WELLS FARGO & COMPANY/MN0000072971false2021Q212/MN0000072971false2022Q112/31NYSE5.85% Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series Q6.625% Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series R1.66661.6666The 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.0.1080.6591.5100.8990.5162.6800.6550.412.16.57.212.18.02.03.32.80.110.95.00IfR1.66661.6666http://fasb.org/us-gaap/2021-01-31#OtherAssetshttp://fasb.org/us-gaap/2021-01-31#OtherAssetshttp://fasb.org/us-gaap/2021-01-31#OtherLiabilitieshttp://fasb.org/us-gaap/2021-01-31#OtherLiabilities0.108110.691.6800.3340.7481.4600.5095.65.65.61.14.02.62.03.32.88.08.08.0If issued, preference shares would be limited to one vote per shareNaNNaN0000072971us-gaap:CustomerRelationshipsMember2021-06-300000072971us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-06-300000072971wfc:TrailingCommissionMember2020-04-012020-06-30sharenilnil0000072971wfc:NonmarketableEquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:MarketApproachValuationTechniqueMemberwfc:MeasurementInputMultiplesMember2021-12-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | |
| ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2021March 31, 2022
OR
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission file number 001-2979
WELLS FARGO & COMPANY
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
| 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
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 | New York Stock Exchange (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 O | WFC.PRO | 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 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 |
| Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series CC | WFC.PRC | NYSE |
| Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series DD | WFC.PRD | 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 |
| | July 19, 2021April 22, 2022 |
| Common stock, $1-2/3 par value | | 4,106,410,5133,790,352,243 |
| | FORM 10-Q | FORM 10-Q | | FORM 10-Q | |
| CROSS-REFERENCE INDEX | CROSS-REFERENCE INDEX | | CROSS-REFERENCE INDEX | |
| PART I | PART I | Financial Information | | PART I | Financial Information | |
| Item 1. | Item 1. | Financial Statements | Page | Item 1. | Financial Statements | Page |
| | Consolidated Statement of Income | | | Consolidated Statement of Income | |
| | Consolidated Statement of Comprehensive Income | | | Consolidated Statement of Comprehensive Income | |
| | Consolidated Balance Sheet | | | Consolidated Balance Sheet | |
| | Consolidated Statement of Changes in Equity | | | Consolidated Statement of Changes in Equity | |
| | Consolidated Statement of Cash Flows | | | Consolidated Statement of Cash Flows | |
| | Notes to Financial Statements | | | Notes to Financial Statements | |
| | 1 | | — | Summary of Significant Accounting Policies | | | 1 | | — | Summary of Significant Accounting Policies | |
| | 2 | | — | Trading Activities | | | 2 | | — | Trading Activities | |
| | 3 | | — | Available-for-Sale and Held-to-Maturity Debt Securities | | | 3 | | — | Available-for-Sale and Held-to-Maturity Debt Securities | |
| | 4 | | — | Loans and Related Allowance for Credit Losses | | | 4 | | — | Loans and Related Allowance for Credit Losses | |
| | 5 | | — | Leasing Activity | | | 5 | | — | Leasing Activity | |
| | 6 | | — | Equity Securities | | | 6 | | — | Equity Securities | |
| | 7 | | — | Other Assets | | | 7 | | — | Other Assets | |
| | 8 | | — | Securitizations and Variable Interest Entities | | | 8 | | — | Securitizations and Variable Interest Entities | |
| | 9 | | — | Mortgage Banking Activities | | | 9 | | — | Mortgage Banking Activities | |
| | 10 | | — | Intangible Assets | | | 10 | | — | Intangible Assets | |
| | 11 | | �� | Guarantees and Other Commitments | | | 11 | | — | Guarantees and Other Commitments | |
| | 12 | | — | Pledged Assets and Collateral | | | 12 | | — | Pledged Assets and Collateral | |
| | 13 | | — | Legal Actions | | | 13 | | — | Legal Actions | |
| | 14 | | — | Derivatives | | | 14 | | — | Derivatives | |
| | 15 | | — | Fair Values of Assets and Liabilities | | | 15 | | — | Fair Values of Assets and Liabilities | |
| | 16 | | — | Preferred Stock | | | 16 | | — | Preferred Stock | |
| | 17 | | — | Revenue from Contracts with Customers | | | 17 | | — | Revenue from Contracts with Customers | |
| | 18 | | — | Employee Benefits and Other Expenses | | | 18 | | — | Employee Benefits and Other Expenses | |
| | 19 | | — | Restructuring Charges | | | 19 | | — | Restructuring Charges | |
| | 20 | | — | Earnings and Dividends Per Common Share | | | 20 | | — | Earnings and Dividends Per Common Share | |
| | 21 | | — | Other Comprehensive Income | | | 21 | | — | Other Comprehensive Income | |
| | 22 | | — | Operating Segments | | | 22 | | — | Operating Segments | |
| | 23 | | — | Regulatory Capital Requirements and Other Restrictions | | | 23 | | — | Regulatory Capital Requirements and Other Restrictions | |
| Item 2. | Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Financial Review) | | Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Financial Review) | |
| | Summary Financial Data | | | Summary Financial Data | |
| | Overview | | | Overview | |
| | Earnings Performance | | | Earnings Performance | |
| | Balance Sheet Analysis | | | Balance Sheet Analysis | |
| | Off-Balance Sheet Arrangements | | | Off-Balance Sheet Arrangements | |
| | Risk Management | | | Risk Management | |
| | Capital Management | | | Capital Management | |
| | Regulatory Matters | | | Regulatory Matters | |
| | Critical Accounting Policies | | | Critical Accounting Policies | |
| | Current Accounting Developments | | | Current Accounting Developments | |
| | Forward-Looking Statements | | | Forward-Looking Statements | |
| | Risk Factors | | | Risk Factors | |
| | Glossary of Acronyms | | | Glossary of Acronyms | |
| Item 3. | Item 3. | Quantitative and Qualitative Disclosures About Market Risk | | Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
| Item 4. | Item 4. | Controls and Procedures | | Item 4. | Controls and Procedures | |
| | PART II | PART II | Other Information | | PART II | Other Information | |
| Item 1. | Item 1. | Legal Proceedings | | Item 1. | Legal Proceedings | |
| Item 1A. | Item 1A. | Risk Factors | | Item 1A. | Risk Factors | |
| Item 2. | Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | | Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
| Item 6. | Item 6. | Exhibits | | Item 6. | Exhibits | |
| | Signature | Signature | | Signature | |
FINANCIAL REVIEW
| Summary Financial Data (1) | Summary Financial Data (1) | | | | | | | | | | | Summary Financial Data (1) | | | | | |
| | Quarter ended | | Jun 30, 2021
% Change from | | Six months ended | | | | Quarter ended | | Mar 31, 2022
% Change from | |
| ($ in millions, except per share amounts) | ($ in millions, except per share amounts) | Jun 30,
2021 | | Mar 31,
2021 | | Jun 30,
2020 | | Mar 31,
2021 | | Jun 30,
2020 | | Jun 30,
2021 | | Jun 30,
2020 | | %
Change | ($ in millions, except per share amounts) | Mar 31,
2022 | | Dec 31,
2021 | | Mar 31,
2021 | | Dec 31,
2021 | | Mar 31,
2021 | |
| Selected Income Statement Data | Selected Income Statement Data | | | | | | | Selected Income Statement Data | | |
| Total revenue | Total revenue | $ | 20,270 | | | 18,532 | | | 18,286 | | | 9 | % | | 11 | | | $ | 38,802 | | | 36,459 | | | 6 | % | Total revenue | $ | 17,592 | | | 20,856 | | | 18,532 | | | (16) | % | | (5) | | |
| Noninterest expense | Noninterest expense | 13,341 | | | 13,989 | | | 14,551 | | | (5) | | | (8) | | | 27,330 | | | 27,599 | | | (1) | | Noninterest expense | 13,870 | | | 13,198 | | | 13,989 | | | 5 | | | (1) | | |
Pre-tax pre-provision profit (PTPP) (2)(1) | Pre-tax pre-provision profit (PTPP) (2)(1) | 6,929 | | | 4,543 | | | 3,735 | | | 53 | | | 86 | | | 11,472 | | | 8,860 | | | 29 | | Pre-tax pre-provision profit (PTPP) (2)(1) | 3,722 | | | 7,658 | | | 4,543 | | | (51) | | | (18) | | |
| Provision for credit losses | Provision for credit losses | (1,260) | | | (1,048) | | | 9,534 | | | (20) | | NM | | (2,308) | | | 13,539 | | | NM | Provision for credit losses | (787) | | | (452) | | | (1,048) | | | (74) | | | 25 | | |
| Wells Fargo net income (loss) | 6,040 | | | 4,636 | | | (3,846) | | | 30 | | | NM | | 10,676 | | | (2,930) | | | NM | |
| Wells Fargo net income (loss) applicable to common stock | 5,743 | | | 4,256 | | | (4,160) | | | 35 | | | NM | | 9,999 | | | (3,856) | | | NM | |
| Wells Fargo net income | | Wells Fargo net income | 3,671 | | | 5,750 | | | 4,636 | | | (36) | | | (21) | | |
| Wells Fargo net income applicable to common stock | | Wells Fargo net income applicable to common stock | 3,393 | | | 5,470 | | | 4,256 | | | (38) | | | (20) | | |
| Common Share Data | Common Share Data | | Common Share Data | | |
| Diluted earnings (loss) per common share | 1.38 | | | 1.02 | | | (1.01) | | | 35 | | | NM | | 2.40 | | | (0.94) | | | NM | |
| Diluted earnings per common share | | Diluted earnings per common share | 0.88 | | | 1.38 | | | 1.02 | | | (36) | | | (14) | | |
| Dividends declared per common share | Dividends declared per common share | 0.10 | | | 0.10 | | | 0.51 | | | — | | | (80) | | | 0.20 | | | 1.02 | | | (80) | | Dividends declared per common share | 0.25 | | | 0.20 | | | 0.10 | | | 25 | | | 150 | | |
| Common shares outstanding | Common shares outstanding | 4,108.0 | | | 4,141.1 | | | 4,119.6 | | | (1) | | | — | | | Common shares outstanding | 3,789.9 | | | 3,885.8 | | | 4,141.1 | | | (2) | | | (8) | | |
| Average common shares outstanding | Average common shares outstanding | 4,124.6 | | | 4,141.3 | | | 4,105.5 | | | — | | | — | | | 4,132.9 | | | 4,105.2 | | | 1 | | Average common shares outstanding | 3,831.1 | | | 3,927.6 | | | 4,141.3 | | | (2) | | | (7) | | |
Diluted average common shares outstanding (3) | Diluted average common shares outstanding (3) | 4,156.1 | | | 4,171.0 | | | 4,105.5 | | | — | | | 1 | | | 4,164.6 | | | 4,105.2 | | | 1 | | Diluted average common shares outstanding (3) | 3,868.9 | | | 3,964.7 | | | 4,171.0 | | | (2) | | | (7) | | |
Book value per common share (4)(2) | Book value per common share (4)(2) | $ | 41.74 | | | 40.27 | | | 38.31 | | | 4 | | | 9 | | | Book value per common share (4)(2) | $ | 42.21 | | | 43.32 | | | 40.27 | | | (3) | | | 5 | | |
Tangible book value per common share (5)(3) | Tangible book value per common share (5)(3) | 34.95 | | | 33.49 | | | 31.52 | | | 4 | | | 11 | | | Tangible book value per common share (5)(3) | 35.13 | | | 36.35 | | | 33.49 | | | (3) | | | 5 | | |
| Selected Equity Data (period-end) | Selected Equity Data (period-end) | | Selected Equity Data (period-end) | | |
| Total equity | Total equity | 193,127 | | | 188,034 | | | 178,635 | | | 3 | | | 8 | | | Total equity | 181,689 | | | 190,110 | | | 188,034 | | | (4) | | | (3) | | |
| Common stockholders' equity | 171,453 | | | 166,748 | | | 157,835 | | | 3 | | | 9 | | | |
| Common stockholders’ equity | | Common stockholders’ equity | 159,968 | | | 168,331 | | | 166,748 | | | (5) | | | (4) | | |
Tangible common equity (5)(3) | Tangible common equity (5)(3) | 143,577 | | | 138,702 | | | 129,842 | | | 4 | | | 11 | | | Tangible common equity (5)(3) | 133,144 | | | 141,254 | | | 138,702 | | | (6) | | | (4) | | |
| Performance Ratios | Performance Ratios | | Performance Ratios | | |
Return on average assets (ROA) (6)(4) | Return on average assets (ROA) (6)(4) | 1.25 | % | | 0.97 | | | (0.79) | | | 1.11 | % | | (0.30) | | | Return on average assets (ROA) (6)(4) | 0.78 | % | | 1.17 | | | 0.97 | | | |
Return on average equity (ROE) (7)(5) | Return on average equity (ROE) (7)(5) | 13.6 | | | 10.3 | | | (10.2) | | | 12.0 | | | (4.7) | | | Return on average equity (ROE) (7)(5) | 8.4 | | | 12.8 | | | 10.3 | | | |
Return on average tangible common equity (ROTCE) (5)(3) | Return on average tangible common equity (ROTCE) (5)(3) | 16.3 | | | 12.4 | | | (12.3) | | | 14.4 | | | (5.7) | | | Return on average tangible common equity (ROTCE) (5)(3) | 10.0 | | | 15.3 | | | 12.4 | | | |
Efficiency ratio (8)(6) | Efficiency ratio (8)(6) | 66 | | | 75 | | | 80 | | | 70 | | | 76 | | | Efficiency ratio (8)(6) | 79 | | | 63 | | | 75 | | | |
| Net interest margin on a taxable-equivalent basis | Net interest margin on a taxable-equivalent basis | 2.02 | | | 2.05 | | | 2.25 | | | 2.04 | | | 2.42 | | | Net interest margin on a taxable-equivalent basis | 2.16 | | | 2.11 | | | 2.05 | | | |
| Selected Balance Sheet Data (average) | Selected Balance Sheet Data (average) | | Selected Balance Sheet Data (average) | | |
| Loans | Loans | $ | 854,747 | | | 873,439 | | | 971,266 | | | (2) | | | (12) | | | $ | 864,041 | | | 968,156 | | | (11) | | Loans | $ | 898,005 | | | 875,036 | | | 873,439 | | | 3 | | | 3 | | |
| Assets | Assets | 1,939,879 | | | 1,934,425 | | | 1,947,180 | | | — | | | — | | | 1,937,167 | | | 1,948,025 | | | (1) | | Assets | 1,919,392 | | | 1,943,430 | | | 1,934,425 | | | (1) | | | (1) | | |
| Deposits | Deposits | 1,435,824 | | | 1,393,472 | | | 1,386,656 | | | 3 | | | 4 | | | 1,414,765 | | | 1,362,309 | | | 4 | | Deposits | 1,464,072 | | | 1,470,027 | | | 1,393,472 | | | — | | | 5 | | |
| Selected Balance Sheet Data (period-end) | Selected Balance Sheet Data (period-end) | | Selected Balance Sheet Data (period-end) | | |
| Debt securities | Debt securities | 533,565 | | | 505,826 | | | 472,580 | | | 5 | | | 13 | | | Debt securities | 535,916 | | | 537,531 | | | 505,826 | | | — | | | 6 | | |
| Loans | Loans | 852,300 | | | 861,572 | | | 935,155 | | | (1) | | | (9) | | | Loans | 911,807 | | | 895,394 | | | 861,572 | | | 2 | | | 6 | | |
| Allowance for credit losses for loans | Allowance for credit losses for loans | 16,391 | | | 18,043 | | | 20,436 | | | (9) | | | (20) | | | Allowance for credit losses for loans | 12,681 | | | 13,788 | | | 18,043 | | | (8) | | | (30) | | |
| Equity securities | Equity securities | 64,547 | | | 57,702 | | | 50,776 | | | 12 | | | 27 | | | Equity securities | 70,755 | | | 72,886 | | | 57,702 | | | (3) | | | 23 | | |
| Assets | Assets | 1,945,996 | | | 1,957,264 | | | 1,967,048 | | | (1) | | | (1) | | | Assets | 1,939,709 | | | 1,948,068 | | | 1,957,264 | | | — | | | (1) | | |
| Deposits | Deposits | 1,440,472 | | | 1,437,119 | | | 1,410,711 | | | — | | | 2 | | | Deposits | 1,481,354 | | | 1,482,479 | | | 1,437,119 | | | — | | | 3 | | |
| | Headcount (#) (period-end) | Headcount (#) (period-end) | 259,196 | | | 264,513 | | | 276,013 | | | (2) | | | (6) | | | Headcount (#) (period-end) | 246,577 | | | 249,435 | | | 264,513 | | | (1) | | | (7) | | |
| Capital and other metrics | Capital and other metrics | | Capital and other metrics | | |
| Risk-based capital ratios and components (9): | | |
| Risk-based capital ratios and components (7): | | Risk-based capital ratios and components (7): | | |
| Standardized Approach: | Standardized Approach: | | Standardized Approach: | | |
| Common equity tier 1 (CET1) | Common equity tier 1 (CET1) | 12.07 | % | | 11.85 | | | 10.97 | | | Common equity tier 1 (CET1) | 10.45 | % | | 11.35 | | | 11.85 | | | |
| Tier 1 capital | Tier 1 capital | 13.71 | | | 13.54 | | | 12.60 | | | Tier 1 capital | 11.96 | | | 12.89 | | | 13.54 | | | |
| Total capital | Total capital | 16.84 | | | 16.75 | | | 15.88 | | | Total capital | 14.72 | | | 15.84 | | | 16.75 | | | |
| Risk-weighted assets (RWAs) (in billions) | Risk-weighted assets (RWAs) (in billions) | 1,188.7 | | | 1,179.0 | | | 1,213.1 | | | 1 | | | (2) | | | Risk-weighted assets (RWAs) (in billions) | $ | 1,265.5 | | | 1,239.0 | | | 1,179.0 | | | 2 | | | 7 | | |
| Advanced Approach: | Advanced Approach: | | Advanced Approach: | | |
| Common equity tier 1 (CET1) | Common equity tier 1 (CET1) | 12.73 | % | | 12.60 | | | 11.13 | | | Common equity tier 1 (CET1) | 11.82 | % | | 12.60 | | | 12.60 | | | |
| Tier 1 capital | Tier 1 capital | 14.47 | | | 14.39 | | | 12.79 | | | Tier 1 capital | 13.52 | | | 14.31 | | | 14.39 | | | |
| Total capital | Total capital | 16.88 | | | 16.92 | | | 15.29 | | | Total capital | 15.87 | | | 16.72 | | | 16.92 | | | |
| Risk-weighted assets (RWAs) (in billions) | Risk-weighted assets (RWAs) (in billions) | $ | 1,126.5 | | | 1,109.4 | | | 1,195.4 | | | 2 | | | (6) | | | Risk-weighted assets (RWAs) (in billions) | $ | 1,119.5 | | | 1,116.1 | | | 1,109.4 | | | — | | | 1 | | |
| Tier 1 leverage ratio | Tier 1 leverage ratio | 8.53 | % | | 8.36 | | | 7.95 | | | Tier 1 leverage ratio | 8.00 | % | | 8.34 | | | 8.36 | | | |
| Supplementary Leverage Ratio (SLR) | Supplementary Leverage Ratio (SLR) | 7.09 | | | 7.91 | | | 7.52 | | | Supplementary Leverage Ratio (SLR) | 6.61 | | | 6.89 | | | 7.91 | | | |
| Total Loss Absorbing Capacity (TLAC) Ratio (10) | 25.11 | | | 25.18 | | | 25.33 | | | |
| Liquidity Coverage Ratio (LCR) (11) | 123 | | | 127 | | | 129 | | | |
| Total Loss Absorbing Capacity (TLAC) Ratio (8) | | Total Loss Absorbing Capacity (TLAC) Ratio (8) | 22.31 | | | 23.03 | | | 25.18 | | | |
| Liquidity Coverage Ratio (LCR) (9) | | Liquidity Coverage Ratio (LCR) (9) | 119 | | | 118 | | | 127 | | | |
NM – Not meaningful
(1)In second quarter 2021, we elected to change our accounting method for low-income housing tax credit investments and elected to change the presentation of investment tax credits related to solar energy investments. Prior period financial statement line items have been revised to conform with the current period presentation. Prior period risk-based capital and certain other regulatory related metrics were not revised. For additional information, see the “Recent Developments” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.
(2)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.
(3)In second quarter 2020, diluted average common shares outstanding equaled average common shares outstanding because our securities convertible into common shares had an anti-dilutive effect.
(4)(2)Book value per common share is common stockholders'stockholders’ equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.
(5)(3)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,investments in consolidated portfolio companies, net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity and tangible book value per common share, which utilize tangible common equity, are useful financial measures because they enable management, investors, and others to assess the Company’s use of equity. For additional information, including a corresponding reconciliation to generally accepted accounting principles (GAAP) financial measures, see the “Capital Management – Tangible Common Equity” section in this Report.
(6)(4)Represents Wells Fargo net income (loss) divided by average assets.
(7)(5)Represents Wells Fargo net income (loss) applicable to common stock divided by average common stockholders’ equity.
(8)(6)The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(9)(7)The information presented reflects fully phased-in CET1, tier 1 capital, and RWAs, but reflects total capital in accordance with transition requirements. For additional information, see the “Capital Management” section and Note 23 (Regulatory Capital Requirements and Other Restrictions) to Financial Statements in this Report.
(10)(8)Represents TLAC divided by RWAs, which is our binding TLAC ratio, determined by using the greater of RWAs determined under the Standardized and Advanced Approaches, which is our binding TLAC ratio.Approaches.
(11)(9)Represents high-quality liquid assets divided by projected net cash outflows, as each is defined under the LCR rule.
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, 2020 (20202021 (2021 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
Wells Fargo & Company is a leading financial services company that has approximately $1.9 trillion in assets, proudly serves one in three U.S. households and more than 10% of small businesses in the U.S., and is thea leading middle market banking provider in the U.S. We provide a diversified set of banking, investment and mortgage products and services, as well as consumer and commercial finance, through our four reportable operating segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management. Wells Fargo ranked No. 37 on Fortune’s 2021 rankings of America’s largest corporations. We ranked fourth in assets and third in the market value of our common stock among all U.S. banks at June 30, 2021.March 31, 2022.
Wells Fargo’s top priority remains meetingbuilding a risk and control infrastructure appropriate for its regulatory requirements to build the right foundation for all that lies ahead.size and complexity. The Company is subject to a number of consent orders and other regulatory actions, which may require the Company, among other things, to undertake certain changes to its business, operations, products and services, and risk management practices. Addressing these regulatory actions is expected to take multiple years, and we mayare likely to experience issues or delays along the way in satisfying their requirements. Issues or delays with one regulatory action could affect our progress on others, and failure to satisfy the requirements of a regulatory action on a timely basis could result in additional penalties, enforcement actions, and other negative consequences.consequences, which could be significant. While we still have significant work to do, the Company is committed to devoting the resources necessary to operate with strong business practices and controls, maintain the highest level of integrity, and have an appropriate culture in place.
Federal Reserve Board Consent Order Regarding Governance Oversight and Compliance and Operational Risk Management
On February 2, 2018, the Company entered into a consent order with the Board of Governors of the Federal Reserve System (FRB). As required by the consent order, the Company’s Board of Directors (Board) submitted to the FRB a plan to further enhance the Board’s governance and oversight of the Company, and the Company submitted to the FRB a plan to further improve the Company’s compliance and operational risk management program. The Company continues to engage with the FRB as the Company works to address the consent order provisions. The consent order also requires the Company, following the FRB’s acceptance and approval of the plans and the Company’s adoption and implementation of the plans, to complete an initial third-party review of the enhancements and improvements provided for in the plans. Until this third-party review is complete
and the plans are 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. 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 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, to the extent the Company chooses to exclude these exposures from the asset cap, 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. As of June 30, 2021, the Company had not excluded these exposures from the asset cap. 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. The Company continues to work to address the provisions of the consent orders. The Company has not yet satisfied certain aspects of the consent orders, and as a result, we believe regulators may impose additional penalties or take other enforcement actions. On September 9, 2021, the OCC assessed a $250 million civil money penalty against the Company related to insufficient progress in addressing requirements under the OCC’s April 2018 consent order and loss mitigation activities in the Company’s Home Lending business.
Consent Order with the OCC Regarding Loss Mitigation Activities
On September 9, 2021, the Company entered into a consent order with the OCC requiring the Company to improve the execution, risk management, and oversight of loss mitigation activities in its Home Lending business. In addition, the consent order restricts the Company from acquiring certain third-party
residential mortgage servicing and limits transfers of certain mortgage loans requiring customer remediation out of the Company’s mortgage servicing portfolio until remediation is provided.
Retail Sales Practices Matters and Other Customer Remediation Activities
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, 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 informationOn September 8, 2021, the CFPB consent order regarding retail sales practices matters, including related legal matters, see the “Risk Factors” section in our 2020 Form 10-K and Note 13 (Legal Actions) to Financial Statements in this Report.
Other Customer Remediation Activitiesexpired.
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 probable and 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 thatand as we continue to strengthen our risk and control infrastructure, we have identified and may 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 additional information regarding retail sales practices matters and other customer remediation activities, including related legal and regulatory risk, see the “Risk Factors” section in our 20202021 Form 10-K and Note 13 (Legal Actions) to Financial Statements in this Report.
Recent Developments
Change in Accounting Policies
In second quarter 2021, we retroactively changed the accounting for certain tax-advantaged investments to better align the financial statement presentation with the economic impact of these investments.
Specifically, we elected to change our accounting for low-income housing tax credit investments from the equity method of accounting to the proportional amortization method. Under the proportional amortization method, the amortization of the investments and the related tax impacts are recognized in income tax expense. Previously, we recognized the amortization of the investments in other noninterest income and the related tax impacts were recognized in income tax expense.
Also, we elected to change the presentation of investment tax credits related to solar energy investments. We reclassified the investment tax credits on our consolidated balance sheet from accrued expenses and other liabilities to a reduction of the carrying value of the investment balances. We also reclassified the investment tax credits from income tax expense to interest income for solar energy leases or noninterest income for solar energy equity investments.
These changes had a nominal impact on net income and retained earnings on an annual basis; however, our quarterly results were affected in both the second and third quarters of
2020 due to the impact of these changes on the estimated annual effective income tax rate applied to each quarter. These changes also improved our efficiency ratio and generally increased our effective income tax rate from what was previously reported.
Prior period financial statement line items have been revised to conform with the current period presentation. Prior period risk-based capital and certain other regulatory related metrics were not revised. For additional information, including the financial statement line items impacted by these changes, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.
COVID-19 Pandemic
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 essential services to the public. We have taken comprehensive steps to help customers, employees and communities.
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 program called the Paycheck Protection Program (PPP). Since its inception, we have funded approximately 282,000 loans under the PPP totaling approximately $14.0 billion, and more than $5.8 billion of principal forgiveness has been provided on qualifying PPP loans. We deferred approximately $420 million of SBA processing fees in 2020 that will be recognized as interest income over the terms of the loans. We voluntarily committed to donate all of the gross processing fees received from PPP loans funded in 2020. Through June 30, 2021, we donated approximately $260 million of these processing fees. We funded approximately $3.5 billion of PPP loans in the first half of 2021 and deferred approximately $270 million of related SBA processing fees that will be recognized as interest income over the terms of the loans. We have committed to donate any net profits from processing fees received from PPP loans funded in 2021. For additional information on the CARES Act and the PPP, see the “Overview – Recent Developments – COVID-19 Pandemic” section in our 2020 Form 10-K.
LIBOR Transition
The London Interbank Offered Rate (LIBOR) is a widely-referencedwidely referenced benchmark rate which is published in five currencies and a range of tenors, andthat seeks to estimate the cost at which banks can borrow on an unsecured basis from other banks. On March 5, 2021, the United Kingdom’s Financial Conduct Authority and ICE Benchmark Administration, the administrator of LIBOR, announced that certain settings of LIBOR willwould no longer be published on a representative basis after December 31, 2021, with the exception ofand the most commonly used tenors of U.S. dollar (USD) LIBOR which willsettings would no longer be published on a representative basis after June 30, 2023. Central banks in various jurisdictions convened committees to identify replacement rates to facilitate the transition away from LIBOR. The committee convened by the Federal banking agenciesReserve in the United States, the Alternative Reference Rates Committee (ARRC), recommended the Secured Overnight Financing Rate (SOFR) as the replacement rate for USD LIBOR. Additionally, the Federal Reserve, the OCC and the Federal Deposit Insurance Corporation (FDIC) have issued guidance strongly encouraging banking organizations to cease using USD LIBOR as a reference rate in new contracts.
In preparation for the cessation of the various LIBOR settings, we have undertaken a variety of activities. Among other things, we proactively implemented internal “stop-sell” dates to discontinue offering products referencing LIBOR except pursuant to limited exceptions consistent with regulatory guidance. At the same time, we expanded our suite of product offerings that are indexed to alternative reference rates.
We also continue to transition our legacy LIBOR contracts as soon as practicable and in any eventto alternative reference rates. We transitioned substantially all of our legacy contracts with LIBOR settings impacted by the December 31, 2021.2021, cessation date to alternative reference rates, and we will continue to address contracts with LIBOR settings that are impacted by the June 30, 2023, cessation date.
In first quarter 2022, the Adjustable Interest Rate Act (the LIBOR Act) was enacted to provide a statutory framework to replace LIBOR with a benchmark rate based on SOFR in contracts that do not have fallback provisions or that have fallback provisions resulting in a replacement rate based on LIBOR. We expect that the LIBOR Act will allow for the transition of certain of our commercial credit facilities and other contracts that do not have appropriate fallback provisions to replace LIBOR.
For additional information on the amountamounts of certain of our LIBOR-linked assets and liabilities,contracts, as well as initiatives created by our transition plans for these contracts, see the “Overview – Recent Developments – LIBOR Transition OfficeTransition” section in an effort to mitigateour 2021 Form 10-K. For information regarding the risks associated withand potential impact of LIBOR or any other referenced financial metric being significantly changed, replaced or discontinued, see the “Risk Factors” section in our 2021 Form 10-K.
a transition away from LIBOR, see the “Overview – Recent Developments – LIBOR Transition” section in our 2020 Form
10-K. For information regarding the risks and potential impact of LIBOR or any other referenced financial metric being significantly changed, replaced or discontinued, see the “Risk Factors” section in our 2020 Form 10-K.
Capital Actions and Restrictions
In June 2021, the Company completed the 2021 Comprehensive Capital Analysis and Review (CCAR) stress test process. We expect our stress capital buffer (SCB) for the period October 1, 2021, through September 30, 2022, to be 3.10%. The FRB has indicated it will publish our final SCB by August 31, 2021.
On July 27, 2021, the Board approved an increase to the Company's third quarter 2021 common stock dividend to $0.20 per share. Additionally, our capital plan includes gross common share repurchases of approximately $18 billion for the four-quarter period beginning third quarter 2021 through second quarter 2022.
For additional information about capital planning, see the “Capital Management – Capital Planning and Stress Testing” section in this Report.
In June 2021, we redeemed the remaining $350 million of our Non-Cumulative Perpetual Class A Preferred Stock, Series N. In July 2021, we issued $1.25 billion of our Preferred Stock, Series DD.
Business and Portfolio Divestitures
On February 23, 2021, we announced an agreement to sell Wells Fargo Asset Management for a purchase price of $2.1 billion. As part of the transaction, we will own a 9.9% equity interest and continue to serve as a client and distribution partner. On March 23, 2021, we announced an agreement to sell our Corporate Trust Services business for a purchase price of $750 million. Both transactions are expected to close in the second half of 2021, subject to customary closing conditions.
In the first half of 2021, we completed substantially all of the previously announced sale of our student loan portfolio, which resulted in gains in other noninterest income of $208 million and $147 million in first and second quarter 2021, respectively, and goodwill write-downs in other noninterest expense of $104 million and $79 million in first and second quarter 2021, respectively.
Financial Performance
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| Consolidated Financial Highlights | | | | | | | | | | | | | | | |
| Quarter ended Jun 30, | | | | | | Six months ended Jun 30, | | | | |
| ($ in millions) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change |
| Selected income statement data | | | | | | | | | | | | | | | |
| Net interest income | $ | 8,800 | | | 9,892 | | | (1,092) | | | (11) | % | | $ | 17,608 | | | 21,222 | | | (3,614) | | | (17) | % |
| Noninterest income | 11,470 | | | 8,394 | | | 3,076 | | | 37 | | | 21,194 | | | 15,237 | | | 5,957 | | | 39 | |
| Total revenue | 20,270 | | | 18,286 | | | 1,984 | | | 11 | | | 38,802 | | | 36,459 | | | 2,343 | | | 6 | |
| Net charge-offs | 379 | | | 1,114 | | | (735) | | | (66) | | | 902 | | | 2,055 | | | (1,153) | | | (56) | |
| Change in the allowance for credit losses | (1,639) | | | 8,420 | | | (10,059) | | | NM | | (3,210) | | | 11,484 | | | (14,694) | | | NM |
| Provision for credit losses | (1,260) | | | 9,534 | | | (10,794) | | | NM | | (2,308) | | | 13,539 | | | (15,847) | | | NM |
| Noninterest expense | 13,341 | | | 14,551 | | | (1,210) | | | (8) | | | 27,330 | | | 27,599 | | | (269) | | | (1) | |
| Income tax expense | 1,445 | | | (2,001) | | | 3,446 | | | NM | | 2,346 | | | (1,648) | | | 3,994 | | | NM |
| Wells Fargo net income | 6,040 | | | (3,846) | | | 9,886 | | | NM | | 10,676 | | | (2,930) | | | 13,606 | | | NM |
| Wells Fargo net income applicable to common stock | 5,743 | | | (4,160) | | | 9,903 | | | NM | | 9,999 | | | (3,856) | | | 13,855 | | | NM |
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NM – Not meaningful
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| Consolidated Financial Highlights | | | | | | | | | | | | | | | |
| | | | | | | Quarter ended Mar 31, | | | | |
| ($ in millions) | | | | | | | | | 2022 | | 2021 | | $ Change | | % Change |
| Selected income statement data | | | | | | | | | | | | | | | |
| Net interest income | | | | | | | | | $ | 9,221 | | | 8,808 | | | 413 | | | 5 | % |
| Noninterest income | | | | | | | | | 8,371 | | | 9,724 | | | (1,353) | | | (14) | |
| Total revenue | | | | | | | | | 17,592 | | | 18,532 | | | (940) | | | (5) | |
| Net charge-offs | | | | | | | | | 305 | | | 523 | | | (218) | | | (42) | |
| Change in the allowance for credit losses | | | | | | | | | (1,092) | | | (1,571) | | | 479 | | | 30 | |
| Provision for credit losses | | | | | | | | | (787) | | | (1,048) | | | 261 | | | 25 | |
| Noninterest expense | | | | | | | | | 13,870 | | | 13,989 | | | (119) | | | (1) | |
| Income tax expense | | | | | | | | | 707 | | | 901 | | | (194) | | | (22) | |
| Wells Fargo net income | | | | | | | | | 3,671 | | | 4,636 | | | (965) | | | (21) | |
| Wells Fargo net income applicable to common stock | | | | | | | | | 3,393 | | | 4,256 | | | (863) | | | (20) | |
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In secondfirst quarter 2021,2022, we generated $6.0$3.7 billion of net income and diluted earnings per common share (EPS) of $1.38,$0.88, compared with a$4.6 billion of net lossincome and EPS of $3.8 billion and diluted loss per common share of $1.01$1.02 in the same period a year ago. Financial performance for secondfirst quarter 2021,2022, compared with the same period a year ago, included the following:
•total revenue increaseddecreased due to higher net gains from equity securitieslower mortgage banking income, other income, and mortgage bankinginvestment advisory and other asset-based fee income, partially offset by lowerhigher net interest income;
•provision for credit losses decreased reflectingreflected lower net charge-offs, and improvements inreduced uncertainty around the economic environment;impact of the COVID-19 pandemic on our loan portfolios, and increased uncertainty related to the risks of high inflation;
•noninterest expense decreased due to lower operating losses and lowerpersonnel expense, professional and outside services expense;expense, and other expense, partially offset by higher operating losses;
•average loans decreasedincreased due to paydowns exceeding originationsgrowth in thecommercial, credit card and auto loans, partially offset by a decrease in residential mortgage and credit card portfolios, weak demand for commercial loans and the reclassification of student loans, included in other consumer loans, to loans held for sale after the announced sale of the portfolio in fourth quarter 2020;as paydowns exceeded originations; and
•average deposits increased driven by growth in consumer deposits in the Consumer Banking and Lending, and Wealth
and Investment Management (WIM) operating segments due to higher levels of liquidity and savings for consumer customers reflecting government stimulus programs and payment deferral programs, as well as continued economic uncertainty associated with the COVID-19 pandemic, partially offset by actions taken to manage under the asset cap which reduced deposits in the Corporate and InvestmentCommercial Banking, operating segment and Corporate.
In the first half of 2021, we generated $10.7 billion of net income and diluted EPS of $2.40, compared with a net loss of $2.9 billion and diluted loss per common share of $0.94 in the same period a year ago. Financial performance for the first half of 2021, compared with the same period a year ago, included the following:
•total revenue increased due to higher net gains from equity securities and mortgage banking income, partially offset by lower net interest income;
•provision for credit losses decreased reflecting lower net charge-offs due to better portfolio credit quality driven by improvements in the economic environment;
•noninterest expense decreased due to lower operating losses and lower professional and outside services expense, partially offset by higher personnel expense;
•average loans decreased due to paydowns exceeding originations in the residential mortgage and credit card portfolios, weak demand for commercial loans, and the reclassification of student loans, included in other consumer loans, to loans held for sale after the announced sale of the portfolio in fourth quarter 2020; and
•average deposits increased driven by growth in consumer deposits in the Consumer Banking and Lending and Wealth and Investment Management (WIM) operating segments due to higher levels of liquidity and savings for consumer customers reflecting government stimulus programs and payment deferral programs, as well as continued economic uncertainty associated with the COVID-19 pandemic,commercial customers, partially offset by actions taken to manage under the asset cap which reduced deposits in the Corporate and Investment Banking operating segment and Corporate.
Capital and Liquidity
We maintained a strong capital position in the first half of 2021,quarter 2022, with total equity of $193.1$181.7 billion at June 30, 2021,March 31, 2022, compared with $185.7$190.1 billion at December 31, 2020.2021. Our liquidity and regulatory capital ratios remained strong at June 30, 2021,March 31, 2022, including:
•our liquidity coverage ratio (LCR) was 123%, which continued to exceed the regulatory minimum of 100%;
•our Common Equity Tier 1 (CET1) ratio was 12.07%10.45% under the Standardized Approach (our binding ratio), which continued to exceed both the regulatory requirement of 9% and our current internal target; and9.10%;
•our eligible external total loss absorbing capacity (TLAC) as a percentage of total risk-weighted assets was 25.11%22.31%, compared with the regulatory requirement of 21.50%; and
•our liquidity coverage ratio (LCR) was 119%, which continued to exceed the regulatory minimum of 100%.
See the “Capital Management” and the “Risk Management – Asset/Liability Management – Liquidity Risk and Funding” sections in this Report for additional information regarding our capital and liquidity, including the calculation of our regulatory capital and liquidity amounts.
Credit Quality
Credit quality reflected the improving economic environment.following:
•The allowance for credit losses (ACL) for loans of $16.4$12.7 billion at June 30, 2021,March 31, 2022, decreased $3.3$1.1 billion from December 31, 2020.2021.
•Our provision for credit losses for loans was $(2.4) billion$(775) million in the first half of 2021, downquarter 2022, up from $13.4$(1.1) billion in the same period a year ago. The decrease in the ACL for loans and the provision for credit losses inreflected lower net charge-offs, reduced uncertainty around the first halfeconomic impact of 2021, compared with the same period a year ago, reflected improvements in currentCOVID-19 pandemic on our loan portfolios, and forecasted economic conditions.increased uncertainty related to the risks of high inflation.
•The allowance coverage for total loans was 1.92%1.39% at June 30, 2021,March 31, 2022, compared with 2.22%1.54% at December 31, 2020.2021.
•Commercial portfolio net loan charge-offs were $80$(29) million, or 7(2) basis points of average commercial loans, in secondfirst quarter 2021,2022, compared with net loan charge-offs of $602$149 million, or 4413 basis points, in the same period a year ago, predominantly driven bydue to lower losses in our commercial and industrial portfolio primarily withindriven by higher recoveries in the oil, gas and pipelinespipeline industry, and lower losses in theour real estate mortgage portfolio.
•Consumer portfolio net loan charge-offs were $301$334 million, or 3235 basis points of average consumer loans, in secondfirst quarter 2021,2022, compared with net loan charge-offs of $511$364 million, or 4837 basis points, in the same period a year ago, driven by lower losses in allour credit card and other consumer loan portfolios, as a result of payment deferral activities, government stimulus programs institutedpartially offset by higher losses in response to the COVID-19 pandemic, and the sale of a portion of our studentauto loan portfolio.
•Nonperforming assets (NPAs) of $7.5$7.0 billion at June 30, 2021,March 31, 2022, decreased $1.4 billion,$323 million, or 16%4%, from December 31, 2020, predominantly2021, driven by decreases in ourall commercial and industrial portfolio reflecting improvements in the economic environment, and decreasesnonaccrual loan portfolios, partially offset by increases in our residential mortgage portfolios reflecting loan sales and payment deferral activities.nonaccrual loans primarily resulting from certain customers exiting COVID-19 accommodation programs. NPAs represented 0.88%0.77% of total loans at June 30, 2021.March 31, 2022.
Wells Fargo net income for secondfirst quarter 20212022 was $6.0$3.7 billion ($1.380.88 diluted EPS), compared with a net loss of $3.8$4.6 billion ($1.011.02 diluted loss per common share)EPS) in the same period a year ago. Net income increaseddecreased in secondfirst quarter 2021,2022, compared with the same period a year ago, predominantly due to a $10.8$1.4 billion decrease in provision for credit losses, a $3.1 billion increase in noninterest income, and a $1.2 billion decrease in noninterest expense, partially offset by a $3.4 billion increase in income tax expense and a $1.1 billion decrease in net interest income.
Net income for the first half of 2021 was $10.7 billion ($2.40 diluted EPS), compared with a net loss of $2.9 billion ($0.94 diluted loss per common share) in the same period a year ago. Net income increased in the first half of 2021, compared with the same period a year ago, predominantly due to a $15.8 billion decrease in provision for credit losses and a $6.0 billion increase in noninterest income, partially offset by a $4.0 billion$413 million increase in income tax expense and a $3.6 billion decrease in net interest income.
Net Interest Income
Net interest income and net interest margin decreasedincreased in both the secondfirst quarter and first half of 2021,2022, compared with the same periodsperiod a year ago, due to the impact of lower interest rates and lower loan balances reflecting soft demand and elevated prepayments, as well as higher mortgage-backed securities premium amortization, lower costs and balances of long-term debt, and higher loan balances, partially offset by a reduction in long-term debtlower interest income from loans purchased from securitization pools and Paycheck Protection Program (PPP) loans. TheInterest income from PPP loans was $49 million in first half of 2021quarter 2022, compared with $102 million in the same period a year ago. Additionally, interest income associated with loans we purchased from Government National Mortgage Association (GNMA) loan securitization pools was also impacted by unfavorable hedge ineffectiveness accounting results.$221 million in first quarter 2022, compared with $263 million in the same period a year ago. For additional information about loans purchased from GNMA loan securitization pools, see the “Risk Management – Credit Risk Management – Mortgage Banking Activities” section in this Report.
Table 1 presents the individual components of net interest income and the net interest margin. Net interest income and net interest margin are presented on a taxable-equivalent basis in Table 1 to consistently reflect income from taxable and tax-exempt loans and debt and equity securities based on a 21% federal statutory tax rate for the periods ended June 30, 2021March 31, 2022 and 2020.2021.
For additional information about net interest income and net interest margin, see the “Earnings Performance – Net Interest Income” section in our 20202021 Form 10-K.
Table 1: Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) (1)
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| Quarter ended June 30, |
| | 2021 | | 2020 |
| (in millions) | Average
balance | | Interest
income/
expense | | Interest
rates | | Average
balance | | Interest
income/
expense | | Interest
rates |
| Assets | | | | | | | | | | | |
| Interest-earning deposits with banks | $ | 255,237 | | | 70 | | | 0.11 | % | | $ | 176,327 | | | 51 | | | 0.12 | % |
| Federal funds sold and securities purchased under resale agreements | 72,513 | | | 3 | | | 0.02 | | | 76,384 | | | 2 | | | 0.01 | |
| Debt securities: | | | | | | | | | | | |
| Trading debt securities | 84,612 | | | 501 | | | 2.37 | | | 96,049 | | | 663 | | | 2.76 | |
| Available-for-sale debt securities | 192,418 | | | 686 | | | 1.43 | | | 232,444 | | | 1,416 | | | 2.44 | |
| Held-to-maturity debt securities | 237,812 | | | 1,106 | | | 1.86 | | | 166,804 | | | 968 | | | 2.33 | |
| Total debt securities | 514,842 | | | 2,293 | | | 1.78 | | | 495,297 | | | 3,047 | | | 2.46 | |
| Loans held for sale (2) | 27,173 | | | 193 | | | 2.85 | | | 27,610 | | | 237 | | | 3.45 | |
| Loans: | | | | | | | | | | | |
| Commercial loans: | | | | | | | | | | | |
| Commercial and industrial – U.S. | 248,153 | | | 1,627 | | | 2.63 | | | 310,104 | | | 1,990 | | | 2.58 | |
| Commercial and industrial – Non-U.S. | 70,764 | | | 374 | | | 2.12 | | | 72,241 | | | 445 | | | 2.48 | |
| Real estate mortgage | 120,526 | | | 823 | | | 2.74 | | | 123,525 | | | 930 | | | 3.03 | |
| Real estate construction | 22,015 | | | 169 | | | 3.08 | | | 21,361 | | | 179 | | | 3.37 | |
| Lease financing | 15,565 | | | 174 | | | 4.49 | | | 18,087 | | | 210 | | | 4.62 | |
| Total commercial loans | 477,023 | | | 3,167 | | | 2.66 | | | 545,318 | | | 3,754 | | | 2.77 | |
| Consumer loans: | | | | | | | | | | | |
| Residential mortgage – first lien | 247,815 | | | 1,957 | | | 3.16 | | | 280,878 | | | 2,414 | | | 3.44 | |
| Residential mortgage – junior lien | 20,457 | | | 211 | | | 4.13 | | | 27,700 | | | 292 | | | 4.24 | |
| Credit card | 34,211 | | | 979 | | | 11.48 | | | 36,539 | | | 979 | | | 10.78 | |
| Auto | 50,014 | | | 563 | | | 4.52 | | | 48,441 | | | 601 | | | 4.99 | |
| Other consumer | 25,227 | | | 233 | | | 3.70 | | | 32,390 | | | 440 | | | 5.45 | |
| Total consumer loans | 377,724 | | | 3,943 | | | 4.18 | | | 425,948 | | | 4,726 | | | 4.45 | |
| Total loans (2) | 854,747 | | | 7,110 | | | 3.33 | | | 971,266 | | | 8,480 | | | 3.50 | |
| Equity securities | 29,773 | | | 133 | | | 1.77 | | | 27,417 | | | 117 | | | 1.70 | |
| Other | 9,103 | | | 1 | | | 0.04 | | | 7,715 | | | — | | | (0.02) | |
| Total interest-earning assets | 1,763,388 | | | 9,803 | | | 2.23 | | | 1,782,016 | | | 11,934 | | | 2.69 | |
| Cash and due from banks | 24,336 | | | — | | | | | 21,227 | | | — | | | |
| Goodwill | 26,213 | | | — | | | | | 26,384 | | | — | | | |
| Other (3) | 125,942 | | | — | | | | | 117,553 | | | — | | | |
| Total noninterest-earning assets | 176,491 | | | — | | | | | 165,164 | | | — | | | |
| Total assets | $ | 1,939,879 | | | 9,803 | | | | | 1,947,180 | | | 11,934 | | | |
| Liabilities | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | |
| Demand deposits | $ | 452,184 | | | 31 | | | 0.03 | % | | $ | 53,592 | | | 9 | | | 0.07 | % |
| Savings deposits | 422,650 | | | 32 | | | 0.03 | | | 799,949 | | | 311 | | | 0.16 | |
| Time deposits | 37,116 | | | 29 | | | 0.32 | | | 86,971 | | | 224 | | | 1.04 | |
| Deposits in non-U.S offices | 29,796 | | | — | | | — | | | 37,682 | | | 41 | | | 0.44 | |
| Total interest-bearing deposits | 941,746 | | | 92 | | | 0.04 | | | 978,194 | | | 585 | | | 0.24 | |
| Short-term borrowings | 48,505 | | | (11) | | | (0.09) | | | 63,535 | | | (17) | | | (0.10) | |
| Long-term debt | 181,101 | | | 712 | | | 1.57 | | | 232,395 | | | 1,237 | | | 2.13 | |
| Other liabilities | 27,718 | | | 101 | | | 1.47 | | | 29,947 | | | 116 | | | 1.53 | |
| Total interest-bearing liabilities | 1,199,070 | | | 894 | | | 0.30 | | | 1,304,071 | | | 1,921 | | | 0.59 | |
| Noninterest-bearing demand deposits | 494,078 | | | — | | | | | 408,462 | | | — | | | |
| Other noninterest-bearing liabilities | 55,763 | | | — | | | | | 50,575 | | | — | | | |
| Total noninterest-bearing liabilities | 549,841 | | | — | | | | | 459,037 | | | — | | | |
| Total liabilities | 1,748,911 | | | 894 | | | | | 1,763,108 | | | 1,921 | | | |
| Total equity (3) | 190,968 | | | — | | | | | 184,072 | | | — | | | |
| Total liabilities and equity | $ | 1,939,879 | | | 894 | | | | | 1,947,180 | | | 1,921 | | | |
| | | | | | | | | | | |
| Interest rate spread on a taxable-equivalent basis (3) | | | | | 1.93 | % | | | | | | 2.10 | % |
| Net interest income and net interest margin on a taxable-equivalent basis (3) | | | $ | 8,909 | | | 2.02 | % | | | | $ | 10,013 | | | 2.25 | % |
(continued on following page)
Earnings Performance (continued)
(continued from previous page)
| | | | Six months ended June 30, | | | Quarter ended March 31, | |
| | | 2021 | | 2020 | | | | 2022 | | 2021 | |
| (in millions) | (in millions) | Average
balance | | Interest
income/
expense | | Interest rates | | Average
balance | | Interest
income/
expense | | Interest rates | | (in millions) | Average
balance | | Interest
income/
expense | | Interest rates | | Average
balance | | Interest
income/
expense | | Interest rates | |
| Assets | Assets | | | Assets | | |
| Interest-earning deposits with banks | Interest-earning deposits with banks | $ | 239,425 | | | 127 | | | 0.11 | % | | $ | 152,924 | | | 432 | | | 0.57 | % | | Interest-earning deposits with banks | $ | 179,051 | | | 96 | | | 0.22 | % | | $ | 223,437 | | | 57 | | | 0.10 | % | |
| Federal funds sold and securities purchased under resale agreements | Federal funds sold and securities purchased under resale agreements | 72,332 | | | 10 | | | 0.03 | | | 91,969 | | | 382 | | | 0.84 | | | Federal funds sold and securities purchased under resale agreements | 64,845 | | | (9) | | | (0.05) | | | 72,148 | | | 7 | | | 0.04 | | |
| Debt securities: | Debt securities: | | | Debt securities: | | |
| Trading debt securities | Trading debt securities | 85,990 | | | 1,035 | | | 2.41 | | | 98,556 | | | 1,433 | | | 2.91 | | | Trading debt securities | 90,677 | | | 553 | | | 2.44 | | | 87,383 | | | 534 | | | 2.45 | | |
| Available-for-sale debt securities | Available-for-sale debt securities | 199,642 | | | 1,527 | | | 1.53 | | | 242,501 | | | 3,226 | | | 2.66 | | | Available-for-sale debt securities | 169,048 | | | 723 | | | 1.72 | | | 206,946 | | | 841 | | | 1.63 | | |
| Held-to-maturity debt securities | Held-to-maturity debt securities | 227,377 | | | 2,133 | | | 1.88 | | | 162,348 | | | 1,977 | | | 2.44 | | | Held-to-maturity debt securities | 279,245 | | | 1,379 | | | 1.98 | | | 216,826 | | | 1,027 | | | 1.90 | | |
| Total debt securities | Total debt securities | 513,009 | | | 4,695 | | | 1.83 | | | 503,405 | | | 6,636 | | | 2.64 | | | Total debt securities | 538,970 | | | 2,655 | | | 1.97 | | | 511,155 | | | 2,402 | | | 1.89 | | |
| Loans held for sale (2) | Loans held for sale (2) | 30,843 | | | 524 | | | 3.41 | | | 24,728 | | | 446 | | | 3.62 | | | Loans held for sale (2) | 19,513 | | | 140 | | | 2.86 | | | 34,554 | | | 331 | | | 3.85 | | |
| Loans: | Loans: | | | Loans: | | |
| Commercial loans: | Commercial loans: | | | Commercial loans: | | |
| Commercial and industrial – U.S. | Commercial and industrial – U.S. | 250,510 | | | 3,223 | | | 2.59 | | | 299,303 | | | 4,536 | | | 3.05 | | | Commercial and industrial – U.S. | 276,070 | | | 1,700 | | | 2.50 | | | 252,892 | | | 1,596 | | | 2.56 | | |
| Commercial and industrial – Non-U.S. | Commercial and industrial – Non-U.S. | 68,106 | | | 712 | | | 2.11 | | | 71,451 | | | 1,001 | | | 2.82 | | | Commercial and industrial – Non-U.S. | 77,759 | | | 403 | | | 2.10 | | | 65,419 | | | 338 | | | 2.10 | | |
| Real estate mortgage | Real estate mortgage | 120,629 | | | 1,635 | | | 2.73 | | | 122,656 | | | 2,117 | | | 3.47 | | | Real estate mortgage | 127,464 | | | 833 | | | 2.65 | | | 120,734 | | | 812 | | | 2.73 | | |
| Real estate construction | Real estate construction | 21,886 | | | 335 | | | 3.09 | | | 20,819 | | | 408 | | | 3.94 | | | Real estate construction | 20,259 | | | 165 | | | 3.31 | | | 21,755 | | | 166 | | | 3.10 | | |
| Lease financing | Lease financing | 15,681 | | | 358 | | | 4.55 | | | 18,687 | | | 443 | | | 4.74 | | | Lease financing | 14,586 | | | 155 | | | 4.24 | | | 15,799 | | | 184 | | | 4.62 | | |
| Total commercial loans | Total commercial loans | 476,812 | | | 6,263 | | | 2.64 | | | 532,916 | | | 8,505 | | | 3.21 | | | Total commercial loans | 516,138 | | | 3,256 | | | 2.56 | | | 476,599 | | | 3,096 | | | 2.63 | | |
| Consumer loans: | Consumer loans: | | | | | | Consumer loans: | | | | | |
| Residential mortgage – first lien | Residential mortgage – first lien | 256,982 | | | 4,025 | | | 3.13 | | | 287,217 | | | 5,064 | | | 3.53 | | | Residential mortgage – first lien | 242,883 | | | 1,907 | | | 3.14 | | | 266,251 | | | 2,068 | | | 3.11 | | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | 21,384 | | | 439 | | | 4.13 | | | 28,303 | | | 662 | | | 4.70 | | | Residential mortgage – junior lien | 16,017 | | | 165 | | | 4.17 | | | 22,321 | | | 228 | | | 4.13 | | |
| Credit card | Credit card | 34,705 | | | 2,012 | | | 11.69 | | | 38,147 | | | 2,186 | | | 11.53 | | | Credit card | 38,164 | | | 1,065 | | | 11.32 | | | 35,205 | | | 1,033 | | | 11.90 | | |
| Auto | Auto | 49,351 | | | 1,123 | | | 4.59 | | | 48,350 | | | 1,197 | | | 4.98 | | | Auto | 56,701 | | | 584 | | | 4.17 | | | 48,680 | | | 560 | | | 4.66 | | |
| Other consumer | Other consumer | 24,807 | | | 466 | | | 3.79 | | | 33,223 | | | 974 | | | 5.89 | | | Other consumer | 28,102 | | | 256 | | | 3.69 | | | 24,383 | | | 233 | | | 3.87 | | |
| Total consumer loans | Total consumer loans | 387,229 | | | 8,065 | | | 4.18 | | | 435,240 | | | 10,083 | | | 4.65 | | | Total consumer loans | 381,867 | | | 3,977 | | | 4.20 | | | 396,840 | | | 4,122 | | | 4.18 | | |
| Total loans (2) | Total loans (2) | 864,041 | | | 14,328 | | | 3.33 | | | 968,156 | | | 18,588 | | | 3.85 | | | Total loans (2) | 898,005 | | | 7,233 | | | 3.25 | | | 873,439 | | | 7,218 | | | 3.34 | | |
| Equity securities | Equity securities | 29,604 | | | 270 | | | 1.82 | | | 32,475 | | | 325 | | | 2.00 | | | Equity securities | 33,282 | | | 170 | | | 2.05 | | | 29,434 | | | 137 | | | 1.87 | | |
| Other | Other | 9,299 | | | 2 | | | 0.04 | | | 7,573 | | | 14 | | | 0.37 | | | Other | 11,498 | | | 3 | | | 0.12 | | | 9,498 | | | 1 | | | 0.03 | | |
| Total interest-earning assets | Total interest-earning assets | 1,758,553 | | | 19,956 | | | 2.28 | | | 1,781,230 | | | 26,823 | | | 3.02 | | | Total interest-earning assets | $ | 1,745,164 | | | 10,288 | | | 2.38 | % | | $ | 1,753,665 | | | 10,153 | | | 2.33 | % | |
| Cash and due from banks | Cash and due from banks | 24,466 | | | — | | | 20,899 | | | — | | | | Cash and due from banks | 24,976 | | | — | | | 24,598 | | | — | | | |
| Goodwill | Goodwill | 26,297 | | | — | | | 26,386 | | | — | | | | Goodwill | 25,180 | | | — | | | 26,383 | | | — | | | |
| Other(3) | 127,851 | | | — | | | 119,510 | | | — | | | | |
| Other | | Other | 124,072 | | | — | | | 129,779 | | | — | | | |
| Total noninterest-earning assets | Total noninterest-earning assets | 178,614 | | | — | | | 166,795 | | | — | | | | Total noninterest-earning assets | $ | 174,228 | | | — | | | 180,760 | | | — | | | |
| Total assets | Total assets | $ | 1,937,167 | | | 19,956 | | | 1,948,025 | | | 26,823 | | | | Total assets | $ | 1,919,392 | | | 10,288 | | | 1,934,425 | | | 10,153 | | | |
| Liabilities | Liabilities | | | | | | Liabilities | | | | | |
| Deposits: | Deposits: | | | Deposits: | | |
| Demand deposits | Demand deposits | $ | 448,495 | | | 64 | | | 0.03 | % | | $ | 58,339 | | | 144 | | | 0.50 | % | | Demand deposits | $ | 455,350 | | | 38 | | | 0.03 | % | | $ | 444,764 | | | 33 | | | 0.03 | % | |
| Savings deposits | Savings deposits | 417,153 | | | 64 | | | 0.03 | | | 781,044 | | | 1,289 | | | 0.33 | | | Savings deposits | 440,680 | | | 24 | | | 0.02 | | | 411,596 | | | 32 | | | 0.03 | | |
| Time deposits | Time deposits | 40,552 | | | 76 | | | 0.38 | | | 99,524 | | | 690 | | | 1.39 | | | Time deposits | 27,849 | | | 19 | | | 0.28 | | | 44,025 | | | 47 | | | 0.43 | | |
| Deposits in non-U.S. offices | Deposits in non-U.S. offices | 30,260 | | | — | | | — | | | 45,508 | | | 204 | | | 0.90 | | | Deposits in non-U.S. offices | 21,456 | | | 2 | | | 0.03 | | | 30,731 | | | — | | | 0.01 | | |
| Total interest-bearing deposits | Total interest-bearing deposits | 936,460 | | | 204 | | | 0.04 | | | 984,415 | | | 2,327 | | | 0.48 | | | Total interest-bearing deposits | 945,335 | | | 83 | | | 0.04 | | | 931,116 | | | 112 | | | 0.05 | | |
| Short-term borrowings | 53,764 | | | (20) | | | (0.08) | | | 83,256 | | | 275 | | | 0.66 | | | |
| Short-term borrowings: | | Short-term borrowings: | | |
| Federal funds purchased and securities sold under agreements to repurchase | | Federal funds purchased and securities sold under agreements to repurchase | 20,431 | | | (3) | | | (0.05) | | | 47,357 | | | 2 | | | — | | |
| Other short-term borrowings | | Other short-term borrowings | 12,327 | | | (11) | | | (0.36) | | | 11,725 | | | (11) | | | (0.37) | | |
| Total short-term borrowings | | Total short-term borrowings | 32,758 | | | (14) | | | (0.17) | | | 59,082 | | | (9) | | | (0.06) | | |
| Long-term debt | Long-term debt | 189,673 | | | 1,738 | | | 1.83 | | | 230,699 | | | 2,477 | | | 2.15 | | | Long-term debt | 153,803 | | | 761 | | | 1.98 | | | 198,340 | | | 1,026 | | | 2.07 | | |
| Other liabilities | Other liabilities | 28,294 | | | 210 | | | 1.49 | | | 30,073 | | | 258 | | | 1.71 | | | Other liabilities | 31,092 | | | 130 | | | 1.68 | | | 28,875 | | | 109 | | | 1.50 | | |
| Total interest-bearing liabilities | Total interest-bearing liabilities | 1,208,191 | | | 2,132 | | | 0.35 | | | 1,328,443 | | | 5,337 | | | 0.81 | | | Total interest-bearing liabilities | $ | 1,162,988 | | | 960 | | | 0.33 | % | | $ | 1,217,413 | | | 1,238 | | | 0.41 | % | |
| Noninterest-bearing demand deposits | Noninterest-bearing demand deposits | 478,305 | | | — | | | 377,894 | | | — | | | | Noninterest-bearing demand deposits | 518,737 | | | — | | | 462,356 | | | — | | | |
| Other noninterest-bearing liabilities | Other noninterest-bearing liabilities | 60,645 | | | — | | | 55,706 | | | — | | | | Other noninterest-bearing liabilities | 51,330 | | | — | | | 65,582 | | | — | | | |
| Total noninterest-bearing liabilities | Total noninterest-bearing liabilities | 538,950 | | | — | | | 433,600 | | | — | | | | Total noninterest-bearing liabilities | $ | 570,067 | | | — | | | 527,938 | | | — | | | |
| Total liabilities | Total liabilities | 1,747,141 | | | 2,132 | | | 1,762,043 | | | 5,337 | | | | Total liabilities | $ | 1,733,055 | | | 960 | | | 1,745,351 | | | 1,238 | | | |
| Total equity (3) | 190,026 | | | — | | | 185,982 | | | — | | | | |
| Total equity | | Total equity | 186,337 | | | — | | | 189,074 | | | — | | | |
| Total liabilities and equity | Total liabilities and equity | $ | 1,937,167 | | | 2,132 | | | 1,948,025 | | | 5,337 | | | | Total liabilities and equity | $ | 1,919,392 | | | 960 | | | 1,934,425 | | | 1,238 | | | |
| | Interest rate spread on a taxable-equivalent basis (3) | Interest rate spread on a taxable-equivalent basis (3) | | 1.93 | % | | 2.21 | % | | Interest rate spread on a taxable-equivalent basis (3) | | 2.05 | % | | 1.92 | % | |
Net interest margin and net interest income on a taxable-equivalent basis (3) | Net interest margin and net interest income on a taxable-equivalent basis (3) | | $ | 17,824 | | | 2.04 | % | | $ | 21,486 | | | 2.42 | % | | Net interest margin and net interest income on a taxable-equivalent basis (3) | | $ | 9,328 | | | 2.16 | % | | $ | 8,915 | | | 2.05 | % | |
(1)The average balance amounts represent amortized costs. The interest rates are based on interest income or expense amounts for the period and are annualized. Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(2)Nonaccrual loans and any related income are included in their respective loan categories.
(3)Includes taxable-equivalent adjustments of $109 million and $121$107 million for theboth quarters ended June 30,March 31, 2022 and 2021, and 2020, respectively, and $216 million and $264 million for the first half of 2021 and 2020, respectively, predominantly related to tax-exempt income on certain loans and securities.
Earnings Performance (continued)
Noninterest Income
Table 2: Noninterest Income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Quarter ended June 30, | | | | | | Six months ended June 30, | | | | | | | | | | |
| (in millions) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | | | | | |
| Deposit-related fees | $ | 1,342 | | | 1,142 | | | 200 | | | 18 | % | | $ | 2,597 | | | 2,589 | | | 8 | | | — | % | | | | | | |
| Lending-related fees | 362 | | | 323 | | | 39 | | | 12 | | | 723 | | | 673 | | | 50 | | | 7 | | | | | | | |
| Investment advisory and other asset-based fees | 2,794 | | | 2,254 | | | 540 | | | 24 | | | 5,550 | | | 4,760 | | | 790 | | | 17 | | | | | | | |
| Commissions and brokerage services fees | 580 | | | 550 | | | 30 | | | 5 | | | 1,216 | | | 1,227 | | | (11) | | | (1) | | | | | | | |
| Investment banking fees | 570 | | | 547 | | | 23 | | | 4 | | | 1,138 | | | 938 | | | 200 | | | 21 | | | | | | | |
| Card fees | 1,077 | | | 797 | | | 280 | | | 35 | | | 2,026 | | | 1,689 | | | 337 | | | 20 | | | | | | | |
| Servicing income, net | (21) | | | (689) | | | 668 | | | 97 | | | (120) | | | (418) | | | 298 | | | 71 | | | | | | |
| Net gains on mortgage loan originations/sales | 1,357 | | | 1,006 | | | 351 | | | 35 | | | 2,782 | | | 1,114 | | | 1,668 | | | 150 | | | | | | |
| Mortgage banking | 1,336 | | | 317 | | | 1,019 | | | 321 | | 2,662 | | | 696 | | | 1,966 | | | 282 | | | | | | |
| Net gains from trading activities | 21 | | | 807 | | | (786) | | | (97) | | | 369 | | | 871 | | | (502) | | | (58) | | | | | | | |
| Net gains on debt securities | — | | | 212 | | | (212) | | | (100) | | | 151 | | | 449 | | | (298) | | | (66) | | | | | | | |
| Net gains (losses) from equity securities | 2,696 | | | 533 | | | 2,163 | | | 406 | | | 3,088 | | | (868) | | | 3,956 | | | NM | | | | | | |
| Lease income | 313 | | | 335 | | | (22) | | | (7) | | | 628 | | | 688 | | | (60) | | | (9) | | | | | | | |
| Other | 379 | | | 577 | | | (198) | | | (34) | | | 1,046 | | | 1,525 | | | (479) | | | (31) | | | | | | | |
| Total | $ | 11,470 | | | 8,394 | | | 3,076 | | | 37 | | | $ | 21,194 | | | 15,237 | | | 5,957 | | | 39 | | | | | | | |
NM – Not meaningful
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | Quarter ended Mar 31, | | | | | | | | | | |
| (in millions) | | | | | | | | | 2022 | | 2021 | | $ Change | | % Change | | | | | | |
| Deposit-related fees | | | | | | | | | $ | 1,473 | | | 1,255 | | | 218 | | | 17 | % | | | | | | |
| Lending-related fees | | | | | | | | | 342 | | | 361 | | | (19) | | | (5) | | | | | | | |
| Investment advisory and other asset-based fees | | | | | | | | | 2,498 | | | 2,756 | | | (258) | | | (9) | | | | | | | |
| Commissions and brokerage services fees | | | | | | | | | 537 | | | 636 | | | (99) | | | (16) | | | | | | | |
| Investment banking fees | | | | | | | | | 447 | | | 568 | | | (121) | | | (21) | | | | | | | |
| Card fees | | | | | | | | | 1,029 | | | 949 | | | 80 | | | 8 | | | | | | | |
| Net servicing income | | | | | | | | | 154 | | | (99) | | | 253 | | | 256 | | | | | | | |
| Net gains on mortgage loan originations/sales | | | | | | | | | 539 | | | 1,425 | | | (886) | | | (62) | | | | | | | |
| Mortgage banking | | | | | | | | | 693 | | | 1,326 | | | (633) | | | (48) | | | | | | | |
| Net gains from trading activities | | | | | | | | | 218 | | | 348 | | | (130) | | | (37) | | | | | | | |
| Net gains from debt securities | | | | | | | | | 2 | | | 151 | | | (149) | | | (99) | | | | | | | |
| Net gains from equity securities | | | | | | | | | 576 | | | 392 | | | 184 | | | 47 | | | | | | | |
| Lease income | | | | | | | | | 327 | | | 315 | | | 12 | | | 4 | | | | | | | |
| Other | | | | | | | | | 229 | | | 667 | | | (438) | | | (66) | | | | | | | |
| Total | | | | | | | | | $ | 8,371 | | | 9,724 | | | (1,353) | | | (14) | | | | | | | |
SecondFirst quarter 20212022 vs. secondfirst quarter 2020
Deposit-related fees increased driven by:
•by lower fee waivers and reversals compared with a secondas first quarter 2020 that2021 included elevated fee waivers due to our actionsvarious accommodations to support customers during the COVID-19 pandemic; andpandemic, as well as other temporary fee waivers.
•
higher treasury management
In January 2022, we announced enhancements and changes to help our consumer customers avoid overdraft-related fees, on commercial accounts driven by an increasewhich we began to implement in transaction service volumes and repricing.March 2022. We expect this will lower certain deposit-related fees for the remainder of 2022.
Investment advisory and other asset-based fees increased reflecting decreased reflecting:
•lower asset-based and trust fees due to divestitures in fourth quarter 2021;
partially offset by:
•higher market valuations on client investmentWIM advisory assets.
For additional information on certain client investment assets, see the “Earnings Performance – Operating Segment Results – Wealth and Investment Management – WIM Advisory Assets” and “Earnings Performance – Operating Segment Results – Corporate – Wells Fargo Asset Management (WFAM) Assets Under Management” sectionssection in this Report.
Commissions and brokerage services fees decreased driven by lower transactional revenue.
Investment banking fees decreased driven by lower debt and equity underwriting fees as a result of lower market activity.
Card fees increased reflecting higher interchange fees, net of rewards, driven by increased purchase and transaction volumes.
ServicingNet servicing income net increased due to:reflecting:
•higher income fromlower amortization of the fair value mortgage servicing right (MSR) valuation changes and related hedgesdue to lower prepayment rates driven by negative valuation adjustmentsincreases in second quarter 2020 for higher expectedinterest rates; and
•lower unreimbursed servicing costs and prepayment estimates due to changes in economic conditions;fewer payoffs and favorable recoveries from loss mitigation activities;
partially offset by:
•lower contractually specified servicing fees due to a lower balance of loans serviced for others resulting from prepayments.others.
Net gains on mortgage loan originations/sales increaseddecreased
driven by:
•higher gains related to the re-securitization of loans we purchased from Government National Mortgage Association (GNMA) loan securitization pools in 2020; and
•higherlower residential real estatemortgage held for sale (HFS) origination volumes in our retail production channel;
partially offset by:
•lower HFS origination volumes in our correspondent production channel; and
•lower margins in our retail and correspondent production channels.channels; and
•a shift in production to more correspondent loans, which have a lower production margin compared with retail loans.
For additional information on servicing income and net gains on mortgage loan originations/sales, see Note 9 (Mortgage Banking Activities) to Financial Statements in this Report.
Net gains from trading activities decreased driven by reflecting:
•fewer gainslower trading activity in asset-backed financeresidential mortgage-backed securities and credit products due to limited credit spread movement compared with a second quarter 2020 that reflected gains driven by volatility in credit spreads from the impact of the COVID-19 pandemic.high yield products;
partially offset by:
•higher foreign exchange, rates, and commodities trading revenue.
Net gains onfrom debt securities decreased due to lower gains from feweron sales of agency mortgage-backed securities (MBS) and municipal bonds.as a result of decreased sales volumes.
Net gains (losses) from equity securities increased driven by:reflecting:
•higher unrealized gains on nonmarketable equity securities fromdriven by our affiliated venture capital and private equity businesses; and
•higher realized gains on the sales of equity securities;
partially offset by:
•lower gains on deferred compensation plan investments (largely offset in personnel expense). Refer to Table 3a for the results for our deferred compensation plan and related hedges.
Other income decreased due to:
•lower gains on the saleshigher impairment of residential mortgage loans which were reclassified to held for sale in 2019; and
•higher valuation losses related to the retained litigation risk, including the timing and amount of final settlement, associated with shares of Visa Class B common stock thatequity securities.
Earnings Performance (continued)
we sold. For additional information, see the “Risk Management – Asset/Liability Management – Market Risk – Equity Securities” section in our 2020 Form 10-K;
partially offset by:Other income decreased due to:
•a gain on the sale of a portion of our student loan portfolio.
First half of 2021 vs.portfolio in first half of 2020
Investment advisory and other asset-based fees increased reflecting higher market valuations on client investment assets.
For additional information on certain client investment assets, see the “Earnings Performance – Operating Segment Results – Wealth and Investment Management – WIM Advisory Assets” and “Earnings Performance – Operating Segment Results – Corporate – Wells Fargo Asset Management (WFAM) Assets Under Management” sections in this Report.
Investment banking fees increased driven by higher loan syndication fees, advisory fees, and equity underwriting fees.
Card fees increased reflecting higher interchange fees, net of rewards, driven by increased purchase and transaction volumes.
Servicing income, net increased reflecting:quarter 2021;
•higher income from MSR valuation changes and related hedges driven by negative valuation adjustments to the MSR in the first half of 2020 for higher expected servicing costs and prepayment estimateslosses due to changesgrowth in economic conditions;
partially offset by:
•lower servicing fees due to a lower balance of loans serviced for others resulting from prepayments.
Net gains on mortgage loan originations/sales increased
driven by:
•higher margins wind energy investments (offset by benefits and credits in our retail production channel;
•higher HFS origination volume in our retail production channel;
•higher gains related to the re-securitization of loans we purchased from GNMA loan securitization pools in 2020;income tax expense); and
•higher gains due to losses in the first half of 2020 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.
For additional information on servicing income and net gains on mortgage loan originations/sales, see Note 9 (Mortgage Banking Activities) to Financial Statements in this Report.
Net gains from trading activities decreased reflecting:
•lower client trading activity for interest rate products, equities, and commodities;
partially offset by:
•higher client trading activity for asset-backed finance products.
Net gains on debt securities decreased due to lower gains from fewer sales of agency MBS and municipal bonds.
Net gains (losses) from equity securities increased driven by:
•higher unrealized gains on nonmarketable equity securities from our affiliated venture capital and private equity businesses;
•lower impairment on equity securities due to the market impact of the COVID-19 pandemic in first quarter 2020;
•higher realized gains on the sales of equity securities; and
•higher gains on deferred compensation plan investments (largely offset in personnel expense). Refer to Table 3a for the results for our deferred compensation plan and related hedges.
Other income decreased due to:
•lower gains on the sales of certain residential mortgage loans which were reclassified to held for sale in 2019; and
•higher valuation losses related to the retained litigation risk, including the timing and amount of final settlement, associated with shares of Visa Class B common stock that we sold. For additional information, see the “Risk Management – Asset/Liability Management – Market Risk – Equity Securities” section in our 2020 Form 10-K;
partially offset by:
•a gain on the sale of substantially all of our student loan portfolio; and
•higher income from investments accounted for under the equity method.HFS.
Noninterest Expense
Table 3: Noninterest Expense
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| Quarter ended June 30, | | | | | | Six months ended June 30, | | | | | | | | | | |
| (in millions) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | | | | | |
| Personnel | $ | 8,818 | | | 8,916 | | | (98) | | | (1) | % | | $ | 18,376 | | | 17,239 | | | 1,137 | | | 7 | % | | | | | | |
| Technology, telecommunications and equipment | 815 | | | 672 | | | 143 | | | 21 | | | 1,659 | | | 1,470 | | | 189 | | | 13 | | | | | | | |
| Occupancy | 735 | | | 871 | | | (136) | | | (16) | | | 1,505 | | | 1,586 | | | (81) | | | (5) | | | | | | | |
| Operating losses | 303 | | | 1,219 | | | (916) | | | (75) | | | 516 | | | 1,683 | | | (1,167) | | | (69) | | | | | | | |
| Professional and outside services | 1,450 | | | 1,676 | | | (226) | | | (13) | | | 2,838 | | | 3,282 | | | (444) | | | (14) | | | | | | | |
| Leases (1) | 226 | | | 244 | | | (18) | | | (7) | | | 452 | | | 504 | | | (52) | | | (10) | | | | | | | |
| Advertising and promotion | 132 | | | 137 | | | (5) | | | (4) | | | 222 | | | 318 | | | (96) | | | (30) | | | | | | | |
| Restructuring charges | (4) | | | — | | | (4) | | | NM | | 9 | | | — | | | 9 | | | NM | | | | | | |
| Other | 866 | | | 816 | | | 50 | | | 6 | | | 1,753 | | | 1,517 | | | 236 | | | 16 | | | | | | | |
| Total | $ | 13,341 | | | 14,551 | | | (1,210) | | | (8) | | $ | 27,330 | | | 27,599 | | | (269) | | | (1) | | | | | | | |
NM – Not meaningful | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | Quarter ended Mar 31, | | | | | | | | | | |
| (in millions) | | | | | | | | | 2022 | | 2021 | | $ Change | | % Change | | | | | | |
| Personnel | | | | | | | | | $ | 9,271 | | | 9,558 | | | (287) | | | (3) | % | | | | | | |
| Technology, telecommunications and equipment | | | | | | | | | 876 | | | 844 | | | 32 | | | 4 | | | | | | | |
| Occupancy | | | | | | | | | 722 | | | 770 | | | (48) | | | (6) | | | | | | | |
| Operating losses | | | | | | | | | 673 | | | 213 | | | 460 | | | 216 | | | | | | | |
| Professional and outside services | | | | | | | | | 1,286 | | | 1,388 | | | (102) | | | (7) | | | | | | | |
| Leases (1) | | | | | | | | | 188 | | | 226 | | | (38) | | | (17) | | | | | | | |
| Advertising and promotion | | | | | | | | | 99 | | | 90 | | | 9 | | | 10 | | | | | | | |
| Restructuring charges | | | | | | | | | 5 | | | 13 | | | (8) | | | (62) | | | | | | | |
| Other | | | | | | | | | 750 | | | 887 | | | (137) | | | (15) | | | | | | | |
| Total | | | | | | | | | $ | 13,870 | | | 13,989 | | | (119) | | | (1) | | | | | | | |
(1)Represents expenses for assets we lease to customers.
SecondFirst quarter 20212022 vs. secondfirst quarter 20202021
Personnel expense decreased driven by:
•lower salaries as a result of reduced headcount;headcount driven by efficiency initiatives and divestitures; and
•lower deferred compensation expense;
partially offset by:
•higher incentive compensation expense, including the impact of higher market valuations on stock-based compensation; and
•higher revenue-related compensation expense.
Technology, telecommunications and equipment expense increased due to higher expense for technology contracts and the reversal of a software licensing liability accrual in second quarter 2020.
Occupancy expense decreased driven by:
•lower rent expense; and
•lower cleaning fees, supplies, and equipment expenses compared with a second quarter 2020 that included higher expenses due to the COVID-19 pandemic.by efficiency initiatives.
Operating losses decreased driven by lower expense for litigation accruals and customer remediation accruals.
Professional and outside services expense decreased driven by efficiency initiatives to reduce our spending on consultants and contractors.
Other expensesincreased driven by a write-down of goodwill in second quarter 2021higher customer remediation expense related to the sale of a portion of our student loan portfolio.
First half of 2021 vs. first half of 2020
Personnel expense increased driven by:
•higher incentive compensation expense, including the impact of higher market valuations on stock-based compensation;
•higher revenue-related compensation expense; and
•higher deferred compensation expense;
partially offset by:
•lower salaries as a result of reduced headcount.
Table 3a presents results for our deferred compensation plan and related hedges. In second quarter 2020, we entered into arrangements to transition our economic hedgesexpansions of the deferred compensation plan liabilities from equity securities to derivative instruments. Aspopulation of affected customers, remediation payments, and/or remediation time frames predominantly for a resultvariety of this transition, changes in fair value of derivatives used to economically hedge the deferred compensation plan are reported in personnel expense rather than in net gains (losses) from equity securities within noninterest income. For additional information on the derivatives used in the economic hedges, see Note 14 (Derivatives) to Financial Statements in this Report.
Table 3a:Deferred Compensation and Related Hedges
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| Quarter ended June 30, | | Six months ended June 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Net interest income | $ | — | | | 3 | | | $ | — | | | 15 | |
| Net gains (losses) from equity securities | 1 | | | 346 | | | 1 | | | (275) | |
| Total revenue (losses) from deferred compensation plan investments | 1 | | | 349 | | | 1 | | | (260) | |
| Decrease (increase) in deferred compensation plan liabilities | (257) | | | (490) | | | (422) | | | 108 | |
| Net derivative gains from economic hedges of deferred compensation | 239 | | | 141 | | | 399 | | | 141 |
| Decrease (increase) in personnel expense | (18) | | | (349) | | | (23) | | | 249 | |
| Loss before income tax expense | $ | (17) | | | — | | | $ | (22) | | | (11) | |
Technology, telecommunications and equipment expense increased due to higher expense for technology contracts and
the reversal of a software licensing liability accrual in second quarter 2020.
Earnings Performance (continued)
Occupancy expense decreased driven by:
•lower rent expense; and
•lower cleaning fees, supplies, and equipment expenses compared with a first half of 2020 that included higher expenses due to the COVID-19 pandemic.
Operating losses decreased driven by lower expense for litigation accruals and customer remediation accruals.historical matters.
Professional and outside services expense decreased driven by efficiency initiatives to reduce our spending on consultants and contractors.
Advertising and promotionLeases expense decreased driven by lower depreciation expense from a continued reduction in marketing and brand campaign volumes due to the impactsize of the COVID-19 pandemic.
Restructuring charges increased related to our efficiency initiatives that began in third quarter 2020. For additional information on restructuring charges, see Note 19 (Restructuring Charges) to Financial Statements in this Report.operating lease asset portfolio.
Other expenses increaseddecreased driven by:
•a write-down of goodwill in the first half ofquarter 2021 related to the sale of substantially alla portion of our student loan portfolio;portfolio, and
•higher charitable donationslower donation expense driven bydue to the donation of PPP processing fees; and
•higher Federal Deposit Insurance Corporation (FDIC) deposit assessment expense driven by a higher assessment rate;fees in first quarter 2021;
partially offset by:
•a reduction in business travel and company events due to the impact of the COVID-19 pandemic.higher pension plan settlement expense.
Income Tax Expense
Income tax expense was $1.4 billion$707 million in secondfirst quarter 2021,2022, compared with an income tax benefit of $2.0 billion$901 million in the same period a year ago.ago, driven by lower pre-tax income and net discrete income tax benefits primarily related to stock-based compensation. The effective income tax rate was 19.3%16.1% for secondfirst quarter 2021,2022, compared with 34.2%16.3% for the same period a year ago.
Income tax expense was $2.3 billion in the first half of 2021, compared with an income tax benefit of $1.6 billion in the same period a year ago. Theeffective income tax rate was 18.0% for the first half of 2021, compared with 36.0% for the same period a year ago.
The increase in our income tax expense for both the second quarter and first half of 2021, compared with the same periods a year ago, was driven by higher pre-tax income, including the impact of the changes in accounting policy for certain tax-advantaged investments. For additional information on the changes in accounting policy, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.
Operating Segment Results
Our management reporting is organized into four reportable operating segments: Consumer Banking and Lending; Commercial Banking; Corporate and Investment Banking; and Wealth and Investment Management. All other business activities that are not included in the reportable operating segments have been included in Corporate. For additional information, see Table 4. We define our reportable operating segments by type of product and customer segment, and their results are based on our management reporting process. The management reporting process measures the performance of the reportable operating segments based on the Company’s management structure, and the results are regularly reviewed by our Chief Executive Officer and Operating Committee. The management reporting process is based on U.S. GAAP and includes specific adjustments, such as funds transfer pricing for asset/liability management, shared revenues and expenses, and taxable-equivalent adjustments to consistently reflect income from taxable and tax-exempt sources, which allows management to assess performance consistently across the operating segments.
In March 2021, we announced an agreement to sell our Corporate Trust Services business and, in second quarter 2021, we moved the business from the Commercial Banking operating segment to Corporate. Prior period balances have been revised to conform with the current period presentation. This change did not impact the previously reported consolidated financial results of the Company.
In second quarter 2021, we elected to change our accounting method for low-income housing tax credit (LIHTC) investments and elected to change the presentation of investment tax credits related to solar energy investments. These accounting policy changes had a nominal impact on reportable operating segment results. Prior period financial statement line items for the Company, as well as for the reportable operating segments, have been revised to conform with the current period presentation. Our LIHTC investments are included in the Corporate and Investment Banking operating segment and our solar energy investments are included in the Commercial Banking operating segment. For additional information, see the “Recent Developments” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.
Funds Transfer Pricing Corporate treasury manages a funds transfer pricing methodology that considers interest rate risk, liquidity risk, and other product characteristics. Operating segments pay a funding charge for their assets and receive a funding credit for their deposits, both of which are included in net interest income. The net impact of the funding charges or credits is recognized in corporate treasury.
Revenue and Expense Sharing When lines of business jointly serve customers, the line of business that is responsible for providing the product or service recognizes revenue or expense with a referral fee paid or an allocation of cost to the other line of
business based on established internal revenue-sharing agreements.
When a line of business uses a service provided by another line of business or enterprise function (included in Corporate), expense is generally allocated based on the cost and use of the service provided.
Taxable-Equivalent Adjustments Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for low-income housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.
Allocated Capital Reportable operating segments are allocated capital under a risk-sensitive framework that is primarily based on aspects of our regulatory capital requirements, and the assumptions and methodologies used to allocate capital are periodically assessed and revised. Management believes that return on allocated capital is a useful financial measure because it enables management, investors, and others to assess a reportable operating segment’s use of capital.
Selected Metrics We present certain financial and nonfinancial metrics that management uses when evaluating reportable operating segment results. Management believes that these metrics are useful to investors and others to assess the performance, customer growth, and trends of reportable operating segments or lines of business.
Table 4: Management Reporting Structure
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| Wells Fargo & Company | | | |
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| | | Consumer Banking and Lending | | | | Commercial Banking | | | | Corporate and Investment Banking | | | | Wealth and Investment Management | | | Corporate | | | |
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• Consumer and Small Business Banking
• Home Lending
• Credit Card
• Auto
• Personal Lending | | | |
• Middle Market Banking
• Asset-Based Lending and Leasing | | | |
• Banking
• Commercial Real Estate
• Markets | | | |
• Wells Fargo Advisors
• The Private
Bank | | | |
• Corporate Treasury
• Enterprise Functions
• Investment Portfolio
• Affiliated venture capital and private equity businesses
• Non-strategic businesses | | | |
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Table 5 and the following discussion present our results by reportable operating segment. For additional information, see Note 22 (Operating Segments) to Financial Statements in this Report.
Earnings Performance (continued)
Table 5: Operating Segment Results – Highlights
| | | (in millions) | (in millions) | Consumer Banking and Lending | | Commercial Banking | | Corporate and Investment Banking | | Wealth and Investment Management | | Corporate (1) | | Reconciling Items (2) | | Consolidated Company | (in millions) | Consumer Banking and Lending | | Commercial Banking | | Corporate and Investment Banking | | Wealth and Investment Management | | Corporate (1) | | Reconciling Items (2) | | Consolidated Company |
| Quarter ended June 30, 2021 | | |
| Net interest income | $ | 5,618 | | | 1,202 | | | 1,783 | | | 610 | | | (304) | | | (109) | | | 8,800 | | |
| Noninterest income | 3,068 | | | 906 | | | 1,555 | | | 2,926 | | | 3,327 | | | (312) | | | 11,470 | | |
| Total revenue | 8,686 | | | 2,108 | | | 3,338 | | | 3,536 | | | 3,023 | | | (421) | | | 20,270 | | |
| Provision for credit losses | (367) | | | (382) | | | (501) | | | 24 | | | (34) | | | — | | | (1,260) | | |
| Noninterest expense | 6,202 | | | 1,443 | | | 1,805 | | | 2,891 | | | 1,000 | | | — | | | 13,341 | | |
| Income (loss) before income tax expense (benefit) | 2,851 | | | 1,047 | | | 2,034 | | | 621 | | | 2,057 | | | (421) | | | 8,189 | | |
| Income tax expense (benefit) | 713 | | | 261 | | | 513 | | | 156 | | | 223 | | | (421) | | | 1,445 | | |
| Net income before noncontrolling interests | 2,138 | | | 786 | | | 1,521 | | | 465 | | | 1,834 | | | — | | | 6,744 | | |
| Less: Net income (loss) from noncontrolling interests | — | | | 2 | | | (2) | | | — | | | 704 | | | — | | | 704 | | |
| Net income | $ | 2,138 | | | 784 | | | 1,523 | | | 465 | | | 1,130 | | | — | | | 6,040 | | |
| Quarter ended June 30, 2020 | | |
| Quarter ended March 31, 2022 | | Quarter ended March 31, 2022 | |
| Net interest income | Net interest income | $ | 5,717 | | | 1,554 | | | 1,963 | | | 719 | | | 60 | | | (121) | | | 9,892 | | Net interest income | $ | 5,996 | | | 1,361 | | | 1,990 | | | 799 | | | (818) | | | (107) | | | 9,221 | |
| Noninterest income | Noninterest income | 1,891 | | | 797 | | | 2,096 | | | 2,487 | | | 1,318 | | | (195) | | | 8,394 | | Noninterest income | 2,567 | | | 966 | | | 1,480 | | | 2,958 | | | 806 | | | (406) | | | 8,371 | |
| Total revenue | Total revenue | 7,608 | | | 2,351 | | | 4,059 | | | 3,206 | | | 1,378 | | | (316) | | | 18,286 | | Total revenue | 8,563 | | | 2,327 | | | 3,470 | | | 3,757 | | | (12) | | | (513) | | | 17,592 | |
| Provision for credit losses | Provision for credit losses | 3,102 | | | 2,295 | | | 3,756 | | | 255 | | | 126 | | | — | | | 9,534 | | Provision for credit losses | (190) | | | (344) | | | (196) | | | (37) | | | (20) | | | — | | | (787) | |
| Noninterest expense | Noninterest expense | 6,933 | | | 1,580 | | | 2,044 | | | 2,743 | | | 1,251 | | | — | | | 14,551 | | Noninterest expense | 6,395 | | | 1,531 | | | 1,983 | | | 3,175 | | | 786 | | | — | | | 13,870 | |
| Income (loss) before income tax expense (benefit) | Income (loss) before income tax expense (benefit) | (2,427) | | | (1,524) | | | (1,741) | | | 208 | | | 1 | | | (316) | | | (5,799) | | Income (loss) before income tax expense (benefit) | 2,358 | | | 1,140 | | | 1,683 | | | 619 | | | (778) | | | (513) | | | 4,509 | |
| Income tax expense (benefit) | Income tax expense (benefit) | (650) | | | (379) | | | (408) | | | 52 | | | (300) | | | (316) | | | (2,001) | | Income tax expense (benefit) | 588 | | | 280 | | | 425 | | | 154 | | | (227) | | | (513) | | | 707 | |
| Net income (loss) before noncontrolling interests | Net income (loss) before noncontrolling interests | (1,777) | | | (1,145) | | | (1,333) | | | 156 | | | 301 | | | — | | | (3,798) | | Net income (loss) before noncontrolling interests | 1,770 | | | 860 | | | 1,258 | | | 465 | | | (551) | | | — | | | 3,802 | |
| Less: Net income from noncontrolling interests | Less: Net income from noncontrolling interests | — | | | 1 | | | — | | | — | | | 47 | | | — | | | 48 | | Less: Net income from noncontrolling interests | — | | | 3 | | | — | | | — | | | 128 | | | — | | | 131 | |
| Net income (loss) | Net income (loss) | $ | (1,777) | | | (1,146) | | | (1,333) | | | 156 | | | 254 | | | — | | | (3,846) | | Net income (loss) | $ | 1,770 | | | 857 | | | 1,258 | | | 465 | | | (679) | | | — | | | 3,671 | |
| Six months ended June 30, 2021 | | |
| Net interest income | $ | 11,233 | | | 2,456 | | | 3,562 | | | 1,267 | | | (694) | | | (216) | | | 17,608 | | |
| Noninterest income | 6,107 | | | 1,733 | | | 3,380 | | | 5,813 | | | 4,744 | | | (583) | | | 21,194 | | |
| Total revenue | 17,340 | | | 4,189 | | | 6,942 | | | 7,080 | | | 4,050 | | | (799) | | | 38,802 | | |
| Provision for credit losses | (786) | | | (781) | | | (785) | | | (19) | | | 63 | | | — | | | (2,308) | | |
| Noninterest expense | 12,469 | | | 3,073 | | | 3,638 | | | 5,919 | | | 2,231 | | | — | | | 27,330 | | |
| Income (loss) before income tax expense (benefit) | 5,657 | | | 1,897 | | | 4,089 | | | 1,180 | | | 1,756 | | | (799) | | | 13,780 | | |
| Income tax expense (benefit) | 1,415 | | | 473 | | | 1,013 | | | 296 | | | (52) | | | (799) | | | 2,346 | | |
| Net income before noncontrolling interests | 4,242 | | | 1,424 | | | 3,076 | | | 884 | | | 1,808 | | | — | | | 11,434 | | |
| Less: Net income (loss) from noncontrolling interests | — | | | 3 | | | (2) | | | — | | | 757 | | | — | | | 758 | | |
| Net income | $ | 4,242 | | | 1,421 | | | 3,078 | | | 884 | | | 1,051 | | | — | | | 10,676 | | |
| Six months ended June 30, 2020 | | |
| Quarter ended March 31, 2021 | | Quarter ended March 31, 2021 | |
| Net interest income | Net interest income | $ | 11,719 | | | 3,287 | | | 3,984 | | | 1,557 | | | 939 | | | (264) | | | 21,222 | | Net interest income | $ | 5,615 | | | 1,254 | | | 1,779 | | | 657 | | | (390) | | | (107) | | | 8,808 | |
| Noninterest income | Noninterest income | 4,538 | | | 1,409 | | | 3,483 | | | 4,919 | | | 1,303 | | | (415) | | | 15,237 | | Noninterest income | 3,039 | | | 827 | | | 1,825 | | | 2,887 | | | 1,417 | | | (271) | | | 9,724 | |
| Total revenue | Total revenue | 16,257 | | | 4,696 | | | 7,467 | | | 6,476 | | | 2,242 | | | (679) | | | 36,459 | | Total revenue | 8,654 | | | 2,081 | | | 3,604 | | | 3,544 | | | 1,027 | | | (378) | | | 18,532 | |
| Provision for credit losses | Provision for credit losses | 4,671 | | | 3,336 | | | 4,881 | | | 263 | | | 388 | | | — | | | 13,539 | | Provision for credit losses | (419) | | | (399) | | | (284) | | | (43) | | | 97 | | | — | | | (1,048) | |
| Noninterest expense | Noninterest expense | 13,190 | | | 3,153 | | | 3,914 | | | 5,400 | | | 1,942 | | | — | | | 27,599 | | Noninterest expense | 6,267 | | | 1,630 | | | 1,833 | | | 3,028 | | | 1,231 | | | — | | | 13,989 | |
| Income (loss) before income tax expense (benefit) | Income (loss) before income tax expense (benefit) | (1,604) | | | (1,793) | | | (1,328) | | | 813 | | | (88) | | | (679) | | | (4,679) | | Income (loss) before income tax expense (benefit) | 2,806 | | | 850 | | | 2,055 | | | 559 | | | (301) | | | (378) | | | 5,591 | |
| Income tax expense (benefit) | Income tax expense (benefit) | (445) | | | (442) | | | (307) | | | 204 | | | 21 | | | (679) | | | (1,648) | | Income tax expense (benefit) | 702 | | | 212 | | | 500 | | | 140 | | | (275) | | | (378) | | | 901 | |
| Net income (loss) before noncontrolling interests | Net income (loss) before noncontrolling interests | (1,159) | | | (1,351) | | | (1,021) | | | 609 | | | (109) | | | — | | | (3,031) | | Net income (loss) before noncontrolling interests | 2,104 | | | 638 | | | 1,555 | | | 419 | | | (26) | | | — | | | 4,690 | |
Less: Net income (loss) from noncontrolling interests | — | | | 2 | | | — | | | — | | | (103) | | | — | | | (101) | | |
| Less: Net income from noncontrolling interests | | Less: Net income from noncontrolling interests | — | | | 1 | | | — | | | — | | | 53 | | | — | | | 54 | |
| Net income (loss) | Net income (loss) | $ | (1,159) | | | (1,353) | | | (1,021) | | | 609 | | | (6) | | | — | | | (2,930) | | Net income (loss) | $ | 2,104 | | | 637 | | | 1,555 | | | 419 | | | (79) | | | — | | | 4,636 | |
| |
(1)All other business activities that are not included in the reportable operating segments have been included in Corporate. For additional information, see the “Corporate” section below. In March 2021, we announced an agreement to sell our Corporate Trust Services business and, in second quarter 2021, we moved the business from the Commercial Banking operating segment to Corporate. Prior period balances have been revised to conform with the current period presentation.
(2)Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for low-income housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.
| | | | | | | | |
14 | Wells Fargo & Company | 11 |
Earnings Performance (continued)
Consumer Banking and Lending offers diversified financial products and services for consumers and small businesses with annual sales generally up to $5$10 million. These financial products and services include checking and savings accounts, credit and
debit cards, as well as home, auto, personal, and small business lending. Table 5a and Table 5b provide additional information for Consumer Banking and Lending.
Table 5a: Consumer Banking and Lending – Income Statement and Selected Metrics
| | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended Mar 31, | |
| ($ in millions, unless otherwise noted) | ($ in millions, unless otherwise noted) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | ($ in millions, unless otherwise noted) | 2022 | | 2021 | | $ Change | | % Change | |
| Income Statement | Income Statement | | | Income Statement | | |
| Net interest income | Net interest income | $ | 5,618 | | | 5,717 | | | (99) | | | (2) | % | | $ | 11,233 | | | 11,719 | | | (486) | | | (4) | % | | Net interest income | $ | 5,996 | | | 5,615 | | | 381 | | | 7 | % | |
| Noninterest income: | Noninterest income: | | | Noninterest income: | | |
| Deposit-related fees | Deposit-related fees | 732 | | | 575 | | | 157 | | | 27 | | | 1,393 | | | 1,454 | | | (61) | | | (4) | | | Deposit-related fees | 845 | | | 661 | | | 184 | | | 28 | | |
| Card fees | Card fees | 1,017 | | | 749 | | | 268 | | | 36 | | | 1,909 | | | 1,568 | | | 341 | | | 22 | | | Card fees | 961 | | | 892 | | | 69 | | | 8 | | |
| Mortgage banking | Mortgage banking | 1,158 | | | 256 | | | 902 | | | 352 | | | 2,417 | | | 598 | | | 1,819 | | | 304 | | | Mortgage banking | 654 | | | 1,259 | | | (605) | | | (48) | | |
| Other | Other | 161 | | | 311 | | | (150) | | | (48) | | | 388 | | | 918 | | | (530) | | | (58) | | | Other | 107 | | | 227 | | | (120) | | | (53) | | |
| Total noninterest income | Total noninterest income | 3,068 | | | 1,891 | | | 1,177 | | | 62 | | | 6,107 | | | 4,538 | | | 1,569 | | | 35 | | | Total noninterest income | 2,567 | | | 3,039 | | | (472) | | | (16) | | |
| Total revenue | Total revenue | 8,686 | | | 7,608 | | | 1,078 | | | 14 | | | 17,340 | | | 16,257 | | | 1,083 | | | 7 | | | Total revenue | 8,563 | | | 8,654 | | | (91) | | | (1) | | |
| Net charge-offs | Net charge-offs | 359 | | | 553 | | | (194) | | | (35) | | | 729 | | | 1,174 | | | (445) | | | (38) | | | Net charge-offs | 375 | | | 370 | | | 5 | | | 1 | | |
| Change in the allowance for credit losses | Change in the allowance for credit losses | (726) | | | 2,549 | | | (3,275) | | | NM | | (1,515) | | | 3,497 | | | (5,012) | | | NM | | Change in the allowance for credit losses | (565) | | | (789) | | | 224 | | | 28 | |
| Provision for credit losses | Provision for credit losses | (367) | | | 3,102 | | | (3,469) | | | NM | | (786) | | | 4,671 | | | (5,457) | | | NM | | Provision for credit losses | (190) | | | (419) | | | 229 | | | 55 | |
| Noninterest expense | Noninterest expense | 6,202 | | | 6,933 | | | (731) | | | (11) | | | 12,469 | | | 13,190 | | | (721) | | | (5) | | | Noninterest expense | 6,395 | | | 6,267 | | | 128 | | | 2 | | |
| Income (loss) before income tax expense (benefit) | 2,851 | | | (2,427) | | | 5,278 | | | NM | | 5,657 | | | (1,604) | | | 7,261 | | | NM | | |
| Income tax expense (benefit) | 713 | | | (650) | | | 1,363 | | | NM | | 1,415 | | | (445) | | | 1,860 | | | NM | | |
| Net income (loss) | $ | 2,138 | | | (1,777) | | | 3,915 | | | NM | | $ | 4,242 | | | (1,159) | | | 5,401 | | | NM | | |
| Income before income tax expense | | Income before income tax expense | 2,358 | | | 2,806 | | | (448) | | | (16) | |
| Income tax expense | | Income tax expense | 588 | | | 702 | | | (114) | | | (16) | |
| Net income | | Net income | $ | 1,770 | | | 2,104 | | | (334) | | | (16) | |
| Revenue by Line of Business | Revenue by Line of Business | | | | | | Revenue by Line of Business | | | |
| Consumer and Small Business Banking | Consumer and Small Business Banking | $ | 4,714 | | | 4,401 | | | 313 | | | 7 | | | $ | 9,264 | | | 9,262 | | | 2 | | | — | | | Consumer and Small Business Banking | $ | 5,071 | | | 4,550 | | | 521 | | | 11 | | |
| Consumer Lending: | Consumer Lending: | | | Consumer Lending: | | |
| Home Lending | Home Lending | 2,072 | | | 1,477 | | | 595 | | | 40 | | | 4,299 | | | 3,353 | | | 946 | | | 28 | | | Home Lending | 1,490 | | | 2,227 | | | (737) | | | (33) | | |
Credit Card | Credit Card | 1,363 | | | 1,196 | | | 167 | | | 14 | | | 2,709 | | | 2,571 | | | 138 | | | 5 | | | Credit Card | 1,265 | | | 1,188 | | | 77 | | | 6 | | |
| Auto | Auto | 415 | | | 388 | | | 27 | | | 7 | | | 818 | | | 768 | | | 50 | | | 7 | | | Auto | 444 | | | 403 | | | 41 | | | 10 | | |
Personal Lending | Personal Lending | 122 | | | 146 | | | (24) | | | (16) | | | 250 | | | 303 | | | (53) | | | (17) | | | Personal Lending | 293 | | | 286 | | | 7 | | | 2 | | |
| Total revenue | Total revenue | $ | 8,686 | | | 7,608 | | | 1,078 | | | 14 | | | $ | 17,340 | | | 16,257 | | | 1,083 | | | 7 | | | Total revenue | $ | 8,563 | | | 8,654 | | | (91) | | | (1) | | |
| | Selected Metrics | Selected Metrics | | | Selected Metrics | | |
| Consumer Banking and Lending: | Consumer Banking and Lending: | | | Consumer Banking and Lending: | | |
Return on allocated capital (1)(2) | Return on allocated capital (1)(2) | 17.3 | % | | (15.5) | | | 17.2 | % | | (5.5) | | | | | Return on allocated capital (1)(2) | 14.4 | % | | 17.2 | | | |
Efficiency ratio (2)(3) | Efficiency ratio (2)(3) | 71 | | | 91 | | | 72 | | | 81 | | | | Efficiency ratio (2)(3) | 75 | | | 72 | | | |
| Headcount (#) (period-end) | Headcount (#) (period-end) | 116,185 | | | 133,876 | | | (13) | | | 116,185 | | | 133,876 | | | (13) | | | Headcount (#) (period-end) | 113,273 | | | 123,547 | | | (8) | | |
| Retail bank branches (#) | Retail bank branches (#) | 4,878 | | | 5,300 | | | (8) | | | 4,878 | | | 5,300 | | | (8) | | | Retail bank branches (#) | 4,705 | | | 4,944 | | | (5) | | |
Digital active customers (# in millions) (3)(4) | Digital active customers (# in millions) (3)(4) | 32.6 | | | 31.1 | | | 5 | | | 32.6 | | | 31.1 | | | 5 | | | Digital active customers (# in millions) (3)(4) | 33.7 | | | 32.9 | | | 2 | | |
Mobile active customers (# in millions) (3)(4) | Mobile active customers (# in millions) (3)(4) | 26.8 | | | 25.2 | | | 6 | | | 26.8 | | | 25.2 | | | 6 | | | Mobile active customers (# in millions) (3)(4) | 27.8 | | | 26.7 | | | 4 | | |
| | Consumer and Small Business Banking: | Consumer and Small Business Banking: | | | | | Consumer and Small Business Banking: | | |
Deposit spread (4)(5) | Deposit spread (4)(5) | 1.5 | % | | 1.8 | | | | | 1.6 | % | | 1.9 | | | | Deposit spread (4)(5) | 1.6 | % | | 1.6 | | | |
Debit card purchase volume ($ in billions) (5)(6) | Debit card purchase volume ($ in billions) (5)(6) | $ | 122.0 | | | 93.1 | | | 28.9 | | | 31 | | | $ | 230.5 | | | 183.7 | | | 46.8 | | | 25 | | | Debit card purchase volume ($ in billions) (5)(6) | $ | 115.0 | | | 108.5 | | | 6.5 | | | 6 | | |
Debit card purchase transactions (# in millions) (5)(6) | Debit card purchase transactions (# in millions) (5)(6) | 2,504 | | | 2,027 | | | 24 | | | 4,770 | | | 4,222 | | | 13 | | | Debit card purchase transactions (# in millions) (5)(6) | 2,338 | | | 2,266 | | | 3 | | |
(continued on following page)
| | | | | | | | |
| 12 | Wells Fargo & Company | 15 |
Earnings Performance (continued)
(continued from previous page)
| | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended Mar 31, | |
| ($ in millions, unless otherwise noted) | ($ in millions, unless otherwise noted) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | ($ in millions, unless otherwise noted) | 2022 | | 2021 | | $ Change | | % Change | |
| Home Lending: | Home Lending: | | | Home Lending: | | |
| Mortgage banking: | Mortgage banking: | | | Mortgage banking: | | |
| Servicing income, net | $ | (76) | | | (666) | | | 590 | | | 89% | | $ | (199) | | | (409) | | | 210 | | | 51 | % | | |
| Net servicing income | | Net servicing income | $ | 116 | | | (123) | | | 239 | | | 194 | % | |
| Net gains on mortgage loan originations/sales | Net gains on mortgage loan originations/sales | 1,234 | | | 922 | | | 312 | | | 34 | | 2,616 | | | 1,007 | | | 1,609 | | | 160 | | Net gains on mortgage loan originations/sales | 538 | | | 1,382 | | | (844) | | | (61) | | |
| Total mortgage banking | Total mortgage banking | $ | 1,158 | | | 256 | | | 902 | | | 352 | | $ | 2,417 | | | 598 | | | 1,819 | | | 304 | | Total mortgage banking | $ | 654 | | | 1,259 | | | (605) | | | (48) | | |
| | Originations ($ in billions): | Originations ($ in billions): | | | Originations ($ in billions): | | |
| Retail | Retail | $ | 36.9 | | | 30.5 | | | 6.4 | | | 21 | | $ | 70.5 | | | 53.6 | | | 16.9 | | | 32 | | Retail | $ | 24.1 | | | 33.6 | | | (9.5) | | | (28) | | |
| Correspondent | Correspondent | 16.3 | | | 28.7 | | | (12.4) | | | (43) | | 34.5 | | | 53.6 | | | (19.1) | | | (36) | | Correspondent | 13.8 | | | 18.2 | | | (4.4) | | | (24) | | |
| Total originations | Total originations | $ | 53.2 | | | 59.2 | | | (6.0) | | | (10) | | $ | 105.0 | | | 107.2 | | | (2.2) | | | (2) | | Total originations | $ | 37.9 | | | 51.8 | | | (13.9) | | | (27) | | |
| | % of originations held for sale (HFS) | % of originations held for sale (HFS) | 65.6 | % | | 71.8 | | | | | 70.7 | % | | 70.7 | | | | % of originations held for sale (HFS) | 51.4 | % | | 75.8 | | | |
| Third-party mortgage loans serviced (period-end) ($ in billions) (6) | $ | 769.4 | | | 989.5 | | | (220.1) | | | (22) | | $ | 769.4 | | | 989.5 | | | (220.1) | | | (22) | | |
| Third-party mortgage loans serviced (period-end)($ in billions) (7) | | Third-party mortgage loans serviced (period-end)($ in billions) (7) | $ | 704.2 | | | 801.0 | | | (96.8) | | | (12) | | |
| Mortgage servicing rights (MSR) carrying value (period-end) | Mortgage servicing rights (MSR) carrying value (period-end) | 6,717 | | | 6,819 | | | (102) | | | (1) | | 6,717 | | | 6,819 | | | (102) | | | (1) | | Mortgage servicing rights (MSR) carrying value (period-end) | 8,511 | | | 7,536 | | | 975 | | | 13 | | |
Ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end) (6)(7) | Ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end) (6)(7) | 0.87 | % | | 0.69 | | | | | 0.87 | % | | 0.69 | | | | Ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end) (6)(7) | 1.21 | % | | 0.94 | | | |
| Home lending loans 30+ days or more delinquency rate (7)(8) | 0.51 | | | 0.54 | | | | | 0.51 | | | 0.54 | | | | |
| Home lending loans 30+ days delinquency rate (8)(9)(10) | | Home lending loans 30+ days delinquency rate (8)(9)(10) | 0.29 | | | 0.56 | | | |
| | Credit Card: | | | | | |
| | Credit Card: (1) | | Credit Card: (1) | | |
| Point of sale (POS) volume ($ in billions) | Point of sale (POS) volume ($ in billions) | $ | 25.5 | | | 17.5 | | | 8.0 | | | 46 | | $ | 46.6 | | | 37.4 | | | 9.2 | | | 25 | | Point of sale (POS) volume ($ in billions) | $ | 26.0 | | | 19.6 | | | 6.4 | | | 33 | | |
| New accounts (# in thousands) (9) | 323 | | | 255 | | | 27 | | 589 | | | 570 | | | 3 | | |
| Credit card loans 30+ days or more delinquency rate (8) | 1.46 | % | | 2.10 | | | | | 1.46 | % | | 2.10 | | | | |
| New accounts (# in thousands) | | New accounts (# in thousands) | 484 | | | 266 | | | 82 | | |
| Credit card loans 30+ days delinquency rate (10) | | Credit card loans 30+ days delinquency rate (10) | 1.58 | % | | 2.13 | | | |
| | Auto: | Auto: | | | | | Auto: | | |
| Auto originations ($ in billions) | Auto originations ($ in billions) | $ | 8.3 | | | 5.6 | | | 2.7 | | | 48 | | $ | 15.3 | | | 12.1 | | | 3.2 | | | 26 | | Auto originations ($ in billions) | $ | 7.3 | | | 7.0 | | | 0.3 | | | 4 | | |
| Auto loans 30+ days or more delinquency rate (8) | 1.30 | % | | 1.70 | | | | | 1.30 | % | | 1.70 | | | | |
| Auto loans 30+ days delinquency rate (9)(10) | | Auto loans 30+ days delinquency rate (9)(10) | 1.68 | % | | 1.22 | | | |
| | Personal Lending: | | | | | |
| New funded balances | $ | 565 | | | 315 | | | 250 | | | 79 | | $ | 978 | | | 982 | | (4) | | | — | | |
| | Personal Lending: (1) | | Personal Lending: (1) | | |
| New volume ($ in billions) | | New volume ($ in billions) | $ | 2.6 | | | 1.9 | | | 0.7 | | | 37 | | |
NM – Not meaningful
(1)In first quarter 2022, we transferred our Retail Services business from Credit Card to Personal Lending. Prior period balances have been revised to conform with the current period presentation.
(2)Return on allocated capital is segment net income (loss) applicable to common stock divided by segment average allocated capital. Segment net income (loss) applicable to common stock is segment net income (loss) less allocated preferred stock dividends.
(2)(3)Efficiency ratio is segment noninterest expense divided by segment total revenue (net interest income and noninterest income).
(3)(4)Digital and mobile active customers is the number of consumer and small business customers who have logged on via a digital or mobile device, respectively, in the prior 90 days. Digital active customers includes both online and mobile customers.
(4)(5)Deposit spread is (i) the internal funds transfer pricing credit on segment deposits minus interest paid to customers for segment deposits, divided by (ii) average segment deposits.
(5)(6)Debit card purchase volume and transactions reflect combined activity for both consumer and business debit card purchases.
(6)(7)Excludes residential mortgage loans subserviced for others.
(7)(8)Excludes residential mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and loans held for sale.
(8)(9)Excludes nonaccrual loans.
(10)Beginning in second quarter 2020, customer payment deferral activities instituted in response to the COVID-19 pandemic may have delayed the recognition of delinquencies for those customers who would have otherwise moved into past due or nonaccrual status.
(9)Excludes certain private label new account openings.
SecondFirst quarter 20212022 vs. secondfirst quarter 20202021
Revenue increaseddecreased driven by:
•higherlower mortgage banking noninterest income due to higher gains related to the re-securitization of loans we purchased from GNMA loan securitization pools in 2020, as well as higher income from MSR valuation changeslower HFS origination volumes and related hedges;
•higher card fees reflecting higher interchange fees, net of rewards, driven by increased purchase and transaction volumes; and
•higher deposit-related fees driven by lower fee waivers and reversals compared with a second quarter 2020 that included elevated fee waivers due to our actions to support customers during the COVID-19 pandemic;
margins, partially offset by:
•lower net interest income reflecting the lower interest rate environment and lower loan balances;by higher servicing income; and
•lower other income driven by lower gains on loan sales.
Provisionthe sales of certain residential mortgage loans which were reclassified to held for credit losses decreased driven by an improving economic environment.
Noninterest expense decreased driven by:
•lower operating losses due to lower expense for litigation accruals and customer remediation accruals;
•lower personnel expense driven by additional payments in second quarter 2020 for certain customer-facing and support employees and for back-up child care services, as well as lower branch staffing expense in second quarter 2021 related to efficiency initiatives in Consumer and Small Business Banking, partially offset by higher revenue-related compensation in Home Lending; and
•lower expense allocated from enterprise functions, reflecting risk management and technology support related expenses;sale;
partially offset by:
•higher charitable donations expense due to the donation of PPP processing fees;net interest income reflecting higher interest rates and higher deposit balances, partially offset by lower loan balances;
•higher FDIC deposit assessment expense driven by a higher assessment rate.
First half ofdeposit-related fees primarily reflecting lower fee waivers and reversals as first quarter 2021 vs. first half of 2020
Revenue increased driven by:
•higher mortgage banking noninterest income dueincluded various accommodations to higher retail HFS origination volumes and margins, and higher income from MSR valuation changes and related hedges;support customers during the COVID-19 pandemic, as well as other temporary fee waivers; and
•higher card fees reflecting higher interchange fees, net of rewards, driven by increased purchase and transaction volumes, partially offset by lower late feesvolumes.
Provision for credit losses reflected reduced uncertainty around the economic impact of the COVID-19 pandemic on our loan portfolios and increased uncertainty related to the risks of high inflation.
Noninterest expense increased driven by:
•higher operating losses due to higher payment rates;customer remediation expense related to expansions of the population of affected customers, remediation payments, and/or remediation time frames predominantly for a variety of historical matters;
partially offset by:
•lower net interest income reflecting the lower interest rate environment and lower loan balances;
•lower other income driven by lower gains on loan sales; and
•lower deposit-related fees driven by higher fee waivers and reversals, as well as higher average consumer deposit account balances due to the economic slowdown associated with the COVID-19 pandemic.
Provision for credit losses decreased driven by an improving economic environment.
Noninterest expense decreased driven by:
•lower operating losses due to lower expense for litigation accruals and customer remediation accruals;
•lower personnel expense driven by a first half of 2020 that included additional payments for certain customer-facing and support employees and for back-up child care services, as well as lower branch and operations staffing expense in the first half of 2021 related to efficiency initiatives in Consumer and Small Business Banking, partially offset by higheras well as lower revenue-related incentive compensation in Home Lending;
•lower occupancy expense and professional and outside services expense related to efficiency initiatives; and
•lower advertising and promotion expense;
partially offset by:
•higher charitable donationsdonation expense due to the donation of PPP processing fees;
•higher FDIC deposit assessment expense driven by a higher assessment rate; and
•higher expense allocated from enterprise functions, reflecting risk management and technology support related expenses.
