Wells Fargo Reports $6.0 Billion in Quarterly Net Income; Diluted EPS of $1.13

Wells Fargo & Company (NYSE:WFC):

• Financial results:
  • Net income of $6.0 billion, compared with $4.5 billion in third quarter 2017
  • Diluted earnings per share (EPS) of $1.13, compared with $0.83
    • Third quarter 2018 included the redemption of our Series J Preferred Stock, which reduced diluted EPS by $0.03 per share
  • Revenue of $21.9 billion, up from $21.8 billion
    • Net interest income of $12.6 billion, up $123 million, or 1 percent
    • Noninterest income of $9.4 billion, down $31 million
  • Noninterest expense of $13.8 billion, down $588 million, or 4 percent
  • Average deposits of $1.3 trillion, down $40.0 billion, or 3 percent
  • Average loans of $939.5 billion, down $12.9 billion, or 1 percent
  • Return on assets (ROA) of 1.27 percent, return on equity (ROE) of 12.04 percent, and return on average tangible common equity (ROTCE) of 14.33 percent1

• Credit quality:
  • Provision expense of $580 million, down $137 million, or 19 percent, from third quarter 2017
    • Net charge-offs decreased $37 million to $680 million, or 0.29 percent of average loans (annualized)
    • Reserve release2 of $100 million
  • Nonaccrual loans of $7.1 billion, down $1.6 billion, or 18 percent

• Strong capital position while returning more capital to shareholders:.
  • Common Equity Tier 1 ratio (fully phased-in) of 11.9 percent3
  • Returned $8.9 billion to shareholders through common stock dividends and net share repurchases, which more than doubled from $4.0 billion in third quarter 2017
    • Net share repurchases of $6.8 billion, which more than tripled from $2.0 billion
    • Period-end common shares outstanding down 216.3 million shares, or 4 percent
    • Quarterly common stock dividend of $0.43 per share, up 10 percent from $0.39 per share

Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.

Wells Fargo & Company (NYSE:WFC) reported net income of $6.0 billion, or $1.13 per diluted common share, for third quarter 2018, compared with $4.5 billion, or $0.83 per share, for third quarter 2017, and $5.2 billion, or $0.98 per share, for second quarter 2018.

Chief Executive Officer Tim Sloan said, “In the third quarter, we continued to make progress in our efforts to build a better Wells Fargo with a specific focus on our six goals: risk management, customer service, team member engagement, innovation, corporate citizenship and shareholder value. We are strengthening how we manage risk and have made enhancements to our risk management framework. We also continued to make progress on customer remediation, which is an important step in our efforts to rebuild trust. In addition, to better serve our customers and help them succeed financially, we launched Control TowerSM, a digital experience that simplifies our customers’ online financial lives, and our new Propel® Card, one of the richest no-annual-fee credit cards in the industry. Furthermore, our ongoing efforts in corporate citizenship and building stronger communities were recognized in a recent survey on corporate giving by the Chronicle of Philanthropy, which ranked the Wells Fargo Foundation as the No.2 corporate cash giver in the United States. Our focus on shareholder value included progress on our expense savings initiatives, and we returned a record $8.9 billion to shareholders through net common stock repurchases and dividends in the third quarter. I’m confident that our efforts to transform Wells Fargo position us for long-term success.”

Chief Financial Officer John Shrewsberry said, “Wells Fargo reported $6.0 billion of net income in the third quarter. Revenue increased and noninterest expense declined both linked quarter and year-over-year. Our positive operating leverage reflected the benefit of the transformational changes we are making at Wells Fargo, including our focus on reducing expenses. In addition, we saw positive business trends in the third quarter, including growth in primary consumer checking customers, increased debit and credit card usage, and higher year-over-year loan originations in auto, small business, home equity and personal loans and lines. Credit performance and capital levels remained strong. Our commitment to returning more capital to shareholders was demonstrated by an increase in net common share repurchases, which more than tripled from a year ago, and a higher common stock dividend.”

Net Interest Income

Net interest income in the third quarter was $12.6 billion, up $31 million from second quarter 2018. Net interest margin was 2.94 percent, up 1 basis point from the prior quarter.

Noninterest Income

Noninterest income in the third quarter was $9.4 billion, up $357 million from second quarter 2018. Third quarter noninterest income included higher other income, market sensitive revenue4, mortgage banking fees, service charges on deposit accounts, and card fees, partially offset by lower trust and investment fees.

