Edgar Filing: WELLS FARGO & COMPANY/MN

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

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 94163

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 1-866-249-3302

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



Yes þ		No o

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



	Large accelerated filer þ		Accelerated filer o

	Non‑accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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



Yes o		No þ

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



		Shares Outstanding
		April 29, 2016
Common stock, $1-2/3 par value		5,077,047,651



FORM 10-Q
CROSS-REFERENCE INDEX
PART I	Financial Information
Item 1.	Financial Statements			Page
	Consolidated Statement of Income			63
	Consolidated Statement of Comprehensive Income			64
	Consolidated Balance Sheet			65
	Consolidated Statement of Changes in Equity			66
	Consolidated Statement of Cash Flows			68
	Notes to Financial Statements
	1	—	Summary of Significant Accounting Policies	69
	2	—	Business Combinations	71
	3	—	Federal Funds Sold, Securities Purchased under Resale Agreements and Other Short-Term Investments	71
	4	—	Investment Securities	72
	5	—	Loans and Allowance for Credit Losses	79
	6	—	Other Assets	95
	7	—	Securitizations and Variable Interest Entities	96
	8	—	Mortgage Banking Activities	104
	9	—	Intangible Assets	107
	10	—	Guarantees, Pledged Assets and Collateral	108
	11	—	Legal Actions	112
	12	—	Derivatives	113
	13	—	Fair Values of Assets and Liabilities	120
	14	—	Preferred Stock	137
	15	—	Employee Benefits	140
	16	—	Earnings Per Common Share	141
	17	—	Other Comprehensive Income	142
	18	—	Operating Segments	144
	19	—	Regulatory and Agency Capital Requirements	145
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (Financial Review)
	Summary Financial Data			2
	Overview			3
	Earnings Performance			5
	Balance Sheet Analysis			16
	Off-Balance Sheet Arrangements			19
	Risk Management			20
	Capital Management			51
	Regulatory Reform			57
	Critical Accounting Policies			58
	Current Accounting Developments			59
	Forward-Looking Statements			61
	Risk Factors			62
	Glossary of Acronyms			146
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			40
Item 4.	Controls and Procedures			62

PART II	Other Information
Item 1.	Legal Proceedings			147
Item 1A.	Risk Factors			147
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			147
Item 6.	Exhibits			148

Signature				148

Exhibit Index				149

PART I - FINANCIAL INFORMATION

FINANCIAL REVIEW



Summary Financial Data
						% Change
	Quarter ended					Mar 31, 2016 from
($ in millions, except per share amounts)	Mar 31, 2016			Dec 31, 2015	Mar 31, 2015	Dec 31, 2015		Mar 31, 2015
For the Period
Wells Fargo net income	$	5,462		5,575	5,804	(2	)%	(6	)
Wells Fargo net income applicable to common stock	5,085			5,203	5,461	(2	)	(7	)
Diluted earnings per common share	0.99			1.00	1.04	(1	)	(5	)
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA)	1.21		%	1.24	1.38	(2	)	(12	)
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders' equity (ROE)	11.75			11.93	13.17	(2	)	(11	)
Efficiency ratio (1)	58.7			58.4	58.8	1		—
Total revenue	$	22,195		21,586	21,278	3		4
Pre-tax pre-provision profit (PTPP) (2)	9,167			8,987	8,771	2		5
Dividends declared per common share	0.375			0.375	0.350	—		7
Average common shares outstanding	5,075.7			5,108.5	5,160.4	(1	)	(2	)
Diluted average common shares outstanding	5,139.4			5,177.9	5,243.6	(1	)	(2	)
Average loans	$	927,220		912,280	863,261	2		7
Average assets	1,819,875			1,787,287	1,707,798	2		7
Average total deposits	1,219,430			1,216,809	1,174,793	—		4
Average consumer and small business banking deposits (3)	714,837			696,484	665,896	3		7
Net interest margin	2.90		%	2.92	2.95	(1	)	(2	)
At Period End
Investment securities	$	334,899		347,555	324,736	(4	)	3
Loans	947,258			916,559	861,231	3		10
Allowance for loan losses	11,621			11,545	12,176	1		(5	)
Goodwill	27,003			25,529	25,705	6		5
Assets	1,849,182			1,787,632	1,737,737	3		6
Deposits	1,241,490			1,223,312	1,196,663	1		4
Common stockholders' equity	175,534			172,036	168,834	2		4
Wells Fargo stockholders' equity	197,496			192,998	188,796	2		5
Total equity	198,504			193,891	189,964	2		4
Capital ratios (4)(5):
Total equity to assets	10.73		%	10.85	10.93	(1	)	(2	)
Risk-based capital:
Common Equity Tier 1	10.87			11.07	10.69	(2	)	NM
Tier 1 capital	12.49			12.63	12.20	(1	)	NM
Total capital	14.91			15.45	15.08	(3	)	NM
Tier 1 leverage	9.26			9.37	9.48	(1	)	NM
Common shares outstanding	5,075.9			5,092.1	5,162.9	—		(2	)
Book value per common share (6)	$	34.58		33.78	32.70	2		6
Common stock price:
High	53.27			56.34	56.29	(5	)	(5	)
Low	44.50			49.51	50.42	(10	)	(12	)
Period end	48.36			54.36	54.40	(11	)	(11	)
Team members (active, full-time equivalent)	268,600			264,700	266,000	1		1

NM - Not meaningful, as approaches differ between periods.


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


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

(4)

The risk-based capital ratios presented at March 31, 2016 and December 31, 2015, were calculated under the lower of Standardized or Advanced Approach determined pursuant to Basel III with Transition Requirements. Accordingly, the total capital ratio was calculated under the Advanced Approach and the other ratios were calculated under the Standardized Approach, for both periods, respectively. The risk-based capital ratios were calculated under the Basel III Standardized Approach at March 31, 2015.


(5)	See the "Capital Management" section and Note 19 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information.


(6)	Book value per common share is common stockholders' equity divided by common shares outstanding.

Overview (continued)

This Quarterly Report, including the Financial Review and the Financial Statements and related Notes, contains forward-looking statements, which may include forecasts of our financial results and condition, expectations for our operations and business, and our assumptions for those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual results may differ materially from our forward-looking statements due to several factors. Factors that could cause our actual results to differ materially from our forward-looking statements are described in this Report, including in the “Forward-Looking Statements” section, and the “Risk Factors” and “Regulation and Supervision” sections of our Annual Report on Form 10-K for the year ended December 31, 2015 (2015 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 terms used throughout this Report.

