from ~~second~~first quarter ~~2017.~~

We2019. For information about when we generally place loans on nonaccrual status, ~~when:~~

~~the full and timely collection~~see Note 1 (Summary of ~~interest or principal becomes uncertain (generally based on an assessment of the borrower’s financial condition and the adequacy of collateral, if any);~~

~~they are 90 days (120 days with respect~~Significant Accounting Policies) to ~~real estate 1-4 family first and junior lien mortgages) past due for interest~~

~~or principal, unless both well-secured and~~Financial Statements in ~~the process of collection;~~

~~part of the principal balance has been charged off;~~

~~for junior lien mortgages, we have evidence that the related first lien mortgage may be 120 days past due or in the process of foreclosure regardless of the junior lien delinquency status; or~~

~~consumer real estate and automobile loans receive notification of bankruptcy, regardless of their delinquency status.~~

our 2018 Form 10-K. Credit card loans are not placed on nonaccrual status, but are generally fully charged off when the loan reaches 180 days past due. For additional information on impaired loans, see Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Table ~~22:~~21:Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)


	September 30, 2017					June 30, 2017					March 31, 2017					December 31, 2016					June 30, 2019					March 31, 2019				December 31, 2018					September 30, 2018
($ in millions)	Balance			% of total loans		Balance			% of total loans		Balance			% of total loans		Balance			% of total loans		Balance			% of total loans		Balance		% of total loans		Balance			% of total loans		Balance			% of total loans
Nonaccrual loans:
Commercial:
Commercial and industrial	$	2,397		0.73	%	$	2,632		0.79	%	$	2,898		0.88	%	$	3,216		0.97	%	$	1,634		0.47	%	$	1,986	0.57	%	$	1,486		0.42	%	$	1,555		0.46	%
Real estate mortgage	593			0.46		630			0.48		672			0.51		685			0.52		737			0.60		699		0.57		580			0.48		603			0.50
Real estate construction	38			0.15		34			0.13		40			0.16		43			0.18		36			0.17		36		0.16		32			0.14		44			0.19
Lease financing	81			0.42		89			0.46		96			0.50		115			0.60		63			0.33		76		0.40		90			0.46		96			0.49
Total commercial	3,109			0.62		3,385			0.67		3,706			0.73		4,059			0.80		2,470			0.48		2,797		0.55		2,188			0.43		2,298			0.46
Consumer:
Real estate 1-4 family first mortgage ~~(1)~~	4,213			1.50		4,413			1.60		4,743			1.73		4,962			1.80		2,425			0.85		3,026		1.06		3,183			1.12		3,267			1.15
Real estate 1-4 family junior lien mortgage	1,101			2.68		1,095			2.56		1,153			2.60		1,206			2.61		868			2.71		916		2.77		945			2.75		983			2.78
Automobile	137			0.25		104			0.18		101			0.17		106			0.17		115			0.25		116		0.26		130			0.29		118			0.26
Other revolving credit and installment	59			0.15		59			0.15		56			0.14		51			0.13		44			0.13		50		0.14		50			0.14		48			0.13
Total consumer ~~(2)~~	5,510			1.22		5,671			1.26		6,053			1.34		6,325			1.37		3,452			0.79		4,108		0.94		4,308			0.98		4,416			1.00
Total nonaccrual loans ~~(5)~~(2)	8,619			0.91		9,056			0.95		9,759			1.02		10,384			1.07		5,922			0.62		6,905		0.73		6,496			0.68		6,714			0.71
Foreclosed assets:
Government insured/guaranteed ~~(6)~~(3)	137					149					179					197					68					75				88					87
Non-government insured/guaranteed	569					632					726					781					309					361				363					435
Total foreclosed assets	706					781					905					978					377					436				451					522
Total nonperforming assets	$	9,325		0.98	%	$	9,837		1.03	%	$	10,664		1.11	%	$	11,362		1.17	%	$	6,299		0.66	%	$	7,341	0.77	%	$	6,947		0.73	%	$	7,236		0.77	%
Change in NPAs from prior quarter	$	(512	)			(827		)			(698		)			(644		)			$	(1,042	)			394				(289		)			(389		)


(1)	~~Includes MHFS of~~ ~~$133 million~~, ~~$140 million~~, ~~$145 million, and~~ ~~$149 million~~ at ~~September 30~~, ~~June 30,~~ ~~and~~ ~~March 31, 2017~~ ~~and~~ ~~December 31, 2016, respectively.~~


~~(2)~~	~~Includes an incremental $171 million of nonaccrual loans at September 30, 2017, reflecting updated industry regulatory guidance related to loans in bankruptcy.~~


~~(3)~~	Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.


~~(4)~~(2)	Real estate 1-4 family mortgage loans predominantly insured by the FHA or guaranteed by the VA ~~and student loans largely guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP~~ are not placed on nonaccrual status because they are insured or guaranteed. ~~All remaining student loans guaranteed under the FFELP were sold as of March 31, 2017.~~


~~(5)~~(3)	~~See Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report for further information on impaired loans.~~

~~(6)~~

Consistent with regulatory reporting requirements, foreclosed real estate resulting from government insured/guaranteed loans are classified as nonperforming. ~~However, both~~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. Foreclosure of certain government guaranteed residential real estate mortgage loans ~~that meet criteria specified by Accounting Standards Update (ASU) 2014-14,~~ ~~Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure, effective as of January 1, 2014~~ are excluded from this table and included in Accounts Receivable in Other Assets. For more information on ~~the changes in foreclosures for government guaranteed residential real estate mortgage loans,~~foreclosed assets, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our ~~2016~~2018 Form 10-K.

Table 2322 provides an analysis of the changes in nonaccrual loans.

Table ~~23:~~22:Analysis of Changes in Nonaccrual Loans

Quarter ended
(in millions) Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Commercial nonaccrual loans
Balance, beginning of period $ 3,385
3,706
4,059
4,262
4,507
Inflows 627
704
945
951
1,180
Outflows:
Returned to accruing (97 ) (61 ) (133 ) (59 ) (80 )
Foreclosures (3 ) (15 ) (1 ) (15 ) (1 )
Charge-offs (173 ) (116 ) (202 ) (292 ) (290 )
Payments, sales and other (630 ) (833 ) (962 ) (788 ) (1,054 )
Total outflows (903 ) (1,025 ) (1,298 ) (1,154 ) (1,425 )
Balance, end of period 3,109

3,385

3,706

4,059

4,262
Consumer nonaccrual loans
Balance, beginning of period 5,671
6,053
6,325
6,724
7,456
Inflows (1) 887
676
814
863
868
Outflows:
Returned to accruing (397 ) (425 ) (428 ) (410 ) (597 )
Foreclosures (56 ) (72 ) (81 ) (59 ) (85 )
Charge-offs (109 ) (117 ) (151 ) (158 ) (192 )
Payments, sales and other (486 ) (444 ) (426 ) (635 ) (726 )
Total outflows (1,048 ) (1,058 ) (1,086 ) (1,262 ) (1,600 )
Balance, end of period 5,510

5,671

6,053

6,325

6,724
Total nonaccrual loans $ 8,619
9,056
9,759
10,384
10,986


~~(1)~~	~~Quarter ended September 30, 2017, includes an incremental $171 million of nonaccrual loans, reflecting updated industry regulatory guidance related to loans in bankruptcy.~~



	Quarter ended
(in millions)	Jun 30, 2019			Mar 31, 2019		Dec 31, 2018		Sep 30, 2018		Jun 30, 2018
Commercial nonaccrual loans
Balance, beginning of period	$	2,797		2,188		2,298		2,455		2,409
Inflows	621			1,238		662		774		726
Outflows:
Returned to accruing	(46		)	(43	)	(45	)	(122	)	(43	)
Foreclosures	(2		)	(15	)	(12	)	—		—
Charge-offs	(187		)	(158	)	(193	)	(191	)	(133	)
Payments, sales and other	(713		)	(413	)	(522	)	(618	)	(504	)
Total outflows	(948		)	(629	)	(772	)	(931	)	(680	)
Balance, end of period	2,470			2,797		2,188		2,298		2,455
Consumer nonaccrual loans
Balance, beginning of period	4,108			4,308		4,416		4,671		4,930
Inflows	437			552		569		572		578
Outflows:
Returned to accruing	(250		)	(248	)	(269	)	(319	)	(342	)
Foreclosures	(34		)	(42	)	(35	)	(41	)	(40	)
Charge-offs	(34		)	(49	)	(57	)	(65	)	(84	)
Payments, sales and other	(775		)	(413	)	(316	)	(402	)	(371	)
Total outflows	(1,093		)	(752	)	(677	)	(827	)	(837	)
Balance, end of period	3,452			4,108		4,308		4,416		4,671
Total nonaccrual loans	$	5,922		6,905		6,496		6,714		7,126

Typically, changes to nonaccrual loans period-over-period represent inflows for loans that are placed on nonaccrual status in accordance with our policy, 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. ~~Also, reductions can come from borrower repayments even if the loan remains on nonaccrual.~~

While nonaccrual loans are not free of loss content, we believe exposure to loss is significantly mitigated by the following factors at ~~September~~June 30, ~~2017:~~2019:


•	85% of total commercial nonaccrual loans and 99% of total consumer nonaccrual loans are secured. Of the consumer nonaccrual loans, 95% are secured by real estate and 87% have a combined LTV (CLTV) ratio of 80% or less.


•	losses of $284 million and $1.1 billion have already been recognized on 15% of commercial nonaccrual loans and 38% of consumer nonaccrual loans, respectively, in accordance with our charge-off policies. Once we write down loans to the net realizable value (fair value of collateral less estimated costs to sell), we re-evaluate each loan regularly and record additional write-downs if needed.

~~98%~~ ~~of total commercial nonaccrual loans and~~ ~~99%~~ ~~of total consumer nonaccrual loans are secured. Of the consumer nonaccrual loans,~~ ~~96%~~ ~~are secured by real estate and~~ ~~81%~~ ~~have a combined LTV (CLTV) ratio of 80% or less.~~

~~losses of~~ ~~$380 million~~ ~~and~~ ~~$1.9 billion~~ ~~have already been recognized on~~ ~~16%~~ ~~of commercial nonaccrual loans and~~ ~~45%~~ of consumer nonaccrual loans, respectively. Generally, when a consumer real estate loan is 120 days past due (except when required earlier by guidance issued by bank regulatory agencies), we transfer it to nonaccrual status. When the loan reaches 180 days past due, or is discharged in bankruptcy, it is our policy to write these loans down to net realizable value (fair value of collateral less estimated costs to sell), except for modifications in their trial period that are not written down as long as trial payments are made on time. Thereafter, we reevaluate each loan regularly and record additional write-downs if needed.

~~88%~~ ~~of commercial nonaccrual loans were current on interest, but were on nonaccrual status because the full or timely collection of interest or principal had become uncertain.~~

~~82%~~ ~~of commercial nonaccrual loans were current on both principal and interest, and will remain on nonaccrual until the full and timely collection of principal and interest becomes certain.~~


•	70% of commercial nonaccrual loans were current on interest and 54% 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.


•	of the $1.5 billion of consumer loans in bankruptcy or discharged in bankruptcy, and classified as nonaccrual, $1.0 billion were current.

the remaining risk of loss of all nonaccrual loans has been considered and we believe is adequately covered by the allowance for loan losses.

of ~~$2.4 billion~~ ~~of consumer loans in bankruptcy or discharged in bankruptcy, and classified as nonaccrual,~~ ~~$1.5 billion~~ ~~were current.~~

We continue to work with our customers experiencing financial difficulty to determine if they can qualify for a loan modification so that they can stay in their homes. Under ~~both~~ our proprietary modification ~~programs and the Making Home Affordable (MHA)~~ programs, customers may be required to provide updated documentation, and some programs require completion of payment during trial periods to demonstrate sustained performance before the loan can be removed from nonaccrual status.

Risk Management - Credit Risk Management (~~continued~~)(continued)

Table 2423 provides a summary of foreclosed assets and an analysis of changes in foreclosed assets.

Table ~~24:~~23:Foreclosed Assets


(in millions)	Sep 30, 2017			Jun 30, 2017		Mar 31, 2017		Dec 31, 2016		Sep 30, 2016		Jun 30, 2019			Mar 31, 2019		Dec 31, 2018		Sep 30, 2018		Jun 30, 2018
Summary by loan segment
Government insured/guaranteed	$	137		149		179		197		282		$	68		75		88		87		90
PCI loans:
Commercial	67			79		84		91		98		101			124		127		201		176
Consumer	72			67		80		75		88		208			237		236		234		233
Total PCI loans	139			146		164		166		186
All other loans:
Commercial	226			259		275		287		298
Consumer	204			227		287		328		254
Total all other loans	430			486		562		615		552
Total foreclosed assets	$	706		781		905		978		1,020		$	377		436		451		522		499
Analysis of changes in foreclosed assets (1)
Analysis of changes in foreclosed assets
Balance, beginning of period	$	781		905		978		1,020		1,117		$	436		451		522		499		571
Net change in government insured/guaranteed (2)	(12		)	(30	)	(18	)	(85	)	(39	)
Additions to foreclosed assets (3)	198			233		288		405		261
Net change in government insured/guaranteed (1)												(7		)	(13	)	1		(3	)	(13	)
Additions to foreclosed assets (2)												144			193		193		209		191
Reductions:
Sales	(257		)	(330	)	(307	)	(296	)	(421	)	(199		)	(205	)	(274	)	(181	)	(257	)
Write-downs and gains (losses) on sales	(4		)	3		(36	)	(66	)	102		3			10		9		(2	)	7
Total reductions	(261		)	(327	)	(343	)	(362	)	(319	)	(196		)	(195	)	(265	)	(183	)	(250	)
Balance, end of period	$	706		781		905		978		1,020		$	377		436		451		522		499

(1)

During fourth quarter 2016, we evaluated a population of foreclosed properties that were previously security for FHA insured loans, and made the decision to retain some of the properties as foreclosed real estate, thereby foregoing the FHA insurance claim. Accordingly, the loans for which we decided not to file a claim are reported as additions to foreclosed assets rather than included as net change in government insured/guaranteed foreclosures.


~~(2)~~	Foreclosed government insured/guaranteed loans are temporarily transferred to and held by us as servicer, until reimbursement is received from FHA or VA. ~~The net change in government insured/guaranteed foreclosed assets is generally made up of inflows from mortgages held for investment and MHFS, and outflows when we are reimbursed by FHA/VA.~~


~~(3)~~(2)	Includes loans moved into ~~foreclosure~~foreclosed assets from nonaccrual status, PCI loans transitioned directly to foreclosed assets and repossessed automobiles.

Foreclosed assets at ~~September~~June 30, ~~2017,~~2019, included ~~$398~~$253 million of foreclosed residential real estate, of which ~~34%~~27% is predominantly FHA insured or VA guaranteed and expected to have minimal or no loss content. The remaining amount of foreclosed assets ~~balance of $308 million~~ has been written down to estimated net realizable value. Of the ~~$706~~$377 million in foreclosed assets at ~~September~~June 30, ~~2017, 56%~~2019, 67% have been in the foreclosed assets portfolio one year or less.

TROUBLED DEBT RESTRUCTURINGS (TDRs)

Table ~~25:~~24:Troubled Debt Restructurings (TDRs)


(in millions)	Sep 30, 2017		Jun 30, 2017	Mar 31, 2017	Dec 31, 2016	Sep 30, 2016	Jun 30, 2019		Mar 31, 2019	Dec 31, 2018	Sep 30, 2018	Jun 30, 2018
Commercial:
Commercial and industrial	$	2,424	2,629	2,484	2,584	2,445	$	1,294	1,740	1,623	1,837	1,792
Real estate mortgage	953		1,024	1,090	1,119	1,256	620		681	704	782	904
Real estate construction	48		62	73	91	95	43		45	39	49	40
Lease financing	39		21	8	6	8	31		46	56	65	50
Total commercial TDRs	3,464		3,736	3,655	3,800	3,804	1,988		2,512	2,422	2,733	2,786
Consumer:
Real estate 1-4 family first mortgage	12,617		13,141	13,680	14,134	14,761	8,218		10,343	10,629	10,967	11,387
Real estate 1-4 family junior lien mortgage	1,919		1,975	2,027	2,074	2,144	1,550		1,604	1,639	1,689	1,735
Credit Card	340		316	308	300	294	486		473	449	431	410
Automobile	88		85	80	85	89	85		85	89	91	81
Other revolving credit and installment	124		118	107	101	93	159		156	154	146	141
Trial modifications	183		215	261	299	348	127		136	149	163	200
Total consumer TDRs ~~(1)~~	15,271		15,850	16,463	16,993	17,729	10,625		12,797	13,109	13,487	13,954
Total TDRs	$	18,735	19,586	20,118	20,793	21,533	$	12,613	15,309	15,531	16,220	16,740
TDRs on nonaccrual status	$	5,218	5,637	5,819	6,193	6,429	$	3,058	4,037	4,058	4,298	4,454
TDRs on accrual status (1)	13,517		13,949	14,299	14,600	15,104
TDRs on accrual status:
Government insured/guaranteed							1,209		1,275	1,299	1,308	1,368
Non-government insured/guaranteed							8,346		9,997	10,174	10,614	10,918
Total TDRs	$	18,735	19,586	20,118	20,793	21,533	$	12,613	15,309	15,531	16,220	16,740


~~(1)~~	~~TDR loans include~~ ~~$1.4 billion~~, ~~$1.4 billion~~, ~~$1.5 billion~~, ~~$1.5 billion, and~~ ~~$1.6 billion~~ at ~~September 30~~, ~~June 30~~ ~~and~~ ~~March 31,2017, and~~ ~~December 31~~ ~~and~~ ~~September 30,2016, respectively, of government insured/guaranteed loans that are predominantly insured by the FHA or guaranteed by the VA and accruing.~~

Table 2524 provides information regarding the recorded investment of loans modified in TDRs. The allowance for loan losses for TDRs was ~~$1.6~~$1.1 billion and ~~$2.2~~$1.2 billion at ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, respectively. See Note 56 (Loans and Allowance for Credit Losses) to Financial Statements in this Report for additional information regarding TDRs. In those situations where principal is forgiven, the entire amount of such forgiveness is immediately charged ~~off to the extent not done so prior to the modification.~~off. When we delay the timing on the repayment of a portion of principal (principal forbearance), we charge off the amount of forbearance if that amount is not considered fully collectible.

For more information on our nonaccrual policies when a restructuring is involved, see the “Risk Management – Credit Risk Management – Troubled Debt Restructurings (TDRs)” section in our ~~2016~~2018 Form 10-K.

Table 2625 provides an analysis of the changes in TDRs. Loans modified more than once are reported as TDR inflows only in the period they are first modified. Other than resolutions such as foreclosures, sales and transfers to held for sale, we may remove loans held for investment from TDR classification, but only if they have been refinanced or restructured at market terms and qualify as new loans.

TDRs of $12.6 billion at June 30, 2019, decreased $2.7 billion from first quarter 2019 primarily due to a ~~new loan.~~decline in consumer TDRs from the reclassification of $1.7 billion in real estate 1-4 family first mortgage TDR loans to MLHFS, as well as paydowns.

Risk Management - Credit Risk Management (~~continued~~)(continued)

Table ~~26:~~25:Analysis of Changes in TDRs


						Quarter ended											Quarter ended
(in millions)	Sep 30, 2017			Jun 30, 2017		Mar 31, 2017		Dec 31, 2016		Sep 30, 2016		Jun 30, 2019			Mar 31, 2019		Dec 31, 2018		Sep 30, 2018		Jun 30, 2018
Commercial:
Commercial TDRs
Balance, beginning of quarter	$	3,736		3,655		3,800		3,804		3,386		$	2,512		2,422		2,733		2,786		2,740
Inflows (1)	333			730		642		615		914
Inflows (1)(2)												232			539		374		588		481
Outflows
Charge-offs	(74		)	(59	)	(108	)	(120	)	(76	)	(37		)	(44	)	(88	)	(92	)	(41	)
Foreclosures	(2		)	(12	)	—		(13	)	(2	)	—			—		(2	)	(13	)	—
Payments, sales and other ~~(2)~~(3)	(529		)	(578	)	(679	)	(486	)	(418	)	(719		)	(405	)	(595	)	(536	)	(394	)
Balance, end of quarter	3,464			3,736		3,655		3,800		3,804		1,988			2,512		2,422		2,733		2,786
Consumer:
Consumer TDRs
Balance, beginning of quarter	15,850			16,463		16,993		17,729		18,565		12,797			13,109		13,487		13,954		14,380
Inflows (1)	461			444		517		513		542		336			439		379		414		467
Outflows
Charge-offs	(51		)	(51	)	(51	)	(48	)	(65	)	(61		)	(60	)	(57	)	(56	)	(56	)
Foreclosures	(146		)	(159	)	(179	)	(166	)	(230	)	(74		)	(86	)	(90	)	(116	)	(133	)
Payments, sales and other ~~(2)~~(3)	(811		)	(801	)	(779	)	(987	)	(1,067	)	(2,364		)	(593	)	(595	)	(672	)	(706	)
Net change in trial modifications ~~(3)~~(4)	(32		)	(46	)	(38	)	(48	)	(16	)	(9		)	(12	)	(15	)	(37	)	2
Balance, end of quarter	15,271			15,850		16,463		16,993		17,729		10,625			12,797		13,109		13,487		13,954
Total TDRs	$	18,735		19,586		20,118		20,793		21,533		$	12,613		15,309		15,531		16,220		16,740


(1)	Inflows include loans that modify, even if they resolve within the period, as well as gross advances on term loans that modified in a prior period and net advances on revolving commercial TDRs that modified in a prior period.


(2)	Information for the quarter ended June 30, 2018 has been revised to offset payments and advances (i.e. inflows) on revolving commercial TDRs, for consistent presentation of this activity for all periods.

(3)

Other outflows ~~include~~consist of normal amortization/accretion of loan basis adjustments and loans transferred to held-for-sale. ~~It also includes~~ ~~$6 million~~ ~~and~~ ~~$4 million~~ ofOccasionally, loans that have been refinanced or restructured at market terms ~~and qualifying~~qualify as new loans, ~~and removed from TDR classification for the quarters ended September 30, 2017 and December 31,~~ ~~2016, respectively, while~~ no ~~loans were removed from TDR classification for the quarters ended~~ ~~June 30~~ ~~and~~ ~~March 31~~, ~~2017, and~~ ~~September 30~~, ~~2016~~.which are also included as other outflows.


~~(3)~~(4)	Net change in trial modifications includes: inflows of new TDRs entering the trial payment period, net of outflows for modifications that either (i) successfully perform and enter into a permanent modification, or (ii) did not successfully perform according to the terms of the trial period plan and are subsequently charged-off, foreclosed upon or otherwise resolved.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

Loans 90 days or more past due as to interest or principal are still accruing if they are (1) well-secured and in the process of collection or (2) real estate 1-4 family mortgage loans or consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due. PCI loans are not included in past due and still accruing loans even when they are 90 days or more contractually past due. These PCI loans are considered to be accruing because they continue to earn interest from accretable yield, independent of performance in accordance with their contractual terms.

Excluding insured/guaranteed loans, loans 90 days or more past due and still accruing at ~~September~~June 30, ~~2017,~~2019, were down ~~$11~~$199 million, or 1%20%, from December 31, ~~2016,~~2018, due to payoffs, ~~modifications and~~

other loss mitigation activities, and credit

stabilization. Also, fluctuations from quarter to quarter are influenced by seasonality.

Loans 90 days or more past due and still accruing whose repayments are predominantly insured by the FHA or guaranteed by the VA for mortgages were ~~$9.3~~$6.5 billion at ~~September~~June 30, ~~2017,~~2019, down from ~~$10.9~~$7.7 billion at December 31, ~~2016,~~2018, due to ~~improving credit trends. All remaining student loans guaranteed by agencies on behalf of~~an improvement in delinquencies as well as a reduction in the ~~U.S. Department of Education under the FFELP were sold as of March 31, 2017.~~portfolio.

Table 2726 reflects non-PCI loans 90 days or more past due and still accruing by class for loans not government insured/guaranteed. For additional information on delinquencies by loan class, see Note 56 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Table ~~27:~~26:Loans 90 Days or More Past Due and Still Accruing


(in millions)	Sep 30, 2017		Jun 30, 2017	Mar 31, 2017	Dec 31, 2016	Sep 30, 2016	Jun 30, 2019		Mar 31, 2019	Dec 31, 2018	Sep 30, 2018	Jun 30, 2018
Total (excluding PCI (1)):	$	10,227	9,716	10,525	11,858	12,068	$	7,258	7,870	8,704	8,838	9,087
Less: FHA insured/VA guaranteed ~~(3)~~(2)	9,266		8,873	9,585	10,883	11,198	6,478		6,996	7,725	7,906	8,246
Less: Student loans guaranteed under the FFELP (4)	—		—	—	3	17
Total, not government insured/guaranteed	$	961	843	940	972	853	$	780	874	979	932	841
By segment and class, not government insured/guaranteed: Commercial:
Commercial and industrial	$	27	42	88	28	47	$	17	42	43	42	23
Real estate mortgage	11		2	11	36	4	24		20	51	56	26
Real estate construction	—		10	3	—	—	—		5	—	—	—
Total commercial	38		54	102	64	51	41		67	94	98	49
Consumer:
Real estate 1-4 family first mortgage (3)	190		145	149	175	171
Real estate 1-4 family junior lien mortgage (3)	49		44	42	56	54
Real estate 1-4 family first mortgage							108		117	124	128	132
Real estate 1-4 family junior lien mortgage							27		28	32	32	33
Credit card	475		411	453	452	392	449		502	513	460	429
Automobile	111		91	79	112	81	63		68	114	108	105
Other revolving credit and installment	98		98	115	113	104	92		92	102	106	93
Total consumer	923		789	838	908	802	739		807	885	834	792
Total, not government insured/guaranteed	$	961	843	940	972	853	$	780	874	979	932	841


(1)	PCI loans totaled ~~$1.4 billion~~, ~~$1.5 billion~~, ~~$1.8 billion~~, ~~$2.0 billion~~,$156 million, $243 million, $370 million, $567 million, and ~~$2.2 billion~~$811 million at June 30, and March 31, 2019, and December 31, September 30,, and June 30, ~~and~~ ~~March 31~~, ~~2017~~ ~~and~~ ~~December 31~~ ~~and~~ ~~September 30,2016~~, 2018, respectively.


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


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


~~(4)~~	Represents loans whose repayments are largely guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP. All remaining student loans guaranteed under the FFELP were sold as of March 31, 2017.

Risk Management - Credit Risk Management (~~continued~~)(continued)

NET CHARGE-OFFS

Table ~~28:~~27:Net Charge-offs


																					Quarter ended																									Quarter ended
	Sep 30, 2017					Jun 30, 2017					Mar 31, 2017					Dec 31, 2016					Sep 30, 2016					Jun 30, 2019					Mar 31, 2019					Dec 31, 2018					Sep 30, 2018					Jun 30, 2018
($ 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)		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)		Net loan charge-offs			% of avg. loans (1)		Net loan charge-offs			% of avg. loans (1)
Commercial:
Commercial and industrial	$	125		0.15	%	$	78		0.10	%	$	171		0.21	%	$	256		0.31	%	$	259		0.32	%	$	159		0.18	%	$	133		0.15	%	$	132		0.15	%	$	148		0.18	%	$	58		0.07	%
Real estate mortgage	(3		)	(0.01	)	(6		)	(0.02	)	(25		)	(0.08	)	(12		)	(0.04	)	(28		)	(0.09	)	4			0.01		6			0.02		(12		)	(0.04	)	(1		)	—		—			—
Real estate construction	(15		)	(0.24	)	(4		)	(0.05	)	(8		)	(0.15	)	(8		)	(0.13	)	(18		)	(0.32	)	(2		)	(0.04	)	(2		)	(0.04	)	(1		)	(0.01	)	(2		)	(0.04	)	(6		)	(0.09	)
Lease financing	6			0.12		7			0.15		5			0.11		15			0.32		2			0.04		4			0.09		8			0.17		13			0.26		7			0.14		15			0.32
Total commercial	113			0.09		75			0.06		143			0.11		251			0.20		215			0.17		165			0.13		145			0.11		132			0.10		152			0.12		67			0.05
Consumer:
Real estate 1-4 family first mortgage	(16		)	(0.02	)	(16		)	(0.02	)	7			0.01		(3		)	—		20			0.03		(30		)	(0.04	)	(12		)	(0.02	)	(22		)	(0.03	)	(25		)	(0.04	)	(23		)	(0.03	)
Real estate 1-4 family junior lien mortgage	1			—		(4		)	(0.03	)	23			0.21		44			0.38		49			0.40		(19		)	(0.24	)	(9		)	(0.10	)	(10		)	(0.11	)	(9		)	(0.10	)	(13		)	(0.13	)
Credit card	277			3.08		320			3.67		309			3.54		275			3.09		245			2.82		349			3.68		352			3.73		338			3.54		299			3.22		323			3.61
Automobile	202			1.41		126			0.86		167			1.10		166			1.05		137			0.87		52			0.46		91			0.82		133			1.16		130			1.10		113			0.93
Other revolving credit and installment	140			1.44		154			1.58		156			1.60		172			1.70		139			1.40		136			1.56		128			1.47		150			1.64		133			1.44		135			1.44
Total consumer ~~(2)~~	604			0.53		580			0.51		662			0.59		654			0.56		590			0.51		488			0.45		550			0.51		589			0.53		528			0.47		535			0.49
Total	$	717		0.30	%	$	655		0.27	%	$	805		0.34	%	$	905		0.37	%	$	805		0.33	%	$	653		0.28	%	$	695		0.30	%	$	721		0.30	%	$	680		0.29	%	$	602		0.26	%


(1)	Quarterly net charge-offs (recoveries) as a percentage of average respective loans are annualized.


~~(2)~~	~~Quarter ended September 30, 2017, includes an incremental~~ ~~$29 million~~ ~~of charge-offs in accordance with updated industry regulatory guidance regarding the timing of loss recognition for real estate 1-4 family mortgage and automobile loans in bankruptcy.~~

Table 2827 presents net charge-offs for ~~third~~second quarter ~~2017~~2019 and the previous four quarters. Net charge-offs in ~~third~~second quarter ~~2017~~2019 were ~~$717~~$653 million ~~(0.30%~~(0.28% of average total loans outstanding), compared with ~~$805~~$602 million ~~(0.33%~~(0.26%) in ~~third~~second quarter ~~2016.~~2018.

The ~~decrease~~increase in commercial net charge-offs from second quarter 2018 was due to higher commercial and industrial loan charge-offs and lower recoveries in the commercial and industrial portfolio. Consumer net charge-offs from third quarter 2016 reflected continued improvement in our oil and gas portfolio. Our commercial real estate portfolios were in a net recovery position. Total consumer net charge-offs increased slightlydecreased from the prior year predominantly due to ~~an increase~~a decrease in ~~credit card and~~ automobile net charge-offs, partially offset by ~~a decrease~~an increase in ~~residential real estate~~credit card net charge-offs.

ALLOWANCE FOR CREDIT LOSSESThe allowance for credit losses, which consists of the allowance for loan losses and the allowance for unfunded credit commitments, is management’s estimate of credit losses inherent in the loan portfolio and unfunded credit commitments at the balance sheet date, excluding loans carried at fair value. The detail of the changes in the allowance for credit losses by portfolio segment (including charge-offs and recoveries by loan class) is in Note 56 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

We apply a disciplined process and methodology to establish our allowance for credit losses each quarter. This process 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. Our estimation approach for the commercial portfolio reflects the estimated probability of default in accordance with the borrower’s financial strength, and the severity of loss in the event of default, considering the quality of any underlying collateral. Probability of default and severity at the time of default are statistically derived through historical observations of defaults and losses after default within each credit risk rating. Our estimation approach for the consumer portfolio uses forecasted losses that represent our best estimate of inherent loss based on historical experience, quantitative and other mathematical techniques. For additional information on our allowance for credit losses, see the “Critical Accounting Policies – Allowance for Credit Losses” section in our ~~2016~~2018 Form 10-K and Note 56 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Table 2928 presents the allocation of the allowance for credit losses by loan segment and class for the most recent quarter end and last four year ends.

Table ~~29:~~28:Allocation of the Allowance for Credit Losses (ACL)


	Sep 30, 2017				Dec 31, 2016				Dec 31, 2015				Dec 31, 2014				Dec 31, 2013				Jun 30, 2019				Dec 31, 2018				Dec 31, 2017				Dec 31, 2016				Dec 31, 2015
(in millions)	ACL		Loans as % of total loans		ACL		Loans as % of total loans		ACL		Loans as % of total loans		ACL		Loans as % of total loans		ACL		Loans as % of total loans		ACL		Loans as % of total loans		ACL		Loans as % of total loans		ACL		Loans as % of total loans		ACL		Loans as % of total loans		ACL		Loans as % of total loans
Commercial:
Commercial and industrial	$	4,076	34	%	$	4,560	34	%	$	4,231	33	%	$	3,506	32	%	$	3,040	29	%	$	3,583	37	%	$	3,628	37	%	$	3,752	35	%	$	4,560	34	%	$	4,231	33	%
Real estate mortgage	1,248		14		1,320		14		1,264		13		1,576		13		2,157		14		1,275		13		1,282		13		1,374		13		1,320		14		1,264		13
Real estate construction	1,262		3		1,294		2		1,210		3		1,097		2		775		2		1,122		2		1,200		2		1,238		3		1,294		2		1,210		3
Lease financing	246		2		220		2		167		1		198		1		131		1		318		2		307		2		268		2		220		2		167		1
Total commercial	6,832		53		7,394		52		6,872		50		6,377		48		6,103		46		6,298		54		6,417		54		6,632		53		7,394		52		6,872		50
Consumer:
Real estate 1-4 family first mortgage	1,173		29		1,270		29		1,895		30		2,878		31		4,087		32		729		30		750		30		1,085		30		1,270		29		1,895		30
Real estate 1-4 family junior lien mortgage	672		4		815		5		1,223		6		1,566		7		2,534		8		294		3		431		3		608		4		815		5		1,223		6
Credit card	1,900		4		1,605		4		1,412		4		1,271		4		1,224		3		2,249		4		2,064		4		1,944		4		1,605		4		1,412		4
Automobile	853		6		817		6		529		6		516		6		475		6		462		5		475		5		1,039		5		817		6		529		6
Other revolving credit and installment	679		4		639		4		581		4		561		4		548		5		571		4		570		4		652		4		639		4		581		4
Total consumer	5,277		47		5,146		48		5,640		50		6,792		52		8,868		54		4,305		46		4,290		46		5,328		47		5,146		48		5,640		50
Total	$	12,109	100	%	$	12,540	100	%	$	12,512	100	%	$	13,169	100	%	$	14,971	100	%	$	10,603	100	%	$	10,707	100	%	$	11,960	100	%	$	12,540	100	%	$	12,512	100	%

	Sep 30, 2017				Dec 31, 2016				Dec 31, 2015				Dec 31, 2014				Dec 31, 2013				Jun 30, 2019				Dec 31, 2018				Dec 31, 2017				Dec 31, 2016				Dec 31, 2015
Components:
Allowance for loan losses	$	11,078			11,419				11,545				12,319				14,502				$	9,692			9,775				11,004				11,419				11,545
Allowance for unfunded credit commitments	1,031				1,121				967				850				469				911				932				956				1,121				967
Allowance for credit losses	$	12,109			12,540				12,512				13,169				14,971				$	10,603			10,707				11,960				12,540				12,512
Allowance for loan losses as a percentage of total loans	1.16			%	1.18				1.26				1.43				1.76				1.02			%	1.03				1.15				1.18				1.26
Allowance for loan losses as a percentage of total net charge-offs (1)	390				324				399				418				322				370				356				376				324				399
Allowance for credit losses as a percentage of total loans	1.27				1.30				1.37				1.53				1.82				1.12				1.12				1.25				1.30				1.37
Allowance for credit losses as a percentage of total nonaccrual loans	141				121				110				103				96				179				165				156				126				115


(1)	Total net charge-offs are annualized for quarter ended ~~September~~June 30, ~~2017~~. 2019.

In addition to the allowance for credit losses, there was ~~$454~~$595 million at ~~September~~June 30, ~~2017,~~2019, and ~~$954~~$480 million at December 31, ~~2016~~2018, of nonaccretable difference to absorb losses ~~for~~on PCI loans ~~which totaled $13.6~~of $1.2 billion at ~~September~~June 30, ~~2017.~~2019 and $5.0 billion at December 31, 2018. The allowance for credit losses is lower than otherwise would have been required without PCI loan accounting. As a result of PCI loans, certain ratios of the Company may not be directly comparable with credit-related metrics for other financial institutions. Additionally, loans purchased at fair value, including loans from the GE Capital business acquisitions, generally reflect a lifetime credit loss adjustment and therefore do not initially require additions to the allowance as is typically associated with loan growth. For additional information on PCI loans, see the “Risk Management – Credit Risk Management – Purchased Credit-Impaired Loans” section and Note 56 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

The ratio of the allowance for credit losses to total nonaccrual loans may fluctuate significantly 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. ~~Our nonaccrual loans consisted~~

~~primarily of real estate 1-4 family first and junior lien mortgage loans at September 30, 2017.~~

The allowance for credit losses decreased~~$431~~ $104 million, or 3%1%, from December 31, ~~2016, due to a decrease in our commercial allowance reflecting~~2018, primarily driven by strong overall credit ~~quality improvement, including in the oil and gas~~ portfolio ~~as well as improvement in our residential real estate portfolios, partially offset by increased allowance in the credit card, automobile and other revolving credit and installment portfolios.~~performance. Total provision for credit losses was ~~$717~~$503 million in ~~third~~second quarter ~~2017,~~2019, compared with ~~$805~~$452 million in ~~third~~second quarter ~~2016, reflecting~~ 2018. The increase in the provision for credit losses in second quarter 2019, compared with

the same ~~changes mentioned above for~~period a year ago, was due to loan growth, primarily in the ~~allowance for~~ credit ~~losses.~~card portfolio.

We believe the allowance for credit losses of ~~$12.1~~$10.6 billion at ~~September~~June 30, ~~2017,~~2019, was appropriate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at that date. Approximately $797 million of the allowance at September 30, 2017, was allocated to our oil and gas portfolio, compared with $1.3 billion at December 31, 2016. This represented 6.2% and 8.5% of total oil and gas loans outstanding at September 30, 2017, and December 31, 2016, respectively. The ~~allowance for credit losses at September 30, 2017 also included~~

~~Risk Management - Credit Risk Management (continued~~)

~~$450 million for coverage of our preliminary estimate of potential hurricane-related losses from Hurricanes Harvey, Irma and Maria. However, the~~ entire allowance is available to absorb credit losses inherent in the total loan portfolio. The allowance for credit losses 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 allowance for credit losses 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. Future allowance levels will be based on a variety of factors, including loan growth, portfolio performance and general economic conditions. Our process for determining the allowance for credit losses 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 ~~2016~~2018 Form 10-K.

LIABILITY FOR MORTGAGE LOAN REPURCHASE LOSSES

In connection with our sales and securitization of residential mortgage loans to various parties, we have established a mortgage repurchase liability, initially at fair value, related to various representations and warranties that reflect management’s estimate of losses for loans for which we could have a repurchase obligation, whether or not we currently service those loans, based on a combination of factors. Our mortgage repurchase liability estimation process also incorporates a forecast of repurchase demands associated with mortgage insurance rescission activity.

Because we typically retain the servicing for the mortgage loans we sell or securitize, we believe the quality of our residential mortgage loan servicing portfolio provides helpful information in evaluating our repurchase liability. Of the $1.6 trillion in the residential mortgage loan servicing portfolio at September 30, 2017, 95% was current and less than 1% was subprime at origination. Our combined delinquency and foreclosure rate on this portfolio was 4.83% at September 30, 2017, and at December 31, 2016. Two percent of this portfolio is private label securitizations for which we originated the loans and, therefore have some repurchase risk.

The overall level of unresolved repurchase demands and mortgage insurance rescissions outstanding at September 30, 2017, was $120 million, representing 549 loans, up from a year ago both in number of outstanding loans and in total dollar balances. The increase was largely due to private investor demands we expect to resolve with minimal repurchase risk.

Our liability for mortgage repurchases, included in “Accrued expenses and other liabilities” in our consolidated balance sheet, represents our best estimate of the probable loss that we expect to incur for various representations and warranties in the contractual provisions of our sales of mortgage loans. The liability was $179 million at September 30, 2017, and $229 million at December 31, 2016. In third quarter 2017, we released $6 million due to re-estimation of our liability based on recently observed trends, which increased net gains on mortgage loan origination/sales activities, compared with a release of $13 million in third quarter 2016. Additionally, in third quarter 2017, we recognized a $10 million reserve build for an MSR acquisition. We incurred net losses on repurchased loans and investor reimbursements totaling $3 million in third quarter 2017 and in third quarter 2016.

Because of the uncertainty in the various estimates underlying the mortgage repurchase liability, there is a range of losses in excess of the recorded mortgage repurchase liability that are reasonably possible. The estimate of the range of possible loss for representations and warranties does not represent a probable loss, and is based on currently available information, significant judgment, and a number of assumptions that are subject to change. The high end of this range of reasonably possible losses exceeded our recorded liability by $180 million at September 30, 2017, and was determined based upon modifying the assumptions (particularly to assume significant changes in investor repurchase demand practices) used in our best estimate of probable loss to reflect what we believe to be the high end of reasonably possible adverse assumptions.

For ~~additional~~ information on our repurchase liability, see the “Risk Management – Credit Risk Management – Liability For Mortgage Loan Repurchase Losses” section in our ~~2016~~2018 Form ~~10-K and Note 8 (Mortgage Banking Activities) to Financial Statements in this Report.~~10-K.

RISKS RELATING TO SERVICING ACTIVITIESIn addition to servicing loans in our portfolio, we act as servicer and/or master servicer of residential mortgage loans included in GSE-guaranteed 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. In connection with our servicing activities, we ~~have entered into various settlements~~could become subject to consent orders and settlement agreements with federal and state regulators ~~to resolve certain~~for alleged servicing issues and practices. In general, these ~~settlements required~~can require us to provide customers with loan modification relief, refinancing relief, and foreclosure prevention and assistance, as well as ~~imposed~~can impose certain monetary penalties on us.

For additional information about the risks ~~and various settlements~~ related to our servicing activities, see the “Risk Management – Credit Risk Management – Risks Relating to Servicing Activities” section in our ~~2016~~2018 Form 10-K.

Asset/Liability Management

Asset/liability management involves evaluating, monitoring and managing interest rate risk, market risk, liquidity and funding. Primary oversight of interest rate risk and market risk resides with the Finance Committee of our Board of Directors (Board), which oversees the administration and effectiveness of financial risk management policies and processes used to assess and manage these risks. Primary oversight of liquidity and funding resides with the Risk Committee of the Board. At the management level we utilize a Corporate Asset/Liability Management Committee (Corporate ALCO), which consists of senior financial, risk, and business executives, to oversee these risks and report on them periodically to the Board’s Finance Committee and Risk Committee as appropriate. As discussed in more detail for ~~trading~~market risk activities below, we employ separate management level oversight specific to market risk.

INTEREST RATE RISK Interest rate risk, which potentially can have a significant earnings impact, is an integral part of being a financial intermediary. We are subject to interest rate risk because:

assets and liabilities may mature or reprice at different times (for example, if assets reprice faster than liabilities and interest rates are generally ~~falling,~~rising, earnings will initially ~~decline)~~increase);

assets and liabilities may reprice at the same time but by different amounts (for example, when the general level of interest rates is ~~falling,~~rising, we may ~~reduce~~increase rates paid on checking and savings deposit accounts by an amount that is less than the general ~~decline~~rise in market interest rates);

short-term and long-term market interest rates may change by different amounts (for example, the shape of the yield curve may affect new loan yields and funding costs differently);

the remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change (for example, if long-term mortgage interest rates ~~decline~~increase sharply, MBS held in the ~~investment~~debt securities portfolio may ~~prepay significantly earlier~~pay down slower than anticipated, which could ~~reduce~~impact portfolio income); or

interest rates may also have a direct or indirect effect on loan demand, collateral values, credit losses, mortgage origination volume, the fair value of MSRs and other financial instruments, the value of the pension liability and other items affecting earnings.

We assess interest rate risk by comparing outcomes under various net interest income simulations using many interest rate scenarios that differ in the direction of interest rate changes, the degree of change over time, the speed of change and the projected shape of the yield curve. These simulations require assumptions regarding drivers of earnings and balance sheet composition such as loan originations, prepayment speeds on loans and ~~investment~~debt securities, deposit flows and mix, as well as pricing strategies.

Currently, our profile is such that we project net interest income will benefit modestly 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.

~~As of September 30, 2017, our~~Our most recent simulations estimate net interest income sensitivity over the next two years under a range of both lower and higher interest rates. Measured impacts from standardized ramps (gradual changes) and shocks

~~(instantaneous~~ (instantaneous changes) are summarized in Table ~~30,~~29, indicating net interest income sensitivity relative to the ~~Company's~~Company’s base net interest income plan. Ramp scenarios assume interest rates move gradually in parallel across the yield curve relative to the base scenario in year one, and the full amount of the ramp is held as a constant differential to the base scenario in year two. The following describes the simulation assumptions for the scenarios presented in Table ~~30:~~29:

Simulations are dynamic and reflect anticipated growth across assets and liabilities.

Other macroeconomic variables that could be correlated with the changes in interest rates are held constant.

Mortgage prepayment and origination assumptions vary across scenarios and reflect only the impact of the higher or lower interest rates.

Our base scenario deposit forecast incorporates mix changes consistent with the base interest rate trajectory. Deposit mix is modeled to be the same as in the base scenario across the alternative scenarios. In higher interest rate scenarios, customer activity that shifts balances into higher-yielding products could reduce expected net interest income.

We hold the size of the projected ~~investment~~debt and equity securities ~~portfolio~~portfolios constant across scenarios.

Table ~~30:~~29:Net Interest Income Sensitivity Over Next Two-Year Horizon Relative to Base Expectation



			Lower Rates	Higher Rates
($ in billions)	Base		100 bps Ramp Parallel Decrease	100 bps Instantaneous Parallel Increase	200 bps Ramp Parallel Increase
First Year of Forecasting Horizon
Net Interest Income Sensitivity to Base Scenario		$	(1.2) - (0.7)	1.2 - 1.7	1.0 - 1.5
Key Rates at Horizon End
Fed Funds Target	2.50	%	1.50	3.50	4.50
10-year CMT (1)	2.87		1.87	3.87	4.87
Second Year of Forecasting Horizon
Net Interest Income Sensitivity to Base Scenario		$	(3.1) - (2.6 )	1.6 - 2.1	2.3 - 2.8
Key Rates at Horizon End
Fed Funds Target	2.50	%	1.50	3.50	4.50
10-year CMT (1)	3.16		2.16	4.16	5.16

Lower Rates Higher Rates
($ in billions) Base
100 bps
Ramp
Parallel
Decrease

100 bps Instantaneous
Parallel
Increase

200 bps
Ramp
Parallel
Increase
First Year of Forecasting Horizon
Net Interest Income Sensitivity to Base Scenario (0.7) - (0.2) 1.1 - 1.6 0.9 - 1.4
Key Rates at Horizon End
Fed Funds Target 2.09 1.09 3.09 4.09
10-year CMT (1) 2.97 1.97 3.97 4.97
Second Year of Forecasting Horizon
Net Interest Income Sensitivity to Base Scenario (1.1) - (0.6) 1.5 - 2.0 2.1 - 2.6
Key Rates at Horizon End
Fed Funds Target 2.50 1.50 3.50 4.50
10-year CMT (1) 3.59 2.59 4.59 5.59


(1)	U.S. Constant Maturity Treasury Rate

The sensitivity results above do not capture interest rate sensitive noninterest income and expense impacts. Our interest rate sensitive noninterest income and expense is ~~significantly~~predominantly driven by mortgage activity, and may move in the opposite direction of our net interest income. Typically, in response to higher interest rates, mortgage activity, primarily refinancing activity, generally declines. And in response to lower interest rates, mortgage activity generally increases. Mortgage results are also impacted by the valuation of MSRs and related hedge positions. See the “Risk Management – Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section in this Report for more information.

Interest rate sensitive noninterest income also results from changes in earnings credit for non-interest bearing deposits that reduce treasury management deposit service fees. Additionally, for the trading portfolio, our trading assets are (before the effects of certain economic hedges) generally less sensitive to changes in interest rates than the related funding liabilities. As a result, net interest income from the trading portfolio contracts and expands as interest rates rise and fall, respectively. The impact to net interest income does not include the fair value changes of trading securities and loans, which, along with the effects of related economic hedges, are recorded in noninterest income.

We use the ~~investment~~debt securities portfolio and exchange-traded and over-the-counter (OTC) interest rate derivatives to hedge our interest rate exposures. See the “Balance Sheet Analysis – ~~Investment~~Available-for-Sale and Held-to-Maturity Debt Securities” section in this Report for more information on the use of the available-for-sale and ~~held-to-~~

~~Asset/Liability Management (continued~~)

~~maturity~~held-to-maturity securities portfolios. The notional or contractual amount, credit risk amount and fair value of the derivatives used to hedge our interest rate risk exposures as of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, are presented in Note 1215 (Derivatives) to Financial Statements in this Report. We use derivatives for asset/liability management in two main ways:

to convert the cash flows from selected asset and/or liability instruments/portfolios including investments, commercial loans and long-term debt, from fixed-rate payments to floating-rate payments, or vice versa; and

to economically hedge our mortgage origination pipeline, funded mortgage loans and MSRs using interest rate swaps, swaptions, futures, forwards and options.

MORTGAGE BANKING INTEREST RATE AND MARKET RISK We originate, fund and service mortgage loans, which subjects us to various risks, including credit, liquidity and interest rate risks. For more information on mortgage banking interest rate and market risk, see the “Risk Management – Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section in our ~~2016~~2018 Form 10-K.

While our hedging activities are designed to balance our mortgage banking interest rate risks, the financial instruments we use may not perfectly correlate with the values and income being hedged. For example, the change in the value of ARM production held for sale from changes in mortgage interest rates may or may not be fully offset by ~~LIBOR~~ index-based financial instruments used as economic hedges for such ARMs. Additionally, hedge-carry income on our economic hedges for the MSRs may not continue at recent levels if the spread between short-term and long-term interest rates decreases, the overall level of hedges changes as interest rates change, or there are other changes in the market for mortgage forwards that affect the implied carry.

The total carrying value of our residential and commercial MSRs was ~~$14.7~~$13.5 billion at ~~September~~June 30, ~~2017,~~2019, and ~~$14.4~~$16.1 billion at December 31, ~~2016.~~2018. The weighted-average note rate on our portfolio of loans serviced for others was ~~4.23%~~4.33% at ~~September~~June 30, ~~2017,~~2019, and ~~4.26%~~4.32% at December 31, ~~2016.~~2018. The carrying value of our total MSRs represented ~~0.87%~~0.82% of mortgage loans serviced for others at ~~September~~June 30, ~~2017,~~2019, and ~~0.85%~~0.94% of mortgage loans serviced for others at December 31, ~~2016.~~2018.

MARKET RISK ~~– TRADING ACTIVITIES~~The Finance Committee of our Board of Directors reviews the acceptable market risk appetite for our trading activities. We engage in trading activities to accommodate the investment and risk management activities of our customers (which generally comprises a subset of the transactions recorded as trading and derivative assets and liabilities on our balance sheet), and to execute economic hedging to manage certain balance sheet risks. These activities primarily occur within our Wholesale Banking businesses and to a lesser extent other divisions of the Company. All of our trading assets, and derivative assets and liabilities, (including securities, foreign exchange transactions, and commodity transactions) are carried at fair value. Income earned related to these trading activities include net interest income and changes in fair value related to trading assets and derivative assets and liabilities. Net interest income earned from trading activity is reflected in the interest income and interest expense components of our income statement. Changes in fair value related to trading assets, and derivative assets and liabilities are reflected in net gains on trading activities, a component of noninterest income in our income statement.

~~Table 31 presents total revenue from trading activities.~~

~~Table 31:Net Gains (Losses) from Trading Activities~~

Quarter ended September 30, Nine months ended September 30,
(in millions) 2017
2016
2017
2016
Interest income (1) $ 754
593
$ 2,107
1,761
Less: Interest expense (2) 109
88
309
260
Net interest income 645
505
1,798
1,501
Noninterest income:
Net gains (losses) from trading activities (3):
Customer accommodation 188
348
720
947
Economic hedges and other (4) 57
67
201
(4 )
Total net gains from trading activities 245
415
921
943
Total trading-related net interest and noninterest income $ 890
920
$ 2,719
2,444


~~(1)~~	~~Represents interest and dividend income earned on trading securities.~~


~~(2)~~	~~Represents interest and dividend expense incurred on trading securities we have sold but have not yet purchased.~~


~~(3)~~	~~Represents realized gains (losses) from our trading activity and unrealized gains (losses) due to changes in fair value of our trading positions, attributable to the type of business activity.~~


~~(4)~~	~~Excludes economic hedging of mortgage banking and asset/liability management activities, for which hedge results (realized and unrealized) are reported with the respective hedged activities.~~

~~Customer accommodation~~ Customer accommodation activities are conducted to help customers manage their investment and risk management needs. We engage in market-making activities or act as an intermediary to purchase or sell financial instruments in anticipation of or in response to customer needs. This category also includes positions we use to manage our exposure to customer transactions.

In our customer accommodation trading, we serve as intermediary between buyer and seller. For example, we may purchase or sell a derivative to a customer who wants to manage interest rate risk exposure. We typically enter into offsetting derivative or security positions with a separate counterparty or exchange to manage our exposure to the derivative with our customer. We earn income on this activity based on the transaction price difference between the customer and offsetting derivative or security positions, which is reflected in the fair value changes of the positions recorded in net gains on trading activities.

Customer accommodation trading also includes net gains related to market-making activities in which we take positions to facilitate customer order flow. For example, we may own securities recorded as trading assets (long positions) or sold securities we have not yet purchased, recorded as trading liabilities (short positions), typically on a short-term basis, to facilitate support of buying and selling demand from our customers. As a market maker in these securities, we earn income due to: (1) the difference between the price paid or received for the purchase and sale of the security (bid-ask spread), (2) the net interest income, and (3) the change in fair value of the long or short positions during the short-term period held on our balance sheet. Additionally, we may enter into separate derivative or security positions to manage our exposure related to our long or short security positions. Income earned on this type of market-making activity is reflected in the fair value changes of these positions recorded in net gains on trading activities.

~~Economic hedges and other~~ Economic hedges in trading activities are not designated in a hedge accounting relationship and exclude economic hedging related to our asset/liability risk management and mortgage banking risk management activities. Economic hedging activities include the use of trading securities to economically hedge risk exposures related to non-trading activities or derivatives to hedge risk exposures related to trading assets or trading liabilities. Economic hedges are unrelated to our customer accommodation activities. Other activities include financial assets held for investment purposes that we elected to carry at fair value with changes in fair value recorded to earnings in order to mitigate accounting measurement mismatches or avoid embedded derivative accounting complexities.

~~Daily Trading-Related Revenue~~ Table 32 provides information on the distribution of daily trading-related revenues for the Company’s trading portfolio. This trading-related revenue is defined as the change in value of the trading assets and trading liabilities, trading-related net interest income, and trading-related intra-day gains and losses. Net trading-related revenue does not include activity related to long-term positions held for economic hedging purposes, period-end adjustments, and other activity not representative of daily price changes driven by market factors.

~~Table 32:Distribution of Daily Trading-Related Revenues~~

~~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, ~~mortgage rates,~~and the risk of possible loss due to counterparty risk. This includes implied volatility risk, basis risk, and market ~~liquidity.~~liquidity risk. Market risk ~~is intrinsic~~also includes counterparty credit risk, price risk in the trading book, mortgage servicing rights and the associated hedge effectiveness risk associated with the mortgage book, and impairment on private equity investments.

The Board’s Finance Committee has primary oversight responsibility for market risk and oversees the Company’s market risk exposure and market risk management strategies. In addition, the Board’s Risk Committee has certain oversight responsibilities with respect to market risk, including adjusting the Company’s market risk appetite with input from the Finance Committee. The Finance Committee also reports key market risk matters to the ~~Company’s sales~~Risk Committee.

At the management level, the Market and Counterparty Risk Management function, which is part of Corporate Risk, has primary oversight responsibility for market risk. The Market and Counterparty Risk Management function reports into the CRO and also provides periodic reporting related to market risk to the Board’s Finance Committee. In addition, the Risk & Control Committee for each business group and enterprise function reports market risk matters to the Enterprise Risk & Control Committee.

MARKET RISK – TRADING ACTIVITIESWe engage in trading ~~market making, investing,~~activities to accommodate the investment and risk management ~~activities.~~activities of our customers and to execute economic hedging to manage certain balance sheet risks. These trading activities predominantly occur within our Wholesale Banking businesses and to a lesser extent other divisions of the Company. Debt securities held for trading, equity securities held for trading, trading loans and trading derivatives are financial instruments

~~The Company uses value-at-risk~~

Asset/Liability Management (continued)

used in our trading activities, and all are carried at fair value. 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 income statement. Changes in fair value of the financial instruments used in our trading activities are reflected in net gains on trading activities, a component of noninterest income in our income statement. For more information on the financial instruments used in our trading activities and the income from these trading activities, see Note 4 (Trading Activities) to Financial Statements in this Report.

Value-at-risk (VaR) ~~metrics complemented with sensitivity analysis and stress testing in measuring and monitoring market risk. VaR~~ is a statistical risk measure used to estimate the potential loss from adverse moves in the financial markets. The Company uses VaR metrics complemented with sensitivity analysis and stress testing in measuring and monitoring market risk. For more information, ~~on VaR,~~including information regarding our monitoring activities, sensitivity analysis and stress testing, see the “Risk Management – Asset/

Liability Management – Market Risk – Trading Activities” section in our ~~2016~~2018 Form 10-K.

Trading VaR is the measure used to provide insight into the market risk exhibited by the Company’s trading positions. The

Company calculates Trading VaR for risk management purposes to establish line of business and Company-wide risk limits. Trading VaR is calculated based on all trading positions ~~classified as trading assets or other liabilities, derivative assets or derivative liabilities~~ on our balance sheet.

~~Asset/Liability Management (continued~~)

Table 3330 shows the Company’s Trading General VaR by risk category. As presented in ~~the table,~~Table 30, average Company Trading General VaR was $20 million for the quarter ended June 30, 2019, compared with $15 million for the quarter ended ~~September 30, 2017, compared with $29~~March 31, 2019, and $15 million for the quarter

ended June 30, ~~2017.~~2018. The ~~decrease~~increase in average Company Trading General VaR for the quarter ended June 30, 2019, compared with the quarter ended June 30, 2018, was mainly driven by changes in ~~historical VaR dates dropping out of the 1-year time horizon.~~portfolio composition.

Table ~~33:~~30:Trading 1-Day 99% General VaR by Risk Category


				Quarter ended													Quarter ended
	September 30, 2017							June 30, 2017						June 30, 2019							March 31, 2019						June 30, 2018
(in millions)	Period end			Average		Low	High	Period end		Average		Low	High	Period end			Average		Low	High	Period end		Average		Low	High	Period end		Average		Low	High
Company Trading General VaR Risk Categories
Credit	$	18		26		18	35	23		29		23	36	$	15		15		11	18	15		15		11	19	17		18		15	20
Interest rate	7			13		7	20	10		20		10	27	29			37		27	49	42		34		22	44	18		17		11	24
Equity	13			11		9	14	10		11		9	14	4			5		4	8	5		5		4	7	8		7		5	16
Commodity	2			1		1	2	1		1		1	2	2			2		1	6	2		2		1	4	1		1		1	1
Foreign exchange	0			1		0	1	1		1		0	1	1			1		1	1	1		1		1	1	0		0		0	1
Diversification benefit (1)	(22		)	(37	)			(29	)	(33	)			(32		)	(40	)			(46	)	(42	)			(29	)	(28	)
Company Trading General VaR	$	18		15				16		29				$	19		20				19		15				15		15

(1)

The period-end VaR was less than the sum of the VaR components described above, which is 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.

~~Regulatory Market Risk Capital~~ reflects U.S. regulatory agency risk-based capital regulations that are based on the Basel Committee Capital Accord of the Basel Committee on Banking Supervision. The Company must calculate regulatory capital under the Basel III market risk capital rule, which requires banking organizations with significant trading activities to adjust their capital requirements to reflect the market risks of those activities based on comprehensive and risk sensitive methods and models. The market risk capital rule is intended to cover the risk of loss in value of covered positions due to changes in market conditions.

~~Composition of Material Portfolio of Covered Positions~~ The positions that are “covered” by the market risk capital rule are generally a subset of our trading assets, and derivative assets and liabilities, specifically those held by the Company for the purpose of short-term resale or with the intent of benefiting from actual or expected short-term price movements, or to lock in arbitrage profits. Positions excluded from market risk regulatory capital treatment are subject to the credit risk capital rules applicable to the “non-covered” trading positions.

The material portfolio of the Company’s “covered” positions is mostly concentrated in the trading assets, and derivative assets and liabilities within Wholesale Banking where the substantial portion of market risk capital resides. Wholesale Banking engages in the fixed income, traded credit, foreign exchange, equities, and commodities markets businesses. Other business segments hold smaller trading positions covered under the market risk capital rule.

~~Regulatory Market Risk Capital Components~~ The capital required for market risk on the Company’s “covered” positions is determined by internally developed models or standardized specific risk charges. The market risk regulatory capital models are subject to internal model risk management and validation. The models are continuously monitored and enhanced in response to changes in market conditions, improvements in system capabilities, and changes in the Company’s market risk exposure. The Company is required to obtain and has received prior written approval from its regulators before using its internally developed models to calculate the market risk capital charge.

Basel III prescribes various VaR measures in the determination of regulatory capital and RWAs. The Company uses the same VaR models for both market risk management purposes as well as regulatory capital calculations. For regulatory purposes, we use the following metrics to determine the Company’s market risk capital requirements:

~~General VaR~~ measures the risk of broad market movements such as changes in the level of credit spreads, interest rates, equity prices, commodity prices, and foreign exchange rates. General VaR uses historical simulation analysis based on 99% confidence level and a 10-day holding period.

Table 34 shows the General VaR measure categorized by major risk categories. Average 10-day Company Regulatory General VaR was $31 million for the quarter ended September 30, 2017, compared with $30 million for the quarter

~~ended June 30, 2017. The increase was primarily driven by changes in portfolio composition.~~

~~Table 34:Regulatory 10-Day 99% General VaR by Risk Category~~

Quarter ended
September 30, 2017 June 30, 2017
(in millions)
Period
end

Average
Low
High

Period
end

Average
Low
High
Wholesale Regulatory General VaR Risk Categories
Credit $ 51
66
45
86
60
72
57
93
Interest rate 14
23
14
38
17
39
17
71
Equity (1) 7
12
4
23
6
4
2
7
Commodity 6
8
4
21
11
4
3
11
Foreign exchange 3
6
2
16
8
6
3
29
Diversification benefit (2) (57 ) (86 ) (71 ) (96 )
Wholesale Regulatory General VaR $ 24
29
20
36
31
29
24
37
Company Regulatory General VaR 26
31
22
39
35
30
25
40

~~(1)~~

The period-end VaR was less than the sum of the VaR components described above, which is due to portfolio diversification. The diversification benefit 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.

~~Specific Risk~~ measures the risk of loss that could result from factors other than broad market movements, or name-specific market risk. Specific Risk uses Monte Carlo simulation analysis based on a 99% confidence level and a 10-day holding period.

~~Total VaR~~ ~~(as presented in Table 35) is composed of General VaR and Specific Risk and uses the previous 12 months of historical market data in compliance with regulatory requirements.~~

~~Total Stressed VaR~~ (as presented in Table 35) uses a historical period of significant financial stress over a continuous 12 month period using historically available market data and is composed of Stressed General VaR and Stressed Specific Risk. Total Stressed VaR uses the same methodology and models as Total VaR.

~~Incremental Risk Charge~~ (as presented in Table 35) captures losses due to both issuer default and migration risk at the 99.9% confidence level over the one-year capital horizon under the assumption of constant level of risk or a constant position assumption. The model covers non-securitized credit-sensitive trading products.

The Company calculates Incremental Risk by generating a portfolio loss distribution using Monte Carlo simulation, which assumes numerous scenarios, where an assumption is made that the portfolio’s composition remains constant for a one-year time horizon. Individual issuer credit grade migration and issuer default risk is modeled through generation of the issuer’s credit rating transition based upon statistical modeling. Correlation between credit grade migration and default is captured by a multifactor proprietary model which takes into account industry classifications as well as regional effects. Additionally, the impact of market and issuer specific concentrations is reflected in the modeling framework by assignment of a higher charge for portfolios that have increasing concentrations in particular issuers or sectors. Lastly, the model captures product basis risk; that is, it reflects the material disparity between a position and its hedge.

Table 35 provides information on Total VaR, Total Stressed VaR and the Incremental Risk Charge results for the quarter ended September 30, 2017. Incremental Risk Charge uses the higher of the quarterly average or the quarter end result. For third quarter 2017, the required capital for market risk equals the quarter end results.

~~Table 35:Market Risk Regulatory Capital Modeled Components~~

Quarter ended September 30, 2017 September 30, 2017
(in millions) Average
Low
High
Period end
Risk-
based
capital (1)
Risk-
weighted
assets (1)
Total VaR $ 54
47
65
62
163
2,039
Total Stressed VaR 279
232
321
292
837
10,461
Incremental Risk Charge 32
26
38
34
34
423


~~(1)~~	~~Results represent the risk-based capital and RWAs based on the VaR and Incremental Risk Charge models.~~

~~Securitized Products Charge~~Basel III requires a separate market risk capital charge for positions classified as a securitization or re-securitization. The primary criteria for classification as a securitization are whether there is a transfer of risk and whether the credit risk associated with the underlying exposures has been separated into at least two tranches reflecting different levels of

seniority. Covered trading securitizations positions include consumer and commercial asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), residential mortgage-backed securities (RMBS), and collateralized loan and other debt obligations (CLO/CDO) positions. The securitization capital requirements are the greater of the capital requirements

~~Asset/Liability Management (continued~~)

~~of the net long or short exposure, and are capped at the maximum loss that could be incurred on any given transaction.~~

Table 36 shows the aggregate net fair market value of securities and derivative securitization positions by exposure type that meet the regulatory definition of a covered trading securitization position at~~September 30, 2017, and December 31, 2016.~~

~~Table 36:Covered Securitization Positions by Exposure Type (Net Market Value)~~

(in millions) ABS
CMBS
RMBS
CLO/CDO
September 30, 2017
Securitization exposure:
Securities $ 559
220
744
738
Derivatives 3
(4 ) 1
(2 )
Total $ 562
216
745
736
December 31, 2016
Securitization exposure:
Securities $ 801
397
911
791
Derivatives 3
4
1
(8 )
Total $ 804
401
912
783

~~Securitization Due Diligence and Risk Monitoring~~ The market risk capital rule requires that the Company conduct due diligence on the risk of each securitization position within three days of its purchase. The Company’s due diligence seeks to provide an understanding of the features that would materially affect the performance of a securitization or re-securitization. The due diligence analysis is re-performed on a quarterly basis for each

securitization and re-securitization position. The Company uses an automated solution to track the due diligence associated with securitization activity. The Company aims to manage the risks associated with securitization and re-securitization positions through the use of offsetting positions and portfolio diversification.

~~Standardized Specific Risk Charge~~For debt and equity positions that are not evaluated by the approved internal specific risk models, a regulatory prescribed standard specific risk charge is applied. The standard specific risk add-on for sovereign entities, public sector entities, and depository institutions is based on the Organization for Economic Co-operation and Development (OECD) country risk classifications (CRC) and the remaining contractual maturity of the position. These risk add-ons for debt positions range from 0.25% to 12%. The add-on for corporate debt is based on creditworthiness and the remaining contractual maturity of the position. All other types of debt positions are subject to an 8% add-on. The standard specific risk add-on for equity positions is generally 8%.

~~Comprehensive Risk Charge / Correlation Trading~~The market risk capital rule requires capital for correlation trading positions. The Company's remaining correlation trading exposure covered under the market risk capital rule matured in fourth quarter 2014.

Table 37 summarizes the market risk-based capital requirements charge and market RWAs in accordance with the Basel III market risk capital rule as of September 30, 2017, and December 31, 2016. The market RWAs are calculated as the sum of the components in the table below.

~~Table 37:Market Risk Regulatory Capital and RWAs~~

September 30, 2017 December 31, 2016
(in millions)
Risk-
based
capital

Risk-
weighted
assets

Risk-
based
capital

Risk-
weighted
assets

Total VaR $ 163
2,039
247
3,091
Total Stressed VaR 837
10,461
1,135
14,183
Incremental Risk Charge 34
423
217
2,710
Securitized Products Charge 678
8,469
561
7,007
Standardized Specific Risk Charge 1,248
15,606
1,357
16,962
De minimis Charges (positions not included in models) 10
132
11
147
Total $ 2,970
37,130
3,528
44,100

~~RWA RollforwardTable 38depicts the changes in the market risk regulatory capital and RWAs under Basel III for the first nine months and third quarter of 2017.~~

~~Table 38:Analysis of Changes in Market Risk Regulatory Capital and RWAs~~

(in millions)
Risk-
based
capital

Risk-
weighted
assets

Balance, December 31, 2016 $ 3,528
44,100
Total VaR (84 ) (1,052 )
Total Stressed VaR (298 ) (3,722 )
Incremental Risk Charge (183 ) (2,288 )
Securitized Products Charge 117
1,461
Standardized Specific Risk Charge (108 ) (1,356 )
De minimis Charges (2 ) (13 )
Balance, September 30, 2017 $ 2,970
37,130

Balance, June 30, 2017 $ 3,026
37,827
Total VaR 11
141
Total Stressed VaR (62 ) (774 )
Incremental Risk Charge 4
47
Securitized Products Charge 55
689
Standardized Specific Risk Charge (66 ) (831 )
De minimis Charges 2
31
Balance, September 30, 2017 $ 2,970
37,130

~~The largest contributor to the changes to market risk regulatory capital and RWAs in the first nine months of 2017 was associated with changes in positions due to normal trading activity.~~

~~VaRBacktesting~~The market risk capital rule requires backtesting as one form of validation of the VaR model. Backtesting is a comparison of the daily VaR estimate with the actual clean profit and loss (clean P&L) as defined by the market risk capital rule. Clean P&L is the change in the value of the Company’s covered trading positions that would have occurred had previous end-of-day covered trading positions remained unchanged (therefore, excluding fees, commissions, net interest income, and intraday trading gains and losses). The backtesting analysis compares the daily Total VaR for each of the trading days in the preceding 12 months with the net clean P&L. Clean P&L does not include credit adjustments and other activity not representative of daily price changes driven by market risk factors. The clean P&L measure of revenue is used to evaluate the performance of the Total VaR and is not comparable to our actual daily trading net revenues, as reported elsewhere in this Report.

Any observed clean P&L loss in excess of the Total VaR is considered a market risk regulatory capital backtesting exception. The actual number of exceptions (that is, the number of business days for which the clean P&L losses exceed the corresponding 1-day, 99% Total VaR measure) over the preceding 12 months is used to determine the capital multiplier for the capital calculation. The number of actual backtesting exceptions is dependent on current market performance relative to historic market volatility in addition to model performance and assumptions. This capital multiplier increases from a minimum of three to a maximum of four, depending on the number of exceptions. No backtesting exceptions occurred over the preceding 12 months. Backtesting is also performed at line of business levels within the Company.

Table 39 shows daily Total VaR (1-day, 99%) used for regulatory market risk capital backtesting for the 12 months ended September 30, 2017. The Company’s average Total VaR for third quarter 2017 was $19 million with a low of $17 million and a high of $21 million. The decrease in Total 1-day VaR in second quarter 2017 was attributable to a decline in modeled Specific Risk.

~~Asset/Liability Management (continued~~)

~~Table 39: Daily Total 1-Day 99% VaR Measure (Rolling 12 Months)~~

~~Market Risk Governance,Measurement, Monitoring and Model Risk Management~~We employ a well-defined and structured market risk governance process and market risk measurement process, which incorporates value-at-risk (VaR) measurements combined with sensitivity analysis and stress testing to help us monitor our market risk. These monitoring measurements require the use of market risk models, which we govern by our Corporate Model Risk policies and procedures. For more information on our governance, measurement, monitoring, and model risk management practices, see the “Risk Management – Asset/Liability Management – Market Risk – Trading Activities” section in our 2016 Form 10-K.

MARKET RISK – EQUITY ~~INVESTMENTS~~SECURITIESWe are directly and indirectly affected by changes in the equity markets. We make and manage direct ~~equity~~ investments in start-up businesses, emerging growth companies, management buy-outs, acquisitions and corporate recapitalizations. We also invest in non-affiliated funds that make similar private equity investments. These private equity investments are made within capital allocations approved by management and the Board. The Board’s policy is to review business developments, key risks and historical returns for the private equity investment portfolio at least annually. Management reviews these investments at least quarterly and assesses them for possible ~~OTTI.~~OTTI and observable price changes. For nonmarketable ~~investments,~~equity securities, the analysis is based on facts and circumstances of each individual investment and the expectations for that investment’s cash flows, ~~and~~ capital needs, the viability of its business model, ~~and~~ our exit ~~strategy. Nonmarketable investments~~strategy, and observable price changes that are similar to the investment held. Investments in nonmarketable equity securities include private equity investments accounted for under the ~~cost method,~~ equity method, ~~and~~ fair value ~~option.~~through net income, and the measurement alternative.

In conjunction with the March 2008 initial public offering (IPO) of Visa, Inc. (Visa), we received approximately 20.7 million shares of Visa Class B common stock, the class which was apportioned to member banks of Visa at the time of the IPO. To

manage our exposure to Visa and realize the value of the appreciated Visa shares, we incrementally sold these shares

through a series of sales, ~~over the past few years,~~ thereby eliminating this position as of September 30, 2015. As part of these sales, we agreed to compensate the buyer for any additional contributions to a litigation settlement fund for the litigation matters associated with the Class B shares we sold. Our exposure to this retained litigation risk has been updated quarterly and is reflected on our balance sheet. For additional information about the associated litigation matters, see the “Interchange Litigation” section in Note 1114 (Legal Actions) to Financial Statements in this Report.

As part of our business to support our customers, we trade public equities, listed/OTC equity derivatives and convertible bonds. We have parameters that govern these activities. We also have marketable equity securities ~~in the available-for-sale securities portfolio, including securities~~that include investments relating to our venture capital activities. We manage these ~~investments~~marketable equity securities within capital risk limits approved by management and the Board and monitored by Corporate ALCO and the ~~Corporate~~ Market Risk Committee. ~~Gains and losses on~~The fair value changes in these marketable equity securities are recognized in net ~~income when realized and periodically include OTTI charges.~~income. For more information, see Note 8 (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.

~~Table 40 provides information regarding our marketable and nonmarketable equity investments as of September 30, 2017, and December 31, 2016.~~

~~Table 40:Nonmarketable and Marketable Equity Investments~~


~~(1)~~	~~Represents low income housing tax credit investments.~~


~~(2)~~	Represents nonmarketable equity investments for which we have elected the fair value option. See Note 6 (Other Assets) and Note 13 (Fair Values of Assets and Liabilities) to Financial Statements in this Report for additional information.


~~(3)~~	~~Included in other assets on the balance sheet. See Note 6 (Other Assets) to Financial Statements in this Report for additional information.~~


~~(4)~~	~~Included in available-for-sale securities. See Note 4 (Investment Securities) to Financial Statements in this Report for additional information.~~

LIQUIDITY AND FUNDINGThe objective of effective liquidity management is to ensure that we can meet customer loan requests, customer deposit maturities/withdrawals and other cash commitments efficiently under both normal operating conditions and under periods of Wells Fargo-specific and/or market stress. To achieve this objective, the Board of Directors 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 Corporate ALCO and on a quarterly basis by the Board of Directors. These guidelines are established and monitored for both the consolidated company and for the Parent on a stand-alone basis to ensure that the Parent is a source of strength for its regulated, deposit-taking banking subsidiaries.

Liquidity Standards ~~On September 3, 2014,~~ We are subject to a rule, issued by the FRB, OCC and FDIC, ~~issued a final rule~~ that ~~implements~~implemented a quantitative liquidity requirement consistent with the liquidity coverage ratio (LCR) established by the Basel Committee on Banking Supervision (BCBS). The rule requires banking institutions, such as Wells Fargo, to hold high-quality liquid assets (HQLA), such as central bank reserves and government and corporate debt that can be converted easily and quickly into cash, in an amount equal to or greater than its projected net cash outflows during a 30-day stress period. The rule is applicable to the Company on a consolidated basis and to our insured depository institutions with total assets greater than $10 billion. In addition, rules issued by the FRB ~~finalized rules imposing~~impose enhanced liquidity management standards on large bank holding companies (BHC) such as Wells ~~Fargo, and finalized a rule that requires large bank holding companies to publicly disclose on a quarterly basis beginning~~

~~April 1, 2017, certain quantitative and qualitative information regarding their LCR calculations.~~Fargo.

The FRB, OCC and FDIC have proposed a rule that would implement a stable funding requirement, the net stable funding ratio (NSFR), which would require large banking organizations, such as Wells Fargo, to maintain a sufficient amount of stable funding in relation to their assets, derivative exposures and commitments over a one-year horizon period. ~~As proposed, the rule would become effective on January 1, 2018.~~

Liquidity Coverage Ratio As of ~~September~~June 30, ~~2017,~~2019, the consolidated Company and Wells Fargo Bank, N.A. were above

the minimum LCR requirement of 100%, which is calculated as HQLA divided by projected net cash outflows, as each is defined under the LCR rule. Table 4131 presents the Company’s quarterly average values for the daily-calculated LCR and its components calculated pursuant to the LCR rule requirements.

Table ~~41:~~31: Liquidity Coverage Ratio


(in millions)	Average for Quarter ended September 30, 2017
(in millions, except ratio)				Average for Quarter ended June 30, 2019
HQLA (1)(2)	$	398,381		$	352,298
Projected net cash outflows	311,592			291,624
LCR	128		%	121		%
HQLA in excess of projected net cash outflows	$	86,789

(1) Excludes excess HQLA at Wells Fargo Bank, N.A.

(2) Net of applicable haircuts required under the LCR rule.

Liquidity Sources We maintain liquidity in the form of cash, cash equivalents and unencumbered high-quality, liquid debt securities. These assets make up our primary sources of liquidity which are presented in Table ~~42.~~32. 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 insured depository institutions required under the LCR rule.

Our cash is predominantly on deposit with the Federal Reserve. ~~Securities~~Debt securities included as part of our primary sources of liquidity are comprised of U.S. Treasury and federal agency debt, and mortgage-backed securities issued by federal agencies within our ~~investment~~debt securities portfolio. We believe these debt securities provide quick sources of liquidity through sales or by pledging to obtain financing, regardless of market conditions. Some of these debt securities are within the held-to-maturity portion of our ~~investment~~debt securities portfolio and as such are not intended for sale but may be pledged to obtain financing. Some of the legal entities within our consolidated group of companies are subject to various regulatory, tax, legal and other restrictions that can limit the transferability of their funds. We believe we maintain adequate liquidity for these entities in consideration of such funds transfer restrictions.

~~Asset/Liability Management (continued~~)

Table ~~42:~~32:Primary Sources of Liquidity


	September 30, 2017				December 31, 2016				June 30, 2019				December 31, 2018
(in millions)	Total		Encumbered	Unencumbered	Total		Encumbered	Unencumbered	Total		Encumbered	Unencumbered	Total	Encumbered	Unencumbered
Interest-earning deposits	$	205,648	—	205,648	$	200,671	—	200,671
Securities of U.S. Treasury and federal agencies	51,632		1,101	50,531	70,898		1,160	69,738
Interest-earning deposits with banks									$	143,547	—	143,547	149,736	—	149,736
Debt securities of U.S. Treasury and federal agencies									60,655		2,384	58,271	57,688	1,504	56,184
Mortgage-backed securities of federal agencies (1)	239,798		46,137	193,661	205,655		52,672	152,983	249,619		34,627	214,992	244,211	35,656	208,555
Total	$	497,078	47,238	449,840	$	477,224	53,832	423,392	$	453,821	37,011	416,810	451,635	37,160	414,475


(1)	Included in encumbered debt securities at ~~September~~June 30, ~~2017~~,2019, were debt securities with a fair value of ~~$8.0~~$2.1 billion which were purchased in ~~September 2017,~~June 2019, but settled in ~~October 2017.~~ July 2019.

In addition to our primary sources of liquidity shown in Table ~~42,~~32, liquidity is also available through the sale or financing of other debt securities including trading and/or available-for-sale debt securities, as well as through the sale, securitization or financing of loans, to the extent such debt securities and loans are not encumbered. In addition, other debt securities in our held-to-maturity portfolio, to the extent not encumbered, may be pledged to obtain financing.

Deposits have historically provided a sizable source of relatively low-cost funds. Deposits were ~~137%~~136% of total loans at ~~September~~June 30, ~~2017~~2019, and 135% at December 31, ~~2016.~~2018.

Additional funding is provided by long-term debt and short-term borrowings. We access domestic and international capital markets for long-term funding (generally greater than one year) through issuances of registered debt securities, private placements and asset-backed secured funding.

Asset/Liability Management (continued)

Table 4333 shows selected information for short-term borrowings, which generally mature in less than 30 days.

Table ~~43:~~33:Short-Term Borrowings


	Quarter ended						Quarter ended
(in millions)	Sep 30 2017		Jun 30, 2017	Mar 31, 2017	Dec 31, 2016	Sep 30, 2016	Jun 30 2019		Mar 31, 2019	Dec 31, 2018	Sep 30, 2018	Jun 30, 2018
Balance, period end
Federal funds purchased and securities sold under agreements to repurchase	$	79,824	78,683	76,366	78,124	108,468	$	102,560	93,896	92,430	92,418	89,307
Commercial paper	—		11	10	120	123
Other short-term borrowings	13,987		16,662	18,495	18,537	16,077	12,784		12,701	13,357	13,033	15,189
Total	$	93,811	95,356	94,871	96,781	124,668	$	115,344	106,597	105,787	105,451	104,496
Average daily balance for period
Federal funds purchased and securities sold under agreements to repurchase	$	81,980	79,826	79,942	107,271	101,252	$	102,557	95,721	93,483	92,141	89,138
Commercial paper	4		10	51	121	137
Other short-term borrowings	17,209		15,927	18,556	17,306	14,839	12,197		12,930	12,479	13,331	14,657
Total	$	99,193	95,763	98,549	124,698	116,228	$	114,754	108,651	105,962	105,472	103,795
Maximum month-end balance for period
Federal funds purchased and securities sold under agreements to repurchase (1)	$	83,260	78,683	81,284	109,645	108,468	$	105,098	97,650	93,918	92,531	92,103
Commercial paper (2)	11		11	78	121	138
Other short-term borrowings (3)	18,301		18,281	19,439	18,537	16,077
Other short-term borrowings (2)							12,784		14,129	13,357	14,270	15,272


(1)	Highest month-end balance in each of the last five quarters was in ~~August, June~~May and ~~February 2017, October~~January 2019, and ~~September 2016.~~ November, July and May 2018.