Table 5b: Consumer Banking and Lending – Balance Sheet
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter ended June 30, | | | | | | Six months ended June 30, | | | | | | | | | | |
| (in millions) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | | | | | |
| Selected Balance Sheet Data (average) | | | | | | | | | | | | | | | | | | | | | |
| Loans by Line of Business: | | | | | | | | | | | | | | | | | | | | | |
| Home Lending | $ | 223,229 | | | 262,209 | | | (38,980) | | | (15) | % | | $ | 233,078 | | | 269,518 | | | (36,440) | | | (14) | % | | | | | | |
| Auto | 50,762 | | | 49,611 | | | 1,151 | | | 2 | | | 50,143 | | | 49,552 | | | 591 | | | 1 | | | | | | | |
| Credit Card | 34,211 | | | 36,539 | | | (2,328) | | | (6) | | | 34,705 | | | 38,147 | | | (3,442) | | | (9) | | | | | | | |
| Small Business | 18,768 | | | 14,887 | | | 3,881 | | | 26 | | | 19,449 | | | 12,301 | | | 7,148 | | | 58 | | | | | | | |
| Personal Lending | 4,922 | | | 6,385 | | | (1,463) | | | (23) | | | 5,053 | | | 6,578 | | | (1,525) | | | (23) | | | | | | | |
| Total loans | $ | 331,892 | | | 369,631 | | | (37,739) | | | (10) | | | $ | 342,428 | | | 376,096 | | | (33,668) | | | (9) | | | | | | | |
| Total deposits | 835,752 | | | 715,144 | | | 120,608 | | | 17 | | | 812,723 | | | 683,925 | | | 128,798 | | | 19 | | | | | | | |
| Allocated capital | 48,000 | | | 48,000 | | | — | | | — | | | 48,000 | | | 48,000 | | | — | | | — | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Selected Balance Sheet Data (period-end) | | | | | | | | | | | | | | | | | | | | | |
| Loans by Line of Business: | | | | | | | | | | | | | | | | | | | | | |
| Home Lending | $ | 218,626 | | | 258,582 | | | (39,956) | | | (15) | | | $ | 218,626 | | | 258,582 | | | (39,956) | | | (15) | | | | | | | |
| Auto | 51,784 | | | 49,924 | | | 1,860 | | | 4 | | | 51,784 | | | 49,924 | | | 1,860 | | | 4 | | | | | | | |
| Credit Card | 34,936 | | | 36,018 | | | (1,082) | | | (3) | | | 34,936 | | | 36,018 | | | (1,082) | | | (3) | | | | | | | |
| Small Business | 16,494 | | | 18,116 | | | (1,622) | | | (9) | | | 16,494 | | | 18,116 | | | (1,622) | | | (9) | | | | | | | |
| Personal Lending | 4,920 | | | 6,113 | | | (1,193) | | | (20) | | | 4,920 | | | 6,113 | | | (1,193) | | | (20) | | | | | | | |
| Total loans | $ | 326,760 | | | 368,753 | | | (41,993) | | | (11) | | | $ | 326,760 | | | 368,753 | | | (41,993) | | | (11) | | | | | | | |
| Total deposits | 840,434 | | | 746,602 | | | 93,832 | | | 13 | | | 840,434 | | | 746,602 | | | 93,832 | | | 13 | | | | | | | |
Secondfees in first quarter 2021 vs. second quarter 2020
Total loans (average) decreased as paydowns exceeded originations. Home lending loan balances were also impacted by actions taken to suspend certain non-conforming residential mortgage and home equity originations.
Total deposits (average) increased driven by higher levels of liquidity and savings for consumer customers reflecting government stimulus programs and payment deferral programs, as well as continued economic uncertainty associated with the COVID-19 pandemic.
First half of 2021 vs. first half of 2020
Total loans (average and period-end) decreased as paydowns exceeded originations. Home lending loan balances were also impacted by actions taken to suspend certain non-conforming residential mortgage and home equity originations.
Total deposits (average and period-end) increased driven by higher levels of liquidity and savings for consumer customers reflecting government stimulus programs and payment deferral programs, as well as continued economic uncertainty associated with the COVID-19 pandemic.2021.
| | | | | | | | |
| Wells Fargo & Company | 1713 |
Earnings Performance(continued)
Table 5b: Consumer Banking and Lending – Balance Sheet
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter ended Mar 31, | | |
| (in millions) | 2022 | | 2021 | | $ Change | | % Change | | | | | | | | | | | | | | |
| Selected Balance Sheet Data (average) | | | | | | | | | | | | | | | | | | | | | |
| Loans by Line of Business: | | | | | | | | | | | | | | | | | | | | | |
| Consumer and Small Business Banking (1) | $ | 10,605 | | | 20,137 | | | (9,532) | | | (47) | % | | | | | | | | | | | | | | |
| Consumer Lending: | | | | | | | | | | | | | | | | | | | | | |
| Home Lending | 213,714 | | | 243,036 | | | (29,322) | | | (12) | | | | | | | | | | | | | | | |
| Credit Card (2) | 31,503 | | | 28,891 | | | 2,612 | | | 9 | | | | | | | | | | | | | | | |
| Auto | 57,278 | | | 49,518 | | | 7,760 | | | 16 | | | | | | | | | | | | | | | |
| Personal Lending (2) | 11,955 | | | 11,499 | | | 456 | | | 4 | | | | | | | | | | | | | | | |
| Total loans | $ | 325,055 | | | 353,081 | | | (28,026) | | | (8) | | | | | | | | | | | | | | | |
| Total deposits (1) | 881,339 | | | 789,439 | | | 91,900 | | | 12 | | | | | | | | | | | | | | | |
| Allocated capital | 48,000 | | | 48,000 | | | — | | | — | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Selected Balance Sheet Data (period-end) | | | | | | | | | | | | | | | | | | | | | |
| Loans by Line of Business: | | | | | | | | | | | | | | | | | | | | | |
| Consumer and Small Business Banking (1) | $ | 11,006 | | | 20,820 | | | (9,814) | | | (47) | | | | | | | | | | | | | | | |
| Consumer Lending: | | | | | | | | | | | | | | | | | | | | | |
| Home Lending | 215,858 | | | 230,478 | | | (14,620) | | | (6) | | | | | | | | | | | | | | | |
| Credit Card (2) | 31,974 | | | 28,035 | | | 3,939 | | | 14 | | | | | | | | | | | | | | | |
| Auto | 57,652 | | | 50,007 | | | 7,645 | | | 15 | | | | | | | | | | | | | | | |
| Personal Lending (2) | 12,068 | | | 11,209 | | | 859 | | | 8 | | | | | | | | | | | | | | | |
| Total loans | $ | 328,558 | | | 340,549 | | | (11,991) | | | (4) | | | | | | | | | | | | | | | |
| Total deposits (1) | 909,896 | | | 837,765 | | | 72,131 | | | 9 | | | | | | | | | | | | | | | |
(1)In first quarter 2022, we prospectively transferred certain customer accounts from the Commercial Banking operating segment to Small Business Banking in the Consumer Banking and Lending operating segment.
(2)In first quarter 2022, we transferred our Retail Services business from Credit Card to Personal Lending. Prior period balances have been revised to conform with the current period presentation.
First quarter 2022 vs. first quarter 2021
Total loans (average) decreased as paydowns exceeded originations in our Home Lending and Consumer and Small Business Banking businesses, partially offset by originations exceeding paydowns in our Auto and Credit Card businesses. Home Lending loan balances were impacted by the resecuritization of loans we purchased from GNMA loan securitization pools, as well as actions taken to suspend home equity originations. Consumer and Small Business Banking loan balances were impacted by a decline in PPP loans.
Total deposits (average and period-end) increased driven by higher levels of customer liquidity and savings reflecting an improved economic environment.
Commercial Banking provides financial solutions to private, family owned and certain public companies. Products and services include banking and credit products across multiple
industry sectors and municipalities, secured lending and lease products, and treasury management. In March 2021, we announced an agreement to sell our Corporate Trust Services
business and, in second quarter 2021, we moved the business from the Commercial Banking operating segment to Corporate. Prior period balances have been revised to conform with the current period presentation. Table 5c and Table 5d provide additional information for Commercial Banking.
Table 5c: Commercial Banking – Income Statement and Selected Metrics
| | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended Mar 31, | |
| ($ in millions) | ($ in millions) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | ($ in millions) | 2022 | | 2021 | | $ Change | | % Change | |
| Income Statement | Income Statement | | | Income Statement | | |
| Net interest income | Net interest income | $ | 1,202 | | | 1,554 | | | (352) | | | (23) | % | | $ | 2,456 | | | 3,287 | | | (831) | | | (25) | % | | Net interest income | $ | 1,361 | | | 1,254 | | | 107 | | | 9 | % | |
| Noninterest income: | Noninterest income: | | | Noninterest income: | | |
| Deposit-related fees | Deposit-related fees | 325 | | | 297 | | | 28 | | | 9 | | | 642 | | | 599 | | | 43 | | | 7 | | | Deposit-related fees | 328 | | | 317 | | | 11 | | | 3 | | |
| Lending-related fees | Lending-related fees | 135 | | | 125 | | | 10 | | | 8 | | | 271 | | | 253 | | | 18 | | | 7 | | | Lending-related fees | 121 | | | 136 | | | (15) | | | (11) | | |
| Lease income | Lease income | 173 | | | 189 | | | (16) | | | (8) | | | 347 | | | 387 | | | (40) | | | (10) | | | Lease income | 179 | | | 174 | | | 5 | | | 3 | | |
| Other | Other | 273 | | | 186 | | | 87 | | | 47 | | | 473 | | | 170 | | | 303 | | | 178 | | | Other | 338 | | | 200 | | | 138 | | | 69 | | |
| Total noninterest income | Total noninterest income | 906 | | | 797 | | | 109 | | | 14 | | | 1,733 | | | 1,409 | | | 324 | | | 23 | | | Total noninterest income | 966 | | | 827 | | | 139 | | | 17 | | |
| Total revenue | Total revenue | 2,108 | | | 2,351 | | | (243) | | | (10) | | | 4,189 | | | 4,696 | | | (507) | | | (11) | | | Total revenue | 2,327 | | | 2,081 | | | 246 | | | 12 | | |
| Net charge-offs | Net charge-offs | 53 | | | 120 | | | (67) | | | (56) | | | 92 | | | 290 | | | (198) | | | (68) | | | Net charge-offs | (29) | | | 39 | | | (68) | | | NM | |
| Change in the allowance for credit losses | Change in the allowance for credit losses | (435) | | | 2,175 | | | (2,610) | | | NM | | (873) | | | 3,046 | | | (3,919) | | | NM | | Change in the allowance for credit losses | (315) | | | (438) | | | 123 | | | 28 | | |
| Provision for credit losses | Provision for credit losses | (382) | | | 2,295 | | | (2,677) | | | NM | | (781) | | | 3,336 | | | (4,117) | | | NM | | Provision for credit losses | (344) | | | (399) | | | 55 | | | 14 | | |
| Noninterest expense | Noninterest expense | 1,443 | | | 1,580 | | | (137) | | | (9) | | | 3,073 | | | 3,153 | | | (80) | | | (3) | | | Noninterest expense | 1,531 | | | 1,630 | | | (99) | | | (6) | | |
| Income (loss) before income tax expense (benefit) | 1,047 | | | (1,524) | | | 2,571 | | | NM | | 1,897 | | | (1,793) | | | 3,690 | | | NM | | |
| Income tax expense (benefit) | 261 | | | (379) | | | 640 | | | NM | | 473 | | | (442) | | | 915 | | | NM | | |
| Income before income tax expense | | Income before income tax expense | 1,140 | | | 850 | | | 290 | | | 34 | | |
| Income tax expense | | Income tax expense | 280 | | | 212 | | | 68 | | | 32 | | |
| Less: Net income from noncontrolling interests | Less: Net income from noncontrolling interests | 2 | | | 1 | | | 1 | | | 100 | | 3 | | | 2 | | | 1 | | | 50 | | | Less: Net income from noncontrolling interests | 3 | | | 1 | | | 2 | | | 200 | | |
| Net income (loss) | $ | 784 | | | (1,146) | | | 1,930 | | | NM | | $ | 1,421 | | | (1,353) | | | 2,774 | | | NM | | |
| Net income | | Net income | $ | 857 | | | 637 | | | 220 | | | 35 | | |
| | Revenue by Line of Business | Revenue by Line of Business | | | Revenue by Line of Business | | |
| Middle Market Banking | Middle Market Banking | $ | 1,151 | | | 1,267 | | | (116) | | | (9) | | | $ | 2,310 | | | 2,722 | | | (412) | | | (15) | | | Middle Market Banking | $ | 1,246 | | | 1,159 | | | 87 | | | 8 | | |
| Asset-Based Lending and Leasing | Asset-Based Lending and Leasing | 957 | | | 1,084 | | | (127) | | | (12) | | | 1,879 | | | 1,974 | | | (95) | | | (5) | | | Asset-Based Lending and Leasing | 1,081 | | | 922 | | | 159 | | | 17 | | |
| Total revenue | Total revenue | $ | 2,108 | | | 2,351 | | | (243) | | | (10) | | | $ | 4,189 | | | 4,696 | | | (507) | | | (11) | | | Total revenue | $ | 2,327 | | | 2,081 | | | 246 | | | 12 | | |
| | Revenue by Product | Revenue by Product | | | Revenue by Product | | |
| Lending and leasing | Lending and leasing | $ | 1,207 | | | 1,404 | | | (197) | | | (14) | | | $ | 2,409 | | | 2,835 | | | (426) | | | (15) | | | Lending and leasing | $ | 1,255 | | | 1,202 | | | 53 | | | 4 | | |
| Treasury management and payments | Treasury management and payments | 680 | | | 780 | | | (100) | | | (13) | | | 1,401 | | | 1,723 | | | (322) | | | (19) | | | Treasury management and payments | 779 | | | 721 | | | 58 | | | 8 | | |
| Other | Other | 221 | | | 167 | | | 54 | | | 32 | | | 379 | | | 138 | | | 241 | | | 175 | | | Other | 293 | | | 158 | | | 135 | | | 85 | | |
| Total revenue | Total revenue | $ | 2,108 | | | 2,351 | | | (243) | | | (10) | | | $ | 4,189 | | | 4,696 | | | (507) | | | (11) | | | Total revenue | $ | 2,327 | | | 2,081 | | | 246 | | | 12 | | |
| | Selected Metrics | Selected Metrics | | | Selected Metrics | | |
| Return on allocated capital | Return on allocated capital | 15.2 | % | | (24.7) | | | 13.8 | % | | (15.0) | | | | Return on allocated capital | 16.9 | % | | 12.3 | | | |
| Efficiency ratio | Efficiency ratio | 68 | | | 67 | | | 73 | | | 67 | | | | Efficiency ratio | 66 | | | 78 | | | |
| Headcount (#) (period-end) | Headcount (#) (period-end) | 19,647 | | | 21,984 | | | (11) | | | 19,647 | | | 21,984 | | (11) | | | Headcount (#) (period-end) | 17,360 | | | 20,486 | | | (15) | | |
NM – Not meaningful
SecondFirst quarter 20212022 vs. secondfirst quarter 20202021
Revenue decreasedincreased driven by:
•lowerhigher net interest income reflecting lowerhigher interest rates, as well as higher loan balances and the lower interest rate environment;deposit balances; and
partially offset by:
•higher other noninterest income due to higher unrealized gains on equity securities and higher income from renewable energy investments; and
•higher deposit-related fees due to higher treasury management fees, driven by an increase in transaction service volumes and repricing.investments.
Provision for credit losses decreased driven by an improvingreflected lower net charge-offs, reduced uncertainty around the economic environment.impact of the COVID-19 pandemic on our loan portfolios, and increased uncertainty related to the risks of high inflation.
Noninterest expense decreased driven by:
•lower spending relateddue to efficiency initiatives, including lower personnel expense from reduced headcount;headcount, as well as lower occupancy expense;
•lower lease expense reflectingdriven by lower depreciation expense from a reduction in the size of the operating lease asset portfolio;
•lower professional and outside services expense reflecting decreased project-related expense; and
•lower expenses allocated from enterprise functions, including lower technology expenses.
First half of 2021 vs. first half of 2020
Revenue decreased driven by:
•lower net interest income reflecting the lower interest rate environment and lower loan balances; and
•lower lease income reflecting a reduction in the size of the operating lease asset portfolio;
partially offset by:
•higher other noninterest income due to gains on equity securities, impairments on equity securities in first quarter 2020, and higher income from renewable energy investments; and
•higher deposit-related fees due to higher treasury management fees, driven by a lower earnings credit rate due to the lower interest rate environment and repricing.
Provision for credit losses decreased driven by an improving economic environment.
Noninterest expense decreased driven by:
•lower spending related to efficiency initiatives, including lower personnel expense from reduced headcount;
•lower lease expense reflecting a reduction in the size of theour operating lease asset portfolio; and
•lower professional and outside services expense reflecting decreased project-related expense;
partially offset by:
•higher expensesoperating losses due to lower allocations of shared expenses with other lines of business.
Table 5d:Commercial Banking – Balance Sheet
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter ended June 30, | | | | | | Six months ended June 30, | | | | | | | | | | |
| (in millions) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | | | | | |
| Selected Balance Sheet Data (average) | | | | | | | | | | | | | | | | | | | | | |
| Loans: | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | $ | 117,585 | | | 158,982 | | | (41,397) | | | (26) | % | | $ | 119,248 | | | 156,645 | | | (37,397) | | | (24) | % | | | | | | |
| Commercial real estate | 47,203 | | | 53,157 | | | (5,954) | | | (11) | | | 47,885 | | | 53,223 | | | (5,338) | | | (10) | | | | | | | |
| Lease financing and other | 13,784 | | | 16,284 | | | (2,500) | | | (15) | | | 13,712 | | | 16,773 | | | (3,061) | | | (18) | | | | | | | |
| Total loans | $ | 178,572 | | | 228,423 | | | (49,851) | | | (22) | | | $ | 180,845 | | | 226,641 | | | (45,796) | | | (20) | | | | | | | |
| Loans by Line of Business: | | | | | | | | | | | | | | | | | | | | | |
| Middle Market Banking | $ | 102,054 | | | 122,319 | | | (20,265) | | | (17) | | | $ | 103,210 | | | 119,276 | | | (16,066) | | | (13) | | | | | | | |
| Asset-Based Lending and Leasing | 76,518 | | | 106,104 | | | (29,586) | | | (28) | | | 77,635 | | | 107,365 | | | (29,730) | | | (28) | | | | | | | |
| Total loans | $ | 178,572 | | | 228,423 | | | (49,851) | | | (22) | | | $ | 180,845 | | | 226,641 | | | (45,796) | | | (20) | | | | | | | |
| Total deposits | 192,586 | | | 184,132 | | | 8,454 | | | 5 | | | 190,984 | | | 175,929 | | | 15,055 | | | 9 | | | | | | | |
| Allocated capital | 19,500 | | | 19,500 | | | — | | | — | | | 19,500 | | | 19,500 | | — | | | — | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Selected Balance Sheet Data (period-end) | | | | | | | | | | | | | | | | | | | | | |
| Loans: | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | $ | 117,782 | | | 142,315 | | | (24,533) | | | (17) | | | $ | 117,782 | | | 142,315 | | | (24,533) | | | (17) | | | | | | | |
| Commercial real estate | 46,905 | | | 52,802 | | | (5,897) | | | (11) | | | 46,905 | | | 52,802 | | | (5,897) | | | (11) | | | | | | | |
| Lease financing and other | 14,218 | | | 15,662 | | | (1,444) | | | (9) | | | 14,218 | | | 15,662 | | | (1,444) | | | (9) | | | | | | | |
| Total loans | $ | 178,905 | | | 210,779 | | | (31,874) | | | (15) | | | $ | 178,905 | | | 210,779 | | | (31,874) | | | (15) | | | | | | | |
| Loans by Line of Business: | | | | | | | | | | | | | | | | | | | | | |
| Middle Market Banking | $ | 102,062 | | | 115,105 | | | (13,043) | | | (11) | | | $ | 102,062 | | | 115,105 | | | (13,043) | | | (11) | | | | | | | |
| Asset-Based Lending and Leasing | 76,843 | | | 95,674 | | | (18,831) | | | (20) | | | 76,843 | | | 95,674 | | | (18,831) | | | (20) | | | | | | | |
| Total loans | $ | 178,905 | | | 210,779 | | | (31,874) | | | (15) | | | $ | 178,905 | | | 210,779 | | | (31,874) | | | (15) | | | | | | | |
| Total deposits | 197,461 | | | 183,085 | | | 14,376 | | | 8 | | | 197,461 | | | 183,085 | | | 14,376 | | | 8 | | | | | | | |
Second quarter 2021 vs. second quarter 2020
Total loans (average) decreased driven by lower loan demand, including lower line utilization,litigation expense and higher paydowns reflecting continued high levels of client liquidity and strength in the capital markets.
Total deposits (average) increased due to higher levels of liquidity and lower investment spending reflecting government stimulus programs and continued economic uncertainty associated with the COVID-19 pandemic.
First half of 2021 vs. first half of 2020
Total loans (average and period-end) decreased driven by lower loan demand, including lower line utilization, and higher paydowns reflecting continued high levels of client liquidity and strength in the capital markets.
Total deposits (average and period-end) increased due to higher levels of liquidity and lower investment spending reflecting government stimulus programs and continued economic uncertainty associated with the COVID-19 pandemic.customer remediation expense.
| | | | | | | | |
| Wells Fargo & Company | 1915 |
Earnings Performance(continued)
Table 5d:Commercial Banking – Balance Sheet
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter ended Mar 31, | | |
| (in millions) | 2022 | | 2021 | | $ Change | | % Change | | | | | | | | | | | | | | |
| Selected Balance Sheet Data (average) | | | | | | | | | | | | | | | | | | | | | |
| Loans: | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial (1) | $ | 135,792 | | | 120,929 | | | 14,863 | | | 12 | % | | | | | | | | | | | | | | |
| Commercial real estate (1) | 45,053 | | | 48,574 | | | (3,521) | | | (7) | | | | | | | | | | | | | | | |
| Lease financing and other | 13,550 | | | 13,640 | | | (90) | | | (1) | | | | | | | | | | | | | | | |
| Total loans | $ | 194,395 | | | 183,143 | | | 11,252 | | | 6 | | | | | | | | | | | | | | | |
| Loans by Line of Business: | | | | | | | | | | | | | | | | | | | | | |
| Middle Market Banking (1) | $ | 108,583 | | | 104,379 | | | 4,204 | | | 4 | | | | | | | | | | | | | | | |
| Asset-Based Lending and Leasing | 85,812 | | | 78,764 | | | 7,048 | | | 9 | | | | | | | | | | | | | | | |
| Total loans | $ | 194,395 | | | 183,143 | | | 11,252 | | | 6 | | | | | | | | | | | | | | | |
| Total deposits (1) | 200,699 | | | 189,364 | | | 11,335 | | | 6 | | | | | | | | | | | | | | | |
| Allocated capital | 19,500 | | | 19,500 | | | — | | | — | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Selected Balance Sheet Data (period-end) | | | | | | | | | | | | | | | | | | | | | |
| Loans: | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial (1) | $ | 140,932 | | | 119,322 | | | 21,610 | | | 18 | | | | | | | | | | | | | | | |
| Commercial real estate (1) | 44,428 | | | 47,832 | | | (3,404) | | | (7) | | | | | | | | | | | | | | | |
| Lease financing and other | 13,473 | | | 13,534 | | | (61) | | | — | | | | | | | | | | | | | | | |
| Total loans | $ | 198,833 | | | 180,688 | | | 18,145 | | | 10 | | | | | | | | | | | | | | | |
| Loans by Line of Business: | | | | | | | | | | | | | | | | | | | | | |
| Middle Market Banking (1) | $ | 110,258 | | | 102,372 | | | 7,886 | | | 8 | | | | | | | | | | | | | | | |
| Asset-Based Lending and Leasing | 88,575 | | | 78,316 | | | 10,259 | | | 13 | | | | | | | | | | | | | | | |
| Total loans | $ | 198,833 | | | 180,688 | | | 18,145 | | | 10 | | | | | | | | | | | | | | | |
| Total deposits (1) | 195,549 | | | 191,948 | | | 3,601 | | | 2 | | | | | | | | | | | | | | | |
(1)In first quarter 2022, we prospectively transferred certain customer accounts from the Commercial Banking operating segment to Small Business Banking in the Consumer Banking and Lending operating segment.
First quarter 2022 vs. first quarter 2021
Total loans (average and period-end) increased driven by higher loan demand, including higher line utilization, and customer growth.
Total deposits (average and period-end) increased due to higher levels of customer liquidity and rising interest rates, partially offset by the transfer of certain customer accounts to the Consumer Banking and Lending operating segment in first quarter 2022.
Corporate and Investment Banking delivers a suite of capital markets, banking, and financial products and services to corporate, commercial real estate, government and institutional clients globally. Products and services include corporate banking, investment banking, treasury management, commercial real
estate lending and servicing, equity and fixed income solutions, as well as sales, trading, and research capabilities. Table 5e and Table 5f provide additional information for Corporate and Investment Banking.
Table 5e: Corporate and Investment Banking – Income Statement and Selected Metrics
| | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended Mar 31, | |
| ($ in millions) | ($ in millions) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | ($ in millions) | 2022 | | 2021 | | $ Change | | % Change | |
| Income Statement | Income Statement | | | Income Statement | | |
| Net interest income | Net interest income | $ | 1,783 | | | 1,963 | | | (180) | | | (9) | % | | $ | 3,562 | | | 3,984 | | | (422) | | | (11) | % | | Net interest income | $ | 1,990 | | | 1,779 | | | 211 | | | 12 | % | |
| Noninterest income: | Noninterest income: | | | Noninterest income: | | |
| Deposit-related fees | Deposit-related fees | 277 | | | 261 | | | 16 | | | 6 | | | 543 | | | 518 | | | 25 | | | 5 | | | Deposit-related fees | 293 | | | 266 | | | 27 | | | 10 | | |
| Lending-related fees | Lending-related fees | 190 | | | 163 | | | 27 | | | 17 | | | 373 | | | 335 | | | 38 | | | 11 | | | Lending-related fees | 185 | | | 183 | | | 2 | | | 1 | | |
| Investment banking fees | Investment banking fees | 580 | | | 588 | | | (8) | | | (1) | | | 1,191 | | | 1,065 | | | 126 | | | 12 | | | Investment banking fees | 462 | | | 611 | | | (149) | | | (24) | | |
| Net gains from trading activities | Net gains from trading activities | 30 | | | 809 | | | (779) | | | (96) | | | 361 | | | 844 | | | (483) | | | (57) | | | Net gains from trading activities | 228 | | | 331 | | | (103) | | | (31) | | |
| Other | Other | 478 | | | 275 | | | 203 | | | 74 | | | 912 | | | 721 | | | 191 | | | 26 | | | Other | 312 | | | 434 | | | (122) | | | (28) | | |
| Total noninterest income | Total noninterest income | 1,555 | | | 2,096 | | | (541) | | | (26) | | | 3,380 | | | 3,483 | | | (103) | | | (3) | | | Total noninterest income | 1,480 | | | 1,825 | | | (345) | | | (19) | | |
| Total revenue | Total revenue | 3,338 | | | 4,059 | | | (721) | | | (18) | | | 6,942 | | | 7,467 | | | (525) | | | (7) | | | Total revenue | 3,470 | | | 3,604 | | | (134) | | | (4) | | |
| Net charge-offs | Net charge-offs | (19) | | | 401 | | | (420) | | | NM | | 18 | | | 448 | | | (430) | | | (96) | | | Net charge-offs | (31) | | | 37 | | | (68) | | | NM | |
| Change in the allowance for credit losses | Change in the allowance for credit losses | (482) | | | 3,355 | | | (3,837) | | | NM | | (803) | | | 4,433 | | | (5,236) | | | NM | | Change in the allowance for credit losses | (165) | | | (321) | | | 156 | | | 49 | | |
| Provision for credit losses | Provision for credit losses | (501) | | | 3,756 | | | (4,257) | | | NM | | (785) | | | 4,881 | | | (5,666) | | | NM | | Provision for credit losses | (196) | | | (284) | | | 88 | | | 31 | | |
| Noninterest expense | Noninterest expense | 1,805 | | | 2,044 | | | (239) | | | (12) | | | 3,638 | | | 3,914 | | | (276) | | | (7) | | | Noninterest expense | 1,983 | | | 1,833 | | | 150 | | | 8 | | |
| Income (loss) before income tax expense (benefit) | 2,034 | | | (1,741) | | | 3,775 | | | NM | | 4,089 | | | (1,328) | | | 5,417 | | | NM | | |
| Income tax expense (benefit) | 513 | | | (408) | | | 921 | | | NM | | 1,013 | | | (307) | | | 1,320 | | | NM | | |
| Less: Net loss from noncontrolling interests | (2) | | | — | | | (2) | | | NM | | (2) | | | — | | | (2) | | | NM | | |
| Net income (loss) | $ | 1,523 | | | (1,333) | | | 2,856 | | | NM | | $ | 3,078 | | | (1,021) | | | 4,099 | | | NM | | |
| Income before income tax expense | | Income before income tax expense | 1,683 | | | 2,055 | | | (372) | | | (18) | | |
| Income tax expense | | Income tax expense | 425 | | | 500 | | | (75) | | | (15) | | |
| | Net income | | Net income | $ | 1,258 | | | 1,555 | | | (297) | | | (19) | | |
| | Revenue by Line of Business | Revenue by Line of Business | | | Revenue by Line of Business | | |
| Banking: | Banking: | | | Banking: | | |
| Lending | Lending | $ | 474 | | | 464 | | | 10 | | | 2 | | | $ | 927 | | | 921 | | | 6 | | | 1 | | | Lending | $ | 521 | | | 453 | | | 68 | | | 15 | | |
| Treasury Management and Payments | Treasury Management and Payments | 353 | | | 403 | | | (50) | | | (12) | | | 723 | | | 901 | | | (178) | | | (20) | | | Treasury Management and Payments | 432 | | | 370 | | | 62 | | | 17 | | |
| Investment Banking | Investment Banking | 407 | | | 444 | | | (37) | | | (8) | | | 823 | | | 805 | | | 18 | | | 2 | | | Investment Banking | 331 | | | 416 | | | (85) | | | (20) | | |
| Total Banking | Total Banking | 1,234 | | | 1,311 | | | (77) | | | (6) | | | 2,473 | | | 2,627 | | | (154) | | | (6) | | | Total Banking | 1,284 | | | 1,239 | | | 45 | | | 4 | | |
| Commercial Real Estate | Commercial Real Estate | 1,014 | | | 837 | | | 177 | | | 21 | | | 1,926 | | | 1,740 | | | 186 | | | 11 | | | Commercial Real Estate | 995 | | | 912 | | | 83 | | | 9 | | |
| Markets: | Markets: | | | Markets: | | |
| Fixed Income, Currencies, and Commodities (FICC) | Fixed Income, Currencies, and Commodities (FICC) | 888 | | | 1,506 | | | (618) | | | (41) | | | 2,032 | | | 2,420 | | | (388) | | | (16) | | | Fixed Income, Currencies, and Commodities (FICC) | 877 | | | 1,144 | | | (267) | | | (23) | | |
| Equities | Equities | 206 | | | 302 | | | (96) | | | (32) | | | 458 | | | 698 | | | (240) | | | (34) | | | Equities | 267 | | | 252 | | | 15 | | | 6 | | |
| Credit Adjustment (CVA/DVA) and Other | Credit Adjustment (CVA/DVA) and Other | (16) | | | 139 | | | (155) | | | NM | | 20 | | | 31 | | | (11) | | | (35) | | | Credit Adjustment (CVA/DVA) and Other | 25 | | | 36 | | | (11) | | | (31) | | |
| Total Markets | Total Markets | 1,078 | | | 1,947 | | | (869) | | | (45) | | | 2,510 | | | 3,149 | | | (639) | | | (20) | | | Total Markets | 1,169 | | | 1,432 | | | (263) | | | (18) | | |
| Other | Other | 12 | | | (36) | | | 48 | | | NM | | 33 | | | (49) | | | 82 | | | NM | | Other | 22 | | | 21 | | | 1 | | | 5 | | |
| Total revenue | Total revenue | $ | 3,338 | | | 4,059 | | | (721) | | | (18) | | | $ | 6,942 | | | 7,467 | | | (525) | | | (7) | | | Total revenue | $ | 3,470 | | | 3,604 | | | (134) | | | (4) | | |
| | Selected Metrics | Selected Metrics | | | Selected Metrics | | |
| Return on allocated capital | Return on allocated capital | 17.0 | % | | (16.8) | | | 17.3 | % | | (7.1) | | | | | Return on allocated capital | 13.2 | % | | 17.6 | | | |
| Efficiency ratio | Efficiency ratio | 54 | | | 50 | | | 52 | | | 52 | | | | Efficiency ratio | 57 | | | 51 | | | |
| Headcount (#) (period-end) | Headcount (#) (period-end) | 8,673 | | | 8,213 | | | 6 | | | 8,673 | | | 8,213 | | 6 | | | Headcount (#) (period-end) | 8,416 | | | 8,249 | | | 2 | | |
NM – Not meaningful
SecondFirst quarter 20212022 vs. secondfirst quarter 20202021
Revenue decreased driven by:
•lower net gains from trading activities reflecting fewer gains in asset-backed finance and credit products due to limited credit spread movement compared with a second quarter 2020 that reflected gains driven by volatility in credit spreads from the impact of the COVID-19 pandemic; and
•lower net interest income reflecting the lower interest rate environment, lower deposit balances, and lower trading-related assets;
partially offset by:
•higher other noninterest income driven by higher mortgageinvestment banking income due to higher servicing income, reflecting a reversal of an impairment of commercial MSRs in second quarter 2021, compared with the related impairment recorded in second quarter 2020, as well as higher gains on the sales of mortgage loans;
•higher income from low income housing and equity investments; and
•higher deposit and lending-related fees reflecting growth in treasury management service charges and increased commitment fees related to revolver utilization.
Provision for credit losses decreased driven by an improving economic environment.
Noninterest expense decreased driven by:
•lower operating losses due to lower expense for litigation accrualsdebt and customer remediation accruals; and
•equity underwriting fees as a result of lower expenses allocated from enterprise functions reflecting lower spending due to efficiency initiatives;
partially offset by:
•higher personnel expense driven by higher incentive compensation.
First half of 2021 vs. first half of 2020
Revenue decreased driven by:market activity;
•lower net gains from trading activities driven by lower client trading activity for interest ratein residential mortgage-backed securities and high yield products, equities, and commodities, partially offset by higher clientforeign exchange, rates, and commodities trading activity for asset-backed finance products;revenue; and
•lower net interestother noninterest income reflecting thedriven by lower interest rate environment,commercial mortgage banking income due to lower deposit balances,gain on sale volumes and lower trading-related assets;margins, partially offset by higher income in our low-income housing business;
partially offset by:
•higher investment banking fees due tonet interest income reflecting higher loan syndication fees, advisory fees,balances and equity underwriting fees;
•higher other noninterest income driven by higher mortgage banking income due to higher servicing income, reflecting a reversal of an impairment of commercial MSRs in the first half of 2021, compared with the related impairment recorded in the first half of 2020, as well as higher gains on the sales of mortgage loans; and
•higher income from low income housing and equity investments.
Provision for credit losses decreased driven by an improving economic environment.
Noninterest expense decreased driven by:
•lower operating losses due to lower expense for litigation accruals and customer remediation accruals;
•lower expenses allocated from enterprise functions reflecting lower spending due to efficiency initiatives;
•lower professional and outside services expense reflecting decreased project-related expense; and
•a reduction in business travel and company events due to the impact of the COVID-19 pandemic;
deposit spreads, partially offset by:
•higher personnel expense driven by higher incentive compensation.lower deposit balances.
| | | | | | | | |
| Wells Fargo & Company | 2117 |
Earnings Performance(continued)
Provision for credit losses reflected lower net charge-offs, reduced uncertainty around the economic impact of the COVID-19 pandemic on our loan portfolios, and increased uncertainty related to the risks of high inflation.
Noninterest expense increased driven by higher personnel expense due to higher incentive compensation expense.
Table 5f: Corporate and Investment Banking – Balance Sheet
| | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended Mar 31, | |
| (in millions) | (in millions) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | (in millions) | 2022 | | 2021 | | $ Change | | % Change | |
| Selected Balance Sheet Data (average) | Selected Balance Sheet Data (average) | | | Selected Balance Sheet Data (average) | | |
| Loans: | Loans: | | | Loans: | | |
| Commercial and industrial | Commercial and industrial | $ | 167,076 | | | 190,861 | | | (23,785) | | | (12) | % | | $ | 164,696 | | | 184,558 | | | (19,862) | | | (11) | % | | Commercial and industrial | $ | 191,152 | | | 162,290 | | | 28,862 | | | 18 | % | |
| Commercial real estate | Commercial real estate | 85,346 | | | 82,726 | | | 2,620 | | | 3 | | | 84,606 | | | 81,357 | | | 3,249 | | | 4 | | | Commercial real estate | 93,346 | | | 83,858 | | | 9,488 | | | 11 | | |
| Total loans | Total loans | $ | 252,422 | | | 273,587 | | | (21,165) | | | (8) | | | $ | 249,302 | | | 265,915 | | | (16,613) | | | (6) | | | Total loans | $ | 284,498 | | | 246,148 | | | 38,350 | | | 16 | | |
| Loans by Line of Business: | Loans by Line of Business: | | | | | | Loans by Line of Business: | | | |
| Banking | Banking | $ | 90,839 | | | 105,983 | | | (15,144) | | | (14) | | | $ | 88,699 | | | 101,414 | | | (12,715) | | | (13) | | | Banking | $ | 102,485 | | | 86,536 | | | 15,949 | | | 18 | | |
| Commercial Real Estate | Commercial Real Estate | 108,893 | | | 110,594 | | | (1,701) | | | (2) | | | 108,255 | | | 107,894 | | | 361 | | | — | | | Commercial Real Estate | 126,248 | | | 107,609 | | | 18,639 | | | 17 | | |
| Markets | Markets | 52,690 | | | 57,010 | | | (4,320) | | | (8) | | | 52,348 | | | 56,607 | | | (4,259) | | | (8) | | | Markets | 55,765 | | | 52,003 | | | 3,762 | | | 7 | | |
| Total loans | Total loans | $ | 252,422 | | | 273,587 | | | (21,165) | | | (8) | | | $ | 249,302 | | | 265,915 | | | (16,613) | | | (6) | | | Total loans | $ | 284,498 | | | 246,148 | | | 38,350 | | | 16 | | |
| Trading-related assets: | Trading-related assets: | | | | | | Trading-related assets: | | | |
| Trading account securities | Trading account securities | $ | 104,743 | | | 106,836 | | | (2,093) | | | (2) | | | $ | 105,546 | | | 115,082 | | | (9,536) | | | (8) | | | Trading account securities | $ | 115,687 | | | 106,358 | | | 9,329 | | | 9 | | |
| Reverse repurchase agreements/securities borrowed | Reverse repurchase agreements/securities borrowed | 62,066 | | | 70,335 | | | (8,269) | | | (12) | | | 63,010 | | | 79,734 | | | (16,724) | | | (21) | | | Reverse repurchase agreements/securities borrowed | 54,832 | | | 63,965 | | | (9,133) | | | (14) | | |
| Derivative assets | Derivative assets | 24,731 | | | 22,380 | | | 2,351 | | | 11 | | | 25,910 | | | 20,332 | | | 5,578 | | | 27 | | | Derivative assets | 26,244 | | | 27,102 | | | (858) | | | (3) | | |
| Total trading-related assets | Total trading-related assets | $ | 191,540 | | | 199,551 | | | (8,011) | | | (4) | | | $ | 194,466 | | | 215,148 | | | (20,682) | | | (10) | | | Total trading-related assets | $ | 196,763 | | | 197,425 | | | (662) | | | — | | |
| Total assets | Total assets | 513,414 | | | 535,298 | | | (21,884) | | | (4) | | | 512,476 | | | 543,455 | | | (30,979) | | | (6) | | | Total assets | 551,404 | | | 511,528 | | | 39,876 | | | 8 | | |
| Total deposits | Total deposits | 190,810 | | | 239,637 | | | (48,827) | | | (20) | | | 192,645 | | | 252,902 | | | (60,257) | | | (24) | | | Total deposits | 169,181 | | | 194,501 | | | (25,320) | | | (13) | | |
| Allocated capital | Allocated capital | 34,000 | | | 34,000 | | | — | | | — | | | 34,000 | | | 34,000 | | | — | | | — | | | Allocated capital | 36,000 | | | 34,000 | | | 2,000 | | | 6 | | |
| | Selected Balance Sheet Data (period-end) | Selected Balance Sheet Data (period-end) | | | Selected Balance Sheet Data (period-end) | | |
| Loans: | Loans: | | | Loans: | | |
| Commercial and industrial | Commercial and industrial | $ | 166,969 | | | 171,859 | | | (4,890) | | | (3) | | | $ | 166,969 | | | 171,859 | | | (4,890) | | | (3) | | | Commercial and industrial | $ | 194,201 | | | 163,808 | | | 30,393 | | | 19 | | |
| Commercial real estate | Commercial real estate | 86,290 | | | 83,715 | | | 2,575 | | | 3 | | | 86,290 | | | 83,715 | | | 2,575 | | | 3 | | | Commercial real estate | 96,426 | | | 84,836 | | | 11,590 | | | 14 | | |
| Total loans | Total loans | $ | 253,259 | | | 255,574 | | | (2,315) | | | (1) | | | $ | 253,259 | | | 255,574 | | | (2,315) | | | (1) | | | Total loans | $ | 290,627 | | | 248,644 | | | 41,983 | | | 17 | | |
| Loans by Line of Business: | Loans by Line of Business: | | | | | | Loans by Line of Business: | | | |
| Banking | Banking | $ | 92,758 | | | 91,093 | | | 1,665 | | | 2 | | | $ | 92,758 | | | 91,093 | | | 1,665 | | | 2 | | | Banking | $ | 107,081 | | | 88,042 | | | 19,039 | | | 22 | | |
| Commercial Real Estate | Commercial Real Estate | 108,885 | | | 109,402 | | | (517) | | | — | | | 108,885 | | | 109,402 | | | (517) | | | — | | | Commercial Real Estate | 129,375 | | | 108,508 | | | 20,867 | | | 19 | | |
| Markets | Markets | 51,616 | | | 55,079 | | | (3,463) | | | (6) | | | 51,616 | | | 55,079 | | | (3,463) | | | (6) | | | Markets | 54,171 | | | 52,094 | | | 2,077 | | | 4 | | |
| Total loans | Total loans | $ | 253,259 | | | 255,574 | | | (2,315) | | | (1) | | | $ | 253,259 | | | 255,574 | | | (2,315) | | | (1) | | | Total loans | $ | 290,627 | | | 248,644 | | | 41,983 | | | 17 | | |
| Trading-related assets: | Trading-related assets: | | | | | | Trading-related assets: | | | |
| Trading account securities | Trading account securities | $ | 108,291 | | | 97,708 | | | 10,583 | | | 11 | | | $ | 108,291 | | | 97,708 | | | 10,583 | | | 11 | | | Trading account securities | $ | 113,763 | | | 100,586 | | | 13,177 | | | 13 | | |
| Reverse repurchase agreements/securities borrowed | Reverse repurchase agreements/securities borrowed | 57,351 | | | 70,949 | | | (13,598) | | | (19) | | | 57,351 | | | 70,949 | | | (13,598) | | | (19) | | | Reverse repurchase agreements/securities borrowed | 57,579 | | | 71,282 | | | (13,703) | | | (19) | | |
| Derivative assets | Derivative assets | 25,288 | | | 22,757 | | | 2,531 | | | 11 | | | 25,288 | | | 22,757 | | | 2,531 | | | 11 | | | Derivative assets | 26,695 | | | 24,228 | | | 2,467 | | | 10 | | |
| Total trading-related assets | Total trading-related assets | $ | 190,930 | | | 191,414 | | | (484) | | | — | | | $ | 190,930 | | | 191,414 | | | (484) | | | — | | | Total trading-related assets | $ | 198,037 | | | 196,096 | | | 1,941 | | | 1 | | |
| Total assets | Total assets | 516,518 | | | 510,205 | | | 6,313 | | | 1 | | | 516,518 | | | 510,205 | | | 6,313 | | | 1 | | | Total assets | 564,976 | | | 512,045 | | | 52,931 | | | 10 | | |
| Total deposits | Total deposits | 188,219 | | | 236,620 | | | (48,401) | | | (20) | | | 188,219 | | | 236,620 | | | (48,401) | | | (20) | | | Total deposits | 168,467 | | | 188,920 | | | (20,453) | | | (11) | | |
SecondFirst quarter 20212022 vs. secondfirst quarter 20202021
Total assets (average)(average and period-end) decreased predominantly due to a decline inincreased reflecting higher loan balances driven by lower demandgrowth in commercial loan originations and usage of lines of credit due to the COVID-19 pandemic and higher paydowns reflecting continued high levels of client liquidity and strength in the capital markets.
Total deposits (average) decreased reflecting continued actions to manage under the asset cap.
First half of 2021 vs. first half of 2020
Total assets (average) decreased predominantly due to a decline in trading-related assets reflecting continued actions to manage under the asset cap and a decline in loan balances driven by lower demand due to the COVID-19 pandemic and higher paydowns reflecting continued high levels of client liquidity and strength in the capital markets.increased corporate spending.
Total deposits (average and period-end) decreased reflecting continued actions to manage under the asset cap.
| | | | | | | | |
2218 | Wells Fargo & Company | |
Wealth and Investment Management provides personalized wealth management, investmentbrokerage, financial planning, lending, private banking, trust and retirementfiduciary products and services to clients across U.S.-based businesses including Wells Fargo Advisors and The Private Bank. We serve clients’
brokerage needs, and deliver financial planning, private banking, credit, and fiduciary services toaffluent, high-net worth and ultra-high-net worth individualsclients. We operate through financial advisors in our brokerage and families.wealth
offices, consumer bank branches, independent offices, and digitally through WellsTrade® and Intuitive Investor®. Table 5g and Table 5h provide additional information for Wealth and Investment Management.
Table 5g: Wealth and Investment Management
| | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended Mar 31, | |
| ($ in millions, unless otherwise noted) | ($ in millions, unless otherwise noted) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | ($ in millions, unless otherwise noted) | 2022 | | 2021 | | $ Change | | % Change | |
| Income Statement | Income Statement | | | Income Statement | | |
| Net interest income | Net interest income | $ | 610 | | | 719 | | | (109) | | | (15) | % | | $ | 1,267 | | | 1,557 | | | (290) | | | (19) | % | | Net interest income | $ | 799 | | | 657 | | | 142 | | | 22 | % | |
| Noninterest income: | Noninterest income: | | | Noninterest income: | | |
| Investment advisory and other asset-based fees | Investment advisory and other asset-based fees | 2,382 | | | 1,835 | | | 547 | | | 30 | | | 4,688 | | | 3,908 | | | 780 | | | 20 | | | Investment advisory and other asset-based fees | 2,476 | | | 2,306 | | | 170 | | | 7 | | |
| Commissions and brokerage services fees | Commissions and brokerage services fees | 513 | | | 470 | | | 43 | | | 9 | | | 1,068 | | | 1,063 | | | 5 | | | — | | | Commissions and brokerage services fees | 454 | | | 555 | | | (101) | | | (18) | | |
| Other | Other | 31 | | | 182 | | | (151) | | | (83) | | | 57 | | | (52) | | | 109 | | | NM | | Other | 28 | | | 26 | | | 2 | | | 8 | | |
| Total noninterest income | Total noninterest income | 2,926 | | | 2,487 | | | 439 | | | 18 | | | 5,813 | | | 4,919 | | | 894 | | | 18 | | | Total noninterest income | 2,958 | | | 2,887 | | | 71 | | | 2 | | |
| Total revenue | Total revenue | 3,536 | | | 3,206 | | | 330 | | | 10 | | | 7,080 | | | 6,476 | | | 604 | | | 9 | | | Total revenue | 3,757 | | | 3,544 | | | 213 | | | 6 | | |
| Net charge-offs | Net charge-offs | (6) | | | 1 | | | (7) | | | NM | | (6) | | | 2 | | | (8) | | | NM | | Net charge-offs | (4) | | | — | | | (4) | | | NM | |
| Change in the allowance for credit losses | Change in the allowance for credit losses | 30 | | | 254 | | | (224) | | | (88) | | (13) | | | 261 | | | (274) | | | NM | | Change in the allowance for credit losses | (33) | | | (43) | | | 10 | | | 23 | | |
| Provision for credit losses | Provision for credit losses | 24 | | | 255 | | | (231) | | | (91) | | (19) | | | 263 | | | (282) | | | NM | | Provision for credit losses | (37) | | | (43) | | | 6 | | | 14 | | |
| Noninterest expense | Noninterest expense | 2,891 | | | 2,743 | | | 148 | | | 5 | | | 5,919 | | | 5,400 | | | 519 | | | 10 | | | Noninterest expense | 3,175 | | | 3,028 | | | 147 | | | 5 | | |
| Income before income tax expense | Income before income tax expense | 621 | | | 208 | | | 413 | | | 199 | | | 1,180 | | | 813 | | | 367 | | | 45 | | | Income before income tax expense | 619 | | | 559 | | | 60 | | | 11 | | |
| Income tax expense | Income tax expense | 156 | | | 52 | | | 104 | | | 200 | | | 296 | | | 204 | | | 92 | | | 45 | | | Income tax expense | 154 | | | 140 | | | 14 | | | 10 | | |
| | Net income | Net income | $ | 465 | | | 156 | | | 309 | | | 198 | | | $ | 884 | | | 609 | | | 275 | | | 45 | | | Net income | $ | 465 | | | 419 | | | 46 | | | 11 | | |
| | Selected Metrics | Selected Metrics | | | | Selected Metrics | | |
| Return on allocated capital | Return on allocated capital | 20.7 | % | | 6.6 | | | 19.8 | % | | 13.4 | | | | Return on allocated capital | 21.0 | % | | 18.9 | | | |
| Efficiency ratio | Efficiency ratio | 82 | | | 86 | | | 84 | | | 83 | | | | Efficiency ratio | 85 | | | 85 | | | |
| Headcount (#) (period-end) | Headcount (#) (period-end) | 26,989 | | | 29,088 | | | (7) | | | 26,989 | | | 29,088 | | | (7) | | | Headcount (#) (period-end) | 25,165 | | | 27,993 | | | (10) | | |
| Advisory assets ($ in billions) | Advisory assets ($ in billions) | $ | 931 | | | 743 | | | 188 | | | 25 | | | $ | 931 | | | 743 | | | 188 | | | 25 | | | Advisory assets ($ in billions) | $ | 912 | | | 885 | | | 27 | | | 3 | | |
| Other brokerage assets and deposits ($ in billions) | Other brokerage assets and deposits ($ in billions) | 1,212 | | | 1,042 | | | 170 | | | 16 | | | 1,212 | | | 1,042 | | | 170 | | | 16 | | | Other brokerage assets and deposits ($ in billions) | 1,168 | | | 1,177 | | | (9) | | | (1) | | |
| Total client assets ($ in billions) | Total client assets ($ in billions) | $ | 2,143 | | | 1,785 | | | 358 | | | 20 | | | $ | 2,143 | | | 1,785 | | | 358 | | | 20 | | | Total client assets ($ in billions) | $ | 2,080 | | | 2,062 | | | 18 | | | 1 | | |
| Annualized revenue per advisor ($ in thousands) (1) | Annualized revenue per advisor ($ in thousands) (1) | 1,084 | | | 898 | | | 186 | | | 21 | | | 1,071 | | | 904 | | | 167 | | | 18 | | | Annualized revenue per advisor ($ in thousands) (1) | 1,221 | | | 1,058 | | | 163 | | | 15 | | |
| Total financial and wealth advisors (#) (period-end) | Total financial and wealth advisors (#) (period-end) | 12,819 | | | 14,206 | | | (10) | | | 12,819 | | | 14,206 | | | (10) | | | Total financial and wealth advisors (#) (period-end) | 12,250 | | | 13,277 | | | (8) | | |
| | Selected Balance Sheet Data (average) | Selected Balance Sheet Data (average) | | | Selected Balance Sheet Data (average) | | |
| Total loans | Total loans | $ | 81,784 | | | 78,091 | | | 3,693 | | | 5 | | | $ | 81,314 | | | 77,987 | | | 3,327 | | | 4 | | | Total loans | $ | 84,765 | | | 80,839 | | | 3,926 | | | 5 | | |
| Total deposits | Total deposits | 174,980 | | | 165,103 | | | 9,877 | | | 6 | | | 174,333 | | | 155,246 | | | 19,087 | | | 12 | | | Total deposits | 185,814 | | | 173,678 | | | 12,136 | | | 7 | | |
| Allocated capital | Allocated capital | 8,750 | | | 8,750 | | | — | | | — | | | 8,750 | | | 8,750 | | | — | | | — | | | Allocated capital | 8,750 | | | 8,750 | | | — | | | — | | |
| | Selected Balance Sheet Data (period-end) | Selected Balance Sheet Data (period-end) | | | Selected Balance Sheet Data (period-end) | | |
| Total loans | Total loans | $ | 82,783 | | | 78,101 | | | 4,682 | | | 6 | | | $ | 82,783 | | | 78,101 | | | 4,682 | | | 6 | | | Total loans | $ | 84,688 | | | 81,175 | | | 3,513 | | | 4 | | |
| Total deposits | Total deposits | 174,267 | | | 168,249 | | | 6,018 | | | 4 | | | 174,267 | | | 168,249 | | | 6,018 | | | 4 | | | Total deposits | 183,727 | | | 175,999 | | | 7,728 | | | 4 | | |
NM – Not meaningful
(1)Represents annualized segment total revenue divided by average total financial and wealth advisors for the period.
SecondFirst quarter 2021 vs. second quarter 2020
Revenue increased driven by:
•higher investment advisory and other asset-based fees due to higher market valuations on WIM advisory assets;
partially offset by:
•lower deferred compensation plan investment results included in other noninterest income (largely offset by personnel expense); and
•lower net interest income reflecting the lower interest rate environment, partially offset by higher deposit balances.
Provision for credit losses decreased driven by an improving economic environment.
Noninterest expense increased due to:
•higher personnel expense driven by higher revenue-related compensation, partially offset by lower deferred compensation expense; and
•the reversal of a software licensing liability accrual in second quarter 2020.
Total deposits (average) increased primarily due to growth in customer balances in both The Private Bank and Wells Fargo Advisors.
Earnings Performance (continued)
First half of 20212022 vs. first half of 2020quarter 2021
Revenue increased driven by:
•higher investment advisory and other asset-based fees due to higher market valuations on WIM advisory assets; and
•higher deferred compensation plan investment results included in other noninterestnet interest income (largely offset by personnel expense);reflecting higher interest rates, as well as higher deposit and loan balances;
partially offset by:
•lower net interest income reflecting thecommissions and brokerage services fees due to lower interest rate environment, partially offsettransactional revenue.
Noninterest expense increased driven by higher depositpersonnel expense due to higher revenue-related compensation expense.
Total loans (average) increased due to higher securities-based loan balances.
Provision for credit losses decreased driven by an improving economic environment.
Noninterest expenseTotal deposits (average) increased due to:
•to higher personnel expense driven by higher revenue-related compensation and higher deferred compensation expense; and
•the reversallevels of a software licensing liability accrual in the first half of 2020;
partially offset by:
•lower professional and outside services expense driven by efficiency initiatives to reduce our spending on consultants and contractors.
Total deposits (average and period-end) increased primarily due to growth in customer balances in both The Private Bank and Wells Fargo Advisors.liquidity.
Earnings Performance (continued)
WIM Advisory Assets In addition to transactional accounts, WIM offers advisory account relationships to brokerage customers. Fees from advisory accounts are based on a percentage of the market value of the assets as of the beginning of the quarter, which vary across the account types based on the distinct services provided, and are affected by investment performance as well as asset inflows and outflows. Advisory accounts include assets that are financial advisor-directed and separately managed by third-party managers, as well as certain client-directed brokerage assets where we earn a fee for advisory and other services, but do not have investment discretion.
WIM also manages personal trust and other assets for high net worth clients, with fee income earned based on a percentage of the market value of these assets. Table 5h presents advisory assets activity by WIM line of business for the second quarter and first half of 2021 and 2020.business. Management believes that advisory assets is a useful metric because it allows management, investors, and others to assess how changes in asset amounts may impact the generation of certain asset-based fees.
For secondfirst quarter 20212022 and 2020,2021, the average fee rate by account type ranged from 50 to 120 basis points.
Table 5h: WIM Advisory Assets
| | | Quarter ended | | Six months ended | | Quarter ended | |
| (in billions) | (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 | (in billions) | Balance, beginning of period | Inflows (1) | Outflows (2) | Market impact (3) | Balance, end of period | |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | | |
| Client-directed (4) | Client-directed (4) | $ | 192.7 | | 11.1 | | (12.2) | | 9.7 | | 201.3 | | | $ | 186.3 | | 21.7 | | (22.0) | | 15.3 | | 201.3 | | Client-directed (4) | $ | 205.6 | | 8.8 | | (10.2) | | (10.5) | | 193.7 | | |
| Financial advisor-directed (5) | Financial advisor-directed (5) | 223.4 | | 12.3 | | (10.9) | | 13.2 | | 238.0 | | | 211.0 | | 24.6 | | (19.9) | | 22.3 | | 238.0 | | Financial advisor-directed (5) | 255.5 | | 12.6 | | (9.9) | | (11.0) | | 247.2 | | |
| Separate accounts (6) | Separate accounts (6) | 183.1 | | 8.0 | | (7.7) | | 9.5 | | 192.9 | | | 174.6 | | 16.5 | | (14.7) | | 16.5 | | 192.9 | | Separate accounts (6) | 203.3 | | 7.5 | | (7.0) | | (11.0) | | 192.8 | | |
| Mutual fund advisory (7) | Mutual fund advisory (7) | 94.7 | | 4.3 | | (3.6) | | 4.7 | | 100.1 | | | 91.4 | | 8.3 | | (7.1) | | 7.5 | | 100.1 | | Mutual fund advisory (7) | 102.1 | | 3.2 | | (4.0) | | (6.2) | | 95.1 | | |
| Total Wells Fargo Advisors | Total Wells Fargo Advisors | $ | 693.9 | | 35.7 | | (34.4) | | 37.1 | | 732.3 | | | $ | 663.3 | | 71.1 | | (63.7) | | 61.6 | | 732.3 | | Total Wells Fargo Advisors | $ | 766.5 | | 32.1 | | (31.1) | | (38.7) | | 728.8 | | |
| The Private Bank (8) | The Private Bank (8) | 191.5 | | 9.3 | | (11.1) | | 8.7 | | 198.4 | | | 189.4 | | 18.2 | | (23.6) | | 14.4 | | 198.4 | | The Private Bank (8) | 198.0 | | 7.4 | | (11.7) | | (10.1) | | 183.6 | | |
| Total WIM advisory assets | Total WIM advisory assets | $ | 885.4 | | 45.0 | | (45.5) | | 45.8 | | 930.7 | | | $ | 852.7 | | 89.3 | | (87.3) | | 76.0 | | 930.7 | | Total WIM advisory assets | $ | 964.5 | | 39.5 | | (42.8) | | (48.8) | | 912.4 | | |
| June 30, 2020 | | | | |
| Client directed (4) | $ | 142.7 | | 7.3 | | (7.8) | | 20.0 | | 162.2 | | | $ | 169.4 | | 17.4 | | (17.4) | | (7.2) | | 162.2 | | |
| Financial advisor directed (5) | 152.4 | | 8.4 | | (6.6) | | 22.6 | | 176.8 | | | 176.3 | | 19.1 | | (15.2) | | (3.4) | | 176.8 | | |
| March 31, 2021 | | March 31, 2021 | | |
| Client-directed (4) | | Client-directed (4) | $ | 186.3 | | 10.6 | | (9.8) | | 5.6 | | 192.7 | | |
| Financial advisor-directed (5) | | Financial advisor-directed (5) | 211.0 | | 12.3 | | (9.0) | | 9.1 | | 223.4 | | |
| Separate accounts (6) | Separate accounts (6) | 134.2 | | 5.0 | | (5.8) | | 18.1 | | 151.5 | | | 160.1 | | 11.8 | | (14.3) | | (6.1) | | 151.5 | | Separate accounts (6) | 174.6 | | 8.5 | | (7.0) | | 7.0 | | 183.1 | | |
| Mutual fund advisory (7) | Mutual fund advisory (7) | 69.5 | | 2.2 | | (2.7) | | 9.9 | | 78.9 | | | 83.7 | | 5.4 | | (7.2) | | (3.0) | | 78.9 | | Mutual fund advisory (7) | 91.4 | | 4.0 | | (3.5) | | 2.8 | | 94.7 | | |
| Total Wells Fargo Advisors | Total Wells Fargo Advisors | $ | 498.8 | | 22.9 | | (22.9) | | 70.6 | | 569.4 | | | $ | 589.5 | | 53.7 | | (54.1) | | (19.7) | | 569.4 | | Total Wells Fargo Advisors | $ | 663.3 | | 35.4 | | (29.3) | | 24.5 | | 693.9 | | |
| The Private Bank (8) | The Private Bank (8) | 161.8 | | 7.2 | | (11.8) | | 16.0 | | 173.2 | | | 188.0 | | 15.7 | | (22.8) | | (7.7) | | 173.2 | | The Private Bank (8) | 189.4 | | 8.9 | | (12.5) | | 5.7 | | 191.5 | | |
| Total WIM advisory assets | Total WIM advisory assets | $ | 660.6 | | 30.1 | | (34.7) | | 86.6 | | 742.6 | | | $ | 777.5 | | 69.4 | | (76.9) | | (27.4) | | 742.6 | | Total WIM advisory assets | $ | 852.7 | | 44.3 | | (41.8) | | 30.2 | | 885.4 | | |
|
(1)Inflows include new advisory account assets, contributions, dividends and interest.
(2)Outflows include closed advisory account assets, withdrawals and client management fees.
(3)Market impact reflects gains and losses on portfolio investments.
(4)Investment advice and other services are provided to client, but decisions are made by the client and the fees earned are based on a percentage of the advisory account assets, not the number and size of transactions executed by the client.
(5)Professionally managed portfolios with fees earned based on respective strategies and as a percentage of certain client assets.
(6)Professional advisory portfolios managed by Wells Fargo Asset Management 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.
(8)Discretionary and non-discretionary portfolios held in personal trusts, investment agency, or custody accounts with fees earned based on a percentage of client assets.
| | | | | | | | |
2420 | Wells Fargo & Company | |
Corporate includes corporate treasury and enterprise functions, net of allocations (including funds transfer pricing, capital, liquidity and certain expenses), in support of the reportable operating segments, as well as our investment portfolio and affiliated venture capital and private equity businesses. In addition, Corporate includes all restructuring charges related to our efficiency initiatives. See Note 19 (Restructuring Charges) to
Financial Statements in this Report for additional information on restructuring charges. Corporate also includes certain lines of
business that management has determined are no longer consistent with the long-term strategic goals of the Company, as well as results for previously divested businesses. In March 2021, we announced an agreement to sell our Corporate Trust Services business and, in second quarter 2021, we moved the business from the Commercial Banking operating segment to Corporate. Prior period balances have been revised to conform with the current period presentation. Table 5i and
Table 5j and Table 5k provide additional information for Corporate.
Table 5i: Corporate – Income Statement and Selected Metrics
| | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended Mar 31, | |
| ($ in millions, unless otherwise noted) | ($ in millions, unless otherwise noted) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | ($ in millions, unless otherwise noted) | 2022 | | 2021 | | $ Change | | % Change | |
| Income Statement | Income Statement | | | Income Statement | | |
| Net interest income | Net interest income | $ | (304) | | | 60 | | | (364) | | | NM | | $ | (694) | | | 939 | | | (1,633) | | | NM | | Net interest income | $ | (818) | | | (390) | | | (428) | | | NM | |
| Noninterest income | Noninterest income | 3,327 | | | 1,318 | | | 2,009 | | | 152 | % | | 4,744 | | | 1,303 | | | 3,441 | | | 264 | % | | Noninterest income | 806 | | | 1,417 | | | (611) | | | (43) | % | |
| Total revenue | Total revenue | 3,023 | | | 1,378 | | | 1,645 | | | 119 | | | 4,050 | | | 2,242 | | | 1,808 | | | 81 | | | Total revenue | (12) | | | 1,027 | | | (1,039) | | | NM | |
| Net charge-offs | Net charge-offs | (8) | | | 39 | | | (47) | | | NM | | 69 | | | 141 | | | (72) | | | (51) | | | Net charge-offs | (6) | | | 77 | | | (83) | | | NM | |
| Change in the allowance for credit losses | Change in the allowance for credit losses | (26) | | | 87 | | | (113) | | | NM | | (6) | | | 247 | | | (253) | | | NM | | Change in the allowance for credit losses | (14) | | | 20 | | | (34) | | | NM | |
| Provision for credit losses | Provision for credit losses | (34) | | | 126 | | | (160) | | | NM | | 63 | | | 388 | | | (325) | | | (84) | | | Provision for credit losses | (20) | | | 97 | | | (117) | | | NM | |
| Noninterest expense | Noninterest expense | 1,000 | | | 1,251 | | | (251) | | | (20) | | | 2,231 | | | 1,942 | | | 289 | | | 15 | | | Noninterest expense | 786 | | | 1,231 | | | (445) | | | (36) | | |
| Income (loss) before income tax expense (benefit) | 2,057 | | | 1 | | | 2,056 | | | NM | | 1,756 | | | (88) | | | 1,844 | | | NM | | |
| Income tax expense (benefit) | 223 | | | (300) | | | 523 | | | NM | | (52) | | | 21 | | | (73) | | | NM | | |
| Less: Net income (loss) from noncontrolling interests (1) | 704 | | | 47 | | | 657 | | | NM | | 757 | | | (103) | | | 860 | | | NM | | |
| Net income (loss) | $ | 1,130 | | | 254 | | | 876 | | | 345 | | | $ | 1,051 | | | (6) | | | 1,057 | | | NM | | |
| Loss before income tax benefit | | Loss before income tax benefit | (778) | | | (301) | | | (477) | | | NM | |
| Income tax benefit | | Income tax benefit | (227) | | | (275) | | | 48 | | | 17 | | |
| Less: Net income from noncontrolling interests (1) | | Less: Net income from noncontrolling interests (1) | 128 | | | 53 | | | 75 | | | 142 | | |
| Net loss | | Net loss | $ | (679) | | | (79) | | | (600) | | | NM | |
| | Selected Metrics | Selected Metrics | | | Selected Metrics | | |
Headcount (#) (period-end) (2) | Headcount (#) (period-end) (2) | 87,702 | | | 82,852 | | | 6 | | | 87,702 | | | 82,852 | | | 6 | | | Headcount (#) (period-end) (2) | 82,363 | | | 84,238 | | | (2) | | |
| Wells Fargo Asset Management assets under management ($ in billions) | $ | 603 | | | 578 | | | 25 | | | 4 | | | $ | 603 | | | 578 | | | 25 | | | 4 | | | |
|
(1)Reflects results attributable to noncontrolling interests predominantly associated with the Company’s consolidated venture capital investments.
(2)Beginning inFirst quarter 2022 vs. first quarter 2021 employees who were notified of displacement remained as headcount in their respective operating segment rather than included in Corporate.
Second quarter 2021 vs. second quarter 2020
Revenue increaseddecreased driven by:
•lower net interest income due to higher gains on equity securitiesdeposit crediting rates paid to the operating segments, as well as the sales of our student loan portfolio and our Corporate Trust Services business in our affiliated venture capital2021;
•lower investment advisory and private equity businesses; andother asset-based fees due to divestitures in fourth quarter 2021;
•a gain on the sale of a portion of our student loan portfolio in first quarter 2021; and
•lower gains from debt securities due to lower gains on sales of agency MBS as a modest gain on the saleresult of our Canadian equipment finance business;decreased sales volumes;
partially offset by:
•lower net interest income reflecting the lower interest rate environment and lower loan balances;
•lowerhigher unrealized gains on debtnonmarketable equity securities due to fewer sales;from our affiliated venture capital and
•lower private equity businesses and higher realized gains on deferred compensation plan investments (largelythe sales of equity securities, partially offset by personnel expense).higher impairment.
Provision for credit losses decreased driven by an improving economic environment andreflected lower provision associated with the sale of a portion of our student loan portfolio.net charge-offs.
Noninterest expense decreased due to:
•lower operating losses due to lower expense for litigation accrualsthe impact of business divestitures; and customer remediation accruals; and
•lower deferred compensation plan expense;
partially offset by:
•a write-down of goodwill in secondfirst quarter 2021 related to the sale of a portion of our student loan portfolio.
First half of 2021 vs. first half of 2020
Revenue increased driven by:
•higher gains on equity securities in our affiliated venture capital and private equity businesses, as well as impairments on equity securities in first quarter 2020 due to the market impact of the COVID-19 pandemic ;
•higher gains on deferred compensation plan investments (largely offset by personnel expense); and
•a gain on the sale of substantially all of our student loan portfolio;
partially offset by:
•lower net interest income reflecting the lower interest rate environment, unfavorable hedge ineffectiveness accounting results, and lower loan balances; and
•lower gains on debt securities due to fewer sales.
Provision for credit losses decreased driven by an improving economic environment and lower provision associated with the sale of substantially all of our student loan portfolio.
Noninterest expense increased due to:
•higher incentive compensation expense, including the impact of higher market valuations on stock-based compensation;
•higher deferred compensation expense; and
•a write-down of goodwill in 2021 related to the sale of substantially all of our student loan portfolio.
Earnings Performance (continued)
Corporate includes our rail car leasing business, which had long-lived operating lease assets (as a lessor) of $5.6$5.0 billion, which was net of $1.9$2.2 billion of accumulated depreciation, as of June 30, 2021.March 31, 2022. The average age of our rail cars is 2122 years and the rail cars are typically leased under short-term leases of 3 to 5 years. Our three largest concentrations, which represented 55% of our rail car fleet as of June 30, 2021,March 31, 2022, were rail cars used for the transportation of agricultural grain, coal, and cement/sand products. ImpairmentsImpairment may result in the future based on changing economic and market conditions affecting the long-term demand and utility of specific types of rail cars. Our assumptions for impairment are sensitive to estimated
utilization and rental rates, as well as the estimated economic life of the leased asset. For additional information on the accounting for impairment of operating lease assets, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 20202021 Form 10-K.
In addition, Corporate includesAs of March 31, 2022, we completed the transition of substantially all of the assets under management (AUM) and assets under administration (AUA) for Institutional Retirement and Trust (IRT) client assets of $20 billion and $580 billion, respectively, at June 30, 2021, which we continue to administer at the direction of the buyer pursuant to a transition services agreement. The transition services agreement terminates in December 2021, with available options to extend.
Table 5j: Corporate – Balance Sheet
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter ended June 30, | | | | | | Six months ended June 30, | | | | | | | | | | |
| (in millions) | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | $ Change | | % Change | | | | | | |
| Selected Balance Sheet Data (average) | | | | | | | | | | | | | | | | | | | | | |
| Cash, cash equivalents, and restricted cash | $ | 255,043 | | | 173,754 | | | 81,289 | | | 47 | % | | $ | 239,010 | | | 148,108 | | | 90,902 | | | 61 | % | | | | | | |
| Available-for-sale debt securities | 185,396 | | | 223,222 | | | (37,826) | | | (17) | | | 192,867 | | | 234,028 | | | (41,161) | | | (18) | | | | | | | |
| Held-to-maturity debt securities | 237,788 | | | 166,127 | | | 71,661 | | | 43 | | | 227,623 | | | 161,958 | | | 65,665 | | | 41 | | | | | | | |
| Equity securities | 11,499 | | | 13,604 | | | (2,105) | | | (15) | | | 11,203 | | | 13,787 | | | (2,584) | | | (19) | | | | | | | |
| Total loans | 10,077 | | | 21,534 | | | (11,457) | | | (53) | | | 10,152 | | | 21,517 | | | (11,365) | | | (53) | | | | | | | |
| Total assets | 754,629 | | | 655,617 | | | 99,012 | | | 15 | | | 741,203 | | | 642,513 | | | 98,690 | | | 15 | | | | | | | |
| Total deposits | 41,696 | | | 82,640 | | | (40,944) | | | (50) | | | 44,080 | | | 94,307 | | | (50,227) | | | (53) | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Selected Balance Sheet Data (period-end) | | | | | | | | | | | | | | | | | | | | | |
| Cash, cash equivalents, and restricted cash | $ | 248,784 | | | 236,219 | | | 12,565 | | | 5 | | | $ | 248,784 | | | 236,219 | | | 12,565 | | | 5 | | | | | | | |
| Available-for-sale debt securities | 177,923 | | | 217,339 | | | (39,416) | | | (18) | | | 177,923 | | | 217,339 | | | (39,416) | | | (18) | | | | | | | |
| Held-to-maturity debt securities | 260,054 | | | 168,162 | | | 91,892 | | | 55 | | | 260,054 | | | 168,162 | | | 91,892 | | | 55 | | | | | | | |
| Equity securities | 13,142 | | | 12,546 | | | 596 | | | 5 | | | 13,142 | | | 12,546 | | | 596 | | | 5 | | | | | | | |
| Total loans | 10,593 | | | 21,948 | | | (11,355) | | | (52) | | | 10,593 | | | 21,948 | | | (11,355) | | | (52) | | | | | | | |
| Total assets | 761,915 | | | 713,309 | | | 48,606 | | | 7 | | | 761,915 | | | 713,309 | | | 48,606 | | | 7 | | | | | | | |
| Total deposits | 40,091 | | | 76,155 | | | (36,064) | | | (47) | | | 40,091 | | | 76,155 | | | (36,064) | | | (47) | | | | | | | |
Second quarter 2021 vs. second quarter 2020
Total assets (average) increased due to:
•an increase in cash, cash equivalents, and restricted cash managed by corporate treasury as a result of an increase in deposits from the reportable operating segments; and
•an increase in held-to-maturity debt securities related to portfolio rebalancing to manage liquidity and interest rate risk;
partially offset by:
•a decline in available-for-sale debt securities related to portfolio rebalancing to manage liquidity and interest rate risk;
•a decline in average equity securities due to the transition from equity securities to derivative instruments for economic hedges of the deferred compensation plan liabilities in second quarter 2020 and a reduction in Federal Home Loan Bank stock, partially offset by higher balances in our venture capital business; and
•a decline in loans due to the sale of a portion of our student loan portfolio.
Total deposits (average) decreased reflecting actions taken to manage under the asset cap.
First half of 2021 vs. first half of 2020
Total assets (average and period-end) increased due to:
•an increase in cash, cash equivalents, and restricted cash managed by corporate treasury as a result of an increase in deposits from the reportable operating segments; and
•an increase in held-to-maturity debt securities related to portfolio rebalancing to manage liquidity and interest rate risk;
partially offset by:
•a decline in available-for-sale debt securities related to portfolio rebalancing to manage liquidity and interest rate risk;
•a decline in average equity securities due to the transition from equity securities to derivative instruments for economic hedges of the deferred compensation plan liabilities in second quarter 2020 and a reduction in Federal Home Loan Bank stock, partially offset by higher balances in our venture capital business; and
•a decline in loans due to the sale of substantially all of our student loan portfolio in the first half of 2021.
Total deposits (average and period-end) decreased reflecting actions taken to manage under the asset cap.
Wells Fargo Asset Management (WFAM) Assets Under Management We earn investment advisory and other asset-based fees from managing and administering assets through WFAM, which offers Wells Fargo proprietary mutual funds and manages institutional separate accounts. Generally, we earn fees from AUM where we have discretionary management authority over the investments and generate fees as a percentage of the market value of the AUM. WFAM assets under management
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. Table 5k presents WFAM AUM activity for the second quarter and first half of 2021 and 2020. Management believes that AUM is a useful metric because it allows management, investors, and others to assess how changes in asset amounts may impact the generation of certain asset-based fees.
Table 5k:WFAM Assets Under Management
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter ended | | Six months ended |
| (in billions) | Balance, beginning of period | Inflows (1) | Outflows (2) | Market impact (3) | Balance, end
of period | | Balance, beginning of period | Inflows (1) | Outflows (2) | Market impact (3) | Balance, end
of period |
| June 30, 2021 | | | | | | | | | | | |
| | | | | | | | | | | |
| Money market funds (4) | $ | 191.2 | | 8.5 | | — | | — | | 199.7 | | | $ | 197.4 | | 2.3 | | — | | — | | 199.7 | |
| Other assets managed | 399.2 | | 22.1 | | (28.5) | | 11.0 | | 403.8 | | | 405.6 | | 45.9 | | (58.8) | | 11.1 | | 403.8 | |
| | | | | | | | | | | |
| Total WFAM assets under management | $ | 590.4 | | 30.6 | | (28.5) | | 11.0 | | 603.5 | | | $ | 603.0 | | 48.2 | | (58.8) | | 11.1 | | 603.5 | |
| June 30, 2020 | | | | | | | | | | | |
| | | | | | | | | | | |
| Money market funds (4) | $ | 166.2 | | 35.7 | | — | | — | | 201.9 | | | $ | 130.6 | | 71.3 | | — | | — | | 201.9 | |
| Other assets managed | 351.6 | | 26.9 | | (26.5) | | 24.4 | | 376.4 | | | 378.2 | | 53.1 | | (55.1) | | 0.2 | | 376.4 | |
| | | | | | | | | | | |
| Total WFAM assets under management | $ | 517.8 | | 62.6 | | (26.5) | | 24.4 | | 578.3 | | | $ | 508.8 | | 124.4 | | (55.1) | | 0.2 | | 578.3 | |
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(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)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.
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| Wells Fargo & Company | 2721 |
Earnings Performance (continued)
Table 5j: Corporate – Balance Sheet
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter ended Mar 31, | | |
| (in millions) | 2022 | | 2021 | | $ Change | | % Change | | | | | | | | | | | | | | |
| Selected Balance Sheet Data (average) | | | | | | | | | | | | | | | | | | | | | |
| Cash, cash equivalents, and restricted cash | $ | 178,747 | | | 222,799 | | | (44,052) | | | (20) | % | | | | | | | | | | | | | | |
| Available-for-sale debt securities | 156,756 | | | 200,421 | | | (43,665) | | | (22) | | | | | | | | | | | | | | | |
| Held-to-maturity debt securities | 275,510 | | | 217,346 | | | 58,164 | | | 27 | | | | | | | | | | | | | | | |
| Equity securities | 15,760 | | | 10,904 | | | 4,856 | | | 45 | | | | | | | | | | | | | | | |
| Total loans | 9,292 | | | 10,228 | | | (936) | | | (9) | | | | | | | | | | | | | | | |
| Total assets | 687,341 | | | 727,628 | | | (40,287) | | | (6) | | | | | | | | | | | | | | | |
| Total deposits | 27,039 | | | 46,490 | | | (19,451) | | | (42) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Selected Balance Sheet Data (period-end) | | | | | | | | | | | | | | | | | | | | | |
| Cash, cash equivalents, and restricted cash | $ | 175,201 | | | 257,887 | | | (82,686) | | | (32) | | | | | | | | | | | | | | | |
| Available-for-sale debt securities | 157,164 | | | 188,724 | | | (31,560) | | | (17) | | | | | | | | | | | | | | | |
| Held-to-maturity debt securities | 277,965 | | | 231,352 | | | 46,613 | | | 20 | | | | | | | | | | | | | | | |
| Equity securities | 16,137 | | | 11,093 | | | 5,044 | | | 45 | | | | | | | | | | | | | | | |
| Total loans | 9,101 | | | 10,516 | | | (1,415) | | | (13) | | | | | | | | | | | | | | | |
| Total assets | 682,912 | | | 753,899 | | | (70,987) | | | (9) | | | | | | | | | | | | | | | |
| Total deposits | 23,715 | | | 42,487 | | | (18,772) | | | (44) | | | | | | | | | | | | | | | |
First quarter 2022 vs. first quarter 2021
Total assets (average and period-end) decreased due to:
•a decrease in cash, cash equivalents, and restricted cash managed by corporate treasury as a result of an increase in loans and a decrease in long-term debt and short-term borrowings, partially offset by an increase in deposits from the operating segments;
•a decline in available-for-sale debt securities related to portfolio rebalancing to manage liquidity and interest rate risk; and
•a decline in loans as a result of the sale of our student loan portfolio in 2021;
partially offset by:
•an increase in held-to-maturity debt securities related to portfolio rebalancing to manage liquidity and interest rate risk; and
•an increase in equity securities related to our affiliated venture capital business.
Total deposits (average and period-end) decreased reflecting actions taken to manage under the asset cap.
At June 30, 2021,March 31, 2022, our assets totaled $1.95$1.94 trillion, down $6.9$8.4 billion from December 31, 2020.2021.
The following discussion provides additional information about the major components of our consolidated balance sheet.
See the “Capital Management” section in this Report for information on changes in our equity.
Available-for-Sale and Held-to-Maturity Debt Securities
Table 6: Available-for-Sale and Held-to-Maturity Debt Securities
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| ($ in millions) | ($ in millions) | Amortized
cost, net (1) | | Net
unrealized gains | | Fair value | | Weighted
average expected maturity (yrs) | | Amortized
cost, net (1) | | Net
unrealized gains | | Fair value | | Weighted average expected maturity (yrs) | ($ in millions) | Amortized
cost, net (1) | | Net
unrealized gains (losses) | | Fair value | | Weighted
average expected maturity (yrs) | | Amortized
cost, net (1) | | Net
unrealized gains (losses) | | Fair value | | Weighted average expected maturity (yrs) |
| | Available-for-sale (2) | Available-for-sale (2) | 186,309 | | | 3,588 | | | 189,897 | | | 4.9 | | | 215,533 | | | 4,859 | | | 220,392 | | | 4.5 | | Available-for-sale (2) | 173,118 | | | (4,682) | | | 168,436 | | | 5.9 | | | 175,463 | | | 1,781 | | | 177,244 | | | 5.2 | |
| Held-to-maturity (3) | Held-to-maturity (3) | 260,941 | | | 3,146 | | | 264,087 | | | 6.1 | | | 205,720 | | | 6,587 | | | 212,307 | | | 4.5 | | Held-to-maturity (3) | 280,808 | | | (16,167) | | | 264,641 | | | 7.6 | | | 272,022 | | | 364 | | | 272,386 | | | 6.3 | |
| Total | Total | $ | 447,250 | | | 6,734 | | | 453,984 | | | n/a | | 421,253 | | | 11,446 | | | 432,699 | | | n/a | Total | $ | 453,926 | | | (20,849) | | | 433,077 | | | n/a | | 447,485 | | | 2,145 | | | 449,630 | | | n/a |
|
(1)Represents amortized cost of the securities, net of the allowance for credit losses of $33$9 million and $28$8 million related to available-for-sale debt securities and $77$84 million and $41$96 million related to held-to-maturity debt securities at June 30, 2021,March 31, 2022 and December 31, 2020.2021, respectively.
(2)Available-for-sale debt securities are carried on the consolidated balance sheet at fair value.
(3)Held-to-maturity debt securities are carried on the consolidated balance sheet at amortized cost, net of the allowance for credit losses.
Table 6 presents a summary of our portfolio of investments in available-for-sale (AFS) and held-to-maturity (HTM) debt securities. See the “Balance Sheet Analysis – Available-for-Sale and Held-to-Maturity Debt Securities” section in our 20202021 Form 10-K for information on our investment management objectives and practices and the “Risk Management – Asset/Liability Management” section in this Report for information on liquidity and interest rate risk.
The fair valueamortized cost, net of the allowance for credit losses, of AFS and HTM debt securities increased from December 31, 2021. We continued to purchase AFS and HTM debt securities, including HTM debt securities through securitizations of LHFS, which more than offset portfolio runoff and AFS debt security sales. In addition, we transferred $14.7 billion of AFS debt securities decreased from December 31, 2020, as purchases were more than offset by runoff, sales and transfers to HTM debt securities in first quarter 2022 due to actions taken to reposition the overall portfolio for capital management purposes.
The total net amortized cost ofunrealized gains (losses) on AFS and HTM debt securities increaseddecreased from December 31, 2020, as purchases2021, driven by higher interest rates and transfers from AFS debt securities were partially offset by runoff.wider credit spreads.
At June 30, 2021, 94%March 31, 2022, 98% of the combined AFS and HTM debt securities portfolio was rated AA- or above. Ratings are based on external ratings where available and, where not available, based on internal credit grades.
The total net unrealized gains on AFS and HTM debt securities decreased from December 31, 2020, driven by higher interest rates, partially offset by tighter credit spreads. See
Note 3 (Available-for-Sale and Held-to-Maturity Debt Securities) to Financial Statements in this Report for additional information on AFS and HTM debt securities, including a summary of debt securities by security type.
Balance Sheet Analysis (continued)
Loan Portfolios
Table 7 provides a summary of total outstanding loans by portfolio segment. Commercial loans were relatively flat compared with December 31, 2020. Consumer loans decreasedincreased from December 31, 2020,2021, predominantly due to an increase in the commercial and industrial loan portfolio, driven by a decreasehigher loan demand resulting in increased originations and loan draws, partially offset by paydowns. Consumer loans increased from
December 31, 2021, predominantly driven by an increase in the residential mortgage – first lien portfolio due to loan originations of $18.4 billion, partially offset by loan paydowns and the transfer of $10.8 billion of first lien mortgage loans to loans held for sale (LHFS), substantially all of which related to the sales of loans purchased from GNMA loan securitization pools in prior periods, partially offset by originations of $30.8 billion.periods.
Table 7: Loan Portfolios
| | (in millions) | (in millions) | | June 30, 2021 | | December 31, 2020 | (in millions) | | March 31, 2022 | | December 31, 2021 |
| Commercial | Commercial | | $ | 476,422 | | | 478,417 | | Commercial | | $ | 526,714 | | | 513,120 | |
| Consumer | Consumer | | 375,878 | | | 409,220 | | Consumer | | 385,093 | | | 382,274 | |
| Total loans | Total loans | | $ | 852,300 | | | 887,637 | | Total loans | | $ | 911,807 | | | 895,394 | |
| Change from prior year-end | Change from prior year-end | | $ | (35,337) | | | (74,628) | | Change from prior year-end | | $ | 16,413 | | | 7,757 | |
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 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
See the “Balance Sheet Analysis – Loan Portfolios” section in our 20202021 Form 10-K for additional information regarding contractual loan maturities and the distribution of loans to changes in interest rates.
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2824 | Wells Fargo & Company | |
Deposits
Deposits increaseddecreased from December 31, 2020,2021, reflecting:
•higher levelslower interest-bearing demand deposits driven by the transition of liquidityclient assets related to the sale of trust deposits, and savings for consumer customers reflecting government stimulus programs and payment deferral programs, as well as continued economic uncertainty associated with the COVID-19 pandemic;
partially offset by:
•actions taken to manage under the asset cap resulting in declines in time deposits, such as brokered certificates of deposit (CDs);
deposit (CDs), and interest-bearingpartially offset by:
•higher savings deposits in non-U.S. offices.driven by seasonality for items such as income tax refunds.
Table 8 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: Deposits
| | ($ in millions) | ($ in millions) | Jun 30,
2021 | | % of total deposits | | Dec 31,
2020 | | % of total
deposits | | % Change | ($ in millions) | Mar 31,
2022 | | % of total deposits | | Dec 31,
2021 | | % of
total
deposits | | % Change |
| Noninterest-bearing demand deposits | Noninterest-bearing demand deposits | $ | 504,108 | | | 35 | % | | $ | 467,068 | | | 33 | % | | 8 | | Noninterest-bearing demand deposits | $ | 529,957 | | | 36 | % | | $ | 527,748 | | | 36 | % | | — | |
| Interest-bearing demand deposits | Interest-bearing demand deposits | 453,277 | | | 32 | | | 447,446 | | | 32 | | | 1 | | Interest-bearing demand deposits | 457,238 | | | 31 | | | 465,887 | | | 31 | | | (2) | |
| Savings deposits | Savings deposits | 419,812 | | | 29 | | | 404,935 | | | 29 | | | 4 | | Savings deposits | 447,096 | | | 30 | | | 439,600 | | | 30 | | | 2 | |
| Time deposits | Time deposits | 35,269 | | | 2 | | | 49,775 | | | 4 | | | (29) | | Time deposits | 26,089 | | | 2 | | | 29,461 | | | 2 | | | (11) | |
| Interest-bearing deposits in non-U.S. offices | Interest-bearing deposits in non-U.S. offices | 28,006 | | | 2 | | | 35,157 | | | 2 | | | (20) | | Interest-bearing deposits in non-U.S. offices | 20,974 | | | 1 | | | 19,783 | | | 1 | | | 6 | |
| Total deposits | Total deposits | $ | 1,440,472 | | | 100 | % | | $ | 1,404,381 | | | 100 | % | | 3 | | Total deposits | $ | 1,481,354 | | | 100 | % | | $ | 1,482,479 | | | 100 | % | | — | |
| | |
| Off-Balance Sheet Arrangements |
In the ordinary course of business, we engage in financial transactions that are not recorded on the consolidated balance sheet, or may be recorded on the consolidated balance sheet in amounts that are different from the full contract or notional amount of the transaction. Our off-balance sheet arrangements include commitments to lend and purchase debt and equity securities, transactions with unconsolidated entities, guarantees, derivatives, and other commitments. These transactions are designed to (1) meet the financial needs of customers, (2) manage our credit, market or liquidity risks, and/or (3) diversify our funding sources.
Commitments to Lend
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 additional information, see Note 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
Transactions with Unconsolidated Entities
In the normal course of business, we enter into various types of on- and off-balance sheet transactions with special purpose entities (SPEs), which are corporations, trusts, limited liability companies or partnerships that are established for a limited purpose. Generally, SPEs are formed in connection with securitization transactions and are considered variable interest entities (VIEs). For additional information, see Note 8 (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 and direct pay letters of credit, written options, recourse obligations, exchange and clearing house guarantees, indemnifications, and other types of similar arrangements. For additional information, see Note 11 (Guarantees and Other Commitments) 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 additional information, see Note 11 (Guarantees and Other Commitments) to Financial Statements in this Report.
Derivatives
We use derivatives to manage exposure to market risk, including interest rate risk, credit risk and foreign currency risk, and to assist customers with their risk management objectives. Derivatives are recorded on the consolidated balance sheet at fair value, and volume can be measured in terms of the notional amount, which is generally not exchanged, but is used only as the basis on which interest and other payments are determined. The notional amount is not recorded on the consolidated balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. For additional information, see Note 14 (Derivatives) to Financial Statements in this Report.
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| 26 | Wells Fargo & Company | 29 |
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. We continue to monitor our business, including our loan portfolios, for potential direct, indirect, and macro-economic impacts stemming from the conflict in Ukraine and any associated economic sanctions.
For additional information about how we manage risk, see the “Risk Management” section in our 20202021 Form 10-K. The discussion that follows supplements our discussion of the management of certain risks contained in the “Risk Management” section in our 20202021 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 ourthe Company’s assets and exposures such as loans, debt security holdings,securities, and certain derivatives, and loans.derivatives.
The Board’s Risk Committee has primary oversight responsibility for credit risk. A Credit Subcommittee of the Risk Committee assists the Risk Committee in providing oversight of credit risk. At the management level, Credit Risk, which is part of IRM,Independent Risk Management, has oversight responsibility for credit risk. Credit Risk reports to the CROChief Risk Officer and supports periodic reports related to credit risk provided to the Board’s Risk Committee or its Credit Subcommittee.
Loan Portfolio
Our loan portfolios represent the largest component of assets on our consolidated balance sheet for which we have credit risk. Table 9 presents our total loans outstanding by portfolio segment and class of financing receivable.
Table 9: Total Loans Outstanding by Portfolio Segment and Class of Financing Receivable
| | (in millions) | (in millions) | Jun 30, 2021 | | Dec 31, 2020 | (in millions) | Mar 31, 2022 | | Dec 31, 2021 |
| Commercial: | Commercial: | | Commercial: | |
| Commercial and industrial | Commercial and industrial | $ | 317,618 | | | 318,805 | | Commercial and industrial | $ | 362,137 | | | 350,436 | |
| Real estate mortgage | Real estate mortgage | 120,678 | | | 121,720 | | Real estate mortgage | 129,495 | | | 127,733 | |
| Real estate construction | Real estate construction | 22,406 | | | 21,805 | | Real estate construction | 20,613 | | | 20,092 | |
| Lease financing | Lease financing | 15,720 | | | 16,087 | | Lease financing | 14,469 | | | 14,859 | |
| Total commercial | Total commercial | 476,422 | | | 478,417 | | Total commercial | 526,714 | | | 513,120 | |
| Consumer: | Consumer: | | Consumer: | |
| Residential mortgage – first lien | Residential mortgage – first lien | 244,371 | | | 276,674 | | Residential mortgage – first lien | 245,242 | | | 242,270 | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | 19,637 | | | 23,286 | | Residential mortgage – junior lien | 15,392 | | | 16,618 | |
| Credit card | Credit card | 34,936 | | | 36,664 | | Credit card | 38,639 | | | 38,453 | |
| Auto | Auto | 51,073 | | | 48,187 | | Auto | 57,083 | | | 56,659 | |
| Other consumer | Other consumer | 25,861 | | | 24,409 | | Other consumer | 28,737 | | | 28,274 | |
| Total consumer | Total consumer | 375,878 | | | 409,220 | | Total consumer | 385,093 | | | 382,274 | |
| Total loans | Total loans | $ | 852,300 | | | 887,637 | | Total loans | $ | 911,807 | | | 895,394 | |
We manage our credit risk by establishing what we believe are sound credit policies for underwriting new business, while monitoring and reviewing the performance of our existing loan portfolios. We employ various credit risk management and monitoring activities to mitigate risks associated with multiple risk factors affecting loans we hold including:
•Loan concentrations and related credit quality;
•Counterparty credit risk;
•Economic and market conditions;
•Legislative or regulatory mandates;
•Changes in interest rates;
•Merger and acquisition activities; and
•Reputation risk.
In addition, the Company will continue to integrate climate considerations into its credit risk management activities.
Our credit risk management oversight process is governed centrally, but provides for direct management and accountability by our lines of business. Our overall credit process includes comprehensive credit policies, disciplined credit underwriting, frequent and detailed risk measurement and modeling, extensive credit training programs, and a continual loan review and audit process.
A key to our credit risk management is adherence to a well-controlled underwriting process, which we believe is appropriate for the needs of our customers as well as investors who purchase the loans or securities collateralized by the loans.
Credit Quality Overview Credit quality in secondfirst quarter 2021 reflected continued improvement in the economic environment. In particular:2022 reflected:
•Nonaccrual loans were $7.4$6.9 billion at June 30, 2021,March 31, 2022, down from $8.7$7.2 billion at December 31, 2020.2021. Commercial nonaccrual loans decreased to $3.5$2.0 billion at June 30,March 31, 2022, compared with $2.4 billion at December 31, 2021, and consumer nonaccrual loans increased to $4.9 billion at March 31, 2022, compared with $4.8 billion at December 31, 2020, and consumer nonaccrual loans declined to $3.8 billion at June 30, 2021, compared with $3.9 billion at December 31, 2020.2021. Nonaccrual loans represented 0.86%0.75% of total loans at June 30, 2021,March 31, 2022, compared with 0.98%0.81% at December 31, 2020.2021.
•Net loan charge-offs (recoveries) as a percentage of our average commercial and consumer loan portfolios were 0.07%(0.02)% and 0.32%0.35%, respectively, in the secondfirst quarter and 0.10% and 0.35% in the first half of 2021, respectively,2022, compared with 0.44%0.13% and 0.48%0.37%, respectively, in the secondfirst quarter and 0.35% and 0.51% in the first half of 2020.2021.
•Loans that are not government insured/guaranteed and 90 days or more past due and still accruing were $277$267 million and $460$409 million in our commercial and consumer portfolios, respectively, at June 30, 2021,March 31, 2022, compared with $78$235 million and $612$424 million at December 31, 2020.2021.
•Our provision for credit losses for loans was $(1.2) billion and $(2.4) billion(775) million in the secondfirst quarter and first half of 2021, respectively,2022, compared with $9.6(1.1) billion in first quarter 2021 and $13.4 billion for the same periods a year ago..
•The ACL for loans decreased to $16.4$12.7 billion, or 1.92%1.39% of total loans, at June 30, 2021,March 31, 2022, compared with $19.7$13.8 billion, or 2.22%1.54%, at December 31, 2020.2021.
Additional information on our loan portfolios and our credit quality trends follows.
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30 | Wells Fargo & Company | 27 |
COVID-Related Lending AccommodationsDuring 2020, we provided accommodations to customers in response to the COVID-19 pandemic, including payment deferrals, and other expanded assistance for mortgage, credit card, auto, small business, personal and commercial lending customers. With the exception of residential mortgage-related accommodation programs, the COVID-related lending accommodations instituted during 2020 were no longer offered as of December 31, 2020. Residential mortgage accommodation programs, which continued during the first half of 2021, offered payment deferrals for up to a total of 18 months. Table 10 summarizes the unpaid principal balance (UPB) of consumer loans that received accommodations under loan modification programs established to assist customers with the economic impact of the COVID-19 pandemic (COVID-related modifications) and that remained in a deferral period as of June 30, 2021.
Based on guidance in the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) issued by federal banking regulators in April 2020 (the Interagency Statement), both of which we elected to apply, loan modifications related to COVID-19 and that meet certain other criteria are exempt from troubled debt restructuring (TDR) classification. 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. At June 30, 2021, substantially all residential mortgage loans that were in a deferral period, excluding those that were government insured/guaranteed, met the criteria for TDR relief and were therefore not classified as TDRs. 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 our 2020 Form 10-K.
Customer payment deferral activities instituted in response to the COVID-19 pandemic could continue to 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. Customer loans that are not further modified upon exit from the deferral period may be placed on nonaccrual status or charged-off in accordance with our policies if customers are unable to resume making payments in accordance with the contractual terms of their agreement. As of June 30, 2021, substantially all of our consumer loans were current after exiting the deferral period. For additional information about our COVID-related modifications, see the “RiskRisk Management – Credit Risk Management – COVID-Related Lending Accommodations” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2020 Form 10-K.
Table 10:Consumer Loan Modifications Related to COVID-19
| | | | | | | | | | | | | | | | | | | |
| ($ in millions) | | | Unpaid principal balance of modified loans still in deferral period at Jun 30, 2021 | % of loan class (1) | | | | | % current at Jun 30, 2021 after exit from deferral period (2) |
| Consumer: | | | | | | | | | |
| Residential mortgage – first lien (3) | | | $ | 6,810 | | 3 | % | | | | | 96 | |
| Residential mortgage – junior lien (3) | | | 997 | | 5 | | | | | | 90 | |
| All other consumer (4) | | | 29 | | * | | | | | 92 | |
| Subtotal | | | 7,836 | | 2 | | | | | | |
| Residential mortgage – first lien (government insured/guaranteed) (5) | | | 11,400 | | 5 | | | | | | |
| Total consumer | | | $ | 19,236 | | | | | | | |
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*Less than 1%.(continued)
(1)Based on total loans outstanding at June 30, 2021.
(2)Represents the UPB of loans that exited the deferral period and had a balance that was less than 30 days past due as of June 30, 2021.
(3)For residential mortgage loans still in active COVID-related accommodation programs as of June 30, 2021, 96% of first lien and 86% of junior lien mortgage loans had a loan-to-value ratio that was 80% or lower.
(4)Includes credit card, auto, and other consumer loans (including personal lines/loans).
(5)Represents residential mortgage – first lien 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 GNMA loan 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 interest up to a total of 18 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 portfolios. See Note 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report for more analysis and credit metric information for each of the following portfolios.
COMMERCIAL AND INDUSTRIAL LOANS AND LEASE FINANCING
For purposes of portfolio risk management, we aggregate commercial and industrial loans and lease financing according to market segmentation and standard industry codes. We
generally subject commercial and industrial loans and lease financing to individual risk assessment using our internal borrower and collateral quality ratings. Our ratings are aligned to regulatory definitions of pass and criticized categories with criticized segmented among special mention, substandard, doubtful and loss categories.
We had $15.6$11.8 billion of the commercial and industrial loanloans and lease financing portfolio internally classified as criticized in accordance with regulatory guidance at June 30, 2021,March 31, 2022, compared with $19.3$13.0 billion at December 31, 2020.2021. The change was driven by decreases in the real estate and construction, technology, telecom and media, oil, gas and pipelines, and retail materials and commodities, entertainment and recreation, and technology, telecom and media industries, reflecting improvement inas these industries continue to recover from the economic environment.effects of the COVID-19 pandemic.
The majority of our commercial and industrial loans and lease financing portfolio is secured by short-term assets, such as accounts receivable, inventory and debt securities, as well as long-lived assets, such as equipment and other business assets.
Risk Management – Credit Risk Management (continued)
Generally, the primary source of repayment for this portfolio is the operating cash flows of customers, with the collateral securing this portfolio representing a secondary source of repayment.
The portfolio decreased slightlyincreased at June 30, 2021,March 31, 2022, compared with December 31, 2020, as a result of paydowns,2021, driven by higher loan demand resulting in increased originations and loan draws, partially offset
by limited loan draws.paydowns. Table 1110 provides our commercial and industrial loans and lease financing by industry. The industry categories are based on the North American Industry Classification System.
Table 11:10: Commercial and Industrial Loans and Lease Financing by Industry
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| ($ in millions) | ($ in millions) | Nonaccrual loans | | Total portfolio | | % of total loans | | Total commitments (1) | | Nonaccrual loans | | Total portfolio | | % of total loans | | Total commitments (1) | ($ in millions) | Nonaccrual loans | | Total portfolio | | % of total loans | | Total commitments (1) | | Nonaccrual loans | | Total portfolio | | % of total loans | | Total commitments (1) |
| Financials except banks | Financials except banks | $ | 154 | | | 124,759 | | | 15 | % | | $ | 215,207 | | | $ | 160 | | | 117,726 | | | 13 | % | | $ | 206,999 | | Financials except banks | $ | 59 | | | 140,267 | | | 15 | % | | $ | 243,673 | | | $ | 104 | | | 142,283 | | | 16 | % | | $ | 236,435 | |
| Technology, telecom and media | Technology, telecom and media | 65 | | | 20,669 | | | 2 | | | 59,245 | | | 144 | | | 23,061 | | | 3 | | | 56,500 | | Technology, telecom and media | 63 | | | 24,382 | | | 3 | | | 61,899 | | | 64 | | | 23,345 | | | 3 | | | 63,551 | |
| Real estate and construction | Real estate and construction | 136 | | | 22,488 | | | 3 | | | 54,354 | | | 133 | | | 23,113 | | | 3 | | | 51,526 | | Real estate and construction | 72 | | | 24,961 | | | 3 | | | 56,783 | | | 78 | | | 25,035 | | | 3 | | | 56,278 | |
| Equipment, machinery and parts manufacturing | Equipment, machinery and parts manufacturing | 41 | | | 16,833 | | | 2 | | | 40,174 | | | 81 | | | 18,158 | | | 2 | | | 41,332 | | Equipment, machinery and parts manufacturing | 17 | | | 19,763 | | | 2 | | | 44,640 | | | 24 | | | 18,130 | | | 2 | | | 43,778 | |
| Retail | Retail | 44 | | | 16,726 | | | 2 | | | 39,732 | | | 94 | | | 17,393 | | | 2 | | | 41,669 | | Retail | 21 | | | 17,529 | | | 2 | | | 40,651 | | | 27 | | | 17,645 | | | 2 | | | 41,447 | |
| Materials and commodities | Materials and commodities | 19 | | | 13,033 | | | 2 | | | 35,232 | | | 39 | | | 12,071 | | | 1 | | | 33,879 | | Materials and commodities | 28 | | | 16,141 | | | 2 | | | 38,491 | | | 32 | | | 14,684 | | | 2 | | | 36,704 | |
| Food and beverage manufacturing | Food and beverage manufacturing | 9 | | | 11,955 | | | 1 | | | 29,460 | | | 17 | | | 12,401 | | | 1 | | | 28,908 | | Food and beverage manufacturing | 6 | | | 14,935 | | | 2 | | | 31,794 | | | 7 | | | 13,242 | | | 1 | | | 30,903 | |
| Health care and pharmaceuticals | Health care and pharmaceuticals | 26 | | | 13,484 | | | 2 | | | 29,259 | | | 145 | | | 15,322 | | | 2 | | | 32,154 | | Health care and pharmaceuticals | 25 | | | 13,279 | | | 1 | | | 29,827 | | | 24 | | | 12,847 | | | 1 | | | 29,057 | |
| Oil, gas and pipelines | Oil, gas and pipelines | 486 | | | 9,186 | | | 1 | | | 28,785 | | | 953 | | | 10,471 | | | 1 | | | 30,055 | | Oil, gas and pipelines | 85 | | | 8,447 | | | * | | 29,626 | | | 197 | | | 8,828 | | | * | | 29,010 | |
| Auto related | Auto related | 63 | | | 9,873 | | | 1 | | | 25,036 | | | 79 | | | 11,817 | | | 1 | | | 25,034 | | Auto related | 22 | | | 10,762 | | | 1 | | | 26,051 | | | 31 | | | 10,629 | | | 1 | | | 25,772 | |
| Commercial services | Commercial services | 76 | | | 10,018 | | | 1 | | | 23,965 | | | 107 | | | 10,284 | | | 1 | | | 24,442 | | Commercial services | 69 | | | 10,632 | | | 1 | | | 25,284 | | | 78 | | | 10,492 | | | 1 | | | 24,804 | |
| Utilities | Utilities | 67 | | | 7,136 | | | * | | 21,615 | | | 2 | | | 5,031 | | | * | | 18,564 | | Utilities | 78 | | | 8,303 | | | * | | 24,429 | | | 77 | | | 6,982 | | | * | | 22,428 | |
| Diversified or miscellaneous | | Diversified or miscellaneous | 21 | | | 8,233 | | | * | | 20,103 | | | 3 | | | 7,493 | | | * | | 19,395 | |
| Entertainment and recreation | | Entertainment and recreation | 43 | | | 11,438 | | | 1 | | 19,426 | | | 23 | | | 9,907 | | | 1 | | 17,943 | |
| Insurance and fiduciaries | Insurance and fiduciaries | 1 | | | 4,371 | | | * | | 19,233 | | | 2 | | | 3,297 | | | * | | 14,334 | | Insurance and fiduciaries | 1 | | | 4,366 | | | * | | 18,879 | | | 1 | | | 3,387 | | | * | | 17,521 | |
| Diversified or miscellaneous | 27 | | | 6,309 | | | * | | 17,108 | | | 7 | | | 5,437 | | | * | | 14,717 | | |
| Banks | | Banks | — | | | 18,336 | | | 2 | | | 18,829 | | | — | | | 16,178 | | | 2 | | 16,615 | |
| Transportation services | Transportation services | 492 | | | 8,566 | | | 1 | | 16,866 | | | 573 | | | 9,236 | | | 1 | | | 15,531 | | Transportation services | 246 | | | 8,116 | | | * | | 15,173 | | | 288 | | | 8,162 | | | * | | 14,775 | |
| Entertainment and recreation | 68 | | | 7,612 | | | * | | 15,540 | | | 263 | | | 9,884 | | | 1 | | | 17,551 | | |
| Banks | — | | | 14,839 | | | 2 | | 15,290 | | | — | | | 12,789 | | | 1 | | | 13,842 | | |
| Agribusiness | Agribusiness | 57 | | | 5,402 | | | * | | 11,221 | | | 81 | | | 6,314 | | | * | | 11,642 | | Agribusiness | 32 | | | 6,058 | | | * | | 11,642 | | | 35 | | | 6,086 | | | * | | 11,701 | |
| Government and education | Government and education | 4 | | | 5,033 | | | * | | 10,793 | | | 9 | | | 5,464 | | | * | | 11,065 | | Government and education | 4 | | | 5,717 | | | * | | 11,230 | | | 5 | | | 5,863 | | | * | | 11,358 | |
| Other (2) | Other (2) | 71 | | | 5,046 | | | * | | 19,693 | | | 68 | | | 5,623 | | | * | | 23,315 | | Other (2) | 24 | | | 4,941 | | | * | | 20,821 | | | 30 | | | 4,077 | | | * | | 20,112 | |
| Total | Total | $ | 1,906 | | | 333,338 | | | 39 | % | | $ | 727,808 | | | $ | 2,957 | | | 334,892 | | | 33 | % | | $ | 713,059 | | Total | $ | 916 | | | 376,606 | | | 41 | % | | $ | 789,251 | | | $ | 1,128 | | | 365,295 | | | 41 | % | | $ | 769,587 | |
*Less than 1%.
(1)Total commitments consist of loans outstanding plus unfunded credit commitments, excluding issued letters of credit. For additional information on issued letters of credit, see Note 11 (Guarantees and Other Commitments) to Financial Statements in this Report.
(2)No other single industry had total loans in excess of $3.4$3.0 billion and $3.8$3.1 billion at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively.
Loans to financials except banks,
Table 10a provides further loan segmentation for our largest industry concentration, is predominantly comprised ofcategory, financials except banks. This category includes loans to investment firms, financial vehicles, nonbank creditors, rental and nonbank creditors. We had $88.1 billionleasing companies, securities firms, and $80.0 billion of loans originated by our Asset Backed Finance (ABF) and Financial Institution Group (FIG) lines of business at June 30, 2021, and December 31, 2020, respectively.investment banks. These loans include: (i) loansare generally secured and have features to customers related to their subscription or capital calls, (ii) loans to nonbank lenders collateralized by commercial
help manage credit risk, such as structural credit enhancements, collateral eligibility requirements, contractual re-margining of collateral supporting the loans, and (iii) loans to originators or servicers of financial assets collateralized by residential real estate or other consumer loans such as credit cards, auto loans and leases, student loans and other financial assets eligible for the securitization market. These ABF and FIG loans areloan amounts limited to a percentage of the value of the underlying financial assets considering underlying credit risk, asset duration, and ongoing performance. These ABF
Table 10a:Financials Except Banks Industry Category | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| ($ in millions) | Nonaccrual loans | | Total portfolio | | % of total loans | | Total commitments (1) | | Nonaccrual loans | | Total portfolio | | % of total loans | | Total commitments (1) |
| Asset managers and funds (2) | $ | 1 | | | 59,404 | | | 6 | % | | $ | 102,214 | | | $ | 1 | | | 60,518 | | | 7 | % | | $ | 101,311 | |
| Commercial finance (3) | 39 | | | 44,665 | | | 5 | | | 73,162 | | | 82 | | | 46,043 | | | 5 | | | 69,941 | |
| Real estate finance (4) | 9 | | | 23,978 | | | 3 | | | 41,583 | | | 9 | | | 23,231 | | | 3 | | | 38,003 | |
| Consumer finance (5) | 10 | | | 12,220 | | | 1 | | | 26,714 | | | 12 | | | 12,491 | | | 1 | | | 27,180 | |
| Total | $ | 59 | | | 140,267 | | | 15 | % | | $ | 243,673 | | | $ | 104 | | | 142,283 | | | 16 | % | | $ | 236,435 | |
(1)Total commitments consist of loans outstanding plus unfunded credit commitments, excluding issued letters of credit. For additional information on issued letters of credit, see Note 11 (Guarantees and FIGOther Commitments) to Financial Statements in this Report.
(2)Includes loans may also have other features to manage credit risk such as cross-collateralization, credit enhancements,for subscription or capital calls and contractual re-margining of collateral supporting the loans. In addition, loans to financials except banks includedprime brokerage customers and securities firms.
(3)Includes asset-based lending and leasing, including loans to special purpose entities; and includes collateralized loan obligations (CLOs) in loan form, all of which were rated AA or above, of $7.8 billion and $8.1 billion and $7.9 billion at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively.
Oil, gas(4)Includes originators or servicers of financial assets collateralized by commercial or residential real estate loans.
(5)Includes originators or servicers of financial assets collateralized by consumer loans such as auto loans and pipelines loans included $6.6 billionleases, and $7.5 billion of senior secured loans outstanding at June 30, 2021, and December 31, 2020, respectively. Oil, gas and pipelines
credit cards.
nonaccrual loans decreased at June 30, 2021, compared with December 31, 2020, driven by loan payoffs.
We continue to perform escalated credit monitoring for certain industries that we consider to be directly and most adversely affected by the COVID-19 pandemic.
Our commercial and industrial loans and lease financing portfolio also includesincluded non-U.S. loans of $72.1$81.1 billion and $63.8$78.0 billion at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively. Significant industry concentrations of non-U.S. loans at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively, included:
•$43.546.3 billion and $36.2$46.7 billion in the financials except banks category;
•$14.718.0 billion and $12.8$15.9 billion in the banks category; and
•$1.41.5 billion and $1.6$1.7 billion in the oil, gas and pipelines category.
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 definitions of pass and criticized categories with criticized segmented among special mention, substandard, doubtful and loss categories. We had $15.6$12.0 billion of CRE mortgage loans classified as criticized at June 30, 2021,March 31, 2022, compared with $12.0$13.1 billion at December 31, 2020,2021, and $2.6$1.7 billion of CRE construction loans classified as criticized at June 30, 2021,
compared with $1.6 billion atboth March 31, 2022 and December 31, 2020.2021. The increasedecrease in criticized CRE mortgage and construction loans was driven by the hotel/motel, apartment, institutional,retail (excluding shopping center) and officeshopping center property types and reflected the economic impact of the COVID-19 pandemic. Dueas these property types continued to uncertainty in the recoveryrecover from the economic impacts of the COVID-19 pandemic, thepandemic. The credit quality of certain property types within our CRE loan portfolio, such as retail, hotel/motel, office buildings, and shopping centers, could continue to be adversely affected.affected due to uncertainty in their recovery from the economic impacts of the COVID-19 pandemic.
The total CRE loan portfolio decreased $441 millionincreased $2.3 billion from December 31, 2020,2021, predominantly driven by a decrease in CRE mortgage loans predominantly related to the office, retail (excluding shopping
center), and shopping center property types, partially offset by an increase in loans related to apartments.mixed use properties and apartments property types. The CRE loan portfolio included $8.4$8.6 billion of non-U.S. CRE loans at June 30, 2021.March 31, 2022. The portfolio is diversified both geographically and by property type. The largest geographic concentrations of CRE loans are in California, New York, Texas, and Florida, and Texas, which represented a combined represented 48% of the total CRE portfolio. The largest property type concentrations are office buildings at 25%24% and apartments at 20%22% of the portfolio.
Table 1211 summarizes CRE loans by state and property type with the related nonaccrual totals at June 30, 2021.March 31, 2022.
Table 12:11: CRE Loans by State and Property Type
| | | June 30, 2021 | | March 31, 2022 |
| | Real estate mortgage | | Real estate construction | | Total | | % of
total
loans | | Real estate mortgage | | Real estate construction | | Total | | % of
total
loans |
| ($ in millions) | ($ in millions) | Nonaccrual loans | | Total portfolio | | Nonaccrual loans | | Total portfolio | | Nonaccrual loans | | Total portfolio | | ($ in millions) | Nonaccrual loans | | Total portfolio | | Nonaccrual loans | | Total portfolio | | Nonaccrual loans | | Total portfolio | |
| By state: | By state: | | By state: | |
| California | California | $ | 218 | | | 30,684 | | | 3 | | | 4,380 | | | 221 | | | 35,064 | | | 4 | % | California | $ | 175 | | | 30,403 | | | 1 | | | 3,840 | | | 176 | | | 34,243 | | | 4 | % |
| New York | New York | 58 | | | 12,618 | | | 2 | | | 1,997 | | | 60 | | | 14,615 | | | 2 | | New York | 129 | | | 13,364 | | | — | | | 2,072 | | | 129 | | | 15,436 | | | 2 | |
| Texas | | Texas | 49 | | | 10,884 | | | — | | | 1,202 | | | 49 | | | 12,086 | | | 1 | |
| Florida | Florida | 111 | | | 8,617 | | | 1 | | | 1,571 | | | 112 | | | 10,188 | | | 1 | | Florida | 37 | | | 9,172 | | | 1 | | | 1,248 | | | 38 | | | 10,420 | | | 1 | |
| Texas | 308 | | | 8,253 | | | — | | | 1,139 | | | 308 | | | 9,392 | | | 1 | | |
| Washington | Washington | 139 | | | 3,839 | | | 6 | | | 1,072 | | | 145 | | | 4,911 | | | * | Washington | 84 | | | 4,020 | | | — | | | 1,399 | | | 84 | | | 5,419 | | | * |
| Georgia | Georgia | 51 | | | 3,820 | | | — | | | 585 | | | 51 | | | 4,405 | | | * | Georgia | 12 | | | 4,719 | | | — | | | 412 | | | 12 | | | 5,131 | | | * |
| Arizona | | Arizona | 38 | | | 4,622 | | | — | | | 414 | | | 38 | | | 5,036 | | | * |
| North Carolina | North Carolina | 11 | | | 3,526 | | | — | | | 871 | | | 11 | | | 4,397 | | | * | North Carolina | 3 | | | 3,989 | | | — | | | 682 | | | 3 | | | 4,671 | | | * |
| Arizona | 50 | | | 3,978 | | | 1 | | | 289 | | | 51 | | | 4,267 | | | * | |
| Illinois | | Illinois | 16 | | | 3,654 | | | — | | | 553 | | | 16 | | | 4,207 | | | * |
| New Jersey | New Jersey | 72 | | | 2,637 | | | — | | | 1,042 | | | 72 | | | 3,679 | | | * | New Jersey | 23 | | | 2,705 | | | — | | | 924 | | | 23 | | | 3,629 | | | * |
| Colorado | 12 | | | 3,146 | | | — | | | 440 | | | 12 | | | 3,586 | | | * | |
| Other (1) | Other (1) | 568 | | | 39,560 | | | 32 | | | 9,020 | | | 600 | | | 48,580 | | | 6 | | Other (1) | 467 | | | 41,963 | | | 2 | | | 7,867 | | | 469 | | | 49,830 | | | 5 | |
| Total | Total | $ | 1,598 | | | 120,678 | | | 45 | | | 22,406 | | | 1,643 | | | 143,084 | | | 17 | % | Total | $ | 1,033 | | | 129,495 | | | 4 | | | 20,613 | | | 1,037 | | | 150,108 | | | 16 | % |
By property: | By property: | | By property: | |
| Office buildings | Office buildings | $ | 146 | | | 33,098 | | | 2 | | | 3,173 | | | 148 | | | 36,271 | | | 4 | % | Office buildings | $ | 130 | | | 33,476 | | | — | | | 3,075 | | | 130 | | | 36,551 | | | 4 | % |
| Apartments | Apartments | 27 | | | 20,645 | | | — | | | 8,208 | | | 27 | | | 28,853 | | | 3 | | Apartments | 13 | | | 26,317 | | | — | | | 7,184 | | | 13 | | | 33,501 | | | 4 | |
| Industrial/warehouse | Industrial/warehouse | 88 | | | 15,331 | | | 2 | | | 1,746 | | | 90 | | | 17,077 | | | 2 | | Industrial/warehouse | 70 | | | 16,047 | | | — | | | 1,882 | | | 70 | | | 17,929 | | | 2 | |
| Hotel/motel | | Hotel/motel | 200 | | | 10,897 | | | — | | | 1,542 | | | 200 | | | 12,439 | | | 1 | |
| Retail (excluding shopping center) | Retail (excluding shopping center) | 230 | | | 13,091 | | | 3 | | | 142 | | | 233 | | | 13,233 | | | 2 | | Retail (excluding shopping center) | 115 | | | 12,198 | | | 2 | | | 110 | | | 117 | | | 12,308 | | | 1 | |
| Hotel/motel | 361 | | | 10,552 | | | — | | | 1,719 | | | 361 | | | 12,271 | | | 1 | | |
| Shopping center | Shopping center | 509 | | | 10,002 | | | — | | | 911 | | | 509 | | | 10,913 | | | 1 | | Shopping center | 342 | | | 9,438 | | | — | | | 857 | | | 342 | | | 10,295 | | | 1 | |
| Institutional | Institutional | 54 | | | 4,289 | | | 20 | | | 2,619 | | | 74 | | | 6,908 | | | * | Institutional | 38 | | | 5,385 | | | 1 | | | 2,501 | | | 39 | | | 7,886 | | | * |
| Mixed use properties | Mixed use properties | 98 | | | 5,306 | | | — | | | 938 | | | 98 | | | 6,244 | | | * | Mixed use properties | 71 | | | 6,341 | | | — | | | 1,162 | | | 71 | | | 7,503 | | | * |
| Collateral pool | Collateral pool | — | | | 2,947 | | | — | | | 191 | | | — | | | 3,138 | | | * | Collateral pool | — | | | 3,371 | | | — | | | 232 | | | — | | | 3,603 | | | * |
| 1-4 family structure | — | | | 8 | | | — | | | 1,348 | | | — | | | 1,356 | | | * | |
| Storage facility | | Storage facility | — | | | 2,390 | | | — | | | 139 | | | — | | | 2,529 | | | * |
| Other | Other | 85 | | | 5,409 | | | 18 | | | 1,411 | | | 103 | | | 6,820 | | | * | Other | 54 | | | 3,635 | | | 1 | | | 1,929 | | | 55 | | | 5,564 | | | * |
| Total | Total | $ | 1,598 | | | 120,678 | | | 45 | | | 22,406 | | | 1,643 | | | 143,084 | | | 17 | % | Total | $ | 1,033 | | | 129,495 | | | 4 | | | 20,613 | | | 1,037 | | | 150,108 | | | 16 | % |
* Less than 1%.