Financial Review

Overview

Wells Fargo & Company is a diversified, community-based financial services company with $1.8 trillion in assets. Founded in 1852 and headquartered in San Francisco, we provide banking, insurance, investments, mortgage, and consumer and commercial finance through 8,800 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and we have offices in 36 countries to support customers who conduct business in the global economy. With approximately 269,000 active, full-time equivalent team members, we serve one in three households in the United States and ranked No. 30 on Fortune’s 2015 rankings of America’s largest corporations. We ranked third in assets and first in the market value of our common stock among all U.S. banks at March 31, 2016.

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

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

Financial Performance

Wells Fargo net income was $5.5 billion in first quarter 2016 with diluted earnings per common share (EPS) of $0.99, compared with $5.8 billion and $1.04, respectively, a year ago. We have now generated quarterly earnings of more than $5 billion for 14 consecutive quarters, one of only two companies in the U.S. to

do so, which reflected the ability of our diversified business model and consistent risk discipline to generate consistent financial performance in an uneven economic environment. While our net income declined from a year ago, the first quarter 2015 results included a discrete tax benefit of $359 million, or $0.07 per share, and a $100 million allowance release. We remain focused on meeting the financial needs of our customers and on investing in our businesses so we may continue to meet the evolving needs of our customers in the future.

Compared with a year ago:


•	revenue was $22.2 billion, up 4%, with growth in both net interest income and noninterest income;


•	we grew pre-tax pre-provision profit by 5%;


•	our total loans reached a record $947.3 billion, an increase of $86.0 billion, or 10%;


•	our deposit franchise generated strong customer and balance growth, with total deposits reaching a record $1.24 trillion, up $44.8 billion, or 4%, and we grew the number of primary consumer checking customers by 5.0% (February 2016 compared with February 2015); and


•	our solid capital position enabled us to acquire assets from GE Capital and return $3.0 billion to our shareholders.

Balance Sheet and Liquidity

Our balance sheet maintained its strength in first quarter 2016 as we increased our liquidity position, generated loan and deposit growth, experienced solid credit quality and maintained strong capital levels. We have been able to grow our loans on a year-over-year basis for 19 consecutive quarters (for the past 16 quarters year-over-year loan growth has been 3% or greater). Our loan portfolio increased $30.7 billion from December 31, 2015, and included $24.9 billion from the GE Capital acquisitions. First quarter organic loan growth included commercial and industrial, real estate mortgage, real estate construction, lease financing, real estate 1-4 family first mortgage and automobile.

Our investment securities decreased by $12.7 billion, or 4%, from December 31, 2015, due to securities sales and runoff, partially offset by modest securities purchases due to volatility in the bond market. We had $5 billion of gross purchases during first quarter 2016, compared with last year's average of $26 billion per quarter.

Deposit growth continued in first quarter 2016 with period-end deposits up $18.2 billion, or 1%, from December 31, 2015. This increase reflected growth across our consumer businesses. Our average deposit cost was 10 basis points, up 1 basis point from a year ago, which reflected an increase in deposit pricing for certain wholesale banking customers. We successfully grew our primary consumer checking customers (i.e., customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit) by 5.0% (February 2016 compared with February 2015). Our ability to consistently grow primary checking customers is important to

our results because these customers have more interactions with us and are significantly more profitable than non-primary customers.

Credit Quality

Solid overall credit results continued in first quarter 2016 as losses remained low and we continued to originate high quality loans, reflecting our long-term risk focus. Net charge-offs were $886 million, or 0.38% (annualized) of average loans, in first quarter 2016, compared with $708 million a year ago (0.33%). While substantially all of the loan portfolio continues to perform well, the oil and gas portfolio remains under significant stress due to low energy prices and excess leverage in this industry. The increases in losses and nonperforming loans in first quarter 2016 were primarily due to continued challenges in this portfolio. Our commercial portfolio net charge-offs were $237 million, or 20 basis points of average commercial loans, in first quarter 2016, compared with net charge-offs of $44 million, or 4 basis points, a year ago. Net consumer credit losses declined to 57 basis points of average consumer loans in first quarter 2016 from 60 basis points in first quarter 2015. Our commercial real estate portfolios were in a net recovery position for the 13th consecutive quarter, reflecting our conservative risk discipline and improved market conditions. Losses on our consumer real estate portfolios declined $84 million from a year ago, down 41%. The lower consumer loss levels reflected the benefit of the improving housing market and our continued focus on originating high quality loans. Approximately 68% of the consumer first mortgage portfolio was originated after 2008, when more stringent underwriting standards were implemented.

The allowance for credit losses in first quarter 2016 reflected an allowance build of $200 million as a higher commercial allowance reflecting continued deterioration within the oil and gas portfolio was partially offset by continued credit quality improvements in the residential real estate portfolio. Since first quarter 2015 we have released $1.8 billion of allowance that was allocated to our residential real estate portfolios while providing $1.4 billion of additional allowance allocated to our oil and gas portfolio, demonstrating the advantage of our diversified loan portfolio. Future allowance levels will be based on a variety of factors, including loan growth, portfolio performance and general economic conditions.

Nonperforming assets were up $706 million, or 6%, from December 31, 2015. Nonaccrual loans increased $852 million from the prior quarter driven by a $1.1 billion increase in the oil and gas portfolio and the addition of $343 million of nonaccrual loans from the GE Capital acquisitions, which was within our acquisition underwriting assumptions, partially offset by a $684 million decline in consumer real estate nonaccrual loans and a $76 million decline in commercial real estate nonaccrual loans. In addition, foreclosed assets were down $146 million from the prior quarter.

Capital

Our financial performance in first quarter 2016 resulted in strong capital generation, which increased total equity to $198.5 billion at March 31, 2016, up $4.6 billion from the prior quarter. We returned $3.0 billion to shareholders in first quarter 2016 through common stock dividends and net share repurchases and our net payout ratio (which is the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock) was 60%, compared with 61% in the prior quarter. We continued to reduce our common share count through the repurchase of 51.7 million common shares in the quarter. We also entered into a $750 million forward repurchase contract with an unrelated third party in April 2016 that is expected to settle in second quarter 2016 for approximately 15 million shares. We expect to reduce our common shares outstanding through share repurchases throughout the remainder of 2016.

