0000072971 us-gaap:AutomobileLoanMember wfc:A90119DaysPastDueMember wfc:LoansExcludingGovernmentInsuredOrGuaranteedLoansMember 2020-03-31 0000072971 srt:MaximumMember us-gaap:CreditDefaultSwapMember 2019-01-01 2019-12-31 0000072971 srt:MinimumMember us-gaap:EquityContractMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember wfc:MeasurementInputCorrelationFactorMember us-gaap:ValuationTechniqueOptionPricingModelMember 2020-03-31 0000072971 wfc:SeriesLPreferredStockMember 2019-01-01 2019-03-31WELLS FARGO & COMPANY/MN0000072971false2020Q312/31DECACommon Stock, par value $1-2/37.5% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series LDep Shares, 1/1000th int. per share of Non-Cumulative Perpetual Class A Preferred Stock, Series NDep Shares, 1/1000th int. per share of Non-Cumulative Perpetual Class A Preferred Stock, Series ODep Shares, 1/1000th int. per share of Non-Cumulative Perpetual Class A Preferred Stock, Series PDep Shr, 1/1000th int. per shr of 5.85% Fix-to-Float Non-Cum. Perpetual Class A Pref. Stock, Ser. QDep Shr, 1/1000th int. per shr of 6.625% Fix-to-Float Non-Cum. Perpetual Class A Pref. Stock, Ser. RDep Shares, 1/1000th int. per share of Non-Cumulative Perpetual Class A Preferred Stock, Series TDep Shares, 1/1000th int. per share of Non-Cumulative Perpetual Class A Preferred Stock, Series VDep Shares, 1/1000th int. per share of Non-Cumulative Perpetual Class A Preferred Stock, Series WDep Shares, 1/1000th int. per share of Non-Cumulative Perpetual Class A Preferred Stock, Series XDep Shares, 1/1000th int. per share of Non-Cumulative Perpetual Class A Preferred Stock, Series YDep Shares, 1/1000th int. per share of Non-Cumulative Perpetual Class A Preferred Stock, Series ZDep Shares, 1/1000th int. per share of Non-Cumulative Perpetual Class A Preferred Stock, Series AAGuarantee 5.80% Fix-to-Float Normal Wachovia Income Trust Securities of Wachovia Capital Trust IIIGuarantee of Medium-Term Notes, Series A, due October 30, 2028 of Wells Fargo Finance LLC0790260189,434156,86019,88416,6061,68897214817125,05341,93601.66661.66665,481,811,4745,481,811,4749,000,000,0009,000,000,0001,349,294,5921,347,385,5375.65.8010101000000000111.471556The 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.180.1082020-01-012029-12-312020-01-012029-12-312034-01-012047-12-312022-01-012047-12-312020-01-012029-12-312020-01-012029-12-312047-01-012072-12-312047-01-012058-12-312045-01-012046-12-312045-01-012046-12-312020-01-012040-12-312020-01-012049-12-310.5281.560.5850.3221.490.3640.110.94.9the greater of three-month LIBOR plus 0.93% and 5.56975the greater of three-month LIBOR plus 0.93% and 5.56975three-month LIBOR plus 3.77three-month LIBOR plus 3.777.507.505.205.205.1255.1255.255.255.855.856.6256.6255.905.906.006.005.8755.8756.006.005.705.705.505.505.6255.6254.75000If issued, preference shares would be limited to one vote per shareNaNNaN7.008.007.008.009.3010.308.909.908.709.708.509.5010.0011.009.0010.002201.31.50000072971us-gaap:LoansReceivableMember2019-01-012019-09-300000072971wfc:WealthAndInvestmentManagementMemberus-gaap:AssetManagement1Member2019-01-012019-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~March 31,~~September 30, 2020



☐			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,, California 94104

(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
Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series Z	WFC.PRZ	NYSE
Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series AA	WFC.PRA	NYSE
Guarantee of 5.80% Fixed-to-Floating Rate Normal Wachovia Income Trust Securities of Wachovia Capital Trust III	WFC/TP	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. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer ¨

Non-accelerated filer ¨ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


		Shares Outstanding
		~~Shares Outstanding~~
	~~April 24,~~October 23, 2020
Common stock, $1-2/3 par value		~~4,099,997,545~~4,134,489,571


FORM 10-Q
CROSS-REFERENCE INDEX
PART I	Financial Information
Item 1.	Financial Statements			Page
	Consolidated Statement of Income			65
	Consolidated Statement of Comprehensive Income			66
	Consolidated Balance Sheet			67
	Consolidated Statement of Changes in Equity			68
	Consolidated Statement of Cash Flows			72
	Notes to Financial Statements
	1	—	Summary of Significant Accounting Policies	73
	2	—	Restructuring Charges	78
	3	—	Cash, Loan and Dividend Restrictions	79
	4	—	Trading Activities	80
	5	—	Available-for-Sale and Held-to-Maturity Debt Securities	81
	6	—	Loans and Related Allowance for Credit Losses	88
	7	—	Leasing Activity	106
	8	—	Equity Securities	107
	9	—	Other Assets	109
	10	—	Securitizations and Variable Interest Entities	110
	11	—	Mortgage Banking Activities	117
	12	—	Intangible Assets	119
	13	—	Guarantees, Pledged Assets and Collateral, and Other Commitments	120
	14	—	Legal Actions	124
	15	—	Derivatives	129
	16	—	Fair Values of Assets and Liabilities	140
	17	—	Preferred Stock	157
	18	—	Revenue from Contracts with Customers	160
	19	—	Employee Benefits and Other Expenses	163
	20	—	Earnings and Dividends Per Common Share	164
	21	—	Other Comprehensive Income	165
	22	—	Operating Segments	167
	23	—	Regulatory and Agency Capital Requirements	168
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (Financial Review)
	Summary Financial Data			2
	Overview			3
	Earnings Performance			7
	Balance Sheet Analysis			22
	Off-Balance Sheet Arrangements			24
	Risk Management			25
	Capital Management			50
	Regulatory Matters			57
	Critical Accounting Policies			58
	Current Accounting Developments			60
	Forward-Looking Statements			61
	Risk Factors			63
	Glossary of Acronyms			170
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			43
Item 4.	Controls and Procedures			64

PART II	Other Information
Item 1.	Legal Proceedings			171
Item 1A.	Risk Factors			171
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			171
Item 6.	Exhibits			172

Signature				173

FORM 10-Q
CROSS-REFERENCE INDEX
PART I Financial Information
Item 1. Financial Statements Page
Consolidated Statement of Income
59
Consolidated Statement of Comprehensive Income
60
Consolidated Balance Sheet
61
Consolidated Statement of Changes in Equity
62
Consolidated Statement of Cash Flows
64
Notes to Financial Statements
1
— Summary of Significant Accounting Policies
65
2
— Business Combinations
70
3
— Cash, Loan and Dividend Restrictions
71
4
— Trading Activities
72
5
— Available-for-Sale and Held-to-Maturity Debt Securities
73
6
— Loans and Related Allowance for Credit Losses
80
7
— Leasing Activity
97
8
— Equity Securities
98
9
— Other Assets
100
10
— Securitizations and Variable Interest Entities
101
11
— Mortgage Banking Activities
107
12
— Intangible Assets
109
13
— Guarantees, Pledged Assets and Collateral, and Other Commitments
110
14
— Legal Actions
114
15
— Derivatives
119
16
— Fair Values of Assets and Liabilities
127
17
— Preferred Stock
140
18
— Revenue from Contracts with Customers
143
19
— Employee Benefits and Other Expenses
146
20
— Earnings and Dividends Per Common Share
147
21
— Other Comprehensive Income
148
22
— Operating Segments
150
23
— Regulatory and Agency Capital Requirements
151
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Financial Review)
Summary Financial Data
2
Overview
3
Earnings Performance
6
Balance Sheet Analysis
18
Off-Balance Sheet Arrangements
21
Risk Management
22
Capital Management
45
Regulatory Matters
51
Critical Accounting Policies
52
Current Accounting Developments
54
Forward-Looking Statements
55
Risk Factors
57
Glossary of Acronyms
152
Item 3. Quantitative and Qualitative Disclosures About Market Risk
39
Item 4. Controls and Procedures
58

PART II Other Information
Item 1. Legal Proceedings
153
Item 1A. Risk Factors
153
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
153
Item 6. Exhibits
154

Signature
155

PART I -– FINANCIAL INFORMATION

FINANCIAL REVIEW


Summary Financial Data
						% Change
	Quarter ended					Sep 30, 2020 from		Nine months ended
($ in millions, except per share amounts)	Sep 30, 2020			June 30, 2020	Sep 30, 2019	Jun 30, 2020	Sep 30, 2019	Sep 30, 2020			Sep 30, 2019	% Change
For the Period
Wells Fargo net income (loss)	$	2,035		(2,379)	4,610	NM	(56)	$	309		16,676	(98)	%
Wells Fargo net income (loss) applicable to common stock	1,720			(2,694)	4,037	NM	(57)	(932)			15,392	NM
Diluted earnings (loss) per common share	0.42			(0.66)	0.92	NM	(54)	(0.23)			3.43	NM
Profitability ratios (annualized):
Wells Fargo net income (loss) to average assets (ROA)	0.42		%	(0.49)	0.95	NM	(56)	0.02		%	1.17	(98)
Wells Fargo net income (loss) applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)	4.22			(6.63)	9.00	NM	(53)	(0.76)			11.64	NM
Return on average tangible common equity (ROTCE) (1)	5.10			(8.00)	10.70	NM	(52)	(0.91)			13.85	NM
Efficiency ratio (2)	80.7			81.6	69.1	(1)	17	78.7			65.3	21
Total revenue	$	18,862		17,836	22,010	6	(14)	$	54,415		65,203	(17)
Pre-tax pre-provision profit (PTPP) (3)	3,633			3,285	6,811	11	(47)	11,587			22,639	(49)
Dividends declared per common share	0.10			0.51	0.51	(80)	(80)	1.12			1.41	(21)
Average common shares outstanding	4,123.8			4,105.5	4,358.5	—	(5)	4,111.4			4,459.1	(8)
Diluted average common shares outstanding (4)	4,132.2			4,105.5	4,389.6	1	(6)	4,111.4			4,489.5	(8)
Average loans	$	931,708		971,266	949,760	(4)	(2)	$	955,918		949,076	1
Average assets	1,947,672			1,948,939	1,927,415	—	1	1,949,085			1,903,873	2
Average total deposits	1,399,028			1,386,656	1,291,375	1	8	1,374,638			1,274,246	8
Average consumer and small business banking deposits (5)	897,779			857,943	749,529	5	20	845,977			745,370	13
Net interest margin	2.13		%	2.25	2.66	(5)	(20)	2.32		%	2.79	(17)
At Period End
Debt securities	$	476,421		472,580	503,528	1	(5)	$	476,421		503,528	(5)
Loans	920,082			935,155	954,915	(2)	(4)	920,082			954,915	(4)
Allowance for loan losses	19,463			18,926	9,715	3	100	19,463			9,715	100
Goodwill	26,387			26,385	26,388	—	—	26,387			26,388	—
Equity securities	51,169			52,494	63,884	(3)	(20)	51,169			63,884	(20)
Assets	1,922,220			1,968,766	1,943,950	(2)	(1)	1,922,220			1,943,950	(1)
Deposits	1,383,215			1,410,711	1,308,495	(2)	6	1,383,215			1,308,495	6
Common stockholders’ equity	161,109			159,322	172,827	1	(7)	161,109			172,827	(7)
Wells Fargo stockholders’ equity	181,173			179,386	193,304	1	(6)	181,173			193,304	(6)
Total equity	182,032			180,122	194,416	1	(6)	182,032			194,416	(6)
Tangible common equity (1)	133,179			131,329	144,481	1	(8)	133,179			144,481	(8)
Capital ratios (6):
Total equity to assets	9.47		%	9.15	10.00	3	(5)	9.47		%	10.00	(5)
Risk-based capital:
Common Equity Tier 1	11.38			10.97	11.61	4	(2)	11.38			11.61	(2)
Tier 1 capital	13.05			12.60	13.23	4	(1)	13.05			13.23	(1)
Total capital	15.71			15.29	15.96	3	(2)	15.71			15.96	(2)
Tier 1 leverage	8.05			7.95	8.68	1	(7)	8.05			8.68	(7)
Common shares outstanding	4,132.5			4,119.6	4,269.1	—	(3)	4,132.5			4,269.1	(3)
Book value per common share (7)	$	38.99		38.67	40.48	1	(4)	$	38.99		40.48	(4)
Tangible book value per common share (1)(7)	32.23			31.88	33.84	1	(5)	32.23			33.84	(5)
Headcount (8)	274,900			276,000	272,700	—	1	274,900			272,700	1

(1)Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, goodwill, certain identifiable intangible assets (other than mortgage servicing rights) and goodwill and other intangibles on nonmarketable equity securities, 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 use of equity. For additional information, including a corresponding reconciliation to generally accepted accounting principles (GAAP) financial measures, see the “Capital Management – Tangible Common Equity” section in this Report.

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

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

(4)For second quarter 2020 and the nine months ended September 30, 2020, diluted average common shares outstanding equaled average common shares outstanding because our securities convertible into common shares had an anti-dilutive effect.

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

(6)The risk-based capital ratios were calculated under the lower of the Standardized or Advanced Approach determined pursuant to Basel 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. See the “Capital Management” section and Note 23 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information.

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

(8)In third quarter 2020, we began reporting headcount rather than active, full-time equivalent employees. Prior period balances have been revised to conform with the current period presentation.

Summary Financial Data
% Change
Quarter ended Mar 31, 2020 from
($ in millions, except per share amounts) Mar 31,
2020
Dec 31,
2019
Mar 31,
2019
Dec 31,
2019
Mar 31,
2019
For the Period
Wells Fargo net income $ 653
2,873
5,860
(77 )% (89 )
Wells Fargo net income applicable to common stock 42
2,546
5,507
(98 ) (99 )
Diluted earnings per common share 0.01
0.60
1.20
(98 ) (99 )
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA) 0.13 % 0.59
1.26
(78 ) (90 )
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 0.10
5.91
12.71
(98 ) (99 )
Return on average tangible common equity (ROTCE) (1) 0.12
7.08
15.16
(98 ) (99 )
Efficiency ratio (2) 73.6
78.6
64.4
(6 ) 14
Total revenue $ 17,717
19,860
21,609
(11 ) (18 )
Pre-tax pre-provision profit (PTPP) (3) 4,669
4,246
7,693
10
(39 )
Dividends declared per common share 0.51
0.51
0.45
—
13
Average common shares outstanding 4,104.8
4,197.1
4,551.5
(2 ) (10 )
Diluted average common shares outstanding 4,135.3
4,234.6
4,584.0
(2 ) (10 )
Average loans $ 965,046
956,536
950,010
1
2
Average assets 1,950,659
1,941,843
1,883,091
—
4
Average total deposits 1,337,963
1,321,913
1,262,062
1
6
Average consumer and small business banking deposits (4) 779,521
763,169
739,654
2
5
Net interest margin 2.58 % 2.53
2.91
2
(11 )
At Period End
Debt securities $ 501,563
497,125
483,467
1
4
Loans 1,009,843
962,265
948,249
5
6
Allowance for loan losses 11,263
9,551
9,900
18
14
Goodwill 26,381
26,390
26,420
—
—
Equity securities 54,047
68,241
58,440
(21 ) (8 )
Assets 1,981,349
1,927,555
1,887,792
3
5
Deposits 1,376,532
1,322,626
1,264,013
4
9
Common stockholders’ equity 162,654
166,669
176,025
(2 ) (8 )
Wells Fargo stockholders’ equity 182,718
187,146
197,832
(2 ) (8 )
Total equity 183,330
187,984
198,733
(2 ) (8 )
Tangible common equity (1) 134,787
138,506
147,723
(3 ) (9 )
Capital ratios (5):
Total equity to assets 9.25 % 9.75
10.53
(5 ) (12 )
Risk-based capital:

Common Equity Tier 1 10.67
11.14
11.92
(4 ) (10 )
Tier 1 capital 12.22
12.76
13.64
(4 ) (10 )
Total capital (6) 15.21
15.75
16.74
(3 ) (9 )
Tier 1 leverage 8.03
8.31
9.15
(3 ) (12 )
Common shares outstanding 4,096.4
4,134.4
4,511.9
(1 ) (9 )
Book value per common share (7) $ 39.71
40.31
39.01
(1 ) 2
Tangible book value per common share (1)(7) 32.90
33.50
32.74
(2 ) —
Team members (active, full-time equivalent) 262,800
259,800
262,100
1
—

~~(1)~~

Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, goodwill, certain identifiable intangible assets (other than mortgage servicing rights) and goodwill and other intangibles on nonmarketable equity securities, 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 use of equity. For additional information, including a corresponding reconciliation to generally accepted accounting principles (GAAP) financial measures, see the “Capital Management – Tangible Common Equity” section in this Report.


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


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


~~(4)~~	~~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 the Standardized or Advanced Approach determined pursuant to Basel 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. See the “Capital Management” section and Note 23 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information.


~~(6)~~	The total capital ratio for December 31, 2019, has been revised to the lower ratio under the Standardized Approach due to an increase in the previously disclosed total capital ratio under the Advanced Approach as a result of a decrease in risk-weighted assets (RWAs) due to the correction of duplicated operational loss amounts.


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

~~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, 2019 (2019 Form 10-K).

When we refer to “Wells Fargo,” “the Company,” “we,” “our,” or “us” in this Report, we mean Wells Fargo & Company and Subsidiaries (consolidated). When we refer to the “Parent,” we mean Wells Fargo & Company. See the Glossary of Acronyms for definitions of terms used throughout this Report.

Financial Review

Overview

Wells Fargo & Company is a diversified, community-based financial services company with ~~$1.98~~$1.92 trillion in assets. Founded in 1852 and headquartered in San Francisco, we provide banking, investment and mortgage products and services, as well as consumer and commercial finance, through ~~7,400~~7,200 locations, more than 13,000 ATMs, digital (online, mobile and social), and contact centers (phone, email and correspondence), and we have offices in 31 countries and territories to support customers who conduct business in the global economy. ~~With approximately 263,000 active, full-time equivalent team members, we~~We serve one in three households in the United States and ranked No. 2930 on Fortune’s ~~2019~~2020 rankings of America’s largest corporations. We ranked fourth in assets and third in the market value of our common stock among all U.S. banks at ~~March 31,~~September 30, 2020.

Wells Fargo’s top priority remains meeting its regulatory requirements ~~in order~~ to build the right foundation for all that lies ahead. To do that, the Company is committing the resources necessary to ensure that we operate with the strongest business practices and controls, maintain the highest level of integrity, and have an appropriate culture in place.

In response to the COVID-19 pandemic, we have been working diligently to protect employee safety while continuing to carry out Wells Fargo’s role as a provider of critical and essential services to the public. We have taken comprehensive steps to help customers, employees and communities.

For our customers, we have suspended residential property foreclosure activities, offered fee waivers, and provided payment deferrals, among other actions. We are also rapidly expanding digital access and deploying new tools, including changes to our ATMs and mobile technology for the convenience of our customers. We continue to work with regulatory agencies, government officials, and not-for-profit groups to identify other ways to assist customers facing financial challenges in the current environment.

For our employees, we have enabled approximately 180,000 to work remotely. For jobs that cannot be done from home, we have taken significant actions to help ensure employee safety, including adopting social distancing measures, staggering staff and shifts, and implementing an enhanced cleaning program. We are also making additional cash payments to employees whose roles require them to come into the office.

To support our communities, we are directing $175 million in charitable donations from the Wells Fargo Foundation to help address food, shelter, small business and housing stability, as well as providing help to public health organizations fighting to contain the spread of COVID-19.

~~We have strong levels of capital and liquidity, and we remain focused on delivering for our customers and communities to get through these unprecedented times.~~

Federal Reserve Board Consent Order Regarding Governance Oversight and Compliance and Operational Risk Management

On February 2, 2018, the Company entered into a consent order with the Board of Governors of the Federal Reserve System (FRB). As required by the consent order, the Company’s Board of Directors (Board) submitted to the FRB a plan to further enhance the Board’s governance and oversight of the Company, and the Company submitted to the FRB a plan to further improve the Company’s compliance and operational risk management program. The Company continues to engage with the FRB as the Company works to address the consent order provisions. The consent order also requires the Company, following the FRB’s acceptance and approval of the plans and the Company’s adoption and implementation of the plans, to complete an initial third-party review of the enhancements and improvements provided for in the plans. Until this third-party review is complete and the plans are approved and implemented to the satisfaction of the FRB, the Company’s total consolidated assets as defined under the consent order will be limited to the level as of December 31, 2017. Compliance with this asset cap is measured on a two-quarter daily average basis to allow for management of temporary fluctuations. While our total consolidated assets of $1.98 trillion as of the end of first quarter 2020 were in excess of our total consolidated assets of $1.95 trillion as of December 31, 2017, we continued to operate in compliance with the asset cap because the two-quarter daily average for our assets of $1.943 trillion remained below the asset cap level. We are actively working to create balance sheet capacity to lend to and help our customers during these unprecedented and challenging times created by the COVID-19 pandemic. Due to the COVID-19 pandemic, on April 8, 2020, the FRB amended the consent order to allow the Company to exclude from the asset cap any ~~on- balance~~on-balance sheet exposure resulting from loans made by the Company in connection with the Small Business Administration’s Paycheck Protection Program and the FRB’s Main Street Lending Program.

As required under the amendment to the consent order, certain fees and other economic benefits received by the Company from loans made in connection with these programs shall be transferred to the U.S. Treasury or to non-profit organizations approved by the FRB that support small businesses. After removal of the asset cap, a second third-party review must also be conducted to assess the efficacy and sustainability of the enhancements and improvements.

Consent Orders with the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency Regarding Compliance Risk Management Program, Automobile Collateral Protection Insurance Policies, and Mortgage Interest Rate Lock Extensions

On April 20, 2018, the Company entered into consent orders with the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) to pay an aggregate of $1 billion in civil money penalties to resolve matters regarding the Company’s compliance risk management program and past practices involving certain automobile collateral protection insurance (CPI) policies and certain mortgage interest rate lock extensions. As required by the consent orders, the Company submitted to the CFPB and OCC an enterprise-wide compliance risk management plan and a plan to enhance the Company’s internal audit program with respect to federal consumer financial law and the terms of the consent orders. In addition, as required by the consent orders, the Company submitted for non-objection plans to remediate customers affected by the automobile collateral protection insurance and mortgage interest rate lock matters, as well as a plan for the management of remediation activities conducted by the Company.

Retail Sales Practices Matters

In September 2016, we announced settlements with the CFPB, the OCC, and the Office of the Los Angeles City Attorney, and entered into related 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 a top priority to rebuild trust through a comprehensive action plan that includes making things right for our customers, ~~team members,~~employees, and other stakeholders, and building a better Company for the future. Our priority of rebuilding trust has included numerous actions focused on identifying potential financial harm to customers resulting from these matters and providing remediation.

For additional information regarding retail sales practices matters, including related legal matters, see the “Risk Factors”

Overview (continued)

section in our 2019 Form 10-K and Note 14 (Legal Actions) to Financial Statements in this Report.

Other Customer Remediation Activities

Our priority of rebuilding trust has also included an effort to identify other areas or instances where customers may have experienced financial harm, provide remediation as appropriate, and implement additional operational and control procedures. We are working with our regulatory agencies in this effort. We have previously disclosed key areas of focus as part of our rebuilding trust efforts and are in the process of providing remediation for those matters. We have accrued for the reasonably estimable remediation costs related to our rebuilding trust efforts, which amounts may change based on additional facts and information, as well as ongoing reviews and communications with our regulators.

As our ongoing reviews continue, it is possible that in the future we may identify additional items or areas of potential concern. To the extent issues are identified, we will continue to assess any customer harm and provide remediation as appropriate. For ~~more~~additional information, including related legal and regulatory risk, see the “Risk Factors” section in our 2019 Form 10-K and Note 14 (Legal Actions) to Financial Statements in this Report.

Recent Developments

Efficiency Initiatives

We are pursuing various initiatives to reduce expenses and create a more efficient and streamlined organization. Actions from these initiatives may include reorganizing and simplifying business processes and structures, reducing headcount, optimizing third-party spending, and rationalizing our branch and administrative locations, which may include consolidations and closures. We have established dedicated teams in each of our lines of businesses and functions to focus on an organized and structured approach for implementing these initiatives. The evaluation of potential actions will continue in future periods. In third quarter 2020, we recognized $718 million of restructuring charges, predominantly severance costs, within noninterest expense in our consolidated statement of income as a result of these initiatives. For additional information, see Note 2 (Restructuring Charges) to Financial Statements in this Report.

COVID-19 Pandemic

We have strong levels of capital and liquidity, and we remain focused on delivering for our customers and communities to get through these unprecedented times.

PAYCHECK PROTECTION PROGRAM The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)created funding for the Small Business Administration’s (SBA) loan program providing forgiveness of up to the full principal amount of qualifying loans guaranteed under a new program called the Paycheck Protection Program (PPP). The intent of the PPP is to provide loans to small businesses in order to keep their employees on the payroll and make certain other eligible payments. Loans granted under the PPP are guaranteed by the SBA and are fully forgivable if used for qualifying expenses such as payroll, mortgage interest, rent and utilities. If the loans are not forgiven, they must be repaid over a

term not to exceed five years. Under the PPP, through September 30, 2020, we funded $10.5 billion in loans to more than 190,000 borrowers and deferred $417 million of SBA processing fees that will be recognized as interest income over the term of the loans. As of September 30, 2020, $10.2 billion of principal remained outstanding on these PPP loans. We have committed to donating the gross processing fees received from funding PPP loans to non-profit organizations that support small businesses as the fees are recognized in earnings. Through September 30, 2020, we donated $51 million of processing fees.

SBA SIX-MONTH PAYMENT ASSISTANCE Under the CARES Act, the SBA will make principal and interest payments on behalf of certain borrowers for six months. During the first nine months of 2020, over 20,000 of our lending customers were eligible for SBA payment assistance, and we received $393 million in payments from the SBA.

LIBOR Transition

Due to uncertainty surrounding the suitability and sustainability of the London Interbank Offered Rate (LIBOR), central banks and global regulators have called for financial market participants to prepare for the discontinuation of LIBOR by the end of 2021. LIBOR is a widely-referenced benchmark rate, which is published in five currencies and a range of tenors, and seeks to estimate the cost at which banks can borrow on an unsecured basis from other banks. We have a significant number of assets and liabilities referenced to LIBOR and other interbank offered rates (IBORs), such as commercial loans, adjustable-rate mortgage loans, derivatives, debt securities, and long-term debt.

Accordingly, we established a LIBOR Transition Office (LTO) in February 2018, with senior management and Board oversight. The LTO is responsible for developing a coordinated strategy to transition the IBOR-linked contracts and processes across Wells Fargo to alternative reference rates and serves as the primary conduit between Wells Fargo and relevant industry groups, such as the Alternative Reference Rates Committee (ARRC).

In addition, the Company is actively working with regulators, industry working groups (such as the ARRC) and trade associations that are developing guidance to facilitate an orderly transition away from the use of LIBOR. We are closely monitoring and seeking to follow the recommendations and guidance announced by such organizations, including those announced by the ARRC and the Bank of England’s Working Group on Sterling Risk-Free Reference Rates. We continue to assess the risks and related impacts associated with a transition away from IBORs. See the “Risk Factors” section in the 2019 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.

On March 12, 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04 – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Update) that provides temporary relief from existing GAAP accounting requirements for entities that perform activities related to reference rate reform. The relief provided by the Update is primarily related to contract modifications and hedge accounting relationships that are impacted by the Company’s reference rate reform activities. For additional information on the Update, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

For additional information on the amount of our IBOR-linked assets and liabilities, as well as the program structure and initiatives created by the LTO, see the “Risk Management –

Asset/Liability Management – LIBOR Transition” section in our 2019 Form 10-K.

Capital Actions and Restrictions

FRB’s capital plan rule, including Wells Fargo, from making capital distributions, subject to certain limited exceptions. For additional information about capital planning, including the FRB’s recent prohibition on capital distributions, see the “Capital Management – Capital Planning and Stress Testing” section in this Report.

In October 2020, we issued $1.2 billion of our Non-Cumulative Perpetual Class A Preferred Stock, Series AA.

Financial Performance


Consolidated Financial Highlights
	Quarter ended Sep 30,						Nine months ended Sep 30,
($ in millions)	2020		2019	$ Change	% Change		2020		2019	$ Change	% Change
Selected income statement data
Net interest income	$	9,368	11,625	(2,257)	(19)	%	$	30,560	36,031	(5,471)	(15)	%
Noninterest income	9,494		10,385	(891)	(9)		23,855		29,172	(5,317)	(18)
Total revenue	18,862		22,010	(3,148)	(14)		54,415		65,203	(10,788)	(17)
Provision for credit losses	769		695	74	11		14,308		2,043	12,265	600
Noninterest expense	15,229		15,199	30	—		42,828		42,564	264	1
Income tax expense (benefit)	645		1,304	(659)	(51)		(3,113)		3,479	(6,592)	NM
Wells Fargo net income	2,035		4,610	(2,575)	(56)		309		16,676	(16,367)	(98)
Wells Fargo net income (loss) applicable to common stock	1,720		4,037	(2,317)	(57)		(932)		15,392	(16,324)	NM

NM – Not meaningful

Wells Fargo had net income ~~was $653 million~~of $2.0 billion in ~~first~~third quarter 2020 with diluted earnings per common share (EPS) of ~~$0.01,~~$0.42, compared with ~~$5.9~~net income of $4.6 billion and ~~$1.20, respectively,~~diluted EPS of $0.92 a year ago. ~~Our results in first~~Financial performance for third quarter 2020 ~~were~~was impacted by ~~a $4.0 billion provision for credit losses~~$961 million of customer remediation accruals and ~~an impairment~~$718 million of ~~debt and equity securities of $950 million driven by economic and market conditions. Financial performance items for first~~restructuring charges included in noninterest expense. Also, in third quarter 2020 compared with the same period a year ~~ago included:~~


•	~~revenue of~~ ~~$17.7 billion~~, ~~down$3.9 billion, with net interest income of~~ ~~$11.3 billion~~, ~~down$999 million, or~~ 8%~~, and noninterest income of~~ ~~$6.4 billion~~, ~~down$2.9 billion, or~~ ~~31%~~;


•	~~a net interest margin of~~ ~~2.58%, down~~ 33 ~~basis points;~~


•	~~noninterest expense of~~ ~~$13.0 billion~~, ~~down$868 million, or~~ 6%;


•	~~an efficiency ratio of~~ ~~73.6%, compared with~~ ~~64.4%~~;


•	~~average loans of~~ ~~$965.0 billion~~, up~~$15.0 billion~~;


•	~~average deposits of~~ ~~$1.34 trillion~~, up~~$75.9 billion~~;


•	~~net loan charge-off rate of~~ ~~0.38%~~ ~~(annualized) of average loans, compared with~~ ~~0.30%~~ ~~(annualized);~~


•	~~nonaccrual loans of~~ ~~$6.2 billion~~, ~~down$749 million, or~~ ~~11%; and~~


•	~~return on assets (ROA) of~~ ~~0.13%~~ ~~and return on equity (ROE) of~~ ~~0.10%, down from~~ ~~1.26%~~ ~~and~~ ~~12.71%, respectively.~~

ago:

~~Balance Sheet~~•total revenue decreased due to lower net interest income and lower noninterest income driven by lower other noninterest income, partially offset by higher mortgage banking noninterest income;

•noninterest expense increased due to higher restructuring charges, partially offset by lower operating losses;

•average loans decreased due to lower commercial and consumer loans; and

•average deposits increased on growth in interest-bearing and noninterest-bearing deposits.

Wells Fargo had net income of $309 million in the first nine months of 2020 with diluted loss per common share of $0.23, compared with net income of $16.7 billion and diluted EPS of $3.43 a year ago. Financial performance for the first nine months of 2020 was impacted by $14.3 billion of provision for credit losses, $1.9 billion of customer remediation accruals and $718 million of restructuring charges included in noninterest expense. Also, in the first nine months of 2020 compared with the same period a year ago:

•total revenue decreased due to lower net interest income and lower noninterest income driven by lower other noninterest income and net gains (losses) from equity securities;

•noninterest expense increased due to higher restructuring charges, operating losses, and occupancy expense, partially offset by lower personnel and advertising and promotion expense;

•average loans increased due to higher commercial loans, partially offset by lower consumer loans; and

•average deposits increased on growth in interest-bearing and noninterest-bearing deposits.

Capital and Liquidity

We maintained a solid capital position in the first nine months of 2020, with total equity of $182.0 billion at September 30, 2020, compared with $188.0 billion at December 31, 2019. Our ~~balance sheet~~liquidity and regulatory capital ratios remained strong ~~during first quarter~~at September 30, 2020, and included:

•our liquidity coverage ratio (LCR) was 134% at September 30, 2020, which continued to exceed the regulatory minimum of 100%;

•our Common Equity Tier 1 (CET1) ratio was 11.38% at September 30, 2020, which continued to exceed both the regulatory minimum of 9% and our current internal target of 10%; and

•our eligible external total loss absorbing capacity (TLAC) as a percentage of total risk-weighted assets was 25.76% as of September 30, 2020, compared with ~~solid levels~~the regulatory minimum of 22.0%.

See the “Capital Management” and the “Risk Management – Asset/Liability Management – Liquidity and Funding” sections in this Report for additional information regarding our capital and liquidity, including the calculation of our regulatory capital and capital. Our total assets were $1.98 trillion at March 31, 2020. Cash and other short-term investments decreased $6.1 billion from December 31, 2019, reflecting lower federal funds sold and securities purchased under resale agreements, partially offset by an increase in cash balances. Debt securities increased $4.4 billion from December 31, 2019, predominantly due to an increase in held-to-maturity debt securities, partially offset by a decline in available-for-sale debt securities. Loans increased $47.6 billion from December 31, 2019, predominantly due to increases in commercial and industrial loans driven by draws of revolving lines and origination of new lending facilities due to the impact of the COVID-19 pandemic on economic and market conditions. The increase in loans was partially offset by a decrease in credit card loans primarily due to seasonality and fewer new account openings, and declines in consumer real estate mortgages and other revolving credit and installment loans, as originations and draws of existing lines were more than offset by paydowns.liquidity amounts.

Average deposits in first quarter 2020 were $1.34 trillion, up $75.9 billion from first quarter 2019, which reflected growth from retail banking deposit campaigns, as well as the inflow of deposits associated with corporate and commercial loan draws.

Overview (continued)

Credit Quality

Credit quality ~~declined~~was affected by the economic impact that the COVID-19 pandemic had on our customer base.

•The allowance for credit losses (ACL) for loans of $20.5 billion at September 30, 2020, increased $10.0 billion from December 31, 2019. We had a $11.3 billion increase in the ACL for loans in the first nine months of 2020, partially offset by a $1.3 billion decrease as a result of our adoption on January 1, 2020, of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL). Our provision for credit losses for loans was $14.1 billion in the first nine months of 2020, up from $2.0 billion in the same period a year ago. The increase in the ACL for loans and the provision for credit losses reflected current and forecasted economic conditions due to the COVID-19 ~~pandemic’s effect on market conditions, which impacted our customer base.~~pandemic.

•The allowance coverage for total loans was 2.22% at September 30, 2020, compared with 1.09% at December 31, 2019.

•Net loan charge-offs were ~~$909~~$683 million, or ~~0.38%~~0.29% (annualized) of average loans, in ~~first~~third quarter 2020, compared with ~~$695~~$645 million a year ago ~~(0.30%~~(0.27%)(annualized). ~~Our commercial~~

•Commercial portfolio net loan charge-offs were ~~$324~~$356 million, or 2529 basis points (annualized) of average commercial loans, in ~~first~~third quarter 2020, compared with net loan charge-offs of ~~$145~~$139 million, or 11 basis points (annualized), a year ago, predominantly driven by increased losses in our commercial and industrial and commercial real estate loan ~~portfolio primarily related to higher oil and gas net charge-offs reflecting significant declines in oil prices. Our consumer~~portfolios.

•Consumer portfolio net loan charge-offs were ~~$585~~$327 million, or 5330 basis points (annualized) of average consumer loans, in ~~first~~

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

third quarter 2020, compared with net loan charge-offs of ~~$550~~$506 million, or 5146 basis points (annualized), a year ago, ~~primarily~~predominantly driven by ~~increased~~lower losses in our credit card, ~~portfolio.~~

~~The allowance for~~automobile and other revolving credit ~~losses (ACL) for loans of $12.0 billion at March 31, 2020, increased $1.2 billion, compared with a year ago,~~ and ~~increased $1.6 billion from December 31, 2019. We had a $2.9 billion increase in the allowance for credit losses for loans in first quarter 2020,~~installment loan portfolios, partially offset by ~~a $1.3 billion decline as a result of~~lower recoveries in our ~~adoption on January 1, 2020, of Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326):~~ ~~Measurement of Credit Losses on Financial Instruments~~ (CECL), compared with a $150 million increase in the allowance in the same period a year ago. The increase in the allowance for credit losses for loans reflected forecasted credit deterioration due to the COVID-19 pandemic and credit weakness in the oil and gas portfolio due to the recent sharp declines in oil prices. The allowance coverage for total loans was 1.19% at March 31, 2020, compared with 1.14% a year ago and 1.09% at December 31, 2019. The allowance covered 3.3 times annualized net loan charge-offs in first quarter 2020, compared with 3.8 times in first quarter 2019. Our provision for loan losses was $3.8 billion in first quarter 2020, up from $845 million a year ago, which reflected an increase in the allowance for credit losses for loans due to forecasted credit deterioration due to the COVID-19 pandemic, and higher net loan charge-offs primarily due to the impact of the recent sharp decline in oil prices on our oil and gas portfolio.residential real estate portfolios.

•Nonperforming assets (NPAs) of $8.2 billion at ~~March 31,~~September 30, 2020, ~~of $6.4~~increased $2.5 billion, ~~increased $759 million,~~ or ~~13%~~45%, from December 31, 2019, ~~and represented 0.63% of total loans at March 31, 2020. Nonaccrual loans increased $810 million from December 31, 2019,~~predominantly driven by increases in commercial and industrial and commercial real estate mortgage ~~as the effect of the COVID-19 pandemic on market conditions began to impact our customer base. In addition, real estate 1-4 family mortgage~~ nonaccrual loans increased primarily as a result of our adoption of CECL, which required the reclassification of purchased credit-impaired loans as nonaccruing based on performance. Foreclosed assets decreased $51 million from December 31, 2019. For information on how we are assisting our customers in response to the COVID-19 pandemic, see the “Risk Management – Credit Risk Management” section in this Report.

~~Capital~~

We maintained a solid capital position in first quarter 2020, with total equity of $183.3 billion at March 31, 2020, compared with $188.0 billion at December 31, 2019. We reduced our common shares outstanding by 38.0 million shares through the repurchase of 75.4 million common shares, net of issuances, in the quarter. On March 15, 2020, we, along with the other members of the Financial Services Forum (which consists of the eight largest and most diversified financial institutions headquartered in the U.S.), decided to temporarily suspend share repurchases for the remainder of the first quarter and for second quarter 2020. This decision is consistent with our objective to use our significant capital and liquidity to provide support to individuals, small businesses, and the broader economy through lending and other important services.

In first quarter 2020, we issued $2.0 billion of Non-Cumulative Perpetual Class A Preferred Stock, Series Z. Additionally, we redeemed the remaining $1.8 billion of our Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series K. We also redeemed $669 million of our Non-Cumulative Perpetual Class A Preferred Stock, Series T.

We believe an important measure of our capital strength is the Common Equity Tier 1 (CET1) ratio, which was 10.67% at March 31, 2020, down from 11.14% at December 31, 2019, but still above our internal target of 10% and the regulatory minimum of 9%. As of March 31, 2020, our eligible external total loss absorbing capacity (TLAC) as a percentageloans. NPAs represented 0.89% of total risk-weighted assets was 23.27%, 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.loans at September 30, 2020.



Earnings Performance

Wells Fargo net income for ~~first~~third quarter 2020 was ~~$653 million~~$2.0 billion ($~~0.01~~0.42 diluted earnings per common share), compared with ~~$5.9~~$4.6 billion ($~~1.20~~0.92 diluted per share) ~~for first quarter 2019.~~in the same period a year ago. Net income decreased in third quarter 2020, compared with the same period a year ago, predominantly due to a $2.3 billion decrease in net interest income and an $891 million decrease in noninterest income, partially offset by a $659 million decrease in income tax expense.

Net income for the first ~~quarter~~nine months of 2020 was $309 million, compared with $16.7 billion in the same period a year ago. Net income decreased in the first nine months of 2020, compared with the same period a year ago, due to a ~~$999 million decrease in net interest income, a $3.2~~$12.3 billion increase in our provision for credit losses, a $5.5 billion decrease in net interest income, and a ~~$2.9~~$5.3 billion decrease in noninterest income, partially offset by a ~~$868 million decrease in noninterest expense, and a $722 million~~$6.6 billion decrease in income tax expense.

Revenue, the sum of net interest income and noninterest income, was $17.7 billion in first quarter 2020, compared with $21.6 billion in the same period a year ago. Net interest income represented 64% of revenue in first quarter 2020, compared with 57% in first quarter 2019. Noninterest income represented 36% of revenue in first quarter 2020, compared with 43% in first quarter 2019.

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 21% federal statutory tax rate for the periods ending ~~March 31,~~September 30, 2020 and 2019.

Net interest income and ~~the~~ net interest margin decreased in ~~any one period can be significantly affected by a variety~~both the third quarter and first nine months of factors including the mix of earning assets in our portfolio, the overall size of our earning assets portfolio, and the cost of funding those assets. In addition, variable sources of interest income, such as loan fees, periodic dividends, and collection of interest on nonaccrual loans, can fluctuate from period to period.

Net interest income on a taxable-equivalent basis was $11.5 billion in first quarter 2020, compared with $12.5 billion for the same period a year ago. Net interest margin on a taxable-equivalent basis was 2.58% in first quarter 2020, compared with 2.91% for the same period a year ago. The decrease in net interest income and net interest margin in first quarter 2020, compared with the same ~~period~~periods a year ago, ~~was~~ driven by unfavorable impacts of repricing due to the lower ~~market rates~~interest rate environment and higher mortgage-backed securities (MBS) premium amortization. The decrease in third quarter 2020 also reflected changes in the mix of earning assets and funding ~~sources, including sales of high yielding Pick-a-Pay loans in 2019, as well as higher costs on promotional retail banking deposits.~~

sources.

~~Average earning assets increased $49.8 billion in first quarter 2020 compared with the same period a year ago. The change was driven by increases in:~~


•	~~average federal funds sold and securities purchased under resale agreements of~~ ~~$24.0 billion~~;


•	~~average loans of~~ ~~$15.0 billion~~;


•	~~average debt securities of~~ ~~$8.5 billion~~;


•	~~average mortgage loans held for sale of~~ ~~$6.5 billion~~;


•	~~average equity securities of~~ ~~$4.5 billion; and~~


•	~~other earning assets of~~ ~~$3.0 billion~~;

~~partially offset by decreases in:~~


•	~~average interest-earning deposits with banks of~~ ~~$11.3 billion; and~~


•	~~average loans held for sale of~~ ~~$377 million~~.

~~Deposits are an important low-cost source of funding and affect both~~For additional information about 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~~margin, see the “Earnings Performance – Net Interest Income” section in foreign offices. Average deposits were $1.34 trillion in first quarter 2020, compared with $1.26 trillion in the same period a year ago, and represented 139% of average loans in first quarter 2020, compared with 133% in first quarter 2019. Average deposits were 75% of average earning assets in first quarter 2020, compared with 73% in the same period a year ago. The average deposit cost for first quarter 2020 was 52 basis points, down 13 basis points from a year ago, reflecting the lower interest rate environment, partially offset by retail banking promotional pricing for new deposits.our 2019 Form 10-K.

Earnings Performance (continued)

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


	Quarter ended September 30,
					2020					2019
(in millions)	Average balance		Yields/ rates		Interest income/ expense		Average balance	Yields/ rates		Interest income/ expense
Earning assets
Interest-earning deposits with banks	$	216,958	0.11	%	$	58	134,017	2.14	%	$	723
Federal funds sold and securities purchased under resale agreements	80,431		0.02		3		105,919	2.24		599
Debt securities (2):
Trading debt securities	88,021		2.49		548		94,737	3.35		794
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	8,126		0.87		18		16,040	2.14		87
Securities of U.S. states and political subdivisions	32,326		2.16		174		43,305	3.78		409
Mortgage-backed securities:
Federal agencies	131,182		2.03		665		154,134	2.77		1,066
Residential and commercial	4,051		1.58		16		5,175	4.02		52
Total mortgage-backed securities	135,233		2.02		681		159,309	2.81		1,118
Other debt securities	41,871		1.84		194		42,435	4.12		440
Total available-for-sale debt securities	217,556		1.96		1,067		261,089	3.14		2,054
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	48,582		2.14		261		44,770	2.18		247
Securities of U.S. states and political subdivisions	14,145		3.84		136		8,688	4.01		87
Federal agency and other mortgage-backed securities	113,646		1.85		525		95,434	2.54		606
Other debt securities	11		1.66		—		50	3.58		—
Total held-to-maturity debt securities	176,384		2.09		922		148,942	2.52		940
Total debt securities	481,961		2.10		2,537		504,768	3.00		3,788
Mortgage loans held for sale (3)	29,426		3.15		232		22,743	4.08		232
Loans held for sale (3)	1,597		1.60		7		1,964	4.17		20
Loans:
Commercial loans:
Commercial and industrial – U.S.	270,998		2.53		1,721		284,278	4.21		3,015
Commercial and industrial – Non-U.S.	64,048		2.14		344		64,016	3.67		593
Real estate mortgage	123,391		2.81		870		121,819	4.36		1,338
Real estate construction	22,216		3.13		175		20,686	5.13		267
Lease financing	17,091		3.41		146		19,266	4.34		209
Total commercial loans	497,744		2.60		3,256		510,065	4.22		5,422
Consumer loans:
Real estate 1-4 family first mortgage	290,607		3.24		2,357		288,383	3.74		2,699
Real estate 1-4 family junior lien mortgage	26,018		4.13		270		31,454	5.66		448
Credit card	35,965		11.70		1,057		39,204	12.55		1,240
Automobile	48,718		4.90		600		46,286	5.13		599
Other revolving credit and installment	32,656		5.25		431		34,368	6.95		601
Total consumer loans	433,964		4.33		4,715		439,695	5.06		5,587
Total loans (3)	931,708		3.41		7,971		949,760	4.61		11,009
Equity securities	25,185		1.61		100		37,075	2.68		249
Other	6,974		(0.02)		—		6,695	1.77		30
Total earning assets	$	1,774,240	2.45	%	$	10,908	1,762,941	3.76	%	$	16,650
Funding sources
Deposits:
Interest-bearing checking	$	49,608	0.07	%	$	8	59,310	1.39	%	$	208
Market rate and other savings	803,942		0.08		157		711,334	0.66		1,182
Savings certificates	24,808		0.83		52		32,751	1.72		142
Other time deposits	46,920		0.64		75		91,820	2.42		561
Deposits in non-U.S. offices	33,992		0.25		22		51,709	1.77		231
Total interest-bearing deposits	959,270		0.13		314		946,924	0.97		2,324
Short-term borrowings	57,292		(0.08)		(12)		121,842	2.07		635
Long-term debt	222,862		1.86		1,038		229,689	3.09		1,780
Other liabilities	27,679		1.33		92		26,173	2.06		135
Total interest-bearing liabilities	1,267,103		0.45		1,432		1,324,628	1.46		4,874
Portion of noninterest-bearing funding sources	507,137		—		—		438,313	—		—
Total funding sources	$	1,774,240	0.32		1,432		1,762,941	1.10		4,874
Net interest margin and net interest income on a taxable-equivalent basis (4)			2.13	%	$	9,476		2.66	%	$	11,776
Noninterest-earning assets
Cash and due from banks	$	21,991					19,199
Goodwill	26,388						26,413
Other	125,053						118,862
Total noninterest-earning assets	$	173,432					164,474
Noninterest-bearing funding sources
Deposits	$	439,758					344,451
Other liabilities	57,961						58,241
Total equity	182,850						200,095
Noninterest-bearing funding sources used to fund earning assets	(507,137)						(438,313)
Net noninterest-bearing funding sources	$	173,432					164,474
Total assets	$	1,947,672					1,927,415

Average prime rate			3.25	%				5.31	%
Average three-month London Interbank Offered Rate (LIBOR)			0.25					2.20

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

(2)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.

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

(4)Includes taxable-equivalent adjustments of $108 million and $151 million for the quarters ended September 30, 2020 and 2019, respectively, and $367 million and $469 million for the first nine months of 2020 and 2019, respectively, predominantly related to tax-exempt income on certain loans and securities.

   Quarter ended March 31,
2020
2019
(in millions)
Average
balance

Yields/
rates

Interest
income/
expense

Average
balance

Yields/
rates

Interest
income/
expense

Earning assets
Interest-earning deposits with banks $ 129,522
1.18 % $ 381
140,784
2.33 % $ 810
Federal funds sold and securities purchased under resale agreements 107,555
1.42
380
83,539
2.40
495
Debt securities (2):
Trading debt securities 101,062
3.05
770
89,378
3.58
798
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 10,781
1.40
38
14,070
2.14
74
Securities of U.S. states and political subdivisions 38,950
3.43
334
48,342
4.02
486
Mortgage-backed securities:
Federal agencies 158,639
2.68
1,062
151,494
3.10
1,173
Residential and commercial 4,648
2.82
33
5,984
4.31
64
Total mortgage-backed securities 163,287
2.68
1,095
157,478
3.14
1,237
Other debt securities 39,541
3.48
343
46,788
4.46
517
Total available-for-sale debt securities 252,559
2.87
1,810
266,678
3.48
2,314
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 45,937
2.19
251
44,754
2.20
243
Securities of U.S. states and political subdivisions 13,536
3.84
130
6,158
4.03
62
Federal agency and other mortgage-backed securities 98,394
2.55
628
96,004
2.74
656
Other debt securities 24
3.10
—
61
3.96
1
Total held-to-maturity debt securities 157,891
2.56
1,009
146,977
2.63
962
Total debt securities 511,512
2.81
3,589
503,033
3.25
4,074
Mortgage loans held for sale (3) 20,361
3.87
197
13,898
4.37
152
Loans held for sale (3) 1,485
3.17
12
1,862
5.25
24
Loans:
Commercial loans:
Commercial and industrial – U.S. 288,502
3.55
2,546
286,577
4.48
3,169
Commercial and industrial – non U.S. 70,659
3.16
556
62,821
3.90
604
Real estate mortgage 121,788
3.92
1,187
121,417
4.58
1,373
Real estate construction 20,277
4.54
229
22,435
5.43
301
Lease financing 19,288
4.40
212
19,391
4.61
224
Total commercial loans 520,514
3.65
4,730
512,641
4.48
5,671
Consumer loans:
Real estate 1-4 family first mortgage 293,556
3.61
2,650
285,214
3.96
2,821
Real estate 1-4 family junior lien mortgage 28,905
5.14
370
33,791
5.75
481
Credit card 39,756
12.21
1,207
38,182
12.88
1,212
Automobile 48,258
4.96
596
44,833
5.19
574
Other revolving credit and installment 34,057
6.32
534
35,349
7.14
623
Total consumer loans 444,532
4.83
5,357
437,369
5.26
5,711
Total loans (3) 965,046
4.20
10,087
950,010
4.84
11,382
Equity securities 37,532
2.22
208
33,080
2.56
211
Other 7,431
0.77
14
4,416
1.63
18
Total earning assets $ 1,780,444
3.35 % $ 14,868
1,730,622
4.00 % $ 17,166
Funding sources
Deposits:
Interest-bearing checking $ 63,086
0.86 % $ 135
56,253
1.42 % $ 197
Market rate and other savings 762,138
0.52
978
688,568
0.50
847
Savings certificates 30,099
1.47
110
25,231
1.26
78
Other time deposits 81,978
1.74
356
97,830
2.67
645
Deposits in non-U.S. offices 53,335
1.23
163
55,443
1.89
259
Total interest-bearing deposits 990,636
0.71
1,742
923,325
0.89
2,026
Short-term borrowings 102,977
1.14
292
108,651
2.23
597
Long-term debt 229,002
2.17
1,240
233,172
3.32
1,927
Other liabilities 30,199
1.90
142
25,292
2.28
143
Total interest-bearing liabilities 1,352,814
1.01
3,416
1,290,440
1.47
4,693
Portion of noninterest-bearing funding sources 427,630
—
—
440,182
—
—
Total funding sources $ 1,780,444
0.77
3,416
1,730,622
1.09
4,693
Net interest margin and net interest income on a taxable-equivalent basis (4) 2.58 % $ 11,452
2.91 % $ 12,473
Noninterest-earning assets
Cash and due from banks $ 20,571
      19,614

Goodwill 26,387
      26,420

Other 123,257
106,435

Total noninterest-earning assets $ 170,215
152,469

Noninterest-bearing funding sources
Deposits $ 347,327
338,737

Other liabilities 62,348
55,565

Total equity 188,170
198,349

Noninterest-bearing funding sources used to fund earning assets (427,630 ) (440,182 )
Net noninterest-bearing funding sources $ 170,215
152,469

Total assets $ 1,950,659
1,883,091

Average prime rate 4.41 % 5.50 %
Average three-month London Interbank Offered Rate (LIBOR) 1.53
2.69


~~(1)~~	~~Yields/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.~~


~~(2)~~	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.


~~(3)~~	~~Nonaccrual loans and related income are included in their respective loan categories.~~


~~(4)~~	~~Includes taxable-equivalent adjustments of~~ ~~$140 million~~ ~~and~~ ~~$162 million~~ ~~for the quarters ended~~ ~~March 31, 2020~~ ~~and~~ ~~2019, respectively, predominantly related to tax-exempt income on certain loans and securities.~~


	Nine months ended September 30,
					2020					2019
(in millions)	Average balance		Yields/ rates		Interest income/ expense		Average balance	Yields/ rates		Interest income/ expense
Earning assets
Interest-earning deposits with banks	$	174,425	0.37	%	$	490	138,591	2.27	%	$	2,352
Federal funds sold and securities purchased under resale agreements	88,095		0.58		385		95,945	2.36		1,692
Debt securities (2):
Trading debt securities	95,018		2.78		1,981		90,229	3.46		2,338
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	9,448		1.06		75		15,178	2.17		246
Securities of U.S. states and political subdivisions	35,656		2.90		775		45,787	3.95		1,355
Mortgage-backed securities:
Federal agencies	144,425		2.37		2,564		151,806	2.95		3,359
Residential and commercial	4,376		2.25		74		5,571	4.12		172
Total mortgage-backed securities	148,801		2.36		2,638		157,377	2.99		3,531
Other debt securities	40,220		2.67		805		44,746	4.33		1,451
Total available-for-sale debt securities	234,125		2.45		4,293		263,088	3.34		6,583
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	47,701		2.16		770		44,762	2.19		734
Securities of U.S. states and political subdivisions	13,950		3.83		401		7,277	4.03		220
Federal agency and other mortgage-backed securities	105,393		2.19		1,728		95,646	2.64		1,894
Other debt securities	17		2.64		—		56	3.81		1
Total held-to-maturity debt securities	167,061		2.31		2,899		147,741	2.57		2,849
Total debt securities	496,204		2.47		9,173		501,058	3.13		11,770
Mortgage loans held for sale (3)	25,264		3.48		659		18,401	4.20		579
Loans held for sale (3)	1,577		2.19		26		1,823	4.72		64
Loans:
Commercial loans:
Commercial and industrial – U.S.	289,799		2.88		6,257		285,305	4.39		9,360
Commercial and industrial – Non U.S.	68,965		2.61		1,345		63,252	3.82		1,808
Real estate mortgage	122,903		3.25		2,987		121,703	4.51		4,101
Real estate construction	21,288		3.66		583		21,557	5.31		856
Lease financing	18,152		4.07		554		19,262	4.56		659
Total commercial loans	521,107		3.01		11,726		511,079	4.39		16,784
Consumer loans:
Real estate 1-4 family first mortgage	288,355		3.43		7,421		286,600	3.86		8,296
Real estate 1-4 family junior lien mortgage	27,535		4.52		932		32,610	5.72		1,397
Credit card	37,415		11.58		3,243		38,517	12.69		3,656
Automobile	48,473		4.95		1,797		45,438	5.18		1,762
Other revolving credit and installment	33,033		5.68		1,405		34,832	7.07		1,841
Total consumer loans	434,811		4.54		14,798		437,997	5.17		16,952
Total loans (3)	955,918		3.70		26,524		949,076	4.75		33,736
Equity securities	30,027		1.89		425		35,139	2.65		697
Other	7,373		0.24		14		5,275	1.73		68
Total earning assets	$	1,778,883	2.83	%	$	37,696	1,745,308	3.90	%	$	50,958
Funding sources
Deposits:
Interest-bearing checking	$	55,407	0.37	%	$	152	57,715	1.42	%	$	615
Market rate and other savings	788,732		0.24		1,446		696,943	0.58		3,038
Savings certificates	27,310		1.16		237		29,562	1.56		344
Other time deposits	62,881		1.23		580		95,490	2.57		1,836
Deposits in non-U.S. offices	41,642		0.73		226		52,995	1.84		730
Total interest-bearing deposits	975,972		0.36		2,641		932,705	0.94		6,563
Short-term borrowings	74,538		0.47		263		115,131	2.18		1,878
Long-term debt	228,067		2.06		3,515		233,186	3.21		5,607
Other liabilities	29,270		1.59		350		25,263	2.17		410
Total interest-bearing liabilities	1,307,847		0.69		6,769		1,306,285	1.48		14,458
Portion of noninterest-bearing funding sources	471,036		—		—		439,023	—		—
Total funding sources	$	1,778,883	0.51		6,769		1,745,308	1.11		14,458
Net interest margin and net interest income on a taxable-equivalent basis (4)			2.32	%	$	30,927		2.79	%	$	36,500
Noninterest-earning assets
Cash and due from banks	$	21,266					19,428
Goodwill	26,386						26,416
Other	122,550						112,721
Total noninterest-earning assets	$	170,202					158,565
Noninterest-bearing funding sources
Deposits	$	398,666					341,541
Other liabilities	57,537						56,664
Total equity	185,035						199,383
Noninterest-bearing funding sources used to fund earning assets	(471,036)						(439,023)
Net noninterest-bearing funding sources	$	170,202					158,565
Total assets	$	1,949,085					1,903,873

Average prime rate			3.63	%				5.43	%
Average three-month London Interbank Offered Rate (LIBOR)			0.79					2.46

Earnings Performance (continued)

Noninterest Income

Table 2: Noninterest Income


	Quarter ended Sep 30,						Nine months ended Sep 30,
(in millions)	2020		2019	$ Change	% Change		2020		2019	$ Change	% Change
Deposit-related fees (1)	$	1,299	1,480	(181)	(12)	%	$	3,888	4,289	(401)	(9)	%
Trust and investment fees:
Brokerage advisory, commissions and other fees	2,336		2,346	(10)	—		6,935		6,857	78	1
Trust and investment management	737		729	8	1		2,125		2,310	(185)	(8)
Investment banking	441		484	(43)	(9)		1,379		1,333	46	3
Total trust and investment fees	3,514		3,559	(45)	(1)		10,439		10,500	(61)	(1)
Card fees	912		1,027	(115)	(11)		2,601		2,996	(395)	(13)
Lending-related fees (1)	352		374	(22)	(6)		1,025		1,116	(91)	(8)
Mortgage banking:
Servicing income, net	341		(142)	483	NM		(77)		499	(576)	NM
Net gains on mortgage loan origination/sales activities	1,249		608	641	105		2,363		1,433	930	65
Total mortgage banking	1,590		466	1,124	241		2,286		1,932	354	18
Net gains from trading activities	361		276	85	31		1,232		862	370	43
Net gains on debt securities	264		3	261	NM		713		148	565	382
Net gains (losses) from equity securities	649		956	(307)	(32)		(219)		2,392	(2,611)	NM
Lease income	333		402	(69)	(17)		1,021		1,270	(249)	(20)
Life insurance investment income	156		173	(17)	(10)		480		499	(19)	(4)
Other (1)	64		1,669	(1,605)	(96)		389		3,168	(2,779)	(88)
Total	$	9,494	10,385	(891)	(9)		$	23,855	29,172	(5,317)	(18)

Quarter ended Mar 31, %
(in millions) 2020
2019
Change
Service charges on deposit accounts $ 1,209
1,094
11 %
Trust and investment fees:
Brokerage advisory, commissions and other fees 2,482
2,193
13
Trust and investment management 701
786
(11 )
Investment banking 391
394
(1 )
Total trust and investment fees 3,574
3,373
6
Card fees 892
944
(6 )
Other fees:
Lending related charges and fees 328
347
(5 )
Cash network fees 106
109
(3 )
Commercial real estate brokerage commissions 1
81
(99 )
Wire transfer and other remittance fees 110
113
(3 )
All other fees 87
120
(28 )
Total other fees 632

770
(18 )
Mortgage banking:
Servicing income, net 271
364
(26 )
Net gains on mortgage loan origination/sales activities 108
344
(69 )
Total mortgage banking 379

708
(46 )
Insurance 95
96
(1 )
Net gains from trading activities 64
357
(82 )
Net gains on debt securities 237
125
90
Net gains (losses) from equity securities (1,401 ) 814
NM
Lease income 352
443
(21 )
Life insurance investment income 161
159
1
All other 211
415
(49 )
Total $ 6,405

9,298
(31 )

~~NM – Not~~NM- not meaningful

~~Noninterest income was $6.4 billion, or 36% of revenue, in first~~(1)In third quarter 2020, compared with $9.3 billion, or 43% of revenue, for the same period a year ago. The decrease in noninterest income in first quarter 2020, compared with the same period a year ago, was predominantly due to lower other fees, mortgage banking income, net gains from trading activities, and net losses from equity securities, partially offset by higher service charges on deposit accounts, cash network fees, wire transfer and trust and investment fees. For more information on our performance obligations and the nature of services performed for certain of our revenues discussed below, see Note 18 (Revenue from Contracts with Customers) to Financial Statements in this Report.

~~Service charges on deposit accounts increased to~~ ~~$1.2 billion~~ in ~~first quarter 2020, compared with $1.1 billion for the same period a year ago, driven by higher overdraft~~other remittance fees, and certain other fees were combined into a single line item for deposit-related fees; certain fees associated with lending activities were combined into a single line item for lending-related fees; and certain other fees were reclassified to other noninterest income. Prior period balances have been revised to conform with the current period presentation.

Third quarter 2020 vs. third quarter 2019

Deposit-related fees decreased driven by:

•lower customer transaction volumes and higher ~~treasury management fees~~average consumer deposit account balances due to the ~~impact of a lower earnings credit rate applied to commercial accounts given the lower interest rate environment. Overdraft fees were higher due to one additional day in first quarter 2020, compared~~economic slowdown associated with the ~~same period a year ago, as well as~~COVID-19 pandemic; and

•higher fee waivers and reversals ~~for customers affected by our data center system outage and the government shutdown in first quarter 2019. As~~as part of our actions to support customers during the COVID-19 ~~pandemic, we have provided~~pandemic;

partially offset by:

•higher treasury management fees on commercial accounts driven by a lower earnings credit rate due to the lower interest rate environment.

Card fees decreased reflecting:

•lower interchange fees, net of rewards costs, driven by decreased purchase volume due to the impact of the COVID-19 pandemic; and

•higher fee waivers as part of our actions to support customers during the COVID-19 pandemic.

Servicing income, net increased reflecting:

•higher mortgage servicing right (MSR) valuation gains, net of hedge results, driven by favorable hedge results, changes in expected servicing costs reflecting economic improvements in third quarter 2020 compared with second quarter 2020 and negative valuation model adjustments made in third quarter 2019 reflecting higher prepayment estimates;

partially offset by:

•lower servicing fees due to a lower balance of loans serviced for others.

For additional information on servicing income, see Note 11 (Mortgage Banking Activities) to Financial Statements in this Report.

Net gains on mortgage loan origination/sales activities increased driven by:

•higher residential real estate held for sale (HFS) origination volumes; and

•an increase in production margin in both our retail and correspondent production channels, as well as a shift to more retail origination volume, which has a higher margin.

The production margin provides a measure of the profitability of our residential held for sale mortgage loan originations.Table 2a presents the information used in determining the production margin.

Table 2aSelected Mortgage Production Data


		Quarter ended Sep 30,				Nine months ended Sep 30,
		2020			2019	2020			2019
Net gains on mortgage loan origination/sales activities (in millions):
Residential	(A)	$	1,039		461	$	2,265		1,015
Commercial		45			106	151			236
Residential pipeline and unsold/repurchased loan management (1)		165			41	(53)			182
Total		$	1,249		608	$	2,363		1,433
Residential real estate originations (in billions):
Held for sale	(B)	$	48		38	$	124		93
Held for investment		14			20	45			51
Total		$	62		58	$	169		144
Production margin on residential held for sale mortgage loan originations	(A)/(B)	2.16		%	1.21	1.83		%	1.09

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

Net gains from trading activities increased reflecting higher volumes and customer activity in equities trading due to volatility in the equity markets.

Net gains on debt securities increased due to higher gains from the sales of agency MBS as a result of portfolio re-balancing and actions taken to manage under the asset cap.

Net gains from equity securities decreased reflecting:

•lower realized gains on nonmarketable equity securities;

partially offset by:

•$224 million of net unrealized gains related to a change in the accounting measurement model for certain nonmarketable equity securities from our affiliated venture capital partnerships.

Other income decreased due to:

•a $1.1 billion gain in third quarter 2019 from the sale of our Institutional Retirement and Trust (IRT) business and $302 million of gains from the sales of purchased credit-impaired (PCI) loans in third quarter 2019; and

•a decline in commercial real estate brokerage commissions as a result of the sale of Eastdil Secured (Eastdil) in fourth quarter 2019;

partially offset by:

•$228 million of higher equity method investment income related to a change in the accounting measurement model for certain nonmarketable equity securities from our affiliated venture capital partnerships.

First nine months of 2020 vs. first nine months of 2019

Deposit-related fees decreased driven by:

•lower customer transaction volumes and higher average consumer deposit account balances due to the economic slowdown associated with the COVID-19 pandemic; and

•higher fee waivers and reversals as part of our actions to ~~our~~support customers ~~which may negatively impact income from service charges~~during the COVID-19 pandemic;

partially offset by:

•higher treasury management fees on ~~deposit~~commercial accounts ~~in future periods.~~driven by a lower earnings credit rate due to the lower interest rate environment.

Brokerage advisory, commissions and other fees increased toreflecting ~~$2.5 billion~~ in ~~first quarter 2020, compared with~~ ~~$2.2 billion~~ ~~for the same period a year ago, due to~~ higher asset-based fees, ~~and higher~~partially offset by lower transactional revenue. ~~Retail brokerage client assets totaled $1.4 trillion at March 31, 2020, compared with $1.6 trillion at March 31, 2019.~~ Asset-based fees include fees from advisory accounts that are ~~generally calculated~~based on a percentage of the market value of the assets as of the beginning of ~~each~~the quarter. All retail brokerage services are 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.

Trust and investment management fees ~~decreased to~~ ~~$701 million~~ in ~~first quarter 2020, from$786 million~~ ~~for the same period a year ago, predominantly~~decreased driven by lower trust fees due to the sale of our ~~Institutional Retirement and Trust (IRT)~~IRT business in third quarter 2019.

Our assets under management (AUM) totaled ~~$693.1~~$797.9 billion at ~~March 31,~~September 30, 2020, compared with ~~$661.1~~$691.9 billion at ~~March 31,~~September 30, 2019. Substantially all of our AUM is managed by our ~~WIM~~Wealth and Investment Management (WIM) operating segment. Our assets under administration (AUA) totaled ~~$1.7~~$1.6 trillion at ~~both March 31,~~September 30, 2020 and $1.8 trillion at September 30, 2019. Management believes that AUM and AUA are useful metrics because they allow investors and others to assess how changes in asset amounts may impact the generation of certain asset-based fees.

~~Earnings Performance (continued~~)

Our AUM and AUA included IRT client assets of ~~$19~~$22 billion and ~~$797~~$708 billion, respectively, at ~~March 31,~~September 30, 2020, which we continue to administer at the direction of the buyer pursuant to a transition services agreement that will terminate no later than July 2021.

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.

Card fees decreased ~~to $892 million~~reflecting:

• in ~~first quarter 2020, compared with~~ ~~$944 million~~ ~~for the same period~~ ~~a year ago, due to higher rewards costs and~~ lower interchange fees, net of rewards costs, driven by decreased purchase ~~activity~~volume due to the impact of the COVID-19 ~~pandemic on consumer spending, partially~~pandemic; and

•higher fee waivers as part of our actions to support customers during the COVID-19 pandemic.

Lending-related fees decreased driven by an increase in fee waivers and reversals as part of our actions to support customers during the COVID-19 pandemic.

Servicing income, net decreased reflecting:

•higher MSR valuation losses, net of hedge results, as gains from favorable hedge results were more than offset by ~~strong purchase volume early~~valuation adjustments for higher expected servicing costs and prepayment estimates due to changes in ~~the quarter.~~economic conditions; and

~~Other~~•lower servicing fees ~~decreased to$632 million~~ in ~~first quarter 2020, compared with~~ ~~$770 million~~ ~~for the same period a year ago, largely driven by~~ ~~the sale of our commercial real estate brokerage business, Eastdil Secured (Eastdil), in fourth quarter 2019 and lower business payroll income~~ due to a lower balance of loans serviced for others and the ~~sale~~impacts of ~~our Business Payroll Services business~~customer accommodations instituted in ~~first quarter 2019.~~response to the COVID-19 pandemic.

~~Mortgage~~

~~banking noninterest income, consisting of net~~For additional information on servicing income, ~~and net gains on mortgage loan origination/ sales activities, decreased to $379 million in~~ s~~first quarter 2020, compared with $708 million for the same period a year ago.~~ ~~For more information, see~~ee Note 11 (Mortgage Banking Activities) to Financial Statements in this Report.

~~Net servicing income~~
decreased to $271 million in first quarter 2020, compared with $364 million for the same period a year ago driven by a decrease in contractually specified fees as a result of sales of mortgage servicing rights (MSRs) in 2019 and continued prepayments, as well as higher unreimbursed servicing costs due to the expected impact of the COVID-19 pandemic, such as extended foreclosure timelines and higher defaults. In addition to servicing fees, net servicing income includes amortization of commercial MSRs, changes in the fair value of residential MSRs, as well as changes in the fair value of derivatives (economic hedges) used to hedge the residential MSRs. The total fair value of our residential MSRs declined in first quarter 2020, compared with the same period a year ago, driven by lower mortgage interest rates and higher prepayments, which were substantially offset by hedge gains. In addition, the fair value decline in first quarter 2020 included assumption updates attributable to higher prepayment estimates. Table 2a presents the components of the market-related valuation changes to our residential MSRs, net of hedge results.

~~Table 2a~~: ~~Market-Related Valuation Changes on Residential MSRs, Net of Hedge Results~~

Quarter ended Mar 31,
(in millions) 2020
2019
MSR valuation losses $ (3,257 ) (891 )
Net derivative gains from economic hedges of residential MSRs 3,400
962
Net MSR valuation gain $ 143
71

~~Our portfolio of~~ loans serviced for others was $1.6 trillion at both March 31, 2020, and December 31, 2019. At March 31, 2020, the ratio of combined residential and commercial MSRs to related loans serviced for others was 0.60%, compared with 0.79% at December 31, 2019~~. 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 ~~decreased to $108 million in~~ ~~first quarter 2020~~ increased driven by:

•~~, compared with $344 million for the same period a year ago, as gains from~~ higher residential real estate HFS origination ~~volumes~~volumes; and margins in first quarter 2020 were more than offset by losses driven by the impact of interest rate volatility on hedging activities associated with our residential mortgage loans held for sale portfolio and pipeline, as well as valuation ~~losses on certain residential and commercial loans held for sale due to market conditions.~~

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•~~. Table 2b presents the information used in determining the production margin.~~

~~Table 2b:Selected Mortgage Production Data~~

Quarter ended March 31,
2020
2019
Net gains on mortgage loan origination/sales activities (in millions):
Residential (A) $ 360
232
Commercial 23
47
Residential pipeline and unsold/repurchased loan management (1) (275 ) 65
Total $ 108
344
Residential real estate originations (in billions):
Held-for-sale (B) $ 33
22
Held-for-investment 15
11
Total $ 48
33
Production margin on residential held-for-sale mortgage loan originations (A)/(B) 1.08 % 1.05 %


~~(1)~~	Predominantly includes the results of 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 1.08% for~~ ~~first quarter 2020, compared with 1.05% for the same period a year ago. The~~an increase in production margin in ~~first quarter 2020,compared with the same period a year ago,~~ ~~was~~ due to higher margins in both our retail and correspondent production ~~channel,~~channels, as well as a shift to more retail origination volume, which has a higher margin. ~~The higher~~For additional information on the production margin ~~was reduced by~~ ~~valuation~~ ~~losses~~ on residential ~~mortgage loans~~ held for sale ~~particularly non-agency loans.~~mortgage loan originations, see Table 2a.

~~Mortgage applications increased to $108 billion in~~ ~~first quarter 2020, compared with $64 billion for the same period a year ago~~. The 1-4 family first mortgage unclosed application pipeline was $62 billion at March 31, 2020, compared with $32 billion at March 31, 2019. 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 11 (Mortgage Banking Activities) and Note 16 (Fair Values of Assets and Liabilities) to Financial Statements in this Report.

Net gains from trading activities ~~which reflect unrealized changes in fair value of our trading positions and realized gains and losses, decreased to $64 million in~~ ~~first quarter 2020, compared with $357 million in the same period a year ago.~~ increased reflecting:

•~~The decrease in~~ ~~first quarter 2020, compared with the same period a year ago,~~ ~~reflected trading volatility created~~higher income driven by ~~the COVID-19 pandemic. We had lower income in first quarter 2020 from wider~~

~~credit spreads for asset-backed securities and credit trading, as well as lower trading volumes on asset-backed securities, partially offset by increased~~ demand for interest rate products due to lower interest ~~rates.~~ rates;

•higher volumes and customer activity for equities trading due to volatility in the equity markets; and

Earnings Performance (continued)

•higher volumes for credit trading due to additional market liquidity from government actions in response to the COVID-19 pandemic;

partially offset by:

•losses due to higher prepayment speeds on agency MBS pools, net of hedge gains, and wider credit spreads for non-agency and certain asset-backed securities.

Net gains on debt securities increased due to higher gains from the sales of agency MBS as a result of portfolio re-balancing and actions taken to manage under the asset cap.

Net gains from ~~trading activities exclude interest and dividend income and expense on trading securities, which are reported within interest income from debt and~~ equity securities ~~and other interest income.~~ For additional information about trading activities, see the “Risk Management – Asset/Liability Management – Market Risk-Trading Activities” section and Note 4 (Trading Activities) to Financial Statements in this Report. decreased driven by:

~~Net losses from equity securities~~ •~~were~~ ~~$1.4 billion~~changes in ~~first quarter 2020~~ ~~and included~~ ~~$621~~ ~~million~~the value of deferred compensation plan ~~investment losses~~investments (largely offset in ~~employee benefits~~personnel expense). ~~Net losses from equity securities in~~ ~~first quarter 2020~~ also included nonmarketable equity securities impairments of $935 million, reflecting lower market valuations. The impairments on equity securities in the venture capital, private equity and certain wholesale businesses represented 17% of the carrying values of these businesses’ portfolio investments subjectRefer to ~~the impairment assessment.~~ Table 3a ~~presents~~for the results for our deferred compensation plan and related ~~investments.~~investments;

•lower realized gains on nonmarketable equity securities; and

•impairment on equity securities of $1.6 billion, including $434 million related to a change in the accounting

measurement model for certain nonmarketable equity securities from our affiliated venture capital partnerships;

partially offset by:

~~Lease~~ •~~income decreased~~higher unrealized gains, including $658 million related to ~~$352 million in~~ ~~first quarter 2020, compared with $443 million for the same period~~ a ~~year ago, driven by reductions~~change in the ~~size of the equipment leasing portfolio.~~accounting measurement model for certain nonmarketable equity securities from our affiliated venture capital partnerships.

~~All~~

O~~other~~ther income decreased ~~to $211 million~~due to:

•a $1.1 billion gain in ~~first quarter 2020~~, compared with $415 million for the same period a year ago. All other income includes income or losses from equity method investments, including low-income housing tax credit investments (excluding related tax credits recorded in income tax expense), foreign currency adjustments and related hedges of foreign currency risks, and certain economic hedges. ~~The decrease in all other income was driven by higher income in first~~third quarter 2019 from gains on the sales of purchased credit-impaired (PCI) loans and a pre-tax gain on the sale of our Business Payroll Services business, partially offset by transition services fees in first quarter 2020 associated with the sale of our IRT business and $1.6 billion of gains from the sales of PCI loans in the first nine months of 2019;

•a decline in commercial real estate brokerage commissions as a result of the sale of Eastdil in fourth quarter 2019; and

•lower equity method investments income;

partially offset by:

•gains on the sales of loans reclassified to held for sale in 2019 and sold in ~~first~~the second quarter ~~2020.~~of 2020; and

•transition services fees associated with the sale of our IRT business.

~~Earnings Performance (continued~~)

Noninterest Expense

Table 3: Noninterest Expense


	Quarter ended Sep 30,						Nine months ended Sep 30,
(in millions)	2020		2019	$ Change	% Change		2020		2019	$ Change	% Change
Personnel	$	8,624	8,604	20	—	%	$	25,863	26,309	(446)	(2)	%
Technology, telecommunications and equipment (1)	791		821	(30)	(4)		2,261		2,340	(79)	(3)
Occupancy (2)	851		760	91	12		2,437		2,196	241	11
Operating losses	1,219		1,920	(701)	(37)		2,902		2,405	497	21
Professional and outside services (1)	1,760		1,737	23	1		5,042		4,956	86	2
Leases (3)	291		272	19	7		795		869	(74)	(9)
Advertising and promotion	144		266	(122)	(46)		462		832	(370)	(44)
Restructuring charges	718		—	718	NM		718		—	718	NM
Other (1)	831		819	12	1		2,348		2,657	(309)	(12)
Total	$	15,229	15,199	30	—		$	42,828	42,564	264	1

NM - Not meaningful

(1)In third quarter 2020, expenses for outside professional services, contract services, and outside data processing were combined into a single line item for professional and outside services expense; expenses for technology and equipment and telecommunications were combined into a single line item for technology, telecommunications and equipment expense; and certain other expenses were reclassified to other noninterest expense. Prior period balances have been revised to conform with the current period presentation.

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

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

Quarter ended Mar 31, %
(in millions) 2020
2019
Change
Salaries $ 4,721
4,425
7 %
Commission and incentive compensation 2,463
2,845
(13 )
Employee benefits 1,130
1,938
(42 )
Technology and equipment 661
661
—
Net occupancy (1) 715
717
—
Core deposit and other intangibles 23
28
(18 )
FDIC and other deposit assessments 118
159
(26 )
Operating losses 464
238
95
Outside professional services 727
678
7
Contract services 630
563
12
Leases (2) 260
286
(9 )
Advertising and promotion 181
237
(24 )
Outside data processing 165
167
(1 )
Travel and entertainment 93
147
(37 )
Postage, stationery and supplies 129
122
6
Telecommunications 92
91
1
Foreclosed assets 29
37
(22 )
Insurance 25
25
—
All other 422
552
(24 )
Total $ 13,048
13,916
(6 )


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


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

~~Noninterest expense was $13.0 billion in first~~Third quarter 2020 ~~down 6% from $13.9 billion in the same period a year ago, driven by lower personnel expenses, advertising and promotions~~vs. third quarter 2019

Personnel expense ~~travel and entertainment expense, and other expense, partially offset by higher operating losses, and outside professional and contract services expense.~~ remained relatively flat, reflecting:

Personnel expenses, which include salaries, commissions, incentive compensation, and employee benefits, were down $894 million, or 10%, in first quarter 2020, compared with the same period a year ago, due to lower employee benefits expense from lower deferred compensation expense (largely offset in net losses from equity securities) and lower incentive compensation and commissions, partially offset by •higher salaries expense driven by the impact of ~~staffing mix changes and~~ annual salary increases and higher staffing levels;

partially offset by:

•lower incentive compensation expense.