(2)	Highest month-end balance in each of the last five quarters was in ~~July~~, June and ~~January 2017, November~~February 2019, and December, July ~~2016.~~


~~(3)~~	~~Highest month-end balance in each of the last five quarters was in~~ ~~July, April~~ and ~~February 2017, December and September 2016.~~ May 2018.

Long-Term Debt We issue long-term debt in a variety of maturities and currencies to achieve cost-efficient funding and to maintain an appropriate maturity profile. Long-term debt of ~~$238.9~~$241.5 billion at ~~September~~June 30, ~~2017, decreased $16.2~~2019, increased $12.4 billion from December 31, ~~2016.~~2018. We issued ~~$10.4~~$15.8 billion and ~~$38.4~~$33.1 billion of

long-term debt in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively. Table 4434 provides the aggregate carrying value of long-term debt maturities (based on contractual payment dates) for the remainder of ~~2017~~2019 and the following years thereafter, as of ~~September~~June 30, ~~2017.~~2019.

Table ~~44:~~34:Maturity of Long-Term Debt


	September 30, 2017								June 30, 2019
(in millions)	Remaining 2017		2018	2019	2020	2021	Thereafter	Total	Remaining 2019		2020	2021	2022	2023	Thereafter	Total
Wells Fargo & Company (Parent Only)
Senior notes	$	3,084	8,002	6,791	13,300	18,036	71,083	120,296	$	1,280	13,497	18,146	18,028	11,092	54,815	116,858
Subordinated notes	—		608	—	—	—	26,380	26,988	—		—	—	—	3,655	23,619	27,274
Junior subordinated notes	—		—	—	—	—	1,658	1,658	—		—	—	—	—	1,733	1,733
Total long-term debt - Parent	$	3,084	8,610	6,791	13,300	18,036	99,121	148,942	$	1,280	13,497	18,146	18,028	14,747	80,167	145,865
Wells Fargo Bank, N.A. and other bank entities (Bank)
Senior notes	$	4,512	31,622	18,888	5,511	10,238	240	71,011	$	17,219	30,630	27,232	2,148	2,883	181	80,293
Subordinated notes	1,026		—	—	—	—	5,406	6,432	—		—	—	—	1,041	4,354	5,395
Junior subordinated notes	—		—	—	—	—	340	340	—		—	—	—	—	357	357
Securitizations and other bank debt	1,732		1,803	728	649	117	3,639	8,668	1,302		1,793	861	418	108	2,035	6,517
Total long-term debt - Bank	$	7,270	33,425	19,616	6,160	10,355	9,625	86,451	$	18,521	32,423	28,093	2,566	4,032	6,927	92,562
Other consolidated subsidiaries
Senior notes	$	—	807	1,200	—	1,016	404	3,427	$	1,146	66	1,123	12	422	248	3,017
Junior subordinated notes	—		—	—	—	—	—	—
Securitizations and other bank debt	—		73	—	—	—	—	73	—		—	—	—	—	32	32
Total long-term debt - Other consolidated subsidiaries	$	—	880	1,200	—	1,016	404	3,500	$	1,146	66	1,123	12	422	280	3,049
Total long-term debt	$	10,354	42,915	27,607	19,460	29,407	109,150	238,893	$	20,947	45,986	47,362	20,606	19,201	87,374	241,476

Parent In ~~February 2017,~~March 2019, the ~~Parent filed a~~Securities and Exchange Commission (SEC) declared effective the Parent’s registration statement ~~with the SEC~~ for the issuance of up to $50 billion of senior and subordinated notes, preferred stock and other securities. At June 30, 2019, the Parent’s remaining authorized issuance capacity under this registration statement was $47.5 billion. The Parent’s overall ability to issue debt ~~and other~~ securities ~~under this registration statement~~ is limited by the debt issuance authority granted by the Board. As of ~~September~~June 30, ~~2017,~~2019, the Parent was authorized by the Board to issue up to ~~$50 billion in outstanding short-term debt and $180~~$200 billion in outstanding long-term debt. The Parent’s long-term debt issuance authority granted by the Board includes debt

issued to affiliates and others. At June 30, 2019, the Parent had available $52.3 billion in long-term debt issuance authority, net of debt issued to affiliates. During the first half of 2019, the Parent issued $11.3 billion of senior notes, most of which were registered with the SEC. The Parent’s short-term debt issuance authority granted by the Board iswas limited to debt issued to affiliates, ~~while the Parent’s long-term debt issuance authority granted~~and was revoked by the Board ~~includes debt issued to affiliates and others. At September 30, 2017, the Parent had available $50.0 billion~~at management’s request in short-term debt issuance authority and $26.9 billion in long-term debt issuance authority. During the first nine months of 2017, the Parent issued $21.9 billion of senior notes, of which $16.1 billion were registered with the SEC.January 2018.

The Parent’s proceeds from securities issued were used for general corporate purposes, and, unless otherwise specified in the applicable prospectus or prospectus supplement, we expect the

proceeds from securities issued in the future will be used for the same purposes. Depending on market conditions, we may purchase our outstanding debt securities from time to time in privately negotiated or open market transactions, by tender offer, or otherwise.

Wells Fargo Bank, N.A. As of ~~September~~June 30, ~~2017,~~2019, Wells Fargo Bank, N.A. was authorized by its board of directors to issue $100 billion in outstanding short-term debt and $175 billion in outstanding long-term debt and had available ~~$97.4~~$98.9 billion in short-term debt issuance authority and ~~$98.2~~$97.7 billion in long-term debt issuance authority. In April ~~2015,~~2018, Wells Fargo Bank, N.A. established a $100 billion bank note program under which, subject to any other debt outstanding under the limits described above, it may issue $50 billion in outstanding short-term senior notes and $50 billion in outstanding long-term senior or subordinated notes. At ~~September~~June 30, ~~2017,~~2019, Wells Fargo Bank, N.A. had remaining issuance capacity under the bank note program of $50.0 billion

in short-term senior notes and ~~$38.0~~$34.2 billion in long-term senior or subordinated notes. During the first ~~nine months~~half of ~~2017,~~2019, Wells Fargo Bank, N.A. issued ~~$1.0~~$6.7 billion of unregistered senior ~~notes, none of which were issued under the bank note program. In addition, during~~notes.

During the first ~~nine months~~half of ~~2017,~~2019, Wells Fargo Bank, N.A. ~~executed advances of $20.4~~borrowed $8.5 billion ~~with~~from the Federal Home Loan Bank of Des Moines, and as of ~~September~~June 30, ~~2017,~~2019, Wells Fargo Bank, N.A. had outstanding advances of ~~$60.0~~$45.9 billion across the Federal Home Loan Bank System. Federal Home Loan Bank advances are reflected as short-term borrowings or long-term debt on the Company’s balance sheet.

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.

On ~~September 18, 2017,~~April 1, 2019, S&P Global Ratings affirmed ~~all of~~ the ~~Company’s~~credit ratings for both the Parent and maintained its negative ratings outlook. On September 20, 2017, DBRS, Inc. (DBRS) downgraded the Company’s long-term ratings by one notch and affirmed the Company’s short-term ratings. DBRS revised the trend on the Company's long-term ratings from negative to stable. On October 3, 2017, Fitch Ratings, Inc. downgraded certain of the Company’s ratings by one notch andWells Fargo Bank, N.A., but revised the ratings outlook for the Parent to negative from ~~negative~~stable. There were no other actions undertaken by the rating agencies with regard to ~~stable.~~our credit ratings during second quarter 2019. Both the Parent and Wells Fargo Bank, N.A. remain among the ~~top-rated~~highest-rated financial firms in the U.S.

See the “Risk Factors” section in our ~~2016~~2018 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 1215 (Derivatives) to Financial Statements in this Report for information regarding additional collateral and funding obligations required for certain

~~Asset/Liability Management (continued~~)

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 ~~September~~June 30, ~~2017,~~2019, are presented in Table ~~45.~~

35.

Table ~~45:~~35:Credit Ratings as of ~~September~~June 30, ~~2017~~2019



	Wells Fargo & Company		Wells Fargo Bank, N.A.
	Senior debt	Short-term borrowings	Long-term deposits	Short-term borrowings
~~Moody's~~Moody’s	A2	P-1	Aa1	P-1
S&P Global Ratings	AA-	~~A-1~~A-2	~~AA-~~A+	~~A-1+~~A-1
Fitch Ratings, Inc.	A+	F1	AA	F1+
DBRS	~~AA(low)~~AA (low)	~~R-1(middle)~~R-1 (middle)	AA	~~R-1(high)~~R-1 (high)

FEDERAL HOME LOAN BANK MEMBERSHIP The Federal Home Loan Banks (the FHLBs) are a group of cooperatives that lending institutions use to finance housing and economic development in local communities. We are a member of the FHLBs based in Dallas, Des Moines and San Francisco. Each member of the FHLBs is required to maintain a minimum investment in capital stock of the applicable FHLB. The board of directors of each FHLB can increase the minimum investment requirements in the event it has concluded that additional capital is required to allow it to meet its own regulatory capital requirements. Any increase in the minimum investment requirements outside of specified ranges requires the approval of the Federal Housing Finance ~~Board.~~Agency. Because the extent of any obligation to increase our investment in any of the FHLBs depends entirely upon the occurrence of a future event, potential future payments to the FHLBs are not determinable.

LIBOR TRANSITION During the first half of 2019, the Company did not issue any debt securities with an interest rate indexed to the new Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. SOFR is an alternative to LIBOR and is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities. Due to the uncertainty surrounding the future of LIBOR, it is expected that a transition away from the widespread use of LIBOR to alternative benchmark rates will occur by the end of 2021. See the “Asset/Liability Management – Liquidity and Funding” section in our 2018 Form 10-K for additional information regarding our strategy to transition products and exposures away from LIBOR, and the “Risk Factors” section in our 2018 Form 10-K for additional information regarding the potential impact of a benchmark rate, such as LIBOR, or other referenced financial metric being significantly changed, replaced or discontinued.

Capital Management (continued)

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 working 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. Retained earnings increased ~~$8.7~~$6.4 billion from December 31, ~~2016,~~2018, predominantly from Wells Fargo net income of ~~$15.9~~$12.1 billion, less common and preferred stock dividends of ~~$7.0~~$4.8 billion. During ~~third~~second quarter ~~2017,~~2019, we issued ~~10.1 million shares of common stock. During third quarter 2017, we repurchased 49.0~~8.5 million shares of common stock, ~~in open market transactions, private transactions and from employee benefit plans,~~excluding conversions of preferred shares. During second quarter 2019, we repurchased 104.9 million shares of common stock at a cost of ~~$2.6~~$4.9 billion. ~~We also entered into a $1 billion forward repurchase contract with an unrelated third party~~The amount of our repurchases are subject to various factors as discussed in ~~October 2017 that is expected to settle in first quarter 2018 for approximately 19 million shares.~~the “Securities Repurchases” section below. For additional information about ~~our forward repurchase agreements,~~share repurchases, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

Regulatory Capital Guidelines

The Company and each of our insured depository institutions are subject to various regulatory capital adequacy requirements administered by the FRB and the OCC. Risk-based capital (RBC) guidelines establish a risk-adjusted ratio relating 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 final and interim final rules issued by federal banking regulators to implement Basel III capital requirements for U.S. banking organizations. These rules are based on international guidelines for determining regulatory capital issued by the ~~Basel Committee on Banking Supervision (BCBS).~~BCBS. The federal banking regulators’ capital rules, among other things, require on a fully phased-in basis:

a minimum Common Equity Tier 1 (CET1) ratio of 9.0%, comprised of a 4.5% minimum requirement plus a capital conservation buffer of 2.5% and for us, as a global systemically important bank (G-SIB), a capital surcharge to be calculated annually, which is 2.0% ~~based on our year-end 2015 data;~~for 2019;

a minimum tier 1 capital ratio of 10.5%, comprised of a 6.0% minimum requirement plus the capital conservation buffer of 2.5% and the G-SIB capital surcharge of 2.0%;

a minimum total capital ratio of 12.5%, comprised of a 8.0% minimum requirement plus the capital conservation buffer of 2.5% and the G-SIB capital surcharge of 2.0%;

a potential countercyclical buffer of up to 2.5% to be added to the minimum capital ratios, which is currently not in effect but could be imposed by regulators at their discretion if it is determined that a period of excessive credit growth is contributing to an increase in systemic risk;

a minimum tier 1 leverage ratio of 4.0%; and

a minimum supplementary leverage ratio (SLR) of 5.0% (comprised of a 3.0% minimum requirement plus a supplementary leverage buffer of 2.0%) for large and internationally active ~~bank holding companies (BHCs).~~BHCs.

We were required to comply with the final Basel III capital rules beginning January 2014, with certain provisions subject to phase-in periods. The entire Basel III capital rules are scheduled

to be fully phased in by the end of 2021. The Basel III capital rules contain two frameworks for calculating capital requirements, a Standardized Approach, which replaced Basel I, and an Advanced Approach applicable to certain institutions, including Wells Fargo. Accordingly, in the assessment of our capital adequacy, we must report the lower of our CET1, tier 1 and total capital ratios calculated under the Standardized Approach and under the Advanced Approach.

On April 10, 2018, the FRB issued a proposed rule that would add a stress capital buffer and a stress leverage buffer to the minimum capital and tier 1 leverage ratio requirements. The buffers would be calculated based on the decrease in a financial institution’s risk-based capital and tier 1 leverage ratios under the supervisory severely adverse scenario in the Comprehensive Capital Analysis and Review (CCAR), plus four quarters of planned common stock dividends. The stress capital buffer would replace the 2.5% capital conservation buffer under the Standardized Approach, whereas the stress leverage buffer would be added to the current 4% minimum tier 1 leverage ratio.

Because the Company has been designated as a G-SIB, we ~~will~~are also be subject to the ~~FRB’s~~FRB's rule implementing the additional capital surcharge of between 1.0-4.5% on the minimum capital 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) ~~will consider~~considers our size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity, consistent with athe methodology developed by the BCBS and the Financial Stability Board (FSB). The second (method two) ~~will use~~uses similar inputs, but ~~will replace~~replaces substitutability with use of short-term wholesale funding and will generally result in higher surcharges than the BCBS methodology. The ~~phase-in period for the~~ G-SIB surcharge ~~began on January 1, 2016 and will become~~became fully ~~effective~~phased-in on January 1, 2019. ~~Based on year-end 2015 data, our 2017~~Our 2019 G-SIB surcharge under method two is 2.0% of the Company’s ~~RWAs,~~risk-weighted assets (RWAs), which is the higher of method one and method two. Because the G-SIB surcharge is calculated annually based on data that can differ over time, the amount of the surcharge is subject to change in future years. Under the Standardized Approach, ~~(fully phased-in),~~ our CET1 ratio (fully phased-in) of ~~11.82%~~11.97% exceeded the minimum of 9.0% by ~~282~~297 basis points at ~~September~~June 30, ~~2017.~~2019.

Beginning January 1, 2018, the requirements for calculating CET1 and tier 1 capital, along with RWAs, became fully phased-in. However, the requirements for calculating tier 2 and total capital are still in accordance with Transition Requirements. The tables that follow provide information about our ~~risk- based~~risk-based capital and related ratios as calculated under Basel III capital guidelines. For banking industry regulatory reporting purposes, we continue to report our tier 2 and total capital in accordance with Transition Requirements but are managing our capital based on a fully phased-in calculation. For information about our capital requirements calculated in accordance with Transition Requirements, see Note 1923 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report.

~~Capital Management (continued~~)

Table 4636 summarizes our CET1, tier 1 capital, total capital, risk-weighted assets and capital ratios on a fully phased-in basis at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016.~~2018. As of ~~September~~June 30, ~~2017,~~2019, our CET1, ~~and~~ tier 1, and total capital ratios were lower using RWAs calculated under the Standardized Approach.

Table ~~46:~~36:Capital Components and Ratios (Fully Phased-In) (1)


		September 30, 2017						December 31, 2016					June 30, 2019					December 31, 2018
(in millions)		Advanced Approach				Standardized Approach		Advanced Approach		Standardized Approach
(in millions, except ratios)													Advanced Approach			Standardized Approach		Advanced Approach	Standardized Approach
Common Equity Tier 1	(A)	$	152,808			152,808		146,424		146,424		(A)	$	149,183		149,183		146,363	146,363
Tier 1 Capital	(B)	176,263				176,263		169,063		169,063		(B)	170,675			170,675		167,866	167,866
Total Capital	(C)	207,593				217,279		200,344		210,796		(C)	200,291			208,298		198,103	206,346
Risk-Weighted Assets	(D)	1,243,355				1,292,841		1,298,688		1,358,933		(D)	1,182,838			1,246,683		1,177,350	1,247,210
Common Equity Tier 1 Capital Ratio	(A)/(D)	12.29		%		11.82	*	11.27		10.77	*	(A)/(D)	12.61		%	11.97	*	12.43	11.74	*
Tier 1 Capital Ratio	(B)/(D)	14.18				13.63	*	13.02		12.44	*	(B)/(D)	14.43			13.69	*	14.26	13.46	*
Total Capital Ratio	(C)/(D)	16.70			*	16.81		15.43	*	15.51		(C)/(D)	16.93			16.71	*	16.83	16.54	*

*Denotes the lowest capital ratio as determined under the Advanced and Standardized Approaches.

(1)

Fully phased-in ~~regulatory~~total capital amounts ~~ratios~~ and ~~RWAs~~ratios are considered non-GAAP financial measures that are used by management, bank regulatory agencies, investors and analysts to assess and monitor the Company’s capital position. See Table 4737 for information regarding the calculation and components of CET1, tier 1 capital, total capital and RWAs, as well as the corresponding reconciliation of our fully phased-in regulatory capital amounts to GAAP financial measures.

Table 4737 provides information regarding the calculation and composition of our risk-based capital under the Advanced and ~~Standardized Approaches at September 30, 2017 and December 31, 2016.~~

Standardized Approaches at June 30, 2019 and December 31, 2018.

Table ~~47:~~37:Risk-Based Capital Calculation and Components


		September 30, 2017					December 31, 2016					June 30, 2019					December 31, 2018
(in millions)		Advanced Approach			Standardized Approach		Advanced Approach		Standardized Approach			Advanced Approach			Standardized Approach		Advanced Approach		Standardized Approach
Total equity		$	206,824		206,824		200,497		200,497			$	200,037		200,037		197,066		197,066
Adjustments:
Preferred stock		(25,576		)	(25,576	)	(24,551	)	(24,551	)		(23,021		)	(23,021	)	(23,214	)	(23,214	)
Additional paid-in capital on ESOP preferred stock		(130		)	(130	)	(126	)	(126	)		(78		)	(78	)	(95	)	(95	)
Unearned ESOP shares		1,904			1,904		1,565		1,565			1,292			1,292		1,502		1,502
Noncontrolling interests		(895		)	(895	)	(916	)	(916	)		(995		)	(995	)	(900	)	(900	)
Total common stockholders' equity		182,127			182,127		176,469		176,469
Total common stockholders’ equity												177,235			177,235		174,359		174,359
Adjustments:
Goodwill		(26,581		)	(26,581	)	(26,693	)	(26,693	)		(26,415		)	(26,415	)	(26,418	)	(26,418	)
Certain identifiable intangible assets (other than MSRs)		(1,913		)	(1,913	)	(2,723	)	(2,723	)		(493		)	(493	)	(559	)	(559	)
Other assets (1)		(2,282		)	(2,282	)	(2,088	)	(2,088	)		(2,251		)	(2,251	)	(2,187	)	(2,187	)
Applicable deferred taxes (2)		1,550			1,550		1,772		1,772			788			788		785		785
Investment in certain subsidiaries and other		(93		)	(93	)	(313	)	(313	)		319			319		383		383
Common Equity Tier 1 (Fully Phased-In)		152,808			152,808		146,424		146,424			149,183			149,183		146,363		146,363
Effect of Transition Requirements		740			740		2,361		2,361
Common Equity Tier 1 (Transition Requirements)		$	153,548		153,548		148,785		148,785

Common Equity Tier 1 (Fully Phased-In)		$	152,808		152,808		146,424		146,424			$	149,183		149,183		146,363		146,363
Preferred stock		25,576			25,576		24,551		24,551			23,021			23,021		23,214		23,214
Additional paid-in capital on ESOP preferred stock		130			130		126		126			78			78		95		95
Unearned ESOP shares		(1,904		)	(1,904	)	(1,565	)	(1,565	)		(1,292		)	(1,292	)	(1,502	)	(1,502	)
Other		(347		)	(347	)	(473	)	(473	)		(315		)	(315	)	(304	)	(304	)
Total Tier 1 capital (Fully Phased-In)	(A)	176,263			176,263		169,063		169,063		(A)	170,675			170,675		167,866		167,866
Effect of Transition Requirements		733			733		2,301		2,301
Total Tier 1 capital (Transition Requirements)		$	176,996		176,996		171,364		171,364

Total Tier 1 capital (Fully Phased-In)		$	176,263		176,263		169,063		169,063
Long-term debt and other instruments qualifying as Tier 2		29,183			29,183		29,465		29,465			27,223			27,223		27,946		27,946
Qualifying allowance for credit losses (3)		2,423			12,109		2,088		12,540			2,596			10,603		2,463		10,706
Other		(276		)	(276	)	(272	)	(272	)		(203		)	(203	)	(172	)	(172	)
Total Tier 2 capital (Fully Phased-In)	(B)	31,330			41,016		31,281		41,733		(B)	29,616			37,623		30,237		38,480
Effect of Transition Requirements		1,196			1,196		1,780		1,780			519			519		695		695
Total Tier 2 capital (Transition Requirements)		$	32,526		42,212		33,061		43,513			$	30,135		38,142		30,932		39,175

Total qualifying capital (Fully Phased-In)	(A)+(B)	$	207,593		217,279		200,344		210,796		(A)+(B)	$	200,291		208,298		198,103		206,346
Total Effect of Transition Requirements		1,929			1,929		4,081		4,081			519			519		695		695
Total qualifying capital (Transition Requirements)		$	209,522		219,208		204,425		214,877			$	200,810		208,817		198,798		207,041

Risk-Weighted Assets (RWAs) (4)(5):
Credit risk		$	910,562		1,255,711		960,763		1,314,833			$	802,054		1,203,474		803,273		1,201,246
Market risk		37,130			37,130		44,100		44,100			43,209			43,209		45,964		45,964
Operational risk		295,663			N/A		293,825		N/A			337,575			—		328,113		N/A
Total RWAs (Fully Phased-In)		$	1,243,355		1,292,841		1,298,688		1,358,933			$	1,182,838		1,246,683		1,177,350		1,247,210
Credit risk		$	884,907		1,231,508		936,664		1,292,098
Market risk		37,130			37,130		44,100		44,100
Operational risk		295,663			N/A		293,825		N/A
Total RWAs (Transition Requirements)		$	1,217,700		1,268,638		1,274,589		1,336,198


(1)	Represents goodwill and other intangibles on nonmarketable equity ~~investments and on held-for-sale assets,~~securities, which are included in other assets.


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

(3)

Under the Advanced Approach the allowance for credit losses that exceeds expected credit losses is eligible for inclusion in Tier 2 Capital, to the extent the excess allowance does not exceed 0.6% of Advanced credit RWAs, and under the Standardized Approach, the allowance for credit losses is includable in Tier 2 Capital up to 1.25% of Standardized credit RWAs, with any excess allowance for credit losses being deducted from total RWAs.


(4)	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. Advanced Approach also includes an operational risk component, which reflects the risk of operating loss resulting from inadequate or failed internal processes or systems.

(5)

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.

Capital Management (continued)

Table 4838 presents the changes in Common Equity Tier 1 under the Advanced Approach for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019.

Table ~~48:~~38:Analysis of Changes in Common Equity Tier 1


(in millions)
Common Equity Tier 1 (Fully Phased-In) at December 31, 2016	$	146,424
Net income	14,645
Common Equity Tier 1 (Fully Phased-In) at December 31, 2018				$	146,363
Net income applicable to common stock				11,355
Common stock dividends	(5,738		)	(4,069		)
Common stock issued, repurchased, and stock compensation-related items	(4,750		)	(8,030		)
Goodwill	112			3
Certain identifiable intangible assets (other than MSRs)	811			67
Other assets (1)	(195		)	(64		)
Applicable deferred taxes (2)	(221		)	3
Investment in certain subsidiaries and other	1,720			3,555
Change in Common Equity Tier 1	6,384			2,820
Common Equity Tier 1 (Fully Phased-In) at September 30, 2017	$	152,808
Common Equity Tier 1 (Fully Phased-In) at June 30, 2019				$	149,183


(1)	Represents goodwill and other intangibles on nonmarketable equity ~~investments and on held-for-sale assets,~~securities, which are included in other assets.


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

Table 4939 presents net changes in the components of RWAs under the Advanced and Standardized Approaches for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019.

Table ~~49:~~39:Analysis of Changes in RWAs


(in millions)	Advanced Approach			Standardized Approach		Advanced Approach			Standardized Approach
RWAs (Fully Phased-In) at December 31, 2016	$	1,298,688		1,358,933
RWAs (Fully Phased-In) at December 31, 2018						$	1,177,350		1,247,210
Net change in credit risk RWAs	(50,201		)	(59,122	)	(1,219		)	2,228
Net change in market risk RWAs	(6,970		)	(6,970	)	(2,755		)	(2,755	)
Net change in operational risk RWAs	1,838			N/A		9,462			—
Total change in RWAs	(55,333		)	(66,092	)	5,488			(527	)
RWAs (Fully Phased-In) at September 30, 2017	1,243,355			1,292,841
Effect of Transition Requirements	(25,655		)	(24,203	)
RWAs (Transition Requirements) at September 30, 2017	$	1,217,700		1,268,638
RWAs (Fully Phased-In) at June 30, 2019						$	1,182,838		1,246,683

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, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity ~~investments~~securities, but excluding mortgage servicing rights), net of applicable deferred taxes. These tangible common equity ratios are as follows:

Tangible book value per common share, which represents tangible common equity divided by common shares outstanding.

Return on average tangible common equity (ROTCE), which represents our annualized earnings contribution as a percentage of tangible common equity.

The methodology of determining tangible common equity may differ among companies. Management believes that tangible book value per common share and return on average tangible common equity, which utilize tangible common equity, are useful financial measures because they enable investors and others to assess the ~~Company's~~Company’s use of equity.

Table 5040 provides a reconciliation of these non-GAAP financial measures to GAAP financial measures.

Table ~~50:~~40:Tangible Common Equity


		Balance at period end							Average balance													Balance at period end							Average balance
		Quarter ended							Quarter ended								Nine months ended					Quarter ended							Quarter ended							Six months ended
(in millions, except ratios)		Sep 30, 2017			Jun 30, 2017		Sep 30, 2016		Sep 30, 2017				Jun 30, 2017		Sep 30, 2016		Sep 30, 2017		Sep 30, 2016			Jun 30, 2019			Mar 31, 2019		Jun 30, 2018		Jun 30, 2019			Mar 31, 2019		Jun 30, 2018		Jun 30, 2019		Jun 30, 2018
Total equity		$	206,824		206,145		203,958		207,934				205,968		203,883		205,246		200,502			$	200,037		198,733		206,069		199,685			198,349		206,067		199,021		206,123
Adjustments:
Preferred stock		(25,576		)	(25,785	)	(24,594	)	(25,780		)		(25,849	)	(24,813	)	(25,600	)	(24,291	)		(23,021		)	(23,214	)	(25,737	)	(23,023		)	(23,214	)	(26,021	)	(23,118	)	(26,089	)
Additional paid-in capital on ESOP preferred stock		(130		)	(136	)	(130	)	(136		)		(144	)	(148	)	(142	)	(172	)		(78		)	(95	)	(116	)	(78		)	(95	)	(129	)	(87	)	(141	)
Unearned ESOP shares		1,904			2,119		1,612		2,114				2,366		1,850		2,226		2,150			1,292			1,502		2,051		1,294			1,502		2,348		1,397		2,428
Noncontrolling interests		(895		)	(915	)	(930	)	(926		)		(910	)	(927	)	(931	)	(938	)		(995		)	(901	)	(881	)	(939		)	(899	)	(919	)	(919	)	(958	)
Total common stockholders' equity	(A)	182,127			181,428		179,916		183,206				181,431		179,845		180,799		177,251
Total common stockholders’ equity																					(A)	177,235			176,025		181,386		176,939			175,643		181,346		176,294		181,363
Adjustments:
Goodwill		(26,581		)	(26,573	)	(26,688	)	(26,600		)		(26,664	)	(26,979	)	(26,645	)	(26,696	)		(26,415		)	(26,420	)	(26,429	)	(26,415		)	(26,420	)	(26,444	)	(26,417	)	(26,480	)
Certain identifiable intangible assets (other than MSRs)		(1,913		)	(2,147	)	(3,001	)	(2,056		)		(2,303	)	(3,145	)	(2,314	)	(3,383	)		(493		)	(522	)	(1,091	)	(505		)	(543	)	(1,223	)	(524	)	(1,355	)
Other assets (1)		(2,282		)	(2,268	)	(2,230	)	(2,231		)		(2,160	)	(2,131	)	(2,163	)	(2,097	)		(2,251		)	(2,131	)	(2,160	)	(2,155		)	(2,159	)	(2,271	)	(2,157	)	(2,252	)
Applicable deferred taxes (2)		1,550			1,624		1,832		1,579				1,648		1,855		1,650		1,973			788			771		874		780			784		889		782		911
Tangible common equity	(B)	$	152,901		152,064		149,829		153,898				151,952		149,445		151,327		147,048		(B)	$	148,864		147,723		152,580		148,644			147,305		152,297		147,978		152,187
Common shares outstanding	(C)	4,927.9			4,966.8		5,023.9		N/A				N/A		N/A		N/A		N/A		(C)	4,419.6			4,511.9		4,849.1		N/A			N/A		N/A		N/A		N/A
Net income applicable to common stock (3)	(D)	N/A			N/A		N/A		$	4,185			5,404		5,243		14,645		15,501		(D)	N/A			N/A		N/A		$	5,848		5,507		4,792		11,355		9,525
Book value per common share	(A)/(C)	$	36.96		36.53		35.81		N/A				N/A		N/A		N/A		N/A		(A)/(C)	$	40.10		39.01		37.41		N/A			N/A		N/A		N/A		N/A
Tangible book value per common share	(B)/(C)	31.03			30.62		29.82		N/A				N/A		N/A		N/A		N/A		(B)/(C)	33.68			32.74		31.47		N/A			N/A		N/A		N/A		N/A
Return on average common stockholders’ equity (ROE) (annualized)	(D)/(A)	N/A			N/A		N/A		9.06			%	11.95		11.60		10.83		11.68		(D)/(A)	N/A			N/A		N/A		13.26		%	12.71		10.60		12.99		10.59
Return on average tangible common equity (ROTCE) (annualized)	(D)/(B)	N/A			N/A		N/A		10.79				14.26		13.96		12.94		14.08		(D)/(B)	N/A			N/A		N/A		15.78			15.16		12.62		15.47		12.62


(1)	Represents goodwill and other intangibles on nonmarketable equity ~~investments and on held-for-sale assets,~~securities, which are included in other assets.


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


(3)	Quarter ended net income applicable to common stock is annualized for the respective ROE and ROTCE ratios.

Capital Management (continued)

SUPPLEMENTARY LEVERAGE RATIO In April 2014, federal banking regulators finalized a rule that enhances the SLR requirements for BHCs, like Wells Fargo, and their insured depository institutions. The calculation of the SLR ~~consists of~~is Tier 1 capital divided by the Company’s total leverage exposure. Total leverage exposure consists of ~~the~~ total average ~~on-balance sheet~~ assets, less goodwill and other permitted Tier 1 capital deductions (net of deferred tax liabilities), plus certain off-balance sheet ~~exposures, such as undrawn commitments and derivative exposures, less amounts permitted to be deducted from Tier 1 capital.~~exposures. The rule, which ~~becomes~~became effective on January 1, 2018, ~~will require~~requires a covered BHC to maintain a SLR of at least 5.0% (comprised of the 3.0% minimum requirement plus a supplementary leverage buffer of 2.0%) to avoid restrictions on capital distributions and discretionary bonus payments. The rule ~~will~~ also ~~require~~requires that all of our insured depository institutions maintain a SLR of 6.0% under applicable regulatory capital adequacy guidelines. In ~~September 2014, federal banking regulators finalized additional changes~~April 2018, the FRB and OCC proposed rules (the “Proposed SLR Rules”) that would replace the 2% supplementary leverage buffer with a buffer equal to the SLR requirements to implement revisions to the Basel III leverage framework finalized by the BCBS in January 2014. These additional changes, among other things, modify the methodology for including off- balance sheet items, including credit derivatives, repo-style transactions and lines of credit, in the denominatorone-half of the firm’s G-SIB capital surcharge. The Proposed SLR ~~and will become effective on January 1, 2018.~~ Rules would similarly tailor the current 6% SLR requirement for our insured depository institutions.

At ~~September~~June 30, ~~2017,~~2019, our SLR for the Company was ~~7.9% assuming full phase-in of the Advanced Approach capital framework.~~7.7%. Based on our review, our current leverage levels would exceed the applicable requirements for each of our insured depository institutions as well. ~~The fully phased-in SLR is considered a non-GAAP financial measure that is used by management, bank regulatory agencies, investors and analysts to assess and monitor the Company’s leverage exposure.~~ See Table 5141 for information regarding the calculation and components of the SLR.

Table ~~51:Fully Phased-In SLR~~41:Supplementary Leverage Ratio


(in millions, except ratio)	September 30, 2017				Quarter ended June 30, 2019
Tier 1 capital	$	176,263		(A)	$	170,675
Total average assets	1,938,522				1,900,627
Less: deductions from Tier 1 capital	29,705
Less: Goodwill and other permitted Tier 1 capital deductions (net of deferred tax liabilities)					28,821
Total adjusted average assets	1,908,817				1,871,806
Adjustments:
Derivative exposures	73,681
Plus adjustments for off-balance sheet exposures:
Derivatives (1)					68,229
Repo-style transactions(2)	3,055				5,033
Other off-balance sheet exposures	243,339
Total adjustments	320,075
Other (3)					257,539
Total off-balance sheet exposures					330,801
Total leverage exposure	$	2,228,892		(B)	$	2,202,607
Supplementary leverage ratio	7.9		%	(A)/(B)	7.7		%


(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 (i.e., 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.

OTHER REGULATORY CAPITAL MATTERS In December 2016, the FRB finalized rules to address the amount of equity and unsecured long-term debt a U.S. G-SIB must hold to improve its resolvability and resiliency, often referred to as Total Loss Absorbing Capacity (TLAC). Under the rules, which ~~become~~became effective on January 1, 2019, U.S. G-SIBs ~~will be~~are required to have a minimum TLAC amount (consisting of CET1 capital and additional tier 1 capital issued directly by the top-tier or covered BHC plus eligible external long-term debt) equal to the greater of (i) 18% of RWAs and (ii) 7.5% of total leverage exposure (the denominator of the SLR calculation). Additionally, U.S. G-SIBs ~~will be~~are required to maintain (i) a TLAC buffer equal to 2.5% of RWAs plus the firm’s applicable G-SIB capital surcharge calculated under method one plus any applicable countercyclical buffer ~~that will~~to be added to the 18% minimum and (ii) an external

TLAC leverage buffer equal to 2.0% of total leverage exposure ~~that will~~to be added to the

7.5% minimum, in order to avoid restrictions on capital distributions and discretionary bonus payments. The rules ~~will~~ also require U.S. G-SIBs to have a minimum amount of eligible unsecured long-term debt equal to the greater of (i) 6.0% of RWAs plus the firm’s applicable G-SIB capital surcharge calculated under method two and (ii) 4.5% of the total leverage exposure. In addition, the rules ~~will~~ impose certain restrictions on the operations and liabilities of the top-tier or covered BHC in order to further facilitate an orderly resolution, including prohibitions on the issuance of short-term debt to external investors and on entering into derivatives and certain other types of financial contracts with external counterparties. While the rules permit permanent grandfathering of a significant portion of otherwise ineligible long-term debt that was issued prior to December 31, 2016, long-term debt issued after that date must be fully compliant with the eligibility requirements of the rules in order to count toward the minimum TLAC amount. As a result of the rules, we will need to issue additional long-term debt to remain compliant with the requirements.Under the Proposed SLR Rules, the 2% external TLAC leverage buffer would be replaced with a buffer equal to one-half of the firm’s G-SIB capital surcharge. Additionally, the Proposed SLR Rules would modify the leverage component for calculating the minimum amount of eligible unsecured long-term debt from 4.5% of total leverage exposure to 2.5% of total leverage exposure plus one-half of the firm’s G-SIB capital surcharge. As of June 30, 2019, our eligible external TLAC as a percentage of total risk-weighted assets was 24.09% compared with a required minimum of 22.0%. Similar to the risk-based capital requirements, we determine minimum required TLAC based on the greater of RWAs determined under the Standardized and Advanced approaches.

In addition, as discussed in the “Risk Management – Asset/ Liability Management – Liquidity and Funding – Liquidity Standards” section in this Report, federal banking regulators have issued a final rule regarding the U.S. implementation of the Basel III LCR and a proposed rule regarding the NSFR.

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 surcharge. Accordingly, based on the final Basel III capital rules under the lower of the Standardized or Advanced Approaches CET1 capital ratios, we currently target a long-term CET1 capital ratio at or in excess of 10%, which includes a 2% G-SIB surcharge. Our capital targets are subject to change based on various factors, including changes to the regulatory capital framework and expectations for large banks promulgated by bank regulatory agencies, planned capital actions, changes in our risk profile and other factors. As discussed above in the “Capital Management – Regulatory Capital Guidelines – Risk-Based Capital and Risk-Weighted Assets” section of this Report, the FRB has proposed including a stress capital buffer to replace the current 2.5% capital conservation buffer. Under the proposal, it is expected that the adoption of CECL accounting would be included in the calculation of the stress capital buffer. We expect that implementation of the stress capital buffer may increase the level and volatility of minimum capital ratio requirements, which may cause our current long-term CET1 capital ratio target of 10% to increase.

Under the FRB’s capital plan rule, large BHCs are required to submit capital plans annually for review to determine if the FRB has any objections before making any capital distributions. The rule requires updates to capital plans in the event of material changes in a BHC’s risk profile, including as a result of any significant acquisitions. The FRB assesses, among other things, the overall financial condition, risk profile, and capital adequacy of BHCs ~~while considering both quantitative and qualitative factors~~ when evaluating capital plans.

Our ~~2017~~2019 capital plan, which was submitted on April 4, ~~2017,~~2019, as part of CCAR, included a comprehensive capital outlook supported by an assessment of expected sources and uses of capital over a given planning horizon under a range of expected and stress scenarios. As part of the ~~2017~~2019 CCAR, the FRB also generated a supervisory stress test, which assumed a sharp decline in the economy and significant decline in asset pricing using the information provided by the Company to estimate performance. The FRB reviewed the supervisory stress results both as required under the Dodd-Frank Act using a common set of capital actions for all large BHCs and by taking into account the Company’s proposed capital actions. The FRB published its

supervisory stress test results as required under the Dodd-Frank Act on June ~~22, 2017.~~21, 2019. On June ~~28, 2017,~~27, 2019, the FRB notified us that it did not object to our capital plan included in the ~~2017~~2019 CCAR. On July 23, 2019, the Company increased its quarterly common stock dividend to $0.51 per share, as approved by the Board. The plan also includes up to $23.1 billion of gross common stock repurchases, subject to management discretion, for the four-quarter period from third quarter 2019 through second quarter 2020.

Federal banking regulators require stress tests to evaluate whether an institution has sufficient capital to continue to operate during periods of adverse economic and financial conditions. These stress testing requirements set forth the timing and type of stress test activities large BHCs and banks must undertake as well as rules governing stress testing controls, oversight and disclosure requirements. The rules also limit a large BHC’s ability to make capital distributions to the extent its actual capital issuances were less than amounts indicated in its capital plan. As required under the FRB’s stress testing rule, we must submit a mid-cycle stress test based on second quarter data and scenarios developed by the Company. ~~We submitted~~In October 2018, the ~~results of~~FRB proposed a rule that would, among other things, eliminate the mid-cycle stress test ~~to the FRB and disclosed a summary of the results~~requirement for banks beginning in ~~October 2017.~~2020.

Securities Repurchases

From time to time the Board authorizes the Company to repurchase shares of our common stock. Although we announce when the Board authorizes share repurchases, we typically do not give any public notice before we repurchase our shares. Future stock repurchases may be private or open-market repurchases, including block transactions, accelerated or delayed block transactions, forward repurchase transactions, and similar transactions. Additionally, we may enter into plans to purchase stock that satisfy the conditions of Rule 10b5-1 of the Securities Exchange Act of 1934. Various factors determine the amount ~~and timing~~ of our share repurchases, including our capital requirements, the number of shares we expect to issue for employee benefit plans and acquisitions, market conditions (including the trading price of our stock), and regulatory and legal considerations, including the FRB’s response to our capital plan and to changes in our risk profile. Due to the various factors impacting the amount of our share repurchases and the fact that we tend to be in the market regularly to satisfy repurchase considerations under our capital plan, our share repurchases occur at various price levels. We may suspend share repurchase activity at any time.

In ~~January 2016,~~October 2018, the Board authorized the repurchase of 350 million shares of our common stock. At ~~September~~June 30, ~~2017,~~2019, we had remaining authority to repurchase approximately ~~122~~193 million shares, subject to regulatory and legal conditions. In July 2019, the Board authorized the repurchase of an additional 350 million shares of our common stock. For more information about share repurchases during ~~third~~second quarter ~~2017,~~2019, see Part II, Item 2 in this Report.

Historically, our policy has been to repurchase shares under the “safe harbor” conditions of Rule 10b-18 of the Securities Exchange Act of 1934 including a limitation on the daily volume of repurchases. Rule 10b-18 imposes an additional daily volume limitation on share repurchases during a pending merger or acquisition in which shares of our stock will constitute some or all of the consideration. Our management may determine that during a pending stock merger or acquisition when the safe harbor would otherwise be available, it is in our best interest to repurchase shares in excess of this additional daily volume limitation. In such cases, we intend to repurchase shares in compliance with the other conditions of the safe harbor, including the standing daily volume limitation that applies whether or not there is a pending stock merger or acquisition.

In connection with our participation in the Capital Purchase Program (CPP), a part of the Troubled Asset Relief Program (TARP), we issued to the U.S. Treasury Department warrants to purchase 110,261,688 shares of our common stock with an original exercise price of $34.01 per share expiring on October 28, 2018. The terms of the warrants require the exercise price to be adjusted under certain circumstances when the Company’s quarterly common stock dividend exceeds $0.34 per share, which began occurring in second quarter 2014. Accordingly, with each quarterly common stock dividend above $0.34 per share, we must calculate whether an adjustment to the exercise price is required by the terms of the warrants, including whether certain minimum thresholds have been met to trigger an adjustment, and notify the holders of any such change. The Board authorized the repurchase by the Company of up to $1 billion of the warrants. At September 30, 2017, there were 26,560,862 warrants outstanding, exercisable at $33.731 per share, and $452 million of unused warrant repurchase authority. Depending on market conditions, we may purchase from time to time additional warrants in privately negotiated or open market transactions, by tender offer or otherwise.

~~Regulatory Matters (continued~~)

Regulatory Matters

Since the enactment of the Dodd-Frank Act in 2010, the U.S. financial services industry has been subject to a significant increase in regulation and regulatory oversight initiatives. This increased regulation and oversight has substantially changed how most U.S. financial services companies conduct business and has increased their 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 the 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 ~~2016~~2018 Form 10-K and the ~~“Regulatory Matters”~~"Regulatory Matters" section in our ~~2017~~2019 First ~~and Second~~ Quarter ~~Reports~~Report on Form 10-Q.

~~REGULATION OF CONSUMER FINANCIAL PRODUCTS~~ The Dodd-Frank Act established the Consumer Financial Protection Bureau (CFPB) to ensure consumers receive clear and accurate disclosures regarding financial products and to protect them from hidden fees and unfair or abusive practices. With respect to residential mortgage lending, the CFPB issued a number of final rules implementing new origination, notification, disclosure and other requirements, as well as additional limitations on the fees and charges that may be increased from the estimates provided by lenders. In October 2015, the CFPB finalized amendments to the rule implementing the Home Mortgage Disclosure Act, resulting in a significant expansion of the data points lenders will be required to collect beginning January 1, 2018 and report to the CFPB beginning January 1, 2019. The CFPB also expanded the transactions covered by the rule and increased the reporting frequency from annual to quarterly for large volume lenders, such as Wells Fargo, beginning January 1, 2020. With respect to other financial products, in October 2016, the CFPB finalized rules, most of which become effective on April 1, 2018, to make prepaid cards subject to similar consumer protections as those provided by more traditional debit and credit cards such as fraud protection and expanded access to account information. In July 2017, the CFPB finalized a rule, which became effective on September 18, 2017, prohibiting covered providers of certain consumer financial products and services, such as Wells Fargo, from using arbitration agreements that prevent consumers from filing or participating in class action litigation. However, Congress subsequently used its powers under the Congressional Review Act to overturn the CFPB's arbitration rule and prohibited the CFPB from writing a “substantially similar” rule in the future without congressional action.

In addition to these rulemaking activities, the CFPB is continuing its on-going supervisory examination activities of the financial services industry with respect to a number of consumer businesses and products, including mortgage lending and servicing, fair lending requirements, student lending activities, and automobile finance. At this time, the Company cannot predict the full impact of the CFPB’s rulemaking and supervisory authority on our business practices or financial results.

“LIVING ~~WILL~~”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 revise resolution plans, so-called “living-wills”, that would facilitate their resolution in the event of material distress or failure. Under the rules, resolution plans are required to provide strategies for resolution under the Bankruptcy Code and other applicable insolvency regimes that can be accomplished in a reasonable period of time and in a

manner that mitigates the risk that failure would have serious adverse effects on the financial stability of the United States. We submitted our ~~2017~~2019 resolution plan to the FRB and FDIC on June ~~30, 2017, but have not yet received regulatory feedback on the~~27, 2019. Our national bank subsidiary, Wells Fargo Bank, N.A. (the "Bank"), is also required to prepare a resolution plan. If the FRB ~~and~~or FDIC ~~determine~~determines that our ~~2017~~ resolution plan has

Regulatory Matters (continued)

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~~determines that we have been unable to remedy any deficiencies, they could require us to divest certain assets or operations.

We must also prepare and 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. ~~Our insured national bank subsidiary, Wells Fargo~~The Bank ~~N.A. (the “Bank”),~~ must also prepare and submit to the OCC a recovery plan that sets forth the ~~bank’s~~Bank’s plan to remain a going concern when the ~~bank~~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 determine that our recovery plan is deficient, they may impose fines, restrictions on our business or ultimately require us to divest assets.

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 Wells Fargo & Company (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, and allows the FDIC to disregard the strict priority of creditor claims under the U.S. Bankruptcy Code in certain circumstances.

Whether under the U.S. Bankruptcy Code or by the FDIC under the orderly liquidation authority, Wells Fargo could be resolved using a ~~“multiple~~"multiple point of ~~entry”~~entry" strategy, in which the Parent and one or more of its subsidiaries would each undergo separate resolution proceedings, or a “single point of entry” strategy, in which the Parent would likely be the only material legal entity to enter resolution proceedings. 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.

The strategy described in our most recent resolution plan submission is a ~~multiple~~single point of entry ~~strategy; however,~~strategy. However, we ~~have made a decision~~are not obligated to ~~move to~~maintain a single point of entry strategy, ~~for our next resolution plan submission. We are not obligated to maintain either a single point of entry or multiple point of entry strategy,~~ and the ~~strategies~~strategy reflected in our resolution plan ~~submissions are~~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.

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 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 in order to facilitate an orderly resolution. In response to the regulators’ guidance and to facilitate the orderly resolution of the Company, ~~using either a single point of entry or multiple point of entry resolution strategy,~~ 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”), ~~and~~ the Bank, Wells Fargo Securities, LLC (“WFS”), ~~and~~ Wells Fargo Clearing Services, LLC (“WFCS”), ~~each an~~and certain other direct and indirect ~~subsidiary~~subsidiaries of the ~~Parent.~~Parent designated as material entities for resolution planning purposes (the “Covered Entities”) or identified 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 and to WFS and WFCS through repurchase facilities entered into in connection with~~ 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, ~~and~~ 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 ~~Parent's and the IHC's~~ 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.

BROKER-DEALER STANDARDS OF CONDUCT In June 2019, the SEC finalized a rule that requires broker-dealers to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities. This rule impacts the manner in which business is conducted with customers seeking investment advice and may affect certain investment product offerings.

Critical Accounting Policies

Our significant accounting policies (see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our ~~2016~~2018 Form 10-K) 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~~Five 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;

~~PCI loans;~~

the valuation of residential MSRs;

the fair value of financial instruments;

income taxes; and

liability for contingent litigation losses.

~~Starting second quarter 2017,~~Management and the ~~liability for contingent litigation losses has been designated as one of our~~Board’s Audit and Examination Committee have reviewed and approved these critical accounting policies. ~~The remaining five of these~~These policies are described further in the “Financial Review – Critical Accounting Policies” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our ~~2016~~2018 Form 10-K.

~~Liability for Contingent Litigation Losses~~

The Company is involved in a number of judicial, regulatory, arbitration and other proceedings concerning matters arising from the conduct of its business activities, and many of those proceedings expose the Company to potential financial loss. We establish accruals for these 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. The actual costs of resolving legal actions may be substantially higher or lower than the amounts accrued for those actions.

We apply judgment when establishing an accrual for potential losses associated with legal actions and in establishing the range of reasonably possible losses in excess of the accrual. Our judgment in establishing accruals and the range of reasonably possible losses in excess of the Company's accrual for probable and estimable losses is influenced by our understanding of information currently available related to the legal evaluation and potential outcome of actions, including input and advice on these matters from our internal counsel, external counsel and senior management. These matters may be in various stages of investigation, discovery or proceedings. They may also involve a wide variety of claims across our businesses, legal entities and jurisdictions. The eventual outcome may be a scenario that was not considered or was considered remote in anticipated occurrence. Accordingly, our estimate of potential losses will change over time and the actual losses may vary significantly.

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.

~~See Note 11 (Legal Actions) to Financial Statements in this Report for further information.~~

~~Management and the Board's Audit and Examination Committee have reviewed and approved these critical accounting policies.~~

Current Accounting Developments (continued)

Current Accounting Developments

Table 5242 provides the significant accounting ~~pronouncements~~updates applicable to us that have been issued by the FASB but are not yet effective.

Table ~~52:~~42:Current Accounting Developments – Issued Standards



~~Standard~~	~~Description~~	~~Effective date and financial statement impact~~material.
ASU 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent related Updates	The Update changes the accounting for credit losses measurement on loans and debt securities. For loans and held-to-maturity debt securities, the Update requires a current expected credit loss (CECL) ~~approach~~measurement to ~~determine~~estimate the allowance for credit ~~losses. CECL requires loss estimates~~losses (ACL) for the remaining estimated life of the financial asset (including off-balance sheet credit exposures) using historical experience, current conditions, and reasonable and supportable forecasts. ~~Also, the~~The Update eliminates the existing guidance for PCI loans, but requires an allowance for purchased financial assets with more than insignificant deterioration since origination. In addition, the Update modifies the other-than-temporary impairment model for available-for-sale debt securities to require an allowance for credit impairment instead of a direct write-down, which allows for reversal of credit impairments in future periods based on improvements in credit.	The guidance is effective in first quarter 2020 with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. While early adoption is permitted beginning in first quarter 2019, we do not expect to elect that option. We are evaluating the impact of the Update on our consolidated financial statements. We expect the Update will result in an increase in the allowance for credit losses given the change to estimated losses over the contractual life adjusted for expected prepayments with an anticipated material impact from longer duration portfolios, as well as the addition of an allowance for debt securities. The amount of the increase will be impacted by the portfolio composition and credit quality at the adoption date as well as economic conditions and forecasts at that time.
~~ASU 2016-02 – Leases (Topic 842)~~	The Update requires lessees to recognize leases on the balance sheet with lease liabilities and corresponding right-of-use assets based on the present value of lease payments. Lessor accounting activities are largely unchanged from existing lease accounting. The Update also eliminates leveraged lease accounting but allows existing leveraged leases to continue their current accounting until maturity, termination or modification.	We expect to adopt the guidance in first quarter ~~2019 using the modified retrospective method~~2020. Our implementation process includes loss forecasting model development, evaluation of technical accounting topics, updates to our allowance documentation, reporting processes and ~~practical expedients for transition. The practical expedients allow us to largely account~~related internal controls, and overall operational readiness for our ~~existing leases consistent with current guidance except for the incremental balance sheet recognition for lessees. We have started our implementation~~adoption of the Update, which ~~has included an initial evaluation~~will continue throughout 2019, including parallel runs for CECL alongside our current allowance process. We are in the process of developing, validating, and implementing models used to estimate credit losses under CECL. We have completed substantially all of our ~~leasing contracts~~loss forecasting models, and ~~activities. As a lessee~~ we ~~are developing~~expect to complete the validation process for our ~~methodology to estimate~~loan models during 2019. Our current planned approach for estimating expected life-time credit losses for loans and debt securities includes the ~~right-of use assets~~following key components: • An initial forecast period of one year for all portfolio segments and ~~lease liabilities, which is~~classes of financing receivables and off-balance-sheet credit exposures. This period reflects management’s expectation of losses based on forward-looking economic scenarios over that time. • A historical loss forecast period covering the remaining contractual life, adjusted for prepayments, by portfolio segment and class of financing receivables based on the ~~present~~change in key historical economic variables during representative historical expansionary and recessionary periods. • A reversion period of up to 2 years connecting the initial loss forecast to the historical loss forecast based on economic conditions at the measurement date. • We will utilize discounted cash flow (DCF) methods to measure credit impairment for loans modified in a troubled debt restructuring, unless they are collateral dependent and measured at the fair value of ~~lease payments (the December 31, 2016 future minimum lease payments~~collateral. The DCF methods would obtain estimated life-time credit losses using the conceptual components described above. • For available-for-sale debt securities and certain beneficial interests classified as held-to-maturity, we plan to utilize the DCF methods to measure the ACL, which will incorporate expected credit losses using the conceptual components described above. Based on our portfolio composition at June 30, 2019, and the current economic environment, we currently estimate an overall decrease in our ACL for loans of approximately $1.5 billion. The reduction reflects an expected decrease for commercial loans, given their short contractual maturities, partially offset by an expected increase for longer duration consumer loans and includes recoveries related to residential mortgage loans that were ~~$6.9 billion). We do not expect~~previously written down during the last credit cycle and are below their current recovery value. The change from the estimate we provided last quarter primarily reflects a ~~material change~~reduction in our expected recoveries on loans previously written down due to the ~~timing~~reclassification of ~~expense recognition. Given~~$1.8 billion of residential mortgage loans to held for sale, as well as additional refinements to our assumptions and changes in our portfolio composition. We will continue to evaluate and refine the ~~limited changes~~results of our loss estimates throughout 2019. We will recognize an ACL for held-to-maturity and available-for-sale debt securities. The ACL on available-for-sale debt securities will be subject to ~~lessor accounting,~~a limitation based on the fair value of the debt securities. Based on the credit quality of our existing debt securities portfolio, we do not expect ~~material changes~~the ACL for held-to-maturity and available-for-sale debt securities to ~~recognition or measurement, but we are early in~~be significant. The ultimate effect of CECL on our ACL will depend on the ~~implementation process~~size and ~~will continue to evaluate~~composition of our portfolio, the ~~impact. We are evaluating our existing disclosures~~portfolio’s credit quality and ~~may need to provide additional information as a result~~economic conditions at the time of adoption, ~~of the Update.~~

~~Current Accounting Developments (continued~~)



~~Standard~~	~~Description~~	~~Effective date~~as well as any refinements to our models, methodology and ~~financial statement impact~~
~~ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10):~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~	The Update amends the presentation and accounting for certain financial instruments, including liabilities measured at fair value under the fair value option and equity investments. The guidance also updates fair value presentation and disclosure requirements for financial instruments measured at amortized cost.	Weother key assumptions. At adoption, we will ~~adopt the guidance in first quarter 2018 with~~have a cumulative-effect adjustment to retained earnings ~~as of~~for our change in the ~~beginning of the year of adoption, except for changes related to nonmarketable equity investments,~~ACL, which ~~are applied prospectively.~~ ~~Our investments~~will impact our capital. A decrease in ~~marketable equity securities classified as available-for-sale as of the adoption date~~our ACL will ~~be accounted for at fair value with unrealized gains or losses reflected~~result in earnings. As of September 30, 2017, the carrying value of these securities was $893 million, which included a $287 million net unrealized pre-tax gain reflected in other comprehensive income. Upon adoption, the amount of net unrealized gain or loss relatedan increase to our ~~available-for-sale equity securities portfolio as of December 31, 2017 will be reclassified~~regulatory capital amounts and ratios. Federal banking regulatory agencies have provided relief for an initial capital decrease from ~~other comprehensive income to retained earnings.~~the Update by allowing a phased adoption over four years, on a straight-line basis. Our investments in nonmarketable equity instruments accounted for under the cost method of accounting, except for Federal bank stock, will be measured either at fair value with unrealized gains and losses reflected in earnings or the measurement alternative. The measurement alternative is similar to the cost method of accounting, except the carrying value is adjusted, through earnings, for subsequent observable transactions in the same or similar investment. We expect to account for substantially all of our private equity cost method investments using the measurement alternative and our auction rate securities portfolio at fair value with unrealized gains and losses reflected in earnings. Upon adoption, we do not expect a significant transition adjustment for the accounting change related to our nonmarketable cost method equity investments. Additionally, for purposes of disclosing the fair value of loans carried at amortized cost, we are evaluating our valuation methods to determine the necessary changes to present fair value disclosures based on “exit price” as required by the Update. Accordingly, the fair value amounts disclosed for such loans may change upon adoption.



~~Standard~~	~~Description~~	~~Effective date and financial statement impact~~
~~ASU 2014-09 – Revenue from Contracts With Customers (Topic 606) and subsequent related Updates~~	The Update modifies the guidance used to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other guidance. The Update also requires new qualitative and quantitative disclosures, including disaggregation of revenues and descriptions of performance obligations.	We will adopt the guidance in first quarter 2018 using the modified retrospective method with a cumulative-effect adjustment to opening retained earnings. Our revenue is the sum of net interest income and noninterest income. The scope of the guidance explicitly excludes net interest income as well as many other revenues for financial assets and liabilities including loans, leases, securities, and derivatives. Accordingly, the majority of our revenues will not be affected. We have performed an assessment of our revenue contracts as well as worked with industry participants on matters of interpretation and application. Our accounting policies will not change materially since the principles of revenue recognition from the Update are largely consistent with existing guidance and current practices applied by our businesses. We have not identified material changes to the timing or amount of revenue recognition. Based on changes to guidance applied by broker-dealers, we expect a minor change to the presentation of our broker-dealer’s costs for underwriting activities which will be presented in expenses rather than the current presentation against the related revenues. We will provide qualitative disclosures of our performance obligations related to our revenue recognition and we continue to evaluate disaggregation for significant categories of revenue in the scope of the guidance.

In addition to the list above, the following ~~updates~~Updates are applicable to us but ~~subject to completion of our assessment,~~ are not expected to have a material impact on our consolidated financial statements:


•	ASU 2019-04 – Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This Update includes guidance on recoveries of financial assets, which has been included in the discussion for ASU 2016-13 above.


•	ASU 2018-17 – Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities

~~ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815):~~ (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception

~~ASU 2017-09 – Compensation – Stock Compensation (Topic718):~~ ~~Scope of Modification Accounting~~

~~ASU 2017-04 – Goodwill and Other (Topic 350):~~ ~~Simplifying the Test for Goodwill Impairment~~

~~ASU 2017-03 – Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323):~~ ~~Amendments to SEC Paragraphs~~

~~Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update)~~

~~ASU 2017-01 – Business Combinations (Topic 805):~~ ~~Clarifying the Definition of a Business~~


•	ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)


•	ASU 2018-13 – Fair Value Measurement (Topic 820):Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This Update has been partially adopted; however, the remainder of this Update will be adopted at the effective date of January 1, 2020.


•	ASU 2017-04 – Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

~~ASU 2016-18 – Statement of Cash Flows (Topic 230):~~ ~~Restricted Cash~~

~~ASU 2016-16 – Income Taxes (Topic 740):~~ ~~Intra-Entity Transfers of Assets Other Than Inventory~~

~~ASU 2016-15 – Statement of Cash Flows (Topic 230):~~ ~~Classification of Certain Cash Receipts and Cash Payments~~

~~ASU 2016-04 – Liabilities – Extinguishment of Liabilities (Subtopic 405-20):~~ ~~Recognition of Breakage for Certain Prepaid Stored-Value Products~~

We have determined that other existing accounting updates are either not applicable to us or have completed our assessment and determined will not have a material impact on our consolidated financial statements.

~~Forward-Looking Statements (continued~~)

Forward-Looking Statements

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

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

current and future economic and market conditions, including the effects of declines in housing prices, high

unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and ~~the overall~~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;

financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;

developments in our mortgage banking business, including the extent of the success of our ~~success in our~~mortgage loan modification efforts, ~~as well as the effects of regulatory requirements or guidance regarding loan modifications;~~

the amount of mortgage loan repurchase demands that we receive, ~~and our ability to satisfy~~ any ~~such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;~~

negative effects relating to our mortgage servicing, ~~and~~loan modification or foreclosure practices, ~~as well as changes in industry standards or practices,~~and the effects of regulatory or judicial requirements ~~penalties~~ or ~~fines, increased servicing~~guidance impacting our mortgage banking business and ~~other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;~~any changes in industry standards;

our ability to realize ~~our~~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;

losses related to recent hurricanes, which primarily affected Texas, Florida and Puerto Rico, and related to recent California wildfires, in each case including from damage or loss to our collateral for loans in our consumer and commercial loan portfolios and from the impact on the ability of our borrowers to repay their loans;

the effect of the current ~~low~~ interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and ~~mortgages~~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 other-than-temporary impairment on securities held in our ~~investment~~debt securities ~~portfolio;~~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, asset and wealth management businesses;

negative effects from the retail banking sales practices matter and from other instances where customers may have experienced financial harm, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability

Forward-Looking Statements (continued)

to attract and retain qualified team members, and our reputation;

~~reputational damage from negative publicity, protests,~~resolution of regulatory matters, litigation, or other legal actions, which may result in, among other things, additional costs, fines, penalties, ~~and~~restrictions on our business activities, reputational harm, or other ~~negative consequences from regulatory violations and legal actions;~~adverse consequences;

a failure in or breach of our operational or security systems or infrastructure, or those of our ~~third party~~third-party vendors or other service providers, including as a result of cyber attacks;

the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;

fiscal and monetary policies of the Federal Reserve Board; and

~~the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended~~ ~~December 31, 2016~~.


•	the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018.

In addition to the above factors, we also caution that the amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and

financial condition of the Company, market conditions, capital requirements (including under Basel capital standards), common stock issuance requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company’s Board of Directors, and may be subject to regulatory approval or conditions.

For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2018, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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

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.

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 ~~2016~~2018 Form 10-K.

Controls and Procedures

Disclosure Controls and Procedures

The Company’s management evaluated the effectiveness, as of ~~September~~June 30, ~~2017,~~2019, 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 ~~September~~June 30, ~~2017.~~2019.

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 ~~third~~second quarter ~~2017~~2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.



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)	2019		2018	2019	2018
Interest income
Debt securities	$	3,781	3,594	7,722	7,008
Mortgage loans held for sale	195		198	347	377
Loans held for sale	20		48	44	72
Loans	11,316		10,912	22,670	21,491
Equity securities	236		221	446	452
Other interest income	1,438		1,042	2,760	1,962
Total interest income	16,986		16,015	33,989	31,362
Interest expense
Deposits	2,213		1,268	4,239	2,358
Short-term borrowings	646		398	1,242	709
Long-term debt	1,900		1,658	3,827	3,234
Other interest expense	132		150	275	282
Total interest expense	4,891		3,474	9,583	6,583
Net interest income	12,095		12,541	24,406	24,779
Provision for credit losses	503		452	1,348	643
Net interest income after provision for credit losses	11,592		12,089	23,058	24,136
Noninterest income
Service charges on deposit accounts	1,206		1,163	2,300	2,336
Trust and investment fees	3,568		3,675	6,941	7,358
Card fees	1,025		1,001	1,969	1,909
Other fees	800		846	1,570	1,646
Mortgage banking	758		770	1,466	1,704
Insurance	93		102	189	216
Net gains from trading activities	229		191	586	434
Net gains on debt securities (1)	20		41	145	42
Net gains from equity securities (2)	622		295	1,436	1,078
Lease income	424		443	867	898
Other	744		485	1,318	1,087
Total noninterest income	9,489		9,012	18,787	18,708
Noninterest expense
Salaries	4,541		4,465	8,966	8,828
Commission and incentive compensation	2,597		2,642	5,442	5,410
Employee benefits	1,336		1,245	3,274	2,843
Equipment	607		550	1,268	1,167
Net occupancy	719		722	1,436	1,435
Core deposit and other intangibles	27		265	55	530
FDIC and other deposit assessments	144		297	303	621
Other	3,478		3,796	6,621	8,190
Total noninterest expense	13,449		13,982	27,365	29,024
Income before income tax expense	7,632		7,119	14,480	13,820
Income tax expense	1,294		1,810	2,175	3,184
Net income before noncontrolling interests	6,338		5,309	12,305	10,636
Less: Net income from noncontrolling interests	132		123	239	314
Wells Fargo net income	$	6,206	5,186	12,066	10,322
Less: Preferred stock dividends and other	358		394	711	797
Wells Fargo net income applicable to common stock	$	5,848	4,792	11,355	9,525
Per share information
Earnings per common share	$	1.31	0.98	2.52	1.95
Diluted earnings per common share	1.30		0.98	2.50	1.94
Average common shares outstanding	4,469.4		4,865.8	4,510.2	4,875.7
Diluted average common shares outstanding	4,495.0		4,899.8	4,540.1	4,916.1

Wells Fargo & Company and Subsidiaries
Consolidated Statement of Income (Unaudited)
Quarter ended September 30, Nine months ended September 30,
(in millions, except per share amounts) 2017
2016
2017
2016
Interest income
Trading assets $ 754
593
2,107
1,761
Investment securities 2,662
2,298
8,035
6,736
Mortgages held for sale 219
207
598
549
Loans held for sale 5
2
10
7
Loans 10,522
9,978
31,021
29,377
Other interest income 896
409
2,228
1,175
Total interest income 15,058
13,487
43,999
39,605
Interest expense
Deposits 870
356
2,090
995
Short-term borrowings 226
85
503
229
Long-term debt 1,377
1,006
3,838
2,769
Other interest expense 109
88
309
260
Total interest expense 2,582
1,535
6,740
4,253
Net interest income 12,476
11,952
37,259

35,352
Provision for credit losses 717
805
1,877
2,965
Net interest income after provision for credit losses 11,759
11,147
35,382
32,387
Noninterest income
Service charges on deposit accounts 1,276
1,370
3,865
4,015
Trust and investment fees 3,609
3,613
10,808
10,545
Card fees 1,000
997
2,964
2,935
Other fees 877
926
2,644
2,765
Mortgage banking 1,046
1,667
3,422
4,679
Insurance 269
293
826
1,006
Net gains from trading activities 245
415
921
943
Net gains on debt securities (1) 166
106
322
797
Net gains from equity investments (2) 238
140
829
573
Lease income 475
534
1,449
1,404
Other 249
315
788
1,671
Total noninterest income 9,450
10,376
28,838
31,333
Noninterest expense
Salaries 4,356
4,224
12,960
12,359
Commission and incentive compensation 2,553
2,520
7,777
7,769
Employee benefits 1,279
1,223
4,273
3,993
Equipment 523
491
1,629
1,512
Net occupancy 716
718
2,134
2,145
Core deposit and other intangibles 288
299
864
891
FDIC and other deposit assessments 314
310
975
815
Other 4,322
3,483
11,072
9,678
Total noninterest expense 14,351
13,268
41,684
39,162
Income before income tax expense 6,858
8,255
22,536

24,558
Income tax expense 2,204
2,601
6,486
7,817
Net income before noncontrolling interests 4,654
5,654
16,050

16,741
Less: Net income from noncontrolling interests 58
10
187
77
Wells Fargo net income $ 4,596
5,644
15,863

16,664
Less: Preferred stock dividends and other 411
401
1,218
1,163
Wells Fargo net income applicable to common stock $ 4,185
5,243
14,645
15,501
Per share information
Earnings per common share $ 0.85
1.04
2.94
3.06
Diluted earnings per common share 0.84
1.03
2.91
3.03
Dividends declared per common share 0.390
0.380
1.150
1.135
Average common shares outstanding 4,948.6
5,043.4
4,982.1
5,061.9
Diluted average common shares outstanding 4,996.8
5,094.6
5,035.4
5,118.2

(1)

Total other-than-temporary impairment (OTTI) losses (reversal of losses) were $5$6 million and ~~$36~~$(3) million for ~~third~~second quarter ~~2017~~2019 and ~~2016~~,2018, respectively. Of total OTTI, losses of $7$7 million and ~~$51~~$8 million were recognized in earnings, and ~~reversal~~losses (reversal of ~~losses~~losses) of ~~$(2)~~$(1) million and ~~$(15)~~$(11) million were recognized as non-credit-related OTTI in other comprehensive income for ~~third~~second quarter ~~2017~~2019 and ~~2016~~,2018, respectively. Total OTTI losses were ~~$54~~$51 million and ~~$123~~$14 million for the first ~~nine months~~half of ~~2017~~2019 and ~~2016~~,2018, respectively. Of total OTTI, losses of ~~$107~~$52 million and ~~$142~~$18 million were recognized in earnings, and ~~reversal~~losses (reversal of ~~losses~~losses) of ~~$(53)~~$(1) million and ~~$(19)~~$(4) million were recognized as non-credit-related OTTI in other comprehensive income for the first ~~nine months~~half of ~~2017~~2019 and ~~2016~~,2018, respectively.


(2)	Includes OTTI losses of ~~$84~~$31 million and ~~$85~~$237 million for ~~third~~second quarter ~~2017~~2019 and ~~2016~~,2018, respectively, and ~~$186~~$67 million and ~~$322~~$257 million for the first ~~nine months~~half of ~~2017~~2019 and ~~2016~~,2018, respectively.

The accompanying notes are an integral part of these statements.



Wells Fargo & Company and Subsidiaries
Consolidated Statement of Comprehensive Income (Unaudited)
	Quarter ended June 30,					Six months ended June 30,
(in millions)	2019			2018		2019		2018
Wells Fargo net income	$	6,206		5,186		12,066		10,322
Other comprehensive income (loss), before tax:
Debt securities:
Net unrealized gains (losses) arising during the period	1,709			(617	)	4,540		(4,060	)
Reclassification of net (gains) losses to net income	39			49		(42	)	117
Derivative and hedging activities:
Net unrealized gains (losses) arising during the period	57			(150	)	22		(392	)
Reclassification of net losses to net income	79			77		158		137
Defined benefit plans adjustments:
Net actuarial and prior service gains (losses) arising during the period	—			—		(4	)	6
Amortization of net actuarial loss, settlements and other to net income	33			29		68		61
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period	14			(83	)	56		(85	)
Other comprehensive income (loss), before tax	1,931			(695	)	4,798		(4,216	)
Income tax benefit (expense) related to other comprehensive income	(473		)	154		(1,167	)	1,016
Other comprehensive income (loss), net of tax	1,458			(541	)	3,631		(3,200	)
Less: Other comprehensive loss from noncontrolling interests	—			(1	)	—		(1	)
Wells Fargo other comprehensive income (loss), net of tax	1,458			(540	)	3,631		(3,199	)
Wells Fargo comprehensive income	7,664			4,646		15,697		7,123
Comprehensive income from noncontrolling interests	132			122		239		313
Total comprehensive income	$	7,796		4,768		15,936		7,436

Wells Fargo & Company and Subsidiaries
Consolidated Statement of Comprehensive Income (Unaudited)
Quarter ended September 30, Nine months ended September 30,
(in millions) 2017
2016
2017
2016
Wells Fargo net income $ 4,596
5,644
15,863
16,664
Other comprehensive income (loss), before tax:
Investment securities:
Net unrealized gains arising during the period 891
112
2,825
2,478
Reclassification of net gains to net income (200 ) (193 ) (522 ) (1,001 )
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period 36
(445 ) 279
2,611
Reclassification of net gains on cash flow hedges to net income (105 ) (262 ) (460 ) (783 )
Defined benefit plans adjustments:
Net actuarial and prior service gains (losses) arising during the period 11
(447 ) 4
(474 )
Amortization of net actuarial loss, settlements and other to net income 41
39
120
115
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period 40
(10 ) 87
27
Other comprehensive income (loss), before tax 714
(1,206 ) 2,333
2,973
Income tax benefit (expense) related to other comprehensive income (265 ) 461
(852 ) (1,110 )
Other comprehensive income (loss), net of tax 449
(745 ) 1,481
1,863
Less: Other comprehensive income (loss) from noncontrolling interests (34 ) 19
(29 ) (24 )
Wells Fargo other comprehensive income (loss), net of tax 483
(764 ) 1,510
1,887
Wells Fargo comprehensive income 5,079
4,880
17,373
18,551
Comprehensive income from noncontrolling interests 24
29
158
53
Total comprehensive income $ 5,103
4,909
17,531
18,604

The accompanying notes are an integral part of these statements.


Wells Fargo & Company and Subsidiaries
Consolidated Balance Sheet
(in millions, except shares)	Sep 30, 2017			Dec 31, 2016		Jun 30, 2019			Dec 31, 2018
Assets	(Unaudited)					(Unaudited)
Cash and due from banks	$	19,206		20,729		$	20,880		23,551
Federal funds sold, securities purchased under resale agreements and other short-term investments	273,105			266,038
Trading assets	88,404			74,397
Investment securities:
Interest-earning deposits with banks						143,547			149,736
Total cash, cash equivalents, and restricted cash						164,427			173,287
Federal funds sold and securities purchased under resale agreements						112,119			80,207
Debt securities:
Trading, at fair value						70,208			69,989
Available-for-sale, at fair value	272,210			308,364		265,983			269,912
Held-to-maturity, at cost (fair value $142,818 and $99,155)	142,423			99,583
Mortgages held for sale (includes $16,484 and $22,042 carried at fair value) (1)	20,009			26,309
Loans held for sale	157			80
Loans (includes $410 and $758 carried at fair value) (1)	951,873			967,604
Held-to-maturity, at cost (fair value $147,864 and $142,115)						145,876			144,788
Mortgage loans held for sale (includes $16,343 and $11,771 carried at fair value) (1)						22,998			15,126
Loans held for sale (includes $1,118 and $1,469 carried at fair value) (1)						1,181			2,041
Loans (includes $202 and $244 carried at fair value) (1)						949,878			953,110
Allowance for loan losses	(11,078		)	(11,419	)	(9,692		)	(9,775	)
Net loans	940,795			956,185		940,186			943,335
Mortgage servicing rights:
Measured at fair value	13,338			12,959		12,096			14,649
Amortized	1,406			1,406		1,407			1,443
Premises and equipment, net	8,449			8,333		9,435			8,920
Goodwill	26,581			26,693		26,415			26,418
Derivative assets	12,580			14,498		13,162			10,770
Other assets (includes $4,523 and $3,275 carried at fair value) (1)	116,276			114,541
Equity securities (includes $35,950 and $29,556 carried at fair value) (1)						61,537			55,148
Other assets						76,358			79,850
Total assets (2)	$	1,934,939		1,930,115		$	1,923,388		1,895,883
Liabilities
Noninterest-bearing deposits	$	366,528		375,967		$	340,813		349,534
Interest-bearing deposits	940,178			930,112		947,613			936,636
Total deposits	1,306,706			1,306,079		1,288,426			1,286,170
Short-term borrowings	93,811			96,781		115,344			105,787
Derivative liabilities	9,497			14,492		8,399			8,499
Accrued expenses and other liabilities	79,208			57,189		69,706			69,317
Long-term debt	238,893			255,077		241,476			229,044
Total liabilities (3)	1,728,115			1,729,618		1,723,351			1,698,817
Equity
Wells Fargo stockholders' equity:
Wells Fargo stockholders’ equity:
Preferred stock	25,576			24,551		23,021			23,214
Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares	9,136			9,136		9,136			9,136
Additional paid-in capital	60,759			60,234		60,625			60,685
Retained earnings	141,761			133,075		164,551			158,163
Cumulative other comprehensive income (loss)	(1,627		)	(3,137	)	(2,224		)	(6,336	)
Treasury stock – 553,940,326 shares and 465,702,148 shares	(27,772		)	(22,713	)
Treasury stock – 1,062,220,277 shares and 900,557,866 shares						(54,775		)	(47,194	)
Unearned ESOP shares	(1,904		)	(1,565	)	(1,292		)	(1,502	)
Total Wells Fargo stockholders' equity	205,929			199,581
Total Wells Fargo stockholders’ equity						199,042			196,166
Noncontrolling interests	895			916		995			900
Total equity	206,824			200,497		200,037			197,066
Total liabilities and equity	$	1,934,939		1,930,115		$	1,923,388		1,895,883


(1)	Parenthetical amounts represent assets and liabilities ~~for which~~that we are required to carry at fair value or have elected the fair value option.

(2)

Our consolidated assets at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, include the following assets of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs: Cash and due from banks, ~~$115~~$11 million and ~~$168~~$139 million; Interest-earning deposits with banks, $8 million~~; Federal funds sold,~~ and $8 million; Debt securities, ~~purchased under resale agreements~~$60 million and ~~other short-term investments,~~ ~~$402 million~~ ~~and~~ ~~$74 million; Trading assets,~~ ~~$130 million~~ ~~at both period ends; Investment securities,~~ ~~$0 million~~ ~~at both period ends;~~$45 million; Net loans, ~~$11.9~~$13.6 billion and ~~$12.6 billion; Derivative assets,~~ $0$13.6 billion; Equity securities, $121 million and ~~$1 million~~;$85 million; Other assets, ~~$352~~$208 million and ~~$452 million~~;$221 million; and Total assets, ~~$12.9~~$14.0 billion and ~~$13.4~~$14.1 billion,, respectively.

(3)

Our consolidated liabilities at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, include the following VIE liabilities for which the VIE creditors do not have recourse to Wells Fargo: Derivative liabilities, ~~$26~~$1 million and ~~$33 million~~;$0 million; Accrued expenses and other liabilities, ~~$141~~$201 million and ~~$107 million~~;$191 million; Long-term debt, ~~$2.1 billion~~$748 million and ~~$3.7 billion~~;$816 million; and Total liabilities, ~~$2.3~~$950 million and $1.0 billion, ~~and~~ ~~$3.8 billion~~, respectively.

~~The accompanying notes are an integral part of these statements.~~

Wells Fargo & Company and Subsidiaries
Consolidated Statement of Changes in Equity (Unaudited)

Preferred stock Common stock
(in millions, except shares) Shares
Amount
Shares
Amount
Balance December 31, 2015 11,259,917
$ 22,214
5,092,128,810
$ 9,136
Cumulative effect from change in consolidation accounting (1)
Balance January 1, 2016 11,259,917
$ 22,214
5,092,128,810
$ 9,136
Net income
Other comprehensive income (loss), net of tax
Noncontrolling interests
Common stock issued 47,151,609

Common stock repurchased (134,787,773 )
Preferred stock issued to ESOP 1,150,000
1,150

Preferred stock released by ESOP
Preferred stock converted to common shares (920,314 ) (920 ) 19,396,555

Common stock warrants repurchased/exercised
Preferred stock issued 86,000
2,150

Common stock dividends
Preferred stock dividends
Tax benefit from stock incentive compensation
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change 315,686

2,380

(68,239,609 )
—
Balance September 30, 2016 11,575,603

$ 24,594

5,023,889,201

$ 9,136
Balance January 1, 2017 11,532,712
$ 24,551
5,016,109,326
$ 9,136
Net income
Other comprehensive income, net of tax
Noncontrolling interests
Common stock issued 45,738,310

Common stock repurchased (145,143,692 )
Preferred stock issued to ESOP 950,000
950

Preferred stock released by ESOP
Preferred stock converted to common shares (614,529 ) (615 ) 11,167,204

Common stock warrants repurchased/exercised
Preferred stock issued 27,600
690

Common stock dividends
Preferred stock dividends
Tax benefit from stock incentive compensation (2)
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change 363,071

1,025

(88,238,178 )
—
Balance September 30, 2017 11,895,783

$ 25,576

4,927,871,148

$ 9,136


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


~~(2)~~	~~Effective January 1, 2017, we adopted Accounting Standards Update 2016-09 (Improvements to Employee Share-Based Payment Accounting).~~ ~~Accordingly, tax benefit from stock incentive compensation is reported in income tax expense in the consolidated statement of income.~~

The accompanying notes are an integral part of these statements.