We believe an important measure of our capital strength is the Common Equity Tier 1 ratio under Basel III, fully phased-in, which was 10.61% at March 31, 2016. Likewise, our other regulatory capital ratios remained strong. See the “Capital Management” section in this Report for more information regarding our capital, including the calculation of our regulatory capital amounts.

Earnings Performance

Wells Fargo net income for first quarter 2016 was $5.5 billion ($0.99 diluted earnings per common share), compared with $5.8 billion ($1.04 diluted per share) for first quarter 2015. Our first quarter 2016 earnings reflected continued strong execution of our business strategy as we continued to satisfy our customers' financial needs. We generated revenue across many of our businesses and grew loans and deposits. Our financial performance in first quarter 2016, compared with the same period a year ago, benefited from a $681 million increase in net interest income, which was offset by a $478 million increase in our provision for credit losses and a $521 million increase in noninterest expense. While our net income declined from a year ago, the first quarter 2015 results included a discrete tax benefit of $359 million primarily from a reduction in the reserve for uncertain tax positions due to audit resolutions of prior period matters with U.S federal and state taxing authorities.

Revenue, the sum of net interest income and noninterest income, was $22.2 billion in first quarter 2016, compared with $21.3 billion in first quarter 2015. The diversified revenue generated by our businesses continued to be balanced between net interest income and noninterest income. The increase in revenue for first quarter 2016, compared with the same period in 2015, was mostly due to an increase in net interest income, reflecting increases in income from trading assets, investment securities, loans, and financing leases. In first quarter 2016, net interest income of $11.7 billion represented 53% of revenue, compared with $11.0 billion (52%) in the same period in 2015.

Noninterest income was $10.5 billion in first quarter 2016, representing 47% of revenue, compared with $10.3 billion (48%) in first quarter 2015. Noninterest income reflected an increase in lease income related to operating leases acquired in the GE Capital transactions, gain from the sale of our crop insurance business, as well as the net impact of hedge ineffectiveness primarily on our long-term debt hedges.

Noninterest expense was $13.0 billion in first quarter 2016, compared with $12.5 billion for the same period in 2015. The increase in noninterest expense reflected higher operating lease expense due to the leases acquired in the GE Capital transactions as well as increases in operating losses, salaries, and employee benefits, partially offset by lower foreclosed assets expense. Noninterest expense as a percentage of revenue (efficiency ratio) was 58.7% in first quarter 2016, compared with 58.8% in first quarter 2015.

Net Interest Income

Net interest income is the interest earned on debt securities, loans (including yield-related loan fees) and other interest-earning assets minus the interest paid on deposits, short-term borrowings and long-term debt. The net interest margin is the average yield on earning assets minus the average interest rate paid for deposits and our other sources of funding. Net interest income and the net interest margin are presented on a taxable-equivalent basis in Table 1 to consistently reflect income from taxable and tax-exempt loans and securities based on a 35% federal statutory tax rate.

While the Company believes that it has the ability to increase net interest income over time, net interest income and the net interest margin in any one period can be significantly affected by a variety of factors including the mix and overall size of our earning assets portfolio and the cost of funding those assets. In addition, some variable sources of interest income, such as resolutions from purchased credit-impaired (PCI) loans, loan

prepayment fees and collection of interest on nonaccrual loans, can vary from period to period. Net interest income growth has been challenged during the prolonged low interest rate environment as higher yielding loans and securities have runoff and been replaced with lower yielding assets.

Net interest income on a taxable-equivalent basis was $12.0 billion in first quarter 2016, compared with $11.2 billion for the same period a year ago. The net interest margin was 2.90% for first quarter 2016, down from 2.95% in the same period a year ago. The increase in net interest income in first quarter 2016 from the same period a year ago was driven by growth in commercial and consumer loans, including the GE Capital transactions that closed in first quarter 2016, increased trading income, growth in investment securities, and higher short-term interest rates. Funding expense increased in first quarter 2016 compared with first quarter 2015 largely due to higher long-term debt interest expense. Deposit expense was higher compared with first quarter 2015 predominantly due to an increase in wholesale pricing resulting from higher short-term interest rates.

The decline in net interest margin in first quarter 2016, compared with the same period a year ago, was primarily due to customer-driven deposit growth and higher long-term debt balances, including pre-funding for the GE Capital acquisition. As a result of growth in funding balances, net interest margin was diluted by an increase in cash, federal funds sold, and other short-term investments, which was partially offset by growth in loans, trading, and the benefit of higher short-term interest rates. During first quarter 2016, we closed substantially all of the previously announced acquisition of certain commercial lending businesses and assets from GE Capital. A portion of the assets were acquired in January 2016 with additional assets acquired in March 2016. The remaining assets are anticipated to be acquired in the second half of 2016.

Average earning assets increased $117.5 billion in first quarter 2016, compared with the same period a year ago, as average loans increased $64.0 billion, average investment securities increased $28.1 billion, and average trading assets increased $17.5 billion from the same period a year ago. In addition, average federal funds sold and other short-term investments increased $9.0 billion in first quarter 2016, compared with the same period a year ago.

Deposits are an important low-cost source of funding and affect both net interest income and the net interest margin. Deposits include noninterest-bearing deposits, interest-bearing

checking, market rate and other savings, savings certificates,

other time deposits, and deposits in foreign offices. Average deposits of $1.22 trillion remained relatively stable in first quarter 2016, compared with $1.17 trillion in first quarter 2015, and represented 132% of average loans in first quarter 2016 compared with 136% a year ago. Average deposits decreased to 74% of average earning assets in first quarter 2016 compared with 77% for the same period a year ago as the growth in total loans and investment securities outpaced deposit growth.