• Mortgage banking income was $846 million, up from $770 million in second quarter 2018. The production margin on residential held-for-sale mortgage loan originations5 increased to 0.97 percent, from 0.77 percent in the second quarter, primarily due to an improvement in secondary market conditions. Residential mortgage loan originations were $46 billion, down from $50 billion in the second quarter. Net mortgage servicing income was $390 million, down from $406 million in the second quarter.
• Market sensitive revenue was $631 million, up from $527 million in second quarter 2018, predominantly due to higher net gains from equity securities on lower other-than-temporary impairment (OTTI).
• Other income was $466 million, compared with $323 million in the second quarter. Third quarter results included a $638 million gain from sales of $1.7 billion of purchased credit-impaired (PCI) Pick-a-Pay loans, compared with a $479 million gain from sales of $1.3 billion of PCI Pick-a-Pay loans in second quarter 2018.

Noninterest Expense

Noninterest expense in the third quarter declined $219 million from the prior quarter to $13.8 billion, predominantly due to lower commission and incentive compensation, outside professional services and charitable donations expense. These decreases were partially offset by higher employee benefits, equipment and contract services expense. The efficiency ratio was 62.7 percent in third quarter 2018, compared with 64.9 percent in the second quarter.

Third quarter 2018 operating losses were $605 million, driven primarily by remediation expense for a variety of matters, including an additional $241 million accrual for previously disclosed issues related to automobile collateral protection insurance (CPI).

Income Taxes

The Company’s effective income tax rate was 20.1 percent for third quarter 2018 and included net discrete income tax expense related to the re-measurement of our initial estimates for the impacts of the Tax Cuts & Jobs Act recognized in fourth quarter 2017. The effective income tax rate in second quarter 2018 was 25.9 percent and included net discrete income tax expense of $481 million mostly related to state income taxes. The Company currently expects the effective income tax rate in fourth quarter 2018 to be approximately 19 percent, excluding the impact of any future discrete items.

Loans

Total average loans were $939.5 billion in the third quarter, down $4.6 billion from the second quarter. Period-end loan balances were $942.3 billion at September 30, 2018, down $2.0 billion from June 30, 2018. Commercial loans were down $1.2 billion compared with June 30, 2018, predominantly due to a $2.8 billion decline in commercial real estate loans, partially offset by $1.5 billion of growth in commercial and industrial loans. Consumer loans decreased $746 million from the prior quarter, driven by:

• a $1.6 billion decline in automobile loans due to expected continued runoff, as well as the reclassification of the remaining $374 million of Reliable Financial Services Inc. auto loans to held for sale
• a $1.2 billion decline in junior lien mortgage loans as payoffs continued to exceed originations
• these decreases were partially offset by:
  • a $1.3 billion increase in 1-4 family first mortgage loans, as nonconforming mortgage loan originations were partially offset by payoffs and $1.7 billion of sales of PCI Pick-a-Pay mortgage loans
  • a $1.1 billion increase in credit card loans

Additionally, $249 million of nonconforming mortgage loan originations that would have otherwise been included in 1-4 family first mortgage loan outstandings were designated as held for sale in third quarter 2018 in anticipation of the future issuance of residential mortgage-backed securities (RMBS).

Debt and Equity Securities

Debt securities include available-for-sale and held-to-maturity debt securities, as well as debt securities held for trading. Debt securities were $472.3 billion at September 30, 2018, down $3.2 billion from the second quarter, predominantly due to a net decrease in available-for-sale debt securities, as approximately $14.3 billion of purchases, primarily federal agency mortgage-backed securities (MBS) in the available-for-sale portfolio, were more than offset by runoff and sales.

Net unrealized losses on available-for-sale debt securities were $3.8 billion at September 30, 2018, compared with net unrealized losses of $2.4 billion at June 30, 2018, predominantly due to higher interest rates.

Equity securities include marketable and non-marketable equity securities, as well as equity securities held for trading. Equity securities were $61.8 billion at September 30, 2018, up $4.3 billion from the second quarter, largely due to an increase in equity securities held for trading due to stronger customer activity.