Wells Fargo stockholders' equity
Additional
paid-in
capital

Retained
earnings

Cumulative
other
comprehensive
income

Treasury
stock

Unearned
ESOP
shares

Total
Wells Fargo
stockholders'
equity

Noncontrolling
interests

Total
equity

60,714
120,866
297
(18,867 ) (1,362 ) 192,998
893
193,891
121
121
60,714
120,866
297
(18,867 ) (1,362 ) 192,998
1,014
194,012
16,664
16,664
77
16,741
1,887
1,887
(24 ) 1,863
1
1
(137 ) (136 )
(194 ) (286 ) 2,256
1,776
1,776
500
(6,582 ) (6,082 ) (6,082 )
99
(1,249 ) —
—
(79 ) 999
920
920
(16 ) 936
—
—
(17 ) (17 ) (17 )
(49 ) 2,101
2,101
39
(5,791 ) (5,752 ) (5,752 )
(1,165 ) (1,165 ) (1,165 )
203
203
203
547
547
547
(1,063 ) 10
(1,053 ) (1,053 )
(29 )
9,422

1,887

(3,380 )
(250 )
10,030

(84 )
9,946
60,685

130,288

2,184

(22,247 )
(1,612 )
203,028

930

203,958
60,234
133,075
(3,137 ) (22,713 ) (1,565 ) 199,581
916
200,497
15,863
15,863
187
16,050
1,510
1,510
(29 ) 1,481
1
1
(179 ) (178 )
(87 ) (184 ) 2,183
1,912
1,912
750
(7,813 ) (7,063 ) (7,063 )
31
(981 ) —
—
(27 ) 642
615
615
61
554
—
—
(87 ) (87 ) (87 )
(13 ) 677
677
37
(5,775 ) (5,738 ) (5,738 )
(1,218 ) (1,218 ) (1,218 )
—
—
—
669
669
669
(810 ) 17
(793 ) (793 )
525

8,686

1,510

(5,059 )
(339 )
6,348

(21 )
6,327
60,759

141,761

(1,627 )
(27,772 )
(1,904 )
205,929

895

206,824



Wells Fargo & Company and Subsidiaries
Consolidated Statement of Changes in Equity (Unaudited)

	Preferred stock					Common stock
(in millions, except shares)	Shares		Amount			Shares			Amount
Balance March 31, 2019	9,377,211		$	23,214		4,511,947,830			$	9,136
Net income
Other comprehensive income (loss), net of tax
Noncontrolling interests
Common stock issued						8,491,923
Common stock repurchased						(104,852,744	)
Preferred stock issued to ESOP	—		—
Preferred stock released by ESOP
Preferred stock converted to common shares	(193,042	)	(193		)	4,004,188
Common stock warrants repurchased/exercised
Preferred stock issued	—		—
Common stock dividends
Preferred stock dividends
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change	(193,042	)	(193		)	(92,356,633	)	Balance	—
Balance June 30, 2019	9,184,169		$	23,021		4,419,591,197			$	9,136
Balance March 31, 2018	12,546,235		$	26,227		4,873,882,481			$	9,136
Net income
Other comprehensive income (loss), net of tax
Noncontrolling interests
Common stock issued						1,834,029
Common stock repurchased (1)						(35,771,728	)
Preferred stock issued to ESOP	—		—
Preferred stock released by ESOP
Preferred stock converted to common shares	(490,251	)	(490		)	9,123,072
Common stock warrants repurchased/exercised
Preferred stock issued	—		—
Common stock dividends
Preferred stock dividends
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change	(490,251	)	(490		)	(24,814,627	)		—
Balance June 30, 2018	12,055,984		$	25,737		4,849,067,854			$	9,136

Wells Fargo & Company and Subsidiaries
Consolidated Statement of Cash Flows (Unaudited)
Nine months ended September 30,
(in millions) 2017
2016
Cash flows from operating activities:
Net income before noncontrolling interests $ 16,050
16,741
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 1,877
2,965
Changes in fair value of MSRs, MHFS and LHFS carried at fair value 828
1,695
Depreciation, amortization and accretion 3,794
3,598
Other net (gains) losses 659
(74 )
Stock-based compensation 1,595
1,474
Originations and purchases of MHFS and LHFS (1) (134,363 ) (144,022 )
Proceeds from sales of and paydowns on mortgages originated for sale and LHFS (1) 97,116
91,877
Net change in:
Trading assets (1) 28,463
30,774
Deferred income taxes 1,748
(1,617 )
Derivative assets and liabilities (1) (3,777 ) (836 )
Other assets (1) 2,115
(7,895 )
Other accrued expenses and liabilities (1) 2,375
1,502
Net cash provided (used) by operating activities 18,480
(3,818 )
Cash flows from investing activities:
Net change in:
Federal funds sold, securities purchased under resale agreements and other short-term investments (13,896 ) (28,296 )
Available-for-sale securities:
Sales proceeds 37,520
28,147
Prepayments and maturities 35,392
27,768
Purchases (74,260 ) (66,685 )
Held-to-maturity securities:
Paydowns and maturities 7,557
5,085
Purchases —
(23,593 )
Nonmarketable equity investments:
Sales proceeds 2,838
1,298
Purchases (2,027 ) (3,001 )
Loans:
Loans originated by banking subsidiaries, net of principal collected 5,665
(28,155 )
Proceeds from sales (including participations) of loans held for investment 8,473
6,958
Purchases (including participations) of loans (2,436 ) (4,007 )
Principal collected on nonbank entities’ loans 9,072
8,736
Loans originated by nonbank entities (7,400 ) (9,091 )
Net cash paid for acquisitions (23 ) (29,797 )
Proceeds from sales of foreclosed assets and short sales 4,175
5,560
Other, net (1) (1,336 ) (115 )
Net cash provided (used) by investing activities 9,314
(109,188 )
Cash flows from financing activities:
Net change in:
Deposits 627
52,582
Short-term borrowings 4,655
26,882
Long-term debt:
Proceeds from issuance 38,358
67,677
Repayment (60,103 ) (23,505 )
Preferred stock:
Proceeds from issuance 677
2,101
Cash dividends paid (1,226 ) (1,173 )
Common stock:
Proceeds from issuance 905
1,024
Stock tendered for payment of withholding taxes (1) (376 ) (486 )
Repurchased (7,063 ) (6,082 )
Cash dividends paid (5,605 ) (5,609 )
Net change in noncontrolling interests (72 ) (159 )
Other, net (94 ) (70 )
Net cash provided (used) by financing activities (29,317 ) 113,182
Net change in cash and due from banks (1,523 ) 176
Cash and due from banks at beginning of period 20,729
19,111
Cash and due from banks at end of period $ 19,206
19,287
Supplemental cash flow disclosures:
Cash paid for interest $ 6,514
3,920
Cash paid for income taxes 4,687
7,158


(1)	~~Prior periods have been revised~~For the quarter ended June 30, 2018, additional paid-in capital was reduced by $1.0 billion for the upfront payment related to ~~conform~~a private forward repurchase transaction that settled in third quarter 2018 and reduced our third quarter 2018 shares of common stock by 18.8 million shares upon settlement.




												Quarter ended June 30,
						Wells Fargo stockholders’ equity
Additional paid-in capital		Retained earnings		Cumulative other comprehensive income		Treasury stock		Unearned ESOP shares		Total Wells Fargo stockholders’ equity		Noncontrolling interests		Total equity
60,409		160,776		(3,682	)	(50,519	)	(1,502	)	197,832		901		198,733
		6,206								6,206		132		6,338
				1,458						1,458		—		1,458
—										—		(38	)	(38	)
(2	)	(38	)			439				399				399
—						(4,898	)			(4,898	)			(4,898	)
—								—		—				—
(17	)							210		193				193
(15	)					208				—				—
—										—				—
—										—				—
20		(2,035	)							(2,015	)			(2,015	)
		(358	)							(358	)			(358	)
247										247				247
(17	)					(5	)			(22	)			(22	)
216		3,775		1,458		(4,256	)	210		1,210		94		1,304
60,625		164,551		(2,224	)	(54,775	)	(1,292	)	199,042		995		200,037
60,399		147,928		(4,921	)	(31,246	)	(2,571	)	204,952		958		205,910
		5,186								5,186		123		5,309
				(540	)					(540	)	(1	)	(541	)
—										—		(199	)	(199	)
(20	)	—				93				73				73
(1,000	)					(1,923	)			(2,923	)			(2,923	)
—								—		—				—
(30	)							520		490				490
22						468				—				—
(1	)									(1	)			(1	)
—										—				—
17		(1,917	)							(1,900	)			(1,900	)
		(394	)							(394	)			(394	)
258										258				258
(1	)					(12	)			(13	)			(13	)
(755	)	2,875		(540	)	(1,374	)	520		236		(77	)	159
59,644		150,803		(5,461	)	(32,620	)	(2,051	)	205,188		881		206,069



Wells Fargo & Company and Subsidiaries
Consolidated Statement of Changes in Equity (Unaudited)

	Preferred stock					Common stock
(in millions, except shares)	Shares		Amount			Shares		Amount
Balance December 31, 2018	9,377,216		$	23,214		4,581,253,608		$	9,136
Cumulative effect from change in accounting policies (1)
Balance January 1, 2019	9,377,216		$	23,214		4,581,253,608		$	9,136
Net income
Other comprehensive income (loss), net of tax
Noncontrolling interests
Common stock issued						36,549,824
Common stock repurchased						(202,216,454	)
Preferred stock issued to ESOP	—		—
Preferred stock released by ESOP
Preferred stock converted to common shares	(193,047	)	(193		)	4,004,219
Common stock warrants repurchased/exercised
Preferred stock issued	—		—
Common stock dividends
Preferred stock dividends
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change	(193,047	)	(193		)	(161,662,411	)	—
Balance June 30, 2019	9,184,169		$	23,021		4,419,591,197		$	9,136
Balance December 31, 2017	11,677,235		$	25,358		4,891,616,628		$	9,136
Cumulative effect from change in accounting policies (2)
Balance January 1, 2018	11,677,235		$	25,358		4,891,616,628		$	9,136
Net income
Other comprehensive income (loss), net of tax
Noncontrolling interests
Common stock issued						30,259,788
Common stock repurchased (3)						(86,339,185	)
Preferred stock issued to ESOP	1,100,000		1,100
Preferred stock released by ESOP
Preferred stock converted to common shares	(721,251	)	(721		)	13,530,623
Common stock warrants repurchased/exercised
Preferred stock issued	—		—
Common stock dividends
Preferred stock dividends
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change	378,749		379			(42,548,774	)	—
Balance June 30, 2018	12,055,984		$	25,737		4,849,067,854		$	9,136


(1)	Effective January 1, 2019, we adopted ASU 2016-02 – Leases (Topic 842) and subsequent related Updates, ASU 2017-08 – Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. See Note 1 (Summary of Significant Accounting Policies) for more information.

(2)

Effective January 1, 2018, we adopted ASU 2016-04 – Liabilities – Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products, ASU 2016-01 –Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, and ASU 2014-09 – Revenue from Contracts With Customers (Topic 606) and subsequent related Updates. See Note 1 (Summary of Significant Accounting Policies) for more information.


(3)	For the quarter ended June 30, 2018, additional paid-in capital was reduced by $1.0 billion for the upfront payment related to ~~the current period presentation.~~a private forward repurchase transaction that settled in third quarter 2018 and reduced our third quarter 2018 shares of common stock by 18.8 million shares upon settlement.




										Six months ended June 30,
						Wells Fargo stockholders’ equity
Additional paid-in capital		Retained earnings		Cumulative other comprehensive income		Treasury stock		Unearned ESOP shares		Total Wells Fargo stockholders’ equity		Noncontrolling interests		Total equity
60,685		158,163		(6,336	)	(47,194	)	(1,502	)	196,166		900		197,066
		(492	)	481						(11	)			(11	)
60,685		157,671		(5,855	)	(47,194	)	(1,502	)	196,155		900		197,055
		12,066								12,066		239		12,305
				3,631						3,631		—		3,631
—										—		(144	)	(144	)
(2	)	(367	)			1,907				1,538				1,538
—						(9,718	)			(9,718	)			(9,718	)
—								—		—				—
(17	)							210		193				193
(15	)					208				—				—
—										—				—
—										—				—
39		(4,108	)							(4,069	)			(4,069	)
		(711	)							(711	)			(711	)
791										791				791
(856	)					22				(834	)			(834	)
(60	)	6,880		3,631		(7,581	)	210		2,887		95		2,982
60,625		164,551		(2,224	)	(54,775	)	(1,292	)	199,042		995		200,037
60,893		145,263		(2,144	)	(29,892	)	(1,678	)	206,936		1,143		208,079
		94		(118	)					(24	)			(24	)
60,893		145,357		(2,262	)	(29,892	)	(1,678	)	206,912		1,143		208,055
		10,322								10,322		314		10,636
				(3,199	)					(3,199	)	(1	)	(3,200	)
7										7		(575	)	(568	)
5		(231	)			1,507				1,281				1,281
(1,000	)					(4,952	)			(5,952	)			(5,952	)
43								(1,143	)	—				—
(49	)							770		721				721
27						694				—				—
(158	)									(158	)			(158	)
—										—				—
30		(3,841	)							(3,811	)			(3,811	)
		(804	)							(804	)			(804	)
695										695				695
(849	)					23				(826	)			(826	)
(1,249	)	5,446		(3,199	)	(2,728	)	(373	)	(1,724	)	(262	)	(1,986	)
59,644		150,803		(5,461	)	(32,620	)	(2,051	)	205,188		881		206,069



Wells Fargo & Company and Subsidiaries
Consolidated Statement of Cash Flows (Unaudited)
	Six months ended June 30,
(in millions)	2019			2018
Cash flows from operating activities:
Net income before noncontrolling interests	$	12,305		10,636
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	1,348			643
Changes in fair value of MSRs, MLHFS and LHFS carried at fair value	2,408			(787	)
Depreciation, amortization and accretion	3,100			2,835
Other net (gains)	(1,360		)	(6,285	)
Stock-based compensation	1,388			1,286
Originations and purchases of mortgage loans held for sale	(63,836		)	(80,948	)
Proceeds from sales of and paydowns on mortgage loans held for sale	39,741			60,898
Net change in:
Debt and equity securities, held for trading	14,777			16,371
Loans held for sale	619			(411	)
Deferred income taxes	(821		)	1,118
Derivative assets and liabilities	(2,461		)	958
Other assets	7,194			7,547
Other accrued expenses and liabilities	(7,120		)	520
Net cash provided by operating activities	7,282			14,381
Cash flows from investing activities:
Net change in:
Federal funds sold and securities purchased under resale agreements	(31,912		)	(1,161	)
Available-for-sale debt securities:
Proceeds from sales	6,682			6,151
Prepayments and maturities	17,657			17,377
Purchases	(18,306		)	(26,300	)
Held-to-maturity debt securities:
Paydowns and maturities	5,145			5,431
Purchases	(154		)	—
Equity securities, not held for trading:
Proceeds from sales and capital returns	2,320			3,337
Purchases	(2,426		)	(2,791	)
Loans:
Loans originated by banking subsidiaries, net of principal collected	(7,008		)	(445	)
Proceeds from sales (including participations) of loans held for investment	8,196			7,879
Purchases (including participations) of loans	(1,001		)	(668	)
Principal collected on nonbank entities’ loans	1,770			3,229
Loans originated by nonbank entities	(2,604		)	(2,998	)
Proceeds from sales of foreclosed assets and short sales	1,405			1,954
Other, net	512			(284	)
Net cash provided (used) by investing activities	(19,724		)	10,711
Cash flows from financing activities:
Net change in:
Deposits	1,938			(67,101	)
Short-term borrowings	9,557			1,240
Long-term debt:
Proceeds from issuance	33,091			21,308
Repayment	(26,357		)	(22,305	)
Preferred stock:
Cash dividends paid	(711		)	(872	)
Common stock:
Proceeds from issuance	242			446
Stock tendered for payment of withholding taxes	(272		)	(311	)
Repurchased	(9,718		)	(5,952	)
Cash dividends paid	(3,954		)	(3,722	)
Net change in noncontrolling interests	(124		)	(232	)
Other, net	(110		)	(89	)
Net cash provided (used) by financing activities	3,582			(77,590	)
Net change in cash, cash equivalents, and restricted cash	(8,860		)	(52,498	)
Cash, cash equivalents, and restricted cash at beginning of period	173,287			215,947
Cash, cash equivalents, and restricted cash at end of period	$	164,427		163,449
Supplemental cash flow disclosures:
Cash paid for interest	$	9,354		6,352
Cash paid for income taxes	2,516			1,679

The accompanying notes are an integral part of these statements. See Note 1 (Summary of Significant Accounting Policies) for noncash activities.

Note 1: Summary of Significant Accounting Policies (continued)

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, ~~insurance,~~ trust and investments, mortgage banking, investment banking, retail banking, brokerage, and consumer and commercial finance through ~~branches,~~banking locations, the internet and other distribution channels to consumers, businesses and institutions in all 50 states, the District of Columbia, and in foreign countries. 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 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, ~~2016 (2016~~2018 (2018 Form 10-K). 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 ~~significantly different~~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 ~~and purchased credit-impaired (PCI) loans~~ (Note 56 (Loans and Allowance for Credit Losses));

valuations of residential mortgage servicing rights (MSRs) (Note 710 (Securitizations and Variable Interest Entities) and Note 811 (Mortgage Banking Activities)) ~~and~~;

valuations of financial instruments (Note 1315 (Derivatives) and Note 16 (Fair Values of Assets and Liabilities));

~~income taxes; and~~

liabilities for contingent litigation losses (Note 1114 (Legal Actions)).; and

income taxes.

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 ~~2016~~2018 Form 10-K.

Accounting Standards Adopted in ~~2017~~2019

In first quarter ~~2017,~~2019, we adopted the following new accounting guidance:

~~Accounting Standards Update (ASU or Update) 2016-09 –~~ ~~Compensation – Stock Compensation (Topic 718):~~


•	Accounting Standards Update (ASU or Update) 2018-16 – Derivatives and Hedging (Topic 815): Inclusion of the

~~Improvements to Employee Share-Based Payment Accounting;~~

~~ASU 2016-07 -~~ ~~Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting;~~

~~ASU 2016-06 -~~ ~~Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments; and~~

~~ASU 2016-05 -~~ ~~Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing~~Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting ~~Relationships.~~Purposes


•	ASU 2017-08 – Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities


•	ASU 2016-02 – Leases (Topic 842) and subsequent related Updates, including early adoption of ASU 2019-01 – Leases (Topic 842): Codification Improvements

ASU ~~2016-09Simplifies~~2018-16 expands the ~~accounting for share-based payment awards issued to employees. We have income tax effects~~list of U.S. benchmark interest rates permitted in the application of hedge accounting. The Update adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes ~~in our stock price from the grant date~~ to ~~the vesting date of the employee stock compensation.~~interest rate risk hedging strategies for both risk management and hedge accounting purposes. The Update requires these income tax effects to be recognized in the statement of income within income tax expense instead of within additional paid-in capital. In addition, the Update requires changes to the Statement of Cash Flows including the classification between the operating and financing section for tax activity related to employee stock compensation, which we adopted retrospectively. We recorded excess tax benefits and tax deficiencies within income tax expense in the statement of income in first quarter 2017, on a prospective basis.

~~ASU 2016-07~~ eliminates the requirement for companies to retroactively apply the equity method of accounting for investments when increases in ownership interests or degree of influence result in the adoption of the equity method. Under the guidance, the equity method should beis applied prospectively ~~in the period in which the ownership changes occur. We adopted this change in first quarter 2017. The Update did not impact our consolidated financial statements, as the standard is applied~~for qualifying new or re-designated hedging relationships entered into on ~~a prospective basis.~~or after adoption date.

~~ASU 2016-06~~ clarifies the criteria entities should use when evaluating whether embedded contingent put and call options in debt instruments should be separated from the debt instrument and accounted for separately as derivatives. The Update clarifies that companies should not consider whether the event that triggers the ability to exercise put or call options is related to interest rates or credit risk. We adopted this change in first quarter 2017. The Update did not have a material impact on our consolidated financial statements.

~~ASU 2016-05~~ clarifies that a change in the counterparty to a derivative instrument that has been designated as an accounting hedge does not require the hedging relationship to be dedesignated as long as all other hedge accounting criteria continue to be met. We adopted the guidance in first quarter ~~2017.~~2019. The ~~Update~~adoption did not have an impact as we did not designate SOFR OIS as a ~~material impact~~benchmark interest rate in any hedging relationships.

ASU 2017-08 changes the interest income recognition model for purchased callable debt securities carried at a premium, as the premium will be amortized to the earliest call date rather than to the contractual maturity date. Accounting for purchased callable debt securities held at a discount does not change, as the discount will continue to accrete to the contractual maturity date. The Update impacted our investments in purchased callable debt securities classified as available-for-sale (AFS) and held-to-maturity (HTM), which primarily consist of debt securities of U.S. states and political subdivisions.

We adopted the Update in first quarter 2019 and recorded a cumulative-effect adjustment as of January 1, 2019, that decreased total stockholders’ equity by $111 million. Retained earnings was reduced by $592 million which reflects both the incremental premium amortization under the new guidance from the acquisition date of our impacted AFS and HTM debt securities through the date of adoption and the fact that the incremental premium amortization is not deductible for federal income tax purposes. Other comprehensive income (OCI) was increased by $481 million which reflects the corresponding adjustment to the adoption date unrealized gain or loss of impacted AFS debt securities. Going forward, interest income recognized prior to the call date will be reduced because the premium will be amortized over a shorter period.

ASU 2016-02 modifies the guidance used by lessors and lessees to account for leasing transactions. For our transition to the new guidance, we elected several available practical expedients, including to not reassess the classification of our existing leases, any initial direct costs associated with our leases, or whether any existing contracts are or contain leases. In addition, we elected not to provide a comparative presentation for 2018 and 2017 financial statements.

We adopted the Update in first quarter 2019 and recorded a cumulative-effect adjustment that increased retained earnings by $100 million related to deferred gains on our ~~consolidated financial statements.~~prior sale-leaseback transactions. We also recognized operating lease right-of-use

~~Accounting Standards with Retrospective Application~~

(ROU) assets and liabilities, substantially all of which relate to our leasing of real estate as a lessee, of $4.9 billion and $5.6 billion, respectively.

Leasing Activity

AS LESSOR We lease equipment to our customers under financing or operating leases.

Financing leases are presented in loans and are recorded at the discounted amounts of lease payments receivable plus the estimated residual value of the leased asset. Leveraged leases, which are a form of financing leases, are reduced by related non-recourse debt from third-party investors. Lease payments receivable reflect contractual lease payments adjusted for renewal or termination options that we believe the customer is reasonably certain to exercise. The ~~following accounting pronouncements have been issued~~residual value reflects our best estimate of the expected sales price for the equipment at lease termination based on sales history adjusted for recent trends in the expected exit markets. Many of our leases allow the customer to extend the lease at prevailing market terms or purchase the asset for fair value at lease termination.

Our allowance for loan losses for financing leases considers both the collectability of the lease payments receivable as well as the estimated residual value of the leased asset. We typically purchase residual value insurance on our financing leases so that our risk of loss at lease termination will be less than 10% of the initial value of the lease. Our risk to declines in residual values is further mitigated by the ~~FASB but~~diversity of leased assets in our lease portfolio. In addition, we have several channels for re-leasing or marketing those assets.

In connection with a lease, we may finance the customer’s purchase of other products or services from the equipment vendor and allocate the contract consideration between the use of the asset and the purchase of those products or services based on information obtained from the vendor. Amounts allocated to financing of vendor products or services are reported in loans as commercial and industrial loans, rather than as lease financing.

Our primary income from financing leases is interest income recognized using the effective interest method. Variable lease revenues, such as reimbursement for property taxes associated with the leased asset, are included in lease income within noninterest income.

Operating lease assets are presented in other assets, net of accumulated depreciation. Periodic depreciation expense is recorded on a straight-line basis to the estimated residual value over the estimated useful life of the leased asset. On a periodic basis, operating lease assets are reviewed for impairment and impairment loss is recognized if the carrying amount of operating lease assets exceeds fair value and is not ~~yet effective:~~recoverable. The carrying amount of leased assets is deemed not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the lease payments and the estimated residual value upon the eventual disposition of the equipment. Depreciation of leased assets and impairment loss are presented in operating leases expense within other noninterest expense.

~~ASU 2016-15 –~~ ~~Statement~~Operating lease rental income for leased assets is recognized in lease income within noninterest income on a straight-line basis over the lease term. For leases of ~~Cash Flows (Topic 230): Classification~~railcars, revenue for maintenance services provided under the lease is recognized in lease income.

We elected to exclude from revenues and expenses any sales tax incurred on lease payments which are reimbursed by the lessee. Substantially all of ~~Certain Cash Receipts~~our leased assets are protected against casualty loss through third party insurance.

AS LESSEEWe enter into lease agreements to obtain the right to use assets for our business operations, substantially all of which are real estate. Lease liabilities and ~~Cash Payments~~ROU assets are recognized when we enter into operating or financing leases and represent our obligations and rights to use these assets over the period of the leases and may be re-measured for certain modifications, resolution of certain contingencies involving variable consideration, or our exercise of options (renewal, extension, or termination) under the lease.

Operating lease liabilities include fixed and in-substance fixed payments for the contractual duration of the lease, adjusted for renewals or terminations which were deemed probable of exercise when measured. The lease payments are discounted using a rate determined when the lease is recognized. As we typically do not know the discount rate implicit in the lease, we estimate a discount rate that we believe approximates a collateralized borrowing rate for the estimated duration of the lease. The discount rate is updated when re-measurement events occur. The related operating lease ROU assets may differ from operating lease liabilities due to initial direct costs, deferred or prepaid lease payments and lease incentives.

We present operating lease liabilities in accrued expenses and other liabilities and the related operating lease ROU assets in other assets. The amortization of operating lease ROU assets and the accretion of operating lease liabilities are reported together as fixed lease expense and are included in net occupancy expense within noninterest expense. The fixed lease expense is recognized on a straight-line basis over the life of the lease.

Some of our operating leases include variable lease payments which are periodic adjustments of our payments for the use of the asset based on changes in factors such as consumer price indices, fair market value, tax rates imposed by taxing authorities, or lessor cost of insurance. To the extent not included in operating lease liabilities and operating lease ROU assets, these variable lease payments are recognized as incurred in net occupancy expense within noninterest expense.

For substantially all of our leased assets, we account for consideration paid under the contract for maintenance or other services as lease payments. In addition, for certain asset classes, we have elected to exclude leases with original terms of less than one year from the operating lease ROU assets and lease liabilities. The related short-term lease expense is included in net occupancy expense.

Finance lease (formerly capital lease) liabilities are presented in long-term debt and the associated finance ROU assets are presented in premises and equipment.

Note 1: Summary of Significant Accounting Policies (continued)

~~ASU 2016-18~~ ~~– Statement of Cash Flows (Topic 230):~~ ~~Restricted Cash~~

~~ASU 2016-15~~ addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice for reporting in the Statement of Cash Flows. The Update is effective for us in first quarter 2018 with retrospective application. Subject to completion of our assessment, we are not expecting this Update to have a material impact on our financial statements.

~~ASU 2016-18~~ requires that amounts described as restricted cash and cash equivalents be included with cash and cash equivalents in the statement of cash flows. In addition, we will be required to disclose information in our footnotes about the nature of the restriction on cash and cash equivalents. The Update is effective for us in first quarter 2018 with retrospective application. Subject to completion of our assessment, we are not expecting this Update to have a material impact on our financial statements.

~~Private~~ Share Repurchases

From time to time we may enter into private forward repurchase ~~transactions with unrelated third parties~~contracts, written repurchase plans pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, or a combination of the two to complement our open-market common stock repurchase ~~strategies, to~~strategies. The stock repurchase transactions allow us to manage our share repurchases in a manner consistent with our

capital plans submitted annually under the Comprehensive Capital Analysis and Review (CCAR) and to provide an economic benefit to the Company.

Our payments to the counterparties for ~~these~~the private forward repurchase contracts are recorded in permanent equity in the quarter paid and are not subject to re-measurement. The classification of the up-front payments as permanent equity assures that we have appropriate repurchase timing consistent with our capital plans, which contemplate a fixed dollar amount available per quarter for share repurchases pursuant to the Board of Governors of the Federal Reserve ~~Board~~System (FRB) supervisory

guidance. In return, the counterparty agrees to deliver a variable number of shares based on a per share discount to the volume-weighted average stock price over the contract period. There are no scenarios where the contracts would not either physically settle in shares or allow us to choose the settlement method. Our total number of outstanding shares of common stock is not reduced until settlement of the private share repurchase contract.

We did not enter into any private forward repurchase contracts in second quarter 2019 and we had no unsettled private share repurchase contracts at ~~both September~~June 30, ~~2017~~2019.

Under a Rule 10b5-1 repurchase plan, payments and ~~September 30, 2016.~~receipt of repurchased shares settle on the same day and the shares repurchased reduce the total number of outstanding shares of common stock upon the settlement of each trade under the plan.

Supplemental Cash Flow Information

Significant noncash activities are presented ~~below.~~in Table 1.1.

Table 1.1:Supplemental Cash Flow Information



	Six months ended June 30,
(in millions)	2019		2018
Trading debt securities retained from securitization of MLHFS	$	19,131	17,674
Transfers from loans to MLHFS	4,419		3,053
Transfers from loans to LHFS	92		2,149
Transfers from available-for-sale debt securities to held-to-maturity debt securities	6,071		10,371
Operating lease ROU assets acquired with operating lease liabilities (1)	5,302		—


(1)	The six months ended June 30, 2019, balance includes $4.9 billion from adoption of ASU 2016-02 – Leases (Topic 842) and $402 million attributable to new leases and changes from modified leases.

Nine months ended September 30,
(in millions) 2017
2016
Trading assets retained from securitization of MHFS $ 43,394
47,291
Transfers from loans to MHFS 4,015
5,257
Transfers from available-for-sale to held-to-maturity securities 50,405
816

Subsequent Events

We have evaluated the effects of events that have occurred subsequent to ~~September~~June 30, ~~2017,~~2019, and, except as disclosed elsewhere in the footnotes, there have been no material events that would

require recognition in our ~~third~~second quarter ~~2017~~2019 consolidated financial statements or disclosure in the Notes to the consolidated financial statements.

Note 2: Business Combinations

We regularly explore opportunities to acquire financial services companies and businesses. Generally, we do not make a public announcement about an acquisition opportunity until a definitive agreement has been signed. ~~For information~~

We completed no acquisitions during the first half of 2019 and had no business combinations pending as of June 30, 2019.

We closed the previously announced sale of our Institutional Retirement and Trust business (IRT) on ~~additional contingent consideration~~July 1, 2019, and we recognized a pre-tax gain of approximately $1.1 billion, which will be reflected in our third quarter 2019 net income. We will continue to administer client assets at the direction of the buyer for up to 24 months pursuant to a transition services agreement. The buyer will receive all post-closing revenue from the client assets and will pay us a fee for costs that we incur to administer the client assets during the transition period. The transition services fee will be recognized as other noninterest income. Assets under administration related to ~~acquisitions, which~~IRT were $918 billion at June 30, 2019. Transition period revenue, is ~~considered~~expected to ~~be a guarantee, see Note 10 (Guarantees, Pledged Assets~~approximate transition period expenses and ~~Collateral).~~is subject to downward adjustment as client assets transition to the buyer's platform.

~~On July 1, 2017, we completed a step acquisition involving an investment management firm with approximately $10 billion of~~

~~assets under management. We had previously been the majority owner.~~

~~At September 30, 2017, we had no pending business combinations.~~

Note 3: ~~Federal Funds Sold, Securities Purchased under Resale Agreements~~Cash, Loan and ~~OtherShort-Term Investments~~Dividend Restrictions

Cash and cash equivalents may be restricted as to usage or withdrawal. FRB regulations require that each of our subsidiary banks maintain reserve balances on deposit with the Federal Reserve Banks. Table 3.1 provides a summary of restrictions on cash equivalents in addition to the ~~detail of federal funds sold, securities purchased under short-term resale agreements(generally less than one year) and other short-term investments. Substantially all of the interest-earning deposits at September 30, 2017, and December 31, 2016, were held at Federal Reserve Banks.~~FRB reserve cash balance requirements.

Table 3.1:~~Fed Funds Sold and Other Short-Term Investments~~Nature of Restrictions on Cash Equivalents

(in millions) Sep 30,
2017
Dec 31,
2016
Federal funds sold and securities purchased under resale agreements $ 66,156
58,215
Interest-earning deposits 205,648
200,671
Other short-term investments 1,301
7,152
Total $ 273,105
266,038



(in millions)	Jun 30, 2019		Dec 31, 2018
Average required reserve balance for FRB (1)	$	11,179	12,428
Reserve balance for non-U.S. central banks	556		517
Segregated for benefit of brokerage customers under federal and other brokerage regulations	956		1,135
Related to consolidated variable interest entities (VIEs) that can only be used to settle liabilities of VIEs	19		147


(1)	FRB required reserve balance represents average for the first half of 2019 and for the year ended December 31, 2018.

We have a state-chartered subsidiary bank that is subject to state regulations that limit dividends. Under these provisions and regulatory limitations, our national and state-chartered subsidiary banks could have declared additional dividends of $7.6 billion at June 30, 2019, without obtaining prior regulatory approval. 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, under a Support Agreement dated June 28, 2017, as amended and restated on June 26, 2019, among Wells Fargo & Company, the parent holding company (the “Parent”), WFC Holdings, LLC, an intermediate holding company and subsidiary of the Parent (the “IHC”), Wells Fargo Bank, N.A., Wells Fargo Securities, LLC, Wells Fargo Clearing Services, LLC, and certain other direct and indirect subsidiaries of the Parent designated as material entities for resolution planning purposes or identified as related support entities in our resolution plan, 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. Based on retained earnings at June 30, 2019, our nonbank subsidiaries could have declared additional dividends of $25.1 billion at June 30, 2019, without obtaining prior regulatory approval. For additional information see Note 3 (Cash, Loan and Dividend Restrictions) in our 2018 Form 10-K.

~~As part~~The FRB’s Capital Plan Rule (codified at 12 CFR 225.8 of ~~maintaining our memberships in~~Regulation Y) establishes capital planning and prior notice and approval requirements for capital distributions including dividends by certain ~~clearing organizations, we are required~~large bank holding companies. The FRB has also published guidance regarding its supervisory expectations for capital planning, including capital policies regarding the process relating to ~~stand ready to provide liquidity meant to sustain market clearing activity~~common stock dividend and repurchase decisions in the ~~event unforeseen events occur~~FRB’s SR Letter 15-18. The effect of this guidance is to require the approval of the FRB (or specifically under the Capital Plan Rule, a notice of non-objection) for the Company to repurchase or ~~are deemed likely~~redeem common or perpetual preferred stock as well as to ~~occur. This includes commitments we have entered into to purchase securities under resale agreements~~raise the per share quarterly dividend from ~~a central clearing organization that, at~~ its ~~option, require us to provide funding under such agreements. We do not have any outstanding amounts funded, and~~current level of $0.51 per share as declared by the ~~amount~~Company’s Board of ~~our unfunded contractual commitment was $1.5 billion and $2.9 billion as of~~ Directors on July 23, 2019, payable on September ~~30, 2017, and December 31, 2016, respectively.~~1, 2019.

We have classified securities purchased under long-term resale agreements (generally one year or more), which totaled $20.6 billion and $21.3 billion in loans at September 30, 2017, and December 31, 2016, respectively. For additional information on the collateral we receive from other entities under resale agreements and securities borrowings, see the “Offsetting of Resale and Repurchase Agreements and Securities Borrowing and Lending Agreements” section in Note 10 (Guarantees, Pledged Assets and Collateral).

Note 4: ~~Investment Securities~~ Trading Activities

Table 4.1 presents a summary of our trading assets and liabilities measured at fair value through earnings.

Table 4.1: Trading Assets and Liabilities



	Jun 30,			Dec 31,
(in millions)	2019			2018
Trading assets:
Debt securities	$	70,208		69,989
Equity securities	23,327			19,449
Loans held for sale	1,118			1,469
Gross trading derivative assets	34,683			29,216
Netting (1)	(22,827		)	(19,807	)
Total trading derivative assets	11,856			9,409
Total trading assets	106,509			100,316
Trading liabilities:
Short sale	15,955			19,720
Gross trading derivative liabilities	33,458			28,717
Netting (1)	(26,417		)	(21,178	)
Total trading derivative liabilities	7,041			7,539
Total trading liabilities	$	22,996		27,259


(1)	Represents balance sheet netting for trading derivative asset and liability balances, and trading portfolio level counterparty valuation adjustments.

Table 4.2 provides a summary of the 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 includes dividend income on trading securities and dividend expense on trading securities we have sold, but not yet purchased.

Table 4.2:Net Interest Income and Net Gains (Losses) on Trading Activities



	Quarter ended June 30,					Six months ended June 30,
(in millions)	2019			2018		2019		2018
Interest income:
Debt securities	$	740		689		1,533		1,320
Equity securities	143			128		258		269
Loans held for sale	20			15		43		23
Total interest income	903			832		1,834		1,612
Less: Interest expense	127			144		263		272
Net interest income	776			688		1,571		1,340

Net gains (losses) from trading activities (1):
Debt securities	401			(140	)	1,089		(639	)
Equity securities	1,236			(635	)	3,303		(1,104	)
Loans held for sale	(4		)	7		10		15
Derivatives (2)	(1,404		)	959		(3,816	)	2,162
Total net gains from trading activities	229			191		586		434
Total trading-related net interest and noninterest income	$	1,005		879		2,157		1,774


(1)	Represents realized gains (losses) and unrealized gains (losses) due to changes in fair value of our trading positions.


(2)	Excludes economic hedging of mortgage banking and asset/liability management activities, for which hedge results (realized and unrealized) are reported with the respective hedged activities.

Note 5: Available-for-Sale and Held-to-Maturity Debt Securities

Table 5.1 provides the amortized cost and fair value by major categories of available-for-sale debt securities, which are carried at fair value, and held-to-maturity debt securities, which are carried at

amortized cost. The net unrealized gains (losses) for

available-for-sale debt securities are reported on an after-tax basis as a component of cumulative OCI. Information on debt securities held for trading is included in Note 4 (Trading Activities).

Table ~~4.1:~~5.1:Amortized Cost and Fair Value

(in millions) Amortized Cost

Gross
unrealized
gains

Gross
unrealized
losses

Fair
value

September 30, 2017
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ 6,408
8
(66 ) 6,350
Securities of U.S. states and political subdivisions 52,854
774
(854 ) 52,774
Mortgage-backed securities:
Federal agencies 149,872
1,237
(928 ) 150,181
Residential 5,942
455
(3 ) 6,394
Commercial 4,586
74
(8 ) 4,652
Total mortgage-backed securities 160,400
1,766
(939 ) 161,227
Corporate debt securities 8,962
443
(65 ) 9,340
Collateralized loan and other debt obligations (1) 35,298
317
(7 ) 35,608
Other (2) 5,857
168
(7 ) 6,018
Total debt securities 269,779
3,476
(1,938 ) 271,317
Marketable equity securities:
Perpetual preferred securities 412
12
(5 ) 419
Other marketable equity securities 194
282
(2 ) 474
Total marketable equity securities 606
294
(7 ) 893
Total available-for-sale securities 270,385
3,770
(1,945 ) 272,210
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,712
606
(36 ) 45,282
Securities of U.S. states and political subdivisions 6,321
70
(45 ) 6,346
Federal agency and other mortgage-backed securities (3) 90,071
305
(509 ) 89,867
Collateralized loan obligations 661
3
—
664
Other (2) 658
1
—
659
Total held-to-maturity securities 142,423
985
(590 ) 142,818
Total $ 412,808
4,755
(2,535 ) 415,028
December 31, 2016
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ 25,874
54
(109 ) 25,819
Securities of U.S. states and political subdivisions 52,121
551
(1,571 ) 51,101
Mortgage-backed securities:
Federal agencies 163,513
1,175
(3,458 ) 161,230
Residential 7,375
449
(8 ) 7,816
Commercial 8,475
101
(74 ) 8,502
Total mortgage-backed securities 179,363
1,725
(3,540 ) 177,548
Corporate debt securities 11,186
381
(110 ) 11,457
Collateralized loan and other debt obligations (1) 34,764
287
(31 ) 35,020
Other (2) 6,139
104
(35 ) 6,208
Total debt securities 309,447
3,102
(5,396 ) 307,153
Marketable equity securities:
Perpetual preferred securities 445
35
(11 ) 469
Other marketable equity securities 261
481
—
742
Total marketable equity securities 706
516
(11 ) 1,211
Total available-for-sale securities 310,153
3,618
(5,407 ) 308,364
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies 44,690
466
(77 ) 45,079
Securities of U.S. states and political subdivisions 6,336
17
(144 ) 6,209
Federal agency and other mortgage-backed securities (3) 45,161
100
(804 ) 44,457
Collateralized loan obligations 1,065
6
(1 ) 1,070
Other (2) 2,331
10
(1 ) 2,340
Total held-to-maturity securities 99,583
599
(1,027 ) 99,155
Total $ 409,736
4,217
(6,434 ) 407,519



(in millions)	Amortized Cost		Gross unrealized gains	Gross unrealized losses		Fair value
June 30, 2019
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	15,334	2	(17	)	15,319
Securities of U.S. states and political subdivisions (1)	44,205		968	(78	)	45,095
Mortgage-backed securities:
Federal agencies	154,549		1,617	(308	)	155,858
Residential	1,241		23	(1	)	1,263
Commercial	4,140		45	(5	)	4,180
Total mortgage-backed securities	159,930		1,685	(314	)	161,301
Corporate debt securities	6,058		208	(36	)	6,230
Collateralized loan and other debt obligations (2)	32,944		165	(114	)	32,995
Other (3)	4,987		70	(14	)	5,043
Total available-for-sale debt securities	263,458		3,098	(573	)	265,983
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	44,766		574	(4	)	45,336
Securities of U.S. states and political subdivisions	7,948		182	(5	)	8,125
Federal agency and other mortgage-backed securities (4)	93,105		1,312	(71	)	94,346
Collateralized loan obligations	57		—	—		57
Total held-to-maturity debt securities	145,876		2,068	(80	)	147,864
Total	$	409,334	5,166	(653	)	413,847
December 31, 2018
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	13,451	3	(106	)	13,348
Securities of U.S. states and political subdivisions (1)	48,994		716	(446	)	49,264
Mortgage-backed securities:
Federal agencies	155,974		369	(3,140	)	153,203
Residential	2,638		142	(5	)	2,775
Commercial	4,207		40	(22	)	4,225
Total mortgage-backed securities	162,819		551	(3,167	)	160,203
Corporate debt securities	6,230		131	(90	)	6,271
Collateralized loan and other debt obligations (2)	35,581		158	(396	)	35,343
Other (3)	5,396		100	(13	)	5,483
Total available-for-sale debt securities	272,471		1,659	(4,218	)	269,912
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	44,751		4	(415	)	44,340
Securities of U.S. states and political subdivisions	6,286		30	(116	)	6,200
Federal agency and other mortgage-backed securities (4)	93,685		112	(2,288	)	91,509
Collateralized loan obligations	66		—	—		66
Total held-to-maturity debt securities	144,788		146	(2,819	)	142,115
Total	$	417,259	1,805	(7,037	)	412,027


(1)	Includes investments in tax-exempt preferred debt securities issued by investment funds or trusts that predominantly invest in tax-exempt municipal securities. The ~~available-for-sale portfolio includes~~cost basis and fair value of these types of securities was $5.8 billion each at June 30, 2019, and $6.3 billion each at December 31, 2018.


(2)	Includes collateralized debt obligations (CDOs) with a cost basis and fair value of ~~$914~~$521 million and ~~$1.0 billion~~,$649 million, respectively, at ~~September~~June 30, ~~2017~~,2019, and ~~$819~~$662 million and ~~$847~~$800 million,, respectively, at December 31, ~~2016~~.

~~(2)~~

The “Other” category of available-for-sale securities largely includes asset-backed securities collateralized by student loans. Included in the “Other” category of held-to-maturity securities are asset-backed securities collateralized by automobile leases or loans and cash with a cost basis and fair value of ~~$158 million~~ ~~each at~~ ~~September 30, 2017, and~~ ~~$1.3 billion~~ ~~each at~~ ~~December 31, 2016. Also included in the “Other” category of held-to-maturity securities are asset-backed securities collateralized by dealer floorplan loans with a cost basis and fair value of~~ ~~$500 million~~ ~~and~~ ~~$501 million, respectively at~~ ~~September 30, 2017, and~~ ~~$1.1 billion~~ ~~each at~~ ~~December 31, 2016~~.

2018.


(3)	Largely includes asset-backed securities collateralized by student loans.


(4)	Predominantly consists of federal agency mortgage-backed securities at both ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~.2018.

Note ~~4: Investment~~5: Available-for-Sale and Held-to-Maturity Debt Securities (continued)

Gross Unrealized Losses and Fair Value

Table ~~4.2~~5.2 shows the gross unrealized losses and fair value of available-for-sale and held-to-maturity debt securities ~~in the investment securities portfolio~~ by length of time ~~that~~those individual securities in each category have been in a continuous loss position. Debt securities on which we have taken credit-related ~~OTTI write-downs~~other-than-temporary impairment (OTTI) write-

downs 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 cost basis and not the period of time since the credit-related OTTI write-down.

Table ~~4.2:~~5.2:Gross Unrealized Losses and Fair Value



	Less than 12 months				12 months or more			Total
(in millions)	Gross unrealized losses			Fair value	Gross unrealized losses		Fair value	Gross unrealized losses		Fair value
June 30, 2019
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	(2	)	5,780	(15	)	5,511	(17	)	11,291
Securities of U.S. states and political subdivisions	(32		)	5,003	(46	)	2,696	(78	)	7,699
Mortgage-backed securities:
Federal agencies	(2		)	1,203	(306	)	32,179	(308	)	33,382
Residential	(1		)	180	—		—	(1	)	180
Commercial	(3		)	837	(2	)	89	(5	)	926
Total mortgage-backed securities	(6		)	2,220	(308	)	32,268	(314	)	34,488
Corporate debt securities	(11		)	470	(25	)	281	(36	)	751
Collateralized loan and other debt obligations	(58		)	12,847	(56	)	7,239	(114	)	20,086
Other	(8		)	1,222	(6	)	246	(14	)	1,468
Total available-for-sale debt securities	(117		)	27,542	(456	)	48,241	(573	)	75,783
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	—			—	(4	)	1,613	(4	)	1,613
Securities of U.S. states and political subdivisions	—			—	(5	)	514	(5	)	514
Federal agency and other mortgage-backed securities	(1		)	15	(70	)	17,392	(71	)	17,407
Collateralized loan obligations	—			—	—		—	—		—
Total held-to-maturity debt securities	(1		)	15	(79	)	19,519	(80	)	19,534
Total	$	(118	)	27,557	(535	)	67,760	(653	)	95,317
December 31, 2018
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	(1	)	498	(105	)	6,204	(106	)	6,702
Securities of U.S. states and political subdivisions	(73		)	9,746	(373	)	9,017	(446	)	18,763
Mortgage-backed securities:
Federal agencies	(42		)	10,979	(3,098	)	112,252	(3,140	)	123,231
Residential	(3		)	398	(2	)	69	(5	)	467
Commercial	(20		)	1,972	(2	)	79	(22	)	2,051
Total mortgage-backed securities	(65		)	13,349	(3,102	)	112,400	(3,167	)	125,749
Corporate debt securities	(64		)	1,965	(26	)	298	(90	)	2,263
Collateralized loan and other debt obligations	(388		)	28,306	(8	)	553	(396	)	28,859
Other	(7		)	819	(6	)	159	(13	)	978
Total available-for-sale debt securities	(598		)	54,683	(3,620	)	128,631	(4,218	)	183,314
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	(3		)	895	(412	)	41,083	(415	)	41,978
Securities of U.S. states and political subdivisions	(4		)	598	(112	)	3,992	(116	)	4,590
Federal agency and other mortgage-backed securities	(5		)	4,635	(2,283	)	77,741	(2,288	)	82,376
Collateralized loan obligations	—			—	—		—	—		—
Total held-to-maturity debt securities	(12		)	6,128	(2,807	)	122,816	(2,819	)	128,944
Total	$	(610	)	60,811	(6,427	)	251,447	(7,037	)	312,258

Less than 12 months 12 months or more Total
(in millions)
Gross
unrealized
losses

Fair
value

Gross
unrealized
losses

Fair
value

Gross
unrealized
losses

Fair
value

September 30, 2017
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ (4 ) 2,582
(62 ) 1,968
(66 ) 4,550
Securities of U.S. states and political subdivisions (23 ) 6,117
(831 ) 19,188
(854 ) 25,305
Mortgage-backed securities:
Federal agencies (383 ) 50,708
(545 ) 22,103
(928 ) 72,811
Residential (2 ) 145
(1 ) 64
(3 ) 209
Commercial (1 ) 393
(7 ) 348
(8 ) 741
Total mortgage-backed securities (386 ) 51,246
(553 ) 22,515
(939 ) 73,761
Corporate debt securities (5 ) 305
(60 ) 886
(65 ) 1,191
Collateralized loan and other debt obligations (1 ) 3,171
(6 ) 581
(7 ) 3,752
Other (1 ) 494
(6 ) 526
(7 ) 1,020
Total debt securities (420 ) 63,915
(1,518 ) 45,664
(1,938 ) 109,579
Marketable equity securities:

Perpetual preferred securities (1 ) 21
(4 ) 67
(5 ) 88
Other marketable equity securities (2 ) 10
—
—
(2 ) 10
Total marketable equity securities (3 ) 31
(4 ) 67
(7 ) 98
Total available-for-sale securities (423 ) 63,946
(1,522 ) 45,731
(1,945 ) 109,677
Held-to-maturity securities:

Securities of U.S. Treasury and federal agencies (36 ) 3,345
—
—
(36 ) 3,345
Securities of U.S. states and political subdivisions (19 ) 2,016
(26 ) 785
(45 ) 2,801
Federal agency and other mortgage-backed
securities
(465 ) 53,128
(44 ) 5,212
(509 ) 58,340
Collateralized loan obligations —
—
—
—
—
—
Other —
—
—
—
—
—
Total held-to-maturity securities (520 ) 58,489
(70 ) 5,997
(590 ) 64,486
Total $ (943 ) 122,435
(1,592 ) 51,728
(2,535 ) 174,163
December 31, 2016
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ (109 ) 10,816
—
—
(109 ) 10,816
Securities of U.S. states and political subdivisions (341 ) 17,412
(1,230 ) 16,213
(1,571 ) 33,625
Mortgage-backed securities:
Federal agencies (3,338 ) 120,735
(120 ) 3,481
(3,458 ) 124,216
Residential (4 ) 527
(4 ) 245
(8 ) 772
Commercial (43 ) 1,459
(31 ) 1,690
(74 ) 3,149
Total mortgage-backed securities (3,385 ) 122,721
(155 ) 5,416
(3,540 ) 128,137
Corporate debt securities (11 ) 946
(99 ) 1,229
(110 ) 2,175
Collateralized loan and other debt obligations (2 ) 1,899
(29 ) 3,197
(31 ) 5,096
Other (9 ) 971
(26 ) 1,262
(35 ) 2,233
Total debt securities (3,857 ) 154,765
(1,539 ) 27,317
(5,396 ) 182,082
Marketable equity securities:
Perpetual preferred securities (3 ) 41
(8 ) 45
(11 ) 86
Other marketable equity securities —
—
—
—
—
—
Total marketable equity securities (3 ) 41
(8 ) 45
(11 ) 86
Total available-for-sale securities (3,860 ) 154,806
(1,547 ) 27,362
(5,407 ) 182,168
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies (77 ) 6,351
—
—
(77 ) 6,351
Securities of U.S. states and political subdivisions (144 ) 4,871
—
—
(144 ) 4,871
Federal agency and other mortgage-backed securities (804 ) 40,095
—
—
(804 ) 40,095
Collateralized loan obligations —
—
(1 ) 266
(1 ) 266
Other —
—
(1 ) 633
(1 ) 633
Total held-to-maturity securities (1,025 ) 51,317
(2 ) 899
(1,027 ) 52,216
Total $ (4,885 ) 206,123
(1,549 ) 28,261
(6,434 ) 234,384

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. ~~For debt securities, we~~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. For equity securities, we consider numerous factors in determining whether impairment exists, including our intent and ability to hold the securities for a period of time sufficient to recover the cost basis of the securities.

For descriptions of the factors we consider when analyzing debt securities for impairment, see Note 1 (Summary of Significant Accounting Policies) and Note 5 ~~(Investment~~(Available-for-Sale and Held-to-Maturity Debt Securities) ~~to Financial Statements~~ in our ~~2016~~2018 Form 10-K. There were no material changes to our methodologies for assessing impairment in the first ~~nine months~~half of ~~2017.~~2019.

Table ~~4.3~~5.3 shows the gross unrealized losses and fair value of ~~debt~~the available-for-sale and ~~perpetual preferred investment~~held-to-maturity debt securities by those rated investment grade and those rated less than investment grade,

according to their lowest credit rating by Standard & Poor’s Rating Services (S&P) or Moody’s Investors

Service (Moody’s). Credit ratings express opinions about the credit quality of a debt security. ~~Securities~~Debt securities rated investment grade, that is those rated BBB- or higher by S&P or Baa3 or higher by Moody’s, 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. We have also included debt securities not rated by S&P or Moody’s in the table below based on our internal credit grade of the debt securities (used for credit risk management purposes) equivalent to the credit rating assigned by major credit agencies. The unrealized losses and fair value of unrated debt securities categorized as investment grade based on internal credit grades were ~~$27~~$9 million and ~~$5.7~~$2.3 billion, respectively, at ~~September~~June 30, ~~2017,~~2019, and ~~$54~~$20 million and ~~$7.0~~$5.2 billion, respectively, at December 31, ~~2016.~~2018. If an internal credit grade was not assigned, we categorized the debt security as non-investment grade.

Table ~~4.3:~~5.3:Gross Unrealized Losses and Fair Value by Investment Grade



	Investment grade				Non-investment grade
(in millions)	Gross unrealized losses			Fair value	Gross unrealized losses		Fair value
June 30, 2019
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	(17	)	11,291	—		—
Securities of U.S. states and political subdivisions	(69		)	7,480	(9	)	219
Mortgage-backed securities:
Federal agencies	(308		)	33,382	—		—
Residential	(1		)	180	—		—
Commercial	(4		)	915	(1	)	11
Total mortgage-backed securities	(313		)	34,477	(1	)	11
Corporate debt securities	(6		)	299	(30	)	452
Collateralized loan and other debt obligations	(114		)	20,086	—		—
Other	(8		)	1,120	(6	)	348
Total available-for-sale debt securities	(527		)	74,753	(46	)	1,030
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	(4		)	1,613	—		—
Securities of U.S. states and political subdivisions	(5		)	514	—		—
Federal agency and other mortgage-backed securities	(70		)	17,374	(1	)	33
Collateralized loan obligations	—			—	—		—
Total held-to-maturity debt securities	(79		)	19,501	(1	)	33
Total	$	(606	)	94,254	(47	)	1,063
December 31, 2018
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	(106	)	6,702	—		—
Securities of U.S. states and political subdivisions	(425		)	18,447	(21	)	316
Mortgage-backed securities:
Federal agencies	(3,140		)	123,231	—		—
Residential	(2		)	295	(3	)	172
Commercial	(20		)	1,999	(2	)	52
Total mortgage-backed securities	(3,162		)	125,525	(5	)	224
Corporate debt securities	(17		)	791	(73	)	1,472
Collateralized loan and other debt obligations	(396		)	28,859	—		—
Other	(7		)	726	(6	)	252
Total available-for-sale debt securities	(4,113		)	181,050	(105	)	2,264
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	(415		)	41,978	—		—
Securities of U.S. states and political subdivisions	(116		)	4,590	—		—
Federal agency and other mortgage-backed securities	(2,278		)	81,977	(10	)	399
Collateralized loan obligations	—			—	—		—
Total held-to-maturity debt securities	(2,809		)	128,545	(10	)	399
Total	$	(6,922	)	309,595	(115	)	2,663

Note 5: Available-for-Sale and Held-to-Maturity Debt Securities (continued)

Investment grade Non-investment grade
(in millions)
Gross
unrealized
losses

Fair
value

Gross
unrealized
losses

Fair
value

September 30, 2017
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ (66 ) 4,550
—
—
Securities of U.S. states and political subdivisions (822 ) 25,098
(32 ) 207
Mortgage-backed securities:
Federal agencies (928 ) 72,811
—
—
Residential (1 ) 134
(2 ) 75
Commercial (2 ) 527
(6 ) 214
Total mortgage-backed securities (931 ) 73,472
(8 ) 289
Corporate debt securities (14 ) 674
(51 ) 517
Collateralized loan and other debt obligations (7 ) 3,752
—
—
Other (5 ) 781
(2 ) 239
Total debt securities (1,845 ) 108,327
(93 ) 1,252
Perpetual preferred securities (4 ) 70
(1 ) 18
Total available-for-sale securities (1,849 )
108,397

(94 )
1,270
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies (36 ) 3,345
—
—
Securities of U.S. states and political subdivisions (45 ) 2,801
—
—
Federal agency and other mortgage-backed securities (508 ) 58,248
(1 ) 92
Collateralized loan obligations —
—
—
—
Other —
—
—
—
Total held-to-maturity securities (589 ) 64,394
(1 ) 92
Total $ (2,438 ) 172,791
(95 ) 1,362
December 31, 2016

Available-for-sale securities:
Securities of U.S. Treasury and federal agencies $ (109 ) 10,816
—
—
Securities of U.S. states and political subdivisions (1,517 ) 33,271
(54 ) 354
Mortgage-backed securities:
Federal agencies (3,458 ) 124,216
—
—
Residential (1 ) 176
(7 ) 596
Commercial (15 ) 2,585
(59 ) 564
Total mortgage-backed securities (3,474 ) 126,977
(66 ) 1,160
Corporate debt securities (31 ) 1,238
(79 ) 937
Collateralized loan and other debt obligations (31 ) 5,096
—
—
Other (30 ) 1,842
(5 ) 391
Total debt securities (5,192 ) 179,240
(204 ) 2,842
Perpetual preferred securities (10 ) 68
(1 ) 18
Total available-for-sale securities (5,202 ) 179,308
(205 ) 2,860
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies (77 ) 6,351
—
—
Securities of U.S. states and political subdivisions (144 ) 4,871
—
—
Federal agency and other mortgage-backed securities (803 ) 40,078
(1 ) 17
Collateralized loan obligations (1 ) 266
—
—
Other (1 ) 633

—
—
Total held-to-maturity securities (1,026 ) 52,199
(1 ) 17
Total $ (6,228 ) 231,507
(206 ) 2,877

~~Note 4: Investment Securities (continued~~)

Contractual Maturities

Table ~~4.4~~5.4 shows the ~~remaining contractual maturities~~fair value and contractual weighted-average yields (taxable-equivalent basis) of available-for-sale debt ~~securities.~~securities by contractual maturity. The remaining contractual principal maturities for ~~MBS~~mortgage-backed securities (MBS) do not ~~consider~~

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 ~~4.4:~~5.4:Available-for Sale Debt Securities - Fair Value by Contractual ~~Maturities~~Maturity


					Remaining contractual maturity																				Remaining contractual maturity
	Total				Within one year				After one year through five years				After five years through ten years				After ten years				Total				Within one year				After one year through five years				After five years through ten years				After ten years
(in millions)	amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
September 30, 2017
June 30, 2019
Available-for-sale debt securities (1):
Fair value:
Securities of U.S. Treasury and federal agencies	$	6,350	1.60	%	$	81	1.36	%	$	6,221	1.60	%	$	48	1.88	%	$	—	—	%	$	15,319	1.94	%	$	5,521	1.69	%	$	9,747	2.08	%	$	51	1.89	%	$	—	—	%
Securities of U.S. states and political subdivisions	52,774		5.77		1,375		2.32		10,788		2.93		2,237		4.65		38,374		6.76		45,095		4.92		2,016		3.34		5,135		3.34		4,322		3.54		33,622		5.40
Mortgage-backed securities:
Federal agencies	150,181		3.24		1		5.03		223		2.78		5,927		2.83		144,030		3.26		155,858		3.50		—		—		137		3.48		1,665		2.56		154,056		3.51
Residential	6,394		3.88		—		—		27		5.66		11		2.42		6,356		3.88		1,263		2.80		—		—		—		—		—		—		1,263		2.80
Commercial	4,652		3.74		—		—		—		—		64		2.76		4,588		3.75		4,180		3.71		—		—		—		—		342		3.61		3,838		3.72
Total mortgage-backed securities	161,227		3.28		1		5.03		250		3.09		6,002		2.83		154,974		3.30		161,301		3.50		—		—		137		3.48		2,007		2.74		159,157		3.51
Corporate debt securities	9,340		4.94		976		4.08		3,009		5.57		4,373		4.61		982		5.28		6,230		5.01		484		6.17		2,384		5.00		2,737		4.69		625		5.59
Collateralized loan and other debt obligations	35,608		2.97		—		—		100		1.83		16,498		2.95		19,010		3.00		32,995		3.96		—		—		8		5.02		10,005		4.03		22,982		3.93
Other	6,018		2.29		44		3.42		525		2.69		1,584		1.97		3,865		2.35		5,043		3.10		12		3.34		749		3.80		1,424		2.13		2,858		3.40
Total available-for-sale debt securities at fair value	$	271,317	3.72	%	$	2,477	3.00	%	$	20,893	2.90	%	$	30,742	3.23	%	$	217,205	3.88	%	$	265,983	3.73	%	$	8,033	2.38	%	$	18,160	2.96	%	$	20,546	3.75	%	$	219,244	3.85	%
December 31, 2016
Available-for-sale debt securities (1):									`
Fair value:
Securities of U.S. Treasury and federal agencies	$	25,819	1.44	%	$	1,328	0.92	%	$	23,477	1.45	%	$	1,014	1.80	%	$	—	—	%
Securities of U.S. states and political subdivisions	51,101		5.65		2,990		1.69		9,299		2.74		2,391		4.71		36,421		6.78
Mortgage-backed securities:
Federal agencies	161,230		3.09		—		—		128		2.98		5,363		3.16		155,739		3.09
Residential	7,816		3.84		—		—		25		5.21		35		4.34		7,756		3.83
Commercial	8,502		4.58		—		—		—		—		30		3.13		8,472		4.59
Total mortgage-backed securities	177,548		3.19		—		—		153		3.34		5,428		3.16		171,967		3.19
Corporate debt securities	11,457		4.81		2,043		2.90		3,374		5.89		4,741		4.71		1,299		5.38
Collateralized loan and other debt obligations	35,020		2.70		—		—		168		1.34		16,482		2.66		18,370		2.74
Other	6,208		2.18		57		3.06		971		2.35		1,146		2.04		4,034		2.17
Total available-for-sale debt securities at fair value	$	307,153	3.44	%	$	6,418	1.93	%	$	37,442	2.20	%	$	31,202	3.17	%	$	232,091	3.72	%


(1)	Weighted-average yields displayed by maturity bucket are weighted based on fair value and predominantly represent contractual coupon rates without effect for any related hedging derivatives.

Table ~~4.5~~5.5 shows the amortized cost and weighted-average yields of held-to-maturity debt securities by contractual maturity.

Table ~~4.5:~~5.5:Held-to-Maturity Debt Securities - Amortized Cost by Contractual Maturity


					Remaining contractual maturity																				Remaining contractual maturity
	Total				Within one year				After one year through five years				After five years through ten years				After ten years				Total				Within one year				After one year through five years				After five years through ten years				After ten years
(in millions)	amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
September 30, 2017
Held-to-maturity securities (1):
June 30, 2019
Held-to-maturity debt securities (1):
Amortized cost:
Securities of U.S. Treasury and federal agencies	$	44,712	2.12	%	$	—	—	%	$	32,323	2.04	%	$	12,389	2.32	%	$	—	—	%	$	44,766	2.12	%	$	—	—	%	$	34,667	2.07	%	$	10,099	2.28	%	$	—	—	%
Securities of U.S. states and political subdivisions	6,321		6.04		—		—		49		7.71		655		6.44		5,617		5.98		7,948		4.97		—		—		75		6.05		1,570		4.89		6,303		4.98
Federal agency and other mortgage-backed securities	90,071		3.11		—		—		—		—		—		—		90,071		3.11		93,105		3.12		—		—		15		3.77		—		—		93,090		3.12
Collateralized loan obligations	661		2.81		—		—		—		—		661		2.81		—		—		57		3.78		—		—		—		—		57		3.78		—		—
Other	658		2.17		—		—		658		2.17		—		—		—		—
Total held-to-maturity debt securities at amortized cost	$	142,423	2.92	%	$	—	—	%	$	33,030	2.05	%	$	13,705	2.54	%	$	95,688	3.27	%	$	145,876	2.91	%	$	—	—	%	$	34,757	2.08	%	$	11,726	2.64	%	$	99,393	3.24	%
December 31, 2016
Held-to-maturity securities (1):
Amortized cost:
Securities of U.S. Treasury and federal agencies	$	44,690	2.12	%	$	—	—	%	$	31,956	2.05	%	$	12,734	2.30	%	$	—	—	%
Securities of U.S. states and political subdivisions	6,336		6.04		—		—		24		8.20		436		6.76		5,876		5.98
Federal agency and other mortgage-backed securities	45,161		3.23		—		—		—		—		—		—		45,161		3.23
Collateralized loan obligations	1,065		2.58		—		—		—		—		1,065		2.58		—		—
Other	2,331		1.83		—		—		1,683		1.81		648		1.89		—		—
Total held-to-maturity debt securities at amortized cost	$	99,583	2.87	%	$	—	—	%	$	33,663	2.04	%	$	14,883	2.43	%	$	51,037	3.55	%


(1)	Weighted-average yields displayed by maturity bucket are weighted based on amortized cost and predominantly represent contractual coupon rates.

Table ~~4.6~~5.6 shows the fair value of held-to-maturity debt securities by contractual maturity.

Table ~~4.6:~~5.6:Held-to-Maturity Debt Securities - Fair Value by Contractual Maturity



			Remaining contractual maturity
	Total		Within one year	After one year through five years	After five years through ten years	After ten years
(in millions)	amount		Amount	Amount	Amount	Amount
June 30, 2019
Held-to-maturity debt securities:
Fair value:
Securities of U.S. Treasury and federal agencies	$	45,336	—	34,962	10,374	—
Securities of U.S. states and political subdivisions	8,125		—	75	1,625	6,425
Federal agency and other mortgage-backed securities	94,346		—	15	—	94,331
Collateralized loan obligations	57		—	—	57	—
Total held-to-maturity debt securities at fair value	$	147,864	—	35,052	12,056	100,756

Remaining contractual maturity
Total
Within one year

After one year
through five years

After five years
through ten years

After ten years
(in millions) amount
Amount
Amount
Amount
Amount
September 30, 2017
Held-to-maturity securities:
Fair value:
Securities of U.S. Treasury and federal agencies $ 45,282
—
32,733
12,549
—
Securities of U.S. states and political subdivisions 6,346
—
48
664
5,634
Federal agency and other mortgage-backed securities 89,867
—
—
—
89,867
Collateralized loan obligations 664
—
—
664
—
Other 659
—
659
—
—
Total held-to-maturity debt securities at fair value $ 142,818
—
33,440
13,877
95,501
December 31, 2016
Held-to-maturity securities:
Fair value:
Securities of U.S. Treasury and federal agencies $ 45,079
—
32,313
12,766
—
Securities of U.S. states and political subdivisions 6,209
—
24
430
5,755
Federal agency and other mortgage-backed securities 44,457
—
—
—
44,457
Collateralized loan obligations 1,070
—
—
1,070
—
Other 2,340
—
1,688
652
—
Total held-to-maturity debt securities at fair value $ 99,155
—
34,025
14,918
50,212

~~Note 4: Investment Securities (continued~~)

Realized Gains and Losses

Table ~~4.7~~5.7 shows the gross realized gains and losses on sales and OTTI write-downs related to ~~the~~ available-for-sale ~~securities~~

~~portfolio, which includes marketable equity securities, as well as net realized gains and losses on nonmarketable equity investments (see Note 6 (Other Assets)).~~debt securities.

Table ~~4.7:~~5.7:Realized Gains and Losses



	Quarter ended June 30,					Six months ended June 30,
(in millions)	2019			2018		2019		2018
Gross realized gains	$	29		53		202		74
Gross realized losses	(2		)	(4	)	(5	)	(14	)
OTTI write-downs	(7		)	(8	)	(52	)	(18	)
Net realized gains from available-for-sale debt securities	$	20		41		145		42

Quarter ended September 30, Nine months ended September 30,
(in millions) 2017
2016
2017
2016
Gross realized gains $ 298
266
859
1,215
Gross realized losses (18 ) (23 ) (102 ) (67 )
OTTI write-downs (8 ) (52 ) (112 ) (147 )
Net realized gains from available-for-sale securities 272
191
645
1,001
Net realized gains from nonmarketable equity investments 132
55
506
369
Net realized gains from debt securities and equity investments $ 404
246
1,151
1,370

~~Other-Than-Temporary Impairment~~

~~Table 4.8 shows the detail of total OTTI write-downs included in earnings for available-for-sale debt securities, marketable equity~~

~~securities and nonmarketable equity investments. There were no OTTI write-downs on held-to-maturity securities during the first nine months of 2017 and~~ ~~2016~~.

~~Table 4.8:OTTI Write-downs~~

Quarter ended September 30, Nine months ended September 30,
(in millions) 2017
2016
2017
2016
OTTI write-downs included in earnings
Debt securities:
Securities of U.S. states and political subdivisions $ 1
30
9
40
Mortgage-backed securities:
Residential 1
4
7
28
Commercial 4
10
70
11
Corporate debt securities 1
7
21
57
Other debt securities —
—
—
6
Total debt securities 7
51
107
142
Equity securities:
Marketable equity securities:
Other marketable equity securities 1
1
5
5
Total marketable equity securities 1
1
5
5
Total investment securities (1) 8
52
112
147
Nonmarketable equity investments (1) 83
84
181
317
Total OTTI write-downs included in earnings (1) $ 91
136
293
464

~~(1)~~

~~The quarters ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016, include~~ ~~$19 million~~ ~~and~~ ~~$32 million, respectively, in OTTI write-downs of oil and gas investments, of which~~ ~~$2 million~~ ~~and~~ ~~$6 million, respectively, related to investment securities and~~ ~~$17 million~~ ~~and~~ ~~$26 million, respectively, related to nonmarketable equity investments. Oil and gas related OTTI for the~~ ~~first nine months of 2017~~ ~~and~~ ~~2016, totaled~~ ~~$77 million~~ ~~and~~ ~~$185 million, respectively, of which~~ ~~$24 million~~ ~~and~~ ~~$57 million, respectively, related to investment securities and~~ ~~$53 million~~ ~~and~~ ~~$128 million, respectively, related to nonmarketable equity investments.~~

Other-Than-Temporarily Impaired Debt Securities

Table ~~4.9~~5.8 shows the detail of total OTTI write-downs included in earnings for available-for-sale debt securities. There were no

OTTI write-downs on held-to-maturity debt securities during the first half of 2019 and 2018.

Table 5.8:Detail of OTTI Write-downs



	Quarter ended June 30,			Six months ended June 30,
(in millions)	2019		2018	2019	2018
Debt securities OTTI write-downs included in earnings:
Securities of U.S. states and political subdivisions	$	4	—	33	2
Mortgage-backed securities:
Residential	—		1	—	2
Commercial	3		7	17	14
Corporate debt securities	—		—	2	—
Total debt securities OTTI write-downs included in earnings	$	7	8	52	18

Table 5.9 shows the detail of OTTI write-downs on available-for-sale debt securities included in earnings and the related changes in OCI for the same securities.

Table ~~4.9:~~5.9:OTTI Write-downs Included in Earnings and the Related Changes in OCI


	Quarter ended September 30,					Nine months ended September 30,				Quarter ended June 30,					Six months ended June 30,
(in millions)	2017			2016		2017		2016		2019			2018		2019		2018
OTTI on debt securities
Recorded as part of gross realized losses:
Credit-related OTTI	$	6		21		105		102		$	7		8		23		17
Intent-to-sell OTTI	1			30		2		40		—			—		29		1
Total recorded as part of gross realized losses	7			51		107		142		7			8		52		18
Changes to OCI for losses (reversal of losses) in non-credit-related OTTI (1):
Securities of U.S. states and political subdivisions	—			—		(5	)	—		(1		)	—		(1	)	(2	)
Residential mortgage-backed securities	(1		)	(4	)	(1	)	1		—			—		(1	)	(1	)
Commercial mortgage-backed securities	—			(11	)	(47	)	(9	)	—			(11	)	1		(1	)
Corporate debt securities	—			—		1		(13	)
Other debt securities	(1		)	—		(1	)	2
Total changes to OCI for non-credit-related OTTI	(2		)	(15	)	(53	)	(19	)	(1		)	(11	)	(1	)	(4	)
Total OTTI losses recorded on debt securities	$	5		36		54		123		$	6		(3	)	51		14

(1)

Represents amounts recorded to OCI for impairment of debt securities, due to factors other than credit, ~~on debt securities~~ that have also had credit-related OTTI write-downs during the period. Increases represent initial or subsequent non-credit-related OTTI on debt securities. Decreases represent partial to full reversal of impairment due to recoveries in the fair value of debt securities due to non-credit factors.

Note 5: Available-for-Sale and Held-to-Maturity Debt Securities (continued)

Table ~~4.10~~5.10 presents a rollforward of the OTTI credit loss that has been recognized in earnings as a write-down of available-for-sale debt securities we still own (referred to as “credit-impaired” debt securities) and do not intend to sell. Recognized credit loss

represents the difference between the present value of expected

future cash flows discounted using the security’s current effective interest rate and the amortized cost basis of the security prior to considering credit loss.

Table ~~4.10:~~5.10:Rollforward of OTTI Credit Loss


	Quarter ended September 30,					Nine months ended September 30,				Quarter ended June 30,					Six months ended June 30,
(in millions)	2017			2016		2017		2016		2019			2018		2019		2018
Credit loss recognized, beginning of period	$	1,120		1,080		1,043		1,092		$	232		649		562		742
Additions:
For securities with initial credit impairments	—			16		8		54		4			—		6		—
For securities with previous credit impairments	6			5		97		48		3			8		17		17
Total additions	6			21		105		102		7			8		23		17
Reductions:
For securities sold, matured, or intended/required to be sold	(96		)	(22	)	(114	)	(111	)	(23		)	(30	)	(369	)	(131	)
For recoveries of previous credit impairments (1)	(1		)	(2	)	(5	)	(6	)	—			(1	)	—		(2	)
Total reductions	(97		)	(24	)	(119	)	(117	)	(23		)	(31	)	(369	)	(133	)
Credit loss recognized, end of period	$	1,029		1,077		1,029		1,077		$	216		626		216		626


(1)	Recoveries of previous credit impairments result from increases in expected cash flows subsequent to credit loss recognition. Such recoveries are reflected prospectively as interest yield adjustments using the effective interest method.

~~Note 5: Loans and Allowance for Credit Losses (continued~~)

Note 5:6: Loans and Allowance for Credit Losses

Table ~~5.1~~6.1 presents total loans outstanding by portfolio segment and class of financing receivable. Outstanding balances include ~~a total net reduction of $3.7 billion and $4.4 billion at September 30, 2017, andDecember 31, 2016, respectively, for~~

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 June 30, 2019 and December 31, 2018.

Table ~~5.1:~~6.1:Loans Outstanding


(in millions)	Sep 30, 2017		Dec 31, 2016	Jun 30, 2019		Dec 31, 2018
Commercial:
Commercial and industrial	$	327,944	330,840	$	348,846	350,199
Real estate mortgage	128,475		132,491	123,008		121,014
Real estate construction	24,520		23,916	21,067		22,496
Lease financing	19,211		19,289	19,324		19,696
Total commercial	500,150		506,536	512,245		513,405
Consumer:
Real estate 1-4 family first mortgage	280,173		275,579	286,427		285,065
Real estate 1-4 family junior lien mortgage	41,152		46,237	32,068		34,398
Credit card	36,249		36,700	38,820		39,025
Automobile	55,455		62,286	45,664		45,069
Other revolving credit and installment	38,694		40,266	34,654		36,148
Total consumer	451,723		461,068	437,633		439,705
Total loans	$	951,873	967,604	$	949,878	953,110

Our foreign loans are reported by respective class of financing receivable in the table above. Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign primarily based on whether the borrower’s primary

address is outside of the United States. Table ~~5.2~~6.2 presents total commercial foreign loans outstanding by class of financing receivable.

Table ~~5.2:~~6.2:Commercial Foreign Loans Outstanding



(in millions)	Jun 30, 2019		Dec 31, 2018
Commercial foreign loans:
Commercial and industrial	$	63,296	62,564
Real estate mortgage	6,801		6,731
Real estate construction	1,287		1,011
Lease financing	1,215		1,159
Total commercial foreign loans	$	72,599	71,465

Note 6: Loans and Allowance for Credit Losses (continued)

(in millions) Sep 30,
2017
Dec 31,
2016
Commercial foreign loans:
Commercial and industrial $ 58,570
55,396
Real estate mortgage 8,032
8,541
Real estate construction 647
375
Lease financing 1,141
972
Total commercial foreign loans $ 68,390
65,284

Loan Purchases, Sales, and Transfers

Table ~~5.3~~6.3 summarizes the proceeds paid or received for purchases and sales of loans and transfers from loans held for investment to mortgages/loans held for sale at lower of cost or fair value. This loan activity also includes participating interests, whereby we

receive or transfer a portion of a loan. The table excludes PCI

loans, ~~and~~ loans for which we have elected the fair value option, ~~including~~and government insured/ guaranteed real estate 1-4 family first mortgage loans ~~originated for sale~~ because their loan activity normally does not impact the allowance for credit losses.

Table ~~5.3:~~6.3:Loan Purchases, Sales, and Transfers



	2019							2018
(in millions)	Commercial			Consumer		Total		Commercial		Consumer		Total
Quarter ended June 30,
Purchases	$	670		5		675		398		7		405
Sales	(535		)	(153	)	(688	)	(294	)	(88	)	(382	)
Transfers (to) from MLHFS/LHFS	(89		)	(1,852	)	(1,941	)	(100	)	(72	)	(172	)
Six months ended June 30,
Purchases	$	999		8		1,007		654		7		661
Sales	(956		)	(332	)	(1,288	)	(754	)	(88	)	(842	)
Transfers (to) from MLHFS/LHFS	(92		)	(1,852	)	(1,944	)	(520	)	(1,625	)	(2,145	)

2017 2016
(in millions) Commercial
Consumer (1)
Total
Commercial (2)
Consumer (1)
Total
Quarter ended September 30,
Purchases $ 449
—
449
1,902
—
1,902
Sales (310 ) (145 ) (455 ) (324 ) (306 ) (630 )
Transfers to MHFS/LHFS 374
—
374
(44 ) (1 ) (45 )
Nine months ended September 30,
Purchases $ 2,418
2
2,420
29,155
—
29,155
Sales (1,649 ) (291 ) (1,940 ) (932 ) (985 ) (1,917 )
Transfers to MHFS/LHFS (284 ) (1 ) (285 ) (145 ) (5 ) (150 )

~~(1)~~

Excludes activity in government insured/guaranteed real estate 1-4 family first mortgage loans. As servicer, we are able to buy delinquent insured/guaranteed loans out of the Government National Mortgage Association (GNMA) pools, and manage and/or resell them in accordance with applicable requirements. These loans are predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Accordingly, these loans have limited impact on the allowance for loan losses.


~~(2)~~	~~Purchases include loans and capital leases from the 2016 GE Capital business acquisitions.~~

Commitments to Lend

A commitment to lend is a legally binding agreement to lend funds to a customer, usually at a stated interest rate, if funded, and for specific purposes and time periods. We generally require a fee to extend such commitments. Certain commitments are subject to loan agreements with covenants regarding the financial performance of the customer or borrowing base formulas on an ongoing basis that must be met before we are required to fund the commitment. We may reduce or cancel consumer commitments, including home equity lines and credit card lines, in accordance with the contracts and applicable law.

We may, as a representative for other lenders, 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. ~~These~~The unfunded amount of these temporary advance arrangements totaled approximately ~~$84~~$94 billion and ~~$77~~$91 billion at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively.

We issue commercial letters of credit to assist customers in purchasing goods or services, typically for international trade. At ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, we had ~~$1.2~~$1.0 billion and ~~$1.1 billion,~~$919 million, respectively, of outstanding issued commercial letters of credit. We also originate multipurpose lending commitments under which borrowers have the option to draw on the facility for different purposes in one of several forms, including a standby letter of credit. See Note 1013 (Guarantees, Pledged Assets and ~~Collateral)~~Collateral, and Other Commitments) for additional information on standby letters of credit.

When we make commitments, we are exposed to credit risk. The maximum credit risk for these commitments will generally be lower than the contractual amount because a significant portion of these commitments is expected to expire without being used by the customer. In addition, we manage the potential risk in commitments to lend by limiting the total amount of commitments, both by individual customer and in total, by monitoring the size and maturity structure of these commitments and by applying the same credit standards for these commitments as for all of our credit activities.

For loans and commitments to lend, we generally require collateral or a guarantee. We may require various types of collateral, including commercial and consumer real estate, automobiles, other short-term liquid assets such as accounts receivable or inventory and long-lived assets, such as equipment and other business assets. Collateral requirements for each loan or commitment may vary based on the loan product and our assessment of a customer’s credit risk according to the specific credit underwriting, including credit terms and structure.

The contractual amount of our unfunded credit commitments, including unissued standby and commercial letters of credit, is summarized by portfolio segment and class of financing receivable in Table ~~5.4.~~6.4. The table excludes the issued standby and commercial letters of credit and temporary advance arrangements described above.

Table ~~5.4:~~6.4:Unfunded Credit Commitments


(in millions)	Sep 30, 2017		Dec 31, 2016	Jun 30, 2019		Dec 31, 2018
Commercial:
Commercial and industrial	$	321,797	319,662	$	329,751	330,492
Real estate mortgage	7,686		7,833	7,905		6,984
Real estate construction	16,025		18,840	15,459		16,400
Lease financing	—		16
Total commercial	345,508		346,351	353,115		353,876
Consumer:
Real estate 1-4 family first mortgage	33,985		33,498	43,427		29,736
Real estate 1-4 family junior lien mortgage	39,437		41,431	37,454		37,719
Credit card	108,240		101,895	113,306		109,840
Other revolving credit and installment	27,796		28,349	26,676		27,530
Total consumer	209,458		205,173	220,863		204,825
Total unfunded credit commitments	$	554,966	551,524	$	573,978	558,701

~~Note 5: Loans and Allowance for Credit Losses (continued~~)

Allowance for Credit Losses

impact to our customers and our business as a result of the hurricanes and refine our estimates as more information becomes available. However, in light of the ongoing recovery challenges in Puerto Rico after Hurricane Maria, it may take longer to assess the hurricane’s impact on our portfolios there. We are still evaluating the impact on our portfolio from the California wildfires that occurred in October 2017.

Table ~~5.5~~6.5 presents the allowance for credit losses, which consists of the allowance for loan losses and the allowance for unfunded credit commitments.