(1)Includes 40 states; no state in Other had loans in excess of $3.6 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 June 30, 2021,March 31, 2022, non-U.S. loans totaled $80.8$90.0 billion, representing approximately 9%10% of our total consolidated loans outstanding, compared with $72.9$86.9 billion, or approximately 8%10% of our total consolidated loans outstanding, at December 31, 2020.2021. Non-U.S. loans were approximately 5% and 4% of our total consolidated assets at both June 30, 2021,March 31, 2022, and December 31, 2020.2021, respectively.
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. at June 30, 2021,March 31, 2022, was the United Kingdom, which totaled $34.4$40.2 billion, or approximately 2% of our total assets, and included $7.7$9.6 billion of sovereign claims. Our United Kingdom sovereign claims arise predominantly from deposits we have placed with the Bank of England pursuant to regulatory requirements in support of our London branch.
Table 1312 provides information regarding our top 20 exposures by country (excluding the U.S.), based on our assessment of risk, which gives consideration to the country of any guarantors and/or underlying collateral. With respect to Table 13:12:
•Lending and deposits exposure includes outstanding loans, unfunded credit commitments, and deposits with non-U.S. banks. These balances are presented prior to the deduction of allowance for credit losses or collateral received under the terms of the credit agreements, if any.
•Securities exposure represents debt and equity securities of non-U.S. issuers. Long and short positions are netted, and net short positions are reflected as negative exposure.
•Derivatives and other exposure represents foreign exchange contracts, derivative contracts, securities resale agreements, and securities lending agreements.
Table 13:12: Select Country Exposures
| | | June 30, 2021 | | March 31, 2022 |
| | Lending and deposits | | Securities | | Derivatives and other | | Total exposure | | Lending and deposits | | Securities | | Derivatives and other | | Total exposure |
| ($ in millions) | ($ in millions) | Sovereign | | Non-sovereign | | Sovereign | | Non-sovereign | | Sovereign | | Non-sovereign | | Sovereign | | Non-
sovereign (1) | | Total | ($ in millions) | Sovereign | | Non-sovereign | | Sovereign | | Non-sovereign | | Sovereign | | Non-sovereign | | Sovereign | | Non-
sovereign (1) | | Total |
| Top 20 country exposures: | Top 20 country exposures: | | Top 20 country exposures: | |
| United Kingdom | United Kingdom | $ | 7,716 | | | 23,986 | | | — | | | 970 | | | — | | | 1,689 | | | 7,716 | | | 26,645 | | | 34,361 | | United Kingdom | $ | 9,561 | | | 26,111 | | | — | | | 1,087 | | | 1 | | | 3,451 | | | 9,562 | | | 30,649 | | | 40,211 | |
| Canada | Canada | 2 | | | 16,693 | | | 1 | | | (19) | | | 2 | | | 456 | | | 5 | | | 17,130 | | | 17,135 | | Canada | 1 | | | 18,295 | | | 27 | | | 163 | | | 14 | | | 480 | | | 42 | | | 18,938 | | | 18,980 | |
| Cayman Islands | | Cayman Islands | — | | | 7,472 | | | — | | | — | | | — | | | 144 | | | — | | | 7,616 | | | 7,616 | |
| Luxembourg | | Luxembourg | — | | | 5,906 | | | — | | | 51 | | | — | | | 101 | | | — | | | 6,058 | | | 6,058 | |
| Ireland | | Ireland | 559 | | | 5,121 | | | — | | | 249 | | | — | | | 63 | | | 559 | | | 5,433 | | | 5,992 | |
| Japan | Japan | 19 | | | 700 | | | 11,173 | | | 161 | | | — | | | 46 | | | 11,192 | | | 907 | | | 12,099 | | Japan | 3,604 | | | 1,129 | | | — | | | 95 | | | — | | | 73 | | | 3,604 | | | 1,297 | | | 4,901 | |
| Cayman Islands | — | | | 6,757 | | | — | | | — | | | — | | | 153 | | | — | | | 6,910 | | | 6,910 | | |
| Ireland | 254 | | | 5,050 | | | — | | | 155 | | | — | | | 117 | | | 254 | | | 5,322 | | | 5,576 | | |
| Luxembourg | — | | | 4,258 | | | — | | | 126 | | | — | | | 129 | | | — | | | 4,513 | | | 4,513 | | |
| Guernsey | Guernsey | — | | | 4,157 | | | — | | | 3 | | | — | | | 39 | | | — | | | 4,199 | | | 4,199 | | Guernsey | — | | | 3,885 | | | — | | | 1 | | | — | | | 72 | | | — | | | 3,958 | | | 3,958 | |
| China | | China | — | | | 3,206 | | | 1 | | | 128 | | | 337 | | | 33 | | | 338 | | | 3,367 | | | 3,705 | |
| Bermuda | Bermuda | — | | | 3,842 | | | — | | | 65 | | | — | | | 130 | | | — | | | 4,037 | | | 4,037 | | Bermuda | — | | | 3,511 | | | — | | | 35 | | | — | | | 52 | | | — | | | 3,598 | | | 3,598 | |
| China | — | | | 3,353 | | | (2) | | | 447 | | | 17 | | | 39 | | | 15 | | | 3,839 | | | 3,854 | | |
| France | | France | 126 | | | 2,934 | | | — | | | 151 | | | 351 | | | 36 | | | 477 | | | 3,121 | | | 3,598 | |
| Germany | Germany | — | | | 3,073 | | | — | | | 62 | | | 3 | | | 93 | | | 3 | | | 3,228 | | | 3,231 | | Germany | — | | | 2,973 | | | — | | | 29 | | | — | | | 208 | | | — | | | 3,210 | | | 3,210 | |
| France | 131 | | | 2,233 | | | — | | | 212 | | | 184 | | | 12 | | | 315 | | | 2,457 | | | 2,772 | | |
| South Korea | | South Korea | — | | | 2,452 | | | (1) | | | 181 | | | 6 | | | 15 | | | 5 | | | 2,648 | | | 2,653 | |
| Netherlands | Netherlands | — | | | 1,978 | | | 3 | | | 211 | | | — | | | 116 | | | 3 | | | 2,305 | | | 2,308 | | Netherlands | — | | | 2,156 | | | — | | | 91 | | | — | | | 81 | | | — | | | 2,328 | | | 2,328 | |
| South Korea | — | | | 1,991 | | | — | | | 198 | | | 2 | | | 13 | | | 2 | | | 2,202 | | | 2,204 | | |
| Brazil | — | | | 1,438 | | | — | | | 2 | | | 3 | | | — | | | 3 | | | 1,440 | | | 1,443 | | |
| Switzerland | Switzerland | — | | | 1,193 | | | — | | | (13) | | | — | | | 212 | | | — | | | 1,392 | | | 1,392 | | Switzerland | — | | | 1,595 | | | — | | | (8) | | | — | | | 171 | | | — | | | 1,758 | | | 1,758 | |
| United Arab Emirates | — | | | 1,014 | | | — | | | 87 | | | — | | | — | | | — | | | 1,101 | | | 1,101 | | |
| Australia | — | | | 992 | | | — | | | 8 | | | — | | | 11 | | | — | | | 1,011 | | | 1,011 | | |
| Singapore | — | | | 820 | | | — | | | 51 | | | — | | | 98 | | | — | | | 969 | | | 969 | | |
| Chile | Chile | — | | | 918 | | | — | | | — | | | — | | | — | | | — | | | 918 | | | 918 | | Chile | — | | | 1,673 | | | — | | | 2 | | | — | | | 2 | | | — | | | 1,677 | | | 1,677 | |
| India | India | — | | | 877 | | | — | | | 20 | | | — | | | — | | | — | | | 897 | | | 897 | | India | — | | | 1,467 | | | — | | | 103 | | | — | | | — | | | — | | | 1,570 | | | 1,570 | |
| Australia | | Australia | — | | | 1,305 | | | — | | | 228 | | | — | | | 14 | | | — | | | 1,547 | | | 1,547 | |
| United Arab Emirates | | United Arab Emirates | — | | | 1,375 | | | — | | | 45 | | | — | | | — | | | — | | | 1,420 | | | 1,420 | |
| Brazil | | Brazil | — | | | 1,171 | | | — | | | (1) | | | 85 | | | — | | | 85 | | | 1,170 | | | 1,255 | |
| Norway | | Norway | — | | | 1,141 | | | — | | | 24 | | | — | | | 7 | | | — | | | 1,172 | | | 1,172 | |
| Total top 20 country exposures | Total top 20 country exposures | $ | 8,122 | | | 85,323 | | | 11,175 | | | 2,746 | | | 211 | | | 3,353 | | | 19,508 | | | 91,422 | | | 110,930 | | Total top 20 country exposures | $ | 13,851 | | | 94,878 | | | 27 | | | 2,654 | | | 794 | | | 5,003 | | | 14,672 | | | 102,535 | | | 117,207 | |
|
(1)Total non-sovereign exposure comprised $47.6$54.3 billion exposure to financial institutions and $43.8$48.2 billion to non-financial corporations at June 30, 2021.March 31, 2022.
RESIDENTIAL MORTGAGE LOANS Our residential mortgage loan portfolio is comprised of 1-4 family first and junior lien mortgage loans. Residential mortgage – first lien loans comprised 93%94% of the total residential mortgage loan portfolio at both June 30, 2021,March 31, 2022, and December 31, 2020.2021.
The outstanding balance of residential mortgage lines of credit was $21.2 billion at March 31, 2022. The unfunded credit commitments for these lines of credit totaled $42.9 billion at March 31, 2022.
The residential mortgage loan portfolio includes some loans with adjustable-rate features and some with an interest-only feature as part of the loan terms. Interest-only loans were approximately 3% of total loans at both June 30, 2021,March 31, 2022, and December 31, 2020.2021. We believe our origination process appropriately addresses our adjustable-rate mortgage (ARM) reset risk across our residential mortgage loan portfoliosloans and our ACL for loans considers this risk. 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.
We continue to modifyThe residential mortgage – junior lien portfolio consists of residential mortgage lines of credit and loans that are subordinate in rights to assist homeownersan existing lien on the same property. These lines and other borrowers experiencing financial difficulties.loans may have draw periods, interest-only payments, balloon payments, adjustable rates and similar
features. For additional information on our modification programs,residential mortgage loan portfolio, see the “Risk Management – Credit Risk Management – Residential Mortgage Loans” section in our 20202021 Form 10-K. For additional information on customer accommodations, including loan modifications, in response to the COVID-19 pandemic, see the “Risk Management – Credit Risk Management – COVID-Related Lending Accommodations” section in this Report.
We monitor changes in real estate values and underlying economic or market conditions for all geographic areas of our residential mortgage portfoliosportfolio as part of our credit risk management process. Our underwriting and periodic review of loans and lines secured by residential real estate collateralthis portfolio includes original appraisals adjusted for the change in Home Price Index (HPI) or estimates from automated valuation models (AVMs) to support property values. AdditionalFor additional information about appraisals, AVMs, and our policy for their use, can be found insee Note 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report and the “Risk Management – Credit Risk Management – Residential Mortgage Loans” section in our 20202021 Form 10-K.
Part of our credit monitoring includes tracking delinquency, current FICO scores and loan/combined loan to collateral values (LTV/CLTV) on the entire residential mortgage loan portfolio. Excluding government insured/guaranteed loans, theseCLTV represents the ratio of the total loan balance of first and junior lien mortgages (including unused line amounts for credit riskline products) to property collateral value. For additional information regarding credit quality indicators, on thesee Note 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
We continue to modify residential mortgage portfolio were:
•Loans 30 days or more delinquent at June 30,loans to assist homeowners and other borrowers experiencing financial difficulties. For additional information on loan modifications, see the “Risk Management – Credit Risk Management – Residential Mortgage Loans” section in our 2021 totaled $3.7 billion, or 1% of total mortgages, compared with $4.7 billion, or 2%, at December 31, 2020.Form 10-K. Customer payment deferral activities instituted in response to the COVID-19 pandemic could continue to delay the recognition of delinquencies;delinquencies. For information on customer accommodations, including loan modifications, in response to the COVID-19 pandemic, see the “Risk Management – Credit Risk Management – COVID-Related Lending Accommodations” section in our 2021 Form 10-K.
Residential Mortgage – First Lien Portfolio Our residential mortgage – first lien portfolio increased $3.0 billion from
•Loans with FICO scores lower than 640 totaled $4.3 billion, or 2% of total mortgages at June 30, 2021, compared with $5.6 billion, or 2%, at December 31, 2020;2021, driven by originations of $18.4 billion, partially offset by loan paydowns and
•Mortgages with a LTV/CLTV greater than 100% totaled $912 million at June 30, 2021, or less than 1% the transfer of total mortgages, compared with $1.6$2.8 billion or 1%, at December 31, 2020.
Information regarding credit quality indicators can be found in Note 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report. Residentialof first lien mortgage loans to loans held for sale (LHFS), substantially all of which related to the sales of loans purchased from GNMA loan securitization pools in prior periods.
Table 13 shows certain delinquency and loss information for the residential mortgage – first lien portfolio and lists the top five states by state are presented in Table 14.outstanding balance.
Table 14:13: Residential Mortgage Loans by State– First Lien Portfolio Performance
| | | June 30, 2021 | | Outstanding balance | | % of total loans | | % of loans 30 days
or more past due | | | Net loan charge-off rate quarter ended (1)(2) |
| ($ in millions) | ($ in millions) | Residential mortgage – first lien | | Residential mortgage – junior lien | | Total residential mortgage | | % of
total loans | ($ in millions) | Mar 31,
2022 | | Dec 31,
2021 | | Mar 31,
2022 | | Dec 31,
2021 | | Mar 31,
2022 | | Dec 31,
2021 | | | Mar 31,
2022 | | Dec 31,
2021 |
| Residential mortgage loans: | | |
| California (1) | $ | 96,679 | | | 5,155 | | | 101,834 | | | 12 | % | |
| | | | California (3) | | California (3) | $ | 104,552 | | | 100,933 | | | 11.47 | % | | 11.27 | | | 0.76 | | | 0.95 | | | | (0.01) | | | 0.01 |
| New York | New York | 29,635 | | | 1,117 | | | 30,752 | | | 4 | | New York | 30,498 | | | 30,039 | | | 3.34 | | | 3.35 | | | 1.01 | | | 1.34 | | | | (0.03) | | | 0.50 |
| New Jersey | New Jersey | 10,491 | | | 1,988 | | | 12,479 | | | 1 | | New Jersey | 10,184 | | | 10,205 | | | 1.12 | | | 1.14 | | | 1.55 | | | 1.95 | | | | 0.01 | | | 0.40 |
| Florida | Florida | 9,839 | | | 1,804 | | | 11,643 | | | 1 | | Florida | 10,077 | | | 9,978 | | | 1.11 | | | 1.11 | | | 1.60 | | | 1.93 | | | | (0.06) | | | 0.64 |
| Washington | Washington | 8,088 | | | 414 | | | 8,502 | | | 1 | | Washington | 9,097 | | | 8,636 | | | 1.00 | | | 0.96 | | | 0.36 | | | 0.47 | | | | — | | | 0.02 |
| Texas | 6,956 | | | 388 | | | 7,344 | | | 1 | | |
| Virginia | 5,656 | | | 1,148 | | | 6,804 | | | 1 | | |
| North Carolina | 4,380 | | | 932 | | | 5,312 | | | 1 | | |
| Colorado | 4,668 | | | 400 | | | 5,068 | | | 1 | | |
| Other (2) | 47,748 | | | 6,291 | | | 54,039 | | | 6 | | |
| Other (4) | | Other (4) | 70,264 | | | 69,321 | | | 7.71 | | | 7.74 | | | 1.17 | | | 1.48 | | | | 0.01 | | | 0.25 |
| Total | | Total | 234,672 | | | 229,112 | | | 25.75 | | | 25.57 | | | 0.97 | | | 1.23 | | | | — | | | 0.18 |
Government insured/guaranteed loans (3)(5) | Government insured/guaranteed loans (3)(5) | 20,231 | | | — | | | 20,231 | | | 2 | | Government insured/guaranteed loans (3)(5) | 10,570 | | | 13,158 | | | 1.16 | | | 1.47 | | | | |
| Total | $ | 244,371 | | | 19,637 | | | 264,008 | | | 31 | % | |
| Total first lien mortgage portfolio | | Total first lien mortgage portfolio | $ | 245,242 | | | 242,270 | | | 26.91 | | | 27.04 | | | | |
(1)Quarterly net charge-offs as a percentage of average respective loans are annualized.
(2)The net loan charge-off rate for the quarter ended December 31, 2021, includes $120 million of loan charge-offs related to a change in practice to fully charge-off certain delinquent legacy residential mortgage loans.
(3)Our residential mortgage loans to borrowers in California are located predominantly within the larger metropolitan areas, with no single California metropolitan area consisting of more than 4% of total loans.
(2)(4)Consists of 4145 states; no state in Other had loans in excess of $5.1 billion.$7.3 billion and $7.2 billion at March 31, 2022, and December 31, 2021, respectively.
(3)(5)Represents loans, whose repayments aresubstantially all of which were repurchased from GNMA loan securitization pools, where the repayment of the loans is predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).
Risk For additional information on GNMA loan securitization pools, see the “Risk Management – Credit Risk Management (continued)
Residential– Mortgage – First Lien Portfolio Our total residential mortgage – first lien portfolio decreased $32.3 billion from December 31, 2020, driven by loan paydowns as a result of the low interest rate environment and the transfer of $10.8 billion of first lien mortgage loans to loans held for sale (LHFS) substantially all of which related to the sales of loans purchased
from GNMA loan securitization poolsBanking Activities” section in prior periods, partially offset by originations of $30.8 billion.
Table 15 shows certain delinquency and loss information for the residential mortgage – first lien portfolio and lists the top five states by outstanding balance.
Table 15:this Report.Residential Mortgage – First Lien Portfolio Performance
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Outstanding balance | | % of loans 30 days
or more past due | | | Loss (recovery) rate (annualized) quarter ended |
| ($ in millions) | Jun 30,
2021 | Dec 31,
2020 | | Jun 30,
2021 | Dec 31,
2020 | | | Jun 30,
2021 | Mar 31,
2021 | | Dec 31,
2020 | Sep 30,
2020 | Jun 30,
2020 |
| | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | |
| California | $ | 96,679 | | 104,260 | | | 0.84 | % | 1.00 | | | | (0.02) | | (0.02) | | | (0.03) | | (0.01) | | (0.01) | |
| New York | 29,635 | | 31,028 | | | 1.12 | | 1.40 | | | | 0.01 | | (0.01) | | | 0.01 | | 0.02 | | 0.02 | |
| New Jersey | 10,491 | | 12,073 | | | 1.71 | | 1.92 | | | | (0.03) | | — | | | (0.03) | | (0.01) | | 0.03 | |
| Florida | 9,839 | | 10,623 | | | 2.04 | | 2.56 | | | | (0.14) | | (0.11) | | | 0.01 | | 0.03 | | (0.01) | |
| Washington | 8,088 | | 9,094 | | | 0.51 | | 0.66 | | | | (0.02) | | 0.02 | | | (0.01) | | 0.01 | | (0.01) | |
| Other | 69,408 | | 79,356 | | | 1.42 | | 1.60 | | | | (0.06) | | (0.09) | | | 0.02 | | (0.01) | | 0.01 | |
| Total | 224,140 | | 246,434 | | | 1.14 | | 1.34 | | | | (0.03) | | (0.04) | | | — | | — | | — | |
| Government insured/guaranteed loans | 20,231 | | 30,240 | | | | | | | | | | | | |
| Total first lien mortgage portfolio | $ | 244,371 | | 276,674 | | | | | | | | | | | | |
Residential Mortgage – Junior Lien Portfolio TheOur residential mortgage – junior lien 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 liendecreased $1.2 billion from December 31, 2021, driven by loan products are primarily amortizing payment loans with fixed interest rates and repayment periods between five to 30 years. We continuously monitor the credit performance of our residential mortgage –paydowns.
junior lien portfolio for trends and factors that influence the frequency and severity of losses, such as residential mortgage – junior lien performance when the residential mortgage – first lien loan is delinquent.
The decrease in the residential mortgage – junior lien portfolio at June 30, 2021, compared with December 31, 2020, reflected loan paydowns. Table 1614 shows certain delinquency and loss information for the residential mortgage – junior lien portfolio and lists the top five states by outstanding balance.
Table 16:14: Residential Mortgage – Junior Lien Portfolio Performance
| | | Outstanding balance | | % of loans 30 days or more past due | | | Loss (recovery) rate (annualized) quarter ended | | Outstanding balance | | % of total loans | | % of loans 30 days or more past due | | | Net loan charge-off rate quarter ended (1)(2) |
| ($ in millions) | ($ in millions) | Jun 30,
2021 | | Dec 31,
2020 | | Jun 30,
2021 | Dec 31,
2020 | | | Jun 30,
2021 | | Mar 31,
2021 | | Dec 31,
2020 | | Sep 30,
2020 | | Jun 30,
2020 | ($ in millions) | Mar 31,
2022 | | Dec 31,
2021 | | Mar 31,
2022 | | Dec 31,
2021 | | Mar 31,
2022 | | Dec 31,
2021 | | | Mar 31,
2022 | | Dec 31,
2021 |
| | | | | California | California | $ | 5,155 | | | 6,237 | | | 2.49 | % | 2.20 | | | | (0.67) | | | (0.69) | | | (0.46) | | | (0.34) | | | (0.26) | | California | $ | 3,984 | | | 4,310 | | | 0.44 | % | | 0.48 | | | 3.23 | | | 3.52 | | | | (0.48) | | | (0.24) | |
| New Jersey | New Jersey | 1,988 | | | 2,258 | | | 2.78 | | 2.84 | | | | (0.33) | | | 0.32 | | | (0.06) | | | (0.02) | | | (0.12) | | New Jersey | 1,625 | | | 1,728 | | | 0.18 | | | 0.19 | | | 2.98 | | | 2.98 | | | | (0.11) | | | 0.54 | |
| Florida | Florida | 1,804 | | | 2,119 | | | 2.67 | | 3.06 | | | | (0.78) | | | (0.11) | | | (0.35) | | | (0.22) | | | (0.01) | | Florida | 1,396 | | | 1,533 | | | 0.15 | | | 0.17 | | | 2.33 | | | 2.54 | | | | (0.59) | | | 0.87 | |
| Pennsylvania | Pennsylvania | 1,196 | | | 1,377 | | | 2.22 | | 2.30 | | | | (0.13) | | | (0.22) | | | (0.62) | | | (0.19) | | | 0.05 | | Pennsylvania | 972 | | | 1,039 | | | 0.11 | | | 0.12 | | | 2.16 | | | 2.19 | | | | — | | | 0.12 | |
| Virginia | 1,148 | | | 1,355 | | | 2.53 | | 2.41 | | | | (0.62) | | | (0.29) | | | (0.15) | | | (0.34) | | | (0.05) | | |
| Other | 8,346 | | | 9,940 | | | 2.37 | | 2.31 | | | | (0.64) | | | (0.36) | | | (0.43) | | | (0.17) | | | (0.21) | | |
| New York | | New York | 913 | | | 975 | | | 0.10 | | | 0.11 | | | 3.82 | | | 4.05 | | | | (0.22) | | | 2.71 | |
| Other (3) | | Other (3) | 6,502 | | | 7,033 | | | 0.71 | | | 0.79 | | | 2.40 | | | 2.25 | | | | (0.59) | | | (0.11) | |
| Total junior lien mortgage portfolio | Total junior lien mortgage portfolio | $ | 19,637 | | | 23,286 | | | 2.47 | % | 2.41 | | | | (0.60) | | | (0.35) | | | (0.39) | | | (0.22) | | | (0.17) | | Total junior lien mortgage portfolio | $ | 15,392 | | | 16,618 | | | 1.69 | % | | 1.86 | | | 2.74 | | | 2.91 | | | | (0.46) | | | 0.19 | |
As(2)The net loan charge-off rate for the quarter ended December 31, 2021, includes $32 million of June 30, 2021, with respectloan charge-offs related to loansa change in thepractice to fully charge-off certain delinquent legacy residential mortgage – junior lien portfolio thatloans.
(3)Consists of 45 states; no state in Other had a CLTV ratioloans in excess of 100%:
•such loans totaled 2% of the outstanding balance of the residential mortgage – junior lien portfolio;$910 million and $980 million at March 31, 2022 and December 31, 2021, respectively.
•3% were 30 days or more past due. Customer payment deferral activities instituted in response to the COVID-19 pandemic could continue to delay the recognition of delinquencies; and
•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 residential mortgage – junior lien portfolio.
CLTV represents the ratio of the total loan balance of first and junior lien mortgages (including unused line amounts for credit line products) to property collateral value. For additional information on consumer loans by LTV/CLTV, see Table 4.11 in Note 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
| | | | | | | | |
3632 | Wells Fargo & Company | |
Residential Mortgage – Junior Lien Line and Loan and Residential Mortgage – First Lien Line CREDIT CARD, AUTO AND OTHER CONSUMER LOANSOur junior lien, as well as first lien, lines of credit portfolios generally have draw periods of 10,Table 15 or 20 years with variable interest rate and payment options available during the draw period of (1) interest-only or (2) 1.5% of outstanding principal balance plus accrued interest. As of June 30, 2021, 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.
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 risk in our ACL for loans estimate.
In anticipation of our borrowers reaching the end of their contractual commitment, we have created a program to inform, educate and help these borrowers transition from interest-only to fully-amortizing payments or full repayment. We monitor the performance of the borrowers moving through the program in an effort to refine our ongoing program strategy.
Table 17 reflectsshows the outstanding balance of our portfolio of residential mortgage – junior liens, including linescredit card, auto and loans,other consumer loan portfolios. For information regarding credit quality indicators for these portfolios, see Note 4 (Loans and residential mortgage – first lien lines segregated into scheduled end of draw or end-of-term periods and products that are currently amortizing, orRelated Allowance for Credit Losses) to Financial Statements in balloon repayment status. The unfunded credit commitments for residential mortgage – junior and first lien lines totaled $49.8 billion at June 30, 2021.
Table 17:Residential Mortgage – Junior Lien Line and Loan and Residential Mortgage – First Lien Line Portfolios Payment Schedule
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Scheduled end of draw/term | | Amortizing (2) |
| Outstanding balance | | Remainder of 2021 | | | | | | | | | | 2026 and | |
| ($ in millions) | June 30, 2021 | | | 2022 | | 2023 | | 2024 | | 2025 | | thereafter (1) | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Residential mortgage – junior lien lines and loans | $ | 19,637 | | | 384 | | | 2,271 | | | 1,563 | | | 1,239 | | | 2,059 | | | 6,050 | | | 6,071 | |
| Residential mortgage – first lien lines | 7,957 | | | 212 | | | 1,212 | | | 929 | | | 721 | | | 1,006 | | | 2,495 | | | 1,382 | |
| Total | $ | 27,594 | | | 596 | | | 3,483 | | | 2,492 | | | 1,960 | | | 3,065 | | | 8,545 | | | 7,453 | |
| % of portfolios | 100 | % | | 2 | | | 13 | | | 9 | | | 7 | | | 11 | | | 31 | | | 27 | |
(1)Substantially all lines and loans are scheduled to convert to amortizing loans by the end of 2030, with annual scheduled amounts through 2030 ranging from $914 million to $3.3 billion and averaging $1.7 billion per year.
(2)Includes $69 million of end-of-term balloon payments which were past due.
At June 30, 2021, $339 million, or 2%, of lines in their draw period were 30 days or more past due, compared with $347 million, or 5%, of amortizing lines of credit. Customer payment deferral activities instituted in response to the COVID-19 pandemic could continue to delay the recognition of delinquencies. On a monthly basis, we monitor the payment characteristics of borrowers in our residential mortgage – first and junior lien lines of credit portfolios. In June 2021, excluding borrowers with COVID-related loan modification payment deferrals:
•Approximately 43% of these borrowers paid only the minimum amount due and approximately 52% paid more than the minimum amount due. The rest were either delinquent or paid less than the minimum amount due.
•For the borrowers with an interest-only payment feature, approximately 28% paid only the minimum amount due and approximately 67% paid more than the minimum amount due.
Table 18:15: Credit Card, Auto, and Other Consumer Loans
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| ($ in millions) | ($ in millions) | | Outstanding
balance | | % of
total
loans | | Outstanding
balance | | % of
total
loans | ($ in millions) | | Outstanding
balance | | % of
total
loans | | Outstanding
balance | | % of
total
loans |
| Credit card | Credit card | | $ | 34,936 | | | 4.10 | % | | $ | 36,664 | | | 4.13 | % | Credit card | | $ | 38,639 | | | 4.24 | % | | $ | 38,453 | | | 4.29 | % |
| Auto | Auto | | 51,073 | | | 5.99 | | | 48,187 | | | 5.43 | | Auto | | 57,083 | | | 6.26 | | | 56,659 | | | 6.33 | |
| Other consumer (1) | Other consumer (1) | | 25,861 | | | 3.03 | | | 24,409 | | | 2.75 | | Other consumer (1) | | 28,737 | | | 3.15 | | | 28,274 | | | 3.16 | |
| Total | Total | | $ | 111,870 | | | 13.13 | % | | $ | 109,260 | | | 12.31 | % | Total | | $ | 124,459 | | | 13.65 | % | | $ | 123,386 | | | 13.78 | % |
(1)Other consumer loans primarily include securities-based loans.
CREDIT CARDOur credit card portfolio totaled $34.9 billion at June 30, 2021, compared with $36.7 billion at December 31, 2020. The decrease in the outstanding balance at June 30, 2021, compared with December 31, 2020, was due to seasonal paydowns.
AUTOOur auto portfolio totaled $51.1 billion at June 30, 2021, compared with $48.2 billion at December 31, 2020. The outstanding balance at June 30, 2021, compared with December 31, 2020, increased as originations exceeded paydowns.
OTHER CONSUMEROther consumer loans, which include revolving credit and installment loans, totaled $25.9 billion at June 30, 2021, compared with $24.4 billion at December 31, 2020.
Risk Management – Credit Risk Management (continued)
NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS) For information about when we generally place loans on nonaccrual status, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 20202021 Form 10-K. Customer payment deferral activities in the residential mortgage portfolio instituted in response to the COVID-19 pandemic could continue to delay the recognition of nonaccrual loans for those residential mortgage customers who would have otherwise moved into nonaccrual status. For additional
information on customer accommodations, including loan modifications, in response to the COVID-19 pandemic, see the “Risk Management – Credit Risk Management – COVID-Related Lending Accommodations” section in this Report.our 2021 Form 10-K.
Table 1916 summarizes nonperforming assets (NPAs) for each of the last four quarters..
Table 19:16: Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
| | | June 30, 2021 | | March 31, 2021 | | December 31, 2020 | | September 30, 2020 | |
| ($ in millions) | ($ in millions) | | Balance | | % of
total
loans | | Balance | | % of
total
loans | | Balance | | % of
total
loans | | Balance | | % of
total
loans | ($ in millions) | | Mar 31,
2022 | | Dec 31,
2021 |
| Nonaccrual loans: | Nonaccrual loans: | | Nonaccrual loans: | |
| Commercial: | Commercial: | | Commercial: | |
| Commercial and industrial | Commercial and industrial | | $ | 1,691 | | | 0.53 | % | | $ | 2,223 | | | 0.70 | % | | $ | 2,698 | | | 0.85 | % | | $ | 2,834 | | | 0.88 | % | Commercial and industrial | | $ | 799 | | | 980 | |
| Real estate mortgage | Real estate mortgage | | 1,598 | | | 1.32 | | | 1,703 | | | 1.41 | | | 1,774 | | | 1.46 | | | 1,343 | | | 1.10 | | Real estate mortgage | | 1,033 | | | 1,235 | |
| Real estate construction | Real estate construction | | 45 | | | 0.20 | | | 55 | | | 0.26 | | | 48 | | | 0.22 | | | 34 | | | 0.15 | | Real estate construction | | 4 | | | 13 | |
| Lease financing | Lease financing | | 215 | | | 1.37 | | | 249 | | | 1.58 | | | 259 | | | 1.61 | | | 187 | | | 1.10 | | Lease financing | | 117 | | | 148 | |
| Total commercial | Total commercial | | 3,549 | | | 0.74 | | | 4,230 | | | 0.89 | | | 4,779 | | | 1.00 | | | 4,398 | | | 0.91 | | Total commercial | | 1,953 | | | 2,376 | |
| Consumer: | Consumer: | | | | | | | | | Consumer: | |
| Residential mortgage – first lien (1) | Residential mortgage – first lien (1) | | 2,852 | | | 1.17 | | | 2,859 | | | 1.12 | | | 2,957 | | | 1.07 | | | 2,641 | | | 0.90 | | Residential mortgage – first lien (1) | | 3,873 | | | 3,803 | |
| Residential mortgage – junior lien (1) | Residential mortgage – junior lien (1) | | 713 | | | 3.63 | | | 747 | | | 3.51 | | | 754 | | | 3.24 | | | 767 | | | 3.05 | | Residential mortgage – junior lien (1) | | 802 | | | 801 | |
| Auto | Auto | | 221 | | | 0.43 | | | 181 | | | 0.37 | | | 202 | | | 0.42 | | | 176 | | | 0.36 | | Auto | | 208 | | | 198 | |
| Other consumer | Other consumer | | 36 | | | 0.14 | | | 38 | | | 0.15 | | | 36 | | | 0.15 | | | 40 | | | 0.12 | | Other consumer | | 35 | | | 34 | |
| Total consumer | Total consumer | | 3,822 | | | 1.02 | | | 3,825 | | | 1.00 | | | 3,949 | | | 0.97 | | | 3,624 | | | 0.83 | | Total consumer | | 4,918 | | | 4,836 | |
| Total nonaccrual loans | Total nonaccrual loans | | 7,371 | | | 0.86 | | | 8,055 | | | 0.93 | | | 8,728 | | | 0.98 | | | 8,022 | | | 0.87 | | Total nonaccrual loans | | $ | 6,871 | | | 7,212 | |
| As a percentage of total loans | | As a percentage of total loans | | 0.75 | % | | 0.81 | |
| Foreclosed assets: | Foreclosed assets: | | | | | | | | | Foreclosed assets: | |
| Government insured/guaranteed (2) | Government insured/guaranteed (2) | | 15 | | | 16 | | | 18 | | | 22 | | | Government insured/guaranteed (2) | | $ | 16 | | | 16 | |
| Non-government insured/guaranteed | Non-government insured/guaranteed | | 114 | | | 124 | | | 141 | | | 134 | | | Non-government insured/guaranteed | | 114 | | | 96 | |
| Total foreclosed assets | Total foreclosed assets | | 129 | | | 140 | | | 159 | | | 156 | | | Total foreclosed assets | | 130 | | | 112 | |
| Total nonperforming assets | Total nonperforming assets | | $ | 7,500 | | | 0.88 | % | | $ | 8,195 | | | 0.95 | % | | $ | 8,887 | | | 1.00 | % | | $ | 8,178 | | | 0.89 | % | Total nonperforming assets | | $ | 7,001 | | | 7,324 | |
| Change in NPAs from prior quarter | | $ | (695) | | | $ | (692) | | | $ | 709 | | | $ | 378 | | | |
| As a percentage of total loans | | As a percentage of total loans | | 0.77 | % | | 0.82 | |
(1)Residential mortgage loans predominantly insured by the FHA or guaranteed by the VA are not placed on nonaccrual status because they are insured or guaranteed.
(2)Consistent with regulatory reporting requirements, foreclosed real estate resulting from government insured/guaranteed loans are classified as nonperforming. Both principal and interest related to these foreclosed real estate assets are collectible because the loans were predominantly insured by the FHA or guaranteed by the VA. Receivables related to the foreclosure of certain government guaranteed real estate mortgage loans are excluded from this table and included in Accounts Receivable in Other Assets. For additional information on foreclosed assets,the classification of certain government-guaranteed mortgage loans upon foreclosure, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 20202021 Form 10-K.
Commercial nonaccrual loans decreased $1.2 billion$423 million from December 31, 2020,2021, predominantly due to a decline in commercial and industrial nonaccrual loans, driven by a decreaseprimarily in the oil, gas, and pipelinepipelines industry, and a decline in real estate mortgage nonaccrual loans, reflecting improvement in the economic environment.loans. For additional information on commercial and industrial nonaccrual loans, see the “Risk Management – Credit Risk Management – Commercial and Industrial Loans and Lease Financing” sectionand “Risk Management – Credit Risk Management – Commercial Real Estate” sections in this Report.
Consumer nonaccrual loans decreased $127increased $82 million from December 31, 2020,2021, driven by a declinean increase in residential mortgage nonaccrual loans.loans primarily resulting from certain customers exiting COVID-19-related accommodation programs. Customers requiring further payment assistance after exiting from these programs may have their loans modified or may be eligible to receive modifications.
| | | | | | | | |
38 | Wells Fargo & Company | 33 |
Table 2017 provides an analysis of the changes in nonaccrual loans. Typically, changes to nonaccrual loans period-over-period represent inflows for loans that are placed on nonaccrual status in accordance with our policies, offset by reductions for loans
that are paid down, charged off, sold, foreclosed, or are no longer
classified as nonaccrual as a result of continued performance and an improvement in the borrower’s financial condition and loan repayment capabilities.
Table 20:17: Analysis of Changes in Nonaccrual Loans
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter ended | | | | |
| | | | | | | | | | | | | |
| | | | | |
| (in millions) | Jun 30,
2021 | | Mar 31,
2021 | | Dec 31,
2020 | | Sep 30,
2020 | | Jun 30,
2020 | | | | |
| Commercial nonaccrual loans | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 4,230 | | | 4,779 | | | 4,398 | | | 4,285 | | | 2,875 | | | | | |
| Inflows | 560 | | | 773 | | | 1,696 | | | 1,316 | | | 2,741 | | | | | |
| Outflows: | | | | | | | | | | | | | |
| Returned to accruing | (287) | | | (177) | | | (99) | | | (166) | | | (64) | | | | | |
| Foreclosures | (3) | | | (6) | | | (37) | | | — | | | — | | | | | |
| Charge-offs | (145) | | | (202) | | | (367) | | | (382) | | | (560) | | | | | |
| Payments, sales and other | (806) | | | (937) | | | (812) | | | (655) | | | (707) | | | | | |
| Total outflows | (1,241) | | | (1,322) | | | (1,315) | | | (1,203) | | | (1,331) | | | | | |
| Balance, end of period | 3,549 | | | 4,230 | | | 4,779 | | | 4,398 | | | 4,285 | | | | | |
| Consumer nonaccrual loans | | | | | | | | | | | | | |
| Balance, beginning of period | 3,825 | | | 3,949 | | | 3,624 | | | 3,320 | | | 3,281 | | | | | |
| Inflows | 563 | | | 454 | | | 792 | | | 696 | | | 379 | | | | | |
| Outflows: | | | | | | | | | | | | | |
| Returned to accruing | (200) | | | (152) | | | (208) | | | (160) | | | (135) | | | | | |
| Foreclosures | (16) | | | (19) | | | (5) | | | (4) | | | (6) | | | | | |
| Charge-offs | (17) | | | (26) | | | (36) | | | (36) | | | (39) | | | | | |
| Payments, sales and other | (333) | | | (381) | | | (218) | | | (192) | | | (160) | | | | | |
| Total outflows | (566) | | | (578) | | | (467) | | | (392) | | | (340) | | | | | |
| Balance, end of period | 3,822 | | | 3,825 | | | 3,949 | | | 3,624 | | | 3,320 | | | | | |
| Total nonaccrual loans | $ | 7,371 | | | 8,055 | | | 8,728 | | | 8,022 | | | 7,605 | | | | | |
| | | | | | | | | | | | | | | |
| Quarter ended March 31, | | |
| | | | | | | |
| | | | | |
| (in millions) | 2022 | | 2021 | | | | |
| Commercial nonaccrual loans | | | | | | | |
| Balance, beginning of period | $ | 2,376 | | | 4,779 | | | | | |
| Inflows | 191 | | | 773 | | | | | |
| Outflows: | | | | | | | |
| Returned to accruing | (194) | | | (177) | | | | | |
| Foreclosures | (19) | | | (6) | | | | | |
| Charge-offs | (35) | | | (202) | | | | | |
| Payments, sales and other | (366) | | | (937) | | | | | |
| Total outflows | (614) | | | (1,322) | | | | | |
| Balance, end of period | 1,953 | | | 4,230 | | | | | |
| Consumer nonaccrual loans | | | | | | | |
| Balance, beginning of period | 4,836 | | | 3,949 | | | | | |
| Inflows | 594 | | | 454 | | | | | |
| Outflows: | | | | | | | |
| Returned to accruing | (186) | | | (152) | | | | | |
| Foreclosures | (18) | | | (19) | | | | | |
| Charge-offs | (74) | | | (26) | | | | | |
| Payments, sales and other | (234) | | | (381) | | | | | |
| Total outflows | (512) | | | (578) | | | | | |
| Balance, end of period | 4,918 | | | 3,825 | | | | | |
| Total nonaccrual loans | $ | 6,871 | | | 8,055 | | | | | |
We considered the risk of losses on nonaccrual loans in developing our allowance for loan losses. We believe exposure to losslosses on nonaccrual loans is mitigated by the following factors at June 30, 2021:March 31, 2022:
•96%94% of total commercial nonaccrual loans and 99%are secured, the majority of total consumer nonaccrual loans are secured. Of the consumer nonaccrual loans, 93%which are secured by real estate and 93% have a combined LTV (CLTV) ratio of 80% or less.estate.
•71%80% of commercial nonaccrual loans were current on interest and 66%78% of commercial nonaccrual loans were current on both principal and interest, but were on nonaccrual status because the full or timely collection of interest or principal had become uncertain.
•99% of total consumer nonaccrual loans are secured, of which 95% are secured by real estate and 96% have a combined LTV (CLTV) ratio of 80% or less.
•$664 million of the $1.0 billion$858 million of consumer loans in bankruptcy or discharged in bankruptcy, and classified as nonaccrual, $691 million were current.
•the remaining risk of loss of all nonaccrual loans has been considered 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. 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.
| | | | | | | | |
| 34 | Wells Fargo & Company | 39 |
Risk Management – Credit Risk Management (continued)
Table 2118 provides a summary of foreclosed assets and an analysis of changes in foreclosed assets.
Table 21:18: Foreclosed Assets
| | | Quarter ended | | |
| | | (in millions) | (in millions) | Jun 30,
2021 | | Mar 31,
2021 | | Dec 31,
2020 | | Sep 30,
2020 | | Jun 30,
2020 | | (in millions) | Mar 31,
2022 | | Dec 31,
2021 | |
| Summary by loan segment | Summary by loan segment | | | Summary by loan segment | | |
| Government insured/guaranteed | Government insured/guaranteed | $ | 15 | | | 16 | | | 18 | | | 22 | | | 31 | | | Government insured/guaranteed | $ | 16 | | | 16 | | |
| Commercial | Commercial | 63 | | | 64 | | | 70 | | | 39 | | | 45 | | | Commercial | 71 | | | 54 | | |
| Consumer | Consumer | 51 | | | 60 | | | 71 | | | 95 | | | 119 | | | Consumer | 43 | | | 42 | | |
| Total foreclosed assets | Total foreclosed assets | $ | 129 | | | 140 | | | 159 | | | 156 | | | 195 | | | Total foreclosed assets | $ | 130 | | | 112 | | |
| (in millions) | | (in millions) | Quarter ended March 31, | |
| 2022 | | 2021 | |
| Analysis of changes in foreclosed assets | Analysis of changes in foreclosed assets | | | Analysis of changes in foreclosed assets | | |
| Balance, beginning of period | Balance, beginning of period | $ | 140 | | | 159 | | | 156 | | | 195 | | | 252 | | | Balance, beginning of period | $ | 112 | | | 159 | | |
| Net change in government insured/guaranteed (1) | Net change in government insured/guaranteed (1) | (1) | | | (2) | | | (4) | | | (9) | | | (12) | | | Net change in government insured/guaranteed (1) | — | | | (2) | | |
| Additions to foreclosed assets (2) | Additions to foreclosed assets (2) | 96 | | | 88 | | | 114 | | | 60 | | | 51 | | | Additions to foreclosed assets (2) | 102 | | | 88 | | |
| Reductions: | | | |
| Sales | (104) | | | (107) | | | (104) | | | (88) | | | (98) | | | |
| Write-downs and gains (losses) on sales | (2) | | | 2 | | | (3) | | | (2) | | | 2 | | | |
| Total reductions | (106) | | | (105) | | | (107) | | | (90) | | | (96) | | | |
| Reductions from sales and write-downs | | Reductions from sales and write-downs | (84) | | | (105) | | |
| | Balance, end of period | Balance, end of period | $ | 129 | | | 140 | | | 159 | | | 156 | | | 195 | | | Balance, end of period | $ | 130 | | | 140 | | |
(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 autos.
Foreclosed assets at June 30, 2021, included $49 million of foreclosed residential real estate, of which 30% 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 $129 million in foreclosed assets at June 30, 2021, 61% have been in the foreclosed assets portfolio for one year or less.
As part of our actions to support customers during the COVID-19 pandemic, we have temporarily suspended certain residential mortgage foreclosure activities which has affected the amount of our foreclosed assets.through December 31, 2021. Beginning January 1, 2022, we resumed these mortgage foreclosure activities. For additional information on loans in process of foreclosure, see Note 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
TROUBLED DEBT RESTRUCTURINGS (TDRs) Table 2219 provides information regarding the recorded investment of loans modified in TDRs. TDRs decreased from December 31, 2020, due to paydowns and2021, predominantly driven by a $436 million transfer fromdecrease in residential mortgage – first lien loans, partially offset by an increase in trial modifications. The decrease in residential mortgage – first lien loans was due to paydowns and transfers to LHFS, which related to the sales of repurchased loans purchased from GNMA loan securitization pools in 2020. pools.
The amount of our TDRs at June 30, 2021,March 31, 2022, would have otherwise been higher without the TDR relief provided by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) (Interagency Statement). Customers who are unable to resume making their contractual loan payments upon exiting from these deferral programs may require further assistance and may receive or be eligible to receive modifications, which may be classified as TDRs. For additional information on the CARES Act and the Interagency Statement.Statement, see the “Risk Management – Credit Risk Management – COVID-Related Lending Accommodations” section in our 2021 Form 10-K.
Table 22:19: TDR Balances
| | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, | | December 31, |
| (in millions) | (in millions) | Jun 30,
2021 | | Mar 31,
2021 | | Dec 31,
2020 | | Sep 30,
2020 | | Jun 30,
2020 | (in millions) | 2022 | | 2021 |
| Commercial: | Commercial: | | Commercial: | |
| Commercial and industrial | Commercial and industrial | $ | 1,225 | | | 1,331 | | | 1,933 | | | 2,082 | | | 1,882 | | Commercial and industrial | $ | 672 | | | 793 | |
| Real estate mortgage | Real estate mortgage | 645 | | | 652 | | | 774 | | | 805 | | | 717 | | Real estate mortgage | 530 | | | 543 | |
| Real estate construction | Real estate construction | 15 | | | 21 | | | 15 | | | 21 | | | 20 | | Real estate construction | 2 | | | 2 | |
| Lease financing | Lease financing | 9 | | | 9 | | | 9 | | | 9 | | | 10 | | Lease financing | 8 | | | 10 | |
| Total commercial TDRs | Total commercial TDRs | 1,894 | | | 2,013 | | | 2,731 | | | 2,917 | | | 2,629 | | Total commercial TDRs | 1,212 | | | 1,348 | |
| Consumer: | Consumer: | | Consumer: | |
| Residential mortgage – first lien | Residential mortgage – first lien | 8,841 | | | 9,446 | | | 9,764 | | | 9,420 | | | 7,176 | | Residential mortgage – first lien | 6,757 | | | 7,282 | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | 1,097 | | | 1,174 | | | 1,237 | | | 1,298 | | | 1,309 | | Residential mortgage – junior lien | 906 | | | 946 | |
| Credit card | Credit card | 368 | | | 411 | | | 458 | | | 494 | | | 510 | | Credit card | 329 | | | 309 | |
| Auto | Auto | 196 | | | 156 | | | 176 | | | 156 | | | 108 | | Auto | 179 | | | 169 | |
| Other consumer | Other consumer | 63 | | | 67 | | | 67 | | | 190 | | | 173 | | Other consumer | 52 | | | 57 | |
| Trial modifications | Trial modifications | 77 | | | 81 | | | 90 | | | 91 | | | 91 | | Trial modifications | 277 | | | 71 | |
| Total consumer TDRs | Total consumer TDRs | 10,642 | | | 11,335 | | | 11,792 | | | 11,649 | | | 9,367 | | Total consumer TDRs | 8,500 | | | 8,834 | |
| Total TDRs | Total TDRs | $ | 12,536 | | | 13,348 | | | 14,523 | | | 14,566 | | | 11,996 | | Total TDRs | $ | 9,712 | | | 10,182 | |
| TDRs on nonaccrual status | TDRs on nonaccrual status | $ | 3,711 | | | 3,800 | | | 4,456 | | | 4,163 | | | 3,475 | | TDRs on nonaccrual status | $ | 3,270 | | | 3,142 | |
| TDRs on accrual status: | TDRs on accrual status: | | TDRs on accrual status: | |
| Government insured/guaranteed | Government insured/guaranteed | 3,431 | | | 3,708 | | | 3,721 | | | 3,467 | | | 1,277 | | Government insured/guaranteed | 2,068 | | | 2,462 | |
| Non-government insured/guaranteed | Non-government insured/guaranteed | 5,394 | | | 5,840 | | | 6,346 | | | 6,936 | | | 7,244 | | Non-government insured/guaranteed | 4,374 | | | 4,578 | |
| Total TDRs | Total TDRs | $ | 12,536 | | | 13,348 | | | 14,523 | | | 14,566 | | | 11,996 | | Total TDRs | $ | 9,712 | | | 10,182 | |
| | | | | | | | |
4036 | Wells Fargo & Company | |
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. The allowance for loan losses for TDRs was $360 million and $565 million at June 30, 2021, and December 31, 2020, respectively. 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 additional information on the CARES Act
and the Interagency Statement, see the “Risk Management – Credit Risk Management – Credit Quality Overview – COVID-Related Lending Accommodations” section in this Report.
For information on our nonaccrual policies when a restructuring is involved, see the “Risk Management – Credit Risk Management – Troubled Debt Restructurings (TDRs)” section in our 20202021 Form 10-K. See Note 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report for additional information regarding TDRs.
Table 2320 provides an analysis of the changes in TDRs. Loans modified more than once as a TDR are reported as inflows only in the period they are first modified. In addition to foreclosures, sales and transfers to held for sale, we may remove loans from TDR classification, but only if they have been refinanced or restructured at market terms and qualify as a new loan.
Table 23:20: Analysis of Changes in TDRs
| | | Quarter ended | | | Quarter ended March 31, | |
| | | (in millions) | (in millions) | Jun 30,
2021 | | Mar 31,
2021 | | Dec 31,
2020 | | Sep 30,
2020 | | Jun 30,
2020 | | (in millions) | 2022 | 2021 | |
| Commercial TDRs | Commercial TDRs | | | Commercial TDRs | | |
| Balance, beginning of period | Balance, beginning of period | $ | 2,013 | | | 2,731 | | | 2,917 | | | 2,629 | | | 2,042 | | | Balance, beginning of period | $ | 1,348 | | 2,731 | | |
| Inflows (1) | Inflows (1) | 336 | | | 155 | | | 486 | | | 866 | | | 971 | | | Inflows (1) | 87 | | 155 | | |
| Outflows | Outflows | | | Outflows | | |
| Charge-offs | Charge-offs | (45) | | | (49) | | | (72) | | | (77) | | | (60) | | | Charge-offs | (1) | | (49) | | |
| Foreclosure | Foreclosure | — | | | (5) | | | — | | | — | | | — | | | Foreclosure | — | | (5) | | |
| Payments, sales and other (2) | Payments, sales and other (2) | (410) | | | (819) | | | (600) | | | (501) | | | (324) | | | Payments, sales and other (2) | (222) | | (819) | | |
| Balance, end of period | Balance, end of period | 1,894 | | | 2,013 | | | 2,731 | | | 2,917 | | | 2,629 | | | Balance, end of period | 1,212 | | 2,013 | | |
| Consumer TDRs | Consumer TDRs | | | Consumer TDRs | | |
| Balance, beginning of period | Balance, beginning of period | 11,335 | | | 11,792 | | | 11,649 | | | 9,367 | | | 9,523 | | | Balance, beginning of period | 8,834 | | 11,792 | | |
| Inflows (1) | Inflows (1) | 495 | | | 633 | | | 1,226 | | | 2,805 | | | 425 | | | Inflows (1) | 458 | | 633 | | |
| Outflows | Outflows | | | Outflows | | |
| Charge-offs | Charge-offs | (36) | | | (43) | | | (57) | | | (58) | | | (46) | | | Charge-offs | (33) | | (43) | | |
| Foreclosure | Foreclosure | (15) | | | (14) | | | (5) | | | (7) | | | (8) | | | Foreclosure | (12) | | (14) | | |
| Payments, sales and other (2) | Payments, sales and other (2) | (1,133) | | | (1,024) | | | (1,020) | | | (458) | | | (510) | | | Payments, sales and other (2) | (953) | | (1,024) | | |
| Net change in trial modifications (3) | Net change in trial modifications (3) | (4) | | | (9) | | | (1) | | | — | | | (17) | | | Net change in trial modifications (3) | 206 | | (9) | | |
| Balance, end of period | Balance, end of period | 10,642 | | | 11,335 | | | 11,792 | | | 11,649 | | | 9,367 | | | Balance, end of period | 8,500 | | 11,335 | | |
| Total TDRs | Total TDRs | $ | 12,536 | | | 13,348 | | | 14,523 | | | 14,566 | | | 11,996 | | | Total TDRs | $ | 9,712 | | 13,348 | | |
(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 include normal amortization/accretion of loan basis adjustments and loans transferred to held for sale.LHFS. 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) residential mortgage loans or consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due.
Table 24 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 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
Table 24:Loans 90 Days or More Past Due and Still Accruing
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Jun 30,
2021 | | Mar 31,
2021 | | Dec 31,
2020 | | Sep 30,
2020 | | Jun 30,
2020 |
| Total: | $ | 4,703 | | | 6,273 | | | 7,041 | | | 11,698 | | | 9,739 | |
| Less: FHA insured/VA guaranteed (1) | 3,966 | | | 5,406 | | | 6,351 | | | 11,041 | | | 8,922 | |
| | | | | | | | | |
| Total, not government insured/guaranteed | $ | 737 | | | 867 | | | 690 | | | 657 | | | 817 | |
By segment and class, not government insured/guaranteed: Commercial: | | | | | | | | | |
| Commercial and industrial | $ | 165 | | | 55 | | | 39 | | | 61 | | | 101 | |
| Real estate mortgage | 105 | | | 128 | | | 38 | | | 47 | | | 44 | |
| Real estate construction | 7 | | | 86 | | | 1 | | | — | | | — | |
| Total commercial | 277 | | | 269 | | | 78 | | | 108 | | | 145 | |
| Consumer: | | | | | | | | | |
| Residential mortgage – first lien | 73 | | | 85 | | | 135 | | | 97 | | | 93 | |
| Residential mortgage – junior lien | 12 | | | 15 | | | 19 | | | 28 | | | 19 | |
| Credit card | 271 | | | 394 | | | 365 | | | 297 | | | 418 | |
| Auto | 43 | | | 46 | | | 65 | | | 50 | | | 54 | |
| Other consumer | 61 | | | 58 | | | 28 | | | 77 | | | 88 | |
| Total consumer | 460 | | | 598 | | | 612 | | | 549 | | | 672 | |
| Total, not government insured/guaranteed | $ | 737 | | | 867 | | | 690 | | | 657 | | | 817 | |
(1)Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
Loans 90 days or more past due and still accruing, excluding government insured/guaranteed loans, at June 30, 2021, were up from December 31, 2020, due to an increase in delinquent commercial real estate mortgage loans and commercial and industrial loans, partially offset by a decline in delinquent consumer loans in line with the decrease in our total consumer loan portfolio. Customer payment deferral activities instituted in response to the COVID-19 pandemic could continue to delay the 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 largely insured by the FHA or guaranteed by the VA for mortgages at June 30, 2021, were down from December 31, 2020, largely due to transfers to LHFS related to the sales of loans purchased from GNMA loan securitization pools in prior periods.
| | | | | | | | |
42 | Wells Fargo & Company | 37 |
NET CHARGE-OFFS Table 2521 presents net loan charge-offs for second quarter 2021 and the previous four quarters.charge-offs.
Table 25:21: Net Loan Charge-offs
| | | | | Quarter ended | | Quarter ended March 31, |
| | | | Jun 30, 2021 | | Mar 31, 2021 | | Dec 31, 2020 | | Sep 30, 2020 | | Jun 30, 2020 | | 2022 | | 2021 |
| ($ in millions) | ($ 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) | ($ in millions) | Net loan
charge-
offs | | % of
avg.
loans (1) | | Net loan
charge-
offs | | % of
avg.
loans (1) |
| | | | | | Commercial: | Commercial: | | | | Commercial: | | | |
| | Commercial and industrial | | | $ | 81 | | | 0.10 | % | | $ | 88 | | | 0.11 | % | | $ | 111 | | | 0.14 | % | | $ | 274 | | | 0.33 | % | | $ | 521 | | | 0.55 | % | | Commercial and industrial | $ | (23) | | | (0.03) | % | | $ | 88 | | | 0.11 | % |
| | Real estate mortgage | | | (5) | | | (0.02) | | | 46 | | | 0.16 | | | 162 | | | 0.53 | | | 56 | | | 0.18 | | | 67 | | | 0.22 | | | Real estate mortgage | (5) | | | (0.02) | | | 46 | | | 0.16 | |
| | Real estate construction | | | (1) | | | — | | | — | | | — | | | — | | | — | | | (2) | | | (0.03) | | | (1) | | | (0.02) | | | Real estate construction | — | | | — | | | — | | | — | |
| | Lease financing | | | 5 | | | 0.12 | | | 15 | | | 0.40 | | | 35 | | | 0.83 | | | 28 | | | 0.66 | | | 15 | | | 0.33 | | | Lease financing | (1) | | | (0.02) | | | 15 | | | 0.40 | |
| Total commercial | Total commercial | | | 80 | | | 0.07 | | | 149 | | | 0.13 | | | 308 | | | 0.26 | | | 356 | | | 0.29 | | | 602 | | | 0.44 | | Total commercial | (29) | | | (0.02) | | | 149 | | | 0.13 | |
| Consumer: | Consumer: | | | | | | | | | | | | | Consumer: | | | | |
| | Residential mortgage – first lien | | | (19) | | | (0.03) | | | (24) | | | (0.04) | | | (3) | | | — | | | (1) | | | — | | | 2 | | | — | | | Residential mortgage – first lien | (3) | | | — | | | (24) | | | (0.04) | |
| | Residential mortgage – junior lien | | | (31) | | | (0.60) | | | (19) | | | (0.35) | | | (24) | | | (0.39) | | | (14) | | | (0.22) | | | (12) | | | (0.17) | | | Residential mortgage – junior lien | (18) | | | (0.46) | | | (19) | | | (0.35) | |
| | Credit card | | | 256 | | | 3.01 | | | 236 | | | 2.71 | | | 190 | | | 2.09 | | | 245 | | | 2.71 | | | 327 | | | 3.60 | | | Credit card | 176 | | | 1.87 | | | 236 | | | 2.71 | |
| | Auto | | | 45 | | | 0.35 | | | 52 | | | 0.44 | | | 51 | | | 0.43 | | | 31 | | | 0.25 | | | 106 | | | 0.88 | | | Auto | 96 | | | 0.68 | | | 52 | | | 0.44 | |
| | Other consumer | | | 50 | | | 0.80 | | | 119 | | | 1.97 | | | 62 | | | 0.88 | | | 66 | | | 0.80 | | | 88 | | | 1.09 | | | Other consumer | 83 | | | 1.20 | | | 119 | | | 1.97 | |
| Total consumer | Total consumer | | | 301 | | | 0.32 | | | 364 | | | 0.37 | | | 276 | | | 0.26 | | | 327 | | | 0.30 | | | 511 | | | 0.48 | | Total consumer | 334 | | | 0.35 | | | 364 | | | 0.37 | |
| | Total | | | $ | 381 | | | 0.18 | % | | $ | 513 | | | 0.24 | % | | $ | 584 | | | 0.26 | % | | $ | 683 | | | 0.29 | % | | $ | 1,113 | | | 0.46 | % | | Total | $ | 305 | | | 0.14 | % | | $ | 513 | | | 0.24 | % |
| | | | | | |
(1)Quarterly net charge-offs as a percentage of average respective loans are annualized.
The decrease in commercial net loan charge-offs in secondfirst quarter 2021,2022, compared with the prior quarter,same period in 2021, was due to lower losses in the commercial and industrial portfolio, driven by lower charge-offs across the entire portfolio as well as higher recoveries in the CREoil, gas, and pipeline industry, and lower losses in the real estate mortgage portfolio.
The decrease in consumer net loan charge-offs in secondfirst quarter 2021,2022, compared with the prior quarter,same period in 2021, was driven by lower losses in credit card due to elevated losses in first quarter 2021 and lower losses in other consumer loans due to the sale of a portion of our student loan portfolio in first quarter 2021.2021, partially offset by an increase in auto losses reflecting reduced benefits for customers from government stimulus programs instituted in response to the COVID-19 pandemic.
The COVID-19 pandemic may continue to impact the credit quality of our loan portfolio. Although the potential impacts were considered in our allowance for credit losses for loans, payment deferral activities in our residential mortgage portfolio instituted in response to the COVID-19 pandemic could continue to delay the recognition of netresidential mortgage loan charge-offs. For additional information on customer accommodations in response to the COVID-19 pandemic, see the “Risk Management – Credit Risk Management – COVID-Related Lending Accommodations” section in this Report.our 2021 Form 10-K.
ALLOWANCE FOR CREDIT LOSSES We maintain an allowance for credit losses (ACL) for loans, which is management’s estimate of the expected life-time credit losses in the loan portfolio and unfunded credit commitments, at the balance sheet date, excluding loans and unfunded credit commitments carried at fair value or held for sale. Additionally, we maintain an ACL for debt securities classified as either AFS or HTM, other financial assets measured at amortized cost, net investments in leases, and other off-balance sheet credit exposures.
We apply a disciplined process and methodology to establish our ACL each quarter. The process for establishing the ACL for loans takes into consideration many factors, including historical and forecasted loss trends, loan-level credit quality ratings and loan grade-specific characteristics. The process involves subjective and complex judgments. In addition, we review a variety of credit metrics and trends. These credit metrics and trends, however, do not solely determine the amount of the allowance as we use several analytical tools. For additional information on our ACL, see the “Critical Accounting Policies – Allowance for Credit Losses” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 20202021 Form 10-K. For additional information on our ACL for loans, see Note 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report, and for additional information on our ACL for debt securities, see the “Balance Sheet Analysis – Available-For-Sale and Held-To-Maturity Debt Securities” section and Note 3 (Available-for-Sale and Held-to-Maturity Debt Securities) to Financial Statements in this Report.
Table 22 presents the allocation of the ACL for loans by loan portfolio segment and class.
| | | | | | | | |
| 38 | Wells Fargo & Company | 43 |
Risk Management – Credit Risk Management (continued)
Table 26 presents the allocation of the ACL for loans by loan portfolio segment and class for the most recent quarter and last four year ends.
Table 26:22: Allocation of the ACL for Loans (1)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jun 30, 2021 | | Dec 31, 2020 | | Dec 31, 2019 | | Dec 31, 2018 | | Dec 31, 2017 |
| ($ 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 | $ | 5,640 | | | 37 | % | | $ | 7,230 | | | 36 | % | | $ | 3,600 | | | 37 | % | | $ | 3,628 | | | 37 | % | | $ | 3,752 | | | 35 | % |
| Real estate mortgage | 2,884 | | | 14 | | | 3,167 | | | 14 | | | 1,236 | | | 13 | | | 1,282 | | | 13 | | | 1,374 | | | 13 | |
| Real estate construction | 530 | | | 3 | | | 410 | | | 2 | | | 1,079 | | | 2 | | | 1,200 | | | 2 | | | 1,238 | | | 3 | |
| Lease financing | 516 | | | 2 | | | 709 | | | 2 | | | 330 | | | 2 | | | 307 | | | 2 | | | 268 | | | 2 | |
| Total commercial | 9,570 | | | 56 | | | 11,516 | | | 54 | | | 6,245 | | | 54 | | | 6,417 | | | 54 | | | 6,632 | | | 53 | |
| Consumer: | | | | | | | | | | | | | | | | | | | |
| Residential mortgage – first lien | 1,283 | | | 29 | | | 1,600 | | | 31 | | | 692 | | | 30 | | | 750 | | | 30 | | | 1,085 | | | 30 | |
| Residential mortgage – junior lien | 320 | | | 2 | | | 653 | | | 3 | | | 247 | | | 3 | | | 431 | | | 3 | | | 608 | | | 4 | |
| Credit card | 3,663 | | | 4 | | | 4,082 | | | 4 | | | 2,252 | | | 4 | | | 2,064 | | | 4 | | | 1,944 | | | 4 | |
| Auto | 1,026 | | | 6 | | | 1,230 | | | 5 | | | 459 | | | 5 | | | 475 | | | 5 | | | 1,039 | | | 5 | |
| Other consumer | 529 | | | 3 | | | 632 | | | 3 | | | 561 | | | 4 | | | 570 | | | 4 | | | 652 | | | 4 | |
| Total consumer | 6,821 | | | 44 | | | 8,197 | | | 46 | | | 4,211 | | | 46 | | | 4,290 | | | 46 | | | 5,328 | | | 47 | |
| Total | $ | 16,391 | | | 100 | % | | $ | 19,713 | | | 100 | % | | $ | 10,456 | | | 100 | % | | $ | 10,707 | | | 100 | % | | $ | 11,960 | | | 100 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Components: | | | | | | | | | |
| Allowance for loan losses | | | $ | 15,148 | | | | 18,516 | | | | 9,551 | | | | 9,775 | | | | 11,004 |
| Allowance for unfunded credit commitments | | | 1,243 | | | | 1,197 | | | | 905 | | | | 932 | | | | 956 |
| Allowance for credit losses | | | $ | 16,391 | | | | 19,713 | | | | 10,456 | | | | 10,707 | | | | 11,960 |
| Ratio of allowance for loan losses to total net loan charge-offs (2) | | | 9.93x | | | | 5.63 | | | | 3.46 | | | | 3.56 | | | | 3.76 |
| Allowance for loan losses as a percentage of total loans | | | 1.78 | % | | | | 2.09 | | | | | 0.99 | | | | | 1.03 | | | | | 1.15 | |
| Allowance for credit losses for loans as a percentage of total loans | | | 1.92 | | | | | 2.22 | | | | | 1.09 | | | | | 1.12 | | | | | 1.25 | |
| Allowance for credit losses for loans as a percentage of total nonaccrual loans | | | 222 | | | | | 226 | | | | | 196 | | | | | 165 | | | | | 156 | |
(1)Disclosure is not comparative due 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. For additional information, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2020 Form 10-K.
(2)Total net loan charge-offs are annualized for the quarter ended June 30, 2021. | | | | | | | | | | | | | | | | | | | | | | | |
| Mar 31, 2022 | | Dec 31, 2021 |
| ($ in millions) | ACL | | Loans
as %
of total
loans | | ACL | | Loans
as %
of total
loans |
| Commercial: | | | | | | | |
| Commercial and industrial | $ | 4,625 | | | 40 | % | | $ | 4,873 | | | 39 | % |
| Real estate mortgage | 1,883 | | | 14 | | | 2,085 | | | 14 | |
| Real estate construction | 366 | | | 2 | | | 431 | | | 2 | |
| Lease financing | 274 | | | 2 | | | 402 | | | 2 | |
| Total commercial | 7,148 | | | 58 | | | 7,791 | | | 57 | |
| Consumer: | | | | | | | |
| Residential mortgage – first lien | 927 | | | 27 | | | 1,156 | | | 28 | |
| Residential mortgage – junior lien | 2 | | | 2 | | | 130 | | | 2 | |
| Credit card | 3,094 | | | 4 | | | 3,290 | | | 4 | |
| Auto | 1,030 | | | 6 | | | 928 | | | 6 | |
| Other consumer | 480 | | | 3 | | | 493 | | | 3 | |
| Total consumer | 5,533 | | | 42 | | | 5,997 | | | 43 | |
| Total | $ | 12,681 | | | 100 | % | | $ | 13,788 | | | 100 | % |
| | | |
| Components: | | | |
| Allowance for loan losses | | | $ | 11,504 | | | | 12,490 |
| Allowance for unfunded credit commitments | | | 1,177 | | | | 1,298 |
| Allowance for credit losses | | | $ | 12,681 | | | | 13,788 |
| | | | | | | |
| Ratio of allowance for loan losses to total net loan charge-offs (annualized) | | | 9.31x | | | | 7.94 | |
| Ratio of allowance for loan losses to total nonaccrual loans | | | 1.67 | | | | | 1.73 | |
| Allowance for loan losses as a percentage of total loans | | | 1.26 | % | | | | 1.39 | |
| Allowance for credit losses for loans as a percentage of total loans | | | 1.39 | | | | | 1.54 | |
The ratios for the allowance for loan losses and the ACL for loans presented in Table 2622 may fluctuate from period to period due to such factors as the mix of loan types in the portfolio, borrower credit strength, and the value and marketability of collateral.
The ACL for loans decreased $3.3$1.1 billion, or 17%8%, from December 31, 2020,2021, reflecting better portfolio credit qualityreduced uncertainty around the economic impact of the COVID-19 pandemic on our loan portfolios and improvements in current and forecasted economic conditions. Total provision for credit losses for loans was $(1.2) billion in second quarter 2021, compared with $9.6 billion inincreased uncertainty related to the same period a year ago, reflecting lower net charge-offs and improvements in current and forecasted economic conditions.risks of high inflation. The detail of the changes in the ACL for loans by portfolio segment (including charge-offs and recoveries by loan class) is included in Note 4 (Loans and Related Allowance for Credit Losses) to Financial Statements in this Report.
We consider multiple economic scenarios to develop our estimate of the ACL for loans. The scenariosloans, which generally include a base scenario, along with an optimistic (upside) and one or more pessimistic (downside) scenarios. OurIn our estimate of the ACL for loans at June 30, 2021, was based on a weightingMarch 31, 2022, we weighted the base scenario and the downside scenarios to reflect our expectations for reduced uncertainty around the economic impact of the baseCOVID-19 pandemic and a downside economic scenario of 50%increased uncertainty related to inflationary and 50%, respectively, with no weighting applied to an upside scenario.geopolitical risks. The base scenario assumed solid economic improvementsconditions with elevated inflation in the near term with a return to normalized levels near the end of 2022.term. The downside scenarioscenarios assumed sustained adverse economic impacts resulting from the
COVID-19 pandemic, compared withcontractions, including higher geopolitical risks and inflation levels exceeding those in the base scenario. The downside scenario assumed U.S. real GDP growth rates decline in the first half of 2022 before returning to normalized levels after 2023 and the U.S. unemployment rate increases through 2022 and peaks in the first half of 2023. We considered within each scenario our expectations for the impact of customer accommodation activity, as well as the estimated impact on certain industries that we consider to be directly and most adversely affected by the COVID-19 pandemic.
In addition to quantitative estimates,Additionally, we consider qualitative factors that represent risks inherent in our processes and assumptions such as economic environmental factors, modeling assumptions and performance, and other subjective factors, including industry trends and emerging risk assessments. We also considered the significant uncertainty related to the duration and severity of the economic impacts from the COVID-19 pandemic and the incremental risks to our loan portfolio.
The forecasted key economic variables used in our estimate of the ACL for loans at June 30March 31, 2022, and MarchDecember 31, 2021, are presented in Table 27.
23.
Table 27:23: Forecasted Key Economic Variables
| | | | | | | | | | | | | | | | | | | |
| | | 4Q 2021 | | 2Q 2022 | | 4Q 2022 |
| Blend of economic scenarios (1): | | | | | | | |
| U.S. unemployment rate (2): | | | | | | | |
| | | | | | | |
| | | | | | | |
| March 31, 2021 | | | 6.5 | % | | 7.0 | | | 7.1 | |
| June 30, 2021 | | | 5.6 | | | 6.2 | | | 6.9 | |
| | | | | | | |
| U.S. real GDP (3): | | | | | | | |
| | | | | | | |
| | | | | | | |
| March 31, 2021 | | | (1.1) | | | (0.6) | | | 1.8 | |
| June 30, 2021 | | | 1.0 | | | (0.4) | | | 0.6 | |
| | | | | | | |
| Home price index (4): | | | | | | | |
| | | | | | | |
| | | | | | | |
| March 31, 2021 | | | 1.0 | | | (5.2) | | | (5.7) | |
| June 30, 2021 | | | 2.8 | | | (6.5) | | | (5.2) | |
| | | | | | | |
| Commercial real estate asset prices (4): | | | | | | | |
| | | | | | | |
| | | | | | | |
| March 31, 2021 | | | (10.0) | | | (11.5) | | | (9.0) | |
| June 30, 2021 | | | (7.8) | | | (11.9) | | | (10.4) | |
| | | | | | | | | | | | | | | | | | | |
| | | 2Q 2022 | | 4Q 2022 | | 2Q 2023 |
| Weighted blend of economic scenarios: | | | | | | | |
| U.S. unemployment rate (1): | | | | | | | |
| | | | | | | |
| | | | | | | |
| December 31, 2021 | | | 4.8 | % | | 5.4 | | | 5.9 | |
| March 31, 2022 | | | 4.1 | | | 4.7 | | | 5.6 | |
| | | | | | | |
| U.S. real GDP (2): | | | | | | | |
| | | | | | | |
| | | | | | | |
| December 31, 2021 | | | 1.4 | | | (0.3) | | | 1.4 | |
| March 31, 2022 | | | 1.2 | | | (0.6) | | | 0.2 | |
| | | | | | | |
| Home price index (3): | | | | | | | |
| | | | | | | |
| | | | | | | |
| December 31, 2021 | | | 5.9 | | | (4.3) | | | (6.0) | |
| March 31, 2022 | | | 12.2 | | | 2.1 | | | (3.1) | |
| | | | | | | |
| Commercial real estate asset prices (3): | | | | | | | |
| | | | | | | |
| | | | | | | |
| December 31, 2021 | | | 5.0 | | | (4.2) | | | (6.0) | |
| March 31, 2022 | | | 13.0 | | | 2.8 | | | (2.7) | |
(1)Represents a weighting of the forecasted economic variable inputs based on a weighting of 50% for the base and 50% for a downside scenario at both June 30 and March 31, 2021.
(2)Quarterly average.
(3)(2)Percent change from the preceding period, seasonally adjusted annualized rate.
(4)(3)Percent change year over year of national average; outlook differs by geography and property type.
Future amounts of the ACL for loans will be based on a variety of factors, including loan balance changes, portfolio credit quality and mix changes, and changes in general economic conditions and expectations (including for unemployment and real GDP), among other factors. We observed economic improvements in the first half of 2021; however, there remained significant uncertainty related to the length and severity of the economic impact of 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 ACL, including the impact of economic stimulus programs and customer accommodation activity. The COVID-19 pandemic could continue to impact the recognition of credit losses in our loan portfolios and may result in increases in our ACL, particularly if the impact on the economy worsens.
We believe the ACL for loans of $16.4$12.7 billion at June 30, 2021,March 31, 2022, was appropriate to cover expected credit losses, including unfunded credit commitments, at that date. The entire allowance is available to absorb credit losses from the total loan portfolio. The ACL for loans is subject to change and reflects existing factors as of the date of determination, including economic or market conditions and ongoing internal and external examination
processes. Due to the sensitivity of the ACL for loans to changes in the economic and business environment, it is possible that we will incur incremental credit losses not anticipated as of the balance sheet date. Our process for determining the ACL is discussed in the “Critical Accounting Policies – Allowance for Credit Losses” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 20202021 Form 10-K.
LIABILITY FOR MORTGAGE LOAN REPURCHASE LOSSESBANKING ACTIVITIES We sell residential and commercial mortgage loans to various parties. In connection with our sales and securitization of residential mortgage loans, we have established a mortgage repurchase liability. For information on our repurchase liability, see the “Risk Management – Credit Risk Management – Liability For Mortgage Loan Repurchase Losses”Banking Activities” section in our 20202021 Form 10-K.
RISKS RELATING TO SERVICING ACTIVITIESIn addition to servicing loans in our portfolio, we act as servicer and/or master servicer of residential and commercial mortgage loans included in GSE-guaranteedgovernment 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.
As a servicer, we are required to advance certain delinquent payments of principal and interest on mortgage loans we service. The amount and timing of reimbursement offor advances of delinquent payments vary by investor and the applicable servicing agreements. DueSee Note 9 (Mortgage Banking Activities) to Financial Statements in this Report for additional information about residential and commercial servicing rights, servicer advances and servicing fees.
In accordance with applicable servicing guidelines, delinquency status continues to advance for loans with COVID-related payment deferrals, provided aswhich has resulted in an increase in delinquent loans serviced for others and a result of the COVID-19 pandemic, the amount of our servicing advances of principal and interest remained elevated. The amount of these advances maycorresponding increase if additional payment deferrals are provided. Payment deferrals also delay the collection of contractually specified servicing fees, resulting in lower net servicing income.
loans eligible for repurchase from GNMA loan securitization pools. Upon transfer as servicer, we retain the option to repurchase loans from GNMA loan securitization pools, which 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. As a result ofThese repurchased loan balances were $14.2 billion and $17.3 billion at March 31, 2022 and December 31, 2021, respectively, which included $10.3 billion and $12.9 billion, respectively, in our held for investment loan portfolio, with the COVID-19 pandemic, our repurchases of theseremainder in loans were elevated in 2020 but returned to more normalized levels in the first half of 2021.held for sale.
Repurchased 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, certain loans repurchased after June 30, 2020, 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. See Note 8 (Securitizations and Variable Interest Entities) to Financial Statements in this Report for additional information about our involvement with mortgage loan securitizations.
For additional information about the risks related to our servicing activities, see the “Risk Management – Credit Risk Management – Risks Relating to ServicingMortgage Banking Activities” section in our 20202021 Form 10-K. For additional information on mortgage banking activities, see Note 9 (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. For information on our oversight of asset/liability risks, see the “Risk Management – Asset/Liability Management” section in our 20202021 Form 10-K.
INTEREST RATE RISK Interest rate risk is created in our role as a financial intermediary for customers based on investments such as loans and other extensions of credit and debt securities. Interest rate risk can have a significant impact to our earnings. We are subject to interest rate risk because:
•assets and liabilities may mature or reprice at different times. 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;
•short-term and long-term market interest rates may change by different amounts. For example, the shape of the yield curve may affect yield for new loans and funding costs differently;
•the remaining maturity for 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 at a slower rate than anticipated, which could impact portfolio income; or
Risk Management – Asset/Liability Management (continued)
•interest rates may have a direct or indirect effect on loan demand, collateral values, credit losses, mortgage origination volume, and the fair value of MSRs and other financial instruments.
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 speedsrates on loans and debt securities, deposit flows and mix, as well as pricing strategies.
Our most recent simulations, as presented in Table 28,24, estimate net interest income sensitivity over the next 12 months using instantaneous movements across the yield curve with both lower and higher interest rates relative to our base scenario. Steeper and flatter scenarios measure non-parallel changes in the yield curve, with long-term interest rates defined as all tenors three years and longer (e.g., 10-year U.S. Treasury securities) and short-term interest rates defined as all tenors less than three years. Where applicable, U.S. dollar interest rates are floored at 0.00%. The following describes the simulation assumptions for the scenarios presented in Table 28:24:
•Simulations are dynamic and reflect anticipated changes to our 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 deposit activity that shifts balances into higher-yieldinghigher-
yielding products could reduceimpact expected net interest income.
•Deposit rates paid may change with market interest rate changes. Our interest rate sensitivity of deposits, referred to as deposit betas, is modeled using the historical behavior of our deposits portfolio, including certain customer account migration. The actual deposit rates paid may differ from the assumed deposit rates paid in these scenarios due to lags in repricing, customer behavior, and other factors.
•We hold the size of the projected debt and equity securities portfolios constant across scenarios.
Table 28:24: Net Interest Income Sensitivity
| | ($ in billions) | ($ in billions) | Jun 30, 2021 | | Dec 31, 2020 | ($ in billions) | Mar 31, 2022 | | Dec 31, 2021 |
| Parallel Shift: | Parallel Shift: | | Parallel Shift: | |
| +100 bps shift in interest rates | +100 bps shift in interest rates | $ | 7.0 | | | 6.7 | | +100 bps shift in interest rates | $ | 5.7 | | | 7.1 | |
| -100 bps shift in interest rates | -100 bps shift in interest rates | (2.9) | | | (2.7) | | -100 bps shift in interest rates | (6.1) | | | (3.3) | |
| | Steeper yield curve: | Steeper yield curve: | | Steeper yield curve: | |
| +50 bps shift in long-term interest rates | +50 bps shift in long-term interest rates | 1.2 | | | 1.3 | | +50 bps shift in long-term interest rates | 0.9 | | | 1.2 | |
| | Flatter yield curve: | Flatter yield curve: | | Flatter yield curve: | |
| +50 bps shift in short-term interest rates | +50 bps shift in short-term interest rates | 2.5 | | | 2.2 | | +50 bps shift in short-term interest rates | 2.3 | | | 2.6 | |
| -50 bps shift in long-term interest rates | -50 bps shift in long-term interest rates | (1.2) | | | (1.4) | | -50 bps shift in long-term interest rates | (0.7) | | | (1.0) | |
The changes in our interest rate sensitivity includedfrom December 31, 2021 to March 31, 2022 in Table 2824 reflected updates to our base scenario, which included higher interest rates and changes to our assets and liabilities. Our interest rate sensitivity indicates that we would expect to benefit from higher interest rates as our assets would reprice faster and to a greater degree than our liabilities, while in the case of lower interest rates, our assets would reprice downward and to a greater degree than our liabilities resulting in lower net interest income. For the simulations with downward shifts in interest rates, the 0.00% interest rate floor limits the amount of the decline in net interest income. We may have a larger decline in net interest income when interest rates increase for the base scenario relative to the interest rate floor.
The sensitivity results above do not capture noninterest income or 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. See the “Risk Management
– Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section in our 20202021 Form 10-K for additional information. For additional information on our trading assets and liabilities, see Note 2 (Trading Activities) to Financial Statements in this Report.
We use the debt securities portfolio and exchange-traded and over-the-counter (OTC) interest rate derivatives to manage our interest rate exposures. As interest rates increase, changes in the fair value of AFS debt securities may negatively affect cumulative other comprehensive income, which lowers the amount of our risk-based capital. See Note 1 (Summary of Significant Accounting Policies), Note 3 (Available-for-Sale and Held-to-Maturity Debt Securities) and Note 14 (Derivatives) to Financial Statements in our 20202021 Form 10-K for additional information.
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 additional information on mortgage banking interest rate and market risk, see Note 9 (Mortgage Banking Activities) to
Financial Statements in this Report and the “Risk Management – Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section in our 20202021 Form 10-K.
Hedging the various sources of interest rate risk in mortgage banking is a complex process that requires sophisticated modeling and constant monitoring. There are several potential risks to earnings from mortgage banking related to origination volumes and mix, valuation of MSRs and associated hedging results, the relationship and degree of volatility between short-term and long-term interest rates, and changes in servicing and foreclosures costs. While we attempt to balance our mortgage banking interest rate and market risks, the financial instruments we use may not perfectly correlate with the values and income being hedged.
MARKET RISK Market risk is the risk of possible economic loss from adverse changes in market risk factors such as interest rates, credit spreads, foreign exchange rates, equity and commodity prices, and the risk of possible loss due to counterparty exposure. This applies to implied volatility risk, basis risk, and market liquidity risk. It also includes price risk in the trading book, mortgage servicing rights and the hedge effectiveness risk associated with the mortgage book, and impairment onof private equity investments. For information on our oversight of market risk, see the “Risk Management – Asset/Liability Management – Market Risk” section in our 20202021 Form 10-K.
MARKET RISK – TRADING ACTIVITIES We engage in trading activities to accommodate the investment and risk management activities of our customers and to execute economic hedging to manage certain balance sheet risks. These trading activities predominantly occur within our CIB businesses and to a lesser extent other businesses 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 consolidated statement of income. Changes in fair value of the financial instruments used in our trading activities are reflected in net gains from trading activities. For additional information on the financial instruments used in our trading activities and the income from these trading activities, see Note 2 (Trading Activities) to Financial Statements in this Report.
Value-at-risk (VaR) is a statistical risk measure used to estimate the potential loss from adverse moves in the financial markets. The Company uses VaR metrics complemented with sensitivity analysis and stress testing in measuring and monitoring market risk. For additional information on our monitoring activities, sensitivity analysis and stress testing, see the “Risk Management – Asset/Liability Management – Market Risk – Trading Activities” section in our 20202021 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 consolidated balance sheet.
Table 2925 shows the Company’s Trading General VaR by risk category. The decrease in average Company Trading General VaR for the quarter ended June 30, 2021,March 31, 2022, compared with the same
Risk Management – Asset/Liability Management (continued)
period a year ago, was driven by a greater presence ofreduced market volatility dropping out ofin the 12-month historical lookback window used to calculate average Company Trading General VaR for the quarter ended June 30, 2021.March 31, 2022. Market volatility present in average Company Trading General VaR for
the quarter ended June 30, 2020,March 31, 2021, was driven by the introductionimpact of the COVID-19 pandemic, primarily resulting in particular, changes in interest rate curves and a significant widening of credit spreads.
Table 29:25: Trading 1-Day 99% General VaR by Risk Category
| | | | Quarter ended | | Quarter ended |
| | June 30, 2021 | | March 31, 2021 | | June 30, 2020 | | | March 31, 2022 | | December 31, 2021 | | March 31, 2021 | |
| (in millions) | (in millions) | Period
end | | Average | | Low | | High | | Period
end | | Average | | Low | | High | | Period
end | | Average | | Low | | High | | (in millions) | Period
end | | Average | | Low | | High | | Period
end | | Average | | Low | | High | | Period
end | | Average | | Low | | High | |
| Company Trading General VaR Risk Categories | Company Trading General VaR Risk Categories | | | Company Trading General VaR Risk Categories | | |
| Credit | Credit | $ | 14 | | | 21 | | | 12 | | | 30 | | | 22 | | | 94 | | | 21 | | | 112 | | | 86 | | | 82 | | | 61 | | | 99 | | | Credit | $ | 33 | | | 28 | | | 20 | | | 35 | | | 19 | | | 21 | | | 16 | | | 27 | | | 22 | | | 94 | | | 21 | | | 112 | | |
| Interest rate | Interest rate | 7 | | | 7 | | | 4 | | | 22 | | | 36 | | | 73 | | | 26 | | | 120 | | | 155 | | | 106 | | | 42 | | | 161 | | | Interest rate | 26 | | | 15 | | | 9 | | | 30 | | | 15 | | | 12 | | | 9 | | | 15 | | | 36 | | | 73 | | | 26 | | | 120 | | |
| Equity | Equity | 29 | | | 37 | | | 25 | | | 56 | | | 35 | | | 36 | | | 28 | | | 72 | | | 14 | | | 10 | | | 6 | | | 17 | | | Equity | 26 | | | 21 | | | 13 | | | 28 | | | 15 | | | 19 | | | 13 | | | 29 | | | 35 | | | 36 | | | 28 | | | 72 | | |
| Commodity | Commodity | 28 | | | 7 | | | 2 | | | 28 | | | 11 | | | 5 | | | 2 | | | 12 | | | 4 | | | 4 | | | 2 | | | 7 | | | Commodity | 6 | | | 5 | | | 2 | | | 20 | | | 10 | | | 8 | | | 2 | | | 23 | | | 11 | | | 5 | | | 2 | | | 12 | | |
| Foreign exchange | Foreign exchange | 0 | | | 1 | | | 0 | | | 1 | | | 1 | | | 1 | | | 1 | | | 1 | | | 1 | | | 2 | | | 1 | | | 3 | | | Foreign exchange | 1 | | | 1 | | | 0 | | | 1 | | | 1 | | | 0 | | | 0 | | | 1 | | | 1 | | | 1 | | | 1 | | | 1 | | |
| Diversification benefit (1) | Diversification benefit (1) | (38) | | | (30) | | | (64) | | | (111) | | | (51) | | | (49) | | | | Diversification benefit (1) | (63) | | | (43) | | | (40) | | | (37) | | | (64) | | | (111) | | | |
| Company Trading General VaR | Company Trading General VaR | 40 | | | 43 | | | 41 | | | 98 | | | 209 | | | 155 | | | | Company Trading General VaR | 29 | | | 27 | | | 20 | | | 23 | | | 41 | | | 98 | | | |
(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. For additional information, see the “Risk Management – Asset/Liability Management – Market Risk – Equity Securities” section in our 20202021 Form 10-K.
We also have marketable equity securities that include investments relating to our venture capital activities. The fair value changes in these marketable equity securities are recognized in net income. For additional information, see Note 6 (Equity Securities) to Financial Statements in this Report.
Changes in equity market prices may also indirectly affect our net income by (1) the value of third-party assets under management and, hence, fee income, (2) borrowers whose ability to repay principal and/or interest may be affected by the stock market, or (3) brokerage activity, related commission income and other business activities. Each business line monitors and manages these indirect risks.
LIQUIDITY RISK AND FUNDING In the ordinary course of business, we enter into contractual obligations that may require future cash payments, including funding for customer loan requests, customer deposit maturities and withdrawals, debt service, leases for premises and equipment, and other cash commitments. The objective of effective liquidity management is to ensure that we can meet our contractual obligations and other cash commitments efficiently under both normal operating conditions and under periods of Wells Fargo-specific and/or market stress. To help achieve this objective, we monitor both
the consolidated company and the Parent on a stand-alone basis to ensure that the Parent is a source of strength for its regulated, deposit-taking banking subsidiaries. The Parent acts as a source of funding for the Company through the issuance of long-term debt and equity, and WFC Holdings, LLC, an intermediate holding company and subsidiary of the Parent (the “IHC”), provides funding support for the ongoing operational requirements of the Parent and certain of its direct and indirect subsidiaries. For
additional information on liquidity risk and funding management, see the “Risk Management – Liquidity Risk and Funding” section in our 20202021 Form 10-K. For additional information on the IHC, see the “Regulatory Matters – ‘Living Will’ Requirements and Related Matters” section in this Report.our 2021 Form 10-K.
Liquidity Standards We are subject to a rule issued by the FRB, OCC and FDIC that establishes a quantitative minimum liquidity requirement consistent with the liquidity coverage ratio (LCR) established by the Basel Committee on Banking Supervision (BCBS). The rule requires a covered banking organization such as Wells Fargo, to hold high-quality liquid assets (HQLA), predominantly consisting of central bank deposits, government debt securities, and 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. Our HQLA under the rule predominantly consists of central bank deposits, government debt securities, and mortgage-backed securities of federal agencies. The LCR applies to the Company on a consolidated basis and to our insured depository institutions (IDIs) with total assets of $10 billion or more. In addition, rules issued by the FRB impose enhanced liquidity risk management standards on large bank holding companies (BHCs), such as Wells Fargo.
The FRB, OCC and FDIC have also issued a rule implementing a stable funding requirement, known as the net stable funding
Risk Management – Asset/Liability Management (continued)
ratio (NSFR), which requires a covered banking organization, such as Wells Fargo, to maintain a minimum amount of stable funding, including common equity, long-term debt and most types of deposits, in relation to its assets, derivative exposures and commitments over a one-year horizon period. The NSFR became effective on July 1, 2021, and applies to the Company on a consolidated basis and to our IDIs with total assets of $10 billion or more. As of July 1, 2021,March 31, 2022, we were compliant with the NSFR requirement.
Liquidity Coverage Ratio As of June 30, 2021,March 31, 2022, the consolidated Company, Wells Fargo Bank, N.A., and Wells Fargo National Bank West exceeded 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 3026 presents the Company’s quarterly average values for the daily-calculated LCR and its components calculated pursuant to the LCR rule requirements.
Table 30:26: Liquidity Coverage Ratio
| | | Average for Quarter ended | | Average for Quarter ended |
| (in millions, except ratio) | (in millions, except ratio) | Jun 30, 2021 | | Mar 31, 2021 | | Jun 30, 2020 | (in millions, except ratio) | Mar 31, 2022 | | Dec 31, 2021 | | Mar 31, 2021 |
| HQLA (1): | HQLA (1): | | HQLA (1): | |
| Eligible cash | Eligible cash | $ | 248,404 | | 216,403 | | | 166,947 | | Eligible cash | $ | 170,867 | | 210,527 | | | 216,403 | |
| Eligible securities (2) | Eligible securities (2) | 137,718 | | 186,270 | | | 242,520 | | Eligible securities (2) | 203,622 | | 172,761 | | | 186,270 | |
| Total HQLA | Total HQLA | 386,122 | | 402,673 | | | 409,467 | | Total HQLA | 374,489 | | 383,288 | | | 402,673 | |
| Projected net cash outflows | Projected net cash outflows | 314,678 | | 316,116 | | | 316,268 | | Projected net cash outflows | 314,691 | | 325,015 | | | 316,116 | |
| LCR | LCR | 123 | % | | 127 | | | 129 | | LCR | 119 | % | | 118 | | | 127 | |
|
(1)Excludes excess HQLA at certain subsidiaries that is not transferable to other Wells Fargo entities.
(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. Our primary sources of liquidity are substantially the same in composition as HQLA under the LCR rule; however, our primary sources of liquidity will generally exceed HQLA calculated under the LCR rule due to the applicable haircuts to HQLA and the exclusion of excess HQLA at our subsidiary IDIs required under the LCR rule. Our primary sources of liquidity are presented in Table 31,27 at fair value, which also includes encumbered securities that are not included as available HQLA in the calculation of the LCR.
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 MBS 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 HTM portfolio and, as such, are not intended for sale but may be pledged to obtain financing.
Table 31:27: Primary Sources of Liquidity
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| (in millions) | (in millions) | Total | | Encumbered | | Unencumbered | | Total | | Encumbered | | Unencumbered | (in millions) | Total | | Encumbered | | Unencumbered | | Total | | Encumbered | | Unencumbered |
| Interest-earning deposits with banks | Interest-earning deposits with banks | $ | 248,869 | | | — | | | 248,869 | | | 236,376 | | | — | | | 236,376 | | Interest-earning deposits with banks | $ | 174,441 | | | — | | | 174,441 | | | 209,614 | | | — | | | 209,614 | |
| Debt securities of U.S. Treasury and federal agencies | Debt securities of U.S. Treasury and federal agencies | 63,934 | | | 3,304 | | | 60,630 | | | 70,756 | | | 5,370 | | | 65,386 | | Debt securities of U.S. Treasury and federal agencies | 61,984 | | | 5,414 | | | 56,570 | | | 56,486 | | | 4,066 | | | 52,420 | |
| Mortgage-backed securities of federal agencies | 280,984 | | | 52,700 | | | 228,284 | | | 258,668 | | | 49,156 | | | 209,512 | | |
| Federal agency mortgage-backed securities (1) | | Federal agency mortgage-backed securities (1) | 276,450 | | | 49,248 | | | 227,202 | | | 293,870 | | | 58,955 | | | 234,915 | |
| Total | Total | $ | 593,787 | | | 56,004 | | | 537,783 | | | 565,800 | | | 54,526 | | | 511,274 | | Total | $ | 512,875 | | | 54,662 | | | 458,213 | | | 559,970 | | | 63,021 | | | 496,949 | |
(1)Included in encumbered securities at March 31, 2022, were securities with a fair value of $836 million, which were purchased in March 2022, but settled in April 2022.
In addition to our primary sources of liquidity shown in
Table 31,27, liquidity is also available through the sale or financing of other debt securities including trading and/or AFS debt securities, as well as through the sale, securitization or financing of loans, to the extent such debt securities and loans are not encumbered. As of June 30, 2021,March 31, 2022, we also maintained approximately $222.7$213.7 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 169%162% and 158%166% of total
loans at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively. Additional funding is provided by long-term debt and short-term borrowings. Table 32 shows selected information for28 presents a summary of our short-term borrowings, which generally mature in less than 30 days. We pledge certain financial instruments that we own to collateralize repurchase agreements and other securities financings. For additional information, see the “Pledged Assets” section of
Note 12 (Pledged Assets and Collateral) to Financial Statements in this Report.
| | | | | | | | | | | |
| (in millions) | March 31, 2022 | | December 31, 2021 |
| Federal funds purchased and securities sold under agreements to repurchase | $ | 19,969 | | | 21,191 | |
| | | |
| Other short-term borrowings | 13,632 | | | 13,218 | |
| Total | $ | 33,601 | | | 34,409 | |
| | | | | | | | |
48 | Wells Fargo & Company | 43 |
Risk Management – Asset/Liability Management Table 32:Short-Term Borrowings(continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter ended |
| (in millions) | Jun 30,
2021 | | Mar 31,
2021 | | Dec 31,
2020 | | Sep 30,
2020 | | Jun 30,
2020 |
| Balance, period end | | | | | | | | | |
| Federal funds purchased and securities sold under agreements to repurchase | $ | 33,708 | | | 46,871 | | | 46,362 | | | 44,055 | | | 49,659 | |
| | | | | | | | | |
| Other short-term borrowings | 11,927 | | | 12,049 | | | 12,637 | | | 11,169 | | | 10,826 | |
| Total | $ | 45,635 | | | 58,920 | | | 58,999 | | | 55,224 | | | 60,485 | |
| Average daily balance for period | | | | | | | | | |
| Federal funds purchased and securities sold under agreements to repurchase | $ | 36,526 | | | 47,358 | | | 46,069 | | | 46,504 | | | 52,868 | |
| | | | | | | | | |
| Other short-term borrowings | 11,979 | | | 11,724 | | | 11,235 | | | 10,788 | | | 10,667 | |
| Total | $ | 48,505 | | | 59,082 | | | 57,304 | | | 57,292 | | | 63,535 | |
| Maximum month-end balance for period | | | | | | | | | |
| Federal funds purchased and securities sold under agreements to repurchase (1) | $ | 33,708 | | | 47,050 | | | 46,879 | | | 49,148 | | | 50,397 | |
| | | | | | | | | |
| Other short-term borrowings (2) | 12,563 | | | 12,049 | | | 12,637 | | | 11,169 | | | 11,220 | |
(1)Maximum month-end balance in each of the last five quarters was in June and February 2021, and November, July and April 2020.
(2)Maximum month-end balance in each of the last five quarters was in April and March 2021, and December, September and April 2020.
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. Depending on market conditions and our liquidity
position, we may purchaseredeem or repurchase, and subsequently retire, our outstanding debt securities from time to time in privately negotiated or open market transactions, by tender offer, or otherwise. WeIn addition, we issued $1.0 billion and $1.1$8.1 billion of long-term debt in the second quarter and first half of 2021, respectively.April 2022. Table 3329 provides the aggregate carrying value of long-term debt maturities (based on contractual payment dates) for the remainder of 20212022 and the following years thereafter, as of June 30, 2021.March 31, 2022.
Table 33:29: Maturity of Long-Term Debt
| | | June 30, 2021 | | March 31, 2022 |
| (in millions) | (in millions) | Remaining 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter | | Total | (in millions) | Remaining 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total |
| Wells Fargo & Company (Parent Only) | Wells Fargo & Company (Parent Only) | | Wells Fargo & Company (Parent Only) | |
| Senior notes | Senior notes | $ | 6,501 | | | 13,563 | | | 8,260 | | | 12,233 | | | 15,151 | | | 71,163 | | | 126,871 | | Senior notes | $ | 8,904 | | | 5,947 | | | 11,551 | | | 13,960 | | | 18,303 | | | 54,934 | | | 113,599 | |
| Subordinated notes | Subordinated notes | — | | | — | | | 3,706 | | | 753 | | | 1,124 | | | 22,752 | | | 28,335 | | Subordinated notes | — | | | 2,659 | | | 720 | | | 1,049 | | | 2,784 | | | 17,689 | | | 24,901 | |
| Junior subordinated notes | Junior subordinated notes | — | | | — | | | — | | | — | | | — | | | 1,388 | | | 1,388 | | Junior subordinated notes | — | | | — | | | — | | | — | | | — | | | 1,290 | | | 1,290 | |
| Total long-term debt – Parent | Total long-term debt – Parent | 6,501 | | | 13,563 | | | 11,966 | | | 12,986 | | | 16,275 | | | 95,303 | | | 156,594 | | Total long-term debt – Parent | 8,904 | | | 8,606 | | | 12,271 | | | 15,009 | | | 21,087 | | | 73,913 | | | 139,790 | |
| Wells Fargo Bank, N.A. and other bank entities (Bank) | Wells Fargo Bank, N.A. and other bank entities (Bank) | | Wells Fargo Bank, N.A. and other bank entities (Bank) | |
| Senior notes | Senior notes | 3,208 | | | 2,833 | | | 2,861 | | | 3 | | | 188 | | | 231 | | | 9,324 | | Senior notes | 27 | | | 3 | | | 3 | | | 186 | | | 88 | | | 140 | | | 447 | |
| Subordinated notes | Subordinated notes | — | | | — | | | 1,098 | | | — | | | 168 | | | 4,236 | | | 5,502 | | Subordinated notes | — | | | 999 | | | — | | | 156 | | | — | | | 3,830 | | | 4,985 | |
| Junior subordinated notes | Junior subordinated notes | — | | | — | | | — | | | — | | | — | | | 382 | | | 382 | | Junior subordinated notes | — | | | — | | | — | | | — | | | — | | | 391 | | | 391 | |
| Securitizations and other bank debt | Securitizations and other bank debt | 1,579 | | | 1,383 | | | 876 | | | 424 | | | 146 | | | 1,476 | | | 5,884 | | Securitizations and other bank debt | 2,037 | | | 1,377 | | | 1,087 | | | 251 | | | 124 | | | 1,424 | | | 6,300 | |
| Total long-term debt – Bank | Total long-term debt – Bank | 4,787 | | | 4,216 | | | 4,835 | | | 427 | | | 502 | | | 6,325 | | | 21,092 | | Total long-term debt – Bank | 2,064 | | | 2,379 | | | 1,090 | | | 593 | | | 212 | | | 5,785 | | | 12,123 | |
| Other consolidated subsidiaries | Other consolidated subsidiaries | | Other consolidated subsidiaries | |
| Senior notes | Senior notes | 358 | | | 190 | | | 517 | | | 107 | | | 428 | | | 338 | | | 1,938 | | Senior notes | 67 | | | 500 | | | 106 | | | 422 | | | 225 | | | 104 | | | 1,424 | |
| | Securitizations and other bank debt | — | | | — | | | — | | | — | | | — | | | 32 | | | 32 | | |
| | Total long-term debt – Other consolidated subsidiaries | Total long-term debt – Other consolidated subsidiaries | 358 | | | 190 | | | 517 | | | 107 | | | 428 | | | 370 | | | 1,970 | | Total long-term debt – Other consolidated subsidiaries | 67 | | | 500 | | | 106 | | | 422 | | | 225 | | | 104 | | | 1,424 | |
| Total long-term debt | Total long-term debt | $ | 11,646 | | | 17,969 | | | 17,318 | | | 13,520 | | | 17,205 | | | 101,998 | | | 179,656 | | Total long-term debt | $ | 11,035 | | | 11,485 | | | 13,467 | | | 16,024 | | | 21,524 | | | 79,802 | | | 153,337 | |
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| 44 | Wells Fargo & Company | 49 |
Risk Management – Asset/Liability Management (continued)
Credit Ratings Investors in the long-term capital markets, as well as other market participants, generally will consider, among other factors, a company’s debt rating in making investment decisions. Rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, the level and quality of earnings, and rating agency assumptions regarding the probability and extent of federal financial assistance or support for certain large financial institutions. Adverse changes in these factors could result in a reduction of our credit rating; however, our debt securities do not contain credit rating covenants.
On April 22, 2021,February 16, 2022, Moody's Investors Service (Moody's)(Moody’s) affirmed ourthe Company’s ratings and retainedchanged the negative ratings outlook. On July 12, 2021, Moody's upgraded the senior debt rating of the Company to A1 from A2 as a result of revisions to its bankoutlook
to stable from negative. There were no other actions undertaken by the rating agencies with regard to our credit ratings methodology. On May 24, 2021, DBRS Morningstar confirmed our ratings and retained the negative ratings trend. On June 14, 2021, Fitch Ratings affirmed our ratings and retained the negative ratings outlook.during first quarter 2022.
See the “Risk Factors” section in our 20202021 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 14 (Derivatives) to Financial Statements in this Report for information regarding additional collateral and funding obligations required for certain derivative instruments in the event our credit ratings were to fall below investment grade.
The credit ratings of the Parent and Wells Fargo Bank, N.A., as of June 30, 2021,March 31, 2022, are presented in Table 34.30.
Table 34:30: Credit Ratings as of June 30, 2021March 31, 2022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Wells Fargo & Company | | Wells Fargo Bank, N.A. |
| Senior debt | | Short-term borrowings | | Long-term deposits | | Short-term borrowings |
| Moody’s | A2A1 | | P-1 | | Aa1 | | P-1 |
| S&P Global Ratings | BBB+ | | A-2 | | A+ | | A-1 |
| Fitch Ratings | A+ | | F1 | | AA | | F1+ |
| DBRS Morningstar | AA (low) | | R-1 (middle) | | AA | | R-1 (high) |
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. FHLB members are 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, the amount of any future investment in the capital stock of the FHLBs is not determinable.
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50 | Wells Fargo & Company | 45 |
We have an active program for managing capital through a comprehensive process for assessing the Company’s overall capital adequacy. Our objective is to maintain capital at an amount commensurate with our risk profile and risk tolerance objectives, and to meet both regulatory and market expectations. We primarily fund our capital needs through the retention of earnings net of both dividends and share repurchases, as well as through the issuance of preferred stock and long- and short-term debt. Retained earnings at June 30, 2021,March 31, 2022, increased $9.1$2.3 billion from December 31, 2020,2021, predominantly as a result of $10.7$3.7 billion of Wells Fargo net income, partially offset by $1.5$1.3 billion of common and preferred stock dividends. During the first half of 2021,quarter 2022, we issued $819$580 million of common stock, substantially all of which was issued in connection with employee compensation and benefits. During theIn first half of 2021,quarter 2022, we repurchased 53110 million shares of common stock at a cost of $2.2$6 billion. In first quarter 2022, our cumulative other comprehensive income decreased $5.1 billion, predominantly due to net unrealized losses on AFS debt securities. As interest rates increase, changes in the fair value of AFS debt securities may negatively affect cumulative other comprehensive income, which lowers the amount of our risk-based capital. For additional information about capital planning, see the “Capital Planning and Stress Testing” section below.
In the first half of 2021, we issued $4.6 billion of preferred stock and redeemed $4.9 billion of preferred stock, including the redemption of the remaining $350 million of our Preferred Stock, Series N, in June 2021. In July 2021, we issued $1.25 billion of our Preferred Stock, Series DD. For additional information, see Note 16 (Preferred Stock) to Financial Statements in this Report.
Regulatory Capital Requirements
The Company and each of our IDIs are subject to various regulatory capital adequacy requirements administered by the FRB and the OCC. Risk-based capital rules establish risk-adjusted ratios relating regulatory capital to different categories of assets and off-balance sheet exposures as discussed below.
RISK-BASED CAPITAL AND RISK-WEIGHTED ASSETS The Company is subject to rules issued by federal banking regulators to implement Basel III capital requirements for U.S. banking organizations. The rules contain two frameworks for calculating capital requirements, a Standardized Approach and an Advanced Approach applicable to certain institutions, including Wells Fargo. Our capital adequacy is assessed based on the lower ofFargo, and we must calculate our risk-based capital ratios calculated under the twoboth approaches. The Company is required to satisfy the risk-based capital ratio requirements to avoid restrictions on capital distributions and discretionary bonus payments. Table 3531 and Table 3632 present the risk-based capital requirements applicable to the Company on a fully phased-in basis under the Standardized Approach and Advanced Approach, respectively, as of June 30, 2021.March 31, 2022.
Table 35:31: Risk-Based Capital Requirements – Standardized Approach as of March 31, 2022
Table 36:32: Risk-Based Capital Requirements – Advanced Approach as of March 31, 2022
In addition to the risk-based capital requirements described in Table 3531 and Table 36,32, if the FRB determines that a period of excessive credit growth is contributing to an increase in systemic risk, a countercyclical buffer of up to 2.50% could be added to the risk-based capital ratio requirements under federal banking regulations. The countercyclical buffer in effect at March 31, 2022, was 0.00%.
The capital conservation buffer is applicable to certain institutions, including Wells Fargo, under the Advanced Approach and is intended to absorb losses during times of economic or financial stress.
The stress capital buffer is calculated based on the decrease in a BHC’s risk-based capital ratios under the severely adverse scenario in the FRB’s annual supervisory stress test and related Comprehensive Capital Analysis and Review (CCAR), plus four quarters of planned common stock dividends. Because the stress capital buffer is calculated annually based on data that can differ over time, our stress capital buffer, and thus our risk-based capital ratio requirements under the Standardized Approach, are subject to change in future periods. The Company’s stress capital buffer for the period October 1, 2020, through September 30, 2021, is 2.50%. The Company expects itsOur stress capital buffer for the period October 1, 2021, through September 30, 2022, to beis 3.10%. The FRB has indicated that it will publish the final stress capital buffer for the period October 1, 2021, through September 30, 2022, for each BHC by August 31, 2021.
Capital Management (continued)
As a global systemically important bank (G-SIB), we are also subject to the FRB’s rule implementing an additional capital surcharge of between 1.00-4.50% on the risk-based capital ratio requirements of G-SIBs. Under the rule, we must annually calculate our surcharge under two methods and use the higher of the two surcharges. The first method (method one) considers our size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity, consistent with the methodology developed by the BCBS and the Financial Stability Board (FSB). The second method (method two) uses similar inputs, but replaces substitutability with use of short-term wholesale funding and will generally result in higher surcharges than under method one. Because the G-SIB capital surcharge is calculated annually based on data that can differ over time, the amount of the surcharge is subject to change in future years. We expectIf our annual calculation
results in a decrease to our G-SIB capital surcharge, the decrease takes effect the next calendar year. If our annual calculation results in an increase to decrease by 50 basis points toour G-SIB capital surcharge, the increase takes effect in two calendar years. For 2022, our G-SIB capital surcharge is 1.50% beginning in first quarter 2022, subject to finalization in fourth quarter 2021.
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..
Under the risk-based capital rules, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories
according to the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWAs.risk-weighted assets (RWAs).
Effective January 1, 2022, we are required by federal
banking regulators to use the Standardized Approach for Counterparty Credit Risk (SA-CCR) for calculating exposure amounts for credit RWAs on derivative contracts. The adoption of SA-CCR resulted in an increase of less than 1.00% in total RWAs under the Standardized Approach (our binding approach) in first quarter 2022.
The tables that follow provide information about our risk-based capital and related ratios as calculated under Basel III capital rules. Although we report certain capital amounts and ratios in accordance with transition requirements for bank regulatory reporting purposes, we manage our capital on a fully phased-in basis. For information about our capital requirements calculated in accordance with transition requirements, see
Note 23 (Regulatory Capital Requirements and Other Restrictions) to Financial Statements in this Report.
Table 3733 summarizes our CET1, tier 1 capital, total capital, RWAs and capital ratios on a fully phased-in basis at June 30, 2021,March 31, 2022, and December 31, 2020. 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 38 for information regarding the calculation and components of our CET1, tier 1 capital, total capital and RWAs, as well as a corresponding reconciliation to GAAP financial measures for our fully phased-in total capital amounts.2021.
Table 37:33: Capital Components and Ratios (Fully Phased-In)
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| | | | June 30, 2021 | | | December 31, 2020 | |
| (in millions, except ratios) | | Required
Capital
Ratios (1) | | Advanced Approach | | Standardized Approach | | | Advanced Approach | | Standardized Approach | |
| Common Equity Tier 1 | (A) | | | $ | 143,442 | | | 143,442 | | | | 138,297 | | | 138,297 | | |
| Tier 1 Capital | (B) | | | 162,999 | | | 162,999 | | | | 158,196 | | | 158,196 | | |
| Total Capital | (C) | | | 190,147 | | | 200,130 | | | | 186,803 | | | 196,529 | | |
| Risk-Weighted Assets | (D) | | | 1,126,535 | | | 1,188,727 | | | | 1,158,355 | | | 1,193,744 | | |
| Common Equity Tier 1 Capital Ratio | (A)/(D) | 9.00 | % | | 12.73 | | | 12.07 | | * | | 11.94 | | | 11.59 | | * |
| Tier 1 Capital Ratio | (B)/(D) | 10.50 | | | 14.47 | | | 13.71 | | * | | 13.66 | | | 13.25 | | * |
| Total Capital Ratio | (C)/(D) | 12.50 | | | 16.88 | | | 16.84 | | * | | 16.14 | | * | 16.47 | | |
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| | Standardized Approach | | Advanced Approach |
| ($ in millions) | | Required
Capital
Ratios (1) | | Mar 31,
2022 | | Dec 31,
2021 | | Required
Capital
Ratios (1) | | Mar 31,
2022 | | Dec 31,
2021 |
| Common Equity Tier 1 | (A) | | | $ | 132,298 | | | 140,643 | | | | | 132,298 | | | 140,643 | |
| Tier 1 capital | (B) | | | 151,340 | | | 159,671 | | | | | 151,340 | | | 159,671 | |
| Total capital | (C) | | | 186,316 | | | 196,281 | | | | | 177,686 | | | 186,553 | |
| Risk-weighted assets | (D) | | | 1,265,517 | | | 1,239,026 | | | | | 1,119,518 | | | 1,116,068 | |
| Common Equity Tier 1 capital ratio | (A)/(D) | 9.10 | % | | 10.45 | | * | 11.35 | | | 8.50 | | | 11.82 | | | 12.60 | |
| Tier 1 capital ratio | (B)/(D) | 10.60 | | | 11.96 | | * | 12.89 | | | 10.00 | | | 13.52 | | | 14.31 | |
| Total capital ratio | (C)/(D) | 12.60 | | | 14.72 | | * | 15.84 | | | 12.00 | | | 15.87 | | | 16.72 | |
*Denotes the binding ratio based on the lower calculation under the Standardized and Advanced and Standardized Approaches.Approaches at March 31, 2022.
(1)Represents the minimum ratios required to avoid restrictions on capital distributions and discretionary bonus payments. The required ratios were the same under both the Standardized and Advanced Approachespayments at June 30, 2021.March 31, 2022.