Deposits

Total average deposits for third quarter 2018 were $1.3 trillion, down $5.0 billion from the prior quarter, as consumers continued to move excess liquidity to higher-rate alternatives. The average deposit cost for third quarter 2018 was 47 basis points, up 7 basis points from the prior quarter and 21 basis points from a year ago, primarily driven by an increase in Wholesale Banking and Wealth and Investment Management deposit rates.

Capital

Capital in the third quarter continued to exceed our internal target, with a Common Equity Tier 1 ratio (fully phased-in) of 11.9 percent3, down from 12.0 percent in the prior quarter. In third quarter 2018, the Company repurchased 146.5 million shares of its common stock, which reduced period-end common shares outstanding by 137.5 million. The Company paid a quarterly common stock dividend of $0.43 per share.

The Company redeemed its 8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J, on September 17, 2018, which reduced diluted earnings per common share in third quarter 2018 by $0.03 per share as a result of eliminating the purchase accounting discount recorded on these shares at the time of the Wachovia acquisition.

Credit Quality

Net Loan Charge-offs

The quarterly loss rate in the third quarter was 0.29 percent (annualized), compared with 0.26 percent in the prior quarter and 0.30 percent a year ago. Commercial and consumer losses were 0.12 percent and 0.47 percent, respectively. Total credit losses were $680 million in third quarter 2018, up $78 million from second quarter 2018. Commercial losses were up $85 million driven by higher commercial and industrial loan charge-offs and lower recoveries, while consumer losses decreased $7 million.

Nonperforming Assets

Nonperforming assets decreased $410 million, or 5 percent, from second quarter 2018 to $7.6 billion. Nonaccrual loans decreased $433 million from second quarter 2018 to $7.1 billion reflecting both lower consumer and commercial nonaccruals.

Allowance for Credit Losses

The allowance for credit losses, including the allowance for unfunded commitments, totaled $11.0 billion at September 30, 2018, down $154 million from June 30, 2018. Third quarter 2018 included a $100 million reserve release2, which reflected strong credit performance and lower loan balances. The allowance coverage for total loans was 1.16 percent, compared with 1.18 percent in second quarter 2018. The allowance covered 4.1 times annualized third quarter net charge-offs, compared with 4.6 times in the prior quarter. The allowance coverage for nonaccrual loans was 155 percent at September 30, 2018, compared with 148 percent at June 30, 2018. The Company believes the allowance was appropriate for losses inherent in the loan portfolio at September 30, 2018.

Business Segment Performance

Wells Fargo defines its operating segments by product type and customer segment. Segment net income for each of the three business segments was:

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

Third Quarter 2018 vs. Second Quarter 2018

• Net income of $2.8 billion, up $320 million, or 13 percent. Second quarter 2018 results included net discrete income tax expense of $481 million mostly related to state income taxes
• Revenue was flat at $11.8 billion, as higher service charges on deposit accounts, mortgage banking income, gains from sales of PCI Pick-a-Pay loans, and card fees were predominantly offset by lower market sensitive revenue
• Noninterest expense was up $177 million, or 2 percent, driven mainly by higher operating losses and equipment expense, partially offset by lower charitable contributions, outside professional services and other expense

Third Quarter 2018 vs. Third Quarter 2017

• Net income was up $939 million, or 50 percent, predominantly due to lower noninterest expense and higher revenue
• Revenue increased $296 million, or 3 percent, due to a gain from the sales of PCI Pick-a-Pay loans and higher net interest income, partially offset by lower mortgage banking income, market sensitive revenue and service charges on deposit accounts
• Noninterest expense of $7.5 billion decreased $385 million, or 5 percent, driven by lower operating losses, partially offset by higher personnel expense
• Provision for credit losses decreased $103 million due to credit improvement in the automobile and consumer real estate portfolios

Business Metrics and Highlights

• Primary consumer checking customers6,7 up 1.7 percent year-over-year
• More than 357,000 branch customer experience surveys completed during third quarter 2018, with both ‘Loyalty’ and ‘Overall Satisfaction with Most Recent Visit’ scores up from the prior quarter
• #1 in retail deposits8, based on the FDIC's recently published Summary of Deposits annual survey
• Debit card point-of-sale purchase volume9 of $87.5 billion in the third quarter, up 9 percent year-over-year
• General purpose credit card point-of-sale purchase volume of $19.4 billion in the third quarter, up 7 percent year-over-year
• Business Insider named our Propel® Card the #1 no-fee credit card on its list of "The 8 Best No-Fee Credit Cards to Open in 2018"
• 29.0 million digital (online and mobile) active customers, including 22.5 million mobile active users7,10
• 5,663 retail bank branches as of the end of third quarter 2018, reflecting 93 branch consolidations in the quarter and 207 in the first nine months of 2018; additionally, we expect to complete the previously announced divestiture of 52 branches in Indiana, Ohio, Michigan and part of Wisconsin in fourth quarter 2018
• Home Lending