Table ~~5.5:~~6.5:Allowance for Credit Losses


	Quarter ended September 30,					Nine months ended September 30,				Quarter ended June 30,					Six months ended June 30,
(in millions)	2017			2016		2017		2016		2019			2018		2019		2018
Balance, beginning of period	$	12,146		12,749		12,540		12,512		$	10,821		11,313		10,707		11,960
Provision for credit losses	717			805		1,877		2,965		503			452		1,348		643
Interest income on certain impaired loans (1)	(43		)	(54	)	(137	)	(153	)	(39		)	(43	)	(78	)	(86	)
Loan charge-offs:
Commercial:
Commercial and industrial	(194		)	(324	)	(608	)	(1,110	)	(205		)	(134	)	(381	)	(298	)
Real estate mortgage	(21		)	(7	)	(34	)	(13	)	(14		)	(19	)	(26	)	(21	)
Real estate construction	—			—		—		(1	)	—			—		(1	)	—
Lease financing	(11		)	(4	)	(31	)	(25	)	(12		)	(20	)	(23	)	(37	)
Total commercial	(226		)	(335	)	(673	)	(1,149	)	(231		)	(173	)	(431	)	(356	)
Consumer:
Real estate 1-4 family first mortgage	(67		)	(106	)	(191	)	(366	)	(27		)	(55	)	(70	)	(96	)
Real estate 1-4 family junior lien mortgage	(70		)	(119	)	(225	)	(385	)	(29		)	(47	)	(63	)	(94	)
Credit card	(337		)	(296	)	(1,083	)	(930	)	(437		)	(404	)	(874	)	(809	)
Automobile	(274		)	(215	)	(741	)	(602	)	(142		)	(216	)	(329	)	(516	)
Other revolving credit and installment	(170		)	(170	)	(544	)	(508	)	(167		)	(164	)	(329	)	(344	)
Total consumer ~~(2)~~	(918		)	(906	)	(2,784	)	(2,791	)	(802		)	(886	)	(1,665	)	(1,859	)
Total loan charge-offs	(1,144		)	(1,241	)	(3,457	)	(3,940	)	(1,033		)	(1,059	)	(2,096	)	(2,215	)
Loan recoveries:
Commercial:
Commercial and industrial	69			65		234		210		46			76		89		155
Real estate mortgage	24			35		68		90		10			19		16		36
Real estate construction	15			18		27		30		2			6		5		10
Lease financing	5			2		13		10		8			5		11		10
Total commercial	113			120		342		340		66			106		121		211
Consumer:
Real estate 1-4 family first mortgage	83			86		216		284		57			78		112		137
Real estate 1-4 family junior lien mortgage	69			70		205		200		48			60		91		115
Credit card	60			51		177		153		88			81		173		154
Automobile	72			78		246		248		90			103		186		195
Other revolving credit and installment	30			31		94		100		31			29		65		60
Total consumer	314			316		938		985		314			351		627		661
Total loan recoveries	427			436		1,280		1,325		380			457		748		872
Net loan charge-offs	(717		)	(805	)	(2,177	)	(2,615	)	(653		)	(602	)	(1,348	)	(1,343	)
Other	6			(1	)	6		(15	)	(29		)	(10	)	(26	)	(64	)
Balance, end of period	$	12,109		12,694		12,109		12,694		$	10,603		11,110		10,603		11,110
Components:
Allowance for loan losses	$	11,078		11,583		11,078		11,583		$	9,692		10,193		9,692		10,193
Allowance for unfunded credit commitments	1,031			1,111		1,031		1,111		911			917		911		917
Allowance for credit losses	$	12,109		12,694		12,109		12,694		$	10,603		11,110		10,603		11,110
Net loan charge-offs (annualized) as a percentage of average total loans	0.30		%	0.33		0.30		0.37		0.28		%	0.26		0.29		0.29
Allowance for loan losses as a percentage of total loans	1.16			1.20		1.16		1.20		1.02			1.08		1.02		1.08
Allowance for credit losses as a percentage of total loans	1.27			1.32		1.27		1.32		1.12			1.18		1.12		1.18


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


~~(2)~~	~~Quarter and nine months ended September 30, 2017, include an incremental~~ ~~$29 million~~ ~~of charge-offs in accordance with updated industry regulatory guidance regarding the timing of loss recognition for real estate 1-4 family mortgage and automobile loans in bankruptcy.~~

Note 6: Loans and Allowance for Credit Losses (continued)

Table ~~5.6~~6.6 summarizes the activity in the allowance for credit losses by our commercial and consumer portfolio segments.

Table ~~5.6:~~6.6:Allowance Activity by Portfolio Segment



						2019						2018
(in millions)	Commercial			Consumer		Total		Commercial		Consumer		Total
Quarter ended June 30,
Balance, beginning of period	$	6,428		4,393		10,821		6,708		4,605		11,313
Provision for credit losses	46			457		503		89		363		452
Interest income on certain impaired loans	(14		)	(25	)	(39	)	(14	)	(29	)	(43	)

Loan charge-offs	(231		)	(802	)	(1,033	)	(173	)	(886	)	(1,059	)
Loan recoveries	66			314		380		106		351		457
Net loan charge-offs	(165		)	(488	)	(653	)	(67	)	(535	)	(602	)
Other	3			(32	)	(29	)	(5	)	(5	)	(10	)
Balance, end of period	$	6,298		4,305		10,603		6,711		4,399		11,110

Six months ended June 30,
Balance, beginning of period	$	6,417		4,290		10,707		6,632		5,328		11,960
Provision for credit losses	210			1,138		1,348		258		385		643
Interest income on certain impaired loans	(25		)	(53	)	(78	)	(25	)	(61	)	(86	)

Loan charge-offs	(431		)	(1,665	)	(2,096	)	(356	)	(1,859	)	(2,215	)
Loan recoveries	121			627		748		211		661		872
Net loan charge-offs	(310		)	(1,038	)	(1,348	)	(145	)	(1,198	)	(1,343	)
Other	6			(32	)	(26	)	(9	)	(55	)	(64	)
Balance, end of period	$	6,298		4,305		10,603		6,711		4,399		11,110

2017


2016
(in millions) Commercial
Consumer
Total
Commercial
Consumer
Total
Quarter ended September 30,
Balance, beginning of period $ 6,961
5,185
12,146
7,441
5,308
12,749
Provision (reversal of provision) for credit losses (9 ) 726
717
158
647
805
Interest income on certain impaired loans (13 ) (30 ) (43 ) (14 ) (40 ) (54 )

Loan charge-offs (226 ) (918 ) (1,144 ) (335 ) (906 ) (1,241 )
Loan recoveries 113
314
427
120
316
436
Net loan charge-offs (113 ) (604 ) (717 ) (215 ) (590 ) (805 )
Other 6
—
6
(1 ) —
(1 )
Balance, end of period $ 6,832
5,277
12,109
7,369
5,325
12,694

Nine months ended September 30,
Balance, beginning of period $ 7,394
5,146
12,540
6,872
5,640
12,512
Provision (reversal of provision) for credit losses (195 ) 2,072
1,877
1,350
1,615
2,965
Interest income on certain impaired loans (42 ) (95 ) (137 ) (29 ) (124 ) (153 )

Loan charge-offs (673 ) (2,784 ) (3,457 ) (1,149 ) (2,791 ) (3,940 )
Loan recoveries 342
938
1,280
340
985
1,325
Net loan charge-offs (331 ) (1,846 ) (2,177 ) (809 ) (1,806 ) (2,615 )
Other 6
—
6
(15 ) —
(15 )
Balance, end of period $ 6,832
5,277
12,109
7,369
5,325
12,694

Table ~~5.7~~6.7 disaggregates our allowance for credit losses and recorded investment in loans by impairment methodology.

Table ~~5.7:~~6.7:Allowance by Impairment Methodology


	Allowance for credit losses				Recorded investment in loans			Allowance for credit losses				Recorded investment in loans
(in millions)	Commercial		Consumer	Total	Commercial	Consumer	Total	Commercial		Consumer	Total	Commercial	Consumer	Total
September 30, 2017
June 30, 2019
Collectively evaluated (1)	$	6,032	4,094	10,126	495,395	423,102	918,497	$	5,831	3,436	9,267	508,798	425,818	934,616
Individually evaluated (2)	786		1,183	1,969	4,521	15,291	19,812	467		869	1,336	3,447	10,641	14,088
PCI (3)	14		—	14	234	13,330	13,564	—		—	—	—	1,174	1,174
Total	$	6,832	5,277	12,109	500,150	451,723	951,873	$	6,298	4,305	10,603	512,245	437,633	949,878
December 31, 2016
December 31, 2018
Collectively evaluated (1)	$	6,392	3,553	9,945	500,487	428,009	928,496	$	5,903	3,361	9,264	510,180	421,574	931,754
Individually evaluated (2)	1,000		1,593	2,593	5,372	17,005	22,377	514		929	1,443	3,221	13,126	16,347
PCI (3)	2		—	2	677	16,054	16,731	—		—	—	4	5,005	5,009
Total	$	7,394	5,146	12,540	506,536	461,068	967,604	$	6,417	4,290	10,707	513,405	439,705	953,110


(1)	Represents loans collectively evaluated for impairment in accordance with Accounting Standards Codification (ASC) 450-20, Loss Contingencies~~(formerly FAS 5)~~, and pursuant to amendments by ASU 2010-20 regarding allowance for non-impaired loans.


(2)	Represents loans individually evaluated for impairment in accordance with ASC 310-10, Receivables~~(formerly FAS 114)~~, and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.


(3)	Represents the allowance and related loan carrying value determined in accordance with ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality ~~(formerly SOP 03-3)~~ and pursuant to amendments by ASU 2010-20 regarding allowance for PCI loans.

Credit Quality

We monitor credit quality by evaluating various attributes and utilize such information in our evaluation of the appropriateness of the allowance for credit losses. 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, with the exception of updated Fair Isaac Corporation (FICO) scores and updated loan-to-value (LTV)/

combined LTV (CLTV). 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). Generally, the LTV and CLTV indicators are updated in the second month of each quarter, with updates no older than ~~June 30, 2017. See the “Purchased Credit-Impaired Loans” section in this Note for credit quality information on our PCI portfolio.~~March 31, 2019.

~~Note 5: Loans and Allowance for Credit Losses (continued~~)

COMMERCIAL CREDIT QUALITY INDICATORS In addition to monitoring commercial loan concentration risk, we manage a consistent process for assessing commercial loan credit quality. Generally, commercial loans are subject to individual risk assessment using our internal borrower and collateral quality ratings. Our ratings are aligned to Pass and Criticized categories. The Criticized category includes Special Mention, Substandard, and Doubtful categories which are defined by bank regulatory ~~agencies.~~

agencies.

Table ~~5.8~~6.8 provides a breakdown of outstanding commercial loans by risk category. ~~Of the $18.7 billion in criticized~~Criticized commercial ~~and industrial loans and $5.1 billion in criticized commercial real estate (CRE)~~ loans at ~~September~~June 30, ~~2017, $2.4~~2019, included $2.5 billion ~~and $631 million, respectively, have been placed~~ on nonaccrual status ~~and~~that have been written down to net realizable ~~collateral~~ value. For additional information on nonaccrual loans, see Table 6.13.

Table ~~5.8:~~6.8:Commercial Loans by Risk Category



(in millions)	Commercial and industrial		Real estate mortgage	Real estate construction	Lease financing	Total
June 30, 2019
By risk category:
Pass	$	334,034	118,768	20,883	18,225	491,910
Criticized	14,812		4,240	184	1,099	20,335
Total commercial loans (excluding PCI)	348,846		123,008	21,067	19,324	512,245
Total commercial PCI loans (carrying value)	—		—	—	—	—
Total commercial loans	$	348,846	123,008	21,067	19,324	512,245
December 31, 2018
By risk category:
Pass	$	335,412	116,514	22,207	18,671	492,804
Criticized	14,783		4,500	289	1,025	20,597
Total commercial loans (excluding PCI)	350,195		121,014	22,496	19,696	513,401
Total commercial PCI loans (carrying value)	4		—	—	—	4
Total commercial loans	$	350,199	121,014	22,496	19,696	513,405

(in millions)
Commercial
and
industrial

Real
estate
mortgage

Real
estate
construction

Lease
financing

Total
September 30, 2017
By risk category:
Pass $ 309,149
123,547
24,189
18,004
474,889
Criticized 18,679
4,820
321
1,207
25,027
Total commercial loans (excluding PCI) 327,828
128,367
24,510
19,211
499,916
Total commercial PCI loans (carrying value) 116
108
10
—
234
Total commercial loans $ 327,944
128,475
24,520
19,211
500,150
December 31, 2016
By risk category:
Pass $ 308,166
126,793
23,408
17,899
476,266
Criticized 22,437
5,315
451
1,390
29,593
Total commercial loans (excluding PCI) 330,603
132,108
23,859
19,289
505,859
Total commercial PCI loans (carrying value) 237
383
57
—
677
Total commercial loans $ 330,840
132,491
23,916
19,289
506,536

Table ~~5.9~~6.9 provides past due information for commercial loans, which we monitor as part of our credit risk management practices.

Table ~~5.9:~~6.9:Commercial Loans by Delinquency Status



(in millions)	Commercial and industrial		Real estate mortgage	Real estate construction	Lease financing	Total
June 30, 2019
By delinquency status:
Current-29 days past due (DPD) and still accruing	$	346,688	122,101	20,854	19,101	508,744
30-89 DPD and still accruing	507		146	177	160	990
90+ DPD and still accruing	17		24	—	—	41
Nonaccrual loans	1,634		737	36	63	2,470
Total commercial loans (excluding PCI)	348,846		123,008	21,067	19,324	512,245
Total commercial PCI loans (carrying value)	—		—	—	—	—
Total commercial loans	$	348,846	123,008	21,067	19,324	512,245
December 31, 2018
By delinquency status:
Current-29 DPD and still accruing	$	348,158	120,176	22,411	19,443	510,188
30-89 DPD and still accruing	508		207	53	163	931
90+ DPD and still accruing	43		51	—	—	94
Nonaccrual loans	1,486		580	32	90	2,188
Total commercial loans (excluding PCI)	350,195		121,014	22,496	19,696	513,401
Total commercial PCI loans (carrying value)	4		—	—	—	4
Total commercial loans	$	350,199	121,014	22,496	19,696	513,405

Note 6: Loans and Allowance for Credit Losses (continued)

(in millions)
Commercial
and
industrial

Real
estate
mortgage

Real
estate
construction

Lease
financing

Total
September 30, 2017
By delinquency status:
Current-29 days past due (DPD) and still accruing $ 324,706
127,438
24,378
18,993
495,515
30-89 DPD and still accruing 698
325
94
137
1,254
90+ DPD and still accruing 27
11
—
—
38
Nonaccrual loans 2,397
593
38
81
3,109
Total commercial loans (excluding PCI) 327,828
128,367
24,510
19,211
499,916
Total commercial PCI loans (carrying value) 116
108
10
—
234
Total commercial loans $ 327,944
128,475
24,520
19,211
500,150
December 31, 2016
By delinquency status:
Current-29 DPD and still accruing $ 326,765
131,165
23,776
19,042
500,748
30-89 DPD and still accruing 594
222
40
132
988
90+ DPD and still accruing 28
36
—
—
64
Nonaccrual loans 3,216
685
43
115
4,059
Total commercial loans (excluding PCI) 330,603
132,108
23,859
19,289
505,859
Total commercial PCI loans (carrying value) 237
383
57
—
677
Total commercial loans $ 330,840
132,491
23,916
19,289
506,536

CONSUMER CREDIT QUALITY INDICATORSWe have various classes of consumer loans that present unique risks. Loan delinquency, FICO credit scores and LTV for loan types are common credit quality indicators that we monitor and utilize in our evaluation of the appropriateness of the allowance for credit losses for the consumer portfolio segment.

Many of our loss estimation techniques used for the allowance for credit losses rely on delinquency-based models; therefore, delinquency is an important indicator of credit quality and the establishment of our allowance for credit losses. Table ~~5.10~~6.10 provides the outstanding balances of our consumer portfolio by delinquency status.

Table ~~5.10:~~6.10:Consumer Loans by Delinquency Status


(in millions)	Real estate 1-4 family first mortgage		Real estate 1-4 family junior lien mortgage	Credit card	Automobile	Other revolving credit and installment	Total	Real estate 1-4 family first mortgage	Real estate 1-4 family junior lien mortgage	Credit card	Automobile	Other revolving credit and installment	Total
September 30, 2017
June 30, 2019
By delinquency status:
Current-29 DPD	$	248,896	40,242	35,297	53,684	38,316	416,435	271,144	31,374	37,925	44,554	34,383	419,380
30-59 DPD	1,895		308	282	1,287	146	3,918	1,311	250	258	808	97	2,724
60-89 DPD	687		147	195	349	102	1,480	436	115	188	232	70	1,041
90-119 DPD	339		86	168	127	79	799	196	63	152	69	68	548
120-179 DPD	263		94	288	7	26	678	177	70	297	1	22	567
180+ DPD	1,186		246	19	1	25	1,477	630	181	—	—	14	825
Government insured/guaranteed loans (1)	13,606		—	—	—	—	13,606	11,172	—	—	—	—	11,172
Loans held at fair value								202	—	—	—	—	202
Total consumer loans (excluding PCI)	266,872		41,123	36,249	55,455	38,694	438,393	285,268	32,053	38,820	45,664	34,654	436,459
Total consumer PCI loans (carrying value)	13,301		29	—	—	—	13,330
Total consumer PCI loans (carrying value) (2)								1,159	15	—	—	—	1,174
Total consumer loans	$	280,173	41,152	36,249	55,455	38,694	451,723	286,427	32,068	38,820	45,664	34,654	437,633
December 31, 2016
December 31, 2018
By delinquency status:
Current-29 DPD	$	239,061	45,238	35,773	60,572	39,833	420,477	263,881	33,644	38,008	43,604	35,794	414,931
30-59 DPD	1,904		296	275	1,262	177	3,914	1,411	247	292	1,040	140	3,130
60-89 DPD	700		160	200	330	111	1,501	549	126	212	314	87	1,288
90-119 DPD	307		102	169	116	93	787	257	74	192	109	80	712
120-179 DPD	323		108	279	5	30	745	225	77	320	2	27	651
180+ DPD	1,661		297	4	1	22	1,985	822	213	1	—	20	1,056
Government insured/guaranteed loans (1)	15,605		—	—	—	—	15,605	12,688	—	—	—	—	12,688
Loans held at fair value								244	—	—	—	—	244
Total consumer loans (excluding PCI)	259,561		46,201	36,700	62,286	40,266	445,014	280,077	34,381	39,025	45,069	36,148	434,700
Total consumer PCI loans (carrying value)	16,018		36	—	—	—	16,054
Total consumer PCI loans (carrying value) (2)								4,988	17	—	—	—	5,005
Total consumer loans	$	275,579	46,237	36,700	62,286	40,266	461,068	285,065	34,398	39,025	45,069	36,148	439,705


(1)	Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA. Loans insured/guaranteed by the FHA/VA and 90+ DPD totaled ~~$8.8~~$6.5 billion at ~~September~~June 30, ~~2017~~,2019, compared with ~~$10.1~~$7.7 billion at December 31, ~~2016~~. 2018.


(2)	23% of the adjusted unpaid principal balance for consumer PCI loans are 30+ DPD at June 30, 2019, compared with 18% at December 31, 2018.

Of the ~~$3.0~~$1.9 billion of consumer loans not government insured/guaranteed that are 90 days or more past due at ~~September~~June 30, ~~2017, $923~~2019, $739 million was accruing, compared with ~~$3.5~~$2.4 billion past due and ~~$908~~$885 million accruing at December 31, ~~2016.~~2018.

Real estate 1-4 family first mortgage loans 180 days or more past due totaled ~~$1.2 billion,~~$630 million, or ~~0.4%~~0.2% of total first mortgages (excluding PCI), at ~~September~~June 30, ~~2017,~~2019, compared with ~~$1.7 billion,~~$822 million, or ~~0.6%~~0.3%, at December 31, ~~2016.~~2018.

~~Note 5: Loans and Allowance for Credit Losses (continued~~)

Table ~~5.11~~6.11 provides a breakdown of our consumer portfolio by FICO. The September 30, 2017 FICO scores for real estate 1-4 family first and junior lien mortgages reflect a new FICO score version we adopted in first quarter 2017 to monitor and manage those portfolios. In general the impact for us is a shift to higher scores, particularly to the 800+ level, as the new FICO score version utilizes a more refined approach that better distinguishes borrower credit risk. MostSubstantially all of the scored consumer portfolio has

an updated FICO of 680 and above, reflecting a strong current borrower credit profile. FICO is not available for certain loan types, or may not be required if we deem it unnecessary due to

strong collateral and other borrower attributes. Substantially all loans not requiring a FICO score are securities-based loans originated through retail brokerage, and totaled ~~$8.1~~$8.6 billion at ~~September~~June 30, ~~2017,~~2019, and ~~$8.0~~$8.9 billion at December 31, ~~2016.~~2018.

Table ~~5.11:~~6.11:Consumer Loans by FICO


(in millions)	Real estate 1-4 family first mortgage (1)		Real estate 1-4 family junior lien mortgage (1)	Credit card	Automobile	Other revolving credit and installment (1)	Total	Real estate 1-4 family first mortgage	Real estate 1-4 family junior lien mortgage	Credit card	Automobile	Other revolving credit and installment	Total
September 30, 2017
June 30, 2019
By FICO:
< 600	$	5,416	1,842	3,436	9,245	871	20,810	3,539	1,297	3,064	6,442	707	15,049
600-639	3,630		1,313	2,970	5,961	919	14,793	2,559	897	2,670	4,498	677	11,301
640-679	7,123		2,512	5,468	8,146	1,994	25,243	5,276	1,720	6,313	6,386	1,757	21,452
680-719	15,039		5,001	7,300	9,189	3,696	40,225	12,898	3,620	9,415	7,475	3,283	36,691
720-759	28,453		6,506	7,721	8,018	5,203	55,901	27,807	4,947	8,022	7,051	4,164	51,991
760-799	54,885		7,561	6,108	6,612	6,493	81,659	61,007	6,001	5,323	6,240	4,999	83,570
800+	133,164		15,574	2,880	7,987	8,620	168,225	157,049	12,346	3,879	7,464	8,011	188,749
No FICO available	5,556		814	366	297	2,761	9,794	3,759	1,225	134	108	2,434	7,660
FICO not required	—		—	—	—	8,137	8,137	—	—	—	—	8,622	8,622
Government insured/guaranteed loans ~~(2)~~(1)	13,606		—	—	—	—	13,606	11,374	—	—	—	—	11,374
Total consumer loans (excluding PCI)	266,872		41,123	36,249	55,455	38,694	438,393	285,268	32,053	38,820	45,664	34,654	436,459
Total consumer PCI loans (carrying value)(2)	13,301		29	—	—	—	13,330	1,159	15	—	—	—	1,174
Total consumer loans	$	280,173	41,152	36,249	55,455	38,694	451,723	286,427	32,068	38,820	45,664	34,654	437,633
December 31, 2016
December 31, 2018
By FICO:
< 600	$	6,720	2,591	3,475	9,934	976	23,696	4,273	1,454	3,292	7,071	697	16,787
600-639	5,400		1,917	3,109	6,705	1,056	18,187	2,974	994	2,777	4,431	725	11,901
640-679	10,975		3,747	5,678	10,204	2,333	32,937	5,810	1,898	6,464	6,225	1,822	22,219
680-719	23,300		6,432	7,382	11,233	4,302	52,649	13,568	3,908	9,445	7,354	3,384	37,659
720-759	38,832		9,413	7,632	8,769	5,869	70,515	27,258	5,323	7,949	6,853	4,395	51,778
760-799	103,608		14,929	6,191	8,164	8,348	141,240	57,193	6,315	5,227	5,947	5,322	80,004
800+	49,508		6,391	2,868	6,856	6,434	72,057	151,465	13,190	3,794	7,099	8,411	183,959
No FICO available	5,613		781	365	421	2,906	10,086	4,604	1,299	77	89	2,507	8,576
FICO not required	—		—	—	—	8,042	8,042	—	—	—	—	8,885	8,885
Government insured/guaranteed loans ~~(2)~~(1)	15,605		—	—	—	—	15,605	12,932	—	—	—	—	12,932
Total consumer loans (excluding PCI)	259,561		46,201	36,700	62,286	40,266	445,014	280,077	34,381	39,025	45,069	36,148	434,700
Total consumer PCI loans (carrying value)(2)	16,018		36	—	—	—	16,054	4,988	17	—	—	—	5,005
Total consumer loans	$	275,579	46,237	36,700	62,286	40,266	461,068	285,065	34,398	39,025	45,069	36,148	439,705


(1)	~~The~~ ~~September 30, 2017, amounts reflect updated FICO score version implemented in first quarter 2017.~~


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


(2)	44% of the adjusted unpaid principal balance for consumer PCI loans have FICO scores less than 680 and 16% where no FICO is available to us at June 30, 2019, compared with 45% and 15%, respectively, at December 31, 2018.

LTV refers to the ratio comparing the loan’s unpaid principal balance to the property’s collateral value. CLTV refers to the combination of first mortgage and junior lien mortgage (including unused line amounts for credit line products) ratios. LTVs and CLTVs are updated quarterly 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 million or more, as the AVM values have proven less accurate for these properties.

Table ~~5.12~~6.12 shows the most updated LTV and CLTV distribution of the real estate 1-4 family first and junior lien mortgage loan portfolios. We consider the trends in residential real estate markets as we monitor credit risk and establish our allowance for credit losses. In the event of a default, any loss should be limited to the portion of the loan amount in excess of the net realizable value of the underlying real estate collateral value. Certain loans do not have an LTV or CLTV due to industry data availability and portfolios acquired from or serviced by other institutions.

Note 6: Loans and Allowance for Credit Losses (continued)

Table ~~5.12:~~6.12:Consumer Loans by LTV/CLTV


	September 30, 2017				December 31, 2016			June 30, 2019				December 31, 2018
(in millions)	Real estate 1-4 family first mortgage by LTV		Real estate 1-4 family junior lien mortgage by CLTV	Total	Real estate 1-4 family first mortgage by LTV	Real estate 1-4 family junior lien mortgage by CLTV	Total	Real estate 1-4 family first mortgage by LTV		Real estate 1-4 family junior lien mortgage by CLTV	Total	Real estate 1-4 family first mortgage by LTV	Real estate 1-4 family junior lien mortgage by CLTV	Total
By LTV/CLTV:
0-60%	$	130,463	16,168	146,631	121,430	16,464	137,894	$	145,884	15,004	160,888	147,666	15,753	163,419
60.01-80%	104,674		13,447	118,121	101,726	15,262	116,988	110,919		10,452	121,371	104,477	11,183	115,660
80.01-100%	14,179		7,136	21,315	15,795	8,765	24,560	14,763		4,387	19,150	12,372	4,874	17,246
100.01-120% (1)	2,000		2,746	4,746	2,644	3,589	6,233	1,052		1,350	2,402	1,211	1,596	2,807
> 120% (1)	840		1,154	1,994	1,066	1,613	2,679	412		480	892	484	578	1,062
No LTV/CLTV available	1,110		472	1,582	1,295	508	1,803	864		380	1,244	935	397	1,332
Government insured/guaranteed loans (2)	13,606		—	13,606	15,605	—	15,605	11,374		—	11,374	12,932	—	12,932
Total consumer loans (excluding PCI)	266,872		41,123	307,995	259,561	46,201	305,762	285,268		32,053	317,321	280,077	34,381	314,458
Total consumer PCI loans (carrying value)(3)	13,301		29	13,330	16,018	36	16,054	1,159		15	1,174	4,988	17	5,005
Total consumer loans	$	280,173	41,152	321,325	275,579	46,237	321,816	$	286,427	32,068	318,495	285,065	34,398	319,463


(1)	Reflects total loan balances with LTV/CLTV 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/CLTV.


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


(3)	12% of the adjusted unpaid principal balance for consumer PCI loans have LTV/CLTV amounts greater than 80% at June 30, 2019, compared with 10% at December 31, 2018.

NONACCRUAL LOANSTable ~~5.13~~6.13 provides loans on nonaccrual status. PCI loans are excluded from this table because they continue to earn interest fromaccretable yield, independent of performance in accordance with their contractual terms.

Table ~~5.13:~~6.13:Nonaccrual Loans


(in millions)	Sep 30, 2017		Dec 31, 2016	Jun 30, 2019		Dec 31, 2018
Commercial:
Commercial and industrial	$	2,397	3,216	$	1,634	1,486
Real estate mortgage	593		685	737		580
Real estate construction	38		43	36		32
Lease financing	81		115	63		90
Total commercial	3,109		4,059	2,470		2,188
Consumer:
Real estate 1-4 family first mortgage ~~(1)~~	4,213		4,962	2,425		3,183
Real estate 1-4 family junior lien mortgage	1,101		1,206	868		945
Automobile	137		106	115		130
Other revolving credit and installment	59		51	44		50
Total consumer ~~(2)~~	5,510		6,325	3,452		4,308
Total nonaccrual loans (excluding PCI)	$	8,619	10,384	$	5,922	6,496


~~(1)~~	~~Includes MHFS of~~ ~~$133 million~~ ~~and~~ ~~$149 million~~ at ~~September 30, 2017, and~~ ~~December 31, 2016, respectively.~~


~~(2)~~	~~Includes an incremental~~ ~~$171 million~~ ~~of nonaccrual loans at September 30, 2017, reflecting updated industry regulatory guidance related to loans in bankruptcy.~~

LOANS IN PROCESS OF FORECLOSUREOur recorded investment in consumer mortgage loans collateralized by residential real estate property that are in process of foreclosure was ~~$6.7~~$3.7 billion and ~~$8.1~~$4.6 billion at ~~September~~June 30, ~~2017~~2019, and December 31, ~~2016,~~2018, respectively, which included ~~$4.1~~$2.9 billion and ~~$4.8~~$3.2 billion, respectively, of loans that are government insured/guaranteed. WeUnder the Consumer Financial Protection Bureau guidelines, we do not commence the foreclosure process on consumer real estate loans ~~when a borrower becomes~~until after the loan is 120 days ~~delinquent in accordance with Consumer Finance Protection Bureau Guidelines.~~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.

~~Note 5: Loans and Allowance for Credit Losses (continued~~)

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUINGCertain loans 90 days or more past due as to interest or principal are still accruing, because they are (1) well-secured and in the process of collection or (2) real estate 1-4 family mortgage loans or consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due. PCI loans of ~~$1.4 billion~~$156 million at ~~September~~June 30, ~~2017,~~2019, and ~~$2.0 billion~~$370 million at December 31, ~~2016,~~2018, are not included in ~~these~~ past due and still accruing loans even when they are 90 days or more contractually past due. ~~These~~ PCI loans are considered to be accruingbecause they continue to earn interest from accretable yield, independent of performance in accordance with their contractual terms.

Table ~~5.14~~6.14 shows non-PCI loans 90 days or more past due and still accruing by class for loans not government insured/guaranteed.

Table ~~5.14:~~6.14:Loans 90 Days or More Past Due and Still Accruing (1)


(in millions)	Sep 30, 2017		Dec 31, 2016	Jun 30, 2019		Dec 31, 2018
Total (excluding PCI):	$	10,227	11,858	$	7,258	8,704
Less: FHA insured/guaranteed by the VA (1)(2)	9,266		10,883
Less: Student loans guaranteed under the Federal Family Education Loan Program (FFELP) (3)	—		3
Less: FHA insured/VA guaranteed (1)				6,478		7,725
Total, not government insured/guaranteed	$	961	972	$	780	979
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial	$	27	28	$	17	43
Real estate mortgage	11		36	24		51
Real estate construction				—		—
Total commercial	38		64	41		94
Consumer:
Real estate 1-4 family first mortgage ~~(2)~~	190		175	108		124
Real estate 1-4 family junior lien mortgage ~~(2)~~	49		56	27		32
Credit card	475		452	449		513
Automobile	111		112	63		114
Other revolving credit and installment	98		113	92		102
Total consumer	923		908	739		885
Total, not government insured/guaranteed	$	961	972	$	780	979


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


~~(2)~~	~~Includes mortgages held for sale 90 days or more past due and still accruing.~~


~~(3)~~	Represents loans whose repayments are largely guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP. All remaining student loans guaranteed under the FFELP were sold as of March 31, 2017.

Note 6: Loans and Allowance for Credit Losses (continued)

IMPAIRED LOANS Table ~~5.15~~6.15 summarizes key information for impaired loans. Our impaired loans predominantly include loans on nonaccrual status in the commercial portfolio segment and loans modified in a TDR, whether on accrual or nonaccrual status. These impaired loans generally have estimated losses which are included in the allowance for credit losses. We have impaired loans with no allowance for credit losses when loss content has been previously recognized through charge-offs and we do not anticipate additional charge-offs or losses, or certain

loans are currently performing in accordance with their terms and for which no loss has been estimated. Impaired loans exclude PCI loans. Table ~~5.15~~6.15 includes trial modifications that totaled ~~$183~~$127 million at ~~September~~June 30, ~~2017,~~2019, and ~~$299~~$149 million at December 31, ~~2016.~~2018.

For additional information on our impaired loans and allowance for credit losses, see Note 1 (Summary of Significant Accounting Policies) in our ~~2016~~2018 Form 10-K.

Table ~~5.15:~~6.15:Impaired Loans Summary


			Recorded investment					Recorded investment
(in millions)	Unpaid principal balance (1)		Impaired loans	Impaired loans with related allowance for credit losses	Related allowance for credit losses	Unpaid principal balance (1)		Impaired loans	Impaired loans with related allowance for credit losses	Related allowance for credit losses
September 30, 2017
June 30, 2019
Commercial:
Commercial and industrial	$	4,259	3,098	2,779	518	$	2,963	2,169	1,991	303
Real estate mortgage	1,541		1,263	1,243	230	1,297		1,142	1,078	134
Real estate construction	87		53	53	11	82		54	53	10
Lease financing	143		107	107	27	91		82	82	20
Total commercial	6,030		4,521	4,182	786	4,433		3,447	3,204	467
Consumer:
Real estate 1-4 family first mortgage(2)	14,635		12,756	6,353	781	8,803		8,307	3,782	451
Real estate 1-4 family junior lien mortgage	2,206		1,981	1,466	237	1,781		1,603	1,040	174
Credit card	341		340	340	129	487		486	486	194
Automobile	158		88	33	5	144		85	45	9
Other revolving credit and installment	134		126	115	31	166		160	142	41
Total consumer ~~(2)~~(3)	17,474		15,291	8,307	1,183	11,381		10,641	5,495	869
Total impaired loans (excluding PCI)	$	23,504	19,812	12,489	1,969	$	15,814	14,088	8,699	1,336
December 31, 2016
December 31, 2018
Commercial:
Commercial and industrial	$	5,058	3,742	3,418	675	$	3,057	2,030	1,730	319
Real estate mortgage	1,777		1,418	1,396	280	1,228		1,032	1,009	154
Real estate construction	167		93	93	22	74		47	46	9
Lease financing	146		119	119	23	146		112	112	32
Total commercial	7,148		5,372	5,026	1,000	4,505		3,221	2,897	514
Consumer:
Real estate 1-4 family first mortgage	16,438		14,362	9,475	1,117	12,309		10,738	4,420	525
Real estate 1-4 family junior lien mortgage	2,399		2,156	1,681	350	1,886		1,694	1,133	183
Credit card	300		300	300	104	449		449	449	172
Automobile	153		85	31	5	153		89	43	8
Other revolving credit and installment	109		102	91	17	162		156	136	41
Total consumer ~~(2)~~(3)	19,399		17,005	11,578	1,593	14,959		13,126	6,181	929
Total impaired loans (excluding PCI)	$	26,547	22,377	16,604	2,593	$	19,464	16,347	9,078	1,443


(1)	Excludes the unpaid principal balance for loans that have been fully charged off or otherwise have zero recorded investment.


(2)	Impaired loans includes reduction of $1.7 billion reclassified to MLHFS.

(3)

Includes the recorded investment of ~~$1.4~~$1.2 billion at June 30, 2019, and ~~$1.5~~$1.3 billion at ~~September 30, 2017~~ ~~and~~ December 31, ~~2016, respectively,~~2018, of government insured/guaranteed loans that are predominantly insured by the FHA or guaranteed by the VA and generally do not have an allowance. Impaired loans may also have limited, if any, allowance when the recorded investment of the loan approximates estimated net realizable value as a result of charge-offs prior to a TDR modification.

~~Note 5: Loans and Allowance for Credit Losses (continued~~)

Commitments to lend additional funds on loans whose terms have been modified in a TDRamounted to ~~$628~~$478 million and ~~$403~~$513 million at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively.

Table ~~5.16~~6.16 provides the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans by portfolio segment and class.

Table ~~5.16:~~6.16:Average Recorded Investment in Impaired Loans


	Quarter ended September 30,						Nine months ended September 30,				Quarter ended June 30,						Six months ended June 30,
	2017				2016		2017		2016		2019				2018		2019		2018
(in millions)	Average recorded investment		Recognized interest income		Average recorded investment	Recognized interest income	Average recorded investment	Recognized interest income	Average recorded investment	Recognized interest income	Average recorded investment		Recognized interest income		Average recorded investment	Recognized interest income	Average recorded investment	Recognized interest income	Average recorded investment	Recognized interest income
Commercial:
Commercial and industrial	$	3,208	22		3,961	25	3,460	91	3,350	65	$	2,285	50		2,212	43	2,249	73	2,318	79
Real estate mortgage	1,293		19		1,644	33	1,351	70	1,699	99	1,116		16		1,299	22	1,079	31	1,266	50
Real estate construction	58		—		108	3	69	3	117	8	55		—		62	1	53	2	60	2
Lease financing	105		1		99	—	110	1	89	—	88		—		138	1	98	—	132	1
Total commercial	4,664		42		5,812	61	4,990	165	5,255	172	3,544		66		3,711	67	3,479	106	3,776	132
Consumer:
Real estate 1-4 family first mortgage	13,044		180		15,471	203	13,594	555	16,224	635	9,398		128		11,772	167	9,950	281	11,921	339
Real estate 1-4 family junior lien mortgage	2,009		30		2,268	32	2,072	92	2,327	99	1,630		26		1,832	29	1,654	52	1,861	58
Credit card	326		9		292	9	314	26	294	26	480		16		398	12	470	31	384	22
Automobile	86		2		90	3	84	8	95	9	86		3		82	3	87	7	83	6
Other revolving credit and installment	123		2		91	2	114	6	84	5	158		3		140	3	157	7	136	5
Total consumer	15,588		223		18,212	249	16,178	687	19,024	774	11,752		176		14,224	214	12,318	378	14,385	430
Total impaired loans (excluding PCI)	$	20,252	265		24,024	310	21,168	852	24,279	946	$	15,296	242		17,935	281	15,797	484	18,161	562
Interest income:
Cash basis of accounting			$	64		87		219		274			$	76		84		135		165
Other (1)			201			223		633		672			166			197		349		397
Total interest income			$	265		310		852		946			$	242		281		484		562


(1)	Includes interest recognized on accruing TDRs, interest recognized related to certain impaired loans which have an allowance calculated using discounting, and amortization of purchase accounting adjustments related to certain impaired loans.

TROUBLED DEBT RESTRUCTURINGS (TDRs) When, for economic or legal reasons related to a borrower’s financial difficulties, we grant a concession for other than an insignificant period of time to a borrower that we would not otherwise consider, the related loan is classified as a TDR, the balance of which totaled ~~$18.7~~$12.6 billion and ~~$20.8~~$15.5 billion at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. We do not consider loan resolutions such as foreclosure or short sale to be a TDR.

We may require some consumer borrowers experiencing financial difficulty to make trial payments generally for a period of three to four months, according to the terms of a planned permanent modification, to determine if they can perform according to those terms. These arrangements represent trial modifications, which we classify and account for as TDRs. While loans are in trial payment programs, their original terms are not considered modified and they continue to advance through delinquency status and accrue interest according to their original terms.

Note 6: Loans and Allowance for Credit Losses (continued)

Table ~~5.17~~6.17 summarizes our TDR modifications for the periods presented by primary modification type and includes the financial effects of these modifications. For those loans that modify more than once, the table reflects each modification that occurred during the period. Loans that both modify and pay off

within the period, as well as changes in recorded investment during the period for loans modified in prior periods, are not included in the table.

Table ~~5.17:~~6.17:TDR Modifications

Primary modification type (1) Financial effects of modifications
(in millions) Principal (2)

Interest
rate
reduction

Other
concessions (3)

Total

Charge-
offs (4)

Weighted
average
interest
rate
reduction

Recorded
investment
related to
interest rate
reduction (5)

Quarter ended September 30, 2017
Commercial:
Commercial and industrial $ —
19
481
500
60
0.34 % $ 18
Real estate mortgage 1
12
98
111
7
1.58
13
Real estate construction —
—
1
1
—
1.85
—
Lease financing —
—
23
23
—
—
—
Total commercial 1
31
603
635
67
0.85
31
Consumer:
Real estate 1-4 family first mortgage 48
15
272
335
2
2.62
41
Real estate 1-4 family junior lien mortgage 3
23
20
46
4
3.97
26
Credit card —
74
—
74
—
12.00
74
Automobile 1
4
20
25
12
5.53
4
Other revolving credit and installment —
11
1
12
—
7.72
12
Trial modifications (6) —
—
(10 ) (10 ) —
—
—
Total consumer 52
127
303
482
18
7.68
157
Total $ 53
158
906
1,117
85
6.56 % $ 188
Quarter ended September 30, 2016
Commercial:
Commercial and industrial $ —
10
1,032
1,042
61
1.28 % $ 10
Real estate mortgage —
28
168
196
1
0.99
29
Real estate construction —
12
—
12
—
0.80
12
Lease financing —
—
4
4
—
—
—
Total commercial —
50
1,204
1,254
62
1.01
51
Consumer:
Real estate 1-4 family first mortgage 84
79
330
493
11
2.56
138
Real estate 1-4 family junior lien mortgage 5
25
22
52
9
3.08
29
Credit card —
46
—
46
—
12.13
46
Automobile 1
4
15
20
11
6.42
4
Other revolving credit and installment —
9
3
12
—
6.86
9
Trial modifications (6) —
—
15
15
—
—
—
Total consumer 90
163
385
638
31
4.82
226
Total $ 90
213
1,589
1,892
93
4.13 % $ 277

~~Note 5: Loans and Allowance for Credit Losses (continued~~)


	Primary modification type (1)							Financial effects of modifications					Primary modification type (1)					Financial effects of modifications
(in millions)	Principal (2)		Interest rate reduction	Other concessions (3)		Total		Charge- offs (4)	Weighted average interest rate reduction		Recorded investment related to interest rate reduction (5)		Principal (2)		Interest rate reduction	Other concessions (3)	Total	Charge- offs (4)	Weighted average interest rate reduction		Recorded investment related to interest rate reduction (5)
Nine months ended September 30, 2017
Quarter ended June 30, 2019
Commercial:
Commercial and industrial	$	17	38	2,323		2,378		154	0.61	%	$	37	$	—	34	180	214	26	0.34	%	$	34
Real estate mortgage	5		51	416		472		20	1.31		52		—		24	95	119	—	0.49		24
Real estate construction	—		1	24		25		—	0.90		1		13		—	13	26	—	—		—
Lease financing	—		—	37		37		—	—		—		—		—	—	—	—	—		—
Total commercial	22		90	2,800		2,912		174	1.02		90		13		58	288	359	26	0.40		58
Consumer:
Real estate 1-4 family first mortgage	196		132	797		1,125		14	2.59		227		28		2	181	211	—	1.83		19
Real estate 1-4 family junior lien mortgage	23		70	64		157		13	3.26		80		1		11	21	33	1	2.39		11
Credit card	—		188	—		188		—	12.21		188		—		89	—	89	—	13.35		89
Automobile	2		11	52		65		30	5.92		11		2		3	14	19	8	4.13		3
Other revolving credit and installment	—		38	5		43		1	7.41		38		—		12	1	13	—	7.67		12
Trial modifications (6)	—		—	(54	)	(54	)	—	—		—		—		—	5	5	—	—		—
Total consumer	221		439	864		1,524		58	6.41		544		31		117	222	370	9	10.06		134
Total	$	243	529	3,664		4,436		232	5.64	%	$	634	$	44	175	510	729	35	7.17	%	$	192
Nine months ended September 30, 2016
Quarter ended June 30, 2018
Commercial:
Commercial and industrial	$	42	123	2,361		2,526		304	1.95	%	$	123	$	3	5	449	457	14	0.58	%	$	5
Real estate mortgage	—		81	462		543		1	1.14		81		—		11	121	132	—	0.67		11
Real estate construction	—		26	62		88		—	0.94		26		—		—	1	1	—	—		—
Lease financing	—		—	8		8		—	—		—		—		—	—	—	—	—		—
Total commercial	42		230	2,893		3,165		305	1.55		230		3		16	571	590	14	0.64		16
Consumer:
Real estate 1-4 family first mortgage	272		222	1,094		1,588		36	2.66		395		64		8	286	358	2	2.26		31
Real estate 1-4 family junior lien mortgage	17		81	82		180		30	3.03		96		2		12	30	44	2	1.66		13
Credit card	—		131	—		131		—	12.02		131		—		83	—	83	—	13.19		83
Automobile	2		11	44		57		27	6.45		11		2		4	11	17	5	6.49		4
Other revolving credit and installment	—		25	8		33		1	6.64		25		—		10	2	12	—	7.95		10
Trial modifications (6)	—		—	47		47		—	—		—		—		—	17	17	—	—		—
Total consumer	291		470	1,275		2,036		94	4.80		658		68		117	346	531	9	9.17		141
Total	$	333	700	4,168		5,201		399	3.96	%	$	888	$	71	133	917	1,121	23	8.30	%	$	157



	Primary modification type (1)					Financial effects of modifications
(in millions)	Principal (2)		Interest rate reduction	Other concessions (3)	Total	Charge- offs (4)	Weighted average interest rate reduction		Recorded investment related to interest rate reduction (5)
Six months ended June 30, 2019
Commercial:
Commercial and industrial	$	—	45	734	779	39	0.42	%	$	45
Real estate mortgage	—		26	168	194	—	0.54		26
Real estate construction	13		—	16	29	—	—		—
Lease financing	—		—	—	—	—	—		—
Total commercial	13		71	918	1,002	39	0.47		71
Consumer:
Real estate 1-4 family first mortgage	63		5	475	543	1	1.89		38
Real estate 1-4 family junior lien mortgage	3		22	46	71	2	2.34		23
Credit card	—		186	—	186	—	13.27		186
Automobile	4		4	26	34	14	4.55		4
Other revolving credit and installment	—		23	4	27	—	7.63		23
Trial modifications (6)	—		—	5	5	—	—		—
Total consumer	70		240	556	866	17	10.17		274
Total	$	83	311	1,474	1,868	56	8.18	%	$	345
Six months ended June 30, 2018
Commercial:
Commercial and industrial	$	3	14	937	954	20	0.88	%	$	14
Real estate mortgage	—		17	219	236	—	0.89		17
Real estate construction	—		—	4	4	—	—		—
Lease financing	—		—	39	39	—	—		—
Total commercial	3		31	1,199	1,233	20	0.88		31
Consumer:
Real estate 1-4 family first mortgage	110		18	592	720	3	2.33		66
Real estate 1-4 family junior lien mortgage	3		20	58	81	3	1.89		22
Credit card	—		169	—	169	—	12.24		169
Automobile	3		8	25	36	14	6.48		8
Other revolving credit and installment	—		25	4	29	—	7.95		25
Trial modifications (6)	—		—	32	32	—	—		—
Total consumer	116		240	711	1,067	20	8.67		290
Total	$	119	271	1,910	2,300	40	7.92	%	$	321

(1)

Amounts represent the recorded investment in loans after recognizing the effects of the TDR, if any. TDRs may have multiple types of concessions, but are presented only once in the first modification type based on the order presented in the table above. The reported amounts include loans remodified of ~~$394~~$323 million and ~~$484~~$381 million for the quarters ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~,2018, respectively, and ~~$1.7 billion~~$683 million and ~~$1.1 billion~~,$884 million for the first ~~nine months~~half of ~~2017~~2019 and ~~2016~~,2018, respectively.


(2)	Principal modifications include principal forgiveness at the time of the modification, contingent principal forgiveness granted over the life of the loan based on borrower performance, and principal that has been legally separated and deferred to the end of the loan, with a zero percent contractual interest rate.


(3)	Other concessions include loans discharged in bankruptcy, loan renewals, term extensions and other interest and noninterest adjustments, but exclude modifications that also forgive principal and/or reduce the contractual interest rate.

(4)

Charge-offs include write-downs of the investment in the loan in the period it is contractually modified. The amount of charge-off will differ from the modification terms if the loan has been charged down prior to the modification based on our policies. In addition, there may be cases where we have a charge-off/down with no legal principal modification. Modifications resulted in legally forgiving principal (actual, contingent or deferred) of $4$3 million and ~~$16~~$14 million for the quarters ended ~~September~~June 30,, ~~2017~~ 2019 and ~~2016~~,2018, and ~~$23~~$6 million and ~~$54~~$17 million for the first ~~nine months~~half of ~~2017~~2019 and ~~2016~~,2018, respectively.


(5)	Reflects the effect of reduced interest rates on loans with an interest rate concession as one of ~~their~~its concession types, which includes loans reported as a principal primary modification type that also have an interest rate concession.

(6)

Trial modifications are granted a delay in payments due under the original terms during the trial payment period. However, these loans continue to advance through delinquency status and accrue interest according to their original terms. Any subsequent permanent modification generally includes interest rate related concessions; however, the exact concession type and resulting financial effect are usually not known until the loan is permanently modified. Trial modifications for the period are presented net of previously reported trial modifications that became permanent in the current period.

Note 6: Loans and Allowance for Credit Losses (continued)

Table ~~5.18~~6.18 summarizes permanent modification TDRs that have defaulted in the current period within 12 months of their permanent modification date. We are reporting these defaulted TDRs based on a payment default definition of 90 days past due for the commercial portfolio segment and 60 days past due for the consumer portfolio segment.

Table ~~5.18:~~6.18:Defaulted TDRs



	Recorded investment of defaults
	Quarter ended June 30,			Six months ended June 30,
(in millions)	2019		2018	2019	2018
Commercial:
Commercial and industrial	$	25	7	48	93
Real estate mortgage	5		14	33	40
Real estate construction	—		16	3	16
Total commercial	30		37	84	149
Consumer:
Real estate 1-4 family first mortgage	13		15	24	33
Real estate 1-4 family junior lien mortgage	4		2	9	7
Credit card	21		24	42	37
Automobile	4		4	7	7
Other revolving credit and installment	1		1	3	2
Total consumer	43		46	85	86
Total	$	73	83	169	235

Recorded investment of defaults
Quarter ended September 30, Nine months ended September 30,
(in millions) 2017
2016
2017
2016
Commercial:
Commercial and industrial $ 14
39
106
84
Real estate mortgage 16
7
47
58
Real estate construction 4
—
4
3
Total commercial 34
46
157
145
Consumer:
Real estate 1-4 family first mortgage 32
36
83
97
Real estate 1-4 family junior lien mortgage 5
6
14
15
Credit card 20
15
52
41
Automobile 4
4
11
10
Other revolving credit and installment 1
—
3
2
Total consumer 62
61
163
165
Total $ 96
107
320
310

Purchased Credit-Impaired Loans

Substantially all of our PCI loans were acquired from Wachovia on December 31, 2008, at which time we acquired commercial and consumer loans with a carrying value of $18.7 billion and $40.1 billion, respectively. The unpaid principal balance on December 31, 2008 was $98.2 billion for the total of commercial and consumer PCI loans. Table ~~5.19~~6.19 presents PCI loans net of any remaining purchase accounting adjustments. Real estate 1-4 family first mortgage PCI loans are predominantly Pick-a-Pay loans.

Table ~~5.19:~~6.19:PCI Loans



(in millions)	Jun 30, 2019		Dec 31, 2018
Total commercial	$	—	4
Consumer:
Real estate 1-4 family first mortgage	1,159		4,988
Real estate 1-4 family junior lien mortgage	15		17
Total consumer	1,174		5,005
Total PCI loans (carrying value)	$	1,174	5,009
Total PCI loans (unpaid principal balance)	$	1,952	7,348

(in millions) Sep 30,
2017
Dec 31,
2016
Commercial:
Commercial and industrial $ 116
237
Real estate mortgage 108
383
Real estate construction 10
57
Total commercial 234
677
Consumer:
Real estate 1-4 family first mortgage 13,301
16,018
Real estate 1-4 family junior lien mortgage 29
36
Total consumer 13,330
16,054
Total PCI loans (carrying value) $ 13,564
16,731
Total PCI loans (unpaid principal balance) $ 20,023
24,136

~~Note 5: Loans and Allowance for Credit Losses (continued~~)

~~ACCRETABLE YIELD~~The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the loan, or pools of loans. The accretable yield is affected by:

changes in interest rate indices for variable rate PCI loans – expected future cash flows are based on the variable rates in effect at the time of the regular evaluations of cash flows expected to be collected;

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

~~changes in the expected principal and interest payments over the estimated weighted-average life – updates to expected cash flows are driven by the credit outlook and actions taken~~

~~with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.~~

The change in the accretable yield related to PCI loans since the merger with Wachovia is presented in Table 5.20. Changes during the first nine months of 2017 reflect an expectation, as a result of our quarterly evaluation of PCI cash flows, that prepayment of modified Pick-a-Pay loans will increase over their estimated weighted-average life and that expected loss has decreased as a result of reduced loan to value ratios and sustained higher housing prices in addition to improved cash flow timing. Changes during the first nine months of 2017 also reflect a $309 million gain on the sale of $569 million Pick-a-Pay PCI loans in second quarter 2017.

~~Table 5.20:Change in Accretable Yield~~

(in millions) Quarter
ended
Sep 30,
2017
Nine months ended
Sep 30,
2017
2009-2016
Balance, beginning of period $ 9,369
11,216
10,447
Change in accretable yield due to acquisitions —
2
159
Accretion into interest income (1) (340 ) (1,071 ) (15,577 )
Accretion into noninterest income due to sales (2) —
(334 ) (467 )
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 234
640
10,955
Changes in expected cash flows that do not affect nonaccretable difference (3) (20 ) (1,210 ) 5,699
Balance, end of period $ 9,243
9,243
11,216


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


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


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

~~COMMERCIAL PCI CREDIT QUALITY INDICATORSTable 5.21 provides a breakdown of commercial PCI loans by risk category.~~

~~Table 5.21:Commercial PCI Loans by Risk Category~~

(in millions)
Commercial
and
industrial

Real
estate
mortgage

Real
estate
construction

Total
September 30, 2017
By risk category:
Pass $ 18
81
4
103
Criticized 98
27
6
131
Total commercial PCI loans $ 116
108
10
234
December 31, 2016
By risk category:
Pass $ 92
263
47
402
Criticized 145
120
10
275
Total commercial PCI loans $ 237
383
57
677

~~Table 5.22 provides past due information for commercial PCI loans.~~

~~Table 5.22:Commercial PCI Loans by Delinquency Status~~

(in millions)
Commercial
and
industrial

Real
estate
mortgage

Real
estate
construction

Total
September 30, 2017
By delinquency status:
Current-29 DPD and still accruing $ 114
87
10
211
30-89 DPD and still accruing 2
—
—
2
90+ DPD and still accruing —
21
—
21
Total commercial PCI loans $ 116
108
10
234
December 31, 2016
By delinquency status:
Current-29 DPD and still accruing $ 235
353
48
636
30-89 DPD and still accruing 2
10
—
12
90+ DPD and still accruing —
20
9
29
Total commercial PCI loans $ 237
383
57
677

~~CONSUMER PCI CREDIT QUALITY INDICATORS~~Our consumer PCI loans were aggregated into several pools of loans at acquisition. Below, we have provided credit quality indicators based on the unpaid principal balance (adjusted for write-downs) of the individual loans included in the pool, but we have not

~~allocated the remaining purchase accounting adjustments, which were established at a pool level. Table 5.23 provides the delinquency status of consumer PCI loans.~~

~~Table 5.23:Consumer PCI Loans by Delinquency Status~~ -

September 30, 2017 December 31, 2016
(in millions)
Real estate
1-4 family
first
mortgage

Real estate
1-4 family
junior lien
mortgage

Total

Real estate
1-4 family
first
mortgage

Real estate
1-4 family
junior lien
mortgage

Total
By delinquency status:
Current-29 DPD and still accruing $ 13,672
149
13,821
16,095
171
16,266
30-59 DPD and still accruing 1,410
6
1,416
1,488
7
1,495
60-89 DPD and still accruing 605
3
608
668
2
670
90-119 DPD and still accruing 257
1
258
233
2
235
120-179 DPD and still accruing 191
1
192
238
2
240
180+ DPD and still accruing 1,425
5
1,430
2,081
8
2,089
Total consumer PCI loans (adjusted unpaid principal balance) $ 17,560
165
17,725
20,803
192
20,995
Total consumer PCI loans (carrying value) $ 13,301
29
13,330
16,018
36
16,054

~~Note 5: Loans and Allowance for Credit Losses (continued~~)

~~Table 5.24 provides FICO scores forconsumer PCI loans.~~

~~Table 5.24:Consumer PCI Loans by FICO~~

September 30, 2017 (1) December 31, 2016
(in millions)
Real estate
1-4 family
first
mortgage

Real estate
1-4 family
junior lien
mortgage

Total

Real estate
1-4 family
first
mortgage

Real estate
1-4 family
junior lien
mortgage

Total
By FICO:
< 600 $ 4,175
37
4,212
4,292
46
4,338
600-639 2,153
21
2,174
3,001
26
3,027
640-679 2,496
27
2,523
3,972
35
4,007
680-719 2,359
32
2,391
3,170
37
3,207
720-759 1,840
23
1,863
1,767
24
1,791
760-799 957
13
970
962
15
977
800+ 471
7
478
254
4
258
No FICO available 3,109
5
3,114
3,385
5
3,390
Total consumer PCI loans (adjusted unpaid principal balance) $ 17,560
165
17,725
20,803
192
20,995
Total consumer PCI loans (carrying value) $ 13,301
29
13,330
16,018
36
16,054


~~(1)~~	~~September 30, 2017~~ ~~amounts reflect updated FICO score version implemented in first quarter 2017.~~

~~Table 5.25 shows the distribution of consumer PCIloans by LTV for real estate 1-4 family first mortgages and byCLTV for real estate 1-4 family junior lien mortgages.~~

~~Table 5.25:Consumer PCI Loans by LTV/CLTV~~

September 30, 2017 December 31, 2016
(in millions)
Real estate
1-4 family
first
mortgage
by LTV

Real estate
1-4 family
junior lien
mortgage
by CLTV

Total

Real estate
1-4 family
first
mortgage
by LTV

Real estate
1-4 family
junior lien
mortgage
by CLTV

Total
By LTV/CLTV:
0-60% $ 7,642
41
7,683
7,513
38
7,551
60.01-80% 7,079
66
7,145
9,000
76
9,076
80.01-100% 2,358
42
2,400
3,458
54
3,512
100.01-120% (1) 392
12
404
669
18
687
> 120% (1) 87
3
90
161
5
166
No LTV/CLTV available 2
1
3
2
1
3
Total consumer PCI loans (adjusted unpaid principal balance) $ 17,560
165
17,725
20,803
192
20,995
Total consumer PCI loans (carrying value) $ 13,301
29
13,330
16,018
36
16,054


~~(1)~~	~~Reflects total loan balances with LTV/CLTV 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/CLTV.~~

Note 6: ~~Other Assets~~7: Leasing Activity

The information below provides a summary of our leasing activities as a lessor and lessee.

As a Lessor

Table ~~6.1~~7.1 presents the composition of our leasing revenue and Table 7.2 provides the components of ~~other assets.~~our investment in lease financing.

Table ~~6.1:Other Assets~~7.1:Leasing Revenue

(in millions) Sep 30,
2017
Dec 31,
2016
Nonmarketable equity investments:
Cost method:
Federal bank stock $ 5,839
6,407
Private equity 1,428
1,465
Auction rate securities 400
525
Total cost method 7,667
8,397
Equity method:
LIHTC (1) 9,884
9,714
Private equity 3,758
3,635
Tax-advantaged renewable energy 1,954
2,054
New market tax credit and other 291
305
Total equity method 15,887
15,708
Fair value (2) 4,523
3,275
Total nonmarketable equity investments 28,077
27,380
Corporate/bank-owned life insurance 19,479
19,325
Accounts receivable (3) 38,284
31,056
Interest receivable 5,579
5,339
Core deposit intangibles 981
1,620
Customer relationship and other amortized intangibles 918
1,089
Foreclosed assets:
Residential real estate:
Government insured/guaranteed (3) 137
197
Non-government insured/guaranteed 261
378
Non-residential real estate 308
403
Operating lease assets 9,672
10,089
Due from customers on acceptances 228
196
Other 12,352
17,469
Total other assets $ 116,276
114,541



(in millions)	Quarter ended June 30, 2019		Six months ended June 30, 2019
Interest income on lease financing	$	224	447
Other lease revenues:
Variable revenues on lease financing	26		50
Fixed revenues on operating leases	357		730
Variable revenues on operating leases	14		32
Other lease-related revenues (1)	27		55
Lease income	424		867
Total leasing revenue	$	648	1,314


(1)	~~Represents low~~Predominantly includes net gains on disposition of assets leased under operating leases or lease financings.

Table 7.2:Investment in Lease Financing



(in millions)	Jun 30, 2019
Lease receivables	$	17,735
Residual asset values	4,244
Unearned income	(2,655		)
Lease financing	$	19,324

Our net investment in financing and sales-type leases includes $2.1 billion of leveraged leases at June 30, 2019.

As shown in Table 9.1, included in Note 9 (Other Assets), we had $8.7 billion in operating lease assets at June 30, 2019, which was net of $3.2 billion of accumulated depreciation. Depreciation expense for the lease assets was $219 million and $448 million in the second quarter and first half of 2019, respectively.

Table 7.3 presents future lease payments owed by our lessees.

Table 7.3:Maturities of Lease Receivables



	June 30, 2019
(in millions)	Direct financing and sales- type leases		Operating leases
Remainder of 2019	$	3,036	535
2020	5,167		880
2021	4,004		591
2022	2,127		407
2023	1,219		269
Thereafter	2,182		605
Total lease receivables	$	17,735	3,287

As a Lessee

Substantially all of our leases are operating leases. Table 7.4 presents balances for our operating leases.

Table 7.4:Operating Lease Right of Use (ROU) Assets and Lease Liabilities



(in millions)	Jun 30, 2019
ROU assets	$	4,776
Lease liabilities	5,302

Table 7.5 provides the composition of our lease costs, which are predominantly included in net occupancy expense.

Table 7.5:Lease Costs



(in millions)	Quarter ended June 30, 2019			Six months ended June 30, 2019
Fixed lease expense - operating leases	$	291		588
Variable lease expense	80			153
Other (1)	(9		)	(17	)
Total lease costs	$	362		724


(1)	Predominantly includes sublease rental income ~~housing tax credit investments.~~and gains recognized from sale leaseback transactions.

Note 7: Leasing Activity (continued)

Tables 7.6 and 7.7 provide the future lease payments under operating leases as of December 31, 2018 and June 30, 2019, respectively. Table 7.7 also includes information on the remaining average lease term and discount rate.

Table 7.6:Lease Payments on Operating Leases Prior to Adoption of ASU 2016-02 - Leases



(in millions)	December 31, 2018
2019	$	1,174
2020	1,056
2021	880
2022	713
2023	577
Thereafter	1,654
Total	$	6,054

Table 7.7:Lease Payments on Operating Leases Subsequent to Adoption of ASU 2016-02 - Leases



(in millions, except for weighted averages)	June 30, 2019
Remainder of 2019	$	566
2020	1,127
2021	947
2022	792
2023	654
Thereafter	2,054
Total lease payments	6,140
Less: imputed interest	838
Total operating lease liabilities	$	5,302
Weighted average remaining lease term (in years)	7.3
Weighted average discount rate	3.2		%

Our operating leases predominantly expire within the next 15 years, with the longest lease expiring in 2105. We do not include renewal or termination options in the establishment of the lease term when we are not reasonably certain that we will exercise them. As of June 30, 2019, we had additional operating leases commitments of $72 million, predominantly for real estate, which leases had not yet commenced. These leases will commence by 2020 and have lease terms of 1 year to 11 years.

Note 8: Equity Securities

Table 8.1 provides a summary of our equity securities by business purpose and accounting method, including equity securities with readily determinable fair values (marketable) and those without readily determinable fair values (nonmarketable).

Table 8.1: Equity Securities



	Jun 30,		Dec 31,
(in millions)	2019		2018
Held for trading at fair value:
Marketable equity securities	$	23,327	19,449
Not held for trading:
Fair value:
Marketable equity securities (1)	5,379		4,513
Nonmarketable equity securities	7,244		5,594
Total equity securities at fair value	12,623		10,107
Equity method:
Low-income housing tax credit investments	11,162		10,999
Private equity	3,352		3,832
Tax-advantaged renewable energy	3,051		3,073
New market tax credit and other	294		311
Total equity method	17,859		18,215
Other:
Federal Reserve Bank stock and other at cost (2)	5,622		5,643
Private equity (3)	2,106		1,734
Total equity securities not held for trading	38,210		35,699
Total equity securities	$	61,537	55,148


(1)	Includes $3.5 billion and $3.2 billion at June 30, 2019, and December 31, 2018, respectively, related to securities held as economic hedges of our deferred compensation plan obligations.


(2)	~~Represents nonmarketable equity~~Includes $5.6 billion and $5.6 billion at June 30, 2019 and December 31, 2018, respectively, related to investments ~~for which we have elected the fair value option. See Note 13 (Fair Values of Assets~~in Federal Reserve Bank and ~~Liabilities) for additional information.~~Federal Home Loan Bank stock.

(3)

Certain government-guaranteed residential real estate mortgage loans upon foreclosure are included in Accounts receivable. Both principal and interest related to these foreclosed real estate assets are collectible becauseRepresents nonmarketable equity securities accounted for under the loans were predominantly insured by the FHA or guaranteed by the VA. For more 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 ~~2016~~ ~~10-K.~~

measurement alternative.

Equity Securities Held for Trading

Equity securities held for trading purposes are marketable equity securities traded on organized exchanges. These securities are held as part of our customer accommodation trading activities. For more information on these activities, see Note 4 (Trading Activities).

Equity Securities Not Held for Trading

We also hold equity securities unrelated to trading activities. These securities include private equity and tax credit investments, securities held as economic hedges or to meet regulatory requirements (for example, Federal Reserve Bank and Federal Home Loan Bank stock). Equity securities not held for trading purposes are accounted for at either fair value, equity method, cost or the measurement alternative.

~~Table 6.2 presents income (expense)~~FAIR VALUEMarketable equity securities held for purposes other than trading primarily consist of exchange-traded equity funds held to economically hedge obligations related to our deferred compensation plans and to a lesser extent other holdings of publicly traded equity securities held for investment purposes. We account for certain nonmarketable equity ~~investments.~~ securities under the fair value method, and substantially all of these securities are economically hedged with equity derivatives.

~~Table 6.2:Nonmarketable Equity Investments~~

EQUITY METHODOur equity method investments consist of tax credit and private equity investments, the majority of which are our low-income housing tax credit (LIHTC) investments.

Quarter ended September 30, Nine months ended September 30,
(in millions) 2017
2016
2017
2016
Net realized gains from nonmarketable equity investments $ 132
55
506
369
All other (184 ) (83 ) (424 ) (404 )
Total $ (52 ) (28 ) 82
(35 )

~~Low Income Housing Tax Credit Investments~~ We invest in affordable housing projects that qualify for the ~~low income housing tax credit (LIHTC),~~LIHTC, which isare designed to promote private development of ~~low income~~low-income housing. These investments generate a return mostly through realization of federal tax ~~credits.~~

~~Total LIHTC investments were $9.9 billion~~credit and ~~$9.7 billion at September 30, 2017 and December 31, 2016, respectively.~~other tax benefits. In the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, we recognized pre-tax losses of ~~$227~~$298 million and ~~$684~~$571 million, respectively, related to our LIHTC investments, compared with ~~$199~~$287 million and ~~$600~~$567 million, respectively, for the same periods a year ago. These losses were recognized in other noninterest income. We also recognized total tax benefits of ~~$360~~$376 million and ~~$1.1 billion~~$746 million in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, which included tax credits recorded into income taxes of ~~$275~~$303 million ~~and$796~~and $605 million for the same periods, respectively. In the ~~third~~second quarter and first ~~nine months~~half of ~~2016,~~2018, total tax benefits were ~~$308~~$352 million and ~~$919~~$711 million, respectively, which included tax credits of ~~$233~~$281 million and ~~$693~~$571 million for the same periods, respectively. We are periodically required to provide additional financial support during the investment period. A liability is recognized for unfunded commitments that are both legally binding and probable of funding. These commitments are predominantly funded within three years of initial investment. Our liability for these unfunded commitments was ~~$3.1~~$3.9 billion at ~~September~~June 30, ~~2017~~2019, and $3.6 billion at December 31, ~~2016. Predominantly all of this~~2018. This liability ~~is expected to be paid over the next three years. This liability~~for unfunded commitments is included in long-term debt.

OTHERThe remaining portion of our nonmarketable equity securities portfolio consists of securities accounted for using the cost or measurement alternative method.

Note 8: Equity Securities (continued)

Realized Gains and Losses Not Held for Trading

Table 8.2 provides a summary of the net gains and losses from equity securities not held for trading. Gains and losses for securities held for trading are reported in net gains from trading activities.

Table 8.2:Net Gains (Losses) from Equity Securities Not Held for Trading



	Quarter ended June 30,					Six months ended June 30,
(in millions)	2019			2018		2019		2018
Net gains (losses) from equity securities carried at fair value:
Marketable equity securities	$	264		28		641		36
Nonmarketable equity securities	732			594		1,668		703
Total equity securities carried at fair value	996			622		2,309		739
Net gains (losses) from nonmarketable equity securities not carried at fair value:
Impairment write-downs	(31		)	(237	)	(67	)	(257	)
Net unrealized gains related to measurement alternative observable transactions	146			35		331		263
Net realized gains on sale	169			399		406		897
All other	—			16		—		34
Total nonmarketable equity securities not carried at fair value	284			213		670		937
Net losses from economic hedge derivatives (1)	(658		)	(540	)	(1,543	)	(598	)
Total net gains from equity securities	$	622		295		1,436		1,078


(1)	Includes net gains (losses) on derivatives not designated as hedging instruments.

Measurement Alternative

Table 8.3 provides additional information about the impairment write-downs and observable price adjustments related to

nonmarketable equity securities accounted for under the measurement alternative. Gains and losses related to these adjustments are also included in Table 8.2.

Table 8.3:Net Gains (Losses) from Measurement Alternative Equity Securities



	Quarter ended June 30,					Six months ended June 30,
(in millions)	2019			2018		2019		2018
Net gains (losses) recognized in earnings during the period:
Gross unrealized gains due to observable price changes	$	157		43		342		271
Gross unrealized losses due to observable price changes	(11		)	(8	)	(11	)	(8	)
Impairment write-downs	(11		)	(5	)	(33	)	(12	)
Realized net gains from sale	102			16		125		91
Total net gains recognized during the period	$	237		46		423		342

Table 8.4 presents cumulative carrying value adjustments to nonmarketable equity securities accounted for under the measurement alternative that were still held as of the balance sheet date.

Table 8.4:Measurement Alternative Cumulative Gains (Losses)



	Jun 30,			Dec 31,
(in millions)	2019			2018
Cumulative gains (losses):
Gross unrealized gains due to observable price changes	$	733		415
Gross unrealized losses due to observable price changes	(36		)	(25	)
Impairment write-downs	(52		)	(33	)

Note 9: Other Assets

Table 9.1 presents the components of other assets.

Table 9.1:Other Assets



(in millions)	Jun 30, 2019		Dec 31, 2018
Corporate/bank-owned life insurance	$	19,912	19,751
Accounts receivable (1)	26,213		34,281
Interest receivable	6,177		6,084
Customer relationship and other amortized intangibles	479		545
Foreclosed assets:
Residential real estate:
Government insured/guaranteed	68		88
Non-government insured/guaranteed	185		229
Other	124		134
Operating lease assets (lessor)	8,663		9,036
Operating lease ROU assets (lessee) (2)	4,776		—
Due from customers on acceptances	272		258
Other	9,489		9,444
Total other assets	$	76,358	79,850


(1)	Certain government-guaranteed residential real estate mortgage loans upon foreclosure are included in Accounts receivable. For more information, see Note 1 (Summary of Significant Accounting Policies) in our 2018 Form 10-K.


(2)	We recognized operating lease right of use (ROU) assets effective January 1, 2019, in connection with the adoption of ASU 2016-02 – Leases. For more information, see Note 1 (Summary of Significant Accounting Policies).

Note 7:10: Securitizations and Variable Interest Entities (continued)

Note 7:10: Securitizations and Variable Interest Entities

Involvement with ~~SPEs~~Special Purpose Entities (SPEs)

In the normal course of business, we enter into various types of on- and off-balance sheet transactions with 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 further description of our involvement with SPEs, see Note 89 (Securitizations and Variable Interest Entities) ~~to Financial Statements~~ in our ~~2016~~2018 Form 10-K.

We have segregated our involvement with VIEs between those VIEs which we consolidate, those which we do not consolidate and those for which we account for the transfers of financial assets as secured borrowings. Secured borrowings are transactions involving transfers of our financial assets to third parties that are accounted for as financings with the assets pledged as collateral. Accordingly, the transferred assets remain recognized on our balance sheet. Subsequent tables within this Note further segregate these transactions by structure type.

Table ~~7.1~~10.1 provides the classifications of assets and liabilities in our balance sheet for our transactions with VIEs.

Table ~~7.1:~~10.1:Balance Sheet Transactions with VIEs


(in millions)	VIEs that we do not consolidate		VIEs that we consolidate	Transfers that we account for as secured borrowings		Total	VIEs that we do not consolidate		VIEs that we consolidate	Transfers that we account for as secured borrowings		Total
September 30, 2017
Cash	$	—	115		—	115
Federal funds sold, securities purchased under resale agreements and other short-term investments	—		402		—	402
Trading assets	1,150		130		201	1,481
Investment securities (1)	4,944		—		364	5,308
June 30, 2019
Cash and due from banks							$	—	11		—	11
Interest-earning deposits with banks							—		8		—	8
Debt securities:
Trading debt securities							2,072		60		200	2,332
Available-for-sale debt securities (1)							1,879		—		68	1,947
Held-to-maturity debt securities							560		—		—	560
Loans	4,491		11,905		508	16,904	1,214		13,602		87	14,903
Mortgage servicing rights	13,340		—		—	13,340	12,354		—		—	12,354
Derivative assets	80		—		—	80	143		—		—	143
Equity securities							11,211		121		—	11,332
Other assets	10,355		352		7	10,714	—		208		2	210
Total assets	34,360		12,904		1,080	48,344	29,433		14,010		357	43,800
Short-term borrowings	—		—		523	523	—		—		263	263
Derivative liabilities	101		26	(2)	—	127	1		1	(2)	—	2
Accrued expenses and other liabilities	240		141	(2)	32	413	198		201	(2)	2	401
Long-term debt	3,103		2,103	(2)	489	5,695	3,857		748	(2)	85	4,690
Total liabilities	3,444		2,270		1,044	6,758	4,056		950		350	5,356
Noncontrolling interests	—		119		—	119	—		41		—	41
Net assets	$	30,916	10,515		36	41,467	$	25,377	13,019		7	38,403
December 31, 2016
Cash	$	—	168		—	168
Federal funds sold, securities purchased under resale agreements and other short-term investments	—		74		—	74
Trading assets	2,034		130		201	2,365
Investment securities (1)	8,530		—		786	9,316
December 31, 2018
Cash and due from banks							$	—	139		—	139
Interest-earning deposits with banks							—		8		—	8
Debt securities:
Trading debt securities							2,110		45		200	2,355
Available-for-sale debt securities (1)							2,686		—		317	3,003
Held-to-maturity debt securities							510		—		—	510
Loans	6,698		12,589		138	19,425	1,433		13,564		94	15,091
Mortgage servicing rights	13,386		—		—	13,386	14,761		—		—	14,761
Derivative assets	91		1		—	92	53		—		—	53
Equity securities							11,041		85		—	11,126
Other assets	10,281		452		11	10,744	—		221		6	227
Total assets	41,020		13,414		1,136	55,570	32,594		14,062		617	47,273
Short-term borrowings	—		—		905	905	—		—		493	493
Derivative liabilities	59		33	(2)	—	92	26		—	(2)	—	26
Accrued expenses and other liabilities	306		107	(2)	2	415	231		191	(2)	8	430
Long-term debt	3,598		3,694	(2)	136	7,428	3,870		816	(2)	93	4,779
Total liabilities	3,963		3,834		1,043	8,840	4,127		1,007		594	5,728
Noncontrolling interests	—		138		—	138	—		34		—	34
Net assets	$	37,057	9,442		93	46,592	$	28,467	13,021		23	41,511


(1)	Excludes certain debt securities related to loans serviced for the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and GNMA.


(2)	There were no VIE liabilities with recourse to the general credit of Wells Fargo for the periods presented.

Transactions with Unconsolidated VIEs

Our transactions with unconsolidated VIEs include securitizations of residential mortgage loans, CRE loans, student loans, automobile loans and leases, certain dealer floorplan loans; investment and financing activities involving collateralized debt obligations (CDOs) backed by asset-backed and CRE securities, tax credit structures, collateralized loan obligations (CLOs) backed by corporate loans, and other types of structured financing. We have various forms of involvement with VIEs, including servicing, holding senior or subordinated interests, entering into liquidity arrangements, credit default swaps and other derivative contracts. Involvements with these unconsolidated VIEs are recorded on our balance sheet in ~~trading assets, investment~~debt and equity securities, loans, MSRs, derivative assets and liabilities, other assets, other liabilities, and long-term debt, as appropriate.

Table ~~7.2~~10.2 provides a summary of unconsolidated VIEs with which we have significant continuing involvement, but we are not the primary beneficiary. We do not consider our continuing involvement in an unconsolidated VIE to be significant when it relates to third-party sponsored VIEs for which we were not the transferor (unless we are servicer and have other significant forms of involvement) or if we were the sponsor only or sponsor

and servicer but do not have any other forms of significant involvement.

Significant continuing involvement includes transactions where we were the sponsor or transferor and have other significant forms of involvement. Sponsorship includes transactions with unconsolidated VIEs where we solely or materially participated in the initial design or structuring of the entity or marketing of the transaction to investors. When we transfer assets to a VIE and account for the transfer as a sale, we are considered the transferor. We consider investments in securities (other than those held temporarily in trading), loans, guarantees, liquidity agreements, written options and servicing of collateral to be other forms of involvement that may be significant. We have excluded certain transactions with unconsolidated VIEs from the balances presented in the following table where we have determined that our continuing involvement is not significant due to the temporary nature and size of our variable interests, because we were not the transferor or because we were not involved in the design of the unconsolidated VIEs. We also exclude from the table secured borrowing transactions with unconsolidated VIEs (for information on these transactions, see the Transactions with Consolidated VIEs and Secured Borrowings section in this Note).

Table ~~7.2:~~10.2:Unconsolidated VIEs


			Carrying value – asset (liability)											Carrying value – asset (liability)
(in millions)	Total VIE assets		Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Net assets		Total VIE assets		Debt and equity interests (1)		Servicing assets	Derivatives	Other commitments and guarantees		Net assets
September 30, 2017
June 30, 2019
Residential mortgage loan securitizations:
Conforming (2)	$	1,172,135	2,056		12,387	—		(188	)	14,255		$	1,132,124	2,367		11,420	—	(136	)	13,651
Other/nonconforming	15,226		774		85	—		—		859		9,438		37		57	—	—		94
Commercial mortgage securitizations	142,525		2,535		868	70		(33	)	3,440		154,690		2,041		877	85	(42	)	2,961
Collateralized debt obligations:
Debt securities	1,074		—		—	5		(20	)	(15	)	637		—		—	4	(20	)	(16	)
Loans (3)	1,494		1,457		—	—		—		1,457
Asset-based finance structures	3,569		2,666		—	—		—		2,666		244		143		—	—	—		143
Tax credit structures	29,295		10,820		—	—		(3,103	)	7,717		36,888		12,232		—	—	(3,857	)	8,375
Collateralized loan obligations	18		4		—	—		—		4		176		1		—	—	—		1
Investment funds	216		51		—	—		—		51		210		49		—	—	—		49
Other (4)	2,521		577		—	(95	)	—		482
Other (3)												1,508		66		—	53	—		119
Total	$	1,368,073	20,940		13,340	(20	)	(3,344	)	30,916		$	1,335,915	16,936		12,354	142	(4,055	)	25,377
			Maximum exposure to loss											Maximum exposure to loss
			Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Total exposure				Debt and equity interests (1)		Servicing assets	Derivatives	Other commitments and guarantees		Total exposure
Residential mortgage loan securitizations:
Conforming			$	2,056	12,387	—		976		15,419				$	2,367	11,420	—	902		14,689
Other/nonconforming			774		85	—		—		859				37		57	—	—		94
Commercial mortgage securitizations			2,535		868	73		9,901		13,377				2,041		877	85	12,007		15,010
Collateralized debt obligations:
Debt securities			—		—	5		20		25				—		—	4	20		24
Loans (3)			1,457		—	—		—		1,457
Asset-based finance structures			2,666		—	—		71		2,737				143		—	—	71		214
Tax credit structures			10,820		—	—		947		11,767				12,232		—	—	1,373		13,605
Collateralized loan obligations			4		—	—		—		4				1		—	—	—		1
Investment funds			51		—	—		—		51				49		—	—	—		49
Other (4)			577		—	120		157		854
Other (3)														66		—	54	159		279
Total			$	20,940	13,340	198		12,072		46,550				$	16,936	12,354	143	14,532		43,965

(continued on following page)

Note 7:10: Securitizations and Variable Interest Entities (continued)

(continued from previous page)


			Carrying value – asset (liability)											Carrying value – asset (liability)
(in millions)	Total VIE assets		Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Net assets		Total VIE assets		Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Net assets
December 31, 2016
December 31, 2018
Residential mortgage loan securitizations:
Conforming (2)	$	1,166,296	3,026		12,434	—		(232	)	15,228		$	1,172,833	2,377		13,811	—		(171	)	16,017
Other/nonconforming	18,805		873		109	—		(2	)	980		10,596		453		57	—		—		510
Commercial mortgage securitizations	166,596		4,258		843	87		(35	)	5,153		153,350		2,409		893	(22	)	(40	)	3,240
Collateralized debt obligations:
Debt securities	1,472		—		—	—		(25	)	(25	)	659		—		—	5		(20	)	(15	)
Loans (3)	1,545		1,507		—	—		—		1,507
Asset-based finance structures	9,152		6,522		—	—		—		6,522		304		205		—	—		—		205
Tax credit structures	29,713		10,669		—	—		(3,609	)	7,060		35,185		12,087		—	—		(3,870	)	8,217
Collateralized loan obligations	78		10		—	—		—		10		2		—		—	—		—		—
Investment funds	214		48		—	—		—		48		185		42		—	—		—		42
Other (4)	1,733		630		—	(56	)	—		574
Other (3)												1,688		207		—	44		—		251
Total	$	1,395,604	27,543		13,386	31		(3,903	)	37,057		$	1,374,802	17,780		14,761	27		(4,101	)	28,467
			Maximum exposure to loss											Maximum exposure to loss
			Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Total exposure				Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Total exposure
Residential mortgage loan securitizations:
Conforming			$	3,026	12,434	—		979		16,439				$	2,377	13,811	—		1,183		17,371
Other/nonconforming			873		109	—		2		984				453		57	—		—		510
Commercial mortgage securitizations			4,258		843	94		9,566		14,761				2,409		893	28		11,563		14,893
Collateralized debt obligations:
Debt securities			—		—	—		25		25				—		—	5		20		25
Loans (3)			1,507		—	—		—		1,507
Asset-based finance structures			6,522		—	—		72		6,594				205		—	—		71		276
Tax credit structures			10,669		—	—		1,104		11,773				12,087		—	—		1,420		13,507
Collateralized loan obligations			10		—	—		—		10				—		—	—		—		—
Investment funds			48		—	—		—		48				42		—	—		—		42
Other (4)			630		—	93		—		723
Other (3)														207		—	45		158		410
Total			$	27,543	13,386	187		11,748		52,864				$	17,780	14,761	78		14,415		47,034


(1)	Includes total equity interests of ~~$10.4~~$11.2 billion and ~~$10.3~~$11.0 billion at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, respectively. Also includes debt interests in the form of both loans and securities. Excludes certain debt securities held related to loans serviced for FNMA, FHLMC and GNMA.