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52 | Wells Fargo & Company | 47 |
Capital Management (continued)
Table 3834 provides information regarding the calculation and composition of our risk-based capital under the AdvancedStandardized and StandardizedAdvanced Approaches at June 30, 2021,March 31, 2022, and December 31, 2020.2021.
Table 38:34: Risk-Based Capital Calculation and Components | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | June 30, 2021 | | | | | December 31, 2020 |
| (in millions) | | Advanced Approach | | Standardized Approach | | | | | Advanced Approach | | Standardized Approach |
| Total equity (1) | | $ | 193,127 | | | 193,127 | | | | | | 185,712 | | | 185,712 | |
| Effect of accounting policy changes (1) | | — | | | — | | | | | | 208 | | | 208 | |
| Total equity (as reported) | | 193,127 | | | 193,127 | | | | | | 185,920 | | | 185,920 | |
| Adjustments: | | | | | | | | | | | |
| Preferred stock | | (20,820) | | | (20,820) | | | | | | (21,136) | | | (21,136) | |
| Additional paid-in capital on preferred stock | | 136 | | | 136 | | | | | | 152 | | | 152 | |
| Unearned ESOP shares | | 875 | | | 875 | | | | | | 875 | | | 875 | |
| Noncontrolling interests | | (1,865) | | | (1,865) | | | | | | (1,033) | | | (1,033) | |
| Total common stockholders’ equity | | $ | 171,453 | | | 171,453 | | | | | | 164,778 | | | 164,778 | |
| Adjustments: | | | | | | | | | | | |
| Goodwill | | (26,194) | | | (26,194) | | | | | | (26,392) | | | (26,392) | |
| Certain identifiable intangible assets (other than MSRs) | | (301) | | | (301) | | | | | | (342) | | | (342) | |
| Goodwill and other intangibles on nonmarketable equity securities (included in other assets) | | (2,256) | | | (2,256) | | | | | | (1,965) | | | (1,965) | |
| Applicable deferred taxes related to goodwill and other intangible assets (2) | | 875 | | | 875 | | | | | | 856 | | | 856 | |
| CECL transition provision (3) | | 879 | | | 879 | | | | | | 1,720 | | | 1,720 | |
| Other | | (1,014) | | | (1,014) | | | | | | (358) | | | (358) | |
| Common Equity Tier 1 | | $ | 143,442 | | | 143,442 | | | | | | 138,297 | | | 138,297 | |
| Preferred stock | | 20,820 | | | 20,820 | | | | | | 21,136 | | | 21,136 | |
| Additional paid-in capital on preferred stock | | (136) | | | (136) | | | | | | (152) | | | (152) | |
| Unearned ESOP shares | | (875) | | | (875) | | | | | | (875) | | | (875) | |
| Other | | (252) | | | (252) | | | | | | (210) | | | (210) | |
| Total Tier 1 capital | (A) | $ | 162,999 | | | 162,999 | | | | | | 158,196 | | | 158,196 | |
| Long-term debt and other instruments qualifying as Tier 2 | | 23,206 | | | 23,206 | | | | | | 24,387 | | | 24,387 | |
| Qualifying allowance for credit losses (4) | | 4,304 | | | 14,287 | | | | | | 4,408 | | | 14,134 | |
| Other | | (362) | | | (362) | | | | | | (188) | | | (188) | |
| Total Tier 2 capital (fully phased-in) | (B) | $ | 27,148 | | | 37,131 | | | | | | 28,607 | | | 38,333 | |
| Effect of Basel III transition requirements | | 26 | | | 26 | | | | | | 131 | | | 131 | |
| Total Tier 2 capital (Basel III transition requirements) | | $ | 27,174 | | | 37,157 | | | | | | 28,738 | | | 38,464 | |
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| Total qualifying capital (fully phased-in) | (A)+(B) | $ | 190,147 | | | 200,130 | | | | | | 186,803 | | | 196,529 | |
| Total Effect of Basel III transition requirements | | 26 | | | 26 | | | | | | 131 | | | 131 | |
| Total qualifying capital (Basel III transition requirements) | | $ | 190,173 | | | 200,156 | | | | | | 186,934 | | | 196,660 | |
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| Risk-Weighted Assets (RWAs)(5): | | | | | | | | | | | |
| Credit risk (6) | | $ | 729,917 | | | 1,140,459 | | | | | | 752,999 | | | 1,125,813 | |
| Market risk | | 48,268 | | | 48,268 | | | | | | 67,931 | | | 67,931 | |
| Operational risk | | 348,350 | | | — | | | | | | 337,425 | | | — | |
| Total RWAs | | $ | 1,126,535 | | | 1,188,727 | | | | | | 1,158,355 | | | 1,193,744 | |
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| (in millions) | | Mar 31,
2022 | | Dec 31,
2021 |
| Total equity | | $ | 181,689 | | | 190,110 | |
| Adjustments: | | | | |
| Preferred stock | | (20,057) | | | (20,057) | |
| Additional paid-in capital on preferred stock | | 136 | | | 136 | |
| Unearned ESOP shares | | 646 | | | 646 | |
| Noncontrolling interests | | (2,446) | | | (2,504) | |
| Total common stockholders’ equity | | $ | 159,968 | | | 168,331 | |
| Adjustments: | | | | |
| Goodwill | | (25,181) | | | (25,180) | |
| Certain identifiable intangible assets (other than MSRs) | | (210) | | | (225) | |
| Goodwill and other intangibles on investments in consolidated portfolio companies (included in other assets) | | (2,304) | | | (2,437) | |
| Applicable deferred taxes related to goodwill and other intangible assets (1) | | 870 | | | 765 | |
| CECL transition provision (2) | | 179 | | | 241 | |
| Other | | (1,024) | | | (852) | |
| Common Equity Tier 1 under the Standardized and Advanced Approaches | | $ | 132,298 | | | 140,643 | |
| Preferred stock | | 20,057 | | | 20,057 | |
| Additional paid-in capital on preferred stock | | (136) | | | (136) | |
| Unearned ESOP shares | | (646) | | | (646) | |
| Other | | (233) | | | (247) | |
| Total Tier 1 capital under the Standardized and Advanced Approaches | (A) | $ | 151,340 | | | 159,671 | |
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| Long-term debt and other instruments qualifying as Tier 2 | | 22,318 | | | 22,740 | |
| Qualifying allowance for credit losses (3) | | 13,038 | | | 14,149 | |
| Other | | (380) | | | (279) | |
| Total Tier 2 capital under the Standardized Approach | (B) | $ | 34,976 | | | 36,610 | |
| Total qualifying capital under the Standardized Approach | (A)+(B) | $ | 186,316 | | | 196,281 | |
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| Long-term debt and other instruments qualifying as Tier 2 | | $ | 22,318 | | | 22,740 | |
| Qualifying allowance for credit losses (3) | | 4,408 | | | 4,421 | |
| Other | | (380) | | | (279) | |
| Total Tier 2 capital under the Advanced Approach | (C) | $ | 26,346 | | | 26,882 | |
| Total qualifying capital under the Advanced Approach | (A)+(C) | $ | 177,686 | | | 186,553 | |
(1)In second quarter 2021, we elected to change our accounting method for low-income housing tax credit investments and elected to change the presentation of investment tax credits related to solar energy investments. Prior period total equity was revised to conform with the current period presentation. Prior period risk-based capital and certain other regulatory related metrics were not revised.
(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)(2)At June 30, 2021,In second quarter 2020, the impact of the CECLCompany elected to apply a modified transition provision issued by federal banking regulators related to the impact of the current expected credit loss accounting standard (CECL) on ourregulatory capital. The rule permits certain banking organizations to exclude from regulatory capital was an increase in capital of $879 million, reflecting a $991 million (post-tax) increase in capital recognized upon ourthe initial adoption impact of CECL, offset byplus 25% of the $7.5 billion increasecumulative changes in our ACL under CECL from January 1, 2020, through June 30, 2021.
(4)Under the Advanced Approach the allowance for credit losses that exceeds(ACL) under CECL for each period until December 31, 2021, followed by a three-year phase-out period in which the benefit is reduced by 25% in year one, 50% in year two and 75% in year three.
(3)Differences between the approaches are driven by the qualifying amounts of ACL includable in Tier 2 capital. Under the Advanced Approach, eligible credit reserves represented by the amount of qualifying ACL in excess of expected credit losses (using regulatory definitions) is eligible for inclusion in tier 2 capital,limited to the extent the excess allowance does not exceed 0.60% of Advanced credit RWAs, and underwhereas the Standardized Approach the allowance for credit losses is includableincludes ACL in tierTier 2 capital up to 1.25% of Standardized credit RWAs, in each case withRWAs. Under both approaches, any excess allowance for credit losses beingACL is deducted from the respective total RWAs.
(5)
Table 35 provides the composition of our RWAs under the Standardized and Advanced Approaches at March 31, 2022, and December 31, 2021.
Table 35: Risk-Weighted Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Standardized Approach | | Advanced Approach |
| (in millions) | | Mar 31,
2022 | | | | Dec 31,
2021 | | Mar 31,
2022 | | | | Dec 31,
2021 |
| Risk-weighted assets (RWAs) (1): | | | | | | | | | | | | |
| Credit risk | | $ | 1,212,082 | | | | | 1,186,810 | | | 752,633 | | | | | 747,714 | |
| Market risk | | 53,435 | | | | | 52,216 | | | 53,435 | | | | | 52,216 | |
| Operational risk | | — | | | | | — | | | 313,450 | | | | | 316,138 | |
| Total RWAs | | $ | 1,265,517 | | | | | 1,239,026 | | | 1,119,518 | | | | | 1,116,068 | |
(1)RWAs calculated under the Advanced Approach utilize a risk-sensitive methodology, which relies upon the use of internal credit models based upon our experience with internal rating grades. 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.
(6)Includes an increase of $547 million under the Standardized Approach and a decrease of $1.4 billion under the Advanced Approach related to the impact of the CECL transition provision on our excess allowance for credit losses as of June 30, 2021. See footnote (4) to this table.
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| 48 | Wells Fargo & Company | 53 |
Capital Management (continued)
Table 3936 presents the changes in CET1 for the sixthree months ended June 30, 2021.March 31, 2022.
Table 39:36: Analysis of Changes in Common Equity Tier 1
| | | | | | | | |
| (in millions) | | |
Common Equity Tier 1 at December 31, 20202021 | | $ | 138,297140,643 | |
| Net income applicable to common stock | | 9,9993,393 | |
| Common stock dividends | | (826)(959) | |
| Common stock issued, repurchased, and stock compensation-related items | | (1,539)(5,725) | |
| Changes in cumulative other comprehensive income | | (758)(5,065) | |
| | |
| Goodwill | | 198 (1) | |
| Certain identifiable intangible assets (other than MSRs) | | 4115 | |
Goodwill and other intangibles on nonmarketable equity securitiesinvestments in consolidated portfolio companies (included in other assets) | | (291)133 | |
| Applicable deferred taxes related to goodwill and other intangible assets (1) | | 19105 | |
| CECL transition provision (2) | | (841)(62) | |
| Other | | (857)(179) | |
| Change in Common Equity Tier 1 | | 5,145 (8,345) | |
Common Equity Tier 1 at June 30, 2021March 31, 2022 | | $ | 143,442132,298 | |
(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)At June 30, 2021,In second quarter 2020, the impact of the CECLCompany elected to apply a modified transition provision issued by federal banking regulators related to the impact of CECL on ourregulatory capital. The rule permits certain banking organizations to exclude from regulatory capital was an increase in capital of $879 million, reflecting a $991 million (post-tax) increase in capital recognized upon ourthe initial adoption impact of CECL, offset byplus 25% of the $7.5 billion increasecumulative changes in our ACLthe allowance for credit losses (ACL) under CECL from January 1, 2020, through June 30, 2021.for each period until December 31, 2021, followed by a three-year phase-out period in which the benefit is reduced by 25% in year one, 50% in year two and 75% in year three.
Table 4037 presents net changes in the components of RWAs under the AdvancedStandardized and StandardizedAdvanced Approaches for the sixthree months ended June 30, 2021.March 31, 2022.
Table 40:37: Analysis of Changes in RWAs
| | | | | | | | |
| (in millions) | Advanced Approach | Standardized Approach |
| RWAs at December 31, 2020 | $ | 1,158,355 | | 1,193,744 | |
| Net change in credit risk RWAs (1) | (23,082) | | 14,646 | |
| Net change in market risk RWAs | (19,663) | | (19,663) | |
| Net change in operational risk RWAs | 10,925 | | — | |
| Total change in RWAs | (31,820) | | (5,017) | |
| RWAs at June 30, 2021 | $ | 1,126,535 | | 1,188,727 | |
(1)Includes an increase of $547 million under the Standardized Approach and a decrease of $1.4 billion under the Advanced Approach related to the impact of the CECL transition provision on our excess allowance for credit losses. See Table 38 for additional information. | | | | | | | | |
| (in millions) | Standardized Approach | Advanced Approach |
| Risk-weighted assets (RWAs) at December 31, 2021 | $ | 1,239,026 | | 1,116,068 | |
| Net change in credit risk RWAs | 25,272 | | 4,919 | |
| Net change in market risk RWAs | 1,219 | | 1,219 | |
| Net change in operational risk RWAs | — | | (2,688) | |
| Total change in RWAs | 26,491 | | 3,450 | |
| RWAs at March 31, 2022 | $ | 1,265,517 | | 1,119,518 | |
| | | | | | | | |
54 | Wells Fargo & Company | 49 |
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,investments in consolidated portfolio companies, net of applicable deferred taxes. The ratios are (i) tangible book value per common share, which represents tangible common equity divided by common shares outstanding; and (ii) return on average tangible common equity (ROTCE),
equity (ROTCE), which represents our annualized earnings as a percentage of tangible common equity. The methodology of determining tangible common equity may differ among companies. Management believes that tangible book value per common share and return on average tangible common equity, which utilize tangible common equity, are useful financial measures because they enable management, investors, and others to assess the Company’s use of equity.
Table 4138 provides a reconciliation of these non-GAAP financial measures to GAAP financial measures.
Table 41:38: Tangible Common Equity
| | | Balance at period end | | Average balance | | Balance at period end | | Average balance |
| | Quarter ended | | Quarter ended | | Six months ended | | Quarter ended | | Quarter ended | |
| (in millions, except ratios) | (in millions, except ratios) | | Jun 30,
2021 | Mar 31,
2021 | Jun 30,
2020 | | Jun 30,
2021 | Mar 31,
2021 | Jun 30,
2020 | | Jun 30,
2021 | Jun 30,
2020 | (in millions, except ratios) | | Mar 31,
2022 | Dec 31,
2021 | Mar 31,
2021 | | | Mar 31,
2022 | Dec 31,
2021 | Mar 31,
2021 | |
| Total equity | Total equity | | $ | 193,127 | | 188,034 | | 178,635 | | | 190,968 | 189,074 | | 184,072 | | | 190,026 | 185,982 | | Total equity | | $ | 181,689 | | 190,110 | | 188,034 | | | | 186,337 | 190,744 | | 189,074 | | |
| Adjustments: | Adjustments: | | Adjustments: | | | | |
| Preferred stock | Preferred stock | | (20,820) | | (21,170) | | (21,098) | | | (21,108) | | (21,840) | | (21,344) | | | (21,472) | | (21,569) | | Preferred stock | | (20,057) | | (20,057) | | (21,170) | | | | (20,057) | | (20,267) | | (21,840) | | |
| Additional paid-in capital on preferred stock | Additional paid-in capital on preferred stock | | 136 | | 139 | | 159 | | | 138 | | 145 | | 140 | | | 142 | | 138 | | Additional paid-in capital on preferred stock | | 136 | | 136 | | 139 | | | | 134 | | 120 | | 145 | | |
| Unearned ESOP shares | Unearned ESOP shares | | 875 | | 875 | | 875 | | | 875 | | 875 | | 1,140 | | | 875 | | 1,141 | | Unearned ESOP shares | | 646 | | 646 | | 875 | | | | 646 | | 872 | | 875 | | |
| Noncontrolling interests | Noncontrolling interests | | (1,865) | | (1,130) | | (736) | | | (1,313) | | (1,115) | | (643) | | | (1,215) | | (714) | | Noncontrolling interests | | (2,446) | | (2,504) | | (1,130) | | | | (2,468) | | (2,119) | | (1,115) | | |
| Total common stockholders’ equity | Total common stockholders’ equity | (A) | | 171,453 | | 166,748 | | 157,835 | | | 169,560 | | 167,139 | | 163,365 | | | 168,356 | | 164,978 | | Total common stockholders’ equity | (A) | | 159,968 | | 168,331 | | 166,748 | | | | 164,592 | | 169,350 | | 167,139 | | |
| Adjustments: | Adjustments: | | Adjustments: | | | | |
| Goodwill | Goodwill | | (26,194) | | (26,290) | | (26,385) | | | (26,213) | | (26,383) | | (26,384) | | | (26,297) | | (26,386) | | Goodwill | | (25,181) | | (25,180) | | (26,290) | | | | (25,180) | | (25,569) | | (26,383) | | |
| Certain identifiable intangible assets (other than MSRs) | Certain identifiable intangible assets (other than MSRs) | | (301) | | (322) | | (389) | | | (310) | | (330) | | (402) | | | (320) | | (414) | | Certain identifiable intangible assets (other than MSRs) | | (210) | | (225) | | (322) | | | | (218) | | (246) | | (330) | | |
| Goodwill and other intangibles on nonmarketable equity securities (included in other assets) | | (2,256) | | (2,300) | | (2,050) | | | (2,208) | | (2,217) | | (1,922) | | | (2,212) | | (2,037) | | |
| Goodwill and other intangibles on investments in consolidated portfolio companies (included in other assets) | | Goodwill and other intangibles on investments in consolidated portfolio companies (included in other assets) | | (2,304) | | (2,437) | | (2,300) | | | | (2,395) | | (2,309) | | (2,217) | | |
| Applicable deferred taxes related to goodwill and other intangible assets (1) | Applicable deferred taxes related to goodwill and other intangible assets (1) | | 875 | | 866 | | 831 | | | 873 | | 863 | | 828 | | | 868 | | 823 | | Applicable deferred taxes related to goodwill and other intangible assets (1) | | 871 | | 765 | | 866 | | | | 803 | | 848 | | 863 | | |
| Tangible common equity | Tangible common equity | (B) | | $ | 143,577 | | 138,702 | | 129,842 | | | 141,702 | | 139,072 | | 135,485 | | | 140,395 | | 136,964 | | Tangible common equity | (B) | | $ | 133,144 | | 141,254 | | 138,702 | | | | 137,602 | | 142,074 | | 139,072 | | |
| Common shares outstanding | Common shares outstanding | (C) | | 4,108.0 | | 4,141.1 | | 4,119.6 | | | N/A | N/A | | N/A | N/A | Common shares outstanding | (C) | | 3,789.9 | | 3,885.8 | | 4,141.1 | | | | N/A | N/A | |
| Net income applicable to common stock | Net income applicable to common stock | (D) | | N/A | N/A | | $ | 5,743 | | 4,256 | | (4,160) | | | $ | 9,999 | | (3,856) | | Net income applicable to common stock | (D) | | N/A | N/A | | | $ | 3,393 | | 5,470 | | 4,256 | | |
| Book value per common share | Book value per common share | (A)/(C) | | $ | 41.74 | | 40.27 | | 38.31 | | | N/A | N/A | | N/A | N/A | Book value per common share | (A)/(C) | | $ | 42.21 | | 43.32 | | 40.27 | | | | N/A | N/A | |
| Tangible book value per common share | Tangible book value per common share | (B)/(C) | | 34.95 | | 33.49 | | 31.52 | | | N/A | N/A | | N/A | N/A | Tangible book value per common share | (B)/(C) | | 35.13 | | 36.35 | | 33.49 | | | | N/A | N/A | |
| Return on average common stockholders’ equity (ROE) (annualized) | (D)/(A) | | N/A | N/A | | 13.59 | % | 10.33 | | (10.24) | | | 11.98 | % | (4.70) | % | |
| Return on average tangible common equity (ROTCE) (annualized) | (D)/(B) | | N/A | N/A | | 16.26 | | 12.41 | | (12.35) | | | 14.36 | % | (5.66) | % | |
| Return on average common stockholders’ equity (ROE) | | Return on average common stockholders’ equity (ROE) | (D)/(A) | | N/A | N/A | | | 8.36 | % | 12.81 | | 10.33 | | |
| Return on average tangible common equity (ROTCE) | | Return on average tangible common equity (ROTCE) | (D)/(B) | | N/A | N/A | | | 10.00 | | 15.27 | | 12.41 | | |
(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.
LEVERAGE REQUIREMENTS As a BHC, we are required to maintain a supplementary leverage ratio (SLR) to avoid restrictions on capital distributions and discretionary bonus payments and maintain a minimum tier 1 leverage ratio. Table 4239 presents the leverage requirements applicable to the Company as of June 30, 2021.March 31, 2022.
Table 42:39: Leverage Requirements Applicable to the Company
In addition, our IDIs are required to maintain an SLR of at least 6.00% to be considered well capitalized under applicable regulatory capital adequacy rules and maintain a minimum tier 1 leverage ratio of 4.00%.
The FRB and OCC have proposed amendments to the SLR rules. For information regarding the proposed amendments to the SLR rules, see the “Capital Management – Leverage Requirements” section in our 20202021 Form 10-K.
At June 30, 2021,March 31, 2022, the Company’s SLR was 7.09%6.61%, and each of our IDIs exceeded their applicable SLR requirements. Table 4340 presents information regarding the calculation and components of the Company’s SLR and tier 1 leverage ratio.
Capital Management (continued)
Table 43:40: Leverage Ratios for the Company
| | | | | | | | |
($ in millions, except ratios)millions) | | Quarter ended June 30, 2021March 31, 2022 |
| Tier 1 capital | (A) | $ | 162,999151,340 | |
| Total average assets | | 1,940,7571,919,572 | |
| Less: Goodwill and other permitted Tier 1 capital deductions (net of deferred tax liabilities) | | 29,103 | |
Less: Other SLR exclusions | | —27,957 | |
| Total adjusted average assets | | 1,911,6541,891,615 | |
| Plus adjustments for off-balance sheet exposures: | | |
| Derivatives (1) | | 68,73866,322 | |
| Repo-style transactions (2) | | 3,6263,227 | |
| Other (3) | | 316,398327,950 | |
| Total off-balance sheet exposures | | 388,762397,499 | |
| Total leverage exposure | (B) | $ | 2,300,4162,289,114 | |
| Supplementary leverage ratio | (A)/(B) | 7.096.61 | % |
| | |
| Tier 1 leverage ratio (4) | | 8.538.00 | % |
(1)Adjustment represents derivatives and collateral netting exposures as defined for supplementary leverage ratio determination purposes.
(2)Adjustment represents counterparty credit risk for repo-style transactions where Wells Fargo & Company is the principal counterparty facing the client.
(3)Adjustment represents credit equivalent amounts of other off-balance sheet exposures not already included as derivatives and repo-style transactions exposures.
(4)The tier 1 leverage ratio consists of tier 1 capital divided by total average assets, excluding goodwill and certain other items as determined under the rule.
TOTAL LOSS ABSORBING CAPACITY As a G-SIB, we are required to have a minimum amount of equity and unsecured long-term debt for purposes of resolvability and resiliency, often referred to as Total Loss Absorbing Capacity (TLAC). U.S. G-SIBs are required to have a minimum amount of TLAC (consisting of CET1 capital and additional tier 1 capital issued directly by the top-tier or covered BHC plus eligible external long-term debt) to avoid restrictions on capital distributions and discretionary bonus payments, as well as a minimum amount of eligible unsecured long-term debt. The components used to calculate our minimum TLAC and eligible unsecured long-term debt requirements as of June 30, 2021,March 31, 2022, are presented in Table 44.41.
Table 44:41: Components Used to Calculate TLAC and Eligible Unsecured Long-Term Debt Requirements
| | | | | | | | | | | | | | |
TLAC requirement
Greater of: |
| 18.00% of RWAs | | 7.50% of total leverage exposure
(the denominator of the SLR calculation) |
| + | + |
| TLAC buffer (equal to 2.50% of RWAs + method one G-SIB capital surcharge + any countercyclical buffer) | External TLAC leverage buffer
(equal to 2.00% of total leverage exposure) |
| | | | |
Minimum amount of eligible unsecured long-term debt
Greater of: |
| 6.00% of RWAs | | 4.50% of total leverage exposure |
| + |
MethodGreater of method one and method two G-SIB capital surcharge |
| | | | |
The FRB and OCC have proposed amendments to the TLAC and eligible unsecured long-term debt requirements. For information regarding these proposed amendments, see the “Capital Management – Total Loss Absorbing Capacity” section in our 20202021 Form 10-K.
Table 4542 provides our TLAC and eligible unsecured long-term debt and related ratios as of June 30, 2021,March 31, 2022, and December 31, 2020.2021.
Table 45:42: TLAC and Eligible Unsecured Long-Term Debt
| | ($ in millions) | ($ in millions) | | TLAC (1) | | Regulatory Minimum (2) | | Eligible Unsecured Long-term Debt | | Regulatory Minimum | ($ in millions) | | TLAC (1) | | Regulatory Minimum (2) | | Eligible Unsecured Long-term Debt | | Regulatory Minimum |
| | June 30, 2021 | | March 31, 2022 |
| Total eligible amount | Total eligible amount | | $ | 298,496 | | 129,411 | | | Total eligible amount | | 282,311 | | | 125,083 | | |
| | Percentage of RWAs (3) | Percentage of RWAs (3) | | 25.11 | % | | 21.50 | | | 10.89 | | | 8.00 | | Percentage of RWAs (3) | | 22.31 | % | | 21.50 | | | 9.88 | | | 7.50 | |
| Percentage of total leverage exposure | Percentage of total leverage exposure | | 12.98 | | | 9.50 | | | 5.63 | | | 4.50 | | Percentage of total leverage exposure | | 12.33 | | | 9.50 | | | 5.46 | | | 4.50 | |
| | | December 31, 2020 | |
| Total eligible amount | | $ | 307,226 | | 140,703 | | | |
| | Percentage of RWAs (3) | | 25.74 | % | | 22.00 | | | 11.79 | | | 8.00 | | |
| Percentage of total leverage exposure (4) | | 15.64 | | | 9.50 | | | 7.16 | | | 4.50 | | |
|
(1)TLAC ratios are calculated using the CECL transition provision issued by federal banking regulators.
(2)Represents the minimum required to avoid restrictions on capital distributions and discretionary bonus payments.
(3)Our minimum TLAC and eligible unsecured long-term debt requirements are calculated based on the greater of RWAs determined under the Standardized and Advanced Approaches.
(4)Total leverage exposure at December 31, 2020, reflected an interim final rule issued by the FRB that temporarily allowed a bank holding company 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.
OTHER REGULATORY CAPITAL AND LIQUIDITY MATTERS For information regarding the U.S. implementation of the Basel III LCR and NSFR, see the “Risk Management – Asset/ Liability Management – Liquidity Risk and Funding – Liquidity Standards” section in this Report.
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, we currently target a long-term CET1 capital ratio that is 100 basis points above our regulatory requirement plus an incremental buffer of 25 to 50 basis points. 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 requirements for our capital ratios, planned capital actions, changes in our risk profile and other factors.
The FRB capital plan rule establishes capital planning and other requirements that govern capital distributions, including dividends and share repurchases, by certain BHCs, including Wells Fargo. The FRB assesses, among other things, the overall financial condition, risk profile, and capital adequacy of BHCs when evaluating their capital plans.
On March 25, 2021, We submitted our 2022 capital plan to the FRB announced that it was extending measures it previously announced limitingprior to the April 5, 2022, deadline.
As part of the annual Comprehensive Capital Analysis and Review (CCAR), the FRB generated a supervisory stress test. The FRB is expected to review the supervisory stress test results as required under the Dodd-Frank Act using a common set of capital actions for all large BHCs including Wells Fargo, from making anyand is also expected to review the Company's proposed 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.actions. The FRB generally authorized BHCs to (i) provided that the BHC does not increase the amount ofhas indicated it will publish its common stock dividends to
be larger than the level paid in second quarter 2020, pay common stock dividends and make share repurchases that, in the aggregate, do not exceed an amount equal to the average of the BHC’s net income for the four preceding calendar quarters; (ii) make share repurchases that equal the amount of share issuances related to expensed employee compensation; and (iii) redeem and make scheduled payments on additional tier 1 and tier 2 capital instruments. These limitations on capital distributions ended on June 30, 2021.
Concurrently with CCAR, federalFederal 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.
In June 2021, the Company completed the 2021 CCAR stress test process. On July 27, 2021, the Board approved an increase to the Company's third quarter 2021 common stock dividend to $0.20 per share. Additionally, our capital plan includes gross common share repurchases of approximately $18 billion for the four-quarter period beginning third quarter 2021 through second quarter 2022.
Capital Management (continued)
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. 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 under the FRB’s capital plan rule. Due to the various factors that may impact 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.
At June 30, 2021,March 31, 2022, we had remaining Board authority to repurchase approximately 615251 million shares, subject to regulatory and legal conditions. For additional information about share repurchases during secondfirst quarter 2021,2022, see Part II, Item 2 in this Report.
The U.S. financial services industry is subject to significant regulation and regulatory oversight initiatives. This regulation and oversight may continue to impact how U.S. financial services companies conduct business and may continue to result in increased regulatory compliance costs.
For a discussion of certain consent orders applicable to the Company, see the “Overview” section in this Report. The following supplements our discussion of 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 20202021 Form 10-K.
“Living Will” RequirementsRegulatory Developments in Response to Climate Change Federal and Related Matters
Rules adopted bystate governments and government agencies have demonstrated increased attention to the FRBimpacts and potential risks associated with climate change. For example, federal banking regulators are reviewing the FDIC under the Dodd-Frank Act require large financial institutions, including Wells Fargo, to prepare and periodically submit resolution plans, also known as “living wills,” that would facilitate their rapid and orderly resolution in the eventimplications of material financial distress or failure. Under the rules, rapid and orderly resolution means a reorganization or liquidation of the covered company under the U.S. Bankruptcy Code that can be accomplished in a reasonable period of time and in a manner that substantially mitigates the risk that failure would have serious adverse effectsclimate change on the financial stability of the United States.States and the identification and management by large banks of climate-related financial risks. In addition, the SEC has proposed rules that would require public companies to the Company’s resolution plan, our national bank subsidiary, Wells Fargo Bank, N.A. (the “Bank”), is also requireddisclose certain climate-related information, including greenhouse gas emissions, climate-related targets and goals, and governance of climate-related risks and relevant risk management processes. The approaches taken by various governments and government agencies can vary significantly, evolve over time, and sometimes conflict. Any current or future rules, regulations, and guidance related to prepareclimate change and periodically submit a resolution plan. If the FRB and/or FDIC determine that our resolution plan has deficiencies, they may impose more stringent capital, leverage or liquidity requirements on us or restrict our growth, activities or operations until we adequately remedy the deficiencies. If the FRB and/or FDIC ultimately determine that we have been unable to remedy any deficiencies, theyits impacts could require us to divestchange certain assetsof our business practices, reduce our revenue and earnings, impose additional costs on us, or operations. On June 29, 2021, we submittedotherwise adversely affect our most recent resolution plan to the FRB and FDIC.
If Wells Fargo were to fail, it may be resolved in a bankruptcy proceeding business operations and/or if certain conditions are met, under the resolution regime created by the Dodd-Frank Act known as the “orderly liquidation authority.” The orderly liquidation authority allows for the appointment of the FDIC as receiver for a systemicallycompetitive position.
important financial institution that is in default or in danger of default if, among other things, the resolution of the institution under the U.S. Bankruptcy Code would have serious adverse effects on financial stability in the United States. If the FDIC is appointed as receiver for Wells Fargo & Company (the “Parent”), then the orderly liquidation authority, rather than the U.S. Bankruptcy Code, would determine the powers of the receiver and the rights and obligations of our security holders. The FDIC’s orderly liquidation authority requires that security holders of a company in receivership bear all losses before U.S. taxpayers are exposed to any losses, and allows the FDIC to disregard the strict priority of creditor claims under the U.S. Bankruptcy Code in certain circumstances.
The strategy described in our most recent resolution plan is a single point of entry strategy, in which the Parent would likely be the only material legal entity to enter resolution proceedings. However, we are not obligated to maintain a single point of entry strategy, and the strategy described in our resolution plan is not binding in the event of an actual resolution of Wells Fargo, whether conducted under the U.S. Bankruptcy Code or by the FDIC under the orderly liquidation authority. The FDIC has announced that a single point of entry strategy may be a desirable strategy under its implementation of the orderly liquidation authority, but not all aspects of how the FDIC might exercise this authority are known and additional rulemaking is possible.
To facilitate the orderly resolution of systemically important financial institutions in case of material distress or failure, federal banking regulations require that institutions, such as Wells Fargo, maintain a minimum amount of equity and unsecured debt to absorb losses and recapitalize operating subsidiaries. Federal banking regulators have also required measures to facilitate the continued operation of operating subsidiaries notwithstanding the failure of their parent companies, such as limitations on parent guarantees, and have issued guidance encouraging institutions to take legally binding measures to provide capital and liquidity resources to certain subsidiaries to facilitate an orderly resolution. In response to the regulators’ guidance and to facilitate the orderly resolution of the Company, on June 28, 2017, the Parent entered into a support agreement, as amended
Regulatory Matters (continued)
and restated on June 26, 2019 (the “Support Agreement”), with WFC Holdings, LLC, an intermediate holding company and subsidiary of the Parent (the “IHC”), the Bank, Wells Fargo Securities, LLC (“WFS”), Wells Fargo Clearing Services, LLC (“WFCS”), and certain other subsidiaries of the Parent designated from time to time as material entities for resolution planning purposes (the “Covered Entities”) or identified from time to time as related support entities in our resolution plan (the “Related Support Entities”). Pursuant to the Support Agreement, the Parent transferred a significant amount of its assets, including the majority of its cash, deposits, liquid securities and intercompany loans (but excluding its equity interests in its subsidiaries and certain other assets), to the IHC and will continue to transfer those types of assets to the IHC from time to time. In the event of our material financial distress or failure, the IHC will be obligated to use the transferred assets to provide capital and/or liquidity to the Bank, WFS, WFCS, and the Covered Entities pursuant to the Support Agreement. Under the Support Agreement, the IHC will also provide funding and liquidity to the Parent through subordinated notes and a committed line of credit, which, together with the issuance of dividends, is expected to provide the Parent, during business as usual operating conditions, with the same access to cash necessary to service its debts, pay dividends, repurchase its shares, and perform its other obligations as it would have had if it had not entered into these arrangements and transferred any assets. If certain liquidity and/or capital metrics fall below defined triggers, or if the Parent’s board of directors authorizes it to file a case under the U.S. Bankruptcy Code, the subordinated notes would be forgiven, the committed line of credit would terminate, and the IHC’s ability to pay dividends to the Parent would be restricted, any of which could materially and adversely impact the Parent’s liquidity and its ability to satisfy its debts and other obligations, and could result in the commencement of bankruptcy proceedings by the Parent at an earlier time than might have otherwise occurred if the Support Agreement were not implemented. The respective obligations under the Support Agreement of the Parent, the IHC, the Bank, and the Related Support Entities are secured pursuant to a related security agreement.
In addition to our resolution plans, we must also prepare and submit to the FRB a recovery plan that identifies a range of options that we may consider during times of idiosyncratic or systemic economic stress to remedy any financial weaknesses and restore market confidence without extraordinary government support. Recovery options include the possible sale, transfer or disposal of assets, securities, loan portfolios or businesses. The Bank must also prepare and submit to the OCC a recovery plan that sets forth the Bank’s plan to remain a going concern when the Bank is experiencing considerable financial or operational stress, but has not yet deteriorated to the point where liquidation or resolution is imminent. If either the FRB or the OCC determines that our recovery plan is deficient, they may impose fines, restrictions on our business or ultimately require us to divest assets.
| | | | | | | | |
5852 | Wells Fargo & Company | |
| | |
| Critical Accounting Policies |
Our significant accounting policies (see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 20202021 Form 10-K) are fundamental to understanding our results of operations and financial condition because they require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results. Six of these policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. These policies govern:
•the allowance for credit losses;
•the valuation of residential MSRs;
•the fair value of financial instruments;
•income taxes;
•liability for contingent litigation losses; and
•goodwill impairment.
Management has discussed these critical accounting policies and the related estimates and judgments with the Board’s Audit Committee. For additional information on these policies, see the “Critical Accounting Policies” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 20202021 Form 10-K.10-K and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report .
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| Current Accounting Developments |
The followingTable 43 provides the significant accounting update hasupdates applicable to us that have been issued by the Financial Accounting Standards Board (FASB) and is applicable to us, but isare not yet effective:
•Accounting Standards Update (ASU or Update) 2018-12 – Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts and subsequent related updates
ASU 2018-12 See the “Current Accounting Developments” section in our 2020 Form 10-K for information on the effective date and our assessment of the expected financial statement impact upon adoption.effective.
Table 43:Current Accounting Developments – Issued Standards | | | | | | | | |
| Description and Effective Date | | 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, effective January 1, 2023, requires market risk benefits (features of insurance contracts that protect the policyholder from other-than-nominal capital market risk and expose the insurer to that risk) to be measured at fair value through earnings with changes in fair value attributable to our own credit risk recognized in other comprehensive income. The Update also requires more frequent updates for insurance assumptions, mandates the use of a standardized discount rate for traditional long-duration contracts, and simplifies the amortization of deferred acquisition costs. | | The most significant impact of adoption relates to reinsurance of variable annuity products for a limited number of our insurance clients. Our reinsurance business is no longer entering into new contracts. These variable annuity products contain guaranteed minimum benefits that require us to make benefit payments for the remainder of the policyholder's life once the account values are exhausted. These guaranteed minimum benefits meet the definition of market risk benefits and will be measured at fair value. The cumulative effect of the difference between fair value and the carrying value upon adoption of the Update, net of income tax adjustments and excluding the impact of our own credit risk, will be recognized in the opening balance of retained earnings in the earliest period presented and will affect our regulatory capital calculations. At March 31, 2022, our estimated liability related to these guaranteed minimum benefits was approximately $500 million and was associated with approximately $12.0 billion of policyholder account values. We expect future earnings volatility from changes in the fair value of market risk benefits, which are sensitive to changes in equity and fixed income markets, as well as policyholder behavior and changes in mortality assumptions. We plan to economically hedge the market volatility, where feasible. Changes in the accounting for the liability of future policy benefits for traditional long-duration contracts and deferred acquisition costs are not expected to be material. |
ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method |
| The Update, effective January 1, 2023 (with early adoption permitted), establishes the portfolio layer method, which expands an entity’s ability to achieve fair value hedge accounting for interest rate risk hedges of closed portfolios of financial assets. The Update also provides guidance on the accounting for hedged item basis adjustments under the portfolio layer method. | | The Update improves our ability to use derivatives to hedge interest rate risk exposures associated with portfolios of financial assets, such as fixed-rate available-for-sale debt securities and loans. The Update allows us to hedge a larger proportion of these portfolios by expanding the number and type of derivatives permitted as eligible hedges, as well as by increasing the scope of eligible hedged items to include both prepayable and nonprepayable assets.
Upon adoption, any election to designate portfolio layer method hedges is applied prospectively. Additionally, the Update permits a one-time reclassification of debt securities from held-to-maturity to available-for-sale classification as long as the securities are designated in a portfolio layer method hedge no later than 30 days after the adoption date. We are currently evaluating the impact of the Update on our consolidated financial statements. |
ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures |
| The Update, effective January 1, 2023 (with early adoption permitted), eliminates the accounting guidance for troubled debt restructurings (TDRs) by creditors and introduces new required disclosures for loan modifications made to borrowers experiencing financial difficulty. The Update also amends the guidance for vintage disclosures to require disclosure of current period gross charge-offs by year of origination. | | The Update will impact the measurement of the allowance for credit losses (ACL) and require new disclosures related to loan modifications and credit quality, specifically the Update: •Eliminates the requirement to use a discounted cash flow (DCF) approach to measure the ACL for certain TDRs and instead allows for the use of an expected loss approach for all loans. Upon adoption, we expect to discontinue using a DCF approach for consumer loans and retain a DCF approach for certain nonperforming commercial loans. Any changes to the ACL as a result of the change in TDR measurement will be included as an adjustment to opening retained earnings as of the beginning of the earliest period presented. •Requires new disclosures for modifications made to borrowers experiencing financial difficulty in the form of principal forgiveness, interest rate reduction, other than insignificant payment delay, term extension, or a combination of these modifications. •Requires us to provide current period gross charge-offs by origination date (vintage) in our credit quality disclosures on a prospective basis beginning as of the adoption date. |
Other Accounting Developments
The following Updates are applicable to us but are not expected to have a material impact on our consolidated financial statements:
•ASU 2020-062021-08 – Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)Business Combinations (Topic 805): AccountingAccounting for Convertible InstrumentsContract Assets and Contract Liabilities from Contracts in an Entity’s Own Equitywith Customers
•ASU 2021-052021-10 – LeasesGovernment Assistance (Topic 842)832): Lessors – Certain Leases with Variable Lease PaymentsDisclosures by Business Entities About Government Assistance
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| 54 | Wells Fargo & Company | 59 |
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| Forward-Looking Statements |
This document contains forward-looking statements. In addition, we may make forward-looking statements in our other documents filed or furnished with the Securities and Exchange Commission, and our management may make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “target,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar references to future periods. In particular, forward-looking statements include, but are not limited to, statements we make about: (i) the future operating or financial performance of the Company, including our outlook for future growth; (ii) our noninterest expense and efficiency ratio; (iii) future credit quality and performance, including our expectations regarding future loan losses, our allowance for credit losses, and the economic scenarios considered to develop the allowance; (iv) our expectations regarding net interest income and net interest margin; (v) loan growth or the reduction or mitigation of risk in our loan portfolios; (vi) future capital or liquidity levels, ratios or targets; (vii) the performance of our mortgage business and any related exposures; (viii) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (ix) future common stock dividends, common share repurchases and other uses of capital; (x) our targeted range for return on assets, return on equity, and return on tangible common equity; (xi) expectations regarding our effective income tax rate; (xii) the outcome of contingencies, such as legal proceedings; (xiii) environmental, social and governance related goals or commitments; and (xiv) the Company’s plans, objectives and strategies.
Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:
•current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters (including the conflict in Ukraine), 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;
•current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses,
including rules and regulations relating to bank products and financial services;
•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 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 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, 2020.2021.
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
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60 | Wells Fargo & Company | 55 |
Forward-Looking Statements (continued)
financial condition of the Company, market conditions, capital requirements (including under Basel capital standards), common stock issuance requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company’s Board of Directors, and may be subject to regulatory approval or conditions.
For 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, 2020,2021, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.1
Any forward-looking statement made by us speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
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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.
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| 56 | Wells Fargo & Company | 61 |
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 20202021 Form 10-K.
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62 | Wells Fargo & Company | 57 |
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| Disclosure Controls and Procedures |
The Company’s management evaluated the effectiveness, as of June 30, 2021,March 31, 2022, of the Company’s disclosure controls and procedures. The Company’s chief executive officer and chief financial officer participated in the evaluation. Based on this evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2021.March 31, 2022.
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| 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 secondfirst quarter 20212022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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| 58 | Wells Fargo & Company | 63 |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Wells Fargo & Company and Subsidiaries |
| Consolidated Statement of Income (Unaudited) |
| Quarter ended June 30, | | Six months ended June 30, |
| (in millions, except per share amounts) | 2021 | | 2020 | | 2021 | | 2020 | | |
| Interest income | | | | | | | | | |
| Debt securities | $ | 2,199 | | | 2,946 | | | $ | 4,511 | | | 6,418 | | | |
| Loans held for sale | 193 | | | 237 | | | 524 | | | 446 | | | |
| Loans (1) | 7,095 | | | 8,460 | | | 14,296 | | | 18,543 | | | |
| Equity securities | 132 | | | 116 | | | 269 | | | 322 | | | |
| Other interest income | 74 | | | 54 | | | 139 | | | 829 | | | |
| Total interest income | 9,693 | | | 11,813 | | | 19,739 | | | 26,558 | | | |
| Interest expense | | | | | | | | | |
| Deposits | 92 | | | 585 | | | 204 | | | 2,327 | | | |
| Short-term borrowings | (12) | | | (17) | | | (21) | | | 274 | | | |
| Long-term debt | 712 | | | 1,237 | | | 1,738 | | | 2,477 | | | |
| Other interest expense | 101 | | | 116 | | | 210 | | | 258 | | | |
| Total interest expense | 893 | | | 1,921 | | | 2,131 | | | 5,336 | | | |
| Net interest income | 8,800 | | | 9,892 | | | 17,608 | | | 21,222 | | | |
| Noninterest income | | | | | | | | | |
| Deposit and lending-related fees | 1,704 | | | 1,465 | | | 3,320 | | | 3,262 | | | |
| Investment advisory and other asset-based fees (2) | 2,794 | | | 2,254 | | | 5,550 | | | 4,760 | | | |
| Commissions and brokerage services fees (2) | 580 | | | 550 | | | 1,216 | | | 1,227 | | | |
| Investment banking fees | 570 | | | 547 | | | 1,138 | | | 938 | | | |
| Card fees | 1,077 | | | 797 | | | 2,026 | | | 1,689 | | | |
| Mortgage banking | 1,336 | | | 317 | | | 2,662 | | | 696 | | | |
| Net gains on trading and securities | 2,717 | | | 1,552 | | | 3,608 | | | 452 | | | |
| Other (1) | 692 | | | 912 | | | 1,674 | | | 2,213 | | | |
| Total noninterest income | 11,470 | | | 8,394 | | | 21,194 | | | 15,237 | | | |
| Total revenue | 20,270 | | | 18,286 | | | 38,802 | | | 36,459 | | | |
| Provision for credit losses | (1,260) | | | 9,534 | | | (2,308) | | | 13,539 | | | |
| Noninterest expense | | | | | | | | | |
| Personnel | 8,818 | | | 8,916 | | | 18,376 | | | 17,239 | | | |
| Technology, telecommunications and equipment | 815 | | | 672 | | | 1,659 | | | 1,470 | | | |
| Occupancy | 735 | | | 871 | | | 1,505 | | | 1,586 | | | |
| Operating losses | 303 | | | 1,219 | | | 516 | | | 1,683 | | | |
| Professional and outside services | 1,450 | | | 1,676 | | | 2,838 | | | 3,282 | | | |
| Advertising and promotion | 132 | | | 137 | | | 222 | | | 318 | | | |
| Restructuring charges | (4) | | | 0 | | | 9 | | | 0 | | | |
| Other | 1,092 | | | 1,060 | | | 2,205 | | | 2,021 | | | |
| Total noninterest expense | 13,341 | | | 14,551 | | | 27,330 | | | 27,599 | | | |
| Income (loss) before income tax expense | 8,189 | | | (5,799) | | | 13,780 | | | (4,679) | | | |
| Income tax expense (benefit) (1) | 1,445 | | | (2,001) | | | 2,346 | | | (1,648) | | | |
| Net income (loss) before noncontrolling interests | 6,744 | | | (3,798) | | | 11,434 | | | (3,031) | | | |
| Less: Net income (loss) from noncontrolling interests | 704 | | | 48 | | | 758 | | | (101) | | | |
| Wells Fargo net income (loss) (1) | $ | 6,040 | | | (3,846) | | | $ | 10,676 | | | (2,930) | | | |
| Less: Preferred stock dividends and other | 297 | | | 314 | | | 677 | | | 926 | | | |
| Wells Fargo net income (loss) applicable to common stock (1) | $ | 5,743 | | | (4,160) | | | $ | 9,999 | | | (3,856) | | | |
| Per share information (1) | | | | | | | | | |
| Earnings (loss) per common share | $ | 1.39 | | | (1.01) | | | $ | 2.42 | | | (0.94) | | | |
| Diluted earnings (loss) per common share | 1.38 | | | (1.01) | | | 2.40 | | | (0.94) | | | |
| Average common shares outstanding | 4,124.6 | | | 4,105.5 | | | 4,132.9 | | | 4,105.2 | | | |
| Diluted average common shares outstanding | 4,156.1 | | | 4,105.5 | | | 4,164.6 | | | 4,105.2 | | | |
(1)In second quarter 2021, we elected to change our accounting method for low-income housing tax credit investments and elected to change the presentation of investment tax credits related to solar energy investments. Prior period balances have been revised to conform with the current period presentation. For additional information, see Note 1 (Summary of Significant Accounting Policies).
(2)In first quarter 2021, trust and investment management fees and asset-based brokerage fees were combined into a single line item for investment advisory and other asset-based fees, and brokerage commissions and other brokerage services fees were combined into a single line item for commissions and brokerage services fees. Prior period balances have been revised to conform with the current period presentation. | | | | | | | | | | | | | | | | | |
| Wells Fargo & Company and Subsidiaries |
| Consolidated Statement of Income (Unaudited) |
| | | Quarter ended March 31, |
| (in millions, except per share amounts) | | | | | 2022 | | 2021 | | |
| Interest income | | | | | | | | | |
| Debt securities | | | | | $ | 2,563 | | | 2,312 | | | |
| Loans held for sale | | | | | 140 | | | 331 | | | |
| Loans | | | | | 7,218 | | | 7,201 | | | |
| Equity securities | | | | | 170 | | | 137 | | | |
| Other interest income | | | | | 90 | | | 65 | | | |
| Total interest income | | | | | 10,181 | | | 10,046 | | | |
| Interest expense | | | | | | | | | |
| Deposits | | | | | 83 | | | 112 | | | |
| Short-term borrowings | | | | | (14) | | | (9) | | | |
| Long-term debt | | | | | 761 | | | 1,026 | | | |
| Other interest expense | | | | | 130 | | | 109 | | | |
| Total interest expense | | | | | 960 | | | 1,238 | | | |
| Net interest income | | | | | 9,221 | | | 8,808 | | | |
| Noninterest income | | | | | | | | | |
| Deposit and lending-related fees | | | | | 1,815 | | | 1,616 | | | |
| Investment advisory and other asset-based fees | | | | | 2,498 | | | 2,756 | | | |
| Commissions and brokerage services fees | | | | | 537 | | | 636 | | | |
| Investment banking fees | | | | | 447 | | | 568 | | | |
| Card fees | | | | | 1,029 | | | 949 | | | |
| Mortgage banking | | | | | 693 | | | 1,326 | | | |
| Net gains from trading and securities | | | | | 796 | | | 891 | | | |
| Other | | | | | 556 | | | 982 | | | |
| Total noninterest income | | | | | 8,371 | | | 9,724 | | | |
| Total revenue | | | | | 17,592 | | | 18,532 | | | |
| Provision for credit losses | | | | | (787) | | | (1,048) | | | |
| Noninterest expense | | | | | | | | | |
| Personnel | | | | | 9,271 | | | 9,558 | | | |
| Technology, telecommunications and equipment | | | | | 876 | | | 844 | | | |
| Occupancy | | | | | 722 | | | 770 | | | |
| Operating losses | | | | | 673 | | | 213 | | | |
| Professional and outside services | | | | | 1,286 | | | 1,388 | | | |
| Advertising and promotion | | | | | 99 | | | 90 | | | |
| Restructuring charges | | | | | 5 | | | 13 | | | |
| Other | | | | | 938 | | | 1,113 | | | |
| Total noninterest expense | | | | | 13,870 | | | 13,989 | | | |
| Income before income tax expense | | | | | 4,509 | | | 5,591 | | | |
| Income tax expense | | | | | 707 | | | 901 | | | |
| Net income before noncontrolling interests | | | | | 3,802 | | | 4,690 | | | |
| Less: Net income from noncontrolling interests | | | | | 131 | | | 54 | | | |
| Wells Fargo net income | | | | | $ | 3,671 | | | 4,636 | | | |
| Less: Preferred stock dividends and other | | | | | 278 | | | 380 | | | |
| Wells Fargo net income applicable to common stock | | | | | $ | 3,393 | | | 4,256 | | | |
| Per share information | | | | | | | | | |
| Earnings per common share | | | | | $ | 0.89 | | | 1.03 | | | |
| Diluted earnings per common share | | | | | 0.88 | | | 1.02 | | | |
| Average common shares outstanding | | | | | 3,831.1 | | | 4,141.3 | | | |
| Diluted average common shares outstanding | | | | | 3,868.9 | | | 4,171.0 | | | |
The accompanying notes are an integral part of these statements.
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64 | Wells Fargo & Company | 59 |
| | | | | | | | | | | | | | | | | |
| Wells Fargo & Company and Subsidiaries |
| Consolidated Statement of Comprehensive Income (Unaudited) |
| | | Quarter ended March 31, | | |
| | | | | |
| (in millions) | | | | | 2022 | | 2021 | | |
| Net income before noncontrolling interests | | | | | $ | 3,802 | | | 4,690 | | | |
| Other comprehensive income (loss), after tax: | | | | | | | | | |
| Net change in debt securities | | | | | (5,148) | | | (1,525) | | | |
| Net change in derivatives and hedging activities | | | | | 20 | | | 36 | | | |
| Defined benefit plans adjustments | | | | | 72 | | | 35 | | | |
| | | | | | | | | |
| Other | | | | | (9) | | | 11 | | | |
| Other comprehensive loss, after tax | | | | | (5,065) | | | (1,443) | | | |
| Total comprehensive income (loss) before noncontrolling interests | | | | | (1,263) | | | 3,247 | | | |
| Less: Other comprehensive income from noncontrolling interests | | | | | — | | | 1 | | | |
| Less: Net income from noncontrolling interests | | | | | 131 | | | 54 | | | |
| Wells Fargo comprehensive income (loss) | | | | | $ | (1,394) | | | 3,192 | | | |
The accompanying notes are an integral part of these statements.
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| Wells Fargo & Company and Subsidiaries |
| Consolidated Statement of Comprehensive Income (Unaudited) |
| Quarter ended June 30, | | Six months ended June 30, |
| | | | | |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 | | |
| Net income (loss) before noncontrolling interests (1) | $ | 6,744 | | | (3,798) | | | 11,434 | | | (3,031) | | | |
| Other comprehensive income (loss), after tax: | | | | | | | | | |
| Net change in debt securities | 304 | | | 1,143 | | | (1,221) | | | 915 | | | |
| Net change in derivatives and hedging activities | 27 | | | 3 | | | 63 | | | 140 | | | |
| Defined benefit plans adjustments | 334 | | | (431) | | | 369 | | | (401) | | | |
| | | | | | | | | |
| Net change in foreign currency translation adjustments | 22 | | | 51 | | | 33 | | | (142) | | | |
| Other comprehensive income (loss), after tax | 687 | | | 766 | | | (756) | | | 512 | | | |
| Total comprehensive income (loss) before noncontrolling interests (1) | 7,431 | | | (3,032) | | | 10,678 | | | (2,519) | | | |
| Less: Other comprehensive income (loss) from noncontrolling interests | 1 | | | 0 | | | 2 | | | (1) | | | |
| Less: Net income (loss) from noncontrolling interests | 704 | | | 48 | | | 758 | | | (101) | | | |
| Wells Fargo comprehensive income (loss) (1) | $ | 6,726 | | | (3,080) | | | 9,918 | | | (2,417) | | | |
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| Wells Fargo & Company and Subsidiaries |
| Consolidated Balance Sheet |
| (in millions, except shares) | Mar 31,
2022 | | Dec 31,
2021 |
| Assets | (Unaudited) | | |
| Cash and due from banks | $ | 27,454 | | | 24,616 | |
| Interest-earning deposits with banks | 174,441 | | | 209,614 | |
| Total cash, cash equivalents, and restricted cash | 201,895 | | | 234,230 | |
| Federal funds sold and securities purchased under resale agreements | 67,764 | | | 66,223 | |
| Debt securities: | | | |
| Trading, at fair value | 86,672 | | | 88,265 | |
| Available-for-sale, at fair value (includes amortized cost of $173,118 and $175,463, net of allowance for credit losses) | 168,436 | | | 177,244 | |
| Held-to-maturity, at amortized cost, net of allowance for credit losses (fair value $264,641 and $272,386) | 280,808 | | | 272,022 | |
| Loans held for sale (includes $13,155 and $15,895 carried at fair value) | 19,824 | | | 23,617 | |
| Loans | 911,807 | | | 895,394 | |
| Allowance for loan losses | (11,504) | | | (12,490) | |
| Net loans | 900,303 | | | 882,904 | |
| Mortgage servicing rights (includes $8,511 and $6,920 carried at fair value) | 9,753 | | | 8,189 | |
| Premises and equipment, net | 8,473 | | | 8,571 | |
| Goodwill | 25,181 | | | 25,180 | |
| Derivative assets | 27,365 | | | 21,478 | |
| Equity securities (includes $36,362 and $39,098 carried at fair value) | 70,755 | | | 72,886 | |
| Other assets | 72,480 | | | 67,259 | |
| Total assets (1) | $ | 1,939,709 | | | 1,948,068 | |
| Liabilities | | | |
| Noninterest-bearing deposits | $ | 529,957 | | | 527,748 | |
| Interest-bearing deposits | 951,397 | | | 954,731 | |
| Total deposits | 1,481,354 | | | 1,482,479 | |
| Short-term borrowings (includes $168 and $0 carried at fair value) | 33,601 | | | 34,409 | |
| Derivative liabilities | 15,499 | | | 9,424 | |
| Accrued expenses and other liabilities (includes $26,145 and $20,685 carried at fair value) | 74,229 | | | 70,957 | |
| Long-term debt (includes $69 and $0 carried at fair value) | 153,337 | | | 160,689 | |
| Total liabilities (2) | 1,758,020 | | | 1,757,958 | |
| Equity | | | |
| Wells Fargo stockholders’ equity: | | | |
| Preferred stock | 20,057 | | | 20,057 | |
| 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 | 59,899 | | | 60,196 | |
| Retained earnings | 182,623 | | | 180,322 | |
| Cumulative other comprehensive income (loss) | (6,767) | | | (1,702) | |
| Treasury stock – 1,691,916,667 shares and 1,596,009,977 shares | (85,059) | | | (79,757) | |
| Unearned ESOP shares | (646) | | | (646) | |
| Total Wells Fargo stockholders’ equity | 179,243 | | | 187,606 | |
| Noncontrolling interests | 2,446 | | | 2,504 | |
| Total equity | 181,689 | | | 190,110 | |
| Total liabilities and equity | $ | 1,939,709 | | | 1,948,068 | |
(1)In second quarterOur consolidated assets at March 31, 2022 and December 31, 2021, we electedincluded the following assets of certain variable interest entities (VIEs) that can only be used to change our accounting methodsettle the liabilities of those VIEs: Debt securities, $71 million and $71 million; Loans, $4.9 billion and $4.5 billion; All other assets, $229 million and $234 million; and Total assets, $5.2 billion and $4.8 billion, respectively.
(2)Our consolidated liabilities at March 31, 2022 and December 31, 2021, include the following VIE liabilities for low-income housing tax credit investmentswhich the VIE creditors do not have recourse to Wells Fargo: Long-term debt, $133 million and elected to change the presentation of investment tax credits related to solar energy investments. Prior period balances have been revised to conform with the current period presentation. For additional information, see Note 1 (Summary of Significant Accounting Policies).$149 million ; All other liabilities, $265 million and $259 million; and Total liabilities, $398 million and $408 million, respectively.
The accompanying notes are an integral part of these statements.
| | | | | | | | |
| Wells Fargo & Company | 6561 |
| | | | | | | | | | | |
| Wells Fargo & Company and Subsidiaries |
| Consolidated Balance Sheet |
| (in millions, except shares) | Jun 30,
2021 | | Dec 31,
2020 |
| Assets | (Unaudited) | | |
| Cash and due from banks | $ | 25,304 | | | 28,236 | |
| Interest-earning deposits with banks | 248,869 | | | 236,376 | |
| Total cash, cash equivalents, and restricted cash | 274,173 | | | 264,612 | |
| Federal funds sold and securities purchased under resale agreements | 70,149 | | | 65,672 | |
| Debt securities: | | | |
| Trading, at fair value | 82,727 | | | 75,095 | |
| Available-for-sale, at fair value (includes amortized cost of $186,309 and $215,533, net of allowance for credit losses) | 189,897 | | | 220,392 | |
| Held-to-maturity, at amortized cost, net of allowance for credit losses (fair value $264,087 and $212,307) | 260,941 | | | 205,720 | |
| Loans held for sale (includes $18,894 and $18,806 carried at fair value) | 25,594 | | | 36,384 | |
| Loans | 852,300 | | | 887,637 | |
| Allowance for loan losses | (15,148) | | | (18,516) | |
| Net loans | 837,152 | | | 869,121 | |
| Mortgage servicing rights (includes $6,717 and $6,125 carried at fair value) | 8,009 | | | 7,437 | |
| Premises and equipment, net | 8,745 | | | 8,895 | |
| Goodwill | 26,194 | | | 26,392 | |
| Derivative assets | 25,415 | | | 25,846 | |
| Equity securities (includes $35,331 and $34,009 carried at fair value) (1) | 64,547 | | | 60,008 | |
| Other assets | 72,453 | | | 87,337 | |
| Total assets (2) | $ | 1,945,996 | | | 1,952,911 | |
| Liabilities | | | |
| Noninterest-bearing deposits | $ | 504,108 | | | 467,068 | |
| Interest-bearing deposits | 936,364 | | | 937,313 | |
| Total deposits | 1,440,472 | | | 1,404,381 | |
| Short-term borrowings | 45,635 | | | 58,999 | |
| Derivative liabilities | 14,551 | | | 16,509 | |
| Accrued expenses and other liabilities (includes $22,043 and $22,441 carried at fair value) (1) | 72,555 | | | 74,360 | |
| Long-term debt | 179,656 | | | 212,950 | |
| Total liabilities (3) | 1,752,869 | | | 1,767,199 | |
| Equity | | | |
| Wells Fargo stockholders’ equity: | | | |
| Preferred stock | 20,820 | | | 21,136 | |
| 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 | 60,018 | | | 60,197 | |
| Retained earnings (1) | 171,765 | | | 162,683 | |
| Cumulative other comprehensive income (loss) | (564) | | | 194 | |
| Treasury stock – 1,373,813,200 shares and 1,337,799,931 shares | (69,038) | | | (67,791) | |
| Unearned ESOP shares | (875) | | | (875) | |
| Total Wells Fargo stockholders’ equity | 191,262 | | | 184,680 | |
| Noncontrolling interests | 1,865 | | | 1,032 | |
| Total equity | 193,127 | | | 185,712 | |
| Total liabilities and equity | $ | 1,945,996 | | | 1,952,911 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Wells Fargo & Company and Subsidiaries | | | | | | | | | | | | | | | | |
| Consolidated Statement of Changes in Equity (Unaudited) | | | | | | | | | | |
| Wells Fargo stockholders’ equity | | | | | | |
| Preferred stock | | Common stock | | | | | | | | | | | | | | | | |
| ($ and shares in millions) | Shares | | Amount | | Shares | | Amount | | Additional
paid-in
capital | | Retained
earnings | | Cumulative
other
comprehensive
income (loss) | | Treasury
stock | | Unearned
ESOP
shares | | | | Noncontrolling
interests | | Total
equity |
| Balance December 31, 2021 | 5.3 | | | $ | 20,057 | | | 3,885.8 | | | $ | 9,136 | | | 60,196 | | | 180,322 | | | (1,702) | | | (79,757) | | | (646) | | | | | 2,504 | | | 190,110 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | 3,671 | | | | | | | | | | | 131 | | | 3,802 | |
Other comprehensive loss, net of tax | | | | | | | | | | | | | (5,065) | | | | | | | | | — | | | (5,065) | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | | (189) | | | (189) | |
| Common stock issued | | | | | 14.2 | | | | | — | | | (117) | | | | | 697 | | | | | | | | | 580 | |
| Common stock repurchased | | | | | (110.1) | | | | | | | | | | | (6,018) | | | | | | | | | (6,018) | |
| Preferred stock issued | — | | | — | | | | | | | — | | | | | | | | | | | | | | | — | |
| Preferred stock redeemed | — | | | — | | | | | | | — | | | — | | | | | | | | | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Common stock dividends | | | | | | | | | 16 | | | (975) | | | | | | | | | | | | | (959) | |
| Preferred stock dividends | | | | | | | | | | | (278) | | | | | | | | | | | | | (278) | |
| Stock-based compensation | | | | | | | | | 494 | | | | | | | | | | | | | | | 494 | |
| Net change in deferred compensation and related plans | | | | | | | | | (807) | | | | | | | 19 | | | | | | | | | (788) | |
| Net change | — | | | — | | | (95.9) | | | — | | | (297) | | | 2,301 | | | (5,065) | | | (5,302) | | | — | | | | | (58) | | | (8,421) | |
| Balance March 31, 2022 | 5.3 | | | $ | 20,057 | | | 3,789.9 | | | $ | 9,136 | | | 59,899 | | | 182,623 | | | (6,767) | | | (85,059) | | | (646) | | | | | 2,446 | | | 181,689 | |
| Balance December 31, 2020 | 5.5 | | | $ | 21,136 | | | 4,144.0 | | | $ | 9,136 | | | 60,197 | | | 162,683 | | | 194 | | | (67,791) | | | (875) | | | | | 1,032 | | | 185,712 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | 4,636 | | | | | | | | | | | 54 | | | 4,690 | |
Other comprehensive income (loss), net of tax | | | | | | | | | | | | | (1,444) | | | | | | | | | 1 | | | (1,443) | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | | 43 | | | 43 | |
| Common stock issued | | | | | 14.3 | | | | | — | | | (61) | | | | | 785 | | | | | | | | | 724 | |
| Common stock repurchased | | | | | (17.2) | | | | | | | | | | | (596) | | | | | | | | | (596) | |
| Preferred stock issued | 0.2 | | | 4,560 | | | | | | | (31) | | | | | | | | | | | | | | | 4,529 | |
| Preferred stock redeemed (1) | (0.1) | | | (4,526) | | | | | | | 44 | | | (44) | | | | | | | | | | | | | (4,526) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Common stock dividends | | | | | | | | | 6 | | | (420) | | | | | | | | | | | | | (414) | |
| Preferred stock dividends | | | | | | | | | | | (336) | | | | | | | | | | | | | (336) | |
| Stock-based compensation | | | | | | | | | 498 | | | | | | | | | | | | | | | 498 | |
| Net change in deferred compensation and related plans | | | | | | | | | (860) | | | | | | | 13 | | | | | | | | | (847) | |
| Net change | 0.1 | | | 34 | | | (2.9) | | | — | | | (343) | | | 3,775 | | | (1,444) | | | 202 | | | — | | | | | 98 | | | 2,322 | |
| Balance March 31, 2021 | 5.6 | | | $ | 21,170 | | | 4,141.1 | | | $ | 9,136 | | | 59,854 | | | 166,458 | | | (1,250) | | | (67,589) | | | (875) | | | | | 1,130 | | | 188,034 | |
(1)In secondRepresents the impact of the redemption of Preferred Stock, Series I, Series P and Series W, and partial redemption of Preferred Stock, Series N, in first quarter 2021, we elected to change our accounting method for low-income housing tax credit investments and elected to change the presentation of investment tax credits related to solar energy investments. Prior period balances have been revised to conform with the current period presentation. For additional information, see Note 1 (Summary of Significant Accounting Policies).
(2)Our consolidated assets at June 30, 2021, and December 31, 2020, included the following assets of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs: Debt securities, $518 million and $967 million; Loans, $4.1 billion and $10.9 billion; All other assets, $334 million and $310 million; and Total assets, $4.9 billion and $12.1 billion, respectively.
(3)Our consolidated liabilities at June 30, 2021, and December 31, 2020, include the following VIE liabilities for which the VIE creditors do not have recourse to Wells Fargo: Long-term debt, $178 million and $203 million; All other liabilities, $587 million and $900 million; and Total liabilities, $765 million and $1.1 billion, respectively.2021.
The accompanying notes are an integral part of these statements.
| | | | | | | | |
6662 | Wells Fargo & Company | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Wells Fargo & Company and Subsidiaries | | | | | | | | | | | | | | | | |
| Consolidated Statement of Changes in Equity – Quarter ended June 30 (Unaudited) | | | | | | | | | | |
| Wells Fargo stockholders’ equity | | | | | | |
| Preferred stock | | Common stock | | | | | | | | | | | | | | | | |
| ($ and shares in millions) | Shares | | Amount | | Shares | | Amount | | Additional
paid-in
capital | | Retained
earnings | | Cumulative
other
comprehensive
income (loss) | | Treasury
stock | | Unearned
ESOP
shares | | | | Noncontrolling
interests | | Total
equity |
| Balance March 31, 2021 (1) | 5.6 | | | $ | 21,170 | | | 4,141.1 | | | $ | 9,136 | | | 59,854 | | | 166,458 | | | (1,250) | | | (67,589) | | | (875) | | | | | 1,130 | | | 188,034 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | 6,040 | | | | | | | | | | | 704 | | | 6,744 | |
Other comprehensive income (loss), net of tax | | | | | | | | | | | | | 686 | | | | | | | | | 1 | | | 687 | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | | 30 | | | 30 | |
| Common stock issued | | | | | 2.2 | | | | | 0 | | | (20) | | | | | 115 | | | | | | | | | 95 | |
| Common stock repurchased | | | | | (35.3) | | | | | | | | | | | (1,565) | | | | | | | | | (1,565) | |
| Preferred stock redeemed (2) | 0 | | | (350) | | | | | | | 4 | | | (4) | | | | | | | | | | | | | (350) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Preferred stock released by ESOP | | | | | | | | | 0 | | | | | | | | | 0 | | | | | | | 0 | |
Preferred stock converted to common shares | 0 | | | 0 | | | 0 | | | | | 0 | | | | | | | 0 | | | | | | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Common stock dividends | | | | | | | | | 4 | | | (416) | | | | | | | | | | | | | (412) | |
| Preferred stock dividends | | | | | | | | | | | (293) | | | | | | | | | | | | | (293) | |
Stock incentive compensation expense | | | | | | | | | 226 | | | | | | | | | | | | | | | 226 | |
| Net change in deferred compensation and related plans | | | | | | | | | (70) | | | | | | | 1 | | | | | | | | | (69) | |
| Net change | 0 | | | (350) | | | (33.1) | | | 0 | | | 164 | | | 5,307 | | | 686 | | | (1,449) | | | 0 | | | | | 735 | | | 5,093 | |
| Balance June 30, 2021 | 5.6 | | | $ | 20,820 | | | 4,108.0 | | | $ | 9,136 | | | 60,018 | | | 171,765 | | | (564) | | | (69,038) | | | (875) | | | | | 1,865 | | | 193,127 | |
| Balance March 31, 2020 (1) | 5.7 | | | $ | 21,347 | | | 4,096.4 | | | $ | 9,136 | | | 59,849 | | | 165,288 | | | (1,564) | | | (70,215) | | | (1,143) | | | | | 612 | | | 183,310 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) (1) | | | | | | | | | | | (3,846) | | | | | | | | | | | 48 | | | (3,798) | |
Other comprehensive income (loss), net of tax | | | | | | | | | | | | | 766 | | | | | | | | | 0 | | | 766 | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | | 75 | | | 75 | |
| Common stock issued | | | | | 13.5 | | | | | 224 | | | (549) | | | | | 692 | | | | | | | | | 367 | |
| Common stock repurchased | | | | | 0 | | | | | | | | | | | (2) | | | | | | | | | (2) | |
| Preferred stock redeemed | 0 | | | 0 | | | | | | | 0 | | | 0 | | | | | | | | | | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Preferred stock released by ESOP | | | | | | | | | (19) | | | | | | | | | 268 | | | | | | | 249 | |
Preferred stock converted to common shares | (0.2) | | | (249) | | | 9.7 | | | | | (243) | | | | | | | 492 | | | | | | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Common stock dividends | | | | | | | | | 20 | | | (2,113) | | | | | | | | | | | | | (2,093) | |
| Preferred stock dividends | | | | | | | | | | | (314) | | | | | | | | | | | | | (314) | |
Stock incentive compensation expense | | | | | | | | | 120 | | | | | | | | | | | | | | | 120 | |
| Net change in deferred compensation and related plans | | | | | | | | | (28) | | | | | | | (17) | | | | | | | | | (45) | |
| Net change (1) | (0.2) | | | (249) | | | 23.2 | | | 0 | | | 74 | | | (6,822) | | | 766 | | | 1,165 | | | 268 | | | | | 123 | | | (4,675) | |
| Balance June 30, 2020 (1) | 5.5 | | | $ | 21,098 | | | 4,119.6 | | | $ | 9,136 | | | 59,923 | | | 158,466 | | | (798) | | | (69,050) | | | (875) | | | | | 735 | | | 178,635 | |
| | | | | | | | | | | | | |
| Wells Fargo & Company and Subsidiaries |
| Consolidated Statement of Cash Flows (Unaudited) |
| Quarter ended March 31, |
| (in millions) | 2022 | | 2021 | | |
| Cash flows from operating activities: | | | | | |
| Net income before noncontrolling interests | $ | 3,802 | | | 4,690 | | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Provision for credit losses | (787) | | | (1,048) | | | |
| Changes in fair value of MSRs and LHFS carried at fair value | (891) | | | (1,368) | | | |
| Depreciation, amortization and accretion | 1,791 | | | 2,150 | | | |
| Deferred income tax benefit | (179) | | | 386 | | | |
| Other, net (1) | (6,116) | | | (5,335) | | | |
| Originations and purchases of loans held for sale | (24,206) | | | (45,179) | | | |
| Proceeds from sales of and paydowns on loans originally classified as held for sale | 18,324 | | | 24,757 | | | |
| Net change in: | | | | | |
| Debt and equity securities, held for trading | 11,771 | | | 11,122 | | | |
| Derivative assets and liabilities | (766) | | | (922) | | | |
| Other assets | (5,815) | | | 8,481 | | | |
| Other accrued expenses and liabilities | 3,271 | | | (1,204) | | | |
| Net cash provided (used) by operating activities | 199 | | | (3,470) | | | |
| Cash flows from investing activities: | | | | | |
| Net change in: | | | | | |
| Federal funds sold and securities purchased under resale agreements | (1,541) | | | (13,830) | | | |
| Available-for-sale debt securities: | | | | | |
| Proceeds from sales | 19 | | | 13,367 | | | |
| Prepayments and maturities | 6,876 | | | 21,840 | | | |
| Purchases | (19,195) | | | (36,203) | | | |
| Held-to-maturity debt securities: | | | | | |
| Paydowns and maturities | 8,626 | | | 20,643 | | | |
| Purchases | (2,295) | | | (19,899) | | | |
| Equity securities, not held for trading: | | | | | |
| Proceeds from sales and capital returns | 1,911 | | | 545 | | | |
| Purchases | (1,481) | | | (1,626) | | | |
| Loans: | | | | | |
| Loans originated by banking subsidiaries, net of principal collected | (20,285) | | | 17,447 | | | |
| Proceeds from sales of loans originally classified as held for investment | 4,143 | | | 11,358 | | | |
| Purchases of loans | (100) | | | (50) | | | |
| Principal collected on nonbank entities’ loans | 1,465 | | | 5,265 | | | |
| Loans originated by nonbank entities | (1,219) | | | (3,469) | | | |
| Other, net (1) | 115 | | | 140 | | | |
| Net cash provided (used) by investing activities | (22,961) | | | 15,528 | | | |
| Cash flows from financing activities: | | | | | |
| Net change in: | | | | | |
| Deposits | (1,125) | | | 33,222 | | | |
| Short-term borrowings | (980) | | | (79) | | | |
| Long-term debt: | | | | | |
| Proceeds from issuance | 8,089 | | | 110 | | | |
| Repayment | (7,889) | | | (21,676) | | | |
| Preferred stock: | | | | | |
| Proceeds from issuance | — | | | 4,529 | | | |
| Redeemed | — | | | (4,525) | | | |
| Cash dividends paid | (220) | | | (276) | | | |
| Common stock: | | | | | |
| Repurchased | (6,018) | | | (596) | | | |
| Cash dividends paid | (958) | | | (383) | | | |
| Other, net (1) | (472) | | | (263) | | | |
| Net cash provided (used) by financing activities | (9,573) | | | 10,063 | | | |
| Net change in cash, cash equivalents, and restricted cash | (32,335) | | | 22,121 | | | |
| Cash, cash equivalents, and restricted cash at beginning of period | 234,230 | | | 264,612 | | | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 201,895 | | | 286,733 | | | |
| Supplemental cash flow disclosures: | | | | | |
| Cash paid for interest | $ | 661 | | | 1,091 | | | |
| Cash paid for income taxes, net | 76 | | | 358 | | | |
(1)In second quarter 2021, we elected to change our accounting method for low-income housing tax credit investments and elected to change the presentation of investment tax credits related to solar energy investments. Prior period balances have been revised to conform with the current period presentation. For additional information, see Note 1 (Summary of Significant Accounting Policies).
(2)Represents the impact of the redemption of the remaining Preferred Stock, Series N, in second quarter 2021. For additional information, see Note 16 (Preferred Stock).
The accompanying notes are an integral part of these statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Wells Fargo & Company and Subsidiaries | | | | | | | | | | | | | | | | |
| Consolidated Statement of Changes in Equity – Six months ended June 30 (Unaudited) | | | | | | | | | | |
| Wells Fargo stockholders’ equity | | | | | | |
| Preferred stock | | Common stock | | | | | | | | | | | | | | | | |
| ($ and shares in millions) | Shares | | Amount | | Shares | | Amount | | Additional
paid-in
capital | | Retained
earnings | | Cumulative
other
comprehensive
income (loss) | | Treasury
stock | | Unearned
ESOP
shares | | | | Noncontrolling
interests | | Total
equity |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance December 31, 2020 (1) | 5.5 | | | $ | 21,136 | | | 4,144.0 | | | $ | 9,136 | | | 60,197 | | | 162,683 | | | 194 | | | (67,791) | | | (875) | | | | | 1,032 | | | 185,712 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | 10,676 | | | | | | | | | | | 758 | | | 11,434 | |
Other comprehensive income (loss), net of tax | | | | | | | | | | | | | (758) | | | | | | | | | 2 | | | (756) | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | | 73 | | | 73 | |
| Common stock issued | | | | | 16.5 | | | | | 0 | | | (81) | | | | | 900 | | | | | | | | | 819 | |
| Common stock repurchased | | | | | (52.5) | | | | | | | | | | | (2,161) | | | | | | | | | (2,161) | |
| Preferred stock redeemed (2) | (0.1) | | | (4,876) | | | | | | | 48 | | | (48) | | | | | | | | | | | | | (4,876) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Preferred stock released by ESOP | | | | | | | | | 0 | | | | | | | | | 0 | | | | | | | 0 | |
Preferred stock converted to common shares | 0 | | | 0 | | | 0 | | | | | 0 | | | | | | | 0 | | | | | | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Preferred stock issued | 0.2 | | | 4,560 | | | | | | | (31) | | | | | | | | | | | | | | | 4,529 | |
| Common stock dividends | | | | | | | | | 10 | | | (836) | | | | | | | | | | | | | (826) | |
| Preferred stock dividends | | | | | | | | | | | (629) | | | | | | | | | | | | | (629) | |
Stock incentive compensation expense | | | | | | | | | 724 | | | | | | | | | | | | | | | 724 | |
| Net change in deferred compensation and related plans | | | | | | | | | (930) | | | | | | | 14 | | | | | | | | | (916) | |
| Net change | 0.1 | | | (316) | | | (36.0) | | | 0 | | | (179) | | | 9,082 | | | (758) | | | (1,247) | | | 0 | | | | | 833 | | | 7,415 | |
| Balance June 30, 2021 | 5.6 | | | $ | 20,820 | | | 4,108.0 | | | $ | 9,136 | | | 60,018 | | | 171,765 | | | (564) | | | (69,038) | | | (875) | | | | | 1,865 | | | 193,127 | |
| Balance December 31, 2019 | 7.5 | | | $ | 21,549 | | | 4,134.4 | | | $ | 9,136 | | | 61,049 | | | 166,697 | | | (1,311) | | | (68,831) | | | (1,143) | | | | | 838 | | | 187,984 | |
| Cumulative effect from change in accounting policies (1) | | | | | | | | | | | 708 | | | | | | | | | | | | | 708 | |
| Balance January 1, 2020 (1) | 7.5 | | | 21,549 | | | 4,134.4 | | | 9,136 | | | 61,049 | | | 167,405 | | | (1,311) | | | (68,831) | | | (1,143) | | | | | 838 | | | 188,692 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) (1) | | | | | | | | | | | (2,930) | | | | | | | | | | | (101) | | | (3,031) | |
Other comprehensive income (loss), net of tax | | | | | | | | | | | | | 513 | | | | | | | | | (1) | | | 512 | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | | (1) | | | (1) | |
| Common stock issued | | | | | 50.9 | | | | | 207 | | | (857) | | | | | 2,694 | | | | | | | | | 2,044 | |
| Common stock repurchased | | | | | (75.4) | | | | | | | | | | | (3,409) | | | | | | | | | (3,409) | |
| Preferred stock redeemed (3) | (1.9) | | | (2,215) | | | | | | | 17 | | | (272) | | | | | | | | | | | | | (2,470) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Preferred stock released by ESOP | | | | | | | | | (19) | | | | | | | | | 268 | | | | | | | 249 | |
Preferred stock converted to common shares | (0.2) | | | (249) | | | 9.7 | | | | | (243) | | | | | | | 492 | | | | | | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Preferred stock issued | 0.1 | | | 2,013 | | | | | | | (45) | | | | | | | | | | | | | | | 1,968 | |
| Common stock dividends | | | | | | | | | 38 | | | (4,226) | | | | | | | | | | | | | (4,188) | |
| Preferred stock dividends | | | | | | | | | | | (654) | | | | | | | | | | | | | (654) | |
Stock incentive compensation expense | | | | | | | | | 301 | | | | | | | | | | | | | | | 301 | |
| Net change in deferred compensation and related plans | | | | | | | | | (1,382) | | | | | | | 4 | | | | | | | | | (1,378) | |
| Net change (1) | (2.0) | | | (451) | | | (14.8) | | | 0 | | | (1,126) | | | (8,939) | | | 513 | | | (219) | | | 268 | | | | | (103) | | | (10,057) | |
| Balance June 30, 2020 (1) | 5.5 | | | $ | 21,098 | | | 4,119.6 | | | $ | 9,136 | | | 59,923 | | | 158,466 | | | (798) | | | (69,050) | | | (875) | | | | | 735 | | | 178,635 | |
(1)We adopted Accounting Standards Update (ASU) 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL) effective January 1, 2020. For additional information, see Note 1 (Summary of Significant Accounting Policies) in our Annual Report on Form 10-K for the year ended December 31, 2020. In second quarter 2021, we elected to change our accounting method for low-income housing tax credit investments and elected to change the presentation of investment tax credits related to solar energy investments. Prior period balances have been revised to conform with the current period presentation. For additional information, see Note 1 (Summary of Significant Accounting Policies).
(2)Represents the impact of the redemption of Preferred Stock, Series I, Series P and Series W, in first quarter 2021, and Preferred Stock, Series N, in second quarter 2021. For additional information, see Note 16 (Preferred Stock).
(3)Represents the impact of the redemption of the remaining Preferred Stock, Series K, and partial redemption of Preferred Stock, Series T, in first quarter 2020.
The accompanying notes are an integral part of these statements.
| | | | | | | | | | | | | |
| Wells Fargo & Company and Subsidiaries |
| Consolidated Statement of Cash Flows (Unaudited) |
| Six months ended June 30, |
| (in millions) | 2021 | | 2020 | | |
| Cash flows from operating activities: | | | | | |
| Net income (loss) before noncontrolling interests (1) | $ | 11,434 | | | (3,031) | | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Provision for credit losses | (2,308) | | | 13,539 | | | |
| Changes in fair value of MSRs and LHFS carried at fair value | (895) | | | 4,481 | | | |
| Depreciation, amortization and accretion (1) | 4,173 | | | 3,858 | | | |
| Stock-based compensation | 1,475 | | | 953 | | | |
| Deferred income tax benefit (1) | (1,495) | | | (118) | | | |
| Other net (gains) losses (2) | (7,661) | | | 7,150 | | | |
| Originations and purchases of loans held for sale (2) | (87,673) | | | (83,540) | | | |
| Proceeds from sales of and paydowns on loans originally classified as held for sale (2) | 55,502 | | | 69,195 | | | |
| Net change in: | | | | | |
| Debt and equity securities, held for trading | 7,531 | | | 36,459 | | | |
| | | | | |
| Derivative assets and liabilities | (1,299) | | | (6,825) | | | |
| Other assets | 11,256 | | | (5,910) | | | |
| Other accrued expenses and liabilities (1) | (1,572) | | | (2,819) | | | |
| Net cash provided (used) by operating activities | (11,532) | | | 33,392 | | | |
| Cash flows from investing activities: | | | | | |
| Net change in: | | | | | |
| Federal funds sold and securities purchased under resale agreements | (4,477) | | | 22,851 | | | |
| Available-for-sale debt securities: | | | | | |
| Proceeds from sales | 13,675 | | | 29,524 | | | |
| Prepayments and maturities | 45,238 | | | 35,340 | | | |
| Purchases | (71,997) | | | (28,310) | | | |
| Held-to-maturity debt securities: | | | | | |
| Paydowns and maturities | 45,833 | | | 11,566 | | | |
| Purchases | (43,192) | | | (25,376) | | | |
| Equity securities, not held for trading: | | | | | |
| Proceeds from sales and capital returns | 2,131 | | | 5,584 | | | |
| Purchases | (3,033) | | | (5,587) | | | |
| Loans: | | | | | |
| Loans originated by banking subsidiaries, net of principal collected | 21,926 | | | 8,871 | | | |
| Proceeds from sales of loans originally classified as held for investment | 22,174 | | | 5,325 | | | |
| Purchases of loans | (186) | | | (775) | | | |
| Principal collected on nonbank entities’ loans | 7,007 | | | 5,505 | | | |
| Loans originated by nonbank entities | (5,723) | | | (5,856) | | | |
| | | | | |
| Proceeds from sales of foreclosed assets and short sales | 372 | | | 753 | | | |
| Other, net | 1,056 | | | (31) | | | |
| Net cash provided by investing activities | 30,804 | | | 59,384 | | | |
| Cash flows from financing activities: | | | | | |
| Net change in: | | | | | |
| Deposits | 36,575 | | | 88,085 | | | |
| Short-term borrowings | (13,364) | | | (44,027) | | | |
| Long-term debt: | | | | | |
| Proceeds from issuance | 1,125 | | | 37,664 | | | |
| Repayment | (29,810) | | | (44,574) | | | |
| Preferred stock: | | | | | |
| Proceeds from issuance | 4,529 | | | 1,968 | | | |
| Redeemed | (4,875) | | | (2,470) | | | |
| Cash dividends paid | (629) | | | (654) | | | |
| Common stock: | | | | | |
| Proceeds from issuance | 114 | | | 454 | | | |
| Stock tendered for payment of withholding taxes | (250) | | | (320) | | | |
| Repurchased | (2,161) | | | (3,409) | | | |
| Cash dividends paid | (795) | | | (4,055) | | | |
| Net change in noncontrolling interests | (13) | | | (31) | | | |
| Other, net | (157) | | | (154) | | | |
| Net cash provided (used) by financing activities | (9,711) | | | 28,477 | | | |
| Net change in cash, cash equivalents, and restricted cash | 9,561 | | | 121,253 | | | |
| Cash, cash equivalents, and restricted cash at beginning of period | 264,612 | | | 141,250 | | | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 274,173 | | | 262,503 | | | |
| Supplemental cash flow disclosures: | | | | | |
| Cash paid for interest | $ | 2,345 | | | 5,545 | | | |
| Cash paid for income taxes, net (2) | 3,052 | | | 2,070 | | | |
(1)In second quarter 2021, we elected to change our accounting method for low-income housing tax credit investments and elected to change the presentation of investment tax credits related to solar energy investments. Prior period balances have been revised to conform with the current period presentation. For additional information, see Note 1 (Summary of Significant Accounting Policies).
(2)Prior period balances have been revised to conform with the current period presentation.
The accompanying notes are an integral part of these statements. See Note 1 (Summary of Significant Accounting Policies) for noncash activities.
| | | | | | | | |
| Wells Fargo & Company | 6963 |
Notes to Financial Statements
-See the Glossary of Acronyms at the end of this Report for terms used throughout the Financial Statements and related Notes.
| | |
| Note 1: Summary of Significant Accounting Policies |
Wells Fargo & Company is a diversified financial services company. We provide banking, investment and mortgage products and services, as well as consumer and commercial finance, through banking locations and offices, the internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia, and in countries outside the U.S. When we refer to “Wells Fargo,” “the Company,” “we,” “our” or “us,” we mean Wells Fargo & Company and Subsidiaries (consolidated). Wells Fargo & Company (the Parent) is a financial holding company and a bank holding company. We also hold a majority interest in a real estate investment trust, which has publicly traded preferred stock outstanding.
Our accounting and reporting policies conform with U.S. generally accepted accounting principles (GAAP) and practices in the financial services industry. For 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, 2020 (20202021 (2021 Form 10-K). There were no material changes to these policies in first quarter 2022.
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 4 (Loans and Related Allowance for Credit Losses));
•valuations of residential mortgage servicing rights (MSRs) (Note 8 (Securitizations and Variable Interest Entities) and Note 9 (Mortgage Banking Activities));
•valuations of financial instruments (Note 15 (Fair Values of Assets and Liabilities));
•liabilities for contingent litigation losses (Note 13 (Legal Actions));
•income taxes; and
•goodwill impairment (Note 10 (Intangible Assets)).
Actual results could differ from those estimates.
These unaudited interim financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q. The results of operations in the interim financial statements do not necessarily indicate the results that may be expected for the full year. The interim financial information should be read in conjunction with our 20202021 Form 10-K.
Change in Accounting Policies
In second quarter 2021, we elected to change our accounting method for low-income housing tax credit (LIHTC) investments from the equity method of accounting to the proportional amortization method. Under the proportional amortization method, the investments are carried at amortized cost and amortized in proportion to the tax credits received. The amortization of the investments and the related tax impacts are recognized in income tax expense. Previously, we recognized the amortization of the investments in other noninterest income and the related tax impacts were recognized in income tax expense. We determined that the proportional amortization method is preferable because it better aligns the financial statement presentation with the economic impact of these investments, which generate tax credits over the lives of the investments. Adoption of the proportional amortization method was applied retrospectively, to the earliest period presented, which resulted in a cumulative-effect adjustment to reduce retained earnings by $283 million as of January 1, 2020.
In second quarter 2021, we also elected to change the presentation of investment tax credits related to solar energy investments, which are accounted for under the deferral method. We reclassified the investment tax credits on our consolidated balance sheet from accrued expenses and other liabilities to a reduction of the carrying value of the investment balances. We also reclassified the investment tax credits, which are recognized over time, from income tax expense to interest income for solar energy leases or noninterest income for solar energy equity investments. We determined that this presentation is preferable because it better reflects the financial statement presentation of the investment tax credits as an integral component of the investments. The change in accounting policy was adopted retrospectively to January 1, 2020.
Table 1.1 presents the impact of the accounting policy changes for LIHTC investments and solar energy investments to our consolidated statement of income and consolidated balance sheet. There was no material impact to the consolidated statement of cash flows.
Table 1.1:Impact of the Accounting Policy Changes for LIHTC Investments and Solar Energy Investments
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter ended June 30, 2020 | | Six months ended June 30, 2020 |
| | | Effect of accounting policy changes ($) | | | | | | Effect of accounting policy changes ($) | | |
| ($ in millions, except per share amounts) | As reported | | LIHTC | Solar | | As revised | | As reported | | LIHTC | Solar | | As revised |
| Selected Income Statement Data | | | | | | | | | | | | | |
| Interest income – loans | $ | 8,448 | | | 0 | | 12 | | | 8,460 | | | 18,513 | | | 0 | | 30 | | | 18,543 | |
| Noninterest income | 7,956 | | | 370 | | 68 | | | 8,394 | | | 14,361 | | | 739 | | 137 | | | 15,237 | |
| Income tax expense (benefit) (1) | (3,917) | | | 1,434 | | 482 | | | (2,001) | | | (3,758) | | | 1,584 | | 526 | | | (1,648) | |
| Net income (loss) | (2,379) | | | (1,064) | | (403) | | | (3,846) | | | (1,726) | | | (845) | | (359) | | | (2,930) | |
| Earnings (loss) per common share | (0.66) | | | (0.26) | | (0.09) | | | (1.01) | | | (0.65) | | | (0.21) | | (0.08) | | | (0.94) | |
| Diluted earnings (loss) per common share | (0.66) | | | (0.26) | | (0.09) | | | (1.01) | | | (0.65) | | | (0.21) | | (0.08) | | | (0.94) | |
| | | | | | | | | | | | | |
| | | | | | | | At December 31, 2020 |
| | | | | | | | | | Effect of accounting policy changes ($) | | |
| | | | | | | | As reported | | LIHTC | Solar | | As revised |
| Selected Balance Sheet Data | | | | | | | | | | | | | |
| Equity securities | | | | | | | | $ | 62,260 | | | (275) | | (1,977) | | | 60,008 | |
| Accrued expenses and other liabilities | | | | | | | | 76,404 | | | (62) | | (1,982) | | | 74,360 | |
| Retained earnings | | | | | | | | 162,890 | | | (207) | | 0 | | | 162,683 | |
(1)The quarterly income tax expense (benefit) varies based on the income (loss) before income tax expense (benefit) and the estimated annual effective income tax rate applied to each quarter.
Accounting Standards Adopted in 20212022
In
In 2021, 2022, we adopted the following new accounting guidance:
•Accounting Standards Update (ASU or Update) 2021-012020-06 – Reference Rate Reform (Topic 848)Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): ScopeAccounting for Convertible Instruments and Contracts in an Entity’s Own Equity
•ASU 2020-082021-05 – Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs
•ASU 2020-01 – Investments – Equity SecuritiesLeases (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)842): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Financial Accounting Standards Board (FASB) Emerging Issues Task Force)
•ASU 2019-12Lessors – Income Taxes (Topic 740): Simplifying the Accounting for Income TaxesCertain Leases with Variable Lease Payments
ASU 2021-01 2020-06clarifiessimplifies the scopeaccounting for convertible financial instruments that embody characteristics of Topic 848 to include derivatives affecteddebt and equity by changes in interest rates(1) eliminating accounting models for margining, discounting, or contract price alignment as part of the market-wide transition to new reference rates (commonly referred to as the “discounting transition”), even if they do not reference the London Interbank Offered Rate or another rate that is expected to be discontinued as a result of reference rate reform. The Update also clarifies other aspects of the relief provided inconvertible financial instruments with cash conversion and beneficial conversion features within Accounting Standards Codification (ASC) 848.470-20, (2) removing three equity classification requirements for a contract in an entity's own equity to qualify for the derivative scope exception in ASC Subtopic 815-40, and (3) prescribing the method used for computing earnings per share. We adopted this Update prospectively in first quarter 2021 on a prospective basis, and the guidance will be followed until the Update terminates on December 31, 2022. TheThis Update did not have a material impact onto our consolidated financial statements.
ASU 2020-082021-05 clarifiesamends ASC 842 Topic – Leases and provides specific guidance for lessors whose leases include variable lease payments that are not dependent on a reference index or rate and otherwise would have resulted in the accountingrecognition of a loss at lease commencement (a day 1 loss). Prior to ASU 2016-02, variable lease payments were excluded from the definition of lease payments for purchased callable debt securities carried atlessors measuring their net investment loss in a premium and was issued to correct an unintended application of ASU 2017-08 – Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities,which requires amortization of such premiums tosales-type lease or direct financing lease. This often resulted in a day 1 loss, even if the earliest call date, but was not clear forlessor expected the methodarrangement to be used for instruments with multiple call dates. The Update now specifies that such premiums are amortized to the next call date and requires reassessment throughout the life of the instruments with multiple call dates.profitable overall. We adopted this Update prospectively in first quarter
2021. The 2022. This Update did not have a material impact on our consolidated financial statements.
ASU 2020-01 clarifies the accounting for equity securities upon transition between the measurement alternative and equity method. The Update also clarifies for forward contracts and options to purchase equity securities an entity need not consider whether upon settlement of the forward contract or option if the equity securities would be accounted for by the equity method or the fair value option. We adopted this Update in first quarter 2021. The Update did not have a material impact on our consolidated financial statements.
ASU 2019-12 provides narrow scope simplifications and improvements to the general principles in ASC Topic 740 – Income Taxes related to intraperiod tax allocation, basis differences when there are changes in ownership of foreign investments and interim periods income tax accounting for year to date losses that exceed anticipated annual losses. We adopted this Update in first quarter 2021. The Update did not have a material impact on our consolidated financial statements.
| | | | | | | | |
| 64 | Wells Fargo & Company | 71 |
Note 1: Summary of Significant Accounting Policies (continued)
Supplemental Cash Flow Information
Significant noncash activities are presented in Table 1.2.1.1.
Table 1.2:1.1: Supplemental Cash Flow Information
| | | Six months ended June 30, | | Quarter ended March 31, |
| (in millions) | (in millions) | 2021 | | 2020 | | (in millions) | 2022 | | 2021 | |
| | Available-for-sale debt securities purchased from securitization of LHFS (1) | | Available-for-sale debt securities purchased from securitization of LHFS (1) | $ | 1,053 | | | — | | |
| Held-to-maturity debt securities purchased from securitization of LHFS (1) | Held-to-maturity debt securities purchased from securitization of LHFS (1) | 16,462 | | | 664 | | | Held-to-maturity debt securities purchased from securitization of LHFS (1) | 638 | | | 10,252 | | |
Transfers from loans to LHFS (2) | Transfers from loans to LHFS (2) | 11,551 | | | 12,753 | | | Transfers from loans to LHFS (2) | 2,827 | | | 6,249 | | |
| Transfers from available-for-sale debt securities to held-to-maturity debt securities | Transfers from available-for-sale debt securities to held-to-maturity debt securities | 41,298 | | | 0 | | | Transfers from available-for-sale debt securities to held-to-maturity debt securities | 14,651 | | | 16,617 | | |
|
(1)For the six months ended June 30, 2021,predominantlyPredominantly represents agency mortgage-backed securities purchased upon settlement of the sale and securitization of our conforming residential mortgage loans. See Note 8 (Securitizations and Variable Interest Entities) for additional information.
(2)Prior periods have been revised to conform to the current period presentation.
Subsequent Events
We have evaluated the effects of events that have occurred subsequent to June 30, 2021,March 31, 2022, and except as disclosed in Note 16 (Preferred Stock), there have been no material events that would require recognition in our secondfirst quarter 20212022 consolidated financial statements or disclosure in the Notes to the consolidated financial statements.
| | | | | | | | |
72 | Wells Fargo & Company | 65 |
| | |
Note 2: Trading Activities |
Table 2.1 presents a summary of our trading assets and liabilities measured at fair value through earnings.
Table 2.1: Trading Assets and Liabilities
| | (in millions) | (in millions) | Jun 30,
2021 | | Dec 31,
2020 | (in millions) | Mar 31,
2022 | | Dec 31,
2021 |
| Trading assets: | Trading assets: | | Trading assets: | |
| Debt securities | Debt securities | $ | 82,727 | | | 75,095 | | Debt securities | $ | 86,672 | | | 88,265 | |
Equity securities | Equity securities | 23,701 | | | 23,032 | | Equity securities | 34,203 | | | 27,476 | |
| Loans held for sale | Loans held for sale | 2,269 | | | 1,015 | | Loans held for sale | 3,984 | | | 3,242 | |
Gross trading derivative assets | Gross trading derivative assets | 54,965 | | | 58,767 | | Gross trading derivative assets | 63,104 | | | 48,325 | |
| Netting (1) | (31,052) | | | (34,301) | | |
| Netting (2) | | Netting (2) | (36,862) | | | (28,146) | |
| Total trading derivative assets | Total trading derivative assets | 23,913 | | | 24,466 | | Total trading derivative assets | 26,242 | | | 20,179 | |
| Total trading assets | Total trading assets | 132,610 | | | 123,608 | | Total trading assets | 151,101 | | | 139,162 | |
| Trading liabilities: | Trading liabilities: | | Trading liabilities: | |
| Short sale | Short sale | 22,043 | | | 22,441 | | Short sale | 26,145 | | | 20,685 | |
| Gross trading derivative liabilities | 45,441 | | | 53,285 | | |
| Netting (1) | (33,614) | | | (39,444) | | |
| Other liabilities | | Other liabilities | 237 | | | — | |
| Gross trading derivative liabilities (1) | | Gross trading derivative liabilities (1) | 53,430 | | | 42,449 | |
| Netting (2) | | Netting (2) | (39,056) | | | (33,978) | |
| Total trading derivative liabilities | Total trading derivative liabilities | 11,827 | | | 13,841 | | Total trading derivative liabilities | 14,374 | | | 8,471 | |
| Total trading liabilities | Total trading liabilities | $ | 33,870 | | | 36,282 | | Total trading liabilities | $ | 40,756 | | | $ | 29,156 | |
(1)In first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from “not held for trading activities” to “held for trading activities” to better reflect the business activity of those financial instruments. For additional information on Trading Activities, see Note 1 (Summary of Significant Accounting Policies) in our 2021 Form 10-K.
(2)Represents balance sheet netting for trading derivative asset and liability balances, and trading portfolio level counterparty valuation adjustments.
Table 2.2 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 2.2: Net Interest Income and Net Gains (Losses) onfrom Trading Activities
| | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended March 31, | |
| (in millions) | (in millions) | 2021 | | 2020 | | 2021 | | 2020 | | (in millions) | | 2022 | | 2021 | |
| Interest income: | Interest income: | | | Interest income: | | | |
| Debt securities | Debt securities | $ | 496 | | | $ | 659 | | | $ | 1,025 | | | 1,425 | | | Debt securities | | $ | 548 | | | 529 | | |
Equity securities | Equity securities | 93 | | | 68 | | | 196 | | | 205 | | | Equity securities | | 120 | | | 103 | | |
| Loans held for sale | Loans held for sale | 3 | | | 6 | | | 15 | | | 18 | | | Loans held for sale | | 11 | | | 12 | | |
| Total interest income | Total interest income | 592 | | | 733 | | | 1,236 | | | 1,648 | | | Total interest income | | 679 | | | 644 | | |
| Less: Interest expense | Less: Interest expense | 105 | | | 116 | | | 215 | | | 257 | | | Less: Interest expense | | 132 | | | 110 | | |
| Net interest income | Net interest income | 487 | | | 617 | | | 1,021 | | | 1,391 | | | Net interest income | | 547 | | | 534 | | |
| Net gains (losses) from trading activities (1): | | | |
| Net gains (losses) from trading activities (2): | | Net gains (losses) from trading activities (2): | | | |
| Debt securities | Debt securities | 769 | | | 329 | | | (1,337) | | | 2,684 | | | Debt securities | | (3,648) | | | (2,106) | | |
Equity securities | Equity securities | 856 | | | 2,329 | | | 2,009 | | | (2,072) | | | Equity securities | | (824) | | | 1,153 | | |
| Loans held for sale | Loans held for sale | 15 | | | 24 | | | 39 | | | 12 | | | Loans held for sale | | 9 | | | 24 | | |
| Derivatives (2) | (1,619) | | | (1,875) | | | (342) | | | 247 | | | |
| Other liabilities | | Other liabilities | | 12 | | | — | | |
| Derivatives (1)(3) | | Derivatives (1)(3) | | 4,669 | | | 1,277 | | |
| Total net gains from trading activities | Total net gains from trading activities | 21 | | | 807 | | | 369 | | | 871 | | | Total net gains from trading activities | | 218 | | | 348 | | |
| Total trading-related net interest and noninterest income | Total trading-related net interest and noninterest income | $ | 508 | | | $ | 1,424 | | | $ | 1,390 | | | 2,262 | | | Total trading-related net interest and noninterest income | | $ | 765 | | | 882 | | |
(1)In first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from “not held for trading activities” to “held for trading activities” to better reflect the business activity of those financial instruments. For additional information on Trading Activities, see Note 1 (Summary of Significant Accounting Policies) in our 2021 Form 10-K.
(2)Represents realized gains (losses) from our trading activities and unrealized gains (losses) due to changes in fair value of our trading positions.
(2)(3)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.
| | | | | | | | |
| 66 | Wells Fargo & Company | 73 |
| | |
Note 3: Available-for-Sale and Held-to-Maturity Debt Securities |
Table 3.1 provides the amortized cost, net of the allowance for credit losses (ACL) for debt securities, and fair value by major categories of available-for-sale (AFS) debt securities, which are carried at fair value, and held-to-maturity (HTM) debt securities, which are carried at amortized cost, net of the ACL. The net unrealized gains (losses) for AFS debt securities are reported as a component of cumulative other comprehensive income (OCI), net of the ACL and applicable income taxes. Information on debt
securities held for trading is included in Note 2 (Trading Activities).
Outstanding balances exclude accrued interest receivable on AFS and HTM debt securities, which are included in other assets. See Note 7 (Other Assets) for additional information on accrued interest receivable. Amounts considered to be uncollectible are reversed through interest income. The interest income reversed in the secondfirst quarter 2022 and first half of both 2021 and 2020 was insignificant.
Table 3.1: Available-for-Sale and Held-to-Maturity Debt Securities Outstanding
| | (in millions) | (in millions) | Amortized
cost, net (1) | | Gross
unrealized gains | | Gross
unrealized losses | | Fair value | (in millions) | Amortized
cost, net (1) | | Gross
unrealized gains | | Gross
unrealized losses | | Fair value |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Available-for-sale debt securities: | Available-for-sale debt securities: | | Available-for-sale debt securities: | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | $ | 35,741 | | | 195 | | | (31) | | | 35,905 | | Securities of U.S. Treasury and federal agencies | $ | 47,946 | | | 91 | | | (1,604) | | | 46,433 | |
| Non-U.S. government securities | Non-U.S. government securities | 11,201 | | | 0 | | | 0 | | | 11,201 | | Non-U.S. government securities | 116 | | | — | | | — | | | 116 | |
| Securities of U.S. states and political subdivisions (2) | Securities of U.S. states and political subdivisions (2) | 19,121 | | | 410 | | | (32) | | | 19,499 | | Securities of U.S. states and political subdivisions (2) | 16,484 | | | 271 | | | (269) | | | 16,486 | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | 94,186 | | | 2,679 | | | (331) | | | 96,534 | | Federal agency mortgage-backed securities | 94,726 | | | 245 | | | (3,534) | | | 91,437 | |
| Non-agency mortgage-backed securities (3) | Non-agency mortgage-backed securities (3) | 4,349 | | | 51 | | | (22) | | | 4,378 | | Non-agency mortgage-backed securities (3) | 4,641 | | | 12 | | | (45) | | | 4,608 | |
| Collateralized loan obligations | Collateralized loan obligations | 12,406 | | | 8 | | | (7) | | | 12,407 | | Collateralized loan obligations | 5,231 | | | — | | | (34) | | | 5,197 | |
| Other debt securities | Other debt securities | 9,305 | | | 699 | | | (31) | | | 9,973 | | Other debt securities | 3,974 | | | 200 | | | (15) | | | 4,159 | |
| Total available-for-sale debt securities | Total available-for-sale debt securities | 186,309 | | | 4,042 | | | (454) | | | 189,897 | | Total available-for-sale debt securities | 173,118 | | | 819 | | | (5,501) | | | 168,436 | |
| Held-to-maturity debt securities: | Held-to-maturity debt securities: | | Held-to-maturity debt securities: | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | 27,576 | | | 862 | | | (409) | | | 28,029 | | Securities of U.S. Treasury and federal agencies | 16,196 | | | 14 | | | (659) | | | 15,551 | |
| Securities of U.S. states and political subdivisions | Securities of U.S. states and political subdivisions | 28,243 | | | 931 | | | (36) | | | 29,138 | | Securities of U.S. states and political subdivisions | 32,969 | | | 69 | | | (2,122) | | | 30,916 | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | 182,891 | | | 2,908 | | | (1,349) | | | 184,450 | | Federal agency mortgage-backed securities | 198,266 | | | 115 | | | (13,368) | | | 185,013 | |
| Non-agency mortgage-backed securities | 948 | | | 46 | | | (11) | | | 983 | | |
| Non-agency mortgage-backed securities (3) | | Non-agency mortgage-backed securities (3) | 1,174 | | | 5 | | | (64) | | | 1,115 | |
| Collateralized loan obligations | Collateralized loan obligations | 21,283 | | | 205 | | | (1) | | | 21,487 | | Collateralized loan obligations | 30,475 | | | 62 | | | (141) | | | 30,396 | |
| | Other debt securities | | Other debt securities | 1,728 | | | — | | | (78) | | | 1,650 | |
| Total held-to-maturity debt securities | Total held-to-maturity debt securities | 260,941 | | | 4,952 | | | (1,806) | | | 264,087 | | Total held-to-maturity debt securities | 280,808 | | | 265 | | | (16,432) | | | 264,641 | |
Total (4) | Total (4) | $ | 447,250 | | | 8,994 | | | (2,260) | | | 453,984 | | Total (4) | $ | 453,926 | | | 1,084 | | | (21,933) | | | 433,077 | |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| Available-for-sale debt securities: | Available-for-sale debt securities: | | Available-for-sale debt securities: | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | $ | 21,954 | | | 205 | | | 0 | | | 22,159 | | Securities of U.S. Treasury and federal agencies | $ | 39,668 | | | 185 | | | (192) | | | 39,661 | |
| Non-U.S. government securities | Non-U.S. government securities | 16,816 | | | 0 | | | (3) | | | 16,813 | | Non-U.S. government securities | 71 | | | — | | | — | | | 71 | |
| Securities of U.S. states and political subdivisions (2) | Securities of U.S. states and political subdivisions (2) | 19,263 | | | 224 | | | (81) | | | 19,406 | | Securities of U.S. states and political subdivisions (2) | 16,618 | | | 350 | | | (51) | | | 16,917 | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | 134,838 | | | 4,260 | | | (28) | | | 139,070 | | Federal agency mortgage-backed securities | 104,661 | | | 1,807 | | | (582) | | | 105,886 | |
| Non-agency mortgage-backed securities (3) | Non-agency mortgage-backed securities (3) | 3,745 | | | 30 | | | (46) | | | 3,729 | | Non-agency mortgage-backed securities (3) | 4,515 | | | 32 | | | (15) | | | 4,532 | |
| Collateralized loan obligations | Collateralized loan obligations | 9,058 | | | 4 | | | (44) | | | 9,018 | | Collateralized loan obligations | 5,713 | | | 2 | | | (7) | | | 5,708 | |
| Other debt securities | Other debt securities | 9,859 | | | 399 | | | (61) | | | 10,197 | | Other debt securities | 4,217 | | | 259 | | | (7) | | | 4,469 | |
| Total available-for-sale debt securities | Total available-for-sale debt securities | 215,533 | | | 5,122 | | | (263) | | | 220,392 | | Total available-for-sale debt securities | 175,463 | | | 2,635 | | | (854) | | | 177,244 | |
| Held-to-maturity debt securities: | Held-to-maturity debt securities: | | Held-to-maturity debt securities: | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | 47,295 | | | 1,472 | | | (170) | | | 48,597 | | Securities of U.S. Treasury and federal agencies | 16,544 | | | 599 | | | (318) | | | 16,825 | |
| Securities of U.S. states and political subdivisions | Securities of U.S. states and political subdivisions | 25,860 | | | 938 | | | (5) | | | 26,793 | | Securities of U.S. states and political subdivisions | 32,689 | | | 847 | | | (61) | | | 33,475 | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | 115,437 | | | 4,182 | | | (21) | | | 119,598 | | Federal agency mortgage-backed securities | 188,909 | | | 1,882 | | | (2,807) | | | 187,984 | |
| Non-agency mortgage-backed securities | 890 | | | 51 | | | (8) | | | 933 | | |
| Non-agency mortgage-backed securities (3) | | Non-agency mortgage-backed securities (3) | 1,082 | | | 31 | | | (18) | | | 1,095 | |
| Collateralized loan obligations | Collateralized loan obligations | 16,238 | | | 148 | | | 0 | | | 16,386 | | Collateralized loan obligations | 31,067 | | | 194 | | | (2) | | | 31,259 | |
| | Other debt securities | | Other debt securities | 1,731 | | | 17 | | | — | | | 1,748 | |
| Total held-to-maturity debt securities | Total held-to-maturity debt securities | 205,720 | | | 6,791 | | | (204) | | | 212,307 | | Total held-to-maturity debt securities | 272,022 | | | 3,570 | | | (3,206) | | | 272,386 | |
Total (4) | Total (4) | $ | 421,253 | | | 11,913 | | | (467) | | | 432,699 | | Total (4) | $ | 447,485 | | | 6,205 | | | (4,060) | | | 449,630 | |
(1)Represents amortized cost of the securities, net of the ACL of $33$9 million and $28$8 million related to AFS debt securities and $77$84 million and $41$96 million related to HTM debt securities at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively.
(2)Includes investments in tax-exempt preferred debt securities issued by investment funds or trusts that predominantly invest in tax-exempt municipal securities. The amortized cost, net of the ACL, and fair value of these types of securities, was $5.2$5.3 billion at June 30, 2021,March 31, 2022, and $5.0$5.2 billion at December 31, 2020.2021.
(3)Predominantly consists of commercial mortgage-backed securities at both June 30, 2021,March 31, 2022, and December 31, 2020.
(4)We held AFS and HTM 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 $119.8 billion and $89.9 billion and a fair value of $121.5 billion and $91.3 billion at June 30, 2021, and an amortized cost of $99.8 billion and $88.7 billion and a fair value of $103.2 billion and $91.5 billion at December 31, 2020, respectively.2021.
| | | | | | | | |
74 | Wells Fargo & Company | 67 |
Note 3: Available-for-Sale and Held-to-Maturity Debt Securities (continued)
Table 3.2 details the breakout of purchases of and transfers to HTM debt securities by major category of security.
Table 3.2: Held-to-Maturity Debt Securities Purchases and Transfers
| | | Quarter ended June 30, | | Six months ended June 30, | | | Quarter ended March 31, | |
| (in millions) | (in millions) | 2021 | | 2020 | | 2021 | | 2020 | | (in millions) | | 2022 | | 2021 | |
| Purchases of held-to-maturity debt securities (1): | Purchases of held-to-maturity debt securities (1): | | | Purchases of held-to-maturity debt securities (1): | | | |
| Securities of U.S. Treasury and federal agencies | $ | 0 | | | 0 | | | $ | 0 | | | 3,016 | | | |
| | Securities of U.S. states and political subdivisions | Securities of U.S. states and political subdivisions | 1,173 | | | 15 | | | 3,083 | | | 881 | | | Securities of U.S. states and political subdivisions | | $ | 834 | | | 1,910 | | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | 24,855 | | | 6,958 | | | 49,722 | | | 22,821 | | | Federal agency mortgage-backed securities | | 2,051 | | | 24,867 | | |
| Non-agency mortgage-backed securities | Non-agency mortgage-backed securities | 55 | | | 12 | | | 84 | | | 74 | | | Non-agency mortgage-backed securities | | 104 | | | 29 | | |
| Collateralized loan obligations | Collateralized loan obligations | 3,385 | | | 0 | | | 7,338 | | | 0 | | | Collateralized loan obligations | | — | | | 3,953 | | |
| | Total purchases of held-to-maturity debt securities | Total purchases of held-to-maturity debt securities | 29,468 | | | 6,985 | | | 60,227 | | | 26,792 | | | Total purchases of held-to-maturity debt securities | | 2,989 | | | 30,759 | | |
| Transfers from available-for-sale debt securities to held-to-maturity debt securities: | Transfers from available-for-sale debt securities to held-to-maturity debt securities: | | | Transfers from available-for-sale debt securities to held-to-maturity debt securities: | | | |
| | Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | 24,681 | | | 0 | | | 41,298 | | | 0 | | | Federal agency mortgage-backed securities | | 14,651 | | | 16,617 | | |
| | | Total transfers from available-for-sale debt securities to held-to-maturity debt securities | Total transfers from available-for-sale debt securities to held-to-maturity debt securities | $ | 24,681 | | | 0 | | | $ | 41,298 | | | 0 | | | Total transfers from available-for-sale debt securities to held-to-maturity debt securities | | $ | 14,651 | | | 16,617 | | |
(1)Inclusive of securities purchased but not yet settled and noncash purchases from securitization of loans held for sale (LHFS).
Table 3.3 shows the composition of interest income, provision for credit losses, and gross realized gains and losses
from sales and impairment write-downs included in earnings related to AFS and HTM debt securities (pre-tax).
Table 3.3: Income Statement Impacts for Available-for-Sale and Held-to-Maturity Debt Securities
| | | Quarter ended June 30, | | Six months ended June 30, | | | Quarter ended March 31, | |
| (in millions) | (in millions) | 2021 | | 2020 | | 2021 | | 2020 | | (in millions) | | 2022 | | 2021 | |
| Interest income (1): | Interest income (1): | | | Interest income (1): | | | |
| Available-for-sale | Available-for-sale | $ | 655 | | | 1,349 | | | $ | 1,466 | | | 3,075 | | | Available-for-sale | | $ | 702 | | | 811 | | |
| Held-to-maturity | Held-to-maturity | 1,048 | | | 938 | | | 2,020 | | | 1,918 | | | Held-to-maturity | | 1,313 | | | 972 | | |
| Total interest income | Total interest income | 1,703 | | | 2,287 | | | 3,486 | | | 4,993 | | | Total interest income | | 2,015 | | | 1,783 | | |
| Provision for credit losses: | Provision for credit losses: | | | Provision for credit losses: | | | |
| Available-for-sale | Available-for-sale | (10) | | | (40) | | | 12 | | | 128 | | | Available-for-sale | | 1 | | | 22 | | |
| Held-to-maturity | Held-to-maturity | (11) | | | 9 | | | 36 | | | 13 | | | Held-to-maturity | | (13) | | | 47 | | |
| Total provision for credit losses | Total provision for credit losses | (21) | | | (31) | | | 48 | | | 141 | | | Total provision for credit losses | | (12) | | | 69 | | |
| Realized gains and losses (2): | Realized gains and losses (2): | | | Realized gains and losses (2): | | | |
| Gross realized gains | Gross realized gains | 1 | | | 248 | | | 152 | | | 504 | | | Gross realized gains | | 2 | | | 151 | | |
| Gross realized losses | (1) | | | (36) | | | (1) | | | (40) | | | |
| | Impairment write-downs | 0 | | | 0 | | | 0 | | | (15) | | | |
| | Net realized gains | Net realized gains | $ | 0 | | | $ | 212 | | | $ | 151 | | | 449 | | | Net realized gains | | $ | 2 | | | 151 | | |
(1)Excludes interest income from trading debt securities, which is disclosed in Note 2 (Trading Activities).