• Originations of $46 billion, down from $50 billion in the prior quarter, primarily due to seasonality; included home equity originations of $713 million, up 3 percent from the prior quarter and up 16 percent from the prior year
• Applications of $57 billion, down from $67 billion in the prior quarter, primarily due to seasonality
• Application pipeline of $22 billion at quarter end, down from $26 billion at June 30, 2018
• Production margin on residential held-for-sale mortgage loan originations5 of 0.97 percent, up from 0.77 percent in the prior quarter, due to an improvement in secondary market conditions

• For the 10th consecutive year, Wells Fargo received first place in the Dynatrace 2018 Mortgage and Home Equity Scorecard, a customer experience best practice benchmark of mortgage and home equity digital channels
• Automobile originations of $4.8 billion in the third quarter, up 8 percent from the prior quarter and up 10 percent from the prior year
• Originations of personal loans and lines of $684 million in third quarter 2018, up 3 percent from the prior year
• Small Business Lending11 originations of $627 million, up 28 percent from the prior year

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, Commercial Real Estate, Corporate Banking, Financial Institutions Group, Government and Institutional Banking, Middle Market Banking, Principal Investments, Treasury Management, Wells Fargo Commercial Capital, and Wells Fargo Securities.

Third Quarter 2018 vs. Second Quarter 2018

• Net income of $2.9 billion, up $216 million, or 8 percent
• Revenue of $7.3 billion increased $107 million, or 1 percent, driven by higher net interest income, other income and mortgage banking income, partially offset by lower market sensitive revenue
• Noninterest expense decreased $284 million, or 7 percent, reflecting lower operating losses and personnel expense
• Provision for credit losses increased $62 million driven by higher loan losses and lower recoveries

Third Quarter 2018 vs. Third Quarter 2017

• Net income increased $537 million, or 23 percent, as third quarter 2018 results benefited from a lower effective income tax rate
• Revenue decreased $200 million, or 3 percent, primarily due to the impact of the sales of Wells Fargo Insurance Services USA (WFIS) in fourth quarter 2017 and Wells Fargo Shareowner Services in first quarter 2018, as well as lower net interest income, treasury management fees and operating lease income
• Noninterest expense decreased $299 million, or 7 percent, on lower expense related to the sales of WFIS and Wells Fargo Shareowner Services, lower project-related expense and operating losses, partially offset by higher regulatory, risk and technology expense

Business Metrics and Highlights

• Commercial card spend volume12 of $8.2 billion, up 9 percent from the prior year on increased transaction volumes primarily reflecting customer growth, and flat compared with second quarter 2018
• U.S. investment banking market share of 3.3 percent year-to-date 201813, compared with 3.6 percent year-to-date 201713

Wealth and Investment Management (WIM) 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.

Third Quarter 2018 vs. Second Quarter 2018

• Net income of $732 million, up $287 million, or 64 percent
• Revenue of $4.2 billion increased $275 million, or 7 percent, primarily due to higher net gains from equity securities primarily on lower OTTI from a second quarter that included an impairment of $214 million related to the sale of Wells Fargo Asset Management's (WFAM) ownership stake in The Rock Creek Group, LP (RockCreek), and higher deferred compensation plan investments (offset in employee benefits expense)
• Noninterest expense decreased $118 million, or 4 percent, predominantly driven by lower operating losses and personnel expense, partially offset by higher employee benefits from deferred compensation plan expense (offset in net gains from equity securities)

Third Quarter 2018 vs. Third Quarter 2017

• Net income up $13 million, or 2 percent, as third quarter 2018 results benefited from a lower effective income tax rate
• Revenue decreased $30 million, driven by lower net interest income and brokerage transaction revenue, partially offset by higher asset-based fees and net gains from equity securities
• Noninterest expense increased $141 million, or 5 percent, primarily due to higher regulatory, risk and technology expense, higher broker commissions and other non-personnel expense