(2)

Excludes assets and related liabilities with a recorded carrying value on our balance sheet of ~~$1.3~~$551 million and $1.2 billion at June 30, 2019, and ~~$1.2 billion~~ at ~~September 30, 2017, and~~ December 31, ~~2016~~,2018, respectively, for certain delinquent loans that are eligible for repurchase from GNMA loan securitizations. The recorded carrying value represents the amount that would be payable if the Company was to exercise the repurchase option. The carrying amounts are excluded from the table because the loans eligible for repurchase do not represent interests in the VIEs.

(3)

Represents senior loans to trusts that are collateralized by asset-backed securities. The trusts invest in senior tranches from a diversified pool of U.S. asset securitizations, of which all are current and ~~100%~~ ~~were rated as investment grade by the primary rating agencies at both~~ ~~September 30, 2017, and~~ ~~December 31, 2016. These senior loans are accounted for at amortized cost and are subject to the Company’s allowance and credit charge-off policies.~~


~~(4)~~	Includes structured financing and credit-linked note structures. ~~Also contains investments in auction rate securities (ARS) issued by VIEs that we do not sponsor and, accordingly, are unable to obtain the total assets of the entity.~~

In Table ~~7.2,~~10.2, “Total VIE ~~assets”~~assets�� represents the remaining principal balance of assets held by unconsolidated VIEs using the most current information available. For VIEs that obtain exposure to assets synthetically through derivative instruments, the remaining notional amount of the derivative is included in the asset balance. “Carrying value” is the amount in our consolidated balance sheet related to our involvement with the unconsolidated VIEs. “Maximum exposure to loss” from our involvement with off-balance sheet entities, which is a required disclosure under GAAP, is determined as the carrying value of our involvement with off-balance sheet (unconsolidated) VIEs 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. It 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 required disclosure is not an indication of expected loss.

For complete descriptions of our types of transactions with unconsolidated VIEs with which we have a significant continuing involvement, but we are not the primary beneficiary, see Note 8

~~(Securitizations~~9 (Securitizations and Variable Interest Entities) ~~to Financial Statements~~ in our ~~2016~~2018 Form 10-K.

INVESTMENT FUNDS ~~Subsequent to adopting ASU 2015-02 (Amendments to the Consolidation Analysis) in first quarter 2016, we do not consolidate these investment funds because we do not hold variable interests that are considered significant to the funds.~~

We voluntarily waived a portion of our management fees for certain money market funds that are

exempt from the consolidation analysis to ensure the funds maintained a minimum level of daily net investment income. The amount of fees waived in the ~~third~~second quarter and first ~~nine months~~half of ~~2017~~2019 was ~~$12~~$10 million and $3920 million, respectively, compared with ~~$28~~$12 million and ~~$84~~$25 million, respectively, in the same periods of ~~2016.~~2018.

~~OTHER TRANSACTIONS WITH VIEs~~ Other VIEs include certain entities that issue auction rate securities (ARS) which are debt instruments with long-term maturities, that re-price more frequently, and preferred equities with no maturity. At September 30, 2017, we held $400 million of ARS issued by VIEs compared with $453 million at December 31, 2016. We acquired the ARS pursuant to agreements entered into in 2008 and 2009.

~~We do not consolidate the VIEs that issued the ARS because we do not have power over the activities of the VIEs.~~

TRUST PREFERRED SECURITIESVIEs that we wholly own issue debt securities or preferred equity to third party investors. All of the proceeds of the issuance are invested in debt securities or preferred equity that we issue to the VIEs. The VIEs’ operations and cash flows relate only to the issuance, administration and repayment of the securities held by third parties. We do not consolidate these VIEs because the sole assets of the VIEs are receivables from us, 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. In our consolidated balance sheet ~~at September 30, 2017, and December 31, 2016,~~ we reported the debt securities issued to the VIEs as long-term junior subordinated debt with a carrying value of $2.1 billion and $2.0 billion at June 30, 2019 and ~~$2.1 billion,~~December 31, 2018, respectively, and the preferred equity securities issued to the VIEs as preferred stock with a carrying value of $2.5 billion at both dates. These ~~amounts~~VIEs are ~~in addition to the involvements in these VIEs~~not included in the preceding table.

In the first nine months of 2017, we redeemed $150 million of trust preferred securities which were partially included in Tier 2 capital (50% credit in 2017) in the transitional framework and were not included under the fully-phased framework under the Basel III standards.

Loan Sales and Securitization Activity

We periodically transfer consumer and CRE loans and other types of financial assets in securitization and whole loan sale

transactions. We typically retain the servicing rights from these sales and may continue to hold other beneficial interests in the transferred financial assets. We may also provide liquidity to investors in the beneficial interests and credit enhancements in the form of standby letters of credit. Through these transfers we may be exposed to liability under limited amounts of recourse as

well as standard representations and warranties we make to purchasers and issuers. Table ~~7.3~~10.3 presents the cash flows for our transfers accounted for as ~~sales.~~sales in which we have continuing involvement with the transferred financial assets.

Table ~~7.3:~~10.3:Cash Flows From Sales and Securitization Activity


	2017				2016			Mortgage loans
(in millions)	Mortgage loans			Other financial assets	Mortgage loans		Other financial assets	2019			2018
Quarter ended September 30,
Quarter ended June 30,
Proceeds from securitizations and whole loan sales	$	61,756		—	66,830		53	$	39,697		51,990
Fees from servicing rights retained	826			—	891		—	786			830
Cash flows from other interests held (1)	408			—	930		—	133			168
Repurchases of assets/loss reimbursements (2):
Non-agency securitizations and whole loan transactions	5			—	4		—	1			1
Agency securitizations (3)	20			—	22		—	27			19
Servicing advances, net of repayments	(90		)	—	(52	)	—	(54		)	(7	)
Nine months ended September 30,
Six months ended June 30,
Proceeds from securitizations and whole loan sales	$	172,837		25	178,301		186	$	76,204		102,577
Fees from servicing rights retained	2,520			—	2,636		—	1,566			1,675
Cash flows from other interests held (1)	1,883			—	1,964		1	244			353
Repurchases of assets/loss reimbursements (2):
Non-agency securitizations and whole loan transactions	12			—	22		—	1			2
Agency securitizations (3)	66			—	104		—	44			52
Servicing advances, net of repayments	(252		)	—	(159	)	—	(93		)	(43	)


(1)	Cash flows from other interests held include principal and interest payments received on retained bonds and excess cash flows received on interest-only strips. We also received $1 million in both the second quarter and first half of 2018 related to other financial assets.


(2)	Consists of cash paid to repurchase loans from investors and cash paid to investors to reimburse them for losses on individual loans that are already liquidated.

(3)

Represent loans repurchased from GNMA, FNMA, and FHLMC under representation and warranty provisions included in our loan sales contracts. ~~Third~~Second quarter and first ~~nine months~~half of ~~2017~~2019 exclude ~~$2.1~~$1.3 billion and $~~6.0~~$3.2 billion,, respectively, in delinquent insured/guaranteed loans that we service and have exercised our option to purchase out of GNMA pools, compared with ~~$2.4~~$1.8 billion and ~~$7.3~~$4.7 billion,, respectively, in the same periods of ~~2016~~.2018. These loans are predominantly insured by the FHA or guaranteed by the VA.

In the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, we recognized net gains of ~~$91~~$119 million and $~~616~~180 million, respectively, from transfers accounted for as sales of financial assets, in which we have continuing involvement with the transferred assets, compared with ~~$141~~$54 million and ~~$436~~$112 million, respectively, in the same periods of ~~2016.~~2018. Net gains recognized in the second quarter and first half of 2018 were revised from the amounts previously reported to exclude transfers for which we do not have continuing involvement. These net gains ~~largely~~predominantly relate to commercial mortgage securitizations, and residential mortgage securitizations where the loans were not already carried at fair value.

Sales with continuing involvement during the ~~third~~second quarter and first ~~nine months~~half of ~~2017~~2019 and ~~2016~~2018 largely related to securitizations of residential mortgages that are sold to the government-sponsored entities (GSEs), including FNMA, FHLMC and GNMA (conforming residential mortgage

securitizations). During the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, we transferred ~~$57.8~~$36.7 billion and ~~$163.0~~$70.8 billion, respectively, in fair value of residential mortgages to unconsolidated VIEs and third-party investors and recorded the transfers as sales, compared with ~~$63.3~~$47.7 billion and ~~$165.6~~$95.0 billion, respectively, in the same periods of ~~2016.~~2018. Substantially all of these transfers did not result in a gain or loss because the loans were already carried at fair value. In connection with all of these transfers, in the first ~~nine months~~half of ~~2017,~~2019, we recorded a ~~$1.5 billion~~$707 million servicing asset, measured at fair value using a Level 3 measurement technique, securities of ~~$2.2~~$3.4 billion, classified as Level 2, and a ~~$20~~$8 million liability for repurchase losses which reflects management’s estimate of probable losses related to

~~Note 7: Securitizations and Variable Interest Entities (continued~~)

various representations and warranties for the loans

transferred, initially measured at fair value. In the first ~~nine months~~half of ~~2016,~~2018, we recorded a ~~$1.3 billion~~$988 million servicing asset, securities of ~~$3.0~~$1.8 billion, and a ~~$26~~$7 million liability.

Table ~~7.4~~10.4 presents the key weighted-average assumptions we used to measure residential mortgage servicing rights at the date of securitization.

Table ~~7.4:~~10.4:Residential Mortgage Servicing Rights


	Residential mortgage servicing rights				Residential mortgage servicing rights
	2017			2016	2019			2018
Quarter ended September 30,
Quarter ended June 30,
Prepayment speed (1)	12.1		%	12.4	13.5		%	10.7
Discount rate	6.9			6.2	7.5			7.4
Cost to service ($ per loan) (2)	$	122		124	$	121		146
Nine months ended September 30,
Six months ended June 30,
Prepayment speed (1)	11.7		%	12.5	13.5		%	10.1
Discount rate	6.9			6.5	7.7			7.4
Cost to service ($ per loan) (2)	$	135		136	$	109		132


(1)	The prepayment speed assumption for residential mortgage servicing rights includes a blend of prepayment speeds and default rates. Prepayment speed assumptions are influenced by mortgage interest rate inputs as well as our estimation of drivers of borrower behavior.


(2)	Includes costs to service and unreimbursed foreclosure costs, which can vary period to period depending on the mix of modified government-guaranteed loans sold to GNMA.

During the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, we transferred ~~$4.6~~$3.4 billion and ~~$11.2~~$6.1 billion, respectively, in carrying value of commercial mortgages to unconsolidated VIEs and third-party investors and recorded the transfers as sales, compared

Note 10: Securitizations and Variable Interest Entities (continued)

with ~~$4.0~~$4.4 billion and ~~$13.9~~$7.5 billion, respectively, in the same periods of ~~2016.~~2018. These transfers resulted in gains of ~~$89~~$74 million and ~~$265~~$121 million in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, because the loans were carried at ~~lower of cost or market value (LOCOM),~~LOCOM, compared with gains of ~~$134~~$60 million and ~~$327~~$129 million ~~respectively,~~ in the same periods of ~~2016.~~2018. In connection with these transfers, in the first ~~nine months~~half of ~~2017,~~2019, we recorded a servicing asset of ~~$123~~$59 million, initially measured at fair value using a Level 3 measurement technique, and ~~securities of $65 million, classified as Level 2.~~no securities. In the first ~~nine months~~half of ~~2016,~~2018, we recorded a servicing asset of ~~$204~~$73 million and securities of ~~$236~~$208 million.

Retained Interests from Unconsolidated VIEs

Table ~~7.5~~10.5 provides key economic assumptions and the sensitivity of the current fair value of residential mortgage servicing rights and other interests held related to unconsolidated VIEs to

immediate adverse changes in those assumptions. “Other interests held” relate to residential and commercial mortgage loan securitizations. Residential mortgage-backed securities retained in securitizations issued through GSEs, such as FNMA, FHLMC and GNMA, are excluded from the table because these securities have a remote risk of credit loss due to

the GSE guarantee. These securities also have economic characteristics similar to GSE mortgage-backed securities that we purchase, which are not included in the table. Subordinated interests include only those bonds whose credit rating was below AAA by a major rating agency at issuance. Senior interests include only those bonds whose credit rating was AAA by a major rating agency at issuance. The information presented excludes trading positions held in inventory.

Table ~~7.5:~~10.5:Retained Interests from Unconsolidated VIEs


				Other interests held																Other interests held
	Residential mortgage servicing rights (1)			Interest-only strips			Consumer				Commercial (2)					Residential mortgage servicing rights (1)				Interest-only strips		Commercial
($ in millions, except cost to service amounts)						Subordinated bonds				Subordinated bonds			Senior bonds						Subordinated bonds				Senior bonds
Fair value of interests held at September 30, 2017	$	13,338			23			—				561			526
Fair value of interests held at June 30, 2019																$	12,096				14		706			302
Expected weighted-average life (in years)	6.1			3.8			0.0				5.7			5.2		5.6				3.4		7.2			5.3
Key economic assumptions:
Prepayment speed assumption ~~(3)~~(2)	10.8		%	17.4			—									12.2		%		18.8
Decrease in fair value from:
10% adverse change	$	575		1			—									$	526			1
25% adverse change	1,359			2			—									1,239				1
Discount rate assumption	6.7		%	12.7			—				3.0			2.9		7.4		%		13.9		3.5			2.8
Decrease in fair value from:
100 basis point increase	$	647		—			—				25			22		$	499			—		41			14
200 basis point increase	1,236			1			—				47			44		954				—		79			26
Cost to service assumption ($ per loan)	145															104
Decrease in fair value from:
10% adverse change	476															283
25% adverse change	1,189															707
Credit loss assumption							—		%		2.0			—								4.4		%	—
Decrease in fair value from:
10% higher losses							$	—			—			—								$	2		—
25% higher losses							—				—			—								5			—
Fair value of interests held at December 31, 2016	$	12,959		28			1				249			552
Fair value of interests held at December 31, 2018																$	14,649			16		668			309
Expected weighted-average life (in years)	6.3			3.9			8.3				3.1			5.1		6.5				3.6		7.0			5.7
Key economic assumptions:
Prepayment speed assumption ~~(3)~~(2)	10.3		%	17.4			13.5									9.9		%		17.7
Decrease in fair value from:
10% adverse change	$	583		1			—									$	530			1
25% adverse change	1,385			2			—									1,301				1
Discount rate assumption	6.8		%	13.3			10.7				5.2			2.7		8.1		%		14.5		4.3			3.7
Decrease in fair value from:
100 basis point increase	$	649		1			—				7			23		$	615			—		37			14
200 basis point increase	1,239			1			—				12			45		1,176				1		72			28
Cost to service assumption ($ per loan)	155															106
Decrease in fair value from:
10% adverse change	515															316
25% adverse change	1,282															787
Credit loss assumption							3.0		%		4.7			—								5.1		%	—
Decrease in fair value from:
10% higher losses							$	—			—			—								$	2		—
25% higher losses							—				—			—								5			—


(1)	See narrative following this table for a discussion of commercial mortgage servicing rights.


(2)	Prepayment speed assumptions do not significantly impact the value of commercial mortgage securitization bonds as the underlying commercial mortgage loans experience significantly lower prepayments due to certain contractual restrictions, impacting the borrower’s ability to prepay the mortgage.


~~(3)~~	The prepayment speed assumption for residential mortgage servicing rights includes a blend of prepayment speeds and default rates. Prepayment speed assumptions are influenced by mortgage interest rate inputs as well as our estimation of drivers of borrower behavior.

~~Note 7: Securitizations and Variable Interest Entities (continued~~)

In addition to residential ~~mortgage servicing rights (MSRs)~~MSRs included in the previous table, we have a small portfolio of commercial MSRs with a fair value of ~~$2.0~~$1.9 billion and $2.3 billion at ~~both September~~June 30, ~~2017,~~2019, and December 31, ~~2016.~~2018, respectively. The nature of our commercial MSRs, which are carried at LOCOM, is different from our residential MSRs. Prepayment activity on serviced loans does not significantly impact the value of commercial MSRs because, unlike residential mortgages, commercial mortgages experience

significantly lower prepayments due to certain contractual restrictions, impacting the borrower’s ability to prepay the mortgage. Similarly, prepayment speed assumptions do not significantly impact the value of the commercial mortgage securitization bonds. Additionally, for our commercial MSR portfolio, we are typically master/primary servicer, but not the special servicer, who is separately responsible for the servicing and workout of delinquent and foreclosed loans. It is the special

servicer, similar to our role as servicer of residential mortgage loans, who is affected by higher servicing and foreclosure costs due to an increase in delinquent and foreclosed loans. Accordingly, prepayment speeds and costs to service are not key assumptions for commercial MSRs as they do not significantly impact the valuation. The primary economic driver impacting the fair value of our commercial MSRs is forward interest rates, which are derived from market observable yield curves used to price capital markets instruments. Market interest rates significantly affect interest earned on custodial deposit balances. The sensitivity of the current fair value to an immediate adverse 25% change in the assumption about interest earned on deposit balances at ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, results in a decrease in fair value of ~~$238~~$231 million and ~~$259~~$320 million, respectively. See Note 811 (Mortgage Banking Activities) for further information on our commercial MSRs.

We also have a loan to an unconsolidated third party VIE that we extended in fourth quarter 2014 in conjunction with our sale of government guaranteed student loans. The loan is carried at amortized cost and approximates fair value at September 30, 2017, and December 31, 2016. The carrying amount of the loan at September 30, 2017, and December 31, 2016, was $1.3 billion and $3.2 billion, respectively. The estimated fair value of the loan is considered a Level 3 measurement that is determined using

discounted cash flows that are based on changes in the discount rate due to changes in the risk premium component (credit spreads). The primary economic assumption impacting the fair value of our loan is the discount rate. Changes in the credit loss assumption are not expected to affect the estimated fair value of the loan due to the government guarantee of the underlying collateral. The sensitivity of the current fair value to an immediate adverse increase of 200 basis points in the risk premium component of the discount rate assumption is a decrease in fair value of $23 million and $154 million at September 30, 2017, and December 31, 2016, respectively.

The sensitivities in the preceding ~~paragraphs~~paragraph and 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 (for example, changes in prepayment speed estimates could result in changes in the credit losses), which might magnify or counteract the sensitivities.

Off-Balance Sheet Loans

Table ~~7.6~~10.6 presents information about the principal balances of off-balance sheet loans that were sold or securitized, including residential mortgage loans sold to FNMA, FHLMC, GNMA and other investors, for which we have some form of continuing involvement (including servicer). Delinquent loans include loans 90 days or more past due and loans in bankruptcy, regardless of delinquency status. For loans sold or securitized where servicing is our only form of continuing involvement, we would only experience a loss 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 ~~7.6:~~10.6:Off-Balance Sheet Loans Sold or Securitized


						Net charge-offs							Net charge-offs
	Total loans			Delinquent loans and foreclosed assets (1)		Nine months ended September 30,		Total loans			Delinquent loans and foreclosed assets (1)		Six months ended Jun 30,
(in millions)	Sep 30, 2017		Dec 31, 2016	Sep 30, 2017	Dec 31, 2016	2017	2016	Jun 30, 2019		Dec 31, 2018	Jun 30, 2019	Dec 31, 2018	2019	2018
Commercial:
Real estate mortgage	$	98,350	106,745	2,879	3,325	718	210	$	107,239	105,173	955	1,008	89	151
Total commercial	98,350		106,745	2,879	3,325	718	210	107,239		105,173	955	1,008	89	151
Consumer:
Real estate 1-4 family first mortgage	1,135,409		1,160,191	12,434	16,453	546	764	1,045,840		1,097,128	7,650	8,947	110	250
Total consumer	1,135,409		1,160,191	12,434	16,453	546	764	1,045,840		1,097,128	7,650	8,947	110	250
Total off-balance sheet sold or securitized loans (2)	$	1,233,759	1,266,936	15,313	19,778	1,264	974	$	1,153,079	1,202,301	8,605	9,955	199	401


(1)	Includes ~~$1.4 billion~~$583 million and ~~$1.7 billion~~$675 million of commercial foreclosed assets and ~~$1.1 billion~~$507 million and ~~$1.8 billion~~$582 million of consumer foreclosed assets at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, respectively.

(2)

At ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, the table includes total loans of ~~$1.2~~$1.1 trillion at both dates, delinquent loans of ~~$7.6~~$5.7 billion and ~~$9.8~~$6.4 billion,, and foreclosed assets of ~~$730~~$364 million and ~~$1.3 billion~~,$442 million, respectively, for FNMA, FHLMC and GNMA. Net charge-offs exclude loans sold to FNMA, FHLMC and GNMA as we do not service or manage the underlying real estate upon foreclosure and, as such, do not have access to net charge-off information.

Note 10: Securitizations and Variable Interest Entities (continued)

Transactions with Consolidated VIEs and Secured Borrowings

Table ~~7.7~~10.7 presents a summary of financial assets and liabilities for asset transfers accounted for as secured borrowings and involvements with consolidated VIEs. Carrying values of “Assets” are presented using GAAP measurement methods, which may include fair value, credit impairment or other adjustments, and

therefore in some instances will differ from “Total VIE assets.” For VIEs that obtain exposure synthetically through derivative instruments, the remaining notional amount of the derivative is included in “Total VIE assets.” On the consolidated balance sheet, we separately disclose the consolidated assets of certain VIEs that can only be used to settle the liabilities of those VIEs.

Table ~~7.7:~~10.7:Transactions with Consolidated VIEs and Secured Borrowings



			Carrying value
(in millions)	Total VIE assets		Assets	Liabilities		Noncontrolling interests		Net assets
June 30, 2019
Secured borrowings:
Municipal tender option bond securitizations	$	263	270	(265	)	—		5
Residential mortgage securitizations	87		87	(85	)	—		2
Total secured borrowings	350		357	(350	)	—		7
Consolidated VIEs:
Commercial and industrial loans and leases	7,742		7,728	(490	)	(13	)	7,225
Nonconforming residential mortgage loan securitizations	1,475		1,288	(452	)	—		836
Commercial real estate loans	4,794		4,794	—		—		4,794
Investment funds	194		194	(6	)	(24	)	164
Other	6		6	(2	)	(4	)	—
Total consolidated VIEs	14,211		14,010	(950	)	(41	)	13,019
Total secured borrowings and consolidated VIEs	$	14,561	14,367	(1,300	)	(41	)	13,026
December 31, 2018
Secured borrowings:
Municipal tender option bond securitizations	$	627	523	(501	)	—		22
Residential mortgage securitizations	95		94	(93	)	—		1
Total secured borrowings	722		617	(594	)	—		23
Consolidated VIEs:
Commercial and industrial loans and leases	8,215		8,204	(477	)	(14	)	7,713
Nonconforming residential mortgage loan securitizations	1,947		1,732	(521	)	—		1,211
Commercial real estate loans	3,957		3,957	—		—		3,957
Investment funds	155		155	(5	)	(15	)	135
Other	14		14	(4	)	(5	)	5
Total consolidated VIEs	14,288		14,062	(1,007	)	(34	)	13,021
Total secured borrowings and consolidated VIEs	$	15,010	14,679	(1,601	)	(34	)	13,044

Carrying value
(in millions)
Total VIE
assets

Assets
Liabilities

Noncontrolling
interests

Net assets
September 30, 2017
Secured borrowings:
Municipal tender option bond securitizations $ 670
572
(539 ) —
33
Commercial real estate loans 392
392
(388 ) —
4
Residential mortgage securitizations 119
116
(117 ) —
(1 )
Total secured borrowings 1,181
1,080
(1,044 ) —
36
Consolidated VIEs:
Commercial and industrial loans and leases 8,546
8,051
(1,425 ) (14 ) 6,612
Nonconforming residential mortgage loan securitizations 2,812
2,486
(837 ) —
1,649
Commercial real estate loans 2,120
2,120
—
—
2,120
Structured asset finance 13
8
(6 ) —
2
Investment funds 135
135
(1 ) (72 ) 62
Other 118
104
(1 ) (33 ) 70
Total consolidated VIEs 13,744
12,904
(2,270 ) (119 ) 10,515
Total secured borrowings and consolidated VIEs $ 14,925
13,984
(3,314 ) (119 ) 10,551
December 31, 2016
Secured borrowings:
Municipal tender option bond securitizations $ 1,473
998
(907 ) —
91
Residential mortgage securitizations 139
138
(136 ) —
2
Total secured borrowings 1,612
1,136
(1,043 ) —
93
Consolidated VIEs:
Commercial and industrial loans and leases 8,821
8,623
(2,819 ) (14 ) 5,790
Nonconforming residential mortgage loan securitizations 3,349
2,974
(1,003 ) —
1,971
Commercial real estate loans 1,516
1,516
—
—
1,516
Structured asset finance 23
13
(9 ) —
4
Investment funds 142
142
(2 ) (67 ) 73
Other 166
146
(1 ) (57 ) 88
Total consolidated VIEs 14,017
13,414
(3,834 ) (138 ) 9,442
Total secured borrowings and consolidated VIEs $ 15,629
14,550
(4,877 ) (138 ) 9,535

~~INVESTMENT FUNDS~~ ~~Subsequent to adopting ASU 2015-02 (Amendments to the Consolidation Analysis) in first quarter 2016, we consolidate certain investment funds because we have both the power to manage fund assets and hold variable interests that are considered significant.~~

~~OTHER CONSOLIDATED VIE STRUCTURES~~In addition to the structure types included in the previous table, at December 31, 2016, we had approximately $6.0 billion of private placement debt financing issued through a consolidated VIE. The issuance was classified as long-term debt in our consolidated financial statements. At December 31, 2016, we pledged approximately $434 million in loans (principal and interest eligible to be capitalized) and $6.1 billion in available-for-sale securities to collateralize the VIE’s borrowings. These assets were not transferred to the VIE, and accordingly we excluded the VIE from the previous table. During second quarter 2017, the private

~~placement debt financing was repaid, and the entity was no longer considered a VIE.~~

For complete descriptions of our accounting for transfers accounted for as secured borrowings and involvements with consolidated VIEs, see Note 89 (Securitizations and Variable Interest Entities) ~~to Financial Statements~~ in our ~~2016~~2018 Form 10-K.

~~Note 8: Mortgage Banking Activities (continued~~)

Note 8:11: Mortgage Banking Activities

Mortgage banking activities, included in the Community Banking and Wholesale Banking operating segments, consist of residential and commercial mortgage originations, sale activity and servicing.

We apply the amortization method to commercial MSRs and ~~apply~~ the fair value method to residential MSRs. Table ~~8.1~~11.1 presents the changes in MSRs measured using the fair value method.

Table ~~8.1:~~11.1:Analysis of Changes in Fair Value MSRs



	Quarter ended June 30,					Six months ended June 30,
(in millions)	2019			2018		2019		2018
Fair value, beginning of period	$	13,336		15,041		14,649		13,625
Servicing from securitizations or asset transfers (1)	400			486		741		1,059
Sales and other (2)	(1		)	(1	)	(282	)	(5	)
Net additions	399			485		459		1,054
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (3)	(1,153		)	376		(2,093	)	1,629
Servicing and foreclosure costs (4)	(22		)	30		(10	)	64
Discount rates (5)	(109		)	—		(9	)	—
Prepayment estimates and other (6)	206			(61	)	143		(18	)
Net changes in valuation model inputs or assumptions	(1,078		)	345		(1,969	)	1,675
Changes due to collection/realization of expected cash flows over time	(561		)	(460	)	(1,043	)	(943	)
Total changes in fair value	(1,639		)	(115	)	(3,012	)	732
Fair value, end of period	$	12,096		15,411		12,096		15,411

Quarter ended Sep 30, Nine months ended Sep 30,
(in millions) 2017
2016
2017
2016
Fair value, beginning of period $ 12,789
10,396
12,959
12,415
Purchases 541
—
541
—
Servicing from securitizations or asset transfers (1) 605
609
1,624
1,452
Sales and other (2) 64
4
9
(18 )
Net additions 1,210
613
2,174
1,434
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (3) (171 ) 39
(324 ) (1,824 )
Servicing and foreclosure costs (4) 60
(10 ) 73
13
Prepayment estimates and other (5) (31 ) (37 ) (77 ) 22
Net changes in valuation model inputs or assumptions (142 ) (8 ) (328 ) (1,789 )
Changes due to collection/realization of expected cash flows over time (519 ) (586 ) (1,467 ) (1,645 )
Total changes in fair value (661 ) (594 ) (1,795 ) (3,434 )
Fair value, end of period $ 13,338
10,415
13,338
10,415


(1)	Includes impacts associated with exercising our right to repurchase delinquent loans from GNMA loan securitization pools. Total reported MSRs may increase upon repurchase due to servicing liabilities associated with these loans.


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


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


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


(5)	Reflects discount rate assumption change, excluding portion attributable to changes in mortgage interest rates.


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

Table ~~8.2~~11.2 presents the changes in amortized MSRs.

Table ~~8.2:~~11.2:Analysis of Changes in Amortized MSRs


	Quarter ended Sep 30,					Nine months ended Sep 30,				Quarter ended June 30,					Six months ended June 30,
(in millions)	2017			2016		2017		2016		2019			2018		2019		2018
Balance, beginning of period	$	1,399		1,353		1,406		1,308		$	1,427		1,411		1,443		1,424
Purchases	31			18		75		63		16			22		40		40
Servicing from securitizations or asset transfers	41			69		123		204		33			39		59		73
Amortization	(65		)	(67	)	(198	)	(202	)	(69		)	(65	)	(135	)	(130	)
Balance, end of period (1)	$	1,406		1,373		1,406		1,373		$	1,407		1,407		1,407		1,407
Fair value of amortized MSRs:
Beginning of period	$	1,989		1,620		1,956		1,680		$	2,149		2,307		2,288		2,025
End of period	1,990			1,627		1,990		1,627		1,897			2,309		1,897		2,309


(1)	Commercial amortized MSRs are evaluated for impairment purposes by the following risk strata: agency (GSEs) for multi-family properties and non-agency. There was no valuation allowance recorded for the periods presented on the commercial amortized MSRs.

Note 11: Mortgage Banking Activities (continued)

We present the components of our managed servicing portfolio in Table ~~8.3~~11.3 at unpaid principal balance for loans serviced and subserviced for others and at book value for owned loans serviced.

Table ~~8.3:~~11.3:Managed Servicing Portfolio



(in billions)	Jun 30, 2019			Dec 31, 2018
Residential mortgage servicing:
Serviced for others	$	1,107		1,164
Owned loans serviced	340			334
Subserviced for others	5			4
Total residential servicing	1,452			1,502
Commercial mortgage servicing:
Serviced for others	548			543
Owned loans serviced	123			121
Subserviced for others	9			9
Total commercial servicing	680			673
Total managed servicing portfolio	$	2,132		2,175
Total serviced for others	$	1,655		1,707
Ratio of MSRs to related loans serviced for others	0.82		%	0.94

(in billions) Sep 30, 2017
Dec 31, 2016
Residential mortgage servicing:
Serviced for others $ 1,223
1,205
Owned loans serviced 340
347
Subserviced for others 3
8
Total residential servicing 1,566
1,560
Commercial mortgage servicing:
Serviced for others 480
479
Owned loans serviced 128
132
Subserviced for others 8
8
Total commercial servicing 616
619
Total managed servicing portfolio $ 2,182
2,179
Total serviced for others $ 1,703
1,684
Ratio of MSRs to related loans serviced for others 0.87 % 0.85

Table ~~8.4~~11.4 presents the components of mortgage banking noninterest income.

Table ~~8.4:~~11.4:Mortgage Banking Noninterest Income


		Quarter ended Sep 30,					Nine months ended Sep 30,					Quarter ended June 30,					Six months ended June 30,
(in millions)		2017			2016		2017		2016			2019			2018		2019		2018
Servicing income, net:
Servicing fees:
Contractually specified servicing fees		$	889		954		2,696		2,857			$	846		901		1,686		1,817
Late charges		41			45		133		135			30			42		63		86
Ancillary fees		51			56		160		171			38			47		76		87
Unreimbursed direct servicing costs (1)		(186		)	(177	)	(430	)	(533	)		(84		)	(85	)	(154	)	(179	)
Net servicing fees		795			878		2,559		2,630			830			905		1,671		1,811
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2)	(A)	(142		)	(8	)	(328	)	(1,789	)	(A)	(1,078		)	345		(1,969	)	1,675
Changes due to collection/realization of expected cash flows over time		(519		)	(586	)	(1,467	)	(1,645	)		(561		)	(460	)	(1,043	)	(943	)
Total changes in fair value of MSRs carried at fair value		(661		)	(594	)	(1,795	)	(3,434	)		(1,639		)	(115	)	(3,012	)	732
Amortization		(65		)	(67	)	(198	)	(202	)		(69		)	(65	)	(135	)	(130	)
Net derivative gains from economic hedges (3)	(B)	240			142		599		2,575
Net derivative gains (losses) from economic hedges (3)											(B)	1,155			(319	)	2,117		(1,539	)
Total servicing income, net		309			359		1,165		1,569			277			406		641		874
Net gains on mortgage loan origination/sales activities(4)		737			1,308		2,257		3,110			481			364		825		830
Total mortgage banking noninterest income		$	1,046		1,667		3,422		4,679			$	758		770		1,466		1,704
Market-related valuation changes to MSRs, net of hedge results (2)(3)	(A)+(B)	$	98		134		271		786		(A)+(B)	$	77		26		148		136


(1)	Includes costs associated with foreclosures, unreimbursed interest advances to investors, and other interest costs.


(2)	Refer to the analysis of changes in fair value MSRs presented in Table ~~8.1~~11.1 in this Note for more detail.


(3)	Represents results from economic hedges used to hedge the risk of changes in fair value of MSRs. See Note ~~12 (Derivatives Not Designated as Hedging Instruments)~~15 (Derivatives) for additional discussion and detail.

~~Note 8: Mortgage Banking Activities (continued~~)

Table 8.5 summarizes the changes in our liability for mortgage loan repurchase losses. This liability is in “Accrued expenses and other liabilities” in our consolidated balance sheet and adjustments to the repurchase liability are recorded in net gains on mortgage loan origination/sales activities in “Mortgage banking” in our consolidated income statement.

loss, and is based on currently available information, significant judgment, and a number of assumptions that are subject to change. The high end of this range of reasonably possible losses exceeded our recorded liability by $180 million at September 30, 2017, and was determined based upon modifying the assumptions (particularly to assume significant changes in investor repurchase demand practices) used in our best estimate of probable loss to reflect what we believe to be the high end of reasonably possible adverse assumptions.

~~Table 8.5:Analysis of Changes in Liability for Mortgage Loan Repurchase Losses~~

Quarter ended Sep 30, Nine months ended Sep 30,
(in millions) 2017
2016
2017
2016
Balance, beginning of period $ 178
255
229
378
Assumed with MSR purchases (1) 10
—
10
—
Provision for repurchase losses:
Loan sales 6
11
20
26
Change in estimate (2) (12 ) (24 ) (65 ) (132 )
Net reductions to provision (6 ) (13 ) (45 ) (106 )
Losses (3 ) (3 ) (15 ) (33 )
Balance, end of period $ 179
239
179
239


~~(1)~~(4)	~~Represents repurchase liability associated with portfolio~~Includes net gains (losses) of ~~loans underlying mortgage servicing rights acquired during the period.~~

~~(2)~~

~~Results from changes in investor demand~~$(283) million and ~~mortgage insurer practices, credit deterioration and changes~~$(434) million in the ~~financial stability~~second quarter and first half of ~~correspondent lenders.~~2019, respectively, and $134 million and $759 million in the second quarter and first half of 2018, respectively, related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments.

Note 9:12: Intangible Assets

Table ~~9.1~~12.1 presents the gross carrying value of intangible assets and accumulated amortization.

Table ~~9.1:~~12.1:Intangible Assets


	September 30, 2017					December 31, 2016				June 30, 2019					December 31, 2018
(in millions)	Gross carrying value		Accumulated amortization		Net carrying value	Gross carrying value	Accumulated amortization		Net carrying value	Gross carrying value		Accumulated amortization		Net carrying value	Gross carrying value	Accumulated amortization		Net carrying value
Amortized intangible assets (1):
MSRs (2)	$	3,793	(2,387	)	1,406	3,595	(2,189	)	1,406	$	4,260	(2,853	)	1,407	4,161	(2,718	)	1,443
Core deposit intangibles	12,834		(11,853	)	981	12,834	(11,214	)	1,620	—		—		—	12,834	(12,834	)	—
Customer relationship and other intangibles	3,991		(3,073	)	918	3,928	(2,839	)	1,089	3,937		(3,458	)	479	3,994	(3,449	)	545
Total amortized intangible assets	$	20,618	(17,313	)	3,305	20,357	(16,242	)	4,115	$	8,197	(6,311	)	1,886	20,989	(19,001	)	1,988
Unamortized intangible assets:
MSRs (carried at fair value) (2)	$	13,338				12,959				$	12,096				14,649
Goodwill	26,581					26,693				26,415					26,418
Trademark	14					14				14					14


(1)	~~Excludes fully amortized intangible assets.~~Balances are excluded commencing in the period following full amortization.


(2)	See Note 811 (Mortgage Banking Activities) for additional information on MSRs.

Table ~~9.2~~12.2 provides the current year and estimated future amortization expense for amortized intangible assets. We based our projections of amortization expense shown below on existing

asset balances at ~~September~~June 30, ~~2017.~~2019. Future amortization expense may vary from these projections.

Table ~~9.2:~~12.2:Amortization Expense for Intangible Assets



(in millions)	Amortized MSRs		Customer relationship and other intangibles	Total
Six months ended June 30, 2019 (actual)	$	135	59	194
Estimate for the remainder of 2019	$	136	55	191
Estimate for year ended December 31,
2020	249		95	344
2021	213		81	294
2022	188		68	256
2023	159		59	218
2024	134		48	182

Note 12: Intangible Assets (continued)

(in millions) Amortized MSRs

Core deposit
intangibles

Customer
relationship
and other
intangibles (1)

Total
Nine months ended September 30, 2017 (actual) $ 198
639
235
1,072
Estimate for the remainder of 2017 $ 64
212
76
352
Estimate for year ended December 31,
2018 240
769
301
1,310
2019 212
—
116
328
2020 192
—
96
288
2021 166
—
82
248
2022 146
—
68
214


~~(1)~~	~~The~~ ~~nine months endedSeptember 30, 2017~~ ~~balance includes~~ ~~$11 million~~ ~~for lease intangible amortization.~~

Table ~~9.3~~12.3 shows the allocation of goodwill to our reportable operating segments.

Table ~~9.3:~~12.3:Goodwill



(in millions)	Community Banking			Wholesale Banking		Wealth and Investment Management		Consolidated Company
December 31, 2017	$	16,849		8,455		1,283		26,587
Reclassification of goodwill held for sale to other assets	(155		)	—		—		(155	)
Reduction in goodwill related to divested businesses and other	—			(3	)	—		(3	)
June 30, 2018 (1)	$	16,694		8,452		1,283		26,429
December 31, 2018	$	16,685		8,450		1,283		26,418
Reclassification of goodwill held for sale to other assets	—			—		(7	)	(7	)
Foreign currency translation	—			4		—		4
June 30, 2019 (1)	$	16,685		8,454		1,276		26,415

(in millions)
Community
Banking

Wholesale
Banking

Wealth and Investment Management

Consolidated
Company

December 31, 2015 $ 16,849
7,475
1,205

25,529
Reduction in goodwill related to divested businesses and other —
(84 ) (2 ) (86 )
Goodwill from business combinations —
1,245
—
1,245
September 30, 2016 $ 16,849
8,636
1,203
26,688
December 31, 2016 $ 16,849
8,585
1,259
26,693
Reclassification of goodwill held for sale to Other Assets (1) —
(116 ) —
(116 )
Reduction in goodwill related to divested businesses and other —
(20 ) —
(20 )
Goodwill from business combinations —
—
24
24
September 30, 2017 (1) $ 16,849
8,449
1,283
26,581

(1)

~~Goodwill reclassified to~~At June 30, 2018, others assets included goodwill classified as held-for-sale ~~in other assets~~ of ~~$116~~$155 million ~~for the nine months ended~~ ~~September 30, 2017~~ ~~relates~~ related to the sales ~~agreement~~agreements for ~~Wells Fargo Insurance~~Reliable Financial Services, ~~USA (and related businesses)~~Inc. and ~~Wells Fargo Shareowner Services.~~ Nothe branch divestitures announced in June 2018. At June 30, 2019, other assets included goodwill ~~was~~ classified as held-for-sale of $7 million related to the sale of our Institutional Retirement and Trust business, which was announced in ~~other assets at~~ ~~December 31, 2016~~April 2019 and ~~2015~~.

closed on July 1, 2019.

We assess goodwill for impairment at a reporting unit level, which is one level below the operating segments. See Note 1822 (Operating Segments) for further information on management reporting.

Note ~~10:~~13: Guarantees, Pledged Assets and Collateral, and Other Commitments

complete descriptions of our guarantees, see Note 1415 (Guarantees, Pledged Assets and ~~Collateral) to Financial Statements~~Collateral, and Other Commitments) in our ~~2016~~2018 Form 10-K. Table ~~10.1~~13.1 shows carrying value, maximum exposure to loss on our guarantees and the related non-investment grade amounts.

Table ~~10.1:~~13.1:Guarantees – Carrying Value and Maximum Exposure to Loss


				Maximum exposure to loss									Maximum exposure to loss
(in millions)	Carrying value of obligation (asset)			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	Carrying value of obligation (asset)			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
September 30, 2017
June 30, 2019
Standby letters of credit (1)	$	37		14,045	8,621	3,251	689	26,606	8,325	$	38		14,078	7,185	3,901	464	25,628	7,938
Securities lending and other indemnifications (2)	—			—	—	2	929	931	2	—			—	1	—	849	850	1
Written put options (3)	(407		)	15,576	11,921	4,392	1,260	33,149	19,817	(371		)	12,574	11,682	2,803	386	27,445	15,882
Loans and MHFS sold with recourse (4)	51			203	508	914	9,160	10,785	7,964
Loans and MLHFS sold with recourse (4)										53			111	634	1,205	10,597	12,547	9,318
Factoring guarantees (5)	—			775	—	—	—	775	711	—			639	—	—	—	639	558
Other guarantees	1			4	4	2	4,093	4,103	7	1			—	—	3	4,146	4,149	1
Total guarantees	$	(318	)	30,603	21,054	8,561	16,131	76,349	36,826	$	(279	)	27,402	19,502	7,912	16,442	71,258	33,698
December 31, 2016
December 31, 2018
Standby letters of credit (1)	$	38		16,050	8,727	3,194	658	28,629	9,898	$	40		14,636	7,897	3,398	497	26,428	8,027
Securities lending and other indemnifications (2)	—			—	—	1	1,166	1,167	2	—			—	1	—	1,044	1,045	1
Written put options (3)	37			10,427	10,805	4,573	1,216	27,021	15,915	(185		)	17,243	10,502	3,066	400	31,211	21,732
Loans and MHFS sold with recourse (4)	55			84	637	947	8,592	10,260	7,228
Loans and MLHFS sold with recourse (4)										54			104	653	1,207	10,163	12,127	9,079
Factoring guarantees (5)	—			1,109	—	—	—	1,109	1,109	—			889	—	—	—	889	751
Other guarantees	6			19	21	17	3,580	3,637	15	1			—	—	3	2,959	2,962	1
Total guarantees	$	136		27,689	20,190	8,732	15,212	71,823	34,167	$	(90	)	32,872	19,053	7,674	15,063	74,662	39,591

(1)

Total maximum exposure to loss includes direct pay letters of credit (DPLCs) of ~~$8.6~~$6.4 billion and ~~$9.2~~$7.5 billion at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, respectively. We issue DPLCs to provide credit enhancements for certain bond issuances. Beneficiaries (bond trustees) may draw upon these instruments to make scheduled principal and interest payments, redeem all outstanding bonds because a default event has occurred, or for other reasons as permitted by the agreement. We also originate multipurpose lending commitments under which borrowers have the option to draw on the facility in one of several forms, including as a standby letter of credit. Total maximum exposure to loss includes the portion of these facilities for which we have issued standby letters of credit under the commitments.

(2)

Includes indemnifications provided to certain third-party clearing agents. Outstanding customer obligations under these arrangements were ~~$92~~$90 million and ~~$175~~$70 million with related collateral of ~~$837~~$759 million and ~~$991~~$974 million at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, respectively. ~~Estimated maximum exposure to loss was~~ ~~$929 million~~ at ~~September 30, 2017~~ ~~and~~ ~~$1.2 billion~~ at ~~December 31, 2016~~.


(3)	Written put options, which are in the form of derivatives, are also included in the derivative disclosures in Note 1215 (Derivatives). Carrying value net asset position is a result of certain deferred premium option trades.

(4)

Represent recourse provided, predominantly to the GSEs, on loans sold under various programs and arrangements. ~~Under these arrangements, we repurchased~~ ~~$1 million~~ ~~and~~ ~~$3 million~~ ~~respectively, of loans associated with these agreements in the~~ ~~third~~ ~~quarter and~~ ~~first nine months of 2017, and~~ ~~$2 million~~ ~~and~~ ~~$4 million~~ ~~in the same periods of~~ ~~2016, respectively.~~


(5)	Consists of guarantees made under certain factoring arrangements to purchase trade receivables from third parties, generally upon their request, if receivable debtors default on their payment obligations.

“Maximum exposure to loss” and “Non-investment grade” are required disclosures under GAAP. Non-investment grade represents those guarantees on which we have a higher risk of ~~being required to perform~~performance under the terms of the guarantee. If the underlying assets under the guarantee are non-investment grade (that is, an external rating that is below investment grade or an internal credit default grade that is equivalent to a below investment grade external rating), we consider the risk of performance to be high. Internal credit default grades are determined based upon the same credit policies that we use to evaluate the risk of payment or performance when making loans and other extensions of credit. Credit quality indicators we usually consider in evaluating risk of payments or performance are described in Note 56 (Loans and Allowance for Credit Losses).

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 ~~10.1~~13.1 do not reflect economic hedges or collateral we could use to offset or recover losses we may incur under our guarantee agreements. Accordingly, this required disclosure is not an indication of expected loss. We believe the carrying value, which is either fair value for derivative-related products or the allowance for lending-related commitments, is more representative of our exposure to loss than maximum exposure to loss.

Note ~~10:~~13: Guarantees, Pledged Assets and Collateral, and Other Commitments (continued)

Pledged Assets

As part of our liquidity management strategy, we pledge various assets to secure trust and public deposits, borrowings and letters of credit from the ~~FHLB~~Federal Home Loan Bank (FHLB) and FRB, securities sold under agreements to repurchase (repurchase agreements), securities lending arrangements, and for other purposes as required or permitted by law or insurance statutory requirements. The types of collateral we pledge include securities issued by federal agencies, GSEs, domestic and foreign companies and various commercial and consumer loans. Table ~~10.2~~13.2 provides the total carrying amount of pledged assets

by asset type and the fair value of pledged ~~off-~~

~~balance~~off-balance sheet securities for securities financings. The table excludes pledged consolidated VIE assets of ~~$12.9~~$14.0 billion and ~~$13.4~~$14.1 billion at ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, respectively, which can only be used to settle the liabilities of those entities. The table also excludes ~~$1.1 billion~~$357 million and $617 million in assets pledged in transactions with ~~VIE's~~VIE’s accounted for as secured borrowings at ~~both September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, respectively. See Note 710 (Securitizations and Variable Interest Entities) for additional information on consolidated VIE assets and secured borrowings.

Table ~~10.2:~~13.2:Pledged Assets

(in millions) Sep 30,
2017
Dec 31,
2016
Trading assets and other (1) $ 100,160
84,603
Investment securities (2) 67,142
90,946
Mortgages held for sale and loans (3) 480,422
516,112
Total pledged assets $ 647,724
691,661



(in millions)	Jun 30, 2019		Dec 31, 2018
Related to trading activities:
Debt securities	$	107,673	96,616
Equity securities	10,594		9,695
Total pledged assets related to trading activities (1)	118,267		106,311
Related to non-trading activities:
Debt securities and other (2)	56,413		62,438
Mortgage loans held for sale and loans (3)	413,882		453,894
Total pledged assets related to non-trading activities	470,295		516,332
Total pledged assets	$	588,562	622,643

(1)

Consists of pledged assets related to trading ~~assets~~activities of ~~$40.1~~$45.9 billion and ~~$33.2~~$45.5 billion at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, respectively and off-balance sheet securities of ~~$60.1~~$72.3 billion and ~~$51.4~~$60.8 billion as of the same dates, respectively, that are pledged as collateral for repurchase agreements and other securities financings. Total pledged assets related to trading ~~assets~~activities includes $118.2 billion and ~~other includes~~ ~~$100.1~~$106.2 billion at June 30, 2019, and ~~$84.2 billion~~ at ~~September 30, 2017, and~~ December 31, ~~2016~~,2018, respectively, under agreements that permit the secured parties to sell or repledge the collateral.

(2)

Includes carrying value of ~~$5.0~~$3.5 billion and ~~$6.2~~$4.2 billion (fair value of ~~$5.0~~$3.5 billion and $~~6.2 billion~~)$4.1 billion) in collateral for repurchase agreements at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, respectively, which are pledged under agreements that do not permit the secured parties to sell or repledge the collateral. Also includes ~~$84~~$33 million and ~~$617~~$68 million in collateral pledged under repurchase agreements at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, respectively, that permit the secured parties to sell or repledge the collateral. ~~All~~Substantially all other pledged securities are pursuant to agreements that do not permit the secured party to sell or repledge the collateral.

(3)

Includes ~~mortgages~~mortgage loans held for sale of ~~$1.3~~$2.0 billion and ~~$15.8~~$7.4 billion at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, respectively. Substantially all of the total ~~mortgages~~mortgage loans held for sale and loans are pledged under agreements that do not permit the secured parties to sell or repledge the collateral. Amounts exclude ~~$1.3~~$551 million and $1.2 billion at June 30, 2019, and ~~$1.2 billion~~ at ~~September 30, 2017, and~~ December 31, ~~2016~~,2018, respectively, of pledged loans recorded on our balance sheet representing certain delinquent loans that are eligible for repurchase from GNMA loan securitizations.

Securities 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~~broker-dealer subsidiaries and to a lesser extent through other bank entities. Most of our securities financing activities 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.

OFFSETTING OF ~~RESALE AND REPURCHASE AGREEMENTS AND~~ SECURITIES ~~BORROWING AND LENDING AGREEMENTS~~FINANCING ACTIVITIES Table ~~10.3~~13.3 presents resale and repurchase agreements subject to master repurchase agreements (MRA) and securities borrowing and lending agreements subject to master securities lending agreements (MSLA). We account for

transactions subject to these agreements as collateralized financings, and those with a single counterparty are presented net on our balance sheet, provided certain criteria are met that permit balance sheet netting. Most 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 the balance sheet against the related liability. Collateral we received includes securities or loans and is not recognized on our 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. 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, U.S. GAAP requires disclosure in this table to limit 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 ~~10.3,~~13.3, we also have balance sheet netting related to derivatives that is disclosed in Note 1215 (Derivatives).

Table ~~10.3:~~13.3:Offsetting – ~~Resale and Repurchase Agreements~~Securities Financing Activities


(in millions)	Sep 30, 2017			Dec 31, 2016		Jun 30, 2019			Dec 31, 2018
Assets:
Resale and securities borrowing agreements
Gross amounts recognized	$	109,529		91,123		$	146,096		112,662
Gross amounts offset in consolidated balance sheet (1)	(22,954		)	(11,680	)	(15,248		)	(15,258	)
Net amounts in consolidated balance sheet (2)	86,575			79,443		130,848			97,404
Collateral not recognized in consolidated balance sheet (3)	(85,777		)	(78,837	)	(130,082		)	(96,734	)
Net amount (4)	$	798		606		$	766		670
Liabilities:
Repurchase and securities lending agreements
Gross amounts recognized (5)	$	102,281		89,111		$	116,900		106,248
Gross amounts offset in consolidated balance sheet (1)	(22,954		)	(11,680	)	(15,248		)	(15,258	)
Net amounts in consolidated balance sheet (6)	79,327			77,431		101,652			90,990
Collateral pledged but not netted in consolidated balance sheet (7)	(79,060		)	(77,184	)	(101,476		)	(90,798	)
Net amount (8)	$	267		247		$	176		192


(1)	Represents recognized amount of resale and repurchase agreements with counterparties subject to enforceable MRAs that have been offset in the consolidated balance sheet.

(2)

At ~~September 30, 2017~~,Includes $112.1 billion and ~~December 31, 2016, includes~~ ~~$66.0~~$80.1 billion ~~and~~ ~~$58.1 billion, respectively,~~ classified on our consolidated balance sheet in federal funds sold and securities purchased under resale agreements at June 30, 2019, and ~~other short-term investments~~December 31, 2018, respectively. Also includes securities purchased under long-term resale agreements (generally one year or more) classified in loans, which totaled $18.8 billion and ~~$20.6~~$17.3 billion, at June 30, 2019, and ~~$21.3 billion, respectively, in loans.~~

December 31, 2018, respectively.

(3)

Represents the fair value of collateral we have received under enforceable MRAs or MSLAs, limited for table presentation purposes to the amount of the recognized asset due from each counterparty. At ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, we have received total collateral with a fair value of ~~$120.5~~$157.4 billion and ~~$102.3~~$123.1 billion,, respectively, all of which, we have the right to sell or repledge. These amounts include securities we have sold or repledged to others with a fair value of ~~$58.4~~$73.4 billion at ~~September~~June 30, ~~2017~~,2019, and ~~$50.0~~$60.8 billion at December 31, ~~2016~~.

2018.


(4)	Represents the amount of our exposure that is not collateralized and/or is not subject to an enforceable MRA or MSLA.


(5)	For additional information on underlying collateral and contractual maturities, see the “Repurchase and Securities Lending Agreements” section in this Note.


(6)	Amount is classified in short-term borrowings on our consolidated balance sheet.

(7)

Represents the fair value of collateral we have pledged, related to enforceable MRAs or MSLAs, limited for table presentation purposes to the amount of the recognized liability owed to each counterparty. At ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, we have pledged total collateral with a fair value of ~~$104.2~~$119.6 billion and ~~$91.4~~$108.8 billion,, respectively, of which, the counterparty does not have the right to sell or repledge ~~$5.0~~$3.5 billion as of ~~September~~June 30, ~~2017~~2019 and ~~$6.6~~$4.4 billion as of December 31, ~~2016~~.

2018.


(8)	Represents the amount of our obligation that is not covered by pledged collateral and/or is not subject to an enforceable MRA or MSLA.

~~Note 10: Guarantees, Pledged Assets and Collateral (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~~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 ~~by the fact that most~~in various ways. Most of our ~~securities financing activities involve~~collateral consists of highly liquid ~~securities,~~securities. In addition, we underwrite and monitor the financial strength of our counterparties, we monitor the fair value of collateral pledged relative to contractually required repurchase amounts, and we monitor that our collateral is properly returned through the clearing and settlement process in advance of our cash repayment. Table ~~10.4~~13.4 provides the ~~underlying collateral types~~gross amounts recognized on the balance sheet (before the effects of offsetting) of our ~~gross obligations under~~liabilities for repurchase and securities lending ~~agreements.~~agreements disaggregated by underlying collateral type.

Note 13: Guarantees, Pledged Assets and Collateral, and Other Commitments (continued)

Table ~~10.4:~~13.4:Underlying Collateral Types of Gross Obligations


(in millions)	Sep 30, 2017		Dec 31, 2016	Jun 30, 2019		Dec 31, 2018
Repurchase agreements:
Securities of U.S. Treasury and federal agencies	$	44,312	34,335	$	49,622	38,408
Securities of U.S. States and political subdivisions	120		81	97		159
Federal agency mortgage-backed securities	33,456		32,669	43,346		47,241
Non-agency mortgage-backed securities	1,548		2,167	1,754		1,875
Corporate debt securities	7,381		6,829	8,132		6,191
Asset-backed securities	1,873		3,010	2,258		2,074
Equity securities	368		1,309	2,034		992
Other	1,300		1,704	866		340
Total repurchases	90,358		82,104	108,109		97,280
Securities lending:
Securities lending arrangements:
Securities of U.S. Treasury and federal agencies	134		152	198		222
Federal agency mortgage-backed securities	80		104	—		2
Non-agency mortgage-backed securities	—		1
Corporate debt securities	592		653	483		389
Equity securities (1)	11,117		6,097	8,094		8,349
Other				16		6
Total securities lending	11,923		7,007	8,791		8,968
Total repurchases and securities lending	$	102,281	89,111	$	116,900	106,248


(1)	Equity securities are generally exchange traded and either re-hypothecated under margin lending agreements or obtained through contemporaneous securities borrowing transactions with other counterparties.

Table ~~10.5~~13.5 provides the contractual maturities of our gross obligations under repurchase and securities lending agreements.

Table ~~10.5:~~13.5:Contractual Maturities of Gross Obligations


(in millions)	Overnight/continuous		Up to 30 days	30-90 days	>90 days	Total gross obligation	Overnight/continuous		Up to 30 days	30-90 days	>90 days	Total gross obligation
September 30, 2017
June 30, 2019
Repurchase agreements	$	73,953	8,212	3,898	4,295	90,358	$	96,487	3,565	3,938	4,119	108,109
Securities lending	9,765		405	1,753	—	11,923
Securities lending arrangements							8,643		—	148	—	8,791
Total repurchases and securities lending (1)	$	83,718	8,617	5,651	4,295	102,281	$	105,130	3,565	4,086	4,119	116,900
December 31, 2016
December 31, 2018
Repurchase agreements	$	60,516	9,598	6,762	5,228	82,104	$	86,574	3,244	2,153	5,309	97,280
Securities lending	5,565		167	1,275	—	7,007
Securities lending arrangements							8,669		—	299	—	8,968
Total repurchases and securities lending (1)	$	66,081	9,765	8,037	5,228	89,111	$	95,243	3,244	2,452	5,309	106,248


(1)	Securities lending is executed under agreements that allow either party to terminate the transaction without notice, while repurchase agreements have a term structure to them that technically matures at a point in time. The overnight/continuous repurchase agreements require election of both parties to roll the trade rather than the election to terminate the arrangement as in securities lending.

OTHER COMMITMENTS To meet the financing needs of our customers, we may enter into commitments to purchase debt and equity securities to provide capital for their funding, liquidity or other future needs. As of June 30, 2019, and December 31, 2018, we had commitments to purchase debt securities of $212 million and $335 million, respectively, and commitments to purchase equity securities of $2.1 billion and $2.5 billion, respectively.

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 obligations are guarantees of other members’ performance and accordingly are included in Other guarantees in Table 13.1.

Also, we have commitments to purchase securities under resale agreements from central clearing organizations. We do not have any outstanding amounts funded, and the amount of our unfunded contractual commitments was $5.1 billion and $9.8 billion as of June 30, 2019, and December 31, 2018, respectively. Given the nature of these commitments, they are

excluded from Table 6.4 (Unfunded Credit Commitments) in Note 6 (Loans and Allowance for Credit Losses).

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 guaranteed liabilities were $545 million and $5 million at June 30, 2019 and December 31, 2018, respectively. These guarantees rank on parity with all of the Parent’s other unsecured and unsubordinated indebtedness.

Note ~~11:~~14: 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. 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 or otherwise cooperate with government authorities in the conduct of investigations of other persons or industry groups.

Although there can be no assurance as to the ultimate outcome, Wells Fargo and/or our subsidiaries have generally denied, or believe we have a meritorious defense and will deny, liability in all significant legal actions pending against us, including the matters described below, and we intend to defend vigorously each case, other than matters we describe as having settled. 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. The actual costs of resolving legal actions may be substantially higher or lower than the amounts accrued for those actions.

ATM ACCESS FEE LITIGATION In October 2011, plaintiffs filed a putative class action, Mackmin, ~~et.~~et al. v. Visa, Inc. ~~et.~~et al., against Wells Fargo & Company, Wells Fargo Bank, N.A., Visa, MasterCard, and several other banks in the United States District Court for the District of Columbia. Plaintiffs allege that the Visa and MasterCard requirement that if an ATM operator charges an access fee on Visa and MasterCard transactions, then that fee cannot be greater than the access fee charged for transactions on other networks, violates antitrust rules. Plaintiffs seek treble damages, restitution, injunctive relief, and attorneys’ fees where available under federal and state law. Two other antitrust cases ~~which~~that make similar allegations were filed in the same court, but these cases did not name Wells Fargo as a defendant. On February 13, 2013, the district court granted defendants’ motions to dismiss the three actions. Plaintiffs appealed the dismissals and, on August 4, 2015, the United States Court of Appeals for the District of Columbia Circuit vacated the district court’s decisions and remanded the three cases to the district court for further proceedings. On June 28, 2016, the United States Supreme Court granted defendants’ petitions for writ of certiorari to review the decisions of the United States Court of Appeals for the District of Columbia. On November 17, 2016, the United States Supreme Court dismissed the petitions as improvidently granted, and the three cases returned to the district court for further proceedings.

AUTOMOBILE LENDING MATTERS As On April 20, 2018, the Company ~~centralizes operations in its dealer services business~~entered into consent orders with the Office of the Comptroller of the Currency (OCC) and ~~tightens controls and oversight of third-party~~the Consumer Financial Protection Bureau (CFPB) to resolve, among other things, investigations by the agencies into the Company’s compliance risk management program and its past practices involving certain automobile collateral protection insurance (CPI) policies and, as

discussed below, certain mortgage interest rate lock extensions. The consent orders require remediation to customers and the ~~Company anticipates it will identify and remediate issues related~~payment of a total of $1.0 billion in civil money penalties to ~~historical practices concerning~~ the ~~origination, servicing, and/or collection of consumer automobile loans, including related insurance products. For example, in~~agencies. In July 2017, the Company announced a plan to remediate customers who may have been

financially harmed due to issues related to automobile ~~collateral protection insurance (CPI)~~CPI policies purchased through a third-party vendor on their behalf. The Company determined that certain external vendor processes and operational controls were inadequate and, as a result, customers may have been charged premiums for CPI even if they were paying for their own vehicle insurance, as required, and in some cases the CPI premiums may have contributed to a default that led to their vehicle’s repossession. The Company discontinued the practice of placing CPI in September 2016. Multiple putative class action cases alleging, among other things, unfair and deceptive practices relating to these CPI policies, have been filed against the Company and consolidated into one multi-district litigation in the United States District Court for the Central District of California. ~~Further,~~The Company has reached an agreement in principle to resolve the multi-district litigation pursuant to which the Company has agreed to pay, consistent with its remediation obligations under the consent orders, approximately $424 million in remediation to customers with CPI policies placed between October 15, 2005, and September 30, 2016. The settlement amount is not incremental to the Company’s remediation obligations under the consent orders, but instead encompasses those obligations, including remediation payments to date. The settlement amount is subject to change as the Company finalizes its remediation activity under the consent orders. In addition, the Company has agreed to contribute $1 million to a ~~former~~common fund for the class. The district court scheduled a preliminary approval hearing for August 5, 2019. A putative class of shareholders also filed a securities fraud class action against the Company and its executive officers alleging material misstatements and omissions of CPI-related information in the Company’s public disclosures. Former team ~~member has~~members have also alleged retaliation for raising concerns regarding automobile lending practices. In addition, the Company has identified certain issues related to the unused portion of guaranteed automobile protection (GAP) waiver or insurance agreements between the customer and dealer and, by assignment, the lender, which ~~may result in refunds~~will require remediation to customers in certain states. The Company is subject to a class action lawsuit in the United States District Court for the Central District of California alleging that customers are entitled to refunds in all states. Allegations related to ~~both~~ the CPI and GAP programs are among the subjects of ~~two~~ shareholder derivative lawsuits pending in federal and state court in California. The court dismissed the state court action in September 2018, but plaintiffs filed an amended complaint in ~~California~~November 2018. The parties to the state ~~court.~~court action have entered into an agreement to resolve the action pursuant to which the Company will pay plaintiffs’ attorneys’ fees and undertake certain business and governance practices. The court granted preliminary approval of the settlement on July 12, 2019, and scheduled a final approval hearing for October 9, 2019. These and other issues related to the origination, servicing, ~~and/or~~and collection of consumer automobile loans, including related insurance products, have also subjected the Company to formal or informal inquiries, investigations, or examinations from federal and state government agencies. In December 2018, the Company entered into an agreement with all 50 state Attorneys General and the District of Columbia to resolve an investigation into the Company’s retail sales practices, CPI and GAP, and mortgage interest rate lock matters, pursuant to which the Company paid $575 million.

Note 14: Legal Actions (continued)

CONSUMER DEPOSIT ACCOUNT RELATED REGULATORY INVESTIGATION The ~~Consumer Financial Protection Bureau (the “CFPB”) has commenced~~CFPB is conducting an investigation into whether customers were unduly harmed by the Company’s ~~procedures regarding~~historical practices associated with the freezing (and, in many cases, closing) of consumer deposit accounts after the Company detected suspected fraudulent activity (by ~~third-parties~~third parties or account holders) that affected those accounts.

~~INADVERTENT CLIENT INFORMATION DISCLOSURE~~ ~~In July 2017, the Company inadvertently provided certain client information in response to~~ A former team member has brought a third-party subpoena issued in a civil litigation. The Company obtained permanent injunctions in New Jersey and New York state courts requiring the electronic data and all copies to be delivered to the New Jersey state court action alleging retaliation for raising concerns about these practices.

FIDUCIARY AND CUSTODY ACCOUNT FEE CALCULATIONS Federal government agencies are conducting formal or informal inquiries, investigations, or examinations regarding fee calculations within certain fiduciary and custody accounts in the ~~Company for safekeeping.~~Company’s investment and fiduciary services business, which is part of the wealth management business within the Wealth and Investment Management (WIM) operating segment. The Company has ~~made voluntary self-disclosure to various state and federal regulatory agencies. Notifications~~determined that there have been ~~sent~~instances of incorrect fees being applied to ~~clients whose personal identifying data was contained~~certain assets and accounts, resulting in both overcharges and undercharges to customers.

FOREIGN EXCHANGE BUSINESSFederal government agencies, including the United States Department of Justice (Department of Justice), are investigating or examining certain activities in the ~~inadvertent production.~~Company’s foreign exchange business. These matters are at varying stages. The Company has responded, and continues to respond, to requests from a number of the foregoing and has discussed the potential resolution of some of the matters. The Company is in the process of providing remediation to customers that may have received pricing inconsistent with commitments made to those customers, and rebates to customers where historic pricing, while consistent with contracts entered into with those customers, does not conform to recently implemented pricing review standards for prior periods.

INTERCHANGE LITIGATIONPlaintiffs representing a putative class of merchants have filed putative class actions, and individual merchants have filed individual actions, against Wells Fargo Bank, N.A., Wells Fargo & Company, Wachovia Bank, N.A., and Wachovia Corporation regarding the interchange fees associated with Visa and MasterCard payment card transactions. Visa, MasterCard, and several other banks and bank holding companies are also named as defendants in these actions. These actions have been consolidated in the United States District Court for the Eastern District of New York. The amended and consolidated complaint asserts claims against defendants based on alleged violations of federal and state antitrust laws and seeks damages, as well as injunctive relief. Plaintiff merchants allege that Visa, MasterCard, and payment card issuing banks unlawfully

~~Note 11: Legal Actions (continued~~)

colluded to set interchange rates. Plaintiffs also allege that enforcement of certain Visa and MasterCard rules and alleged tying and bundling of services offered to merchants are anticompetitive. Wells Fargo and Wachovia, 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 from the Interchange Litigation. On July 13, 2012, Visa, MasterCard, and the financial institution defendants, including Wells Fargo, signed a memorandum of understanding with plaintiff merchants to resolve the consolidated class action and reached a separate settlement in principle of the consolidated individual actions. The settlement payments to be made by all defendants in the consolidated class and individual actions totaled approximately $6.6 billion before reductions applicable to certain merchants opting out of the settlement. The class settlement also provided

for the distribution to class merchants of 10 basis points of default interchange across all credit rate categories for a period of eight consecutive months. The district court granted final approval of the settlement, which was appealed to the United States Court of Appeals for the Second Circuit by settlement objector merchants. Other merchants opted out of the settlement and are pursuing several individual actions. On June 30, 2016, the Second Circuit vacated the settlement agreement and reversed and remanded the consolidated action to the United States District Court for the Eastern District of New York for further proceedings. On November 23, 2016, prior class counsel filed a petition to the United States Supreme Court, seeking review of the reversal of the settlement by the Second Circuit, and the Supreme Court denied the petition on March 27, 2017. On November 30, 2016, the district court appointed lead class counsel for a damages class and an equitable relief class. The parties have entered into a settlement agreement to resolve the money damages class claims pursuant to which defendants will pay a total of approximately $6.2 billion, which includes approximately $5.3 billion of funds remaining from the 2012 settlement and $900 million in additional funding. The Company’s allocated responsibility for the additional funding is approximately $94.5 million. The court granted preliminary approval of the settlement in January 2019, and scheduled a final approval hearing for November 7, 2019. Several of the opt-out and direct action litigations were settled during the pendency of the Second Circuit appeal while others remain pending. Discovery is proceeding in the opt-out litigations and the ~~remanded~~equitable relief class ~~cases.~~case.

LOW INCOME HOUSING TAX CREDITSFederal government agencies have undertaken formal or informal inquiries or investigations regarding the manner in which the Company purchased, and negotiated the purchase of, certain federal low income housing tax credits in connection with the financing of low income housing developments.

MOBILE DEPOSIT PATENT LITIGATION The Company is a defendant in two separate cases brought by United Services Automobile Association (USAA) in the United States District Court for the Eastern District of Texas alleging claims of patent infringement regarding mobile deposit capture technology patents held by USAA. Trial in the first case is scheduled for November 2019 and trial in the second case is scheduled for January 2020.

MORTGAGE ~~BANKRUPTCY LOAN MODIFICATION LITIGATION~~ ~~Plaintiffs, representing~~INTEREST RATE LOCK MATTERS On April 20, 2018, the Company entered into consent orders with the OCC and CFPB to resolve, among other things, investigations by the agencies into the Company’s compliance risk management program and its past practices involving certain automobile CPI policies and certain mortgage interest rate lock extensions. The consent orders require remediation to customers and the payment of a ~~putative class~~total of ~~mortgage borrowers who were debtors~~$1.0 billion in ~~Chapter 13 bankruptcy cases, filed~~civil money penalties to the agencies. The Company was named in a putative class action, ~~Cotton, et al. v. Wells Fargo, et al, against Wells Fargo & Company and Wells Fargo Bank, N.A.~~filed in the United States ~~Bankruptcy~~District Court for the Western District of North Carolina on June 7, 2017. The plaintiffs allege that Wells Fargo improperly and unilaterally modified the mortgages of borrowers who were debtors in Chapter 13 bankruptcy cases. The plaintiffs allege that Wells Fargo implemented these modifications by improperly filing mortgage payment change notices in Chapter 13 bankruptcy cases, in violation of bankruptcy rules and process. The amended complaint asserts claims based on, among other things, alleged fraud, violations of bankruptcy rules and laws, and unfair and deceptive trade practices. The amended complaint seeks monetary damages, attorneys’ fees, and declaratory and injunctive relief.

~~MORTGAGE INTEREST RATE LOCK RELATED REGULATORY INVESTIGATION~~ The CFPB has commenced an investigation into the Company’s policies and procedures regarding the circumstances in which the Company required customers to pay fees for the extension of interest rate lock periods for residential mortgages. On October 4, 2017, the Company announced plans to reach out to all home lending customers who paid fees for mortgage rate lock extensions requested from September 16, 2013, through February 28, 2017, and to refund customers who believe they shouldn't have paid those fees. The Company is named in two putative class actions, filed in the United States

~~District Courts for the Central District of California and~~ the Northern District of California, alleging violations of federal and state consumer fraud statutes relating to mortgage rate lock extension fees. The Company filed a motion to dismiss and the court granted the motion. Subsequently, a putative class action was filed in the United States District Court for the District of Oregon, raising similar allegations. The Company filed a motion to dismiss this action and the court granted the motion. In addition, former team members have asserted claims, including in pending litigation, that they were terminated for raising concerns

regarding ~~these policies and procedures.~~mortgage interest rate lock extension practices. Allegations related to mortgage interest rate lock extension fees are also among the subjects of two shareholder derivative lawsuits ~~filed~~consolidated in California state court. The parties have entered into an agreement to resolve the state court action pursuant to which the Company will pay plaintiffs’ attorneys’ fees and undertake certain business and governance practices. The court granted preliminary approval of the settlement on July 12, 2019, and scheduled a final approval hearing for October 9, 2019. This matter has also subjected the Company to formal or informal inquiries, investigations or examinations from other federal and state government agencies. In December 2018, the Company entered into an agreement with all 50 state Attorneys General and the District of Columbia to resolve an investigation into the Company’s retail sales practices, CPI and GAP, and mortgage interest rate lock matters, pursuant to which the Company paid $575 million.

MORTGAGE ~~RELATED~~LOAN MODIFICATION LITIGATION Plaintiffs representing a putative class of mortgage borrowers have filed separate putative class actions, Hernandez v. Wells Fargo, et al., and Coordes v. Wells Fargo, et al., against Wells Fargo Bank, N.A. in the United States District Court for the Northern District of California and the United States District Court for the District of Washington, respectively. Plaintiffs allege that Wells Fargo improperly denied mortgage loan modifications or repayment plans to customers in the foreclosure process due to the overstatement of foreclosure attorneys’ fees that were included for purposes of determining whether a customer in the foreclosure process qualified for a mortgage loan modification or repayment plan.

MORTGAGE-RELATED REGULATORY INVESTIGATIONS Federal and state government agencies, including the ~~United States~~ Department of Justice, ~~(the “Department of Justice”), continue investigations~~have been investigating or ~~examinations of~~examining certain mortgage related activities of Wells Fargo and predecessor institutions. Wells Fargo, for itself and for predecessor institutions, has responded, ~~and~~or continues to respond, to requests from these agencies seeking information regarding the origination, underwriting, and securitization of residential mortgages, including sub-prime mortgages. These agencies have advanced theories of purported liability with respect to certain of these activities. ~~The Department of Justice and Wells Fargo continue~~An agreement, pursuant to ~~discuss~~which the ~~matter, including potential settlement of the Department of Justice's concerns; however, litigation with these agencies, including with~~Company paid $2.09 billion, was reached in August 2018 to resolve the Department of Justice ~~remains~~investigation, which related to certain 2005-2007 residential mortgage-backed securities activities. In addition, the Company reached an agreement with the Attorney General of the State of Illinois in November 2018 pursuant to which the Company paid $17 million in restitution to certain Illinois state pension funds to resolve a ~~possibility.~~claim relating to certain residential mortgage-backed securities activities. Other financial institutions have entered into similar settlements with these agencies, the nature of which related to the specific activities of those financial institutions, including the imposition of significant financial penalties and remedial actions.

OFAC RELATED INVESTIGATION The Company has self-identified an issue whereby certain foreign banks utilized a Wells Fargo software-based solution to conduct import/export trade-related financing transactions with countries and entities prohibited by the Office of Foreign Assets Control ~~(“OFAC”)~~(OFAC) of the United States Department of the Treasury. We do not believe any funds related to these transactions flowed through accounts at Wells Fargo as a result of the aforementioned conduct. The

Company has made voluntary self-disclosures to OFAC and is cooperating with an inquiry from the Department of Justice.

ORDER OF POSTING LITIGATION Plaintiffs filed a series of putative class actions against Wachovia Bank, N.A. and Wells Fargo Bank, N.A., as well as many other banks, challenging the “high to low” order in which the banks post debit card transactions to consumer deposit accounts. Most of these actions were consolidated in multi-district litigation proceedings ~~(the “MDL proceedings”)~~(MDL proceedings) in the United States District Court for the Southern District of Florida. The court in the MDL proceedings has certified a class of putative plaintiffs, and Wells Fargo moved to compel arbitration of the claims of unnamed class members. The court denied the motions to compel arbitration onin October ~~17, 2016.~~2016, and Wells Fargo ~~has~~ appealed this decision to the United States Court of Appeals for the Eleventh Circuit.

~~RMBS TRUSTEE LITIGATION~~ In ~~November 2014, a group of institutional investors (the “Institutional Investor Plaintiffs”), including funds affiliated with BlackRock, Inc.,~~May 2018, the Eleventh Circuit ruled in Wells Fargo’s favor and found that Wells Fargo had not waived its arbitration rights and remanded the case to the district court for further proceedings. Plaintiffs filed a ~~putative class action~~petition for rehearing to the Eleventh Circuit, which was denied in August 2018. Plaintiffs petitioned for certiorari from the United States ~~District~~Supreme Court, for the Southern District of New York against Wells Fargo Bank, N.A., alleging claims against the Company in its capacity as trustee for a number of residential mortgage-backed securities (RMBS) trusts (the “Federal Court Complaint”). Similar complaints have been filed against other trustees in various courts, including in the Southern District of New York, in New

~~York state court,~~ and ~~in other states, by RMBS investors. The Federal Court Complaint alleges~~ that Wells Fargo Bank, N.A., as trustee, caused losses to investors and asserts 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. Plaintiffs seek money damages in an unspecified amount, reimbursement of expenses, and equitable relief. In December 2014 and December 2015, certain other investors filed four complaints alleging similar claims against Wells Fargo Bank, N.A. in the Southern District of New York (the “Related Federal Cases”), and the various cases pending against Wells Fargo are proceeding before the same judge. On January 19, 2016, the Southern District of New York entered an order in connection with the Federal Court Complaint dismissing claims related to certain of the trusts at issue (the “Dismissed Trusts”). The Company's motion to dismiss the Federal Court Complaint and the complaints for the Related Federal Casespetition was ~~granted in part and~~ denied in ~~part in March 2017~~. In May 2017, the Company filed third-party complaints against certain investment advisors affiliated with the Institutional Investor Plaintiffs seeking contribution with respect to claims alleged in the Federal Court Complaint.

~~A complaint raising similar allegations~~January 2019. The case has returned to the ~~Federal Court Complaint was filed in May 2016 in New York state~~district court by a different plaintiff investor. In addition, the Institutional Investor Plaintiffs subsequently filed a complaint relating to the Dismissed Trusts and certain additional trusts in California state court (the “California Action”). The California Action was subsequently dismissed in September 2016. In December 2016, the Institutional Investor Plaintiffs filed a new putative class action complaint in New York state court in respect of 261 RMBS trusts, including the Dismissed Trusts, for ~~which Wells Fargo Bank, N.A. serves or served as trustee (the “State Court Action”). The Company has moved to dismiss the State Court Action.~~further proceedings.

In July 2017, certain of the plaintiffs from the State Court Action filed a civil complaint relating to Wells Fargo Bank, N.A.'s setting aside reserves for legal fees and expenses in connection with the liquidation of eleven RMBS trusts at issue in the State Court Action. The complaint seeks, among other relief, declarations that Wells Fargo Bank, N.A. is not entitled to indemnification, the advancement of funds or the taking of reserves from trust funds for legal fees and expenses it incurs in defending the claims in the State Court Action. In September 2017, one of the plaintiffs in the Related Federal Cases filed a similar complaint in the Southern District of New York seeking declaratory and injunctive relief and money damages on an individual and class action basis.

RETAIL SALES PRACTICES MATTERS Federal, state, and local government agencies, including the Department of Justice, the United States Securities and Exchange Commission (SEC), and the United States Department of ~~Labor, and~~Labor; state attorneys general, including the New York Attorney General; and prosecutors’ offices, as well as Congressional committees, have undertaken formal or informal inquiries, investigations or examinations arising out of certain retail sales practices of the Company that were the subject of settlements with the ~~Consumer Financial Protection Bureau,~~CFPB, the ~~Office of the Comptroller of the Currency~~OCC, and the Office of the Los Angeles City Attorney announced by the Company on September 8, 2016. These matters are at varying stages. The Company has responded, and

continues to respond, to requests from a number of the ~~foregoing seeking information regarding these~~foregoing. In October 2018, the Company entered into an agreement to resolve the New York Attorney General’s investigation pursuant to which the Company paid $65 million to the State of New York. In December 2018, the Company entered into an agreement with all 50 state Attorneys General and the District of Columbia to resolve an investigation into the Company’s retail sales practices, CPI and GAP, and mortgage interest rate lock matters, pursuant to which the Company paid $575 million. The Company has also engaged in preliminary and/or exploratory resolution discussions with the Department of Justice and the ~~circumstances~~SEC, although there can be no assurance as to the outcome of ~~the settlements and related matters.~~these discussions.