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



	Quarter ended March 31,
						2016						2015
(in millions)	Average balance			Yields/ rates		Interest income/ expense		Average balance		Yields/ rates		Interest income/ expense
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	284,697		0.49	%	$	344	275,731		0.28	%	$	190
Trading assets	80,464			3.01		605		62,977		2.88		453
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies	34,474			1.59		136		26,163		1.55		100
Securities of U.S. states and political subdivisions	50,512			4.24		535		44,948		4.20		472
Mortgage-backed securities:
Federal agencies	96,423			2.80		675		102,193		2.76		706
Residential and commercial	20,827			5.20		271		23,938		5.71		342
Total mortgage-backed securities	117,250			3.23		946		126,131		3.32		1,048
Other debt and equity securities	53,558			3.21		429		47,051		3.43		400
Total available-for-sale securities	255,794			3.20		2,046		244,293		3.32		2,020
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies	44,664			2.20		244		42,869		2.21		234
Securities of U.S. states and political subdivisions	2,156			5.41		29		1,948		5.16		25
Federal agency mortgage-backed securities	28,114			2.49		175		11,318		1.87		53
Other debt securities	4,598			1.92		22		6,792		1.72		29
Total held-to-maturity securities	79,532			2.37		470		62,927		2.19		341
Total investment securities	335,326			3.01		2,516		307,220		3.08		2,361
Mortgages held for sale (4)	17,870			3.59		161		19,583		3.61		177
Loans held for sale (4)	282			3.23		2		700		2.67		5
Loans:
Commercial:
Commercial and industrial – U.S.	257,727			3.39		2,177		227,682		3.28		1,844
Commercial and industrial – Non U.S.	49,508			2.10		258		45,062		1.88		209
Real estate mortgage	122,739			3.41		1,040		111,497		3.57		981
Real estate construction	22,603			3.61		203		19,492		3.52		169
Lease financing	15,047			4.74		178		12,319		4.95		152
Total commercial	467,624			3.31		3,856		416,052		3.26		3,355
Consumer:
Real estate 1-4 family first mortgage	274,722			4.05		2,782		265,823		4.13		2,741
Real estate 1-4 family junior lien mortgage	52,236			4.39		571		58,880		4.27		621
Credit card	33,366			11.61		963		30,380		11.78		883
Automobile	60,114			5.67		848		56,004		5.95		821
Other revolving credit and installment	39,158			5.99		584		36,122		6.01		535
Total consumer	459,596			5.02		5,748		447,209		5.05		5,601
Total loans (4)	927,220			4.16		9,604		863,261		4.19		8,956
Other	5,808			2.06		30		4,730		5.41		63
Total earning assets	$	1,651,667		3.22	%	$	13,262	1,534,202		3.21	%	$	12,205
Funding sources
Deposits:
Interest-bearing checking	$	38,711		0.12	%	$	11	39,155		0.05	%	$	5
Market rate and other savings	651,551			0.07		107		613,413		0.06		97
Savings certificates	27,880			0.45		31		34,608		0.75		64
Other time deposits	58,206			0.74		107		56,549		0.39		56
Deposits in foreign offices	97,682			0.21		51		105,537		0.14		36
Total interest-bearing deposits	874,030			0.14		307		849,262		0.12		258
Short-term borrowings	107,857			0.25		67		71,712		0.11		18
Long-term debt	216,883			1.56		842		183,763		1.32		604
Other liabilities	16,492			2.14		89		16,894		2.30		97
Total interest-bearing liabilities	1,215,262			0.43		1,305		1,121,631		0.35		977
Portion of noninterest-bearing funding sources	436,405					—		412,571				—
Total funding sources	$	1,651,667		0.32		1,305		1,534,202		0.26		977
Net interest margin and net interest income on a taxable-equivalent basis (5)				2.90	%	$	11,957			2.95	%	$	11,228
Noninterest-earning assets
Cash and due from banks	$	17,995						17,059
Goodwill	26,069							25,705
Other	124,144							130,832
Total noninterest-earning assets	$	168,208						173,596
Noninterest-bearing funding sources
Deposits	$	345,400						325,531
Other liabilities	62,627							71,988
Total equity	196,586							188,648
Noninterest-bearing funding sources used to fund earning assets	(436,405		)					(412,571	)
Net noninterest-bearing funding sources	$	168,208						173,596
Total assets	$	1,819,875						1,707,798


(1)	Our average prime rate was 3.50% and 3.25% for the quarters ended March 31, 2016 and 2015, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.62% and 0.26% for the quarters ended March 31, 2016 and 2015, respectively.


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


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


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


(5)	Includes taxable-equivalent adjustments of $290 million and $242 million for the quarters ended March 31, 2016 and 2015, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate utilized was 35% for the periods presented.

Earnings Performance (continued)

Noninterest Income

Table 2: Noninterest Income



	Quarter ended Mar 31,
(in millions)	2016		2015	% Change
Service charges on deposit accounts	$	1,309	1,215	8	%
Trust and investment fees:
Brokerage advisory, commissions and other fees	2,239		2,380	(6	)
Trust and investment management	815		852	(4	)
Investment banking	331		445	(26	)
Total trust and investment fees	3,385		3,677	(8	)
Card fees	941		871	8
Other fees:
Charges and fees on loans	313		309	1
Cash network fees	131		125	5
Commercial real estate brokerage commissions	117		129	(9	)
Letters of credit fees	78		88	(11	)
Wire transfer and other remittance fees	92		87	6
All other fees (1)(2)(3)	202		340	(41	)
Total other fees	933		1,078	(13	)
Mortgage banking:
Servicing income, net	850		523	63
Net gains on mortgage loan origination/sales activities	748		1,024	(27	)
Total mortgage banking	1,598		1,547	3
Insurance	427		430	(1	)
Net gains (losses) from trading activities	200		408	(51	)
Net gains on debt securities	244		278	(12	)
Net gains from equity investments	244		370	(34	)
Lease income	373		132	183
Life insurance investment income	154		145	6
All other (3)	720		141	411
Total	$	10,528	10,292	2


(1)	Wire transfer and other remittance fees, reflected in all other fees prior to 2016, have been separately disclosed.


(2)	All other fees have been revised to include merchant processing fees for all periods presented.


(3)	Effective fourth quarter 2015, the Company's proportionate share of its merchant services joint venture earnings is included in all other income.

Noninterest income was $10.5 billion and $10.3 billion for first quarter 2016 and 2015, respectively. This income represented 47% of revenue for first quarter 2016, compared with 48% for the same period in 2015. Noninterest income in first quarter 2016 benefited from the previously announced sale of our crop insurance business, hedge ineffectiveness primarily on our long-term debt hedges, and the increase in lease income related to the GE Capital acquisitions we completed in the quarter. Many of our businesses, including credit and debit cards, middle market banking, international, mortgage banking, and venture capital, also grew noninterest income in first quarter 2016.