Occupancy expense increased due to additional cleaning fees, supplies, and equipment expenses related to the COVID-19 pandemic.

Operating losses decreased driven by:

•lower litigation accruals, as third quarter 2019 included a $1.6 billion discrete litigation accrual related to retail sales practices matters;

partially offset by:

•increased customer remediation accruals reflecting expansions of the population of affected customers, remediation payments, and/or remediation time frames for a variety of matters.

Advertising and promotion expense decreased driven by decreases in marketing and brand campaign volumes due to the impact of the COVID-19 pandemic.

Restructuring charges increased driven predominantly by severance costs, as well as ~~one~~facility closure costs, related to our efficiency initiatives that commenced in third quarter 2020. For additional ~~payroll day~~information on restructuring charges, see Note 2 (Restructuring Charges) to Financial Statements in this Report.

First nine months of 2020 vs. first nine months of 2019

Personnel expense decreased driven by:

•lower deferred compensation expense (offset in net gains from equity securities);

partially offset by:

•higher salaries expense driven by annual salary increases and higher staffing levels; and

•increases in employee benefits and incentive compensation expense related to the ~~quarter.~~ COVID-19 pandemic, including

additional payments for certain customer-facing and support employees and back-up childcare services.

Table 3a presents results for our deferred compensation plan and related ~~investments.~~

~~The decrease~~hedges. Historically, we used equity securities as economic hedges of our deferred compensation plan liabilities. Changes in incentive compensation and commissions was due to lower stock incentive compensation expense and lower annual bonus expense, partially offset by higher revenue-related incentive compensation. We have provided various typesthe fair value of ~~financial support to our employees~~the equity securities used as economic hedges were recorded in response to the COVID-19 pandemic, including additional cash payments for our employees who continue to serve customers, enhanced childcare, and other extended benefits. These additional benefits did not meaningfully impact our expenses in first quarter 2020, but are expected to have a greater impact beginning innet gains (losses) from equity securities within noninterest income. In second quarter 2020, ~~and throughout~~we entered into arrangements to transition our economic hedges

from equity securities to derivative instruments. Changes in fair value of derivatives used as economic hedges are presented within the ~~remainder~~same financial statement line as the related business activity being hedged. As a result of this transition, we presented the ~~year. See~~net gains (losses) on derivatives from economic hedges on the ~~“Financial Review – Overview” section~~deferred compensation plan liabilities in ~~this Report for more~~personnel expense. For additional information on the ~~actions we have taken~~derivatives used in the economic hedges, see Note 15 (Derivatives) to ~~support our employees during the COVID-19 pandemic.~~Financial Statements in this Report.

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


	Quarter ended Sep 30,			Nine months ended Sep 30,
(in millions)	2020		2019	2020		2019
Net interest income	$	—	13	$	15	44
Net gains (losses) from equity securities	1		(4)	(274)		428
Total revenue (losses) from deferred compensation plan investments	1		9	(259)		472
Change in deferred compensation plan liabilities	220		5	112		476
Net derivative (gains) losses from economic hedges of deferred compensation	(215)		—	(356)		—
Personnel expense	5		5	(244)		476
Income (loss) before income tax expense	$	(4)	4	$	(15)	(4)

Quarter ended Mar 31,
(in millions) 2020
2019
Net interest income $ 12
13
Net gains (losses) from equity securities (621 ) 345
Total revenue (losses) from deferred compensation plan investments (609 ) 358
Employee benefits expense (1) (598 ) 357
Income (loss) before income tax expense $ (11 ) 1


~~(1)~~	~~Represents change in deferred compensation plan liability.~~

Technology, telecommunications and equipment expense decreased due to:

•a software impairment in third quarter 2019; and

•a software licensing liability accrual reversal in second quarter 2020;

partially offset by:

•higher cloud computing expenses; and

•higher telecommunications expense related to the COVID-19 pandemic.

Occupancy expense increased due to additional cleaning fees, supplies, and equipment expenses related to the COVID-19 pandemic.

Operating losses ~~were up $226 million,~~ increased driven by:

•higher customer remediation accruals reflecting expansions of the population of affected customers, remediation payments, and/or ~~95%, in first quarter 2020, compared with the same period~~remediation time frames for a ~~year ago, due to higher litigation and remediation accruals.~~

variety of matters;

~~Outside professional and contract services expense was up $116 million, or 9%, in first quarter 2020, compared with the~~

~~same period a year ago, largely due to an increase in project spending,~~ partially offset by by:

•lower ~~legal expenses.~~litigation accruals as third quarter 2019 included a $1.6 billion discrete litigation accrual related to retail sales practices matters.

Advertising and promotion expense ~~was down $56 million, or 24%, in first quarter 2020, compared with the same period a year ago, due to decreases in~~ decreased driven by reduced marketing and brand campaign ~~volumes.~~volumes due to the impact of the COVID-19 pandemic.

~~Travel and entertainment was down $54 million, or 37%,~~

Restructuring charges increased driven predominantly by severance costs, as well as facility closure costs, related to our efficiency initiatives that commenced in ~~first~~third quarter ~~2020, compared with the same period a year ago,~~2020. For additional information on restructuring charges, see Note 2 (Restructuring Charges) to Financial Statements in this Report.

Other expenses decreased driven by by:

•a reduction in business travel and company events due to ongoing expense management initiatives, as well as the impact of the COVID-19 ~~pandemic.~~pandemic; and

~~All other~~•lower foreclosed assets expense ~~was down $130 million, or 24%, in first quarter 2020, compared with the same period a year ago,~~ due to the suspension of certain mortgage foreclosure activities in response to the COVID-19 pandemic;

partially offset by:

•higher ~~gains on the extinguishment of debt, lower~~ pension ~~benefit~~ plan ~~expenses,~~settlement expenses; and

•higher Federal Deposit Insurance Corporation (FDIC) deposit assessment expense driven by a ~~lower insurance claims reserve.~~higher assessment rate and higher deposit balances.

Income Tax Expense

Income tax expense was ~~$159~~$645 million in ~~first~~third quarter 2020, ~~down 82% from $881 million~~compared with $1.3 billion in the same period a year ago, driven by lower pre-tax income. ~~Our~~The effective income tax rate was ~~19.5%~~24.1% for ~~first~~third quarter 2020, compared with ~~13.1%~~22.1% for the same period a year ago. The effective income tax rate for ~~first~~third quarter 2020 reflected lower pre-tax income and included net discrete income tax benefits primarily related to the resolution and reevaluation of prior period matters with U.S federal and state tax authorities. The effective income tax rate for third quarter 2019 reflected a net discrete income tax expense related to the non-tax deductible treatment of ~~$141 million~~a $1.6 billion discrete litigation accrual.

Income tax benefit was $3.1 billion in the first nine months of 2020, compared with income tax expense of $3.5 billion in the same period a year ago, driven by ~~the accounting for stock compensation activity, the net impact of accounting for uncertain tax positions, and the outcome of U.S. federal~~lower pre-tax income. Theeffective income tax ~~examinations.~~rate was 111.0% for the first nine months of 2020, compared with 17.3% for the same period a year ago. The effective income tax rate for the first nine months of 2020 reflected lower ~~rate in first quarter 2019 was related to~~pre-tax income and included net discrete income tax benefits primarily related to the resolution and reevaluation of ~~$297 million~~prior period matters with U.S federal and state tax authorities. The effective income tax rate for the first nine months of 2019 reflected a net discrete income tax expense related ~~mostly~~to the non-tax deductible treatment of a $1.6 billion discrete litigation accrual, partially offset by net discrete income tax benefits related to the results of U.S. federal and state income tax ~~examinations and the accounting for stock compensation activity.~~examinations.

Earnings Performance (continued)

Operating Segment Results

~~As of March 31, 2020, we were organized for management reporting purposes into three~~Our 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 reporting process. The management reporting process is based on U.S. GAAP with specific adjustments, such as for funds transfer pricing for asset/liability management, for shared revenues and expenses, and tax-equivalent adjustments to consistently reflect income from taxable and tax-exempt sources. On February 11, 2020, we announced a new organizational ~~structure with five principal lines~~structure. We continue to refine the composition of ~~business: Consumer~~our operating segments and ~~Small Business Banking; Consumer Lending; Commercial Banking; Corporate and Investment Banking; and Wealth and Investment~~

~~Management. This new organizational structure is intended to help drive operating, control, and business performance. The Company is currently~~allocation methodologies. Additionally, we are still in the process of transitioning ~~to this new organizational structure, including identifying~~key leadership for some of these principal business lines and aligning management reporting and allocation methodologies. These changes will not impact the consolidated financial results of the Company, but are expectedpositions. We now expect to ~~result in changes to our operating segments. We will~~ update our operating segment disclosures, including comparative financial results, ~~when~~in fourth quarter 2020. These changes will not impact previously reported consolidated financial results of the ~~Company completes its transition and is managed in accordance with the new organizational structure.~~Company. Table 4 and the following discussion present our results by current operating segment. For additional description of our operating segments, including additional financial information and the underlying management reporting process, see Note 22 (Operating Segments) to Financial Statements in this Report.

We perform a goodwill impairment assessment annually in the fourth quarter. ~~However,~~Since our last annual assessment, we have observed a significant decline in ~~first quarter 2020, we performed an interim, quantitative impairment assessment of our goodwill~~market capitalization given deteriorated macroeconomic conditions from the impact of the COVID-19 pandemic. ~~These market conditions led to a sharp decline in share prices for Wells Fargo~~In first and ~~other companies across many industries. As part~~second quarter 2020, we performed interim, quantitative impairment assessments of our interim assessment, we updated our assumptions used in both the income and market approaches for estimating fair values of our reporting units. The update to assumptions incorporated current market-based information such as price-earnings information and a regular update to our internal enterprise-wide forecasts, which reflected lower interest rates and higher expected credit losses, as well as a weaker macroeconomic outlook. While we observed declines in the fair values of our reporting units and the amount of excess fair value over the carrying amount of our reporting units, we did not havegoodwill with no evidence of goodwill impairment. Due to the impact of the market disruption on our investment banking fees and trading activities, our corporate and investment banking reporting unit, included within the Wholesale Banking operating segment, had the smallest difference between fair value and carrying value. Given the uncertainty of the severity or length of the current economic downturn, we ~~will~~ continue to monitor our performance against our internal forecasts as well as market conditions for circumstances that could have a further negative effect on ~~our~~the estimated fair

values onof our reporting units. In third quarter 2020, we performed a qualitative assessment of goodwill impairment and concluded that it was more likely than not that the fair value of our reporting units were greater than their carrying amounts as of September 30, 2020.

The aggregate fair value of our reporting units calculated during our latest interim quantitative assessment exceeded our market capitalization as of September 30, 2020. Individual reporting unit fair values cannot be directly correlated to the Company’s market capitalization. However, we consider several factors in the comparison of aggregate fair value to market capitalization, including (i) control premiums adjusted for the current market environment, which include synergies that may not be reflected in current market pricing, (ii) degree of complexity and execution risk at the reporting unit level compared with the enterprise level, and (iii) issues or risks related to the Company level that may not be included in the fair value of the individual reporting units.

In connection with the planned change to our operating segment disclosures, we will realign our goodwill to the reporting units that underlie our operating ~~segments.~~segments, which could impact the results of our goodwill impairment assessment. We will reassess goodwill for impairment at the time of the realignment. In addition, we may divest or otherwise wind down certain businesses or portfolios of assets in connection with the realignment of our operating segments, which may result in the impairment of goodwill or other long-lived assets related to these businesses or portfolios.

For additional information about goodwill, see Note 1 (Summary of Significant Accounting Policies) in our 2019 Form 10-K.

Table 4: Operating Segment Results – Highlights


(income/expense in millions,	Community Banking			Wholesale Banking		Wealth and Investment Management		Other (1)		Consolidated Company
balance sheet data in billions)	2020		2019	2020	2019	2020	2019	2020	2019	2020	2019
Quarter ended September 30,
Total revenue	$	10,722	11,239	5,594	6,942	3,794	5,141	(1,248)	(1,312)	18,862	22,010
Provision (reversal of provision) for credit losses	556		608	219	92	(9)	3	3	(8)	769	695

Net income (loss)	336		999	1,488	2,644	463	1,280	(252)	(313)	2,035	4,610
Average loans	$	457.6	459.0	455.1	474.3	79.8	75.9	(60.8)	(59.4)	931.7	949.8
Average deposits	881.7		789.7	418.8	422.0	175.3	142.4	(76.8)	(62.7)	1,399.0	1,291.4
Goodwill	16.7		16.7	8.4	8.4	1.3	1.3	—	—	26.4	26.4
Nine months ended September 30,
Total revenue	$	28,984	34,794	17,974	21,118	11,169	13,270	(3,712)	(3,979)	54,415	65,203
Provision (reversal of provision) for credit losses	5,652		1,797	8,535	254	256	6	(135)	(14)	14,308	2,043

Net income (loss)	160		6,969	(344)	8,203	1,106	2,459	(613)	(955)	309	16,676
Average loans	$	456.5	458.3	481.2	474.9	79.0	75.1	(60.8)	(59.2)	955.9	949.1
Average deposits	843.0		777.7	438.8	414.1	166.2	146.3	(73.4)	(63.9)	1,374.6	1,274.2
Goodwill	16.7		16.7	8.4	8.4	1.3	1.3	—	—	26.4	26.4

(1)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.

(income/expense in millions, Community
Banking
Wholesale
Banking

Wealth and
Investment
Management
Other (1)
Consolidated
Company

balance sheet data in billions) 2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Quarter ended Mar 31,
Revenue $ 9,496
11,750
5,817
7,111
3,715
4,079
(1,311 ) (1,331 ) 17,717
21,609
Provision (reversal of provision) for credit losses 1,718
710
2,288
134
8
4
(9 ) (3 ) 4,005
845
Net income (loss) 155
2,823
311
2,770
463
577
(276 ) (310 ) 653
5,860

Average loans $ 462.6
458.2
484.5
476.4
78.5
74.4
(60.6 ) (59.0 ) 965.0
950.0
Average deposits 798.6
765.6
456.6
409.8
151.4
153.2
(68.6 ) (66.5 ) 1,338.0
1,262.1
Goodwill 16.7
16.7
8.4
8.4
1.3
1.3
—
—
26.4
26.4


~~(1)~~	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.

~~Earnings Performance (continued~~)

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses with annual sales generally up to $5 million in which the owner generally is the financial decision maker. These financial products and services include checking and savings accounts, credit and debit cards, automobile, student, mortgage, home equity and small business lending, as well as referrals to ~~Wholesale Banking~~

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 other segments and results of investments in our affiliated venture capital and private equity partnerships. Table 4a provides additional financial information for Community Banking.

Table 4a: Community Banking

Quarter ended Mar 31,
(in millions, except average balances which are in billions) 2020
2019
% Change
Net interest income $ 6,787
7,248
(6 )%
Noninterest income:
Service charges on deposit accounts 700
610
15
Trust and investment fees:
Brokerage advisory, commissions and other fees (1) 518
449
15
Trust and investment management (1) 194
210
(8 )
Investment banking (2) (99 ) (20 ) NM
Total trust and investment fees 613
639
(4 )
Card fees 809
858
(6 )
Other fees 285
332
(14 )
Mortgage banking 340
641
(47 )
Insurance 11
11
—
Net gains from trading activities 29
5
480
Net gains on debt securities 194
37
424
Net gains (losses) from equity securities (3) (1,028 ) 601
NM
Other income of the segment 756
768
(2 )
Total noninterest income 2,709
4,502
(40 )

Total revenue 9,496
11,750
(19 )

Provision for credit losses 1,718
710
142
Noninterest expense:
Personnel expense 5,455
5,981
(9 )
Technology and equipment 645
641
1
Net occupancy 529
542
(2 )
Core deposit and other intangibles 1
1
—
FDIC and other deposit assessments 68
106
(36 )
Outside professional services 442
316
40
Operating losses 454
219
107
Other expense of the segment (478 ) (117 ) NM
Total noninterest expense 7,116
7,689
(7 )
Income before income tax expense and noncontrolling interests 662
3,351
(80 )
Income tax expense 644
424
52
Less: Net income (loss) from noncontrolling interests (4) (137 ) 104
NM
Net income $ 155
2,823
(95 )
Average loans $ 462.6
458.2
1
Average deposits 798.6
765.6
4


	Quarter ended Sep 30,						Nine months ended Sep 30,
(in millions, except average balances which are in billions)	2020		2019	$ Change	% Change		2020		2019	$ Change	% Change
Net interest income	$	5,587	6,769	(1,182)	(17)	%	$	18,073	21,083	(3,010)	(14)	%
Noninterest income (1)
Deposit-related fees	723		952	(229)	(24)		2,207		2,675	(468)	(17)
Trust and investment fees:
Brokerage advisory, commissions and other fees (2)	489		504	(15)	(3)		1,440		1,433	7	—
Trust and investment management (2)	188		203	(15)	(7)		556		612	(56)	(9)
Investment banking (3)	—		(26)	26	100		(166)		(64)	(102)	NM
Total trust and investment fees	677		681	(4)	(1)		1,830		1,981	(151)	(8)
Card fees	856		936	(80)	(9)		2,397		2,723	(326)	(12)
Lending-related fees	42		60	(18)	(30)		128		191	(63)	(33)
Mortgage banking	1,542		339	1,203	355		2,135		1,635	500	31
Net gains (losses) from trading activities	(11)		19	(30)	NM		24		13	11	85
Net gains (losses) on debt securities	240		(1)	241	NM		557		51	506	992
Net gains (losses) from equity securities (4)	587		822	(235)	(29)		(53)		1,894	(1,947)	NM
Other	479		662	(183)	(28)		1,686		2,548	(862)	(34)
Total noninterest income	5,135		4,470	665	15		10,911		13,711	(2,800)	(20)

Total revenue	10,722		11,239	(517)	(5)		28,984		34,794	(5,810)	(17)

Provision for credit losses	556		608	(52)	(9)		5,652		1,797	3,855	215
Noninterest expense (5)
Personnel	5,688		5,533	155	3		17,146		16,941	205	1
Technology, telecommunications and equipment	775		691	84	12		2,305		2,150	155	7
Occupancy	649		584	65	11		1,863		1,668	195	12
Operating losses	1,209		1,806	(597)	(33)		2,700		2,222	478	22
Professional and outside services	1,284		1,212	72	6		3,590		3,445	145	4
Advertising and promotion	139		252	(113)	(45)		442		791	(349)	(44)
Restructuring charges	718		—	718	NM		718		—	718	NM
Other	(1,515)		(1,312)	(203)	(15)		(4,355)		(3,550)	(805)	(23)
Total noninterest expense	8,947		8,766	181	2		24,409		23,667	742	3
Income (loss) before income tax expense (benefit) and noncontrolling interests	1,219		1,865	(646)	(35)		(1,077)		9,330	(10,407)	NM
Income tax expense (benefit)	703		667	36	5		(1,319)		1,929	(3,248)	NM
Less: Net income from noncontrolling interests (6)	180		199	(19)	(10)		82		432	(350)	(81)
Net income	$	336	999	(663)	(66)		$	160	6,969	(6,809)	(98)
Average loans	$	457.6	459.0	(1.4)	—		$	456.5	458.3	(1.8)	—
Average deposits	881.7		789.7	92.0	12		843.0		777.7	65.3	8

NM – Not meaningful

~~(1)~~

(1)In third quarter 2020, service charges on deposit accounts, cash network fees, wire transfer and other remittance fees, and certain other fees were combined into a single line item for deposit-related fees; certain fees associated with lending activities were combined into a single line item for lending-related fees; and certain other fees were reclassified to other noninterest income. Prior period balances have been revised to conform with the current period presentation.

(2)Represents income on products and services for WIM customers served through ~~Community Banking distribution channels which is eliminated in consolidation.~~


~~(2)~~	Includes underwriting fees paid to Wells Fargo Securities for services related to the issuance of our corporate securities which are offset in our Wholesale Banking segment and eliminated in consolidation.


~~(3)~~	~~Primarily 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~~distribution channels which is eliminated in consolidation.

(3)Includes underwriting fees paid to Wells Fargo Securities for services related to the issuance of ~~$155 million~~our corporate securities which are offset in ~~first~~our Wholesale Banking segment and eliminated in consolidation.

(4)Primarily represents gains (losses) resulting from venture capital investments.

(5)In third quarter 2020, ~~down $2.7 billion, or 95%, compared~~expenses for outside professional services, contract services, and outside data processing were combined into a single line item for professional and outside services expense; expenses for technology and equipment and telecommunications were combined into a single line item for technology, telecommunications and equipment expense; and certain other expenses were reclassified to other noninterest expense. Prior period balances have been revised to conform with the ~~same~~current period ~~a year ago.~~presentation.

~~Revenue of $9.5 billion in first~~(6)Reflects results attributable to noncontrolling interests predominantly associated with the Company’s consolidated venture capital investments.

Third quarter 2020 vs. third quarter 2019

Revenuedecreased $2.3 billion, or 19%, compared with the same period a year ago. The decrease in revenue was due to net losses on equity securities (including lower deferred compensation plan investment results, which were largely offset in employee benefits expense), lower card fees driven ~~by higher rewards costs and the impact of the COVID-19 pandemic on consumer spending,~~ by:

•lower net interest income reflecting the lower interest rate environment and changes in the mix of earning assets and funding sources;

•lower deposit-related fees driven by lower customer transaction volumes and higher average consumer deposit account balances due to the economic slowdown associated with the COVID-19 pandemic, as well as fee waivers and reversals as part of our actions to support customers during the COVID-19 pandemic;

•lower net gains from equity securities due to impairments; and

•lower other income driven by higher gains in third quarter 2019 related to sales of PCI loans;

partially offset by:

•higher mortgage banking ~~income. These decreases~~revenue due to an increase in real estate HFS origination volumes and higher MSR valuation gains, net of hedge results, driven by favorable hedge results.

Noninterest expense increased due to:

•higher restructuring charges driven predominantly by severance costs, as well as facility closure costs, related to our efficiency initiatives that commenced in third quarter 2020. All restructuring charges were included in the Community Banking segment. For additional information on

Earnings Performance (continued)

restructuring charges, see Note 2 (Restructuring Charges) to Financial Statements in this Report;

•higher personnel expense, and technology, telecommunications and equipment expense;

•higher charitable contributions expense within other expense; and

•higher FDIC deposit assessment expense within other expense driven by a higher assessment rate and higher deposit balances;

partially offset by:

•lower operating losses, as third quarter 2019 included a $1.6 billion discrete litigation accrual related to retail sales practices matters; and

•lower advertising and promotion expense.

Average deposits increased driven by government stimulus programs and lower consumer spending due to the COVID-19 pandemic.

First nine months of 2020 vs. first nine months of 2019

Revenue decreased driven by:

•lower net interest income reflecting the lower interest rate environment;

•a decrease in deposit-related fees and card fees driven by lower customer transaction volumes and higher average consumer deposit account balances due to the economic slowdown associated with the COVID-19 pandemic, as well as fee waivers and reversals as part of our actions to support customers during the COVID-19 pandemic;

•net losses from equity securities due to impairments and changes in the value of deferred compensation plan investments (largely offset in personnel expense); and

•lower other income driven by higher gains in third quarter 2019 related to sales of PCI loans;

partially offset by:

•higher mortgage banking revenue as a result of an increase in real estate HFS origination volumes; and

•higher gains on debt securities and service charges on deposit accounts due to one additional day in first quarter 2020, and that first quarter 2019 included a higher level of fee waivers for customers affected by our data center system outage and the government shutdown.securities.

~~The provision~~Provision for credit losses increased driven by a decline in first quarter 2020 increased $1.0 billion compared with the same period a year ago, predominantly due to a $1.0 billion increase in the allowance for credit losses in first quarter 2020 reflecting expected credit deteriorationeconomic conditions due to the impact of the COVID-19 pandemic.

Noninterest expense ~~of $7.1 billion~~ increased due to:

•higher restructuring charges driven predominantly by severance costs, as well as facility closure costs, related to our efficiency initiatives that commenced in ~~first~~third quarter ~~2020, decreased $573 million, or 7%, compared with~~2020. All restructuring charges were included in the ~~same period a year ago, predominantly due~~Community Banking segment. For additional information on restructuring charges, see Note 2 (Restructuring Charges) to Financial Statements in this Report; and

•higher operating losses, personnel expense, occupancy expense, FDIC deposit assessment expense within other expense, and charitable donations within other expense;

partially offset by:

•lower advertising and promotion expense and travel and entertainment expense within other expense; and

•lower stock-based compensation expense within personnel ~~expenses driven by~~expense and lower deferred compensation plan expense within personnel expense (largely offset by net losses from equity securities).

Average deposits increased driven by government stimulus programs and lower ~~other expenses, partially offset by higher operating losses driven by an increase in remediation accruals and higher outside professional services expense.~~

Income tax expense of $644 million in first quarter 2020, increased $220 million from first quarter 2019, driven by a higher effective income tax rate of 19.5% and included net discrete income tax expense of $141 million driven byconsumer spending due to the ~~accounting for~~COVID-19 pandemic.

~~stock compensation activity, the net impact of accounting for uncertain tax positions, and the outcome of U.S. federal income tax examinations.~~

Average loans of $462.6 billion in first quarter 2020, increased $4.4 billion, or 1%, compared with first quarter 2019. The increase in average loans from first quarter 2019 was due to higher real estate 1-4 family first mortgage loans and automobile loans, partially offset by lower junior lien mortgage loans.

~~Average deposits of $798.6 billion in first quarter 2020 increased $33.0 billion, or 4%, from first quarter 2019 reflecting growth from retail banking deposit campaigns.~~

Wholesale Bankingprovides financial solutions to businesses with annual sales generally in excess of $5 million and to financial institutions globally. Products and businesses include Commercial Banking, Commercial Real Estate, Corporate and Investment

Banking, Credit Investment Portfolio, Treasury Management, and Commercial Capital. Table 4b provides additional financial information for Wholesale Banking.

Table 4b: Wholesale Banking


	Quarter ended Mar 31,							Quarter ended Sep 30,						Nine months ended Sep 30,
(in millions, except average balances which are in billions)	2020			2019	% Change		(in millions, except average balances which are in billions)	2020		2019	$ Change	% Change		2020		2019	$ Change	% Change
Net interest income	$	4,136		4,534	(9	)%	Net interest income	$	3,481	4,382	(901)	(21)	%	$	11,508	13,451	(1,943)	(14)	%
Noninterest income:
Service charges on deposit accounts	508			483	5
Noninterest income (1)							Noninterest income (1)
Deposit-related fees							Deposit-related fees	574		527	47	9		1,676		1,610	66	4
Trust and investment fees:							Trust and investment fees:
Brokerage advisory, commissions and other fees	90			78	15		Brokerage advisory, commissions and other fees	70		62	8	13		239		214	25	12
Trust and investment management	131			114	15		Trust and investment management	140		121	19	16		401		352	49	14
Investment banking	490			412	19		Investment banking	440		510	(70)	(14)		1,544		1,397	147	11
Total trust and investment fees	711			604	18		Total trust and investment fees	650		693	(43)	(6)		2,184		1,963	221	11
Card fees	83			86	(3	)	Card fees	55		90	(35)	(39)		203		271	(68)	(25)
Other fees	346			437	(21	)
Lending-related fees							Lending-related fees	310		314	(4)	(1)		897		925	(28)	(3)
Mortgage banking	40			68	(41	)	Mortgage banking	49		128	(79)	(62)		154		300	(146)	(49)
Insurance	75			78	(4	)
Net gains from trading activities	41			333	(88	)	Net gains from trading activities	363		247	116	47		1,198		806	392	49
Net gains on debt securities	43			88	(51	)	Net gains on debt securities	24		4	20	500		156		97	59	61
Net gains (losses) from equity securities	(95		)	77	NM		Net gains (losses) from equity securities	59		135	(76)	(56)		(52)		328	(380)	NM
Other income of the segment	(71		)	323	NM
Other							Other	29		422	(393)	(93)		50		1,367	(1,317)	(96)
Total noninterest income	1,681			2,577	(35	)	Total noninterest income	2,113		2,560	(447)	(17)		6,466		7,667	(1,201)	(16)

Total revenue	5,817			7,111	(18	)	Total revenue	5,594		6,942	(1,348)	(19)		17,974		21,118	(3,144)	(15)

Provision for credit losses	2,288			134	NM		Provision for credit losses	219		92	127	138		8,535		254	8,281	NM
Noninterest expense:
Personnel expense	1,383			1,510	(8	)
Technology and equipment	9			9	—
Net occupancy	104			95	9
Core deposit and other intangibles	19			24	(21	)
FDIC and other deposit assessments	44			45	(2	)
Outside professional services	101			184	(45	)
Noninterest expense (2)							Noninterest expense (2)
Personnel							Personnel	1,414		1,455	(41)	(3)		4,109		4,382	(273)	(6)
Technology, telecommunications and equipment							Technology, telecommunications and equipment	10		16	(6)	(38)		34		48	(14)	(29)
Occupancy							Occupancy	116		95	21	22		326		286	40	14
Operating losses	4			1	300		Operating losses	9		16	(7)	(44)		186		27	159	589
Other expense of the segment	2,099			1,970	7
Professional and outside services							Professional and outside services	222		263	(41)	(16)		651		760	(109)	(14)
Advertising and promotion							Advertising and promotion	2		8	(6)	(75)		8		23	(15)	(65)

Other							Other	2,240		2,036	204	10		6,425		6,083	342	6
Total noninterest expense	3,763			3,838	(2	)	Total noninterest expense	4,013		3,889	124	3		11,739		11,609	130	1
Income (loss) before income tax expense (benefit) and noncontrolling interests	(234		)	3,139	NM		Income (loss) before income tax expense (benefit) and noncontrolling interests	1,362		2,961	(1,599)	(54)		(2,300)		9,255	(11,555)	NM
Income tax expense (benefit) (1)	(546		)	369	NM
Income tax expense (benefit) (3)							Income tax expense (benefit) (3)	(127)		315	(442)	NM		(1,959)		1,049	(3,008)	NM
Less: Net income from noncontrolling interests	1			—	NM		Less: Net income from noncontrolling interests	1		2	(1)	(50)		3		3	—	—
Net income	$	311		2,770	(89	)
Net income (loss)							Net income (loss)	$	1,488	2,644	(1,156)	(44)		$	(344)	8,203	(8,547)	NM
Average loans	$	484.5		476.4	2		Average loans	$	455.1	474.3	(19.2)	(4)		$	481.2	474.9	6.3	1
Average deposits	456.6			409.8	11		Average deposits	418.8		422.0	(3.2)	(1)		438.8		414.1	24.7	6

NM – Not meaningful

~~(1)~~

(2)In third quarter 2020, expenses for outside professional services, contract services, and outside data processing were combined into a single line item for professional and outside services expense; expenses for technology and equipment and telecommunications were combined into a single line item for technology, telecommunications and equipment expense; and certain other expenses were reclassified to other noninterest expense. Prior period balances have been revised to conform with the current period presentation.

(3)Income tax expense for our ~~Wholesale Banking operating segment included income tax credits related to low-income housing and renewable energy investments of~~ ~~$491 million~~ ~~and~~ ~~$427 million~~ ~~for the~~ ~~first quarter 2020~~ ~~and~~ ~~2019, respectively.~~

Wholesale Banking ~~reported net~~operating segment included income tax credits related to low income housing and renewable energy investments of ~~$311~~$469 million inand $1.4 billion for the third quarter and first nine months of 2020, respectively, and $422 million and $1.3 billion for the third quarter and first nine months of 2019, respectively.

Third quarter 2020 ~~down $2.5 billion, or 89%, from the same period a year ago.~~vs. third quarter 2019

~~Net~~

Revenue decreased driven by:

•lower net interest income ~~of $4.1 billion in first quarter 2020 decreased $398 million, or 9%, from first quarter 2019, due to the impact of~~reflecting the lower interest rate environment, ~~partially offset by higher loan and deposit volumes and increased spreads on trading assets.~~

Noninterest income decreased $896 million, or 35%, from first quarter 2019, predominantly due to lower market sensitive revenue (represents net gains (losses) from trading activities, debt securities, and equity securities), lower other income from higher amortization on renewable energy and community lending

~~investments and lower operating lease income,~~ as well as lower average loan balances and lower funds transfer pricing credit earned from lower deposit balances;

•lower other noninterest income due to lower commercial real estate brokerage fees related to our sale of Eastdil in fourth quarter ~~2019.~~2019, lower community lending investments, lower strategic capital and renewable energy equity method income, and lower lease income; and

~~The provision~~•lower investment banking fees, mortgage banking fees, and gains from equity securities;

partially offset by:

•higher gains from trading activities and gains on debt securities, as well as higher deposit-related fees.

Provision for credit losses increased ~~$2.2 billion from first quarter 2019, predominantly due to a $2.1 billion increase in the allowance for credit losses~~ reflecting ~~forecasted credit deterioration~~economic uncertainty due to the impact of the COVID-19 pandemic ~~and higher charge-offs in~~on our commercial loan portfolios, including the oil and gas ~~portfolio~~portfolio.

Noninterest expense increased driven ~~by the significant decline in oil prices.~~by:

~~Noninterest~~•higher other expense, ~~decreased $75 million, or 2%, from first quarter 2019, reflecting the sale of Eastdil, as well as~~ including increased risk management expense;

partially offset by:

•lower personnel expense, ~~lease expense within other noninterest expense, and~~ travel expense within other ~~noninterest~~ expense, ~~partially offset by higher regulatory~~ and ~~risk related~~project-related expense within ~~other noninterest~~professional and outside services expense.

Average loans decreased driven by lower loan demand and higher paydowns reflecting continued liquidity and strength in the capital markets.

Earnings Performance (continued)

Average ~~loans~~deposits decreased reflecting continued actions taken to manage under the asset cap.

First nine months of ~~$484.5 billion~~2020 vs. first nine months of 2019

Revenue decreased driven by:

•lower net interest income reflecting the lower interest rate environment, partially offset by higher investment asset spread and higher average loan balances and higher funds transfer pricing credit earned from higher deposit balances; and

•lower noninterest income driven by lower other income from community lending investments, lower strategic capital and renewable energy equity method income, and lower commercial real estate brokerage fees related to our sale of Eastdil in ~~first quarter 2020 increased $8.1 billion, or 2%, from first~~fourth quarter 2019, as well as lower mortgage banking fees and net losses from equity securities;

partially offset by:

•higher investment banking fees, gains from trading activities, gains on debt securities, and deposit-related fees.

Provision for credit losses increased due to:

•increases in the ACL reflecting current and forecasted economic conditions due to the impact of the COVID-19 pandemic; and

•higher charge-offs in the oil and gas, commercial real estate, and commercial capital portfolios.

Noninterest expense increased due to:

•higher other expense, including increased risk management expense and charitable donations; and

•higher operating losses;

partially offset by:

•lower personnel expense, and lower lease and travel expenses within other expense, as well as the impact of the sale of Eastdil in fourth quarter 2019.

Average loans increased reflecting broad-based growth across the lines of ~~businesses~~business driven by draws of revolving lines due to the economic slowdown associated with the COVID-19 pandemic.

Average deposits ~~of $456.6 billion in first quarter 2020~~ increased ~~$46.8 billion, or 11%, from first quarter 2019,~~ reflecting ~~an inflow of deposits associated with corporate and commercial loan draws.~~customers’ preferences for liquidity due to the COVID-19 pandemic.

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, and Wells Fargo Asset Management. We deliver financial planning, private banking, credit, investment management and fiduciary services to high-net worth and ultra-high-net worth individuals and families. We also serve clients’ brokerage needs

and provide investment management capabilities delivered to global institutional clients through separate accounts and the Wells Fargo Funds. The sale of our IRT business closed on July 1, 2019. For additional information on the sale of our IRT business, including its impact on our AUM and AUA, see the “Earnings Performance – Noninterest Income” section in this Report.

Table 4c provides additional financial information for WIM.

Table 4c: Wealth and Investment Management


	Quarter ended Mar 31,								Quarter ended Sep 30,						Nine months ended Sep 30,
(in millions, except average balances which are in billions)	2020			2019		% Change		(in millions, except average balances which are in billions)	2020		2019	$ Change	% Change		2020		2019	$ Change	% Change
Net interest income	$	867		1,101		(21	)%	Net interest income	$	771	989	(218)	(22)	%	$	2,374	3,127	(753)	(24)	%
Noninterest income:
Service charges on deposit accounts	5			4		25
Noninterest income (1)								Noninterest income (1)
Deposit-related fees								Deposit-related fees	7		6	1	17		20		18	2	11
Trust and investment fees:								Trust and investment fees:
Brokerage advisory, commissions and other fees	2,397			2,124		13		Brokerage advisory, commissions and other fees	2,265		2,272	(7)	—		6,701		6,644	57	1
Trust and investment management	582			676		(14	)	Trust and investment management	610		615	(5)	(1)		1,760		1,978	(218)	(11)
Investment banking	1			5		(80	)	Investment banking	4		—	4	NM		6		4	2	50
Total trust and investment fees	2,980			2,805		6		Total trust and investment fees	2,879		2,887	(8)	—		8,467		8,626	(159)	(2)
Card fees	1			1		—		Card fees	1		2	(1)	(50)		3		5	(2)	(40)
Other fees	4			4		—
Lending-related fees								Lending-related fees	2		2	—	—		6		6	—	—
Mortgage banking	(3		)	(3	)	—		Mortgage banking	(3)		(3)	—	—		(9)		(9)	—	—
Insurance	19			17		12
Net gains (losses) from trading activities	(7		)	19		NM
Net gains on debt securities	—			—		NM
Net gains from trading activities								Net gains from trading activities	9		10	(1)	(10)		8		42	(34)	(81)

Net gains (losses) from equity securities	(278		)	136		NM		Net gains (losses) from equity securities	3		(1)	4	400		(114)		170	(284)	NM
Other income of the segment	127			(5	)	NM
Other								Other	125		1,249	(1,124)	(90)		414		1,285	(871)	(68)
Total noninterest income	2,848			2,978		(4	)	Total noninterest income	3,023		4,152	(1,129)	(27)		8,795		10,143	(1,348)	(13)

Total revenue	3,715			4,079		(9	)	Total revenue	3,794		5,141	(1,347)	(26)		11,169		13,270	(2,101)	(16)

Provision for credit losses	8			4		100
Noninterest expense:
Personnel expense	1,950			2,197		(11	)
Technology and equipment	7			11		(36	)
Net occupancy	113			112		1
Core deposit and other intangibles	3			3		—
FDIC and other deposit assessments	12			14		(14	)
Outside professional services	191			184		4
Provision (reversal of provision) for credit losses								Provision (reversal of provision) for credit losses	(9)		3	(12)	NM		256		6	250	NM
Noninterest expense (2)								Noninterest expense (2)
Personnel								Personnel	1,937		2,060	(123)	(6)		5,911		6,369	(458)	(7)
Technology, telecommunications and equipment								Technology, telecommunications and equipment	6		115	(109)	(95)		(77)		145	(222)	NM
Occupancy								Occupancy	123		113	10	9		347		337	10	3
Operating losses	9			21		(57	)	Operating losses	3		101	(98)	(97)		27		165	(138)	(84)
Other expense of the segment	818			761		7
Professional and outside services								Professional and outside services	262		271	(9)	(3)		825		775	50	6
Advertising and promotion								Advertising and promotion	3		7	(4)	(57)		13		21	(8)	(38)

Other								Other	850		764	86	11		2,394		2,168	226	10
Total noninterest expense	3,103			3,303		(6	)	Total noninterest expense	3,184		3,431	(247)	(7)		9,440		9,980	(540)	(5)
Income before income tax expense and noncontrolling interests	604			772		(22	)	Income before income tax expense and noncontrolling interests	619		1,707	(1,088)	(64)		1,473		3,284	(1,811)	(55)
Income tax expense	153			192		(20	)	Income tax expense	153		426	(273)	(64)		369		819	(450)	(55)
Less: Net income (loss) from noncontrolling interests	(12		)	3		NM		Less: Net income (loss) from noncontrolling interests	3		1	2	200		(2)		6	(8)	NM
Net income	$	463		577		(20	)	Net income	$	463	1,280	(817)	(64)		$	1,106	2,459	(1,353)	(55)
Average loans	$	78.5		74.4		6		Average loans	$	79.8	75.9	3.9	5		$	79.0	75.1	3.9	5
Average deposits	151.4			153.2		(1	)	Average deposits	175.3		142.4	32.9	23		166.2		146.3	19.9	14

NM – Not meaningful

~~WIM reported net income of $463 million in first~~(1)In third quarter 2020, ~~down $114 million, or 20%, from first~~service charges on deposit accounts, cash network fees, wire transfer and other remittance fees, and certain other fees were combined into a single line item for deposit-related fees; certain fees associated with lending activities were combined into a single line item for lending-related fees; and certain other fees were reclassified to other noninterest income. Prior period balances have been revised to conform with the current period presentation.

(2)In third quarter ~~2019.~~2020, expenses for outside professional services, contract services, and outside data processing were combined into a single line item for professional and outside services expense; expenses for technology and equipment and telecommunications were combined into a single line item for technology, telecommunications and equipment expense; and certain other expenses were reclassified to other noninterest expense. Prior period balances have been revised to conform with the current period presentation.

~~Net~~

Third quarter 2020 vs. third quarter 2019

Revenue decreased driven by:

•lower net interest income reflecting the lower interest rate environment, partially offset by higher funds transfer pricing credit earned from higher average deposit balances; and

•lower noninterest income predominantly related to a $1.1 billion gain from the sale of ~~$867 million~~our IRT business in ~~first quarter 2020 decreased $234 million, or 21%, from first~~third quarter 2019 (in other income).

Noninterest expense decreased driven by:

•lower personnel expense from lower incentive compensation;

•lower technology, telecommunications and equipment expense driven by a $103 million impairment of capitalized software reflecting a reevaluation of software under development in third quarter 2019; and

•lower operating losses;

partially offset by:

•higher project spending on regulatory and compliance related initiatives included within other expense.

Average loans increased driven by growth in real estate 1-4 first mortgage loans.

Average deposits increased primarily due to growth in brokerage clients’ cash balances.

Earnings Performance (continued)

First nine months of 2020 vs. first nine months of 2019

Revenue decreased driven by:

•lower net interest income reflecting the lower interest ~~rates.~~rate environment, partially offset by higher funds transfer pricing credit earned from higher average deposit balances; and

~~Noninterest~~•lower noninterest income largely related to a $1.1 billion gain from the sale of ~~$2.8 billion~~our IRT business in ~~first quarter 2020 decreased $130 million from first~~third quarter 2019 ~~predominantly driven by~~(in other income), as well as net losses from equity securities driven by a decline in deferred compensation plan investment results (largely offset by lower ~~employee benefits~~personnel expense), and lower trust and investment management income;

partially offset by by:

•higher retail brokerage advisory fees (priced at the beginning of the quarter) ~~and higher brokerage transaction revenue.~~

~~Noninterest expense of $3.1 billion in first quarter 2020 decreased $200 million, or 6%, from first quarter 2019, predominantly~~Provision for credit losses increased due to current and forecasted economic conditions due to the impact of the COVID-19 pandemic.

Noninterest expense decreased due to:

•lower personnel expense driven by lower deferred compensation plan expense (largely offset by net losses from equity securities), and lower incentive compensation;

•lower operating losses;

partially offset by by:

•higher ~~broker commissions~~project spending on regulatory and compliance related initiatives included within ~~personnel~~other expense.

Average loans ~~of $78.5 billion in first quarter 2020~~ increased ~~$4.1 billion, or 6%, from first quarter 2019,~~ driven by growth in ~~nonconforming~~real estate 1-4 first mortgage loans.

Average deposits ~~of $151.4 billion~~ increased primarily due to growth in ~~first quarter 2020 decreased $1.8 billion, or 1%.~~

brokerage clients’ cash balances.

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~~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. In addition to these types of accounts, we also offer advisory account relationships as an important component of our broader strategy of meeting brokerage clients’ financial needs. Fees from advisory accounts are based on a percentage of the market value of the assets as of the beginning of the quarter, which vary across the account types based on the distinct services provided, and are affected by investment performance as well as asset inflows and outflows. 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 ~~March 31,~~September 30, 2020 and 2019.

Table 4d: Retail Brokerage Client Assets


	September 30,
($ in billions)	2020			2019
Retail brokerage client assets	$	1,625.8		1,629.4
Advisory account client assets	601.7			569.4
Advisory account client assets as a percentage of total client assets	37		%	35

March 31,
($ in billions) 2020
2019
Retail brokerage client assets $ 1,397.9
1,600.6
Advisory account client assets 498.8
546.7
Advisory account client assets as a percentage of total client assets 36 % 34

~~Retail Brokerage advisory~~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. For ~~first~~third quarter 2020 and 2019, 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 quarter and first ~~quarter~~nine months of 2020 and 2019.

Table 4e: Retail Brokerage Advisory Account Client Assets


	Quarter ended						Nine 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
September 30, 2020
Client directed (4)	$	162.2	8.8	(10.2)	9.5	170.3	$	169.4	26.2	(27.6)	2.3	170.3
Financial advisor directed (5)	176.8		9.9	(9.0)	11.6	189.3	176.3		29.0	(24.2)	8.2	189.3
Separate accounts (6)	151.5		5.9	(6.0)	8.0	159.4	160.1		17.7	(20.3)	1.9	159.4
Mutual fund advisory (7)	78.9		2.9	(3.3)	4.2	82.7	83.7		8.3	(10.5)	1.2	82.7
Total advisory client assets	$	569.4	27.5	(28.5)	33.3	601.7	$	589.5	81.2	(82.6)	13.6	601.7
September 30, 2019
Client directed (4)	$	166.2	8.3	(8.3)	0.7	166.9	$	151.5	24.8	(27.3)	17.9	166.9
Financial advisor directed (5)	163.2		8.8	(7.0)	3.1	168.1	141.9		24.9	(23.4)	24.7	168.1
Separate accounts (6)	151.9		6.2	(6.4)	2.3	154.0	136.4		18.0	(21.3)	20.9	154.0
Mutual fund advisory (7)	80.0		2.9	(3.0)	0.5	80.4	71.3		8.6	(9.7)	10.2	80.4
Total advisory client assets	$	561.3	26.2	(24.7)	6.6	569.4	$	501.1	76.3	(81.7)	73.7	569.4

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

Quarter ended
(in billions)
Balance,
beginning of period

Inflows (1)
Outflows (2)
Market impact (3)
Balance,
end of period

March 31, 2020
Client directed (4) $ 169.4
10.1
(9.6 ) (27.2 ) 142.7
Financial advisor directed (5) 176.3
10.7
(8.6 ) (26.0 ) 152.4
Separate accounts (6) 160.1
6.8
(8.5 ) (24.2 ) 134.2
Mutual fund advisory (7) 83.7
3.2
(4.5 ) (12.9 ) 69.5
Total advisory client assets $ 589.5
30.8
(31.2 ) (90.3 ) 498.8
March 31, 2019
Client directed (4) $ 151.5
7.9
(9.3 ) 13.5
163.6
Financial advisor directed (5) 141.9
7.5
(7.7 ) 15.2
156.9
Separate accounts (6) 136.4
5.6
(6.9 ) 13.2
148.3
Mutual fund advisory (7) 71.3
2.8
(3.2 ) 7.0
77.9
Total advisory client assets $ 501.1
23.8
(27.1 ) 48.9
546.7


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


~~(2)~~	(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 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~~)

(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 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.

Trust and Investment Client Assets Under Management We earn trust and investment management fees from managing and administering assets, including mutual funds, separate accounts, and personal trust assets, through our asset management and wealth businesses. Prior to the sale of our IRT business, which closed on July 1, 2019, we also earned fees from managing employee benefit trusts through the retirement business. Our asset management business is conducted by Wells Fargo Asset Management (WFAM), which offers Wells Fargo proprietary mutual funds and manages institutional separate accounts, and

our wealth business, which manages assets for high net worth clients. ~~Substantially all of~~Generally, 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. For additional information on the sale of our IRT business, including its impact on our AUM and AUA, see the “Earnings Performance – Noninterest Income” section in this Report. Table 4f presents AUM activity for the third quarter and first ~~quarter~~nine months of 2020 and 2019.

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


	Quarter ended						Nine 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
September 30, 2020
Assets managed by WFAM (4):
Money market funds (5)	$	201.9	19.2	—	—	221.1	$	130.6	90.5	—	—	221.1
Other assets managed	376.4		23.2	(24.1)	10.3	385.8	378.2		76.3	(79.2)	10.5	385.8
Assets managed by Wealth and IRT (6)	176.5		7.2	(10.6)	7.6	180.7	187.4		23.5	(31.8)	1.6	180.7
Total assets under management	$	754.8	49.6	(34.7)	17.9	787.6	$	696.2	190.3	(111.0)	12.1	787.6
September 30, 2019
Assets managed by WFAM (4):
Money market funds (5)	$	119.8	9.6	—	—	129.4	$	112.4	17.0	—	—	129.4
Other assets managed	375.3		16.4	(20.7)	3.0	374.0	353.5		57.9	(65.6)	28.2	374.0
Assets managed by Wealth and IRT (6)	181.9		7.9	(9.1)	1.1	181.8	170.7		25.3	(30.7)	16.5	181.8
Total assets under management	$	677.0	33.9	(29.8)	4.1	685.2	$	636.6	100.2	(96.3)	44.7	685.2

(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 $4.8 billion and $5.4 billion as of September 30, 2020 and 2019, respectively, of client assets invested in proprietary funds managed by WFAM.

Quarter ended
(in billions)
Balance,
beginning of period

Inflows (1)
Outflows (2)
Market impact (3)
Balance,
end of period

March 31, 2020
Assets managed by WFAM (4):
Money market funds (5) $ 130.6
35.6
—
—
166.2
Other assets managed 378.2
26.2
(28.6 ) (24.2 ) 351.6
Assets managed by Wealth and IRT (6) 187.4
7.8
(10.6 ) (21.8 ) 162.8
Total assets under management $ 696.2
69.6
(39.2 ) (46.0 ) 680.6
March 31, 2019
Assets managed by WFAM (4):
Money market funds (5) $ 112.4
—
(2.9 ) —
109.5
Other assets managed 353.5
19.3
(21.9 ) 16.1
367.0
Assets managed by Wealth and IRT (6) 170.7
9.2
(10.4 ) 11.9
181.4
Total assets under management $ 636.6
28.5
(35.2 ) 28.0
657.9


~~(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~~ ~~$4.9 billion~~ ~~and~~ ~~$4.8 billion~~ ~~as of~~ ~~March 31, 2020~~ ~~and~~ ~~2019, respectively, of client assets invested in proprietary funds managed by WFAM.~~

Balance Sheet Analysis

At ~~March 31,~~September 30, 2020, our assets totaled ~~$1.98~~$1.92 trillion, ~~up $53.8~~down $5.3 billion from December 31, 2019. ~~Asset growth reflected increases~~The decline in assets reflected:

•a decrease in debt securities ~~and~~of $20.7 billion;

•a decrease in loans of ~~$4.4 billion and $47.6 billion, respectively, partially offset by~~ $42.2 billion;

•a ~~$15.7 billion~~ decrease in federal funds sold and securities purchased under resale agreements of $32.8 billion; and

•a ~~$14.2 billion~~ decrease in equity ~~securities.~~securities of $17.1 billion;

partially offset by:

•an increase in cash, cash equivalents and restricted cash of $105.5 billion.

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 23 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report.

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

Table 5: Available-for-Sale and Held-to-Maturity Debt Securities


	September 30, 2020					December 31, 2019
(in millions)	Amortized cost, net (1)		Net unrealized gain (loss)	Fair value	Weighted average expected maturity (yrs)	Amortized cost	Net unrealized gain (loss)	Fair value	Weighted average expected maturity (yrs)

Available-for-sale (2)	216,311		4,262	220,573	4.5	260,060	3,399	263,459	4.7
Held-to-maturity (3)	182,595		6,839	189,434	4.5	153,933	2,927	156,860	4.9
Total	$	398,906	11,101	410,007	n/a	413,993	6,326	420,319	n/a

(1)Represents amortized cost of the securities, net of the allowance for credit losses, of $79 million related to available-for-sale debt securities and $26 million related to held-to-maturity debt securities at September 30, 2020. The allowance for credit losses related to available-for-sale and held-to-maturity debt securities was $0 at December 31, 2019, due to our adoption of CECL on January 1, 2020. For additional information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

(2)Available-for-sale debt securities are carried on the balance sheet at fair value, which includes the allowance for credit losses, subsequent to the adoption of CECL on January 1, 2020.

March 31, 2020 December 31, 2019
(in millions) Amortized cost, net (1)

Net
unrealized
gain (loss)

Fair value
Amortized cost

Net
unrealized
gain (loss)

Fair value
Available-for-sale (2) 248,187
3,042
251,229
260,060
3,399
263,459
Held-to-maturity (3) 169,909
7,653
177,562
153,933
2,927
156,860
Total $ 418,096
10,695
428,791
413,993
6,326
420,319

~~(1)~~

~~Represents~~(3)Held-to-maturity debt securities are carried on the balance sheet at amortized cost, net of allowance for credit losses, subsequent to the ~~securities, net of the allowance for credit losses, of~~ ~~$161 million~~ ~~related to available-for-sale debt securities and~~ ~~$11 million~~ ~~related to held-to-maturity debt securities at~~ ~~March 31, 2020. The allowance for credit losses related to available-for-sale and held-to-maturity debt securities was~~ $0 at ~~December 31, 2019, due to our~~ adoption of CECL on January 1, 2020. ~~For more information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.~~


~~(2)~~	~~Available-for-sale debt securities are carried on the balance sheet at fair value, which includes the allowance for credit losses, subsequent to the adoption of CECL on January 1, 2020.~~


~~(3)~~	~~Held-to-maturity debt securities are carried on the balance sheet at amortized cost, net of allowance for credit losses, subsequent to the adoption of CECL on January 1, 2020.~~

Table 5 presents a summary of our portfolio of investments in available-for-sale (AFS) and held-to-maturity (HTM) debt securities, which ~~increased $3.7 billion~~decreased in balance sheet carrying value from December 31, 2019, ~~predominantly~~as purchases were more than offset by runoff and sales. While the overall portfolio decreased from December 31, 2019, HTM debt securities increased due to ~~higher net unrealized gains.~~actions taken to reposition the overall portfolio for capital management purposes. See Note 5 (Available-for-Sale and Held-to-Maturity Debt Securities) to Financial Statements in this Report for additional information on AFS and HTM debt securities, including a summary of debt securities by security type.

The total net unrealized gains on ~~available-for-sale~~AFS debt securities ~~were $3.0 billion at March 31, 2020, down~~increased from ~~net unrealized gains of $3.4 billion at~~ December 31, 2019, driven by lower interest rates, partially offset by wider credit ~~spreads, which were primarily offset by lower interest rates.~~spreads. For a discussion of our investment management objectives and practices, see the “Balance Sheet Analysis” section in our 2019 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.

After adoption of CECL, we recorded an allowance for credit losses on available-for-sale and held-to-maturity debt securities. Total provision for credit losses on debt securities was $172 million in first quarter 2020. For a discussion of our accounting policies relating to the allowance for credit losses on debt securities and underlying considerations and analysis, see Note 1 (Summary of Significant Accounting Policies) and Note 5 (Available-for-Sale and Held-to-Maturity Debt Securities) to Financial Statements in this Report.

At March 31, 2020, debt securities included $52.4 billion of municipal bonds, of which 97.2% were rated “A-” or better based predominantly on external 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 evaluation of the appropriateness of the allowance for credit losses on debt securities.

The weighted-average expected maturity of debt securities available-for-sale was 4.2 years at March 31, 2020. The expected remaining maturity is shorter than the remaining contractual maturity for the 66% of this portfolio that is 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)
At March 31, 2020
Actual $ 164.6
5.5
3.5
Assuming a 200 basis point:
Increase in interest rates 150.2
(8.9 ) 5.6
Decrease in interest rates 168.2
9.1
3.2

The weighted-average expected remaining maturity of debt securities held-to-maturity (HTM) was 4.5 years at March 31, 2020. 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 earnings. See Note 5 (Available-for-Sale and Held-to-Maturity Debt Securities) to Financial Statements in this Report for a summary of debt securities by security type.

~~Balance Sheet Analysis (continued~~)

Loan Portfolios

Table 76 provides a summary of total outstanding loans by portfolio segment. ~~Total~~Commercial loans ~~increased $47.6 billion~~decreased from December 31, 2019, driven by:

•lower demand for originations of new loans and lower utilization on existing revolving loans in commercial and industrial loans; and

•loan paydowns on continued customer liquidity from strength in capital markets.

Consumer loans decreased from December 31, 2019, due ~~to an increase~~to:

•paydowns exceeding originations in ~~commercial loans.~~first and junior lien mortgage loans; and

~~Commercial loans increased $52.0 billion from December 31, 2019, predominantly driven by growth in our commercial and industrial loan portfolio, reflecting significant draws on revolving~~

~~lines of credit and additional funding requests within our Corporate & Investment Banking and Commercial Banking businesses due to the impact of COVID-19.~~

~~Consumer loans were down $4.4 billion from December 31, 2019, primarily due to a decrease in the credit card portfolio due to seasonality and fewer new accounts and~~ •lower consumer spending ~~as a result~~and originations in credit cards;

partially offset by:

•the repurchase of ~~the impact~~$26.9 billion of ~~COVID-19.~~first lien mortgage loans from GNMA loan securitization pools, including $21.9 billion in third quarter 2020.

Table 7:6: Loan Portfolios


(in millions)	September 30, 2020		December 31, 2019
Commercial	$	482,289	515,719
Consumer	437,793		446,546
Total loans	$	920,082	962,265
Change from prior year-end	$	(42,183)	9,155

(in millions) March 31, 2020
December 31, 2019
Commercial $ 567,735
515,719
Consumer 442,108
446,546
Total loans $ 1,009,843
962,265
Change from prior year-end $ 47,578
9,155

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 6 (Loans

and Related Allowance for Credit Losses) to Financial Statements in this Report.

See the “Balance Sheet Analysis – Loan Portfolios” section in our 2019 Form 10-K for information regarding contractual loan maturities and the distribution of loans to changes in interest rates.

Deposits

Deposits ~~were $1.4 trillion at March 31, 2020, up $53.9 billion~~increased from December 31, 2019, ~~reflecting growth across all deposit gathering businesses driven by seasonality,~~reflecting:

•consumer and wealth customers’ ~~flight to quality following~~preferences for liquidity given the ~~emergence of COVID-19, as well as the inflow of deposits~~economic uncertainty associated with ~~corporate~~the

COVID-19 pandemic, loan payment deferrals, government stimulus programs, and ~~commercial loan draws. The increase in deposits was~~ lower customer spending;

partially offset by by:

•actions taken to manage tounder the asset cap resulting in declines in interest-bearing checking, other

time deposits, ~~driven by lower~~such as brokered certificates of deposit (CDs), and deposits in non-U.S. offices.

Table 87 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 8:7: Deposits


($ in millions)	Sep 30, 2020		% of total deposits		Dec 31, 2019		% of total deposits		% Change
Noninterest-bearing	$	447,011	32	%	$	344,496	26	%	30
Interest-bearing checking	48,660		4		62,814		5		(23)
Market rate and other savings	790,117		57		751,080		57		5
Savings certificates	23,187		2		31,715		2		(27)
Other time deposits	41,843		3		78,609		6		(47)
Deposits in non-U.S. offices (1)	32,397		2		53,912		4		(40)
Total deposits	$	1,383,215	100	%	$	1,322,626	100	%	5

($ in millions)
Mar 31,
2020

% of
total
deposits

Dec 31,
2019
% of
total
deposits

% Change

Noninterest-bearing $ 379,678
28 % $ 344,496
26 % 10
Interest-bearing checking 71,668
5
62,814
5
14
Market rate and other savings 781,051
57
751,080
57
4
Savings certificates 28,431
2
31,715
2
(10 )
Other time deposits 72,928
5
78,609
6
(7 )
Deposits in non-U.S. offices (1) 42,776
3
53,912
4
(21 )
Total deposits $ 1,376,532
100 % $ 1,322,626
100 % 4


~~(1)~~	~~Includes Eurodollar sweep balances of $22.0 billion and $34.2 billion at March 31,~~(1) Includes Eurodollar sweep balances of $19.8 billion and $34.2 billion at September 30, 2020, and December 31, 2019, 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 2019 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 9 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 9:Fair Value Level 3 Summary~~

March 31, 2020 December 31, 2019
($ in billions)
Total
balance

Level 3 (1)

Total
balance

Level 3 (1)

Assets carried
at fair value
$ 411.5
23.3
428.6
24.3
As a percentage
of total assets
21 % 1
22
1
Liabilities carried
at fair value
$ 33.2
1.3
26.5
1.8
As a percentage of
total liabilities
2 % *
2
*

* Less than 1%.


~~(1)~~	~~Before derivative netting adjustments.~~

See Note 16 (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 ~~$183.3~~$182.0 billion at ~~March 31,~~September 30, 2020, compared with $188.0 billion at December 31, 2019. The decrease was ~~predominantly~~ driven by by:

•common stock repurchases of $3.4 billion ~~preferred~~(substantially all of which occurred in first quarter 2020); and

•dividends of $5.6 billion;

partially offset by:

•issuances of common stock ~~redemptions of $2.5 billion, and dividends~~ of $2.4 billion ~~partially offset by the issuance of preferred~~predominantly related to employee stock ~~of $2.0 billion and net income of $653 million.~~ownership plans.



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. For additional information on our contractual obligations that may require future cash payments, see the “Off-Balance Sheet Arrangements – Contractual Cash Obligations” section in our 2019 Form 10-K.

Commitments to Lend

We enter into commitments to lend to customers, which are usually at a stated interest rate, if funded, and for specific purposes and time periods. When we enter into 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 are not funded. For ~~more~~additional information, see Note 6 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.

Commitments to Purchase Debt and Equity Securities

We enter into commitments to purchase securities under resale agreements. 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~~additional information, see 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~~additional information, see Note 10 (Securitizations and Variable Interest Entities) to Financial Statements in this Report.

Guarantees and Other 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, direct pay letters of credit, written options, recourse obligations, exchange and clearing house guarantees, indemnifications, and other types of similar arrangements. For ~~more~~additional information, see Note 13 (Guarantees, Pledged Assets and 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~~additional information, see Note 15 (Derivatives) to Financial Statements in this Report.



Risk Management

Wells Fargo manages a variety of risks that can significantly affect our financial performance and our ability to meet the expectations of our customers, shareholders, regulators and other stakeholders. For ~~more~~additional information about how we manage risk, see the “Risk Management” section in our 2019 Form 10-K. The discussion that follows supplements our discussion of the management of certain risks contained in the “Risk Management” section in our 2019 Form 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, Credit Risk, which is part of the Company’s Independent Risk Management (IRM) organization, has primary oversight responsibility for credit risk. Credit Risk reports to the Chief Risk Officer (CRO) and also provides periodic reports related to credit risk to the Board’s Credit Committee.

~~Actions~~Loan Portfolios

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 8 presents our total loans outstanding by portfolio segment and class of financing receivable.

Table 8:Total Loans Outstanding by Portfolio Segment and Class of Financing Receivable


(in millions)	Sep 30, 2020		Dec 31, 2019
Commercial:
Commercial and industrial	$	320,913	354,125
Real estate mortgage	121,910		121,824
Real estate construction	22,519		19,939
Lease financing	16,947		19,831
Total commercial	482,289		515,719
Consumer:
Real estate 1-4 family first mortgage	294,990		293,847
Real estate 1-4 family junior lien mortgage	25,162		29,509
Credit card	36,021		41,013
Automobile	48,450		47,873
Other revolving credit and installment	33,170		34,304
Total consumer	437,793		446,546
Total loans	$	920,082	962,265

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 ~~Support Customers During~~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; and

•Reputation risk.

Our credit risk management oversight process is governed centrally, but provides for direct management and accountability by our lines of business. Our overall credit process includes comprehensive credit policies, disciplined credit underwriting, frequent and detailed risk measurement and modeling, extensive credit training programs, and a continual loan review and audit process.

A key to our credit risk management is adherence to a well-controlled underwriting process, which we believe is appropriate for the ~~COVID-19 Pandemic~~needs of our customers as well as investors who purchase the loans or securities collateralized by the loans.

~~In response~~

Credit Quality OverviewCredit quality in third quarter 2020 continued to be affected by the economic impact that the COVID-19 pandemic ~~we have provided accommodations~~had on our customer base. Third quarter 2020 results reflected:

•Nonaccrual loans were $8.0 billion at September 30, 2020, up from $5.3 billion at December 31, 2019. Commercial nonaccrual loans increased to $4.4 billion at September 30, 2020, compared with $2.3 billion at December 31, 2019, and consumer nonaccrual loans increased to $3.6 billion at September 30, 2020, compared with $3.1 billion at December 31, 2019. Nonaccrual loans represented 0.87% of total loans at September 30, 2020, compared with 0.56% at December 31, 2019.

•Net loan charge-offs (annualized) as a percentage of our ~~customers, including fee reversals for~~average commercial and consumer loan portfolios were 0.29% and ~~small business deposit customers,~~0.30% in the third quarter and ~~fee waivers, payment deferrals,~~0.33% and ~~other expanded assistance for mortgage, credit card, automobile, small business, personal~~0.44% in the first nine months of 2020, respectively, compared with 0.11% and ~~commercial lending customers. We have also provided significant credit to our customers. In March 2020,~~0.46% in the third quarter and 0.12% and 0.47% in the first nine months of 2019.

•Loans that are not government insured/guaranteed and 90 days or more past due and still accruing were $108 million and $549 million in our commercial ~~customers drew over $80~~and consumer portfolios, respectively, at September 30, 2020, compared with $78 million and $855 million at December 31, 2019.

•Provision for credit losses for loans was $751 million and $14.1 billion ~~on revolving lines of credit.~~

From March 9 through April 24, 2020, we helped more than 1.7 million consumer, small business, and commercial customers by deferring payments, reversing and waiving fees, and offering maturity date extensions. We deferred approximately 1.4 million payments, representing more than $4.6 billion of principal and interest payments, of which approximately 50% related to real estate 1-4 family mortgage loans that we service for others. Additionally, we provided over 1.8 million fee waivers exceeding $75 million. For commercial distribution and automobile finance customers, we provided over 175,000 maturity date extensions, representing approximately $6.3 billion of outstanding principal and interest. The accommodations provided to our customers were not limited to customers that were past due. In addition, we do not plan on retaining fees from loans made in connection with the Paycheck Protection Program.

On March 25, 2020, the U.S. Senate approved the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), a bill designed to provide a wide range of economic relief to consumers and businesses in the ~~U.S. In addition,~~third quarter and first nine months of 2020, respectively, compared with $695 million and $2.0 billion for the same periods a year ago.

•The ACL for loans totaled $20.5 billion, or 2.22% of total loans, at September 30, 2020, up from $10.5 billion, or 1.09%, at December 31, 2019.

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

TROUBLED DEBT RESTRUCTURING RELIEF The CARES Act provides banks optional, temporary relief from accounting for certain loan modifications as troubled debt restructurings (TDRs). The modifications must be related to the adverse effects of COVID-19, and certain other criteria are required to be met in order to apply the relief. In first quarter 2020, we elected to apply the TDR relief provided by the CARES Act, which expires no later than December 31, 2020.

On April 7, 2020, federal banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the

Risk Management – Credit Risk Management (continued)

Coronavirus (Revised) (the Interagency Statement). The

Interagency Statement provides additional TDR relief as it clarifies that it is not necessary to consider the impact of COVID-19 on the financial condition of a borrower in connection with short-term (e.g., six ~~months)~~months or less) loan modifications related to COVID-19 provided the borrower is current at the date the modification program is implemented. For additional information regarding the TDR relief provided by the CARES Act and the clarifying TDR accounting guidance from the Interagency Statement, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this ~~Report~~Report.

The TDR relief provided under the CARES Act, as well as from the Interagency Statement, does not change our processes for monitoring the credit quality of our loan portfolios or for updating our measurement of the allowance for credit losses for loans based on expected losses.

Additionally, our election to apply the TDR relief provided by the CARES Act and the Interagency Statement impacts our regulatory capital ratios as these loan modifications related to COVID-19 are not adjusted to a higher risk-weighting normally required with TDR classification.

~~Loan Portfolios~~COVID-Related Lending Accommodations

~~The following discussion focuses~~During the first nine months of 2020, we provided accommodations to customers in response to the COVID-19 pandemic, including fee reversals for consumer and small business banking customers, and payment deferrals, fee waivers, covenant waivers, and other expanded assistance for mortgage, credit card, automobile, small business, personal and commercial lending customers. Certain foreclosure, collection and credit bureau reporting activities were also suspended. Additionally, we deferred rental payments on ~~our loan portfolios, which represent the largest component of~~certain leased assets ~~on our balance sheet~~ for which we ~~have credit risk. Table 10 presents our total loans outstanding by portfolio segment and class of financing receivable.~~are the lessor.

~~Table 10:Total Loans Outstanding by Portfolio Segment and Class of Financing Receivable~~

(in millions) Mar 31, 2020
Dec 31, 2019
Commercial:
Commercial and industrial $ 405,020
354,125
Real estate mortgage 122,767
121,824
Real estate construction 20,812
19,939
Lease financing 19,136
19,831
Total commercial 567,735
515,719
Consumer:
Real estate 1-4 family first mortgage 292,920
293,847
Real estate 1-4 family junior lien mortgage 28,527
29,509
Credit card 38,582
41,013
Automobile 48,568
47,873
Other revolving credit and installment 33,511
34,304
Total consumer 442,108
446,546
Total loans $ 1,009,843
962,265

~~We manage our credit risk by establishing what we believe are sound credit policies for underwriting new business, while monitoring~~Table 9 and ~~reviewing~~Table 9a summarize the ~~performance~~unpaid principal balance (UPB) of ~~our existing~~commercial and consumer loans that received accommodations under loan ~~portfolios. We employ various credit risk management and monitoring activities~~modification programs established to ~~mitigate risks associated~~assist customers 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~~

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

~~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 OverviewCredit quality in first quarter 2020 declined due to the effect~~economic impact of the COVID-19 pandemic (COVID-related modifications) and that remained in a deferral period as of September 30, 2020. These amounts included accommodations made for customers with loans reported on ~~market conditions, which impacted~~ our ~~customer base. First quarter~~consolidated balance sheet and excluded accommodations made for customers with loans that we service for others. COVID-related modifications primarily included payment deferrals of principal, interest or both as well as interest and fee waivers.

Customer payment deferral activities instituted in response to the COVID-19 pandemic could delay the recognition of net charge-offs, delinquencies, and nonaccrual status for those customers who would have otherwise moved into past due or nonaccrual status. Customers requiring assistance after receiving payment deferrals under the programs described in Tables 9 and 9a may be eligible to receive modifications consistent with those offered prior to the COVID-19 pandemic, such as interest rate reductions, term extensions, or principal forgiveness.

Of the total modifications granted during the first nine months of 2020, ~~results reflected:~~$222 million and $6.1 billion of unpaid principal balance of commercial and consumer loans, respectively, were classified as TDRs as of September 30, 2020, including $201 million and $4.0 billion, respectively, that were already classified as a TDR when the COVID-related modification was granted.

For information related to loans that are classified as TDRs, see Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Table 9:Commercial Loan Modifications Related to COVID-19

•

~~Nonaccrual loans were~~ ~~$6.2 billion~~ at ~~March 31, 2020, up from~~ ~~$5.3 billion~~ at ~~December 31, 2019, largely driven by a $585 million~~ increase in commercial real estate and commercial and industrial nonaccrual loans, as the effect of the COVID-19 pandemic on market conditions began to impact our customer base. Commercial nonaccrual loans ~~increased~~ to ~~$2.9 billion~~ at ~~March 31, 2020, compared with~~ ~~$2.3 billion~~ at ~~December 31, 2019, and consumer nonaccrual loans~~ ~~increased~~ to ~~$3.3 billion~~ at ~~March 31, 2020, compared with~~ ~~$3.1 billion~~ at ~~December 31, 2019. Nonaccrual loans represented~~ ~~0.61%~~ ~~of total loans at~~ ~~March 31, 2020, compared with~~ ~~0.56%~~ at ~~December 31, 2019~~.


•	~~Net loan charge-offs (annualized) as a percentage of our average commercial and consumer loan portfolios were~~ ~~0.25%~~ ~~and~~ ~~0.53%~~ in ~~first~~ ~~quarter~~ ~~2020, respectively, compared with~~ ~~0.11%~~ ~~and~~ ~~0.51%~~ in ~~first quarter 2019~~.


•	~~Loans that are not government insured/guaranteed and 90 days or more past due and still accruing were~~ ~~$53 million~~ ~~and~~ ~~$828 million~~ ~~in our commercial and consumer portfolios, respectively, at~~ ~~March 31, 2020, compared with~~ ~~$78 million~~ ~~and~~ ~~$855 million~~ at ~~December 31, 2019~~.

•

~~Our provision for credit losses for loans was~~ ~~$3.8 billion~~ in ~~first quarter 2020, compared with~~ ~~$845 million~~ ~~for the same period a year ago. The increase in provision for credit losses for loans in~~ ~~first~~ quarter 2020, compared with the same period a year ago, reflected an increase in the allowance for credit losses for loans due to forecasted credit deterioration from the impact of the COVID-19 pandemic, and higher net loan charge-offs primarily due to the impact of the recent sharp decline in oil prices on our oil and gas portfolio.


•	~~The allowance for credit losses for loans totaled~~ ~~$12.0 billion, or~~ ~~1.19%~~ ~~of total loans, at~~ ~~March 31, 2020, up from~~ ~~$10.5 billion, or~~ ~~1.09%, at~~ ~~December 31, 2019~~.

~~Additional~~


($ in millions)	Unpaid principal balance of modified loans still in deferral period at Sep 30, 2020 (1)		% of loan class (2)		General program description
Commercial:
Commercial and industrial	$	1,102	*		Initial deferral of scheduled principal and/or interest up to 90 days, extensions available on a case-by-case basis, generally in increments of 90 days.
Real estate mortgage and construction	2,504		2		Initial deferral of scheduled principal and/or interest up to 90 days, extensions available on a case-by-case basis, generally in increments of 90 days.
Lease financing	111		1		Initial deferral of lease payments up to 90 days, with available extensions up to 90 days.
Total commercial	$	3,717	1	%

*Less than 1%.

(1)COVID-related modifications are at the loan facility level.

(2)Based on total loans outstanding at September 30, 2020.

Table 9a:Consumer Loan Modifications Related to COVID-19


($ in millions)	Unpaid principal balance of modified loans still in deferral period at Jun 30, 2020		% of loan class (1)		Unpaid principal balance of modified loans still in deferral period at Sep 30, 2020		% of loan class (2)		% current after exit from deferral period (3)	General program description
Consumer:
Real estate 1-4 family first mortgage	$	25,194	9	%	$	16,994	6	%	96	Initial deferral up to 90 days of scheduled principal and interest, with available extensions up to a total of 12 months.
Real estate 1-4 family junior lien mortgage	2,812		10		1,848		7		94	Initial deferral up to 90 days of scheduled principal and interest, with available extensions up to a total of 12 months.
Credit card	2,616		7		783		2		92	Initial 90 day deferral of minimum payment and waiver of interest and fees until June 2020, then initial or subsequent 60 day deferral of minimum payment and waiver of certain fees. Deferrals limited to an initial period and one subsequent deferral.
Automobile	4,880		10		2,796		6		96	Initial 90 day deferral of scheduled principal and interest, with available extensions of 90 days.
Other revolving credit and installment	1,673		5		1,057		3		95	Revolving lines: Initial 90 day deferral of minimum payment and waiver of interest and fees, with available extensions of 60 days. Installment loans: Initial 90 day deferral of scheduled principal and interest, with available extensions of 90 days.
Subtotal	$	37,175	9		$	23,478	5
Real estate 1-4 family first mortgage (government insured/guaranteed) (4)	7,059		3		19,111		6
Total consumer	$	44,234	10	%	$	42,589	10	%

(1)Based on total loans outstanding at June 30, 2020.

(2)Based on total loans outstanding at September 30, 2020.

(3)Represents the UPB of loans that exited the deferral period and had a balance that was less than 30 days past due as of September 30, 2020.

(4)Represents real estate 1-4 family first mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) that were primarily repurchased from GNMA loan securitization pools. For additional information on ~~our~~GNMA loan ~~portfolios~~securitization pools, see the “Risk Management – Credit Risk Management – Risks Relating to Servicing Activities” section in this Report. FHA/VA loans are entitled to payment deferrals of scheduled principal and ~~our credit quality trends follows.~~interest up to a total of 12 months.

Significant Loan Portfolio Reviews Measuring and monitoring our credit risk is an ongoing process that tracks delinquencies, collateral values, 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 loan portfolios. See Note 6 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report for more analysis and credit metric information for each of the following portfolios.

COMMERCIAL AND INDUSTRIAL LOANS AND LEASE FINANCING For purposes of portfolio risk management, we aggregate commercial and industrial loans and lease financing according to market segmentation and standard industry codes. We generally subject commercial and industrial loans and lease financing to individual risk assessment using our internal borrower and collateral quality ratings. Our ratings are aligned to federal banking regulators’ definitions of pass and criticized categories with the criticized category including special mention, substandard, doubtful, and loss categories.

The commercial and industrial loans and lease financing portfolio totaled ~~$424.2~~$337.9 billion, or ~~42%~~37% of total loans, at ~~March 31,~~September 30, 2020. The net charge-off rate (annualized) of average loans for this portfolio was ~~0.36%~~0.34% and 0.42% in the third quarter and first ~~quarter~~nine months of 2020, respectively, compared with ~~0.16%~~0.17% for both the ~~same period a year ago.~~third quarter and first nine months of 2019. At ~~March 31,~~September 30, 2020, ~~and December 31, 2019, 0.45% and 0.44%~~0.89% of this portfolio was nonaccruing, ~~respectively.~~compared with 0.44% at December 31, 2019. Nonaccrual loans in this portfolio increased ~~$270 million~~$1.4 billion from December 31, 2019, a significant portion of which was in the oil, gas and pipelines category due to the ~~effect~~economic impact of the

COVID-19 ~~pandemic on market conditions, which impacted our customer base.~~pandemic. Also, ~~$20.5~~$24.6 billion of the commercial and industrial loan and lease financing portfolio was internally classified as criticized in accordance with regulatory guidance at ~~March 31,~~September 30, 2020, compared with $16.6 billion at December 31, 2019, reflecting increases primarily in the ~~effect~~oil, gas and pipelines, real estate and construction, entertainment and recreation, and retail categories due to the economic impact of the COVID-19 ~~pandemic on market conditions, which impacted our customer base.~~pandemic.

The majority of our commercial and industrial loans and lease financing portfolio is secured by short-term assets, such as accounts receivable, inventory, and debt securities, as well as long-lived assets, such as equipment and other business assets. Generally, the collateral securing this portfolio represents a secondary source of repayment.

Table 1110 provides our commercial and industrial loans and lease financing by industry, and includes non-U.S. loans of ~~$79.9~~$62.8 billion and $71.7 billion at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively. Significant industry concentrations of non-U.S. loans included ~~$36.8~~$33.0 billion and $31.2 billion in the financials except banks category, and ~~$20.2~~$13.0 billion and $19.9 billion in the banks category, at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively. The oil, gas and pipelines category included ~~$1.6~~$1.5 billion of non-U.S. loans at both ~~March 31,~~September 30, 2020, and December 31, 2019. The industry categories are based on the North American Industry Classification System.

Loans to financials except banks, our largest industry concentration, ~~were $126.3 billion, or 13% of total outstanding loans, at March 31, 2020, compared with $117.3 billion, or 12% of total outstanding loans, at December 31, 2019. This industry category~~ is comprised of loans to investment firms, financial vehicles, and non-bank creditors, including those that invest in financial assets backed predominantly by commercial or residential real estate or consumer loan assets. We had ~~$83.1~~$72.8 billion and ~~$75.2~~$75.9 billion of loans originated by our Asset Backed Finance (ABF) and Financial Institution Group (FIG) lines of business at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively. These ABF and FIG loans are limited to a percentage

Risk Management – Credit Risk Management (continued)

of the value of the underlying financial assets considering underlying credit risk, asset duration, and ongoing performance. These ABF and FIG loans may also have other features to manage credit risk such as cross-collateralization, credit enhancements, and contractual re-margining of collateral supporting the loans. Loans to financials except banks included

collateralized loan obligations (CLOs) in loan form of $7.7 billion and $7.0 billion at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively.