In addition, a number of lawsuits have also been filed by non-governmental parties seeking damages or other remedies related to these retail sales practices. First, various class plaintiffs purporting to represent consumers who allege that they received products or services without their authorization or consent have brought separate putative class actions against the Company in the United States District Court for the Northern District of California and various other jurisdictions. In April 2017, the Company entered into a settlement agreement in the first-filed action, Jabbari v. Wells Fargo Bank, N.A., to resolve claims regarding certain products or services provided without authorization or consent for the time period May 1, 2002 to April 20, 2017. Pursuant to the settlement, the Company will pay $142 million for remediation, attorneys’ fees, and settlement fund

Note 14: Legal Actions (continued)

claims administration. In the unlikely event that the $142 million settlement total is not enough to provide remediation, pay ~~attorneys'~~attorneys’ fees, pay settlement fund claims administration costs, and have at least $25 million left over to distribute to all class members, the Company will contribute additional funds to the settlement. In addition, in the unlikely event that the number of unauthorized accounts identified by settlement class members in the claims process and not disputed by the claims administrator exceeds plaintiffs’ 3.5 million account estimate, the Company will proportionately increase the $25 million reserve so that the ratio of reserve to unauthorized accounts is no less than what was implied by plaintiffs’ estimate at the time of the district court’s preliminary approval of the settlement in July 2017. AThe district court issued an order granting final approval ~~hearing has~~of the settlement on June 14, 2018. Several appeals of the district court’s order granting final approval of the settlement have been ~~scheduled~~filed with the United States Court of Appeals for the ~~first quarter of 2018.~~Ninth Circuit. Second, Wells Fargo shareholders ~~are pursuing~~brought a consolidated securities fraud class action in the United States District Court for the Northern District of California alleging certain misstatements and omissions in the Company’s disclosures related to sales practices matters. The Company entered into a settlement agreement to resolve this matter pursuant to which the Company paid $480 million. The district court issued an order granting final approval of the settlement on December 20, 2018. Third, Wells Fargo shareholders have brought numerous shareholder derivative lawsuits asserting breach of fiduciary duty claims, among others, against current and former directors and officers for their alleged involvement with and failure to detect and prevent sales practices ~~issues, which were consolidated into two separate~~issues. These actions are currently pending in the United States District Court for the Northern District of California and California state court ~~as well as two separate actions~~for coordinated proceedings. An additional lawsuit asserting similar claims pending in Delaware state ~~court.~~court has been stayed. The parties have entered into settlement agreements to resolve the shareholder derivative lawsuits pursuant to which insurance carriers will pay the Company approximately $240 million for alleged damage to the Company, and the Company will pay plaintiffs’ attorneys’ fees. Preliminary approval of the settlements has been granted, and the federal court held a final approval hearing on August 1, 2019, and the state court scheduled a final approval hearing for October 9, 2019. Fourth, ~~a range of~~multiple employment litigation ~~has~~matters have been brought against Wells Fargo, including an Employee Retirement Income Security Act (ERISA) class action in the United States District Court for the District of Minnesota ~~brought~~ on behalf of 401(k) plan ~~participants;~~participants that has been dismissed and is now on appeal; a class ~~actions pending~~action in the United States District ~~Courts~~Court for the Northern District of California ~~and Eastern District of New York~~ on behalf of ~~employees~~team members who allege that they protested sales practice misconduct and/or were terminated for not meeting sales ~~goals;~~goals that has now been dismissed, and we have entered into a framework with plaintiffs’ counsel to address individual claims that have been asserted; various wage and hour class actions brought in federal and state court in California and Pennsylvania (which have been settled), and in New Jersey ~~Florida, and Pennsylvania~~ on behalf of non-exempt branch based ~~employees~~team members alleging that sales pressure resulted in uncompensated overtime; and multiple single plaintiff Sarbanes-Oxley Act complaints and state law whistleblower actions filed with the United States Department of Labor or in various state courts alleging adverse employment actions for raising sales practice misconduct issues.

RMBS TRUSTEE LITIGATION In November 2014, a group of institutional investors (Institutional Investor Plaintiffs), including funds affiliated with BlackRock, Inc., filed a putative

class action in the United States District Court for the Southern District of New York against Wells Fargo Bank, N.A., alleging claims against the Company in its capacity as trustee for a number of residential mortgage-backed securities (RMBS) trusts (Federal Court Complaint). Similar complaints have been filed against other trustees in various courts, including in the Southern District of New York, in New York state court, and in other states, by RMBS investors. The Federal Court Complaint alleged that Wells Fargo Bank, N.A., as trustee, caused losses to investors and asserted 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. Plaintiffs sought money damages in an unspecified amount, reimbursement of expenses, and equitable relief. In December 2014 and December 2015, certain other investors filed four complaints alleging similar claims against Wells Fargo Bank, N.A. in the Southern District of New York (Related Federal Cases). In January 2016, the Southern District of New York entered an order in connection with the Federal Court Complaint dismissing claims related to certain of the trusts at issue (Dismissed Trusts). The Company’s subsequent motion to dismiss the Federal Court Complaint and the complaints for the Related Federal Cases was granted in part and denied in part in March 2017. In May 2017, the Company filed third-party complaints against certain investment advisors affiliated with the Institutional Investor Plaintiffs seeking contribution with respect to claims alleged in the Federal Court Complaint (Third-Party Claims).

In December 2016, the Institutional Investor Plaintiffs filed a new putative class action complaint in New York state court in respect of 261 RMBS trusts, including the Dismissed Trusts, for which Wells Fargo Bank, N.A. serves or served as trustee (State Court Action). A complaint raising similar allegations to those in the Federal Court Complaint was filed in May 2016 in New York state court by IKB International and IKB Deutsche Industriebank (IKB Action).

In July 2017, certain of the plaintiffs from the State Court Action filed a civil complaint relating to Wells Fargo Bank, N.A.’s setting aside reserves for legal fees and expenses in connection with the liquidation of eleven RMBS trusts at issue in the State Court Action (Declaratory Judgment Action). The complaint sought, among other relief, declarations that the Company is not entitled to indemnification, the advancement of funds, or the taking of reserves from trust funds for legal fees and expenses it incurs in defending the claims in the State Court Action.

In May 2019, the New York state court approved a settlement agreement among the Institutional Investor Plaintiffs and the Company pursuant to which, among other terms, the Company paid $43 million to resolve the Federal Court Complaint and the State Court Action. The settlement also resolved the Third Party Claims and the Declaratory Judgment Action. The settlement did not affect the Related Federal Cases or the IKB Action, which remain pending.

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. In December 2016, the Company filed a motion to dismiss the

amended complaint on the grounds that the Tribe is a necessary party and that the individual beneficiaries lack standing to bring claims. The motion was denied in June 2018. Trial is scheduled for February 2020.

WHOLESALE BANKING CONSENT ORDER INVESTIGATIONOn November 19, 2015, the Company entered into a consent order with the OCC, pursuant to which the Wholesale Banking group was required to implement customer due diligence standards that include collection of current beneficial ownership information for certain business customers. The Company is responding to inquiries from various federal government agencies regarding potentially inappropriate conduct in connection with the collection of beneficial ownership information.

OUTLOOKAs 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 potential losses in excess of the Company’s accrual for probable

~~Note 11: Legal Actions (continued~~)

and estimable losses was approximately ~~$3.3~~$3.9 billion as of ~~September~~June 30, ~~2017.~~2019. The increase in the high end of the range ~~as of September 30, 2017, remained unchanged~~ from June 30, 2017, reflecting a decrease from the $1 billion discrete litigation accrual in third quarter 2017 for the Company's existing mortgage-related regulatory investigations, offset by the possibility of increased risk inMarch 31, 2019, was due to a variety of matters, including ~~the Company's existing mortgage-related regulatory investigations.~~retail sales practices matters. 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. Wells Fargo is unable to determine whether the ultimate resolution of ~~either~~ the ~~mortgage related regulatory investigations or the~~retail sales practices matters will have a material adverse effect on its consolidated financial condition. Based on information currently available, advice of counsel, available insurance coverage, and established reserves, Wells Fargo believes that the eventual outcome of other 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.

Note 15: Derivatives (continued)

Note ~~12:~~15: 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 a qualifying hedge accounting relationship (fair value or cash flow hedge). Our remaining derivatives consist of economic hedges that do not qualify for hedge accounting, and derivatives held for customer accommodation trading or other purposes. For more information on our derivative activities, see Note 1617 (Derivatives) ~~to Financial Statements~~ in our ~~2016~~2018 Form 10-K.

Table ~~12.1~~15.1 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 the 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 interest and other payments are determined.

Table ~~12.1:~~15.1:Notional or Contractual Amounts and Fair Values of Derivatives


	September 30, 2017							December 31, 2016							June 30, 2019									December 31, 2018
	Notional or contractual amount					Fair value		Notional or contractual amount					Fair value		Notional or contractual amount							Fair value		Notional or contractual amount					Fair value
(in millions)	Notional or contractual amount		Derivative assets			Derivative liabilities			Derivative assets			Derivative liabilities			Notional or contractual amount		Derivative assets				Derivative liabilities			Notional or contractual amount	Derivative assets			Derivative liabilities
Derivatives designated as hedging instruments								Notional or contractual amount
Interest rate contracts ~~(1)~~	$	243,338	2,589			1,190		235,222		6,587			2,710		$	186,206		2,559				1,368		177,511		2,237			636
Foreign exchange contracts (1)	33,398		1,219			1,211		25,861		673			2,779		33,439			540				1,162		34,176		573			1,376
Total derivatives designated as qualifying hedging instruments			3,808			2,401				7,260			5,489					3,099				2,530				2,810			2,012
Derivatives not designated as hedging instruments
Economic hedges:
Interest rate contracts (2)	228,310		219			299		228,051		1,098			1,441		255,760			692				290		173,215		849			369
Equity contracts	10,650		640			134		7,964		545			83		17,374			1,213				658		13,920		1,362			79
Foreign exchange contracts	17,678		66			467		20,435		626			165		20,829			212				85		19,521		225			80
Credit contracts – protection purchased	123		52			—		482		102			—		220			38				—		100		27			—
Subtotal			977			900				2,371			1,689					2,155				1,033				2,463			528
Customer accommodation trading and
other derivatives:
Customer accommodation trading and other derivatives:
Interest rate contracts	6,717,492		15,533			14,144		6,018,370		57,583			61,058		11,130,569			22,302				18,979		9,162,821		15,349			15,303
Commodity contracts	66,743		1,574			1,172		65,532		3,057			2,551		72,255			1,424				1,936		66,173		1,588			2,336
Equity contracts	173,306		6,156			7,501		151,675		4,813			6,029		246,045			6,164				8,520		217,890		6,183			5,931
Foreign exchange contracts	367,266		7,487			7,128		318,999		9,595			9,798		353,918			4,803				5,021		364,982		5,916			5,657
Credit contracts – protection sold	9,754		154			219		10,483		85			389		10,507			15				80		11,741		76			182
Credit contracts – protection purchased	20,263		214			257		19,964		365			138		20,784			88				17		20,880		175			98
Other contracts	955		—			26		961		—			47
Subtotal			31,118			30,447				75,498			80,010					34,796				34,553				29,287			29,507
Total derivatives not designated as hedging instruments			32,095			31,347				77,869			81,699					36,951				35,586				31,750			30,035
Total derivatives before netting			35,903			33,748				85,129			87,188					40,050				38,116				34,560			32,047
Netting (3)			(23,323		)	(24,251	)			(70,631	)		(72,696	)				(26,888		)		(29,717	)			(23,790	)		(23,548	)
Total			$	12,580		9,497				14,498			14,492					$	13,162			8,399				10,770			8,499

(1)

~~Notional amounts presented exclude~~ ~~$500 million~~ ~~and~~ ~~$1.9 billion~~ ~~of interest rate~~The notional amount for foreign exchange contracts at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, excludes $10.0 billion and $11.2 billion, respectively, for certain derivatives that are combined for designation as a hedge on a single instrument. ~~The notional amount for foreign exchange contracts at~~ ~~September 30, 2017, and~~ ~~December 31, 2016, excludes~~ ~~$13.3 billion~~ ~~and~~ ~~$9.6 billion, respectively, for certain derivatives that are combined for designation as a hedge on a single instrument.~~


(2)	Includes economic hedge derivatives used to hedge the risk of changes in the fair value of residential MSRs, ~~MHFS,~~MLHFS, loans, derivative loan commitments and other interests held.


(3)	Represents balance sheet netting of derivative asset and liability balances, related cash collateral and portfolio level counterparty valuation adjustments. See Table ~~12.2~~15.2 for further information.

~~Note 12: Derivatives (continued~~)

Table ~~12.2~~15.2 provides information on the gross fair values of derivative assets and liabilities, the balance sheet netting adjustments and the resulting net fair value amount recorded on our balance sheet, as well as the non-cash collateral associated with such arrangements. We execute ~~largely~~substantially all of our derivative transactions under master netting arrangements and reflect all derivative balances and related cash collateral subject to enforceable master netting arrangements on a net basis within the balance sheet. The “Gross amounts recognized” column in the following table includes ~~$27.2~~$35.1 billion and ~~$28.8~~$34.9 billion of gross derivative assets and liabilities, respectively, at ~~September~~June 30, ~~2017,~~2019, and ~~$74.4~~$30.9 billion and ~~$78.4~~$28.4 billion, respectively, at December 31, ~~2016,~~2018, with counterparties subject to enforceable master netting arrangements that are carried on the balance sheet net of offsetting amounts. The remaining gross derivative assets and liabilities of ~~$8.7~~$5.0 billion and ~~$4.9~~$3.2 billion, respectively, at ~~September~~June 30, ~~2017,~~2019, and ~~$10.7~~$3.7 billion and ~~$8.7~~$3.6 billion, respectively, at December 31, ~~2016,~~2018, include those with counterparties subject to master netting arrangements for which we have not assessed the enforceability because they are with counterparties where we do not currently have positions to offset, those subject to master netting arrangements where we have not been able to confirm the enforceability and those not subject to master netting arrangements. As such, we do not net derivative balances or collateral within the balance sheet for these counterparties.

We determine the balance sheet netting adjustments based on the terms specified within each master netting arrangement. We disclose the balance sheet netting amounts within the column titled “Gross amounts offset in consolidated balance sheet.” Balance sheet netting adjustments are determined at the counterparty level for which there may be multiple contract types. For disclosure purposes, we allocate these netting adjustments to the contract type for each counterparty proportionally based upon the “Gross amounts recognized” by counterparty. As a result, the net amounts disclosed by contract type may not represent the actual exposure upon settlement of the contracts.

We do not net non-cash collateral that we receive and pledge on the balance sheet. For disclosure purposes, we present the fair value of this non-cash collateral in the column titled “Gross amounts not offset in consolidated balance sheet (Disclosure-only netting)” within the table. We determine and allocate the Disclosure-only netting amounts in the same manner as balance sheet netting amounts.

The “Net amounts” column within Table ~~12.2~~15.2 represents the aggregate of our net exposure to each counterparty after considering the balance sheet and Disclosure-only netting adjustments. 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. Derivative contracts executed in over-the-counter markets include bilateral contractual arrangements that are not cleared through a central clearing organization but are typically subject to master netting arrangements. The percentage of our bilateral derivative transactions outstanding at period end in such markets, based on gross fair value, is provided within the following table. Other derivative contracts executed in over-the-counter or exchange-traded markets are settled through a central clearing organization and are excluded from this percentage. 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 1013 (Guarantees, Pledged Assets and ~~Collateral)~~Collateral, and Other Commitments).

Note 15: Derivatives (continued)

Table ~~12.2:~~15.2:Gross Fair Values of Derivative Assets and Liabilities


(in millions)	Gross amounts recognized (1)		Gross amounts offset in consolidated balance sheet (1)(2)		Net amounts in consolidated balance sheet	Gross amounts not offset in consolidated balance sheet (Disclosure-only netting) (3)		Net amounts	Percent exchanged in over-the-counter market (1)(4)		Gross amounts recognized		Gross amounts offset in consolidated balance sheet (1)		Net amounts in consolidated balance sheet	Gross amounts not offset in consolidated balance sheet (Disclosure-only netting) (2)		Net amounts	Percent exchanged in over-the-counter market (3)
September 30, 2017
June 30, 2019
Derivative assets
Interest rate contracts	$	18,341	(11,991	)	6,350	(313	)	6,037	99	%	$	25,553	(16,558	)	8,995	(313	)	8,682	95	%
Commodity contracts	1,574		(672	)	902	(5	)	897	83		1,424		(951	)	473	(1	)	472	73
Equity contracts	6,796		(4,149	)	2,647	(473	)	2,174	75		7,377		(5,041	)	2,336	(34	)	2,302	71
Foreign exchange contracts	8,772		(6,306	)	2,466	(63	)	2,403	100		5,555		(4,250	)	1,305	(8	)	1,297	100
Credit contracts – protection sold	154		(14	)	140	—		140	10		15		(9	)	6	—		6	74
Credit contracts – protection purchased	266		(191	)	75	(1	)	74	94		126		(79	)	47	(1	)	46	99
Total derivative assets	$	35,903	(23,323	)	12,580	(855	)	11,725			$	40,050	(26,888	)	13,162	(357	)	12,805
Derivative liabilities
Interest rate contracts	$	15,633	(12,932	)	2,701	(1,567	)	1,134	99	%	$	20,637	(18,046	)	2,591	(848	)	1,743	95	%
Commodity contracts	1,172		(361	)	811	(13	)	798	80		1,936		(738	)	1,198	—		1,198	81
Equity contracts	7,635		(3,708	)	3,927	(365	)	3,562	85		9,178		(5,934	)	3,244	(214	)	3,030	84
Foreign exchange contracts	8,806		(7,049	)	1,757	(429	)	1,328	100		6,268		(4,918	)	1,350	(197	)	1,153	100
Credit contracts – protection sold	219		(196	)	23	(17	)	6	89		80		(75	)	5	(3	)	2	99
Credit contracts – protection purchased	257		(5	)	252	—		252	7		17		(6	)	11	—		11	98
Other contracts	26		—		26	—		26	100
Total derivative liabilities	$	33,748	(24,251	)	9,497	(2,391	)	7,106			$	38,116	(29,717	)	8,399	(1,262	)	7,137
December 31, 2016
December 31, 2018
Derivative assets
Interest rate contracts	$	65,268	(59,880	)	5,388	(987	)	4,401	34	%	$	18,435	(12,029	)	6,406	(80	)	6,326	90	%
Commodity contracts	3,057		(707	)	2,350	(30	)	2,320	74		1,588		(849	)	739	(4	)	735	57
Equity contracts	5,358		(3,018	)	2,340	(365	)	1,975	75		7,545		(5,318	)	2,227	(755	)	1,472	78
Foreign exchange contracts	10,894		(6,663	)	4,231	(362	)	3,869	97		6,714		(5,355	)	1,359	(35	)	1,324	100
Credit contracts – protection sold	85		(48	)	37	—		37	61		76		(73	)	3	—		3	12
Credit contracts – protection purchased	467		(315	)	152	(1	)	151	98		202		(166	)	36	(1	)	35	78
Total derivative assets	$	85,129	(70,631	)	14,498	(1,745	)	12,753			$	34,560	(23,790	)	10,770	(875	)	9,895
Derivative liabilities
Interest rate contracts	$	65,209	(58,956	)	6,253	(3,129	)	3,124	30	%	$	16,308	(13,152	)	3,156	(567	)	2,589	92	%
Commodity contracts	2,551		(402	)	2,149	(37	)	2,112	38		2,336		(727	)	1,609	(8	)	1,601	85
Equity contracts	6,112		(2,433	)	3,679	(331	)	3,348	85		6,010		(3,877	)	2,133	(110	)	2,023	75
Foreign exchange contracts	12,742		(10,572	)	2,170	(251	)	1,919	100		7,113		(5,522	)	1,591	(188	)	1,403	100
Credit contracts – protection sold	389		(295	)	94	(44	)	50	98		182		(180	)	2	(2	)	—	67
Credit contracts – protection purchased	138		(38	)	100	(2	)	98	50		98		(90	)	8	—		8	11
Other contracts	47		—		47	—		47	100
Total derivative liabilities	$	87,188	(72,696	)	14,492	(3,794	)	10,698			$	32,047	(23,548	)	8,499	(875	)	7,624

(1)

In~~second quarter,2017, we adopted Settlement to Market treatment for the cash collateralizing our interest rate derivative contracts with certain centrally cleared counterparties.~~As a result of this adoption, the “gross amounts recognized” and “gross amounts offset in the consolidated balance sheet” columns do not include exposure with certain centrally cleared counterparties because the contracts are considered settled by the collateral. Likewise, what remains in these gross amount columns consists primarily of over-the-counter (OTC) market contracts for most of the contract types as reflected by the high percentage of OTC contracts in the “percent exchanged in over-the counter market” column as of September 30, 2017.

~~(2)~~

Represents amounts with counterparties subject to enforceable master netting arrangements that have been offset in the consolidated balance sheet, including related cash collateral and portfolio level counterparty valuation adjustments. Counterparty valuation adjustments were ~~$273~~$301 million and ~~$348~~$353 million related to derivative assets and ~~$98~~$92 million and ~~$114~~$152 million related to derivative liabilities at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, respectively. Cash collateral totaled ~~$3.1~~$3.6 billion and ~~$4.2~~$6.6 billion,, netted against derivative assets and liabilities, respectively, at ~~September~~June 30, ~~2017~~,2019, and ~~$4.8~~$3.7 billion and ~~$7.1~~$3.6 billion,, respectively, at December 31, ~~2016~~.

2018.


~~(3)~~(2)	Represents the fair value of non-cash collateral pledged and received against derivative assets and liabilities with the same counterparty that are subject to enforceable master netting arrangements. U.S. GAAP does not permit netting of such non-cash collateral balances in the consolidated balance sheet but requires disclosure of these amounts.

~~(4)~~(3)

~~Represents derivatives executed in over-the-counter markets that are not settled through a central clearing organization.~~ Over-the-counter percentages are calculated based on gross amounts recognized as of the respective balance sheet date. ~~The remaining percentage represents derivatives settled through a central clearing organization, which are executed in either over-the-counter or exchange-traded markets.~~

~~Note 12: Derivatives (continued~~)

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. In addition, we use ~~derivatives~~interest rate swaps, cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge against changes in fair value of certain ~~financial instruments, including~~investments in available-for-sale debt securities ~~mortgages~~due to changes in interest rates, foreign currency rates, or both. We also use interest rate swaps to hedge

against changes in fair value for certain mortgage loans held for ~~sale,~~sale.

For cash flow hedges, we use interest rate swaps to hedge the variability in interest payments received on certain floating-rate commercial loans and ~~long-term debt.~~paid on certain floating-rate debt due to changes in the contractually specified interest rate.

We estimate $247 million pre-tax of deferred net losses related to cash flow hedges in OCI at June 30, 2019, will be reclassified into net interest income during the next twelve months. The deferred losses expected to be reclassified into net interest income are predominantly related to discontinued hedges of floating rate loans. For cash flow hedges as of June 30, 2019, we are hedging the variability of future cash flows for a maximum of 7 years. For more information on ~~fair value~~ our accounting

hedges, see Note 1 (Summary of Significant Accounting Policies) and Note 16 (Derivatives) ~~to Financial Statements~~ in our ~~2016~~2018 Form 10-K.

Table ~~12.3~~15.3 shows the net gains (losses) ~~recognized in the income statement~~ related to derivatives in fair value and cash flow hedging relationships.

Table ~~12.3:Derivatives~~15.3:Gains (Losses) Recognized in Consolidated Statement of Income on Fair Value and Cash Flow Hedging Relationships



	Net interest income											Noninterest income
(in millions)	Debt securities			Loans		Mortgage loans held for sale		Deposits		Long-term debt		Other		Total
Quarter ended June 30, 2019
Total amounts presented in the consolidated statement of income	$	3,781		11,316		195		(2,213	)	(1,900	)	744		11,923

Gains (losses) on fair value hedging relationships
Interest contracts
Amounts related to interest settlements on derivatives (1)	14			—		—		(7	)	7		—		14
Recognized on derivatives	(1,089		)	—		(25	)	351		2,947		—		2,184
Recognized on hedged items	1,096			—		24		(343	)	(2,890	)	—		(2,113	)
Foreign exchange contracts
Amounts related to interest settlements on derivatives (1)(2)	10			—		—		—		(128	)	—		(118	)
Recognized on derivatives (3)	(5		)	—		—		—		205		326		526
Recognized on hedged items	4			—		—		—		(186	)	(315	)	(497	)
Net income (expense) recognized on fair value hedges	30			—		(1	)	1		(45	)	11		(4	)

Gains (losses) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from cumulative OCI into net income (4)	—			(77	)	—		—		1		—		(76	)
Foreign exchange contracts
Realized gains (losses) (pre-tax) reclassified from cumulative OCI into net income (4)	$	—		—		—		—		(3	)	—		(3	)
Net income (expense) recognized on cash flow hedges	$	—		(77	)	—		—		(2	)	—		(79	)
Six months ended June 30, 2019
Total amounts presented in the consolidated statement of income	$	7,722		22,670		347		(4,239	)	(3,827	)	1,318		23,991

Gains (losses) on fair value hedging relationships:
Interest contracts
Amounts related to interest settlements on derivatives (1)	30			—		—		(30	)	—		—		—
Recognized on derivatives	(1,903		)	—		(33	)	558		4,933		—		3,555
Recognized on hedged items	1,913			—		31		(533	)	(4,837	)	—		(3,426	)
Foreign exchange contracts
Amounts related to interest settlements on derivatives (1)(2)	20			—		—		—		(270	)	—		(250	)
Recognized on derivatives (3)	(9		)	—		—		—		497		(76	)	412
Recognized on hedged items	9			—		—		—		(452	)	76		(367	)
Net income (expense) recognized on fair value hedges	60			—		(2	)	(5	)	(129	)	—		(76	)

Gains (losses) on cash flow hedging relationships:
Interest contracts
Realized gains (losses) (pre-tax) reclassified from cumulative OCI into net income (4)	—			(155	)	—		—		1		—		(154	)
Foreign exchange contracts
Realized gains (losses) (pre-tax) reclassified from cumulative OCI into net income (4)	—			—		—		—		(4	)	—		(4	)
Net income (expense) recognized on cash flow hedges	$	—		(155	)	—		—		(3	)	—		(158	)

(continued on following page)

Note 15: Derivatives (continued)

Interest rate
contracts hedging:

Foreign exchange
contracts hedging:

Total net
gains
(losses)
on fair
value
hedges

(in millions)
Available-
for-sale
securities

Mortgages
held for
sale

Long-term
debt

Available-
for-sale
securities

Long-term
debt

Quarter ended September 30, 2017





Net interest income (expense) recognized on derivatives $ (110 ) (1 ) 271
4
(60 ) 104
Gains (losses) recorded in noninterest income

Recognized on derivatives (6 ) —
(161 ) (87 ) 996
742
Recognized on hedged item (6 ) (2 ) 173
86
(878 ) (627 )
Net recognized on fair value hedges (ineffective portion) (1) $ (12 ) (2 ) 12
(1 ) 118
115
Quarter ended September 30, 2016





Net interest income (expense) recognized on derivatives $ (117 ) (1 ) 471
2
9
364
Gains (losses) recorded in noninterest income




Recognized on derivatives 21
6
(271 ) 30
312
98
Recognized on hedged item (10 ) (7 ) 354
(32 ) (234 ) 71
Net recognized on fair value hedges (ineffective portion) (1) $ 11
(1 ) 83
(2 ) 78
169
Nine months ended September 30, 2017





Net interest income (expense) recognized on derivatives (1) $ (363 ) (5 ) 1,070
10
(142 ) 570
Gains (losses) recorded in noninterest income

Recognized on derivatives (167 ) (11 ) (294 ) (216 ) 2,579
1,891
Recognized on hedged item 121
4
314
216
(2,554 ) (1,899 )
Net recognized on fair value hedges (ineffective portion) $ (46 )
(7 )
20

—

25
(8 )
Nine months ended September 30, 2016





Net interest income (expense) recognized on derivatives (1) $ (468 ) (5 ) 1,436
4
40
1,007
Gains (losses) recorded in noninterest income




Recognized on derivatives (2,674 ) (36 ) 4,815
98
1,475
3,678
Recognized on hedged item 2,699
32
(4,215 ) (106 ) (1,242 ) (2,832 )
Net recognized on fair value hedges (ineffective portion) $ 25
(4 ) 600
(8 ) 233
846



(continued from previous page)
	Net interest income											Noninterest income
(in millions)	Debt securities			Loans		Mortgage loans held for sale		Deposits		Long-term debt		Other		Total
Quarter ended June 30, 2018
Total amounts presented in the consolidated statement of income	$	3,594		10,912		198		(1,268	)	(1,658	)	485		12,263

Gains (losses) on fair value hedging relationships:
Interest contracts
Amounts related to interest settlements on derivatives (1)	(42		)	—		(1	)	(20	)	81		—		18
Recognized on derivatives	356			—		5		(41	)	(819	)	—		(499	)
Recognized on hedged items	(352		)	—		(7	)	31		780		—		452
Foreign exchange contracts
Amounts related to interest settlements on derivatives (1)(2)	10			—		—		—		(102	)	—		(92	)
Recognized on derivatives (3)	2			—		—		—		97		(1,410	)	(1,311	)
Recognized on hedged items	1			—		—		—		(82	)	1,308		1,227
Net income (expense) recognized on fair value hedges	(25		)	—		(3	)	(30	)	(45	)	(102	)	(205	)

Gains (losses) on cash flow hedging relationships:
Interest contracts
Realized gains (losses) (pre-tax) reclassified from cumulative OCI into net income (4)	—			(77	)	—		—		—		—		(77	)
Foreign exchange contracts
Realized gains (losses) (pre-tax) reclassified from cumulative OCI into net income (4)	—			—		—		—		—		—		—
Net income (expense) recognized on cash flow hedges	$	—		(77	)	—		—		—		—		(77	)
Six months ended June 30, 2018
Total amounts presented in the consolidated statement of income	$	7,008		21,491		377		(2,358	)	(3,234	)	1,087		24,371

Gains (losses) on fair value hedging relationships:
Interest contracts
Amounts related to interest settlements on derivatives (1)	(124		)	—		(2	)	(25	)	252		—		101
Recognized on derivatives	1,306			1		11		(190	)	(3,212	)	—		(2,084	)
Recognized on hedged items	(1,320		)	(1	)	(15	)	172		3,114		—		1,950
Foreign exchange contracts
Amounts related to interest settlements on derivatives (1)(2)	15			—		—		—		(182	)	—		(167	)
Recognized on derivatives (3)	6			—		—		—		(74	)	(750	)	(818	)
Recognized on hedged items	(2		)	—		—		—		27		681		706
Net income (expense) recognized on fair value hedges	(119		)	—		(6	)	(43	)	(75	)	(69	)	(312	)

Gains (losses) on cash flow hedging relationships:
Interest contracts
Realized gains (losses) (pre-tax) reclassified from cumulative OCI into net income (4)	—			(137	)	—		—		—		—		(137	)
Foreign exchange contracts
Realized gains (losses) (pre-tax) reclassified from cumulative OCI into net income (4)	—			—		—		—		—		—		—
Net income (expense) recognized on cash flow hedges	$	—		(137	)	—		—		—		—		(137	)


(1)	Includes changes in fair value due to the passage of time associated with the non-zero fair value amount at hedge inception.

(2)

The ~~third~~second quarter and first ~~nine months~~half of ~~2017~~2019 included ~~$(1)~~$7 million and ~~$(2)~~$14 million,, respectively, and the ~~third~~second quarter and first ~~nine months~~half of ~~2016~~2018 both included ~~$(3)~~$2 million ~~and~~ ~~$(10) million, respectively,~~ of the time value component recognized as net interest income (expense) on forward derivatives hedging foreign currency debt securities and long-term debt that were excluded from the assessment of hedge effectiveness.


(3)	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. See Note 21 (Other Comprehensive Income) for the amounts recognized in other comprehensive income.


(4)	See Note 21 (Other Comprehensive Income) for details of amounts reclassified to net income.

~~Cash Flow Hedges~~

~~We use derivatives~~Table 15.4 shows the carrying amount and associated cumulative basis adjustment related to the application of hedge ~~certain financial instruments against future interest rate increases and to limit the variability of cash flows on certain financial instruments due to changes~~accounting that is included in the ~~benchmark interest rate. For more information on cash flow hedges, see Note 1 (Summary~~carrying amount of ~~Significant Accounting Policies)~~hedged assets and ~~Note 16 (Derivatives) to Financial Statements~~liabilities in ~~our 2016 Form 10-K.~~

~~Based upon current interest rates, we estimate that $224 million (pre tax) of deferred net gains on derivatives in OCI~~fair value hedging relationships.

at September 30, 2017, will be reclassified into net interest income during the next twelve months. Future changes to interest rates may significantly change actual amounts reclassified to earnings. We are hedging our exposure to the variability of future cash flows for all forecasted transactions for a maximum of 5 years.

~~Table 12.4 shows the net gains (losses) recognized related to derivatives in cash flow hedging relationships.~~

Table ~~12.4:Derivatives~~15.4:Hedged Items in ~~Cash Flow~~Fair Value Hedging ~~Relationships~~Relationship

Quarter ended Sep 30, Nine months ended Sep 30,
(in millions) 2017
2016
2017
2016
Gains (losses) (pre tax) recognized in OCI on derivatives $ 36
(445 ) 279
2,611
Gains (pre tax) reclassified from cumulative OCI into net income (1) 105
262
460
783
Gains (losses) (pre tax) recognized in noninterest income for hedge ineffectiveness (2) (4 ) —
(7 ) 1



	Hedged Items Currently Designated					Hedged Items No Longer Designated (1)
(in millions)	Carrying Amount of Assets/(Liabilities) (2)(4)			Hedge Accounting Basis Adjustment Assets/(Liabilities) (3)		Carrying Amount of Assets/(Liabilities) (4)		Hedge Accounting Basis Adjustment Assets/(Liabilities)
June 30, 2019
Available-for-sale debt securities (5)	$	39,478		1,226		5,704		110
Mortgage loans held for sale	852			16		388		4
Deposits	(56,584		)	(425	)	—		—
Long-term debt	(115,922		)	(5,999	)	(25,638	)	270
December 31, 2018
Available-for-sale debt securities (5)	37,857			(157	)	4,938		238
Mortgage loans held for sale	448			7		—		—
Deposits	(56,535		)	115		—		—
Long-term debt	(104,341		)	(742	)	(25,539	)	366


(1)	~~See Note 17 (Other Comprehensive Income)~~Represents hedged items no longer designated in qualifying fair value hedging relationships for ~~detail on components of net income.~~which an associated basis adjustment exists at the balance sheet date.


(2)	~~None~~Does not include the carrying amount of hedged items where only foreign currency risk is the designated hedged risk. The carrying amount excluded $1.5 billion for debt securities and $(5.7) billion for long-term debt as of June 30, 2019, and $1.6 billion for debt securities and $(6.3) billion for long-term debt as of December 31, 2018.


(3)	The balance includes $828 million and $99 million of debt securities and long-term debt cumulative basis adjustments, respectively, as of June 30, 2019, and $1.4 billion and $66 million of debt securities and long-term debt cumulative basis adjustments,respectively, as of December 31, 2018, on terminated hedges whereby the hedged items have subsequently been re-designated into existing hedges.


(4)	Represents the full carrying amount of the ~~change in value~~hedged asset or liability item as of the ~~derivatives~~balance sheet date, except for circumstances in which only a portion of the asset or liability was ~~excluded from~~designated as the ~~assessment of hedge effectiveness.~~ hedged item in which case only the portion designated is presented.


(5)	Carrying amount represents the amortized cost.

Derivatives Not Designated as Hedging Instruments

We use economic ~~hedges primarily~~hedge derivatives to hedge the risk of changes in the fair value of certain residential ~~MHFS,~~MLHFS, residential MSRs measured at fair value, ~~loans,~~ derivative loan commitments and other interests held. We also use economic hedge derivatives to mitigate the periodic earnings volatility caused by ~~ineffectiveness~~mismatches between the changes in fair value of the hedged item and hedging instrument recognized on our fair value accounting hedges. The resulting gain or loss on these economic hedge derivatives is reflected in mortgage banking noninterest income, net gains (losses) from equity investments and other noninterest income.

The derivatives used to hedge MSRs measured at fair value, resulted in net derivative gains (losses) of ~~$240 million~~$1.2 billion and ~~$599 million~~$2.1 billion in the ~~third~~second quarter and first ~~nine months~~half of ~~2017,~~2019, respectively, and ~~$142~~$(319) million and ~~$2.6~~$(1.5) billion in the ~~third~~second quarter and first ~~nine months~~half of ~~2016,~~2018, respectively, which are included in mortgage banking noninterest income. The aggregate fair value of these derivatives was a net ~~liability~~asset of $9$602 million at ~~September~~June 30, ~~2017,~~2019, and net ~~liability~~asset of ~~$617~~$757 million at

December 31, ~~2016.~~2018. The change in fair value of these derivatives for each period end is due to changes in the underlying market indices and interest rates as well as the purchase and sale of derivative financial instruments throughout the period as part of our dynamic MSR risk management process.

~~Interest rate lock~~

Loan commitments for mortgage loans that we intend to sell are considered derivatives. The aggregate fair value of derivative loan commitments on the balance sheet was a net ~~asset~~positive fair value of ~~$25 million and net liability of $6~~$94 million at ~~September~~June 30, ~~2017,~~2019 and a net positive fair value of $60 million at December 31, ~~2016, respectively,~~2018, and is included in the caption “Interest rate contracts” under “Customer accommodation trading and other derivatives” in Table ~~12.1~~15.1 in this Note.

For more information on economic hedges and other derivatives, see Note 16 (Derivatives) to Financial Statements in our ~~2016~~2018 Form 10-K. Table ~~12.5~~15.5 shows the net gains (losses) recognized ~~in the~~by income statement lines, related to derivatives not designated as hedging instruments.

Note 15: Derivatives (continued)

Table ~~12.5:~~15.5:Gains (Losses) on Derivatives Not Designated as Hedging Instruments

Quarter ended Sep 30, Nine months ended Sep 30,
(in millions) 2017
2016
2017
2016
Net gains (losses) recognized on economic hedges derivatives:
Interest rate contracts
Recognized in noninterest income:

Mortgage banking (1) $ 138
4
480
1,435
Other (2) (19 ) (56 ) (64 ) (308 )
Equity contracts (3) (489 ) (372 ) (1,175 ) (84 )
Foreign exchange contracts (2) (300 ) 175
(834 ) 504
Credit contracts (2) (6 ) 12
8
12
Subtotal (4) (676 ) (237 ) (1,585 ) 1,559
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest rate contracts
Recognized in noninterest income:

Mortgage banking (5) 152
510
599
1,485
Other (6) 17
210
80
(520 )
Commodity contracts (6) 63
45
138
162
Equity contracts (6) (851 ) (982 ) (2,525 ) (1,277 )
Foreign exchange contracts (6) 155
188
356
686
Credit contracts (6) (31 ) (25 ) (59 ) (66 )
Other (2) 8
15
22
(15 )
Subtotal (487 ) (39 ) (1,389 ) 455
Net gains (losses) recognized related to derivatives not designated as hedging instruments $ (1,163 ) (276 ) (2,974 ) 2,014



	Noninterest income
(in millions)	Mortgage banking		Net gains (losses) from equity securities		Net gains (losses) from trading activities		Other		Total
Quarter ended June 30, 2019
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	872	—		—		2		874
Equity contracts	—		(658	)	—		(7	)	(665	)
Foreign exchange contracts	—		—		—		164		164
Credit contracts	—		—		—		(5	)	(5	)
Subtotal (2)	872		(658	)	—		154		368
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts (3)	179		—		(222	)	—		(43	)
Commodity contracts	—		—		27		—		27
Equity contracts	—		—		(1,110	)	(133	)	(1,243	)
Foreign exchange contracts	—		—		(83	)	—		(83	)
Credit contracts	—		—		(16	)	—		(16	)
Subtotal	179		—		(1,404	)	(133	)	(1,358	)
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	1,051	(658	)	(1,404	)	21		(990	)
Six months ended June 30, 2019
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	1,683	—		—		7		1,690
Equity contracts	—		(1,543	)	—		—		(1,543	)
Foreign exchange contracts	—		—		—		140		140
Credit contracts	—		—		—		10		10
Subtotal (2)	1,683		(1,543	)	—		157		297
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts (3)	297		—		(506	)	—		(209	)
Commodity contracts	—		—		78		—		78
Equity contracts	—		—		(3,259	)	(406	)	(3,665	)
Foreign exchange contracts	—		—		(69	)	—		(69	)
Credit contracts	—		—		(60	)	—		(60	)
Subtotal	297		—		(3,816	)	(406	)	(3,925	)
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	1,980	(1,543	)	(3,816	)	(249	)	(3,628	)

(continued on following page)



(continued from previous page)
	Noninterest income
(in millions)	Mortgage banking			Net gains (losses) from equity securities		Net gains (losses) from trading activities		Other		Total
Quarter ended June 30, 2018
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	(185	)	—		—		(3	)	(188	)
Equity contracts	—			(540	)	—		5		(535	)
Foreign exchange contracts	—			—		—		486		486
Credit contracts	—			—		—		(10	)	(10	)
Subtotal (2)	(185		)	(540	)	—		478		(247	)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts (3)	(46		)	—		182		—		136
Commodity contracts	—			—		35		—		35
Equity contracts	—			—		655		(71	)	584
Foreign exchange contracts	—			—		91		—		91
Credit contracts	—			—		(4	)	—		(4	)
Subtotal	(46		)	—		959		(71	)	842
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	(231	)	(540	)	959		407		595
Six months ended June 30, 2018
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	(780	)	—		—		6		(774	)
Equity contracts	—			(598	)	—		5		(593	)
Foreign exchange contracts	—			—		—		327		327
Credit contracts	—			—		—		(6	)	(6	)
Subtotal (2)	(780		)	(598	)	—		332		(1,046	)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts (3)	(305		)	—		567		—		262
Commodity contracts	—			—		74		—		74
Equity contracts	—			—		1,114		(266	)	848
Foreign exchange contracts	—			—		401		—		401
Credit contracts	—			—		6		—		6
Subtotal	(305		)	—		2,162		(266	)	1,591
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	(1,085	)	(598	)	2,162		66		545

(1)

~~Reflected in mortgage~~Mortgage banking ~~noninterest income including~~amounts for the second quarter and first half of 2019 are comprised of gains (losses) ~~on the~~of $1.2 billion and $2.1 billion, respectively, related to derivatives used as economic hedges of MSRs measured at fair value ~~interest rate lock commitments~~offset by gains (losses) of $(283) million and ~~mortgages~~$(434) million related to derivatives used as economic hedges of mortgage loans held for ~~sale.~~sale and derivative loan commitments. The corresponding amounts for the second quarter and first half of 2018 are comprised of gains (losses) of $(319) million and $(1.5) billion offset by gains (losses) of $134 million and $759 million, respectively.


(2)	~~Included in other noninterest income.~~Includes hedging gains (losses) of $(18) million and $(36) million for the second quarter and first half of 2019, respectively, and $8 million and $36 million for the second quarter and first half of 2018, respectively, which partially offset hedge accounting ineffectiveness.


(3)	~~Included in net gains from equity investments and other noninterest income.~~


~~(4)~~	~~Includes hedging gains (losses) of~~ ~~$(18) million~~ ~~and~~ ~~$(64) million~~ ~~for the third quarter and first nine months of 2017, respectively, and~~ ~~$(29) million~~ ~~and~~ ~~$(272) million~~ ~~for the third quarter and first nine months of~~ ~~2016, respectively, which partially offset hedge accounting ineffectiveness.~~


~~(5)~~	~~Reflected~~Amounts presented in mortgage banking noninterest income ~~including~~are gains (losses) on ~~interest rate lock commitments and net gains from trading activities in noninterest income.~~


~~(6)~~	~~Included in net gains from trading activities in noninterest income.~~derivative loan commitments.

Note ~~12:~~15: 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 use credit derivatives to assist customers with their risk management objectives. We may also use credit derivatives in structured product transactions or liquidity agreements written to special purpose vehicles. The maximum exposure of sold credit derivatives is managed through posted collateral, purchased credit derivatives and similar products in order to achieve our desired credit risk profile. This credit risk management provides

an ability to recover a significant portion of any amounts that would be paid under the sold credit derivatives. We would be

required to perform under sold credit derivatives 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. In certain cases, other triggers may exist, such as the credit downgrade of the referenced obligors or the inability of the special purpose vehicle for which we have provided liquidity to obtain funding.

Table ~~12.6~~15.6 provides details of sold and purchased credit derivatives.

Table ~~12.6:~~15.6:Sold and Purchased Credit Derivatives


			Notional amount								Notional amount
(in millions)	Fair value liability		Protection sold (A)	Protection sold – non- investment grade	Protection purchased with identical underlyings (B)	Net protection sold (A) - (B)	Other protection purchased	Range of maturities	Fair value liability		Protection sold (A)	Protection sold – non- investment grade	Protection purchased with identical underlyings (B)	Net protection sold (A) - (B)	Other protection purchased	Range of maturities
September 30, 2017
June 30, 2019
Credit default swaps on:
Corporate bonds	$	26	1,932	535	1,255	677	1,379	2017 - 2027	$	1	1,995	472	1,362	633	2,021	2019 - 2029
Structured products	91		210	205	184	26	140	2020 - 2047	31		138	133	109	29	113	2022 - 2047
Credit protection on:
Default swap index	—		3,553	537	62	3,491	5,665	2017 - 2027	—		1,897	194	163	1,734	3,923	2019 - 2029
Commercial mortgage-backed securities index	92		441	—	410	31	146	2047 - 2058	38		342	87	316	26	51	2047 - 2058
Asset-backed securities index	9		42	—	38	4	5	2045 - 2046	8		41	41	41	—	1	2045 - 2046
Other	1		3,576	3,576	—	3,576	11,102	2017 - 2028	2		6,094	5,796	—	6,094	12,904	2019 - 2048
Total credit derivatives	$	219	9,754	4,853	1,949	7,805	18,437		$	80	10,507	6,723	1,991	8,516	19,013
December 31, 2016
December 31, 2018
Credit default swaps on:
Corporate bonds	$	22	4,324	1,704	3,060	1,264	1,804	2017 - 2026	$	59	2,037	441	1,374	663	1,460	2019 - 2027
Structured products	193		405	333	295	110	79	2020 - 2047	62		133	128	121	12	113	2022 - 2047
Credit protection on:
Default swap index	—		1,515	257	139	1,376	3,668	2017 - 2021	1		3,618	582	1,998	1,620	2,896	2019 - 2028
Commercial mortgage-backed securities index	156		627	—	584	43	71	2047 - 2058	49		389	109	363	26	51	2047 - 2058
Asset-backed securities index	17		45	—	40	5	187	2045 - 2046	9		42	42	42	—	1	2045 - 2046
Other	1		3,567	3,568	—	3,567	10,519	2017 - 2047	2		5,522	5,327	—	5,522	12,561	2018 - 2048
Total credit derivatives	$	389	10,483	5,862	4,118	6,365	16,328		$	182	11,741	6,629	3,898	7,843	17,082

Protection sold represents the estimated maximum exposure to loss that would be incurred under an assumed hypothetical circumstance, where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. We believe this hypothetical circumstance to be a remote possibility and accordingly, this required disclosure is not an indication of expected loss. 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 risk of performance to be high if the underlying assets under the credit derivative have an external rating that is below investment grade or an internal credit default grade that is equivalent thereto. We believe the net protection sold, which is representative of the net notional amount of protection sold and purchased with identical underlyings, in combination with other protection purchased, is more representative of our exposure to loss than either non-investment grade or protection sold. Other protection purchased represents additional protection, which may offset the exposure to loss for protection sold, that was not purchased with an identical underlying of the protection sold.

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. The aggregate fair value of all derivative instruments with such credit-risk-related contingent features that are in a net liability position was ~~$9.2~~$10.7 billion at ~~September~~June 30, ~~2017,~~2019, and ~~$12.8~~$7.4 billion at December 31, ~~2016,~~2018, for which we posted ~~$8.0~~$9.2 billion and ~~$8.9~~$5.6 billion, respectively, in collateral in the normal course of business. A credit rating below investment grade is the credit-risk-related contingent feature that if triggered requires the maximum amount of collateral to be posted. If the credit rating of our debt had been downgraded below investment grade, on ~~September~~June 30, ~~2017,~~2019, or December 31, ~~2016,~~2018, we would have been required to post additional collateral of ~~$1.2~~$1.5 billion or ~~$4.0~~$1.8 billion, respectively, or potentially settle the contract in an amount equal to its fair value. Some contracts require that we provide more collateral than the fair value of derivatives that are in a net liability position if a downgrade occurs.

Counterparty Credit Risk

By using derivatives, we are exposed to counterparty credit risk if counterparties to the derivative contracts do not perform as expected. If a counterparty fails to perform, our counterparty credit risk is equal to the amount reported as a derivative asset on our balance sheet. The amounts reported as a derivative asset are derivative contracts in a gain position, and to the extent subject to legally enforceable master netting arrangements, net of derivatives in a loss position with the same counterparty and cash collateral received. We minimize counterparty credit risk through credit approvals, limits, monitoring procedures, executing master netting arrangements and obtaining collateral, where appropriate. To the extent the master netting arrangements and other criteria meet the applicable requirements, including determining the legal enforceability of the arrangement, it is our policy to present derivative balances and related cash collateral amounts net on the balance sheet. We incorporate credit valuation adjustments (CVA) to reflect counterparty credit risk in determining the fair value of our derivatives. Such adjustments, which consider the effects of enforceable master netting agreements and collateral arrangements, reflect market-based views of the credit quality of each counterparty. Our CVA calculation is determined based on observed credit spreads in the credit default swap market and indices indicative of the credit quality of the counterparties to our derivatives.

Note ~~13:~~16: Fair Values of Assets and Liabilities (continued)

Note ~~13:~~16: Fair Values of Assets and Liabilities

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Assets and liabilities recorded at fair value on a recurring basis are presented in Table ~~13.2~~16.2 in this Note. From time to time, we may be required to record fair value adjustments on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of LOCOM accounting, measurement alternative accounting for nonmarketable equity securities or write-downs of individual assets. Assets recorded on a nonrecurring basis are presented in Table ~~13.14~~16.13 in this Note.

See Note 1 (Summary of Significant Accounting Policies) ~~to Financial Statements~~ in our ~~2016~~2018 Form 10-K for 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 and for estimating fair value for financial instruments that are not recorded at fair value, see Note 1718 (Fair Values of Assets and Liabilities) ~~to Financial Statements~~ in our ~~2016~~2018 Form 10-K.

FAIR VALUE HIERARCHY We group our assets and liabilities measured at fair value in three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from techniques that use significant assumptions that are not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

~~In accordance with new accounting guidance that we adopted effective January 1, 2016, we~~We do not classify an ~~investment~~equity security in the fair value hierarchy if we use the non-published net asset value (NAV) per share (or its equivalent) that has been communicated to us as an investor as a practical expedient to measure fair value. We ~~generally~~ use NAV per share as the fair value measurement for certain nonmarketable equity fund investments. ~~This guidance was required to be applied retrospectively. Accordingly, certain prior period fair value disclosures have been revised to conform with current period presentation.~~ Marketable equity ~~investments~~securities with published NAVs continue to be classified in the fair value hierarchy.

Fair Value Measurements from Vendors

For certain assets and liabilities, we obtain fair value measurements from vendors, which predominantly consist of third-party pricing services, and record the unadjusted fair value in our financial statements. For additional information, see Note 1718 (Fair Values of Assets and Liabilities) ~~to Financial Statements~~ in our ~~2016~~ 2018

Form 10-K. Table ~~13.1.~~16.1 presents unadjusted fair value measurements provided by brokers or third-party pricing services by fair value hierarchy level. Fair value measurements obtained from brokers or third-party pricing services that we have adjusted to determine the fair value recorded in our financial statements are excluded from Table ~~13.1.~~16.1.

Table ~~13.1:~~16.1:Fair Value Measurements by Brokers or Third-Party Pricing Services

   Brokers Third-party pricing services
(in millions) Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
September 30, 2017
Trading assets $ —
—
—
674
211
—
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies —
—
—
3,400
2,950
—
Securities of U.S. states and political subdivisions —
—
—
—
52,068
50
Mortgage-backed securities —
37
—
—
160,628
76
Other debt securities (1) —
684
1,146
—
46,098
22
Total debt securities —
721
1,146
3,400
261,744
148
Total marketable equity securities —
—
—
—
264
—
Total available-for-sale securities —
721
1,146
3,400
262,008
148
Derivatives assets —
—
—
19
—
—
Derivatives liabilities —
—
—
(16 ) —
—
Other liabilities (2) —
—
—
—
—
—
December 31, 2016
Trading assets $ —
—
—
899
60
—
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies —
—
—
22,870
2,949
—
Securities of U.S. states and political subdivisions —
—
—
—
49,837
208
Mortgage-backed securities —
171
—
—
176,923
92
Other debt securities (1) —
450
968
—
49,162
54
Total debt securities —
621
968
22,870
278,871
354
Total marketable equity securities —
—
—
—
358
—
Total available-for-sale securities —
621
968
22,870
279,229
354
Derivatives assets —
—
—
22
—
—
Derivatives liabilities —
—
—
(109 ) (1 ) —
Other liabilities (2) —
—
—
—
—
—



	Brokers				Third-party pricing services
(in millions)	Level 1		Level 2	Level 3	Level 1		Level 2		Level 3
June 30, 2019
Trading debt securities	$	—	—	—	534		319		—
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	—		—	—	12,324		2,995		—
Securities of U.S. states and political subdivisions	—		—	—	—		44,642		38
Mortgage-backed securities	—		—	—	—		161,260		41
Other debt securities (1)	—		45	130	—		41,947		663
Total available-for-sale debt securities	—		45	130	12,324		250,844		742
Equity securities:
Marketable	—		—	—	—		160		—
Nonmarketable	—		—	—	—		—		—
Total equity securities	—		—	—	—		160		—
Derivative assets	—		—	—	12		—		—
Derivative liabilities	—		—	—	(13	)	(2	)	—
Other liabilities (2)	—		—	—	—		—		—
December 31, 2018
Trading debt securities	$	—	—	—	899		256		—
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	—		—	—	10,399		2,949		—
Securities of U.S. states and political subdivisions	—		—	—	—		48,377		43
Mortgage-backed securities	—		—	—	—		160,162		41
Other debt securities (1)	—		45	129	—		44,292		758
Total available-for-sale debt securities	—		45	129	10,399		255,780		842
Equity securities:
Marketable	—		—	—	—		158		—
Nonmarketable	—		—	—	—		1		—
Total equity securities	—		—	—	—		159		—
Derivative assets	—		—	—	17		—		—
Derivative liabilities	—		—	—	(12	)	—		—
Other liabilities (2)	—		—	—	—		—		—


(1)	Includes corporate debt securities, collateralized loan and other debt obligations, asset-backed securities, and other debt securities.


(2)	Includes short sale liabilities and other liabilities.

Note ~~13:~~16: Fair Values of Assets and Liabilities (continued)

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Table ~~13.2~~16.2 presents the balances of assets and liabilities recorded at fair value on a recurring basis.

Table ~~13.2:~~16.2:Fair Value on a Recurring Basis


(in millions)	Level 1			Level 2		Level 3			Netting			Total			Level 1			Level 2		Level 3			Netting (1)		Total
September 30, 2017
Trading assets
June 30, 2019
Trading debt securities:
Securities of U.S. Treasury and federal agencies	$	16,882		3,012		—			—			19,894			$	15,010		3,215		—			—		18,225
Securities of U.S. states and political subdivisions	—			4,401		3			—			4,404			—			3,314		—			—		3,314
Collateralized loan obligations	—			359		383			—			742			—			758		249			—		1,007
Corporate debt securities	—			11,098		34			—			11,132			—			11,321		44			—		11,365
Mortgage-backed securities	—			23,966		—			—			23,966			—			35,186		—			—		35,186
Asset-backed securities	—			799		—			—			799			—			1,084		—			—		1,084
Equity securities	25,980			270		—			—			26,250
Total trading securities (1)	42,862			43,905		420			—			87,187
Other trading assets	—			1,161		56			—			1,217
Total trading assets	42,862			45,066		476			—			88,404
Other trading debt securities															—			13		14			—		27
Total trading debt securities															15,010			54,891		307			—		70,208
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	3,400			2,950		—			—			6,350			12,324			2,995		—			—		15,319
Securities of U.S. states and political subdivisions	—			52,068		706		(2)	—			52,774			—			44,704		391			—		45,095
Mortgage-backed securities:
Federal agencies	—			150,181		—			—			150,181			—			155,858		—			—		155,858
Residential	—			6,393		1			—			6,394			—			1,263		—			—		1,263
Commercial	—			4,576		76			—			4,652			—			4,139		41			—		4,180
Total mortgage-backed securities	—			161,150		77			—			161,227			—			161,260		41			—		161,301
Corporate debt securities	56			8,904		380			—			9,340			37			5,810		383			—		6,230
Collateralized loan and other debt obligations (3)	—			34,594		1,014		(2)	—			35,608
Collateralized loan and other debt obligations (2)															—			32,346		649			—		32,995
Asset-backed securities:
Automobile loans and leases	—			544		—			—			544			—			889		—			—		889
Home equity loans	—			283		—			—			283			—			14		—			—		14
Other asset-backed securities	—			4,556		635		(2)	—			5,191			—			3,792		341			—		4,133
Total asset-backed securities	—			5,383		635			—			6,018			—			4,695		341			—		5,036
Other debt securities	—			—		—			—			—			—			7		—			—		7
Total debt securities	3,456			265,049		2,812			—			271,317
Marketable equity securities:
Perpetual preferred securities	155			264		—			—			419
Other marketable equity securities	474			—		—			—			474
Total marketable equity securities	629			264		—			—			893
Total available-for-sale securities	4,085			265,313		2,812			—			272,210
Mortgages held for sale	—			15,452		1,032			—			16,484
Total available-for-sale debt securities															12,361			251,817		1,805		(3)	—		265,983
Mortgage loans held for sale															—			15,228		1,115			—		16,343
Loans held for sale															—			1,106		12			—		1,118
Loans	—			—		410			—			410			—			—		202			—		202
Mortgage servicing rights (residential)	—			—		13,338			—			13,338			—			—		12,096			—		12,096
Derivative assets:
Interest rate contracts	26			18,143		172			—			18,341			45			25,258		250			—		25,553
Commodity contracts	—			1,546		28			—			1,574			—			1,404		20			—		1,424
Equity contracts	1,708			3,867		1,221			—			6,796			2,162			3,300		1,915			—		7,377
Foreign exchange contracts	19			8,733		20			—			8,772			12			5,522		21			—		5,555
Credit contracts	—			275		145			—			420			—			62		79			—		141
Netting	—			—		—			(23,323	)	(4)	(23,323		)	—			—		—			(26,888	)	(26,888	)
Total derivative assets	1,753			32,564		1,586			(23,323	)		12,580			2,219			35,546		2,285			(26,888	)	13,162
Other assets – excluding nonmarketable equity investments at NAV	—			50		4,473			—			4,523
Equity securities - excluding securities at NAV:
Marketable															28,447			259		—			—		28,706
Nonmarketable															—			16		7,110			—		7,126
Total equity securities															28,447			275		7,110			—		35,832
Total assets included in the fair value hierarchy	$	48,700		358,445		24,127			(23,323	)		407,949			$	58,037		358,863		24,932			(26,888	)	414,944
Other assets – nonmarketable equity investments at NAV (5)												—
Equity securities at NAV (4)																									118
Total assets recorded at fair value												$	407,949												415,062
Derivative liabilities:
Interest rate contracts	$	(18	)	(15,557	)	(58	)		—			(15,633		)	$	(55	)	(20,537	)	(45	)		—		(20,637	)
Commodity contracts	—			(1,156	)	(16	)		—			(1,172		)	—			(1,887	)	(49	)		—		(1,936	)
Equity contracts	(1,125		)	(4,698	)	(1,812	)		—			(7,635		)	(1,509		)	(5,526	)	(2,143	)		—		(9,178	)
Foreign exchange contracts	(16		)	(8,777	)	(13	)		—			(8,806		)	(13		)	(6,224	)	(31	)		—		(6,268	)
Credit contracts	—			(384	)	(92	)		—			(476		)	—			(63	)	(34	)		—		(97	)
Other derivative contracts	—			—		(26	)		—			(26		)
Netting	—			—		—			24,251		(4)	24,251			—			—		—			29,717		29,717
Total derivative liabilities	(1,159		)	(30,572	)	(2,017	)		24,251			(9,497		)	(1,577		)	(34,237	)	(2,302	)		29,717		(8,399	)
Short sale liabilities:
Securities of U.S. Treasury and federal agencies	(10,401		)	(728	)	—			—			(11,129		)	(7,768		)	(230	)	—			—		(7,998	)
Mortgage-backed securities															—			(533	)	—			—		(533	)
Asset-backed securities															—			(10	)	—			—		(10	)
Corporate debt securities	—			(5,643	)	—			—			(5,643		)	—			(4,887	)	—			—		(4,887	)
Equity securities	(2,283		)	(7	)	—			—			(2,290		)	(2,527		)	—		—			—		(2,527	)
Other securities	—			(34	)	(3	)		—			(37		)	—			—		—			—		—
Total short sale liabilities	(12,684		)	(6,412	)	(3	)		—			(19,099		)	(10,295		)	(5,660	)	—			—		(15,955	)
Other liabilities	—			—		(3	)		—			(3		)	—			—		(2	)		—		(2	)
Total liabilities recorded at fair value	$	(13,843	)	(36,984	)	(2,023	)		24,251			(28,599		)	$	(11,872	)	(39,897	)	(2,304	)		29,717		(24,356	)

(1)

~~Net gains (losses) from trading activities recognized in the income statement~~Represents balance sheet netting of derivative asset and liability balances and related cash collateral. See Note 15 (Derivatives) for ~~the~~ ~~first nine monthsSeptember 30,2017~~ ~~and~~ ~~2016~~ ~~both include~~ ~~$1.4 billion~~ ~~in net unrealized gains (losses) on trading securities held at~~ ~~September 30, 2017~~ ~~and~~ ~~2016, respectively.~~

additional information.


(2)	~~Balances consist~~Includes collateralized debt obligations of $649 million.


(3)	A significant portion of the balance consists of securities that are ~~mostly~~ investment grade based on ratings received from the ratings agencies or internal credit grades categorized as investment grade if external ratings are not available. The securities are classified as Level 3 due to limited market activity.


~~(3)~~	~~Includes collateralized debt obligations of~~ ~~$1.0 billion~~.


(4)	~~Represents balance sheet netting of derivative asset and liability balances and related cash collateral. See Note 12 (Derivatives) for additional information.~~


~~(5)~~	Consists of certain nonmarketable equity ~~investments~~securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

(continued on following page)

(continued from previous page)


(in millions)	Level 1			Level 2		Level 3			Netting			Total			Level 1			Level 2		Level 3			Netting (1)		Total
December 31, 2016
Trading assets
December 31, 2018
Trading debt securities:
Securities of U.S. Treasury and federal agencies	$	14,950		2,710		—			—			17,660			$	20,525		2,892		—			—		23,417
Securities of U.S. states and political subdivisions	—			2,910		3			—			2,913			—			3,272		3			—		3,275
Collateralized loan obligations	—			501		309			—			810			—			673		237			—		910
Corporate debt securities	—			9,481		34			—			9,515			—			10,723		34			—		10,757
Mortgage-backed securities	—			20,254		—			—			20,254			—			30,715		—			—		30,715
Asset-backed securities	—			1,128		—			—			1,128			—			893		—			—		893
Equity securities	20,462			290		—			—			20,752
Total trading securities (1)	35,412			37,274		346			—			73,032
Other trading assets	—			1,337		28			—			1,365
Total trading assets	35,412			38,611		374			—			74,397
Other trading debt securities															—			6		16			—		22
Total trading debt securities															20,525			49,174		290			—		69,989
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	22,870			2,949		—			—			25,819			10,399			2,949		—			—		13,348
Securities of U.S. states and political subdivisions	—			49,961		1,140		(2)	—			51,101			—			48,820		444			—		49,264
Mortgage-backed securities:
Federal agencies	—			161,230		—			—			161,230			—			153,203		—			—		153,203
Residential	—			7,815		1			—			7,816			—			2,775		—			—		2,775
Commercial	—			8,411		91			—			8,502			—			4,184		41			—		4,225
Total mortgage-backed securities	—			177,456		92			—			177,548			—			160,162		41			—		160,203
Corporate debt securities	58			10,967		432			—			11,457			34			5,867		370			—		6,271
Collateralized loan and other debt obligations (3)	—			34,141		879		(2)	—			35,020
Collateralized loan and other debt obligations (2)															—			34,543		800			—		35,343
Asset-backed securities:
Automobile loans and leases	—			9		—			—			9			—			925		—			—		925
Home equity loans	—			327		—			—			327			—			112		—			—		112
Other asset-backed securities	—			4,909		962		(2)	—			5,871			—			4,056		389			—		4,445
Total asset-backed securities	—			5,245		962			—			6,207			—			5,093		389			—		5,482
Other debt securities	—			1		—			—			1			—			1		—			—		1
Total debt securities	22,928			280,720		3,505			—			307,153
Marketable equity securities:
Perpetual preferred securities	112			357		—			—			469
Other marketable equity securities	741			1		—			—			742
Total marketable equity securities	853			358		—			—			1,211
Total available-for-sale securities	23,781			281,078		3,505			—			308,364
Mortgages held for sale	—			21,057		985			—			22,042
Total available-for-sale debt securities															10,433			257,435		2,044		(3)	—		269,912
Mortgage loans held for sale															—			10,774		997			—		11,771
Loans held for sale															—			1,409		60			—		1,469
Loans	—			—		758			—			758			—			—		244			—		244
Mortgage servicing rights (residential)	—			—		12,959			—			12,959			—			—		14,649			—		14,649
Derivative assets:
Interest rate contracts	44			64,986		238			—			65,268			46			18,294		95			—		18,435
Commodity contracts	—			3,020		37			—			3,057			—			1,535		53			—		1,588
Equity contracts	1,314			2,997		1,047			—			5,358			1,648			4,582		1,315			—		7,545
Foreign exchange contracts	22			10,843		29			—			10,894			17			6,689		8			—		6,714
Credit contracts	—			280		272			—			552			—			179		99			—		278
Netting	—			—		—			(70,631	)	(4)	(70,631		)	—			—		—			(23,790	)	(23,790	)
Total derivative assets	1,380			82,126		1,623			(70,631	)		14,498			1,711			31,279		1,570			(23,790	)	10,770
Other assets – excluding nonmarketable equity investments at NAV	—			16		3,259			—			3,275
Equity securities - excluding securities at NAV:
Marketable															23,205			757		—			—		23,962
Nonmarketable															—			24		5,468			—		5,492
Total equity securities															23,205			781		5,468			—		29,454
Total assets included in the fair value hierarchy	$	60,573		422,888		23,463			(70,631	)		436,293			$	55,874		350,852		25,322			(23,790	)	408,258
Other assets – nonmarketable equity investments at NAV (5)												—
Equity securities at NAV (4)																									102
Total assets recorded at fair value												$	436,293												408,360
Derivative liabilities:
Interest rate contracts	$	(45	)	(65,047	)	(117	)		—			(65,209		)	$	(21	)	(16,217	)	(70	)		—		(16,308	)
Commodity contracts	—			(2,537	)	(14	)		—			(2,551		)	—			(2,287	)	(49	)		—		(2,336	)
Equity contracts	(919		)	(3,879	)	(1,314	)		—			(6,112		)	(1,492		)	(3,186	)	(1,332	)		—		(6,010	)
Foreign exchange contracts	(109		)	(12,616	)	(17	)		—			(12,742		)	(12		)	(7,067	)	(34	)		—		(7,113	)
Credit contracts	—			(332	)	(195	)		—			(527		)	—			(216	)	(64	)		—		(280	)
Other derivative contracts	—			—		(47	)		—			(47		)
Netting	—			—		—			72,696		(4)	72,696			—			—		—			23,548		23,548
Total derivative liabilities	(1,073		)	(84,411	)	(1,704	)		72,696			(14,492		)	(1,525		)	(28,973	)	(1,549	)		23,548		(8,499	)
Short sale liabilities:
Securities of U.S. Treasury and federal agencies	(9,722		)	(701	)	—			—			(10,423		)	(11,850		)	(411	)	—			—		(12,261	)
Mortgage-backed securities															—			(47	)	—			—		(47	)
Corporate debt securities	—			(4,063	)	—			—			(4,063		)	—			(4,505	)	—			—		(4,505	)
Equity securities	(1,795		)	—		—			—			(1,795		)	(2,902		)	(2	)	—			—		(2,904	)
Other securities	—			(98	)	—			—			(98		)	—			(3	)	—			—		(3	)
Total short sale liabilities	(11,517		)	(4,862	)	—			—			(16,379		)	(14,752		)	(4,968	)	—			—		(19,720	)
Other liabilities	—			—		(4	)		—			(4		)	—			—		(2	)		—		(2	)
Total liabilities recorded at fair value	$	(12,590	)	(89,273	)	(1,708	)		72,696			(30,875		)	$	(16,277	)	(33,941	)	(1,551	)		23,548		(28,221	)


(1)	~~Net gains (losses) from trading activities recognized in the income statement~~Represents balance sheet netting of derivative asset and liability balances and related cash collateral. See Note 15 (Derivatives) for ~~the year ended~~ ~~December 31, 2016, include~~ ~~$820 million~~ ~~in net unrealized gains (losses) on trading securities held at~~ ~~December 31, 2016~~. additional information.


(2)	~~Balances consist~~Includes collateralized debt obligations of $800 million.


(3)	A significant portion of the balance consists of securities that are ~~mostly~~ investment grade based on ratings received from the ratings agencies or internal credit grades categorized as investment grade if external ratings are not available. The securities are classified as Level 3 due to limited market activity.


~~(3)~~	~~Includes collateralized debt obligations of~~ ~~$847 million~~.


(4)	~~Represents balance sheet netting of derivative asset and liability balances and related cash collateral. See Note 12 (Derivatives) for additional information.~~


~~(5)~~	Consists of certain nonmarketable equity ~~investments~~securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

Note ~~13:~~16: Fair Values of Assets and Liabilities (continued)

Changes in Fair Value Levels

We monitor the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy and transfer between Level 1, Level 2, and Level 3 accordingly. Observable market data includes but is not limited to quoted prices and market transactions. Changes in economic conditions or market liquidity generally will drive changes in availability of observable market data. Changes in availability of observable market data, which also may result in

changing the valuation technique used, are generally the cause of transfers between Level 1, Level 2,and Level 3.

~~Transfers into and out of Level 1, Level 2, and Level 3 are provided within Table 13.3 for the periods presented.~~ The amounts reported as transfers represent the fair value as of the beginning of the quarter in which the transfer occurred.

~~Table 13.3:Transfers Between Fair Value Levels~~

   Transfers Between Fair Value Levels
   Level 1 Level 2 Level 3 (1)
(in millions) In Out In Out In Out Total
Quarter ended September 30, 2017
Trading assets $ —
—
—
(20 ) 20
—
—
Available-for-sale securities —
—
838
—
—
(838 ) —
Mortgages held for sale —
—
2
(55 ) 55
(2 ) —
Other assets —
—
—
—
—
—
—
Net derivative assets and liabilities (2) —
—
6
15
(15 ) (6 ) —
Short sale liabilities —
—
—
—
—
—
—
Total transfers $ —
—
846
(60 ) 60
(846 ) —
Quarter ended September 30, 2016
Trading assets $ 1
(44 ) 44
(2 ) 1
—
—
Available-for-sale securities —
—
465
—
—
(465 ) —
Mortgages held for sale —
—
3
(18 ) 18
(3 ) —
Other assets —
—
—
—
—
—
—
Net derivative assets and liabilities (2) —
—
79
(14 ) 14
(79 ) —
Short sale liabilities —
1
(1 ) —
—
—
—
Total transfers $ 1
(43 ) 590
(34 ) 33
(547 ) —
Nine months ended September 30, 2017
Trading assets $ —
—
1
(39 ) 39
(1 ) —
Available-for-sale securities —
—
1,334
(5 ) 5
(1,334 ) —
Mortgages held for sale —
—
8
(116 ) 116
(8 ) —
Other assets —
—
—
(1 ) 1
—
�� —
Net derivative assets and liabilities (2) —
—
89
37
(37 ) (89 ) —
Short sale liabilities —
—
—
—
—
—
—
Total transfers $ —
—
1,432
(124 ) 124
(1,432 ) —
Nine months ended September 30, 2016
Trading assets $ 5
(48 ) 59
(6 ) 1
(11 ) —
Available-for-sale securities —
—
481
(80 ) 80
(481 ) —
Mortgages held for sale —
—
12
(72 ) 72
(12 ) —
Other assets —
—
—
—
—
—
—
Net derivative assets and liabilities (2) —
—
129
(42 ) 42
(129 ) —
Short sale liabilities (1 ) 1
(1 ) 1
—
—
—
Total transfers $ 4
(47 ) 680
(199 ) 195
(633 ) —


~~(1)~~	~~All transfers in and out of Level 3 are disclosed within the recurring Level 3 rollforward tables in this Note.~~


~~(2)~~	~~Includes transfers of net derivative assets and net derivative liabilities between levels due to changes in observable market data.~~

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarter ended ~~September~~June 30, ~~2017,~~2019, are presented in Table ~~13.4.~~16.3.

Table ~~13.4:~~16.3:Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis – Quarter ended ~~September~~June 30, ~~2017~~2019

Total net gains
(losses) included in

Purchases,
sales,
issuances
and
settlements,
net (1)





Net unrealized
gains (losses)
included in
income related
to assets and
liabilities held
at period end


(in millions)
Balance,
beginning
of period

Net
income

Other
compre-
hensive
income

Transfers
into
Level 3

Transfers
out of
Level 3

Balance,
end of
period

(2)
Quarter ended September 30, 2017
Trading assets:
Securities of U.S. states and
political subdivisions
$ 9
—
—
(6 ) —
—
3
—

Collateralized loan obligations 403
—
—
(20 ) —
—
383
(4 )
Corporate debt securities 26
—
—
6
2
—
34
—

Mortgage-backed securities —
—
—
—
—
—
—
—

Asset-backed securities —
—
—
—
—
—
—
—

Equity securities —
—
—
—
—
—
—
—

Total trading securities 438
—
—
(20 ) 2
—
420
(4 )
Other trading assets 39
—
—
(1 ) 18
—
56
—

Total trading assets 477
—
—
(21 ) 20
—
476
(4 ) (3)
Available-for-sale securities:
Securities of U.S. states and
political subdivisions
1,557
3
3
(19 ) —
(838 ) 706
—

Mortgage-backed securities:
Residential 1
—
—
—
—
—
1
—

Commercial 75
—
1
—
—
—
76
—

Total mortgage-backed securities 76
—
1
—
—
—
77
—

Corporate debt securities 376
1
4
(1 ) —
—
380
—

Collateralized loan and other
debt obligations
1,002
7
25
(20 ) —
—
1,014
—

Asset-backed securities:
Automobile loans and leases —
—
—
—
—
—
—
—

Other asset-backed securities 872
1
2
(240 ) —
—
635
—

Total asset-backed securities 872
1
2
(240 ) —
—
635
—

Total debt securities 3,883
12
35
(280 ) —
(838 ) 2,812
—
(4)
Marketable equity securities:
Perpetual preferred securities —
—
—
—
—
—
—
—

Other marketable equity securities —
—
—
—
—
—
—
—

Total marketable
equity securities
—
—
—
—
—
—
—
—
(5)
Total available-for-sale
securities
3,883
12
35
(280 ) —
(838 ) 2,812
—

Mortgages held for sale 995
(10 ) —
(6 ) 55
(2 ) 1,032
(11 ) (6)
Loans 443
—
—
(33 ) —
—
410
(3 ) (6)
Mortgage servicing rights (residential) (7) 12,789
(661 ) —
1,210
—
—
13,338
(142 ) (6)
Net derivative assets and liabilities:
Interest rate contracts 115
158
—
(159 ) —
—
114
8

Commodity contracts 17
(16 ) —
9
2
�� —
12
7

Equity contracts (471 ) (70 ) —
(27 ) (17 ) (6 ) (591 ) (130 )
Foreign exchange contracts 4
3
—
—
—
—
7
1

Credit contracts 72
(6 ) —
(13 ) —
—
53
(6 )
Other derivative contracts (34 ) 8
—
—
—
—
(26 ) 8

Total derivative contracts (297 ) 77
—
(190 ) (15 ) (6 ) (431 ) (112 ) (8)
Other assets 3,960
513
—
—
—
—
4,473
513
(5)
Short sale liabilities —
—
—
(3 ) —
—
(3 ) —
(3)
Other liabilities (3 ) —
—
—
—
—
(3 ) —
(6)



				Total net gains (losses) included in				Purchases, sales, issuances and settlements, net (1)								Net unrealized gains (losses) included in income related to assets and liabilities held at period end (4)
(in millions)	Balance, beginning of period			Net income		Other compre- hensive income		Purchases, sales, issuances and settlements, net (1)		Transfers into Level 3 (2)		Transfers out of Level 3 (3)		Balance, end of period
Quarter ended June 30, 2019
Trading debt securities:
Securities of U.S. states and political subdivisions	$	—		—		—		—		—		—		—		—
Collateralized loan obligations	275			(2	)	—		(24	)	—		—		249		(6	)
Corporate debt securities	41			1		—		3		—		(1	)	44		1
Other trading debt securities	15			(1	)	—		—		—		—		14		—
Total trading debt securities	331			(2	)	—		(21	)	—		(1	)	307		(5	)	(5)
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	470			1		2		(33	)	—		(49	)	391		—
Mortgage-backed securities:
Residential	—			—		—		—		—		—		—		—
Commercial	41			—		—		—		—		—		41		—
Total mortgage-backed securities	41			—		—		—		—		—		41		—
Corporate debt securities	377			—		(1	)	7		—		—		383		—
Collateralized loan and other debt obligations	755			7		(6	)	(107	)	—		—		649		—
Asset-backed securities:
Other asset-backed securities	362			—		—		(21	)	—		—		341		—
Total asset-backed securities	362			—		—		(21	)	—		—		341		—
Total available-for-sale debt securities	2,005			8		(5	)	(154	)	—		(49	)	1,805		—		(6)
Mortgage loans held for sale	998			37		—		(22	)	104		(2	)	1,115		39		(7)
Loans held for sale	71			—		—		(3	)	—		(56	)	12		—
Loans	225			1		—		(24	)	—		—		202		(2	)	(7)
Mortgage servicing rights (residential)(8)	13,336			(1,639	)	—		399		—		—		12,096		(1,078	)	(7)
Net derivative assets and liabilities:
Interest rate contracts	101			237		—		(133	)	—		—		205		141
Commodity contracts	(18		)	(75	)	—		64		—		—		(29	)	(10	)
Equity contracts	(162		)	15		—		(66	)	(2	)	(13	)	(228	)	(29	)
Foreign exchange contracts	(16		)	3		—		3		—		—		(10	)	7
Credit contracts	49			(3	)	—		(1	)	—		—		45		(3	)
Total derivative contracts	(46		)	177		—		(133	)	(2	)	(13	)	(17	)	106		(9)
Equity securities:
Nonmarketable	6,381			724		—		—		5		—		7,110		724
Total equity securities	6,381			724		—		—		5		—		7,110		724		(10)
Other liabilities	(2		)	—		—		—		—		—		(2	)	—		(7)


(1)	See Table ~~13.5~~16.4 for detail.


(2)	All assets and liabilities transferred into level 3 were previously classified within level 2.


(3)	All assets and liabilities transferred out of level 3 are classified as level 2.


(4)	Represents only net gains (losses) that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/realization of cash flows over time.


~~(3)~~(5)	Included in net gains (losses) from trading activities ~~and other noninterest income~~ in the income statement.


~~(4)~~(6)	Included in net gains (losses) ~~from~~on debt securities in the income statement.


~~(5)~~	~~Included in net gains (losses) from equity investments in the income statement.~~


~~(6)~~(7)	Included in mortgage banking and other noninterest income in the income statement.


~~(7)~~(8)	For more information on the changes in mortgage servicing rights, see Note 811 (Mortgage Banking Activities).


~~(8)~~(9)	Included in mortgage banking, trading activities, equity ~~investments~~securities and other noninterest income in the income statement.


(10)	Included in net gains (losses) from equity securities in the income statement.

(continued on following page)

~~Note 13: Fair Values of Assets and Liabilities (continued~~)

(continued from previous page)

Table ~~13.5~~16.4 presents gross purchases, sales, issuances and settlements related to the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarter ended ~~September~~June 30, ~~2017.~~2019.