Service charges on deposit accounts were $1.3 billion in first quarter 2016, compared with $1.2 billion in first quarter 2015. The increase was driven by higher overdraft fees, account growth and higher fees from commercial product sales and commercial product re-pricing.

Brokerage advisory, commissions and other fees are received for providing full-service and discount brokerage services predominantly to retail brokerage clients. Income from these brokerage-related activities include asset-based fees for advisory accounts, which are based on the market value of the client’s assets, and transactional commissions based on the number and size of transactions executed at the client’s direction. These fees decreased to $2.2 billion in first quarter 2016 from $2.4 billion

for the same period in 2015. The decrease was predominantly due to lower brokerage transaction revenue and lower asset-based fees as a result of lower market values at the end of the prior quarter pricing period. Retail brokerage client assets totaled $1.42 trillion at March 31, 2016, compared with $1.44 trillion at March 31, 2015, with all retail brokerage services provided by our Wealth and Investment Management (WIM) operating segment. For additional information on retail brokerage client assets, see the discussion and Tables 4d and 4e in the "Operating Segment Results – Wealth and Investment Management – Retail Brokerage Client Assets" section in this Report.

We earn trust and investment management fees from managing and administering assets, including mutual funds, institutional separate accounts, corporate trust, personal trust, employee benefit trust and agency assets. Trust and investment management fee income is predominantly from client assets under management (AUM) for which the fees are determined based on a tiered scale relative to the market value of the AUM. AUM consists of assets for which we have investment management discretion. Our AUM totaled $645.7 billion at March 31, 2016, compared with $660.2 billion at March 31, 2015, with substantially all of our AUM managed by our WIM operating segment. Additional information regarding our WIM operating segment AUM is provided in Table 4f and the related discussion

in the "Operating Segment Results – Wealth and Investment Management – Trust and Investment Client Assets Under Management" section in this Report. In addition 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. Our AUA totaled $1.3 trillion at March 31, 2016, compared with $1.5 trillion at March 31, 2015. Trust and investment management fees decreased to $815 million in first quarter 2016 from $852 million for the same period in 2015, due to lower AUM reflecting lower market values.

We earn investment banking fees from underwriting debt and equity securities, arranging loan syndications, and performing other related advisory services. Investment banking fees decreased to $331 million in first quarter 2016 from $445 million for the same period in 2015, driven by declines in equity origination due to market volatility.

Card fees were $941 million in first quarter 2016, compared with $871 million for the same period a year ago. The increase was primarily due to account growth and increased purchase activity.

Other fees decreased to $933 million in first quarter 2016, from $1.1 billion for the same period in 2015, predominantly driven by lower all other fees. In first quarter 2016, all other fees decreased to $202 million from $340 million for the same period in 2015, mainly due to the deconsolidation of our merchant services joint venture in fourth quarter 2015, which resulted in a proportionate share of that income now being reported in all other income.

Mortgage banking noninterest income, consisting of net servicing income and net gains on loan origination/sales activities, totaled $1.6 billion in first quarter 2016, compared with $1.5 billion for the same period a year ago.

In addition to servicing fees, net mortgage loan servicing income includes amortization of commercial mortgage servicing rights (MSRs), changes in the fair value of residential MSRs during the period, as well as changes in the value of derivatives (economic hedges) used to hedge the residential MSRs. Net servicing income of $850 million for first quarter 2016 included a $498 million net MSR valuation gain ($957 million decrease in the fair value of the MSRs and a $1.5 billion hedge gain). Net servicing income of $523 million for first quarter 2015 included a $108 million net MSR valuation gain ($773 million decrease in the fair value of the MSRs and an $881 million hedge gain). The increase in net MSR valuation gains in first quarter 2016, compared with the same period in 2015, was primarily attributable to MSR valuation adjustments in first quarter 2015 that reflected higher prepayment expectations due to the reduction in FHA mortgage insurance premiums as well as a reduction in forecasted prepayments in first quarter 2016 due to updated economic and mortgage market rate inputs.

Our portfolio of loans serviced for others was $1.77 trillion at March 31, 2016, and $1.78 trillion at December 31, 2015. At March 31, 2016, the ratio of combined residential and commercial MSRs to related loans serviced for others was 0.72%, compared with 0.77% at December 31, 2015. See the “Risk Management – Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section in this Report for additional information regarding our MSRs risks and hedging approach.

Net gains on mortgage loan origination/sale activities was $748 million in first quarter 2016, compared with $1.0 billion for the same period a year ago. The decrease in first quarter 2016 compared with first quarter 2015 was primarily driven by a decrease in mortgage loan originations and production margins.

Mortgage loan originations were $44 billion for first quarter 2016, compared with $49 billion for the same period a year ago. The production margin on residential held-for-sale mortgage originations, which represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations, provides a measure of the profitability of our residential mortgage origination activity. Table 2a presents the information used in determining the production margin.

Table 2a: Selected Residential Mortgage Production Data



		Quarter ended Mar 31,
		2016			2015
Net gains on mortgage loan origination/sales activities (in millions):
Residential	(A)	$	532		711
Commercial		71			91
Residential pipeline and unsold/repurchased loan management (1)		145			222
Total		$	748		1,024
Residential real estate originations (in billions):
Held-for-sale	(B)	$	31		37
Held-for-investment		13			12
Total		$	44		49
Production margin on residential held-for-sale mortgage originations	(A)/(B)	1.68		%	1.93


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

The production margin was 1.68% for first quarter 2016, compared with 1.93% for the same period a year ago primarily due to a higher mix of correspondent production. Mortgage applications were $77 billion in first quarter 2016, compared with $93 billion for the same period a year ago. The 1-4 family first mortgage unclosed pipeline was $39 billion at March 31, 2016, compared with $44 billion at March 31, 2015. For additional information about our mortgage banking activities and results, see the “Risk Management – Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section and Note 8 (Mortgage Banking Activities) and Note 13 (Fair Values of Assets and Liabilities) to Financial Statements in this Report.

Net gains on mortgage loan origination/sales activities include adjustments to the mortgage repurchase liability. Mortgage loans are repurchased from third parties based on standard representations and warranties, and early payment default clauses in mortgage sale contracts. For first quarter 2016, we released a net $12 million from the repurchase liability, compared with a net $16 million release for first quarter 2015. For additional information about mortgage loan repurchases, see the “Risk Management – Credit Risk Management – Liability for Mortgage Loan Repurchase Losses” section and Note 8 (Mortgage Banking Activities) to Financial Statements in this Report.