Oil, gas and pipelines loans ~~totaled $14.3 billion, or 1% of total outstanding loans, at March 31, 2020, compared with $13.6 billion, or 1% of total outstanding loans, at December 31, 2019. Oil, gas and pipelines loans~~ included ~~$9.5~~$8.1 billion and $9.2 billion of senior secured loans outstanding at ~~March 31,~~ September 30,

2020 and December 31, 2019, respectively. Oil, gas and pipelines nonaccrual loans ~~decreased to $549 million~~increased at ~~March 31,~~September 30, 2020,

compared with ~~$615 million at~~ December 31, 2019, due to ~~higher net loan charge-offs, as well as loan payments, partially offset by~~ new downgrades to nonaccrual status in ~~first quarter~~ 2020.

In addition to the oil, gas and pipelines category, industries with escalated credit monitoring include real estate and construction, retail ~~entertainment~~(including restaurants), and recreation, transportation services, and commercial real estate. Table 11 and Table 12 include information about our exposure to certain sectors of these industries, including those that have been significantly affected by the COVID-19 pandemic.hotels/motels.

Table ~~11:~~10: Commercial and Industrial Loans and Lease Financing by Industry


	September 30, 2020							December 31, 2019
($ in millions)	Nonaccrual loans		Loans outstanding	% of total loans		Total commitments (1)		Nonaccrual loans		Loans outstanding	% of total loans		Total commitments (1)
Financials except banks	$	204	108,597	12	%	$	193,838	$	112	117,312	12	%	$	200,848
Equipment, machinery and parts manufacturing	95		19,586	2		40,649		36		23,457	2		42,040
Technology, telecom and media	100		24,517	3		56,417		28		22,447	2		53,343
Real estate and construction	287		24,959	3		52,995		47		22,011	2		48,217
Banks	—		12,975	1		13,982		—		20,070	2		20,728
Retail	149		19,243	2		42,250		105		19,923	2		41,938
Materials and commodities	48		13,188	1		35,885		33		16,375	2		39,369
Automobile related	24		12,031	1		25,240		24		15,996	2		26,310
Food and beverage manufacturing	30		12,051	1		28,597		9		14,991	2		29,172
Health care and pharmaceuticals	163		16,074	2		32,304		28		14,920	2		30,168
Oil, gas and pipelines	1,188		11,138	1		31,344		615		13,562	1		35,445
Entertainment and recreation	85		9,643	1		16,849		44		13,462	1		19,854
Transportation services	390		10,216	1		16,642		224		10,957	1		17,660
Commercial services	145		10,618	1		24,467		50		10,455	1		22,713
Agribusiness	40		6,829	*		12,419		35		7,539	*		12,901
Utilities	9		5,922	*		19,315		224		5,995	*		19,390
Insurance and fiduciaries	2		3,463	*		14,814		1		5,525	*		15,596
Government and education	10		5,413	*		11,691		6		5,363	*		12,267
Other (2)	52		11,397	2		27,989		19		13,596	*		32,988
Total	$	3,021	337,860	37	%	$	697,687	$	1,640	373,956	39	%	$	720,947

March 31, 2020 December 31, 2019
($ in millions)
Nonaccrual
loans

Loans outstanding

% of
total
loans

Total commitments (1)
Nonaccrual
loans
Loans outstanding
% of
total
loans
Total commitments (1)
Financials except banks $ 95
126,270
13 % 204,143
$ 112
117,312
12 % 200,848
Equipment, machinery and parts manufacturing 58
25,054
2
44,641
36
23,457
2
42,040
Technology, telecom and media 57
26,896
3
56,462
28
22,447
2
53,343
Real estate and construction 49
27,222
3
48,977
47
22,011
2
48,217
Banks —
20,282
2
20,948
—
20,070
2
20,728
Retail (2) 204
27,844
3
43,801
105
19,923
2
41,938
Materials and commodities 57
19,118
2
39,385
33
16,375
2
39,369
Automobile related 24
17,436
2
26,032
24
15,996
2
26,310
Food and beverage manufacturing 12
16,908
2
31,004
9
14,991
2
29,172
Health care and pharmaceuticals 81
18,785
2
32,230
28
14,920
2
30,168
Oil, gas and pipelines 549
14,287
1
34,443
615
13,562
1
35,445
Entertainment and recreation (3) 65
16,163
2
20,532
44
13,462
1
19,854
Transportation services (4) 336
11,901
1
17,853
224
10,957
1
17,660
Commercial services 120
12,684
1
22,989
50
10,455
1
22,713
Agribusiness 37
6,994
*
12,137
35
7,539
*
12,901
Utilities 147
8,598
*
21,545
224
5,995
*
19,390
Insurance and fiduciaries 1
7,292
*
16,481
1
5,525
*
15,596
Government and education 7
5,548
*
11,918
6
5,363
*
12,267
Other (5) 11
14,874
1
32,769
19
13,596
*
32,988
Total $ 1,910
424,156
42 % 738,290
$ 1,640
373,956
39 % 720,947
*Less than 1%.


*	~~Less than 1%.~~


~~(1)~~	~~Total commitments consist of loans outstanding plus unfunded credit commitments, excluding issued letters of credit.~~

~~(2)~~

~~Loans outstanding to the restaurant sector were $5.8~~

(1)Total commitments consist of loans outstanding plus unfunded credit commitments, excluding issued letters of credit.

(2)No other single industry had total loans in excess of $5.0 billion and $4.7 billion at September 30, 2020, and ~~$4.3 billion and included $3.9 billion and $3.1 billion of loans outstanding to limited service restaurants at~~ ~~March 31, 2020, and~~ December 31, 2019,, respectively.


~~(3)~~	~~Less than 1% of loans outstanding and 1% of total commitments were to cruise lines at both~~ ~~March 31, 2020, and~~ ~~December 31, 2019~~.


~~(4)~~	~~Includes air transportation loans outstanding of $2.4 billion and $1.1 billion at~~ ~~March 31, 2020, and~~ ~~December 31, 2019, respectively.~~


~~(5)~~	~~No other single industry had total loans in excess of~~ ~~$5.0 billion~~ ~~and~~ ~~$4.7 billion~~ at ~~March 31, 2020, and~~ ~~December 31, 2019, respectively.~~

~~Risk Management - Credit Risk Management~~ ~~(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~~federal banking regulators' definitions of pass and criticized categories with criticized segmented among special mention, substandard, doubtful and loss categories. The CRE portfolio, which included ~~$7.8~~$8.1 billion of non-U.S. CRE loans, totaled ~~$143.6~~$144.4 billion, or ~~14%~~16% of total loans, at ~~March 31,~~September 30, 2020, and consisted of ~~$122.8~~$121.9 billion of mortgage loans and ~~$20.8~~$22.5 billion of construction loans.

Table 1211 summarizes CRE loans by state and property type with the related nonaccrual ~~totals.~~totals at September 30, 2020. The portfolio is diversified both geographically and by property type. The largest geographic concentrations of CRE loans are in California, New York, Florida,

and Texas, which combined represented ~~49%~~48% of the total CRE portfolio. By property type, the

largest concentrations are office buildings at 26% and apartments at ~~18%~~19% of the portfolio. CRE nonaccrual loans totaled ~~0.67%~~0.95% of the CRE outstanding balance at ~~March 31,~~September 30, 2020, compared with 0.43% at December 31, 2019. The increase in CRE nonaccrual loans was predominantly driven by the hotel/motel, shopping center, and office buildings property types and reflected the ~~effect~~economic impact of the COVID-19 ~~pandemic on market conditions, which impacted our customer base.~~pandemic. At ~~March 31,~~September 30, 2020, we had ~~$4.1~~$11.2 billion of criticized CRE mortgage loans, compared with $3.8 billion at December 31, 2019, and ~~$222 million~~$1.5 billion of criticized CRE construction loans, compared with $187 million at December 31, 2019. The increase in criticized CRE mortgage and CRE construction loans was driven by the hotel/motel, shopping center, and retail (excluding shopping center) property types and reflected the economic impact of the COVID-19 pandemic.

Table ~~12:~~11: CRE Loans by State and Property Type


	September 30, 2020
	Real estate mortgage			Real estate construction		Total		% of total loans
($ in millions)	Nonaccrual loans		Total portfolio	Nonaccrual loans	Total portfolio	Nonaccrual loans	Total portfolio
By state:
California	$	172	31,615	2	4,515	174	36,130	4	%
New York	97		12,973	2	2,022	99	14,995	2
Florida	24		8,104	1	1,542	25	9,646	1
Texas	325		7,855	—	1,221	325	9,076	*
Washington	13		3,935	—	837	13	4,772	*
North Carolina	14		3,666	—	743	14	4,409	*
Georgia	12		3,919	—	446	12	4,365	*
Arizona	35		3,672	—	334	35	4,006	*
New Jersey	51		3,049	—	915	51	3,964	*
Colorado	82		3,275	—	615	82	3,890	*
Other (1)	518		39,847	29	9,329	547	49,176	5
Total	$	1,343	121,910	34	22,519	1,377	144,429	16	%
By property:
Office buildings	$	279	34,133	1	3,214	280	37,347	4	%
Apartments	30		19,162	—	8,273	30	27,435	3
Industrial/warehouse	76		15,949	1	1,781	77	17,730	2
Retail (excluding shopping center)	170		13,886	2	167	172	14,053	2
Hotel/motel	159		10,594	—	1,694	159	12,288	1
Shopping center	408		10,703	—	1,029	408	11,732	1
Mixed use properties	91		5,516	—	701	91	6,217	*
Institutional	75		3,871	20	2,344	95	6,215	*
Collateral pool	—		2,659	—	191	—	2,850	*
Storage facilities	1		1,577	—	226	1	1,803	*
Other	54		3,860	10	2,899	64	6,759	*
Total	$	1,343	121,910	34	22,519	1,377	144,429	16	%

March 31, 2020
Real estate mortgage Real estate construction Total
% of
total
loans

($ in millions)
Nonaccrual
loans

Total
portfolio

Nonaccrual
loans

Total
portfolio

Nonaccrual
loans

Total
portfolio

By state:
California $ 172
31,837
1
4,446
173
36,283
4 %
New York 21
12,676
2
1,861
23
14,537
1
Florida 22
8,200
1
1,487
23
9,687
*
Texas 304
7,848
5
1,393
309
9,241
*
Washington 11
3,979
—
768
11
4,747
*
North Carolina 14
3,868
—
617
14
4,485
*
Georgia 15
3,901
—
465
15
4,366
*
Arizona 40
4,034
—
269
40
4,303
*
Colorado 16
3,298
—
546
16
3,844
*
New Jersey 18
2,962
—
682
18
3,644
*
Other 311
40,164
12
8,278
323
48,442
(1) 5
Total $ 944
122,767
21
20,812
965
143,579
14 %
By property:

Office buildings $ 140
34,547
5
2,945
145
37,492
4 %
Apartments 12
18,642
—
7,103
12
25,745
3
Industrial/warehouse 76
15,929
1
1,471
77
17,400
2
Retail (excluding shopping center) 125
14,089
2
223
127
14,312
1
Hotel/motel 79
10,637
—
1,543
79
12,180
1
Shopping Center 279
10,707
—
1,361
279
12,068
1
Mixed use properties 95
6,087
—
545
95
6,632
*
Institutional 60
3,934
1
2,041
61
5,975
*
Collateral pool —
2,514
—
200
—
2,714
*
Agriculture 70
2,144
—
9
70
2,153
*
Other 8
3,537
12
3,371
20
6,908
*
Total $ 944
122,767
21
20,812
965
143,579
14 %
*Less than 1%.


*	~~Less than 1%.~~

(1)~~Includes~~ Consists of 40 ~~states; no state~~ states, none of which had loans in excess of ~~$3.7 billion~~.$3.8 billion.

Risk Management – Credit Risk Management (continued)

NON-U.S LOANS Our classification of non-U.S. loans is based on whether the borrower’s primary address is outside of the United States. At ~~March 31,~~September 30, 2020, non-U.S. loans totaled ~~$88.0~~$71.2 billion, representing approximately 9%8% of our total consolidated loans outstanding, compared with $80.5 billion, or approximately 8% of total consolidated loans outstanding, at December 31, 2019. Non-U.S. loans were approximately 4% of our consolidated total assets at both ~~March 31,~~September 30, 2020, and December 31, 2019.

COUNTRY RISK EXPOSURE Our country risk monitoring process incorporates centralized monitoring of economic, political, social, legal, and transfer risks in countries where we do or plan to do business, along with frequent dialogue with our customers, counterparties and regulatory agencies. We establish exposure limits for each country through a centralized oversight process based on customer needs, and through consideration of the relevant and distinct risk of each country. We monitor exposures closely and adjust our country limits in response to changing conditions.

We evaluate our individual country risk exposure based on our assessment of 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 country exposure outside the U.S. based on our assessment of risk at ~~March 31,~~September 30, 2020, was the United Kingdom, which totaled ~~$37.6~~$38.1 billion, or approximately 2% of our total assets, and included ~~$11.2~~$12.2 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 withdrew from the European Union (Brexit) on January 31, 2020, and is currently subject to a

transition period during which the terms and conditions of its exit are being negotiated. AsFor additional information on our plans to address Brexit, see the ~~United Kingdom exits from the European Union,~~“Risk Management – Credit Risk Management – Country Risk Exposure” section in our primary goal is to continue to serve our 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 those locations. We have an existing authorized bank in Ireland and an asset management entity in Luxembourg. Additionally, we established a broker dealer in France. We are in the process of leveraging these entities to continue to serve clients in the European Union and continue to take actions to update our business operations in the United Kingdom and European Union, including implementing new supplier contracts and staffing arrangements.2019 Form 10-K. For additional information on risks associated with Brexit, see the “Risk Factors” section in our 2019 Form 10-K.

Table 1312 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. With respect to

Table ~~13:~~12:

•Lending and deposits exposure includes outstanding loans, unfunded credit commitments, and deposits with non-U.S. banks. These balances are presented prior to the deduction of allowance for credit losses or collateral received under the terms of the credit agreements, if any.

•Securities exposure represents debt and equity securities of non-U.S. issuers. Long and short positions are netted, and net short positions are reflected as negative exposure.

•Derivatives and other exposure represents foreign exchange contracts, derivative contracts, securities resale agreements, and securities lending agreements.

Table ~~13:~~12: Select Country Exposures


	September 30, 2020
	Lending and deposits			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	$	12,150	23,010	—	1,075	3	1,868	12,153	25,953	38,106
Canada	3		14,712	—	(60)	—	410	3	15,062	15,065
Japan	20		913	8,848	229	—	20	8,868	1,162	10,030
Cayman Islands	—		6,380	—	—	—	186	—	6,566	6,566
Ireland (EU)	1,375		4,802	—	81	—	84	1,375	4,967	6,342
Luxembourg (EU)	—		3,772	—	99	—	90	—	3,961	3,961
Guernsey	—		3,537	—	2	—	7	—	3,546	3,546
Germany (EU)	—		2,834	—	197	6	120	6	3,151	3,157
Bermuda	—		2,885	—	6	—	92	—	2,983	2,983
China	—		2,540	(12)	294	39	47	27	2,881	2,908
Netherlands (EU)	—		2,340	—	304	1	226	1	2,870	2,871
South Korea	—		2,229	2	60	1	12	3	2,301	2,304
Switzerland	—		1,843	—	(84)	—	118	—	1,877	1,877
France (EU)	—		1,761	—	23	52	2	52	1,786	1,838
Brazil	—		1,501	—	3	5	15	5	1,519	1,524
Australia	—		1,366	—	33	—	22	—	1,421	1,421
India	—		1,008	—	67	—	—	—	1,075	1,075
Chile	—		966	—	49	—	1	—	1,016	1,016
United Arab Emirates	—		1,004	—	1	—	4	—	1,009	1,009
Singapore	—		821	—	145	—	37	—	1,003	1,003
Total top 20 country exposures	$	13,548	80,224	8,838	2,524	107	3,361	22,493	86,109	108,602

(1)Total non-sovereign exposure comprised $45.6 billion of exposure to financial institutions and $40.5 billion to non-financial corporations at September 30, 2020.

March 31, 2020
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 $ 11,182
22,815
—
1,672
1
1,968
11,183
26,455
37,638
Canada 4
16,778
2
120
—
593
6
17,491
17,497
Cayman Islands —
8,952
—
—
—
328
—
9,280
9,280
Ireland 976
4,857
—
122
—
68
976
5,047
6,023
China —
4,188
(13 ) 444
37
35
24
4,667
4,691
Bermuda —
4,308
—
125
—
51
—
4,484
4,484
Luxembourg —
3,925
—
126
—
103
—
4,154
4,154
Japan 20
1,304
1,996
143
—
256
2,016
1,703
3,719
Guernsey —
3,494
—
3
—
35
—
3,532
3,532
Germany —
2,787
10
45
6
59
16
2,891
2,907
South Korea —
2,546
3
84
—
15
3
2,645
2,648
Netherlands —
1,794
—
171
14
241
14
2,206
2,220
France —
1,847
—
94
142
13
142
1,954
2,096
Brazil —
2,062
1
3
6
8
7
2,073
2,080
Chile —
1,910
—
1
—
—
—
1,911
1,911
India —
1,683
—
114
—
1
—
1,798
1,798
Switzerland —
1,608
—
38
—
90
—
1,736
1,736
Australia —
1,505
—
68
—
17
—
1,590
1,590
Singapore —
1,304
—
24
—
88
—
1,416
1,416
United Arab Emirates —
1,286
—
82
—
4
—
1,372
1,372
Total top 20 country exposures $ 12,182
90,953
1,999
3,479
206
3,973
14,387
98,405
112,792
Eurozone exposure:
Eurozone countries included in Top 20 above (2) $ 976
15,210
10
558
162
484
1,148
16,252
17,400
Spain —
385
—
121
—
9
—
515
515
Belgium —
536
—
(54 ) —
4
—
486
486
Austria —
234
—
1
—
—
—
235
235
Italy —
108
—
19
—
1
—
128
128
Other Eurozone exposure —
93
—
27
—
—
—
120
120
Total Eurozone exposure $ 976
16,566
10
672
162
498
1,148
17,736
18,884


~~(1)~~	~~For countries presented in the table, total non-sovereign exposure comprises~~ ~~$56.0 billion~~ ~~exposure to financial institutions and~~ ~~$43.9 billion~~ ~~to non-financial corporations at~~ ~~March 31, 2020~~.


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

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

REAL ESTATE 1-4 FAMILY MORTGAGE LOANS Our real estate 1-4 family mortgage loan portfolio is comprised of both first and junior lien mortgage loans, which are presented in Table ~~14.~~13.

Table ~~14:~~13: Real Estate 1-4 Family Mortgage Loans


	September 30, 2020				December 31, 2019
($ in millions)	Balance		% of portfolio		Balance		% of portfolio
Real estate 1-4 family first mortgage	$	294,990	92	%	$	293,847	91	%
Real estate 1-4 family junior lien mortgage	25,162		8		29,509		9
Total real estate 1-4 family mortgage loans	$	320,152	100	%	$	323,356	100	%

March 31, 2020 December 31, 2019
(in millions) Balance

% of
portfolio

Balance

% of
portfolio

Real estate 1-4 family first mortgage $ 292,920
91 % $ 293,847
91 %
Real estate 1-4 family junior lien mortgage 28,527
9
29,509
9
Total real estate 1-4 family mortgage loans $ 321,447
100 % $ 323,356
100 %

The real estate 1-4 family mortgage loan portfolio includes some loans with an interest-only feature as part of the loan terms and some with adjustable-rate features. Interest-only loans were approximately 3% of total loans at both ~~March 31,~~September 30, 2020, and December 31, 2019. We believe we have manageable adjustable-rate mortgage (ARM) reset risk across our mortgage loan portfolios, including ARM loans that have negative amortizing features that were acquired in prior business combinations. 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. In connection with our adoption of CECL on January 1, 2020, our real estate 1-4 family mortgage purchased credit-impaired (PCI) loans, which had a carrying value of $568 million, were reclassified as purchased credit-deteriorated (PCD) loans. PCD loans are generally accounted for in the same manner as non-PCD loans. For ~~more~~additional information on PCD loans, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements 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~~additional information on our modification programs, see the “Risk Management – Credit Risk Management – Real Estate 1-4 Family Mortgage Loans” section in our 2019

Form 10-K. For ~~more~~additional information on customer accommodations, including loan modifications, in response to the COVID-19 pandemic, see the “Risk Management – Credit Risk Management – ~~Actions to Support Customers During the COVID-19 Pandemic”~~COVID-Related Lending Accommodations” section in this Report.

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 on the mortgage portfolio exclude government insured/guaranteed loans. Loans 30 days or more delinquent at ~~March 31,~~September 30, 2020, totaled ~~$3.6~~$3.1 billion, or 1% of total mortgages, compared with $3.0 billion, or 1%, at December 31, 2019. Loans with FICO scores lower than 640 totaled ~~$7.5~~$6.1 billion, or 2% of total mortgages at ~~March 31,~~September 30, 2020, compared with $7.6 billion, or 2%, at December 31, 2019. Mortgages with a LTV/CLTV greater than 100% totaled ~~$2.5~~$2.0 billion at ~~March 31,~~September 30, 2020, or 1% of total mortgages, compared with $2.5 billion, or 1%, at December 31, 2019. Information regarding credit quality indicators can be found in Note 6 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.

Real estate 1-4 mortgage loans by state are presented in Table ~~15.~~14. Our real estate 1-4 family mortgage loans to borrowers in California represented 13% of total loans at ~~March 31,~~September 30, 2020, located predominantly within the larger metropolitan areas, with no single California metropolitan area consisting of more than 4%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 mortgage 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 original appraisals adjusted for the change in Home Price Index (HPI) or estimates from automated valuation models (AVMs) to support property values. Additional information about appraisals and AVMs and our policy for their use can be found in Note 6 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report and the “Risk Management – Credit Risk Management – Real Estate 1-4 Family Mortgage Loans” section in our 2019 Form 10-K.

Table ~~15:~~14: Real Estate 1-4 Family Mortgage Loans by State


	September 30, 2020
($ 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 mortgage loans:
California	$	110,292	6,795	117,087	13	%
New York	31,652		1,347	32,999	4
New Jersey	13,020		2,406	15,426	2
Florida	11,063		2,254	13,317	1
Washington	9,935		558	10,493	1
Virginia	7,622		1,459	9,081	1
Texas	8,275		508	8,783	1
North Carolina	5,307		1,185	6,492	1
Colorado	5,771		542	6,313	1
Other (1)	59,116		8,108	67,224	7
Government insured/ guaranteed loans (2)	32,937		—	32,937	3
Total	$	294,990	25,162	320,152	35	%

March 31, 2020
(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 loans:
California $ 118,484
7,814
126,298
13 %
New York 31,801
1,469
33,270
3
New Jersey 14,074
2,667
16,741
2
Florida 11,675
2,523
14,198
1
Washington 10,869
644
11,513
1
Virginia 8,740
1,645
10,385
1
Texas 8,954
576
9,530
1
North Carolina 5,758
1,338
7,096
1
Colorado 6,357
644
7,001
1
Other (1) 65,369
9,207
74,576
7
Government insured/
guaranteed loans (2)
10,839
—
10,839
1
Total $ 292,920
28,527
321,447
32 %
(1)Consists of 41 states, none of which had loans in excess of $6.3 billion.


~~(1)~~	~~Consists~~ (2)Represents loans whose repayments are predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). 41 ~~states; none of which had loans in excess of~~ ~~$6.9 billion~~.


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

Risk Management – Credit Risk Management (continued)

First Lien Mortgage Portfolio Our total real estate 1-4 family first lien mortgage portfolio (first mortgage) ~~decreased $927 million~~increased $1.1 billion from December 31, 2019, driven by our repurchase of $26.9 billion of loans from GNMA loan securitization pools, including $21.9 billion in ~~first~~third quarter ~~2020. Mortgage~~2020, and mortgage loan originations of ~~$14.3~~$44.1 billion ~~in first quarter 2020~~that were more than offset by paydowns. We also reclassified $9.0 billion of loans that were designated as mortgage loans held for sale (MLHFS) in second quarter 2020 to held for investment in third quarter 2020.

Net loan charge-offs (annualized) as a percentage of average first mortgage loans ~~was~~were 0.00% in both the third quarter and first ~~quarter~~nine months of 2020, compared with a net recovery of 0.01% and 0.02%, respectively, for the same ~~period~~periods a year ago.

Nonaccrual loans were ~~$2.4~~$2.6 billion at ~~March 31,~~September 30, 2020, up

~~$222~~ $491 million from December 31, 2019. The increase in nonaccrual loans from December 31, 2019 was driven by COVID-related loan payment deferrals that did not qualify for legislative or regulatory relief, as well as the implementation of CECL, which required PCI loans to be classified as nonaccruing based on performance. For additional information, see the “Risk Management – Credit Risk Management – Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)” section in this Report.

Table 1615 shows certain delinquency and loss information for the first mortgage portfolio and lists the top five states by outstanding balance.

Table ~~16:~~15: First Mortgage Portfolio Performance


	Outstanding balance			% of loans 30 days or more past due			Loss (recovery) rate (annualized) quarter ended
($ in millions)	Sep 30, 2020		Dec 31, 2019	Sep 30, 2020		Dec 31, 2019	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
California	$	110,292	118,256	0.69	%	0.48	(0.01)	(0.01)	(0.01)	(0.02)	(0.01)
New York	31,652		31,336	0.97		0.83	0.02	0.02	(0.01)	0.02	0.01
New Jersey	13,020		14,113	1.41		1.40	(0.01)	0.03	—	0.02	0.02
Florida	11,063		11,804	2.07		1.81	0.03	(0.01)	(0.03)	(0.06)	(0.07)
Washington	9,935		10,863	0.55		0.29	0.01	(0.01)	(0.02)	(0.02)	—
Other	86,091		95,750	1.28		1.20	(0.01)	0.01	0.01	(0.02)	—
Total	262,053		282,122	1.00		0.86	—	—	—	(0.02)	(0.01)
Government insured/guaranteed loans	32,937		11,170
PCI (1)	N/A		555
Total first lien mortgages	$	294,990	293,847

(1)In connection with our adoption of CECL on January 1, 2020, PCI loans were reclassified as PCD loans and are therefore included with other non-PCD loans in this table. For additional information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

Outstanding balance % of loans 30 days or more past due Loss (recovery) rate (annualized) quarter ended
(in millions) Mar 31,
2020
Dec 31,
2019
Mar 31,
2020
Dec 31,
2019 Mar 31,
2020
Dec 31,
2019
Sep 30,
2019
Jun 30,
2019
Mar 31,
2019
California $ 118,484
118,256
0.66 % 0.48 (0.01 ) (0.02 ) (0.01 ) (0.04 ) (0.03 )
New York 31,801
31,336
1.11
0.83 (0.01 ) 0.02
0.01
—
0.02
New Jersey 14,074
14,113
1.65
1.40 —
0.02
0.02
(0.06 ) 0.08
Florida 11,675
11,804
2.36
1.81 (0.03 ) (0.06 ) (0.07 ) (0.11 ) (0.10 )
Washington 10,869
10,863
0.40
0.29 (0.02 ) (0.02 ) —
(0.03 ) (0.04 )
Other 95,178
95,750
1.36
1.20 0.01
(0.02 ) —
(0.06 ) (0.02 )
Total 282,081
282,122
1.05
0.86 —
(0.02 ) (0.01 ) (0.04 ) (0.02 )
Government insured/guaranteed loans 10,839
11,170

PCI (1) N/A
555

Total first lien mortgages $ 292,920
293,847


~~(1)~~	In connection with our adoption of CECL on January 1, 2020, PCI loans were reclassified as PCD loans and are therefore included with other non-PCD loans in this table. For more information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

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

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,~~losses, such as junior lien mortgage performance when the first mortgage loan is delinquent. Table 1716 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, 2019, predominantly

reflected loan paydowns. Beginning in second quarter 2020, we suspended the origination of junior lien mortgages. As of ~~March 31,~~September 30, 2020, 4% 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%, 3% were 30 days or more past due. CLTV means the ratio of the total loan balance of first 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 1% of the junior lien mortgage portfolio at ~~March 31,~~September 30, 2020. For additional information on consumer loans by LTV/CLTV, see Table 6.12 in Note 6 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.

Table ~~17:~~16: Junior Lien Mortgage Portfolio Performance


	Outstanding balance			% of loans 30 days or more past due			Loss (recovery) rate (annualized) quarter ended
($ in millions)	Sep 30, 2020		Dec 31, 2019	Sep 30, 2020		Dec 31, 2019	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
California	$	6,795	8,054	1.78	%	1.62	(0.34)	(0.26)	(0.36)	(0.44)	(0.51)
New Jersey	2,406		2,744	2.52		2.74	(0.02)	(0.12)	0.13	0.07	0.11
Florida	2,254		2,600	2.74		2.93	(0.22)	(0.01)	—	(0.09)	(0.11)
Virginia	1,459		1,712	2.06		1.97	(0.34)	(0.05)	0.09	(0.02)	(0.23)
Pennsylvania	1,464		1,674	1.96		2.16	(0.19)	0.05	0.11	(0.10)	(0.05)
Other	10,784		12,712	2.01		2.05	(0.17)	(0.21)	0.01	(0.18)	(0.29)
Total	25,162		29,496	2.06		2.07	(0.22)	(0.17)	(0.07)	(0.21)	(0.28)
PCI (1)	N/A		13
Total junior lien mortgages	$	25,162	29,509

Outstanding balance
% of loans 30 days
or more past due
Loss (recovery) rate (annualized) quarter ended
(in millions) Mar 31,
2020
Dec 31,
2019
Mar 31,
2020
Dec 31,
2019 Mar 31,
2020
Dec 31,
2019
Sep 30,
2019
Jun 30,
2019
Mar 31,
2019
California $ 7,814
8,054
1.65 % 1.62 (0.36 ) (0.44 ) (0.51 ) (0.40 ) (0.39 )
New Jersey 2,667
2,744
2.67
2.74 0.13
0.07
0.11
(0.07 ) 0.12
Florida 2,523
2,600
2.76
2.93 —
(0.09 ) (0.11 ) (0.11 ) (0.05 )
Virginia 1,645
1,712
2.15
1.97 0.09
(0.02 ) (0.23 ) (0.17 ) 0.14
Pennsylvania 1,618
1,674
2.18
2.16 0.11
(0.10 ) (0.05 ) (0.19 ) 0.04
Other 12,260
12,712
2.06
2.05 0.01
(0.18 ) (0.29 ) (0.22 ) (0.03 )
Total 28,527
29,496
2.08
2.07 (0.07 ) (0.21 ) (0.28 ) (0.24 ) (0.11 )
PCI (1) N/A
13

Total junior lien mortgages $ 28,527
29,509


~~(1)~~	In connection with our adoption of CECL on January 1, 2020, PCI loans were reclassified as PCD loans and are therefore included with other non-PCD loans in this table. For more information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

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 ~~March 31,~~September 30, 2020, 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 lines of credit portfolios. In ~~March~~September 2020, excluding borrowers with COVID-related loan modification payment deferrals, approximately ~~46%~~43% of ~~these~~ borrowers paid ~~only~~ the minimum amount due and approximately ~~50%~~52% 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 ~~30%~~28% paid ~~only~~ the minimum amount due and approximately ~~66%~~67% 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.

Risk Management – Credit Risk Management (continued)

Table 1817 reflects the outstanding balance of our portfolio of junior lien mortgages, including lines and loans, and 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. At ~~March 31,~~September 30, 2020, ~~$464~~$383 million, or 2%, of lines in their draw period were 30 days or more past due,

compared with ~~$395~~$377 million, or 5%, of amortizing lines of credit. Included in the amortizing amounts in Table 1817 is ~~$53~~$64 million of end-of-term balloon payments which were past due. The unfunded credit commitments for junior and first lien lines totaled ~~$58.1~~$55.7 billion at ~~March 31,~~September 30, 2020.

Table ~~18:~~17: Junior Lien Mortgage Line and Loan and First Lien Mortgage Line Portfolios Payment Schedule


					Scheduled end of draw / term
($ in millions)	Outstanding balance September 30, 2020			Remainder of 2020	2021	2022	2023	2024	2025 and thereafter (1)	Amortizing
Junior lien lines and loans	$	25,162		61	682	2,822	1,930	1,545	10,441	7,681
First lien lines	9,393			24	345	1,433	1,076	847	4,103	1,565
Total	$	34,555		85	1,027	4,255	3,006	2,392	14,544	9,246
% of portfolios	100		%	—	3	12	9	7	42	27

(1)Substantially all lines and loans are scheduled to convert to amortizing loans by the end of 2029, with annual scheduled amounts through 2029 ranging from $1.5 billion to $4.1 billion and averaging $2.7 billion per year.

Scheduled end of draw / term
(in millions) Outstanding balance March 31, 2020
Remainder of 2020
2021
2022
2023
2024

2025 and
thereafter (1)

Amortizing
Junior lien lines and loans $ 28,527
218
809
3,177
2,191
1,769
11,693
8,670
First lien lines 10,210
103
395
1,566
1,186
922
4,368
1,670
Total $ 38,737
321
1,204
4,743
3,377
2,691
16,061
10,340
% of portfolios 100 % 1
3
12
9
7
41
27


~~(1)~~	~~Substantially all lines and loans are scheduled to convert to amortizing loans by the end of 2029, with annual scheduled amounts through 2029 ranging from~~ ~~$1.8 billion~~ to ~~$4.6 billion~~ ~~and averaging~~ ~~$3.1 billion~~ ~~per year.~~

CREDIT CARDS Our credit card portfolio totaled ~~$38.6~~$36.0 billion at ~~March 31,~~September 30, 2020, which represented 4% of our total outstanding loans. The net charge-off rate (annualized) for our credit card portfolio was ~~3.81%~~2.71% for ~~first~~third quarter 2020, compared with ~~3.73%~~3.22% for third quarter 2019, and 3.39% and 3.54% for the first nine months of 2020 and 2019, respectively. The decrease in the net charge-off rate in the third quarter ~~2019.~~and first nine months of 2020, compared with the same periods a year ago, was driven by payment deferral activities in response to the COVID-19 pandemic and the effects of government stimulus programs.

AUTOMOBILE Our automobile portfolio totaled ~~$48.6~~$48.5 billion at ~~March 31,~~September 30, 2020. The net charge-off rate (annualized) for our automobile portfolio was ~~0.68%~~0.25% for ~~first~~third quarter 2020, compared with ~~0.82%~~0.65% for third quarter 2019, and 0.60% and 0.64% for the first ~~quarter 2019.~~nine months of 2020 and 2019, respectively. The decrease in the net charge-off rate in the third quarter and first ~~quarter~~nine months of 2020, compared with the same ~~period~~periods in 2019, was driven by ~~lower early losses on~~payment deferral activities in response to the COVID-19 pandemic and stronger recoveries from higher ~~quality originations.~~used car values.

OTHER REVOLVING CREDIT AND INSTALLMENT Other revolving credit and installment loans totaled ~~$33.5~~$33.2 billion at ~~March 31,~~September 30, 2020, and ~~largely~~predominantly included student and securities-based loans. Our private student loan portfolio totaled ~~$10.6~~$10.0 billion at ~~March 31,~~September 30, 2020. On September 22, 2020, we notified customers of our exit from the student lending business. New applications from current customers will be accepted for the 2020-2021 academic year until January 28, 2021, with final disbursement of funds to colleges by June 30, 2021. The net charge-off rate (annualized) for other revolving credit and installment loans was ~~1.59%~~0.80% for ~~first~~third quarter 2020, compared with ~~1.47%~~1.60% for third quarter 2019, and 1.16% and 1.54% for the first nine months of 2020 and 2019, respectively. The decrease in the net charge-off rate in the third quarter ~~2019.~~and first nine months of 2020, compared with the same periods a year ago, was driven by payment deferral activities in response to the COVID-19 pandemic.

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

NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS) Table 1918 summarizes nonperforming assets (NPAs) for each of the last four quarters. Total NPAs increased ~~$759~~$378 million from ~~fourth~~second quarter ~~2019~~2020 to ~~$6.4~~$8.2 billion. Nonaccrual loans of ~~$6.2~~$8.0 billion increased ~~$810~~$417 million from ~~fourth~~second quarter ~~2019. Commercial~~2020. The increase in nonaccrual loans ~~increased predominantly due to an increase in commercial and industrial and real estate mortgage nonaccrual loans as a result of the economic slowdown~~was due to the economic impact of the COVID-19 pandemic, ~~impacting our customers. Consumer nonaccrual loans increased driven by higher nonaccruals in the~~including real estate 1-4 family mortgage ~~portfolio, as our adoption of CECL required PCI~~ loans ~~to be~~in COVID-related payment deferral programs that were classified as ~~nonaccruing based on performance.~~nonaccrual because they did not qualify for legislative or regulatory relief. Customer payment deferral activities instituted in response to the COVID-19 pandemic may delay recognition of delinquencies for customers who otherwise would have moved into nonaccrual status. Prior to January 1, 2020, PCI loans were excluded from nonaccrual loans because they continued to earn interest income from accretable yield, independent of performance in accordance with their contractual terms. However, as a result of our adoption of CECL on January 1,

2020, $275 million of real estate 1-4 family mortgage loans were reclassified from PCI to PCD loans, and as a result, were also classified as nonaccrual loans given their contractual delinquency. For ~~more~~additional information on PCD

loans, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

For information about when we generally place loans on nonaccrual status, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2019 Form 10-K. As part of our actions to support customers during the COVID-19 pandemic, we have provided borrowers relief in the form of loan modifications. Loan delinquency status will not change during any payment deferral period and loans that were accruing at the time the relief was provided generally will not be placed on nonaccrual status during the deferral period. For ~~more~~additional information on customer accommodations, including loan modifications, in response to the COVID-19 pandemic, see the “Risk Management – Credit Risk Management – ~~Actions to Support Customers During the COVID-19 Pandemic”~~COVID-Related Lending Accommodations” section in this Report.

Foreclosed assets of ~~$252~~$156 million were down ~~$51~~$39 million from ~~fourth~~second quarter ~~2019.~~2020.

Table ~~19:~~18: Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)


	September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019
($ in millions)	Balance		% of total loans		Balance		% of total loans		Balance		% of total loans		Balance		% of total loans
Nonaccrual loans:
Commercial:
Commercial and industrial	$	2,834	0.88	%	$	2,896	0.83	%	$	1,779	0.44	%	$	1,545	0.44	%
Real estate mortgage	1,343		1.10		1,217		0.98		944		0.77		573		0.47
Real estate construction	34		0.15		34		0.16		21		0.10		41		0.21
Lease financing	187		1.10		138		0.79		131		0.68		95		0.48
Total commercial	4,398		0.91		4,285		0.83		2,875		0.51		2,254		0.44
Consumer:
Real estate 1-4 family first mortgage (1)	2,641		0.90		2,393		0.86		2,372		0.81		2,150		0.73
Real estate 1-4 family junior lien mortgage (1)	767		3.05		753		2.81		769		2.70		796		2.70
Automobile	176		0.36		129		0.26		99		0.20		106		0.22
Other revolving credit and installment	40		0.12		45		0.14		41		0.12		40		0.12
Total consumer	3,624		0.83		3,320		0.79		3,281		0.74		3,092		0.69
Total nonaccrual loans	8,022		0.87		7,605		0.81		6,156		0.61		5,346		0.56
Foreclosed assets:
Government insured/guaranteed (2)	22				31				43				50
Non-government insured/guaranteed	134				164				209				253
Total foreclosed assets	156				195				252				303
Total nonperforming assets	$	8,178	0.89	%	$	7,800	0.83	%	$	6,408	0.63	%	$	5,649	0.59	%
Change in NPAs from prior quarter	$	378			1,392				759				(333)

(1)Real estate 1-4 family mortgage loans predominantly insured by the FHA or guaranteed by the VA are not placed on nonaccrual status because they are insured or guaranteed.

(2)Consistent with regulatory reporting requirements, foreclosed real estate resulting from government insured/guaranteed loans are classified as nonperforming. Both principal and interest related to these foreclosed real estate assets are collectible because the loans were predominantly insured by the FHA or guaranteed by the VA. Receivables related to the foreclosure of certain government guaranteed residential real estate mortgage loans are excluded from this table and included in Accounts Receivable in Other Assets. For additional information on foreclosed assets, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2019 Form 10-K.

March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019
($ in millions) Balance

% of
total
loans

Balance

% of
total
loans

Balance

% of
total
loans

Balance

% of
total
loans

Nonaccrual loans:
Commercial:
Commercial and industrial $ 1,779
0.44 % $ 1,545
0.44 % $ 1,539
0.44 % $ 1,634
0.47 %
Real estate mortgage 944
0.77
573
0.47
669
0.55
737
0.60
Real estate construction 21
0.10
41
0.21
32
0.16
36
0.17
Lease financing 131
0.68
95
0.48
72
0.37
63
0.33
Total commercial 2,875
0.51
2,254
0.44
2,312
0.45
2,470
0.48
Consumer:
Real estate 1-4 family first mortgage (1) 2,372
0.81
2,150
0.73
2,261
0.78
2,425
0.85
Real estate 1-4 family junior lien mortgage (1) 769
2.70
796
2.70
819
2.66
868
2.71
Automobile 99
0.20
106
0.22
110
0.24
115
0.25
Other revolving credit and installment 41
0.12
40
0.12
43
0.12
44
0.13
Total consumer 3,281
0.74
3,092
0.69
3,233
0.73
3,452
0.79
Total nonaccrual loans 6,156
0.61
5,346
0.56
5,545
0.58
5,922
0.62
Foreclosed assets:
Government insured/guaranteed (2) 43
50
59
68

Non-government insured/guaranteed 209
253
378
309

Total foreclosed assets 252
303
437
377

Total nonperforming assets $ 6,408
0.63 % $ 5,649
0.59 % $ 5,982
0.63 % $ 6,299
0.66 %
Change in NPAs from prior quarter $ 759
(333 ) (317 ) (1,042 )


~~(1)~~	~~Real estate 1-4 family mortgage loans~~ ~~predominantly~~ ~~insured by the FHA or guaranteed by the VA are not placed on nonaccrual status because they are insured or guaranteed.~~ Risk Management – Credit Risk Management (continued)

~~(2)~~

Consistent with regulatory reporting requirements, foreclosed real estate resulting from government insured/guaranteed loans are classified as nonperforming. Both principal and interest related to these foreclosed real estate assets are collectible because the loans were ~~predominantly~~ insured by the FHA or guaranteed by the VA. Receivables related to the foreclosure of certain government guaranteed residential real estate mortgage loans are excluded from this table and included in Accounts Receivable in Other Assets. For more information on foreclosed assets, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our ~~2019~~ ~~Form 10-K.~~

Table 2019 provides an analysis of the changes in nonaccrual loans.

Table ~~20:~~19: Analysis of Changes in Nonaccrual Loans


	Quarter ended
(in millions)	Sep 30, 2020		Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
Commercial nonaccrual loans
Balance, beginning of period	$	4,285	2,875	2,254	2,312	2,470
Inflows	1,316		2,741	1,479	652	710
Outflows:
Returned to accruing	(166)		(64)	(56)	(124)	(52)
Foreclosures	—		—	—	—	(78)
Charge-offs	(382)		(560)	(360)	(201)	(194)
Payments, sales and other	(655)		(707)	(442)	(385)	(544)
Total outflows	(1,203)		(1,331)	(858)	(710)	(868)
Balance, end of period	4,398		4,285	2,875	2,254	2,312
Consumer nonaccrual loans
Balance, beginning of period	3,320		3,281	3,092	3,233	3,452
Inflows (1)	696		379	749	473	448
Outflows:
Returned to accruing	(160)		(135)	(254)	(227)	(274)
Foreclosures	(4)		(6)	(21)	(29)	(32)
Charge-offs	(36)		(39)	(48)	(45)	(44)
Payments, sales and other	(192)		(160)	(237)	(313)	(317)
Total outflows	(392)		(340)	(560)	(614)	(667)
Balance, end of period	3,624		3,320	3,281	3,092	3,233
Total nonaccrual loans	$	8,022	7,605	6,156	5,346	5,545

(1)In connection with our adoption of CECL on January 1, 2020, we classified $275 million of PCD loans as nonaccruing based on performance.

Quarter ended
(in millions) Mar 31,
2020
Dec 31,
2019
Sep 30,
2019
Jun 30,
2019
Mar 31,
2019
Commercial nonaccrual loans
Balance, beginning of period $ 2,254
2,312
2,470
2,797
2,188
Inflows 1,479
652
710
621
1,238
Outflows:
Returned to accruing (56 ) (124 ) (52 ) (46 ) (43 )
Foreclosures —
—
(78 ) (2 ) (15 )
Charge-offs (360 ) (201 ) (194 ) (187 ) (158 )
Payments, sales and other (442 ) (385 ) (544 ) (713 ) (413 )
Total outflows (858 ) (710 ) (868 ) (948 ) (629 )
Balance, end of period 2,875

2,254

2,312

2,470

2,797
Consumer nonaccrual loans
Balance, beginning of period 3,092
3,233
3,452
4,108
4,308
Inflows (1) 749
473
448
437
552
Outflows:
Returned to accruing (254 ) (227 ) (274 ) (250 ) (248 )
Foreclosures (21 ) (29 ) (32 ) (34 ) (42 )
Charge-offs (48 ) (45 ) (44 ) (34 ) (49 )
Payments, sales and other (237 ) (313 ) (317 ) (775 ) (413 )
Total outflows (560 ) (614 ) (667 ) (1,093 ) (752 )
Balance, end of period 3,281

3,092

3,233

3,452

4,108
Total nonaccrual loans $ 6,156
5,346
5,545
5,922
6,905


~~(1)~~	~~In connection with our adoption of CECL on January 1, 2020, we classified $275 million of PCD loans as nonaccruing based on performance.~~

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.

~~While nonaccrual loans are not free of loss content, we~~We believe exposure to loss on nonaccrual loans is ~~significantly~~ mitigated by the following factors at ~~March 31,~~September 30, 2020:

•

•92% of total commercial nonaccrual loans and 99% of total consumer nonaccrual loans are secured. Of the consumer nonaccrual loans, 94% are secured by real estate and 90% have a combined LTV (CLTV) ratio of 80% or less.

•losses of $701 million and $1.0 billion have already been recognized on 18% of commercial nonaccrual loans and 32% 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.

~~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~~ ~~88%~~ ~~have a combined LTV (CLTV) ratio of 80% or less.~~

•

~~losses of~~ ~~$573 million~~ ~~and~~ ~~$985 million~~ ~~have already been recognized on~~ ~~11%~~ ~~of commercial nonaccrual loans and~~ ~~34%~~ 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.

•74% of commercial nonaccrual loans were current on interest and 70% of commercial nonaccrual loans were current on both principal and interest, but were on nonaccrual status because the full or timely collection of interest or principal had become uncertain.

•of the $1.3 billion of consumer loans in bankruptcy or discharged in bankruptcy, and classified as nonaccrual, $848 million were current.

•

~~73%~~ ~~of commercial nonaccrual loans were current on interest and~~ ~~66%~~ ~~of commercial nonaccrual loans were current on both principal and interest, but were on nonaccrual status because the full or timely collection of interest or principal had become uncertain.~~


•	~~of the~~ ~~$1.4 billion~~ ~~of consumer loans in bankruptcy or discharged in bankruptcy, and classified as nonaccrual,~~ ~~$905 million~~ ~~were current.~~

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

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 our proprietary modification 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)~~

Table 2120 provides a summary of foreclosed assets and an analysis of changes in foreclosed assets.

Table ~~21:~~20: Foreclosed Assets


(in millions)	Sep 30, 2020		Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
Summary by loan segment
Government insured/guaranteed	$	22	31	43	50	59
Commercial	39		45	49	62	180
Consumer	95		119	160	191	198
Total foreclosed assets	$	156	195	252	303	437
Analysis of changes in foreclosed assets
Balance, beginning of period	$	195	252	303	437	377
Net change in government insured/guaranteed (1)	(9)		(12)	(7)	(9)	(9)
Additions to foreclosed assets (2)	60		51	107	126	235
Reductions:
Sales	(88)		(98)	(154)	(250)	(155)
Write-downs and gains (losses) on sales	(2)		2	3	(1)	(11)
Total reductions	(90)		(96)	(151)	(251)	(166)
Balance, end of period	$	156	195	252	303	437

(1)Foreclosed government insured/guaranteed loans are temporarily transferred to and held by us as servicer, until reimbursement is received from FHA or VA.

(2)Includes loans moved into foreclosed assets from nonaccrual status and repossessed automobiles.

(in millions) Mar 31,
2020
Dec 31,
2019
Sep 30,
2019
Jun 30,
2019
Mar 31,
2019
Summary by loan segment
Government insured/guaranteed $ 43
50
59
68
75
Commercial 49
62
180
101
124
Consumer 160
191
198
208
237
Total foreclosed assets $ 252
303
437
377
436
Analysis of changes in foreclosed assets
Balance, beginning of period $ 303
437
377
436
451
Net change in government insured/guaranteed (1) (7 ) (9 ) (9 ) (7 ) (13 )
Additions to foreclosed assets (2) 107
126
235
144
193
Reductions:
Sales (154 ) (250 ) (155 ) (199 ) (205 )
Write-downs and gains (losses) on sales 3
(1 ) (11 ) 3
10
Total reductions (151 ) (251 ) (166 ) (196 ) (195 )
Balance, end of period $ 252
303
437
377
436


~~(1)~~	~~Foreclosed government insured/guaranteed loans are temporarily transferred to and held by us as servicer, until reimbursement is received from FHA or VA.~~


~~(2)~~	~~Includes loans moved into foreclosed assets from nonaccrual status and repossessed automobiles.~~

Foreclosed assets at ~~March 31,~~September 30, 2020, included ~~$180~~$104 million of foreclosed residential real estate, of which ~~24%~~21% is predominantly FHA insured or VA guaranteed and expected to have minimal or no loss content. The remaining amount of foreclosed assets has been written down to estimated net realizable value. Of the ~~$252~~$156 million in foreclosed assets at ~~March 31,~~September 30, 2020, ~~71%~~52% have been in the foreclosed assets portfolio one year or less.

As part of our actions to support customers during the COVID-19 pandemic, we have temporarily suspended certain mortgage foreclosure activities, which may affect the amount of our foreclosed assets for the remainder of the year. For additional information on loans in process of foreclosure, see Note 6 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.

Risk Management – Credit Risk Management (continued)

TROUBLED DEBT RESTRUCTURINGS ~~(TDRs)~~

Table ~~22:~~21: ~~Troubled Debt Restructurings (TDRs)~~TDR Balances


(in millions)	Mar 31, 2020		Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019	(in millions)	Sep 30, 2020		Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
Commercial:							Commercial:
Commercial and industrial	$	1,302	1,183	1,162	1,294	1,740	Commercial and industrial	$	2,082	1,882	1,302	1,183	1,162
Real estate mortgage	697		669	598	620	681	Real estate mortgage	805		717	697	669	598
Real estate construction	33		36	40	43	45	Real estate construction	21		20	33	36	40
Lease financing	10		13	16	31	46	Lease financing	9		10	10	13	16
Total commercial TDRs	2,042		1,901	1,816	1,988	2,512	Total commercial TDRs	2,917		2,629	2,042	1,901	1,816
Consumer:							Consumer:
Real estate 1-4 family first mortgage	7,284		7,589	7,905	8,218	10,343	Real estate 1-4 family first mortgage	9,420		7,176	7,284	7,589	7,905
Real estate 1-4 family junior lien mortgage	1,356		1,407	1,457	1,550	1,604	Real estate 1-4 family junior lien mortgage	1,298		1,309	1,356	1,407	1,457
Credit Card	527		520	504	486	473	Credit Card	494		510	527	520	504
Automobile	76		81	82	85	85	Automobile	156		108	76	81	82
Other revolving credit and installment	172		170	167	159	156	Other revolving credit and installment	190		173	172	170	167
Trial modifications	108		115	123	127	136	Trial modifications	91		91	108	115	123
Total consumer TDRs	9,523		9,882	10,238	10,625	12,797	Total consumer TDRs	11,649		9,367	9,523	9,882	10,238
Total TDRs	$	11,565	11,783	12,054	12,613	15,309	Total TDRs	$	14,566	11,996	11,565	11,783	12,054
TDRs on nonaccrual status	$	2,846	2,833	2,775	3,058	4,037	TDRs on nonaccrual status	$	4,163	3,475	2,846	2,833	2,775
TDRs on accrual status:							TDRs on accrual status:
Government insured/guaranteed	1,157		1,190	1,199	1,209	1,275	Government insured/guaranteed	3,467		1,277	1,157	1,190	1,199
Non-government insured/guaranteed	7,562		7,760	8,080	8,346	9,997	Non-government insured/guaranteed	6,936		7,244	7,562	7,760	8,080
Total TDRs	$	11,565	11,783	12,054	12,613	15,309	Total TDRs	$	14,566	11,996	11,565	11,783	12,054

Table 2221 provides information regarding the recorded investment of loans modified in TDRs. The allowance for loan losses for TDRs was ~~$439~~$732 million and $1.0 billion at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively. See Note 6 (Loans and Related 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. 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. As part of our actions to support customers during the COVID-19 pandemic, we have provided borrowers relief in the form of loan modifications. Under the CARES Act and the Interagency Statement, loan modifications related to the COVID-19 pandemic will not be classified as TDRs if they meet certain eligibility criteria. For ~~more~~additional information on the CARES Act and the Interagency Statement, see the “Risk Management – Credit Risk Management – ~~Actions to Support Customers During the COVID-19 Pandemic”~~Credit Quality Overview – Troubled Debt Restructuring Relief” section in this Report.

For ~~more~~additional information on our nonaccrual policies when a restructuring is involved, see the “Risk Management – Credit Risk Management – Troubled Debt Restructurings (TDRs)” section in our 2019 Form 10-K.

Table 2322 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.

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

Table ~~23:~~22: Analysis of Changes in TDRs


				Quarter ended
(in millions)	Sep 30, 2020		Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
Commercial TDRs
Balance, beginning of quarter	$	2,629	2,042	1,901	1,816	1,988
Inflows (1)	866		971	452	476	293
Outflows
Charge-offs	(77)		(60)	(56)	(48)	(66)
Foreclosures	—		—	—	(1)	—
Payments, sales and other (2)	(501)		(324)	(255)	(342)	(399)
Balance, end of quarter	2,917		2,629	2,042	1,901	1,816
Consumer TDRs
Balance, beginning of quarter	9,367		9,523	9,882	10,238	10,625
Inflows (1)	2,805		425	312	350	360
Outflows
Charge-offs	(58)		(46)	(63)	(57)	(56)
Foreclosures	(7)		(8)	(57)	(61)	(70)
Payments, sales and other (2)	(458)		(510)	(544)	(580)	(617)
Net change in trial modifications (3)	—		(17)	(7)	(8)	(4)
Balance, end of quarter	11,649		9,367	9,523	9,882	10,238
Total TDRs	$	14,566	11,996	11,565	11,783	12,054

(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 TDRs that modified in a prior period.

(2)Other outflows consist of normal amortization/accretion of loan basis adjustments and loans transferred to held for sale. Occasionally, loans that have been refinanced or restructured at market terms qualify as new loans, which are also included as other outflows.

(3)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.

Quarter ended
(in millions) Mar 31,
2020
Dec 31,
2019
Sep 30,
2019
Jun 30,
2019
Mar 31,
2019
Commercial TDRs
Balance, beginning of quarter $ 1,901
1,816
1,988
2,512
2,422
Inflows (1) 452
476
293
232
539
Outflows
Charge-offs (56 ) (48 ) (66 ) (37 ) (44 )
Foreclosures —
(1 ) —
—
—
Payments, sales and other (2) (255 ) (342 ) (399 ) (719 ) (405 )
Balance, end of quarter 2,042
1,901
1,816
1,988
2,512
Consumer TDRs
Balance, beginning of quarter 9,882
10,238
10,625
12,797
13,109
Inflows (1) 312
350
360
336
439
Outflows
Charge-offs (63 ) (57 ) (56 ) (61 ) (60 )
Foreclosures (57 ) (61 ) (70 ) (74 ) (86 )
Payments, sales and other (2) (544 ) (580 ) (617 ) (2,364 ) (593 )
Net change in trial modifications (3) (7 ) (8 ) (4 ) (9 ) (12 )
Balance, end of quarter 9,523
9,882
10,238
10,625
12,797
Total TDRs $ 11,565
11,783
12,054
12,613
15,309


~~(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 TDRs that modified in a prior period.


~~(2)~~	Other outflows consist of normal amortization/accretion of loan basis adjustments and loans transferred to held-for-sale. Occasionally, loans that have been refinanced or restructured at market terms qualify as new loans, which are also included as other outflows.


~~(3)~~	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.

Risk Management – Credit Risk Management (continued)

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING Loans 90 days or more past due 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. Prior to January 1, 2020, PCI loans were excluded from loans 90 days or more past due and still accruing because they continued to earn interest income from accretable yield, independent of performance in accordance with their contractual terms. In connection with our adoption of CECL, PCI loans were reclassified as PCD loans and classified as accruing or nonaccruing based on performance.

Loans 90 days or more past due and still accruing, excluding insured/guaranteed loans, at ~~March 31,~~September 30, 2020, were down ~~$52~~$276 million, or 6%30%, from December 31, 2019 due to ~~payoffs. Also, fluctuations from quarter~~lower

delinquencies in consumer loans as payment deferral activities instituted in response to ~~quarter may be influenced by seasonality.~~the COVID-19 pandemic delayed recognition of delinquencies for customers who would have otherwise moved into past due status.

Loans 90 days or more past due and still accruing whose repayments are ~~predominantly~~largely insured by the FHA or guaranteed by the VA for mortgages at September 30, 2020, were ~~$6.1 billion at March 31, 2020, down~~up from ~~$6.4 billion at~~ December 31, ~~2019.~~2019, driven by our repurchases of loans more than 90 days past due from GNMA loan securitization pools.

Table 2423 reflects 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 6 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.

Table ~~24:~~23: Loans 90 Days or More Past Due and Still Accruing


(in millions)	Sep 30, 2020		Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
Total:	$	11,698	9,739	7,023	7,285	7,130
Less: FHA insured/VA guaranteed (1)	11,041		8,922	6,142	6,352	6,308

Total, not government insured/guaranteed	$	657	817	881	933	822
By segment and class, not government insured/guaranteed: Commercial:
Commercial and industrial	$	61	101	24	47	6
Real estate mortgage	47		44	28	31	28
Real estate construction	—		—	1	—	—
Total commercial	108		145	53	78	34
Consumer:
Real estate 1-4 family first mortgage	97		93	128	112	100
Real estate 1-4 family junior lien mortgage	28		19	25	32	35
Credit card	297		418	528	546	491
Automobile	50		54	69	78	75
Other revolving credit and installment	77		88	78	87	87
Total consumer	549		672	828	855	788
Total, not government insured/guaranteed	$	657	817	881	933	822

(1)Represents loans whose repayments are largely insured by the FHA or guaranteed by the VA.

(in millions) Mar 31, 2020
Dec 31, 2019
Sep 30, 2019
Jun 30, 2019
Mar 31, 2019
Total: $ 7,023
7,285
7,130
7,258
7,870
Less: FHA insured/VA guaranteed (1) 6,142
6,352
6,308
6,478
6,996
Total, not government insured/guaranteed $ 881
933
822
780
874
By segment and class, not government insured/guaranteed:
Commercial:

Commercial and industrial $ 24
47
6
17
42
Real estate mortgage 28
31
28
24
20
Real estate construction 1
—
—
—
5
Total commercial 53

78

34

41

67
Consumer:
Real estate 1-4 family first mortgage 128
112
100
108
117
Real estate 1-4 family junior lien mortgage 25
32
35
27
28
Credit card 528
546
491
449
502
Automobile 69
78
75
63
68
Other revolving credit and installment 78
87
87
92
92
Total consumer 828
855

788

739

807
Total, not government insured/guaranteed $ 881
933

822

780

874


~~(1)~~	~~Represents loans whose repayments are~~ ~~predominantly~~ ~~insured by the FHA or guaranteed by the VA.~~

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

NET LOAN CHARGE-OFFS

Table ~~25:~~24: Net Loan Charge-offs


																	Quarter ended
	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019
($ 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)
Commercial:
Commercial and industrial	$	274	0.33	%	$	521	0.55	%	$	333	0.37	%	$	168	0.19	%	$	147	0.17	%
Real estate mortgage	56		0.18		67		0.22		(2)		(0.01)		4		0.01		(8)		(0.02)
Real estate construction	(2)		(0.03)		(1)		(0.02)		(16)		(0.32)		—		—		(8)		(0.14)
Lease financing	28		0.66		15		0.33		9		0.19		31		0.63		8		0.17
Total commercial	356		0.29		602		0.44		324		0.25		203		0.16		139		0.11
Consumer:
Real estate 1-4 family first mortgage	(1)		—		2		—		(3)		—		(3)		—		(5)		(0.01)
Real estate 1-4 family junior lien mortgage	(14)		(0.22)		(12)		(0.17)		(5)		(0.07)		(16)		(0.20)		(22)		(0.28)
Credit card	245		2.71		327		3.60		377		3.81		350		3.48		319		3.22
Automobile	31		0.25		106		0.88		82		0.68		87		0.73		76		0.65
Other revolving credit and installment	66		0.80		88		1.09		134		1.59		148		1.71		138		1.60
Total consumer	327		0.30		511		0.48		585		0.53		566		0.51		506		0.46
Total	$	683	0.29	%	$	1,113	0.46	%	$	909	0.38	%	$	769	0.32	%	$	645	0.27	%

Quarter ended
Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Jun 30, 2019 Mar 31, 2019
($ 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)

Commercial:
Commercial and industrial $ 333
0.37 % $ 168
0.19 % $ 147
0.17 % $ 159
0.18 % $ 133
0.15 %
Real estate mortgage (2 ) (0.01 ) 4
0.01
(8 ) (0.02 ) 4
0.01
6
0.02
Real estate construction (16 ) (0.32 ) —
—
(8 ) (0.14 ) (2 ) (0.04 ) (2 ) (0.04 )
Lease financing 9
0.19
31
0.63
8
0.17
4
0.09
8
0.17
Total commercial 324
0.25
203
0.16
139
0.11
165
0.13
145
0.11
Consumer:
Real estate 1-4 family first mortgage (3 ) —
(3 ) —
(5 ) (0.01 ) (30 ) (0.04 ) (12 ) (0.02 )
Real estate 1-4 family junior lien mortgage (5 ) (0.07 ) (16 ) (0.20 ) (22 ) (0.28 ) (19 ) (0.24 ) (9 ) (0.10 )
Credit card 377
3.81
350
3.48
319
3.22
349
3.68
352
3.73
Automobile 82
0.68
87
0.73
76
0.65
52
0.46
91
0.82
Other revolving credit and installment 134
1.59
148
1.71
138
1.60
136
1.56
128
1.47
Total consumer 585
0.53
566
0.51
506
0.46
488
0.45
550
0.51
Total $ 909
0.38 % $ 769
0.32 % $ 645
0.27 % $ 653
0.28 % $ 695
0.30 %

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


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

Table 2524 presents net loan charge-offs for ~~first~~third quarter 2020 and the previous four quarters. ~~Net loan charge-offs in first quarter 2020 were $909 million (0.38% of average total loans outstanding), compared with $695 million (0.30%) in first quarter 2019.~~

The ~~increase~~decrease in commercial ~~and industrial~~ net loan charge-offs in ~~first~~third quarter 2020 from the prior quarter was driven by ~~higher~~lower commercial and industrial losses predominantly in our oil and gas ~~portfolio.~~portfolio, as well as lower commercial real estate mortgage losses. The ~~increase~~decrease in consumer net loan charge-offs in ~~first~~third quarter 2020 from the prior quarter was driven by ~~higher~~lower losses in ~~the~~our credit card ~~portfolio.~~and automobile portfolios.

The COVID-19 pandemic may continue to impact the credit quality of our loan ~~portfolio, including resulting~~portfolio. Although the potential impacts were considered in ~~additional~~our allowance for credit losses for loans, payment deferral activities instituted in response to the COVID-19 pandemic could delay the recognition of net loan charge-offs. For ~~more~~additional information on customer accommodations in response to the COVID-19 pandemic, see the “Risk Management – Credit Risk Management – ~~Actions to Support Customers During the COVID-19 Pandemic”~~COVID-Related Lending Accommodations” section in this Report.

ALLOWANCE FOR CREDIT LOSSES We maintain an allowance for credit losses (ACL) for loans, which is management’s estimate of the expected credit losses in the loan portfolio and unfunded credit commitments, at the balance sheet date, excluding loans and unfunded credit commitments carried at fair value or held for sale. Additionally, we maintain an ~~allowance for credit losses~~ACL for debt securities classified as either available-for-sale or held-to-maturity, other financial assets measured at amortized cost, net investments in leases, and other off-balance sheet credit exposures.

We apply a disciplined process and methodology to establish our ~~allowance for credit losses~~ACL each quarter. The process for establishing the ~~allowance for credit losses~~ACL for loans takes into consideration many factors, including historical and forecasted loss trends, loan-level credit quality ratings and loan grade-specific characteristics. The process involves subjective and complex judgments. In addition, we review a variety of credit metrics and trends. These credit metrics and trends, however, do not solely determine the amount of the allowance as we use several analytical tools. For additional information on our ~~allowance for credit losses,~~ACL, see the “Critical Accounting Policies – Allowance for Credit Losses” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report. For additional information on our ~~allowance for credit losses~~ACL for loans, see Note 6 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report, and for additional information on our allowance for credit losses for debt securities, see the “Balance Sheet Analysis – Available-For-Sale and Held-To-Maturity Debt Securities” section and Note 5 (Available-for-Sale and Held-to-Maturity Debt Securities) to Financial Statements in this Report.

Table 2625 presents the allocation of the ~~allowance for credit losses~~ACL for loans by loan segment and class for the most recent quarter end and last four year ends. The detail of the changes in the ~~allowance for credit losses~~ACL for loans by portfolio segment

~~(including~~ (including charge-offs and recoveries by loan class) is included in Note 6 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.

Risk Management – Credit Risk Management (continued)

Table ~~26:~~25: Allocation of the ~~Allowance for Credit Losses (ACL)~~ACL for Loans (1)


	Sep 30, 2020				Dec 31, 2019				Dec 31, 2018				Dec 31, 2017				Dec 31, 2016
($ 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
Commercial:
Commercial and industrial	$	7,845	35	%	$	3,600	37	%	$	3,628	37	%	$	3,752	35	%	$	4,560	34	%
Real estate mortgage	2,517		13		1,236		13		1,282		13		1,374		13		1,320		14
Real estate construction	521		2		1,079		2		1,200		2		1,238		3		1,294		2
Lease financing	659		2		330		2		307		2		268		2		220		2
Total commercial	11,542		52		6,245		54		6,417		54		6,632		53		7,394		52
Consumer:
Real estate 1-4 family first mortgage	1,519		32		692		30		750		30		1,085		30		1,270		29
Real estate 1-4 family junior lien mortgage	710		3		247		3		431		3		608		4		815		5
Credit card	4,082		4		2,252		4		2,064		4		1,944		4		1,605		4
Automobile	1,225		5		459		5		475		5		1,039		5		817		6
Other revolving credit and installment	1,393		4		561		4		570		4		652		4		639		4
Total consumer	8,929		48		4,211		46		4,290		46		5,328		47		5,146		48
Total	$	20,471	100	%	$	10,456	100	%	$	10,707	100	%	$	11,960	100	%	$	12,540	100	%

	Sep 30, 2020				Dec 31, 2019				Dec 31, 2018				Dec 31, 2017				Dec 31, 2016
Components:
Allowance for loan losses	$	19,463			9,551				9,775				11,004				11,419
Allowance for unfunded credit commitments	1,008				905				932				956				1,121
Allowance for credit losses for loans	$	20,471			10,456				10,707				11,960				12,540
Allowance for loan losses as a percentage of total loans	2.12			%	0.99				1.03				1.15				1.18
Allowance for loan losses as a percentage of total net loan charge-offs (2)	716				346				356				376				324
Allowance for credit losses for loans as a percentage of total loans	2.22				1.09				1.12				1.25				1.30
Allowance for credit losses for loans as a percentage of total nonaccrual loans	255				196				165				156				126

Mar 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
($ 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

Commercial:
Commercial and industrial $ 4,231
40 % $ 3,600
37 % $ 3,628
37 % $ 3,752
35 % $ 4,560
34 %
Real estate mortgage 848
12
1,236
13
1,282
13
1,374
13
1,320
14
Real estate construction 36
2
1,079
2
1,200
2
1,238
3
1,294
2
Lease financing 164
2
330
2
307
2
268
2
220
2
Total commercial 5,279
56
6,245
54
6,417
54
6,632
53
7,394
52
Consumer:
Real estate 1-4 family first mortgage 836
29
692
30
750
30
1,085
30
1,270
29
Real estate 1-4 family
junior lien mortgage
125
3
247
3
431
3
608
4
815
5
Credit card 3,481
4
2,252
4
2,064
4
1,944
4
1,605
4
Automobile 1,016
5
459
5
475
5
1,039
5
817
6
Other revolving credit and installment 1,285
3
561
4
570
4
652
4
639
4
Total consumer 6,743
44
4,211
46
4,290
46
5,328
47
5,146
48
Total $ 12,022
100 % $ 10,456
100 % $ 10,707
100 % $ 11,960
100 % $ 12,540
100 %

Mar 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Components:
Allowance for loan losses $ 11,263 9,551 9,775 11,004 11,419
Allowance for unfunded
credit commitments
759 905 932 956 1,121
Allowance for credit losses for loans $ 12,022 10,456 10,707 11,960 12,540
Allowance for loan losses as a percentage of total loans 1.12 % 0.99 1.03 1.15 1.18
Allowance for loan losses as a percentage of total net loan charge-offs (2) 308 346 356 376 324
Allowance for credit losses for loans as a percentage of total loans 1.19 1.09 1.12 1.25 1.30
Allowance for credit losses for loans as a percentage of total nonaccrual loans 195 196 165 156 126
(1)Disclosure is not comparative due to our adoption of CECL on January 1, 2020. For additional information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.


~~(1)~~	~~Disclosure is not comparative due to our adoption of CECL on January 1,~~ (2)Total net loan charge-offs are annualized for the quarter ended September 30, 2020. ~~For more information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.~~


~~(2)~~	~~Total net loan charge-offs are annualized for quarter ended~~ ~~March 31, 2020~~.

The ~~ratio of~~ratios for the allowance for ~~credit~~loan losses and the ACL for loans ~~to total nonaccrual loans~~presented in Table 25 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.

The ~~allowance for credit losses~~ACL for loans increased ~~$1.6~~$10.0 billion, or ~~15%~~96%, from December 31, 2019, driven by a ~~$2.9~~$11.3 billion increase in the ~~allowance for credit losses~~ACL for loans in the first ~~quarter~~nine months of 2020 reflecting current and forecasted economic conditions due to the COVID-19 pandemic, partially offset by a $1.3 billion ~~decline~~decrease as a result of adopting CECL. The increase in the allowance for credit losses for loans reflected forecasted credit deterioration due to the COVID-19 pandemic and credit weakness in the oil and gas portfolio due to the recent sharp declines in oil prices. Total provision for credit losses for loans was ~~$3.8 billion~~$751 million in ~~first~~third quarter 2020, compared with ~~$845~~$695 million in ~~first~~third quarter 2019. The increase in the provision for credit losses for loans in ~~first~~third quarter 2020, compared with the same period a year ago, reflected an

increase in the ~~allowance for credit losses~~ACL for loans due to ~~forecasted credit deterioration as a result of~~ the economic impact of the COVID-19 pandemic.

We consider multiple economic scenarios to develop our estimate of the ACL for loans. The scenarios include a base case considered to be the most likely economic forecast, along with an optimistic (upside) and a pessimistic (downside) economic forecast. Our estimate of the ACL for loans at September 30, 2020, was based on a weighting of the base case and downside

economic scenarios of 80% and 20%, respectively, with no weighting applied to the upside scenario. The base case economic forecast assumed near-term economic stress recovering into late 2021. The downside scenario assumed more sustained adverse economic impacts resulting from the COVID-19 pandemic compared with the base case. The downside scenario assumed U.S. real GDP increasing slowly and ~~higher net loan charge-offs largely~~not fully recovering during the remainder of 2020 and 2021, and a sustained elevation in the ~~oil and gas portfolio due to~~U.S. unemployment rate until mid-2022. We considered expectations for the ~~recent sharp declines~~impact of government economic stimulus programs in ~~oil prices.~~

~~In determining our allowance for credit losses for loans in first quarter 2020, our analysis considered multiple factors to evaluate~~effect on September 30, 2020; however, we did not consider the ~~rapidly evolving impacts related to the COVID-19 pandemic. We evaluated a range~~impact of ~~expected losses based on~~future government economic ~~forecasts that projected both a limited and a severe downturn in economic conditions.~~stimulus programs. In addition, we ~~reviewed several alternative forecasts that included relatively longer yet less severe downturns,~~considered expectations for the impact of customer accommodation activity, as well as relatively shorter yet deeper downturns followed by a significant rebound near the end of 2020. We also assessed the impact of the federal government’s recent economic stimulus programs coupled with expectations for customer accommodation activity of up to six months. Our

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

~~forecasted view reflected a sustained recession through 2020 with a sustained increase in unemployment and decrease in gross domestic product (GDP) for the rest of the year. We also considered~~ the estimated impact on certain industries that we ~~expect~~consider to be directly and most adversely affected by the COVID-19 ~~pandemic,~~pandemic.

In addition to quantitative estimates, we consider qualitative factors that represent risks inherent in our processes and assumptions such as ~~well as~~economic environmental factors, modeling assumptions and performance, and other subjective factors, including industry trends and emerging risk assessments. The forecasted key economic variables used in our ~~exposure~~estimate of the

ACL for loans generally reflected improvement from our prior expectations resulting in lower loss expectations in the quantitative component of our ACL for loans at September 30, 2020. However, we significantly increased the qualitative component of our ACL for loans at September 30, 2020, to consider the significant uncertainty related to the ~~oil~~duration and ~~gas industry~~severity of the economic impacts from the COVID-19 pandemic and the ~~potential for additional draws on~~incremental risks to our loan portfolio, including specifically impacted industries in our commercial loan ~~commitments.~~portfolio.

The forecasted key economic variables used in our estimate of the ACL for loans at June 30 and September 30, 2020, are presented in Table 26.

Table 26:ForecastedKeyEconomic Variables


	4Q 2020	2Q 2021	4Q 2021
Blend of economic scenarios (1):
U.S. unemployment rate (2)
Jun 30, 2020	11.0	9.2	7.5
Sep 30, 2020	8.8	7.3	6.0
U.S. real GDP (3)
Jun 30, 2020	4.3	6.3	3.5
Sep 30, 2020	1.7	3.9	2.8
Home price index (4)
Jun 30, 2020	0.7	(3.0)	(0.9)
Sep 30, 2020	2.0	(2.0)	(1.8)
Commercial real estate asset prices (4)
Jun 30, 2020	(2.5)	(7.6)	(5.1)
Sep 30, 2020	(5.4)	(10.9)	(5.5)

(1)Represents a weighted average of the forecasted economic variable inputs.

(2)Quarterly average.

(3)Percent change from the preceding period, seasonally adjusted annualized rate.

(4)Percent change year over year of national average; outlook differs by geography and property type.

Future amounts of the ~~allowance for credit losses~~ACL for loans will be based on a variety of factors, including loan balance changes, portfolio credit quality and mix changes, and changes in general economic conditions and expectations (including for unemployment and GDP), among other factors. Based on economic conditions at the end of ~~first~~third quarter 2020, it was difficult to estimate the length and severity of the economic downturn that may result from the COVID-19 pandemic and the impact of other factors that may influence the level of eventual losses and corresponding requirements for future amounts of the ~~allowance for credit losses,~~ACL, including the impact of economic stimulus programs and customer accommodation activity. The ~~ultimate impact of the~~ COVID-19 pandemic will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic. The pandemic could continue to result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if the impact on the economy worsens.

We believe the ~~allowance for credit losses~~ACL for loans of ~~$12.0~~$20.5 billion at ~~March 31,~~September 30, 2020, was appropriate to cover expected credit losses, including unfunded credit commitments, at that date. The entire allowance is available to absorb expected credit losses from the total loan portfolio. The ~~allowance for credit losses~~ACL for loans is subject to change and reflects existing factors as of the date of determination, including economic or market conditions and ongoing internal and external examination processes. Due to the sensitivity of the ~~allowance for credit losses~~ACL for loans to changes in the economic and business environment, it is possible that we will incur incremental credit losses not anticipated as of the balance sheet date.

LIABILITY FOR MORTGAGE LOAN REPURCHASE LOSSES For information on our repurchase liability, see the “Risk

Management – Credit Risk Management – Liability For Mortgage Loan Repurchase Losses” section in our 2019 Form 10-K.

RISKS RELATING TO SERVICING ACTIVITIES In addition to servicing loans in our portfolio, we act as servicer and/or master servicer of residential mortgage loans included in ~~GSE-guaranteed~~government-sponsored entity (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 could become subject to consent orders and settlement agreements with federal and state regulators for alleged servicing issues and practices. In general, these can require us to provide customers with loan modification relief, refinancing relief, and foreclosure prevention and assistance, ~~as well as~~and can ~~impose~~result in the imposition of certain monetary ~~penalties on us.~~penalties.

As a servicer, we are required to advance certain delinquent payments of principal and interest on ~~the~~ mortgage loans we service. The amount and timing of reimbursement of these advances vary by investor and the applicable servicing agreements. Due to ~~an increase in~~continued customer requests for payment deferrals as a result of the COVID-19 pandemic, ~~we expect~~ the amount of our servicing advances of principal and interest ~~advances we are required to make as a servicer to increase, which may adversely impact our~~

~~net servicing income.~~remained elevated in third quarter 2020. The amount ~~and timing of reimbursement~~ of these advances ~~varies by investor and~~may continue to increase if additional payment deferrals are provided. Payment deferrals also delay the collection of contractually specified servicing fees, resulting in lower net servicing income.

In accordance with applicable servicing ~~agreements~~guidelines, delinquency status continues to advance for loans with COVID-related payment deferrals, which has resulted in ~~place.~~an increase in delinquent loans serviced for others and a corresponding increase in loans eligible for repurchase from GNMA loan securitization pools. Our option to repurchase loans from GNMA loan securitization pools becomes exercisable when three scheduled loan payments remain unpaid by the borrower. We generally repurchase these loans for cash and as a result, our total consolidated assets do not change. In third quarter 2020, we repurchased $21.9 billion of these delinquent loans, substantially all of which had COVID-related payment deferrals.

Loans that regain current status or are otherwise modified in accordance with applicable servicing guidelines may be included in future GNMA loan securitization pools. However, in accordance with guidance issued by GNMA, loans repurchased after June 30, 2020 with COVID-related payment deferrals are ineligible for inclusion in future GNMA loan securitization pools until the borrower has timely made six consecutive payments. This requirement may delay our ability to resell loans into the securitization market. At September 30, 2020, the amount of repurchased GNMA loans with COVID-related payment deferrals that were ineligible for inclusion in future GNMA loan securitization pools due to this requirement was $21.0 billion.

For additional information about the risks related to our servicing activities, see the “Risk Management – Credit Risk Management – Risks Relating to Servicing Activities” section in our 2019 Form 10-K. For additional information on mortgage banking activities, see Note 11 (Mortgage Banking Activities) to Financial Statements in this Report.

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, which oversees the administration and effectiveness of financial risk management

Asset/Liability Management (continued)

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 Committee (Corporate ALCO), which consists of management from finance, risk and business groups, to oversee these risks and provide periodic reports to the Board’s Finance Committee and Risk Committee as appropriate. As discussed in more detail for 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 rising, earnings will initially increase);

•assets and liabilities may reprice at the same time but by different amounts (for example, when the general level of interest rates is rising, we may increase rates paid on checking and savings deposit accounts by an amount that is less than the general 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 increase sharply, MBS held in the debt securities portfolio may pay down slower than anticipated, which could 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 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.