Table ~~13.5:~~16.4:Gross Purchases, Sales, Issuances and Settlements – Level 3 – Quarter ended ~~September~~June 30, ~~2017~~2019


(in millions)	Purchases		Sales		Issuances	Settlements		Net		Purchases		Sales		Issuances	Settlements		Net
Quarter ended September 30, 2017
Trading assets:
Quarter ended June 30, 2019
Trading debt securities:
Securities of U.S. states and political subdivisions	$	30	(35	)	—	(1	)	(6	)	$	—	—		—	—		—
Collateralized loan obligations	51		(36	)	—	(35	)	(20	)	44		(65	)	—	(3	)	(24	)
Corporate debt securities	9		(3	)	—	—		6		6		(3	)	—	—		3
Mortgage-backed securities	—		—		—	—		—
Asset-backed securities	—		—		—	—		—
Equity securities	—		—		—	—		—
Total trading securities	90		(74	)	—	(36	)	(20	)
Other trading assets	—		(1	)	—	—		(1	)
Total trading assets	90		(75	)	—	(36	)	(21	)
Available-for-sale securities:
Other trading debt securities										—		—		—	—		—
Total trading debt securities										50		(68	)	—	(3	)	(21	)
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	—		(68	)	98	(49	)	(19	)	—		—		6	(39	)	(33	)
Mortgage-backed securities:
Residential	—		—		—	—		—		—		—		—	—		—
Commercial	—		—		—	—		—		—		—		—	—		—
Total mortgage-backed securities	—		—		—	—		—		—		—		—	—		—
Corporate debt securities	—		—		—	(1	)	(1	)	8		—		—	(1	)	7
Collateralized loan and other debt obligations	6		—		—	(26	)	(20	)	—		—		—	(107	)	(107	)
Asset-backed securities:
Automobile loans and leases	—		—		—	—		—
Other asset-backed securities	—		—		16	(256	)	(240	)	—		(2	)	57	(76	)	(21	)
Total asset-backed securities	—		—		16	(256	)	(240	)	—		(2	)	57	(76	)	(21	)
Total debt securities	6		(68	)	114	(332	)	(280	)
Marketable equity securities:
Perpetual preferred securities	—		—		—	—		—
Other marketable equity securities	—		—		—	—		—
Total marketable equity securities	—		—		—	—		—
Total available-for-sale securities	6		(68	)	114	(332	)	(280	)
Mortgages held for sale	17		(130	)	147	(40	)	(6	)
Total available-for-sale debt securities										8		(2	)	63	(223	)	(154	)
Mortgage loans held for sale										30		(47	)	54	(59	)	(22	)
Loans held for sale										—		(1	)	—	(2	)	(3	)
Loans	2		—		5	(40	)	(33	)	—		—		2	(26	)	(24	)
Mortgage servicing rights (residential) (1)	541		64		605	—		1,210		—		(1	)	400	—		399
Net derivative assets and liabilities:
Interest rate contracts	—		—		—	(159	)	(159	)	—		—		—	(133	)	(133	)
Commodity contracts	—		—		—	9		9		—		—		—	64		64
Equity contracts	—		(48	)	—	21		(27	)	—		—		—	(66	)	(66	)
Foreign exchange contracts	—		—		—	—		—		—		—		—	3		3
Credit contracts	1		—		—	(14	)	(13	)	2		(3	)	—	—		(1	)
Other derivative contracts	—		—		—	—		—
Total derivative contracts	1		(48	)	—	(143	)	(190	)	2		(3	)	—	(132	)	(133	)
Other assets	—		—		—	—		—
Short sale liabilities	—		(3	)	—	—		(3	)
Equity securities:
Nonmarketable										—		—		—	—		—
Total equity securities										—		—		—	—		—
Other liabilities	—		—		—	—		—		—		—		—	—		—


(1)	For more information on the changes in mortgage servicing rights, see Note 811 (Mortgage Banking Activities).

Note 16: Fair Values of Assets and Liabilities (continued)

~~The~~

(continued from previous page)

Table 16.5 presents gross purchases, sales, issuances and settlements related to the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarter ended ~~September~~June 30, ~~2016, are presented in~~ 2018.

Table ~~13.6.~~

~~Table 13.6:~~16.5:Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis – Quarter ended ~~September~~June 30, ~~2016~~2018

Balance,
beginning
of period

Total net gains
(losses) included in

Purchases,
sales,
issuances
and
settlements,
net (1)





Net unrealized
gains (losses)
included in
income related
to assets and
liabilities held
at period end


(in millions)
Net
income

Other
compre-
hensive
income

Transfers
into
Level 3

Transfers
out of
Level 3

Balance,
end of
period

(2)
Quarter ended September 30, 2016
Trading assets:
Securities of U.S. states and
political subdivisions
$ 7
—
—
(4 ) —
—
3
—

Collateralized loan obligations 249
—
—
39
—
—
288
(1 )
Corporate debt securities 36
1
—
9
—
—
46
1

Mortgage-backed securities —
—
—
—
—
—
—
—

Asset-backed securities —
—
—
—
—
—
—
—

Equity securities —
—
—
(1 ) 1
—
—
—

Total trading securities 292
1
—
43
1
—
337
—

Other trading assets 33
(3 ) —
—
—
—
30
(2 )
Total trading assets 325
(2 ) —
43
1
—
367
(2 ) (3)
Available-for-sale securities:
Securities of U.S. states and
political subdivisions
1,793
1
(15 ) (114 ) —
(465 ) 1,200
—

Mortgage-backed securities:
Residential 1
—
—
—
—
—
1
—

Commercial 94
—
1
(2 ) —
—
93
(1 )
Total mortgage-backed securities 95
—
1
(2 ) —
—
94
(1 )
Corporate debt securities 471
3
5
(4 ) —
—
475
—

Collateralized loan and other
debt obligations
951
19
2
(12 ) —
—
960
—

Asset-backed securities:
Automobile loans and leases —
—
—
—
—
—
—
—

Other asset-backed securities 1,117
(1 ) —
(70 ) —
—
1,046
—

Total asset-backed securities 1,117
(1 ) —
(70 ) —
—
1,046
—

Total debt securities 4,427
22
(7 ) (202 ) —
(465 ) 3,775
(1 ) (4)
Marketable equity securities:
Perpetual preferred securities —
—
—
—
—
—
—
—

Other marketable equity securities —
—
—
—
—
—
—
—

Total marketable equity securities —
—
—
—
—
—
—
—
(5)
Total available-for-sale
securities
4,427
22
(7 ) (202 ) —
(465 ) 3,775
(1 )
Mortgages held for sale 1,084
(10 ) —
18
18
(3 ) 1,107
(11 ) (6)
Loans 5,032
(25 ) —
(219 ) —
—
4,788
(26 ) (6)
Mortgage servicing rights (residential) (7) 10,396
(594 ) —
613
—
—
10,415
(8 ) (6)
Net derivative assets and liabilities:
Interest rate contracts 690
504
—
(561 ) —
—
633
186

Commodity contracts 21
(3 ) —
—
1
1
20
(1 )
Equity contracts (252 ) (33 ) —
(7 ) (3 ) (80 ) (375 ) (54 )
Foreign exchange contracts —
1
—
—
16
—
17
2

Credit contracts 61
17
—
(8 ) —
—
70
14

Other derivative contracts (88 ) 15
—
—
—
—
(73 ) 16

Total derivative contracts 432
501
—
(576 ) 14
(79 ) 292
163
(8)
Other assets 3,038
380
—
—
—
—
3,418
381
(5)
Short sale liabilities —
—
—
—
—
—
—
—
(3)
Other liabilities (5 ) 1
—
—
—
—
(4 ) —
(6)



	Balance, beginning of period			Total net gains (losses) included in				Purchases, sales, issuances and settlements, net (1)							Net unrealized gains (losses) included in income related to assets and liabilities held at period end
(in millions)	Balance, beginning of period			Net income		Other compre- hensive income		Purchases, sales, issuances and settlements, net (1)		Transfers into Level 3 (2)	Transfers out of Level 3 (3)		Balance, end of period				(4)
Quarter ended June 30, 2018
Trading debt securities:
Securities of U.S. states and political subdivisions	$	3		—		—		—		—	—		3		—
Collateralized loan obligations	316			(6	)	—		(19	)	—	—		291		(8	)
Corporate debt securities	34			—		—		3		—	(1	)	36		1
Other trading debt securities	18			(1	)	—		—		—	—		17		—
Total trading debt securities	371			(7	)	—		(16	)	—	(1	)	347		(7	)	(5)
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	617			1		—		(49	)	—	(10	)	559		—
Mortgage-backed securities:
Residential	1			—		(1	)	—		—	—		—		—
Commercial	67			—		(1	)	(13	)	—	—		53		—
Total mortgage-backed securities	68			—		(2	)	(13	)	—	—		53		—
Corporate debt securities	410			1		1		31		—	—		443		—
Collateralized loan and other debt obligations	1,045			6		10		(24	)	—	—		1,037		—
Asset-backed securities:
Other asset-backed securities	501			—		(1	)	(99	)	—	—		401		—
Total asset-backed securities	501			—		(1	)	(99	)	—	—		401		—
Total available-for-sale debt securities	2,641			8		8		(154	)	—	(10	)	2,493		—		(6)
Mortgage loans held for sale	950			(11	)	—		25		25	(3	)	986		(11	)	(7)
Loans held for sale	—			(1	)	—		—		21	—		20		—
Loans	352			—		—		(31	)	—	—		321		(4	)	(7)
Mortgage servicing rights (residential) (8)	15,041			(115	)	—		485		—	—		15,411		345		(7)
Net derivative assets and liabilities:
Interest rate contracts	(8		)	(63	)	—		30		—	—		(41	)	6
Commodity contracts	10			15		—		(2	)	3	—		26		21
Equity contracts	(322		)	(12	)	—		(7	)	—	2		(339	)	261
Foreign exchange contracts	1			(18	)	—		2		—	—		(15	)	(13	)
Credit contracts	41			(12	)	—		(5	)	—	—		24		(17	)
Total derivative contracts	(278		)	(90	)	—		18		3	2		(345	)	258		(9)
Equity securities:
Nonmarketable	5,219			585		—		—		6	(4	)	5,806		586
Total equity securities	5,219			585		—		—		6	(4	)	5,806		586		(10)
Other liabilities	(2		)	—		—		—		—	—		(2	)	—		(7)


(1)	See Table ~~13.7~~16.6 for detail.


(2)	All assets and liabilities transferred into level 3 were previously classified within level 2.


(3)	All assets and liabilities transferred out of level 3 are classified as level 2.


(4)	Represents only net gains (losses) that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/realization of cash flows over time.


~~(3)~~(5)	Included in net gains (losses) from trading activities ~~and other noninterest income~~ in the income statement.


~~(4)~~(6)	Included in net gains (losses) ~~from~~on debt securities in the income statement.


~~(5)~~	~~Included in net gains (losses) from equity investments in the income statement.~~


~~(6)~~(7)	Included in mortgage banking and other noninterest income in the income statement.


~~(7)~~(8)	For more information on the changes in mortgage servicing rights, see Note 811 (Mortgage Banking Activities).


~~(8)~~(9)	Included in mortgage banking, trading activities, equity ~~investments~~securities and other noninterest income in the income statement.


(10)	Included in net gains (losses) from equity securities in the income statement.

(continued on following page)

~~Note 13: Fair Values of Assets and Liabilities (continued~~)

(continued from previous page)

Table ~~13.7~~16.6 presents gross purchases, sales, issuances and settlements related to the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarter ended ~~September~~June 30, ~~2016.~~2018.

Table ~~13.7:~~16.6:Gross Purchases, Sales, Issuances and Settlements – Level 3 – Quarter ended ~~September~~June 30, ~~2016~~2018



(in millions)	Purchases		Sales		Issuances	Settlements		Net
Quarter ended June 30, 2018
Trading debt securities:
Securities of U.S. states and political subdivisions	$	—	—		—	—		—
Collateralized loan obligations	89		(39	)	—	(69	)	(19	)
Corporate debt securities	4		(1	)	—	—		3
Other trading debt securities	—		—		—	—		—
Total trading debt securities	93		(40	)	—	(69	)	(16	)
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	—		—		—	(49	)	(49	)
Mortgage-backed securities:
Residential	—		—		—	—		—
Commercial	—		—		—	(13	)	(13	)
Total mortgage-backed securities	—		—		—	(13	)	(13	)
Corporate debt securities	31		—		—	—		31
Collateralized loan and other debt obligations	—		—		—	(24	)	(24	)
Asset-backed securities:
Other asset-backed securities	—		—		9	(108	)	(99	)
Total asset-backed securities	—		—		9	(108	)	(99	)
Total available-for-sale debt securities	31		—		9	(194	)	(154	)
Mortgage loans held for sale	20		(68	)	109	(36	)	25
Loans held for sale	—		—		—	—		—
Loans	—		—		4	(35	)	(31	)
Mortgage servicing rights (residential) (1)	—		(1	)	486	—		485
Net derivative assets and liabilities:
Interest rate contracts	—		—		—	30		30
Commodity contracts	—		—		—	(2	)	(2	)
Equity contracts	—		—		—	(7	)	(7	)
Foreign exchange contracts	—		—		—	2		2
Credit contracts	5		(2	)	—	(8	)	(5	)
Total derivative contracts	5		(2	)	—	15		18
Equity securities:
Nonmarketable	—		—		—	—		—
Total equity securities	—		—		—	—		—
Other liabilities	—		—		—	—		—

(in millions) Purchases
Sales
Issuances
Settlements
Net
Quarter ended September 30, 2016
Trading assets:
Securities of U.S. states and political subdivisions $ —
—
—
(4 ) (4 )
Collateralized loan obligations 75
(36 ) —
—
39
Corporate debt securities 19
(10 ) —
—
9
Mortgage-backed securities —
—
—
—
—
Asset-backed securities —
—
—
—
—
Equity securities —
(1 ) —
—
(1 )
Total trading securities 94
(47 ) —
(4 ) 43
Other trading assets —
—
—
—
—
Total trading assets 94
(47 ) —
(4 ) 43
Available-for-sale securities:
Securities of U.S. states and political subdivisions —
—
—
(114 ) (114 )
Mortgage-backed securities:
Residential —
—
—
—
—
Commercial —
—
—
(2 ) (2 )
Total mortgage-backed securities —
—
—
(2 ) (2 )
Corporate debt securities 1
(4 ) —
(1 ) (4 )
Collateralized loan and other debt obligations 121
(45 ) —
(88 ) (12 )
Asset-backed securities:
Automobile loans and leases —
—
—
—
—
Other asset-backed securities —
—
16
(86 ) (70 )
Total asset-backed securities —
—
16
(86 ) (70 )
Total debt securities 122
(49 ) 16
(291 ) (202 )
Marketable equity securities:
Perpetual preferred securities —
—
—
—
—
Other marketable equity securities —
—
—
—
—
Total marketable equity securities —
—
—
—
—
Total available-for-sale securities 122
(49 ) 16
(291 ) (202 )
Mortgages held for sale 23
(113 ) 161
(53 ) 18
Loans —
—
76
(295 ) (219 )
Mortgage servicing rights (residential) (1) —
3
609
1
613
Net derivative assets and liabilities:
Interest rate contracts —
—
—
(561 ) (561 )
Commodity contracts —
—
—
—
—
Equity contracts —
—
—
(7 ) (7 )
Foreign exchange contracts —
—
—
—
—
Credit contracts 2
(1 ) —
(9 ) (8 )
Other derivative contracts —
—
—
—
—
Total derivative contracts 2
(1 ) —
(577 ) (576 )
Other assets —
—
—
—
—
Short sale liabilities —
—
—
—
—
Other liabilities —
—
—
—
—


(1)	For more information on the changes in mortgage servicing rights, see Note 811 (Mortgage Banking Activities).

Note 16: Fair Values of Assets and Liabilities (continued)

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the first ~~nine months~~half of ~~2017,~~2019, are presented in Table ~~13.8.~~16.7.

Table ~~13.8:~~16.7:Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis – ~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2019


				Total net gains (losses) included in			Purchases, sales, issuances and settlements, net (1)												Net unrealized gains (losses) included in income related to assets and liabilities held at period end							Total net gains (losses) included in					Purchases, sales, issuances and settlements, net (1)										Net unrealized gains (losses) included in income related to assets and liabilities held at period end (4)
(in millions)	Balance, beginning of period			Net income		Other compre- hensive income			Transfers into Level 3			Transfers out of Level 3			Balance, end of period			(2)			Balance, beginning of period				Net income			Other compre- hensive income			Purchases, sales, issuances and settlements, net (1)		Transfers into Level 3 (2)		Transfers out of Level 3 (3)			Balance, end of period
Nine months ended September 30, 2017							Purchases, sales, issuances and settlements, net (1)
Trading assets:
Six months ended June 30, 2019
Trading debt securities:
Securities of U.S. states and political subdivisions	$	3		—		—	—			—			—			3			—			$	3			—			—		(2	)		—		(1	)		—		—
Collateralized loan obligations	309			(3	)	—	77			—			—			383			(12	)		237				(5	)		—		17			—		—			249		(4	)
Corporate debt securities	34			1		—	(5	)		5			(1	)		34			—			34				3			—		7			1		(1	)		44		3
Mortgage-backed securities	—			—		—	—			—			—			—			—
Asset-backed securities	—			—		—	—			—			—			—			—
Equity securities	—			—		—	—			—			—			—			—
Total trading securities	346			(2	)	—	72			5			(1	)		420			(12	)
Other trading assets	28			(3	)	—	(3	)		34			—			56			(2	)
Total trading assets	374			(5	)	—	69			39			(1	)		476			(14	)	(3)
Available-for-sale securities:
Other trading debt securities																						16				(2	)		—		—			—		—			14		—
Total trading debt securities																						290				(4	)		—		22			1		(2	)		307		(1	)	(5)
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	1,140			4		7	884			5			(1,334	)		706			—			444				1			5		(10	)		—		(49	)		391		—
Mortgage-backed securities:
Residential	1			—		—	—			—			—			1			—			—				—			—		—			—		—			—		—
Commercial	91			(6	)	—	(9	)		—			—			76			(11	)		41				—			—		—			—		—			41		—
Total mortgage-backed securities	92			(6	)	—	(9	)		—			—			77			(11	)		41				—			—		—			—		—			41		—
Corporate debt securities	432			(13	)	14	(53	)		—			—			380			—			370				1			3		9			—		—			383		—
Collateralized loan and other debt obligations	879			17		70	48			—			—			1,014			—			800				13			(10	)	(154	)		—		—			649		—
Asset-backed securities:
Automobile loans and leases	—			—		—	—			—			—			—			—
Other asset-backed securities	962			1		5	(333	)		—			—			635			—			389				—			(1	)	(47	)		—		—			341		—
Total asset-backed securities	962			1		5	(333	)		—			—			635			—			389				—			(1	)	(47	)		—		—			341		—
Total debt securities	3,505			3		96	537			5			(1,334	)		2,812			(11	)	(4)
Marketable equity securities:
Perpetual preferred securities	—			—		—	—			—			—			—			—
Other marketable equity securities	—			—		—	—			—			—			—			—
Total marketable equity securities	—			—		—	—			—			—			—			—		(5)
Total available-for-sale securities	3,505			3		96	537			5			(1,334	)		2,812			(11	)
Mortgages held for sale	985			(20	)	—	(41	)		116			(8	)		1,032			(21	)	(6)
Total available-for-sale debt securities																						2,044				15			(3	)	(202	)		—		(49	)		1,805		—		(6)
Mortgage loans held for sale																						997				52			—		(88	)		160		(6	)		1,115		54		(7)
Loans held for sale																						60				—			—		8			37		(93	)		12		—
Loans	758			(6	)	—	(342	)		—			—			410			(9	)	(6)	244				1			—		(43	)		—		—			202		(4	)	(7)
Mortgage servicing rights (residential) (7)	12,959			(1,795	)	—	2,174			—			—			13,338			(328	)	(6)
Mortgage servicing rights (residential) (8)																						14,649				(3,012	)		—		459			—		—			12,096		(1,969	)	(7)
Net derivative assets and liabilities:
Interest rate contracts	121			625		—	(632	)		—			—			114			(10	)		25				424			—		(244	)		—		—			205		220
Commodity contracts	23			(14	)	—	3			2			(2	)		12			9			4				(126	)		—		91			2		—			(29	)	(26	)
Equity contracts	(267		)	(128	)	—	(70	)		(39	)		(87	)		(591	)		(223	)		(17		)		(104	)		—		(69	)		7		(45	)		(228	)	(175	)
Foreign exchange contracts	12			(5	)	—	—			—			—			7			(1	)		(26		)		10			—		6			—		—			(10	)	17
Credit contracts	77			29		—	(53	)		—			—			53			(42	)		35				5			—		5			—		—			45		10
Other derivative contracts	(47		)	22		—	(1	)		—			—			(26	)		22
Total derivative contracts	(81		)	529		—	(753	)		(37	)		(89	)		(431	)		(245	)	(8)	21				209			—		(211	)		9		(45	)		(17	)	46		(9)
Other assets	3,259			1,214		—	(1	)		1			—			4,473			1,215		(5)
Short sale liabilities	—			—		—	(3	)		—			—			(3	)		—		(3)
Equity securities:
Nonmarketable																						5,468				1,650			—		(1	)		5		(12	)		7,110		1,650
Total equity securities																						5,468				1,650			—		(1	)		5		(12	)		7,110		1,650		(10)
Other liabilities	(4		)	1		—	—			—			—			(3	)		—		(6)	(2		)		—			—		—			—		—			(2	)	—		(7)


(1)	See Table ~~13.9~~16.8 for detail.


(2)	All assets and liabilities transferred into level 3 were previously classified within level 2.


(3)	All assets and liabilities transferred out of level 3 are classified as level 2.


(4)	Represents only net gains (losses) that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/realization of cash flows over time.


~~(3)~~(5)	Included in net gains (losses) from trading activities ~~and other noninterest income~~ in the income statement.


~~(4)~~(6)	Included in net gains (losses) ~~from~~on debt securities in the income statement.


~~(5)~~	~~Included in net gains (losses) from equity investments in the income statement.~~


~~(6)~~(7)	Included in mortgage banking and other noninterest income in the income statement.


~~(7)~~(8)	For more information on the changes in mortgage servicing rights, see Note 811 (Mortgage Banking Activities).


~~(8)~~(9)	Included in mortgage banking, trading activities, equity ~~investments~~securities and other noninterest income in the income statement.


(10)	Included in net gains (losses) from equity securities in the income statement.

(continued on following page)

~~Note 13: Fair Values of Assets and Liabilities (continued~~)

(continued from previous page)

Table ~~13.9~~16.8 presents gross purchases, sales, issuances and settlements related to the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the first ~~nine months~~half of ~~2017.~~2019.

Table ~~13.9:~~16.8:Gross Purchases, Sales, Issuances and Settlements – Level 3 – ~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2019


(in millions)	Purchases		Sales		Issuances	Settlements		Net		Purchases		Sales		Issuances	Settlements		Net
Nine months ended September 30, 2017
Trading assets:
Six months ended June 30, 2019
Trading debt securities:
Securities of U.S. states and political subdivisions	$	37	(36	)	—	(1	)	—		$	—	—		—	(2	)	(2	)
Collateralized loan obligations	337		(165	)	—	(95	)	77		174		(152	)	—	(5	)	17
Corporate debt securities	18		(23	)	—	—		(5	)	11		(4	)	—	—		7
Mortgage-backed securities	—		—		—	—		—
Asset-backed securities	—		—		—	—		—
Equity securities	—		—		—	—		—
Total trading securities	392		(224	)	—	(96	)	72
Other trading assets	—		(1	)	—	(2	)	(3	)
Total trading assets	392		(225	)	—	(98	)	69
Available-for-sale securities:
Other trading debt securities										—		—		—	—		—
Total trading debt securities										185		(156	)	—	(7	)	22
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	—		(68	)	1,099	(147	)	884		—		—		55	(65	)	(10	)
Mortgage-backed securities:
Residential	—		—		—	—		—		—		—		—	—		—
Commercial	—		—		—	(9	)	(9	)	—		—		—	—		—
Total mortgage-backed securities	—		—		—	(9	)	(9	)	—		—		—	—		—
Corporate debt securities	4		—		—	(57	)	(53	)	11		—		—	(2	)	9
Collateralized loan and other debt obligations	135		—		—	(87	)	48		—		—		—	(154	)	(154	)
Asset-backed securities:
Automobile loans and leases	—		—		—	—		—
Other asset-backed securities	—		—		198	(531	)	(333	)	—		(5	)	123	(165	)	(47	)
Total asset-backed securities	—		—		198	(531	)	(333	)	—		(5	)	123	(165	)	(47	)
Total debt securities	139		(68	)	1,297	(831	)	537
Marketable equity securities:
Perpetual preferred securities	—		—		—	—		—
Other marketable equity securities	—		—		—	—		—
Total marketable equity securities	—		—		—	—		—
Total available-for-sale securities	139		(68	)	1,297	(831	)	537
Mortgages held for sale	57		(374	)	386	(110	)	(41	)
Total available-for-sale debt securities										11		(5	)	178	(386	)	(202	)
Mortgage loans held for sale										46		(140	)	100	(94	)	(88	)
Loans held for sale										12		(2	)	—	(2	)	8
Loans	5		(129	)	14	(232	)	(342	)	2		—		5	(50	)	(43	)
Mortgage servicing rights (residential) (1)	541		9		1,624	—		2,174		—		(282	)	741	—		459
Net derivative assets and liabilities:
Interest rate contracts	—		—		—	(632	)	(632	)	—		—		—	(244	)	(244	)
Commodity contracts	—		—		—	3		3		—		—		—	91		91
Equity contracts	—		(117	)	—	47		(70	)	—		—		—	(69	)	(69	)
Foreign exchange contracts	—		—		—	—		—		—		—		—	6		6
Credit contracts	5		(2	)	—	(56	)	(53	)	8		(3	)	—	—		5
Other derivative contracts	—		—		—	(1	)	(1	)
Total derivative contracts	5		(119	)	—	(639	)	(753	)	8		(3	)	—	(216	)	(211	)
Other assets	—		(1	)	—	—		(1	)
Short sale liabilities	—		(3	)	—	—		(3	)
Equity securities:
Nonmarketable										—		(1	)	—	—		(1	)
Total equity securities										—		(1	)	—	—		(1	)
Other liabilities	—		—		—	—		—		—		—		—	—		—


(1)	For more information on the changes in mortgage servicing rights, see Note 811 (Mortgage Banking Activities).

Note 16: Fair Values of Assets and Liabilities (continued)

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the first ~~nine months~~half of ~~2016,~~2018, are presented in Table ~~13.10.~~16.9.

Table ~~13.10:~~16.9:Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis – ~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2018


	Balance, beginning of period			Total net gains (losses) included in				Purchases, sales, issuances and settlements, net (1)											Net unrealized gains (losses) included in income related to assets and liabilities held at period end			Balance, beginning of period				Total net gains (losses) included in					Purchases, sales, issuances and settlements, net (1)											Net unrealized gains (losses) included in income related to assets and liabilities held at period end
(in millions)	Balance, beginning of period			Net income		Other compre- hensive income				Transfers into Level 3		Transfers out of Level 3			Balance, end of period			(2)				Balance, beginning of period			Net income			Other compre- hensive income			Purchases, sales, issuances and settlements, net (1)		Transfers into Level 3 (2)		Transfers out of Level 3 (3)			Balance, end of period			(4)
Nine months ended September 30, 2016								Purchases, sales, issuances and settlements, net (1)
Trading assets:
Six months ended June 30, 2018
Trading debt securities:
Securities of U.S. states and political subdivisions	$	8		—		—		(5	)		—		—			3			—			$	3			—			—		—			—		—			3			—
Collateralized loan obligations	343			(24	)	—		(20	)		—		(11	)		288			(25	)		354				(4	)		—		(59	)		—		—			291			—
Corporate debt securities	56			(7	)	—		(3	)		—		—			46			(6	)		31				—			—		6			—		(1	)		36			—
Mortgage-backed securities	—			—		—		—			—		—			—			—
Asset-backed securities	—			—		—		—			—		—			—			—
Equity securities	—			—		—		(1	)		1		—			—			—
Total trading securities	407			(31	)	—		(29	)		1		(11	)		337			(31	)
Other trading assets	34			(4	)	—		—			—		—			30			1
Total trading assets	441			(35	)	—		(29	)		1		(11	)		367			(30	)	(3)
Available-for-sale securities:
Other trading debt securities																						19				(2	)		—		—			—		—			17			—
Total trading debt securities																						407				(6	)		—		(53	)		—		(1	)		347			—		(5)
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	1,500			5		(11	)	107			80		(481	)		1,200			—			925				5			(2	)	(90	)		—		(279	)		559			—
Mortgage-backed securities:
Residential	1			—		—		—			—		—			1			—			1				—			(1	)	—			—		—			—			—
Commercial	73			—		1		19			—		—			93			(1	)		75				1			(2	)	(21	)		—		—			53			—
Total mortgage-backed securities	74			—		1		19			—		—			94			(1	)		76				1			(3	)	(21	)		—		—			53			—
Corporate debt securities	405			8		33		29			—		—			475			—			407				2			4		30			—		—			443			—
Collateralized loan and other debt obligations	565			42		(18	)	371			—		—			960			—			1,020				11			53		(47	)		—		—			1,037			—
Asset-backed securities:
Automobile loans and leases	—			—		—		—			—		—			—			—
Other asset-backed securities	1,182			1		(7	)	(130	)		—		—			1,046			(4	)		566				8			(8	)	(165	)		—		—			401			—
Total asset-backed securities	1,182			1		(7	)	(130	)		—		—			1,046			(4	)		566				8			(8	)	(165	)		—		—			401			—
Total debt securities	3,726			56		(2	)	396			80		(481	)		3,775			(5	)	(4)
Marketable equity securities:
Perpetual preferred securities	—			—		—		—			—		—			—			—
Other marketable equity securities	—			—		—		—			—		—			—			—
Total marketable equity securities	—			—		—		—			—		—			—			—		(5)
Total available-for-sale securities	3,726			56		(2	)	396			80		(481	)		3,775			(5	)
Mortgages held for sale	1,082			20		—		(55	)		72		(12	)		1,107			15		(6)
Total available-for-sale debt securities																						2,994				27			44		(293	)		—		(279	)		2,493			—		(6)
Mortgage loans held for sale																						998				(34	)		—		(12	)		40		(6	)		986			(32	)	(7)
Loans held for sale																						14				1			—		(16	)		21		—			20			—
Loans	5,316			(29	)	—		(499	)		—		—			4,788			(30	)	(6)	376				(1	)		—		(54	)		—		—			321			(7	)	(7)
Mortgage servicing rights (residential) (7)	12,415			(3,434	)	—		1,434			—		—			10,415			(1,789	)	(6)
Mortgage servicing rights (residential) (8)																						13,625				732			—		1,054			—		—			15,411			1,675		(7)
Net derivative assets and liabilities:
Interest rate contracts	288			1,763		—		(1,411	)		—		(7	)		633			374			71				(408	)		—		296			—		—			(41	)		(94	)
Commodity contracts	12			5		—		(2	)		4		1			20			13			19				30			—		(26	)		3		—			26			22
Equity contracts	(111		)	(26	)	—		(137	)		22		(123	)		(375	)		(278	)		(511		)		57			—		64			—		51			(339	)		80
Foreign exchange contracts	—			1		—		—			16		—			17			16			7				(25	)		—		3			—		—			(15	)		(17	)
Credit contracts	(3		)	25		—		48			—		—			70			16			36				(4	)		—		(8	)		—		—			24			(8	)
Other derivative contracts	(58		)	(15	)	—		—			—		—			(73	)		(15	)
Total derivative contracts	128			1,753		—		(1,502	)		42		(129	)		292			126		(8)	(378		)		(350	)		—		329			3		51			(345	)		(17	)	(9)
Other assets	3,065			142		—		211			—		—			3,418			142		(5)
Short sale liabilities	—			—		—		—			—		—			—			—		(3)
Equity securities:
Nonmarketable																						5,203				693			—		(96	)		10		(4	)		5,806			687
Total equity securities																						5,203				693			—		(96	)		10		(4	)		5,806			687		(10)
Other liabilities	(30		)	1		—		25			—		—			(4	)		—		(6)	(3		)		1			—		—			—		—			(2	)		—		(7)


(1)	See Table ~~13.11~~16.10 for detail.


(2)	All assets and liabilities transferred into level 3 were previously classified within level 2.


(3)	All assets and liabilities transferred out of level 3 are classified as level 2.


(4)	Represents only net gains (losses) that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/realization of cash flows over time.


~~(3)~~(5)	Included in net gains (losses) from trading activities ~~and other noninterest income~~ in the income statement.


~~(4)~~(6)	Included in net gains (losses) ~~from~~on debt securities in the income statement.


~~(5)~~	~~Included in net gains (losses) from equity investments in the income statement.~~


~~(6)~~(7)	Included in mortgage banking and other noninterest income in the income statement.


~~(7)~~(8)	For more information on the changes in mortgage servicing rights, see Note 811 (Mortgage Banking Activities).


~~(8)~~(9)	Included in mortgage banking, trading activities, equity ~~investments~~securities and other noninterest income in the income statement.


(10)	Included in net gains (losses) from equity securities in the income statement.

(continued on following page)

~~Note 13: Fair Values of Assets and Liabilities (continued~~)

(continued from previous page)

Table ~~13.11~~16.10 presents gross purchases, sales, issuances and settlements related to the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the first ~~nine months~~half of ~~2016.~~2018.

Table ~~13.11:~~16.10:Gross Purchases, Sales, Issuances and Settlements – Level 3 – ~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2018



(in millions)	Purchases		Sales		Issuances	Settlements		Net
Six months ended June 30, 2018
Trading debt securities:
Securities of U.S. states and political subdivisions	$	—	—		—	—		—
Collateralized loan obligations	271		(230	)	—	(100	)	(59	)
Corporate debt securities	8		(2	)	—	—		6
Other trading debt securities	—		—		—	—		—
Total trading debt securities	279		(232	)	—	(100	)	(53	)
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	—		(4	)	10	(96	)	(90	)
Mortgage-backed securities:
Residential	—		—		—	—		—
Commercial	—		—		—	(21	)	(21	)
Total mortgage-backed securities	—		—		—	(21	)	(21	)
Corporate debt securities	31		—		—	(1	)	30
Collateralized loan and other debt obligations	—		—		—	(47	)	(47	)
Asset-backed securities:
Other asset-backed securities	—		(8	)	58	(215	)	(165	)
Total asset-backed securities	—		(8	)	58	(215	)	(165	)
Total available-for-sale debt securities	31		(12	)	68	(380	)	(293	)
Mortgage loans held for sale	47		(151	)	167	(75	)	(12	)
Loans held for sale	—		(16	)	—	—		(16	)
Loans	1		—		8	(63	)	(54	)
Mortgage servicing rights (residential) (1)	—		(5	)	1,059	—		1,054
Net derivative assets and liabilities:
Interest rate contracts	—		—		—	296		296
Commodity contracts	—		—		—	(26	)	(26	)
Equity contracts	—		—		—	64		64
Foreign exchange contracts	—		—		—	3		3
Credit contracts	8		(4	)	—	(12	)	(8	)
Total derivative contracts	8		(4	)	—	325		329
Equity securities:
Nonmarketable	—		(17	)	—	(79	)	(96	)
Total equity securities	—		(17	)	—	(79	)	(96	)
Other liabilities	—		—		—	—		—

(in millions) Purchases
Sales
Issuances
Settlements
Net
Nine months ended September 30, 2016
Trading assets:
Securities of U.S. states and political subdivisions $ 2
(2 ) —
(5 ) (5 )
Collateralized loan obligations 265
(285 ) —
—
(20 )
Corporate debt securities 32
(35 ) —
—
(3 )
Mortgage-backed securities —
—
—
—
—
Asset-backed securities —
—
—
—
—
Equity securities —
(1 ) —
—
(1 )
Total trading securities 299
(323 ) —
(5 ) (29 )
Other trading assets —
—
—
—
—
Total trading assets 299
(323 ) —
(5 ) (29 )
Available-for-sale securities:
Securities of U.S. states and political subdivisions 28
(7 ) 475
(389 ) 107
Mortgage-backed securities:
Residential —
—
—
—
—
Commercial 22
—
—
(3 ) 19
Total mortgage-backed securities 22
—
—
(3 ) 19
Corporate debt securities 35
(4 ) —
(2 ) 29
Collateralized loan and other debt obligations 610
(49 ) —
(190 ) 371
Asset-backed securities:
Automobile loans and leases —
—
—
—
—
Other asset-backed securities —
(28 ) 214
(316 ) (130 )
Total asset-backed securities —
(28 ) 214
(316 ) (130 )
Total debt securities 695
(88 ) 689
(900 ) 396
Marketable equity securities:
Perpetual preferred securities —
—
—
—
—
Other marketable equity securities —
—
—
—
—
Total marketable equity securities —
—
—
—
—
Total available-for-sale securities 695
(88 ) 689
(900 ) 396
Mortgages held for sale 67
(424 ) 443
(141 ) (55 )
Loans 12
—
248
(759 ) (499 )
Mortgage servicing rights (residential) (1) —
(19 ) 1,452
1
1,434
Net derivative assets and liabilities:
Interest rate contracts —
—
—
(1,411 ) (1,411 )
Commodity contracts —
—
—
(2 ) (2 )
Equity contracts 29
(146 ) —
(20 ) (137 )
Foreign exchange contracts —
—
—
—
—
Credit contracts 5
(2 ) —
45
48
Other derivative contracts —
—
—
—
—
Total derivative contracts 34
(148 ) —
(1,388 ) (1,502 )
Other assets 211
—
—
—
211
Short sale liabilities —
—
—
—
—
Other liabilities —
—
—
25
25


(1)	For more information on the changes in mortgage servicing rights, see Note 811 (Mortgage Banking Activities).

Table ~~13.12~~16.11 and Table ~~13.13~~16.12 provide quantitative information about the valuation techniques and significant unobservable inputs used in the valuation of substantially all of our Level 3 assets and liabilities measured at fair value on a recurring basis for which we use an internal model.

The significant unobservable inputs for Level 3 assets and liabilities that are valued using fair values obtained from third party vendors are not included in the table, as the specific inputs applied are not provided by the vendor. In addition, the table excludes the valuation techniques and significant unobservable inputs for certain classes of Level 3 assets and liabilities measured using an internal model that we consider, both individually and in the aggregate, insignificant relative to our overall Level 3 assets and liabilities. We made this determination

based upon an evaluation of each class, which considered the magnitude of the positions, nature of the unobservable inputs and potential for significant changes in fair value due to changes in those inputs. For information on how changes in significant unobservable inputs affect the fair values of Level 3 assets and liabilities, see Note 1718 (Fair Values of Assets and Liabilities) ~~to Financial Statements~~ in our ~~2016~~2018 Form 10-K.

Note 16: Fair Values of Assets and Liabilities (continued)

Table ~~13.12:~~16.11:Valuation Techniques – Recurring Basis – ~~September~~June 30, ~~2017~~

2019


($ in millions, except cost to service amounts)	Fair Value Level 3				Valuation Technique(s)	Significant Unobservable Input	Range of Inputs							Weighted Average (1)		Fair Value Level 3				Valuation Technique(s)	Significant Unobservable Input	Range of Inputs							Weighted Average (1)
September 30, 2017
Trading and available-for-sale securities:
June 30, 2019
Trading and available-for-sale debt securities:
Securities of U.S. states and political subdivisions:
Government, healthcare and other revenue bonds	$	630			Discounted cash flow	Discount rate	1.3			-	5.4		%	2.4		$	353			Discounted cash flow	Discount rate	1.5			-	6.2		%	3.0
Other municipal bonds	29				Discounted cash flow	Discount rate	4.2			-	4.3			4.3
	50				Vendor priced											38				Vendor priced
Collateralized loan and other debt obligations (2)	383				Market comparable pricing	Comparability adjustment	(16.5		)	-	24.0			3.1		249				Market comparable pricing	Comparability adjustment	(11.3		)	-	20.0			1.7
																649				Vendor priced
Corporate debt securities																232				Discounted cash flow	Discount rate	2.0				14.9			8.5
																66				Market comparable pricing	Comparability adjustment	(14.0		)		14.4			(2.8	)
	1,014				Vendor priced											129				Vendor priced
Asset-backed securities:
Diversified payment rights (3)	324				Discounted cash flow	Discount rate	2.1			-	3.7			2.8		132				Discounted cash flow	Discount rate	2.5			-	4.9			3.4
Other commercial and consumer	285			(4)	Discounted cash flow	Discount rate	3.3			-	4.7			3.9		194			(4)	Discounted cash flow	Discount rate	3.9			-	4.8			4.0
						Weighted average life	1.3			-	3.5		yrs	1.9							Weighted average life	1.3			-	1.9		yrs	1.8
	26				Vendor priced											15				Vendor priced
Mortgages held for sale (residential)	1,009				Discounted cash flow	Default rate	0.0			-	5.6		%	1.2
Mortgage loans held for sale (residential)																1,101				Discounted cash flow	Default rate	0.0			-	18.4		%	0.8
						Discount rate	1.1			-	7.1			5.3							Discount rate	3.0			-	6.3			4.6
						Loss severity	0.1			-	40.8			18.8							Loss severity	0.0			-	46.4			25.0
						Prepayment rate	6.5			-	15.8			9.2							Prepayment rate	4.3			-	14.4			6.1
	23				Market comparable pricing	Comparability adjustment	(53.3		)	-	(20.0	)		(43.2	)	14				Market comparable pricing	Comparability adjustment	(56.3		)	-	(25.0	)		(40.9	)
Loans	410			(5)	Discounted cash flow	Discount rate	2.8			-	7.3			4.1		202			(5)	Discounted cash flow	Discount rate	3.9			-	4.4			4.1
						Prepayment rate	8.5			-	100.0			92.4							Prepayment rate	4.4			-	100.0			85.6
						Loss severity	0.0			-	31.9			5.8							Loss severity	0.0			-	34.8			12.0
Mortgage servicing rights (residential)	13,338				Discounted cash flow	Cost to service per loan (6)	$	79		-	584			145		12,096				Discounted cash flow	Cost to service per loan (6)	$	63		-	482			104
						Discount rate	6.5			-	12.0		%	6.7							Discount rate	6.5			-	13.2		%	7.4
						Prepayment rate (7)	10.0			-	20.5			10.8							Prepayment rate (7)	10.6			-	24.6			12.2
Net derivative assets and (liabilities):
Interest rate contracts	89				Discounted cash flow	Default rate	0.0			-	5.0			1.7		111				Discounted cash flow	Default rate	0.0			-	5.0			2.0
						Loss severity	50.0			-	50.0			50.0							Loss severity	50.0			-	50.0			50.0
						Prepayment rate	2.8			-	12.5			10.1							Prepayment rate	2.8			-	25.0			15.3
Interest rate contracts: derivative loan commitments	25				Discounted cash flow	Fall-out factor	1.0			-	99.0			17.8		94				Discounted cash flow	Fall-out factor	1.0			-	99.0			19.5
						Initial-value servicing	(38.0		)	-	98.2		bps	27.9							Initial-value servicing	(40.5		)	-	67.1		bps	12.3
Equity contracts	105				Discounted cash flow	Conversion factor	(9.8		)	-	0.0		%	(7.8	)	146				Discounted cash flow	Conversion factor	(8.9		)	-	0.0		%	(8.3	)
						Weighted average life	0.3			-	2.3		yrs	1.4							Weighted average life	1.0			-	3.5		yrs	2.0
	(696		)		Option model	Correlation factor	(77.0		)	-	98.0		%	29.5		(374		)		Option model	Correlation factor	(77.0		)	-	98.5		%	63.9
						Volatility factor	5.0			-	100.0			19.2							Volatility factor	6.5			-	105.2			24.1
Credit contracts	(3		)		Market comparable pricing	Comparability adjustment	(25.8		)	-	15.7			(0.8	)	2				Market comparable pricing	Comparability adjustment	(48.3		)	-	29.6			(6.9	)
	56				Option model	Credit spread	0.0			-	12.2			1.2		43				Option model	Credit spread	0.1			-	21.4			0.9
						Loss severity	12.0			-	60.0			48.8							Loss severity	13.0			-	60.0			45.6
Other assets: nonmarketable equity investments	10				Discounted cash flow	Discount rate	5.0			-	10.3			9.7
						Volatility Factor	0.5			-	1.3			0.8
	4,463				Market comparable pricing	Comparability adjustment	(19.1		)	-	(3.3	)		(14.6	)
Nonmarketable equity securities																7,110				Market comparable pricing	Comparability adjustment	(21.7		)	-	(6.3	)		(16.6	)

Insignificant Level 3 assets, net of liabilities	534			(8)												26			(8)
Total level 3 assets, net of liabilities	$	22,104		(9)												$	22,628		(9)


(1)	Weighted averages are calculated using outstanding unpaid principal balance for cash instruments, such as loans and securities, and notional amounts for derivative instruments.


(2)	Includes ~~$1.0 billion~~$649 million of collateralized debt obligations.


(3)	Securities backed by specified sources of current and future receivables generated from foreign originators.


(4)	~~A significant portion of the balance~~Predominantly consists of investments in asset-backed securities that are revolving in nature, for which the timing of advances and repayments of principal are uncertain.


(5)	Consists of reverse mortgage loans.


(6)	The high end of the range of inputs is for servicing modified loans. For non-modified loans the range is ~~$79~~$63 - ~~$282~~. $208.


(7)	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.

(8)

Represents the aggregate amount of Level 3 assets and liabilities measured at fair value on a recurring basis that are individually and in the aggregate insignificant. The amount includes ~~corporate debt securities,~~ mortgage-backed securities, other trading ~~assets,~~positions, other liabilities and certain net derivative assets and liabilities, such as commodity contracts and foreign exchange ~~contracts, and other derivative~~ contracts.


(9)	Consists of total Level 3 assets of ~~$24.1~~$24.9 billion and total Level 3 liabilities of ~~$2.0~~$2.3 billion,, before netting of derivative balances.

~~Note 13: Fair Values of Assets and Liabilities (continued~~)

Table ~~13.13:~~16.12:Valuation Techniques – Recurring Basis – December 31, ~~2016~~2018


($ in millions, except cost to service amounts)	Fair Value Level 3				Valuation Technique(s)	Significant Unobservable Input		Range of Inputs							Weighted Average (1)		Fair Value Level 3				Valuation Technique(s)	Significant Unobservable Input	Range of Inputs							Weighted Average (1)
December 31, 2016
Trading and available-for-sale securities:
December 31, 2018
Trading and available-for-sale debt securities:
Securities of U.S. states and political subdivisions:
Government, healthcare and other revenue bonds	$	906			Discounted cash flow	Discount rate		1.1			-	5.6		%	2.0		$	404			Discounted cash flow	Discount rate	2.1			-	6.4		%	3.4
Other municipal bonds	29				Discounted cash flow	Discount rate		3.7			-	4.9			4.5
						Weighted average life		3.6			-	3.6		yrs	3.6
	208				Vendor priced												43				Vendor priced
Collateralized loan and other debt obligations (2)	309				Market comparable pricing	Comparability adjustment		(15.5		)	-	20.3		%	2.9		298				Market comparable pricing	Comparability adjustment	(13.5		)	-	22.1			3.2
																	739				Vendor priced
Corporate debt securities																	220				Discounted cash flow	Discount rate	4.0				11.7			8.5
																	56				Market comparable pricing	Comparability adjustment	(11.3		)		16.6			(1.4	)
	879				Vendor priced												128				Vendor priced
Asset-backed securities:
Diversified payment rights (3)	443				Discounted cash flow	Discount rate		1.9			-	4.8			3.3		171				Discounted cash flow	Discount rate	3.4			-	6.2			4.4
Other commercial and consumer	492			(4)	Discounted cash flow	Discount rate		3.0			-	4.6			3.9		198			(4)	Discounted cash flow	Discount rate	4.6			-	5.2			4.7
						Weighted average life		0.8			-	4.2		yrs	2.9							Weighted average life	1.1			-	1.5		yrs	1.1
	27				Vendor priced												20				Vendor priced
Mortgages held for sale (residential)	955				Discounted cash flow	Default rate		0.5			-	7.9		%	1.9
Mortgage loans held for sale (residential)																	982				Discounted cash flow	Default rate	0.0			-	15.6		%	0.8
						Discount rate		1.1			-	6.9			5.1							Discount rate	1.1			-	6.6			5.5
						Loss severity		0.1			-	42.5			26.9							Loss severity	—			-	43.3			23.4
						Prepayment rate		6.3			-	17.1			10.0							Prepayment rate	3.2			-	13.4			4.6
	30				Market comparable pricing	Comparability adjustment		(53.3		)	-	0.0			(37.8	)	15				Market comparable pricing	Comparability adjustment	(56.3		)	-	(6.3	)		(36.3	)
Loans	758			(5)	Discounted cash flow	Discount rate		0.0			-	3.9			0.6		244			(5)	Discounted cash flow	Discount rate	3.4			-	6.4			4.2
						Prepayment rate		0.4			-	100.0			83.7							Prepayment rate	2.9			-	100.0			87.2
						Utilization rate		0.0			-	0.8			0.1							Loss severity	0.0			-	34.8			10.2
Mortgage servicing rights (residential)	12,959				Discounted cash flow	Cost to service per loan (6)		$	79		-	598			155		14,649				Discounted cash flow	Cost to service per loan (6)	$	62		-	507			106
						Discount rate		6.5			-	18.4		%	6.8							Discount rate	7.1			-	15.3		%	8.1
						Prepayment rate (7)		9.4			-	20.6			10.3							Prepayment rate (7)	9.0			-	23.5			9.9
Net derivative assets and (liabilities):
Interest rate contracts	127				Discounted cash flow	Default rate		0.1			-	6.8			2.1		(35		)		Discounted cash flow	Default rate	0.0			-	5.0			2.0
						Loss severity		50.0			-	50.0			50.0							Loss severity	50.0			-	50.0			50.0
						Prepayment rate		2.8			-	12.5			9.6							Prepayment rate	2.8			-	25.0			13.8
Interest rate contracts: derivative loan commitments	(6		)		Discounted cash flow	Fall-out factor		1.0			-	99.0			15.0		60				Discounted cash flow	Fall-out factor	1.0			-	99.0			19.4
						Initial-value servicing		(23.0		)	-	131.2		bps	56.8							Initial-value servicing	(36.6		)	-	91.7		bps	18.5
Equity contracts	79				Discounted cash flow	Conversion factor		(10.6		)	-	0.0		%	(7.9	)	104				Discounted cash flow	Conversion factor	(9.3		)	-	0.0		%	(7.8	)
						Weighted average life	��	1.0			-	3.0		yrs	2.0							Weighted average life	1.0			-	3.0		yrs	1.8
	(346		)		Option model	Correlation factor		(65.0		)	-	98.5		%	39.9		(121		)		Option model	Correlation factor	(77.0		)	-	99.0		%	21.6
						Volatility factor		6.5			-	100.0			20.7							Volatility factor	6.5			-	100.0			21.8
Credit contracts	(28		)		Market comparable pricing	Comparability adjustment		(27.7		)	-	21.3			0.02		3				Market comparable pricing	Comparability adjustment	(15.5		)	-	40.0			3.5
	105				Option model	Credit spread		0.0			-	11.6			1.2		32				Option model	Credit spread	0.9			-	21.5			1.3
						Loss severity		12.0			-	60.0			50.4							Loss severity	13.0			-	60.0			45.2
Other assets: nonmarketable equity investments	21				Discounted cash flow	Discount rate		5.0			-	10.3			8.7
						Volatility Factor		0.3			-	2.4			1.1
	3,238				Market comparable pricing	Comparability adjustment		(22.1		)	-	(5.5	)		(16.4	)
Nonmarketable equity securities																	5,468				Market comparable pricing	Comparability adjustment	(20.6		)	-	(4.3	)		(15.8	)

Insignificant Level 3 assets, net of liabilities	570			(8)													93			(8)
Total level 3 assets, net of liabilities	$	21,755		(9)													$	23,771		(9)


(1)	Weighted averages are calculated using outstanding unpaid principal balance for cash instruments, such as loans and securities, and notional amounts for derivative instruments.


(2)	Includes ~~$847~~$800 million of collateralized debt obligations.


(3)	Securities backed by specified sources of current and future receivables generated from foreign originators.


(4)	~~A significant portion of the balance~~Predominantly consists of investments in asset-backed securities that are revolving in nature, for which the timing of advances and repayments of principal are uncertain.


(5)	Consists of reverse mortgage loans.


(6)	The high end of the range of inputs is for servicing modified loans. For non-modified loans the range is ~~$79~~$62 - ~~$293~~. $204.


(7)	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.

(8)


(9)	Consists of total Level 3 assets of ~~$23.5~~$25.3 billion and total Level 3 liabilities of ~~$1.7~~$1.6 billion,, before netting of derivative balances.

Note 16: Fair Values of Assets and Liabilities (continued)

The valuation techniques used for our Level 3 assets and liabilities, as presented in the previous tables, are described as follows:

~~Discounted cash flow~~ – Discounted cash flow valuation techniques generally consist of developing an estimate of future cash flows that are expected to occur over the life of an instrument and then discounting those cash flows at a rate of return that results in the fair value amount.

~~Market comparable pricing~~ – Market comparable pricing valuation techniques are used to determine the fair value of certain instruments by incorporating known inputs, such as recent transaction prices, pending transactions, or prices of other similar investments that require significant adjustment to reflect differences in instrument characteristics.

~~Option model~~ – Option model valuation techniques are generally used for instruments in which the holder has a contingent right or obligation based on the occurrence of a future event, such as the price of a referenced asset going above or below a predetermined strike price. Option models estimate the likelihood of the specified event occurring by incorporating assumptions such as volatility estimates, price of the underlying instrument and expected rate of return.

~~Vendor-priced~~ – Prices obtained from third party pricing vendors or brokers that are used to record the fair value of the asset or liability for which the related valuation technique and significant unobservable inputs are not provided.


•	Discounted cash flow – Discounted cash flow valuation techniques generally consist of developing an estimate of future cash flows that are expected to occur over the life of an instrument and then discounting those cash flows at a rate of return that results in the fair value amount.


•	Market comparable pricing – Market comparable pricing valuation techniques are used to determine the fair value of certain instruments by incorporating known inputs, such as recent transaction prices, pending transactions, or prices of other similar investments that require significant adjustment to reflect differences in instrument characteristics.

•

Option model – Option model valuation techniques are generally used for instruments in which the holder has a contingent right or obligation based on the occurrence of a future event, such as the price of a referenced asset going above or below a predetermined strike price. Option models estimate the likelihood of the specified event occurring by incorporating assumptions such as volatility estimates, price of the underlying instrument and expected rate of return.


•	Vendor-priced – Prices obtained from third party pricing vendors or brokers that are used to record the fair value of the asset or liability for which the related valuation technique and significant unobservable inputs are not provided.

Significant unobservable inputs presented in the previous tables are those we consider significant to the fair value of the Level 3 asset or liability. We consider unobservable inputs to be significant if by their exclusion the fair value of the Level 3 asset or liability would be impacted by a predetermined percentage change. We also consider qualitative factors, such as nature of the instrument, type of valuation technique used, and the significance of the unobservable inputs relative to other inputs used within the valuation. Following is a description of the significant unobservable inputs provided in the table.


•	Comparability adjustment – is an adjustment made to observed market data, such as a transaction price in order to reflect dissimilarities in underlying collateral, issuer, rating, or other factors used within a market valuation approach, expressed as a percentage of an observed price.


•	Conversion Factor – is the risk-adjusted rate in which a particular instrument may be exchanged for another instrument upon settlement, expressed as a percentage change from a specified rate.


•	Correlation factor – is the likelihood of one instrument changing in price relative to another based on an established relationship expressed as a percentage of relative change in price over a period over time.

~~Comparability adjustment~~ – is an adjustment made to observed market data, such as a transaction price in order to reflect dissimilarities in underlying collateral, issuer, rating, or other factors used within a market valuation approach, expressed as a percentage of an observed price.

~~Conversion Factor~~ ~~– is the risk-adjusted rate in which a particular instrument may be exchanged for another instrument upon settlement, expressed as a percentage change from a specified rate.~~

~~Correlation factor~~ ~~– is the likelihood of one instrument changing in price relative to another based on an established relationship expressed as a percentage of relative change in price over a period over time.~~


•	Cost to service – is the expected cost per loan of servicing a portfolio of loans, which includes estimates for unreimbursed expenses (including delinquency and foreclosure costs) that may occur as a result of servicing such loan portfolios.


•	Credit spread – is the portion of the interest rate in excess of a benchmark interest rate, such as Overnight Index Swap (OIS), LIBOR or U.S. Treasury rates, that when applied to an investment captures changes in the obligor’s creditworthiness.


•	Default rate – is an estimate of the likelihood of not collecting contractual amounts owed expressed as a constant default rate (CDR).

•

Discount rate – is a rate of return used to calculate the present value of the future expected cash flow to arrive at the fair value of an instrument. The discount rate consists of a benchmark rate component and a risk premium component. The benchmark rate component, for example, OIS, LIBOR or U.S. Treasury rates, is generally observable within the market and is necessary to appropriately reflect the time value of money. The risk premium component reflects the amount of compensation market participants require due to the uncertainty inherent in the instruments’ cash flows resulting from risks such as credit and liquidity.


•	Fall-out factor – is the expected percentage of loans associated with our interest rate lock commitment portfolio that are likely of not funding.


•	Initial-value servicing – is the estimated value of the underlying loan, including the value attributable to the embedded servicing right, expressed in basis points of outstanding unpaid principal balance.


•	Loss severity – is the estimated percentage of contractual cash flows lost in the event of a default.


•	Prepayment rate – is the estimated rate at which forecasted prepayments of principal of the related loan or debt instrument are expected to occur, expressed as a constant prepayment rate (CPR).


•	Volatility factor – is the extent of change in price an item is estimated to fluctuate over a specified period of time expressed as a percentage of relative change in price over a period over time.


•	Weighted average life – is the weighted average number of years an investment is expected to remain outstanding based on its expected cash flows reflecting the estimated date the issuer will call or extend the maturity of the instrument or otherwise reflecting an estimate of the timing of an instrument’s cash flows whose timing is not contractually fixed.

~~Cost to service~~ – is the expected cost per loan of servicing a portfolio of loans, which includes estimates for unreimbursed expenses (including delinquency and foreclosure costs) that may occur as a result of servicing such loan portfolios.

~~Credit spread~~ – is the portion of the interest rate in excess of a benchmark interest rate, such as Overnight Index Swap (OIS), LIBOR or U.S. Treasury rates, that when applied to an investment captures changes in the obligor’s creditworthiness.

~~Default rate~~ ~~– is an estimate of the likelihood of not collecting contractual amounts owed expressed as a constant default rate (CDR).~~

~~Discount rate~~ – is a rate of return used to calculate the present value of the future expected cash flow to arrive at the fair value of an instrument. The discount rate consists of a benchmark rate component and a risk premium component. The benchmark rate component, for example, OIS, LIBOR or U.S. Treasury rates, is generally observable within the market and is necessary to appropriately reflect the time value of money. The risk premium component reflects the amount of compensation market participants require due to the uncertainty inherent in the instruments’ cash flows resulting from risks such as credit and liquidity.

~~Fall-out factor~~ ~~– is the expected percentage of loans associated with our interest rate lock commitment portfolio that are likely of not funding.~~

~~Initial-value servicing~~ ~~– is the estimated value of the underlying loan, including the value attributable to the embedded servicing right, expressed in basis points of outstanding unpaid principal balance.~~

~~Loss severity~~ ~~– is the estimated percentage of contractual cash flows lost in the event of a default.~~

~~Prepayment rate~~ ~~– is the estimated rate at which forecasted prepayments of principal of the related loan or debt instrument are expected to occur, expressed as a constant prepayment rate (CPR).~~

~~Utilization rate~~ ~~– is the estimated rate in which incremental portions of existing reverse mortgage credit lines are expected to be drawn by borrowers, expressed as an annualized rate.~~

~~Volatility factor~~ ~~– is the extent of change in price an item is estimated to fluctuate over a specified period of time expressed as a percentage of relative change in price over a period over time.~~

~~Weighted average life~~ – is the weighted average number of years an investment is expected to remain outstanding based on its expected cash flows reflecting the estimated date the issuer will call or extend the maturity of the instrument or otherwise reflecting an estimate of the timing of an instrument’s cash flows whose timing is not contractually fixed.

~~Note 13: Fair Values of Assets and Liabilities (continued~~)

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 use of the measurement alternative for nonmarketable equity securities.

~~LOCOM accounting or write-downs of individual assets.~~ Table ~~13.14~~16.13 provides the fair value hierarchy and ~~carrying amount~~fair value at the date of the nonrecurring fair value adjustment for all assets that were still held as of ~~September~~June 30, ~~2017,~~2019 and December 31, ~~2016,~~2018,and for which a nonrecurring fair value adjustment was recorded during the ~~periods presented.~~six months ended June 30, 2019 and year ended December 31, 2018.

Table ~~13.14:~~16.13:Fair Value on a Nonrecurring Basis


	September 30, 2017						December 31, 2016				June 30, 2019					December 31, 2018
(in millions)	Level 1		Level 2	Level 3	Total		Level 1	Level 2	Level 3	Total	Level 1		Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Mortgages held for sale (LOCOM) (1)	$	—	1,652	1,340	2,992		—	2,312	1,350	3,662
Mortgage loans held for sale (LOCOM) (1)											$	—	1,865	3,148	5,013	—	1,213	1,233	2,446
Loans held for sale	—		18	—	18		—	8	—	8	—		26	—	26	—	313	—	313
Loans:
Commercial	—		386	—	386		—	464	—	464	—		215	—	215	—	339	—	339
Consumer	—		460	10	470		—	822	7	829	—		164	1	165	—	346	1	347
Total loans (2)	—		846	10	856		—	1,286	7	1,293	—		379	1	380	—	685	1	686
Other assets - excluding nonmarketable equity investments at NAV (3)	—		198	146	344		—	233	412	645
Total included in the fair value hierarchy	$	—	2,714	1,496	4,210		—	3,839	1,769	5,608
Other assets - nonmarketable equity investments at NAV (4)					5					13
Nonmarketable equity securities (3)											—		812	83	895	—	774	157	931
Other assets (4)											—		153	—	153	—	149	6	155
Total assets at fair value on a nonrecurring basis					$	4,215				5,621	$	—	3,235	3,232	6,467	—	3,134	1,397	4,531


(1)	Consists of commercial mortgages and residential real estate 1-4 family first mortgage loans.


(2)	Represents the carrying value of loans for which nonrecurring adjustments are based on the appraised value of the collateral.


(3)	Consists of certain nonmarketable equity securities that are measured at fair value on a nonrecurring basis, including observable price adjustments for nonmarketable equity securities carried under the measurement alternative.


(4)	Includes the fair value of foreclosed real estate, other collateral owned and operating lease ~~assets and nonmarketable equity investments.~~assets.


~~(4)~~	Consists of certain nonmarketable equity investments that are measured at fair value on a nonrecurring basis using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

Table ~~13.15~~16.14 presents the increase (decrease) in value of certain assets held at the end of the respective reporting periods presented for which a nonrecurring fair value adjustment was recognized during the periods presented.

Table ~~13.15:~~16.14:Change in Value of Assets with Nonrecurring Fair Value Adjustment


	Nine months ended September 30,					Six months ended June 30,
(in millions)	2017			2016		2019			2018
Mortgages held for sale (LOCOM)	$	23		26
Mortgage loans held for sale (LOCOM)						$	18		13
Loans held for sale	(1		)	(21	)	(2		)	(78	)
Loans:
Commercial	(286		)	(736	)	(106		)	(138	)
Consumer	(371		)	(578	)	(121		)	(185	)
Total loans (1)	(657		)	(1,314	)	(227		)	(323	)
Other assets (2)	(179		)	(339	)
Nonmarketable equity securities (2)						264			(17	)
Other assets (3)						(29		)	(30	)
Total	$	(814	)	(1,648	)	$	24		(435	)


(1)	Represents write-downs of loans based on the appraised value of the collateral.


(2)	Includes impairment losses for nonmarketable equity securities accounted for under the equity method and measurement alternative. Also includes observable price adjustments for nonmarketable equity securities accounted for under the measurement alternative.


(3)	Includes the losses on foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets. ~~Also includes impairment losses on nonmarketable equity investments.~~

Note 16: Fair Values of Assets and Liabilities (continued)

Table ~~13.16~~16.15 provides quantitative information about the valuation techniques and significant unobservable inputs used in the valuation of substantially all of our Level 3 assets that are measured at fair value on a nonrecurring basis using an internal model. The table is limited to financial instruments that had nonrecurring fair value adjustments during the periods presented.

We have excluded from the table valuation techniques and significant unobservable inputs for certain classes of Level 3

assets measured using an internal model that we consider, both individually and in the aggregate, insignificant relative to our overall Level 3 nonrecurring measurements. We made this determination based upon an evaluation of each class that considered the magnitude of the positions, nature of the unobservable inputs and potential for significant changes in fair value due to changes in those inputs.

Table ~~13.16:~~16.15:Valuation Techniques – Nonrecurring Basis

($ in millions)
Fair Value
Level 3

Valuation Technique(s) (1)

Significant
Unobservable Inputs (1)
Range of inputs
Weighted
Average (2)

September 30, 2017
Residential mortgages held for sale (LOCOM) $ 1,340
(3) Discounted cash flow Default rate (4) 0.1 — 10.3 % 2.6 %
Discount rate 1.5 — 8.5
3.8
Loss severity 0.8 — 57.6
2.6
Prepayment rate (5) 5.3 — 100.0
49.8
Other assets: nonmarketable equity investments 34
Discounted cash flow Discount rate 5.0 — 10.5
9.4
Insignificant level 3 assets 122

Total $ 1,496

December 31, 2016
Residential mortgages held for sale (LOCOM) $ 1,350
(3) Discounted cash flow Default rate (4) 0.2 — 4.3 % 1.9 %
Discount rate 1.5 — 8.5
3.8
Loss severity 0.7 — 50.1
2.4
Prepayment rate (5) 3.0 — 100.0
50.7
Other assets: nonmarketable equity investments 220
Discounted cash flow Discount rate 4.7 — 9.3
7.3
Insignificant level 3 assets 199

Total $ 1,769



($ in millions)	Fair Value Level 3			Valuation Technique(s) (1)	Significant Unobservable Inputs (1)		Range of inputs				Weighted Average (2)
June 30, 2019
Residential mortgage loans held for sale (LOCOM)	$	3,148	(3)	Discounted cash flow	Default rate	(4)	0.3	—	5.7	%	1.4	%
					Discount rate		1.5	—	9.5		4.8
					Loss severity		0.5	—	62.3		24.7
					Prepayment rate	(5)	5.1	—	100.0		21.6
Nonmarketable equity securities	—			Discounted cash flow	Discount rate		—	—	—		—
Insignificant level 3 assets	84
Total	$	3,232
December 31, 2018
Residential mortgage loans held for sale (LOCOM)	$	1,233	(3)	Discounted cash flow	Default rate	(4)	0.2	—	2.3	%	1.4	%
					Discount rate		1.5	—	8.5		4.0
					Loss severity		0.5	—	66.0		1.7
					Prepayment rate	(5)	3.5	—	100.0		46.5
Nonmarketable equity securities	7			Discounted cash flow	Discount rate		10.5	—	10.5		10.5
Insignificant level 3 assets	157
Total	$	1,397


(1)	Refer to the narrative following Table ~~13.13~~16.12 for a definition of the valuation technique(s) and significant unobservable inputs.


(2)	For residential ~~MHFS,~~MLHFS, weighted averages are calculated using the outstanding unpaid principal balance of the loans.

(3)

Consists of approximately ~~$1.3~~$1.3 billion and $1.2 billion of government insured/guaranteed loans purchased from GNMA-guaranteed mortgage securitizations at ~~both~~ ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, respectively, and ~~$30~~$1.8 billion and $27 million, ~~and~~ ~~$33 million~~ respectively, of other mortgage loans that are not government insured/~~guaranteed at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, respectively.~~

guaranteed.


(4)	Applies only to non-government insured/guaranteed loans.


(5)	Includes the impact on prepayment rate of expected defaults for government insured/guaranteed loans, which impact the frequency and timing of early resolution of loans.

~~Alternative Investments~~

We hold certain nonmarketable equity investments for which we use NAV per share (or its equivalent) as a practical expedient for fair value measurements, including estimated fair values for investments accounted for under the cost method. The investments consist of private equity funds that invest in equity and debt securities issued by private and publicly-held companies. The fair values of these investments and related unfunded commitments totaled $27 million and $25 million, respectively, at September 30, 2017, and $48 million and $37 million, respectively, at December 31, 2016. The investments do not allow redemptions. We receive distributions as the underlying assets of the funds liquidate, which we expect to occur through 2025.

~~Note 13: Fair Values of Assets and Liabilities (continued~~)

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. For more information, including the basis for our fair value option elections, see Note 1718 (Fair Values of Assets and Liabilities) ~~to Financial Statements~~ in our ~~2016~~2018 Form 10-K.

Table ~~13.17~~16.16 reflects differences between the fair value carrying amount of the assets for which we have elected the fair value option and the contractual aggregate unpaid principal amount at maturity.

Table ~~13.17:~~16.16:Fair Value Option

   September 30, 2017 December 31, 2016
(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

Trading assets – loans:
     Total loans $ 1,182
1,231
(49 ) 1,332
1,418
(86 )
     Nonaccrual loans 65
84
(19 ) 100
115
(15 )
Mortgages held for sale:
Total loans 16,484
16,087
397
22,042
21,961
81
Nonaccrual loans 120
159
(39 ) 136
182
(46 )
Loans 90 days or more past due and still accruing 13
16
(3 ) 12
16
(4 )
Loans held for sale:
Total loans —
6
(6 ) —
6
(6 )
Nonaccrual loans —
6
(6 ) —
6
(6 )
Loans:
Total loans 410
437
(27 ) 758
775
(17 )
Nonaccrual loans 267
293
(26 ) 297
318
(21 )
Other assets (1) 4,523
N/A
N/A
3,275
N/A
N/A


~~(1)~~	~~Consists of nonmarketable equity investments carried at fair value. See Note 6 (Other Assets) for more information.~~



	June 30, 2019					December 31, 2018
(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
Mortgage loans held for sale:
Total loans	$	16,343	15,906	437		11,771	11,573	198
Nonaccrual loans	130		155	(25	)	127	158	(31	)
Loans 90 days or more past due and still accruing	8		10	(2	)	7	9	(2	)
Loans held for sale:
Total loans	1,118		1,166	(48	)	1,469	1,536	(67	)
Nonaccrual loans	57		65	(8	)	21	32	(11	)
Loans:
Total loans	202		231	(29	)	244	274	(30	)
Nonaccrual loans	150		179	(29	)	179	208	(29	)

Note 16: Fair Values of Assets and Liabilities (continued)

The assets accounted for under the fair value option are initially measured at fair value. Gains and losses from initial measurement and subsequent changes in fair value are recognized in earnings. The changes in fair value related to initial

measurement and subsequent changes in fair value included in

earnings for these assets measured at fair value are shown in Table ~~13.18~~16.17 by income statement line item. Amounts recorded as interest income are excluded from Table 16.17.

Table ~~13.18:~~16.17:Fair Value Option – Changes in Fair Value Included in Earnings

   2017 2016
(in millions) Mortgage banking noninterest income

Net gains
(losses)
from
trading
activities

Other
noninterest
income

Mortgage
banking
noninterest
income

Net gains
(losses)
from
trading
activities

Other
noninterest
income

Quarter ended September 30,




Trading assets - loans $ —
6
—
—
21
1
Mortgages held for sale 400
—
—
563
—
—
Loans —
—
—
—
—
(25 )
Other assets —
—
522
—
—
383
Other interests held (1) —
(1 ) —
—
(3 ) —
Nine months ended September 30,
Trading assets – loans $ —
42
1
—
47
2
Mortgages held for sale 967
—
—
1,739
—
—
Loans —
—
—
—
—
(29 )
Other assets —
—
1,233
—
—
149
Other interests held (1) —
(5 ) —
—
(4 ) —



	2019					2018
(in millions)	Mortgage banking noninterest income		Net gains (losses) from trading activities		Other noninterest income	Mortgage banking noninterest income	Net gains (losses) from trading activities		Other noninterest income
Quarter ended June 30,
Mortgage loans held for sale	$	379	—		—	114	—		—
Loans held for sale	—		(4	)	—	—	9		—
Loans	—		—		1	—	—		—
Other interests held (1)	—		(1	)	—	—	(1	)	—
Six months ended June 30,
Mortgage loans held for sale	$	593	—		—	55	—		—
Loans held for sale	—		10		1	—	15		—
Loans	—		—		1	—	—		(1	)
Other interests held (1)	—		(2	)	—	—	(2	)	—


(1)	Includes retained interests in securitizations.

For performing loans, instrument-specific credit risk gains or losses were 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. Table ~~13.19~~16.18 shows the estimated gains and losses from earnings attributable to instrument-specific credit risk related to assets accounted for under the fair value option.

Table ~~13.19:~~16.18:Fair Value Option – Gains/Losses Attributable to Instrument-Specific Credit Risk



	Quarter ended June 30,					Six months ended June 30,
(in millions)	2019			2018		2019	2018
Gains (losses) attributable to instrument-specific credit risk:
Mortgage loans held for sale	$	16		(2	)	12	(1	)
Loans held for sale	(3		)	9		11	15
Total	$	13		7		23	14

   Quarter ended September 30, Nine months ended September 30,
(in millions) 2017
2016
2017
2016
Gains (losses) attributable to instrument-specific credit risk:


Trading assets – loans $ 6
21
42
47
Mortgages held for sale (4 ) 1
(9 ) (4 )
Total $ 2
22
33
43

Disclosures about Fair Value of Financial Instruments

Table ~~13.20~~16.19 is a summary of fair value estimates for financial instruments, excluding financial instruments recorded at fair value on a recurring basis, as they are included within Table ~~13.2~~16.2 in this Note. The carrying amounts in the following table are recorded on the balance sheet under the indicated ~~captions, except for nonmarketable equity investments, which are included in other assets.~~captions.

We have not included assets and liabilities that are not financial instruments in our disclosure, such as the value of the long-term relationships with our deposit, credit card and trust customers, amortized MSRs, premises and equipment, goodwill and other intangibles, deferred taxes and other liabilities.

The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company.

~~Note 13: Fair Values of Assets and Liabilities (continued~~)

Table ~~13.20:~~16.19:Fair Value Estimates for Financial Instruments



			Estimated fair value
(in millions)	Carrying amount		Level 1	Level 2	Level 3	Total
June 30, 2019
Financial assets
Cash and due from banks (1)	$	20,880	20,880	—	—	20,880
Interest-earning deposits with banks (1)	143,547		143,312	235	—	143,547
Federal funds sold and securities purchased under resale agreements (1)	112,119		—	112,119	—	112,119
Held-to-maturity debt securities	145,876		45,336	101,943	585	147,864
Mortgage loans held for sale	6,655		—	3,548	4,102	7,650
Loans held for sale	63		—	63	—	63
Loans, net (2)	920,977		—	49,839	878,601	928,440
Nonmarketable equity securities (cost method)	5,622		—	—	5,654	5,654
Total financial assets	$	1,355,739	209,528	267,747	888,942	1,366,217
Financial liabilities
Deposits (3)	$	139,343	—	106,653	32,549	139,202
Short-term borrowings	115,344		—	115,345	—	115,345
Long-term debt (4)	241,441		—	242,529	1,626	244,155
Total financial liabilities	$	496,128	—	464,527	34,175	498,702
December 31, 2018
Financial assets
Cash and due from banks (1)	$	23,551	23,551	—	—	23,551
Interest-earning deposits with banks (1)	149,736		149,542	194	—	149,736
Federal funds sold and securities purchased under resale agreements (1)	80,207		—	80,207	—	80,207
Held-to-maturity debt securities	144,788		44,339	97,275	501	142,115
Mortgage loans held for sale	3,355		—	2,129	1,233	3,362
Loans held for sale	572		—	572	—	572
Loans, net (2)	923,703		—	45,190	872,725	917,915
Nonmarketable equity securities (cost method)	5,643		—	—	5,675	5,675
Total financial assets	$	1,331,555	217,432	225,567	880,134	1,323,133
Financial liabilities
Deposits (3)	$	130,645	—	107,448	22,641	130,089
Short-term borrowings	105,787		—	105,789	—	105,789
Long-term debt (4)	229,008		—	225,904	2,230	228,134
Total financial liabilities	$	465,440	—	439,141	24,871	464,012

Estimated fair value
(in millions) Carrying amount
Level 1
Level 2
Level 3
Total
September 30, 2017
Financial assets
Cash and due from banks (1) $ 19,206
19,206
—
—
19,206
Federal funds sold, securities purchased under resale agreements and other short-term investments (1) 273,105
206,073
66,963
69
273,105
Held-to-maturity securities 142,423
45,282
96,627
909
142,818
Mortgages held for sale (2) 3,525
—
2,189
1,340
3,529
Loans held for sale 157
—
157
—
157
Loans, net (3) 921,420
—
54,106
881,812
935,918
Nonmarketable equity investments (cost method)
Excluding investments at NAV 7,642
—
23
8,084
8,107
Total financial assets included in the fair value hierarchy 1,367,478
270,561
220,065
892,214
1,382,840
Investments at NAV (4) 25
27
Total financial assets $ 1,367,503

1,382,867
Financial liabilities
Deposits $ 1,306,706
—
1,285,239
21,455
1,306,694
Short-term borrowings (1) 93,811
—
93,811
—
93,811
Long-term debt (5) 238,854
—
240,846
2,306
243,152
Total financial liabilities $ 1,639,371

—

1,619,896

23,761
1,643,657
December 31, 2016
Financial assets
Cash and due from banks (1) $ 20,729
20,729
—
—
20,729
Federal funds sold, securities purchased under resale agreements and other short-term investments (1) (6) 266,038
207,003
58,953
82
266,038
Held-to-maturity securities 99,583
45,079
51,706
2,370
99,155
Mortgages held for sale (2) 4,267
—
2,927
1,350
4,277
Loans held for sale 80
—
81
—
81
Loans, net (3) 936,358
—
60,245
887,589
947,834
Nonmarketable equity investments (cost method)
Excluding investments at NAV 8,362
—
18
8,924
8,942
Total financial assets included in the fair value hierarchy 1,335,417
272,811
173,930
900,315
1,347,056
Investments at NAV (4) 35

48
Total financial assets $ 1,335,452

1,347,104
Financial liabilities
Deposits $ 1,306,079
—
1,282,158
23,995
1,306,153
Short-term borrowings (1) 96,781
—
96,781
—
96,781
Long-term debt (5) 255,070
—
245,704
10,075
255,779
Total financial liabilities $ 1,657,930

—

1,624,643

34,070
1,658,713


(1)	Amounts consist of financial instruments for which carrying value approximates fair value.


(2)	Excludes ~~MHFS for which we elected the fair value option.~~lease financing with a carrying amount of $19.0 billion and $19.7 billion at June 30, 2019, and December 31, 2018, respectively.


(3)	Excludes ~~loans for which the fair value option was elected~~deposit liabilities with no defined or contractual maturity of $1.1 trillion and ~~also excludes lease financing with a carrying amount of~~ ~~$19.2 billion~~$1.2 trillion at June 30, 2019 and ~~$19.3 billion~~ at ~~September 30, 2017, and~~ December 31, ~~2016~~,2018, respectively.


(4)	Consists of certain nonmarketable equity investments for which estimated fair values are determined using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.


~~(5)~~	Excludes capital lease obligations under capital leases of ~~$39~~$35 million and $7$36 million at ~~September~~June 30, ~~2017~~,2019, and December 31, ~~2016~~,2018, respectively.


~~(6)~~	~~The fair value classification level of certain interest-earning deposits have been reclassified to conform with the current period end classification.~~

Loan commitments, standby letters of credit and commercial and similar letters of credit are not included in ~~the table above.~~Table 16.19. 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 ~~$1.1 billion and $1.2~~$1.0 billion at ~~September~~both June 30, ~~2017,~~2019, and December 31, ~~2016, respectively.~~

2018.

Note 17: Preferred Stock (continued)

Note ~~14:~~17: Preferred Stock

We are authorized to issue 20 million shares of preferred stock and 4 million shares of preference stock, both without par value. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference but have no general voting rights. We have not issued any preference shares under

this authorization. If issued, preference shares would be limited to one vote per share. Our total authorized, issued and outstanding preferred stock is presented in the following two tables along with the Employee Stock Ownership Plan (ESOP) Cumulative Convertible Preferred Stock.

Table ~~14.1:~~17.1:Preferred Stock Shares


	September 30, 2017			December 31, 2016			June 30, 2019			December 31, 2018
	Liquidation preference per share		Shares authorized and designated	Liquidation preference per share		Shares authorized and designated	Liquidation preference per share		Shares authorized and designated	Liquidation preference per share		Shares authorized and designated
DEP Shares
Dividend Equalization Preferred Shares (DEP)	$	10	97,000	$	10	97,000	$	10	97,000	$	10	97,000
Series H
Series I
Floating Class A Preferred Stock (1)	—		—	20,000		50,000	100,000		25,010	100,000		25,010
Series I
Floating Class A Preferred Stock	100,000		25,010	100,000		25,010
Series J
8.00% Non-Cumulative Perpetual Class A Preferred Stock	1,000		2,300,000	1,000		2,300,000
Series K
7.98% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock	1,000		3,500,000	1,000		3,500,000
Floating Non-Cumulative Perpetual Class A Preferred Stock (2)							1,000		3,500,000	1,000		3,500,000
Series L
7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock	1,000		4,025,000	1,000		4,025,000	1,000		4,025,000	1,000		4,025,000
Series N
5.20% Non-Cumulative Perpetual Class A Preferred Stock	25,000		30,000	25,000		30,000	25,000		30,000	25,000		30,000
Series O
5.125% Non-Cumulative Perpetual Class A Preferred Stock	25,000		27,600	25,000		27,600	25,000		27,600	25,000		27,600
Series P
5.25% Non-Cumulative Perpetual Class A Preferred Stock	25,000		26,400	25,000		26,400	25,000		26,400	25,000		26,400
Series Q
5.85% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock	25,000		69,000	25,000		69,000	25,000		69,000	25,000		69,000
Series R
6.625% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock	25,000		34,500	25,000		34,500	25,000		34,500	25,000		34,500
Series S
5.90% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock	25,000		80,000	25,000		80,000	25,000		80,000	25,000		80,000
Series T
6.00% Non-Cumulative Perpetual Class A Preferred Stock	25,000		32,200	25,000		32,200	25,000		32,200	25,000		32,200
Series U
5.875% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock	25,000		80,000	25,000		80,000	25,000		80,000	25,000		80,000
Series V
6.00% Non-Cumulative Perpetual Class A Preferred Stock	25,000		40,000	25,000		40,000	25,000		40,000	25,000		40,000
Series W
5.70% Non-Cumulative Perpetual Class A Preferred Stock	25,000		40,000	25,000		40,000	25,000		40,000	25,000		40,000
Series X
5.50% Non-Cumulative Perpetual Class A Preferred Stock	25,000		46,000	25,000		46,000	25,000		46,000	25,000		46,000
Series Y
5.625% Non-Cumulative Perpetual Class A Preferred Stock	25,000		27,600	—		—	25,000		27,600	25,000		27,600
ESOP
Cumulative Convertible Preferred Stock (2)	—		1,774,652	—		1,439,181
Cumulative Convertible Preferred Stock (3)							—		1,213,418	—		1,406,460
Total			12,254,962			11,941,891			9,393,728			9,586,770

(1)

~~On January 26, 2017, we filed with~~Series I preferred stock issuance relates to trust preferred securities. See Note 10 (Securitizations and Variable Interest Entities) for additional information. This issuance has a floating interest rate that is the ~~Delaware Secretary~~greater of ~~State a Certificate Eliminating the Certificate of Designations with respect to the Series H preferred stock.~~three-month LIBOR plus 0.93% and 5.56975%.


(2)	Floating rate for Preferred Stock, Series K, is three-month LIBOR plus 3.77%.


(3)	See the ESOP Cumulative Convertible Preferred Stock section in this Note for additional information about the liquidation preference for the ESOP Cumulative Convertible Preferred Stock.