Business Metrics and Highlights

Total WIM Segment

• WIM total client assets of $1.9 trillion, up 2 percent from a year ago, driven by higher market valuations, partially offset by net outflows
• Average loan balances up 3 percent from a year ago largely due to growth in non-conforming mortgage loans
• Third quarter 2018 closed referred investment assets (referrals resulting from the WIM/Community Banking partnership) were flat compared with a year ago

Retail Brokerage

• Client assets of $1.6 trillion, up 2 percent from prior year, primarily driven by higher market valuations, partially offset by net outflows
• Advisory assets of $560 billion, up 7 percent from prior year, primarily driven by higher market valuations

Wealth Management

• Client assets of $240 billion, flat compared with prior year

Asset Management

• Total assets under management (AUM) of $483 billion, down 3 percent from prior year, as a result of the sale of WFAM's ownership stake in RockCreek and removal of the associated AUM, as well as equity and fixed income net outflows, partially offset by higher market valuations and money market fund net inflows

Retirement

• IRA assets of $418 billion, up 5 percent from prior year
• Institutional Retirement plan assets of $398 billion, up 3 percent from prior year

Conference Call

The Company will host a live conference call on Friday, October 12, at 7:00 a.m. PT (10:00 a.m. ET). You may participate by dialing 866-872-5161 (U.S. and Canada) or 440-424-4922 (International). The call will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~8888608.

A replay of the conference call will be available beginning at 11:00 a.m. PT (2:00 p.m. ET) on Friday, October 12 through Friday, October 26. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #8888608. The replay will also be available online at https://www.wellsfargo.com/about/investor-relations/quarterly-earnings/ and https://engage.vevent.com/rt/wells_fargo_ao~8888608.

End Notes

1 Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity securities but excluding mortgage servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the Company's use of equity. For additional information, including a corresponding reconciliation to GAAP financial measures, see the “Tangible Common Equity” tables on page 36.

2 Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which net charge-offs exceed the provision for credit losses.

3 See table on page 37 for more information on Common Equity Tier 1. Common Equity Tier 1 (fully phased-in) is a preliminary estimate and is calculated assuming the full phase-in of the Basel III capital rules.

4 Market sensitive revenue represents net gains from trading activities, debt securities, and equity securities.

5 Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations. See the Selected Five Quarter Residential Mortgage Production Data table on page 42 for more information.

6 Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.

7 Data as of August 2018, comparisons with August 2017.

8 FDIC data, SNL Financial, as of June 2018. Retail deposit data is pro forma for acquisitions and caps deposits at $1 billion in a single banking branch and excludes credit union deposits.

9 Combined consumer and business debit card purchase volume dollars.

10 Primarily includes retail banking, consumer lending, small business and business banking customers.

11 Small Business Lending includes credit card, lines of credit and loan products (primarily under $100,000 sold through our retail banking branches).

12 Includes commercial card volume for the entire company.

13 Year-to-date through September. Source: Dealogic U.S. investment banking fee market share.

Forward-Looking Statements

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

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

• current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters (including the impact of the Tax Cuts & Jobs Act), geopolitical matters, and any slowdown in global economic growth;
• our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
• financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
• the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications;
• the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;
• negative effects relating to our mortgage servicing and foreclosure practices, as well as changes in industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures;
• 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 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 other-than-temporary impairment on securities held in our debt securities and equity securities portfolios;
• the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
• negative effects from the retail banking sales practices matter and from other instances where customers may have experienced financial harm, including on our legal, operational and compliance costs, our ability to engage in certain business activities or offer certain products or services, our ability to keep and attract customers, our ability to attract and retain qualified team members, 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; 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, 2017.

In addition to the above factors, we also caution that the amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of the Company, market conditions, capital requirements (including under Basel capital standards), common stock issuance requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company’s Board of Directors, and may be subject to regulatory approval or conditions.

For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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

Forward-looking Non-GAAP Financial Measures. From time to time management may discuss forward-looking non-GAAP financial measures, such as forward-looking estimates or targets for return on average tangible common equity. We are unable to provide a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because we are unable to provide, without unreasonable effort, a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur. Such unavailable information could be significant to future results.

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investments, mortgage, and consumer and commercial finance through 7,950 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 37 countries and territories to support customers who conduct business in the global economy. With approximately 262,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2018 rankings of America’s largest corporations.