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 changes) are summarized in Table 27, indicating net interest income sensitivity relative to the 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 27:

•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 debt and equity securities portfolios constant across scenarios.

Table 27: Net Interest Income Sensitivity Over Next Two-Year Horizon Relative to Base Expectation


			Lower Rates (1)	Higher Rates					Lower Rates (1)			Higher Rates
($ in billions)	Base		100 bps Ramp Parallel Decrease	100 bps Instantaneous Parallel Increase	200 bps Ramp Parallel Increase	($ in billions)	Base		100 bps Ramp Parallel Decrease			100 bps Instantaneous Parallel Increase			200 bps Ramp Parallel Increase
First Year of Forecasting Horizon						First Year of Forecasting Horizon
Net Interest Income Sensitivity to Base Scenario		$	(1.3) - (0.8)	4.7 - 5.2	4.0 - 4.5	Net Interest Income Sensitivity to Base Scenario		$	(1.7)	-	(1.2)	5.9	-	6.4	5.3	-	5.8
Key Rates at Horizon End						Key Rates at Horizon End
Fed Funds Target	0.27	%	0.00	1.27	2.27	Fed Funds Target	0.25	%	0.00			1.25			2.25
10-year CMT (2)	0.81		0.00	1.81	2.81	10-year CMT (2)	0.84		0.00			1.84			2.84
Second Year of Forecasting Horizon						Second Year of Forecasting Horizon
Net Interest Income Sensitivity to Base Scenario		$	(3.5) - (3.0)	6.8 - 7.3	10.1 - 10.6	Net Interest Income Sensitivity to Base Scenario		$	(3.5)	-	(3.0)	8.6	-	9.1	13.2	-	13.7
Key Rates at Horizon End						Key Rates at Horizon End
Fed Funds Target	0.42	%	0.00	1.42	2.42	Fed Funds Target	0.25	%	0.00			1.25			2.25
10-year CMT (2)	0.89		0.00	1.89	2.89	10-year CMT (2)	0.99		0.00			1.99			2.99


~~(1)~~	~~U.S. interest rates are floored at zero where applicable in this scenario analysis~~


~~(2)~~	~~U.S. Constant Maturity Treasury Rate~~

(1)U.S. interest rates are floored at zero where applicable in this scenario analysis

(2)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 are predominantly driven by mortgage banking activities, and may move in the opposite direction of our net interest income. Mortgage originations generally decline in response to higher interest rates and generally increase, particularly refinancing activity, in response to lower interest rates. 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~~additional information.

Interest rate sensitive noninterest income also results from changes in earnings credit for noninterest-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 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 – Available-for-Sale and Held-to-Maturity Debt Securities” section in this Report for ~~more~~additional information on the use of the available-for-sale and 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 ~~March 31,~~September 30, 2020, and December 31, 2019, are presented in Note 15 (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~~additional 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 2019 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 index-based financial instruments used as economic hedges for such ARMs. Hedge results may also be impacted as the overall level of hedges changes as interest rates change, or as there are other changes in the market for mortgage forwards that may affect the implied carry on the MSRs.

The total carrying value of our residential and commercial MSRs was ~~$9.5~~$7.7 billion at ~~March 31,~~September 30, 2020, and $12.9 billion at December 31, 2019. The ~~weighted-average~~weighted average note rate on our portfolio of loans serviced for others was ~~4.20%~~4.13% at ~~March 31,~~September 30, 2020, and 4.25% at December 31, 2019. The carrying value of our total MSRs represented ~~0.60%~~0.52% and 0.79% of mortgage loans serviced for others at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively.

MARKET RISK Market risk is the risk of possible economic loss from adverse changes in market risk factors such as interest rates, credit spreads, foreign exchange rates, equity and commodity prices, and the risk of possible loss due to counterparty exposure. This applies to implied volatility risk, basis

~~Asset/Liability Management (continued~~)

risk, and market liquidity risk. It also includes price risk in the trading book, mortgage servicing rights and the 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 Risk Committee.

At the management level, the Market and Counterparty Risk Management function, which is part of IRM, has primary oversight responsibility for market risk. The Market and Counterparty Risk Management function reports into the CRO and also provides periodic reports related to market risk to the Board’s Finance Committee.

MARKET RISK – TRADING ACTIVITIES We engage in trading activities to accommodate the investment and risk management activities of our customers and to execute economic hedging to manage certain balance sheet risks. These trading activities predominantly occur within our 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 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~~additional 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) 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~~additional information, 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 2019 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 on our balance sheet.

Table 28 shows the Company’s Trading General VaR by risk category. As presented in Table 28, average Company Trading General VaR was ~~$33~~$153 million for the quarter ended ~~March 31,~~September 30, 2020, compared with ~~$31~~$155 million for the quarter ended ~~December 31, 2019,~~June 30, 2020, and ~~$15~~$24 million for the quarter ended ~~March 31,~~September 30, 2019. The increase in average as well as period end Company Trading General VaR for the quarter ended ~~March 31,~~September 30, 2020, compared with the quarter ended ~~March 31,~~September 30, 2019, was driven by ~~recent~~ market volatility due to the COVID-19 pandemic, in particular changes in interest rate curves and a significant widening of credit spreads entering the 12-month historical lookback window used to calculate VaR.

Asset/Liability Management (continued)

Table 28: Trading 1-Day 99% General VaR by Risk Category


			Quarter ended
	September 30, 2020					June 30, 2020				September 30, 2019
(in millions)	Period end		Average	Low	High	Period end	Average	Low	High	Period end	Average	Low	High
Company Trading General VaR Risk Categories
Credit	$	98	85	59	104	86	82	61	99	27	20	12	30
Interest rate	145		155	114	201	155	106	42	161	15	18	13	26
Equity	21		17	9	24	14	10	6	17	6	5	4	11
Commodity	5		5	2	8	4	4	2	7	2	2	1	3
Foreign exchange	1		1	1	2	1	2	1	3	1	1	1	1
Diversification benefit (1)	(121)		(110)			(51)	(49)			(16)	(22)
Company Trading General VaR	$	149	153			209	155			35	24

Quarter ended
March 31, 2020 December 31, 2019 March 31, 2019
(in millions)
Period
end

Average
Low
High
Period
end
Average
Low
High

Period
end

Average
Low
High
Company Trading General VaR Risk Categories
Credit $ 62
28
15
75
15
18
15
26
15
15
11
19
Interest rate 84
32
5
198
14
21
9
45
42
34
22
44
Equity 6
7
4
10
5
5
4
8
5
5
4
7
Commodity 2
2
1
6
2
2
1
4
2
2
1
4
Foreign exchange 2
1
1
6
1
1
1
1
1
1
1
1
Diversification benefit (1) (63 ) (37 )

(13 ) (16 ) (46 ) (42 )
Company Trading General VaR $ 93
33
24
31
19
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.

~~(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.

MARKET RISK – EQUITY SECURITIES We are directly and indirectly affected by changes in the equity markets. We make and manage direct 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 other-than-temporary impairment

(OTTI) and observable price changes. For nonmarketable equity securities, the analysis is based on facts and circumstances of each individual investment and the expectations for that investment’s cash flows, capital needs, the viability of its business model, our exit strategy, and observable price changes that are similar to the investments held. Investments in nonmarketable equity securities include private equity investments accounted for under the equity method, fair value 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, 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 14 (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 that include investments relating to our venture capital activities. We manage these marketable equity securities within capital risk limits approved by management and the Board and monitored by Corporate ALCO and the Market Risk Committee. The fair value changes in these marketable equity securities are recognized in net income. For ~~more~~additional 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.

LIQUIDITY AND FUNDING The 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 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. 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 We are subject to a rule, issued by the FRB, OCC and Federal Deposit Insurance Corporation (FDIC), that includes 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~~predominantly consisting of central bank ~~reserves~~deposits, government debt securities, and ~~government and corporate debt~~mortgage-backed securities of federal agencies 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 (IDIs) with total assets greater than $10 billion. In addition, rules issued by the FRB impose enhanced liquidity management standards on large ~~bank holding companies (BHC)~~BHCs such as Wells Fargo.

The FRB, OCC and FDIC have ~~proposed~~issued a rule ~~that would implement~~implementing a stable funding requirement, known as the net stable funding ratio (NSFR), which ~~would~~will require large banking organizations, ~~such as~~including Wells Fargo, to maintain a sufficient amount of available stable funding, such as common equity, long-term subordinated debt and most types of deposits, in relation to their assets, derivative exposures and commitments over a one-year horizon period. The rule will become effective on July 1, 2021.

Liquidity Coverage Ratio As of ~~March 31,~~September 30, 2020, the consolidated Company, ~~and~~ Wells Fargo Bank, N.A. and Wells Fargo

National Bank West 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 29 presents the Company’s quarterly average values for the daily-calculated LCR and its components calculated pursuant to the LCR rule requirements.

Table 29: Liquidity Coverage Ratio


	Average for Quarter ended
(in millions, except ratio)	Sep 30, 2020			Jun 30, 2020	Sep 30, 2019
HQLA (1)(2)	$	424,073		409,467	359,364
Projected net cash outflows	317,064			316,268	302,214
LCR	134		%	129	119

(in millions, except ratio) Average for Quarter ended March 31, 2020
HQLA (1)(2) $ 381,950
Projected net cash outflows 315,980
LCR 121 %
(1)Excludes excess HQLA at certain subsidiaries that is not transferable to other Wells Fargo entities.


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


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

(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 30. Our primary sources of liquidity are substantially the same in composition as HQLA under the LCR rule; however, our primary sources of liquidity will generally exceed HQLA calculated under the LCR rule due to the applicable haircuts to HQLA and the exclusion of excess HQLA at our subsidiary IDIs required under the LCR rule.

Our cash is predominantly on deposit with the Federal Reserve. 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 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 our held-to-maturity 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.

Table 30: Primary Sources of Liquidity

March 31, 2020 December 31, 2019
(in millions) Total
Encumbered
Unencumbered
Total
Encumbered
Unencumbered
Interest-earning deposits with banks $ 128,071
—
128,071
119,493
—
119,493
Debt securities of U.S. Treasury and federal agencies 61,727
3,785
57,942
61,099
3,107
57,992
Mortgage-backed securities of federal agencies (1) 271,644
40,769
230,875
258,589
41,135
217,454
Total $ 461,442
44,554
416,888
439,181
44,242
394,939


~~(1)~~	~~Included in encumbered securities at~~ ~~March 31, 2020, were securities with a fair value of~~ ~~$1.7 billion, which were purchased in~~ ~~March 2020, but settled in April 2020.~~

~~Asset/Liability Management (continued~~)


	September 30, 2020				December 31, 2019
(in millions)	Total		Encumbered	Unencumbered	Total	Encumbered	Unencumbered
Interest-earning deposits with banks	$	221,235	—	221,235	119,493	—	119,493
Debt securities of U.S. Treasury and federal agencies	56,262		4,907	51,355	61,099	3,107	57,992
Mortgage-backed securities of federal agencies	258,554		36,935	221,619	258,589	41,135	217,454
Total	$	536,051	41,842	494,209	439,181	44,242	394,939

In addition to our primary sources of liquidity shown in

Table 30, 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. As of ~~March 31,~~September 30, 2020, we also maintained approximately ~~$273.5~~$262.7 billion of available borrowing capacity at various Federal Home Loan Banks and the Federal Reserve Discount Window.

Deposits have historically provided a sizable source of relatively low-cost funds. Deposits were ~~136%~~150% of total loans at ~~March 31,~~September 30, 2020, and 137% at December 31, 2019.

Additional funding is provided by long-term debt and short-term borrowings. Table 31 shows selected information for short-term borrowings, which generally mature in less than 30 days.

Asset/Liability Management (continued)

Table 31: Short-Term Borrowings


	Quarter ended
(in millions)	Sep 30, 2020		Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
Balance, period end
Federal funds purchased and securities sold under agreements to repurchase	$	44,055	49,659	79,036	92,403	110,399

Other short-term borrowings	11,169		10,826	13,253	12,109	13,509
Total	$	55,224	60,485	92,289	104,512	123,908
Average daily balance for period
Federal funds purchased and securities sold under agreements to repurchase	$	46,504	52,868	90,722	103,614	109,499

Other short-term borrowings	10,788		10,667	12,255	12,335	12,343
Total	$	57,292	63,535	102,977	115,949	121,842
Maximum month-end balance for period
Federal funds purchased and securities sold under agreements to repurchase (1)	$	49,148	50,397	91,121	111,727	110,399

Other short-term borrowings (2)	11,169		11,220	13,253	12,708	13,509

Quarter ended
(in millions) Mar 31
2020
Dec 31,
2019
Sep 30,
2019
Jun 30,
2019
Mar 31,
2019
Balance, period end
Federal funds purchased and securities sold under agreements to repurchase $ 79,036
92,403
110,399
102,560
93,896
Other short-term borrowings 13,253
12,109
13,509
12,784
12,701
Total $ 92,289
104,512
123,908
115,344
106,597
Average daily balance for period
Federal funds purchased and securities sold under agreements to repurchase $ 90,722
103,614
109,499
102,557
95,721
Other short-term borrowings 12,255
12,335
12,343
12,197
12,930
Total $ 102,977
115,949
121,842
114,754
108,651
Maximum month-end balance for period
Federal funds purchased and securities sold under agreements to repurchase (1) $ 91,121
111,727
110,399
105,098
97,650
Other short-term borrowings (2) 13,253
12,708
13,509
12,784
14,129
(1)Highest month-end balance in each of the last five quarters was in July, April and February 2020, and October and September 2019.


~~(1)~~	~~Highest month-end balance in each of the last five quarters was in February 2020, and September, May and January 2019.~~


~~(2)~~	~~Highest month-end balance in each of the last five quarters was in March 2020, and September, June and February 2019.~~

(2)Highest month-end balance in each of the last five quarters was in September, April and March 2020, and October and September 2019.

Long-Term Debt 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. We issue long-term debt in a variety of maturities and currencies to achieve cost-efficient funding and to maintain an appropriate maturity profile. Proceeds from securities issued were used for general corporate purposes, 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. Long-term debt of ~~$237.3~~$215.7 billion at ~~March 31,~~

September 30, 2020, ~~increased $9.2~~decreased $12.5 billion from December 31, 2019. We issued ~~$18.9~~$237.1 million and $37.9 billion of long-term debt in the third quarter and first ~~quarter~~nine months of 2020, ~~and $11.8 billion in April and May 2020.~~respectively. 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. Table 32 provides the aggregate carrying value of long-term debt maturities (based on contractual payment dates) for the remainder of 2020 and the following years thereafter, as of ~~March 31,~~September 30, 2020.

Table 32: Maturity of Long-Term Debt


	September 30, 2020
(in millions)	Remaining 2020		2021	2022	2023	2024	Thereafter	Total
Wells Fargo & Company (Parent Only)
Senior notes	$	2,713	18,126	18,748	11,472	12,373	88,839	152,271
Subordinated notes	—		—	—	3,770	768	26,251	30,789
Junior subordinated notes	—		—	—	—	—	1,820	1,820
Total long-term debt – Parent	$	2,713	18,126	18,748	15,242	13,141	116,910	184,880
Wells Fargo Bank, N.A. and other bank entities (Bank)
Senior notes	$	257	6,872	4,887	2,924	6	420	15,366
Subordinated notes	—		—	—	1,048	—	4,834	5,882
Junior subordinated notes	—		—	—	—	—	372	372
Securitizations and other bank debt	1,254		1,353	1,057	339	156	1,383	5,542
Total long-term debt – Bank	$	1,511	8,225	5,944	4,311	162	7,009	27,162
Other consolidated subsidiaries
Senior notes	$	91	1,861	205	517	124	839	3,637

Securitizations and other bank debt	—		—	—	—	—	32	32
Total long-term debt – Other consolidated subsidiaries	$	91	1,861	205	517	124	871	3,669
Total long-term debt	$	4,315	28,212	24,897	20,070	13,427	124,790	215,711

March 31, 2020
(in millions) Remaining 2020
2021
2022
2023
2024
Thereafter
Total
Wells Fargo & Company (Parent Only)
Senior notes $ 9,627
17,802
17,782
11,192
9,476
72,658
138,537
Subordinated notes —
—
—
3,786
770
26,704
31,260
Junior subordinated notes —
—
—
—
—
1,940
1,940
Total long-term debt – Parent $ 9,627
17,802
17,782
14,978
10,246
101,302
171,737
Wells Fargo Bank, N.A. and other bank entities (Bank)
Senior notes $ 12,373
28,398
5,636
2,989
6
311
49,713
Subordinated notes —
—
—
1,010
—
4,923
5,933
Junior subordinated notes —
—
—
—
—
366
366
Securitizations and other bank debt 2,019
1,207
787
264
153
1,890
6,320
Total long-term debt – Bank $ 14,392
29,605
6,423
4,263
159
7,490
62,332
Other consolidated subsidiaries
Senior notes $ 135
1,833
187
475
127
484
3,241
Securitizations and other bank debt —
—
—
—
—
32
32
Total long-term debt – Other consolidated subsidiaries $ 135
1,833
187
475
127
516
3,273
Total long-term debt $ 24,154
49,240
24,392
19,716
10,532
109,308
237,342

Credit Ratings Investors in the long-term capital markets, as well as other market participants, generally will consider, among other factors, a company’s debt rating in making investment decisions. Rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, the level and quality of earnings, and rating agency assumptions regarding the probability and extent of federal financial assistance or support for certain large financial institutions. Adverse changes in these factors could result in a reduction of our credit rating; however, our debt securities do not contain credit rating covenants.

~~There were no actions undertaken by the ratings agencies with regard to our credit ratings during first quarter 2020.~~ On ~~April~~July 22, 2020, ~~Fitch~~Standard & Poor's (S&P) Global Ratings ~~Inc. (Fitch) affirmed~~lowered the ~~Company’s~~ long-term ~~and short-term issuer default ratings~~rating of the Company to BBB+ from A- and revised the rating outlook to stable from negative. On

September 2, 2020, Moody’s Investors Service affirmed the Company’s ratings and revised the ratings outlook to negative from ~~stable as Fitch expects significant~~

operating environment headwinds from the disruption to economic activity and financial markets as a result of the COVID-19 pandemic. This rating action followed Fitch’s event-driven review of the commercially-oriented U.S. G-SIBs. Both the Parent and Wells Fargo Bank, N.A. remain among the highest-rated financial firms in the United States.stable.

See the “Risk Factors” section in our 2019 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 15 (Derivatives) to Financial Statements in this Report for information regarding additional collateral and funding obligations required for certain derivative instruments in the event our credit ratings were to fall below investment grade.

The credit ratings of the ~~Parent~~Company and Wells Fargo Bank, N.A. as of ~~March 31,~~September 30, 2020, are presented in Table 33.

Table 33: Credit Ratings as of ~~March 31,~~September 30, 2020

Wells Fargo & Company

Wells Fargo Bank, N.A.

Senior debt

Short-term

borrowings

Long-term

deposits

Short-term

borrowings

Moody’s

P-1

Aa1

P-1

S&P Global Ratings

A-BBB+

A-2

A+

A-1

Fitch Ratings, Inc.

A+

F1+

DBRS Morningstar

AA (low)

R-1 (middle)

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 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~~ Due to uncertainty surrounding the suitability and sustainability of the London Interbank Offered Rate (LIBOR), central banks and global regulators have called for financial market participants to prepare for the discontinuation of LIBOR by the end of 2021. LIBOR is a widely-referenced benchmark rate, which is published in five currencies and a range of tenors, and seeks to estimate the cost at which banks can borrow on an unsecured basis from other banks. We have a significant number of assets and liabilities referenced to LIBOR and other interbank offered rates (IBORs), such as commercial loans, adjustable-rate mortgage loans, derivatives, debt securities, and long-term debt.

In addition, the Company is actively working with regulators, industry working groups (such as the ARRC) and trade associations that are developing guidance to facilitate an orderly transition away from the use of LIBOR. We are closely monitoring and seeking to follow the recommendations and guidance announced by such organizations, including those announced by the Bank of England’s Working Group on Sterling Risk-Free Reference Rates. We continue to assess the risks and related impacts associated with a transition away from IBORs. See the “Risk Factors” section in the 2019 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.

~~On March 12, 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-04 –~~ ~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ (Update) that provides temporary relief from existing GAAP accounting requirements for entities that perform activities related to reference rate reform. The relief provided by the Update is primarily related to contract modifications and hedge accounting relationships that are impacted by the Company’s reference rate reform activities. For additional information on the Update, see the “Current Accounting Developments” section in this Report.

For additional information on the amount of our IBOR-linked assets and liabilities, as well as the program structure and initiatives created by the LTO, see the “Risk Management – Asset/Liability Management – LIBOR Transition” section in our ~~2019~~ ~~Form 10-K.~~49

~~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 at September 30, 2020, decreased ~~$1.4~~$5.8 billion from December 31, 2019, predominantly as a result of common and preferred stock dividends of ~~$2.5 billion, partially offset by $653 million of Wells Fargo net income.~~$5.6 billion. During ~~first~~third quarter 2020, we issued ~~$1.7 billion~~$325 million of common stock, excluding conversions of preferred shares. ~~During first~~On September 30, 2020, the Board of Governors of the Federal Reserve System (FRB) announced that it was extending through fourth quarter 2020 ~~we repurchased $3.4 billionof common stock. The amount of our repurchases are~~measures it announced on June 25, 2020, prohibiting large bank holding companies (BHCs) subject to ~~various factors as discussed in~~ the ~~“Securities Repurchases” section below. On March 15, 2020, we suspended our share repurchase activities for the remainder of the first quarter and for second quarter 2020.~~FRB’s capital plan rule, including Wells Fargo, from making capital distributions, subject to certain limited exceptions. For additional information about ~~share repurchases,~~capital planning, including the FRB’s recent prohibition on capital distributions, see ~~Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.~~the “Capital Planning and Stress Testing” and “Securities Repurchases” sections below.

In January 2020, we issued $2.0 billion of our Preferred Stock, Series Z. In March 2020, we redeemed the remaining $1.8 billion of our Preferred Stock, Series K, and redeemed $669 million of our Preferred Stock, Series T. In October 2020, we issued $1.2 billion of our Preferred Stock, Series AA. For ~~more~~additional information, see Note 17 (Preferred Stock) to Financial Statements in this Report.

Regulatory Capital Guidelines

The Company and each of our ~~IDIs~~insured depository institutions (IDIs) 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 rules issued by federal banking regulators to implement Basel III capital requirements for U.S. banking organizations. The federal banking regulators’ capital rules, among other things, required on a fully phased-in basis as of ~~March 31,~~September 30, 2020:

•a minimum Common Equity Tier 1 (CET1) ratio of 9.00%, comprised of a 4.50% minimum requirement plus a capital conservation buffer of 2.50% and for us, as a global systemically important bank (G-SIB), a capital surcharge of 2.00%;

•a minimum tier 1 capital ratio of 10.50%, comprised of a 6.00% minimum requirement plus the capital conservation buffer of 2.50% and the G-SIB capital surcharge of 2.00%;

•a minimum total capital ratio of 12.50%, comprised of a 8.00% minimum requirement plus the capital conservation buffer of 2.50% and the G-SIB capital surcharge of 2.00%;

•a potential countercyclical buffer of up to 2.50% to be added to the minimum risk-based capital ratios, which 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; and

•a minimum tier 1 leverage ratio of 4.00%.

The Basel III capital requirements for calculating CET1 and tier 1 capital, along with risk-weighted assets (RWAs), are fully phased-in. However, the requirements for determining tier 2 and total capital are still in accordance with Transition Requirements and 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 and an Advanced Approach applicable to certain institutions, including Wells Fargo. ~~Accordingly, in the assessment of our~~Our capital adequacy ~~we must report~~is assessed based on the lower of our ~~CET1, tier 1 and total~~risk-based capital ratios calculated under the Standardized Approach and under the Advanced Approach. The difference between RWAs under the Standardized and Advanced Approach has narrowed in recent quarters due to economic conditions from the COVID-19 pandemic impacting our calculation of Advanced Approach RWAs. In particular, changes in internal credit ratings in our loan portfolio contributed to an increase in our Advanced Approach RWAs at September 30, 2020. We expect this trend to continue if the economic impact of the COVID-19 pandemic continues to affect our customer base.

Effective October 1, 2020, a stress capital buffer ~~will be added to~~replaced the ~~minimum~~2.50% capital ~~ratio requirements.~~conservation buffer under the Standardized Approach. The stress capital buffer ~~will be~~is calculated based on the decrease in a ~~financial institution’s~~BHC’s risk-based capital ratios under the ~~supervisory~~ severely adverse scenario in the FRB’s annual supervisory stress test and related Comprehensive Capital Analysis and Review (CCAR), plus four quarters of planned common stock dividends. ~~The~~On August 10, 2020, the FRB announced that the Company's stress capital buffer ~~will replace~~for the ~~current~~period October 1, 2020, through September 30, 2021, is 2.50% ~~capital conservation buffer under the Standardized Approach.~~. Because the stress capital buffer ~~will be~~is calculated annually as part of the FRB’s supervisory stress test and related CCAR and will be based on data that can differ over time, our stress capital buffer, and thus the ~~amount of the buffer is~~regulatory minimums for our risk-based capital ratios, are subject to change in future years.

As a G-SIB, we are also subject to the FRB’s rule implementing the additional capital surcharge of between 1.00-4.50% 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) considers our size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity, consistent with the methodology developed by the BCBS and the Financial Stability Board (FSB). The second method (method two) uses similar inputs, but replaces substitutability with use of short-term wholesale funding and will generally result in higher surcharges than the BCBS methodology. Because the G-SIB capital surcharge is calculated annually based on data that can differ over time, the amount of the surcharge is subject to change in future years.

The tables that follow provide information about our risk-based capital and related ratios as calculated under Basel III capital guidelines. Although we ~~continue to~~ report certain capital amounts and ratios in accordance with Transition Requirements for banking industry regulatory reporting purposes, we ~~are managing~~manage our capital based on a fully phased-in basis. For information about

our capital requirements calculated in accordance with Transition Requirements, see Note 23 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report.

Table 34 summarizes our CET1, tier 1 capital, total capital, RWAs and capital ratios on a fully phased-in basis at ~~March 31,~~September 30, 2020, and December 31, 2019.

Table 34: Capital Components and Ratios (Fully Phased-In) (1)


				March 31, 2020					December 31, 2019							September 30, 2020						December 31, 2019
(in millions, except ratios)		Required Minimum Capital Ratios		Advanced Approach			Standardized Approach		Advanced Approach	Standardized Approach		(in millions, except ratios)		Required Minimum Capital Ratios		Advanced Approach				Standardized Approach		Advanced Approach	Standardized Approach
Common Equity Tier 1	(A)			$	134,751		134,751		138,760	138,760		Common Equity Tier 1	(A)			$	134,901			134,901		138,760	138,760
Tier 1 Capital	(B)			154,277			154,277		158,949	158,949		Tier 1 Capital	(B)			154,743				154,743		158,949	158,949
Total Capital (2)	(C)			183,932			191,985		187,813	195,703		Total Capital (2)	(C)			184,040				193,667		187,813	195,703
Risk-Weighted Assets (3)	(D)			1,181,271			1,262,808		1,165,079	1,245,853		Risk-Weighted Assets (3)	(D)			1,171,956				1,185,610		1,165,079	1,245,853
Common Equity Tier 1 Capital Ratio (3)	(A)/(D)	9.00	%	11.41		%	10.67	*	11.91	11.14	*	Common Equity Tier 1 Capital Ratio (3)	(A)/(D)	9.00	%	11.51		%		11.38	*	11.91	11.14	*
Tier 1 Capital Ratio (3)	(B)/(D)	10.50		13.06			12.22	*	13.64	12.76	*	Tier 1 Capital Ratio (3)	(B)/(D)	10.50		13.20				13.05	*	13.64	12.76	*
Total Capital Ratio (2)(3)	(C)/(D)	12.50		15.57			15.20	*	16.12	15.71	*	Total Capital Ratio (2)(3)	(C)/(D)	12.50		15.70			*	16.33		16.12	15.71	*

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

~~(1)~~

(1)See Table 35 for information regarding the calculation and components of CET1, tier 1 capital, total capital and RWAs.

(2)Fully phased-in total capital amounts and 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 35 for information regarding the calculation and components of our fully phased-in total capital amounts, including a corresponding reconciliation to GAAP financial measures.

(3)RWAs and capital ratios for December 31, 2019, have been revised as a result of a decrease in RWAs under the Advanced Approach due to the correction of duplicated operational loss amounts.

Capital Management (continued)

~~(2)~~

Fully phased-in total capital amounts and 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 35~~ ~~for information regarding the calculation and components of our fully phased-in total capital amounts, including a corresponding reconciliation to GAAP financial measures.~~


~~(3)~~	~~RWAs and capital ratios for December 31, 2019, have been revised as a result of a decrease in RWAs under the Advanced Approach due to the correction of duplicated operational loss amounts.~~

Table 35 provides information regarding the calculation and composition of our risk-based capital under the Advanced and

Standardized Approaches at ~~March 31,~~September 30, 2020, and

December 31, 2019.

Table 35: Risk-Based Capital Calculation and Components



		September 30, 2020			December 31, 2019
(in millions)		Advanced Approach		Standardized Approach	Advanced Approach	Standardized Approach
Total equity		$	182,032	182,032	187,984	187,984
Adjustments:
Preferred stock		(21,098)		(21,098)	(21,549)	(21,549)
Additional paid-in capital on preferred stock		159		159	(71)	(71)
Unearned ESOP shares		875		875	1,143	1,143
Noncontrolling interests		(859)		(859)	(838)	(838)
Total common stockholders’ equity		161,109		161,109	166,669	166,669
Adjustments:
Goodwill		(26,387)		(26,387)	(26,390)	(26,390)
Certain identifiable intangible assets (other than MSRs)		(366)		(366)	(437)	(437)
Goodwill and other intangibles on nonmarketable equity securities (included in other assets)		(2,019)		(2,019)	(2,146)	(2,146)
Applicable deferred taxes related to goodwill and other intangible assets (1)		842		842	810	810
CECL transition provision (2)		1,877		1,877	—	—
Other		(155)		(155)	254	254
Common Equity Tier 1		134,901		134,901	138,760	138,760



Common Equity Tier 1		$	134,901	134,901	138,760	138,760
Preferred stock		21,098		21,098	21,549	21,549
Additional paid-in capital on preferred stock		(159)		(159)	71	71
Unearned ESOP shares		(875)		(875)	(1,143)	(1,143)
Other		(222)		(222)	(288)	(288)
Total Tier 1 capital	(A)	154,743		154,743	158,949	158,949




Long-term debt and other instruments qualifying as Tier 2		24,953		24,953	26,515	26,515
Qualifying allowance for credit losses (3)		4,504		14,131	2,566	10,456
Other		(160)		(160)	(217)	(217)
Total Tier 2 capital (Fully Phased-In)	(B)	29,297		38,924	28,864	36,754
Effect of Basel III Transition Requirements		132		132	520	520
Total Tier 2 capital (Basel III Transition Requirements)		$	29,429	39,056	29,384	37,274

Total qualifying capital (Fully Phased-In)	(A)+(B)	$	184,040	193,667	187,813	195,703
Total Effect of Basel IIII Transition Requirements		132		132	520	520
Total qualifying capital (Basel III Transition Requirements)		$	184,172	193,799	188,333	196,223

Risk-Weighted Assets (RWAs) (4)(5):
Credit risk (6)		$	772,206	1,125,098	790,784	1,210,209
Market risk		60,512		60,512	35,644	35,644
Operational risk (7)		339,238		—	338,651	—
Total RWAs (7)		$	1,171,956	1,185,610	1,165,079	1,245,853

(1)Determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.

(2)In second quarter 2020, the Company elected to apply a modified transition provision issued by federal banking regulators related to the impact of CECL on regulatory capital. The rule permits certain banking organizations to exclude from regulatory capital the initial adoption impact of CECL, plus 25% of the cumulative changes in the ACL under CECL for each period until December 31, 2021, followed by a three-year phase-out of the benefits. The impact of the CECL transition provision on our regulatory capital at September 30, 2020, was an increase in capital of $1.9 billion, reflecting a $991 million (post-tax) increase in capital recognized upon our initial adoption of CECL, offset by 25% of the $11.5 billion increase in our ACL under CECL from January 1, 2020, through September 30, 2020.

(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 0.60% 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, in each case with any excess allowance for credit losses being deducted from the respective 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 loss resulting from inadequate or failed internal processes, people and systems, or from external events.

(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.

(6)Includes an increase of $1.5 billion under the Standardized Approach and a decrease of $1.3 billion under the Advanced Approach related to the impact of the CECL transition provision on our excess allowance for credit losses as of September 30, 2020. See footnote (3) to this table.

(7)Amounts for December 31, 2019, have been revised as a result of a decrease in RWAs under the Advanced Approach due to the correction of duplicated operational loss amounts.

March 31, 2020 December 31, 2019
(in millions) Advanced Approach
Standardized Approach
Advanced Approach
Standardized Approach
Total equity $ 183,330
183,330
187,984
187,984
Adjustments:

Preferred stock (21,347 ) (21,347 ) (21,549 ) (21,549 )
Additional paid-in capital on preferred stock 140
140
(71 ) (71 )
Unearned ESOP shares 1,143
1,143
1,143
1,143
Noncontrolling interests (612 ) (612 ) (838 ) (838 )
Total common stockholders’ equity
162,654
162,654
166,669
166,669
Adjustments:
Goodwill (26,381 ) (26,381 ) (26,390 ) (26,390 )
Certain identifiable intangible assets (other than MSRs) (413 ) (413 ) (437 ) (437 )
Goodwill and other intangibles on nonmarketable equity securities (included in other assets) (1,894 ) (1,894 ) (2,146 ) (2,146 )
Applicable deferred taxes related to goodwill and other intangible assets (1) 821
821
810
810
Other (37 ) (37 ) 254
254
Common Equity Tier 1
134,751
134,751
138,760
138,760

Common Equity Tier 1 $ 134,751
134,751
138,760
138,760
Preferred stock 21,347
21,347
21,549
21,549
Additional paid-in capital on preferred stock (140 ) (140 ) 71
71
Unearned ESOP shares (1,143 ) (1,143 ) (1,143 ) (1,143 )
Other (538 ) (538 ) (288 ) (288 )
Total Tier 1 capital (A) 154,277
154,277
158,949
158,949

Long-term debt and other instruments qualifying as Tier 2 25,836
25,836
26,515
26,515
Qualifying allowance for credit losses (2) 3,990
12,043
2,566
10,456
Other (171 ) (171 ) (217 ) (217 )
Total Tier 2 capital (Fully Phased-In) (B) 29,655
37,708
28,864
36,754
Effect of Transition Requirements 136
136
520
520
Total Tier 2 capital (Transition Requirements) $ 29,791
37,844
29,384
37,274

Total qualifying capital (Fully Phased-In) (A)+(B) $ 183,932
191,985
187,813
195,703
Total Effect of Transition Requirements 136
136
520
520
Total qualifying capital (Transition Requirements) $ 184,068
192,121
188,333
196,223

Risk-Weighted Assets (RWAs) (3)(4):
Credit risk $ 802,686
1,219,948
790,784
1,210,209
Market risk 42,860
42,860
35,644
35,644
Operational risk (5) 335,725
—
338,651
—
Total RWAs (5) $ 1,181,271
1,262,808
1,165,079
1,245,853


~~(1)~~	Determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.

~~(2)~~

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 0.60% 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.


~~(3)~~	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.

~~(4)~~

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.


~~(5)~~	~~Amounts for December 31, 2019, have been revised as a result of a decrease in RWAs under the Advanced Approach due to the correction of duplicated operational loss amounts.~~

~~Capital Management (continued~~)

Table 36 presents the changes in Common Equity Tier 1 under the Advanced Approach for the ~~three~~nine months ended ~~March 31,~~September 30, 2020.

Table 36: Analysis of Changes in Common Equity Tier 1 (Advanced Approach)

(in millions)
Common Equity Tier 1 at December 31, 2019 $ 138,760
Net income applicable to common stock 42
Common stock dividends (2,096 )
Common stock issued, repurchased, and stock compensation-related items (2,882 )
Changes in cumulative other comprehensive income (253 )
Cumulative effect from change in accounting policies (1) 991
Goodwill 9
Certain identifiable intangible assets (other than MSRs) 24
Goodwill and other intangibles on nonmarketable equity securities (included in other assets) 252
Applicable deferred taxes related to goodwill and other intangible assets (2) 11
Other (107 )
Change in Common Equity Tier 1 (4,009 )
Common Equity Tier 1 at March 31, 2020 $ 134,751


~~(1)~~			~~Effective January 1, 2020, we adopted CECL. For more information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements~~ (in ~~this Report.~~millions)


~~(2)~~Common Equity Tier 1 at December 31, 2019	~~Determined by applying the combined federal statutory rate~~	$	138,760
Net income applicable to common stock		(932)
Common stock dividends		(4,602)
Common stock issued, repurchased, and ~~composite state~~stock compensation-related items		(1,759)
Changes in cumulative other comprehensive income ~~tax rates~~		561
Cumulative effect from change in accounting policies (1)		991
Goodwill		3
Certain identifiable intangible assets (other than MSRs)		71
Goodwill and other intangibles on nonmarketable equity securities (included in other assets)		127
Applicable deferred taxes related to ~~the difference between book and tax basis of the respective~~ goodwill and other intangible assets (2)		32
CECL transition provision (3)		1,877
Other		(228)
Change in Common Equity Tier 1		(3,859)
Common Equity Tier 1 at ~~period end.~~September 30, 2020		$	134,901

(1)Effective January 1, 2020, we adopted CECL. For additional information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

(2)Determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.

(3)In second quarter 2020, the Company elected to apply a modified transition provision issued by federal banking regulators related to the impact of CECL on regulatory capital. The rule permits certain banking organizations to exclude from regulatory capital the initial adoption impact of CECL, plus 25% of the cumulative changes in the ACL under CECL for each period until December 31, 2021, followed by a three-year phase-out of the benefits. The impact of the CECL transition provision on our regulatory capital at September 30, 2020, was an increase in capital of $1.9 billion, reflecting a $991 million (post-tax) increase in capital recognized upon our initial adoption of CECL, offset by 25% of the $11.5 billion increase in our ACL under CECL from January 1, 2020, through September 30, 2020.

Table 37 presents net changes in the components of RWAs under the Advanced and Standardized Approaches for the ~~three~~nine months ended ~~March 31,~~September 30, 2020.

Table 37: Analysis of Changes in RWAs


(in millions)	Advanced Approach		Standardized Approach


RWAs at December 31, 2019 (1)	$	1,165,079	1,245,853
Net change in credit risk RWAs (2)	(18,578)		(85,111)
Net change in market risk RWAs	24,868		24,868
Net change in operational risk RWAs	587		—
Total change in RWAs	6,877		(60,243)
RWAs at September 30, 2020	$	1,171,956	1,185,610

(1)Amount for December 31, 2019, has been revised as a result of a decrease in RWAs under the Advanced Approach due to the correction of duplicated operational loss amounts.

(2)Includes an increase of $1.5 billion under the Standardized Approach and a decrease of $1.3 billion under the Advanced Approach related to the impact of the CECL transition provision on our excess allowance for credit losses. See Table 35 for additional information.

(in millions) Advanced Approach
Standardized Approach
RWAs at December 31, 2019 (1) $ 1,165,079
1,245,853
Net change in credit risk RWAs 11,902
9,739
Net change in market risk RWAs 7,216
7,216
Net change in operational risk RWAs (2,926 ) —
Total change in RWAs 16,192
16,955
RWAs at March 31, 2020 $ 1,181,271
1,262,808


~~(1)~~	~~Amount for December 31, 2019, has been revised as a result of a decease in RWAs under the Advanced Approach due to the correction of duplicated operational loss amounts.~~

Capital Management (continued)

TANGIBLE COMMON EQUITY We also evaluate our business based on certain ratios that utilize tangible common equity. Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, goodwill, certain identifiable intangible assets (other than MSRs) and goodwill and other intangibles on nonmarketable equity securities, net of applicable deferred taxes. These tangible common equity ratios are as follows:

•Tangible book value per common share, which represents tangible common equity divided by common shares outstanding; and

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

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

Table 38 provides a reconciliation of these non-GAAP financial measures to GAAP financial measures.

Table 38: Tangible Common Equity


		Balance at period end				Average balance
		Quarter ended				Quarter ended						Nine months ended
(in millions, except ratios)		Sep 30, 2020		June 30, 2020	Sep 30, 2019		Sep 30, 2020		June 30, 2020		Sep 30, 2019		Sep 30, 2020	Sep 30, 2019
Total equity		$	182,032	180,122	194,416		182,850		184,108		200,095		185,035	199,383
Adjustments:
Preferred stock		(21,098)		(21,098)	(21,549)		(21,098)		(21,344)		(22,325)		(21,411)	(22,851)
Additional paid-in capital on preferred stock		159		159	(71)		158		140		(78)		145	(84)

Unearned ESOP shares		875		875	1,143		875		1,140		1,290		1,052	1,361
Noncontrolling interests		(859)		(736)	(1,112)		(761)		(643)		(1,065)		(730)	(968)
Total common stockholders’ equity	(A)	161,109		159,322	172,827		162,024		163,401		177,917		164,091	176,841
Adjustments:
Goodwill		(26,387)		(26,385)	(26,388)		(26,388)		(26,384)		(26,413)		(26,386)	(26,416)
Certain identifiable intangible assets (other than MSRs)		(366)		(389)	(465)		(378)		(402)		(477)		(401)	(508)
Goodwill and other intangibles on nonmarketable equity securities (included in other assets)		(2,019)		(2,050)	(2,295)		(2,045)		(1,922)		(2,159)		(2,040)	(2,158)
Applicable deferred taxes related to goodwill and other intangible assets (1)		842		831	802		838		828		797		828	787
Tangible common equity	(B)	$	133,179	131,329	144,481		134,051		135,521		149,665		136,092	148,546
Common shares outstanding	(C)	4,132.5		4,119.6	4,269.1		N/A		N/A		N/A		N/A	N/A
Net income applicable to common stock	(D)	N/A		N/A	N/A		1,720		$	(2,694)	4,037		(932)	15,392
Book value per common share	(A)/(C)	$	38.99	38.67	40.48		N/A		N/A		N/A		N/A	N/A
Tangible book value per common share	(B)/(C)	32.23		31.88	33.84		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		4.22	%	(6.63)		9.00		(0.76)	11.64
Return on average tangible common equity (ROTCE) (annualized)	(D)/(B)	N/A		N/A	N/A		5.10		(8.00)		10.70		(0.91)	13.85

Balance at period end Average balance
Quarter ended Quarter ended
(in millions, except ratios) Mar 31,
2020
Dec 31,
2019
Mar 31,
2019
Mar 31,
2020
Dec 31,
2019
Mar 31,
2019
Total equity $ 183,330
187,984
198,733
188,170
192,393
198,349
Adjustments:
Preferred stock (21,347 ) (21,549 ) (23,214 ) (21,794 ) (21,549 ) (23,214 )
Additional paid-in capital on preferred stock 140
(71 ) (95 ) 135
(71 ) (95 )
Unearned ESOP shares 1,143
1,143
1,502
1,143
1,143
1,502
Noncontrolling interests (612 ) (838 ) (901 ) (785 ) (945 ) (899 )
Total common stockholders’ equity (A) 162,654
166,669
176,025
166,869
170,971
175,643
Adjustments:

Goodwill (26,381 ) (26,390 ) (26,420 ) (26,387 ) (26,389 ) (26,420 )
Certain identifiable intangible assets (other than MSRs) (413 ) (437 ) (522 ) (426 ) (449 ) (543 )
Goodwill and other intangibles on nonmarketable equity securities (included in other assets) (1,894 ) (2,146 ) (2,131 ) (2,152 ) (2,223 ) (2,159 )
Applicable deferred taxes related to goodwill and other intangible assets (1) 821
810
771
818
807
784
Tangible common equity (B) $ 134,787
138,506
147,723
138,722
142,717
147,305
Common shares outstanding (C) 4,096.4
4,134.4
4,511.9
N/A
N/A
N/A
Net income applicable to common stock (D) N/A
N/A
N/A
$ 42
2,546
5,507
Book value per common share (A)/(C) $ 39.71
40.31
39.01
N/A
N/A
N/A
Tangible book value per common share (B)/(C) 32.90
33.50
32.74
N/A
N/A
N/A
Return on average common stockholders’ equity (ROE) (annualized) (D)/(A) N/A
N/A
N/A
0.10 % 5.91
12.71
Return on average tangible common equity (ROTCE) (annualized) (D)/(B) N/A
N/A
N/A
0.12
7.08
15.16


~~(1)~~	Determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.

~~Capital Management (continued~~)

SUPPLEMENTARY LEVERAGE RATIO As a BHC, we are required to maintain a supplementary leverage ratio (SLR) of at least 5.00% (comprised of a 3.00% minimum requirement plus a supplementary leverage buffer of 2.00%) to avoid restrictions on capital distributions and discretionary bonus payments. Our IDIs are required to maintain a SLR of at least 6.00% to be considered well-capitalized under applicable regulatory capital adequacy guidelines. In April 2018, the FRB and OCC proposed rules ~~(the “Proposed~~(Proposed SLR ~~Rules”)~~rules) that would replace the 2.00% supplementary leverage buffer with a buffer equal to one-half of our G-SIB capital surcharge. The Proposed SLR ~~Rules~~rules would similarly tailor the current 6.00% SLR requirement for our IDIs. In April 2020, the FRB issued an interim final rule that temporarily allows a BHC to exclude on-balance sheet amounts of U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of its total leverage exposure in the denominator of the SLR. ~~The~~This interim final rule became effective on April 1, 2020, and expires on March 31, 2021. In May 2020, federal banking regulators issued an interim final rule that permits IDIs to choose to similarly exclude these items from the denominator of their SLRs; however, if an IDI chooses to exclude such amounts from the calculation of its SLR, it will be required to request approval from its primary federal banking regulator before making capital distributions, such as paying dividends, to its parent company. As of September 30, 2020, none of the Company’s IDIs elected to apply this exclusion.

At ~~March 31,~~September 30, 2020, our SLR for the Company was ~~6.84%~~7.75%, and we also exceeded the applicable SLR requirements for each of our IDIs. See Table 39 for information regarding the calculation and components of the SLR.

Table 39: Supplementary Leverage Ratio

(in millions, except ratio) Quarter ended March 31, 2020
Tier 1 capital (A) $ 154,277
Total average assets 1,950,659
Less: Goodwill and other permitted Tier 1 capital deductions (net of deferred tax liabilities) 28,530
Total adjusted average assets 1,922,129
Plus adjustments for off-balance sheet exposures:
Derivatives (1) 75,994
Repo-style transactions (2) 4,613
Other (3) 253,578
Total off-balance sheet exposures 334,185
Total leverage exposure (B) $ 2,256,314
Supplementary leverage ratio (A)/(B) 6.84 %


~~(1)~~(in millions, except ratio)	~~Adjustment represents derivatives~~	Quarter ended September 30, 2020
Tier 1 capital	(A)	$	154,743
Total average assets		1,949,549
Less: Goodwill and ~~collateral netting exposures as defined~~other permitted Tier 1 capital deductions (net of deferred tax liabilities)		28,246
Less: Other SLR exclusions		257,568
Total adjusted average assets		1,663,735
Plus adjustments for ~~supplementary leverage ratio determination purposes.~~off-balance sheet exposures:


~~(2)~~Derivatives (1)			~~Adjustment represents counterparty credit risk for repo-style transactions where Wells Fargo & Company is the principal (i.e., principal counterparty facing the client).~~

69,902
~~(3)~~Repo-style transactions (2)	~~Adjustment represents credit equivalent amounts of other~~	2,839
Other (3)		260,973
Total off-balance sheet exposures ~~not already included as derivatives and repo-style transactions exposures.~~		333,714
Total leverage exposure	(B)	$	1,997,449
Supplementary leverage ratio	(A)/(B)	7.75		%

(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.

TOTAL LOSS ABSORBING CAPACITY As a G-SIB, we are required to have a minimum amount of equity and unsecured long-term debt for purposes of resolvability and resiliency, often referred to as Total Loss Absorbing Capacity (TLAC). U.S. G-SIBs are required to have a minimum 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) 18.00% of RWAs and (ii) 7.50% of total leverage exposure (the denominator of the SLR calculation). Additionally, U.S. G-SIBs are required to maintain (i) a TLAC buffer equal to 2.50% of RWAs plus our applicable G-SIB capital surcharge calculated under

method one plus any applicable countercyclical buffer to be added to the 18.00% minimum and (ii) an external TLAC leverage buffer equal to 2.00% of total leverage exposure to be added to the 7.50% minimum, in order to avoid restrictions on capital distributions and discretionary bonus payments. U.S. G-SIBs are also required to have a minimum amount of eligible unsecured long-term debt equal to the greater of (i) 6.00% of RWAs plus our applicable G-SIB capital surcharge calculated under method two

and (ii) 4.50% of the total leverage exposure. Under the Proposed SLR ~~Rules,~~rules, the 2.00% external TLAC leverage buffer would be replaced with a buffer equal to one-half of our applicable G-SIB capital surcharge, and the leverage component for calculating the minimum amount of eligible unsecured long-term debt would be modified from 4.50% of total leverage exposure to 2.50% of total leverage exposure plus one-half of our applicable G-SIB capital surcharge. As of ~~March 31,~~September 30, 2020, our eligible external TLAC as a percentage of total risk-weighted assets was ~~23.27%~~25.76% compared with a required minimum of 22.00%. Similar to the risk-based capital requirements, ~~we determine~~our minimum ~~required~~ TLAC requirement is assessed based on the greater of RWAs determined under the Standardized and Advanced approaches.

OTHER REGULATORY CAPITAL AND LIQUIDITY MATTERS 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.

As a result of our adoption of CECL on January 1, 2020, our allowance for credit losses is now measured using an estimate of expected life-time credit losses methodology. Federal banking regulators issued rules permitting banking institutions whose capital levels decreased upon the adoption of CECL to phase in the adoption impact of CECL over a period of three years. Because we recognized a net reduction to our allowance for credit losses and a resulting increase to our capital levels upon the adoption of CECL, we were not eligible for this transition relief. In March 2020, federal banking regulators also issued rules that provide banking institutions an option to reduce any negative capital impact from the adoption of CECL and the difference between the allowance for credit losses under CECL and the previous incurred loss methodology. In first quarter 2020, we were not eligible for this transition relief.

Capital Planning and Stress Testing

Our planned long-term capital structure is designed to meet regulatory and market expectations. We believe that our long-term targeted capital structure enables us to invest in and grow our business, satisfy our customers’ financial needs in varying environments, access markets, and maintain flexibility to return capital to our shareholders. Our long-term targeted capital structure also considers capital levels sufficient to exceed capital requirements including the G-SIB capital surcharge. 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 10.00%, which includes a 2.00% G-SIB capital 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, changes to the regulatory minimums for our capital ratios (including changes to our stress capital buffer), 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 issued a final rule that will replace the current 2.50% capital conservation buffer under the Standardized Approach with a stress capital buffer. Implementation of the stress capital buffer may cause our current long-term CET1 capital ratio target of 10.00% 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 when evaluating capital plans. ~~The capital plan rule also limits 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.~~

Our 2020 capital plan, which was submitted on April 3, 2020, 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 2020 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 ~~is expected to review~~reviewed the supervisory stress test

Capital Management (continued)

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 ~~has indicated that it will publish~~published its supervisory stress test results as required under the Dodd-Frank Act on June 25, 2020.

On June 25, 2020, the FRB also announced that it was requiring large BHCs, including Wells Fargo, to update and resubmit their capital plans within 45 days after the FRB provides updated scenarios. The FRB released the updated scenarios on September 17, 2020, and has announced that it will release BHC-specific results under the updated scenarios by the end of 2020.

On September 30, 2020, the FRB announced that it was extending through fourth quarter 2020 measures it announced on June 25, 2020, prohibiting large BHCs subject to the FRB's capital plan rule, including Wells Fargo, from making any capital distribution (excluding any capital distribution arising from the issuance of a capital instrument eligible for inclusion in the numerator of a regulatory capital ratio), unless otherwise approved by the FRB. The FRB has generally authorized BHCs to (i) make share repurchases relating to issuances of common stock related ~~CCAR results taking into account~~to employee stock ownership plans; (ii) provided that the ~~Company’s proposed~~BHC does not increase the amount of its common stock dividends, pay common stock dividends that do not exceed an amount equal to the average of the BHC’s net income for the four preceding calendar quarters, unless otherwise specified by the FRB; and (iii) make scheduled payments on additional tier 1 and tier 2 capital ~~actions,~~instruments. These provisions may be extended by ~~June 30, 2020.~~the FRB quarter-by-quarter.

Concurrently with CCAR, federal banking regulators also require large BHCs and banks to conduct their own stress tests to evaluate whether the institution has sufficient capital to continue to operate during periods of adverse economic and financial conditions. 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. We submitted the results of our stress test to the FRB and disclosed a summary of the results in June 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 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. ~~On March 15, 2020, we, along with the other members of the Financial Services Forum, suspended our share repurchase activities for the remainder of the first quarter and for second quarter 2020.~~

On September 30, 2020, the FRB announced that it was extending through fourth quarter 2020 measures it announced on June 25, 2020, prohibiting large BHCs subject to the FRB’s capital plan rule, including Wells Fargo, from making capital distributions, subject to certain limited exceptions that are described in the “Capital Planning and Stress Testing” section above.

At ~~March 31,~~September 30, 2020, we had remaining Board authority to repurchase approximately ~~168~~167 million shares, subject to regulatory and legal conditions. For ~~more~~additional information about share repurchases during ~~first~~third quarter 2020, 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.

~~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 2019 Form ~~10-K.~~10-K and in our 2020 First and Second Quarter Reports on Form 10-Q.

REGULATORY DEVELOPMENTS RELATED TO COVID-19 In response to the COVID-19 pandemic and related events, federal banking regulators have undertaken a number of measures to help stabilize the banking sector, support the broader economy, and facilitate the ability of banking organizations like Wells Fargo to continue lending to consumers and businesses. For example, ~~following the passage of~~in order to facilitate the Coronavirus Aid, Relief and Economic Security Act (CARES Act) ~~in March 2020,~~, federal banking regulators issued ~~interim final~~ rules designed to encourage financial institutions to participate in stimulus measures, such as the Small Business Administration’s Paycheck Protection Program and the FRB’s Main Street Lending Program. Similarly, the FRB launched a number of lending facilities designed to enhance liquidity and the functioning of markets, including facilities covering money market mutual funds and term asset-backed securities loans. Federal banking regulators ~~have~~ also issued several ~~joint interim final~~ rules amending the regulatory capital and TLAC rules and other prudential regulations to ease certain restrictions on banking organizations and encourage the use of certain FRB-established facilities in order to further promote lending to consumers and businesses.

In addition, the OCC and the FRB ~~have~~ issued guidelines for banks and BHCs related to working with customers affected by the COVID-19 pandemic, including guidance with respect to waiving fees, offering repayment accommodations, and providing payment ~~deferrals, and increasing daily withdrawal limits at automated teller machines. In addition, the federal government has instituted a moratorium on certain mortgage foreclosure activities.~~deferrals. Any current or future rules, regulations, and guidance related to the COVID-19 pandemic and its impacts could require us to change certain of our business practices, reduce our revenue and earnings, impose additional costs on us, or otherwise adversely affect our business operations and/or competitive position.

~~COMMUNITY REINVESTMENT ACT (CRA) RATING~~ ~~On May 4, 2020, we announced that we received an “Outstanding” rating from the OCC on our most recent CRA performance evaluation, which covers the years 2012 to 2018.~~



Critical Accounting Policies

Our significant accounting policies (see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2019 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. 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;~~losses (ACL);

•the valuation of residential MSRs;

•the fair value of financial instruments;

•income taxes; and

•liability for contingent litigation losses.

Management and the Board’s Audit Committee have reviewed and approved these critical accounting policies. 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 2019 Form 10-K. In connection with our adoption of CECL on January 1, 2020, we have updated our critical accounting policy for the allowance for credit losses.

Allowance for Credit Losses

We maintain an ~~allowance for credit losses (ACL)~~ACL for loans, which is management’s estimate of the expected credit losses in the loan portfolio and unfunded credit commitments, at the balance sheet date, excluding loans and unfunded credit commitments carried at fair value or held for sale. Additionally, we maintain an allowance for credit losses for debt securities classified as either held-to-maturity (HTM) or available-for-sale (AFS), other financial assets measured at amortized cost, net investments in leases, and other off-balance sheet credit exposures. In connection with our adoption of CECL, we updated our approach for estimating expected credit losses, which includes new areas for management judgment, described more fully below, and updated our accounting policies. For ~~more~~additional information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

For loans and HTM debt securities, the ACL is measured based on the remaining contractual term of the financial asset (including off-balance sheet credit exposures) adjusted, as appropriate, for prepayments and permitted extension options using historical experience, current conditions, and forecasted information. For AFS debt securities, the ACL is measured using a discounted cash flow approach and is limited to the difference between the fair value of the security and its amortized cost.

Changes in the ACL and, therefore, in the related provision for credit losses can materially affect net income. In applying the judgment and review required to determine the ACL, management considerations include the evaluation of past events, historical experience, changes in economic forecasts and conditions, customer behavior, collateral values, and the length of the initial loss forecast period, and other influences. From time to time, changes in economic factors or assumptions, business strategy, products or product mix, or debt security investment strategy, may result in a corresponding increase or decrease in our ACL. While our methodology attributes portions of the ACL to specific financial asset classes (loan and debt

security portfolios) or loan portfolio segments (commercial and

consumer), the entire ACL is available to absorb credit losses of the ~~company.~~Company.

Judgment is specifically applied in:

•

•Economic assumptions and the length of the initial loss forecast period. Forecasted economic variables, such as gross domestic product (GDP), unemployment rate or collateral asset prices, are used to estimate expected credit losses. While many of these economic variables are evaluated at the macro-economy level, some economic variables may be forecasted at more granular levels, for example, using the metro statistical area (MSA) level for unemployment rates, home prices and commercial real estate prices. Quarterly, we assess the length of the initial loss forecast period and have currently set the period to one year.

•

~~Reversion of losses beyond the initial forecast period.~~ ~~We use a reversion approach to connect the losses estimated for our initial loss forecast period to the period of our historical loss expectations. We give consideration~~ to estimate expected credit losses. While many of these economic variables are evaluated at the macro-economy level, some economic variables may be forecasted at more granular levels, for example, using the metro statistical area (MSA) level for unemployment rates, home prices and commercial real estate prices. Quarterly, we assess the length of the initial loss forecast period and have currently set the period to one year. Management exercises judgment when assigning weight to the three economic scenarios that are used to estimate future credit losses. The three scenarios include a most likely expectation of economic variables referred to as the base case scenario, as well as an optimistic (upside) scenario and a pessimistic (downside) scenario.

•Reversion of losses beyond the initial forecast period. We use a reversion approach to connect the losses estimated for our initial loss forecast period to the period of our historical loss forecast based on economic conditions at the measurement date. Our reversion methodology considers the type of portfolio, point in the credit cycle, expected length of recessions and recoveries, as well as other relevant factors. The length of reversion period varies by asset type – one year for shorter contractual term loans such as commercial loans and two years for longer contractual term loans such as real estate 1-4 family mortgage loans. We assess the reversion approach on a quarterly basis and the length of the reversion period by asset type annually.

•Historical loss expectations. At the end of the reversion period, we incorporate the changes in economic variables observed during representative historical time periods that include both recessions and expansions. This analysis is used to compute average losses for any given portfolio and its associated credit characteristics. Annually, we assess the historical time periods and ensure the average loss estimates are representative of our historical loss experience.

•Credit risk ratings applied to individual commercial loans, unfunded credit commitments, and debt securities. Individually assessed credit risk ratings are considered key credit variables in our modeled approaches to help assess probability of default and loss given default. Borrower quality ratings are aligned to the borrower’s financial strength and contribute to forecasted probability of default curves. Collateral quality ratings combined with forecasted collateral prices (as applicable) contribute to the forecasted severity of loss in the event of default. These credit risk ratings are reviewed by experienced senior credit officers and subjected to reviews by an internal team of credit risk specialists.

•Usage of credit loss estimation models. We use internally developed models that incorporate credit attributes and economic variables to generate estimates of credit losses. Management uses a combination of judgement and quantitative analytics in the determination of segmentation, modeling approach, and variables that are leveraged in the models. These models are validated in the credit cycle, expected length of recessions and recoveries, as well as other relevant factors. During forecasted periods of expansionary economic conditions, we revert immediately to our historical loss expectations. However, when recessionary conditions are forecasted over the initial loss forecast period, we will utilize a linear reversion to the long-term average losses. The length of reversion period varies by asset type – one year for shorter contractual term loans such as commercial loans and two years for longer contractual term loans such as 1-4 family mortgage loans. We assess the reversion approach on a quarterly basis and the length of the reversion period by asset type annually.

•

~~Historical loss expectations~~. At the end of the reversion period, we incorporate the changes in economic variables observed during representative historical time periods that include both recessions and expansions. This analysis is used to compute average losses for any given portfolio and its associated credit characteristics. Annually, we assess the historical time periods and ensure the average loss estimates are representative of our historical loss experience.

•

~~Credit risk ratings applied to individual commercial loans, unfunded credit commitments, and debt securities.~~ Individually assessed credit risk ratings are considered key credit variables in our modeled approaches to help assess probability of default and loss given default. Borrower quality ratings are aligned to the borrower’s financial strength and contribute to forecasted probability of default curves. Collateral quality ratings combined with forecasted collateral prices (as applicable) contribute to the forecasted severity of loss in the event of default. These credit risk ratings are reviewed by experienced senior credit officers and subjected to reviews by an internal team of credit risk specialists.


•	~~Usage of credit loss estimation models.~~ We use internally developed models that incorporate credit attributes and economic variables to generate estimates of credit losses. Management uses a combination of judgement and quantitative analytics in the determination of segmentation, modeling approach, and variables that are leveraged in the models. These models are validated in

accordance with the Company’s policies by an internal model validation group. We routinely assess our model performance and apply

adjustments when necessary to improve the accuracy of loss estimation. We also assess our models for limitations against the company-wide risk inventory to help ensure that we appropriately capture known and emerging risks in our estimate of expected credit losses and apply overlays as needed.

•Valuation of collateral. The current fair value of collateral is utilized to assess the expected credit losses when a financial asset is considered to be collateral dependent. We apply judgment when valuing the collateral either through appraisals, evaluation of the cash flows of the property, or other quantitative techniques. Decreases in collateral valuations support incremental charge-downs and increases in collateral valuation are included in the allowance for credit losses as a negative allowance when the financial asset has been previously written-down below current recovery value.

•

~~Valuation of collateral~~

•Contractual term considerations. The remaining contractual term of a loan is adjusted for expected prepayments and certain expected extensions, renewals, or modifications. We extend the contractual term when we are not able to unconditionally cancel contractual renewals or extension options. We also incorporate into our allowance for credit losses any scenarios where we reasonably expect to provide an extension through a TDR.

•Qualitative factors which may not be adequately captured in the loss models. These amounts represent management’s judgment of risks inherent in the processes and assumptions used in establishing the ACL. We also consider economic environmental factors, modeling assumptions and performance, process risk, and other subjective factors, including industry trends and emerging risk assessments.

. The current fair value of collateral is utilized to assess the expected credit losses when a financial asset is considered to be collateral dependent. We apply judgment when valuing the collateral either through appraisals, evaluation of the cash flows of the property, or other quantitative techniques. Decreases in collateral valuations support incremental charge-downs and increases in collateral valuation are included in the allowance for credit losses as a negative allowance when the financial asset has been previously written-down below current recovery value.

•

~~Contractual term considerations.~~ The remaining contractual term of a loan is adjusted for expected prepayments and certain expected extensions, renewals, or modifications. We extend the contractual term when we are not able to unconditionally cancel contractual renewals or extension options. We also incorporate into our allowance for credit losses any scenarios where we reasonably expect to provide an extension through a TDR.


•	~~Qualitative factors which may not be adequately captured in the loss models.~~ These amounts represent management’s judgment of risks inherent in the processes and assumptions used in establishing the ACL. We also consider economic environmental factors, modeling assumptions and performance, process risk, and other subjective factors, including industry trends and emerging risk assessments.

Sensitivity The ACL for loans is sensitive to changes in key assumptions which requires significant judgment to be used by management. Future amounts of the ACL for loans will be based on a variety of factors, including loan balance changes, portfolio credit quality, and general economic conditions. General economic conditions are forecasted using economic variables, which could have varying impacts on different financial assets or portfolios. Additionally, throughout numerous credit cycles, there are observed changes in economic variables such as the unemployment rate, GDP and real estate prices which may not move in a correlated manner as variables may move in opposite directions or differ across portfolios or geography.

~~In order to provide a~~

Our sensitivity analysis ~~we developed two hypothetical scenarios by applying changes~~does not represent management’s view of expected credit losses at the balance sheet date. We applied 50% weight to both the base case scenario and the downside scenario in our sensitivity analysis to reflect the potential for further economic ~~variables to our loan portfolio, which affect the expected balances, credit quality, and mix.~~deterioration from a COVID-19 resurgence. The outcomes of both scenarios were influenced by the ~~length of the scenario periods, as well as the~~ duration, severity, and timing of changes in economic variables within those scenarios. The scenarios reflect the impact of economic stress and corresponding adverse changes in economic variables for a longer period than the initial loss forecast period used to develop our current ACL for loans. Neither of the scenarios consider any benefit related to economic stimulus programs or other legislative or regulatory relief.

One hypothetical scenario represents an adverse scenario based on changes in economic variables experienced during the last credit crisis. Compared with the economic forecast used to develop our current ACL for loans, this adverse scenario reflects a more substantial and sustained increase in unemployment, a deeper and more sustained decline in GDP along with significant declines in consumer and commercial real estate prices. This adverse scenariosensitivity analysis resulted in ana hypothetical increase in the ACL for loans of ~~$6.8 billion.~~

~~A second more severe scenario is similar to our annual Company-run stress test. Compared with the adverse scenario, the more severe scenario reflects a sustained but sharper~~approximately $2.3 billion at September 30, 2020. The hypothetical increase in unemployment and a more significant and sustained decline in GDP. Declines in real estate prices are consistent with the adverse scenario, with additional stress to consumer and commercial real estate prices based on our regional and industry concentrations, as well as an idiosyncratic stress as a result of declines in oil and gas prices. The more severe scenario resulted in an increase in the ACL for loans of $11.3 billion.

~~The changes in economic variables in these scenarios were not contemplated in the economic forecast used to develop our current ACL for loans. In addition, these hypothetical increases~~ in our ACL for loans ~~represent changes to our quantitative estimate and do~~does not incorporate the impact of management judgment for qualitative factors applied in the current ACL for loans, which may have ~~an offsetting impact to~~a positive or negative effect on the ~~scenario~~ results. ~~Finally, if these hypothetical scenarios were to materialize, the increase in our ACL for loans may be recognized over time if actual loss expectations exceed our historical loss experience.~~

~~These~~It is possible that others performing similar sensitivity analyses ~~are hypothetical scenarios and the results do not represent management’s view of expected credit losses at the balance sheet date.~~ could reach different conclusions or results.

The sensitivity ~~analyses exclude~~analysis excludes the ACL for debt securities given its size relative to the overall ACL. Management believes that the ~~current~~ estimate for the ACL for loans was appropriate at the balance sheet date. ~~Because significant judgment is used, it is possible that others performing similar analyses could reach different conclusions.~~



Current Accounting Developments

Table 4140 provides the significant accounting updates applicable to us that have been issued by the Financial Accounting Standards Board (FASB) but are not yet effective.

Table ~~41:~~40: Current Accounting Developments – Issued Standards

Description

Effective date and financial statement impact

ASU 2018-12 – Financial Services – Insurance (Topic 944):

Targeted Improvements to the Accounting for Long-Duration Contracts and subsequent related updates

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 guidance becomes effective on January 1, 2022. 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 of our own credit, will be recognized in the opening balance of retained earnings. As of ~~March 31,~~September 30, 2020, we held ~~$1.1~~$1.2 billion in insurance-related reserves of which ~~$560~~$583 million was in scope of the Update. A total of ~~$553~~$531 million was associated with products that meet the definition of market risk benefits, and of this amount, ~~$65~~$47 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 generally due to the long duration of these contracts. We plan to economically hedge this volatility, where feasible. The ultimate impact of these changes will depend on the composition of our market risk benefits portfolio at the date of adoption. Changes in the accounting for the liability of future policy benefits for traditional long-duration contracts and deferred acquisition costs will be applied to all outstanding long-duration contracts on the basis of their existing carrying amounts at the beginning of the earliest period presented, and are not expected to be material.

~~ASU 2020-04 – Reference Rate Reform (Topic 848) –~~ ~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~

The Update provides temporary, optional relief to ease the potential burden of accounting for reference rate reform activities that affect contractual modifications of floating-rate financial instruments indexed to IBORs and hedge accounting relationships. Contractual modifications and changes to existing hedge accounting relationships must meet specific requirements to qualify for the relief. Upon election the guidance is applied consistently to all applicable instruments, where a qualifying contractual modification is accounted for as the continuation of an existing contract rather than a new contract. The optional relief facilitates the preservation of existing fair value and cash flow hedge relationships while amending certain contractual terms of hedge accounting relationships, and changes the way the amounts excluded from the evaluation of hedge effectiveness are reported in earnings. Hedging relationships that qualify for the relief will not require discontinuation of the existing hedge accounting relationships. The election to apply the optional relief for existing fair value and cash flow hedge accounting relationships may be made on a hedge-by-hedge basis and across multiple reporting periods.

We adopted the guidance on April 1, 2020. We applied the guidance consistently to contractual amendments made to all applicable floating rate instruments indexed to IBORs. We elected to apply the guidance on an individual hedge-by-hedge basis for changes to hedge accounting relationships. The financial statement impact of the Update will change each period as contracts, existing and new, are impacted by reference rate reform activities and as our exposure changes to LIBOR and other IBORs.

The following Updates are applicable to us but are not expected to have a material impact on our consolidated financial statements:

•ASU 2020-10 - Codification Improvements

•ASU 2020-09 – Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762

•ASU 2020-08 – Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs

•ASU 2020-06 – Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

•ASU 2020-01 – Investments – Equity Securities (Topic 321),

Investments – Equity Method and Joint Ventures (Topic

323), and Derivatives and Hedging (Topic 815): Clarifying the

Interactions between Topic 321, Topic 323, and Topic 815 (a

consensus of the FASB Emerging Issues Task Force)

•ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes


•			~~ASU 2019-12 – Income Taxes (Topic 740):~~ ~~Simplifying the Accounting for Income Taxes~~

~~Forward-Looking Statements (continued~~)

Forward-Looking Statements

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

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

•current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth;

•the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions;

•our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;

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

•developments in our mortgage banking business, including the extent of the success of our mortgage loan modification efforts, the amount of mortgage loan repurchase demands that we receive, any negative effects relating to our mortgage servicing, loan modification or foreclosure practices, and the effects of regulatory or judicial requirements or guidance impacting our mortgage banking business and any changes in industry standards;

•our ability to realize any efficiency ratio or expense target as part of our expense management initiatives, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters;

•the effect of the current interest rate environment or changes in interest rates or in the level or composition of our assets or liabilities on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgage loans held for sale;

•significant turbulence or a disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for mortgage loans, a reduction in the availability of funding or increased funding costs, and declines in asset values and/or recognition of impairments of securities held in our debt securities and equity securities portfolios;

•the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;

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

•resolution of regulatory matters, litigation, or other legal actions, which may result in, among other things, additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other adverse consequences;

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

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

•fiscal and monetary policies of the Federal Reserve Board;

•changes to U.S. tax guidance and regulations, as well as the effect of discrete items on our effective income tax rate;

•our ability to develop and execute effective business plans and strategies; and


•	•the other risk factors and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019,, as supplemented by the “Risk Factors” section in this Report.

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

Forward-Looking Statements (continued)

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~~additional information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, as supplemented by the “Risk Factors” section in this Report, as filed with the Securities and Exchange Commission and available on its website at ~~www.sec.gov.~~ www.sec.gov1.

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

1 We do not control this website. Wells Fargo has provided this link for your convenience, but does not endorse and is not responsible for the content, links, privacy policy, or security policy of this website.

Forward-looking Non-GAAP Financial Measures. From time to time management may discuss forward-looking non-GAAP financial measures, such as forward-looking estimates or targets for return on average tangible common equity. We are unable to provide a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because we are unable to provide, without unreasonable effort, a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur. Such unavailable information could be significant to future results.



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 2019 Form 10-K.

The following risk factor supplements the “Risk Factors” section in our 2019 Form 10-K.

The COVID-19 pandemic has adversely impacted our business and financial results, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, ~~lowered~~affected equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in ~~temporary~~restrictions and closures offor many businesses, ~~and~~as well as the institution of social distancing and sheltering in place requirements in many states and communities. As a result, the demand for our products and services may continue to be significantly impacted, which could adversely affect our revenue. Furthermore, the pandemic could continue to result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain closed, the impact on the global economy worsens, or more customers draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions affecting issuers, we may be required to recognize further impairments on the securities we hold, as well as reductions in other comprehensive income. Moreover, the persistence of adverse economic conditions and reduced revenue may adversely affect the fair value of our operating segments and underlying reporting units which may result in the impairment of goodwill or other long-lived assets. Our business operations may be further disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic, and we have already temporarily closed certain of our branches and offices.

Moreover, the pandemic has created additional operational and compliance risks, including the need to quickly implement and execute new programs and procedures for the products and services we offer our customers, provide enhanced safety measures for our employees and customers, comply with rapidly changing regulatory requirements, address any increased risk of fraudulent activity, and protect the integrity and functionality of our systems and networks as a larger number of our employees work remotely. The pandemic could also result in or contribute to additional downgrades to our credit ratings or credit outlook. In response to the pandemic, we have temporarily suspended ~~residential property~~certain mortgage foreclosure ~~sales, evictions,~~activities, and ~~involuntary automobile repossessions, and are offering~~have provided fee waivers, payment deferrals, and other expanded assistance for credit card, automobile, mortgage, small business, personal and ~~personal~~commercial lending customers, and future governmental actions may require these and other types of customer-related responses. In addition, we have reduced our common stock dividend and temporarily suspended share repurchases, and we could take, or be required to take, other capital actions in ~~response to~~ the ~~COVID-19 pandemic.~~future. The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

Controls and Procedures



Disclosure Controls and Procedures

The Company’s management evaluated the effectiveness, as of ~~March 31,~~September 30, 2020, 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 ~~March 31,~~September 30, 2020.



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 ~~first~~third quarter 2020 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 March 31,
(in millions, except per share amounts) 2020
2019
Interest income
Debt securities $ 3,472
3,941
Mortgage loans held for sale 197
152
Loans held for sale 12
24
Loans 10,065
11,354
Equity securities 206
210
Other interest income 775
1,322
Total interest income 14,727
17,003
Interest expense
Deposits 1,742
2,026
Short-term borrowings 291
596
Long-term debt 1,240
1,927
Other interest expense 142
143
Total interest expense 3,415
4,692
Net interest income 11,312

12,311
Provision for credit losses:
Debt securities (1) 172
—
Loans 3,833
845
Net interest income after provision for credit losses 7,307
11,466
Noninterest income
Service charges on deposit accounts 1,209
1,094
Trust and investment fees 3,574
3,373
Card fees 892
944
Other fees 632
770
Mortgage banking 379
708
Insurance 95
96
Net gains from trading activities 64
357
Net gains on debt securities 237
125
Net gains (losses) from equity securities (1,401 ) 814
Lease income 352
443
Other 372
574
Total noninterest income 6,405
9,298
Noninterest expense
Salaries 4,721
4,425
Commission and incentive compensation 2,463
2,845
Employee benefits 1,130
1,938
Technology and equipment 661
661
Net occupancy 715
717
Core deposit and other intangibles 23
28
FDIC and other deposit assessments 118
159
Other 3,217
3,143
Total noninterest expense 13,048
13,916
Income before income tax expense 664

6,848
Income tax expense 159
881
Net income before noncontrolling interests 505

5,967
Less: Net income (loss) from noncontrolling interests (148 ) 107
Wells Fargo net income $ 653

5,860
Less: Preferred stock dividends and other 611
353
Wells Fargo net income applicable to common stock $ 42
5,507
Per share information
Earnings per common share $ 0.01
1.21
Diluted earnings per common share 0.01
1.20
Average common shares outstanding 4,104.8
4,551.5
Diluted average common shares outstanding 4,135.3
4,584.0

~~(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)	2020		2019	2020		2019
Interest income
Debt securities	$	2,446	3,666	$	8,864	11,388
Mortgage loans held for sale	232		232	659		579
Loans held for sale	7		20	26		64
Loans	7,954		10,982	26,467		33,652
Equity securities	101		247	423		693
Other interest income	60		1,352	889		4,112
Total interest income	10,800		16,499	37,328		50,488
Interest expense
Deposits	314		2,324	2,641		6,563
Short-term borrowings	(12)		635	262		1,877
Long-term debt	1,038		1,780	3,515		5,607
Other interest expense	92		135	350		410
Total interest expense	1,432		4,874	6,768		14,457
Net interest income	9,368		11,625	30,560		36,031
Provision for credit losses:
Debt securities (1)	18		0	159		0
Loans	751		695	14,149		2,043
Net interest income after provision for credit losses	8,599		10,930	16,252		33,988
Noninterest income (2)
Deposit-related fees	1,299		1,480	3,888		4,289
Trust and investment fees	3,514		3,559	10,439		10,500
Card fees	912		1,027	2,601		2,996
Lending-related fees	352		374	1,025		1,116
Mortgage banking	1,590		466	2,286		1,932
Net gains from trading activities	361		276	1,232		862
Net gains on debt securities	264		3	713		148
Net gains (losses) from equity securities	649		956	(219)		2,392
Lease income	333		402	1,021		1,270
Other	220		1,842	869		3,667
Total noninterest income	9,494		10,385	23,855		29,172
Noninterest expense (3)



Personnel	8,624		8,604	25,863		26,309
Technology, telecommunications and equipment	791		821	2,261		2,340
Occupancy	851		760	2,437		2,196
Operating losses	1,219		1,920	2,902		2,405
Professional and outside services	1,760		1,737	5,042		4,956
Leases	291		272	795		869
Advertising and promotion	144		266	462		832
Restructuring charges	718		0	718		0
Other	831		819	2,348		2,657
Total noninterest expense	15,229		15,199	42,828		42,564
Income (loss) before income tax expense (benefit)	2,864		6,116	(2,721)		20,596
Income tax expense (benefit)	645		1,304	(3,113)		3,479
Net income before noncontrolling interests	2,219		4,812	392		17,117
Less: Net income from noncontrolling interests	184		202	83		441
Wells Fargo net income	$	2,035	4,610	$	309	16,676
Less: Preferred stock dividends and other	315		573	1,241		1,284
Wells Fargo net income (loss) applicable to common stock	$	1,720	4,037	$	(932)	15,392
Per share information
Earnings (loss) per common share	$	0.42	0.93	$	(0.23)	3.45
Diluted earnings (loss) per common share	0.42		0.92	(0.23)		3.43
Average common shares outstanding	4,123.8		4,358.5	4,111.4		4,459.1
Diluted average common shares outstanding (4)	4,132.2		4,389.6	4,111.4		4,489.5

(1)Prior to our adoption of Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL), on January 1, 2020, provision for credit losses from debt securities was not applicable and is therefore presented as $0 for both the third quarter and first nine months of 2019. For additional information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

(2)In third quarter 2020, service charges on deposit accounts, cash network fees, wire transfer and other remittance fees, and certain other fees were combined into a single line item for deposit-related fees; certain fees associated with lending activities were combined into a single line item for lending-related fees; and certain other fees were reclassified to other noninterest income. Prior period balances have been revised to conform with the current period presentation.