~~Note 14: Preferred Stock (continued~~)

Table ~~14.2:~~17.2:Preferred Stock – Shares Issued and Carrying Value



	June 30, 2019					December 31, 2018
(in millions, except shares)	Shares issued and outstanding	Liquidation preference value		Carrying value	Discount	Shares issued and outstanding	Liquidation preference value		Carrying value	Discount
DEP Shares
Dividend Equalization Preferred Shares (DEP)	96,546	$	—	—	—	96,546	$	—	—	—
Series I (1)(2)
Floating Class A Preferred Stock	25,010	2,501		2,501	—	25,010	2,501		2,501	—
Series K (1)(3)
Floating Non-Cumulative Perpetual Class A Preferred Stock	3,352,000	3,352		2,876	476	3,352,000	3,352		2,876	476
Series L (1)
7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock	3,967,995	3,968		3,200	768	3,968,000	3,968		3,200	768
Series N (1)
5.20% Non-Cumulative Perpetual Class A Preferred Stock	30,000	750		750	—	30,000	750		750	—
Series O (1)
5.125% Non-Cumulative Perpetual Class A Preferred Stock	26,000	650		650	—	26,000	650		650	—
Series P (1)
5.25% Non-Cumulative Perpetual Class A Preferred Stock	25,000	625		625	—	25,000	625		625	—
Series Q (1)
5.85% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock	69,000	1,725		1,725	—	69,000	1,725		1,725	—
Series R (1)
6.625% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock	33,600	840		840	—	33,600	840		840	—
Series S (1)
5.90% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock	80,000	2,000		2,000	—	80,000	2,000		2,000	—
Series T (1)
6.00% Non-Cumulative Perpetual Class A Preferred Stock	32,000	800		800	—	32,000	800		800	—
Series U (1)
5.875% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock	80,000	2,000		2,000	—	80,000	2,000		2,000	—
Series V (1)
6.00% Non-Cumulative Perpetual Class A Preferred Stock	40,000	1,000		1,000	—	40,000	1,000		1,000	—
Series W (1)
5.70% Non-Cumulative Perpetual Class A Preferred Stock	40,000	1,000		1,000	—	40,000	1,000		1,000	—
Series X (1)
5.50% Non-Cumulative Perpetual Class A Preferred Stock	46,000	1,150		1,150	—	46,000	1,150		1,150	—
Series Y (1)
5.625% Non-Cumulative Perpetual Class A Preferred Stock	27,600	690		690	—	27,600	690		690	—
ESOP
Cumulative Convertible Preferred Stock	1,213,418	1,214		1,214	—	1,406,460	1,407		1,407	—
Total	9,184,169	$	24,265	23,021	1,244	9,377,216	$	24,458	23,214	1,244

   September 30, 2017 December 31, 2016
(in millions, except shares)
Shares
issued and
outstanding

Liquidation preference
value

Carrying
value

Discount

Shares
issued and
outstanding

Liquidation preference
value

Carrying
value

Discount
DEP Shares







Dividend Equalization Preferred Shares (DEP) 96,546
$ —
—
—
96,546
$ —
—
—
Series I (1)

Floating Class A Preferred Stock 25,010
2,501
2,501
—
25,010
2,501
2,501
—
Series J (1)

8.00% Non-Cumulative Perpetual Class A Preferred Stock 2,150,375
2,150
1,995
155
2,150,375
2,150
1,995
155
Series K (1)

7.98% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock 3,352,000
3,352
2,876
476
3,352,000
3,352
2,876
476
Series L (1)

7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock 3,968,000
3,968
3,200
768
3,968,000
3,968
3,200
768
Series N (1)

5.20% Non-Cumulative Perpetual Class A Preferred Stock 30,000
750
750
—
30,000
750
750
—
Series O (1)

5.125% Non-Cumulative Perpetual Class A Preferred Stock 26,000
650
650
—
26,000
650
650
—
Series P (1)

5.25% Non-Cumulative Perpetual Class A Preferred Stock 25,000
625
625
—
25,000
625
625
—
Series Q (1)

5.85% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock 69,000
1,725
1,725
—
69,000
1,725
1,725
—
Series R (1)

6.625% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock 33,600
840
840
—
33,600
840
840
—
Series S (1)

5.90% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock 80,000
2,000
2,000
—
80,000
2,000
2,000
—
Series T (1)

6.00% Non-Cumulative Perpetual Class A Preferred Stock 32,000
800
800
—
32,000
800
800
—
Series U (1)

5.875% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock 80,000
2,000
2,000
—
80,000
2,000
2,000
—
Series V (1)

6.00% Non-Cumulative Perpetual Class A Preferred Stock 40,000
1,000
1,000
—
40,000
1,000
1,000
—
Series W (1)

5.70% Non-Cumulative Perpetual Class A Preferred Stock 40,000
1,000
1,000
—
40,000
1,000
1,000
—
Series X (1)

5.50% Non-Cumulative Perpetual Class A Preferred Stock 46,000
1,150
1,150
—
46,000
1,150
1,150
—
Series Y (1)

5.625% Non-Cumulative Perpetual Class A Preferred Stock 27,600
690
690
—
—
—
—
—
ESOP
Cumulative Convertible Preferred Stock 1,774,652
1,774
1,774
—
1,439,181
1,439
1,439
—
Total 11,895,783
$ 26,975
25,576
1,399
11,532,712
$ 25,950
24,551
1,399


(1)	Preferred shares qualify as Tier 1 capital.


(2)	Floating rate for Preferred Stock, Series I, is the greater of three-month LIBOR plus 0.93% and 5.56975%.


(3)	Floating rate for Preferred Stock, Series K, is three-month LIBOR plus 3.77%.

~~In April 2017, we issued 27.6 million Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A~~

Note 17: Preferred Stock ~~Series Y, for an aggregate public offering price of $690 million.~~

~~See Note 7 (Securitizations and Variable Interest Entities) for additional information on our trust preferred securities.~~

(continued)

ESOP CUMULATIVE CONVERTIBLE PREFERRED STOCKAll shares of our ESOP Cumulative Convertible Preferred Stock (ESOP Preferred Stock) were issued to a trustee acting on behalf of the Wells Fargo & Company 401(k) Plan (the 401(k) Plan). Dividends on the ESOP Preferred Stock are cumulative from the date of initial issuance and are payable quarterly at annual rates based upon the year of issuance. Each share of ESOP Preferred Stock released from the unallocated reserve of the 401(k) Plan is converted into shares of our common stock based on the stated

value of the ESOP Preferred Stock and the then current market price of our common stock. The ESOP Preferred Stock is also convertible at the option of the holder at any time, unless previously redeemed. We have the option to redeem the ESOP Preferred Stock at any time, in whole or in part, at a redemption price per share equal to the higher of (a) $1,000 per share plus accrued and unpaid dividends or (b) the fair market value, as defined in the Certificates of Designation for the ESOP Preferred Stock.

Table ~~14.3:~~17.3:ESOP Preferred Stock


	Shares issued and outstanding		Carrying value					Adjustable dividend rate			Shares issued and outstanding		Carrying value					Adjustable dividend rate
(in millions, except shares)	Sep 30, 2017	Dec 31, 2016	Sep 30, 2017			Dec 31, 2016		Minimum		Maximum	Jun 30, 2019	Dec 31, 2018	Jun 30, 2019			Dec 31, 2018		Minimum		Maximum
ESOP Preferred Stock
$1,000 liquidation preference per share
2018											336,945	336,945	337			337		7.00	%	8.00	%
2017	491,758	—	$	492		—		7.00	%	8.00	222,210	222,210	222			222		7.00		8.00
2016	322,826	358,528	323			358		9.30		10.30	227,450	233,835	228			234		9.30		10.30
2015	187,436	200,820	187			201		8.90		9.90	116,784	144,338	117			144		8.90		9.90
2014	237,151	255,413	237			255		8.70		9.70	136,151	174,151	136			174		8.70		9.70
2013	201,948	222,558	202			223		8.50		9.50	97,948	133,948	98			134		8.50		9.50
2012	128,634	144,072	129			144		10.00		11.00	49,134	77,634	49			78		10.00		11.00
2011	129,296	149,301	129			149		9.00		10.00	26,796	61,796	27			62		9.00		10.00
2010	75,603	90,775	75			91		9.50		10.50
2008	—	17,714	—			18		10.50		11.50
2010 (1)											—	21,603	—			22		9.50		10.50
Total ESOP Preferred Stock ~~(1)~~(2)	1,774,652	1,439,181	$	1,774		1,439					1,213,418	1,406,460	$	1,214		1,407
Unearned ESOP shares ~~(2)~~(3)			$	(1,904	)	(1,565	)						$	(1,292	)	(1,502	)


(1)	At ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, additional paid-in capital included~~ ~~$130 million~~ ~~and~~ ~~$126 million, respectively, related to~~In April 2019, all of the 2010 ESOP ~~preferred~~Preferred Stock was converted into common stock.


(2)	At June 30, 2019 and December 31, 2018, additional paid-in capital included $78 million and $95 million, respectively, related to ESOP preferred stock.


(3)	We recorded a corresponding charge to unearned ESOP shares in connection with the issuance of the ESOP Preferred Stock. The unearned ESOP shares are reduced as shares of the ESOP Preferred Stock are committed to be released.

Note 18: Revenue from Contracts with Customers

Our revenue includes net interest income on financial instruments and noninterest income. Table 18.1 presents our revenue by operating segment. The “Other” segment for each of the tables below includes the elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for WIM customers served through Community Banking distribution channels. For additional description of our operating segments, including

additional financial information and the underlying management accounting process, see Note 22 (Operating Segments).

We adopted ASU 2014-09 – Revenue from Contracts with Customers on a modified retrospective basis as of January 1, 2018. For details on the impact of the adoption of this ASU, see Note 1 (Summary of Significant Accounting Policies) in our 2018 Form 10-K.

Table 18.1: Revenue by Operating Segment



	Quarter ended June 30,
	Community Banking					Wholesale Banking				Wealth and Investment Management				Other				Consolidated Company
(in millions)	2019			2018		2019		2018		2019		2018		2019		2018		2019	2018
Net interest income (1)	$	7,066		7,346		4,535		4,693		1,037		1,111		(543	)	(609	)	12,095	12,541
Noninterest income:
Service charges on deposit accounts	704			632		502		530		4		5		(4	)	(4	)	1,206	1,163
Trust and investment fees:
Brokerage advisory, commissions and other fees	480			465		74		78		2,248		2,284		(484	)	(473	)	2,318	2,354
Trust and investment management	199			220		117		110		687		731		(208	)	(226	)	795	835
Investment banking	(18		)	—		475		485		(1	)	1		(1	)	—		455	486
Total trust and investment fees	661			685		666		673		2,934		3,016		(693	)	(699	)	3,568	3,675
Card fees	929			904		95		96		2		2		(1	)	(1	)	1,025	1,001
Other fees:
Lending related charges and fees (1)(2)	65			69		284		307		2		2		(2	)	(2	)	349	376
Cash network fees	117			118		—		2		—		—		—		—		117	120
Commercial real estate brokerage commissions	—			—		105		109		—		—		—		—		105	109
Wire transfer and other remittance fees	71			67		49		53		2		2		(1	)	(1	)	121	121
All other fees(1)	82			94		26		25		—		1		—		—		108	120
Total other fees	335			348		464		496		4		5		(3	)	(3	)	800	846
Mortgage banking (1)	655			695		104		75		(3	)	(2	)	2		2		758	770
Insurance (1)	11			16		75		78		17		18		(10	)	(10	)	93	102
Net gains (losses) from trading activities (1)	(11		)	24		226		154		13		13		1		—		229	191
Net gains (losses) on debt securities (1)	15			(2	)	5		42		—		1		—		—		20	41
Net gains from equity securities (1)	471			409		116		89		35		(203	)	—		—		622	295
Lease income (1)	—			—		424		443		—		—		—		—		424	443
Other income of the segment (1)	969			749		(147	)	(172	)	7		(15	)	(85	)	(77	)	744	485
Total noninterest income	4,739			4,460		2,530		2,504		3,013		2,840		(793	)	(792	)	9,489	9,012
Revenue	$	11,805		11,806		7,065		7,197		4,050		3,951		(1,336	)	(1,401	)	21,584	21,553
	Six months ended June 30,
	Community Banking					Wholesale Banking				Wealth and Investment Management				Other				Consolidated Company
(in millions)	2019			2018		2019		2018		2019		2018		2019		2018		2019	2018
Net interest income (1)	$	14,314		14,541		9,069		9,225		2,138		2,223		(1,115	)	(1,210	)	24,406	24,779
Noninterest income:
Service charges on deposit accounts	1,314			1,271		985		1,064		8		9		(7	)	(8	)	2,300	2,336
Trust and investment fees:
Brokerage advisory, commissions and other fees	929			943		152		145		4,372		4,628		(942	)	(959	)	4,511	4,757
Trust and investment management	409			453		231		223		1,363		1,474		(422	)	(465	)	1,581	1,685
Investment banking	(38		)	(10	)	887		925		4		1		(4	)	—		849	916
Total trust and investment fees	1,300			1,386		1,270		1,293		5,739		6,103		(1,368	)	(1,424	)	6,941	7,358
Card fees	1,787			1,725		181		183		3		3		(2	)	(2	)	1,969	1,909
Other fees:
Lending related charges and fees (1)(2)	130			145		566		611		4		4		(4	)	(4	)	696	756
Cash network fees	226			243		—		3		—		—		—		—		226	246
Commercial real estate brokerage commissions	—			—		186		194		—		—		—		—		186	194
Wire transfer and other remittance fees	135			130		97		105		4		4		(2	)	(2	)	234	237
All other fees (1)	176			157		52		55		—		1		—		—		228	213
Total other fees	667			675		901		968		8		9		(6	)	(6	)	1,570	1,646
Mortgage banking (1)	1,296			1,537		172		168		(6	)	(5	)	4		4		1,466	1,704
Insurance (1)	22			44		153		157		34		36		(20	)	(21	)	189	216
Net gains (losses) from trading activities (1)	(6		)	23		559		379		32		32		1		—		586	434
Net gains on debt securities (1)	52			(2	)	93		43		—		1		—		—		145	42
Net gains from equity securities (1)	1,072			1,093		193		182		171		(197	)	—		—		1,436	1,078
Lease income (1)	—			—		867		898		—		—		—		—		867	898
Other income of the segment (1)	1,737			1,343		(267	)	(84	)	2		(21	)	(154	)	(151	)	1,318	1,087
Total noninterest income	9,241			9,095		5,107		5,251		5,991		5,970		(1,552	)	(1,608	)	18,787	18,708
Revenue	$	23,555		23,636		14,176		14,476		8,129		8,193		(2,667	)	(2,818	)	43,193	43,487


(1)	Most of our revenue is not within the scope of Accounting Standards Update (ASU) 2014-09 – Revenue from Contracts with Customers, and additional details are included in other footnotes to our financial statements. The scope explicitly excludes net interest income as well as many other revenues for financial assets and liabilities, including loans, leases, securities, and derivatives.


(2)	Represents combined amount of previously reported “Charges and fees on loans” and “Letters of credit fees.”

Note 18: Revenue from Contracts with Customers (continued)

We provide services to customers which have related performance obligations that we complete to recognize revenue. Our revenues are generally recognized either immediately upon the completion of our service or over time as we perform services. Any services performed over time generally require that we render services each period and therefore we measure our progress in completing these services based upon the passage of time.

SERVICE CHARGES ON DEPOSIT ACCOUNTS are earned on depository accounts for commercial and consumer customers and

include fees for account and overdraft services. Account charges include fees for periodic account maintenance activities and event-driven services such as stop payment fees. Our obligation for event-driven services is satisfied at the time of the event when the service is delivered, while our obligation for maintenance services is satisfied over the course of each month. Our obligation for overdraft services is satisfied at the time of the overdraft.

Table 18.2 presents our service charges on deposit accounts by operating segment.

Table 18.2: Service Charges on Deposit Accounts by Operating Segment



	Quarter ended June 30,
	Community Banking			Wholesale Banking		Wealth and Investment Management		Other				Consolidated Company
(in millions)	2019		2018	2019	2018	2019	2018	2019		2018		2019	2018
Overdraft fees	$	496	416	1	1	1	1	—		—		498	418
Account charges	208		216	501	529	3	4	(4	)	(4	)	708	745
Service charges on deposit accounts	$	704	632	502	530	4	5	(4	)	(4	)	1,206	1,163
	Six months ended June 30,
	Community Banking			Wholesale Banking		Wealth and Investment Management		Other				Consolidated Company
(in millions)	2019		2018	2019	2018	2019	2018	2019		2018		2019	2018
Overdraft fees	$	913	828	2	3	1	1	—		—		916	832
Account charges	401		443	983	1,061	7	8	(7	)	(8	)	1,384	1,504
Service charges on deposit accounts	$	1,314	1,271	985	1,064	8	9	(7	)	(8	)	2,300	2,336

BROKERAGE ADVISORY, COMMISSIONS AND OTHER FEES are earned for providing full-service and discount brokerage services predominantly to retail brokerage clients. These revenues include fees earned on asset-based and transactional accounts and other brokerage advisory services.

Asset-based revenues are charged based on the market value of the client’s assets. The services and related obligations associated with certain of these revenues, which include investment advice, active management of client assets, or assistance with selecting and engaging a third-party advisory manager, are generally satisfied over a month or quarter. The remaining revenues include trailing commissions which are earned for selling shares to investors. Our obligation associated with earning trailing commissions is satisfied at the time shares are sold. However, these fees are received and recognized over time during the period the customer owns the shares and we remain the broker of record. The amount of trailing commissions is variable based on the length of time the customer holds the shares and on changes in the value of the underlying assets.

Transactional revenues are earned for executing transactions at the client’s direction. Our obligation is generally satisfied upon the execution of the transaction and the fees are based on the size and number of transactions executed.

Other revenues earned from other brokerage advisory services include omnibus and networking fees received from mutual fund companies in return for providing record keeping and other administrative services, and annual account maintenance fees charged to customers.

Table 18.3 presents our brokerage advisory, commissions and other fees by operating segment.

Table 18.3: Brokerage Advisory, Commissions and Other Fees by Operating Segment



	Quarter ended June 30,
	Community Banking			Wholesale Banking		Wealth and Investment Management		Other				Consolidated Company
(in millions)	2019		2018	2019	2018	2019	2018	2019		2018		2019	2018
Asset-based revenue (1)	$	369	365	—	—	1,698	1,722	(369	)	(365	)	1,698	1,722
Transactional revenue	94		83	10	16	390	400	(98	)	(92	)	396	407
Other revenue	17		17	64	62	160	162	(17	)	(16	)	224	225
Brokerage advisory, commissions and other fees	$	480	465	74	78	2,248	2,284	(484	)	(473	)	2,318	2,354
	Six months ended June 30,
	Community Banking			Wholesale Banking		Wealth and Investment Management		Other				Consolidated Company
(in millions)	2019		2018	2019	2018	2019	2018	2019		2018		2019	2018
Asset-based revenue (1)	$	712	736	—	—	3,278	3,465	(712	)	(736	)	3,278	3,465
Transactional revenue	183		176	26	28	777	839	(196	)	(192	)	790	851
Other revenue	34		31	126	117	317	324	(34	)	(31	)	443	441
Brokerage advisory, commissions and other fees	$	929	943	152	145	4,372	4,628	(942	)	(959	)	4,511	4,757


(1)	We earned trailing commissions of $289 million and $569 million for the second quarter and first half of 2019, respectively, and $321 million and $652 million for the second quarter and first half of 2018, respectively.

TRUST AND INVESTMENT MANAGEMENT FEES are earned for providing trust, investment management and other related services.

Investment management services include managing and administering assets, including mutual funds, and institutional separate accounts. Fees for these services are generally determined based on a tiered scale relative to the market value of assets under management (AUM). In addition to AUM, we have client assets under administration (AUA) that earn various administrative fees which are generally based on the extent of the services provided to administer the account. Services with AUM

and AUA-based fees are generally performed over time.

Trust services include acting as a trustee or agent for corporate trust, personal trust, and agency assets. Obligations for trust services are generally satisfied over time, while obligations for activities that are transactional in nature are satisfied at the time of the transaction.

Other related services include the custody and safekeeping of accounts. Our obligation for these services is generally satisfied over time.

Table 18.4 presents our trust and investment management fees by operating segment.

Table 18.4: Trust and Investment Management Fees by Operating Segment



	Quarter ended June 30,
	Community Banking					Wholesale Banking		Wealth and Investment Management		Other				Consolidated Company
(in millions)	2019			2018		2019	2018	2019	2018	2019		2018		2019	2018
Investment management fees	$	(1	)	—		—	—	501	531	—		—		500	531
Trust fees	200			232		83	82	175	185	(208	)	(226	)	250	273
Other revenue	—			(12	)	34	28	11	15	—		—		45	31
Trust and investment management fees	$	199		220		117	110	687	731	(208	)	(226	)	795	835
	Six months ended June 30,
	Community Banking					Wholesale Banking		Wealth and Investment Management		Other				Consolidated Company
(in millions)	2019			2018		2019	2018	2019	2018	2019		2018		2019	2018
Investment management fees	$	—		—		—	—	978	1,065	—		—		978	1,065
Trust fees	409			453		165	168	343	373	(422	)	(465	)	495	529
Other revenue	—			—		66	55	42	36	—		—		108	91
Trust and investment management fees	$	409		453		231	223	1,363	1,474	(422	)	(465	)	1,581	1,685

Note 18: Revenue from Contracts with Customers (continued)

INVESTMENT BANKING FEES are earned for underwriting debt and equity securities, arranging loan syndications and performing other advisory services. Our obligation for these services is generally satisfied at closing of the transaction. Substantially all of these fees are in the Wholesale Banking operating segment.

CARD FEES include credit and debit card interchange and network revenues and various card-related fees. Credit and debit card interchange and network revenues are earned on credit and debit card transactions conducted through payment networks such as Visa, MasterCard, and American Express. Our obligation is satisfied concurrently with the delivery of services on a daily basis.

Table 18.5 presents our card fees by operating segment.

Table 18.5: Card Fees by Operating Segment



	Quarter ended June 30,
	Community Banking			Wholesale Banking		Wealth and Investment Management		Other				Consolidated Company
(in millions)	2019		2018	2019	2018	2019	2018	2019		2018		2019	2018
Credit card interchange and network revenues (1)	$	209	211	95	96	2	2	(1	)	(1	)	305	308
Debit card interchange and network revenues	546		525	—	—	—	—	—		—		546	525
Late fees, cash advance fees, balance transfer fees, and annual fees	174		168	—	—	—	—	—		—		174	168
Card fees (1)	$	929	904	95	96	2	2	(1	)	(1	)	1,025	1,001
	Six months ended June 30,
	Community Banking			Wholesale Banking		Wealth and Investment Management		Other				Consolidated Company
(in millions)	2019		2018	2019	2018	2019	2018	2019		2018		2019	2018
Credit card interchange and network revenues (1)	$	398	382	181	183	3	3	(2	)	(2	)	580	566
Debit card interchange and network revenues	1,053		1,004	—	—	—	—	—		—		1,053	1,004
Late fees, cash advance fees, balance transfer fees, and annual fees	336		339	—	—	—	—	—		—		336	339
Card fees (1)	$	1,787	1,725	181	183	3	3	(2	)	(2	)	1,969	1,909


(1)	The cost of credit card rewards and rebates of $375 million and $729 million for the second quarter and first half of 2019, respectively, and $335 million and $678 million for the second quarter and first half of 2018, respectively, are presented net against the related revenues.

CASH NETWORK FEES are earned for processing ATM transactions. Our obligation is completed daily upon settlement of ATM transactions. All of these fees are in the Community Banking operating segment.

COMMERCIAL REAL ESTATE BROKERAGE COMMISSIONS are earned for assisting customers in the sale of real estate property. Our obligation is satisfied upon the successful brokering of a transaction. Fees are based on a fixed percentage of the sales price. All of these fees are in the Wholesale Banking operating segment.

WIRE TRANSFER AND OTHER REMITTANCE FEES consist of fees earned for funds transfer services and issuing cashier’s checks and money orders. Our obligation is satisfied at the time of the funds transfer services or upon issuance of the cashier’s check or money order. Substantially all of these fees are in the Community Banking and Wholesale Banking operating segments.

ALL OTHER FEES include various types of fees earned on services to customers which have related performance obligations that we complete to recognize revenue. A majority portion of the revenue is earned from providing business payroll services and merchant services, which are generally recognized over time as we perform the services. Most of these fees are in the Community Banking operating segment.

Note ~~15:~~19: Employee Benefits

We sponsor a frozen noncontributory qualified defined benefit retirement plan, ~~called~~ 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 22 (Employee Benefits and Other Expenses) in our 2018 Form 10-K.

Table ~~15.1~~19.1 presents the components of net periodic benefit cost.

Table ~~15.1:~~19.1:Net Periodic Benefit Cost



	2019						2018
	Pension benefits						Pension benefits
(in millions)	Qualified			Non-qualified	Other benefits		Qualified		Non-qualified	Other benefits
Quarter ended June 30,
Service cost	$	3		—	—		2		—	—
Interest cost (1)	104			5	6		98		6	5
Expected return on plan assets (1)	(142		)	—	(7	)	(161	)	—	(8	)
Amortization of net actuarial loss (gain) (1)	37			3	(4	)	33		3	(5	)
Amortization of prior service credit (1)	—			—	(3	)	—		—	(2	)
Settlement loss (1)	—			—	—		—		—	—
Net periodic benefit cost (income)	$	2		8	(8	)	(28	)	9	(10	)
Six months ended June 30,
Service cost	$	6		—	—		3		—	—
Interest cost (1)	209			11	11		196		11	10
Expected return on plan assets (1)	(284		)	—	(14	)	(321	)	—	(15	)
Amortization of net actuarial loss (gain) (1)	74			5	(8	)	66		6	(9	)
Amortization of prior service credit (1)	—			—	(5	)	—		—	(5	)
Settlement loss (1)	—			2	—		—		3	—
Net periodic benefit cost (income)	$	5		18	(16	)	(56	)	20	(19	)


(1)	Balances are reported in other noninterest expense on the consolidated statement of income.

   2017 2016
   Pension benefits
Pension benefits
(in millions) Qualified
Non-qualified

Other
benefits

Qualified
Non-qualified

Other
benefits

Quarter ended September 30,
Service cost $ 1
—
—
—
—
—
Interest cost 103
5
7
105
6
11
Expected return on plan assets (163 ) —
(7 ) (152 ) —
(8 )
Amortization of net actuarial loss (gain) 37
3
(3 ) 37
3
(1 )
Amortization of prior service credit —
—
(2 ) —
—
—
Settlement loss 6
—
—
—
—
—
Net periodic benefit cost (income) $ (16 ) 8
(5 ) (10 ) 9
2
Nine months ended September 30,
Service cost $ 4
—
—
2
—
—
Interest cost 309
17
21
323
19
31
Expected return on plan assets (489 ) —
(22 ) (435 ) —
(23 )
Amortization of net actuarial loss (gain) 113
9
(8 ) 103
9
(3 )
Amortization of prior service credit —
—
(7 ) —
—
—
Settlement loss 7
6
—
4
2
—
Net periodic benefit cost (income) $ (56 ) 32
(16 ) (3 ) 30
5

Note ~~16:~~20: Earnings and Dividends Per Common Share

Table ~~16.1~~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 ~~16.1:~~20.1:Earnings Per Common Share Calculations



	Quarter ended June 30,			Six months ended June 30,
(in millions, except per share amounts)	2019		2018	2019		2018
Wells Fargo net income	$	6,206	5,186	$	12,066	10,322
Less: Preferred stock dividends and other	358		394	711		797
Wells Fargo net income applicable to common stock (numerator)	$	5,848	4,792	$	11,355	9,525
Earnings per common share
Average common shares outstanding (denominator)	4,469.4		4,865.8	4,510.2		4,875.7
Per share	$	1.31	0.98	$	2.52	1.95
Diluted earnings per common share
Average common shares outstanding	4,469.4		4,865.8	4,510.2		4,875.7
Add: Stock options (1)	0.1		8.2	1.4		9.0
Restricted share rights (1)	25.5		20.7	28.5		25.4
Warrants (1)	—		5.1	—		6.0
Diluted average common shares outstanding (denominator)	4,495.0		4,899.8	4,540.1		4,916.1
Per share	$	1.30	0.98	$	2.50	1.94

Quarter ended September 30, Nine months ended September 30,
(in millions, except per share amounts) 2017
2016
2017
2016
Wells Fargo net income $ 4,596
5,644
$ 15,863
16,664
Less: Preferred stock dividends and other 411
401
1,218
1,163
Wells Fargo net income applicable to common stock (numerator) $ 4,185
5,243
$ 14,645
15,501
Earnings per common share
Average common shares outstanding (denominator) 4,948.6
5,043.4
4,982.1
5,061.9
Per share $ 0.85
1.04
$ 2.94
3.06
Diluted earnings per common share
Average common shares outstanding 4,948.6
5,043.4
4,982.1
5,061.9
Add: Stock options 15.8
18.1
18.1
19.6
Restricted share rights 22.4
23.1
24.1
26.1
Warrants 10.0
10.0
11.1
10.6
Diluted average common shares outstanding (denominator) 4,996.8
5,094.6
5,035.4
5,118.2
Per share $ 0.84
1.03
$ 2.91
3.03


(1)	Calculated using the treasury stock method.

Table ~~16.2~~20.2 presents the outstanding Series L convertible preferred stock and options to purchase shares of common stock that were anti-dilutive ~~(the exercise~~

~~price was higher than the weighted-average market price),~~ and therefore not included in the calculation of diluted earnings per common share.

Table ~~16.2:~~20.2:Outstanding Anti-Dilutive ~~Options~~Securities


	Weighted-average shares				Weighted-average shares
	Quarter ended September 30,		Nine months ended September 30,		Quarter ended June 30,		Six months ended June 30,
(in millions)	2017	2016	2017	2016	2019	2018	2019	2018
Options	1.8	2.6	2.0	3.4
Series L Convertible Preferred Stock (1)					25.3	25.3	25.3	25.3
Stock options (2)					—	—	—	0.5


(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,
	2019		2018	2019	2018
Per common share	$	0.450	0.390	0.900	0.780

~~Note 17: Other Comprehensive Income (continued~~)

Note ~~17:~~21: Other Comprehensive Income

Table ~~17.1~~21.1 provides the components of ~~other comprehensive income (OCI),~~OCI, reclassifications to net income by income statement line item, and the related tax effects.

Table ~~17.1:~~21.1:Summary of Other Comprehensive Income


	Quarter ended September 30,														Nine months ended September 30,												Quarter ended June 30,														Six months ended June 30,
	2017								2016						2017						2016						2019								2018						2019						2018
(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		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
Investment securities:
Net unrealized gains arising during the period	$	891		(353	)	538			112		(32	)	80		2,825		(1,075	)	1,750		2,478		(938	)	1,540
Debt securities:
Net unrealized gains (losses) arising during the period																											$	1,709		(422	)	1,287			(617	)	152		(465	)	4,540		(1,117	)	3,423		(4,060	)	1,000		(3,060	)
Reclassification of net (gains) losses to net income:
Interest income on investment securities (1)	70			(26	)	44			2		(1	)	1		122		(46	)	76		5		(2	)	3
Interest income on debt securities (1)																											61			(15	)	46			90		(22	)	68		106		(26	)	80		159		(39	)	120
Net gains on debt securities	(166		)	62		(104		)	(106	)	40		(66	)	(322	)	119		(203	)	(797	)	299		(498	)	(20		)	5		(15		)	(41	)	10		(31	)	(145	)	36		(109	)	(42	)	10		(32	)
Net gains from equity investments	(106		)	41		(65		)	(85	)	32		(53	)	(323	)	120		(203	)	(204	)	77		(127	)
Other noninterest income	2			—		2			(4	)	2		(2	)	1		—		1		(5	)	2		(3	)	(2		)	1		(1		)	—		—		—		(3	)	1		(2	)	—		—		—
Subtotal reclassifications to net income	(200		)	77		(123		)	(193	)	73		(120	)	(522	)	193		(329	)	(1,001	)	376		(625	)	39			(9	)	30			49		(12	)	37		(42	)	11		(31	)	117		(29	)	88
Net change	691			(276	)	415			(81	)	41		(40	)	2,303		(882	)	1,421		1,477		(562	)	915		1,748			(431	)	1,317			(568	)	140		(428	)	4,498		(1,106	)	3,392		(3,943	)	971		(2,972	)
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the period	36			(13	)	23			(445	)	168		(277	)	279		(105	)	174		2,611		(984	)	1,627
Reclassification of net (gains) losses to net income:
Derivative and hedging activities:
Fair Value Hedges:
Change in fair value of excluded components on fair value hedges (2)																											56			(14	)	42			(150	)	37		(113	)	30		(7	)	23		(126	)	31		(95	)
Cash Flow Hedges:
Net unrealized gains (losses) arising during the period on cash flow hedges																											1			—		1			—		—		—		(8	)	2		(6	)	(266	)	66		(200	)
Reclassification of net losses to net income on cash flow hedges:
Interest income on loans	(107		)	41		(66		)	(266	)	100		(166	)	(468	)	177		(291	)	(794	)	299		(495	)	77			(19	)	58			77		(19	)	58		155		(38	)	117		137		(34	)	103
Interest expense on long-term debt	2			(1	)	1			4		(1	)	3		8		(3	)	5		11		(4	)	7		2			(1	)	1			—		—		—		3		(1	)	2		—		—		—
Subtotal reclassifications to net income	(105		)	40		(65		)	(262	)	99		(163	)	(460	)	174		(286	)	(783	)	295		(488	)	79			(20	)	59			77		(19	)	58		158		(39	)	119		137		(34	)	103
Net change	(69		)	27		(42		)	(707	)	267		(440	)	(181	)	69		(112	)	1,828		(689	)	1,139		136			(34	)	102			(73	)	18		(55	)	180		(44	)	136		(255	)	63		(192	)
Defined benefit plans adjustments:
Net actuarial and prior service gains (losses) arising during the period	11			(5	)	6			(447	)	168		(279	)	4		(2	)	2		(474	)	178		(296	)	—			—		—			—		—		—		(4	)	1		(3	)	6		(2	)	4
Reclassification of amounts to net periodic benefit costs (2):
Reclassification of amounts to non interest expense (3):
Amortization of net actuarial loss	37			(13	)	24			39		(14	)	25		114		(43	)	71		109		(41	)	68		36			(9	)	27			31		(7	)	24		71		(17	)	54		63		(15	)	48
Settlements and other	4			(1	)	3			—		—		—		6		—		6		6		(2	)	4		(3		)	2		(1		)	(2	)	—		(2	)	(3	)	2		(1	)	(2	)	1		(1	)
Subtotal reclassifications to net periodic benefit costs	41			(14	)	27			39		(14	)	25		120		(43	)	77		115		(43	)	72
Subtotal reclassifications to non interest expense																											33			(7	)	26			29		(7	)	22		68		(15	)	53		61		(14	)	47
Net change	52			(19	)	33			(408	)	154		(254	)	124		(45	)	79		(359	)	135		(224	)	33			(7	)	26			29		(7	)	22		64		(14	)	50		67		(16	)	51
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period	40			3		43			(10	)	(1	)	(11	)	87		6		93		27		6		33		14			(1	)	13			(83	)	3		(80	)	56		(3	)	53		(85	)	(2	)	(87	)
Net change	40			3		43			(10	)	(1	)	(11	)	87		6		93		27		6		33		14			(1	)	13			(83	)	3		(80	)	56		(3	)	53		(85	)	(2	)	(87	)
Other comprehensive income (loss)	$	714		(265	)	449			(1,206	)	461		(745	)	2,333		(852	)	1,481		2,973		(1,110	)	1,863		$	1,931		(473	)	1,458			(695	)	154		(541	)	4,798		(1,167	)	3,631		(4,216	)	1,016		(3,200	)
Less: Other comprehensive income (loss) from noncontrolling interests, net of tax						(34		)					19						(29	)					(24	)
Less: Other comprehensive loss from noncontrolling interests, net of tax																																—							(1	)					—						(1	)
Wells Fargo other comprehensive income (loss), net of tax						$	483						(764	)					1,510						1,887							$	1,458						(540	)					3,631						(3,199	)


(1)	Represents net unrealized gains and losses amortized over the remaining lives of securities that were transferred from the available-for-sale portfolio to the held-to-maturity portfolio.


(2)	Represents changes in fair value of cross-currency swaps attributable to changes in cross-currency basis spreads, which are excluded from the assessment of effectiveness recorded in other comprehensive income.


(3)	These items are included in the computation of net periodic benefit cost ~~which is recorded in employee benefits expense~~ (see Note 1519 (Employee Benefits) for ~~additional details)~~more information).

Note 21: Other Comprehensive Income (continued)

Table ~~17.2:~~21.2:Cumulative OCI Balances



(in millions)	Debt securities			Derivative and hedging activities		Defined benefit plans adjustments		Foreign currency translation adjustments		Cumulative other compre- hensive income
Quarter ended June 30, 2019
Balance, beginning of period	$	(566	)	(651	)	(2,272	)	(193	)	(3,682	)
Net unrealized gains arising during the period	1,287			43		—		13		1,343
Amounts reclassified from accumulated other comprehensive income	30			59		26		—		115
Net change	1,317			102		26		13		1,458
Less: Other comprehensive income from noncontrolling interests	—			—		—		—		—
Balance, end of period	$	751		(549	)	(2,246	)	(180	)	(2,224	)
Quarter ended June 30, 2018
Balance, beginning of period	$	(2,491	)	(555	)	(1,779	)	(96	)	(4,921	)
Net unrealized losses arising during the period	(465		)	(113	)	—		(80	)	(658	)
Amounts reclassified from accumulated other comprehensive income	37			58		22		—		117
Net change	(428		)	(55	)	22		(80	)	(541	)
Less: Other comprehensive loss from noncontrolling interests	—			—		—		(1	)	(1	)
Balance, end of period	$	(2,919	)	(610	)	(1,757	)	(175	)	(5,461	)
Six months ended June 30, 2019
Balance, beginning of period	$	(3,122	)	(685	)	(2,296	)	(233	)	(6,336	)
Transition adjustment (1)	481			—		—		—		481
Balance, January 1, 2019	(2,641		)	(685	)	(2,296	)	(233	)	(5,855	)
Net unrealized gains (losses) arising during the period	3,423			17		(3	)	53		3,490
Amounts reclassified from accumulated other comprehensive income	(31		)	119		53		—		141
Net change	3,392			136		50		53		3,631
Less: Other comprehensive income from noncontrolling interests	—			—		—		—		—
Balance, end of period	$	751		(549	)	(2,246	)	(180	)	(2,224	)
Six months ended June 30, 2018
Balance, beginning of period	$	171		(418	)	(1,808	)	(89	)	(2,144	)
Transition adjustment (2)	(118		)	—		—		—		(118	)
Balance, January 1, 2018	53			(418	)	(1,808	)	(89	)	(2,262	)
Net unrealized gains (losses) arising during the period	(3,060		)	(295	)	4		(87	)	(3,438	)
Amounts reclassified from accumulated other comprehensive income	88			103		47		—		238
Net change	(2,972		)	(192	)	51		(87	)	(3,200	)
Less: Other comprehensive loss from noncontrolling interests	—			—		—		(1	)	(1	)
Balance, end of period	$	(2,919	)	(610	)	(1,757	)	(175	)	(5,461	)


(1)	The transition adjustment relates to the adoption of ASU 2017-08 – Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. See Note 1 (Summary of Significant Accounting Policies) for more information.


(2)	The transition adjustment relates to the adoption of ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. See Note 1 (Summary of Significant Accounting Policies) for more information.

(in millions)
Investment
securities

Derivatives
and
hedging
activities

Defined
benefit
plans
adjustments

Foreign
currency
translation
adjustments

Cumulative
other
compre-
hensive
income

Quarter ended September 30, 2017
Balance, beginning of period $ (96 ) 19
(1,897 ) (136 ) (2,110 )
Net unrealized gains arising during the period 538
23
6
43
610
Amounts reclassified from accumulated other comprehensive income (123 ) (65 ) 27
—
(161 )
Net change 415
(42 ) 33
43
449
Less: Other comprehensive loss from noncontrolling interests (34 ) —
—
—
(34 )
Balance, end of period $ 353
(23 ) (1,864 ) (93 ) (1,627 )
Quarter ended September 30, 2016
Balance, beginning of period $ 2,812
2,199
(1,921 ) (142 ) 2,948
Net unrealized gains (losses) arising during the period 80
(277 ) (279 ) (11 ) (487 )
Amounts reclassified from accumulated other comprehensive income (120 ) (163 ) 25
—
(258 )
Net change (40 ) (440 ) (254 ) (11 ) (745 )
Less: Other comprehensive income from noncontrolling interests 19
—
—
—
19
Balance, end of period $ 2,753
1,759
(2,175 ) (153 ) 2,184
Nine months ended September 30, 2017




Balance, beginning of period $ (1,099 ) 89
(1,943 ) (184 ) (3,137 )
Net unrealized gains arising during the period 1,750
174
2
93
2,019
Amounts reclassified from accumulated other comprehensive income (329 ) (286 ) 77
—
(538 )
Net change 1,421
(112 ) 79
93
1,481
Less: Other comprehensive income (loss) from noncontrolling interests (31 ) —
—
2
(29 )
Balance, end of period $ 353
(23 ) (1,864 ) (93 ) (1,627 )
Nine months ended September 30, 2016




Balance, beginning of period $ 1,813
620
(1,951 ) (185 ) 297
Net unrealized gains (losses) arising during the period 1,540
1,627
(296 ) 33
2,904
Amounts reclassified from accumulated other comprehensive income (625 ) (488 ) 72
—
(1,041 )
Net change 915
1,139
(224 ) 33
1,863
Less: Other comprehensive income (loss) from noncontrolling interests (25 ) —
—
1
(24 )
Balance, end of period $ 2,753
1,759
(2,175 ) (153 ) 2,184

Note ~~18:~~22: Operating Segments

We have three reportable operating segments: Community Banking; Wholesale Banking; and Wealth and Investment Management (WIM). We define our operating segments by product type and customer segment and their results are based on our management accounting process, for which there is no comprehensive, authoritative guidance equivalent to GAAP for financial accounting. The management accounting process measures the performance of the operating segments based on

our management structure and is not necessarily comparable with similar information for other financial services companies. If the management structure and/or the allocation process changes, allocations, transfers and assignments may change. For a description of our operating segments ~~including the underlying management accounting process,~~ see Note 2426 (Operating Segments) ~~to Financial Statements~~ in our ~~2016~~2018 Form 10-K. Table ~~18.1~~22.1 presents our results by operating segment.

Table ~~18.1:~~22.1:Operating Segments


	Community Banking			Wholesale Banking				Wealth and Investment Management				Other (1)				Consolidated Company		Community Banking			Wholesale Banking			Wealth and Investment Management				Other (1)				Consolidated Company
(income/expense in millions, average balances in billions)	2017		2016	2017		2016		2017		2016		2017		2016		2017	2016	2019		2018	2019	2018		2019		2018		2019		2018		2019	2018
Quarter ended Sep 30,
Quarter ended June 30,
Net interest income (2)																		$	7,066	7,346	4,535	4,693		1,037		1,111		(543	)	(609	)	12,095	12,541
Provision (reversal of provision) for credit losses																		479		484	28	(36	)	(1	)	(2	)	(3	)	6		503	452
Noninterest income																		4,739		4,460	2,530	2,504		3,013		2,840		(793	)	(792	)	9,489	9,012
Noninterest expense																		7,212		7,290	3,882	4,219		3,246		3,361		(891	)	(888	)	13,449	13,982
Income (loss) before income tax expense (benefit)																		4,114		4,032	3,155	3,014		805		592		(442	)	(519	)	7,632	7,119
Income tax expense (benefit)																		838		1,413	365	379		201		147		(110	)	(129	)	1,294	1,810
Net income (loss) before noncontrolling interests																		3,276		2,619	2,790	2,635		604		445		(332	)	(390	)	6,338	5,309
Less: Net income from noncontrolling interests																		129		123	1	—		2		—		—		—		132	123
Net income (loss) (3)																		$	3,147	2,496	2,789	2,635		602		445		(332	)	(390	)	6,206	5,186
Average loans																		$	457.7	463.8	474.0	464.7		75.0		74.7		(59.2	)	(59.1	)	947.5	944.1
Average assets																		1,024.8		1,034.3	852.2	826.4		83.8		84.0		(60.2	)	(59.8	)	1,900.6	1,884.9
Average deposits																		777.6		760.6	410.4	414.0		143.5		167.1		(62.5	)	(70.4	)	1,269.0	1,271.3
Six months ended June 30,
Net interest income (2)	$	7,645	7,430	4,353		4,062		1,159		977		(681	)	(517	)	12,476	11,952	$	14,314	14,541	9,069	9,225		2,138		2,223		(1,115	)	(1,210	)	24,406	24,779
Provision (reversal of provision) for credit losses	650		651	69		157		(1	)	4		(1	)	(7	)	717	805	1,189		702	162	(56	)	3		(8	)	(6	)	5		1,348	643
Noninterest income	4,415		4,957	2,732		3,085		3,087		3,122		(784	)	(788	)	9,450	10,376	9,241		9,095	5,107	5,251		5,991		5,970		(1,552	)	(1,608	)	18,787	18,708
Noninterest expense	7,834		6,953	4,248		4,120		3,106		2,999		(837	)	(804	)	14,351	13,268	14,901		15,992	7,720	8,197		6,549		6,651		(1,805	)	(1,816	)	27,365	29,024
Income (loss) before income tax expense (benefit)	3,576		4,783	2,768		2,870		1,141		1,096		(627	)	(494	)	6,858	8,255	7,465		6,942	6,294	6,335		1,577		1,550		(856	)	(1,007	)	14,480	13,820
Income tax expense (benefit)	1,286		1,546	729		827		427		415		(238	)	(187	)	2,204	2,601	1,262		2,222	734	827		393		386		(214	)	(251	)	2,175	3,184
Net income (loss) before noncontrolling interests	2,290		3,237	2,039		2,043		714		681		(389	)	(307	)	4,654	5,654	6,203		4,720	5,560	5,508		1,184		1,164		(642	)	(756	)	12,305	10,636
Less: Net income (loss) from noncontrolling interests	61		10	(7	)	(4	)	4		4		—		—		58	10	233		311	1	(2	)	5		5		—		—		239	314
Net income (loss) (3)	$	2,229	3,227	2,046		2,047		710		677		(389	)	(307	)	4,596	5,644	$	5,970	4,409	5,559	5,510		1,179		1,159		(642	)	(756	)	12,066	10,322
Average loans	$	473.5	489.2	463.8		454.3		72.4		68.4		(57.4	)	(54.4	)	952.3	957.5	$	457.9	467.1	475.2	464.9		74.7		74.3		(59.1	)	(58.8	)	948.7	947.5
Average assets	988.9		993.6	824.3		794.2		213.4		212.1		(88.1	)	(85.3	)	1,938.5	1,914.6	1,020.1		1,048.0	848.4	827.8		83.5		84.1		(60.1	)	(59.6	)	1,891.9	1,900.3
Average deposits	734.5		708.0	463.4		441.2		188.1		189.2		(79.6	)	(76.9	)	1,306.4	1,261.5	771.6		754.1	410.1	429.9		148.3		172.5		(64.5	)	(72.3	)	1,265.5	1,284.2
Nine months ended Sep 30,
Net interest income (2)	$	22,820	22,277	12,779		11,729		3,360		2,852		(1,700	)	(1,506	)	37,259	35,352
Provision (reversal of provision) for credit losses	1,919		2,060	(39	)	905		2		(8	)	(5	)	8		1,877	2,965
Noninterest income	13,622		14,928	8,295		9,660		9,261		9,020		(2,340	)	(2,275	)	28,838	31,333
Noninterest expense	22,278		20,437	12,551		12,124		9,387		9,017		(2,532	)	(2,416	)	41,684	39,162
Income (loss) before income tax expense (benefit)	12,245		14,708	8,562		8,360		3,232		2,863		(1,503	)	(1,373	)	22,536	24,558
Income tax expense (benefit)	3,817		4,910	2,034		2,341		1,206		1,087		(571	)	(521	)	6,486	7,817
Net income (loss) before noncontrolling interests	8,428		9,798	6,528		6,019		2,026		1,776		(932	)	(852	)	16,050	16,741
Less: Net income (loss) from noncontrolling interests	197		96	(21	)	(22	)	11		3		—		—		187	77
Net income (loss) (3)	$	8,231	9,702	6,549		6,041		2,015		1,773		(932	)	(852	)	15,863	16,664
Average loans	$	477.8	486.4	465.0		445.2		71.6		66.4		(56.8	)	(52.8	)	957.6	945.2
Average assets	987.7		969.6	816.5		771.9		216.1		208.5		(88.1	)	(84.3	)	1,932.2	1,865.7
Average deposits	726.4		698.3	464.1		431.7		190.6		185.4		(78.8	)	(76.1	)	1,302.3	1,239.3


(1)	Includes the elimination of certain items that are included in more than one business segment, ~~most~~substantially all of which represents products and services for Wealth and Investment Management customers served through Community Banking distribution channels.

(2)

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


(3)	Represents segment net income (loss) for Community Banking; Wholesale Banking; and Wealth and Investment Management segments and Wells Fargo net income for the consolidated company.

Note ~~19:~~23: Regulatory and Agency Capital Requirements

The Company and each of its subsidiary banks are subject to regulatory capital adequacy requirements promulgated by federal bank regulatory agencies. The Federal Reserve establishes capital requirements for the consolidated financial holding company, and the OCC has similar requirements for the Company’s national banks, including Wells Fargo Bank, N.A. (the Bank).

Table ~~19.1~~23.1 presents regulatory capital information for Wells Fargo & Company and the Bank using Basel III, which increased minimum required capital ratios, and introduced a minimum Common Equity Tier 1 (CET1) ratio. We must report the lower of our CET1, tier 1 and total capital ratios calculated under the Standardized Approach and under the Advanced Approach in the assessment of our capital adequacy. The ~~information presented reflects risk-weighted assets (RWAs) under the Standardized and Advanced Approaches with Transition Requirements. The~~ Standardized Approach applies assigned risk weights to broad risk categories, while the calculation of ~~RWAs~~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. The

Basel III ~~revised definition of~~ capital ~~and changes~~rules are being phased-in effective January 1, 2014, through the end of 2021. Beginning January 1, 2018, the requirements for calculating CET1 and tier 1 capital, along with RWAs, became fully phased-in. Accordingly, the information presented reflects fully phased-in CET1 capital, tier 1 capital, and RWAs, but reflects total capital still in accordance with Transition Requirements.

The Bank is an approved seller/servicer of mortgage loans and is required to maintain minimum levels of shareholders’ equity, as specified by various agencies, including the United States Department of Housing and Urban Development, GNMA, FHLMC and FNMA. At ~~September~~June 30, ~~2017,~~2019, the Bank met these requirements. Other subsidiaries, including the Company’s insurance and broker-dealer subsidiaries, are also subject to various minimum capital levels, as defined by applicable industry regulations. The minimum capital levels for these subsidiaries, and related restrictions, are not significant to our consolidated operations.

Table ~~19.1:~~23.1:Regulatory Capital Information


	Wells Fargo & Company										Wells Fargo Bank, N.A.						Wells Fargo & Company									Wells Fargo Bank, N.A.
	September 30, 2017						December 31, 2016				September 30, 2017			December 31, 2016			June 30, 2019						December 31, 2018			June 30, 2019			December 31, 2018
(in millions, except ratios)	Advanced Approach				Standardized Approach		Advanced Approach		Standardized Approach		Advanced Approach	Standardized Approach		Advanced Approach	Standardized Approach		Advanced Approach			Standardized Approach			Advanced Approach	Standardized Approach		Advanced Approach	Standardized Approach		Advanced Approach	Standardized Approach
Regulatory capital:	Regulatory capital:																Regulatory capital:
Common equity tier 1	$	153,548			153,548		148,785		148,785		140,021	140,021		132,225	132,225		$	149,183		149,183			146,363	146,363		146,505	146,505		142,685	142,685
Tier 1	176,996				176,996		171,364		171,364		140,021	140,021		132,225	132,225		170,675			170,675			167,866	167,866		146,505	146,505		142,685	142,685
Total	209,522				219,208		204,425		214,877		153,558	162,723		145,665	155,281		200,810			208,817			198,798	207,041		159,090	166,648		155,558	163,380
Assets:
Risk-weighted	$	1,217,700			1,268,638		1,274,589		1,336,198		1,103,800	1,173,294		1,143,681	1,222,876
Adjusted average (1)	1,908,883				1,908,883		1,914,802		1,914,802		1,713,046	1,713,046		1,714,524	1,714,524
Risk-weighted assets																	$	1,182,838		1,246,683			1,177,350	1,247,210		1,059,642	1,144,959		1,058,653	1,154,182
Adjusted average assets (1)																	1,871,806			1,871,806			1,850,299	1,850,299		1,654,994	1,654,994		1,652,009	1,652,009
Regulatory capital ratios:
Common equity tier 1 capital	12.61		%		12.10	*	11.67		11.13	*	12.69	11.93	*	11.56	10.81	*	12.61		%	11.97		*	12.43	11.74	*	13.83	12.80	*	13.48	12.36	*
Tier 1 capital	14.54				13.95	*	13.44		12.82	*	12.69	11.93	*	11.56	10.81	*	14.43			13.69		*	14.26	13.46	*	13.83	12.80	*	13.48	12.36	*
Total capital	17.21			*	17.28		16.04	*	16.08		13.91	13.87	*	12.74	12.70	*	16.98			16.75		*	16.89	16.60	*	15.01	14.56	*	14.69	14.16	*
Tier 1 leverage (1)	9.27				9.27		8.95		8.95		8.17	8.17		7.71	7.71		9.12			9.12			9.07	9.07		8.85	8.85		8.64	8.64
																	Wells Fargo & Company									Wells Fargo Bank, N.A.
																	June 30, 2019						December 31, 2018			June 30, 2019			December 31, 2018
Supplementary leverage: (2)
Total leverage exposure																	$	2,202,607					2,174,564			1,964,107			1,957,276
Supplementary leverage ratio																	7.75				%		7.72			7.46			7.29

*Denotes the lowest capital ratio as determined under the Advanced and Standardized Approaches.


(1)	The leverage ratio consists of Tier 1 capital divided by ~~quarterly~~total average ~~total~~ assets, excluding goodwill and certain other items.


(2)	The supplementary leverage ratio consists of Tier 1 capital divided by total leverage exposure. Total leverage exposure consists of total average assets, less goodwill and other permitted Tier 1 capital deductions (net of deferred tax liabilities), plus certain off-balance sheet exposures.

Table ~~19.2~~23.2 presents the minimum required regulatory capital ratios under Transition Requirements to which the Company and the Bank were subject as of ~~September~~June 30, ~~2017~~2019, and December 31, ~~2016.~~2018.

Table ~~19.2:~~23.2:Minimum Required Regulatory Capital Ratios – Transition Requirements (1)


	Wells Fargo & Company			Wells Fargo Bank, N.A.		Wells Fargo & Company			Wells Fargo Bank, N.A.
	September 30, 2017		December 31, 2016	September 30, 2017	December 31, 2016	June 30, 2019		December 31, 2018	June 30, 2019	December 31, 2018
Regulatory capital ratios:
Common equity tier 1 capital	6.750	%	5.625	5.750	5.125	9.000	%	7.875	7.000	6.375
Tier 1 capital	8.250		7.125	7.250	6.625	10.500		9.375	8.500	7.875
Total capital	10.250		9.125	9.250	8.625	12.500		11.375	10.500	9.875
Tier 1 leverage	4.000		4.000	4.000	4.000	4.000		4.000	4.000	4.000
Supplementary leverage						5.000		5.000	6.000	6.000

(1)

At ~~September~~June 30, ~~2017~~,2019, under transition requirements, the CET1, tier 1 and total capital minimum ratio requirements for Wells Fargo & Company include a capital conservation buffer of ~~1.250%~~2.500% and a global systemically important bank (G-SIB) surcharge of ~~1.000%~~2.000%. Only the ~~1.250%~~2.500% capital conservation buffer applies to the Bank at ~~September~~June 30, ~~2017~~.

2019.



Glossary of Acronyms

~~ABS~~	~~Asset-backed security~~	~~G-SIB~~	~~Globally systemic important bank~~
ACL	Allowance for credit losses	~~HAMP~~HQLA	~~Home Affordability Modification Program~~High-quality liquid assets
ALCO	Asset/Liability Management Committee	~~HUD~~HTM	~~U.S. Department of Housing and Urban Development~~Held to maturity
ARM	Adjustable-rate mortgage	LCR	Liquidity coverage ratio
ASC	Accounting Standards Codification	LHFS	Loans held for sale
ASU	Accounting Standards Update	LIBOR	London Interbank Offered Rate
AUA	Assets under administration	LIHTC	Low income housing tax credit
AUM	Assets under management	LOCOM	Lower of cost or ~~market~~fair value
AVM	Automated valuation model	LTV	Loan-to-value
BCBS	Basel Committee on Bank Supervision	MBS	Mortgage-backed security
BHC	Bank holding company	~~MHA~~MLHFS	~~Making Home Affordable programs~~Mortgage loans held for sale
CCAR	Comprehensive Capital Analysis and Review	~~MHFS~~MSR	~~Mortgages held for sale~~Mortgage servicing right
CD	Certificate of deposit	~~MSR~~NAV	~~Mortgage servicing right~~Net asset value
CDO	Collateralized debt obligation	~~MTN~~NPA	~~Medium-term note~~Nonperforming asset
CDS	Credit default swaps	~~NAV~~	~~Net asset value~~
~~CECL~~	~~Current expected credit loss~~	~~NPA~~	~~Nonperforming asset~~
~~CET1~~	~~Common Equity Tier 1~~	OCC	Office of the Comptroller of the Currency
~~CFPB~~CECL	~~Consumer Financial Protection Bureau~~Current expected credit loss	OCI	Other comprehensive income
~~CLO~~CET1	~~Collateralized loan obligation~~Common Equity Tier 1	OTC	Over-the-counter
~~CLTV~~CFPB	~~Combined loan-to-value~~Consumer Financial Protection Bureau	OTTI	Other-than-temporary impairment
~~CMBS~~CLO	~~Commercial mortgage-backed securities~~Collateralized loan obligation	PCI Loans	Purchased credit-impaired loans
~~CPI~~CLTV	~~Collateral protection insurance~~Combined loan-to-value	PTPP	Pre-tax pre-provision profit
~~CPP~~CPI	~~Capital Purchase Program~~Collateral protection insurance	RBC	Risk-based capital
~~CRE~~CPP	~~Commercial real estate~~Capital Purchase Program	RMBS	Residential mortgage-backed securities
~~DPD~~CRE	~~Days past due~~Commercial real estate	ROA	Wells Fargo net income to average total assets
~~ESOP~~DPD	~~Employee Stock Ownership Plan~~Days past due	ROE	Wells Fargo net income applicable to common stock
~~FAS~~ESOP	~~Statement of Financial Accounting Standards~~Employee Stock Ownership Plan		to average Wells Fargo common ~~stockholders'~~stockholders’ equity
~~FASB~~FAS	Statement of Financial Accounting Standards ~~Board~~	ROTCE	Return on average tangible common equity
~~FDIC~~FASB	~~Federal Deposit Insurance Corporation~~Financial Accounting Standards Board	RWAs	Risk-weighted assets
~~FFELP~~FDIC	Federal ~~Family Education Loan Program~~Deposit Insurance Corporation	SEC	Securities and Exchange Commission
FHA	Federal Housing Administration	S&P	Standard & Poor’s Global Ratings ~~Services~~
FHLB	Federal Home Loan Bank	SLR	Supplementary leverage ratio
FHLMC	Federal Home Loan Mortgage Corporation	~~SPE~~SOFR	~~Special purpose entity~~Secured Overnight Financing Rate
FICO	Fair Isaac Corporation (credit rating)	~~TARP~~SPE	~~Troubled Asset Relief Program~~Special purpose entity
FNMA	Federal National Mortgage Association	TDR	Troubled debt restructuring
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 entity	VIE	Variable interest entity
G-SIB	Globally systemic important bank	WIM	Wealth and Investment Management

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Information in response to this item can be found in Note 1114 (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 ~~September~~June 30, ~~2017.~~2019.

Calendar month
Total number
of shares
repurchased (1)

Weighted-average
price paid per share

Maximum number of
shares that may yet
be repurchased under
the authorization
July 6,616,050
$ 54.73
164,594,913
August (2) 30,887,246
53.26
133,707,667
September (2) 11,519,239
51.50
122,188,428
Total 49,022,535



Calendar month	Total number of shares repurchased (1)	Weighted-average price paid per share		Maximum number of shares that may yet be repurchased under the authorization
April	28,673,471	$	47.86	269,297,234
May	41,151,107	46.79		228,146,127
June	35,028,166	45.68		193,117,961
Total	104,852,744

(1)

All shares were repurchased under an authorization covering up to 350 million shares of common stock approved by the Board of Directors and publicly announced by the Company on ~~January 26, 2016.~~October 23, 2018. In addition, the Company publicly announced on July 23, 2019, that the Board of Directors authorized the repurchase of an additional 350 million shares of common stock. Unless modified or revoked by the Board, ~~this authorization does~~these authorizations do not expire.


~~(2)~~	~~August includes a private repurchase transaction of~~ ~~18,746,180~~ ~~shares at a weighted-average price per share of~~ ~~$53.34. September includes a private repurchase transaction of~~ ~~9,717,399~~ ~~shares at a weighted-average price per share of~~ ~~$51.45~~.

~~The following table shows Company repurchases of the warrants for each calendar month in the quarter ended September 30, 2017.~~



~~Calendar month~~	~~Total number~~ ~~of warrants~~ ~~repurchased (1)~~	~~Average price~~ ~~paid per warrant~~		~~Maximum dollar value~~ ~~of warrants that~~ ~~may yet be repurchased~~
~~July~~	—	$	—	~~451,944,402~~
~~August~~	—	—		~~451,944,402~~
~~September~~	—	—		~~451,944,402~~
~~Total~~	—


~~(1)~~	~~Warrants are repurchased under the authorization covering up to~~ ~~$1 billion~~ ~~in warrants approved by the Board of Directors (ratified and approved on June 22, 2010). Unless modified or revoked by the Board, this authorization does not expire.~~


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
3(a)

Restated Certificate of Incorporation, as amended and in effect on the date hereof.
Incorporated by reference to Exhibit 3(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.
3(b)

By-Laws.
Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed December 1, 2016.
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.
12(a)

Computation of Ratios of Earnings to Fixed Charges:
Filed herewith.
      Quarter ended September 30, Nine months ended September 30,
      2017
2016
2017
2016

   Including interest on deposits 3.53
6.03
4.17
6.36

   Excluding interest on deposits 4.75
7.42
5.51
7.86


12(b)

Computation of Ratios of Earnings to Fixed Charges and Preferred Dividends:
Filed herewith.
      Quarter ended September 30, Nine months ended September 30,
      2017
2016
2017
2016

   Including interest on deposits 2.88
4.44
3.35
4.63

   Excluding interest on deposits 3.56
5.10
4.09
5.31


31(a)

Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
31(b)

Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
32(a)

Certification of Periodic Financial Report by Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350.
Furnished herewith.
32(b)

Certification of Periodic Financial Report by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350.
Furnished herewith.
101.INS XBRL Instance Document Filed herewith.
101.SCH XBRL Taxonomy Extension Schema Document Filed herewith.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith.
101.DEF XBRL Taxonomy Extension Definitions Linkbase Document Filed herewith.
101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed herewith.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith.

Exhibit

Number

Description

Location

3(a)

Restated Certificate of Incorporation, as amended and in effect on the date hereof.

Incorporated by reference to Exhibit 3(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

3(b)

By-Laws.

Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed March 1, 2018.

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.

10(a)

Long-Term Incentive Compensation Plan (as amended and restated on April 23, 2019)

Incorporated by reference to Exhibit 10(b) to the Company’s Current Report on Form 8-K filed April 26, 2019.

Form of Restricted Share Rights Award Agreement:

For grants on or after April 7, 2019.

Filed herewith.

31(a)

Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith.

31(b)

Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith.

32(a)

Certification of Periodic Financial Report by Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350.

Furnished herewith.

32(b)

Certification of Periodic Financial Report by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350.

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.

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: ~~November 3, 2017~~ August 2, 2019 WELLS FARGO & COMPANY

By: ~~/s/~~ /s/ RICHARD D. LEVY

Richard D. Levy

Executive Vice President and Controller

(Principal Accounting Officer)

~~168~~165



	September 30, 2017
	Lending (1)			Securities (2)				Derivatives and other (3)		Total exposure
(in millions)	Sovereign		Non- sovereign	Sovereign		Non- sovereign		Sovereign	Non- sovereign	Sovereign	Non- sovereign (4)	Total
Top 20 country exposures:
United Kingdom	$	7,079	20,200	—		1,852		—	473	7,079	22,525	29,604
Canada	29		18,240	61		189		—	507	90	18,936	19,026
Cayman Islands	—		6,723	—		—		—	151	—	6,874	6,874
Germany	3,349		1,664	5		162		3	392	3,357	2,218	5,575
Ireland	—		3,528	—		118		—	140	—	3,786	3,786
Bermuda	—		2,827	—		112		—	196	—	3,135	3,135
China	—		2,761	(2	)	182		32	30	30	2,973	3,003
Netherlands	—		2,278	22		285		2	247	24	2,810	2,834
India	—		2,092	—		112		—	—	—	2,204	2,204
Luxembourg	—		1,258	—		656		—	120	—	2,034	2,034
Guernsey	—		1,971	—		3		—	3	—	1,977	1,977
Australia	—		1,581	—		282		—	78	—	1,941	1,941
Brazil	—		1,689	—		17		—	—	—	1,706	1,706
Chile	—		1,485	—		21		—	—	—	1,506	1,506
South Korea	—		1,352	2		85		2	8	4	1,445	1,449
Switzerland	—		1,210	—		(2	)	—	35	—	1,243	1,243
Jersey, Channel lslands	—		645	—		469		—	14	—	1,128	1,128
Japan	285		710	6		42		—	63	291	815	1,106
France	—		798	—		205		—	67	—	1,070	1,070
Mexico	56		925	—		4		—	4	56	933	989
Total top 20 country exposures	$	10,798	73,937	94		4,794		39	2,528	10,931	81,259	92,190
Eurozone exposure:
Eurozone countries included in Top 20 above (5)	$	3,349	9,526	27		1,426		5	966	3,381	11,918	15,299
Austria	—		590	—		3		—	3	—	596	596
Spain	—		362	—		54		—	19	—	435	435
Belgium	—		274	—		(45	)	—	5	—	234	234
Other Eurozone exposure (6)	24		211	—		47		—	—	24	258	282
Total Eurozone exposure	$	3,373	10,963	27		1,485		5	993	3,405	13,441	16,846



	September 30, 2017
	PCI loans									All other loans
(in millions)	Adjusted unpaid principal balance (2)		Current LTV ratio (3)		Carrying value (4)		Ratio of carrying value to current value (5)			Carrying value (4)		Ratio of carrying value to current value (5)
California	$	11,753	61	%	$	9,033	47	%		$	6,703	44	%
Florida	1,481		69		1,076		49		��	1,439		54
New Jersey	586		76		429		55			953		62
New York	446		69		363		52			477		59
Texas	135		48		102		36			570		37
Other	2,928		68		2,208		51			3,942		56
Total Pick-a-Pay loans	$	17,329	64		$	13,211	48			$	14,084	50



(in millions)	ABS		CMBS		RMBS	CLO/CDO
September 30, 2017
Securitization exposure:
Securities	$	559	220		744	738
Derivatives	3		(4	)	1	(2	)
Total	$	562	216		745	736
December 31, 2016
Securitization exposure:
Securities	$	801	397		911	791
Derivatives	3		4		1	(8	)
Total	$	804	401		912	783



(in millions)	Risk- based capital			Risk- weighted assets
Balance, December 31, 2016	$	3,528		44,100
Total VaR	(84		)	(1,052	)
Total Stressed VaR	(298		)	(3,722	)
Incremental Risk Charge	(183		)	(2,288	)
Securitized Products Charge	117			1,461
Standardized Specific Risk Charge	(108		)	(1,356	)
De minimis Charges	(2		)	(13	)
Balance, September 30, 2017	$	2,970		37,130

Balance, June 30, 2017	$	3,026		37,827
Total VaR	11			141
Total Stressed VaR	(62		)	(774	)
Incremental Risk Charge	4			47
Securitized Products Charge	55			689
Standardized Specific Risk Charge	(66		)	(831	)
De minimis Charges	2			31
Balance, September 30, 2017	$	2,970		37,130



(in millions)	Quarter ended Sep 30, 2017			Nine months ended Sep 30, 2017		2009-2016
Balance, beginning of period	$	9,369		11,216		10,447
Change in accretable yield due to acquisitions	—			2		159
Accretion into interest income (1)	(340		)	(1,071	)	(15,577	)
Accretion into noninterest income due to sales (2)	—			(334	)	(467	)
Reclassification from nonaccretable difference for loans with improving credit-related cash flows	234			640		10,955
Changes in expected cash flows that do not affect nonaccretable difference (3)	(20		)	(1,210	)	5,699
Balance, end of period	$	9,243		9,243		11,216



	September 30, 2017 (1)				December 31, 2016
(in millions)	Real estate 1-4 family first mortgage		Real estate 1-4 family junior lien mortgage	Total	Real estate 1-4 family first mortgage	Real estate 1-4 family junior lien mortgage	Total
By FICO:
< 600	$	4,175	37	4,212	4,292	46	4,338
600-639	2,153		21	2,174	3,001	26	3,027
640-679	2,496		27	2,523	3,972	35	4,007
680-719	2,359		32	2,391	3,170	37	3,207
720-759	1,840		23	1,863	1,767	24	1,791
760-799	957		13	970	962	15	977
800+	471		7	478	254	4	258
No FICO available	3,109		5	3,114	3,385	5	3,390
Total consumer PCI loans (adjusted unpaid principal balance)	$	17,560	165	17,725	20,803	192	20,995
Total consumer PCI loans (carrying value)	$	13,301	29	13,330	16,018	36	16,054



(in millions)	Amortized MSRs		Core deposit intangibles	Customer relationship and other intangibles (1)	Total
Nine months ended September 30, 2017 (actual)	$	198	639	235	1,072
Estimate for the remainder of 2017	$	64	212	76	352
Estimate for year ended December 31,
2018	240		769	301	1,310
2019	212		—	116	328
2020	192		—	96	288
2021	166		—	82	248
2022	146		—	68	214



	Interest rate contracts hedging:							Foreign exchange contracts hedging:				Total net gains (losses) on fair value hedges
(in millions)	Available- for-sale securities			Mortgages held for sale		Long-term debt		Available- for-sale securities		Long-term debt		Total net gains (losses) on fair value hedges
Quarter ended September 30, 2017
Net interest income (expense) recognized on derivatives	$	(110	)	(1	)	271		4		(60	)	104
Gains (losses) recorded in noninterest income
Recognized on derivatives	(6		)	—		(161	)	(87	)	996		742
Recognized on hedged item	(6		)	(2	)	173		86		(878	)	(627	)
Net recognized on fair value hedges (ineffective portion) (1)	$	(12	)	(2	)	12		(1	)	118		115
Quarter ended September 30, 2016
Net interest income (expense) recognized on derivatives	$	(117	)	(1	)	471		2		9		364
Gains (losses) recorded in noninterest income
Recognized on derivatives	21			6		(271	)	30		312		98
Recognized on hedged item	(10		)	(7	)	354		(32	)	(234	)	71
Net recognized on fair value hedges (ineffective portion) (1)	$	11		(1	)	83		(2	)	78		169
Nine months ended September 30, 2017
Net interest income (expense) recognized on derivatives (1)	$	(363	)	(5	)	1,070		10		(142	)	570
Gains (losses) recorded in noninterest income
Recognized on derivatives	(167		)	(11	)	(294	)	(216	)	2,579		1,891
Recognized on hedged item	121			4		314		216		(2,554	)	(1,899	)
Net recognized on fair value hedges (ineffective portion)	$	(46	)	(7	)	20		—		25		(8	)
Nine months ended September 30, 2016
Net interest income (expense) recognized on derivatives (1)	$	(468	)	(5	)	1,436		4		40		1,007
Gains (losses) recorded in noninterest income
Recognized on derivatives	(2,674		)	(36	)	4,815		98		1,475		3,678
Recognized on hedged item	2,699			32		(4,215	)	(106	)	(1,242	)	(2,832	)
Net recognized on fair value hedges (ineffective portion)	$	25		(4	)	600		(8	)	233		846



	Transfers Between Fair Value Levels
	Level 1					Level 2				Level 3 (1)
(in millions)	In			Out		In		Out		In		Out			Total
Quarter ended September 30, 2017
Trading assets	$	—		—		—		(20	)	20		—			—
Available-for-sale securities	—			—		838		—		—		(838	)		—
Mortgages held for sale	—			—		2		(55	)	55		(2	)		—
Other assets	—			—		—		—		—		—			—
Net derivative assets and liabilities (2)	—			—		6		15		(15	)	(6	)		—
Short sale liabilities	—			—		—		—		—		—			—
Total transfers	$	—		—		846		(60	)	60		(846	)		—
Quarter ended September 30, 2016
Trading assets	$	1		(44	)	44		(2	)	1		—			—
Available-for-sale securities	—			—		465		—		—		(465	)		—
Mortgages held for sale	—			—		3		(18	)	18		(3	)		—
Other assets	—			—		—		—		—		—			—
Net derivative assets and liabilities (2)	—			—		79		(14	)	14		(79	)		—
Short sale liabilities	—			1		(1	)	—		—		—			—
Total transfers	$	1		(43	)	590		(34	)	33		(547	)		—
Nine months ended September 30, 2017
Trading assets	$	—		—		1		(39	)	39		(1	)		—
Available-for-sale securities	—			—		1,334		(5	)	5		(1,334	)		—
Mortgages held for sale	—			—		8		(116	)	116		(8	)		—
Other assets	—			—		—		(1	)	1		—		��	—
Net derivative assets and liabilities (2)	—			—		89		37		(37	)	(89	)		—
Short sale liabilities	—			—		—		—		—		—			—
Total transfers	$	—		—		1,432		(124	)	124		(1,432	)		—
Nine months ended September 30, 2016
Trading assets	$	5		(48	)	59		(6	)	1		(11	)		—
Available-for-sale securities	—			—		481		(80	)	80		(481	)		—
Mortgages held for sale	—			—		12		(72	)	72		(12	)		—
Other assets	—			—		—		—		—		—			—
Net derivative assets and liabilities (2)	—			—		129		(42	)	42		(129	)		—
Short sale liabilities	(1		)	1		(1	)	1		—		—			—
Total transfers	$	4		(47	)	680		(199	)	195		(633	)		—



($ in millions)	Fair Value Level 3			Valuation Technique(s) (1)	Significant Unobservable Inputs (1)		Range of inputs				Weighted Average (2)
September 30, 2017
Residential mortgages held for sale (LOCOM)	$	1,340	(3)	Discounted cash flow	Default rate	(4)	0.1	—	10.3	%	2.6	%
					Discount rate		1.5	—	8.5		3.8
					Loss severity		0.8	—	57.6		2.6
					Prepayment rate	(5)	5.3	—	100.0		49.8
Other assets: nonmarketable equity investments	34			Discounted cash flow	Discount rate		5.0	—	10.5		9.4
Insignificant level 3 assets	122
Total	$	1,496
December 31, 2016
Residential mortgages held for sale (LOCOM)	$	1,350	(3)	Discounted cash flow	Default rate	(4)	0.2	—	4.3	%	1.9	%
					Discount rate		1.5	—	8.5		3.8
					Loss severity		0.7	—	50.1		2.4
					Prepayment rate	(5)	3.0	—	100.0		50.7
Other assets: nonmarketable equity investments	220			Discounted cash flow	Discount rate		4.7	—	9.3		7.3
Insignificant level 3 assets	199
Total	$	1,769



(in millions)	Investment securities			Derivatives and hedging activities		Defined benefit plans adjustments		Foreign currency translation adjustments		Cumulative other compre- hensive income
Quarter ended September 30, 2017
Balance, beginning of period	$	(96	)	19		(1,897	)	(136	)	(2,110	)
Net unrealized gains arising during the period	538			23		6		43		610
Amounts reclassified from accumulated other comprehensive income	(123		)	(65	)	27		—		(161	)
Net change	415			(42	)	33		43		449
Less: Other comprehensive loss from noncontrolling interests	(34		)	—		—		—		(34	)
Balance, end of period	$	353		(23	)	(1,864	)	(93	)	(1,627	)
Quarter ended September 30, 2016
Balance, beginning of period	$	2,812		2,199		(1,921	)	(142	)	2,948
Net unrealized gains (losses) arising during the period	80			(277	)	(279	)	(11	)	(487	)
Amounts reclassified from accumulated other comprehensive income	(120		)	(163	)	25		—		(258	)
Net change	(40		)	(440	)	(254	)	(11	)	(745	)
Less: Other comprehensive income from noncontrolling interests	19			—		—		—		19
Balance, end of period	$	2,753		1,759		(2,175	)	(153	)	2,184
Nine months ended September 30, 2017
Balance, beginning of period	$	(1,099	)	89		(1,943	)	(184	)	(3,137	)
Net unrealized gains arising during the period	1,750			174		2		93		2,019
Amounts reclassified from accumulated other comprehensive income	(329		)	(286	)	77		—		(538	)
Net change	1,421			(112	)	79		93		1,481
Less: Other comprehensive income (loss) from noncontrolling interests	(31		)	—		—		2		(29	)
Balance, end of period	$	353		(23	)	(1,864	)	(93	)	(1,627	)
Nine months ended September 30, 2016
Balance, beginning of period	$	1,813		620		(1,951	)	(185	)	297
Net unrealized gains (losses) arising during the period	1,540			1,627		(296	)	33		2,904
Amounts reclassified from accumulated other comprehensive income	(625		)	(488	)	72		—		(1,041	)
Net change	915			1,139		(224	)	33		1,863
Less: Other comprehensive income (loss) from noncontrolling interests	(25		)	—		—		1		(24	)
Balance, end of period	$	2,753		1,759		(2,175	)	(153	)	2,184

Description

Effective date and financial statement impact

Accounting ~~Standards~~Standard Update (ASU or Update) ~~2017-12 - Derivatives and Hedging~~2018-12 – Financial Services – Insurance (Topic ~~815)~~944): Targeted Improvements to the Accounting for ~~Hedging Activities~~Long-Duration Contracts

The Update requires all features in long-duration insurance contracts that meet the definition of a market risk benefit to be measured at fair value through earnings with changes in fair value attributable to our own credit risk recognized in other comprehensive income. Currently, two measurement models exist for these features, fair value and insurance accrual. The Update requires the use of a standardized discount rate and routine updates for insurance assumptions used in valuing the liability for future policy benefits for traditional long-duration contracts. The Update also simplifies the amortization of deferred acquisition costs.

The ~~Update makes targeted~~guidance becomes effective on January 1, 2021. Certain of our variable annuity reinsurance products meet the definition of market risk benefits and will require the associated insurance-related reserves for these products to be measured at fair value as of the earliest period presented, with the cumulative effect on fair value for changes attributable to our own credit risk recognized in the beginning balance of accumulated other comprehensive income. The cumulative effect of the difference between fair value and carrying value, excluding the effect on fair value for our own credit risk, will be recognized in the opening balance of retained earnings. As of June 30, 2019, we held $1.0 billion in insurance-related reserves of which $444 million was in scope of the Update. A total of $387 million was associated with products that meet the definition of market risk benefits, and of this amount, $21 million was measured at fair value under current accounting standards. The market risk benefits are largely indexed to U.S. equity and fixed income markets. Upon adoption, we may incur periodic earnings volatility from changes in the fair value of market risk benefits primarily due to the long duration of these contracts. We plan to economically hedge ~~accounting model intended to facilitate financial reporting that more closely reflects an entity’s~~this volatility, where feasible. The ultimate impact of these changes will depend on the composition of our market risk ~~management activities and to simplify application~~benefits portfolio at the date of ~~hedge accounting.~~adoption. Changes include expanding the types of risk management strategies eligible for hedge accounting, easing the documentation and effectiveness assessment requirements, changing how ineffectiveness is measured and changing the presentation and disclosure requirements for hedge accounting activities.

We adopted the Update in fourth quarter 2017. Our financial statements for the year ended December 31, 2017, will include a cumulative-effect adjustment to opening retained earnings and adjustments to our 2017 earnings to reflect application of the new guidance effective January 1, 2017. The new guidance significantly reduces but does not eliminate interest-rate and foreign-currency related hedge ineffectiveness. However, we may continue to experience hedge ineffectiveness volatility related to certain hedges of foreign-currency denominated debt liabilities. The adjustment as of January 1, 2017, reduced retained earnings by approximately $381 million and increased other comprehensive income by approximately $168 million. Through September 30, 2017, year-to-date net income will increase approximately $169 million ($242 million pre-tax) and other comprehensive income will decrease by $163 million upon application of the new guidance.

~~ASU 2017-08 – Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20):~~ ~~Premium Amortization on Purchased Callable Debt Securities~~

~~The Update changes the accounting for certain purchased callable debt securities held at a premium to shorten the amortization period for the premium~~ to the ~~earliest call date rather than~~liability for future policy benefits for traditional long-duration contracts and deferred acquisition costs will be applied to all outstanding long-duration contracts on the ~~maturity date. Accounting for purchased callable debt securities held~~basis of their existing carrying amounts at ~~a discount does not change. The discount would continue to amortize to the maturity date.~~

~~We expect to adopt the guidance in first quarter 2019 using the modified retrospective method with a cumulative-effect adjustment to retained earnings as of~~ the beginning of the ~~year of adoption. Our investment securities portfolio includes holdings of available-for-sale (AFS)~~earliest period presented, and ~~held-to-maturity (HTM) callable debt securities held at a premium. At adoption, the guidance is~~are not expected to ~~result in a cumulative effect adjustment which will~~ be primarily offset with a corresponding adjustment to other comprehensive income related to AFS securities. After adoption, the guidance will reduce interest income prior to the call date because the premium will be amortized over a shorter time period. Our implementation effort includes identifying the population of debt securities subject to the new guidance, which are primarily obligations of U.S. states and political subdivisions, and quantifying the expected impacts. The impact of the Update on our consolidated financial statements will be affected by our portfolio composition at the time of adoption, which may change between September 30, 2017 and the adoption date.