We engage in trading activities primarily to accommodate the investment activities of our customers, and to execute economic hedging to manage certain components of our balance sheet risks. Net gains (losses) from trading activities, which reflect unrealized changes in fair value of our trading positions and realized gains and losses, were $200 million in first quarter 2016, compared with $408 million for the same period a year ago. The decrease was primarily driven by lower economic hedge

Earnings Performance (continued)

income, lower customer accommodation trading activity within our capital markets business, and lower deferred compensation gains (offset in employee benefits expense). Net gains from trading activities do not include interest and dividend income and expense on trading securities. Those amounts are reported within interest income from trading assets and other interest expense from trading liabilities. For additional information about our trading activities, see the “Risk Management – Asset/Liability Management – Market Risk – Trading Activities” section in this Report.

Net gains on debt and equity securities totaled $488 million for first quarter 2016 and $648 million for first quarter 2015, after other-than-temporary impairment (OTTI) write-downs of $198 million and $73 million for first quarter 2016 and 2015, respectively. OTTI write-downs in first quarter 2016 mainly reflected deterioration in energy sector investments and largely drove the decrease in net gains on debt and equity securities in first quarter 2016 compared with the same period a year ago.

Lease income was $373 million in first quarter 2016, compared with $132 million for the same period a year ago, primarily driven by the closing of the GE Capital acquisitions in first quarter 2016.

All other income was $720 million in first quarter 2016, compared with $141 million for the same period a year ago. All

other income includes ineffectiveness recognized on derivatives that qualify for hedge accounting, the results of certain economic hedges, losses on low income housing tax credit investments, foreign currency adjustments, and income from investments accounted for under the equity method, any of which can cause decreases and net losses in other income. The increase in other income for first quarter 2016, compared with the same period a year ago, primarily reflected a $381 million gain on sale of our crop insurance business and changes in ineffectiveness recognized on interest rate swaps used to hedge our exposure to interest rate risk on long-term debt and cross-currency swaps, cross-currency interest rate swaps and forward contracts used to hedge our exposure to foreign currency risk and interest rate risk involving non-U.S. dollar denominated long-term debt. A portion of the hedge ineffectiveness recognized was partially offset by the results of certain economic hedges and accordingly we recognized a net hedge benefit of $379 million in first quarter 2016 as compared with $123 million for the same period a year ago. For additional information about derivatives used as part of our asset/liability management, see Note 12 (Derivatives) to Financial Statements in this Report.

Noninterest Expense

Table 3: Noninterest Expense



	Quarter ended Mar 31,			%
(in millions)	2016		2015	Change
Salaries	$	4,036	3,851	5	%
Commission and incentive compensation	2,645		2,685	(1	)
Employee benefits	1,526		1,477	3
Equipment	528		494	7
Net occupancy	711		723	(2	)
Core deposit and other intangibles	293		312	(6	)
FDIC and other deposit assessments	250		248	1
Outside professional services	583		548	6
Operating losses	454		295	54
Outside data processing	208		253	(18	)
Contract services	282		225	25
Postage, stationery and supplies	163		171	(5	)
Travel and entertainment	172		158	9
Advertising and promotion	134		118	14
Insurance	111		140	(21	)
Telecommunications	92		111	(17	)
Foreclosed assets	78		135	(42	)
Operating leases	235		62	279
All other	527		501	5
Total	$	13,028	12,507	4

Noninterest expense was $13.0 billion in first quarter 2016, up 4% from $12.5 billion in the same period a year ago, driven by higher personnel expenses, operating leases, operating losses, and higher contract services, partially offset by lower foreclosed assets expense.

Personnel expenses, which include salaries, commissions, incentive compensation and employee benefits, were up $194 million, or 2%, in first quarter 2016 compared with the same period a year ago, predominantly due to annual salary increases, an extra payroll day in first quarter 2016, and

increased staffing in risk management and our non-mortgage businesses.

Operating lease expense was up $173 million in first quarter 2016 compared with the same period a year ago, largely due to the leases acquired from GE Capital.

Operating losses were up $159 million, or 54%, in first quarter 2016 compared with the same period a year ago, predominantly due to litigation expense for various legal matters.

Contract services expense was up $57 million, or 25%, in first quarter 2016 compared with the same period a year ago. Many

noninterest expense categories in first quarter 2016, including contract services and outside professional services, reflected continued investments in our products, technology and service delivery, as well as costs for the heightened industry focus on regulatory compliance and evolving cybersecurity risk.

Foreclosed assets expense was down $57 million, or 42%, in first quarter 2016 compared with the same period a year ago, mainly driven by lower operating expenses and lower write-downs.

The efficiency ratio was 58.7% in first quarter 2016, compared with 58.8% in first quarter 2015. The Company expects to operate at the higher end of its targeted efficiency ratio range of 55-59% for full year 2016.

Income Tax Expense

Our effective tax rate was 32.0% and 28.2% for first quarter 2016 and 2015, respectively. The effective tax rate for first quarter 2015 reflected $359 million of discrete tax benefits primarily from

reductions in reserves for uncertain tax positions due to audit resolutions of prior period matters with U.S. federal and state taxing authorities.

Operating Segment Results

We are organized for management reporting purposes into three operating segments: Community Banking; Wholesale Banking; and WIM. These segments are defined by product type and customer segment and their results are based on our management accounting process, for which there is no comprehensive, authoritative financial accounting guidance equivalent to generally accepted accounting principles (GAAP). Table 4 and the following discussion present our results by operating segment. For additional description of our operating segments, including additional financial information and the underlying management accounting process, see Note 18 (Operating Segments) to Financial Statements in this Report.