(2)Realized gains and losses relate to AFS debt securities. There were 0no realized gains or losses from HTM debt securities in all periods presented.
Credit Quality
We monitor credit quality of debt securities by evaluating various attributes and utilize such information in our evaluation of the appropriateness of the ACL for debt securities. The credit quality indicators that we most closely monitor include credit ratings and delinquency status and are based on information as of our financial statement date.
CREDIT RATINGS Credit ratings express opinions about the credit quality of a debt security. We determine the credit rating of a security according to the lowest credit rating made available by national recognized statistical rating organizations (NRSROs). Debt securities rated investment grade, that is those with ratings similar to BBB-/Baa3 or above, as defined by NRSROs, are generally considered by the rating agencies and market
participants to be low credit risk. Conversely, debt securities rated below investment grade, labeled as “speculative grade” by the rating agencies, are considered to be distinctively higher
credit risk than investment grade debt securities. For debt securities not rated by NRSROs, we determine an internal credit grade of the debt securities (used for credit risk management purposes) equivalent to the credit ratings assigned by major credit agencies. Substantially all of our debt securities were rated by NRSROs at June 30, 2021,March 31, 2022, and December 31, 2020.2021.
Table 3.4 shows the percentage of fair value of AFS debt securities and amortized cost of HTM debt securities determined to be rated investment grade, inclusive of securities rated based on internal credit grades.
| | | | | | | | |
| 68 | Wells Fargo & Company | 75 |
Note 3: Available-for-Sale and Held-to-Maturity Debt Securities (continued)
Table 3.4: Investment Grade Debt Securities
| | | Available-for-Sale | | Held-to-Maturity | | Available-for-Sale | | Held-to-Maturity |
| ($ in millions) | ($ in millions) | Fair value | % investment grade | | Amortized cost | % investment grade | ($ in millions) | Fair value | % investment grade | | Amortized cost | % investment grade |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Total portfolio (1) | Total portfolio (1) | $ | 189,897 | | 99 | % | | 261,018 | | 99 | % | Total portfolio (1) | $ | 168,436 | | 99 | % | | 280,892 | | 99 | % |
| Breakdown by category: | Breakdown by category: | | Breakdown by category: | |
| Securities of U.S. Treasury and federal agencies (2) | Securities of U.S. Treasury and federal agencies (2) | $ | 132,439 | | 100 | % | | 210,467 | | 100 | % | Securities of U.S. Treasury and federal agencies (2) | $ | 137,870 | | 100 | % | | 214,462 | | 100 | % |
| Securities of U.S. states and political subdivisions | Securities of U.S. states and political subdivisions | 19,499 | | 99 | | | 28,258 | | 100 | | Securities of U.S. states and political subdivisions | 16,486 | | 99 | | | 32,984 | | 100 | |
| Collateralized loan obligations (3) | Collateralized loan obligations (3) | 12,407 | | 100 | | | 21,329 | | 100 | | Collateralized loan obligations (3) | 5,197 | | 100 | | | 30,518 | | 100 | |
| All other debt securities (4) | All other debt securities (4) | 25,552 | | 91 | | | 964 | | 4 | | All other debt securities (4) | 8,883 | | 89 | | | 2,928 | | 62 | |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| Total portfolio (1) | Total portfolio (1) | $ | 220,392 | | 99 | % | | 205,761 | | 99 | % | Total portfolio (1) | $ | 177,244 | | 99 | % | | 272,118 | | 99 | % |
| Breakdown by category: | Breakdown by category: | | Breakdown by category: | |
| Securities of U.S. Treasury and federal agencies (2) | Securities of U.S. Treasury and federal agencies (2) | $ | 161,229 | | 100 | % | | 162,732 | | 100 | % | Securities of U.S. Treasury and federal agencies (2) | $ | 145,547 | | 100 | % | | 205,453 | | 100 | % |
| Securities of U.S. states and political subdivisions | Securities of U.S. states and political subdivisions | 19,406 | | 99 | | | 25,870 | | 100 | | Securities of U.S. states and political subdivisions | 16,917 | | 99 | | | 32,704 | | 100 | |
| Collateralized loan obligations (3) | Collateralized loan obligations (3) | 9,018 | | 100 | | | 16,255 | | 100 | | Collateralized loan obligations (3) | 5,708 | | 100 | | | 31,128 | | 100 | |
| All other debt securities (4) | All other debt securities (4) | 30,739 | | 93 | | | 904 | | 6 | | All other debt securities (4) | 9,072 | | 88 | | | 2,833 | | 64 | |
(1)94% and 92%98% were rated AA- and above at June 30, 2021,both March 31, 2022, and December 31, 2020,2021, respectively.
(2)Includes federal agency mortgage-backed securities.
(3)99% and 98%100% were rated AA- and above at June 30, 2021,both March 31, 2022, and December 31, 2020,2021, respectively.
(4)Includes non-U.S. government, non-agency mortgage-backed, and all other debt securities.
DELINQUENCY STATUS AND NONACCRUAL DEBT SECURITIES Debt security issuers that are delinquent in payment of amounts due under contractual debt agreements have a higher probability of recognition of credit losses. As such, as part of our monitoring of the credit quality of the debt security portfolio, we consider whether debt securities we own are past due in payment of principal or interest payments and whether any securities have been placed into nonaccrual status.
Debt securities that are past due and still accruing were insignificant at both June 30, 2021,March 31, 2022, and December 31, 2020.2021. The carrying value of debt securities in nonaccrual status was insignificant at both June 30, 2021,March 31, 2022, and December 31, 2020.2021. Charge-offs on debt securities were insignificant in the secondfirst quarter and first half of both 20212022 and 2020.2021.
Purchased debt securities with credit deterioration (PCD) are not considered to be in nonaccrual status, as payments from issuers of these securities remain current. PCD securities were insignificant in the secondfirst quarter and first half of both 20212022 and 2020.2021.
| | | | | | | | |
76 | Wells Fargo & Company | 69 |
Note 3: Available-for-Sale and Held-to-Maturity Debt Securities (continued)
Unrealized Losses of Available-for-Sale Debt Securities
Table 3.5 shows the gross unrealized losses and fair value of AFS debt securities by length of time those individual securities in each category have been in a continuous loss position. Debt securities on which we have recorded credit impairment are
categorized as being “less than 12 months” or “12 months or more” in a continuous loss position based on the point in time that the fair value declined to below the amortized cost basis, net of allowance for credit losses.
Table 3.5: Gross Unrealized Losses and Fair Value – Available-for-Sale Debt Securities
| | | Less than 12 months | | 12 months or more | | Total | | Less than 12 months | | 12 months or more | | Total |
| (in millions) | (in millions) | Gross unrealized losses | | Fair value | | Gross unrealized losses | | Fair value | | Gross unrealized losses | | Fair value | (in millions) | Gross unrealized losses | | Fair value | | Gross unrealized losses | | Fair value | | Gross unrealized losses | | Fair value |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Available-for-sale debt securities: | Available-for-sale debt securities: | | Available-for-sale debt securities: | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | $ | (31) | | | 11,924 | | | 0 | | | 0 | | | (31) | | | 11,924 | | Securities of U.S. Treasury and federal agencies | $ | (1,559) | | | 41,680 | | | (45) | | | 1,257 | | | (1,604) | | | 42,937 | |
| Non-U.S. government securities | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | |
| | Securities of U.S. states and political subdivisions | Securities of U.S. states and political subdivisions | (21) | | | 1,413 | | | (11) | | | 717 | | | (32) | | | 2,130 | | Securities of U.S. states and political subdivisions | (186) | | | 3,036 | | | (83) | | | 610 | | | (269) | | | 3,646 | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | (285) | | | 18,152 | | | (46) | | | 2,924 | | | (331) | | | 21,076 | | Federal agency mortgage-backed securities | (2,276) | | | 63,258 | | | (1,258) | | | 15,441 | | | (3,534) | | | 78,699 | |
| Non-agency mortgage-backed securities | Non-agency mortgage-backed securities | (3) | | | 330 | | | (19) | | | 771 | | | (22) | | | 1,101 | | Non-agency mortgage-backed securities | (29) | | | 3,027 | | | (16) | | | 534 | | | (45) | | | 3,561 | |
| Collateralized loan obligations | Collateralized loan obligations | (2) | | | 1,312 | | | (5) | | | 1,698 | | | (7) | | | 3,010 | | Collateralized loan obligations | (28) | | | 4,523 | | | (6) | | | 581 | | | (34) | | | 5,104 | |
| Other debt securities | Other debt securities | (15) | | | 1,196 | | | (16) | | | 807 | | | (31) | | | 2,003 | | Other debt securities | (6) | | | 763 | | | (9) | | | 521 | | | (15) | | | 1,284 | |
| Total available-for-sale debt securities | Total available-for-sale debt securities | $ | (357) | | | 34,327 | | | (97) | | | 6,917 | | | (454) | | | 41,244 | | Total available-for-sale debt securities | $ | (4,084) | | | 116,287 | | | (1,417) | | | 18,944 | | | (5,501) | | | 135,231 | |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| Available-for-sale debt securities: | Available-for-sale debt securities: | | Available-for-sale debt securities: | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | $ | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Securities of U.S. Treasury and federal agencies | $ | (192) | | | 24,418 | | | — | | | — | | | (192) | | | 24,418 | |
| Non-U.S. government securities | (3) | | | 16,812 | | | 0 | | | 0 | | | (3) | | | 16,812 | | |
| | Securities of U.S. states and political subdivisions | Securities of U.S. states and political subdivisions | (51) | | | 3,681 | | | (30) | | | 1,101 | | | (81) | | | 4,782 | | Securities of U.S. states and political subdivisions | (36) | | | 2,308 | | | (15) | | | 532 | | | (51) | | | 2,840 | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | (27) | | | 11,310 | | | (1) | | | 316 | | | (28) | | | 11,626 | | Federal agency mortgage-backed securities | (334) | | | 40,695 | | | (248) | | | 9,464 | | | (582) | | | 50,159 | |
| Non-agency mortgage-backed securities | Non-agency mortgage-backed securities | (28) | | | 1,366 | | | (18) | | | 534 | | | (46) | | | 1,900 | | Non-agency mortgage-backed securities | (4) | | | 1,966 | | | (11) | | | 543 | | | (15) | | | 2,509 | |
| Collateralized loan obligations | Collateralized loan obligations | (27) | | | 5,082 | | | (17) | | | 1,798 | | | (44) | | | 6,880 | | Collateralized loan obligations | (3) | | | 1,619 | | | (4) | | | 1,242 | | | (7) | | | 2,861 | |
| Other debt securities | Other debt securities | (16) | | | 647 | | | (45) | | | 1,604 | | | (61) | | | 2,251 | | Other debt securities | — | | | — | | | (7) | | | 624 | | | (7) | | | 624 | |
| Total available-for-sale debt securities | Total available-for-sale debt securities | $ | (152) | | | 38,898 | | | (111) | | | 5,353 | | | (263) | | | 44,251 | | Total available-for-sale debt securities | $ | (569) | | | 71,006 | | | (285) | | | 12,405 | | | (854) | | | 83,411 | |
We have assessed each debt security with gross unrealized losses included in the previous table for credit impairment. As part of that assessment we evaluated and concluded that we do not intend to sell any of the debt securities, and that it is more likely than not that we will not be required to sell, prior to recovery of the amortized cost basis. We evaluate, where necessary, whether credit impairment exists by comparing the present value of the expected cash flows to the debt securities’ amortized cost basis. Credit impairment is recorded as an ACL for debt securities.
For descriptions of the factors we consider when analyzing debt securities for impairment as well as methodology and significant inputs used to measure credit losses, see Note 1 (Summary of Significant Accounting Policies) in our 20202021 Form 10-K.
| | | | | | | | |
| 70 | Wells Fargo & Company | 77 |
Note 3: Available-for-Sale and Held-to-Maturity Debt Securities (continued)
Contractual Maturities
Table 3.6 and Table 3.7 show the remaining contractual maturities, amortized cost, net of the ACL, fair value and weighted average effective yields of AFS and HTM debt securities, respectively. The remaining contractual principal
maturities for mortgage-backed securities (MBS) do not consider prepayments. Remaining expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature.
Table 3.6: Contractual Maturities – Available-for-Sale Debt Securities
| | By remaining contractual maturity ($ in millions) | 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 | By remaining contractual maturity ($ in millions) | Total | | Within
one year | | After
one year
through
five years | | After
five years
through
ten years | | After
ten years |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Available-for-sale debt securities (1): | Available-for-sale debt securities (1): | | Available-for-sale debt securities (1): | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | | Securities of U.S. Treasury and federal agencies | |
| Amortized cost, net | Amortized cost, net | $ | 35,741 | | | 5 | | | 17,965 | | | 15,777 | | | 1,994 | | Amortized cost, net | $ | 47,946 | | | 251 | | | 18,089 | | | 27,778 | | | 1,828 | |
| Fair value | Fair value | 35,905 | | | 5 | | | 17,978 | | | 15,837 | | | 2,085 | | Fair value | 46,433 | | | 247 | | | 17,794 | | | 26,478 | | | 1,914 | |
| Weighted average yield | Weighted average yield | 0.75 | % | | 2.00 | | | 0.33 | | | 1.13 | | | 1.44 | | Weighted average yield | 1.01 | % | | 0.25 | | | 0.34 | | | 1.42 | | | 1.44 | |
| Non-U.S. government securities | Non-U.S. government securities | | Non-U.S. government securities | |
| Amortized cost, net | Amortized cost, net | $ | 11,201 | | | 11,176 | | | 25 | | | 0 | | | 0 | | Amortized cost, net | $ | 116 | | | 1 | | | 90 | | | 25 | | | — | |
| Fair value | Fair value | 11,201 | | | 11,176 | | | 25 | | | 0 | | | 0 | | Fair value | 116 | | | 1 | | | 90 | | | 25 | | | — | |
| Weighted average yield | Weighted average yield | (0.11 | %) | | (0.11) | | | 0.42 | | | 0 | | | 0 | | Weighted average yield | 0.40 | % | | 1.49 | | | 0.38 | | | 0.43 | | | — | |
| Securities of U.S. states and political subdivisions | Securities of U.S. states and political subdivisions | | Securities of U.S. states and political subdivisions | |
| Amortized cost, net | Amortized cost, net | $ | 19,121 | | | 1,546 | | | 2,225 | | | 5,244 | | | 10,106 | | Amortized cost, net | $ | 16,484 | | | 752 | | | 2,177 | | | 5,757 | | | 7,798 | |
| Fair value | Fair value | 19,499 | | | 1,549 | | | 2,270 | | | 5,253 | | | 10,427 | | Fair value | 16,486 | | | 751 | | | 2,181 | | | 5,599 | | | 7,955 | |
| Weighted average yield | Weighted average yield | 2.07 | % | | 1.46 | | | 1.58 | | | 1.41 | | | 2.62 | | Weighted average yield | 2.03 | % | | 1.41 | | | 1.41 | | | 1.51 | | | 2.65 | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | | Federal agency mortgage-backed securities | |
| Amortized cost, net | Amortized cost, net | $ | 94,186 | | | 8 | | | 171 | | | 3,359 | | | 90,648 | | Amortized cost, net | $ | 94,726 | | | — | | | 247 | | | 2,415 | | | 92,064 | |
| Fair value | Fair value | 96,534 | | | 8 | | | 181 | | | 3,484 | | | 92,861 | | Fair value | 91,437 | | | — | | | 249 | | | 2,381 | | | 88,807 | |
| Weighted average yield | Weighted average yield | 2.72 | % | | 2.35 | | | 3.30 | | | 2.30 | | | 2.74 | | Weighted average yield | 2.60 | % | | — | | | 2.86 | | | 2.32 | | | 2.61 | |
| Non-agency mortgage-backed securities | Non-agency mortgage-backed securities | | Non-agency mortgage-backed securities | |
| Amortized cost, net | Amortized cost, net | $ | 4,349 | | | 0 | | | 0 | | | 151 | | | 4,198 | | Amortized cost, net | $ | 4,641 | | | — | | | — | | | 110 | | | 4,531 | |
| Fair value | Fair value | 4,378 | | | 0 | | | 0 | | | 150 | | | 4,228 | | Fair value | 4,608 | | | — | | | — | | | 110 | | | 4,498 | |
| Weighted average yield | Weighted average yield | 2.00 | % | | 0 | | | 0 | | | 2.27 | | | 1.99 | | Weighted average yield | 2.06 | % | | — | | | — | | | 2.63 | | | 2.04 | |
| Collateralized loan obligations | Collateralized loan obligations | | Collateralized loan obligations | |
| Amortized cost, net | Amortized cost, net | $ | 12,406 | | | 0 | | | 90 | | | 7,306 | | | 5,010 | | Amortized cost, net | $ | 5,231 | | | — | | | 4 | | | 4,824 | | | 403 | |
| Fair value | Fair value | 12,407 | | | 0 | | | 90 | | | 7,304 | | | 5,013 | | Fair value | 5,197 | | | — | | | 4 | | | 4,794 | | | 399 | |
| Weighted average yield | Weighted average yield | 1.42 | % | | 0 | | | 2.21 | | | 1.44 | | | 1.39 | | Weighted average yield | 1.55 | % | | — | | | 2.26 | | | 1.55 | | | 1.56 | |
| Other debt securities | Other debt securities | | Other debt securities | |
| Amortized cost, net | Amortized cost, net | $ | 9,305 | | | 160 | | | 2,791 | | | 2,865 | | | 3,489 | | Amortized cost, net | $ | 3,974 | | | 55 | | | 400 | | | 1,030 | | | 2,489 | |
| Fair value | Fair value | 9,973 | | | 160 | | | 3,152 | | | 2,910 | | | 3,751 | | Fair value | 4,159 | | | 55 | | | 398 | | | 1,030 | | | 2,676 | |
| Weighted average yield | Weighted average yield | 3.17 | % | | 2.97 | | | 4.23 | | | 3.31 | | | 2.22 | | Weighted average yield | 2.00 | % | | 1.99 | | | 1.65 | | | 1.87 | | | 2.10 | |
| Total available-for-sale debt securities | Total available-for-sale debt securities | | Total available-for-sale debt securities | |
| Amortized cost, net | Amortized cost, net | $ | 186,309 | | | 12,895 | | | 23,267 | | | 34,702 | | | 115,445 | | Amortized cost, net | $ | 173,118 | | | 1,059 | | | 21,007 | | | 41,939 | | | 109,113 | |
| Fair value | Fair value | $ | 189,897 | | | 12,898 | | | 23,696 | | | 34,938 | | | 118,365 | | Fair value | 168,436 | | | 1,054 | | | 20,716 | | | 40,417 | | | 106,249 | |
| Weighted average yield | Weighted average yield | 2.03 | % | | 0.22 | | | 0.95 | | | 1.54 | | | 2.60 | | Weighted average yield | 2.04 | % | | 1.17 | | | 0.50 | | | 1.51 | | | 2.55 | |
(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.
| | | | | | | | |
78 | Wells Fargo & Company | 71 |
Note 3: Available-for-Sale and Held-to-Maturity Debt Securities (continued)
Table 3.7: Contractual Maturities – Held-to-Maturity Debt Securities
| | By remaining contractual maturity ($ in millions) | 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 | By remaining contractual maturity ($ in millions) | Total | | Within
one year | | After
one year
through
five years | | After
five years
through
ten years | | After
ten years |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Held-to-maturity debt securities (1): | Held-to-maturity debt securities (1): | | Held-to-maturity debt securities (1): | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | | Securities of U.S. Treasury and federal agencies | |
| Amortized cost, net | Amortized cost, net | $ | 27,576 | | | 11,386 | | | 12,407 | | | 0 | | | 3,783 | | Amortized cost, net | $ | 16,196 | | | — | | | 12,411 | | | — | | | 3,785 | |
| Fair value | Fair value | 28,029 | | | 11,461 | | | 13,140 | | | 0 | | | 3,428 | | Fair value | 15,551 | | | — | | | 12,386 | | | — | | | 3,165 | |
| Weighted average yield | Weighted average yield | 2.10 | % | | 1.98 | | | 2.37 | | | 0 | | | 1.57 | | Weighted average yield | 2.18 | % | | — | | | 2.37 | | | — | | | 1.57 | |
| Securities of U.S. states and political subdivisions | Securities of U.S. states and political subdivisions | | Securities of U.S. states and political subdivisions | |
| Amortized cost, net | Amortized cost, net | $ | 28,243 | | | 673 | | | 2,177 | | | 2,066 | | | 23,327 | | Amortized cost, net | $ | 32,969 | | | 1,243 | | | 2,949 | | | 2,235 | | | 26,542 | |
| Fair value | Fair value | 29,138 | | | 680 | | | 2,246 | | | 2,150 | | | 24,062 | | Fair value | 30,916 | | | 1,246 | | | 2,914 | | | 2,234 | | | 24,522 | |
| Weighted average yield | Weighted average yield | 2.19 | % | | 2.09 | | | 1.90 | | | 2.65 | | | 2.18 | | Weighted average yield | 2.12 | % | | 2.11 | | | 1.32 | | | 2.51 | | | 2.18 | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | | Federal agency mortgage-backed securities | |
| Amortized cost, net | Amortized cost, net | $ | 182,891 | | | 0 | | | 0 | | | 0 | | | 182,891 | | Amortized cost, net | $ | 198,266 | | | — | | | — | | | — | | | 198,266 | |
| Fair value | Fair value | 184,450 | | | 0 | | | 0 | | | 0 | | | 184,450 | | Fair value | 185,013 | | | — | | | — | | | — | | | 185,013 | |
| Weighted average yield | Weighted average yield | 2.20 | % | | 0 | | | 0 | | | 0 | | | 2.20 | | Weighted average yield | 2.16 | % | | — | | | — | | | — | | | 2.16 | |
| Non-agency mortgage-backed securities | Non-agency mortgage-backed securities | | Non-agency mortgage-backed securities | |
| Amortized cost, net | Amortized cost, net | $ | 948 | | | 0 | | | 15 | | | 0 | | | 933 | | Amortized cost, net | $ | 1,174 | | | 15 | | | 18 | | | 30 | | | 1,111 | |
| Fair value | Fair value | 983 | | | 0 | | | 15 | | | 0 | | | 968 | | Fair value | 1,115 | | | 15 | | | 18 | | | 29 | | | 1,053 | |
| Weighted average yield | Weighted average yield | 3.09 | % | | 0 | | | 1.56 | | | 0 | | | 3.12 | | Weighted average yield | 2.97 | % | | 3.24 | | | 2.93 | | | 3.16 | | | 2.97 | |
| Collateralized loan obligations | Collateralized loan obligations | | Collateralized loan obligations | |
| Amortized cost, net | Amortized cost, net | $ | 21,283 | | | 0 | | | 0 | | | 8,155 | | | 13,128 | | Amortized cost, net | $ | 30,475 | | | — | | | — | | | 13,361 | | | 17,114 | |
| Fair value | Fair value | 21,487 | | | 0 | | | 0 | | | 8,248 | | | 13,239 | | Fair value | 30,396 | | | — | | | — | | | 13,396 | | | 17,000 | |
| Weighted average yield | Weighted average yield | 1.68 | % | | 0 | | | 0 | | | 1.73 | | | 1.65 | | Weighted average yield | 1.65 | % | | — | | | — | | | 1.73 | | | 1.59 | |
| Other debt securities | | Other debt securities | |
| Amortized cost, net | | Amortized cost, net | $ | 1,728 | | | — | | | 762 | | | 966 | | | — | |
| Fair value | | Fair value | 1,650 | | | — | | | 732 | | | 918 | | | — | |
| Weighted average yield | | Weighted average yield | 4.47 | % | | — | | | 4.13 | | | 4.74 | | | — | |
| Total held-to-maturity debt securities | Total held-to-maturity debt securities | | Total held-to-maturity debt securities | |
| Amortized cost, net | Amortized cost, net | $ | 260,941 | | | 12,059 | | | 14,599 | | | 10,221 | | | 224,062 | | Amortized cost, net | $ | 280,808 | | | 1,258 | | | 16,140 | | | 16,592 | | | 246,818 | |
| Fair value | Fair value | 264,087 | | | 12,141 | | | 15,401 | | | 10,398 | | | 226,147 | | Fair value | 264,641 | | | 1,261 | | | 16,050 | | | 16,577 | | | 230,753 | |
| Weighted average yield | Weighted average yield | 2.15 | % | | 1.98 | | | 2.30 | | | 1.91 | | | 2.16 | | Weighted average yield | 2.12 | % | | 2.12 | | | 2.26 | | | 2.01 | | | 2.12 | |
(1)Weighted average yields displayed by maturity bucket are weighted based on amortized cost and are shown pre-tax.
| | | | | | | | |
| 72 | Wells Fargo & Company | 79 |
| | |
Note 4: Loans and Related Allowance for Credit Losses |
Table 4.1 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 June 30, 2021,March 31, 2022, and December 31, 2020.2021.
Outstanding balances exclude accrued interest receivable on loans, except for certain revolving loans, such as credit card loans.
See Note 7 (Other Assets) for additional information on accrued interest receivable. Amounts considered to be uncollectible are reversed through interest income. During the first half of 2021,quarter 2022, we reversed accrued interest receivable of $24$12 million for our commercial portfolio segment and $104$32 million for our consumer portfolio segment, compared with $21$16 million and $114$51 million, respectively, for the same period a year ago.
Table 4.1: Loans Outstanding
| | (in millions) | (in millions) | Jun 30,
2021 | | Dec 31,
2020 | | (in millions) | Mar 31,
2022 | | Dec 31,
2021 | |
| | | | Commercial: | Commercial: | | | Commercial: | | |
| Commercial and industrial | Commercial and industrial | $ | 317,618 | | | 318,805 | | | Commercial and industrial | $ | 362,137 | | | 350,436 | | |
| Real estate mortgage | Real estate mortgage | 120,678 | | | 121,720 | | | Real estate mortgage | 129,495 | | | 127,733 | | |
| Real estate construction | Real estate construction | 22,406 | | | 21,805 | | | Real estate construction | 20,613 | | | 20,092 | | |
| Lease financing | Lease financing | 15,720 | | | 16,087 | | | Lease financing | 14,469 | | | 14,859 | | |
| Total commercial | Total commercial | 476,422 | | | 478,417 | | | Total commercial | 526,714 | | | 513,120 | | |
| Consumer: | Consumer: | | | Consumer: | | |
| Residential mortgage – first lien | Residential mortgage – first lien | 244,371 | | | 276,674 | | | Residential mortgage – first lien | 245,242 | | | 242,270 | | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | 19,637 | | | 23,286 | | | Residential mortgage – junior lien | 15,392 | | | 16,618 | | |
| Credit card | Credit card | 34,936 | | | 36,664 | | | Credit card | 38,639 | | | 38,453 | | |
| Auto | Auto | 51,073 | | | 48,187 | | | Auto | 57,083 | | | 56,659 | | |
| Other consumer | Other consumer | 25,861 | | | 24,409 | | | Other consumer | 28,737 | | | 28,274 | | |
| Total consumer | Total consumer | 375,878 | | | 409,220 | | | Total consumer | 385,093 | | | 382,274 | | |
| Total loans | Total loans | $ | 852,300 | | | 887,637 | | | Total loans | $ | 911,807 | | | 895,394 | | |
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 4.2 presents total non-U.S. commercial loans outstanding by class of financing receivable.
Table 4.2: Non-U.S. Commercial Loans Outstanding
| | (in millions) | (in millions) | Jun 30,
2021 | | Dec 31,
2020 | | (in millions) | Mar 31,
2022 | | Dec 31,
2021 |
| | | | Non-U.S. commercial loans: | Non-U.S. commercial loans: | | | Non-U.S. commercial loans: | |
| Commercial and industrial | Commercial and industrial | $ | 71,409 | | | 63,128 | | | Commercial and industrial | $ | 80,435 | | | 77,365 | |
| Real estate mortgage | Real estate mortgage | 6,619 | | | 7,278 | | | Real estate mortgage | 7,072 | | | 7,070 | |
| Real estate construction | Real estate construction | 1,820 | | | 1,603 | | | Real estate construction | 1,577 | | | 1,582 | |
| Lease financing | Lease financing | 672 | | | 629 | | | Lease financing | 690 | | | 680 | |
| Total non-U.S. commercial loans | Total non-U.S. commercial loans | $ | 80,520 | | | 72,638 | | | Total non-U.S. commercial loans | $ | 89,774 | | | 86,697 | |
| | | | | | | | |
80 | Wells Fargo & Company | 73 |
Loan Purchases, Sales, and Transfers
Table 4.3 presents the proceeds paid or received for purchases and sales of loans and transfers from loans held for investment to mortgages/loans held for sale. The table excludes loans for
which we have elected the fair value option and government insured/guaranteed residential mortgage – first lien loans because their loan activity normally does not impact the ACL.
Table 4.3: Loan Purchases, Sales, and Transfers
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| 2021 | | 2020 |
| (in millions) | Commercial | | Consumer | | Total | | Commercial | | Consumer | | Total |
| Quarter ended June 30, | | | | | | | | | | | |
| Purchases | $ | 134 | | | 1 | | | 135 | | | 332 | | | 2 | | | 334 | |
| Sales | (65) | | | 0 | | | (65) | | | (1,957) | | | (1) | | | (1,958) | |
| Transfers (to)/from LHFS | (359) | | | (99) | | | (458) | | | (8) | | | (10,379) | | | (10,387) | |
| Six months ended June 30, | | | | | | | | | | | |
| Purchases | $ | 182 | | | 2 | | | 184 | | | 673 | | | 3 | | | 676 | |
| Sales | (338) | | | (188) | | | (526) | | | (2,770) | | | (27) | | | (2,797) | |
| Transfers (to)/from LHFS | (794) | | | (36) | | | (830) | | | 69 | | | (10,377) | | | (10,308) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| 2022 | | 2021 |
| (in millions) | Commercial | | Consumer | | Total | | Commercial | | Consumer | | Total |
| Quarter ended March 31, | | | | | | | | | | | |
| Purchases | $ | 100 | | | — | | | 100 | | | 48 | | | 1 | | | 49 | |
| Sales | (582) | | | — | | | (582) | | | (273) | | | (188) | | | (461) | |
| Transfers (to)/from LHFS | 21 | | | (9) | | | 12 | | | (435) | | | 63 | | | (372) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Commitments to Lend
A commitment to lend is a legally binding agreement to lend 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 either provide us with funding discretion or 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. For unconditionally cancelable commitments at our discretion, we do not recognize an ACL.
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 $82.6$90.6 billion at June 30, 2021.March 31, 2022.
We issue commercial letters of credit to assist customers in purchasing goods or services, typically for international trade. At June 30, 2021,March 31, 2022, and December 31, 2020,2021, we had $1.4$1.9 billion and $1.3$1.5 billion, 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 11 (Guarantees and Other Commitments) for additional information on standby letters of credit.
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. 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, autos, 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 4.4. The table excludes the issued standby and commercial letters of credit and temporary advance arrangements described above.
Table 4.4: Unfunded Credit Commitments
| | (in millions) | (in millions) | Jun 30,
2021 | | Dec 31,
2020 | (in millions) | Mar 31,
2022 | | Dec 31,
2021 |
| Commercial: | Commercial: | | Commercial: | |
| Commercial and industrial | Commercial and industrial | $ | 394,370 | | | 378,167 | | Commercial and industrial | $ | 412,645 | | | 404,292 | |
| Real estate mortgage | Real estate mortgage | 8,794 | | | 7,993 | | Real estate mortgage | 9,499 | | | 11,515 | |
| Real estate construction | Real estate construction | 16,260 | | | 15,650 | | Real estate construction | 19,389 | | | 19,943 | |
| | Total commercial | Total commercial | 419,424 | | | 401,810 | | Total commercial | 441,533 | | | 435,750 | |
| Consumer: | Consumer: | | Consumer: | |
| Residential mortgage – first lien | Residential mortgage – first lien | 37,920 | | | 31,530 | | Residential mortgage – first lien | 32,442 | | | 32,992 | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | 30,170 | | | 32,820 | | Residential mortgage – junior lien | 25,924 | | | 27,447 | |
| Credit card | Credit card | 124,985 | | | 121,096 | | Credit card | 135,021 | | | 130,743 | |
| Other consumer | Other consumer | 54,724 | | | 49,179 | | Other consumer | 59,489 | | | 59,789 | |
| Total consumer | Total consumer | 247,799 | | | 234,625 | | Total consumer | 252,876 | | | 250,971 | |
| Total unfunded credit commitments | Total unfunded credit commitments | $ | 667,223 | | | 636,435 | | Total unfunded credit commitments | $ | 694,409 | | | 686,721 | |
| | | | | | | | |
| 74 | Wells Fargo & Company | 81 |
Note 4: Loans and Related Allowance for Credit Losses (continued)
Allowance for Credit Losses
Table 4.5 presents the allowance for credit losses (ACL) for loans, which consists of the allowance for loan losses and the allowance
for unfunded credit commitments. The ACL for loans decreased $3.3
$1.1 billion from December 31, 2020, due2021, reflecting reduced uncertainty around the economic impact of the COVID-19 pandemic on our loan portfolios and increased uncertainty related to improvements in current and forecasted economic conditions.the risks of high inflation.
Table 4.5: Allowance for Credit Losses for Loans
| | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended March 31, | |
| ($ in millions) | ($ in millions) | 2021 | | 2020 | | 2021 | | 2020 | | ($ in millions) | | 2022 | | 2021 | |
| Balance, beginning of period | Balance, beginning of period | $ | 18,043 | | | 12,022 | | | 19,713 | | | 10,456 | | | Balance, beginning of period | | $ | 13,788 | | | 19,713 | | |
| | Cumulative effect from change in accounting policies (1) | 0 | | | 0 | | | 0 | | | (1,337) | | | |
| Allowance for purchased credit-deteriorated (PCD) loans (2) | 0 | | | 0 | | | 0 | | | 8 | | | |
| | Balance, beginning of period, adjusted | 18,043 | | | 12,022 | | | 19,713 | | | 9,127 | | | |
| Provision for credit losses | Provision for credit losses | (1,239) | | | 9,565 | | | (2,356) | | | 13,398 | | | Provision for credit losses | | (775) | | | (1,117) | | |
| Interest income on certain impaired loans (3) | (36) | | | (38) | | | (77) | | | (76) | | | |
| Interest income on certain loans (1) | | Interest income on certain loans (1) | | (29) | | | (41) | | |
| Loan charge-offs: | Loan charge-offs: | | | Loan charge-offs: | | | |
| Commercial: | Commercial: | | | Commercial: | | | |
| Commercial and industrial | Commercial and industrial | (149) | | | (556) | | | (308) | | | (933) | | | Commercial and industrial | | (56) | | | (159) | | |
| Real estate mortgage | Real estate mortgage | (11) | | | (72) | | | (63) | | | (75) | | | Real estate mortgage | | — | | | (52) | | |
| Real estate construction | Real estate construction | 0 | | | 0 | | | 0 | | | 0 | | | Real estate construction | | — | | | — | | |
| Lease financing | Lease financing | (10) | | | (19) | | | (31) | | | (32) | | | Lease financing | | (4) | | | (21) | | |
| Total commercial | Total commercial | (170) | | | (647) | | | (402) | | | (1,040) | | | Total commercial | | (60) | | | (232) | | |
| Consumer: | Consumer: | | | Consumer: | | | |
| Residential mortgage – first lien | Residential mortgage – first lien | (6) | | | (20) | | | (23) | | | (43) | | | Residential mortgage – first lien | | (25) | | | (17) | | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | (12) | | | (18) | | | (31) | | | (48) | | | Residential mortgage – junior lien | | (22) | | | (19) | | |
| Credit card | Credit card | (357) | | | (415) | | | (692) | | | (886) | | | Credit card | | (267) | | | (335) | | |
| Auto | Auto | (128) | | | (158) | | | (257) | | | (314) | | | Auto | | (165) | | | (129) | | |
| Other consumer | Other consumer | (79) | | | (113) | | | (226) | | | (278) | | | Other consumer | | (108) | | | (147) | | |
| Total consumer | Total consumer | (582) | | | (724) | | | (1,229) | | | (1,569) | | | Total consumer | | (587) | | | (647) | | |
| Total loan charge-offs | Total loan charge-offs | (752) | | | (1,371) | | | (1,631) | | | (2,609) | | | Total loan charge-offs | | (647) | | | (879) | | |
| Loan recoveries: | Loan recoveries: | | | Loan recoveries: | | | |
| Commercial: | Commercial: | | | Commercial: | | | |
| Commercial and industrial | Commercial and industrial | 68 | | | 35 | | | 139 | | | 79 | | | Commercial and industrial | | 79 | | | 71 | | |
| Real estate mortgage | Real estate mortgage | 16 | | | 5 | | | 22 | | | 10 | | | Real estate mortgage | | 5 | | | 6 | | |
| Real estate construction | Real estate construction | 1 | | | 1 | | | 1 | | | 17 | | | Real estate construction | | — | | | — | | |
| Lease financing | Lease financing | 5 | | | 4 | | | 11 | | | 8 | | | Lease financing | | 5 | | | 6 | | |
| Total commercial | Total commercial | 90 | | | 45 | | | 173 | | | 114 | | | Total commercial | | 89 | | | 83 | | |
| Consumer: | Consumer: | | | Consumer: | | | |
| Residential mortgage – first lien | Residential mortgage – first lien | 25 | | | 18 | | | 66 | | | 44 | | | Residential mortgage – first lien | | 28 | | | 41 | | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | 43 | | | 30 | | | 81 | | | 65 | | | Residential mortgage – junior lien | | 40 | | | 38 | | |
| Credit card | Credit card | 101 | | | 88 | | | 200 | | | 182 | | | Credit card | | 91 | | | 99 | | |
| Auto | Auto | 83 | | | 52 | | | 160 | | | 126 | | | Auto | | 69 | | | 77 | | |
| Other consumer | Other consumer | 29 | | | 25 | | | 57 | | | 56 | | | Other consumer | | 25 | | | 28 | | |
| Total consumer | Total consumer | 281 | | | 213 | | | 564 | | | 473 | | | Total consumer | | 253 | | | 283 | | |
| Total loan recoveries | Total loan recoveries | 371 | | | 258 | | | 737 | | | 587 | | | Total loan recoveries | | 342 | | | 366 | | |
| Net loan charge-offs | Net loan charge-offs | (381) | | | (1,113) | | | (894) | | | (2,022) | | | Net loan charge-offs | | (305) | | | (513) | | |
| Other | Other | 4 | | | 0 | | | 5 | | | 9 | | | Other | | 2 | | | 1 | | |
| Balance, end of period | Balance, end of period | $ | 16,391 | | | 20,436 | | | 16,391 | | | 20,436 | | | Balance, end of period | | $ | 12,681 | | | 18,043 | | |
| | Components: | Components: | | | Components: | | | |
| Allowance for loan losses | Allowance for loan losses | $ | 15,148 | | | 18,926 | | | 15,148 | | | 18,926 | | | Allowance for loan losses | | $ | 11,504 | | | 16,928 | | |
| Allowance for unfunded credit commitments | Allowance for unfunded credit commitments | 1,243 | | | 1,510 | | | 1,243 | | | 1,510 | | | Allowance for unfunded credit commitments | | 1,177 | | | 1,115 | | |
| Allowance for credit losses | Allowance for credit losses | $ | 16,391 | | | 20,436 | | | 16,391 | | | 20,436 | | | Allowance for credit losses | | $ | 12,681 | | | 18,043 | | |
| Net loan charge-offs (annualized) as a percentage of average total loans | 0.18 | % | | 0.46 | | | 0.21 | | | 0.42 | | | |
| | Net loan charge-offs as a percentage of average total loans | | Net loan charge-offs as a percentage of average total loans | | 0.14 | % | | 0.24 | | |
| Allowance for loan losses as a percentage of total loans | Allowance for loan losses as a percentage of total loans | 1.78 | | | 2.02 | | | 1.78 | | | 2.02 | | | Allowance for loan losses as a percentage of total loans | | 1.26 | | | 1.96 | | |
| Allowance for credit losses for loans as a percentage of total loans | Allowance for credit losses for loans as a percentage of total loans | 1.92 | | | 2.19 | | | 1.92 | | | 2.19 | | | Allowance for credit losses for loans as a percentage of total loans | | 1.39 | | | 2.09 | | |
(1)Represents the overall decrease in our ACL for loans as a result of our adoption of CECL on January 1, 2020.
(2)Represents the allowance estimated for purchased credit-impaired (PCI) loans that automatically became PCD loans with the adoption of CECL. For additional information, see Note 1 (Summary of Significant Accounting Policies) in our 2020 Form 10-K.
(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.
| | | | | | | | |
82 | Wells Fargo & Company | 75 |
Table 4.6 summarizes the activity in the ACL by our commercial and consumer portfolio segments.
Table 4.6: Allowance for Credit Losses for Loans Activity by Portfolio Segment
| | | | 2021 | | 2020 | | 2022 | | 2021 |
| (in millions) | (in millions) | Commercial | | Consumer | | Total | | Commercial | | Consumer | | Total | (in millions) | Commercial | | Consumer | | Total | | Commercial | | Consumer | | Total |
| Quarter ended June 30, | | |
| Balance, beginning of period | $ | 10,682 | | | 7,361 | | | 18,043 | | | 5,279 | | | 6,743 | | | 12,022 | | |
| | | Quarter ended March 31, | | Quarter ended March 31, | | | |
| Balance, beginning of period | | Balance, beginning of period | $ | 7,791 | | | 5,997 | | | 13,788 | | | 11,516 | | | 8,197 | | | 19,713 | |
| Provision for credit losses | Provision for credit losses | (1,021) | | | (218) | | | (1,239) | | | 6,999 | | | 2,566 | | | 9,565 | | Provision for credit losses | (665) | | | (110) | | | (775) | | | (667) | | | (450) | | | (1,117) | |
| Interest income on certain loans (3) | (15) | | | (21) | | | (36) | | | (12) | | | (26) | | | (38) | | |
| Loan charge-offs | (170) | | | (582) | | | (752) | | | (647) | | | (724) | | | (1,371) | | |
| Loan recoveries | 90 | | | 281 | | | 371 | | | 45 | | | 213 | | | 258 | | |
| Net loan charge-offs | (80) | | | (301) | | | (381) | | | (602) | | | (511) | | | (1,113) | | |
| Other | 4 | | | 0 | | | 4 | | | 5 | | | (5) | | | 0 | | |
| Balance, end of period | $ | 9,570 | | | 6,821 | | | 16,391 | | | 11,669 | | | 8,767 | | | 20,436 | | |
| Six months ended June 30, | | |
| Balance, beginning of period | $ | 11,516 | | | 8,197 | | | 19,713 | | | 6,245 | | | 4,211 | | | 10,456 | | |
| Cumulative effect from change in accounting policies (1) | 0 | | | 0 | | | 0 | | | (2,861) | | | 1,524 | | | (1,337) | | |
| Allowance for purchased credit-deteriorated (PCD) loans (2) | 0 | | | 0 | | | 0 | | | 0 | | | 8 | | | 8 | | |
| Balance, beginning of period, adjusted | 11,516 | | | 8,197 | | | 19,713 | | | 3,384 | | | 5,743 | | | 9,127 | | |
| Provision for credit losses | (1,688) | | | (668) | | | (2,356) | | | 9,239 | | | 4,159 | | | 13,398 | | |
| Interest income on certain loans (3) | (34) | | | (43) | | | (77) | | | (26) | | | (50) | | | (76) | | |
| Interest income on certain loans (1) | | Interest income on certain loans (1) | (9) | | | (20) | | | (29) | | | (19) | | | (22) | | | (41) | |
| Loan charge-offs | Loan charge-offs | (402) | | | (1,229) | | | (1,631) | | | (1,040) | | | (1,569) | | | (2,609) | | Loan charge-offs | (60) | | | (587) | | | (647) | | | (232) | | | (647) | | | (879) | |
| Loan recoveries | Loan recoveries | 173 | | | 564 | | | 737 | | | 114 | | | 473 | | | 587 | | Loan recoveries | 89 | | | 253 | | | 342 | | | 83 | | | 283 | | | 366 | |
| Net loan charge-offs | Net loan charge-offs | (229) | | | (665) | | | (894) | | | (926) | | | (1,096) | | | (2,022) | | Net loan charge-offs | 29 | | | (334) | | | (305) | | | (149) | | | (364) | | | (513) | |
| Other | Other | 5 | | | 0 | | | 5 | | | (2) | | | 11 | | | 9 | | Other | 2 | | | — | | | 2 | | | 1 | | | — | | | 1 | |
| Balance, end of period | Balance, end of period | $ | 9,570 | | | 6,821 | | | 16,391 | | | 11,669 | | | 8,767 | | | 20,436 | | Balance, end of period | $ | 7,148 | | | 5,533 | | | 12,681 | | | 10,682 | | | 7,361 | | | 18,043 | |
|
(1)Represents the overall decrease in our ACL 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) in our 2020 Form 10-K.
(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 4: 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 ACL for loans. The following sections provide the credit quality indicators we most closely monitor. The credit quality indicators are generally based on information as of our financial statement date, 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 March 31, 2021.
COMMERCIAL CREDIT QUALITY INDICATORS We manage a consistent process for assessing commercial loan credit quality.
Commercial loans are generally subject to individual risk assessment using our internal borrower and collateral quality
ratings, which is our primary credit quality indicator. Our ratings are aligned to regulatory definitions of pass and criticized categories with the criticized segmented among special mention, substandard, doubtful and loss categories.
Table 4.7 provides the outstanding balances of our commercial loan portfolio by risk category. Creditcategory and credit quality information is provided with theby origination 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 troubled
debt restructuring (TDR). At June 30, 2021,March 31, 2022, we had $442.6$501.2 billion and $33.8$25.5 billion of pass and criticized commercial loans, respectively.
Table 4.7: Commercial Loan Categories by Risk Categories and Vintage
| | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | | Total | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | | Total |
| (in millions) | (in millions) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | (in millions) | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Commercial and industrial | Commercial and industrial | | Commercial and industrial | |
| Pass | Pass | $ | 37,051 | | | 25,171 | | | 28,385 | | | 11,075 | | | 5,582 | | | 12,341 | | | 183,360 | | | 341 | | | 303,306 | | Pass | $ | 25,954 | | | 49,141 | | | 16,084 | | | 19,801 | | | 6,756 | | | 11,769 | | | 221,270 | | | 643 | | | 351,418 | |
| Criticized | Criticized | 729 | | | 1,317 | | | 1,325 | | | 1,594 | | | 826 | | | 1,078 | | | 7,443 | | | 0 | | | 14,312 | | Criticized | 330 | | | 1,470 | | | 819 | | | 946 | | | 1,121 | | | 928 | | | 5,094 | | | 11 | | | 10,719 | |
| Total commercial and industrial | Total commercial and industrial | 37,780 | | | 26,488 | | | 29,710 | | | 12,669 | | | 6,408 | | | 13,419 | | | 190,803 | | | 341 | | | 317,618 | | Total commercial and industrial | 26,284 | | | 50,611 | | | 16,903 | | | 20,747 | | | 7,877 | | | 12,697 | | | 226,364 | | | 654 | | | 362,137 | |
| Real estate mortgage | Real estate mortgage | | Real estate mortgage | |
| Pass | Pass | 14,713 | | | 18,977 | | | 21,983 | | | 15,350 | | | 9,245 | | | 20,321 | | | 4,478 | | | 1 | | | 105,068 | | Pass | 9,636 | | | 36,066 | | | 15,336 | | | 17,767 | | | 11,912 | | | 21,815 | | | 5,009 | | | — | | | 117,541 | |
| Criticized | Criticized | 1,664 | | | 2,450 | | | 3,444 | | | 2,679 | | | 1,286 | | | 3,665 | | | 422 | | | 0 | | | 15,610 | | Criticized | 450 | | | 3,260 | | | 1,083 | | | 2,616 | | | 1,497 | | | 2,804 | | | 244 | | | — | | | 11,954 | |
| Total real estate mortgage | Total real estate mortgage | 16,377 | | | 21,427 | | | 25,427 | | | 18,029 | | | 10,531 | | | 23,986 | | | 4,900 | | | 1 | | | 120,678 | | Total real estate mortgage | 10,086 | | | 39,326 | | | 16,419 | | | 20,383 | | | 13,409 | | | 24,619 | | | 5,253 | | | — | | | 129,495 | |
| Real estate construction | Real estate construction | | Real estate construction | |
| Pass | Pass | 2,800 | | | 4,995 | | | 6,148 | | | 3,607 | | | 775 | | | 359 | | | 1,138 | | | 2 | | | 19,824 | | Pass | 913 | | | 6,255 | | | 3,866 | | | 4,216 | | | 2,055 | | | 561 | | | 1,043 | | | 1 | | | 18,910 | |
| Criticized | Criticized | 354 | | | 501 | | | 746 | | | 418 | | | 442 | | | 120 | | | 1 | | | 0 | | | 2,582 | | Criticized | 195 | | | 475 | | | 205 | | | 534 | | | 227 | | | 67 | | | — | | | — | | | 1,703 | |
| Total real estate construction | Total real estate construction | 3,154 | | | 5,496 | | | 6,894 | | | 4,025 | | | 1,217 | | | 479 | | | 1,139 | | | 2 | | | 22,406 | | Total real estate construction | 1,108 | | | 6,730 | | | 4,071 | | | 4,750 | | | 2,282 | | | 628 | | | 1,043 | | | 1 | | | 20,613 | |
| Lease financing | Lease financing | | Lease financing | |
| Pass | Pass | 2,244 | | | 3,545 | | | 3,180 | | | 1,752 | | | 1,107 | | | 2,555 | | | 0 | | | 0 | | | 14,383 | | Pass | 611 | | | 4,152 | | | 2,777 | | | 2,245 | | | 1,203 | | | 2,361 | | | — | | | — | | | 13,349 | |
| Criticized | Criticized | 145 | | | 293 | | | 374 | | | 254 | | | 129 | | | 142 | | | 0 | | | 0 | | | 1,337 | | Criticized | 77 | | | 275 | | | 217 | | | 249 | | | 154 | | | 148 | | | — | | | — | | | 1,120 | |
| Total lease financing | Total lease financing | 2,389 | | | 3,838 | | | 3,554 | | | 2,006 | | | 1,236 | | | 2,697 | | | 0 | | | 0 | | | 15,720 | | Total lease financing | 688 | | | 4,427 | | | 2,994 | | | 2,494 | | | 1,357 | | | 2,509 | | | — | | | — | | | 14,469 | |
| Total commercial loans | Total commercial loans | $ | 59,700 | | | 57,249 | | | 65,585 | | | 36,729 | | | 19,392 | | | 40,581 | | | 196,842 | | | 344 | | | 476,422 | | Total commercial loans | $ | 38,166 | | | 101,094 | | | 40,387 | | | 48,374 | | | 24,925 | | | 40,453 | | | 232,660 | | | 655 | | | 526,714 | |
| | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | | Total | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | | Total |
| | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| Commercial and industrial | Commercial and industrial | | Commercial and industrial | |
| Pass | Pass | $ | 56,915 | | | 34,040 | | | 15,936 | | | 7,274 | | | 4,048 | | | 4,738 | | | 177,107 | | | 997 | | | 301,055 | | Pass | $ | 65,562 | | | 15,193 | | | 20,553 | | | 7,400 | | | 3,797 | | | 13,985 | | | 211,452 | | | 679 | | | 338,621 | |
| Criticized | Criticized | 1,404 | | | 1,327 | | | 1,357 | | | 972 | | | 672 | | | 333 | | | 11,534 | | | 151 | | | 17,750 | | Criticized | 1,657 | | | 884 | | | 1,237 | | | 1,256 | | | 685 | | | 551 | | | 5,528 | | | 17 | | | 11,815 | |
| Total commercial and industrial | Total commercial and industrial | 58,319 | | | 35,367 | | | 17,293 | | | 8,246 | | | 4,720 | | | 5,071 | | | 188,641 | | | 1,148 | | | 318,805 | | Total commercial and industrial | 67,219 | | | 16,077 | | | 21,790 | | | 8,656 | | | 4,482 | | | 14,536 | | | 216,980 | | | 696 | | | 350,436 | |
| Real estate mortgage | Real estate mortgage | | Real estate mortgage | |
| Pass | Pass | 22,444 | | | 26,114 | | | 18,679 | | | 11,113 | | | 11,582 | | | 14,663 | | | 5,152 | | | 6 | | | 109,753 | | Pass | 38,196 | | | 15,929 | | | 19,013 | | | 12,618 | | | 7,451 | | | 16,026 | | | 5,411 | | | 3 | | | 114,647 | |
| Criticized | Criticized | 2,133 | | | 2,544 | | | 1,817 | | | 1,287 | | | 1,625 | | | 2,082 | | | 479 | | | 0 | | | 11,967 | | Criticized | 3,462 | | | 1,119 | | | 2,975 | | | 1,834 | | | 875 | | | 2,421 | | | 400 | | | — | | | 13,086 | |
| Total real estate mortgage | Total real estate mortgage | 24,577 | | | 28,658 | | | 20,496 | | | 12,400 | | | 13,207 | | | 16,745 | | | 5,631 | | | 6 | | | 121,720 | | Total real estate mortgage | 41,658 | | | 17,048 | | | 21,988 | | | 14,452 | | | 8,326 | | | 18,447 | | | 5,811 | | | 3 | | | 127,733 | |
| Real estate construction | Real estate construction | | Real estate construction | |
| Pass | Pass | 5,242 | | | 6,574 | | | 4,771 | | | 1,736 | | | 477 | | | 235 | | | 1,212 | | | 3 | | | 20,250 | | Pass | 5,895 | | | 4,058 | | | 4,549 | | | 2,167 | | | 379 | | | 329 | | | 1,042 | | | 2 | | | 18,421 | |
| Criticized | Criticized | 449 | | | 452 | | | 527 | | | 4 | | | 113 | | | 10 | | | 0 | | | 0 | | | 1,555 | | Criticized | 510 | | | 266 | | | 586 | | | 234 | | | 68 | | | 7 | | | — | | | — | | | 1,671 | |
| Total real estate construction | Total real estate construction | 5,691 | | | 7,026 | | | 5,298 | | | 1,740 | | | 590 | | | 245 | | | 1,212 | | | 3 | | | 21,805 | | Total real estate construction | 6,405 | | | 4,324 | | | 5,135 | | | 2,401 | | | 447 | | | 336 | | | 1,042 | | | 2 | | | 20,092 | |
| Lease financing | Lease financing | | Lease financing | |
| Pass | Pass | 3,970 | | | 3,851 | | | 2,176 | | | 1,464 | | | 1,199 | | | 1,924 | | | 0 | | | 0 | | | 14,584 | | Pass | 4,100 | | | 3,012 | | | 2,547 | | | 1,373 | | | 838 | | | 1,805 | | | — | | | — | | | 13,675 | |
| Criticized | Criticized | 308 | | | 433 | | | 372 | | | 197 | | | 108 | | | 85 | | | 0 | | | 0 | | | 1,503 | | Criticized | 284 | | | 246 | | | 282 | | | 184 | | | 86 | | | 102 | | | — | | | — | | | 1,184 | |
| Total lease financing | Total lease financing | 4,278 | | | 4,284 | | | 2,548 | | | 1,661 | | | 1,307 | | | 2,009 | | | 0 | | | 0 | | | 16,087 | | Total lease financing | 4,384 | | | 3,258 | | | 2,829 | | | 1,557 | | | 924 | | | 1,907 | | | — | | | — | | | 14,859 | |
| Total commercial loans | Total commercial loans | $ | 92,865 | | | 75,335 | | | 45,635 | | | 24,047 | | | 19,824 | | | 24,070 | | | 195,484 | | | 1,157 | | | 478,417 | | Total commercial loans | $ | 119,666 | | | 40,707 | | | 51,742 | | | 27,066 | | | 14,179 | | | 35,226 | | | 223,833 | | | 701 | | | 513,120 | |
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84 | Wells Fargo & Company | 77 |
Table 4.8 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 could continue to delay the recognition of delinquencies for customers who otherwise would have moved into past due status.
Table 4.8: Commercial Loan Categories by Delinquency Status
| | (in millions) | (in millions) | Commercial
and
industrial | | Real
estate
mortgage | | Real
estate
construction | | Lease
financing | | Total | (in millions) | Commercial
and
industrial | | Real
estate
mortgage | | Real
estate
construction | | Lease
financing | | Total |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| By delinquency status: | By delinquency status: | | By delinquency status: | |
| Current-29 days past due (DPD) and still accruing | Current-29 days past due (DPD) and still accruing | $ | 315,279 | | | 118,719 | | | 22,329 | | | 15,350 | | | 471,677 | | Current-29 days past due (DPD) and still accruing | $ | 360,333 | | | 127,757 | | | 20,513 | | | 14,221 | | | 522,824 | |
| 30-89 DPD and still accruing | 30-89 DPD and still accruing | 483 | | | 256 | | | 25 | | | 155 | | | 919 | | 30-89 DPD and still accruing | 819 | | | 625 | | | 95 | | | 131 | | | 1,670 | |
| 90+ DPD and still accruing | 90+ DPD and still accruing | 165 | | | 105 | | | 7 | | | 0 | | | 277 | | 90+ DPD and still accruing | 186 | | | 80 | | | 1 | | | — | | | 267 | |
| Nonaccrual loans | Nonaccrual loans | 1,691 | | | 1,598 | | | 45 | | | 215 | | | 3,549 | | Nonaccrual loans | 799 | | | 1,033 | | | 4 | | | 117 | | | 1,953 | |
| Total commercial loans | Total commercial loans | $ | 317,618 | | | 120,678 | | | 22,406 | | | 15,720 | | | 476,422 | | Total commercial loans | $ | 362,137 | | | 129,495 | | | 20,613 | | | 14,469 | | | 526,714 | |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| By delinquency status: | By delinquency status: | | By delinquency status: | |
| Current-29 DPD and still accruing | Current-29 DPD and still accruing | $ | 315,493 | | | 119,561 | | | 21,532 | | | 15,595 | | | 472,181 | | Current-29 DPD and still accruing | $ | 348,033 | | | 126,184 | | | 19,900 | | | 14,568 | | | 508,685 | |
| 30-89 DPD and still accruing | 30-89 DPD and still accruing | 575 | | | 347 | | | 224 | | | 233 | | | 1,379 | | 30-89 DPD and still accruing | 1,217 | | | 285 | | | 179 | | | 143 | | | 1,824 | |
| 90+ DPD and still accruing | 90+ DPD and still accruing | 39 | | | 38 | | | 1 | | | 0 | | | 78 | | 90+ DPD and still accruing | 206 | | | 29 | | | — | | | — | | | 235 | |
| Nonaccrual loans | Nonaccrual loans | 2,698 | | | 1,774 | | | 48 | | | 259 | | | 4,779 | | Nonaccrual loans | 980 | | | 1,235 | | | 13 | | | 148 | | | 2,376 | |
| Total commercial loans | Total commercial loans | $ | 318,805 | | | 121,720 | | | 21,805 | | | 16,087 | | | 478,417 | | Total commercial loans | $ | 350,436 | | | 127,733 | | | 20,092 | | | 14,859 | | | 513,120 | |
CONSUMER CREDIT QUALITY INDICATORS We have various classes of consumer loans that present unique credit risks. Loan delinquency, FICO credit scores and LTVloan-to-value (LTV) for residential mortgage loans are the primary credit quality indicators that we monitor and utilize in our evaluation of the appropriateness of the ACL for the consumer loan portfolio segment.
Many of our loss estimation techniques used for the ACL for loans rely on delinquency-based models; therefore, delinquency is an important indicator of credit quality in the establishment of our ACL for consumer loans.
Table 4.9 provides the outstanding balances of our consumer loan portfolio by delinquency status. Payment deferral activities instituted in response to the COVID-19 pandemic could continue to delay the recognition of delinquencies for customers who otherwise would have moved into past due status.
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.
Payment deferral activities in the residential mortgage portfolio instituted in response to the COVID-19 pandemic could continue to delay the recognition of delinquencies for residential mortgage customers who otherwise would have moved into past due status.
Table 4.9:Consumer Loan Categories by Delinquency Status and Vintage
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| Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | | |
| (in millions) | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | | | Total |
| March 31, 2022 | | | | | | | | | | | | | | | | | |
| Residential mortgage – first lien | | | | | | | | | | | | | | | | | |
| By delinquency status: | | | | | | | | | | | | | | | | | |
| Current-29 DPD | $ | 18,386 | | | 68,443 | | | 39,567 | | | 22,814 | | | 6,951 | | | 69,780 | | | 4,671 | | | 1,788 | | | 232,400 | |
| 30-59 DPD | 49 | | | 97 | | | 20 | | | 31 | | | 12 | | | 430 | | | 13 | | | 32 | | | 684 | |
| 60-89 DPD | — | | | 13 | | | 5 | | | 1 | | | 5 | | | 122 | | | 5 | | | 17 | | | 168 | |
| 90-119 DPD | — | | | 3 | | | 2 | | | — | | | 6 | | | 59 | | | 3 | | | 10 | | | 83 | |
| 120-179 DPD | — | | | 2 | | | 11 | | | 1 | | | 1 | | | 77 | | | 6 | | | 13 | | | 111 | |
| 180+ DPD | — | | | — | | | 41 | | | 39 | | | 40 | | | 929 | | | 30 | | | 147 | | | 1,226 | |
Government insured/guaranteed loans (1) | 1 | | | 25 | | | 124 | | | 167 | | | 283 | | | 9,970 | | | — | | | — | | | 10,570 | |
| Total residential mortgage – first lien | 18,436 | | | 68,583 | | | 39,770 | | | 23,053 | | | 7,298 | | | 81,367 | | | 4,728 | | | 2,007 | | | 245,242 | |
| Residential mortgage – junior lien | | | | | | | | | | | | | | | | | |
| By delinquency status: | | | | | | | | | | | | | | | | | |
| Current-29 DPD | 5 | | | 31 | | | 19 | | | 28 | | | 24 | | | 652 | | | 9,695 | | | 4,516 | | | 14,970 | |
| 30-59 DPD | — | | | — | | | — | | | 1 | | | — | | | 10 | | | 18 | | | 38 | | | 67 | |
| 60-89 DPD | — | | | — | | | — | | | — | | | — | | | 4 | | | 7 | | | 20 | | | 31 | |
| 90-119 DPD | — | | | — | | | — | | | — | | | — | | | 2 | | | 5 | | | 12 | | | 19 | |
| 120-179 DPD | — | | | — | | | — | | | — | | | — | | | 4 | | | 5 | | | 17 | | | 26 | |
| 180+ DPD | — | | | — | | | — | | | — | | | — | | | 35 | | | 51 | | | 193 | | | 279 | |
| Total residential mortgage – junior lien | 5 | | | 31 | | | 19 | | | 29 | | | 24 | | | 707 | | | 9,781 | | | 4,796 | | | 15,392 | |
| Credit cards | | | | | | | | | | | | | | | | | |
| By delinquency status: | | | | | | | | | | | | | | | | | |
| Current-29 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 37,844 | | | 195 | | | 38,039 | |
| 30-59 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 169 | | | 10 | | | 179 | |
| 60-89 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 119 | | | 8 | | | 127 | |
| 90-119 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 100 | | | 6 | | | 106 | |
| 120-179 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 185 | | | 3 | | | 188 | |
| 180+ DPD | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total credit cards | — | | | — | | | — | | | — | | | — | | | — | | | 38,417 | | | 222 | | | 38,639 | |
| Auto | | | | | | | | | | | | | | | | | |
| By delinquency status: | | | | | | | | | | | | | | | | | |
| Current-29 DPD | 7,230 | | | 26,314 | | | 10,965 | | | 7,331 | | | 2,721 | | | 1,511 | | | — | | | — | | | 56,072 | |
| 30-59 DPD | 9 | | | 251 | | | 158 | | | 125 | | | 60 | | | 67 | | | — | | | — | | | 670 | |
| 60-89 DPD | — | | | 94 | | | 57 | | | 45 | | | 20 | | | 25 | | | — | | | — | | | 241 | |
| 90-119 DPD | — | | | 41 | | | 24 | | | 17 | | | 7 | | | 9 | | | — | | | — | | | 98 | |
| 120-179 DPD | — | | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | — | | | 2 | |
| 180+ DPD | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total auto | 7,239 | | | 26,701 | | | 11,205 | | | 7,518 | | | 2,808 | | | 1,612 | | | — | | | — | | | 57,083 | |
| Other consumer | | | | | | | | | | | | | | | | | |
| By delinquency status: | | | | | | | | | | | | | | | | | |
| Current-29 DPD | 985 | | | 1,892 | | | 579 | | | 576 | | | 153 | | | 198 | | | 24,155 | | | 132 | | | 28,670 | |
| 30-59 DPD | — | | | 5 | | | 2 | | | 3 | | | 1 | | | 1 | | | 10 | | | 3 | | | 25 | |
| 60-89 DPD | — | | | 3 | | | 1 | | | 1 | | | 1 | | | 1 | | | 4 | | | 1 | | | 12 | |
| 90-119 DPD | — | | | 3 | | | 1 | | | 1 | | | 1 | | | — | | | 3 | | | 1 | | | 10 | |
| 120-179 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 7 | | | 3 | | | 10 | |
| 180+ DPD | — | | | — | | | — | | | — | | | — | | | 1 | | | 1 | | | 8 | | | 10 | |
| Total other consumer | 985 | | | 1,903 | | | 583 | | | 581 | | | 156 | | | 201 | | | 24,180 | | | 148 | | | 28,737 | |
| Total consumer loans | $ | 26,665 | | | 97,218 | | | 51,577 | | | 31,181 | | | 10,286 | | | 83,887 | | | 77,106 | | | 7,173 | | | 385,093 | |
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| Wells Fargo & Company | 8579 |
Note 4: Loans and Related Allowance for Credit Losses (continued)
Table 4.9:Consumer Loan Categories by Delinquency Status and Vintage
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | | |
| (in millions) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | | | Total |
| June 30, 2021 | | | | | | | | | | | | | | | | | |
| Residential mortgage – first lien | | | | | | | | | | | | | | | | | |
| By delinquency status: | | | | | | | | | | | | | | | | | |
| Current-29 DPD | $ | 30,494 | | | 47,246 | | | 32,078 | | | 10,137 | | | 17,647 | | | 76,251 | | | 5,989 | | | 1,598 | | | 221,440 | |
| 30-59 DPD | 28 | | | 33 | | | 52 | | | 21 | | | 34 | | | 604 | | | 15 | | | 30 | | | 817 | |
| 60-89 DPD | 1 | | | 11 | | | 1 | | | 3 | | | 3 | | | 187 | | | 8 | | | 18 | | | 232 | |
| 90-119 DPD | 2 | | | 8 | | | 3 | | | 1 | | | 7 | | | 64 | | | 6 | | | 11 | | | 102 | |
| 120-179 DPD | 0 | | | 12 | | | 6 | | | 3 | | | 3 | | | 85 | | | 16 | | | 23 | | | 148 | |
| 180+ DPD | 0 | | | 204 | | | 12 | | | 10 | | | 21 | | | 809 | | | 100 | | | 245 | | | 1,401 | |
Government insured/guaranteed loans (1) | 3 | | | 193 | | | 364 | | | 566 | | | 635 | | | 18,470 | | | 0 | | | 0 | | | 20,231 | |
| Total residential mortgage – first lien | 30,528 | | | 47,707 | | | 32,516 | | | 10,741 | | | 18,350 | | | 96,470 | | | 6,134 | | | 1,925 | | | 244,371 | |
| Residential mortgage – junior lien | | | | | | | | | | | | | | | | | |
| By delinquency status: | | | | | | | | | | | | | | | | | |
| Current-29 DPD | 13 | | | 22 | | | 34 | | | 35 | | | 28 | | | 909 | | | 12,913 | | | 4,680 | | | 18,634 | |
| 30-59 DPD | 0 | | | 0 | | | 1 | | | 0 | | | 0 | | | 15 | | | 28 | | | 40 | | | 84 | |
| 60-89 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 7 | | | 16 | | | 29 | | | 52 | |
| 90-119 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 3 | | | 11 | | | 22 | | | 36 | |
| 120-179 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 6 | | | 37 | | | 49 | | | 92 | |
| 180+ DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 32 | | | 215 | | | 492 | | | 739 | |
| Total residential mortgage – junior lien | 13 | | | 22 | | | 35 | | | 35 | | | 28 | | | 972 | | | 13,220 | | | 5,312 | | | 19,637 | |
| Credit cards | | | | | | | | | | | | | | | | | |
| By delinquency status: | | | | | | | | | | | | | | | | | |
| Current-29 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 34,201 | | | 226 | | | 34,427 | |
| 30-59 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 135 | | | 7 | | | 142 | |
| 60-89 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 90 | | | 6 | | | 96 | |
| 90-119 DPD | 0 | | | 0 | | | 0 | | | — | | | 0 | | | 0 | | | 80 | | | 7 | | | 87 | |
| 120-179 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 182 | | | 2 | | | 184 | |
| 180+ DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Total credit cards | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 34,688 | | | 248 | | | 34,936 | |
| Auto | | | | | | | | | | | | | | | | | |
| By delinquency status: | | | | | | | | | | | | | | | | | |
| Current-29 DPD | 14,445 | | | 15,920 | | | 11,321 | | | 4,644 | | | 2,309 | | | 1,677 | | | 0 | | | 0 | | | 50,316 | |
| 30-59 DPD | 33 | | | 143 | | | 148 | | | 81 | | | 52 | | | 85 | | | 0 | | | 0 | | | 542 | |
| 60-89 DPD | 8 | | | 42 | | | 44 | | | 24 | | | 14 | | | 25 | | | 0 | | | 0 | | | 157 | |
| 90-119 DPD | 3 | | | 17 | | | 17 | | | 8 | | | 5 | | | 8 | | | 0 | | | 0 | | | 58 | |
| 120-179 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| 180+ DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Total auto | 14,489 | | | 16,122 | | | 11,530 | | | 4,757 | | | 2,380 | | | 1,795 | | | 0 | | | 0 | | | 51,073 | |
| Other consumer | | | | | | | | | | | | | | | | | |
| By delinquency status: | | | | | | | | | | | | | | | | | |
| Current-29 DPD | 982 | | | 990 | | | 994 | | | 335 | | | 155 | | | 173 | | | 22,011 | | | 150 | | | 25,790 | |
| 30-59 DPD | 1 | | | 2 | | | 3 | | | 2 | | | 1 | | | 2 | | | 8 | | | 3 | | | 22 | |
| 60-89 DPD | 0 | | | 2 | | | 2 | | | 1 | | | 1 | | | 1 | | | 5 | | | 1 | | | 13 | |
| 90-119 DPD | 0 | | | 1 | | | 2 | | | 1 | | | 0 | | | 0 | | | 4 | | | 1 | | | 9 | |
| 120-179 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 8 | | | 2 | | | 10 | |
| 180+ DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 2 | | | 4 | | | 11 | | | 17 | |
| Total other consumer | 983 | | | 995 | | | 1,001 | | | 339 | | | 157 | | | 178 | | | 22,040 | | | 168 | | | 25,861 | |
| Total consumer loans | $ | 46,013 | | | 64,846 | | | 45,082 | | | 15,872 | | | 20,915 | | | 99,415 | | | 76,082 | | | 7,653 | | | 375,878 | |
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(continued from previous page)
| | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | |
| (in millions) | (in millions) | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total | (in millions) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total |
| December 31, 2020 | | | | |
| December 31, 2021 | | December 31, 2021 | |
| Residential mortgage – first lien | Residential mortgage – first lien | | Residential mortgage – first lien | |
| By delinquency status: | By delinquency status: | | By delinquency status: | |
| Current-29 DPD | Current-29 DPD | $ | 53,298 | | | 43,297 | | | 14,761 | | | 24,619 | | | 30,533 | | | 67,960 | | | 6,762 | | | 1,719 | | | 242,949 | | Current-29 DPD | $ | 69,994 | | | 41,527 | | | 24,887 | | | 7,660 | | | 13,734 | | | 61,576 | | | 5,248 | | | 1,673 | | | 226,299 | |
| 30-59 DPD | 30-59 DPD | 111 | | | 76 | | | 36 | | | 67 | | | 79 | | | 750 | | | 52 | | | 66 | | | 1,237 | | 30-59 DPD | 129 | | | 27 | | | 30 | | | 12 | | | 24 | | | 418 | | | 14 | | | 29 | | | 683 | |
| 60-89 DPD | 60-89 DPD | 88 | | | 10 | | | 6 | | | 12 | | | 13 | | | 305 | | | 56 | | | 68 | | | 558 | | 60-89 DPD | 10 | | | 7 | | | 2 | | | — | | | 3 | | | 126 | | | 7 | | | 15 | | | 170 | |
| 90-119 DPD | 90-119 DPD | 232 | | | 11 | | | 5 | | | 8 | | | 7 | | | 197 | | | 26 | | | 33 | | | 519 | | 90-119 DPD | — | | | 1 | | | 1 | | | 1 | | | 5 | | | 53 | | | 4 | | | 9 | | | 74 | |
| 120-179 DPD | 120-179 DPD | 3 | | | 4 | | | 1 | | | 3 | | | 5 | | | 151 | | | 17 | | | 29 | | | 213 | | 120-179 DPD | 1 | | | 16 | | | 2 | | | 2 | | | 1 | | | 63 | | | 4 | | | 14 | | | 103 | |
| 180+ DPD | 180+ DPD | 3 | | | 1 | | | 4 | | | 11 | | | 15 | | | 758 | | | 21 | | | 145 | | | 958 | | 180+ DPD | — | | | 62 | | | 72 | | | 71 | | | 92 | | | 1,294 | | | 36 | | | 156 | | | 1,783 | |
Government insured/guaranteed loans (1) | Government insured/guaranteed loans (1) | 215 | | | 639 | | | 904 | | | 1,076 | | | 2,367 | | | 25,039 | | | 0 | | | 0 | | | 30,240 | | Government insured/guaranteed loans (1) | 14 | | | 134 | | | 209 | | | 349 | | | 364 | | | 12,088 | | | — | | | — | | | 13,158 | |
| Total residential mortgage – first lien | Total residential mortgage – first lien | 53,950 | | | 44,038 | | | 15,717 | | | 25,796 | | | 33,019 | | | 95,160 | | | 6,934 | | | 2,060 | | | 276,674 | | Total residential mortgage – first lien | 70,148 | | | 41,774 | | | 25,203 | | | 8,095 | | | 14,223 | | | 75,618 | | | 5,313 | | | 1,896 | | | 242,270 | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | | Residential mortgage – junior lien | |
| By delinquency status: | By delinquency status: | | By delinquency status: | |
| Current-29 DPD | Current-29 DPD | 22 | | | 39 | | | 39 | | | 37 | | | 31 | | | 1,115 | | | 15,366 | | | 5,434 | | | 22,083 | | Current-29 DPD | 28 | | | 20 | | | 30 | | | 26 | | | 21 | | | 700 | | | 10,883 | | | 4,426 | | | 16,134 | |
| 30-59 DPD | 30-59 DPD | 0 | | | 0 | | | 1 | | | 1 | | | 0 | | | 22 | | | 113 | | | 160 | | | 297 | | 30-59 DPD | — | | | — | | | — | | | — | | | 1 | | | 10 | | | 29 | | | 46 | | | 86 | |
| 60-89 DPD | 60-89 DPD | 0 | | | 0 | | | 1 | | | 0 | | | 0 | | | 11 | | | 154 | | | 271 | | | 437 | | 60-89 DPD | — | | | — | | | — | | | — | | | — | | | 4 | | | 10 | | | 21 | | | 35 | |
| 90-119 DPD | 90-119 DPD | 0 | | | 0 | | | 0 | | | 1 | | | 0 | | | 7 | | | 45 | | | 84 | | | 137 | | 90-119 DPD | — | | | — | | | — | | | 1 | | | — | | | 3 | | | 4 | | | 12 | | | 20 | |
| 120-179 DPD | 120-179 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 9 | | | 36 | | | 77 | | | 122 | | 120-179 DPD | — | | | — | | | — | | | — | | | — | | | 5 | | | 7 | | | 14 | | | 26 | |
| 180+ DPD | 180+ DPD | 0 | | | 0 | | | 0 | | | 0 | | | 1 | | | 25 | | | 29 | | | 155 | | | 210 | | 180+ DPD | — | | | — | | | 1 | | | — | | | — | | | 40 | | | 59 | | | 217 | | | 317 | |
| Total residential mortgage – junior lien | Total residential mortgage – junior lien | 22 | | | 39 | | | 41 | | | 39 | | | 32 | | | 1,189 | | | 15,743 | | | 6,181 | | | 23,286 | | Total residential mortgage – junior lien | 28 | | | 20 | | | 31 | | | 27 | | | 22 | | | 762 | | | 10,992 | | | 4,736 | | | 16,618 | |
| Credit cards | Credit cards | | Credit cards | |
| By delinquency status: | By delinquency status: | | By delinquency status: | |
| Current-29 DPD | Current-29 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 35,612 | | | 255 | | | 35,867 | | Current-29 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 37,686 | | | 192 | | | 37,878 | |
| 30-59 DPD | 30-59 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 243 | | | 12 | | | 255 | | 30-59 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 176 | | | 7 | | | 183 | |
| 60-89 DPD | 60-89 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 167 | | | 10 | | | 177 | | 60-89 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 118 | | | 5 | | | 123 | |
| 90-119 DPD | 90-119 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 144 | | | 10 | | | 154 | | 90-119 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 98 | | | 5 | | | 103 | |
| 120-179 DPD | 120-179 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 208 | | | 3 | | | 211 | | 120-179 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 165 | | | 1 | | | 166 | |
| 180+ DPD | 180+ DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 180+ DPD | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total credit cards | Total credit cards | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 36,374 | | | 290 | | | 36,664 | | Total credit cards | — | | | — | | | — | | | — | | | — | | | — | | | 38,243 | | | 210 | | | 38,453 | |
| Auto | Auto | | Auto | |
| By delinquency status: | By delinquency status: | | By delinquency status: | |
| Current-29 DPD | Current-29 DPD | 19,625 | | | 14,561 | | | 6,307 | | | 3,459 | | | 2,603 | | | 697 | | | 0 | | | 0 | | | 47,252 | | Current-29 DPD | 29,246 | | | 12,412 | | | 8,476 | | | 3,271 | | | 1,424 | | | 714 | | | — | | | — | | | 55,543 | |
| 30-59 DPD | 30-59 DPD | 120 | | | 183 | | | 114 | | | 80 | | | 107 | | | 46 | | | 0 | | | 0 | | | 650 | | 30-59 DPD | 220 | | | 193 | | | 165 | | | 81 | | | 46 | | | 57 | | | — | | | — | | | 762 | |
| 60-89 DPD | 60-89 DPD | 32 | | | 60 | | | 36 | | | 25 | | | 35 | | | 16 | | | 0 | | | 0 | | | 204 | | 60-89 DPD | 69 | | | 67 | | | 53 | | | 25 | | | 14 | | | 21 | | | — | | | — | | | 249 | |
| 90-119 DPD | 90-119 DPD | 13 | | | 26 | | | 14 | | | 9 | | | 12 | | | 6 | | | 0 | | | 0 | | | 80 | | 90-119 DPD | 31 | | | 27 | | | 22 | | | 9 | | | 6 | | | 8 | | | — | | | — | | | 103 | |
| 120-179 DPD | 120-179 DPD | 0 | | | 1 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1 | | 120-179 DPD | — | | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | — | | | 2 | |
| 180+ DPD | 180+ DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 180+ DPD | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total auto | Total auto | 19,790 | | | 14,831 | | | 6,471 | | | 3,573 | | | 2,757 | | | 765 | | | 0 | | | 0 | | | 48,187 | | Total auto | 29,566 | | | 12,700 | | | 8,717 | | | 3,386 | | | 1,490 | | | 800 | | | — | | | — | | | 56,659 | |
| Other consumer | Other consumer | | Other consumer | |
| By delinquency status: | By delinquency status: | | By delinquency status: | |
| Current-29 DPD | Current-29 DPD | 1,406 | | | 1,383 | | | 577 | | | 261 | | | 59 | | | 193 | | | 20,246 | | | 162 | | | 24,287 | | Current-29 DPD | 2,221 | | | 716 | | | 703 | | | 203 | | | 107 | | | 125 | | | 23,988 | | | 143 | | | 28,206 | |
| 30-59 DPD | 30-59 DPD | 2 | | | 7 | | | 5 | | | 2 | | | 1 | | | 3 | | | 19 | | | 10 | | | 49 | | 30-59 DPD | 3 | | | 2 | | | 3 | | | 1 | | | — | | | 2 | | | 10 | | | 4 | | | 25 | |
| 60-89 DPD | 60-89 DPD | 1 | | | 5 | | | 3 | | | 1 | | | 1 | | | 1 | | | 10 | | | 6 | | | 28 | | 60-89 DPD | 2 | | | 1 | | | 2 | | | 1 | | | — | | | 1 | | | 5 | | | 1 | | | 13 | |
| 90-119 DPD | 90-119 DPD | 1 | | | 4 | | | 2 | | | 1 | | | 0 | | | 1 | | | 8 | | | 3 | | | 20 | | 90-119 DPD | 1 | | | 1 | | | 2 | | | 1 | | | — | | | — | | | 4 | | | — | | | 9 | |
| 120-179 DPD | 120-179 DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 10 | | | 4 | | | 14 | | 120-179 DPD | — | | | — | | | — | | | — | | | — | | | — | | | 8 | | | 2 | | | 10 | |
| 180+ DPD | 180+ DPD | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 2 | | | 3 | | | 6 | | | 11 | | 180+ DPD | — | | | — | | | — | | | — | | | — | | | 1 | | | 1 | | | 9 | | | 11 | |
| Total other consumer | Total other consumer | 1,410 | | | 1,399 | | | 587 | | | 265 | | | 61 | | | 200 | | | 20,296 | | | 191 | | | 24,409 | | Total other consumer | 2,227 | | | 720 | | | 710 | | | 206 | | | 107 | | | 129 | | | 24,016 | | | 159 | | | 28,274 | |
| Total consumer loans | Total consumer loans | $ | 75,172 | | | 60,307 | | | 22,816 | | | 29,673 | | | 35,869 | | | 97,314 | | | 79,347 | | | 8,722 | | | 409,220 | | Total consumer loans | $ | 101,969 | | | 55,214 | | | 34,661 | | | 11,714 | | | 15,842 | | | 77,309 | | | 78,564 | | | 7,001 | | | 382,274 | |
|
(1)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$3.8 billion and $11.1$5.7 billion at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively.
Of the $2.9$2.2 billion of consumer loans not government insured/guaranteed that are 90 days or more past due at June 30, 2021, $460March 31, 2022, $409 million was accruing, compared with
$2.7 billion past due and $612$424 million accruing at December 31, 2020.2021.
| | | | | | | | |
| 80 | Wells Fargo & Company | 87 |
Note 4: Loans and Related Allowance for Credit Losses (continued)
We obtain Fair Isaac Corporation (FICO) scores at loan origination and the scores are generally updated at least quarterly, except in limited circumstances, including compliance with the Fair Credit Reporting Act (FCRA). FICO scores are not available for certain loan types or may not be required if we deem it unnecessary due to strong collateral and other borrower attributes. Substantially all loans not requiring a FICO score are
securities-based loans originated by our retail brokerage business.
Table 4.10 provides the outstanding balances of our consumer loan portfolio by 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 scores are not available for certain loan types or may not be required if we deem it unnecessary due to strong collateral andabove.
other borrower attributes. Loans not requiring a FICO score totaled $15.9 billion and $13.2 billion at June 30, 2021, and December 31, 2020, respectively. Substantially all loans not requiring a FICO score are securities-based loans originated through retail brokerage.
Table 4.10: Consumer Loan Categories by FICO and Vintage
| | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | |
| (in millions) | (in millions) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | (in millions) | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total |
| June 30, 2021 | | | | |
| March 31, 2022 | | March 31, 2022 | |
| By FICO: | By FICO: | | By FICO: | |
| Residential mortgage – first lien | Residential mortgage – first lien | | Residential mortgage – first lien | |
| 800+ | 800+ | $ | 14,373 | | | 29,351 | | | 21,113 | | | 6,709 | | | 12,245 | | | 47,225 | | | 2,973 | | | 453 | | | 134,442 | | 800+ | $ | 6,959 | | | 41,019 | | | 27,546 | | | 15,795 | | | 4,757 | | | 43,819 | | | 2,327 | | | 533 | | | 142,755 | |
| 760-799 | 760-799 | 11,864 | | | 12,539 | | | 7,250 | | | 2,017 | | | 3,200 | | | 12,684 | | | 1,229 | | | 257 | | | 51,040 | | 760-799 | 8,055 | | | 18,449 | | | 8,173 | | | 4,520 | | | 1,219 | | | 11,509 | | | 927 | | | 280 | | | 53,132 | |
| 720-759 | 720-759 | 3,281 | | | 4,024 | | | 2,566 | | | 857 | | | 1,343 | | | 7,473 | | | 771 | | | 243 | | | 20,558 | | 720-759 | 2,485 | | | 6,500 | | | 2,683 | | | 1,699 | | | 593 | | | 6,619 | | | 595 | | | 256 | | | 21,430 | |
| 680-719 | 680-719 | 794 | | | 1,103 | | | 788 | | | 363 | | | 603 | | | 4,188 | | | 463 | | | 215 | | | 8,517 | | 680-719 | 707 | | | 1,811 | | | 795 | | | 558 | | | 250 | | | 3,739 | | | 359 | | | 208 | | | 8,427 | |
| 640-679 | 640-679 | 129 | | | 294 | | | 222 | | | 107 | | | 143 | | | 2,117 | | | 213 | | | 135 | | | 3,360 | | 640-679 | 164 | | | 490 | | | 243 | | | 149 | | | 93 | | | 1,819 | | | 167 | | | 142 | | | 3,267 | |
| 600-639 | 600-639 | 30 | | | 47 | | | 75 | | | 37 | | | 51 | | | 1,234 | | | 109 | | | 93 | | | 1,676 | | 600-639 | 32 | | | 103 | | | 62 | | | 57 | | | 32 | | | 1,012 | | | 80 | | | 84 | | | 1,462 | |
| < 600 | < 600 | 7 | | | 11 | | | 28 | | | 16 | | | 32 | | | 1,303 | | | 139 | | | 145 | | | 1,681 | | < 600 | 1 | | | 23 | | | 22 | | | 14 | | | 18 | | | 1,007 | | | 103 | | | 129 | | | 1,317 | |
| No FICO available | No FICO available | 47 | | | 145 | | | 110 | | | 69 | | | 98 | | | 1,776 | | | 237 | | | 384 | | | 2,866 | | No FICO available | 32 | | | 163 | | | 122 | | | 94 | | | 53 | | | 1,873 | | | 170 | | | 375 | | | 2,882 | |
| Government insured/guaranteed loans (1) | Government insured/guaranteed loans (1) | 3 | | | 193 | | | 364 | | | 566 | | | 635 | | | 18,470 | | | 0 | | | 0 | | | 20,231 | | Government insured/guaranteed loans (1) | 1 | | | 25 | | | 124 | | | 167 | | | 283 | | | 9,970 | | | — | | | — | | | 10,570 | |
| Total residential mortgage – first lien | Total residential mortgage – first lien | 30,528 | | | 47,707 | | | 32,516 | | | 10,741 | | | 18,350 | | | 96,470 | | | 6,134 | | | 1,925 | | | 244,371 | | Total residential mortgage – first lien | 18,436 | | | 68,583 | | | 39,770 | | | 23,053 | | | 7,298 | | | 81,367 | | | 4,728 | | | 2,007 | | | 245,242 | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | | Residential mortgage – junior lien | |
| 800+ | 800+ | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 236 | | | 6,715 | | | 1,612 | | | 8,563 | | 800+ | — | | | — | | | — | | | — | | | — | | | 170 | | | 4,987 | | | 1,561 | | | 6,718 | |
| 760-799 | 760-799 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 142 | | | 2,588 | | | 906 | | | 3,636 | | 760-799 | — | | | — | | | — | | | — | | | — | | | 102 | | | 1,884 | | | 809 | | | 2,795 | |
| 720-759 | 720-759 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 169 | | | 1,721 | | | 891 | | | 2,781 | | 720-759 | — | | | — | | | — | | | — | | | — | | | 114 | | | 1,290 | | | 777 | | | 2,181 | |
| 680-719 | 680-719 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 143 | | | 1,022 | | | 719 | | | 1,884 | | 680-719 | — | | | — | | | — | | | — | | | — | | | 105 | | | 752 | | | 634 | | | 1,491 | |
| 640-679 | 640-679 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 82 | | | 396 | | | 405 | | | 883 | | 640-679 | — | | | — | | | — | | | — | | | — | | | 56 | | | 293 | | | 323 | | | 672 | |
| 600-639 | 600-639 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 52 | | | 189 | | | 232 | | | 473 | | 600-639 | — | | | — | | | — | | | — | | | — | | | 33 | | | 141 | | | 192 | | | 366 | |
| < 600 | < 600 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 53 | | | 195 | | | 267 | | | 515 | | < 600 | — | | | — | | | — | | | — | | | — | | | 42 | | | 147 | | | 210 | | | 399 | |
| No FICO available | No FICO available | 13 | | | 22 | | | 35 | | | 35 | | | 28 | | | 95 | | | 394 | | | 280 | | | 902 | | No FICO available | 5 | | | 31 | | | 19 | | | 29 | | | 24 | | | 85 | | | 287 | | | 290 | | | 770 | |
| Total residential mortgage – junior lien | Total residential mortgage – junior lien | 13 | | | 22 | | | 35 | | | 35 | | | 28 | | | 972 | | | 13,220 | | | 5,312 | | | 19,637 | | Total residential mortgage – junior lien | 5 | | | 31 | | | 19 | | | 29 | | | 24 | | | 707 | | | 9,781 | | | 4,796 | | | 15,392 | |
| Credit card | Credit card | | Credit card | |
| 800+ | 800+ | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 3,987 | | | 1 | | | 3,988 | | 800+ | — | | | — | | | — | | | — | | | — | | | — | | | 4,468 | | | 2 | | | 4,470 | |
| 760-799 | 760-799 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 5,561 | | | 8 | | | 5,569 | | 760-799 | — | | | — | | | — | | | — | | | — | | | — | | | 6,070 | | | 8 | | | 6,078 | |
| 720-759 | 720-759 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 7,825 | | | 30 | | | 7,855 | | 720-759 | — | | | — | | | — | | | — | | | — | | | — | | | 8,383 | | | 27 | | | 8,410 | |
| 680-719 | 680-719 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 8,437 | | | 57 | | | 8,494 | | 680-719 | — | | | — | | | — | | | — | | | — | | | — | | | 9,129 | | | 49 | | | 9,178 | |
| 640-679 | 640-679 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 5,122 | | | 56 | | | 5,178 | | 640-679 | — | | | — | | | — | | | — | | | — | | | — | | | 5,866 | | | 46 | | | 5,912 | |
| 600-639 | 600-639 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,929 | | | 39 | | | 1,968 | | 600-639 | — | | | — | | | — | | | — | | | — | | | — | | | 2,284 | | | 32 | | | 2,316 | |
| < 600 | < 600 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,819 | | | 56 | | | 1,875 | | < 600 | — | | | — | | | — | | | — | | | — | | | — | | | 2,124 | | | 57 | | | 2,181 | |
| No FICO available | No FICO available | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 8 | | | 1 | | | 9 | | No FICO available | — | | | — | | | — | | | — | | | — | | | — | | | 93 | | | 1 | | | 94 | |
| Total credit card | Total credit card | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 34,688 | | | 248 | | | 34,936 | | Total credit card | — | | | — | | | — | | | — | | | — | | | — | | | 38,417 | | | 222 | | | 38,639 | |
| Auto | Auto | | Auto | |
| 800+ | 800+ | 2,576 | | | 2,329 | | | 2,157 | | | 941 | | | 509 | | | 271 | | | 0 | | | 0 | | | 8,783 | | 800+ | 1,486 | | | 4,161 | | | 1,836 | | | 1,485 | | | 586 | | | 301 | | | — | | | — | | | 9,855 | |
| 760-799 | 760-799 | 2,505 | | | 2,698 | | | 2,145 | | | 850 | | | 390 | | | 216 | | | 0 | | | 0 | | | 8,804 | | 760-799 | 1,323 | | | 4,418 | | | 1,850 | | | 1,323 | | | 471 | | | 220 | | | — | | | — | | | 9,605 | |
| 720-759 | 720-759 | 2,430 | | | 2,721 | | | 1,999 | | | 825 | | | 387 | | | 251 | | | 0 | | | 0 | | | 8,613 | | 720-759 | 1,214 | | | 4,229 | | | 1,826 | | | 1,279 | | | 473 | | | 237 | | | — | | | — | | | 9,258 | |
| 680-719 | 680-719 | 2,518 | | | 2,965 | | | 1,968 | | | 772 | | | 358 | | | 259 | | | 0 | | | 0 | | | 8,840 | | 680-719 | 1,227 | | | 4,316 | | | 1,953 | | | 1,217 | | | 427 | | | 226 | | | — | | | — | | | 9,366 | |
| 640-679 | 640-679 | 2,267 | | | 2,548 | | | 1,400 | | | 527 | | | 257 | | | 222 | | | 0 | | | 0 | | | 7,221 | | 640-679 | 1,034 | | | 4,003 | | | 1,548 | | | 859 | | | 303 | | | 179 | | | — | | | — | | | 7,926 | |
| 600-639 | 600-639 | 1,418 | | | 1,519 | | | 822 | | | 333 | | | 178 | | | 190 | | | 0 | | | 0 | | | 4,460 | | 600-639 | 641 | | | 2,741 | | | 952 | | | 524 | | | 198 | | | 144 | | | — | | | — | | | 5,200 | |
| < 600 | < 600 | 775 | | | 1,313 | | | 993 | | | 498 | | | 288 | | | 362 | | | 0 | | | 0 | | | 4,229 | | < 600 | 314 | | | 2,804 | | | 1,237 | | | 816 | | | 337 | | | 291 | | | — | | | — | | | 5,799 | |
| No FICO available | No FICO available | 0 | | | 29 | | | 46 | | | 11 | | | 13 | | | 24 | | | 0 | | | 0 | | | 123 | | No FICO available | — | | | 29 | | | 3 | | | 15 | | | 13 | | | 14 | | | — | | | — | | | 74 | |
| Total auto | Total auto | 14,489 | | | 16,122 | | | 11,530 | | | 4,757 | | | 2,380 | | | 1,795 | | | 0 | | | 0 | | | 51,073 | | Total auto | 7,239 | | | 26,701 | | | 11,205 | | | 7,518 | | | 2,808 | | | 1,612 | | | — | | | — | | | 57,083 | |
| Other consumer | Other consumer | | Other consumer | |
| 800+ | 800+ | 253 | | | 250 | | | 204 | | | 59 | | | 18 | | | 60 | | | 1,839 | | | 19 | | | 2,702 | | 800+ | 222 | | | 393 | | | 147 | | | 103 | | | 25 | | | 46 | | | 1,171 | | | 25 | | | 2,132 | |
| 760-799 | 760-799 | 265 | | | 225 | | | 186 | | | 59 | | | 15 | | | 31 | | | 943 | | | 22 | | | 1,746 | | 760-799 | 244 | | | 407 | | | 114 | | | 89 | | | 23 | | | 23 | | | 715 | | | 18 | | | 1,633 | |
| 720-759 | 720-759 | 190 | | | 184 | | | 175 | | | 67 | | | 19 | | | 26 | | | 829 | | | 28 | | | 1,518 | | 720-759 | 209 | | | 383 | | | 103 | | | 89 | | | 29 | | | 20 | | | 629 | | | 20 | | | 1,482 | |
| 680-719 | 680-719 | 115 | | | 125 | | | 147 | | | 61 | | | 19 | | | 21 | | | 711 | | | 26 | | | 1,225 | | 680-719 | 153 | | | 295 | | | 80 | | | 79 | | | 28 | | | 19 | | | 586 | | | 18 | | | 1,258 | |
| 640-679 | 640-679 | 47 | | | 52 | | | 74 | | | 34 | | | 12 | | | 11 | | | 343 | | | 19 | | | 592 | | 640-679 | 68 | | | 156 | | | 37 | | | 43 | | | 16 | | | 12 | | | 306 | | | 16 | | | 654 | |
| 600-639 | 600-639 | 9 | | | 14 | | | 24 | | | 13 | | | 5 | | | 6 | | | 122 | | | 11 | | | 204 | | 600-639 | 14 | | | 46 | | | 11 | | | 15 | | | 7 | | | 6 | | | 111 | | | 10 | | | 220 | |
| < 600 | < 600 | 3 | | | 13 | | | 27 | | | 16 | | | 6 | | | 7 | | | 121 | | | 14 | | | 207 | | < 600 | 3 | | | 29 | | | 12 | | | 19 | | | 9 | | | 7 | | | 108 | | | 11 | | | 198 | |
| No FICO available | No FICO available | 101 | | | 132 | | | 164 | | | 30 | | | 63 | | | 16 | | | 1,197 | | | 29 | | | 1,732 | | No FICO available | 72 | | | 194 | | | 79 | | | 144 | | | 19 | | | 68 | | | 1,167 | | | 30 | | | 1,773 | |
| FICO not required | FICO not required | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 15,935 | | | 0 | | | 15,935 | | FICO not required | — | | | — | | | — | | | — | | | — | | | — | | | 19,387 | | | — | | | 19,387 | |
| Total other consumer | Total other consumer | 983 | | | 995 | | | 1,001 | | | 339 | | | 157 | | | 178 | | | 22,040 | | | 168 | | | 25,861 | | Total other consumer | 985 | | | 1,903 | | | 583 | | | 581 | | | 156 | | | 201 | | | 24,180 | | | 148 | | | 28,737 | |
| Total consumer loans | Total consumer loans | $ | 46,013 | | | 64,846 | | | 45,082 | | | 15,872 | | | 20,915 | | | 99,415 | | | 76,082 | | | 7,653 | | | 375,878 | | Total consumer loans | $ | 26,665 | | | 97,218 | | | 51,577 | | | 31,181 | | | 10,286 | | | 83,887 | | | 77,106 | | | 7,173 | | | 385,093 | |
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88 | Wells Fargo & Company | 81 |
(continued from previous page)
| | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | |
| (in millions) | (in millions) | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total | (in millions) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total |
| December 31, 2020 | | | | |
| December 31, 2021 | | December 31, 2021 | |
| By FICO: | By FICO: | | By FICO: | |
| Residential mortgage – first lien | Residential mortgage – first lien | | Residential mortgage – first lien | |
| 800+ | 800+ | $ | 29,365 | | | 28,652 | | | 9,911 | | | 17,416 | | | 22,215 | | | 40,440 | | | 3,391 | | | 493 | | | 151,883 | | 800+ | $ | 35,935 | | | 27,396 | | | 16,583 | | | 5,153 | | | 9,430 | | | 37,495 | | | 2,554 | | | 469 | | | 135,015 | |
| 760-799 | 760-799 | 17,154 | | | 9,866 | | | 2,908 | | | 4,380 | | | 4,955 | | | 10,843 | | | 1,361 | | | 274 | | | 51,741 | | 760-799 | 23,645 | | | 9,814 | | | 5,412 | | | 1,464 | | | 2,485 | | | 10,509 | | | 1,073 | | | 265 | | | 54,667 | |
| 720-759 | 720-759 | 5,274 | | | 3,290 | | | 1,189 | | | 1,829 | | | 2,106 | | | 7,001 | | | 879 | | | 265 | | | 21,833 | | 720-759 | 7,842 | | | 3,083 | | | 1,980 | | | 642 | | | 1,137 | | | 6,277 | | | 646 | | | 238 | | | 21,845 | |
| 680-719 | 680-719 | 1,361 | | | 1,084 | | | 490 | | | 678 | | | 831 | | | 4,403 | | | 520 | | | 221 | | | 9,588 | | 680-719 | 1,986 | | | 876 | | | 645 | | | 283 | | | 501 | | | 3,682 | | | 393 | | | 206 | | | 8,572 | |
| 640-679 | 640-679 | 376 | | | 287 | | | 148 | | | 192 | | | 226 | | | 2,385 | | | 241 | | | 154 | | | 4,009 | | 640-679 | 449 | | | 233 | | | 187 | | | 89 | | | 129 | | | 1,851 | | | 188 | | | 146 | | | 3,272 | |
| 600-639 | 600-639 | 55 | | | 56 | | | 44 | | | 56 | | | 92 | | | 1,429 | | | 127 | | | 106 | | | 1,965 | | 600-639 | 101 | | | 63 | | | 46 | | | 31 | | | 41 | | | 1,035 | | | 102 | | | 89 | | | 1,508 | |
| < 600 | < 600 | 14 | | | 29 | | | 36 | | | 44 | | | 66 | | | 1,789 | | | 162 | | | 175 | | | 2,315 | | < 600 | 15 | | | 13 | | | 24 | | | 19 | | | 41 | | | 1,083 | | | 114 | | | 124 | | | 1,433 | |
| No FICO available | No FICO available | 136 | | | 135 | | | 87 | | | 125 | | | 161 | | | 1,831 | | | 253 | | | 372 | | | 3,100 | | No FICO available | 161 | | | 162 | | | 117 | | | 65 | | | 95 | | | 1,598 | | | 243 | | | 359 | | | 2,800 | |
| Government insured/guaranteed loans (1) | Government insured/guaranteed loans (1) | 215 | | | 639 | | | 904 | | | 1,076 | | | 2,367 | | | 25,039 | | | 0 | | | 0 | | | 30,240 | | Government insured/guaranteed loans (1) | 14 | | | 134 | | | 209 | | | 349 | | | 364 | | | 12,088 | | | — | | | — | | | 13,158 | |
| Total residential mortgage – first lien | Total residential mortgage – first lien | 53,950 | | | 44,038 | | | 15,717 | | | 25,796 | | | 33,019 | | | 95,160 | | | 6,934 | | | 2,060 | | | 276,674 | | Total residential mortgage – first lien | 70,148 | | | 41,774 | | | 25,203 | | | 8,095 | | | 14,223 | | | 75,618 | | | 5,313 | | | 1,896 | | | 242,270 | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | | Residential mortgage – junior lien | |
| 800+ | 800+ | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 293 | | | 7,973 | | | 1,819 | | | 10,085 | | 800+ | — | | | — | | | — | | | — | | | — | | | 188 | | | 5,512 | | | 1,481 | | | 7,181 | |
| 760-799 | 760-799 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 177 | | | 3,005 | | | 1,032 | | | 4,214 | | 760-799 | — | | | — | | | — | | | — | | | — | | | 110 | | | 2,154 | | | 828 | | | 3,092 | |
| 720-759 | 720-759 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 207 | | | 2,093 | | | 1,034 | | | 3,334 | | 720-759 | — | | | — | | | — | | | — | | | — | | | 130 | | | 1,462 | | | 790 | | | 2,382 | |
| 680-719 | 680-719 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 183 | | | 1,233 | | | 854 | | | 2,270 | | 680-719 | — | | | — | | | — | | | — | | | — | | | 118 | | | 881 | | | 633 | | | 1,632 | |
| 640-679 | 640-679 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 103 | | | 503 | | | 493 | | | 1,099 | | 640-679 | — | | | — | | | — | | | — | | | — | | | 65 | | | 325 | | | 338 | | | 728 | |
| 600-639 | 600-639 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 67 | | | 241 | | | 299 | | | 607 | | 600-639 | — | | | — | | | — | | | — | | | — | | | 39 | | | 160 | | | 208 | | | 407 | |
| < 600 | < 600 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 76 | | | 254 | | | 374 | | | 704 | | < 600 | — | | | — | | | — | | | — | | | — | | | 43 | | | 164 | | | 215 | | | 422 | |
| No FICO available | No FICO available | 22 | | | 39 | | | 41 | | | 39 | | | 32 | | | 83 | | | 441 | | | 276 | | | 973 | | No FICO available | 28 | | | 20 | | | 31 | | | 27 | | | 22 | | | 69 | | | 334 | | | 243 | | | 774 | |
| Total residential mortgage – junior lien | Total residential mortgage – junior lien | 22 | | | 39 | | | 41 | | | 39 | | | 32 | | | 1,189 | | | 15,743 | | | 6,181 | | | 23,286 | | Total residential mortgage – junior lien | 28 | | | 20 | | | 31 | | | 27 | | | 22 | | | 762 | | | 10,992 | | | 4,736 | | | 16,618 | |
| Credit card | Credit card | | Credit card | |
| 800+ | 800+ | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 3,860 | | | 1 | | | 3,861 | | 800+ | — | | | — | | | — | | | — | | | — | | | — | | | 4,247 | | | 1 | | | 4,248 | |
| 760-799 | 760-799 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 5,438 | | | 7 | | | 5,445 | | 760-799 | — | | | — | | | — | | | — | | | — | | | — | | | 6,053 | | | 7 | | | 6,060 | |
| 720-759 | 720-759 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 7,897 | | | 29 | | | 7,926 | | 720-759 | — | | | — | | | — | | | — | | | — | | | — | | | 8,475 | | | 26 | | | 8,501 | |
| 680-719 | 680-719 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 8,854 | | | 60 | | | 8,914 | | 680-719 | — | | | — | | | — | | | — | | | — | | | — | | | 9,136 | | | 50 | | | 9,186 | |
| 640-679 | 640-679 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 5,657 | | | 64 | | | 5,721 | | 640-679 | — | | | — | | | — | | | — | | | — | | | — | | | 5,850 | | | 47 | | | 5,897 | |
| 600-639 | 600-639 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 2,242 | | | 46 | | | 2,288 | | 600-639 | — | | | — | | | — | | | — | | | — | | | — | | | 2,298 | | | 31 | | | 2,329 | |
| < 600 | < 600 | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 2,416 | | | 82 | | | 2,498 | | < 600 | — | | | — | | | — | | | — | | | — | | | — | | | 2,067 | | | 47 | | | 2,114 | |
| No FICO available | No FICO available | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 10 | | | 1 | | | 11 | | No FICO available | — | | | — | | | — | | | — | | | — | | | — | | | 117 | | | 1 | | | 118 | |
| Total credit card | Total credit card | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 36,374 | | | 290 | | | 36,664 | | Total credit card | — | | | — | | | — | | | — | | | — | | | — | | | 38,243 | | | 210 | | | 38,453 | |
| Auto | Auto | | Auto | |
| 800+ | 800+ | 2,875 | | | 2,606 | | | 1,211 | | | 731 | | | 452 | | | 104 | | | 0 | | | 0 | | | 7,979 | | 800+ | 4,688 | | | 1,983 | | | 1,680 | | | 690 | | | 318 | | | 108 | | | — | | | — | | | 9,467 | |
| 760-799 | 760-799 | 3,036 | | | 2,662 | | | 1,122 | | | 579 | | | 349 | | | 81 | | | 0 | | | 0 | | | 7,829 | | 760-799 | 4,967 | | | 2,123 | | | 1,586 | | | 586 | | | 234 | | | 87 | | | — | | | — | | | 9,583 | |
| 720-759 | 720-759 | 3,162 | | | 2,514 | | | 1,095 | | | 576 | | | 395 | | | 98 | | | 0 | | | 0 | | | 7,840 | | 720-759 | 4,789 | | | 2,104 | | | 1,503 | | | 583 | | | 241 | | | 106 | | | — | | | — | | | 9,326 | |
| 680-719 | 680-719 | 3,534 | | | 2,542 | | | 1,066 | | | 545 | | | 400 | | | 105 | | | 0 | | | 0 | | | 8,192 | | 680-719 | 5,005 | | | 2,282 | | | 1,441 | | | 526 | | | 218 | | | 111 | | | — | | | — | | | 9,583 | |
| 640-679 | 640-679 | 3,381 | | | 1,948 | | | 763 | | | 395 | | | 334 | | | 94 | | | 0 | | | 0 | | | 6,915 | | 640-679 | 4,611 | | | 1,824 | | | 1,025 | | | 369 | | | 160 | | | 99 | | | — | | | — | | | 8,088 | |
| 600-639 | 600-639 | 2,208 | | | 1,165 | | | 479 | | | 274 | | | 276 | | | 87 | | | 0 | | | 0 | | | 4,489 | | 600-639 | 3,118 | | | 1,114 | | | 617 | | | 243 | | | 117 | | | 92 | | | — | | | — | | | 5,301 | |
| < 600 | < 600 | 1,581 | | | 1,357 | | | 730 | | | 463 | | | 533 | | | 186 | | | 0 | | | 0 | | | 4,850 | | < 600 | 2,372 | | | 1,236 | | | 853 | | | 376 | | | 193 | | | 187 | | | — | | | — | | | 5,217 | |
| No FICO available | No FICO available | 13 | | | 37 | | | 5 | | | 10 | | | 18 | | | 10 | | | 0 | | | 0 | | | 93 | | No FICO available | 16 | | | 34 | | | 12 | | | 13 | | | 9 | | | 10 | | | — | | | — | | | 94 | |
| Total auto | Total auto | 19,790 | | | 14,831 | | | 6,471 | | | 3,573 | | | 2,757 | | | 765 | | | 0 | | | 0 | | | 48,187 | | Total auto | 29,566 | | | 12,700 | | | 8,717 | | | 3,386 | | | 1,490 | | | 800 | | | — | | | — | | | 56,659 | |
| Other consumer | Other consumer | | Other consumer | |
| 800+ | 800+ | 353 | | | 287 | | | 94 | | | 35 | | | 10 | | | 71 | | | 2,249 | | | 21 | | | 3,120 | | 800+ | 450 | | | 162 | | | 128 | | | 34 | | | 8 | | | 47 | | | 1,343 | | | 22 | | | 2,194 | |
| 760-799 | 760-799 | 342 | | | 279 | | | 93 | | | 29 | | | 10 | | | 34 | | | 1,110 | | | 16 | | | 1,913 | | 760-799 | 502 | | | 147 | | | 117 | | | 33 | | | 7 | | | 22 | | | 819 | | | 19 | | | 1,666 | |
| 720-759 | 720-759 | 262 | | | 258 | | | 107 | | | 35 | | | 11 | | | 30 | | | 915 | | | 26 | | | 1,644 | | 720-759 | 461 | | | 134 | | | 115 | | | 38 | | | 9 | | | 18 | | | 714 | | | 22 | | | 1,511 | |
| 680-719 | 680-719 | 156 | | | 213 | | | 99 | | | 36 | | | 11 | | | 24 | | | 798 | | | 31 | | | 1,368 | | 680-719 | 349 | | | 95 | | | 99 | | | 37 | | | 9 | | | 15 | | | 630 | | | 22 | | | 1,256 | |
| 640-679 | 640-679 | 71 | | | 112 | | | 59 | | | 21 | | | 7 | | | 10 | | | 415 | | | 23 | | | 718 | | 640-679 | 170 | | | 44 | | | 55 | | | 21 | | | 6 | | | 8 | | | 328 | | | 17 | | | 649 | |
| 600-639 | 600-639 | 18 | | | 36 | | | 22 | | | 9 | | | 4 | | | 8 | | | 151 | | | 13 | | | 261 | | 600-639 | 42 | | | 13 | | | 19 | | | 9 | | | 3 | | | 4 | | | 117 | | | 9 | | | 216 | |
| < 600 | < 600 | 13 | | | 41 | | | 30 | | | 12 | | | 5 | | | 7 | | | 161 | | | 18 | | | 287 | | < 600 | 18 | | | 12 | | | 22 | | | 11 | | | 3 | | | 5 | | | 114 | | | 12 | | | 197 | |
| No FICO available | No FICO available | 195 | | | 173 | | | 83 | | | 88 | | | 3 | | | 16 | | | 1,248 | | | 43 | | | 1,849 | | No FICO available | 235 | | | 113 | | | 155 | | | 23 | | | 62 | | | 10 | | | 1,236 | | | 36 | | | 1,870 | |
| FICO not required | FICO not required | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 13,249 | | | 0 | | | 13,249 | | FICO not required | — | | | — | | | — | | | — | | | — | | | — | | | 18,715 | | | — | | | 18,715 | |
| Total other consumer | Total other consumer | 1,410 | | | 1,399 | | | 587 | | | 265 | | | 61 | | | 200 | | | 20,296 | | | 191 | | | 24,409 | | Total other consumer | 2,227 | | | 720 | | | 710 | | | 206 | | | 107 | | | 129 | | | 24,016 | | | 159 | | | 28,274 | |
| Total consumer loans | Total consumer loans | $ | 75,172 | | | 60,307 | | | 22,816 | | | 29,673 | | | 35,869 | | | 97,314 | | | 79,347 | | | 8,722 | | | 409,220 | | Total consumer loans | $ | 101,969 | | | 55,214 | | | 34,661 | | | 11,714 | | | 15,842 | | | 77,309 | | | 78,564 | | | 7,001 | | | 382,274 | |
(1)Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
LTV refers to the ratio comparing the loan’s unpaid principal balance to the property’s collateral value. CLTVCombined LTV (CLTV) refers to the combination of first lien mortgage and junior lien mortgage (including unused line amounts for credit line products) ratios. We obtain 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
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. Generally, we obtain available LTVs
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| 82 | Wells Fargo & Company | 89 |
Note 4: Loans and Related Allowance for Credit Losses (continued)
and CLTVs on a quarterly basis. Certain loans do not have an LTV or CLTV due to a lack of industry data availability and portfolios acquired from or serviced by other institutions.
Table 4.11 shows the most updated LTV and CLTV distribution of the residential mortgage – first lien and residential mortgage – junior lien loan portfolios. We consider the trends in residential real estate markets as we monitor credit risk and establish our ACL. 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.
