Wells Fargo (NYSE:WFC) has been rocked by a series of scandals and penalties in recent years, and its recent results have been disappointing, to say the least. In the second quarter, for example, the bank revealed that its deposit base and loan portfolio both contracted, while most other banks experienced impressive growth.

So, it might come as a pleasant surprise to shareholders that Wells Fargo looks like one of the early winners of third-quarter earnings season. Here's a rundown of the headline numbers, other key highlights, and what investors can expect going forward.

Exterior of a Wells Fargo branch.

Image source: Wells Fargo.

The headline numbers

First, let's take a look at the headline numbers. Wells Fargo's earnings actually missed estimates, coming in at $1.13 per share versus expectations of $1.17. Revenue beat estimates, but not by much, with the bank's total of $21.9 billion coming in just $10 million ahead of estimates.

Having said all that, the top- and bottom-line numbers don't come close to telling us the whole story, so let's look a little deeper.

The most important thing for Wells Fargo

Of course, all Wells Fargo investors would love to see improved efficiency and profitability. However, those aren't the most important things to focus on for the time being.

Instead, the most important thing is whether the bank's scandals are causing it to lose business (which has been the case over the past few quarters) or if things are starting to stabilize or even improve. And on this front, the results look quite positive.

Wells Fargo reported 1.7% more checking account customers than last year and also said that car and small business loan originations rose by 10% and 28%, respectively. Home equity originations grew 16% year over year, and personal loans and lines of credit also grew.

Deposits and loans are still down on a year-over-year basis, but both are down just slightly (less than 0.5%) from the second quarter. And to be fair, with the Fed's penalty, the bank isn't able to focus on growing its assets just yet.

So while we're still potentially a long way off from seeing true growth, the business appears to be heading in the right direction.

Rundown of other key metrics

Wells Fargo showed substantial improvement in most key areas of its earnings report. Here's a quick rundown of some of the other highlights that investors should be aware of:

  • Wells Fargo's net interest margin continues to improve, with a one-basis-point improvement from the second quarter. The rising-rate environment has resulted in generally stronger margins for banks, but Wells Fargo had lagged behind until recently.
  • After reporting a disappointing 10.6% return on equity and 1.10% return on assets for the second quarter, the bank's third-quarter 12.04% ROE and 1.27% ROA should calm investors' fears about the bank's profitability.
  • Wells Fargo's efficiency ratio of 62.7% leaves much to be desired, but this is a substantial improvement from 64.9% in the second quarter and 65.7% a year ago.
  • Wells Fargo repurchased $6.8 billion in stock, more than three times the bank's repurchases during the third quarter of 2017.

Is Wells Fargo finally getting past the scandals?

From a numbers standpoint, it looks like the fallout from the fake-accounts scandal and Wells Fargo's other issues might be finally starting to subside.

While this is certainly welcome news to shareholders, keep in mind that the penalty levied by the Federal Reserve prohibits the bank from growing larger than its assets as of the end of 2017. Until the bank makes satisfactory improvements in the eyes of the Fed and the penalty is lifted, the bank's upside potential continues to be limited for the time being.

This is likely the reason Wells Fargo's stock price didn't pop following the earnings announcement -- until the Fed's penalty is lifted and Wells Fargo's growth potential returns, it can be tough to justify investing in this bank in what's arguably the best growth environment for banks in decades.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.