Table 4: Operating Segment Results – Highlights



(income/expense in millions,	Community Banking			Wholesale Banking			Wealth and Investment Management				Other (1)				Consolidated Company
average balances in billions)	2016		2015	2016	2015		2016		2015		2016		2015		2016	2015
Quarter ended March 31,
Revenue	$	12,614	12,111	6,958	6,409		3,854		3,976		(1,231	)	(1,218	)	22,195	21,278
Provision (reversal of provision) for credit losses	720		658	363	(51	)	(14	)	(3	)	17		4		1,086	608
Noninterest expense	6,836		6,591	3,968	3,618		3,042		3,122		(818	)	(824	)	13,028	12,507
Net income (loss)	3,296		3,547	1,921	1,974		512		529		(267	)	(246	)	5,462	5,804
Average loans	$	484.3	472.2	429.8	380.0		64.1		56.9		(51.0	)	(45.8	)	927.2	863.3
Average deposits	683.0		643.4	428.0	431.7		184.5		170.3		(76.1	)	(70.6	)	1,219.4	1,174.8


(1)	Includes items not specific to a business segment and elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for WIM customers served through Community Banking distribution channels.

Cross-sell We aspire to create deep and enduring relationships with our customers by providing them with an exceptional experience and by discovering their needs and delivering the most relevant products, services, advice, and guidance. An outcome of offering customers the products and services they need, want and value is that we earn more opportunities to serve them, or what we call cross-sell. Cross-sell is the result of serving our customers well, understanding their financial needs and goals over their lifetimes, and ensuring we innovate our products, services and channels so that we earn more of their business and help them succeed financially. Our approach to cross-sell is needs-based as some customers will benefit from more products, and some may need fewer. We believe there is continued opportunity to meet our customers' financial needs as we build lifelong relationships with them. One way we track the degree to which we are satisfying our customers' financial needs is through our cross-sell metrics, which are based on whether the customer is a retail bank household or has a wholesale banking relationship. For additional information regarding our cross-sell metrics, see the "Earnings Performance – Operating Segments – Cross-sell" section in our 2015 Form 10-K.

Operating Segment Results

The following discussion provides a description of each of our operating segments, including cross-sell metrics and financial results.

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and auto, student, and small business lending. These products also include investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. The Community Banking segment also includes the results of our Corporate Treasury activities net of allocations in support of the other operating segments and results of investments in our affiliated venture capital partnerships. Our retail bank household cross-sell was 6.09 products per household in February 2016, compared with 6.13 in February 2015. Table 4a provides additional financial information for Community Banking.

Earnings Performance (continued)

Table 4a: Community Banking



	Quarter ended March 31,
(in millions, except average balances which are in billions)	2016			2015		% Change
Net interest income	$	7,468		7,147		4	%
Noninterest income:
Service charges on deposit accounts	753			692		9
Trust and investment fees:
Brokerage advisory, commissions and other fees (1)	450			506		(11	)
Trust and investment management (1)	205			214		(4	)
Investment banking (2)	(19		)	(36	)	47
Total trust and investment fees	636			684		(7	)
Card fees	852			790		8
Other fees	372			359		4
Mortgage banking	1,508			1,435		5
Insurance	2			31		(94	)
Net gains (losses) from trading activities	(27		)	83		NM
Net gains on debt securities	219			206		6
Net gains from equity investments (3)	175			290		(40	)
Other income of the segment	656			394		66
Total noninterest income	5,146			4,964		4

Total revenue	12,614			12,111		4

Provision for credit losses	720			658		9
Noninterest expense:
Personnel expense	4,618			4,518		2
Equipment	493			461		7
Net occupancy	510			527		(3	)
Core deposit and other intangibles	128			144		(11	)
FDIC and other deposit assessments	146			130		12
Outside professional services	185			180		3
Operating losses	407			226		80
Other expense of the segment	349			405		(14	)
Total noninterest expense	6,836			6,591		4
Income before income tax expense and noncontrolling interests	5,058			4,862		4
Income tax expense	1,697			1,290		32
Net income from noncontrolling interests (4)	65			25		160
Net income	$	3,296		3,547		(7	)
Average loans	$	484.3		472.2		3
Average deposits	683.0			643.4		6

NM – Not meaningful


(1)	Represents income on products and services for Wealth and Investment Management customers served through Community Banking distribution channels and is eliminated in consolidation.


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


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


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

Community Banking reported net income of $3.3 billion, down $251 million, or 7%, from first quarter 2015. First quarter 2015 results included a discrete tax benefit of $359 million. Revenue of $12.6 billion increased $503 million, or 4%, from a year ago primarily due to higher net interest income, other income driven by positive hedge ineffectiveness related to our long term debt hedging results, mortgage banking fees, deposit service charges, and revenue from debit and credit card volumes, partially offset by lower market sensitive revenue, primarily gains on equity investments and trading activities, and lower trust and investment fees. Average loans of $484.3 billion in first quarter 2016 increased $12.1 billion, or 3%, from first quarter 2015. Average deposits increased $39.6 billion, or 6%, from first quarter 2015. Noninterest expense increased $245 million, or 4%,

from first quarter 2015, driven by higher operating losses and personnel expenses, partially offset by lower foreclosed assets expense. The provision for credit losses increased $62 million from a year ago primarily due to an allowance build compared with an allowance release in first quarter 2015.

Wholesale Banking provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include Business Banking, Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments, and Asset

Backed Finance. Wholesale Banking cross-sell is reported on a one-quarter lag and for first quarter 2016 was 7.3 products per relationship, up from 7.2 for first quarter 2015. Wholesale Banking cross-sell does not reflect Business Banking relationships, which were realigned from Community Banking to Wholesale Banking effective fourth quarter 2015. Table 4b provides additional financial information for Wholesale Banking.

Table 4b: Wholesale Banking



	Quarter ended March 31,
(in millions, except average balances which are in billions)	2016			2015		% Change
Net interest income	$	3,748		3,437		9	%
Noninterest income:
Service charges on deposit accounts	555			523		6
Trust and investment fees:
Brokerage advisory, commissions and other fees	91			66		38
Trust and investment management	111			100		11
Investment banking	350			484		(28	)
Total trust and investment fees	552			650		(15	)
Card fees	89			81		10
Other fees	560			718		(22	)
Mortgage banking	91			113		(19	)
Insurance	425			398		7
Net gains from trading activities	207			277		(25	)
Net gains on debt securities	25			72		(65	)
Net gains from equity investments	66			75		(12	)
Other income of the segment	640			65		885
Total noninterest income	3,210			2,972		8