Table 4.11: Consumer Loan Categories by LTV/CLTV and Vintage
| | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | |
| (in millions) | (in millions) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | (in millions) | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Residential mortgage – first lien | Residential mortgage – first lien | | Residential mortgage – first lien | |
| By LTV: | By LTV: | | By LTV: | |
| 0-60% | 0-60% | $ | 9,789 | | | 18,204 | | | 14,733 | | | 5,341 | | | 11,884 | | | 66,680 | | | 4,604 | | | 1,567 | | | 132,802 | | 0-60% | $ | 7,187 | | | 27,906 | | | 24,257 | | | 15,714 | | | 5,040 | | | 64,410 | | | 3,997 | | | 1,772 | | | 150,283 | |
| 60.01-80% | 60.01-80% | 20,654 | | | 27,433 | | | 15,773 | | | 4,339 | | | 5,369 | | | 10,096 | | | 1,071 | | | 256 | | | 84,991 | | 60.01-80% | 10,940 | | | 39,437 | | | 14,916 | | | 6,725 | | | 1,808 | | | 6,340 | | | 549 | | | 177 | | | 80,892 | |
| 80.01-100% | 80.01-100% | 40 | | | 1,720 | | | 1,498 | | | 416 | | | 382 | | | 801 | | | 304 | | | 68 | | | 5,229 | | 80.01-100% | 290 | | | 1,056 | | | 354 | | | 359 | | | 121 | | | 342 | | | 111 | | | 39 | | | 2,672 | |
| 100.01-120% (1) | 100.01-120% (1) | 0 | | | 35 | | | 52 | | | 19 | | | 16 | | | 101 | | | 72 | | | 17 | | | 312 | | 100.01-120% (1) | — | | | 25 | | | 26 | | | 18 | | | 8 | | | 45 | | | 22 | | | 5 | | | 149 | |
| > 120% (1) | > 120% (1) | 0 | | | 21 | | | 17 | | | 6 | | | 7 | | | 50 | | | 30 | | | 6 | | | 137 | | > 120% (1) | — | | | 12 | | | 5 | | | 5 | | | 1 | | | 29 | | | 12 | | | 3 | | | 67 | |
| No LTV available | No LTV available | 42 | | | 101 | | | 79 | | | 54 | | | 57 | | | 272 | | | 53 | | | 11 | | | 669 | | No LTV available | 18 | | | 122 | | | 88 | | | 65 | | | 37 | | | 231 | | | 37 | | | 11 | | | 609 | |
| Government insured/guaranteed loans (2) | Government insured/guaranteed loans (2) | 3 | | | 193 | | | 364 | | | 566 | | | 635 | | | 18,470 | | | 0 | | | 0 | | | 20,231 | | Government insured/guaranteed loans (2) | 1 | | | 25 | | | 124 | | | 167 | | | 283 | | | 9,970 | | | — | | | — | | | 10,570 | |
| Total residential mortgage – first lien | Total residential mortgage – first lien | 30,528 | | | 47,707 | | | 32,516 | | | 10,741 | | | 18,350 | | | 96,470 | | | 6,134 | | | 1,925 | | | 244,371 | | Total residential mortgage – first lien | 18,436 | | | 68,583 | | | 39,770 | | | 23,053 | | | 7,298 | | | 81,367 | | | 4,728 | | | 2,007 | | | 245,242 | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | | Residential mortgage – junior lien | |
| By CLTV: | By CLTV: | | By CLTV: | |
| 0-60% | 0-60% | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 496 | | | 8,124 | | | 3,558 | | | 12,178 | | 0-60% | — | | | — | | | — | | | — | | | — | | | 450 | | | 7,388 | | | 3,707 | | | 11,545 | |
| 60.01-80% | 60.01-80% | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 254 | | | 3,718 | | | 1,178 | | | 5,150 | | 60.01-80% | — | | | — | | | — | | | — | | | — | | | 145 | | | 1,875 | | | 793 | | | 2,813 | |
| 80.01-100% | 80.01-100% | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 123 | | | 1,051 | | | 424 | | | 1,598 | | 80.01-100% | — | | | — | | | — | | | — | | | — | | | 43 | | | 403 | | | 223 | | | 669 | |
| 100.01-120% (2) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 31 | | | 225 | | | 92 | | | 348 | | |
| > 120% (2) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 8 | | | 78 | | | 28 | | | 114 | | |
| 100.01-120% (1) | | 100.01-120% (1) | — | | | — | | | — | | | — | | | — | | | 9 | | | 73 | | | 34 | | | 116 | |
| > 120% (1) | | > 120% (1) | — | | | — | | | — | | | — | | | — | | | 2 | | | 25 | | | 10 | | | 37 | |
| No CLTV available | No CLTV available | 13 | | | 22 | | | 35 | | | 35 | | | 28 | | | 60 | | | 24 | | | 32 | | | 249 | | No CLTV available | 5 | | | 31 | | | 19 | | | 29 | | | 24 | | | 58 | | | 17 | | | 29 | | | 212 | |
| Total residential mortgage – junior lien | Total residential mortgage – junior lien | 13 | | | 22 | | | 35 | | | 35 | | | 28 | | | 972 | | | 13,220 | | | 5,312 | | | 19,637 | | Total residential mortgage – junior lien | 5 | | | 31 | | | 19 | | | 29 | | | 24 | | | 707 | | | 9,781 | | | 4,796 | | | 15,392 | |
| Total | Total | $ | 30,541 | | | 47,729 | | | 32,551 | | | 10,776 | | | 18,378 | | | 97,442 | | | 19,354 | | | 7,237 | | | 264,008 | | Total | $ | 18,441 | | | 68,614 | | | 39,789 | | | 23,082 | | | 7,322 | | | 82,074 | | | 14,509 | | | 6,803 | | | 260,634 | |
| | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | | | Term loans by origination year | | Revolving loans | | Revolving loans converted to term loans | |
| | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| Residential mortgage – first lien | Residential mortgage – first lien | | Residential mortgage – first lien | |
| By LTV: | By LTV: | | By LTV: | |
| 0-60% | 0-60% | $ | 16,582 | | | 15,449 | | | 6,065 | | | 13,190 | | | 21,097 | | | 59,291 | | | 4,971 | | | 1,587 | | | 138,232 | | 0-60% | $ | 26,618 | | | 22,882 | | | 16,063 | | | 5,310 | | | 11,030 | | | 57,880 | | | 4,348 | | | 1,644 | | | 145,775 | |
| 60.01-80% | 60.01-80% | 34,639 | | | 24,736 | | | 7,724 | | | 10,745 | | | 8,970 | | | 9,333 | | | 1,323 | | | 326 | | | 97,796 | | 60.01-80% | 42,893 | | | 18,188 | | | 8,356 | | | 2,234 | | | 2,647 | | | 5,017 | | | 674 | | | 188 | | | 80,197 | |
| 80.01-100% | 80.01-100% | 2,332 | | | 2,975 | | | 900 | | | 654 | | | 441 | | | 1,003 | | | 425 | | | 100 | | | 8,830 | | 80.01-100% | 486 | | | 437 | | | 474 | | | 147 | | | 134 | | | 339 | | | 157 | | | 42 | | | 2,216 | |
| 100.01-120% (1) | 100.01-120% (1) | 41 | | | 106 | | | 45 | | | 40 | | | 41 | | | 168 | | | 117 | | | 26 | | | 584 | | 100.01-120% (1) | 10 | | | 31 | | | 24 | | | 11 | | | 7 | | | 48 | | | 33 | | | 8 | | | 172 | |
| > 120% (1) | > 120% (1) | 31 | | | 41 | | | 16 | | | 19 | | | 16 | | | 78 | | | 44 | | | 8 | | | 253 | | > 120% (1) | 5 | | | 10 | | | 10 | | | 4 | | | 3 | | | 35 | | | 14 | | | 3 | | | 84 | |
| No LTV available | No LTV available | 110 | | | 92 | | | 63 | | | 72 | | | 87 | | | 248 | | | 54 | | | 13 | | | 739 | | No LTV available | 122 | | | 92 | | | 67 | | | 40 | | | 38 | | | 211 | | | 87 | | | 11 | | | 668 | |
| Government insured/guaranteed loans (2) | Government insured/guaranteed loans (2) | 215 | | | 639 | | | 904 | | | 1,076 | | | 2,367 | | | 25,039 | | | 0 | | | 0 | | | 30,240 | | Government insured/guaranteed loans (2) | 14 | | | 134 | | | 209 | | | 349 | | | 364 | | | 12,088 | | | — | | | — | | | 13,158 | |
| Total residential mortgage – first lien | Total residential mortgage – first lien | 53,950 | | | 44,038 | | | 15,717 | | | 25,796 | | | 33,019 | | | 95,160 | | | 6,934 | | | 2,060 | | | 276,674 | | Total residential mortgage – first lien | 70,148 | | | 41,774 | | | 25,203 | | | 8,095 | | | 14,223 | | | 75,618 | | | 5,313 | | | 1,896 | | | 242,270 | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | | Residential mortgage – junior lien | |
| By CLTV: | By CLTV: | | By CLTV: | |
| 0-60% | 0-60% | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 548 | | | 8,626 | | | 3,742 | | | 12,916 | | 0-60% | — | | | — | | | — | | | — | | | — | | | 475 | | | 7,949 | | | 3,588 | | | 12,012 | |
| 60.01-80% | 60.01-80% | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 335 | | | 5,081 | | | 1,554 | | | 6,970 | | 60.01-80% | — | | | — | | | — | | | — | | | — | | | 172 | | | 2,329 | | | 823 | | | 3,324 | |
| 80.01-100% | 80.01-100% | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 187 | | | 1,507 | | | 641 | | | 2,335 | | 80.01-100% | — | | | — | | | — | | | — | | | — | | | 55 | | | 554 | | | 241 | | | 850 | |
| 100.01-120% (2) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 59 | | | 376 | | | 156 | | | 591 | | |
| > 120% (2) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 15 | | | 128 | | | 50 | | | 193 | | |
| 100.01-120% (1) | | 100.01-120% (1) | — | | | — | | | — | | | — | | | — | | | 13 | | | 104 | | | 42 | | | 159 | |
| > 120% (1) | | > 120% (1) | — | | | — | | | — | | | — | | | — | | | 3 | | | 35 | | | 13 | | | 51 | |
| No CLTV available | No CLTV available | 22 | | | 39 | | | 41 | | | 39 | | | 32 | | | 45 | | | 25 | | | 38 | | | 281 | | No CLTV available | 28 | | | 20 | | | 31 | | | 27 | | | 22 | | | 44 | | | 21 | | | 29 | | | 222 | |
| Total residential mortgage – junior lien | Total residential mortgage – junior lien | 22 | | | 39 | | | 41 | | | 39 | | | 32 | | | 1,189 | | | 15,743 | | | 6,181 | | | 23,286 | | Total residential mortgage – junior lien | 28 | | | 20 | | | 31 | | | 27 | | | 22 | | | 762 | | | 10,992 | | | 4,736 | | | 16,618 | |
| Total | Total | $ | 53,972 | | | 44,077 | | | 15,758 | | | 25,835 | | | 33,051 | | | 96,349 | | | 22,677 | | | 8,241 | | | 299,960 | | Total | $ | 70,176 | | | 41,794 | | | 25,234 | | | 8,122 | | | 14,245 | | | 76,380 | | | 16,305 | | | 6,632 | | | 258,888 | |
(1)Reflects total loan balances with LTV/CLTV amounts in excess of 100%. In the event of default, the loss content would generally be limited to only the amount in excess of 100% LTV/CLTV.
(2)Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
| | | | | | | | |
90 | Wells Fargo & Company | 83 |
NONACCRUAL LOANS Table 4.12 provides loans on nonaccrual status. In connection with our adoption of CECL, nonaccrualNonaccrual loans may have an ACL or a negative allowance for credit losses from expected recoveries of amounts previously written off. PaymentCustomer payment deferral activities in
deferral activitiesthe residential mortgage portfolio instituted in response to the COVID-19 pandemic could continue to delay the recognition of delinquenciesnonaccrual loans for those residential mortgage customers who otherwise would have otherwise moved into nonaccrual status.
Table 4.12: Nonaccrual Loans
| | | Amortized cost | | Recognized interest income | | Amortized cost | | Recognized interest income |
| | Nonaccrual loans | | Nonaccrual loans without related allowance for credit losses (1) | | Six months ended June 30, | | Nonaccrual loans | | Nonaccrual loans without related allowance for credit losses (1) | | Quarter ended March 31, |
| (in millions) | (in millions) | Jun 30,
2021 | | Dec 31,
2020 | | Jun 30,
2021 | | Dec 31,
2020 | | 2021 | | 2020 | (in millions) | Mar 31,
2022 | | Dec 31,
2021 | | Mar 31,
2022 | | Dec 31,
2021 | | 2022 | | 2021 |
| Commercial: | Commercial: | | Commercial: | |
| Commercial and industrial | Commercial and industrial | $ | 1,691 | | | 2,698 | | | 464 | | | 382 | | | 45 | | | 30 | | Commercial and industrial | $ | 799 | | | 980 | | | 191 | | | 190 | | | 22 | | | 31 | |
| Real estate mortgage | Real estate mortgage | 1,598 | | | 1,774 | | | 201 | | | 93 | | | 33 | | | 17 | | Real estate mortgage | 1,033 | | | 1,235 | | | 50 | | | 66 | | | 17 | | | 11 | |
| Real estate construction | Real estate construction | 45 | | | 48 | | | 13 | | | 15 | | | 1 | | | 5 | | Real estate construction | 4 | | | 13 | | | 2 | | | 5 | | | — | | | — | |
| Lease financing | Lease financing | 215 | | | 259 | | | 40 | | | 16 | | | 0 | | | 0 | | Lease financing | 117 | | | 148 | | | 7 | | | 9 | | | — | | | — | |
| Total commercial | Total commercial | 3,549 | | | 4,779 | | | 718 | | | 506 | | | 79 | | | 52 | | Total commercial | 1,953 | | | 2,376 | | | 250 | | | 270 | | | 39 | | | 42 | |
| Consumer: | Consumer: | | Consumer: | |
| Residential mortgage- first lien | Residential mortgage- first lien | 2,852 | | | 2,957 | | | 1,949 | | | 1,908 | | | 56 | | | 81 | | Residential mortgage- first lien | 3,873 | | | 3,803 | | | 2,764 | | | 2,722 | | | 41 | | | 37 | |
| Residential mortgage- junior lien | Residential mortgage- junior lien | 713 | | | 754 | | | 463 | | | 461 | | | 25 | | | 28 | | Residential mortgage- junior lien | 802 | | | 801 | | | 555 | | | 497 | | | 14 | | | 12 | |
| Auto | Auto | 221 | | | 202 | | | 0 | | | 0 | | | 17 | | | 7 | | Auto | 208 | | | 198 | | | — | | | — | | | 8 | | | 9 | |
| Other consumer | Other consumer | 36 | | | 36 | | | 0 | | | 0 | | | 1 | | | 1 | | Other consumer | 35 | | | 34 | | | — | | | — | | | 1 | | | 1 | |
| Total consumer | Total consumer | 3,822 | | | 3,949 | | | 2,412 | | | 2,369 | | | 99 | | | 117 | | Total consumer | 4,918 | | | 4,836 | | | 3,319 | | | 3,219 | | | 64 | | | 59 | |
| Total nonaccrual loans | Total nonaccrual loans | $ | 7,371 | | | 8,728 | | | 3,130 | | | 2,875 | | | 178 | | | 169 | | Total nonaccrual loans | $ | 6,871 | | | 7,212 | | | 3,569 | | | 3,489 | | | 103 | | | 101 | |
(1)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 $939$997 million and $2.1 billion$694 million at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively, which included $650$834 million and $1.7 billion,$583 million, respectively, of loans that are government insured/guaranteed. Under the Consumer Financial Protection Bureau guidelines, we do not commence the foreclosure process on residential mortgage loans until after the loan is 120 days delinquent. Foreclosure procedures and timelines vary depending on whether the property address resides in a judicial or non-judicial state. Judicial states require the foreclosure to be processed through the state’s courts while non-judicial states are processed without court intervention. Foreclosure timelines vary according to state law. In connection with our actions to support customers during the COVID-19 pandemic, we have suspended certain mortgage foreclosure activities.
| | | | | | | | |
| 84 | Wells Fargo & Company | 91 |
Note 4: Loans and Related Allowance for Credit Losses (continued)
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING Certain loans 90 days or more past due are still accruing, because they are (1) well-secured and in the process of collection or (2) residential mortgage or consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due.
Table 4.13 shows loans 90 days or more past due and still accruing by class for loans not government insured/guaranteed.
Table 4.13: Loans 90 Days or More Past Due and Still Accruing | | ($ in millions) | ($ in millions) | Jun 30,
2021 | | Dec 31,
2020 | ($ in millions) | Mar 31,
2022 | | Dec 31,
2021 |
| Total: | Total: | $ | 4,703 | | | 7,041 | | Total: | $ | 4,011 | | | 5,358 | |
| Less: FHA insured/VA guaranteed (1) | Less: FHA insured/VA guaranteed (1) | 3,966 | | | 6,351 | | Less: FHA insured/VA guaranteed (1) | 3,335 | | | 4,699 | |
| | Total, not government insured/guaranteed | Total, not government insured/guaranteed | $ | 737 | | | 690 | | Total, not government insured/guaranteed | $ | 676 | | | 659 | |
| By segment and class, not government insured/guaranteed: | By segment and class, not government insured/guaranteed: | | By segment and class, not government insured/guaranteed: | |
| Commercial: | Commercial: | | Commercial: | |
| Commercial and industrial | Commercial and industrial | $ | 165 | | | 39 | | Commercial and industrial | $ | 186 | | | 206 | |
| Real estate mortgage | Real estate mortgage | 105 | | | 38 | | Real estate mortgage | 80 | | | 29 | |
| Real estate construction | Real estate construction | 7 | | | 1 | | Real estate construction | 1 | | | — | |
| Total commercial | Total commercial | 277 | | | 78 | | Total commercial | 267 | | | 235 | |
| Consumer: | Consumer: | | Consumer: | |
| Residential mortgage – first lien | Residential mortgage – first lien | 73 | | | 135 | | Residential mortgage – first lien | 14 | | | 37 | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | 12 | | | 19 | | Residential mortgage – junior lien | 6 | | | 12 | |
| Credit card | Credit card | 271 | | | 365 | | Credit card | 294 | | | 269 | |
| Auto | Auto | 43 | | | 65 | | Auto | 79 | | | 88 | |
| Other consumer | Other consumer | 61 | | | 28 | | Other consumer | 16 | | | 18 | |
| Total consumer | Total consumer | 460 | | | 612 | | Total consumer | 409 | | | 424 | |
| Total, not government insured/guaranteed | Total, not government insured/guaranteed | $ | 737 | | | 690 | | Total, not government insured/guaranteed | $ | 676 | | | 659 | |
(1)Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
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 $12.5$9.7 billion and $14.5$10.2 billion at June 30, 2021,March 31, 2022 and December 31, 2020,2021, 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 and the Interagency Statement. For additional information on the TDR relief, see Note 1 (Summary of Significant Accounting Policies) in our 20202021 Form 10-K.
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 $344$471 million and $489$431 million at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively.
Table 4.14 summarizes our TDR modifications for the periods presented by primary modification type and includes the financial effects of these modifications. For those loans that modify more than once, the table reflects each modification that occurred during the period. Loans that both modify and are paid off or written-off within the period, as well as changes in recorded investment during the period for loans modified in prior periods, are not included in the table.
Table 4.14:TDR Modifications
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Primary modification type (1) | | Financial effects of modifications |
| ($ 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 June 30, 2021 | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | |
| Commercial and industrial | $ | 0 | | | 1 | | | 330 | | | 331 | | | 14 | | | 1.22 | % | | $ | 1 | |
| Real estate mortgage | 41 | | | 5 | | | 86 | | | 132 | | | 0 | | | 1.15 | | | 5 | |
| Real estate construction | 0 | | | 0 | | | 2 | | | 2 | | | 0 | | | 0 | | | 0 | |
| Lease financing | 0 | | | 0 | | | 1 | | | 1 | | | 0 | | | 0 | | | 0 | |
| Total commercial | 41 | | | 6 | | | 419 | | | 466 | | | 14 | | | 1.17 | | | 6 | |
| Consumer: | | | | | | | | | | | | | |
| Residential mortgage – first lien | 0 | | | 8 | | | 353 | | | 361 | | | 1 | | | 1.26 | | | 8 | |
| Residential mortgage – junior lien | 0 | | | 2 | | | 9 | | | 11 | | | 0 | | | 2.51 | | | 2 | |
| Credit card | 0 | | | 24 | | | 0 | | | 24 | | | 0 | | | 19.02 | | | 24 | |
| Auto | 1 | | | 1 | | | 72 | | | 74 | | | 30 | | | 3.93 | | | 1 | |
| Other consumer | 0 | | | 4 | | | 0 | | | 4 | | | 0 | | | 12.02 | | | 4 | |
| Trial modifications (5) | 0 | | | 0 | | | 2 | | | 2 | | | 0 | | | 0 | | | 0 | |
| Total consumer | 1 | | | 39 | | | 436 | | | 476 | | | 31 | | | 13.24 | | | 39 | |
| Total | $ | 42 | | | 45 | | | 855 | | | 942 | | | 45 | | | 11.68 | % | | $ | 45 | |
| Quarter ended June 30, 2020 | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | |
| Commercial and industrial | $ | 0 | | | 17 | | | 948 | | | 965 | | | 38 | | | 0.79 | % | | $ | 17 | |
| Real estate mortgage | 0 | | | 5 | | | 98 | | | 103 | | | 0 | | | 1.75 | | | 5 | |
| Real estate construction | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Lease financing | 0 | | | 0 | | | 1 | | | 1 | | | 0 | | | 0 | | | 0 | |
| Total commercial | 0 | | | 22 | | | 1,047 | | | 1,069 | | | 38 | | | 1.00 | | | 22 | |
| Consumer: | | | | | | | | | | | | | |
| Residential mortgage – first lien | 0 | | | 14 | | | 288 | | | 302 | | | 1 | | | 1.84 | | | 14 | |
| Residential mortgage – junior lien | 0 | | | 3 | | | 24 | | | 27 | | | 0 | | | 2.39 | | | 3 | |
| Credit card | 0 | | | 62 | | | 0 | | | 62 | | | 0 | | | 12.79 | | | 62 | |
| Auto | 1 | | | 2 | | | 44 | | | 47 | | | 28 | | | 4.42 | | | 2 | |
| Other consumer | 0 | | | 3 | | | 6 | | | 9 | | | 0 | | | 5.90 | | | 3 | |
| Trial modifications (5) | 0 | | | 0 | | | (13) | | | (13) | | | 0 | | | 0 | | | 0 | |
| Total consumer | 1 | | | 84 | | | 349 | | | 434 | | | 29 | | | 10.09 | | | 84 | |
| Total | $ | 1 | | | 106 | | | 1,396 | | | 1,503 | | | 67 | | | 8.17 | % | | $ | 106 | |
(continued on following page)
| | | | | | | | |
| Wells Fargo & Company | 9385 |
Note 4: Loans and Related Allowance for Credit Losses (continued)
(continued from previous page)
| | | Primary modification type (1) | | Financial effects of modifications | | | Primary modification type (1) | | Financial effects of modifications | |
| ($ in millions) | ($ 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) | | ($ 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) | |
| Six months ended June 30, 2021 | | | |
| Quarter ended March 31, 2022 | | Quarter ended March 31, 2022 | | |
| Commercial: | Commercial: | | | Commercial: | | |
| Commercial and industrial | Commercial and industrial | $ | 0 | | | 2 | | | 560 | | | 562 | | | 20 | | | 1.10 | % | | $ | 2 | | | Commercial and industrial | $ | — | | | 6 | | | 73 | | | 79 | | | — | | | 9.94 | % | | $ | 6 | | |
| Real estate mortgage | Real estate mortgage | 41 | | | 9 | | | 186 | | | 236 | | | 0 | | | 1.04 | | | 9 | | | Real estate mortgage | — | | | 5 | | | 27 | | | 32 | | | — | | | 1.45 | | | 5 | | |
| Real estate construction | Real estate construction | 0 | | | 0 | | | 3 | | | 3 | | | 0 | | | 0 | | | 0 | | | Real estate construction | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
| Lease financing | Lease financing | 0 | | | 0 | | | 4 | | | 4 | | | 0 | | | 0 | | | 0 | | | Lease financing | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
| Total commercial | Total commercial | 41 | | | 11 | | | 753 | | | 805 | | | 20 | | | 1.05 | | | 11 | | | Total commercial | — | | | 11 | | | 100 | | | 111 | | | — | | | 6.37 | | | 11 | | |
| Consumer: | Consumer: | | | | | Consumer: | | | | |
| Residential mortgage – first lien | Residential mortgage – first lien | 0 | | | 15 | | | 885 | | | 900 | | | 1 | | | 1.53 | | | 15 | | | Residential mortgage – first lien | 1 | | | 60 | | | 315 | | | 376 | | | 1 | | | 1.58 | | | 60 | | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | 0 | | | 7 | | | 22 | | | 29 | | | 1 | | | 2.44 | | | 7 | | | Residential mortgage – junior lien | — | | | 8 | | | 21 | | | 29 | | | — | | | 2.34 | | | 8 | | |
| Credit card | Credit card | 0 | | | 56 | | | 0 | | | 56 | | | 0 | | | 18.93 | | | 56 | | | Credit card | — | | | 70 | | | — | | | 70 | | | — | | | 19.12 | | | 70 | | |
| Auto | Auto | 1 | | | 2 | | | 86 | | | 89 | | | 37 | | | 3.90 | | | 2 | | | Auto | 1 | | | 3 | | | 40 | | | 44 | | | 9 | | | 4.91 | | | 3 | | |
| Other consumer | Other consumer | 0 | | | 11 | | | 1 | | | 12 | | | 0 | | | 12.14 | | | 11 | | | Other consumer | — | | | 3 | | | 1 | | | 4 | | | — | | | 11.64 | | | 3 | | |
| Trial modifications (5) | Trial modifications (5) | 0 | | | 0 | | | 2 | | | 2 | | | 0 | | | 0 | | | 0 | | | Trial modifications (5) | — | | | — | | | 211 | | | 211 | | | — | | | — | | | — | | |
| Total consumer | Total consumer | 1 | | | 91 | | | 996 | | | 1,088 | | | 39 | | | 13.67 | | | 91 | | | Total consumer | 2 | | | 144 | | | 588 | | | 734 | | | 10 | | | 10.43 | | | 144 | | |
| Total | Total | $ | 42 | | | 102 | | | 1,749 | | | 1,893 | | | 59 | | | 12.31 | % | | $ | 102 | | | Total | $ | 2 | | | 155 | | | 688 | | | 845 | | | 10 | | | 10.15 | % | | $ | 155 | | |
| Six months ended June 30, 2020 | | | |
| Quarter ended March 31, 2021 | | Quarter ended March 31, 2021 | | |
| Commercial: | Commercial: | | | Commercial: | | |
| Commercial and industrial | Commercial and industrial | $ | 18 | | | 32 | | | 1,262 | | | 1,312 | | | 82 | | | 0.73 | % | | $ | 32 | | | Commercial and industrial | $ | — | | | 1 | | | 230 | | | 231 | | | 6 | | | 0.89 | % | | $ | 1 | | |
| Real estate mortgage | Real estate mortgage | 0 | | | 18 | | | 250 | | | 268 | | | 0 | | | 1.17 | | | 18 | | | Real estate mortgage | — | | | 4 | | | 100 | | | 104 | | | — | | | 0.93 | | | 4 | | |
| Real estate construction | Real estate construction | 0 | | | 0 | | | 6 | | | 6 | | | 0 | | | 2.49 | | | 0 | | | Real estate construction | — | | | — | | | 1 | | | 1 | | | — | | | — | | | — | | |
| Lease financing | Lease financing | 0 | | | 0 | | | 1 | | | 1 | | | 0 | | | 0 | | | 0 | | | Lease financing | — | | | — | | | 3 | | | 3 | | | — | | | — | | | — | | |
| Total commercial | Total commercial | 18 | | | 50 | | | 1,519 | | | 1,587 | | | 82 | | | 0.90 | | | 50 | | | Total commercial | — | | | 5 | | | 334 | | | 339 | | | 6 | | | 0.92 | | | 5 | | |
| Consumer: | Consumer: | | | | | Consumer: | | | | |
| Residential mortgage – first lien | Residential mortgage – first lien | 0 | | | 31 | | | 461 | | | 492 | | | 1 | | | 1.73 | | | 31 | | | Residential mortgage – first lien | — | | | 7 | | | 532 | | | 539 | | | — | | | 1.87 | | | 7 | | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | 0 | | | 9 | | | 39 | | | 48 | | | 0 | | | 2.38 | | | 9 | | | Residential mortgage – junior lien | — | | | 5 | | | 13 | | | 18 | | | 1 | | | 2.41 | | | 5 | | |
| Credit card | Credit card | 0 | | | 157 | | | 0 | | | 157 | | | 0 | | | 12.51 | | | 157 | | | Credit card | — | | | 32 | | | — | | | 32 | | | — | | | 18.87 | | | 32 | | |
| Auto | Auto | 3 | | | 4 | | | 54 | | | 61 | | | 34 | | | 4.56 | | | 4 | | | Auto | — | | | 1 | | | 14 | | | 15 | | | 7 | | | 3.87 | | | 1 | | |
| Other consumer | Other consumer | 0 | | | 15 | | | 8 | | | 23 | | | 0 | | | 7.71 | | | 15 | | | Other consumer | — | | | 7 | | | 1 | | | 8 | | | — | | | 12.20 | | | 7 | | |
| Trial modifications (5) | Trial modifications (5) | 0 | | | 0 | | | (11) | | | (11) | | | 0 | | | 0 | | | 0 | | | Trial modifications (5) | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
| Total consumer | Total consumer | 3 | | | 216 | | | 551 | | | 770 | | | 35 | | | 10.04 | | | 216 | | | Total consumer | — | | | 52 | | | 560 | | | 612 | | | 8 | | | 14.01 | | | 52 | | |
| Total | Total | $ | 21 | | | 266 | | | 2,070 | | | 2,357 | | | 117 | | | 8.30 | % | | $ | 266 | | | Total | $ | — | | | 57 | | | 894 | | | 951 | | | 14 | | | 12.82 | % | | $ | 57 | | |
|
(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 $202$118 million and $221$256 million for the quarters ended June 30,first quarter 2022 and 2021, and 2020, respectively, and $458 million and $484 million for the first half of 2021 and 2020, respectively.
(2)Other concessions include loans with payment (principal and/or interest) deferral, 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. The reported amounts include COVID-related payment deferralsloans that are new TDRs that may have COVID-related payment deferrals and exclude COVID-related payment deferrals on loans previously reported as TDRs given limited current financial effects other than 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.
(4)Recorded investment related to interest rate reduction reflects the effect of reduced interest rates on loans with an interest rate concession as one of their 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.
| | | | | | | | |
9486 | Wells Fargo & Company | |
Table 4.15 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 4.15: Defaulted TDRs
| | | Recorded investment of defaults | | | | Recorded investment of defaults | |
| | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended March 31, | |
| (in millions) | (in millions) | 2021 | | 2020 | | 2021 | | 2020 | | (in millions) | | 2022 | | 2021 | |
| Commercial: | Commercial: | | | Commercial: | | | |
| Commercial and industrial | Commercial and industrial | $ | 84 | | | 37 | | | 125 | | | 222 | | | Commercial and industrial | | $ | 49 | | | 41 | | |
| Real estate mortgage | Real estate mortgage | 9 | | | 81 | | | 25 | | | 102 | | | Real estate mortgage | | 2 | | | 16 | | |
| Real estate construction | Real estate construction | 0 | | | 0 | | | 0 | | | 0 | | | Real estate construction | | — | | | — | | |
| Lease financing | Lease financing | 0 | | | 0 | | | 0 | | | 0 | | | Lease financing | | — | | | — | | |
| Total commercial | Total commercial | 93 | | | 118 | | | 150 | | | 324 | | | Total commercial | | 51 | | | 57 | | |
| Consumer: | Consumer: | | | Consumer: | | | |
| Residential mortgage – first lien | Residential mortgage – first lien | 2 | | | 8 | | | 5 | | | 18 | | | Residential mortgage – first lien | | 7 | | | 3 | | |
| Residential mortgage – junior lien | Residential mortgage – junior lien | 0 | | | 6 | | | 1 | | | 8 | | | Residential mortgage – junior lien | | — | | | 1 | | |
| Credit card | Credit card | 6 | | | 19 | | | 16 | | | 45 | | | Credit card | | 5 | | | 10 | | |
| Auto | Auto | 12 | | | 1 | | | 23 | | | 3 | | | Auto | | 6 | | | 11 | | |
| Other consumer | Other consumer | 0 | | | 2 | | | 1 | | | 3 | | | Other consumer | | — | | | 1 | | |
| Total consumer | Total consumer | 20 | | | 36 | | | 46 | | | 77 | | | Total consumer | | 18 | | | 26 | | |
| Total | Total | $ | 113 | | | 154 | | | 196 | | | 401 | | | Total | | $ | 69 | | | 83 | | |
| | | | | | | | |
| Wells Fargo & Company | 9587 |
The information below provides a summary of our leasing activities as a lessor and lessee. See Note 5
(Leasing (Leasing Activity) in our 20202021 Form 10-K for additional information about our leasing activities.
As a Lessor
Noninterest income on leases, which is presentedincluded in Table 5.1, is included in other noninterest income on our consolidated statement of income. Lease expense, included in other noninterest expense on our consolidated statement of income, was $188 million and $226 million in first quarter 2022 and $244 million for the quarters ended June 30, 2021, and 2020, respectively, and $452 million and $504 million for the first half of 2021 and 2020, respectively.
Table 5.1: Leasing Revenue
| | | Quarter ended June 30, | | Six months ended June 30, | | | Quarter ended March 31, | |
| (in millions) | (in millions) | 2021 | | 2020 | | 2021 | | 2020 | (in millions) | | 2022 | | 2021 | |
Interest income on lease financing (1) | Interest income on lease financing (1) | $ | 172 | | | 208 | | | 353 | | | 437 | | Interest income on lease financing (1) | | $ | 152 | | | 181 | | |
| Other lease revenues: | Other lease revenues: | | Other lease revenues: | | | |
| Variable revenues on lease financing | Variable revenues on lease financing | 25 | | | 26 | | | 51 | | | 54 | | Variable revenues on lease financing | | 30 | | | 26 | | |
| Fixed revenues on operating leases | Fixed revenues on operating leases | 254 | | | 294 | | | 514 | | | 608 | | Fixed revenues on operating leases | | 245 | | | 260 | | |
| Variable revenues on operating leases | Variable revenues on operating leases | 18 | | | 12 | | | 36 | | | 25 | | Variable revenues on operating leases | | 15 | | | 18 | | |
Other lease-related revenues (2)(1) | Other lease-related revenues (2)(1) | 16 | | | 3 | | | 27 | | | 1 | | Other lease-related revenues (2)(1) | | 37 | | | 11 | | |
| Noninterest income on leases | Noninterest income on leases | 313 | | | 335 | | | 628 | | | 688 | | Noninterest income on leases | | 327 | | | 315 | | |
| Total leasing revenue | Total leasing revenue | $ | 485 | | | 543 | | | 981 | | | 1,125 | | Total leasing revenue | | $ | 479 | | | 496 | | |
(1) In second quarter 2021, we elected to change the presentation of investment tax credits related to solar energy investments. Prior period balances have been revised to conform with the current period presentation. For additional information, see Note 1 (Summary of Significant Accounting Policies).
(2) 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 5.2 presents balances for our operating leases.
Table 5.2: Operating Lease Right of UseRight-of-Use (ROU) Assets and Lease Liabilities | | | | | | | | |
| (in millions) | Mar 31, 2022 | Dec 31, 2021 |
| ROU assets | $ | 3,782 | | 3,805 | |
| Lease liabilities | 4,415 | | 4,476 | |
| | | | | | | | |
| (in millions) | Jun 30, 2021 | Dec 31, 2020 |
| ROU assets | $ | 4,053 | | 4,306 | |
| Lease liabilities | 4,705 | | 4,962 | |
Table 5.3 provides the composition of our lease costs, which are predominantly included in net occupancy expense.
Table 5.3: Lease Costs
| | | Quarter ended June 30, | | Six months ended June 30, | | | Quarter ended March 31, | |
| (in millions) | (in millions) | 2021 | | 2020 | | 2021 | | 2020 | (in millions) | | 2022 | | 2021 | |
| Fixed lease expense – operating leases | Fixed lease expense – operating leases | $ | 265 | | | 292 | | | 530 | | | 583 | | Fixed lease expense – operating leases | | $ | 253 | | | 265 | | |
| Variable lease expense | Variable lease expense | 69 | | | 80 | | | 147 | | | 146 | | Variable lease expense | | 73 | | | 78 | | |
| Other (1) | Other (1) | (28) | | | (42) | | | (31) | | | (56) | | Other (1) | | (10) | | | (3) | | |
| Total lease costs | Total lease costs | $ | 306 | | | 330 | | | 646 | | | 673 | | Total lease costs | | $ | 316 | | | 340 | | |
(1)Predominantly includes gains recognized from sale leaseback transactions and sublease rental income.
| | | | | | | | |
9688 | Wells Fargo & Company | |
| | |
Note 6: Equity Securities |
Table 6.1 provides a summary of our equity securities by business purpose and accounting method.
Table 6.1: Equity Securities
| | (in millions) | (in millions) | Jun 30,
2021 | | Dec 31,
2020 | (in millions) | Mar 31,
2022 | | Dec 31,
2021 |
| Held for trading at fair value: | Held for trading at fair value: | | Held for trading at fair value: | |
| Marketable equity securities (1) | Marketable equity securities (1) | $ | 23,701 | | | 23,032 | | Marketable equity securities (1) | $ | 23,739 | | | 27,476 | |
| Nonmarketable equity securities (2)(3) | | Nonmarketable equity securities (2)(3) | 10,464 | | | — | |
| Total equity securities held for trading | | Total equity securities held for trading | 34,203 | | | 27,476 | |
| Not held for trading: | Not held for trading: | | Not held for trading: | |
| Fair value: | Fair value: | | Fair value: | |
| Marketable equity securities | Marketable equity securities | 1,624 | | | 1,564 | | Marketable equity securities | 2,027 | | | 2,578 | |
| Nonmarketable equity securities (2) | Nonmarketable equity securities (2) | 10,006 | | | 9,413 | | Nonmarketable equity securities (2) | 132 | | | 9,044 | |
| Total equity securities at fair value | 11,630 | | | 10,977 | | |
| Total equity securities not held for trading at fair value | | Total equity securities not held for trading at fair value | 2,159 | | | 11,622 | |
| Equity method: | Equity method: | | Equity method: | |
| Private equity | Private equity | 2,897 | | | 2,960 | | Private equity | 2,972 | | | 3,077 | |
| Tax-advantaged renewable energy (3) | 3,853 | | | 3,481 | | |
| Tax-advantaged renewable energy | | Tax-advantaged renewable energy | 5,018 | | | 4,740 | |
| New market tax credit and other | New market tax credit and other | 378 | | | 409 | | New market tax credit and other | 369 | | | 379 | |
| Total equity method | Total equity method | 7,128 | | | 6,850 | | Total equity method | 8,359 | | | 8,196 | |
| Other methods : | | |
| Low-income housing tax credit investments (3) | 11,439 | | | 11,353 | | |
| Federal Reserve Bank stock and other at cost (4) | 3,585 | | | 3,588 | | |
| Private equity (5) | 7,064 | | | 4,208 | | |
| Other methods: | | Other methods: | |
| Low-income housing tax credit investments | | Low-income housing tax credit investments | 12,199 | | | 12,314 | |
| Private equity (4) | | Private equity (4) | 10,251 | | | 9,694 | |
| Federal Reserve Bank stock and other at cost (5) | | Federal Reserve Bank stock and other at cost (5) | 3,584 | | | 3,584 | |
| Total equity securities not held for trading | Total equity securities not held for trading | 40,846 | | | 36,976 | | Total equity securities not held for trading | 36,552 | | | 45,410 | |
| Total equity securities | Total equity securities | $ | 64,547 | | | 60,008 | | Total equity securities | $ | 70,755 | | | 72,886 | |
(1) Represents securities held as part of our customer accommodation trading activities. For additional information on these activities, see Note 2 (Trading Activities).
(2) Substantially allIn first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from “not held for trading activities” to “held for trading activities” to better reflect the business activity of these securities are economically hedged with equity derivatives.
(3) In second quarter 2021, we elected to change our accounting method for low-income housing tax credit investments and elected to change the presentation of investment tax credits related to solar energy investments. Prior period balances have been revised to conform with the current period presentation.those financial instruments. For additional information on Trading Activities, see Note 1 (Summary of Significant Accounting Policies). in our 2021 Form 10-K.
(3) Represents securities economically hedged with equity derivatives.
(4) Substantially all relates to investments in Federal Reserve Bank stock at both June 30, 2021, and December 31, 2020.
(5) Represents nonmarketable equity securities accounted for under the measurement alternative, which were predominantly securities associated with our affiliated venture capital business.
Low-Income Housing Tax Credit Investments
We invest(5) Substantially all relates to investments in affordable housing projects that qualify for the low-income housing tax credit (LIHTC), which are designed to promote private development of low-income housing. These investments typically generate a return through the realization of tax credits and other tax benefits. Table 6.2 summarizes the amortization of the investments and the related tax credits and other tax benefits that are recognized in income tax expense/(benefit) on our consolidated statement of income. 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 billionFederal Reserve Bank stock at both June 30, 2021,March 31, 2022, and December 31, 2020. This liability for unfunded commitments is included in long-term debt on our consolidated balance sheet.
Table 6.2: LIHTC Investments (1)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Quarter ended June 30, | | Six months ended June 30, | | |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 | | |
| Proportional amortization of investments | $ | 382 | | | 352 | | | 764 | | | 703 | | | |
| Tax credits and other tax benefits | (431) | | | (401) | | | (875) | | | (797) | | | |
| Net expense/(benefit) recognized within income tax expense | $ | (49) | | | (49) | | | (111) | | | (94) | | | |
(1)Excludes the impact of the estimated annual effective income tax rate applied to each period.
Note 6: Equity Securities (continued)
2021.Realized Gains and Losses Not Held for Trading
Table 6.36.2 provides a summary of the net gains and losses from equity securities not held for trading, which excludes equity method adjustments for our share of the investee’s earnings or
losses that are recognized in other noninterest income. Gains and losses for securities held for trading are reported in net gains onfrom trading and securities.
Table 6.3:6.2: Net Gains (Losses) from Equity Securities Not Held for Trading
| | | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended March 31, | |
| (in millions) | (in millions) | 2021 | | 2020 | | 2021 | | 2020 | | (in millions) | | 2022 | | 2021 | |
| Net gains (losses) from equity securities carried at fair value: | Net gains (losses) from equity securities carried at fair value: | | | Net gains (losses) from equity securities carried at fair value: | | | |
| Marketable equity securities | Marketable equity securities | $ | 74 | | | 394 | | | $ | 134 | | | (409) | | | Marketable equity securities | | $ | (2) | | | 60 | | |
Nonmarketable equity securities | Nonmarketable equity securities | 893 | | | 1,424 | | | 535 | | | 320 | | | Nonmarketable equity securities | | (22) | | | (358) | | |
| Total equity securities carried at fair value | Total equity securities carried at fair value | 967 | | | 1,818 | | | 669 | | | (89) | | | Total equity securities carried at fair value | | (24) | | | (298) | | |
| Net gains (losses) from nonmarketable equity securities not carried at fair value (1): | | | |
| Net gains (losses) from nonmarketable equity securities not carried at fair value (2): | | Net gains (losses) from nonmarketable equity securities not carried at fair value (2): | | | |
| Impairment write-downs | Impairment write-downs | (42) | | | (106) | | | (57) | | | (1,041) | | | Impairment write-downs | | (438) | | | (15) | | |
| Net unrealized gains related to measurement alternative observable transactions | 2,037 | | | 24 | | | 2,262 | | | 246 | | | |
| Net unrealized gains (3) | | Net unrealized gains (3) | | 690 | | | 225 | | |
| Net realized gains on sale | Net realized gains on sale | 496 | | | 199 | | | 551 | | | 199 | | | Net realized gains on sale | | 348 | | | 55 | | |
| | Total nonmarketable equity securities not carried at fair value | Total nonmarketable equity securities not carried at fair value | 2,491 | | | 117 | | | 2,756 | | | (596) | | | Total nonmarketable equity securities not carried at fair value | | 600 | | | 265 | | |
| Net losses from economic hedge derivatives (2) | (762) | | | (1,402) | | | (337) | | | (183) | | | |
| Net gains from economic hedge derivatives (1) | | Net gains from economic hedge derivatives (1) | | — | | | 425 | | |
| Total net gains (losses) from equity securities not held for trading | Total net gains (losses) from equity securities not held for trading | $ | 2,696 | | | 533 | | | $ | 3,088 | | | (868) | | | Total net gains (losses) from equity securities not held for trading | | $ | 576 | | | 392 | | |
|
(1)In first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from “not held for trading activities” to “held for trading activities” to better reflect the business activity of those financial instruments. For additional information on Trading Activities, see Note 1 (Summary of Significant Accounting Policies) in our 2021 Form 10-K.
(2)Includes impairment write-downs and net realized gains on saleamounts related to private equity and venture capital investments in consolidated portfolio companies, which are not reported in equity securities on our consolidated balance sheet.
(2)(3)Includes netunrealized gains (losses) on derivatives not designated as hedging instruments.due to observable price changes from equity securities accounted for under the measurement alternative.
Note 6: Equity Securities (continued)
Measurement Alternative
Table 6.46.3 provides additional information about the impairment write-downs and observable price adjustments related tochanges from nonmarketable
nonmarketable equity securities accounted for under the measurement alternative. Gains and losses related to these adjustments are also included in Table 6.3.6.2.
Table 6.4:6.3: Net Gains (Losses) from Measurement Alternative Equity Securities
| | | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended March 31, | |
| (in millions) | (in millions) | 2021 | | 2020 | | 2021 | | 2020 | | (in millions) | | 2022 | | 2021 | |
| Net gains (losses) recognized in earnings during the period: | Net gains (losses) recognized in earnings during the period: | | | Net gains (losses) recognized in earnings during the period: | | | |
| Gross unrealized gains due to observable price changes | $ | 2,037 | | | 24 | | | $ | 2,262 | | | 246 | | | |
| Gross unrealized gains from observable price changes | | Gross unrealized gains from observable price changes | | $ | 690 | | | 225 | | |
| | Impairment write-downs | Impairment write-downs | (38) | | | (58) | | | (50) | | | (412) | | | Impairment write-downs | | (395) | | | (12) | | |
| Realized net gains from sale | Realized net gains from sale | 195 | | | 11 | | | 195 | | | 13 | | | Realized net gains from sale | | 33 | | | — | | |
| Total net gains recognized during the period | Total net gains recognized during the period | $ | 2,194 | | | $ | (23) | | | $ | 2,407 | | | (153) | | | Total net gains recognized during the period | | $ | 328 | | | 213 | | |
Table 6.56.4 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 6.5:6.4: Measurement Alternative Cumulative Gains (Losses)
| | | (in millions) | (in millions) | Jun 30,
2021 | | Dec 31,
2020 | | (in millions) | Mar 31,
2022 | | Dec 31,
2021 | |
| | | Cumulative gains (losses): | Cumulative gains (losses): | | | Cumulative gains (losses): | | |
| Gross unrealized gains due to observable price changes | $ | 4,577 | | | 2,356 | | | |
| Gross unrealized losses due to observable price changes | (25) | | | (25) | | | |
| Gross unrealized gains from observable price changes | | Gross unrealized gains from observable price changes | $ | 6,957 | | | 6,278 | | |
| Gross unrealized losses from observable price changes | | Gross unrealized losses from observable price changes | (3) | | | (3) | | |
| Impairment write-downs | Impairment write-downs | (1,008) | | | (969) | | | Impairment write-downs | (1,216) | | | (821) | | |
| | | | | | | | |
9890 | Wells Fargo & Company | |
Table 7.1 presents the components of other assets.
Table 7.1: Other Assets
| | (in millions) | (in millions) | Jun 30, 2021 | | Dec 31, 2020 | (in millions) | Mar 31, 2022 | | Dec 31, 2021 |
| Corporate/bank-owned life insurance | Corporate/bank-owned life insurance | $ | 20,488 | | | 20,380 | | Corporate/bank-owned life insurance | $ | 20,667 | | | 20,619 | |
Accounts receivable | Accounts receivable | 24,372 | | | 38,116 | | Accounts receivable | 25,308 | | | 20,831 | |
| Interest receivable: | Interest receivable: | | Interest receivable: | |
| AFS and HTM debt securities | AFS and HTM debt securities | 1,366 | | | 1,368 | | AFS and HTM debt securities | 1,352 | | | 1,360 | |
| Loans | Loans | 2,224 | | | 2,838 | | Loans | 1,978 | | | 1,950 | |
| Trading and other | Trading and other | 482 | | | 415 | | Trading and other | 354 | | | 305 | |
| Customer relationship and other amortized intangibles | 287 | | | 328 | | |
| Foreclosed assets: | | |
| Residential real estate | 49 | | | 73 | | |
| Other | 80 | | | 86 | | |
| Operating lease assets (lessor) | Operating lease assets (lessor) | 6,773 | | | 7,391 | | Operating lease assets (lessor) | 6,040 | | | 6,182 | |
| Operating lease ROU assets (lessee) | Operating lease ROU assets (lessee) | 4,053 | | | 4,306 | | Operating lease ROU assets (lessee) | 3,782 | | | 3,805 | |
| Customer relationship and other amortized intangibles | | Customer relationship and other amortized intangibles | 196 | | | 211 | |
| Foreclosed assets | | Foreclosed assets | 130 | | | 112 | |
| | Due from customers on acceptances | Due from customers on acceptances | 144 | | | 268 | | Due from customers on acceptances | 125 | | | 155 | |
Other | Other | 12,135 | | | 11,768 | | Other | 12,548 | | | 11,729 | |
| Total other assets | Total other assets | $ | 72,453 | | | 87,337 | | Total other assets | $ | 72,480 | | | 67,259 | |
(1)Primarily includes derivatives clearinghouse receivables, trade date receivables, and servicer advances.
(2)Primarily includes income tax receivables, prepaid expenses, and private equity and venture capital investments in consolidated portfolio companies.
| | | | | | | | |
| Wells Fargo & Company | 9991 |
| | |
Note 8: Securitizations and Variable Interest Entities |
Involvement with Variable Interest Entities (VIEs)
In the normal course of business, we enter into various types of on- and off-balance sheet transactions with special purpose entities (SPEs), which are corporations, trusts, limited liability companies or partnerships that are established for a limited purpose. SPEs are often formed in connection with securitization transactions whereby financial assets are transferred to an SPE. SPEs formed in connection with securitization transactions are generally considered variable interest entities (VIEs). The VIE may alter the risk profile of the asset by entering into derivative transactions or obtaining credit support, and issues various forms of interests in those assets to investors. When we transfer financial assets from our consolidated balance sheet to a VIE in connection with a securitization, we typically receive cash and sometimes other interests in the VIE as proceeds for the assets we transfer. In certain transactions with VIEs, we may retain the right to service the transferred assets and repurchase the transferred assets if the outstanding balance of the assets falls below the level at which the cost to service the assets exceed the benefits. In addition, we may purchase the right to service loans transferred to a VIE by a third party.
In connection with our securitization or other VIE activities, we have various forms of ongoing involvement with VIEs, which may include:
•underwriting securities issued by VIEs and subsequently making markets in those securities;
•providing credit enhancement on securities issued by VIEs through the use of letters of credit or financial guarantees;
•entering into other derivative contracts with VIEs;
•holding senior or subordinated interests in VIEs;
•acting as servicer or investment manager for VIEs;
•providing administrative or trustee services to VIEs; and
•providing seller financing to VIEs.
Loan Sales and Securitization Activity
We periodically transfer consumer and commercial loans and other types of financial assets in securitization and whole loan sale transactions.
MORTGAGE LOANS SOLD TO U.S. GOVERNMENT SPONSORED ENTITIES AND TRANSACTIONS WITH GINNIE MAE In the normal course of business we sell originated and purchased residential and commercial mortgage loans to government-sponsored entities (GSEs). These loans are generally transferred into securitizations sponsored by the GSEs, which provide certain credit guarantees to investors and servicers. We also transfer mortgage loans into securitizations pursuant to Government National Mortgage Association (GNMA) guidelines which are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Mortgage loans eligible for securitization with the GSEs or GNMA are considered conforming loans. The GSEs or GNMA design the structure of these securitizations, sponsor the involved VIEs, and have power over the activities most significant to the VIE.
We account for loans transferred in conforming mortgage loan securitization transactions as sales and do not consolidate the VIEs as we are not the primary beneficiary. In exchange for the transfer of loans, we typicallytypically receive securities issued by the VIEs which we sell to third parties for cash or hold for investment purposes as HTM or AFS securities. We also retain servicing rights on the transferred loans. As a servicer, we retain the option
to repurchase loans from GNMA loan securitization pools, which becomes exercisable when three scheduled loan payments remain unpaid by the borrower. WeDuring the quarters ended March 31, 2022 and 2021, we repurchased loans of $1.0$933 million and $1.9 billion, and $2.9 billion, during the second quarter and first half of 2021, respectively, and $3.6 billion and $5.1 billion during the second quarter and first half of 2020, respectively, which predominantly represented repurchases of government insured loans. We recorded assets and related liabilities of $128$35 million and $176$107 million at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively, where we did not exercise our option to repurchase eligible loans.
Upon transfers of loans, we also provide indemnification for losses incurred due to material breaches of contractual representations and warranties, as well as other recourse arrangements. At June 30, 2021,March 31, 2022, and December 31, 2020,2021, our liability associated withfor these provisionsrepurchase and recourse arrangements was $201$164 million and $221$173 million, respectively, and the maximum exposure to loss was $13.4$13.3 billion at both March 31, 2022, and $13.7 billion, respectively.December 31, 2021.
Off-balance sheet mortgage loans sold or securitizedLoans serviced for others presented in Table 8.58.3 are predominantly loans securitized by the GSEs and GNMA. See Note 9 (Mortgage Banking Activities) for additional information about residential and commercial servicing rights, advances and servicing fees. Substantially all residential servicing activity is related to assets transferred to GSE and GNMA securitizations.
NONCONFORMING MORTGAGE LOAN SECURITIZATIONS In the normal course of business, we sell nonconforming residential and commercial mortgage loans in securitization transactions that we design and sponsor. Nonconforming mortgage loan securitizations do not involve a government credit guarantee, and accordingly, beneficial interest holders are subject to credit risk of the underlying assets held by the securitization VIE. We typically originate the transferred loans, account for the transfers as sales and do not consolidate the VIE. We also typically retain the right to service the loans and may hold other beneficial interests issued by the VIEs, such as debt securities held for investment purposes. Our servicing role related to nonconforming commercial mortgage loan securitizations is limited to primary or master servicer and the most significant decisions impacting the performance of the VIE are generally made by the special servicer or the controlling class security holder. For our residential nonconforming mortgage loan securitizations accounted for as sales, we either do not hold variable interests that we consider potentially significant or are not the primary servicer for a majority of the VIE assets.
WHOLE LOAN SALE TRANSACTIONS We also sell whole loans to VIEs where we have continuing involvement in the form of financing. We account for these transfers as sales, and do not consolidate the VIEs as we do not have the power to direct the most significant activities of the VIEs.
Table 8.1 presents information about transfers of assets during the period for which we recorded the transfers as sales and have continuing involvement with the transferred assets. In connection with these transfers, we received proceeds and recorded servicing assets, securities, and loans. Each of these interests are initially measured at fair value. Servicing rights are classified as Level 3 measurements, and generally securities are classified as Level 2. Substantially all transfers were related to residential mortgage securitizations with the GSEs or GNMA and resulted in no gain or loss because the loans wereare already measured at fair value on a recurring basis. Each of these interests are initially measured at fair value.Additionally, we may transfer certain government insured loans that we previously
| | | | | | | | |
10092 | Wells Fargo & Company | |
Servicing rightsrepurchased. These loans are classified as Level 3 measurements,carried at the lower of cost or market, and generally securities are classified as Level 2.we recognize gains on such transfers when the
market value is greater than the carrying value of the loan when it is sold.
Table 8.1: Transfers with Continuing Involvement
| | | | 2021 | | 2020 | | | 2022 | | 2021 | |
| (in millions) | (in millions) | Residential mortgages | | Commercial mortgages | | Residential mortgages | | Commercial mortgages | | (in millions) | Residential mortgages | | Commercial mortgages | | Residential mortgages | | Commercial mortgages | |
| Quarter ended June 30, | | | |
| Quarter ended March 31, | | Quarter ended March 31, | | |
| | Assets sold | Assets sold | $ | 45,903 | | | 5,173 | | | 43,602 | | | 2,505 | | | Assets sold | $ | 26,174 | | | 4,033 | | | 40,586 | | | 3,191 | | |
| Proceeds from transfer (1) | Proceeds from transfer (1) | 46,230 | | | 5,227 | | | 43,605 | | | 2,569 | | | Proceeds from transfer (1) | 26,226 | | | 4,097 | | | 40,691 | | | 3,282 | | |
| Net gains (losses) on sale | Net gains (losses) on sale | 327 | | | 54 | | | 3 | | | 64 | | | Net gains (losses) on sale | 52 | | | 64 | | | 105 | | | 91 | | |
| | Continuing involvement (2): | Continuing involvement (2): | | | Continuing involvement (2): | | |
| Servicing rights recognized | Servicing rights recognized | $ | 487 | | | 24 | | | 443 | | | 48 | | | Servicing rights recognized | $ | 327 | | | 29 | | | 407 | | | 47 | | |
| Securities recognized (3) | Securities recognized (3) | 6,171 | | | 39 | | | 590 | | | 12 | | | Securities recognized (3) | 1,587 | | | 104 | | | 10,223 | | | 29 | | |
| Loans recognized | Loans recognized | 0 | | | 0 | | | 0 | | | 0 | | | Loans recognized | — | | | — | | | 926 | | | — | | |
| Six months ended June 30, | | | |
| Asset balances sold | $ | 86,489 | | | 8,364 | | | 81,987 | | | 5,233 | | | |
| Proceeds from transfer (1) | 86,921 | | | 8,509 | | | 82,025 | | | 5,366 | | | |
| Net gains (losses) on sale | 432 | | | 145 | | | 38 | | | 133 | | | |
| | Continuing involvement (2): | | | |
| Servicing rights recognized | $ | 894 | | | 71 | | | 889 | | | 82 | | | |
| Securities recognized (3) | 16,394 | | | 68 | | | 590 | | | 74 | | | |
| Loans recognized | 926 | | | 0 | | | 0 | | | 0 | | | |
(1)Represents cash proceeds and the fair value of non-cash beneficial interests recognized at securitization settlement. Prior periods have been revised to conform with the current period presentation.
(2)Represents assets or liabilities recognized at securitization settlement date related to our continuing involvement in the transferred assets.
(3)Represents debt securities obtained at securitization settlement held for investment purposes that are classified as available-for-sale or held-to-maturity, which predominantly relate to agency securities. Excludes trading debt securities held temporarily for market-marking purposes, which are sold to third parties at or shortly after securitization settlement, of $11.2$6.7 billion and $18.0$6.8 billion, during the second quarterquarters ended March 31, 2022 and first half of 2021, respectively, and $9.4 billion and $17.1 billion during the second quarter and first half of 2020, respectively.
In the normal course of business we purchase certain
non-agency securities at initial securitization or subsequently in the secondary market.market, which we hold for investment. We also provide seller financing in the form of loans. WeDuring the quarters ended March 31, 2022 and 2021, we received cash flows of $3.0 billion and $3.1 billion during the second quarter and first half of 2021, respectively, and $44$136 million and $117$75 million, during the second quarter and first half of 2020, respectively, related to principal and interest payments on these securities and loans.loans, which exclude cash flows related to trading activities and to the sale of our student loan portfolio.
Table 8.2 presents the key weighted-average assumptions we used to initially measure residential MSRs recognized during the periods presented.
Table 8.2: Residential Mortgage Servicing Rights
| | | | 2021 | | 2020 | | | 2022 | | 2021 | |
| Quarter ended June 30, | | | |
| Prepayment speed (1) | 13.4 | % | | 15.0 | | | |
| Quarter ended March 31, | | Quarter ended March 31, | | |
| | Prepayment rate (1) | | Prepayment rate (1) | 11.1 | % | | 14.4 | | |
| Discount rate | Discount rate | 6.1 | | | 7.0 | | | Discount rate | 7.0 | | | 6.0 | | |
| Cost to service ($ per loan) (2) | Cost to service ($ per loan) (2) | $ | 91 | | | 97 | | | Cost to service ($ per loan) (2) | $ | 112 | | | 82 | | |
| Six months ended June 30, | | | |
| Prepayment speed (1) | 13.8 | % | | 14.0 | | | |
| Discount rate | 6.0 | | | 6.8 | | | |
Cost to service ($ per loan) (2) | $ | 87 | | | 94 | | | |
(1)The prepayment speed assumption for residential MSRs includesIncludes a blend of prepayment speeds and default rates.expected defaults. Prepayment speed assumptionsspeeds are influenced by mortgage interest rate inputsrates as well as our estimation of drivers of borrower behavior.
(2)Includes costs to service and unreimbursed foreclosure costs, which can vary period to period due to changes in model assumptions and the mix of modified government-guaranteed loans sold to GNMA.
See Note 15 (Fair Values of Assets and Liabilities) and
Note 9 (Mortgage Banking Activities) for additional information on key economic assumptions for residential MSRs.
SALE OF STUDENT LOAN PORTFOLIO In the second quarter and first half of 2021, we sold $3.9 billion and $9.5 billion of student loans, servicing-released, respectively. For the same periods, we received $4.0 billion and $9.8 billion in proceeds from the sales, respectively, and recognized $147 million and $355 million of gains, respectively, which are included in other noninterest income on our consolidated statement of income. In connection with the sales, we provided $1.6 billion and $3.8 billion of collateralized loan financing to a third-party sponsored VIE in the second quarter and first half of 2021, respectively. The loans are measured at amortized cost and are classified in loans on the consolidated balance sheet. The collateral supporting our loan includes the student loans we sold. We do not consolidate the VIE as we do not have power over the significant activities of the entity.
RESECURITIZATION ACTIVITIES We enter into resecuritization transactions as part of our trading activities to accommodate the investment and risk management activities of our customers. In our resecuritization transactions, we transfer trading debt securities to VIEs in exchange for new beneficial interests that are sold to third parties at or shortly after securitization settlement. This activity is performed for customers seeking a specific return or risk profile. Substantially all of our transactions involve the resecuritization of conforming mortgage-backed securities issued by the GSEs or GNMA. We do not consolidate the resecuritization VIEs as we share in the decision-making power with third parties and do not hold significant economic interests in the VIEs other than for market-making activities. Table 8.3 presents information about assetsWe transferred $6.4 billion and $17.4 billion of securities to re-securitization VIEs during the quarters ended March 31, 2022 and 2021, respectively. These amounts are not included in
Table 8.4 presents information about our resecuritization VIEs.8.1. Related total VIE assets were $115.9 billion and $117.7 billion at March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022 and December 31, 2021 we held $1.3 billion and $817 million of securities, respectively. $738 million and $1.0 billion of these securities related to resecuritizations transacted during the quarters ended March 31, 2022 and 2021, respectively.
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| Wells Fargo & Company | 10193 |
Note 8: Securitizations and Variable Interest Entities (continued)
Table 8.3:Transfers to Resecuritization VIEs
| | | | | | | | | | | | | |
| |
(in millions) | 2021 | | 2020 | | |
| Quarter ended June 30, | | | | | |
| Assets sold | $ | 7,873 | | | 19,982 | | | |
| Securities recognized | (99) | | | 153 | | | |
| Six months ended June 30, | | | | | |
| Assets sold | $ | 25,302 | | | 29,454 | | | |
| Securities recognized | 915 | | | 815 | | | |
Table 8.4:Resecuritization VIEs
| | | | | | | | |
| (in millions) | Jun 30, 2021 | Dec 31, 2020 |
| Total VIE assets | $ | 125,543 | | 130,446 | |
| Carrying value of securities | 1,137 | | 1,461 | |
Off-Balance Sheet Loans Serviced for Others
Table 8.58.3 presents information about the principal balances of off-balance sheet loans that werewe sold or securitized includingin which we have ongoing involvement as servicer. These are primarily residential mortgage loans sold to the GSEs GNMA and other investors, for which we have some form of continuing involvement (including servicer).or GNMA. Delinquent loans include loans 90 days or more past due and loans in bankruptcy, regardless of delinquency status. In accordance with applicable servicing guidelines, delinquency status continues to advance for loans with COVID-related payment deferrals.
For loans sold or securitized where servicing is our only form of continuing involvement, we generally experience a loss only if we were required to repurchase a delinquent loan or foreclosed asset due to a breach in representations and warranties associated with our loan sale or servicing contracts.
Table 8.5:8.3: Off-Balance Sheet Loans Sold or SecuritizedServiced for Others
| | | Net charge-offs (2) | | Net charge-offs (2) |
| | Total loans | | Delinquent loans and foreclosed assets (1) | | Six months ended June 30, | | Total loans | | Delinquent loans and foreclosed assets (1) | | Quarter ended March 31, |
| (in millions) | (in millions) | Jun 30, 2021 | | Dec 31, 2020 | | Jun 30, 2021 | | Dec 31, 2020 | | 2021 | | 2020 | (in millions) | Mar 31, 2022 | | Dec 31, 2021 | | Mar 31, 2022 | | Dec 31, 2021 | | 2022 | | 2021 |
| Commercial | Commercial | $ | 116,704 | | | 114,134 | | | 2,363 | | | 2,217 | | | 122 | | | 83 | | Commercial | $ | 122,487 | | | 120,962 | | | 1,809 | | | 1,923 | | | 4 | | | 115 | |
| Residential | Residential | 738,698 | | | 818,886 | | | 20,869 | | | 29,962 | | | 12 | | | 59 | | Residential | 679,687 | | | 690,813 | | | 8,407 | | | 10,714 | | | 3 | | | 6 | |
| Total off-balance sheet sold or securitized loans (3) | Total off-balance sheet sold or securitized loans (3) | $ | 855,402 | | | 933,020 | | | 23,232 | | | 32,179 | | | 134 | | | 142 | | Total off-balance sheet sold or securitized loans (3) | $ | 802,174 | | | 811,775 | | | 10,216 | | | 12,637 | | | 7 | | | 121 | |
(1)Includes $203$444 million and $394$403 million of commercial foreclosed assets and $163$145 million and $204$129 million of residential foreclosed assets at June 30, 2021,March 31, 2022 and December 31, 2020,2021, respectively.
(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 informationinformation.
(3)At June 30, 2021,March 31, 2022 and December 31, 2020,2021, the table includes total loans of $784.3$725.5 billion and $864.8$736.8 billion, delinquent loans of $19.8$8.0 billion and $28.5$10.2 billion, and foreclosed assets of $124$114 million and $152$100 million, respectively, for FNMA, FHLMC and GNMA.
Transactions with Unconsolidated VIEs
MORTGAGE LOAN SECURITIZATIONS Table 8.68.4 includes nonconforming mortgage loan securitizations where we originate and transfer the loans to the unconsolidated securitization VIEs that we sponsor. For additional information about these VIEs, see the “Loan Sales and Securitization Activity” section within this Note. Nonconforming mortgage loan securitizations also include commercial mortgage loan securitizations sponsored by third parties where we did not originate or transfer the loans but serve as master servicer and invest in securities that could be potentially significant to the VIE.
Conforming loan securitization and resecuritization transactions involving the GSEs and GNMA are excluded from Table 8.68.4 because we are not the sponsor or we do not have power over the activities most significant to the VIEs. Additionally, due to the nature of the guarantees provided by the GSEs and the FHA and VA, our credit risk associated with these VIEs is limited. For additional information about conforming mortgage loan securitizations and resecuritizations, see the “Loan Sales and Securitization Activity” and "Resecuritization Activities"“Resecuritization Activities” sections within this Note.
TAX CREDIT STRUCTURES We co-sponsor and make investments in affordable housing and sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits. The projects are typically managed by project sponsors who have the power over the VIE’s assets. In some instances, our investments in these structures may require that we fund future capital commitments at the discretion of the project sponsors.
COMMERCIAL REAL ESTATE LOANS We may transfer purchased industrial development bonds and GSE credit enhancements to VIEs in exchange for beneficial interests. We may also acquire such beneficial interests in transactions where we do not act as a transferor. We own all of the beneficial interests and may also service the underlying mortgages that serve as collateral to the bonds. Prior to first quarter 2021, we consolidated these VIEs as we controlled the key decisions. During first quarter 2021, we amended the structures such that we no longer control the key decisions of the VIEs. The GSEs have the power to direct the servicing and workout activities of the VIE in the event of a default. As a result, we deconsolidated the VIEs during first quarter 2021, and recognized the beneficial interests at fair value on our consolidated balance sheet.
OTHER VIE STRUCTURES We engage in various forms of structured finance arrangements with other VIEs, including collateralized debt obligations, asset-backed finance structures and other securitizations collateralized by asset classes other than mortgages. Collateral may include rental properties, asset-backed securities, student loans mortgage loans and automortgage loans. We may participate in structuring or marketing the arrangements, as well as provide financing, service one or more of the underlying assets, or enter into derivatives with the VIEs. We may also receive fees for those services. We are not the primary beneficiary of these structures because we do not have power to direct the most significant activities of the VIEs.
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10294 | Wells Fargo & Company | |
Table 8.68.4 provides a summary of our exposure to the unconsolidated VIEs described above, which includes investments in securities, loans, guarantees, liquidity agreements, commitments and certain derivatives. We exclude certain transactions with unconsolidated VIEs when our continuing involvement is temporary or administrative in nature or insignificant in size.
In Table 8.6,8.4, “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 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 the notional amount of, or stressed loss estimate for, other commitments and guarantees.
Debt, guarantees and other commitments include amounts related to loans sold that we may be required to repurchase, or otherwise indemnify or reimburse the investor or insurer for losses incurred, due to material breach of contractual representations and warranties as well as other retained recourse arrangements. The maximum exposure to loss for material breach of contractual representations and warranties represents a stressed case estimate we utilize for determining stressed case regulatory capital needs and is considered to be a remote scenario.
“Maximum exposure to loss” represents estimated loss that would be incurred under severe, hypothetical circumstances, for which we believe the possibility is extremely remote, such as where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. Accordingly, this disclosure is not an indication of expected loss.
Table 8.6:8.4: Unconsolidated VIEs
| | | Carrying value – asset (liability) | | Carrying value – asset (liability) |
| (in millions) | (in millions) | Total
VIE assets | | Loans | | Debt
securities (1) | | Equity securities | | All other
assets (2) | | Debt and other liabilities | | Net assets | (in millions) | Total
VIE assets | | Loans | | Debt
securities (1) | | Equity securities | | All other
assets (2) | | Debt and other liabilities | | Net assets |
| June 30, 2021 | | | |
| March 31, 2022 | | March 31, 2022 | | |
| | Nonconforming mortgage loan securitizations | Nonconforming mortgage loan securitizations | $ | 134,023 | | | 0 | | | 2,401 | | | 0 | | | 663 | | | 0 | | | 3,064 | | Nonconforming mortgage loan securitizations | $ | 149,765 | | | — | | | 2,773 | | | — | | | 708 | | | (1) | | | 3,480 | |
| Tax credit structures | Tax credit structures | 41,058 | | | 1,875 | | | 0 | | | 11,448 | | | 0 | | | (4,218) | | | 9,105 | | Tax credit structures | 45,264 | | | 1,704 | | | — | | | 12,206 | | | — | | | (4,696) | | | 9,214 | |
| Commercial real estate loans | Commercial real estate loans | 5,366 | | | 5,357 | | | 0 | | | 0 | | | 8 | | | 0 | | | 5,365 | | Commercial real estate loans | 5,482 | | | 5,473 | | | — | | | — | | | 9 | | | — | | | 5,482 | |
| | Other | Other | 6,541 | | | 1,888 | | | 0 | | | 57 | | | 52 | | | (1) | | | 1,996 | | Other | 2,842 | | | 472 | | | 2 | | | 55 | | | 37 | | | (1) | | | 565 | |
| Total | Total | $ | 186,988 | | | 9,120 | | | 2,401 | | | 11,505 | | | 723 | | | (4,219) | | | 19,530 | | Total | $ | 203,353 | | | 7,649 | | | 2,775 | | | 12,261 | | | 754 | | | (4,698) | | | 18,741 | |
| | Maximum exposure to loss | | Maximum exposure to loss |
| | Loans | | Debt
securities (1) | | Equity securities | | All other
assets (2) | | Debt, guarantees,
and other commitments | | Total exposure | | Loans | | Debt
securities (1) | | Equity securities | | All other
assets (2) | | Debt, guarantees,
and other commitments | | Total exposure |
| | Nonconforming mortgage loan securitizations | Nonconforming mortgage loan securitizations | | $ | 0 | | | 2,401 | | | 0 | | | 663 | | | 31 | | | 3,095 | | Nonconforming mortgage loan securitizations | | $ | — | | | 2,773 | | | — | | | 708 | | | 1 | | | 3,482 | |
| Tax credit structures | Tax credit structures | | 1,875 | | | 0 | | | 11,448 | | | 0 | | | 3,023 | | | 16,346 | | Tax credit structures | | 1,704 | | | — | | | 12,206 | | | — | | | 3,818 | | | 17,728 | |
| Commercial real estate loans | Commercial real estate loans | | 5,357 | | | 0 | | | 0 | | | 8 | | | 712 | | | 6,077 | | Commercial real estate loans | | 5,473 | | | — | | | — | | | 9 | | | 709 | | | 6,191 | |
| | Other | Other | | 1,888 | | | 0 | | | 57 | | | 52 | | | 230 | | | 2,227 | | Other | | 472 | | | 2 | | | 55 | | | 37 | | | 229 | | | 795 | |
| Total | Total | | $ | 9,120 | | | 2,401 | | | 11,505 | | | 723 | | | 3,996 | | | 27,745 | | Total | | $ | 7,649 | | | 2,775 | | | 12,261 | | | 754 | | | 4,757 | | | 28,196 | |
| | Carrying value – asset (liability) | | Carrying value – asset (liability) |
(in millions) |
(in millions) | Total
VIE assets | | Loans | | Debt
securities (1) | | Equity
securities | | All other
assets (2 | | Debt and other liabilities | | Net assets |
(in millions) | Total
VIE assets | | Loans | | Debt
securities (1) | | Equity
securities | | All other
assets (2) | | Debt and other liabilities | | Net assets |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| | Nonconforming mortgage loan securitizations | Nonconforming mortgage loan securitizations | $ | 127,717 | | | 0 | | | 2,303 | | | 0 | | | 606 | | | 0 | | | 2,909 | | Nonconforming mortgage loan securitizations | $ | 146,482 | | | — | | | 2,620 | | | — | | | 694 | | | — | | | 3,314 | |
| Tax credit structures (3) | 41,125 | | | 1,760 | | | 0 | | | 11,362 | | | 0 | | | (4,202) | | | 8,920 | | |
| Tax credit structures | | Tax credit structures | 44,528 | | | 1,904 | | | — | | | 12,322 | | | — | | | (4,941) | | | 9,285 | |
| Commercial real estate loans | Commercial real estate loans | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Commercial real estate loans | 5,489 | | | 5,481 | | | — | | | — | | | 8 | | | — | | | 5,489 | |
| | Other | Other | 1,991 | | | 89 | | | 0 | | | 51 | | | 62 | | | (1) | | | 201 | | Other | 3,196 | | | 531 | | | 3 | | | 62 | | | 49 | | | (1) | | | 644 | |
| Total | Total | $ | 170,833 | | | 1,849 | | | 2,303 | | | 11,413 | | | 668 | | | (4,203) | | | 12,030 | | Total | $ | 199,695 | | | 7,916 | | | 2,623 | | | 12,384 | | | 751 | | | (4,942) | | | 18,732 | |
| | Maximum exposure to loss | | Maximum exposure to loss |
| | Loans | | Debt
securities (1) | | Equity
securities | | All other
assets (2) | | Debt,
guarantees,
and other commitments | | Total exposure | | Loans | | Debt
securities (1) | | Equity
securities | | All other
assets (2) | | Debt,
guarantees,
and other commitments | | Total exposure |
| | Nonconforming mortgage loan securitizations | Nonconforming mortgage loan securitizations | | $ | 0 | | | 2,303 | | | 0 | | | 607 | | | 34 | | | 2,944 | | Nonconforming mortgage loan securitizations | | $ | — | | | 2,620 | | | — | | | 694 | | | 27 | | | 3,341 | |
| Tax credit structures (3) | | 1,760 | | | 0 | | | 11,362 | | | 0 | | | 3,108 | | | 16,230 | | |
| Tax credit structures | | Tax credit structures | | 1,904 | | | — | | | 12,322 | | | — | | | 3,730 | | | 17,956 | |
| Commercial real estate loans | Commercial real estate loans | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Commercial real estate loans | | 5,481 | | | — | | | — | | | 8 | | | 710 | | | 6,199 | |
| | Other | Other | | 89 | | | 0 | | | 51 | | | 62 | | | 230 | | | 432 | | Other | | 531 | | | 3 | | | 62 | | | 49 | | | 229 | | | 874 | |
| Total | Total | | $ | 1,849 | | | 2,303 | | | 11,413 | | | 669 | | | 3,372 | | | 19,606 | | Total | | $ | 7,916 | | | 2,623 | | | 12,384 | | | 751 | | | 4,696 | | | 28,370 | |
(1)Includes $317$336 million and $310$352 million of securities classified as trading at June 30, 2021,March 31, 2022 and December 31, 2020,2021, respectively.
(2)All other assets includes mortgage servicing rights, derivative assets, and other assets (predominantly servicing advances).
(3)In second quarter 2021, we elected to change our accounting method for low-income housing tax credit investments. Prior period balances have been revised to conform with the current period presentation. For additional information, see Note 1 (Summary of Significant Accounting Policies).
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| Wells Fargo & Company | 10395 |
Note 8: Securitizations and Variable Interest Entities (continued)
Consolidated VIEs
We consolidate VIEs where we are the primary beneficiary. We are the primary beneficiary of the following structure types:
COMMERCIAL AND INDUSTRIAL LOANS AND LEASES We securitize dealer floor plan loans and leases in a revolving master trust entity and hold the subordinated notes and residual equity interests. As servicer and residual interest holder, we control the key decisions of the trust and consolidate the entity. The total VIE assets held by the master trust represent a majority of the total VIE assets presented for this category in Table 8.7.8.5. In a separate transaction structure, we also provide the majority of debt and equity financing to an SPE that engages in lending and leasing to specific vendors and service the underlying collateral.
OTHER VIE STRUCTURES Other VIEs are primarily related to municipal tender option bond (MTOB) transactions and nonconforming mortgage loan securitizations that we sponsor. MTOBs are vehicles to finance the purchase of municipal bonds through the issuance of short-term debt to investors. Our
involvement with MTOBs includes serving as the residual interest
holder, which provides control over the key decisions of the VIE, as well as the remarketing agent or liquidity provider related to the debt issued to investors. We also securitize nonconforming mortgage loans, in which our involvement includes servicer of the underlying assets and holder of subordinate or senior securities issued by the VIE.
Table 8.78.5 presents a summary of financial assets and liabilities of our consolidated VIEs. The carrying value represents assets and liabilities recorded on our consolidated balance sheet. 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 notional amount of the derivative is included in “Total VIE assets.”
On our consolidated balance sheet, we separately disclose (1) the consolidated assets of certain VIEs that can only be used to settle the liabilities of those VIEs, and (2) the consolidated liabilities of certain VIEs for which the VIE creditors do not have recourse to Wells Fargo.
Table 8.7:8.5: Transactions with Consolidated VIEs
| | | Carrying value – asset (liability) | | Carrying value – asset (liability) |
| (in millions) | (in millions) | Total
VIE assets | | Loans | | Debt
securities (1) | | All other
assets (2) | | Long-term debt | | All other liabilities (3) | (in millions) | Total
VIE assets | | Loans | | Debt
securities | | All other
assets (1) | | Long-term debt | | All other liabilities (2) |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Commercial and industrial loans and leases | Commercial and industrial loans and leases | $ | 6,981 | | | 3,623 | | | 0 | | | 238 | | | 0 | | | (183) | | Commercial and industrial loans and leases | $ | 7,026 | | | 4,534 | | | — | | | 226 | | | — | | | (194) | |
| Commercial real estate loans (4) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | |
| Other | Other | 1,138 | | | 452 | | | 518 | | | 96 | | | (178) | | | (404) | | Other | 471 | | | 336 | | | 71 | | | 3 | | | (133) | | | (71) | |
| Total consolidated VIEs | Total consolidated VIEs | $ | 8,119 | | | 4,075 | | | 518 | | | 334 | | | (178) | | | (587) | | Total consolidated VIEs | $ | 7,497 | | | 4,870 | | | 71 | | | 229 | | | (133) | | | (265) | |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| Commercial and industrial loans and leases | Commercial and industrial loans and leases | $ | 6,987 | | | 5,005 | | | 0 | | | 223 | | | 0 | | | (200) | | Commercial and industrial loans and leases | $ | 7,013 | | | 4,099 | | | — | | | 231 | | | — | | | (188) | |
| Commercial real estate loans (4) | 5,369 | | | 5,357 | | | 0 | | | 12 | | | 0 | | | 0 | | |
| Other | Other | 1,627 | | | 507 | | | 967 | | | 75 | | | (203) | | | (900) | | Other | 516 | | | 377 | | | 71 | | | 3 | | | (149) | | | (71) | |
| Total consolidated VIEs | Total consolidated VIEs | $ | 13,983 | | | 10,869 | | | 967 | | | 310 | | | (203) | | | (1,100) | | Total consolidated VIEs | $ | 7,529 | | | 4,476 | | | 71 | | | 234 | | | (149) | | | (259) | |
(1)Includes $117 million and $269 million of securities classified as trading at June 30, 2021, and December 31, 2020, respectively.
(2)All other assets includes cash and due from banks, Interest-earninginterest-earning deposits with banks, derivative assets, equity securities, and other assets.
(3)(2)All other liabilities includes short-term borrowings, derivative liabilities, and accrued expenses and other liabilities.
(4)For structure description, see the "Transactions with Unconsolidated VIEs" section within this Note. These consolidated VIEs were deconsolidated in first quarter 2021.
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 $381$391 million and $704$388 million at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively. In second quarter 2021, 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 $332 million were distributed to the preferred security holders. See Note 16 (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 insignificant in the second quarter and first half of both 2021 and 2020.
| | | | | | | | |
10496 | Wells Fargo & Company | |
| | |
Note 9: 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 apply the fair value method to residential MSRs. The amortized
cost of commercial MSRs was $1.3$1.2 billion and $1.4$1.3 billion, with an estimated fair value of $1.5$1.9 billion and $1.4$1.7 billion, at June 30,March 31, 2022 and 2021, and June 30, 2020, respectively. Table 9.1 presents the changes in MSRs measured using the fair value method.
Table 9.1: Analysis of Changes in Fair Value MSRs
| | | Quarter ended June 30, | | Six months ended June 30, | | | Quarter ended March 31, | |
| (in millions) | (in millions) | 2021 | | 2020 | | 2021 | | 2020 | | (in millions) | | 2022 | | 2021 | |
| Fair value, beginning of period | Fair value, beginning of period | $ | 7,536 | | | 8,126 | | | 6,125 | | | 11,517 | | | Fair value, beginning of period | | $ | 6,920 | | | 6,125 | | |
| Servicing from securitizations or asset transfers (1) | Servicing from securitizations or asset transfers (1) | 485 | | | 462 | | | 891 | | | 923 | | | Servicing from securitizations or asset transfers (1) | | 342 | | | 406 | | |
| Sales and other (2) | Sales and other (2) | (7) | | | (1) | | | (8) | | | (32) | | | Sales and other (2) | | 1 | | | (1) | | |
| Net additions | Net additions | 478 | | | 461 | | | 883 | | | 891 | | | Net additions | | 343 | | | 405 | | |
| Changes in fair value: | Changes in fair value: | | | Changes in fair value: | | | |
| Due to valuation inputs or assumptions: | Due to valuation inputs or assumptions: | | | Due to valuation inputs or assumptions: | | | |
| Mortgage interest rates (3) | Mortgage interest rates (3) | (529) | | | (600) | | | 1,101 | | | (3,622) | | | Mortgage interest rates (3) | | 1,699 | | | 1,630 | | |
| Servicing and foreclosure costs (4) | Servicing and foreclosure costs (4) | 0 | | | (349) | | | 9 | | | (422) | | | Servicing and foreclosure costs (4) | | (3) | | | 9 | | |
| Discount rates | Discount rates | 160 | | | 0 | | | 207 | | | 27 | | | Discount rates | | 55 | | | 47 | | |
| Prepayment estimates and other (5) | Prepayment estimates and other (5) | (440) | | | (182) | | | (535) | | | (371) | | | Prepayment estimates and other (5) | | (146) | | | (95) | | |
| Net changes in valuation inputs or assumptions | Net changes in valuation inputs or assumptions | (809) | | | (1,131) | | | 782 | | | (4,388) | | | Net changes in valuation inputs or assumptions | | 1,605 | | | 1,591 | | |
| Changes due to collection/realization of expected cash flows (6) | Changes due to collection/realization of expected cash flows (6) | (488) | | | (637) | | | (1,073) | | | (1,201) | | | Changes due to collection/realization of expected cash flows (6) | | (357) | | | (585) | | |
| Total changes in fair value | Total changes in fair value | (1,297) | | | (1,768) | | | (291) | | | (5,589) | | | Total changes in fair value | | 1,248 | | | 1,006 | | |
| Fair value, end of period | Fair value, end of period | $ | 6,717 | | | 6,819 | | | 6,717 | | | 6,819 | | | Fair value, end of period | | $ | 8,511 | | | 7,536 | | |
(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.
(2)Includes sales and transfers of MSRs, which can result in an increase in MSRs if related to portfolios with servicing liabilities.
(3)Includes prepayment speedrate 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 speedrate 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 9.2 provides key economic assumptions and sensitivity of the current fair value of residential MSRs to immediate adverse changes in those assumptions. Amounts for residential MSRs include purchased servicing rights as well as servicing
rights resulting from the transfer of loans. See Note 15 (Fair Values of Assets and Liabilities) for additional information on key economic assumptions for residential MSRs.
Table 9.2: Economic Assumptions and Sensitivity of Residential MSRs
| | ($ in millions, except cost to service amounts) | ($ in millions, except cost to service amounts) | Jun 30, 2021 | | Dec 31, 2020 | ($ in millions, except cost to service amounts) | Mar 31, 2022 | | Dec 31, 2021 |
| Fair value of interests held | Fair value of interests held | $ | 6,717 | | | 6,125 | | Fair value of interests held | $ | 8,511 | | | 6,920 | |
| Expected weighted-average life (in years) | Expected weighted-average life (in years) | 4.2 | | 3.7 | Expected weighted-average life (in years) | 5.7 | | 4.7 |
| | Key economic assumptions: | Key economic assumptions: | | Key economic assumptions: | |
| Prepayment speed assumption | 17.2 | % | | 19.9 | | |
| Prepayment rate assumption (1) | | Prepayment rate assumption (1) | 11.1 | % | | 14.7 | |
| Impact on fair value from 10% adverse change | Impact on fair value from 10% adverse change | $ | 417 | | | 434 | | Impact on fair value from 10% adverse change | $ | 339 | | | 356 | |
| Impact on fair value from 25% adverse change | Impact on fair value from 25% adverse change | 967 | | | 1,002 | | Impact on fair value from 25% adverse change | 803 | | | 834 | |
| | Discount rate assumption | Discount rate assumption | 5.4 | % | | 5.8 | | Discount rate assumption | 7.4 | % | | 6.4 | |
| Impact on fair value from 100 basis point increase | Impact on fair value from 100 basis point increase | $ | 274 | | | 229 | | Impact on fair value from 100 basis point increase | $ | 337 | | | 276 | |
| Impact on fair value from 200 basis point increase | Impact on fair value from 200 basis point increase | 525 | | | 440 | | Impact on fair value from 200 basis point increase | 646 | | | 529 | |
| | Cost to service assumption ($ per loan) | Cost to service assumption ($ per loan) | 111 | | | 130 | | Cost to service assumption ($ per loan) | 102 | | | 106 | |
| Impact on fair value from 10% adverse change | Impact on fair value from 10% adverse change | 171 | | | 181 | | Impact on fair value from 10% adverse change | 177 | | | 165 | |
| Impact on fair value from 25% adverse change | Impact on fair value from 25% adverse change | 427 | | | 454 | | Impact on fair value from 25% adverse change | 441 | | | 411 | |
(1)Includes a blend of prepayment speeds and expected defaults. Prepayment speeds are influenced by mortgage interest rates as well as our estimation of drivers of borrower behavior.
The sensitivities in the preceding table are hypothetical and caution should be exercised when relying on this data. Changes in value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in value may not be linear. Also, the effect of a variation in a particular assumption on the value of the other interests held is calculated independently without changing
any other assumptions. In reality, changes in one factor may
result in changes in others, which might magnify or counteract the sensitivities.
| | | | | | | | |
| Wells Fargo & Company | 10597 |
Note 9: Mortgage Banking Activities (continued)
We present the components of our managed servicing portfolio in Table 9.3 at unpaid principal balance for loans serviced and subserviced for others and at book value for owned loans serviced.
Table 9.3: Managed Servicing Portfolio
| | (in billions) | (in billions) | Jun 30, 2021 | | Dec 31, 2020 | (in billions) | Mar 31, 2022 | | Dec 31, 2021 |
| Residential mortgage servicing: | Residential mortgage servicing: | | Residential mortgage servicing: | |
| Serviced and subserviced for others | Serviced and subserviced for others | $ | 771 | | | 859 | | Serviced and subserviced for others | $ | 705 | | | 718 | |
| Owned loans serviced | Owned loans serviced | 284 | | | 323 | | Owned loans serviced | 273 | | | 276 | |
| Total residential servicing | Total residential servicing | 1,055 | | | 1,182 | | Total residential servicing | 978 | | | 994 | |
| Commercial mortgage servicing: | Commercial mortgage servicing: | | Commercial mortgage servicing: | |
| Serviced and subserviced for others | Serviced and subserviced for others | 584 | | | 583 | | Serviced and subserviced for others | 598 | | | 597 | |
| Owned loans serviced | Owned loans serviced | 123 | | | 123 | | Owned loans serviced | 132 | | | 130 | |
| Total commercial servicing | Total commercial servicing | 707 | | | 706 | | Total commercial servicing | 730 | | | 727 | |
| Total managed servicing portfolio | Total managed servicing portfolio | $ | 1,762 | | | 1,888 | | Total managed servicing portfolio | $ | 1,708 | | | 1,721 | |
| Total serviced for others, excluding subserviced for others | Total serviced for others, excluding subserviced for others | $ | 1,344 | | | 1,431 | | Total serviced for others, excluding subserviced for others | $ | 1,293 | | | 1,304 | |
| MSRs as a percentage of loans serviced for others | MSRs as a percentage of loans serviced for others | 0.60 | % | | 0.52 | | MSRs as a percentage of loans serviced for others | 0.75 | % | | 0.63 | |
| Weighted average note rate (mortgage loans serviced for others) | Weighted average note rate (mortgage loans serviced for others) | 3.93 | | | 4.03 | | Weighted average note rate (mortgage loans serviced for others) | 3.81 | | | 3.82 | |
At both June 30, 2021,March 31, 2022, and December 31, 2020,2021, we had servicer advances, net of an allowance for uncollectible amounts, of $3.4 billion.$2.9 billion and $3.2 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
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 9.4 presents the components of mortgage banking noninterest income.
Table 9.4: Mortgage Banking Noninterest Income
| | | Quarter ended June 30, | | Six months ended June 30, | | | Quarter ended March 31, | |
| (in millions) | (in millions) | | 2021 | | 2020 | | 2021 | | 2020 | | (in millions) | | | 2022 | | 2021 | |
| Servicing fees: | Servicing fees: | | | Servicing fees: | | | | |
| Contractually specified servicing fees, late charges and ancillary fees | Contractually specified servicing fees, late charges and ancillary fees | | $ | 692 | | | 749 | | | 1,416 | | | 1,614 | | | Contractually specified servicing fees, late charges and ancillary fees | | | $ | 635 | | | 724 | | |
| Unreimbursed direct servicing costs (1) | Unreimbursed direct servicing costs (1) | | (90) | | | (105) | | | (214) | | | (212) | | | Unreimbursed direct servicing costs (1) | | | (24) | | | (124) | | |
| Servicing fees | Servicing fees | | 602 | | | 644 | | | 1,202 | | | 1,402 | | | Servicing fees | | | 611 | | | 600 | | |
| Amortization (2) | Amortization (2) | | (33) | | | (100) | | | (98) | | | (166) | | | Amortization (2) | | | (59) | | | (65) | | |
| Changes due to collection/realization of expected cash flows (3) | Changes due to collection/realization of expected cash flows (3) | (A) | (488) | | | (637) | | | (1,073) | | | (1,201) | | | Changes due to collection/realization of expected cash flows (3) | (A) | | (357) | | | (585) | | |
| Net servicing fees | Net servicing fees | | 81 | | | (93) | | | 31 | | | 35 | | | Net servicing fees | | | 195 | | | (50) | | |
| Changes in fair value of MSRs due to valuation inputs or assumptions (4) | Changes in fair value of MSRs due to valuation inputs or assumptions (4) | (B) | (809) | | | (1,131) | | | 782 | | | (4,388) | | | Changes in fair value of MSRs due to valuation inputs or assumptions (4) | (B) | | 1,605 | | | 1,591 | | |
| Net derivative gains (losses) from economic hedges (5) | Net derivative gains (losses) from economic hedges (5) | | 707 | | | 535 | | | (933) | | | 3,935 | | | Net derivative gains (losses) from economic hedges (5) | | | (1,646) | | | (1,640) | | |
| Market-related valuation changes to MSRs, net of hedge results | Market-related valuation changes to MSRs, net of hedge results | | (102) | | | (596) | | | (151) | | | (453) | | | Market-related valuation changes to MSRs, net of hedge results | | | (41) | | | (49) | | |
| Total servicing income, net | | (21) | | | (689) | | | (120) | | | (418) | | | |
| Total net servicing income | | Total net servicing income | | | 154 | | | (99) | | |
| Net gains on mortgage loan originations/sales (6) | Net gains on mortgage loan originations/sales (6) | | 1,357 | | | 1,006 | | | 2,782 | | | 1,114 | | | Net gains on mortgage loan originations/sales (6) | | | 539 | | | 1,425 | | |
| Total mortgage banking noninterest income | Total mortgage banking noninterest income | | $ | 1,336 | | | 317 | | | 2,662 | | | 696 | | | Total mortgage banking noninterest income | | | 693 | | | 1,326 | | |
| Total changes in fair value of MSRs carried at fair value | Total changes in fair value of MSRs carried at fair value | (A)+(B) | $ | (1,297) | | | (1,768) | | | (291) | | | (5,589) | | | Total changes in fair value of MSRs carried at fair value | (A)+(B) | | $ | 1,248 | | | 1,006 | | |
(1)Includes costs associated with foreclosures, unreimbursed interest advances to investors, and other interest costs.
(2)Includes a $37$4 million reversal of impairment recorded in the secondfirst quarter and first half of 2021,2022 on the commercial amortized MSRs. Also, includes $30 millionThere was no impairment recorded in the secondfirst quarter and first half of 2020,2021 on the commercial amortized MSRs.
(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 9.1 in this Note for more detail.
(5)See Note 14 (Derivatives) for additional discussion and detail on economic hedges.
(6)Includes net gains (losses) of $(420) million and $845 million in the second quarter and first half of 2021, respectively, and $(393) million and $(1.3)$1.3 billion in the secondboth first quarter 2022 and first half of 2020, respectively,2021, related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments.
| | | | | | | | |
10698 | Wells Fargo & Company | |
| | |
Note 10: Intangible Assets |
Table 10.1 presents the gross carrying value of intangible assets and accumulated amortization.
Table 10.1: Intangible Assets
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| (in millions) | (in millions) | Gross carrying value | | Accumulated amortization | | Net carrying value | | Gross carrying value | | Accumulated amortization | | Net carrying value | (in millions) | Gross carrying value | | Accumulated amortization | | Net carrying value | | Gross carrying value | | Accumulated amortization | | Net carrying value |
| Amortized intangible assets (1): | Amortized intangible assets (1): | | Amortized intangible assets (1): | |
| MSRs (2) | MSRs (2) | $ | 4,690 | | | (3,398) | | | 1,292 | | | 4,612 | | | (3,300) | | | 1,312 | | MSRs (2) | $ | 4,826 | | | (3,584) | | | 1,242 | | | 4,794 | | | (3,525) | | | 1,269 | |
| | Customer relationship and other intangibles | Customer relationship and other intangibles | 879 | | | (592) | | | 287 | | | 879 | | | (551) | | | 328 | | Customer relationship and other intangibles | 754 | | | (558) | | | 196 | | | 842 | | | (631) | | | 211 | |
| Total amortized intangible assets | Total amortized intangible assets | $ | 5,569 | | | (3,990) | | | 1,579 | | | 5,491 | | | (3,851) | | | 1,640 | | Total amortized intangible assets | $ | 5,580 | | | (4,142) | | | 1,438 | | | 5,636 | | | (4,156) | | | 1,480 | |
| Unamortized intangible assets: | Unamortized intangible assets: | | Unamortized intangible assets: | |
| MSRs (carried at fair value) | MSRs (carried at fair value) | $ | 6,717 | | | 6,125 | | | MSRs (carried at fair value) | $ | 8,511 | | | 6,920 | | |
| Goodwill | Goodwill | 26,194 | | | 26,392 | | | Goodwill | 25,181 | | | 25,180 | | |
| Trademark | 14 | | | 14 | | | |
|
(1)Balances are excluded commencing in the period following full amortization.
(2)Includes a $5 million and $37$4 million valuation allowance recorded for amortized MSRs at June 30, 2021, and December 31, 2020, respectively.2021. See Note 9 (Mortgage Banking Activities) for additional information on MSRs.
Table 10.2 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 June 30, 2021.March 31, 2022. Future amortization expense may vary from these projections.
Table 10.2: Amortization Expense for Intangible Assets
| | (in millions) | (in millions) | Amortized MSRs | | | Customer relationship and other intangibles | | Total | (in millions) | Amortized MSRs | | | Customer relationship and other intangibles | | Total |
| Six months ended June 30, 2021 (actual) | $ | 98 | | | | 41 | | | 139 | | |
| Estimate for the remainder of 2021 | $ | 127 | | | | 40 | | | 167 | | |
| Three months ended March 31, 2022 (actual) | | Three months ended March 31, 2022 (actual) | $ | 59 | | | | 15 | | | 74 | |
| Estimate for the remainder of 2022 | | Estimate for the remainder of 2022 | $ | 187 | | | | 44 | | | 231 | |
| Estimate for year ended December 31, | Estimate for year ended December 31, | | | | Estimate for year ended December 31, | | | |
| 2022 | 232 | | | | 68 | | | 300 | | |
| 2023 | 2023 | 203 | | | | 59 | | | 262 | | 2023 | 218 | | | | 51 | | | 269 | |
| 2024 | 2024 | 177 | | | | 48 | | | 225 | | 2024 | 190 | | | | 41 | | | 231 | |
| 2025 | 2025 | 152 | | | | 39 | | | 191 | | 2025 | 167 | | | | 33 | | | 200 | |
| 2026 | 2026 | 117 | | | | 32 | | | 149 | | 2026 | 133 | | | | 27 | | | 160 | |
| 2027 | | 2027 | 102 | | | | — | | | 102 | |
In the first half of 2021, we announced agreements to sell Wells Fargo Asset Management and Corporate Trust Services and transferred the associated goodwill from the Wealth and Investment Management operating segment and the Commercial Banking operating segment, respectively, to
Corporate. Also in the first half of 2021, we recognized goodwill write-downs related to sales of the student loan portfolio and our Canadian equipment finance business. Table 10.3 shows the allocation of goodwill to our reportable operating segments.
Table 10.3: Goodwill
| | (in millions) | (in millions) | Consumer Banking and Lending | | | Commercial Banking | | Corporate and Investment Banking | | Wealth and Investment Management | | Corporate | | Consolidated Company | (in millions) | Consumer Banking and Lending | | Commercial Banking | | Corporate and Investment Banking | | Wealth and Investment Management | | Corporate | | Consolidated Company |
| December 31, 2020 | | December 31, 2020 | $ | 16,418 | | | 3,018 | | | 5,375 | | | 1,276 | | | 305 | | | 26,392 | |
| Foreign currency translation | | Foreign currency translation | — | | | 2 | | | — | | | — | | | — | | | 2 | |
| Transfers of goodwill | | Transfers of goodwill | — | | | — | | | — | | | (932) | | | 932 | | | — | |
| Divestitures | | Divestitures | $ | — | | | — | | | — | | | — | | | (104) | | | (104) | |
| March 31, 2021 | | March 31, 2021 | $ | 16,418 | | | 3,020 | | | 5,375 | | | 344 | | | 1,133 | | | 26,290 | |
| December 31, 2021 | | December 31, 2021 | $ | 16,418 | | | 2,938 | | | 5,375 | | | 344 | | | 105 | | | 25,180 | |
| | Foreign currency translation | | Foreign currency translation | — | | | 1 | | | — | | | — | | | — | | | 1 | |
| | December 31, 2020 | $ | 16,418 | | | | 3,018 | | | 5,375 | | | 1,276 | | | 305 | | | 26,392 | | |
| | Divestitures | 0 | | | | 0 | | | 0 | | | 0 | | | (201) | | | (201) | | |
| Foreign currency translation | 0 | | | | 3 | | | 0 | | | 0 | | | 0 | | | 3 | | |
| Transfers of goodwill | 0 | | | | (80) | | | 0 | | | (932) | | | 1,012 | | | 0 | | |
| June 30, 2021 | $ | 16,418 | | | | 2,941 | | | 5,375 | | | 344 | | | 1,116 | | | 26,194 | | |
| March 31, 2022 | | March 31, 2022 | $ | 16,418 | | | 2,939 | | | 5,375 | | | 344 | | | 105 | | | 25,181 | |
| | | | | | | | |
| Wells Fargo & Company | 10799 |
| | |
Note 11: Guarantees and Other Commitments |
Guarantees are contracts that contingently require us to make payments to a guaranteed party based on an event or a change in an underlying asset, liability, rate or index. Guarantees are generally in the form of standby and direct pay letters of credit,
written options, recourse obligations, and other types of similar
arrangements. For additional descriptions of our guarantees, see Note 13 (Guarantees and Other Commitments) in our 2021 Form 10-K. Table 11.1 shows carrying value, maximum exposure to loss on our guarantees and the related non-investment grade amounts.
Table 11.1: Guarantees – Carrying Value and Maximum Exposure to Loss
| | | Maximum exposure to loss | | Maximum exposure to loss |
| (in millions) | (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 | (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 |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
Standby letters of credit | Standby letters of credit | $ | 132 | | | 12,639 | | | 4,838 | | | 1,927 | | | 457 | | | 19,861 | | | 6,873 | | Standby letters of credit | $ | 116 | | | 14,658 | | | 4,952 | | | 1,664 | | | 433 | | | 21,707 | | | 6,969 | |
| Direct pay letters of credit | Direct pay letters of credit | 10 | | | 1,927 | | | 2,544 | | | 368 | | | 43 | | | 4,882 | | | 1,140 | | Direct pay letters of credit | 12 | | | 1,738 | | | 1,934 | | | 1,216 | | | 4 | | | 4,892 | | | 1,328 | |
| Written options (1) | Written options (1) | (548) | | | 12,943 | | | 6,278 | | | 723 | | | 58 | | | 20,002 | | | 13,666 | | Written options (1) | (125) | | | 12,202 | | | 4,464 | | | 553 | | | 36 | | | 17,255 | | | 14,097 | |
| Loans and LHFS sold with recourse (2) | Loans and LHFS sold with recourse (2) | 30 | | | 89 | | | 826 | | | 3,010 | | | 9,323 | | | 13,248 | | | 11,216 | | Loans and LHFS sold with recourse (2) | 17 | | | 164 | | | 924 | | | 3,787 | | | 8,506 | | | 13,381 | | | 11,385 | |
| Exchange and clearing house guarantees | Exchange and clearing house guarantees | 0 | | | 0 | | | 0 | | | 0 | | | 5,243 | | | 5,243 | | | 0 | | Exchange and clearing house guarantees | — | | | — | | | — | | | — | | | 5,590 | | | 5,590 | | | — | |
| Other guarantees and indemnifications (3) | Other guarantees and indemnifications (3) | 1 | | | 629 | | | 3 | | | 0 | | | 239 | | | 871 | | | 570 | | Other guarantees and indemnifications (3) | — | | | 687 | | | 1 | | | — | | | 277 | | | 965 | | | 594 | |
| Total guarantees | Total guarantees | $ | (375) | | | 28,227 | | | 14,489 | | | 6,028 | | | 15,363 | | | 64,107 | | | 33,465 | | Total guarantees | $ | 20 | | | 29,449 | | | 12,275 | | | 7,220 | | | 14,846 | | | 63,790 | | | 34,373 | |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| Standby letters of credit | Standby letters of credit | $ | 156 | | | 11,977 | | | 4,962 | | | 1,897 | | | 433 | | | 19,269 | | | 7,528 | | Standby letters of credit | $ | 119 | | | 13,816 | | | 5,260 | | | 1,572 | | | 460 | | | 21,108 | | | 6,939 | |
| Direct pay letters of credit | Direct pay letters of credit | 18 | | | 2,256 | | | 2,746 | | | 531 | | | 39 | | | 5,572 | | | 1,102 | | Direct pay letters of credit | 6 | | | 1,597 | | | 2,137 | | | 1,283 | | | 4 | | | 5,021 | | | 1,373 | |
| Written options (1) | Written options (1) | (538) | | | 12,735 | | | 7,972 | | | 889 | | | 58 | | | 21,654 | | | 13,394 | | Written options (1) | (280) | | | 12,107 | | | 4,575 | | | 513 | | | 36 | | | 17,231 | | | 13,645 | |
| Loans and LHFS sold with recourse (2) | Loans and LHFS sold with recourse (2) | 33 | | | 177 | | | 819 | | | 1,870 | | | 9,723 | | | 12,589 | | | 10,332 | | Loans and LHFS sold with recourse (2) | 20 | | | 71 | | | 943 | | | 3,610 | | | 8,650 | | | 13,274 | | | 11,268 | |
| Exchange and clearing house guarantees | Exchange and clearing house guarantees | 0 | | | 0 | | | 0 | | | 0 | | | 5,510 | | | 5,510 | | | 0 | | Exchange and clearing house guarantees | — | | | — | | | — | | | — | | | 8,100 | | | 8,100 | | | — | |
| Other guarantees and indemnifications (3) | Other guarantees and indemnifications (3) | 0 | | | 734 | | | 1 | | | 1 | | | 1,414 | | | 2,150 | | | 590 | | Other guarantees and indemnifications (3) | — | | | 797 | | | 2 | | | 12 | | | 263 | | | 1,074 | | | 756 | |
| Total guarantees | Total guarantees | $ | (331) | | | 27,879 | | | 16,500 | | | 5,188 | | | 17,177 | | | 66,744 | | | 32,946 | | Total guarantees | $ | (135) | | | 28,388 | | | 12,917 | | | 6,990 | | | 17,513 | | | 65,808 | | | 33,981 | |
(1)Written options, which are in the form of derivatives, are also included in the derivative disclosures in Note 14 (Derivatives). Carrying value net asset position is a result of certain deferred premium option trades.
(2)Represents recourse provided, allpredominantly to the GSEs, on loans sold under various programs and arrangements.
(3)Includes indemnifications provided to certain third-party clearing agents. Estimated maximum exposure to loss was $210$218 million and $1.4 billion$216 million with related collateral of $2.1$2.2 billion and $1.2$2.3 billion as of June 30, 2021,March 31, 2022 and December 31, 2020,2021, 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 11.1 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. In determining the ACL for guarantees, we consider the credit risk of the related contingent obligation.
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 4 (Loans and Related Allowance for Credit Losses).
MERCHANT PROCESSING SERVICES We provide debit and credit card transaction processing services through payment networks directly for merchants and as a sponsor for merchant processing servicers, including our joint venture with a third party that is accounted for as an equity method investment. In our role as the merchant acquiring bank, we have a potential obligation in connection with payment and delivery disputes between the merchant and the cardholder that are resolved in favor of the cardholder. If we are unablecardholder, referred to collectas a charge-back transaction. We estimate our potential maximum exposure to be the amounts from thetotal merchant we incur a loss for the refund to the cardholder. We are secondarily obligated to make a refund for transactions involving sponsored merchant processing servicers. We generally have a low likelihood of loss in connection with our merchant processing services because most products and services are delivered when purchased and amounts are generally refunded when items are returned to the merchant. In addition, we may reduce our risk in connection with these transactions by withholding future payments and requiring cash or other collateral. For the first half of 2021, we processed card transaction volume processed in the preceding four months, which is generally the lifecycle for a charge-back transaction. As of $790.2March 31, 2022, our potential maximum exposure was approximately $748.8 billion, as a merchant acquiring bank, and related losses, including those from our joint venture entity, were immaterial.
GUARANTEES OF SUBSIDIARIES In the normal course of business, the Parent may provide counterparties with guarantees related to its subsidiaries’ obligations. These obligations are included in the Company’s consolidated balance sheet or are reflected as off-balance sheet commitments, and therefore, the Parent has not recognized a separate liability for these guarantees.insignificant.
The Parent fully and unconditionally guarantees the payment of principal, interest, and any other amounts that may be due on securities that its 100% owned finance subsidiary, Wells Fargo Finance LLC, may issue. These securities are not guaranteed by any other subsidiary of the Parent. The guaranteed liabilities were $1.6$1.1 billion and $2.3$1.2 billion at June 30, 2021,March 31, 2022 and December 31, 2020,2021, respectively. These guarantees rank on parity with all of the Parent’s other unsecured and unsubordinated indebtedness. The assets of the Parent consist primarily of equity in its subsidiaries, and the Parent is a separate and distinct legal entity from its subsidiaries. As a result, the Parent’s ability to address claims of holders of these debt securities against the Parent under the guarantee depends on the Parent’s receipt of dividends, loan payments and other funds from its subsidiaries. If any of the Parent’s subsidiaries becomes insolvent, the direct creditors of that subsidiary will have a prior claim on that subsidiary’s assets. The rights of the Parent and the rights of the Parent’s creditors will be subject to that prior claim unless the Parent is also a direct creditor of that subsidiary. For additional information regarding other restrictions on the Parent’s ability to receive dividends, loan payments and other funds from its subsidiaries, see Note 23 (Regulatory Capital Requirements and Other Restrictions).
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 both June 30, 2021,March 31, 2022 and December 31, 2020,2021, we had commitments to purchase debt securities of $18 million and commitments to purchase equity securities of $3.2 billion.$2.3 billion and $2.4 billion, respectively.
As part of maintaining our memberships in certain clearing organizations, we are required to stand ready to provide liquidity to sustain market clearing activity in the event unforeseen events occur or are deemed likely to occur. Certain of these obligations are guarantees of other members’ performance and accordingly are included in Table 11.1 in Other guarantees and indemnifications.
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 $12.9$13.2 billion and $12.0$11.0 billion as of June 30, 2021,March 31, 2022 and December 31, 2020,2021, respectively.
Given the nature of these commitments, they are excluded from Table 4.4 (Unfunded Credit Commitments) in Note 4 (Loans and Related Allowance for Credit Losses).
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| Wells Fargo & Company | 109101 |
| | |
Note 12: Pledged Assets and Collateral |
Pledged Assets
Table 12.1 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 consolidated 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. All of the collateral we pledge related to trading activity 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 financial assets to secure trust and public deposits, borrowings and letters of credit from the Federal Home Loan Bank (FHLB) and the Board of Governors of the Federal Reserve System (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 consolidated balance sheet which represent certain delinquent loans that are eligible for repurchase from GNMA loan securitizations. See Note 8 (Securitizations and Variable Interest Entities) for additional information on consolidated VIE assets.
Table 12.1: Pledged Assets
| | (in millions) | (in millions) | Jun 30,
2021 | | Dec 31,
2020 | (in millions) | Mar 31,
2022 | | Dec 31,
2021 |
| Related to trading activities: | Related to trading activities: | | Related to trading activities: | |
| Repledged third-party owned debt and equity securities | Repledged third-party owned debt and equity securities | $ | 37,134 | | | 44,765 | | Repledged third-party owned debt and equity securities | $ | 28,120 | | | 31,087 | |
| Trading debt securities and other | Trading debt securities and other | 18,362 | | | 19,572 | | Trading debt securities and other | 18,464 | | | 14,216 | |
| Equity securities | Equity securities | 704 | | | 470 | | Equity securities | 1,276 | | | 984 | |
| Total pledged assets related to trading activities | Total pledged assets related to trading activities | 56,200 | | | 64,807 | | Total pledged assets related to trading activities | 47,860 | | | 46,287 | |
| Related to non-trading activities: | Related to non-trading activities: | | Related to non-trading activities: | |
| Loans | Loans | 308,551 | | | 344,220 | | Loans | 285,659 | | | 288,698 | |
| Debt securities: | Debt securities: | | Debt securities: | |
| | Available-for-sale | Available-for-sale | 59,512 | | | 57,289 | | Available-for-sale | 57,663 | | | 65,198 | |
| Held-to-maturity | Held-to-maturity | 11,552 | | | 17,290 | | Held-to-maturity | 11,475 | | | 13,843 | |
| Other financial assets | Other financial assets | 531 | | | 230 | | Other financial assets | 565 | | | 1,600 | |
| Total pledged assets related to non-trading activities | Total pledged assets related to non-trading activities | 380,146 | | | 419,029 | | Total pledged assets related to non-trading activities | 355,362 | | | 369,339 | |
| Related to VIEs: | Related to VIEs: | | Related to VIEs: | |
| Consolidated VIE assets | Consolidated VIE assets | 4,927 | | | 12,146 | | Consolidated VIE assets | 5,170 | | | 4,781 | |
| Loans eligible for repurchase from GNMA securitizations | Loans eligible for repurchase from GNMA securitizations | 130 | | | 179 | | Loans eligible for repurchase from GNMA securitizations | 36 | | | 109 | |
| Total pledged assets related to VIEs | Total pledged assets related to VIEs | 5,057 | | | 12,325 | | Total pledged assets related to VIEs | 5,206 | | | 4,890 | |
| Total pledged assets | Total pledged assets | $ | 441,403 | | | 496,161 | | Total pledged assets | $ | 408,428 | | | 420,516 | |
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. 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 12.2 presents resale and repurchase agreements subject to master repurchase agreements (MRA) and securities borrowing and lending agreements subject to master securities lending agreements (MSLA). Collateralized financings, and those with a single counterparty, are presented net on our consolidated balance sheet, provided certain criteria are met that permit balance sheet netting. Substantially allThe majority of transactions subject to these agreements do not meet those criteria and thus are not eligible for balance sheet netting.
Collateral we pledged consists of non-cash instruments, such as securities or loans, and is not netted on the consolidated balance sheet against the related liability. Collateral we received includes securities or loans and is not recognized on our consolidated balance sheet. Collateral pledged or received may be increased or decreased over time to maintain certain contractual thresholds, as the assets underlying each arrangement fluctuate in value. Generally, these agreements require collateral to exceed the asset or liability recognized on
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110102 | Wells Fargo & Company | |
the balance sheet. The following table includes the amount of collateral pledged or received related to exposures subject to enforceable MRAs or MSLAs. While these agreements are typically over-collateralized, U.S. GAAP requires disclosure in this table to limit the reported amount of such collateral to the
amount of the related recognized asset or liability for each counterparty.
In addition to the amounts included in Table 12.2, we also have balance sheet netting related to derivatives that is disclosed in Note 14 (Derivatives).
Table 12.2: Offsetting – Securities Financing Activities
| (in millions) | (in millions) | Jun 30,
2021 | | Dec 31,
2020 | (in millions) | Mar 31,
2022 | | Dec 31,
2021 |
| Assets: | Assets: | | Assets: | |
| Resale and securities borrowing agreements | Resale and securities borrowing agreements | | Resale and securities borrowing agreements | |
| Gross amounts recognized | Gross amounts recognized | $ | 101,027 | | | 92,446 | | Gross amounts recognized | $ | 105,614 | | | 103,140 | |
| Gross amounts offset in consolidated balance sheet (1) | Gross amounts offset in consolidated balance sheet (1) | (13,845) | | | (11,513) | | Gross amounts offset in consolidated balance sheet (1) | (14,992) | | | (14,074) | |
| Net amounts in consolidated balance sheet (2) | Net amounts in consolidated balance sheet (2) | 87,182 | | | 80,933 | | Net amounts in consolidated balance sheet (2) | 90,622 | | | 89,066 | |
| Collateral not recognized in consolidated balance sheet (3) | Collateral not recognized in consolidated balance sheet (3) | (86,453) | | | (80,158) | | Collateral not recognized in consolidated balance sheet (3) | (89,845) | | | (88,330) | |
| Net amount (4) | Net amount (4) | $ | 729 | | | 775 | | Net amount (4) | $ | 777 | | | 736 | |
| Liabilities: | Liabilities: | | Liabilities: | |
| Repurchase and securities lending agreements | Repurchase and securities lending agreements | | Repurchase and securities lending agreements | |
| Gross amounts recognized | Gross amounts recognized | $ | 47,281 | | | 57,622 | | Gross amounts recognized | $ | 34,752 | | | 35,043 | |
| Gross amounts offset in consolidated balance sheet (1) | Gross amounts offset in consolidated balance sheet (1) | (13,844) | | | (11,513) | | Gross amounts offset in consolidated balance sheet (1) | (14,992) | | | (14,074) | |
| Net amounts in consolidated balance sheet (5) | Net amounts in consolidated balance sheet (5) | 33,437 | | | 46,109 | | Net amounts in consolidated balance sheet (5) | 19,760 | | | 20,969 | |
| Collateral pledged but not netted in consolidated balance sheet (6) | Collateral pledged but not netted in consolidated balance sheet (6) | (33,177) | | | (45,819) | | Collateral pledged but not netted in consolidated balance sheet (6) | (19,555) | | | (20,820) | |
| Net amount (4) | Net amount (4) | $ | 260 | | | 290 | | Net amount (4) | $ | 205 | | | 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.
(2)Includes $70.1$67.7 billion and $65.6$66.2 billion classified on our consolidated balance sheet in federal funds sold and securities purchased under resale agreements at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively. Also includes securities purchased under long-term resale agreements (generally one year or more) classified in loans, which totaled $17.1$22.9 billion and $15.3$22.9 billion, at June 30, 2021,March 31, 2022, and December 31, 2020,2021, 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 June 30, 2021,March 31, 2022, and December 31, 2020,2021, we have received total collateral with a fair value of $118.9$128.2 billion and $108.5$124.4 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 $34.5$26.3 billion and $36.1$28.8 billion at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively.
(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 June 30, 2021,March 31, 2022, and December 31, 2020,2021, we have pledged total collateral with a fair value of $48.5$35.7 billion and $59.2$35.9 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. 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 12.3 provides the gross amounts recognized on the consolidated 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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| Wells Fargo & Company | 111103 |
Note 12: Pledged Assets and Collateral (continued)
Table 12.3: Gross Obligations by Underlying Collateral Type
| | (in millions) | (in millions) | | Jun 30,
2021 | | Dec 31,
2020 | (in millions) | | Mar 31,
2022 | | Dec 31,
2021 |
| Repurchase agreements: | Repurchase agreements: | | Repurchase agreements: | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | | $ | 19,730 | | | 22,922 | | Securities of U.S. Treasury and federal agencies | | $ | 16,141 | | | 14,956 | |
| Securities of U.S. States and political subdivisions | Securities of U.S. States and political subdivisions | | 24 | | | 4 | | Securities of U.S. States and political subdivisions | | 1 | | | 1 | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | | 8,029 | | | 15,353 | | Federal agency mortgage-backed securities | | 2,326 | | | 3,432 | |
| Non-agency mortgage-backed securities | Non-agency mortgage-backed securities | | 860 | | | 1,069 | | Non-agency mortgage-backed securities | | 759 | | | 809 | |
| Corporate debt securities | Corporate debt securities | | 10,047 | | | 9,944 | | Corporate debt securities | | 8,215 | | | 8,899 | |
| Asset-backed securities | Asset-backed securities | | 1,262 | | | 1,054 | | Asset-backed securities | | 473 | | | 358 | |
| Equity securities | Equity securities | | 892 | | | 1,500 | | Equity securities | | 1,217 | | | 919 | |
| Other | Other | | 783 | | | 336 | | Other | | 241 | | | 409 | |
| Total repurchases | Total repurchases | | 41,627 | | | 52,182 | | Total repurchases | | 29,373 | | | 29,783 | |
| Securities lending arrangements: | Securities lending arrangements: | | Securities lending arrangements: | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | | 42 | | | 64 | | Securities of U.S. Treasury and federal agencies | | 117 | | | 33 | |
| | Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | | 31 | | | 23 | | Federal agency mortgage-backed securities | | 17 | | | 17 | |
| | Corporate debt securities | Corporate debt securities | | 45 | | | 79 | | Corporate debt securities | | 126 | | | 80 | |
| | Equity securities (1) | Equity securities (1) | | 5,422 | | | 5,189 | | Equity securities (1) | | 5,067 | | | 5,050 | |
| Other | Other | | 114 | | | 85 | | Other | | 52 | | | 80 | |
| Total securities lending | Total securities lending | | 5,654 | | | 5,440 | | Total securities lending | | 5,379 | | | 5,260 | |
| Total repurchases and securities lending | Total repurchases and securities lending | | $ | 47,281 | | | 57,622 | | Total repurchases and securities lending | | $ | 34,752 | | | 35,043 | |
(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 12.4 provides the contractual maturities of our gross obligations under repurchase and securities lending agreements.