(3)In third quarter 2020, expenses for outside professional services, contract services, and outside data processing were combined into a single line item for professional and outside services expense; expenses for technology and equipment and telecommunications were combined into a single line item for technology, telecommunications and equipment expense; and certain other expenses were reclassified to other noninterest expense. Prior period balances have been revised to conform with the current period presentation.

(4)For the nine months ended September 30, 2020, diluted average common shares outstanding equaled average common shares outstanding because our securities convertible into common shares had an anti-dilutive effect.

~~Measurement of Credit Losses on Financial Instruments~~ ~~(CECL)~~, ~~on January 1, 2020, provision for credit losses from debt securities was not applicable and is therefore presented as~~ $0 ~~for the prior period. For more information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.~~

The accompanying notes are an integral part of these statements.

Wells Fargo & Company and Subsidiaries
Consolidated Statement of Comprehensive Income (Unaudited)
Quarter ended March 31,
(in millions) 2020
2019
Wells Fargo net income $ 653
5,860
Other comprehensive income (loss), before tax:
Debt securities:
Net unrealized gains (losses) arising during the period (110 ) 2,831
Reclassification of net gains to net income (172 ) (81 )
Derivative and hedging activities:
Net unrealized gains (losses) arising during the period 124
(35 )
Reclassification of net losses to net income 58
79
Defined benefit plans adjustments:
Net actuarial and prior service gains (losses) arising during the period 3
(4 )
Amortization of net actuarial loss, settlements and other to net income 36
35
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period (194 ) 42
Other comprehensive income (loss), before tax (255 ) 2,867
Income tax benefit (expense) related to other comprehensive income 1
(694 )
Other comprehensive income (loss), net of tax (254 ) 2,173
Less: Other comprehensive loss from noncontrolling interests (1 ) —
Wells Fargo other comprehensive income (loss), net of tax (253 ) 2,173
Wells Fargo comprehensive income 400
8,033
Comprehensive income (loss) from noncontrolling interests (149 ) 107
Total comprehensive income $ 251
8,140


Wells Fargo & Company and Subsidiaries
Consolidated Statement of Comprehensive Income (Unaudited)
	Quarter ended September 30,			Nine months ended September 30,
(in millions)	2020		2019	2020	2019
Wells Fargo net income	$	2,035	4,610	309	16,676
Other comprehensive income (loss), before tax:
Debt securities:
Net unrealized gains arising during the period	96		652	1,582	5,192
Reclassification of net (gains) losses to net income	(95)		76	(357)	34
Derivative and hedging activities:
Net unrealized gains (losses) arising during the period	(70)		10	2	32
Reclassification of net losses to net income	52		75	165	233
Defined benefit plans adjustments:
Net actuarial and prior service losses arising during the period	(89)		0	(760)	(4)
Amortization of net actuarial loss, settlements and other to net income	68		33	205	101
Foreign currency translation adjustments:
Net unrealized gains (losses) arising during the period	74		(53)	(70)	3

Other comprehensive income, before tax	36		793	767	5,591
Income tax benefit (expense) related to other comprehensive income	13		(208)	(206)	(1,375)
Other comprehensive income, net of tax	49		585	561	4,216
Less: Other comprehensive income from noncontrolling interests	1		0	0	0
Wells Fargo other comprehensive income, net of tax	48		585	561	4,216
Wells Fargo comprehensive income	2,083		5,195	870	20,892
Comprehensive income from noncontrolling interests	185		202	83	441
Total comprehensive income	$	2,268	5,397	953	21,333

The accompanying notes are an integral part of these statements.

Wells Fargo & Company and Subsidiaries
Consolidated Balance Sheet
(in millions, except shares) Mar 31,
2020
Dec 31,
2019
Assets (Unaudited)

Cash and due from banks $ 22,738
21,757
Interest-earning deposits with banks 128,071
119,493
Total cash, cash equivalents, and restricted cash 150,809
141,250
Federal funds sold and securities purchased under resale agreements 86,465
102,140
Debt securities:
Trading, at fair value 80,425
79,733
Available-for-sale, at fair value (includes amortized cost of $248,187 and $260,060,
net of allowance for credit losses of $161 and $0) (1)
251,229
263,459
Held-to-maturity, at amortized cost, net of allowance for credit losses of $11 and $0 (fair value $177,562 and $156,860) (1) 169,909
153,933
Mortgage loans held for sale (includes $16,665 and $16,606 carried at fair value) (2) 21,795
23,342
Loans held for sale (includes $1,673 and $972 carried at fair value) (2) 1,883
977
Loans (includes $160 and $171 carried at fair value) (2) 1,009,843
962,265
Allowance for loan losses (11,263 ) (9,551 )
Net loans 998,580
952,714
Mortgage servicing rights:
Measured at fair value 8,126
11,517
Amortized 1,406
1,430
Premises and equipment, net 9,108
9,309
Goodwill 26,381
26,390
Derivative assets 25,023
14,203
Equity securities (includes $28,176 and $41,936 carried at fair value) (2) 54,047
68,241
Other assets 96,163
78,917
Total assets (3) $ 1,981,349
1,927,555
Liabilities
Noninterest-bearing deposits $ 379,678
344,496
Interest-bearing deposits 996,854
978,130
Total deposits 1,376,532
1,322,626
Short-term borrowings 92,289
104,512
Derivative liabilities 15,618
9,079
Accrued expenses and other liabilities 76,238
75,163
Long-term debt 237,342
228,191
Total liabilities (4) 1,798,019
1,739,571
Equity
Wells Fargo stockholders’ equity:
Preferred stock 21,347
21,549
Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares 9,136
9,136
Additional paid-in capital 59,849
61,049
Retained earnings 165,308
166,697
Cumulative other comprehensive income (loss) (1,564 ) (1,311 )
Treasury stock – 1,385,401,170 shares and 1,347,385,537 shares (70,215 ) (68,831 )
Unearned ESOP shares (1,143 ) (1,143 )
Total Wells Fargo stockholders’ equity 182,718
187,146
Noncontrolling interests 612
838
Total equity 183,330
187,984
Total liabilities and equity $ 1,981,349
1,927,555

~~(1)~~


Wells Fargo & Company and Subsidiaries
Consolidated Balance Sheet
(in millions, except shares)	Sep 30, 2020		Dec 31, 2019
Assets	(Unaudited)
Cash and due from banks	$	25,535	21,757
Interest-earning deposits with banks	221,235		119,493
Total cash, cash equivalents, and restricted cash	246,770		141,250
Federal funds sold and securities purchased under resale agreements	69,304		102,140
Debt securities:
Trading, at fair value	73,253		79,733
Available-for-sale, at fair value (includes amortized cost of $216,311 and $260,060, net of allowance for credit losses of $79 and $0) (1)	220,573		263,459
Held-to-maturity, at amortized cost, net of allowance for credit losses of $26 and $0 (fair value $189,434 and $156,860) (1)	182,595		153,933
Mortgage loans held for sale (includes $19,884 and $16,606 carried at fair value) (2)	23,307		23,342
Loans held for sale (includes $1,688 and $972 carried at fair value) (2)	1,697		977
Loans (includes $148 and $171 carried at fair value) (2)	920,082		962,265
Allowance for loan losses	(19,463)		(9,551)
Net loans	900,619		952,714
Mortgage servicing rights:
Measured at fair value	6,355		11,517
Amortized	1,325		1,430
Premises and equipment, net	8,977		9,309
Goodwill	26,387		26,390
Derivative assets	23,715		14,203
Equity securities (includes $25,053 and $41,936 carried at fair value) (2)	51,169		68,241
Other assets	86,174		78,917
Total assets (3)	$	1,922,220	1,927,555
Liabilities
Noninterest-bearing deposits	$	447,011	344,496
Interest-bearing deposits	936,204		978,130
Total deposits	1,383,215		1,322,626
Short-term borrowings	55,224		104,512
Derivative liabilities	13,767		9,079
Accrued expenses and other liabilities	72,271		75,163
Long-term debt	215,711		228,191
Total liabilities (4)	1,740,188		1,739,571
Equity
Wells Fargo stockholders’ equity:
Preferred stock	21,098		21,549
Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares	9,136		9,136
Additional paid-in capital	60,035		61,049
Retained earnings	160,913		166,697
Cumulative other comprehensive income (loss)	(750)		(1,311)
Treasury stock – 1,349,294,592 shares and 1,347,385,537 shares	(68,384)		(68,831)
Unearned ESOP shares	(875)		(1,143)
Total Wells Fargo stockholders’ equity	181,173		187,146
Noncontrolling interests	859		838
Total equity	182,032		187,984
Total liabilities and equity	$	1,922,220	1,927,555

(1)Prior to our adoption of CECL on January 1, 2020, the allowance for credit losses (ACL) related to available-for-sale (AFS) and held-to-maturity (HTM) debt securities was not applicable and is therefore presented as $0 at December 31, 2019. For additional information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

(2)Parenthetical amounts represent assets and liabilities that we are required to carry at fair value or for which we have elected the fair value option.

(3)Our consolidated assets at September 30, 2020, and December 31, 2019, included 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, $16 million and $16 million; Interest-earning deposits with banks, $0 million and $284 million; Debt securities, $662 million and $540 million; Net loans, $10.6 billion and $13.2 billion; Derivative assets, $1 million and $1 million; Equity securities, $72 million and $118 million; Other assets, $214 million and $239 million; and Total assets, $11.6 billion and $14.4 billion, respectively.

(4)Our consolidated liabilities at September 30, 2020, and December 31, 2019, included the following VIE liabilities for which the VIE creditors do not have recourse to Wells Fargo: Short-term borrowings, $395 million and $401 million; Derivative liabilities, $1 million and $3 million; Accrued expenses and other liabilities, $229 million and $235 million; Long-term debt, $215 million and $587 million; and Total liabilities, $840 million and $1.2 billion, respectively.

$0 ~~at December 31, 2019. For more information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.~~


~~(2)~~	~~Parenthetical amounts represent assets and liabilities that we are required to carry at fair value or have elected the fair value option.~~

~~(3)~~

~~Our consolidated assets at~~ ~~March 31, 2020, and~~ ~~December 31, 2019, 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,~~ ~~$19 million~~ ~~and~~ ~~$16 million; Interest-earning deposits with banks,~~ ~~$0 million~~ ~~and~~ ~~$284 million; Debt securities,~~ ~~$616 million~~ ~~and~~ ~~$540 million; Net loans,~~ ~~$13.1 billion~~ ~~and~~ ~~$13.2 billion; Derivative assets,~~ ~~$6 million~~ ~~and~~ ~~$1 million; Equity securities,~~ ~~$95 million~~ ~~and~~ ~~$118 million; Other assets,~~ ~~$258 million~~ ~~and~~ ~~$239 million; and Total assets,~~ ~~$14.1 billion~~ ~~and~~ ~~$14.4 billion, respectively.~~

~~(4)~~

~~Our consolidated liabilities at~~ ~~March 31, 2020, and~~ ~~December 31, 2019, include the following VIE liabilities for which the VIE creditors do not have recourse to Wells Fargo: Short-term borrowings,~~ ~~$300 million~~ ~~and~~ ~~$401 million; Derivative liabilities,~~ ~~$8 million~~ ~~and~~ ~~$3 million; Accrued expenses and other liabilities,~~ ~~$230 million~~ ~~and~~ ~~$235 million; Long-term debt,~~ ~~$235 million~~ ~~and~~ ~~$587 million; and Total liabilities,~~ ~~$773 million~~ ~~and~~ ~~$1.2 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, 2019 7,492,169
$ 21,549
4,134,425,937
$ 9,136
Cumulative effect from change in accounting policies (1)
Balance January 1, 2020 7,492,169
$ 21,549
4,134,425,937
$ 9,136
Net income
Other comprehensive income (loss), net of tax
Noncontrolling interests
Common stock issued 37,351,887

Common stock repurchased (75,367,520 )
Preferred stock redeemed (1,828,720 ) (2,215 )
Preferred stock issued to ESOP

Preferred stock released by ESOP
Preferred stock converted to common shares —
—
—

Preferred stock issued 80,500
2,013

Common stock dividends
Preferred stock dividends
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change (1,748,220 ) (202 ) (38,015,633 ) —
Balance March 31, 2020 5,743,949
$ 21,347
4,096,410,304
$ 9,136
Balance December 31, 2018 9,377,216
$ 23,214
4,581,253,608
$ 9,136
Cumulative effect from change in accounting policies (2)
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 28,057,901

Common stock repurchased (97,363,710 )
Preferred stock redeemed —
—

Preferred stock issued to ESOP

Preferred stock released by ESOP

Preferred stock converted to common shares (5 ) —
31

Preferred stock issued

Common stock dividends
Preferred stock dividends
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change (5 ) —
(69,305,778 ) —
Balance March 31, 2019 9,377,211
$ 23,214
4,511,947,830
$ 9,136


~~(1)~~	~~We adopted CECL effective January 1, 2020. For more information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.~~


~~(2)~~	~~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.~~


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 June 30, 2020	5,494,773	$	21,098	4,119,558,592	$	9,136


Net income
Other comprehensive income (loss), net of tax
Noncontrolling interests
Common stock issued				13,087,759
Common stock repurchased				(129,469)
Preferred stock redeemed	0	0

Preferred stock released by ESOP
Preferred stock converted to common shares	0	0		0

Common stock dividends
Preferred stock dividends
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change	0	0		12,958,290	0
Balance September 30, 2020	5,494,773	$	21,098	4,132,516,882	$	9,136
Balance June 30, 2019	9,184,169	$	23,021	4,419,591,197	$	9,136


Net income
Other comprehensive income (loss), net of tax
Noncontrolling interests
Common stock issued				5,834,645
Common stock repurchased				(159,099,263)
Preferred stock redeemed	(1,550,000)	(1,330)

Preferred stock released by ESOP
Preferred stock converted to common shares	(142,000)	(142)		2,815,225

Common stock dividends
Preferred stock dividends
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change	(1,692,000)	(1,472)		(150,449,393)	0
Balance September 30, 2019	7,492,169	$	21,549	4,269,141,804	$	9,136

Three months ended March 31,
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

61,049
166,697
(1,311 ) (68,831 ) (1,143 ) 187,146
838
187,984
991

991
991
61,049
167,688
(1,311 ) (68,831 ) (1,143 ) 188,137
838
188,975
653
653
(148 ) 505
(253 ) (253 ) (1 ) (254 )
—

—
(77 ) (77 )
(17 ) (308 )

2,002

1,677
1,677
—

(3,407 )

(3,407 ) (3,407 )
17
(272 ) (2,470 ) (2,470 )
—

—
—
—
—

—
—
—
—

—

—
—
(45 )

1,968
1,968
18
(2,114 )

(2,096 ) (2,096 )

(339 )

(339 ) (339 )
181

181
181
(1,354 )

21

(1,333 ) (1,333 )
(1,200 ) (2,380 ) (253 ) (1,384 ) —
(5,419 ) (226 ) (5,645 )
59,849
165,308
(1,564 ) (70,215 ) (1,143 ) 182,718
612
183,330
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
   5,860

   5,860
107
5,967
      2,173
   2,173
—
2,173
—



—
(106 ) (106 )
—
(329 )
1,468
1,139
1,139
—

(4,820 ) (4,820 ) (4,820 )
—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—


—
—
19
(2,073 )

(2,054 ) (2,054 )
(353 )

(353 ) (353 )
544

544
544
(839 )

27
(812 ) (812 )
(276 ) 3,105
2,173
(3,325 ) —
1,677
1
1,678
60,409
160,776
(3,682 ) (50,519 ) (1,502 ) 197,832
901
198,733



					Quarter ended September 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
59,923	159,952	(798)	(69,050)	(875)	179,386	736	180,122


	2,035				2,035	184	2,219
		48			48	1	49
					0	(62)	(62)
0	(343)		668		325		325
			(3)		(3)		(3)
	0				0		0

0				0	0		0
0			0		0		0

3	(416)				(413)		(413)
	(315)				(315)		(315)
136					136		136
(27)			1		(26)		(26)
112	961	48	666	0	1,787	123	1,910
60,035	160,913	(750)	(68,384)	(875)	181,173	859	182,032
60,625	164,551	(2,224)	(54,775)	(1,292)	199,042	995	200,037


	4,610				4,610	202	4,812
		585			585	0	585
					0	(85)	(85)
(6)	(15)		299		278		278
			(7,448)		(7,448)		(7,448)
	(220)				(1,550)		(1,550)

(7)				149	142		142
(1)			143		0		0

23	(2,253)				(2,230)		(2,230)
	(353)				(353)		(353)
262					262		262
(30)			(4)		(34)		(34)
241	1,769	585	(7,010)	149	(5,738)	117	(5,621)
60,866	166,320	(1,639)	(61,785)	(1,143)	193,304	1,112	194,416


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, 2019	7,492,169	$	21,549	4,134,425,937	$	9,136
Cumulative effect from change in accounting policies (1)
Balance January 1, 2020	7,492,169	$	21,549	4,134,425,937	$	9,136
Net income
Other comprehensive income (loss), net of tax
Noncontrolling interests
Common stock issued				63,900,366
Common stock repurchased				(75,542,855)
Preferred stock redeemed	(1,828,720)	(2,215)

Preferred stock released by ESOP
Preferred stock converted to common shares	(249,176)	(249)		9,733,434
Preferred stock issued	80,500	2,013
Common stock dividends
Preferred stock dividends
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change	(1,997,396)	(451)		(1,909,055)	0
Balance September 30, 2020	5,494,773	$	21,098	4,132,516,882	$	9,136
Balance December 31, 2018	9,377,216	$	23,214	4,581,253,608	$	9,136
Cumulative effect from change in accounting policies (2)
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				42,384,469
Common stock repurchased				(361,315,717)
Preferred stock redeemed	(1,550,000)	(1,330)

Preferred stock released by ESOP
Preferred stock converted to common shares	(335,047)	(335)		6,819,444
Preferred stock issued	0	0
Common stock dividends
Preferred stock dividends
Stock incentive compensation expense
Net change in deferred compensation and related plans
Net change	(1,885,047)	(1,665)		(312,111,804)	0
Balance September 30, 2019	7,492,169	$	21,549	4,269,141,804	$	9,136

(1)We adopted CECL effective January 1, 2020. For additional information, see Note 1 (Summary of Significant Accounting Policies) in this Report.

(2)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.

Wells Fargo & Company and Subsidiaries
Consolidated Statement of Cash Flows (Unaudited)
Quarter ended March 31,
(in millions) 2020
2019
Cash flows from operating activities:
Net income before noncontrolling interests $ 505
5,967
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 4,005
845
Changes in fair value of MSRs, MLHFS and LHFS carried at fair value 3,486
1,144
Depreciation, amortization and accretion 1,868
1,449
Other net (gains) losses 7,638
(1,418 )
Stock-based compensation 582
902
Originations and purchases of mortgage loans held for sale (37,216 ) (25,098 )
Proceeds from sales of and paydowns on mortgage loans held for sale 31,922
17,148
Net change in:
Debt and equity securities, held for trading 20,413
6,969
Loans held for sale (731 ) 728
Deferred income taxes (1,448 ) 312
Derivative assets and liabilities (4,293 ) (1,586 )
Other assets (10,391 ) 1,130
Other accrued expenses and liabilities 933
(541 )
Net cash provided by operating activities 17,273
7,951
Cash flows from investing activities:
Net change in:
Federal funds sold and securities purchased under resale agreements 15,675
(18,414 )
Available-for-sale debt securities:
Proceeds from sales 11,843
1,680
Prepayments and maturities 14,135
6,001
Purchases (18,658 ) (4,937 )
Held-to-maturity debt securities:
Paydowns and maturities 3,769
2,123
Purchases (19,141 ) —
Equity securities, not held for trading:
Proceeds from sales and capital returns 1,115
1,180
Purchases (3,338 ) (1,352 )
Loans:
Loans originated by banking subsidiaries, net of principal collected (53,400 ) 669
Proceeds from sales (including participations) of loans held for investment 1,959
3,410
Purchases (including participations) of loans (342 ) (331 )
Principal collected on nonbank entities’ loans 3,837
899
Loans originated by nonbank entities (2,348 ) (1,318 )
Proceeds from sales of foreclosed assets and short sales 500
707
Other, net 91
657
Net cash used by investing activities (44,303 ) (9,026 )
Cash flows from financing activities:
Net change in:
Deposits 53,903
(22,161 )
Short-term borrowings (12,223 ) 810
Long-term debt:
Proceeds from issuance 18,895
17,338
Repayment (17,563 ) (11,898 )
Preferred stock:
Proceeds from issuance 1,968
—
Redeemed (2,470 ) —
Cash dividends paid (280 ) (294 )
Common stock:
Proceeds from issuance 209
181
Stock tendered for payment of withholding taxes (306 ) (264 )
Repurchased (3,407 ) (4,820 )
Cash dividends paid (2,032 ) (1,997 )
Net change in noncontrolling interests (29 ) (83 )
Other, net (76 ) (56 )
Net cash provided (used) by financing activities 36,589
(23,244 )
Net change in cash, cash equivalents, and restricted cash 9,559
(24,319 )
Cash, cash equivalents, and restricted cash at beginning of period 141,250
173,287
Cash, cash equivalents, and restricted cash at end of period $ 150,809
148,968
Supplemental cash flow disclosures:
Cash paid for interest $ 3,479
4,401
Cash paid for income taxes 207
126



					Nine months ended September 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
61,049	166,697	(1,311)	(68,831)	(1,143)	187,146	838	187,984
	991	0			991		991
61,049	167,688	(1,311)	(68,831)	(1,143)	188,137	838	188,975
	309				309	83	392
		561			561	0	561
					0	(62)	(62)
207	(1,200)		3,362		2,369		2,369
			(3,412)		(3,412)		(3,412)
17	(272)				(2,470)		(2,470)

(19)				268	249		249
(243)			492		0		0
(45)					1,968		1,968
41	(4,643)				(4,602)		(4,602)
	(969)				(969)		(969)
437					437		437
(1,409)			5		(1,404)		(1,404)
(1,014)	(6,775)	561	447	268	(6,964)	21	(6,943)
60,035	160,913	(750)	(68,384)	(875)	181,173	859	182,032
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
	16,676				16,676	441	17,117
		4,216			4,216	0	4,216
					0	(229)	(229)
(8)	(382)		2,206		1,816		1,816
			(17,166)		(17,166)		(17,166)
0	(220)				(1,550)		(1,550)

(24)				359	335		335
(16)			351		0		0
0					0		0
62	(6,361)				(6,299)		(6,299)
	(1,064)				(1,064)		(1,064)
1,053					1,053		1,053
(886)			18		(868)		(868)
181	8,649	4,216	(14,591)	359	(2,851)	212	(2,639)
60,866	166,320	(1,639)	(61,785)	(1,143)	193,304	1,112	194,416


Wells Fargo & Company and Subsidiaries
Consolidated Statement of Cash Flows (Unaudited)
	Nine months ended September 30,
(in millions)	2020		2019
Cash flows from operating activities:
Net income before noncontrolling interests	$	392	17,117
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	14,308		2,043
Changes in fair value of MSRs, MLHFS and LHFS carried at fair value	4,434		3,704
Depreciation, amortization and accretion	6,444		4,940
Other net (gains) losses	6,753		(2,888)
Stock-based compensation	1,337		1,885
Originations and purchases of mortgage loans held for sale	(134,318)		(109,609)
Proceeds from sales of and paydowns on mortgage loans held for sale	87,350		70,676
Net change in:
Debt and equity securities, held for trading	58,969		17,104
Loans held for sale	(669)		241
Deferred income taxes	(1,647)		(3,142)
Derivative assets and liabilities	(5,823)		(2,397)
Other assets	(9,482)		(6,320)
Other accrued expenses and liabilities	(3,232)		953
Net cash provided (used) by operating activities	24,816		(5,693)
Cash flows from investing activities:
Net change in:
Federal funds sold and securities purchased under resale agreements	32,836		(22,844)
Available-for-sale debt securities:
Proceeds from sales	40,709		7,709
Prepayments and maturities	59,393		30,362
Purchases	(54,010)		(44,460)
Held-to-maturity debt securities:
Paydowns and maturities	22,767		9,154
Purchases	(41,758)		(2,929)
Equity securities, not held for trading:
Proceeds from sales and capital returns	10,344		4,104
Purchases	(6,518)		(4,595)
Loans:
Loans originated by banking subsidiaries, net of principal collected	33,296		(15,133)
Proceeds from sales (including participations) of loans held for investment	6,828		10,416
Purchases (including participations) of loans	(1,036)		(1,574)
Principal collected on nonbank entities’ loans	7,150		2,990
Loans originated by nonbank entities	(8,703)		(3,816)

Proceeds from sales of foreclosed assets and short sales	967		1,992
Other, net	(223)		1,519
Net cash provided (used) by investing activities	102,042		(27,105)
Cash flows from financing activities:
Net change in:
Deposits	60,589		22,005
Short-term borrowings	(49,288)		18,121
Long-term debt:
Proceeds from issuance	37,901		40,220
Repayment	(61,151)		(45,940)
Preferred stock:
Proceeds from issuance	1,968		0
Redeemed	(2,470)		(1,550)
Cash dividends paid	(910)		(1,005)
Common stock:
Proceeds from issuance	513		356
Stock tendered for payment of withholding taxes	(326)		(283)
Repurchased	(3,412)		(17,166)
Cash dividends paid	(4,454)		(6,118)
Net change in noncontrolling interests	(67)		(221)
Other, net	(231)		(177)
Net cash provided (used) by financing activities	(21,338)		8,242
Net change in cash, cash equivalents, and restricted cash	105,520		(24,556)
Cash, cash equivalents, and restricted cash at beginning of period	141,250		173,287
Cash, cash equivalents, and restricted cash at end of period	$	246,770	148,731
Supplemental cash flow disclosures:
Cash paid for interest	$	7,099	14,505
Cash paid for income taxes	2,360		5,248

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, trust and investments, mortgage banking, investment banking, retail banking, brokerage, and consumer and commercial finance through 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, 2019 (2019 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 worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Management has made significant estimates in several areas, including:

•allowance for credit losses (Note 6 (Loans and Related Allowance for Credit Losses);

•valuations of residential mortgage servicing rights (MSRs) (Note 10 (Securitizations and Variable Interest Entities) and Note 11 (Mortgage Banking Activities));

•valuations of financial instruments (Note 15 (Derivatives) and Note 16 (Fair Values of Assets and Liabilities));

•liabilities for contingent litigation losses (Note 14 (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 2019 Form 10-K.

Accounting Standards Adopted in 2020

In ~~first quarter~~ 2020, we adopted the following new accounting guidance:


•	~~Accounting Standards Update (ASU or Update) 2019-04 – Codification Improvements to Topic 326,~~ ~~Financial Instruments~~ – ~~Credit Losses, Topic 815,~~ ~~Derivatives and~~ •Accounting Standards Update (ASU or Update) 2020-04 – Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

•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 is included in the discussion for ASU 2016-13 below.

•

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

•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 Financial Accounting Standards Board (FASB) Emerging Issues Task Force)

•ASU 2018-13 – Fair Value Measurement (Topic 820):Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.

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

•ASU 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and related subsequent Updates

ASU 2020-04 provides optional, temporary relief to ease the burden of accounting for reference rate reform activities that affect contractual modifications of floating rate financial instruments indexed to interbank offering rates (IBORs) and hedge accounting relationships. Modifications of qualifying contracts are accounted for as the continuation of an existing contract rather than as a new contract. Modifications of qualifying hedging relationships will not require discontinuation of the existing hedge accounting relationships. The application of the relief for qualifying existing hedging relationships may be made on a hedge-by-hedge basis and across multiple reporting periods.

We adopted ASU 2020-04 on April 1, 2020, and the guidance will be followed until the Update terminates on December 31, 2022. This guidance is applied on a prospective basis. The Update did not have a material impact on our consolidated financial statements.

~~Targeted Improvements to Related Party Guidance for Variable Interest Entities~~


•	~~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.~~


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


•	~~ASU 2016-13 – Financial Instruments – Credit Losses (Topic 326):~~ ~~Measurement of Credit Losses on Financial Instruments~~ ~~and related subsequent Updates~~

ASU 2018-17 updates the guidance used by decision-makers of VIEs. Indirect interests held through related parties in common control arrangements will be considered on a proportional basis for determining whether fees paid to decision-makers and service providers are variable interests. This is consistent with how indirect interests held through related parties under common control are considered for determining whether a reporting entity must consolidate a VIE. The Update did not have a material impact on our consolidated financial statements.

ASU 2018-15 clarifies the accounting for implementation costs related to a cloud computing arrangement that is a service contract and enhances disclosures around implementation costs for internal-use software and cloud computing arrangements. The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use

Note 1: Summary of Significant Accounting Policies (continued)

software license). It also requires the expense related to the capitalized implementation costs be presented in the same line item in the statement of income as the fees associated with the hosting element of the arrangement and capitalized implementation costs be presented in the balance sheet in the same line item that a prepayment for the fees of the associated hosting arrangement are presented. The Update did not have a material impact on our consolidated financial statements.

ASU 2018-13 clarifies, eliminates and adds certain fair value measurement disclosure requirements for assets and liabilities, which affects our disclosures in Note 16 (Fair Values of Assets and Liabilities). Although the ASU became effective on January 1, 2020, it permitted early adoption of individual requirements without causing others to be early adopted and, as such, we partially adopted the Update during third quarter 2018 and the remainder of the requirements in first quarter 2020. The Update did not have a material impact on our consolidated financial statements.

ASU 2017-04 simplifies the goodwill impairment test by eliminating the requirement to assign the fair value of a reporting unit to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. The Update requires that a goodwill impairment loss is recognized if the fair value of the reporting unit is less than the carrying amount, including goodwill. The goodwill impairment loss is limited to the amount of goodwill allocated to the reporting unit. The guidance did not change the qualitative assessment of goodwill. This guidance is applied on a prospective basis, and accordingly, the Update did not have a material impact on our consolidated financial statements.

ASU 2016-13 changes the accounting for the measurement of credit losses on loans and debt securities. For loans and held-to-maturity (HTM) debt securities, the Update requires a current expected credit loss (CECL) measurement to estimate the allowance for credit losses (ACL) for the remaining contractual term, adjusted for prepayments, of the financial asset (including off-balance sheet credit exposures) using historical experience, current conditions, and reasonable and supportable forecasts.

Also, the Update eliminates the existing guidance for purchased credit-impaired (PCI) loans, but requires an allowance for purchased financial assets with more than an insignificant deterioration of credit since origination. In addition, the Update modifies the other-than-temporary impairment (OTTI) model for available-for-sale (AFS) 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. Upon adoption, we recognized an overall decrease in our ACL of approximately $1.3 billion (pre-tax) as a cumulative effect adjustment from a change in accounting policies, which increased our retained earnings and regulatory capital amounts and ratios. Loans previously classified as PCI were automatically transitioned to purchased credit-deteriorated (PCD) classification. We recognized an ACL for these new PCD loans and made a corresponding adjustment to the loan balance, with no impact to net income or transition adjustment to retained earnings. For more information on the impact of CECL by type of financial asset, see Table 1.1 below.

Table 1.1: ASU 2016-13 Adoption Impact to Allowance for Credit Losses (1)


				Dec 31, 2019		ASU 2016-13 Adoption Impact				Jan 1, 2020						Dec 31, 2019		ASU 2016-13 Adoption Impact			Jan 1, 2020
(in billions)	Balance Outstanding		ACL Balance	Coverage					ACL Balance	Coverage		(in billions)	Balance Outstanding		ACL Balance	Coverage				ACL Balance	Coverage
Total commercial (2)	$	515.7	6.2	1.2	%	$	(2.9	)	3.4	0.7	%	Total commercial (2)	$	515.7	6.2	1.2	%	$	(2.9)	3.4	0.7	%

Real estate 1-4 family mortgage (3)	323.4		0.9	0.3		—			0.9	0.3		Real estate 1-4 family mortgage (3)	323.4		0.9	0.3		0		0.9	0.3
Credit card (4)	41.0		2.3	5.5		0.7			2.9	7.1		Credit card (4)	41.0		2.3	5.5		0.7		2.9	7.1
Automobile (4)	47.9		0.5	1.0		0.3			0.7	1.5		Automobile (4)	47.9		0.5	1.0		0.3		0.7	1.5
Other revolving credit and installment (4)	34.3		0.6	1.6		0.6			1.2	3.5		Other revolving credit and installment (4)	34.3		0.6	1.6		0.6		1.2	3.5
Total consumer	446.5		4.2	0.9		1.5			5.7	1.3		Total consumer	446.5		4.2	0.9		1.5		5.7	1.3
Total loans	962.3		10.5	1.1		(1.3		)	9.1	0.9		Total loans	962.3		10.5	1.1		(1.3)		9.1	0.9
Available-for-sale and held-to-maturity debt securities and other assets (5)	420.0		0.1	NM		—			0.1	NM		Available-for-sale and held-to-maturity debt securities and other assets (5)	420.0		0.1	NM		0		0.1	NM
Total	$	1,382.3	10.6	NM		$	(1.3	)	9.3	NM		Total	$	1,382.3	10.6	NM		$	(1.3)	9.3	NM

NM – Not meaningful


~~(1)~~	~~Amounts presented in this table may not equal the sum of its components due to rounding.~~


~~(2)~~	~~Decrease reflecting shorter contractual maturities given limitation to contractual terms.~~


~~(3)~~	Impact reflects an increase due to longer contractual terms, offset by expectation of recoveries in collateral value on mortgage loans previously written down significantly below current recovery value.


~~(4)~~	~~Increase due to longer contractual terms or indeterminate maturities.~~


~~(5)~~	~~Excludes other financial assets in the scope of CECL that do not have an allowance for credit losses based on the nature of the asset.~~

(1)Amounts presented in this table may not equal the sum of its components due to rounding.

(2)Decrease reflecting shorter contractual maturities given limitation to contractual terms.

(3)Impact reflects an increase due to longer contractual terms, offset by expectation of recoveries in collateral value on mortgage loans previously written down significantly below current recovery value.

(4)Increase due to longer contractual terms or indeterminate maturities.

(5)Excludes other financial assets in the scope of CECL that do not have an allowance for credit losses based on the nature of the asset.

The adoption of ASU 2016-13 did not result in a change to accounting policies, except as noted herein. Our accounting policy for the ACL was updated and is now inclusive of loans, debt securities and other financing receivables. Other than the ACL and the elimination of PCI loans, there were no changes to accounting policies for loans as described in the 2019 Form 10-K. For debt securities, other than the policies with respect to the ACL, all of the current accounting policies, including those that changed as a result of CECL adoption, are included below under Debt Securities.

Debt Securities

Our investments in debt securities that are not held for trading purposes are classified as either debt securities available-for-sale (AFS) or held-to-maturity (HTM).

Investments in debt securities for which the Company does not have the positive intent and ability to hold to maturity are classified as AFS. AFS debt securities are measured at fair value, with unrealized gains and losses reported in cumulative other comprehensive income (OCI), net of the allowance for credit

losses and applicable income taxes. Investments in debt securities

for which the Company has the positive intent and ability to hold to maturity are classified as HTM. HTM debt securities are measured at amortized cost, net of allowance for credit losses.

INTEREST INCOME AND GAIN/LOSS RECOGNITION Unamortized premiums and discounts are recognized in interest income over the contractual life of the security using the effective interest method, except for purchased callable debt securities carried at a premium. For purchased callable debt securities carried at a premium, the premium is amortized into interest income to the earliest call date using the effective interest method. As principal repayments are received on securities (e.g., mortgage-backed securities (MBS)), a proportionate amount of the related premium or discount is recognized in income so that the effective interest rate on the remaining portion of the security continues unchanged.

We recognize realized gains and losses on the sale of debt securities in net gains (losses) on debt securities within noninterest income using the specific identification method.

~~Note 1: Summary of Significant Accounting Policies (continued~~)

IMPAIRMENT AND CREDIT LOSSES Unrealized losses of AFS debt securities are driven by a number of factors, including changes in interest rates and credit spreads which impact most types of debt securities with additional considerations for certain types of debt securities:

•Debt securities of U.S. Treasury and federal agencies, including federal agency MBS, are not impacted by credit movements given the explicit or implicit guarantees provided by the U.S. government.

•Debt securities of U.S. states and political subdivisions are most impacted by changes in the relationship between municipal and term funding credit curves rather than by changes in the credit quality of the underlying securities.

•Structured securities, such as MBS and collateralized loan obligations (CLO), are also impacted by changes in projected collateral losses of assets underlying the security.

For debt securities where fair value is less than amortized cost basis, we recognize impairment in earnings if we have the intent to sell the security or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. Impairment is recognized equal to the entire difference between the amortized cost basis and the fair value of the security and is classified as net gains (losses) from debt securities within noninterest income. Following the recognition of impairment, the security’s new amortized cost basis is the previous basis less impairment.

For debt securities where fair value is less than amortized cost basis where we did not recognize impairment in earnings, we set up an allowance for credit losses as of the balance sheet date. See “Allowance for Credit Losses” section in this Note.

TRANSFERS BETWEEN CATEGORIES OF DEBT SECURITIES AFS debt securities transferred to the HTM classification are recorded at fair value and the unrealized gains or losses resulting from the transfer of these securities continue to be reported in cumulative OCI. The cumulative OCI balance is amortized into earnings over the same period as the unamortized premiums and discounts using the effective interest method. Any allowance for credit losses previously recorded under the AFS model on securities transferred to HTM is reversed and an allowance for credit losses is subsequently recorded under the HTM debt security model.

NONACCRUAL AND PAST DUE, AND CHARGE-OFF POLICIES We generally place debt securities on nonaccrual status using factors similar to those described for loans. When we place a debt security on nonaccrual status, we reverse the accrued unpaid interest receivable against interest income and suspend the

amortization of premiums and accretion of discounts. If the ultimate collectability of the principal is in doubt on a nonaccrual debt security, any cash collected is first applied to reduce the security’s amortized cost basis to zero, followed by recovery of amounts previously charged off, and subsequently to interest income. Generally, we return a debt security to accrual status when all delinquent interest and principal become current under the contractual terms of the security and collectability of remaining principal and interest is no longer doubtful.

Our debt securities are considered past due when contractually required principal or interest payments have not been made on the due dates.

Our charge-off policy for debt securities are similar to those described for loans. Subsequent to charge-off, the debt security will be designated as nonaccrual and follow the process described above for any cash received.

Allowance for Credit Losses

The ACL is management’s estimate of the current expected credit losses in the loan portfolio and unfunded credit commitments, at the balance sheet date, excluding loans and unfunded credit commitments carried at fair value or held for sale. Additionally, we maintain an ACL on AFS and HTM debt securities, other financing receivables measured at amortized cost, and other off-balance sheet credit exposures. While we attribute portions of the allowance to specific financial asset classes (loan and debt security portfolios), loan portfolio segments (commercial and consumer) or major security type, the entire ACL is available to absorb credit losses of the Company.

Our ACL process involves procedures to appropriately consider the unique risk characteristics of our financial asset classes, portfolio segments, and major security types. For each loan portfolio segment and each major HTM debt security type, losses are estimated collectively for groups of loans or securities with similar risk characteristics. For loans and securities that do not share similar risk characteristics with other financial assets, the losses are estimated individually, which primarily includes our impaired large commercial loans and non-accruing HTM debt securities. For AFS debt securities, losses are estimated at the tax-lot level.

Our ACL amounts are influenced by a variety of factors, including changes in loan and debt security volumes, portfolio credit quality, and general economic conditions. General economic conditions are forecasted using economic variables which will create volatility as those variables change over time. See Table 1.2 for key economic variables used for our loan portfolios.

Note 1: Summary of Significant Accounting Policies (continued)

Table 1.2: Key Economic Variables



Loan Portfolio						Key economic variables
Total commercial						• Gross domestic product • Commercial real estate asset prices, where applicable • Unemployment rate • Corporate investment-grade bond spreads
Real estate 1-4 family mortgage						• Home price index • Unemployment rate
Other consumer (including credit card, automobile, and other revolving credit and installment)						• Unemployment rate

Our approach for estimating expected life-time credit losses for loans and debt securities includes the following key components:

•An initial loss forecast period of one year for all portfolio segments and classes of financing receivables and ~~off-~~

~~balance-sheet~~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 term, adjusted for expected prepayments and

certain expected extensions, renewals, or modifications, by portfolio segment and class of financing receivables based on the changes in key historical economic variables during representative historical expansionary and recessionary periods.

•A reversion period of up to 2two years ~~connecting~~to connect the losses estimated for our initial loss forecast period to the period of our historical loss forecast based on economic conditions at the measurement date. Our reversion methodology considers the type of portfolio, point in the credit cycle, expected length of recessions and recoveries, as well as other relevant factors.

•Utilization of 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 the collateral. The DCF methods obtain estimated life-time credit losses using the initial and historical mean loss forecast periods described above.

•For AFS debt securities and certain beneficial interests classified as HTM, we utilize the DCF methods to measure the ACL, which incorporate expected credit losses using the conceptual components described above. The ACL on AFS debt securities is subject to a limitation based on the fair value of the debt securities (fair value floor).

The ACL for financial assets held at amortized cost and AFS debt securities will be reversible with immediate recognition of recovery in earnings if credit improves. The ACL for financial assets held at amortized cost is a valuation account that is deducted from, or added to, the amortized cost basis of the financial assets to present the net amount expected to be collected, which can include a negative allowance limited to the cumulative amounts previously charged off. For financial assets with an ACL estimated using DCF methods, changes in the ACL due to the passage of time are recorded in interest income. The ACL for AFS debt securities reflects the amount of unrealized loss related to expected credit losses, limited by the amount that fair value is less than the amortized cost basis, and cannot have an associated negative allowance.

For certain financial assets, such as residential real estate loans guaranteed by the Government National Mortgage Association (GNMA), an agency of the federal government, U. S. Treasury and Agency mortgage backed debt securities, as well as certain sovereign debt securities, the Company has not recognized an ACL as our expectation of nonpayment of the

amortized cost basis, based on historical losses, adjusted for current conditions and reasonable and supportable forecasts, is zero.

A financial asset is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. When a collateral-dependent financial asset is probable of foreclosure, we will measure the ACL based on the fair value of the collateral. If we intend to sell the underlying collateral, we will measure the ACL based on the collateral’s net realizable value (fair value of collateral, less estimated costs to sell). In most situations, based on our charge-off policies, we will immediately write-down the financial asset to the fair value of the collateral or net realizable value. For consumer loans, collateral-dependent financial assets may have collateral in the form of residential real estate, automobiles or other personal assets. For commercial loans, collateral-dependent financial assets may have collateral in the form of commercial real estate or other business assets.

~~In general, we~~We do not generally record an ACL for accrued interest receivables ~~which are included in other assets. Uncollectible~~because uncollectible accrued interest is reversed through interest income in a timely manner in line with our non-accrual and past due policies for loans and debt securities. For consumer credit card and certain consumer lines of credit, we include an ACL for accrued interest

and fees since these loans are not placed on nonaccrual status and written off until the loan is 180 days past due. Accrued interest receivables are included in other assets, except for certain revolving loans, such as credit card loans.

COMMERCIAL LOAN PORTFOLIO SEGMENT ACL METHODOLOGY Generally, commercial loans, which include net investments in lease financing, are assessed for estimated losses by grading each loan using various risk factors as identified through periodic reviews. 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 default and losses after default within each credit risk rating. These estimates are adjusted as appropriate based on additional analysis of long-term average loss experience compared with previously forecasted losses, external loss data or other risks identified from current economic conditions and credit quality trends. The estimated probability of default and severity at the time of default are applied to loan equivalent exposures to estimate losses for unfunded credit commitments.

CONSUMER LOAN PORTFOLIO SEGMENT ACL METHODOLOGY For consumer loans, we determine the allowance at the individual loan level. When developing historical loss experience, we pool loans, generally by product types with similar risk characteristics, such as residential real estate mortgages and credit cards. As appropriate and to achieve greater accuracy, we may further stratify selected portfolios by sub-product, origination channel,

vintage, loss type, geographic location and other predictive characteristics. We use pooled loan data such as historic delinquency and default and loss severity in the development of our consumer loan models, in addition to home price trends, unemployment trends, and other economic variables that may influence the frequency and severity of losses in the consumer portfolio.

AFS PORTFOLIO ACL METHODOLOGY We develop our ACL estimate for AFS debt securities by utilizing a security-level multi-scenario, probability-weighted discounted cash flow model based on a combination of past events, current conditions, as well as reasonable and supportable forecasts. The projected cash flows are discounted at the security’s effective interest rate, except for certain variable rate securities which are discounted using projections of future changes in interest rates, prepayable securities which are adjusted for estimated prepayments, and securities part of a fair value hedge which use hedge-adjusted assumptions. The ACL on an AFS debt security is limited to the difference between its amortized cost basis and fair value (fair value floor) and reversals of the allowance are permitted up to the amount previously recorded.

HTM PORTFOLIO ACL METHODOLOGY For most HTM debt securities, the ACL is measured using an expected loss model, similar to the methodology used for loans. Unlike AFS debt securities, the ACL on an HTM debt security is not limited to the fair value floor.

Certain beneficial interests categorized as HTM debt securities utilize a similar discounted cash flow model as described for AFS debt securities, without the limitation of the fair value floor.

OTHER QUALITATIVE FACTORS The ACL includes amounts for qualitative factors which may not be adequately reflected in our loss models. These amounts represent management’s judgment

~~Note 1: Summary of Significant Accounting Policies (continued~~)

of risks in the processes and assumptions used in establishing the ACL. Generally, these amounts are established at a granular level below our loan portfolio segments. We also consider economic environmental factors, modeling assumptions and performance, process risk, and other subjective factors, including industry trends and emerging risk assessments.

OFF-BALANCE SHEET CREDIT EXPOSURES Our off-balance sheet credit exposures include unfunded loan commitments (generally in the form of revolving lines of credit), financial guarantees not accounted for as insurance contracts or derivatives, including standby letters of credit, and other similar instruments. For off-balance sheet credit exposures, we recognize an ACL associated with the unfunded amounts. We do not recognize an ACL for commitments that are unconditionally cancelable at our discretion. Additionally, we recognize an ACL for financial guarantees that create off-balance sheet credit exposure, such as loans sold with credit recourse and factoring guarantees. ACL for off-balance sheet credit exposures are reported as a liability in accrued expenses and other liabilities on our consolidated balance sheet.

OTHER FINANCIAL ASSETS Other financial assets are evaluated for expected credit losses. These other financial assets include accounts receivable for fees, receivables from government-sponsored entities, such as Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC), and GNMA, and other accounts receivable from high-credit quality counterparties, such as central clearing

counterparties. Many of these financial assets are generally not expected to have an ACL as there is a zero loss expectation (for example, government guarantee) or no historical credit losses. Some financial assets, such as loans to employees, maintain an ACL that is presented on a net basis with the related amortized cost amounts in other assets on our consolidated balance sheet. Given the nature of these financial assets, provision for credit losses is not recognized separately from the regular income or expense associated with these financial assets.

Securities purchased under resale agreements are generally over-collateralized by securities or cash and are generally short-term in nature. We have elected the practical expedient for these financial assets given collateral maintenance provisions. These provisions require that we monitor the collateral value and customers are required to replenish collateral, if needed. Accordingly, we generally do not maintain an ACL for these financial assets.

PURCHASED CREDIT DETERIORATED FINANCIAL ASSETS Financial assets acquired that are of poor credit quality and with more than an insignificant evidence of credit deterioration since their origination or issuance are PCD assets. PCD assets are recorded at their purchase price plus an ACL estimated at the time of acquisition. Under this approach, there is no provision for credit losses recognized at acquisition; rather, there is a gross-up of the purchase price of the financial asset for the estimate of expected credit losses and a corresponding ACL recorded. Changes in estimates of expected credit losses after acquisition are recognized as provision for credit losses (or reversal of provision for credit losses) in subsequent periods. In general, interest income recognition for PCD financial assets is consistent with interest income recognition for the similar non-PCD financial asset.

Troubled Debt Restructuring and Other Relief Related to COVID-19

On March 25, 2020, the U.S. Senate approved the Coronavirus, Aid, Relief, and Economic Security Act (the CARES Act) providing optional, temporary relief from accounting for certain loan modifications as troubled debt restructurings (TDRs). Under the CARES Act, TDR relief is available to banks for loan modifications related to the adverse effects of Coronavirus Disease 2019 (COVID-19) (COVID-related modifications) granted to borrowers that are current as of December 31, 2019. TDR relief applies to COVID-related modifications made from March 1, 2020, until the earlier of December 31, 2020, or 60 days following the termination of the national emergency declared by the President of the United States. In first quarter 2020, we elected to apply the TDR relief provided by the CARES Act.

On April 7, 2020, federal banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) (the Interagency Statement). The guidance in the Interagency Statement provides additional TDR relief as it clarifies that it is not necessary to consider the impact of the COVID-19 pandemic on the financial condition of a borrower in connection with a short-term (e.g., six ~~months)~~months or less) COVID-related modification provided the borrower is current at the date the modification program is implemented.

For COVID-related modifications in the form of payment deferrals, delinquency status will not advance and loans that were accruing at the time the relief is provided will generally not be placed on nonaccrual status during the deferral period. COVID-related modifications that do not meet the provisions of the

Note 1: Summary of Significant Accounting Policies (continued)

CARES Act or the Interagency Statement will be assessed for TDR classification.

~~Share Repurchases~~On April 10, 2020, the FASB Staff issued Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic, a question and answer guide (the guide). The guide provided an election for leases accounted for under Accounting Standards Codification (ASC) 842, Leases, that were modified due to COVID-19 and met certain criteria in order to not require a new

~~During the first~~

lease classification test upon modification. In second quarter ~~of 2020 and 2019, we repurchased shares of our common stock under Rule 10b5-1 repurchase plans. On March 15,~~ 2020, we ~~along with~~elected to apply the ~~other members of~~lease modification relief provided by the Financial Services Forum, suspended our share repurchase activities for the remainder of the first quarter and for second quarter 2020. For more information about share repurchases, see Note 1 (Summary of Significant Accounting Policies) in our 2019 Form 10-K.guide.

Supplemental Cash Flow Information

Significant noncash activities are presented in Table 1.3.

Table 1.3: Supplemental Cash Flow Information


	Nine months ended September 30,
(in millions)	2020		2019
Trading debt securities retained from securitization of mortgage loans held for sale (MLHFS)	$	39,626	31,517
Available-for-sale debt securities retained from securitization of MLHFS	2,710		0
Held-to-maturity debt securities retained from securitization of MLHFS	9,016		115

Transfers from (to) loans to (from) MLHFS	4,033		5,409


Transfers from available-for-sale debt securities to held-to-maturity debt securities	1,236		13,833
Operating lease ROU assets acquired with operating lease liabilities (1)	482		5,644

Quarter ended March 31,
(in millions) 2020
2019
Trading debt securities retained from securitization of mortgage loans held for sale (MLHFS) $ 7,538
8,875
Transfers from loans to MLHFS 858
1,292
Transfers from available-for-sale debt securities to held-to-maturity debt securities —
2,407
Operating lease ROU assets acquired with operating lease liabilities (1) 197
5,127
(1)Includes amounts attributable to new leases and changes from modified leases. The nine months ended September 30, 2019, balance also includes $4.9 billion from adoption of ASU 2016-02 – Leases (Topic 842).


~~(1)~~	~~Includes amounts attributable to new leases and changes from modified leases. First quarter 2019 also includes~~ ~~$4.9 billion~~ ~~from adoption of ASU 2016-02 – Leases (Topic 842).~~

Subsequent Events

We have evaluated the effects of events that have occurred subsequent to ~~March 31,~~September 30, 2020, and, except as disclosed in Note 17 (Preferred Stock) and Note 19 (Employee Benefits and

Other Expenses), there have been no material

events that would require recognition in our ~~first~~third quarter 2020 consolidated financial statements or disclosure in the Notes to the consolidated financial ~~statements.~~

statements.



Note 2: ~~Business Combinations~~Restructuring Charges

~~There were 0 acquisitions during first quarter 2020. As~~The Company is pursuing various initiatives to reduce expenses and create a more efficient and streamlined organization. Actions from these initiatives may include reorganizing and simplifying business processes and structures, reducing headcount, optimizing third-party spending, and rationalizing our branch and administrative locations, which may include consolidations and closures. The evaluation of ~~March 31, 2020, we had 0 pending acquisitions.~~potential actions will continue in future periods.

Restructuring charges are recorded as a component of noninterest expense on our consolidated statement of income.

The following costs associated with these initiatives are included in restructuring charges

•Personnel costs – Primarily severance costs associated with headcount reductions with payments made over time in accordance with our severance plan.

•Facility closure costs – Write-downs and acceleration of depreciation and amortization of owned or leased assets for branch and administrative locations, as well as related decommissioning costs.

Table 2.1 provides details on our restructuring charges.

Table 2.1:Restructuring Charges


(in millions)	Personnel costs		Facility closure costs	Total
Restructuring charges	$	694	24	718
Payments and utilization	0		(24)	(24)

Accrual balance at September 30, 2020	$	694	0	694



Note 3: Cash, Loan and Dividend Restrictions

Cash and cash equivalents may be restricted as to usage or withdrawal. Federal Reserve Board (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 FRB reserve cash balance requirements.

Table 3.1: Nature of Restrictions on Cash Equivalents


(in millions)	Sep 30, 2020		Dec 31, 2019
Required reserve balance for the FRB (1)	$	0	11,374
Reserve balance for non-U.S. central banks	220		460
Segregated for benefit of brokerage customers under federal and other brokerage regulations	875		733
Related to consolidated variable interest entities (VIEs) that can only be used to settle liabilities of VIEs	16		300

(1)Effective March 26, 2020, the FRB reduced reserve requirement ratios to 0%. The amount for December 31, 2019, represents an average for the year ended December 31, 2019.

(in millions) Mar 31,
2020
Dec 31,
2019
Average required reserve balance for FRB (1) $ 11,932
11,374
Reserve balance for non-U.S. central banks 1,133
460
Segregated for benefit of brokerage customers under federal and other brokerage regulations 970
733
Related to consolidated variable interest entities (VIEs) that can only be used to settle liabilities of VIEs 19
300


~~(1)~~	~~Represents average for~~ ~~first quarter 2020~~ ~~and for the year ended~~ ~~December 31, 2019~~.

~~We have~~Federal laws and regulations limit the dividends that a ~~state-chartered subsidiary~~national bank ~~that is subject to state regulations that limit dividends. Under these provisions and regulatory limitations, our~~may pay. Our national ~~and state-chartered subsidiary banks~~bank subsidiaries could have declared additional dividends of ~~$1.9~~$2.7 billion at ~~March 31,~~September 30, 2020, without obtaining prior regulatory approval. We have elected to retain higher capital at our national ~~and state-chartered subsidiary banks~~bank subsidiaries in order to meet internal capital policy minimums and regulatory requirements. 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 ~~March 31,~~September 30, 2020, our nonbank subsidiaries could have declared additional dividends of ~~$24.8~~$27.8 billion at ~~March 31,~~September 30, 2020, without obtaining prior regulatory approval. For additional information see Note 3 (Cash, Loan and Dividend Restrictions) in our 2019 Form 10-K.

The FRB’s Capital Plan Rule (codified at 12 CFR 225.8 of Regulation Y) establishes capital planning and ~~prior notice and approval~~other requirements ~~for~~that govern capital distributions including dividends by certain 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 common stock dividend and repurchase decisions in the FRB’s SR Letter 15-18. The ~~effect of this guidance~~Parent’s ability to make certain capital distributions is subject to ~~require~~review by the ~~approval~~FRB as part of the Parent’s capital plan in connection with the FRB’s annual Comprehensive Capital Analysis and Review (CCAR). The Parent’s ability to take certain capital actions is also subject to the Parent meeting or exceeding certain regulatory capital minimums.

On September 30, 2020, the Board of Governors of the Federal Reserve System (FRB) announced that it was extending through fourth quarter 2020 measures it announced on June 25, 2020, prohibiting large bank holding companies (BHCs) subject to the FRB’s capital plan rule, including Wells Fargo, from making any capital distribution (excluding any capital distribution arising from the issuance of a capital instrument eligible for inclusion in the numerator of a regulatory capital ratio), unless otherwise approved by the FRB. The FRB ~~(or specifically under~~has generally authorized BHCs to (i) make share repurchases relating to issuances of common stock related to employee stock ownership plans; (ii) provided that the ~~Capital Plan Rule, a notice~~BHC does not increase the amount of ~~non-objection)~~its common stock dividends, pay common stock dividends that do not exceed an amount equal to the average of the BHC’s net income for the ~~repurchase or redemption of common or perpetual preferred stock as well as to raise the per share quarterly dividend from its current level of $0.51 per share as declared~~four preceding calendar quarters, unless otherwise specified by the ~~Company’s Board of Directors~~FRB; and (iii) make scheduled payments on ~~April 28, 2020, payable on~~ ~~June~~additional tier 1 ~~2020~~.

and tier 2 capital instruments. These provisions may be extended by the FRB quarter-by-quarter.



Note 4: 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


(in millions)	Sep 30, 2020		Dec 31, 2019
Trading assets:
Debt securities	$	73,253	79,733
Equity securities	14,058		27,440
Loans held for sale	1,688		972
Gross trading derivative assets	57,990		34,825
Netting (1)	(35,662)		(21,463)
Total trading derivative assets	22,328		13,362
Total trading assets	111,327		121,507
Trading liabilities:
Short sale	18,779		17,430
Gross trading derivative liabilities	51,241		33,861
Netting (1)	(39,278)		(26,074)
Total trading derivative liabilities	11,963		7,787
Total trading liabilities	$	30,742	25,217

(1)Represents balance sheet netting for trading derivative asset and liability balances, and trading portfolio level counterparty valuation adjustments.

Mar 31,
Dec 31,
(in millions) 2020
2019
Trading assets:
Debt securities $ 80,425
79,733
Equity securities 13,573
27,440
Loans held for sale 1,673
972
Gross trading derivative assets 72,527
34,825
Netting (1) (49,821 ) (21,463 )
Total trading derivative assets 22,706
13,362
Total trading assets 118,377
121,507
Trading liabilities:
Short sale 17,603
17,430
Gross trading derivative liabilities 67,891
33,861
Netting (1) (53,598 ) (26,074 )
Total trading derivative liabilities 14,293
7,787
Total trading liabilities $ 31,896
25,217


~~(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 also 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 Sep 30,			Nine months ended Sep 30,
(in millions)	2020		2019	2020		2019
Interest income:
Debt securities	$	546	790	$	1,971	2,323
Equity securities	68		157	273		415
Loans held for sale	6		20	24		63
Total interest income	620		967	2,268		2,801
Less: Interest expense	93		129	350		392
Net interest income	527		838	1,918		2,409
Net gains (losses) from trading activities (1):
Debt securities	214		451	2,898		1,540
Equity securities	1,381		(242)	(691)		3,061
Loans held for sale	14		5	26		15
Derivatives (2)	(1,248)		62	(1,001)		(3,754)
Total net gains from trading activities	361		276	1,232		862
Total trading-related net interest and noninterest income	$	888	1,114	$	3,150	3,271

(1)Represents realized gains (losses) from our trading activities 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.

Quarter ended March 31,
(in millions) 2020
2019
Interest income:
Debt securities $ 766
793
Equity securities 137
115
Loans held for sale 12
23
Total interest income 915
931
Less: Interest expense 141
136
Net interest income 774
795
Net gains (losses) from trading activities (1):
Debt securities 2,355
688
Equity securities (4,401 ) 2,067
Loans held for sale (12 ) 14
Derivatives (2) 2,122
(2,412 )
Total net gains from trading activities 64
357
Total trading-related net interest and noninterest income $ 838
1,152


~~(1)~~			~~Represents realized gains (losses) from our trading activities 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, net of the allowance for credit losses, 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, net of allowance for credit losses. The net unrealized gains (losses) for available-for-sale debt securities are reported as a component of cumulative OCI, net of the allowance for credit losses and applicable income taxes. Information on debt securities held for trading is included in Note 4 (Trading Activities).

Outstanding balances exclude accrued interest receivable on available-for-sale and held-to-maturity debt securities which are included in other assets. During the ~~quarter ended March 31,~~first nine months of 2020, we reversed accrued interest receivable on our available-for-sale and held-to-maturity debt securities by reversing interest income of $6 million. See Note 9 (Other Assets) for additional information on accrued interest receivable.

Table 5.1: Available-for-Sale and Held-to-Maturity Debt Securities Outstanding


(in millions)	Amortized cost, net (1)		Gross unrealized gains	Gross unrealized losses	Fair value
September 30, 2020
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	5,826	149	0	5,975
Securities of U.S. states and political subdivisions (2)	31,563		239	(291)	31,511
Mortgage-backed securities:
Federal agencies	130,717		4,582	(72)	135,227
Residential	539		3	(1)	541
Commercial	3,393		17	(67)	3,343
Total mortgage-backed securities	134,649		4,602	(140)	139,111
Corporate debt securities	5,687		131	(46)	5,772
Collateralized loan obligations	25,389		5	(380)	25,014
Other	13,197		80	(87)	13,190
Total available-for-sale debt securities	216,311		5,206	(944)	220,573
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	48,587		1,765	(65)	50,287
Securities of U.S. states and political subdivisions	14,232		682	(4)	14,910
Federal agency and other mortgage-backed securities (3)	119,766		4,518	(57)	124,227
Other debt securities	10		0	0	10

Total held-to-maturity debt securities	182,595		6,965	(126)	189,434
Total (4)	$	398,906	12,171	(1,070)	410,007
December 31, 2019
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	14,948	13	(1)	14,960
Securities of U.S. states and political subdivisions (2)	39,381		992	(36)	40,337
Mortgage-backed securities:
Federal agencies	160,318		2,299	(164)	162,453
Residential	814		14	(1)	827
Commercial	3,899		41	(6)	3,934
Total mortgage-backed securities	165,031		2,354	(171)	167,214
Corporate debt securities	6,343		252	(32)	6,563
Collateralized loan obligations	29,153		25	(123)	29,055
Other	5,204		150	(24)	5,330
Total available-for-sale debt securities	260,060		3,786	(387)	263,459
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	45,541		617	(19)	46,139
Securities of U.S. states and political subdivisions	13,486		286	(13)	13,759
Federal agency and other mortgage-backed securities (3)	94,869		2,093	(37)	96,925
Other debt securities	37		0	0	37

Total held-to-maturity debt securities	153,933		2,996	(69)	156,860
Total (4)	$	413,993	6,782	(456)	420,319

(1)Represents amortized cost of the securities, net of the allowance for credit losses of $79 million related to available-for-sale debt securities and $26 million related to held-to-maturity debt securities at September 30, 2020. Prior to our adoption of CECL on January 1, 2020, the allowance for credit losses related to available-for-sale and held-to-maturity debt securities was not applicable and is therefore presented as $0 at December 31, 2019. For additional information, see Note 1 (Summary of Significant Accounting Policies).

(2)Includes investments in tax-exempt preferred debt securities issued by investment funds or trusts that predominantly invest in tax-exempt municipal securities. The amortized cost net of allowance for credit losses and fair value of these types of securities was $5.6 billion at September 30, 2020, and $5.8 billion at December 31, 2019.

(3)Predominantly consists of federal agency mortgage-backed securities at both September 30, 2020 and December 31, 2019.

(4)We held available-for-sale and held-to-maturity debt securities from Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) that each exceeded 10% of stockholders’ equity, with an amortized cost of $97.1 billion and $85.0 billion and a fair value of $100.9 billion and $88.1 billion at September 30, 2020 and an amortized cost of $98.5 billion and $84.1 billion and a fair value of $100.3 billion and $85.5 billion at December 31, 2019, respectively.

(in millions) Amortized cost, net (1)

Gross
unrealized gains

Gross
unrealized losses

Fair value
March 31, 2020
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies $ 10,952
88
(4 ) 11,036
Securities of U.S. states and political subdivisions (2) 38,686
206
(748 ) 38,144
Mortgage-backed securities:

Federal agencies 154,390
5,839
(15 ) 160,214
Residential 820
—
(44 ) 776
Commercial 3,897
10
(253 ) 3,654
Total mortgage-backed securities 159,107
5,849
(312 ) 164,644
Corporate debt securities 6,092
38
(275 ) 5,855
Collateralized loan and other debt obligations 26,873
63
(1,768 ) 25,168
Other (3) 6,477
19
(114 ) 6,382
Total available-for-sale debt securities 248,187
6,263
(3,221 ) 251,229
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 48,569
2,146
(24 ) 50,691
Securities of U.S. states and political subdivisions 14,304
344
(37 ) 14,611
Federal agency and other mortgage-backed securities (4) 107,013
5,268
(43 ) 112,238
Other debt securities 23
—
(1 ) 22
Total held-to-maturity debt securities 169,909
7,758
(105 ) 177,562
Total (5) $ 418,096
14,021
(3,326 ) 428,791
December 31, 2019
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies $ 14,948
13
(1 ) 14,960
Securities of U.S. states and political subdivisions (2) 39,381
992
(36 ) 40,337
Mortgage-backed securities:
Federal agencies 160,318
2,299
(164 ) 162,453
Residential 814
14
(1 ) 827
Commercial 3,899
41
(6 ) 3,934
Total mortgage-backed securities 165,031
2,354
(171 ) 167,214
Corporate debt securities 6,343
252
(32 ) 6,563
Collateralized loan and other debt obligations 29,693
125
(123 ) 29,695
Other (3) 4,664
50
(24 ) 4,690
Total available-for-sale debt securities 260,060
3,786
(387 ) 263,459
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies 45,541
617
(19 ) 46,139
Securities of U.S. states and political subdivisions 13,486
286
(13 ) 13,759
Federal agency and other mortgage-backed securities (4) 94,869
2,093
(37 ) 96,925
Other debt securities 37
—
—
37
Total held-to-maturity debt securities 153,933
2,996
(69 ) 156,860
Total (5) $ 413,993
6,782
(456 ) 420,319

~~(1)~~

~~Represents amortized cost of the securities, net of the allowance for credit losses of~~ ~~$161 million~~ ~~related to available-for-sale debt securities and~~ ~~$11 million~~ ~~related to held-to-maturity debt securities at~~ ~~March 31, 2020. Prior to our adoption of CECL on January 1, 2020, the allowance for credit losses related to available-for-sale and held-to-maturity debt securities was not applicable and is therefore presented as~~ $0 ~~at December 31, 2019. For more information, see Note 1 (Summary of Significant Accounting Policies).~~


~~(2)~~	~~Includes investments in tax-exempt preferred debt securities issued by investment funds or trusts that~~ ~~predominantly~~ ~~invest in tax-exempt municipal securities. The amortized cost net of allowance for credit losses and fair value of these types of securities was~~ ~~$5.8 billion~~ ~~at both~~ ~~March 31, 2020, and~~ ~~December 31, 2019~~.


~~(3)~~	~~Primarily~~ ~~includes asset-backed securities collateralized by student loans.~~


~~(4)~~	~~Predominantly~~ ~~consists of federal agency mortgage-backed securities at both~~ ~~March 31, 2020~~ ~~and~~ ~~December 31, 2019~~.

~~(5)~~

We held available-for-sale and held-to-maturity debt securities from Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) that each exceeded 10% of stockholders’ equity, with an amortized cost of ~~$102.4 billion~~ ~~and~~ ~~$88.4 billion~~ ~~and a fair value of~~ ~~$107.0 billion~~ ~~and~~ ~~$92.2 billion~~ at ~~March 31, 2020~~ ~~and an amortized cost of~~ ~~$98.5 billion~~ ~~and~~ ~~$84.1 billion~~ ~~and a fair value of~~ ~~$100.3 billion~~ ~~and~~ ~~$85.5 billion~~ at ~~December 31, 2019, respectively.~~

Note 5: Available-for-Sale and Held-to-Maturity Debt Securities (continued)

Table 5.2 details the breakout of purchases of and transfers to held-to-maturity debt securities by major category of security.

Table 5.2: Held-to-Maturity Debt Securities Purchases and Transfers

Quarter ended March 31,
(in millions) 2020
2019
Purchases of held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies $ 3,016
—
Securities of U.S. states and political subdivisions 866
—
Federal agency and other mortgage-backed securities 15,925
16
Total purchases of held-to-maturity debt securities 19,807
16
Transfers from available-for-sale debt securities to held-to-maturity debt securities:
Federal agency and other mortgage-backed securities —
2,407
Total transfers from available-for-sale debt securities to held-to-maturity debt securities $ —
2,407


	Quarter ended September 30,			Nine months ended September 30,
(in millions)	2020		2019	2020		2019
Purchases of held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	$	0	0	$	3,016	0
Securities of U.S. states and political subdivisions	0		491	881		734
Federal agency and other mortgage-backed securities	23,683		3,108	46,578		3,161
Total purchases of held-to-maturity debt securities	23,683		3,599	50,475		3,895
Transfers from available-for-sale debt securities to held-to-maturity debt securities:
Securities of U.S. states and political subdivisions	1,236		4,354	1,236		5,912
Federal agency and other mortgage-backed securities	0		3,408	0		7,921
Total transfers from available-for-sale debt securities to held-to-maturity debt securities	$	1,236	7,762	$	1,236	13,833

Table 5.3 shows the composition of interest income, provision for credit losses, and gross realized gains and losses

from sales and impairment write-downs included in earnings related to available-for-sale and held-to-maturity debt securities (pre-tax).

Table 5.3: Income Statement Impacts for Available-for-Sale and Held-to-Maturity Debt Securities


	Quarter ended September 30,			Nine months ended September 30,
(in millions)	2020		2019	2020		2019
Interest income:
Available-for-sale	$	1,009	1,957	$	4,084	6,268
Held-to-maturity	891		919	2,809		2,797
Total interest income (1)	1,900		2,876	6,893		9,065
Provision for credit losses (2):
Available-for-sale	12		0	140		0
Held-to-maturity	6		0	19		0
Total provision for credit losses	18		0	159		0
Realized gains and losses (3):
Gross realized gains	264		21	768		223
Gross realized losses	0		(12)	(40)		(17)
Impairment write-downs included in earnings:
Credit-related (4)	0		0	0		(23)
Intent-to-sell	0		(6)	(15)		(35)
Total impairment write-downs included in earnings	0		(6)	(15)		(58)
Net realized gains	$	264	3	$	713	148

(1)Total interest income from debt securities excludes interest income from trading debt securities, which is disclosed in Note 4 (Trading Activities).

(2)Prior to our adoption of CECL on January 1, 2020, the provision for credit losses from debt securities was not applicable and is therefore presented as $0 for the prior period. For additional information, see Note 1 (Summary of Significant Accounting Policies).

Quarter ended March 31,
(in millions) 2020
2019
Interest income:
Available-for-sale $ 1,726
2,201
Held-to-maturity 980
947
Total interest income (1) 2,706
3,148
Provision for credit losses (2):
Available-for-sale 168
—
Held-to-maturity 4
—
Total provision for credit losses 172
—
Realized gains and losses (3):
Gross realized gains 256
173
Gross realized losses (4 ) (3 )
Impairment write-downs included in earnings:
Credit-related (4) —
(16 )
Intent-to-sell (15 ) (29 )
Total impairment write-downs included in earnings (15 ) (45 )
Net realized gains $ 237
125
(3)Realized gains and losses relate to available-for-sale debt securities. There were 0 realized gains or losses from held-to-maturity debt securities in all periods presented.


~~(1)~~	~~Total interest income from debt securities excludes interest income from trading debt securities, which is disclosed in Note 4 (Trading Activities).~~

~~(2)~~

~~Prior to our adoption of CECL on January 1, 2020, the provision for credit losses from debt securities was not applicable and is therefore presented as~~ $0 ~~for the prior period. For more~~

(4)For the third quarter and first nine months of 2020, credit-related impairment recognized in earnings is classified as provision for credit losses due to our adoption of CECLon January 1, 2020. For additional information, see Note 1 (Summary of Significant Accounting Policies).


~~(3)~~	~~Realized gains and losses relate to available-for-sale debt securities. There were~~ 0 ~~realized gains or losses from held-to-maturity debt securities in all periods presented.~~


~~(4)~~	~~For the~~ ~~quarter ended March 31, 2020, credit-related impairment recognized in earnings is classified as provision for credit losses due to our adoption of CECLon January 1, 2020. For more information, see Note 1 (Summary of Significant Accounting Policies).~~

~~Note 5: Available-for-Sale and Held-to-Maturity Debt Securities~~ ~~(continued)~~

Credit Quality

We monitor credit quality of debt securities by evaluating various attributes and utilize such information in our evaluation of the appropriateness of the allowance for credit losses. The credit quality indicators that we most closely monitor include credit ratings and delinquency status and are based on information as of our financial statement date.

CREDIT RATINGS Credit ratings express opinions about the credit quality of a debt security. We determine the credit rating of a security according to the lowest credit rating made available by national recognized statistical rating organizations ~~(NRSRO)~~(NRSROs).

Debt securities rated investment grade, that is those with ratings similar to BBB-/Baa3 or above, as defined by ~~NRSRO,~~NRSROs, are generally considered by the rating agencies and market participants to be low credit risk. Conversely, debt securities rated

below investment grade, labeled as “speculative grade” by the rating agencies, are considered to be distinctively higher credit risk than investment grade debt securities.

For debt securities not rated by ~~the NRSRO,~~NRSROs, we determine an internal credit grade of the debt securities (used for credit risk management purposes) equivalent to the credit ratings assigned by major credit agencies. ~~The fair value~~Substantially all of ~~available-for-sale~~our debt securities ~~categorized as investment grade based on internal credit grades was $1.2 billion~~were rated by NRSROs at ~~March 31,~~September 30, 2020, and ~~$2.2 billion at~~ December 31, 2019. Held-to-maturity debt securities categorized as investment grade based on internal credit grades are not significant. If an internal credit grade was not assigned, we categorized the debt security as non-investment grade.

Table 5.4 shows the percentage of fair value of available-for-sale debt securities and amortized cost of held-to-maturity debt

securities determined by those rated investment grade, inclusive of those based on internal credit grades.

Table 5.4: Investment Grade Debt Securities


	Available-for-Sale				Held-to-Maturity
($ in millions)	Fair value		% investment grade		Amortized cost	% investment grade
September 30, 2020
Total portfolio	$	220,573	99	%	182,621	99	%
Breakdown by category:
Securities of U.S. Treasury and federal agencies (1)	$	141,202	100	%	167,489	100	%
Securities of U.S. states and political subdivisions	31,511		99		14,245	100
Collateralized loan obligations	25,014		100		N/A	N/A
All other debt securities (2)	22,846		90		887	7
December 31, 2019
Total portfolio	$	263,459	99	%	153,933	99	%
Breakdown by category:
Securities of U.S. Treasury and federal agencies (1)	$	177,413	100	%	139,619	100	%
Securities of U.S. states and political subdivisions	40,337		99		13,486	100
Collateralized loan obligations	29,055		100		N/A	N/A
All other debt securities (2)	16,654		82		828	4

(1)Includes federal agency mortgage-backed securities.

(2)Includes non-agency mortgage-backed, corporate, and all other debt securities.

Available-for-Sale Held-to-Maturity
($ in millions) Fair value
% investment grade
Amortized cost
% investment grade
March 31, 2020
Total portfolio $ 251,229
99 % 169,920
99 %

Breakdown by category:
Securities of U.S. Treasury and federal agencies (1) $ 171,250
100 % 154,734
100 %
Securities of U.S. states and political subdivisions 38,144
99
14,313
100
Collateralized loan obligations 24,582
100
N/A
N/A
All other debt securities (2) 17,253
82
873
7
December 31, 2019
Total portfolio $ 263,459
99 % 153,933
99 %

Breakdown by category:
Securities of U.S. Treasury and federal agencies (1) $ 177,413
100 % 139,619
100 %
Securities of U.S. states and political subdivisions 40,337
99
13,486
100
Collateralized loan obligations 29,055
100
N/A
N/A
All other debt securities (2) 16,654
82
828
4


~~(1)~~	~~Includes federal agency mortgage-backed securities.~~


~~(2)~~	~~Includes non-agency mortgage-backed, corporate, and all other debt securities.~~

DELINQUENCY STATUS AND NONACCRUAL DEBT SECURITIES Debt security issuers that are delinquent in payment of amounts due under contractual debt agreements have a higher probability of recognition of credit losses. As such, as part of our monitoring of the credit quality of the debt security portfolio, we consider whether debt securities we own are past due in payment of principal or interest payments and whether any securities have been placed into nonaccrual status.

We had 0 debt securities that were past due and still accruing at ~~March 31,~~September 30, 2020 or December 31, 2019. The fair value of available-for-sale debt securities in nonaccrual status was ~~$327~~$98 million and $110 million as of ~~March 31,~~September 30, 2020, and

December 31, 2019, respectively. There were 0 ~~held-to-maturity~~held-to-

maturity debt securities in nonaccrual status as of ~~March 31,~~September 30, 2020, or December 31, 2019. Purchased debt securities with credit deterioration (PCD) are not considered to be in nonaccrual status, as payments from issuers of these securities remain current.

Table 5.5 presents detail of available-for-sale debt securities purchased with credit deterioration during the period. There were 0 available-for-sale debt securities purchased with credit deterioration during third quarter 2020. There were 0 held-to-maturity debt securities purchased with credit deterioration during the third quarter ~~ended March 31,~~and first nine months of 2020. The amounts presented are as of the date of the PCD assets were purchased.

Table 5.5: Debt Securities Purchased with Credit Deterioration

(in millions) Quarter ended March 31, 2020
Available-for-sale debt securities purchased with credit deterioration (PCD):
Par value $ 164
Allowance for credit losses at acquisition (11 )
Discount (or premiums) attributable to other factors 3
Purchase price of available-for-sale debt securities purchased with credit deterioration $ 156


(in millions)	Nine months ended September 30, 2020
Available-for-sale debt securities purchased with credit deterioration (PCD):
Par value	$	164
Allowance for credit losses at acquisition	(11)
Discount (or premiums) attributable to other factors	3
Purchase price of available-for-sale debt securities purchased with credit deterioration	$	156

Note 5: Available-for-Sale and Held-to-Maturity Debt Securities (continued)

Unrealized Losses of Available-for-Sale Debt Securities

Table 5.6 shows the gross unrealized losses and fair value of available-for-sale debt securities by length of time those individual securities in each category have been in a continuous loss position. Debt securities on which we have recorded credit impairment are categorized as being “less than 12 months” or

“12 months or more” in a continuous loss position based on the point in time that the fair value declined to below the (1) for the current period presented, amortized cost basis net of allowance for credit losses, or the (2) for the prior period presented, amortized cost basis.

