MReport June 2018

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TH E M R EP O RT | 41 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Bank of America Reports Record Earnings in Q1 NORTH CAROLINA BASED BANK OF AMERICA WITNESSED STRONG QUARTER, THANKS IN PART TO AN INCREASE IN CONSUMER SPENDING. NORTH CAROLINA // Bank of America joins the list of some of the country's largest banks reporting earnings that exceeded industry estimates. In fact, Bank of America reported record quarterly earnings of $6.9 billion for the end of Q1, with its pretax earnings of $8.4 billion up 15 percent. The bank also increased its lending during the quarter, driven by an increase in consumer spending. It reported an increase of 3 percent in loans to $352 billion. Its noninterest income in- creased $327 million to $11.5 billion marking a 3 percent increase over the last quarter, while its nonin- terest expenses declined 1 percent to $13.9 billion. "Our responsible growth model continues to deliver consistent re- sults," said Brian Moynihan, CEO, Bank of America. "Strong client activity, coupled with a growing global economy and solid U.S. consumer activity, led to record quarterly earnings." While Bank of America's net of interest revenue increased 4 percent to $23.1 billion, its net interest income increased 5 percent to 11.6 billion, reflecting the benefits from higher interest rates that have been seen in the market since the begin- ning of the year. It was also reflec- tive of loan and deposit growths that increased during the quarter. "This was a strong quarter. Revenue was up 4 percent year- over-year and expenses were down 1 percent, making this the 13th con- secutive quarter of positive operat- ing leverage," said Paul Donofrio, CFO, Bank of America. "We also carefully managed credit costs. This enabled us to deliver double-digit EPS growth. We also returned $6.1 billion in capital to our share- holders through dividends and common stock repurchases." The bank's provision for credit losses increased $97 million to $935 million, primarily driven by credit card seasoning and loan growth. The bank reported a strong overall credit quality across its consumer and commercial portfo- lios and its non-performing assets declined $943 million to $6.7 billion, driven primarily by loan sales and credit quality improvement. How CFPB's Fine Impacts Wells Fargo's Q1 Earnings THE $1 BILLION RULING COMES AFTER FINDING INAPPROPRIATE FEES ON BORROWERS FOR MORTGAGE LOANS. CALIFORNIA // The Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of Currency (OCC) announced a fine of $1 billion on Wells Fargo on April 20. The San Francisco-based bank had charged over 570,000 consumers for car insurance they didn't need, and in October the bank revealed that some of its mortgage loan borrowers had been inappropriately charged for missing a deadline to lock in promised interest rates, though it was not borrower's fault. According to the CFPB's con- sent orders, apart from paying the fine, Wells Fargo will remediate harmed consumers and undertake certain activities related to its risk management and compliance management. "I am especially pleased that we were able to work closely and effectively with our colleagues at the OCC, and I appreciate the key role they played in the negotia- tions," said Mick Mulvaney, Acting Director at CFPB. "As to the terms of the settlement: we have said all along that we will enforce the law. That is what we did here." The bank, while announcing its first-quarter results said that the net income reported was subject to the resolutions of the CFPB/ OCC matter, and that its earnings performance included contin- ued strong credit performance, liquidity, and capital levels. The bank reported a net income of $5.9 billion, which was up from $5.6 billion in the first quarter of 2017. While the bank's rev- enue was down to $21.9 billion from $22.3 billion, it reported an increase in earnings per share of $1.12 compared with $1.03 in the same period last year. Confirming the order, Wells Fargo said that the company would adjust its first quarter 2018 preliminary financial results by an additional accrual of $800 million, which is not tax deductible. "The accrual reduces reported first-quar- ter 2018 net income by $800 million, or $0.16 cents per diluted common share, to $4.7 billion, or 96 cents per diluted common share," Wells Fargo said in a statement. "For more than a year and a half, we have made progress on strengthening operational pro- cesses, internal controls, compli- ance and oversight, and delivering on our promise to review all of our practices and make things right for our customers," said Timothy J. Sloan, President, and CEO of Wells Fargo. "While we have more work to do, these orders affirm that we share the same priorities with our regula- tors and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency. Our customers deserve only the best from Wells Fargo, and we are committed to delivering that." Applauding CFPB and OCC's move, Jeb Hensarling, Chairman of the House Financial Services Committee said that the best form of consumer protection remained competitive and transparent markets that were vigorously policed for fraud and deception. "It is not enough to hold a bank accountable; the actual individuals responsible for the wrongful deeds must be held responsible as well," he said. "I know that Wells Fargo has many dedicated employees who do serve their customers well and had nothing to do with the wrongful acts. We all look for- ward to the current management concluding all necessary reviews and restructuring so that Wells Fargo can once again regain the trust and respect it once had." Calling for steeper penalties, Maxine Waters, a Democrat Representative from California and a Ranking Member of the Committee on Financial Services said that more action was required to make banks more responsible. "It is disappointing that the OCC is today loosening the restrictions they put on the bank in 2016 and has not taken the kinds of tougher supervisory actions I have long called for, such as holding culpable executives accountable or revok- ing the bank's charter," she said. "I have been clear in the past that fines are not sufficient in address- ing the pattern of illegal behavior by Wells Fargo, and this action still does not put the bank's past behavior to rest. Steeper penalties are still necessary." LOCAL EDITION "It is not enough to hold a bank accountable; the actual individuals responsible for the wrongful deeds must be held responsible as well." — Jeb Hensarling, Chairman of the House Financial Services Committee ORIGINATION AMERICAN MORTGAGE DIVERSITY COUNCIL SPRING 2018 MEMBER MEETING THE JOULE HOTEL | DALLAS, TEXAS | MAY 2, 2018 CO-HOSTS KEYNOTE ADDRESS PRESENTED BY THANK YOU SPONSORS

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