Wells Fargo (NYSE:WFC) reported its second-quarter earnings Friday morning, and missed analysts' expectations on both the top and bottom lines. In addition, the bank's loan and deposit portfolios shrunk over the past year, and its profitability and efficiency both leave something to be desired. Here's a rundown of the numbers, and what they mean for investors.

The headline numbers

Wells Fargo's earnings came in at $1.08 per share for the second quarter, excluding a one-time expense. This fell short of analysts' expectations of $1.12.

Exterior of a Wells Fargo banking branch.

Image source: Wells Fargo.

On the revenue side, the bank's $21.6 billion in revenue was $77 million short of expectations and represented a 2.7% year-over-year decline.

Looking across the bank's business segments, community banking revenue dropped by 1.2%, corporate and wholesale banking revenue fell 3.8%, and wealth management revenue took a 6.5% year-over-year dive.

The effects of the scandals continue

Looking a little deeper, it's apparent that the bank's infamous fake-accounts scandal and subsequently revealed auto-insurance and mortgage-fee scandals aren't exactly in the past just yet.

The bank continues to experience the fallout from these, with Wells Fargo's deposit base down 2% year over year, and its loan portfolio 1% smaller. And remember that Wells Fargo isn't allowed to grow for the indefinite future, thanks to the Federal Reserve-imposed penalty earlier this year.

In terms of profitability, Wells Fargo's return on assets (ROA) of 1.10% and its return on equity (ROE) of 10.6% both surpassed the industry benchmarks of 1% and 10%, respectively. However, they represent a drop from an ROA of 1.22% and ROE of 12.06% a year ago, and that was before tax reform gave profitability a boost. To be fair, some of this has to do with the one-time $481 million charge it incurred during the quarter, but this is still disappointing. And while we haven't heard from all the other big U.S. banks, I wouldn't be surprised if Wells Fargo's 64.9% efficiency ratio is among the worst of its peer group, if not the worst.

Some good news

While the bank's earnings report was generally disappointing, there is some good news worth mentioning.

For one thing, we finally saw Wells Fargo's net interest margin (NIM) expand during the second quarter. With rising interest rates, most of Wells' peers had seen significant margin expansion for some time, but Wells Fargo seemed to lag behind. However, the bank's second-quarter NIM of 2.93% represents a three-basis-point (0.03%) increase from a year ago and an impressive nine-basis-point increase from the first quarter.

In addition, Wells Fargo is making the best out of its underperformance by aggressively buying back stock, and the post-earnings stock price dip could help maximize these efforts. One of the biggest surprises to come out of the Federal Reserve stress tests was Wells Fargo receiving permission to more than double its buyback to $24.5 billion over the next year. While this quarter's earnings were certainly disappointing, a silver lining is that it could allow the bank to buy back even more shares than it would otherwise be able to.

Wells Fargo hasn't quite turned the corner yet

To be fair, CEO Tim Sloan appears to be doing an excellent job of leading Wells Fargo in its post-scandal recovery efforts. However, it's important for investors to realize that rebuilding the bank's damaged reputation will take time, and it's not there just yet.

Warren Buffett recently said that he thinks Wells Fargo will be the best-performing big bank stock over the next decade, and if the bank's rebuilding efforts are successful, he could certainly be right. Unfortunately, the second-quarter earnings aren't showing concrete signs of progress just yet.

Matthew Frankel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.