Table 5.6: Gross Unrealized Losses and Fair Value – Available-for-Sale Debt Securities

Less than 12 months 12 months or more Total
(in millions) Gross unrealized losses
Fair value
Gross unrealized losses
Fair value
Gross unrealized losses
Fair value
March 31, 2020
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies $ (4 ) 615
—
—
(4 ) 615
Securities of U.S. states and political subdivisions (678 ) 22,740
(70 ) 1,490
(748 ) 24,230
Mortgage-backed securities:

Federal agencies (3 ) 594
(12 ) 737
(15 ) 1,331
Residential (44 ) 591
—
—
(44 ) 591
Commercial (228 ) 3,275
(25 ) 243
(253 ) 3,518
Total mortgage-backed securities (275 ) 4,460
(37 ) 980
(312 ) 5,440
Corporate debt securities (263 ) 3,337
(12 ) 129
(275 ) 3,466
Collateralized loan and other debt obligations (1,226 ) 18,303
(542 ) 6,442
(1,768 ) 24,745
Other (91 ) 4,085
(23 ) 618
(114 ) 4,703
Total available-for-sale debt securities $ (2,537 ) 53,540
(684 ) 9,659
(3,221 ) 63,199
December 31, 2019
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies $ —
—
(1 ) 2,423
(1 ) 2,423
Securities of U.S. states and political subdivisions (10 ) 2,776
(26 ) 2,418
(36 ) 5,194
Mortgage-backed securities:
Federal agencies (50 ) 16,807
(114 ) 10,641
(164 ) 27,448
Residential (1 ) 149
—
—
(1 ) 149
Commercial (3 ) 998
(3 ) 244
(6 ) 1,242
Total mortgage-backed securities (54 ) 17,954
(117 ) 10,885
(171 ) 28,839
Corporate debt securities (9 ) 303
(23 ) 216
(32 ) 519
Collateralized loan and other debt obligations (13 ) 5,070
(110 ) 16,789
(123 ) 21,859
Other (12 ) 1,587
(12 ) 492
(24 ) 2,079
Total available-for-sale debt securities $ (98 ) 27,690
(289 ) 33,223
(387 ) 60,913


	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, 2020
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	0	0	0	0	0	0
Securities of U.S. states and political subdivisions	(234)		12,366	(57)	1,817	(291)	14,183
Mortgage-backed securities:
Federal agencies	(71)		15,985	(1)	365	(72)	16,350
Residential	0		0	(1)	58	(1)	58
Commercial	(45)		1,910	(22)	331	(67)	2,241
Total mortgage-backed securities	(116)		17,895	(24)	754	(140)	18,649
Corporate debt securities	(35)		788	(11)	95	(46)	883
Collateralized loan obligations	(208)		16,696	(172)	7,265	(380)	23,961
Other	(34)		6,545	(53)	1,382	(87)	7,927
Total available-for-sale debt securities	$	(627)	54,290	(317)	11,313	(944)	65,603
December 31, 2019
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	0	0	(1)	2,423	(1)	2,423
Securities of U.S. states and political subdivisions	(10)		2,776	(26)	2,418	(36)	5,194
Mortgage-backed securities:
Federal agencies	(50)		16,807	(114)	10,641	(164)	27,448
Residential	(1)		149	0	0	(1)	149
Commercial	(3)		998	(3)	244	(6)	1,242
Total mortgage-backed securities	(54)		17,954	(117)	10,885	(171)	28,839
Corporate debt securities	(9)		303	(23)	216	(32)	519
Collateralized loan obligations	(13)		5,001	(110)	16,789	(123)	21,790
Other	(12)		1,656	(12)	492	(24)	2,148
Total available-for-sale debt securities	$	(98)	27,690	(289)	33,223	(387)	60,913

We have assessed each debt security with gross unrealized losses included in the previous table for credit impairment. As part of that assessment we evaluated and concluded that we do not intend to sell any of the debt securities, and that it is more likely than not that we will not be required to sell, prior to recovery of the amortized cost basis. We evaluate, where necessary, whether credit impairment exists by comparing the present value of the expected cash flows to the debt securities’ amortized cost basis. In prior periods, credit impairment was recorded as a write-down to the amortized cost basis of the security. In the current period, credit impairment is recorded as an allowance for credit ~~losses.~~losses for debt securities.

For descriptions of the factors we consider when analyzing debt securities for impairment as well as methodology and significant inputs used to measure credit losses, see Note 1 (Summary of Significant Accounting Policies).

~~Note 5: Available-for-Sale and Held-to-Maturity Debt Securities~~ ~~(continued)~~

Allowance for Credit Losses for Debt Securities

Table 5.7 presents the allowance for credit losses on available-for-sale and held-to-maturity debt securities.

Table 5.7: Allowance for Credit Losses for Debt Securities


	Quarter ended September 30, 2020			Nine months ended September 30, 2020
(in millions)	Available-for-Sale		Held-to-Maturity	Available-for-Sale		Held-to-Maturity
Balance, beginning of period (1)	$	114	20	$	0	0
Cumulative effect from change in accounting policies (2)	0		0	24		7
Balance, beginning of period, adjusted	114		20	24		7



Provision for credit losses	12		6	140		19
Securities purchased with credit deterioration	0		0	11		0
Reduction due to sales	0		0	(8)		0
Reduction due to intent to sell	(2)		0	(13)		0
Charge-offs	(48)		0	(81)		0

Interest income (3)	3		0	6		0
Balance, end of period (4)	$	79	26	$	79	26

(1)Prior to our adoption of CECL on January 1, 2020, the allowance for credit losses related to available-for-sale and held-to-maturity debt securities was not applicable and is therefore presented as $0 at December 31, 2019. For additional information, see Note 1 (Summary of Significant Accounting Policies).

(2)Represents the impact of adoption of CECL on January 1, 2020. For additional information, see Note 1 (Summary of Significant Accounting Policies).

(3)Certain debt securities with an allowance for credit losses calculated by discounting expected cash flows using the securities’ effective interest rate over its remaining life, recognize changes in the allowance for credit losses attributable to the passage of time as interest income.

(4)The allowance for credit losses for debt securities primarily relates to corporate debt securities as of September 30, 2020.

Quarter ended March 31, 2020
(in millions) Available-for-Sale
Held-to-Maturity
Balance, beginning of period (1) $ —
—
Cumulative effect from change in accounting policies (2) 24
7
Balance, beginning of period, adjusted 24
7
Provision for credit losses 168
4
Securities purchased with credit deterioration 11
—
Reduction due to intent to sell (11 ) —
Charge-offs (32 ) —
Interest income (3) 1
—
Balance, end of period (4) $ 161
11


~~(1)~~	~~Prior to our adoption of CECL on January 1, 2020, the allowance for credit losses related to available-for-sale and held-to-maturity debt securities was not applicable and is therefore presented as~~ $0 ~~at December 31, 2019. For more information, see Note 1 (Summary of Significant Accounting Policies).~~ Note 5: Available-for-Sale and Held-to-Maturity Debt Securities (continued)


~~(2)~~	~~Represents the impact of adoption of CECL on January 1, 2020. For more information, see Note 1 (Summary of Significant Accounting Policies).~~


~~(3)~~	Certain debt securities with an allowance for credit losses calculated by discounting expected cash flows using the securities’ effective interest rate over its remaining life, recognize changes in the allowance for credit losses attributable to the passage of time as interest income.


~~(4)~~	~~Substantially all of allowance for credit losses for debt securities relates to~~ ~~corporate debt securities~~ ~~as of~~ ~~March 31, 2020~~.

Contractual Maturities

Table 5.8 shows the remaining contractual maturities, amortized cost net of allowance for credit losses, fair value and ~~weighted-average~~weighted average effective yields of available-for-sale debt securities. The remaining contractual principal maturities for MBS do not

consider prepayments. Remaining expected maturities will differ

from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature.

Table 5.8: Contractual Maturities – Available-for-Sale Debt Securities


By remaining contractual maturity ($ in millions)	Total			Within one year	After one year through five years	After five years through ten years	After ten years
September 30, 2020
Available-for-sale debt securities (1):
Securities of U.S. Treasury and federal agencies
Amortized cost, net	$	5,826		511	2,771	10	2,534
Fair value	5,975			511	2,777	11	2,676
Weighted average yield	0.99		%	2.61	0.28	2.34	1.42
Securities of U.S. states and political subdivisions
Amortized cost, net	$	31,563		2,748	3,193	3,558	22,064
Fair value	31,511			2,754	3,246	3,570	21,941
Weighted average yield	2.34		%	1.37	1.74	1.46	2.68
Mortgage-backed securities:
Federal agencies
Amortized cost, net	$	130,717		0	138	2,766	127,813
Fair value	135,227			0	146	2,865	132,216
Weighted average yield	3.01		%	0	3.24	2.34	3.02
Residential
Amortized cost, net	$	539		0	0	0	539
Fair value	541			0	0	0	541
Weighted average yield	2.24		%	0	0	0	2.24
Commercial
Amortized cost, net	$	3,393		0	0	161	3,232
Fair value	3,343			0	0	159	3,184
Weighted average yield	2.16		%	0	0	1.63	2.18
Total mortgage-backed securities
Amortized cost, net	$	134,649		0	138	2,927	131,584
Fair value	139,111			0	146	3,024	135,941
Weighted average yield	2.98		%	0	3.24	2.30	3.00
Corporate debt securities
Amortized cost, net	$	5,687		207	2,390	2,301	789
Fair value	5,772			208	2,459	2,326	779
Weighted average yield	4.75		%	6.41	4.88	4.61	4.36
Collateralized loan obligations
Amortized cost, net	$	25,389		0	249	12,901	12,239
Fair value	25,014			0	248	12,731	12,035
Weighted average yield	1.67		%	0	2.40	1.75	1.57
Other
Amortized cost, net	$	13,197		8,991	457	1,087	2,662
Fair value	13,190			8,985	446	1,078	2,681
Weighted average yield	0.42		%	(0.15)	1.76	1.03	1.84
Total available-for-sale debt securities
Amortized cost, net	$	216,311		12,457	9,198	22,784	171,872
Fair value	220,573			12,458	9,322	22,740	176,053
Weighted average yield	2.57		%	0.41	2.17	2.03	2.82

(1)Weighted average yields displayed by maturity bucket are weighted based on amortized cost without effect for any related hedging derivatives and are shown pre-tax.

By remaining contractual maturity ($ in millions) Total
Within one year

After one year
through five years

After five years
through ten years

After ten years
March 31, 2020
Available-for-sale debt securities (1):
Securities of U.S. Treasury and federal agencies
Amortized cost, net $ 10,952
8,023
28
45
2,856
Fair value 11,036
8,029
29
49
2,929
Weighted average yield 2.10 % 2.32
1.97
1.84
1.49
Securities of U.S. states and political subdivisions
Amortized cost, net 38,686
3,940
4,196
4,034
26,516
Fair value 38,144
3,963
4,244
4,039
25,898
Weighted average yield 3.15
4.58
3.20
2.78
2.98
Mortgage-backed securities:
Federal agencies
Amortized cost, net 154,390
2
123
1,944
152,321
Fair value 160,214
2
128
2,005
158,079
Weighted average yield 3.19
1.93
3.06
2.44
3.20
Residential
Amortized cost, net 820
—
—
—
820
Fair value 776
—
—
—
776
Weighted average yield 3.19
—
—
—
3.19
Commercial
Amortized cost, net 3,897
—
32
194
3,671
Fair value 3,654
—
31
187
3,436
Weighted average yield 2.62
—
2.49
2.71
2.62
Total mortgage-backed securities
Amortized cost, net 159,107
2
155
2,138
156,812
Fair value 164,644
2
159
2,192
162,291
Weighted average yield 3.18
1.93
2.94
2.46
3.19
Corporate debt securities
Amortized cost, net 6,092
373
2,048
2,847
824
Fair value 5,855
355
1,973
2,755
772
Weighted average yield 4.97
4.12
5.18
5.03
4.67
Collateralized loan and other debt obligations
Amortized cost, net 26,873
—
—
12,014
14,859
Fair value 25,168
—
—
11,362
13,806
Weighted average yield 3.21
—
—
3.29
3.15
Other
Amortized cost, net 6,477
2,021
704
1,296
2,456
Fair value 6,382
2,021
685
1,287
2,389
Weighted average yield 1.51
(0.22 ) 2.95
1.41
2.57
Total available-for-sale debt securities
Amortized cost, net $ 248,187
14,359
7,131
22,374
204,323
Fair value 251,229
14,370
7,090
21,684
208,085
Weighted average yield 3.13 % 2.63
3.75
3.24
3.14


~~(1)~~	~~Weighted-average yields displayed by maturity bucket are weighted based on amortized cost without effect for any related hedging derivatives and are shown pre-tax.~~

~~Note 5: Available-for-Sale and Held-to-Maturity Debt Securities~~ ~~(continued)~~

Table 5.9 shows the remaining contractual maturities, amortized cost net of allowance for credit losses, fair value, and

~~weighted-average~~ weighted average effective yields of held-to-maturity debt securities.

Table 5.9: Contractual Maturities – Held-to-Maturity Debt Securities


By remaining contractual maturity ($ in millions)	Total			Within one year	After one year through five years	After five years through ten years	After ten years
September 30, 2020
Held-to-maturity debt securities (1):
Securities of U.S. Treasury and federal agencies
Amortized cost, net	$	48,587		24,742	20,064	0	3,781
Fair value	50,287			25,051	21,275	0	3,961
Weighted average yield	2.14		%	2.19	2.19	0	1.57
Securities of U.S. states and political subdivisions
Amortized cost, net	$	14,232		292	1,006	1,830	11,104
Fair value	14,910			295	1,059	1,932	11,624
Weighted average yield	2.72		%	2.36	2.59	2.93	2.71
Federal agency and other mortgage-backed securities
Amortized cost, net	$	119,766		0	15	0	119,751
Fair value	124,227			0	14	0	124,213
Weighted average yield	2.65		%	0	1.50	0	2.65
Other debt securities
Amortized cost, net	$	10		0	0	10	0
Fair value	10			0	0	10	0
Weighted average yield	1.45		%	0	0	1.45	0
Total held-to-maturity debt securities
Amortized cost, net	$	182,595		25,034	21,085	1,840	134,636
Fair value	189,434			25,346	22,348	1,942	139,798
Weighted average yield	2.52		%	2.19	2.21	2.92	2.62

(1)Weighted average yields displayed by maturity bucket are weighted based on amortized cost and are shown pre-tax.

By remaining contractual maturity ($ in millions) Total
Within one year

After one year
through five years

After five years
through ten years

After ten years
March 31, 2020
Held-to-maturity debt securities (1):
Securities of U.S. Treasury and federal agencies
Amortized cost, net $ 48,569
8,336
36,454
—
3,779
Fair value 50,691
8,494
38,170
—
4,027
Weighted average yield 2.14 % 2.24
2.18
—
1.56
Securities of U.S. states and political subdivisions
Amortized cost, net 14,304
11
713
1,724
11,856
Fair value 14,611
11
731
1,794
12,075
Weighted average yield 2.71
1.95
2.22
2.86
2.72
Federal agency and other mortgage-backed securities
Amortized cost, net 107,013
—
15
104
106,894
Fair value 112,238
—
13
111
112,114
Weighted average yield 2.96
—
2.99
1.37
2.96
Other debt securities
Amortized cost, net 23
—
—
23
—
Fair value 22
—
—
22
—
Weighted average yield 3.01
—
—
3.01
—
Total held-to-maturity debt securities
Amortized cost, net $ 169,909
8,347
37,182
1,851
122,529
Fair value 177,562
8,505
38,914
1,927
128,216
Weighted average yield 2.70 % 2.24
2.18
2.78
2.89


~~(1)~~			~~Weighted-average yields displayed by maturity bucket are weighted based on amortized cost and are shown pre-tax.~~

Note 6: Loans and Related Allowance for Credit Losses

Table 6.1 presents total loans outstanding by portfolio segment and class of financing receivable. Outstanding balances include unearned income, net deferred loan fees or costs, and unamortized discounts and premiums. These amounts were less than 1% of our total loans outstanding at ~~March 31,~~September 30, 2020, and December 31, 2019.

Outstanding balances exclude accrued interest receivable on loans, ~~which are included in other assets.~~ except for certain revolving loans, such as credit card loans.

During the ~~quarter ended~~

~~March 31,~~first nine months of 2020, we reversed accrued interest receivable by reversing interest income of $9$29 million for our commercial portfolio segment and ~~$63~~$161 million for our consumer portfolio segment. See Note 9 (Other Assets) for additional information on accrued interest receivable.

Table 6.1: Loans Outstanding


(in millions)	Mar 31, 2020		Dec 31, 2019	(in millions)	Sep 30, 2020		Dec 31, 2019
Commercial:				Commercial:
Commercial and industrial	$	405,020	354,125	Commercial and industrial	$	320,913	354,125
Real estate mortgage	122,767		121,824	Real estate mortgage	121,910		121,824
Real estate construction	20,812		19,939	Real estate construction	22,519		19,939
Lease financing	19,136		19,831	Lease financing	16,947		19,831
Total commercial	567,735		515,719	Total commercial	482,289		515,719
Consumer:				Consumer:
Real estate 1-4 family first mortgage	292,920		293,847	Real estate 1-4 family first mortgage	294,990		293,847
Real estate 1-4 family junior lien mortgage	28,527		29,509	Real estate 1-4 family junior lien mortgage	25,162		29,509
Credit card	38,582		41,013	Credit card	36,021		41,013
Automobile	48,568		47,873	Automobile	48,450		47,873
Other revolving credit and installment	33,511		34,304	Other revolving credit and installment	33,170		34,304
Total consumer	442,108		446,546	Total consumer	437,793		446,546
Total loans	$	1,009,843	962,265	Total loans	$	920,082	962,265

Our non-U.S. loans are reported by respective class of financing receivable in the table above. Substantially all of our non-U.S. loan portfolio is commercial loans. Table 6.2 presents total non-U.S. commercial loans outstanding by class of financing receivable.

Table 6.2: Non-U.S. Commercial Loans Outstanding


(in millions)	Sep 30, 2020		Dec 31, 2019
Non-U.S. Commercial Loans
Commercial and industrial	$	61,594	70,494
Real estate mortgage	6,228		7,004
Real estate construction	1,898		1,434
Lease financing	1,156		1,220
Total non-U.S. commercial loans	$	70,876	80,152

(in millions) Mar 31,
2020
Dec 31,
2019
Non-U.S. Commercial Loans
Commercial and industrial $ 78,753
70,494
Real estate mortgage 6,309
7,004
Real estate construction 1,478
1,434
Lease financing 1,120
1,220
Total non-U.S. commercial loans $ 87,660
80,152

~~Note 6: Loans and Related Allowance for Credit Losses~~ ~~(continued)~~

Loan Purchases, Sales, and Transfers

Table 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. The table excludes loans for which we have elected the fair value option and government insured/guaranteed real estate 1-4 family first mortgage loans because

their loan activity normally does not impact the ACL. In the first ~~quarter~~nine months of 2020, we sold ~~$709 million~~$1.2 billion of 1-4 family first mortgage loans for a gain of ~~$463~~$724 million, which is included in other noninterest income on our consolidated income statement. These whole loans were ~~reclassified to~~designated as MLHFS in 2019.

Table 6.3: Loan Purchases, Sales, and Transfers

2020 2019
(in millions) Commercial
Consumer
Total
Commercial
Consumer
Total
Quarter ended March 31,
Purchases $ 341
1
342
329
3
332
Sales (813 ) (26 ) (839 ) (421 ) (179 ) (600 )
Transfers (to) from MLHFS/LHFS 77
2
79
(3 ) —
(3 )


	2020				2019
(in millions)	Commercial		Consumer	Total	Commercial	Consumer	Total
Quarter ended September 30,
Purchases	$	260	2	262	571	910	1,481
Sales	(564)		0	(564)	(433)	(85)	(518)
Transfers (to) from MLHFS/LHFS	(170)		8,990	8,820	(25)	(37)	(62)
Nine months ended September 30,
Purchases	$	1,034	5	1,039	1,570	918	2,488
Sales	(3,334)		(27)	(3,361)	(1,389)	(417)	(1,806)
Transfers (to) from MLHFS/LHFS	(101)		(1,387)	(1,488)	(117)	(1,889)	(2,006)

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. The unfunded amount of these temporary advance arrangements totaled approximately ~~$72.7~~$79.9 billion at ~~March 31,~~September 30, 2020.

We issue commercial letters of credit to assist customers in purchasing goods or services, typically for international trade. At ~~March 31,~~September 30, 2020, and December 31, 2019, we had ~~$981.3~~$942 million and $862 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 13 (Guarantees, Pledged Assets and 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 are not funded. 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 6.4. The table excludes the issued standby and commercial letters of credit and temporary advance arrangements described above.

Table 6.4: Unfunded Credit Commitments


(in millions)	Sep 30, 2020		Dec 31, 2019
Commercial:
Commercial and industrial	$	359,827	346,991
Real estate mortgage	8,420		8,206
Real estate construction	16,028		17,729

Total commercial	384,275		372,926
Consumer:
Real estate 1-4 family first mortgage	30,853		34,391
Real estate 1-4 family junior lien mortgage	34,452		36,916
Credit card	121,312		114,933
Other revolving credit and installment	22,239		25,898
Total consumer	208,856		212,138
Total unfunded credit commitments	$	593,131	585,064

Note 6: Loans and Related Allowance for Credit Losses (continued)

(in millions) Mar 31,
2020
Dec 31,
2019
Commercial:
Commercial and industrial $ 314,135
346,991
Real estate mortgage 9,360
8,206
Real estate construction 17,236
17,729
Total commercial 340,731
372,926
Consumer:
Real estate 1-4 family first mortgage 42,691
34,391
Real estate 1-4 family
junior lien mortgage
36,301
36,916
Credit card 118,339
114,933
Other revolving credit and installment 25,187
25,898
Total consumer 222,518
212,138
Total unfunded credit commitments $ 563,249
585,064

Allowance for Credit Losses for Loans

Table 6.5 presents the allowance for credit losses for loans, which consists of the allowance for loan losses and the allowance for unfunded credit commitments. On January 1, 2020, we adopted CECL. Additional information onregarding our adoption of CECL is included in Note 1 (Summary of Significant Accounting Policies). ~~In first quarter 2020, after the adoption of CECL, we added a net $2.9 billion to our~~

The ACL for loans ~~predominantly~~increased $10.0 billion from December 31, 2019, driven by a $11.3 billion increase in the

~~expected impacts from~~ ACL for loans in the first nine months of 2020 reflecting current and forecasted economic conditions due to the COVID-19 ~~pandemic. These expected impacts were most significantly affected~~pandemic, partially offset by ~~anticipated changes to economic variables,~~a $1.3 billion decrease as well as higher expected losses from certain industries in our commercial portfolio segment that we expect to be directly and most adversely affected by the COVID-19 pandemic. In addition, the increase included expected impacts on oil and gas loans due to lower oil prices and deteriorating credit trends.a result of adopting CECL.

Table 6.5: Allowance for Credit Losses for Loans


	Quarter ended September 30,				Nine months ended September 30,
(in millions)	2020			2019	2020	2019
Balance, beginning of period	$	20,436		10,603	10,456	10,707
Cumulative effect from change in accounting policies (1)	0			0	(1,337)	0
Allowance for purchased credit-deteriorated (PCD) loans (2)	0			0	8	0
Balance, beginning of period, adjusted	20,436			10,603	9,127	10,707
Provision for credit losses	751			695	14,149	2,043

Interest income on certain loans (3)	(41)			(34)	(117)	(112)
Loan charge-offs:
Commercial:
Commercial and industrial	(327)			(209)	(1,260)	(590)
Real estate mortgage	(59)			(2)	(134)	(28)
Real estate construction	0			0	0	(1)
Lease financing	(34)			(12)	(66)	(35)
Total commercial	(420)			(223)	(1,460)	(654)
Consumer:
Real estate 1-4 family first mortgage	(20)			(31)	(63)	(101)
Real estate 1-4 family junior lien mortgage	(22)			(27)	(70)	(90)
Credit card	(339)			(404)	(1,225)	(1,278)
Automobile	(99)			(156)	(413)	(485)
Other revolving credit and installment	(94)			(168)	(372)	(497)
Total consumer	(574)			(786)	(2,143)	(2,451)
Total loan charge-offs	(994)			(1,009)	(3,603)	(3,105)
Loan recoveries:
Commercial:
Commercial and industrial	53			62	132	151
Real estate mortgage	3			10	13	26
Real estate construction	2			8	19	13
Lease financing	6			4	14	15
Total commercial	64			84	178	205
Consumer:
Real estate 1-4 family first mortgage	21			36	65	148
Real estate 1-4 family junior lien mortgage	36			49	101	140
Credit card	94			85	276	258
Automobile	68			80	194	266
Other revolving credit and installment	28			30	84	95
Total consumer	247			280	720	907
Total loan recoveries	311			364	898	1,112
Net loan charge-offs	(683)			(645)	(2,705)	(1,993)
Other	8			(6)	17	(32)
Balance, end of period	$	20,471		10,613	20,471	10,613
Components:
Allowance for loan losses	$	19,463		9,715	19,463	9,715
Allowance for unfunded credit commitments	1,008			898	1,008	898
Allowance for credit losses for loans	$	20,471		10,613	20,471	10,613
Net loan charge-offs (annualized) as a percentage of average total loans	0.29		%	0.27	0.38	0.28
Allowance for loan losses as a percentage of total loans	2.12			1.02	2.12	1.02
Allowance for credit losses for loans as a percentage of total loans	2.22			1.11	2.22	1.11

(1)Represents the overall decrease in our allowance for credit losses for loans as a result of our adoption of CECL on January 1, 2020.

(2)Represents the allowance estimated for PCI loans that automatically became PCD loans with the adoption of CECL. For additional information, see Note 1 (Summary of Significant Accounting Policies).

(3)Loans with an allowance measured 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.

Quarter ended March 31,
(in millions) 2020
2019
Balance, beginning of period 10,456
10,707
Cumulative effect from change in accounting policies (1) (1,337 ) —
Allowance for purchased credit-deteriorated (PCD) loans (2) 8
—
Balance, beginning of period, adjusted 9,127
10,707
Provision for credit losses 3,833
845
Interest income on certain loans (3) (38 ) (39 )
Loan charge-offs:
Commercial:
Commercial and industrial (377 ) (176 )
Real estate mortgage (3 ) (12 )
Real estate construction —
(1 )
Lease financing (13 ) (11 )
Total commercial (393 ) (200 )
Consumer:
Real estate 1-4 family first mortgage (23 ) (43 )
Real estate 1-4 family junior lien mortgage (30 ) (34 )
Credit card (471 ) (437 )
Automobile (156 ) (187 )
Other revolving credit and installment (165 ) (162 )
Total consumer (845 ) (863 )
Total loan charge-offs (1,238 ) (1,063 )
Loan recoveries:
Commercial:
Commercial and industrial 44
43
Real estate mortgage 5
6
Real estate construction 16
3
Lease financing 4
3
Total commercial 69
55
Consumer:
Real estate 1-4 family first mortgage 26
55
Real estate 1-4 family junior lien mortgage 35
43
Credit card 94
85
Automobile 74
96
Other revolving credit and installment 31
34
Total consumer 260
313
Total loan recoveries 329
368
Net loan charge-offs (909 ) (695 )
Other 9
3
Balance, end of period 12,022
10,821
Components:
Allowance for loan losses 11,263
9,900
Allowance for unfunded credit commitments 759
921
Allowance for credit losses for loans 12,022
10,821
Net loan charge-offs (annualized) as a percentage of average total loans 0.38
0.30
Allowance for loan losses as a percentage of total loans 1.12
1.04
Allowance for credit losses for loans as a percentage of total loans 1.19
1.14


~~(1)~~	~~Represents the overall decrease in our allowance for credit losses for loans as a result of our adoption of CECL on January 1, 2020.~~


~~(2)~~	~~Represents the allowance estimated for PCI loans that automatically became PCD loans with the adoption of CECL. For more information, see Note 1 (Summary of Significant Accounting Policies).~~


~~(3)~~	Loans with an allowance measured 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.

~~Note 6: Loans and Related Allowance for Credit Losses~~ ~~(continued)~~

Table 6.6 summarizes the activity in the allowance for credit losses for loans by our commercial and consumer portfolio segments.

Table 6.6: Allowance for Credit Losses for Loans Activity by Portfolio Segment


				2020			2019
(in millions)	Commercial		Consumer	Total	Commercial	Consumer	Total
Quarter ended September 30,
Balance, beginning of period	$	11,669	8,767	20,436	6,298	4,305	10,603



Provision for credit losses	241		510	751	84	611	695
Interest income on certain loans (1)	(18)		(23)	(41)	(10)	(24)	(34)
Loan charge-offs	(420)		(574)	(994)	(223)	(786)	(1,009)
Loan recoveries	64		247	311	84	280	364
Net loan charge-offs	(356)		(327)	(683)	(139)	(506)	(645)
Other	6		2	8	(3)	(3)	(6)
Balance, end of period	$	11,542	8,929	20,471	6,230	4,383	10,613
Nine months ended September 30,
Balance, beginning of period	$	6,245	4,211	10,456	6,417	4,290	10,707
Cumulative effect from change in accounting policies (1)	(2,861)		1,524	(1,337)	0	0	0
Allowance for purchased credit-deteriorated (PCD) loans (2)	0		8	8	0	0	0
Balance, beginning of period, adjusted	3,384		5,743	9,127	6,417	4,290	10,707
Provision for credit losses	9,480		4,669	14,149	294	1,749	2,043
Interest income on certain loans (3)	(44)		(73)	(117)	(35)	(77)	(112)

Loan charge-offs	(1,460)		(2,143)	(3,603)	(654)	(2,451)	(3,105)
Loan recoveries	178		720	898	205	907	1,112
Net loan charge-offs	(1,282)		(1,423)	(2,705)	(449)	(1,544)	(1,993)
Other	4		13	17	3	(35)	(32)
Balance, end of period	$	11,542	8,929	20,471	6,230	4,383	10,613

2020
2019
(in millions) Commercial
Consumer
Total
Commercial
Consumer
Total
Quarter ended March 31,
Balance, beginning of period $ 6,245
4,211
10,456
6,417
4,290
10,707
Cumulative effect from change in accounting policies (1) (2,861 ) 1,524
(1,337 ) —
—
—
Allowance for purchased credit-deteriorated (PCD) loans (2) —
8
8
—
—
—
Balance, beginning of period, adjusted 3,384
5,743
9,127
6,417
4,290
10,707
Provision for credit losses 2,240
1,593
3,833
164
681
845
Interest income on certain loans (3) (14 ) (24 ) (38 ) (11 ) (28 ) (39 )

Loan charge-offs (393 ) (845 ) (1,238 ) (200 ) (863 ) (1,063 )
Loan recoveries 69
260
329
55
313
368
Net loan charge-offs (324 ) (585 ) (909 ) (145 ) (550 ) (695 )
Other (7 ) 16
9
3
—
3
Balance, end of period $ 5,279
$ 6,743
$ 12,022
$ 6,428
$ 4,393
$ 10,821

(1)Represents the overall decrease in our allowance for credit losses for loans as a result of our adoption of CECL on January 1, 2020.


~~(1)~~	~~Represents the overall decrease in our allowance for credit losses for loans as a result of our adoption of CECL on January 1, 2020.~~


~~(2)~~	~~Represents the allowance estimated for PCI loans that automatically became PCD loans with the adoption of CECL. For more information, see Note 1 (Summary of Significant Accounting Policies).~~


~~(3)~~	Loans with an allowance measured 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)Represents the allowance estimated for PCI loans that automatically became PCD loans with the adoption of CECL. For additional information, see Note 1 (Summary of Significant Accounting Policies).

Table 6.7 disaggregates our allowance for credit losses for loans and recorded investment in loans by impairment methodology. This information is no longer relevant after December 31, 2019,

given our adoption of CECL on January 1, 2020, which has a single impairment methodology.

Table 6.7: Allowance for Credit Losses for Loans by Impairment Methodology


	Allowance for credit losses for loans				Recorded investment in loans				Allowance for credit losses for loans				Recorded investment in loans
(in millions)	Commercial		Consumer	Total	Commercial	Consumer	Total	(in millions)	Commercial		Consumer	Total	Commercial	Consumer	Total
December 31, 2019								December 31, 2019
Collectively evaluated (1)	$	5,778	3,364	9,142	512,586	436,081	948,667	Collectively evaluated (1)	$	5,778	3,364	9,142	512,586	436,081	948,667
Individually evaluated (2)	467		847	1,314	3,133	9,897	13,030	Individually evaluated (2)	467		847	1,314	3,133	9,897	13,030
PCI (3)	—		—	—	—	568	568	PCI (3)	0		0	0	0	568	568
Total	$	6,245	4,211	10,456	515,719	446,546	962,265	Total	$	6,245	4,211	10,456	515,719	446,546	962,265


~~(1)~~	~~Represents non-impaired loans evaluated collectively for impairment.~~


~~(2)~~	~~Represents impaired loans evaluated individually for impairment.~~


~~(3)~~	~~Represents the allowance for loan losses and related loan carrying value for PCI loans.~~

(1)Represents non-impaired loans evaluated collectively for impairment.

(2)Represents impaired loans evaluated individually for impairment.

(3)Represents the allowance for loan losses and related loan carrying value for PCI loans.

Note 6: Loans and Related Allowance for Credit Losses (continued)

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 ~~December 31, 2019.~~June 30, 2020. Amounts disclosed in the credit quality tables that follow are not comparative between reported periods due to our adoption of CECL on January 1, 2020. For ~~more~~additional information, see Note 1 (Summary of Significant Accounting Policies).

COMMERCIAL CREDIT QUALITY INDICATORS 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, which is our primary credit quality indicator. Our ratings are aligned to federal banking regulators’ definitions of pass and criticized categories with the criticized category including special mention, substandard, doubtful, and loss categories.

Table 6.8 provides ~~a breakdown~~the outstanding balances of ~~outstanding~~our commercial ~~loans~~loan portfolio by risk category. In connection with our adoption of CECL, credit quality information is provided with the year of origination for term loans. Revolving loans may convert to term loans as a result of a contractual provision in the original loan agreement or if modified in a TDR. At September 30, 2020, we had $444.9 billion and $37.3 billion of pass and criticized loans, respectively.

Table 6.8: Commercial Loans Categories by Risk Categories and Vintage (1)


	Term loans by origination year								Revolving loans	Revolving loans converted to term loans	Total
(in millions)	2020		2019	2018	2017	2016		Prior
September 30, 2020
Commercial and industrial
Pass	$	46,064	39,124	18,498	8,711	4,905		5,748	172,440	2,546	298,036
Criticized	1,591		2,010	1,893	1,207	915		428	14,645	188	22,877
Total commercial and industrial	47,655		41,134	20,391	9,918	5,820		6,176	187,085	2,734	320,913
Real estate mortgage
Pass	15,269		27,768	20,335	12,452	13,232		16,833	4,831	6	110,726
Criticized	1,307		2,106	2,033	1,361	1,393		2,507	477	0	11,184
Total real estate mortgage	16,576		29,874	22,368	13,813	14,625		19,340	5,308	6	121,910
Real estate construction
Pass	4,244		6,828	5,248	2,139	618		399	1,506	3	20,985
Criticized	123		416	518	96	371		10	0	0	1,534
Total real estate construction	4,367		7,244	5,766	2,235	989		409	1,506	3	22,519
Lease financing
Pass	2,958		4,276	2,496	1,759	1,381		2,324	0	0	15,194
Criticized	254		533	469	249	151		97	0	0	1,753
Total lease financing	3,212		4,809	2,965	2,008	1,532		2,421	0	0	16,947
Total commercial loans	$	71,810	83,061	51,490	27,974	22,966		28,346	193,899	2,743	482,289
						Commercial and industrial		Real estate mortgage	Real estate construction	Lease financing	Total
December 31, 2019
By risk category:
Pass						$	338,740	118,054	19,752	18,655	495,201
Criticized						15,385		3,770	187	1,176	20,518
Total commercial loans						$	354,125	121,824	19,939	19,831	515,719

Term loans by origination year Revolving loans
Revolving loans converted to term loans
Total
(in millions) 2020
2019
2018
2017
2016
Prior

March 31, 2020
Commercial and industrial
Pass $ 32,531
53,904
23,788
11,603
7,815
5,061
250,893
209
385,804
Criticized 885
1,053
948
721
433
458
14,718
—
19,216
Total commercial and industrial 33,416
54,957
24,736
12,324
8,248
5,519
265,611
209
405,020
Real estate mortgage
Pass 7,336
31,320
23,268
14,577
15,376
21,087
5,563
128
118,655
Criticized 60
452
515
741
546
1,525
273
—
4,112
Total real estate mortgage 7,396
31,772
23,783
15,318
15,922
22,612
5,836
128
122,767
Real estate construction
Pass 1,293
7,226
5,528
3,024
1,290
472
1,750
7
20,590
Criticized 2
98
93
6
8
14
1
—
222
Total real estate construction 1,295
7,324
5,621
3,030
1,298
486
1,751
7
20,812
Lease financing
Pass 1,439
5,566
3,769
2,447
1,844
2,739
—
—
17,804
Criticized 83
422
365
196
139
127
—
—
1,332
Total lease financing 1,522
5,988
4,134
2,643
1,983
2,866
—
—
19,136
Total commercial loans $ 43,629
100,041
58,274
33,315
27,451
31,483
273,198
344
567,735
Commercial
and
industrial
Real
estate
mortgage
Real
estate
construction
Lease
financing
Total
December 31, 2019
By risk category:
Pass $ 338,740
118,054
19,752
18,655
495,201
Criticized 15,385
3,770
187
1,176
20,518
Total commercial loans $ 354,125
121,824
19,939
19,831
515,719
(1)Disclosure is not comparative due to our adoption of CECL on January 1, 2020. For additional information, see Note 1 (Summary of Significant Accounting Policies).


~~(1)~~	~~Disclosure is not comparative due to our adoption of CECL on January 1, 2020. For more information, see Note 1 (Summary of Significant Accounting Policies).~~

~~Note 6: Loans and Related Allowance for Credit Losses~~ ~~(continued)~~

Table 6.9 provides past due information for commercial loans, which we monitor as part of our credit risk management

practices; however, delinquency is not a primary credit quality indicator for commercial loans. Payment deferral activities instituted in response to the COVID-19 pandemic may delay recognition of delinquencies for customers who otherwise would have moved into past due status.

Table 6.9: Commercial Loan Categories by Delinquency Status

(in millions)
Commercial
and
industrial

Real
estate
mortgage

Real
estate
construction

Lease
financing

Total
March 31, 2020
By delinquency status:
Current-29 days past due (DPD) and still accruing $ 402,706
121,621
20,696
18,793
563,816
30-89 DPD and still accruing 511
174
94
212
991
90+ DPD and still accruing 24
28
1
—
53
Nonaccrual loans 1,779
944
21
131
2,875
Total commercial loans $ 405,020
122,767
20,812
19,136
567,735
December 31, 2019
By delinquency status:
Current-29 DPD and still accruing $ 352,110
120,967
19,845
19,484
512,406
30-89 DPD and still accruing 423
253
53
252
981
90+ DPD and still accruing 47
31
—
—
78
Nonaccrual loans 1,545
573
41
95
2,254
Total commercial loans $ 354,125
121,824
19,939
19,831
515,719


(in millions)	Commercial and industrial		Real estate mortgage	Real estate construction	Lease financing	Total
September 30, 2020
By delinquency status:
Current-29 days past due (DPD) and still accruing	$	317,563	120,055	22,252	16,518	476,388
30-89 DPD and still accruing	455		465	233	242	1,395
90+ DPD and still accruing	61		47	0	0	108
Nonaccrual loans	2,834		1,343	34	187	4,398
Total commercial loans	$	320,913	121,910	22,519	16,947	482,289
December 31, 2019
By delinquency status:
Current-29 DPD and still accruing	$	352,110	120,967	19,845	19,484	512,406
30-89 DPD and still accruing	423		253	53	252	981
90+ DPD and still accruing	47		31	0	0	78
Nonaccrual loans	1,545		573	41	95	2,254
Total commercial loans	$	354,125	121,824	19,939	19,831	515,719

CONSUMER CREDIT QUALITY INDICATORS We have various classes of consumer loans that present unique credit risks. Loan delinquency, FICO credit scores and LTV for 1-4 family mortgage loans are the primary 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~~in the establishment of our allowance for credit losses.

Table 6.10 provides the outstanding balances of our consumer loan portfolio by delinquency status. Payment deferral activities instituted in response to the COVID-19 pandemic may delay recognition of delinquencies for customers who otherwise would have moved into past due status.

In connection with our adoption of CECL, credit quality information is provided with the year of origination for term loans. Revolving loans may convert to term loans as a result of a contractual provision in the original loan agreement or if modified in a TDR. The revolving loans converted to term loans in the credit card loan category represent credit card loans with modified terms that require payment over a specific term.

Note 6: Loans and Related Allowance for Credit Losses (continued)

Table 6.10: Consumer Loan Categories by Delinquency Status and Vintage (1)


	Term loans by origination year							Revolving loans	Revolving loans converted to term loans
(in millions)	2020		2019	2018	2017	2016	Prior			Total
September 30, 2020
Real estate 1-4 family first mortgage
By delinquency status:
Current-29 DPD	$	42,388	49,009	17,902	28,860	34,728	77,341	7,300	1,906	259,434
30-59 DPD	40		84	36	61	64	723	28	42	1,078
60-89 DPD	1		6	2	7	17	236	13	23	305
90-119 DPD	2		6	2	7	2	194	9	19	241
120-179 DPD	3		4	6	3	9	222	8	22	277
180+ DPD	1		0	4	15	14	543	12	129	718
Government insured/guaranteed loans (2)	204		794	969	1,248	2,646	27,076	0	0	32,937
Total real estate 1-4 family first mortgage	42,639		49,903	18,921	30,201	37,480	106,335	7,370	2,141	294,990
Real estate 1-4 family junior mortgage
By delinquency status:
Current-29 DPD	16		41	47	43	35	1,255	16,896	6,302	24,635
30-59 DPD	1		0	0	0	0	23	57	86	167
60-89 DPD	0		0	0	0	0	10	24	50	84
90-119 DPD	0		0	0	0	0	8	14	29	51
120-179 DPD	0		0	0	0	0	11	12	42	65
180+ DPD	0		0	0	0	1	14	17	128	160
Total real estate 1-4 family junior mortgage	17		41	47	43	36	1,321	17,020	6,637	25,162
Credit cards
By delinquency status:
Current-29 DPD	0		0	0	0	0	0	35,123	264	35,387
30-59 DPD	0		0	0	0	0	0	196	13	209
60-89 DPD	0		0	0	0	0	0	118	10	128
90-119 DPD	0		0	0	0	0	0	93	10	103
120-179 DPD	0		0	0	0	0	0	185	6	191
180+ DPD	0		0	0	0	0	0	3	0	3
Total credit cards	0		0	0	0	0	0	35,718	303	36,021
Automobile
By delinquency status:
Current-29 DPD	15,736		16,210	7,186	4,087	3,269	1,053	0	0	47,541
30-59 DPD	66		185	126	90	127	62	0	0	656
60-89 DPD	15		54	37	27	39	20	0	0	192
90-119 DPD	6		20	11	7	11	5	0	0	60
120-179 DPD	0		1	0	0	0	0	0	0	1
180+ DPD	0		0	0	0	0	0	0	0	0
Total automobile	15,823		16,470	7,360	4,211	3,446	1,140	0	0	48,450
Other revolving credit and installment
By delinquency status:
Current-29 DPD	1,820		2,972	1,809	1,239	1,116	5,148	18,688	165	32,957
30-59 DPD	2		7	7	6	6	41	12	6	87
60-89 DPD	1		6	6	6	6	29	7	2	63
90-119 DPD	0		3	3	3	3	21	5	2	40
120-179 DPD	0		0	0	0	0	1	9	3	13
180+ DPD	0		0	0	0	0	1	3	6	10
Total other revolving credit and installment	1,823		2,988	1,825	1,254	1,131	5,241	18,724	184	33,170
Total consumer loans	$	60,302	69,402	28,153	35,709	42,093	114,037	78,832	9,265	437,793

Term loans by origination year Revolving loans
Revolving loans converted to term loans

(in millions) 2020
2019
2018
2017
2016
Prior
Total
March 31, 2020
Real estate 1-4 family first mortgage
By delinquency status:
Current-29 DPD $ 14,238
59,044
25,047
36,185
41,121
93,490
7,981
2,020
279,126
30-59 DPD 14
65
30
39
64
1,184
38
57
1,491
60-89 DPD 2
3
6
5
8
370
20
27
441
90-119 DPD —
—
3
—
6
190
8
17
224
120-179 DPD —
—
1
4
7
142
11
22
187
180+ DPD —
—
4
7
5
466
5
125
612
Government insured/guaranteed loans (2) 2
32
150
271
498
9,726
—
—
10,679
Loans held at fair value —
—
—
—
—
160
—
—
160
Total real estate 1-4 family first mortgage 14,256
59,144
25,241
36,511
41,709
105,728
8,063
2,268
292,920
Real estate 1-4 family junior mortgage
By delinquency status:
Current-29 DPD 8
44
51
48
39
1,491
19,178
7,058
27,917
30-59 DPD —
—
—
—
—
34
76
119
229
60-89 DPD —
—
—
1
1
15
28
58
103
90-119 DPD —
—
—
—
—
8
19
32
59
120-179 DPD —
—
—
—
—
6
17
44
67
180+ DPD —
—
—
—
1
16
10
125
152
Total real estate 1-4 family junior mortgage 8
44
51
49
41
1,570
19,328
7,436
28,527
Credit cards
By delinquency status:
Current-29 DPD —
—
—
—
—
—
37,320
259
37,579
30-59 DPD —
—
—
—
—
—
260
18
278
60-89 DPD —
—
—
—
—
—
184
13
197
90-119 DPD —
—
—
—
—
—
167
14
181
120-179 DPD —
—
—
—
—
—
335
10
345
180+ DPD —
—
—
—
—
—
2
—
2
Total credit cards —
—
—
—
—
—
38,268
314
38,582
Automobile
By delinquency status:
Current-29 DPD 6,334
19,682
9,085
5,509
4,857
2,145
—
—
47,612
30-59 DPD 8
158
134
111
168
104
—
—
683
60-89 DPD —
49
40
32
53
34
—
—
208
90-119 DPD —
18
13
9
15
10
—
—
65
120-179 DPD —
—
—
—
—
—
—
—
—
180+ DPD —
—
—
—
—
—
—
—
—
Total automobile 6,342
19,907
9,272
5,661
5,093
2,293
—
—
48,568
Other revolving credit and installment
By delinquency status:
Current-29 DPD 948
3,580
2,207
1,468
1,298
5,751
17,766
202
33,220
30-59 DPD 1
9
10
12
9
66
19
7
133
60-89 DPD —
5
6
5
5
32
9
4
66
90-119 DPD —
4
6
6
6
31
9
3
65
120-179 DPD —
—
—
—
—
—
15
2
17
180+ DPD —
—
—
—
—
1
2
7
10
Total other revolving credit and installment 949
3,598
2,229
1,491
1,318
5,881
17,820
225
33,511
Total consumer loans $ 21,555
82,693
36,793
43,712
48,161
115,472
83,479
10,243
442,108

(continued on following page)

~~Note 6: Loans and Related Allowance for Credit Losses~~ ~~(continued)~~

(continued from previous page)

Real estate
1-4 family
first
mortgage

Real estate
1-4 family
junior lien
mortgage

Credit
card

Automobile

Other
revolving
credit and
installment

Total
December 31, 2019
By delinquency status:
Current-29 DPD $ 279,722
28,870
39,935
46,650
33,981
429,158
30-59 DPD 1,136
216
311
882
140
2,685
60-89 DPD 404
115
221
263
81
1,084
90-119 DPD 197
69
202
77
74
619
120-179 DPD 160
71
343
1
18
593
180+ DPD 503
155
1
—
10
669
Government insured/guaranteed loans (2) 10,999
—
—
—
—
10,999
Loans held at fair value 171
—
—
—
—
171
Total consumer loans (excluding PCI) 293,292
29,496
41,013
47,873
34,304
445,978
Total consumer PCI loans (carrying value) (3) 555
13
—
—
—
568
Total consumer loans $ 293,847
29,509
41,013
47,873
34,304
446,546

~~(1)~~

~~Disclosure is not comparative due to our adoption of CECL on January 1, 2020. For more~~


	Real estate 1-4 family first mortgage		Real estate 1-4 family junior lien mortgage	Credit card	Automobile	Other revolving credit and installment	Total
December 31, 2019
By delinquency status:
Current-29 DPD	$	279,722	28,870	39,935	46,650	33,981	429,158
30-59 DPD	1,136		216	311	882	140	2,685
60-89 DPD	404		115	221	263	81	1,084
90-119 DPD	197		69	202	77	74	619
120-179 DPD	160		71	343	1	18	593
180+ DPD	503		155	1	0	10	669
Government insured/guaranteed loans (2)	11,170		0	0	0	0	11,170
Total consumer loans (excluding PCI)	293,292		29,496	41,013	47,873	34,304	445,978
Total consumer PCI loans (carrying value) (3)	555		13	0	0	0	568
Total consumer loans	$	293,847	29,509	41,013	47,873	34,304	446,546

(1)Disclosure is not comparative due to our adoption of CECL on January 1, 2020. For additional information, see Note 1 (Summary of Significant Accounting Policies).

~~(2)~~

~~Represents loans whose repayments are~~ ~~predominantly~~ ~~insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Loans insured/guaranteed by the FHA/VA and 90+ DPD totaled~~ ~~$6.1 billion~~ at ~~March 31, 2020, compared with~~ ~~$6.4 billion~~ at ~~December 31, 2019~~.

(2)Represents loans whose repayments are predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Loans insured/guaranteed by the FHA/VA and 90+ DPD totaled $11.0 billion at September 30, 2020, compared with $6.4 billion at December 31, 2019.

(3)26% of the adjusted unpaid principal balance for consumer PCI loans was 30+ DPD at December 31, 2019.


~~(3)~~	~~26%~~ ~~of the adjusted unpaid principal balance for consumer PCI loans was 30+ DPD at~~ ~~December 31, 2019~~.

Of the ~~$2.0~~$1.9 billion of consumer loans not government insured/guaranteed that are 90 days or more past due at ~~March 31,~~September 30, 2020, ~~$828~~$549 million was accruing, compared with $1.9 billion past due and $855 million accruing at December 31, 2019.

Table 6.11 provides ~~a breakdown~~the outstanding balances of our consumer loan portfolio by ~~FICO.~~FICO score. Substantially all of the scored consumer portfolio has an updated FICO score of 680 and above, reflecting a strong current borrower credit profile. FICO isscores are not available for certain loan types, or may not be required if we deem it unnecessary due to strong collateral and other borrower attributes. Loans not requiring a FICO score totaled ~~$8.9~~$11.3 billion and $9.1 billion at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively. Substantially all loans not requiring a FICO score are securities-based loans originated through retail brokerage.

Note 6: Loans and Related Allowance for Credit Losses (continued)

Table 6.11: Consumer Loan Categories by FICO and Vintage (1)


	Term loans by origination year							Revolving loans	Revolving loans converted to term loans
(in millions)	2020		2019	2018	2017	2016	Prior			Total
September 30, 2020
By FICO:
Real estate 1-4 family first mortgage
800+	$	22,861	32,129	12,129	20,712	25,429	46,803	3,644	510	164,217
760-799	13,693		11,343	3,522	5,002	5,507	11,999	1,428	279	52,773
720-759	4,224		3,822	1,376	1,994	2,397	7,526	910	273	22,522
680-719	1,249		1,170	552	745	901	4,718	557	230	10,122
640-679	253		292	184	237	267	2,588	263	163	4,247
600-639	30		77	66	91	77	1,522	131	107	2,101
< 600	16		24	37	44	85	1,994	174	189	2,563
No FICO available	109		252	86	128	171	2,109	263	390	3,508
Government insured/guaranteed loans (2)	204		794	969	1,248	2,646	27,076	0	0	32,937
Total real estate 1-4 family first mortgage	42,639		49,903	18,921	30,201	37,480	106,335	7,370	2,141	294,990
Real estate 1-4 family junior lien mortgage
800+	0		0	0	0	0	325	8,689	1,926	10,940
760-799	0		0	0	0	0	193	3,213	1,100	4,506
720-759	0		0	0	0	0	233	2,224	1,109	3,566
680-719	0		0	0	0	0	204	1,337	930	2,471
640-679	0		0	0	0	0	114	546	528	1,188
600-639	0		0	0	0	0	70	264	323	657
< 600	0		0	0	0	0	87	291	432	810
No FICO available	17		41	47	43	36	95	456	289	1,024
Total real estate 1-4 family junior lien mortgage	17		41	47	43	36	1,321	17,020	6,637	25,162
Credit card
800+	0		0	0	0	0	0	3,827	1	3,828
760-799	0		0	0	0	0	0	5,312	7	5,319
720-759	0		0	0	0	0	0	7,795	28	7,823
680-719	0		0	0	0	0	0	8,731	60	8,791
640-679	0		0	0	0	0	0	5,495	65	5,560
600-639	0		0	0	0	0	0	2,223	49	2,272
< 600	0		0	0	0	0	0	2,325	92	2,417
No FICO available	0		0	0	0	0	0	10	1	11
Total credit card	0		0	0	0	0	0	35,718	303	36,021
Automobile
800+	2,102		2,856	1,378	861	577	168	0	0	7,942
760-799	2,333		2,951	1,276	684	449	128	0	0	7,821
720-759	2,565		2,806	1,251	687	498	153	0	0	7,960
680-719	2,950		2,839	1,224	648	505	157	0	0	8,323
640-679	2,839		2,190	871	464	409	137	0	0	6,910
600-639	1,830		1,335	542	315	328	121	0	0	4,471
< 600	1,198		1,460	814	541	660	263	0	0	4,936
No FICO available	6		33	4	11	20	13	0	0	87
Total automobile	15,823		16,470	7,360	4,211	3,446	1,140	0	0	48,450
Other revolving credit and installment
800+	621		964	583	432	439	2,070	2,454	23	7,586
760-799	485		676	365	240	225	1,058	1,198	18	4,265
720-759	330		515	303	195	184	830	954	26	3,337
680-719	180		363	229	147	134	590	838	28	2,509
640-679	70		167	117	77	70	323	439	20	1,283
600-639	18		51	41	31	31	154	165	14	505
< 600	10		48	47	33	33	143	166	20	500
No FICO available	109		204	140	99	15	73	1,191	35	1,866
FICO not required	0		0	0	0	0	0	11,319	0	11,319
Total other revolving credit and installment	1,823		2,988	1,825	1,254	1,131	5,241	18,724	184	33,170
Total consumer loans	$	60,302	69,402	28,153	35,709	42,093	114,037	78,832	9,265	437,793

Term loans by origination year Revolving loans
Revolving loans converted to term loans

(in millions) 2020
2019
2018
2017
2016
Prior
Total
March 31, 2020
By FICO:
Real estate 1-4 family first mortgage
< 600 $ 2
27
43
60
92
2,643
209
229
3,305
600-639 10
105
67
68
128
1,663
148
115
2,304
640-679 80
481
297
311
368
3,075
298
171
5,081
680-719 458
1,870
905
1,181
1,301
5,847
665
264
12,491
720-759 1,896
6,104
2,198
2,901
3,147
9,491
1,024
291
27,052
760-799 6,242
16,885
5,542
7,135
7,458
15,595
1,609
298
60,764
800+ 5,522
33,344
15,917
24,461
28,544
55,278
3,824
512
167,402
No FICO available 45
296
122
123
173
2,249
286
388
3,682
Government insured/guaranteed loans (2) 1
32
150
271
498
9,887
—
—
10,839
Total real estate 1-4 family first mortgage 14,256
59,144
25,241
36,511
41,709
105,728
8,063
2,268
292,920
Real estate 1-4 family junior lien mortgage
< 600 —
—
—
—
—
133
370
611
1,114
600-639 —
—
—
—
—
82
310
361
753
640-679 —
—
—
—
—
134
686
610
1,430
680-719 —
—
—
—
—
250
1,697
1,102
3,049
720-759 —
—
—
—
—
274
2,751
1,243
4,268
760-799 —
—
—
—
—
228
3,785
1,198
5,211
800+ —
—
—
—
—
359
9,220
2,009
11,588
No FICO available 8
44
51
49
41
110
509
302
1,114
Total real estate 1-4 family junior lien mortgage 8
44
51
49
41
1,570
19,328
7,436
28,527
Credit Card
< 600 —
—
—
—
—
—
3,117
119
3,236
600-639 —
—
—
—
—
—
2,657
49
2,706
640-679 —
—
—
—
—
—
6,291
61
6,352
680-719 —
—
—
—
—
—
9,324
53
9,377
720-759 —
—
—
—
—
—
7,866
24
7,890
760-799 —
—
—
—
—
—
5,176
6
5,182
800+ —
—
—
—
—
—
3,678
1
3,679
No FICO available —
—
—
—
—
—
159
1
160
Total credit card —
—
—
—
—
—
38,268
314
38,582
Automobile
< 600 419
2,045
1,163
825
1,082
541
—
—
6,075
600-639 687
1,849
715
425
453
216
—
—
4,345
640-679 1,031
2,830
1,168
644
596
262
—
—
6,531
680-719 1,104
3,383
1,549
885
749
318
—
—
7,988
720-759 1,045
3,334
1,554
911
723
312
—
—
7,879
760-799 991
3,335
1,533
890
652
270
—
—
7,671
800+ 1,065
3,112
1,580
1,064
808
349
—
—
7,978
No FICO available —
19
10
17
30
25
—
—
101
Total automobile 6,342
19,907
9,272
5,661
5,093
2,293
—
—
48,568
Other revolving credit and installment
< 600 3
49
65
50
47
204
219
27
664
600-639 12
66
59
40
41
198
188
15
619
640-679 51
226
169
105
96
410
525
23
1,605
680-719 124
472
310
195
172
719
1,005
29
3,026
720-759 191
683
399
248
226
969
1,169
28
3,913
760-799 249
857
445
288
265
1,179
1,524
18
4,825
800+ 274
1,024
621
452
453
2,118
2,690
44
7,676
No FICO available 45
221
161
113
18
84
1,564
41
2,247
FICO not required —
—
—
—
—
—
8,936
—
8,936
Total other revolving credit and installment 949
3,598
2,229
1,491
1,318
5,881
17,820
225
33,511
Total consumer loans $ 21,555
82,693
36,793
43,712
48,161
115,472
83,479
10,243
442,108

(continued on next page)

~~Note 6: Loans and Related Allowance for Credit Losses~~ ~~(continued)~~

(continued from prior page)


	Real estate 1-4 family first mortgage		Real estate 1-4 family junior lien mortgage	Credit card	Automobile	Other revolving credit and installment	Total
December 31, 2019
By FICO:
800+	$	165,460	11,851	4,037	7,900	7,585	196,833
760-799	61,559		5,483	5,648	7,624	4,915	85,229
720-759	27,879		4,407	8,376	7,839	4,097	52,598
680-719	12,844		3,192	9,732	7,871	3,212	36,851
640-679	5,068		1,499	6,626	6,324	1,730	21,247
600-639	2,392		782	2,853	4,230	670	10,927
< 600	3,264		1,164	3,373	6,041	704	14,546
No FICO available	3,656		1,118	368	44	2,316	7,502
FICO not required	0		0	0	0	9,075	9,075
Government insured/guaranteed loans (2)	11,170		0	0	0	0	11,170
Total consumer loans (excluding PCI)	293,292		29,496	41,013	47,873	34,304	445,978
Total consumer PCI loans (carrying value) (3)	555		13	0	0	0	568
Total consumer loans	$	293,847	29,509	41,013	47,873	34,304	446,546

Real estate
1-4 family
first
mortgage
Real estate
1-4 family
junior lien
mortgage
Credit
card
Automobile
Other
revolving
credit and
installment
Total
December 31, 2019
By FICO:
< 600 $ 3,264
1,164
3,373
6,041
704
14,546
600-639 2,392
782
2,853
4,230
670
10,927
640-679 5,068
1,499
6,626
6,324
1,730
21,247
680-719 12,844
3,192
9,732
7,871
3,212
36,851
720-759 27,879
4,407
8,376
7,839
4,097
52,598
760-799 61,559
5,483
5,648
7,624
4,915
85,229
800+ 165,460
11,851
4,037
7,900
7,585
196,833
No FICO available 3,656
1,118
368
44
2,316
7,502
FICO not required —
—
—
—
9,075
9,075
Government insured/guaranteed loans (2) 11,170
—
—
—
—
11,170
Total consumer loans (excluding PCI) 293,292
29,496
41,013
47,873
34,304
445,978
Total consumer PCI loans (carrying value) (3) 555
13
—
—
—
568
Total consumer loans $ 293,847
29,509
41,013
47,873
34,304
446,546
(1)Disclosure is not comparative due to our adoption of CECL on January 1, 2020. For additional information, see Note 1 (Summary of Significant Accounting Policies).


~~(1)~~	~~Disclosure is not comparative due to our adoption of CECL on January 1, 2020. For more information, see Note 1 (Summary of Significant Accounting Policies).~~


~~(2)~~	(2)Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA. (3)41% of the adjusted unpaid principal balance for consumer PCI loans had FICO scores less than 680 and 19% where no FICO was available to us at December 31, 2019. ~~Represents loans whose repayments are~~ ~~predominantly~~ ~~insured by the FHA or guaranteed by the VA.~~


~~(3)~~	~~41%~~ ~~of the adjusted unpaid principal balance for consumer PCI loans had FICO scores less than 680 and~~ ~~19%~~ ~~where no FICO was available to us at~~ ~~December 31, 2019~~.

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 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 Related Allowance for Credit Losses (continued)

Table 6.12: Consumer Loan Categories by LTV/CLTV and Vintage (1)


	Term loans by origination year							Revolving loans		Revolving loans converted to term loans
(in millions)	2020		2019	2018	2017	2016	Prior				Total
September 30, 2020
Real estate 1-4 family first mortgage
By LTV/CLTV:
0-60%	$	12,777	15,718	6,606	13,753	21,870	65,355	5,138		1,605	142,822
60.01-80%	27,558		28,843	9,775	14,099	12,226	12,003	1,485		359	106,348
80.01-100%	1,981		4,293	1,419	943	567	1,321	488		119	11,131
100.01-120% (2)	20		110	64	59	56	226	150		32	717
> 120% (2)	10		49	22	21	23	100	53		12	290
No LTV/CLTV available	89		96	66	78	92	254	56		14	745
Government insured/guaranteed loans (3)	204		794	969	1,248	2,646	27,076	0		0	32,937
Total real estate 1-4 family first mortgage	42,639		49,903	18,921	30,201	37,480	106,335	7,370		2,141	294,990
Real estate 1-4 family junior lien mortgage
By LTV/CLTV:
0-60%	0		0	0	0	0	572	8,819		3,829	13,220
60.01-80%	0		0	0	0	0	373	5,784		1,740	7,897
80.01-100%	0		0	0	0	0	229	1,772		773	2,774
100.01-120% (2)	0		0	0	0	0	74	452		193	719
> 120% (2)	0		0	0	0	0	22	167		61	250
No LTV/CLTV available	17		41	47	43	36	51	26		41	302
Total real estate 1-4 family junior lien mortgage	17		41	47	43	36	1,321	17,020		6,637	25,162
Total	$	42,656	49,944	18,968	30,244	37,516	107,656	24,390		8,778	320,152
December 31, 2019								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%								$	151,478	14,603	166,081
60.01-80%								114,795		9,663	124,458
80.01-100%								13,867		3,574	17,441
100.01-120% (2)								860		978	1,838
> 120% (2)								338		336	674
No LTV/CLTV available								784		342	1,126
Government insured/guaranteed loans (3)								11,170		0	11,170
Total consumer loans (excluding PCI)								293,292		29,496	322,788
Total consumer PCI loans (carrying value) (4)								555		13	568
Total consumer loans								$	293,847	29,509	323,356

Term loans by origination year Revolving loans
Revolving loans converted to term loans

(in millions) 2020
2019
2018
2017
2016
Prior
Total
March 31, 2020
Real estate 1-4 family first mortgage
By LTV/CLTV:
0-60% $ 4,143
16,842
8,032
14,961
22,878
76,122
5,503
1,644
150,125
60.01-80% 9,526
34,239
14,133
19,674
17,326
17,228
1,672
401
114,199
80.01-100% 544
7,791
2,714
1,412
814
1,757
585
155
15,772
100.01-120% (2) —
80
96
86
72
310
169
39
852
> 120% (2) —
47
29
27
29
124
71
14
341
No LTV/CLTV available 42
113
87
80
92
300
63
15
792
Government insured/guaranteed loans (3) 1
32
150
271
498
9,887
—
—
10,839
Total real estate 1-4 family first mortgage 14,256
59,144
25,241
36,511
41,709
105,728
8,063
2,268
292,920
Real estate 1-4 family junior lien mortgage
By LTV/CLTV:
0-60% —
—
—
—
—
634
9,526
4,023
14,183
60.01-80% —
—
—
—
—
450
6,827
2,055
9,332
80.01-100% —
—
—
—
—
290
2,165
971
3,426
100.01-120% (2) —
—
—
—
—
102
566
262
930
> 120% (2) —
—
—
—
—
33
216
80
329
No LTV/CLTV available 8
44
51
49
41
61
28
45
327
Total real estate 1-4 family junior lien mortgage 8
44
51
49
41
1,570
19,328
7,436
28,527
Total $ 14,264
59,188
25,292
36,560
41,750
107,298
27,391
9,704
321,447
December 31, 2019
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% $ 151,478
14,603
166,081
60.01-80% 114,795
9,663
124,458
80.01-100% 13,867
3,574
17,441
100.01-120% (2) 860
978
1,838
> 120% (2) 338
336
674
No LTV/CLTV available 784
342
1,126
Government insured/guaranteed loans (3) 11,170
—
11,170
Total consumer loans (excluding PCI) 293,292
29,496
322,788
Total consumer PCI loans (carrying value) (4) 555
13
568
Total consumer loans $ 293,847
29,509
323,356


(1)	~~Disclosure is not comparative due to our adoption of CECL on January 1, 2020. For more information, see Note 1 (Summary of Significant Accounting Policies).~~


~~(2)~~	~~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.~~

~~(3)~~

~~Represents loans whose repayments are~~ ~~predominantly~~Disclosure is not comparative due to our adoption of CECL on January 1, 2020. For additional information, see Note 1 (Summary of Significant Accounting Policies).

(2)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.

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

(4)9% of the adjusted unpaid principal balance for consumer PCI loans have LTV/CLTV amounts greater than 80% at December 31, 2019.


~~(4)~~	9% ~~of the adjusted unpaid principal balance for consumer PCI loans have LTV/CLTV amounts greater than 80% at~~ ~~December 31, 2019~~.

~~Note 6: Loans and Related Allowance for Credit Losses~~ ~~(continued)~~

NONACCRUAL LOANS Table 6.13 provides loans on nonaccrual status. In connection with our adoption of CECL, nonaccrual loans may have an allowance for credit losses or a negative allowance for credit losses from expected recoveries of amounts previously ~~written off.~~

written off. Payment deferral activities instituted in response to the COVID-19 pandemic may delay recognition of delinquencies for customers who otherwise would have moved into nonaccrual status.

Table 6.13: Nonaccrual Loans (1)


	Amortized cost			Nine months ended September 30, 2020
(in millions)	Nonaccrual loans		Nonaccrual loans without related allowance for credit losses (2)	Recognized interest income
September 30, 2020
Commercial:
Commercial and industrial	$	2,834	293	48
Real estate mortgage	1,343		113	25
Real estate construction	34		2	6
Lease financing	187		18	0
Total commercial	4,398		426	79
Consumer:
Real estate 1-4 family first mortgage	2,641		1,549	116
Real estate 1-4 family junior lien mortgage	767		465	39
Automobile	176		0	12
Other revolving credit and installment	40		0	2
Total consumer	3,624		2,014	169
Total nonaccrual loans	$	8,022	2,440	248
December 31, 2019 (1)
Commercial:
Commercial and industrial	$	1,545
Real estate mortgage	573
Real estate construction	41
Lease financing	95
Total commercial	2,254
Consumer:
Real estate 1-4 family first mortgage	2,150
Real estate 1-4 family junior lien mortgage	796
Automobile	106
Other revolving credit and installment	40
Total consumer	3,092
Total nonaccrual loans (excluding PCI)	$	5,346

Amortized cost
(in millions) Nonaccrual loans
Nonaccrual loans without related allowance for credit losses (2)
Recognized interest income
March 31, 2020
Commercial:
Commercial and industrial $ 1,779
243
16
Real estate mortgage 944
194
8
Real estate construction 21
5
4
Lease financing 131
10
—
Total commercial 2,875
452
28
Consumer:
Real estate 1-4 family first mortgage 2,372
1,382
44
Real estate 1-4 family junior lien mortgage 769
431
16
Automobile 99
—
3
Other revolving credit and installment 41
—
1
Total consumer 3,281
1,813
64
Total nonaccrual loans $ 6,156
2,265
92
December 31, 2019
Commercial:
Commercial and industrial $ 1,545

Real estate mortgage 573

Real estate construction 41

Lease financing 95

Total commercial 2,254

Consumer:
Real estate 1-4 family first mortgage 2,150

Real estate 1-4 family junior lien mortgage 796

Automobile 106

Other revolving credit and installment 40

Total consumer 3,092

Total nonaccrual loans (excluding PCI) $ 5,346

(1)Disclosure is not comparative due to our adoption of CECL on January 1, 2020. For additional information, see Note 1 (Summary of Significant Accounting Policies).


~~(1)~~	~~Disclosure is not comparative due to our adoption of CECL on January 1, 2020. For more information, see Note 1 (Summary of Significant Accounting Policies).~~


~~(2)~~	~~Nonaccrual loans may not have an allowance for credit losses if the loss expectations are zero given solid collateral value.~~

(2)Nonaccrual loans may not have an allowance for credit losses if the loss expectations are zero given solid collateral value.

LOANS IN PROCESS OF FORECLOSURE Our recorded investment in consumer mortgage loans collateralized by residential real estate property that are in process of foreclosure was ~~$3.4~~$2.3 billion and $3.5 billion at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively, which included ~~$2.7~~$1.9 billion and $2.8 billion, respectively, of loans that are government insured/guaranteed. Under the Consumer Financial Protection Bureau guidelines, we do not commence the foreclosure process on real estate 1-4 family mortgage loans until after the loan is 120 days delinquent. Foreclosure procedures and timelines vary depending on whether the property address resides in a judicial or non-judicial state. Judicial states require the foreclosure to be processed through the state’s courts while non-judicial states are processed without court intervention. Foreclosure timelines vary according to state law. In connection with our actions to support customers during the COVID-19 pandemic, we have suspended certain mortgage foreclosure activities.

Note 6: Loans and Related Allowance for Credit Losses (continued)

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING Certain loans 90 days or more past due are still accruing, because they are (1) well-secured and in the process of collection or (2) 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.

Table 6.14 shows loans 90 days or more past due and still accruing by class for loans not government insured/guaranteed.

Table 6.14: Loans 90 Days or More Past Due and Still Accruing


(in millions)	Sep 30, 2020		Dec 31, 2019
Total:	$	11,698	7,285
Less: FHA insured/VA guaranteed (1)	11,041		6,352

Total, not government insured/guaranteed	$	657	933
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial	$	61	47
Real estate mortgage	47		31

Total commercial	108		78
Consumer:
Real estate 1-4 family first mortgage	97		112
Real estate 1-4 family junior lien mortgage	28		32
Credit card	297		546
Automobile	50		78
Other revolving credit and installment	77		87
Total consumer	549		855
Total, not government insured/guaranteed	$	657	933

(1)Represents loans whose repayments are largely insured by the FHA or guaranteed by the VA.

(in millions) Mar 31, 2020
Dec 31, 2019
Total: $ 7,023
7,285
Less: FHA insured/VA guaranteed (1) 6,142
6,352
Total, not government insured/guaranteed $ 881
933
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial $ 24
47
Real estate mortgage 28
31
Real estate construction 1
—
Total commercial 53
78
Consumer:
Real estate 1-4 family first mortgage 128
112
Real estate 1-4 family junior lien mortgage 25
32
Credit card 528
546
Automobile 69
78
Other revolving credit and installment 78
87
Total consumer 828
855
Total, not government insured/guaranteed $ 881
933


~~(1)~~	~~Represents loans whose repayments are~~ ~~predominantly~~ ~~insured by the FHA or guaranteed by the VA.~~

100

~~Note 6: Loans and Related Allowance for Credit Losses~~ ~~(continued)~~

IMPAIRED LOANS In connection with our adoption of CECL, we no longer provide information on impaired loans. We have retained impaired loans information for the period ended December 31, 2019. Table 6.15 summarizes key information for impaired loans. Our impaired loans at December 31, 2019, predominantly included loans on nonaccrual status in the commercial portfolio segment and loans modified in a TDR, whether on accrual or nonaccrual status. Impaired loans generally had estimated losses which are included in the allowance for credit losses. We did have impaired loans with no allowance for credit losses when the loss

content has been previously recognized through charge-offs,

such as collateral dependent loans, or when loans are currently performing in accordance with their terms and no loss has been estimated. Impaired loans excluded PCI loans and loans that had been fully charged off or otherwise had zero recorded investment.

Table 6.15 included trial modifications that totaled $115 million at December 31, 2019.

For additional information on our legacy impaired loans and allowance for credit losses, see Note 1 (Summary of Significant Accounting Policies) in our 2019 Form 10-K.

Table 6.15: Impaired Loans Summary


			Recorded investment
(in millions)	Unpaid principal balance		Impaired loans	Impaired loans with related allowance for credit losses	Related allowance for credit losses
December 31, 2019
Commercial:
Commercial and industrial	$	2,792	2,003	1,903	311
Real estate mortgage	1,137		974	803	110
Real estate construction	81		51	41	11
Lease financing	131		105	105	35
Total commercial	4,141		3,133	2,852	467
Consumer:
Real estate 1-4 family first mortgage	8,107		7,674	4,433	437
Real estate 1-4 family junior lien mortgage	1,586		1,451	925	144
Credit card	520		520	520	209
Automobile	138		81	42	8
Other revolving credit and installment	178		171	155	49
Total consumer (1)	10,529		9,897	6,075	847
Total impaired loans (excluding PCI)	$	14,670	13,030	8,927	1,314

(1)Included the recorded investment of $1.2 billion at December 31, 2019 of government insured/guaranteed loans that are predominantly insured by the FHA or guaranteed by the VA and generally do not have an ACL. Impaired loans may also have limited, if any, ACL when the recorded investment of the loan approximates estimated net realizable value as a result of charge-offs prior to a TDR modification.

Recorded investment
(in millions) Unpaid principal balance
Impaired loans
Impaired loans with related allowance for credit losses
Related allowance for credit losses
December 31, 2019
Commercial:
Commercial and industrial $ 2,792
2,003
1,903
311
Real estate mortgage 1,137
974
803
110
Real estate construction 81
51
41
11
Lease financing 131
105
105
35
Total commercial 4,141
3,133
2,852
467
Consumer:
Real estate 1-4 family first mortgage 8,107
7,674
4,433
437
Real estate 1-4 family junior lien mortgage 1,586
1,451
925
144
Credit card 520
520
520
209
Automobile 138
81
42
8
Other revolving credit and installment 178
171
155
49
Total consumer (1) 10,529
9,897
6,075
847
Total impaired loans (excluding PCI) $ 14,670
13,030
8,927
1,314

101

~~(1)~~

~~Included the recorded investment of~~ ~~$1.2 billion~~ at ~~December 31, 2019~~ of government insured/guaranteed loans that are predominantly insured by the FHA or guaranteed by the VA and generally do not have an ACL. Impaired loans may also have limited, if any, ACL when the recorded investment of the loan approximates estimated net realizable value as a result of charge-offs prior to a TDR modification.

Note 6: Loans and Related Allowance for Credit Losses (continued)

Table 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 6.16: Average Recorded Investment in Impaired Loans

Year ended December 31,
2019
(in millions) Average recorded investment
Recognized interest income
Commercial:
Commercial and industrial $ 2,150
129
Real estate mortgage 1,067
59
Real estate construction 52
6
Lease financing 93
1
Total commercial 3,362
195
Consumer:
Real estate 1-4 family first mortgage 9,031
506
Real estate 1-4 family junior lien mortgage 1,586
99
Credit card 488
64
Automobile 84
12
Other revolving credit and installment 162
13
Total consumer 11,351
694
Total impaired loans (excluding PCI) $ 14,713
889

Interest income:
Cash basis of accounting $ 241
Other (1) 648
Total interest income $ 889


	Year ended December 31, 2019
(in millions)	Average recorded investment		Recognized interest income
Commercial:
Commercial and industrial	$	2,150	129
Real estate mortgage	1,067		59
Real estate construction	52		6
Lease financing	93		1
Total commercial	3,362		195
Consumer:
Real estate 1-4 family first mortgage	9,031		506
Real estate 1-4 family junior lien mortgage	1,586		99
Credit card	488		64
Automobile	84		12
Other revolving credit and installment	162		13
Total consumer	11,351		694
Total impaired loans (excluding PCI)	$	14,713	889


~~(1)~~Interest income:	~~Included~~
Cash basis of accounting	$	241
Other (1)	648
Total 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.income	$	889

(1)Included 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 ~~$11.6~~$14.6 billion and $11.8 billion at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively. We do not consider loan resolutions such as foreclosure or short sale to be a TDR. In addition, COVID-related modifications are generally not classified as TDRs due to the relief under the CARES ~~Act.~~Act and the Interagency Statement. For ~~more~~additional information on the TDR relief, see Note 1 (Summary of Significant Accounting Policies).

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.

Commitments to lend additional funds on loans whose terms have been modified in a TDR amounted to ~~$403~~$477 million and $500 million at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively.

102

~~Note 6: Loans and Related Allowance for Credit Losses~~ ~~(continued)~~

Table 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 6.17: TDR Modifications



	Primary modification type (1)					Financial effects of modifications
($ in millions)	Principal forgiveness		Interest rate reduction	Other concessions (2)	Total	Charge- offs (3)	Weighted average interest rate reduction		Recorded investment related to interest rate reduction (4)
Quarter ended September 30, 2020
Commercial:
Commercial and industrial	$	0	7	882	889	44	0.79	%	$	7
Real estate mortgage	0		5	238	243	5	1.38		5
Real estate construction	9		1	1	11	0	5.25		1
Lease financing	0		0	0	0	0	0		0
Total commercial	9		13	1,121	1,143	49	1.29		13
Consumer:
Real estate 1-4 family first mortgage	1		4	2,576	2,581	1	2.06		4
Real estate 1-4 family junior lien mortgage	0		2	59	61	2	2.63		2
Credit card	0		72	0	72	0	15.06		72
Automobile	0		1	65	66	35	3.99		1
Other revolving credit and installment	0		3	24	27	1	7.36		3
Trial modifications (5)	0		0	10	10	0	0		0
Total consumer	1		82	2,734	2,817	39	13.64		82
Total	$	10	95	3,855	3,960	88	12.07	%	$	95
Quarter ended September 30, 2019
Commercial:
Commercial and industrial	$	13	9	209	231	39	0.67	%	$	9
Real estate mortgage	0		4	72	76	0	0.91		4
Real estate construction	0		1	15	16	0	1.00		1
Lease financing	0		0	2	2	0	0		0
Total commercial	13		14	298	325	39	0.75		14
Consumer:
Real estate 1-4 family first mortgage	24		4	199	227	0	2.11		16
Real estate 1-4 family junior lien mortgage	1		8	19	28	0	2.49		9
Credit card	0		94	0	94	0	12.78		94
Automobile	2		3	12	17	7	5.30		3
Other revolving credit and installment	0		14	2	16	0	8.38		14
Trial modifications (5)	0		0	6	6	0	0		0
Total consumer	27		123	238	388	7	10.23		136
Total	$	40	137	536	713	46	9.32	%	$	150

(continued on following page)

103

Note 6: Loans and Related Allowance for Credit Losses (continued)

(continued from previous page)


	Primary modification type (1)					Financial effects of modifications
($ in millions)	Principal forgiveness		Interest rate reduction	Other concessions (2)	Total	Charge- offs (3)	Weighted average interest rate reduction		Recorded investment related to interest rate reduction (4)
Nine months ended September 30, 2020
Commercial:
Commercial and industrial	$	18	39	2,144	2,201	126	0.74	%	$	39
Real estate mortgage	0		23	488	511	5	1.21		23
Real estate construction	9		1	7	17	0	4.29		1
Lease financing	0		0	1	1	0	0		0
Total commercial	27		63	2,640	2,730	131	0.98		63
Consumer:
Real estate 1-4 family first mortgage	42		10	3,021	3,073	2	1.76		35
Real estate 1-4 family junior lien mortgage	4		10	95	109	2	2.43		11
Credit card	0		229	0	229	0	13.31		229
Automobile	3		5	119	127	69	4.45		5
Other revolving credit and installment	0		18	32	50	1	7.65		18
Trial modifications (5)	0		0	(1)	(1)	0	0		0
Total consumer	49		272	3,266	3,587	74	11.03		298
Total	$	76	335	5,906	6,317	205	9.29	%	$	361
Nine months ended September 30, 2019
Commercial:
Commercial and industrial	$	13	54	943	1,010	78	0.47	%	$	54
Real estate mortgage	0		30	240	270	0	0.59		30
Real estate construction	13		1	31	45	0	1.00		1
Lease financing	0		0	2	2	0	0		0
Total commercial	26		85	1,216	1,327	78	0.51		85
Consumer:
Real estate 1-4 family first mortgage	87		9	674	770	1	1.96		54
Real estate 1-4 family junior lien mortgage	4		30	65	99	2	2.38		32
Credit card	0		280	0	280	0	13.11		280
Automobile	6		7	38	51	21	4.84		7
Other revolving credit and installment	0		37	6	43	0	7.92		37
Trial modifications (5)	0		0	11	11	0	0		0
Total consumer	97		363	794	1,254	24	10.19		410
Total	$	123	448	2,010	2,581	102	8.52	%	$	495

(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 $382 million and $188 million for the quarters ended September 30, 2020 and 2019, respectively, and $866 million and $871 million for the first nine months of 2020 and 2019, respectively.