Table 12.4: Contractual Maturities of Gross Obligations
| | (in millions) | (in millions) | Overnight/continuous | | Up to 30 days | | 30-90 days | | >90 days | | Total gross obligation | (in millions) | Overnight/continuous | | Up to 30 days | | 30-90 days | | >90 days | | Total gross obligation |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Repurchase agreements | Repurchase agreements | $ | 28,584 | | | 3,093 | | | 4,765 | | | 5,185 | | | 41,627 | | Repurchase agreements | $ | 18,187 | | | 1,262 | | | 4,139 | | | 5,785 | | | 29,373 | |
| Securities lending arrangements | Securities lending arrangements | 4,853 | | | 200 | | | 601 | | | 0 | | | 5,654 | | Securities lending arrangements | 4,929 | | | — | | | — | | | 450 | | | 5,379 | |
| Total repurchases and securities lending (1) | Total repurchases and securities lending (1) | $ | 33,437 | | | 3,293 | | | 5,366 | | | 5,185 | | | 47,281 | | Total repurchases and securities lending (1) | $ | 23,116 | | | 1,262 | | | 4,139 | | | 6,235 | | | 34,752 | |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| Repurchase agreements | Repurchase agreements | $ | 36,946 | | | 5,251 | | | 5,100 | | | 4,885 | | | 52,182 | | Repurchase agreements | $ | 16,452 | | | 3,570 | | | 4,276 | | | 5,485 | | | 29,783 | |
| Securities lending arrangements | Securities lending arrangements | 4,690 | | | 400 | | | 350 | | | 0 | | | 5,440 | | Securities lending arrangements | 4,810 | | | — | | | — | | | 450 | | | 5,260 | |
| Total repurchases and securities lending (1) | Total repurchases and securities lending (1) | $ | 41,636 | | | 5,651 | | | 5,450 | | | 4,885 | | | 57,622 | | Total repurchases and securities lending (1) | $ | 21,262 | | | 3,570 | | | 4,276 | | | 5,935 | | | 35,043 | |
(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.
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112104 | Wells Fargo & Company | |
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.loss or other adverse consequences. These proceedings and investigations include actions brought against Wells Fargo and/or our subsidiaries with respect to corporate-related matters and transactions in which Wells Fargo and/or our subsidiaries were involved. In addition, Wells Fargo and our subsidiaries may be requested to provide information to or otherwise cooperate with government authorities in the conduct of investigations of other persons or industry groups.
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. TheThere can be no assurance as to the ultimate outcome of legal actions, including the matters described below, and the actual costs of resolving legal actions may be substantially higher or lower than the amounts accrued for those actions.
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. The Company has entered intoIn November 2021, the district court granted preliminary approval of an agreement pursuant to which the Company will pay $20.8 million in order to resolve the cases, subject to court approval.cases.
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 actions alleging, among other things, unfair and deceptive practices relating to these CPI policies, were filed against the Company and consolidated into 1 multi-district litigation in the United States District Court for the Central District of California. As previously disclosed, the Company entered into a settlement to resolve the multi-district litigation. Shareholders also filed a putative 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 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. In JuneNovember 2021, the court granted preliminaryfinal approval of an agreement pursuant to which the Company willagreed to pay $45 million and make certain changes to its GAP refund practices in order to settle the action. Allegations related to the CPI and GAP programs arewere among the subjects of a shareholder derivative lawsuit pending in the United States District Court for the Northern District of California. TheseCalifornia, which has been dismissed. In addition, federal and state government agencies, including the CFPB, have undertaken formal or informal inquiries, investigations, or examinations regarding these and other issues related to the origination, servicing, and collection of consumer auto loans, including related insurance products, have also subjected the Company to formal or informal inquiries, investigations, or examinations from federal and state government agencies, including the CFPB.products. As previously disclosed, the Company entered into an agreement to resolve investigations by the state attorneys general.
COMMERCIAL LENDING SHAREHOLDER LITIGATION In October and November 2020, plaintiffs filed two putative securities fraud class actions, which were consolidated into 1 lawsuit pending in the United States District Court for the Northern District of California alleging that the Company and certain of its current and former executive officers made false and misleading statements or omissions regarding, among other things, the Company’s commercial lending underwriting practices, the credit quality of its commercial credit portfolios, and the value of its commercial loans, collateralized loan obligations and commercial mortgage-backed securities.
COMPANY 401(K) PLAN REGULATORY INVESTIGATIONS Federal government agencies, including the United States Department of Labor, are reviewing certain transactions associated with the Employee Stock Ownership Plan feature of the Company’s 401(k) plan, including the manner in which the 401(k) plan purchased certain securities used in connection with the Company’s contributions to the 401(k) plan. The Company is in resolution discussions with the Department of Labor, although there can be no assurance as to the outcome of these discussions.
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| Wells Fargo & Company | 113105 |
Note 13: Legal Actions (continued)
CONSENT ORDER DISCLOSURE LITIGATION Wells Fargo shareholders have brought a putative securities fraud class action in the United States District Court for the Southern District of New York alleging that the Company and certain of its current and former executive officers and directors 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. Allegations related to the Company’s efforts to comply with these three consent orders arewere also among the subjects of a shareholder derivative lawsuit pendingfiled in the United States District Court for the Northern District of California. On February 4, 2022, the district court granted the Company's motion to dismiss the shareholder derivative lawsuit. On April 19, 2022, shareholders filed a new derivative lawsuit in California state court making similar allegations.
CONSUMER DEPOSIT ACCOUNT RELATED REGULATORY INVESTIGATIONS The CFPB is conducting an investigation into 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. The CFPB is also investigating certain of the Company'sCompany’s past disclosures to customers regarding the minimum qualifying debit card usage required for customers to receive a waiver of monthly service fees on certain consumer deposit accounts.
FOREIGN EXCHANGE BUSINESSThe 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 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. On September 27, 2021, the district court granted the plaintiffs’ motion for class certification in the equitable relief case. Several of the opt-out and direct action litigations have been settled while others remain pending.
LOW INCOME HOUSING TAX CREDITSFederal government agencies have undertaken formal or informal inquiries or investigations regarding the manner in which the Company purchased, and negotiated the purchase of, certain federal low income housing tax credits in connection with the financing of low income housing developments.
MORTGAGE LENDING MATTERS Plaintiffs representing a 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 allegealleged 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. In March 2020, theThe Company entered into an agreement pursuantagreements to which the Company paid $18.5 million to resolve the claims of the initial certified class insettle the Hernandez case whichin two phases, an initial $18.5 million class settlement that was approved by the district court in October 2020. The Hernandez2020 and an additional $22 million class settlement has been reopenedthat was approved by the district court in January 2022 in order to include additional borrowers who the Company determined should have been included in the initial settlement class because the Company 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.class. In June 2021, the Company entered into an agreement pursuant to which the Company will pay an additional approximately $22 million to resolve the Hernandez case. In July 2021,addition, the Company entered into an agreement in the Ryder case pursuant to which the Company will paypaid $12 million to cover other impacted borrowers who were not included in the Hernandez case.case, which was approved by the district court in January 2022. The Dore, and Coordes,and Liguori cases have been voluntarily dismissed. In addition, federal banking regulators and otherstate government agencies, including the CFPB, have undertaken formal or informal inquiries or investigations regarding these and other mortgage servicing matters. On September 9, 2021, the OCC assessed a $250 million civil money penalty against the Company regarding loss mitigation activities in the Company’s Home Lending business and insufficient progress in addressing requirements under the OCC’s April 2018 consent order. In addition, on September 9, 2021, the Company entered into a consent order with the OCC requiring the Company to improve the execution, risk management, and oversight of loss mitigation activities in its Home Lending business.
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114106 | Wells Fargo & Company | |
inquiries or investigations regarding these and other mortgage servicing matters.
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. In March 2022, Wells Fargo entered into an agreement to settle the six actions filed by Nomura, and the actions have been voluntarily dismissed. In the remaining action filed by Natixis, Wells Fargo has asserted counterclaims alleging that Nomura and Natixis failed to provide Wells Fargo notice of theirits 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 ishas been cooperating with an inquiry from the Departmentinvestigations or inquiries arising out 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” orderthis matter by federal government agencies. The Company is in which the banks post debit card transactions to consumer deposit accounts. Mostresolution discussions with certain 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 decisionagencies, although there can be no assurance as to the United States Courtoutcome 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, which was appealed by plaintiffs to the United States Court of Appeals for the Eleventh Circuit. In April 2021, the Eleventh Circuit upheld the district court's decision.these discussions.
RETAIL SALES PRACTICES MATTERS A number of bodies or entities, including (a) federal,Federal and state and local government agencies, including the United States Department of Justice (Department of Justice) and 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 examinationsinvestigations 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. The Company has responded to requests from certain of the foregoing. As previously disclosed, the Company entered into agreements to resolve the state attorneys general investigations. 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 made payments totaling $3.0 billion. In addition, as part of the settlements and included in the $3.0 billion amount, theThe Company agreedhas also entered into agreements to the creation of a $500 million Fair Fund for the benefit of investors who were harmedresolve other government agency investigations, including investigations by the conduct covered in the SEC settlement.state attorneys general. In addition, a number of lawsuits were filed by
non-governmental parties seeking damages or other remedies related to these retail sales practices. As previously disclosed, the Company entered into various settlements to resolve these lawsuits.
RMBS TRUSTEE LITIGATION In December 2014, Phoenix Light SF Limited and certain related entities and the National Credit Union Administration (NCUA) filed complaintsa complaint in the United States District Court for the Southern District of New York alleging claims 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. Complaints raising similar allegations have been filed by Commerzbank AG in the Southern District of New York and by IKB International and IKB Deutsche Industriebank in New York state court. In each case, the plaintiffs allege that Wells Fargo Bank, N.A., as trustee, caused losses to investors, and plaintiffs assert 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. The Company previously settled 2 class actions with similar allegations that were filed in November 2014 and December 2016 by institutional investors inand an action filed by the Southern District of New YorkNational Credit Union Administration with similar allegations. In addition, Park Royal I LLC and Park Royal II LLC have filed complaints that were consolidated in New York state court respectively. In March 2021, the Company entered into an agreementalleging Wells Fargo Bank, N.A., as trustee, failed to resolve the case filed by the NCUA.take appropriate actions upon learning of defective mortgage loan documentation.
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 CompanyWells Fargo filed a motionpetition to dismissremove the amended complaint on the grounds that the Tribe is a necessary party and that the individual beneficiaries lack standingcase to bringfederal court.
Note 13: Legal Actions (continued)
claims. The motion was denied in June 2018. The case is pending trial.
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 $2.8 billion as of June 30, 2021.March 31, 2022. The outcomes of legal actions are unpredictable and subject to significant uncertainties, and it is inherently difficult to determine whether any loss is probable or even possible. It is also inherently difficult to estimate the amount of any loss and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Accordingly, actual losses may be in excess of the established accrual or the range of reasonably possible loss. Based on information currently available, advice of counsel, available insurance coverage, and established reserves, Wells Fargo believes that the eventual outcome of the actions against Wells Fargo and/or its subsidiaries will not, individually or in the aggregate, have a material adverse effect on Wells Fargo’s consolidated financial condition. However, it is possible that the ultimate resolution of a matter, if unfavorable, may be material to Wells Fargo’s results of operations for any particular period.
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116 | Wells Fargo & Company | 107 |
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 additional information on our derivative activities, see Note 16 (Derivatives) in our 20202021 Form 10-K.
Table 14.1 presents the total notional or contractual amounts and fair values for our derivatives. Derivative transactions can be measured in terms of the notional amount, but this amount is not recorded on our consolidated balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged, but is used only as the basis on which interest and other payments are determined.
Table 14.1: Notional or Contractual Amounts and Fair Values of Derivatives
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | Notional or | | Fair value | | Notional or | | Fair value | | Notional or | | Fair value | | Notional or | | Fair value |
| | contractual | | Derivative | | Derivative | | contractual | | Derivative | | Derivative | | contractual | | Derivative | | Derivative | | contractual | | Derivative | | Derivative |
| (in millions) | (in millions) | amount | | assets | | liabilities | | amount | | assets | | liabilities | (in millions) | amount | | assets | | liabilities | | amount | | assets | | liabilities |
| Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | Derivatives designated as hedging instruments | |
| Interest rate contracts | Interest rate contracts | $ | 166,843 | | | 2,428 | | | 529 | | | 184,090 | | | 3,212 | | | 789 | | Interest rate contracts | $ | 158,877 | | | 1,604 | | | 194 | | | 153,993 | | | 2,212 | | | 327 | |
| Foreign exchange contracts | Foreign exchange contracts | 39,001 | | | 1,143 | | | 504 | | | 47,331 | | | 1,381 | | | 607 | | Foreign exchange contracts | 22,326 | | | 137 | | | 827 | | | 24,949 | | | 281 | | | 669 | |
| Total derivatives designated as qualifying hedging instruments | Total derivatives designated as qualifying hedging instruments | | 3,571 | | | 1,033 | | | 4,593 | | | 1,396 | | Total derivatives designated as qualifying hedging instruments | | 1,741 | | | 1,021 | | | 2,493 | | | 996 | |
| Derivatives not designated as hedging instruments | Derivatives not designated as hedging instruments | | | | | Derivatives not designated as hedging instruments | | | | |
| Economic hedges: | Economic hedges: | | Economic hedges: | |
| Interest rate contracts | Interest rate contracts | 231,356 | | | 251 | | | 161 | | | 261,159 | | | 341 | | | 344 | | Interest rate contracts | 127,600 | | | 604 | | | 283 | | | 142,234 | | | 40 | | | 41 | |
Equity contracts | Equity contracts | 27,740 | | | 1,582 | | | 392 | | | 25,997 | | | 1,363 | | | 490 | | Equity contracts | 4,468 | | | 56 | | | 60 | | | 26,263 | | | 1,493 | | | 1,194 | |
| Foreign exchange contracts | Foreign exchange contracts | 53,396 | | | 372 | | | 1,292 | | | 47,106 | | | 331 | | | 1,515 | | Foreign exchange contracts | 34,236 | | | 694 | | | 123 | | | 28,192 | | | 395 | | | 88 | |
| Credit contracts | Credit contracts | 72 | | | 26 | | | 0 | | | 73 | | | 31 | | | 0 | | Credit contracts | 290 | | | 12 | | | — | | | 290 | | | 7 | | | — | |
| Subtotal | Subtotal | | 2,231 | | | 1,845 | | | 2,066 | | | 2,349 | | Subtotal | | 1,366 | | | 466 | | | 1,935 | | | 1,323 | |
| Customer accommodation trading and other derivatives: | Customer accommodation trading and other derivatives: | | | | | Customer accommodation trading and other derivatives: | | | | |
| Interest rate contracts | Interest rate contracts | 9,256,224 | | | 24,068 | | | 18,785 | | | 7,947,941 | | | 32,510 | | | 25,169 | | Interest rate contracts | 10,645,520 | | | 28,330 | | | 27,232 | | | 7,976,534 | | | 20,286 | | | 17,435 | |
| Commodity contracts | Commodity contracts | 76,612 | | | 7,234 | | | 2,309 | | | 65,790 | | | 2,036 | | | 1,543 | | Commodity contracts | 105,256 | | | 13,847 | | | 5,851 | | | 76,642 | | | 5,965 | | | 2,417 | |
Equity contracts | Equity contracts | 322,733 | | | 17,697 | | | 21,126 | | | 280,195 | | | 17,522 | | | 21,516 | | Equity contracts | 351,655 | | | 12,856 | | | 13,452 | | | 321,863 | | | 16,278 | | | 17,827 | |
| Foreign exchange contracts | Foreign exchange contracts | 415,458 | | | 6,177 | | | 4,505 | | | 412,879 | | | 6,891 | | | 6,034 | | Foreign exchange contracts | 637,869 | | | 8,130 | | | 8,144 | | | 560,049 | | | 5,912 | | | 5,915 | |
| Credit contracts | Credit contracts | 36,179 | | | 49 | | | 50 | | | 34,329 | | | 64 | | | 58 | | Credit contracts | 48,160 | | | 38 | | | 38 | | | 38,318 | | | 39 | | | 43 | |
| | Subtotal | Subtotal | | 55,225 | | | 46,775 | | | 59,023 | | | 54,320 | | Subtotal | | 63,201 | | | 54,717 | | | 48,480 | | | 43,637 | |
| Total derivatives not designated as hedging instruments | Total derivatives not designated as hedging instruments | | 57,456 | | | 48,620 | | | 61,089 | | | 56,669 | | Total derivatives not designated as hedging instruments | | 64,567 | | | 55,183 | | | 50,415 | | | 44,960 | |
| Total derivatives before netting | Total derivatives before netting | | 61,027 | | | 49,653 | | | 65,682 | | | 58,065 | | Total derivatives before netting | | 66,308 | | | 56,204 | | | 52,908 | | | 45,956 | |
| Netting | Netting | | (35,612) | | | (35,102) | | | (39,836) | | | (41,556) | | Netting | | (38,943) | | | (40,705) | | | (31,430) | | | (36,532) | |
| Total | Total | | $ | 25,415 | | | 14,551 | | | 25,846 | | | 16,509 | | Total | | $ | 27,365 | | | 15,499 | | | 21,478 | | | 9,424 | |
(1) In first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from "not held for trading activities" to "held for trading activities" to better reflect the business activity of those financial instruments. For additional information on Trading Activities, see Note 1 (Summary of Significant Accounting Policies) in our 2021 Form 10-K.
Table 14.2 provides information on the gross fair values of derivative assets and liabilities subject to enforceable master netting arrangements, the balance sheet netting adjustments and the resulting net fair value amount recorded on our consolidated balance sheet, as well as the non-cash collateral associated with such arrangements. 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 theour consolidated balance sheet. The “Gross amounts recognized” column in the following table includes $52.9 billion and $44.7 billion of gross derivative assets and liabilities, respectively, at June 30, 2021, and $54.6 billion and $50.1 billion, respectively, at December 31, 2020, 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 $8.1 billion and $5.0 billion, respectively, at June 30, 2021, and $11.1 billion
and $8.0 billion, respectively, at December 31, 2020, 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 consolidated balance sheet for these counterparties. Cash collateral receivables and payables that have not been offset against our derivatives were $2.6 billion and $828 million, respectively, at June 30, 2021, and $1.8 billion and $984 million, respectively, at December 31, 2020.
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 adjustmentsarrangement, which are
determined at the counterparty level for which there may be multiple contract
Note 14: Derivatives (continued)
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.
level. We do not net non-cash collateral that we receive and pledge on our consolidated 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 14.2“Total Derivatives, net” which represents the aggregate of our net exposure to each counterparty after
considering the balance sheet and Disclosure-onlydisclosure-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. The proportion of these derivative contracts relative to our total derivative assets and liabilities are presented in the “Percent exchanged in over-the-counter market” column in Table 14.2. 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 12 (Pledged Assets and Collateral).
Table 14.2: Gross Fair Values of Derivative Assets and Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2022 | | December 31, 2021 |
| (in millions) | (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 | (in millions) | Derivative Assets | | Derivative Liabilities | | Derivative Assets | | Derivative Liabilities |
| June 30, 2021 | | |
| Derivative assets | | |
| Interest rate contracts | Interest rate contracts | $ | 26,747 | | | (16,711) | | | 10,036 | | | (680) | | | 9,356 | | | 97 | % | Interest rate contracts | | | |
| Over-the-counter (OTC) | | Over-the-counter (OTC) | $ | 26,017 | | | 23,939 | | | 20,067 | | | 16,654 | |
| OTC cleared | | OTC cleared | 1,544 | | | 1,659 | | | 168 | | | 192 | |
| Exchange traded | | Exchange traded | 241 | | | 131 | | | 52 | | | 28 | |
| Total interest rate contracts | | Total interest rate contracts | 27,802 | | | 25,729 | | | 20,287 | | | 16,874 | |
| Commodity contracts | Commodity contracts | 7,234 | | | (1,481) | | | 5,753 | | | (14) | | | 5,739 | | | 92 | | Commodity contracts | |
| OTC | | OTC | 11,968 | | | 2,859 | | | 5,040 | | | 1,249 | |
| Exchange traded | | Exchange traded | 1,153 | | | 2,677 | | | 557 | | | 1,047 | |
| Total commodity contracts | | Total commodity contracts | 13,121 | | | 5,536 | | | 5,597 | | | 2,296 | |
| Equity contracts | Equity contracts | 19,279 | | | (11,488) | | | 7,791 | | | (766) | | | 7,025 | | | 69 | | Equity contracts | |
| OTC | | OTC | 4,478 | | | 8,045 | | | 6,132 | | | 9,730 | |
| Exchange traded | | Exchange traded | 4,561 | | | 2,871 | | | 7,493 | | | 6,086 | |
| Total equity contracts | | Total equity contracts | 9,039 | | | 10,916 | | | 13,625 | | | 15,816 | |
| Foreign exchange contracts | Foreign exchange contracts | 7,692 | | | (5,892) | | | 1,800 | | | (28) | | | 1,772 | | | 100 | | Foreign exchange contracts | |
| OTC | | OTC | 8,617 | | | 8,417 | | | 6,335 | | | 6,221 | |
| | Total foreign exchange contracts | | Total foreign exchange contracts | 8,617 | | | 8,417 | | | 6,335 | | | 6,221 | |
| Credit contracts | Credit contracts | 75 | | | (40) | | | 35 | | | (1) | | | 34 | | | 90 | | Credit contracts | |
| OTC | | OTC | 32 | | | 27 | | | 32 | | | 31 | |
| | Total derivative assets | $ | 61,027 | | | (35,612) | | | 25,415 | | | (1,489) | | | 23,926 | | | |
| Derivative liabilities | | |
| Interest rate contracts | $ | 19,475 | | | (16,453) | | | 3,022 | | | (1,524) | | | 1,498 | | | 96 | % | |
| Commodity contracts | 2,309 | | | (1,086) | | | 1,223 | | | (17) | | | 1,206 | | | 50 | | |
| Equity contracts | 21,518 | | | (12,956) | | | 8,562 | | | (749) | | | 7,813 | | | 79 | | |
| Foreign exchange contracts | 6,301 | | | (4,574) | | | 1,727 | | | (423) | | | 1,304 | | | 100 | | |
| Credit contracts | 50 | | | (33) | | | 17 | | | (3) | | | 14 | | | 90 | | |
| | Total derivative liabilities | $ | 49,653 | | | (35,102) | | | 14,551 | | | (2,716) | | | 11,835 | | | |
| December 31, 2020 | | |
| Derivative assets | | |
| Interest rate contracts | $ | 36,063 | | | (21,968) | | | 14,095 | | | (1,274) | | | 12,821 | | | 96 | % | |
| Commodity contracts | 2,036 | | | (940) | | | 1,096 | | | (4) | | | 1,092 | | | 84 | | |
| Equity contracts | 18,885 | | | (10,968) | | | 7,917 | | | (737) | | | 7,180 | | | 74 | | |
| Foreign exchange contracts | 8,603 | | | (5,887) | | | 2,716 | | | (141) | | | 2,575 | | | 100 | | |
| Credit contracts | 95 | | | (73) | | | 22 | | | (1) | | | 21 | | | 90 | | |
| | Total derivative assets | $ | 65,682 | | | (39,836) | | | 25,846 | | | (2,157) | | | 23,689 | | | |
| Derivative liabilities | | |
| Interest rate contracts | $ | 26,302 | | | (21,934) | | | 4,368 | | | (2,219) | | | 2,149 | | | 95 | % | |
| Commodity contracts | 1,543 | | | (819) | | | 724 | | | 0 | | | 724 | | | 69 | | |
| Equity contracts | 22,006 | | | (12,283) | | | 9,723 | | | (837) | | | 8,886 | | | 78 | | |
| Foreign exchange contracts | 8,156 | | | (6,481) | | | 1,675 | | | (529) | | | 1,146 | | | 100 | | |
| Credit contracts | 58 | | | (39) | | | 19 | | | (3) | | | 16 | | | 91 | | |
| | Total derivative liabilities | $ | 58,065 | | | (41,556) | | | 16,509 | | | (3,588) | | | 12,921 | | | |
| Total credit contracts | | Total credit contracts | 32 | | | 27 | | | 32 | | | 31 | |
| Total derivatives subject to enforceable master netting arrangements, gross | | Total derivatives subject to enforceable master netting arrangements, gross | 58,611 | | | 50,625 | | | 45,876 | | | 41,238 | |
| Less: Gross amounts offset | | Less: Gross amounts offset | | | |
| Counterparty netting (1) | | Counterparty netting (1) | (32,575) | | | (32,479) | | | (27,172) | | | (27,046) | |
| Cash collateral netting | | Cash collateral netting | (6,368) | | | (8,226) | | | (4,258) | | | (9,486) | |
| Total derivatives subject to enforceable master netting arrangements, net | | Total derivatives subject to enforceable master netting arrangements, net | 19,668 | | | 9,920 | | | 14,446 | | | 4,706 | |
| Derivatives not subject to enforceable master netting arrangements | | Derivatives not subject to enforceable master netting arrangements | 7,697 | | | 5,579 | | | 7,032 | | | 4,718 | |
| Total derivatives recognized in consolidated balance sheet, net | | Total derivatives recognized in consolidated balance sheet, net | 27,365 | | | 15,499 | | | 21,478 | | | 9,424 | |
| Non-cash collateral | | Non-cash collateral | (1,949) | | | (1,121) | | | (1,432) | | | (412) | |
| Total Derivatives, net | | Total Derivatives, net | $ | 25,416 | | | 14,378 | | | 20,046 | | | 9,012 | |
(1)Represents amounts with counterparties subject to enforceable master netting arrangements that have been offset in theour consolidated balance sheet, including related cash collateral and portfolio level counterparty valuation adjustments.adjustments related to customer accommodation and other trading derivatives. Counterparty valuation adjustments related to derivative assets were $299$341 million and $399$284 million and debit valuation adjustments related to derivative liabilities were $145$244 million and $201$158 million as of June 30, 2021,March 31, 2022, and December 31, 2020, respectively. Cash collateral totaled $5.4 billion2021, respectively, and $5.1 billion, netted against derivative assets and liabilities, respectively, at June 30, 2021, and $5.5 billion and $7.5 billion, respectively, at December 31, 2020.were primarily related to interest rate contracts.
Fair Value and Cash Flow Hedges
For fair value hedges, we use interest rate swaps to convert certain of our fixed-rate long-term debt and time certificates of deposit to floating rates to hedge our exposure to interest rate risk. We also enter into cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge our exposure to foreign currency risk and interest rate risk associated with the issuance of non-U.S. dollar denominated long-term debt. 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. For certain fair value hedges of foreign currency risk, changes in fair value of cross-currency swaps attributable to changes in cross-currency basis spreads are excluded from the assessment of hedge effectiveness and recorded in other comprehensive income. See Note 21 (Other Comprehensive Income) for the amounts recognized in other comprehensive income.
For cash flow hedges, we use interest rate swaps to hedge the variability in interest payments received on certain floating-
rateinterest-earning deposits with banks and certain floating-rate commercial loans, and interest 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 $76$17 million pre-tax of deferred net losses related to cash flow hedges in OCI at June 30, 2021,March 31, 2022, will be reclassified into net interest income during the next twelve months. The deferred losses expected to be reclassified into net interest income are predominantlyprimarily related to discontinued hedges of floating rate loans. For cash flow hedges as of June 30, 2021,March 31, 2022, we are hedging our interest rate and foreign currency exposure to the variability of future cash flows for all forecasted transactions for a maximum of 910 years. For additional information on our accounting hedges, see Note 1 (Summary of Significant Accounting Policies). in our 2021 Form 10-K.
Note 14: Derivatives (continued)
Table 14.3 and Table 14.4 show the net gains (losses) related to derivatives in fair value and cash flow hedging relationships, respectively.
Table 14.3: Gains (Losses) Recognized on Fair Value Hedging Relationships
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest income | | Noninterest income | | Total recorded in net income | | Total recorded in OCI |
| (in millions) | Debt securities | Deposits | Long-term debt | | Other | | Derivative gains (losses) | | Derivative gains (losses) |
| Quarter ended June 30, 2021 | | | | | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 2,199 | | (92) | | (712) | | | 692 | | | N/A | | 37 | |
| Interest contracts | | | | | | | | | |
| Amounts related to interest settlements on derivatives | (68) | | 74 | | 541 | | | 0 | | | 547 | | | |
| Recognized on derivatives | (468) | | (61) | | 2,453 | | | 0 | | | 1,924 | | | 0 | |
| Recognized on hedged items | 452 | | 62 | | (2,402) | | | 0 | | | (1,888) | | | |
| Total gains (losses) (pre-tax) on interest rate contracts | (84) | | 75 | | 592 | | | 0 | | | 583 | | | 0 | |
| Foreign exchange contracts | | | | | | | | | |
| Amounts related to interest settlements on derivatives | 15 | | 0 | | 4 | | | 0 | | | 19 | | | |
| Recognized on derivatives | 2 | | 0 | | (42) | | | 202 | | | 162 | | | (14) | |
| Recognized on hedged items | (1) | | 0 | | 44 | | | (203) | | | (160) | | | |
| Total gains (losses) (pre-tax) on foreign exchange contracts | 16 | | 0 | | 6 | | | (1) | | | 21 | | | (14) | |
| Total gains (losses) (pre-tax) recognized on fair value hedges | $ | (68) | | 75 | | 598 | | | (1) | | | 604 | | | (14) | |
| Quarter ended June 30, 2020 | | | | | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 2,946 | | (585) | | (1,237) | | | 912 | | | N/A | | 3 | |
| Interest contracts | | | | | | | | | |
| Amounts related to interest settlements on derivatives | (93) | | 152 | | 428 | | | 0 | | | 487 | | | |
| Recognized on derivatives | (21) | | (86) | | 549 | | | 0 | | | 442 | | | 0 | |
| Recognized on hedged items | 63 | | 77 | | (618) | | | 0 | | | (478) | | | |
| Total gains (losses) (pre-tax) on interest rate contracts | (51) | | 143 | | 359 | | | 0 | | | 451 | | | 0 | |
| Foreign exchange contracts | | | | | | | | | |
| Amounts related to interest settlements on derivatives | 11 | | 0 | | (46) | | | 0 | | | (35) | | | |
| Recognized on derivatives | (1) | | 0 | | 117 | | | 709 | | | 825 | | | (57) | |
| Recognized on hedged items | 1 | | 0 | | (70) | | | (684) | | | (753) | | | |
| Total gains (losses) (pre-tax) on foreign exchange contracts | 11 | | 0 | | 1 | | | 25 | | | 37 | | | (57) | |
| Total gains (losses) (pre-tax) recognized on fair value hedges | $ | (40) | | 143 | | 360 | | | 25 | | | 488 | | | (57) | |
(continued on following page) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest income | | Noninterest income | | Total recorded in net income | | Total recorded in OCI |
| (in millions) | Debt securities | | Deposits | Long-term debt | | Other | | Derivative gains (losses) | | Derivative gains (losses) |
| Quarter ended March 31, 2022 | | | | | | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 2,563 | | | (83) | | (761) | | | 556 | | | N/A | | 27 | |
| Interest contracts | | | | | | | | | | |
| Amounts related to interest settlements on derivatives | (41) | | | 41 | | 481 | | | — | | | 481 | | | N/A |
| Recognized on derivatives | 1,262 | | | (145) | | (6,869) | | | — | | | (5,752) | | | — | |
| Recognized on hedged items | (1,248) | | | 143 | | 6,813 | | | — | | | 5,708 | | | N/A |
| Total gains (losses) (pre-tax) on interest rate contracts | (27) | | | 39 | | 425 | | | — | | | 437 | | | — | |
| Foreign exchange contracts | | | | | | | | | | |
| Amounts related to interest settlements on derivatives | — | | | — | | 4 | | | — | | | 4 | | | N/A |
| Recognized on derivatives | — | | | — | | (456) | | | (242) | | | (698) | | | 64 | |
| Recognized on hedged items | — | | | — | | 445 | | | 241 | | | 686 | | | N/A |
| Total gains (losses) (pre-tax) on foreign exchange contracts | — | | | — | | (7) | | | (1) | | | (8) | | | 64 | |
| Total gains (losses) (pre-tax) recognized on fair value hedges | $ | (27) | | | 39 | | 418 | | | (1) | | | 429 | | | 64 | |
| Quarter ended March 31, 2021 | | | | | | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 2,312 | | | (112) | | (1,026) | | | 982 | | | N/A | | 47 | |
| Interest contracts | | | | | | | | | | |
| Amounts related to interest settlements on derivatives | (67) | | | 91 | | 550 | | | — | | | 574 | | | N/A |
| Recognized on derivatives | 1,294 | | | (123) | | (7,071) | | | — | | | (5,900) | | | — | |
| Recognized on hedged items | (1,258) | | | 119 | | 6,944 | | | — | | | 5,805 | | | N/A |
| Total gains (losses) (pre-tax) on interest rate contracts | (31) | | | 87 | | 423 | | | — | | | 479 | | | — | |
| Foreign exchange contracts | | | | | | | | | | |
| Amounts related to interest settlements on derivatives | 28 | | | — | | (1) | | | — | | | 27 | | | N/A |
| Recognized on derivatives | 1 | | | — | | (227) | | | 307 | | | 81 | | | 25 | |
| Recognized on hedged items | (1) | | | — | | 194 | | | (317) | | | (124) | | | N/A |
| Total gains (losses) (pre-tax) on foreign exchange contracts | 28 | | | — | | (34) | | | (10) | | | (16) | | | 25 | |
| Total gains (losses) (pre-tax) recognized on fair value hedges | $ | (3) | | | 87 | | 389 | | | (10) | | | 463 | | | 25 | |
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Note 14: Derivatives (continued)
(continued from previous page)
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| Net interest income | | Noninterest income | | Total recorded in net income | | Total recorded in OCI |
| (in millions) | Debt securities | | Deposits | Long-term debt | | Other | | Derivative gains (losses) | | Derivative gains (losses) |
| Six months ended June 30, 2021 | | | | | | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 4,511 | | | (204) | | (1,738) | | | 1,674 | | | N/A | | 84 | |
| Interest contracts | | | | | | | | | | |
| Amounts related to interest settlements on derivatives | (135) | | | 165 | | 1,091 | | | 0 | | | 1,121 | | | |
| Recognized on derivatives | 826 | | | (184) | | (4,618) | | | 0 | | | (3,976) | | | 0 | |
| Recognized on hedged items | (806) | | | 181 | | 4,542 | | | 0 | | | 3,917 | | | |
| Total gains (losses) (pre-tax) on interest rate contracts | (115) | | | 162 | | 1,015 | | | 0 | | | 1,062 | | | 0 | |
| Foreign exchange contracts | | | | | | | | | | |
| Amounts related to interest settlements on derivatives | 43 | | | 0 | | 3 | | | 0 | | | 46 | | | |
| Recognized on derivatives | 3 | | | 0 | | (269) | | | 509 | | | 243 | | | 11 | |
| Recognized on hedged items | (2) | | | 0 | | 238 | | | (520) | | | (284) | | | |
| Total gains (losses) (pre-tax) on foreign exchange contracts | 44 | | | 0 | | (28) | | | (11) | | | 5 | | | 11 | |
| Total gains (losses) (pre-tax) recognized on fair value hedges | $ | (71) | | | 162 | | 987 | | | (11) | | | 1,067 | | | 11 | |
| Six months ended June 30, 2020 | | | | | | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 6,418 | | | (2,327) | | (2,477) | | | 2,213 | | | N/A | | 185 | |
| Interest contracts | | | | | | | | | | |
| Amounts related to interest settlements on derivatives | (139) | | | 222 | | 602 | | | 0 | | | 685 | | | |
| Recognized on derivatives | (1,892) | | | 444 | | 10,324 | | | 0 | | | 8,876 | | | 0 | |
| Recognized on hedged items | 1,919 | | | (434) | | (10,044) | | | 0 | | | (8,559) | | | |
| Total gains (losses) (pre-tax) on interest rate contracts | (112) | | | 232 | | 882 | | | 0 | | | 1,002 | | | 0 | |
| Foreign exchange contracts | | | | | | | | | | |
| Amounts related to interest settlements on derivatives | 17 | | | 0 | | (131) | | | 0 | | | (114) | | | |
| Recognized on derivatives | (2) | | | 0 | | 224 | | | (76) | | | 146 | | | 87 | |
| Recognized on hedged items | 3 | | | 0 | | (244) | | | 80 | | | (161) | | | |
| Total gains (losses) (pre-tax) on foreign exchange contracts | 18 | | | 0 | | (151) | | | 4 | | | (129) | | | 87 | |
| Total gains (losses) (pre-tax) recognized on fair value hedges | $ | (94) | | | 232 | | 731 | | | 4 | | | 873 | | | 87 | |
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120110 | Wells Fargo & Company | |
Table 14.4: Gains (Losses) Recognized on Cash Flow Hedging Relationships | | | | | | | | | | | | | | | | | | | | |
| Net interest income | | Total recorded in net income | Total recorded in OCI |
| (in millions) | Loans | Other interest income | Long-term debt | | Derivative gains (losses) | Derivative gains (losses) |
| Quarter ended March 31, 2022 | | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 7,218 | | 90 | | (761) | | | N/A | 27 | |
| Interest rate contracts: | | | | | | |
| Realized gains (losses) (pre-tax) reclassified from OCI into net income | (16) | | 4 | | — | | | (12) | | 12 | |
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | N/A | | N/A | (48) | |
| Total gains (losses) (pre-tax) on interest rate contracts | (16) | | 4 | | — | | | (12) | | (36) | |
| 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 | | N/A | (3) | |
| Total gains (losses) (pre-tax) on foreign exchange contracts | — | | — | | (2) | | | (2) | | (1) | |
| Total gains (losses) (pre-tax) recognized on cash flow hedges | $ | (16) | | 4 | | (2) | | | (14) | | (37) | |
| Quarter ended March 31, 2021 | | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 7,201 | | 65 | | (1,026) | | | N/A | 47 | |
| Interest rate contracts: | | | | | | |
| Realized gains (losses) (pre-tax) reclassified from OCI into net income | (52) | | — | | — | | | (52) | | 52 | |
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | N/A | | N/A | (20) | |
| Total gains (losses) (pre-tax) on interest rate contracts | (52) | | — | | — | | | (52) | | 32 | |
| 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 | | N/A | (11) | |
| Total gains (losses) (pre-tax) on foreign exchange contracts | — | | — | | (1) | | | (1) | | (10) | |
| Total gains (losses) (pre-tax) recognized on cash flow hedges | $ | (52) | | — | | (1) | | | (53) | | 22 | |
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| 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 June 30, 2021 | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 7,095 | | (712) | | | N/A | 37 | |
| Interest rate contracts: | | | | | |
| Realized gains (losses) (pre-tax) reclassified from OCI into net income | (39) | | — | | | (39) | | 39 | |
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | | N/A | 10 | |
| Total gains (losses) (pre-tax) on interest rate contracts | (39) | | 0 | | | (39) | | 49 | |
| 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 | 1 | |
| Total gains (losses) (pre-tax) on foreign exchange contracts | 0 | | (1) | | | (1) | | 2 | |
| Total gains (losses) (pre-tax) recognized on cash flow hedges | $ | (39) | | (1) | | | (40) | | 51 | |
| Quarter ended June 30, 2020 | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 8,460 | | (1,237) | | | N/A | 3 | |
| Interest rate contracts: | | | | | |
| Realized gains (losses) (pre-tax) reclassified from OCI into net income | (53) | | 1 | | | (52) | | 52 | |
| 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) | | 1 | | | (52) | | 52 | |
| Foreign exchange contracts: | | | | | |
| Realized gains (losses) (pre-tax) reclassified from OCI into net income | 0 | | (3) | | | (3) | | 3 | |
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | | N/A | 5 | |
| Total gains (losses) (pre-tax) on foreign exchange contracts | 0 | | (3) | | | (3) | | 8 | |
| Total gains (losses) (pre-tax) recognized on cash flow hedges | $ | (53) | | (2) | | | (55) | | 60 | |
| Six months ended June 30, 2021 | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 14,296 | | (1,738) | | | N/A | 84 | |
| Interest rate contracts: | | | | | |
| Realized gains (losses) (pre-tax) reclassified from OCI into net income | (91) | | — | | | (91) | | 91 | |
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | | N/A | (10) | |
| Total gains (losses) (pre-tax) on interest rate contracts | (91) | | 0 | | | (91) | | 81 | |
| 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 | (10) | |
| Total gains (losses) (pre-tax) on foreign exchange contracts | 0 | | (2) | | | (2) | | (8) | |
| Total gains (losses) (pre-tax) recognized on cash flow hedges | $ | (91) | | (2) | | | (93) | | 73 | |
| Six months ended June 30, 2020 | | | | | |
| Total amounts presented in the consolidated statement of income and other comprehensive income | $ | 18,543 | | (2,477) | | | N/A | 185 | |
| Interest rate contracts: | | | | | |
| Realized gains (losses) (pre-tax) reclassified from OCI into net income | (109) | | 1 | | | (108) | | 108 | |
| 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 | (109) | | 1 | | | (108) | | 108 | |
| Foreign exchange contracts: | | | | | |
| Realized gains (losses) (pre-tax) reclassified from OCI into net income | 0 | | (5) | | | (5) | | 5 | |
| Net unrealized gains (losses) (pre-tax) recognized in OCI | N/A | N/A | | N/A | (15) | |
| Total gains (losses) (pre-tax) on foreign exchange contracts | 0 | | (5) | | | (5) | | (10) | |
| Total gains (losses) (pre-tax) recognized on cash flow hedges | $ | (109) | | (4) | | | (113) | | 98 | |
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| Wells Fargo & Company | 121111 |
Note 14: Derivatives (continued)
Table 14.5 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 14.5: Hedged Items in Fair Value Hedging RelationshipRelationships
| | | Hedged Items Currently Designated | | Hedged Items No Longer Designated (1) | | Hedged items currently designated | | Hedged items no longer designated |
| (in millions) | (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) | (in millions) | Carrying amount of assets/(liabilities) (1)(2) | Hedge accounting
basis adjustment
assets/(liabilities) (3) | | Carrying amount of assets/(liabilities) (2) | Hedge accounting basis adjustment
assets/(liabilities) |
| June 30, 2021 | | | | |
| March 31, 2022 | | March 31, 2022 | |
Available-for-sale debt securities (5)(4) | Available-for-sale debt securities (5)(4) | $ | 28,655 | | (35) | | | 16,792 | | 994 | | Available-for-sale debt securities (5)(4) | $ | 22,937 | | (1,818) | | | 17,723 | | 903 | |
| | Deposits | Deposits | (14,206) | | (295) | | | 0 | | 0 | | Deposits | (7,135) | | (1) | | | (11) | | — | |
| Long-term debt | Long-term debt | (148,673) | | (7,312) | | | (5,248) | | 2 | | Long-term debt | (134,848) | | 2,096 | | | (6) | | — | |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
Available-for-sale debt securities (5)(4) | Available-for-sale debt securities (5)(4) | $ | 29,538 | | 827 | | | 17,091 | | 1,111 | | Available-for-sale debt securities (5)(4) | $ | 24,144 | | (559) | | | 17,962 | | 965 | |
| | Deposits | Deposits | (22,384) | | (477) | | | 0 | | 0 | | Deposits | (10,187) | | (144) | | | — | | — | |
| Long-term debt | Long-term debt | (156,907) | | (12,466) | | | (14,468) | | 31 | | Long-term debt | (138,801) | | (5,192) | | | — | | — | |
(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 for debt securities is $12.0 billion$848 million and for long-term debt is $(2.8) billion$(412) million as of June 30, 2021,March 31, 2022, and $17.6 billion$873 million for debt securities and $(4.7)$(2.7) billion for long-term debt as of December 31, 2020.2021.
(3)The balance includes $188 million and $160 million of debt securities and long-term debt cumulative basis adjustments as of June 30, 2021, respectively, and $205 million and $130 million of debt securities and long-term debt cumulative basis adjustments as of December 31, 2020, respectively, on terminated hedges whereby the hedged items have subsequently been re-designated into existing hedges.
(4)(2)Represents the full carrying amount of the hedged asset or liability item as of the balance sheet date, except for circumstances in which only a portion of the asset or liability was designated as the hedged item in which case only the portion designated is presented.
(5)(3)The balance includes $124 million and $203 million of debt securities and long-term debt cumulative basis adjustments as of March 31, 2022, respectively, and $136 million and $188 million of debt securities and long-term debt cumulative basis adjustments as of December 31, 2021, respectively, on terminated hedges whereby the hedged items have subsequently been re-designated into existing hedges.
(4)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 derivativesto 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 additional information on economic hedges and other derivatives, see Note 1416 (Derivatives) to Financial Statements in our 20202021 Form 10-K.
Table 14.6 shows the net gains (losses), recognized by income statement lines, related to derivatives not designated as hedging instruments.
Table 14.6: Gains (Losses) on Derivatives Not Designated as Hedging Instruments
| | | Noninterest income | | Noninterest expense | | Noninterest income | | Noninterest expense |
| (in millions) | (in millions) | Mortgage banking | Net gains (losses) on trading and securities | | Other | Total | | Personnel expense | (in millions) | Mortgage banking | Net gains from trading and securities | | Other | Total | | Personnel expense |
| Quarter ended June 30, 2021 | | | | |
| | Quarter ended March 31, 2022 | | Quarter ended March 31, 2022 | | | |
| Net gains (losses) recognized on economic hedges derivatives: | | Net gains (losses) recognized on economic hedges derivatives: | | | |
| Interest contracts (1) | | Interest contracts (1) | $ | (368) | | — | | | (26) | | (394) | | | — | |
| Equity contracts (2) | | Equity contracts (2) | — | | — | | | 8 | | 8 | | | 266 | |
| Foreign exchange contracts | | Foreign exchange contracts | — | | — | | | 231 | | 231 | | | — | |
| Credit contracts | | Credit contracts | — | | — | | | 5 | | 5 | | | — | |
| Subtotal | | Subtotal | (368) | | — | | | 218 | | (150) | | | 266 | |
| Net gains (losses) recognized on customer accommodation trading and other derivatives: | | Net gains (losses) recognized on customer accommodation trading and other derivatives: | | | |
| Interest contracts | | Interest contracts | (498) | | 3,214 | | | — | | 2,716 | | | — | |
| Commodity contracts | | Commodity contracts | — | | 113 | | | — | | 113 | | | — | |
| Equity contracts (2) | | Equity contracts (2) | — | | 1,003 | | | (38) | | 965 | | | — | |
| Foreign exchange contracts | | Foreign exchange contracts | — | | 327 | | | — | | 327 | | | — | |
| Credit contracts | | Credit contracts | — | | 12 | | | — | | 12 | | | — | |
| Subtotal | | Subtotal | (498) | | 4,669 | | | (38) | | 4,133 | | | — | |
| Net gains (losses) recognized related to derivatives not designated as hedging instruments | | Net gains (losses) recognized related to derivatives not designated as hedging instruments | $ | (866) | | 4,669 | | | 180 | | 3,983 | | | 266 | |
| | Quarter ended March 31, 2021 | | Quarter ended March 31, 2021 | | | |
| Net gains (losses) recognized on economic hedges derivatives: | Net gains (losses) recognized on economic hedges derivatives: | | | | Net gains (losses) recognized on economic hedges derivatives: | | | |
| Interest contracts (1) | Interest contracts (1) | $ | 287 | | 0 | | | 14 | | 301 | | | 0 | | Interest contracts (1) | $ | (375) | | — | | | (20) | | (395) | | | — | |
| Equity contracts | Equity contracts | 0 | | (762) | | | (4) | | (766) | | | (239) | | Equity contracts | — | | 425 | | | 5 | | 430 | | | (160) | |
| Foreign exchange contracts | Foreign exchange contracts | 0 | | 0 | | | (90) | | (90) | | | 0 | | Foreign exchange contracts | — | | — | | | 71 | | 71 | | | — | |
| Credit contracts | Credit contracts | 0 | | 0 | | | (5) | | (5) | | | 0 | | Credit contracts | — | | — | | | — | | — | | | — | |
| Subtotal | Subtotal | 287 | | (762) | | | (85) | | (560) | | | (239) | | Subtotal | (375) | | 425 | | | 56 | | 106 | | | (160) | |
| Net gains (losses) recognized on customer accommodation trading and other derivatives: | Net gains (losses) recognized on customer accommodation trading and other derivatives: | | | | Net gains (losses) recognized on customer accommodation trading and other derivatives: | | | |
| Interest contracts | Interest contracts | 482 | | (594) | | | 0 | | (112) | | | 0 | | Interest contracts | (531) | | 1,924 | | | — | | 1,393 | | | — | |
| Commodity contracts | Commodity contracts | 0 | | (36) | | | 0 | | (36) | | | 0 | | Commodity contracts | — | | 80 | | | — | | 80 | | | — | |
| Equity contracts | Equity contracts | 0 | | (922) | | | (304) | | (1,226) | | | 0 | | Equity contracts | — | | (1,163) | | | (89) | | (1,252) | | | — | |
| Foreign exchange contracts | Foreign exchange contracts | 0 | | (24) | | | 0 | | (24) | | | 0 | | Foreign exchange contracts | — | | 464 | | | — | | 464 | | | — | |
| Credit contracts | Credit contracts | 0 | | (43) | | | 0 | | (43) | | | 0 | | Credit contracts | — | | (28) | | | — | | (28) | | | — | |
| Subtotal | Subtotal | 482 | | (1,619) | | | (304) | | (1,441) | | | 0 | | Subtotal | (531) | | 1,277 | | | (89) | | 657 | | | — | |
| Net gains (losses) recognized related to derivatives not designated as hedging instruments | Net gains (losses) recognized related to derivatives not designated as hedging instruments | $ | 769 | | (2,381) | | | (389) | | (2,001) | | | (239) | | Net gains (losses) recognized related to derivatives not designated as hedging instruments | $ | (906) | | 1,702 | | | (33) | | 763 | | | (160) | |
| Quarter ended June 30, 2020 | | | | |
| Net gains (losses) recognized on economic hedges derivatives: | | | | |
| Interest contracts (1) | $ | 142 | | 0 | | | (74) | | 68 | | | 0 | | |
| Equity contracts | 0 | | (1,402) | | | (6) | | (1,408) | | | (141) | | |
| Foreign exchange contracts | 0 | | 0 | | | (55) | | (55) | | | 0 | | |
| Credit contracts | 0 | | 0 | | | 1 | | 1 | | | 0 | | |
| Subtotal | 142 | | (1,402) | | | (134) | | (1,394) | | | (141) | | |
| Net gains (losses) recognized on customer accommodation trading and other derivatives: | | | | |
| Interest contracts | 546 | | 676 | | | 0 | | 1,222 | | | 0 | | |
| Commodity contracts | 0 | | (224) | | | 0 | | (224) | | | 0 | | |
| Equity contracts | 0 | | (2,348) | | | (145) | | (2,493) | | | 0 | | |
| Foreign exchange contracts | 0 | | 155 | | | 0 | | 155 | | | 0 | | |
| Credit contracts | 0 | | (134) | | | 0 | | (134) | | | 0 | | |
| Subtotal | 546 | | (1,875) | | | (145) | | (1,474) | | | 0 | | |
| Net gains (losses) recognized related to derivatives not designated as hedging instruments | $ | 688 | | (3,277) | | | (279) | | (2,868) | | | (141) | | |
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(continued(2)In first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from “not held for trading activities” to “held for trading activities” to better reflect the business activity of those financial instruments. For additional information on following page)Trading Activities, see Note 1 (Summary of Significant Accounting Policies) in our 2021 Form 10-K.
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| Wells Fargo & Company | 123113 |
Note 14: Derivatives (continued)
(continued from previous page)
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| Noninterest income | | Noninterest expense |
| (in millions) | Mortgage banking | Net gains (losses) on trading and securities | | Other | Total | | Personnel expense |
| Six months ended June 30, 2021 | | | | | | | |
| Net gains (losses) recognized on economic hedges derivatives: | | | | | | | |
| Interest contracts (1) | $ | (88) | | 0 | | | (6) | | (94) | | | 0 | |
| Equity contracts | 0 | | (337) | | | 1 | | (336) | | | (399) | |
| Foreign exchange contracts | 0 | | 0 | | | (19) | | (19) | | | 0 | |
| Credit contracts | 0 | | 0 | | | (5) | | (5) | | | 0 | |
| Subtotal | (88) | | (337) | | | (29) | | (454) | | | (399) | |
| Net gains (losses) recognized on customer accommodation trading and other derivatives: | | | | | | | |
| Interest contracts | (49) | | 1,330 | | | 0 | | 1,281 | | | 0 | |
| Commodity contracts | 0 | | 44 | | | 0 | | 44 | | | 0 | |
| Equity contracts | 0 | | (2,085) | | | (393) | | (2,478) | | | 0 | |
| Foreign exchange contracts | 0 | | 440 | | | 0 | | 440 | | | 0 | |
| Credit contracts | 0 | | (71) | | | 0 | | (71) | | | 0 | |
| Subtotal | (49) | | (342) | | | (393) | | (784) | | | 0 | |
| Net gains (losses) recognized related to derivatives not designated as hedging instruments | $ | (137) | | (679) | | | (422) | | (1,238) | | | (399) | |
| Six months ended June 30, 2020 | | | | | | | |
| Net gains (losses) recognized on economic hedges derivatives: | | | | | | | |
| Interest contracts (1) | $ | 2,613 | | 0 | | | (45) | | 2,568 | | | 0 | |
| Equity contracts | 0 | | (183) | | | (34) | | (217) | | | (141) | |
| Foreign exchange contracts | 0 | | 0 | | | 572 | | 572 | | | 0 | |
| Credit contracts | 0 | | 0 | | | 17 | | 17 | | | 0 | |
| Subtotal | 2,613 | | (183) | | | 510 | | 2,940 | | | (141) | |
| Net gains (losses) recognized on customer accommodation trading and other derivatives: | | | | | | | |
| Interest contracts | 1,099 | | (1,787) | | | 0 | | (688) | | | 0 | |
| Commodity contracts | 0 | | (112) | | | 0 | | (112) | | | 0 | |
| Equity contracts | 0 | | 2,401 | | | (72) | | 2,329 | | | 0 | |
| Foreign exchange contracts | 0 | | (402) | | | 0 | | (402) | | | 0 | |
| Credit contracts | 0 | | 147 | | | 0 | | 147 | | | 0 | |
| Subtotal | 1,099 | | 247 | | | (72) | | 1,274 | | | 0 | |
| Net gains (losses) recognized related to derivatives not designated as hedging instruments | $ | 3,712 | | 64 | | | 438 | | 4,214 | | | (141) | |
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(1)Mortgage banking amounts for the second quarter and first half of 2021 are comprised of gains (losses) of $707 million and $(933) million, respectively, related to derivatives used as economic hedges of MSRs measured at fair value offset by gains (losses) of $(420) million and $845 million related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments. The corresponding amounts for the second quarter and first half of 2020 are comprised of gains (losses) of $535 million and $3.9 billion offset by gains (losses) of $(393) million and $(1.3) billion, respectively.
Credit Derivatives
Credit derivative contracts are arrangements whose value is derived from the transfer of credit risk of a reference asset or entity from one party (the purchaser of credit protection) to another party (the seller of credit protection). We generally use credit derivatives to assist customers with their risk management objectives. We may alsoobjectives by purchasing and selling credit protection on corporate debt obligations through the use of credit derivatives in structured product transactionsdefault swaps or liquidity agreements writtenthrough risk participation swaps 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 sold credit derivatives.help manage counterparty exposure. We would be required to perform under the sold credit derivatives we sold in the event of default by the referenced obligors. Events of default include events such as bankruptcy, capital restructuring or lack of principal and/or interest payment. 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 14.7 provides details of sold and purchased credit derivatives.
Table 14.7: Sold and Purchased Credit Derivatives
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| | | | | 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 |
| June 30, 2021 | | | | | | | | | | | | | | | |
| Credit default swaps on: | | | | | | | | | | | | | | | |
| Corporate bonds | $ | 5 | | | 3 | | | 4,724 | | | 1,236 | | | 3,130 | | | 1,594 | | | 3,582 | | | 2021 - 2031 |
| Structured products | 0 | | | 4 | | | 16 | | | 16 | | | 12 | | | 4 | | | 82 | | | 2034 - 2047 |
| Credit protection on: | | | | | | | | | | | | | | | |
| Default swap index | 1 | | | 0 | | | 1,760 | | | 698 | | | 924 | | | 836 | | | 3,765 | | | 2021 - 2030 |
| Commercial mortgage-backed securities index | 2 | | | 15 | | | 283 | | | 29 | | | 258 | | | 25 | | | 134 | | | 2047 - 2072 |
| Asset-backed securities index | 0 | | | 7 | | | 41 | | | 41 | | | 40 | | | 1 | | | 1 | | | 2045 - 2046 |
| Other | 0 | | | 2 | | | 6,300 | | | 6,206 | | | 0 | | | 6,300 | | | 11,199 | | | 2021 - 2040 |
| Total credit derivatives | $ | 8 | | | 31 | | | 13,124 | | | 8,226 | | | 4,364 | | | 8,760 | | | 18,763 | | | |
| December 31, 2020 | | | | | | | | | | | | | | | |
| Credit default swaps on: | | | | | | | | | | | | | | | |
| Corporate bonds | $ | 7 | | | 2 | | | 3,767 | | | 971 | | | 2,709 | | | 1,058 | | | 3,012 | | | 2021 - 2029 |
| Structured products | 0 | | | 5 | | | 20 | | | 20 | | | 19 | | | 1 | | | 84 | | | 2034 - 2047 |
| Credit protection on: | | | | | | | | | | | | | | | |
| Default swap index | 0 | | | 0 | | | 1,582 | | | 731 | | | 559 | | | 1,023 | | | 3,925 | | | 2021 - 2030 |
| Commercial mortgage-backed securities index | 3 | | | 21 | | | 297 | | | 42 | | | 272 | | | 25 | | | 75 | | | 2047 - 2072 |
| Asset-backed securities index | 0 | | | 7 | | | 41 | | | 41 | | | 40 | | | 1 | | | 1 | | | 2045 - 2046 |
| Other | 0 | | | 4 | | | 6,378 | | | 6,262 | | | 0 | | | 6,378 | | | 11,621 | | | 2021 - 2040 |
| Total credit derivatives | $ | 10 | | | 39 | | | 12,085 | | | 8,067 | | | 3,599 | | | 8,486 | | | 18,718 | | | |
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| Notional amount |
| (in millions) | Protection sold | | Protection sold – non-investment grade |
| March 31, 2022 | | | |
| Credit default swaps | $ | 12,438 | | | 2,622 | |
| Risk participation swaps | 6,288 | | | 6,143 | |
| Total credit derivatives | 18,726 | | | 8,765 | |
| December 31, 2021 | | | |
| Credit default swaps | 8,033 | | | 1,982 | |
| Risk participation swaps | 6,756 | | | 6,012 | |
| Total credit derivatives | 14,789 | | | 7,994 | |
Protection sold represents the estimated maximum exposure to loss that would be incurred underif, upon an assumed hypothetical circumstance, whereevent of default, the value of our interests and any associated collateral declinesdeclined to zero, withoutand does not take into consideration any consideration of recovery value from the referenced obligation or offset from collateral held or 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 credit risk of performance to be highlow if the underlying assets under the credit derivative have an external rating that is below investment grade orgrade. If an internalexternal rating is not available, we classify the credit default grade thatderivative as non-investment grade.
Our maximum exposure to sold credit derivatives is equivalent thereto. We believe the net protection sold, which is representative of the net notional amount of protection soldmanaged through posted collateral and purchased credit derivatives with identical underlyings,or similar reference positions in combination with other protection purchased,order to achieve our desired credit risk profile. The credit risk management is more representativedesigned to provide an ability to recover a significant portion 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 protectionany amounts that would be paid under sold that was not purchased with an identical underlying of the protection sold.
credit derivatives.
Credit-Risk Contingent Features
Certain of our derivative contracts contain provisions whereby if the credit rating of our debt were to be downgraded by certain major credit rating agencies, the counterparty could demand additional collateral or require termination or replacement of derivative instruments in a net liability position. Table 14.8 illustrates our exposure to OTC bilateral derivative contracts with credit-risk contingent features, collateral we have posted, and the additional collateral we would be required to post if the credit rating of our debt was downgraded below investment grade.
Table 14.8: Credit-Risk Contingent Features
| | (in billions) | (in billions) | Jun 30,
2021 | Dec 31,
2020 | (in billions) | Mar 31,
2022 | Dec 31,
2021 |
| Net derivative liabilities with credit-risk contingent features | Net derivative liabilities with credit-risk contingent features | $ | 10.4 | | 10.5 | | Net derivative liabilities with credit-risk contingent features | $ | 11.6 | | 12.2 | |
| Collateral posted | Collateral posted | 9.4 | | 9.0 | | Collateral posted | 10.1 | | 11.0 | |
| Additional collateral to be posted upon a below investment grade credit rating (1) | Additional collateral to be posted upon a below investment grade credit rating (1) | 1.0 | | 1.5 | | Additional collateral to be posted upon a below investment grade credit rating (1) | 1.5 | | 1.2 | |
(1)Any credit rating below investment grade requires us to post the maximum amount of collateral.
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| 114 | Wells Fargo & Company | 125 |
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Note 15: Fair Values of Assets and Liabilities |
We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determinefulfill fair value disclosures.disclosure requirements. Assets and liabilities recorded at fair value on a recurring basis, such as derivatives, residential MSRs, and trading or AFS debt securities, are presented in Table 15.1 in this Note. Additionally, from time to time, we record fair value adjustments on a nonrecurring basis. These nonrecurring adjustments typically involve application of lower of cost or fair value (LOCOM) accounting, write-downs of individual assets or application of the measurement alternative for nonmarketable equity securities. Assets recorded at fair value on a nonrecurring basis are presented in Table 15.4 in this Note. We provide in Table 15.8 estimates of fair value for financial instruments that are not recorded at fair value, such as loans and debt liabilities carried at amortized cost.
See Note 1 (Summary of Significant Accounting Policies) in our 20202021 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, see Note 17 (Fair Values of Assets and Liabilities) in our 20202021 Form 10-K.
FAIR VALUE HIERARCHY We classify our assets and liabilities recorded at fair value as either Level 1, 2, or 3 in the fair value hierarchy. The highest priority (Level 1) is assigned to valuations based on unadjusted quoted prices in active markets and the lowest priority (Level 3) is assigned to valuations based on significant unobservable inputs. See Note 1 (Summary of Significant Accounting Policies) in our 20202021 Form 10-K for a detailed description of the fair value hierarchy.
In the determination of the classification of financial instruments in Level 2 or Level 3 of the fair value hierarchy, we consider all available information, including observable market data, indications of market liquidity and orderliness, and our understanding of the valuation techniques and significant inputs used. This determination is ultimately based upon the specific facts and circumstances of each instrument or instrument category and judgments are made regarding the significance of the unobservable inputs to the instruments’ fair value measurement in its entirety. If unobservable inputs are considered significant, the instrument is classified as Level 3.
We do not classify nonmarketable equity securities in the fair value hierarchy if we use the non-published net asset value (NAV) per share (or its equivalent) as a practical expedient to measure fair value. Marketable equity securities with published NAVs are classified in the fair value hierarchy.
| | | | | | | | |
126 | Wells Fargo & Company | 115 |
Note 15: Fair Values of Assets and Liabilities (continued)
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Table 15.1 presents the balances of assets and liabilities recorded at fair value on a recurring basis.
Table 15.1: Fair Value on a Recurring Basis
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| (in millions) | (in millions) | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | (in millions) | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
| Trading debt securities: | Trading debt securities: | | Trading debt securities: | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | $ | 29,497 | | | 2,207 | | | 0 | | | 31,704 | | | $ | 32,060 | | | 3,197 | | | 0 | | | 35,257 | | Securities of U.S. Treasury and federal agencies | $ | 29,706 | | | 3,317 | | | — | | | 33,023 | | | $ | 27,607 | | | 2,249 | | | — | | | 29,856 | |
| Collateralized loan obligations | Collateralized loan obligations | 0 | | | 469 | | | 158 | | | 627 | | | 0 | | | 534 | | | 148 | | | 682 | | Collateralized loan obligations | — | | | 683 | | | 179 | | | 862 | | | — | | | 655 | | | 211 | | | 866 | |
| Corporate debt securities | Corporate debt securities | 0 | | | 12,062 | | | 11 | | | 12,073 | | | 0 | | | 10,696 | | | 13 | | | 10,709 | | Corporate debt securities | — | | | 11,096 | | | 18 | | | 11,114 | | | — | | | 9,987 | | | 18 | | | 10,005 | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | 0 | | | 33,105 | | | 0 | | | 33,105 | | | 0 | | | 23,549 | | | 0 | | | 23,549 | | Federal agency mortgage-backed securities | — | | | 32,788 | | | — | | | 32,788 | | | — | | | 40,350 | | | — | | | 40,350 | |
| Non-agency mortgage-backed securities | Non-agency mortgage-backed securities | 0 | | | 1,275 | | | 22 | | | 1,297 | | | 0 | | | 1,039 | | | 12 | | | 1,051 | | Non-agency mortgage-backed securities | — | | | 1,518 | | | 4 | | | 1,522 | | | — | | | 1,531 | | | 11 | | | 1,542 | |
| Other debt securities | Other debt securities | 0 | | | 3,920 | | | 1 | | | 3,921 | | | 0 | | | 3,847 | | | 0 | | | 3,847 | | Other debt securities | — | | | 7,363 | | | — | | | 7,363 | | | — | | | 5,645 | | | 1 | | | 5,646 | |
| Total trading debt securities | Total trading debt securities | 29,497 | | | 53,038 | | | 192 | | | 82,727 | | | 32,060 | | | 42,862 | | | 173 | | | 75,095 | | Total trading debt securities | 29,706 | | | 56,765 | | | 201 | | | 86,672 | | | 27,607 | | | 60,417 | | | 241 | | | 88,265 | |
| Available-for-sale debt securities: | Available-for-sale debt securities: | | Available-for-sale debt securities: | |
| Securities of U.S. Treasury and federal agencies | Securities of U.S. Treasury and federal agencies | 35,905 | | | 0 | | | 0 | | | 35,905 | | | 22,159 | | | 0 | | | 0 | | | 22,159 | | Securities of U.S. Treasury and federal agencies | 46,433 | | | — | | | — | | | 46,433 | | | 39,661 | | | — | | | — | | | 39,661 | |
| Non-U.S. government securities | Non-U.S. government securities | 0 | | | 11,201 | | | 0 | | | 11,201 | | | 0 | | | 16,813 | | | 0 | | | 16,813 | | Non-U.S. government securities | — | | | 116 | | | — | | | 116 | | | — | | | 71 | | | — | | | 71 | |
| Securities of U.S. states and political subdivisions | Securities of U.S. states and political subdivisions | 0 | | | 19,377 | | | 122 | | | 19,499 | | | 0 | | | 19,182 | | | 224 | | | 19,406 | | Securities of U.S. states and political subdivisions | — | | | 16,354 | | | 132 | | | 16,486 | | | — | | | 16,832 | | | 85 | | | 16,917 | |
| Federal agency mortgage-backed securities | Federal agency mortgage-backed securities | 0 | | | 96,534 | | | 0 | | | 96,534 | | | 0 | | | 139,070 | | | 0 | | | 139,070 | | Federal agency mortgage-backed securities | — | | | 91,437 | | | — | | | 91,437 | | | — | | | 105,886 | | | — | | | 105,886 | |
| Non-agency mortgage-backed securities | Non-agency mortgage-backed securities | 0 | | | 4,347 | | | 31 | | | 4,378 | | | 0 | | | 3,697 | | | 32 | | | 3,729 | | Non-agency mortgage-backed securities | — | | | 4,597 | | | 11 | | | 4,608 | | | — | | | 4,522 | | | 10 | | | 4,532 | |
| Collateralized loan obligations | Collateralized loan obligations | 0 | | | 12,407 | | | 0 | | | 12,407 | | | 0 | | | 9,018 | | | 0 | | | 9,018 | | Collateralized loan obligations | — | | | 5,197 | | | — | | | 5,197 | | | — | | | 5,708 | | | — | | | 5,708 | |
| Other debt securities | Other debt securities | 37 | | | 7,284 | | | 2,652 | | | 9,973 | | | 38 | | | 7,421 | | | 2,738 | | | 10,197 | | Other debt securities | — | | | 3,964 | | | 195 | | | 4,159 | | | — | | | 4,378 | | | 91 | | | 4,469 | |
| Total available-for-sale debt securities | Total available-for-sale debt securities | 35,942 | | | 151,150 | | | 2,805 | | | 189,897 | | | 22,197 | | | 195,201 | | | 2,994 | | | 220,392 | | Total available-for-sale debt securities | 46,433 | | | 121,665 | | | 338 | | | 168,436 | | | 39,661 | | | 137,397 | | | 186 | | | 177,244 | |
| Loans held for sale | Loans held for sale | 0 | | | 17,825 | | | 1,069 | | | 18,894 | | | 0 | | | 17,572 | | | 1,234 | | | 18,806 | | Loans held for sale | — | | | 12,136 | | | 1,019 | | | 13,155 | | | — | | | 14,862 | | | 1,033 | | | 15,895 | |
| Mortgage servicing rights (residential) | Mortgage servicing rights (residential) | 0 | | | 0 | | | 6,717 | | | 6,717 | | | 0 | | | 0 | | | 6,125 | | | 6,125 | | Mortgage servicing rights (residential) | — | | | — | | | 8,511 | | | 8,511 | | | — | | | — | | | 6,920 | | | 6,920 | |
| Derivative assets (gross): | Derivative assets (gross): | | Derivative assets (gross): | |
| Interest rate contracts | Interest rate contracts | 20 | | | 26,370 | | | 357 | | | 26,747 | | | 11 | | | 35,590 | | | 462 | | | 36,063 | | Interest rate contracts | 241 | | | 30,251 | | | 46 | | | 30,538 | | | 52 | | | 22,296 | | | 190 | | | 22,538 | |
| Commodity contracts | Commodity contracts | 0 | | | 7,139 | | | 95 | | | 7,234 | | | 0 | | | 1,997 | | | 39 | | | 2,036 | | Commodity contracts | — | | | 13,531 | | | 316 | | | 13,847 | | | — | | | 5,902 | | | 63 | | | 5,965 | |
| Equity contracts | Equity contracts | 4,620 | | | 12,763 | | | 1,896 | | | 19,279 | | | 4,888 | | | 12,384 | | | 1,613 | | | 18,885 | | Equity contracts | 3,752 | | | 8,555 | | | 605 | | | 12,912 | | | 6,402 | | | 9,350 | | | 2,019 | | | 17,771 | |
| Foreign exchange contracts | Foreign exchange contracts | 21 | | | 7,664 | | | 7 | | | 7,692 | | | 19 | | | 8,573 | | | 11 | | | 8,603 | | Foreign exchange contracts | 33 | | | 8,912 | | | 16 | | | 8,961 | | | 8 | | | 6,573 | | | 7 | | | 6,588 | |
| Credit contracts | Credit contracts | 0 | | | 36 | | | 39 | | | 75 | | | 0 | | | 45 | | | 50 | | | 95 | | Credit contracts | — | | | 32 | | | 18 | | | 50 | | | — | | | 32 | | | 14 | | | 46 | |
| | Total derivative assets (gross) | Total derivative assets (gross) | 4,661 | | | 53,972 | | | 2,394 | | | 61,027 | | | 4,918 | | | 58,589 | | | 2,175 | | | 65,682 | | Total derivative assets (gross) | 4,026 | | | 61,281 | | | 1,001 | | | 66,308 | | | 6,462 | | | 44,153 | | | 2,293 | | | 52,908 | |
| Equity securities: | Equity securities: | | Equity securities: | |
| Marketable | Marketable | 25,138 | | | 186 | | | 1 | | | 25,325 | | | 23,995 | | | 596 | | | 5 | | | 24,596 | | Marketable | 25,526 | | | 236 | | | 4 | | | 25,766 | | | 29,968 | | | 82 | | | 4 | | | 30,054 | |
| Nonmarketable (1) | Nonmarketable (1) | 0 | | | 199 | | | 9,659 | | | 9,858 | | | 10 | | | 21 | | | 9,228 | | | 9,259 | | Nonmarketable (1) | — | | | 10,487 | | | 22 | | | 10,509 | | | — | | | 57 | | | 8,906 | | | 8,963 | |
| Total equity securities | Total equity securities | 25,138 | | | 385 | | | 9,660 | | | 35,183 | | | 24,005 | | | 617 | | | 9,233 | | | 33,855 | | Total equity securities | 25,526 | | | 10,723 | | | 26 | | | 36,275 | | | 29,968 | | | 139 | | | 8,910 | | | 39,017 | |
| Total assets prior to derivative netting | Total assets prior to derivative netting | $ | 95,238 | | | 276,370 | | | 22,837 | | | 394,445 | | | $ | 83,180 | | | 314,841 | | | 21,934 | | | 419,955 | | Total assets prior to derivative netting | $ | 105,691 | | | 262,570 | | | 11,096 | | | 379,357 | | | $ | 103,698 | | | 256,968 | | | 19,583 | | | 380,249 | |
| Derivative netting (2) | Derivative netting (2) | | (35,612) | | | (39,836) | | Derivative netting (2) | | (38,943) | | | (31,430) | |
| Total assets after derivative netting | Total assets after derivative netting | | 358,833 | | | 380,119 | | Total assets after derivative netting | | 340,414 | | | 348,819 | |
| Derivative liabilities (gross): | Derivative liabilities (gross): | | Derivative liabilities (gross): | |
| Interest rate contracts | Interest rate contracts | $ | (14) | | | (19,418) | | | (43) | | | (19,475) | | | $ | (27) | | | (26,259) | | | (16) | | | (26,302) | | Interest rate contracts | $ | (131) | | | (27,356) | | | (222) | | | (27,709) | | | $ | (28) | | | (17,712) | | | (63) | | | (17,803) | |
| Commodity contracts | Commodity contracts | 0 | | | (2,216) | | | (93) | | | (2,309) | | | 0 | | | (1,503) | | | (40) | | | (1,543) | | Commodity contracts | — | | | (5,543) | | | (308) | | | (5,851) | | | — | | | (2,351) | | | (66) | | | (2,417) | |
| Equity contracts | Equity contracts | (4,108) | | | (15,089) | | | (2,321) | | | (21,518) | | | (4,860) | | | (15,219) | | | (1,927) | | | (22,006) | | Equity contracts | (2,620) | | | (8,862) | | | (2,030) | | | (13,512) | | | (5,820) | | | (10,753) | | | (2,448) | | | (19,021) | |
| Foreign exchange contracts | Foreign exchange contracts | (14) | | | (6,280) | | | (7) | | | (6,301) | | | (10) | | | (8,134) | | | (12) | | | (8,156) | | Foreign exchange contracts | (30) | | | (9,051) | | | (13) | | | (9,094) | | | (8) | | | (6,654) | | | (10) | | | (6,672) | |
| Credit contracts | Credit contracts | 0 | | | (44) | | | (6) | | | (50) | | | 0 | | | (49) | | | (9) | | | (58) | | Credit contracts | — | | | (36) | | | (2) | | | (38) | | | — | | | (40) | | | (3) | | | (43) | |
| | Total derivative liabilities (gross) | Total derivative liabilities (gross) | (4,136) | | | (43,047) | | | (2,470) | | | (49,653) | | | (4,897) | | | (51,164) | | | (2,004) | | | (58,065) | | Total derivative liabilities (gross) | (2,781) | | | (50,848) | | | (2,575) | | | (56,204) | | | (5,856) | | | (37,510) | | | (2,590) | | | (45,956) | |
| | Short-sale trading liabilities | (15,579) | | | (6,464) | | | 0 | | | (22,043) | | | (15,292) | | | (7,149) | | | 0 | | | (22,441) | | |
| Short-sale and other trading liabilities | | Short-sale and other trading liabilities | (20,180) | | | (6,202) | | | — | | | (26,382) | | | (15,436) | | | (5,249) | | | — | | | (20,685) | |
| Total liabilities prior to derivative netting | Total liabilities prior to derivative netting | $ | (19,715) | | | (49,511) | | | (2,470) | | | (71,696) | | | $ | (20,189) | | | (58,313) | | | (2,004) | | | (80,506) | | Total liabilities prior to derivative netting | $ | (22,961) | | | (57,050) | | | (2,575) | | | (82,586) | | | $ | (21,292) | | | (42,759) | | | (2,590) | | | (66,641) | |
| Derivative netting (2) | Derivative netting (2) | | 35,102 | | | 41,556 | | Derivative netting (2) | | 40,705 | | | 36,532 | |
| Total liabilities after derivative netting | Total liabilities after derivative netting | | (36,594) | | | (38,950) | | Total liabilities after derivative netting | | (41,881) | | | (30,109) | |
(1)Excludes $148$87 million and $154$81 million of nonmarketable equity securities as of June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively, that are measured at fair value using non-published NAV per share (or its equivalent) as a practical expedient that are not classified in the fair value hierarchy.
(2)Represents balance sheet netting of derivative asset and liability balances, related cash collateral and portfolio level counterparty valuation adjustments. See Note 14 (Derivatives) for additional information.
| | | | | | | | |
| 116 | Wells Fargo & Company | 127 |
Note 15: Fair Values of Assets and Liabilities (continued)
Level 3 Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Table 15.2 presents the changes in Level 3 assets and liabilities measured at fair value on a recurring basis.
Table 15.2: Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis
| | | Net unrealized gains (losses)
related to assets and liabilities held at period end | | | Net unrealized gains (losses)
related to assets and liabilities held at period end | |
| (in millions) | (in millions) | Balance,
beginning
of period | | Net gains/(losses) (1) | | Purchases (2) | | Sales | | Settlements | | Transfers
into
Level 3 (3) | | Transfers
out of
Level 3 (4) | | Balance,
end of
period | | (5) | (in millions) | Balance,
beginning
of period | | Net gains/(losses) (1) | | Purchases (2) | | Sales | | Settlements | | Transfers
into
Level 3 (3) | | Transfers
out of
Level 3 (4) | | Balance,
end of
period | | (5) |
| Quarter ended June 30, 2021 | | | |
| | Quarter ended March 31, 2022 | | Quarter ended March 31, 2022 | | |
| Trading debt securities | Trading debt securities | $ | 192 | | | 4 | | | 123 | | | (129) | | | (5) | | | 15 | | | (8) | | | 192 | | | 1 | | (6) | Trading debt securities | $ | 241 | | | (15) | | | 47 | | | (14) | | | (35) | | | 5 | | | (28) | | | 201 | | | (17) | | (6) |
| Available-for-sale debt securities | Available-for-sale debt securities | 3,142 | | | 28 | | | 9 | | | 0 | | | (120) | | | 11 | | | (265) | | | 2,805 | | | 41 | | (6) | Available-for-sale debt securities | 186 | | | (21) | | | 52 | | | — | | | (5) | | | 126 | | | — | | | 338 | | | (21) | | (6) |
| Loans held for sale | Loans held for sale | 1,166 | | | 15 | | | 131 | | | (231) | | | (107) | | | 97 | | | (2) | | | 1,069 | | | 9 | | (7) | Loans held for sale | 1,033 | | | (57) | | | 63 | | | (43) | | | (73) | | | 102 | | | (6) | | | 1,019 | | | (57) | | (7) |
| Mortgage servicing rights (residential) (8) | Mortgage servicing rights (residential) (8) | 7,536 | | | (1,297) | | | 485 | | | (7) | | | 0 | | | 0 | | | 0 | | | 6,717 | | | (809) | | (7) | Mortgage servicing rights (residential) (8) | 6,920 | | | 1,248 | | | 342 | | | 1 | | | — | | | — | | | — | | | 8,511 | | | 1,605 | | (7) |
| Net derivative assets and liabilities: | Net derivative assets and liabilities: | | Net derivative assets and liabilities: | |
| Interest rate contracts | Interest rate contracts | 1 | | | 458 | | | 0 | | | 0 | | | (145) | | | 0 | | | 0 | | | 314 | | | 167 | | | Interest rate contracts | 127 | | | (578) | | | — | | | — | | | 275 | | | — | | | — | | | (176) | | | (259) | | |
| Equity contracts | Equity contracts | (429) | | | (158) | | | 0 | | | 0 | | | 120 | | | (10) | | | 52 | | | (425) | | | (130) | | | Equity contracts | (429) | | | (213) | | | — | | | — | | | 589 | | | (80) | | | (1,292) | | | (1,425) | | | 269 | | |
| Other derivative contracts | Other derivative contracts | 56 | | | (67) | | | 2 | | | (1) | | | 42 | | | 0 | | | 3 | | | 35 | | | (16) | | | Other derivative contracts | 5 | | | (22) | | | — | | | — | | | 44 | | | — | | | — | | | 27 | | | 18 | | |
| Total derivative contracts | Total derivative contracts | (372) | | | 233 | | | 2 | | | (1) | | | 17 | | | (10) | | | 55 | | | (76) | | | 21 | | (9) | Total derivative contracts | (297) | | | (813) | | | — | | | — | | | 908 | | | (80) | | | (1,292) | | | (1,574) | | | 28 | | (9) |
| Equity securities | Equity securities | 8,865 | | | 794 | | | 0 | | | 0 | | | 0 | | | 1 | | | 0 | | | 9,660 | | | 794 | | (6) | Equity securities | 8,910 | | | (1) | | | — | | | — | | | — | | | 2 | | | (8,885) | | | 26 | | | (2) | | (6) |
| Quarter ended June 30, 2020 | | | |
| Trading debt securities | $ | 389 | | | 33 | | | 186 | | | (346) | | | (5) | | | 15 | | | (49) | | | 223 | | | 14 | | (6) | |
| Available-for-sale debt securities | 2,412 | | | 21 | | | 5 | | | (28) | | | (100) | | | 85 | | | (297) | | | 2,098 | | | 8 | | (6) | |
| Loans held for sale | 3,176 | | | (41) | | | 94 | | | (288) | | | (64) | | | 80 | | | (2,199) | | | 758 | | | (32) | | (7) | |
| Mortgage servicing rights (residential) (8) | 8,126 | | | (1,768) | | | 462 | | | (1) | | | 0 | | | 0 | | | 0 | | | 6,819 | | | (1,131) | | (7) | |
| Net derivative assets and liabilities: | | |
| Interest rate contracts | 685 | | | 460 | | | 0 | | | 0 | | | (622) | | | 0 | | | 0 | | | 523 | | | 291 | | | |
| Equity contracts | 217 | | | (277) | | | 0 | | | 0 | | | 79 | | | 0 | | | 1 | | | 20 | | | (387) | | | |
| Other derivative contracts | (3) | | | 7 | | | 2 | | | (1) | | | 12 | | | 18 | | | 0 | | | 35 | | | 47 | | | |
| Total derivative contracts | 899 | | | 190 | | | 2 | | | (1) | | | (531) | | | 18 | | | 1 | | | 578 | | | (49) | | (9) | |
| Equity securities | 6,754 | | | 1,414 | | | 0 | | | 0 | | | 0 | | | 0 | | | (3) | | | 8,165 | | | 1,414 | | (6) | |
| Six months ended June 30, 2021 | | | | | |
| Trading debt securities | $ | 173 | | | 20 | | | 292 | | | (302) | | | (5) | | | 22 | | | (8) | | | 192 | | | 5 | | (6) | |
| Available-for-sale debt securities | 2,994 | | | 21 | | | 24 | | | 0 | | | (188) | | | 253 | | | (299) | | | 2,805 | | | 16 | | (6) | |
| Loans held for sale | 1,234 | | | (4) | | | 260 | | | (379) | | | (217) | | | 178 | | | (3) | | | 1,069 | | | (5) | | (7) | |
| Mortgage servicing rights (residential) (8) | 6,125 | | | (291) | | | 891 | | | (8) | | | 0 | | | 0 | | | 0 | | | 6,717 | | | 782 | | (7) | |
| Net derivative assets and liabilities: | | |
| Interest rate contracts | 446 | | | (83) | | | 0 | | | 0 | | | (44) | | | 0 | | | (5) | | | 314 | | | 109 | | | |
| Equity contracts | (314) | | | (326) | | | 0 | | | 0 | | | 160 | | | (37) | | | 92 | | | (425) | | | (236) | | | |
| Other derivative contracts | 39 | | | (40) | | | 2 | | | (1) | | | 32 | | | 0 | | | 3 | | | 35 | | | 4 | | | |
| Total derivative contracts | 171 | | | (449) | | | 2 | | | (1) | | | 148 | | | (37) | | | 90 | | | (76) | | | (123) | | (9) | |
| Equity securities | 9,233 | | | 429 | | | 0 | | | (5) | | | 0 | | | 3 | | | 0 | | | 9,660 | | | 429 | | (6) | |
| Six months ended June 30, 2020 | | | |
| Quarter ended March 31, 2021 | | Quarter ended March 31, 2021 | | |
| Trading debt securities | Trading debt securities | $ | 223 | | | (85) | | | 476 | | | (439) | | | (15) | | | 115 | | | (52) | | | 223 | | | (69) | | (6) | Trading debt securities | $ | 173 | | | 16 | | | 169 | | | (173) | | | — | | | 7 | | | — | | | 192 | | | 8 | | (6) |
| Available-for-sale debt securities | Available-for-sale debt securities | 1,565 | | | (121) | | | 31 | | | (33) | | | (148) | | | 1,172 | | | (368) | | | 2,098 | | | (99) | | (6) | Available-for-sale debt securities | 2,994 | | | (7) | | | 15 | | | — | | | (68) | | | 242 | | | (34) | | | 3,142 | | | (27) | | (6) |
| Loans held for sale | Loans held for sale | 1,214 | | | (104) | | | 960 | | | (358) | | | (162) | | | 1,409 | | | (2,201) | | | 758 | | | (34) | | (7) | Loans held for sale | 1,234 | | | (19) | | | 129 | | | (148) | | | (110) | | | 81 | | | (1) | | | 1,166 | | | (17) | | (7) |
| Mortgage servicing rights (residential) (8) | Mortgage servicing rights (residential) (8) | 11,517 | | | (5,589) | | | 923 | | | (33) | | | 1 | | | 0 | | | 0 | | | 6,819 | | | (4,388) | | (7) | Mortgage servicing rights (residential) (8) | 6,125 | | | 1,006 | | | 406 | | | (1) | | | — | | | — | | | — | | | 7,536 | | | 1,591 | | (7) |
| Net derivative assets and liabilities: | Net derivative assets and liabilities: | | Net derivative assets and liabilities: | |
| Interest rate contracts | Interest rate contracts | 214 | | | 1,204 | | | 0 | | | 0 | | | (895) | | | 0 | | | 0 | | | 523 | | | 374 | | | Interest rate contracts | 446 | | | (541) | | | — | | | — | | | 101 | | | — | | | (5) | | | 1 | | | (225) | | |
| Equity contracts | Equity contracts | (269) | | | 153 | | | 0 | | | 0 | | | 152 | | | (10) | | | (6) | | | 20 | | | 48 | | | Equity contracts | (314) | | | (168) | | | — | | | — | | | 40 | | | (27) | | | 40 | | | (429) | | | (177) | | |
| Other derivative contracts | Other derivative contracts | (5) | | | (48) | | | 8 | | | (4) | | | 72 | | | 12 | | | 0 | | | 35 | | | 33 | | | Other derivative contracts | 39 | | | 27 | | | — | | | — | | | (10) | | | — | | | — | | | 56 | | | 16 | | |
| Total derivative contracts | Total derivative contracts | (60) | | | 1,309 | | | 8 | | | (4) | | | (671) | | | 2 | | | (6) | | | 578 | | | 455 | | (9) | Total derivative contracts | 171 | | | (682) | | | — | | | — | | | 131 | | | (27) | | | 35 | | | (372) | | | (386) | | (9) |
| Equity securities | Equity securities | 7,850 | | | 313 | | | 0 | | | 0 | | | 0 | | | 7 | | | (5) | | | 8,165 | | | 310 | | (6) | Equity securities | 9,233 | | | (365) | | | — | | | (5) | | | — | | | 2 | | | — | | | 8,865 | | | (365) | | (6) |
|
(1)Includes net gains (losses) included in both net income and other comprehensive income. All amounts represent net gains (losses) included in net income except for $22$(21) million and $36$14 million included in other comprehensive income from available-for-saleAFS debt securities in the secondfor first quarter 2022 and first half of 2021, respectively. The corresponding amounts for the second quarter and first half of 2020 were $16 million and $(75) million, respectively.
(2)Includes originations of mortgage servicing rights and loans held for sale.
(3)All assets and liabilities transferred into Level 3 were previously classified within Level 2.
(4)All assets and liabilities transferred out of Level 3 are classified as Level 2. During first quarter 2022, we transferred $8.9 billion of non-marketable equity securities and $1.4 billion of related economic hedging derivative assets (equity contracts) out of Level 3 due to our election to measure fair value of these instruments as a portfolio. Under this election, the unit of valuation is the portfolio-level, rather than each individual instrument. The unobservable inputs previously significant to the valuation of the instruments individually are no longer significant, as those unobservable inputs offset under the portfolio election.
(5)Includes net unrealized gains (losses) related to assets and liabilities held at period end included in both net income and other comprehensive income. All amounts represent net unrealized gains (losses) included in net income except for $38$(21) million and $31$0 million included in other comprehensive income from available-for-saleAFS debt securities in the secondfor first quarter 2022 and first half of 2021, , respectively. The corresponding amounts for the second quarter and first half of 2020 were $13 million and $(40) million, respectively.
(6)Included in net gains onfrom trading and securities in the consolidated statement of income.
(7)Included in mortgage banking income in the consolidated statement of income.
(8)For additional information on the changes in mortgage servicing rights, see Note 9 (Mortgage Banking Activities).
(9)Included in mortgage banking income, net gains onfrom trading and securities, and other noninterest income in the consolidated statement of income.
| | | | | | | | |
128 | Wells Fargo & Company | 117 |
Note 15: Fair Values of Assets and Liabilities (continued)
Table 15.3 provides quantitative information about the valuation techniques and significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value on a recurring basis.
The significant unobservable inputs for Level 3 assets inherent in the fair values obtained from third-party vendors are not included in the table, as the specific inputs applied are not
provided by the vendor (for additional information on vendor-developed valuations, see Note 17 (Fair Values of Assets and Liabilities) in our 20202021 Form 10-K).
Weighted averages of inputs are calculated using outstanding unpaid principal balance for cash instruments, such as loans and securities, and notional amounts for derivative instruments.
Table 15.3: Valuation Techniques – Recurring Basis
| | ($ in millions, except cost to service amounts) | ($ in millions, except cost to service amounts) | Fair Value Level 3 | | Valuation Technique | | Significant
Unobservable Input | | Range of Inputs | | Weighted
Average | ($ in millions, except cost to service amounts) | Fair Value Level 3 | | Valuation Technique | | Significant
Unobservable Input | | Range of Inputs | | Weighted
Average |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Trading and available-for-sale debt securities | | Trading and available-for-sale debt securities | $ | 182 | | | Discounted cash flow | | Discount rate | | 1.1 | | - | 12.5 | | % | | 4.8 | |
| | | 12 | | | Vendor priced | |
| | | 240 | | | Market comparable pricing | | Comparability adjustment | | (29.2) | | - | 13.7 | | | (5.9) | |
| | | 105 | | | Market comparable pricing | | Multiples | | 5.6x | - | 5.6x | | 5.6x |
| Loans held for sale | | Loans held for sale | 1,019 | | | Discounted cash flow | | Default rate | | 0.0 | | - | 39.9 | | % | | 1.2 | |
| | | Discount rate | | 0.7 | | - | 13.6 | | | 6.2 | |
| | | Loss severity | | 0.0 | | - | 46.1 | | | 14.8 | |
| | | Prepayment rate | | 6.7 | | - | 17.2 | | | 12.4 | |
| Mortgage servicing rights (residential) | | Mortgage servicing rights (residential) | 8,511 | | | Discounted cash flow | | Cost to service per loan (1) | | $ | 52 | | - | 555 | | | 102 | |
| | | Discount rate | | 6.8 | | - | 9.9 | | % | | 7.4 | |
| | | Prepayment rate (2) | | 10.0 | | - | 17.0 | | | 11.1 | |
| Net derivative assets and (liabilities): | | Net derivative assets and (liabilities): | | |
| Interest rate contracts | | Interest rate contracts | 9 | | | Discounted cash flow | | Default rate | | 0.0 | | - | 5.0 | | | 2.2 | |
| | | Loss severity | | 50.0 | | - | 50.0 | | | 50.0 | |
| | | Prepayment rate | | 2.8 | | - | 22.0 | | | 18.8 | |
Interest rate contracts: derivative loan commitments | | Interest rate contracts: derivative loan commitments | (185) | | | Discounted cash flow | | Fall-out factor | | 1.0 | | - | 99.0 | | | 15.1 | |
| | | Initial-value servicing | | (69.0) | | - | 168.0 | | bps | | 33.4 | |
| Equity contracts | | Equity contracts | (1,070) | | | Discounted cash flow | | Conversion factor | | (10.1) | | - | 0.0 | | % | | (9.6) | |
| | | Weighted average life | | 0.3 | - | 1.8 | yrs | | 0.9 |
| | | (355) | | | Option model | | Correlation factor | | (77.0) | | - | 99.0 | | % | | 56.5 | |
| | | Volatility factor | | 6.5 | | - | 83.5 | | | 31.1 | |
| | Insignificant Level 3 assets, net of liabilities | | Insignificant Level 3 assets, net of liabilities | 53 | | | |
| Total Level 3 assets, net of liabilities | | Total Level 3 assets, net of liabilities | $ | 8,521 | | (3) | |
| December 31, 2021 | | December 31, 2021 | |
| Trading and available-for-sale debt securities | Trading and available-for-sale debt securities | $ | 1,926 | | | Discounted cash flow | | Discount rate | | 0.4 | | - | 12.4 | | % | | 4.4 | | Trading and available-for-sale debt securities | $ | 136 | | | Discounted cash flow | | Discount rate | | 0.4 | | - | 12.5 | | % | | 5.5 | |
| | 747 | | | Vendor priced | | | 11 | | | Vendor priced | |
| | 193 | | | Market comparable pricing | | Comparability adjustment | | (29.1) | | - | 9.5 | | | (6.6) | | | 280 | | | Market comparable pricing | | Comparability adjustment | | (30.2) | | - | 19.2 | | | (4.6) | |
| | 131 | | | Market comparable pricing | | Multiples | | 0.4x | - | 12.1x | | 6.5x | |
| Loans held for sale | Loans held for sale | 1,069 | | | Discounted cash flow | | Default rate | | 0.0 | | - | 35.7 | | % | | 1.5 | | Loans held for sale | 1,033 | | | Discounted cash flow | | Default rate | | 0.0 | | - | 29.2 | | % | | 1.2 | |
| | Discount rate | | 1.1 | | - | 12.5 | | | 4.6 | | | Discount rate | | 1.6 | | - | 11.9 | | | 5.1 | |
| | Loss severity | | 0.0 | | - | 32.9 | | | 15.8 | | | Loss severity | | 0.0 | | - | 46.9 | | | 15.4 | |
| | Prepayment rate | | 6.9 | | - | 17.6 | | | 12.9 | | | Prepayment rate | | 7.5 | | - | 18.2 | | | 13.1 | |
| Mortgage servicing rights (residential) | Mortgage servicing rights (residential) | 6,717 | | | Discounted cash flow | | Cost to service per loan (1) | | $ | 57 | | - | 642 | | | 111 | | Mortgage servicing rights (residential) | 6,920 | | | Discounted cash flow | | Cost to service per loan (1) | | $ | 54 | | - | 585 | | | 106 | |
| | Discount rate | | 4.6 | | - | 8.3 | | % | | 5.4 | | | Discount rate | | 5.8 | | - | 8.8 | | % | | 6.4 | |
| | Prepayment rate (2) | | 14.2 | | - | 21.4 | | | 17.2 | | | Prepayment rate (2) | | 12.5 | | - | 21.1 | | | 14.7 | |
| Net derivative assets and (liabilities): | Net derivative assets and (liabilities): | | | Net derivative assets and (liabilities): | | |
| Interest rate contracts | Interest rate contracts | 139 | | | Discounted cash flow | | Default rate | | 0.0 | | - | 6.0 | | | 1.9 | | Interest rate contracts | 87 | | | Discounted cash flow | | Default rate | | 0.0 | | - | 5.0 | | | 2.1 | |
| | Loss severity | | 50.0 | | - | 50.0 | | | 50.0 | | | Loss severity | | 50.0 | | - | 50.0 | | | 50.0 | |
| | Prepayment rate | | 2.8 | | - | 22.0 | | | 18.5 | | | Prepayment rate | | 2.8 | | - | 22.0 | | | 18.7 | |
Interest rate contracts: derivative loan commitments | Interest rate contracts: derivative loan commitments | 175 | | | Discounted cash flow | | Fall-out factor | | 1.0 | | - | 99.0 | | | 20.2 | | Interest rate contracts: derivative loan commitments | 40 | | | Discounted cash flow | | Fall-out factor | | 1.0 | | - | 99.0 | | | 16.8 | |
| | Initial-value servicing | | (65.9) | | - | 151.0 | | bps | | 89.9 | | | Initial-value servicing | | (74.8) | | - | 146.0 | | bps | | 50.9 | |
| Equity contracts | Equity contracts | 239 | | | Discounted cash flow | | Conversion factor | | (9.3) | | - | 0.0 | | % | | (9.0) | | Equity contracts | 253 | | | Discounted cash flow | | Conversion factor | | (10.2) | | - | 0.0 | | % | | (9.7) | |
| | Weighted average life | | 0.0 | - | 2.5 | yrs | | 1.4 | | Weighted average life | | 0.5 | - | 2.0 | yrs | | 1.1 |
| | (664) | | | Option model | | Correlation factor | | (77.0) | | - | 99.0 | | % | | 17.5 | | | (682) | | | Option model | | Correlation factor | | (77.0) | | - | 99.0 | | % | | 23.2 | |
| | Volatility factor | | 6.5 | | - | 78.8 | | | 21.8 | | | Volatility factor | | 6.5 | | - | 72.0 | | | 29.1 | |
| Nonmarketable equity securities | Nonmarketable equity securities | 9,659 | | | Market comparable pricing | | Comparability adjustment | | (19.3) | | - | (5.5) | | | (15.6) | | Nonmarketable equity securities | 8,906 | | | Market comparable pricing | | Comparability adjustment | | (21.6) | | - | (7.7) | | | (15.5) | |
| | Insignificant Level 3 assets, net of liabilities | Insignificant Level 3 assets, net of liabilities | 36 | | | Insignificant Level 3 assets, net of liabilities | 9 | | | |
| Total Level 3 assets, net of liabilities | Total Level 3 assets, net of liabilities | $ | 20,367 | | (3) | | Total Level 3 assets, net of liabilities | $ | 16,993 | | (3) | |
| December 31, 2020 | | |
| Trading and available-for-sale debt securities | $ | 2,126 | | | Discounted cash flow | | Discount rate | | 0.4 | | - | 14.7 | | % | | 3.6 | | |
| 759 | | | Vendor priced | | |
| 173 | | | Market comparable pricing | | Comparability adjustment | | (39.8) | | - | 0.3 | | | (8.4) | | |
| 109 | | | Market comparable pricing | | Multiples | | 7.2x | - | 12.1x | | 8.0x | |
| Loans held for sale | 1,234 | | | Discounted cash flow | | Default rate | | 0.0 | | - | 31.6 | | % | | 1.7 | | |
| Discount rate | | 1.3 | | - | 12.0 | | | 4.5 | | |
| Loss severity | | 0.0 | | - | 32.3 | | | 18.4 | | |
| Prepayment rate | | 8.3 | | - | 23.6 | | | 15.1 | | |
| Mortgage servicing rights (residential) | 6,125 | | | Discounted cash flow | | Cost to service per loan (1) | | $ | 63 | | - | 712 | | | 130 | | |
| Discount rate | | 4.9 | | - | 8.3 | | % | | 5.8 | | |
| Prepayment rate (2) | | 14.3 | | - | 22.8 | | | 19.9 | | |
| Net derivative assets and (liabilities): | | | |
| Interest rate contracts | 206 | | | Discounted cash flow | | Default rate | | 0.0 | | - | 6.0 | | | 1.7 | | |
| Loss severity | | 50.0 | | - | 50.0 | | | 50.0 | | |
| Prepayment rate | | 2.8 | | - | 22.0 | | | 18.2 | | |
Interest rate contracts: derivative loan
commitments | 240 | | | Discounted cash flow | | Fall-out factor | | 1.0 | | - | 99.0 | | | 28.8 | | |
| Initial-value servicing | | (51.6) | | - | 268.0 | | bps | | 65.5 | | |
| Equity contracts | 220 | | | Discounted cash flow | | Conversion factor | | (8.6) | | - | 0.0 | | % | | (8.2) | | |
| Weighted average life | | 0.5 | - | 2.0 | yrs | | 1.0 | |
| (534) | | | Option model | | Correlation factor | | (77.0) | | - | 99.0 | | % | | 24.8 | | |
| Volatility factor | | 6.5 | | - | 96.6 | | | 26.4 | | |
| Nonmarketable equity securities | 9,228 | | | Market comparable pricing | | Comparability adjustment | | (20.3) | | - | (3.2) | | | (13.8) | | |
| | Insignificant Level 3 assets, net of liabilities | 44 | | | |
| Total Level 3 assets, net of liabilities | $ | 19,930 | | (3) | | |
(1)The high end of the range of inputs is for servicing modified loans. For non-modified loans the range is $57$52 - $239$196 at June 30, 2021,March 31, 2022, and $63$54 - $252$199 at December 31, 2020.2021.
(2)Includes a blend of prepayment speeds and expected defaults. Prepayment speeds are influenced by mortgage interest rates as well as our estimation of drivers of borrower behavior.
(3)Consists of total Level 3 assets of $22.8$11.1 billion and $21.9$19.6 billion and total Level 3 liabilities of $2.5$2.6 billion and $2.0$2.6 billion, before netting of derivative balances, at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively.
Note 15: Fair Values of Assets and Liabilities (continued)
For additional information on the valuation techniques and significant unobservable inputs used in the valuation of our Level 3 assets and liabilities, including how changes in these inputs affect fair value estimates, see Note 17 (Fair Values of Assets and Liabilities) in our 20202021 Form 10-K.10-K).
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of LOCOM accounting, write-downs of individual
assets, or application of the measurement alternative for nonmarketable equity securities.
Table 15.4 provides the fair value hierarchy and fair value at the date of the nonrecurring fair value adjustment for all assets that were still held as of June 30, 2021,March 31, 2022 and December 31, 2020,2021, and for which a nonrecurring fair value adjustment was recorded during the six monthsquarter ended June 30, 2021,March 31, 2022, and year ended December 31, 2020.
Table 15.5 presents the increase (decrease) in value of certain assets held at the end of the respective reporting periods presented for which a nonrecurring fair value adjustment was recognized during the periods presented. 2021.
Table 15.4: Fair Value on a Nonrecurring Basis
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| (in millions) | (in millions) | Level 2 | | Level 3 | | Total | | Level 2 | | Level 3 | | Total | (in millions) | Level 2 | | Level 3 | | Total | | Level 2 | | Level 3 | | Total |
| Loans held for sale (1) | Loans held for sale (1) | 2,956 | | | 1,439 | | | 4,395 | | | 2,672 | | | 2,945 | | | 5,617 | | Loans held for sale (1) | $ | 3,125 | | | 1,422 | | | 4,547 | | | 3,911 | | | 1,407 | | | 5,318 | |
| Loans: | Loans: | | Loans: | |
| Commercial | Commercial | 432 | | | 0 | | | 432 | | | 1,385 | | | 0 | | | 1,385 | | Commercial | 29 | | | — | | | 29 | | | 476 | | | — | | | 476 | |
| Consumer | Consumer | 221 | | | 0 | | | 221 | | | 395 | | | 0 | | | 395 | | Consumer | 392 | | | — | | | 392 | | | 380 | | | — | | | 380 | |
| Total loans | Total loans | 653 | | | 0 | | | 653 | | | 1,780 | | | 0 | | | 1,780 | | Total loans | 421 | | | — | | | 421 | | | 856 | | | — | | | 856 | |
| Mortgage servicing rights (commercial) | Mortgage servicing rights (commercial) | 0 | | | 567 | | | 567 | | | 0 | | | 510 | | | 510 | | Mortgage servicing rights (commercial) | — | | | 75 | | | 75 | | | — | | | 567 | | | 567 | |
| Nonmarketable equity securities | Nonmarketable equity securities | 3,882 | | | 85 | | | 3,967 | | | 2,397 | | | 790 | | | 3,187 | | Nonmarketable equity securities | 1,275 | | | 1,048 | | | 2,323 | | | 6,262 | | | 765 | | | 7,027 | |
| Other assets | Other assets | 976 | | | 157 | | | 1,133 | | | 1,350 | | | 428 | | | 1,778 | | Other assets | 1,746 | | | 102 | | | 1,848 | | | 1,373 | | | 175 | | | 1,548 | |
| Total assets at fair value on a nonrecurring basis | Total assets at fair value on a nonrecurring basis | $ | 8,467 | | | 2,248 | | | 10,715 | | | 8,199 | | | 4,673 | | | 12,872 | | Total assets at fair value on a nonrecurring basis | $ | 6,567 | | | 2,647 | | | 9,214 | | | 12,402 | | | 2,914 | | | 15,316 | |
(1)Predominantly consists of commercial mortgages and residential mortgage – first lien loans.
NonmarketableTable 15.5 presents the gains (losses) on certain assets held at the end of the reporting periods presented for which a nonrecurring fair value adjustment was recognized in earnings during the respective periods.
Table 15.5:Gains (Losses) on Assets with Nonrecurring Fair Value Adjustment
| | | | | | | | | | | | |
| Quarter ended March 31, |
| (in millions) | 2022 | | 2021 | |
| Loans held for sale | $ | (59) | | | 25 | | |
| Loans: | | | | |
| Commercial | (12) | | | (130) | | |
| Consumer | (206) | | | (47) | | |
| Total loans | (218) | | | (177) | | |
| Mortgage servicing rights (commercial) | 4 | | | — | | |
| Nonmarketable equity securities (1) | 295 | | | 210 | | |
| | | | |
| Other assets (2) | (52) | | | (19) | | |
| Total | $ | (30) | | | 39 | | |
(1)Includes impairment of nonmarketable equity securities includes impairment on privateand observable price changes related to nonmarketable equity and venture capital investments and gains or lossessecurities accounted for under the measurement alternative. Other assets includes impairments
(2)Includes impairment of operating lease ROU assets, valuation losses on foreclosed real estate and other collateral owned, and impairment onof private equity and venture capital investments in consolidated portfolio companies.
Table 15.5:Change in Value of Assets with Nonrecurring Fair Value Adjustment
| | | | | | | | | | | | |
| Six months ended June 30, |
| (in millions) | 2021 | | 2020 | |
| Loans held for sale | $ | 38 | | | (77) | | |
| Loans: | | | | |
| Commercial | (182) | | | (392) | | |
| Consumer | (90) | | | (128) | | |
| Total loans | (272) | | | (520) | | |
| Mortgage servicing rights (commercial) | 31 | | | (30) | | |
| Nonmarketable equity securities | 2,215 | | | (410) | | |
| | | | |
| Other assets | (56) | | | (394) | | |
| Total | $ | 1,956 | | | (1,431) | | |
Table 15.6 provides quantitative information about the valuation techniques and significant unobservable inputs used in the valuation of our Level 3 assets that are measured at fair value on a nonrecurring basis and determined using an internal model. The table is limited to financial instruments that had nonrecurring fair value adjustments during the periods presented. Weighted averages of inputs are calculated using outstanding unpaid principal balance for cash instruments, such as loans, and carrying value prior to the nonrecurring fair value measurement for nonmarketable equity securities.
securities and private equity and venture capital investments in consolidated portfolio companies.
| | | | | | | | |
130 | Wells Fargo & Company | 119 |
Note 15: Fair Values of Assets and Liabilities (continued)
Table 15.6: Valuation Techniques – Nonrecurring Basis
| | ($ in millions) | ($ in millions) | Fair Value
Level 3 | Valuation Technique (1) | | Significant
Unobservable Input (1) | | Range of Inputs
Positive (Negative) | | Weighted
Average | ($ in millions) | Fair Value
Level 3 | Valuation
Technique (1) | | Significant
Unobservable Input (1) | | Range of Inputs
Positive (Negative) | | Weighted
Average |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Loans held for sale (2) | Loans held for sale (2) | $ | 1,269 | | Discounted cash flow | | Default rate | (3) | 0.8 | | - | 80.2 | % | | 30.3 | | Loans held for sale (2) | $ | 1,422 | | Discounted cash flow | | Default rate | (3) | 0.2 | | - | 83.0 | % | | 23.1 | |
| | Discount rate | | 0.6 | | - | 12.6 | | 3.1 | | | Discount rate | | 0.6 | | - | 12.7 | | 3.6 | |
| | Loss severity | | 0.3 | | - | 51.0 | | 5.9 | | | Loss severity | | 0.3 | | - | 42.9 | | 4.1 | |
| | Prepayment rate | (4) | 4.2 | | - | 100.0 | | 41.3 | | | Prepayment rate | (4) | 4.1 | | - | 100.0 | | 36.3 | |
| | 170 | | Market comparable pricing | | Comparability adjustment | | (5.9) | | - | (1.4) | | (5.0) | | |
| Mortgage servicing rights (commercial) | Mortgage servicing rights (commercial) | 567 | | Discounted cash flow | | Cost to service per loan | | $ | 150 | | - | 3,381 | | 2,773 | | Mortgage servicing rights (commercial) | 75 | | Discounted cash flow | | Cost to service per loan | | $ | 3,775 | | - | 3,775 | | 3,775 | |
| | Discount rate | | 4.0 | | - | 4.2 | % | | 4.0 | | | Discount rate | | 5.2 | | - | 5.2 | % | | 5.2 | |
| | Prepayment rate | | 0.0 | | - | 20.6 | | 5.5 | | | Prepayment rate | | 0.0 | | - | 20.6 | | 6.7 | |
| Nonmarketable equity securities | Nonmarketable equity securities | 15 | | Market comparable pricing | | Multiples | | 2.0x | - | 3.3x | | 2.8x | Nonmarketable equity securities | 916 | | Market comparable pricing | | Comparability adjustment | | (82.0) | | - | (8.0) | | | (21.0) | |
| | | 65 | | Market comparable pricing | | Comparability Adjustment | | (100.0) | | - | (5.3) | % | | (50.0) | | | 129 | | Market comparable pricing | | Multiples | | 1.1x | - | 4.0x | | 2.6x |
| | 5 | | Discounted cash flow | | Discount rate | | 10.5 | | - | 10.5 | | 10.5 | | |
| Other assets | Other assets | 157 | | Discounted cash flow | | Discount rate | | 0.3 | | - | 4.4 | | 2.9 | | Other assets | 102 | | Market comparable pricing | | Multiples | | 8.0 | | - | 8.0 | | 8.0 | |
| | Insignificant Level 3 assets | | Insignificant Level 3 assets | 3 | | |
| Total | Total | $ | 2,248 | | | Total | $ | 2,647 | | |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| Loans held for sale (2) | Loans held for sale (2) | $ | 1,628 | | Discounted cash flow | | Default rate | (3) | 0.3 | | - | 85.5 | % | | 31.5 | | Loans held for sale (2) | $ | 1,407 | | Discounted cash flow | | Default rate | (3) | 0.2 | | - | 78.3 | % | | 25.6 | |
| | Discount rate | | 0.6 | | - | 11.9 | | 3.0 | | | Discount rate | | 0.6 | | - | 12.0 | | 3.3 | |
| | Loss severity | | 0.4 | | - | 45.0 | | 8.1 | | | Loss severity | | 0.4 | | - | 45.6 | | 4.8 | |
| | Prepayment rate | (4) | 8.3 | | - | 100.0 | | 42.5 | | | Prepayment rate | (4) | 5.4 | | - | 100.0 | | 38.9 | |
| | 1,317 | | Market comparable pricing | | Comparability adjustment | | (11.6) | | - | (1.8) | | (3.1) | | |
| Mortgage servicing rights (commercial) | Mortgage servicing rights (commercial) | 510 | | Discounted cash flow | | Cost to service per loan | | $ | 150 | | - | 3,377 | | 2,779 | | Mortgage servicing rights (commercial) | 567 | | Discounted cash flow | | Cost to service per loan | | $ | 150 | | - | 3,381 | | 2,771 | |
| | Discount rate | | 1.9 | | - | 1.9 | % | | 1.9 | | | Discount rate | | 4.0 | | - | 4.5 | % | | 4.0 | |
| | Prepayment rate | | 0.0 | | - | 20.0 | | 5.4 | | | Prepayment rate | | 0.0 | | - | 20.6 | | 5.5 | |
Nonmarketable equity securities (5) | Nonmarketable equity securities (5) | 844 | | Market comparable pricing | | Multiples | | 0.1x | - | 10.9x | | 5.0x | Nonmarketable equity securities (5) | 745 | | Market comparable pricing | | Comparability adjustment | | (100.0) | | - | (33.0) | | | (59.0) | |
| | 188 | | Market comparable pricing | | Comparability adjustment | | (100.0) | | - | (20.0) | % | | (61.4) | | | 15 | | Market comparable pricing | | Multiples | | 2.0x | - | 3.3x | | 2.8x |
| | 76 | | Other | | Company risk factor | | (100.0) | | - | (20.0) | | (57.7) | | | 5 | | Discounted cash flow | | Discount rate | | 10.5 | | - | 10.5 | % | | 10.5 | |
| 91 | | Discounted cash flow | | Discount rate | | 10.0 | | - | 20.0 | | 11.5 | | |
| Company risk factor | | (62.6) | | - | 0.0 | | (30.3) | | |
| Crude oil prices ($/barrel) | | $ | 42 | | - | 48 | | 47 | | |
| Natural gas prices ($/MMBtu) | | 2 | | - | 2 | | 2 | | |
| Insignificant Level 3 assets | 19 | | | |
| Other assets | | Other assets | 175 | | Discounted cash flow | | Discount rate | | 0.2 | | - | 4.4 | | 2.9 | |
| Total | Total | $ | 4,673 | | | Total | $ | 2,914 | | |
(1)See Note 17 (Fair Values of Assets and Liabilities) in our 20202021 Form 10-K for additional information on the valuation technique(s)technique and significant unobservable inputs used in the valuation of Level 3 assets.
(2)Consists of approximately $1.2 billion and $2.6 billion of government insured/guaranteed loans purchased from GNMA-guaranteed mortgage securitizations at June 30, 2021,both March 31, 2022, and December 31, 2020,2021, respectively, and approximately $200 million and $300 million of other mortgage loans that are not government insured/guaranteed at June 30, 2021,both March 31, 2022, and December 31, 2020.2021.
(3)Applies only to non-government insured/guaranteed loans.
(4)Includes the impact on prepayment rate of expected defaults for government insured/guaranteed loans, which impact the frequency and timing of early resolution of loans.
(5)Includes $417 million ofRepresents private equity and venture capital investments in consolidated portfolio companies classified in other assets on the consolidated balance sheet at December 31, 2020.companies.
Fair Value Option
The fair value option is an irrevocable election, generally only permitted upon initial recognition of financial assets or liabilities, to measure eligible financial instruments at fair value with changes in fair value reflected in earnings. We may elect the fair value option to align the measurement model with how the financial assets or liabilities are managed or to reduce complexity or accounting asymmetry. Following is a discussion of the portfolios for which we elected the fair value option. For additional information, including the basis for our fair value
option elections, see Note 17 (Fair Values of Assets and Liabilities) in our 20202021 Form 10-K.
Table 15.7 reflects differences between the fair value carrying amount of the assets for which we have elected the fair value option and the contractual aggregate unpaid principal amount at maturity. Nonaccrual loans and loans 90 days or more past due and still accruing included in LHFS for which we have elected the fair value option were insignificant at June 30, 2021,March 31, 2022, and December 31, 2020.2021.
Table 15.7: Fair Value Option
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| (in millions) | Fair value carrying amount | | Aggregate unpaid principal | | Fair value carrying amount less aggregate unpaid principal | | Fair value carrying amount | | Aggregate unpaid principal | | Fair value carrying amount less aggregate
unpaid
principal |
| Loans held for sale | $ | 18,894 | | | 18,526 | | | 368 | | | 18,806 | | | 18,217 | | | 589 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Note 15: Fair Values of Assets and Liabilities (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| (in millions) | Fair value carrying amount | | Aggregate unpaid principal | | Fair value carrying amount less aggregate unpaid principal | | Fair value carrying amount | | Aggregate unpaid principal | | Fair value carrying amount less aggregate
unpaid
principal |
| Loans held for sale | $ | 13,155 | | | 13,471 | | | (316) | | | 15,895 | | | 15,750 | | | 145 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
The changes in fair value related to initial measurement and subsequent changes in fair value included in earnings for LHFS accounted for under the fair value option were $823$(357) million and $1.2 billion in$363 million for the second quarterquarters ended March 31, 2022 and first half of 2021, respectively, and $773 million and $1.1 billion in the second quarter and first half of 2020, respectively. Substantially all of these amounts were included in the mortgage banking noninterest income line of the consolidated statement of income. For performing loans, instrument-specific credit risk gains or losses were derived principally by determining the change in fair value of the loans due to changes in the observable or implied credit spread. Credit spread is the market yield on the loans less the relevant risk-free benchmark interest rate. For nonperforming loans, we attribute all changes in fair value to instrument-specific credit risk. Gains
and losses attributable to instrument-specific credit risk related to assets accounted for under the fair value option infor the second quarterquarters ended March 31, 2022 and first half of both 2021, and 2020 were insignificant.