Total revenue	6,958			6,409		9

Provision (reversal of provision) for credit losses	363			(51	)	812
Noninterest expense:
Personnel expense	1,974			1,839		7
Equipment	21			20		5
Net occupancy	118			114		4
Core deposit and other intangibles	90			87		3
FDIC and other deposit assessments	86			96		(10	)
Outside professional services	214			169		27
Operating losses	37			9		311
Other expense of the segment	1,428			1,284		11
Total noninterest expense	3,968			3,618		10
Income before income tax expense and noncontrolling interests	2,627			2,842		(8	)
Income tax expense	719			817		(12	)
Net income (loss) from noncontrolling interests	(13		)	51		NM
Net income	$	1,921		1,974		(3	)
Average loans	$	429.8		380.0		13
Average deposits	428.0			431.7		(1	)

NM – Not meaningful

Wholesale Banking reported net income of $1.9 billion, down $53 million, or 3%, from first quarter 2015. Revenue grew $549 million, or 9%, from first quarter 2015 on both increased net interest income and noninterest income. Net interest income increased $311 million, or 9%, driven by strong loan growth and the GE Capital acquisitions. Noninterest income increased $238 million, or 8%, on the gain related to the sale of our crop

insurance business, the GE Capital acquisitions and increased treasury management fees, partially offset by lower gains on debt securities, lower customer accommodation trading, and lower investment banking fees. Average loans of $429.8 billion increased $49.8 billion, or 13%, from first quarter 2015, driven by broad based growth including asset backed finance, commercial real estate, corporate banking, equipment finance and structured

Earnings Performance (continued)

real estate as well as the GE Capital acquisitions. Average deposits of $428.0 billion decreased $3.7 billion, or 1%, from first quarter 2015 reflecting lower interest bearing deposits, primarily in the International business, driven by market volatility and the competitive market environment. Noninterest expense increased $350 million, or 10%, from first quarter 2015 primarily due to the GE Capital acquisitions and higher personnel expense related to growth initiatives, compliance and regulatory requirements. The provision for credit losses increased $414 million from first quarter 2015 primarily due to deterioration in the oil and gas portfolio.

Wealth and Investment Management provides a full range of personalized wealth management, investment and retirement products and services to clients across U.S. based businesses

including Wells Fargo Advisors, The Private Bank, Abbot Downing, Wells Fargo Institutional Retirement and Trust, and Wells Fargo Asset Management. We deliver financial planning, private banking, credit, investment management and fiduciary services to high-net worth and ultra-high-net worth individuals and families. We also serve clients’ brokerage needs, supply retirement and trust services to institutional clients and provide investment management capabilities delivered to global institutional clients through separate accounts and the Wells Fargo Funds. WIM cross-sell was 10.55 products per retail banking household in February 2016, up from 10.44 in February 2015. Table 4c provides additional financial information for WIM.

Table 4c: Wealth and Investment Management



	Quarter ended March 31,
(in millions, except average balances which are in billions)	2016			2015		% Change
Net interest income	$	943		826		14	%
Noninterest income:
Service charges on deposit accounts	5			4		25
Trust and investment fees:
Brokerage advisory, commissions and other fees	2,154			2,313		(7	)
Trust and investment management	712			760		(6	)
Investment banking (1)	—			(3	)	100
Total trust and investment fees	2,866			3,070		(7	)
Card fees	1			1		—
Other fees	4			4		—
Mortgage banking	(2		)	(2	)	—
Insurance	—			1		(100	)
Net gains from trading activities	20			48		(58	)
Net gains on debt securities	—			—		NM
Net gains from equity investments	3			5		(40	)
Other income of the segment	14			19		(26	)
Total noninterest income	2,911			3,150		(8	)

Total revenue	3,854			3,976		(3	)

Reversal of provision for credit losses	(14		)	(3	)	NM
Noninterest expense:
Personnel expense	2,025			2,074		(2	)
Equipment	15			14		7
Net occupancy	112			111		1
Core deposit and other intangibles	75			81		(7	)
FDIC and other deposit assessments	31			37		(16	)
Outside professional services	191			206		(7	)
Operating losses	12			62		(81	)
Other expense of the segment	581			537		8
Total noninterest expense	3,042			3,122		(3	)
Income before income tax expense and noncontrolling interests	826			857		(4	)
Income tax expense	314			324		(3	)
Net income (loss) from noncontrolling interests	—			4		(100	)
Net income	$	512		529		(3	)
Average loans	$	64.1		56.9		13
Average deposits	184.5			170.3		8

NM – Not meaningful


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

WIM reported net income of $512 million in first quarter 2016, down $17 million, or 3%, from first quarter 2015 primarily driven by lower noninterest income, partially offset by higher net interest income and lower expenses. Revenue of $3.9 billion in first quarter 2016 was down $122 million, or 3%, from first quarter 2015 driven by lower asset-based fees and lower brokerage transaction revenue, partially offset by growth in net interest income. Net interest income increased 14% from first quarter 2015 due to growth in investment portfolios and loan balances. Average loan balances of $64.1 billion in first quarter 2016 increased 13% from first quarter 2015. Average deposits in first quarter 2016 of $184.5 billion increased 8% from first quarter 2015. Noninterest expense of $3.0 billion in first quarter 2016 was down $80 million, or 3%, from first quarter 2015, primarily driven by decreased broker commissions and lower operating losses reflecting decreased litigation accruals, partially offset by higher other personnel expenses. Total provision for credit losses decreased $11 million from first quarter 2015, driven by lower net charge-offs.

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

Retail Brokerage Client Assets Brokerage advisory, commissions and other fees are received for providing full-service and discount brokerage services predominantly to retail brokerage clients. Offering advisory account relationships to our brokerage clients is an important component of our broader strategy of meeting their financial needs. Although most of our retail brokerage client assets are in accounts that earn brokerage commissions, the fees from those accounts generally represent transactional commissions based on the number and size of transactions executed at the client’s direction. Fees earned from advisory accounts are asset-based and depend on changes in the value of the client’s assets as well as the level of assets resulting from inflows and outflows. A major portion of our brokerage advisory, commissions and other fee income is earned from advisory accounts. Table 4d shows advisory account client assets as a percentage of total retail brokerage client assets at March 31, 2016 and 2015.

Table 4d: Retail Brokerage Client Assets



	Quarter ended March 31,
(in billions)	2016			2015
Retail brokerage client assets	$	1,415.7		1,442.7
Advisory account client assets	428.2			434.5
Advisory account client assets as a percentage of total client assets	30		%