(2)Other concessions include loans with payment (principal and/or interest) deferral, loans discharged in bankruptcy, and loans with renewals, extensions, or other changes to original contract terms and other interest and noninterest adjustments, but exclude modifications that also forgive principal and/or reduce the contractual interest rate. The reported amounts include COVID-related payment deferrals that are new TDRs and exclude COVID-related payment deferrals previously reported as TDRs given limited current financial effects other than the payment deferral.

(3)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 deferring or legally forgiving principal of $2 million and $16 million for the quarters ended September 30, 2020 and 2019, respectively, and $34 million and $22 million for the first nine months of 2020 and 2019, respectively.

(4)Reflects the effect of reduced interest rates on loans with an interest rate concession as one of its concession types, which includes loans reported as a principal primary modification type that also have an interest rate concession.

(5)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.

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 March 31, 2020
Commercial:
Commercial and industrial $ 18
15
314
347
44
0.65 % $ 15
Real estate mortgage —
13
152
165
—
0.97
13
Real estate construction —
—
6
6
—
2.49
—
Lease financing —
—
—
—
—
—
—
Total commercial 18
28
472
518
44
0.82
28
Consumer:
Real estate 1-4 family first mortgage 21
3
166
190
—
1.63
17
Real estate 1-4 family junior lien mortgage 1
6
14
21
—
2.38
6
Credit card —
95
—
95
—
12.33
95
Automobile 2
2
10
14
6
4.69
2
Other revolving credit and installment —
12
2
14
—
8.22
12
Trial modifications (6) —
—
2
2
—
—
—
Total consumer 24
118
194
336
6
10.00
132
Total $ 42
146
666
854
50
8.38 % $ 160
Quarter ended March 31, 2019
Commercial:
Commercial and industrial $ —
11
554
565
13
0.68 % $ 11
Real estate mortgage —
2
73
75
—
0.95
2
Real estate construction —
—
3
3
—
—
—
Lease financing —
—
—
—
—
—
—
Total commercial —
13
630
643
13
0.73
13
Consumer:
Real estate 1-4 family first mortgage 35
3
294
332
1
1.95
19
Real estate 1-4 family junior lien mortgage 2
11
25
38
1
2.29
12
Credit card —
97
—
97
—
13.20
97
Automobile 2
1
12
15
6
5.38
1
Other revolving credit and installment —
11
3
14
—
7.58
11
Trial modifications (6) —
—
—
—
—
—
—
Total consumer 39
123
334
496
8
10.27
140
Total $ 39
136
964
1,139
21
9.44 % $ 153

~~(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 ~~$263 million~~ ~~and~~ ~~$360 million~~ ~~for the first quarter of~~ ~~2020~~ ~~and~~ ~~2019, respectively.~~

104


~~(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 deferring or legally forgiving principal (actual or contingent) of ~~$29 million~~ ~~and~~ ~~$3 million~~ ~~for the first quarter of~~ ~~2020~~ ~~and~~ ~~2019, respectively.~~


~~(5)~~	Reflects the effect of reduced interest rates on loans with an interest rate concession as one of 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.

Table 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 6.18: Defaulted TDRs


	Recorded investment of defaults
	Quarter ended September 30,			Nine months ended September 30,
(in millions)	2020		2019	2020	2019
Commercial:
Commercial and industrial	$	138	24	360	72
Real estate mortgage	3		5	105	38
Real estate construction	0		12	0	15
Total commercial	141		41	465	125
Consumer:
Real estate 1-4 family first mortgage	8		8	26	32
Real estate 1-4 family junior lien mortgage	1		2	9	11
Credit card	11		23	56	65
Automobile	11		2	14	9
Other revolving credit and installment	1		2	4	5
Total consumer	32		37	109	122
Total	$	173	78	574	247

Recorded investment of defaults
Quarter ended March 31,
(in millions) 2020
2019
Commercial:
Commercial and industrial $ 185
23
Real estate mortgage 21
28
Real estate construction —
3
Total commercial 206
54
Consumer:
Real estate 1-4 family first mortgage 10
11
Real estate 1-4 family junior lien mortgage 2
5
Credit card 26
21
Automobile 2
3
Other revolving credit and installment 1
2
Total consumer 41
42
Total $ 247
96

105

~~Note 7: Leasing Activity (~~
~~continued~~)



Note 7: Leasing Activity

The information below provides a summary of our leasing activities as a lessor and lessee. See Note 7 (Leasing ~~Activities)~~Activity) in our 2019 Form 10-K for additional information about our leasing activities.

As a Lessor

Table 7.1 presents the composition of our leasing revenue.

Table 7.1: Leasing Revenue


	Quarter ended September 30,			Nine months ended September 30,
(in millions)	2020		2019	2020		2019
Interest income on lease financing	$	144	208	$	551	655
Other lease revenues:
Variable revenues on lease financing	26		23	80		74
Fixed revenues on operating leases	287		339	895		1,069
Variable revenues on operating leases	9		16	34		48
Other lease-related revenues (1)	11		24	12		79
Lease income	333		402	1,021		1,270
Total leasing revenue	$	477	610	$	1,572	1,925

(1) Predominantly includes net gains (losses) on disposition of assets leased under operating leases or lease financings.

Quarter ended March 31,
(in millions) 2020

2019
Interest income on lease financing $ 211
223
Other lease revenues:
Variable revenues on lease financing 27
24
Fixed revenues on operating leases 314
373
Variable revenues on operating leases 13
18
Other lease-related revenues (1) (2 ) 28
Lease income 352
443
Total leasing revenue $ 563
666


~~(1)~~	~~Predominantly includes net gains (losses) on disposition of assets leased under operating leases or lease financings.~~

As a Lessee

Substantially all of our leases are operating leases. Table 7.2 presents balances for our operating leases.

Table 7.2: Operating Lease Right of Use (ROU) Assets and Lease Liabilities


(in millions)	Sep 30, 2020		Dec 31, 2019
ROU assets	$	4,421	4,724
Lease liabilities	5,022		5,297

(in millions) Mar 31, 2020
Dec 31, 2019
ROU assets $ 4,650
4,724
Lease liabilities 5,224
5,297

Table 7.3 provides the composition of our lease costs, which are predominantly included in ~~net~~ occupancy expense.

Table 7.3: Lease Costs


	Quarter ended September 30,			Nine months ended September 30,
(in millions)	2020		2019	2020		2019
Fixed lease expense – operating leases	$	286	302	$	869	890
Variable lease expense	81		81	227		234
Other (1)	(7)		(40)	(63)		(57)
Total lease costs	$	360	343	$	1,033	1,067

Quarter ended March 31,
(in millions) 2020
2019
Fixed lease expense – operating leases $ 291
297
Variable lease expense 66
73
Other (1) (14 ) (8 )
Total lease costs $ 343
362


~~(1)~~	~~Predominantly includes gains recognized from sale leaseback transactions and sublease rental income.~~

(1)Predominantly includes gains recognized from sale leaseback transactions and sublease rental income.

106



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


(in millions)	Sep 30, 2020		Dec 31, 2019
Held for trading at fair value:
Marketable equity securities	$	14,058	27,440
Not held for trading:
Fair value:
Marketable equity securities (1)	2,412		6,481
Nonmarketable equity securities	8,583		8,015
Total equity securities at fair value	10,995		14,496
Equity method:
Low income housing tax credit investments	11,295		11,343
Private equity	2,841		3,459
Tax-advantaged renewable energy	4,142		3,811
New market tax credit and other	356		387
Total equity method	18,634		19,000
Other:
Federal Reserve Bank stock and other at cost (2)	3,585		4,790
Private equity (3)	3,897		2,515
Total equity securities not held for trading	37,111		40,801
Total equity securities	$	51,169	68,241

(1)Includes $206 million and $3.8 billion at September 30, 2020, and December 31, 2019, respectively, related to securities held as economic hedges of our deferred compensation plan liabilities. In second quarter 2020, we entered into arrangements to transition our economic hedges of our deferred compensation plan liabilities from equity securities to derivative instruments.

(2)Includes $3.5 billion and $4.8 billion at September 30, 2020, and December 31, 2019, respectively, related to investments in Federal Reserve Bank and Federal Home Loan Bank stock.

(in millions) Mar 31,
2020
Dec 31,
2019
Held for trading at fair value:
Marketable equity securities $ 13,573
27,440
Not held for trading:
Fair value:
Marketable equity securities (1) 7,708
6,481
Nonmarketable equity securities 6,895
8,015
Total equity securities at fair value 14,603
14,496
Equity method:
Low-income housing tax credit investments 11,290
11,343
Private equity 3,351
3,459
Tax-advantaged renewable energy 3,991
3,811
New market tax credit and other 387
387
Total equity method 19,019

19,000
Other:
Federal Reserve Bank stock and other at cost (2) 4,512
4,790
Private equity (3) 2,340
2,515
Total equity securities not held for trading 40,474
40,801
Total equity securities $ 54,047
68,241
(3)Represents nonmarketable equity securities accounted for under the measurement alternative.


~~(1)~~	~~Includes~~ ~~$3.1 billion~~ ~~and~~ ~~$3.8 billion~~ at ~~March 31, 2020, and~~ ~~December 31, 2019, respectively, related to securities held as economic hedges of our deferred compensation plan obligations.~~


~~(2)~~	~~Includes~~ ~~$4.5 billion~~ ~~and~~ ~~$4.8 billion~~ at ~~March 31, 2020, and~~ ~~December 31, 2019, respectively, related to investments in Federal Reserve Bank and Federal Home Loan Bank stock.~~


~~(3)~~	~~Represents nonmarketable equity securities accounted for under the 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~~additional 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).

FAIR VALUE Marketable equity securities held for purposes other than trading ~~partially~~ consist of exchange-traded equity funds held to economically hedge obligations related to our deferred compensation plans, ~~and, to a lesser extent,~~as well as other holdings of publicly traded equity securities held for investment purposes. We account for certain nonmarketable equity securities under the fair value method, and substantially all of these securities are economically hedged with equity derivatives.

EQUITY METHOD Our equity method investments consist of tax credit and private equity investments, the majority of which are our ~~low-income~~low income housing tax credit (LIHTC) investments.

We invest in affordable housing projects that qualify for the LIHTC, which are designed to promote private development of ~~low-income~~low income housing. These investments typically generate a return ~~mostly~~ through realization of federal tax credit and other tax benefits. In the third quarter and first ~~quarter~~nine months of 2020, we recognized pre-tax losses of ~~$339~~$336 million and $1.0 billion, respectively, related to our LIHTC investments, compared with ~~$273~~$304 million ~~in first quarter 2019.~~and $875 million, respectively, for the same periods a year ago. These losses were recognized in other noninterest income. We also recognized total tax benefits of ~~$398~~$422 million and $1.2 billion in the third quarter and first ~~quarter~~nine months of 2020, respectively, which included tax credits recorded to income taxes of ~~$314 million.~~$339 million and $970 million for the same periods, respectively. In the third quarter and first ~~quarter~~nine months of 2019, total tax benefits were ~~$370~~$362 million and $1.1 billion, respectively, which included tax credits of ~~$302 million.~~$286 million and $891 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 ~~$4.2~~$4.0 billion at ~~March 31,~~September 30, 2020, and $4.3 billion at December 31, 2019. This liability for unfunded commitments is included in long-term debt.

OTHER The remaining portion of our nonmarketable equity securities portfolio consists of securities accounted for using the cost or measurement alternative.

107

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 Sep 30,			Nine months ended Sep 30,
(in millions)	2020		2019	2020		2019
Net gains (losses) from equity securities carried at fair value:
Marketable equity securities	$	38	116	$	(371)	757
Nonmarketable equity securities	265		1,477	585		3,145
Total equity securities carried at fair value	303		1,593	214		3,902
Net gains (losses) from nonmarketable equity securities not carried at fair value:
Impairment write-downs (1)	(535)		(43)	(1,576)		(110)
Net unrealized gains related to measurement alternative observable transactions (1)	1,030		158	1,276		489
Net realized gains on sale	60		623	259		1,029

Total nonmarketable equity securities not carried at fair value	555		738	(41)		1,408
Net gains (losses) from economic hedge derivatives (2)	(209)		(1,375)	(392)		(2,918)
Total net gains (losses) from equity securities not held for trading	$	649	956	$	(219)	2,392

(1)In third quarter 2020, we recorded $452 million of income related to a change in the accounting measurement model from the equity method to the measurement alternative for certain nonmarketable equity securities from our affiliated venture capital partnerships. This amount is comprised of $(434) million of impairment write-downs and $$658 million of net unrealized gains reported in the table above, as well as $228 million of equity method investment income reported in other noninterest income.

(2)Includes net gains (losses) on derivatives not designated as hedging instruments.

Quarter ended March 31,
(in millions) 2020
2019
Net gains (losses) from equity securities carried at fair value:
Marketable equity securities $ (803 ) 377
Nonmarketable equity securities (1,104 ) 936
Total equity securities carried at fair value (1,907 ) 1,313
Net gains (losses) from nonmarketable equity securities not carried at fair value:
Impairment write-downs (935 ) (36 )
Net unrealized gains related to measurement alternative observable transactions 222
185
Net realized gains on sale —
237
All other —
—
Total nonmarketable equity securities not carried at fair value (713 ) 386
Net gains (losses) from economic hedge derivatives (1) 1,219
(885 )
Total net gains (losses) from equity securities not held for trading $ (1,401 ) 814


~~(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 Sep 30,			Nine months ended Sep 30,
(in millions)	2020		2019	2020		2019
Net gains (losses) recognized in earnings during the period:
Gross unrealized gains due to observable price changes	$	1,030	158	$	1,276	500
Gross unrealized losses due to observable price changes	0		0	0		(11)
Impairment write-downs	(506)		(20)	(918)		(53)
Realized net gains from sale	8		36	21		161
Total net gains (losses) recognized during the period	$	532	174	$	379	597

Quarter ended March 31,
(in millions) 2020
2019
Net gains (losses) recognized in earnings during the period:
Gross unrealized gains due to observable price changes $ 222
185
Gross unrealized losses due to observable price changes —
—
Impairment write-downs (354 ) (22 )
Realized net gains from sale 2
23
Total net gains (losses) recognized during the period $ (130 ) 186

Table 8.4 presents cumulative carrying value adjustments to nonmarketable equity securities accounted for under the measurement alternative that were still held at the end of each reporting period presented.

Table 8.4: Measurement Alternative Cumulative Gains (Losses)


(in millions)	Sep 30, 2020		Dec 31, 2019
Cumulative gains (losses):
Gross unrealized gains due to observable price changes	$	2,138	973
Gross unrealized losses due to observable price changes	(43)		(42)
Impairment write-downs	(1,024)		(134)

(in millions) Mar 31,
2020
Dec 31,
2019
Cumulative gains (losses):
Gross unrealized gains due to observable price changes $ 1,084
973
Gross unrealized losses due to observable price changes (42 ) (42 )
Impairment write-downs (473 ) (134 )

108



Note 9: Other Assets

Table 9.1 presents the components of other assets.

Table 9.1: Other Assets


(in millions)	Sep 30, 2020		Dec 31, 2019
Corporate/bank-owned life insurance	$	20,303	20,070
Accounts receivable (1)	34,524		29,137
Interest receivable:

AFS and HTM debt securities	1,399		1,729
Loans	3,074		3,099
Trading and other	409		758
Customer relationship and other amortized intangibles	352		423
Foreclosed assets:
Residential real estate:
Government insured/guaranteed (1)	22		50
Non-government insured/guaranteed	82		172
Other	52		81
Operating lease assets (lessor)	7,573		8,221
Operating lease ROU assets (lessee)	4,421		4,724
Due from customers on acceptances	207		253
Other	13,756		10,200
Total other assets	$	86,174	78,917

(1)Certain government-guaranteed residential real estate mortgage loans upon foreclosure are included in Accounts receivable. For additional information, see Note 1 (Summary of Significant Accounting Policies) in our 2019 Form 10-K.

(in millions) Mar 31,
2020
Dec 31,
2019
Corporate/bank-owned life insurance $ 20,128
20,070
Accounts receivable (1) 46,762
29,137
Interest receivable:
AFS and HTM debt securities 1,705
1,729
Loans 3,038
3,099
Trading and other 708
758
Customer relationship and other amortized intangibles 399
423
Foreclosed assets:
Residential real estate:
Government insured/guaranteed (1) 43
50
Non-government insured/guaranteed 137
172
Other 72
81
Operating lease assets (lessor) 8,124
8,221
Operating lease ROU assets (lessee) 4,650
4,724
Due from customers on acceptances 128
253
Other 10,269
10,200
Total other assets $ 96,163
78,917

109


~~(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 ~~2019~~ ~~Form 10-K.~~

~~Note 10: Securitizations and Variable Interest Entities (continued~~)

Note 10: Securitizations and Variable Interest Entities

Involvement with 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. For further description

of our involvement with SPEs, see Note 10 (Securitizations and Variable Interest Entities) in our 2019 Form 10-K.

Table 10.1 provides the classifications of assets and liabilities in our balance sheet for our transactions with VIEs.

Table 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
September 30, 2020
Cash and due from banks	$	0	16		0	16
Interest-earning deposits with banks	0		0		0	0

Debt securities (1):
Trading debt securities	1,869		267		0	2,136
Available-for-sale debt securities	1,484		395		0	1,879
Held-to-maturity debt securities	1,170		0		0	1,170

Loans	1,960		10,634		69	12,663
Mortgage servicing rights	7,009		0		0	7,009
Derivative assets	247		1		0	248
Equity securities	11,356		72		0	11,428
Other assets	1,002		214		0	1,216
Total assets	26,097		11,599		69	37,765
Short-term borrowings	0		595		0	595
Derivative liabilities	2		1		0	3
Accrued expenses and other liabilities	223		229		0	452
Long-term debt	4,080		215		68	4,363
Total liabilities	4,305		1,040		68	5,413
Noncontrolling interests	0		35		0	35
Net assets	$	21,792	10,524		1	32,317
December 31, 2019
Cash and due from banks	$	0	16		0	16
Interest-earning deposits with banks	0		284		0	284

Debt securities (1):
Trading debt securities	792		339		0	1,131
Available-for-sale debt securities	1,696		201		0	1,897
Held-to-maturity debt securities	791		0		0	791

Loans	2,127		13,170		80	15,377
Mortgage servicing rights	11,884		0		0	11,884
Derivative assets	142		1		0	143
Equity securities	11,401		118		0	11,519
Other assets	1,268		239		0	1,507
Total assets	30,101		14,368		80	44,549
Short-term borrowings	0		401		0	401
Derivative liabilities	1		3		0	4
Accrued expenses and other liabilities	189		235		0	424
Long-term debt	4,817		587		79	5,483
Total liabilities	5,007		1,226		79	6,312
Noncontrolling interests	0		43		0	43
Net assets	$	25,094	13,099		1	38,194

(in millions)
VIEs that we
do not
consolidate

VIEs
that we
consolidate

Transfers that
we account
for as secured
borrowings
Total
March 31, 2020
Cash and due from banks $ —
19
—
19
Interest-earning deposits with banks —
—
—
—
Debt securities (1):
Trading debt securities 1,326
316
—
1,642
Available-for-sale debt securities 1,718
300
—
2,018
Held-to-maturity debt securities 1,158
—
—
1,158
Loans 2,196
13,102
77
15,375
Mortgage servicing rights 8,709
—
—
8,709
Derivative assets 269
6
—
275
Equity securities 11,337
95
—
11,432
Other assets 1,030
258
—
1,288
Total assets 27,743
14,096
77
41,916
Short-term borrowings —
500
—
500
Derivative liabilities 2
8
—
10
Accrued expenses and other liabilities
154
231
—
385
Long-term debt
4,722
235
76
5,033
Total liabilities 4,878
974
76
5,928
Noncontrolling interests —
33
—
33
Net assets $ 22,865
13,089
1
35,955
December 31, 2019
Cash and due from banks $ —
16
—
16
Interest-earning deposits with banks —
284
—
284
Debt securities (1):
Trading debt securities 792
339
—
1,131
Available-for-sale debt securities 1,696
201
—
1,897
Held-to-maturity debt securities 791
—
—
791
Loans 2,127
13,170
80
15,377
Mortgage servicing rights 11,884
—
—
11,884
Derivative assets 142
1
—
143
Equity securities 11,401
118
—
11,519
Other assets 1,268
239
—
1,507
Total assets 30,101
14,368
80
44,549
Short-term borrowings —
401
—
401
Derivative liabilities 1
3
—
4
Accrued expenses and other liabilities 189
235
—
424
Long-term debt 4,817
587
79
5,483
Total liabilities 5,007
1,226
79
6,312
Noncontrolling interests —
43
—
43
Net assets $ 25,094
13,099
1
38,194


~~(1)~~	Excludes certain debt securities related to loans serviced for the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Government National Mortgage Association (GNMA).

(1)Excludes certain debt securities related to loans serviced for the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Government National Mortgage Association (GNMA).

Transactions with Unconsolidated VIEs

Our transactions with unconsolidated VIEs include predominantly securitizations of residential and commercial mortgage loans, and investments in tax credit structures. We have various forms of involvement with VIEs, including servicing, holding senior or

subordinated interests, and entering into liquidity arrangements and derivative contracts. Involvements with these unconsolidated VIEs are recorded on our balance sheet in debt and equity securities, loans, MSRs, derivative assets and liabilities, other assets, other liabilities, and long-term debt, as appropriate.

110

Table 10.2 provides a summary of our exposure to unconsolidated VIEs with which we have significant continuing involvement but for which we are not the primary beneficiary.

We include transactions where we were the sponsor or servicer and also have other significant forms of continuing

involvement. Sponsorship includes transactions where we solely or materially participated in the initial design or structuring of the VIE or marketed the transaction to investors. We consider investments in securities, loans, guarantees, liquidity agreements, commitments and certain derivatives to be other forms of

continuing involvement that may be significant. We also include transactions where we transferred assets to a VIE, account for the transfer as a sale, and service the VIE collateral or have other forms of continuing involvement that may be significant (as described above). We exclude certain transactions with unconsolidated VIEs when our continuing involvement is temporary in nature or insignificant in size. We also exclude 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 10.2: Unconsolidated VIEs


			Carrying value – asset (liability)
(in millions)	Total VIE assets		Debt and equity interests (1)		Servicing assets and advances	Derivatives	Debt, guarantees, and other commitments	Net assets
September 30, 2020
Residential mortgage loan securitizations:
Conforming (2)	$	979,592	2,067		6,787	0	(217)	8,637
Other/nonconforming	5,762		15		38	0	0	53
Commercial mortgage loan securitizations (2)	177,421		2,512		1,186	179	(76)	3,801
Tax credit structures	39,532		13,094		0	0	(4,010)	9,084
Other asset-based finance structures	865		100		0	66	0	166
Other	1,153		51		0	0	0	51
Total	$	1,204,325	17,839		8,011	245	(4,303)	21,792
			Maximum exposure to loss
			Debt and equity interests (1)		Servicing assets and advances	Derivatives	Debt, guarantees, and other commitments	Total exposure
Residential mortgage loan securitizations:
Conforming (2)			$	2,047	6,787	0	1,355	10,189
Other/nonconforming			15		38	0	0	53
Commercial mortgage loan securitizations (2)			2,461		1,186	179	12,200	16,026
Tax credit structures			13,094		0	0	1,331	14,425
Other asset-based finance structures			100		0	70	71	241
Other			51		0	0	157	208
Total			$	17,768	8,011	249	15,114	41,142

			Carrying value – asset (liability)
(in millions)	Total VIE assets		Debt and equity interests (1)		Servicing assets and advances	Derivatives	Debt, guarantees, and other commitments	Net assets
December 31, 2019
Residential mortgage loan securitizations:
Conforming (2)	$	1,098,103	1,528		11,931	0	(683)	12,776
Other/nonconforming	5,178		6		152	0	0	158
Commercial mortgage loan securitizations (2)	169,736		2,239		1,069	80	(43)	3,345
Tax credit structures	39,091		12,826		0	0	(4,260)	8,566
Other asset-based finance structures	1,355		157		0	61	(20)	198
Other	1,167		51		0	0	0	51
Total	$	1,314,630	16,807		13,152	141	(5,006)	25,094
			Maximum exposure to loss
			Debt and equity interests (1)		Servicing assets and advances	Derivatives	Debt, guarantees, and other commitments	Total exposure
Residential mortgage loan securitizations:
Conforming (2)			$	972	11,931	0	937	13,840
Other/nonconforming			6		152	0	0	158
Commercial mortgage loan securitizations (2)			2,239		1,069	80	11,667	15,055
Tax credit structures			12,826		0	0	1,701	14,527
Other asset-based finance structures			157		0	63	91	311
Other			51		0	0	157	208
Total			$	16,251	13,152	143	14,553	44,099

Carrying value – asset (liability)
(in millions)
Total
VIE
assets

Debt and
equity
interests (1)

Servicing
assets and advances

Derivatives

Debt, guarantees, and other
commitments

Net
assets

March 31, 2020
Residential mortgage loan securitizations:
Conforming (2) $ 1,082,170
2,103
8,607
—
(649 ) 10,061
Other/nonconforming 5,226
120
89
—
—
209
Commercial mortgage loan securitizations 174,761
2,440
1,043
196
(18 ) 3,661
Tax credit structures 39,499
12,841
—
—
(4,201 ) 8,640
Other asset-based finance structures 1,314
190
—
71
(8 ) 253
Other 1,118
41
—
—
—
41
Total $ 1,304,088
17,735
9,739
267
(4,876 ) 22,865
Maximum exposure to loss

Debt and
equity
interests (1)

Servicing
assets and advances

Derivatives

Debt, guarantees, and other
commitments

Total
exposure

Residential mortgage loan securitizations:
Conforming (2) $ 1,582
8,607
—
973
11,162
Other/nonconforming 120
89
—
—
209
Commercial mortgage loan securitizations 2,440
1,043
196
11,776
15,455
Tax credit structures 12,841
—
—
1,684
14,525
Other asset-based finance structures 190
—
76
79
345
Other 41
—
—
157
198
Total $ 17,214
9,739
272
14,669
41,894

Carrying value – asset (liability)
(in millions) Total
VIE
assets
Debt and
equity
interests (1)
Servicing
assets and advances
Derivatives
Debt, guarantees,
and other
commitments
Net
assets
December 31, 2019
Residential mortgage loan securitizations:
Conforming (2) $ 1,098,103
1,528
11,931
—
(683 ) 12,776
Other/nonconforming 5,178
6
152
—
—
158
Commercial mortgage loan securitizations 169,736
2,239
1,069
80
(43 ) 3,345
Tax credit structures 39,091
12,826
—
—
(4,260 ) 8,566
Other asset-based finance structures 1,355
157
—
61
(20 ) 198
Other 1,167
51
—
—
—
51
Total $ 1,314,630
16,807
13,152
141
(5,006 ) 25,094
Maximum exposure to loss

Debt and
equity
interests (1)

Servicing
assets and advances

Derivatives

Debt, guarantees,
and other
commitments

Total
exposure

Residential mortgage loan securitizations:
Conforming (2) $ 972
11,931
—
937
13,840
Other/nonconforming 6
152
—
—
158
Commercial mortgage loan securitizations 2,239
1,069
80
11,667
15,055
Tax credit structures 12,826
—
—
1,701
14,527
Other asset-based finance structures 157
—
63
91
311
Other 51
—
—
157
208
Total $ 16,251
13,152
143
14,553
44,099

(1)

~~Includes total equity interests of~~ ~~$11.3 billion~~Includes total equity interests of $11.4 billion at both September 30, 2020, and December 31, 2019. 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)Carrying values include assets and related liabilities of $71 million and $556 million at September 30, 2020, and ~~$11.4 billion~~ at ~~March 31, 2020, and~~ December 31, 2019,~~, 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)~~

~~Carrying values include assets and related liabilities of~~ ~~$521 million~~ ~~and~~ ~~$556 million~~ at ~~March 31, 2020, and~~ ~~December 31, 2019~~, respectively, related to certain unexercised unconditional repurchase options. These amounts represent the carrying value of the loans and associated debt that would be payable if the option was exercised to repurchase eligible loans from GNMA residential and multifamily loan securitizations. These amounts are excluded from maximum exposure to loss as we are not obligated to exercise the options.

~~Note 10: Securitizations and Variable Interest Entities (continued~~)

In Table 10.2, “Total VIE 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” is determined as the carrying value of our investment in the VIEs excluding the unconditional repurchase options that have not been exercised, plus the remaining undrawn liquidity and lending commitments, the notional amount of net written derivative contracts, and generally

111

Note 10: Securitizations and Variable Interest Entities (continued)

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 disclosure is not an indication of expected loss.

For complete descriptions of our transactions with unconsolidated VIEs with which we have a significant continuing involvement, but we are not the primary beneficiary, see Note 10 (Securitizations and Variable Interest Entities) in our 2019 Form 10-K.

Loan Sales and Securitization Activity

We periodically transfer consumer and commercial loans and other types of financial assets in securitization and whole loan sale transactions. 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. 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 10.3 presents information about transfers of assets during the period ~~of assets~~ to unconsolidated VIEs or third-party investors for which we recorded the transfers as sales and have continuing involvement with the transferred assets. In connection with these transfers, we recorded servicing assets, securities, and a liability for repurchase losses which reflects management’s estimate of probable losses related to various representations and warranties for the loans transferred. Each of these interests are initially measured at fair value. Servicing rights are classified as Level 3 measurements, and generally securities are initially ~~predominantly~~ classified as Level 2.

Sales with continuing involvement include securitizations of conforming residential mortgages that are sold to the ~~GSEs~~government-sponsored entities (GSEs) or GNMA. Substantially all transfers to these entities resulted in no gain or loss because the loans were already measured at fair value on a recurring basis.

Table 10.3: Transfers With Continuing Involvement



(in millions)			2020		2019
Quarter ended September 30,	Residential mortgages		Commercial mortgages	Residential mortgages	Commercial mortgages
Net gains (losses) on sale	$	1	54	25	72
Asset balances sold	71,032		2,430	48,378	4,419
Servicing rights recognized	477		32	532	33
Securities recognized (1)	12,024		5	4,271	0
Liability for repurchase losses recognized	8		0	5	0
Nine months ended September 30,
Net gains (losses) on sale	$	53	187	85	193
Asset balances sold	182,473		7,663	119,153	10,479
Servicing rights recognized	1,366		114	1,239	92
Securities recognized (1)	14,074		79	7,665	0
Liability for repurchase losses recognized	15		0	13	0

Quarter ended March 31,
(in millions) 2020
2019
Residential mortgages
Commercial mortgages
Residential mortgages
Commercial mortgages
Net gains (losses) on sale $ 52
69
14
47
Asset balances sold 47,857
2,728
34,103
2,702
Servicing rights recognized 446
34
320
26
Securities recognized 2,313
62
912
—
Liability for repurchase losses recognized 3
—
3
—

(1)Includes securities retained upon initial transfer and subsequent sales during the periods presented, which may result in a net reduction of securities recognized.

Net charge-offs (2)
Total loans
Delinquent loans
and foreclosed assets (1)
Quarter ended Mar 31,
(in millions) Mar 31, 2020
Dec 31, 2019
Mar 31, 2020
Dec 31, 2019
2020
2019
Commercial:
Real estate mortgage $ 113,196
112,507
679
776
71
79
Total commercial 113,196
112,507
679
776
71
79
Consumer:
Real estate 1-4 family first mortgage 986,570
1,008,446
6,326
6,664
31
67
Real estate 1-4 family junior lien mortgage 12
13
2
2
—
—
Total consumer 986,582
1,008,459
6,328
6,666
31
67
Total off-balance sheet sold or securitized loans (3) $ 1,099,778
1,120,966
7,007
7,442
102
146

115


~~(1)~~	~~Includes~~ ~~$365 million~~ ~~and~~ ~~$492 million~~ ~~of commercial foreclosed assets and~~ ~~$354 million~~ ~~and~~ ~~$356 million~~ ~~of consumer foreclosed assets at~~ ~~March 31, 2020, and~~ ~~December 31, 2019, respectively.~~ Note 10: Securitizations and Variable Interest Entities (continued)


~~(2)~~	~~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.~~


~~(3)~~	At ~~March 31, 2020, and~~ ~~December 31, 2019, the table includes total loans of~~ ~~$1.0 trillion~~ ~~at both dates, delinquent loans of~~ ~~$5.2 billion~~ ~~at both dates, and foreclosed assets of~~ ~~$259 million~~ ~~and~~ ~~$251 million, respectively, for FNMA, FHLMC and GNMA.~~

Transactions with Consolidated VIEs and Secured Borrowings

Table 10.8 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 10.8: Transactions with Consolidated VIEs and Secured Borrowings

Carrying value
(in millions)
Total
VIE assets

Assets
Liabilities

Noncontrolling
interests

Net assets
March 31, 2020
Secured borrowings:
Residential mortgage securitizations $ 77
77
(76 ) —
1
Total secured borrowings 77
77
(76 ) —
1
Consolidated VIEs:
Commercial and industrial loans and leases 7,760
7,755
(226 ) (11 ) 7,518
Nonconforming residential mortgage loan securitizations 679
567
(236 ) —
331
Commercial real estate loans 5,022
5,022
—
—
5,022
Municipal tender option bond securitizations 500
505
(502 ) —
3
Other 247
247
(10 ) (22 ) 215
Total consolidated VIEs 14,208
14,096
(974 ) (33 ) 13,089
Total secured borrowings and consolidated VIEs $ 14,285
14,173
(1,050 ) (33 ) 13,090
December 31, 2019
Secured borrowings:
Residential mortgage securitizations $ 81
80
(79 ) —
1
Total secured borrowings 81
80
(79 ) —
1
Consolidated VIEs:
Commercial and industrial loans and leases 8,054
8,042
(529 ) (16 ) 7,497
Nonconforming residential mortgage loan securitizations 935
809
(290 ) —
519
Commercial real estate loans 4,836
4,836
—
—
4,836
Municipal tender option bond securitizations 401
402
(401 ) —
1
Other 279
279
(6 ) (27 ) 246
Total consolidated VIEs 14,505
14,368
(1,226 ) (43 ) 13,099
Total secured borrowings and consolidated VIEs $ 14,586
14,448
(1,305 ) (43 ) 13,100


			Carrying value
(in millions)	Total VIE assets		Assets	Liabilities	Noncontrolling interests	Net assets
September 30, 2020
Secured borrowings:
Residential mortgage securitizations	$	69	69	(68)	0	1
Total secured borrowings	69		69	(68)	0	1
Consolidated VIEs:
Commercial and industrial loans and leases	6,978		4,924	(227)	(13)	4,684
Nonconforming residential mortgage loan securitizations	622		538	(214)	0	324
Commercial real estate loans	5,379		5,379	0	0	5,379
Municipal tender option bond securitizations	596		599	(596)	0	3
Other	159		159	(3)	(22)	134
Total consolidated VIEs	13,734		11,599	(1,040)	(35)	10,524
Total secured borrowings and consolidated VIEs	$	13,803	11,668	(1,108)	(35)	10,525
December 31, 2019
Secured borrowings:
Residential mortgage securitizations	$	81	80	(79)	0	1
Total secured borrowings	81		80	(79)	0	1
Consolidated VIEs:
Commercial and industrial loans and leases	8,054		8,042	(529)	(16)	7,497
Nonconforming residential mortgage loan securitizations	935		809	(290)	0	519
Commercial real estate loans	4,836		4,836	0	0	4,836
Municipal tender option bond securitizations	401		402	(401)	0	1
Other	279		279	(6)	(27)	246
Total consolidated VIEs	14,505		14,368	(1,226)	(43)	13,099
Total secured borrowings and consolidated VIEs	$	14,586	14,448	(1,305)	(43)	13,100

We have raised financing through the securitization of certain financial assets in transactions with VIEs accounted for as secured borrowings. We also consolidate VIEs where we are the primary beneficiary. In certain transactions, we provide contractual support in the form of limited recourse and liquidity to facilitate the remarketing of short-term securities issued to third-party investors. Other than this limited contractual support, the assets of the VIEs are the sole source of repayment of the securities held by third parties.

For complete descriptions of our accounting for transfers accounted for as secured borrowings and involvement with consolidated VIEs, see Note 10 (Securitizations and Variable Interest Entities) in our 2019 Form 10-K.

Other Transactions

In addition to the transactions included in the previous tables, we have used wholly-owned trust preferred security VIEs to issue debt securities or preferred equity exclusively to third-party investors. As the sole assets of the VIEs are receivables from us, we do not consolidate the VIEs even though we own all of the voting equity shares of the VIEs, have fully guaranteed the obligations of the VIEs, and may have the right to redeem the third-party securities under certain circumstances. In our

consolidated balance sheet we reported the debt securities issued to the VIEs as long-term junior subordinated debt with a carrying value of ~~$686~~$698 million and $2.1 billion at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively. During first quarter 2020, we liquidated certain of our trust preferred security VIEs. As part of these liquidations, the preferred securities issued by the trusts were canceled and junior subordinated debentures with a total carrying value of $1.4 billion were distributed to the preferred security holders. Prior to the liquidations, we held $10 million of these preferred securities, which were exchanged for junior subordinated debentures upon liquidation and subsequently retired with no0 impact to earnings. See Note 17 (Preferred Stock) for additional information about trust preferred securities.

Certain money market funds are also excluded from the previous tables because they are exempt from the consolidation analysis. We voluntarily waived a portion of our management fees for these money market funds to maintain a minimum level of daily net investment income. The amount of fees waived was ~~$11~~$30 million and $63 million in the third quarter and first nine months of 2020, respectively, compared with $10 million ~~in first quarter 2020~~ and ~~2019, respectively.~~$30 million for the same periods a year ago.

116

~~Note 11: Mortgage Banking Activities (~~
~~continued~~)



Note 11: Mortgage Banking Activities

Mortgage banking activities consist of residential and commercial mortgage originations, sales and servicing.

We apply the amortization method to commercial MSRs and the fair value method to residential MSRs. Table 11.1 presents the changes in MSRs measured using the fair value method.

Table 11.1: Analysis of Changes in Fair Value MSRs


	Quarter ended September 30,			Nine months ended September 30,
(in millions)	2020		2019	2020		2019
Fair value, beginning of period	$	6,819	12,096	$	11,517	14,649

Servicing from securitizations or asset transfers (1)	351		538	1,274		1,279
Sales and other (2)	0		(4)	(32)		(286)
Net additions	351		534	1,242		993
Changes in fair value:
Due to valuation inputs or assumptions:
Mortgage interest rates (3)	(294)		(718)	(3,916)		(2,811)
Servicing and foreclosure costs (4)	157		13	(265)		3
Discount rates	0		188	27		179
Prepayment estimates and other (5)	(80)		(445)	(451)		(302)
Net changes in valuation inputs or assumptions	(217)		(962)	(4,605)		(2,931)
Changes due to collection/realization of expected cash flows (6)	(598)		(596)	(1,799)		(1,639)
Total changes in fair value	(815)		(1,558)	(6,404)		(4,570)
Fair value, end of period	$	6,355	11,072	$	6,355	11,072

(1)Includes impacts associated with exercising cleanup calls on securitizations and our right to repurchase delinquent loans from GNMA loan securitization pools. MSRs may increase upon repurchase due to servicing liabilities associated with these delinquent GNMA loans.

Quarter ended March 31,
(in millions) 2020
2019
Fair value, beginning of period $ 11,517
14,649
Servicing from securitizations or asset transfers (1) 461
341
Sales and other (2) (31 ) (281 )
Net additions 430
60
Changes in fair value:
Due to changes in valuation model inputs or assumptions:
Mortgage interest rates (3) (3,022 ) (940 )
Servicing and foreclosure costs (4) (73 ) 12
Discount rates (5) 27
100
Prepayment estimates and other (6) (189 ) (63 )
Net changes in valuation model inputs or assumptions (3,257 ) (891 )
Changes due to collection/realization of expected cash flows over time (7) (564 ) (482 )
Total changes in fair value (3,821 ) (1,373 )
Fair value, end of period $ 8,126
13,336

(2)Includes sales and transfers of MSRs, which can result in an increase in MSRs if related to portfolios with servicing liabilities.


~~(1)~~	Includes impacts associated with exercising cleanup calls on securitizations as well as 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 delinquent GNMA 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 updates to 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.


~~(7)~~	~~Represents the reduction in the MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.~~

(3)Includes prepayment speed changes as well as other valuation changes due to changes in mortgage interest rates.

(4)Includes costs to service and unreimbursed foreclosure costs.

(5)Represents other changes in valuation model inputs or assumptions including prepayment speed estimation changes that are independent of mortgage interest rate changes.

(6)Represents the reduction in the MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.

Table 11.2 presents the changes in amortized MSRs.

Table 11.2: Analysis of Changes in Amortized MSRs


	Quarter ended September 30,			Nine months ended September 30,
(in millions)	2020		2019	2020		2019
Balance, beginning of period	$	1,361	1,407	$	1,430	1,443
Purchases	6		25	21		65
Servicing from securitizations or asset transfers	32		33	114		92
Amortization (1)	(74)		(68)	(240)		(203)
Balance, end of period	$	1,325	1,397	$	1,325	1,397
Fair value of amortized MSRs:
Beginning of period	$	1,401	1,897	$	1,872	2,288
End of period	1,400		1,813	1,400		1,813

(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 a $7 million and $37 million impairment recorded in the third quarter and first nine months of 2020, respectively, and an associated valuation allowance of $37 million recorded at September 30, 2020, on the commercial amortized MSRs.

Quarter ended March 31,
(in millions) 2020
2019
Balance, beginning of period $ 1,430
1,443
Purchases 8
24
Servicing from securitizations or asset transfers 34
26
Amortization (66 ) (66 )
Balance, end of period (1) $ 1,406
1,427
Fair value of amortized MSRs:
Beginning of period $ 1,872
2,288
End of period 1,490
2,149


~~(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~~ 0 ~~valuation allowance recorded for the periods presented on the commercial amortized MSRs.~~

117

Note 11: Mortgage Banking Activities (continued)

We present the components of our managed servicing portfolio in Table 11.3 at unpaid principal balance for loans serviced and subserviced for others and at book value for owned loans serviced.

Table 11.3: Managed Servicing Portfolio


(in billions)	Sep 30, 2020			Dec 31, 2019
Residential mortgage servicing:
Serviced and subserviced for others	$	920		1,065
Owned loans serviced	342			343

Total residential servicing	1,262			1,408
Commercial mortgage servicing:
Serviced and subserviced for others	579			575
Owned loans serviced	123			124

Total commercial servicing	702			699
Total managed servicing portfolio	$	1,964		2,107
Total serviced for others, excluding subserviced for others	$	1,488		1,629
Ratio of MSRs to related loans serviced for others	0.52		%	0.79
Weighted average note rate (mortgage loans serviced for others)	4.13			4.25

(in billions) Mar 31, 2020
Dec 31, 2019
Residential mortgage servicing:
Serviced and subserviced for others $ 1,041
1,065
Owned loans serviced 341
343
Total residential servicing 1,382
1,408
Commercial mortgage servicing:
Serviced and subserviced for others 573
575
Owned loans serviced 124
124
Total commercial servicing 697
699
Total managed servicing portfolio $ 2,079
2,107
Total serviced for others, excluding subserviced for others $ 1,602
1,629
Ratio of MSRs to related loans serviced for others 0.60 % 0.79

At September 30, 2020, and December 31, 2019, we had servicer advances, net of an allowance for uncollectible amounts, of $2.6 billion and $2.0 billion, respectively. As the servicer of loans for others, we advance certain payments of principal, interest, taxes, insurance, and default-related expenses which are generally reimbursed within a short timeframe from cash flows from the trust, GSEs, insurer or borrower. The credit risk related to these advances is limited since the reimbursement is generally senior to cash payments to investors. We also advance payments of taxes and insurance for our owned loans which are collectible

from the borrower. We maintain an allowance for uncollectible amounts for advances on loans serviced for others that may not be reimbursed if the payments were not made in accordance with applicable servicing agreements or if the insurance or servicing agreements contain limitations on reimbursements. Servicing advances on owned loans are charged-off when deemed uncollectible.

Table 11.4 presents the components of mortgage banking noninterest income.

Table 11.4: Mortgage Banking Noninterest Income


		Quarter ended September 30,			Nine months ended September 30,
(in millions)		2020		2019	2020		2019
Servicing fees:
Contractually specified servicing fees, late charges and ancillary fees		$	838	924	$	2,452	2,749


Unreimbursed direct servicing costs (1)		(121)		(118)	(333)		(272)
Servicing fees		717		806	2,119		2,477
Amortization (2)		(74)		(68)	(240)		(203)
Changes due to collection/realization of expected cash flows (3)	(A)	(598)		(596)	(1,799)		(1,639)
Net servicing fees		45		142	80		635
Changes in fair value of MSRs due to valuation inputs or assumptions (4)	(B)	(217)		(962)	(4,605)		(2,931)
Net derivative gains from economic hedges (5)		513		678	4,448		2,795
Market-related valuation changes to MSRs, net of hedge results		296		(284)	(157)		(136)
Total servicing income (loss), net		341		(142)	(77)		499
Net gains on mortgage loan origination/sales activities (6)		1,249		608	2,363		1,433
Total mortgage banking noninterest income		$	1,590	466	$	2,286	1,932
Total changes in fair value of MSRs carried at fair value	(A)+(B)	$	(815)	(1,558)	$	(6,404)	(4,570)

(1)Includes costs associated with foreclosures, unreimbursed interest advances to investors, and other interest costs.

(2)Includes a $7 million and $37 million impairment recorded in the third quarter and first nine months of 2020, respectively, on the commercial amortized MSRs.

Quarter ended March 31,
(in millions) 2020
2019
Servicing income, net:
Servicing fees:
Contractually specified servicing fees $ 808
840
Late charges 27
33
Ancillary fees 30
38
Unreimbursed direct servicing costs (1) (107 ) (70 )
Net servicing fees 758
841
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2) (A) (3,257 ) (891 )
Changes due to collection/realization of expected cash flows over time (3) (564 ) (482 )
Total changes in fair value of MSRs carried at fair value (3,821 ) (1,373 )
Amortization (66 ) (66 )
Net derivative gains from economic hedges (4) (B) 3,400
962
Total servicing income, net 271
364
Net gains on mortgage loan origination/sales activities (5) 108
344
Total mortgage banking noninterest income $ 379
708
Market-related valuation changes to MSRs, net of hedge results (2)(4) (A)+(B) $ 143
71
(3)Represents the reduction in the MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.

(4)Refer to the analysis of changes in fair value MSRs presented in Table 11.1 in this Note for more detail.

(5)See Note 15 (Derivatives) for additional discussion and detail on economic hedges.

(6)Includes net gains (losses) of $(297) million and $(1.6) billion in the third quarter and first nine months of 2020, respectively, and $58 million and $(376) million in the third quarter and first nine months of 2019, respectively, related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments.

118


~~(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 11.1 in this Note for more detail.~~


~~(3)~~	~~Represents the reduction in in the MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.~~


~~(4)~~	~~Represents results from economic hedges used to hedge the risk of changes in fair value of MSRs. See Note 15 (Derivatives) for additional discussion and detail.~~


~~(5)~~	~~Includes net losses of~~ ~~$(929) million~~ ~~and~~ ~~$(151) million~~ in ~~first quarter 2020~~ ~~and~~ ~~2019, respectively, related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments.~~

~~Note 12: Intangible Assets (continued~~)

Note 12: Intangible Assets

Table 12.1 presents the gross carrying value of intangible assets and accumulated amortization.

Table 12.1: Intangible Assets


	September 30, 2020				December 31, 2019
(in millions)	Gross carrying value		Accumulated amortization	Net carrying value	Gross carrying value	Accumulated amortization	Net carrying value
Amortized intangible assets (1):
MSRs (2)	$	4,557	(3,232)	1,325	4,422	(2,992)	1,430

Customer relationship and other intangibles	879		(527)	352	947	(524)	423
Total amortized intangible assets	$	5,436	(3,759)	1,677	5,369	(3,516)	1,853
Unamortized intangible assets:
MSRs (carried at fair value) (2)	$	6,355			11,517
Goodwill	26,387				26,390
Trademark	14				14

(1)Balances are excluded commencing in the period following full amortization.

(2)Includes a $37 million valuation allowance recorded for amortized MSRs at September 30, 2020. See Note 11 (Mortgage Banking Activities) for additional information on MSRs.

March 31, 2020 December 31, 2019
(in millions)
Gross
carrying
value

Accumulated
amortization

Net
carrying
value

Gross
carrying
value

Accumulated
amortization

Net
carrying
value

Amortized intangible assets (1):
MSRs (2) $ 4,465
(3,059 ) 1,406
4,422
(2,992 ) 1,430
Customer relationship and other intangibles 879
(480 ) 399
947
(524 ) 423
Total amortized intangible assets $ 5,344
(3,539 ) 1,805
5,369
(3,516 ) 1,853
Unamortized intangible assets:
MSRs (carried at fair value) (2) $ 8,126
11,517

Goodwill 26,381
26,390

Trademark 14
14


~~(1)~~	~~Balances are excluded commencing in the period following full amortization.~~


~~(2)~~	~~See Note 11 (Mortgage Banking Activities) for additional information on MSRs.~~

Table 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 ~~March 31,~~September 30, 2020. Future amortization expense may vary from these projections.

Table 12.2: Amortization Expense for Intangible Assets

(in millions) Amortized MSRs

Customer
relationship
and other
intangibles

Total
Three months ended March 31, 2020 (actual) $ 67
24
91
Estimate for the remainder of 2020 $ 202
71
273
Estimate for year ended December 31,
2021 235
81
316
2022 210
68
278
2023 181
59
240
2024 156
48
204
2025 130
39
169


(in millions)	Amortized MSRs		Customer relationship and other intangibles	Total
Nine months ended September 30, 2020 (actual)	$	240	71	311
Estimate for the remainder of 2020	$	66	24	90
Estimate for year ended December 31,
2021	239		81	320
2022	212		68	280
2023	184		59	243
2024	159		48	207
2025	134		39	173

Table 12.3 shows the allocation of goodwill to our reportable operating segments. We assess goodwill for impairment at a

reporting unit level, which is generally one level below the operating segments.

Table 12.3: Goodwill

(in millions)
Community
Banking

Wholesale
Banking

Wealth and Investment Management

Consolidated
Company

December 31, 2018 $ 16,685
8,450
1,283

26,418
Foreign currency translation —
2
—
2
March 31, 2019 $ 16,685
8,452
1,283
26,420
December 31, 2019 $ 16,685
8,429
1,276
26,390
Foreign currency translation —
(9 ) —
(9 )
March 31, 2020 $ 16,685
8,420
1,276
26,381


(in millions)	Community Banking		Wholesale Banking	Wealth and Investment Management	Consolidated Company
December 31, 2018	$	16,685	8,450	1,283	26,418
Reclassification of goodwill held for sale to other assets	0		(25)	0	(25)
Reduction in goodwill related to divested business and other	0		0	(7)	(7)
Foreign currency translation	0		2	0	2


September 30, 2019	$	16,685	8,427	1,276	26,388
December 31, 2019	$	16,685	8,429	1,276	26,390

Foreign currency translation	0		(3)	0	(3)


September 30, 2020	$	16,685	8,426	1,276	26,387

119



Note 13: Guarantees, Pledged Assets and Collateral, and Other Commitments

arrangements. For complete descriptions of our guarantees, see Note 16 (Guarantees, Pledged Assets and Collateral, and Other Commitments) in our 2019 Form 10-K. Table 13.1 shows carrying value, maximum exposure to loss on our guarantees and the related non-investment grade amounts.

Table 13.1: Guarantees – Carrying Value and 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
September 30, 2020
Standby letters of credit	$	195	12,381	4,287	1,844	446	18,958	7,484
Direct pay letters of credit	42		2,227	2,853	704	48	5,832	1,175
Written options (1)	(245)		13,356	10,851	2,379	152	26,738	16,205
Loans and MLHFS sold with recourse (2)	34		231	752	1,596	10,016	12,595	10,254
Exchange and clearing house guarantees	0		0	0	0	5,516	5,516	0
Other guarantees and indemnifications (3)	1		567	1	1	1,667	2,236	528
Total guarantees	$	27	28,762	18,744	6,524	17,845	71,875	35,646
December 31, 2019
Standby letters of credit	$	36	11,569	4,460	2,812	467	19,308	7,104
Direct pay letters of credit	0		1,861	3,815	824	105	6,605	1,184
Written options (1)	(345)		17,088	10,869	2,341	273	30,571	18,113
Loans and MLHFS sold with recourse (2)	52		114	576	1,356	10,050	12,096	9,835
Exchange and clearing house guarantees	0		0	0	0	4,817	4,817	0
Other guarantees and indemnifications (3)	1		785	1	3	809	1,598	698
Total guarantees	$	(256)	31,417	19,721	7,336	16,521	74,995	36,934

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

March 31, 2020
Standby letters of credit $ 83
12,016
3,839
2,756
429
19,040
7,183
Direct pay letters of credit —
1,674
3,955
836
40
6,505
1,321
Written options (1) 690
18,799
10,315
2,387
327
31,828
24,176
Loans and MLHFS sold with recourse (2) 28
111
712
1,333
10,039
12,195
10,000
Exchange and clearing house guarantees —
—
—
—
5,054
5,054
—
Other guarantees and indemnifications (3) 1
610
3
1
450
1,064
559
Total guarantees $ 802
33,210
18,824
7,313
16,339
75,686
43,239
December 31, 2019
Standby letters of credit $ 36
11,569
4,460
2,812
467
19,308
7,104
Direct pay letters of credit —
1,861
3,815
824
105
6,605
1,184
Written options (1) (345 ) 17,088
10,869
2,341
273
30,571
18,113
Loans and MLHFS sold with recourse (2) 52
114
576
1,356
10,050
12,096
9,835
Exchange and clearing house guarantees —
—
—
—
4,817
4,817
—
Other guarantees and indemnifications (3) 1
785
1
3
809
1,598
698
Total guarantees $ (256 ) 31,417
19,721
7,336
16,521
74,995
36,934


~~(1)~~	(1)Written options, which are in the form of derivatives, are also included in the derivative disclosures in Note 15 (Derivatives). Carrying value net asset position is a result of certain deferred premium option trades.


~~(2)~~	~~Represent recourse provided,~~ ~~predominantly~~ ~~to the GSEs, on loans sold under various programs and arrangements.~~


~~(3)~~	~~Includes indemnifications provided to certain third-party clearing agents. Outstanding customer obligations under these arrangements were~~ ~~$27 million~~ ~~and~~ ~~$80 million~~ ~~with related collateral of~~ ~~$389 million~~ ~~and~~ ~~$696 million~~ at ~~March 31, 2020, and~~ ~~December 31, 2019, respectively.~~

(2)Represent recourse provided, predominantly to the GSEs, on loans sold under various programs and arrangements.

(3)Includes indemnifications provided to certain third-party clearing agents. Outstanding customer obligations under these arrangements were $176 million and $80 million with related collateral of $1.5 billion and $696 million at September 30, 2020, and December 31, 2019, respectively.

“Maximum exposure to loss” and “Non-investment grade” are required disclosures under GAAP. 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 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 is more representative of our exposure to loss than maximum exposure to loss. The carrying value represents the fair value of the guarantee, if any, and also includes an ACL for guarantees, if applicable.

Non-investment grade represents those guarantees on which we have a higher risk of 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 6 (Loans and Related Allowance for Credit Losses).

We provide debit and credit card transaction processing services through the payment networks directly for merchants and as a sponsor for merchant processing servicers, including our joint venture with a third party that is accounted for as an equity method investment. In our role as the merchant acquiring bank, we have a potential obligation for payment and delivery disputes between the merchant and the cardholder that are resolved in favor of the cardholder. If we are unable to collect the amounts from the merchant, we incur a loss for the refund to the cardholder. We are secondarily obligated to make a refund for transactions involving the sponsored merchant processing servicers. We have a low likelihood of loss since most products and services are delivered when purchased and amounts are refunded when items are returned to the merchant. In addition, we may reduce our risk by withholding future payments and requiring cash or other collateral. For the first nine months of 2020, we processed card transaction volume of $982.7 billion as a merchant acquiring bank, and related losses, including those from our joint venture entity, were immaterial.

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 ~~$2.1~~$2.4 billion and $1.6 billion at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. These guarantees rank on parity with all of the Parent’s other unsecured and unsubordinated indebtedness.

120

~~Note 13: Guarantees, Pledged Assets and Collateral, and Other Commitments (continued~~)

Pledged Assets

Table 13.2 provides the carrying amount of on-balance sheet pledged assets and the fair value of other pledged collateral. Other pledged collateral is collateral we have received from third parties, have the right to repledge and is not recognized on our balance sheet.

TRADING RELATED ACTIVITY Our trading businesses may pledge debt and equity securities in connection with securities sold under agreements to repurchase (repurchase agreements) and securities lending arrangements. The collateral that we pledge related to our trading activities may include our own collateral as well as collateral that we have received from third parties and have the right to repledge. ~~Substantially all~~All of the trading activity pledged collateral is eligible to be repledged or sold by the secured party.

NON-TRADING RELATED ACTIVITY As part of our liquidity management strategy, we may pledge loans, debt securities, and

other assets to secure trust and public deposits, borrowings and letters of credit from the Federal Home Loan Bank (FHLB) and FRB and for other purposes as required or permitted by law or insurance statutory requirements. Substantially all of the non-trading activity pledged collateral is not eligible to be repledged or sold by the secured party.

VIE RELATED We pledge assets in connection with various types of transactions entered into with VIEs. These pledged assets can only be used to settle the liabilities of those entities. We also have loans recorded on our balance sheet which represent certain delinquent loans that are eligible for repurchase from GNMA loan securitizations. See Note 10 (Securitizations and Variable Interest Entities) for additional information on consolidated VIE assets and VIEs accounted for as secured borrowings.

Table 13.2: Pledged Assets ~~(1)~~


(in millions)	Mar 31, 2020		Dec 31, 2019	(in millions)	Sep 30, 2020		Dec 31, 2019
Related to trading activities:				Related to trading activities:
Repledged third-party owned debt and equity securities	$	61,479	60,083	Repledged third-party owned debt and equity securities	$	37,121	60,083
Trading debt securities and other	39,828		51,083	Trading debt securities and other	20,483		51,083
Equity securities	1,122		1,379	Equity securities	835		1,379
Total pledged assets related to trading activities	102,429		112,545	Total pledged assets related to trading activities	58,439		112,545
Related to non-trading activities:				Related to non-trading activities:
Loans	400,111		406,106	Loans	364,865		406,106
Debt securities:				Debt securities:

Available-for-sale	59,116		61,126	Available-for-sale	55,479		61,126
Held-to-maturity	3,884		3,685	Held-to-maturity	2,786		3,685
Mortgage loans held for sale	1,877		2,266	Mortgage loans held for sale	0		2,266
Total pledged assets related to non-trading activities	464,988		473,183	Total pledged assets related to non-trading activities	423,130		473,183
Related to VIEs:				Related to VIEs:
Consolidated VIE assets	14,096		14,368	Consolidated VIE assets	11,599		14,368
VIEs accounted for as secured borrowings	77		80	VIEs accounted for as secured borrowings	69		80
Loans eligible for repurchase from GNMA securitizations	533		568	Loans eligible for repurchase from GNMA securitizations	76		568
Total pledged assets related to VIEs	14,706		15,016	Total pledged assets related to VIEs	11,744		15,016
Total pledged assets	$	582,123	600,744	Total pledged assets	$	493,313	600,744


~~(1)~~	~~Prior period amounts have been revised to conform with the current period presentation.~~

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 subsidiaries and to a lesser extent through other bank entities. ~~Most of our~~Our securities financing activities primarily involve high quality, liquid securities such as U.S. Treasury securities and government agency securities, and to a lesser extent, less liquid securities, including equity securities, corporate bonds and asset-backed securities. We account for these transactions as collateralized financings in which we typically receive or pledge securities as collateral. We believe these financing transactions generally do not have material credit risk given the collateral provided and the related monitoring processes.

OFFSETTING OF SECURITIES FINANCING ACTIVITIES Table 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~~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

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Note 13: Guarantees, Pledged Assets and Collateral, and Other Commitments (continued)

amount of the related recognized asset or liability for each counterparty.

In addition to the amounts included in Table 13.3, we also have balance sheet netting related to derivatives that is disclosed in Note 15 (Derivatives).

Table 13.3: Offsetting – Securities Financing Activities


(in millions)	Sep 30, 2020		Dec 31, 2019
Assets:
Resale and securities borrowing agreements
Gross amounts recognized	$	94,579	140,773
Gross amounts offset in consolidated balance sheet (1)	(11,066)		(19,180)
Net amounts in consolidated balance sheet (2)	83,513		121,593
Collateral not recognized in consolidated balance sheet (3)	(82,736)		(120,786)
Net amount (4)	$	777	807
Liabilities:
Repurchase and securities lending agreements
Gross amounts recognized	$	54,888	111,038
Gross amounts offset in consolidated balance sheet (1)	(11,066)		(19,180)
Net amounts in consolidated balance sheet (5)	43,822		91,858
Collateral pledged but not netted in consolidated balance sheet (6)	(43,602)		(91,709)
Net amount (4)	$	220	149

(in millions) Mar 31,
2020
Dec 31,
2019
Assets:
Resale and securities borrowing agreements
Gross amounts recognized $ 128,844
140,773
Gross amounts offset in consolidated balance sheet (1) (22,762 ) (19,180 )
Net amounts in consolidated balance sheet (2) 106,082
121,593
Collateral not recognized in consolidated balance sheet (3) (105,136 ) (120,786 )
Net amount (4) $ 946
807
Liabilities:
Repurchase and securities lending agreements
Gross amounts recognized (5) $ 101,516
111,038
Gross amounts offset in consolidated balance sheet (1) (22,762 ) (19,180 )
Net amounts in consolidated balance sheet (6) 78,754
91,858
Collateral pledged but not netted in consolidated balance sheet (7) (78,412 ) (91,709 )
Net amount (8) $ 342
149
(1)Represents recognized amount of resale and repurchase agreements with counterparties subject to enforceable MRAs that have been offset in the consolidated balance sheet.


~~(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)~~

Includes $86.4 billion and $102.1 billion classified on our consolidated balance sheet in federal funds sold and securities purchased under resale agreements at March 31, 2020, and December 31, 2019, respectively. Also includes securities purchased under long-term resale agreements (generally one year or more) classified in loans, which totaled $19.7 billion and $19.5 billion, at March 31, 2020, and December 31, 2019, respectively.

~~(3)~~

Represents the fair value of collateral we have received under enforceable MRAs or MSLAs, limited in the table above to the amount of the recognized asset due from each counterparty. At March 31, 2020, and December 31, 2019, we have received total collateral with a fair value of $138.7 billion and $150.9 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 $61.1 billion at March 31, 2020, and $59.1 billion at December 31, 2019.


~~(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 in the table above to the amount of the recognized liability owed to each counterparty. At March 31, 2020, and December 31, 2019, we have pledged total collateral with a fair value of $103.4 billion and $113.3 billion, respectively, substantially all of which may be sold or repledged by the counterparty.


~~(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.~~

(2)Includes $69.2 billion and $102.1 billion classified on our consolidated balance sheet in federal funds sold and securities purchased under resale agreements at September 30, 2020, and December 31, 2019, respectively. Also includes securities purchased under long-term resale agreements (generally one year or more) classified in loans, which totaled $14.3 billion and $19.5 billion, at September 30, 2020, and December 31, 2019, respectively.

(3)Represents the fair value of collateral we have received under enforceable MRAs or MSLAs, limited in the table above to the amount of the recognized asset due from each counterparty. At September 30, 2020, and December 31, 2019, we have received total collateral with a fair value of $106.5 billion and $150.9 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 $35.9 billion at September 30, 2020, and $59.1 billion at December 31, 2019.

(4)Represents the amount of our exposure (assets) or obligation (liabilities) that is not collateralized and/or is not subject to an enforceable MRA or MSLA.

(5)Amount is classified in short-term borrowings on our consolidated balance sheet.

(6)Represents the fair value of collateral we have pledged, related to enforceable MRAs or MSLAs, limited in the table above to the amount of the recognized liability owed to each counterparty. At September 30, 2020, and December 31, 2019, we have pledged total collateral with a fair value of $56.5 billion and $113.3 billion, respectively, substantially all of which may be sold or repledged by the counterparty.

REPURCHASE AND SECURITIES LENDING AGREEMENTS Securities sold under repurchase agreements and securities lending arrangements are effectively short-term collateralized borrowings. In these transactions, we receive cash in exchange for transferring securities as collateral and recognize an obligation to reacquire the securities for cash at the transaction’s maturity. These types of transactions create risks, including (1) the counterparty may fail to return the securities at maturity, (2) the fair value of the securities transferred may decline below the amount of our obligation to reacquire the securities, and therefore create an obligation for us to pledge additional amounts, and (3) the counterparty may accelerate the maturity on demand, requiring us to reacquire the security prior to contractual maturity. We attempt to mitigate these risks in various ways. ~~Most of our~~Our collateral primarily consists of highly liquid securities. In addition, we underwrite and monitor the financial strength of our counterparties, monitor the fair value of collateral pledged relative to contractually required repurchase amounts, and monitor that our collateral is properly returned through the clearing and settlement process in advance of our cash repayment. Table 13.4 provides the gross amounts recognized on the balance sheet (before the effects of offsetting) of our liabilities for repurchase and securities lending agreements disaggregated by underlying collateral type.

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~~Note 13: Guarantees, Pledged Assets and Collateral, and Other Commitments (continued~~)

Table 13.4: Gross Obligations by Underlying Collateral Type


(in millions)	Sep 30, 2020		Dec 31, 2019
Repurchase agreements:
Securities of U.S. Treasury and federal agencies	$	22,342	48,161
Securities of U.S. States and political subdivisions	46		104
Federal agency mortgage-backed securities	13,184		44,737
Non-agency mortgage-backed securities	1,176		1,818
Corporate debt securities	8,780		7,126
Asset-backed securities	1,050		1,844
Equity securities	1,463		1,674
Other	830		705
Total repurchases	48,871		106,169
Securities lending arrangements:
Securities of U.S. Treasury and federal agencies	57		163

Federal agency mortgage-backed securities	42		0

Corporate debt securities	98		223

Equity securities (1)	5,788		4,481
Other	32		2
Total securities lending	6,017		4,869
Total repurchases and securities lending	$	54,888	111,038

(in millions) Mar 31,
2020
Dec 31,
2019
Repurchase agreements:
Securities of U.S. Treasury and federal agencies $ 50,787
48,161
Securities of U.S. States and political subdivisions 89
104
Federal agency mortgage-backed securities 32,027
44,737
Non-agency mortgage-backed securities 1,263
1,818
Corporate debt securities 10,048
7,126
Asset-backed securities 1,460
1,844
Equity securities 721
1,674
Other 514
705
Total repurchases 96,909
106,169
Securities lending arrangements:
Securities of U.S. Treasury and federal agencies 134
163
Corporate debt securities 364
223
Equity securities (1) 4,100
4,481
Other 9
2
Total securities lending 4,607
4,869
Total repurchases and securities lending $ 101,516
111,038
(1)Equity securities are generally exchange traded and represent collateral received from third parties that has been repledged. We received the collateral through either margin lending agreements or contemporaneous securities borrowing transactions with other counterparties.


~~(1)~~	Equity securities are generally exchange traded and represent collateral received from third parties that has been repledged. We received the collateral through either margin lending agreements or contemporaneous securities borrowing transactions with other counterparties.

Table 13.5 provides the contractual maturities of our gross obligations under repurchase and securities lending agreements.

Table 13.5: Contractual Maturities of Gross Obligations


(in millions)	Overnight/continuous		Up to 30 days	30-90 days	>90 days	Total gross obligation
September 30, 2020
Repurchase agreements	$	37,173	1,963	6,150	3,585	48,871
Securities lending arrangements	5,467		0	550	0	6,017
Total repurchases and securities lending (1)	$	42,640	1,963	6,700	3,585	54,888
December 31, 2019
Repurchase agreements	$	79,793	17,681	4,825	3,870	106,169
Securities lending arrangements	4,724		0	145	0	4,869
Total repurchases and securities lending (1)	$	84,517	17,681	4,970	3,870	111,038

(in millions) Overnight/continuous
Up to 30 days
30-90 days
>90 days
Total gross obligation
March 31, 2020
Repurchase agreements $ 75,413
7,681
10,680
3,135
96,909
Securities lending arrangements 4,392
65
150
—
4,607
Total repurchases and securities lending (1) $ 79,805
7,746
10,830
3,135
101,516
December 31, 2019
Repurchase agreements $ 79,793
17,681
4,825
3,870
106,169
Securities lending arrangements 4,724
—
145
—
4,869
Total repurchases and securities lending (1) $ 84,517
17,681
4,970
3,870
111,038
(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.


~~(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 ~~March 31,~~September 30, 2020, and December 31, 2019, we had commitments to purchase debt securities of ~~$89 million and~~ $18 million ~~respectively,~~in both periods and commitments to purchase equity securities of $3.2 billion and $2.7 billion, ~~as of both periods.~~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 and indemnifications in

Table 13.1.

Also, we have commitments to purchase loans and securities under resale agreements from certain counterparties, including central clearing organizations. The amount of our unfunded contractual commitments was ~~$10.8~~$9.1 billion and $7.5 billion as of ~~March 31,~~September 30, 2020, and December 31, 2019, respectively.

Given the nature of these commitments, they are excluded from Table 6.4 (Unfunded Credit Commitments) in Note 6 (Loans and Related Allowance for Credit Losses).

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Note 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 al. v. Visa, Inc. 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 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 3 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 3 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 3 cases returned to the district court for further proceedings. ~~On March 18, 2020, the~~The Company ~~reached a settlement in principle~~has entered into an agreement pursuant to which the Company will pay $20.8 million to resolve the cases, subject to ~~final documentation of the settlement agreement.~~court approval.

AUTOMOBILE LENDING MATTERS On April 20, 2018, the Company entered into consent orders with the Office of the Comptroller of the Currency (OCC) and 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 certain mortgage interest rate lock extensions. The consent orders require remediation to customers and the payment of a total of $1.0 billion in civil money penalties to the agencies. In July 2017, the Company announced a plan to remediate customers who may have been financially harmed due to issues related to automobile CPI policies purchased through a third-party vendor on their behalf. 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 1 multi-district litigation in the United States District Court for the Central District of California. The Company has reached an agreement 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 ~~$547~~$643 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 common fund for the class. The district court granted final approval of the settlement on November 21, 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. In January 2020, the court dismissed this action as to all defendants except the Company and a former executive officer and limited the action to two alleged misstatements. In addition, 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 related to the unused portion of guaranteed automobile protection (GAP) waiver or insurance agreements between the customer and dealer and, by assignment, the lender. Allegations related to the CPI and GAP programs are among the subjects of 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 November 2018. The parties to the state 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 state court granted final approval of the settlement on January 15, 2020, and a notice of appeal has been filed. These and other issues related to the origination, servicing, 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.

CONSENT ORDER DISCLOSURE LITIGATION Wells Fargo shareholders have brought a securities fraud class action in the United States District Court for the Southern District of New

124

York alleging that the Company and certain of its current and former executive officers made false or misleading statements regarding the Company’s efforts to comply with the February 2018 consent order with the Federal Reserve Board and the April 2018 consent orders with the CFPB and OCC.

CONSUMER DEPOSIT ACCOUNT RELATED REGULATORY INVESTIGATION The CFPB is conducting an investigation into

~~Note 14: Legal Actions (continued~~)

whether customers were unduly harmed by the Company’s 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.

CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY ACT/~~PAYMENT~~PAYCHECK PROTECTION PROGRAM Plaintiffs have filed putative class actions in ~~state and~~various federal ~~court in Texas, California, and Colorado~~courts against the Company. The actions seek damages and injunctive relief related to the Company’s offering of Paycheck Protection Program (PPP) loans under the Coronavirus Aid, Relief, and Economic Security ~~Act.~~Act, as well as claims for fees by purported agents who allegedly assisted customers with preparing PPP loan applications submitted to the Company. The Company has also received formal and informal inquiries from federal and state governmental agencies regarding its offering of PPP loans. In addition, Wells Fargo shareholders have brought a securities fraud class action in the United States District Court for the Northern District of California alleging that the Company and certain of its executive officers made false or misleading statements regarding the Company's participation in the PPP and the Company's compliance with related regulations.

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’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 determined that there have been instances of incorrect fees being applied to certain assets and accounts, resulting in both overcharges and undercharges to customers.

FOREIGN EXCHANGE BUSINESS The United States Department of Justice (Department of Justice) is investigating certain activities in the Company’s foreign exchange business, including whether customers may have received pricing inconsistent with commitments made to those customers. Previous investigations by other federal government agencies have been resolved.

INTERCHANGE LITIGATION Plaintiffs 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 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 final approval of the settlement on December 13, 2019, which was appealed to the United States Court of Appeals for the Second Circuit by settlement objector merchants. Several of the opt-out and direct action litigations have been settled while others remain pending. Discovery is proceeding in the opt-out litigations and the equitable relief class case.

LOW INCOME HOUSING TAX CREDITS Federal 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 2 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 commenced on October 30, 2019, and resulted in a $200 million verdict against the Company. Trial in the second case commenced on January 6, 2020, and resulted in a $102.7 million verdict against the Company. The Company has filed post-trial motions to, among other things, vacate the verdicts, and USAA has filed post-trial motions seeking future royalty payments and damages for willful infringement.

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Note 14: Legal Actions (continued)

MORTGAGE LOAN MODIFICATION LITIGATION Plaintiffs representing a putative class of mortgage borrowers have filed separate putative class actions, Hernandez v. Wells Fargo, et al., Coordes v. Wells Fargo, et al., Ryder v. Wells Fargo, Liguori v. Wells Fargo, and Dore v. Wells Fargo, against Wells Fargo Bank, N.A., in the United States District Court for the Northern District of California, the United States District Court for the District of Washington, the United States District Court for the Southern District of Ohio, the United States District Court for the Southern District of New York, and the United States District Court for the Western District of Pennsylvania, 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. The district court in the Hernandez case certified a nationwide breach of contract class for foreclosed borrowers and denied certification on claims pertaining to other impacted borrowers. In March 2020, the Company entered into an agreement pursuant to which the Company will pay $18.5 million to resolve the claims of the certified class in the Hernandez ~~case.~~case, which was approved by the district court in October 2020. The plaintiffs and the Company have informed the district court that they will move to reopen the Hernandez settlement to include additional borrowers who the Company determined should have been included in the settlement class once the total number of additional borrowers has been confirmed. The Company has identified a population of additional borrowers during the relevant class period whose loans had not previously been reviewed for inclusion in the original population of impacted customers. The identification of these additional borrowers may also increase the potential class of mortgage borrowers in the other pending matters.

MORTGAGE-RELATED REGULATORY INVESTIGATIONS Federal and state government agencies, including the Department of Justice, have been investigating or examining certain mortgage related activities of Wells Fargo and predecessor institutions. Wells Fargo, for itself and for predecessor institutions, has responded ~~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. An agreement, pursuant to which the Company paid $2.09 billion, was reached in August 2018 to resolve the Department of Justice 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 and reached an agreement with the Attorney General of the State of Maryland in June 2020 pursuant to which the Company agreed to pay $20 million in restitution, in each case to resolve ~~a claim~~claims 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.

NOMURA/NATIXIS MORTGAGE-RELATED LITIGATION In August 2014 and August 2015, Nomura Credit & Capital Inc. (Nomura) and Natixis Real Estate Holdings, LLC (Natixis) filed a total of 7 third-party complaints against Wells Fargo Bank, N.A., in New York state court. In the underlying first-party actions,

Nomura and Natixis have been sued for alleged breaches of representations and warranties made in connection with residential mortgage-backed securities sponsored by them. In the third-party actions, Nomura and Natixis allege that Wells Fargo, as master servicer, primary servicer or securities administrator, failed to notify Nomura and Natixis of their own breaches, failed to properly oversee the primary servicers, and failed to adhere to accepted servicing practices. Natixis additionally alleges that Wells Fargo failed to perform default oversight duties. Wells Fargo has asserted counterclaims alleging that Nomura and Natixis failed to provide Wells Fargo notice of their representation and warranty breaches.

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) 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 (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 in October 2016, and Wells Fargo appealed this decision to the United States Court of Appeals for the Eleventh Circuit. In 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. On September 26, 2019, the district court entered an order granting Wells Fargo’s motion and dismissed the claims of unnamed class members in favor of arbitration. Plaintiffs appealed this decision to the United States Court of Appeals for the Eleventh Circuit.

RETAIL SALES PRACTICES MATTERS A number of bodies or entities, including (a) 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, (b) state attorneys general, including the New York Attorney General, and (c) 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 CFPB, the 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~~certain of the 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

126

practices, CPI and GAP, and mortgage interest rate lock matters, pursuant to which the Company paid $575 million. On February 21, 2020,, the Company entered into an agreement with the Department of Justice to resolve the Department of Justice’s criminal investigation into the Company’s retail sales practices, as well as a separate agreement to resolve the Department of Justice’s civil investigation. As part of the Department of Justice criminal settlement, no charges will be filed against the Company provided the Company abides by all the terms of the agreement. The Department of Justice criminal settlement also includes the Company’s agreement that the facts set forth in the settlement document constitute sufficient facts for the finding of criminal violations of statutes regarding bank records and personal information. On February 21, 2020,, the Company also entered into an order to resolve the SEC’s investigation arising out of the Company’s retail sales practices. The SEC order contains a finding, to which the Company consented, that the facts set forth include violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. As part of the resolution of the Department of Justice and SEC investigations, the Company has agreed to make payments totaling $3.0 billion. In addition, as part of the settlements and included in the $3.0 billion amount, the Company has agreed to the creation of a $500 million Fair Fund for the benefit of investors who were harmed by the conduct covered in the SEC settlement.

In addition, a number of lawsuits have 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

~~Note 14: Legal Actions (continued~~)

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,~~On June 14, 2018, the ~~Company~~district court granted final approval of a settlement entered into ~~a settlement agreement~~by the Company in the first-filed action, Jabbari v. Wells Fargo Bank, N.A., pursuant to which the Company will pay $142 million to resolve claims regarding certain products or services provided without authorization or consent for the time period May 1, 2002 to April 20, 2017. The district court issued an order granting final approval of the settlement on June 14, 2018. Several appeals of the district court’s order granting final approval of the settlement have been filed withOn July 20, 2020, the United States Court of Appeals for the Ninth ~~Circuit.~~Circuit affirmed the district court's order granting final approval of the settlement. On September 29, 2020, the district court approved the settlement distribution to the Jabbari claimants. Second, ~~Wells Fargo shareholders brought~~the Company was subject to 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 against, among others, current and former directors and officers for their alleged involvement with and failure to detect and prevent sales practices issues. These actions are currently pending in the United States District Court for the Northern District of California and California state court as consolidated or coordinated proceedings. ~~An additional lawsuit, which asserts similar claims and is pending in Delaware state 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. The federal court granted final approval of the settlement for its action on April 7, 2020. The state court granted final approval of the settlement for its action on January 15, ~~2020, and a notice of appeal has been filed.~~2020. Fourth, ~~multiple employment litigation matters are pending against Wells Fargo, including (a)~~ a purported Employee Retirement Income Security Act (ERISA) class action was filed in the United States District Court for the

District of Minnesota on behalf of 401(k) plan ~~participants; this~~participants. The district court dismissed the action, ~~has been dismissed~~ and ~~is now~~ on ~~appeal; and (b) multiple single-plaintiff Sarbanes-Oxley Act complaints and state law whistleblower actions filed with~~July 27, 2020, the United States ~~Department~~Court of ~~Labor or in various state courts alleging adverse employment actions~~Appeals for ~~raising sales practice misconduct issues.~~the Eighth Circuit affirmed the dismissal.

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 additional 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 11 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.

127

Note 14: Legal Actions (continued)

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 3 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. The case is pending trial.

WHOLESALE BANKING CONSENT ORDER INVESTIGATION On 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.

OUTLOOK As described above, the Company establishes accruals for legal actions when potential losses associated with the actions become probable and the costs can be reasonably estimated. The high end of the range of reasonably possible potential losses in excess of the Company’s accrual for probable and estimable losses was approximately ~~$2.5~~$2.4 billion as of ~~March 31,~~September 30, 2020. 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 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.