Disclosures about Fair Value of Financial Instruments
Table 15.8 presents a summary of fair value estimates for financial instruments that are not carried at fair value on a recurring basis. Some financial instruments are excluded from the scope of this table, such as certain insurance contracts, certain nonmarketable equity securities, and leases. This table also excludes assets and liabilities that are not financial instruments such as the value of the long-term relationships with our deposit, credit card and trust customers, MSRs, premises and equipment, goodwill and deferred taxes.
Loan commitments, standby letters of credit and commercial and similar letters of credit are not included in
Table 15.8. A reasonable estimate of the fair value of these instruments is the carrying value of deferred fees plus the allowance for unfunded credit commitments, which totaled $1.3 billion and $1.4 billion and at both June 30, 2021,March 31, 2022 and December 31, 2020,2021, respectively.
The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying fair value of the Company.
Table 15.8: Fair Value Estimates for Financial Instruments
| | | Estimated fair value | | Estimated fair value |
| (in millions) | (in millions) | Carrying amount | | Level 1 | | Level 2 | | Level 3 | | Total | (in millions) | Carrying amount | | Level 1 | | Level 2 | | Level 3 | | Total |
| June 30, 2021 | | |
| March 31, 2022 | | March 31, 2022 | |
| Financial assets | Financial assets | | Financial assets | |
| Cash and due from banks (1) | Cash and due from banks (1) | $ | 25,304 | | | 25,304 | | | 0 | | | 0 | | | 25,304 | | Cash and due from banks (1) | $ | 27,454 | | | 27,454 | | | — | | | — | | | 27,454 | |
| Interest-earning deposits with banks (1) | Interest-earning deposits with banks (1) | 248,869 | | | 248,686 | | | 183 | | | 0 | | | 248,869 | | Interest-earning deposits with banks (1) | 174,441 | | | 174,296 | | | 145 | | | — | | | 174,441 | |
| Federal funds sold and securities purchased under resale agreements (1) | Federal funds sold and securities purchased under resale agreements (1) | 70,149 | | | 0 | | | 70,149 | | | 0 | | | 70,149 | | Federal funds sold and securities purchased under resale agreements (1) | 67,764 | | | — | | | 67,764 | | | — | | | 67,764 | |
| Held-to-maturity debt securities | Held-to-maturity debt securities | 260,941 | | | 28,028 | | | 235,075 | | | 984 | | | 264,087 | | Held-to-maturity debt securities | 280,808 | | | 15,551 | | | 246,325 | | | 2,765 | | | 264,641 | |
| Loans held for sale | Loans held for sale | 6,700 | | | 0 | | | 5,259 | | | 1,669 | | | 6,928 | | Loans held for sale | 6,669 | | | — | | | 5,097 | | | 1,656 | | | 6,753 | |
| Loans, net (2) | Loans, net (2) | 821,774 | | | 0 | | | 59,140 | | | 781,652 | | | 840,792 | | Loans, net (2) | 885,950 | | | — | | | 62,483 | | | 816,122 | | | 878,605 | |
| Nonmarketable equity securities (cost method) | Nonmarketable equity securities (cost method) | 3,585 | | | 0 | | | 0 | | | 3,647 | | | 3,647 | | Nonmarketable equity securities (cost method) | 3,584 | | | — | | | — | | | 3,648 | | | 3,648 | |
| Total financial assets | Total financial assets | $ | 1,437,322 | | | 302,018 | | | 369,806 | | | 787,952 | | | 1,459,776 | | Total financial assets | $ | 1,446,670 | | | 217,301 | | | 381,814 | | | 824,191 | | | 1,423,306 | |
| Financial liabilities | Financial liabilities | | Financial liabilities | |
| Deposits (3) | Deposits (3) | $ | 35,964 | | | 0 | | | 18,823 | | | 17,368 | | | 36,191 | | Deposits (3) | $ | 26,648 | | | — | | | 11,542 | | | 14,659 | | | 26,201 | |
| Short-term borrowings | Short-term borrowings | 45,635 | | | 0 | | | 45,635 | | | 0 | | | 45,635 | | Short-term borrowings | 33,433 | | | — | | | 33,433 | | | — | | | 33,433 | |
| Long-term debt (4) | Long-term debt (4) | 179,625 | | | 0 | | | 186,681 | | | 1,282 | | | 187,963 | | Long-term debt (4) | 153,243 | | | — | | | 156,237 | | | 1,221 | | | 157,458 | |
| Total financial liabilities | Total financial liabilities | $ | 261,224 | | | 0 | | | 251,139 | | | 18,650 | | | 269,789 | | Total financial liabilities | $ | 213,324 | | | — | | | 201,212 | | | 15,880 | | | 217,092 | |
| December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| Financial assets | Financial assets | | Financial assets | |
| Cash and due from banks (1) | Cash and due from banks (1) | $ | 28,236 | | | 28,236 | | | 0 | | | 0 | | | 28,236 | | Cash and due from banks (1) | $ | 24,616 | | | 24,616 | | | — | | | — | | | 24,616 | |
| Interest-earning deposits with banks (1) | Interest-earning deposits with banks (1) | 236,376 | | | 236,258 | | | 118 | | | 0 | | | 236,376 | | Interest-earning deposits with banks (1) | 209,614 | | | 209,452 | | | 162 | | | — | | | 209,614 | |
| Federal funds sold and securities purchased under resale agreements (1) | Federal funds sold and securities purchased under resale agreements (1) | 65,672 | | | 0 | | | 65,672 | | | 0 | | | 65,672 | | Federal funds sold and securities purchased under resale agreements (1) | 66,223 | | | — | | | 66,223 | | | — | | | 66,223 | |
| Held-to-maturity debt securities | Held-to-maturity debt securities | 205,720 | | | 48,597 | | | 162,777 | | | 933 | | | 212,307 | | Held-to-maturity debt securities | 272,022 | | | 16,825 | | | 252,717 | | | 2,844 | | | 272,386 | |
| Loans held for sale | Loans held for sale | 17,578 | | | 0 | | | 14,952 | | | 3,419 | | | 18,371 | | Loans held for sale | 7,722 | | | — | | | 6,300 | | | 1,629 | | | 7,929 | |
| Loans, net (2) | Loans, net (2) | 853,595 | | | 0 | | | 56,270 | | | 817,827 | | | 874,097 | | Loans, net (2) | 868,278 | | | — | | | 63,404 | | | 820,559 | | | 883,963 | |
| Nonmarketable equity securities (cost method) | Nonmarketable equity securities (cost method) | 3,588 | | | 0 | | | 0 | | | 3,632 | | | 3,632 | | Nonmarketable equity securities (cost method) | 3,584 | | | — | | | — | | | 3,646 | | | 3,646 | |
| Total financial assets | Total financial assets | $ | 1,410,765 | | | 313,091 | | | 299,789 | | | 825,811 | | | 1,438,691 | | Total financial assets | $ | 1,452,059 | | | 250,893 | | | 388,806 | | | 828,678 | | | 1,468,377 | |
| Financial liabilities | Financial liabilities | | Financial liabilities | |
| Deposits (3) | Deposits (3) | $ | 52,807 | | | 0 | | | 33,321 | | | 19,940 | | | 53,261 | | Deposits (3) | $ | 30,012 | | | — | | | 14,401 | | | 15,601 | | | 30,002 | |
| Short-term borrowings | Short-term borrowings | 58,999 | | | 0 | | | 58,999 | | | 0 | | | 58,999 | | Short-term borrowings | 34,409 | | | — | | | 34,409 | | | — | | | 34,409 | |
| Long-term debt (4) | Long-term debt (4) | 212,922 | | | 0 | | | 219,321 | | | 1,381 | | | 220,702 | | Long-term debt (4) | 160,660 | | | — | | | 166,682 | | | 1,402 | | | 168,084 | |
| Total financial liabilities | Total financial liabilities | $ | 324,728 | | | 0 | | | 311,641 | | | 21,321 | | | 332,962 | | Total financial liabilities | $ | 225,081 | | | — | | | 215,492 | | | 17,003 | | | 232,495 | |
(1)Amounts consist of financial instruments for which carrying value approximates fair value.
(2)Excludes lease financing with a carrying amount of $15.2$14.2 billion and $15.4$14.5 billion at June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively.
(3)Excludes deposit liabilities with no defined or contractual maturity of $1.4$1.5 trillion at both June 30, 2021,March 31, 2022, and December 31, 2020, respectively.2021.
(4)Excludes capital lease obligations under capitalfinance leases of $28$25 million and $26 million at both June 30, 2021,March 31, 2022, and December 31, 2020,2021, respectively.
| | | | | | | | |
132 | Wells Fargo & Company | 121 |
We are authorized to issue 20 million shares of preferred stock and 4 million shares of preference stock, both without par value. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference but have no general voting rights. We have not issued any preference shares under
this authorization. If issued, preference shares would be limited to 1 vote per share. Our total authorized, issued and outstandingTable 16.1 summarizes information about our preferred stock is presented in the following two tables along withincluding the Employee Stock Ownership Plan (ESOP) Cumulative Convertible Preferred Stock.
In January 2021, we issued $3.5 billion of our Preferred Stock, Series BB, and in February 2021, we issued $1.05 billion of our Preferred Stock, Series CC. In March 2021, we redeemed our Preferred Stock Series I, Series P and Series W, and partially redeemed our Preferred Stock, Series N, for an aggregate cost of $4.5 billion. In June 2021, we redeemed the remaining outstanding shares of our Preferred Stock, Series N, for a cost of $350 million. In July 2021, we issued $1.25 billion of our Preferred Stock, Series DD.
Table 16.1: Preferred Stock Shares
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| Liquidation
preference
per share | | Shares
authorized
and designated | | Liquidation
preference
per share | | Shares
authorized
and designated | |
| (in millions, except shares) | | (in millions, except shares) | Shares
authorized
and designated | | Shares issued and outstanding | | Liquidation preference value | | Carrying
value | | Shares
authorized
and designated | | Shares
issued and outstanding | | Liquidation preference value | | Carrying value |
| DEP Shares | DEP Shares | | DEP Shares | |
| Dividend Equalization Preferred Shares (DEP) | Dividend Equalization Preferred Shares (DEP) | $ | 10 | | | 97,000 | | | $ | 10 | | | 97,000 | | Dividend Equalization Preferred Shares (DEP) | 97,000 | | | 96,546 | | | $ | — | | | — | | | 97,000 | | | 96,546 | | | $ | — | | | — | |
Series I (1) | | |
| Floating Class A Preferred Stock | 0 | | | 0 | | | 100,000 | | | 25,010 | | |
Series L (2) | | |
Series L (1) | | Series L (1) | |
| 7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock | 7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock | 1,000 | | | 4,025,000 | | | 1,000 | | | 4,025,000 | | 7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock | 4,025,000 | | | 3,967,986 | | | 3,968 | | | 3,200 | | | 4,025,000 | | | 3,967,995 | | | 3,968 | | | 3,200 | |
Series N (3) | | |
| 5.20% Non-Cumulative Perpetual Class A Preferred Stock | 0 | | | 0 | | | 25,000 | | | 30,000 | | |
| Series O | | |
| 5.125% Non-Cumulative Perpetual Class A Preferred Stock | 25,000 | | | 27,600 | | | 25,000 | | | 27,600 | | |
Series P (3) | | |
| 5.25% Non-Cumulative Perpetual Class A Preferred Stock | 0 | | | 0 | | | 25,000 | | | 26,400 | | |
| Series Q | Series Q | | Series Q | |
| 5.85% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 5.85% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 25,000 | | | 69,000 | | | 25,000 | | | 69,000 | | 5.85% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 69,000 | | | 69,000 | | | 1,725 | | | 1,725 | | | 69,000 | | | 69,000 | | | 1,725 | | | 1,725 | |
| Series R | Series R | | Series R | |
| 6.625% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 6.625% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 25,000 | | | 34,500 | | | 25,000 | | | 34,500 | | 6.625% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 34,500 | | | 33,600 | | | 840 | | | 840 | | | 34,500 | | | 33,600 | | | 840 | | | 840 | |
| Series S | Series S | | Series S | |
| 5.90% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 5.90% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 25,000 | | | 80,000 | | | 25,000 | | | 80,000 | | 5.90% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 80,000 | | | 80,000 | | | 2,000 | | | 2,000 | | | 80,000 | | | 80,000 | | | 2,000 | | | 2,000 | |
| Series U | Series U | | Series U | |
| 5.875% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 5.875% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 25,000 | | | 80,000 | | | 25,000 | | | 80,000 | | 5.875% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 80,000 | | | 80,000 | | | 2,000 | | | 2,000 | | | 80,000 | | | 80,000 | | | 2,000 | | | 2,000 | |
Series W (3) | | |
| 5.70% Non-Cumulative Perpetual Class A Preferred Stock | 0 | | | 0 | | | 25,000 | | | 40,000 | | |
| Series X | | |
| 5.50% Non-Cumulative Perpetual Class A Preferred Stock | 25,000 | | | 46,000 | | | 25,000 | | | 46,000 | | |
| Series Y | Series Y | | Series Y | |
| 5.625% Non-Cumulative Perpetual Class A Preferred Stock | 5.625% Non-Cumulative Perpetual Class A Preferred Stock | 25,000 | | | 27,600 | | | 25,000 | | | 27,600 | | 5.625% Non-Cumulative Perpetual Class A Preferred Stock | 27,600 | | | 27,600 | | | 690 | | | 690 | | | 27,600 | | | 27,600 | | | 690 | | | 690 | |
| Series Z | Series Z | | Series Z | |
| 4.75% Non-Cumulative Perpetual Class A Preferred Stock | 4.75% Non-Cumulative Perpetual Class A Preferred Stock | 25,000 | | | 80,500 | | | 25,000 | | | 80,500 | | 4.75% Non-Cumulative Perpetual Class A Preferred Stock | 80,500 | | | 80,500 | | | 2,013 | | | 2,013 | | | 80,500 | | | 80,500 | | | 2,013 | | | 2,013 | |
| Series AA | Series AA | | Series AA | |
| 4.70% Non-Cumulative Perpetual Class A Preferred Stock | 4.70% Non-Cumulative Perpetual Class A Preferred Stock | 25,000 | | | 46,800 | | | 25,000 | | | 46,800 | | 4.70% Non-Cumulative Perpetual Class A Preferred Stock | 46,800 | | | 46,800 | | | 1,170 | | | 1,170 | | | 46,800 | | | 46,800 | | | 1,170 | | | 1,170 | |
| Series BB | Series BB | | Series BB | |
| 3.90% Fixed-Reset Non-Cumulative Perpetual Class A Preferred Stock | 3.90% Fixed-Reset Non-Cumulative Perpetual Class A Preferred Stock | 25,000 | | | 140,400 | | | 0 | | | 0 | | 3.90% Fixed-Reset Non-Cumulative Perpetual Class A Preferred Stock | 140,400 | | | 140,400 | | | 3,510 | | | 3,510 | | | 140,400 | | | 140,400 | | | 3,510 | | | 3,510 | |
| Series CC | Series CC | | Series CC | |
| 4.375% Non-Cumulative Perpetual Class A Preferred Stock | 4.375% Non-Cumulative Perpetual Class A Preferred Stock | 25,000 | | | 46,000 | | | 0 | | | 0 | | 4.375% Non-Cumulative Perpetual Class A Preferred Stock | 46,000 | | | 42,000 | | | 1,050 | | | 1,050 | | | 46,000 | | | 42,000 | | | 1,050 | | | 1,050 | |
ESOP (4) | | |
| Series DD | | Series DD | |
| 4.25% Non-Cumulative Perpetual Class A Preferred Stock | | 4.25% Non-Cumulative Perpetual Class A Preferred Stock | 50,000 | | | 50,000 | | | 1,250 | | | 1,250 | | | 50,000 | | | 50,000 | | | 1,250 | | | 1,250 | |
ESOP (2) | | ESOP (2) | |
| Cumulative Convertible Preferred Stock | Cumulative Convertible Preferred Stock | 0 | | | 822,242 | | | 0 | | | 822,242 | | Cumulative Convertible Preferred Stock | 609,434 | | | 609,434 | | | 609 | | | 609 | | | 609,434 | | | 609,434 | | | 609 | | | 609 | |
| Total | Total | | 5,622,642 | | | 5,557,652 | | Total | 5,386,234 | | | 5,323,866 | | | $ | 20,825 | | | 20,057 | | | 5,386,234 | | | 5,323,875 | | | $ | 20,825 | | | 20,057 | |
(1)Series I preferred stock issuance relates to trust preferred securities. See Note 8 (Securitizations and Variable Interest Entities) for additional information. This issuance has a floating interest rate that is the greater of three-month London Interbank Offered Rate (LIBOR) plus 0.93% and 5.56975%. In first quarter 2021, Preferred Stock, Series I, was redeemed.
(2)Preferred Stock, Series L, may be converted at any time, at the option of the holder, into 6.3814 shares of our common stock, plus cash in lieu of fractional shares, subject to anti-dilution adjustments.
(3)In first quarter 2021, 16,000 shares of Preferred Stock, Series N, were redeemed and Preferred Stock, Series P and Series W were fully redeemed; in second quarter 2021, the remaining 14,000 shares of Preferred Stock, Series N, were redeemed.
(4)See the “ESOP Cumulative Convertible Preferred Stock” section in this Note for additional information about the liquidation preference for the ESOP Cumulative Convertible Preferred Stock.
Note 16: Preferred Stock (continued)
Table 16.2:Preferred Stock – Shares Issued and Carrying Value
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| (in millions, except shares) | Shares issued and outstanding | | Liquidation preference value | | Carrying
value | | Discount | | Shares
issued and outstanding | | Liquidation preference value | | Carrying value | | Discount |
| DEP Shares | | | | | | | | | | | | | | | |
| Dividend Equalization Preferred Shares (DEP) | 96,546 | | | $ | 0 | | | 0 | | | 0 | | | 96,546 | | | $ | 0 | | | 0 | | | 0 | |
Series I (1) | | | | | | | | | | | | | | | |
| Floating Class A Preferred Stock | 0 | | | 0 | | | 0 | | | 0 | | | 25,010 | | | 2,501 | | | 2,501 | | | 0 | |
Series L (2) | | | | | | | | | | | | | | | |
| 7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock | 3,967,995 | | | 3,968 | | | 3,200 | | | 768 | | | 3,967,995 | | | 3,968 | | | 3,200 | | | 768 | |
Series N (3) | | | | | | | | | | | | | | | |
| 5.20% Non-Cumulative Perpetual Class A Preferred Stock | 0 | | | 0 | | | 0 | | | 0 | | | 30,000 | | | 750 | | | 750 | | | 0 | |
| Series O | | | | | | | | | | | | | | | |
| 5.125% Non-Cumulative Perpetual Class A Preferred Stock | 26,000 | | | 650 | | | 650 | | | 0 | | | 26,000 | | | 650 | | | 650 | | | 0 | |
Series P (3) | | | | | | | | | | | | | | | |
| 5.25% Non-Cumulative Perpetual Class A Preferred Stock | 0 | | | 0 | | | 0 | | | 0 | | | 25,000 | | | 625 | | | 625 | | | 0 | |
| Series Q | | | | | | | | | | | | | | | |
| 5.85% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 69,000 | | | 1,725 | | | 1,725 | | | 0 | | | 69,000 | | | 1,725 | | | 1,725 | | | 0 | |
| Series R | | | | | | | | | | | | | | | |
| 6.625% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 33,600 | | | 840 | | | 840 | | | 0 | | | 33,600 | | | 840 | | | 840 | | | 0 | |
| Series S | | | | | | | | | | | | | | | |
| 5.90% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 80,000 | | | 2,000 | | | 2,000 | | | 0 | | | 80,000 | | | 2,000 | | | 2,000 | | | 0 | |
| Series U | | | | | | | | | | | | | | | |
| 5.875% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock | 80,000 | | | 2,000 | | | 2,000 | | | 0 | | | 80,000 | | | 2,000 | | | 2,000 | | | 0 | |
Series W (3) | | | | | | | | | | | | | | | |
| 5.70% Non-Cumulative Perpetual Class A Preferred Stock | 0 | | | 0 | | | 0 | | | 0 | | | 40,000 | | | 1,000 | | | 1,000 | | | 0 | |
| Series X | | | | | | | | | | | | | | | |
| 5.50% Non-Cumulative Perpetual Class A Preferred Stock | 46,000 | | | 1,150 | | | 1,150 | | | 0 | | | 46,000 | | | 1,150 | | | 1,150 | | | 0 | |
| Series Y | | | | | | | | | | | | | | | |
| 5.625% Non-Cumulative Perpetual Class A Preferred Stock | 27,600 | | | 690 | | | 690 | | | 0 | | | 27,600 | | | 690 | | | 690 | | | 0 | |
| Series Z | | | | | | | | | | | | | | | |
| 4.750% Non-Cumulative Perpetual Class A Preferred Stock | 80,500 | | | 2,013 | | | 2,013 | | | 0 | | | 80,500 | | | 2,013 | | | 2,013 | | | 0 | |
| Series AA | | | | | | | | | | | | | | | |
| 4.70% Non-Cumulative Perpetual Class A Preferred Stock | 46,800 | | | 1,170 | | | 1,170 | | | 0 | | | 46,800 | | | 1,170 | | | 1,170 | | | 0 | |
| Series BB | | | | | | | | | | | | | | | |
| 3.90% Fixed-Reset Non-Cumulative Perpetual Class A Preferred Stock | 140,400 | | | 3,510 | | | 3,510 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Series CC | | | | | | | | | | | | | | | |
| 4.375% Non-Cumulative Perpetual Class A Preferred Stock | 42,000 | | | 1,050 | | | 1,050 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
ESOP (4) | | | | | | | | | | | | | | | |
| Cumulative Convertible Preferred Stock | 822,242 | | | 822 | | | 822 | | | 0 | | | 822,242 | | | 822 | | | 822 | | | 0 | |
| Total | 5,558,683 | | | $ | 21,588 | | | 20,820 | | | 768 | | | 5,496,293 | | | $ | 21,904 | | | 21,136 | | | 768 | |
(1)Floating rate for Preferred Stock, Series I, is the greater of three-month London Interbank Offered Rate (LIBOR) plus 0.93% and 5.56975%. In first quarter 2021, Preferred Stock, Series I, was redeemed.
(2)Preferred Stock, Series L, may be converted at any time, at the option of the holder, into 6.3814 shares of our common stock, plus cash in lieu of fractional shares, subject to anti-dilution adjustments.
(3)In first quarter 2021, $400 million of Preferred Stock, Series N, was redeemed and Preferred Stock, Series P and Series W were fully redeemed; in second quarter 2021, the remaining $350 million of Preferred Stock, Series N, was redeemed.
(4)See the “ESOP Cumulative Convertible Preferred Stock” section in this Note for additional information about the liquidation preference for the ESOP Cumulative Convertible Preferred Stock.
| | | | | | | | |
134122 | Wells Fargo & Company | |
ESOP CUMULATIVE CONVERTIBLE PREFERRED STOCK All shares of our ESOP Cumulative Convertible Preferred Stock (ESOP Preferred Stock) were issued to a trustee acting on behalf of the Wells Fargo & Company 401(k) Plan (the 401(k) Plan). Dividends on the ESOP Preferred Stock are cumulative from the date of initial issuance and are payable quarterly at annual rates based upon the year of issuance. Each share of ESOP Preferred Stock released from the unallocated reserve of the 401(k) Plan is converted into shares of our common stock based on the stated
value of the ESOP Preferred Stock and the then current market price of our common stock. The ESOP Preferred Stock is also convertible at the option of the holder at any time, unless previously redeemed. We have the option to redeem the ESOP Preferred Stock at any time, in whole or in part, at a redemption price per share equal to the higher of (a) $1,000 per share plus accrued and unpaid dividends or (b) the fair market value, as defined in the Certificates of Designation for the ESOP Preferred Stock.
Table 16.3:16.2: ESOP Preferred Stock
| | | Shares issued and outstanding | | Carrying value | | Adjustable dividend rate | | Shares issued and outstanding | | Carrying value | | Adjustable dividend rate |
| (in millions, except shares) | (in millions, except shares) | Jun 30,
2021 | | Dec 31,
2020 | | Jun 30,
2021 | | Dec 31,
2020 | | Minimum | | Maximum | (in millions, except shares) | Mar 31,
2022 | | Dec 31,
2021 | | Mar 31,
2022 | | Dec 31,
2021 | | Minimum | | Maximum |
| ESOP Preferred Stock | ESOP Preferred Stock | | ESOP Preferred Stock | |
| $1,000 liquidation preference per share | $1,000 liquidation preference per share | | $1,000 liquidation preference per share | |
| 2018 | 2018 | 221,945 | | | 221,945 | | | $ | 222 | | | 222 | | | 7.00 | % | | 8.00 | % | 2018 | 189,225 | | | 189,225 | | | $ | 189 | | | 189 | | | 7.00 | % | | 8.00 | % |
| 2017 | 2017 | 163,210 | | | 163,210 | | | 163 | | | 163 | | | 7.00 | | | 8.00 | | 2017 | 135,135 | | | 135,135 | | | 135 | | | 135 | | | 7.00 | | | 8.00 | |
| 2016 | 2016 | 162,450 | | | 162,450 | | | 162 | | | 162 | | | 9.30 | | | 10.30 | | 2016 | 128,380 | | | 128,380 | | | 128 | | | 128 | | | 9.30 | | | 10.30 | |
| 2015 | 2015 | 92,904 | | | 92,904 | | | 93 | | | 93 | | | 8.90 | | | 9.90 | | 2015 | 68,106 | | | 68,106 | | | 68 | | | 68 | | | 8.90 | | | 9.90 | |
| 2014 | 2014 | 99,151 | | | 99,151 | | | 99 | | | 99 | | | 8.70 | | | 9.70 | | 2014 | 62,420 | | | 62,420 | | | 63 | | | 63 | | | 8.70 | | | 9.70 | |
| 2013 | 2013 | 61,948 | | | 61,948 | | | 62 | | | 62 | | | 8.50 | | | 9.50 | | 2013 | 26,168 | | | 26,168 | | | 26 | | | 26 | | | 8.50 | | | 9.50 | |
| 2012 | 20,634 | | | 20,634 | | | 21 | | | 21 | | | 10.00 | | | 11.00 | | |
| Total ESOP Preferred Stock (1) | Total ESOP Preferred Stock (1) | 822,242 | | | 822,242 | | | $ | 822 | | | 822 | | | Total ESOP Preferred Stock (1) | 609,434 | | | 609,434 | | | $ | 609 | | | 609 | | |
| Unearned ESOP shares (2) | Unearned ESOP shares (2) | | $ | (875) | | | (875) | | | Unearned ESOP shares (2) | | $ | (646) | | | (646) | | |
(1)At both June 30, 2021,March 31, 2022 and December 31, 2020,2021, additional paid-in capital included $53$37 million related to ESOP preferred stock.
(2)We recorded a corresponding charge to unearned ESOP shares in connection with the issuance of the ESOP Preferred Stock. The unearned ESOP shares are reduced as shares of the ESOP Preferred Stock are committed to be released.
| | | | | | | | |
| Wells Fargo & Company | 135123 |
| | |
Note 17: Revenue from Contracts with Customers |
Our revenue includes net interest income on financial instruments and noninterest income. Table 17.1 presents our revenue by operating segment. For additional description of our
operating segments, including additional financial information
and the underlying management accounting process, see
Note 22 (Operating Segments). For a description of our revenue from contracts with customers, see Note 20 (Revenue from Contracts with Customers) in our 2021 Form 10-K.
Table 17.1: Revenue by Operating Segment
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Consumer Banking and Lending | | Commercial Banking | | Corporate and Investment Banking | | Wealth and Investment Management | | Corporate | | Reconciling
Items (1) | | Consolidated
Company |
| Quarter ended June 30, 2021 |
| Net interest income (2) | $ | 5,618 | | | 1,202 | | | 1,783 | | | 610 | | | (304) | | | (109) | | | 8,800 | |
| Noninterest income: | | | | | | | | | | | | | |
| Deposit-related fees | 732 | | | 325 | | | 277 | | | 7 | | | 1 | | | 0 | | | 1,342 | |
| Lending-related fees (2) | 36 | | | 135 | | | 190 | | | 2 | | | (1) | | | 0 | | | 362 | |
| Investment advisory and other asset-based fees (3) | 0 | | | 2 | | | 12 | | | 2,382 | | | 398 | | | 0 | | | 2,794 | |
| Commissions and brokerage services fees | 0 | | | 0 | | | 68 | | | 513 | | | (1) | | | 0 | | | 580 | |
| Investment banking fees | (2) | | | 9 | | | 580 | | | (1) | | | (16) | | | 0 | | | 570 | |
| Card fees: | | | | | | | | | | | | | |
| Card interchange and network revenues (4) | 896 | | | 49 | | | 11 | | | 1 | | | 0 | | | 0 | | | 957 | |
| Other card fees (2) | 121 | | | 0 | | | 0 | | | 0 | | | (1) | | | 0 | | | 120 | |
| Total card fees | 1,017 | | | 49 | | | 11 | | | 1 | | | (1) | | | 0 | | | 1,077 | |
| Mortgage banking (2) | 1,158 | | | 0 | | | 181 | | | (3) | | | 0 | | | 0 | | | 1,336 | |
| Net gains (losses) from trading activities (2) | 0 | | | (1) | | | 30 | | | 6 | | | (14) | | | 0 | | | 21 | |
| Net gains on debt securities (2) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Net gains from equity securities (2) | 0 | | | 32 | | | 46 | | | 6 | | | 2,612 | | | 0 | | | 2,696 | |
| Lease income (2) | 0 | | | 173 | | | 0 | | | 0 | | | 140 | | | 0 | | | 313 | |
| Other (2) | 127 | | | 182 | | | 160 | | | 13 | | | 209 | | | (312) | | | 379 | |
| Total noninterest income | 3,068 | | | 906 | | | 1,555 | | | 2,926 | | | 3,327 | | | (312) | | | 11,470 | |
| Total revenue | $ | 8,686 | | | 2,108 | | | 3,338 | | | 3,536 | | | 3,023 | | | (421) | | | 20,270 | |
| Quarter ended June 30, 2020 |
| Net interest income (2) | $ | 5,717 | | | 1,554 | | | 1,963 | | | 719 | | | 60 | | | (121) | | | 9,892 | |
| Noninterest income: | | | | | | | | | | | | | |
| Deposit-related fees | 575 | | | 297 | | | 261 | | | 6 | | | 3 | | | 0 | | | 1,142 | |
| Lending-related fees (2) | 33 | | | 125 | | | 163 | | | 2 | | | 0 | | | 0 | | | 323 | |
| Investment advisory and other asset-based fees (3) | 0 | | | 8 | | | 24 | | | 1,835 | | | 387 | | | 0 | | | 2,254 | |
| Commissions and brokerage services fees | 0 | | | 0 | | | 79 | | | 470 | | | 1 | | | 0 | | | 550 | |
| Investment banking fees | (1) | | | 26 | | | 588 | | | 1 | | | (67) | | | 0 | | | 547 | |
| Card fees: | | | | | | | | | | | | | |
| Card interchange and network revenues (4) | 650 | | | 36 | | | 11 | | | 1 | | | 0 | | | 0 | | | 698 | |
| Other card fees (2) | 99 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 99 | |
| Total card fees | 749 | | | 36 | | | 11 | | | 1 | | | 0 | | | 0 | | | 797 | |
| Mortgage banking (2) | 256 | | | 0 | | | 65 | | | (3) | | | (1) | | | 0 | | | 317 | |
| Net gains (losses) from trading activities (2) | 1 | | | 1 | | | 809 | | | 9 | | | (13) | | | 0 | | | 807 | |
| Net gains on debt securities (2) | 6 | | | 0 | | | 0 | | | 0 | | | 206 | | | 0 | | | 212 | |
| Net gains (losses) from equity securities (2) | 0 | | | (28) | | | 8 | | | 150 | | | 403 | | | 0 | | | 533 | |
| Lease income (2) | 0 | | | 189 | | | 5 | | | 0 | | | 141 | | | 0 | | | 335 | |
| Other (2) | 272 | | | 143 | | | 83 | | | 16 | | | 258 | | | (195) | | | 577 | |
| Total noninterest income | 1,891 | | | 797 | | | 2,096 | | | 2,487 | | | 1,318 | | | (195) | | | 8,394 | |
| Total revenue | $ | 7,608 | | | 2,351 | | | 4,059 | | | 3,206 | | | 1,378 | | | (316) | | | 18,286 | |
| Six months ended June 30, 2021 |
| Net interest income (2) | $ | 11,233 | | | 2,456 | | | 3,562 | | | 1,267 | | | (694) | | | (216) | | | 17,608 | |
| Noninterest income: | | | | | | | | | | | | | |
| Deposit-related fees | 1,393 | | | 642 | | | 543 | | | 14 | | | 5 | | | 0 | | | 2,597 | |
| Lending-related fees (2) | 76 | | | 271 | | | 373 | | | 4 | | | (1) | | | 0 | | | 723 | |
| Investment advisory and other asset-based fees (3) | 0 | | | 7 | | | 34 | | | 4,688 | | | 821 | | | 0 | | | 5,550 | |
| Commissions and brokerage services fees | 0 | | | 0 | | | 149 | | | 1,068 | | | (1) | | | 0 | | | 1,216 | |
| Investment banking fees | (8) | | | 22 | | | 1,191 | | | (2) | | | (65) | | | 0 | | | 1,138 | |
| Card fees: | | | | | | | | | | | | | |
| Card interchange and network revenues (4) | 1,674 | | | 94 | | | 21 | | | 2 | | | 0 | | | 0 | | | 1,791 | |
| Other card fees (2) | 235 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 235 | |
| Total card fees | 1,909 | | | 94 | | | 21 | | | 2 | | | 0 | | | 0 | | | 2,026 | |
| Mortgage banking (2) | 2,417 | | | 0 | | | 251 | | | (6) | | | 0 | | | 0 | | | 2,662 | |
| Net gains (losses) from trading activities (2) | 1 | | | 1 | | | 361 | | | 12 | | | (6) | | | 0 | | | 369 | |
| Net gains on debt securities (2) | 0 | | | 0 | | | 0 | | | 0 | | | 151 | | | 0 | | | 151 | |
| Net gains from equity securities (2) | 34 | | | 45 | | | 121 | | | 6 | | | 2,882 | | | 0 | | | 3,088 | |
| Lease income (2) | 0 | | | 347 | | | 1 | | | 0 | | | 280 | | | 0 | | | 628 | |
| Other (2) | 285 | | | 304 | | | 335 | | | 27 | | | 678 | | | (583) | | | 1,046 | |
| Total noninterest income | 6,107 | | | 1,733 | | | 3,380 | | | 5,813 | | | 4,744 | | | (583) | | | 21,194 | |
| Total revenue | $ | 17,340 | | | 4,189 | | | 6,942 | | | 7,080 | | | 4,050 | | | (799) | | | 38,802 | |
| | | | | | | | | | | | | |
| (continued on following page) | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | (continued from previous page) | | |
|
(in millions) |
(in millions) | Consumer Banking and Lending | | Commercial Banking | | Corporate and Investment Banking | | Wealth and Investment Management | | Corporate | | Reconciling
Items (1) | | Consolidated
Company |
(in millions) | Consumer Banking and Lending | | Commercial Banking | | Corporate and Investment Banking | | Wealth and Investment Management | | Corporate | | Reconciling
Items (1) | | Consolidated
Company |
| Six months ended June 30, 2020 | |
| | | | | Quarter ended March 31, 2022 | | Quarter ended March 31, 2022 |
| Net interest income (2) | Net interest income (2) | $ | 11,719 | | | 3,287 | | | 3,984 | | | 1,557 | | | 939 | | | (264) | | | 21,222 | | Net interest income (2) | $ | 5,996 | | | 1,361 | | | 1,990 | | | 799 | | | (818) | | | (107) | | | 9,221 | |
| Noninterest income: | Noninterest income: | | Noninterest income: | |
| Deposit-related fees | Deposit-related fees | 1,454 | | | 599 | | | 518 | | | 13 | | | 5 | | | 0 | | | 2,589 | | Deposit-related fees | 845 | | | 328 | | | 293 | | | 7 | | | — | | | — | | | 1,473 | |
| Lending-related fees (2) | Lending-related fees (2) | 81 | | | 253 | | | 335 | | | 4 | | | 0 | | | 0 | | | 673 | | Lending-related fees (2) | 34 | | | 121 | | | 185 | | | 2 | | | — | | | — | | | 342 | |
| Investment advisory and other asset-based fees (3) | Investment advisory and other asset-based fees (3) | 0 | | | 16 | | | 40 | | | 3,908 | | | 796 | | | 0 | | | 4,760 | | Investment advisory and other asset-based fees (3) | — | | | 2 | | | 12 | | | 2,476 | | | 8 | | | — | | | 2,498 | |
| Commissions and brokerage services fees | Commissions and brokerage services fees | 0 | | | 0 | | | 169 | | | 1,063 | | | (5) | | | 0 | | | 1,227 | | Commissions and brokerage services fees | — | | | — | | | 83 | | | 454 | | | — | | | — | | | 537 | |
| Investment banking fees | Investment banking fees | (2) | | | 39 | | | 1,065 | | | 2 | | | (166) | | | 0 | | | 938 | | Investment banking fees | (1) | | | 15 | | | 462 | | | — | | | (29) | | | — | | | 447 | |
| Card fees: | Card fees: | | Card fees: | |
| Card interchange and network revenues (4) | Card interchange and network revenues (4) | 1,307 | | | 88 | | | 29 | | | 2 | | | 2 | | | 0 | | | 1,428 | | Card interchange and network revenues (4) | 834 | | | 53 | | | 14 | | | 1 | | | — | | | — | | | 902 | |
| Other card fees (2) | Other card fees (2) | 261 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 261 | | Other card fees (2) | 127 | | | — | | | — | | | — | | | — | | | — | | | 127 | |
| Total card fees | Total card fees | 1,568 | | | 88 | | | 29 | | | 2 | | | 2 | | | 0 | | | 1,689 | | Total card fees | 961 | | | 53 | | | 14 | | | 1 | | | — | | | — | | | 1,029 | |
| Mortgage banking (2) | Mortgage banking (2) | 598 | | | 0 | | | 105 | | | (6) | | | (1) | | | 0 | | | 696 | | Mortgage banking (2) | 654 | | | — | | | 42 | | | (3) | | | — | | | — | | | 693 | |
| Net gains (losses) from trading activities (2) | Net gains (losses) from trading activities (2) | 1 | | | (4) | | | 844 | | | 8 | | | 22 | | | 0 | | | 871 | | Net gains (losses) from trading activities (2) | — | | | — | | | 228 | | | 1 | | | (11) | | | — | | | 218 | |
| Net gains on debt securities (2) | 6 | | | 0 | | | 0 | | | 0 | | | 443 | | | 0 | | | 449 | | |
| Net gains from debt securities (2) | | Net gains from debt securities (2) | — | | | — | | | — | | | — | | | 2 | | | — | | | 2 | |
| Net gains (losses) from equity securities (2) | Net gains (losses) from equity securities (2) | 0 | | | (222) | | | 124 | | | (111) | | | (659) | | | 0 | | | (868) | | Net gains (losses) from equity securities (2) | (9) | | | 86 | | | (5) | | | — | | | 504 | | | — | | | 576 | |
| Lease income (2) | Lease income (2) | 0 | | | 387 | | | 6 | | | 0 | | | 295 | | | 0 | | | 688 | | Lease income (2) | — | | | 179 | | | 2 | | | — | | | 146 | | | — | | | 327 | |
| Other (2) | Other (2) | 832 | | | 253 | | | 248 | | | 36 | | | 571 | | | (415) | | | 1,525 | | Other (2) | 83 | | | 182 | | | 164 | | | 20 | | | 186 | | | (406) | | | 229 | |
| Total noninterest income | Total noninterest income | 4,538 | | | 1,409 | | | 3,483 | | | 4,919 | | | 1,303 | | | (415) | | | 15,237 | | Total noninterest income | 2,567 | | | 966 | | | 1,480 | | | 2,958 | | | 806 | | | (406) | | | 8,371 | |
| Total revenue | Total revenue | $ | 16,257 | | | 4,696 | | | 7,467 | | | 6,476 | | | 2,242 | | | (679) | | | 36,459 | | Total revenue | $ | 8,563 | | | 2,327 | | | 3,470 | | | 3,757 | | | (12) | | | (513) | | | 17,592 | |
| | Quarter ended March 31, 2021 | | Quarter ended March 31, 2021 |
| Net interest income (2) | | Net interest income (2) | $ | 5,615 | | | 1,254 | | | 1,779 | | | 657 | | | (390) | | | (107) | | | 8,808 | |
| Noninterest income: | | Noninterest income: | |
| Deposit-related fees | | Deposit-related fees | 661 | | | 317 | | | 266 | | | 7 | | | 4 | | | — | | | 1,255 | |
| Lending-related fees (2) | | Lending-related fees (2) | 40 | | | 136 | | | 183 | | | 2 | | | — | | | — | | | 361 | |
| Investment advisory and other asset-based fees (3) | | Investment advisory and other asset-based fees (3) | — | | | 5 | | | 22 | | | 2,306 | | | 423 | | | — | | | 2,756 | |
| Commissions and brokerage services fees | | Commissions and brokerage services fees | — | | | — | | | 81 | | | 555 | | | — | | | — | | | 636 | |
| Investment banking fees | | Investment banking fees | (6) | | | 13 | | | 611 | | | (1) | | | (49) | | | — | | | 568 | |
| Card fees: | | Card fees: | |
| Card interchange and network revenues (4) | | Card interchange and network revenues (4) | 778 | | | 45 | | | 10 | | | 1 | | | — | | | — | | | 834 | |
| Other card fees (2) | | Other card fees (2) | 114 | | | — | | | — | | | — | | | 1 | | | — | | | 115 | |
| Total card fees | | Total card fees | 892 | | | 45 | | | 10 | | | 1 | | | 1 | | | — | | | 949 | |
| Mortgage banking (2) | | Mortgage banking (2) | 1,259 | | | — | | | 70 | | | (3) | | | — | | | — | | | 1,326 | |
| Net gains from trading activities (2) | | Net gains from trading activities (2) | 1 | | | 2 | | | 331 | | | 6 | | | 8 | | | — | | | 348 | |
| Net gains from debt securities (2) | | Net gains from debt securities (2) | — | | | — | | | — | | | — | | | 151 | | | — | | | 151 | |
| Net gains from equity securities (2) | | Net gains from equity securities (2) | 34 | | | 13 | | | 75 | | | — | | | 270 | | | — | | | 392 | |
| Lease income (2) | | Lease income (2) | — | | | 174 | | | 1 | | | — | | | 140 | | | — | | | 315 | |
| Other (2) | | Other (2) | 158 | | | 122 | | | 175 | | | 14 | | | 469 | | | (271) | | | 667 | |
| Total noninterest income | | Total noninterest income | 3,039 | | | 827 | | | 1,825 | | | 2,887 | | | 1,417 | | | (271) | | | 9,724 | |
| Total revenue | | Total revenue | $ | 8,654 | | | 2,081 | | | 3,604 | | | 3,544 | | | 1,027 | | | (378) | | | 18,532 | |
| |
(1)Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for low-income housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.
(2)These revenues are related to financial assets and liabilities, including loans, leases, securities and derivatives, with additional details included in other footnotes to our financial statements.
(3)We earned trailing commissions of $300$271 million and $598$298 million for the second quarterquarters ended March 31, 2022 and first half of 2021, respectively, and $257 million and $532 million for the second quarter and first half of 2020, respectively.
(4)The cost of credit card rewards and rebates of $373$482 million and $683$310 million for the second quarterquarters ended March 31, 2022 and first half of 2021, respectively, and $266 million and $651 million for the second quarter and first half of 2020, respectively, are presented net against the related revenues.
INVESTMENT ADVISORY AND OTHER ASSET-BASED FEES
are earned for providing brokerage advisory, asset management and trust services.
Fees from advisory account relationships with brokerage customers are charged based on a percentage of the market value of the client’s assets. Services and obligations related to providing investment advice, active management of client assets, and assistance with selecting and engaging a third-party advisory manager are generally satisfied over a month or quarter. Trailing commissions are earned for selling shares to investors and our obligation is satisfied at the time shares are sold. However, these fees are received and recognized over time during the period the customer owns the shares and we remain the broker of record. The amount of trailing commissions is variable based on the length of time the customer holds the shares and on changes in the value of the underlying assets.
Asset management services include managing and administering assets, including mutual funds, and institutional separate accounts. Fees for these services are generally determined based on a tiered scale relative to the market value of assets under management (AUM). In addition to AUM, we have client assets under administration (AUA) that earn various administrative fees which are generally based on the extent of the services provided to administer the account. Services with AUM and AUA-based fees are generally satisfied over time.
Trust services include acting as a trustee or agent for corporate trust, personal trust, and agency assets. Obligations for trust services are generally satisfied over time; however, obligations for activities that are transitional in nature are satisfied at the time of the transaction.
COMMISSIONS AND BROKERAGE SERVICES FEES are earned for providing brokerage services.
Commissions from transactional accounts with brokerage customers are earned for executing transactions at the client’s direction. Our obligation is generally satisfied upon the execution of the transaction and the fees are based on the size and number of transactions executed.
Fees earned from other brokerage services include securities clearance, omnibus and networking fees received from mutual fund companies in return for providing record keeping and other administrative services, and annual account maintenance fees charged to customers. Our obligation is satisfied at the time we provide the service which is generally at the time of the transaction.
For a description of our other revenues, see Note 20 (Revenue from Contracts with Customers) in our 2020 Form 10-K.
| | | | | | | | |
| 124 | Wells Fargo & Company | 137 |
| | |
Note 18: Employee Benefits and Other Expenses |
Pension and Postretirement Plans
We sponsor a frozen noncontributory qualified defined benefit retirement plan, the Wells Fargo & Company Cash Balance Plan (Cash Balance Plan), which covers eligible employees of Wells Fargo. The Cash Balance Plan was frozen on July 1, 2009, and 0no new benefits accrue after that date. For additional information on our pension and postretirement plans, including plan assumptions, investment strategy and asset allocation, projected benefit payments, and valuation methodologies used for assets measured at fair value, see Note 1 (Summary of Significant Accounting Policies) and Note 21 (Employee Benefits and Other Expenses) in our 20202021 Form 10-K.
We recognize settlement losses for our Cash Balance Plan based on an assessment of whether lump sum benefit payments will, in aggregate for the year, exceed the sum of its annual service and interest cost (threshold). Settlement losses of $62 million and $70$47 million were recognized during secondfirst quarter 2021 and 2020, respectively,2022, representing the pro rata portion of the net loss in cumulative other comprehensive income based on the percentage reduction
Plan’s projected benefit obligation attributable to lump sum benefit payments during the first half of both 2021 and 2020.quarter 2022. There were 0 settlement losses recognized during first quarter 2021. As a result of the settlement losses, we re-measuredremeasured the Cash Balance Plan obligation and plan assets as of both June 30, 2021 and 2020,March 31, 2022, and used a discount rate of 2.80% and 2.75%, respectively, based on our consistent methodology of determining our discount rate using a yield curve with maturity dates that closely match3.65%. In first quarter 2022, the estimated timing of the expected benefit payments. The result of the settlement losses and remeasurement increasedwas:
•an increase of $10 million in the Cash Balance Plan asset by $347asset; and
•an increase of $57 million andin other comprehensive income (pre-tax) by $409 million in second quarter 2021, and increased the Cash Balance Plan liability by $674 million and decreased other comprehensive income (pre-tax) by $604 million in second quarter 2020..
Table 18.1 presents the components of net periodic benefit cost. The expected long-term rate of return on plan assets and interest cost discount rate in determining net periodic benefit cost for first quarter 2022 were 5.00% and 2.47%, respectively. Service cost is reported in personnel expense and all other components of net periodic benefit cost are reported in other noninterest expense on the consolidated statement of income.
Table 18.1: Net Periodic Benefit Cost
| | | 2021 | | 2020 | | | 2022 | | 2021 | |
| | Pension benefits | | | Pension benefits | | | | Pension benefits | | | Pension benefits | | |
| (in millions) | (in millions) | Qualified | | Non- qualified | | Other benefits | | Qualified | | Non- qualified | | Other benefits | | (in millions) | Qualified | | Non- qualified | | Other benefits | | Qualified | | Non- qualified | | Other benefits | |
| Quarter ended June 30, | | | |
| | Quarter ended March 31, | | Quarter ended March 31, | | |
| Service cost | Service cost | $ | 5 | | | 0 | | | 0 | | | 4 | | | 0 | | | 0 | | | Service cost | $ | 5 | | | — | | | — | | | 4 | | | — | | | — | | |
| Interest cost | Interest cost | 71 | | | 3 | | | 3 | | | 86 | | | 4 | | | 4 | | | Interest cost | 67 | | | 2 | | | 2 | | | 71 | | | 3 | | | 3 | | |
| Expected return on plan assets | Expected return on plan assets | (154) | | | 0 | | | (4) | | | (149) | | | 0 | | | (5) | | | Expected return on plan assets | (139) | | | — | | | (5) | | | (152) | | | — | | | (5) | | |
| Amortization of net actuarial loss (gain) | Amortization of net actuarial loss (gain) | 38 | | | 3 | | | (5) | | | 35 | | | 3 | | | (4) | | | Amortization of net actuarial loss (gain) | 33 | | | 3 | | | (5) | | | 37 | | | 4 | | | (5) | | |
| Amortization of prior service credit | Amortization of prior service credit | 0 | | | 0 | | | (3) | | | 0 | | | 0 | | | (3) | | | Amortization of prior service credit | — | | | — | | | (3) | | | — | | | — | | | (2) | | |
| Settlement loss | Settlement loss | 62 | | | 0 | | | 0 | | | 70 | | | 0 | | | 0 | | | Settlement loss | 47 | | | 1 | | | — | | | — | | | 2 | | | — | | |
| Net periodic benefit cost | Net periodic benefit cost | $ | 22 | | | 6 | | | (9) | | | 46 | | | 7 | | | (8) | | | Net periodic benefit cost | $ | 13 | | | 6 | | | (11) | | | (40) | | | 9 | | | (9) | | |
| Six months ended June 30, | | | |
| Service cost | $ | 9 | | | 0 | | | 0 | | | 7 | | | 0 | | | 0 | | | |
| Interest cost | 142 | | | 6 | | | 6 | | | 172 | | | 8 | | | 8 | | | |
| Expected return on plan assets | (306) | | | 0 | | | (9) | | | (297) | | | 0 | | | (11) | | | |
| Amortization of net actuarial loss (gain) | 75 | | | 7 | | | (10) | | | 71 | | | 7 | | | (9) | | | |
| Amortization of prior service credit | 0 | | | 0 | | | (5) | | | 0 | | | 0 | | | (5) | | | |
| Settlement loss | 62 | | | 2 | | | 0 | | | 70 | | | 3 | | | 0 | | | |
| Net periodic benefit cost | $ | (18) | | | 15 | | | (18) | | | 23 | | | 18 | | | (17) | | | |
Other Expenses
Regulatory Charges and Assessments expense, which is included in other noninterest expense, was $192 million and $409$225 million in the secondfirst quarter and first half of 2021, respectively,2022, compared with $211 million and $374$217 million in the same periodsperiod a year ago, and primarily consisted of Federal Deposit Insurance Corporation (FDIC) deposit assessment expense.
| | | | | | | | |
138 | Wells Fargo & Company | 125 |
| | |
Note 19: Restructuring Charges |
The Company began pursuing various initiatives to reduce expenses and create a more efficient and streamlined organization in third quarter 2020. Actions from these initiatives may includeincluded (i) reorganizing and simplifying business processes and structures to improve internal operations and the customer experience, (ii) reducing headcount, (iii) optimizing third-party spending, including for our technology infrastructure, and (iv) rationalizing our branch and administrative locations, which may include consolidations and closures.
Restructuring Substantially all of the 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 – Severancewere personnel expenses related to severance costs associated with headcount reductions with
payments made over time in accordance with our severance plan, as well as payments for other employee benefit costs such as incentive compensation.
•Facility closure costs – Write-downs and accelerationRestructuring charges are recorded as a component of depreciation and amortizationnoninterest expense on our consolidated statement of owned or leased assets for branch and administrative locations,income. Changes in estimates represent adjustments to noninterest expense based on refinements to previously estimated amounts, which may reflect trends such as higher voluntary employee attrition, as well as related decommissioning costs.
•Other – Impairment of other assets and costs associated with our technology infrastructure.
Table 19.1 provides details on our restructuring charges.
Table 19.1: Accruals for Restructuring Charges
| | | | | | | | | | | | | | | | | | Quarter ended March 31, | |
| (in millions) | (in millions) | Personnel costs | Facility closure costs | Other | Total | (in millions) | | 2022 | | 2021 | |
| Quarter ended June 30, 2021 | | |
| Balance, beginning of period | Balance, beginning of period | $ | 1,010 | | 0 | | 44 | | 1,054 | | Balance, beginning of period | | $ | 565 | | | 1,214 | | |
| Restructuring charges | Restructuring charges | 155 | | 3 | | 0 | | 158 | | Restructuring charges | | — | | | 145 | | |
| Changes in estimates | | Changes in estimates | | 5 | | | (132) | | |
| Payments and utilization | Payments and utilization | (213) | | 4 | | (37) | | (246) | | Payments and utilization | | (99) | | | (173) | | |
| Changes in estimates (1) | (148) | | (7) | | (7) | | (162) | | |
| Balance, end of period | Balance, end of period | $ | 804 | | 0 | | 0 | | 804 | | Balance, end of period | | $ | 471 | | | 1,054 | | |
| Six months ended June 30, 2021 | | |
| Balance, beginning of period | $ | 1,170 | | 0 | | 44 | | 1,214 | | |
| Restructuring charges | 285 | | 18 | | 0 | | 303 | | |
| Payments and utilization | (370) | | (11) | | (38) | | (419) | | |
| Changes in estimates (1) | (281) | | (7) | | (6) | | (294) | | |
| Balance, end of period | $ | 804 | | 0 | | 0 | | 804 | | |
| Year ended December 31, 2020 | | |
| Balance, beginning of year | $ | 0 | | 0 | | 0 | | 0 | | |
| Restructuring charges | 1,371 | | 80 | | 144 | | 1,595 | | |
| Payments and utilization | (105) | | (80) | | (100) | | (285) | | |
| Changes in estimates (1) | (96) | | 0 | | 0 | | (96) | | |
| Balance, end of year | $ | 1,170 | | 0 | | 44 | | 1,214 | | |
(1)Represents reduction of expense for changes in previously estimated amounts based on refinements of assumptions.
| | | | | | | | |
| 126 | Wells Fargo & Company | 139 |
| | |
Note 20: Earnings and Dividends Per Common Share |
Table 20.1 shows earnings per common share and diluted earnings per common share and reconciles the numerator and denominator of both earnings per common share calculations.
Table 20.1: Earnings Per Common Share Calculations
| | | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended March 31, |
| (in millions, except per share amounts) | (in millions, except per share amounts) | 2021 | | 2020 | | 2021 | | 2020 | | (in millions, except per share amounts) | | 2022 | | 2021 | |
| Wells Fargo net income (loss) (1) | $ | 6,040 | | | $ | (3,846) | | | $ | 10,676 | | | (2,930) | | | |
| Wells Fargo net income | | Wells Fargo net income | | $ | 3,671 | | | 4,636 | | |
Less: Preferred stock dividends and other (2)(1) | Less: Preferred stock dividends and other (2)(1) | 297 | | | 314 | | | 677 | | | 926 | | | Less: Preferred stock dividends and other (2)(1) | | 278 | | | 380 | | |
| Wells Fargo net income (loss) applicable to common stock (numerator) (1) | $ | 5,743 | | | (4,160) | | | $ | 9,999 | | | (3,856) | | | |
| Wells Fargo net income applicable to common stock (numerator) | | Wells Fargo net income applicable to common stock (numerator) | | $ | 3,393 | | | 4,256 | | |
| Earnings per common share | Earnings per common share | | | Earnings per common share | | | |
| Average common shares outstanding (denominator) | Average common shares outstanding (denominator) | 4,124.6 | | | 4,105.5 | | | 4,132.9 | | | 4,105.2 | | | Average common shares outstanding (denominator) | | 3,831.1 | | | 4,141.3 | | |
| Per share | Per share | $ | 1.39 | | | (1.01) | | | $ | 2.42 | | | (0.94) | | | Per share | | $ | 0.89 | | | 1.03 | | |
| Diluted earnings per common share | Diluted earnings per common share | | | Diluted earnings per common share | | | |
| Average common shares outstanding | Average common shares outstanding | 4,124.6 | | | 4,105.5 | | | 4,132.9 | | | 4,105.2 | | | Average common shares outstanding | | 3,831.1 | | | 4,141.3 | | |
| | Add: Restricted share rights (3) | 31.5 | | | 0 | | | 31.7 | | | 0 | | | |
| Add: | | Add: | Restricted share rights (2) | | 37.8 | | | 29.7 | | |
| Diluted average common shares outstanding (denominator) | Diluted average common shares outstanding (denominator) | 4,156.1 | | | 4,105.5 | | | 4,164.6 | | | 4,105.2 | | | Diluted average common shares outstanding (denominator) | | 3,868.9 | | | 4,171.0 | | |
| Per share | Per share | $ | 1.38 | | | (1.01) | | | $ | 2.40 | | | (0.94) | | | Per share | | $ | 0.88 | | | 1.02 | | |
(1)In second quarter 2021, we elected to change our accounting method for low-income housing tax credit investments and elected to change the presentation of investment tax credits related to solar energy investments. Prior period balances have been revised to conform with the current period presentation. For additional information, see Note 1 (Summary of Significant Accounting Policies).
(2)The quarter ended June 30,March 31, 2021, balance included$4includes $44 million and the six months ended June 30, 2021 and 2020, includes $48 million and $272 million, respectively, from the elimination of discounts or issuance costs associated with redemptions of preferred stock.
(3)(2)Calculated using the treasury stock method. In the second quarter and first half of 2020, diluted average common shares outstanding equaled average common shares outstanding because our securities convertible into common shares had an anti-dilutive effect.
Table 20.2 presents the outstanding securities that were anti-dilutive and therefore not included in the calculation of diluted earnings per common share.
Table 20.2: Outstanding Anti-Dilutive Securities
| | | | | Weighted-average shares | | | Weighted-average shares |
| | Quarter ended June 30, | | Six months ended June 30, | | | | Quarter ended March 31, |
| (in millions) | (in millions) | 2021 | | 2020 | | 2021 | | 2020 | | (in millions) | | 2022 | | 2021 | |
| Convertible Preferred Stock, Series L (1) | Convertible Preferred Stock, Series L (1) | 25.3 | | | 25.3 | | | 25.3 | | | 25.3 | | | Convertible Preferred Stock, Series L (1) | | 25.3 | | | 25.3 | | |
| Restricted share rights (2) | Restricted share rights (2) | 0.2 | | | 35.9 | | | 0.1 | | | 0.9 | | | Restricted share rights (2) | | 0.1 | | | 0.3 | | |
|
(1) Calculated using the if-converted method.
(2) Calculated using the treasury stock method. Since we had net losses attributable to common shareholders for the second quarter and first half of 2020, all RSRs outstanding were anti-dilutive. Weighted average RSRs outstanding were 50.7 million and 54.7 million for the second quarter and first half of 2020, respectively.
Table 20.3 presents dividends declared per common share.
Table 20.3: Dividends Declared Per Common Share
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter ended June 30, | | Six months ended June 30, | | |
| 2021 | | 2020 | | 2021 | | 2020 | | |
| Per common share | $ | 0.10 | | | $ | 0.51 | | | $ | 0.20 | | | 1.02 | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | Quarter ended March 31, |
| | | | | 2022 | | 2021 | | |
| Per common share | | | | | $ | 0.25 | | | 0.10 | | | |
| | | | | | | | | |
| | | | | | | | |
140 | Wells Fargo & Company | 127 |
| | |
Note 21: Other Comprehensive Income |
Table 21.1 provides the components of other comprehensive income (OCI), reclassifications to net income by income statement line item, and the related tax effects.
Table 21.1: Summary of Other Comprehensive Income
| | | Quarter ended June 30, | | Six months ended June 30, | | | Quarter ended March 31, |
| | 2021 | | 2020 | | 2021 | | 2020 | | | | 2022 | | 2021 | |
| (in millions) | (in millions) | Before
tax | | Tax
effect | | Net of
tax | | Before
tax | | Tax
effect | | Net of
tax | | Before
tax | | Tax
effect | | Net of
tax | | Before
tax | | Tax
effect | | Net of
tax | | (in millions) | | Before
tax | | Tax
effect | | Net of
tax | | Before
tax | | Tax
effect | | Net of
tax | |
| Debt securities: | Debt securities: | | | Debt securities: | | | | | |
| Net unrealized gains (losses) arising during the period | Net unrealized gains (losses) arising during the period | $ | 272 | | | (68) | | | 204 | | | 1,596 | | | (395) | | | 1,201 | | | (1,740) | | | 432 | | | (1,308) | | | 1,486 | | | (373) | | | 1,113 | | | Net unrealized gains (losses) arising during the period | | $ | (6,888) | | | 1,697 | | | (5,191) | | | (2,012) | | | 500 | | | (1,512) | | |
| Reclassification of net (gains) losses to net income: | | | |
| Interest income on debt securities (1) | 134 | | | (33) | | | 101 | | | 123 | | | (31) | | | 92 | | | 271 | | | (67) | | | 204 | | | 189 | | | (47) | | | 142 | | | |
| Net gains on debt securities | 0 | | | 0 | | | 0 | | | (212) | | | 63 | | | (149) | | | (151) | | | 35 | | | (116) | | | (449) | | | 111 | | | (338) | | | |
| Other noninterest income | (2) | | | 1 | | | (1) | | | (1) | | | 0 | | | (1) | | | (2) | | | 1 | | | (1) | | | (2) | | | 0 | | | (2) | | | |
| Subtotal reclassifications to net income | 132 | | | (32) | | | 100 | | | (90) | | | 32 | | | (58) | | | 118 | | | (31) | | | 87 | | | (262) | | | 64 | | | (198) | | | |
| Reclassification of net (gains) losses to net income | | Reclassification of net (gains) losses to net income | | 58 | | | (15) | | | 43 | | | (14) | | | 1 | | | (13) | | |
| Net change | Net change | 404 | | | (100) | | | 304 | | | 1,506 | | | (363) | | | 1,143 | | | (1,622) | | | 401 | | | (1,221) | | | 1,224 | | | (309) | | | 915 | | | Net change | | (6,830) | | | 1,682 | | | (5,148) | | | (2,026) | | | 501 | | | (1,525) | | |
| Derivatives and hedging activities: | Derivatives and hedging activities: | | | Derivatives and hedging activities: | | | |
| Fair Value Hedges: | Fair Value Hedges: | | | Fair Value Hedges: | | | |
| Change in fair value of excluded components on fair value hedges (2) | (14) | | | 3 | | | (11) | | | (57) | | | 13 | | | (44) | | | 11 | | | (3) | | | 8 | | | 87 | | | (22) | | | 65 | | | |
| Change in fair value of excluded components on fair value hedges (1) | | Change in fair value of excluded components on fair value hedges (1) | | 64 | | | (16) | | | 48 | | | 25 | | | (6) | | | 19 | | |
| Cash Flow Hedges: | Cash Flow Hedges: | | | Cash Flow Hedges: | | | |
| Net unrealized gains (losses) arising during the period on cash flow hedges | Net unrealized gains (losses) arising during the period on cash flow hedges | 11 | | | (3) | | | 8 | | | 5 | | | (1) | | | 4 | | | (20) | | | 5 | | | (15) | | | (15) | | | 4 | | | (11) | | | Net unrealized gains (losses) arising during the period on cash flow hedges | | (51) | | | 13 | | | (38) | | | (31) | | | 8 | | | (23) | | |
| Reclassification of net (gains) losses to net income: | | | |
| Interest income on loans | 39 | | | (10) | | | 29 | | | 53 | | | (12) | | | 41 | | | 91 | | | (23) | | | 68 | | | 109 | | | (26) | | | 83 | | | |
| Interest expense on long-term debt | 1 | | | 0 | | | 1 | | | 2 | | | 0 | | | 2 | | | 2 | | | 0 | | | 2 | | | 4 | | | (1) | | | 3 | | | |
| Subtotal reclassifications to net income | 40 | | | (10) | | | 30 | | | 55 | | | (12) | | | 43 | | | 93 | | | (23) | | | 70 | | | 113 | | | (27) | | | 86 | | | |
| Reclassification of net (gains) losses to net income | | Reclassification of net (gains) losses to net income | | 14 | | | (4) | | | 10 | | | 53 | | | (13) | | | 40 | | |
| Net change | Net change | 37 | | | (10) | | | 27 | | | 3 | | | 0 | | | 3 | | | 84 | | | (21) | | | 63 | | | 185 | | | (45) | | | 140 | | | Net change | | 27 | | | (7) | | | 20 | | | 47 | | | (11) | | | 36 | | |
| Defined benefit plans adjustments: | Defined benefit plans adjustments: | | | Defined benefit plans adjustments: | | | |
| Net actuarial and prior service gains (losses) arising during the period | Net actuarial and prior service gains (losses) arising during the period | 347 | | | (85) | | | 262 | | | (674) | | | 167 | | | (507) | | | 357 | | | (88) | | | 269 | | | (671) | | | 166 | | | (505) | | | Net actuarial and prior service gains (losses) arising during the period | | 19 | | | (5) | | | 14 | | | 10 | | | (3) | | | 7 | | |
| Reclassification of amounts to noninterest expense (3): | | | |
| Amortization of net actuarial loss | 36 | | | (9) | | | 27 | | | 34 | | | (9) | | | 25 | | | 72 | | | (18) | | | 54 | | | 69 | | | (17) | | | 52 | | | |
| Settlements and other | 59 | | | (14) | | | 45 | | | 67 | | | (16) | | | 51 | | | 59 | | | (13) | | | 46 | | | 68 | | | (16) | | | 52 | | | |
| Subtotal reclassifications to noninterest expense | 95 | | | (23) | | | 72 | | | 101 | | | (25) | | | 76 | | | 131 | | | (31) | | | 100 | | | 137 | | | (33) | | | 104 | | | |
| Reclassification of amounts to noninterest expense (2) | | Reclassification of amounts to noninterest expense (2) | | 76 | | | (18) | | | 58 | | | 36 | | | (8) | | | 28 | | |
| Net change | Net change | 442 | | | (108) | | | 334 | | | (573) | | | 142 | | | (431) | | | 488 | | | (119) | | | 369 | | | (534) | | | 133 | | | (401) | | | Net change | | 95 | | | (23) | | | 72 | | | 46 | | | (11) | | | 35 | | |
| | Debit valuation adjustments (DVA): | | Debit valuation adjustments (DVA): | | | |
| Net unrealized gains (losses) arising during the period | | Net unrealized gains (losses) arising during the period | | (4) | | | 1 | | | (3) | | | — | | | — | | | — | | |
| Reclassification of net (gains) losses to net income | | Reclassification of net (gains) losses to net income | | — | | | — | | | — | | | — | | | — | | | — | | |
| Net change | | Net change | | (4) | | | 1 | | | (3) | | | — | | | — | | | — | | |
| Foreign currency translation adjustments: | Foreign currency translation adjustments: | | | Foreign currency translation adjustments: | | | |
| Net unrealized gains (losses) arising during the period | Net unrealized gains (losses) arising during the period | 23 | | | (1) | | | 22 | | | 51 | | | 0 | | | 51 | | | 36 | | | (3) | | | 33 | | | (144) | | | 2 | | | (142) | | | Net unrealized gains (losses) arising during the period | | (6) | | | — | | | (6) | | | 13 | | | (2) | | | 11 | | |
| Reclassification of net (gains) losses to net income | | Reclassification of net (gains) losses to net income | | — | | | — | | | — | | | — | | | — | | | — | | |
| Net change | Net change | 23 | | | (1) | | | 22 | | | 51 | | | 0 | | | 51 | | | 36 | | | (3) | | | 33 | | | (144) | | | 2 | | | (142) | | | Net change | | (6) | | | — | | | (6) | | | 13 | | | (2) | | | 11 | | |
| Other comprehensive income (loss) | Other comprehensive income (loss) | $ | 906 | | | (219) | | | 687 | | | 987 | | | (221) | | | 766 | | | (1,014) | | | 258 | | | (756) | | | 731 | | | (219) | | | 512 | | | Other comprehensive income (loss) | | $ | (6,718) | | | 1,653 | | | (5,065) | | | (1,920) | | | 477 | | | (1,443) | | |
| Less: Other comprehensive income (loss) from noncontrolling interests, net of tax | | 1 | | | 0 | | | 2 | | | (1) | | | |
| Wells Fargo other comprehensive income (loss), net of tax | | $ | 686 | | | 766 | | | (758) | | | 513 | | | |
| Less: Other comprehensive income from noncontrolling interests, net of tax | | Less: Other comprehensive income from noncontrolling interests, net of tax | | | — | | | 1 | | |
| Wells Fargo other comprehensive loss, net of tax | | Wells Fargo other comprehensive loss, net of tax | | | $ | (5,065) | | | (1,444) | | |
(1)Represents net unrealized gains and losses amortized over the remaining lives of securities that were transferred from the available-for-sale portfolio to the held-to-maturity portfolio.
(2)Represents changes in fair value of cross-currency swaps attributable to changes in cross-currency basis spreads, which are excluded from the assessment of hedge effectiveness and recorded in other comprehensive income.
(3)(2)These items are included in the computation of net periodic benefit cost (see Note 18 (Employee Benefits and Other Expenses) for additional information).
| | | | | | | | |
| 128 | Wells Fargo & Company | 141 |
Note 21: Other Comprehensive Income (continued)
Table 21.2 provides the cumulative OCI balance activity on an after-tax basis.
Table 21.2: Cumulative OCI Balances
| | (in millions) | (in millions) | Debt
securities | | Fair value hedges (1) | | Cash flow hedges (2) | | Defined benefit plans adjustments | | | Foreign currency translation adjustments | | Cumulative other comprehensive income (loss) | (in millions) | Debt
securities | | Fair value hedges (1) | | Cash flow hedges (2) | | Defined benefit plans adjustments | | Debit valuation adjustments
(DVA) | | Foreign currency translation adjustments | | Cumulative other comprehensive income (loss) |
| Quarter ended June 30, 2021 | | | | |
| Balance, beginning of period | $ | 1,514 | | | (185) | | | (108) | | | (2,369) | | | | (102) | | | (1,250) | | |
| | Net unrealized gains (losses) arising during the period | 204 | | | (11) | | | 8 | | | 262 | | | | 22 | | | 485 | | |
| Amounts reclassified from accumulated other comprehensive income | 100 | | | 0 | | | 30 | | | 72 | | | | 0 | | | 202 | | |
| Net change | 304 | | | (11) | | | 38 | | | 334 | | | | 22 | | | 687 | | |
| Less: Other comprehensive income from noncontrolling interests | 1 | | | 0 | | | 0 | | | 0 | | | | 0 | | | 1 | | |
| Balance, end of period | $ | 1,817 | | | (196) | | | (70) | | | (2,035) | | | | (80) | | | (564) | | |
| Quarter ended June 30, 2020 | | | | |
| Balance, beginning of period | $ | 1,324 | | | (71) | | | (270) | | | (2,193) | | | | (354) | | | (1,564) | | |
| | Net unrealized gains (losses) arising during the period | 1,201 | | | (44) | | | 4 | | | (507) | | | | 51 | | | 705 | | |
| Amounts reclassified from accumulated other comprehensive income | (58) | | | 0 | | | 43 | | | 76 | | | | 0 | | | 61 | | |
| Net change | 1,143 | | | (44) | | | 47 | | | (431) | | | | 51 | | | 766 | | |
| Less: Other comprehensive income from noncontrolling interests | 0 | | | 0 | | | 0 | | | 0 | | | | 0 | | | 0 | | |
| Balance, end of period | $ | 2,467 | | | (115) | | | (223) | | | (2,624) | | | | (303) | | | (798) | | |
| Six months ended June 30, 2021 | | | | |
| Balance, beginning of period | $ | 3,039 | | | (204) | | | (125) | | | (2,404) | | | | (112) | | | 194 | | |
| | Net unrealized gains (losses) arising during the period | (1,308) | | | 8 | | | (15) | | | 269 | | | | 33 | | | (1,013) | | |
| Amounts reclassified from accumulated other comprehensive income | 87 | | | 0 | | | 70 | | | 100 | | | | 0 | | | 257 | | |
| Net change | (1,221) | | | 8 | | | 55 | | | 369 | | | | 33 | | | (756) | | |
| Less: Other comprehensive income from noncontrolling interests | 1 | | | 0 | | | 0 | | | 0 | | | | 1 | | | 2 | | |
| Balance, end of period | $ | 1,817 | | | (196) | | | (70) | | | (2,035) | | | | (80) | | | (564) | | |
| Six months ended June 30, 2020 | | | | |
| | Quarter ended March 31, 2022 | | Quarter ended March 31, 2022 | |
| | Balance, beginning of period | Balance, beginning of period | $ | 1,552 | | | (180) | | | (298) | | | (2,223) | | | | (162) | | | (1,311) | | Balance, beginning of period | $ | 665 | | | (143) | | | (27) | | | (2,055) | | | — | | | (142) | | | (1,702) | |
| Net unrealized gains (losses) arising during the period | Net unrealized gains (losses) arising during the period | 1,113 | | | 65 | | | (11) | | | (505) | | | | (142) | | | 520 | | Net unrealized gains (losses) arising during the period | (5,191) | | | 48 | | | (38) | | | 14 | | | (3) | | | (6) | | | (5,176) | |
| Amounts reclassified from accumulated other comprehensive income | Amounts reclassified from accumulated other comprehensive income | (198) | | | 0 | | | 86 | | | 104 | | | | 0 | | | (8) | | Amounts reclassified from accumulated other comprehensive income | 43 | | | — | | | 10 | | | 58 | | | — | | | — | | | 111 | |
| Net change | Net change | 915 | | | 65 | | | 75 | | | (401) | | | | (142) | | | 512 | | Net change | (5,148) | | | 48 | | | (28) | | | 72 | | | (3) | | | (6) | | | (5,065) | |
| Less: Other comprehensive loss from noncontrolling interests | 0 | | | 0 | | | 0 | | | 0 | | | | (1) | | | (1) | | |
| Less: Other comprehensive income from noncontrolling interests | | Less: Other comprehensive income from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Balance, end of period | | Balance, end of period | $ | (4,483) | | | (95) | | | (55) | | | (1,983) | | | (3) | | | (148) | | | (6,767) | |
| Quarter ended March 31, 2021 | | Quarter ended March 31, 2021 | |
| | Balance, beginning of period | | Balance, beginning of period | $ | 3,039 | | | (204) | | | (125) | | | (2,404) | | | — | | | (112) | | | 194 | |
| Net unrealized gains (losses) arising during the period | | Net unrealized gains (losses) arising during the period | (1,512) | | | 19 | | | (23) | | | 7 | | | — | | | 11 | | | (1,498) | |
| Amounts reclassified from accumulated other comprehensive income | | Amounts reclassified from accumulated other comprehensive income | (13) | | | — | | | 40 | | | 28 | | | — | | | — | | | 55 | |
| Net change | | Net change | (1,525) | | | 19 | | | 17 | | | 35 | | | — | | | 11 | | | (1,443) | |
| Less: Other comprehensive income from noncontrolling interests | | Less: Other comprehensive income from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 1 | | | 1 | |
| Balance, end of period | Balance, end of period | $ | 2,467 | | | (115) | | | (223) | | | (2,624) | | | | (303) | | | (798) | | Balance, end of period | $ | 1,514 | | | (185) | | | (108) | | | (2,369) | | | — | | | (102) | | | (1,250) | |
|
(1)Substantially all of the amounts for fair value hedges are foreign exchange contracts.
(2)Majority of the amounts for cash flow hedges are interest rate contracts.
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142 | Wells Fargo & Company | 129 |
| | |
Note 22: Operating Segments |
Our management reporting is organized into 4 reportable operating segments: Consumer Banking and Lending; Commercial Banking; Corporate and Investment Banking; and Wealth and Investment Management. All other business activities that are not included in the reportable operating segments have been included in Corporate. We define our reportable operating segments by type of product and customer segment, and their results are based on our management reporting process. The management reporting process measures the performance of the reportable operating segments based on the Company’s management structure, and the results are regularly reviewed by our Chief Executive Officer and Operating Committee. The management reporting process is based on U.S. GAAP and includes specific adjustments, such as funds transfer pricing for asset/liability management, shared revenues and expenses, and taxable-equivalent adjustments to consistently reflect income from taxable and tax-exempt sources, which allows management to assess performance consistently across the operating segments.
In March 2021, we announced an agreement to sell our Corporate Trust Services business and, in second quarter 2021, we moved the business from the Commercial Banking operating segment to Corporate. Prior period balances have been revised to conform with the current period presentation. This change did not impact the previously reported consolidated financial results of the Company.
In second quarter 2021, we elected to change our accounting method for low-income housing tax credit (LIHTC) investments and elected to change the presentation of investment tax credits related to solar energy investments. These accounting policy changes had a nominal impact on reportable operating segment results. Prior period financial statement line items for the Company, as well as for the reportable operating segments, have been revised to conform with the current period presentation. Our LIHTC investments are included in the Corporate and Investment Banking operating segment and our solar energy investments are included in the Commercial Banking operating segment. For additional information, see Note 1 (Summary of Significant Accounting Policies).
Consumer Banking and Lending offers diversified financial products and services for consumers and small businesses with annual sales generally up to $5$10 million. These financial products and services include checking and savings accounts, credit and debit cards, as well as home, auto, personal, and small business lending.
Commercial Banking provides financial solutions to private, family owned and certain public companies. Products and services include banking and credit products across multiple industry sectors and municipalities, secured lending and lease products, and treasury management.
Corporate and Investment Banking delivers a suite of capital markets, banking, and financial products and services to corporate, commercial real estate, government and institutional clients globally. Products and services include corporate banking, investment banking, treasury management, commercial real estate lending and servicing, equity and fixed income solutions, as well as sales, trading, and research capabilities.
Wealth and Investment Managementprovides personalized wealth management, investmentbrokerage, financial planning, lending, private banking, trust and retirementfiduciary products and services to clients across U.S.-based businesses including Wells Fargo Advisors and The Private Bank. We serve clients’ brokerage needs, and deliver financial planning, private banking, credit, and fiduciary services toaffluent, high-net worth and ultra-high-net worth individualsclients. We operate through financial advisors in our brokerage and families.wealth offices, consumer bank branches, independent offices, and digitally through WellsTrade® and Intuitive Investor®.
Corporate includes corporate treasury and enterprise functions, net of allocations (including funds transfer pricing, capital, liquidity and certain expenses), in support of the reportable operating segments, as well as our investment portfolio and affiliated venture capital and private equity businesses. In addition, Corporate includes all restructuring charges related to our efficiency initiatives. See Note 19 (Restructuring Charges) for additional information on restructuring charges. Corporate also includes certain lines of business that management has determined are no longer consistent with the long-term strategic goals of the Company, as well as results for previously divested businesses.
Basis of Presentation
FUNDS TRANSFER PRICING Corporate treasury manages a funds transfer pricing methodology that considers interest rate risk, liquidity risk, and other product characteristics. Operating segments pay a funding charge for their assets and receive a funding credit for their deposits, both of which are included in net interest income. The net impact of the funding charges or credits is recognized in corporate treasury.
REVENUE AND EXPENSE SHARING When lines of business jointly serve customers, the line of business that is responsible for providing the product or service recognizes revenue or expense with a referral fee paid or an allocation of cost to the other line of business based on established internal revenue-sharing agreements.
When a line of business uses a service provided by another line of business or enterprise function (included in Corporate), expense is generally allocated based on the cost and use of the service provided.
TAXABLE-EQUIVALENT ADJUSTMENTS Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for low-income housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.
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| 130 | Wells Fargo & Company | 143 |
Note 22: Operating Segments (continued)
Table 22.1 presents our results by operating segment.
Table 22.1: Operating Segments
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(in millions) | Consumer Banking and Lending | | Commercial Banking | | Corporate and Investment Banking | | Wealth and Investment Management | | Corporate | | Reconciling Items (1) | | Consolidated
Company |
| Quarter ended June 30, 2021 | | | | | | | | | | | | | |
| Net interest income (2) | $ | 5,618 | | | 1,202 | | | 1,783 | | | 610 | | | (304) | | | (109) | | | 8,800 | |
| Noninterest income | 3,068 | | | 906 | | | 1,555 | | | 2,926 | | | 3,327 | | | (312) | | | 11,470 | |
| Total revenue | 8,686 | | | 2,108 | | | 3,338 | | | 3,536 | | | 3,023 | | | (421) | | | 20,270 | |
| Provision for credit losses | (367) | | | (382) | | | (501) | | | 24 | | | (34) | | | 0 | | | (1,260) | |
| Noninterest expense | 6,202 | | | 1,443 | | | 1,805 | | | 2,891 | | | 1,000 | | | 0 | | | 13,341 | |
| Income (loss) before income tax expense (benefit) | 2,851 | | | 1,047 | | | 2,034 | | | 621 | | | 2,057 | | | (421) | | | 8,189 | |
| Income tax expense (benefit) | 713 | | | 261 | | | 513 | | | 156 | | | 223 | | | (421) | | | 1,445 | |
| Net income before noncontrolling interests | 2,138 | | | 786 | | | 1,521 | | | 465 | | | 1,834 | | | 0 | | | 6,744 | |
| Less: Net income (loss) from noncontrolling interests | 0 | | | 2 | | | (2) | | | 0 | | | 704 | | | 0 | | | 704 | |
| Net income | $ | 2,138 | | | 784 | | | 1,523 | | | 465 | | | 1,130 | | | 0 | | | 6,040 | |
| Quarter ended June 30, 2020 | | | | | | | | | | | | | |
| Net interest income (2) | $ | 5,717 | | | 1,554 | | | 1,963 | | | 719 | | | 60 | | | (121) | | | 9,892 | |
| Noninterest income | 1,891 | | | 797 | | | 2,096 | | | 2,487 | | | 1,318 | | | (195) | | | 8,394 | |
| Total revenue | 7,608 | | | 2,351 | | | 4,059 | | | 3,206 | | | 1,378 | | | (316) | | | 18,286 | |
| Provision for credit losses | 3,102 | | | 2,295 | | | 3,756 | | | 255 | | | 126 | | | 0 | | | 9,534 | |
| Noninterest expense | 6,933 | | | 1,580 | | | 2,044 | | | 2,743 | | | 1,251 | | | 0 | | | 14,551 | |
| Income (loss) before income tax expense (benefit) | (2,427) | | | (1,524) | | | (1,741) | | | 208 | | | 1 | | | (316) | | | (5,799) | |
| Income tax expense (benefit) | (650) | | | (379) | | | (408) | | | 52 | | | (300) | | | (316) | | | (2,001) | |
| Net income (loss) before noncontrolling interests | (1,777) | | | (1,145) | | | (1,333) | | | 156 | | | 301 | | | 0 | | | (3,798) | |
| Less: Net income from noncontrolling interests | 0 | | | 1 | | | 0 | | | 0 | | | 47 | | | 0 | | | 48 | |
| Net income (loss) | $ | (1,777) | | | (1,146) | | | (1,333) | | | 156 | | | 254 | | | 0 | | | (3,846) | |
| Six months ended June 30, 2021 | | | | | | | | | | | | | |
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| Net interest income (2) | $ | 11,233 | | | 2,456 | | | 3,562 | | | 1,267 | | | (694) | | | (216) | | | 17,608 | |
| Noninterest income | 6,107 | | | 1,733 | | | 3,380 | | | 5,813 | | | 4,744 | | | (583) | | | 21,194 | |
| Total revenue | 17,340 | | | 4,189 | | | 6,942 | | | 7,080 | | | 4,050 | | | (799) | | | 38,802 | |
| Provision for credit losses | (786) | | | (781) | | | (785) | | | (19) | | | 63 | | | 0 | | | (2,308) | |
| Noninterest expense | 12,469 | | | 3,073 | | | 3,638 | | | 5,919 | | | 2,231 | | | 0 | | | 27,330 | |
| Income (loss) before income tax expense (benefit) | 5,657 | | | 1,897 | | | 4,089 | | | 1,180 | | | 1,756 | | | (799) | | | 13,780 | |
| Income tax expense (benefit) | 1,415 | | | 473 | | | 1,013 | | | 296 | | | (52) | | | (799) | | | 2,346 | |
| Net income before noncontrolling interests | 4,242 | | | 1,424 | | | 3,076 | | | 884 | | | 1,808 | | | 0 | | | 11,434 | |
| Less: Net income (loss) from noncontrolling interests | 0 | | | 3 | | | (2) | | | 0 | | | 757 | | | 0 | | | 758 | |
| Net income | $ | 4,242 | | | 1,421 | | | 3,078 | | | 884 | | | 1,051 | | | 0 | | | 10,676 | |
| Six months ended June 30, 2020 | | | | | | | | | | | | | |
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| Net interest income (2) | $ | 11,719 | | | 3,287 | | | 3,984 | | | 1,557 | | | 939 | | | (264) | | | 21,222 | |
| Noninterest income | 4,538 | | | 1,409 | | | 3,483 | | | 4,919 | | | 1,303 | | | (415) | | | 15,237 | |
| Total revenue | 16,257 | | | 4,696 | | | 7,467 | | | 6,476 | | | 2,242 | | | (679) | | | 36,459 | |
| Provision for credit losses | 4,671 | | | 3,336 | | | 4,881 | | | 263 | | | 388 | | | 0 | | | 13,539 | |
| Noninterest expense | 13,190 | | | 3,153 | | | 3,914 | | | 5,400 | | | 1,942 | | | 0 | | | 27,599 | |
| Income (loss) before income tax expense (benefit) | (1,604) | | | (1,793) | | | (1,328) | | | 813 | | | (88) | | | (679) | | | (4,679) | |
| Income tax expense (benefit) | (445) | | | (442) | | | (307) | | | 204 | | | 21 | | | (679) | | | (1,648) | |
| Net income (loss) before noncontrolling interests | (1,159) | | | (1,351) | | | (1,021) | | | 609 | | | (109) | | | 0 | | | (3,031) | |
| Less: Net income (loss) from noncontrolling interests | 0 | | | 2 | | | 0 | | | 0 | | | (103) | | | 0 | | | (101) | |
| Net income (loss) | $ | (1,159) | | | (1,353) | | | (1,021) | | | 609 | | | (6) | | | 0 | | | (2,930) | |
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(in millions) | |
(in millions) | Consumer Banking and Lending | | Commercial Banking | | Corporate and Investment Banking | | Wealth and Investment Management | | Corporate | | Reconciling Items (1) | | Consolidated
Company |
| | | (continued from previous page) | | |
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| Consumer Banking and Lending | | Commercial Banking | | Corporate and Investment Banking | | Wealth and Investment Management | | Corporate | | Reconciling Items (1) | | Consolidated
Company | |
| Quarter ended June 30, 2021 | | |
| Loans (average) | $ | 331,892 | | | 178,572 | | | 252,422 | | | 81,784 | | | 10,077 | | | 0 | | | 854,747 | | |
| Assets (average) | 388,617 | | | 195,453 | | | 513,414 | | | 87,766 | | | 754,629 | | | 0 | | | 1,939,879 | | |
| Deposits (average) | 835,752 | | | 192,586 | | | 190,810 | | | 174,980 | | | 41,696 | | | 0 | | | 1,435,824 | | |
| | Six months ended June 30, 2021 | | |
| | | Quarter ended March 31, 2022 | | Quarter ended March 31, 2022 | |
| Net interest income (2) | | Net interest income (2) | $ | 5,996 | | | 1,361 | | | 1,990 | | | 799 | | | (818) | | | (107) | | | 9,221 | |
| Noninterest income | | Noninterest income | 2,567 | | | 966 | | | 1,480 | | | 2,958 | | | 806 | | | (406) | | | 8,371 | |
| Total revenue | | Total revenue | 8,563 | | | 2,327 | | | 3,470 | | | 3,757 | | | (12) | | | (513) | | | 17,592 | |
| Provision for credit losses | | Provision for credit losses | (190) | | | (344) | | | (196) | | | (37) | | | (20) | | | — | | | (787) | |
| Noninterest expense | | Noninterest expense | 6,395 | | | 1,531 | | | 1,983 | | | 3,175 | | | 786 | | | — | | | 13,870 | |
| Income (loss) before income tax expense (benefit) | | Income (loss) before income tax expense (benefit) | 2,358 | | | 1,140 | | | 1,683 | | | 619 | | | (778) | | | (513) | | | 4,509 | |
| Income tax expense (benefit) | | Income tax expense (benefit) | 588 | | | 280 | | | 425 | | | 154 | | | (227) | | | (513) | | | 707 | |
| Net income (loss) before noncontrolling interests | | Net income (loss) before noncontrolling interests | 1,770 | | | 860 | | | 1,258 | | | 465 | | | (551) | | | — | | | 3,802 | |
| Less: Net income from noncontrolling interests | | Less: Net income from noncontrolling interests | — | | | 3 | | | — | | | — | | | 128 | | | — | | | 131 | |
| Net income (loss) | | Net income (loss) | $ | 1,770 | | | 857 | | | 1,258 | | | 465 | | | (679) | | | — | | | 3,671 | |
| Quarter ended March 31, 2021 | | Quarter ended March 31, 2021 | |
| Net interest income (2) | | Net interest income (2) | $ | 5,615 | | | 1,254 | | | 1,779 | | | 657 | | | (390) | | | (107) | | | 8,808 | |
| Noninterest income | | Noninterest income | 3,039 | | | 827 | | | 1,825 | | | 2,887 | | | 1,417 | | | (271) | | | 9,724 | |
| Total revenue | | Total revenue | 8,654 | | | 2,081 | | | 3,604 | | | 3,544 | | | 1,027 | | | (378) | | | 18,532 | |
| Provision for credit losses | | Provision for credit losses | (419) | | | (399) | | | (284) | | | (43) | | | 97 | | | — | | | (1,048) | |
| Noninterest expense | | Noninterest expense | 6,267 | | | 1,630 | | | 1,833 | | | 3,028 | | | 1,231 | | | — | | | 13,989 | |
| Income (loss) before income tax expense (benefit) | | Income (loss) before income tax expense (benefit) | 2,806 | | | 850 | | | 2,055 | | | 559 | | | (301) | | | (378) | | | 5,591 | |
| Income tax expense (benefit) | | Income tax expense (benefit) | 702 | | | 212 | | | 500 | | | 140 | | | (275) | | | (378) | | | 901 | |
| Net income (loss) before noncontrolling interests | | Net income (loss) before noncontrolling interests | 2,104 | | | 638 | | | 1,555 | | | 419 | | | (26) | | | — | | | 4,690 | |
| Less: Net income from noncontrolling interests | | Less: Net income from noncontrolling interests | — | | | 1 | | | — | | | — | | | 53 | | | — | | | 54 | |
| Net income (loss) | | Net income (loss) | $ | 2,104 | | | 637 | | | 1,555 | | | 419 | | | (79) | | | — | | | 4,636 | |
| | Quarter ended March 31, 2022 (3) | | Quarter ended March 31, 2022 (3) | |
| Loans (average) | Loans (average) | $ | 342,428 | | | 180,845 | | | 249,302 | | | 81,314 | | | 10,152 | | | 0 | | | 864,041 | | Loans (average) | $ | 325,055 | | | 194,395 | | | 284,498 | | | 84,765 | | | 9,292 | | | — | | | 898,005 | |
| Assets (average) | Assets (average) | 398,530 | | | 197,396 | | | 512,476 | | | 87,562 | | | 741,203 | | | 0 | | | 1,937,167 | | Assets (average) | 374,869 | | | 214,937 | | | 551,404 | | | 90,841 | | | 687,341 | | | — | | | 1,919,392 | |
| Deposits (average) | Deposits (average) | 812,723 | | | 190,984 | | | 192,645 | | | 174,333 | | | 44,080 | | | 0 | | | 1,414,765 | | Deposits (average) | 881,339 | | | 200,699 | | | 169,181 | | | 185,814 | | | 27,039 | | | — | | | 1,464,072 | |
| | Loans (period-end) | Loans (period-end) | 326,760 | | | 178,905 | | | 253,259 | | | 82,783 | | | 10,593 | | | 0 | | | 852,300 | | Loans (period-end) | 328,558 | | | 198,833 | | | 290,627 | | | 84,688 | | | 9,101 | | | — | | | 911,807 | |
| Assets (period-end) | Assets (period-end) | 382,464 | | | 196,421 | | | 516,518 | | | 88,678 | | | 761,915 | | | 0 | | | 1,945,996 | | Assets (period-end) | 379,115 | | | 221,886 | | | 564,976 | | | 90,820 | | | 682,912 | | | — | | | 1,939,709 | |
| Deposits (period-end) | Deposits (period-end) | 840,434 | | | 197,461 | | | 188,219 | | | 174,267 | | | 40,091 | | | 0 | | | 1,440,472 | | Deposits (period-end) | 909,896 | | | 195,549 | | | 168,467 | | | 183,727 | | | 23,715 | | | — | | | 1,481,354 | |
| Quarter ended June 30, 2020 | | |
| Loans (average) | $ | 369,631 | | | 228,423 | | | 273,587 | | | 78,091 | | | 21,534 | | | 0 | | | 971,266 | | |
| Assets (average) | 427,065 | | | 243,762 | | | 535,298 | | | 85,438 | | | 655,617 | | | 0 | | | 1,947,180 | | |
| Deposits (average) | 715,144 | | | 184,132 | | | 239,637 | | | 165,103 | | | 82,640 | | | 0 | | | 1,386,656 | | |
| | Six months ended June 30, 2020 | | |
| | | Quarter ended March 31, 2021 | | Quarter ended March 31, 2021 | |
| Loans (average) | Loans (average) | $ | 376,096 | | | 226,641 | | | 265,915 | | | 77,987 | | | 21,517 | | | 0 | | | 968,156 | | Loans (average) | $ | 353,081 | | | 183,143 | | | 246,148 | | | 80,839 | | | 10,228 | | | — | | | 873,439 | |
| Assets (average) | Assets (average) | 433,226 | | | 243,293 | | | 543,455 | | | 85,538 | | | 642,513 | | | 0 | | | 1,948,025 | | Assets (average) | 408,553 | | | 199,361 | | | 511,528 | | | 87,355 | | | 727,628 | | | — | | | 1,934,425 | |
| Deposits (average) | Deposits (average) | 683,925 | | | 175,929 | | | 252,902 | | | 155,246 | | | 94,307 | | | 0 | | | 1,362,309 | | Deposits (average) | 789,439 | | | 189,364 | | | 194,501 | | | 173,678 | | | 46,490 | | | — | | | 1,393,472 | |
| | Loans (period-end) | Loans (period-end) | 368,753 | | | 210,779 | | | 255,574 | | | 78,101 | | | 21,948 | | | 0 | | | 935,155 | | Loans (period-end) | 340,549 | | | 180,688 | | | 248,644 | | | 81,175 | | | 10,516 | | | — | | | 861,572 | |
| Assets (period-end) | Assets (period-end) | 432,100 | | | 226,735 | | | 510,205 | | | 84,699 | | | 713,309 | | | 0 | | | 1,967,048 | | Assets (period-end) | 405,597 | | | 198,684 | | | 512,045 | | | 87,039 | | | 753,899 | | | — | | | 1,957,264 | |
| Deposits (period-end) | Deposits (period-end) | 746,602 | | | 183,085 | | | 236,620 | | | 168,249 | | | 76,155 | | | 0 | | | 1,410,711 | | Deposits (period-end) | 837,765 | | | 191,948 | | | 188,920 | | | 175,999 | | | 42,487 | | | — | | | 1,437,119 | |
(1)Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for low-income housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.
(2)Net interest income is interest earned on assets minus the interest paid on liabilities to fund those assets. Segment interest earned includes actual interest income on segment assets as well as a funding credit for their deposits. Segment interest paid on liabilities includes actual interest expense on segment liabilities as well as a funding charge for their assets.
(3)In first quarter 2022, we prospectively transferred certain customer accounts from the Commercial Banking operating segment to Small Business Banking in the Consumer Banking and Lending operating segment.
| | | | | | | | |
| Wells Fargo & Company | 145131 |
| | |
Note 23: Regulatory Capital Requirements and Other Restrictions |
Regulatory Capital Requirements
The Company and each of its subsidiary banks are subject to regulatory capital adequacy requirements promulgated by federal banking regulators. The FRB establishes capital requirements for the consolidated financial holding company, and the OCC has similar requirements for the Company’s national banks, including Wells Fargo Bank, N.A. (the Bank).
Table 23.1 presents regulatory capital information for Wells Fargo & Company and the Bank in accordance with Basel III capital requirements. Our capital adequacy is assessed based on the lower ofWe must calculate our risk-based capital
ratios calculated under both the Standardized Approach and under the Advanced Approach.Approaches. The Standardized Approach applies assigned risk weights to broad risk categories, while the calculation of risk-weighted assets (RWAs) under the Advanced Approach differs by requiring
applicable banks to utilize a risk-sensitive methodology, which relies upon the use of internal credit models, and includes an operational risk component. The Basel III capital requirements for calculating Common Equity Tier 1 (CET1) and tier 1 capital, along with 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. Accordingly, the information presented below reflects fully phased-in CET1 capital, tier 1 capital, and RWAs, but reflects total capital still in accordance with transition requirements.
At June 30, 2021,March 31, 2022, the Bank and our other insured depository institutions were considered well-capitalized under the requirements of the Federal Deposit Insurance Act.
Table 23.1: Regulatory Capital Information (1)
| | | Wells Fargo & Company | | Wells Fargo Bank, N.A. | | | Wells Fargo & Company | | Wells Fargo Bank, N.A. |
| | June 30, 2021 | | December 31, 2020 | | June 30, 2021 | | December 31, 2020 | | | Standardized Approach | | Advanced Approach | | Standardized Approach | | Advanced Approach |
| (in millions, except ratios) | (in millions, except ratios) | Advanced Approach | | Standardized
Approach | | | Advanced Approach | | Standardized
Approach | | Advanced Approach | | Standardized
Approach | | | Advanced Approach | | Standardized
Approach | | (in millions, except ratios) | March 31, 2022 | | December 31, 2021 | | March 31, 2022 | | December 31, 2021 | | March 31, 2022 | | December 31, 2021 | | March 31, 2022 | | December 31, 2021 |
| Regulatory capital: | Regulatory capital: | | | Regulatory capital: | | | | | | | |
| Common Equity Tier 1 | Common Equity Tier 1 | $ | 143,442 | | | 143,442 | | | 138,297 | | | 138,297 | | | 151,121 | | | 151,121 | | | 150,168 | | | 150,168 | | | Common Equity Tier 1 | $ | 132,298 | | | 140,643 | | | 132,298 | | | 140,643 | | | 143,732 | | | 149,318 | | | 143,732 | | | 149,318 | |
| Tier 1 | Tier 1 | 162,999 | | | 162,999 | | | 158,196 | | | 158,196 | | | 151,121 | | | 151,121 | | | 150,168 | | | 150,168 | | | Tier 1 | 151,340 | | | 159,671 | | | 151,340 | | | 159,671 | | | 143,732 | | | 149,318 | | | 143,732 | | | 149,318 | |
| Total | Total | 190,173 | | | 200,156 | | | 186,934 | | | 196,660 | | | 165,154 | | | 174,641 | | | 164,412 | | | 173,719 | | | Total | 186,316 | | | 196,308 | | | 177,686 | | | 186,580 | | | 166,302 | | | 173,044 | | | 157,604 | | | 163,213 | |
| Assets: | Assets: | | Assets: | |
Risk-weighted assets (2) | Risk-weighted assets (2) | 1,126,535 | | | 1,188,727 | | | 1,158,355 | | | 1,193,744 | | | 988,692 | | | 1,087,876 | | | 1,012,751 | | | 1,085,599 | | | Risk-weighted assets (2) | 1,265,517 | | | 1,239,026 | | | 1,119,518 | | | 1,116,068 | | | 1,169,842 | | | 1,137,839 | | | 977,094 | | | 965,511 | |
| Adjusted average assets | Adjusted average assets | 1,911,654 | | | 1,911,654 | | | 1,900,258 | | | 1,900,258 | | | 1,752,195 | | | 1,752,195 | | | 1,735,406 | | | 1,735,406 | | | Adjusted average assets | 1,891,615 | | | 1,915,585 | | | 1,891,615 | | | 1,915,585 | | | 1,734,148 | | | 1,758,479 | | | 1,734,148 | | | 1,758,479 | |
| Regulatory capital ratios: | Regulatory capital ratios: | | Regulatory capital ratios: | |
| Common Equity Tier 1 capital | Common Equity Tier 1 capital | 12.73 | % | | 12.07 | | * | | 11.94 | | | 11.59 | | * | | 15.28 | | | 13.89 | | * | | 14.83 | | | 13.83 | | * | Common Equity Tier 1 capital | 10.45 | % | * | 11.35 | | | 11.82 | | | 12.60 | | | 12.29 | | * | 13.12 | | | 14.71 | | | 15.47 | |
| Tier 1 capital | Tier 1 capital | 14.47 | | | 13.71 | | * | | 13.66 | | | 13.25 | | * | | 15.28 | | | 13.89 | | * | | 14.83 | | | 13.83 | | * | Tier 1 capital | 11.96 | | * | 12.89 | | | 13.52 | | | 14.31 | | | 12.29 | | * | 13.12 | | | 14.71 | | | 15.47 | |
| Total capital | Total capital | 16.88 | | | 16.84 | | * | | 16.14 | | * | 16.47 | | | | 16.70 | | | 16.05 | | * | | 16.23 | | | 16.00 | | * | Total capital | 14.72 | | * | 15.84 | | | 15.87 | | | 16.72 | | | 14.22 | | * | 15.21 | | | 16.13 | | | 16.90 | |
| | Required minimum capital ratios: | | Required minimum capital ratios: | |
| Common Equity Tier 1 capital | | Common Equity Tier 1 capital | 9.10 | | | 9.60 | | | 8.50 | | | 9.00 | | | 7.00 | | | 7.00 | | | 7.00 | | | 7.00 | |
| Tier 1 capital | | Tier 1 capital | 10.60 | | | 11.10 | | | 10.00 | | | 10.50 | | | 8.50 | | | 8.50 | | | 8.50 | | | 8.50 | |
| Total capital | | Total capital | 12.60 | | | 13.10 | | | 12.00 | | | 12.50 | | | 10.50 | | | 10.50 | | | 10.50 | | | 10.50 | |
| | Wells Fargo & Company | | Wells Fargo Bank, N.A. | | | Wells Fargo & Company | | Wells Fargo Bank, N.A. |
| | June 30, 2021 | | December 31, 2020 | | June 30, 2021 | | December 31, 2020 | | | March 31, 2022 | | December 31, 2021 | | March 31, 2022 | | December 31, 2021 |
| Regulatory leverage: | Regulatory leverage: | | | | | | | | | Regulatory leverage: | | | | | | | |
| Total leverage exposure (3) | $ | 2,300,416 | | | 1,963,971 | | | 2,117,710 | | | 2,041,952 | | | |
| Supplementary leverage ratio (SLR) (3)(4) | 7.09 | % | | 8.05 | | | 7.14 | | | 7.35 | | | |
| Tier 1 leverage ratio (5) | 8.53 | | | 8.32 | | | 8.62 | | | 8.65 | | | |
| Total leverage exposure (1) | | Total leverage exposure (1) | $ | 2,289,114 | | | 2,316,079 | | | 2,117,033 | | | 2,133,798 | |
| Supplementary leverage ratio (SLR) (1) | | Supplementary leverage ratio (SLR) (1) | 6.61 | % | | 6.89 | | | 6.79 | | | 7.00 | |
| Tier 1 leverage ratio (2) | | Tier 1 leverage ratio (2) | 8.00 | | | 8.34 | | | 8.29 | | | 8.49 | |
| Required minimum leverage: | | Required minimum leverage: | |
| Supplementary leverage ratio | | Supplementary leverage ratio | 5.00 | | | 5.00 | | | 6.00 | | | 6.00 | |
| Tier 1 leverage ratio | | Tier 1 leverage ratio | 4.00 | | | 4.00 | | | 4.00 | | | 4.00 | |
*Denotes the binding ratio based on the lower calculation under the Advanced and Standardized Approaches.
(1)At June 30, 2021, the impact of the CECL transition provision issued by federal banking regulators on the regulatory capital of the Company was an increase in capital of $879 million, reflecting a $991 million (post-tax) increase in capital recognized upon our initial adoption of CECL, offset by 25% of the $7.5 billion increase in our ACL under CECL from January 1, 2020, through June 30, 2021. The impact of the CECL transition provision on the regulatory capital of the Bank at June 30, 2021, was an increase in capital of $879 million.
(2)RWAs for the Company and the Bank included an increase of $547 million under the Standardized Approach and a decrease of $1.4 billion under the Advanced Approach related to the impact of the CECL transition provision on the excess allowance for credit losses as of June 30, 2021.Approaches at March 31, 2022.
(3)(1)The SLR consists of tier 1 capital divided by total leverage exposure. Total leverage exposure consists of total average assets, less goodwill and other permitted tier 1 capital deductions (net of deferred tax liabilities), plus certain off-balance sheet exposures.
(4)In 2020, the FRB issued an interim final rule that temporarily allowed the exclusion for on-balance sheet amounts of U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of total leverage exposure in the denominator of the SLR. The Company adopted this interim final rule, but the Bank did not elect to apply these exclusions. The interim final rule expired on April 1, 2021.
(5)(2)The tier 1 leverage ratio consists of tier 1 capital divided by total average assets, excluding goodwill and certain other items as determined under the rule.
At June 30, 2021, under transition requirements,March 31, 2022, the CET1, tier 1 and total capital ratio requirements for the Company included a global systemically important bank (G-SIB) surcharge of 2.00%1.50%. The G-SIB surcharge is not applicable to the Bank. In addition, the CET1, tier 1 and total capital ratio requirements for the Company and the Bank included a stress capital buffer of 2.50%3.10% under the Standardized Approach and a capital conservation buffer of 2.50% under the Advanced Approach. The capital ratio requirements for the Bank included a capital conservation buffer of 2.50% under both the Standardized and Advanced Approaches. The Company is required to maintain these risk-based capital ratios and to maintain an SLR of at least 5.00% (comprised(composed of a 3.00% minimum requirement plus a supplementary leverage buffer of 2.00%) to avoid restrictions on capital distributions and discretionary bonus payments. The Bank is required to maintain an SLR of at least 6.00% to be considered well-capitalized under applicable regulatory capital adequacy rules. Table 23.2 presents the risk-based capital and leverage requirements under transition requirements to which the Company and the Bank
were subject as of June 30, 2021, and December 31, 2020, which were the same under both the Standardized and Advanced Approaches.
Table 23.2:Risk-Based Capital and Leverage Ratios – Transition Requirements
| | | | | | | | | | | | | | | |
| Wells Fargo & Company | | | | Wells Fargo Bank, N.A. | | |
| | | | | | | |
| Jun 30, 2021 | | | | Jun 30, 2021 | | |
| and Dec 31, 2020 | | | | and Dec 31, 2020 | | |
| Common Equity Tier 1 capital | 9.00 | % | | | | 7.00 | | | |
| Tier 1 capital | 10.50 | | | | | 8.50 | | | |
| Total capital | 12.50 | | | | | 10.50 | | | |
| Tier 1 leverage | 4.00 | | | | | 4.00 | | | |
| Supplementary leverage | 5.00 | | | | | 6.00 | | | |
Capital Planning Requirements
The FRB’s capital plan rule establishes capital planning and other requirements that govern capital distributions, including dividends and share repurchases, by certain large bank holding companies (BHCs), including Wells Fargo. The FRB conducts an annual Comprehensive Capital Analysis and Review exercise and has also published guidance regarding its supervisory expectations for capital planning, including capital policies regarding the process relating to common stock dividend and repurchase decisions in the FRB’s SR Letter 15-18. The Parent’s ability to make certain capital distributions is subject to the requirements of the capital plan rule and is also subject to the Parent meeting or exceeding certain regulatory capital minimums.
On March 25, 2021, the FRB announced that it was extending measures it previously announced limiting large BHCs, 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 generally authorized BHCs to (i) provided that the BHC does not increase the amount of its common stock dividends to be larger than the level paid in second quarter 2020, pay common stock dividends and make share repurchases that, in the aggregate, do not exceed an amount equal to the average of the BHC’s net income for the four preceding calendar quarters; (ii) make share repurchases that equal the amount of share issuances related to expensed employee compensation; and (iii) redeem and make scheduled payments on additional tier 1 and tier 2 capital instruments. These limitations on capital distributions ended on June 30, 2021.
Loan and Dividend Restrictions
Federal law restricts the amount and the terms of both credit and non-credit transactions between a bank and its nonbank affiliates. Additionally, federal laws and regulations limit the dividends that a national bank may pay.
Our nonbank subsidiaries are also limited by certain federal and state statutory provisions and regulations covering the amount of dividends that may be paid in any given year. In addition, 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 subsidiaries of the Parent designated from time to time as material entities for resolution planning purposes or identified from time to time as related support entities in our resolution plan, the IHC may be restricted from making dividend payments to the Parent if certain liquidity and/or capital metrics fall below defined triggers or if the Parent’s board of directors authorizes it to file a case under the U.S. Bankruptcy Code.
For additional information on loan and dividend restrictions, see Note 28 (Regulatory Capital Requirements and Other Restrictions) in our 20202021 Form 10-K.
Cash Restrictions
Cash and cash equivalents may be restricted as to usage or withdrawal. Table 23.323.2 provides a summary of restrictions on cash and cash equivalents.
Table 23.3:23.2: Nature of Restrictions on Cash and Cash Equivalents
| | (in millions) | (in millions) | Jun 30,
2021 | | Dec 31,
2020 | (in millions) | Mar 31,
2022 | | Dec 31,
2021 |
| Reserve balance for non-U.S. central banks | Reserve balance for non-U.S. central banks | $ | 199 | | | 243 | | Reserve balance for non-U.S. central banks | $ | 233 | | | 382 | |
| Segregated for benefit of brokerage customers under federal and other brokerage regulations | Segregated for benefit of brokerage customers under federal and other brokerage regulations | 878 | | | 957 | | Segregated for benefit of brokerage customers under federal and other brokerage regulations | 694 | | | 830 | |
|
| | | | | | | | |
| Wells Fargo & Company | 147133 |
| | | | | | | | | | | |
| Glossary of Acronyms |
| | | |
| ACL | Allowance for credit losses | HTM | Held-to-maturity |
AFS | Available-for-sale | LCR | Liquidity coverage ratio |
ALCOAFS | Asset/Liability CommitteeAvailable-for-sale | LHFS | Loans held for sale |
| ARM | Adjustable-rate mortgage | LIBOR | London Interbank Offered Rate |
| ASC | Accounting Standards Codification | LIHTC | Low-income housing tax credit |
| ASU | Accounting Standards Update | LOCOM | Lower of cost or fair value |
AUA | Assets under administration | LTV | Loan-to-value |
AUM | Assets under management | MBS | Mortgage-backed security |
| AVM | Automated valuation model | MSRLTV | Mortgage servicing rightLoan-to-value |
| BCBS | Basel Committee on Banking Supervision | NAVMBS | Net asset valueMortgage-backed securities |
| BHC | Bank holding company | NPAMSR | Nonperforming assetMortgage servicing right |
| CCAR | Comprehensive Capital Analysis and Review | NAV | Net asset value |
| CD | Certificate of deposit | NPA | Nonperforming asset |
| CECL | Current expected credit loss | NSFR | Net stable funding ratio |
CDCET1 | Certificate of depositCommon Equity Tier 1 | OCC | Office of the Comptroller of the Currency |
CECLCFPB | Current expected credit lossConsumer Financial Protection Bureau | OCI | Other comprehensive income |
CET1 | Common Equity Tier 1 | OTC | Over-the-counter |
CFPB | Consumer Financial Protection Bureau | OTTI | Other-than-temporary impairment |
| CLO | Collateralized loan obligation | PCDOTC | Purchased credit-deterioratedOver-the-counter |
| CLTV | Combined loan-to-value | PCIPCD | Purchased credit-impairedcredit-deteriorated |
| CPI | Collateral protection insurance | PTPP | Pre-tax pre-provision profit |
| CRE | Commercial real estate | RMBS | Residential mortgage-backed securities |
| DPD | Days past due | ROA | Return on average assets |
| ESOP | Employee Stock Ownership Plan | ROE | Return on average equity |
| FASB | Financial Accounting Standards Board | ROTCE | Return on average tangible common equity |
| FDIC | Federal Deposit Insurance Corporation | RWAs | Risk-weighted assets |
| FHA | Federal Housing Administration | SEC | Securities and Exchange Commission |
| FHLB | Federal Home Loan Bank | S&P | Standard & Poor’s Ratings Services |
| FHLMC | Federal Home Loan Mortgage Corporation | SLR | Supplementary leverage ratio |
| FICO | Fair Isaac Corporation (credit rating) | SOFR | Secured Overnight Financing Rate |
| FNMA | Federal National Mortgage Association | SPE | Special purpose entity |
| FRB | Board of Governors of the Federal Reserve System | TDR | Troubled debt restructuring |
| GAAP | Generally accepted accounting principles | TLAC | Total Loss Absorbing Capacity |
| GNMA | Government National Mortgage Association | VA | Department of Veterans Affairs |
| GSE | Government-sponsored entity | VaR | Value-at-Risk |
| G-SIB | Global systemically important bank | VIE | Variable interest entity |
| HQLA | High-quality liquid assets | WIM | Wealth and Investment Management |
| HTM | Held-to-maturity | | |
| | | | | | | | |
148134 | Wells Fargo & Company | |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Information in response to this item can be found in Note 13 (Legal Actions) to Financial Statements in this Report which information is incorporated by reference into this item.
Item 1A. Risk Factors
Information in response to this item can be found under the “Financial Review – Risk Factors” section in this Report which information is incorporated by reference into this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table shows Company repurchases of its common stock for each calendar month in the quarter ended June 30, 2021.March 31, 2022.
| | | | | | | | | | | | | | | | | |
| Calendar month | Total number
of shares
repurchased (1) | | Weighted average
price paid per share | | Maximum number of
shares that may yet
be repurchased under
the authorizations |
| April | 20,075,596 | | | $ | 43.60 | | | 629,954,518 | |
| May | 10,893,389 | | | 46.11 | | | 619,061,129 | |
| June | 4,354,796 | | | 43.08 | | | 614,706,333 | |
| Total | 35,323,781 | | | | | |
| | | | | | | | | | | | | | | | | |
| Calendar month | Total number
of shares
repurchased (1) | | Weighted average
price paid per share | | Maximum number of
shares that may yet
be repurchased under
the authorization |
| January | 33,687,433 | | | $ | 54.55 | | | 327,130,834 | |
| February | 55,819,880 | | | 56.79 | | | 271,310,954 | |
| March | 20,586,039 | | | 49.07 | | | 250,724,915 | |
| Total | 110,093,352 | | | | | |
(1)All shares were repurchased under an authorization covering up to 350500 million shares of common stock approved by the Board of Directors and publicly announced by the Company on July 23, 2019. In addition, the Company publicly announced on January 15, 2021, that the Board of Directors authorized the repurchase of an additional 500 million shares of common stock.2021. Unless modified or revoked by the Board, these authorizations dothis authorization does not expire.
| | | | | | | | |
| Wells Fargo & Company | 149135 |
Item 6. Exhibits
A list of exhibits to this Form 10-Q is set forth below.
The Company’s SEC file number is 001-2979. On and before November 2, 1998, the Company filed documents with the SEC under the name Norwest Corporation. The former Wells Fargo & Company filed documents under SEC file number 001-6214.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | Description | | Location |
| | | | Filed herewith.Incorporated by reference to Exhibit 3(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021. |
| | | | Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed March 1, 2018. |
| 4(a) | | See Exhibits 3(a) and 3(b). | | |
| 4(b) | | The Company agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of the Company. | | |
| | | | Filed herewith. |
| | | | Filed herewith. |
| | | | Filed herewith. |
| | | | Filed herewith. |
| | | | Filed herewith. |
| | | | Filed herewith. |
| | | | Filed herewith. |
| | | | Incorporated by reference to Exhibit 10(a) to the Company’s Current Report on Form 8-K filed April 29, 2022. |
| | | | Incorporated by reference to Exhibit 22 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. |
| | | | Filed herewith. |
| | | | Filed herewith. |
| | | | Furnished herewith. |
| | | | Furnished herewith. |
| 101.INS | | Inline XBRL Instance Document | | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. |
| 101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | Filed herewith. |
| 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | Filed herewith. |
| 101.DEF | | Inline XBRL Taxonomy Extension Definitions Linkbase Document | | Filed herewith. |
| 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | | Filed herewith. |
| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | Filed herewith. |
| 104 | | Cover Page Interactive Data File | | Formatted as Inline XBRL and contained in Exhibit 101. |
| | | | | | | | |
150136 | Wells Fargo & Company | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: July 28, 2021May 3, 2022 WELLS FARGO & COMPANY
| | | | | |
| By: | /s/ MUNEERA S. CARR |
| Muneera S. Carr |
| Executive Vice President, Chief Accounting Officer and Controller |
| (Principal Accounting Officer) |
| | | | | | | | |
| Wells Fargo & Company | 151137 |