128

~~Note 15: Derivatives (~~
~~continued~~)



Note 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 qualifying hedge accounting relationships (fair value or cash flow hedges). Our remaining derivatives consist of economic hedges that do not qualify for hedge accounting, and derivatives held for customer accommodation trading or other purposes. For ~~more~~additional information on our derivative activities, see Note 18 (Derivatives) in our 2019 Form 10-K.

Table 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 15.1: Notional or Contractual Amounts and Fair Values of Derivatives


	September 30, 2020					December 31, 2019
	Notional or contractual amount				Fair value	Notional or contractual amount		Fair value
(in millions)			Derivative assets		Derivative liabilities		Derivative assets	Derivative liabilities
Derivatives designated as hedging instruments
Interest rate contracts	$	185,124	3,483		1,820	182,789	2,595	1,237

Foreign exchange contracts	38,477		587		616	32,386	341	1,170
Total derivatives designated as qualifying hedging instruments			4,070		2,436		2,936	2,407
Derivatives not designated as hedging instruments
Economic hedges:
Interest rate contracts	344,263		470		266	235,810	207	160
Equity contracts	23,624		1,724		209	19,263	1,126	224
Foreign exchange contracts	44,282		422		555	26,595	118	286
Credit contracts – protection purchased	81		32		0	1,400	27	0
Subtotal			2,648		1,030		1,478	670
Customer accommodation trading and other derivatives:
Interest rate contracts	10,657,433		37,949		28,936	11,117,542	21,245	17,969
Commodity contracts	73,086		2,344		2,446	79,737	1,421	1,770
Equity contracts	305,900		13,009		16,066	272,145	7,410	10,240
Foreign exchange contracts	347,499		4,880		4,717	364,469	4,755	4,791
Credit contracts – protection sold	16,067		11		48	12,215	12	65
Credit contracts – protection purchased	25,657		75		17	24,030	69	18

Subtotal			58,268		52,230		34,912	34,853
Total derivatives not designated as hedging instruments			60,916		53,260		36,390	35,523
Total derivatives before netting			64,986		55,696		39,326	37,930
Netting			(41,271)		(41,929)		(25,123)	(28,851)
Total			$	23,715	13,767		14,203	9,079

March 31, 2020 December 31, 2019

Notional or
contractual
amount

Fair value

Notional or
contractual
amount

Fair value
(in millions)
Derivative
assets

Derivative
liabilities

Derivative
assets
Derivative
liabilities
Derivatives designated as hedging instruments
Interest rate contracts $ 187,167
3,715
2,199
182,789
2,595
1,237
Foreign exchange contracts 31,800
231
1,812
32,386
341
1,170
Total derivatives designated as qualifying hedging instruments 3,946
4,011
2,936
2,407
Derivatives not designated as hedging instruments
Economic hedges:
Interest rate contracts 358,717
2,732
1,766
235,810
207
160
Equity contracts 16,614
1,969
106
19,263
1,126
224
Foreign exchange contracts 46,486
1,332
233
26,595
118
286
Credit contracts – protection purchased 499
34
—
1,400
27
—
Subtotal 6,067
2,105
1,478
670
Customer accommodation trading and other derivatives:
Interest rate contracts 12,578,353
52,162
43,587
11,117,542
21,245
17,969
Commodity contracts 85,629
2,316
6,838
79,737
1,421
1,770
Equity contracts 316,754
11,181
10,248
272,145
7,410
10,240
Foreign exchange contracts 343,627
7,128
7,979
364,469
4,755
4,791
Credit contracts – protection sold 15,035
13
78
12,215
12
65
Credit contracts – protection purchased 25,144
106
15
24,030
69
18
Subtotal 72,906
68,745
34,912
34,853
Total derivatives not designated as hedging instruments 78,973
70,850
36,390
35,523
Total derivatives before netting 82,919
74,861
39,326
37,930
Netting (57,896 ) (59,243 ) (25,123 ) (28,851 )
Total $ 25,023
15,618
14,203
9,079

129

Note 15: Derivatives (continued)

Table 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 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 ~~$73.1~~$55.9 billion and ~~$69.2~~$48.6 billion of gross derivative assets and liabilities, respectively, at ~~March 31,~~September 30, 2020, and $33.7 billion and $33.5 billion, respectively, at December 31, 2019, with counterparties subject to enforceable master netting arrangements that are eligible for balance sheet netting adjustments. The majority of these amounts are interest rate contracts executed in over-the-counter (OTC) markets. The remaining gross derivative assets and liabilities of ~~$9.8~~$9.1 billion and ~~$5.7~~$7.1 billion, respectively, at ~~March 31,~~September 30, 2020, and $5.6 billion and $4.4 billion, respectively, at December 31, 2019, 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. Cash collateral receivables and payables that have not been offset against our derivatives were ~~$4.4~~$3.6 billion and ~~$6.4 billion,~~$605 million, respectively, at ~~March 31,~~September 30, 2020, and $6.3 billion and $1.4 billion, respectively, at December 31, 2019.

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 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 OTC markets include bilateral contractual arrangements that are not cleared through a central clearing organization but are typically subject to master netting arrangements. ~~Other~~The proportion of these derivative contracts ~~that~~relative to our total derivative assets and liabilities are ~~settled through a central clearing organization whether OTC or exchange-traded, are excluded from that percentage.~~presented in the “Percent exchanged in over-the-counter market” column in Table 15.2. 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 13 (Guarantees, Pledged Assets and Collateral, and Other Commitments).

130

~~Note 15: Derivatives (continued~~)

Table 15.2: Gross Fair Values of Derivative Assets and Liabilities


(in millions)	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)	Net amounts	Percent exchanged in over-the-counter market
September 30, 2020
Derivative assets
Interest rate contracts	$	41,902	(26,163)	15,739	(1,380)	14,359	97	%
Commodity contracts	2,344		(1,345)	999	(6)	993	80
Equity contracts	14,733		(9,390)	5,343	(794)	4,549	71
Foreign exchange contracts	5,889		(4,306)	1,583	(8)	1,575	100
Credit contracts – protection sold	11		(8)	3	0	3	73
Credit contracts – protection purchased	107		(59)	48	(2)	46	88

Total derivative assets	$	64,986	(41,271)	23,715	(2,190)	21,525
Derivative liabilities
Interest rate contracts	$	31,022	(27,112)	3,910	(2,039)	1,871	97	%
Commodity contracts	2,446		(1,225)	1,221	(6)	1,215	79
Equity contracts	16,275		(9,341)	6,934	(372)	6,562	73
Foreign exchange contracts	5,888		(4,206)	1,682	(624)	1,058	100
Credit contracts – protection sold	48		(40)	8	(5)	3	95
Credit contracts – protection purchased	17		(5)	12	0	12	85

Total derivative liabilities	$	55,696	(41,929)	13,767	(3,046)	10,721
December 31, 2019
Derivative assets
Interest rate contracts	$	24,047	(14,878)	9,169	(445)	8,724	95	%
Commodity contracts	1,421		(888)	533	(2)	531	80
Equity contracts	8,536		(5,570)	2,966	(69)	2,897	65
Foreign exchange contracts	5,214		(3,722)	1,492	(22)	1,470	100
Credit contracts – protection sold	12		(9)	3	0	3	84
Credit contracts – protection purchased	96		(56)	40	(1)	39	97

Total derivative assets	$	39,326	(25,123)	14,203	(539)	13,664
Derivative liabilities
Interest rate contracts	$	19,366	(16,595)	2,771	(545)	2,226	94	%
Commodity contracts	1,770		(677)	1,093	(2)	1,091	82
Equity contracts	10,464		(6,647)	3,817	(319)	3,498	81
Foreign exchange contracts	6,247		(4,866)	1,381	(169)	1,212	100
Credit contracts – protection sold	65		(60)	5	(3)	2	98
Credit contracts – protection purchased	18		(6)	12	0	12	93

Total derivative liabilities	$	37,930	(28,851)	9,079	(1,038)	8,041

(1)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 related to derivative assets were $507 million and $231 million and debit valuation adjustments related to derivative liabilities were $236 million and $100 million at September 30, 2020, and December 31, 2019, respectively. Cash collateral totaled $6.4 billion and $7.3 billion, netted against derivative assets and liabilities, respectively, at September 30, 2020, and $2.9 billion and $6.8 billion, respectively, at December 31, 2019.

(in millions)
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)

Net
amounts

Percent
exchanged in
over-the-counter
market

March 31, 2020
Derivative assets
Interest rate contracts $ 58,609
(39,677 ) 18,932
(1,302 ) 17,630
87 %
Commodity contracts 2,316
(1,534 ) 782
(3 ) 779
62
Equity contracts 13,150
(9,929 ) 3,221
(802 ) 2,419
66
Foreign exchange contracts 8,691
(6,660 ) 2,031
(107 ) 1,924
100
Credit contracts – protection sold 13
(13 ) —
—
—
44
Credit contracts – protection purchased 140
(83 ) 57
(3 ) 54
85
Total derivative assets $ 82,919
(57,896 ) 25,023
(2,217 ) 22,806

Derivative liabilities
Interest rate contracts $ 47,552
(42,276 ) 5,276
(995 ) 4,281
87 %
Commodity contracts 6,838
(1,689 ) 5,149
(2 ) 5,147
90
Equity contracts 10,354
(7,546 ) 2,808
(164 ) 2,644
56
Foreign exchange contracts 10,024
(7,661 ) 2,363
(99 ) 2,264
100
Credit contracts – protection sold 78
(68 ) 10
—
10
87
Credit contracts – protection purchased 15
(3 ) 12
—
12
69
Total derivative liabilities $ 74,861
(59,243 ) 15,618
(1,260 ) 14,358

December 31, 2019
Derivative assets
Interest rate contracts $ 24,047
(14,878 ) 9,169
(445 ) 8,724
95 %
Commodity contracts 1,421
(888 ) 533
(2 ) 531
80
Equity contracts 8,536
(5,570 ) 2,966
(69 ) 2,897
65
Foreign exchange contracts 5,214
(3,722 ) 1,492
(22 ) 1,470
100
Credit contracts – protection sold 12
(9 ) 3
—
3
84
Credit contracts – protection purchased 96
(56 ) 40
(1 ) 39
97
Total derivative assets $ 39,326
(25,123 ) 14,203
(539 ) 13,664

Derivative liabilities
Interest rate contracts $ 19,366
(16,595 ) 2,771
(545 ) 2,226
94 %
Commodity contracts 1,770
(677 ) 1,093
(2 ) 1,091
82
Equity contracts 10,464
(6,647 ) 3,817
(319 ) 3,498
81
Foreign exchange contracts 6,247
(4,866 ) 1,381
(169 ) 1,212
100
Credit contracts – protection sold 65
(60 ) 5
(3 ) 2
98
Credit contracts – protection purchased 18
(6 ) 12
—
12
93
Total derivative liabilities $ 37,930
(28,851 ) 9,079
(1,038 ) 8,041

~~(1)~~

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 related to derivative assets were ~~$877 million~~ ~~and~~ ~~$231 million~~ ~~and debit valuation adjustments related to derivative liabilities were~~ ~~$280 million~~ ~~and~~ ~~$100 million~~ at ~~March 31, 2020, and~~ ~~December 31, 2019, respectively. Cash collateral totaled~~ ~~$9.8 billion~~ ~~and~~ ~~$11.7 billion, netted against derivative assets and liabilities, respectively, at~~ ~~March 31, 2020, and~~ ~~$2.9 billion~~ ~~and~~ ~~$6.8 billion, respectively, at~~ ~~December 31, 2019~~.

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 interest rate swaps, cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge against changes in fair value of certain investments in available-for-sale debt securities 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. 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 2621 (Other Comprehensive Income) for the amounts recognized in other comprehensive income.

For cash flow hedges, we use interest rate swaps to hedge the variability in interest payments received on certain floating-rate commercial loans and paid on certain floating-rate debt due to changes in the contractually specified interest rate. We also use cross-currency swaps to hedge variability in interest payments on fixed-rate foreign currency-denominated long-term debt due to changes in foreign exchange rates.

We estimate ~~$218~~$175 million pre-tax of deferred net losses related to cash flow hedges in OCI at ~~March 31,~~September 30, 2020, 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 ~~March 31,~~

131

Note 15: Derivatives (continued)

September 30, 2020, we are hedging our foreign currency exposure to the variability of future cash flows for all forecasted transactions for a maximum of 10 years. For ~~more~~additional information on our accounting hedges, see Note 1 (Summary of Significant

Accounting Policies) and Note 18 (Derivatives) in our 2019 Form 10-K.

Table 15.3 and Table 15.4 show the net gains (losses) by income statement line item impacted, related to derivatives in fair value and cash flow hedging relationships, respectively.

Table 15.3: Gains (Losses) Recognized on Fair Value Hedging Relationships


	Net interest income									Noninterest income		Total recorded in net income		Total recorded in OCI		Net interest income					Noninterest income	Total recorded in net income	Total recorded in OCI
(in millions)	Debt securities			Mortgage loans held for sale		Deposits		Long-term debt		Other		Derivative gains (losses)		Derivative gains (losses)	(in millions)	Debt securities		Mortgage loans held for sale	Deposits	Long-term debt		Other	Derivative gains (losses)
Quarter ended March 31, 2020
Quarter ended September 30, 2020															Quarter ended September 30, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income	$	3,472		197		(1,742	)	(1,240	)	372		N/A		182	Total amounts presented in the consolidated statement of income and other comprehensive income	$	2,446	232	(314)	(1,038)		220	N/A	(18)

Interest contracts:															Interest contracts:
Amounts related to interest settlements on derivatives	(46		)	—		70		174		—		198			Amounts related to interest settlements on derivatives	(114)		0	157	542		0	585
Recognized on derivatives	(1,871		)	(50	)	530		9,775		—		8,384		—	Recognized on derivatives	280		1	(156)	(1,357)		0	(1,232)	0
Recognized on hedged items	1,856			50		(511	)	(9,426	)	—		(8,031	)		Recognized on hedged items	(265)		(1)	156	1,269		0	1,159
Total gains (losses) (pre-tax) on interest rate contracts	(61		)	—		89		523		—		551		—	Total gains (losses) (pre-tax) on interest rate contracts	(99)		0	157	454		0	512	0
Foreign exchange contracts:															Foreign exchange contracts:
Amounts related to interest settlements on derivatives	6			—		—		(85	)	—		(79	)		Amounts related to interest settlements on derivatives	16		0	0	(5)		0	11
Recognized on derivatives	(1		)	—		—		107		(785	)	(679	)	144	Recognized on derivatives	1		0	0	52		856	909	(82)
Recognized on hedged items	2			—		—		(174	)	764		592			Recognized on hedged items	(1)		0	0	(5)		(849)	(855)
Total gains (losses) (pre-tax) on foreign exchange contracts	7			—		—		(152	)	(21	)	(166	)	144	Total gains (losses) (pre-tax) on foreign exchange contracts	16		0	0	42		7	65	(82)
Total gains (losses) (pre-tax) recognized on fair value hedges	$	(54	)	—		89		371		(21	)	385		144	Total gains (losses) (pre-tax) recognized on fair value hedges	$	(83)	0	157	496		7	577	(82)
Nine months ended September 30, 2020															Nine months ended September 30, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income															Total amounts presented in the consolidated statement of income and other comprehensive income	$	8,864	659	(2,641)	(3,515)		869	N/A	167

Interest contracts:															Interest contracts:
Amounts related to interest settlements on derivatives															Amounts related to interest settlements on derivatives	(253)		0	379	1,144		0	1,270
Recognized on derivatives															Recognized on derivatives	(1,612)		(52)	288	8,967		0	7,591	0
Recognized on hedged items															Recognized on hedged items	1,654		53	(278)	(8,775)		0	(7,346)
Total gains (losses) (pre-tax) on interest rate contracts															Total gains (losses) (pre-tax) on interest rate contracts	(211)		1	389	1,336		0	1,515	0
Foreign exchange contracts:															Foreign exchange contracts:
Amounts related to interest settlements on derivatives															Amounts related to interest settlements on derivatives	33		0	0	(136)		0	(103)
Recognized on derivatives															Recognized on derivatives	(1)		0	0	276		780	1,055	5
Recognized on hedged items															Recognized on hedged items	2		0	0	(249)		(769)	(1,016)
Total gains (losses) (pre-tax) on foreign exchange contracts															Total gains (losses) (pre-tax) on foreign exchange contracts	34		0	0	(109)		11	(64)	5
Total gains (losses) (pre-tax) recognized on fair value hedges															Total gains (losses) (pre-tax) recognized on fair value hedges	$	(177)	1	389	1,227		11	1,451	5

Quarter ended March 31, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income $ 3,941
152
(2,026 ) (1,927 ) 574
N/A
44

Interest contracts:
Amounts related to interest settlements on derivatives 16
—
(23 ) (7 ) —
(14 )
Recognized on derivatives (814 ) (8 ) 207
1,986
—
1,371
—
Recognized on hedged items 817
7
(190 ) (1,947 ) —
(1,313 )
Total gains (losses) (pre-tax) on interest rate contracts 19
(1 ) (6 ) 32
—
44
—
Foreign exchange contracts:
Amounts related to interest settlements on derivatives 10
—
—
(142 ) —
(132 )
Recognized on derivatives (4 ) —
—
292
(402 ) (114 ) (26 )
Recognized on hedged items 5
—
—
(266 ) 391
130

Total gains (losses) (pre-tax) on foreign exchange contracts 11
—
—
(116 ) (11 ) (116 ) (26 )
Total gains (losses) (pre-tax) recognized on fair value hedges $ 30
(1 ) (6 ) (84 ) (11 ) (72 ) (26 )

(continued on following page)

132

(continued from previous page)


	Net interest income					Noninterest income	Total recorded in net income	Total recorded in OCI
(in millions)	Debt securities		Mortgage loans held for sale	Deposits	Long-term debt		Other	Derivative gains (losses)	Derivative gains (losses)
Quarter ended September 30, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income	$	3,666	232	(2,324)	(1,780)		1,842	N/A	85

Interest contracts:
Amounts related to interest settlements on derivatives	(1)		1	26	53		0	79
Recognized on derivatives	(628)		(3)	30	2,880		0	2,279	0
Recognized on hedged items	631		1	(30)	(2,809)		0	(2,207)
Total gains (losses) (pre-tax) on interest rate contracts	2		(1)	26	124		0	151	0
Foreign exchange contracts:
Amounts related to interest settlements on derivatives	9		0	0	(115)		0	(106)
Recognized on derivatives	(2)		0	0	86		(918)	(834)	28
Recognized on hedged items	3		0	0	(124)		899	778
Total gains (losses) (pre-tax) on foreign exchange contracts	10		0	0	(153)		(19)	(162)	28
Total gains (losses) (pre-tax) recognized on fair value hedges	$	12	(1)	26	(29)		(19)	(11)	28
Nine months ended September 30, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income	$	11,388	579	(6,563)	(5,607)		3,667	N/A	265

Interest contracts:
Amounts related to interest settlements on derivatives	29		1	(4)	53		0	79
Recognized on derivatives	(2,531)		(36)	588	7,813		0	5,834	0
Recognized on hedged items	2,544		32	(563)	(7,646)		0	(5,633)
Total gains (losses) (pre-tax) on interest rate contracts	42		(3)	21	220		0	280	0
Foreign exchange contracts:
Amounts related to interest settlements on derivatives	29		0	0	(385)		0	(356)
Recognized on derivatives	(11)		0	0	583		(994)	(422)	58
Recognized on hedged items	12		0	0	(576)		975	411
Total gains (losses) (pre-tax) on foreign exchange contracts	30		0	0	(378)		(19)	(367)	58
Total gains (losses) (pre-tax) recognized on fair value hedges	$	72	(3)	21	(158)		(19)	(87)	58

133

Note 15: Derivatives (continued)

Table 15.4: Gains (Losses) Recognized on Cash Flow Hedging Relationships


	Net interest Income			Total recorded in net income	Total recorded in OCI
(in millions)	Loans		Long-term debt	Derivative gains (losses)	Derivative gains (losses)
Quarter ended September 30, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income	$	7,954	(1,038)	N/A	(18)
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(53)		2	(51)	51
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	0
Total gains (losses) (pre-tax) on interest rate contracts	(53)		2	(51)	51
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	0		(1)	(1)	1
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	12
Total gains (losses) (pre-tax) on foreign exchange contracts	0		(1)	(1)	13
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(53)	1	(52)	64
Nine months ended September 30, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income	$	26,467	(3,515)	N/A	167
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(162)		3	(159)	159
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	0
Total gains (losses) (pre-tax) on interest rate contracts	(162)		3	(159)	159
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	0		(6)	(6)	6
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	(3)
Total gains (losses) (pre-tax) on foreign exchange contracts	0		(6)	(6)	3
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(162)	(3)	(165)	162
Quarter ended September 30, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income	$	10,982	(1,780)	N/A	85
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(73)		0	(73)	73
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	0
Total gains (losses) (pre-tax) on interest rate contracts	(73)		0	(73)	73
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	0		(2)	(2)	2
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	(18)
Total gains (losses) (pre-tax) on foreign exchange contracts	0		(2)	(2)	(16)
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(73)	(2)	(75)	57
Nine months ended September 30, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income	$	33,652	(5,607)	N/A	265
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(228)		1	(227)	227
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	0
Total gains (losses) (pre-tax) on interest rate contracts	(228)		1	(227)	227
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	0		(6)	(6)	6
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	(26)
Total gains (losses) (pre-tax) on foreign exchange contracts	0		(6)	(6)	(20)
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(228)	(5)	(233)	207

Net interest Income Total recorded in net income
Total recorded in OCI
(in millions) Loans
Long-term debt
Derivative gains (losses)
Derivative gains (losses)
Quarter ended March 31, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income $ 10,065
(1,240 ) N/A
182
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income (56 ) —
(56 ) 56
Net unrealized gains (losses) (pre-tax) recognized in OCI N/A
N/A
N/A
—
Total gains (losses) (pre-tax) on interest rate contracts (56 ) —
(56 ) 56
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income —
(2 ) (2 ) 2
Net unrealized gains (losses) (pre-tax) recognized in OCI N/A
N/A
N/A
(20 )
Total gains (losses) (pre-tax) on foreign exchange contracts —
(2 ) (2 ) (18 )
Total gains (losses) (pre-tax) recognized on cash flow hedges $ (56 ) (2 ) (58 ) 38
Quarter ended March 31, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income $ 11,354
(1,927 ) N/A
44
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income (78 ) —
(78 ) 78
Net unrealized gains (losses) (pre-tax) recognized in OCI N/A
N/A
N/A
—
Total gains (losses) (pre-tax) on interest rate contracts (78 ) —
(78 ) 78
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income —
(1 ) (1 ) 1
Net unrealized gains (losses) (pre-tax) recognized in OCI N/A
N/A
N/A
(9 )
Total gains (losses) (pre-tax) on foreign exchange contracts —
(1 ) (1 ) (8 )
Total gains (losses) (pre-tax) recognized on cash flow hedges $ (78 ) (1 ) (79 ) 70

134

Table 15.5 shows the carrying amount and associated cumulative basis adjustment related to the application of hedge

accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships.

Table 15.5: Hedged Items in Fair Value Hedging Relationship


	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)
September 30, 2020
Available-for-sale debt securities (5)	$	25,969	2,109	9,435	301

Mortgage loans held for sale	173		5	0	0
Deposits	(29,852)		(604)	0	0
Long-term debt	(164,848)		(14,736)	(16,538)	60
December 31, 2019
Available-for-sale debt securities (5)	$	36,896	1,110	9,486	278

Mortgage loans held for sale	961		(12)	0	0
Deposits	(43,716)		(324)	0	0
Long-term debt	(127,423)		(5,827)	(25,750)	173

(1)Represents hedged items no longer designated in qualifying fair value hedging relationships for which an associated basis adjustment exists at the balance sheet date.

(2)Does not include the carrying amount of hedged items where only foreign currency risk is the designated hedged risk. The carrying amount excluded $9.6 billion for debt securities and $(4.5) billion for long-term debt as of September 30, 2020, and $1.2 billion for debt securities and $(5.2) billion for long-term debt as of December 31, 2019.

(3)The balance includes $476 million and $138 million of debt securities and long-term debt cumulative basis adjustments, respectively, as of September 30, 2020, and $790 million and $109 million of debt securities and long-term debt cumulative basis adjustments, respectively, as of December 31, 2019, on terminated hedges whereby the hedged items have subsequently been re-designated into existing hedges.

(4)Represents the full carrying amount of the hedged asset or liability item as of the balance sheet date, except for circumstances in which only a portion of the asset or liability was designated as the hedged item in which case only the portion designated is presented.

(5)Carrying amount represents the amortized cost.

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)

March 31, 2020
Available-for-sale debt securities (5) $ 34,959
2,750
9,567
261
Mortgage loans held for sale 514
24
—
—
Deposits (41,081 ) (837 ) (35 ) 2
Long-term debt (147,069 ) (15,325 ) (21,214 ) 131
December 31, 2019
Available-for-sale debt securities (5) $ 36,896
1,110
9,486
278
Mortgage loans held for sale 961
(12 ) —
—
Deposits (43,716 ) (324 ) —
—
Long-term debt (127,423 ) (5,827 ) (25,750 ) 173


~~(1)~~	~~Represents hedged items no longer designated in qualifying fair value hedging relationships for which an associated basis adjustment exists at the balance sheet date.~~

~~(2)~~

~~Does not include the carrying amount of hedged items where only foreign currency risk is the designated hedged risk. The carrying amount excluded~~ ~~$3.0 billion~~ ~~for debt securities and~~ ~~$(5.0) billion~~ ~~for long-term debt as of~~ ~~March 31, 2020, and~~ ~~$1.2 billion~~ ~~for debt securities and~~ ~~$(5.2) billion~~ ~~for long-term debt as of~~ ~~December 31, 2019~~.

135

Note 15: Derivatives (continued)

~~(3)~~

~~The balance includes~~ ~~$649 million~~ ~~and~~ ~~$136 million~~ ~~of debt securities and long-term debt cumulative basis adjustments, respectively, as of~~ ~~March 31, 2020, and~~ ~~$790 million~~ ~~and~~ ~~$109 million~~ ~~of debt securities and long-term debt cumulative basis adjustments, respectively, as of~~ ~~December 31, 2019, on terminated hedges whereby the hedged items have subsequently been re-designated into existing hedges.~~


~~(4)~~	Represents the full carrying amount of the hedged asset or liability item as of the balance sheet date, except for circumstances in which only a portion of the asset or liability was designated as the hedged item in which case only the portion designated is presented.


~~(5)~~	~~Carrying amount represents the amortized cost.~~

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedging instruments include economic hedges and derivatives entered into for customer accommodation trading purposes.

We use economic hedge derivatives to manage our exposure to interest rate risk, equity price risk, foreign currency risk, and credit risk. We also use economic hedge derivatives to mitigate the periodic earnings volatility caused by mismatches between

the changes in fair value of the hedged item and hedging instrument recognized on our fair value accounting hedges. In second quarter 2020, we entered into arrangements to transition

the economic hedges of our deferred compensation plan liabilities from equity securities to derivative instruments. Changes in the fair values of derivatives used to economically hedge the deferred compensation plan are reported in personnel expense.

For ~~more~~additional information on economic hedges and other derivatives, see Note 18 (Derivatives) to Financial Statements in our 2019 Form 10-K.

Table 15.6 shows the net gains (losses) recognized by income statement lines, related to derivatives not designated as hedging instruments.

Table 15.6: Gains (Losses) on Derivatives Not Designated as Hedging Instruments


	Noninterest income						Noninterest Expense
(in millions)	Mortgage banking		Net gains (losses) from equity securities	Net gains (losses) from trading activities	Other	Total	Personnel expense
Quarter ended September 30, 2020
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	216	0	0	(27)	189	0
Equity contracts	0		(209)	0	(1)	(210)	(215)
Foreign exchange contracts	0		0	0	(523)	(523)	0
Credit contracts	0		0	0	(3)	(3)	0
Subtotal	216		(209)	0	(554)	(547)	(215)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	485		0	271	0	756	0
Commodity contracts	0		0	(356)	0	(356)	0
Equity contracts	0		0	(1,291)	(142)	(1,433)	0
Foreign exchange contracts	0		0	160	0	160	0
Credit contracts	0		0	(32)	0	(32)	0

Subtotal	485		0	(1,248)	(142)	(905)	0
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	701	(209)	(1,248)	(696)	(1,452)	(215)
Nine months ended September 30, 2020
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	2,829	0	0	(72)	2,757	0
Equity contracts	0		(392)	0	(35)	(427)	(356)
Foreign exchange contracts	0		0	0	49	49	0
Credit contracts	0		0	0	14	14	0
Subtotal	2,829		(392)	0	(44)	2,393	(356)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	1,584		0	(1,516)	0	68	0
Commodity contracts	0		0	(468)	0	(468)	0
Equity contracts	0		0	1,110	(214)	896	0
Foreign exchange contracts	0		0	(242)	0	(242)	0
Credit contracts	0		0	115	0	115	0

Subtotal	1,584		0	(1,001)	(214)	369	0
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	4,413	(392)	(1,001)	(258)	2,762	(356)

(continued on following page)

136

(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 September 30, 2019
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	736	0	0	0	736
Equity contracts	0		(1,375)	0	(6)	(1,381)
Foreign exchange contracts	0		0	0	263	263
Credit contracts	0		0	0	(11)	(11)
Subtotal	736		(1,375)	0	246	(393)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	95		0	(355)	0	(260)
Commodity contracts	0		0	65	0	65
Equity contracts	0		0	284	10	294
Foreign exchange contracts	0		0	78	0	78
Credit contracts	0		0	(10)	0	(10)

Subtotal	95		0	62	10	167
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	831	(1,375)	62	256	(226)
Nine months ended September 30, 2019
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	2,419	0	0	7	2,426
Equity contracts	0		(2,918)	0	(6)	(2,924)
Foreign exchange contracts	0		0	0	403	403
Credit contracts	0		0	0	(1)	(1)
Subtotal	2,419		(2,918)	0	403	(96)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	392		0	(861)	0	(469)
Commodity contracts	0		0	143	0	143
Equity contracts	0		0	(2,975)	(396)	(3,371)
Foreign exchange contracts	0		0	9	0	9
Credit contracts	0		0	(70)	0	(70)

Subtotal	392		0	(3,754)	(396)	(3,758)
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	2,811	(2,918)	(3,754)	7	(3,854)

(1)Mortgage banking amounts for the third quarter and first nine months of 2020 are comprised of gains of $513 million and $4.4 billion, respectively, related to derivatives used as economic hedges of MSRs measured at fair value offset by gains (losses) of $(297) million and $(1.6) billion, respectively, related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments. The corresponding amounts for the third quarter and first nine months of 2019 are comprised of gains of $678 million and $2.8 billion offset by gains (losses) of $58 million and $(376) million, respectively.

Noninterest income
(in millions) Mortgage banking
Net gains (losses) from equity securities
Net gains (losses) from trading activities
Other
Total
Quarter ended March 31, 2020
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1) $ 2,471
—
—
29
2,500
Equity contracts —
1,219
—
(28 ) 1,191
Foreign exchange contracts —
—
—
627
627
Credit contracts —
—
—
16
16
Subtotal (2) 2,471
1,219
—
644
4,334
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts (3) 553
—
(2,463 ) —
(1,910 )
Commodity contracts —
—
112
—
112
Equity contracts —
—
4,749
73
4,822
Foreign exchange contracts —
—
(557 ) —
(557 )
Credit contracts —
—
281
—
281
Subtotal 553
—
2,122
73
2,748
Net gains (losses) recognized related to derivatives not designated as hedging instruments $ 3,024
1,219
2,122
717
7,082

137

Noninterest income
(in millions) Mortgage banking
Net gains (losses) from equity securities
Net gains (losses) from trading activities
Other
Total
Quarter ended March 31, 2019
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1) $ 811
—
—
5
816
Equity contracts —
(885 ) —
7
(878 )
Foreign exchange contracts —
—
—
(24 ) (24 )
Credit contracts —
—
—
15
15
Subtotal 811
(885 ) —
3
(71 )
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts 118
—
(284 ) —
(166 )
Commodity contracts —
—
51
—
51
Equity contracts —
—
(2,149 ) (273 ) (2,422 )
Foreign exchange contracts —
—
14
—
14
Credit contracts —
—
(44 ) —
(44 )
Subtotal 118
—
(2,412 ) (273 ) (2,567 )
Net gains (losses) recognized related to derivatives not designated as hedging instruments $ 929
(885 ) (2,412 ) (270 ) (2,638 )

~~(1)~~

~~Mortgage banking amounts for~~ ~~first quarter 2020~~ ~~are comprised of gains (losses) of~~ ~~$3.4 billion~~ ~~related to derivatives used as economic hedges of MSRs measured at fair value offset by gains (losses) of~~ ~~$(929) million~~ ~~related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments. The corresponding amounts for~~ ~~first quarter 2019~~ ~~are comprised of gains (losses) of~~ ~~$962 million~~ ~~offset by gains (losses) of~~ ~~$(151) million, respectively.~~

Note 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 15.7 provides details of sold and purchased credit derivatives.

Table 15.7: Sold and Purchased Credit Derivatives


				Notional amount
(in millions)	Fair value asset		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, 2020
Credit default swaps on:
Corporate bonds	$	8	3	3,850	1,010	2,677	1,173	3,348	2020 - 2029
Structured products	0		6	22	22	20	2	92	2034 - 2047
Credit protection on:
Default swap index	1		0	5,250	1,239	2,125	3,125	4,762	2020 - 2029
Commercial mortgage-backed securities index	2		26	311	54	286	25	75	2047 - 2072
Asset-backed securities index	0		7	40	40	40	0	1	2045 - 2046
Other	0		6	6,594	6,426	0	6,594	12,312	2020 - 2040
Total credit derivatives	$	11	48	16,067	8,791	5,148	10,919	20,590
December 31, 2019
Credit default swaps on:
Corporate bonds	$	8	1	2,855	707	1,885	970	2,447	2020 - 2029
Structured products	0		25	74	69	63	11	111	2022 - 2047
Credit protection on:
Default swap index	1		0	2,542	120	550	1,992	8,105	2020 - 2029
Commercial mortgage-backed securities index	3		26	322	67	296	26	50	2047 - 2058
Asset-backed securities index	0		8	41	41	41	0	1	2045 - 2046
Other	0		5	6,381	5,738	0	6,381	11,881	2020 - 2049
Total credit derivatives	$	12	65	12,215	6,742	2,835	9,380	22,595

Notional amount
(in millions) Fair value asset
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
March 31, 2020
Credit default swaps on:
Corporate bonds $ 11
11
3,602
825
2,492
1,110
2,753
2020 - 2029
Structured products —
13
37
37
36
1
110
2034 - 2047
Credit protection on:
Default swap index 2
1
4,339
1,118
1,577
2,762
5,497
2020 - 2029
Commercial mortgage-backed securities index —
28
318
60
293
25
50
2047 - 2058
Asset-backed securities index —
8
41
41
41
—
1
2045 - 2046
Other —
17
6,698
6,230
—
6,698
12,793
2020 - 2049
Total credit derivatives $ 13
78
15,035
8,311
4,439
10,596
21,204

December 31, 2019
Credit default swaps on:
Corporate bonds $ 8
1
2,855
707
1,885
970
2,447
2020 - 2029
Structured products —
25
74
69
63
11
111
2022 - 2047
Credit protection on:
Default swap index 1
—
2,542
120
550
1,992
8,105
2020 - 2029
Commercial mortgage-backed securities index 3
26
322
67
296
26
50
2047 - 2058
Asset-backed securities index —
8
41
41
41
—
1
2045 - 2046
Other —
5
6,381
5,738
—
6,381
11,881
2020 - 2049
Total credit derivatives $ 12
65
12,215
6,742
2,835
9,380
22,595

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 an extremely 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.

138

Credit-Risk Contingent Features

Certain of our derivative contracts contain provisions whereby if the credit rating of our debt were to be downgraded by certain major credit rating agencies, the counterparty could demand additional collateral or require termination or replacement of derivative instruments in a net liability position. Table 15.8 illustrates our exposure to such derivatives with credit-risk contingent features, collateral we have posted, and the additional collateral we would be required to post if the credit rating of our debt was downgraded below investment grade.

Table 15.8: Credit-Risk Contingent Features


(in billions)	Sep 30, 2020		Dec 31, 2019
Net derivative liabilities with credit-risk contingent features	$	14.9	10.4
Collateral posted	13.2		9.1
Additional collateral to be posted upon a below investment grade credit rating (1)	1.6		1.3

(1)Any credit rating below investment grade requires us to post the maximum amount of collateral.

(in billions) Mar 31,
2020
Dec 31,
2019
Net derivative liabilities with credit-risk contingent features $ 16.1
10.4
Collateral posted 13.9
9.1
Additional collateral to be posted upon a below investment grade credit rating (1) 2.2
1.3

139


~~(1)~~			~~Any credit rating below investment grade requires us to post the maximum amount of collateral.~~

Note 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 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, write-downs of individual assets or application of the measurement alternative for nonmarketable equity securities. Assets recorded on a nonrecurring basis are presented in Table ~~16.9~~16.13 in this Note.

Table ~~16.15~~16.19 includes estimates of fair value for financial instruments that are not recorded at fair value.

See Note 1 (Summary of Significant Accounting Policies) in our 2019 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 19 (Fair Values of Assets and Liabilities) in our 2019 Form 10-K.

FAIR VALUE HIERARCHY We classify our assets and liabilities measured at fair value as either Level 1, Level 2 or Level 3 in the fair value hierarchy. The highest priority (Level 1) is assigned to valuations based on unadjusted quoted prices in active markets and the lowest priority (Level 3) is assigned to valuations based on significant unobservable inputs. See Note 1 (Summary of Significant Accounting Policies) in our 2019 Form 10-K for a detailed description of the fair value hierarchy.

In the determination of the classification of financial instruments in Level 2 or Level 3 of the fair value hierarchy, we consider all available information, including observable market data, indications of market liquidity and orderliness, and our understanding of the valuation techniques and significant inputs used. For securities in inactive markets, we use a predetermined percentage to evaluate the impact of fair value adjustments

derived from weighting both external and internal indications of value to determine if the instrument is classified as Level 2 or Level 3. Otherwise, the classification of Level 2 or Level 3 is based upon the specific facts and circumstances of each instrument or instrument category and judgments are made regarding the significance of the Level 3 inputs to the instruments’ fair value measurement in its entirety. If Level 3 inputs are considered significant, the instrument is classified as Level 3.

We do not classify equity securities 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. Marketable equity securities with published NAVs are classified in the fair value hierarchy.

Fair Value Measurements from Vendors

For certain assets and liabilities, we obtain fair value measurements from vendors and we record the ~~unadjusted~~ fair value in our financial statements. For additional information, see Note 19 (Fair Values of Assets and Liabilities) in our 2019 Form 10-K.

Table 16.1 presents ~~unadjusted~~ fair value measurements obtained from third-party pricing services classified within the fair value hierarchy. ~~Unadjusted fair~~Fair value measurements obtained from brokers and fair value measurements obtained from ~~brokers or~~ third-party pricing services that we have adjusted using internal models or non-vendor data to determine the fair value are excluded from

Table 16.1.

The unadjusted fair value measurements obtained from brokers for available-for-sale debt securities were ~~$18~~$19 million in Level 2 assets and ~~$123~~$124 million in Level 3 assets at ~~March 31,~~September 30, 2020, and $45 million and $126 million at December 31, 2019, respectively.

Table 16.1: Fair Value Measurements obtained from Third-Party Pricing Services


	September 30, 2020			December 31, 2019
(in millions)	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
Trading debt securities	822	286	0	634	329	0
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	5,975	0	0	13,460	1,500	0
Securities of U.S. states and political subdivisions	0	31,187	38	0	39,868	34
Mortgage-backed securities	0	139,043	43	0	167,172	42
Other debt securities (1)	0	40,614	569	0	38,067	650
Total available-for-sale debt securities	5,975	210,844	650	13,460	246,607	726

Marketable equity securities	0	105	0	0	110	0


Derivative assets	18	1	0	12	1	0
Derivative liabilities	(13)	(1)	0	(11)	(3)	0

(1)Includes corporate debt securities, collateralized loan obligations, and other debt securities.

140

March 31, 2020 December 31, 2019
(in millions) Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Trading debt securities 2,027
357
—
634
329
—
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 11,036
—
—
13,460
1,500
—
Securities of U.S. states and political subdivisions —
37,793
66
—
39,868
34
Mortgage-backed securities —
163,329
185
—
167,172
42
Other debt securities (1) —
34,603
743
—
38,067
650
Total available-for-sale debt securities 11,036
235,725
994
13,460
246,607
726
Marketable equity securities —
98
—
—
110
—
Derivative assets 41
6
—
12
1
—
Derivative liabilities (25 ) (8 ) —
(11 ) (3 ) —


~~(1)~~	~~Includes corporate debt securities, collateralized loan and other debt obligations, asset-backed securities, and other debt securities.~~

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Table 16.2 presents the balances of assets and liabilities recorded at fair value on a recurring basis.

Table 16.2: Fair Value on a Recurring Basis


(in millions)	Level 1			Level 2		Level 3			Netting (1)		Total		(in millions)	Level 1		Level 2	Level 3		Netting (1)	Total
March 31, 2020
September 30, 2020													September 30, 2020
Trading debt securities:													Trading debt securities:
Securities of U.S. Treasury and federal agencies	$	35,069		4,638		—			—		39,707		Securities of U.S. Treasury and federal agencies	$	29,024	3,070	0		—	32,094
Securities of U.S. states and political subdivisions	—			2,972		—			—		2,972		Securities of U.S. states and political subdivisions	0		2,509	0		—	2,509
Collateralized loan obligations	—			472		154			—		626		Collateralized loan obligations	0		564	140		—	704
Corporate debt securities	—			12,392		34			—		12,426		Corporate debt securities	56		12,264	12		—	12,332
Mortgage-backed securities	—			23,738		177			—		23,915		Mortgage-backed securities	0		24,829	11		—	24,840
Asset-backed securities	—			742		24			—		766
Other trading debt securities	—			13		—			—		13
Other													Other	0		774	0		—	774
Total trading debt securities	35,069			44,967		389			—		80,425		Total trading debt securities	29,080		44,010	163		—	73,253
Available-for-sale debt securities:													Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	11,036			—		—			—		11,036		Securities of U.S. Treasury and federal agencies	5,975		0	0		—	5,975
Securities of U.S. states and political subdivisions	—			37,793		351			—		38,144		Securities of U.S. states and political subdivisions	0		31,225	286		—	31,511
Mortgage-backed securities:													Mortgage-backed securities:
Federal agencies	—			160,214		—			—		160,214		Federal agencies	0		135,227	0		—	135,227
Residential	—			745		31			—		776		Residential	0		541	0		—	541
Commercial	—			3,500		154			—		3,654		Commercial	0		3,300	43		—	3,343
Total mortgage-backed securities	—			164,459		185			—		164,644		Total mortgage-backed securities	0		139,068	43		—	139,111
Corporate debt securities	33			4,692		1,130			—		5,855		Corporate debt securities	36		4,694	1,042		—	5,772
Collateralized loan and other debt obligations	—			24,532		636			—		25,168
Asset-backed securities:
Automobile loans and leases	—			884		—			—		884
Home equity loans	—			12		—			—		12
Other asset-backed securities	—			3,380		110			—		3,490
Total asset-backed securities	—			4,276		110			—		4,386
Other debt securities	—			1,996		—			—		1,996
Collateralized loan obligations													Collateralized loan obligations	0		25,014	0		—	25,014
Other													Other	0		12,574	616		—	13,190
Total available-for-sale debt securities	11,069			237,748		2,412		(2)	—		251,229		Total available-for-sale debt securities	6,011		212,575	1,987	(2)	—	220,573
Mortgage loans held for sale	—			13,508		3,157			—		16,665		Mortgage loans held for sale	0		19,037	847		—	19,884
Loans held for sale	—			1,654		19			—		1,673		Loans held for sale	0		1,680	8		—	1,688
Loans	—			—		160			—		160		Loans	0		0	148		—	148
Mortgage servicing rights (residential)	—			—		8,126			—		8,126		Mortgage servicing rights (residential)	0		0	6,355		—	6,355
Derivative assets:													Derivative assets:
Interest rate contracts	152			57,695		762			—		58,609		Interest rate contracts	20		41,402	480		—	41,902
Commodity contracts	—			2,301		15			—		2,316		Commodity contracts	0		2,305	39		—	2,344
Equity contracts	4,418			7,371		1,361			—		13,150		Equity contracts	4,341		8,967	1,425		—	14,733
Foreign exchange contracts	41			8,626		24			—		8,691		Foreign exchange contracts	18		5,864	7		—	5,889
Credit contracts	—			76		77			—		153		Credit contracts	0		60	58		—	118

Netting	—			—		—			(57,896	)	(57,896	)	Netting	0		0	0		(41,271)	(41,271)
Total derivative assets	4,611			76,069		2,239			(57,896	)	25,023		Total derivative assets	4,379		58,598	2,009		(41,271)	23,715
Equity securities – excluding securities at NAV:													Equity securities – excluding securities at NAV:
Marketable	20,983			295		3			—		21,281		Marketable	16,230		238	2		—	16,470
Nonmarketable	—			15		6,751			—		6,766		Nonmarketable	0		15	8,428		—	8,443
Total equity securities	20,983			310		6,754			—		28,047		Total equity securities	16,230		253	8,430		—	24,913
Total assets included in the fair value hierarchy	$	71,732		374,256		23,256			(57,896	)	411,348		Total assets included in the fair value hierarchy	$	55,700	336,153	19,947		(41,271)	370,529
Equity securities at NAV (3)											129		Equity securities at NAV (3)							140
Total assets recorded at fair value											411,477		Total assets recorded at fair value							370,669
Derivative liabilities:													Derivative liabilities:
Interest rate contracts	$	(158	)	(47,317	)	(77	)		—		(47,552	)	Interest rate contracts	$	(32)	(30,956)	(34)		—	(31,022)
Commodity contracts	—			(6,779	)	(59	)		—		(6,838	)	Commodity contracts	0		(2,407)	(39)		—	(2,446)
Equity contracts	(4,600		)	(4,610	)	(1,144	)		—		(10,354	)	Equity contracts	(4,339)		(10,403)	(1,533)		—	(16,275)
Foreign exchange contracts	(25		)	(9,969	)	(30	)		—		(10,024	)	Foreign exchange contracts	(13)		(5,868)	(7)		—	(5,888)
Credit contracts	—			(63	)	(30	)		—		(93	)	Credit contracts	0		(53)	(12)		—	(65)

Netting	—			—		—			59,243		59,243		Netting	0		0	0		41,929	41,929
Total derivative liabilities	(4,783		)	(68,738	)	(1,340	)		59,243		(15,618	)	Total derivative liabilities	(4,384)		(49,687)	(1,625)		41,929	(13,767)
Short sale liabilities:													Short sale liabilities:
Securities of U.S. Treasury and federal agencies	(9,881		)	(103	)	—			—		(9,984	)	Securities of U.S. Treasury and federal agencies	(9,776)		(138)	0		—	(9,914)
Mortgage-backed securities	—			(92	)	—			—		(92	)	Mortgage-backed securities	0		(924)	0		—	(924)

Corporate debt securities	—			(5,520	)	—			—		(5,520	)	Corporate debt securities	(2)		(4,837)	0		—	(4,839)
Equity securities	(1,984		)	—		—			—		(1,984	)	Equity securities	(3,053)		(45)	0		—	(3,098)
Other securities	—			(23	)	—			—		(23	)	Other securities	0		(4)	0		—	(4)
Total short sale liabilities	(11,865		)	(5,738	)	—			—		(17,603	)	Total short sale liabilities	(12,831)		(5,948)	0		—	(18,779)
Other liabilities	—			—		(2	)		—		(2	)	Other liabilities	0		0	(2)		—	(2)
Total liabilities recorded at fair value	$	(16,648	)	(74,476	)	(1,342	)		59,243		(33,223	)	Total liabilities recorded at fair value	$	(17,215)	(55,635)	(1,627)		41,929	(32,548)


~~(1)~~	Represents balance sheet netting of derivative asset and liability balances, related cash collateral and portfolio level counterparty valuation adjustments. See Note 15 (Derivatives) for additional information.

~~(2)~~

(1)Represents balance sheet netting of derivative asset and liability balances, related cash collateral and portfolio level counterparty valuation adjustments. See Note 15 (Derivatives) for additional information.

(2)Largely consists of securities that are 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)Consists of certain nonmarketable equity 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.

consists of securities that are 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)~~	~~Consists of certain nonmarketable equity 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)

141

Note 16: Fair Values of Assets and Liabilities (continued)

(continued from previous page)


(in millions)	Level 1		Level 2	Level 3		Netting (1)	Total
December 31, 2019
Trading debt securities:
Securities of U.S. Treasury and federal agencies	$	32,335	4,382	0		—	36,717
Securities of U.S. states and political subdivisions	0		2,434	0		—	2,434
Collateralized loan obligations	0		555	183		—	738
Corporate debt securities	0		11,006	38		—	11,044
Mortgage-backed securities	0		27,712	0		—	27,712
Other	0		1,086	2		—	1,088
Total trading debt securities	32,335		47,175	223		—	79,733
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	13,460		1,500	0		—	14,960
Securities of U.S. states and political subdivisions	0		39,924	413		—	40,337
Mortgage-backed securities:
Federal agencies	0		162,453	0		—	162,453
Residential	0		827	0		—	827
Commercial	0		3,892	42		—	3,934
Total mortgage-backed securities	0		167,172	42		—	167,214
Corporate debt securities	37		6,159	367		—	6,563
Collateralized loan obligations	0		29,055	0		—	29,055
Other	0		4,587	743		—	5,330
Total available-for-sale debt securities	13,497		248,397	1,565	(2)	—	263,459
Mortgage loans held for sale	0		15,408	1,198		—	16,606
Loans held for sale	0		956	16		—	972
Loans	0		0	171		—	171
Mortgage servicing rights (residential)	0		0	11,517		—	11,517
Derivative assets:
Interest rate contracts	26		23,792	229		—	24,047
Commodity contracts	0		1,413	8		—	1,421
Equity contracts	2,946		4,135	1,455		—	8,536
Foreign exchange contracts	12		5,197	5		—	5,214
Credit contracts	0		49	59		—	108

Netting	0		0	0		(25,123)	(25,123)
Total derivative assets	2,984		34,586	1,756		(25,123)	14,203
Equity securities – excluding securities at NAV:
Marketable	33,702		216	3		—	33,921
Nonmarketable	0		22	7,847		—	7,869
Total equity securities	33,702		238	7,850		—	41,790
Total assets included in the fair value hierarchy	$	82,518	346,760	24,296		(25,123)	428,451
Equity securities at NAV (3)							146
Total assets recorded at fair value							428,597
Derivative liabilities:
Interest rate contracts	$	(23)	(19,328)	(15)		—	(19,366)
Commodity contracts	0		(1,746)	(24)		—	(1,770)
Equity contracts	(2,011)		(6,729)	(1,724)		—	(10,464)
Foreign exchange contracts	(11)		(6,213)	(23)		—	(6,247)
Credit contracts	0		(53)	(30)		—	(83)

Netting	0		0	0		28,851	28,851
Total derivative liabilities	(2,045)		(34,069)	(1,816)		28,851	(9,079)
Short sale liabilities:
Securities of U.S. Treasury and federal agencies	(9,035)		(31)	0		—	(9,066)
Mortgage-backed securities	0		(2)	0		—	(2)
Corporate debt securities	0		(5,915)	0		—	(5,915)
Equity securities	(2,447)		0	0		—	(2,447)
Other securities	0		0	0		—	0
Total short sale liabilities	(11,482)		(5,948)	0		—	(17,430)
Other liabilities	0		0	(2)		—	(2)
Total liabilities recorded at fair value	$	(13,527)	(40,017)	(1,818)		28,851	(26,511)

(2)A significant portion of the balance consists of securities that are 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)Consists of certain nonmarketable equity 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.

142

(in millions)
Level 1
Level 2
Level 3
Netting (1)
Total
December 31, 2019
Trading debt securities:
Securities of U.S. Treasury and federal agencies $ 32,335
4,382
—
—
36,717
Securities of U.S. states and political subdivisions —
2,434
—
—
2,434
Collateralized loan obligations —
555
183
—
738
Corporate debt securities —
11,006
38
—
11,044
Mortgage-backed securities —
27,712
—
—
27,712
Asset-backed securities —
1,081
—
—
1,081
Other trading debt securities —
5
2
—
7
Total trading debt securities 32,335
47,175
223
—
79,733
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies 13,460
1,500
—
—
14,960
Securities of U.S. states and political subdivisions —
39,924
413
—
40,337
Mortgage-backed securities:
Federal agencies —
162,453
—
—
162,453
Residential —
827
—
—
827
Commercial —
3,892
42
—
3,934
Total mortgage-backed securities —
167,172
42
—
167,214
Corporate debt securities 37
6,159
367
—
6,563
Collateralized loan and other debt obligations —
29,055
640
—
29,695
Asset-backed securities:
Automobile loans and leases —
951
—
—
951
Home equity loans —
—
—
—
—
Other asset-backed securities —
3,635
103
—
3,738
Total asset-backed securities —
4,586
103
—
4,689
Other debt securities —
1
—
—
1
Total available-for-sale debt securities 13,497
248,397
1,565
(2) —
263,459
Mortgage loans held for sale —
15,408
1,198
—
16,606
Loans held for sale —
956
16
—
972
Loans —
—
171
—
171
Mortgage servicing rights (residential) —
—
11,517
—
11,517
Derivative assets:
Interest rate contracts 26
23,792
229
—
24,047
Commodity contracts —
1,413
8
—
1,421
Equity contracts 2,946
4,135
1,455
—
8,536
Foreign exchange contracts 12
5,197
5
—
5,214
Credit contracts —
49
59
—
108
Netting —
—
—
(25,123 ) (25,123 )
Total derivative assets 2,984
34,586
1,756
(25,123 ) 14,203
Equity securities – excluding securities at NAV:
Marketable 33,702
216
3
—
33,921
Nonmarketable —
22
7,847
—
7,869
Total equity securities 33,702
238
7,850
—
41,790
Total assets included in the fair value hierarchy $ 82,518
346,760
24,296
(25,123 ) 428,451
Equity securities at NAV (3) 146
Total assets recorded at fair value

428,597
Derivative liabilities:
Interest rate contracts $ (23 ) (19,328 ) (15 ) —
(19,366 )
Commodity contracts —
(1,746 ) (24 ) —
(1,770 )
Equity contracts (2,011 ) (6,729 ) (1,724 ) —
(10,464 )
Foreign exchange contracts (11 ) (6,213 ) (23 ) —
(6,247 )
Credit contracts —
(53 ) (30 ) —
(83 )
Netting —
—
—
28,851
28,851
Total derivative liabilities (2,045 ) (34,069 ) (1,816 ) 28,851
(9,079 )
Short sale liabilities:

Securities of U.S. Treasury and federal agencies (9,035 ) (31 ) —
—
(9,066 )
Mortgage-backed securities —
(2 ) —
—
(2 )
Corporate debt securities —
(5,915 ) —
—
(5,915 )
Equity securities (2,447 ) —
—
—
(2,447 )
Other securities —
—
—
—
—
Total short sale liabilities (11,482 ) (5,948 ) —
—
(17,430 )
Other liabilities —
—
(2 ) —
(2 )
Total liabilities recorded at fair value $ (13,527 ) (40,017 ) (1,818 ) 28,851
(26,511 )


~~(1)~~	Represents balance sheet netting of derivative asset and liability balances, related cash collateral and portfolio level counterparty valuation adjustments. See Note 15 (Derivatives) for additional information.


~~(2)~~	A significant portion of the balance consists of securities that are 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)~~	~~Consists of certain nonmarketable equity 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.~~

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. The amounts reported as transfers represent the fair value as of the beginning of the quarter in which the transfer occurred.

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarter ended ~~March 31,~~September 30, 2020, are presented in Table 16.3.

Table 16.3: Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis – Quarter ended ~~March 31,~~September 30, 2020


				Total net gains (losses) included in				Purchases, sales, issuances and settlements, net (1)												Net unrealized gains (losses) related to assets and liabilities held at period end included in											Total net gains (losses) included in			Purchases, sales, issuances and settlements, net (1)								Net unrealized gains (losses) related to assets and liabilities held at period end included in
(in millions)	Balance, beginning of period			Net income		Other compre- hensive income				Transfers into Level 3 (2)			Transfers out of Level 3 (3)			Balance, end of period			Net income		(4)		Other compre- hensive income		(in millions)		Balance, beginning of period			Net income		Other compre- hensive income			Transfers into Level 3 (2)		Transfers out of Level 3 (3)		Balance, end of period		Net income	(4)	Other compre-hensive income
Quarter ended March 31, 2020
Quarter ended September 30, 2020																										Quarter ended September 30, 2020
Trading debt securities:																										Trading debt securities:
Securities of U.S. states and political subdivisions	$	—		—		—		—			—			—			—			—				—		Securities of U.S. states and political subdivisions		$	0		0		0	0		0		0		0		0		0
Collateralized loan obligations	183			(69	)	—		19			21			—			154			(69	)			—		Collateralized loan obligations		128			17		0	(5)		0		0		140		10		0
Corporate debt securities	38			(4	)	—		3			—			(3	)		34			(3	)			—		Corporate debt securities		23			(1)		0	(10)		0		0		12		(3)		0
Mortgage-backed securities	—			(42	)	—		171			48			—			177			(42	)			—		Mortgage-backed securities		49			1		0	(3)		0		(36)		11		0		0
Asset-backed securities	—			(2	)	—		(5	)		31			—			24			(2	)			—
Other trading debt securities	2			(1	)	—		(1	)		—			—			—			(1	)			—
Other																										Other		23			0		0	0		0		(23)		0		0		0
Total trading debt securities	223			(118	)	—		187			100			(3	)		389			(117	)	(5)		—		Total trading debt securities		223			17		0	(18)		0		(59)		163		7	(5)	0
Available-for-sale debt securities:																										Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	413			—		(2	)	(21	)		32			(71	)		351			—				—		Securities of U.S. states and political subdivisions		351			5		(5)	(65)		0		0		286		0		1
Mortgage-backed securities:																										Mortgage-backed securities:
Residential	—			(5	)	(3	)	26			13			—			31			(5	)			(3	)	Residential		0			0		0	0		0		0		0		0		0
Commercial	42			3		(13	)	(2	)		124			—			154			—				(12	)	Commercial		61			(1)		(3)	0		5		(19)		43		(1)		(4)
Total mortgage-backed securities	42			(2	)	(16	)	24			137			—			185			(5	)			(15	)	Total mortgage-backed securities		61			(1)		(3)	0		5		(19)		43		(1)		(4)
Corporate debt securities	367			(52	)	(16	)	—			831			—			1,130			(54	)			(16	)	Corporate debt securities		1,051			(22)		6	1		6		0		1,042		(22)		7
Collateralized loan and other debt obligations	640			3		(53	)	(12	)		58			—			636			—				(53	)
Asset-backed securities:
Other asset-backed securities	103			—		(4	)	(18	)		29			—			110			—				(4	)
Total asset-backed securities	103			—		(4	)	(18	)		29			—			110			—				(4	)
Collateralized loan obligations																										Collateralized loan obligations		9			0		0	0		0		(9)		0		0		0
Other																										Other		626			4		9	(20)		5		(8)		616		0		9
Total available-for-sale debt securities	1,565			(51	)	(91	)	(27	)		1,087			(71	)		2,412			(59	)	(6	)	(88	)	Total available-for-sale debt securities		2,098			(14)		7	(84)		16		(36)		1,987		(23)	(6)	13
Mortgage loans held for sale	1,198			(61	)	—		700			1,322			(2	)		3,157			(64	)	(7	)	—		Mortgage loans held for sale		751			(7)		0	44		63		(4)		847		(6)	(7)	0
Loans held for sale	16			(2	)	—		(2	)		7			—			19			1				—		Loans held for sale		7			0		0	(2)		3		0		8		0	(5)	0
Loans	171			—		—		(11	)		—			—			160			(2	)	(7	)	—		Loans		152			0		0	(4)		0		0		148		(2)	(7)	0
Mortgage servicing rights (residential) (8)	11,517			(3,821	)	—		430			—			—			8,126			(3,257	)	(7	)	—
Mortgage servicing rights (residential)(8)																										Mortgage servicing rights (residential)(8)		6,819			(815)		0	351		0		0		6,355		(217)	(7)	0
Net derivative assets and liabilities:																										Net derivative assets and liabilities:
Interest rate contracts	214			744		—		(273	)		—			—			685			531				—		Interest rate contracts		523			469		0	(546)		0		0		446		226		0
Commodity contracts	(16		)	(80	)	—		58			(6	)		—			(44	)		(27	)			—		Commodity contracts		1			(15)		0	4		10		0		0		(6)		0
Equity contracts	(269		)	430		—		73			(10	)		(7	)		217			451				—		Equity contracts		20			(191)		0	78		0		(15)		(108)		(114)		0
Foreign exchange contracts	(18		)	10		—		2			—			—			(6	)		(2	)			—		Foreign exchange contracts		(16)			4		0	12		0		0		0		0		0
Credit contracts	29			15		—		3			—			—			47			17				—		Credit contracts		50			(5)		0	1		0		0		46		(7)		0

Total derivative contracts	(60		)	1,119		—		(137	)		(16	)		(7	)		899			970		(9	)	—		Total derivative contracts		578			262		0	(451)		10		(15)		384		99	(9)	0
Equity securities:																										Equity securities:
Marketable	3			—		—		—			—			—			3			—				—		Marketable		0			0		0	0		2		0		2		0		0
Nonmarketable	7,847			(1,101	)	—		—			7			(2	)		6,751			(1,103	)			—		Nonmarketable		8,165			253		0	0		10		0		8,428		253		0
Total equity securities	7,850			(1,101	)	—		—			7			(2	)		6,754			(1,103	)	(10	)	—		Total equity securities		8,165			253		0	0		12		0		8,430		253	(10)	0

Short sale liabilities																										Short sale liabilities		(3)			0		0	3		0		0		0		0	(5)	0
Other liabilities	(2		)	—		—		—			—			—			(2	)		—		(7	)	—		Other liabilities		(2)			0		0	0		0		0		(2)		0	(7)	0


~~(1)~~	~~See Table 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.


~~(5)~~	~~Included in net gains from trading activities in the income statement.~~


~~(6)~~	~~Included in net gains from debt securities and provision for credit losses - debt securities in the income statement.~~


~~(7)~~	~~Included in mortgage banking and other noninterest income in the income statement.~~


~~(8)~~	~~For more information on the changes in mortgage servicing rights, see Note 11 (Mortgage Banking Activities).~~


~~(9)~~	~~Included in mortgage banking income, net gains from trading activities and from equity securities and other noninterest income in the income statement.~~


~~(10)~~	~~Included in net gains (losses) from equity securities in the income statement.~~

(1)See Table 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.

(5)Included in net gains from trading activities in the income statement.

(6)Included in net gains from debt securities and provision for credit losses – debt securities in the income statement.

(7)Included in mortgage banking and other noninterest income in the income statement.

(8)For additional information on the changes in mortgage servicing rights, see Note 11 (Mortgage Banking Activities).

(9)Included in mortgage banking income, net gains from trading activities, net gains (losses) from equity 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)

143

Note 16: Fair Values of Assets and Liabilities (continued)

(continued from previous page)

Table 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 ~~March 31,~~September 30, 2020.

Table 16.4: Gross Purchases, Sales, Issuances and Settlements – Level 3 – Quarter ended ~~March 31,~~September 30, 2020


(in millions)	Purchases		Sales	Issuances	Settlements	Net
Quarter ended September 30, 2020
Trading debt securities:
Securities of U.S. states and political subdivisions	$	0	0	0	0	0
Collateralized loan obligations	46		(51)	0	0	(5)
Corporate debt securities	4		(14)	0	0	(10)
Mortgage-backed securities	14		(17)	0	0	(3)
Other	0		0	0	0	0
Total trading debt securities	64		(82)	0	0	(18)
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	0		(35)	0	(30)	(65)
Mortgage-backed securities:
Residential	0		0	0	0	0
Commercial	0		0	0	0	0
Total mortgage-backed securities	0		0	0	0	0
Corporate debt securities	1		0	0	0	1
Collateralized loan obligations	0		0	0	0	0
Other	0		0	0	(20)	(20)
Total available-for-sale debt securities	1		(35)	0	(50)	(84)
Mortgage loans held for sale	46		(34)	98	(66)	44
Loans held for sale	0		(2)	0	0	(2)
Loans	1		0	1	(6)	(4)
Mortgage servicing rights (residential) (1)	0		0	351	0	351
Net derivative assets and liabilities:
Interest rate contracts	0		0	0	(546)	(546)
Commodity contracts	0		0	0	4	4
Equity contracts	0		0	0	78	78
Foreign exchange contracts	0		0	0	12	12
Credit contracts	0		7	0	(6)	1

Total derivative contracts	0		7	0	(458)	(451)
Equity securities:
Marketable	0		0	0	0	0
Nonmarketable	0		0	0	0	0
Total equity securities	0		0	0	0	0

Short sale liabilities	3		0	0	0	3
Other liabilities	0		0	0	0	0

(1)For additional information on the changes in mortgage servicing rights, see Note 11 (Mortgage Banking Activities).

(in millions) Purchases
Sales
Issuances
Settlements
Net
Quarter ended March 31, 2020
Trading debt securities:
Securities of U.S. states and political subdivisions $ —
—
—
—
—
Collateralized loan obligations 85
(56 ) —
(10 ) 19
Corporate debt securities 10
(7 ) —
—
3
Mortgage-backed securities 195
(24 ) —
—
171
Asset-backed securities —
(5 ) —
—
(5 )
Other trading debt securities —
(1 ) —
—
(1 )
Total trading debt securities 290
(93 ) —
(10 ) 187
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions —
—
—
(21 ) (21 )
Mortgage-backed securities:
Residential 26
—
—
—
26
Commercial —
—
—
(2 ) (2 )
Total mortgage-backed securities 26
—
—
(2 ) 24
Corporate debt securities —
—
—
—
—
Collateralized loan and other debt obligations —
—
—
(12 ) (12 )
Asset-backed securities:
Other asset-backed securities —
(5 ) —
(13 ) (18 )
Total asset-backed securities —
(5 ) —
(13 ) (18 )
Total available-for-sale debt securities 26
(5 ) —
(48 ) (27 )
Mortgage loans held for sale 23
(69 ) 843
(97 ) 700
Loans held for sale —
(1 ) —
(1 ) (2 )
Loans 1
—
2
(14 ) (11 )
Mortgage servicing rights (residential) (1) —
(32 ) 461
1
430
Net derivative assets and liabilities:
Interest rate contracts —
—
—
(273 ) (273 )
Commodity contracts —
—
—
58
58
Equity contracts —
—
—
73
73
Foreign exchange contracts —
—
—
2
2
Credit contracts 6
(3 ) —
—
3
Total derivative contracts 6
(3 ) —
(140 ) (137 )
Equity securities:
Marketable —
—
—
—
—
Nonmarketable —
—
—
—
—
Total equity securities —
—
—
—
—
Other liabilities —
—
—
—
—


~~(1)~~	~~For more information on the changes in mortgage servicing rights, see Note 11 (Mortgage Banking Activities).~~

~~The~~144

Table 16.5 presents the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarter ended ~~March 31, 2019, are presented in Table 16.5.~~

September 30, 2019.

Table 16.5: Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis – Quarter ended ~~March 31,~~September 30, 2019


	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)				Net income		Other compre- hensive income				Transfers into Level 3 (2)		Transfers out of Level 3 (3)			Balance, end of period			(4)			(in millions)				Net income		Other compre- hensive income			Transfers into Level 3 (2)		Transfers out of Level 3 (3)		Balance, end of period		(4)
Quarter ended March 31, 2019
Quarter ended September 30, 2019																						Quarter ended September 30, 2019
Trading debt securities:																						Trading debt securities:
Securities of U.S. states and political subdivisions	$	3		—		—		(2	)		—		(1	)		—			—			Securities of U.S. states and political subdivisions	$	0		0		0	0		0		0		0		0
Collateralized loan obligations	237			(3	)	—		41			—		—			275			1			Collateralized loan obligations	249			(11)		0	(4)		0		(2)		232		(13)
Corporate debt securities	34			2		—		4			1		—			41			2			Corporate debt securities	44			(2)		0	(4)		0		(5)		33		1
Other trading debt securities	16			(1	)	—		—			—		—			15			—
Mortgage-backed securities																						Mortgage-backed securities	0			0		0	0		0		0		0		0
Other																						Other	14			(1)		0	(6)		0		0		7		0
Total trading debt securities	290			(2	)	—		43			1		(1	)		331			3		(5)	Total trading debt securities	307			(14)		0	(14)		0		(7)		272		(12)	(5)
Available-for-sale debt securities:																						Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	444			—		3		23			—		—			470			—			Securities of U.S. states and political subdivisions	391			0		0	(38)		0		0		353		0
Mortgage-backed securities:																						Mortgage-backed securities:
Residential	—			—		—		—			—		—			—			—			Residential	0			0		0	0		0		0		0		0
Commercial	41			—		—		—			—		—			41			—			Commercial	41			0		(1)	(3)		0		0		37		0
Total mortgage-backed securities	41			—		—		—			—		—			41			—			Total mortgage-backed securities	41			0		(1)	(3)		0		0		37		0
Corporate debt securities	370			1		4		2			—		—			377			—			Corporate debt securities	383			6		(8)	(14)		0		0		367		0
Collateralized loan and other debt obligations	800			6		(4	)	(47	)		—		—			755			—
Asset-backed securities:
Other asset-backed securities	389			—		(1	)	(26	)		—		—			362			—
Total asset-backed securities	389			—		(1	)	(26	)		—		—			362			—

Other																						Other	990			6		(11)	(105)		0		(153)		727		0
Total available-for-sale debt securities	2,044			7		2		(48	)		—		—			2,005			—		(6)	Total available-for-sale debt securities	1,805			12		(20)	(160)		0		(153)		1,484		0	(6)
Mortgage loans held for sale	997			15		—		(66	)		56		(4	)		998			15		(7)	Mortgage loans held for sale	1,115			22		0	(6)		121		(3)		1,249		22	(7)
Loans held for sale	60			—		—		11			37		(37	)		71			—			Loans held for sale	12			0		0	(12)		1		0		1		0	(5)
Loans	244			—		—		(19	)		—		—			225			(2	)	(7)	Loans	202			0		0	(17)		0		0		185		(2)	(7)
Mortgage servicing rights (residential) (8)	14,649			(1,373	)	—		60			—		—			13,336			(891	)	(7)	Mortgage servicing rights (residential) (8)	12,096			(1,558)		0	534		0		0		11,072		(962)	(7)
Net derivative assets and liabilities:																						Net derivative assets and liabilities:
Interest rate contracts	25			187		—		(111	)		—		—			101			132			Interest rate contracts	205			71		0	(133)		0		0		143		30
Commodity contracts	4			(51	)	—		27			2		—			(18	)		(15	)		Commodity contracts	(29)			(85)		0	61		0		23		(30)		(6)
Equity contracts	(17		)	(119	)	—		(3	)		9		(32	)		(162	)		(114	)		Equity contracts	(228)			(298)		0	263		0		60		(203)		(80)
Foreign exchange contracts	(26		)	7		—		3			—		—			(16	)		11			Foreign exchange contracts	(10)			17		0	(33)		0		0		(26)		0
Credit contracts	35			8		—		6			—		—			49			13			Credit contracts	45			(8)		0	1		0		0		38		(8)

Total derivative contracts	21			32		—		(78	)		11		(32	)		(46	)		27		(9)	Total derivative contracts	(17)			(303)		0	159		0		83		(78)		(64)	(9)
Equity securities:																						Equity securities:
Marketable																						Marketable	0			0		0	0		0		0		0		0
Nonmarketable	5,468			926		—		(1	)		—		(12	)		6,381			926			Nonmarketable	7,110			13		0	0		7		0		7,130		13
Total equity securities	5,468			926		—		(1	)		—		(12	)		6,381			926		(10)	Total equity securities	7,110			13		0	0		7		0		7,130		13	(10)

Other liabilities	(2		)	—		—		—			—		—			(2	)		—		(7)	Other liabilities	(2)			0		0	0		0		0		(2)		0	(7)


~~(1)~~	~~See Table 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.


~~(5)~~	~~Included in net gains from trading activities in the income statement.~~


~~(6)~~	~~Included in net gains from debt securities in the income statement.~~


~~(7)~~	~~Included in mortgage banking and other noninterest income in the income statement.~~


~~(8)~~	~~For more information on the changes in mortgage servicing rights, see Note 11 (Mortgage Banking Activities).~~


~~(9)~~	~~Included in mortgage banking income, net gains from trading activities and from equity securities and other noninterest income in the income statement.~~


~~(10)~~	~~Included in net gains (losses) from equity securities in the income statement.~~

(1)See Table 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, except for $153 million of asset-backed securities that were transferred to loans during third quarter 2019.

(5)Included in net gains from trading activities in the income statement.

(6)Included in net gains from debt securities in the income statement.

(7)Included in mortgage banking and other noninterest income in the income statement.

(8)For additional information on the changes in mortgage servicing rights, see Note 11 (Mortgage Banking Activities).

(9)Included in mortgage banking income, net gains from trading activities, net gains (losses) from equity 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)

145

Note 16: Fair Values of Assets and Liabilities (continued)

(continued from previous page)

Table 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 ~~March 31,~~September 30, 2019.

Table 16.6: Gross Purchases, Sales, Issuances and Settlements – Level 3 – Quarter ended ~~March 31,~~September 30, 2019

(in millions) Purchases
Sales
Issuances
Settlements
Net
Quarter ended March 31, 2019
Trading debt securities:
Securities of U.S. states and political subdivisions $ —
—
—
(2 ) (2 )
Collateralized loan obligations 130
(87 ) —
(2 ) 41
Corporate debt securities 5
(1 ) —
—
4
Other trading debt securities —
—
—
—
—
Total trading debt securities 135
(88 ) —
(4 ) 43
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions —
—
49
(26 ) 23
Mortgage-backed securities:
Residential —
—
—
—
—
Commercial —
—
—
—
—
Total mortgage-backed securities —
—
—
—
—
Corporate debt securities 3
—
—
(1 ) 2
Collateralized loan and other debt obligations —
—
—
(47 ) (47 )
Asset-backed securities:
Other asset-backed securities —
(3 ) 66
(89 ) (26 )
Total asset-backed securities —
(3 ) 66
(89 ) (26 )
Total available-for-sale debt securities 3
(3 ) 115
(163 ) (48 )
Mortgage loans held for sale 16
(93 ) 46
(35 ) (66 )
Loans held for sale 12
(1 ) —
—
11
Loans 2
—
3
(24 ) (19 )
Mortgage servicing rights (residential) (1) —
(281 ) 341
—
60
Net derivative assets and liabilities:
Interest rate contracts —
—
—
(111 ) (111 )
Commodity contracts —
—
—
27
27
Equity contracts —
—
—
(3 ) (3 )
Foreign exchange contracts —
—
—
3
3
Credit contracts 6
—
—
—
6
Total derivative contracts 6
—
—
(84 ) (78 )
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 11 (Mortgage Banking Activities).~~


(in millions)	Purchases		Sales	Issuances	Settlements	Net
Quarter ended September 30, 2019
Trading debt securities:
Securities of U.S. states and political subdivisions	$	0	0	0	0	0
Collateralized loan obligations	107		(100)	0	(11)	(4)
Corporate debt securities	3		(7)	0	0	(4)
Mortgage-backed securities	0		0	0	0	0
Other	0		0	0	(6)	(6)
Total trading debt securities	110		(107)	0	(17)	(14)
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	0		0	12	(50)	(38)
Mortgage-backed securities:
Residential	0		0	0	0	0
Commercial	0		0	0	(3)	(3)
Total mortgage-backed securities	0		0	0	(3)	(3)
Corporate debt securities	1		0	0	(15)	(14)

Other	0		(4)	10	(111)	(105)
Total available-for-sale debt securities	1		(4)	22	(179)	(160)
Mortgage loans held for sale	23		(45)	87	(71)	(6)
Loans held for sale	0		0	0	(12)	(12)
Loans	1		0	2	(20)	(17)
Mortgage servicing rights (residential) (1)	0		(4)	538	0	534
Net derivative assets and liabilities:
Interest rate contracts	0		0	(1)	(132)	(133)
Commodity contracts	0		0	0	61	61
Equity contracts	0		0	0	263	263
Foreign exchange contracts	0		0	0	(33)	(33)
Credit contracts	4		(3)	0	0	1

Total derivative contracts	4		(3)	(1)	159	159
Equity securities:
Marketable	0		0	0	0	0
Nonmarketable	0		0	0	0	0
Total equity securities	0		0	0	0	0


Other liabilities	0		0	0	0	0

(1)For additional information on the changes in mortgage servicing rights, see Note 11 (Mortgage Banking Activities).

146

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2020, are presented in Table 16.7.

Table 16.7:Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis – Nine months ended September 30, 2020


			Total net gains (losses) included in		Purchases, sales, issuances and settlements, net (1)				Net unrealized gains (losses) related to assets and liabilities held at period end included in
(in millions)	Balance, beginning of period		Net income	Other compre- hensive income		Transfers into Level 3 (2)	Transfers out of Level 3 (3)	Balance, end of period	Net income	(4)	Other compre- hensive income
Nine months ended September 30, 2020
Trading debt securities:
Securities of U.S. states and political subdivisions	$	0	0	0	0	0	0	0	0		0
Collateralized loan obligations	183		(52)	0	18	16	(25)	140	(50)		0
Corporate debt securities	38		(12)	0	(6)	0	(8)	12	(6)		0
Mortgage-backed securities	0		(6)	0	20	52	(55)	11	(1)		0
Other	2		2	0	(28)	47	(23)	0	(1)		0
Total trading debt securities	223		(68)	0	4	115	(111)	163	(58)	(5)	0
Available-for-sale debt securities:
Securities of U.S. states and political subdivisions	413		6	(5)	(109)	67	(86)	286	0		1
Mortgage-backed securities:
Residential	0		0	(3)	1	13	(11)	0	0		0
Commercial	42		0	(17)	(3)	160	(139)	43	(3)		(6)
Total mortgage-backed securities	42		0	(20)	(2)	173	(150)	43	(3)		(6)
Corporate debt securities	367		(76)	33	(45)	837	(74)	1,042	(78)		43
Collateralized loan obligations	0		0	(9)	0	68	(59)	0	0		0
Other	743		10	(67)	(78)	43	(35)	616	(1)		(64)
Total available-for-sale debt securities	1,565		(60)	(68)	(234)	1,188	(404)	1,987	(82)	(6)	(26)
Mortgage loans held for sale	1,198		(105)	0	493	1,465	(2,204)	847	(32)	(7)	0
Loans held for sale	16		(6)	0	(11)	10	(1)	8	(4)	(5)	0
Loans	171		(2)	0	(21)	0	0	148	(7)	(7)	0
Mortgage servicing rights (residential) (8)	11,517		(6,404)	0	1,242	0	0	6,355	(4,605)	(7)	0
Net derivative assets and liabilities:
Interest rate contracts	214		1,673	0	(1,441)	0	0	446	335		0
Commodity contracts	(16)		(80)	0	74	22	0	0	3		0
Equity contracts	(269)		(38)	0	230	(10)	(21)	(108)	194		0
Foreign exchange contracts	(18)		2	0	16	0	0	0	2		0
Credit contracts	29		14	0	3	0	0	46	13		0

Total derivative contracts	(60)		1,571	0	(1,118)	12	(21)	384	547	(9)	0
Equity securities:
Marketable	3		0	0	0	2	(3)	2	(1)		0
Nonmarketable	7,847		566	0	0	17	(2)	8,428	562		0
Total equity securities	7,850		566	0	0	19	(5)	8,430	561	(10)	0

Short sale liabilities	0		0	0	0	0	0	0	0	(5)	0
Other liabilities	(2)		0	0	0	0	0	(2)	0	(7)	0

(1)See Table 16.8 for detail.